economic impact of inshore seafood processing in the ... · other benefits from inshore processing...

35
Economic Impact of Inshore Seafood Processing in the Bering Sea/ Aleutian Islands Region Prepared for Icicle Seafoods Peter Pan Seafoods Trident Seafoods UniSea Westward Seafoods Alyeska Seafoods Prepared by May 2018

Upload: dangquynh

Post on 19-Jul-2018

216 views

Category:

Documents


1 download

TRANSCRIPT

Economic Impact of

Inshore Seafood Processing in the Bering Sea/

Aleutian Islands Region

Prepared for

Icicle Seafoods • Peter Pan Seafoods • Trident Seafoods • UniSea • Westward Seafoods • Alyeska Seafoods

Prepared by

May 2018

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region

Prepared for:

Icicle Seafoods

Peter Pan Seafoods

Trident Seafoods

UniSea

Westward Seafoods

Alyeska Seafoods

Prepared by:

May 2018

McDowell Group Anchorage Office 1400 W. Benson Blvd., Suite 510 Anchorage, Alaska 99503

McDowell Group Juneau Office 9360 Glacier Highway, Suite 201 Juneau, Alaska 99801

Website: www.mcdowellgroup.net

Table of Contents

Key Findings ......................................................................................................................................... 1 Introduction and Methodology ......................................................................................................... 7 Overview of BSAI Inshore Processing Sector ................................................................................... 9

First Wholesale Volume and Value ....................................................................................................................... 9 Seasonality of BSAI Fisheries ................................................................................................................................. 15

Employment and Wage Impacts ...................................................................................................... 17 Processing Industry Employment by Residency ............................................................................................ 17 Contribution to Total Employment in 2016 ..................................................................................................... 18 Employment Multiplier Effects ............................................................................................................................. 18

Community Overview and Tax Revenue ......................................................................................... 22 Community Profiles .................................................................................................................................................. 22 State of Alaska Tax Revenue ................................................................................................................................. 27

Other Benefits from Inshore Processing in the BSAI Region ........................................................ 28 Multi-Species Portfolio ............................................................................................................................................ 29

List of Tables Table 1. First Wholesale Volume of BSAI Inshore Production by Species (Thousand Pounds), 2010-2016 ........... 11 Table 2. First Wholesale Value of BSAI Inshore Production by Species (Thousand Dollars), 2010-2016 ................ 12 Table 3. Average First Wholesale Value of BSAI Inshore Production by Species (Per Pound), 2010-2016 ............ 13 Table 4. First Wholesale Volume of BSAI Inshore Production by Product (Thousand Pounds), 2010-2016 .......... 14 Table 5. First Wholesale Value of BSAI Inshore Production by Product (Thousand Dollars), 2010-2016 ............... 14 Table 6. Average First Wholesale Value of BSAI Inshore Production by Product (Per Pound), 2010-2016 ............ 15 Table 7. Aleutians West Census Area Monthly Seafood Processing Employment, 2012-2017 ................................... 16 Table 8. BSAI Processing Workers by Residency, 2006-2016 ................................................................................................... 17 Table 9. BSAI Processing Worker Wages by Residency (Million Dollars), 2006-2016 .................................................... 18 Table 10. Employment and Wage Impacts of Inshore Processing in the BSAI Region, 2016 ...................................... 20 Table 11. Local Raw Fish Tax and Shared Fisheries Business Tax Revenue by BSAI Community, 2016 .................. 22 Table 12. Select BSAI Local Community Attributes, 2016 .......................................................................................................... 23 Table 13. Aleutians East Borough/West Census Area Resident Fishery Participation, 2016 ........................................ 28 Table 14. Pacific Cod Contribution to Total BSAI Inshore First Wholesale Value, 2010-2016 .................................... 31 Table 15. BSAI Inshore Pacific Cod Production by Component (Thousand Pounds), 2010-2016 .............................. 32

List of Figures Figure 1. BSAI Inshore First Wholesale Volume by Species, 2016........................................................................................... 10 Figure 2. BSAI Inshore First Wholesale Value by Species, 2016 ............................................................................................... 11 Figure 3. Aleutians West Census Area Average Monthly Seafood Processing Employment, 2016 ........................... 16 Figure 4. Aleutians West Census Area and Bristol Bay Borough Monthly Processor Employment, 2016 ............... 30

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 1

Key Findings

The purpose of this study was to measure the regional and statewide economic impacts of inshore seafood

processing in the Bering Sea/Aleutian Islands (BSAI) region. The inshore processing sector includes shoreside

and floating processors in the Aleutians East Borough and Aleutians West Census Area. This analysis

encompasses inshore processing operations in Unalaska/Dutch Harbor, Akutan, Saint Paul, King Cove, Sand

Point, False Pass, and other small communities.

Data sources for this study include Alaska Department of Labor and Workforce Development (ADOLWD), Alaska

Commercial Fisheries Entry Commission (CFEC), Alaska Department of Fish and Game (ADF&G), and Alaska

Fisheries Information Network (AKFIN). A survey of five processing companies with a total of 11 operations in

the BSAI region was conducted to gather information about in-state spending and investment in support of

operations. Economic modeling is based in-part on IMPLAN and other proprietary data.

Key findings including the following:

• Value and Volume: In 2016, the BSAI inshore sector accounted for approximately 28 percent of Alaska’s total first wholesale volume of about 2.7 billion pounds and 26 percent of the total Alaska first wholesale value of nearly $4.2 billion.

• Employment and Wages: Inshore processing accounted for a monthly average of 3,750 jobs in the BSAI region in 2016, with total annual wages of $194 million. The inshore processing workforce included 1,400 Alaskans who earned $48 million in wages and directly accounted for more than 40 percent of all local resident employment in the BSAI region. Including multiplier effects, BSAI inshore processing accounted for 2,627 Alaska resident jobs and $112 million in Alaska resident wages.

• Purchases of Goods and Services: In 2016, BSAI inshore processor spending in Alaska totaled $220 million, including shipping, fuel, construction, air transport, and utilities.

• State and Local Tax Revenues: In 2016, the BSAI inshore sector paid more than $32.7 million to the state and local communities in the form of fisheries taxes, comprising 56 percent of all fish taxes paid in the state. For BSAI communities, local fish taxes represented 25 percent to 70 percent of operating revenue. Property and sales tax revenues are also important to local BSAI communities.

• Investment: From 2015 to 2017, the BSAI inshore processing sector made capital improvements totaling $175 million, including expanding capacity to process and add value to Pacific cod, increased capacity for surimi production, dock improvements, increased freezer capacity, land purchases, and other projects.

• Total Economic Activity: The BSAI inshore processing sector directly accounted for $1.1 billion in output in 2016, as measured by total production value. Overall, approximately $1.56 billion in economic output in Alaska can be attributed to BSAI inshore processing and related commercial fishing activity, 30 percent of the seafood industry’s total impact in Alaska.

Additional study findings are provided in following sections of the executive summary.

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 2

First Wholesale Volume and Value

In 2016, the inshore sector produced more than 745 million pounds of processed seafood from a variety of

species.

• Pollock products were the largest component, accounting for 78 percent of volume.

• Pacific cod products and opilio/tanner crab products contributed 12 and 5 percent of the total,

respectively.

• Salmon (4 percent), king crab (1 percent), and all other species (2 percent) composed the remainder.

• In 2016, the BSAI inshore sector accounted for approximately 28 percent of the total Alaska first

wholesale volume of about 2.7 billion pounds.

In 2016, the total first wholesale value of seafood products generated by the BSAI inshore sector was valued at

$1.1 billion.

• Pollock products were again the largest

component, contributing 53 percent of

the total.

• Low volume and high value

opilio/tanner and king crab accounted

for 16 and 11 percent of total value,

respectively.

• Pacific cod products totaled 14 percent,

and all other species accounted for the

remainder (6 percent).

• In 2016, the BSAI inshore sector accounted for approximately 26 percent of the total Alaska first

wholesale value of nearly $4.2 billion.

In combination with a diversified portfolio of species which can be processed into a variety of products, the

significant volumes of pollock and Pacific cod production provide the foundation upon which the inshore

processing sector’s economic impacts are built.

Direct Employment and Wages

Inshore processing accounted for a monthly average of 3,750 jobs in the BSAI region in 2016, including local

residents, other Alaska residents, and non-residents. These workers earned an estimated $194 million in total

annual wages. The BSAI region accounts for approximately 40 percent of all inshore seafood processing

employment and wages in Alaska. Statewide, the industry employed a monthly average of 9,747 workers in

2016 (with peak month employment of over 20,000), with total annual wages of $437 million.

Seafood processing is a critical source of jobs for residents of the BSAI region:

• A total of 1,407 Alaska residents were employed in seafood processing in the BSAI region, with

estimated total annual earnings of $48 million, including:

o 1,136 BSAI region residents with $42 million in wages

o 271 Alaskans from elsewhere in the state, with $6 million in wages

Pacific cod

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 3

• Inshore processing directly accounted for 40 percent of local resident employment in the BSAI region

in 2016. This does not include jobs for local residents supported by tax payments to local government

or local purchases of goods/services (multiplier effects) or employment supported by harvesting

activity.

• Since 2006, the proportion of processing jobs held by resident Alaskans in the BSAI region has increased

from 17 to 24 percent; wages associated with these positions increased from 23 to 32 percent of total

processing wages over the same period. The local BSAI resident proportion of wages has doubled since

2006 from 14 percent to 28 percent.

• Local BSAI residents employed by the inshore processing sector earn 65 percent more than non-local

workers on an annualized basis.

Purchases of Goods and Services

Inshore processing requires substantial spending on goods and services. These expenditures support jobs and

wages in the region and elsewhere in Alaska, in addition to direct processor employment. Economies of scale

resulting from this spending (and associated processing activity) benefit other businesses, households, and

communities overall. In the absence of processing-related expenditures, costs would be higher and availability

reduced for other buyers of transportation services, fuel, and other goods and services.

• In 2016, based on a survey of BSAI inshore processors, spending in Alaska (with businesses with an

Alaska presence) totaled $220 million, including:

o $100 million on shipping

o $34 million on fuel and other petroleum products

o $32 million on construction

o $17 million on air transportation services

o $6 million on public services (electric power, water, waste water)

o $31 million on a broad array of other goods and services

Local and State Taxes

The inshore sector paid more than $32.7

million in local and state taxes in 2016,

including Fisheries Business Tax and taxes

levied by local governments. This represents

56 percent of all fish taxes paid in Alaska,

which totaled $58.8 million.

The sector pays taxes directly to local

governments, and indirectly through the State

of Alaska. Without these tax revenues, local

governments would be unable to provide Trident Seafood’s Sand Point processing plant

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 4

essential services to local residents. The State of Alaska generates revenue from the inshore sector primarily

from Shared Fisheries Business Tax and Corporate Income Tax.1

• Six communities in the BSAI region, plus the Aleutians East Borough, levy local taxes on the value of

fish landed at local processing facilities and nearby floating processors. In 2016, those taxes generated

$13.4 million in revenue to support local government operations. These local governments also took in

a total of $9.2 million in shared Fisheries Business Tax, for a combined total of $22.6 million.

• Fisheries taxes generated by the inshore processing sector are critical to BSAI communities’ operating

revenue, including:

o $4.2 million to Aleutians East Borough, 45 percent of the Borough’s total General Fund

revenues in 2016

o $10 million to the City of Unalaska, about 30 percent of budgeted General Fund revenue

o $2.7 million to the City of Saint Paul, 70 percent of General Fund revenue

o $3.2 million to the City of Akutan, also 70 percent of General Fund revenue

o $1.6 million to the City of King Cove, 60 percent of General Fund revenue

o $0.9 million to the City of Sand Point, a third of City revenue

o The Cities of Adak and Atka generate about 25 percent of operating revenue from taxes paid

by the inshore sector

• Property taxes paid by processors are also an

important source of revenue for Unalaska (the

only community in the region that levies a

property tax). Unisea, Westward Seafoods, and

Alyeska Seafoods have property in Unalaska

with a combined assessed value of $96 million

(16 percent of total assessed real and personal

property value in Unalaska). At the City’s 10.5

mill rate, about $1 million in property tax

revenue is generated annually.

• The inshore sector and their employees also

generate sales tax revenues for local

governments in the BSAI region. The communities of Unalaska (3% sales tax), False Pass (3%), King Cove

(6%), Saint Paul (3%), Adak (4%), and Sand Point (4%) all have local sales taxes to support government

services. King Cove also has a $100,000 Fisheries Business Impact Tax paid exclusively by the inshore

processing sector.

1 Note: Local communities and the State of Alaska also generate revenue from the Fisheries Landings tax which is paid primarily by the offshore sector. This revenue has been excluded from the economic analysis.

BSAI trawler making a delivery to Akutan

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 5

Multiplier Effects

Tax revenues generated by the inshore processing sector, coupled with the processing industry’s in-state

spending on goods and services, support additional jobs and wages in the region and elsewhere in Alaska

beyond direct employment. These multiplier effects include two basic components:

• Indirect impacts: jobs and income supported through the inshore sector’s expenditures on goods,

services, and tax payments

• Induced impacts: jobs and income supported when processing workers spend their wages in the region

and elsewhere in Alaska

Multiplier effects in the private sector are relatively low for most of the individual BSAI region communities,

given that local economies are generally small with limited service and supply sector development. Nevertheless,

many of the region’s retail and service sector businesses rely on local spending generated by the seafood

processing industry. Further, local government dependence on seafood-related taxes means that many of the

region’s 743 local government jobs, and $31 million in annual wages, are dependent on the region’s seafood

processing industry.

At the statewide level, the multiplier effects are larger, as a result of spending flowing through the BSAI and

Alaska economies. Economic impacts are also larger at the statewide level because all revenue generated by

the State of Alaska Fisheries Business Tax and other state taxes are captured in the analysis.

In 2016, multiplier effects associated with inshore processing in the BSAI region result from the following:

• Local and statewide expenditure of a portion of $48 million in wages earned by Alaska residents

employed in seafood processing positions (including $42 million earned by local BSAI residents)

• Nearly $24 million in seafood-related taxes accruing to local governments in the BSAI region annually

and another $9 million to the State of Alaska, where it is spent on a range of public services or projects

• $220 million in purchases of goods and services from Alaska vendors

In total, the inshore BSAI processing sector supports 2,627 Alaska resident jobs with $112 million in annual

wages statewide, including direct employment and multiplier effects. Total economic impacts on the BSAI region

include 1,926 Alaska resident jobs and $82 million in wages for Alaskans.

Investment

The inshore processing industry is heavily invested in the BSAI region and it continues to make significant annual

investments in its processing infrastructure. In the three-year period between 2015 and 2017, the BSAI inshore

sector made capital improvements totaling $175 million. A significant portion of this investment has been

focused on expanding Pacific cod and surimi processing capacity (including value-added), dock improvements,

freezer capacity, land purchases, and other projects.

Absent significant market disruption, the industry is anticipated to maintain this level of capital investment in

the near-term. Discussions with industry representatives indicate there are at least $30 million in near-term

capital projects planned, including freezer and lighting efficiency projects as well as infrastructure needed for

permanent moorage of Icicle Seafood’s Northern Victor in Dutch Harbor.

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 6

Summary of BSAI Inshore Processing Economic Impacts Economic Impacts of Inshore Processing in the BSAI Region, 2016

Category Impact

Employment and Wages

BSAI Region Resident Processing Employment 1,136

BSAI Region Resident Processing Total Annual Wages $42 million

Alaska Resident Processing Employment 1,407

Alaska Resident Processing Total Annual Wages $48 million

Total BSAI Region Inshore Processing-Related Employment (excl. non-resident processing workers) 1,926

Total BSAI Region Inshore Processing-Related Wages (excl. non-resident processing worker wages) $82 million

Total Statewide Employment (excl. non-resident processing workers) 2,627

Total Statewide Wages (excl. non-resident processing worker wages) $112 million

Taxes

Seafood Taxes to BSAI Region Local Government $14.3 million

State of Alaska Shared Fishery Taxes-State Component $9.2 million

State of Alaska Shared Fishery Taxes-Local Component $9.2 million

Total Fish Taxes to State and Local Government $32.7 million

Capital Investment

Average Annual BSAI Region Capital Project Expenditure (2015-2017 average) $58 million

Total Annual Production Value

Total First Wholesale Value of BSAI Region Inshore Production $1.13 billion

Total Economic Output

Total Economic Activity in Alaska Associated with BSAI Inshore Processing and Related Commercial Fishing $1.56 billion

Note: 2016 tax data subject to revision. Source: McDowell Group.

Other Benefits from the Inshore Processing Industry

In addition to jobs and wages supported directly and

indirectly by the inshore sector, other benefits are realized

by the sector:

• Economies of scale resulting from southbound

movement of seafood products produced by the

inshore sector contributes to lower northbound

rates. Seafood continues to comprise the majority of southbound volume.

• The inshore sector supports the movement of thousands of processing and support workers into and

out of the region, primarily by airlines. The millions of dollars ($17 million+ in 2016) spent on airfare

helps maintain these air routes for communities and businesses.

• The inshore sector provides markets for local and other Alaska fishermen. Without inshore BSAI

processors, local fishermen would be challenged to find buyers for their seafood. In 2016, 205 permit

holders living the BSAI region harvested and sold $53 million worth of seafood.

• The inshore sector directly supports a variety of non-profit organizations and provides significant in-

kind contributions to local government and organizations.

Sand Point commercial fishing vessels

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 7

Introduction and Methodology

The purpose of this study was to measure the regional and statewide economic impacts of inshore seafood

processing in the Bering Sea/Aleutians Islands (BSAI) region. The inshore processing sector includes inshore and

floating processors in the Aleutians East Borough and Aleutians West Census Area. The analysis focuses on

direct and indirect employment and wages, as well as tax revenues flowing to local and state governments from

the inshore processing sector. It does not include employment and spending related to the harvesting sector.

This analysis also considers the contribution of various species to the economic stability of the BSAI inshore

processing sector. As described in this report, a diversified species mix supports year-round operations and

stability through harvest and market cycles. High-volume species such as pollock and Pacific cod are playing an

increasingly important role as crab, halibut, and sablefish volume and values have declined.

The results of this analysis demonstrate the inshore seafood sector is the primary source of economic activity

in the BSAI region and a critical source of income for the region’s communities and residents. It further illustrates

the importance of a diverse portfolio of species and products in sustaining the industry’s important regional

and statewide economic impacts.

Methodology and Data Sources

This analysis relied on public data, a survey of the largest BSAI inshore processors, executive interviews, and

economic impact modeling.

DATA

Key data sources for this study include Alaska Department of Labor and Workforce Development (ADOLWD),

Alaska Commercial Fisheries Entry Commission (CFEC), Alaska Department of Fish and Game (ADF&G), Alaska

Fisheries Information Network (AKFIN), and the Alaska Department of Revenue (DOR).

SURVEY/EXECUTIVE INTERVIEWS

A survey of five processing companies (UniSea, Westward Seafoods/Alyeska Seafoods, Trident Seafoods, Peter

Pan Seafoods, and Icicle Seafoods) with a total of 11 operations in the BSAI region was conducted to gather

information about in-state spending and investment in support of operations. Executive interviews were

conducted with representatives from the five companies, in addition to local city officials and other stakeholders.

ECONOMIC MODELING

Economic modeling is based in-part on IMPLAN and other proprietary data. The purpose of the modeling was

to measure indirect and induced (multiplier) economic effects. IMPLAN is the most widely-used U.S. input-

output model for analyzing the economic impact of industrial and commercial activity. Multipliers capture only

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 8

“backward linkages.” That is, they

capture only jobs associated with

purchases of goods and services by a

seafood processor (for example) and

its employees. Multipliers do not

capture “forward linkages,” or those

downstream jobs associated with

adding value to a seafood product

along the distribution and retail

chain.

It is important to note industry

multipliers measured by IMPLAN or

other models (the federal

government produces sets of industry

multipliers in its “RIMS” model) are approximations of highly complex economic relationships. IMPLAN nearly

always requires some degree of modification, particularly regarding the seafood industry, to account for non-

resident participation and the unique nature of employment and purchases of goods and services in the

commercial fishing industry.

STUDY AREA

The BSAI region used in this report includes Sand Point, King Cove, False Pass, Akutan, Unalaska, Atka, Adak,

and Saint Paul, along with the Aleutians East Borough.

PHOTO CREDITS

Photos used in this report are from the Alaska Seafood Marketing Institute, State of Alaska Department of

Commerce, Community, and Economic Development Division of Community and Regional Affairs, and other

public sources.

False Pass

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 9

Overview of BSAI Inshore Processing Sector

This section provides an overview of the volume and value of seafood produced by the BSAI inshore sector,

measured at the first wholesale level. First wholesale value is the value of a product when sold by a processor

to an entity outside its affiliate network and typically reflects the value of a product as it leaves Alaska. First

wholesale volume is the weight of processed or packaged product, in net weight terms, produced for sale to

buyers outside the processor’s affiliate network.

This overview of production statistics provides an important perspective on the economic impacts of inshore

processing in the BSAI region. In addition to illustrating the year-to-year variability of production volume and

value, it demonstrates the importance of a diversified, multi-species portfolio of products.

The time period from 2010 to 2016 is considered in the following analysis. A brief discussion on processor

employment and the seasonality of regional fisheries is also included in this chapter.

First Wholesale Volume and Value

The BSAI inshore sector is composed of land-based processing plants and floating processors. In 2016, seven

land-based plants and two floating processors from five companies accounted for most of the activity in this

sector, in addition to other smaller-scale operations.

Production Volume

In 2016, the inshore sector produced more than 745

million pounds of processed seafood from a variety of

species. Pollock products were the largest component,

accounting for 78 percent of volume. Pacific cod

products and opilio/tanner crab products contributed

12 and 5 percent of the total, respectively. Salmon (4

percent), king crab (1 percent), and all other species (2

percent) composed the remainder. In 2016, the BSAI

inshore sector accounted for approximately 28

percent of the total Alaska first wholesale volume of

about 2.7 billion pounds.

Alaska crab

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 10

Figure 1. BSAI Inshore First Wholesale Volume by Species, 2016

745 Million Pounds

Source: ADF&G and AKFIN; compiled by McDowell Group.

Between 2010 and 2016, the total volume of seafood products at the first wholesale level increased 40 percent,

from 533 million pounds to 745 million pounds. The primary component to this growth was an additional 187

million pounds of pollock production, representing a 47 percent increase for this species.

Pacific cod product volume peaked in 2014 at 106 million pounds before declining to 88 million pounds in 2016,

a level that is still 33 percent higher than that achieved in 2010. Salmon product volume more than doubled

over this period with significant year-to-year variation.

Opilio/tanner crab product volumes rose to a peak of 58 million pounds in 2012 before settling to 34 million

pounds in 2016, a 15 percent increase over 2010. Halibut (-51 percent), sablefish (-49 percent), and king crab (-

41 percent) experienced significant declines in product volumes because of reduced harvest levels.

Preliminary 2017 data indicate pollock product volume will be comparable to 2016 levels; an increased total

allowable catch (TAC) may support slight growth in product volume in 2018. Pacific cod product volume in 2017

was likely flat or slightly lower from 2016. Due to a 16 percent and 80 percent reduction in TAC for the BSAI and

GOA regions, respectively, Pacific cod product volume will be lower in 2018. Conversations with industry indicate

salmon volume in 2017 increased from 2016 but is expected to be lower again in 2018. All other categories are

anticipated to be flat or lower in 2017 and 2018, including crab.

Pollock78%

Pacific Cod12%

Opilio/Tanner Crab5%

Salmon4%

King Crab1%

Halibut <1%

Sablefish <1%

Other Species <1%

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 11

Table 1. First Wholesale Volume of BSAI Inshore Production by Species (Thousand Pounds), 2010-2016

Year Pollock Pacific Cod

Opilio/Tanner Crab Salmon King

Crab Halibut Sablefish Other Species Total

2010 396,448 66,618 29,264 11,530 12,238 5,492 2,916 8,356 532,861

2011 484,658 77,899 35,197 16,516 9,086 6,355 2,560 8,112 640,382

2012 498,687 90,557 57,504 7,260 8,422 3,967 3,112 9,433 678,941

2013 512,230 87,730 44,401 26,588 9,035 2,745 2,784 5,419 690,932

2014 537,887 105,882 41,628 17,325 9,415 1,207 2,141 6,573 722,058

2015 540,422 82,953 46,512 35,653 8,898 2,171 1,672 8,263 726,544

2016 582,999 88,413 33,515 25,557 7,251 2,711 1,490 3,109 745,045

Note: Includes land-based and floating processors in the BSAI region. Values may not sum due to rounding. Source: ADF&G and AKFIN; compiled by McDowell Group.

Production Value

In 2016, the total first wholesale value of seafood products generated by the BSAI inshore sector was valued at

$1.1 billion. Pollock products were again the largest component, contributing 53 percent of the total. Low

volume and high value opilio/tanner and king crab accounted for 16 and 11 percent of total value, respectively.

Pacific cod products totaled 14 percent, and all other species accounted for the remaining 6 percent. In 2016,

the BSAI inshore sector accounted for approximately 26 percent of the total Alaska first wholesale value of

nearly $4.2 billion.

Figure 2. BSAI Inshore First Wholesale Value by Species, 2016

$1.1 Billion

Source: ADF&G and AKFIN; compiled by McDowell Group.

Pollock53%

Opilio/Tanner Crab16%

Pacific Cod14%

King Crab11%

Salmon3%

Halibut2%

Sablefish 1%

Other Species <1%

Other6%

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 12

Between 2010 and 2016, the total first wholesale value of products produced by the inshore sector increased

26 percent, from $894 million to $1,126 million. Although the total volume of pollock products grew 47 percent

over this period, lower prices limited the increase in value to 28 percent, from $464 million to $594 million. In

contrast, while Pacific cod product volume increased 33 percent from 2010 to 2016, the total value of these

products grew 68 percent, from $92 million to $154 million. Increased value of Pacific cod fillets was a primary

factor supporting this growth.

Although the volume of opilio/tanner crab products (mainly sections) increased 15 percent between 2010 and

2016, the total value increased 92 percent, from $96 million to $184 million. Supported by strong volumes and

values, 2012 was the peak ($271 million) during this period for opilio/tanner products. Salmon product values

are defined by larger odd-year harvests of pink salmon, often one to three times larger than even years. Peak

value of $58 million was observed in 2015.

King crab product volume fell 41 percent over the 2010-2016 period, but higher prices limited the decline in

total value to a 16 percent reduction (from $140 million to $118 million). Halibut and sablefish experienced

similar declines in volume and a nearly proportional decline in total value, falling 47 and 44 percent, respectively.

Table 2. First Wholesale Value of BSAI Inshore Production by Species (Thousand Dollars), 2010-2016

Year Pollock Pacific Cod

Opilio/Tanner Crab Salmon King

Crab Halibut Sablefish Other Species Total

2010 $463,577 $91,735 $95,706 $29,886 $140,307 $44,324 $21,547 $6,457 $893,541

2011 $562,241 $129,829 $189,402 $43,659 $136,589 $55,309 $24,017 $7,007 $1,148,052

2012 $595,583 $137,487 $271,192 $25,266 $105,036 $28,721 $19,484 $5,884 $1,188,652

2013 $536,385 $132,205 $222,917 $55,308 $100,135 $13,355 $17,170 $4,339 $1,081,814

2014 $561,447 $151,264 $218,978 $36,787 $103,475 $7,413 $14,805 $4,555 $1,098,724

2015 $526,683 $114,156 $205,509 $58,405 $112,403 $16,194 $12,455 $6,023 $1,051,829

2016 $594,154 $153,682 $183,794 $38,182 $117,932 $23,341 $11,980 $2,732 $1,125,797

Note: Includes land-based and floating processors in the BSAI region. Values may not sum due to rounding. Source: ADF&G and AKFIN; compiled by McDowell Group.

First Wholesale Prices

An examination of first wholesale value per pound is a useful way to consider trends in the industry. Between

2010 and 2016, the average price of pollock products declined sharply after a peak in 2012 of $1.19 per pound.

The average price of $1.02 per pound in 2016 represented a 15 percent decline from 2012. Because pollock

accounts for such a significant portion of total first wholesale volume (78 percent in 2016), even a small change

in price has a large impact on total BSAI inshore production value.

Pacific cod values have been variable but generally rising, ranging from $1.38 per pound in 2010 and 2015 to a

high of $1.74 per pound in 2016. Opilio/tanner crab values have generally increased over this period as well,

with a low of $3.27 observed in 2010 and a high of $5.48 in 2016. Concurrently, king crab values per pound have

grown considerably, with significant fluctuations year-to-year. The highest value per pound for king crab was

$16.26 in 2016, two years after a low of $10.99 in 2014.

Halibut and sablefish prices moved together between 2010 and 2016, both declining to a low in 2013 before

recovering and ending the period above 2010 levels.

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 13

Table 3. Average First Wholesale Value of BSAI Inshore Production by Species (Per Pound), 2010-2016

Year Pollock Pacific Cod

Opilio/Tanner Crab Salmon King

Crab Halibut Sablefish Other Species

Average All

Species

2010 $1.17 $1.38 $3.27 $2.59 $11.47 $8.07 $7.39 $0.77 $1.68

2011 $1.16 $1.67 $5.38 $2.64 $15.03 $8.70 $9.38 $0.86 $1.79

2012 $1.19 $1.52 $4.72 $3.48 $12.47 $7.24 $6.26 $0.62 $1.75

2013 $1.05 $1.51 $5.02 $2.08 $11.08 $4.86 $6.17 $0.80 $1.57

2014 $1.04 $1.43 $5.26 $2.12 $10.99 $6.14 $6.92 $0.69 $1.52

2015 $0.97 $1.38 $4.42 $1.64 $12.63 $7.46 $7.45 $0.73 $1.45

2016 $1.02 $1.74 $5.48 $1.49 $16.26 $8.61 $8.04 $0.88 $1.51

Note: Includes land-based and floating processors in the BSAI region. Average figure is weighted. Source: ADF&G and AKFIN; compiled by McDowell Group.

Product Form

The following describes the most important

products produced by the inshore sector, by

volume. In 2016, surimi and skinless fillets

accounted for 29 and 21 percent of total first

wholesale volume, respectively. Opilio/tanner

sections contributed 4 percent, and Pacific cod

fillets and H&G products accounted for 4 and 3

percent, respectively. Pollock fillets with skin

and roe totaled 4 percent and all other products

(including fish meal, fish oil, salmon, and king

crab, among others) accounted for the

remainder.

Between 2010 and 2016, (due to larger harvest volume and reductions in other pollock product production)

pollock surimi and skinless fillet production roughly doubled, including 55 and 65 percent increases between

2010 and 2011, respectively. Challenged by generally weak market conditions, pollock roe and fillets with skin

production slowed over this period, falling 51 and 29 percent, respectively.

Opilio/tanner crab section production peaked at 57 million pounds in 2012, before declining to levels

comparable to 2010 in 2016. Larger harvests of Pacific cod have supported increased volume of fillets and H&G

products, and increased investment in fillet production. Fillet production grew 57 percent (from 19 million

pounds to 29 million pounds) and H&G production expanded 36 percent, from 16 million pounds to 22 million

pounds.

Pollock surimi

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 14

Table 4. First Wholesale Volume of BSAI Inshore Production by Product (Thousand Pounds), 2010-2016

Year Pollock Surimi

Pollock Fillets

(Skinless)

Opilio/Tanner Sections

Pacific Cod

Fillets

Pacific Cod H&G

Pollock Fillets

(W/Skin)

Pollock Roe Other Total

2010 103,691 79,315 29,135 18,611 15,820 28,239 17,699 240,352 532,861

2011 160,085 130,353 34,825 21,021 19,003 30,737 14,709 229,649 640,382

2012 181,998 102,503 57,350 22,297 39,625 41,205 16,480 217,483 678,941

2013 182,116 135,051 44,366 28,287 32,238 32,554 12,918 223,401 690,932

2014 189,531 154,266 41,325 27,362 39,097 24,297 20,698 225,483 722,058

2015 214,504 148,970 46,114 18,068 33,481 20,320 15,335 229,753 726,544

2016 218,131 158,287 33,041 29,291 21,508 20,107 8,598 256,082 745,045

Note: Includes land-based and floating processors in the BSAI region. Values may not sum due to rounding. Source: ADF&G and AKFIN; compiled by McDowell Group.

Focusing on the products described below, pollock contributed the largest amount of total value, with surimi

and skinless fillets contributing 20 and 19 percent (2016), respectively. Opilio/tanner crab sections accounted

for 16 percent and Pacific cod fillets and H&G products accounted for 8 and 2 percent of the total, respectively.

Pollock fillets with skins and roe each contributed 2 percent of the total and all other species, most notably king

crab, totaled the remainder.

The total value of pollock surimi and skinless fillets increased between 2010 and 2016 while pollock fillets with

skins and pollock roe declined in value. Opilio/tanner crab section value climbed significantly over this period.

Pacific cod fillets nearly doubled in value while Pacific cod H&G product increased slightly.

Table 5. First Wholesale Value of BSAI Inshore Production by Product (Thousand Dollars), 2010-2016

Year Pollock Surimi

Pollock Fillets

(Skinless)

Opilio/Tanner Sections

Pacific Cod

Fillets

Pacific Cod H&G

Pollock Fillets

(W/Skin)

Pollock Roe Other Total

2010 $140,649 $136,053 $95,341 $49,923 $15,058 $44,221 $35,577 $376,718 $893,541

2011 $183,551 $198,517 $187,539 $66,103 $23,105 $46,709 $44,902 $397,629 $1,148,052

2012 $227,438 $154,912 $271,080 $62,703 $48,022 $68,870 $55,811 $299,816 $1,188,652

2013 $168,281 $195,355 $222,914 $84,835 $25,014 $45,777 $35,069 $304,569 $1,081,814

2014 $190,583 $200,767 $217,714 $77,748 $37,595 $36,460 $49,598 $288,259 $1,098,724

2015 $214,819 $178,211 $203,959 $49,137 $34,574 $29,902 $25,377 $315,850 $1,051,829

2016 $228,362 $217,925 $182,245 $94,839 $21,578 $25,407 $16,960 $338,481 $1,125,797

Note: Includes land-based and floating processors in the BSAI region. Values may not sum due to rounding. Source: ADF&G and AKFIN; compiled by McDowell Group.

The data in Table 5 illustrates the importance of the inshore sector’s multi-species portfolio. Between 2010 and

2016, the total value of production was reasonably consistent, ranging from $1.05 billion to about $1.15 billion.

However, within that total are significant shifts in production value, among the various product forms.

Comparing the highest volume products on a per pound basis shows the significant value differentials between

products and species. In 2016, pollock product values ranged from $1.05 per pound for surimi to $1.97 per

pound for roe. Opilio/tanner sections averaged $5.52 per pound, the highest value of these products. Pacific

cod fillets averaged $3.24 a pound, nearly three times as much as Pacific cod H&G product. The average price

for total production (all species combined) was $1.51 per pound.

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 15

Between 2010 and 2016, prices for pollock products have either declined or been flat while opilio/tanner crab

sections values have been strong. Pacific cod fillet values have been variable but generally increased over this

period; H&G prices were basically flat. The average value of all BSAI products combined has trended lower

between 2010 and 2016, primarily as a result of lower pollock prices.

Table 6. Average First Wholesale Value of BSAI Inshore Production by Product (Per Pound), 2010-2016

Year Pollock Surimi

Pollock Fillets

(Skinless)

Opilio/Tanner Sections

Pacific Cod

Fillets

Pacific Cod H&G

Pollock Fillets

(W/Skin)

Pollock Roe Other Total

2010 $1.36 $1.72 $3.27 $2.68 $0.95 $1.57 $2.01 $1.57 $1.68

2011 $1.15 $1.52 $5.39 $3.14 $1.22 $1.52 $3.05 $1.73 $1.79

2012 $1.25 $1.51 $4.73 $2.81 $1.21 $1.67 $3.39 $1.38 $1.75

2013 $0.92 $1.45 $5.02 $3.00 $0.78 $1.41 $2.71 $1.36 $1.57

2014 $1.01 $1.30 $5.27 $2.84 $0.96 $1.50 $2.40 $1.28 $1.52

2015 $1.00 $1.20 $4.42 $2.72 $1.03 $1.47 $1.65 $1.37 $1.45

2016 $1.05 $1.38 $5.52 $3.24 $1.00 $1.26 $1.97 $1.32 $1.51

Note: Includes land-based and floating processors in the BSAI region. Average figure is weighted. Source: ADF&G and AKFIN; compiled by McDowell Group.

Seasonality of BSAI Fisheries

BSAI fisheries occur year-round and concurrently,

resulting in year-round economic activity that is

important to local communities. The year begins with

pot and trawl vessels harvesting Pacific cod in the

Bering Sea. Crabbing for opilio and tanner crab often

begins in January or February, and March brings the

start of halibut and sablefish fishing. Togiak’s herring

fishery takes place in April, and salmon harvests in

Area M and Bristol Bay begin in June and peak in July.

Concurrently, various pollock, Pacific cod, and

rockfish fisheries in the Bering Sea and Gulf of Alaska

open in June. Golden king crab is harvested in

August, and September brings additional Pacific cod

seasons. The year typically concludes with a Gulf of Alaska pollock season in October and Bering Sea king crab

in November.

Processors are often handling multiple (or the same) species from different gear types, vessel sizes and fisheries.

Floating processors often move between regions and fisheries to be used when needed. For example, a floating

processor may begin the year processing cod in the Bering Sea, then handle herring in Togiak before going to

Bristol Bay to process salmon. They may then go to Prince William Sound for salmon before returning to the

BSAI region in the fall to process Pacific cod.

The processing workforce fluctuates somewhat as seasons open and close. Monthly data from the Aleutians

West Census Area (which includes Unalaska, St. Paul, Adak, and other communities) provides insight into these

BSAI trawler

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 16

seasonal employment patterns.2 In 2016, peak monthly employment (including residents and nonresidents)

occurred in February with 3,063 positions before briefly declining to a low of 900 positions in May. The

processing workforce increased to 2,365 positions in August before declining to end the year at 973 jobs in

December. The monthly employment trends in 2016 were generally consistent with previous years. The

industry’s relatively high level of activity throughout the year provides opportunity for local residents to be

employed year-round in seafood processing related occupations. More detailed analysis of seafood processing

employment in the BSAI region is provided in the following chapter.

Figure 3. Aleutians West Census Area Average Monthly Seafood Processing Employment, 2016

Note: Data may undercount employment associated with floating processors. The employment category of Manufacturing is used as a proxy to understand processing employment which dominates this category in the region. Source: Alaska Department of Labor and Workforce Development; compiled by McDowell Group.

Table 7. Aleutians West Census Area Monthly Seafood Processing Employment, 2012-2017 2012 2013 2014 2015 2016 2017

JAN 2,831 3,062 3,193 2,845 2,664 2,387

FEB 3,916 3,903 4,136 2,773 3,063 2,835

MAR 3,774 3,775 3,844 2,706 2,941 2,606

APR 1,859 2,433 2,908 2,119 2,017 2,144

MAY 1,479 1,287 1,238 1,139 900 1,023

JUN 2,281 2,161 2,075 1,840 1,955 1,552

JUL 2,384 2,293 2,274 2,443 2,336 1,752

AUG 2,406 2,306 2,251 2,283 2,365 1,804

SEP 2,274 2,214 2,156 2,120 2,096 1,468

OCT 2,036 1,927 1,817 1,537 1,583 N/A

NOV 1,632 1,651 1,607 1,241 1,124 N/A

DEC 797 878 845 1,061 973 N/A

Annual Ave. 2,306 2,324 2,362 2,009 2,001 - The employment category of Manufacturing is used as a proxy to understand processing employment which dominates this category in the region. Source: Alaska Department of Labor and Workforce Development; compiled by McDowell Group.

2 Monthly data for the entire BSAI region is not available due to confidentiality requirements.

2,664

3,0632,941

2,017

900

1,955

2,336 2,3652,096

1,583

1,124973

Ave

rag

e M

on

thly

Em

plo

ymen

t

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 17

Employment and Wage Impacts

This section describes the direct employment and wages of the inshore sector, as well as indirect multiplier

effects associated with the sector’s operating and capital expenditures.

Inshore processing directly accounted for a monthly average of 3,750 jobs in the BSAI region in 2016, including

2,000 jobs in the Aleutians West Census Area and 1,750 in the Aleutians East Borough.3 This employment

includes local residents, other Alaska residents, and non-residents. These workers earned an estimated $194

million in total annual wages. The BSAI region accounts for approximately 40 percent of all inshore seafood

processing employment and wages in Alaska. Statewide, the industry employed a monthly average of 9,747

workers in 2016 (with peak month employment of 20,222), with total annual wages of $437 million.

Processing Industry Employment by Residency

The BSAI inshore sector hires local BSAI residents, other Alaska residents, and nonresidents. In 2016, the sector

employed a total of 6,190 individuals. The nonresident component was largest, accounting for 4,783 workers,

or 77.3 percent of the total. Alaska residents accounted for 22.7 percent, including 1,136 local BSAI residents

(18.3 percent), and 271 other Alaska residents (4.4 percent).

Between 2006 and 2016, the total number of processing workers averaged 6,957, with notable year-to-year

fluctuations. Over this time, the total number of Alaskans employed in the BSAI processing sector has slowly

increased. In 2006, Alaska residents held 16 percent of processing jobs while in 2016 that proportion had

increased to about 23 percent. The local (BSAI) resident participation rate has seen notable growth, more than

doubling from 7 percent to 18 percent over the ten-year period.

Table 8. BSAI Processing Workers by Residency, 2006-2016

Year BSAI Local Resident Workers

Other Alaska

Resident Workers

Nonresident Workers

Total Workers

BSAI Local Resident %

of Total

Other Alaska

Resident % of Total

Nonresident Workers %

of Total

2006 538 758 6,603 7,899 6.8% 9.6% 83.6%

2007 742 661 6,062 7,465 9.9% 8.9% 81.2%

2008 733 902 5,640 7,275 10.1% 12.4% 77.5%

2009 997 486 4,780 6,263 15.9% 7.8% 76.3%

2010 957 408 4,626 5,991 16.0% 6.8% 77.2%

2011 1,060 417 5,394 6,871 15.4% 6.1% 78.5%

2012 1,184 281 5,752 7,217 16.4% 3.9% 79.7%

2013 1,129 450 5,987 7,566 14.9% 5.9% 79.1%

2014 1,167 325 5,933 7,425 15.7% 4.4% 79.9%

2015 1,227 293 4,842 6,362 19.3% 4.6% 76.1%

2016* 1,136 271 4,783 6,190 18.3% 4.4% 77.3%

*2016 BSAI resident and other Alaska resident worker counts are estimates based on 2015 shares of total workers. Note: Data may undercount employment associated with floating processors. Source: Alaska Department of Labor and Workforce Development and McDowell Group estimates.

3 Aleutians East Borough employment is a McDowell Group estimate. Data is not available from ADOLWD due to confidentiality restrictions.

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 18

Wages paid by the BSAI inshore sector totaled $156.1 million in 2016, including $107.9 million (70 percent) paid

to nonresidents, an estimated $42.2 million (27 percent) to BSAI local residents, and $6.1 million to other Alaska

residents.

The average resident worker is paid more than the average nonresident worker; while BSAI local resident

workers held 18 percent of processing jobs in 2016, they received 27 percent of wages.

Between 2006 and 2016, Alaska resident participation increased in the BSAI processing sector, with their

proportion of total wages also increasing. In 2006, Alaska residents received 23 percent of total wages whereas

in 2016 they received nearly one-third (31 percent). Local wage growth is even more impressive; since 2006,

BSAI local resident proportion of wages has doubled from about 14 percent to 27 percent of total wages paid.

Table 9. BSAI Processing Worker Wages by Residency (Million Dollars), 2006-2016

Year BSAI Local Resident Wages

Other Alaska

Resident Wages

Nonresident Wages

Total Wages

BSAI Local Resident %

of Total

Other Resident %

of Total

Nonresident Workers %

of Total

2006 $17.4 $11.8 $99.6 $128.9 13.5% 9.2% 77.3%

2007 $22.9 $10.0 $91.3 $124.2 18.4% 8.1% 73.5%

2008 $22.4 $16.6 $79.6 $118.6 18.9% 14.0% 67.1%

2009 $27.1 $7.8 $70.2 $105.1 25.8% 7.4% 66.8%

2010 $26.2 $7.5 $71.6 $105.4 24.9% 7.1% 67.9%

2011 $31.5 $7.8 $87.0 $126.3 24.9% 6.2% 68.9%

2012 $32.7 $4.7 $91.9 $129.3 25.3% 3.6% 71.1%

2013 $32.2 $10.3 $98.8 $141.2 22.8% 7.3% 70.0%

2014 $36.7 $5.5 $98.8 $141.0 26.0% 3.9% 70.1%

2015 $41.1 $5.9 $97.9 $144.8 28.4% 4.1% 67.6%

2016* $42.2 $6.1 $107.9 $156.1 27.1% 3.9% 69.1%

*2016 BSAI resident and other Alaska resident wages are estimates based on 2015 shares of total wages. Values have been rounded. Source: Alaska Department of Labor and Workforce Development and McDowell Group estimates.

Contribution to Total Employment in 2016

The BSAI inshore seafood processing sector is by far the largest

employer in the region. Of the 2,845 jobs held by BSAI community

residents in 2016, 1,136 were in seafood processing, directly accounting

for 40 percent of all employment in the region. These positions included

laborers, technicians, welders, machinists, and managers, among many

others.

Employment Multiplier Effects

In-state spending on goods and services creates additional jobs and

wages in the BSAI region and elsewhere in Alaska. These multiplier

effects include two basic components: BSAI workers processing pollock

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 19

• Indirect impacts: jobs and income supported through the inshore sector’s expenditures on goods,

services, and tax payments

• Induced impacts: jobs and income supported when processing workers spend their wages in the

region and elsewhere in Alaska

Multiplier effects in the private sector are relatively low for most of the individual BSAI region communities

given that local economies are generally small with limited service and supply sector development. Nevertheless,

many of the region’s retail and service sector businesses rely on local spending generated by the seafood

processing industry. Further, local government dependence on seafood-related taxes means that many of the

region’s 743 local government jobs – and $31 million in annual wages – are dependent on the region’s seafood

processing industry. Tax revenues are detailed in the following chapter.

At the statewide level, the multiplier effects are larger, a result of spending flowing through the BSAI and Alaska

economies. Economic impacts are also larger at the statewide level because all revenue generated by the State

of Alaska Fisheries Business Tax and other state taxes are captured in the analysis.

Spending by inshore processors is the key driver of multiplier effects in the region. This spending is described

below, followed by a summary of the results of McDowell Group’s analysis of indirect and induced economic

impacts.

In-Shore Processing Operating and Capital Expenditures

The BSAI inshore sector spends hundreds of millions of dollars annually in

operating and capital costs. These expenditures support jobs and wages in

the region and elsewhere in Alaska.

OPERATING COSTS

The BSAI inshore sector spends significant capital annually in support of

operations. In 2016, based on a survey of the largest BSAI inshore processors,

spending in Alaska (with businesses with an Alaska presence) totaled $220

million, including:

• $100 million on shipping

• $34 million on fuel and other petroleum products

• $32 million on construction

• $17 million on air transportation services

• $6 million on public services (electric power, water, waste water)

• $31 million on a broad array of other goods and services

CAPITAL EXPENDITURES

In the three-year period between 2015 and 2017, the BSAI inshore sector made capital improvements totaling

approximately $175 million.4 (These expenditures are separate from ongoing operating costs.) A significant

4 This figure includes spending with non-Alaska businesses.

Breaded fish sticks from Alaska pollock

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 20

portion of this investment has been focused on expanding capacity to handle and add value to Pacific cod, in

addition to surimi, dock improvements, freezer capacity, land purchases, and other projects.

Absent significant market disruption, the industry is anticipated to maintain this level of capital investment in

the near-term. Discussions with industry indicate planned freezer and lighting efficiency projects, significant

investment related to permanent moorage of Icicle Seafood’s Northern Victor in Dutch Harbor, and a variety of

other projects. At least $30 million in near-term planned capital projects were identified.

Total (Direct, Indirect and Induced) Employment

In 2016, multiplier effects associated with inshore processing in the BSAI region resulted from the following:

• Local and statewide expenditure of a portion of $48 million in wages earned by Alaska residents

employed in seafood processing positions (including $42 million earned by local BSAI residents)

• Nearly $24 million in seafood-related taxes accruing to local governments in the BSAI region annually

and another $9 million to the State of Alaska, where it is spent on a range of public services or

projects

• $220 million in processor purchases of goods and services from Alaska vendors

Based on modelling conducted for purposes of this study, BSAI region inshore processing-related indirect and

induced employment in 2016 is estimated at 790 jobs with $40 million in annual wages. Statewide, BSAI inshore

processing multiplier effects included 1,220 indirect and induced jobs with $64 million in annual wages.

In summary, the inshore BSAI processing sector supported an estimated total of 2,627 Alaska resident jobs with

$112 million in annual wages in 2016, including direct, indirect, and induced employment. This includes BSAI

region impacts of 1,926 Alaskan jobs with $82 million in annual wages.

Table 10. Employment and Wage Impacts of Inshore Processing in the BSAI Region, 2016 Category Impact

Employment and Wages

BSAI Region Resident Processing Employment (number of resident workers) 1,136

BSAI Region Resident Processing Total Annual Wages $42 million

Alaska Resident Processing Employment 1,407

Alaska Resident Processing Total Annual Wages $48 million

BSAI Region Indirect and Induced Employment 790

BSAI Region Indirect and Induced Total Annual Wages $40 million

Statewide Indirect and Induced Employment 1,220

Statewide Indirect and Induced Total Annual Wages $64 million

Total BSAI Region Inshore Processing-Related Employment (excl. non-resident processing workers) 1,926

Total BSAI Region Inshore Processing-Related Wages (excl. non-resident processing worker wages) $82 million

Total Statewide Employment (excl. non-resident processing workers) 2,627

Total Statewide Wages (excl. non-resident processing worker wages) $112 million

Source: McDowell Group.

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 21

Total Economic Impact

A 2017 study conducted by McDowell Group for the Alaska Seafood Marketing Institute (ASMI) measured the

statewide and regional economic impact of Alaska’s seafood industry. That study measured approximately $5.2

billion in total annual statewide seafood industry economic output, based on an average of 2015 and 2016

harvests and production.

BSAI inshore processing accounts for a significant portion of the seafood industry’s economic impact in Alaska.

For example, in 2016 BSAI inshore processing accounted for:

• 28 percent of Alaska’s total first wholesale volume of about 2.7 billion pounds

• 26 percent of Alaska’s total first wholesale value of nearly $4.2 billion

• 44 percent of seafood processing wages paid in Alaska, totaling $437 million

• 46 percent of Fisheries Business Tax paid to the State of Alaska, totaling $39.9 million (a portion of

which is shared with local governments)

• 56 percent of all fish taxes paid in Alaska, including Fisheries Business Tax and taxes levied by local

governments, which together totaled $58.8 million

It is beyond the scope of this study to comprehensively measure the economic impacts of the commercial

fishing activity that supplies BSAI inshore processors, as well as the impact of processors themselves. However,

modeling conducted by McDowell Group indicates that approximately 30 percent of the seafood industry’s total

economic impact in Alaska can be attributed to BSAI inshore processing and related commercial fishing activity.

Based on that estimate, BSAI inshore processing has a total economic output footprint of approximately $1.56

billion in 2016.

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 22

Community Overview and Tax Revenue

This section provides an overview of BSAI communities and details tax revenue paid by the inshore sector. Taxes

paid to the Aleutian East Borough and State of Alaska are also described.

Community Profiles

In the BSAI region, local governments and the Aleutians East Borough (AEB) generate revenue from local

fisheries-related taxes, in addition to receiving a portion of fisheries-related taxes paid to the state. These taxes

are additive: for example, a pound of seafood delivered to Akutan is taxed by the City of Akutan, AEB, and the

State of Alaska. The seafood industry also contributes tax revenue through property, sales, and other taxes. In

2016, local raw fish tax and the local share of the State of Alaska Fishery Business Tax paid by the BSAI inshore

sector totaled more than $22.6 million. In addition, local property and other taxes totaled more than $1.1 million,

and the State of Alaska generated approximately $9.2 million.

Table 11. Summary of Local Raw Fish Tax and Shared Fisheries Business Tax Revenue by BSAI Community, 2016

Area Local Raw Fish Tax

Shared Fisheries

Business Tax Total

Unalaska $5,123,372 $4,411,278 $9,534,650

Aleutians East Borough $2,468,884 $1,723,925 $4,192,809

Akutan $2,098,763 $1,146,251 $3,245,014

Saint Paul $1,771,910 $887,445 $2,659,355

King Cove $1,045,831 $420,087 $1,465,918

Sand Point $674,055 $235,368 $909,423

Adak $76,313 $169,137 $245,450

False Pass $79,800 $148,530 $228,330

Atka $69,619 $34,093 $103,712

Total $13,408,547 $9,176,114 $22,584,661 Note: Excludes King Cove’s Fisheries Business Impact Tax ($100,000). Also excludes property tax and sales tax paid by the processing industry. Source: DOR, DCCED; compiled by McDowell Group.

Unalaska is the largest community in the region, with a population of about 4,300. All other BSAI communities

have fewer than 1,000 residents. Unalaska also has the highest number (1,717 in 2016) of locally employed

residents. Of this total, 804 workers (47 percent) were employed in the local processing sector. With 163 of 211

local workers employed in the inshore sector (2016), Akutan had the highest proportion (77 percent) of local

engagement in seafood processing. While community-level data on seafood processing wages is limited, it is

evident that the inshore sector contributes a large portion of wages earned in BSAI communities.

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 23

Table 12. Select BSAI Local Community Attributes, 2016

Area Population* Total Annual

Wages (Million Dollars)

Employed Local Residents

(Age 16+)

Local Resident Workers

Employed in Processing

Sector**

Processing Sector % of

Total

Unalaska 4,341 $83.2 1,717 804 47%

Akutan 993 $7.7 211 163 77%

King Cove 925 $6.1 196 30 15%

Sand Point 915 $8.2 244 55 23%

Saint Paul 389 $6.3 187 7 4%

Adak 308 $1.6 39 0 0%

Atka 54 $0.9 35 1 3%

False Pass 42 $0.5 19 1 5% *Population estimates are for calendar year 2017. Excludes floating processor employment. ** Data includes only workers who earned most of their annual wages in manufacturing and therefore may undercount actual employment in the sector. Assumes all manufacturing activity in the area in related to seafood processing. Source: DOLWD, Alaska Local and Regional Information; compiled by McDowell Group.

Unalaska

Located approximately 800 miles west of Anchorage, Unalaska’s (population 4,341) Port of Dutch Harbor has

been the largest seafood port in the U.S. by volume for 20+ years. Local residents who own commercial fishing

harvesting rights earned about $22 million in 2016 from participation in Alaska fisheries, primarily from BSAI

groundfish.5

The area is the economic hub of the BSAI region with

daily jet service, a moderate level of marine services,

and large-scale processing activity. In 2016, about

770 million pounds of seafood worth more than

$220 million was landed at Dutch Harbor.6

Groundfish such as pollock and cod account for most

of the volume, in addition to crab, rockfish, and other

species. Note that these figures do not include

significant volumes of transshipped seafood

harvested and processed by catcher/processors or

motherships.

The land-based plants of Unisea, Alyeska Seafoods, and Westward Seafoods are the primary processors in the

area, as well as floating processors owned by Icicle Seafoods and Trident Seafoods. These plants produce a wide

variety of products, including pollock surimi and fillets, Pacific cod headed and gutted (H&G) fish and fillets,

crab sections, and more.

5 Note: Includes Dutch Harbor residents. 6 Fisheries of the United States 2016, National Marine Fisheries Service Office of Science and Technology, https://www.fisheries.noaa.gov/resource/document/fisheries-united-states-2016-report; ADF&G COAR.

Unalaska

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 24

Icicle Seafoods’ Northern Victor, a 380-foot floating processor, was permanently moored in Dutch Harbor within

city limits in late 2017. The addition of this plant, which is capable of handling pollock, cod, and other species,

is anticipated to increase local fish taxes. Additional economic impact will occur from an increase in Icicle’s local

purchases of goods in services and local spending by the addition of its 100-150 workers.

According to budgeted 2016 figures, the inshore sector directly accounted for approximately 30 percent of

Unalaska’s $32.1 million in operating revenues.7 A 2.0 percent raw fish tax generated $5.1 million and Unalaska’s

share of the Fisheries Business Tax totaled about $4.4 million.8

In 2016 the City generated $7.8 million from a 3.0 percent sales tax. This tax is paid by the inshore sector when

purchasing supplies locally or when processing workers bought food, clothing, entertainment, and other goods

and services. Vessels making deliveries to local plants also pay this tax when purchasing supplies, groceries and

fuel. Similarly, the in-shore processing sector contributed a portion of Unalaska’s $0.2 million in bed tax revenue.

Property taxes paid by processors are an important source of revenue for Unalaska. Unisea, Westward Seafoods,

and Alyeska Seafoods have properties in Unalaska with a combined assessed value of $96 million (16 percent

of total assessed real and personal property value in Unalaska). At the City’s 10.5 mill rate, about $1 million in

property tax revenue is generated annually. The inshore sector also purchases electricity from the city-run power

utility.

Aleutians East Borough (AEB)

Including the communities of Sand Point, King Cove, False Pass, Akutan, Cold Bay, and Nelson Lagoon, the

Aleutians East Borough is home to 2,977 residents. While not a year-round community, Port Moller is located

in the Borough (Peter Pan Seafoods has a plant in Port Moller).

Tax revenue paid by the inshore sector is the largest component of operating revenue for borough government

thanks to a 2.0 percent raw fish tax levied on seafood landed in the AEB (in addition to other local and state

taxes); in 2016, this tax generated $2.5 million. Additionally, the AEB received $1.7 million in shared State of

Alaska Business Landings Tax. These (and other) revenues are used to support capital projects throughout the

region, maintain operations at the Akutan Airport, and provide other services.

Akutan

The community of Akutan is home to 993 residents and located about 40 miles east of Unalaska. Eight local IFQ

and limited entry permit owners earned $0.6 million from the harvest of halibut and other groundfish in 2016.

7 https://www.commerce.alaska.gov/dcra/dcrarepoext/RepoPubs/FinDocs/UnalaskaFY2017Budget.pdf 8 Note: Unalaska generated $7.8 million dollars from the State of Alaska Resource Landings tax. This tax is paid by vessels transshipping seafood caught outside State of Alaska waters.

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 25

Trident Seafoods’ Akutan plant is the largest

seafood processing plant in North America,

with a peak workforce of 1,400 and

processing capacity of more than three

million pounds of seafood per day. The plant

operates year-round and is primarily focused

on processing pollock and Pacific cod,

though it handles crab, halibut, and other

species. In addition to traditional pollock and

Pacific cod products, the facility produces

fishmeal, roe, and fish oil products.

Revenue generated from taxes on seafood

landed at the local processing plant typically

accounts for around 70-90 percent of the operating revenue for the City.9 In 2016, $2.1 million was generated

from a 1.5 percent raw fish tax and the City received an additional $1.1 million in shared Fisheries Business tax.

The City of Akutan uses this (and other) revenue to support operations at the Akutan airport as well as provide

a local daycare, library, and health clinic.

City of Saint Paul

Saint Paul, a community of 389 residents, is located on Saint Paul Island, 290 miles northwest of Unalaska. As of

2016, 22 residents held permits to harvest Alaska seafood (including IFQs and Alaska Limited Entry Permits). In

2016, these residents harvested fish with a total ex-vessel value of $2.0 million, primarily from local harvest of

halibut.

The area has a long history with commercial fishing, particularly around the king and opilio crab fisheries. Since

the 1970s, several onshore plants have operated on the Island and floating processors commonly anchor nearby.

Currently, the Trident Seafoods plant is the only processing facility operating onshore. The facility is primarily

designed to process opilio crab with capacity to handle up to 500,000 pounds per day. King and tanner crab

are also processed, in addition to some halibut and other groundfish. Central Bering Sea Fishermen’s Association

(the local CDQ) processes its IFQ halibut allocation at the plant. The plant is seasonal, open in the winter for

crab and in the summer for halibut, with peak employment of up to 400 workers.

In 2016, the City generated total of $3.8 million10 in revenue, of which at least 70 percent was directly connected

to the inshore processing sector. The local 3.0 percent raw fish tax generated $1.8 million and the local portion

of the State of Alaska Fisheries Business tax totaled $0.9 million. Additionally, the inshore sector paid a portion

of the $0.4 million in sales tax revenue and contributed other fees and charges associated with operating in

Saint Paul.

9 https://www.commerce.alaska.gov/dcra/dcrarepoext/RepoPubs/FinDocs/AkutanFY2017Budget.pdf 10 https://www.commerce.alaska.gov/dcra/dcrarepoext/RepoPubs/FinDocs/SaintPaulCY2016Audit.pdf

The City of Akutan and Trident Seafood’s processing plant

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 26

King Cove

Located 80 miles west of Sand Point, the community is home to 925 residents. In 2016, 38 resident permitholders

earned $9.2 million in ex-vessel value from commercial fishing, primarily from groundfish and salmon.

The area has hosted processing operations since the early 1900s. Today, Peter Pan Seafoods operates the sole

plant in King Cove, which operates with a peak workforce of 500. In addition to having the largest salmon

canning operation in Alaska, the facility also handles crab, pollock, halibut, sablefish, and other species.

Tax revenue associated with the local processing plant generally accounts for at least 60 percent of King Cove’s

operating revenue. In 2016, the City earned $1.1 million from a 2.0 percent raw fish tax and received an

additional $0.4 million in shared State of Alaska Fisheries Business Tax. The City also generated another $0.1

million from a Business Impact Tax paid exclusively by Peter Pan Seafoods. The inshore sector also paid a portion

of the $0.9 million generated by a 6.0 percent sales tax.

Sand Point

Located 550 miles southwest of

Anchorage, Sand Point is home to 915

residents. In 2016, this total included 100

commercial fisheries permit holders (85

active), who earned $16.1 million from a

variety of fisheries, including local

groundfish and salmon fisheries. The local

fleet is one of the largest of any BSAI

community and includes gillnet, seine,

trawl, jig, and pot vessels.

The local inshore sector includes a

processing plant owned by Trident

Seafoods and a small Peter Pan Seafood’s

support operation which does not process seafood. The Trident Seafoods facility operates year-round, with

pollock, Pacific cod, and pink salmon being the primary focus, in addition to other salmon species, halibut, and

sablefish. The plant has a daily capacity of up to 1,500,000 pounds of pollock or 350,000 pounds of salmon.

In recent years, about one-third or more of the City’s operating budget has been supported by a 2.0 percent

raw fish tax and its share of the Fisheries Business Tax. In 2016, these two sources totaled $0.7 million and $0.2

million, respectively. The sector also contributes to local services through Sand Point’s 4.0 percent sales tax

which generated $0.9 million in 2016. Trident Seafoods is also an important customer for the city-owned sewer

and water utilities.

Other Communities

Other communities in the BSAI region realize benefit from tax revenue and general economic activity supported

by the inshore processing sector. The 42-resident community of False Pass generated more than $0.1 million

The Sand Point harbor

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 27

from a 2.0 percent raw fish tax and shared fisheries taxes from the State of Alaska in 2016.11 The City of Adak

(308 residents) received approximately 25 percent of its operating budget from a 2.0 percent raw fish tax and

shared State of Alaska fisheries taxes paid by the inshore sector. 12 The sector also paid a portion of the City’s

4.0 percent sales tax which generated $0.3 million in 2016.13 Revenue associated with the one local processor

supported nearly all the tax revenue generated by the City of Atka (54 residents), or about a quarter of its

operating budget.14

State of Alaska Tax Revenue

The Fisheries Business Tax is the primary tax paid by the BSAI inshore sector to the State of Alaska. Levied on

the ex-vessel value of seafood prior to processing, the rate varies from 1 to 5 percent, depending on the type

of facility. Typically, 50 percent of the revenue is shared with the city or borough where the processing takes

place. When the processing plant is located in both a city and borough, each entity receives 25 percent. In 2016,

the state generated $39.9 million from this tax (statewide). Approximately $9.2 million of the shared component

went to BSAI communities and the AEB. In addition to the Fisheries Business Tax, the BSAI inshore sector pays

Alaska’s Corporate Income Tax. Confidentiality restrictions prevent publication of this tax revenue.

Although not paid by the inshore processing sector, the Resource Landings Tax is also an important source of

seafood-related tax revenue for the State of Alaska and local communities. This tax ranges from 1.0 to 3.0

percent and is levied on the fair-market value of seafood harvested outside State of Alaska waters and

transshipped through an Alaska port. Revenue generated from this tax is shared with the communities and

boroughs where transshipments occur. Unalaska is generally the largest recipient of the shared component,

receiving nearly all the $7.8 million which went to BSAI communities in 2016.

11 https://www.commerce.alaska.gov/dcra/dcrarepoext/RepoPubs/FinDocs/FalsePass2016CertifiedFinancialStatement.pdf 12 Note: A portion of shared State of Alaska fisheries tax revenue received by Adak and Atka may have been paid by funds originating from the non-BSAI inshore sector. 13 https://www.commerce.alaska.gov/dcra/dcrarepoext/RepoPubs/FinDocs/AdakFY2016CertifiedFinancialStatement.pdf 14 https://www.commerce.alaska.gov/dcra/dcrarepoext/RepoPubs/FinDocs/AtkaFY2016CertifiedFinancialStatement.pdf

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 28

Other Benefits from Inshore Processing in the BSAI Region

In addition to the employment opportunities provided to local residents, and the significant tax benefits

accruing to local governments in the BSAI region, there are a range of other benefits resulting from inshore

processing, as described below.

Lower-cost Shipping

Economies of scale resulting from southbound movement of seafood products produced by the inshore sector

contribute to lower northbound rates. Based on anecdotal conversations with transportation firms, these

reduced rates help lower the cost for groceries, building supplies, and other consumer goods. Shipping vessels

used to supply the inshore sector will often carry material and other supplies to BSAI communities. Processors

surveyed for purposes of this project reported shipping expenditures totaling $100 million, including inbound

shipments of supplies and outbound shipments of seafood products.

MAINTAINING AIR ROUTES

Each year, the inshore sector supports the movement of thousands of processing and support workers into and

out of the region, primarily by airlines. The millions of dollars ($17 million+ in 2016) spent on airfare helps

maintain these air routes for the community and other businesses.

MARKETS FOR LOCAL COMMERCIAL FISHERMEN

The inshore processing sector provides markets for local and other Alaska fishermen. In 2016, 205 BSAI residents

owned and utilized 300 commercial fishing permits, catching 170 million pounds worth $53 million. Not all of

this harvest is from BSAI region fisheries but a significant portion is from within the region and sold to BSAI

processors. Without inshore BSAI processors, local fishermen would be challenged to find buyers for their catch.

Though not quantified in this study, the economic impact of commercial fishing conducted by residents of the

region is an important aspect of local and regional economic well-being. Typically, about half of ex-vessel

income becomes personal income of skippers and crew, so by buying fish from local fishermen, processors are

indirectly generating additional income for local residents.

Table 13. Aleutians East Borough (AEB) and Aleutians West Census Area (AWCA) Resident Alaska Fishery Earnings, Harvest, and Participation, 2016

Ex-vessel Earnings (Million Dollars)

Ex-vessel Harvest (Million Pounds)

Number of Permit Holders who Fished

AEB AWCA AEB AWCA AEB AWCA

Groundfish X $10.8 X 63.4 42 10

Halibut $1.9 X 0.4 X 45 41

Salmon X $1.0 X 1.2 0 7

Crab X X X X 2 2

Sablefish X X X X 1 3

All Fisheries Combined $29.0 $24.3 103.2 67.2 155 50

Note: X indicates data is withheld to preserve confidentiality. All Fisheries Combined category includes withheld data and represents unduplicated participation. Source: CFEC; compiled by McDowell Group.

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 29

NON-PROFIT AND COMMUNITY SUPPORT

The inshore sector directly supports a variety of non-profit organizations, along with in-kind contributions to

local government and organizations. Examples include:

• Direct support of non-profit organizations including the Akutan Culture Camp, Unalaskans Against

Sexual Assault & Family Violence, Alaska Boy Scouts, and Alaska Peace Officers, among others

• Initial and on-going funding for the Iliuliuk Family and Health Services Inc. clinic in Unalaska

(including $1.2 million by three processing companies for construction)

• Construction and ongoing support of Akutan community center

• Annual funding of scholarships to graduating high school students

• Frequent donations of crab and other products to local non-profits for raffles, auctions, and to Senior

Center lunch programs

• Reduced school district shipping costs for groceries/produce transported on processors’ northbound

containers and direct support of area school districts

• Hundreds of thousands of pounds of seafood donated to SeaShare, which has disbursed nearly two

million servings of seafood to food banks across the nation in the last three years

• Community support including financially contributing to the purchase of the City of Sand Point’s fire

truck and by providing the City of Akutan waste services when its incinerator was not functioning

Multi-Species Portfolio

Role of Multi-Species Portfolio

Participants in Alaska’s state and federal fisheries

deal with significant uncertainty, including: global

competition on supply and substitutes; workforce-

related issues such as recruitment, training, and

retention; significant variance in harvest volume and

value; geopolitical risk and currency fluctuations;

and, access to capital.

In combination with a diversified portfolio of species

which can be processed into a variety of products,

the significant volumes supported by pollock and

Pacific cod fisheries provide the foundation upon

which the inshore processing sector’s economic

impacts are built.

COMMUNITY/WORKFORCE EFFECTS

With relatively long seasons, pollock and Pacific cod contribute to year-round operations in the BSAI. In contrast

to areas with shorter seasons, BSAI communities have greater economic opportunity for local residents and

businesses thanks to their year-round workforce demands.

BSAI trawl vessels

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 30

Because groundfish fisheries offer multiple and overlapping seasons (in addition to non-groundfish fisheries),

processors can support a year-round workforce. This contrasts with an area like Bristol Bay, which operates

under a compressed fishing schedule in the summer. While the BSAI region supports processing employment

in every month of the year, the Bristol Bay salmon fishery sees minimal processing employment outside of the

May-August window. For example, the lowest employment observed in the Aleutians West Census Area’s

processing sector was 900 positions in May; in the same year, a low of 36 workers were employed in the Bristol

Bay Borough’s processing sector in January.15

By employing a significant local workforce, social and civic engagement between the industry and the

community are enhanced. In addition, lower cost and more frequent air and water transportation service is

available than is typical in communities without of a year-round seafood processing industry.

Figure 4. Aleutians West Census Area and Bristol Bay Borough Monthly Processor Employment, 2016

Note: Data may undercount employment associated with floating processors. Source: Alaska Department of Labor and Workforce Development; compiled by McDowell Group.

FINANCIAL DIVERSITY

Having access to multiple species that support a variety of product forms with diverse markets (supports

financial viability when one or more species are affected by low prices, reduced harvest levels, or other

challenges. For example, COAR data indicate the financial importance of Pacific cod to the BSAI inshore sector

has increased in recent years as king crab, halibut, and sablefish volume and values have declined. In 2010,

Pacific cod composed slightly more than 10 percent of first wholesale value for the region; in 2016 this

proportion increased to nearly 14 percent. (For some BSAI inshore platforms, this ratio can be more than 20-30

percent; floating processors are particularly reliant on Pacific cod.) Early indicators for 2017 indicate this

percentage will continue to increase.

15 Monthly employment is not available for the Aleutians East Brough which includes Akutan, False Pass, Sand Point, King Cove, and other communities.

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

To

tal P

roce

ssin

g E

mp

loym

ent

Aleutians West Census Area Bristol Bay Borough

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 31

Table 14. Pacific Cod Contribution to Total BSAI Inshore First Wholesale Value (Thousand Dollars), 2010-2016

Year Pacific Cod Other Species Total Pacific Cod Percent of Total Value

2010 $91,735 $801,806 $893,541 10%

2011 $129,829 $1,018,223 $1,148,052 11%

2012 $137,487 $1,051,165 $1,188,652 12%

2013 $132,205 $949,609 $1,081,814 12%

2014 $151,264 $947,460 $1,098,724 14%

2015 $114,156 $937,673 $1,051,829 11%

2016 $153,682 $972,115 $1,125,797 14%

Note: Includes land-based and floating processors in the BSAI region. Source: ADF&G and AKFIN; compiled by McDowell Group.

DISTRIBUTION OF FIXED PROCESSING COSTS

Many of the costs incurred by seafood processors are fixed, i.e., are not dependent on the volume of fish

produced. Fixed costs may include management and other key personnel, property taxes, certain aspects of

facility maintenance, insurance, utilities, and other expenditures. Holding all other factors constant, increased

volumes handled by the inshore sector create greater economies of scale and bring down the overhead costs

attributed to each pound of production. Higher volumes result in lower unit costs and greater price

competitiveness.

Similarly, high-volume species like pollock and Pacific cod serve as an important source of product volume to

reduce marginal cost of production for other lower volume (but high-value) species such as crab and halibut.

Further, while additional analysis is needed, economic theory supports the claim that high-volume fisheries

enable processors to provide markets for low-volume/low-value fisheries; herring may be an example.

CONNECTION WITH OTHER FISHERIES

In addition to regional operations, BSAI floating processors serve fisheries throughout Alaska. Historically reliant

on high-volume species like Pacific cod, significant reductions to volumes needed to pay fixed costs for these

relatively high-cost platforms could jeopardize the financial viability of their operations. Reduced floating

processor capacity could further challenge full utilization of salmon and/or herring harvests in Bristol Bay,

Kodiak, and Prince William Sound.

ADDING VALUE

The trend toward value-added processing can support or expand economic benefits realized from the industry.

Cod fillets are typically 2-3 times more valuable than H&G product (the primary alternative cod product) and

can require 2-4 times as much labor input per pound, according to processing plant managers. Per the survey

of inshore processors conducted for this analysis, the sector has actively investing in capacity to handle more

Pacific cod and produce more fillet product. Although the amount of Pacific cod fillet production fluctuates

year-to-year, 2016 was a record, with 29.3 million pounds produced (33 percent of total Pacific cod product

volume).

Economic Impact of Inshore Seafood Processing in the Bering Sea/Aleutian Islands Region McDowell Group Page 32

Table 15. BSAI Inshore Pacific Cod Production by Component (Thousand Pounds), 2010-2016

Year Pacific Cod Fillets Pacific Cod H&G Other Products Total

2010 18,611 15,820 32,187 66,618

2011 21,021 19,003 37,875 77,899

2012 22,297 39,625 28,635 90,557

2013 28,287 32,238 27,205 87,730

2014 27,362 39,097 39,423 105,882

2015 18,068 33,481 31,404 82,953

2016 29,291 21,508 37,614 88,413

Note: Includes land-based and floating processors in the BSAI region. Source: ADF&G and AKFIN; compiled by McDowell Group.