While fishermen and shrimpers in the Gulf of Mexico worry about losing their livelihoods, others may be on the verge of a windfall. Experts talk about how the ocean and the oil and gas industry will be impacted by BP's spill, but little attention has been paid to the economics of a spill cleanup.
Some jobs will no doubt be lost because of the spill, but others will be created. Workers are now being hired all over the Gulf region to lay down boom, clean up oil, provide security, and prepare for further damages. Many of these workers are finding jobs in economies that were weak.
Alaska was in a similar situation when the Exxon Valdez oil tanker hit Bligh Reef in 1989. Oils prices had slumped, and the Alaska economy was suffering. More than 20,000 jobs had been lost in 1986 and 1987.
The economy was sputtering back to life by 1988, but it took off with the oil spill.
No year since the spill has seen a larger growth rate in the Alaska economy than occurred in 1989, according to Neal Fried at the Alaska Department of Labor. The Gulf could see a similar boost.
Florida Gov. Charlie Crist on June 17 unveiled a website directing Floridians to more than 3,500 jobs associated with the cleanup, although to this point the tens of thousands of gallons gushing from BP's undersea crude oil volcano have largely missed the Sunshine State.
The Deepwater site has now gushed at least 42 million gallons, almost four times the 11 million gallons with which Exxon smeared Prince William Sound.
Immediately after that accident, the call went out across Alaska for workers to help clean up and contain the spill. According to the Exxon Valdez Oil Spill Trustee Council website, 10,000 workers and 1,000 boats were mobilized at a cost of $2.1 billion. Spill cleanup workers made $16.69 an hour ($29.34 today, adjusted for inflation).
Spill jobs helped pull Alaska's unemployment rate down from 7.2 percent in May 1989 to 6.9 percent in September 1989, when cleanup operations ended, according to the Alaska Department of Labor.
And the amount of money spent to equip the cleanup operation created an economic wave that rippled through Alaska as fishing boats were leased, pilots hired, workers fed, equipment maintained and lawyers retained. Some lawyers had to hire additional staff to handle compensatory claims eventually totaling over $900 million. Most of those claims were paid off over the next 10 years.
The spill jobs, while temporary, gave many people the means to put a down payment on a house or purchase a car. Fried said the increase in purchasing power helped pull the economy out of what had been the worst recession in 20 years.
Some economic benefits have continued for decades. Scientific grants to study the damage to Prince William Sound have continued to this day, making the spill one of the most researched in history, according to the EVOSTC. And in 2008 Exxon settled punitive claims in the case Baker vs. Exxon Valdez Shipping Co. The company was required to pay fishermen and others another $995 million over 10 years.
The money was a fraction of the $5 billion in punitive damages demanded by an Alaska jury that said the oil giant needed to be severely punished. The punishment was later reduced by a federal appeals court and finally by the U.S. Supreme Court. Alaskans were unhappy with the final settlement, but it still pumped a big chunk of change into the state economy.
Economic losses are harder to tease out of the spill history. In the first two years after the spill, $155 million was lost, mainly due to the collapse of Prince William Sound commercial fisheries, according to a study by M.J. Cohen. Another study by Richard T. Carson and W. Michael Hanemann for the Alaska attorney general's office found that roughly $31 million was lost because of damages to the recreational fishing industry.
The costs of psychological and social damages, meanwhile, are hard to measure and some appear to linger to this day. Several coastal communities remain significantly affected by the spill, especially as Deepwater brings back nightmarish memories. But overall the state appears to have benefited economically from the effects of the Exxon Valdez spill, with upwards of $2.1 billion spent on the cleanup, according to Exxon, and the $1.8 billion spent on claims.
The Deepwater spill could similarly change the economy in the Gulf. Many residents are legitimately worried about damages to the fishing industry and a potential lack of investment in future offshore drilling. A negative impact on the tourism industry is also a source of concern, particularly in Florida.
Oil spill jobs could more than offset oil-related job losses, although Fried warned that Florida has a lot more at stake in terms of tourist dollars than Alaska did.
"The negative impacts will be much larger down there," Fried said. "Florida has a monstrous tourism sector... many people are just going to say no to vacationing on either coast (of Florida)."
The region's tourism was, however, already suffering from the national recession. Before the spill, Alabama, Florida and Mississippi all had unemployment rates above 11 percent. The spill has brought jobs that could help push those rates lower.
Over 24,000 workers and volunteers have so far been mobilized in cleanup efforts for the spill, according to the Deepwater Horizon Unified Command. That amounts to the creation of a new regional company slightly larger than the size of Internet phenom Google Inc. BP alone has hired 4,500 formerly unemployed workers for security and cleanup. These employees are being trained and paid $18 an hour by BP for cleanup operations, said Steve Rinehart, a BP spokesman in Alaska. Local companies are hiring additional trained and untrained workers for $10 to $12 an hour. BP said in a recent release that they have spent two billion dollars so far on clean up operations, almost as much as the total cost of the Exxon Valdez spill clean up.
Many of the workers hired by local firms are being paid much less, even for jobs that require a 40-hour hazardous materials worker certification. Still, those classes are filling up rapidly due to the high demand for jobs. Pay for some Gulf spill workers is less than half of that for workers hired by now-defunct VECO Corp. to clean up the Exxon Valdez spill. The lower wages are likely to limit the impact of the cleanup money to smaller local communities.
And oil cleanup jobs can't begin to replace high-paying jobs in the oil industry now lost because of a moratorium on offshore drilling, something that did not happen with the Exxon Valdez spill. An estimated 8,000 jobs have been lost in the Gulf, with another 24,000 affected indirectly due to contracts that have already been canceled.
Of the industries likely to be damaged by the Gulf spill, fishing is the most publicized. However, the fishing industry is only a bit player in the economy compared to the tourism and oil industries, according to Loren Scott of Loren C. Scott and Associates. The professor emeritus of the economics department at Louisiana State University, Scott says that fishing accounts for about $230 million dollars in Louisiana. Louisiana is first in the nation in amount of oil extraction, second in natural gas, and is the second in refining. Louisiana's shipbuilding industry is also likely to suffer.
As for other Gulf Coast states, tourism is the industry most likely to be impacted. According to Scott, there are over 50,000 condos between Pensacola and Panama City, the region in Florida most likely to be affected by the oil spill.
"Their economy is basically military and tourism. And that's about it," Scott said when asked about the economy in the Gulf region of Alabama and Florida.
A recent economics study by Sean Snaith, quoted in the Miama Herald, said that damages to Florida's $12.4 billion dollar tourism industry could reach 10 billion dollars and result in 195,000 jobs lost. These damages were calculated by halving the value of tourism in Florida. Those damages would easily outweigh the number of jobs that oil spill clean up will create in Florida.
Steve Hilton, owner of Hilton Human Capital, is a former Alaskan who now lives in Georgia, where his company assists people with resume building and job creation. While he stresses that the Deepwater Horizon spill is not a good thing, "it will have an impact on long term job prospects." The same need to house, feed and equip workers will hopefully create ripple effects for Gulf communities.
While most Alaskans would call the Exxon Valdez spill a disaster, the economic recovery it helped stimulate allowed for Alaska to continue its development and expansion as a state. In the Gulf region the oil spill may help continue the recovery from the current nationwide recession due to the money spent to help contain and repair the damages caused by the spill -- or it may damage the economy further, having a similar impact to the Dustbowl disaster of the 1930s, keeping a few states mired deep in recession as others struggle to pull themselves out.
Contact Thomas Levine at thomas(at)alaskadispatch.com.