Elwha Watershed Information Resource

Aerial view of the Elwha Dam and Lake Aldwell, looking south. Robert Lundahl, National Park Service

Assessing the economic impacts of a large project with long-term implications is challenging. For a dam removal project like this one, which is one of the largest in U.S. history, the process is further complicated by the fact that there aren't many similar projects to draw from as examples.

This project presents a unique opportunity to help fill that information gap, and the process begins by collecting baseline economic data before the dams are removed. The economic baseline that was developed for this project describes the current economic situation for the people in the region who will be most affected by the dam removal and watershed restoration project. The Battelle Memorial Institute, under contract with NOAA's Coastal Services Center, used regional economic modeling system, IMPLAN (IMpact analysis for PLANning), to develop a custom model of the Clallam County economy and to estimate the overall economic impact resulting from hypothetical changes in different sectors of the economy.

Many factors, including several economic factors, contributed to the decision to remove the Elwha and Glines Canyon Dams from the Elwha River. Since they were built over 90 years ago, the two hydroelectric dams have had an impact on the economy of Clallam County. Some effects were positive--for example, the local supply of energy provided by the dams helped industries develop in the county in the early 20th century. However, many of the effects were negative, including:

• Loss of income from fishing (tribal, commercial, and recreational).
• Increased costs of erosion control (particularly in Ediz Hook on the Port Angeles waterfront) due to the loss of natural sediment transport.

Glines Canyon Dam, Lake Mills, and the upper watershed of the Elwha River. Jeff Adkins, NOAA Coastal Services Center

Removing the dams is expected to have an overall net positive effect on the local economy (National Park Service 1996). Costs associated with removing the dams and obtaining energy from an alternate source, for instance, are predicted to be more than offset by economic benefits that include increased fishing resources and tourism income and decreased erosion expenditures. In fact, the 1996 Final Environmental Impact Statement estimated that market-based benefits from recreation and tourism alone are predicted to exceed costs by a wide margin (National Park Service 1996). Other benefits include commercial fishing, reductions in erosion control costs, and the non-market benefits that accrue to users of the restored watershed. Non-market benefits of dam removal are expected to greatly exceed market benefits.

The Economy of Clallam County

The economy of Clallam County will be most directly affected by the dam removal project. Because its economy is heavily dependent on other regions for goods and services, much of the economic benefit of dam removal will flow to the suppliers of those goods and services. This "sharing of the wealth" reduces the impact of the benefits on the local economy.

However, not all economic sectors are so dependent on other regions. Most of the economic inputs to the wood products industry sectors--for example, the production and milling of forest products--originate within the county. The effects of increased activity in these sectors (resulting, for example, from the construction of new homes for residents drawn by the amenities associated by the restored watershed) will be highly concentrated within the county. In such sectors, local businesses serve local consumers; thus, increases in consumer income and purchases circulate in the local economy and generate additional induced impacts to create a higher "multiplier effect" (Battelle 2007) 

In 2004, 3,188 business establishments operated in Clallam County, 1,136 (36 percent) of which were in Port Angeles. Other important employment centers include Sequim and Port Townsend, accounting for 26 percent and 23 percent, respectively, of Clallam County's business establishments. About 40 percent of Clallam County's employees work in Port Angeles (Battelle 2007).

Since 1990, the number of business establishments, total employment, and economic output in Clallam County has increased by about 30 percent. However, real wages (adjusted for inflation) have declined by about 8 percent. The fall in real wages is the result of two phenomena. First, real wages fell in some sectors--sometimes dramatically. Real wages in the manufacturing and resource extraction sectors fell by 45 percent and 41 percent, respectively. Second, there was an increasing concentration of employment in some low wage sectors--for example, leisure and hospitality (National Ocean Economics Program).

Clallam County's concentration of employment in some sectors is higher than that of Washington State, suggesting that the county is a net exporter of the goods or services produced in these sectors. For example, Clallam County's employment in retail trades, on a percentage basis, is about 28 percent higher than in Washington as a whole. This is not surprising, since the area is a popular tourist destination--its retail sector serves not only the county, but also its visitors. Employment in two components of the agricultural sector is also very highly concentrated. The percentage of employment in the forestry subsector is four times the state average and that in the fishing, hunting, and trapping subsector is three times the state average (Employment Security Department 2001).

Unemployment in Clallam County has followed a trend similar to that of Washington State, well exceeding the national average in recent years. Historical unemployment rates in Clallam County climbed to 10.5 percent in the mid-1990s with the decline of the timber and related industries. Between 1987 and 1995, the timber and manufacturing industries lost 992 jobs in Clallam County. More recently, employment growth in the construction and services industries has caused unemployment rates in Clallam County to fall and nearly converge with the Washington State and U.S. unemployment rates of around 5 to 6 percent in 2005 (Battelle 2007).

The Lower Elwha Klallam Tribe

Locally caught salmon are prepared at a smokehouse operated by the Lower Elwha Klallam Tribe. Jeff Adkins, NOAA Coastal Services Center

The Lower Elwha Klallam Tribe obtained guaranteed fishing rights to the Elwha River as a result of the 1974 Boldt Decision, which allocated 50 percent of the commercial harvest to Western Washington tribes. The tribe also serves as a co-manager of the watershed, and thus represents a significant stakeholder in the Elwha River Restoration project. Members of the Lower Elwha Klallam Tribe were hardest hit by the negative economic effects of the Elwha and Glines Canyon Dams, since they relied heavily on fish in the Elwha River as a source of income and for subsistence. The removal of the dams and the subsequent re-establishment of salmon runs are expected to benefit the tribe greatly.

There are few other economic activities on the reservation, whose residents have substantially higher than average rates of unemployment and substantially lower than average per capita income. Tribal government is the major employer on the reservation. In addition, a small number of tribal members are employed at a tribal fish hatchery, and a few retail shops (Battelle 2007). Unlike many other tribes, the Lower Elwha Klallam Tribe does not operate a casino.

References

1. Batelle. 2007. Economic Support for the Elwha River Watershed: Final Economic Characterization Report with Monitoring Recommendations. Prepared for The Coastal Services Center, National Oceanic and Atmospheric Administration. Download. 
   
2. National Ocean Economics Program. Coastal Economic Data.
   
3. National Park Service. 1996. Elwha River Ecosystem Restoration, Draft Environmental Impact Statement. National Park Service, Olympic National Park, 600 East Park Avenue, Port Angeles, Washington, 98362.
   
4. Washington State, Employment Security Department, Labor Market and Economic Analysis Branch. 2001. Clallam County Profile.