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Regional Review: Natural Resources Fuel Growth in the Pacific States

Natural resources, particularly in the area of energy, serve as the lynchpin for the Pacific States, where hydropower is gaining in importance, and oil and gold exploration also offer major opportunities.

Dan Calabrese (August 2012)
Bonneville Dam on the Columbia River 40 miles east of Portland, Oregon.
Bonneville Dam on the Columbia River 40 miles east of Portland, Oregon.
Oil, Hydropower - and Food
Nowhere is this truer than in Alaska. After a preparation period that lasted more than four years, Alaska has high hopes stemming from Shell's offshore exploration in the Beaufort Sea off the state's North Slope, beginning in late summer 2012. The $4 billion drilling program is one of the largest in Alaska in years. State officials sought to give a boost to oil exploration when they passed a total of $32.5 million in oil and gas production tax credits for exploration north of Cook Inlet and south of the North Slope.

Energy also played a major role in Oregon development, although there it took the form of hydropower. And the energy-intensive data center industry has generated significant growth in Oregon - fueled, literally, by the Columbia River and the robust hydro system it makes possible. Top data companies including Facebook, Apple, Amazon, Adobe, Biowest, and Digital Reality have all made major advances and expansions in Oregon over the past year - with combined investments totaling between $800 million and $1 billion, according to Jill Miles, national business recruitment officer for the state. Although the data centers have not generated major employment (with the exception of Google, which is a large Oregon employer), the state has benefited from significant taxes paid on the high-value servers used in the data centers.

Hydropower is also helping to attract projects in the food-processing industry. Miles says she is working on five different deals to cement new construction or expansion projects in the food processing industry. "It was steady during the recession, and now it's peaking," she notes.

Another high-value Pacific natural resource is seafood, which has been the object of a concerted conservation management effort in Alaska that has produced results. Alaska's seafood industry, which supplies half of all the seafood consumed in the United States, has been a strong performer for the state, buoyed by rising demand both domestically and from China, as well as a program of sustainable fisheries management led by the Alaska Seafood Marketing Institute.

And agriculture emerged as a particularly strong point for California, with gross crop values increasing by about 15 percent over the past year, while the value of California's agricultural exports grew to $21.1 billion in 2011, up from $18.2 billion in 2010.

Advanced Materials
While natural resources power much of the Pacific region's economy, one of the biggest economic stories in the past 12 months has been in the area of advanced materials, according to James Palmer, development manager for the Washington State Department of Commerce.

"It's a confluence of a couple of things," Palmer says. "We have the largest consumer [of advanced materials] here in our state, which is Boeing, and we've also been attracting across aerospace and automotive."

Palmer was part of a team that recently recruited SGL - a BMW partner company specializing in carbon fiber - to open a new carbon fiber manufacturing facility in Moses Lake. It represents an investment of $100 million and is expected to create 80 new jobs.

Boeing itself committed to build its new 767 Max in Washington after a high-profile flirtation with South Carolina. In the aftermath of that decision, major Boeing suppliers Triumph and Taray also announced they will expand in Washington. Palmer says the familiarity of Washington's work force with advanced materials provides a distinct advantage. "We've been making airplanes here in Washington for 100 years," Palmer says. "We've developed a deep and robust labor force around that technical expertise."

IT and Tourism Too
Information technology and tourism have also driven some gains. California saw its unemployment rate drop more than a full percent, from 11.9 percent to 10.8 percent, during the 12-month period between May 2011 and May 2012. The state's biggest employment gains during that period occurred in information technology, which was up 4.4 percent, business services (4.1 percent), education and health services (3.0 percent), and hospitality (2.5 percent).

A report from Comerica Bank indicated that California's economy flat-lined through most of 2011, but has seen some upward movement in the early part of 2012. "Private-sector job growth is starting to improve, and housing markets are looking a little firmer. State fiscal conditions remain challenging, which is adding to the stress on some municipalities," according to Robert Dye, chief economist for Comerica Bank.

Additionally, a report from the Kyser Center for Economic Research forecasts that unemployment will continue to drop, particularly in southern California, in sectors including aerospace, entertainment, education, healthcare, and trade. Jobs will likely be shed, however, in local governments, which continue to struggle with budgetary pressures.

And the hospitality industry is also strengthening in Alaska, with the state citing a rebound in tourism activity. Cruise ship visitation is expected to increase by nearly 100,000 in 2012, and cruise lines are adding Alaska visits to their itineraries.

Hawaii also saw an increase in tourism activity in the first part of 2012, with an 8.6 percent increase compared with the same period in 2011. The daily visitor census increased only 7.8 percent, however, because visitor stays were slightly shorter. Private construction in Hawaii was also up, by a total of $178.5 million - although construction employment was actually down slightly. However, the private sector added just over 5,450 jobs during this period, according to the state's Department of Business, Economic Development and Tourism, with the accommodation industry accounting for most of the increase.
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