Alaska Business Monthly January 2015 by Alaska Business

January 2015

$3.95

30TH ANNIVERSARY ISSUE Junior Achievement Alaska Alaska Economic Outlook Native Corporation Investments Exploring for Oil and Gas in the Interior

First National’s Cuddy—In tribute to the inaugural issue of January 1985

TRUST ESCO AND CONSTRUCTION MACHINERY INDUSTRIAL FOR PREMIUM PARTS AND SERVICE Ultralok® Tooth System

ESCO Crusher Wear Parts

ESCO Blade Products

www.cmiak.com CONTACT THE BRANCH NEAREST YOU FOR ALL YOUR EQUIPMENT NEEDS FAIRBANKS Clayton Dunn P: 907-455-9600 F: 907-455-9700

ANCHORAGE Mike Miller P: 907-563-3822 F: 907-563-1381

JUNEAU P: 907-780-4030 F: 907-780-4800

KETCHIKAN P: 907-247-2228 F: 907-247-2229

INCREASED PRODUCTIVITY. REDUCED MAINTENANCE. GREATER SITE SAFETY. ESCO and Construction Machinery Industrial offers a comprehensive package of wear parts for the construction and aggregate markets. Jordan’s factory trained staff provides application expertise to optimize performance.

escocorp.com

Parker, Smith & Feekâ&#x20AC;&#x2122;s Private Exchange is a single solution alternative beneficial for both employers and employees. Its integrated data management and extensive selection of optional employee coverages offer significant advantages over other healthcare exchanges.

3 Single Solution

3 Budget Management

3 Optional Coverage Offerings

3 Flexible Plan Design

Commercial Insurance Employee Benefits Personal Insurance Risk Management Surety

www.psfinc.com 3800 Centerpoint Drive, Suite 601, Anchorage, Alaska 99503 // 907.562.2225 2233 112th Ave. NE, Bellevue, WA 98004 // 425.709.3600

January 2015 TAB LE

CONTENTS ABOUT THE COVER

DEPARTMENTS From the Editor �� 7 Market Squares �� 75 Right Moves ��76 Inside Alaska Business �� 78 Agenda �� 81 Alaska This Month �� 82 Events Calendar �� 85 Alaska Trends �� 86 Ad Index �� 90

We’ve gone retro with our January cover and brought back the first cover in a mosaic using covers from the last thirty years. Dan Cuddy is still Chairman at First National; as he was in 1985. Cuddy’s daughter Betsy Lawer is President of First National and has offered commentary on the Alaska economy (page 37) for the thirty year anniversary issue of Alaska Business Monthly in the annual Alaska Economic Outlook. Cover design by David Geiger. Cover image created with AndreaMosaic software © Copyright 1997-2014 Andrea Denzler. All Rights Reserved. andreaplanet.com/andreamosaic

ARTICLES

Courtesy Upper One Games

Never Alone concept artwork.

Education

28 | Experimental Economics UAA’s program holds international esteem By Dr. James Murphy and Dr. Jonathan Alevy

Construction

HR Matters

58 | Dam Port Bridge Special projects take ‘one step at a time’ By Kirsten Swann

47 | Are You Creating Drones or Superstars? By Kevin M. Dee

Alaska Native Corporations

48 | Northwest Arctic Leadership Team Invests in People Group works cooperatively and collaboratively By Julie Stricker

52 | Cook Inlet Tribal Council Invests in Sustainability with ‘Never Alone’ Partnership develops new ‘world games’ genre in consumer video games By Rindi White

Lashing a load at the Port of Anchorage

special section 30 Years of ABM 30 | 30th Anniversary Looking back at Alaska Business Monthly By Susan Harrington, Managing Editor

Alaska Business Monthly | January 2015 www.akbizmag.com

We believe in Alaska As Alaskans, we share the privilege of living

in Alaska. But when it comes to knowing Alaska – and believing in Alaskans – that takes time. It takes dedication, hard work and wisdom. Since 1922, one bank has believed in Alaska, and in doing our part to help our neighbors succeed. Today, that ONE bank believes in you. Learn how local knowledge and experience make the diﬀerence. Call 907-777-4362 or 800-856-4362.

FNBAlaska.com

January 2015 TA B LE OF CONTENTS Follow us on

special section

and

Economic Outlook

Volume 31, Number 1 Published by Alaska Business Publishing Co. Anchorage, Alaska

34 | Alaska and the United States in 2045 By Dr. Ashok K. Roy 36 | Alaska’s Leadership Speaks Finding Sound Solutions to Fiscal Challenges By Governor Bill Walker Anchorage Cautiously Optimistic for 2015 By Mayor Dan Sullivan 38 | The Alaska Economy Past, present, and future By Naomi Klouda

Jim Martin, Publisher 1989~2014

EDITORIAL STAFF

Managing Editor Associate Editor Editorial Assistant Art Director Art Production Photo Consultant Photo Contributor

Susan Harrington Russ Slaten Tasha Anderson David Geiger Linda Shogren Chris Arend Judy Patrick

BUSINESS STAFF

special section Junior Achievement Alaska

ARTICLES

Oil & Gas

8 | An Open Invitation Come one, come all By Flora Teo and Logan Burch 10 | Alaska Business Hall of Fame Past Laureates

Profiles

By Amy M. Armstrong 12 | Sherron Perry 15 | Dana Pruhs 18 | Jana Hayenga and Jo Michalski 21 | The Odom Brothers

24 | Junior Achievement Programs in Alaska Schools Teaching financial literacy, entrepreneurship, and work-readiness By Louise Freeman 26 | Junior Achievement Donors

64 | Oilfield HSE Compliance Using science in strategies for health, safety, and the environment By Brian McKay 68 | Ahtna, Doyon, NANA Explore Middle Earth Frontier basins of the Interior closer to development By Mike Bradner

Telecom & Technology

74 | Simply Voice & Data Telecoms make it easy for businesses By Russ Slaten

Correction In the November 2014 print edition of Alaska Business Monthly magazine, people were misidentified and names were misspelled in the article “Alaska Glacier Products Exports Value-Added Water.” Joseph Van Treeck shown as “plant operator” is the Chief Executive Officer. Terry Clark, the Chief Operating Officer, is the number two man at Alaska Glacier Products. Greg Galik shown as “CEO” is the Vice President of Sales. 6

President General Mgr. VP Sales & Mktg. Senior Account Mgr. Account Mgr. Survey Administrator Accountant & Circulation

Billie Martin Jason Martin Charles Bell Anne Campbell Bill Morris Tasha Anderson Melinda Schwab

501 W. Northern Lights Boulevard, Suite 100 Anchorage, Alaska 99503-2577 (907) 276-4373 Outside Anchorage: 1-800-770-4373 Fax: (907) 279-2900 www.akbizmag.com Editorial email: editor@akbizmag.com Advertising email: materials@akbizmag.com Pacific Northwest Advertising Sales 1-800-770-4373 ALASKA BUSINESS PUBLISHING CO., INC. ALASKA BUSINESS MONTHLY (ISSN 8756-4092) is published monthly by Alaska Business Publishing Co., Inc., 501 W. Northern Lights Boulevard, Suite 100, Anchorage, Alaska 99503-2577; Telephone: (907) 276-4373; Fax: (907) 279-2900, ©2015, Alaska Business Publishing Co. All rights reserved. Subscription Rates: $39.95 a year. Single issues of the Power List are $15 each. Single issues of Alaska Business Monthly are $3.95 each; $4.95 for October, and back issues are $5 each. Send subscription orders and address changes to the Circulation Department, Alaska Business Monthly, PO Box 241288, Anchorage, AK 99524. Please supply both old and new addresses and allow six weeks for change, or update online at www.akbizmag.com. Manuscripts: Send query letter to the Editor. Alaska Business Monthly is not responsible for unsolicited materials. Photocopies: Where necessary, permission is granted by the copyright owner for libraries and others registered with Copyright Clearance Center to photocopy any article herein for $1.35 per copy. Send payments to CCC, 27 Congress Street, Salem, MA 01970. Copying done for other than personal or internal reference use without the expressed permission of Alaska Business Publishing Co., Inc. is prohibited. Address requests for specific permission to Managing Editor, Alaska Business Publishing. Online: Alaska Business Monthly is available at www. akbizmag.com/archives, www.thefreelibrary.com/ Alaska+Business+Monthly-p2643 and from Thomson Gale. Microfilm: Alaska Business Monthly is available on microfilm from University Microfilms International, 300 North Zeeb Rd., Ann Arbor, MI 48106.

Alaska Business Monthly | January 2015 www.akbizmag.com

FROM THE EDITOR

Thirty Years of Alaska Business Monthly

ast month we wrapped up thirty years of Alaska Business Monthly, which began with its first issue in January 1985 and has evolved over the years. In reviewing past issues it became apparent some things have remained, though renamed. For example On The Move was the original Right Moves, featuring photos and briefs about new hires and promotions in the Alaska business and industry community. There was an earlier form of Inside Alaska Business. The Economy According To Safir was a precursor to Alaska Trends, with charts consisting of data tables and statistics, plus a regular column by Economist Andrew Safir, president of Recon Research Corporation in San Francisco, now located in Los Angeles. Safir, who still has energy clients doing business in Alaska and travels here to sport fish, spoke briefly about his thoughts on the Alaska economy from his office in Los Angeles. He pointed out that the new group coming in (Governor Bill Walker and his administration) looks less favorably to the TransCanada gas pipeline. Safir says the philosophy is well vindicated with the Permanent Fund—it remains well funded with money from when oil was high and the investments have grown—it’s not going away. He also assured me the price of oil won’t stay low forever, it will come back up. Intrinsically we know that, though it is good to be reminded. The magazine has continuously brought readers some form or another of Alaska Trends, including Alaska Trends: An Economic Perspective, which was another commentary with charts and numbers that featured in-depth facts and figures and data sets of economic indicators for Alaska. Eventually, Alaska Trends evolved into what is now produced by the University of Alaska Anchorage College of Business and Public Policy—interesting facts

www.akbizmag.com

and data as well as timely articles about some aspect of the economy. As far as interesting stories, we’ve had thirty years of those, and expect thirty more. Many on the same themes and subjects, building a natural gas pipeline, producing coal in the Beluga fields on the western shores of Cook Inlet, petroleum development in the Arctic National Wildlife Refuge, riding the economy up and down through times of busts and booms. From the death of the timber industry by environmentalists to the birth of real-time communications by telecom giants throughout the state—in 1985 we reported: “Twenty years later and millions of dollars later, every Alaskan community with twenty-five residents or more is served by at least a single telephone.” That was a huge boon to companies wanting to do business in the Bush—must have a telephone. Thirty years later and hundreds of millions of dollars later, broadband access is the must-have for every Alaska community, and is available nearly everywhere in Alaska. Although the production schedule that comes with being a monthly magazine forgoes breaking news in the print edition, we sure do have it on our website. The majority of akbizmag.com content is press releases so readers get breaking news from companies, organizations, and government officials and agencies as it happens. Our website is the goto spot to find out what is going on in Alaska business. In the monthly edition of the magazine we always work hard to expand those stories and bring readers in-depth, informative, business news from across the many sectors of the Alaska economy to our readers. We’ve always had the Top 49ers. In 1985 it was The New 49ers and Carr-Gottstein Co., Inc. was number one with $355 million in gross revenues and 2,250 employees. There were nine banks on that first Top

49ers list, not so many thirty years later. We started our popular listings in 1988 with an Alaska Ports directory in the November issue that year, followed by an Alaska Native Corporations special section and directory the following month. Through the years the special sections and directories have grown and changed with the nature of business enterprises in Alaska. It’s a formula that’s proved successful for the magazine and popular with our readers. Somewhere along the way we started the Power List, that extra publication with all the directories we publish through the year plus others. It’s the year-round desk reference of Alaska businesses. Alaska Business Monthly has sponsored and promoted the Junior Achievement Alaska Business Hall of Fame since 1987 when JA Alaska began honoring Alaska business leaders. This continues to be a favorite endeavor and commitment of Alaska Business Monthly that we are proud to sponsor every year and feature as a special section each year in the January issue. We salute this year’s Laureates as we do each year. We encourage all businesses and business people to become involved and assist Junior Achievement in bringing financial literacy to the youth of Alaska—in every community. Something new and different this year, our thirty-first, is our mobile migration. Beginning this month there is a digital app for the magazine. Paid subscribers will have it at no extra charge. To get the app, go to our website, which we’re relaunching this month with mobile optimization and a cross-platform, multi-device design. Whichever way you’re reading Alaska Business Monthly this month, enjoy! The team has put together another really great magazine. —Susan Harrington Managing Editor

January 2015 | Alaska Business Monthly

special section

Junior Achievement Alaska

An Open Invitation Come one, come all

oin us Thursday, January 29, for the Annual Alaska Business Hall of Fame, an event that celebrates the past, present, and future of business in Alaska. In 1987, Junior Achievement began the Alaska Business Hall of Fame to honor outstanding individual leaders of Alaska business. Since then, the Hall of Fame has become one of the state’s most prestigious events, inducting new Laureates on an annual basis. These individuals are honored for their direct impact toward furthering the success of Alaska business, support for Junior Achievement’s mission and programs, and demonstrated commitment to the Alaska economy. This important event is a fundraiser for Junior Achievement, an organization dedicated to providing economic and entrepreneurial education in the great state of Alaska. Since 1973, Junior Achievement has served K-12 students statewide from Barrow to Ketchikan. JA serves 9,250 students annually in 43 Alaska communities. As demand for the program continues to grow, JA partners the business community with educators to prepare young people for a global economy. Through the continued support of corporations and businesses in Alaska, we can continue to reach more students in Alaska. It is our privilege to invite you to attend the 2015 Alaska Business Hall of Fame, presented by Alaska Business Monthly. This year we are honored to induct Jo Michalski and Jana Hayenga—Alaska Retail Business Owners; the Odom Brothers—Odom Corporation; Sherron Perry—Founder of Fairweather LLC; and Dana Pruhs—Pruhs Corporation. Congratulations to you all! The Alaska Business Hall of Fame is annually attended by nearly six hundred guests, including many prior Laureates, leaders from the business community, and supporters of Junior Achievement. We are again pleased to have General Mark Hamilton emcee the event along with actual Junior Achievement students. For table reservations, or to inquire about the limited remaining sponsorship opportunities, we encourage you to call Junior Achievement at 907-344-0101 or visit alaska.ja.org. Tables of ten are $1,500, or individual reservations can be made for $150 per ticket. Junior Achievement of Alaska is a registered 501(c)(3) and the majority of your purchase may be tax deductible. The 2015 Alaska Business Hall of Fame will be held on Thursday, January 29 at the Dena’ina Civic & Convention Center. Doors open at 5:30 p.m. for a no-host reception with 8

Share the American Dream Junior Achievement: Inspiring and preparing young people to succeed in a global economy.

Entrepreneurship

Creativity 21st Century Skills

Financial Literacy

Critical Thinking

Collaboration

Work Readiness

Communication

FEATURE

FROM

Program Approach

Fixed

Flexible

Support Materials

Primarily Paper-Based

Primarily Technology-Based

Volunteer Engagement Mode

Inflexible

Flexible

Learning Approach

Face-to-Face

Blended

Program Content

Regularly Updated

Dynamic

Expert Mentors

Intermittent

Intentional Engagement

Increased Depth & Scale of Student Impact Contribute to America’s Global Competitiveness

JA Education Gateway Learning Management & Data Collection System

Blended Curriculum CONTENT

TOOLS

Professional Learning Community SUPPORT

Program Outcomes

Student Outcomes

Volunteer Outcomes

Anywhere, Anytime Learning Ensure Consistency Immediate Capabilities Evaluation Track Progress Regulatory Compliance

Individualized Lessons Extra Learning Opportunities Multidimensional Experience Promotes 21st Century Skills Maximized Time with Volunteer

Fidelity to the Model Comprehensive Training Individual Support Understanding Benchmarks Foster Collaboration Continuous Improvement

the formal program and dinner following at 6:30 p.m. From the board, staff, and students of Junior Achievement of Alaska, we wish you the very best in 2015 and we look forward to seeing you January 29! R Flora Teo and Logan Burch

Flora Teo

Logan Burch

Alaska Business Monthly | January 2015 www.akbizmag.com

Only pay for the speed you need... Dynamic Routing! SM

At Lynden, we understand that plans change but deadlines don’t. That’s why we proudly offer our exclusive Dynamic Routing system. Designed to work around your unique requirements, Dynamic Routing allows you to choose the mode of transportation — air, sea or land — to control the speed of your deliveries so they arrive just as they are needed. With Lynden you only pay for the speed you need!

www.lynden.com 1-888-596-3361

special section

Junior Achievement Alaska

Alaska Business Hall of Fame Past Laureates n Don Abel Jr., 1996 n Jacob Adams, 2002 n Bill Allen, 1995 n Bob & Betty Allen, 2001 n Will Anderson, 2012 n Eleanor Andrews, 2001 n Robert Atwood, 1988 n The Bailey Family, 2010 n Bernard M. Behrends, 1987 n Earl H. Beistline, 1998 n Jim Binkley, 1989 n Bill Bishop, 1994 n Jim Bowles, 2011 n Carl Brady, 1990 n Carl F. Brady Jr., 2004 n Alvin O. Bramstedt Sr., 1991 n Charles H. Brewster, 1999 n Brice Family, 2011 n W. Brindle, 1993 n Margie Brown, 2009 n Edith Bullock, 1987 n Jim Campbell, 2006 n Larry Carr, 1988 n Richard Cattanach, 2008 n Frank Chapados, 1991 n John B. â&#x20AC;&#x153;Jackâ&#x20AC;? Coghill, 2006 n Jack J. Conway, 1995 n William A. Corbus, 1999 n Ron Cosgrave, 2007 n D. H. Cuddy, 1993 n Bob Dindinger, 2012 n Don Donatello, 1995 n The Doyle Family, 2014 n Ron Duncan, 2007 n Oscar & Peggy Dyson, 1992 n Ken Eichner, 1990 n Andrew Eker, 2009 n Mark Eliason, 2013 n Carl Erickson, 1999 n Arnold G. Espe, 2001 n Al Fleetwood, 2005 n Conrad Frank, 1999 n Clyde Geraghty, 1999 10

n Barnard J. Gottstein, 1989 n The Green Family, 2012 n Robert & Barbara Halcro, 2008 n Ernie Hall, 2002 n Lloyd Hames, 1998 n Carl Heflinger, 1999 n The Helmericks Family, 2014 n Michael Heney, 1995 n Willie Hensley, 2009 n Wally J. Hickel Jr., 2014 n Walter Hickel Sr., 1988 n August Hiebert, 1989 n Roy Huhndorf, 1992 n Robert Jacobsen, 2006 n Jim Jansen, 2009 n John Kelsey, 1991 n Bruce Kennedy, 2007 n Clarence Kramer, 2006 n Herbert Lang, 1994 n Marc Langland, 2001 n Austin Lathrop, 1988 n Betsy Lawer, 2007 n Pete Leathard, 2003 n Dale & Carol Ann Lindsey, 1997 n Suzanne (Sue) Linford, 2002 n Loren H. Lounsbury, 2002 n Zachary Loussac, 1989 n Richard Lowell, 2005 n Byron Mallott, 2013 n Harvey Marlin, 1999 n Carl Marrs, 2005 n Vern McCorkle, 2010 n Harry McDonald, 2011 n James A. Messer, 2000 n The Miller Family, 2005 n Robert Mitchell, 1999 n William G. Moran Sr. & William G. Moran Jr., 2004 n Rick Mystrom, 2013 n Les Nerland, 1987 n Matthew Nicolai, 2010

n Milt Odom, 1992 n Pam Oldow, 1990 n Tennys Owens, 2005 n E. Al Parrish, 2006 n Raymond Petersen, 1988 n Martin Pihl, 2014 n Quinn Brothers, 2011 n Elmer Rasmuson, 1987 n Edward Rasmuson, 2000 n Frank M. Reed Sr., 2000 n Robert Reeve, 1987 n David Rose, 2003 n Jim Sampson, 2008 n Helvi Sandvik, 2006 n Grace Berg Schaible, 2004 n Leo & Agnes Schlotfeldt, 1993 n Orin D Seybert, 2006 n Gov. Bill Sheffield, 2003 n Merle (Mudhole) Smith, 1993 n Charles Snedden, 1989 n Sen. Ted Stevens, 2010 n William G. Stroecker, 1997 n Bill & Lilian Stolt, 1998 n A. C. Swalling, 1987 n Cliff Taro, 1992 n Walter & Vivian Teeland, 1997 n Morris Thompson, 2001 n William J. Tobin, 2004 n Joseph Usibelli Sr., 1988 n Joseph Usibelli Jr., 2013 n Chris von Imhof, 2014 n Lowell Wakefield, 1990 n Leo & Beverly Walsh, 1996 n Pat Walsh, 2008 n Chuck West, 1991 n Noel Wien, 1989 n Richard A. Wien, 2003 n Lew Williams Jr., 1994 n William Ransom Wood, 1996

Alaska Business Monthly | January 2015 www.akbizmag.com

special section

Junior Achievement Alaska

Sherron Perry By Amy M. Armstrong

he fact that aviation has been the dominant force in Sherron Perry’s career in Alaska isn’t much of a surprise once one learns more about his background. In the mid-1970s, the Georgia native left the South in a Bush plane headed for the adventure and opportunities Alaska presented. He began his postcollege career in the liquor business in Jacksonville Beach, Florida, but was ready for something a bit more exciting. He made it to Canada in that plane— more specifically to Edmonton—before mechanical failures grounded the plane. It didn’t ground Perry. Despite the angst of leaving his plane behind, Perry hopped a commercial flight and came to Anchorage.

That First Big Job Opportunity seemed endless—he just had to land that first job. Perry was a newcomer, but that didn’t stop Jim Calendar of what was then Unocal from offering Perry a job as a weather observer in remote Alaska. The faith and trust Calendar had in Perry—an unproven, yet eager, energetic and clearly skillful pilot—is something Perry never forgot. It is also a lesson he wants to convey to young people. “When you get that first big job; that first big break, you do everything you can to make sure that you earn the trust you have been given and the chance that the person offering you that opportunity has given you,” Perry says. “Once that job is complete, once you have done that job to the absolute best, then you have earned your way.” Perry’s weather observation skills combined with natural instincts as a pilot quickly landed him job after job supporting the work of the quickly expanding mid-1970s oil and gas exploration industry in Alaska. 12

He formed Fairweather, LLC in 1976 and has been a driving, or more accurately, flying, force in the oil and gas industry support services niche. In the nearly four decades since its establishment, Fairweather has expanded from a small firm providing weather rePerry ports to oil explorers to a large firm meeting just about any need of this specific niche. Fairweather offers airstrip lighting and weather observations, bear guards, climate/ice studies and observation, drilling and production services, environmental science and research, logistics and expediting, medical services for remote locations, and Native cultural awareness training. These may sound like a diverse group of activities, but in reality they all have one thing in common: they are essential support services for Alaska oil and gas industry activities.

Bit of Wisdom: Focus Fairweather’s business model also represents another bit of wisdom Perry wishes to share with Junior Achieve-

ment students and young people in general. “If I had one something to recommend to young kids, I would say to try to pick a niche area and focus on it,” Perry says. “Become an expert on it, study it, and analyze it. Once you become real familiar with, and even perhaps master it, then people will seek your opinion and send business your way in that area of expertise, and you will be gainfully employed.” Don’t try to do everything right or be a master of the entire universe, Perry advises. It is too easy to get lost in the shuffle with that approach to a career. Instead, focus on one thing and perfect that. Doing so will keep one on the cutting edge of a chosen industry, as it has Perry. In 2013, Fairweather again took the helm as an emerging aviation technology took to Alaska skies. Unmanned aerial vehicles, sometimes referred to as “drones,” have long been a military tool; thanks in part to research at the University of Alaska Fairbanks, unmanned aerial vehicles are taking their place as civilian tools useful for moni-

Alaska Business Monthly | January 2015 www.akbizmag.com

Sherron Perry was instrumental in the development of the Deadhorse Aviation Center, a multimodal facility designed to provide oil companies and their suppliers with a safe and efficient aviation command center to manage onshore operations and Outer Continental Shelf exploration and production activities on the Arctic Ocean and Beaufort Sea. Photo courtesy of Fairweather LLC

www.akbizmag.com

January 2015 | Alaska Business Monthly

toring activity in geographic locations offering safety challenges to humans. Perry saw yet another opportunity and formed Tulugaq LLC, a subsidiary of Fairweather that is in partnership with the Olgoonik Corporation and the Kaktovik Iñupiat Corporation, both of which are Alaska Native Corporations formed under the 1971 Alaska Native Claims Settlement Act, located in northern Alaska where Fairweather does most of its work. Tulugaq is poised to make use of the benefits that unmanned aerial observation brings.

Fundamental Lessons Perry says he wouldn’t have the ability to act on emerging opportunities if he had not long ago learned the lessons of saving and re-investing as currently taught by Junior Achievement. “Those are fundamental lessons that prove invaluable in business,” he says. He is somewhat bothered by the negative stigma surrounding business people after the 2007 to 2009 financial collapse on Wall Street, the housing bubble burst, and the media coverage of unscrupulous financial advisors

who abused their clients’ retirement accounts. “I think that in general it is a good idea to reinforce the positive aspects of being in business to our young people who are hearing, seeing, and experiencing these events,” Perry says. “Profit is not a dirty word. One needs to make a profit in order to create job opportunities for the people in a community and to build one’s business.” Rather than downplaying profit, Perry asserts business owners should be proud of the fact when they are making a profit. He has witnessed the tendency of lawmakers to use corporate profit as justification to increase taxation on industries such as oil and gas in Alaska. “There is a lesson to be learned here— especially for our legislators. There is an old saying that pigs get fat and hogs get slaughtered,” he says. “If they tax things too high, they just might kill the golden goose that provides the revenue stream.” He isn’t shy or reserved regarding the fact that the bulk of the state’s funding comes through the royalties collected from the oil and gas industry. He doesn’t hesitate to point out the industry’s extended impact on the Alaska economy. He hopes that Junior Achievement, schools, other organizations working with the state’s next generation, and most importantly, parents, intentionally expose young people to what he considers a truth; oil and gas is an economic reality in The Last Frontier. His other major concern is the preparation of young people for the ever expanding global economy. For the oil and gas industry, the idea of a global economy is a long-established concept. What happens on the other side of the planet, Perry says, impacts activity in Alaska. When production in the Middle East is up and prices per barrel are dropping, budgets in Alaska fall under increased scrutiny. For those in the industry, that may be an obvious fact, but for young people just learning about the workings of the oil and gas industry, it is an important concept to accept, Perry explains. “The State of Alaska and all of the companies dependent on royalties are all re-thinking their budgets with oil prices projected to drop,” Perry says. “Our young people need to understand the impacts this brings and identify creative ways to adapt just as my generation has in the past.” R

Alaska Business Monthly | January 2015 www.akbizmag.com

Junior Achievement Alaska

special section

Dana Pruhs By Amy M. Armstrong

is father took him along to work on Saturdays during his childhood. It was a routine and simple act that for Dana Pruhs became much more than just bonding time for father and son. It is what he credits for his interest in business, for his desire to create his company, to be an entrepreneur that provides employment for others. Pruhs’ father was in the liquor business in the Fairbanks area. He also owned a hotel and a small construction firm. To be sure, these were engaging and profitable ventures for his father and ones that actively demonstrated for Pruhs the principles of re-investing profits toward the future growth of a business. Those are lessons Junior Achievement (JA) strives to teach students in the kindergarten through high school programs delivered at local schools. For Pruhs, those lessons were learned as a child tagging along with his father, watching the activity at each workplace as his father explained to him the importance of what was happening. “As a kid, my biggest excitement was being able to go to work with my Dad that one day a week and go to lunch with him and all of his business buddies,” Pruhs says with a smile full of unmistakable happiness. “Having a Coke with cherries in it and listening to all of the stories being told was the greatest thing ever. It truly, truly inspired me. I believe that was the foundation for my entrepreneurial business.”

Job Shadowing His first job—at about age ten—was transferring the bags of guests at his father’s hotel to their rooms. “I was a bellhop,” he says again with a grin. “That was in the summer.” Later, in his teenage years when the pipeline construction was at its full peak, his father helped Pruhs purchase a truck so his entrepreneurial leanings could www.akbizmag.com

“As a kid, my biggest excitement was being able to go to work with my Dad that one day a week and go to lunch with him and all of his business buddies. Having a Coke with cherries in it and listening to all of the stories being told was the greatest thing ever. It truly, truly inspired me. I believe that was the foundation for my entrepreneurial business.” —Dana Pruhs

take wings as he provided transport for supplies. His trucking business grew, and his father advised him to keep costs as low as possible by not buying brand new equipment. When Pruhs went to college in California, his trucking business continued to provide him an income and a reason to come home on a regular basis. As Pruhs thinks back on his own early beginnings, he quickly switches gears from a pleasant reminiscence of days gone by to today’s world where children are not necessarily welcome in the workplace due to the myriad of regulations prohibiting certain kinds of child labor and the real dangers posed in some circumstances.

“It is very important as a young person to correlate that first of all, the harder you work, the more dollars you get. But once you have those dollars, what do you do with them? Young people need to learn how to hold on to those dollars and grow them so they can fund the things they want to do.” —Dana Pruhs

When possible and when safe, Pruhs says, “more of that” needs to take place today. Children ought to be given opportunities to shadow their working parents to see on a first-hand basis what it means to earn a living and how the nuances of the workplace play out, he believes. This is where, in his opinion, JA can help bridge the gap.

JA Lessons While his school did not have JA, he did learn the lessons of saving and investing as taught by the program via his own home-grown version. He wishes every young person had the opportunity to learn the value of saving money. “It is very important as a young person to correlate that first of all, the harder you work, the more dollars you get,” he says. “But once you have those dollars, what do you do with them? Young people need to learn how to hold on to those dollars and grow them so they can fund the things they want to do.” He also appreciates the lessons of ethics and honesty in business that is promoted by JA. He rather humbly relays a recent experience from his construction company. His company had bid on a lump sum project and secured the job.

January 2015 | Alaska Business Monthly

“Every day when I am doing business with my customers, what comes to mind for me is this question: Are they getting the value they should expect for the money that they spend with me? I try to put myself in their position and ask myself, ‘If I was writing the check, would I be happy with the results?’” —Dana Pruhs

“Once I got into the job, I realized that a mistake had been made,” Pruhs says. “The mistake was that the owner of the project was paying more than he should have to get the project to completion.” This presented Pruhs with an ethical dilemma: His firm followed all the protocol for the bid and won the bid for the price stated. Yet, he was bothered by the overcharge and had to decide how he would handle the situation. “I thought about it and at the end of the project, I went to the owner and gave him the money back,” Pruhs says. “I told him there had been a mistake— through the fault of no one. Just a mistake. But I could not in good conscious take advantage of that.” He knows his action might be considered unique in today’s business world, but he wishes it wasn’t. He agrees with the JA stance that ethics are the cornerstone of any business. “It starts at the top of any organization, and that philosophy needs to be disseminated down through the organization,” Pruhs says of his responsibility to demonstrate ethical behavior for his employees to emulate. “Every day when I am doing business with my customers, what comes to mind for me is this question: Are they getting the value they should expect for the money that they spend with me? I try to put myself in their position and ask myself, ‘If I was writing the check, would I be happy with the results?’”

Business Success Pruhs’ customers must be happy with the work his firm does for them. The Pruhs Corporation, with its Anchorage 16

Alaska Business Monthly | January 2015 www.akbizmag.com

headquarters located in the industrial tract off Viking Street near the railroad, is a leading winner of state and municipal contracts for the construction of civil projects such as roads and airports, as well as private construction projects and the installation and maintenance of fiber optics. Most of Pruhs work is in done in Southcentral Alaska, with a few projects in the Interior and other regions of the state. Recent projects of Pruhs Construction, a division of Pruhs Corporation, include the Eagle River Road upgrade, the Glenn Highway overlay, Kodiak Airport runway improvements, Baxter Road improvements, and in Eklutna, the extension of a forty-eight inch water main. Pruhs’ other holdings include Quality Sand and Gravel, which provides aggregate for the construction work; Meridian Investments; and Harr Technologies. Pruhs knows that since The Great Recession of 2007 to 2009, a negative stereotype toward businessmen has developed in the United States. He is concerned and hopes the business community takes action to thwart the threat to the reputation of honest entrepreneurs. “I hope this is just a passing fad. I think changing it starts with the business community showing young people that the result of hard work is what one can gain and how one can make a difference not only in one’s own life but for the people who work with you,” Pruhs says. “I am concerned because the free enterprise system and the entrepreneurial spirit is the foundation that has built the United States. To criticize business people for making a profit goes against the fact that if you take a risk, there has to be an upside.” For Pruhs, the upside has been being able to live the life he and his family want and to provide gainful employment for many Alaskans. His sense of community goes beyond providing jobs and encompasses serving on public boards and commissions, which in the past included the Alaska Board of Game, Anchorage Community Development Authority, and the Anchorage Planning and Zoning Commission. He is currently the Board Chair of the Alaska Industrial Development and Export Authority, better known as AIDEA. “My legacy?” he questions as that smile spreads back across his face. “I hope people will say that I made a difference in the lives of others.” R www.akbizmag.com

When we work together, we achieve more. Help us increase graduation rates that will in turn supply you with skilled labor. It all starts with a diploma.

“If I can get one more person to say I will mentor a child or one more business leader to say I will invest in the strategies we know will produce results, I’ll feel like I’m doing my part. So let me ask you, what will you do? – Rick Fox, Senior Vice President and General Manager Alaska Operations, Edison Chouest Offshore

RETURN ON COMMUNITY INVESTING WHERE WE LIVE

For information contact Elizabeth Miller 907.263.3842

LIVEUNITEDANC.ORG

January 2015 | Alaska Business Monthly

special section

Junior Achievement Alaska

Jana Hayenga and Jo Michalski By Amy M. Armstrong

ack in 1980, when the sister team of Jana Hayenga and Jo Michalski wanted to start a quilting store because they could not find the supplies they needed in Anchorage, they heard a lot of, “no and no and no” from bankers. Finally, one gave them some more feedback. It wasn’t what they hoped for. “We were told: ‘We are not here to fund housewives’ hobbies,’” recalls Hayenga. The banker went on further to say, “We don’t think that trinkets and blankets will be a going business in this town. Our recommendation to you is that you should go back home, volunteer in the community, and focus on your children.” As a parting commentary, the banker asked the two sisters, “Do your husbands know where you are?” Perhaps it was the times. Perhaps it was the fact that the two sisters had no retail experience. Perhaps that banker didn’t have a clue. They left the bank a bit shocked, the two admit. They thought they had a darn good idea. After all, quilting was an activity that plenty of the area’s women did. Yet, at that time, Anchorage did not have its own store offering the supplies quilters needed. Quilters had to order supplies from the Lower 48. The need for a local quilting supplier became apparent to Hayenga and Michalski when their grandmother died,

Michalski

Hayenga

leaving them with a large stack of unfinished quilt tops. “We were going to have to send away—which we did—to get what we needed to finish those quilt tops,” Michalski says. “But we thought, hey, there is a business idea here.”

The two sisters admit that they made just about every mistake that a new shop owner could. They laugh about it now as they share their story of spending a cold New Year’s Day together and spotting a small house for rent in downtown Anchorage. “We just looked at each other and said, ‘Let’s start a business,’” Michalski says with a knowing chuckle that only those who have been through the start of retail store can know. “We did absolutely the wrong thing. We went out and rented this house and paid rent on it for six months before we could even start.” The sisters had no inventory. They didn’t have a business plan; they had no idea what to charge. But they did know to get help. They took a class with the Small Business Administration and they found a female accountant to mentor them. Starting a business was a big change from the craft fairs the two sisters were doing—not to mention Hayenga’s teaching at Lake Otis Elementary Schools

Well Earned Lessons They finally went to First National Bank and received a positive response. With a $10,000 loan from their parents and the support of FNBA, they launched Country Classics.

“If you are in business to make money to make a profit then you are going to line everything else up correctly. You are going to buy the right inventory. You will hire the right employees and train them correctly. You will take returns in the right manner. You are just better retailers because that is your guiding principle.” —Jo Michalski 18

Alaska Business Monthly | January 2015 www.akbizmag.com

“We are still in the situation where women need to feel more empowered that they can break through and start their own business. It is important that we encourage women to think outside the box to come up with an idea, take that idea and research it, get the funding they need, and then work it.” —Jana Hayenga

and Michalski’s full-time child-rearing at the time. Yet it was the start of Country Classics—a cozy, comfortable local spot where quilters and other handcraft aficionados came for supplies and advice. It was a hit and it filled a need. It also served as the launching pad for what has become one of Anchorage’s most successful retail duos. “We discovered that yes, we liked quilting. But more than that, we liked being retailers,” Michalski says. “And even more importantly,” Hayenga adds, “we liked making money.”

A Love of Retail During their first year of business, the pair went to a quilting conference in the Lower 48. The room was filled

www.akbizmag.com

with women, like themselves, running quilting shops. The conference leader asked around the room why the various women owned a retail quilting stores. Answers such as their love for quilting abounded. But not for Hayenga and Michalski. Their answer involved being profitable retailers. Yet, they remember being slightly embarrassed by their answer. That was temporary. The conference leader exclaimed an enthusiastic, “Bingo! That is the right answer,” to their response, reiterating that making a profit was the only reason one should be in business. Profit equals the ability to stock excellent goods, pay employees an appropriate and decent wage, and give back to the community, the two sisters learned.

“If you are in business to make money, to make a profit, then you are going to line everything else up correctly,” Michalski says. “You are going to buy the right inventory. You will hire the right employees and train them correctly. You are just better retailers because that is your guiding principle.” It was a defining moment, the two sisters agree. “Sometimes, a retailer is made to feel guilty for making money, as if that is a bad thing,” Hayenga says. “But in reality, a good retailer makes money so they can pay their employees a decent wage and give back to the community. There is nothing wrong with saying you are running your business to make money.” It is a lesson they not only embraced, but have mastered. It is one they want to

January 2015 | Alaska Business Monthly

pass on to the students of Junior Achievement and young, emerging entrepreneurs.

Entrepreneurial Expansion Since Country Classics, the two have owned four other stores together: Alaska Book Fair Company from 1988 to 1996; Classic Toys from 1985 to 1998; Flypaper from 1996 to 1999; and Once Upon A Time from 1988 to 1996. Of those, Classic Toys and Flypaper remain in business under new ownership, continuing the success established by the two sisters. Hayenga owned Up North from 1996 and closed the store in 2004. She opened Cabin Fever Gifts located in an enviable spot on downtown’s Fourth Avenue. Tourists flock to the area to visit the Alaska Public Lands Information Center, the Anchorage Log Cabin Visitors Center, and to indulge in the reindeer hotdogs offered by street vendors. The store offers all of the “tourist” type trinkets along with a carefully selected supply of Alaska and cabin-themed décor to please picky locals. Hayenga’s other store, The Quilted Raven, is located right around the corner on G Street. Michalski recently retired from her niche of providing area women with high quality clothing—including a welldeveloped line of plus size clothing. She opened two stores in Midtown where ample parking was available. Classic Woman opened in 1990; Portfolio opened in 2000. She sold both in 2012, and while she won’t discuss the ideas she is currently mulling, chances are good she may come back out of retirement to open yet another retail store. While the two sisters did not have JA at their St. Paul, Minnesota, high school, they are ardent supporters of the program’s goals. They want young people—especially young women—to consider becoming retailers and entrepreneurs. Despite the progress that women have made in retail, including the work of the two sisters, Hayenga sees room for more improvement. “We are still in the situation where women need to feel more empowered that they can break through and start their own business,” she says. “It is important that we encourage women to think outside the box to come up with an idea, take that idea and research it, get 20

the funding they need, and then work it.” Michalski agrees. “Junior Achievement has an enormously important role to play in educating young people about the free enterprise system and encouraging young people—especially young women—to look at what others are doing in business and learn from them.” By being successful business owners, Hayenga and Michalski have been able to prove wrong the banker who didn’t see the value of their business idea.

Giving Back The pair is well-known for their service to the Anchorage community. Hayenga was on the boards of the Imaginarium Children’s Science Center, Alaska Junior Theatre, and the Anchorage YWCA. She serves on the steering committee for the Hiland Mountain Women’s Correctional Facility conference “Success Inside & Out,” which assists inmates during transition from prison life. She is currently on the boards of directors for the Alaska Botanical Garden and the Anchorage Chamber of Commerce. Michalski has held several nonprofit director positions as well. These include the Anchorage Chamber of Commerce, Alaska Public Media, Camp Fire Alaska, Anchorage YWCA, the Bunnell Arts Center in Homer, Alaska Junior Theater, and the Alaska Community Foundation. She is currently a trustee on the University of Alaska Foundation Board and recently chaired the board for two years. And lastly, but certainly not least, the two sisters are generous. They don’t publicly discuss the dollar amounts they’ve given to area charities, but it again is well known that the two—either as a pair or individually—aren’t stingy when it comes to supporting local organizations with civic and community oriented agendas. “That is what making money in our businesses has allowed us to do,” Hayenga says. “The fact that we made money gives us the ability to give to organizations we believe in.” Her sister echoes the sentiment. “We give back to the community,” Michalski says. “If you are a business person and you live in this community and this is where you make your money, it is imperative that you give back to the community.” R

Alaska Business Monthly | January 2015 www.akbizmag.com

Junior Achievement Alaska

special section

Photo courtesy of the Odom Corporation

Bill, John & Jim Odom of the Odom Corporation.

The Odom Brothers By Amy M. Armstrong

s children, there never was any amount of doubt that Bill, Jim, and John Odom would work in the family business. As each of the brothers grew, they took on age-appropriate tasks as assigned by their father, Milt, the founder of what today is The Odom Corporation. Each of the Odom brothers talk fondly of their respective childhoods growing up in Anchorage and working after school and on the weekends at the Odom bottling and distribution facilities. “I know nothing else other than working in the family business,” Bill Odom says with a note of pride derived from the accomplishment of a longterm goal. “It is the same for my broth-

www.akbizmag.com

ers. I heard about the family business at the kitchen table, as did my brothers.”

Fatherly Mentoring During the formative years, the plants the Odom brothers worked at were not named after their family namesake. In those days, the Odom Corporation was operating as Anchorage Cold Storage. It was a burgeoning firm coming into its own in step with the city of Anchorage as Milt secured the rights to distribute many beverages and food products to Anchorage retailers. In 1937, Milt inked a deal with Coca-Cola, acquiring franchise rights for only $1. It paved the way for other consumer products that he added to the, liquor, coffee, tea, spices, meats, candy, and other dry goods he was marketing under Odom & Company. In the mid-1970s Milt created

The Odom Corporation. For his sons, the formation of a corporation was another step in the mentoring process their father had begun many years earlier. By the mid-1970s, Bill, Jim, and John were quite used to their father’s guiding hand. “At an early age, my brothers and I were sweeping the floors, washing the trucks, and separating Coca-Cola bottles from the other bottles,” Jim says. “Our father always had ideas of how to do things better and more efficiently. He was inspiring.” John as well remembers the inspiration he received from the trio’s father. He also remembers the correction he received when mistakes were made. “I can remember sitting across his desk during meetings. Some were not so comfortable when I was getting rep-

January 2015 | Alaska Business Monthly

rimanded,” John says with a chuckle. Today he knows those moments were aimed at teaching and molding his business capabilities and character. “But my Dad was a tremendous mentor and it was inspirational to be around him and watch him build this company.” That mentoring spirit remains a strong, key element at The Odom Corporation where the three brothers do much more than merely talk about responsibility to their customers and their employees. “The employees are the number one asset in the company,” John says, noting Odom’s extensive training program that not only supports employee performance goals but prepares in-house workers for advancement. “We sell and distribute first rate products, which can only be done with first rate team members. This is a very important group of our company. As an employer, we are focused on hiring the best team members, providing them with excellent

sticklers in an effort to keep all of their equipment operating in a safe and effective condition. At the same time this also prevents excessive overhead costs. “We did not go out and just get the newest trucks and newest equipment and buildings,” Bill says. “We bought them as we could afford to and we kept them longer than most others would. We learned to appreciate what we have, and it is part of our corporate culture to not just go out and get something new to replace something just because it is old. It may work just fine. So we keep it and keep using it until it does not, but not until then.” Bill says the corporation’s Ship Creek building complex is paid for free and clear. “We are not paying any rent and we are not making any payments on this building. That is a good thing.” John says the brothers have chosen a rather “frugal” path in regards to the corporation’s physical resources. If an investment was to be made, it was made on necessary information technology as

to help you stay on track, and that helps you in your day-to-day life with your family and friends and spills over into your business.” John and Bill also note that a portion of their business—the distribution of alcoholic beverages—is highly regulated by state and federal authorities. That certainly aids in keeping Odom’s business above board, but Bill believes the firm has such a clean track record for one simple reason. “We just do business in an ethical and upright manner,” Bill says. “For us, there simply is no other way of doing business. We just do not see how we could do something otherwise. We treat people fairly and we conduct business above board. We truly hope that today’s youth will grasp that lesson.” Aside from supporting JA, The Odom Corporation, through the various drink products it represents and distributes, provides financial assistance to more than one hundred groups and charities

“The employees are the number one asset in the company. You can try to sell first rate products, but if you have second rate people, the end result just is not going to be the same. As an employer, you have to guard and tend to this very important group of your company.” —John Odom

training, and supporting them with the necessary tools to do the best job possible for our customers.” Jim echoes this by stating he feels a responsibility to the employees to offer them continuing education that guides them in the type of business atmosphere and goals The Odom Corporation strives to achieve. Education is where the trio believes that Junior Achievement (JA) gives its students a leg up in the real business world. They believe, as do the leaders of JA, that education today is the key to tomorrow’s success. “One cannot achieve enough education,” Jim says.

Frugality and Ethics The brothers appreciate JA’s focus on frugality in the business place. It is one they apply to their own business, despite the temptations presented by the “latest” and “greatest” in equipment. Following again in their father’s shadow, the three brothers have opted to be maintenance 22

that field improved in leaps and bounds in the management capabilities presented through its use. Another budget item for which the three brothers weren’t as conservative is their employees. The three desire to set a high bar for their employees. This is particularly true in the area of business ethics—another topic regularly addressed by JA and one the Odom brothers hope today’s young people are learning. “Honesty is a must in our company,” Jim says. “If young people learn one thing, they need to learn the value of honesty. If they are hard-working and honest in the way they conduct themselves, they will go far and be highly successful at whatever they do.” John views the ethical lessons taught by JA as a daily guiding light that reflects the type of lifestyle one lives. “It isn’t just something for the business world. I think it has to happen every day, beginning with your family,” John says. “You wake up in the morning and you have that certain guiding light

in Alaska and its sales territory in the Lower 48. Locally, that support includes, but is not limited to various Little League organizations, the Iditarod, the Fur Rendezvous Festival in Anchorage, and the Mount Marathon Parade in Seward, as well as charities and organizations such as the Boys & Girls Clubs, Alaska Aviation Heritage Museum, Bean’s Café, Habitat for Humanity, Special Olympics, Anchorage Economic Development Corporation, ALPAR, and United Way. “As businessmen, my brothers and I have built upon the success of our father,” Jim says. “Being successful means we make a profit that we can put back into our community. We are able to achieve charitable goals through our private business profits. That message of responsibility is also one we see Junior Achievement bringing across to students.” R Amy M. Armstrong writes from Eagle River.

Alaska Business Monthly | January 2015 www.akbizmag.com

special section

Junior Achievement Alaska

Junior Achievement Programs in Alaska Schools Teaching financial literacy, entrepreneurship, and work-readiness By Louise Freeman

emember the old game Life popular in the 1960s? Now, instead of a game board, imagine a computer screen in front of which sits a junior high school student. She creates an avatar—a fictional character—for herself. She decides to be a single parent of one child. This single parent—call her Sheila—is randomly assigned a job as a teacher, with an annual income of $48,000. Over the course of six weekly sessions, the teenager will steer Sheila through a series of real-world scenarios. She will establish a household budget, apply for a credit card, and research and purchase health and homeowner’s insurance. Suddenly, Sheila’s work hours are cut and she must recalculate her budget. Can she still afford that new car she has had her eye on? Such an imaginary scenario is part of a Junior Achievement (JA) virtual learning experience called Virtual Finance Park, new to Alaska in the 20142015 school year. Junior Achievement is a worldwide organization that educates students K-12 in financial literacy, entrepreneurship, and work-readiness. All JA programs are free and are led by volunteers from the business community.

Statewide Program Plans JA Alaska offers programs in 103 schools in forty-three communities throughout the state. Virtual Finance Park, an innovative program that focuses on personal financial planning, is being piloted at five schools in Anchorage this school year. Now in thirty different JA markets throughout the United States, Virtual Finance Park is designed for use by students in grades five through nine. Part 24

of the pilot effort in Anchorage is deciding which grade to focus on. “Our strategy, because we have limited resources, will be to pick one grade level, and our goal is to reach all students in that grade level in the Anchorage School District within two years,” says Flora Teo, president of JA Alaska. “We hope to offer it statewide within five years.” JA Alaska is a nonprofit organization that gets half of its revenue from special events and half from grants and corporate sponsorship. “We need feedback from corporate sponsors if there is interest in supporting a program like Virtual Finance Park,” Teo says.

Experiential Learning JA Alaska also offers an experiential learning experience called the Company Program. Starting in January 2015, JA Alaska will be launching an online version of this successful program. “We recognize the importance of a digital strategy, so we want to be able to present our materials to kids in a way that is conversant with how they learn in classroom instruction,” Teo says. The Company Program was JA Alaska’s flagship program, beginning in 1973. It has been the basic part of JA USA since its inception in 1919. JA Alaska will be rolling out the digital version of the Company Program through the support of a JA USA grant from insurance company The Hartford. The thirteen-week program will be accessible online for the students. They’ll be able to watch podcasts from field experts and research crowd-funding opportunities for their business projects. “What is appealing to us about the digital version, given the geographical restrictions we have in Alaska, is it is an

opportunity to reach students that normally wouldn’t have access to it,” Teo says. “We run about ten to twelve company programs statewide. This is a way for us to do more programs.” The online version will not replace the traditional hands-on approach; JA Alaska plans to offer both versions. In the Company Program, students in grades eight through twelve get to run their own company. Led by a JA Alaska volunteer, the students start by examining their own entrepreneurial traits. Then they form into teams and brainstorm potential products that will fill a need in their school community. Student companies often produce school spirit wear, such as t-shirts. Other products have ranged from pallets to flower baskets. Market research comes next, then producing a business plan. Finally comes the exciting moment of launching their business venture. As the students execute the business plan, they create a pitch to potential investors and sell stock. The students learn about customer service, marketing, and quality control. At the end of the program they liquidate the business and compile an annual report for stakeholders. The last step is creating a Personal Action Plan using the skills they have developed to recognize the connection to their future career decisions. “There have been challenges in the last few years because the Company Program takes a semester-long commitment from teachers,” Teo says. The eighth graders at Northern Lights ABC School in Anchorage have created a company called Shazzco. They are designing an app that parents will be able to download for one dollar. Users will be able to download flashcards, log stu-

Alaska Business Monthly | January 2015 www.akbizmag.com

dent reading pages, and access assembly schedules, lunch menus, and teacher websites twenty-four hours a day.

Focus on Investments In high school, the focus is on investments as well as career preparation, especially in the high growth, high potential, high-yield fields that employers are interested in today. Students learn about the importance of STEM (science, technology, engineering, and math) skills and how those skills can translate into lucrative and rewarding careers. Along with such tried-and-true methods as practicing resume writing and doing mock interviews, JA Alaska encourages kids to think of building their brand, starting with designing their own logo. “Your resume is one tool in your toolbox, your job interview skills are another, and your skills in general—all those things contribute to establishing your brand, which is what you want to showcase to your future employer,” Teo says. Students are even encouraged to consider what they put on Facebook and Instagram, resulting in the realization that what they post

will be on the Internet forever and may affect their future careers. Rural students are also benefitting from the JA Alaska programs. Programs are currently active in twenty-seven villages across the state, with new programs being initiated at Nuiqsut and Point Lay in the 2014-2015 school year. A pilot program will be instituted at Crooked Creek in March 2015. JA Alaska partners with Alaska Native regional corporations to offer JA programs in villages in their regions, and some pay to have their own staff flown into the region to spend a day working with students in the JA-in-a-Day program. “They have a vested interested in young people from their region succeeding because they want them to eventually grow up and maybe come to work for their corporation someday. Their students are challenged by a lot of dynamics that are common in any rural Alaska village, socially, in school, and just geographically,” Teo says. Volunteer Louis Christie, president of LMC Management Services LLC, says he enjoys working with third graders at Northern Lights ABC School in Anchorage. “Keeping their energy corralled

is the toughest part,” he says. Christie teaches students such city planning concepts as “Mr. Abi,” an anagram for Multipurpose, Residential, Agricultural, Business, and Industrial zoning. “We have to look at it as a long-term investment,” Christie says, “because the day will come, if we don’t do it, who will do it?”

Volunteers Needed Last year, during the 2013-2014 school year JA Alaska reached more than 8,500 students in grades K-12. The organization’s goal is to reach 9,250 students in the 2014-2015 school year and 10,000 by 2015-2016. Arctic Slope Regional Corporation and ExxonMobil are JA Alaska’s biggest sponsors. There are 270 volunteers statewide, but more are needed. There is a wait list of teachers interested in JA. “Aside from fundraising, our challenge is number of volunteers,” Teo says. “We’re always seeking volunteers from the business community.” R Louise Freeman writes from Anchorage.

Celebrate Junior Achievement of Alaska 2015 Business Hall of Fame Laureates Dena’ina Center - Thursday, January 29, 2015 5:30 p.m. reception, dinner/ceremony 6:30 p.m.

2015 Honorees s Jo Michalski and Jana Hayenga, Retail Store Owners s Odom Brothers, Odom Corporation s Sherron Perry, Fairweather Founder s Dana Pruhs, Pruhs Corporation Sponsorship opportunities for the gala induction ceremony on Jan. 29 at the Dena’ina Center.

of Alaska, Inc. Call Flora Teo at (907) 344-0101 to reserve a table at this prestigious event or go to http://alaska.ja.org for more information www.akbizmag.com

Platinum Sponsorship – $4,000 Gold Sponsorship – $3,000 Silver Sponsorship – $2,500 Table – $1,500

January 2015 | Alaska Business Monthly

special section

Junior Achievement Alaska

Junior Achievement Donors Platinum Plus Investors ($10,000+) n Alaska Business Monthly n Alaska Commercial Fishing and Agriculture Bank n AT&T Alaska n Alaska Communications Systems n Arctic Slope Regional Corporation n BP n CoBank n ConocoPhillips Alaska, Inc. n ExxonMobil n First National Bank Alaska n NANA Development Corporation n Northern Lights Bingo n Ravn Alaska n State of Alaska n Walmart Foundation n Wells Fargo

Platinum Investors ($5,000+) n Alaska Commercial Company n KeyBank n NANA Management Services, LLC n State Farm Insurance

Gold Investors ($2,500+) n Alaska Airlines n Alyeska Pipeline Service Co. n Capital Office Systems n Credit Union 1 n ENSTAR Natural Gas Company n George A. Gates n GCI n Harbor Enterprises, Inc. n The Hotel Captain Cook n Katmailand, Inc. n Kinross n Lynden n David Marquez n Northrim Bank n Shell Oil n Totem Ocean Trailer Express, Inc. n Udelhoven Oilfield System Services, Inc. n United Way of MatanuskaSusitna Borough n Visit Anchorage n Weaver Brothers, Inc.

Silver Investors ($1,000+) n 3M Foundation, Inc. n Alaska Cruise Association n Alaska USA Federal Credit Union n Alyeska Resort n ASRC Energy Services n Avis Rent A Car n Calais Company, Inc. n Tom Corkran n Denali Foods, Inc. n Robert Dindinger n Dowland-Bach Corporation n Andrew Eker n B.J. Gottstein n Holland America Line Inc.

n Jim Jansen n John C. Hughes Foundation n Mary Hughes n Kodiak Lions Club n KPMG LLP n Betsy Lawer n Linda Leary n Adam & Kristen Lewis n Major Marine Tours n Matanuska Valley Federal Credit Union n Odom Corporation n Olive Garden n Petro Star Inc. n Martin Pihl n George Porter n Solsten XP n Elizabeth Stuart n USTravel n Chris von Imhof n Wells Fargo Bank Alaska–Wasilla

Bronze Investors ($500+) n Able Body Shop n Alaska Growth Capital BIDCO, Inc. n Alaska Railroad Corporation n Alaska Rubber & Supply, Inc. n Alaska Tanker Company, LLC n Robert Alexander n Anonymous n Arctic Information Technology n Chena Hot Springs Resort, LLC n Coastal Helicopters, Inc. n Anne Courtright n Cruz Construction, Inc. n David Green & Sons, Inc. n Delta Constructors n Wayne Graham n Harri Plumbing and Heating, Inc. n Tim Jacques n Kodiak Area Native Association n Stephen Lauper n Leonard & Martens Investments LLC n Daniel McCue n Princess Tours n Ted Quinn n MaryAnn Ray n Robert Yundt Homes n Jared Roe n Joseph M. Schierhorn n SKW/Eskimos, Inc. n Stan Stephens Glacier & Wildlife Cruises n Cheryl Stine n Diana Stone Livingston n The Alaska Fudge Company n The Coast International Inn n University of Alaska Anchorage n Watterson Construction Co. n Brendon Webb n Robert Yundt

Green Investors ($250+) n Afognak Native Corporation n Alaska Seaplane Service, LLC n Arctic Roadrunner Inc./ Local Burgerman n Christopher J. Birch n Dawn Bishop-Kleweno n Bradley Reid & Associates n Copper Valley Telephone Cooperative, Inc.

n Sheli Dodson n Amarin Ellis n Michael Hayhurst n Febra C. Hensley n Talitha B. Kindred n Tanya Kocur n David Lenig n Thomas Leonard n Lessmeier & Winters n Patrick K. McCaleb n J. C. Osborne n Tom Redmond n Rotary Club of Seward n Shattuck & Grummett Insurance n Flora Teo n Mark Smith n Greg Stubbs n The Alaska Club n The Shimizu Foundation n Mary L. Webb (Olszewski)

White Investors ($1+) n David Akester n Alaska Dinner Factory n Alaska Pet and Yard Services LLC n Alaska SeaLife Center n Anchorage Sand & Gravel Company, Inc. n Anchorage Symphony Orchestra n Alaina Anderson n Charles E. Ball n Joseph M. Beedle n Melissa Beedle n David Bennett n Blockbuster Video n Staci M. Bloomer n Sundi J. Bloomer n Bovey Trophies n Jennifer L. Brody n Kim J. Brown n Diane G. Bush n Bruce W. Bustamante n Linda Carpenter n Carrs/A Safeway Company n Lori Cato n Roger J. Chan n William A. Corbus n Costco n Amanda B. Crabtree n Craig Decker n Dianne’s Restaurant & Catering n Dino’s Donuts Inc. n Kelley K. Duenas n E/P ROOFING INC. n Germaine Eames n Catherine Earnest n Mark Edwards n Heidi D. Embley n Barbara B. Erb n Facility Contractors, LLC n Ingrid A. Fadaoff n FireTap Alehouse n Fireweed Business Solutions n Al H. Fleetwood n K C. Fouts n Great Harvest Bread Company n GuestHouse Inn & Suites n H2Oasis Indoor Waterpark n Larry Hartig n Annie L. Heffele n Kirk A. Henke n Heath Hilyard n Stacey L. Horn n Dorothy E. Hubbard n Robyn L. Jensen n Jewel Lake Tastee Freez

n Kaladi Brothers Coffee Company n Kenai Fjords Tours n Derek B. King n Todd Knutson n Kodiak Inn n Calvin Koshiyama n Law Offices of Davison & Davison, Inc. n Jeanine Lillo n Logistics, LLC n Lucky Wishbone n Mahay’s Riverboat Service, Inc. n Siri Mandery n Lucinda Martin n Mark Mathis n Christopher McConnell n McDonald’s - Jewel Lake n Rita McKenzie n Keri Melvin n Dorothy J. Michael n Middle Way Cafe n Midnight Sun Brewing Company n Susan Miline n James R. Miller n Stephanie A. Mode n Moose’s Tooth / Bear Tooth n Ann M. Morgester n Erin Morotti n Mary Jo Mrochinski n Bryan Nelson n Teresa D. Newins n Julia M. Niziolek n Stephanie Oglesby n Brittan S. Olsen n Jay Page n Katie Palaniuk n Lori A. Petty n Phillips Cruises and Tours n Walter Phillips n Plumbline Supply n Jacob Polzin n Pat Purcell n Putters Wild n Red Robin Alaska, Inc. n Riverboat Discovery n Rosny Rizk n Robert Cederholm and Associates Inc. n Amy H. Robinson n Daniel J. Rozema n Garnet Sarks n Vincent Schmoyer n Dustin E. Shannon n Sheraton Anchorage Hotel n Louisa Smoke n Jeffery S. Stanford n Michael Taylor n Janet K. Tempel n Carrie A. Todd n United Way of Anchorage n University of Alaska Anchorage/ Department of Athl n Alexandria Utke n Walmart - Midtown n Walmart - Old Seward n Beverly J. Walsh n Laura D. Walsh n Michelle K. Wamack n Maria Ward n Audrie Williams n Heidie L. Wines n Jamie A. Wise n Julie Woodworth n Brian Worthington n Wright Choice Electric Company n Erin Yoshiyama

Alaska Business Monthly | January 2015 www.akbizmag.com

“

Did you know that if you put half of my PFD in a college savings plan I could win a $25,000 scholarship account?

”

When you check “yes” on line #6 of your and/or your child’s PFD application and contribute to a UA College Savings Plan, you’ll be automatically entered to win a $25,000 scholarship account or one of four $2,500 scholarship accounts.*

If kids could see into the future, they’d put a college savings plan at the top of their wish list. It’s easy to see why: • Kids who continue their education after high school are likely to earn more over their lifetime than those who don’t. • You can use any savings at vocational and technical schools. • $25/month is all it takes to get started. • You can automatically invest up to 50% of your PFD. THE UNIVERSITY OF ALASKA

COLLEGE SAVINGS PLAN UACollegeSavings.com 1-888-4-ALASKA

If you are not an Alaska resident, you should compare this plan with any college savings plan offered by your home state or your beneficiary’s home state and consider, before investing, any state or other tax benefits that are only available for investments in the home state’s plan. Go online or call the number listed above to request a Plan Disclosure Document, which includes investment objectives, risks, fees, expenses, and other information. You should read the Plan Disclosure Document carefully before investing. | Offered by the Education Trust of Alaska. T. Rowe Price Investment Services, Inc., Distributor/Underwriter. *Certain restrictions apply; visit UACollegeSavings.com for complete rules.

EDUCATION

Experimental Economics UAA’s program holds international esteem By Dr. James Murphy and Dr. Jonathan Alevy

rape farmers in central Chile had a problem. Their worldfamous vineyards required a steady supply of water, but the region was susceptible to droughts. Growers of annual crops, like wheat and corn, had more flexibility to deal with these water shortages and could sell water to grape farmers. The challenge was figuring out how to connect buyers and sellers. Typically these water trades occur between friends and neighbors, but the process was time consuming and trading partners can be hard to find. A UAA economics professor and his Chilean colleagues had ideas for an online marketplace that might improve the current system. But how could they be sure? And how could they convince the farmers to adopt their idea? To answer these questions, the researchers used the tools of experimental economics, a field pioneered by Vernon Smith, 2002 Nobel laureate and UAA’s first Rasmuson Chair of Economics. Smith recognized that although markets can be incredibly efficient, their success depends upon the rules governing trade. To determine which market design would perform best, the researchers tested their ideas using carefully controlled laboratory experiments—in much the same way that new pharmaceutical drugs are rigorously tested before being adopted. How does an economics lab experiment work? Researchers design an experiment that captures the key features of a “real world” market under study, such as Chilean water. Participants are assigned the roles of buyers and sellers making trades. They have an incentive to think carefully about their decisions since the money they earn from trading is theirs to keep. During the experiment, researchers can change the rules of exchange and the incentives—and by observing how 28

the participants’ behavior changes as the rules or incentives change, they can evaluate the market performance. They can compare results of the experiment with theoretical predictions. In the past twenty years, the field has grown rapidly. Lab experiments have been used in a number of high profile contexts, including the multi-billion dollar FCC spectrum license auctions, the design of emissions trading programs, and the allocation of space on the Cassini mission to Saturn. Many large corporations, including Google, Yahoo, and Microsoft, have added experimental economists to their teams. As modern experimental economics has expanded its range, it has also developed new methods. While laboratory studies using college students remain a core methodology, an important trend is the move to field settings with diverse subjects making decisions in their natural environments. Some Anchorage residents may have noticed that Chugach Electric Association recently started including a comparison of their energy use with those of their neighbors. This idea is rooted in experimental research which showed that these social comparisons are effective at inducing people to curtail consumption. Similarly, a number of nonprofits in Anchorage have used field experiments to refine their messages, attract new donors, and increase giving. Field experiments offer tremendous potential in other Alaskan contexts, such as evaluating the effectiveness of employee wellness programs or creating incentives for improving educational outcomes. While Vernon Smith’s contributions have been felt worldwide, his influence is concrete in Alaska. Under his guidance, UAA established an experimental economics program, which now has a core group of faculty trained in

Current Research Projects at UAA’s Experimental Economics Lab n Charitable giving and philanthropy in Alaska n Fisheries management in Alaska and Chile n Management of shared natural resources in Latin America n Subsistence harvests in Western Alaska and Far East Russia n Design and enforcement of emissions trading programs n Development of a partnership with Nankai University to build a new experimental economics program in China n Recreational demand on the Kenai Peninsula n Asset market bubbles and crashes n Properties of Right-toChoose auctions n Seasonal effects on economic behavior n Emotional and cognitive contributions to ethical decision-making n Inference, decisionmaking, and personal identity

both laboratory and field methods. In less than ten years, this program has achieved international recognition and is now ranked in the top 10 percent of all experimental economics programs worldwide. R

Alaska Business Monthly | January 2015 www.akbizmag.com

Dr. James Murphy is a Professor of Economics at the University of Alaska Anchorage. He arrived at UAA in 2006 as the visiting Rasmuson Chair of Economics and decided to remain at UAA as a full-time faculty member after his tenure as Chair ended in 2011. Prior to arriving at UAA, he was on the faculty at the University of Massachusetts Amherst. He received his Ph.D. from the University of California Davis and studied experimental economics as a pre-doctoral fellow at the University of Arizona. As part of a university partnership to develop a new experimental economics program in China, he is also a visiting professor at Nankai University and Chairman of their new Nankai Vernon L. Smith Experimental Economics Laboratory. Murphy’s research focuses on the use of experimental methods to address environmental policy and natural resource management issues. His goal is to build a world-class research and teaching program at UAA which emphasizes the use of experimental methods applied to various policy issues. He is an active board member of the International Foundation for Research in Experimental Economics and was a member of the North Pacific Fishery Management Council’s Scientific and Statistical Committee from 2011-2013. Dr. Jonathan Alevy is an Associate Professor in the Department of Economics and Public Policy at the University of Alaska Anchorage. He studied experimental economics at the University of Arizona as a predoctoral fellow before receiving his Ph.D. from the University of Maryland in 2006. He held a faculty position at the University of Nevada Reno before coming to Alaska in January 2009. Before graduate school he worked on the floor of the Chicago Mercantile Exchange. Alevy has conducted research in finance and in natural resource, development, and behavioral economics. He has consulted for the World Bank, and the US State Department. www.akbizmag.com

STAY LONGER-SAVE MORE! Best rates in Fairbanks for corporate & government travel.

Free WiFi & HDTV Airport shuttle service - Fitness center - Housekeeping - Laundry facilities Reservations 800.528.4916 | FountainheadHotels.com

UPGRADE YOUR PARKING TO BUSINESS CLASS The next time business takes you to Ted Stevens International Airport, let Alaska Park take care of your vehicle. We’ll keep it safe while you’re gone and warmed-up for you upon your return. • • • • •

Secure, well-lit facility 24/7 on-demand shuttle Minutes from airport Alaska Airlines Miles Incentive program

C O M PA N Y

sales@alaskapark.com • 907-222-6002 AlaskaPark.com January 2015 | Alaska Business Monthly

30 Years of ABM

special section

Anniversary

Alaska Business Monthly | January 2015 www.akbizmag.com

Looking back at Alaska Business Monthly By Susan Harrington, Managing Editor

n the premiere issue of Alaska Business Monthly, January 1985, First National’s Chairman Dan Cuddy (then and now) graced the cover. In 1985, First National was First National Bank of Anchorage—it has since been renamed First National Bank Alaska. Many of the businesses featured (and advertising) in the first issue are still active in Alaska. Some, not. Let’s look at First National, Usibelli, Wein, and what else was going on then.

Cover Story The cover story was entitled “Cuddy’s Three C’s of Banking: Conservative, Consistent, Cash on Hand.” It was a great story by Paul Laird, original editor and one of the magazine’s co-founders, about how Chairman Dan Cuddy turned First National into Alaska’s most profitable bank by maintaining a conservative loan portfolio and building a strong asset and cash base.

Ironically, the lead to the article referred to more thirty years in the past, then—over sixty years ago now! “If it seems ironic that Alaska’s most profitable banker is also its most conservative, it shouldn’t … Chairman Dan Cuddy started building today’s profits more than 30 years ago when he became the bank’s president in 1951.” The article is full of business advice from Cuddy—the patriarch of the Alaska banking industry. Here are a few direct quotes from the article, as applicable today as thirty years ago. “There are two kinds of businesses— ones that are controlled by the shareholders and ones that are controlled by the management. Companies controlled by the management tend to look for immediate returns. Managers are more interested in the shortterm aggrandizement of themselves. Companies that are controlled by the

stockholders tend to have a longer term outlook on things. They’re interested in short-term profits, but they’re not vitally interested in them. They’re more interested in sustained growth.” “A bank can’t expand beyond its capital base or its personnel,” Cuddy says. “That’s why we’ve kept our dividends small. If we spent our profits on dividends, we wouldn’t have had money for expansion.” “Buying everything instead of leasing space adds to our up-front costs, but it’s more economical in the long run,” Cuddy says. “We can build our asset base and lower our occupancy costs at the same time.” “We don’t worry about the industry or the competition. We figure if we look out for the needs of the community and our employees, the return to stockholders will take care of itself.”

Rugged as a Bear STABLE … STURDY … SOLID

With decades of experience serving the Alaska market, Span Alaska’s seasoned team has time-tested solutions for shipping to the Last Frontier. SHIPPING TO ALASKA? CALL SPAN ALASKA.

1.800.257.7726

www.akbizmag.com

•

w w w. s pa n a l a s k a . c o m

January 2015 | Alaska Business Monthly

Usibelli Coal Another story was about Usibelli Coal Mine, Inc. and Joe Usibelli Sr. The company was poised to begin exporting coal to Korea and looking for ways to use more coal in Alaska. Then, as now, Usibelli was and is the only operating coal mine in Alaska. Through what appeared to be a nine-year battle, Usibelli was fighting to be able to export coal and said, “We will get Alaska into business in the Pacific Rim with coal and other minerals since we can’t do it with oil.” Another interesting aspect of the article written thirty years ago by Robert F. Dixon resonates now: “Lately, Usibelli has used his newfound public prominence to argue against construction of the $5.3 billion Susitna hydroelectric dam project.” Does that project sound familiar? The article continued, “In a debate with supporters of the project before the Anchorage Chamber of Commerce, Usibelli argued coal is more economical and can be online much sooner than the huge water power project. Further, he believes the Susitna dams will cost far too much and provide more power than Southcentral Alaska can use.”

Reading that article gave me goose bumps; it’s eerily omniscient in its coverage of the hydroelectric project, Cook Inlet natural gas, North Slope natural gas, Southcentral power plants along the Railbelt, and the way thirty years hasn’t much changed those same issues. One thing hasn’t come true—coal was predicted to be the main generator of electricity, not natural gas, in the absence of hydroelectric power. Also mentioned is Usibelli’s famous walking dragline “Ace in the Hole,” so named because it was operating in Poker Flats. We’ve featured that piece of machinery in subsequent articles about the company, which of course is still in business. The final paragraph foretold that as well. “Already they are a team, Joe Sr. is known to employees on the company’s CB radio system as ‘One.’ Son Joe, grandson of the mine’s founder Emil Usibelli, is known as ‘Number Two.’ It is the only livelihood either of the two men has ever known, and they are certain Usibelli Coal Mine will continue to be a factor in the Pacific Rim’s industry for many years to come.”

Wein’s Bush Pullout “Life without Wien: The Bush barely bats an eye,” proclaimed the headline of another story in the premiere issue. In 1984, Wein Air Alaska pulled out of the rural markets, apparently after deregulation of the airline industry caused the company to no longer have a monopoly and competition ensued; it was also due to the US Postal Service changing the way it allocated mail handling money. The article ended up being a nice write-up of all the Bush carriers with anecdotes from many of the owners and managers of those air carriers— some still in business, some long gone. Northern Air Cargo, Cape Smythe Air, MarkAir, Alaska Airlines, Ryan Air, Bering Air, ERA Helicopters, Seair, and Harold’s Air Service were all mentioned. Wein evenutally went bankrupt later in 1985 after some purported corporate raiding and ceased to exist at all, although years later there was a failed rally to try and get it revived. Juneau, Still the Capital In 1982 Alaska voters refused to fund moving the state capital to Willow from

Alaska Business Monthly | January 2015 www.akbizmag.com

Juneau. There was an article in the January issue about the boom that vote triggered in Juneau and how it was leveling off. This article was a comprehensive look at Juneau in Southeast, setting the magazine’s practice of providing statewide coverage in the initial issue. The bit of increased real estate was seen as possibly helping create a new industry for Juneau—tourism. Guess what, it worked! There was also mention of the possibility of another industry—mining. Greens Creek was producing by 1989 and is now one of the top silver mines in the world.

Economic Outlook “Alaska’s economic growth: Same game, new players” was the title for that first economic forecast article, something else that’s remained throughout the years. It looks like that first one was produced by Alaska Pacific Bancorporation and was rife with predictions in many sectors of the economy, many of which could be recycled for 2015. “1985 will be a year during which Alaska consolidates its gains, takes a deep breath and begins to re-emphasize the private

www.akbizmag.com

sector as the source of sustainable progress,” the forecast says. “1985 will probably see some transitional friction; the realignment of expectations will not be painless, and financial casualties should be expected. They should, however, be viewed in the context of (laying the foundation for longterm growth) and not be interpreted as a sign of permanent doldrums.” Petroleum—The oil industry continues to invest in big-ticket Alaskan projects despite the uncertain future of world oil prices. Construction—This year, commercial construction should slow while residential and public sector activity increases. Forest Products—Nothing is so bad it can’t get worse. Fishing—The biggest cloud on Alaska’s fishing horizon is the strong US Dollar. Visitor—Alaska’s visitor industry continues to gain momentum.

Endearing, Enduring Alaska Business Monthly, thirty years later, is still endearing readers with its great stories and excellent coverage of

all things business in Alaska. We’re committed to continue the traditions for another thirty years and we’ve all got the original founders to thank for starting this fine magazine—especially first publisher Robert F. Dixon and first editor Paul Laird, as well as the rest of the original initial investors: Allan D. Gallant, Larry Dinneen, Carol Smith, David Devine, John Laird, Vern McCorkle, Robert Penney, Robert R. Richards, James T. Robinson, Alan B. Rosenthal, Tony Smith, and Meridith A. Sykes. It was only four years later in the February 1989 issue, not too many years into the production of the magazine, when James C. Martin was welcomed onboard by Carol Smith, then president. He ended up being the most enduring member of the board, yet. His guidance is still fresh in our minds as we continue into the next phase of the evolution of Alaska Business Monthly. To those who came before us, we commend you. To our eminent freelancers and distinguished guest authors, we praise you. To our faithful readers and fabulous advertisers, we thank you for keeping it going. R

January 2015 | Alaska Business Monthly

special section

Economic Outlook

Alaska and the United States in 2045 By Dr. Ashok K. Roy

The opinions expressed herein are the author’s own and not those of the University of Alaska System or Alaska Business Publishing, Inc.

“I never think of the future—it comes soon enough.” —Albert Einstein “For time and the world do not stand still. Change is the law of life. And those who look only to the past or the present are certain to miss the future.” —John F. Kennedy

hirty years from now, in 2045, some key challenges that Alaska and the United States will face relate to growth, which will become increasingly dependent on knowledge and technology while the economic costs of environmental damages will mount. The rising economic importance of knowledge will likely lead to further increases in income inequalities. There will also be policy challenges from rising trade integration, substantial fiscal pressures, burgeoning population growth, and addressing rising climate change costs. My goal is not omniscience but preparedness by pro-

viding broad outlooks for Alaska and the United States.

Diversify State Revenue Base Readers might recall that in my October 2012 article titled “Strategies to Prepare Alaska for the Economic Marathon” I recommended that Alaska needs to diversify its revenue base as early as possible as almost 90 percent of its general fund revenues come from oil (production tax, petroleum property tax, corporate income tax, royalties from stateowned lands) and more than 50 percent of today’s jobs and income in Alaska can be traced back to petroleum. Alternative fuels and technologies are likely to substitute petroleum in the coming decades. The markets will ensure that money/investments go wherever there is opportunity. The biggest shift in global energy markets is that the United States is producing an unprecedented amount of oil now with geopolitical fallout. Apart from crude oil prices, alternative fuels,

higher efficiency vehicles, natural gas, shale oil deposits, biofuels, and stagnation of world economies all cumulatively point to great vulnerability ahead due to Alaska’s over-dependence on oil revenues. It needs to be emphasized that it is not a question of volatility of “prices” but that of “demand” for petroleum. It is a distinction with a difference. Minerals, fish, wildlife, or timber cannot replace or make up the difference in revenue declines from petroleum to sustain Alaska’s economic future. And, this, in turn, will have ripple effects on the University of Alaska (currently receives approximately 46 percent of its revenues from the state); housing (which is driven by jobs and income, and, in turn, the local banks who finance housing); demographic growth; consumer goods; groceries; and almost all other aspects of economic development. As a downstream impact, nearly all the impacted areas will need to collapse around a core to right-size.

Alaska Business Monthly | January 2015 www.akbizmag.com

A Few Opportunities Climate change in Alaska will diminish sea ice which, on one hand, will open huge opportunities, especially for shipping, but on the other hand will cause coastal erosion forcing population relocations, displacement of commercial fishing catch, and damage to infrastructure built on permafrost. Climate change in the Lower 48 will impact critical water supply, especially in the southwestern states (where groundwater depletion will have an impact on food supply, as currently approximately 25 percent of US food supply comes from Central Valley in California), reduce crop yields, disrupt coastal marine ecosystems, and spawn more frequent intense storms and wildfires. The future offers a few opportunities for Alaska to sustain its economy. The tourism industry will continue to have a bright future as Alaska’s natural beauty will remain with few parallels in the world. This is good news for the hospitality industry. Readers will also recall that I dwelt on the discovery of dysprosium on Alaska’s Prince of Wales Island in my April 2014 article “U.S. Relationships with Asia-Pacific Region: A confluence of imperatives for Alaska.” If dysprosium is developed and value-added, this has potential to break China’s monopoly of rare earth elements (used in many critical technologies including the manufacture of smart bombs and drones). Further, as alluded to earlier in this article, there is substantial potential to boost air and sea freight traffic via Alaska between Europe and Asia by switch-loading cargo. The fundamental conundrum for Alaska is to figure out what type and size of economy will sustain jobs in Alaska. Serious Challenges to US Economy Depending on some variables (such as domestic growth, inflation, exchange rate) there is consensus of opinion among experts that in about a decade from now, China will become the world’s biggest economy. This will have serious geopolitical, economic, and military implications for all. I agree with CBO’s projections that the growth of US potential GDP over the next decades will be slower than the average since 1950, primarily from demographic trends. www.akbizmag.com

I believe that, based on data, the United States will continue to benefit from trends in technology and globalization. Over a billion people will be added to the world middle class (due to the rise of emerging markets), which would translate into more consumer demands for education, products, services, and entertainment—all of which the United States excels at. The United States will also continue to propel innovations in medicine, energy, bioengineering, and communications. Further, the United States will retain its dominant military status (defense spending is 5 percent of our GDP). There are always two sides to a coin. If the United States does not address four serious challenges that loom overhead, then its national politics and societal cohesion will become an albatross around its neck. The four chief challenges are: expensive and inefficient healthcare costs (the United States spends 17 percent of its GDP or 50 percent more per capita than that of the next highest OECD country with higher infant mortality and less longevity); income inequality and poverty (income equality in the United States is much higher than any other advanced country); weak secondary education (American fifteen-year-old students rank 22nd in science and 31st in mathematics among sixty-five countries in the PISA standardized tests), which means future workers will offer mediocre skill sets in a knowledge-driven economy; and huge infrastructure deficits. It is easy for a nation, or a state, to stumble into disaster without quite knowing why. The future for Alaska and the United States, like particular fates, hangs in the balance, waiting to be tipped. R

Dr. Ashok K. Roy is the Vice President for Finance & Administration/ CFO and Associate Professor of Business Administration, University of Alaska System. January 2015 | Alaska Business Monthly

special section

Economic Outlook

Finding Sound Solutions to Fiscal Challenges

ecent editorials commenting on Alaska’s revenue projections and declining oil prices have said I must be crazy for wanting to be Governor at this point in our state’s history. With oil prices projected around $65 per barrel for the year ahead, some say Alaska’s economic future looks less than rosy. However, having been in this position for a few weeks now, I can say with the utmost conviction that my passion for leading our great state has never been stronger. I firmly believe in doing the best with the cards you are dealt, and that with adversity come resilience and creativity. With that in mind, Lieutenant Governor Byron Mallott and I are determined to find sound solutions to the fiscal challenges that lie ahead. Will that call for some belt-tightening? Absolutely. But with a more realistic assessment of Alaska’s revenue stream, we can shape our expectations appropriately and make smarter decisions around funding our state government. Ultimately, this will allow us to better serve the people of Alaska for generations to come. This must start by addressing the high cost of energy throughout the state. For so many people living in rural and interior parts of Alaska, it is not uncommon to pay more for monthly heating bills than a mortgage or rent payment. This can put families in the most dire straits, losing basic necessities like heat and electricity when the bills cannot get paid. As a child, my family lived through these struggles, sometimes going without electricity and running water during Delta Junction’s cold winter months. While such living conditions may have been conceivable fifty years ago, today it is unfathomable. This environment is having devastating effects on local economies, and forcing many families to leave their communities, and the state altogether, in search of more affordable living elsewhere. Lieutenant Governor Mallott and I believe this is simply not acceptable, and have made it a top priority of our administration to address the looming energy crisis that our state is facing. As Alaskans, we are in this fight together, and must 36

work together to find energy solutions for the good of our state as a whole, not just our own regions. Developing our natural gas resources on the North Slope is at the center of this solution, reducing our reliance on expensive diesel fuel and providing an additional revenue stream to our state coffers. With oil production declining, an all-Alaska natural gas pipeline would reinvigorate exploration on the North Slope and provide much needed jobs to our state’s workforce. Now, more than ever, is the time to see an LNG project to fruition, and this administration is committed to making that happen. Former Governor Wally Hickel said “during the early days of Alaska, it wasn’t ‘them and us.’ It was all of us.” With Governor Hickel’s words in mind, along with the pioneering spirit of our state’s founding fathers and mothers, I believe we can rise to the occasion and overcome the challenges that lie ahead. It is our duty as leaders, and as Alaskans, to find solutions to these issues in order to better the lives of future Alaska residents. R —Governor Bill Walker

Alaska Business Monthly | January 2015 www.akbizmag.com

Anchorage Cautiously Optimistic for 2015 W

ith the price of oil dipping below $70 per barrel, there is justifiable concern statewide about the future of our economy. The state budget is an estimated $3 billion in deficit, requiring the new administration and the Legislature to make some very tough spending decisions, and once again, the question of new taxes will be on the table. Local governments, Anchorage included, are facing the prospect of revenue sharing being reduced or eliminated altogether. For Anchorage, that represents approximately $15 million in revenue. Other state funded programs will certainly see reductions, which in some cases will transfer the burden to the local communities. Fortunately, Anchorage is well positioned to weather this latest economic storm. For the past five years, my administration has worked diligently to become a more efficient and cost effective government, without reducing essential services. An example is our 2015 budget that was recently approved by the Anchorage Assembly. Amazingly, the budget is $3 million less than the 2014 budget, and continues our efforts to contain the unsustainable spending and property tax growth of the previous administration. Our frugal management has allowed us to establish significant operating and emergency reserve funds that can help

www.akbizmag.com

us through downturns. Our finance team has taken advantage of strategic debt refinancing and has invested our trust fund wisely to earn top returns. This overall financial performance has earned Anchorage an AAA bond rating from Standard and Poor’s, the highest rating a city can receive. Of the 4,000 cities rated by S&P, only a few hundred have an AAA rating, placing Anchorage into truly elite company. Anchorage’s diverse economy helped us weather the 2008 Great Recession and will help us remain stable in the years ahead. Tourism in Anchorage had a record setting year in 2014 and the outlook is good for 2015. The Ted Stevens Anchorage International Airport is gradually rebounding from losses in cargo volume and is the fourth largest cargo airport in the world. Businesses associated directly and indirectly with the airport account for one in eight jobs in Anchorage Our university and medical community, collectively known as the U-Med District, continues to expand with new facilities under construction and with more long-term jobs. Joint Base Elmendorf-Richardson (JBER) will likely see growth if the transfer of the F-16 squadron from Eielson Air Force Base in Fairbanks is approved, which appears likely. The Port of Anchorage will continue its role as the conduit for 90 percent

of all the consumer goods that enter Alaska. It supplies all of the fuel for JBER and also sends fuel to the international airport. The Anchorage Port Modernization Project is back on track and when completed it will have the capacity to expand Port of Anchorage business opportunities and will serve Alaska for many decades to come. Finally, Anchorage is the headquarters city for most professional services including banking, the oil industry, and for the majority of our Alaska Native Corporations, several of which have become billion dollar entities and whose profits return to Alaska from their worldwide ventures. I remain optimistic about Anchorage in 2015 and in the years to follow. Anchorage will be 100 years old in 2015 and with clear vision and strong leadership, we can look forward to another one hundred years of prosperity. —Anchorage Mayor Dan Sullivan

January 2015 | Alaska Business Monthly

special section

Economic Outlook

The Alaska Economy Past, present, and future By Naomi Klouda

he past thirty years witnessed Alaska’s economic growth through climbing and falling oil prices, growing pains of Alaska Native corporation prosperity, and a position in global logistics eyed by not only businesses but also the US military. Predicting those changes in advance tends to be more than an economist’s powers endow, says Neal Fried of the Alaska Department of Labor and Workforce Development. Looking back, political, environmental, and social events erupted and altered what were thought to be predictable economic turns. “In 1985 and into the 90s, we were writing about Alaska’s military influence declining in a dramatically smaller role, while two other industries were growing: the visitor and oil industries,” Fried says. “Then thousands of troops were sent to Alaska after 9/11. We never could have forecast that. Who knows what the federal government might do in the next ten years?” Interest in Alaska gold mining and production came as a huge surprise in the past decade, Fried says. “Gold production had declined for fifty years and it seemed dead. Now we’re producing as much as the Gold Rush. It took one hundred years to make a comeback.” Salmon fisheries saw woefully low prices in the previous decade. “What we didn’t realize was that the demand for wild salmon would grow,” Fried says. Fried makes modest forecasts that oil and gas, the visitor industry, and fisheries will continue to play important economic roles in the years to come. “Those 38

Change is On the Horizon

ny economic forecast in Alaska must start and end with oil—its price on the world market, how much of it is going through the pipeline, and the exploration and new production on the horizon. As the price of oil continues to fall, how will our state leaders respond to what may be a significant negative impact on our state’s income, at least for the short term? What’s the economic impact to Alaska’s economy if budget cuts are to come in response to dwindling oil income to the state? There are individual economic indicators that tell a positive story for the coming year. For instance, there’s reason to feel good about job growth in the private sector and in the oil patch in the coming year. Oilfield services activity is picking up due to new exploration and maintenance at existing facilities. If the state moves forward with the LNG (liquefied natural gas) line on its current path, we can be hopeful about continued development on the North Slope and Point Thomson. Alaska Native corporations are also a bright spot in the state’s economic future. The top forty-nine Alaskan-owned companies in terms of gross revenue, as named by Alaska Business Monthly in October, included nineteen companies owned by Alaska Native corporations and villages. We feel good about job growth in the private sector. Construction on a number of projects will start in 2015 in the Fairbanks and Tok areas, and it looks as though the Healy clean coal project is slated to come back online in 2015. State fisheries experts are predicting an “excellent” pink salmon catch in Southeast, and Bristol Bay is expected to see the largest red run in decades. Commercial fishing is the state’s largest pri-

Betsy Lawer

vate sector employer by number of jobs. And from what we can tell, tourism in Southeast appears to be on the rebound going into 2015. Our bank’s belief in Alaska and confidence about its future is evidenced by two new branches under construction—one in Anchorage and another in Juneau. In response to the continued growth of the state’s healthcare sector, in January our bank will open a new U-Med Branch adjacent to the University and Providence campuses in Anchorage. Acute and outpatient care, physicians’ offices, and home healthcare services will continue to see increased employment as Alaskans age and use a disproportionate amount of these services, according to state labor predictions. We also expect to see continued economic opportunities in Southeast Alaska, and so we will open a new and bigger branch in downtown Juneau. Change is on the horizon, and change means uncertainty. Today we’re working with Alaskans to help them face the challenges of a changing economy and position their businesses for success in the future. We believe in R Alaska. —Betsy Lawer, President, First National Bank Alaska

Alaska Business Monthly | January 2015 www.akbizmag.com

industries will be important. How important is the big question.” Fried celebrates thirty years as an Alaskan economist this year. “In that thirty years, a lot of waxing and waning goes on, factors we had no input on,” he says. What proved constant were the three pillars of the Alaska economy: oil and gas, government spending, and tourism. He doesn’t foresee federal spending going away. “The feds are a major land owner, and they will have a continued presence due to the federal trust relationship with Alaska Native tribes.”

Unknowns and Presumptions Like Fried, Bill Popp, president and CEO of the Anchorage Economic Development Corporation, says forecasting carries a lot of unknowns. Yet reading the writing on walls of the next thirty years does carry a few presumptions worth keeping in mind, he says. “I think we can look at international trade as one place where our opportunities lie in the immediate future and beyond, and Alaska will continue to have a resource extraction-based economy for generations to come,” Popp says. Alaska’s small population spread over a huge geography will continue to influence its limitations and opportunities. “The ability to sell our resources to a global marketplace—our minerals, oil and gas, and wild seafood—will be a major driver,” he says. The immediate years ahead, however, put Alaska in a precarious position in the downward direction of oil prices, the consequent need to ratchet down state spending, and a debt-riddled federal government. “Use the wealth wisely: that will be our challenge, in [this year’s] new fiscal reality of $60 to $70 a barrel of oil,” Popp cautions. “Alaska’s location and global logistics and position in the supply chain—that’s an opportunity for us. After the global recession, the ability to take advantage of the logistics supply chains could present opportunities we don’t expect.” Alaska’s preeminence as a seafood source is one such opportunity. “If we can maintain the integrity of our seafood industry, we will continue to see Alaska seafood command premium prices,” Popp says. “A vast amount of protein comes from here. We can continue to grow in markets like China, given the awful environmental conditions www.akbizmag.com

there that present an opportunity because they value pristine, wild seafood.” Climate change in Arctic and subArctic conditions also bodes challenges and opportunities well into the next thirty years, Popp notes. The ability to develop technologies offers small clusters of growth in the years ahead. These days, even when it’s tough, the market shows more resiliency than in the 70s and 80s and less vulnerability to boom-and-bust doom historically true of Alaska, Popp says. “[Alaska] is in a better fiscal situation in terms of the

overall economy. We have to be mindful of what is going on, protect ourselves when we need to, and be smart with our dollars and smart with our policies.” Popp predicts solving the energy challenges of rural Alaska will be one of the “greatest issues facing our state in the next thirty years. “It shouldn’t take that long to solve. It’s an intractable issue—it slows economic growth or reverses the economies of rural communities. We have to address that issue,” Popp says. “I hope that we solve it. If the challenges are overcome,

BUILDING AL ASK A’S

ECONOMY FROM THE ALEUTIAN ISLANDS TO THE NORTH SLOPE, OUR 2014 PROJECTS SPAN THE STATE.

BRICE

LOCATION: Kotzebue LOCATION: Calista Region PROJECT: Runway Construction PROJECT: Yukon to

E3 ENVIRONMENTAL

NORDIC-CALISTA

BRICE ENVIRONMENTAL

Kuskokwim Freight and Energy Corridor Plan

SOLSTICE ADVERTISING TUNISTA CONSTRUCTION LOCATION: Donlin Creek

LOCATION: Dutch Harbor PROJECT: Contaminated

Soil Removal

CHIULISTA SERVICES

LOCATION: Kodiak PROJECT: Full Food Services

for the United States Coast Guard

PROJECT: Donlin Gold

FUTARIS

LOCATION: Ketchikan,

LOCATION: North Slope PROJECT: Drilling Rigs

Tyee Lake, Swan Lake, Petersburg and Wrangell PROJECT: Southeast Alaska Power Authority

STG

LOCATION: Sitka PROJECT: Blue Lake

Hydro Expansion

YUKON EQUIPMENT

LOCATION: Fairbanks PROJECT: Barracks Rehab

LOCATION: JBER PROJECT: Multi-Purpose Machine Gun Range Construction

TUNISTA, INC.

LOCATION: Bethel PROJECT: Business Complex

t: (907) 275-2800 ★ f: (907) 275-2919 ★ calista@calistacorp.com January 2015 | Alaska Business Monthly

“You cannot be overly focused on just one industry. There has to be diversified income stream. I’ve seen it happen time and again where a larger or smaller corporation counts on one sector and sees a significant downturn for a year or two. It brings their own house down.”

—Jason Metrokin President and CEO, BBNC

then we will see significant activity that we can’t even begin to fathom.” The Knik Arm Crossing, the giant Susitna-Wantana Hydro Project, and new roads to resources are all future possibilities with economic and government hurdles to overcome. A variable that could impact these projects and others is how Alaska’s population growth pans out in the decades ahead, Popp says.

Population Factors Many large-cost projects are difficult to justify for a relatively small population when it comes to investors and government financing. A lot of speculation centers on when Alaska might reach 1 million in population. State Demographer Eddie Hunsinger has projected Alaska’s baseline population out to the year 2042 as growing to about 925,000 from today’s 736,000. That’s a growth of only about 189,000 people in the next three decades, based on consistent mortality, birth, immigration, population loss, and upward shifts in aging populations. “That’s faster growth than the nation as a whole,” Hunsinger says. “We do project the population will grow slower. The birth-to-death ratio will slow down, as will the fast growth we see right now in numbers of those moving here.” On the high end of the baseline projection is a forecast of 1.2 million people—a chance Alaska will pass the 1 million population hurdle. It’s not a large chance, Hunsinger says, but is one within the realm of possibilities. Consider that thirty years ago, in 1985, Alaska was mid-way between its 1980 census of 420,000 and the growth to 550,000 in 1990—an addition of 130,000, and that growth slowed to 80,000 the next decade to the year 2000. Between 2000 and 2014, another spurt brought the census an additional 73,600. Based on this rate of growth, Hunsinger developed the baseline projection of 925,000 by the year 2042. The implication of a larger aging pop40

ulation has meant more services will be needed in the healthcare field and businesses that serve that group. On the other end, children and teen services could see a decline consistent with that slowing demographic growth, including education funding. Alaska’s Native population is expected to continue to grow over the projection period, from 122,944 in 2012 to 161,483 in 2042. Like the state as a whole, the Alaska Native population’s growth is expected to slow as the population ages.

Alaska Native Corporations Of the Alaskan-owned companies that self-report gross revenue to Alaska Business Monthly, the top four are all Alaska Native Corporations, with Arctic Slope Regional Corporation remaining in the lead with its $2.5 billion in gross revenue. Following closely is the Bristol Bay Native Corporation (BBNC)in the second slot ($1.8 billion), NANA Regional in the third ($1.7 billion), and Chenega Corporation in fourth ($1 billion). In fact, of the twenty highest grossing Alaska Business Monthly Top 49er companies, fifteen are Alaska Native Corporations formed under the 1971 Alaska Native Claims Settlement Act. Alaska Native Corporations saw a lot of changes in the past thirty years to build today’s present rate of success, says Jason Metrokin, president and CEO of the BBNC. One of the most important moves was the ability to find diverse investments to buffer against downturns in any one segment. Today, there is a new shift at BBNC and other corporations to add home-grown investment opportunities into the mix. “We’ve all had the experience in the Lower 48 and even internationally in finding opportunities to diversify our portfolios. Now there’s a sharper focus on small business growth and expansion, such as the Alaska cottage industry businesses that have done well.” BBNC’s investment in Peak Oil Field Services was one of the biggest Native

corporation acquisitions. Investing instate makes sense. The expertise and resources are here, while Outside investments may prove difficult to manage from afar, Metrokin says. “This doesn’t mean we’re turning our backs on our business emphasis of diversification,” he says. “Other Native corporations are following a similar strategy, looking for new opportunities. Oil field support is going to be a boon for Alaska, given our new tax structure. You’ll see several regional corporations are building new commercial real estate complexes, such as Calista and CIRI. One of the big areas of investment is government contracting. On the flip side, the federal government is looking for ways to pull back spending. There are regulatory challenges. We are having to look at new ways to contract for the federal government.” The pitfall for any corporation is to focus on too few sources of income. Oil field services, real estate, and tourism are good ways to diversify, Metrokin says. “You cannot be overly focused on just one industry. There has to be diversified income stream. I’ve seen it happen time and again where a larger or smaller corporation counts on one sector and sees a significant downturn for a year or two. It brings their own house down.” If there were a lens to look at thirty years down the road, Metrokin believes that Native corporations can sustain their high levels of success if they strive for multiple sectors, including involvement in large scale opportunities such as the Alaska natural gas pipeline project from the North Slope to the Kenai Peninsula. Training and education options for shareholders, an unique aspect of the Alaska Native corporation role that sets it apart from traditional corporations, is part of that picture to ensure jobs. They must also balance the need for profit against protecting their heritage lands and resources, he says. Public enemy number one is the exorbitant energy costs of rural Alaska, Metrokin notes. Getting the gasline

Alaska Business Monthly | January 2015 www.akbizmag.com

built should help in that direction, plus provide jobs and economic development opportunities. Other partnerships with private entities and government to bring down those costs also will prove important to the future of economic success for Bush Alaska. “When you look at the [building of] the early trans-Alaska oil pipeline project [in the 1970s] compared to today’s opportunities, it’s a whole different environment,” Metrokin says.

Construction The biggest news in the construction outlook for the coming decade includes the plans for a trans-Alaska gas pipeline, a project the Kenai Peninsula Borough, for one, is already trying to foresee in a number of sectors. Borough Mayor Mike Navarre, in his successful 2014 campaign for a second term, spoke of the need to look at possible infrastructure needs due to the anticipation of five thousand construction jobs related to the Nikiski LNG (liquid natural gas) facility. Roads, schools, housing, and small businesses will all likely need to expand in Nikiski in the coming

Alaska is Poised for Continued Growth

ith the exception of a flat spot in 2009, Alaska has seen uninterrupted economic growth for twenty-five years. Unless we choose to shoot ourselves in the foot, I see no reason why that shouldn’t continue. The pro-economy attitude of the policymakers has shown real results. With genuine environmental and social concern, they put the economy of the state first, as it should be. With a healthy economy, we can tackle any problem. Without a healthy economy, meeting even our basic needs will be a challenge. We can point to direct results like the increase in resource jobs in the energy and minerals sectors. Equally important are the other private sector investments that result from the overall climate of optimism created by government policy and government investment in many capital projects, including the so-called mega-projects. The gas line, Susitna hydro, Knik Arm Bridge, and Juneau Access are projects that will reduce energy costs and improve transportation. Such forward thinking sends a strong message that government wants to invest in our state and our people. This stimulates private investment and consumer spending—two significant drivers of the economy. Alaska is poised to continue our economic—construction—boom. We need to strengthen our efforts to help all Alaska students be ready to enter the workforce. It is important to continue the stability and consistency in state policy and regulations and to grow jobs and create opportunities for our families to succeed. R —John MacKinnon, Executive Director, AGC of Alaska

GET WHAT YOUR BUSINESS NEEDS with local equipment financing

Federally insured by NCUA

alaskausa.org/biz Better for business. www.akbizmag.com

January 2015 | Alaska Business Monthly

years, Navarre says, a prospect that will require also anticipating for the time when most of those jobs go away. The construction trade is Alaska’s third largest industry paying the second highest wages. In the October 2014 issue of Alaska Economic Trends, construction forecast 1,087 new jobs would be added between 2012 and 2022. On another front, residential and nonresidential building construction is expected to increase by 14.9 percent and 14.5 percent respectively, according to the Trends, in the years to 2022. “These

come mostly from population increases and replacement of Alaska’s aging housing stock,” according to the Trends report.

Employment Healthcare jobs will grow the most, according to an Alaska Department of Labor and Workforce Development analysis that measures growth to 2022. The expectation is for 3,515 new jobs in this decade. That fact won’t come as much surprise for those anticipating the continued trend of an aging Alaska and its anticipated healthcare service needs

AN ALASKA MINING PROJECT COMMITTED TO: LOCAL HIRE RESPONSIBLE DEVELOPMENT ENVIRONMENTAL INTEGRITY

or the market created by the Affordable Care Act. These jobs range from caregivers to X-ray technicians, from nurses to more physicians. A possible offset would be the implementation of the Affordable Care Act, which some predicted would increase the demand for healthcare services. This contention likely hinges on how many previously uninsured Alaskans enroll in coverage plans, something that has not yet happened en masse. What may strike as more of an eyeopener is how retail trades continue growth, injecting another 3,374 jobs anticipated in the coming decade. Even so, the Trends report forecasts a slowing of retail investment over the previously fastpaced two years. In 2014, growth came from new megastore openings, which include Cabela’s, Bass Pro Shop, a new and much larger Natural Pantry, a Three Bears, and an expanded Fred Meyer. A new Walmart opened in Anchorage in fall 2013. The number of new jobs from these stores alone could total 700 to 900, according to the University of Alaska Center for Economic Development’s 2014 annual report. In Fairbanks, several new businesses started operations, such as REI, Walgreen’s, and Kay Jewelers. The state’s outlook forecasts mining job growth holding a firm number three slot. These include oil and gas employment anticipation of 3,280 jobs. The accommodation and food services category sits at number four top job growth: 2,784 jobs created through to 2022. The hospitality industry growth could be linked to a bright outlook in the Alaska visitor industry. Technology is projected to produce another 1,747 jobs, holding at number five top job growth projections. Transportation and warehousing ride closely behind at 1,590 jobs. Government employment, not surprisingly after about 900 jobs were lost in the previous two years due to federal cutbacks, shows a near-future loss of 1,297 jobs projected through 2022. Meanwhile, local governments are expected to add only 41 more jobs in the same period. State employment forecasts a more optimistic need for another 942 jobs added.

Energy A lot has happened on the non-fossil fuel energy front in Alaska the past thirty 42

Alaska Business Monthly | January 2015 www.akbizmag.com

years. Today there are more than fifty hydro projects around the state, according to the Alaska Energy Authority. The Alaska Energy Authority is looking at an inventory of alternative renewable resources that in the next thirty years could bring more savings by harnessing extreme wind conditions in places such as Bering Sea communities and the Yukon-Kuskokwim Delta, which is already seeing new wind power, coupled with its diesel generation, bring down costs of living in a few villages. Wind has proven a more immediately reality than other options. The first phase of the Fire Island Wind project by CIRI Native Corporation, which began operation in September 2012, is expected to provide up to 17.6 megawatts of electricity to the Chugach Electric utility in Anchorage. CIRI announced an expansion of capacity to be installed by 2015. Tidal and geothermal possibilities, however, remain in the hypothetical. Core test results for geothermal have proved challenging so far. The proposed Mount Spurr geothermal project, located about seventy-five miles west of Anchorage, has the potential to pro-

duce fifty to one hundred megawatts of electricity annually. The prospective developer, Nevada-based Ormat Technologies, was testing new sites last summer (2014) after previous areas did not prove â&#x20AC;&#x153;hotâ&#x20AC;? enough, according to a report to Chugach Electric by Ormat. Current efforts focus on trying to find a location in the central region that satisfies all major requirements of providing a commercial resource, the ability to mitigate volcanic hazard risks, and access to a road to connect it at a reasonable cost to the grid. Geothermal power is highly site-specific and requires a ratio-combination of heat, water, and rock permeability that can only be found in particular locations, Ormat has said. Another promising geothermal site is in Mount St. Augustine on lower Cook Inlet. Also in the exploratory-feasibility stages are a series of tidal studies. The East Foreland site at Nikiski looks at a tidal energy project in a collaboration between Ocean Renewable Power Co., or ORPC, and Homer Electric. Another tidal prospect is at a Fire Island site, also by ORPC. After performing

environmental and design work, the company submitted a draft license application for this project with FERC, but instead chose to move forward with the East Foreland site in Cook Inlet. A Point Possession site, called the Turnagain Arm Tidal Electrical Energy Project, also was under consideration. A host of questions need to be answered about both geothermal and tidal energy, among them the environmental, marine mammal, and fisheries impact potential. But the investment has begun by government, co-ops, and private companies.

Fisheries Fisheries was a solid employer at 70,000 jobs, including fisheries management, research, and education, as well as the myriad processing and fishing jobs, according to the November 2014 Economic Trends. Salmon composes 60 percent of all jobs, while ground fisheries at 13 percent and halibut at 11 percent together form the bulk of jobs. Optimism came more recently after 2013 grew to levels not seen since 2000, with peak employment at 25,854 jobs in July 2013, the last year calculated.

PROTECT WHAT YOUR BUSINESS HAS with business insurance solutions

alaskausa.org/biz

Federally insured by NCUA

Better for business. www.akbizmag.com

January 2015 | Alaska Business Monthly

Andy Wick, an analyst with the McDowell Group, says given the high world demand for Alaska’s wild salmon and an abundant catch the past two summers, there is cause for optimism. The 5.5 billion pounds caught this summer provided for a banner season. Even if most of those employed gain only short-term jobs, “that’s a lot of pounds to deal with,” he says. But there are many variables related to temperature and climatic causes, drivers that are not easily understood when trying to predict fisheries economic contributions in years to come. “For a look into the future, the short answer is that no one knows what [climate change] will do to the volume of what we catch or the species compositions of what we catch,” Wick says. The Bering Sea and Alaska Gulf are fertile cold water environments. “If water warms up—and it was this summer warmer—there is some data that suggests warmer water can improve the survival rates for young salmon in the early life stages. It improves

fish traps. Even other fisheries, such as over-fishing of pollock by the Japanese before the Magnuson-Stevens [Conservation and Management] Act and a couple of examples of over-fishing,” Wick says. “Overall, we’ve had the benefit from mistakes made in other areas. We have a lot more fish than people.” Alaska has a good infrastructure in place and the state funds fish management “probably better than just about anywhere else in the [United States] to keep it sustainable. I’m not sure if there’s more we can do at this point,” he says. Another note for optimism is that Alaska has a corner on the wild fish market. “The wild capture fisheries aren’t expected to make a drastic increase anywhere else,” he says. “That makes our niche more valuable and more important. The number of pristine environments in the world do not seem to be growing. They’re shrinking.”

Healthcare Alaska’s healthcare industry has grown steadily during the past twenty years

cate a continuation in the number of jobs increases, says Deantha Crockett, executive director of the Alaska Miners Association (AMA). According to an economic report issued by Alaska Department of Labor and Workforce Development, a leap of 24.8 percent, or the addition of 683 new jobs, is expected from 2012 to 2022. This will be a result of a combination of increasing mineral commodity prices and the expansion of existing mines. “The projects that are in advanced exploration now have begun permitting or are expected to become permitting soon. We know that there are some very large mines coming on line in the next ten to fifteen years that will multiply the number of workers in the mining industry,” she says. At this fall’s AMA convention in Anchorage, Crockett says the organization reported 4,600 directly employed in Alaska’s mines with a combined 9,100 total direct and indirect jobs. The jobs are held by residents in over eighty communities around the state, paying out $630 million last year. Over the next decade or more, mining industry jobs are expected to be

“A big part of achieving statehood was motivated by the urge to protect our fisheries, such as getting rid of commercial fish traps. Even other fisheries, such as over-fishing of pollock by the Japanese before the Magnuson-Stevens [Conservation and Management] Act and a couple of examples of over-fishing."

—Andy Wick, Analyst, McDowell Group

things like plankton and food sources they eat when they are very young. That could help out, but other side of that coin is that you might also have higher rates of predators in the area that maybe you wouldn’t have otherwise.” Commercial halibut harvests are trended down, Wick notes, due largely to a slower growth rate in halibut size than occurred in the past. When harvest numbers are released this month, the International Pacific Halibut Commission will get an idea of how to adjust harvest levels. So far, the news each year hasn’t proven good news to commercial halibut or the sport-charter halibut fleet of fishers. Still, Alaska’s history is built on fisheries, and Wick sees that staple of the Alaska economy continuing for decades to come. Fisheries have weathered a lot of historical ups and downs, he notes. “A big part of achieving statehood was motivated by the urge to protect our fisheries, such as getting rid of commercial 44

and that trend is expected to continue. Even in Alaska’s smallest rural communities, where jobs are often scarce, healthcare offers year-round employment opportunities. In 2010, the industry provided 31,800 jobs and had a payroll of $1.53 billion. As baby boomers turn sixty-five, Alaska will have more senior citizens than at any other time in history. If current projections are accurate, there could be 124,857 people age sixty-five and older by 2034. With a major customer base for healthcare likely to increase by more than 125 percent, the population growth will most likely equate to continued industry growth. The ongoing expansion of the state’s hospitals and clinics and the adaptation of new technologies, will also contribute to industry growth.

Mining The Alaska Mining Association is looking at projections to the year 2022 that indi-

topped only by healthcare service sector job growth projected at more than 25 percent, according to the Alaska Department of Labor and Workforce Development. The AMA commissioned an annual report by the research firm McDowell Group which summarizes the amount of jobs offered or potentially offered at advanced exploration projects around the state. This report itemizes from the rare earth elements in Southeast Alaska’s Bokan-Dotson Ridge to the Chuitna Coal, Donlin Creek gold’s potential, and a big Livengood gold comeback. It also includes Pebble Mine; the Niblack copper, gold, and silver prospect; the Upper Kobuk Mineral Project; and Wishbone Hill Coal. “In terms of gold production comeback,” Crockett says, “we saw a large increase due to some really impressive commodity prices over the last three years or so. We also had Kensington come online in 2010 [which was not related to gold prices] and a number of new placer mines [related to

Alaska Business Monthly | January 2015 www.akbizmag.com

gold prices and peaked interest], which accounts for the increase in production.” But for gold production, as well as other minerals in Alaska, the decades ahead are unclear, Crockett says. “We have a number of barriers, including lengthy permitting timelines, regulatory uncertainty on the federal level, limited capital for risky ventures like mines that makes for a cold investment climate, huge expenses due to lack of infrastructure and skilled labor, and so on. That doesn’t help in the short term.” In the long term, if those barriers are at least partially resolved, “we have great opportunity,” Crockett says. Alaska has been ranked number one for mineral potential in its world-class deposits. “That will keep Alaska on many investors’ radar screens. We have supportive state government with the Legislature, and by all signs, with the Governor-elect as well,” she says.

Oil and Gas Oil and gas extraction employment is projected to increase by 15.3 percent over the next decade, according to the Alaska Economic Trends forecast in October. But there is a wide range of possible outcomes in the industry, after a “wild ride” in big price swings, declining production, and relatively strong job growth in this decade, according to the Trends report. Neal Fried, state economist, points out that though less oil flows through the trans-Alaska oil pipeline today than previous decades, it takes more labor. “Oil isn’t gushing out. Now operators have to work harder, so it takes more people working it,” Fried says. That translates to more jobs, not less. The industry—including exploration, production, and distribution—employs more than 20,000 workers. It spreads across 270 occupations, according to the Trends report. How the new Senate Bill 21 tax structure implemented in 2014 impacts the picture will take a number of years to assess, he says. Visitor Industry Alaska hit a new record in tourism—nearly 2 million visitors came in the previous year’s count. Tourism officials will receive 2014’s numbers early this year, which could prove last summer’s visitor count surpassed the state’s new record. Total visitor spending reached $1,145,100,00 in 2013. www.akbizmag.com

In 1985... n State acquires railroad: The Alaska Railroad, owned by the US federal government from 1914 to 1985, transfers ownership to the Alaska Railroad Corporation, a public corporation of the State of Alaska, for $22.3 million. n Real estate falls out: In Anchorage in 1985, nearly fourteen thousand housing units were vacant—ISER Report, “Alaska’s Economy: What’s Ahead?” December 1987. “Since the end of 1985, Alaska has lost jobs, population, and income. We now have much more housing than there is demand for. Prices of houses, condominiums, and mobile homes— especially the last two—have come down so far that Alaskans have been left queasy and disbelieving.” n Gas pump prices: $1.20 gallon. n Price per barrel of oil: $23 to $24. n 1986 Nissan: $6,495. n Macintosh Apple 512K computer: $3,025 (with software). n Bank failings: “Alaska learned how vulnerable this narrow, dependent economy is when, in 1985-86, oil prices dropped precipitously from $40 a barrel to $15 a barrel. Jobs evaporated like water in the Saudi desert as oil work diminished. Nine of the fifteen public banking institutions in the state went bankrupt. Sixty thousand people [1985 population, about five hundred thousand] left the state, thirty thousand from Southcentral. It was not pretty.”—Steve Haycox, “Alaska’s isolation, economic dependence fosters unhealthy fear,” Oct. 16, 2014 Alaska Dispatch News. n Timber: High costs and a strong dollar have contributed to problems in lumber. “With the refusal of the Environmental Protection Agency to ease water discharge standards for Alaska pulp mills, declines are expected for wood processing employment.” —ISER report, “Alaska’s Economic Outlook,” by Ed Eboch.

n Federal economic help: “The US Department of Defense announced an additional 2,000-2,500 military personnel will be assigned to Alaska. Their presence should add an additional 1,000-1,500 jobs.” —ISER report, “Alaska’s Economic Outlook,” by Ed Eboch. n First foreign oil export: “With the approval and strong support of the White House, the US Commerce Department will soon issue a permit to allow the export of Alaska Cook Inlet oil to foreign nations. This is the breakthrough we have sought in our effort to begin exporting Alaska oil abroad.” —Senator Frank Murkowski, “Lift the ban on Cook Inlet Oil,” 1985. n Times change: In 1985, Alaskans were getting used to a unified time that meant being in the same time zone, except for the Aleutians, which remained an hour behind. Four time zones had spanned the state of Alaska for several decades, the same as in all of the contiguous Lower 48 and based on longitude. A two-hour gap existed between the Railbelt towns and Juneau, for example. In 1983, Governor Bill Sheffield signed a law creating one time zone, except for the Aleutians, which could stay an hour behind. Among the complaints aired in the Ketchikan Daily News was that the move hurt business with Seattle. This was the same argument that Metlakatla used, because the Native community said it did more business with federal agencies in Seattle and Washington, D.C. n Construction: Residential construction in Anchorage plummeted 62 percent in the first seven months of 1985, from $275.7 million in 1984 to $104.5 million in August 1985. n “You can’t grandfather in ugliness, it’s not acceptable to the community,” said Anchorage Mayor Tony Knowles, referring to a controversial sign ordinance that would soon pass. September, 1985, Anchorage Times. R

January 2015 | Alaska Business Monthly

“Policies and partnerships that make it easier for international visitors to travel to the United States help grow Alaska tourism businesses.”

—Sarah Leonard President and CEO, Alaska Travel Industry Association

Given that Alaska’s three main industries of oil and gas, fisheries, and tourism are considered the state’s mainstay into the coming thirty years, that bit of good news in 2014 gives reason for an optimistic outlook for the seasons to come. A growing number of visitors to Alaska points to a healthy 2014 for the tourism industry and for the near future. Sarah Leonard, President and CEO of the Alaska Travel Industry Association, says, Alaska Travel Industry Association members from around the state have communicated that business is strong and bookings from both domestic and international markets have increased.” One of the bigger news announcements recently is the agreement between the United States and the People’s Republic of China that extends the validity of tourist and business visas.

“Travelers from China are a hugely important and growing international market for Alaska,” Leonard says. “Policies and partnerships that make it easier for international visitors to travel to the United States help grow Alaska tourism businesses.” The US Travel Association points to additional indicators for continued steady growth in both domestic travel and international arrivals, with a plus 5.7 percent increase in overseas arrivals to the United States. In Alaska, other markets show modest increases for 2015 as well. The cruise segment projects an increase in capacity of 2.8 percent with bigger ships replacing smaller vessels in the next year, according to McDowell Group and Cruise Line Agencies of Alaska. Alaska could see continued movement in air traffic, if the trend contin-

ues from 2014 when Alaska saw the increased presence of Delta arriving in Juneau. Other communities saw increases in domestic arrivals including Fairbanks, Ketchikan, and Sitka, with only Anchorage realizing a slight decrease in traffic (minus 2.5 percent). Alaska Marine Highway ferry travel by non-residents also saw an increase of 4 percent in 2014 from numbers dipping in the previous years. Tourists are drawn to Alaskan hospitality, as well as to an experience among glaciers, pristine wilderness, and wildlife that is like nowhere else, she says. “With continued strong investments in tourism marketing dollars at both the state and federal levels,” Leonard says, “Alaska can continue to attract visitor numbers and realize important economic benefits for businesses and communities.” R Naomi Klouda is the former editor of both the Homer Tribune and previously the Tundra Drums. She is a lifelong Alaskan and freelances from Anchorage.

Alaska Business Monthly | January 2015 www.akbizmag.com

HR Matters

By Kevin M. Dee

Are You Creating A

re you creating the workforce you want or a bunch of drones just putting in their time until something better comes along? Are you hiring people who are different and bring new perspectives and creativity to the team? Or do they all act and look a bit like you? Have you fully assessed what your group needs in order to meet the challenges facing them now and in the future? Your very survival as a company may depend on how you answer these questions.

Little Boxes We as a species are really, really good at sorting things. We sort and classify things all day without even thinking about it. This ability can be our worst enemy or our best trait. We have survived on this planet by being able to differentiate. We separated the foods that nourish us from those that may kill us. We learned to sift through the background noise and separate out the signals of danger heading our way. Today our brains work similarly. Just think back to the last car you bought—or even just wanted. Did you start seeing it everywhere? That’s because we told ourselves to pay attention. Our brains respond and sort out all the other clutter, so you can glance over in traffic and immediately notice the car that’s on your mind. Our brains are wired to see that which we program ourselves to look for. Therein lies the problem. If we program in the wrong things we will get the wrong results. In business, our wiring can work for us or against us when it comes to creating high performing teams. Many employers and managers naturally want to group and classify people by their age, looks, or demeanor so sorting people into little boxes is easy to do. They are “Generation X” or “Y” or “Millennials” (along with a whole www.akbizmag.com

or Superstars?

host of other terms). There are papers and articles devoted to describing each one, their strengths and weaknesses and so on, so we can put them in the proper box.

Seek to Diversify When hiring a candidate, we interview them not looking for what the team needs but whether they “fit” into the team or one of the boxes we have in mind. We commonly call this box a job description. Rarely does a team seek out someone different than their groupthink or style. Similarly, who can say they specifically sought out a lazy person to improve efficiency within a company? Yet it is the lazy person who may find the simplest and most efficient way to do things. A famous general in World War I, Baron von Hammerstein-Equord, uniquely classified his officers: “Anyone who is both clever and lazy is qualified for the highest leadership duties, because he possesses the intellectual clarity and the composure necessary for difficult decisions. One must beware of anyone who is stupid and diligent—he must not be entrusted with any responsibility because he will always cause only mischief.” Remember the Sesame Street song “One of these things is not like the others; one of these things just doesn’t belong”? It was a fun to sing and sort out what was different. Even preschoolers do it very naturally. Embrace Differences We have to overcome our natural instinct to exclude that which is different and instead embrace differences in people, backgrounds, and personality in order to create stronger teams. When we have homogenous groups it’s like putting blinders on the team and telling them they can only look in one direc-

tion. Teams excel at what they do when there is a commonality of purpose and goals but a high diversity of approaches and perspectives. Homogenous teams have boring meetings with limited engagement between team members. When diverse teams have safety and have trust in one another, they engage and listen to each other in lively ways—and in the end usually outperform their competition. Diversity with clear rules of engagement and conflict management are the base ingredients of creating greatness. Teams that can learn to embrace differences among members and listen to one another are the ones to watch and emulate. In developing your teams, ask these questions: Are you creating a diverse enough group to accomplish your mission? What skills sets and attitudes would make for a stronger more diverse team? We need to embrace all the different generations for what they can bring to the table for the job at hand while hiring for attitude and training for skill. R

Kevin M. Dee has a master’s degree from Vanderbilt University and is the president of KMD Services & Consulting. He has more than thirty years of experience providing leadership development, organizational development, and human resources services in Alaska and internationally. Contact him at mail@kmdconsulting.biz.

January 2015 | Alaska Business Monthly

ALASKA NATIVE CORPORATIONS

Northwest Arctic Leadership Team Invests in People

Shore Avenue faces Kotzebue Sound. The entire waterfront was redesigned to combat erosion from coastal storms. ÂŠ Julie Stricker

Alaska Business Monthly | January 2015 www.akbizmag.com

Group works cooperatively and collaboratively By Julie Stricker

raditional Iñupiat culture is strong in Northwest Alaska. When regional health provider Maniilaq Association commissioned a study of what elders in the region wanted and needed as far as services in 1997, they were told unequivocally that the elders preferred to stay home so friends and relatives could visit. However, if they had to live in an assisted-living facility, they wanted to stay in the region. The region, however, is remote and sparsely populated. Located mostly above the Arctic Circle, the Northwest Arctic Borough consists of eleven villages with a total population of about 7,400 people. No roads connect the communities. Nearly half live in the community of Kotzebue, located on a narrow spit of land off the Bering Strait. More than three-quarters of the residents are Iñupiat Eskimo. So the completion of the eighteen-bed Utuqanaat Inaat Elder Care Center in 2011 was a milestone. Planning and construction for the facility took years. Maniilaq received the first round of funding, $7 million, from the state and began construction in 2009. But the $10.2 million needed to complete the facility was slow to materialize. It was finally approved after the region’s four major public and private institutions—Maniilaq, the Northwest Arctic Borough, NANA Regional Corporation, and the Northwest Arctic Borough School District— worked together to get the final funding pushed through the Alaska Legislature.

NWALT The four organizations form an extraordinary partnership that works to the benefit of all in Northwest Alaska. It is a testament to the spirit of cooperation that is a hallmark of the Iñupiat people, says Marie Greene, president and CEO of NANA Regional Corporation. “At NANA, time is taken to reach out the shareholders and the villages, to listen to what our shareholders are saying and what they see as the priorities,” Greene says. “We are a region known for its unity because our past leadership taught us this is how it is done, and we www.akbizmag.com

continue to pass that on. This is why we have the Northwest Arctic Leadership Team [NWALT], so we can work closely together, as organizations, for our people. Our cooperation and collaboration is what defines us as a region.” NWALT’s goal is to work cooperatively to promote projects and address problems facing the residents of Northwest Alaska while honoring and perpetuating Iñupiat cultural heritage.

Prioritizing Elders According to Fred Smith, director of economic development for the Northwest Arctic Borough, the group concentrates on five major areas of critical importance to the region: cultural preservation; wellness and healthy communities; economic development; education and workforce development; and infrastructure and services. The Utuqanaat Inaat Elder Care Center, which received strong support from NWALT, achieved many of those goals. The fifteen thousand-square-foot facility replaced the aging Kotzebue Senior Center, which had a malfunctioning heating system, flooring in poor repair, and needed other fixes and upgrades. The center is attached to the Maniilaq Health Center, a state-of-the-art medical facility in Kotzebue that is the primary health care facility for borough residents. NWALT is also working with the federal Indian Health Service to stabilize funding to maintain consistent patient care in the region. The construction of an outpatient care clinic in Kotzebue is another priority. Reaching out directly to the elders is one of the hallmarks of the public and private institutions in the region. Maniilaq, which is named for a nineteenth century Iñupiat leader and healer, has its roots in the 1971 Alaska Native Claims Settlement Act, commonly referred to as ANCSA. ANCSA created twelve Alaska-based Alaska Native regional corporations, which were tasked with the dual roles of fostering economic development in Alaska, as well as meet the needs of shareholders through education, improved living conditions,

“At NANA, time is taken to reach out the shareholders and the villages, to listen to what our shareholders are saying and what they see as the priorities. We are a region known for its unity because our past leadership taught us this is how it is done, and we continue to pass that on. This is why we have the Northwest Arctic Leadership Team [NWALT], so we can work closely together, as organizations, for our people. Our cooperation and collaboration is what defines us as a region.”

—Marie Greene President and CEO NANA Regional Corporation

and the preservation of their cultures. NANA is the regional corporation for Northwest Alaska and Maniilaq initially was the nonprofit arm of NANA, Greene says. The borough was created in 1986 and is largely funded through Payment in Lieu of Taxes generated by the massive Red Dog zinc mine, itself a partnership between NANA and a subsidiary of Teck Corporation.

Productive Communication Local community and tribal leaders meet quarterly with NWALT representatives in Kotzebue to discuss the issues that are important in their communities, none of which are linked by roads and have some of the highest energy costs in the state, Smith says. Other perennial issues are the high cost of living in the region, public safety, the perpetuation of language and culture, the need for improved education options for youth, and vocational-technical opportunities. NWALT hosts a meeting each December to prioritize the major issues in

January 2015 | Alaska Business Monthly

A weathered home faces Kotzebue Sound on Shore Avenue.

the region, meeting with the governor, state commissioners, legislators, the Alaska congressional delegation, and state and federal agencies. They decide which local agency the funding for a project will go through and “the rest of the team gets behind and supports this project,” Smith says. The group has already had some notable successes. In 2004, it helped create the

Iñupiaq Language Center to address the decline in the number of fluent Iñupiaq speakers. Today, residents can learn two Iñupiaq dialects via CDs issued by Rosetta Stone, a language-teaching program. NWALT was also instrumental in getting the Star of the Northwest magnet school constructed in Kotzebue. The school is a residential facility affiliated with Alaska Technical Center to provide further training for high school juniors and seniors with two years of post-secondary education, what they call up to the 14th grade, Smith says. Students will graduate from high school and get additional academic or vocational education, leading to an associate of arts degree or vocational certifications. A dormitory is under construction now with an additional forty beds dedicated to high school students, Smith says. That’s in addition to the forty beds already in place for adults. Many Kotzebue residents also are enrolled in the program, he notes. NWALT is also backing expanding broadband Internet service in the region, which is key to improving education and economic opportunities.

Changing Climate, High Energy Costs Northwest Alaska is bearing the brunt of climate change. A warming Arctic has resulted in more localized flooding and erosion in several villages in the Indiana-sized region, Smith says. One of the hardest-hit villages is Kivalina, a community of four hundred located on a narrow barrier island between the Chukchi Sea and Kivalina Lagoon. The only way to access the community is by plane or boat. In the past five years, residents have been forced to evacuate the village three times because of severe storms. The entire community will have to be relocated because of severe erosion. In 2014, NWALT helped get $2.5 million added to the state budget to start building an evacuation route from the coast to higher ground at Kisimigiuktuk Hill, which is approximately eight miles inland from the existing community. It would also be the location of a new school, which would form the nucleus of the relocated community. Addressing the high energy costs in the region is another NWALT priority

Alaska Business Monthly | January 2015 www.akbizmag.com

“[Wind turbines are] a good opportunity to reduce the dependence on diesel, and the price of fuel, while it fluctuates, it doesn’t seem to go down.”

—Fred Smith Director of Economic Development Northwest Arctic Borough

and a focus for borough Mayor Reggie Joule, Smith says. That has involved items as simple as promoting energyefficient LED lights to trying to devise region-wide strategies to lower the bulk cost of fuel. In some villages, a gallon of diesel costs $10 or more, which affects everything from home heating to being able to head upriver for subsistence hunting and fishing. In 2008, NWALT helped draft the groundbreaking Northwest Strategic Energy Plan, updating and revising it in 2013. The plan is a “dynamic, living document” that serves as a blueprint for energy conservation and development in the region. Among its goals are for the region to be 50 percent reliant on locally available energy resources such as solar, wind, geothermal, and

www.akbizmag.com

biomass, as well as local coal and natural gas reserves by 2050. Ideally, imported diesel fuel will be needed only as a backup, according to the proposal. The plan also champions programs to help residents improve the energy efficiency of their homes. Other projects include a communitywide water and sewer project for the four hundred residents of Buckland, seventy-five miles south of Kotzebue, as well as wind turbines in Buckland and Deering. The wind turbines are “a good opportunity to reduce the dependence on diesel,” Smith notes. “And the price of fuel, while it fluctuates, it doesn’t seem to go down.” Officials are also evaluating whether roads and interties between some villages would be feasible. They are also working with

the Alaska Natural Gas Development Authority to develop an infrastructure that would allow lower-cost propane to be used as an energy source in some communities.

Future Plans Looking ahead, NWALT is championing the construction of a regional port at Cape Blossom, ten miles south of Kotzebue, as well an access road. The port could dramatically reduce the cost of fuel in the region, Smith says. It could also provide an economic boost for the entire area, especially with an increase in marine traffic expected as the climate warms. It is an important project for national, as well as regional interests, the city of Kotzebue notes. “The road to Cape Blossom and the deep water port is consistent with the national strategy and will be pivotal for the survival of the economy in the Northwest Arctic Borough.” R Julie Stricker is a journalist living near Fairbanks.

January 2015 | Alaska Business Monthly

ALASKA NATIVE CORPORATIONS

Cook Inlet Tribal Council Invests in Sustainability with ‘Never Alone’

Never Alone concept art of the little people.

Courtesy Upper One Games

Partnership develops new ‘world games’ genre in consumer video games By Rindi White

“

Courtesy Upper One Games

n Alaska Native game with whispered significance and a soul of its very own,” says the online edition of the British tabloid newspaper The Daily Mirror about the recently released video game called “Never Alone.” Dozens of other publications, from gaming magazines to Forbes.com, give it high praise.

Never Alone concept art of the wolf.

“Never Alone,” a partnership between educational gaming force E-Line Media and Cook Inlet Tribal Council’s for-profit arm CITC Enterprises, Inc. (CEI), is forging new ground in several different fields. It’s the first partnership between an Alaska Native organization and a video game developer and also the first time a game developer has worked inclusively with an indigenous people to include the stories and culture of that community within a commercial video game. But based on the success E-Line and CEI have seen so far, this game will be the first of many of its kind.

Telling an Old Tale in a New Way Making “Never Alone” was a business decision by Cook Inlet Tribal Council employees working under its relatively new for-profit arm CEI. Pita Benz, vice president of Social Enterprise for CITC, says the organiza-

tion set up the for-profit venture to reduce dependence on grants and federal dollars. “We spent a year looking at a variety of projects. We ended up talking at lunch one day about, how do we really reach Alaska Native youth? How do we leverage technology to reach Alaska Native youth and make money? We stumbled on the idea of video games,” Benz says. But the idea was voiced as an unlikely choice. Benz says she was surprised when CITC president and CEO Gloria O’Neill directed her to pursue it. Benz did and asked E-Line Media to come up to give the company a primer on video games. E-Line did their best to discourage the company from jumping into the often-unpredictable world of gaming.

Alaska Business Monthly | January 2015 www.akbizmag.com

Never Alone screen shots, clockwise from top: Sky people, in the forest, and underwater. Courtesy Upper One Games

“Initially, we really tried to stress that this is really risky; over the years, we’ve seen hundreds, if not thousands, of game companies come and go,” says E-Line president and co-founder Alan Gershenfeld. E-Line performed a three-month business analysis to assess both the opportunity and risk with CEI and, at the end, Cook Inlet Tribal officials agreed to move forward on the project. Choosing a theme was relatively easy, Benz says. “Every step of the way we’ve analyzed the business and what’s best for the organization. You’re best off doing what you know best, so we focused on Alaska Native stories,” she says. Cook Inlet Tribal employees collected dozens of Alaska Native stories—enough to fill several boxes—and shipped them to E-Line’s Creative Director Sean Vesce. Ultimately, in collaboration with Ishmael Hope, an Alaska Native writer, a story written by Robert Cleveland of Ambler was chosen as the basis for the game. But the game is multi-faceted and includes tales from other regions of Alaska, from vengeance wreaked by Northern Lights spirits bent on swiping the heads of people who stay out after curfew and using www.akbizmag.com

them as footballs to stories of the Imminnaurat, or the Little People. Those stories, along with twenty-four cultural vignettes, were added as a result of two visits to Barrow and several visits to Anchorage by the game design team as well as many visits to the ELine Seattle studio by the Alaska Native writers and elders. Benz says CEI is proud of the game and is looking forward to more involvement in the video game industry, but the learning curve has been steep. “Looking back, I think everyone on the team would say how hard this was, how messy. How do you balance authenticity with making a fun game?” she says. “It’s really, really hard work.” The community participation element was a new facet for E-Line and one Gershenfeld says was the most rewarding aspect of developing the game. “It’s been an amazing experience. I think everyone on the team will tell you it’s been one of the most incredible and powerful experiences [in video game development] they’ve had in years,” Gershenfeld says. The development process for any game is typically inspiring and even

sometimes moving, he added, but this process was different. “[That’s] nowhere near as enriching as getting to know a new culture and… getting to share it with a new audience,” he says.

The Story of the Game “Never Alone,” or Kisima Ingitchuna in Iñupiat, is the story of a young Iñupiat girl, Nuna, and her companion, an Arctic fox, who search for the source of an ongoing blizzard that threatens the livelihood of Nuna’s village. The pair faces Arctic conditions such as fierce winds and an eternal blizzard, and they progress with the aid of Helping Spirits, traveling through an abandoned coastal village and through the tops of trees in a frozen forest. Set up as a two-player game, single players can alternate between the roles of Nuna and the fox or play side by side with a friend or family member. Neither Nuna nor the fox can make it through the game alone; their skills must be paired for the team to succeed. “It works better as a two-player team rather than one player,” Benz says. “Never Alone” is a digital download; it’s not available on store shelves, but

January 2015 | Alaska Business Monthly

“It’s been a meaningful project for everyone that’s worked on it,” Benz says. “That’s one thing that has been different [in working with E-Line Media]. Bringing in the storytellers… it wasn’t just ‘check off the box, we ran this by Alaska Native community members.’ People were involved in a real and important way.”

ABOVE: Early project strategy discussion at the Cook Inlet Tribal Council offices in Anchorage. RIGHT: Sean Vesce (left), Ossie Kairaiuak (center), and Ishmael Hope at an early project meeting. Photos by Wayde Carroll/Courtesy Cook Inlet Tribal Council

can be downloaded from neveralonegame.com or from the digital game store Steam. It’s currently available for play on PC, XBox One, and PlayStation 4. The game is rated T for Teen, a rating Benz says was given because there is some violence in this survival tale. James Nageak of Anaktuvuk Pass narrates the game in Iñupiat. And at key points in the story, players can learn more about the Iñupiat culture, values, and “the amazing Arctic world encountered by players,” through twenty-four “cultural insight” videos that get unlocked through gameplay. Jana Harcharek, director of Iñupiat education for the North Slope School District, helped provide suggestions for community leaders who might participate in the vignettes; mostly people who had hunting and whaling experience that would be relevant to the story of Nuna and the fox. Harcharek also helped bring together 54

the group of high school students who talked early in the process with game designers and discussed how they wanted to see their culture represented in a game being released around the world. The design team’s first visit to Barrow coincided with a Messenger Feast, a celebration held every two or three years in Barrow that sees singers, drummers, dancers, and feasters from all over the region. Because the event was going on, high-school students from around the region were able to talk with the designers and, she says, the designers were able to get a rare look into the Iñupiat culture. Benz says the design team also visited museums in Barrow and the Alaska Native Heritage Museum and the Anchorage Museum in Anchorage to gather information about tools, clothing, and other design elements. “We tried to be as authentic as possible,” she says.

Shared Vision, Shared Future Through the process of working together, Gershenfeld and Benz says their respective companies glimpsed a brighter, shared future. “We thought a closer relationship would better align our interests,” Benz says. CEI now owns between 33 and 35 percent of E-Line Media, the largest ownership share. “It really happened organically,” Gershenfeld says. “We found we had a shared vision, and we really got along. We found that the more we worked together, the more we enjoyed working together and the greater the opportunity [before us]. There seemed to be a hunger in the marketplace, so it seemed natural to, instead of saying ‘Let’s do one game,’ say, ‘Let’s do a line of games.’” E-Line is seeking to bridge the gap between educational video games and commercial games. Gershenfeld got his start in the film industry and then moved to Activision, where he worked on a number of large commercial games. “I got very interested in the power of games to do more than just entertain, to open and inspire new worlds,” he says. He started tracking gaming projects funded by philanthropic and social organizations.

Alaska Business Monthly | January 2015 www.akbizmag.com

ABOVE: Gray is with E-Line Media’s award winning creative director/designer Sean Vesce. RIGHT: Inupiaq elder Minnie Gray recording stories for Never Alone as part of the unique partnership between members of the Alaska Native community and acclaimed game developers to preserve cultural authenticity during the game development process.

panded range of platform offerings. “Up until now at E-Line, we had been doing game-based curriculum for schools,” he says. This is the first time the company has developed a consumer game for XBox and PlayStation. The team grew as well, he says. About a dozen E-Line employees started the project, but as the game moved toward release, the team grew to include twenty people.

Courtesy Cook Inlet Tribal Council

“We weren’t seeing a lot of those games competing successfully in the consumer space, or really working in the classroom. We started E-Line Media to help close that gap,” he says. The goal, he said, is to design “gateway games,” or games designed to compete in the consumer market, but that also step beyond entertainment—“to engage, inspire, and open new worlds,” he says, as well as “pathways,” which is game-infused curriculum designed for the classroom, he adds. In the scope of the partnership, he says, E-Line has a wealth of experience behind it, which helps cut the risk of launching a new gaming business. CITC brings a collaborative working process that helps make the development process—and the final product—richer. “At the core, I think the partnership is really on solid ground. It’s built on strong goals and trust and a shared vision for what games can do,” he says. “We’re all trying something new here, with this inclusive development process.” Gershenfeld says working on “Never Alone” necessitated building a whole new studio and incorporating an ex-

If the new world games genre that “Never Alone” introduces succeeds, Gershenfeld says the resources E-Line dedicates to games in the genre will also increase.

Tapping a New Market One of the most striking aspects of the November launch of “Never Alone,” Benz and Gershenfeld say, was the interest in the game from all over the world.

GET NOTICED! Reaching a statewide business audience in Alaska’s leading business publication gets results!

Anne Campbell Senior Advertising Account Manager (907) 257-2910 anne@akbizmag.com I will work with you to plan an ad campaign that offers marketplace visibility and fits your budget.

(907) 276-4373 • Toll Free (800) 770-4373

akbizmag.com

www.akbizmag.com

January 2015 | Alaska Business Monthly

“Reviews have been coming in from around the world, which is exciting— the global reach of people trying to learn about another culture,” she says. Gershenfeld says E-Line has been approached by cultures around the world that are interested in the idea of translating traditional stories into new media. Native Hawaiians voiced an interest in the process months ago, after CITC President O’Neill spoke at a conference there. Other places, from Siberia to Ireland and South America to Australia, have also approached E-Line, he says. Rich traditional tales are found around the world. Films, television programs, music, and even graphic novels have explored traditional tales and themes to a successful end, Gershenfeld says. Why not games? “I think this idea of fusing languages and themes and stories that have been around for generations and passed down through generations with these new media platforms is a really exciting opportunity and a creative challenge,” he says.

ditional learning opportunities for students. “When we showed the games in Barrow and Anchorage, we’d have kids come up and say, ‘This is cool, how can I get involved?’ This is [a career] that, when you get the skills and experience, you can work remotely. A lot of people do,” Benz says. Watson says CITC already offers a couple of video game development activities through its Schoolyard program, a multi-pronged after-school program for students in middle school and high school aimed at helping students graduate. The program is offered to all Alaska Native students in the Anchorage School District, but more students living or attending school in the Bartlett, East and Service high school areas have been the focus of recruitment efforts. Harcharek says she’d like to bring the initial group of Barrow-area high school students back together to go through the game and see how their input was incorporated into the game “and see how we can use this avenue to perpetuate the stories that come from our part of the world—and the potential that we have for people in other parts of the world to do the same thing.” “Especially given how violence is so much perpetuated in mainstream media, whether in the gaming world or in films, taking this kind of a track reminds people that we can be caring, loving people in this world, and not hone in only on violence, which is not in our nature,” Harcharek says. “We also want our kids to think about the contributions they can make in computer programming as a profession. There are terrific opportunities.” R

Courtesy Upper One Games

Shaping the Future Many of the loose ends the “Never Alone” team is still working on related to the game involve making it more usable. A parent guide was recently posted on the game website that provides discussion prompts and activities to extend the learning process. Benz says the team is also working on a curriculum guide for teachers. “That’s really where our interest lies, in using technology in new ways to engage the kids who are kind of falling off the rails in middle school,” she says. Much of the educational information will be posted on the game website, she says. A team will also demonstrate the Freelance journalist Rindi White game at the Alaska Society for Technol- writes from Palmer. ogy in Education conference to be held in Anchorage in February, and a teacher guide will be available there. “We’re getting a lot of inbound calls from teachers,” she says. “A lot of people know about the game and are coming to us. CITC Village Liaison Eric Watson says the game development process allowed a number of CITC representatives to become more familiar with the video game industry. He hopes to use Never Alone concept art of the little people the partnership to provide ad- and a rock. 56

Alaska Business Monthly | January 2015 www.akbizmag.com

CONSTRUCTION

Dam Port Bridge Special projects take ‘one step at a time’ By Kirsten Swann

hree major construction projects, poised to change the landscape of commercial transportation and renewable energy in Southcentral Alaska, are making slow but steady progress in the face of uncertain success. The Port of Anchorage modernization, the Knik Arm Crossing, and the Susitna-Watana Hydroelectric projects collectively involve billions of dollars in capital investments and thousands of new jobs. When complete, the projects are set to increase efficiency and longevity at Alaska’s largest port, connect one of the fastest-growing areas in the state with the Municipality of Anchorage, and provide valuable, reliable hydroelectric power to the Railbelt region. But the three massive projects also involve years of development, exhaustive permitting, and licensing processes and other hurdles that are set to push construction well into the future. Project managers believe the longterm reward is worth the work.

Knik Arm Crossing Shannon McCarthy, a spokeswoman for Alaska’s Department of Transportation and Public Facilities, says the proposed toll bridge over the Knik Arm is the largest project the department has taken on in years. “The last project of this magnitude that Alaska built was actually the Parks Highway,” McCarthy says. The Knik Arm Crossing would connect Anchorage with rapidly growing populations in the Matanuska-Susitna 58

Two Liebherr container cranes being used to offload an oversized load of cargo at the Port of Anchorage.

Alaska Business Monthly | January 2015 www.akbizmag.com

Borough, spanning 1.74 miles across the Knik Arm, according to project documents. It could help alleviate traffic on the Glenn Highway, which saw a 32 percent increase in average daily traffic past the Eklutna Overpass between 2000 and 2010. Previously under the purview of the Knik Arm Bridge and Toll Authority (KABATA), the project was transferred to the Department of Transportation & Public Facilities (DOT&PF) by the Alaska Legislature near the end of the 2013-14 legislative session. The state transportation department will oversee the development and construction of the state-owned bridge, McCarthy says, and then hand operations to KABATA once the project is complete. That transfer is still years from happening. When the transportation department took control of the project in spring 2014, McCarthy says, it began the process of reexamining project plans and documentation to make sure everything is in place for the next stage—applying for a federal loan through the Transportation Infrastructure Finance and Innovation Act (TIFIA).

Lashing down the load at the Port of Anchorage.

The success of the Knik Arm Crossing construction hinges on that TIFIA loan: According to a joint KABATADOT&PF funding proposal from March 2014, the project is banking on more than $341 million in TIFIA funding, which would ultimately be repaid through bridge toll revenues. The to-

tal projected cost of the bridge development comes in at just under $900 million—a mix of federal funds, state capital money, and bonds—according to project documents provided by the Alaska Legislature. Before DOT&PF moves forward with its application for the integral TIFIA

Sell

where people

are buying

Don’t wait for buyers to come to you—sell your equipment at the next Ritchie Bros. auction. Less hassle, more buyers—and better results. Call me to discuss your options.

Wasilla, AK Brent Davis | 360.523.4010

rbauction.com RBA Branding AD Alaska www.akbizmag.com Bus Journal 7x4.875 (Nov) 01382.indd

14-09-16 January 2015 | Alaska Business Monthly

10:52 AM 59

Rendering of the Watana Dam.

loan, McCarthy says it’s making sure it’s crossed every T and dotted every I. “The project development process has been fairly intensive over the past ten years,” McCarthy says. “Now is a good time to reexamine everything; make sure it’s in the shape you want it to be in moving forward.” There are decades of work at stake. The Knik Arm bridge concept was first conceived by railroad engineers in the 1920s, according to DOT&PF, and the Alaska Department of Highways completed an engineering study on the project about fifty years later. A draft environmental impact statement was issued by DOT&PF in 1984, and the Alaska Legislature began pursuing the project in earnest with the creation of KABATA in 2003. In 2008, the Federal Highway Administration published a Final Environmental Impact Statement for the Knik Arm Crossing, and it signed a Record of Decision two years later. From 2008 and 2012, the project successfully obtained various memorandums of understanding and applied for several federal permits. In 2013, the project shifted gears toward a publicly financed model and was transferred to the state transportation department with the passage of House Bill 23 in April 2014. McCarthy says the department is now faced with the task of securing essential federal funding for the Knik Arm Crossing, also a transportation priority for the Federal Highway Administration. Pending approval of the multimillion-dollar TIFIA loan, McCarthy says 60

DOT&PF hopes to put out an RFP for the project within a year or two. “We’re at the point now where a great deal is known about where the bridge should go—the economies of both Anchorage and the Mat-Su,” McCarthy says. When construction eventually begins, McCarthy says, it’s expected to last for roughly four years and generate 1,500 full-time positions annually. Because the project involves federal money, it would be required to use American steel by the Buy America Act. McCarthy says construction would most likely first involve clearing in the Mat-Su and then in-water work that would require contractors to drill down into the ocean floor. “In-water work in the Knik Arm is going to be interesting, because we’d have to limit work around beluga whales,” McCarthy says. Cook Inlet beluga whales were listed under the Endangered Species Act in 2008, and it took more than two years for the National Maritime Fisheries Service to issue a biological opinion of “no jeopardy” in regards to the Knik Arm Crossing project and the belugas’ safety. At low tide, McCarthy says, the proposed site of the bridge project is shorter across and shallower than other parts of Knik Arm, but contractors would still have to contend with powerful currents and sensitive environmental conditions. “You’re dealing with both tides and the river,” McCarthy says. “But at the same time it can be done and the engineers have found solutions for it.”

Watana Dam Almost due north of the future bridge site, more than 180 river miles above Cook Inlet, another massive public project is inching its way through an extensive process similar to the Knik Arm Crossing’s. The Susitna-Watana Hydroelectric Project, expected to cost upwards of $5.2 billion, is expected to generate about 2.8 million megawatt hours of electricity annually, according to the Alaska Energy Authority (AEA). That power could fulfill about 50 percent of current Railbelt demand. But Susitna-Watana Hydroelectric isn’t breaking ground any time soon. AEA, which oversees the hydro project, is currently in the end-stages of a three-year pre-application phase—the first in a multi-step process expected to last through 2025. Wayne Dyok, AEA’s project manager, says the pre-application phase involves fifty-eight different studies and ends with the submission of a license application to the Federal Energy Regulatory Commission (FERC). Dyok says the studies cover all of the resource areas potentially impacted by the hydroelectric project, including water quality, fisheries, vegetation, wildlife, social, and cultural resources. The energy authority aims to understand the existing resources well enough to be able to protect them going forward, he says. “The key challenge is dealing with the fish—primarily salmon,” the project manager says. “We’re collecting baseline information and undertaking a suite of assessments to be able to understand what the effects of the project are.” Those pre-application phase assessments also involve studying the reservoir and upstream flow and assessing the potential impacts of earthquakes and floods, information vital to the final FERC application. “All those things get modeled so we understand the effects,” Dyok says. “Dam safety is very important.” Dyok said the study process—which typically only lasts a year—was extended to three years by budget restraints. It culminates with a feasibility report set to be released in early 2015, he says. If all goes according to plan, AEA hopes to submit its license application for the 735-foot-tall, roller-compacted concrete dam to federal regulators by 2016. After a review period of several years, Dyok says,

Alaska Business Monthly | January 2015 www.akbizmag.com

the project would hopefully receive clearance to proceed to the next step: detailed design and engineering work, power sales agreements, and financing. Because, like the Knik Arm Crossing, the Susitna-Watana Hydroelectric Project has yet to secure complete funding for the multibillion-dollar proposal. “We’re keeping all options on the table at this point,” says Dyok, who declined to go into detail about whether that would include majority public financing, private investment, or a combination of both. He says AEA is working with financial consultants, the Alaska Legislature, the administration, and Railbelt utilities to pinpoint a plan that pencils out. The bottom line, he says, is to ensure the state will be repaid its investment in the hydroelectric project. The total end cost would most likely exceed the current $5.2 billion projection, Dyok says. Under the energy authority’s current project schedule, the construction phase is scheduled to begin in 2019. “One of the first things that we want to do is build a road to the site,” Dyok says. “You need to have the access.” There are currently three proposed routes to the dam and powerhouse site on the Susitna River: The Denali Corridor approaches from the Denali Highway to the north, the Chulitna Corridor would connect to the Alaska Railroad to the west, and the Gold Creek Corridor would do the same, just to the south of the Susitna River. The energy authority says a favored route isn’t expected to be announced until the submission of the FERC license application. After creating access to the remote site, Dyok says, the next step would be to build infrastructure and housing for construction crews and the diversionary structures to reroute the flow of water around the proposed dam site. “So those three things—the road, the camp, and the diversion facilities—are going to be the first three things that have to be completed,” Dyok says. It’s no small task. At peak construction, Dyok says the project is expected to employ about one thousand people and involve multiple subcontractors. “We would have all kinds of trades associated with this—from mechanical, electrical to civil carpenters,” he says. www.akbizmag.com

Ronda is a Longshoreman, or a Longshore-woman, at the Port of Anchorage. © Judy Patrick

The energy authority has some experience managing projects of this size— Dyok says the 120-megawatt hydroelectric facility at Bradley Lake is one notable example. As the Susitna-Watana project inches closer to construction, the AEA project manager says it would most likely bring on additional support staff, too. “It’s really important that you have the right internal team set up to construct the project,” he says.

Port of Anchorage Steve Ribuffo agrees. Ribuffo, director at the Port of Anchorage, says he is preparing to lead the facility through a multimillion-dollar modernization project with a staff that includes “two licensed civil engineers … no politicians, and more than fifty years of experience.” While a port expansion effort pursued by the Municipality of Anchorage in years past cost hundreds of millions of dollars and culminated in a lawsuit against several of the engineering firms associated with the project, Ribuffo says the port is now moving in a new direction. “We’ve learned a lot from history down here,” he says. “We are absolutely disinterested in repeating any of that.”

In 2014, the Port held a design charrette with numerous stakeholders—including the Southwest Alaska Pilots Association and area tugboat operators—to identify a different approach to new construction at the Port. They concluded an expansion wasn’t even necessary in the first place, Ribuffo says. “We’re not busy every day; there’s a lot of opportunity for other stuff to come in across these docks,” the port director says. “When you sat down and did the analysis, we’re big enough. We don’t have to add new docks in addition to the ones we have now.” So, rather than expanding, Port stakeholders have shifted their focus toward modernizing existing facilities. About 240,000 containers move through the Port annually, but Ribuffo says it can handle more. “We’ve got plenty of space, we’ve got plenty of time; it annoys me that when we see business opportunities go elsewhere, more often than not people will tell us, ‘We thought you were too busy,’” the port director says. “The fact of the matter is, we’re busy but we’re not so busy you can’t come talk to us and we’ll make you work.” The modernization project comes with a seventy-five-year design life; a much-

January 2015 | Alaska Business Monthly

Concept D, the chosen design for the Port of Anchorage. Rendering by CH2MHILL

We deliver. Advertisers rely on our print and online visibility to reach as many potential clients as possible statewide.

Bill Morris Advertising Account Manager Office (907) 257-2911 b_morris@akbizmag.com

Call me so we can discuss improving your marketing goals.

(907) 276-4373 • Toll Free (800) 770-4373

akbizmag.com

needed upgrade for the current facility, which is more than fifty years old. And while the aging infrastructure could use a facelift, Ribuffo says, there isn’t a strong business case for adding additional capacity. “Until the population of the state doubles or triples, we’ve got enough port,” he says. “There is no low-hanging fruit, untapped market out there that you need more port to support.” With that in mind, Ribuffo says, the August Design Charrette whittled the options down to three possible design concepts. Each of the three concepts would replace Terminals 2 and 3, upgrade existing infrastructure, and improve seismic resilience, all without a gap in Port operations. “One of the goals going forward was to see if we could find a design that would minimize dredging,” Ribuffo says. Engineering firm CH2M Hill—which was awarded a five-year, $30 million contract to manage the new modernization project—unveiled the chosen design concept in November 2014. Now, Ribuffo says, the design needs to mature and progress: It was presented to Anchorage Mayor Dan Sullivan, the Anchorage Assembly, and other stakeholders at the 15 percent design phase. “You don’t want to go any further then that at this phase of the game,” he says. “It’s way too much investment.” Bringing the plans to 100 percent would involve zoning in on the final cost, and the port director says driving test piles would play a major role in the process. “A big part of what it’ll cost to physically do construction is the cost of pile driving,” Ribuffo says.

He says the Port hopes to drive test piles in 2015. And before construction can begin, he says, the project would need to reobtain mandatory permits. The new plan is different from the previous expansion project, and none of the old permits carry forward, Ribuffo says. There would most likely be a need for whale watchers and other environmental work. “You can’t do any of this without permitting,” the port director says. “We’re back to the drawing board on permitting because the new design is so drastically removed from what the last one was.” While the Port still has about $130 million in funding left over from the old expansion project, Ribuffo says it would still need to obtain some additional dollars to complete the new modernization work. And, unlike the previous project, Ribuffo says the new endeavor wouldn’t go forward without being fully funded. “We’re not going to start anything we don’t have the money to finish,” he says. “I don’t want people to be surprised if the decision is, ‘Don’t do anything.’” For a project of this scope, the port director says it’s best to take things one step at a time. “That’s about as much crystal ball as I’ve got,” Ribuffo says. The same goes for the Susitna-Watana Hydroelectric Project and the Knik Arm Crossing: With licensing, financing, and many other steps left to take, construction itself is still a long way down the road. R Kirsten Swann is an independent journalist based in Anchorage.

Alaska Business Monthly | January 2015 www.akbizmag.com

OIL & GAS

Oilfield HSE Compliance Using science in strategies for health, safety, and the environment By Brian McKay

ompliance is a hard word to write about. If you don’t believe me, try to define it. The online version of the Merriam Webster’s dictionary offers a couple of versions; “(1) the act or process of doing what you have been asked to do along with the act or process of complying to a desire, demand, proposal, regimen or coercion, and (2) the ability of an object to yield elastically when a force is applied.” These two definitions seem to contradict each other where the former is begging for rigidness and rules and the latter seems a bit more flexible. Regardless of the semantics, when it comes to matters of health, safety, and the environment (HSE), there should be little doubt as to the context of the definition; follow the rules and nobody gets hurt.

Little Doubt In the Alaska oil and gas industrial sector, there should be little doubt as to what is meant by compliance when it comes to the health and safety of the workforce and the environmental considerations when working in the Arctic. There is tremendous effort expended in the development and deployment of HSE related materials “on the slope” and “in town” from awareness campaigns, hazard hunts, and signs to compulsory training, root cause analysis, and contractual or personal consequences related to contracts, or even employment, if someone is found to be “non-compliant.” Company specific new hire orientations and awareness campaigns are a constant feature in presenting expectations. In an attempt at consistency, those who want to work on the North Slope for one of the majors need to have attended the North Slope Training Cooperatives (NSTC) eight-hour Unescorted Class, which they get from their employer or a third party provider. The Unescorted Class covers working conditions and safe work process (work at height, confined space, hot work, etc.) that can be applied throughout the participating companies’ working areas and 64

covers the minimum information needed to comply with both company policies and HSE related regulations. The regulations governing the minimum safety and health standards at work can be found in the Code of Federal Regulations (CFR): 29 CFR 1910 for General Industry and 1926 for Construction. These CFRs describe the minimum standards for training and performing work in the field at various locations and are the product of what is known now as the OSHA Act. At times, this act is very prescriptive, for example, in describing in great detail the minimum height and width specifications for guardrails, while other times there is room for interpretation in the standard. In addition, since the OSHA Act is a federal regulation, the states have to adopt these regulations verbatim or provide their own OSHA state plan that meets or exceeds the protective measures of the federal plans. Alaska is a state with its own OSHA plan that is administered through the Alaska Department of Labor and Workforce Development. In addition, companies may have their procedures or policies in place that are even more descriptive or protective of personnel and working conditions in the field. With the combination of federal OSHA, state OSHA, company specific requirements, and NSTC training, there is an opportunity for personnel to be overwhelmed with the volume and consistency of HSE related regulations. The question comes up often, how do we maintain a consistent level of HSE related compliance in the field?

Safety Guy I have spent a career in the field of health, safety, and the environment and am known as a “safety guy.” Through my experience, I have come to realize that most of my time has been spent in the arts of influence: that is to say, I have used my time and energy influencing, cajoling, bribing, forcing, asking, pleading, nudging, and suggesting to my fellow

Alaska Business Monthly | January 2015 www.akbizmag.com

workers better, safer, or more efficient methods of work. There were times that I was simply the old cliché of the consultant—borrowing their watch to tell them what time it is. Other times, I am in their business telling them what they don’t want to hear, and other times I am an active participant in the discussion. At times I am not wanted. Sometimes I am asked for. On the whole, though, I would say that most of the time I was just trying to pass on information derived from OSHA regulations and the company’s will to employs in the field and, as with all human endeavor, I have found there are effective methods and methods that are not so effective. In this role, I have made a habit out of trolling for evidence-based effective solutions that will help improve my effectiveness in getting these messages out. A couple of years ago, I picked up a copy of “Yes! 50 Scientifically Proven Ways to be Persuasive” and asked the usual question: can this be used to improve safety performance in the field? The book, written by Robert B. Cialdini with Noah J. Goldstein and Steve J. Martin, outlines fifty short methods for increasing the effectiveness of day-today and business communication and influencing skills. Each of these fifty chapters presents a short story about a business problem, like influencing hotel guests to recycle/reuse their towels more often. The short story is told, a theory from communication of influence psychology is presented, and then a solution is tried out in the laboratory of real life experiences. Three of my favorites are offered below and involve fear, positive social proof, and negative consequences.

see behavioral means for ridding themselves of fear, the less likely they will resort to denial. Example: A photo designed to elicit fear, such as a nail sticking from an eye, may backfire if not accompanied by the proper actions to take in order to prevent the injury. A fear based appeal will be more effective if concrete, and easy, behaviors are available to the intended recipients of the message, such as “in order to prevent eye injuries, new pairs of safety glasses are available at the tool room or through your supervisor. Just ask.”

What Shifts the Bandwagon Effect into Second Gear? Story: A hotel chain wanted to increase the rate by which their guests reused their towels in order to save energy, water, and costs as part of an environmental awareness campaign. They proposed to appeal to the concept of what psychologists call the positive social proof or what we would call the bandwagon effect. In other words, the hotel devised an experiment in which two different requests for reusing the towels were provided to guests: one

Does Fear Persuade or Does it Paralyze? Story: Research has demonstrated that fear arousing communications usually stimulate an audience to take action. However, if the audience is not told to take specific, effective means to reduce the hazard, they may ignore it or think that it doesn’t pertain to them. The Effect: Public health announcements designed to influence behavior are not effective unless accompanied by a specific plan of action. Safety Use: The more clearly people www.akbizmag.com

January 2015 | Alaska Business Monthly

GCI Industrial Telecom has proven experience designing for and working in demanding environments. As experts in the field, our aim is to provide innovative full life cycle communications solutions to increase your productivity.

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

The p gift f erfect slope or every on yo worker ur lis t! ustry looks like in this “To really see what the ind America, “Arctic Oil” forbidding part of North documentary you t by Judy Patrick is the bes will find...”

er of Petroleum News

– Kay Cashman, Publish

PICK UP YOUR COPY TODAY! 511 W. 41st Ave, Suite 101, Anchorage, AK 99503 (907) 258-4704 judypatrickphotography.com Also available in bulk quantities! 66

request was a simple reminder that reusing towels can save water, energy, and cost while the other offered the same information with an additional piece of information about how many people reused towels coming from this same room. In other words, information was given about the towel use of previous guests in the same hotel. The Effect: Increased rate of reuse of towels in that SAME room by 26 percent. Safety Use: The appeal to positive social proof is a powerful motivator for humans. In another example from advertising, an infomercial used to sign off with the commonly heard “operators are waiting, please call now” to a more ambitious “if operators are busy, please call again.” The results, again, were dramatic with the effect of increased sales after the “operators are busy” sign off. The social “proof” that this product is so popular that there may be a wait to order it is a strong motivator to get the product. After all, if everyone else is doing it, it must be good. Example: Arguably one of the most popular uses of the appeal to positive social proof is the claims by businesses that “the so and so work group has worked 1 million hours without a lost time injury.” However, there is a better way to use positive social proof by backing off the all-inclusive reporting or lagging indicators such as injury rates. After all, there could be many people in this group that didn’t do anything different from their day to day routines except be lucky enough not to get hurt. A better example would be: “The insulators in the ISBL piperack decreased their rate of foreign debris in their eyes by switching to XXX brand of safety glasses with side shields,” or something similar.

When Can the Right Way be the Wrong Way? Story: A behavioral researcher was interested in the most effective training methods in an industry where mistakes can mean the difference between life and death—firefighting. Specifically, this researcher wanted to find out whether initial training based on other firefighters’ errors (bad decisions) is better than training that focuses on firefighters’ good decisions or the ways in which firefighters performed their duties while complying with policies.

Alaska Business Monthly | January 2015 www.akbizmag.com

An experiment was set up where applicants were presented with case studies; one set of case studies portrayed firefighters that made errors leading to negative consequences and the other set of case studies focused on firefighters making the right decisions and avoiding negative consequences. The Effect: The results indicated that the firefighters exposed to the negative consequences or “war stories” showed improved judgment and decision making skills than those trained in the conventional way. Vicarious experiences and outlines of how firefighters solved real life problems were a far better teacher than traditional hazard/risk/ rule-based education. Safety Use: Another word for “war stories” or vicarious experiences is the term “near miss.” Depending on the company, a near miss is defined in different ways; some definitions include unsafe conditions and unsafe behaviors while also including the classic near miss (a wrench falling from the pipe rack) or other releases of energy. In any case, it is important to identify and capture these near misses as they

happen because they become the topic of discussion the very next day. Not only are the near misses recorded, but their solutions or mitigating factors are discussed so that personnel are armed with the right information to make quick decisions in the future. Example: I will write about a near miss program we conducted back in 2011 in upcoming articles, but, in short, we showed (through correlation statistics) that the more near misses are reported and acted on, the less frequent first aid cases and recordable injuries become.

Improve Safety How can using these strategies improve safety performance in the field? Using the near miss program in construction decreased recordable injuries by 300 percent. Using vicarious experience to provide educations skits increased participation and fun in all-hands meetings held with more than six hundred camp staff and caterers—also decreasing their rates of injury in the field. My “appeal to fear campaigns” always include a message on how to pre-

vent the injury in order to influence that behavior change. If you feel dirty about using the secrets of persuasion in the same way that infomercials use them to influence your purchase decisions, you shouldn’t. Your motives should be pure in providing an effective, evidence based strategy for better communications. Sharing strategies from our friends in psychology and the behavioral sciences is a proven way to reach the personnel that we serve. R Brian McKay has a post graduate degree in Public Health and is a Certified Safety Professional (CSP) and Certified Industrial Hygienist (CIH). McKay is the Director of Quality, Health, Safety, and the Environment for Fairweather, LLC. Contact him at 907-270-6804 or brian.mckay@fairweather.com.

Natural resources continue to be the cornerstone of Alaska’s economic development and diversification. AIC is proud to provide our Alaska-based construction expertise to the resource development industries.

ALASKA I N T E R S TAT E CONSTRUCTION

AICLLC.COM

www.akbizmag.com

301 W. NORTHERN LIGHTS BLVD., STE. 600

ANCHORAGE, AK 99503

T: 907-562-2792 F: 907-562-4179

January 2015 | Alaska Business Monthly

OIL & GAS

Photo courtesy of Doyon, Limited

Nunivak #1—Doyon Arctic Fox rig setup.

Ahtna, Doyon, NANA Explore Middle Earth

Frontier basins of the Interior closer to development By Mike Bradner

re the North Slope and Cook Inlet the only places where oil and gas will be discovered and produced? There are unexplored “frontier” basins in Interior and western Alaska. Will they remain unproductive? That could easily happen but for the leadership of Alaska Native regional corporations who are staking their own money in exploration of these high-risk areas. Three of the corporations, Doyon Limited, of Fairbanks; Ahtna, Inc. in

the Copper River region; and NANA Regional Corporation, in northwest Alaska own lands in and near large and essentially unexplored basins that could someday produce hydrocarbons for the benefit of local residents as well as out-of-state markets. All three make no secret of the fact that they would like to have oil and gas companies as partners, and all three have had partners in their efforts— Ahtna is currently teaming with two

independent oil and gas companies. However, it is tough to find oil and gas companies who are willing to take a flyer on rank “wildcat” prospects in remote, high-cost areas of Alaska. Given the reality of that, Native corporations have stepped in with their own money, investing in geologic and seismic and, in Doyon’s case, drilling. These are effort aimed “de-risking” prospects in these basins sufficient enough to land a partner, it is hoped.

Alaska Business Monthly | January 2015 www.akbizmag.com

Middle Earth Basins Doyon and Ahtna are targeting prospects on state-owned lands, although both corporations also own lands that are nearby. Doyon is working on four hundred thousand acres of state oil and gas leases in the Nenana Basin about sixty miles west of Fairbanks. Ahtna is exploring on state lands west of Glennallen in the Copper River Basin under a state exploration license, an alternative state exploration program to conventional leasing. Doyon completed new seismic work in the Nenana Basin last fall, and Ahtna was expected to have completed its seismic program in late December in an area west of Glennallen. Meanwhile, NANA is interested in exploring its own lands in the Selawik Basin near Kotzebue and is working to secure an industry partner. There are no state-owned lands in the area. The state of Alaska is supporting these efforts through its exploration licensing program, where large areas of state lands can be made available to explorers under an alternative to the state’s traditional oil and gas leasing program.

The state also offers special tax credits and incentives for frontier basin exploration, regions that the state Legislature nicknamed “Middle Earth.” The name stuck and is now the official title of sections in state law providing for the tax incentives. Doyon began its efforts in the Nenana Basin under an exploration license and then converted to conventional oil and gas leases. Ahtna is still working under an exploration license. If discoveries are made, Ahtna and its partners will convert these to conventional leases. The state also offers special tax credits and incentives for frontier basin exploration, regions that the state Legislature nicknamed “Middle Earth.” The name stuck and is now the official title of sections in state law providing for the tax incentives.

Proven Potential In addition to the Nenana Basin program, Doyon is also active in the Yukon Flats Basin where it and village corporations in the Doyon region own large areas. Doyon controls 1.4 million acres in the region. This basin is considered just as prospective as the Nenana Basin and is much larger, three times the size of the Nenana Basin in fact, and though much of it more remote than areas near Nenana, it also has the advantage of proximity to the trans-Alaska oil pipeline and the route of a potential future natural gas pipeline. Doyon is looking at three specific areas in the Yukon Flats. One of them, near Stevens Village on the Yukon, is very near the TAPS (Trans Alaska Pipeline System) line. Nenana, Yukon Flats, Selawik, and the Copper River Basin aren’t the only frontier basins in Alaska by a long shot, but they are among the few that are not locked up or hemmed in by federal land conservation units formed by the Alaska National Interest Lands and Conservation Land Act, or ANILCA, passed by Congress in 1980. The national parks,

Where the road ends…

Our Work Begins

Our crews have decades of experience, and the skilled manpower to take on any task. With our tundra-approved vehicles, we can get your drill rig and project materials to any remote location, and build ice pads and ice roads. And our range of logistics support – hauling fuel and freight – has been broadened with the addition of our new marine services division.

cruzconstruct.com

Main Office (907) 746-3144 North Slope (907) 659-2866

From start to finish, we are a partner who can deliver what you need.

Anywhere you need it. Any season of the year.

tundra transport • rig moves • rig support • remote camps • ice roads • ice pads • well site trailer units • marine services

www.akbizmag.com

January 2015 | Alaska Business Monthly

Arctic Fox rig sub-base on Totchaket Road bridge. Photo courtesy of Doyon, Limited

wildlife refuges, and other federal land units formed by ANILCA preclude oil and gas exploration for all practical purposes. What is also different about the lands targeted by the three corporations is that they have proven their potential. In the case of Doyon’s programs, the presence of active petroleum systems, oil and gas, have been confirmed in the Nenana Basin by drilling and through geochemical sampling in the Yukon Flats, where Doyon has also done seismic work. In the Selawik Basin there was drilling and seismic done in the years following NANA’s acquiring the lands through the 1971 Alaska Native Claims Settlement Act, and more recently NANA has reprocessed some of that seismic using new reprocessing techniques. That work shows the area has more potential than was previously believed. NANA has reprocessed 400 miles of older two-dimensional seismic done years ago by Chevron Corporation in the Selawik Basin using new techniques 70

that shows prospects that are much more inviting. Chevron and Unocal Corporation “shot” about 1,500 miles of 2D seismic in total. NANA also has access to data from two exploration wells in 1974 and 1975 by Chevron, Nimiuk No. 1 drilled to 6,311 and Cape Espenberg No. 1, drilled to 8,373 feet total depth. Both wells were dry. On Ahtna’s lands, natural gas discoveries have been made by drilling but, in the most recent case, technical problems hampered commercial development.

Gutsy Doyon The impetus for all of these efforts has been providing fuel for local use, but if a discovery is large enough and near enough to a pipeline, as could easily happen with Doyon’s prospects, these resources could be sold outside the region. Doyon’s move to drill its 2013 well in the Nenana Basin, Nunivak No. 2, and to fund the drilling itself was a particularly gutsy move. The corporation had three partners in its first Nenana Basin well, Nunivak No. 1, drilled in 2009, but with no commercial discovery made

(often the case with an initial well) the three partners decided not to participate in further work. Doyon kept going, however. It funded additional seismic and the full cost of Nunivak No. 2. These two wells were also the first deep tests in the basin, fully testing the potential. Two wells drilled by industry much earlier were shallow wells that were actually drilled at the southern edge of the basin and did not reach the deeper, more prospective rocks. Again, no commercial discovery was made in Nunivak No. 2, but the results were encouraging, more so in fact, by demonstrating that oil and gas were there, possibly nearby. Excellent oil and gas source rocks, reservoir traps (structures to hold oil and gas), and competent “seals” (impermeable rock layers to hold oil and gas in a reservoir trap) were found in the well, but finding an actual deposit of hydrocarbons proved elusive. Further work was commissioned, and paid for, by Doyon, including the fifty square miles of 3D seismic work completed in late 2014.

Alaska Business Monthly | January 2015 www.akbizmag.com

www.akbizmag.com

Photo courtesy of Doyon, Limited

Deep Oil or Shallow Gas Why are oil and gas companies, even with generous state exploration incentives, so reluctant to explore in the frontier basins with the result that Alaskan companies, like the Native corporations, have to lead the early work? Doyon’s Senior Vice President for Lands Jim Mery says that, in fact, major oil companies spent a lot of time, and money, looking at the Alaska frontier basins from the 1960s through the early 1980s. A very early exploration well was drilled near Nulato, on the lower Yukon River, and Louisiana Land & Exploration Company drilled three wells in the Kandik Basin in the eastern Interior where a sedimentary basin overlaps the Canada border and extends into Yukon Territory. ARCO Alaska was also very interested in the Kandik. ARCO and Unocal also drilled two early wells in the Nenana Basin, and Chevron drilled two wells in northwest Alaska near Kotzebue. All of these were unsuccessful, such that the companies did not continue the exploration. However, it was a different era for the industry and the tools

Arctic Fox rig sub-base on Nenana River barge.

that were used, the seismic for example, were not as well developed as exploration tools now available. Those companies’ primary targets were also oil, because a market for any gas discovered was not available at the time. Today the regional corporations have local markets for any gas that is discovered. The hope is that gas discoveries could help reduce high local energy costs. However, the industry’s initial drilling, at least where some of the early wells

were drilled, also seemed to indicate that the sedimentary rock layers were shallow, creating geologic conditions more prone to the formation of gas than oil. State and federal geologists generally concurred in this conclusion, although later work by the US Geological Survey in the Nenana Basin and Yukon Flats Basin helped Doyon in its own reassessment of those regions. There were other disincentives for industry, however, such as the locking

January 2015 | Alaska Business Monthly

up of significant areas of the state in national land conservation units, like parks and refuges.

Normally, smaller independent companies move in as large companies move on, and this indeed happened in Cook Inlet and now the North Slope. But the frontier basins, being remote, Shifting Prospects However, there were further discour- high-cost, and virtually unexplored (but with the belief that they agements in attracting industry to the were gas-prone), kept even the independents at bay. area, such as the oil price crashes in 1986 and again in the late 1990s that caused the industry to change its business models. Big companies like ExxonMobil, BP, and Chevron shifted their exploration focus to regions with really big prospects. Normally, smaller independent companies move in as large companies move on, and this indeed happened in Cook Inlet and now the North Slope. But the frontier basins, being remote, high-cost, and virtually unexplored (but with the belief that they were gas-prone), kept even the independents at bay. If anything was to happen local landowners, Alaska Native corporations, had to initiate things, which they have done. When Doyon began later taking its own look at the Nenana Basin and subsequently in the Yukon Flats with the help of the US Geological Survey,

it found the sedimentary rocks to be much deeper than previously thought. This pointed to the possibility that the basins might be deep enough, with pressure and temperatures high enough, that oil might be formed. Subsequent work, including the Nenana Basin drilling, has shown this to be correct. The Alaska Native corporations are motivated somewhat differently than oil and gas companies. As Doyon has explained it, Interior Alaska is where many of Doyon’s shareholders live, and the prospect of proving local jobs and local sources of energy were goals that are different than would motivate conventional petroleum companies. Doyon owns land in the Interior, although it is initially exploring state

TOTAL PROJECT SUPPORT

r EQUIPMENT RENTAL/PROJECT SUPPORT COMPANY r SUPPORTING THE NORTH SLOPE & COOK INLET r HEATERS, GENERATORS, VEHICLES, MANLIFTS, LIGHT PLANTS r CAMPS & CAMP SERVICES r FULL PROJECT LOGISTICS SERVICES & STAFFING 72

Magtec Alaska, LLC (907) 394-6350 Roger Wilson, Prudhoe Bay rwilson@magtecalaska.com Skeeter Creighton, Kenai (907) 394-6305 skeeter@magtecalaska.com

lands, but the corporation is also in the oil service business through subsidiaries, including drilling and pipeline contractors. Creating new markets for Doyon companies is a motivation, the corporation has said. Athna and NANA, which are also exploring, are also landowners and have industry-service subsidiaries shareholders living near places they are looking for oil and gas. What is also important is that the new exploration technology now being employed by all three corporations is demonstrating potential that was not apparent to companies exploring earlier. Doyon’s demonstration that the big Interior sedimentary basins are much deeper than believed earlier and that oil is present as well as gas is a total shift from what was believed earlier by both industry and government geologists. There is also infrastructure available now in at least the Interior and Copper River basins. The Parks Highway, the Alaska Railroad, and a major electric transmission line go through Nenana just a few miles from Doyon’s targets. Some prospects in the Yukon Flats are near the TAPS pipeline and a possible future gas line. Ahtna’s prospects are just off the Glenn Highway and not distant from Glennallen, where there is a regional electric utility and a local market for gas. Like Doyon in the Nenana and Yukon Flats basins, NANA has found the Selawik basin deeper than previously thought, which improves it as a prospect, but the region is still remote and lacking infrastructure. However, there are also customers in the region, such as Kotzebue itself and the Red Dog Mine, a large mining operation which requires a lot of energy to support mining operations. R Mike Bradner is publisher of the Alaska Legislative Digest.

Alaska Business Monthly | January 2015 www.akbizmag.com

TELECOM & TECHNOLOGY

Simply Voice & Data Telecoms make it easy for businesses By Russ Slaten

laska is dubbed the Last Frontier, but as industry and government have discovered the state’s value through it resources, location, and people, more attention continues to be put toward building its infrastructure. The one industry continually connecting Alaskans, shortening the distance between the mountains, lakes, and ice, is the telecommunications industry. In only the last three years, AT&T has invested $200 million to bring fast, reliable internet and tools for Alaska businesses. GCI says it will have spent about $200 million in 2014 alone to bring Alaskans the most reliable network in the state. Verizon opened its first retail stores in September and has invested $115 million since 2011 and is continuing its build out in the next few years. Each telecommunications company has the same end goal for industry in the state: to make it easy to do business in Alaska.

AT&T AT&T’s premier voice and data plan for Alaska is the AT&T Mobile Share Value plan, says AT&T Alaska Business Sales Manager Amy Merchant. Companies using the Mobile Share plan can connect up to one hundred devices from smartphones to basic messaging phones, laptops, mobile hotspot devices, tablets, cameras, and many other devices with wireless connectivity. “At AT&T, we are always looking for ways to measurably impact our customers’ business. We look for opportunities within their business to drive revenue, control expenses, and increase productivity and efficiency, making AT&T the ideal partner for local business,” Merchant says. Plans are meant to fit business needs ranging from 300MB per month for $20 up to 50GB for $375 per month. 74

And like all Mobile Share plans, Merchant says, customers enjoy unlimited talk and text on the nation’s most reliable 4G LTE network, unlimited international texting outside of the United States, and 50GB of free cloud storage. “In just three years, we’ve invested $200 million on the things our customers tell us they want. AT&T has been a member of the Alaska community for more than twenty years and invested millions of dollars to deliver a finely-tuned statewide network, must-have devices, and great customer service,” Merchant says.

GCI GCI continues to expand its network throughout Alaska, while keeping it simple. “GCI Business Simplified has been our mantra for years. It’s about simplifying our customers’ decision process by asking and answering a few questions about how they use their voice and/or data and then designing a streamlined product catalog to match,” says GCI Director of Commercial Marketing Rochelle Marshall. To begin by covering a company’s wireless needs, GCI offers its Simply Share plans starting at $19.99 for 0.5GB and scaling up to 450GB of data with unlimited Alaska or nationwide voice and the ability to connect as many devices as necessary. New to GCI’s offerings is the r:series business broadband plans, giving GCI a distinct advantage in being capable of connecting its customers beyond wireless. Plans range from 10 megabits per second (Mbps) for the r:10 plan, rise to 50Mbps through the r:50 offering, and 100Mbps under r:100. Markets include Anchorage (Girdwood to Eagle River), Mat-Su, Fairbanks, North Pole, Homer, Kenai, Soldotna, Juneau, Kodiak, and Prudhoe Bay.

Recently publicized was GCI’s re:D broadband for business service, currently offering 250Mbps, the fastest speed in the state. By the end of 2015, customers on re:D in Anchorage will have their speed increased to 1GB at no additional cost. Fairbanks and Juneau will follow with additional markets being evaluated. “Unequivocally, the GCI network makes us stand apart. Our investment in Alaska’s communications infrastructure is our top priority. In 2014 alone we spent about $200 million dollars,” Marshall says. GCI has the largest voice and messaging coverage in Alaska, reaching all throughout the Railbelt, much of the Southeast, and including parts of Western rural Alaska and the North Slope. And to wrap up the savings, GCI offers business bundles through Business Flex. This gives companies the flexibility to choose only two of a complete suite of business products and receive up to 30 percent off their monthly bill.

MTA Matanuska Telephone Association (MTA) holds a sixty year history in Alaska as locally-owned and operated telecommunications company servicing Southcentral Alaska from Eagle River to nearly 250 miles north of Wasilla. MTA’s premier plans come in the form of an advanced Voice Over IP hosted telephone service and a robust “fiber extreme” internet offering with 75Mbps download speed and 25Mbps upload speed along with unlimited data usage under a term agreement, says MTA Business Sales Manager, Micah Weinstein. “MTA is a local communications company that takes pride in its network, employees, and reputation. We are focused on providing a superior product to our customers while deliv-

Alaska Business Monthly | January 2015 www.akbizmag.com

ering superior, friendly, and conscientious local customer service, technical support, and repair,” Weinstein says. Weinstein says the perks in choosing MTA’s unlimited gig usage (when purchased on a term agreement) is a worryfree internet product, and using a web hosting package allows businesses to customize internet services to fit their needs.

Verizon After launching in September, Verizon began offering the same nationwide business solutions in Alaska at the same rates. Some of the voice and data plans that fit Alaska businesses are the MORE Everything Plan for Small Business, which connects up to one hundred devices, or the Nationwide for Businesses plan that connects companies with services for more than one hundred devices. The MORE Everything Plan gives customers unlimited talk and text, sharable data, personal hotspot, international messaging, 25GB of cloud storage, and access to one of the nation’s farthest reaching 4G LTE networks, though most of its coverage is in the

Lower 48, according to Demian Voiles, Verizon, Alaska vice president for sales and operations. Verizon offers two types of coverage, 3G and 4G LTE. “We were the pioneers of 4G LTE starting in 2010. We have the largest LTE footprint in Alaska and nationwide. And within that 4G LTE footprint we also offer HD voice and video calling known as ‘Advanced Calling,’” Voiles says. Advanced Calling is integrated highdefinition voice and video that allows Verizon customers to hear the clarity of HD voice and easily switch to video calling without a Wi-Fi connection. Anchorage houses one of the most advanced switching networks in the nation, used to process data and Advanced Calling, Voiles says. The command center resembles an air traffic control tower at a major US airport, in contrast to many of the aging switch facilities that exist in Alaska. “At Verizon the network is built for reliability through redundancy. Verizon’s investment over the past few years has included a lot of behind-the-scenes tech-

Market Squares AK Business Ad-Homer&HMT_raster.pdf 1 6/5/2014 1:26:56 PM

nology work to meet the highest possible standards. Network facilities are built with power outages, windstorms, and blizzards in mind,” Voiles says. Verizon’s Advanced Calling capabilities reaches the Anchorage bowl, the Mat-Su Valley, sections along the highway towards Talkeetna, Fairbanks and North Pole, Juneau, Valdez, and Cordova, with Ketchikan set to be connected to 4G LTE in 2015. Alaska businesses have many decisions to make, but with the shared, ongoing goal for telecommunications companies to streamline services, Alaskans will continue to have a choice in connecting with a provider that fits their needs. R Russ Slaten is the Associate Editor at Alaska Business Monthly.

For Information About Advertising in Market Squares Call (907) 276-4373 or Toll Free (800) 770-4373

Factory Authorized Distributor

CMY

We help good organizations, look great!

Portable Gas Detection • Easy to use • Low cost of ownership • Automated maintenance and record keeping

Ps Paramount Supply Company

Design

907-562-4248 800-478-4248 in AK info@stellar-designs.com

stellar-designs.com www.akbizmag.com

7928 King Street Anchorage, Alaska 99518 907-349-0280 or 907-244-0365 (24/7) www.paramountsupply.com

CA LL TO DAY ! January 2015 | Alaska Business Monthly

RIGHT MOVES Elliott Bay Design Group

Elliott Bay Design Group announced the hire of Jeff Kelton as its Field Liaison Engineer in Ketchikan. Kelton is a naval architect with more than thirty-eight years of industry experience. His vast experience includes project management, shipyard liaison engineering, structural engineering and design, Kelton environmental engineering, and waterborne transportation planning. He holds a BS in Naval Architecture and Marine Engineering from the University of Michigan.

KeyBank

Lisa Gentry joined KeyBank in Fairbanks as a business banking relationship manager and vice president. In her new role, she is responsible for business development and customer service delivery in Fairbanks. Gentry has more than fifteen years of financial service and sales management expe- Gentry rience. She is a graduate of the University of Alaska Fairbanks and a Leadership Fairbanks graduate.

Compiled by Russ Slaten tations for small to midsize businesses, specializing in insurance and risk evaluations, contract review, proposal writing, environmental permitting, and process auditing. Karp is an entry level engineering geologist. She graduated in June of 2014 from Western Washington University with a Bachelor’s in Geology with a concentration in Environmental/Engineering Geology. Moran is a staff geotechnical engineer. Prior to joining Golder, Moran performed field and project support for geotechnical studies and prepared geotechnical recommendations for roads and airports, and has worked in the geotechnical engineering field since May 2011.

Lynden

Lynden Transport Driver John Schank was recognized for thirty-seven years of accident-free driving over one of the most treacherous roads in America, the Dalton Highway from Fairbanks to Prudhoe Bay. Schank began driving for Lynden Schank Transport in 1975, delivering essential supplies and materials for the Alaska pipeline construction. He has the highest number of miles on the Dalton Highway of any driver in history.

McCool Carlson Green

Builders Choice

Builders Choice welcomed Charles Benshetler as the Business Development Manager at their Anchorage Headquarters. He will also be working with their Vermillion, South Dakota facility. Benshetler began his professional career in Houston, Texas, in 1989 serving in various roles for Benshetler PVF suppliers in the oilpatch. The last eleven years were spent in Alaska with Ferguson, Inc. as the Sales Manager serving the oil and gas, mining, EPC, and general/mechanical contractor community.

Golder Associates, Inc.

Golder Associates, Inc. Anchorage office welcomes new hires Chasen Cunitz, Jessa Karp, and Nick Moran. Cunitz is a project coordinator. Prior to joining Golder, Cunitz performed business and legal consul-

Brodt

Burtner

Associate Architect Scott Brodt has been promoted to Senior Associate in recognition of his strong leadership in the studio and in the field. In sixteen years with the firm, Brodt has guided the completion of some of MCG’s most successful projects. A rc h i te c t s G a r r e t t Burtner and Jason Gamache Gamache

have both been promoted to Associate Architect. Burtner has been with MCG for nine years, and his passion for design is integrated into his life through his artwork, architectural design, and his personal projects. Gamache has been with MCG for six years and is a leading sustainability expert who has managed the LEED Certification process for six buildings throughout Alaska.

Alaska Energy Authority

Gene Therriault, deputy director for energy policy at the Alaska Energy Authority, has been elected as vice-chair of the National Association of State Energy Officials (NASEO) board of directors. In his role as vice chair, Therriault will continue to focus and inform six US Territory and fifty state energy offices as they interact with the federal government on energy matters.

R&M Consultants, Inc.

Weiss-Racine

Oleson

Holly Weiss-Racine, CPG, has earned her Certified Professional Geologist (CPG) certification. She is an Environmental Specialist in R&M’s Environmental and Planning Group. Weiss-Racine has more than eight years of experience in providing environmental and geological services. She possesses a strong knowledge of environmental standards and regulatory agency permitting and compliance. Taryn Oleson joined R&M’s Environmental and Planning Group in the Anchorage office as a Planner in August 2014. Oleson is responsible for research and data compilation on transportation projects and comprehensive plans; assisting with public and agency meetings; communicating with project stakeholders; and reviewing, evaluating, and summarizing adopted plans and policies.

Hope Community Resources, Inc.

Hope Community Resources announced the promotion of Michael Bailey to Chief Financial Officer. Bailey has more than fifteen years of experience in finance, management, and disability services. Prior to becoming CFO, Bailey spent three years providing direct support as a Care Coordinator before he was

SLED DOGS & SOFAS & MILK

OH MY!

WE’RE OFF TO RURAL ALASKA

Alaska Business Monthly | January 2015 www.akbizmag.com

RIGHT MOVES tapped to lead Hope’s billing department. In 2009 he was promoted to Controller.

CRW Engineering

CRW Engineering Group, LLC announced that Matt Edge, PE, earned his Professional Traffic Operations Engineer, or PTOE, certification. Edge has a BS in Civil Engineering and an MS in Environmental Quality Engineering from the University of Anchorage Alaska, with professional Edge licenses in both Civil and an Environmental Engineering.

Compiled by Russ Slaten Joe Fey joined Carlile as an account manager in the Heavy Haul Department in Anchorage. Fey has been with Carlile for seventeen years and has worked in a variety of positions in Kenai, Seward, Kodiak, and Anchorage. Fey has specialized in construction and petroleum projects while working for the commercial side of the sales team.

First National Bank Alaska

Bering Straits Native Corporation

B e r i n g S t r a i t s N a t i ve Corporation announced the promotion of shareholder Larry Pederson to Vice President of Lands and Natural Resources. In his new role, Pederson is responsible for establishing and maintaining goals and objectives for the development of BSNC’s mineral and land resources. Pederson earned Pederson a Bachelor of Science in Environmental Biology from Fort Lewis College in Durango, Colorado. He joined Bering Straits with more than eight years of experience in environmental contracting and management.

Lynch

Mena

CIRI Alaska Tourism

Myers

Pence Venters

Carlile

Roser

Kessler

Fey

Greg Kessler joined Carlile as the Alaska vice president of sales. His primary responsibility will be managing and planning for the Alaska sales team out of the Anchorage office. Kessler has more than fifteen years’ experience in the transportation industry and holds a Bachelor in Business Administration from St. John’s University and an MBA with a Finance concentration from UAA.

new U-Med Branch. She has worked for the bank for twenty-three years. Assistant Vice President Vicki Myers was promoted to Anchorage Branch Administrator. Myers has thirteen years of experience in bank management and twentyfive years in customer service. Moving from the Fairbanks Johansen Branch to the Interior City Branch, Jutta Pence was promoted to Branch Manager and has been employed at First National for ten years. Mary Roser was promoted to Operations Supervisor at the Johansen Branch, working for First National for almost a decade. Assistant Vice President Jennifer Snodgrass recently joined First National as Consumer Underwriting Manager. After working in Cash Management as a Business Development Officer, Loan Officer Matt Thon is headed back to the Dimond Branch where he first started as a Personal Banker in 2012.

Snodgrass

Secondar y Mor tgage Market Officer Tina Lynch was appointed Assistant Vice President. Originally from Kansas, Lynch has more than fifteen years’ experience in the financial industry. Kippy Mena was promoted to Branch Manager and will oversee the dayto-day operations of the Thon

Morrison

Dawn Venters has joined CIRI Alaska Tourism as sales manager for the marine division, representing Kenai Fjords Tours and Kenai Fjords Wilderness Lodge in the Alaska tourism markets. Venters brings more than eighteen years of Alaska tourism industry experience to the company. Cameron Morrison was McDonald hired as CIRI Alaska Tourism’s lead reservations agent for the Anchorage call center and Alaska Heritage Tours office. Morrison worked as a seasonal reservations agent in 2014 and brings to the company years of supervisory retail experience. Dan McDonald has rejoined CIRI Alaska Tourism as Revenue Control Supervisor in the Anchorage office. McDonald has twenty years of history with the company, most recently as the Director of Marine Operations. R

W W W. N AC . A E R O • ( 8 0 0 ) 7 27 - 214 1 • www.akbizmag.com

January 2015 | Alaska Business Monthly

INSIDE ALASKA BUSINESS

USI Insurance Services

SI Insurance Services closed the acquisition of Anchorage-based employee benefits practice Wallace Insurance, Inc./Scott Insurance Services and all of its employees joined USI’s Anchorage office. By acquiring Wallace/Scott, USI’s footprint in the Northwest has been further extended and strengthens USI’s vision of becoming the nation’s number one brand in the middle-market insurance brokerage industry. Wallace/Scott has been managing the Alaska Public Employee Insurance Group since 2013. USI is headquartered in Valhalla, New York.

Denali Alaskan Federal Credit Union

enali Alaskan signed an agreement with CO-OP Financial Services to offer more than thirty thousand surcharge free ATMs to its members. This partnership adds to more than forty-five Denali Alaskan ATMs in Alaska as well as convenient account access via internet, phone, and mobile app. In addition, Denali Alaskan members have access to their accounts at more than 6,500 shared branches across the nation. CO-OP Financial Services is based in Rancho Cucamonga, California. Denali Alaskan Federal Credit Union also joined forces with Vantiv to offer merchant services. Vantiv, a leading provider of payment processing services and related technology, will help Denali Alaskan provide the next generation of payment solutions to businesses throughout Alaska. Denali Alaskan’s relationship with Vantiv will allow Denali Alaskan to provide the latest payment solutions and related technology to member busi-

Compiled by Russ Slaten

nesses. Denali Alaskan has offered business lending to local businesses for more than eleven years; the new department fills out the business services suite so local firms and organizations may find all the services they need under one roof.

Emerald Alaska, LLC

merald Alaska, LLC, a leading Alaska environmental services company, was acquired by Great River, New York-based National Response Corporation from Emerald Services, Inc. of Seattle, Washington, in November. Emerald Alaska has been one of Alaska’s top providers of environmental and emergency response solutions to the oil and gas industry for eleven years. Headquartered in Anchorage, with seven permitted facilities strategically located throughout the state, Emerald Alaska employs more than one hundred people and will continue to operate under its name, Emerald Alaska, LLC.

GeoNorth

eoNorth, an Alaskan-based geospatial and information technology solutions provider headquartered in Anchorage and a wholly owned subsidiary of Alaska Native Corporation the Tatitlek Corporation, was awarded a new Information Technology Support Services contract by the Denali Commission. GeoNorth is charged with collaborative efforts with Denali Commission office management for the planning, scheduling, and implementation of various IT projects from inception to roll out, planning and installing new servers, inventorying all hardware and software (and properly disposing of excess government IT property),

and maintaining all systems in accordance with Federal Information Management Security Act of 2002 requirements.

Merrick Alaska

errick & Company, a global geospatial solutions, surveying, engineering, architecture, and design-build firm, opened a full-service, multi-disciplinary regional division office in Anchorage in the Calais Office Center I at 3201 C Street. Merrick Alaska offers an experienced and highly-skilled, Alaska-based staff that understands the unique climate, geography, and culture that Alaska offers, with a core team based in Anchorage and additional personnel in Fairbanks, Valdez, and other client facilities.

CES Oil Services Pte. Ltd.

he Alaska Industrial Development and Export Authority (AIDEA) completed deal structuring with CES Oil Services Pte. Ltd. to jointly finance and own an oil and gas production and processing facility at the Mustang Field on Alaska’s North Slope. AIDEA and CES will own the facility through Mustang Operations Center #1 LLC. Brooks Range Petroleum Corporation will build and operate the facility, which will cost between $200 million and $225 million. AIDEA will invest up to $50 million and previously invested $20 million for the construction of the Mustang road and pad. Mustang Operation Center #1 will process up to fifteen thousand barrels of crude oil per day from the Southern Miluveach Unit (known as the Mustang Field) and transport produced crude to the Trans Alaska Pipeline System via the Alpine and Kuparuk oil pipelines,

Your Project, Our Responsibility. 24/7 Service Pacific Pile & Marine has a robust fleet of marine equipment including our recent addition of a 600-Ton 4600 Ringer.

www.pacificpile.com I (907) 276-3878 276-3873 78

From critical lifts to platform support, PPM is sufficiently resourced to deliver a wide range of construction services. 620B East Whitney Road I Anchorage, AK 99501

Alaska Business Monthly | January 2015 www.akbizmag.com

INSIDE ALASKA BUSINESS and will produce 7.5 million cubic feet per day of gas for fuel and reinjection. The facility will also have 10 megawatts of electrical production as well as an operations camp and personnel quarters. AIDEA’s overall $70 million investment in the Mustang Development Program is estimated to leverage more than $500 million in private investment. The facility is expected to be flowing oil into TAPS in the first quarter of 2016.

ConocoPhillips Alaska

onocoPhillips Alaska, Inc. announced in October that the Kuparuk field expansion project Drill Site 2S has been sanctioned for funding by ConocoPhillips and the Kuparuk co-owners. Plans for construction will move forward. This is the first new drill site at Kuparuk in nearly twelve years, and it is expected to add about eight thousand barrels of oil per day gross at peak production. The approximately $500 million (gross) Drill Site 2S project includes a new gravel road and a new drill site, power lines, pipelines, and other new surface facilities. ConocoPhillips began laying gravel for the project in the first quarter of 2014 in order to initiate facility construction in late 2014. Drilling is slated to begin in mid-2015, with first oil expected in late 2015. In addition to Drill Site 2S and increased rig levels, since the passage of Senate Bill 21, the More Alaska Production Act, ConocoPhillips has also announced plans to pursue two other new projects on the North Slope. Permits for Greater Mooses Tooth #1 in the National Petroleum Reserve-Alaska were filed in July 2013. Plans for viscous oil development at Drill Site 1H North East West Sak in the Kuparuk Unit were announced in February 2014. Other

Compiled by Russ Slaten

Kuparuk owners include BP Exploration, ExxonMobil, and Chevron.

Valley Family Fun Center

close in 2015 after the completion of Horizon’s sale of its Hawaii operations, Horizon’s shareholder approval, and other customary closing conditions.

he Alaska Industrial Development and Export Authority Board approved a $5.4 million loan, to John C. Schweiger Loving Trust and John C. Schweiger, for 90 percent of a $6 million loan brought by Northrim Bank, which originated the loan and is participating with $600,000. The purpose of this loan is for long-term financing for Valley Family Fun Center, a proposed 58,333-square-foot facility located at 1450 Seward Meridian Parkway in Wasilla. The project is expected to create thirty-five to fifty new jobs.

Matson, Inc.

atson, Inc. and Horizon Lines, Inc. entered into a definitive merger agreement pursuant to which Matson will acquire the stock of Horizon, including its Alaska operations and the assumption of all non-Hawaii business liabilities. Separately, Horizon also announced that it has agreed to sell its Hawaii operations to the Pasha Group for $141.5 million and intended to shut down its Puerto Rico liner operations by the end of 2014. Under the terms of the Horizon transaction, Matson will acquire Horizon for $0.72 per fully diluted common share, or $69.2 million, plus the repayment of debt outstanding at closing. The total value for the transaction is $456.1 million (before transaction costs). Matson will fund the Horizon transaction from cash on hand and available borrowings under its revolving credit facility. The transaction is expected to

Kenai Offshore Ventures, LLC

he Alaska Industrial Development and Export Authority (AIDEA) agreed to sell its ownership stake in the Endeavour, Spirit of Independence jack-up drilling rig owned by Kenai Offshore Ventures, LLC (KOV), in which AIDEA invested with partners Ezion Holdings Limited and Teras Investments Pte, Ltd., an Ezion subsidiary, to acquire and own the rig. AIDEA is the preferred owner of KOV; Ezion and Teras are the common owners. AIDEA was approached by KOV common owners with a request to exercise their rights to purchase AIDEA’s ownership stake in KOV under provisions of the KOV Operating Agreement. KOV is repurchasing AIDEA’s preferred shares, leaving the common members as sole owners of KOV. Pending final AIDEA approval of the sale of its preferred ownership in the Endeavour, the rig will leave Cook Inlet on a heavy lift vessel for transport to South Africa for use in offshore exploration.

LifeMed Alaska

ifeMed Alaska launched medevac jet service from its Fairbanks base and now has the resources to respond quickly and efficiently to medical emergencies on the North Slope and Western Alaska from Fairbanks. LifeMed relocated a Learjet 35 from Anchorage to provide expedient re-

Your Project, Our Responsibility. 24/7 Service

Pacific Pile & Marine has a robust fleet of marine equipment including our recent addition of a 600-Ton 4600 Ringer.

www.pacificpile.com I (907) 276-3878 276-3873 www.akbizmag.com

From critical lifts to platform support, PPM is sufficiently resourced to deliver a wide range of construction services. 620B East Whitney Road I Anchorage, AK 99501 January 2015 | Alaska Business Monthly

INSIDE ALASKA BUSINESS sponse to a broader area of Alaska. The company’s Fairbanks-based King Air turbo prop will remain in service to respond to surrounding villages. As an added advantage, long-range medevac flights from Fairbanks to Seattle are now possible for the company. Eight experienced medical flight crew members were hired to staff the Fairbanks-based Learjet with around-the-clock coverage. A Learjet and King Air will remain based in Anchorage, along with a Cessna Caravan in Bethel and AStar helicopters in both Palmer and Soldotna.

ConocoPhillips Alaska

onocoPhillips Alaska, Inc. signed a contract with Nabors Alaska Drilling to build a new coiled-tubing drilling (CTD) rig for use in the ConocoPhillips-operated Kuparuk River Unit on Alaska’s North Slope. The new Nabors CDR3 CTD rig is scheduled to begin drilling in late 2016. CTD is a leading edge technology that utilizes spools of continuous tubing to re-enter existing wells and then drill multiple horizontal laterals from a central wellbore. CTD has proven successful in producing oil resources that might otherwise be left in the ground.

State of Alaska

he State of Alaska received $59.7 million in high bids for its annual Northern Alaska oil and gas lease sales in November—the third highest amount received in state history. Competition was high among bidders—seven lease tracts received a bid of $1 million or higher and a total of fifty-six tracts attracted competition from multiple companies. The two highest

Compiled by Russ Slaten

winning bids, both for $2,538 per acre and submitted by 70 & 148 LLC, netted a combined $13 million for the state. Based on preliminary results, the Alaska Division of Oil and Gas received a total of 356 bids from twelve different bidding groups on 298 tracts encompassing approximately 641,696 acres.

The Arc of Anchorage

he Commission on Accreditation of Rehabilitation Facilities International (CARF) accredited the Arc of Anchorage for a period of three years for its Community Integration: Integrated Developmental Disability/Mental Health programs (Behavioral Health Services). This is the first accreditation that CARF has awarded to the Arc of Anchorage. The Arc helps Alaskans who experience intellectual and developmental disabilities. Some of the individuals served may also experience a mental illness. The Arc strives to help these Alaskans achieve lives of dignity and independence as valued members of the community. An organization receiving a CARF Three-Year Accreditation has put itself through a rigorous peer review process. It has demonstrated to a team of surveyors during an on-site visit its commitment to offering programs and services that are measurable, accountable, and of the highest quality.

Hageland Aviation

ageland Aviation, the rural air carrier in the Ravn Air Group, was awarded a Medallion Foundation Star for Operational Control in November. The Operational Control program is meant to establish an effective flight operations management

system that considers all hazards and associated risks. It also requires shared decision-making for dispatching all flights with appropriate management involvement as risk levels increase. This star is the next step in Hageland Aviation’s increased safety procedures. Hageland is proactively working toward a five-star rating and the award of the Medallion Safety Shield in the Medallion Foundation safety program. The Medallion Shield program requirements exceed current FAA regulations. In order to achieve this goal, Hageland Aviation expanded its operational control center in Palmer.

GCI

ellAware, the oil and gas industry’s only full stack solution for oilfield monitoring and optimization, announced it has entered a strategic partnership with GCI, the top provider of voice, data, and video services in Alaska. This new partnership will be managed by GCI Industrial Telecom, a division of GCI, and will increase its already dominate presence in the Alaska energy sector. WellAware will give oil and gas field operators in the region access to the industry’s most advanced analytics solution. GCI Industrial Telecom brings full lifecycle support to clients and dispatches to their projects from offices in Deadhorse, Anchorage, and Houston, Texas. Through this new partnership, oil and gas operators in the Alaska region will have will greater access to the industry’s most advanced remote monitoring and intelligence platform to more efficiently operate their production in Alaska. R

• General Contracting • Marine Infrastructure • Design Build

Dutch Harbor - Unalaska, Alaska

www.pacificpile.com I (907) 276-3873 80

620B East Whitney Road I Anchorage, AK 99501

Alaska Business Monthly | January 2015 www.akbizmag.com

AGENDA

Compiled by Tasha Anderson

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

Sustainable Agriculture Conference

Alaska Marine Science Symposium

January 19, 2015—Hotel Captain Cook, 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: Featured presenters include Doug Fisher, Austin Buffum, Anita Archer, Tricia McKale Skyles, Catlin Tucker, Lexie Domaradzki and Gary Whiteley. The small and rural schools preconference will take place on Friday, January 23. asdn.org/2015-alaska-rti-conference/

Anchorage AEYC Early Childhood Conference

January 28-31—Hilton Anchorage, Anchorage: “Reaching Potential Together: Join in the Journey.” 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 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 non-profit organization whose purpose is to inspire and prepare young people to succeed in a global economy. juniorachievement.org

February February 9-13, 2014—Dena’ina Center, Anchorage: The Alaska Forum on the Environment is Alaska’s largest statewide gathering of environmental professionals from government agencies, non-profit and for-profit businesses, community leaders, Alaskan youth, conservationists, biologists, and community elders. akforum.com February 21-24—Hotel Captain Cook, Anchorage: This is the educational technology conference of the Alaska Society for Technology in Education. This years’ them is “Game On! Games in Education; Game Based Learning; Gamification.” aste.org

www.akbizmag.com

Animal Behavior Society Annual Conference

March 30-April 3—Fairbanks: The annual symposium is designed for tribal leaders, managers, and administrators and transportation staff; transportation and infrastructure professionals; federal and state representatives; and all those seeking to learn more about tribal transportation and transportation challenges in remote Alaska communities. attwg.org

International Conference on SolidState Sensors, Actuators, and Microsystems

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

April 20-24—Anchorage Sheraton Hotel & Spa, Anchorage: Hosted by the Anchorage chapter of the APOA, or 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

NEA Alaska Spring Conference

April 24-26—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

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

APCOM 2015

May 23-27—Westmark Fairbanks Hotel & Conference Center, Fairbanks: This

July 16-18—Dena’ina Center, Anchorage: The Rocky Mountain Mineral Law Foundation (RMMLF) is a collaborative educational non-profit 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

May

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

Rocky Mountain Mineral Law Institute

AOPA Crime 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. animalbehaviorsociety.org

Southcentral Foundation 2015 Nuka System of Care 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/

April

ASTE Annual Conference

March 4-7—Hilton Anchorage, Anchorage: The annual meeting includes workshops, an evening reception for information and registration, paper presentations, and an awards banquet, business meeting, and the Belzoni meeting. alaskaanthropology.org

Alaska Tribal Transportation Symposium

Alaska Forum on the Environment

June

Alaska Native Studies Conference

Alaska Peony Growers Association Winter 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 wyas to improve the agriculture industry in Alaska. uaf.edu/ces/ah/sare/conference/

Alaska Anthropological Association Annual Meeting

Alaska RTI Conference

is the international symposium for the Application of Computers and Operations Research in the Mineral Industry. apcom2015.org

March

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

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

January 2015 | Alaska Business Monthly

ALASKA THIS MONTH By Tasha Anderson

DINING

Meier’s Lake Roadhouse

Typical meal at the Roadhouse, pictured at left.

ocated at Mile 170 on the Richardson Highway, fiftyfive miles north of Glennallen and sixteen miles south of Paxson, Meiers Lake Roadhouse was built in 1906 by Charles Meiers, who had originally worked as a cook for Alvin Paxson at the Timberline Roadhouse at Mile 192. According to its website, Meier eventually tired of that arrangement and went a few miles down the way to build his own roadhouse on a lake. Today it is owned by Harvel Young. The restaurant is open year-round, according the cook, Wiley Koyoti. “The food is pretty basic—open for breakfast, lunch, and dinner. [We have] a variety of burgers with anything you want on them,” he says. We’re not what they’d call fine dining, with candlelight and high dollar wine, but we’ll fill you up.” Most of the patrons of Meier’s Lake Roadhouse aren’t there for a delicate meal, but to re-fuel on the way to hunt, snowmachine, or other Alaska recreational activities. Koyoti says their busiest time of year is understandably in the summer, but “we do have a few events in the winter,” that can fill the roadhouse. In the first week of January, a dog sled race begins and ends at the roadhouse, Koyoti says, and “in the second weekend in January we’re the halfway stop on the Copper Basin 300. Both are qualifiers for the Yukon Quest and Iditarod.” For those who need a place to stop, Meiers Lake Roadhouse is the right food in the right location. “We’re the only place open between Glennallen and Delta, so it’s one hundred miles to the next place north and sixty miles to the next place south,” Koyoti says. The roadhouse is open from 7 a.m. to 9 p.m. in the winter season. meierslakeroadhousealaska.com R 82

Alaska Business Monthly | January 2015 www.akbizmag.com

ALASKA THIS MONTH By Tasha Anderson

TRAVEL

Photo courtesy of the Soldotna Chamber of Commerce

Peninsula Winter Games

Kids enjoying Winter Games.

oin the fun on Saturday, January 31 at the Soldotna Regional Sports Complex during the annual Peninsula Winter Games. Initiated by Al York, a member of the Soldotna Lions Club, in 1976, the event was intended to provide children with an opportunity to enjoy sports, games, and kid oriented events during the winter season. “After [York] passed away, many people picked up the torch to help keep the games alive… thanks to tremendous community support, the games have continued to grow each year,” says Tami Murray, the visitor center coordinator for the Soldotna Chamber of Commerce & Visitor Center. Leading up to the main event, the Native Youth Olympics take place at Kenai Middle School January 23-25, which includes games such as the scissor broad jump, one-hand reach, seal hop, two-foot high kick, arm pull, toe kick, Eskimo stick pull, wrist carry, and Alaskan high kick. In the week before the games there is an ice carving exhibition featuring works by local artists. “Local businesses sponsor a sculpture and all the proceeds go to the Peninsula Winter Games, helping to fund all of the free games, food, and activities,” Murray says. January 31 events include a hockey tournament, a Monopoly tournament, ice bowling, kid sled races, snow machine rides, an archery lane, face painting, a bouncy house, cookie icing, building birdhouses, scavenger hunts, and a giant ice slide. The sports complex will be busiest at noon: “We have a free lunch for everyone; over one thousand corndogs will be served,” Murray says. “Then, to top off the day, we have a fantastic fireworks display.” Murray says that it’s the partnership between the Soldotna Chamber of Commerce Community Partners and local businesses that makes it possible to “turn what might otherwise be another long winter day into a winter carnival for all to enjoy.” visitsoldotna.com R

www.akbizmag.com

Fairbanks Anchorage

Skagway

Kenai Haines Whittier Sitka

Kodiak

Petersburg

Juneau

Drive With AVIS in Alaska and Get a Vacation in Every Car® Reserve Today at 1 (800) 331-1212 www.AvisAlaska.com We Also Sell Cars!

1 (907) 249-8243 • CarSales@AvisAlaska.com

January 2015 | Alaska Business Monthly

ALASKA THIS MONTH By Tasha Anderson

ENTERTAINMENT

Let’s Murder Marsha

“The play is quick moving and fun. It’s a lighthearted romp through an episode of misunderstandings with twists and turns to circumstances involving everyone who interacts with Marsha.”

—Gary Forrester Executive Director, Valley Performing Arts

tims discover what she has supposed and decide to teach her a lesson by actually pretending to be murderers!” The cast of three men and four women consists of four new faces and three Valley Performing Arts veterans, including Jennifer McGuffey, Mathew Firmin, and Patty Taylor. “Let’s Murder Marsha” is being directed Patricia Blossom. Valley Performing Arts Artistic Director Larry Bottjen selected the play based on its great reviews and top notch comedy aspects. Forrester says “the play is quick moving and fun. It’s a lighthearted romp through an episode of misunderstandings with twists and turns to circumstances involving everyone who interacts with Marsha.” The play runs January 9 through January 25 and is two hours long with a thirty minute intermission. It is recommended for those ages twelve and up. Curtain times are Friday and Saturday evenings at 7 p.m., Sunday matinees at 2 p.m., second and third week Thursday at 7 p.m. valleyperformingarts.org R 84

Alaska Business Monthly | January 2015 www.akbizmag.com

alley Performing Arts, located at 251 West Swanson in Wasilla, is excited to present “Let’s Murder Marsha,” a comedy of misunderstanding written by Monk Ferris. Gary Forrester, executive director of Valley Performing Arts, summarizes the plot: “A happy housewife named Marsha, hopelessly addicted to reading murder mysteries, overhears her husband discussing her upcoming birthday surprise with an interior decorator. To her ears, though, it sounds like they are planning to murder her! With the assistance of her next door neighbor she tries to turn the tables on them with a poisoned potion. When her own mother shows up for her birthday a day early, Marsha thinks she is in on the diabolical scheme. When her maid’s date, a policeman, shows up to take the maid out, Marsha thinks he is on to her poisoning attempt. Finally, just when you would think all of this would be cleared up, Marsha’s intended vic-

EVENTS CALENDAR ANCHORAGE

9-10

Alaska’s Best Wholesale Show

Alaska's Best Wholesale Show (at the Clarion Suites hotel) coincides with the Wholesale Alaska Gift Show (at the Dena’ina Convention Center), creating an opportunity for store owners to shop two shows in Anchorage, Alaska. Wholesale vendors of exclusively hand-crafted, Alaskan-made products capitalize on this buyer traffic at Alaska's Best, where buyers hand-select inventory, place orders, and meet the artists. Alaska's Best Wholesale Show distinguishes itself by featuring a limited number of Alaska's best established and emerging crafters, attracting respectful buyers, and hosting a comfortable, fun and friendly marketplace where artists and buyers meet and mingle at their own pace. The sustainable relationships forged at Alaska’s Best drive the Alaskan economy. 8 a.m. to 4 p.m. alaskasbestwholesale.com

15-25

Anchorage Folk Festival

More than five hundred performers will fill stages at several locations in the city, including the main stage at Wendy Williamson Auditorium on the UAA campus, for the 25th annual Anchorage Folk Festival than spans two weeks. This Anchorage cultural staple offers shows, contests, classes, dancing, educational workshops, and open jams. Various locations and times. anchoragefolkfestival.org

Compiled by Tasha Anderson JUNEAU

23-25

Platypus-Con

The community comes together to play both new and old board and card games. Demonstrations, organized games, miniature painting, and a massive lending library for open tables will be provided. Platypus Gaming hopes both new gamers and those with more experience will join the weekend long gaming extravaganza. Juneau Arts and Culture Center, Friday 6 p.m. to 2 a.m.; Saturday 9 a.m. to 2 a.m.; Sunday 9 a.m. to 6 p.m. facebook.com/PlatypusBoardGaming

KODIAK

Silent Film Double Feature

The Anchorage Symphony provides the sound track for two classic silent films: Buster Keaton stars in “Steamboat Bill Jr.” —he tries to win the girl, impress her father, and save them both when a fierce storm hits the steamboat; in “Mighty Like a Moose,” Mr. and Mrs. Moose, not the prettiest couple with his big teeth and her beak of a nose, try to fix the situation with hilarious results when they don’t recognize each other. Alaska Center for the Performing Arts, 8 p.m. to 10 p.m. anchoragesymphony.org

Anchorage Wedding Fair

For those planning the big day, this is a one-stop solution for wedding arrangements, including gown collections, catering samples, information on venues, music, cosmetics, flowers, and more. Dena’ina Civic and Convention Center, 12:30 p.m. to 5 p.m.

FAIRBANKS

C Note Poker Tournament

The annual C Note Poker Tournament supports the Fairbanks Symphony Orchestra. Players get their names entered into the prize drawing pot with their initial buy in and with each “double your chips” or regular buy back in. Play and prizes continue throughout the evening. Final table players will be eligible for Alaska Airlines miles and more. Pikes Waterfront Lodge. fairbankssymphony.org

www.akbizmag.com

Intergalactic Nemesis

It’s radio play meets comic book in a live action adventure for the kid in everyone. Here’s how it works: three actors voice the dozens of characters, a Foley artist creates all the sound effects, and a pianist plays a cinematic score, while more than 1,250 individual full-color hi-res comic panels tell a hilarious sci-fi adventure story visually from an enormous movie screen. And it’s all done live. Gerald C. Wilson Auditorium, 7 p.m. kodiakartscouncil.org

Great Alaska Beer and Barley Wine Festival

Showcasing beers of the Northwest and beyond with special attention to Alaska’s brews, the whole weekend is a celebration of brewing beer, mead, and barley wine. There will be more than two hundred beers and barley wines from fifty regional brewers. auroraproductions.net

WorldQuest 2015

This is the largest fundraiser for the Juneau World Affairs Council and features an international buffet, no-host bar, silent auctions, and a trivia contest. Centennial Hall, 6 p.m. jwac.org

SEWARD

Polar Bear Jump

Individuals dress in costumes and wacky costumes and then jump into Resurrection Bay. Sponsors are acquired by the jumpers in order to raise money for the Alaska Division of the American Cancer Society. This is the main event of a weekend-long festival that includes auctions, a carnival, turkey bowling, seafood buffet, and parade. Seward Small Boat Harbor, various times. seward.com

SITKA

Russian Christmas and Starring

Russian Christmas is celebrated by the old Julian calendar, on January 7, as it is still today in Russia. The week-long Feast of the Nativity celebration features Festal Vigil and Matins, the Divine Liturgy, Great Vespers, a Christmas feast, and a nativity “starring”—the Orthodox practice of caroling and sharing the joy of Christmas. St. Michaels Russian Orthodox Cathedral. sitka.org

Alaskans serving Alaskans. Oxford is proud to be the only gold refiner and bullion dealer to maintain two locations in Alaska for more than 30 years. BUY : SELL : TRADE • ANCHORAGE • FAIRBANKS • NOME • NEW YORK

1.800.693.6740 www.oxfordmetals.com January 2015 | Alaska Business Monthly

ALASKA TRENDS

By Amy Miller

Oil Prices Dominate Alaska State Budget Discussions

ith the start of a new year comes a look at Alaska’s likely economic fortunes. With a new legislative session about to begin, the topic looming large above all else is the state’s economic outlook. Starting in the third quarter of 2014, the price of a barrel of Alaska North Slope crude began to decline, from a high in 2014 of just over $110 per barrel in June to less than $70 per barrel in December. Because of the huge role oil plays in the state budget, Alaskans will soon be feeling the pinch. The state’s fiscal-year 2015 budget was built on the assumption of approximately $105-per-barrel oil; at $85 per barrel, the state can expect a $3.3 billion deficit, according to Scott Goldsmith of the Institute for Social and Economic Research at the University of Alaska Anchorage. Why is this price dip hurting Alaska’s economic prospects so much and so rapidly? Because oil production on the North Slope has been declining for many years. In the recent past, the high price of oil has masked this decline. But with prices and production trending downward, there’s little relief in sight with status-quo spending and taxation policies. Revenues from taxation on the oil and its associated industries account for 90 percent of state General Fund revenues, and more than 50 percent of overall state spending. In the past, when oil prices declined, recessions were

mitigated somewhat by federal government spending. But federal spending is also on the decline, and it is unlikely to cushion this latest price drop to the degree it has in the past. The good news is Alaska has options for mitigating the situation. As of the beginning of the current fiscal year, the state holds $4.82 billion in its Statutory Budget Reserve, and another $12.78 billion in the Constitutional Budget Reserve. These two accounts can be tapped in the short term, but won’t cover Alaska’s current level of spending if existing dynamics remain in place. Budget cuts will certainly be necessary, but are easier said than done, particularly in the operating (versus capital) budget. Politically unpopular options include tapping the earnings of the Alaska Permanent Fund, implementing state sales or income taxes, or a combination of all of these options. The Alaska Permanent Fund was worth $51.6 billion in December 2014, and while the balance of the fund cannot be tapped without the approval of Alaska voters, a portion of the earnings on the fund could be. Alaska is also the only state in the United States without a state income tax or a state sales tax. R Alaska Trends, an outline of significant statewide statistics, is provided by the University of Alaska Center for Economic Development.

ALASKA TRENDS HAS BEEN BROUGHT TO YOU THIS MONTH COURTESY OF AMERICAN MARINE/PENCO AMERICAN MARINE • Marine Construction/Dredging • Subsea Cable Installation & Maintenance • Commercial Diving • Platform & Pipeline Construction, Installation, Repair & Decommissioning • Underwater Certified Welding • Marine Salvage • NDT Services • ROV Services • Vessel Support Services PENCO • Environmental Response/Containment • Site Support Technicians/Maintenance • Waste Management/Environmental Monitoring • Tank Cleaning/Inspection • Petroleum Facility Maintenance & Repair • Logistics Support • 24-Hour Response

ANCHORAGE OFFICE 6000 A Street, Anchorage, Alaska 99518

(907) 562-5420

www.amarinecorp.com www.penco.org

Alaska I California I Hawaii DEADHORSE OFFICE Pouch 340079, Prudhoe Bay, AK 99734 (907) 659-9010

Alaska Business Monthly | January 2015 www.akbizmag.com

ALASKA TRENDS

www.akbizmag.com

By Amy Miller

January 2015 | Alaska Business Monthly

ALASKA TRENDS

Indicator

By Amy Miller

Units

Period

Latest Report Period

GENERAL Personal Income—Alaska US $ 2ndQ14 37,941 Personal Income—United States US $ 2ndQ14 14,688,618 Consumer Prices—Anchorage 1982-1984 = 100 1stH14 214.78 Consumer Prices—United States 1982-1984 = 100 1stH14 236.38 Bankruptcies Alaska Total Number Filed September 42 Anchorage Total Number Filed September 35 Fairbanks Total Number Filed September 7 EMPLOYMENT Alaska Anchorage & Mat-Su Fairbanks Southeast Gulf Coast Sectorial Distribution—Alaska Total Nonfarm Goods Producing Services Providing Mining and Logging Mining Oil & Gas Construction Manufacturing Seafood Processing Trade/Transportation/Utilities Wholesale Trade Retail Trade Food & Beverage Stores General Merchandise Stores Trans/Warehouse/Utilities Air Transportation Information Telecommunications Financial Activities Professional & Business Svcs Educational & Health Services Health Care Leisure & Hospitality Accommodation Food Svcs & Drinking Places Other Services Government Federal Government State Government State Education Local Government Local Education Tribal Government Labor Force Alaska Anchorage & Mat-Su Fairbanks Southeast Gulf Coast Unemployment Rate Alaska Anchorage & Mat-Su Fairbanks 88

Previous Report Period (revised)

Year Ago Period

37,542 14,465,404 213.91 233.55

35,977 13,639,239 205.22 228.85

5.46% 7.69% 4.66% 3.29%

35 26 7

41 21 6

2.38% 40.00% 14.29%

Year Over Year Change

Thousands Thousands Thousands Thousands Thousands

September September September September September

346.17 187.78 43.97 39.63 38.81

349.51 186.81 42.96 41.69 40.88

331.90 184.40 41.70 40.50 33.50

4.30% 1.83% 5.44% -2.15% 15.85%

Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands

September September September September September September September September September September September September September September September September September September September September September September September September September September September September September September September September September

349.6 55.7 293.9 19.1 18.6 15.0 18.7 17.9 13.3 68.6 6.6 38.4 6.9 10.6 23.6 6.7 6.2 4.0 12.0 31.1 46.6 33.5 35.8 8.6 22.4 11.6 82.0 15.0 26.4 8.2 40.6 22.9 4.2

357.2 62.5 294.7 19.4 18.8 15.1 19.6 23.5 18.7 70.9 6.7 39.4 7.3 10.7 24.8 6.9 6.1 4.0 12.3 31.5 46.5 33.9 38.5 9.6 23.2 11.5 77.4 15.3 25.2 6.5 36.9 18.3 4.5

345.6 51.1 294.5 18.7 18.1 14.8 20.1 12.3 8.2 66.6 6.0 36.8 6.3 9.9 23.8 6.1 6.1 4.0 13.6 29.2 47.0 33.6 36.1 11.9 21.5 11.9 84.0 15.1 26.7 8.4 42.2 23.0 3.4

1.16% 9.00% -0.20% 2.14% 2.76% 1.35% -6.97% 45.53% 62.20% 3.00% 10.00% 4.35% 9.52% 7.07% -0.84% 9.84% 1.64% 0.00% -11.76% 6.51% -0.85% -0.30% -0.83% -27.73% 4.19% -2.52% -2.38% -0.66% -1.12% -2.38% -3.79% -0.43% 23.53%

Thousands September Thousands Thousands Thousands Thousands

367.69 197.99 46.30 41.80 41.36

371.88 196.97 46.08 43.89 43.48

366.05 197.19 46.98 41.28 40.20

0.45% 0.41% -1.45% 1.26% 2.89%

5.9 5.2 5.0

6.2 5.6 5.5

6.5 5.1 4.6

-9.23% 1.96% 8.70%

Percent Percent Percent

Alaska Business Monthly | January 2015 www.akbizmag.com

ALASKA TRENDS

Indicator

Southeast Gulf Coast United States PETROLEUM/MINING Crude Oil Production—Alaska Natural Gas Field Production—Alaska ANS West Coast Average Spot Price Hughes Rig Count Alaska United States Gold Prices Silver Prices Zinc Prices

By Amy Miller

Units

Period

Percent Percent Percent

Latest Report Period

Previous Report Period (revised)

Year Ago Period

Year Over Year Change

5.2 6.2 5.9

5.3 6.2 6.1

4.7 6 7.3

10.64% 3.33% -19.18%

Millions of Barrels Billions of Cubic Ft. $ per Barrel

September September September

14.32 8.92 96.05

12.33 9.16 101.78

15.33 7.48 110.48

-6.59% 19.25% -13.06%

Active Rigs Active Rigs $ Per Troy Oz. $ Per Troy Oz. Per Pound

September September September September September

10 1930 1240.08 18.49 2.29

7 1904 1297.01 19.80 2.33

12 1760 1348.8 22.56 0.93

-16.67% 9.66% -8.06% -18.04% 146.24%

Millions of $ Millions of $ Millions of $

57.7 17.5 39.7

59.7 20.5 38.1

36.46 15.28 21.18

58.26% 14.53% 87.44%

Total Deeds Total Deeds

September September

763 232

846 222

857*GeoNorth 247

-10.97% -6.07%

VISITOR INDUSTRY Total Air Passenger Traffic—Anchorage Total Air Passenger Traffic—Fairbanks

Thousands Thousands

September September

446.81 90.7

632.86 127.45

436.49 89.52

2.36% 1.32%

ALASKA PERMANENT FUND Equity Assets Net Income Net Income—Year to Date Marketable Debt Securities Real Estate Investments Preferred and Common Stock

Millions of $ Millions of $ Millions of $ Millions of $ Millions of $ Millions of $ Millions of $

September September September September September September September

50718.00 51828.10 302.30 -1170.20 -175.40 20.00 -895.60

51838.70 52442.30 224.20 769.10 11.23 5.92 20.72

47,033.70 47,906.20 297.9 1411 80.6 29.7 1,165.10

7.83% 8.19% 1.48% -182.93% -317.62% -32.66% -176.87%

BANKING (excludes interstate branches) Total Bank Assets—Alaska Cash & Balances Due Securities Net Loans and Leases Other Real Estate Owned Total Liabilities Total Bank Deposits—Alaska Noninterest-bearing deposits Interest- bearing deposits

Millions of $ 2ndQ14 Millions of $ Millions of $ Millions of $ Millions of $ Millions of $ Millions of $ Millions of $ Millions of $

5,589.78 309.79 145.27 2,703.46 18.73 4,814.61 4,188.54 1,702.65 2,485.89

5,477.64 347.62 139.05 2,517.48 18.63 4,731.67 4,070.91 1,612.83 2,458.08

5,126.68 59.56 133.58 2,443.81 20.09 4,398.85 3,833.54 1,542.92 2,290.61

9.03% 420.13% 8.75% 10.62% -6.77% 9.45% 9.26% 10.35% 8.53%

FOREIGN TRADE Value of the Dollar In Japanese Yen In Canadian Dollars In British Pounds In European Monetary Unit In Chinese Yuan

Yen September Canadian $ Pounds Euro Yuan

107.18 1.10 0.61 0.77 6.15

102.92 1.09 0.60 0.75 6.16

99.15 1.04 0.63 0.75 6.16

8.10% 5.77% -3.17% 2.67% -0.16%

REAL ESTATE Anchorage Building Permit Valuations Total Residential Commercial Deeds of Trust Recorded Anchorage--Recording District Fairbanks--Recording District

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.

www.akbizmag.com

January 2015 | Alaska Business Monthly

ADVERTISERS INDEX Alaska Executive Search................................42 Alaska Interstate Construction.................... 67 Alaska Park........................................................29 Alaska Roof Coatings......................................62 Alaska Traffic Co.............................................. 35 Alaska Usa Federal Credit Union................. 41 Alaska Usa Insurance Brokers......................43 American Marine / Penco.............................86 Anchorage Opera .......................................... 84 Arctic Office Products................................... 32 Avis Rent-A-Car...............................................83 Bering Air Inc....................................................82 BP.........................................................................11 Brand Energy & Infrastructure.................... 73 Calista Corporation......................................... 39 Carlile Transportation Systems..............19, 91 Chris Arend Photography.............................90 Construction Machinery Industrial...............2 Cruz Construction Inc....................................69 Donlin Gold.......................................................42

Doyon Limited.................................................. 57 Fairweather LLC............................................... 14 First National Bank Alaska...............................5 Fountainhead Hotels......................................29 GCI...............................................................66, 92 Homer Marine Trades Assoc........................ 75 Horizon Lines.....................................................33 Implus Footware LLC.....................................20 Island Air Express............................................83 Judy Patrick Photography.............................66 Junior Achievement of Alaska......................25 Lynden Inc........................................................... 9 Magtec Energy.................................................72 Modern Dwellers Chocolate Lounge......... 84 N C Machinery................................................. 63 NCB..................................................................... 55 Northern Air Cargo.................................. 76, 77 Northwest Data Solutions............................56 Olgoonik Corp...................................................71 Oxford Assaying & Refining Inc...................85

Pacific Pile & Marine........................78, 79, 80 Paramount Suppy Co...................................... 75 Parker Smith & Feek..........................................3 PenAir................................................................ 50 Personnel Plus..................................................82 Ravn Alaska....................................................... 16 Ritchie Brothers Auctioneers....................... 59 Span Alaska Transportation Inc....................31 Stellar Design Inc............................................. 75 T. Rowe Price.................................................... 27 The Odom Corp...............................................23 Trailercraft Inc/Freightliner...........................46 Turnagain Marine Construction....................61 Ukpeagvik Inupiat Corp..................................51 United Way of Alaska......................................17 Usibelli Coal Mine.............................................17 Washington Crane & Hoist............................13 Waste Management........................................ 65

Alaska Business Monthly | January 2015 www.akbizmag.com