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Ia(fu,llllIn,(Q)1I § Slll]' fr If cc;ll (C)) June 27, 1980 Grayingof the orthwest? MotherNature in the form of an unpredictable volcano may playa major role in shaping the economic future of the Pacific Northwestand its more than 7 million inhabitants. Human, plant and animal life in Washington, Oregon, Idaho and parts of Montana . have all been affected to some degree by three major eruptions of Mount St. Helens between mid-May and mid-June. And noone can tell for certain when the volcano will cease its ash-spewing and mud-flowing activity. On one earlier occasion, the mountain came to life in 1832 and continued to erupt for 25 years. The Portland-Vancouver area, 50 miles southwest of Mt. St. Helens, and Spokane, about 175 miles to the northeast, have been the principal urban centers affected by the powdery but abrasive gray ash. In contrast, the Northwest's largest metropolitan area, Seattle-Tacoma, has escaped with only a minor dusting. Precise damage estimates are difficult to come by, but losses of timber and crops, plus cleanup costs, might yet approach $3 billion. Even so, short-term damage to agriculture and to the health of residents living in the paths of the ash fallout hasn't been nearly as bad as originally forecast. The real questions arise about the long-term impact. region's accelerated growth while it continued its successful transition from such cycl ical activities as forest products and agriculture to a more diversified economy. This involved creating jobs in white-collar occupations, the wholesale and retail trades and light manufactUring, while reducing the number of agricultural workers: At the same time, international trade boomed in Pacific Basin markets, the aerospace industry rebounded from its 1970 low, and hightechnology firms came flowing into;the region. The Northwest has had much success in recent years in attracti ng the high-technology software companies which require a clean, dust-free environment. By some estimates, the electronics industry could account for one out of every fou r new manufactu ri ng jobs created in Oregon in coming years. But now, the area's attractiveness has been damaged because of the threat from Mount St. Helens-for example, with a major semiconductor manufacturer postponing plans to build a $70-million plant employing 2,000 persons in Vancouver. Industry and tourism The region's ash showers, along with the nationwide recession, have triggered a falloff in the key tourist industry. Some resort areas report business as being 20 to 50 percent below that of last year, with some convention bookings cancelled heading into the busy summer season. Public and private agencies, however, have leaped into action to resuscitate the tourist industry. Governor Dixy Lee Ray of Washington has formed an emergency task force to design an "ash-free" advertising campaign. Washington, Oregon and Idaho are working through the Northwest Regional Commission to dispel the image of being covered by volcanic ash. In the past decade, the Pacific Northwest's population has grown at a faster rate than the nation's. Clean air and water, beautiful mountains, and a fine climate all contributed to the Agriculture, with its $2.5-billion annual output in Washington, has been affected in Private and public officials are worried about the disappearance of tourists and industrial jobs, budget drains on small communities unable to cope with large natural disasters, flood threats on pumice-clogged rivers, and the prolonged effects of continued eruptions on mechanical machinery and even on the quality of life. Farm prospects 15') ;B\" (G)If nor 01 the Board of f<,est:'I've The fish industry was hit hard by the eruptions and mud flows. In the Toutle River, a prime steel head stream near the volcano, all aquatic life was destroyed'and recovery will take many years. In addition, salmon-spawning grounds were wiped out in the Toutle and Cowlitz rivers, with heavy impact on future runs. Approximately 70 million fingerling fish were destroyed in rnudflows covering hatcheries on the Toutle River and its tributaries. varying degrees by the eruptions. Irrigation pumps in ash-silted rivers have been damaged, along with some harvesting machinery. About 15 to 20 percent of Washington's winter-wheat crop was flattened by the ash storms, and harvest time is approaching. In eastern W<1shington's wheatgrowing are<1 S, brmers are plowing the <1sh into their fallow sLimmer fields despite wLlrnings of possible wind erosion. Yet some brmers clLlim that the white sun-reflecting Llsh tends to keep the soil temperature down and thus preserves the moisture. Alfalfa, hops and timber The first cutting of alfalfa was hit heavily by the shower of ash, so that hay losses accounted for more than half of the agricultural damage in central Washington. Affected farmers are plowing under their damaged alfalfa crops, while other farmers farther away from the volcano are hoping to salvage something from the second and third cuttings. As dairymen and cattlemen scramble for an already short supply of feed, alfalfa is expected to rise to $130 a ton, compared to an anticipated price of about $100 a ton prior to the eruption. The prime apple-producing Yakima Valley, lying directly in the pLlth of the initial ash fallout, originally LlppeLlredto have weathered the ashfall with minimal damage, but there have been <1larmingrep6rts recently of excessive apple "drops." Yakima's apple crop th is year may fall about 20 percent to 20 million bushels. The eruptions affected at least 1 0,000 of the state's 85,000 acres of apple trees, according to the chairman of the Washington State Apple Commission. Beer-drinkers also might be affected if the ash damages the region's small but important hop industry. Hops are leafy herbs growing on vines that give beer its distinctive taste. Washington state alone produces 72 percent of the hops used by the nation's brewers, and hop growers are anxiously waiting for the crop to mature to determine whether the ash has affected the herb's acid content. In contrast, Yakima Valley cherries are ripening and unaffected. Growers expect a cherry pick equal to last year's record crop. This is all to the good, because Japan has increased its order of fresh cherries from the Northwest by 33 percentthis year. On the transportation front, some worries had surfLlced about the blockLlge of the Columbia River, the main conduitto foreign markets for many Northwest products, including 85 percent of Washington's wheat crop. The river had been blocked by mud slides after the fi rst eruption, but the Army Corps of Engineers is now deepening the channel to Portland and other grain ports to allow passage of ships with a 36-foot draft. Meanwhile, most of the export-import activity on the river has been diverted to other ports. Army engineers estimate overall damage to major waterways at $219 million. And a severe flood threat remains for the lower Cowlitz River, which joins the Columbia at Longview. Lossesto the timber industry initially had been estimated at about $500 million because of the two billion board feet of Douglas fir blown down by St. Helens' strongest blast. About half of the 44,000 acres of fallen timber is located in the Gifford Pinchot National Forest, and the remainder is owned by the state of Washington and Weyerhaeuser Company. However, the Department of Natural Resources believes that 85 to 90 percent of thattimber can be salvaged, providing roads and bridges are restored to allow access to the devastated woodland. A big problem facing timber salvagers will be the effects of 2 ash on log-cutting hauling vehicles. machinery Paying for the cleanup To help the Northwest dig out of the ash, the House Appropriations Committee has approved $898 million in aid to the state of Washington, local governments and private enterprise. The Senate Appropriations Committee, chaired by Senator Warren G. Magnuson of Washington, is considering similar disaster funding. Magnuson has called the proposed appropriation "a down payment .. . a first installment." and tree- Finance and government Many financial institutions have seen their operations disrupted by the fine airborne ash. Following the first eruption, many banks near the mountain were forced to close for up to three days,or to curtail operating hours. Following the second eruption, the fine volcanic ash jammed many automated teller machines in eastern Washington and in the Portland area, causing damage to card readers, printers, magnetic stripes on cards and internal circuitry. Looking to the future, the Washington Banking Department is considering requiring financial institutions to provide for safekeeping of duplicate bank records,.and toprovide for temporary sharing of quarters in disaster areas. While the disaster areas are still feeling the impact of the eruptions, rebuilding has begun. Substantial employment could be generated by cleanup activities, and restoration should generate considerable investment in some local economies. The ash itself may prove beneficial in improving soil quality in much of the affected farm area. There is even talk in Washington, D.C., of designating the devastated area around Mount St. Helens as a national park and "tourist attraction." At the same time, everyone is keeping an eye on Mount St. Helens and wondering in what future direction Mother Nature may tend to go. The fine ash played havoc with many municipal sewage and water systems by clogging filters. As a precaution, new filters were installed over the air intakes of the Trojan nuclear plant near Rainier, Oregon, to forestall damage to that facility. The silt damage to municipal sewage and water-treatment plants created a major financial burden for some communities. " Many of the smaller communities in the path of the ashfall have really taken a bath," said a spokesman for Washington's Office of Financial Management. "Two to three years of their budgets are being used for cleanup, repairs and replacements of vital mechanical systems." A preliminary report of the "Oregon 2000" Commission in January 1979 has proved prophetic. "Long-term trends, plus the predictably unexpected, should warn us that we ought to be prepared for better coping with decline (whether prolonged and chronic or short-term and traumatic) ... While describing the present is full of difficulties, predicting the future is an impossibility. Longrange forecasts only turn out to be accurate by accident. Most often predictions of the future are done by pretending things will continue into the future as they have behaved in the past. Usually, projections also assume there will be no major surprisessuch as war, depression or earthquakes." To that, we can add volcanic eruptions. Ronald Supinski Reflecting this situation, many bond buyers have become wary about investing in the securities of communities affected by the eruptions. As a result, interest rates on such issues have risen one-quarter to one-half percentage point above normal levels. The eventual cost could be considerable, because each quarter-point rise means a $1.5-million increase in interest paid on a $30-million bond with a 25-year life. 3 S S\f1 : l U018u! 4seM.4eln • uo8aJO • epeAaN • o4epI !!eMeH .. e!UJoJ! W:) euozpv 0 e)lselV <D> 'l!le::>'O:lSPUeJ:I UI?S C;SL'ON llWlBd OIVd : J9VlS Od's'n llVW SSV1::> lSlIl:I @&Jr@<§@@ :v, BANKING DATA-TWELFTH FEDERAL RESERVE DISTRICT (Dollar amounts in millions) SelectedAssetsand liabilities large CommercialBanks Loans (gross, adjusted) and investments* Loans (gross, adjusted) - total# Commercial and industrial Real estate Loans to individuals Securities loans U.s. Treasury securities* Other securities* Demand deposits - total# Demand deposits - adjusted Savings deposits - total Time deposits - total# Individuals, part. & corp. (Large negotiable CD's) WeeklyAverages of Daily Figures Member BankReservePosition Excess Reserves (+ )/Deficiency (-) Borrowings Net free reserves ( + )/Net borrowed( - ) Amount Outstanding Change from 6/11/80 6/4/80 - 144 165 51 68 63 - 108 139 - 118 - 978 661 146 175 318 352 136,297 114,748 32,893 46,422 23,718 1,176 6,373 15,176 43,023 31,240 27,183 64,087 55,123 22,894 Weekended 6/11/80 110 1 109 Change from year ago Dollar Percent - - - Weekended 6/4/80 82 10 72 8,945 10,337 2,035 8,493 1,459 294 1,338 54 102 130 2,831 14,118 13,983 6,026 - 7.0 9.9 6.6 22.4 6.6 20.0 17.4 0.4 0.2 0.4 9.4 28.3 34.0 35.7 Comparable year-ago period - 7 165 159 * Excludes trading account securities. # Includes items not shown separately. Editorialcommentsmaybeaddressed to theeditor (William Burke)or to theauthor.... 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