Alaska Business Monthly December 2014 by Alaska Business

BUILDING ALASKA | HEALTHCARE INDUSTRY | WORKFORCE TRAINING

December 2014

Top Business Stories of 2014

Yukon-Kuskokwim Regional Aquatic Health and Safety Center in Bethel.

Compiled by Russ Slaten

here were many notable business stories in 2014, and most centered on energy and natural resources. All these top business stories of year in some way benefit the residents of the Alaska, either through jobs or energy or some other form of economic development, but one in particular is a project that people have been personally invested in for years: from holding bake sales and fundraisers to begging legislators for funding, this project has been continuously promoted and people have been waiting and wishing for decades to see it happen. We’ve started with Kuimarvik—place to swim.

Bethel Pool The recently completed Yukon-Kuskokwim Regional Aquatic Health and Safety Center—Kuimarvik, Yupi’ik Eskimo for place to swim—was expected to open once the fire suppression sprinkler system worked properly and passed inspection by the State Fire Marshal. The City of Bethel is proud of its brand new Center. The building was designed by Architects Alaska, Inc. and constructed by Bethel Services, Inc. and Unit Company. The project management firm overseeing 8

construction and the purchase and installation of all furniture, fixtures, and equipment was Project Development Associates. Funding for design and construction of the facility came from city sales taxes collected for this purpose, and a 2011 State of Alaska Designated Legislative Grant awarded to the city in the amount of $23,075,000. A wind turbine was erected on site and is expected to supply about half the electrical needs of the $24 million project. Facilities include a six-lane competition-size swimming pool; water slide; kiddie pool with wheelchair ramp entrance; hot tub that holds seventeen adults; gallery with tables and chairs for viewing swimmers; exercise room with machines and weights; fitness room with mirrors and stretch bars for spin class, aerobics, ballet, karate, and other courses; men’s and women’s locker rooms with showers, lockers, and bathroom amenities; and a concession stand. It is hoped the Center will help reduce the region’s high rate of drowning by teaching water safety and how to swim, as well as provide healthy recreation.

Tourism Surges There were 1.96 million visitors to Alaska

from out of state for the year May 2013 through April 2014, according to a July report by the McDowell Group for the Alaska Department of Commerce, Community, and Economic Development. This set a record as the most visitors in history and 6 percent more than the previous twelve months. Julie Saupe, president and CEO of Visit Anchorage, attributed the surge in visitors to a strong cruise capacity and higher numbers of Anchorage summer conventions because of available capacity in facilities and new hotels.

Interior Energy Project The Interior Energy Project continued to move forward with the signing of a concession agreement between the Alaska Industrial Development and Export Authority (AIDEA) and MWH Global on behalf of its subsidiary Northern Lights Energy, which will arrange financing for the project, manage the project delivery, and have the ability to sell natural gas directly to natural gas wholesale markets in Alaska’s Interior and on the North Slope. The public private-partnership also includes Golden Valley Electric Association, which is partnering with MWH to develop part of the project, including a new plant to supply liquefied natural

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gas (LNG) to Fairbanks residents. In addition, AIDEA announced in September that the 15.4-acre gravel pad for the LNG plant was completed just south of Flow Station 3 in the Prudhoe Bay Unit. In January, AIDEA approved $20 million participation in a $35 million loan brought to AIDEA by Northrim Bank for long-term financing to Fairbanks Natural Gas, LLC and Cassini LNG Storage, LLC, for a 5 million gallon capacity LNG storage and distribution facility in Fairbanks. The project will help reduce area heating costs by increasing the storage

and availability of low-cost natural gas. In April, AIDEA approved two Sustainable Energy Transmission and Supply Development Fund loans to advance natural gas distribution systems in Fairbanks and North Pole as part of the Interior Energy Project. One is to Fairbanks Natural Gas, LLC for $15 million to fund the 2014 initial development and buildout of an expanded gas distribution system within its certificated service area. The project includes constructing thirtytwo miles of new distribution system, which will allow the company to connect

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Facility Support Services Administrative Management Warehousing and Storage SBA 8(a) Certified Company

3003 Minnesota Drive Suite 203 Anchorage, Alaska 99503 907-868-2492

100 commercial and 2,500 residential services to its existing service area. The other goes to Interior Gas Utility for $8.1 million to fund the company’s initial work needed to develop its distribution system and affiliated infrastructure. This project includes engineering design, permitting, and program management. It is projected that the distribution build-out of the service area will provide natural gas service for more than eleven thousand residents.

Railbelt Energy Susitna-Watana Hydro project, a 600 megawatt dam rising 735 feet and holding back a 42-mile reservoir, made progress this year. Cook Inlet Region, Inc. (CIRI), six Cook Inlet village corporations, and the Alaska Energy Authority (AEA) collectively reached agreement on a complex land-use permit to support Susitna-Watana Hydro environmental studies. The project is in the midst of a Federal Energy Regulatory Commission licensing effort and implementing fifty-eight Commission-approved environmental studies. A land access permit is necessary for AEA to implement the studies and conduct field work on private lands. As part of the Alaska Native Claims Settlement Act, Chickaloon Moose Creek Native Association; Knikatnu, Inc.; Ninilchik Natives Association, Inc.; Salamatof Native Association, Inc.; Seldovia Native Association, Inc.; and Tyonek Native Corporation own surface rights to some lands within the Susitna-Watana Hydro project area; CIRI owns sub-surface rights. Location for the project is at river mile 184 on the Susitna River, above Devils Canyon. The $5.2 billion megaproject aims to provide long-term, stable electric rates for one hundred-plus years, with an average fifty-year estimated cost of power at less than seven cents per kilowatt hour, supplying 2.8 million megawatt hours of annual energy, said to be about half of the Railbelt’s current electrical demand. ML&P Municipality of Anchorage and electric utility officials broke ground in April alongside contractors to celebrate construction of what will be one of the world’s most energy-efficient, thermal generation power plants. The expansion of the 1970’s-vintage George M. Sullivan

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Plant 2 in east Anchorage will use GE LM6000 combustion turbine technology. The new plant will produce 120 megawatts in a 2x1 combined-cycle configuration. The $275 million plant is expected to be complete in the summer of 2016.

MEA Eklutna Generation Station nears completion and is expected to begin generating power January 1 when the MEA contract with Chugach Electric Association expires. The $325 million, 171 megawatt power plant will supply power to the Matanuska Electric Association’s customers along the Railbelt. GVEA Also on the Railbelt, Golden Valley Electric Association held a ground breaking ceremony at the Healy Clean Coal Plant for the restart of Healy 2, which will put fifty megawatts of coal-fired power into GVEA’s grid. The project is expected to cost $187 million and save $21 million in annual fuel costs. Arctic Iñupiat Offshore In July, Arctic Slope Regional Corporation (ASRC) and six North Slope village corporations joined together to create a new company known as the Arctic Iñupiat Offshore, LLC (AIO). AIO and Shell Gulf of Mexico, Inc. (Shell) entered into a binding agreement that will allow AIO the option to acquire an interest in Shell’s acreage and activities on its Chukchi Sea leases. This interest will be managed by AIO. AIO members include ASRC, Ukpeaġvik Iñupiat Corporation, Tikigaq Corporation, Olgoonik Corporation, Kaktovik Iñupiat Corporation, Atqasuk Corporation, and Nunamiut Corporation. These corporations represent the communities of Barrow, Point Hope, Wainwright, Kaktovik, Atqasuk, and Anaktuvuk Pass. Through this option agreement, Shell would assign to AIO an overriding royalty interest in oil and gas produced from specific Chukchi Sea leases. In addition, AIO would have the option to participate in project activities by acquiring a working interest at the time Shell makes the decision to proceed with development and production. Shell and AIO will hold quarterly meetings to exchange information and address regional and development issues. www.akbizmag.com

December 2014 | Alaska Business Monthly

BP Alaska On the North Slope, BP deployed an Unmanned Aerial System (UAS) technology at Prudhoe Bay, marking the first time the Federal Aviation Administration has granted permission for UAS routine commercial services over land in the United States. The UAS will be used to perform high accuracy land surveying and mapping. This technology will help BP optimize the planning and implementation of maintenance programs for the North Slope infrastructure throughout Prudhoe Bay. Targeting maintenance

activities on specific road areas will save time and address safety and reliability.

Port Clarence Bering Straits Native Corporation completed an economic feasibility analysis of Port Clarence, a natural deep-water port located on the Bering Strait near the fifty-mile-wide expanse between Russia and Alaska in June. The analysis was completed by economic and engineering consultants familiar with Arctic maritime needs and determined that development of Port Clarence would be

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economically feasible if development occurred in conjunction with development of Alaska’s Outer Continental Shelf. The study determined that port development can be viably achieved with private investment and that Port Clarence would be an ideal staging area for oil and gas exploration in the Chukchi and Beaufort Seas. Bering Straits determined that a basic deep-water port and man-camp at Port Clarence could be operational within four years of an oil and gas industry decision to pursue resource development of Alaska’s Outer Continental Shelf. Development of Port Clarence would occur with minimal dredging, minor marine disturbance, little impact to subsistence harvests, and no required maintenance dredging. Furthermore, to support the report’s concept of private development, Bering Straits has been approached by numerous private entities interested in partnering in financing development of Port Clarence.

Arctic Economic Council The Alaska State Chamber of Commerce and the Alaska Arctic Policy Commission (AAPC) selected three Alaska business leaders who represented the United States in the initial meeting in Iqaluit, Nunavut, on September 2 and 3 of the Arctic Economic Council (AEC). The AEC is an intergovernmental group aiming to foster sustainable development, including economic growth, environmental protection, and social development in the Arctic. Participating for the United States is Lori Davey, General Manager, Fairweather, LLC; Bruce Harland, Vice President Business Development, Crowley Marine Services, Inc.; and Gail Schubert, President and CEO, Bering Straits Native Corporation. Red Dog Mine In July, Red Dog Mine in Northwest Alaska held a celebration for mine employees in honor of its 25th anniversary. The mine is one of the largest zinc producers in the world and is often cited as a positive example of indigenous people and mining companies working together. Alaska Native Corporation NANA Regional Corporation, Inc. owns the land on which the mine is situated and Teck Alaska, a subsidiary of Teck Resources Limited, is the operator.

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Senate Bill 21 Stays In September, Lieutenant Governor Mead Treadwell certified the August Primary Election results for the referendum to repeal Senate Bill 21, or SB21, which passed during the legislative session that adjourned April 14, 2013. The ballot measure was rejected by a vote of 99,855 “no” to 89,608 “yes.” The measure would have repealed SB21, an “Act relating to the Oil and Gas Production Tax, Interest Rates on Overdue Taxes, and Tax Credits,” also known as the More Alaska Production Act. SB21 has been hailed as much-need-

ed oil tax reform in the state.

Vigor Industrial Vigor Alaska was selected by the Alaska Industrial Development and Export Authority (AIDEA) in September to build Alaska’s two newest ferries at AIDEA’s Ketchikan Shipyard. Vigor Alaska, a Vigor Industrial company, operates Ketchikan Shipyard for AIDEA. The facility includes a 130,000-square-foot state-ofthe-art Assembly and Production Hall that has helped make the shipyard competitive on a global level. Ketchikan Ship-

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yard currently employs approximately 165 people. The contract to build two new Alaska Marine Highway System ferries is expected to generate an additional 60 to 80 jobs per year for four years, adding $22.3 million in wages to the local economy, plus $9.8 million in local spending with contractors and vendors, for a total direct economic impact of $32.1 million. Vigor Industrial finalized the purchase of Seward Ship’s Drydock, Inc. at the end of Nash Road in Seward, July 8. The company plans to make improvements to what is the anchor of the Seward Marine Industrial Park.

ConocoPhillips ConocoPhillips Alaska signed a contract with Doyon Drilling to build a new rotary drilling rig for the Kuparuk River Unit on Alaska’s North Slope. This is the first new-build rotary rig that ConocoPhillips has added to Kuparuk’s rig fleet since 2000. And in October, the Kuparuk field expansion project Drill Site 2S was sanctioned for funding by ConocoPhillips and the Kuparuk co-owners, moving forward with plans for construction. The rig will be named Doyon 142 and is scheduled to begin drilling in February 2016. Doyon 142 will join Nabors 7ES and Nabors 9ES, two other recent additions to the ConocoPhillips Alaska drilling operations. Nabors 7ES has added about 4,400 barrels of oil per day to North Slope production since it began drilling in May 2013. Nabors 9ES began working in January and has added 2,600 barrels of oil per day to North Slope daily production. Doyon 142 will employ about one hundred people directly and support hundreds of indirect jobs. Currently, ConocoPhillips has six development rigs working on the North Slope and one in the Beluga River Unit in Cook Inlet. North Slope Assets The sale of four oilfields on the North Slope of Alaska by BP to Hilcorp was expected to be finalized by the end of year for about $1.5 billion. The sale agreement includes all of BP’s interests in the Endicott and Northstar oilfields and a 50 percent interest in each of the Liberty and the Milne Point fields. The sale also includes BP’s interests in the oil and gas pipelines associated with these fields. BP said it remains committed to

Alaska Business Monthly | December 2014 www.akbizmag.com

its plans for increased investment at Prudhoe Bay, which have resulted from recent oil tax reform by the state of Alaska. The plans include adding two drilling rigs, one in 2015 and a second in 2016, for a total incremental $1 billion investment over five years.

NordAq Energy, Inc. NordAq Energy, Inc., an independent oil and gas exploration and production company based in Alaska, signed an agreement for up to $90 million with private Chinese investment group Chinanx. This investment will fund the development of NordAq’s extensive Alaska acreage portfolio. The first tranche of $20 million was received September 9. The $90 million Chinanx investment, along with a debt facility of up to $150 million, will fund NordAq’s drilling program on its North Slope and Cook Inlet acreage. The program will target gross unrisked potential recoverable reserves of 1.2 billion barrels of oil and 115 billion cubic feet of gas. This financing marks a significant accord between NordAq and Chinanx. The transaction forms the basis for

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long-term cooperation between the two companies. Chinanx Honorary Chairman, Doris Cheng, has joined NordAq’s Board of Directors as Vice Chairman.

Alaska LNG Project In July, the Alaska LNG project, which was authorized by the Legislature in Senate Bill 138, moved into the Pre Front End Engineering & Development, (Pre-FEED) stage. The State of Alaska was officially made a full partner at the table through AGDC (Alaska Gasline Development Corporation). The Alaska LNG Project reached a major milestone in September with the submission of a formal request to the Federal Energy Regulatory Commission, or FERC, to start the pre-file process for the major natural gas project. The FERC pre-file milestone sets the stage for the activity associated with the environmental review required for the siting, design, and permitting for construction of the proposed project. This is another important step in the progression of the Alaska LNG project. The Alaska LNG Project participants are the Alaska Gasline Development

Corporation and affiliates of ExxonMobil, TransCanada, BP, and ConocoPhillips. An application for an LNG export license to the US Department of Energy was submitted in July for the project.

Flint Hills Refinery Flint Hills Resources Alaska, LLC ceased crude oil processing at its North Pole refinery in May. The extraction unit at the refinery was shut down, ending gasoline production. Crude unit #2 shut down shortly thereafter, ending production of jet fuel and all other refined products. The company continues to market fuels through its terminals in Anchorage and Fairbanks, but the supply for those terminals will come from another source. The company said it expected about thirty-five employees to be retained for operation of the North Pole Terminal. The tank farm associated with the terminal has 720,000 barrels of product storage, which equate to approximately 30 million gallons of product. Product for distribution to local markets can come into the FHRA North Pole terminal by truck or rail. About ten employees were also retained at the Port of Anchorage terminal. R

December 2014 | Alaska Business Monthly

special section

Healthcare

Healthcare overview in the 49th State

History of Educational Investments in Anchorage K-12 Education Investment Levels (2012 $/student ADM, cpi-u adj.) Anchorage School District - General Fund Operating Expenditures (2012 $ - ANC CPI-U, by Student ADM)

$16,000

By Natasha Von Imhof

High Cost of Care and Coverage The high cost of medical care in Alaska is well documented. In August 2011, the University of Alaska Institute of Social and Economic Research (ISER) published a report that compared Alaska’s medical care prices with those found in several other communities in the United States. The data showed that medical specialist costs are 35 to 40 percent higher than those same services offered in the Lower 48 and that hospital stays were 50 percent more expensive in Alaska than in the contiguous United States. Going forward, 16

$12,000 2012 $/student ADM

eople live in Alaska because they love the fresh air, open space, and the plentiful opportunities to hunt and fish. One would think with so much bounty, our state population would be busting at the seams. Not so. As the biggest state in the union, we have one of the smallest populations. While Alaska is a true gem, living in the Last Frontier comes at a cost. The climate is inhospitable to many, the location to the rest of the contiguous United States creates an additional travel burden, and the cost of living in Alaska can be a significant barrier to entry for many families. But people who do choose to live here generally want it all: quick access to large swaths of wilderness, as well as fresh produce to eat, live theater to watch, an active commercial airport to fly in and out of, and a specialist doctor to treat any ailment. It’s this last point that could use further exploration.

$14,000

■ Other (Liability Insurance) ■ Equipment ■ Supplies & Materials ■ Purchased Services ■ Beneﬁts ■ Salary

$10,000

$8,000

$6,000

$4,000

$2,000

FY82 -30 Years

FY92 -20 Years

ISER projected that hospital cost differentials would moderate, but that physician, diagnostic imaging, and outpatient surgery center cost differentials would continue to grow faster than inflation. Why would costs continue to rise in these areas? There is a growing influx of personnel attracted to the high wage differentials, which combined with high staffing levels and low capacity utilization levels, makes working in Alaska quite attractive, at the expense of being more costly to the downstream payers. Throw in opaque pricing and third party payer disconnect, and nobody is watching the bottom line. The Alaska Regional Hospital Development Manager in 2013, John Brassell, called this trend “The Wild West” of healthcare systems. To compare, in 1990 Alaska and Wy-

FY02

FY12

oming’s healthcare costs were the same. Fast forward twenty years, and Alaska’s costs have doubled, while Wyoming’s grew a quarter of that. As a member of the Anchorage School Board, we have had to cut the budget nearly $30 million over the last three years, reducing staff by over 275 positions. Since 90 percent of the budget is labor costs, we analyzed the components of employee compensation, looking for the largest cost driver. We found it. It’s healthcare. The rapid escalation in group coverage costs, both active and retiree (red bar), is the largest primary driver of the increase in costs of education for the past thirty years, with a compound real growth rate of 16.8 percent, increasing from $977 per student in 1982 to $4,031 per student in 2012 (2012 US dollars inflation adjusted

Alaska Business Monthly | December 2014 www.akbizmag.com

Anchorage School District, Office of Management and Budget—January 23, 2014. Source: ASD Audited Comprehensive Annual Financial Reports (CAFR)

Alaskans Like to Eat Their Cake, Up to a Point

Anchorage School District, Office of Management and Budget. Mark Foster, CFO.—January 23, 2014. Source: MAFA memo to Alaska Health Care Commission

Al Parish, the retired CEO of Providence Hospital Alaska, described this phenomenon as the “hidden tax” where the uninsured, or underinsured, continue to receive medical services, but the medical care delivery system responds by increasing prices for the insured to recoup its costs. It’s kind of like the Chilkoot Charlie’s motto in reverse: “We cheat YOU and pass the savings onto the OTHER GUY.”

Educational Investments in Alaska Medical Care Cost Driver Eﬀects all Sectors and is Well Above Benchmarks 25%

Per Capita Personal Health Care Expenditures (CMS) as a Percentage of Per Capita Personal Income (BLS)

21.5%

20%

7.6 10.6%

9.7 pct pts spread by 2015

15%

3.3 10.6%

10%

13.9%

-Alaska -Wyoming

9.9%

9.9% 3.0

2015

2.0

1.0

0.0

1990

2000

numbers), a factor of more than four. It is important to note that the rapid increase in the cost of group medical coverage is not just occurring in the public sector. Because public sector budgets are available for all to review, people assume this is confined to the public sector only. It’s not. The total cost of all healthcare benefit plans is significantly higher all across the state of Alaska, for everybody.

Factors in the Equation So, how did the state get here? Why is the cost of medical services growing at such high a rate in Alaska? Alaska’s desirable attributes that contribute to an ideal quality of living are also the very same factors that play into the high cost of living. Plenty of open space means high cost of transportation. A small population means the costs are spread across less individuals. And finally, this biggest fundamental issue in exploding costs is that there is little to no inherent control of charges. There isn’t market pressure because setting charges and payment is NOT transparent—the person pursuing services and the entity ultimately paying are not engaged in a direct transaction because of the third party payer system. There are some intangible factors that play into the equation as well: the desire for independence and local control, combined with high expectations, also contribute towards the high cost of healthcare in Alaska. And it’s not just one stakeholder who is responsible; evwww.akbizmag.com

2010

Excessive Medical Cost Growth

Oil Tax Changes

eryone has contributed in their own way, from the individual patient to the largest hospital and everything in between. One of the challenges facing our state is that many Alaskans live in small communities that are not accessible by road. In the last decade, Community Health Centers have been created in many rural communities to provide primary care to any and all people living in the area, regardless of demographics or economic status. The late Ted Stevens defined them as “Frontier Clinics” and helped to secure annual reoccurring Health Resources and Services Administration money from the federal government to subsidize the care. This has been a tremendous asset in rural Alaska, lowering costs for emergency room visits and improving overall well-being for local citizens. But this is for non-emergent care visits. For people living in rural Alaska who are experiencing a life threatening emergency, the common practice is to load the patient onto a Cessna 185 airplane to fly to the nearby regional hub, followed by a flight on a medically equipped jet to Fairbanks, Juneau, or Anchorage. Total cost: $45,000. Transportation costs to provide rural patients access to specialty medical services is a significant cost for insurers. For the uninsured, they either pay the bill personally, or, if they can’t, the costs are absorbed by the medical system, which are oftentimes passed onto the payers through other avenues.

Provider Rivalry There’s another factor: Alaska has several different health providers that either can’t, or won’t, play well together. There are four hospitals in Anchorage alone (Providence, Alaska Regional, Alaska Native Medical Center, and the military hospital on JBER) and numerous outpatient surgery centers to service a population that would be typically covered by one hospital and a few clinics in a comparable sized community in other states. This result is many redundant services trying to eek out sufficient income from a very low patient volume. As a result, medical providers increase prices to compensate for this low volume. To peel the onion further, the type of patient also affects the bottom line. Patients with Medicare, Medicaid, and TriCare insurance sometimes pay only forty cents on the dollar, but account for over 55 percent of the business. But federal payments are based on cost, not price. The cost of a service may be one dollar, including all salaries and benefits. The price of the service may be two dollars—a one dollar margin. The fundamental challenge is that the wild west medical care in Alaska has insurance companies paying for high costs and paying for very high margins in a market with very little price/medical quality competition at the margin. The competition is occurring on convenience. In order to further capture market share, many hospitals and specialists look to cluster around each other for patient location convenience to provide high margin procedures that are paid by a third party. For example, all three hospitals in Anchorage have opened a catheterization laboratory, or Cath-lab, which is an examination room with an x-ray machine to provide real time images of the body. This is state-of-the-art technology that can improve the time and accuracy of a

December 2014 | Alaska Business Monthly

What Do Alaska’s Healthcare Dollars Buy? (2010 Spending: $7.5 Billion)

31.5%

Hospital care

28%

Doctors/clinical services 10%

Administrative costs

Prescriptions/equipment Dentists

5.5%

Nursing homes/home health care 3% All other*

13%

*Other personal and professional care and public health activities.

of Ambulatory Surgical Centers. Some doctors claim that local hospitals oftentimes up-charge the patient seven times for a procedure or supply item when the norm in the Lower 48 is more like three times. For that reason, some doctors favor the surgery centers where they can save the patient up to 40 percent of costs. To get the hospital’s perspective on the high cost of healthcare in Alaska, I Surgery Centers Growing spoke with Bruce Lamoureux, the CEO In addition to the twelve plus hospitals of Providence Health & Services Alaska. in Alaska, there are a growing number He explained that hospital care is a significant source of healthcare costs. Major factors are the state’s aging population, obesity, chronic conditions, and lifestyle choices. As people age, the need for hospital care is more likely. Utilization and cost can be most significant in the last few months of life with issues beyond the need for care, such as a patient’s or a family’s wishes, also impacting costs. Lamoureux mused that personal and complex issues shape patients’ views and understanding of end-of-life care. Some patients elect simple and less intensive comfort measures, while other patients elect heroic efforts. Its seems that Alaskans might not have a culture of “dying well” or “dying with dignity,” and instead doctors oftentimes perform too many very expensive medical procedures towards a patient’s end of life. Ethics in this case trumps economics. Geriatric challenges aside, when asked whether ambulatory centers might offer similar procedures at a lower price than Providence, Lamoureux replied that any facility that offers a narrow scope of procedures, and does many of them over the course of a week, ought to be able to lower their costs. Providence itself is part of a joint vensubmit a Certificate of Need to the Department of Health to demonstrate their need. The failure of the Certificate of Need system to restrain excessive capacity is a testimony to regulatory capture endemic in a small community. Excessive equipment/lab capacity is regulated for investments of $1.2 million or more—but that regulation does not appear to be working.

Alaska Business Monthly | December 2014 www.akbizmag.com

SOURCE: ISER “Alaska’s Health-Care Bill: $7.5 Billion and Climbing” By Mark A. Foster and Scott Goldsmith

diagnosis. However, it’s very costly to operate a Cath-lab. Since all three Anchorage hospitals, as well as the Mat-Su and Fairbanks hospitals, are trauma centers, their Cath-labs must be staffed twenty-four hours a day. This requires very specialized labor not found in abundance in our state. Medical providers must look outside of Alaska to find skilled technicians, paying a premium to entice them to move here. In addition, Cath-labs require nuclear isotopes to use the machines, which have a shelf-life of about twenty-four hours. Since Alaska does not have its own resident cyclotron to create nuclear isotopes, doctors have to order them from Seattle the day before and have them air freighted to Alaska each day. That is expensive. The question is, how many Cath-labs does this state need for its population? On the one hand, a plethora of Cath-labs is convenient for patients, but the large number of relatively underutilized diagnostic facilities significantly increases the costs of the whole medical system. Ironically, the Alaska State Legislature requires providers with large diagnostic equipment and lab expenditures to

ture surgery center in Anchorage. But when asked whether he noticed a difference between what Providence charges for a day surgery versus the same procedure at the surgery center where they are a partner, Lamoureux indicated that Providence cannot and does not compare charges in the community to set its own charges. The best sources for the amount paid to providers, he said, are the buyers of healthcare, such as insurance companies.

User/Payer Disconnect The third contributing factor to the high cost of healthcare is the disconnect between who is receiving the cost of the service and who is actually paying for that service. Rhonda Kitter, chief financial officer for the Public Education Health Trust, says that one of the many approaches the Trust is taking to lower health premiums is to offer free biomedical screenings for employees. This could include tests for cholesterol, blood glucose level (diabetes indicator), and blood pressure. Kitter explains the results are only seen by the employee, and the purpose of these screenings is

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for the employee to take personal control of their health and make lifestyle changes to improve overall well-being. This is local control down to the individual. But Kitter admits that employee turnout is generally low. Kitter recalls one Trust employee saying, “I don’t think about my healthcare. I just want to go to the doctor and have my insurance take care of it.” This is especially prevalent among those with double coverage such as a two parent family where both parents have coverage and one or both are also eligible for a federal program (Medicare, Medicaid, TriCare, or Indian Health Services). Since a large portion of the personal healthcare expenditures are covered by someone other than the person using the services at the point of service, the “It’s free so I don’t really care how much I use, or how much it costs” phenomena is prevalent in Alaska. There could be some downward pressure on physician professional service fees if more employers gravitate towards high deductible plans, causing the employee/patient to “have more skin in the game.” In the United States a free market

economy is encouraged; it is part of the US core liberties. However, in the Alaska healthcare “free market” where someone else pays the bill, this encourages providers to push the envelope to see what the market will bear. Providers have an incentive to make money. They can and will compete by chasing the latest technology and device that they sell to customers on the basis of perceived quality. The providers are competing on convenience, including the appearance of “free” cost and good geographic coverage so patients don’t have to travel out of their way to get service. The high cost disparity of physician specialists among the western states is documented in the November 2011 Milliman Reports, the Hospital and Physician Payment Studies included as Part B of the Alaska Health Care Commission 2011 Report. The question is, can Alaskans have access to a local physician specialist without having to pay twice the rate as a Seattle patient? As one person said, “I didn’t have a vote when Providence chose to bring in a very expensive pediatric cardiologist to Anchorage. I only

December 2014 | Alaska Business Monthly

discovered this when our premiums went up because the doctor’s compensation had to be covered somehow.” She went on to say, “Like voting for a school bond, the community should vote on whether they want to assume the higher cost for that service.” When pressed whether costs would be worth it if it was her own child the doctor saved one day, she shrugged her shoulders and said, “Probably.” But why should Alaskans have to make that kind of choice?

Making Matters Worse To add insult to injury, the Affordable Care Act (ACA) did not incentivize states

SOURCE: ISER “Alaska’s Health-Care Bill: $7.5 Billion and Climbing” By Mark A. Foster and Scott Goldsmith

Table 1. Healthcare Spending in Alaska, 2010 (Total Spending: $7.5 Billion) Individuals Employee premiums Out-of-pocket costs Individual policies

$1,529 million $637 $544 $348

Private Employers* Insurance premiums Self-insurance costs Workers’ compensation medical

$1,384 million $395 $836

Government Employers* Federal State Local Federal Health Programs Medicare Medicaid IHS, VA, Community Health Centers, public health, K-12 health

$153 $1,625 million $586 $408 $631 $2,250 million $733 $871

$646

State Health Programs $670 million Medicaid $409 Local grants, API, Pioneer Homes, K-12 health, WAMI, Department of Corrections $261 Local Health Programs $45 million Hospital and health program support $40 Other local $5 *Includes coverage for current and retired employees. 20

to pool their healthcare plans. Amanda Makki, the health industry specialist for Senator Murkowski, explains that when the ACA insurance exchanges went into effect, there was an exodus out of the Alaska Comprehensive Health Insurance Association (ACHIA), which was set up by the state to provide insurance for about 1,200 of the highest risk Alaskans. Originally, ACHIA was funded by 2 percent of the profits pooled by all the insurance agencies doing business in Alaska. Over the last year, several people previously insured by ACHIA left the program and instead enrolled in an ACA plan, chasing lower premiums. Blue Cross Blue Shield of Alaska is one of only two insurance companies who have assumed responsibility for this patient pool, where less than 50 patients cost the company over $7 million in the last year. To recoup that kind of pressure, Premera Blue Cross Blue Shield chose to raise its rates by 37 percent for its individual and family plans purchased under ACA in 2014, according to a Premera News press release on September 5, 2014. Tim Bradner wrote in the September 11, 2014 issue of the Alaska Journal of Commerce that in both Washington and Oregon there are several hundred thousand people in the ACA metallic plans, which makes them big enough to absorb the costs of people with health problems. States with low populations have to spread the costs among fewer people. Jennifer Bundy-Cobb at the Wilson Agency makes the wry observation that no state in their right mind would want to pool with Alaska. “They have everything to lose and very little to gain.” It seems like there is a lot of finger pointing regarding who is responsible for the high cost of healthcare. It reminds one of a lyric from the Buffalo Springfield song, “Nobody’s right, if everybody’s wrong.” It appears that finally the “high cost medical care” cake is developing a bitter taste for consumers and employers alike. Just as medical service providers are free to test the market for the highest price point, consumers have the privilege of finding new service providers if the price point becomes too high. All stakeholders are changing their behavior to search for better value for healthcare service. So what is happening now to bend the growth curve?

n Medical Travel: After many years of unsuccessful attempts to negotiate with local providers, public and private sector employers have begun to provide their employees with opportunities to bypass the local providers and seek high quality care at affordable rates in other markets. The Public Education Health Trust has sought out a medical/surgical management company that provides connections to facilities and surgeons in the Lower 48. Kitter reports, “The savings has been substantial.” Florian Borowski, the HR director for CH2M HILL, spoke at an Alaska Healthcare Commission panel discussion in October. He stated that his company found high physician and hospital fees in Alaska an impetus to seek treatment elsewhere. CH2M HILL picks a variety of medical providers outside of Alaska and offers employees a choice. Borowski added that even with the cost of hotel, airlines flight, and food built into the rate, it’s still a savings for the company. This option is most often available to larger employers. But what about the small business with just a handful of employees who can’t afford to pay for medical travel? Will they be stuck holding the bag here in Alaska as medical costs continue to increase as patient populations dwindle? n Inter-Employer Communication: The Alaska HR Leadership Network is a newly formed consortium of several local Alaskan businesses. The purpose of this group is two-fold. First, they trade information with one another, sharing leads, recommendations, and advice to help each other find market based solutions to lower their medical costs. Second, the consortium is considering proposing state legislation that includes things like the creation of a statewide all-payer claims database to improve transparency and the revision of state regulations that create market power imbalance. Thomas Showalter, vice president of Ukpeaġvik Iñupiat Corporation, a member group of the consortium, states that the objective of the Leadership Network is to “reduce healthcare costs in Alaska to levels commensurate with the Lower 48.” n Customer Driven Whole Person Care: The Southcentral Foundation has developed a relationship based, custom-

Alaska Business Monthly | December 2014 www.akbizmag.com

er-owned healthcare process called the Nuka System of Care, which is described in a brochure found on Southcentral Foundation’s website. Starting in the mid 90s, Southcentral began to shift their culture away from treating people as “patients,” serving as a mere recipient of tests, diagnosis, and pills, to “customer-owners” who actively share responsibility for the success of their healthcare outcomes. The system works really well. Southcentral reports a 36 percent reduction in hospital stays, a 42 percent reduction in emergency room and urgent care usage, and a 58 percent reduction in specialty clinic visits—all of which has been sustained for more than ten years. When healthcare providers engage their patients to take control of their physical, mental, emotional, and spiritual wellness, and when efforts are coordinated between medical providers, both insurers and patients alike can see costs lowered significantly. n Bundling Services: Bundling payments refers to payments for “episodes of care” based on the nature of the episode, e.g., type of cardio ailment(s), type of cancer, type of joint replacement, etc. It shares cost risk (and associated incentives) between payers and providers. This incentivizes the medical service providers to be thoughtful and collaborative with their care in order to ensure the best outcomes. “If any link in the chain fails, that adds to the cost and providers will have to dip in their own pockets to fix it,” writes Wes Champion, senior VP of Performance Partners for Premier HealthCare Alliance, in an October 2012 article titled “How Bundled Payments Just Might Save Healthcare from Itself.” Some doctors are reticent to engage in bundling negotiations because they feel too much of the risk is borne by the doctors. But it’s a proven strategy, and insurance providers are pushing for it. Dr. Steve Compton says the Alaska Heart Institute (AHI) signed on with the Center for Medicare & Medicaid Services (CMS) with the Bundled Payments for Care Improvement Initiative this past March. The reason why AHI entered into this agreement with CMS is the bargaining power held by CMS. The group size was large enough for AHI to be willing to try this out.

extension of bundling from episodes of care to medical coverage in which a provider organization is given a set amount each month to provide an agreed-upon range of services for the patients enrolled in the program for the period of time covered by the agreement. The question is, how many payers will it take who are peeling off to Seattle before the remaining locals want to manage care similar to what we see in Grand Junction, Colorado, where family physicians assumed leadership in the 1970s and established incentives for cost control and cost transparency, and less like the

“wild west” where transient margin hunting subspecialist doctors continue to charge what the market will bear. “Low-Cost Lessons from Grand Junction, Colorado” by physicians Thomas Bodenheimer and David West was published in the October 7, 2010 issue of the New England Journal of Medicine, and discusses the methods that have led to success. On its website, The Medical Group Management Association out of Englewood, Colorado, describes a successful PMPM model as having fifty primary care physicians work collaboratively as a group

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December 2014 | Alaska Business Monthly

when negotiating a Capitation (PMPM) Contract with insurance companies, versus the current fee for service payment method. To put this in perspective, fifty doctors probably represents about a quarter of the primary care physicians currently working in Anchorage alone.

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n Telemedicine: Telemedicine allows doctors, patients, and local health aides to communicate about diagnosis and treatment through electronic means, avoiding the cost of travel.

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n Health Savings Accounts: Health Savings Accounts are a way to insulate employees for plans with high deductibles. This is a health specific savings account where an employee saves pre-tax dollars from each paycheck and employers can choose to match as well. The idea here is twofold. First, employees have a lower cost health plan due to a higher deductible and second, they have the ability to save for that deductible so a sudden medical injury won’t be so financially debilitating. The theory is that when employees are paying more of their personal money towards medical care, they usually are more involved in their medical care, paying particular attention to cost. n Transparency of Fees and Outcomes: Many stakeholders are asking for transparency of pricing and patient outcomes among doctors. This could be a game changer because patients will choose with their feet and wallet. In a low volume market, it could make a noticeable difference. The two main challenges are that participation is voluntary—not many doctors share this information—and sometimes medical services are not easily comparable, particularly if services are not offered a la’ carte. n Public/Private Partnership Efforts: This could address the “strength in numbers” bargaining power concern. The idea is to create a public/private partnership for the purpose of reaching a minimum threshold of participants in order to successfully negotiate directly with Alaska healthcare providers for lower cost services, including bundled healthcare and PMPM.

Systematic Changes Many of those suggestions for better value for better healthcare are already occurring. However, they only address the symptom and not the root problem.

Alaska Business Monthly | December 2014 www.akbizmag.com

Any systematic change in the growth of healthcare costs would require a shift in ethics and values across the entire state. Alaskans would probably have to accept the tradeoff between access to healthcare with access to lifestyle. Medical providers would publically post both prices and outcomes for their services. Is there any other industry where the buyer and seller reach an agreement without once even discussing price or value? Maybe the presence of a managed care provider, such as an HMO or ACO, (a Health Maintenance Organization or an Accountable Care Organization), could provide competition or downward pressure on charges/costs. As it stands now, it’s the business employers who are ultimately responsible for the medical costs, as they are the ones footing the bill. But does a typical business in Alaska have the expertise and resources to sift through the reams of data, conduct detailed searches for best value, present options to employees in a clear and concise fashion, and update it all each year? Maybe the expansion of Medicaid in Alaska could help lower costs across the board. An influx of tens of millions of dollars into the system should help cover the cost deficits incurred by the uninsured. However, if the Governor agrees to accept federal funds to expand Medicaid in Alaska, perhaps the state should ask for something in return by the medical providers. Maybe the state should require medical service providers to publish fee and outcome data, as well as accept a bundled payment structure, in order to qualify to receive the additional Medicaid funding. John Brassle, currently Vice President at Parker, Smith & Feek, also adds that along with asking medical providers to share in the responsibility of Medicaid expansion, healthcare consumers should as well. He suggests that Medicaid recipients should be charged a modest co-pay for nonemergent and non-urgent care in order to curtail indiscriminate use of emergency services. Brassel suggests that the state could be dollars ahead by funding a twenty-four hour nurse call-line to answer non-emergency questions, with the intent to capture savings on the backend through a decrease in hospital ER visits. Maybe if people took more responsibility of their lifestyle and wellness, people might be able to avoid health problems associated with a sedentary lifestyle, obewww.akbizmag.com

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December 2014 | Alaska Business Monthly

For Further Reading n ISER: Alaska’s Health-Care Bill—$7.5 Billion and Climbing: http://dhss.alaska.gov/ahcc/Documents/ meetings/201108/ISER%20Health-care%20 Spending%20in%20Alaska%202010%20Report.pdf n Milliman Reports: http://dhss.alaska.gov/ahcc/ Pages/Reports/2011commissionreport.aspx n Premera Blue Cross Press Release: http:// premeranews.com/wordpress/2014/09/05/ statement-on-premeras-individual-market-plansin-alaska-under-the-aca/ n Alaska Journal of Commerce article: http://www. alaskajournal.com/Alaska-Journal-of-Commerce/ September-Issue-2-2014/Individual-insurancepool-to-see-sharp-premium-hikes/ n Southcentral Foundation Nuka System of Care: https://www.southcentralfoundation.com/files/ Nuka%20Fundraiser%20Brochure-6pg.pdf n “How Bundled Payments Just Might Save Healthcare From Itself”, by Wes Champion, Senior Vice President of Performance Partners for Premier HealthCare Alliance. October 26, 2012: http://thehealthcareblog.com/blog/2012/10/26/ how-bundled-payments-just-might-save-healthcare-from-itself/ n The New England Journal of Medicine—Low-Cost Lessons from Grand Junction, Colorado: http:// www.nejm.org/doi/full/10.1056/NEJMp1008450 n Medical Group Management Association: http:// www.mgma.com/practice-resources/all-practiceresources/decision-pathways-capitation n Commonwealth North study from 2005: http:// www.commonwealthnorth.org/documents_ cwnorth/2005_updatedhealthcare.pdf n The New Yorker: The Cost Conundrum—What a Texas town can teach us about healthcare: http:// www.newyorker.com/magazine/2009/06/01/thecost-conundrum

sity, smoking, and alcohol abuse. Disregarding health problems and then visiting the emergency room when things get too bad to ignore is much more costly then visiting an internist for a regular preventative evaluation. This idea is well described in the 2005 study produced by Commonwealth North, “Alaska Primary Health: Opportunities and Challenges.” It’s easier to seek small inroads to lower health premiums than it is to make big broad sweeping changes to the entire state system. Everyone must understand that in order to see a significant decrease in health premiums, it will require a coordinated effort among all stakeholders to consolidate infrastructure and coordinate care, provide price and outcome transparency, look at the possibility to pool with other states to spread costs among a larger population, and an acceptance to reduce quick access to medical specialists. A great article in the June 2009 issue in the New Yorker titled “The Cost Conundrum: What a Texas town can teach us about healthcare” sums it up well: “And the damning question we have to ask is whether the doctor is set up to meet the needs of the patient, first and foremost,

or to maximize revenue… There is no insurance system that will make the two aims match perfectly. But having a system that does so much to misalign them has proved disastrous. As economists have often pointed out, we pay doctors for quantity, not quality. As they point out less often, we also pay them as individuals, rather than as members of a team working together for their patients. Both practices have made for serious problems.” This is all very interesting, but not so funny. R Natasha Von Imhof is a board member of the Rasmuson Foundation, Atwood Foundation, and the Anchorage School Board. She is a life-long Alaskan who takes an active interest in Alaska politics and hopes to help shape policy to secure our state’s economic future.

Alaska Business Monthly | December 2014 www.akbizmag.com

special section

Healthcare

Range of Healthcare Services Help Alaskans Stay Safe and Independent at Home By Vanessa Orr

ome is where we feel safe, where many of us gather strength, surrounded by those we love. So it’s no surprise that when someone has a medical issue—whether it’s recovering from an operation, dealing with a longterm disability, or even receiving hospice care—that the person would far rather be cared for in his or her home than in a hospital or nursing care facility. “I don’t think that there is anywhere that a sick person would rather be than at home—if you’re not feeling well, where do you want to be?” asks Deb Seidl, RN, director of Providence InHome Services. “If your mom isn’t feeling well, where do you want her to be? Absolutely, people want to be taken care of in their home environment.” Luckily for many Alaskans, receiving intermittent and long-term home healthcare is an option. And as Baby Boomers continue to age, the demand for these services will continue to grow.

Meeting the Needs of a Diverse Demographic When it comes to providing home healthcare, there are as many different types of patients as there are medical conditions. Frail elders may have mobility issues; middle-aged adults may need help after hip or joint replacement surgery. Young children, born with severe disabilities, may require round-the-clock care. “We offer an array of longterm care services that allow individuals to remain in their homes as long as possible,” explains Duane Mayes, director of Senior and Disabilities Services, Alaska Department of Health and Social Services. “These range from basic grant programs that provide Mayes 26

Cornerstone Home Care’s client Paulina Phillips (right) with her son and caregiver, Ryan David Phillips. Cornerstone is based in Southeast Alaska. Photo courtesy of Cornerstone Home Care

funds to organizations such as senior centers to send someone into people’s homes to conduct a safety check, provide case management, and perhaps provide transportation to medical appointments to skilled nursing care for patients who require 24/7 nursing home-level care. Our PCA [Personal Care Assistance] program falls in the middle of that continuum of care.” At the less severe end of this continuum of care are grant programs, which provide funds to nonprofit organizational partners across Alaska that offer community-based supportive services to families and individuals experiencing developmental disabilities, Alzheimer’s disease and related disorders, and frail or disabled seniors who need assistance at home. Funding for these programs comes from the US Administration on Aging, the Alaska Mental Health Trust Authority, and state general funds. The next level of care is PCA, which provides support for an individual’s activities of daily living, such

as bathing, dressing, and eating, as well as instrumental activities of daily living like shopping, laundry, and light housework. PCA is provided statewide in Alaska through private agencies. “At a nursing facility level of care, there are four different home and communitybased waivers that a person can receive, depending on their needs,” explains Lisa McGuire, chief of programs, Senior and Disability Services. “These include Adults with Physical and Developmental Disabilities; Alaskans Living Independently; Children with Complex Medical Conditions; and Individuals with Intellectual or Developmental Disabilities.”

Providing Care in the Community There are a number of organizations that provide healthcare to those at home, both in a medical and non-medical capacity. Cornerstone Home Care in Juneau has provided home and community-based care in Southeast Alaska since 1997. The local, family-owned business serves approximately 150 clients in Juneau, Haines, Petersburg, Prince of Wales Island, and Ketchikan

Alaska Business Monthly | December 2014 www.akbizmag.com

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with a range of services, including personal care services, care coordination, day habilitation, in-home supports/ supported living, respite and companionship, and chores and housekeeping. “We provide healthcare services to clients whose goal is to remain in the home rather than to go to an assisted living facility or nursing home,” explains Liesel S. Weiland, Cornerstone’s assistant administrator and human resources director. “We offer a lot of different options, because not one size fits all. Though our primary client base is more elderly, we serve clients of all ages—from infants up to ninety-nine years of age.” According to Weiland, while many of the company’s clients are referred by social workers, hospitals, and clinics, more often than not, families hear of them through word-of-mouth. “We serve a lot of small communities, so our best marketing comes from satisfied clients telling others about our agency,” she says. Once a client or family member approaches Cornerstone, the company sets up a screening for the individual to determine what his or her needs are and what types of services they may need.

Their application is sent to Senior and Disabilities Services, who, after reviewing it, sends one of their nurses out to assess the client’s needs. “It’s a fairly long process when Medicaid is paying for the services; when a person is paying out-ofpocket, it’s a lot easier to facilitate and we can turn it around in about a week,” says Cornerstone Billing Director Michelle Iniguez. “We also serve veterans with VA insurance and have grant services provided through Southeast Senior Services; when we first do the intake, we determine what options would work best and how clients would best be served. “It can be a frustrating process for the family, but we have staff to help,” she adds. “That’s why we’re in this—we’re committed to helping people stay at home.” To this end, approximately ninety staff members help to provide non-medical home care to a range of clients. “A person with rheumatoid arthritis can’t lift a pot or pan to cook a meal, but our help can allow that person to remain as independent, and to stay at home, as long as possible,” says Tara Smith, administrator and director of independent living services for Cornerstone. “Someone

with multiple sclerosis may need more extreme assistance because they are not ambulatory and can’t lift themselves out of bed. We can be there three hours a day to seven days a week; whatever it takes to allow a person to remain independent and safe in his or her home.”

Fairbanks Memorial Hospital Fairbanks Memorial Hospital offers intermittent home health, which is designed for patients who are confined to their home for medical reasons and in need of intermittent home visits for a defined period of time. They offer skilled nursing, which includes providing assessments, administering skilled treatment procedures, patient and family health education, and care planning and management as well as physical therapy, occupational therapy, speech pathology, medical social services, and home health aides to assist with personal care. The hospital also has a hospice program that is separate from the home healthcare program. “The majority of our patients are elderly individuals who have experienced a new onset of a disease process or an

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December 2014 | Alaska Business Monthly

Cornerstone Home Care’s Juneau client Ella Vonda (center) with longtime caregiver Rhoda Torrefranca, Personal Care Assistant (left), and Vonda’s daughter, Josephine Purcell (right). Torrefranca is a long-time caregiver for Vonda, who lives with her daughter, who is her primary caregiver. Photo courtesy of Cornerstone Home Care

exacerbation of an existing condition,” explains Nancy Flannery, RN, BSN, manager of Fairbanks Memorial Home Health Care, adding that the home care program’s census ranged between eighty and ninety-five patients in the last year. “Approximately one-third are orthopedic surgical patients.” The organization, which covers a twenty-six-mile radius from the hospital, has been providing home care services since the early 1980s. “The majority of our patients are homebound, unless they have private insurance that does not have a homebound requirement,” says Flannery. “Our patients are able to receive services in their home that they would otherwise have had to leave their house to receive, and we customize our services for their home. “We are the only home healthcare agency in town, and because we are affiliated with the local hospital, we are able to coordinate with the social workers and discharge planners at the hospital to make a smooth transition home following an illness or injury,” she adds. As a certified medical home healthcare provider, the organization must comply with the Conditions of Participation for Home Health Care and also follow Center for Medicaid Services’ (CMS) regulations and state regulations. They are surveyed by CMS every three years. The organization also works closely with other agencies that provide PCA services, as well as the Veterans Administration, infusion pharmacies, assisted living facilities, skilled nursing facilities, and both Anchorage and out-of-state hospitals. “There are a lot of challenges facing home healthcare providers, including 28

road conditions, extreme weather conditions, staff shortages, and Medicare payment reductions that require staff to see more patients in less time. When the staff goes out to patients’ homes, they are on their own; they do not have back-up from other staff such as in hospitals or other facilities,” says Flannery. “But we have staff that have been with us long-term and are familiar with patients and their families. Our goal is to make a difference in people’s lives through excellent patient care.”

Providence Home Health Providence Home Health is the oldest and largest home health provider in the state, offering skilled nursing, home health aides, physical therapy, occupational therapy, speech therapy, medical social work, and chaplain services. Providence also offers a communitybased hospice program that provides comfort care at the end of life through intensive symptom management and support of the patient and family. “Providence Home Health began in 1983; it was originally a grant-funded municipal agency, but Providence took it on at the request of the city,” explains Seidl. “The hospital began the hospice program in 2005.” In order to receive in-home services, patients must meet four requirements. They must require skilled care, skilled assessment, or skilled education from a nurse, occupational therapist, speech therapist, or physical therapist; they need to have a physician’s order; they must be homebound, though they can occasionally leave the home with assistance; and it must be an intermittent need that does not require continuous, round-the-clock care.

Approximately 50 percent of Providence’s home health patients are on Medicare, and 90 percent of their hospice patients are on Medicare. “Of our patients who are not on Medicare, most are still required by the payers to have a homebound status,” says Seidl. “The Veterans Administration is one exception; those patients do not need to be homebound, but may need assistance with medication, so we’ll send in a nurse one time a week to help them manage their medications.” Of their home care patients, 50 percent are therapy-only, which Seidl says is higher than the average at most agencies. “We see a lot of patients with knee replacements or joint replacements, and a number of elderly who are beginning to decline and need a home safety evaluation so that they can remain safe,” she explains. “We will make evaluations and recommendations, and assist them with getting supportive devices in the home.” On the hospice side, Providence provides care to patients who, if the disease process runs its course, are expected to pass away within six months. “Unfortunately, many of these patients and their families come to us very late; we don’t receive the referral until a couple of hours, days, or weeks before their death,” says Seidl. “It’s so much better if we can get in to help them earlier in the disease process to work with them on their goals of care and assist the family. But often patients aren’t ready to hear the word ‘hospice,’ so referrals are made at the last minute.” Because their staff all provide medical care, each member must be licensed in his or her discipline and have the professional education required by the state. Staff sees an average of 120 home healthcare patients daily and 70 hospice patients from Eklutna to Girdwood, and patients are referred to them from all of the hospitals in the Anchorage area. “While we do work with our own physicians’ group, only 50 percent of our patients come from within the Providence Health System,” says Seidl. “The rest are from somewhere else in the community. “Alaska is unique, and I feel fortunate that Anchorage is such a small town,” she adds. “There are only three home healthcare agencies serving the general population here, and we serve

Alaska Business Monthly | December 2014 www.akbizmag.com

everybody, so we work together. One of the biggest challenges is that we do not have a large labor pool up here, so we have to collaborate among agencies to see who has the availability to take patients. In this way, we make sure that we get all of the patients served.” Seidl adds that there are other challenges that home healthcare providers face, including the fact that reimbursement has not caught up to costs and that there are a lot of regulations built around home healthcare and hospice. “There has been a lot of fraud in this industry, and one way to combat it is through regulations,” she explains. “This is very challenging for the businesses out here that are trying to provide good care. I don’t think that anyone in the industry is opposed to going after fraud—we want to make sure that the vulnerable population at home is being serviced correctly and fairly—but the regulations are pretty onerous. It takes a lot of manpower, and hence dollars, to meet these regulations, and it’s difficult to see so many dollars being put toward meeting regulations when our biggest concern should be caring for the patients.”

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Even in the face of these challenges, Providence staff remains committed to the mission of the hospital and to taking care of those in need. “One thing that sets us apart is our longevity; our staff has been here for a very long time,” says Seidl. “Our home health staff retention rate is 100 percent for 2014. “The people who work in home care are here for the community; once they step into this role, very few leave,” she adds. “There is also a uniqueness in working for Providence because our mission is always in front of us; the staff feels called to it.”

Social and Economic Benefits of Home Care While ailing individuals obviously benefit from being able to receive treatment while staying at home, there are economic benefits as well. According to Mayes, the average cost to the state of the Personal Care Assistance program is $21,000 to $22,000 per year per individual served, while the waiver program averages roughly $40,000 to $80,000 per year. “Putting an individual in a nursing home can cost $100,000

to $120,000-plus per year, depending on the region where the person lives,” he explains. “In some areas, it can cost $200,000 to $300,000 per year.” “While cost is important, there are other factors to consider as well,” adds McGuire. “Everything that we do at Senior and Disabilities Services is focused on providing choice and dignity to the individuals receiving our services. They are able to choose to stay at home, to choose to stay in their communities, and to keep those connections that are important to them.” “Integration is what we’re all about; it’s who we are as a state and as a country,” adds Mayes. “We want to make sure that people are integrated into the community, and not just placed into an institution, which is often what used to happen many years ago. Helping people to stay at home not only saves significant costs to the state, but it provides people with options to live an integrated and dignified life; this is paramount to who we are.” R Vanessa Orr is the former editor of the Capitol City Weekly in Juneau.

December 2014 | Alaska Business Monthly

special section

Healthcare

Alaska at Forefront of Fetal Alcohol Spectrum Disorder Research UAA receives $1.1 million grant to study primary prevention strategies for healthcare providers By Vanessa Orr

any people believe that fetal alcohol spectrum disorders, or FASD, only affect young children. But the fact is, individuals who suffer from prenatal exposure to alcohol can develop a number of disabling conditions that last a lifetime. While the most familiar FASD is fetal alcohol syndrome (FAS), which is more easily diagnosed because it causes specific physical changes to the face and body, alcohol use during pregnancy can result in other growth and nervous system abnormalities that can cause children within the spectrum to remain below average in physical and mental development throughout their lives. Birth defects related to alcohol use are permanent; fortunately, they are also completely preventable—100 percent. According to the state of Alaska Department of Health and Social Services, the 49th state has the highest rate of FAS in the nation among states that track the disorder. As many as 180 children are reported to the Alaska Birth Defects Registry each year with a suspected FASD—among all races and socio-economic groups. The good news is that Alaska is at the forefront of FASD training and prevention services and will soon be taking those efforts one step further as the result of a $1.1 million federal grant to establish a Fetal Alcohol Spectrum Disorders Practice and Implementation Center focused on developing a national approach to prevent, identify, and treat FASD.

What is FASD? According to Alexandra Edwards, project manager at the University of Alaska Anchorage Center for Behavioral Health Research and Services (CBHRS), FASD is a range of disorders caused by exposure to alcohol in utero. “Fetal alcohol syndrome, or FAS, is the most severe in terms of the impact that it has on an individual’s potential cognitive functioning and physical development,” she explains. “Individuals with FAS usually exhibit a certain set of facial characteristics and height and weight discrepancies. Other types of FASD, though not as easily recognizable, also have quite a significant impact, especially if they are not recognized and diagnosed. “This is sometimes called an ‘invisible disorder’ because you often can’t tell that someone has FASD by looking at them,” she adds. “You can only tell because of the individual’s behavior and social and cognitive skills, which is why it’s important to have an assessment that looks at the person’s entire range of functioning, including the cognitive process, communication and language skills, and physical and social aspects.” “Alcohol is unlike any other substance of abuse, including heroin, meth, and cocaine,” adds Marilyn Pierce-Bulger, ANP, a certified midwife and owner of FASDx Services, LLC. “Alcohol actually kills and alters cellular structures. If a woman drinks in large doses during the first trimester, it can cause those specific facial features, but there is no

time during a pregnancy when it’s safe to drink and no amount or type of alcohol that is safe.” Diagnosing a child with FASD can be difficult, and it’s even harder to assess adults with the disorder. “An FASD diagnosis is incredibly complicated; there are a number of variables that can influence what a child can look like, including their mom and dad’s genetic makeup; the intrauterine environment, including any alcohol duration and timing; maternal stress, like depression and domestic violence; and other health conditions,” says PierceBulger. “After birth, there may be further complications including exposure to domestic violence and homelessness or multiple caregivers; all of these can influence a child’s clinical presentation and behaviors.” Diagnosing an adult can be difficult because each individual is affected by their life experiences, and it can also be harder to get early medical and school records. “A diagnosis can happen at any time—we’ve diagnosed everyone from a newborn to a sixty-six-year-old,” says Pierce-Bulger. “And if an adult has a disconnect affecting their daily life because of organic brain injury problems, they should have access to services to help them. It can shift the trajectory for the rest of their life.” Healthcare professionals look at a number of factors when diagnosing the condition. A medical provider looks at the individual’s growth and does a facial photo analysis and physical exam,

Alaska Business Monthly | December 2014 www.akbizmag.com

and speech pathologists review language communication skills, including expressive, receptive, pragmatic, and social language. “Often, the language center of the brain is affected by alcohol, which means that while someone with FASD can be a good mimic, if you ask them to explain what they’re saying, they can’t tell you what it means,” says Pierce-Bulger. “They also often miss cues regarding social language.” Psychologists and occupational therapists are also involved in the diagnostic process. With a comprehensive diagnosis, parents and providers can identify which services will most help children with FASD in school and social settings, and adults can be provided with job support as well as other learning opportunities. “There can be significant problems if FASD is not diagnosed; the people who need services in order for them to succeed may not be receiving them,” says Edwards. “Individuals with an undiagnosed FASD are at higher risk of developing secondary disabilities and also may have more negative interactions with the law and the legal

“Alcohol-exposed pregnancy can occur anywhere there is alcohol and procreation. No one demographic can be impacted more than another.”

—Alexandra Edwards Project Manager, University of Alaska Anchorage Center for Behavioral Health Research and Services (CBHRS)

system because of their cognitive and behavioral challenges. They struggle to understand cause and effect and can have difficulty processing what is asked of them. For example, if law enforcement directs them to do something, they are sometimes not able to follow that order immediately.” “An individual with FASD in the workforce can really struggle,” adds Pierce-Bulger. “They may not have organizational planning or sequencing abilities and have difficulty following through. They may not have a sense of time or the ability to do an eight-hour workday because it exhausts them. Imagine walking around in a foreign country and working really hard to catch every twelfth word. Someone with FASD has a similar experience on

a daily basis, which is physically and emotionally exhausting.” Despite the misconception, FASD is also not limited to any race or socioeconomic group. “Alcohol-exposed pregnancy can occur anywhere there is alcohol and procreation. No one demographic can be impacted more than another,” says Edwards. “Data suggests that the Alaska Native community is impacted more heavily than other communities, but their health professionals have been working on this issue since the 1980s, and questions about alcohol use are integrated into their clinics. Because they are better able to identify the individuals impacted, it could create a higher count. In my opinion, because the non-Native population relies on private providers making assessments,

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December 2014 | Alaska Business Monthly

who may not necessarily be asking about alcohol during pregnancy, the numbers could be skewed. If the question is not being asked, you are not going to get the diagnosis.” In fact, the number of babies born with FAS to Alaska Natives has been decreasing. “Alaska Native communities are doing a fantastic job in reducing the number of people exposed to alcohol-related pregnancies; in fact, in the Alaska Birth Defects Registry, the FAS birth cohort from 1996-2002 for Alaska Native infants went from a 63.1 percent prevalence per 10,000 live births to 32.4 percent, while the non-Native rate grew from 3.7 percent to 6.1 percent,” says Edwards.

Prevention and Intervention In 2000, Alaska Department of Health and Social Services received funding from the Substance Abuse and Mental Health Service Administration to support a statewide Alaska FAS Prevention Project. The project, which ran from 2000 to 2005, had several components, including the establishment of a statewide office of FAS; funding for the development of several FAS multidisciplinary community diagnostic teams for screening children at high risk for FASD; prevention of FASD; interventions targeted to high-risk women and families; and delivery of services and treatment to families and individuals already diagnosed with FASD. At the time, fourteen diagnostic teams were established; today, eight still exist in communities including Anchorage, Bethel, Fairbanks, Juneau, Kenai, and the Mat-Su Valley. “It was a challenge for smaller communities; many did not have the infrastructure required, and the nature of medical professionals in those areas is also more transient,” says Pierce-Bulger. “Today, we’re definitely under capacity for what we need.” One bright spot in the fight against FASD is a recent four-year $1.1 million federal grant that investigators at CBHRS received in September 2014. UAA is one of six universities that received the funds, which will be administered by the Centers for Disease Control and Prevention’s national Center on Birth Defects and Developmental Disabilities. The grant will be used to establish a Fe32

tal Alcohol Spectrum Disorders Practice and Implementation Center focused on developing a national approach to prevent, identify, and treat FASD. “The UAA Practice and Implementation Center will be focusing our efforts on the nursing professions, working to make headway in education and implementation of primary prevention strategies within this professional group,” says Diane King, deputy director for CBHRS and project director for the grant. “To do this, we will be partnering with the University of Pittsburgh and the University of California, San Diego.” The ultimate goal of the Fetal Alcohol Spectrum Disorders Practice and Implementation Centers is to develop and disseminate evidence-based strategies for training and improved healthcare practices, such as early identification, diagnosis, and treatment for FASD, and effective strategies to address alcohol misuse and prevent alcohol-exposed pregnancies. “We will be looking at the nursing profession to see what the educational standards are and where organizations are as far as how they conduct services and how screening for alcohol misuse can become a part of that,” says King. The four-year grant will allow UAA to test different interventions and approaches in different practice settings. “We need to figure out how to implement FASD screening and intervention in the real world,” explains King. “Healthcare professionals have a million different screenings and interventions they have to do, which is a lot of pressure in a seven-minute office visit. We will be looking at where healthcare professionals are spending their time and possibly shifting the paradigm as far as what may be lower priorities when you’re considering what has the greatest impact on a person’s health. For instance, taking someone’s blood pressure every time they step into the office may not necessarily be best practice for patients without hypertension—once a year or even every other year is what is recommended, depending on other risk factors. They might need to let go of something like that to focus on a health issue that will make a larger impact.” By screening patients for alcohol use and offering brief interventions, it is hoped that women of child-bearing

age can better understand the risks of FASD. “Through education, we want women to understand that if you’re pregnant, don’t drink. There is conflicting information in the media, saying, for example, that it is safe to have one glass of wine at night,” says King. “But we don’t know when there is a safe time or a safe level; if you want to prevent FASD, there is no safe time when you’re pregnant to be drinking.” “If it’s possible that you could become pregnant, there is no safe time to be drinking,” she adds. “And if you’re not planning to get pregnant, but consume alcohol, use contraception.” While healthcare providers are in an excellent position to provide assessments and interventions, many of them do not ask their patients about their drinking habits. “A study last year by the CDC focused on patient comfort when being asked about alcohol use; healthcare providers believed that people would get upset or offended, but the study actually showed that people wanted to be asked,” says Edwards. “They had a lot of questions about their alcohol use, including whether they should be drinking while on certain medications and what amount is okay to drink. Many people don’t fully understand what a standard drink is. Is it a twelve ounce or a twenty ounce bottle of beer? There is a significant difference.” “People don’t know the recommended limits,” adds King. “For a woman, safe limits are about one drink a day, or seven drinks per week—and she shouldn’t have more than three drinks within a two-hour period. For men, it’s two drinks a day or fourteen drinks per week—and no more than four per occasion. And there is no safe amount if you could become pregnant and are having unprotected sex.” She adds: “This is the message that we’re trying to have healthcare providers deliver, and studies have shown that those who do offer a standardized brief assessment during the course of a regular medical visit can intervene and help patients reduce their drinking and avoid the health risks.” R Vanessa Orr is the former editor of the Capitol City Weekly in Juneau.

Alaska Business Monthly | December 2014 www.akbizmag.com

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ALASKA NATIVE CORPORATIONS

Photo courtesy of Doyon, Limited

Doyon’s new shop in Deadhorse.

Alaska Native Corporations Land Development By Eliza Evans

everal Alaska Native Regional Corporations have current land development projects that may benefit Alaskans within their regions and beyond. From low-cost energy demonstration projects to geothermal pilot programs, the benefits of some of these projects could be far reaching.

The Alaska Native Claims Settlement Act in Brief In 1971, the US Congress passed the Alaska Native Claims Settlement Act, which divided Alaska into twelve geographic regions. Twelve Alaska Native regional corporations were organized to own and manage each of the regions. A thirteenth regional corporation was developed for non-resident Alaska Natives. According to the Resource Development Council for Alaska, Inc., Alaska Native regional corporations hold title to 44 million acres statewide, making them the largest private landowners in Alaska. The Alaska Native Claims Settlement Act was developed in part so Alaska Natives could derive economic benefits from the resources of these lands, creating jobs and economic benefits for Alaska Native shareholders. Current Alaska Native regional cor34

poration land development projects reach across the state.

Bering Straits Native Corporation Bering Straits Native Corporation is headquartered in Nome, the region’s hub. Bering Straits has approximately 2.1 million acres of surface and subsurface estate of land that includes the coastal lands of eastern Norton Sound and the majority of the Seward Peninsula. Matt Ganley, vice president of Resources and External Affairs for Bering Straits, says Bering Straits is currently working on mineral exploration, recreation use permits, and research programs related to Arctic climate change. One project, a geothermal pilot program at Pilgrim Hot Springs, could have especially exciting ramifications for the Bering Straits region of Alaska. Just less than sixty miles northeast of Nome is Pilgrim Hot Springs. According to Alaska Center for Energy and Power, Pilgrim Hot Springs is the hottest resource in Alaska not directly related to a volcanic system. This means it has the potential to power a range of energy projects using geothermal energy. Geothermal energy—most simply the ther-

mal energy generated and stored in the Earth—is a clean, reliable, and renewable resource. Through a partnership with the University of Alaska and a private energy producer, research is currently underway to determine if the flow of hot water from the springs is sufficient for enough power generation to economically export electricity to Nome. With long, cold winters and ever-increasing fuel costs, the financial benefits to residents may well outweigh the cost of developing this resource. Also under consideration is the feasibility of various other ways this site could benefit residents of this region. According to Ganley, “In tandem with the Nome power program, we are also looking at producing enough power and heat at the springs to begin developing a micro-grid and constructing greenhouses to produce local food.” In a part of Alaska where fresh produce is especially expensive and often hard to come by, this could provide a tremendous boon to residents throughout this region. As Ganley says, “The benefit of this program is far reaching. Utilization of local renewable and alternative energy sources will become more imperative in rural Alaska and in areas that are not located along the rail belt…The project

Alaska Business Monthly | December 2014 www.akbizmag.com

provides opportunities for developing local energy production and beginning the process of establishing local food security. Refining and testing micro-grid concepts at the scale afforded by Pilgrim Hot Springs brings with it training in new technologies that can be directly applied throughout much of Alaska.” Bering Straits is also exploring other land development projects as well. Bering Straits and the Village corporations own approximately 2.1 million acres of valuable subsurface estate with great potential. “We continue to work with interested exploration and mining companies to characterize and develop these prospects which include gold, tin, uranium, and rare earth minerals.”

Cook Inlet Region, Inc. Cook Inlet Region, Inc. (CIRI), Southcentral Alaska’s largest private landowner, has 1.6 million acres of land. CIRI projects include commercial and retail real estate development, oilfield and heavy construction services, environmental remediation services, tourism and hospitality, energy and resource development, renewable energy, venture

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capital and marketable securities investments, telecommunications, private equity, and aerospace defense. Many of CIRI’s projects are prominent throughout Anchorage, including the wind farm on Fire Island and the Tikahtnu Commons, a nine hundred thousand-square-foot retail and entertainment center. Anchorage residents can hardly fail to notice one of the newest land development projects currently underway by CIRI. Prominent on the midtown skyline alongside the New Seward Highway is the construction of CIRI’s Fireweed Business Center. Development of this center is beginning with an eight-story, energy efficient building that is expected to include approximately sixty thousand square feet of Class A office space available for lease and will be the new corporate headquarters of CIRI. This building is designed to meet Leadership in Energy and Environmental Design Silver requirements, or LEEDS certified, a rating system for the design, construction, operation, and maintenance of green buildings. Eventually, CIRI plans to make this 8.35-acre site an office campus with up to three buildings.

Doyon, Limited Doyon, Limited, one of the largest landowners in North America, has title to 12.5 million acres in the Doyon region of Alaska. Its lands extend from the Alaska Range in the south, to the Brooks Range in the north, to the Alaska-Canada border in the east, and almost to Norton Sound in the west. Doyon, Limited’s management of these lands focuses on responsible development of natural resources and the protection of traditional uses for shareholders. Doyon lands include sites favorable for gold deposits, metal deposits, and oil and gas deposits. Doyon Drilling, Inc., one of Doyon, Limited’s companies, operates on the North Slope with seven oil and gas land drilling rigs designed specifically to drill oil wells in the extreme conditions all too common in the North Slope. Doyon Drilling is currently developing a ten-acre pad in Deadhorse and is working alongside several Alaska companies to construct a new eighty-byfifty-foot shop. According to Ron Wilson, president and general manager of Doyon Drilling, this shop will house the company’s North Slope operations, serving as the main “call out” facility for Doyon Drilling’s

December 2014 | Alaska Business Monthly

casing service. Doyon Drilling has provided casing services since 1983 and currently provides casing and tubing for oilfield operators on the North Slope.

Ahtna, Inc. Ahtna, Inc., headquartered in Glennallen, Alaska, owns in fee title approximately 1.528 million acres of land located primarily in the Ahtna region of Alaska’s southcentral Interior. The Ahtna region includes the Copper River Basin and the Wrangell Mountains. It is bordered by the Chugach Mountains to the south, the Alaska Range to the north, the Talkeetna Mountains to the west, and the Mentasta and Nutzotin Mountains to the northeast. According to Joe Bovee, vice president of Land and Resources, current projects include oil and gas exploration, mineral exploration, gas lines, the Sustina-Watana Dam, a 1,500-acre moose browse enhancement to improve moose habitats, and a commercial development that includes a 100-acre industrial park near Glennallen. The Ahtna Tolsona Oil and Gas Exploration project is especially beneficial to this region as it is expected to provide low cost energy and a source of revenue for

Alaska through oil and gas royalties. In 2013, Ahtna received a state of Alaska oil and gas exploration license on forty-three thousand acres of state-owned lands located ten miles west of Glennallen. “This past year we reprocessed eightyseven miles of seismic shot thirty to forty years previously and partnered with two independent oil and gas development companies,” Bovee says. “The reprocessed seismic identified a large structure within the license area. We recently signed a 2D seismic program with Global Geophysical Services to provide forty miles of new seismic beginning in November through December.” Of this project’s potential, Bovee says, “The opportunities are endless with a small diameter pipeline to the local school, government facilities, commercial and residential users, and possibly the electric co-op to produce low cost power to the Valley’s residents.” Ahtna is also working toward some innovative energy projects guided by a Regional Energy Plan recently completed by community residents, community associations, tribes, and local nonprofits. “Through the implementation

of the Plan we are working on Phase II and more collaboratively as a region to support energy projects,” Bovee says. This includes providing support and technical land assistance for a region-wide electrical power inter-tie in. “Currently we have four power companies within the Ahtna region,” he explains. “In two cases, only a few miles separate the various power company lines from being interconnected to complete a circuit. An inter-tie would also offer opportunity for large scale hydro-projects and/or local natural gas to become economical with more users.” Bovee says Ahtna has also done a “considerable amount of research and feasibility studies regarding a rural LNG [liquefied natural gas] distribution site specifically to be joined with the North Slope LNG trucking project. This year we are hopeful to secure funding to construct a small LNG distribution facility as a demonstration project to be a model for other rural, off-road communities once LNG becomes more available in-state.” R Freelancer Eliza Evans writes from Anchorage.

Alaska Business Monthly | December 2014 www.akbizmag.com

Legal Speak

By Melanie K. Curtice

Healthcare Reform Requirements for Employers: Are You Ready for 2015?

ealthcare reform’s employer shared responsibility provisions, often referred to as the “employer mandate,” are effective January 1, 2015. These requirements are found in income tax regulations under the Internal Revenue Code. If you haven’t been tracking your full-time (FT) or full-time equivalent (FTE) employees during 2014, you may be surprised by penalties that could be assessed in 2016 for failing to provide health insurance coverage to your FT employees in 2015.

The General Rules In general, and unless you are subject to the 2015 transition rule (discussed below), any employer employing at least fifty FT or FTE employees must offer health coverage to an employee by the first day of the month immediately following the conclusion of three full calendar months of employment or pay a penalty (called an “assessable payment”) to the IRS. Employees in part-time positions need not be offered coverage. The penalties apply regardless of whether you are a forprofit, non-profit, or government employer. There are two types of penalties: the “no coverage penalty” and the “insufficient coverage penalty.” The no coverage penalty applies when an employer does not offer minimum essential coverage to “substantially all” of its FT employees (and their dependent children) and any FT employee is certified to receive a premium tax credit or costsharing reduction (Federal Subsidy) when purchasing individual health insurance coverage through a state-based or the federally facilitated exchange (an Exchange). For 2015, “substantially all” means 70 percent of FT employees. For 2016 and beyond, “substantially all” means 95 percent of FT employees. The “no coverage penalty” is equal to (i) $2,000, multiplied by (ii) the number of FT employees minus 30 (80 for 2015). Example: Employer A has 150 FT employees and does not offer coverage to any of those employees in 2015, and at least one of its FT employees receives a Federal Subsidy when purchasing Exchange coverage. Employer A would be subject to a penalty equal to $140,000 for 2015, to be paid in 2016 (150 employees minus 80 = 70 x $2,000 = $140,000). In 2016, the penalty would be $240,000 (150 employees minus 30 = 120 x $2,000 = $240,000). (Note that the penalty amounts are subject to annual adjustments, so the $2,000 number will likely be slightly higher in 2015, and will increase each year thereafter.) 38

The insufficient coverage penalty applies when an employer offers health insurance coverage to “substantially all” of its employees (and their dependent children), but a FT employee receives a Federal Subsidy when purchasing health coverage in an Exchange because the coverage offered by the employer is not “affordable” or does not provide “minimum value.” The insufficient coverage penalty is equal to $3,000 for any FT employee receiving the Federal Subsidy (subject to annual adjustments). Example: Use the same facts as above, but Employer A offers affordable, minimum value health insurance coverage in 2016 to 95 percent of its FT employees. Two FT employees who were not offered affordable, minimum value coverage receive a Federal Subsidy when purchasing Exchange coverage. Employer A would be subject to a penalty equal to $6,000 for 2015, to be paid in 2016 (2 FT employees x $3,000 = $6,000). Dependent children include biological and adopted children that have not attained the age of twenty-six but not stepchildren or foster children.

The Transition Rule for Employers with Fewer than 100 FTE Employees An employer with at least fifty but less than one hundred FTE employees will not be subject to penalties before 2016, as long as the employer certifies that it (i) employed at least fifty but less than one hundred FTE employees on business days during 2014, (ii) did not reduce the size of its workforce from February 9, 2014, to December 31, 2014, (reductions in force for business reasons are acceptable, however), and (iii) previously offered coverage through 2015. For calendar-year plans, the mandate is delayed until January 1, 2015; for noncalendar year plans that meet certain criteria, the delay is effective on the first day of the 2016 plan year. How to Determine FT Employees An employee is considered to be full-time if the employee works at least 30 hours per week in any month, and 130 hours of service per month is equivalent to 30 hours of service per week. An employer must count actual hours worked for employees who are paid on an hourly basis or entitled to payment for a period of time when no duties are performed due to vacations, holidays, leaves for illness (or disability), layoffs, and jury or military duty to the extent paid.

If an employer does not know on an employee’s hire date whether the employee will be full-time (referred to as “variable hour, seasonal or part-time”), the employer can use an optional lookback measurement period during which the employee’s hours of service are measured, an administrative period during which the employer determines who is a FT employee, and a subsequent stability period of at least six months during which health coverage must be offered. Employers can also use a monthly measurement period to determine whether a variable hour employee is full-time in “real time.” Employers can use the lookback measurement period for certain groups of employees, and a monthly measurement period for other groups of employees, as long as the criteria is applied uniformly. Differing groups of employees include salaried versus hourly, or union versus non-union, as examples. The rules outline how to determine whether a new hire reasonably may be classified as a variable hour employee when using the lookback measurement period, complex rules for employee job status changes, and the ability to treat seasonal workers as variable hour workers subject to the initial measurement period even if they are expected to work more than thirty hours per week at the time they are hired. There are exclusions for hours in certain capacities, such as bona fide volunteers and student employees paid through federal work study. There are special rules for determining hours of service for adjunct faculty and on-call hours, among others. Finally, employees who are rehired or return from unpaid leave after a break in service of at least thirteen weeks are treated as new employees for purposes of the measurement periods. R Melanie K. Curtice is a partner with the Seattle office of Stoel Rives LLP. Curtice regularly assists Alaska employers with their employee benefit law needs. Contact her at mkcurtice@stoel.com or 206.386.7651. This article is provided for educational purposes only. It is not a substitute for legal counsel.

Alaska Business Monthly | December 2014 www.akbizmag.com

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FINANCIAL SERVICES

Business Succession Planning Best Done from Day One

hile a considerable number of baby boomers ponder how they will spend their golden years, the topic of business succession planning is gaining more attention in Alaska. As a relatively young state, Alaska now has second and third generations seeking ways to transfer the ownership of their business while ensuring continuity of the enterprise. But there’s not an abundance of business brokers in the state to shepherd companies through the succession planning process. However, owners can build an advisory team of estate planning attorneys, wealth management experts, accountants, and other professionals to help them orchestrate their exit strategy.

Making a Seamless Transition Succession planning can encompass everything from extracting money and preserving wealth to improving leadership and fostering a good governance concept, according to Joe Beedle, president and CEO of Northrim Bank. For a closely-held business, the strategy could focus Beedle on the smooth transference of leadership to continue growth. For a large corporation, the key concept could center on having an everlasting life. “Our perspective for succession planning is that it’s for continuity, seamlessness, and preserving value,” Beedle says. In Alaska, business succession often involves family-owned companies selling to monetize the business or transferring ownership to heirs. For smaller entities with less infrastructure and broad senior management, the impact of business succession tends to be magnified, says Brent Reys, managing director of Pacific Portfolio Consulting, a Seattlebased Northrim affiliate. Reys 40

By Tracy Barbour Pacific Portfolio, which has an Anchorage office on C Street, helps families navigate the financial potholes, so they won’t be overwhelmed by the many options that have to be considered. The company also helps them address gray areas and truly consider their wishes. “It’s about understanding the participants, their hearts and spirits, and what they want to accomplish,” Reys says. “We’re kind of like a financial psychologist.” Reys holds family meetings at least annually to discuss the goals for the succession plan. He also stages an “advisor summit” to ensure everyone is acquainted and that the plan is up to date with the current company valuation, market conditions, tax laws, and other relevant factors. Typically, succession planning involves the sale of a business by a retiring owner, which can be a delicate situation, according to Brian Pinkston, president of Bright Road Wealth Management. Often, the owner started the business from scratch and is closely intertwined with its daily operations. Essentially, he or she is the business. Pinkston says owners should make sure they have a well-thought-out and graceful exit. This includes deciding when they want to leave the firm, who will run the business, how the company will continue the function after their exit, and how their departure will affect everyone associated with the business. “The more you lay out a plan ahead of time, the less surprises there will be, and you can better be able to protect the business owner,” Pinkston says. Proper preplanning can also make the owner’s transition easier on family members, partners, shareholders, employees, and other stakeholders who will be impacted.

When to Start Planning Normally, a succession plan plays out over a short window of time, with the business owner stepping out of the picture in five or ten years, Pinkston says. However, principals should engage Pinkston in succession planning the second they think about starting a business. “It should be part of long-term planning,” he says. “I don’t think it’s ever too early to starting thinking about it or planning it.” Like Pinkston, Beedle thinks succession planning should take place from day one. For instance, a C corporation with everlasting life should have a buy-sell agreement and a limited liability company should include terms for selling in its articles of organization. “Start your organization right; then make sure succession planning is a part of it,” he says. Jave Ragan, a senior wealth planning strategist with Wells Fargo, says succession planning should be done at least five years in advance. But that’s not what normally happens. “The reality is that it often takes place a couple of years from the time you identify the path to make it a reality—whether it involves a sale to a third party or an internal transition,” he says. The longer lead time that owners have to plan, the greater the odds of a successful transition. For instance, selling a business to a third party typically takes twelve months, and rushing the process can cost owners in terms value, financial security, or both. Ragan advises owners to reset their unrealistic expectations to avoid putting themselves at risk and leaving money on the table. Owners tend to procrastinate about succession planning because they’re fo-

Alaska Business Monthly | December 2014 www.akbizmag.com

cused on operating and growing their business. Planning for succession and eventual retirement is something that gets delayed because it’s not enjoyable for owners to think about, and they often don’t know where to start. “It’s easier to ignore it and carry on with the day-to-day business,” Ragan says. Pinkston agrees, saying: “People are busy running the business. They live and breathe the business, so adding one more thing to their plate is hard.” Besides, it’s human nature for people to not want to plan for their demise— either from a business or physical standpoint. Plus, succession planning takes money, time, and effort, Pinkston says. “You’ve got to make sure all the ‘T’s are crossed and the ‘I’s are dotted,” he says. The planning process, Ragan says, can be especially important for companies that are service-oriented, have a high degree of intellectual capital, or rely on a smaller number of people to operate the business every day. “They have all the knowledge, but if they are not there for some reason, it would be very difficult for the company to keep going,” he says.

Planning for the Unexpected Ideally, Ragan says, a succession plan is developed during the lifetime of the owner or when the owner has the ability to make a choice. But unexpected events like death, disability, and divorce can occur and make succession planning more difficult and stressful. Owners need to plan for these unforeseen circumstances and as much as possible—without restricting the growth of the company. Businesses need a buysell or shareholder agreement in place to dictate what will happen under different events. “It is surprisingly often that companies exist without a buy-sell agreement,” Ragan says. “Even when they have a buy-sell, the agreement is often very dated or unfunded.” To avoid this situation, individuals often use life insurance or a combination of life insurance with an appropriate payment structure to fund the buysell agreement. For normal circumstances, Ragan recommends six steps for business exit planning: identify exit planning goals, analyze the business, determine the business value, identify transition op-

tions, review funding options, and develop an implementation strategy. “A plan without implementation is just another piece of paper in the file,” he says. Wells Fargo walks business owners through all of these areas and brings in different experts throughout the process, Ragan says. For example, mergers and acquisitions specialists are often called upon to assist with the sale of a business to a third party.

Facilitating Succession with a Trust A trust can be an excellent estate planning tool for facilitating business succession. In general, a trust agreement is a document that spells out the rules that are to be followed for property held in trust for beneficiaries. The kind of trust that can be applied to a business succession plan will depend on the unique objectives of the business owner, according to First National Bank Alaska Investment and Trust Officer Matthew Anderson. For instance, a business owner wanting to extract equity and maintain control might consider a grantor retained annuity trust. A grantor retained annuity

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December 2014 | Alaska Business Monthly

Maximizing Personal Wealth When Selling a Business By Zachary Bingham

n estimated 10 million small companies are expected to hang up a “for sale” sign over the next five to ten years, spurred by the upcoming wave of Baby Boomer retirements. Many owners of closely held businesses have spent a lifetime building their enterprises, so it’s no surprise emotions can run high as they explore a sale. This is a life-changing event for the owner, requiring profound financial decisions. In October, KeyBank collaborated with ASG Partners and Thomas, Head & Greisen to host a seminar on transition planning for Alaska business owners. Guests were especially interested in strategies for getting the highest possible sale price for their businesses, since selling a privately held enterprise will likely be the most important financial event in an owner’s life. Most business owners have two primary objectives: obtaining the highest price from the buyer and paying the least amount of taxes on the transaction. By integrating potential deal terms, key tax and estate planning strategies, and the business owner’s financial goals, the owner and his team of advisors can most effectively extract maximum value from the deal.

Identifying the Business Owners’ Goals and Priorities The sale of a business often allows the owner’s spending, legacy, and philanthropic goals to be met through careful planning and setting of priorities prior to the beginning of the sale. These goals and priorities will be major drivers of the strategies adopted. There are four things people can do with their money: n Spend it n Give it to the people they care about n Give it to charity n Send it to the government as taxes

Additionally, business owners must weigh priorities: n Do they want to start a new business or enjoy retirement? n Do they want to pass on a legacy to heirs or establish a charitable foundation? n Do they want to exit or stay involved in the business?

Understanding the Terms of the Sale Relative to Goals Many deals are straightforward, with cash proceeds when the deal closes. Some offers include a significant amount of stock in the acquiring company, and in those cases other issues may arise: Will the proceeds be fixed at the time the deal closes, or based on the performance of the acquiring company’s stock? Will the stock be subject to a lengthy lockup period when selling is prohibited? Whether stock, cash, or both change hands, contingencies may be added to the deal; some of the proceeds may be payable in installments over time, for example, or include “earn-outs” based on the company’s operating performance. Such deal term variants can have material consequences for the owner’s future cash flow, so the deal must be evaluated carefully—and from two different perspectives: the value offered for the business and the impact of the terms on the owner’s personal investment plan. Considering a Partial Sale If an owner still wants to work, yet unlock some of the equity in the business, the three main routes to be considered are a recapitalization, an ESOP, or a captive. Recapitalization In a recapitalization, the company reallocates the equity and debt on its balance sheet to generate liquidity. This opens up several possibilities for the owner, including monetizing his equity, diversifying his portfolio, and

transferring ownership to the next generation. For example, a dividend recapitalization is a type of leveraged recapitalization in which the company raises debt to fund a dividend for the shareholders.

ESOP A company creates a trust (“ESOP Trust” or “ESOT”) for employees and funds it by contributing company shares, contributing cash to buy company shares, or by having the plan borrow money to buy shares and then make payments to the ESOP trust to repay the loan. Shares inside the plan trust are voted by the trustee (usually at the direction of management), which allows initial owners to continue to “control” the business (with certain exceptions such as closing, sale, and liquidation). Captive A captive is a closely held insurance company whose owners primarily supply and control the business and who are its principal beneficiaries. Properly structured captives reduce insurance costs, improve cash flows, control risk, take advantage of tax savings, and establish wealth creation and preservation programs. Bottom Line For many owners of privately held companies, selling their business represents the culmination of years of work and offers the best prospect of lifetime financial security. By defining personal objectives and putting key strategies in place, an already lucrative transaction can become a golden opportunity without slowing down the sales process. R Zachary Bingham is a relationship manager in KeyBank’s Anchorage office. Contact him at 907-564-0205 or zachary_bingham@keybank.com.

Alaska Business Monthly | December 2014 www.akbizmag.com

trust transfers cash or property into a trust, rather than to a beneficiary. The grantor or creator of the trust receives a right to distributions from the property for a certain Anderson number of years, while minimizing tax liability. As another option, a Qualified Terminable Interest Property trust can enable a grantor to provide for a surviving spouse and maintain control of how the assets of the trust are distributed once the surviving spouse has also died. A qualified terminable interest property trust also allows a spouse to give a life estate (in property) to his or her spouse without incurring the federal gift tax. While trusts can assist with the business succession process, they can also help owners plan for the future. “Trusts can support the owners once they have sold the business,” Anderson says. Trusts offer distinctive benefits on both the business and personal side, according to First National Trust Manager

Bob Tannahill. On the busiportunity and a responsibility.” ness side, the trust that’s holdSuccession ing the ownership shares of Planning Tips the business allows the tranExperts offer sage advice to help sition to be much simpler. “It business owners with the sucallows the preplanning to take cession planning process. Beeplace once the agreed upon dle advocates having a plan— events have occurred,” he says. however basic—then evolving On the personal side, a trust Tannahill the plan to an ultimate conclucreates creditor protection for families and beneficiaries. It enables them sion. Reys encourages owners to identify to control the tax debt, and, if necessary, the goals for their exit strategy and focus transfer it from the personal side into an- on the main goals on the front end. Pinkston recommends having a forother entity. “It allows the owner to pass the assets down to the family for specific mal plan in place and reviewing it annupurposes as they desire,” Tannahill says. ally to ensure it’s up to date with relevant However, Tannahill emphasizes that tax, estate planning, and business laws. As for Ragan, he advises owners to First National doesn’t make specific recommendations about business succession. start thinking early, to do their homeInstead, the bank provides preplanning work so they know their numbers, and and goal setting advice and then refers to get objective advice. Lastly, he says, clients to attorneys and accountants to get create a written plan—and implement it. “Hope is not a plan,” he says. “And help implementing their exit strategy. Anderson says First National is happy hoping your succession goes well is rollR to serve as a “match maker” for its client. ing the dice at best.” “We’re a bank that’s built on serving the needs of small and medium-sized businesses,” he says. “First National feels that Tracy Barbour is a former working with clients in this area is an op- Alaskan.

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December 2014 | Alaska Business Monthly

ENTREPRENEURS

Fueling the Entrepreneurial Spirit in Alaska Business Growth Summit shares path to success By Russ Slaten

n entrepreneur is defined as someone who starts a business with the goal of economic gain, but who may also undertake risks in the process. In Alaska, the pioneer spirit established the Last Frontier as the economically-rich state it is today. And although most people today are not coming to Alaska to strike gold, there are still many Alaskans who see the beauty in discovering a new niche in the market or a venture that fits their passion. The Alaska Small Business Development Center of the University of Alaska Anchorage and Wells Fargo hosted an educational forum in October for Alaska small business owners looking to grow their business, discover pitfalls to avoid in the process, and find resources to help them realize their dreams. The business growth summit was well attended and featured several guest speakers, including business owners with their own stories to tell, an attorney who spoke of legal considerations when starting a business, and a videographer who discussed the advantage of using social media and video for effectively marketing a business.

Owning a Business

Guest speaker at the event Nick Hale owns Team Hale Snow Removal in Anchorage. His father started the business and began by hauling gravel in 2005 after a career in the finance industry. “My dad wanted to get out of the financial sector after working thirty years as a regional manager for a large financial company, and he wanted to do something a little dirtier,” Hale says. The business began with his father buying two dump trucks and a short client list from a retiring friend. Hale, barely old enough to obtain his commercial driver’s license, began hauling gravel through the summers for his father during his time off from school, he says. Hale learned from his father’s company and started a winter season business in snow and ice management, which many companies in the construction industry do to keep a steady cash flow. Hale took over as the owner of the business from his father this June. He says a key component of his success has been sustainable growth. 44

“We don’t go out and buy all the biggest and newest equipment we can. We really think about what we need and maybe pick up one large piece of equipment a year. We try to schedule our purchases so we can grow comfortably,” Hale says.

Legal Considerations

Andrew Mitton is an attorney who owns Vellum LLC, which provides consulting services and conducts lawful business for potential and current small business owners. Mitton says the most common consideration a business owner must make is whether to become a sole proprietor, a limited liability company (LLC), a corporation, or a different type of entity. “When it comes to most small business owners who have partners or employees, assets and contracts, and who want better tax benefits, they typically form an LLC. Alaska sees about three thousand LLCs form each year, compared to about five or six hundred corporations formed each year, but there are also about four or five thousand people who just get their business license and open up as a sole proprietor,” Mitten says. Before looking for a lawyer, Mitton says a business must first consider finding a lawyer that is willing to provide the company or sole proprietor with the knowledge and choices that face the organization, in order to allow the owner to take the company in the direction he or she means to take it. “I’ve had a lot of clients come to me and essentially want me to make the decision for them, but a lot of what I do is to explain their options, risks, and liabilities—give them the chance to make the operational decision to choose which path to take,” Mitton says.

Effective Video Marketing

In addition to legal considerations, businesses must decide on their marketing plan in order to gain more customers. Slavik Boyechko is the co-owner of Video Dads, a production company in Anchorage that specializes in creating videos that tell the story of a company. At the summit, he spoke of the proper mix of social media and video to create effective marketing in order to grow a business.

Before forming Video Dads in March, Boyechko worked at the local PBS station, KAKM-TV, for the last five years with Video Dads co-owner Travis Gilmour. The two wrote, shot, and produced the Indie Alaska series for the station. Some of the first work for Video Dads is producing a new series called Indie America with PBS on a national level. The videos are produced in the same way as Indie Alaska, using dynamic footage and introducing the viewer to an individual or organization, and the videos explore aspects that make the subject unique. “A video can makes sense for businesses who already have a website and have established their marketing through print or other means, but who want to tell their story in a more unique way that’s more engaging and inspirational. That’s a good next step,” Boyechko says. “Video these days are not just confined to a thirty second commercial. You can really tell your business’s story and reach people in a very quick and emotional way.” In some cases, Boyechko says, some businesses and projects even start their business with a video by utilizing websites like Kickstarter and Indiegogo. “There are some ideas out there that are actually built upon the support people get from watching a video, so I think a lot of different stages of businesses are interested in video storytelling,” Boyechko says. Social media goes hand in hand with video marketing because a video needs the proper channels in order to reach the right people, Boyechko says. Businesses need to provide content that’s not even specifically about their business before they can ask a customer buy a product or show up to a sale. “One term in social media you hear is the boxing metaphor of ‘left jab, left jab, right hook.’ You provide a lot of tangential content first,” Boyechko says. “For example, if you’re a dentist, you may share photos or stories of the customers or people that work for you, and after ten or twelve of those types of posts, then you ask for something, and you have that hook.” R

Russ Slaten is the Associate Editor for Alaska Business Monthly.

Alaska Business Monthly | December 2014 www.akbizmag.com

Building Alaska

Photos by David Nicol, Capstone Solutions Director of Development

special section

The Naknek High School solar installation is comprised of three separate arrays, top and right is the 30 kW ground mount seen at two different angles. The 15 kW wall mount is shown above left, and there is also a 35 kW roof mount. Each array is optimized for different times of the year; the roof mount works best in the summer, the wall mount works best in the winter.

Infrastructure Builds Wrap Up Construction also underway in Anchorage’s housing market By Lisa Maloney

ecember means wrap-up time for a number of infrastructure projects throughout the state. The list includes power stations and water treatment facilities in rural Alaska, an impressive rush job to repair the Ouzinkie community dam, and an award-winning series of communications towers installed in rural Alaska for GCI’s TERRA project. Infrastructure developments continued apace in Southcentral too, as ENSTAR took just two years to wrap up what would normally have been a ten-year natural gas delivery project in Homer, and the Matanuska Electric Association’s (MEA) Eklutna Generation Station is just about ready to come online. Southcentral development is rounded out by an increase in affordable housing and several new office towers at various stages of construction.

Rural Alaska Infrastructure This year the Alaska Village Electrical Cooperative (AVEC) added a new power plant and fuel tank farm in the community of Stebbins. An intertie between Stebbins and nearby St. Michael will be completed by March 2015, at which point the existing St. Michael power plant will be 46

converted to standby status. AVEC is also in the early stages of designing and funding a Stebbins-St. Michael wind turbine. This year AVEC also completed a new tank farm in Emmonak and will begin building a new power plant for the same community in spring 2015, with an estimated build time of six to eight months. Once complete, the power plant will supply power to both Emmonak and nearby Alakanuk, where an intertie and wind turbines are already installed but not yet fully integrated. “Pretty much everything we do is grant funded, either through state or federal funding,” says Steve Gilbert, AVEC’s manager of energy projects and key accounts. AVEC currently operates fifty power plants and 170 diesel engines in the fiftysix rural communities they serve; add the populations of those communities together, and they’d be the fourth-largest city in Alaska. AVEC also has the largest fleet of wind turbines in the state, with a total of thirty-four in eleven communities. In July, STG Incorporated began installation of a Buckland wind-diesel turbine for the Northwest Arctic Borough; construction should be complete by late

January 2015. They have also installed a number of communications towers for the GCI TERRA project to provide telecommunications and Internet service in rural Alaska. Build sites included Galena, Ruby, Tanana, Gold, Grant Creek, Melozitna, and Mission Hill; this project earned the Engineering News Record award for 2014 Best Regional Project in Specialty Contracting. Tunista Construction, which belongs to the Bilista holding line along with STG Incorporated, was recently awarded contracts for vertical construction on a Kodiak triplex for housing employees of the Kodiak National Wildlife Refuge and construction of a 13,164-square-foot Company Operations Facility for Aviation Task Force Phase 3B at Fort Wainwright. Both facilities will meet LEED Silver certification requirements once complete. In October, Naknek High School received what installer Lime Solar describes as the largest solar array in Alaska. The 310 solar panels (80kW) are expected to produce an average of 200 kilowatt hours each day for the Naknek High School, which is purchasing the power from Capstone Solutions, the

Alaska Business Monthly | December 2014 www.akbizmag.com

system owner. Capstone worked with the RCA and the school to determine the appropriate business structure and paid for the installation; the school is saving money by buying a portion of its energy from Capstone at a fixed rate, below utility cost. “The payback on the system is less than five years,” explains Chester Dyson, one of Lime Solar’s owners, adding that the system will offset about 73,000 kilowatt hours of energy annually and save the school about $20,000 yearly in electricity costs. Because the school has no payback for the system, its savings are immediate.

Ouzinkie Emergency Fix Construction on the new Mahoona Lake community dam for Ouzinkie was expedited when a breach developed in March of this year, apparently caused by a tree stump punching a hole in the rotten wood face of the dam. “It went from dire emergency to construction in a short time,” says John Nichols, project manager for the Alaska Rural Utility Collaborative. The lake had to be emptied to keep the dam from washing out and damaging the town, and the old dam was demolished by midApril. Essential components of the new dam, which serves as a drinking water reservoir and source of electrical power for Ouzinkie’s 185 residents, were completed in October of this year. The new modern rock fill dam will have a concrete face and spillway and is designed to withstand a magnitude 8.8 earthquake. In addition to the emergency construction at Ouzinkie, the Alaska Rural Utility Collaborative also brought a total of five water plants online this year: core sanitation facilities and a water treatment plant at Old Kasigluk, a new water treatment plant at Toksook Bay, a new water treatment plant and water storage tank in Golovin, and a modular small-scale water treatment plant in Akhiok, plus repairs to fire damage to the water treatment plant in Klawock. A New Building for Nome The City of Nome is building the 18,500-square-foot Richard Foster building to contain the Kegoayah Kozga Public Library, the Carrie M. McLain Memorial Museum, and leasable space for the Kawerak Cultural Center. The site was prepared and pilings installed by midwww.akbizmag.com

October; steel for the project arrived on the last barge and should now be erected. The project will shut down for the winter months, with a planned opening date of March 2016. The general contractor is ASRC-SKW Eskimos, the project manager is DOWL HKM, and the architect/ engineering design is by ECI/Hyer.

ConocoPhillips In July 2014, ConocoPhillips Alaska announced a contract with Doyon Drilling to construct the first new-build rotary rig to be added to the Kuparuk River Unit since 2000. Construction on the Doyon 142 rig will create some one hundred direct jobs, and drilling is scheduled to begin in February of 2016. Meanwhile, construction continues apace on the CD5 extension to the Alpine field, with a six-mile gravel access road and three out of four bridges complete. The projected cost for development is $1.1 billion gross, including drilling. First production is expected at the end of 2015, with an estimated peak production of sixteen thousand barrels of oil (gross) per day. ConocoPhillips Alaska expected to have permits in-hand by the end of October for facilities construction on DS 2S, a new development on the southwest flank of the Kuparuk oil field, and for construction of Greater Mooses Tooth 1, or GMT1, an Alpine satellite that will have a road link to CD5. Drilling at DS 2S is expected to begin in mid-2015, and first oil from GMT1 is expected in late 2017. The latter’s cost is estimated at $890 million gross; it will have eight wells and the capacity for up to twenty-five more, with an estimated peak production of thirty thousand barrels of oil per day. Southcentral Utilities Final testing and commissioning activities are underway at MEA’s Eklutna Generation Station. The 171-megawatt natural-gas-powered plant is powered by ten Wartsila 18V50DF duel-fuel engines and will provide energy to MEA’s entire service corridor from Eagle River to north of Denali National Park. The Eklutna Generation Station is projected to have a total cost of about $325 million. Having more, smaller engines at the plant—instead of just a few big ones—makes it easier to ramp production up and down in accord with December 2014 | Alaska Business Monthly

Photo courtesy of ENSTAR

Natural gas distribution line near Big Lake.

Anchorage-Area Housing In Anchorage-area housing, Marathon Construction is contractor and developer for one hundred market-rate townhouses with rooftop decks on 6.5 acres

Photo courtesy of Municipality of Anchorage Solid Waste Services

demand and offers greater options for integrating renewable energy solutions in the future. In case of interruption to the gas supply, advanced dual-fuel technology enables the engines to smoothly switch to diesel during operation. MEA is also upgrading five different substations and constructing a new transmission line to the core of Wasilla, adding significant reliability and redundancy to MEA’s aging system to reduce outages and improve efficiency of the system. Also big news: ENSTAR Natural Gas installed more than eighty-five miles of natural gas lines in 2014. About seventyone miles were placed in Homer, allowing ENSTAR to bring natural gas service

to more than one thousand customers in the area. The $12 million project would normally have taken ten years, but they finished it in just two. In addition to the Homer project, ENSTAR laid about ten miles of natural gas line though the Funny River Road area on the Kenai Peninsula, including a trunk line that bores the Kenai River. They have also begun a five-mile extension to their natural gas distribution lines in Big Lake. In 2017, the Anchorage landfill will be at the halfway point in its expected sixtyyear lifespan. Construction is underway on shared cells 11/12, which will provide about 20 acres of space for general waste disposal, and cell 8B, which creates 5 acres of space for disposal of inert waste such as asbestos or debris from large building demolitions. When completed in early 2015, the new cells will bring the landfill up to 137 acres of the 165 it will cover when completely built out. Additionally, Davis Constructors and Engineers recently completed a number of storm water and sewer upgrades for the municipality.

A new Anchorage Landfill cell under construction. 48

near the intersection of Dimond and Arlene. Construction on this $35 million project will begin in spring 2015 and will finish in spring 2017. Marathon is also putting together a project for a seventy-five-bed assisted living building on property they own off Lake Otis. The roughly $20 million project will begin in fall 2015 and wrap up in fall 2017. Cook Inlet Housing and Alaska Housing Finance Corporation (AHFC) are co-developing Ridgeline Terrace in Mountain View, a mix of twenty senior housing units and fifty family, workforce and low- to moderate-income units spread throughout fourteen buildings along Mountain View Drive. “We tend to create a lot of mixed income housing developments, so it runs the gamut of market rate units all the way down to affordable units all within the same development. It reflects the community, it reflects the neighborhood where you have people of all different incomes,” says Sezy Gerow-Hanson, director of public and resident relations at Cook Inlet Housing. Ground was broken in September, and vertical construction is expected to begin in spring 2015. Existing public housing with sixteen units at the corner of San Roberto Avenue and Lane Street was demolished to make way for another AHFC project, Susitna Square, which will produce eighteen one- and two-bedroom units; construction will continue throughout the winter. Catholic Social Services will provide services to help any formerly homeless tenants integrate into the community. Together, Susitna Square and Ridgeline Terrace are expected to cost $29.5 million, with funding from AHFC, the Rasmuson Foundation, tax credits, and federal funds from the Neighborhood Stabilization program. Both developments will feature solar-powered hot water and electric, which should provide about 10 percent of the building’s total energy use. AHFC is also completing work on the third phase of Trailside Heights, Volunteers of America National Services’ 121unit affordable housing development in South Anchorage. Like Phase II, Phase III will include photovoltaic solar panels to help reduce energy costs for the two- and three-bedroom units. Cook Inlet Housing is also constructing Eklutna Estates II. The 34-unit building will share common areas with

Alaska Business Monthly | December 2014 www.akbizmag.com

Rendering courtesy of kpb architects

Northwest corner of new building in Anchorage U-Med district.

the existing 59-unit Eklutna Estates building, for a total of 401 units in the Centennial Village senior housing campus in East Anchorage. Construction should finish in summer 2015. Cook Inlet Housing is also in their fifth stage of development in Mountain View Village. Mountain View Village 5 is a mix of fifteen duplexes, a triplex, a four-plex, a five-plex, and two single-family homes on scattered sites all through Mountain View; the first duplexes and single-family homes should be available for rent in December, with continuing turnover until completion in June of 2015. NeighborWorks Anchorage has committed to a three-phase Patriot Square project meant to address veterans’ homelessness. Phase I of the project was the purchase and rehabilitation of an existing fiveplex and acquisition of two additional lots. Phases II and III will be the construction of eight- and five-unit buildings on said lots, projected to be done in 2017. GPARCH Architects will be the architectural firm. So far NeighborWorks has invested more than $900,000 in Phase I, with an estimated total cost for all three phases of the project of $4.37 million. “We are confident that even though this is a relatively small development [eighteen units] we will have great impact; housing is the foundation of stable families, neighborhoods, and communities,” explains NeighborWorks staff.

U-Med Projects Designer-builder Criterion General, Inc. expects to complete construction on a new building in the U-Med District this month. As of October steel erection, roof framing, and all underground and in-slab electrical work were complete, as was all exterior concrete www.akbizmag.com

including heated sidewalks. The north side of the building will house the 6,300-square-foot 31st branch of First National Bank of Alaska, including three drive-up lanes, a drive-up ATM, a night drop, and a full-function self-service kiosk. The branch is scheduled to open in mid-January 2015. The south side of the building will be a new imaging facility for Imaging Associates. “The new building will integrate into the existing environment, providing green space and convenient access through pedestrian and bike paths,” said Mark Pfeffer, president of Pfeffer Development LLC, in a press release. Pfeffer Development is the developer on this project; kpb architects is the design firm.

Office Space in Anchorage Davis Constructors and Engineers was general contractor for a four-story JL Properties office building at the corner of C Street and International Airport Road. Construction was completed at the end of September, and tenant improvement space is currently available. Davis is also working on CIRI’s Fireweed Business Center at 725 E. Fireweed Lane, where the Fireweed Theater used to stand. Glasswork is now complete, and interior work will continue through the winter; construction is scheduled to be complete in Spring 2015. RIM Architects designed both the Fireweed Business Center and the JL Properties office building. A new office building for the Kuukpik Corporation should be completed in December 2015. The six-story, sixty thousand-square-foot building will include ten thousand square feet of office space for Kuukpik, with the remainder avail-

able for lease. Building amenities will include a cultural area on the first floor, an outdoor plaza, about thirty covered parking spaces, and bicycle parking. The developer is Pfeffer Development; Criterion General and kpb architects complete the design-build team. The Anchorage Legislative Information Office Building is also undergoing renovations, including expansion of the building from about forty thousand square feet to sixty-four thousand square feet and replacement of the failing mechanical, electrical, and plumbing systems, says Amy Slinker, director of marketing with Pfeffer Development. The project is on schedule and within budget, and should be completed this month. CDF General Contractors recently finished a $1.5 million dollar tenant improvement on all three floors of of a Carr Gottstein office building at 6411 A Street, along with a full refresh of the Barnes & Noble cafe.

Southeast Alaska In Southeast Alaska, North Pacific Erectors is building a new warehouse facility for the Alaska Brewing Company in Juneau. Construction began in spring 2014 and should be complete in the first quarter of 2015. The new warehouse will connect two existing buildings and add seven new truck bays to help get their product out to customers in the Lower 48. The project costs an estimated $4.3 million; North Pacific Erectors is the general contractor, Jensen Yorba Lott is the architect, and PND Engineering is the consulting engineering firm. North Pacific Erectors is also building a new downtown Juneau branch for First National Bank of Alaska. The existing downtown branch is expected to relocate into the new two-story building, with almost 7,800 square feet of space, in fall 2015. Finally, North Pacific is also building a new learning center for Eagle Crest Ski Area. The new Porcupine Lodge building will provide an improved ticketing area and space for teaching avalanche safety and ski/snowboard classes. The project was designed by Jensen Yorba Lott and should be completed early this month. R Lisa Maloney is a freelance writer based in Anchorage.

December 2014 | Alaska Business Monthly

special section

Building Alaska

Photo courtesy of AGC

Buildings over $15 million: Cornerstone General Contractors, Inc.—UAA Alaska Airlines Center Sports Arena, Anchorage.

he Associated General Contractors of Alaska (AGC), the state’s largest construction organization, named the top construction projects and safety awards winners and recognized individuals at the association’s annual conference in Anchorage, November 12 to 15.

Hard Hat Award The Hard Hat Award, given annually to an AGC member who has demonstrated exemplary service to the Association, the community, and the industry, was awarded to a trio of Fairbanks brothers: Al, Sam, and Andy Brice, owners of Brice, Incorporated, a Fairbanks specialized “off the road system” construction company. Excellence in Construction In the Parker, Smith & Feek sponsored Excellence in Construction Awards the following firms won: 50

Buildings over $15 million: Cornerstone General Contractors, Inc.—UAA Alaska Airlines Center Sports Arena, Anchorage Buildings between $5 million and $15 million: Cornerstone General Contractors, Inc.—AVTEC Dormitory Replacement, Seward Buildings under $5 million: Davis Constructors and Engineers, Inc.— Government Peak Transit Center Chalet, in the Ma-Su Transportation, Marine, Heavy, Earthmoving over $15 million: Kiewit Infrastructure West Co.—Northern Rail Extension, Phase I, the longest bridge in Alaska over the Tanana River, southeast of Fairbanks Transportation, Marine, Heavy, Earthmoving between $5 million and $15 million: Brice Incorporated—Galena Campion Road Erosion Protection Transportation, Marine, Heavy, Earthmoving under $5 million:

Roger Hickel Contracting, Inc.—MOA 32nd Avenue Upgrade Muldoon to Brookridge, Anchorage Specialty Contractor Transportation, Marine, Heavy, Earthmoving with contractor as prime contractor: Jolt Construction & Traffic Maintenance, Inc.— Old Glenn Highway MP 15 Erosion Control Specialty Contractor Transportation, Marine, Heavy, Earthmoving with contractor as sub-contractor: STG Inc.—CDS Crane Weatherization, Lease & Operation, on the North Slope Specialty Contractor Vertical Construction with contractor as sub-contractor: Rain Proof Roofing—Natural Pantry, Anchorage Specialty Contractor Vertical Construction with contractor as Prime Contractor: Ahtna Engineering Services—Federal Aviation Administration Kuiu Island Self- Sustained Outlet Radio Communications Facility Replacement, Southeast Alaska

Alaska Business Monthly | December 2014 www.akbizmag.com

Excellence in SafetyGeneral Contractor or Subcontractor (Large) tie: Davis Constructors & Engineers, Anchorage, and Kiewit Infrastructure West Co., Anchorage. Photo courtesy of AGC

Buildings under $5 million: Davis Constructors and Engineers, Inc.â&#x20AC;&#x201D;Government Peak Transit Center Chalet, in the Ma-Su. Photo courtesy of AGC

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December 2014 | Alaska Business Monthly

Photo courtesy of AGC

Alaska Business Monthly | December 2014 www.akbizmag.com

Left: Transportation, Marine, Heavy, Earthmoving over $15 million: Kiewit Infrastructure West Co.—Northern Rail Extension, Phase I, the longest bridge in Alaska over the Tanana River, southeast of Fairbanks.

Sustainability in Construction Award: Benchmark Construction, Inc.—The Rustic Goat, Anchorage

Excellence in Safety In the Wells Fargo sponsored Excellence in Safety Awards the following won top honors: Excellence in Safety-General Contractor or Subcontractor (Large) tie: Davis Constructors & Engineers, Anchorage, and Kiewit Infrastructure West Co., Anchorage Excellence in Safety-General Contractor or Subcontractor (Medium): Rain Proof Roofing, Anchorage Excellence in Safety-General Contractor or Subcontractor (Small): Ahtna Engineering Services LLC, Anchorage Excellence in Safety-Associate: Anchorage Sand and Gravel Co. Excellence in Safety-Individual: Steve Rowe, Cornerstone General Contractors, Anchorage Other Awards AGC also announced the following other winners: Stan Smith Volunteer of the Year: Scott Viera, North Star Equipment Services, Anchorage

Above: Transportation, Marine, Heavy, Earthmoving under $5 million: Roger Hickel Contracting, Inc.—MOA 32nd Avenue Upgrade Muldoon to Brookridge, Anchorage. Left: Transportation, Marine, Heavy, Earthmoving between $5 million and $15 million: Brice Incorporated— Galena Campion Road Erosion Protection. Photos courtesy of AGC

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December 2014 | Alaska Business Monthly

Associate of the Year: Anchorage Sand and Gravel Co., Inc. AGC is a 650 member statewide association for companies in the construction/contracting business including building, highways/utilities, heavy industrial, and specialty areas. Con-

struction is the third largest industry in Alaska, contributing more than $9.1 billion to the Alaska economy and paying the second highest wages with more than twenty-one thousand in the workforce. AGC is headquartered in Anchorage with an office in Fairbanks. R

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Specialty Contractor Transportation, Marine, Heavy, Earthmoving with contractor as prime contractor: Jolt Construction & Traffic Maintenance, Inc.â&#x20AC;&#x201D; Old Glenn Highway MP 15 Erosion Control.

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Alaska Business Monthly | December 2014 www.akbizmag.com

Specialty Contractor Transportation, Marine, Heavy, Earthmoving with contractor as sub-contractor: STG Inc.—CDS Crane Weatherization, Lease & Operation, on the North Slope. Photo courtesy of AGC

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special section

Building Alaska

Anchorage’s Title 21 Update

Loussac Place includes 120 units of mixed-income housing in Midtown. The project, owned by Cook Inlet Housing, was redeveloped from a 62-unit development under the old Title 21 rules.

Developers want more rewrites, planners want more staff By Rindi White

or roughly a dozen years, Anchorage municipal officials, residents, and elected and appointed citizens have been working to develop a new set of rules governing land use regulations, an updated version of Anchorage Municipal Code Title 21. Ask anyone involved: the process was not always easy. But at long last, the new rules were adopted last year with the caveat that they would launch with a one-year trial period in 2014, during which developers and private landowners could weigh the old and new rules and decide which to use when filing their requests. To date, most developers choose to use the old rules. For some, the decision may be based on familiarity with the old standards and ease of use. For others, the old rules simply make for a more affordable development. Developers tend to be opposed to the new rules, which have requirements new to Anchorage, such as “private open space” for non-residential projects or a 10 percent rule for commercial remodels, which states that, for some exterior remodels, 10 percent of the cost of a remodel must go toward bringing an existing building into compli56

ance with the new land use code. “Small things like that make it harder [to build],” says Shaun Debenham, a principal with Debenham Properties in Anchorage and a director of the Building Owners and Managers Association, or BOMA, of Anchorage. “There’s a lot of risk in building a structure. We need a planning department that encourages development.” In October, the Anchorage Assembly approved a request by developers and landowners to extend the trial period through 2015. Although Anchorage municipal employees say the extended trial period is confusing and results in more work for an already overworked staff, those in the development community say the new rules are lacking key pieces—like a user’s guide to help make regulations more clear—and that there are holes in the new rules that need to be fixed. “Particularly in the multi-family housing area, there is still work to be done on Title 21. We’ve got people right now ready to make investments in the millions of dollars. They are really stymied by what direction they’re going to have to take moving forward because, quite frankly, implemen-

tation of the new version at this stage makes some of these projects non-economic,” assembly member Jennifer Johnston said at the October 7 Assembly meeting where the trial period was extended. “This is the culmination of an awful lot of work, but we do need additional time. We want to get it right. We don’t want people not making investments, or making investments that are not profitable for them or for the community,” she continued. Johnston chairs the Title 21 Committee and has worked on the issue for the past six years.

New Rules Needed to Keep Up with Change The project to rewrite Anchorage’s extensive planning code began in 2002, following adoption of the Anchorage 2020 plan, which called for revisions to the planning code, says Anchorage Planning Manager Erika McConnell. “The old code… had been in place since the 1960s,” McConnell says. “It has been revised hundreds of times since then but hadn’t had a comprehensive review since then.” When the old code was adopted, Anchorage was a different place. Today the city lacks

Alaska Business Monthly | December 2014 www.akbizmag.com

room for major developments and many projects are forced to squeeze into the limited amount of undeveloped land available or to buy developed property and rebuild. “Anchorage is also a fairly young city, compared to other cities,” McConnell says. “The first-generation development is going away and we’re starting redevelopment. We’re getting denser and more urban in certain areas of the city. In some situations, we’re raising our standards.” By raising the standards, McConnell means the new code has requirements that are a nod to the demands of a more urban city. Things like private open space for non-residential developments, increases to landscaping in parking lots, and other updates were added to the code through several years of work with input from community members, McConnell says. The new rules are not always popular among landowners and developers, but McConnell counters that the rules are what the community said are needed. “There is always an adjustment period when you make changes, and not everybody is going to like the changes. But… we did have a very, very extensive process and it took a lot of time and… the assembly, the decision-making body, was very involved, and this is what they approved.” Johnston says she sees a balance between

the need for new rules and the need for new development in Anchorage. In her work on the Title 21 Committee, she has hoped to strike that balance between being permissive and being prescriptive. “We knew at the time that we didn’t hit everything perfectly,” she says. “The code was based on a comprehensive plan that was bent on fixing … the massive buildup that happened in the 1980s. The market has certainly changed since then; there is a sophistication in the market that wasn’t there.” Johnston says that’s why she and former Assembly member Debbie Ossiander asked for a one-year trial period, so developers and landowners could suggest changes to the code. But after nine months of that year had passed and the new code remained largely unchanged, Johnston says it was clear more time was needed. “There was no way I could pull together a decent response for what needed to be fixed,” she says. There are other issues with implementing the new code: a user guide has not yet been developed, nor an updated design criteria manual or a map of Anchorage with land use designations marked out. Johnston says she hopes to get the new code, plus those accessories, in place before her term on the assembly ends in 2016.

Two Sets of Rules

Although the user guide, new design criteria manual, and land use map are still being developed, McConnell says her staff hoped the Anchorage Planning and Zoning Commission and Assembly would end the trial period. It’s been difficult to navigate two sets of rules with a small staff and, she says, more costly for applicants. “With two codes available, potential builders must spend a great deal of time working their project through each code to see which one is more advantageous for them. Larger developers will often hire a consulting firm to do this work for them, which is an additional cost to development. Members of the general public who are not in the development industry have an extremely difficult time understanding the situation and navigating the two codes. They often turn to city staff to figure out what to do, requiring significant staff time,” McConnell wrote in a September 30 memo to the Planning and Zoning Commission. To date, McConnell says, about 90 percent of the requests for rezoning, conditional uses, and other complex land use applications (those that involve more than simply getting a permit) have been submitted using the old zoning code. Fewer than twenty applications have been submitted using the new code.

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Cook Inlet Housing’s Eklutna Estates development includes fiftynine units of senior housing. Articulation was used by the architect to maximize daylight exposure in the units. This is the first phase of an ongoing project; Eklutna Estates II was the first multifamily residential property to be permitted using the new Title 21 land use codes.

Problems that arise—true technical problems, not simply a difference in preference— can be fixed at the discretion of the planning director, without having to go through review by the Planning and Zoning Commission, she says. But since the code has not been extensively used, few glitches have arisen. “I don’t think there has been a very good partnership between the development community and the planning department to identify glitches, because it is difficult to agree on what is a glitch,” McConnell says.

Multi-Family Issues Abound

When asked why, McConnell says developers most commonly say they are more familiar with the old rules. “There is no reason to think that more than approximately 10 percent of applications in 2015 will come under the new code, as there is only occasionally an incentive for developers to learn the new code,” McConnell wrote. The unfamiliarity doesn’t stop with developers. McConnell says it’s been difficult for staff to become familiar with the new code because so many land use applications use the old code. Although the municipality has held training sessions for the new code, she says it’s difficult for planners to retain the knowledge when they’re not using it every day. “Until all the staff is familiar with the new code, all questions regarding the new code must be directed to the only two staff members who are very familiar with the code, leading to delays in providing answers and an overloaded burden on the two who know it,” McConnell wrote in the September 30 memo. What about the user guide, new criteria manual, and land use map? McConnell says those are coming along. An ordinance was expected to be before the Assembly by the end of the year that would outline the submittal requirements under the new code. The criteria are currently included as part of the application process, she says. The user’s guide, which takes the matter a step further by providing interpretation and examples with illustrations of different ways developers have met certain requirements, may take a little longer, she says, es58

pecially with a limited staff. The upcoming municipal budget is not likely to include funding for additional planning staff. “It’s on our work list,” McConnell says. The Land Use Plan Map is also in the works, she says.

Developers Say Delays Are Needed to Make Rules Better The Anchorage Planning and Zoning Commission and the Anchorage Assembly received letter after letter from land owners, developers, architects, and others asking that the new rules remain in the trial period for another year. “I do not want to return to the days of the uncontrolled ‘site condos,’ but I do want appropriate, well-tested, and vetted land use regulations that are clear, well-defined, easy to use, and are not in direct odds with other appropriate design parameters, especially in the area of housing,” wrote Timothy Potter, planning director for DOWL HKM, in a June 20 letter to Anchorage Municipal Planning Director Jerry Weaver requesting the trial period be extended. Potter wrote that the new code provisions had not yet been tested enough to identify glitches or conflicts, especially in the multifamily housing area and, as of June, any issues that had been identified as problematic had not been corrected or clarified. McConnell counters that extensive testing was done, particularly on the multifamily standards. “I think one of the challenging things is identifying the glitches,” McConnell says.

An area of major concern is the section regarding multi-family developments. Anchorage is in dire need of housing for its residents—a 2012 Anchorage Housing Market Analysis performed for the Anchorage Planning Division estimated that the city would need more than eighteen thousand new housing units by 2030— more than nine hundred units each year. But the city is way behind on those numbers, with new units of housing numbering in the three hundred-range instead of near one thousand. There are several reasons why: development is more costly in Anchorage than in most cities across the nation; there isn’t a lot of available land for development, particularly in high-traffic areas where multi-family projects would make sense; the financial community is relatively conservative when it comes to lending for multi-family projects; and equity requirements are pretty high. Debenham, whose company develops both commercial and residential properties, says multi-family development was difficult under the old Title 21 rules. The new rules make it even more difficult and, at least for his development, less feasible. Debenham’s company is building Phase II of The Residences at Northwood, a project near Raspberry Road and Minnesota Drive in Anchorage. “These are luxury multi-family apartments, probably the nicest ones in town, and our development wouldn’t have even come close to meeting the [new Title 21 multi-family] code regulations,” he says. The company got a permit this year under the old Title 21 rules for its second phase of development, twenty-seven one- and two-bedroom apartments. Although the company owns a couple more acres nearby, Debenham says they won’t develop until the new Title 21 rules are more amenable. “Quite frankly, until the multi-family criteria requirements for Title 21 get revamped, we don’t plan to build more. There’s a huge demand for multi-family housing and we are a willing multi-family developer here in town, but the new code makes multi-family develop-

Alaska Business Monthly | December 2014 www.akbizmag.com

ment infeasible,” he says, adding that for now, Debenham Properties will focus more on commercial developments or perhaps multi-family developments elsewhere, like in the Valley. Debenham says the problems with the new code are numerous. Although the new rules allow for fewer parking spaces, he says the Northwood development desired the additional parking. In exchange for fewer parking spaces, the new code would have required dedicated snow storage and more landscaping than the old rules mandated. “We wouldn’t have been able to accommodate all that parking, plus snow storage, plus green space,” he says. Additionally, the new code requires thirty square feet of storage per unit, intended for things like winter tires and bicycles. “That’s expensive space. It’s over $200 per square foot for storage, which makes each unit more expensive. We feel like we have enough storage in the units—we have walk-in-closets and pantries,” he says. The interior closet space doesn’t apply to the storage space requirement, however. There are other problems too, he says. Some of the requirements make it difficult or impossible to re-use the same building design on a site. A building design, with input from design professionals such as architects, and structural, electrical, and mechanical engineers, etc.,

is a significant cost—about $400,000, Debenham says, and having to have different designs for each building could easily cripple a project. With the backlog of demand for new housing units, he says the new multi-family rules make a bad problem worse. “We need to be adding hundreds of units per year,” he says. “We would really like to see the new Title 21 changed to make development not more costly and difficult, but less costly and more amenable. The problem isn’t that we’re building poor [quality] multifamily housing right now, it’s that we aren’t building enough multi-family housing.” Carol Gore, president and CEO of Cook Inlet Housing Authority, went so far as to say the multifamily design guidelines are “complicated and to some degree unnecessary” in a September 16 letter to Planning Director Weaver. “By our estimation, only a handful [seven] of multi-family developments have been completed over the past three years. With the exception of the Debenham project on Northwood Drive, these projects have all been subsidized. All of these projects completed have been of high quality, yet many of these projects would struggle to meet certain portions of the new code. The concern for poorly designed multi-family design is overstated, and the [Municipality of Anchorage] should instead be looking for ways to facilitate this

form of development to meet our community’s significant housing needs,” Gore wrote. Cook Inlet Housing is the first developer with a permitted project using the new Title 21 rules for its Eklutna Estates II project, a thirty-four-unit senior housing project in East Anchorage. It was also the first developer to submit an application for a Major Site Plan Review for a one hundred-unit development called Grass Creek North that is due to break ground in 2015. Gore called for a collaborative process between the municipality, designers, builders, and the broader community to improve Title 21. The municipality held a meeting focused on the multi-family design standards that generated helpful comments, McConnell says, adding that the planning division plans to “do some collaborative work and make changes to that section.” Johnston says she hopes the Title 21 Committee can foster fruitful discussions and bring about changes in the coming year. “What we’re wanting to do is have people come forward and make presentations [about what needs to be changed],” Johnston says. “It’s not a simple fix.” R Rindi White is a freelance journalist living in Palmer.

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special section

Building Alaska

Workforce Housing Needed Statewide growth is in jeopardy due to lack of housing By Eliza Evans

Photo courtesy Alaska Housing Finance Corporation/Ash Adams

Alaska Corporation for Affordable Housing, a subsidiary of Alaska Housing Finance Corporation, broke ground in September on Ridgeline Terrace in Mountain View. Adjacent to Glenn Square, the Ridgeline Terrace development will provide seventy newly constructed mixed-income rental units for families and seniors. The completed property will feature solar powered hot water and electricity systems that are collectively estimated to support 10 percent or more of the property’s total energy.

n recent months, Alaska’s shortage of workforce housing, both market priced and affordable, has been thoroughly documented and well publicized. In many parts of the state, there are simply too few housing units to meet both current and projected housing needs. “Affordable housing” generally means people are spending no more than 30 percent of their income on housing. “Anchorage Housing Market Analysis,” a 2012 study by the McDowell Group for the Municipality of Anchorage Planning Division, noted that “without changes in the existing construction environment, Anchorage will not be able to accommodate the forecast for population growth, which could have adverse effects on the area’s growth and economic health.” The study concluded: “Given the historic density of development and rate of redevelopment, the Anchorage Bowl does not have sufficient vacant buildable residential land to accommodate the demand for housing units forecasted over the next 20 years.”

According to the Anchorage Economic Development Corporation’s 2014 3-Year Economic Outlook report, the city’s “local economy is not realizing its full potential because of the housing situation.” Michele Brown, president of United Way of Anchorage, says, “Anchorage needs eighteen thousand net new housing units by 2030, according to experts commissioned by the city. Current production rates are about a third of what’s needed to meet our need. We’re already feeling the pinch: 48 percent of our neighbors say there is insufficient housing to buy and 56 percent report insufficient stock to rent. And half of our residents pay more than 30 percent of their income for housing. That’s a serious red flag.”

Statewide Housing Shortage And the problem is not specific to Anchorage. According to a recent Economic Research Case Study from the Juneau Economic Development Council, “The number of new housing units permit-

ted and built in Juneau has not kept pace with local demand, while at the same time single family homes sales prices are at an all-time high. In the rental market, low income residents are being pushed out of affordable rentals by median and above median income households.” The Juneau Economic Development Council has concluded Juneau needs approximately two hundred fair market rental units and five hundred single family homes to improve Juneau’s housing market and vacancy rates. Greg Chaney, Lands and Resources manager of the City and Borough of Juneau, says recent surveys of Juneau’s housing indicate many people in the lower economic strata pay more than 30 percent of their income for housing. In addition, there are fewer choices at the affordable end of the spectrum. Another measure is vacancy rate: 5 percent is considered to be desirable. Juneau’s vacancy rate for most housing stocks is less than 5 percent. On average, approximately 32 percent of households

Alaska Business Monthly | December 2014 www.akbizmag.com

in the City and Borough of Juneau spend more than 30 percent of total income on housing costs, which include rent, utilities, and energy costs. The affordability of renter-occupied units is lower, with 40 percent of renters considered cost-burdened and the median income of renter-occupied households around half of the median income of owner-occupied homes, according to the Alaska Housing Finance Corporation, 2014 Alaska Housing Assessment, City and Borough of Juneau. Brown says the need in Anchorage is creating housing gridlock. “People are not able to move as they would in a healthy market. That is impacting current residents and projected growth. It also further drives up prices. Only seven of the twenty-five most common job positions in Anchorage can comfortably afford housing at the current rental rates.”

The Social and Economic Ramifications According to Brown, the lack of affordable workforce housing is “an escalating and persistent barrier to business growth, family financial stability, and quality of life.” The social and economic ramifications are myriad. People may be forced to spend so much of their income on housing that their spending on other goods and services is significantly reduced, impeding state and local business growth. The shortage of housing units may result in housing price inflation and may obstruct economic growth. Working families may be prepared to leave subsidized housing, but unable to find other affordable housing options. Job seekers may choose not to move to Alaska when they realize they cannot find affordable housing. Young Alaskans graduating from out-of-state colleges may find the cost of housing means they simply cannot afford to return to Alaska. Chaney says the problems associated with a shortage of affordable workforce housing are multifold. “Since people here spend more on housing, they have less disposable income to spend on other pursuits. This reduces the economic vitality of the community. It is also contributing to outmigration of young people. Expensive housing provides a clear reason for young people not to return to Juneau when they graduate from college.” Chaney says that while the Juneau Economic Plan for the City and Borough of Juneau is still under development, it has already identified the lack of affordable housing as one of Juneau’s biggest barriers www.akbizmag.com

to economic growth. The lack of affordable workforce housing coupled with Alaska’s high cost of living also create barriers to recruiting and retaining professionals in many fields. Brown says in a recent poll, 58 percent of businesses reported that price and quality of housing in Anchorage affected their ability to recruit and retain employees. Chaney says, “I’ve personally had a very difficult time attracting talent to Juneau because, even though our salaries were on par with national averages, the cost of housing made our best offers unappealing compared to other regions of the country.” “Further, many cities have an affordability problem,” says Brown. “Anchorage has a major housing production problem and a major affordability problem. Housing production has significantly decreased because projects, particularly multi-family, do not pencil out for developers, given what people can afford to pay. If we can help jumpstart housing developments, we also reenergize the developer, construction, and realty businesses and the services that those businesses use.”

Potential Solutions The City and Borough of Juneau Assembly has appropriated funds into the

Juneau Affordable Housing Fund for the rehabilitation, preservation, acquisition, or creation of affordable housing. The Juneau Affordable Housing Fund leverages outside resources—including private capital and public subsidies—to assist in the development of affordable housing. It also helps affordable housing developers demonstrate community-based financial match, provides local investment into the affordable housing stock and the economy, and directs resources towards housing that addresses Juneau’s critical housing needs. Currently, the Fund prioritizes the construction of new housing units—especially one-bedroom rentals—structured to provide long-term and/or permanent housing affordability for low income households. Chaney says City of Juneau Lands Division is working on two subdivisions to make land available for development. A ten-acre, six-lot subdivision in Switzer Creek has been designed to accommodate multi-family projects such as apartments, condominiums, and possibly several small houses on one lot. A two hundred-lot subdivision near Pederson Hill is planned to create a more traditional, walkable neighborhood with relatively small lots.

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“The intent is that these small lots will encourage people to build small houses,” says Chaney. “All things being equal, a small house will be more affordable than a large house. This relatively high density, single family residential neighborhood will also be more efficient to build and cost per lot will be lower.”

Housing Anchorage In Anchorage, a collaborated community effort called Housing Anchorage is underway to identify ways to spur economic growth and free up the housing construc-

tion gridlock. Housing Anchorage is a coalition of private, public, and non-profit organizations that includes Anchorage Community Development Authority, Alaska Housing Finance Corporation, Rasmuson Foundation, Cook Inlet Housing Authority, and United Way of Anchorage working in partnership with the Anchorage Economic Development Corporation’s “Live. Work. Play.” initiative. Brown says Housing Anchorage is a group “committed to pull together to assess how big a problem this is, what is causing it, and most importantly, what we do about it.”

Efforts include finding broad-based community solutions to improve housing options for Anchorage’s workforce. Housing Anchorage areas of focus include zoning, policy, permitting, infrastructure, regulations, and financing tools that include public, private, and publicprivate partnerships. Housing Anchorage is working towards ensuring Anchorage produces eighteen thousand net housing units by 2030 and reduces the percentage of households paying more than 30 percent of their income for housing. Initially, Housing Anchorage set out to shine a spotlight on affordable housing issues, spark conversation, and find out what Anchorage wants, needs, and can afford. Brown says Housing Anchorage will draw from the efforts of several expert groups working on these issues and promote comprehensive strategies to change Anchorage’s housing trajectory. “There is very promising work underway by several groups with an impressive number of interested people and perspectives, and great local expertise, to identify our best levers to incent production and remove existing production barriers,” Brown says. “For example, [Alaska Economic Development Corporation’s Live. Work. Play.] cross-sector group is looking at regulatory and policy issues and tax incentives. The Assembly is looking at how Title 21 is impacting production. Fairview and other neighborhoods are proactively seeking strategic investments in redevelopment of deteriorated properties. Financial institutions and philanthropic leaders are exploring partnerships to generate and use capital more effectively to spur developments, particularly multi-family.” Brown says there’s still more to be done. “Other areas to study are around land acquisition and use; how a city organizes and operates to proactively promote development of quality, affordable housing; innovative funding partnerships to offset infrastructure costs; and innovative housing development designs,” she says. Solving the issue of affordable workforce housing is ultimately a way to improve the quality of life in Alaska, Brown says. “Studies abound pointing to the correlation between stable, affordable housing and family financial stability, neighborhood and community prosperity, improved health, and better student outcomes.” R Eliza Evans is an Alaskan author.

Alaska Business Monthly | December 2014 www.akbizmag.com

TRANSPORTATION & CONSTRUCTION

Southwest Alaska Aviation Training Housing for student pilots under construction in Bethel By Michelle DeCorso

The Cold Climate Housing Research Center designed prototype student housing for the aviation training center in Bethel, where two of the dormitories are under construction. Renderings courtesy of CCHRC

ethel, Alaska, is like no other place on earth. The community of seven thousand people is four hundred miles east of Anchorage on the delta of two immense rivers, the Yukon River and the Kuskokwim River. No roads connect Bethel with the rest of Alaska or any other village, except in the winter when the Kuskokwim River freezes and part of it becomes an ice road. The region is tundra, wet marsh in the summer and frozen in the winter, with rolling hills and more than four hundred thousand Ground breaking for the dorms was October 16. From left, Kurt Kuhne, Executive Director, Yuut Elitnaurviat (People’s Learning Center), and Association of Village Council Presidents top brass: Michael J. Hoffman, Executive Vice President; Myron P. Naneng Sr., President; Henry Hunter, Chairman; and Marc D. Stemp, Vice President of Business Development. Photo courtesy of AVCP

charted lakes and ponds. The remote region has no roads because construction is a nearly impossible task on the boggy and unstable tundra. The soil is filled with ice, drains poorly, and usually collapses when it thaws. The tundra makes construction technically challenging and extremely costly. Bethel is the regional hub for fortysix unique and remote communities that range in size from 29 people in Sleetmute to 1,093 in Hooper Bay. The population of the entire region is about

24,000. The population is young; in most villages, about half the population is under the age of eighteen. The Yukon-Kuskokwim Delta is a tundra ecosystem, with the 19.2-millionacre Yukon Delta National Wildlife Refuge surrounding almost every village. Emperor geese, spectacled eider ducks, and tundra swans are among the migratory birds that nest in region. Yup’ik Eskimo have inhabited the region for more than twelve thousand years. Every village on the Yukon-Kuskokwim Delta is an Alaska Native Village, a federallyrecognized Indian Tribe. Every village is unique, influenced by the geography and climate. The Catholic Church established a boarding school in Saint Mary’s and the Moravian Church has a strong presence in some communities. For generations, Yup’ik Eskimo tribes were nomadic. In the 1930s, the US Bureau of Indian Affairs began building schools at fish camp sites, and families settled in one place in order to send children to schools, effectively ending the traditional nomadic way of life. The Yup’ik language is widely spoken across the region. Native arts and crafts, music, and dance

Alaska Business Monthly | December 2014 www.akbizmag.com

flourish. Families depend upon subsistence salmon, seal, walrus, caribou, and other fish for much of their food.

Harsh Subarctic Climate The Yukon-Kuskokwim Delta has a harsh subarctic climate. The Bering Sea brings extreme storms, hurricane force winds, heavy snow, rain, and extreme cold. The remote location and the extreme weather makes traveling from these villages very difficult—and people who live in this region must travel all the time. All services for the region are located in Bethel—the hospital, dentists, doctors, driver’s licenses, state offices, federal agencies, courts, and State Troopers. Physicals, prenatal care, tests, emergencies, stitches, broken bones, and teeth cleaning all require a plane trip to Bethel. Bethel has the PreMaternal Home where women from villages who are expecting a baby live in a dormitory for the month before the birth so they are close to the hospital and not hours—or days—away. Bethel is also where Alaska Airlines can land a jet plane, so everyone going anywhere else must first travel to Bethel aboard a small plane. Bethel is truly unique; as the regional hub, Bethel has hotels, restaurants, and a thriving taxi indus-

times a city office. With the exception of Bethel, there are almost no jobs. People used to commercial fish for salmon on the Yukon and Kuskokwim Rivers, but the last two decades have seen a significant decline in salmon and commercial fishing has almost disappeared. The decline of salmon has impacted families across the region because salmon is an important part of Yup’ik culture and a major food source. Commercial fishing used to help families pay for heating fuel, but now that source of income is gone. Heating fuel costs have skyrocketed over the past few years. Heating fuel costs more than $6 a gallon in every village and more than $10 a gallon in some. Housing was not built to be energy efficient, and most homes use more than one thousand gallons in heating fuel every year. All electricity is produced using diesel generators, and the high cost of fuel, coupled with the high cost of transporting it to a rural location, has caused electric rates to soar. The Association of Village Council Presidents (AVCP) was one of the twelve regional organizations formed in Alaska in 1964 to help with the settlement of aboriginal land claims and Alaska Native Interest Land Claims Act (ANILCA). Since then, AVCP has grown into a di-

lages. The work that AVCP does is complicated by the remote location of all of the villages scattered over a fifty-nine thousand-square-mile region, roughly the size of Ohio. Infrastructure has been slow to arrive; personal computers are not common, and cell phone service is a recent development. In many villages, VHF radio is still the preferred method of communication. KYUK public radio, the only radio station that serves the region, broadcasts birthday messages across the region every day at 3 p.m. AVCP has grown substantially over the last twenty years. The State of Alaska has a hard time providing services to villages, and AVCP has gradually taken over several state programs such as Temporary Assistance for Needy Families. AVCP is able to do a better job with programs; most of their staff speaks Yup’ik, and everyone is familiar with each village and the history of the region. Over the years, AVCP has taken on tasks that created a broader scope of services, making AVCP more diverse and better able to serve villages.

‘Where People Get Their Wings’ One program AVCP has is Yuut Yaqungviat, a flight school. Yuut Yaqungviat trans-

Photos courtesy of AVCP

Construction began in mid-October on the demonstration project for two energy efficient student housing duplexes designed by Cold Climate Housing Research Center.

try. Because it is off the tourist path, Bethel is an authentic Alaska bush community. During the short, ice-free part of summer, some villages can be reached by barge, but the rest of the year all travel is by small plane. All supplies, groceries, mail, and even heating fuel is flown into communities. Alaska State Troopers must fly out to villages to respond to incidents. The severe weather makes all travel unpredictable. Flights are commonly delayed for hours or even days due to weather. The Yukon Kuskokwim Delta is one of the poorest regions in America. Villages are small, often containing only a post office, a school, a tribal office, and somewww.akbizmag.com

verse organization, providing a broad stream of services to the villages in the region. AVCP has the Village Public Safety Program that places officers in villages and offers programs to strengthen tribal governments, social service programs to build healthy families, natural resources programs to protect habitat, and economic development programs to bolster the regional economy. AVCP’s mission is to work with every village to improve the quality of life and culturally relevant programs and to promote self-determination, protection, and enhancement of Alaska Native culture and traditions through a working partnership with vil-

lates as “Where People Get Their Wings.” Air travel is a way of life on the Yukon Kuskokwim Delta; there are thirty thousand air miles flown every day, seven commuter airlines in the region, and more than 250 pilot jobs providing passenger and freight service to villages. Airlines have trouble recruiting and retaining pilots; typically, they hire pilots from outside the region, usually from outside Alaska. The pilots are unfamiliar with the weather, terrain, and culture, and most leave after gaining experience and banking enough flight miles. AVCP decided the best idea would be to train local people to be pilots. People from the Yukon-Kuskokwim Del-

December 2014 | Alaska Business Monthly

Photos courtesy of AVCP

The duplexes are adjacent to the Allanivik Hotel in Bethel and are each 2,250 square feet. They are being constructed utilizing local labor through the AVCP Housing Improvement Program.

ta know the region and the weather and there is a clear need for jobs. Yuut Yaqungviat provides pilot training to prepare students to work as first officers and commercial pilots at a fully equipped training hangar at the Bethel Airport, which has instructor offices and classroom space. The school owns three single-engine land training aircraft, one retractable gear complex aircraft, three flight simulators, and hosts the Medallion Foundation Program, a simulation tool. The pilot training is done under real-time conditions. Yuut Yaqungviat has graduated fifty-one private pilots, twenty-one instrument-rated private pilots, and sixteen commercial pilots. Of the commercial pilots, 92 percent are flying for Ravn Alaska (formerly Era Aviation), Grant, or Yute Air Alaska. The airlines in the region have committed to hiring 100 percent of the commercial pilot graduates. Being a pilot is a high quality employment opportunity. It promotes a healthy role model and a position to aspire to in a region where drug and alcohol use is chronic and suicide rates are high. Alaska has the highest suicide rate in the nation, and the AVCP region has suicide rates six times higher than the state of Alaska average. Alaska Native pilots are an inspiration to young people all over the region. Last winter Yuut Yaqungviat was forced suddenly to close. The school enrolls only ten students at a time, as required by FAA guidelines. The ten students were struggling to afford housing, heat, and electricity in Beth66

el—with the cost of heating exceeding $1,000 a month and electricity (which is subsidized for homes) averaging $400 a month. Food prices also increased as the cost of fuel drove transportation costs up. At the same time, Yuut Yaqungviat was facing high heating costs, unsubsidized electricity, and increasing costs for operating planes, leading to a gap in funding. Tuition did not meet the cost of operating a flight school with ten students, and an increasingly high cost of living was causing students to withdraw from the school. Two things needed to be done—Yuut Yaqungviat needed a plan to keep operating and the cost of housing needed to be reduced for students. Yuut Yaqungviat developed a plan and will reopen in January 2015 with a new funding structure to get back on track. To resolve the issue of affordable student housing, AVCP partnered with the Cold Climate Housing Research Center (CCHRC).

Developing Prototypes CCHRC is an industry-based, nonprofit corporation that develops and tests energy efficient, durable, healthy, and cost-effective building technologies for Alaska and the world’s cold climate regions. Located in Fairbanks, Alaska, the Research Center was conceived and developed by members of the Alaska State Home Builders Association and represents more than 1,200 building industry firms and groups. In 2006, the CCHRC Research and Testing Facility opened on land leased from the University of Alaska Fairbanks. The building

contains research facilities and allows staff to work closely with students, faculty, and researchers at the university. Alaska offers an excellent testing ground for cold-climate technologies and products. The geography provides the full range of climatic conditions a researcher would encounter across the northern United States—from the windy, cool, wet weather in Southeast Alaska to the very cold, snowy conditions across Alaska’s northern tier. Alaska’s cold season lasts for six months or longer, allowing ample time for researchers to conduct experiments and evaluate housing performance. The Building Science Research program at CCHRC focuses on the unique challenges of building in Alaska’s extreme and diverse climates. Researchers test building systems and techniques, such as adding exterior foam to the wall in existing homes and in the lab to see what works in the real world. They produce reports for industry professionals, such as an HRV installation manual, as well as educational materials for the general public, such as the Consumer Guide to Home Heating. The goal of the Building Science Research program is to provide home builders, homeowners, and other stakeholders the information they need to improve shelter in the North. CCHRC has a Product Testing Lab designed to test the cold-climate performance of a wide variety of building products and systems from heating appliances to window shutters to firewood. CCHRC developed the Sustainable Northern Shelter program to address

Alaska Business Monthly | December 2014 www.akbizmag.com

the needs for sustainable rural housing in northern climates. CCHRC designers work with local residents and housing authorities to develop homes that reflect the culture, environment, and local resources of individual communities. The designs emphasize energy efficiency, affordability, and durability. CCHRC designed a prototype-home with the community of Quinhagak in the AVCP region. Quinhagak is a village of 690 on the Kanektok River, less than a mile from the Bering Sea coast. Quinhagak’s housing is aging and has been compromised by extensive water infiltration, rot, and mold. Of particular concern are fifty-five homes from the 1970s that exhibit advanced structural damage and must be replaced. The village invited CCHRC to evaluate current housing and issue a report. The CCHRC design team traveled to Quinhagak to gather input from villagers on the problems with their current housing and explore possible solutions that the prototype could address. The primary goals of the design are to be energy efficient, warm, dry, mold free, durable, affordable, and replicable by local labor resources. CCHRC returned to the village in February with a preliminary design and floor plan, which was later approved by the village. The house is octagonal, which lessens the surface area-to-volume ratio, significantly reducing the amount of surface area exposed to the cold compared to a rectangular model the same size. An elaturaq, or Arctic entry, is wrapped around two of the eight walls, further improving heating efficiency and protecting the home from wet winds. In Quinhagak, wind direction changes seasonally and wind-driven moisture is one of the primary causes of failure in the existing housing. The open floor plan was requested by the community to reflect traditional values. Unlike most foundations in the region, the Quinhagak prototype rests directly on an overbuilt gravel pad. The floor joists are elevated and soy-based polyurethane foam is sprayed through the joists directly on a geo-textile mat. This raftlike foundation provides an insulation value of R-60 and a very effective thermal break, which means heat from inside the home can’t escape through the floor joists directly into the ground. The walls of the prototype are comprised of www.akbizmag.com

Funding for the project, which uses an integrated truss system, is from an Alaska Department of Commerce, Community, and Economic Development grant. Photo courtesy of AVCP

4-inch metal studs on the inside, a 3.5inch plastic spacer in the middle, and a light-gauge angle-iron that holds the cladding (siding) 7.5 inches out from the inside of the stud. The spacer is nonconductive and prevents heat from escaping through the studs. Spray foam is applied continuously to the foundations, walls, and roof, creating a monolithic envelope with no gaps and no thermal bridging. The wall assembly is simple and superinsulated (R-40) without the added material of traditional double-wall construction. The wall is light enough that four men can carry it to the floor platform and install it. The 4-inch metal studs can be nested to reduce shipping costs to remote locations. The home uses a small, high efficiency oil heating appliance and a clean-burning wood stove as backup. It contains a heat recovery ventilator to pre-heat incoming fresh air and maintain healthy indoor air quality. Energy efficient lighting was also installed. A local three-man construction crew worked with two CCHRC instructors to build the prototype in six weeks. The building can be constructed without heavy equipment (which is important in remote villages), and the materials were chosen for simplicity and ease of shipping. Like the home in Quinhagak, CCHRC has developed several other prototype homes that can be easily and affordably reproduced throughout Alaska to provide much-needed housing. The program has grown to encompass more than a dozen villages throughout Alaska. When AVCP decided to construct dormitories for Yuut Yaqungviat, CCHRC was the first choice. In a region where heating fuel can exceed $10 a gallon, homes are aging and not energy efficient, and it takes as much as

one thousand gallons of heating fuel a year to heat a home, the CCHRC dormitories would be an excellent demonstration project. AVCP invited Jack Hébert, President/CEO and founding chair of CCHRC, to make a presentation at the 2013 region-wide Economic Development Summit in Bethel; the goal of the summit was to address the region’s steep energy challenges. When Hébert spoke, the conference room at the Yupiit Piciryarait Cultural Center was absolutely silent. The information he presented could realistically change the economy and improve the quality of life of the region. CCHRC homes reduce energy use by 80 percent on average. CCHRC is designing student dorms for Yuut Yaqungviat as an example of energy efficient, affordable housing for the Bethel region and to demonstrate the potential for new housing. The dorms are located in a prime location and will be a prototype that will test experimental technologies intended to improve energy performance and lower construction costs. The new dorms will provide much needed affordable housing for students, making it possible for Yuut Yaqungviat to train more local residents as pilots. The material for construction was scheduled to be shipped on the last barge before the river freezes up and the dorm will be complete by March 2015. R Michelle DeCorso has worked with Alaska Native villages on the Yukon-Kuskokwim Delta since 1996. She is the Comprehensive Community Development Planner for the Association of Village Council Presidents in Bethel, Alaska. Contact DeCorso at 800478-3521.

December 2014 | Alaska Business Monthly

TRANSPORTATION & CONSTRUCTION

Building Alaska’s Workforce Multi-industry partnerships prevail with Alaska Construction Academies By Kirsten Swann

hile state lawmakers and energy companies work to develop a multibillion-dollar natural gas pipeline, industry leaders and educators are building a different kind of pipeline. It’s not made with steel, but it’s designed to address a critical shortage—one that could impact Alaska business for years to come. “It’s a career cluster,” says Daniel Domke, director of career and technical education (CTE) for the FairbanksNorth Star Borough School District. “It’s a well-choreographed curriculum that starts in high school.”

Workforce Training With collaboration between local school districts, the Alaska Legislature, and Alaska Construction Academies, students have access to a pipeline of opportunity between high school, vocational training, and employment. In Fairbanks, Hutchison High School recently introduced a new Heavy Equipment Operator (HEO) program after about a year’s worth of planning. The HEO pathway— 68

complete with brand new, high-end, scenario-based, graphic simulators—is designed to introduce students to construction careers and help fill looming shortages in Alaska’s workforce. Hutcheson’s simulator lab serves students from the local high school and the University of Alaska Fairbanks Community and Technical College. Domke says the simulators themselves are fully customizable: They can act as motor graders, bulldozers, and front-end loaders. In Alaska, the ability to operate heavy machinery like that can be a valuable skill—opening the door to jobs in some of the state’s most lucrative businesses. “That occupation goes across all industries. It’s union, it’s non-union; it’s with construction, it’s at the big mines,” Domke says. “It’s a demand that’s across the board.” That demand is one of the main reasons Fairbanks-North Star Borough School District decided to pursue the heavy machinery program in cooperation with the Alaska Construction Academy (ACA). It’s also one of the

driving factors behind the Alaska Construction Academy, a statewide training program formed in 2006 by a coalition of local stakeholders. Those stakeholders include the Association of General Contractors, Alaska Home Builders Association, the Anchorage School District, Cook Inlet Tribal Council, the Alaska Legislature Alaska Works Partnership, Inc., and the Alaska Department of Labor and Workforce Development. The Construction Education Foundation—an Alaska nonprofit that aims to facilitate construction workforce training and development—also plays a major role in making ACA a reality.

Growing ACA Program Eight years after ACA began it now operates in eleven communities statewide. Kathleen Castle, ACA’s executive director, says the first construction academy took place in Anchorage with a $1 million grant from the Alaska Legislature. In the second year, it spread to five additional sites, and in 2008 the

Alaska Business Monthly | December 2014 www.akbizmag.com

Students at Hutchison High School in Fairbanks are shown training on the new graphic simulators that, among other things, can act as motor graders, bulldozers, and front-end loaders to train students. Photo courtesy of Alaska Construction Academy

academies received several million additional dollars in state funding. These days, ACA operates in Anchorage, Fairbanks, Juneau, Ketchikan, the Kenai Peninsula, the Matanuska Valley, Kodiak, Bethel, Nome, Kotzebue, and Dillingham. The latter five locations are regional programs, serving students from multiple surrounding communities including Kivalina, Buckland, Kiana, Noatak, Ambler, Kotzebue, Selawik, Tuntutuliak, Kongiganak, Akiak, and beyond. The program has a wide reach, but Castle says it goes to meet a steep demand. Labor market data shows Alaska needs approximately one thousand new construction employees annually in order to meet demand, she says. According to the Department of Labor and Workforce Development, the construction industry is expected to grow by more than 6 percent by 2022. Building construction in particular is expected to grow by more than 14 percent, the department states in its October 2014 economic trends report. When ACA was founded in 2006, Castle says, it was a different market. High school shops were being turned into computer labs, and many students were encouraged to pursue four-year college degrees. Meanwhile, one of the state’s most vital industries was struggling to find qualified employees. Castle says ACA was founded to bridge that divide. “We want young people to know that there are these wonderful careers where they won’t have to pay $50,000 for additional training,” she says.

Expanded Career Options In Fairbanks, those future career options make Domke excited about the potential of Hutchison’s new simulator lab. He said the school district’s CTE department aims to train students in “high wage, high skill, high demand occupations,” and the heavy equipment program fits the bill perfectly. “Geographically, Fairbanks is the www.akbizmag.com

December 2014 | Alaska Business Monthly

hub for a lot of industries that employ a lot of HEO [heavy equipment operations] workers,” Domke says. There’s work to be had for people who know how to operate or maintain the equipment that builds roads, mines, and oil and gas projects. In fact, construction careers are some of the hidden supports crucial to many of Alaska’s most profitable industries. “When you’re putting a mine together, 90 percent of the jobs are construction,” Castle says. That’s where ACA comes into play. At Hutchison’s new simulator lab, Domke says, students learn how to cut a grade, load a dump truck, and other fundamental skills. While the program hoped to attract at least twelve students in its first year, it ultimately enrolled eighteen—50 percent above expectations. Domke described the fledgling program as a seamless experience— launched in cooperation with a handful of vital partners—that allows students to develop a host of skill sets. High school students that study heavy equipment at Hutchison can further their education at UAF’s Community and Technical College, which employs the same simulators. It’s all about building muscle memory and foundational skills. “I would compare it to the training of a professional pilot,” Domke says. And, like pilots, construction industry workers are an important part of Alaska’s economy. Castle says the Hutchison HEO program was piloted based on heavy industry demand, and the construction academy is thrilled with the initial interest. While the impending shortages in Alaska’s construction workforce aren’t entry level positions, the training has to start somewhere. “If somebody goes in, they start out as a new entry level operator—six years from now they’re going to be the person companies are trying to court away,” Castle says. By giving students the foundation to begin a career in a construction-related field, she says, ACA is working to build the state well into the future.

Successful Results According to the McDowell Group, ACA’s multi-partner approach is working. The Juneau-based consulting firm 70

released an independent review of the program in 2009 and concluded that the construction academy’s industry-driven structure seems to be a success. The report acknowledged that, at the time, the program was still too new to see any longterm effects, but both students and contractors appeared to value the real-world opportunities the academy provided. “There is demand among both trainees and employers for this type of entry-level preparation,” the McDowell Group wrote. “Employers value the fact that AkCA [Alaska Construction Academy] graduates have demonstrated that they are motivated and aware of employer expectations in addition to being trained in basic skills.” The employer payoff is one of the reasons Alaska businesses are throwing their support behind ACA and its various programs around the state. “It meets the needs of the students, it meets the needs of business and industry, and it’s done through collaboration,” Domke says.

Collaboration is Key Across Alaska, the entire ACA concept is based on collaboration: between educators, nonprofits, and industry. Castle says it’s one of the keys to the academies’ success. While technical training programs run by school districts themselves can be unwieldy and slow to react to everchanging markets, the construction academy is able to adapt quickly to the needs of Alaska businesses. The model is simple, Castle says. By operating under contract as a high school student or adult training provider, Castle says ACA funds programs in schools directly, rather than relying on government dollars appropriated to school districts. It gives the construction academies important leverage within Alaska schools. “We can dictate what kinds of things they have to do,” Castle says. “We can change on a dime, which we have.” Domke sees it as the path to CTE development in Fairbanks schools. “It is the way that CTE is going to move—there are so many opportunities out there that we simply can’t replicate at the high school level sometimes,” he says. “The educational system in Alaska needs to continue to morph with those

changes. The caliber of student that comes to the public school now; they’re the smartest, most well-educated kids we’ve seen come into the high school.” After debuting the HEO program to resounding popularity, Domke says he hopes to bring three additional simulators to the district following a planned expansion at North Pole High School. Training with the simulators gives students a solid foundation in equipment operations. Domke says it’s all part of providing a pipeline of employment potential. Too often, he says, students are pushed to become “college ready” without necessarily becoming “career ready.” The CTE department and HEO pathway in Fairbanks aim to encourage both. Students who study diesel mechanics and heavy equipment operations at Hutchison can go on to earn a certification at UAF’s Community and Technical College, Domke says. They’d also have the basic skills necessary to work for a local construction company, mining operation, or transportation project. “It’s a win-win,” he says.

‘Great Opportunity’ The idea of career readiness—which buoys up the fledgling HEO pathway at Hutchison High School—can also be found in other ACA programs across Alaska. In Anchorage, where the construction academies first began, the Anchorage School District is expanding opportunities all the way to the middle school level. CTE Director Diane Maple called it a valuable “opportunity to experience exposure to the workplace.” Last year, Maple says, the school district used state funds to purchase twenty welding simulators and twenty portable simulators, which were then used to pilot heavy equipment education within four local middle schools. Maple says the new simulators in Anchorage are intended to give students a hands-on, career-based learning experience, like those at Hutchison. “We intentionally purchased the simulators so we could broaden out our construction program,” she says. Currently, she says, the district’s CTE program includes construction academies within Anchorage middle and high schools. It focuses on exposing students to experiences and opportunities that might not otherwise fit into a

Alaska Business Monthly | December 2014 www.akbizmag.com

standard school day, Maple says. It emphasizes fields in which students could achieve a two-year degree or certificate. While Fairbanks educators strive to stress career readiness through their CTE program, Maple says she doesn’t believe it’s a standalone pursuit. Students involved in the Anchorage School District’s construction program learn there’s more to it than just climbing behind a wheel; they learn math skills, physics principles, and other academic topics pertinent to heavy equipment operation and construction trades, Maple says. It’s about preparing students for success on the job and in school. “Career-ready kind of envelops collegeready as well,” she says. “To me, it’s all career-ready. Certainly, what we’re doing is trying to strengthen the technical side.” Like other similar programs around the state, Anchorage schools’ construction academies are funded by a grant from the Construction Education Foundation. Maple says the grant served about 1,800 students in 2010. Last year, it helped train about 2,400. “One of the biggest growths has

been that seven to twelve [grade] connection—engaging students in middle school,” Maple says. “It’s certainly been helpful to continue to keep that pathway in place.” Maple says there’s still plenty of opportunity for growth. As industry needs continue to propel educational opportunities for Alaska students, she says, the partnerships behind ACA prop up a promising system. Now, she says, she’d like to see the financial commitments necessary to sustain the burgeoning program for a couple more years. “I think this is a great opportunity to see it expand,” Maple says. “The funding supports a great model.” It’s a model that brings real-world rewards for Alaska businesses and students alike.

Hands-On, Utilitarian Learning In Kodiak, where ACA helps fund a small but well-loved construction program, Kodiak Island Borough School District CTE Coordinator Barry Altenhof has seen those rewards firsthand. “The construction academies have become very popular,” says Altenhof,

Photo courtesy Barry Altenhof, Kodiak Island Borough School District

Kodiak High School graduate Tatiana Schneider (class of 2014) participated in the school’s drafting program four years and worked for Watterson Construction in Kodiak this summer on the Kodiak High School improvement project. She is an Alaska Construction Academy success story.

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December 2014 | Alaska Business Monthly

who added that from ten to twelve students have participated annually for the last four or five years. “It’s a practical experience, it’s a skillbuilding experience, and it gives them a taste of the real world,” he says. One student in particular—class of 2014 graduate Tatiana Schneider—participated in the school’s drafting program for four years. Last year, Altenhof says, she claimed the top prize in a prestigious statewide drafting competition for Alaska high school students. “She’s wearing two hats, really,” Altenhof says of his former student, now a freshman at Eastern Washington University. “She’s a competent designer, and she’s also really interested in hands-on construction experience.” That interest led Schneider to pursue an internship with Watterson Construction in Kodiak. Then, when she graduated from high school in June, Altenhof says, the local construction firm hired her right away, and she began work on an improvement project at Kodiak High School. “I think this was a combination of luck and good timing,” Altenhof says.

“The pieces fell into place very easily for Tatiana. She’s a bright young lady and she’s very interested in construction.” He says her story is a perfect example of the work ACA strives to achieve. “If ever there was a poster child for Construction Academy success, this is it,” Altenhof says. Akin to programs in Anchorage and Fairbanks, Altenhof says Kodiak’s construction program focuses on hands-on, utilitarian learning. Two years ago students built greenhouses. The CTE coordinator says they try to complete projects that give back to their community. It’s all about relationships, he says— especially with local business and industry groups. “The stronger those relationships become, the more effective we can be,” Altenhof says. All told, the island school district offers ten different career and technical programs, including construction. The fishing community of Kodiak doesn’t have a large construction base, but Altenhof says students can use their newfound skills on a variety of different jobs. They can go to work at a lumber yard or as a concrete worker or pipefitter.

“There’s obviously an immediate need for basic, entry-level skill positions in the Alaska workforce,” Altenhof says. Ultimately, he says, he hopes to see career education opportunities continue to develop and thrive throughout his district. “I’d like to see both students, parents, and teachers recognize the immediate value of skill-building in high school classes, so students have a real option for work when they leave high school,” he says. That’s really what the ACA strives to accomplish, Castle says: employment options for Alaskans and a way to fill the gaping need for skilled workers within Alaska’s construction industry. “I see it as a workforce pipeline,” says Domke. Based on the instant popularity of the new program at Hutchison High School, the meteoric spread of the construction academy model into schools around the state, and the success of ACA students like Tatiana Schneider, educators and industry proponents are calling it a success. R Kirsten Swann is an independent journalist based in Anchorage.

Alaska Business Monthly | December 2014 www.akbizmag.com

ENVIRONMENTAL SERVICES

Water & Wastewater:

Bethel Managing waste requires multi-million dollar investment By Rindi White Photo courtesy of the City of Bethel

ater and wastewater are some of the most expensive utilities to provide and also the most vital to keeping a community healthy. The American Council for an Energy-Efficient Economy says municipal water and wastewater treatment systems “are among the most energy-intensive facilities owned and operated by local governments, accounting for about 35 percent of energy used by municipalities.” In Alaska, costs can be even higher than those national averages, especially in rural and remote communities where groundwater is brackish or soils unsuitable for building wastewater treatment facilities. Since last year, Alaska Business Monthly readers have been learning about utilities across Alaska and finding out how each community is preparing for the future. This is another installment in the ongoing series. 74

Insulated water pipes to be installed above-ground in Bethel.

he city of Bethel has one of the more complex water and sewer delivery systems in the state, and it’s also a community in need of major investment in the near future to keep it up to date. According to the US Census, Bethel’s estimated population in 2013 was 6,363 people and housing units numbered 2,364 in 2010. City leaders are asking the state for help with more than $30 million in needed infrastructure projects. One is a nearly $20 million update to the city sewage lagoon; the second is a $10.5 million, 0.7mile water line extension that will serve institutional and commercial users along the Chief Eddie Hoffman Highway. The extension would make it possible for the Yukon-Kuskokwim Health Corporation hospital, the Department of Corrections Yukon Kuskokwim Correctional Facility (which can house 207 male and female

adult inmates), and the Department of Health and Human Services Bethel Youth Facility (which has an eight person detention unit and eleven person treatment unit), among others, to be on piped city water. The city recently brought its water and sewer utility rates more in line with actual costs by raising rates significantly. The new rates, which city council members debated for months, go into effect in January. The heavy debate stems from the fact that Bethel already has some of the highest water and sewer utility rates in the state; some residents pay upwards of $300 a month for the services. “The challenge we’re trying to reach is to get our water system to pay for itself, but to also find a fee structure that works,” says Bethel Vice Mayor Lief Albertson. “Trying to do that in a way that was fair… the word ‘fair’ kept coming

Alaska Business Monthly | December 2014 www.akbizmag.com

Aerial of Bethel. The red line is the 0.7 mile, $10.5 million water line extension called the Institutional Corridor that will serve institutional and commercial users along the Chief Eddie Hoffman Highway. Source: Bethel Institutional Corridor Water System Feasibility Study Update, CH2M HILL, July 2014

up and, depending on where you live in town, fair means something different.”

Different Services, Different Rates Bethel operates two water treatment plants, serving about 1,500 customers, according to city staff. Of those, 1,125 customers receive hauled water and sewer services and 474 are on piped water and sewer. The newest water treatment plant is the City Subdivision plant, located on Akiak Drive and built in 2000. Designed to produce a half-million gallons per day, the plant averages much less: about 130,000 gallons per day. It relies on a groundwater well located inside the plant that is capable of producing about 400 gallons per minute. Second and third wells, producing 26 and 27 gallons per minute respectively, are located outside the water plant. Because their capacity is lower than the ideal 400 gallons per minute, those wells are not as frequently used, city employees say. Near the treatment plant, the city also has a 500,000 gallon welded steel storage tank to bolster peak demand and provide capacity for fire flow requirements. The City Subdivision water distribution system is made up of three heated circulation loops, all above ground in insulated pipes. The piping system can’t be placed in the ground, city employees say, because the movement of the permafrost could damage the piping system. www.akbizmag.com

Each loop has a circulation pump to keep the water flowing, as well as a fourth pump for backup, according to a July 2014 CH2M HILL report on city water and sewer services.

Bethel’s other water treatment plant is located on Ridgecrest Drive in the Bethel Heights subdivision, and it also produces about 130,000 gallons of water per day, with a nearby 500,000-gallon welded steel storage tank for peak demand and fire flow requirements. The plant serves residents in the Bethel Heights subdivision, as well as customers on hauled water delivery. Bethel Heights is the older water treatment plant of the two, built in the 1970s. Water from Bethel Heights sometimes generates complaints due to its brown appearance. The aging steel pipes are reacting with the water, leaving the water tinged with iron. City staff says the most effective fix is to replace the outdated pipes, but that’s a project Bethel doesn’t currently have money for. Water from both treatment plants goes

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through a sand filter and receives minimal chemical treatment. Both treatment plants serve customers on piped and hauled water systems, and each treatment plant offers a coin-operated public fill spot for residents who haul their own water. Residents on the hauled water system might have a one hundred-gallon indoor water storage tank or a twelve thousand-gallon outdoor water storage tank, city employees say. It’s up to individual homeowners to install the tanks and to keep anything that’s hooked up to the tank in good repair. The variety in residential storage tanks, as well as water use fluctuations in each household, makes setting rates for water delivery difficult. The issue is further complicated by the fact that most city residents on piped water don’t have water meters, so non-metered customers are charged a flat rate of $166 per month for water usage. Residents with storage tanks pay rates based on capacity and the frequency of delivery. A few residents, for example, have one thousand-gallon tanks and receive delivery twice a month. That amounts to a charge of $95.51 per month, plus $8 per month in facility charges. If guests are in town and a third delivery is needed, it will cost an extra $113.29, according to the new rates passed by the Bethel City Council in October. Rates also vary according to which of the two zones city residents live in; those farther from the water treatment plants pay slightly more.

Sewer System Similar That’s just the water side of the utility. Residents also pay for sewer service, a utility that is similarly divided between customers receiving piped sewer service and those with sewer tanks that are periodically evacuated. Customers who receive hauled water have their sewage tanks evacuated at the same frequency as they get water delivery, city employees say. Like the water delivery, household septic tanks vary in size. But most are steel pipes insulated with spray-foam and placed above ground, or partially insulated and partially buried. All of the sewage is piped or hauled to the Bethel Sewage Lagoon, located off Ridgecrest Drive in Bethel Heights subdivision. The lagoon offers a simple, open-air treatment process with two cells, each a massive seventeen acres in size. Both cells have curtain walls 76

dividing them and separating the treatment lagoon into four treatment cells. The lagoon receives about three hundred thousand gallons of septic waste per day, year-round. Most of that comes from septic trucks, but about a third is piped to the lagoon. Some, but not all, of the piping is heated, city employees say. After being treated, the effluent outfalls into Brown’s Slough, where the city tests it weekly to check for suspended solids, pH levels, and dissolved oxygen. The city also tests three times a week for fecal coliform at the outfall discharge point, and twice a month the city tests discharge water in the slough for contaminants.

Lagoon Reaching Capacity, Repairs Needed Soon Bethel city leaders have been lobbying state legislators for funding to pay for a third treatment cell, plus money to re-

“What we tried to do is pick some numbers that would get us to a break-even point. Depending on the cost of fuel and other things, you just do your best for a moving target.”

—Lief Albertson Vice Mayor, Bethel

place the septic waste offloading dock, which has significant structural damage. The new cell would be a twenty-acre treatment area, which would allow for more treatment capacity and, city employees say, would provide better treatment. But the aging treatment cells also need a costly revitalization: dredging. The first of the two treatment cells was built in the early 1970s and has never been dredged to clean out accumulated septic sludge. It was built twelve feet deep, but today it only has three feet of treatment capacity. The second cell was built at fourteen feet deep and it remains at approximately that depth today. Along with the sewage lagoon dredging, Bethel Public Works Director Muzaffar Lakhani says, the city needs to replace its truck dumping dock. Sheet piles supporting the dock are separating, and city employees say completely replacing the dock would cost an estimated $1.4 million, a cost that is rolled in to the

roughly $20 million cost of dredging, repairing, and adding space to the lagoon. Lakhani says the project has been a budget priority for the city for a couple years, and city leaders will continue requesting the State Legislature for funding. The city is also applying for grants to help with the cost of the project.

Fair Rates May Boost City’s Funding Requests After years of stagnant rates, and yearly help from the city’s general fund to cover Water and Sewer Utility Fund expenditures, Bethel City Council in October agreed to a rate increase. While the increase was not as high as was recommended by a 2013 CH2M HILL rate study, city leaders say they see the increase as fair to both the city and utility customers. “Currently, the water and sewer utility is not generating adequate revenues to cover operating expenses. In FY 2010/2011, the Water and Sewer Utility Fund received an inter-fund transfer from the general fund in the amount of $667,000 to offset operating losses,” the CH2M HILL report states. The report recommended three scenarios, each including an initial rate jump of around 10 percent, followed by additional rate increases each subsequent year. But city council member chose a one-time, significant jump instead. For piped water, flat-rate customers’ bills will go from $125 to $166, an increase of about 33 percent. Customers receiving hauled water will see increases as well, and the city is now divided into two zones: Zone 1, which is closer to the two water treatment plants, and an outer zone, Zone 2, which is farther away. “What we tried to do is pick some numbers that would get us to a breakeven point. Depending on the cost of fuel and other things, you just do your best for a moving target,” Albertson says. The new rates should allow the city to stop using general fund money to pay for day-to-day utility needs, but it won’t be enough to build a working capital project fund. “I think council’s concern is that we’re losing so much money on the system right now, and we needed to find a way to balance those things,” Albertson says. “I’m hoping that if we can show we are paying our own bills on water and sewer, it will make it easier to ask for help replacing pipe [and for other capital needs].”

Alaska Business Monthly | December 2014 www.akbizmag.com

Industrial Corridor May Help City Fund Large Projects A $10.5 million project the city is working on, to extend water and sewer service to twenty-two industrial and commercial users along the Chief Eddie Hoffman Highway, could help the city pay for other sewer and water capital needs in the future. The potential customers in the socalled Industrial Corridor currently receive hauled water from the city or own private wells. According to a July 2014 study of the city’s proposed Institutional Corridor by CH2M HILL, the three largest potential users, the Yukon-Kuskokwim Health Corporation hospital, the state Department of Corrections adult correctional facility, and the Department of Health and Human Services youth correctional and treatment facility, all asked the city to consider bringing piped city water to the area. According to the CH2M HILL Institutional Corridor study, prospective users who operate wells find well maintenance to be “expensive and time consuming for maintenance staff who are stretched thin at these facilities.”

www.akbizmag.com

Maintenance can be expensive because costly glycol systems must be included to prevent pipe freeze-up, operators must be trained for water system maintenance, and some private wells experience problems such as well subsidence that can increase maintenance costs. “The majority of users are very interested in hooking onto piped water service and abandoning their individual wells,” the study states. To handle the additional draw on its water supply, the study states the city will need to install a new high-demand pump and two additional circulation pumps. The city received $7 million from the state to get the 0.7-mile project started. It’s not enough money to extend the new piping to all twenty-two potential customers, but Lakhani says the city is moving forward in hopes additional funding to complete the project will soon be available. While adding the Institutional Corridor won’t solve the city’s water and sewer needs, the new loop should generate more revenue than the city will pay out in maintenance fees, according to CH2M HILL’s 2013 rate study. Un-

der one scenario, the report estimated the Institutional Corridor would add about $320,000 in expenses but generate nearly $450,000 in revenue. Eliminating hauled utility services altogether would likely have the largest effect in reducing operational costs for the sewer and water utilities. The city employs fifteen drivers to haul water and septic waste. Personnel costs for the utility are 57 percent of its total budget. And with the fleet of water and septic trucks the city needs to keep the service operating, vehicle maintenance and fuel costs are the next-largest budget item for the utility at 22 percent of the budget. City employees say the long-term goal for the city is to eventually move as many customers as possible to piped water delivery. However, the city currently lacks funding for that major capital project. “The financial conditions are tight,” Lakhani says, referring to the city’s burden of outstanding capital projects. “So our job is to keep applying.” R Rindi White is a freelance journalist living in Palmer.

December 2014 | Alaska Business Monthly

MARKETING

Artificial Intelligence:

Marketing Implications & Applications

By Edward Forrest and Bogdan Hoanca

t has different names. It uses different terms. It is a combination of many technologies, with many features, being developed by many companies with lots of money at stake. And—it means just one thing—marketing will never be the same. It would be hard to imagine anyone who has not encountered voice-recognition technologies, such as when calling a company and being instructed to press a number or say “Yes” or being asked to enunciate a birthday, address, or whatever else is required to transact business. Apple’s Siri, Google Now, and Microsoft’s Cortana proffer millions of smartphone and tablet users their own personal information concierge.

Beyond Voice Recognition

Variously termed virtual assistants or intelligent agents, computing systems using artificial intelligence (AI) technology have emerged as the interface of customer service. The ability to directly converse with an intelligent agent and have it answer questions or commands is the result of an astonishingly sophisticated amalgamation of voice recognition technology, linguistic science, and natural language processing. Combined with the latest advances in machine learning, cognitive computing, analytical and predictive statistics, neural networking and deep-learning algorithms, and neurosynaptic chips (a brain-inspired computer architecture that mimics one million neurons and 256 million synapses), the role and scope of intelligent agents far surpasses basic keyword searches or a simple command such as “dial my wife’s phone number.” Moreover, today’s emerging intelligent agents have moved beyond a one-systemserves-all and are capable of learning their owners’ every habit, preference, and price point. This past year, IBM introduced its “Engagement Advisor.” Envisioned as an intelligent technology whose services can apply to almost any industry, but especially those that draw volumes of customer service inquiries, such as retail, banking, insurance, and telecommunications, the Engagement Advisor can seamlessly supplement and even supplant human customer service representatives. 78

through what people post online with information in a company database.”

Fundamental Change

Forrest

Hoanca

Impacts to Marketing

The capability to interact, answer questions, and assist consumers with complex purchasing decisions and/or solve problems is set to impact marketing on other fronts as well. As reported in Forbes by Mark Fidelman in an article titled “IBM’s Watson Set To Revolutionize Marketing” published in 2013, the ability to analyze in a matter of seconds 200 million pages of structured and unstructured data from credit cards, sales databases, social networks, location data, and web pages now allows marketers to ascertain trends in consumer preferences and sentiments, calculate sales probabilities, and “proactively and intelligently test, measure, and optimize digital content, ads, website pages.” Accordingly, Steve Lohr reports in in his New York Times blog piece, “IBM Puts Watson to Work in Business” published in May 2013, that Watson is already being utilized “to sift through and make sense of all the data advertisers receive about their web, social media, print, and television marketing campaigns... to optimize campaigns in real time across every marketing channel.” In addition to being able to predict consumer trends and analyze consumer media consumption patterns, emerging AI technology even has the ability to discern consumers’ personalities through psycholinguistic analysis of the language consumers use when posting on social media sites and predict major events that are likely to happen in a consumer’s life. “Amazingly, this tech doesn’t even have to know a company’s customer’s social media accounts beforehand,” observes Kyle Russell in his February 2014, Business Insider article “IBM Is Using Watson to Psychoanalyze People from Their Tweets.” “It can figure them out on its own by sifting

Arguably, the most profound impact of intelligent technology applications on business and marketing practices is going to be a consequence of consumers’ access to and use of Virtual Personal Shopping Assistants (VPSA). The VPSA can learn, predict, and serve the individual consumer’s tastes, needs, and desires and optimize their purchases, whether products or services. It will be able to instantly match an immediate or imminent need against all accessible products that meet a consumer’s expectations and price points. The savings in time will be significant, given that most consumers are hard pressed to keep up with all the latest trends, specials, and sales. Currently, “online and mobile shopping yields a time-consuming, inefficient experience, as consumers comb through websites for information, link by link, or enter keywords into search engines and hope for the best” as “50 percent of consumers spend 75 percent or more of their total shopping time conducting online research,” observes John Natale, in his April 2014 PCWorld article, “IBM Watson Group set to transform the consumer shopping experience.” With one’s own VPSA, the global marketplace is monitored 24/7/365—whether one is shopping or not, the consumer will be notified when any item of relevance is available. Once a potential purchase is identified, the VPSA allows the consumer to “ask specific questions based on explicit needs and get expert, personalized, information-driven responses to guide buying decisions,” thus creating “the same experience we have in real-world stores with great sales reps every day and is what’s missing from digital retail.” Having a VPSA shop on the customer’s behalf will fundamentally change marketing. As customers start to use VPSAs, marketing staff will need to target their messages to the VPSAs, rather than to humans, or might need to have two sets of messages—one for AI agents and one for humans. But VPSAs are going to be tougher negotiators than people, as they will not have as many cognitive limitations. For example, when given a choice of seemingly identical products (e.g. panty hose), customers have

Alaska Business Monthly | December 2014 www.akbizmag.com

been shown to default to simple heuristic rules: a preference to pick the products displayed on the right side of a rack over identical ones on the left. Products placed at eye level are more likely to be purchased than those on lower shelves. Ads with streamlined cars, pretty women, and beautiful beaches influence the human purchaser by appealing to fundamental human desires. AI agents will be able to consider and make a choice among an arbitrarily large set of competing products but without such heuristics. As VPSAs search, evaluate, recommend, and finalize purchases, the actual consumer is removed from the purchasing process. As marketers and consumers begin to fully avail themselves of the advantages that artificial intelligence agents proffer, the nature and process of the facilitating exchange in marketplace will be dramatically altered. On the consumer’s side, having a virtual shopping assistant that is fully informed of all available options, prices, and evaluations greatly lessens the need or influence of the marketer’s commercials or promo-tools. As the marketer is increasingly disintermediated, it will become increasing important for marketers to recognize the primary role that the consumer’s VPSA plays in the marketing game and adjust their marketing efforts accordingly. Continuing to invoke the old moves in the new game will not only prove ineffective but counterproductive in gaining consumers’ trust and patronage.

Alaska Impacts

From the point of view of Alaska based businesses, the emergence of VPSAs will have two types of impacts. First, global competition online will only increase; human users typically only browse the first two pages of Google results. VPSAs will plow through as many pages of results as the search returned. This means that Alaska businesses that do not show up in the top of today’s searches will be able to compete against more established rivals, assuming that their products and services are competitive, but less well known. Second, marketing will need to shift in focus from attracting the attention of humans, with the usual cognitive limitations and inclinations described above, to capturing the attention of VPSA algorithms. A new strain of marketing will emerge, where knowledge of algorithms and reliance on technology will be just as important as understanding the needs of the human customer. As many Alaskan businesses currently focus on search engine optimization, they will have to redouble their efforts in carrying out VPSA optimization as well in the near future. Indeed if there is still doubt that AI is rewww.akbizmag.com

defining the roles and rules of marketing, one need only do a Google search and read the articles and view the YouTube videos of just two of the latest platforms to become available: IPsoft’s Amelia (“the first cognitive agent who understands like a human”)

and IBM’s Watson Analytics (a freemium service which allows anyone to “aggregate, analyze, visualize, and gain insight” from their own data sets). Herein, the adage, “The future is already here…it’s just not very evenly distributed,” has never been truer. R

Professors Edward Forrest and Bogdan Hoanca serve respectively as Chair of the Management & Marketing Department and Director of Graduate Programs in UAA’s College of Business & Public Policy. Together they recently authored “Artificial Intelligence: Marketing’s Game Changer,” forthcoming in IGI Global’s The Handbook of Research on Innovations in Marketing Information Systems. Contact Forrest at 907-854-8784 or ejforrest@uaa.alaska.edu and Bogdan at 907-786-4140 or bhoanca@uaa.alaska.edu.

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December 2014 | Alaska Business Monthly

TELECOM & TECHNOLOGY

Cloud-Based Solutions Enhancing access to IT resources

Having cloud storage is like renting a self-storage unit, Schlabaugh says. Companies can use the cloud to temporarily store information for regular use, as well as archive data for long-term safekeeping. By Tracy Barbour Nowadays, more Alaska businesses are laska businesses are increasingly incorporating cloud storage as a tool for replacing some of their tradition- collaboration. “Instead of putting a file in al IT solutions with cloud-based a computer and then having to email it to services to capitalize on the ease, con- everyone in a group, you can stick a docvenience, and affordability of accessing ument in the cloud and everyone gets acservices over the Internet. cess and can make changes,” Schlabaugh Cloud solutions, which are typically says. “It’s allowing for a lot more efficient offered as pay-per-use or subscription- collaboration.” based options, are services, applications, Schlabaugh says businesses can use GCI’s and other IT resources that companies ac- cloud storage with the confidence of knowcess through a Web portal instead of their ing their information is safe and accessible own computer network. While only to them. Their data gets en“cloud solutions” are relatively crypted or scrambled before it’s new buzz words, the virtualplaced in GCI’s cloud, and GCI’s ization of computer technolconnection into the cloud is also ogy has been around since the encoded. Such security mea70s and 80s, when mainframe sures may not be the case with computers employed the use free cloud storage like Dropbox, of remote terminals and deGoogle Drive, or Apple’s iCloud. centralized administration, “Not all of those have encrypted according to Mike Wheeler, Wheeler connections; however, many of the owner of Alaska Computer these providers are improving Support, an Anchorage-based IT consult- their security,” Schlabaugh says. ing firm. “Computers just got smaller; GCI also offers infrastructure otherwise, they are the same,” he says. as a service (IaaS) to help cusToday, Alaska’s computer technology tomers leverage virtual techand telecommunications providers of- nology. IaaS allows businesses fer a plethora of solutions for businesses to avoid the cost of hiring IT wanting to migrate some of their tradi- staff, buying equipment, and tional services to the cloud. Popular op- maintaining their own servers. tions include data storage, on-demand “Often, it’s hard to put [a server] backup, hosted servers, email, voicemail, in as a truly appropriate data and telephone systems. space with the property cool- Lewis ing, power, and connectivity Cloud Storage Expands that is needed,” Schlabaugh says. “Moving Capacity Instantly to the cloud and doing the infrastructure Cloud storage is one of the most com- as a service really makes sense.” monly used virtual solutions among GCI’s The company delivers IaaS through business customers, says Senior Manager multiple data centers around the state, inCommercial Product Marketing Gregory cluding its recently-built, state-of-the-art Schlabaugh. It gives businesses additional site located off Anchorage’s C Street. The off-site storage capacity without the need Midtown building is a robust data center to purchase and maintain their own Stor- featuring redundant connectivity, redunage Area Network, or SAN. Companies dant power, and backup on site, Schlacan also use GCI’s Cloud Storage product baugh says. “It’s a very secure facility,” he for off-site backup of their existing data. says. “It is designed from the ground up to Then if their hard drive fails, they can still meet the more stringent needs of our more have access to their information to keep demanding customers from the enterprise their operation running. and government sectors.”

Synaptic Storage and Office@Hand At AT&T, popular cloud services in Alaska include Synaptic Storage as a Service and RingCentral Office@Hand. Synaptic Storage is an on-demand backup and disaster recovery service that enables businesses to store and access data using any Internet connection, private cloud, or other AT&T transport services. Users can log into the portal to access their information any time they need it or permanently store data for later retrieval in the event of a disaster. Synaptic Storage is a reliable solution that lets customers instantly expand and shrink storage capacity as needed while paying for only the amount of space they use, says Manny Lewis, AT&T’s application sales consultant for Alaska. “It is truly scalable,” Lewis says. “The great thing is it can be customized for everyone, from the small mom-and-pop shops to the large oil and gas companies.” AT&T’s Office@Hand is also finding favor with businesses in Alaska. Launched about six months ago, it’s a single cloud phone system for voice, fax, and text technology. Office@Hand makes it possible for companies to have telephone service anywhere they have access to the Internet. The service is particularly useful for businesses with employees working remotely, working from multiple locations, or using mixture of desk phones, smartphones, tablets, and PCs. “They have the ability to make and receive calls as if they are in the office,” Lewis says. “It creates the image of always being available to their customers.” Hosted Exchange, an All-Inclusive Solution Alaska Computer Support is seeing a significant amount of interest in Microsoft Hosted Exchange. The all-inclusive cloud solution allows email, contacts, calendars, and tasks to be synchronized across multiple devices. So users can work seamlessly across laptops, desktops, tablets, and smartphones. Wheeler says Hosted Exchange is ideal for smaller companies because they can use the services without having to pay for a server, hosting, and other expenses.

Alaska Business Monthly | December 2014 www.akbizmag.com

Hosted Exchange runs $12 a month per user, while a non-hosted solution would cost significantly more. To have their own exchange server, Wheeler says, a business would need a $1,500 computer system, $1,200 to $1,500 for Exchange software, an uninterrupted power supply (battery backup), and ample bandwidth—not to mention an administrator to maintain everything. “Your break point would be around forty to fifty users,” he says. As a side benefit, Hosted Exchange can enhance workers’ accessibility—even when they’re not in the office. “Whenever you put people’s work email in their hands, you’re going to be getting utilization of employees after hours,” Wheeler says. “It keeps people more in touch.” Spam blocking and Web protection services also remain high-demand services for Alaska Computer Support because they nullify the risk of viruses. Viruses happen every day in the workplace, Wheeler says. And each time a machine is infected with a virus, it can cost a company hundreds of dollars in repairs and employee down time. “We highly recommend proper network and email protection,” he says. Other services from Alaska Computer Support include file storage, backup solutions, telephone systems, and software.

mail, remote teleworker set-up, and email.

and promote a globalized workforce, as well as enhance overall customer satisfaction. “We see cloud-based solutions as the future for business IT and are positioning MTA to be a key player in this arena,” Weinstein says.

Benefits of Cloud Services Cloud solutions offer a variety of benefits to businesses of all types and sizes. Price is a major advantage. They allow smaller Staying on Top of Security businesses to have access to enterprise solutions at a fraction of the cost and As with any technology, security is an iswithout the associated overhead, Wheel- sue that businesses should consider when er says. “Cloud providers deliver services using cloud-based solutions. Often, many to thousands of individual users, so they businesses don’t consider how security issues factor when going into the cloud, can offer lower costs,” he says. As another benefit, cloud services allow says Rebecca Collins, who owns Anchorbusinesses to shift much of the financial age-based Bearpaw Computers and speburden of acquiring and maintaining IT cializes in information security. Collins says it’s important for cloud users equipment to the provider. They also give companies a cost-effective way to keep up to understand how the use of cloud services with the latest technology. “You’re basi- could potentially impact their business. For cally leasing and renting space,” Schla- example, she says, a medical office that uses baugh says. “Once you move into the email to communicate patient privacy data cloud, you’re staying up to date with the should only transmit certain information, have control of their server, and use an inlatest advances, changes, and fixes.” Take GCI’s Productivity Pack, for ex- dustry-standard service such as Microsoft ample. Pricing for the cloud-based pack- Exchange. “That automatically rules out usage starts at $350 a month plus $6 per ing Yahoo or Gmail,” she says. “[The clinic’s user, and businesses can scale the ser- email] has to be hosted on a dedicated servvice to meet their changing personnel, er—not a shared server.” From Collins’ perspective, the storage, bandwidth, and other security of cloud solutions is no needs. GCI’s Productivity Pack different than that of traditional is a turn-key cloud solution for IT services. Most people in the businesses wanting to simplify IT and business world are very their IT resources and reduce TechRemote Keeps Networks dependent upon vendors keepoverall costs. It moves them Running Smoothly ing their equipment updated into the cloud with Google ApAlaska businesses are also capitalizing on plication—a collection of tools and putting out patches, she says. remote desktop services from Matanuska that includes custom email, calHowever, companies that use Telephone Association (MTA), according endar, and video meetings—as Schlabaugh cloud-based services must do to Business Sales Manager Micah Wein- well as one hundred gigabytes their part by being vigilant and stein. TechRemote, as the service is called, of storage, firewall, and Internet. “Com- applying patches. “The problem with secuhelps businesses keep their IT network pared to purchasing and deploying your rity is that anytime you think you’re ahead of running smoothly via an Internet connec- own infrastructure, the monthly cost pro- the game, there’s someone who finds a way tion. The service monitors computer hard- vides a benefit over sustaining infrastruc- in,” Collins says. “The question is: Can you ware and software functions continuously ture yourself,” Schlabaugh says. stay ahead of them?” to detect issues as they occur and even In general, cloud solutions are very seAnother appealing advantage of cloud forecast problems before they happen. services is that they make it possible for us- cure, says Weinstein of MTA. He feels cloud TechRemote also reports on the health of ers to easily and quickly scale up without security is frequently dependent upon cusa businesses’ computer network and alerts having to invest in additional IT cost. The tomers’ attention to follow prudent busiMTA’s TechExpress techs when critical is- ability to build in redundancy by backing nesses practices, such as using solid passsues need to be addressed. up essential information in the words, encrypting data, having a heightened TechRemote installs patches cloud is also important—espe- awareness of employees’ access to data, and and updates for business cuscially in the event of an earth- paying attention to employee turnover. tomers as needed. The service To Schlabaugh, it’s all about being an quake or other disaster. “Having can involve everything from the ability to operate your busi- informed consumer. “If businesses do anti-virus software monitorness even if you lose services in the research, ask the right questions, and ing and automated license make the right decisions, they can defiyour office is vital,” Lewis says. management to remote access In addition to reducing tech- nitely realize the cost savings and prosetup for telecommuting and nology spending and improving ductivity gains of cloud solutions—and on-site system recovery. R accessibility to IT resources, cloud still remain safe,” he says. Weinstein Other virtual services offered solutions offer valuable intangible by MTA include cloud storage, voice over In- benefits, according Weinstein. They help fosTracy Barbour is a former Alaskan. ternet Protocol (VOIP) phone service, voice- ter collaboration between remote employees www.akbizmag.com

December 2014 | Alaska Business Monthly

AVIATION

Cirrus Aircraft Focuses on Alaska

‘Useful tool’ for business owners By Rob Stapleton

Photo by Rob Stapleton

A Cirrus SR22T parked at Ted Stevens Anchorage International Airport.

he Alaska aviation industry has a new Northwest Regional Sales Director for Cirrus Aircraft, Jill “Ivy” McIver. McIver has her sights set on convincing Alaska business owners that the Cirrus aircraft is well suited for their missions statewide.

Not Like Any Other Aircraft Quick to point out that the Cirrus is not like any other aircraft, McIver says it is able to be flown long distances at high altitudes with a specially outfitted cockpit, autopilot, and up-to-date sophisticated weather and navigation systems on board. “Once you become familiar with the aircraft’s systems and how they can work for you, flying a Cirrus can be a time and money saver,” says McIver. “This is the perfect aircraft for a doctor, dentist, engineer, or program managers with business in various Alaskan communities.” This technologically improved, sleek, low wing aircraft is a signal of what is to come with the use of carbon fiber, de82

icing titanium leading edges for making flights into known icing conditions (Cirrus Known Ice Protection), and the ever efficient 315 horsepower Continental TSIO-550-K Turbocharged powerplant. Smooth performance, high airspeed, great visibility, and un-paralleled cockpit situational awareness in an easy to fly aircraft: “It doesn’t get any better than this,” says McIver. Flying magazine refers to the SR22T five seat aircraft as “the most sophisticated single engine aircraft ever.” Despite its near $750,000 price tag, the Cirrus SR22T is the world’s best-selling piston single engine aircraft for more than ten years, according to Cirrus. McIver says the Cirrus Aircraft Corporation has new and used aircraft for sale, different financing options, and will even find a Cirrus pilot to fly the Cirrus aircraft if the buyer is not a pilot. But the challenge ahead for McIver is not the price or the aircraft’s four passenger size, it’s the mentality of aviation departments in higher latitudes regard-

ing the use of a low wing aircraft in the Arctic or sub-Arctic regions. McIver says that there are approximately six Cirrus owners in Alaska; some are located in state and others fly back and forth. For instance, Anchorage businessman Charlie Hewitt of Mirror Studios indicates how the Cirrus aircraft has benefitted his business. “I use my Cirrus to visit my clients and as a photo platform for aerial photography,” Hewitt says. Hewitt has made flights in Alaska to Cordova, Fairbanks, Valdez, and Homer in his Cirrus. Hewitt says he has flown to the Lower 48 more than ten times, both with an SR20 and the SR22 Turbo. Both Hewitt and his Cirrus were featured in a series by Fly Right Films that featured special Attitude Flying and Decision Making films with Dick Rutan.

‘Alaska Is the Biggest Challenge’ In addition to being a Cirrus sales director, McIver demonstrates the air-

Alaska Business Monthly | December 2014 www.akbizmag.com

craft, acts as a factory representative to perspective buyers to prove the versatility of the luxury aircraft, and helps complete their orders. “My territory is large and diverse, but it’s exciting and quite a challenge,” says McIver, who is Airline Transport Pilot certified with more than three thousand hours of flight time in Cirrus aircraft. Her region includes Alaska, Alberta, British Columbia, Washington state, Oregon, Idaho, and Montana. “But Alaska is the biggest challenge,” she says. “Aircraft owner/operators have not yet embraced the usefulness of the Cirrus aircraft. It’s my goal to prove the aircraft as a useful tool to improve business in the state.” Demonstrating the Cirrus SR20, SR22, SR22T, and eventually the new Cirrus SF50 Vision jet, McIver sees Alaska as an open playing field for Cirrus upcoming aircraft. “It’s much better than flying First Class on a commercial jet. The seats are more comfortable and you go where you want, when you want,” says McIver. Besides being comfortable and easily maneuvered by a “side yoke” for controlling pitch and roll, the aircraft is designed for safety. Every Cirrus comes standard with the Cirrus Airframe Parachute System, Airbag seatbelts for the pilot and co-pilot, 406 Emergency Locator Transmitter, ADS-B (Automatic Dependent Surveillance-Broadcast) Transponder, Weather Data link, Synthetic Vision Technology, and high performance brakes. In addition, the aircraft is equipped with a roll cage built into the structure around the cockpit and a beveled firewall to protect the occupants from the force of impact in an emergency landing or a parachute deployment. Each seat in the aircraft is rated to 26Gs— twenty-six times the force of gravity. Safety, efficiency, access, and a new aircraft to the Cirrus line are just some benefits for business. “There are oil companies in Alberta, Canada, that are regularly making flights with the Cirrus from Calgary and Edmonton to Fort McMurray and Grand Prairie,” she says. To break the stigma of the non-tail wheel, low wing aircraft may not be easy, but McIver has an ace up her sleeve. www.akbizmag.com

Jet Coming in 2015 Cirrus will be releasing its “Vision” SF50 Personal Jet single turbine aircraft in the fourth quarter of 2015. “This single engine jet will occupy a niche as a jet with one thousand nautical mile capability that can land on a three thousand foot airstrip or even on grass,” says McIver. “Additionally, it will utilize all of the safety features engineered into the SR line of aircraft such as the Cirrus Airframe Parachute System, will cruise at 300 knots (345 mph), carry up to seven people, can be flown by a single pilot, and will still fit into a forty foot hangar.” The cost of the Vision SF50, Cirrus says, is about $1.96 million, making it an affordable option as a business jet, compared to larger and more expensive executive jets. Ron Nelson, a seasoned Gulfstream pilot and the director of operations for Pathfinder Aviation in Homer, compares the Vision jet to a Cessna Citation, which slightly exceeds the capabilities of the Cirrus jet but at a vastly increased cost. “The price difference between the two is about $6 million more for the basic Cessna Citation X used,” Nelson adds. “This Cirrus jet could be a huge savings to smaller flight departments or individual business owners.” The Vision is designed by Cirrus Aircraft to fill a significant niche between piston aircraft and other Very Light Jets and is being called the first in its class of personal jets. “The footprint for this single jet engine aircraft is much less than other jets,” says McIver. “And as a single engine jet it will not be restricted by twin engine IFR [instrument flight rules], offering more flexibility for operations out of high altitude airports.” Currently Cirrus has over 550 production positions reserved for the personal jet and more to come, according to McIver, who has flown the Vision SF-50 jet. Full Training Provided Buying a Cirrus aircraft is not just a purchase, it’s a commitment to safety, adds McIver. Each new owner operator pilot is sent to a Cirrus Training Center or the Cirrus Factory Training facility to be trained on the flight characteris-

tics, the systems, and the safety aspects of the aircraft. “When you buy new Cirrus, we include a transition training course. You are paired one-on-one with a Factory Cirrus Standardized Instructor Pilot, and the course includes scenario-based ground sessions, flight training, and simulator training in a Frasca Flight Training Device using the exact cockpit and avionics that would you find in a new Cirrus,” McIver says. Other benefits of the Cirrus safety systems include the Perspective ESP (Electronic Stability Protection), a feature which utilizes the autopilot servos to keep the aircraft in a safe operating envelope. If the aircraft is in an unusual attitude and the pilot is becoming disoriented, the system brings the aircraft to a wing level position on the horizon once Perspective ESP is activated. Why has Cirrus exceeded the norm by offering flight training and safety training? During the development of the aircraft one of the co-founders was involved in a mid-air collision that took off part of his wing. This event convinced Cirrus engineers that a ballistic recovery system could offer a unique safety feature not offered on any other commercially available certified aircraft and could save lives. Additionally, each Cirrus pilot is highly encouraged to take a refresher course every six months. Customized flight training is also available at the factory in Duluth, Minnesota, and at any of their regionally available training centers worldwide. McIver is also anxious to present prospective clients the Cirrus Special Mission Aircraft: Cirrus Perception, an electronic digital imaging system that can be fitted in the baggage compartment to provide vision equipment for aerial mapping and surveys, pipeline patrol, wildlife patrol, firefighting, search and rescue, hydrocarbon leak detection, and law enforcement type missions. Her region may be expansive but McIver is one positive and energetic pilot and says, “Cirrus has multiple options for Alaska businesses—the sky is the limit.” R Aviation aficionado Rob Stapleton writes from Alaska.

December 2014 | Alaska Business Monthly

OIL & GAS A Cruz Tundra Bear and ATV side dump trailer on the North Slope hauling snow for an ice road build. Photo courtesy of Cruz Construction

Alaska’s North Slope Infrastructure Steadily Growing into 2015

By Tom Anderson

laska’s North Slope has been active in resource development and the mobilization and demobilization of essential infrastructures since the late 1960s when petroleum was discovered in Prudhoe Bay. Over the last fifty-five years, research, exploration, and drilling have occurred along the northern slope of the Brooks Range from the Arctic Ocean’s Chukchi to Beaufort Seas. The topography of this often harsh terrain and climate includes annually thawing tundra, permafrost, ice, and various soils that require specific equipment and construction techniques to ensure preservation of the ecosystem and successful resource extraction. As a result of critical dependency on equipment, housing, transportation routes, access, and habitat essentials like food, water, supplies, and communications, businesses have risen to meet the challenge and provide such services and technology. The infrastructure and support of all operations on the North Slope represents the core of the process that affords responsible resource development industries to thrive in the state.

If You Build It, They Will Come Cruz Construction has been in the oil field services industry in Alaska since 1979. Owners Dave and Dana Cruz founded the company with an emphasis on infrastructure support in remote places like the North Slope. One impetus for the company’s direction was the recognition that basic essentials like ice roads, tundra transports, exploration support, and ice pad mobilization-demobilization and oilrig movement are vital to the coldweather Arctic development industry. The company’s menu of services is comprehensive and robust. When it comes to region infrastructure, Cruz handles planning, permitting, logistics, and reporting. The company offers ATV/ LGP (All-Terrain/Low Ground Pressure) vehicles designed to move anything from small loads of equipment and supplies to the full-process demobilization of oilrigs and equipment. Unique to this geography, large rubber-tired vehicles and trailers afford access to rougher coastal regions along the Arctic Ocean. Tracked vehicles and trailers are also integrated into the construction process. In concert, these machines open remote land to careful, methodic, and

temporary buildings and camps that house workers and equipment. Removing oil, gas, and minerals is the ultimate objective; stable and uninterrupted infrastructure is the foundation. Cruz’s main office is in Palmer. It has additional offices in Anchorage, Nikiski, and Deadhorse. The company’s seasonal staffing number is near 50 employees; during the busy season (winter), it retains over 250 people. Its list of occupations range from engineers and logistics experts to construction trades like craftsmen, roustabouts, technicians, and operating engineers, who drive the specialized snow ATVs, trucks, and cranes. In 2014, Cruz Construction was busy, especially in the spring when it was demobilizing a client 101 miles west of the Dalton Highway on a snow trail that the company built to Umiat, Alaska. Umiat is in the North Slope Borough, located on

Photo courtesy of Cruz Construction

A Cruz Tundra Bear and ATV trailer hauling a fuel truck at White hills on the North Side of the Brooks Range.

Alaska Business Monthly | December 2014 www.akbizmag.com

the Colville River, 140 miles southwest of Deadhorse. The year 2014 was Cruz’s second season in the area. In total, the company moved 356 loads over 71,000 miles of back-and-forth deliveries. For the 2015 winter season, Cruz will be building a 124-mile snow trail to Smith Bay requiring more than 300 loads to haul one-way on a northern route to support the company’s rubber-tired Tundra Bears. Cruz will also be constructing a 1-mile ice runway, 5.5-mile ice road, and an ice drill island four miles off shore. The infrastructural support for this sole project requires three separate camp locations and upwards of 130 beds for personnel. The client will be performing exploratory drilling and results will determine duration of stay. Smith Bay is 150 miles west of Prudhoe Bay. Craig Thompson, Cruz Construction’s general manager of Oilfield Services, is cognizant of the multifaceted efforts the company must perform. From genesis to the demobilization of a remote site project, beyond building an ice/snow road, Thompson respects the enormous tasks the Cruz team must accomplish. The entire infrastructure, which includes

A Cruz Steiger and ATV trailer at Smith Bay on the West side of Oliktok Point on the North Slope, hauling the FEX Arctic Wolf rig. Photo courtesy of Cruz Construction

camp module delivery and set-up, water and wastewater treatment transfer, food, electricity, telephony and entertainment, and an assortment of utility-based dependency, add to the complexity. “I’ve been involved in some very challenging operations in Alaska over my career and Cruz has raised that bar, particularly when workers are so dependent on our success at building and operating the camps. The ability to ac-

cess these extreme remote sites is limited, so our services for building and maintaining infrastructure truly make a tangible, positive difference.” Thompson explains that the company tries to bring services under one “umbrella” so clients don’t have to work with multiple vendors and contracts; instead, they can use Cruz as a “onestop-shop” for infrastructure needs on the North Slope.

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December 2014 | Alaska Business Monthly white globe and text

Keeping the Lights On and Power Going If the North Slope is as inclement and severe in weather patterns as described, infrastructure like power sources and electricity are literal lifelines to functionality and operations. TDX Power is an Alaskan-based company and wholly-owned subsidiary of Tanadgusix (TDX) Corporation, which is the Alaska Native village corporation from St. Paul Island in St. Paul, Alaska. TDX Power focuses on remote utility systems and renewable energy power

Cruz Steigers hauling a Cruz sleigh camp on the North Slope for a remote project. Photo courtesy of Cruz Construction

generation. The company operates three regulated electric utilities and one wholesale provider in Alaska. Employing thirty-four personnel statewide, the company manages utilities in Manley, Sand Point, Adak, and at its largest operation in Deadhorse on the North

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Slope. In terms of importance, imagine every single outlet and power source, from lighting and heating to industrialsized mechanical pumps, equipment, and man camps housing thousands of North Slope workers—and TDX is in control of and providing the entire power source. “The TDX owned and operated electric utility in Prudhoe Bay has been subject to a rapidly evolving business environment, particularly with the growth of operations and maintenance support services as the infrastructure on the North Slope approaches forty years of operations. A key factor for getting our utility business model right has been to understand and predict long-term growth and requirements of our clients. The rapid load of growth is motivating upgrades and retrofits to our existing generation facilities, and planning for generating capacity that parallels growth in electricity demand have been our primary goals, and we appear to be meeting the needs of our users successfully,” says John Lyons. Lyons is the general manager for the entire state’s TDX Power operations and has been dedicated to electric utility operations for more than thirty years. He began with TDX in 2003 as operations manager after the utility was purchased in Deadhorse and returned to the company in July of 2014 to manage the entire company along with the owner and president, Kord Christianson. TDX specializes in operation and maintenance of reciprocating, gas turbine, and rotating power generation machinery, along with plant controls, subsystems, switchgear, and electric distribution systems. In a remote site like Deadhorse, keeping the power on and stable is not only an essential service to vendors, but inextricably linked to commerce. Over the last twelve years TDX Power’s North Slope infrastructure services have included power generation facilities to meet its electric customers’ expectations. The company’s Deadhorse facilities house six employees with three staff members on duty at one time to operate plant and remote operations and to repair and maintain all power distribution

Alaska Business Monthly | December 2014 www.akbizmag.com

lines, generators, turbines, and support equipment. The staff has varied expertise, from turbine technicians to electric lineman similar to what Matanuska, Chugach, or Golden Valley Electric Associations have in urban markets. TDX acquired the Deadhorse utility in late 2002 when the peak utility load for all of Prudhoe Bay was just 2.6 megawatts. As business and development grew on the North Slope, so did the need for electricity and power, which meant TDX had to expand. In 2003 a new natural gas fired Cat 3516 genset rated at 3.1 megawatts was installed to replace a lesser efficient diesel generator. Between 2004 and 2006 a substantial upgrade was made to the distribution system to increase system reliability and to minimize system outages caused by aging underground cables. As load growth increased, more explorers and producers come to the region to search, discover, and drill for oil and gas. By 2008 the power grid elevated to 8 megawatts and the plant capacity increased with the addition of two Solar T60 natural gas combustion turbines totaling 10 megawatts of additional capacity. Fast-forward to 2014/15, and TDX realized that as the infrastructure in Deadhorse was increasing, even more service facilities were necessary, so the decision was made to upgrade to 15 megawatts in additional gas turbine capacity in 2012. The project timeline called for the new turbines to be brought to Deadhorse by 2014 and construction to occur in 2014. November 2014 the project was completed and went online without complication. Lyons attributed the success of the project to the staff at TDX Power in conjunction with contractors Conam Construction and Norgasco. Lyons is candid when it comes to power and meeting capacity, noting that Deadhorse is unique because it’s both a remote industrial camp and somewhat like a small city. The electricity provided by TDX Power supports all infrastructure and operations, so whether a small oil field support contractor/vendor or mobilization-demobilization service company, the critical electrical infrastructure keeps everything functioning so development isn’t hindered. “That’s a huge responsibility,” adds Lyons, “that TDX doesn’t take lightly.” R

The new 15 megawatt TDX Power electric utility plant at Deadhorse went online in November. Photo courtesy of Tanadgusix Corporation (TDX)

Tom Anderson writes from across Alaska. www.akbizmag.com

December 2014 | Alaska Business Monthly

OIL & GAS

Oilfield safety measures working well By Julie Stricker 88

n early October, a fire broke out on a natural gas platform eight miles offshore from Nikiski in cold, fastflowing Cook Inlet. Four workers on Hilcorp’s Baker Platform were evacuated and the fire, after a couple of minor flare-ups, was extinguished. No one was injured, no petroleum or gas was spilled, and only a small amount of debris was visible in the water, says Lori Nelson, spokeswoman for Hilcorp Alaska LLC. Early investigation pointed to an electrical malfunction in a heater in personnel quarters, she says. “From a response standpoint, it was basically a house fire offshore,” she says,

Alaska Business Monthly | December 2014 www.akbizmag.com

The BP-operated Central Gas Plant and Central Compression Plant were awarded the OSHA VPP star certification, which recognizes the facilities for outstanding employee safety and health programs. Photo courtesy of BP

and Hilcorp’s established evacuation plan and safety-related responses all worked as designed. Baker platform is one of twelve operated by Hilcorp in Cook Inlet. The four workers on the platform had access to fire response equipment, but it was quickly deemed they didn’t have the capability to fight the fire, so they were evacuated by helicopter. Brucker survival capsules were also on standby in case the helicopters couldn’t fly. Response vessels battled the blaze, Nelson says. At the time, only one well was active, which was shut down immediately according to Hilcorp’s emergency shutdown procedures. “The risk of hydrowww.akbizmag.com

carbon loss, from our perspective, was quite low,” Nelson says. “All those things worked just as they were supposed to.”

Basic Standards Thousands of people work in Alaska’s oilfields, which are concentrated in the Cook Inlet region and on the North Slope. Drilling for oil and gas involves heavy equipment, potentially explosive hydrocarbons, high-pressure lines and equipment, remote sites and, in Alaska, extreme weather conditions and frequent wildlife sightings. A focus on safety is no accident for major oil companies working in Alaska, such as BP Alaska.

Michael Barnes, BP vice president of safety and operational risk, says safety is a core value for the company, which has 2,100 employees in Alaska, two-thirds on the North Slope. It also employs about 6,500 contract workers. “(Safety) is our top priority,” he says. “It comes from our CEO all the way down to our workforce.” He estimates BP Alaska has roughly half the injuries as the oil and gas industries as a whole, “but every injury is too many,” Barnes says. “We still have incidents, but we use them as learning tools so that we can prevent them in the future,” he says. Since 2007, injuries to personnel have dropped 56 percent. “Every year we try to get better and better,” he says. While each operation and drill site has its own set of conditions and operating challenges, all of Alaska’s oilfield operators and contractors voluntarily agree to abide by one set of basic safety standards, the North Slope Training Cooperative (NSTC). Every worker and contractor must complete an eight-hour course and have all required weather and safety gear before reporting to the jobsite, says Mark Hylen, co-owner of Beacon Occupational Health and Safety Services in Anchorage. The company, which Hylen and his wife, Holly Hylen, started in 1999, conducts safety training for oil companies and contractors, as well as many others around the state and in the Lower 48. Beacon started out by providing occupational health services, such as hearing preservation in the workplace, Hylen says, and has grown exponentially over the years. “We are the largest provider of what’s called the North Slope Training Cooperative,” Hylen says. “It’s a one-day course. The Alaska Safety Handbook is basically the safety bible all the operators put together, so every employee that goes to the Slope has that with them.” Once on-site, workers will usually get more job-specific training, Hylen says, but the NSTC is “kind of your assurance that there’s at least a basic level of safety training for every employee that goes to work on the North Slope.” That’s important for new entrants to the Alaska market, too, he says. “A lot of these companies don’t realize how remote some of these places are. They rely on the contractors. The contractors

December 2014 | Alaska Business Monthly

know that as contractors they’re going to work from field to field, so it’s really the common denominator for people working on the Slope.”

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A 6-Pack of Safety The NSTC Unescorted 6-Pack Class includes six training modules, and workers get a card upon completion that allows them to move through the oilfield without escort. The modules include an introduction to the Alaska Safety Handbook; camp and safety orientation; environmental awareness and protection; hazard recognition; proper response to hazardous conditions; and use and care of Personal Protection Equipment. Workers or visitors who have not completed the NSTC training must be escorted by a qualified person at all times in the field or at a worksite. Some workers also must take a Hydrogen Sulfide (H2S) Awareness class, which takes about an hour. Refresher courses may be required in the case of major program changes or when the Alaska Safety Handbook is updated. Beacon works with companies all over the state, not just in the oilfields. Hylen says it has “just north of three hundred employees,” who provide standard drug and alcohol testing for companies and run nine medical clinics on the North Slope, as well as provide training on a wide variety of topics, such as Occupational Health and Safety Regulations, dealing with hazardous materials, CPR and first aid, driving standards, emergency response, and many others. Last year, Hylen says, Beacon had eleven thousand students in its classrooms on various topics. ‘Keep the Hydrocarbon in the Pipe’ In the field, BP’s Barnes views safety through two different lenses, the process side and the personal side. On a generic level, the biggest risks on the oilfield would be in the case of an explosion or pipeline leak, he says. “The simplest way we look at our industry is that the best way to manage our mission is to keep the hydrocarbon in the pipe,” he says. “We’ve put a lot of barriers in place to do that every day. A lot of people’s jobs are maintaining those barriers and making sure they’re effective.”

Alaska Business Monthly | December 2014 www.akbizmag.com

Many of BP’s systems are automated, and the company has a series of processes in place that systematically look at each one of them to make sure they’re working. “At an individual level, it’s a little more simple,” he says. BP wants each individual on each team to assess the risks on every task they do, every day. Because the majority of the jobs are inside in enclosed spaces, workers must maintain an awareness of their surroundings. “We train the teams to think of energy sources,” Barnes says. “If you can think of all the energy sources, like electrical or things falling, then you’ve got a good idea of what the risks are.” As an example, he says, if someone is going to change a light fixture in their home, they obviously would switch off the fuse and maybe put in an extra barrier like putting a lock on the fuse box so no one can turn it on by accident. “We use the exact same methodology.” Barnes says the company’s last line of defense is the individual workers. “Everyone in the field, they have the authority to stop the job,” he says. “If there’s anything in the task that we’ve asked them to do that they don’t understand, or if some-

thing changes or if there’s anything they’re uncomfortable with, they can stop it.” BP tries to encourage that behavior and strives to create a culture in which everyone in the workforce feels like they have the authority and are empowered to say, “Hey, let’s take another look at this,” he says. “In a way, the biggest hazard in the oilfield is making sure people have the courage to stop the job anytime they don’t feel something is right,” he says. Barnes says his biggest challenge is to foster that culture.

Weather and Other Considerations Weather, especially on Alaska’s North Slope, is another big consideration, which the required NSTC training covers. Every worker is required to have all of their Personal Protective Equipment when they go into the field, and that includes basic winter gear such multiple layers of clothes, parkas, bibs, and gloves and boots. The North Slope doesn’t get much snowfall, generally, Barnes notes, but winds can be ferocious, leading to drifting snow over the relatively flat land-

scape, generating wind chills that can fall to seventy or eighty degrees below zero. Barnes notes that the oil companies and contractors also have to keep a high level of environmental awareness because the North Slope is a fragile landscape. The long winter darkness and blowing snow can make travel hazardous, and road conditions are monitored closely and sometimes must be shut down to all but emergency personnel. “Once they get on the Slope to the particular facility or camp, they’ll get a unique induction for that camp,” Barnes says. Most workers are housed in dorm-like facilities with two to four people in a room with a bathroom down the hall. Workers will be shown where the emergency exits are located and reminded to have their Arctic gear in the truck in case they break down or weather conditions deteriorate. There is no family housing on the Slope and only workers are allowed in the camps—no spouses, girlfriends, boyfriends, or children. BP Alaska and other Slope companies have a zero tolerance policy toward drugs and alcohol. Barnes says that policy is rigorously en-

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The Unmanned Aerial System (UAS) technology has potential to improve safety, efficiency, and the reliability of BP’s Alaska North Slope infrastructure and maintenance programs. The first FAA-approved commercial use over land uses LIDAR (Light Detection and Ranging) 3D technology to map roads, infrastructure, and pipelines with the AeroVironment PUMA UAV. Photo courtesy of BP

forced with random testing and inspections when there is cause. Alaska’s North Slope is also home to a variety of wildlife, including caribou, musk ox, Arctic fox, which have been known to carry rabies, and polar bears, which will prey on humans. Working alongside the wildlife is one of the unique risks and responsibilities BP Alaska has on the North Slope, Barnes says. Workers are asked to keep an eye out for wildlife, and especially in the case of polar bears, to report the sighting immediately, Barnes says. BP then notifies the U.S. Fish and Wildlife Service of the sighting, which has jurisdiction over the animals. In the meantime, security workers try to keep the bear in sight at all times. “We usually just watch them to make sure our workforce and the bears have a nice, healthy distance between them,” he says. If the bears are hanging around, BP will move its workers to another site if possible so as not to disturb the bears. Sometimes the bears will have to be “hazed” and encouraged to leave the area. “Our basic policy is these animals effectively have the priority and the rightof-way,” Barnes says. “It’s our policy that no one can even take a picture of them so we can try to minimize the impact we have on the wildlife.” Quite a few bears wandered through the oilfields this summer, he says. The sighting reports help the agencies studying the animals, research that is supported by BP.

Alaska Business Monthly | December 2014 www.akbizmag.com

BP is also at the forefront of technology that could mean fewer feet are needed on the ground in very remote areas. In mid-June, BP received FAA approval to use commercial drones to do fieldwork in Alaska, such as surveying roads, pipelines, and oilfield facilities, according to BP Alaska spokeswoman Dawn Patience. The AeroVironment Inc. Puma drone uses LIDAR (Light Detection and Ranging) technology that can create 3-D maps of BP’s facilities. It is also testing sensors to be used to monitor pipelines, she says. In the future, the drones could also be used to monitor ice floes, and wildlife and respond to emergencies such as oil spills or search-and-rescue operations. BP’s focus on safety has resulted in four of its facilities being designated Voluntary Protection Programs by the Occupational Safety and Health Administration. Those facilities have been exempted from random workplace inspections for five years because of the extraordinary commitment to safety from management and workers in those plants, Barnes says. BP facilities designated as five-star VPP sites include the Central Power Station, Endicott Field facilities, and the company’s North Slope gas plants. “That’s really a demonstration of the commitment from the workforce to a culture of safety,” he says. “That puts us right at the top end of the industry.” R Julie Stricker is a journalist living near Fairbanks. www.akbizmag.com

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December 2014 | Alaska Business Monthly

OIL & GAS

Arctic Offshore Technology Advances Production and prospects in Chukchi and Beaufort OCS fields

By Mike Bradner

laska’s onshore North Slope still has billions of barrels of oil yet to be discovered, government geologists say, but the new fields expected to be found will be modest in size and expensive to develop, they say. With luck, this may be enough to keep the Trans Alaska Pipeline System (TAPS) operating at its current rate of five hundred thousand barrels day per day, one fourth of its original capacity. Will it ever be possible to increase the flow of oil through TAPS? What are the prospects for that?

One place where there could be large discoveries—the kind that will really make a difference in the utilization of the pipeline—is the coastal plain of the Arctic National Wildlife Refuge (ANWR). But politically ANWR seems to be locked up. Likewise, prospective oil-prone areas of the National Petroleum ReserveAlaska (NPR-A) are off-limits to drilling. These are coastal areas of northern NPR-A which parallel the “Barrow Arch,” the broad oil-prone geologic formation stretching across the northern

North Slope and where the large, prolific oil fields were discovered on state lands further east. Unfortunately, this area of northern NPR-A is also a prolific summer nesting area for migratory waterfowl. Keeping the drill rigs out of these areas has become a top priority for national environmental groups second only to ANWR.

OCS Prospects Increasingly, it is seen that the big flow of oil to rebuild TAPS’ oil flow, and additional gas for a future gas pipeline, will have to

Alaska Business Monthly | December 2014 www.akbizmag.com

A COFFEE TABLE PHOTO BOOK OF ALASKA’S NORTH SLOPE OIL PATCH

BP’s Northstar facility in the Beaufort Sea six miles offshore Prudhoe Bay in the Alaska Arctic has safely been producing oil since 2001.

come from offshore, mainly the federallyowned Chukchi and Beaufort seas Outer Continental Shelf (OCS) off northern Alaska. There are many large, untested geologic formations that are now known in these areas, and it is confirmed from previous drilling that there actually is oil and gas, although the discoveries, made years ago, were not economic to develop. Two oil discoveries were made in the eastern Beaufort Sea, east of Prudhoe Bay offshore of Point Thomson. One was “Hammerhead,” a find by Unocal Corporation. The other was “Kuvlum,” a discovery by ARCO Alaska. Neither was considered economic to develop at the time, but the confirmation that oil was there prompted Shell, which had also been active in the Beaufort Sea, to take another look at the region with the advantage of more modern technology. When the federal government held OCS lease sales in the www.akbizmag.com

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Beaufort in 2005 and 2007, Shell bid and acquired a substantial number of leases. It is also known that there is oil and gas in the Chukchi Sea. Shell found both when it drilled an OCS exploration well at the “Burger” prospect when that was drilled by Shell in 1990. Again, the find was not considered economic, and Shell filed away its plans but returned again to take another look. Shell bid for leases, with other companies, in a 2008 OCS lease sale. With new technology, such as threedimensional seismic imaging, that was unavailable earlier, Shell reassessed both the Beaufort and Chukchi Sea areas and decided they looked more promising, particularly the Chukchi Sea. Other companies agreed. ConocoPhillips, Statoil, and Repsol also bid along with Shell on Chukchi Sea leases when the federal government held a lease sale in 2008. ConocoPhillips and Statoil are working on drilling plans, but Shell has more or less been given the lead, particularly in dealing with a new regime in government permitting. It is now 2014. The Beaufort Sea OCS lease sales were held in 2005 and 2007,

and the Chukchi Sea lease sale in 2008. Shell’s ten-year primary lease term is up on some of its Beaufort leases in 2016 and in 2018 on some of its leases with the most promising prospects. But why are things taking so long? The rocks and the oceans are the same. Companies drilled in the OCS many times in the 1980s and 1990s. What has happened? Mainly, it is the political environment that has changed. That has become supercharged following the 2010 Gulf of Mexico blowout with its large oil spill. Generally, the blowout at BP’s Macondo well in the Gulf of Mexico led to a loss of confidence in the industry and its technology prowess. There has always been an extreme sensitivity in Alaska over the potential effects of an offshore spill in the Arctic, but Macondo brought things to a new level. Shell and other companies are hoping to restore public confidence by taking the lessons of the Macondo blowout to heart and investing heavily in new technology to convince the public, and the government, that oil and gas can be safely produced offshore.

Alaska Arctic Offshore Production Interestingly, what has been largely forgotten is that oil has been produced safely offshore in the Alaska Arctic for more than a decade. BP, which was criticized for its performance at Macondo, is also a major North Slope operating company and has been successfully producing from its offshore Northstar field, in the Beaufort Sea north of Prudhoe Bay, since 2001. There was actually offshore production much earlier, also by BP, beginning in 1986, from the Endicott field just offshore Prudhoe. Endicott is very close to shore, in very shallow, protected water and is connected by a manmade causeway to shore, but it is still built on two offshore artificial gravel islands and is an offshore field. Northstar, however, is considered a true Arctic offshore field because it is located beyond the protective barrier islands and is exposed fully to heavy, moving winter pack ice and intense summer storms. It was the first to actually produce, and it required development of a special gravel island design to

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protect it from ice, as well as the world’s first Arctic buried subsea pipeline to carry Northstar’s oil ashore. Northstar is six miles offshore, however, in contrast to Shell’s prospects that are farther out, fifteen to twenty miles offshore in the eastern Beaufort Sea and approximately sixty miles offshore at Shell’s Burger prospect in the Chukchi Sea. Northstar’s development in 1999 and 2000 didn’t attract the controversy that confronts Shell and other companies today in the Chukchi Sea, but at the time it was a tough sell to government regulators and the North Slope Borough, the regional municipal government. On behalf of its mostly Iñupiat residents who live in coastal villages, the borough is acutely concerned with oil spill dangers and effects on subsistence whaling. BP developed new technology for Northstar just as Shell is doing now for its prospects to assure itself the field could be safely developed and to answer the concerns of government regulators and the borough. One innovation was a unique gravel island design to protect the gravel production island from

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an override of thick ocean ice during winter. On the subsea pipeline, BP installed a new-technology spill detection system designed to detect very small quantities of leaking oil from the sixmile buried pipeline connecting Northstar’s production island to the onshore Prudhoe Bay pipeline system. It was the first time that system had been used outside Europe, where it was developed. Both innovations have worked very well in the thirteen years that Northstar has produced. The construction of the island, and particularly the subsea pipeline trenching and installation, which was done in winter, also required innovations. Since Northstar is in about forty feet of water, heavy equipment for the pipelaying had to be positioned on the sea ice, which was stable but still floating. Large slots were cut for the trenching and the lowering of pipe into the trench. The confidence in industry’s ability to work safely in the “nearshore” environment, gained through BP’s development of Northstar, was to benefit other companies as they developed other small offshore fields that were near

shore. Pioneer Natural Resources developed its small Oooguruk field with an artificial gravel island in shallow waters northwest of Prudhoe Bay, followed by Eni Petroleum with a similar field, Nikaitchuq. Pioneer’s field was recently purchased by Caelus Energy, an independent. The learning at Northstar will also be put to use as companies work to develop a similar offshore field at Liberty, an undeveloped oil deposit northeast of Prudhoe Bay. Liberty is about the same size as Northstar and is five miles offshore, about the same distance from shore, but it is inside protective barrier islands and in a more benign winter ice environment than is Northstar. A subsea pipeline, similar to Northstar’s, would bring Liberty’s oil ashore. Liberty was owned 100 percent by BP, but half of the project has now been sold to Hilcorp Energy along with three other North Slope fields owned by BP.

Meeting New Challenges Just as the industry’s Arctic technology learning has progressed for the nearshore, Shell and the other companies

December 2014 | Alaska Business Monthly

are planning new approaches and adaptations of existing offshore systems to meet new challenges. In 2012, when Shell finally received permission to return to the Arctic to explore, it had developed an Arctic adaptation of the undersea blowout “capping” system, similar to that developed by BP for the Macondo spill. Shell had also developed a special floating oil and gas separation and oil storage unit to be kept on standby while drilling was underway, but delays in its completion and testing prevented its use in 2012. For that reason Shell was allowed to only drill “top holes,” or partly-drilled wells that did not penetrate potential oil-bearing reservoir rocks. The oil-separation barge has now been completed, tested, and approved by federal regulators, so when Shell is able to return to the Arctic in 2015, as is planned, the barge will come with the support fleet. For its 2012 drilling Shell relied on tried-and-true technologies that had been used by it and other companies in previous years: a drillship and a unique,

conical drilling unit that had been built in earlier years by other companies planning Arctic offshore exploration. Both the drillship Noble Discoverer and the Kulluk, the conical drill vessel, had been upgraded to deal with Arctic conditions. Also, both had upgrades done to their emissions systems to comply with air quality permit requirements. The Kulluk, with its conical design, had essentially been built for the Beaufort Sea. Its design was to allow it to withstand ice forces easier than would be the case with the conventional vessel. Unfortunately, the design also made the Kulluk awkward to move in conventional waters, and after Shell used it to drill in 2012, the vessel went aground near Kodiak in a storm, while being towed, and was heavily damaged. The drillship Noble Discoverer Shell used in 2012 also encountered engine problems following its use in the Arctic, leading to the propulsion system being rebuilt after the drill season. Because of the grounding, the Kulluk is no longer available for drilling, so for 2015 Shell proposes to bring the drillship Noble Discoverer back to the Arctic along with

a semi-submersible, the Polar Pioneer, which is designed for use in the Arctic. Shell had originally intended to keep the semi-submersible on standby in Dutch Harbor while the refitted Noble Discoverer went north to drill, but the company has now decided to bring the semi-submersible to the Chukchi Sea to drill along with the drillship. The drillship and the semi-submersible are conventional technology, although the Discoverer has been adapted for the Arctic and the Polar Pioneer was to begin with to operate in far-northern conditions. Both have been specially modified for the Alaska Arctic offshore, such as the emissions-control equipment to meet stringent air quality standards. Ultra-low sulfur diesel is also used as fuel, which further reduces emission of pollutants. One new system proposed by Shell for use in 2015 is a remotely-operated subsea excavator to move sediments. The device will use a number of implements including an excavator bucket, a rotating auger, drill, and a rock hammer. The equipment is designed to operate on a 15 degree slope, and while it has not been used before for the purposes

Alaska Business Monthly | December 2014 www.akbizmag.com

Shell intends, the technology is commonly used for the trenching of sub-sea pipelines and cables. As challenges present themselves in the Arctic, industry has been able to adapt systems or, in many cases, invent new technology, just as occurred in the 1970s when TAPS was built. Those systems have proven themselves over time, as will new technologies for the Arctic. R

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RIGHT MOVES TelAlaska

Compiled by Russ Slaten environmental remediation contracts throughout the state of Alaska. Relativo holds a BA in Business and a Federal Acquisition Certification in Contracting.

PND Engineers, Inc.

Goggins

Louvier

Dave Goggins assumed the role of President and General Manager at TelAlaska, and Jason Louvier was promoted to Vice President of Operations at the same time. A TelAlaska employee for nearly thirty-five years, Goggins has worked in all of TelAlaska’s communities and thoroughly understands the company’s operations in those culturally diverse and geographically challenging areas of the state. Louvier has over seventeen years of experience in leadership and engineering roles in telecommunications, the last ten with TelAlaska. He is certified as a Project Management Professional with the Project Management Institute.

Fairweather

Fairweather LLC announced the appointment of Sally Marinucci as Business Developer. She work s closely with Fairweather’s ma na g e m e nt tea m to identify business opportunities, prepare proposals, an d over se e co nt ra c t performance. Marinucci earned a degree in business Marinucci administration from the Eller College of Management at the University of Arizona, Tucson.

Alaska Community Foundation

Gemmell

Maxwell

PND Engineers, Inc. announced the hiring of new employees in its Anchorage office. Michael Gemmell, PE, joined the firm as a Senior Civil Engineer. Gemmell is a graduate of the University of Connecticut’s School of Engineering and has six years of experience in construction field engineering. Kolberg Jake Maxwell, PLS, was hired as a Senior Land Surveyor. Maxwell holds an AAS degree in Geomatics from the University of Alaska Anchorage and has nine years of experience in field surveying, office data reduction, and drafting on a wide variety of projects statewide. Marcy Kolberg joined PND as a Geologist. Kolberg holds a Bachelor of Science degree in Geology from Western Washington University and has previous experience as a co-project geologist planning and monitoring drilling operations, core logging, and report writing.

The Salvation Army

US Small Business Administration

The US Small Business Administration named Marichu Relativo as the new Deputy District Director of the Alaska District Office. She has over twenty years of federal government procurement experience Relativo and has worked on major construction, service, and

Center. The assignment represents a return to Alaska for the longtime officer, who has more than twenty years’ past professional experience in the state. McWhorter last served in Alaska as the Divisional Social Services Secretary from 2000 to 2008 and as Emergency Services Director in Fairbanks from 1988 to 1991. Additionally, the Salvation Army Alaska Division added Sonya Senkowsky as the Senior Communications Manager. She has more than twenty-four years of multimedia communications experience. Senkowsky has published hundreds of newspaper and magazine articles and created or maintained dozens of websites for Alaskan writers, scientists, and organizations.

The Alaska Community Foundation welcomed Emily Bass and Sharon Samuels to its staff. Bass joined the Alaska Community Foundation as Program Officer of Programs and Grants. She brings more than twenty-five years of experience in the nonprofit sector. Bass holds a master’s degree in social work from the University of Alaska Anchorage. Samuels joined the Alaska Community Foundation as Executive Assistant/Board Liaison. After many years in tourism on several out-of-state adventures, Samuels settled in to the Alaska non-profit sector as a longtime volunteer, and later, as Program Associate for Four Valleys Community School Program.

BDO USA, LLP

BDO USA, LLP announced that Lia Patton was admitted to the firm’s partnership in Anchorage. She has fifteen years of experience in auditing and accounting, focusing on employee benefit plans, alternative investments, and federal and state single audits. Patton received a BBA in Patton Accounting from the University of Alaska Anchorage.

Foss Maritime

McWhorter

Senkowsky

The Salvation Army Alaska Division welcomed Major Sherry McWhorter as new Administrator of the Clitheroe

Foss Maritime announced that Paul Gallagher will be rejoining the Foss team to work in the commercial services group on major transpor tation project opportunities. He brings more than twenty-five years of experience and during his career he has Gallagher been involved in all aspects

OH MY! 100

Alaska Business Monthly | December 2014 www.akbizmag.com

RIGHT MOVES of maritime operations and cargo transportation in Alaska, Canada, and the Lower 48. Gallagher earned a BS in Nautical Science at Maine Maritime Academy.

Alaska State Fair

T h e A l a sk a St ate Fa i r announced the selection of its new General Manager Jerome Hertel, who will assume the role on December 8. Prior to the Alaska State Fair, Hertel was the executive director of the South Dakota State Fair and served as the Hertel event director/operations manager at the Sioux Empire Fair Association. Hertel holds a bachelor’s degree in business administration from the University of South Dakota.

Compiled by Russ Slaten Vue completed her residency in pediatrics at the University of Colorado School of Medicine in Aurora, Colorado, and then was a pediatric gastroenterology fellow at the university, completing her fellowship in 2014.

Alaska State Hospital and Nursing Home Association

Becky Hultberg took on the role of President/CEO of the Alaska State Hospital and Nursing Home Association. Hultberg joined the Association in January as Senior Vice President after stepping down as Commissioner of the Department of Administration for Governor Sean Parnell. She previously served as press secretary for Governor Frank Murkowski, staff assistant for the Alaska Congressional Delegation, and regional director of communications and marketing for Providence Health and Services Alaska.

MSI Communications

Coffman Engineers

Coffman Engineers promoted C. Dan Stears to Vice President. As a principal of the Anchorage office Corrosion Department, he has more than thirty years of experience in pipeline, tank farm, and marine facilities corrosion control. Stears is technically competent in cathodic protection and coatings activities and proficient at preparing and administering construction documents and contracts.

Providence Health & Services Alaska

Gough

Vue

Cynthia Gough, RN, MS, NE-BC, accepted the role of Operations Administrator for Providence Health & Services Alaska. Gough will oversee Behavioral Health Services, critical access hospitals, long-term and transitional care, assisted living facilities, Providence Imaging Center, and select joint venture operations. Gough earned a Bachelor of Science in Nursing from the University of Alaska Anchorage and a Master of Science in Counseling Psychology from the University of La Verne. Dr. Padade Vue joined Providence Medical Group Pediatric Gastroenterology. She earned her doctorate from the Tufts University School of Medicine in Boston.

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Hayes

Sellars

MSI Communications announced the addition of new Account Managers Jeremy Hayes and Kari Sellars and Audio/visual Editor Jamin Conn. Hayes has worked at advertising and marketing agencies producing work for some of Alaska’s largest and most respected corporations since 2008. Hayes Conn earned a bachelor’s degree in marketing and business administration with a minor in public relations from UNLV. Sellars has ten years of experience in tourism marketing and event planning. Previously, she represented the Alaska Seafood Marketing Institute for its national public relations account. Sellars is a University of Alaska Anchorage graduate in journalism and public communications. Conn comes to MSI from the movie industry, where he worked on TV shows like “Deadliest Catch” and several Hollywood feature films. He has manned a camera in subzero temps on the North Slope and while hanging out of a moving helicopter high above Cook Inlet.

NORTECH, Inc.

NORTECH, Inc. announced the addition of Randy Williams, PE, to the Energy/ Mechanical Engineering team in the Anchorage office. He brings twenty years of experience performing HVAC design and energy efficiency strategy and analysis and is ASHRAE-certified in Williams Commissioning and Building Energy Assessment. Williams will provide third-party commissioning, energy assessment and modelling, and design and management of energy efficiency upgrades.

Denali OB-GYN

Denali OB-GYN Clinic announced the addition of Sandy Mahoney, a Board Certified Family Nurse Practitioner. Her career includes more than a decade of providing primary care for adults. Mahoney specializes in caring for women experiencing high-risk pregMahoney nancies. Mahoney earned an MS in Nursing from the University of Alaska Anchorage.

NANA Management Services

NANA Management Services announced the hire of Patrick Lamboy as Vice President of Sales. With twenty-three years of sales and sales leadership experience, Lamboy most recently worked as a regional sales director of Sodexo USA. He will provide direction for NANA Management Services sales and business Lamboy development efforts. Lamboy earned a BS and MS in Business Administration from the University of Phoenix.

Aleut Corporation

Aleut Corporation welcomed Cara Fairbanks as their new Human Resources Director. Fairbanks graduated Cum Laude from the University of Rochester in New York in Management Studies. Fairbanks started her HR career at Hawaiian Vacations and then worked with Northrim Benefits Group, Citibank in London, England, and was CEO of her own consulting business, White Water Wellness LLC. R

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INSIDE ALASKA BUSINESS

Gray Line Alaska

ray Line Alaska launched its 2015 product lineup of statewide tours, packages, and day trips, including a new self-drive package and a change to the Escorted Great Land Tour itinerary. New for 2015 is the Yukon by Car self-drive tour. This seven-day, sixnight package kicks off in Whitehorse, Canada, and explores the Yukon and parts of Southeast Alaska with stops in Skagway and Dawson City, towns steeped in Klondike Gold Rush history and culture.

PRSA Alaska

ifteen past presidents of the Public Relations Society of America (PRSA) Alaska Chapter gathered during the August CommEx luncheon to honor Founding Chapter President Bruce Pozzi, APR, Fellow PRSA, with the Lifetime Achievement Award for his work in the profession and PRSA. Since starting the Chapter in 1977, Pozzi has served on the Chapter and national boards as well as on almost every committee created. He is a mentor to nearly every past president and serves as advisor for many activities. Pozzi was the first Alaskan selected for the College of Fellows in 1993. Pozzi began his career at Murray, Kraft and Rockey (now Bradley Reid) and later opened his own firm, Bruce Pozzi Publication Relations, where he has represented Alaska clients since. He’s won numerous awards for his work and is well known for his sage counsel, both to companies and professionals. Len McLean, another Chapter founder and

Compiled by Russ Slaten

namesake for the Chapter’s scholarship, said he was “very happy the Chapter was recognizing Bruce for this award.” Eric Peterson, APR, Fellow PRSA, also notes he was “working with Bruce during a time when TV shows were only broadcast on a three-day delay in Anchorage.” Today, Pozzi continues to offer his counsel to clients and to the Chapter. He possesses a wealth of knowledge about Alaska and the profession and is more than willing to discuss that with anyone who will listen.

Sealaska Heritage Institute

he permanent, monumental art in a cultural center under construction in Juneau will feature master works by some of the most renowned Tlingit, Haida, and Tsimshian artists in the world, Sealaska Heritage Institute (SHI) announced in September. The cedar-clad exterior of the Walter Soboleff building, built by SHI, will feature huge, forty-foot panels designed by Haida artist Robert Davidson that will give the center a dramatic façade unlike any other structure in Southeast Alaska. Upon entering the main foyer, visitors will see an enormous carved-andpainted Tsimshian clan house front by Tsimshian artist David A. Boxley. An interior clan house space will showcase a spectacular carved glass house screen flanked by two house posts depicting Eagle and Raven warriors made by Tlingit glass artist Preston Singletary. Singletary’s piece was supported in part by a grant from ArtPlace America. In addition, Singletary’s piece was

funded by an anonymous donor, who also funded the pieces by Davidson and Boxley. The grand opening for the building will be spring 2015.

USDA

SDA-Rural Development announced that five Alaska businesses have been selected for Rural Energy for America Program Projects and Awards totaling $142,999. The Copper Valley Telephone Cooperative, Inc. received $47,325 for a small solar array. Hub of Alaska, Inc. was awarded $31,067 to fund a large solar array. New Caribou Joint Venture, doing business as Caribou Lodge, received $12,500 for a woody biomass boiler conversion. SAF DEV LLC was awarded $2,500 for a small solar array. Superior Pellet Fuels LLC was awarded $49,607 for a woody biomass log condenser. The funding is provided through USDA-Rural Development’s Rural Energy for America program and is contingent upon the recipients meeting the terms of the loan or grant agreement.

GCI

eneral Communication, Inc. (GCI) joined the American Television Alliance to work for retransmission consent reform. Retransmission consent fees are payments cable, satellite, and phone providers make to broadcasters to carry their signals. GCI is concerned with the pace of rising fees being sought by broadcasters, says GCI General Counsel Tina Pidgeon. GCI’s wireless network grew when a launch with a national wireless opera-

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INSIDE ALASKA BUSINESS tor provided for the nation’s first LTE roaming partnership. While roaming agreements across the country are nothing new, this is the first of roaming on LTE, a network’s top speeds. The new deal allows GCI wireless subscribers access to LTE from Fairbanks, Alaska, to Miami, Florida. GCI announced that as part of its quest to re:DEFINE broadband in Alaska it will be bringing fiber re:D broadband to Juneau and Fairbanks before the end of 2016. GCI says this one-gigabit broadband service will not only be the fastest Internet available in Alaska but will be comparable to the fastest speeds available in the entire United States.

ConocoPhillips Alaska

onocoPhillips Alaska signed engineering contracts with three firms to support its North Slope business. These five-year contracts with URS Corporation, CH2M HILL, and ASRC Energy Services are intended to support engineering and procurement services for dozens of projects at Kuparuk, Alpine, and Cook Inlet over the life of the contracts. The contracts will support new projects like 1H NEWS as well as maintenance projects and expansion of infrastructure to accommodate increased drilling, ConocoPhillips Alaska says.

out the Anchorage area. Johannes says he is excited to open a new office for a firm that has built a reputation on serving individual investors.

Donlin Gold

ovaGold Resources, Inc. released updates for its flagship 50 percent owned Donlin Gold project in Alaska where it continued to advance the Donlin Gold permitting process by compiling and submitting all of the outstanding environmental data and analysis to the US Army Corps of Engineers, the lead agency for the Donlin Gold Environmental Impact Statement. NovaGold also launched a collaborative effort with the National Fish and Wildlife Foundation to protect, conserve, and restore Alaska’s fish and wildlife. Over the third quarter NovaGold secured an extension of the Donlin Gold Surface Use Agreement with the Kuskokwim Corporation, which now coincides with the terms of Calista Corporation’s exploration and mining lease and covers the entire projected mine life. NovaGold visited twenty-six villages and fish camps through September as part of the Donlin Gold team’s active involvement with the communities of the Yukon-Kuskokwim region, where the project is located.

Edward Jones

an Johannes announced in September that he opened an Edward Jones office in East Anchorage. Johannes has been working with Financial Advisor Tim Murray to serve investors through-

Compiled by Russ Slaten

Ocean Renewable Power Company

cean Renewable Power Company (ORPC) concluded its highly successful RivGen Power System demonstration project in the Kvichak River at

the remote village of Igiugig, Alaska, 275 miles southwest of Anchorage on the southwest shores of Ilamna Lake. The twenty-five kilowatt system is designed to reduce and stabilize the cost of power in remote communities located near rivers and tidal estuaries that currently use diesel fuel for power generation. ORPC says the successful demonstration of the self-deployment and power generation features of Alaska’s system and the lessons learned will be invaluable as it completes the commercial design of RivGen next year. The Igiugig Village Council says it is impressed that the RivGen system was installed with local equipment, provided significant power to its micro-grid, and coexisted with the fish habitat that the Kvichak River is so famous for. The RivGen Power System Commercialization Project was partially funded by the Denali Commission and Alaska Energy Authority.

Alaska Airlines Center

resh off its grand-opening festivities, the University of Alaska Anchorage’s Alaska Airlines Center Raven’s Nest walking track opened to the public in September, and its Varsity Sports Grill opened in October. Located atop the balcony level of the new facility, the Raven’s Nest track will be open Monday through Friday, though closed during all Seawolf events at the Alaska Airlines Center and on days that the arena is being prepared for concerts or other events. Varsity Sports Grill, located on the mezzanine floor, is managed by NMS

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INSIDE ALASKA BUSINESS Food Services, is open Monday through Saturday, and closed on Sundays as well as during some events on a to-be-determined basis. In this upscale sports pub, Executive Chef Matt Little Dog and his team of chefs serve up specialty salads, burgers, Alaska-flare entrees, and a variety of artisan pizzas. Some of the most exciting restaurant features include an open display kitchen and seating at the food bar, a state-ofthe-art, wall-mounted wine distribution system allowing guests to purchase a single glass or sample a flight of wines, and an extensive selection of Alaska craft beers. There is a spectacular view from floor-to-ceiling windows overlooking the arena floor and several large flat-screen televisions for event viewing.

Kuukpik Corporation

ore than one hundred people gathered in October to break ground for a new sixty thousandsquare-foot office building in Midtown Anchorage at the two-acre project site on 36th Avenue, located between the Alaska Communications flagship store and Stewart Title of Alaska. Kuukpik Corporation, the village corporation for the community of Nuiqsut, will own the building and occupy ten thousand square feet of space for its Anchorage offices. Approximately fifty thousand square feet of space will be available for lease to other tenants. The six-story building will offer panoramic views of the Chugach Mountains and the Alaska Range. Building amenities include a cultural area on the first floor, a fitness room, and a generous outdoor plaza area. In addition to

Compiled by Russ Slaten

about thirty covered parking spaces on the first floor, the facility will offer bicycle parking and direct access to public transportation. Construction of the building began this fall and is scheduled for completion in December 2015. The project team includes commercial real estate developer Pfeffer Development and design-build team Criterion General and kpb architects.

Alaska Communications

ore than twenty-two thousand State of Alaska employees will have increased network bandwidth and faster Internet thanks to the State of Alaska awarding Alaska Communications a five-year contract for Wide Area Network (WAN) services, including network management, as part of the state’s core telecommunications Request for Proposal. Under this agreement, Alaska Communications will provide secure and dedicated network connectivity between the state’s core locations in Anchorage, Juneau, and Fairbanks as well as high-speed, high-capacity Internet. Alaska Communications competed against local and national carriers through the best value procurement process where bidders competed not only on price, but on overall value, including competency, network quality, and past performance. The company demonstrated its work with clients such as the Anchorage School District, NANA, Princess Cruises, Old Harbor Native Corporation, and the Municipality of Anchorage. Alaska Communications serves these and other clients with its Carrier Ethernet 2.0

network certified by the Metro Ethernet Forum, a global industry alliance that defines carrier-class Ethernet networks and services, which means the company meets international standards for its business Ethernet services. State employees will benefit from their core transport provider by receiving a network sized to its needs that provides a high-capacity, secure, reliable and express backhaul and Internet access system needed to operate at peak performance.

APICDA

leutian Pribilof Island Community Development Association (APICDA) opened a fuel facility in False Pass in October. The False Pass Fuel Company will supply fuel for local heating and road vehicle needs, the APICDA-owned Bering Pacific Seafoods plant operations, the City of False Pass, and the fishing fleet. False Pass Fuel Company operates six tanks with a combined holding capacity of 210,000 gallons of diesel, stove oil, and gasoline. The fuel tanks sit conveniently near the False Pass city dock, which will be used for fuel sales to fishing vessels in addition to a land distribution site. False Pass, located on the eastern side of Unimak Island on Isanotski Strait in the Aleutian Islands, 646 air miles southwest of Anchorage, is an important refueling stop for Gulf of Alaska, Bristol Bay, and Bering Sea fishing fleets. APICDA says the fuel facility operation provides jobs for local residents in a region that is in need of dependable employment opportunities and offers a safe and reliable supply of fuel. R

• General Contracting • Marine Infrastructure • Design Build

Dutch Harbor - Unalaska, Alaska

www.pacificpile.com I (907) 276-3873 104

620B East Whitney Road I Anchorage, AK 99501

Alaska Business Monthly | December 2014 www.akbizmag.com

AGENDA

Compiled By Tasha Anderson is to inspire and prepare young people to succeed in a global economy. Annual fundraiser inducts Laureates and showcases programs. juniorachievement.org

December ALASBO Annual Conference

December 7-10—Hotel Captain Cook, Anchorage: Annual conference of the Alaska Association of School Business Officials. alasbo.org

Alaska-China Business Conference

December 9—Millennium Alaskan Hotel, Anchorage: The 10th Annual Alaska-China Business Conference will be the place to learn about business opportunities, challenges, and the resources that are available to you, when considering a future where China will be playing an important role in your business. wtcak.org

Alaska Bird Conference

December 9-11—Baranof Westmark Hotel & Conference Center, Juneau: Every two years, researchers and managers convene to report on all aspects of bird biology, management and conservation in Alaska. alaskabirdconference.org

February Alaska Forum on the Environment

January Meet Alaska

January 8-9—Dena’ina Center, Anchorage: Hosted by the Alliance, this annual energy conference includes educational forums and a tradeshow. alaskaalliance.com January 19—Anchorage: Scientists, researchers, and students from Alaska, the Pacific Northwest, and beyond come to communicate research activities in the marine regions off Alaska. alaskamarinescience.org

January 23-25—Dena’ina Center, Anchorage: Response to Intervention (RTI) is a multi-tiered approach to help struggling learners. The small and rural schools preconference will take place on Friday, January 23. Fourth annual RTI conference of the Alaska Staff Development Network. asdn.org/2015-alaska-rti-conference

Anchorage AEYC Early Childhood Conference

January 28-31—Hilton Anchorage Hotel, Anchorage: Join other early childhood community members to learn new strategies, hear about the latest research, try out a few practical techniques, and discover new tools and resources to help face any challenge. anchorageaeyc.org

Alaska Peony Growers Association Winter Conference

January 29-31—Westmark Hotel, Fairbanks: The Alaska Peony Growers Association is a membership organization comprised of commercial peony growers as well as those interested in the emerging peony industry in Alaska. alaskapeonies.org

Junior Achievement’s Alaska Business Hall of Fame

January 30—Dena’ina Center, Anchorage: Junior Achievement of Alaska is a nonprofitnonprofit organization whose purpose

www.akbizmag.com

Animal Behavior Society Annual Conference

March 3-5—Fairbanks: Held every year in Fairbanks, this conference brings together farmers, ranchers, researchers, extension agents, and members of the agriculture support industry to find ways to improve the agriculture industry in Alaska. uaf.edu/ces/ah/sare/conference March 6-8—University of Alaska Fairbanks, Fairbanks: This year’s theme is “Troth Yeddha’ Roots: Connecting The Place With The People.” alaskanativestudies.org

June 21-25—Dena’ina Center, Anchorage: The world’s premiere conference in MEMS sensors, actuators and integrated micro and nano systems. transducers2015.org

July Rocky Mountain Mineral Law Institute

April APOA Crime Conference

April 20-24—Anchorage Sheraton Hotel & Spa, Anchorage: Hosted by the Anchorage chapter of the Alaska Peace Officers Association. apoaonline.org

AFCCA Annual Child Care Conference

April 24-25—BP Energy Center, Anchorage: The theme of the Alaska Family Child Care Association’s 2015 conference is “For the Love of Kids.” alaskafcca.org

April 24-26—Hotel Captain Cook, Anchorage: NEA Alaska, an affiliate of the National Education Association, is an organization with over twelve thousand members who work in Alaska’s public schools. neaalaska.org

AWWMA Annual Conference

July 23—Dena’ina Center, Anchorage: A one-day trade show for the snow and ice management industry brought to Alaska by the Snowfighters Institute. This year’s conference will include special educational conferences targeting snow contractors, property managers, and municipalities and “Lunch and Learn,” round table discussions facilitated by sponsors and industry leaders during a buffet lunch. alaskasnowsymposium.com

Annual Strategic Lending Conference

May

July 16-18—Dena’ina Center, Anchorage: The Rocky Mountain Mineral Law Foundation is a collaborative educational nonprofit organization dedicated to the scholarly and practical study of the law and regulations relating to mining, oil and gas, water, public lands, energy, environmental protection, and other related areas. rmmlf.org

Alaska Snow Symposium

NEA Alaska Spring Conference

June 15-19—Anchorage: The conference describes the entire healthcare system created, managed, and owned by Alaska Native people to achieve physical, mental, emotional, and spiritual wellness. It includes a pre-conference workshop for building effective relationships, general workshops and break-out sessions, evening networking, and a cultural reception. southcentralfoundation.com

International Conference on SolidState Sensors, Actuators, and Microsystems

Alaska Native Studies Conference

June 10-14—Anchorage: The Animal Behavior Society was founded in 1964 to promote the study of animal behavior in the broadest sense, including studies using descriptive and experimental methods under natural and controlled conditions. abs2015.org

Southcentral Foundation 2015 Nuka System of Care Conference

Sustainable Agriculture Conference

Alaska RTI Conference

February 21-24—Hotel Captain Cook, Anchorage: This is the educational technology conference of the Alaska Society for Technology in Education. This years’ theme is “Game On! Games in Education; Game Based Learning; Gamification.” aste.org

May 23-27—Westmark Fairbanks Hotel & Conference Center, Fairbanks: This is the international symposium for the Application of Computers and Operations Research in the Mineral Industry. apcom2015.org

June

March

Alaska Marine Science Symposium

February 9-13—Dena’ina Center, Anchorage: The Alaska Forum on the Environment is Alaska’s largest statewide gathering of environmental professionals from government agencies, nonprofitnonprofit organizations and for-profit businesses, community leaders, Alaskan youth, conservationists, biologists, and community elders. akforum.com

ASTE Annual Conference

E nd Calendar Year 2015 B egins

APCOM 2015

May 4-7—Hotel Captain Cook, Anchorage: The Alaska Water Wastewater Management Association is dedicated to the stewardship of the environment and the protection of public health. awwma.org

July 23-26—Anchorage: One of the CU Conferences, which educates the Credit Union Community, this conference provides information such as generating loans across all age groups and what types of loans can increase earnings. cuconferences.com

December 2014 | Alaska Business Monthly

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ALASKA THIS MONTH By Tasha Anderson

DINING

Alaska Food Banks

igher utilities bills and an expectation of holiday gifts and treats can make December a particularly hard month for those on tight budgets. There are several food banks in Alaska to give a helping hand to those who need a boost. And for those with a little room to spare, itâ&#x20AC;&#x2122;s a great time of year to think about ways to help community, neighbors, and friends. The Southeast Alaska Food Bank is located at 10020 Crazy Horse Drive in Juneau. It distributes food free of charge on Saturday mornings starting at 8:30 a.m., ending when all of the food is gone. The Southeast Alaska Food Bank accepts donations of money, food, services, and time. Its website is seakfoodbank.org. The Fairbanks Community Food Bank is located at 725 26th Avenue in Fairbanks. There are a variety of ways to donate: online through its website, fairbanksfoodbank.org; through Pick.Click.Give; over the phone; through email; by mail; in person; through United Way; or interested persons can shop through AmazonSmileâ&#x20AC;&#x201D;0.5 percent of any purchases made will then be donated to the Fairbanks Community Food Bank. The Food Pantry of Wasilla is located at 501 E. Bogard Road and operates Monday through Friday from 10 a.m. to 1 p.m. Its website, foodpantryofwasilla.org, keeps a list of current food needs and, except the executive director, is staffed entirely by volunteers. Monetary donations can be made through the website and Pick.Click.Give. The Kenai Peninsula Food Bank is located at 33955 Community College Drive in Soldotna. Donations can be made online through PayPal on its website kpfoodbank.org or by cash, check, or money order. In addition to offering food, the Kenai Peninsula Food Bank offers classes on gardening, butchering, nutrition, and budgeting. The Food Bank of Alaska, foodbankofalaska.org, is located at 2121 Spar Avenue in Anchorage. Donations can be monetary, service, food, or in-kind. foodbankofalaska.org R

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ALASKA THIS MONTH By Tasha Anderson

TRAVEL

Photos by Kathi Riemer

Julebukking

Above: A line of guests, going out onto the sidewalk, waiting to enjoy the treats at First Bank at last year’s celebration in Petersburg. Left: Hayley, an employee of Lee’s Clothing, at the 2013 Julebukking.

“

ulebukking is a Norwegian custom that people brought here from Norway when they settled in Alaska. Traditionally on Christmas Eve, they would go from house to house and eat goodies and wish everyone a happy Christmas,” says Marilyn Menish-Meucci, manager of the Petersburg Visitor and Information Center. In Petersburg, however, the tradition has morphed slightly as local businesses set out goodies as a show of appreciation and Christmas cheer for their customers. “It’s a means of thanking people in Petersburg for their business all year,” she says. Julebukking no longer takes place just on Christmas Eve; it has grown to take place for up to four or five days before Christmas. “It’s kind of spread out, so you can get in on each celebration,” Menish-Meucci says. The local newspaper publishes a Julebukking schedule for various businesses, and it’s also announced through the local radio. “On Christmas Eve day there will probably be about five or six businesses,” she says. “It’s like a little smorgasbord—sweet and savory. But there’s always pickled salmon, pickled herring, pickled black cod, plus Scandinavian foods.” The Sons of Norway, a group that shares and promotes their Norwegian heritage, will have their own Julebukking celebration in the Sons of Norway Hall on December 21 in the afternoon, and it promises to be very festive. Part of the air of festivity comes from the fact that college students and other family members are in town. “The college kids have come home, and you don’t have to worry that you will miss someone because you can just go downtown and wander around,” Menish-Meucci says. “You see everybody, and you can chat for a long time or not. It’s a good time to connect with people who are home for Christmas.” petersburg.org R www.akbizmag.com

Fairbanks Anchorage

Skagway

Kenai Haines Whittier Sitka

Kodiak

Petersburg

Juneau

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December 2014 | Alaska Business Monthly

107

ALASKA THIS MONTH By Tasha Anderson

ENTERTAINMENT

Sitka Artisans Market and Holiday Craft Party Right: Alaskan artist Cara Jane Murray works on a mural.

Photo courtesy of Sitka Arts Council

Below: A young boy makes fish prints at the Holiday Craft Party. Photo by Sarah Lawrie

his year the Greater Sitka Arts council is combining two of its annual holiday events, the Sitka Artisans Market, in its fourteenth year, and the Holiday Craft Party, which has been going on for more than twenty years. “You wouldn’t believe how busy this town is,” says the Greater Sitka Arts Council Executive Director Sarah Lawrie. “It seemed like a natural fit to have the two events together, both for my own sanity and also for the community,” she laughs. The Artisans Market is a juried market of about thirty-five vendors, meaning that the Arts Council is selective when looking at vendor applications. “We’re looking for handcrafted, distinctive, high-quality, original work created by Alaskan artists,” Lawrie says. New this year is a community mural painting activity. Funded by a small grant from the Greater Sitka Legacy Fund, local, contemporary artist Cara Jane Murray will host a design workshop Friday night, and using designs from the workshop, she’ll draw an outline to be filled in by the community on Saturday. Crafts at the Holiday Party include fish prints, raku bowls, holiday cards, holiday ornaments, gingerbread houses, and bentwood boxes demonstrated by an Alaska Native artist. New this year, the market and party will be in Allen Hall, a newly renovated building that’s part of the Sheldon Jackson College, which was gifted to the Sitka Fine Arts Camp. “I think the location is really going to add something special to it this year, too,” Lawrie says. Both events have free admission. The Artisans Market and Holiday Craft Party take place Friday, December 5, from 4:30 p.m. to 8 p.m. and Saturday, December 6, from 10 a.m. to 6 p.m. thinkartthinksitka.com R

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Alaska Business Monthly | December 2014 www.akbizmag.com

EVENTS CALENDAR 2-23

Compiled by Tasha Anderson

ANCHORAGE

Christmas in Spenard

GIRDWOOD

Ski Patrol Auction

Presented by Mr. Whitekeys, Christmas in Spenard is two hours of Alaskan musical comedy; a live band; stunning singers and dancers; a high-definition, multi-media presentation; and “approximately three minutes of sentimental holiday fluff.” Tap Root, Monday through Thursday nights, 6:45 p.m. myalaskacenter.com

Ten (un)willing patrollers from Alyeska’s Ski Patrol will be featured and each live auction winner will win an early morning ski with their patroller of choice. Auctioneer extraordinaire Paul McGuire will be leading the charge. Proceeds benefit the Alyeska Patrol Avalanche Canines. Sitzmark Bar & Grill, 8 p.m. alyeskaresort.com

5-14

Skiers and snowboarders hike up the slopes of Mount Alyeska with torches attached to bamboo poles, lighting the mountain. One of the largest firework displays in Alaska follows the parade. Alyeska Resort, 8 p.m. alyeskaresort.com

Anchorage International Film Festival

This is a provocative showcase of some of the best independent film and video from around the world. And after thirteen fun-filled years, the Festival is gearing up for its biggest, most well-orchestrated event ever. Various locations and times. anchoragefilmfestival.org

AMCC’s Rocking 20th Anniversary Bash

Artist Bazaar

The Alaska Marine Conservation Council is celebrating its 20th anniversary with stories from AMCC members, current and former board members, and staff, followed by live music by local bands. Snow Goose Restaurant, 6:30 p.m. akmarine.org

Explore more than fifty Alaska Native artists’ tables with art from throughout the state. Artists have a wide variety of beading, baskets, ornaments, jewelry, carvings, and more. Alaska Native Heritage Center, 10 a.m. to 5 p.m. alaskanative.net

Christmas Village

Not quite last minute, this one-stop shopping opportunity for Christmas gifts is certainly cutting it close. The show includes Alaskan-made and imported gifts. Dena’ina Center, 10 a.m. to 6 p.m. anchoragemarkets.com

EAGLE RIVER

Annual Solstice Lantern Walk

This traditional candle-lit procession celebrates winter solstice. Participants bring finger foods or desserts to share and can bring or borrow a lantern. There will be a bonfire and heated yurt to warm up. Children can register for classes that will take place December 13 and 20 to make lanterns for the walk. Eagle River Nature Center, walk is at 6 p.m. ernc.org

FAIRBANKS

Winter Solstice Celebration

The celebration features fireworks that can’t be seen in the summertime, musical and artistic events downtown, and shopping for made in Alaska items, while viewing holiday decorations and light posts enamored with charming, lit-up snowf lakes. Downtown Fairbanks, various times. downtownfairbanks.com

www.akbizmag.com

Torchlight Parade & Fireworks Display

KETCHIKAN

Enchanted Forest Gala and Auction

Ketchikan Chamber of Commerce annual fundraiser; attendees bid on a tree adorned with gifts and other treasures. The evening includes dinner and the tree auction. Ted Ferry Civic Center, 6:30 p.m., auction begins at 8 p.m. city.ketchikan.ak.us

NOME

Fireman’s Carnival

Annual fundraiser for the volunteer fire department. Activities include games, concession stands, bingo, cake walks, and raffle prizes. Nome Recreation Center, 7 p.m. visitnomealaska.com

6-7

NORTH POLE

Winter Festival

The festival is comprised of fireworks, a holiday bazaar with fifty vendors, tree- and candle-lighting ceremonies, caroling, and the crowning of the North Pole King and Queen. North Pole Plaza Mall, various times. northpolechamber.us

Fire & Ice New Year’s Celebration

This is a fun, family friendly and free event in Town Square. Enjoy live music, street performers, food, fireworks, and more. Anchorage Town Square, 5 p.m. to 8 p.m. anchoragedowntown.org

12-14

PALMER

Colony Christmas

An old-fashioned country Christmas celebration, including five craft fairs with nearly two hundred vendors, horse-drawn and reindeer sleigh rides, pictures with Santa, fireworks, a gingerbread competition, the Parade of Lights on Saturday starting at 5 p.m., and the Colony Christmas Triathlon. Downtown Palmer, various times. palmerchamber.net

TALKEETNA

Wilderness Woman Contest and Bachelor Auction

Women compete to prove their wilderness skills. Bachelors put themselves on the auction block. A ball follows the auction during which the Wilderness Woman is crowned. When the ball is over at midnight, the Talkeetna Lodge opens for breakfast, which is then served until 2 p.m. the following day. Sheldon Community Arts Hangar. bachelorsoftalkeetna.com

Iditaprov Unwrapped: Xmas UnScripted

It’s a Christmas miracle! The cast of Iditaprov unites in the spirit of the season to bring an all new holiday inspired show with all new and completely improvised Christmas specials, stories, and carols. Sheldon Community Arts Hangar, 7:30 p.m. talkeetnachamber.org December 2014 | Alaska Business Monthly

109

ALASKA TRENDS

By Amy Miller

Growing Population of Alaska Seniors Propels Healthcare Industry

lthough Alaska is known as one of the youngest states in the United States, the coming years will see a rapidly increasing population of Alaskans aged sixty-five or older—and with that change will come growth in Alaska’s healthcare industry. According to the US Census Bureau, only 9 percent of Alaska’s population was sixty-five-plus in 2013, compared to 14.1 percent in the rest of the United States. But Alaska is about to see a dramatic rise in this segment of its population as more and more baby boomers who moved to Alaska during the pipeline years of the 1970s and early 1980s have bucked the trend of earlier generations and are remaining in the state for their senior years. Alaska’s healthcare industry, already one of its strongest private-sector employers, is due to grow well ahead of the rest of the job market as more and more of these aging Alaskans need healthcare. According to the October 2014 edition of Alaska Economic Trends, a publication of the Alaska Department of Labor and Workforce Development, healthcare will lead job growth between 2012 and 2022. During that ten-year period, Alaska is projected to add jobs at a rate of 10.8 percent, but in the healthcare industry,

specific segments will grow much faster. Hospital employment is projected to rise 20.1 percent. A portion of this is due to an increase in the population as a whole, but seniors use a disproportionate amount of hospital services. Jobs in ambulatory care services, which include physicians’ offices, outpatient care center, and home health care services, are projected to increase 28.5 percent. And the 33.1 percent projected increase in employment in the social assistance sector will be attributable to nursing care facilities and retirement communities. Growth in the healthcare industry will provide positive economic impacts in communities statewide. Unlike many of Alaska’s top industries, the healthcare sector tends to provide stable, year-round jobs in rural and urban communities of all sizes. The projected growth in the industry and the portability of healthcare occupational skills to communities across Alaska (and the Lower 48) make it an excellent choice for those considering job-related education or training. R Alaska Trends, an outline of significant statewide statistics, is provided by the University of Alaska Center for Economic Development.

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Alaska Business Monthly | December 2014 www.akbizmag.com

ALASKA TRENDS

By Amy Miller

Employment Growth in the Healthcare Industry, 2012-2022

Source: Alaska Economic Trends, October 2014

Population Growth, 2012-2022

Source: Alaska Economic Trends, October 2014

www.akbizmag.com

The Aging of Alaska

Source: Alaska Department of Labor and Workforce Development, Research & Analysis Section

December 2014 | Alaska Business Monthly

111

ALASKA TRENDS

Indicator

By Amy Miller

Units

Period

Latest Report Period

Previous Report Period (revised)

Year Ago Period

Year Over Year Change

GENERAL Personal Income—Alaska US $ 2ndQ14 37,941 37,542 35,977 5.46% Personal Income—United States US $ 2ndQ14 14,688,618 14,465,404 13,639,239 7.69% Consumer Prices—Anchorage 1982-1984 = 100 1stH14 214.78 213.91 205.22 4.66% Consumer Prices—United States 1982-1984 = 100 1stH14 236.38 233.55 228.85 3.29% Bankruptcies Alaska Total Number Filed August 35 41 47 -34.29% Anchorage Total Number Filed August 26 30 24 7.69% Fairbanks Total Number Filed August 7 9 6 14.29% EMPLOYMENT Alaska Thousands August 349.51 353.79 332.20 5.21% Anchorage & Mat-Su Thousands August 186.81 188.19 184.40 1.31% Fairbanks Thousands August 42.96 43.12 41.40 3.77% Southeast Thousands August 41.69 41.74 43.70 -4.60% Gulf Coast Thousands August 40.88 41.38 36.45 12.15% Sectorial Distribution—Alaska Total Nonfarm Thousands August 357.7 359.0 355.2 0.70% Goods Producing Thousands August 62.5 65.6 58.6 6.66% Services Providing Thousands August 295.2 293.4 296.6 -0.47% Mining and Logging Thousands August 19.4 19.4 18.9 2.65% Mining Thousands August 18.8 18.7 18.2 3.30% Oil & Gas Thousands August 15.0 15.0 14.8 1.35% Construction Thousands August 19.7 18.8 21.5 -8.37% Manufacturing Thousands August 23.4 27.4 18.2 28.57% Seafood Processing Thousands August 18.7 22.4 14.0 33.57% Trade/Transportation/Utilities Thousands August 71.0 71.0 69.2 2.60% Wholesale Trade Thousands August 6.8 6.8 6.2 9.68% Retail Trade Thousands August 39.4 39.6 37.9 3.96% Food & Beverage Stores Thousands August 7.3 7.3 6.4 14.06% General Merchandise Stores Thousands August 10.8 10.8 10.3 4.85% Trans/Warehouse/Utilities Thousands August 24.8 24.6 25.1 -1.20% Air Transportation Thousands August 6.9 6.9 6.4 7.81% Information Thousands August 6.1 6.2 6.1 0.00% Telecommunications Thousands August 4.0 4.1 4.0 0.00% Financial Activities Thousands August 12.4 12.5 14.2 -12.68% Professional & Business Svcs Thousands August 31.5 31.0 29.3 7.51% Educational & Health Services Thousands August 47.1 46.0 46.7 0.86% Health Care Thousands August 34.0 38.6 33.8 0.59% Leisure & Hospitality Thousands August 38.3 33.7 40.2 -4.73% Accommodation Thousands August 9.5 9.5 11.5 -17.39% Food Svcs & Drinking Places Thousands August 23.2 23.1 22.9 1.31% Other Services Thousands August 11.4 11.7 12.1 -5.79% Government Thousands August 77.4 76.4 78.8 -1.78% Federal Government Thousands August 15.3 15.5 15.2 0.66% State Government Thousands August 25.2 24.7 25.5 -1.18% State Education Thousands August 6.5 6.0 6.7 -2.99% Local Government Thousands August 36.9 36.2 38.1 -3.15% Local Education Thousands August 18.3 17.1 18.7 -2.14% Tribal Government Thousands August 4.5 4.4 3.6 25.00% Labor Force Alaska Thousands August 372.82 376.65 369.28 0.96% Anchorage & Mat-Su Thousands 197.98 199.08 195.28 1.38% Fairbanks Thousands 45.51 45.63 45.97 -1.00% Southeast Thousands 44.04 44.02 43.77 0.63% Gulf Coast Thousands 43.60 44.04 42.66 2.21% Unemployment Rate Alaska Percent 6.3 6.1 6.5 -3.08% Anchorage & Mat-Su Percent 5.6 5.5 5.1 9.80% Fairbanks Percent 5.6 5.5 5.1 9.80% 112

Alaska Business Monthly | December 2014 www.akbizmag.com

ALASKA TRENDS

Indicator

By Amy Miller

Units

Period

Latest Report Period

Previous Report Period (revised)

Year Ago Period

Year Over Year Change

Southeast Percent 5.3 5.2 4.7 12.77% Gulf Coast Percent 6.2 6.0 5.7 8.77% United States Percent 6.1 6.2 7.3 -16.44% PETROLEUM/MINING Crude Oil Production—Alaska Millions of Barrels August 12.33 13.09 13.27 -7.08% Natural Gas Field Production—Alaska Billions of Cubic Ft. August 9.16 9.00 6.32 44.94% ANS West Coast Average Spot Price $ per Barrel August 101.78 107.63 110.57 -7.95% Hughes Rig Count Alaska Active Rigs August 7 9 13 -46.15% United States Active Rigs August 1904 1876 1781 6.91% Gold Prices $ Per Troy Oz. August 1297.01 1311.98 1345.05 -3.57% Silver Prices $ Per Troy Oz. August 19.80 20.92 21.84 -9.34% Zinc Prices Per Pound August 2.33 2.31 0.93 150.54% REAL ESTATE Anchorage Building Permit Valuations Total Millions of $ 59.7 67.0 26.1 128.39% Residential Millions of $ 20.5 27.9 15.1 35.58% Commercial Millions of $ 38.1 30.4 11.0 245.74% Deeds of Trust Recorded Anchorage--Recording District Total Deeds August 662 846 1063*GeoNorth -37.72% Fairbanks--Recording District Total Deeds August 222 251 304 -26.97% VISITOR INDUSTRY Total Air Passenger Traffic—Anchorage Thousands August 632.86 664.73 640.65 -1.22% Total Air Passenger Traffic—Fairbanks Thousands August 127.45 128.26 120.45 5.81% ALASKA PERMANENT FUND Equity Millions of $ 51838.70 51729.70 45,568.70 13.76% Assets Millions of $ 52442.30 51012.70 46,222.30 13.46% Net Income Millions of $ 224.20 245.40 221.9 1.04% Net Income—Year to Date Millions of $ 769.10 -264.80 334.4 -129.99% Marketable Debt Securities Millions of $ 11.23 11.85 -85.7 113.10% Real Estate Investments Millions of $ 5.92 6.08 -31.0 119.10% Preferred and Common Stock Millions of $ 20.72 -334.70 -496.6 104.17% BANKING (excludes interstate branches) Total Bank Assets—Alaska Millions of $ 2ndQ14 5,589.78 5,477.64 5,126.68 9.03% Cash & Balances Due Millions of $ 309.79 347.62 59.56 420.13% Securities Millions of $ 145.27 139.05 133.58 8.75% Net Loans and Leases Millions of $ 2,703.46 2,517.48 2,443.81 10.62% Other Real Estate Owned Millions of $ 18.73 18.63 20.09 -6.77% Total Liabilities Millions of $ 4,814.61 4,731.67 4,398.85 9.45% Total Bank Deposits—Alaska Millions of $ 4,188.54 4,070.91 3,833.54 9.26% Noninterest-bearing deposits Millions of $ 1,702.65 1,612.83 1,542.92 10.35% Interest- bearing deposits Millions of $ 2,485.89 2,458.08 2,290.61 8.53% FOREIGN TRADE Value of the Dollar In Japanese Yen Yen August 102.92 101.65 97.82 5.21% In Canadian Dollars Canadian $ 1.09 1.07 1.04 4.81% In British Pounds Pounds 0.60 0.59 0.65 -7.69% In European Monetary Unit Euro 0.75 0.74 0.75 0.00% In Chinese Yuan Yuan 6.16 6.17 6.16 0.00% Notes: 1. Source of Anchorage Deeds of trust (GeoNorth) is cited in the data field. 2. Banking data has been updated to include Alaska State Banks and Alaska’s sole federally chartered, Alaska-based bank, First National Bank Alaska

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December 2014 | Alaska Business Monthly

113

ADVERTISERS INDEX Advanced Physical Therapy.................25

Carlile Transportation Systems............. 9

Implus Footware.....................................47

Parker, Smith & Feek.............................. 39

AE Solutions Alaska ...............................96

Chris Arend Photography................... 114

Island Air Express.................................108

PenAir.........................................................72

Alaska Center For Dermatology.........22

Cook Inlet Region Inc. (CIRI).................35

Judy Patrick Photography.....................95

Personnel Plus......................................106

Alaska Regional Hospital ..................... 21

Colville Inc.................................................92

Junior Achievement of Alaska............... 6

Plans Room...............................................62

Alaska USA Federal Credit Union....... 41

Construction Machinery Industrial...... 2

Lifewater Engineering............................ 75

Ravn Alaska..............................................69

Alaska USA Insurance Brokers............43

Cornerstone Advisors.............................13

Lynden Inc...........................................12, 33

Ritchie Brothers Auctioneers.............. 59

Alyeska Resort......................................... 27

DanTech Services.................................... 79

Magtec Enegy.......................................... 93

RSA Engineering Inc...............................62

American Fast Frieight..............................3

Delta Rental Services............................. 57

Scan Office...............................................29

American Marine / PENCO................110

Donlin Gold................................................61

Modern Dwellers Chocolate Lounge..........................108

F. Robert Bell & Assoc...........................96

N C Machinery......................................... 63

Taylor Fire Protection............................92

Fairbanks Memorial Hospital...............24

Nana Regional Corp.................................37

Trailercraft Inc/Freightliner...................71

Arctic Office Products........................... 77

Fairweather LLC.......................................11

New York Life Insurance.......................45

Turnagain Marine Construction...........11

ARCTOS....................................................90

First National Bank Alaska......................5

North Star Behavioral Hospital........... 19

ASRC Energy............................................85

GCI.....................................................90, 116

Northern Air Cargo...................100, 101

UAA College of Business & Public Policy................................... 79

Associated Builders & Contractors Inc..99

Global Diving & Salvage........................ 93

NTCL...........................................................95

UIC Bowhead-Crowley..........................97

Avis Rent-A-Car.....................................107

Golder Associates...................................99

Offshore Systems Inc............................ 91

Vigor Alaska..............................................86

Bering Air Inc.........................................107

Granite Construction............................. 53

Olgoonik Corp..........................................98

Washington Crane & Hoist..................36

Berry Company.........................................31

Great Originals Inc.................................. 18

Oxford Assaying & Refining Inc.......106

Waste Management...............................87

Blood Bank of Alaska............................115

Healthy Alaska Natives Foundation.....23

Pacific Alaska Freightways Inc............52

Wealth Strategies.................................... 14

Brand Energy & Infrastructure............ 73

Homer Marine Trades Assoc...............99

Pacific Pile & Marine........102, 103, 104

Westmark Hotels - HAP........................23

Calista Corp..............................................10

Horizon Lines............................................15

Paramount Suppy Co.............................99

Yukon Equipment Inc............................. 55

Anchorage Messenger Service............ 57 Architects Alaska....................................22

114

Stellar Design Inc....................................99

Alaska Business Monthly | December 2014 www.akbizmag.com

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