Backl to HTML Index CHAPTER 2: ECONOMICS OF SEVEN
OCEAN-DEPENDENT INDUSTRIES IN CALIFORNIA



The California coastline includes a diverse group of ocean-dependent economies ranging from densely populated urban areas, such as Los Angeles in Southern California, to small rural communities, such as Bodega Bay in Northern California. These coastal economies all depend on the ocean to varying degrees. To fully evaluate policy and management options for California's ocean resources, the Resources Agency requested that the California Research Bureau, a division of the State Library, estimate the contribution selected ocean-dependent industries make to the California economy. This chapter represents a brief summary of the major findings in the Bureau's report. The complete economic analysis, which provides the assumptions, criteria and detailed findings of the study, is included as Appendix A.


INDUSTRIES STUDIED

There are many economic activities that depend to some degree on the ocean. However, this analysis focused only on those industries which could not exist without ocean access. These industries include:



SUMMARY OF FINDINGS
The California Research Bureau's (Bureau) analysis does not attempt to establish the value of ocean resources themselves; this would involve quantifying specific natural resource values, aesthetics, and recreational experiences which would necessitate a costly and time-consuming analysis. While this information would be useful, it is unfortunately beyond the scope of this initial planning effort. Instead, this analysis is limited to helping better understand the contribution of major ocean-dependent industries to the California economy.

All numbers in the Bureau's report are from 1992, unless otherwise specified. The information presented in the report and this summary clearly demonstrates the substantial contribution and
California's Ocean Resources:  An Agenda for the Future		Chapter 2: Economics of Ocean Dependant Industries
The Resources Agency of California						 	       July  1995  (Draft)

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importance of ocean-dependent industry to the State's economy. It also underscores the need for effective and efficient management of those ocean resources which help maintain these economies and the ocean ecosystem upon which they depend.

Market Value of Industries $17.3 Billion, Supporting 370,000 Jobs

The Bureau estimates that the seven ocean-dependent industries studied contributed $17.3 billion to the California economy in 1992, including both direct and indirect effects. Direct effects alone contributed just over $10 billion. Relative to the gross product of other industries in the State, this figure makes the seven ocean-dependent industries studied comparable to farm production.

The combined ocean-dependent commercial and recreational industries that were studied directly employ almost 150,000 people. About 82,000 individuals are employed by hotels, restaurants and other recreational industries, while 67,000 are employed in ports, oil and gas extraction, fisheries and other commercial ocean activities. In addition to these 150,000 jobs, another 220,000 people are indirectly supported by spending from these ocean-dependent jobs. Thus, the ocean industries studied account for 370,000 jobs in California, including multiplier spending effects.

Tourism and Recreation Spending Largest Economic Component. Of the $17.3 billion, the Bureau attributes $9.9 billion to coastal recreation spending in such industries as hotels and restaurants, and $7.4 billion to such industries as commercial fishing, oil and gas production, and port activities.

Tourism and Recreation Spending Mostly Urban. The majority of coastal tourism and recreation spending is located in the three counties with the largest populations. San Diego County ranks first in spending at $1.7 billion, followed by San Francisco at $1.6 billion and Los Angeles at $1.5 billion, accounting for nearly 75 percent of all coastal tourism and recreation spending in the State.

Rural Counties Depend on Tourism and Recreation Spending. While urban counties receive a large share of total California coastal tourism and recreation spending, this industry is also important to rural coastal counties. Rural economies, such as in Humboldt and Mendocino counties, depend more on tourism and recreation for jobs than large counties with a more diversified economic base.

Seaports and Ship Building Represent Second Largest Spending Component. California seaports are an important part of the State's infrastructure and economy, with an estimated $6.0 billion annual infusion into the State. Port activities include cargo documentation, shipping lines, storage services, marine insurance, and freight forwarding. Including indirect effects, water transportation of freight and passengers alone added $3.4 billion to the California economy. Ship and boat building and related activities added another $2.6 billion. Approximately 179,000 direct and indirect jobs were generated from port activities.

Offshore Oil, Gas and Mineral Production Contribute Over $860 Million. The offshore oil and gas industry employed 25,600 people in 1992 and contributed $852 million to the State economy, while mineral production, chiefly sand and salt, provided another $10 million.
California's Ocean Resources:  An Agenda for the Future		Chapter 2: Economics of Ocean Dependant Industries
The Resources Agency of California						 	       July  1995  (Draft)

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Commercial Fishing, Mariculture and Kelp Harvesting Create Almost 17,000 Jobs. Some of the fisheries commercially important to California include tuna, sea urchin, rockfish, crab, and salmon. Commercial fishing, mariculture and kelp harvesting directly and indirectly contributed $554 million to the state's economy.


STUDY ASSUMPTIONS

Several important assumptions were made in the Bureau's study to produce the estimated contributions to California's economy.

Activities Studied Require Ocean Access

The Bureau limited commercial activities studied to those that require or depend on ocean access. For example, oil refining occurs along the California coast, but access to the ocean is not required for refining operations and is therefore not included as an ocean-dependent industry. However, to extract oil from beneath ocean waters, production operations must have ocean access. Closely related activities, such as oil transportation from these locations, are also dependent upon ocean access.

Recreation Travel Included, Business Travel Excluded

Travel and recreational spending presented particular analytical difficulties because the extent of ocean dependence is not a simple determination. For example, attending a business convention in San Francisco is not necessarily related to the ocean. Proximity to the ocean was probably one of several factors considered by the convention's sponsor in its location decision, but conventions can certainly take place at inland sites. For purposes of this analysis, the Bureau did not include the value of conventions or other business travel expenditures since data was not available to determine the degree to which such spending was dependent upon close proximity to the ocean.

The bias inherent in assuming that all business travel is not coastal-dependent is counter balanced by the Bureau's assumption that all coastal recreation spending is ocean-dependent. This assumption was made because it is difficult to determine why tourists go to particular destinations. For example, some tourists visit San Diego to go to the zoo, while others go to the beach or deep-sea fishing. Since these distinctions could not be made based on available data, it was assumed that all recreation travel to coastal locations was ocean-dependent.

Study Limited to Market Value Estimates

The estimated values for ocean-dependent tourism and recreation are market values, the amounts consumers actually pay for goods and services. These estimates do not represent the total value of the ocean to consumers, but only that value which is measured by market transactions. Estimating non-market values requires a subjective analysis that, while important, is beyond the scope of this analysis. Comparable studies reviewed by the Bureau also only considered market values.
California's Ocean Resources:  An Agenda for the Future		Chapter 2: Economics of Ocean Dependant Industries
The Resources Agency of California						 	       July  1995  (Draft)

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Multiplier Spending Included

Though this study does not consider non-market values, it does include economic multiplier effects of ocean-dependent activities. These are the effects in other industries and areas which result from the spending and jobs created in ocean-dependent industries. Because multipliers are included in the Bureau's analysis, the total values generated are not comparable to the industries comprising gross State product, as those figures do not include multiplier effects. For example, the tourism figures include jobs in other sectors, such as automobile repair or food processing, created by the spending in tourism for food and transportation.


CONCLUSIONS

The economic analysis conducted by the California Research Bureau represents the first known attempt to comprehensively quantify the contribution of selected ocean-dependent industries to the California economy. The analysis provides critical information to help define California's economic stake in ocean management. Although the data does not include every conceivable ocean-dependent industry or attempt to quantify the non-market value of ocean resources, the estimated economic impact of $17.3 billion is impressive. The total estimate of direct impacts alone contributed over $10 million, comparable to the contribution made by California's farm production. This data underscores the importance of the ocean to California's economy.

California's ports and associated maritime industries were found to be major contributors ($6 billion annually) to California's economy. The State faces a tremendous challenge in facilitating necessary maintenance activities within ports (such as dredging and filling) while protecting the critical subtidal habitat which often exists within harbors.

Of particular interest, a major finding of the analysis is that coastal tourism and recreation contributed $9.9 billion to the State's economy. People enjoy the California coast for recreational purposes such as fishing, boating, scuba diving, swimming, sun bathing, surfing, picnicking, hiking, camping and sightseeing. While these activities themselves may not have direct commercial value, they result in significant consumer expenditures on food, transportation, accommodations and other recreation-related goods and services.

These findings are testimony to the concept that ongoing efforts to manage California's ocean resources in a sustainable manner will provide long-term economic, as well as environmental, benefits to the State. The State must continue to pursue efficient and effective processes for addressing the protection of ocean resources, while also addressing the legitimate needs of ocean-dependent industries.
California's Ocean Resources:  An Agenda for the Future		Chapter 2: Economics of Ocean Dependant Industries
The Resources Agency of California						 	       July  1995  (Draft)

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