Abm nov 2013 4 web by Alaska Business

Arctic Policy | ANC Outside Interests | Investment Services | Insurance Planning

November 2013

$3.95

Mining

Page 90

Resource Development

Page 78

Building Alaska

Page 148

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At two years old Jacob was diagnosed with a rare blood condition.

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Without your blood donations and a new facility, stories like Jacob’s might have a different outcome.

You can make the difference, they count on it. Just ask Jacob.

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• Ensure that the blood supply is available in times of disaster • Keep patients closer to home during treatment

November 2013 TA BLE OF CONTENTS DEPARTMENTS From the Editor. . . . . . . . . . . . . . . . . . . . . . . . . 7 Inside Alaska Business . . . . . . . . . . . . . . . . . 8 Agenda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 Right Moves . . . . . . . . . . . . . . . . . . . . . . . . . . .54 Alaska This Month . . . . . . . . . . . . . . . . . . 160 Events Calendar . . . . . . . . . . . . . . . . . . . . . 164 Alaska Trends . . . . . . . . . . . . . . . . . . . . . . . 165 What’s Next . . . . . . . . . . . . . . . . . . . . . . . . . 168 Market Squares . . . . . . . . . . . . . . . . . . . . . 169 Ad Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170

ABOUT THE COVER Miners scaling with pry bars at Coeur’s Kensington Mine in Southeast Alaska. Scaling is the taking down of loose material from the roof, ribs, and face in hard rock mining. The mining industry is the focus of the November issue, the special section begins on page 90. Cover photo courtesy of Coeur Mining Inc.

ARTICLES

Photo courtesy of Norman Parrott

VIEW FROM THE TOP

12 | Robert Retherford, President Alaska Earth Sciences Compiled by Mari Gallion

MARITIME LAW

30 | The Law of the Sea and Its Effects On Offshore Mining By Isaak Hurst

SOCIAL MEDIA

Norman Parrott, Senior Vice President Investments and Anchorage Region Manager of Wedbush Securities, shows off a 32-inch rainbow trout caught and released in the fall of 2012 at Mystery Creek, Alaska.

FINANCIAL SERVICES

14 | Investment Services Help Alaskans Meet Financial Needs Catering to the needs of large companies, small business owners, and individuals By Tracy Barbour

ICONIC ALASKANS

20 | Margy Johnson A driving force in Alaska’s growth and success By Shehla Anjum

ARCTIC POLICY

24 | Alaskans Should Lead America’s Activities in the Arctic By US Senator Mark Begich

Margy Johnson is an Iconic Alaskan. 4

25 | The Arctic Region: Part of Who Alaskans Are By US Senator Lisa Murkowski 26 | Coming to Agreement in the Arctic Getting to know Alaskans and their views By Shehla Anjum

Alaska Business Monthly | November 2013

32 | Using Facebook for B2B Marketing Taking action for business growth By Tyler Arnold

MARKETING

34 | You & Your Brand ‘Make the truth fascinating’ By Julie Stricker

INSURANCE ESSENTIALS

38 | Year-End Insurance Planning Review for strategic risk management By Eliza Evans

TELECOM & TECHNOLOGY 42 | Hardware Upgrades What that means in today’s throw-away world By Mari Gallion

ENERGY

46 | Natural Disasters and Energy Local utility companies cover contingencies By Dimitra Lavrakas

HEALTH & MEDICINE

50 | Preventive Health Efforts Staying healthy this winter By Susan Sommer

ALASKA NATIVE CORPORATIONS

56 | ANC Outside Interests Bringing money back to Alaska By Julie Stricker www.akbizmag.com

Maybe it’s time to think about a

�nancial blueprint for your

BUSINESS

Pam Wentz Vice President Johansen Branch Manager

Tom Zimmerman Universal Welding & Fabrication, Inc.

The building industry in Alaska faces challenges like no other in the country. From extreme weather to daunting logistics, it takes a special kind of focus, commitment and drive to build in the Last Frontier. ¶ When you’re on the go 16 hours a day, seven days a week, it’s easy to overlook details like cash management, payroll, working capital and expansion. And that’s where First National Bank Alaska can make a real diﬀerence. ¶ From a complete array of cash management tools and expertise, to fast, local decisions on loans, our friendly, experienced Alaska business specialists can help you activate a successful business strategy. Stop by one of our convenient local branches, or simply visit FNBAlaska.com.

November 2013 TA BLE OF CONTENTS special section

special section

Resource Development

Mining

78 | Resource Extraction Jobs and the Economy Higher paying jobs have big impact By Rindi White 82 | The Rise of Sovereign Wealth Funds By Greg Wolf 86 | A Woman’s Place is in the Driver’s Seat The resource development industry embraces positive change By Mari Gallion

special section Building Alaska 148 | Construction Project Update Busy season at urban and rural job sites Compiled by Susan Harrington, Managing Editor 156 | Sitka’s New Dock is Old Sitka Dock Private infrastructure for public good By Will Swagel

ARTICLES

TRANSPORTATION

62 | From Frozen Ground to Far-Off Markets How Alaska’s natural resources are dug up, drilled, and shipped out By Tasha Anderson

A ﬂoat plane accesses Bokan Mountain, located adjacent to Kendrick Bay on southern Southeast Alaska’s Prince of Wales Island, the site of a proposed rare earth elements mine by Ucore Rare Metals Inc.

90 | Alaska Mining Industry Update Benefits touch every corner of the state By Deantha Crockett

118 | On the Rocks? Anglo American pulls out of Pebble project, but remaining partner perseveres By Wesley Loy

Crockett

94 | Active Mines Production rising By Julie Stricker 100 | Taking Stock Bristol Bay Native Corporation surveys its assets By Dimitra Lavrakas 104 | Local Gravel Operators are ‘good neighbors’ as construction growth continues By Vanessa Orr 112 | Alaska’s Coal Clean burning and abundant By Gail West

OIL & GAS

70 | Sustainable Arctic Oil & Gas Exploration and Development By Bradford G. Keithley 74 | GTL: The ‘Other’ Alternative Fuel Commercializing North Slope natural gas reserves By Mike Bradner

122

Photo courtesy of Ucore Rare Metals Inc.

Photo courtesy of Millrock Resources Inc.

100

Northern cirque of the Bristol Bay Native Corporation’s Kawisgag copper and gold prospect.

Alaska Business Monthly | November 2013

122 | Rare Earth Metals Milestone Moving forward with Bokan-Dotson Ridge project By Nicole Bonham Colby 126 | Alaska’s Gold to Alaskans Dear What happens to the gold that leaves the Last Frontier? By Mari Gallion 128 | Alaska 2013: Mining Review By Curtis J. Freeman 146 | Alaska Business Monthly’s 2013 Mining Directory

Correction On page 128 of the September issue, Doyon Limited’s 2012 Gross Revenue was incorrectly reported in the 2013 Alaska Native Regional Corporation Directory. In 2012, Doyon Limited’s gross revenue was $338,276,000. In the October issue, Doyon Limited’s 2012 Gross Revenue was incorrectly reported in the 2013 Top 49ers special section. The error was corrected after the issue went to press. Top 49er ﬁgures and rankings were revised to reﬂect the correction prior to the awards ceremony held October 2 and in the online archives version of the October magazine. www.akbizmag.com

FROM THE EDITOR Follow us on and

Volume 29, Number 11 Published by Alaska Business Publishing Co. Anchorage, Alaska Vern C. McCorkle, Publisher 1991~2009

EDITORIAL STAFF

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

Susan Harrington Mari Gallion Tasha Anderson David Geiger Linda Shogren Chris Arend Judy Patrick

BUSINESS STAFF

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

Jim 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, ©2013, 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. Microfi lm: Alaska Business Monthly is available on microfi lm from University Microfi lms International, 300 North Zeeb Rd., Ann Arbor, MI 48106.

www.akbizmag.com

Coal Miner’s Daughter

am a coal miner’s daughter and I am a coal miner’s granddaughter. I still have that in my genetic code, though by the time I was born my grandfather had gotten out of the mines and into farming and my father had served in the US Navy, gone to college, and started working for the Federal Aviation Administration. I believe my dad’s work in the mining industry is responsible for my sense of fearless adventure—his coal mining job involved dynamite and blasting caps. Fast forward more than half a century and I’m in Alaska, thousands of miles away from those Missouri coal ﬁelds near the Ozarks where I was born. Here and now, the mining industry is an important force in the state’s economy, provides thousands of jobs, and is a focal point of this month’s issue of Alaska Business Monthly. Alaska has resources the world wants, so much so that the State of Alaska Minerals Development Policies are available in Chinese on the Mining Resources Section of the Department of Natural Resources website. The Resource Development Council reminds us that Fairbanks, Juneau, and Nome were all founded on mining activity and that historically, mining has been a cornerstone of Alaska’s economy. The Council’s website has a great page with mining industry facts and ﬁgures I’d like to share.

Facts and Economic Impact ■ In 2012, the cumulative production value of Alaska’s mining industry was approximately $3 billion, divided between exploration and development investments, and the gross value of the mineral products. Minerals produced included zinc, gold, silver, lead, copper, coal, rock, gravel, and sand. ■ The industry spent an estimated $275 million in Alaska mineral exploration in 2012, down from the previous year. Exploration spending in Alaska accounts for a large percent of the total exploration monies spent in the United States each year. ■ In 2011, there were 30 projects in Alaska that spent more than $1 million each on exploration. ■ The industry spent $270 million on mine construction and development of existing mines. ■ Minerals are the state’s second largest export commodity. Mineral exports accounted for 38 percent of the state’s export total and consist primarily of zinc and lead from the Red Dog Mine. Relatively strong prices for zinc have helped to sustain the high level of mineral export values over the past several years, as has the historically high prices received for lead. ■ Total direct and indirect jobs attributed to the mining industry in 2012 numbered 9,500 with a payroll of $650 million. The mining industry provides some of Alaska’s highest paying jobs with an average annual wage of $100,000, signiﬁcantly higher than the state average for all sectors of the economy. ■ Mining industry payments to municipalities exceeded $21 million in 2012, and royalties and other fees paid to the State of Alaska were estimated at $137 million. ■ The industry paid $28 million to the state-owned Alaska Railroad Corporation for shipments of coal and gravel, and $25.5 million to the Alaska Industrial Development and Export Authority for use of state-owned facilities. The industry also paid $3.4 million to the Alaska Mental Health Trust for rents and royalty payments, and construction material sales in 2012. ■ In 2012, Alaska’s mining industry provided $126 million in payments to Alaska Native Corporations, beneﬁting all Alaska Native Corporations. ■ Approximately 300 placer mines produced 85,000 ounces of gold, as well as platinum, in Alaska in 2012. In addition to Alaska’s active precious-metals mining industry, there were more than 120 active rock quarries and sand and gravel operations throughout the state.

We’ve expounded on many of those details and readers will enjoy excellent coverage of the mining industry and resource development this month. As mining goes, it stays in your blood. My dad, retired in Wyoming, has switched ores; he explores for gold on his claim near South Pass and Atlantic City. As for me, I’ve still got my sense of fearless adventure. The team at Alaska Business Monthly has done another ﬁne job with the November issue. We’ve got a really great magazine this month, enjoy! —Susan Harrington, Managing Editor November 2013 | Alaska Business Monthly

INSIDE ALASKA BUSINESS

Alaska Communications

laska businesses have a new option for reliable, flexible data networks with new business ethernet services from Alaska Communications. The company introduced its new business ethernet services today to meet the growing demand Alaska businesses have to connect with people, places, and information twenty-four/ seven. Business ethernet offers businesses a data networking service with a choice of service level commitments that offer businesses the assurance of reliability. Businesses can prioritize service experience and applications based on network and business needs. Alaska Communications business ethernet is the only ethernet service in Alaska built and certified to the international standard of the Metro Ethernet Forum and supported by Carrier Ethernet certified professionals.

General Communication, Inc.

eneral Communication, Inc. (GCI) launched two new networks on GCI TV: the much anticipated FOX Sports 1 and FOX Sports 2. FOX Sports 1 is the national sports network that puts fans first and will feature live coverage of the most compelling sporting events in the world. It also offers a unique ability to connect with fans through entertaining studio shows and an informative news operation. In most markets, FOX Sports 1 is available with GCI TV Preferred Service and can be found in standard definition on GCI

Compiled by Mari Gallion

TV channel 41, as well as in high definition on channel 661. FOX Sports 2 is an extension of FOX Sports 1. It features live coverage of sporting events and connects with fans through entertaining studio shows and original programming. FOX Sports 2 is available in the GCI TV Digital Sports package and airs in standard definition on channel 307. GCI plans to offer FOX Sports 2 in high definition in the near future. GCI also announces plans for a new 3,500-square-foot retail store in South Anchorage. The GCI Store will open on the first floor of the Dimond Center. The new location will be GCI’s 12th retail store in Anchorage and 39th in Alaska, replacing two stores currently operating in the South Anchorage mall.

Ryder System, Inc.

yder System, Inc., a leader in commercial transportation and supply chain management solutions, announced the grand opening of its new maintenance and rental facility in Anchorage, Ryder’s first operating location in the area. The facility provides state of the art maintenance and rental services for commercial vehicle fleets. The facility, located at 2345 E. Fourth Avenue, features two and a half service bays and the capability to support EPA 2010 engines with maintenance and diesel exhaust fluid. Ryder Full Service Lease is a customized transportation solution that provides businesses with commercial vehicles supported with comprehensive maintenance and a variety of complementary services, such as emergency roadside assistance, fueling, equipment

evaluations and specification, fleet management reporting tools, administrative support, and driver safety programs. Ryder Commercial Rental provides customers with rental trucks on a short-term basis to meet their needs for supplemental capacity. Ryder Contract Maintenance provides maintenance for customers who wish to use Ryder’s extensive network of facilities and technicians to maintain their truck fleet.

ML&P Municipal Light & Power (ML&P) filed for rate relief with the Regulatory Commission of Alaska in September. ML&P is seeking rate relief primarily to fund its investment in the Southcentral Power Project, which went into service on January 31. The utility proposes a phased approach in order to implement the increase over a two-year period. The increase to the average customer’s total monthly bill from September’s rates will be about 17 percent when interim rates were expected to take effect in late October and another 5 percent in early 2016 when Phase 2 permanent rates are implemented. Interim rates will be granted on a refundable basis while the Regulatory Commission of Alaska analyzes the filing, which can take up to fifteen months. Fuel-cost reductions associated with SPP’s more eﬃcient plant have already provided substantial savings for ML&P and its customers. ML&P estimates, at today’s fuel prices, a $4.4 million annual fuel-cost savings with the new technology. Fuel prices are expected to rise.

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 8

Alaska Business Monthly | November 2013

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 www.akbizmag.com

INSIDE ALASKA BUSINESS

Crowley

rowley’s Alaska fuel sales and distribution company, CPD Alaska, LLC, has completed its acquisition of Juneau-based Taku Oil Sales, Inc. Taku, founded in 1953 by Clarence E. Jacobsen, is a well known and respected local fuel company that has been serving the Southeastern Alaska community of Juneau for more than fift y years. Jeff Hansen, president of Taku, and the Jacobsen family are leaving the oil business to pursue other interests. The company operates a 2.5-million-gallon bulk fuel storage terminal, a deep-water marine fuel dock, and two service stations in the Juneau area. While the leadership at Taku will change, the company will continue to provide great products and services under the Taku brand name. The company’s thirteen employees have been welcomed as new members of the Crowley team. Crowley currently operates twentytwo fuel terminals in western Alaska and the rail belt, with over 265 employees. This is Crowley’s second acquisition of a southeast Alaska fuel distributor. The company acquired Anderes Oil in Ketchikan on July 1.

Calista Corporation

alista Corporation has announced the acquisition of STG Incorporated. In the last twenty years STG has earned a solid reputation while operating throughout Alaska, from hot and sunny summer days to frigid winter nights. STG has installed approximately 80 percent of the utility-scale wind projects currently in operation across the state, including crane support for the Fire Is-

Compiled by Mari Gallion

land Wind project near Anchorage and in rural communities throughout Alaska. They also completed the towers and control buildings on thirty-four sites for the massive DeltaNet Project for United Utilities, Inc. in Southwest Alaska. STG is also the premier pile foundations contractor for Western and Interior Alaska. Additionally, the team at STG provides deep experience with diesel power generation projects, bulk fuel systems, and other renewable energy projects. The acquisition also includes Alaska Crane, Ltd., Terra Foundations, Inc. and Gambell Properties, LLC. Alaska Crane provides crane equipment and operators for nearly any sized project. Their equipment includes the largest crane in Alaska, currently working on the Blue Lake Hydroelectric project in Sitka.

TrailerCraft, Inc. / Freightliner of Alaska

railerCraft, Inc. /Freightliner of Alaska announces the opening of a new location in Fairbanks. The store is located at 2143 Van Horn Road and will be open Monday through Friday, 8 a.m. to 5 p.m. This location is a full service dealership offering sales, parts, and service for light and heavy duty trucks, Sprinter vans, RVs, travel trailers, and boat and utility trailers as well as snow plow needs. “We’re serious about supporting our customers and keeping their trucks and trailers on the road. Opening our Fairbanks location will allow us to continue to provide the superior customer service we are known for with the least amount of downtime for the customer,” says Bob Spelta, Director of Operations for TrailerCraft, Inc. TrailerCraft, Inc./Freightliner of Alaska

is Alaskan owned and operated since 1969 and is Alaska’s exclusive dealer for Freightliner trucks, Sprinter vans, and Blue Bird buses; it is also a factory direct dealer for Western and Blizzard snow plows.

UIC Construction Services

IC Construction Services, a wholly owned subsidiary of Ukpeaġvik Iñupiat Corporation, has opened a construction subsidiary in Calgary, Alberta, Canada. UIC First Nations will provide a full range of construction related services including preconstruction and preplanning, design-build, construction management, general contracting, and long-term facilities management. In addition to construction services, UIC First Nations has developed a unique program to work with and integrate aboriginal entities on any reserve related project. The program includes labor pool training and development to improve the aboriginal labor opportunities not just for the short-term, but for the long-term servicing of the project after construction is complete.

Lynden Transport

ynden Transport once again was voted a top Less-than-Truckload carrier in the Western Region in Logistics Management magazine’s 30th annual Quest for Quality Awards. Lynden earned the No. 1 ranking for on-time performance and was ranked second overall among the top four competitors. The award asks shippers to evaluate providers on the following criteria: on-

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 November 2013 | Alaska Business Monthly

INSIDE ALASKA BUSINESS time performance, equipment and operations, value, information technology and customer service. With this year’s award, Lynden Transport has received seventeen Quest for Quality Awards. For thirty years, Quest for Quality has been the transportation industry’s most important measure of customer satisfaction and performance excellence. Voting is by invitation only and the voter must have had experience with that particular provider at some point over the past year. This year, more than six thousand responses were logged over six months to produce the study results.

Construction Machinery Industrial, LLC

onstruction Machinery Industrial, LLC, is proud to be part of the introduction of new SDLG North America product offerings and will offer the LG938L and LG959 to customers via its headquarters in Anchorage, located at 5400 Homer Drive. SDLG North America introduces two wheel loader models offering simple operation, reliable performance, and easy maintenance for secondary and supporting construction and material handling applications. SDLG North America has introduced the LG938L and LG959 wheel loaders, with 2.4 and 4.0 cubic yard (1.8 and 3.1 cubic meter) bucket capacity respectively, providing value and reliability for secondary and supporting applications. The LG938L and LG959 are the first models in the SDLG construction equipment product offering to be made available in North America. The easy-to-operate wheel loaders are particularly well-suited

Compiled by Mari Gallion

to material production facilities, site preparation, and maintenance yards demanding cost-effective, reliable performance from mid-sized wheel loaders in support of their primary operations.

First National Bank Alaska

irst National Bank Alaska has finalized their purchase of the Bill Ray Center in downtown Juneau. The bank’s purchase of this University of Alaska property on F Street affords the bank options to expand their Channel Branch on 10th Street, near one of the busiest traﬃc intersections in Southeast Alaska. The twenty-two thousand-squarefoot, two-story oﬃce building, known as the Bill Ray Center, and two adjacent parking lots, are located on F Street near the intersection of Egan Drive and the Douglas Bridge. The building is currently being used for classroom space. First National Bank does not have plans to change the name of the building, nor make any substantial changes to the property.

NMS Security

laska Communications and NMS Security have partnered to introduce video surveillance monitoring to businesses throughout Alaska. Video surveillance monitoring is a cloud-enabled video surveillance security system monitored around the clock in real-time, with immediate response for a flat monthly fee. It uses the latest in surveillance technology to deliver live video via a dedicated broadband data connection to a manned, in-state monitoring center, where security

agents view alerts in real time. Agents can then dispatch security or local law enforcement to investigate events as they happen, often from hundreds of miles away. The service allows businesses to monitor multiple facilities at the same time, retain video data in a remote, secure environment, and customize surveillance solutions to meet their needs. It is the only video surveillance service in Alaska supported by secure, reliable data networks with carrier Ethernet 2.0 certification from the Metro Ethernet Forum.

Alaska Brands Group, LLC

laska Brands Group, LLC, producers of Alaska’s premium natural glacial water brand, Clear Alaskan Glacial, has announced a marketing, territory, and sales partnership with one of China’s premiere food-marketing enterprises, CHIC of Shanghai, China. Clear Alaskan Glacial recently ranked in the top three for exceptional taste at the 2013 World Water Expo in Shanghai, China. Noted for its exceptional purity, Clear Alaskan Glacial is naturally alkaline, processed at the highest level of quality, and noted for a light, sweet taste. The water is sourced from Eklutna Lake formed with the retreat of the glaciers more than ten thousand years ago. CHIC, located in Shanghai, China, is recognized as one of the world’s leading “from farm to table” agriculture organizations. Founded in 1997, CHIC today exceeds ten thousand employees globally, providing a wide-range of research and development, growing, harvesting, processing, packaging, and logistics. Alaska Brands Group, LLC is a manufacturer of water and beverage products located in Anchorage. 

• General Contracting • Marine Infrastructure • Design Build

Dutch Harbor - Unalaska, Alaska

www.pacificpile.com I (907) 276-3873 10

Alaska Business Monthly | November 2013

620B East Whitney Road I Anchorage, AK 99501 www.akbizmag.com

BusinessPROFILE

Delta Leasing LLC

Flexible leasing options for all your equipment needs

t Delta Leasing LLC, customer service is everything. It’s what differentiates the equipment leasing firm from its competitors, according to Vice President Sam Amato. “Everybody has equipment to rent, but, here, providing excellent customer service is our top priority, Photos by Kevin Smith Photography and we are committed to putting our customers first,” he says. That means having the right products at the right place and at the right time. It also involves trying to have a backup on hand whenever a piece of equipment breaks—which is inevitable. “We always have a Plan B,” Amato says. Planning for contingencies is especially important in one of the most remote and coldest places in the state: Prudhoe Bay. That’s where the Anchorage-based company does its core business, leasing crew-cab pickup trucks, SUV’s, four-wheel drive passenger vans, shuttle buses, welding trucks, utility/work trucks, and flatbed expeditor trucks. It also leases a wide variety of other equipment to the oil and gas and construction industries throughout Alaska, including box vans, mechanic trucks, loaders, loader-mounted snow plows, skid steers, heaters, light towers, storage containers, portable generators, and portable welders. Listening and Responding Delta Leasing is constantly listening to clients and tailoring solutions to meet their project-related needs. Amato explains: “We’re pretty flexible. Whatever our customer is look looking for, we will go out and get it if we don’t already have it. We work in partnership with our customers—for the long term.”

In addition to responding to clients’ needs, Delta Leasing focuses on providing superior products. In fact, innovation has been a major factor in the company’s continued success over the years. The company is always striving to create a better leasing experience for customers. A key element in accomplishing that goal is the team of professionals who comprise the company. Their expertise, dedication, and client-oriented attitude are what define Delta Leasing, according to Amato. It comes down to a certain mentality. For example, Delta Leasing doesn’t just hire mechanics; it employs mechanics with the right skills, a caring attitude, and other traits that have a positive impact on the company and its clients. “Our employees are everything, and they make us who we are,” Amato says. “We take good care of our employees and, in turn, they take care of our customers.” Expanding Its Reach With 30 employees, Delta Leasing has steadily grown since its inception in 2002. The company is broadening its reach within Alaska and in the Lower 48. It also leases vehicles and equipment on the Kenai Peninsula, P A I D

A D V E R T I S E M E N T

as well as in Oregon, Florida, and Minnesota. Additionally, Delta Leasing is enhancing its product offerings to include portable shops, which provide instant shelter for remote projects during the winter time. These temporary structures offer convenient, insulated shelter on the ice pad for valuable equipment and workers. They can be dropped on site and removed without a trace once the project is completed. Delta Leasing provides vehicles, equipment, equipment logistics, and other services for a wide variety of onshore and offshore projects. Regardless of the industry, the company can structure solutions to help clients meet various timing and cash flow requirements. In addition, Delta Leasing is a GM authorized service/warranty center with a full maintenance facility and mobile mechanics.

Delta Leasing LLC Sam Amato, Vice President 8101 Dimond Hook Drive Anchorage, Alaska 99507 Phone: 907-771-1300 Fax: 907-771-1380 deltaleasing.net

View from the Top

Compiled by Mari Gallion

Robert Retherford, President Alaska Earth Sciences

he family of Robert Retherford moved from Lewiston, Idaho to Alaska pre-statehood—in 1950—when his father, an electrical engineer, was offered a position as the first engineer for Chugach Electric Association. While pulling a trailer up the Alaska Highway, truck and trailer combined suffered thirty flat tires, one for every foot in trailer length, and six broken limbs. Rutherford’s residency began in the Sand Lake area of Anchorage, where he learned to milk a cow, raise chickens, and care for horses. He also helped his father build the first telephone network in Anchorage, stringing wire through the woods and linking up old hand cranks. Retherford is now the president of Alaska Earth Sciences (AES), a full-service geologic consulting firm that meets the challenges of geologic engineering and supporting all aspects of mineral and energy exploration. With decades of experience, AES supports assessments of a wide range of commodities and geologic environments in Alaska and world-wide.

SCHOOL CAN BE COOL: I graduated from Anchorage (now West) High School in 1965. After high school I attended Alaska Methodist University (now APU) then travelled to Honolulu with a friend to attend the University of Hawaii. Finally settling on geology as my major, I moved to the University of Colorado, eventually finishing my MS degree thesis studying sea level shifts along the British Columbia [Canada] coast. During college, my summers were filled with remote field programs, and I loved the life. I had opportunities to search for ore deposits, to map geology near hydroelectric sites, and to work on the Alaska Pipeline foundation studies. LEARNING WHAT YOU LOVE: Between 1972 and 1980 I worked primarily in minerals exploration. I began right out of college with Chuck Hawley (C.C. Hawley and Associates). I learned to fly at this time, and we purchased an old Cessna that I could use to support our projects. I really enjoyed the challenge of finding minerals as well as the logistics of getting to the destination and collecting the samples and data. NEW BEGINNING: In 1985, I and two other partners (Toni Hinderman and Bruce Hickok) founded AES. We worked out of my house and I handled most of the bookkeeping and pa12

Alaska Business Monthly | November 2013

perwork. We almost immediately became involved with an Alaska Native Regional Corporation, Calista. Our relationship with them grew and set a course for AES and how it would evolve in the coming years. Working for Calista was perfect for us. It required working in remote areas on a shoestring budget. We flew ourselves and camped. We stayed off the grid and ate beans. We got to know the locals. We listened to those with local knowledge. When we needed extra workforce, we hired the locals. We were creative; where we could see a way to get a job done with ATVs instead of a helicopter, we did it. Sometimes it was exhausting, but we’d get the job done within budget. WE KNOW IT: Our most important resource is our people: the people that work for us, and the people that we work for—especially those people within the various Native regions of the state. Our product is discovering resources, and our services are designed to make the process more effective and economic. We think that combination of skill sets makes us unique. We know where to begin looking, we know who we need to talk to in the process, we know how to access the lands eﬃciently with minimal impact, and we are networked with the right parties throughout the state.  www.akbizmag.com

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FINANCIAL SERVICES

Investment Services Help Alaskans Meet Financial Needs Catering to the needs of large companies, small business owners, and individuals

By Tracy Barbour

laska’s investment and brokerage firms offer a wide array of services to help businesses and business people meet their financial goals. For instance, Wedbush Securities has a myriad of product offerings to cater to the needs of large companies, small business owners, and individuals. The company’s solutions emphasize “proven investment concepts and smooth operation while avoiding a clutter of undifferentiated products,” according to Senior Vice President Investments and Anchorage Region Manager Norman Parrott. Wedbush, which touts a customerfirst approach, offers everything from municipal bonds, insurance, and annuities to mutual funds, retirement plans, and managed asset programs. Its clients can also take advantage of a number of services to enhance their investing experience, including online account access, a consolidated statement for multiple household accounts, interest on cash balances, competitive margin loans, and central cash management for securities, checking, and Visa Gold Card transactions. “What we do is we specialize in custom building tax-efficient, cost-effective portfolios for high net worth individuals, retail investors, corporations, institutional investors, nonprofits, and investors of all kinds,” Parrott says. “We also give our clients our best price first.” Wedbush is one of the largest securities firms and investment banks in the nation, with almost one thousand employees in more than ninety offices. The privately-held company, founded in Los Angeles in 1955, has operated an office in Anchorage since 1971. It is the 14

“Your financial advisor, working with plan design professionals and your tax advisor, can help you analyze the options and choose the plan that fits with your combined personal and business goals.” —Justine Whitman Accredited Asset Management Specialist

largest subsidiary of holding company Wedbush, Inc., which also includes affiliated firms Wedbush Bank, Wedbush Capital Partners, Wedbush Opportunity Partners, Wedbush Asset Management, and Lime Brokerage LLC. “All of our advisors have the strength and resources of our aﬃliate companies,” Parrott says. Alaska investors can also capitalize on the extensive resources of Wells Fargo Private Bank, which provides products and services through Wells Fargo Bank, NA and its various aﬃliates and subsidiaries. Wells Fargo Wealth, Brokerage, and Retirement (WBR) is one of the largest wealth managers in the United States. WBR includes Wells Fargo Advisors, the third-largest investment brokerage in the country; Wells Fargo Private Bank, serving high-networth individuals and families; Abbot Downing, serving ultra-high-net-worth families; and Wells Fargo Retirement, which manages $279 billion in institutional retirement plan and pension assets for 3.7 million Americans. Wells Fargo’s wealth management solutions cover the full gamut, from 529 education plans to retirement plans to estate planning. “There just isn’t anything we don’t have,” says TerriLee Bartlett, a

Alaska Business Monthly | November 2013

wealth advisor with Wells Fargo Private Bank’s Anchorage oﬃce. “If our clients have a wealth or retirement planning need, we can find a solution.” St. Louis-based Edward Jones is another major source of investment and retirement services for Alaska businesses. The company is a full-service brokerage firm and private partnership with more than twelve thousand financial advisors in the United States and Canada. Edward Jones currently serves nearly 7 million clients and is the country’s sixth-largest financial services firm. The company’s advisors assist clients with stocks, mutual funds, annuities, and fi xed-income investments, as

“There just isn’t anything we don’t have. If our clients have a wealth or retirement planning need, we can find a solution.” —TerriLee Bartlett Wealth Advisor, Wells Fargo Private Bank www.akbizmag.com

well as estate and trust issues. Edward Jones also offers a full assortment of retirement plans to help business owners provide for the future for themselves, their families, and their employees. When selecting a retirement plan, businesses need to consider several factors, including the size of their operation and total number of employees, says Anchorage-based financial advisor Justine Whitman, who holds the Accredited Asset Management Specialist designation. For example, if a business has no full-time employees, other than the owner and the owner’s spouse, it might consider a Simplified Employee Pension (SEP) plan or an owner-only 401(k), sometimes known as an individual or solo 401(k). Or, if the goal is to contribute as much as possible, consider an owneronly defined benefit plan. If the business has employees, it might want to investigate a SIMPLE IRA or even a 401(k) plan. “Your financial advisor, working with plan design professionals and your tax advisor, can help you analyze the options and choose the plan that fits with your combined personal and business goals,” Whitman says.

nership units, tax shelters, or esoteric investments. Instead, the investment advisory firm prefers to focus on stocks and bonds. Husband says: “We like the raw assets. We don’t deal in the derivatives or things off to the side. We like the clean assets because you know what they are.” That’s especially important if something goes wrong. The bottom line is that one doesn’t have to get terribly fancy when investing, Husband says. That’s the approach many nonprofit organizations in Alaska take, according

“We like the raw assets. We don’t deal in the derivatives or things off to the side. We like the clean assets because you know what they are.” —Scott Husband Owner, Denali Capital Management

Nonprofit Organizations Nonprofit entities can establish the same types of plans as a for-profit business would, such as a 401(k). In addition, they have access to plans that only a nonprofit organization can offer, such as a 403(b) designed. A 403(b) plan is a retirement plan for certain employees of public schools, employees of certain tax-exempt organizations, and certain ministers. “Your organization can contribute to these retirement plans based on your objectives,” Whitman says. “When you offer the appropriate retirement plan, you can help your employees work toward their retirement goals and help the organization attract and retain high quality employees.” Denali Capital Management of Fairbanks applies a “raw” approach to providing investment services for corporations, nonprofits and high net worth individuals. Owner Scott Husband says when it comes to investments, everything boils down to a few basic groups: the bond market and equity market and insurance. Denali Capital Management doesn’t handle insurance, private limited partwww.akbizmag.com

November 2013 | Alaska Business Monthly

to Husband. They want some particular benchmark that’s traded. They are typically looking for a yard stick that is a blend of a certain percentage in stocks and bonds. “They like that because they’re held accountable and enjoy the predictability of relative performance,’” he says.

Interests and Habits In terms of interest, Parrott says, Alaska businesses have two key areas: They want to segregate their short-term operating capital and longer-term investment capital. For short-term operating capital (anything less than a year), the most important thing is to protect the integrity of the investment—which equates to zero to limited risk. An example is high-grade money market funds, including institutional money markets, certificates of deposit, and any short-term cash instrument where principle fluctuation is limited. “That’s money they will need to use to run the business, and they cannot afford to take any market risk,” Parrott says. “It really limits your investment choices.” For longer-term investment capital (ten-plus years), there are numerous vehicles available to meet a client’s investment objectives. These options could include short-term, tax-free municipal securities in the form of individual bonds and/or closed-end funds or openend mutual funds. The most appropriate investment vehicle depends on when the funds will be used and the level or risk the client is willing to assume. Over the years, Parrott has noticed several interesting trends taking place among Alaska’s investors. He explains: “After the 2009 financial debacle, I think a lot of the maturing boomer generation has recognized that the stock market is great when it’s going up and really bad when it’s going down. Essentially, it’s forced people to really assess what they’re doing with their investments for retirement.” Parrott is seeing a significant amount of money sitting on the sidelines while investors wait for an opportunity to enter the market. Also, many investors are dollar cost averaging into the market to minimize their risk. “The idea is that you may hit some highs and lows, but over time it may average out,” he says. The reservations some Alaska investors have over the market are consistent with what people are feeling nationally, 16

based on a recent Wells Fargo/Gallup Investor and Retirement Optimism Index. The August telephone survey—conducted among a sampling of 1,018 investors across the nation—indicates a loss in optimism due to stock market concerns. It shows that four in ten pre-retired investors fear a repeat of the 2008-2009 financial crisis and 73 percent believe the country is headed for a retirement crisis in the next twenty to thirty years. However, Alaska hasn’t experienced the huge dips in its economy the way other places in the Lower 48 have, Bartlett says, and this presents a good opportunity for Alaskans to start a business or reinvest in an existing one.

you are not speculating on which asset class will perform,” he says. Whitman encourages investors to keep their emotions in check in the face of today’s market conditions. She says market declines can be an opportunity to invest at more attractive prices. In fact, market declines themselves usually don’t keep people from achieving their goals; their emotional reactions do. “If you fall into the emotional investing trap of buying when you feel good and selling when you feel bad, you’re likely buying high and selling low,” she says. “This is not a good strategy to reach your goals and can leave you with one lasting emotion: disappointment.”

“We try and work with our business owners to diversify so they are not so concentrated in [and dependent on] their business and so they have assets that will grow for them.” —JoEllen Weatherholt Senior Investment Strategist, Wells Fargo Private Bank

Interestingly, Alaska businesses tend to be focused in one particular area, according to JoEllen Weatherholt, an Anchoragebased senior investment strategist with Wells Fargo Private Bank. However, she counsels business owners to consider going outside their comfort zone when it comes to investing. “We try and work with our business owners to diversify so they are not so concentrated in [and dependent on] their business and so they have assets that will grow for them,” Weatherholt says.

Coping with the Current Market As the maturing generation of baby boomers moves through retirement, many of them are wondering how to protect the integrity of their investments in the current volatile market. Today, it’s very important to invest within and across the asset classes—including international, Parrott says, and to participate in what is considered to be alternative investments. These include MLPs (master limited partnerships), REITs (real estate investment trusts), currencies, and commodities. “The premise behind that is essentially you’re not putting all of your eggs in one basket, and

Alaska Business Monthly | November 2013

It goes back to the issue of risk. “By understanding your level of comfort with risk, you can better control your emotions and stick to your long-term strategy during the inevitable bumps along the way,” Whitman says. Weatherholt has similar views. There are always many reasons to be concerned about the market, she says, so you have to build a portfolio and investment plan that minimizes your risk and maximizes your return. “Jumping in and out of the market is never a good solution,” she says. “Take the emotions out of it. Work with a financial professional.” Husband also recommends exercising caution in the current market, where bond rates have reached their lowest point in history. When rates are high, you want to capture that interest rate for a longer period of time, he says. But with the lower rates, investors should opt for shorter maturities, such as a year and a half to two years. “I would much rather protect the principle and not make as much money on the income side,” Husband says. “But it depends on the (client’s) tolerance to volatility.” On the bond side, investors can be defensive because rates are inclined to www.akbizmag.com

rise. But on the equity side, it’s an expensive market. “It really hasn’t gone anywhere in thirteen years, and that’s a good thing,” Husband says. “You can’t do all or none. When you’re very young, you can handle more volatility. But when you get older, certainty of value gains importance.” So what constitutes older and younger? According to Husband, it equates to how long before the money from an investment is required or when it needs to be spent. “If you’re forty-seven, you could buy the equity market, and if it gets hammered, it wouldn’t change your life because you have more years to get it right again,” he explains. “If you’re sixty, it’s a different story. You probably need the money much sooner, and you don’t have time to recover from mistakes.”

Working with an Advisor Financial advisors can help clients understand the associated risks, so they can make informed decisions. Wealth management is much more than buying a stock or bond, Parrott says. Consequently, Wedbush takes a holistic stance when

it comes to working with clients. Parrott explains: “Initially, we sit down with clients and listen to what their needs are. We try to figure out what they’re hoping to accomplish, and ultimately we take care of the investment side. If they need additional help from a CPA and a commercial banker, we try to surround our client with the best team of experts possible in an effort to deliver them results that will meet or exceed their expectations.” When assisting clients, Parrott starts with the end goal. Then he “backs into it” to help clients achieve their desired results. All investors have the same retirement goal—to be able to retire with dignity and without compromise of lifestyle—but there are different routes for getting there, according to Parrott. Each client’s situation will influence which investments would be the most suitable. For example, a business suffering from high turnover might offer a 401(k) or profit sharing as a way to retain employees. A company with idle cash sitting in an account could explore options to maximize a return on investment. Wells Fargo Wealth Management, like Wedbush, also employs a team-based

concept that extends beyond clients’ investment solutions. For example, a business owner might meet with one of the company’s business specialists to discuss a potential merger or acquisition. Likewise, clients are connected to experts who can assist with insurance, banking, and other needs. “We have a specialist for every arena in their life,” Bartlett says. Denali Capital Management also likes to meet face-to-face with clients to discuss their goals and help them figure out what they would like to have happen. Husband creates a portfolio designed to accomplish what the client wishes, and a more detailed discussion takes place. “This forces them to place in concrete what their goals are,” he says. Clients typically meet with Husband quarterly to discuss their investment portfolio. Longer-term clients—some of which he has worked with for thirty years—come in much less frequently. An initial client meeting is also part of the advisory process at Edward Jones. Because everyone’s situation is unique, there’s no one perfect plan for everybody. Whitman addresses clients’ unique financial situation by helping

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November 2013 | Alaska Business Monthly

them select a customized investment portfolio. “The portfolio objective will help us determine the most appropriate asset allocation,” she says. The process begins with clients’ vision of retirement. Whitman focuses on where they are today—their income, expenses, assets, and debt—and where they want to be. Then she develops a strategy that is designed to help them achieve their goals. Preparing for retirement, Whitman says, is like a cross-country journey. “While it may seem like a long distance to cover, every journey starts the same way—with the first step,” she says. “Importantly, the earlier you start, the smaller these steps need to be to reach your destination.” However, there is no one-size-fits-all plan for businesses, Whitman adds. “It’s important they work with a financial advisor, CPA, and plan design professional to help determine which plan will help them meet their goals,” she says.

tant to file a flight plan, as it relates to your investment and retirement planning.” Whitman also deems risk to be a critical facet of investment planning. One of the most important steps in helping work toward long-term financial goals, she says, is determining the right level of risk. The process of determining what level of risk is comfortable covers three main areas: risk tolerance, the willingness or comfort level with taking risk; risk capacity, the ability to handle risk; and required risk, the level of risk that is necessary to achieve financial goals. While investors don’t control investment return, they do control return potential. “Generally, the greater the percentage of stocks you own, the more potential increases—but so does the risk,” Whitman says. Financial advisors factor a diversity of elements into portfolio planning. Here are some chief considerations, according to Parrott:

Developing a Plan Planning is, undeniably, one of the most important aspects of investing. And it becomes more critical the closer business owners get to retirement, Parrott says. They need a plan for what they intend to do with their company after retirement. Once they determine how they’re going to retire, they have to look at their entire liquid- and hard-asset portfolio. Then they have to devise a plan to transition from being growthbased to preserving the integrity of the capital they have earned over the years. In other words, they need to focus on growing what they have and not invest money that they can’t afford to risk losing. “It’s very important to understand the associated risks when you invest because it’s very diﬃcult to make a comeback,” Parrott says. People must consider their risk tolerance, he adds. Conservatives might want to preserve the initial principle with minimal risk. Those more moderate are willing to accept some risk and tolerate some volatility to seek higher returns. The aggressive might be willing to take maximum risk to seek maximum return. Parrott compares investing to an airplane ride, saying: “It comes back to making an informed investment decision, so you understand the associated risk before you board the airplane. It’s really impor-

■ Investment profile: These include annual income, liquid net worth, total net worth, and tax bracket. ■ Investment objectives: This encompasses income, growth, trading, speculation, or conservation of capital. ■ Investment experience: Is it none, less than five years, or longer? ■ Source of the funds: Do the investment funds come from the sale of a business or property, an insurance payout, a gift, or an inheritance? ■ Investment allocation: Is it one third of your financial portfolio? ■ Investment knowledge: Is it limited, moderate, or extensive? ■ Investment time horizon: Is it zero to five years, five to ten years, or more than ten years. This is essentially how long investors intend to keep the money invested before needing to start taking withdrawals. ■ Liquidity needs: Are there liquidity needs now, in five years, or ten years?

General Guidance As a general piece of advice, Husband encourages investors to first define

Alaska Business Monthly | November 2013

their goal. People typically say their goal is to make as much money as they can without losing any. But, he says, they need to consider whether they will need the money in the near future, what they’re going to use the money for, and if they’re going to need money for retirement. Parrott agrees. “Generically speaking, you have to make a well-informed decision about how, when, and where to allocate your assets based upon what your needs are,” he says. Parrott views money as a state of mind—a process. He suggests that business owners accumulate wealth during their career and consider that the sale of the business will be additional funds that they’re not counting on for retirement. He reminds investors that there’s always a bull market, and they just have to know where to find it. He explains, “I’m not suggesting timing the market, but time in the market.” Whitman recommends focusing on what investors can control—their money, time, and asset allocation. There are three key variables that will directly influence an investor’s ability to achieve their goals: time (how long they save), money (how much they save) and return (how much their investments earn). “Even small changes in these variables, such as saving a bit more, can be beneficial over the long term,” she says. Be aggressive with saving, not investing, Whitman adds. People often want to invest aggressively to “make up for lost time,” but this could actually increase the risk that they won’t achieve thier goals. Weatherholt urges investors to think beyond traditional bonds, fixed instruments, and savings as generators of retirement income. They should consider a swath of securities, including stocks, REITs, and MLPs. “It’s a matter of diversifying your income stream,” she says. Finally, Bartlett reminds business owners not to overlook their personal lives. “They should hire a full-time professional to handle their banking, estate planning, and retirement and other needs,” she says. “That will contribute to their success, as well.”  Former Alaskan Tracy Barbour writes from Tennessee. www.akbizmag.com

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ICONIC ALASKANS

Margy Johnson

ÂŠ 2013 Chris Arend Photography

Alaska Business Monthly | November 2013

www.akbizmag.com

By Shehla Anjum

er father sailed on a leaky liberty ship to Alaska during World War II. He went to Shemya to help build runways to beat back the Japanese invasion. At eighteen, Margy Johnson took a different route than her father. She graduated from high school in 1966, got married, and headed up the Alaska Highway for Alaska with her Air Force husband. But unlike her father, Johnson never left and became a driving force in Alaska’s growth and success. Johnson has achieved a lot since coming to Alaska: The first woman mayor of Cordova, elected to three terms; the first woman president of the Cordova Chamber of Commerce; served on the Prince William Sound Regional Citizens’ Advisory Council; and director of the International Office of Trade during Governor Frank Murkowski’s administration. Now retired, she still keeps busy. She is on the community advisory boards for BP Exploration (Alaska) Inc. and Alyeska Pipeline Service Co. and is a director for First National Bank Alaska, a position she has held since 1993. In 1966, North Slope oil lay untapped in the ground, Alaska salmon came in tin cans, and Alaska Natives faced disdain. But changes soon started. Passage of the Alaska Native Claims Settlement Act in 1971 empowered Alaska Natives, oil began to flow with the completion of the Trans-Alaska Pipeline System in 1977, and, later, fresh Alaska salmon gained fame as a gourmet food, sought by chefs everywhere.

Growing Up St. Mary, Montana, Johnson’s hometown on the western border of the Blackfeet Indian Reservation, is idyllic, but her life was not. She grew up with hard-working parents in a loving family that operated Johnson’s of St. Mary, a restaurant now run by her sister Kristin. During childhood, Johnson loved listening to her dad’s stories of Alaska and hearing her mother read his letters from Shewww.akbizmag.com

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November 2013 | Alaska Business Monthly

mya. “Mother kept all the letters from Dad in a little bundle carefully wrapped with a satin ribbon. The letters carried a sense of mystery and they had little parts cut out by military censors. Listening to them I knew I would someday go to Alaska.” Coming to Alaska was like coming home, and the state gave her opportunities she wouldn’t have had anywhere else, Johnson says. “It’s a great big, grand, beautiful place, Alaska, and I love being part of it. People either live where they are born, or choose where to live, but in my case Alaska chose me. It embraced me when I came here as a young woman, and it still embraces me.” For the first few years she worked an office job at an engineering firm. In 1972 she gave birth to a son and got divorced later that year. “As a single mom I did whatever was necessary to pay the rent and feed my son. I worked at a dress shop downtown and sold ivory trinkets on Fourth Avenue.” When construction started on the oil pipeline in 1974, Johnson got a job at the Alaska Federation of Natives (AFN) to monitor union recruitment and dispatching of Alaska Natives to construction jobs on the pipeline. While at AFN, Johnson established close relationships with elders and leaders. Gail Schubert, president and CEO, Bering Straits Native Corporation, remembers that Johnson got to know Alaska’s Native people and their strengths and concerns at a critical juncture—right after the Alaska Native Claims Settlement Act passed. “Margy also developed a true respect and appreciation of our cultures. She has been a strong supporter of Alaska Native artists, and her collection of art is a testament to that,” Schubert says. Her knowledge and fondness for Alaska Native arts and crafts led to a contract with the Smithsonian Institution to accompany a group of Alaska Native artists and dancers to the 1976 Festival of American Folklife in Washington, DC.

Transforming the Market In 1978, Johnson and her second husband, Dick Borer, moved to Cordova, where they ran the Reluctant Fisherman Inn. “After all those years of growing up in one, there I was in Cordova running another restaurant.” In Cordova life revolves around salmon fishing, and Johnson soon fell in love with 22

the fresh Copper River salmon and noted that the fish did not get the attention they deserved. “For so many years we had stuck that magnificent fish into a can or shipped it frozen to Japan. Once we got it out of the can we realized how good it was.” While serving as president of the Cordova Chamber of Commerce, Johnson began working with Alaska Airlines, various fishing groups, and Trident Seafoods to promote fresh salmon. “Margy would place a box of fish under her arm and go up and down the West Coast, trying to convince high-end restaurants and retailers of the fine taste of fresh salmon,” says John Garner, a vice president at Trident Seafoods in Seattle. Two companies were crucial for those promotions. “Trident provided fish and Alaska Airlines flew me to any place I wanted to go,” Johnson says. “We held many salmon and wine pairings in Lower 48 restaurants. Sometime it was just me and a fish, and I often slept in airports.” The hard work paid off. It increased the cachet of Copper River sockeye salmon, elevating it to elite status in restaurants across the nation. “Not only did Johnson promote the fish, she also helped arrange the logistics of moving the fish from a remote community, Cordova, by seeking help from Alaska Airlines as well as Lynden Transport and Alaska Marine Lines,” Garner says. Garner credits Johnson for transforming the market for Copper River fish by helping create domestic demand. “Before Margy came along, we froze our Copper River salmon for export to Japan. Today 100 percent of our king salmon and 90 percent of the sockeye are sold fresh in the domestic market.” The promotions of Copper River fish also helped increase domestic sales of other Alaska salmon, Garner says. Later, as the director of the Office of International Trade, Johnson travelled to foreign capitals, such as Tokyo and Seoul, working to expand foreign sales. Alaska Airlines flies a lot of salmon out of the state, including the first catch of Copper River salmon. In 2005, it paid homage to Alaska’s salmon by painting one on a 737-400 airplane and named it “Salmon-30-Salmon.” “That great fish on the plane was just a dream in my heart. I presented the idea to John Kelly, who was Alaska Airlines chairman at the time,” Johnson says.

Alaska Business Monthly | November 2013

Figuring Out the Truth Her love of fish and the fishing industry’s importance to Alaska notwithstanding, Johnson is also aware that the oil industry is vital to the state. “We are essentially a resource state. But I like reasonably paced development. Government should be the gentle breeze on the back of the business and not a stiff wind of opposition. The state and our industries—oil, or timber, mining, or fish—need to be partners.” She likened the roles of industry and government to her role as a Cordova innkeeper. An innkeeper’s responsibility is to provide guests with clean accommodations at a reasonable price and the guest’s responsibility is to pay the bill and not trash the inn, Johnson says. “Similarly, Alaskans and their government’s job is to provide industry with reasonable expectations and regulations and the industry’s job to pay the bill and not trash the environment.” Then the Exxon Valdez oil spill happened in 1989. Johnson’s beloved Prince William Sound, through which salmon swam, was despoiled. Within hours, Johnson boarded a friend’s airplane and flew to the spill site. “Oil was seeping out, but with enough boom, it could have been contained,” she says. “I thought the industry would take care of it.” She also expressed her sadness and put up a sign at the Reluctant Fisherman: “Flags are at half-mast due to the death of our environment.” She watched with dismay how Exxon and the state and federal governments kept “bumbling the cleanup.” And she saw that the spill was tearing apart her town. “The environmental community had anger in its heart and said the Sound was dead, and the oil industry said the oil was organic and would go away. I realized it was up to us as citizens to figure out the truth,” Johnson says. That search for truth led Johnson, by then a member of the Prince William Sound Regional Citizens’ Advisory Council (formed after the spill), to Sullom Voe in the Shetland Islands to look at the North Sea oil facilities. “They had oil production there but also a safe environment for many years and we wanted to see what safeguards they had that we lacked.” Bill Walker, a former mayor of Valdez, also went to Sullom Voe. “During our www.akbizmag.com

discussions Margy made sure the discussion stayed focused and everyone had a chance to voice their opinion,” he recalls. Information gathered from the Shetlands and other places helped bring many changes in the oil industry’s operations in Prince William Sound. “Today we have escort vessels, doublehulled tankers, and depots of equipment around the Sound to dispatch if it occurs again. You simply cannot beat ‘citizen involvement,’” Johnson says. Phil Cochrane, BP’s vice president for external affairs, sees Johnson at meetings of BP’s advisory board and lauds her honesty. “Even after the oil spill she is still an unabashed champion of our business, but she also lets us know if we are not doing something we should be doing, or could do better.” Others, including D.H. Cuddy, chairman of First National, also noticed those qualities. “Margy is one of the smartest people I know. She uses those smarts to help our state become a better place for all Alaskans. I’ve learned to value her opinion, which she’s not afraid to share, and trust her judgment. More often than not, she hits the nail right on the head.” But the spill changed her town. “Our town expanded to meet the demands of the disaster but it was taking a long time to get back together.” Johnson wanted Cordova to become a community again and get back to mundane things such as concern for streets, water, sewer, and schools. So she ran for mayor in 1990. “It was a hard-won contest and I won by one vote. When my opponent demanded a recount I picked up another vote. So I won by two votes.” Johnson went on to win the next election, and then another after a three-year hiatus.

Johnson’s Famous Hats No story about Johnson is complete without mentioning her famous hats. The hats came nine years ago, when she had cancer. She buys hats in vintage shops, and friends bring them for her from their travels. Her hats number “more than twenty, but less than one hundred.” After she was cured she began working with cancer patients. She often invites them to the Enchanted Mermaid, her house, and gives them the choice to wear one of her hats as they sip high tea and talk about options. www.akbizmag.com

Johnson is modest in her generosity and compassion, but people know. Betsy Lawer, president and vice chair at First National says, “Margy is a people person. She seems to know everybody and everything that’s going on, and cares how it affects Alaskans, for good or ill. It’s invaluable to have this kind of experience, know-how, and compassion on our board.” Her accomplishments are significant, but Johnson’s acts of individual kindness, many done privately and quietly, set her apart, Walker says. Johnson is loath to draw attention to herself. Her son Wade Pitts says her way of bragging is to talk about him. “She is the first to jump out of the way when the spotlight shines on her.” The best example of Johnson’s modesty is her not mentioning that First National nominated her for the 2013 William A. Egan Outstanding Alaskan Award; at the time of this writing she

was one of three finalists for the award which was to be presented October 15. In September, Alice Rogoff, publisher of the Alaska Dispatch, told Johnson she wanted her on the Dispatch team. “I will be doing community affairs,” Johnson says, adding that she is “looking forward to this next great adventure in Alaska.” As Johnson sees it, the future of Alaska is bright. She believes that the futures of the state and Alaska Native Corporations are one and the same. “I believe Alaska will be led by its original people. They have reclaimed what was originally theirs. Alaska belonged to them and now they are back in full. I love that change, I absolutely embrace it.” That is how Johnson is—always optimistic, full of grace, and giving accolades while seeking none.  Shehla Anjum writes from Anchorage.

November 2013 | Alaska Business Monthly

ARCTIC POLICY OP-ED

Alaskans Should Lead America’s Activities in the Arctic By US Senator Mark Begich

t’s often lost on those in Washington, DC, that the only reason America is an Arctic nation is because of Alaska. Yet today, the Arctic is a hot topic. With global warming changing the Arctic before our eyes, the opportunities and need to proceed carefully there are enormous. I believe Alaskans have proven that development in the Arctic—oil and gas exploration, shipping, tourism—can be done responsibly. The United States needs to set the bar high for doing Arctic development right. That means using strong science and data, incorporating local traditional knowledge, having critical supporting infrastructure in place, and effective regulations to protect our Arctic people and communities and the subsistence resources upon which they depend.

Making the Right Investments We’re also working with President Barack Obama’s administration to make the right investments now to ensure safe and responsible development, such as adequate icebreaking capacity. At the urging of Alaska’s congressional delegation, the administration recently issued its Arctic Strategy, amplifying the existing national policy in presidential and Homeland Security directives. In many respects, the strategy is still a work in progress—a template that needs to be fleshed out. But it’s an important start that shows the administration’s interest in—and commitment to—the Arctic. All of that is necessary because climate change is melting Arctic ice, opening the region to new development possibilities and maritime shipping. Consider that the Arctic waters beneath the Chukchi and Beaufort seas hold an estimated 24 billion barrels of oil and over 100 trillion cubic feet of natural gas. And shipping in the Arctic is already booming. In 2010, just four ships carrying slightly more than one hundred thousand tons of cargo crossed Russia’s Northern Sea Route. Last year, 250 ships were operating in the Arctic Ocean, making nearly five hundred transits through the Bering Strait. 24

I’ve always said we face greater risks from the increasing traffic we’re seeing along Russia’s Northern Sea Route and later through Canada’s Northwest Passage, than we do from oil and gas drilling in the Arctic.

No Harbors of Refuge In the challenging Arctic ma- Begich rine environment, where there are no harbors of refuge and few aids to navigation or search and rescue assets, mariners have less accurate weather forecasts and must rely on charts with dozens of miles between accurate depth readings. We need a forward operating base in the Arctic to support marine and aircraft operations, as well as Arctic-capable aircraft to execute all of the Coast Guard’s important missions in the region. We need strengthened communications and vessel tracking systems to monitor the increasing maritime shipping through the Bering Straits. It’s not enough to assert a strong, national maritime presence when Russia, China, and now even India are building icebreakers. Deep Concern I’m deeply concerned by the Obama administration’s proposed 40 percent cut to the Coast Guard’s acquisition budget. I have a hard time understanding how the administration can roll out a new, national Arctic strategy which relies so heavily on an expanded Coast Guard role in the same year it proposes such drastic cuts to a service already behind the curve on recapitalization. As I told the president in a recent letter, the United States can no longer afford to have the Coast Guard be perpetually at the back of the line when we are funding our national and homeland security agencies. I also asked the president for a more coordinated and streamlined permitting process for future economic development in the Arctic. We must ensure oil and gas permit applications receive a robust but fair and efficient review by the many federal agencies involved.

Alaska Business Monthly | November 2013

Agreements Reached The international forum empowered to oversee activities in the Arctic, the Arctic Council, has reached legally binding agreements on Search and Rescue and Oil Spill Prevention and Response. The Council is also working on business development and enhanced scientific cooperation in the region. The Council now has a permanent secretariat and welcomed several other nations as observers. And the United States is preparing to assume chairmanship of the Council in 2015. Six of the eight Arctic nations already have ambassador-level diplomats representing their interests before the Arctic Council. Japan and Singapore now have ambassadors to the Arctic, and they were joined by China, South Korea, India, and Italy in gaining observer level status before Arctic Council. As the world increasingly turns its attention toward the Arctic, the United States must continue to exert strong leadership at the top of the globe, and that requires a US Arctic Ambassador. Law of the Sea Finally, any discussion of Arctic governance has to include the Law of the Sea. The treaty provides a basic governance structure to resolve claims for high seas resources. Preliminary findings indicate this area above Alaska may be huge—perhaps twice the size as California. Other Arctic nations already are mobilizing to take full advantage of their resources. But until we ratify the Law of the Sea, we don’t have a seat at the table. The changes we’ve seen over the past decade have made the Arctic more accessible in a way that others only dreamed about. Not unexpectedly, it’s attracting interest from around the globe. At this critical juncture, our nation— led by Alaskans—has a responsibility to take full advantage of this promise and assert our leadership in the changing Arctic.  www.akbizmag.com

ARCTIC POLICY OP-ED

The Arctic Region:

Part of Who Alaskans Are By US Senator Lisa Murkowski

n June 14, the administration of President Barack Obama sent eight prominent officials to Alaska to discuss their ideas of moving forward in the Arctic—what they are calling their “National Strategy for the Arctic Region.” The officials scheduled meetings with State and Native leaders and decided to hold a roundtable open to the public. Going into that event, they may have thought their Alaska visit was a formality, a mere “check the box” exercise when it comes to consultation and coordination with those who have the most at stake, and most interest in, the Arctic Region. What they found, however, was extraordinary and likely not something they’ll soon forget: a standingroom only crowd sharing their knowledge of the Arctic for over three hours (and on a beautiful, sunny Friday afternoon, no less). They found that Alaskans take our nation’s Arctic future seriously and expect to have a meaningful consultation and coordination process so that they can be a true partner with the federal government. They found that the Arctic is part of who Alaskans are.

Alaskans Know Alaskans know that the United States is an Arctic Nation because of Alaska. We are right to insist that the State and our Arctic stakeholders play a prominent role in America’s Arctic policies. Our limitation, however, is the reality that the Arctic is not just Alaska’s backyard. There are seven other nations who are voting members of the Arctic Council. There are four other littoral nations who lay claim to parts of the Arctic as well. The Arctic is an international arena, and that means that federal officials determine the level of engagement within that arena, not Alaska. That is not to say, however, that Alaska does not have a significant role to play in driving the nation’s Arctic agenda. We must, and we do. At the same time, we www.akbizmag.com

gauge what the nations’s Arcneed to make the Arctic more tic priorities are. I am greatly than just a single-state or reconcerned that we are not yet gional issue. It must be nationprepared for this leadership opal in scope and priority in order portunity. The Senate Approprifor the United States, and with ations Committee agrees with it Alaska, to fully benefit from me on this, as well. That’s why its status as an Arctic Nation. I added language in the Senate’s From a policy perspective, that version of the State and Foreign is Alaska’s role in the Arctic. Operations Appropriations Act In order to get Arctic policies Murkowski for Fiscal Year 2014 stating: adopted that benefit Alaska, The Committee notes that the United we need them to be recognized as nationally important—and consistently make States will take over as Chair of the Arcour case at every opportunity, like at that tic Council in May 2015. The Committee crowded event. Otherwise, we will con- is concerned that preparations by the tinue to bemoan the lack of a US Arctic United States Government for this event policy while the rest of the international are inadequate. The Committee recommends that within available funds, the community moves forward. State Department increase the number of personnel assigned to Arctic Council Changing Perceptions Alaskans are well aware that the US issues and establish the position of US Coast Guard currently has two ice-break- Ambassador to the Arctic to provide a ers in its fleet. With the Polar Star duct- point person within the United States taped together and just now back in the Government on Arctic issues and to enwater, she may have another seven to ten gage with other Arctic nations on equal years in life expectancy. It takes a good diplomatic footing. decade to build a new ice-breaker from stem to stern, but when my colleagues in Stepping Up to Lead Congress see the request, they don’t view But it’s more than just planning for an it as the nation needing a new ship, they event. It is about the United States stepview it as Alaska needing a new ship. We ping up to lead on some of the more excitneed to change that perception. ing and evolutionary issues of the day. I Much like stubborn drivers not tak- plan to do everything in my power to see ing their cars to the shop until the check this mission through. Starting in 2015 the engine light appears, the federal govern- United States will host a number of Arctic ment often doesn’t take action unless Council meetings, including the Ministethere is a crisis. We don’t want a crisis rial Meeting at the end of our chairmanin the Arctic, but it wasn’t until Russia ship in 2017. I expect most of those meetsymbolically planted its flag on the Arctic ings to occur in Alaska. seabed in 2007 that the area started to get I believe that the lead up to the US attention in Washington. Chairmanship is a prime opportunity for While not a crisis, there are serious con- Alaska to drive United States Arctic Policerns on the horizon. In just two years, the cy, while at the same time making it a naUnited States will take over as Chair of the tional priority. The US State Department Arctic Council. The eyes of the world, not is looking for issues to focus on. Let’s give just the Arctic community, will be on us to them some.  November 2013 | Alaska Business Monthly

Chart: NOAA

ARCTIC POLICY

Coming to Agreement in the Arctic Getting to know Alaskans and their views By Shehla Anjum

ach day brings a new awareness of changes in the Arctic region— more ships headed across the top of Russia toward the Bering Strait; an image of dozens of polar bears feasting on a whale carcass in Kaktovik; news that Alaska’s valuable king crab fishery can fall victim to the increased acidification of Arctic waters. The topics are varied, but share a common theme— the Arctic is changing, rapidly, and at a pace that is difficult to keep up with. Rising temperatures affect all regions of the world, but none as drastically or

as swiftly as the Arctic, where the loss of ice is leading to profound changes. For Alaska, the nation’s sole Arctic state, these are profound developments. More ships in the Bering Strait pose risks to the surrounding coast of northwest Alaska. Interest in offshore minerals, and someday fisheries, brings new people to the region. Today, state and local officials are trying to figure out a strategy for Alaskans to play a meaningful role in policy discussions about the Arctic. Those discussions are dominated by the federal government, for

Alaska Business Monthly | November 2013

now, and Alaskans are seeking ways to have their views heard. There are worries that some of their views are not being heard.

Government Drivers The federal government is in the driver’s seat because of the Arctic Council, the eight-member multinational body of Arctic nations directly affected by changes in the region—the United States, Canada, Denmark (Greenland), Norway, Sweden, Finland, Iceland, and Russia. A few other nations also have www.akbizmag.com

“permanent observer” status, including Great Britain, a long-standing observer, and most recently Japan, China, India, Singapore, and others who feel they have a stake in the Arctic because of opening sea lanes (Singapore) or its resources (China and India). The United States will assume the chair of the Arctic Council in two years. Canada is now the chair. Ironically, the United States is engaged in Arctic issues only because of Alaska, its only connection to the Arctic. But state officials can’t sit at the table at the Arctic Council meetings. Federal officials sit there. The state can, however, feed ideas to the Arctic Council through its indigenous representatives on the council. Within the council, Alaska Natives and other indigenous people of the Arctic are official “permanent participants” through organizations like the Aleut International Association, Arctic Athabaskan Council, Gwich’in Council International, and the Inuit Circumpolar Conference. The council notes that the permanent participants “have full consultation rights in connection with the Council’s negotiations and decisions.” Indigenous organizations can and do provide a conduit for the views of other Alaskans also shared by their members, particularly in matters of environmental protection. Some state officials are also involved with the Arctic Council’s working groups, where many of the policy decisions are actually formulated to be presented to the full council. However, their influence is limited. The state Legislature joined the debate with its new Alaska Arctic Policy Commission to ensure that “our voices are heard and considered,” according to its co-chair, state Representative Bob Herron of Bethel. The commission’s major tools of influence will be reports and recommendations it will publish, which may be difficult for the federal government to ignore because the Commission’s members represent a cross-section of coastal community leaders as well as legislators and some state administration officials. In the Governor’s Office, Stefanie Moreland serves as the senior advisor for fisheries, oceans, and Arctic policy. She interfaces and coordinates with state www.akbizmag.com

and federal agencies on Arctic policy matters. One positive note is that Alaska is well represented on the Arctic Research Commission. This federally-appointed body includes some Alaskans that help guide federal research priorities on the Arctic. Fran Ulmer, a former lieutenant governor, is now its chair. Mead Treadwell, the current lieutenant governor, is the former chair.

A Forum and Consensus Two Alaskan non-governmental entities are also active in Arctic issues: the Institute of the North, which has long been engaged in the issues since the mid-1990s, and the Arctic Circle, a creation of Alaska businesswoman Alice Rogoff. The benefit of these organizations (although Arctic Circle is still new) is in providing a forum for discussion and consensus building among interested citizens, many who are influential, on Arctic issues. The Institute of the North’s new Alaska Business Roundtable, which meets quarterly, will also allow Alaska business leaders interested in the Arctic to keep abreast of who is doing what. “We bring people together, at one table, to talk about issues important to the Arctic. We come out with recommendations and ideas that shape policy,” says Nils Andreassen, the institute’s executive director. Keeping up with developments in the Arctic can be a challenge. There are several working groups under the Arctic Council, many engaged in things that could affect Alaska. There are also international bodies such as the International Maritime Organization, which is developing a new Polar Code of safety standards for vessels operating in Arctic waters. State agencies are stretched keeping up with all the Arctic missions and initiatives of federal agencies and the onslaughts of new federal reports and policy recommendations—six published last spring. At this point, some aspects of federal Arctic priorities, as they seem to be developing, appear out of sync with what Alaskan officials want. President Barack Obama released a federal policy document last March that outlined broad goals, and later in the spring a November 2013 | Alaska Business Monthly

“strategy paper” on its implementation was released by a White House group working to coordinate things. The reaction in the state was less than positive. Treadwell feels the federal strategy is too focused on broad and undefined environmental protection and gives little attention to economic activities, like oil and gas development and shipping, that an opening Arctic will encourage. More importantly, it says nothing about one environmental challenge that is very important to Alaskans: the absence of rules requiring international shipping using the Bering Strait to plan for oil spill prevention or cleanup. Treadwell has credentials on these matters. He was chair of the Arctic Research Commission, a presidential appointment, for several years. Earlier in his career Treadwell was a deputy state Commissioner of Environmental Conservation, a position that involved him directly in the state’s regulation of oil spill contingency planning required for tankers and other large vessels, which are among the most stringent in the world. The Arctic Council took some steps to prepare for emergencies such as oil spills when its members signed a binding spill response agreement earlier this year. But the agreement deals with mutual-aid among member countries in response to an event. It does not deal with measures to prevent spills or to ensure that shipping companies have taken precautions and made contingency plans. Such concerns were recently brought to light when a Russian tanker carrying diesel fuel struck an ice floe as it traveled the Northern Sea Route. The tanker started taking on water but was rescued by a Russian icebreaker and no oil was spilled. Reacting to the accident, Treadwell acknowledged the new agreement that would have Arctic nations help each other in cleanup but also pointed out that more work was needed in preventing spills.

Polar Standards To be fair, shipping standards, which include the kinds of protections Alaskans want, are not within the jurisdiction of the Arctic Council but rather the International Maritime Agency, or IMO. That agency is now working on a “Polar Code” of standards, but this is 28

moving at the glacial pace typical of international bodies, and it is not known whether it will include spill protections with teeth, which Alaskans desire. Another goal of Alaskans, Treadwell says, is the identification of port locations in or near the Arctic to support increased shipping, particularly in emergency response, as well as offshore oil and gas activity. What is striking, he says, is that neither of these priorities is mentioned in the federal policy statements, at least so far. Some progress is being made with ports as a result of state initiatives and funding. The state Department of Transportation and Public Facilities and US Army Corps of Engineers are jointly studying potential port sites in western Alaska. A preliminary report identified Nome and Port Clarence, near Wales on the Seward Peninsula, as top contenders. Nome was selected because of its existing community infrastructure, although as a port it would require dredging. Port Clarence has a natural harbor with deeper water, but infrastructure is lacking. The Corps is drafting an Environmental Impact Statement that will select a preferred alternative.

Lack of Deference More than anything, what worries Alaskans is the lack of deference that federal officials are giving Alaska, the nation’s only Arctic state. Ed Fogels, Deputy Commissioner of Natural Resources, is among state officials who have met with officials developing the federal policy to urge the federal team for greater involvement of the state. “Alaska has a lot of Arctic expertise and the federal government needs to look at what we are doing well in the Arctic,” Fogels said at a recent listening session for federal officials sponsored by the Institute of the North. The state, Fogels said, “wants to be a partner, not just a stakeholder” in the development of Arctic policy. Fogels said he isn’t encouraged that this will happen, given the history of other federal working groups that nominally include the state but in practice do not. “It’s a federal club. We’re on the outside looking in,” he said. Of the two nonprofits engaged in

Alaska Business Monthly | November 2013

Arctic issues, the Institute of the North has been at it for several years. The Institute’s main function is sponsoring meetings to draw people together, but it also creates products, including its signature accomplishment, promoting and then managing preparation of the Arctic Marine Shipping Assessment, published in 2009. The assessment projects future shipping and identifies infrastructure needs. It has now been adopted as an official document by the Arctic Council. An update is now underway, funded by a state legislative appropriation. Last year the Institute helped draft recommendations for the US federal government for when the United States becomes chair of the Arctic Council in 2015. The recommendations included priorities for infrastructure and coastal protection voiced earlier by Treadwell, but also included that Arctic activities be managed for the benefit of people in the region. These ideas have been incorporated into Canada’s goals under its term and the Institute hopes the United States will also adopt them, Andreassen says. The other nonprofit, businesswoman Alice Rogoff ’s Arctic Circle, was recently formed. It has a high profile with its first major meeting planned in October in Iceland. Roghoff says Arctic Circle is not an action group but a venue for discussion among people with differing views. “We’re simply a big tent, a big, open democratic tent. We’re policy agnostic. As a convener [of forums] we don’t believe it’s appropriate to have a policy prescription,” she says. “One exception, however, is that Arctic Circle will advocate that Arctic policy benefits the people of the Arctic, and to help their voice be heard,” Rogoff says. Getting people together is basically the Davos model, she says, referring to the World Economic Forum meetings taking place since 1971, initially in Davos, Switzerland. “You get people together so they get to know each other. You can’t come to agreement unless you know each other.”  Shehla Anjum writes from Anchorage. www.akbizmag.com

BusinessPROFILE

Senator Lesil McGuire

Championing a sustainable and vibrant Alaska

t was a brisk, windy day in Unalaska last August when Senator Lesil McGuire chaired the Alaska Arctic Policy Commission. Bering Sea fisheries, U.S. Coast Guard Arctic strategies and Native village corporation updates were among the agenda McGuire oversaw. She welcomed diPhotos by Kevin Smith Photography verse dialogue and abundant input from affected Alaskans. Just weeks later, McGuire was in Calgary working with fellow state legislators from Northwest states and policymakers from Canada addressing economic and resource development strategies relating to Alaska. McGuire was the first woman president of the Pacific NorthWest Economic Region in its 20 year history, as well as the chairwoman of the Council of State Governments (CSG-West), representing Alaskan interests while overseeing a national legislative policy association. Senator Lesil McGuire, a 13-year veteran in the Alaska Legislature and lifelong Alaskan, considers her legislative Rules Committee chairmanship, national and international policy chairmanships, and the continued sponsorship of critical natural resource development and economic legislation, as essential traits to being a successful leader and voice for Alaskans. “Growing up in our remarkable state, my parents instilled in me the necessity to reach goals and think outside the box,” reminisces McGuire. “I was blessed with an upbringing that embraced respect for cultural and regional diversity and celebrated community and public service,” added McGuire. “The rest of my passion blossomed from hard work and results, law school and a job in a federal prosecutor’s office, and through the world of Alaskan government and nonprofit volunteering where improving the lives of Alaskans mattered.” To many women across the state, McGuire is most recognized for her leadership in defining and expanding domestic violence legislation while enhancing victims’ rights. She facilitated the 2013 Alaska Women’s Summit in October at Alaska Pacific University, focusing on struggles and successes of Alaska’s most valuable underdeveloped resource.

Others may reference her attentiveness to the nexus between and support of both commercial and sport fisheries, recently chairing a meeting on halibut limits, or her ardent support of tourism. Most cite her strong advocacy for job growth and economic stability. From her Emerging Technology Fund to her elimination of the ten percent tax on geothermal energy, McGuire has worked tirelessly to enhance responsible development. It was McGuire’s SB 309 that created a new incentive to attract a jack-up rig to the Cook Inlet. The legislation also made changes to ACES to improve the economics for small, independent explorers on the North Slope. It created new incentives against Alaska’s corporate income tax for gas exploration in Cook Inlet. When asked about higher office, with such a remarkable success rate in helping Alaskans from Southwest to Southeast, Southcentral to the Northwest, McGuire admits that a Lt. Governor role would be an appropriate next step and complement her credentials in management and ambassadorship of the state abroad. “My focus is service above self, and a commitment to all Alaskans for economic sustainability that future generations can enjoy,” said McGuire. Her long history of public and community service certainly manifests such a commitment.

Paid for by Alaskans for McGuire, 2022 Kimberly Lyn Circle Anchorage, Alaska 99515 www.LesilMcGuire.com P AI D

A D V E R T I S E M E N T

MARITIME LAW

The Law of the Sea and Its Effects On Offshore Mining By Isaak Hurst

he United Nations Convention on the Law of the Sea—the US military backs it, the oil industry loves it, and Senators Murkowski and Begich support it. Hell, even the environmentalists are behind this piece of legislation. So why won’t Congress ratify this treaty and put this issue to bed? Despite the majority of world’s nations adopting this treaty (84 percent), the United States still believes accession to this treaty is not in its best interest. The argument: the treaty contravenes the nation’s economic ideology and it erodes US sovereignty. These arguments are misguided, and non-ratification has begun to stem offshore mining projects by US companies due to the uncertainty over “clear legal title” to the resources extracted. This article will examine the Law of the Sea Convention and the fierce political debate surrounding ratification.

The Law of the Sea— the Early Years Introduced in the late 1960s by UN member states to prevent conflicts over maritime rights between nations, the United Nations Convention on the Law of the Sea (also known as “UNCLOS” or the “Convention”) is a treaty designed to govern the navigation, fishing, and exploitation of resources in the world’s oceans. The Convention’s primary value is it provides legal clarity to the world’s maritime boundaries and clarifies the rights nations have to the exploitation and development of resources within those boundaries. Of the world’s 196 nations, 166 have ratified UNCLOS. One country, however, has been noticeably absent from adopting the Convention—the United States. The United States had its first opportunity to adopt UNCLOS in 1982 un30

Despite the majority of world’s nations adopting this treaty (84 percent), the United States still believes accession to this treaty is not in its best interest. The argument: the treaty contravenes the nation’s economic ideology and it erodes US sovereignty. der the Reagan Administration. Reagan, however, had serious reservations about UNCLOS. First, Reagan believed the language in UNCLOS conflicted with America’s economic ideology and its free market principals. Under UNCLOS, deep-sea resources are classified as the “common heritage of mankind”; may only be mined for “the benefit of mankind as a whole”; and a percentage of the royalties generated from these projects must be “shared” with the world’s developing and landlocked nations. Naturally, the Reagan Administration balked at this language, calling it “fundamentally flawed.” Reagan’s secondary concern was that accession would erode US sovereignty. Under UNCLOS, the International Seabed Authority (ISA) is tasked to manage and control certain aspects of deepsea mining, including the permitting of these projects. Reagan saw the ISA as an unelected, unaccountable international bureaucracy that had no business controlling the affairs of the United States or its offshore mining companies. Reagan’s reservations were enough to convince congress not to ratify the Convention, and his disapproval now forms the political backbone against UNCLOS ratification.

The Law of the Sea— Modern Debate In June of 2012, the Senate Foreign Relations Committee held an array of hearings on UNCLOS to drum up

Alaska Business Monthly | November 2013

congressional support for the Convention’s ratification. Senator John Kerry lead the charge and invited key players from the oil and gas, telecommunications, offshore mining, manufacturing, shipping, environmental, and tourism industries. Their argument was straightforward: without a universally recognized legal regime governing the exploitation of the mineral resources of the deep-sea beyond the zones of national jurisdictions, US companies would not assume the investment rights associated with such projects until it was clear who had “clear legal title” to the resources extracted. Uniformly, these industry leaders testified that accession to UNCLOS would provide such clarity, which would subsequently create jobs, protect the environment, and ultimately lead to a stronger US economy. To drive the point home, Kerry also invited senior members from every branch of the US armed forces to testify that accession would increase national security. The US military supports the Convention because it ensures unimpeded access to travel through and over the world’s oceans. Even former Vice President Dick Cheney and Defense Secretary Leon E. Panetta support ratification—declaring accession will increase the United States’ sovereign right to the outer continental shelf, which, in Alaska, extends six hundred miles offshore, instead of the current two hundred-mile limit. Yet, despite www.akbizmag.com

Countries like China and Russia are now aggressively pursuing offshore mining leases within the parameters of the Convention. As of September of 2013, China is now the only nation authorized by the ISA to explore the deep seabed for as many as three major types of minerals. the overwhelming support and expert testimony of our nation’s military, industrial, and political leaders, the Senate pushed back. Senator Jim DeMint, a conservative Republican from South Carolina and prominent figure of the Tea Party movement, led the opposition. DeMint, armed with Reagan’s reservations about UNCLOS, resurrected congressional fears that accession will erode US sovereignty by subjecting it to the authority of the ISA. DeMint also propagated Reagan’s ideological concerns over the deep seabed mining provisions, which DeMint’s supporters tagged as “socialist.” DeMint and his fellow conservatives even promoted the slogan, “What would Reagan do?” By playing the Reagan card, DeMint secured the signatures of thirty-four other Senators, which scuttled Kerry’s attempt to ratify the Convention.

Why UNCLOS Matters Now DeMint’s concerns are noble, but they are misguided—accession to UNCLOS will not erode US sovereignty, but solidify it. First, under UNCLOS, the United States is entitled to permanent seat on ISA’s Council, which provides the United States with veto power over any decisions or policies it finds objectionable. This “seat at the table” is a seat the United States does not have but desperately needs. Countries like China and Russia are now aggressively pursuing offshore mining leases within the parameters of the Convention. As of September of 2013, China is now the only nation authorized by the ISA to explore the deep seabed for as many as three major types of minerals. Would the United States have allowed such a sweeping grab of www.akbizmag.com

minerals rights if it were a member of the ISA Council? Likely not, but without UNCLOS membership, the United States has no voice. Second, there is no universally recognized legal regime governing the navigational rights of nations beyond the zones of their respective jurisdictions. This issue is of particular concern as China continues to exploit this international law loophole by engaging in naval operations and fishing expeditions in the territorial waters of other nations (Malaysia, Philippines, Taiwan, Brunei, and Vietnam). Under UNCLOS, such activities are explicitly prohibited. Indeed, to curtail China’s lackadaisical stance on maritime borders and resources of other countries, the United States needs to ratify this treaty.

Moving Forward The United States is one of the last remaining countries that has not ratified UNCLOS—along with Iran, Libya, North Korea, Ethiopia, and Burundi. Embarrassing political associations aside, non-ratification is curtailing offshore development as US companies are afraid of the legal risks associated with such projects due to the lack of clear legal title to deep-sea resources. To combat this issue, Congress should look past the political hyperbole and understand that accession will expand US sovereignty by solidifying the world’s maritime borders and provide US entities with the legal confidence necessary to engage in deep-sea mining projects. 

Isaak Hurst is an attorney with the International Maritime Group, PLLC—a boutique law ﬁrm that provides legal services to Alaska’s maritime, oil and gas, mining, and international business communities. Hurst was born and raised in Alaska and can be contacted via email at Isaak. Hurst@InternationalMaritime.net November 2013 | Alaska Business Monthly

SOCIAL MEDIA

Using Facebook for B2B Marketing

n the B2B world, Facebook is highly underutilized. Even though 39 percent of B2B marketers have used Facebook to generated leads, studies show that LinkedIn is the most used social platform for B2B companies. Facebook is more difficult to engage with as a business platform, but that doesn’t mean it should be overlooked. Keep the following seven items in mind as a B2B marketer using Facebook to take advantage of the world’s largest social network.

Make a Strategy It’s all about strategy. If you haven’t created a strategy yet, we recommend a free tool called SocialStrategyBuilder.com. Whatever your trade, start by building a database of your target. Then ask questions that will incite responses and be sure you have participants from your company to enhance your presence. A conversation is bound to spread, and even if it doesn’t, the engagement on Facebook will naturally rise. Persistence is key, so be sure to encourage your employees to share their opinions on your company’s activity. Example: Read how IBM is embracing social media internally.

Use Images Remember that pictures can grab attention faster than text or videos. Share advice or even statistical data accompanied by pictures. People tend to look for things that catch their eye and that they can understand in a jiff y.

Reward Curiosity Play on people’s natural curiosity. Everybody is curious about how things are made, so show the “behind the scenes” of your business. What happened at an interesting event? How did the office prepare for the last networking meeting? Post and then add pictures. Example: Peddinghaus goes behind the scenes to share stories of its employees and factories. 32

Taking action for business growth By Tyler Arnold

Create Incentives Offer a free demo or a way for customers to directly interact with whatever you are selling. A free trial will attract people to your page. That means likes and shares and a lot of talk generated on Facebook and other social platforms. Also offer other kind of things for free: ebooks useful in your line of business, videos with advice, or informative graphics. Remember to keep it useful and relevant.

Promote Other Content You’re probably creating content on some other platform like a blog or webinars. Don’t just put a link to Facebook. Find a good excerpt or make a short summary and post it. You’ll definitely get both Facebook likes and your blog visits up. Action Step: Reshare and retweet content that will resonate with your audience. Promoting content from other sources will encourage their community to “overﬂow” into yours and provide you with an opportunity to repost items that are already getting a response.

Engage with Other Businesses Make your page interesting for other businesses. You can catch their eye by sharing industry news and your opinions in an engaging way. Be sure to like other businesses. Like them and post on their pages if allowed. Share the useful information you have, and keep an eye on whatever they’re doing. There are businesses out there that need you—go out and find them on Facebook. Action Step: Remember SlideShare? It has a Facebook application that can be integrated into any page. Imagine all the presentation you must have stored on a hard-drive or company server—use them on Facebook! It’s a great way to share your business-related content to get a lot more people interested in your business.

Integrate Social into Your Marketing Strategy Last, but not least, integrate Facebook with your other marketing efforts.

Alaska Business Monthly | November 2013

Include your tweets, blog posts, and discussions on LinkedIn as everything needs to be on Facebook too. Facebook is the most used social networking platform, and probably your potential partners are already there as individuals. Even though you may be B2B, businesses are still made up of people. Most of those people engage on Facebook in their spare time. Try to attract them with your content and brand philosophy. Example: The Cisco Social Media Playbook provides a clear strategy that engages the entire company. Using social media software of your choice, it takes no more than a few minutes to post something on Facebook. You don’t need to post a lot, as one item a day does the trick as long as it is consistent and relevant. Just make sure it’s an interesting “thing” and of good quality. When done, ask a few of your employees and friends to like and share, and then you’re all set.

ONUS TIP: Be Conﬁ dent See, it wasn’t that hard after all, was it? Start sharing your B2B experience on social media and let yourself be inspired by the dynamics of a beautiful online world! Don’t be afraid to experiment to find out what type of content your audience is really craving.  Tyler Arnold is Co-Founder and CEO of SimplySocial, whose company namesake social media marketing software for the enterprise and business market helps organizations manage social media activity in three easy steps. Learn more and contact Arnold online at gosimplysocial.com. www.akbizmag.com

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MARKETING

You Your Brand

Mickey Nall, national chairman and CEO of the Public Relations Society of America and managing director of Ogilvy Public Relations worldwide, in Fairbanks in August.

‘Make the truth fascinating’

By Julie Stricker

isten. Do you hear that? It’s your co-workers and employees talking. Do you know what they’re talking about? Their jobs and the company they work for. In short, you and your brand. And they’re not just talking to their spouses at the dinner table, they’re sharing it with their one thousand friends on Facebook and tweeting it to the world. Social media has changed many things about doing business in the twenty-first century. Twitter and Facebook and other social media platforms are the modern equivalent of the office water cooler, only the stories get passed farther and faster. 34

Do you know what kind of messages your employees are sending? That’s the kind of question keeping company and organizational leaders awake at night, and it’s one that public relations specialists are ideally equipped to handle in such a way that the company can benefit. In short, a business can’t control the message, but it must participate in the conversation, says Mickey Nall, managing director of Ogilvy Public Relations Worldwide, based in Atlanta. He is also national chairman and CEO of the Public Relations Society of America, the country’s largest organization of public relations and communications specialists. Nall has worked with clients rang-

Alaska Business Monthly | November 2013

ing from the White House to Coca-Cola to United Way of America. He is accredited in public relations and a member of PRSA’s College of Fellows and has won many industry awards. “Word of mouth is much more powerful than advertising,” Nall told Alaska public relations professionals during an August trip to Fairbanks and Anchorage. With the rise of social media bringing more and more channels through which people are seeking information, it makes it hard for public relations specialists to keep up with rising expectations. Communication is key. And the best way to get your brand’s story across is to tell a story. www.akbizmag.com

“We have to become better storytellers,” Nall said. Public relations professionals are “the people who can put a subject and verb together and put together a narrative on what we want to do.” Storytelling isn’t the most accurate term he’s looking for, Nall acknowledges. “I would rather call it truthtelling, because storytelling can be construed as fiction,” he said. “Our job as public relations practitioners is to make the truth fascinating.” His presentation, “Storytelling, Media Relations, and Reputation: Putting it all together for your brand” is full of anecdotes from his years in the public relations business. Social media offers big opportunities for companies if they can follow four steps: ■ ■ ■ ■

On the other hand, not telling a story effectively can result in backlash. A bad report spread through social media, which is then picked up by the mainstream media, can do serious damage to a company’s reputation, whether there’s a real problem or not. When Netflix announced it was more than doubling its subscription price, it lost eight hundred thousand customers in a thirty-day period. It wasn’t so much their pricing change as the fact that it was perceived as a callous, shortsighted move by Netflix that resulted in

a backlash of angry comments on its blog and thousands of tweets. Its stock price plummeted. “Thousands and thousands of people can hurt you through word of mouth,” Nall said. “Not that you did anything wrong, you just didn’t explain yourself well.”

Create Your Own Content Companies can also control their message by becoming their own media company, which means good writing and good content. There are three kinds ACHIEVE MORE

Focus on your reputation Create your own content Become a storyteller Have your employees become advocates for your company

“Brand is the promise, reputation is what we deliver,” Nall said. Looking at it another way, to paraphrase Abraham Lincoln: “Character is like a tree, reputation is like its shadow.”

Reputation A company Nall likes to use as an example as one with a long shadow is Starbucks, which has a reputation that goes far beyond feeding his caffeine addiction, he said. Starbucks is omnipresent and is known for having a consistent product across the country, Nall said. Beyond that, the company focuses on what it sees as its social responsibility to help provide clean water in Africa, a campaign that reverberates through everything Starbucks does. “They need water to make coffee, to grow coffee, for the people who pick coffee to grow their crops,” he said. “It all fits within the supply chain of getting that four dollar cup of coffee into Mickey Nall’s hands. “There’s a story in that.” Starbucks tells that story on its website, as well as prints it on its cups. Companies that tell stories on their websites in a visually appealing manner are effective in adding to their reputations. www.akbizmag.com

November 2013 | Alaska Business Monthly

Mickey Nall presenting “Storytelling, Media Relations, and Reputation: Putting it all together for your brand” to the Alaskan public relations professionals.

of content: paid, such as advertising; earned, word of mouth about a brand; and owned, content that a brand owns such as its website, flyers, and brochures. Encourage customers to tell their stories. In the aftermath of deadly tornadoes in Alabama, the customers of one power utility started spreading the message that their power was back up. The message got around about the good work the company was doing, a much more effective, much more powerful, and much more real message than anything the utility could have done, Nall said. Brands need to build direct relationships with their customers via Facebook and other social networks. “The currency of that relationship is content,” he said. “Newspapers are dying, but there’s a rebirth of journalism in social media,” Nall said. Facebook is a powerful communication tool and companies can use it to forge direct relationships with their customers. That means public relations specialists are the new citizen journalists for their brand. They can’t wait for newspapers to come to them looking for a story, they have to create the content and get people talking about it. The more friends, the better. “We’ve moved from the age of deference to the age of reference,” Nall says. People are far more interested in what their friends are saying is important 36

than what professional media tell them is important. Some become aggregators of content related to their business. For instance, DuPont gathered all the best content on risk management and put it in one place. The content is authentic and valuable and effectively makes DuPont the thought leader on the topic. “They went from zero to something without having to write all the content,” Nall said. Demographics matter. Ford, trying to reach younger consumers, used an online game to launch its 2013 Ford Fusion because young people it was targeting don’t consume traditional media. Good storytelling gets to the heart of the story, without impediments and with a clear narrative. It makes the abstract concrete so the audience “gets it.” That story should be on the company website, on its Facebook page, not buried in corporate jargon in the annual report. If the story of a company is compelling, it becomes part of the brand. “Every employee at Nike knows the story of Nike,” Nall says. The company was started by a guy who liked to run and wanted to create the best running shoe possible. He made the shoes and sold them out of the back of his car to his friends. The company grew from there. Today, it’s a multi-billiondollar, international company, but the

Alaska Business Monthly | November 2013

story of its humble beginnings is what resonates.

Employee Advocates A company’s employees are one of its strongest resources. They are tuned in to what’s happening around them, and they’re talking about it to everyone. The boss may say he doesn’t want his employees to talk about work, but that’s not likely to happen. “What’s going on in your business is out there,” Nall said. “If you say employees can’t do social media, they’re going to do it anyway, and a lot of it will be negative. You want your employees to be advocates.” Communicate with employees about the company’s goals and message. Support their endeavors and celebrate their successes. One bank featured its employees’ good works around town, creating a website that shared the real stories behind the real people who worked there: The effort resulted in positive coverage for the bank as well as rewarding its workers. When a crisis occurs, address it in real time using real people, not an automated reply. Even in the digital age, it’s the personal touch that matters the most. Remember, people are talking.  Julie Stricker is a journalist living near Fairbanks. www.akbizmag.com

INSURANCE ESSENTIALS

Year-End Insurance Planning Review for strategic risk management By Eliza Evans

or many small business owners, today’s economy can be overwhelming. It’s unpredictable, volatile, and filled with ever-changing challenges and complexities. It can feel like the risks associated with small business are higher than ever. But these risks can be mitigated through strategic risk management planning that includes business insurance. The State of Alaska requires small businesses—with some exceptions—to carry business insurance. The intent of business insurance is to protect investments from financial risks. Business insurance should be enough to cover a business from losses and ensure it can remain solvent and keep the doors open even in the face of unexpected circumstances such as lawsuit, death, or natural disaster. While some insurance types are required, others require common sense; insurance coverage exists for every conceivable risk. It’s up to business owners to determine what coverage is appropriate for their business. It’s also up to business owners to review their insurance coverage on a regular basis to ensure it is appropriate in the ever-changing world of small business in America today.

Risk Management Review The purchase of coverage is not where risk management ends, however. According to Christopher S. Pobieglo, president of Business Insurance Associates Inc., “Ultimately, though, you have to really broaden it to a risk management systems review and strategic analysis. It would be a mistake to purchase insurance and think you are covered and do nothing else to identify, analyze, and form strategies to manage 38

“It would be a mistake to purchase insurance and think you are covered and do nothing else to identify, analyze, and form strategies to manage organizational and operational risk. Industry best practices generally recommend reviewing insurance policies with your broker on an individual basis approximately 90 days prior to renewal/expiration of current policies.” —Christopher S. Pobieglo President, Business Insurance Associates Inc.

organizational and operational risk.” Conducting insurance reviews on a regular basis is an essential step in mitigating risk. At a minimum, according to the United States Small Business Administration, small businesses should assess their insurance coverage annually. As well as an annual review, many insurance agents recommend reviews throughout the year. “Industry best practices generally recommend reviewing insurance policies with your broker on an individual basis approximately ninety days prior to renewal/expiration of current policies,” Pobieglo says. The purpose of an insurance review is to ensure that the information business owners are using to underwrite risks is current and accurate, and that coverage is—at a minimum—adequate to the needs of the business. Pobieglo stresses that insurance review should be completed as part of an organization’s strategic risk management plan, making certain the organization’s risk management goals and objectives are addressed. “It is, in fact, those strategic risk management goals and objectives that should drive insurance purchasing decisions, and that may change from year

Alaska Business Monthly | November 2013

to year for a business owner,” he says. “So while it’s important to review the individual policies on an annual basis with your broker, any kind of annual internal review a corporation or board of directors would conduct should really be on organizational risk management, and within that context insurance coverage and purchasing decisions can be made.”

Strategic Planning According to David Eckroth, senior vice president of Parker, Smith & Feek,

“Most business owners and their insurance brokers do a relatively good job of maintaining asset schedules including real property, vehicles, and scheduled equipment,” Eckroth says. “What frequently is lost in those discussions however, are the deeper questions you don’t want to ask after a loss occurs...” —David Eckroth Senior Vice President Parker, Smith & Feek www.akbizmag.com

year-end business insurance planning meetings should include some weighty questions. “Most business owners and their insurance brokers do a relatively good job of maintaining asset schedules including real property, vehicles, and scheduled equipment,” Eckroth says. “What frequently is lost in those discussions however, are the deeper questions you don’t want to ask after a loss occurs: Am I covered for Replacement Cost or Actual Cash Value? Is there a Co-insurance clause or can we negotiate an Agreed Value basis? Do I have adequate coverage for Business Interruption, Extra Expense, Loss of Rents, or Rental Reimbursement? What about borrowed equipment or equipment loaned or leased to others?” Insurance reviews as part of an overall strategic risk management plan can help identify events that could impact the financial stability of a small business. It’s important to identify prior and potential incidents—whether economic, technological, political, personal, or environmental—that may put the business at risk. According to the United States Small Business Administration,

in preparation for year-end reviews it’s essential to determine if current insurance coverage is enough to keep a small business in operation in any situation. Will the policy cover the replacement cost of vital facilities in the event of a natural disaster? Will it cover the replacement of critical equipment in the event of theft or damage? Is it logical to have business interruption insurance to cover operating costs if the business has to undergo a period of shutdown? An insurance review may include a review of schedules of equipment, automobiles, buildings, and property to ensure the cancelation of insurance on any items no longer owned by the business. It may include a review of employee lists to make sure former employees are removed from insurance (such as automobile and liability insurance) and new employees are added. A review of employee lists may all be used to make certain all employees are classified appropriately for items such as workers’ compensation insurance. “All current information should be reviewed, with particular attention paid to those areas that tend to be fluid [driver

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schedules, equipment and property values, scopes of work, payroll estimates, gross revenue estimates],” Pobieglo says. “This review should include identification and analysis of coverages, limits, deductibles, claims history, basis of premiums, schedules, scope of work and exclusions.” Like Pobieglo, Eckroth recommends small business view insurance planning as part of a strategic plan. “Utilize the annual renewal strategy meeting with your broker to conduct a complete review of your businesses existing program, paying particular attention to changes inside your organization,” he says. “Have you formed or changed ownership status in any entities who are Named Insureds in your program? Have you entered or exited any business ventures or markets?” Eckroth suggests brokers should provide information about trends in exposure to loss, market trends, the expected outcome of the insurance market. He says small business owners should “be prepared to discuss your current providers, your relationship and experience with their claims and risk management personnel, and the value you perceive in their services.”

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he following is a glossary of some of the types of insurance a small business owner might consider. These are brief summaries only—all policies should be discussed with an insurance agent.

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Business Owner’s Policy: Provides combined liability insurance, property insurance, business interruption, crime coverage, and, in some cases, workers’ compensation. Business Income Coverage: Works in conjunction with property policy and provides coverage for events such as ﬁ re, hail, wind, damage from vehicles, or vandalism that may interrupt business. Commercial Auto Insurance: Provides coverage for vehicles used on-the-job. Commercial Property Insurance: Provides coverage related to the loss and/or damage of company property due to a variety of events such as storms, ﬁ re, smoke, and vandalism. General Liability Insurance: Provides coverage for property damage, bodily injury, libel, slander, medical expenses, defending lawsuits, etc. Group Health Insurance: Provides non-work related health and medical coverage for employees, with options for employee spouses and dependents.

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Alaska Business Monthly | November 2013

Home-Based Business Insurance: Homeowners’ insurance policies generally do not cover home-based business losses. Riders may be added to cover business risks such as property damage. Product Liability Insurance: Protects against errors, malpractice, and negligence. Protects against ﬁ nancial loss resulting from defective products that cause injury. Umbrella Insurance: Provides backup for when other insurance coverage is exhausted by supplementing existing policies. Workers’ Compensation: Provides work-related occupational health and medical coverage to employees. www.akbizmag.com

Workforce Needs When considering business insurance for small businesses with employees it’s important to understand the needs of the workforce, according to Jennifer Bundy-Cobb, vice president of The Wilson Agency, LLC. “If a small business has insurance we recommend a review in the middle of the policy year and not later than ninety days prior to renewal,” Bundy says. “If the business does not have current coverage for group insurance than any time is the right time.” With all of the changes in health insurance and the upcoming opportunities provided through the marketplace, the questions and answers are more complicated, she says, and encourages small businesses to begin assessing their situation now. “If a full set of questions can be asked then a seasoned agent should be able to help the employer walk through the matrix of options and explain the pros and cons to each. If the agent isn’t able to collect quality input then the review will be more general in nature.” Bundy-Cobb says there are two important things small businesses with employees should discuss with an in-

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“For business owners who view the effective management of risk as a strategic and competitive advantage, consider options which retain higher levels of risk, but do so in a tax advantaged way,” —David Eckroth Senior Vice President Parker, Smith & Feek

surance agent now, even if their insurance plans are not nearing renewal or expiration. First, should you consider an early renewal? Second, do you have employees or employee family members that may be eligible for a subsidy and should you help them to evaluate that now or wait for policy renewal?

Careful Consideration As insurance is an important part of the budgeting process, it requires careful consideration and planning. In preparation for year-end, Pobieglo says small business owners need to look at the cost of risk to the business in the previous

year, develop a budgetary line item for the estimated cost of risk for the coming year, and ensure risk management and insurance purchasing decisions are driven—in part—by the context of the budget. When conducting year-end planning, Pobieglo says every small business owner should be aware of the total cost of risk during the previous year and conduct a review of leases and other contractual obligations. Eckroth says small businesses should expect year-end planning to include financial management of the balance sheet, tax liability, and compliance with bank or surety covenants. “For business owners who view the effective management of risk as a strategic and competitive advantage, consider options which retain higher levels of risk, but do so in a tax advantaged way,” he says. “Such an approach to risk management can not only lower the firms total cost of risk, but provide a vehicle to facilitate continuity and succession planning and wealth transfer or estate planning.”  Eliza Evans is an Alaskan author.

November 2013 | Alaska Business Monthly

TELECOM & TECHNOLOGY

Hardware Upgrades What that means in today’s throw-away world By Mari Gallion

here once was a time that a computer—much like the family car—was regarded as a long-term investment for a business, a family, or an individual. Just like with the family car, it was understood that one would eventually have to replace components—a blown-out monitor, a keyboard that had drunk too much soup and coffee, or a desktop having to be upgraded with more ram or a new video card to keep junior happy playing the latest and greatest games—to keep the computer addressing the business or family needs for years to come. Well-appointed techies went so far as to purchase computer-specific desks with design features meant to snugly house the integral parts of that special piece of technology: a built-in box that safely suspended the tower off the floor, compartments for standard-sized speakers, a pull-out drawer for the keyboard, strategically drilled holes to accommodate even the biggest tangle of cables and cords, a user-friendly station for the printer, and room enough for a mouse and mouse pad on the right. These computer desks were built strong enough to hold up the biggest—naturally the heaviest—cathode ray tube monitor available. To have such a desk was like having a custom garage. Ten years later, many such computer garages either sit empty, collect dust at the Salvation Army thrift store, or have been downgraded to a sewing station or glorified plant stand (the watering kettle fits nicely in the special compartment that once housed the tower). The computers that once sat with pride in such housings have since lost their lus-

Alaska Business Monthly | November 2013

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ter as well due to their heavy, slow, outdated bigness.

In the business world, if something breaks, an employee cannot simply wait for the technology to be repaired, as doing so could Our Little Companions result in missed deadlines, forgotten appointments, vanished conGone are the days of “bigger is better” when it comes to technology. Today’s tacts, lost sales, and forfeited emails. must-have tech items are those that can travel with their owners whether in an airplane carry-on, in a purse, in a pocket, in the palm of one’s hand, or—as in the case of Google glass—resting on the bridge of one’s nose or around one’s wrist as a smartwatch. Multitasking has become king—with the right equipment, employees do not even have to take their eyes off the road in order to remain accessible, on the clock, and productive while driving through traffic. In business, every employee has their own set of tech tools, which may include a smart phone, a tablet, a laptop, or all the above and more. With texting apps and social media such as Facebook, the typical workday can involve hundreds of conversations going on simultaneously—that is, if this technology is welcome at the workplace. Also gone are the days that upgrades were a viable way to address obsoles-

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cence in lieu of simply buying new equipment that is in step with the rest of the world. When one heavily depended-upon item breaks, one does not simply fix it—after all, that iPhone 3G your neighbor purchased for $350 five years ago can no longer be used as a reliable smartphone, although it can serve as a back-up ipod, camera, calculator, and memo recorder—and those of us who remember what it was like to carry all these items separately may be apt to keep old smartphones just in case. In the business world, if something breaks, an employee cannot simply wait for the technology to be repaired, as doing so could result in missed deadlines, forgotten appointments, vanished contacts, lost sales, and forfeited emails. With planned obsolescence and technology moving forward in leaps

and bounds, most businesspeople agree that when an item has lived out its life, it should be replaced as soon as possible and with the most advanced comparable item available, which might be a different device altogether (remember the notebook?). Furthermore, with the rare earth minerals that are used in manufacturing many of these devices, it serves to recycle those used devices rather than throw them in a drawer if there is no identifiable use for them.

Before it’s Too Late True, some people seem to have a sense for when it’s time to replace a tech item, much like migratory birds know when it’s time to fly south. Others rely on advertising to shake them awake; let’s call them “precautionary upgraders.” These are the types of people who don’t feel

November 2013 | Alaska Business Monthly

Most would agree that the best thing to do is let the data live on a cloud, for away from power surges, purse snatchers, and accidental water immersion incidents. put-upon at the sight of a super thick owner’s manual and who dive into the newest, smallest gadget like it’s Christmas morning and Santa got the memo. Sadly, a lot of us don’t have bird sense when it comes to our technology, and many members of the reading glasses club would rather not spend any more time than necessary reading teeny tiny writing about another teeny tiny device. That said, with all these little bits and pieces on which we so heavily depend (and let’s face it—we need them all), how are those of us who are neither birds nor precautionary upgraders to ensure that losing a gadget doesn’t equate to losing one’s entire lifeline, or that we don’t spend hours duplicating our efforts in order to make sure

all our devices are on the same page? The more we depend on our hardware, the more important it is that we back up the data. Most would agree that the best thing to do is let the data live on a cloud, for away from power surges, purse snatchers, and accidental water immersion incidents. One widely lauded product, Microsoft Exchange, allows a business to store all its data on one of their servers. Benefits of using Microsoft Exchange include the fact that the business’s data is always accessible from a user-friendly interface (also on the cloud), is easy to use, and is protected and secure. For fifteen dollars a month per user, the cost of Microsoft Exchange is recovered the first employees are able to file, answer, or delete an email, or work on a PowerPoint presentation, Excel spreadsheet, or Word document from whichever device they are using without having to duplicate efforts when they switch to another device. The interface can be accessed from any device no matter how diverse. Additionally, if for any reason an employee is not able to get to work (sick

child at home, flight delayed interminably, accident on the Glenn Highway, etc.) he or she can access email, contacts, voice mail, or shared documents from home on any device. If something requires that it be addressed by a warm body (meeting, conference, interview), the absentee employee can share any needed notes or documents on the server. It is an excellent way to make sure a business continues to run optimally come “hell or high water.” That said, these days upgrades are no longer upgrades—they are replacements. And the best way to make sure that your replacement devices get in step with your business as soon as possible is to simply make sure they can all reach the same cloud.  Mari Gallion is Associate Editor at Alaska Business Monthly.

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ENERGY

On April 16, 2008, at four o’clock in the morning, Alaska Electric Light and Power Company in Juneau was smacked by two massive avalanches that damaged or destroyed seven towers along a very steep and rugged one-mile section of the Snettisham transmission line. Juneau was cut off from its inexpensive hydroelectric power source. Photos courtesy of Alaska Electric Light and Power Company

Local utility companies cover contingencies By Dimitra Lavrakas

rom earthquakes to surging icechoked water, the Great Land delivers some great reminders that man is not in control here—nature is. This state has disasters that bring towns and villages to their knees, and recovery is complicated by distance, weather, and cost. Over the last decade, there have been some memorable events that have left communities gasping, but the classic Alaska can-do attitude and preparedness has made the turn-around doable in a short time.

Destroying a Village On May 28 Galena suffered what is considered one of the most devastating disasters in Alaska history, right behind the 1964 Good Friday earthquake. Ninety percent of the village’s buildings were destroyed when an ice dam fifteen miles downriver let loose the almost fift y miles of water that had backed up behind it. Blamed on a rapid thaw after a long springtime that was colder than usual, it devastated Galena as well as villages all along the mighty Yukon River: Circle, Fort Yukon, Alakanuk, Emmonak, and Gulkana. 46

Galena, a mainly Athabascan village with a population of four hundred, is about 270 miles west of Fairbanks. Its electricity system, owned by the village and run on diesel, was also affected. “That was one of our first priorities,” says Galena City Manager Greg Moyer. “Within the first week, we got all the water and silt out of the power house.” Since 2004, Galena has been looking at alternative methods to provide power to the community, among them coal, nuclear, water turbines, and solar. “We’re looking at biomass now,” Moyer says. The Alaska National Guard, the Tanana Chiefs Conference, and the National Army Guard helped evacuate residents to Fairbanks by plane after Alaska Homeland Security stepped in as the waters threatened dike walls protecting the town’s airport and looked as if flooding would cut off the evacuation route. The Galena Interior Learning Academy, the town’s boarding school, spared by a dike wall, served to house and feed residents who lost their homes, but had not left. A major disaster declaration was an-

Alaska Business Monthly | November 2013

nounced on June 25, allowing the Federal Emergency Management Agency to designate Galena, Circle, and Eagle, all recently ravaged by spring floods, as communities eligible for permanent housing construction with agency paying 100 percent of purchasing and shipping for repair materials.

A Similar Scenario Eagle received this declaration following its 2009 flood disaster, experiencing a similar scenario as the Yukon River unleashed its destructive power through ice and water. According to the National Park Service, “Flood waters are being driven by a combination of higher than usual snow pack of up to 150 percent of normal, a higher than usual ice formation on the river of up to 140 percent of normal, and several days of unseasonably warm weather which caused rapid melting and ice movement downstream on the Yukon.” Alaska Power and Telephone installed a low-impact renewable energy system, aiming to displace up to fift yseven thousand gallons of annual diesel generation fuel for the approximately two hundred residents of the Eagle www.akbizmag.com

communities—the first of its kind in Alaska. The one hundred-kilowatt hydrokinetic river turbine is powered by the Yukon’s current, and provides power for all residents of the Native Village of Eagle during the summer. Anticipating the floods, Alaska Power and Telephone pulled the turbine out of the water. “The turbine was well out before the river began to freeze,” says Mark McCready, marketing director for the utility. “There was no real impact on the turbines, but there was infrastructure damage, which we got funding to rebuild.” Like most remote locations, backup power generation is diesel generators.

Roaring Down the Mountainside While Juneauites slept soundly, in the wee hours of April 16, 2008, two huge avalanches hurtled down a steep section near Alaska Electric Light and Power Company’s (AELP) Snettisham Power House, damaging or destroying seven transmission towers with a snow load that measured 1.5 miles across.

The power plant supplies hydroelectric power to 85 to 90 percent of Juneau—surely a disaster, but one quickly averted when company switched to diesel generators, restoring power to the majority of its close to fifteen thousand customers. “The 2008 avalanche did cause an economic disaster, but because of our backup diesel generators, everyone had all the power they wanted or needed,” says Debbie Driscoll, vice president and director of consumer affairs for AELP. Perhaps no utility company in Alaska has been dealt such a devastating blow in such a short a time as AELP. However, disaster planning and back-up systems served the company, and in turn its users, well. But avalanches are not its only concern. “It would probably be earthquakes, since they would affect the largest areas,” says Driscoll. “You get the same widespread impact with hurricanes, large river floods, or ice storms in other locations. Our own rivers are so small flooding is very localized. Likewise, an avalanches breaks down a few towers,

but doesn’t devastate the whole electrical infrastructure.” Most large companies have a safety officer and training to make sure everyone is ready for any event. “Managers serve as company safety director for terms of one to three years on a rotating basis,” Driscoll says. “This arrangement allows the safety program to benefit from a variety of perspectives about how to improve our safe practices. The company also maintains a safety committee to review any significant events or changes to the safety program.” The company makes sure its employees are trained for any contingency. “AELP contracts with an electrical safety firm, which provides a safety professional once a month for safety training tailored to AELP’s needs,” says Driscoll.“The topics include those required for all employees, as well as topics designed to address specific safety issues encountered by each crew or department. “In addition to the monthly trainings, the T&D [transmission and distribution] and generation crews have

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We never sleep.

November 2013 | Alaska Business Monthly

n May 2013, a stubborn ice jam on the Yukon River sent fl oodwater spilling over its banks into the small Alaskan town of Galena. An ice jam is an accumulation of broken river ice caught in a narrow channel. A sharp bend in the river about 18 miles (29 kilometers) from Galena triggered the jam by preventing a large sheet of winter ice from fl owing downstream. The blockage began on May 25, and ice and fl oodwater stretched more than 20 miles (32 kilometers) from the choke point by May 28. Galena residents saw waters surge more than 15 feet (5 meters) in the span of one night. Viewed from above, the fl ood transformed the landscape. The Moderate Resolution Imaging Spectroradiometer (MODIS) on NASA’s Terra satellite captured the top image on May 28, 2013. The lower image shows the condition of the river one year earlier. Both images use a combination of visible and infrared light that make it easier to distinguish between water and land. River water appears navy blue; ice appears teal; and vegetation is bright green. Clouds are pale blue-green and cast shadows. NASA images courtesy of LANCE MODIS Rapid Response. Caption by Adam Voiland. Instrument: Terra - MODIS

crew meetings on a biweekly or weekly basis during which they review a safety topic.”

Contingency Plans Pay Off In order to sidestep any further avalanche disturbance to its infrastructure and customers, AELP began a project of installing three avalanche diversions at a cost of $2.2 million each, with the State of Alaska Renewable Energy Fund granting $2 million toward the project. “These diversion structures are huge steel ‘wedges’ constructed uphill of the 48

transmission tower,” Eric Eriksen, vice president of transmission and distribution, told the Juneau Empire at the time. “If an avalanche comes toward the tower, these structures are designed to split the avalanche and divert it around the tower.” The diversion structure for one of the towers fended off an avalanche in 2012 and proved its worth. Driscoll says the company’s emergency plans extend to the well-being of all employees. “We have a contingency plan in the

Alaska Business Monthly | November 2013

event of a national disaster to feed and house our staff, and continue to provide electricity to our customers,” she says. “We’re 100 percent hydroelectric 98 percent of the time and we can go to full diesel to fuel Juneau and Douglas if we were hit by an avalanche, or our marine cable was severed, or we experienced a mudslide or tsunami.” Bases covered.  Journalist Dimitra Lavrakas writes from Alaska and the East Coast. www.akbizmag.com

AGENDA

Compiled By Tasha Anderson

November 2013

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Alaska Miners Association Annual Convention and Trade Show

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November 4-10 (trade show November 6-8)—Sheraton Hotel, Anchorage: Includes luncheons, banquets, keynote speakers and short courses. alaskaminers.org

December 2013

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Bureau of Indian Affairs Tribal Providers Conference

AASB 60th Annual Conference

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November 7-10—Anchorage Hilton, Anchorage: The theme for this year’s conference is Honor the Past. It includes keynote speakers Chris Rush, co-founder and chief program officer of New Classrooms Innovation Partners, and Linda Chamberlain, PhD, MPH, of the Alaska State Department of Health and Social Services. aasb.org

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November 13-16—Hotel Captain Cook, Anchorage: AGC of Alaska is a nonprofit construction trade association dedicated to improving the professional standards of the construction industry. agcak.org

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RDC Annual Conference: Alaska Resources

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November 20-21—Dena’ina Civic and Convention Center: The conference provides timely updates on projects and prospects, addresses key issues and challenges and considers the implications of state and federal policies on Alaska oil and gas, mining and other resource development sectors. akrdc.org

Bilingual Multicultural Education/ Equity Conference November 20-22—Sheraton Anchorage, Anchorage: BMEEC is the largest gathering of educators in Alaska every year, sharing strategies and practices that increase the expertise of all educators in an environment of collegial exchange. bmeec.net

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December 5-6—Egan Civic and Convention Center, Anchorage: This conference brings lawyers, industry executives, government officials, and consultants up to date on a full range of Alaska energy issues. lawseminars.com December 10-12—Marriott Hotel Downtown Anchorage, Anchorage: Created by the Alaska Sea Grant Marine Advisory Program, this summit is designed to provide information and opportunities for fishermen under forty and/or in the business for less than five years. seagrant.uaf.edu/map/workshops/2013/ayfs/

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Alaska Marine Science Symposium

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Feburary 6-8, 2014—This year’s theme is “Building Healthy Minds and Bodies.” There will be a one-day pre-conference session with training workshops on Wednesday, February 5. akheadstart.org

Engineers Week

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February 16-22, 2014—Engineers Week celebrates the positive contributions engineers make to society and is a catalyst for outreach across the country to kids and adults alike. Various events and activities take place around the state, see website for more information. anc-aspe.org/eweek.html

ASTE Annual Conference

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February 22-25, 2014—Hotel Captain Cook, Anchorage: This four day event kicks off with the annual Leadership Summit and three- to six-hour workshops. The last two days will feature Keynote speakers, the iDidaContest, and dozens of technology sessions. aste.org

Arctic Ambitions III: Commercial Development of the Arctic

January 20-24, 2014—Hotel Captain Cook and Egan Civic and Convention Center, 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

Junior Achievement of Alaska Awards Banquet January 30, 2014—Dena’ina Civic & Convention Center, Anchorage: Three Alaskans and two Alaskan families will be inducted and recognized with this prestigious award. Attended by over four hundred business representatives, the program consists of a networking reception, dinner, and awards ceremony. alaska.ja.org

February 5-8, 2014—Join other early childhood community members to learn new strategies, hear about the latest research, try out a few practical techniques, and discover new tools and resources to help face any challenge. anchorageaeyc.org

Alaska Head Start Association Conference

Statewide Economic Forecast Luncheon Series January, 2014—Anchorage, Fairbanks, Juneau: This annual series takes a look at the economic forecast for the upcoming year. wtcak.org

February 3-7, 2014—Dena’ina Civic & Convention Center, Anchorage: For 2014, the forum will provide expanded event content on issues surrounding coastal communities and general emergency response for remote communities. This will include tsunami impacts, marine debris, flooding, earthquakes, and coastal erosion. akforum.com

Anchorage AEYC Early Childhood Conference

January 2014

Annual Local Government Conference November 18-22—Anchorage: Joint conference of the Alaska Municipal League and the Alaska Conference of Mayors. akml.org

December 5-6—King Career Center, Anchorage: CEFPI is a worldwide professional 501 (c)(3) non-profit association whose sole mission is improving the places where children learn. The conference includes the presentation of the Len Mackler Award. cefpi.org

Alaska Young Fishermen’s Summit

AMMA Annual Business Meeting November 18-19—Hotel Captain Cook, Anchorage: The Alaska Municipal Management Association (AMMA) is a professional organization of municipal managers and administrators in Alaska; its purpose is to increase the proficiency of municipal managers and aid in the improvement of municipal administration in Alaska. alaskamanagers.org

December 2-6—Dena’ina Civic and Convention Center, Anchorage: This conference is an opportunity for representatives of Alaska’s federally recognized Native tribes to learn about and discuss programs and services concerning law enforcement, tribal courts, housing, roads, loans and grants, training, banking, transportation, etc. biaprovidersconference.com

Ninth Annual Energy in Alaska

Associated General Contractors of Alaska Annual Conference

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Alaska Forum on the Environment

Council of Education Facilities Planners, InternationalAlaska Chapter Conference

Clean Energy Forum: Energy Decision Making—A Look at the Alaska Dialogue November 13—Anchorage Museum Auditorium, Anchorage: An overview of the Institute of the North’s Alaska Dialogue; the main guest speaker will be the Institute’s Executive Director Nils Andreassen. alaskarenewableenergy.org

February 2014

February 27-28, 2014—The Hotel Alyeska, Girdwood: Arctic Ambitions III will concentrate on the theme of international trade and business opportunities that flow from resource development in the Arctic. While policy and research inform the discussion, the conference focuses on global markets, international trade and logistics. wtcak.org

March

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SWAMC Annual Economic Summit March 6-7—The Southwest Alaska Municipal Conference’s annual summit and membership meeting. swamc.org

November 2013 | Alaska Business Monthly

HEALTH & MEDICINE

Preventive Health Efforts Staying healthy this winter By Susan Sommer

t might seem as though Alaskans aren’t doing a very good job of staying healthy. Statistics show that 41 percent of the state’s three-year-olds are either overweight or obese. Alaska’s suicide rate is twice the national average. One in three high school students is regularly exposed to secondhand smoke. The preventive health field, however, has many advocates working to support individual and group efforts to keep Alaskans healthy.

Obesity Two-thirds of the state’s population is either overweight or obese. Direct medical health care for obesity in Alaska costs $459 million each year. The State of Alaska Department of Health and Social Services (DHSS) has many preventive health programs in place. One of its priorities is reducing obesity rates. Two youth-focused programs of the Obesity Prevention and Control Program (OPCP) aim to reduce obesity numbers and send the trend running the other way: Play Every Day and Healthy Futures. Play Every Day promotes Alaska-specific, strategic messages focused on raising awareness about childhood obesity and encourages families to be active par50

ticipants in getting an hour of exercise each day. The program uses community and school events as well as a variety of media venues to reach its audience. Healthy Futures promotes a schoolbased physical activity challenge that rewards children who complete the challenge with prizes. The program supports community activity events such as the Anchorage Fur Rendezvous Frostbite Footrace by making them affordable for families. Healthy Futures also partners with well-known athletes like Kikkan Randall and Scotty Gomez. OPCP also supports using local foods in schools and recognizes the importance of traditional Alaska Native foods. It implemented the Alaska Farmers Market Quest-Card Program so that vendors could accept food stamp cards. And OPCP provides funding and leadership for the Alaska Food Policy Council, a conglomerate of state and federal agencies, tribal entities, university programs, farmers, fisheries, and food systems businesses.

Suicide The State’s Community-Based Suicide Prevention Program provides support and assistance to communities to develop and implement their own locallydesigned suicide prevention projects. Grants, training, and support and an

Alaska Business Monthly | November 2013

information network are available. All size communities are involved, as are nonprofits that represent neighborhoods and sub-sections of large communities. The Alaska State Suicide Prevention Council was established by the Alaska State Legislature in 2001. Its uniquely Alaskan endeavor, Casting the Net Upstream: Promoting Wellness to Prevent Suicide, is a call to action that recognizes that “suicidal behavior results from a combination of genetic, developmental, environmental, physiological, psychological, social, and cultural factors operating in complex, and often unseen, ways,” according to its 2012 implementation report. The Council has held numerous public meetings around the state, offered educational presentations, and partnered with several other organizations to help strengthen its objective of preventing suicide. The Gatekeeper Suicide Prevention Training was developed at the University of Alaska Anchorage by staff of Behavioral Health Research and Services and received support from many community volunteers. Training is free and arranged via DHSS. The DHSS web page for the program defines a gatekeeper as “anyone within a community who is responsible for the health and safety of an individual, has access to resources, and has the ability to listen, connect, assess, www.akbizmag.com

and most importantly, act when someone is contemplating suicide.” Gatekeepers look for warning signs of suicidal behavior and practices intervention skills. “The newly revised and updated training is two hours,” says James Gallanos with DHSS. “Minimum is up to the trainer and maximum preferred is twenty-five to thirty depending on if they have a co-trainer.” Alaska Native Tribal health Consortium has a suicide prevention program called ASIST, which stands for Applied Suicide Intervention Skills Trainers. More than sixty ASIST trainers have taught 1,300 teachers, health aides, counselors, clergy and others with the support of regional and community tribal health organizations.

Smoking The Alaska Tobacco Control Alliance (ATCA) was formed in 1992 to create a statewide network of health advocates to develop, support, and sustain comprehensive tobacco control programs. ATCA’s mission is “to create conditions for Alaskans to live free from the harmful effects of tobacco.”

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ATCA works on smoking policy, smoke-free housing issues, prevention of youth smoking, and helping smokers quit. Each year it holds a Tobacco Summit; 2013’s was titled “Turning the Tide Toward a Smokefree Alaska.” It offers work groups on everything from youth to communications to smokeless tobacco. As part of ATCA’s “Good for Health - Good for Business” campaign, they interviewed numerous business owners across the state for their take on making their organization smoke-free. Stan Selman of Club Paris in Anchorage said, “We are smokefree for the health of our staff and customers, and for the quality of our food.” Jolene Gavatte of The Bakery Restaurant in Fairbanks said, “Since going smokefree, we’ve seen an increase in business, especially with families who are happy to have a clean, safe place to visit together.” Even bars have jumped on the smoke-free bandwagon. Christy Tengs and Bob Fowler of Pioneer Bar in Haines said, “Going smokefree was one of the best things we ever did as a business. We broke the tradition of a smokefilled bar for the health of our family, friends, and neighbors.”

Direct medical costs and lost productivity due to tobacco use in Alaska totals $579 million per year, according to the State of Alaska Tobacco Prevention and Control Program (TCP). The TCP’s Mission 100 program was started in 2011, with a goal of making Alaska 100 percent tobacco-free. It is a statewide technical assistance and outreach initiative designed to eliminate exposure to second-hand smoke, prevent tobacco use by youth, promote tobacco cessation by people of all ages, and identify and eliminate tobaccorelated disparities. Tobacco use has decreased in recent years in Alaska. Data from the State’s 2013 update of its Alaska Tobacco Facts report shows that Alaska’s overall high school youth smoking rate went from 37 percent in 1995 to 14 percent in 2011. Adult smoking rates also declined between 1996 and 2011 to the current figure of 22.6 percent. Other State data shows that illegal sales of tobacco products to youth have been curtailed by stepped up enforcement efforts across the state. Schools are integrating TCP information into the classroom—and

November 2013 | Alaska Business Monthly

workplaces and educational campuses are going smoke-free. More and more communities and events are embracing the smoke-free option. In 2011, the Nome City Council approved a smoke-free ordinance that included workplaces, restaurants, bars, and hotel and motel rooms. It was the strongest ordinance passed in Alaska. The Alaska State Fair was a smokefree event for the first time in 2012. Chugachmiut, the tribal consortium for Native communities of the Chugach Region, worked with North Pacific Rim Housing Authority for adoption of the first smoke-free multi-unit housing policy in Alaska. Alaska’s Tobacco Quit Line, launched in 2002, is a toll-free phone-based program that provides free coaching, selfguided materials to help smokers quit, and nicotine replacement patches or gum to any Alaskan adult trying to quit. Last year, 3,775 people called the Quit Line seeking help.

Heart Disease The Alaska Healthy Hearts Program, part of the Alaska Heart Institute and the Providence Heart & Vascular Center, is designed for people who have one or more risk factors for heart disease but have not had a cardiac event. Risk factors are high blood pressure, high cholesterol, smoking, diabetes, obesity, etc. Appointments include consultation with a cardiologist, personalized risk assessment, nutrition counseling, an activity plan, education in community resources, and a follow-up plan. The state’s Take Heart Alaska program is a coalition of agencies, organizations, and individuals working together to improve cardiovascular health across Alaska. Made up of all volunteers, it supports healthy lifestyles, public education and cardiac and stroke systems of care. Eat Smart Alaska is an effort by volunteers within the Take Heart program. It supports activities like health fairs, healthy eating campaigns, in-store food demonstrations, and grocery store tours. It also works with teachers, schools, and other health care educators. Janice Gray, RN, a nurse consultant and program manager for the State’s Heart Disease and Stroke Prevention Program, says that volunteers provide “presentations as they are available and 52

as we have funding available if travel is needed. For instance,” she says, “I did ‘heart healthy’ presentations in Cordova in May for Women’s Health Week and have taught blood pressure skills for the Future Medical Careers group at the University of Alaska Southeast, so the presentations are tailored to what the group requests.”

Workplace Health Many businesses offer a workplace health program advocating exercise, nutrition awareness, and kicking unhealthy habits like smoking. Gym memberships, friendly competitions between coworkers and cash rewards for meeting goals are just a few of the things employers have dangled before their employees as incentives. Shannon Brady Garman, Director at WIN for Alaska, Inc., says that “if a wellness program helps a participant prevent disease, or sustain their body through disease recovery, they have preserved their most valuable resource.” WIN for Alaska, Inc. has worked with organizations across Alaska and nationwide since 1998 to develop methods for controlling health care costs and improving the health of participating employees. “Our Wellness Consultants cultivate meaningful relationships by working face to face with our clients; this helps us understand their culture, obstacles, and environment and helps the participants feel confident, valued, and accountable,” says Brady Garman. Brady Garman relates the story of a woman who participated in a WIN for Alaska, Inc. program through her employer. The woman began the program overweight with high blood pressure and unhealthy cholesterol levels. The wellness program activities helped the woman restore her health. Then, she was diagnosed with a liver tumor. Her doctor told her she was an ideal candidate for recovery. “That is in no small part due to the work I have done with WIN,” said the woman. Public Health A number of entities work to shield Alaskans from a variety of ills. With winter comes flu season, and Alaska is not immune. DHSS promotes annual influenza vaccination, especially for people with high risk for complica-

Alaska Business Monthly | November 2013

tions and for young children. Flu vaccinations are given by public health centers and other clinics throughout the state. Alaska also has a pandemic influenza plan, which calls for actions at the state and local level to communicate medical information, conduct disease surveillance, deliver vaccines, distribute medications and implement public health measures to control the spread of disease. School wellness programs are important to helping Alaska’s children lead healthy lives, which in turn helps them become healthy adults. The 2011 Alaska School Health and Safety Framework report states that the framework was designed around the Coordinated School Health Program Model, a leading framework used by the US Centers for Disease Control and Prevention. Alaska’s Department of Education & Early Development, along with DHSS and others, promotes a system that includes health education, nutrition services, family and community involvement, and counseling, to name a few. Fire drills have been standard procedure at schools for decades, but the Anchorage School District now focuses as well on making sure students are familiar with other safety procedures. Lockdown or stay put drills have been added in recent years as safety measures against everything from the possibility of earthquakes to armed intruders. The Alaska Injury Prevention Center offers information and programs on biking, walking, and driving safety. According to the organization’s data, nearly 20 percent of Alaskan high school students indicated that they had ridden with a driver who had been drinking alcohol on at least one occasion. One of the Center’s programs, called Raise Your Voice, addresses issues like underage drinking, seatbelt use and distracted driving via student created media. Students from Togiak School produced a short video about ATV safety, while students from Two Rivers showed in their video how a few seconds of texting while driving can devastate lives forever. Across the state, Alaskans can engage in preventative health to stay healthy this winter.  Susan Sommer writes from Eagle River. www.akbizmag.com

RIGHT MOVES

Compiled by Mari Gallion

Sustainable Design Group

Hawes received her MBA from University of Texas Arlington, with a concentration in Finance, and received bachelor’s degrees in Marketing and Management from Abilene Christian University. Ohayon graduated from Willamette University College of Law with a juris doctorate. She also received a Master of Arts in International Studies and a Bachelor of Arts in Social Science.

Sustainable Design Group announces the appointment of Luanne Urfer, Principal Landscape Architect to the Alaska State Board of Registration for Architects, Engineers, and Land Surveyors appointed by Governor Sean Parnell. With more than thirty-five years of experience, she will be representing the discipline of landscape architecture for the state.

Petro Star, Inc.

John

Stewart

Castle

Holmes

Machacek Taylor A ngelen e Faulkn er, Community Economic Development Specialist. Don Castle has been appointed to Vice President, Sales and Operations. At the Fairbanks based Sourdough Fuel division, Doug Richmond, who has been with the company Olthoff for thirty-one years, has accepted the new position of Director—Sourdough Fuel Sales and Operations. Advancing to Sourdough Fuel as Retail Sales and Operations Manager is Greg Machacek. In addition, Lynette Taylor has been promoted to Retail Operations Supervisor. Jamie Olthoff continues to head the Heating Oil team as Operations Manager.

Faulkner

Richmond

Petro Star, Inc., a subsidiary of Arctic Slope Regional Corporation, recently appointed Mark John to Vice President—Business Development and Marketing. Joining John in the new group are Orval Holmes, Director of Business Development; Nicole Stewart, Marketing and Communications Manager; and

Alyeska Resort

Alyeska Resort welcomed three new members to the management team this summer: Director of Human Resources Randy Neitzel, Director of Sales Michael Dutton, and Controller Mickey Tveter. Two other employees were promoted to new positions: Mandy Hawes to Vice President of Finance and Jaci Ohayon to Associate General Counsel. Neitzel graduated from the University of Oklahoma with a Master of Public Administration and from the University of Wisconsin with a Bachelor of Arts in Communication. Dutton is a graduate of Middlesex University in London, UK, with a bachelor’s degree in Hotel Management. Tveter holds a Master of Tourism Administration from George Washington School of Business.

Red Cross of Alaska

Red Cross of Alaska announces the addition of new staff member Melissa Himes as well as the promotions of Jess Rude and Laura Spano. Himes joins the Red Cross team as Disaster Services Manager for Southcentral Alaska. Himes holds a Master of Arts from Duke University in International Development Policy. Rude has accepted the position of Chief Development Officer. Rude has more than ten years of experience in the nonprofit sector and holds a degree from New York University. Spano has accepted the position of Regional Communications Officer. Spano was raised in Anchorage and has a degree from Washington State University.

Chugach Electric Association

Sherri McKay-Highers was appointed Chief Financial Officer and Vice President, Finance a n d A dminis tratio n for Chugach Electric Association. She has worked at Chugach for more than fifteen years and has held various accounting McKay-Highers management positions.

kpb architects

kpb architects has expanded its staff with the hiring of Kamu Kakizaki and Martina Parrish for the positions of intern architects. Parrish received her Master of Architecture from Montana State University, where she also earned a Bachelor of Arts in Environmental Design. Kakizaki received his Bachelor of Arts in

OH MY! 54

Alaska Business Monthly | November 2013

www.akbizmag.com

RIGHT MOVES

Compiled by Mari Gallion

Architecture from the University of Washington and studied as an exchange student at the University of Liverpool. He is a LEED Green associate.

infantryman for six years, while also pursuing an education at the Kelley School of Business at Indiana University Purdue University of Indianapolis.

AHFC

Alaska USA

Bryan Butcher has been named AHFC’s new CEO and Executive Director. Butcher comes back to service at AHFC following two-and-a-half years as the state’s Commissioner of Revenue.

Bering Sea Native Corporation

The Bering Sea Native Corporation Board of Directors selected Lee Michael Ryan , Vice President of Ryan Air, Inc., to fill the Board seat previously held by Martha Anagick Aarons. Ryan will serve a two-year term on the Board. Ryan

Hart Crowser

Ingle

Haa Aaní, LLC

Wolf

Debbie Ingle has been hired as executive director of mortgage and real estate lending at Alaska USA. Ingle has twenty-five years of experience in mortgage lending, including underwriting, branch operations management, and sales management. Brian Wolf has been hired as executive director of retail financial services at Alaska USA. Wolf earned a Bachelor of Business Administration from the State University of New York at Buffalo and an MBA from New York University.

Bezek Durst Seiser

Jason Stutes

Adrienne Stutes

Jason Stutes, PhD, has been promoted to Associate Marine Ecologist, and is now Hart Crowser’s Anchorage Office Manager. Adrienne Stutes, MS, also based in Anchorage, has been promoted to Project Marine Scientist and is technical lead for many projects evaluating the effects of environmental chemistry and contamination on freshwater and marine natural resources.

Anchorage Fifth Avenue Mall

Simon Property Group, Inc. announces that Stephen Welch has been named Mall Manager at Anchorage Fifth Avenue Mall. He served as an

www.akbizmag.com

AMC Engineers

AMC Engineers announces the promotion of Keith Confer to Principal. He is a Registered Communications Distribution Designer, a certified Electrical Inspector by the International Association of Electrical Inspectors, and a Construction Specification I n s t i t u t e C e r t i f i e d Confer Construction Documents Technologist.

Bezek D urst S eiser announces Bryce Hamels recently earned his accreditation as a Registered Professional Architect in Alaska. He holds a Masters of Architecture and a Bachelors of Science in Architecture from Texas Tech University. He is a Hamels member of the American Institute of Architects, a LEED Accredited Professional, and a CSI Construction Document Technologist.

CIRI Alaska Tourism Corporation

Gideon Garcia joins CIRI Alaska Tourism Corporation as Chief Operating Officer. Garcia obtained his Master of Business Administration from University of Alaska Fairbanks.

Haa Aaní, LLC President and CEO Russell Dick will provide leadership to the Alaska Industrial Development and Export Authority and Alaska Energy Authority. He holds a Master of Science in Management from Stanford Graduate Dick S chool of Business , Sloan Program, a Bachelor of Science in Industrial Engineering from Stanford University, and a Bachelor of Science in Business with an emphasis in Accounting from the University of Phoenix.

UIC First Nations

McCallion

Fleury

UIC First Nations, a newly-formed subsidiary of UIC Construction Services in Calgary, Alberta, has announced the hiring of Patrick McCallion as General Manager and Theo Fleury as Business Development Manager. 

November 2013 | Alaska Business Monthly

ALASKA NATIVE CORPORATIONS

ANC Outside Interests Bringing money back to Alaska By Julie Stricker

In fiscal year 2012, the twelve Alaska-based regional corporations alone pulled in more than $9 billion in revenue; village corporations accounted for millions more. In 2012, they comprised twenty of the top 49 Alaskan-owned businesses ranked by gross revenue in or the past two hundred years, the state.

the standard business model in Alaska has been focused on exports: fur, fish, timber, gold, and petroleum. Wealth in Alaska has generally moved outward, but in the past twenty years, one group of companies has successfully turned that business model around and brought the money back to the state: Alaska Native Corporations. The corporations were formed under the 1971 Alaska Native Claims Settlement Act, which divided 44 million acres of land and $963 million among Alaska’s Native peoples. It set up twelve regional corporations and more than two hundred village corporations to manage the lands and money. A thirteenth regional corporation was later established for Alaska Natives living outside the state. These corporations were given a dual mandate—to use the money and land to create economic opportunities for shareholders and to provide for their cultural and social well-being. In fiscal year 2012, the twelve Alaska-based regional corporations alone 56

pulled in more than $9 billion in revenue; village corporations accounted for millions more. In 2012, they comprised twenty of the top 49 Alaskan-owned businesses ranked by gross revenue in the state. And while the corporations focus on providing jobs and opportunities for shareholders inside Alaska, much of their business takes place out of state, which means those Outside interests are generating revenue that’s coming in to Alaska. Alaska businesses have operations outside the state for two major reasons: one is the need for a large corporation to have geographic diversity in its holdings; the second is that, for all its great size, economic opportunities in Alaska are limited.

Energy and Real Estate Anchorage-based Cook Inlet Region Inc. (CIRI) makes its investments Outside with an eye toward the business

Alaska Business Monthly | November 2013

sectors it knows well and the ability to partner with businesses that are also successful in their fields. In the past several years, CIRI has focused on specific sectors such as the oil and gas industry, energy, and real estate, says Jason Moore, corporate communications director. “First of all, the reason we focus on certain sectors is because they’re sectors we know well,” he says. “The oil and gas sector, we’ve been involved with that for a long time.” In 2011, CIRI sold its interest in Peak Oilfield Services to its longtime partner, Nabors Industries. A year later, CIRI had the opportunity acquire a majority equity stake in Cruz Energy Services, which has its roots in Alaska’s North Slope. Cruz Energy specializes in moving rigs, crane work, and energy project logistics, all skills honed in Alaska’s unforgiving arctic conditions. This make it ideally suited to work in the harsh conditions found www.akbizmag.com

“ My father and grandfather helped build the pipeline. Now I’m building on the Kenai — working on college housing that will develop another Alaskan resource.”

— Beau Montgomery, Bristol Alliance of Companies, Bristol Bay Native Corporation

Building Alaska’s Future

in the Bakken formation in the Dakotas, Montana, Colorado, and Wyoming. “It’s an example of knowing about the sector,” Moore says. “Our board is familiar with it, our management is familiar with it. We’re pretty confident with knowing how the sector operates.” The same goes for wind-generated energy. CIRI constructed a commercial-scale wind farm on Fire Island, three miles from Anchorage. The success of the sixteen-megawatt project encouraged the company to invest in wind technology outside the state. In 2012, CIRI partnered with Edison Mission Energy and Teachers Insurance and Annuity Association and College Retirement Equities Fund to form Capistrano Wind Partners to operate largescale wind energy projects across the nation. Capistrano oversees five wind farms in Texas, Wyoming, and Nebraska. Later in 2012, CIRI also became a tax partner with Boston-based First Wind in the 105-megawatt Palouse Wind project in eastern Washington. “Given the impressive track record of First Wind as an experienced wind project developer, CIRI is excited about this new partnership,” says CIRI President and CEO Sophie Minich in a news

“I think it’s those two things that really kind of define how we operate. It’s sectors we know well and partnerships with people who have these core competencies.” —Jason Moore Corporate Communications Director, CIRI

Wind energy, like oil and gas, is a sector that CIRI’s board is very comfortable with, Moore says.

Real Estate CIRI also has invested with Weidner Apartment Homes to manage high-end, multi-family rental housing in Arizona and elsewhere. Weidner has a solid reputation in its field, as does Browman Development Corporation, which worked with CIRI to develop Tikahtnu Commons shopping center in Anchorage. Other projects may be coming in the future with Browman, Moore says. “Browman is a company that really knows how to put the pieces together for a successful project,” he says. CIRI looks for solid successful entities for partnership opportunities, Moore says.

in western North Dakota will process crude oil from the Bakken formation into gasoline, diesel, and propane. “The Mandan, Hidatsa, and Arikara Nation is where ASRC was more than thirty years ago, when oil was discovered at Prudhoe Bay,” Jeff Kinneeveauk, president and CEO of ASRC Energy Service, noted when the project was announced. “We’re excited about sharing our decades of unique industry experience and tribal knowledge and helping to responsibly bring this crude oil to market.”

Unattended Fuel Stations As for investments outside Alaska, Bristol Bay Native Corporation (BBNC) holds the keys to one of the largest, but almost invisible, companies in the Northwest. BBNC, with a land base in southwest Alaska, is one of the most successful Alaska-owned corporations. In 1985, it acquired PetroCard, Inc., a cardlock fuel distribution system based in Kent, Washington. It specialized in unattended fuel stations that use a proprietary cardlock system. The company has been a strong performer for BBNC and now has more than 180 employees and eight offices in Oregon and Hawaii. Revenues from petroleum sales to-

SBA 8(a), is designed to help small, disadvantaged business by allowing federal agencies to sole-source contracts with 8(a) businesses without having to go through the competitive bid process. An amendment to the program allows Alaska Native Corporations and other American indigenous groups access to the program and grants extra incentives for agencies to partner with the corporations. It also allows corporations to have multiple subsidiaries in the 8(a) program, under different sectors, and makes them exempt from caps on contracts. release. “Palouse Wind is a good fit for CIRI and complements our diverse and developing portfolio of energy assets.” The Palouse Wind project is a longterm investment for CIRI. Avista Corporation, a transmission and distribution company that serves about 1.5 million people, has signed a thirty-year contract to buy power from the project. The investment made sense for many reasons, says CIRI’s Stig Colberg, chief financial officer. “The project strengthens our energy portfolio and provides significant tax advantages for the corporation, while the thirty-year power purchase agreement reduces our risk and ensures a stable income.” 58

“I think it’s those two things that really kind of define how we operate,” he says. “It’s sectors we know well and partnerships with people who have these core competencies.”

Helping Lower 48 Tribes A subsidiary of Arctic Slope Regional Corporation (ASRC) is using its expertise to help tribes in the Lower 48. ASRC Energy Services, a well-established oil field services company on Alaska’s North Slope, is the lead on a project to build the first oil refinery in the Lower 48 for more than thirty years. The MHA Thunder Butte refinery on the Fort Berthold Indian Reservation

Alaska Business Monthly | November 2013

taled $1.2 billion in 2012, a big chunk of the overall financial snapshot for BBNC. The company originally provided fuel to fleets of commercial vehicles. In the ensuing years, acquisitions added new cardlock locations, one hundred retail fuel dealers, mobile fueling, and wholesale distribution of motor oils and lubrication. Deliveries have also grown, from 25 million gallons to 330 million gallons in fuel sales. In 2011, it was named the fifth-largest privately held business in Washington state.

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cult, but a program administered by the Small Business Administration is designed to give businesses a chance to grow and develop before graduating to compete with other players in their chosen fields. The program, called SBA 8(a), is designed to help small, disadvantaged business by allowing federal agencies to sole-source contracts with 8(a) businesses without having to go through the competitive bid process. An amendment to the program allows Alaska Native Corporations and other American indigenous groups access to the program and grants extra incentives for agencies to partner with the corporations. It also allows corporations to have multiple subsidiaries in the 8(a) program, under different sectors, and makes them exempt from caps on contracts. NANA Development notes that the corporations themselves are owned by Native Americans, who “are among the poorest and most under-employed groups in our society, with many still living in third world conditions.” The profits from these contracts are used to

fund dividends and programs to benefit these shareholders. “We have projects all around the world,” says Blythe Campbell, director of marketing and communications at NANA Development, the business arm of NANA. Most of NANA’s subsidiaries are based in the United States, but they oversee projects around the globe, with one company based in Australia and one joint venture in Russia. Its subsidiaries employ 11,500 workers, and NANA currently has 550 job openings in its family of companies. Twenty-seven NANA Development subsidiaries are based in the Lower 48 in such fields as facility services, logistics, information technology, environmental services, and construction. Subsidiary Akima Construction Services, based in Laurel, Maryland, for example, has built modular housing for Army bases to support troop realignments and in the aftermath of Hurricane Katrina. Wolverine Services, based in Colorado Springs, Colorado, does facility maintenance and warehousing services. Both are certified under the Small Business Administration 8(a) program.

The program is effective, with many companies “graduating” from 8(a) and entering the competitive field. For example, Ahtna Technical Services graduated from the program in 2010 and is working on projects in five states, as well as Alaska. In 2012, it built infrastructure at Watford City, North Dakota, in the heart of the booming Bakken oil development. It also performs facilities services at the Marine Air Corps Air Station in Beaufort, South Carolina.

Broadened Focus In the last decade, government contracting formed the fiscal backbone for many Alaska Native regional and village corporations, with some reporting as much as 88 percent of their revenue coming from subsidiaries working in federal contracting. A congressional backlash, more competition, and fewer federal contracts being offered in recent years has given corporations an incentive to broaden their focus beyond contracting. Kodiak-based Koniag noted the decline in defense contracts in fiscal year

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“We are dedicated to strengthening ties with our Alaska Native shareholders through scholarships, education, training, and employment opportunities. The success of SIOTs has a direct positive impact on the lives of our shareholders.” —Grant Bonser, General Manager, SIOT

2012 and shifted its strategy to focus on projects closer to its land base. It also, however, noted the strength of its real estate investments and purchased interests in property in California and Texas. It holds interests in eleven properties in several states and Alaska.

Federal Contracting All of the regional corporations and many of the village corporations have federal contracting subsidiaries, some 8(a), others in the competitive arena. For remote villages such as the ten along the Kuskokwim River in southwest Alaska that joined to form The Kuskokwim Corporation, there are few other economic opportunities. TKC Development, Inc. oversees four subsidiaries, all enrolled in the SBA 8(a) program or seeking certification. Their success in government contracting has

catapulted the corporation into the top ranks of Alaska-owned businesses. They’re also providing jobs for shareholders outside Alaska. Subsidiary Strategic Initial Outfitting Transition Solutions (SIOTS) works with medical offices and hospitals to help them through moves and renovations with minimal disruption to patients and services. In 2012, SIOTS won a contract for work at Lackland Air Force Base in San Antonio, Texas. It was a large project and enabled SIOTS to open job positions to shareholders. SIOTs general manager Grant Bonser traveled to Alaska to interview shareholders in Anchorage and Aniak. “We are dedicated to strengthening ties with our Alaska Native shareholders through scholarships, education, training, and employment opportuni-

ties,” Bonser said in a release. “The success of SIOTs has a direct positive impact on the lives of our shareholders.” The shareholders were paired with senior SIOTs specialists to learn the skills such as project management, interior design, transition planning, move management, and installation. “We’re very happy that SIOTS is able to provide shareholders with this employment and on-the-job training,” says TKC human resources manager Nichola Ruedy. “Not only are they earning good wages, they’re gaining valuable training, experience, and confidence that will help maximize their employment opportunities in the future.”  Julie Stricker is a journalist living near Fairbanks.

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November 2013 | Alaska Business Monthly

TRANSPORTATION

From Frozen Ground to Far-Off Markets How Alaska’s natural resources are dug up, drilled, and shipped out By Tasha Anderson

laska abounds with natural resources. The trick, of course, is how to get money for them. It seems crass, but Alaska’s industry IS its natural resources, whether they’re cut down, mined out, snatched up in nets, meticulously preserved to show off to the participants of Alaska’s tourism industry, or an integral part of a subsistence lifestyle. Alaska works endlessly to make sure that all of its natural resources can make money in harmony; a productive and respectful balance can be achieved. Of course, some items need to leave the state to realize their best value, in particular, the natural resources Alaska has locked deep underground. In Alaska, the transportation process often begins with a drill or an explosive charge. 62

Red Dog Mine Red Dog Mine is a joint venture between NANA Regional Corporation, Inc., one of the thirteen Alaska Native Regional corporations, and Teck Alaska Incorporated, a subsidiary of Teck Resources Limited, a diversified mining company headquartered in Vancouver, Canada. Red Dog is located in Northwest Alaska, approximately eighty-two miles north of Kotzebue and fortysix miles inland from the coast of the Chukchi Sea. The Alaska Department of Natural Resources, Mining, Land & Water website describes the location as “remote and undeveloped,” an excellent example of understated accuracy. The land is owned by NANA, and the mine is operated by Teck. Red Dog Mine

Alaska Business Monthly | November 2013

has more than five hundred employees, many of which are NANA shareholders. Red Dog is the largest zinc mine in the United States and represents 79 percent of US zinc production and is the second largest lead producing mine, representing 33 percent. The zinc and lead which are obtained through conventional open-pit mining (which includes drill and blast mining methods), milling, and flotation technologies. These techniques produce zinc and lead concentrates. Concentrates are intermediate products—the ore dug from the ground, which is now “the consistency of talcum powder” according to Shelly Wozniak, corporate communications manager for NANA, has been somewhat refined, but is not www.akbizmag.com

Usibelli Coal Mine exports coal from this terminal in Seward.

yet in a state that can be immediately used for commercial purposes. Wozniak says, “After processing, mineral concentrates from Red Dog Mine begin a long journey out of Northwest Alaska. This journey begins with the DeLong Mountain Transportation System [DMTS].” The DMTS is a transportation system that comprises a fifty-two-mile, thirtyfoot-wide, all weather industrial haul road; a shallow water dock located on the Chukchi Sea approximately twelve miles south of Kivalina; offshore conveyers concentrate loading facility; and fuel distribution and storage systems, according to the Alaska Industrial Development and Export Authority website, the organization that owns DMTS. Initial construction on the system was completed in 1990 and a port expansion was completed in 2000. “At the end of the port are the two largest buildings in Alaska,” says Wozniak. “They were built to store the conwww.akbizmag.com

November 2013 | Alaska Business Monthly

The destinations of Red Dog Mine concentrates reach around the globe. Image courtesy of NANA Development Corporation

Northland Services: Consider it done. Since 1977, Northland has provided reliable freight transportation between Seattle, Alaska and Hawaii. With more than 140 sailings annually, Northland delivers cargo to more destinations in the 49th and 50th states than any other marine carrier. Heavy equipment, construction materials, seafood or supplies to remote villages; you name it, Northland delivers. So next time, ship with confidence. Ship with Northland.

Alaska Business Monthly | November 2013

centrate until the ice goes out. Once the ice goes out, the 1.2 million tons of concentrate are put on lightering barges and then put on the bigger ships that go to markets around the world.” Due to weather conditions, the concentrate is stored at a storage facility and is typically shipped to customers between July and October every year. “There’s a one hundred day shipping window in the summer when all the concentrate goes out on barges,” Wozniak says. The concentrate’s destinations include Australia, Europe, Korea, Japan, and Teck’s metallurgical facility in British Columbia, Canada, with the largest amount, 37 percent, going to Europe.

Pogo Mine Pogo Mine is operated by Sumitomo Metal Mining Co., LTD, headquartered in Tokyo, Japan, and owned by Sumitomo Metal Mining and Sumitomo Corporation. The mine is located approximately thirty-eight miles northeast of Delta Junction. The land on which the mine sits is owned by the State of Alaska. The mine has approximately three hundred employees and operates twenty-four hours a day year-long. Pogo produced approximately 315,000 troy ounces of gold in 2012. The mine is accessed by Shaw Creek Road, a forty-nine mile, all-season road from the Richardson highway built to service Pogo that Sumitomo maintains. Pogo is an underground cut-and-fi ll operation that utilizes gravity, flotation, and cyanide leaching to recover gold during an on-site milling process. The milling process takes place at the Liese Creek Valley facility, which comprises two main buildings, one houses the grinding and leaching process and the other processes tailings and other waste products. Milling produces the final product that’s sent out of Alaska. “We pour gold doré—that means mixture,” explains Lorna Shaw, external affairs manager. “It is not the 99.99 percent pure gold that you would buy on the market, but it’s as refined as it gets here in Alaska.” After this last in-state step, it takes about a week for the gold to be “shipped to Johnson Matthey in Salt Lake City, Utah, where it’s melted down with gold from all over the world,” Shaw says, “and it’s no longer identified as Pogo gold.” www.akbizmag.com

Fort Knox Fort Knox Mine is one of the largest gold producing mines in Alaska and is 100 percent owned by Kinross Gold Corporation, headquartered in Canada. The land is owned by the State of Alaska and some private lands within the Fairbanks North Star Borough. Fort Knox is located approximately twentysix miles northeast of Fairbanks in the Fairbanks mining district. It currently employs 630 employees. The mine’s 2012 gold equivalent production was 359,948 ounces. It’s an open pit mine that uses a carbon-in-pulp mill, heap leach, and gravity processing techniques. “We do have a refinery in-state,” says Anna Atchison, community and government relations manager. “We pour our own gold bars, which are then sent to Utah for further refinement.” Atchison declined to comment specifically on the transportation of the gold bars, saying that for security reasons the information could not be disclosed. There is access to Fort Knox, which operates all day and year-round, through a road off the Richardson Highway.

A haul truck entering Kensington Mine through Jualin Portal. Photo courtesy of Coeur Alaska Inc.

Kensington Mine Kensington Mine is also a gold mine; it is wholly owned and operated by Coeur Alaska, a wholly owned subsidiary of Coeur Mining, Inc., headquartered in Coeur d’Alene, Idaho. It is located fortyfive miles north-northwest of Juneau in the Berners Bay Mining district. Kensington has three hundred employees. In 2012, the mine produced 82,125 ounces of gold. Kensington is an underground mine. Director of Corporate Communications Donna Mirandola says the mine uses “mechanized longhole traverse and longitudinal mining methods to extract ore from the Kensington Vein.” Kensington also uses overhand cut-and-fill to extract “small, low angle parts of the Kensington Vein,” Mirandola says. Ore is delivered to the mill by means of thirty- and forty-five-ton haul trucks. At the mill, which is 980 feet above sea level, the ore is crushed and finely ground by a crusher and then a conventional ball mill, says Mirandola. It is then refined through a flotation leaching process. “This process produces a concentrate that contains 95 percent of the gold removed from the ore, it then goes through a press to remove excess moisture. The concenwww.akbizmag.com

November 2013 | Alaska Business Monthly

Mucker removing ore in drift after blast at the Kensington Mine. Photo courtesy of Coeur Alaska Inc.

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Alaska Business Monthly | November 2013

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trate ranges from six to twelve ounces of gold per ton,” Mirandola says. The concentrate now “is in the form of a moist dirt.” Once in this form, Mirandola says, “Our concentrate is put into twoton super sacks which are placed in shipping containers and shipped by barge.” “Currently,” Mirandola says, “Kensington concentrates are shipped to China and Japan.” Kensington ships year round, regardless of season.

Greens Creek Greens Creek Mine, 100 percent owned and operated by Hecla Mining Company, headquartered in Coeur d’Alene, Idaho, is one of the largest and lowest-cost silver mines in the world, though it also produces zinc, lead, and gold. It is located in the Admiralty mining district in the Tongass National Forest approximately eighteen miles south of Juneau. The land has a combined ownership of the US Forest Service and private patents within the City and Borough of Juneau. The mine employs approximately 390 to 400 people. According to Hecla’s 2012 Annual Report, “Greens Creek has so far produced more than 175 million ounces of silver,

1.3 million ounces of gold, and 3.3 billion pounds of zinc and lead.” In 2012 alone it produced 6.4 million ounces of silver, with an expectation of producing more than 6 million ounces in 2013. There is access to the mine by sea and a thirteen-mile access road. It’s an underground mine which produces approximately 2,100 to 2,300 ounces of ore per day, primarily through methods of cut-and-fill and longhole stoping. “We mill our ores on site,” says Mike Satre, Hecla community and government relations manager. “We have three types of concentrate at Greens Creek— zinc, lead, and bulk concentrates,” as well as gold doré. The “bulk” concentrate generally does not have a high enough concentration of zinc, lead, or other metal to be classified specifically, but “it’s still a high grade product that we can sell to smelters,” Satre says. The final on-site process removes excess water from the concentrates, resulting in “a fine, bulk, dust material,” Satre says. “That is transported from our mill facility in covered trailers down to our port facility in Hawk Inlet where it’s stored in a concentrate shed.

“We ship anywhere from twelve to fifteen thousand tons a month, if not more,” Satre says. He continues, “They are shipped in Handymax bulk class freighters. Some go to the Trail smelter in British Columbia, Canada, but then we have a significant amount of our material sent to Japan, Korea, and China and occasionally Mexico.” The gold doré must be further refined for commercial or monetary use, but is generally sold to banks.

Usibelli Coal Mine Usibelli is the only coal mine in Alaska and employs 130 people. Unlike lead, zinc, gold, and silver, coal requires little milling and preparation to be ready for market, making the process somewhat different. Usibelli is an above-surface mine. It is currently processing three different seams, numbers 6, 4, and 3. Once overburden (rocks, dirt, etc. that block access to the coal) is removed, the coal is excavated and then placed in large trucks referred to as “yellow iron.” The haul trucks are each capable of a 150-ton load and have been modified to

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November 2013 | Alaska Business Monthly

suit the Alaska environment—the exhaust runs through the bed to keep the metal surface from freezing, preventing cargo from freezing to the bed. The coal is then crushed to two inches, but no washing is performed. Now ready for market, it is transported by train on the Alaska Railroad. The coal is taken to the Seward Coal Terminal, owned by the Alaska Railroad, at the Port of Seward. The coal is then delivered to six Interior electrical generation power plant locations: Fort Wainwright, Eielson Air Force Base, Clear Air Force Station, Golden Valley Electric Association, Aurora Energy, and the University of Alaska Fairbanks. Coal is also transported from the port to South Korea and Chile. Usibelli Coal mine has also provided smaller “test” shipments to Russia, Taiwan, Japan, and China.

TAPS Oil flows from the North Slope through TAPS, the Trans-Alaska Pipeline System, also known as the Alyeska Pipeline and the trans-Alaska oil pipeline. None of the oil that flows through TAPS is actually owned by the Alyeska Pipeline Service Company. The oil belongs to any

The TransAlaska Pipeline System terminal at Valdez. © Chris Arend/ AlaskaStock.com

one of Alaska’s oil drilling companies at all times, with Alyeska “taking custody” of the oil while it travels eight hundred miles from the North Slope to Valdez. The oil is moved through the pipeline by means of a series of pump stations. There are a total of eleven pump stations, though only four are currently being used to pump oil through TAPS: 1, 3, 4 and 9. The other pump stations are used as relief stations or response bases. Currently, the oil takes approximately

nineteen days to travel from Prudhoe Bay to Valdez. That time fluctuates, however, depending on the amount of oil running in the pipeline, which is generally a lower amount in the summer than in the winter, according to a representative of the Alyeska Pipeline Service Company—when there is more oil in the pipeline, it moves more quickly. The line ends at the Valdez Marine Terminal, which lies on more than one thousand acres of land. It was built to both store and load crude oil so that fluctuations in the marine transportation system would not impact oil coming down TAPS. The facility includes eighteen storage tanks, fourteen of which are currently in service, facilities that measure incoming oil, two functioning loading berths, and a power plant. Once the oil is measured and stored, it is then loaded on to tankers, which have tied into berth and been hooked into loading arms, and then sent to market. The average time it takes for the tankers to berth, offload ballast, load the crude oil, and deberth is twenty-two hours and twenty minutes. The tankers are not owned by the Alyeska Pipeline Service Company, but are owned by shipping companies which contract with the oil companies to transport oil. The largest tankers carry approximately 2 million barrels of oil. The tankers then transport the oil to various US West Coast locations. 

Tasha Anderson is the Editorial Assistant at Alaska Business Monthly. 68

Alaska Business Monthly | November 2013

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OIL & GAS 0º

JMM

NM East Greenland Rift Basins

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Sustainable Arctic Oil & Gas Exploration and Development

EBB East Barents Basin

West Greenland East Canada NGS

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90º W

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LSS Amerasia Basin

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Arctic Alaska

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ARCTI C CI RCLE

By Bradford G. Keithley

180º

ormally pieces that begin with this title are about the environmental aspects of oil and gas exploration and development in the Arctic. This piece isn’t. Instead, this piece is about the commercial aspects of oil and gas exploration and development in the Arctic and near-Arctic, and what economic characteristics make ongoing activity sustainable in some regions and not in others. From my perspective, there is a lesson for Alaska in the results.

Arctic Development In 2009 the federal Energy Information Administration (EIA) published an analysis of “Arctic Oil and Natural Gas Potential.” The analysis concluded, “[o]f the seventeen large Arctic fields located in North America, only three have been developed, all located in Alaska, around the Prudhoe Bay Field complex.” 70

EIA found that the reason was simple. “Finding large Arctic oil and natural gas deposits is difficult and expensive; developing them as commercially profitable ventures is even more challenging.” The analysis found that oil and gas resources in other parts of the Arctic have been more fully developed. For example, as of the time of the analysis, forty-three of the froty-five large Arctic fields that had been discovered in Russia up to that point were in production. The analysis recognized that a commercial reason likely explained that result: “Russia’s Arctic resources were predominantly developed under a Soviet command-and-control economy. Many of Russia’s large producing Arctic fields might not have been commercially viable under market-based economics, when they were originally developed.” Nevertheless, the report concluded that the Russians had both discovered

Alaska Business Monthly | November 2013

NWC

Arctic oil and natural gas resource basins in the Arctic Circle region. Source: US Geological Survey

and developed more large Arctic fields than elsewhere in the Arctic. Outside of Russia, there is another country also with a similarly impressive track record in finding and developing Arctic and near-Arctic oil and gas resources without using a command-and-control approach. That country is Norway. While not discussed extensively in the 2009 EIA study because of a lack of activity prior to that time owing to a dispute involving its offshore Arctic boundary, coincident with the settlement of that dispute Norway has achieved a string of recent successes in Arctic and near-Arctic exploration. In fact, in April of this year “The Barrel,” a widely followed industry blog published by highly respected industry information source Platts, ran an article titled, “Norway: the new oil just keeps on coming.” www.akbizmag.com

But we shouldn’t kid ourselves. Alaska state government is as enmeshed in the development of its oil resources as is Norway’s. We just do it in a different way. That article focuses mostly on the country’s new Johan Sverdrup field, the new 2-plus billion barrel oil field first discovered in 2010 that currently is expected to produce 120,000 – 200,000 barrels per day following startup in 2018. But the article also notes that Johan Sverdrup is not the only recent success story. Earlier this year, for example, Statoil, together with fellow stateowned company Petoro, announced a “significant” new discovery within an already producing license area. Recoverable reserves from that find currently are estimated at up to 150 million barrels of oil equivalent and likely will help extend the life of the field beyond 2030. The result of these and other developments are having an effect. According to both The Barrel article and subsequent reports, Norway is booming. “Licensing rounds are attracting more bidders than ever — even the previously pedestrian mature area rounds — and

according to Statistics Norway, some $35 billion will be spent by the industry in 2013.” In short, Norway appears to have achieved something approaching sustainability in oil and gas exploration and development activity.

Lessons for Alaska Are there lessons for Alaska from the emergence in Norway of what appears to be a sustainable exploration and development program? I believe there are. While there are others, one of the primary differences between the way that Alaska and Norway approach oil development is in the role played by the state. I know, Alaskans argue that we use a free market model, with private industry taking the lead in development. But we shouldn’t kid ourselves. Alaska state government is as enmeshed in the development of its oil resources as is Norway’s. We just do it in a different way.

In Alaska, for example, the state tries to encourage the development of some projects over others through the use of tax credits and, when those don’t work, outright subsidies in the form of tax “credits” that can be traded in to the state treasury for cash. And in the guise of regulation, we often tell industry where and when to spend its money. For example, a few years ago the Department of Natural Resources (DNR) directed the industry to spend billions to develop Point Thomson, although based on then-current (and continuing) conditions the most that will result is ten thousand barrels per day of liquids production. In the meantime, potential oil projects elsewhere on the Slope with much higher production potential and which could have benefitted from the injection of the billions being spent on Point Thomson have continued to languish. More recently, in some instances as a condition of forming new units, ap-

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November 2013 | Alaska Business Monthly

proving plans of development for existing ones or approving extensions of existing leases, DNR has required the drilling of costly additional wells when other uses of the money would make more economic sense. In short, Alaska often takes an active (and sometimes, intrusive) role in oil and gas exploration and development decision-making. But it does so by trying to drive those decisions from the back seat, without putting any of the state’s own skin—in other words, investment— in the game itself. Instead, it pursues its goals by using other people’s money. The result is often increased costs, increased risks and, by imposing various conditions on industry activity, increased time required to accomplish a project. Norway takes an entirely different approach. Recognizing that government is involved in any event, Norway puts itself alongside industry in the front seat of the effort as a co-investor. As I wrote in a previous column (“Achieving Alignment,” Alaska Business Monthly, January 2013), through a state-owned enterprise called Petoro, Norway invests its own money as a full partner in the development of the state’s own resources. That approach produces remarkably different results than Alaska’s. As an investor looking to maximize returns on its money, Norway works alongside industry to identify those opportunities offering the best returns and most efficient use of capital. Petoro sees itself as an oil company, and as a consequence, is positioned and incentivized also to help deal with exploration and development bottlenecks which otherwise get lost in translation from industry to government and sometimes cause long, costly project delays. The approach also produces two other significant benefits. First, Petoro focuses solely on the development of Norwegian oil resources. As a result Norway has an entity that is continually focused on identifying new or previously overlooked investment grade opportunities throughout the country. That focus—and Petoro’s credibility in bringing those projects forward because it is prepared to put its money where its mouth is—helps sustain a level of exploration and development activity that otherwise might shift to other areas. 72

Second, Petoro brings significant, additional cash to bear on the development of the country’s resources. Under the Alaska approach, industry essentially has to carry the state’s share of exploration and development costs. Put another way, industry has to pay 100 percent of the costs and only receives back, on average, around 85 percent of the revenue (before taxes). That approach adds cost, increases risk, and limits the amount of capital available for such activities. As a co-investor, Norway bears the cost of its own share of production. That both significantly improves project economics and brings more investment to bear locally. That is a result Alaska also needs. The EIA analysis reports Alaska North Slope development costs are “1.5 to 2.0 [times the cost of] similar natural gas projects undertaken in Texas.” As a result, Alaska and other Arctic and near-Arctic projects simply require more capital for the same amount of drilling and development than other competing projects. In 2011 then-DNR Commissioner Dan Sullivan estimated that Alaska needs $4 billion minimum in new investment annually in order to stabilize Alaska’s oil decline. Estimates of current, actual levels are less than half that amount. As the EIA analysis concludes, “the bottom line for Arctic oil and natural gas potential is that high costs, high risks and lengthy lead-times can all serve to deter their development in preference to the development of less challenging oil and natural gas resources elsewhere in the world.” The Norway approach addresses all three of those areas. By paying its own way, Norway helps to reduce costs and risks. Through its orientation as a producer, Norway helps to identify early on and resolve bottlenecks that otherwise can cause extended lead times. Those efforts help explain in significant part Norway’s success in building a sustainable Arctic oil and gas exploration and development effort, and I believe, provides lessons for Alaska. Throughout the Arctic it is inevitable that government will play a role in oil and gas development. How it plays that role appears to make a significant difference. Norway’s approach has pro-

Alaska Business Monthly | November 2013

duced a sustained exploration and development program.

Addressing the Concerns In talking about this approach over the last twenty-four months I have encountered two significant objections. First, some argue that the oil companies— those on whom we currently and would continue to rely on for the bulk of the investment dollars—don’t like it. Second, some argue the state shouldn’t be in the oil business. There are answers to both. First, the oil companies don’t like the thought of Alaska adopting the approach because currently they see it as another way for the state to disrupt things by meddling and second guessing the companies’ decisions. The response is simple. There are right ways and wrong ways to implement the approach. Petoro succeeds because it is set up as a professional operation removed from politics, much like Alaska’s Permanent Fund Corporation. The three major oil companies operating in Alaska also operate successfully in Norway alongside Petoro. Alaska can achieve the same results if it sets up an equivalent operation. The answer to the second objection is equally as simple. Recently the Alaska Chamber of Commerce began running a series of radio ads. The one about the oil industry ends with “all of us are in the oil business.” It’s that simple. Alaska is in the oil business; the state already is deeply involved. The appropriate question is what is the most productive way to be involved? The Norway experience suggests there is a more sustainable way than Alaska has used up to now.  Bradford G. Keithley is the President and a Principal with Keithley Consulting, LLC, a consultancy he founded that is Alaska-based and focused oil, gas, and ﬁscal policy. Keithley also publishes the blog, “Thoughts on Alaska Oil & Gas” at bgkeithley.com. www.akbizmag.com

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OIL & GAS

GTL: The ‘Other’ Alternative Fuel From Natural Gas to Liquid Energy How Shell creates products from natural gas that would otherwise be produced from oil.

2. Water and other byproducts are separated from the gas. 4. REACTOR AND CATALYST: Syngas enters a reactor where a catalyst that speeds up the chemical reaction converts the syngas into long-chained waxy hydrocarbons and water.

1. OFFSHORE: Pipes carry gas to a processing facility.

3. GASIFICATION: The remaining pure natural gas ﬂows to the gasiﬁcation unit that mixes it with oxygen and converts it into a combination of hydrogen and carbon monoxide known as synthesis gas or syngas.

RESULTING LIQUIDS: Naphtha Kerosene

5. CRACKER/DISTILLER: The cracker uses hydrogen to cut the long-chained Source: Shell

hydrocarbon molecules into smaller molecules of different sizes which are then distilled into various liquid products, each with different boiling points.

Normal paraﬁns Gasoil Base oils

Commercializing North Slope natural gas reserves By Mike Bradner

or years, oil and gas companies have struggled with how to commercialize the large natural gas reserves on the North Slope. The latest effort, a pipeline to southcentral Alaska and a large liquefied natural gas (LNG) export plant, is being worked on seriously, but the same obstacles loom that blocked earlier efforts—huge costs, competition from other LNG, and uncertainties in the market and the tax regime in Alaska. Costs estimated by the consortium working on this project—BP, ConocoPhillips, ExxonMobil, and TransCanada Corporation—estimate the project could cost over $50 billion. Is there another way? Is an expensive pipeline and costly LNG plant the only way to do this?

Other Options There are other options, and there are some who believe those may become more 74

attractive if the current effort on a pipeline and LNG plant bogs down once again. The alternative is gas-to-liquids (GTL), a process to convert natural gas to liquid products like an ultra-clean diesel (or even just a synthetic crude oil) that could be shipped through the Trans-Alaska Pipeline, either in batches of product in the pipeline or mixed with crude oil. TAPS is now operating at about one-fourth of its original capacity of 2 million barrels per day, so there is plenty of room in the pipeline. If large GTL plants on the North Slope were built, the biggest obstacle, an expensive eight hundred-mile pipeline, would be eliminated because the liquid products would be shipped through the existing oil pipeline. There are complications, of course, because nothing like this is simple. The plants making the GTL conversion are complex and expensive, and building

Alaska Business Monthly | November 2013

them on the North Slope makes them all the more costly. However, the benefits could be substantial. The main benefit is that the liquid products produced by GTL plants, whether a synthetic crude oil or a finished diesel, sell for far higher prices in the market, on an energy-unit value, than does natural gas. They could also be transported to market through an established pipeline that is three-quarters empty. However, if the liquids produced are sent in batches, procedures not uncommon in many Lower 48 pipelines, some modifications to TAPS will be needed.

Old Technology GTL technology is not new. The basic chemical reaction, known as the Fischer–Tropsch process, was discovered in Germany in 1925. Essentially, the process occurs in three stages. www.akbizmag.com

The first stage involves a gas reformer, which breaks the methane, the main component of natural gas, apart into a “synthesis gas,” a mixture of carbon monoxide and hydrogen. This gas is then fed through the second stage, a series of catalysts in a reactor vessel that converts the synthesis gas into long chain hydrocarbon paraffin wax. This is the heart of the process—the Fischer Tropsch “reactor.” The third stage is a refining stage where the paraffin wax is converted or “cracked” into shorter chain liquid products. The simplest form is a synthetic crude, or “syn-crude.” With additional steps of processing in the third stage, which functions essentially like a refinery, products like diesel, gasoline, jet fuel, and even petrochemicals can be made. In most established GTL plants, many products are made. Shell’s GTL plant in Malaysia makes diesel and high value waxes, for example. A North Slope GTL plant, or a plant built elsewhere in Alaska, would make the products most in demand, such as diesel and jet fuel. There is a long history to the Fischer Tropsch process. Germany used it during World War II to make fuels for military use. Since the 1950s and 1990s commercial-scale coal-to-liquids and then GTL plants (the two use essentially the same process) have operated in South Africa. Originally, there were government subsidies for the South African plants, but recent plants, like the Oryx plant in Qatar built by Sasol, a major private energy company based in Johannesburg, are fully commercial, more efficient, and profitable. There are also new advances that make the plants much more efficient in the use of energy and new processes that will limit the release of carbon dioxide.

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GTL Economics So, why hasn’t GTL been looked at for Alaska? It has, quite seriously, but for a variety of reasons the producing companies have stuck with a pipeline, and now an LNG, plan. That could change, of course. In 1999 ExxonMobil selected GTL as its preferred option for its North Slope gas and invested a considerable sum researching its feasibility using that company’s proprietary patented process. www.akbizmag.com

November 2013 | Alaska Business Monthly

ExxonMobil concluded the idea was uneconomic at the time and joined BP and ConocoPhillips on another effort on a gas pipeline. Sasol itself had shown a lot of interest in Alaska. The company has long been interested in bringing its GTL technology to North America and came to Alaska first because of the large stranded gas reserves on the North Slope and the available oil pipeline. Sasol was rebuffed, however, by Alaska political leaders who preferred a gas pipeline out of a belief, mistaken, that a pipeline would bring more jobs. At the same time the North Slope producers, the gas owners, were uncertain about having another major company, Sasol, joining the North Slope club. ExxonMobil showed some interest in Sasol’s idea; BP was neutral; but ARCO Alaska (soon to become ConocoPhillips) opposed Sasol’s entry for reasons that remain unknown. Sasol got a lukewarm welcome from politicians. One reaction that chilled the company was from the late state Representative Ramona Barnes, an Anchorage Republican, who told a senior Sasol executive the company “wasn’t welcome here” unless it would develop an LNG project, which embarrassed Sasol. The exchange is remembered within Sasol. Even today, when Alaskans visit Sasol, Barnes’s remarks are brought up, according to state legislators who have met with the company. Sasol also made other Alaska initiatives, including a concept for a coal-to-liquids plant at the Beluga coalfields, but also felt a lack of encouragement from the state for any major project other than a gas pipeline. Interestingly, Sasol recently announced a $16 billion GTL and petro-

chemical plant in Louisiana. That plant could have been in Alaska. Whether GTL could be an option for the North Slope remains to be seen. It is a decision the gas producers will make. There is actually enough gas for both a pipeline/LNG project and a GTL plant. When the all-land pipeline to Canada was being considered, the producers contemplated shipping 4 to 4.5 billion cubic feet per day. The LNG alternative being considered now would ship 3 to 3.5 billion cubic feet per day. That leaves a billion cubic feet a day available for a GTL plant, enough for a plant making 120,000 barrels a day of liquid products to ship through TAPS. As more gas reserves are developed on the slope, and the potential resources are huge, the GTL production could expand.

Mistaken Beliefs The politicians’ belief that GTL would create fewer jobs than a pipeline is mistaken. In actuality, construction of large GTL facilities on the North Slope would be spread over several years, with many of the plant components built in the state. The construction would have a huge economic impact over several years, in contrast to the boom-and-bust economic effect of a pipeline project, where there would be construction jobs for only three years or so. Could the process be used in other parts of Alaska? It could. Natural gas isn’t the only feedstock, for one thing. Biomass, such as wood waste or even municipal waste, could be used. Also, as the technology advances, firms are building much smaller GTL plants. Historically the larger the size of a complex plant, the more economic it was to build and operate. However,

shale gas development in the Lower 48 encouraged companies to look at ways to build smaller scale plants. One company, Velocys, has taken a microchannel technology developed under a US government program and commercialized it. A catalyst company also developed a micro-size catalyst with a higher conversion efficiency. When both technologies were combined, the companies found they could produce GTL plants in the one hundred to five thousand barrels-per-day size that could be competitive with the Sasol and Shell thirty-five thousand and one hundred thousand barrels-per-day plants. This could solve one of the key problems faced with GTL (or biomass-to-liquids), namely that the plant units need to be very large to achieve economies of scale, requiring massive front-end capital investments. If the plants can be smaller, requiring less up-front investment, it would make projects easier to develop. Also, one of the key criticisms, that the Fischer-Tropsch process is inefficient, consuming a lot of the energy from the feedstock in the process itself, is no longer true. When combined with waste-heat recovery for power generation, a common process, the overall energy efficiency of the plants can exceed 80 percent, putting it on par with LNG. Another criticism is that GTL plants produce a lot of carbon dioxide (CO2). However, GTL, unlike LNG, can actually use the large volume of CO2 contained in North Slope gas. The first step of the GTL process, gas reforming, can break apart CO2 and, when heated with water (H20), can make more synthesis gas, the building block of the FischerTropsch process. This would result in less CO2 being released to the atmosphere. It would instead be used in the process of making liquid fuels. There are a lot of possibilities out there for North Slope gas, and the oil and gas industry is aware of most of them. Sometimes new ideas are called for, such as GTL. State government should encourage all of them, and not discourage any of them.  Mike Bradner is a former state legislator and is publisher of Alaska Legislative Digest.

Alaska Business Monthly | November 2013

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special section

Resource Development

Resource Extraction Jobs and the Economy Higher paying jobs have big impact By Rindi White

laska is a resource development state, purchased because of its resource potential and populated largely due to resource-development jobs. Although only about four percent of the state’s jobs are actually in the oil and gas industry, most state residents would not be here if it weren’t for drilling and mining activities. A June 2013 Alaska Economic Trends article highlighted how vital resource extraction jobs are to the state: “In 2012, Alaskans benefitted from nearly $9 billion in oil and gas tax revenue—more than $12,000 for every man, woman, and child living in Alaska. Because the industry provides 89 percent of state general funds, without oil and gas the Alaska of today wouldn’t exist,” Alaska Department of Labor Commissioner Dianne Blumer states in the magazine.

Big Impact, Not So Many Jobs? The impact to the economy from tax revenue is significant, but the size of the job pool isn’t so huge. Four percent of the state’s workforce, or about 14,100 employees, work in the oil and gas industry, according to the state Department of Labor Research and Analysis division. Add another roughly 3,000 jobs from the mining industry and it adds up to about the same number of employees as work for the top five largest Alaska employers—Providence, Wal-Mart, Carrs/ Safeway, Fred Meyer, and ASRC Energy Services, according to the most recent compiled data from the state. The job count doesn’t include support services jobs—think security, food, lodging, and pipeline transportation, Blumer writes—which make the oil and gas industry run smoothly. After

Alaska Business Monthly | November 2013

all, where would the Kuparuk oil field, for example, be without a cafeteria or without fuel providers to fill up airplanes that carry workers to and from the field? With those jobs factored in, according to a recent study by UAA’s Institute for Social and Economic Research, the oil and gas industry is directly responsible for about 31 percent of all jobs in the state. The federal government is the only industry sector that is larger—it’s responsible for about 35 percent of the jobs in the state. But, as Alaska Department of Labor economist Neal Fried pointed out in the June 2013 edition of Trends, the impact of resource extraction jobs is much more broad. “Because average earnings in the oil industry are more than two and a half www.akbizmag.com

Men repairing the transAlaska oil pipeline at the Tanana River crossing near Delta Junction.

Alaska’s Only Full-Service Employment Company

©Clark James Mishler / AlaskaStock.com

times the average for all Alaska industries, its payroll impact is more pronounced,” Fried writes. According to Fried, the average oil and gas job paid $127,148 in 2012, 354 percent higher than the state average for all wage and salary jobs, Fried writes. The wages tend to be higher for jobs at producing companies versus oilfield service companies. Why so high? Several reasons, Fried writes. “Production jobs require experience, a high skill level and demanding work schedules with a considerable amount of overtime, which stems from nonstandard schedules such as those on the North Slope or on the platforms in Cook Inlet. Remote employees often work eighty-four hours a week, or the standard forty hours plus forty-four hours of overtime,” Fried writes. www.akbizmag.com

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November 2013 | Alaska Business Monthly

In addition, he notes that the global demand for oil and gas employees is high, which spurs employers to compete for workers. In 2012, the oil and gas industry paid about 10 percent of the total wage and salary payroll paid out in the state. And the payroll impact has been growing— Fried writes that between 2002 and 2012 the industry’s payroll inflated by 106 percent, about twice the amount of growth seen in other industries. The impact doesn’t stop at jobs. Oil and gas tax revenue is vital to the state’s economy. The $9 billion in oil and gas tax revenue Blumer mentioned makes up 54 percent of state revenue, including income from federal and other sources.

Oil Employment Fluctuates Fried writes that oil industry employment has fluctuated over the past twenty-five years, with a decline between the 1990s and mid-2000s. A record 1,600 jobs were lost between 1991 and 1992. When the bottom fell out of the oil market in 1999, with per-barrel prices at $13, the number of oil industry jobs dropped below 8,000, a first since 1983, Fried writes. The fluctuations continued through the mid-2000s, but employment began to climb steadily in 2005. After a spill on a section of BP’s pipeline in 2006—a spill Fried points out became the largest in the history of the slope—repair work became a new source of job growth, with the number of monthly jobs soaring above 13,000 and into the 14,000 level this year. The reason? High prices, Fried writes. “In 2008, the average for Alaska North Slope crude climbed to $98 per barrel, then peaked at $134 per barrel in June of that year,” Fried writes. Prices have stayed at a $100 per-barrel average through the first quarter of 2013. And there might be another factor at play. “A related explanation for the increase in production jobs amid lower output is that deeper and harder-to-reach oil reserves require greater effort to extract. As oil prices rise, it becomes more economically feasible for companies to explore these areas,” Fried writes. Mining Jobs Doubled in a Decade Anyone who has traveled to Fairbanks, Nome, or in Southeast is aware of the 80

impact mining has had on the state, luring prospectors from all over the world eager to strike it rich or just get a job. Although the state’s history is in part founded on mining, projects in the last decade have once again made mining a prominent contributor to the state’s economy. Mali Abrahamson, a Department of Labor economist based in Juneau, writes in the May 2013 issue of Alaska Economic Trends that the number of miners in Alaska peaked in 1916 at 8,590 jobs. The number of mining jobs shrank over the next several decades to 1,700 jobs by statehood. The number of mining jobs stayed in the 1,500 range for the next few decades but began to surge upward in 2006 to reach a high of 3,500 jobs in July 2012, according to Abrahamson. Production value of what’s being mined climbed as well. In 2001 production values were at less than $1 billion. In 2011, production values were $3.5 billion. The increase is largely due to surging market prices; zinc prices doubled and gold and silver prices soared. Abrahamson writes that Alaska’s mining production largely comes from six mines throughout the street: Greens Creek, a silver and gold mine near Juneau; Kensington, a gold mine also near Juneau; Usibelli Coal Mine near Healy; Pogo, a gold mine east of Fairbanks; Fort Knox, a gold mine near Fairbanks; and Red Dog, a zinc and lead mine north of Kotzebue. Nixon Fork, a gold mine in the Interior, is ramping up production. On the national scale, Abrahamson writes that Alaska’s metal mining job force is 5.5 percent of the total mining job count in the nation. Gold is a large share of that. “And 10.4 percent of all US gold jobs are in Alaska. Gold mines provide over half the state’s mining jobs and wages, and are responsible for most of the industry’s growth in the past few years,” she writes. Along with job growth, mining jobs are paying more, according to Abrahamson. “Firms paid over two-and-a-half times more in total wages in 2012 than they paid in 2002, or 175 percent more when adjusted for inflation,” she writes.

Alaska Business Monthly | November 2013

The wage average also increased by 22 percent in that time frame, jumping from $80,000 in the early 2000s, adjusted for inflation, to $98,000 by 2011.

More Job Growth Possible The impact of resource extraction jobs might continue to grow. Anchorage Economic Development Corporation, in its Resource Extraction 10-year Project Projection, stated that oil and gas industry jobs are on the rise, though mining job growth has slowed. “Oil and gas and related support industry employment in the Cook Inlet region have seen significant increases in the last eighteen months, with a corresponding drop in the unemployment rates, particularly within the Kenai Peninsula Borough,” the executive summary states. Although the job growth was a good sign, the Anchorage Economic Development Corporation report cautioned that without streamlined permitting, reduced litigation, and other accommodations made, job growth might slow or fall backward. In the mining industry, the Anchorage Economic Development Corporation report states, apparent progress on new projects has slowed largely due to changes in global economic demands for mineral resources and a declining price of gold. “Most companies are new waiting for improved global economic stability before contemplating investments in new mine projects. In effect, venture capital in the global mining industry is significantly constrained at this time, creating serious headwinds for proposed projects,” the executive summary states. The report estimates that progress will be made on projects now in development, but more slowly than initially estimated and new projects are unlikely to begin. However, Alaska has several projects “well into the long-term development process,” the summary states. “Projects are now estimated to take seven to ten years to permit with a long-term outlook of ten to fifteen years from beginning proposal to first production.”  Journalist Rindi White writes from Palmer. www.akbizmag.com

special section

Resource Development

The Rise of Sovereign Wealth Funds By Greg Wolf

elatively new, but increasingly important, players on the global investment scene are the Sovereign Wealth Funds. These governmentcontrolled investment vehicles vary considerably in size and scope, as well as by their particular investment strategies and policies, but they are a formidable force in the markets and their reach can be felt in all corners of the world, including Alaska. The capital for these funds typically originates from excess foreign currency reserves earned from exports or from income derived from commodities such as oil and gas. China’s sovereign wealth fund would be an example of the former, while Norway’s fund would be an example of the latter. By and large, Asian funds arose from export earnings, while Middle Eastern, European, and American funds arose from commodity earnings. Most of these funds invest globally. Some funds dedicate a certain percentage of their fund portfolio for investment in their own countries. Current estimates value the holdings of the sovereign funds at close to $6 trillion. These holdings encompass a wide variety of financial assets such as stocks, bonds, real estate, precious metals, and other investable instruments. The number of sovereign funds, and their assets under management, have increased dramatically in recent years. According the Sovereign Wealth Fund Institute, since 2005, thirty-two new funds have been established, and between 2008 and 2012, the assets of sovereign wealth funds increased by 59 82

Alaska Business Monthly | November 2013

The number of sovereign funds, and their assets under management, have increased dramatically in recent years. According the Sovereign Wealth Fund Institute, since 2005, thirty-two new funds have been established, and between 2008 and 2012, the assets of sovereign wealth funds increased by 59 percent. percent. Two-thirds of these funds have come into existence since 2000, making them a relatively new player in global financial markets. Alaska is home to the largest sovereign fund in the United States. With assets of some $46 billion, the Alaska Permanent Fund ranks 22nd among the world’s funds. By comparison, Norway’s Government Pension Fund Global, like Alaska, a beneficiary of oil revenues, is the world’s largest fund at $732 billion in assets. The Norwegian fund has holdings in 7,500 foreign companies. In Europe alone, it has a more than a 2 percent average stake in all publically-listed companies. It targets a 4 percent annual rate of return on its investments. In addition to Norway, other countries with very large funds include Saudi Arabia, United Arab Emirates, China, Singapore, and Russia. www.akbizmag.com

Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Country Norway Saudi Arabia UAE - Abu Dhabi China China Kuwait China - Hong Kong Singapore Russia Singapore China Qatar Australia Algeria UAE - Dubai Kazakhstan UAE - Abu Dhabi Libya South Korea Iran UAE - Abu Dhabi US - Alaska Brunei Malaysia Azerbaijan

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Sovereign Wealth Fund Name Government Pension Fund - Global SAMA Foreign Holdings Abu Dhabi Investment Authority China Investment Corporation SAFE Investment Company Kuwait Investment Authority Hong Kong Monetary Authority Investment Portfolio Government of Singapore Investment Corporation National Welfare Fund Temasek Holdings National Social Security Fund Qatar Investment Authority Australian Future Fund Revenue Regulation Fund Investment Corporation of Dubai Kazakhstan National Fund International Petroleum Investment Company Libyan Investment Authority Korea Investment Corporation National Development Fund of Iran Mubadala Development Company Alaska Permanent Fund Brunei Investment Agency Khazanah Nasional State Oil Fund

Assets (USD Billion) Inception Origin $737.2 1990 Oil $675.9 n/a Oil $627.0 1976 Oil $575.0 2007 Non-Commodity $567.9 1997 Non-Commodity $386.0 1953 Oil $326.7 1993 Non-Commodity $285.0 1981 Non-Commodity $175.5 2008 Oil $173.3 1974 Non-Commodity $160.6 2000 Non-Commodity $115.0 2005 Oil $88.7 2006 Non-Commodity $77.2 2000 Oil & Gas $70.0 2006 Oil $68.9 2000 Oil $65.3 1984 Oil $65.0 2006 Oil $56.6 2005 Non-Commodity $54.0 2011 Oil & Gas $53.1 2002 Oil $46.8 1976 Oil $40.0 1983 Oil $39.1 1993 Non-Commodity $34.1 1999 Oil

November 2013 | Alaska Business Monthly

Source: T he Sovereign Wealth Fund Institute

Sovereign Wealth Fund Rankings by the Amount of Assets

Differing Investment Policies Investment policies governing the funds diﬀer significantly. Some seek only to obtain a reasonable annual return by managing to outperform the index of the asset classes invested in, while others seek to attain “strategic” objectives to benefit their country. For example, a fund from a country that is energy poor might invest in companies, regions, and projects that are involved with energy production. A fund in a jurisdiction that is seeking to attract a particular industry to its shores may make investments in companies engaged in that industry, or in the infrastructure to make their country more enticing to that industry. Some funds, of course, seek to attain both objectives. The investment horizon for the funds varies according to the fund’s goals and policies. For example, in 2011, China Investment Corporation (CIC), China’s primary sovereign wealth fund, decided to extend investment horizons from five years to ten years. Creating a longer term portfolio allows CIC to participate in nonpublic investment vehicles, such as direct investments, hedge funds, private eq-

uity and real estate. Over time, the fund, which at the outset invested significantly in the US financial sector, has moved into other sectors including energy, natural resources, and infrastructure projects. The Alaska Permanent Fund has a stated investment goal of producing a 5 percent real rate of return over the long term. As the fund is designed to benefit both current and future generations, the investment time horizon is long term: ten years or more. The fund invests in a variety of asset classes including stocks, bonds, real estate, private equity, hedge funds, and infrastructure investments. It has holdings in more than three thousand companies around the world. Uniquely, the fund has paid a cash dividend from its earnings to each eligible Alaskan citizen since 1982. As a number of sovereign wealth funds invest in the natural resources sector, through both stock holdings of the major companies in this space, as well as through direct investments in projects and related infrastructure, it would not come as a surprise for one or more of them to participate in Alaska development projects.

Alaska Business Monthly | November 2013

Alaska Investments Indirectly, there are already examples of this occurring: In 2009, during the financial crisis, Vancouver-based Teck Resources Limited, the operator of the Red Dog Mine in northwest Alaska outside of Kotzebue, announced that it had sold a 17.5 percent interest in their company to China’s sovereign wealth fund, China Investment Corporation, for $1.5 billion. The transaction was described as a long-term, passive portfolio investment for CIC. Teck President and CEO Don Lindsay said in the announcement, “This transaction will have an immediate and very positive impact on Teck’s balance sheet and represents an attractive opportunity for Teck to establish a relationship with a major Chinese financial investor, with a deep understanding of China, the world’s largest consumer of our principal products.” Alaska’s Red Dog Mine is one of the world’s largest zinc producers. China is the world’s largest consumers of zinc, accounting for nearly 35 percent of global zinc consumption. A more recent instance was also in the mining sector and also involved the Chi-

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As a number of sovereign wealth funds invest in the natural resources sector, through both stock holdings of the major companies in this space, as well as through direct investments in projects and related infrastructure, it would not come as a surprise for one or more of them to participate in Alaska development projects. nese. In June 2010, Coeur d’Alene Mines Corporation of Idaho, and its Alaska subsidiary, Coeur Alaska, Inc., announced a landmark agreement for a Chinese company to purchase and process gold concentrates produced at the new Kensington Mine, operated by Coeur Alaska and located outside of Juneau. China National Gold Corporation agreed to purchase approximately half of the gold concentrates produced at Kensington. According to Coeur, the agreement reached was the first of its kind between a state-owned enterprise of the People’s Republic of China and a US precious metals mine. President and CEO of Coeur Dennis Wheeler stated, “We are delighted to enter into this major relationship with China National Gold. This represents a groundbreaking level of business rela-

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tions between the two companies as this new, major gold mine begins the initial stage of its long production life.” China National Gold, a state-owned enterprise headquartered in Beijing, is China’s largest gold producer and operates nearly sixty mines throughout China. In addition to operating mines, the company also owns and operates a number of smelters and refineries. Many consider state-owned enterprises, such as China National Gold, to be something akin to cousins of sovereign wealth funds in that they, too, make investments on behalf of their country. Indeed, a number of sovereign wealth funds were established, at least initially, to invest in state-owned enterprises. China Investment Corporation and Singapore’s Temasek Holdings are examples,

though both have since expanded their scope to include significant investments outside of their respective countries. As the number of sovereign wealth funds grows, and their assets under management continue to build, their presence in world markets will become increasingly significant. Alaska, with its abundance of natural resources so much in demand by both developed and emerging economies, is an attractive destination for investment by the these funds. Many Alaska projects, to be economically viable, need to be large-scale in scope. This implies correspondingly large-scale investments. Sovereign wealth funds, and their stateowned enterprise cousins, could be ideal partners to enable these projects to happen.  Greg Wolf is the Executive Director of World Trade Center Alaska (wtcak.org). Contact him by phone (907-278-7234) or email (greg@ wtcak.org). World Trade Center Alaska has been serving Alaska’s business community since 1987.

November 2013 | Alaska Business Monthly

special section

Resource Development

A Woman’s Place is in the Driver’s Seat The resource development industry embraces positive change By Mari Gallion

hen we think of the women who have made their marks as leaders throughout history, many would call to mind fierce warriors like Boudica, said to be so tough that even the Romans didn’t want to mess with her; Joan of Arc, who was ‘born to’ be martyred; or women like Rosa Parks, whose quiet rebellion in being fed up with an everyday injustice earned a reaction that was anything but quiet. However, the women leaders of today find their leaderships positions quite naturally and with much less fanfare than did their predecessors, and it is becoming

increasingly less unusual to find them not only in the boardroom, but at the head of the table at the biggest resource development companies in the world. Janet Weiss, president of BP Alaska, is one such leader, and feels excited and ready to lead Alaska’s resource development industry through its current transition. “Being the first woman to serve as regional president for BP here in Alaska is a great opportunity,” she says. “It is right up there with being the first longtime Alaskan to become BP’s Alaska regional president,” which is another

Alaska Business Monthly | November 2013

feather in her cap, neither accomplishment of which she could have anticipated when she was getting her Bachelor of Science in Chemical Engineering at Oklahoma State University approximately three decades ago. “When my husband and I arrived here twenty-eight years ago I never imagined that our path would lead me to such an exciting and challenging role,” Weiss says. “I’m both humbled and inspired by the challenge of ensuring BP does our part to build a strong and sustainable future for Alaska following the Alaska Oil Tax Reform law.” www.akbizmag.com

Aerial view of the Point Thomson Project Central Pad. Photo courtesy of ExxonMobil

Weiss’s rather humble industry beginnings tell a similar story to many industry employees, which lends to her credibility as the leader who joins the troops in the vanguard rather than calling out commands from the tower. “To help pay for college, I worked in a co-op program where a student alternates semesters going to school and working in industry,” she says. “It is like a summer internship on steroids. I spent several semesters with ARCO, a company that was starting up fields on the North Slope of Alaska. I was swept up by the possibility of moving to Alaska.” www.akbizmag.com

“I started on the North Slope as a process engineer then moved into reservoir engineering,” she continues. “I gravitated to work assignments that were all about enabling new opportunities and clarifying strategic options, then defining direction.” Like many good leaders, Weiss spends less time focusing on herself and her personal story, demonstrating that her presence here is primarily because of her enthusiasm for the industry and the quality of her work. “Our leaders and employees share the same values: safety, respect, excellence,

courage, and a commitment to one team. Leaders need to encourage these values in the way they lead and nurture the right culture for teams, which enables a better contribution. It’s clear that my first job objective as BP Alaska president is to deliver safe and reliable operations.” Gina Dickerson, Point Thomson project manager for ExxonMobil, is a leader whose roots in industry started in her childhood. “My father was an engineer with Amoco Oil and my mother was a substitute teacher,” Dickerson says. “They

November 2013 | Alaska Business Monthly

“I continue to see an increasing number of women in leadership positions in resource development thanks to the focus our industry has placed on women’s development over the last few decades. ExxonMobil established informal women’s leadership teams and networks to better understand the barriers to attracting, retaining, and developing women. These networks provide mentoring programs, leadership training, and support for women in the industry to help them successfully navigate the complex challenges we all face.” —Gina Dickerson Point Thomson Project Manager, ExxonMobil

both encouraged me to take full advantage of my education from an early age. My father was one of nine children and the only one to graduate in engineering. I enjoyed learning about what he did as an engineer and he was a significant inﬂuence on my educational choices.” “My math and science teachers also inspired my choices and they encouraged me to join my high school engineering team,” Dickerson adds. “I particularly enjoyed chemistry labs. I also knew I liked math, science, and solving problems, but really didn’t have an appreciation of where those interests could take me.” Building upon the lifestyle she already knew, Dickerson studied chemical engineering at Texas A&M University, where she took advantage of work internships in various career streams. It was while working a summer internship for Exxon Co. in Louisiana that she found a match for her talents and interests with the upstream and resource development. Her first assignment was as a reservoir engineer, modeling the recovery of oil and gas resources from Gulf of Mexico fields. Like any another industry leader, Dickerson’s authority comes from a level of experiential knowledge that cannot be attained through taking any shortcuts. “I spent seventeen years in production operations where we were optimizing facilities and ensuring we were maxi88

mizing the resource through prudent operations and capital investments,” Dickerson says. “I moved over to the major capital project side of our business about ten years ago which was, and remains, a growth area for ExxonMobil.”

Why and How Things Are Changing The fact that more women are being given leadership roles is not by accident. Alaska’s oil companies are taking an active role in promoting the best talent for the job, regardless of gender, and the industry at large is increasing opportunities for those potential leaders who may have been overlooked due to our prevailing society’s former culture constraints. “BP has set a global goal of having 25 percent women as group leaders by 2020,” Weiss says. “Today we have about 16 percent women represented as group leaders; a few decades ago, there were very few women in that group.” ExxonMobil has applied a similar emphasis on getting more talented women into jobs traditionally held by men. “I continue to see an increasing number of women in leadership positions in resource development thanks to the focus our industry has placed on women’s development over the last few decades,” Dickerson says. “ExxonMobil

Alaska Business Monthly | November 2013

established informal women’s leadership teams and networks to better understand the barriers to attracting, retaining, and developing women. These networks provide mentoring programs, leadership training, and support for women in the industry to help them successfully navigate the complex challenges we all face.” “There appears to have been a workforce culture shift in resource industries that as women contribute and progress, those contributions are better recognized,” Weiss adds. Additionally, there is a growing awareness that jobs in the resource development industry are no longer slated for male employees. More opportunities are being presented to women, and more women are reaching for them. “More women are benefiting from educational opportunities in the appropriate fields,” Weiss says, “and more women are entering the resource industry.” Dickerson echoes Weiss’s observation: “Today, more girls and women are exposed to engineering through corporate and other partnerships with educators. School-based programs like ‘Introduce a Girl to Engineering Day’ and ‘Science Ambassadors’ bring engineering and science into elementary, middle, and high school classrooms, and these programs are making a real diﬀerence attracting more women to the field. We are able to provide teachers with materials that expose students to science in an interesting and fun way through hands-on experiments, demonstrations, and by career discussions with women who solve math and science-based problems every day in the workplace.” Weiss also stresses that women need to do their part: learn the corporate culture in order to ensure that their contributions are not overlooked. “When climbing the ladder, it is important to continue to contribute and be heard as the issues change from an individual engineering challenge to an organizational direction, or culture issue,” She says. “A woman helps enable that progression when she works on ensuring she communicates well to her audience; she keeps her voice being heard at that table; and keeps herself in consideration for joining the next table in the progression.” www.akbizmag.com

“First, work on solving problems that add value. As you are solving problems, really try to connect which problem aspects actually drive material value, then work hard to deliver that value. Step up and step in. Take on responsibility and follow through. Don’t beat yourself up about the mistakes along the way. Recognize that there is power in community. Connect and form relationships, especially with other women in industry. It’s a whole lot more fun that way.” —Janet Weiss President, BP Alaska

What About Our Daughters? Despite those measures that companies are taking to level the playing field, undermining cultural tenets run deep. In order to ensure workplace gender equality, part of the onus for facilitating this change comes from the workers themselves. As the mother of four children, including a set of twins, Dickerson has first-hand experience with balancing family with a high-powered career, and demonstrated an unwavering commitment to both while establishing herself as an industry leader. “I had to really look at the challenges I was facing now with four children, a dual-career spouse who is also in the industry, and my own career,” she says. “I had open conversations with my management about what I needed to be successful in raising my family and in my job. I relied on mentors who had been through similar circumstances and considered all the advice I could get. “I think the biggest hurdle women must overcome in this field is not letting the stereotypes of the workforce culture define them,” Dickerson says. “They must learn how to take part in redefining the culture. The energy industry needs more professionals in resource development. There is an increased worldwide demand for energy, and resource development is becomwww.akbizmag.com

ing increasingly more challenging and complex. Women should seize the opportunity to be part of that growth.” That said, what concrete things can a competent aspiring female employee in the resource development industry do to help assure that she is considered to fill one of the seats at the head table? “First,” Weiss says, “work on solving problems that add value. As you are solving problems, really try to connect which problem aspects actually drive material value, then work hard to deliver that value.” Next, Weiss adds that the foreground is no place for the shrinking violet. “Step up and step in. Take on responsibility and follow through. Don’t beat yourself up about the mistakes along the way.” Third, Weiss advises to “recognize that there is power in community. Connect and form relationships, especially with other women in industry. It’s a whole lot more fun that way.” Dickerson also has some concrete advice for women who are interested in entering the resource development industry. “Develop expertise in a core area that interests you, such as project management, while learning all you can about the business,” Dickerson says. “Be openminded as your career develops and take advantage of every opportunity to learn about new areas of the business and to gain further experience. Build

your network of mentors—both technical and personal—internal to your company and within industry. Take advantage of multiple types of leadership training—classes, reading material, case studies; ensure you understand your strengths and weaknesses and be an informal leader even when not in a formal leadership position. Know your definition of success and what satisfies you, as there are many types of leaders and leadership positions.”

Ultimately Humble One universally refreshing characteristic of the women in resource development leadership positions is their lack of entitlement to their high positions and their readiness to give credit to those who walked the path before them, as well as those who were brave and wise enough to have a part in taking down the “no trespassing” sign. “I don’t really consider myself a pioneer in this field as I have had several mentors and role models both in ExxonMobil and in industry who have helped paved the way for all of us,” Dickerson says. “I draw on inspiration from some of Alaska’s greatest strides in history, moments like Alaska statehood and the building of TAPS,” Weiss says. “Those moments have come as a result of men and women with a shared vision of the future. They had the courage and determination to make the tough decisions.” True to their natures as leaders, these women don’t dwell on their challenges, but instead can’t help but to inspire further progress. “I’m looking forward to helping continue enabling big opportunities like Alaska gas,” Weiss says. “The State of Alaska has signaled something very important to industry: that the state can work through issues and find solutions. A healthy business environment, including industry/State relations, is a key enabler for advancing big challenging opportunities like we currently have before us.” The key to success, as Dickerson put it, is “seeking new opportunities and building a strong support network!”  Mari Gallion is Associate Editor at Alaska Business Monthly.

November 2013 | Alaska Business Monthly

special section

Mining

Alaska Mining Industry Update

BeneďŹ ts touch every corner of the state By Deantha Crockett

laska is a great place to live, work, and play; thanks in large part to the responsible development of our abundant natural resources. It was our resources that provided a compelling argument for us to become part of the United States, and today, Alaska has one of the healthiest economies in the country. Being this is my article, Iâ&#x20AC;&#x2122;m going delve into the resource industry nearest and dearest to my heart: mining! Without question, every one of us depends on minerals each day. A multitude of minerals make up the things we depend on to make our lives easier: phones, computers, tools, and vehicles. Minerals also make up the

Alaska Business Monthly | November 2013

Crockett www.akbizmag.com

ernment revenues, and benefits Alaska Native Corporations. What’s more, recent research shows that the mining industry buys goods and services from hundreds of Alaska businesses.

Large Part of the Economy Mining is a large part of Alaska’s economy, thanks to the exploration and development of our large deposits of coal, copper, gold, lead, molybdenum, platinum, silver, and zinc, as well as sand, gravel, and quarry rock. Currently, Alaska has six large operating mines. Fort Knox: Alaska’s largest surface (open-pit) gold mine, located near Fairbanks, is operated by Kinross. Fort Knox employs nearly six hundred people, all of whom live in the area and go home at the end of each shift. Greens Creek: Located on Admiralty Island National Monument near Juneau, Greens Creek is operated by Hecla Mining Company. This underground mine produces silver, zinc, lead, and gold, and is one of the top ten silver mines in the world. Kensington: An underground gold mine near Juneau, Kensington is operated by Coeur Mining. The mine is the largest property taxpayer to the City and Borough of Juneau and the second largest private employer in Southeast Alaska. Pogo: Alaska’s largest gold producer, Pogo is an underground gold mine near Delta Junction and is operated by Sumitomo Metal Mining Company. One of Alaska’s newest mines, Pogo produces about 340,000 ounces of gold annually.

Map courtesy of Alaska Miners Assocation

things I hope you never have to use, such as gold in the airbag of your car and the zinc used to galvanize highway guardrails. The amenities and necessities in our lives will ensure the demand for minerals remains constant, so no doubt mining activity will continue for years to come. So, why mine in Alaska? Mining provides Alaskans with good jobs, contributes to local and state govwww.akbizmag.com

Red Dog: One of the world’s largest zinc producers, the Red Dog mine is operated under a partnership of Teck and NANA Regional Corporation, the landowner. Located just north of Kotzebue, Red Dog produces zinc, lead, and silver, and is the only taxpayer in the Northwest Arctic Borough. Usibelli: Usibelli is Alaska’s only operating coal mine. Located in Healy, Usibelli was founded in 1943 and is still operated by the family-owned Usibelli Coal Mine, Inc. Usibelli fuels 40 percent of Interior

Alaska’s electricity and in its record year, exported two million tons of coal.

Benefits Stretch Far Mineral production in Alaska’s large and placer mines accounts for about $3 billion in gross value annually. However, the benefits of mining that stay right here in Alaska stretch far wider than you might think. Surely you have seen it printed somewhere: Mining Works for Alaska. This couldn’t be more evident in the employment numbers the mining industry boasts: 4,800 people work directly in Alaska’s mines, and that number nearly doubles to 9,500 when you add indirect mining jobs. These are some of Alaska’s highest-paying jobs, with an average wage of $100,000— twice the state average for all economic sectors. These are stable, year-round jobs for residents of 120 Alaskan communities, half of which are found in rural areas where other economic opportunities are limited. Works for Alaska, indeed. In addition to a $650 million annual payroll, the mining industry significantly contributes to government revenues. In 2012, mining paid $137 million to the state through taxes, royalties, rents, fees, and revenues to AIDEA, the Alaska Railroad, and the Alaska Mental Health Trust. In addition, mining provides important local government revenues, paying $21 million in taxes and payments to governments around the state. The Red Dog Mine is the Northwest Arctic Borough’s only taxpayer, and the Fort Knox Mine is the largest taxpayer in the Fairbanks North Star Borough. The Kensington and Greens Creek Mines are the largest taxpayers to the City and Borough of Juneau. Other mines in Alaska present annual contributions to their neighboring communities, and all mines contribute to multiple charitable causes in their areas. Mining is also an important part of revenues to Alaska’s Native Corporations. In 2012, mining accounted for $126 million in payments to Alaska Native Corporations. Because of the Alaska Native Claims Settlement Act 7(i) and 7(j) revenue sharing provisions, these revenues are shared with each corporation, including those whose lands do not have current mining activity.

November 2013 | Alaska Business Monthly

Clearly, the benefits of mining touch every corner of our state.

The Road Ahead So, where are we going? In addition to the operating large mines and hundreds of placer mines, we have exciting exploration projects on the horizon. Should these projects complete permitting and be constructed, each stands to contribute to Alaska in the same ways as our mines already in operation. Currently, Alaska has eight mining projects considered to be in “advanced exploration,” meaning, at or near the permitting process. Projects to watch: Bokan Mountain: Perhaps you’ve heard the term rare earth elements (REEs). REEs are in the coloring of plasma televisions and are what makes your cell phone vibrate. Currently, 97 percent of REEs needed in the world are imported from China. Alaska has a REE deposit at Bokan Mountain Dotson Ridge on Prince of Wales Island in Southeast. A drilling program began in 2007 to explore the deposit and in late 2012, a preliminary economic analysis was completed. The company pursuing the project, UCORE, estimates it will enter permitting in early 2014. Chuitna Coal: Situated in West Cook Inlet near Tyonek, Chuitna contains subbituminous coal, similar to what is mined at Usibelli. Strategically located to export to Pacific Rim markets, this sulfur and mercury-free coal is significantly cleaner than coal mined is most other regions in the world. Currently in preliminary permitting stages, PacRim Coal, LP estimates to have 350 jobs at full production. Donlin Gold: Located on Calista land in the Yukon-Kuskokwim region, Donlin stands to be one of the largest suface gold mines in the world. A partnership of Barrick and NOVAGOLD mining companies in conjunction with Calista and the Kuskokwim Corporation, Donlin entered permitting in late 2012 and estimates to employ 1,400 workers at the mine. Livengood: On the Dalton Highway just north of Fairbanks, Livengood was first placer mined in 1914. When a lode (largescale) gold deposit was discovered in 2007, exploration began to determine the project’s feasibility. In mid-2013 the feasibil92

ity study concluded a minimal return on investment for International Tower Hill Mines; however, the project continues to search for ways to decrease costs in the project, including energy and other infrastructure. Approximately $20 million has been invested to date at Livengood, which is expected to provide 500 jobs. Niblack: Also on Prince of Wales Island, Niblack was historically mined from 1905-1908. The project, containing copper, gold, silver, and zinc, has had ongoing exploration for twenty-five years and Heatherdale Resources, Inc. has invested $35 million in Niblack since 2009. Niblack is estimated to provide 200 production jobs. Pebble: Ah, you’ve heard of this one, yes? The Pebble deposit, situated in Southwest Alaska near the community of Iliamna, contains copper, gold, and molybdenum. Exploration, engineering, and environmental studies have been underway since 2002, gathering millions of dollars worth of baseline data. At the time of writing this article, project partner Anglo American announced its withdrawal from the project, and operatorship now lies solely with Northern Dynasty Mines. On State of Alaska land designated for mining, the project is estimated to provide 1,000 production jobs. Upper Kobuk Mineral Projects: In the Ambler Mining District in Northwest Alaska, the Upper Kobuk Mineral Projects is a series of promising deposits on NANA Regional Corporation land. Much of the land is being explored by NovaCopper for deposits containing copper, gold, silver, and zinc. A prefeasibility study is underway. Wishbone Hill: Among a historic coal mining district in the Matanuska-Susitna Valley, Wishbone Hill is a proposed coal project located near essential infrastructure like roads, rail, and energy sources. First mined in 1916, Wishbone Hill is in exploration stages by Usibelli Coal Mine, Inc. The project is awaiting a decision on exploration permits by the Office of Surface Mining, a federal agency. In addition to these emerging projects, Alaska has over twenty exploration projects that spent under $5 million apiece in 2012. These projects range

Alaska Business Monthly | November 2013

from north of Kotzebue to the Juneau area and are targeting coal, copper, gold, graphite, lead, platinum, and zinc.

Great Economic Contributor By its nature, mineral exploration is a great contributor to Alaska’s economy. Exploration frequently requires access to deposits located in remote areas with no existing roads, power sources, or other infrastructure. This activity requires amenities from businesses like air taxis, camp services, lodges, and more, and frequently those dollars spent remain in that area and in the state. In fact, recent research conducted by the McDowell group concluded that the mining industry buys goods and services from more than six hundred Alaska businesses. A whopping $2.3 billion has been spent on mining exploration since the early 1980s. A number of factors impact exploration activity, including access to capital investment dollars, regulatory climate, tax regime, operating costs including energy and other infrastructure, and more, all of which can be obstacles to a robust mining industry in the state. However, Alaska’s mineral deposits are world class, and we have a great deal of mineral potential undiscovered. Worldwide demand of minerals is not expected to decrease, so if Alaska can provide a predictable, stable regulatory process, fair tax regime, and solutions to the costly Alaskan environment, we can ensure we are part of the mineral supply, and our mining industry will ﬂourish. With our superb safety and environmental record, combined with the economic benefits I’ve outlined above, there is no better time to mine in Alaska than now. Remember: If it can’t be grown, it must be mined!  Deantha Crockett is the Executive Director for the Alaska Miners Association, which advocates for and promotes responsible mineral development in the state of Alaska. She was born and raised in Alaska, and came to AMA from the Resource Development Council, where she led issues and policy for the mining and tourism industries for seven years. www.akbizmag.com

special section

Mining

Production rising By Julie Stricker

he Alaska mining industry is predictably cyclic: predictable only in that miners are aware that what goes up usually comes down, whether it’s this season or next or a dozen years from now. To date, 2013 is falling somewhere in the middle of the cycle. While gold prices are still much higher than they were a decade ago, they’ve sagged considerably from the record high prices seen in September 2011. This September, gold was trading at about $1,300 an ounce, significantly lower than the record of $1,916 per ounce only two years ago and a gamechanger for mines with thin margins. That was the case for the Nixon Fork gold mine thirty-five miles northeast of McGrath, which ceased operations this July. The mine, operated by the Vancouver, British Columbia-based Fire River Gold Corporation, was burdened by debt and the challenges and high costs of operating in a remote area. That leaves only six large operating mines in Alaska: ■ Fort Knox gold mine near Fairbanks ■ Greens Creek Mine near Juneau, which produces silver, zinc, gold, and lead ■ Kensington gold mine near Juneau ■ Pogo Gold Mine near Delta Junction ■ Red Dog zinc, lead, and silver mine in northwest Alaska ■ Usibelli Coal Mine in Healy In 2012, these mines, including Nixon Fork, accounted for nearly 2,300 full-time jobs. Overall, 4,800 people were directly employed in the mining industry, with wages nearly double the

“They are small businesses, very hardworking families that are living off the land. They’re not growing crops but they’re working with the land. It makes up quite a bit of the fabric of the population, especially in the Interior.” —Rick Rogers, Executive Director, Alaska Resource Development Council

state average, according to the Alaska Miners Association. In addition to coal and precious metals, sand, gravel, and rock are also important products. Rick Rogers, executive director of the Alaska Resource Development Council, grew up in the Midwest and sees distinct parallels between placer mining and farming. “They are small businesses, very hardworking families that are living off the land,” Rogers says. “They’re not growing crops but they’re working with the land. It makes up quite a bit of the fabric of the population, especially in the Interior.” Mining pays well, with workers at the large mines averaging $100,000 annually, twice Alaska’s average annual wage, says Deantha Crockett, executive director of the Alaska Miners Association. “Mining sustains places that don’t have a lot of opportunities,” Crockett says. “I think the biggest thing is the trickle-down effect of the really highpaying jobs to residents of those areas.” Shift schedules are flexible, too, she says, allowing residents to continue to subsistence hunt and fish. Studies also show the community benefits of mining, which creates thousands of jobs indirectly tied to mining and a $650 million payroll in both direct and indirect wages in 2012. Overall production in 2012 was valued at $3 billion. Mining also produced about 38 percent of Alaska’s exports.

Alaska Business Monthly | November 2013

Mining Challenges But mining is not without its challenges. While mining is less dependent on weather than farming, Alaska’s extreme weather, compounded by its remoteness and high costs, can dim even promising prospects. Fire River Gold had hoped the acquisition of the high-grade mine at Nixon Fork would lift it into the ranks of major gold companies. But it didn’t work out that way. Fire River bought the high-grade underground mine, which has been mined intermittently since 1917, in 2009. It anticipated production of fift y thousand ounces of gold per year as well as silver and copper. The mine’s former operator, Toronto-based St. Andrew Goldfields Ltd., had shuttered the project in 2007 after spending $54 million in upgrades and equipment. Fire River took possession of an essentially turn-key operation and began ramping up production in 2011. But costs were higher than expected and production lagged behind predictions and the company, mired in debt, was forced to shut down. Regional Mines Kinross’s Fort Knox gold mine near Fairbanks continues to hone its operating efficiencies to keep costs down to about $600 per ounce, according to Anna Atchison, manager of commuwww.akbizmag.com

nity and government relations at the giant open-pit mine. The mine employed more than six hundred people in 2013 and was on schedule to produce more than 425,000 troy ounces of gold. In Southeast Alaska, Greens Creek Mine, which is among the world’s top silver producers, saw its production soar in the first quarter of 2013. The mine, owned and operated by Hecla Mining Company, produced 1.8 million ounces of silver in the first quarter, a 34 percent increase over the same quarter in 2012. The ore was also of higher grade. Overall production in 2013 is expected to exceed 6 million ounces. Continuing exploration at the mine site has uncovered additional areas of high mineralization for both silver and zinc. In September, the US Forest Service approved an expansion of the tailings facility at Greens Creek, which is located in Tongass National Forest on Admiralty Island. The agreement will allow Hecla to add about 18 acres to its tailings facility, far less than the 116 acres Hecla had requested. The expansion will extend the life of the Greens Creek Mine about ten years. Greens Creek is the largest South-

east Alaska for-profit employer in terms of payroll with 390 employees. The second largest regional employer is Kensington Gold Mine northeast of Juneau. The mine, owned and operated by Couer Alaska, a wholly owned subsidiary of Couer Mining, went online in mid-2010, reaching full production in 2012. It produced about 82,000 ounces of gold and employed three hundred workers. The mine is expected to produce 108,000 to 114,000 ounces of gold in 2013, with 23,162 ounces produced in the second quarter, an 8 percent decline from the first three months, while operating costs rose to $1,115 per ounce. Company officials say continuing exploration is turning up additional ore, and they expect production to rise in the second half of the year as ore grades improve and costs decrease. In Interior Alaska, workers at Pogo gold mine are continuing to explore new finds at the East Deep deposit, which lies near the Liese deposit. Pogo, owned by Sumitomo Metal Mining Co., produced about 315,000 troy ounces of gold in 2012, making it the highest producing gold mine in Alaska. The

Alaska Business Monthly | November 2013

“As long as [the regulations] remain reasonable and predictable, I think the outlook for placer miners is bright.” —Deantha Crockett Executive Director Alaska Miners Association

underground mine is located eightyfive miles southeast of Fairbanks and thirty-five miles northeast of Delta Junction. It employs about 330 workers, with an average wage of $116,900, according to an economic study by the McDowell Group. In Northwest Alaska, the Red Dog zinc, lead, and silver mine is the main economic driver and sole taxpayer for the Northwest Arctic Borough. Red Dog is one of the world’s largest producers of zinc concentrate. The mine is operated by Teck Alaska in partnership with NANA Regional Corporation. About 56 percent of its workers are NANA shareholders and the mine produces more 1 million tons of zinc and lead concentrates annually. An additional facet to Red Dog is that royalties from the mine go to NANA, one of twelve Alaska Native regional corporations in Alaska. Under the 7(i) and 7(j) clauses of the 1971 Alaska Native Claims Settlement Act that created the corporations, revenue generated by developing resources on Alaska Native land must be shared with the other regional and village corporations. In fiscal year 2012, NANA received $124.7 million in net revenue from Red Dog. In turn, it shared $73.6 million with the other Native corporations in the state. The sixth operating mine is Usibelli Coal Mine in Healy. The mine employs 130 workers and supplies about 40 percent of the energy for Interior Alaska. It produces about 2 million tons of coal annually, half of which is exported overseas. The Usibelli family has owned the mine since 1943. In addition to the large mines, Alaska boasts hundreds of small-scale mines, many of which are mom-and-pop placer gold operations in Interior Alaska, says Crockett of the Alaska Miners Association. And while gold prices are high enough to make small-scale minwww.akbizmag.com

ing pay oﬀ for some, many of them are struggling with regulatory issues. “I don’t mean increased standards for regulations, because we welcome those,” Crockett explains. “It’s the ever-changing things coming down to the small miners that are hard to understand right away.” “While we welcome anything that will protect us and the environment, some of these regulations are a little over the top,” she says. “They’re having a hard time making ends meet and trying to meet all of the regulations. … As long as [the regulations] remain reasonable and predictable, I think the outlook for placer miners is bright.”

Untapped Potential With only six large mines operating, most of Alaska’s mineral potential is still untapped, Rogers says. “We’ve just scratched the surface,” he says. “We’ve got six large hard-rock mines in Alaska and we’ve got the potential for so much more. The oldest of those mines is the Red Dog Mine, and that’s only from the ‘80s.” Large projects in various stages of development include rare earth min-

erals at Bokan Mountain in Southeast Alaska; coal at Chuitna and Wishbone Hill in Southcentral Alaska; gold at Livengood north of Fairbanks and Donlin Creek in southwest Alaska; and multimineral prospects at Niblack in Southeast and the Upper Kobuk region in Northwest Alaska. One of the largest projects on the table is the Pebble gold and copper prospect two hundred miles southwest of Anchorage. That project, which has been controversial due to its location near the headwaters of rivers feeding into salmon-rich Bristol Bay, received a setback this summer when Anglo American, which had partnered with Northern Dynasty to develop the mine, announced it was pulling out. Anglo American had already spent more than a half-billion dollars to develop Pebble, says Karen Matthias, executive director of the Council of Alaska Producers. “That is very unfortunate news from Alaska’s point of view, for any industry,” Matthias says. “When an investor that has put half a billion dollars into a project withdraws, that sends a message to Alaska about how open we are to business.”

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

Although Rogers doesn’t believe Anglo American’s decision to drop out of Pebble would aﬀect projects other than Pebble, he said it demonstrates the challenges of attracting capital to Alaska. “It’s a reminder to all of us that we compete globally, whether it’s in fishing or oil and gas or mining,” he says. “Anglo is in the process of evaluating their global portfolio. It’s really unfortunate for Alaska.” Other large projects, such as the Donlin Gold in southwest Alaska and the Ambler copper prospects in Northwest Alaska, are still showing tremendous promise, but have a long way to go, Roger says. If developed, however, each has the capacity to transform the economy of the regions in which they are located. Donlin, which is on land owned by Calista Corporation and NovaCopper, in the Ambler District, could means millions of dollars annually for all the Alaska Native corporations in the state. Donlin, which is in the permitting phase, has a 90 percent local hire at its camp, which is located in one of the state’s most economically depressed regions. Development of a mine could bring more aﬀordable energy to the region in the form of natural gas, Crockett says. In Northwest Alaska, one of Governor Sean Parnell’s proposed Roads to Resources leads directly to the Ambler District. Matthias says that provides an opportunity for the Alaska Industrial Development and Export Authority to create a transportation corridor similar to the one it has at Red Dog Mine. In 2012, AIDEA received $25.5 million for the use of the Red Dog facilities and the Skagway Ore Terminal. Development though, takes investment, and that’s the one thing that looks problematic in the near future, Rogers says. “A lot of really good projects are in the works and in the exploration side and many of them are actively seeking additional funding,” he says. “I think the biggest challenge is the financial market right now and how difficult it is for the explorers to raise money to advance their projects.”  Julie Stricker is a journalist living near Fairbanks.

Alaska Business Monthly | November 2013

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special section

Mining

Photos courtesy of Millrock Resources Inc.

TAKING STOCK Bristol Bay Native Corporation surveys its assets By Dimitra Lavrakas

n May, Bristol Bay Native Corporation (BBNC) signed an agreement with Millrock Resources, Inc. of Anchorage to assess mineral prospects on the Alaska Peninsula, near the area known as the “Chigniks.” “The board made the decision about its responsibility to fully assess the value of its lands,” says Tiel Smith, vice president for BBNC land and regional operations, who is also a BBNC shareholder, born in Dillingham. According to the press release announcing the venture, “BBNC supports responsible exploration and development of natural resources, in a manner that meets the corporation’s standards of environmental, fiscal, and social sustainability.” “BBNC decided not to exclude anything,” Smith says about its move to consider mining. And BBNC President and CEO Jason Metrokin underscored the corporation’s commitment to safeguarding its resources. “In BBNC’s view, responsible stewardship includes making a reasonable eﬀort to fully assess and understand our lands and resources,” he says.

Taking a Look Around Historically, the Chigniks had been explored for oil and gas, with a number of 100

Mallard Duck Bay outcrop in background, with eastern hillside of the porphyry copper-gold-molybdenum prospect inset. The prospect is about three miles south of Chignik Lagoon on Bristol Bay Native Corporation lands.

wells still existing, Smith says, but looking for hard rock minerals is a new approach. “In this particular case, it could be gold, it could be copper, could be coal,” Smith says. As for infrastructure, access, how to get the minerals out, or support services, Smith says that it’s too early to line those up. There are bound to be comparisons to the Pebble Mine development, but Smith says that’s not the case. “The topography is much diﬀerent,” he says. “I will say that any mining company is looking for a big deal discovery, but this is more about assessment of our lands.” BBNC is not against mining, Smith says, it is just concerned about its most valuable renewable resources and the region’s historical livelihood—fishing. The social and economic security of village communities has always been a BBNC priority. “I would add that for well over ten years, there has been an interest in not only this area but an interest in connecting the villages through interties,” Smith says. “The villages are finding that their populations are going down, and we want to support robust villages with interties efficiencies.” Millrock CEO and President Greg Beischer, worked for BBNC subsidiary

Alaska Business Monthly | November 2013

Bristol Environmental & Engineering Services Corporation from 2000 until 2007, when he, and his partner, Phil St. George, started Millrock. Happenstance: it was St. George who discovered the Pebble deposit when he worked as a geologist for Teck Cominco, now Teck Resources. “Almost all of the work I did for BEESC was for BBNC in a contractual relationship between the related companies,” says Beischer. “I was engaged for two main purposes: to promote development of mineral resources on BBNC-owned subsurface mineral estate lands and to develop a Geographic Information System and database for modern land management. “It was a very successful endeavor. Once the potential for mineral development in the region I had assessed, I was able to convince exploration companies carry out the very expensive business of exploring for minerals. I also helped BBNC develop and more efficiently extract rock, gravel, and sand resources. “At one point BBNC became very interested in developing oﬀshore oil and gas resources, and I played a role in this eﬀort as well.” Beischer became aware of the three known copper-gold prospects on BBNC subsurface lands while doing an initial assessment of BBNC’s mineral assets in 2001. www.akbizmag.com

Bristol Bay Native Corporation’s Bee Creek prospect, being explored by a crew of Millrock geologists from a helicopter, is located in a northeast facing valley less than three miles from the north end of Chignik Bay. Photo courtesy of Millrock Resources Inc.

“BBNC, through my efforts, was able to make an agreement with a company called Full Metal Minerals,” says Beischer. “This company performed early-stage exploration work and drilled a number of test holes. I read and interpreted FMM’s geological reports on behalf of BBNC management, and became more and more interested in these prospects. “The style of mineralization on-site is known to geologists as a porphyry deposit, and these can be exceptionally large deposits of copper and gold. Millrock has done some preliminary fieldwork and shown the prospect to a potential joint venture partner.” Millrock, says Beischer, starts exploration work by doing its homework. “However, most of our work so far has been done in the oﬃce: careful compilation of all known geological, geochemical, and geophysical information for the area. To maximize the chances of success it is always best to start with a comprehensive documentation of all the past work.” www.akbizmag.com

Seven Year Term “Th e exploration agreement we have with BBNC has a term of seven years,” Beischer says. “If, during that term, Millrock makes all the agreed payments and exploration expenditures, we will have the right to exercise one or more lease agreements that would allow us to develop a mine.” While the term of the exploration phase is for seven years, this schedule could be accelerated, he says. “However, Millrock could also opt out of the agreement at any time. We would do this if the results of our exploration work do not meet our expectations, or if we were unable to raise the needed funds to do the work.” Beischer points out that it is very common that exploration agreements often do not run their full term. “These three prospects on BBNC lands are very interesting,” Beischer says, “but the reality is that the odds of finding a deposit of copper and gold that could be profitably mined are very

low. It is estimated that maybe only one-in-a-thousand prospects actually results in the discovery of a deposit that may be mined. Whenever companies work on BBNC lands, they are required to submit reports of their findings to BBNC. Over time, the corporation learns more and more about the minerals that may lie beneath the surface.” Millrock uses a “project generator” business model, Besicher says, where it invests some its own funds to secure mineral rights, compile geological information, and to perform initial earlystage field evaluations. Partnering up is a crucial step, he says. “However, before moving to the much more expensive work of geophysical surveys and test drilling, we always find another larger company with which to make a joint venture and thereby share the financial risk,” he says. “Millrock does not make money. We raise our capital by selling shares in our company. Therefore, we typically make partnerships with companies

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Above: Millrock geologists at the Bristol Bay Native Corporation’s Kawisgag prospect is less than two miles northeast of Ivanof Bay. Right: Millrock CEO and President Greg Beischer taking a break at the Mallard Duck Bay prospect. Photos courtesy of Millrock Resources Inc.

that are operating mines and making profits. These are the companies that can really afford to do this expensive work. As outlined in a previous Alaska Business Monthly article, Millrock is one of the few publicly-listed companies that operate this way.” Beischer says that finding a joint venture partner is crucial to go on to do an initial year of surface geological, geochemical, and geophysical investigations. “In year two, we would envision doing the first round of exploratory drilling using a heliportable drill,” he says. “If successful, we would move to expanded annual exploration programs with multiple drill rigs.” So far, a partner has not come forward. “Right now, everything hinges on our ability to secure a joint venture partner to fund the work,” he says. “So far, to be quite frank, we have not met with a lot of success. If we do not soon find a partner then the entire exploration agreement could end up terminating before it ever really gets going.” But geologists are always optimists, Beischer says, adding: “[We] pretty much have to be in a business where the 102

odds of success are one in a thousand or worse! And we are hopeful that we will be successful in moving the project forward.”

Shareholders Are the Bedrock BBNC’s deliberate decisions for the company benefit its shareholders. “We continue to work hard at it,” Smith says. “We feel that we have an obligation to work with the village corporations. While most villages have basic airports and small roads, they don’t connect to each other, and resource extraction would provide that boost, as well as jobs for locals. Our goal is keeping community members in the region.” Beischer also looks to providing a

Alaska Business Monthly | November 2013

chance to boost local economies. “It’s important for us to learn which local companies, especially villageowned and shareholder-owned companies, are capable of providing services we will need to do our work,” Beischer says. “We want to use these services whenever they can be competently provided at competitive prices. Even in these early stages we need accommodation, food service, fuels, fuel and equipment storage areas, laundry service, and mechanical repair. As the project grows, the number of different services and supplies needed grows as does the value of the contracts we will enter. A mineral exploration project can be a great opportunity for a business to grow its capability and earn profits.” www.akbizmag.com

Photo courtesy of Millrock Resources Inc.

Toe-in helicopter landing at the Kawisgag prospect.

“We strive to be exceptionally sensitive in how we carry out our work in regards to environmental protection and social responsibility. For Millrock, this begins before our geologists ever knock off their ﬁ rst samples with their rock hammers.” —Greg Beischer CEO and President, Millrock

Additonally, Millrock also pays close attention to the villages’ autonomy. “BBNC owns the subsurface mineral rights,” says Beischer. “However, the land surface in much of this area is owned by village corporations. Since we must cross and use the land surface www.akbizmag.com

to search for minerals, we have taken the approach of engaging and contracting with the village corporations first. Once we were able to see that the surface owners welcomed our activities and were open to the possibility of mine development, we made surface use agreements with them.” Affected village corporations and the corresponding villages that are the surface estate owners would include Bay View, Inc. of Ivanoff Bay and Far West, Inc. of Chignik, according to BBNC’s Land Department. “We will have much to do to further develop our relationships and earn the trust of local people, tribes and corporations and will do so as the project further unfolds,” Beischer says.

Exceptionally Sensitive Millrock takes a proactive approach to the environmental and cultural aspects of a project. “We strive to be exceptionally sensi-

tive in how we carry out our work in regards to environmental protection and social responsibility,” Beischer says. “For Millrock, this begins before our geologists ever knock off their first samples with their rock hammers,” he says. “It’s important for us to take the time to learn for what purposes other people are using the land so that we can plan our field activities to minimize any conﬂict or negative impact.” Respected elder Harvey Samuelsen, who passed away in 2004, made this touchstone statement, which is prominently displayed on BBNC’s website, “Land is the gift of our ancestors and the guarantee of our right to continue our subsistence lifestyle. Land is the heart of our culture. Without land, we are nothing.”  Long-time Alaskan journalist Dimitra Lavrakas writes from the East Coast and Alaska.

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special section

Mining

Local Gravel

Operators are ‘good neighbors’ as construction growth continues By Vanessa Orr

Photo courtesy of Granite Construction Inc.

Ridges are formed at the top of a Granite Construction Company gravel pile as material comes off the conveyor belt from the pit.

sk someone if they want a gravel quarry in their neighborhood and the answer is most likely “no.” It’s a dusty, loud, and dirty business, and yet it’s a necessity in a state where roads are still being built and housing developments and commercial and industrial sites still need to be constructed. While some municipalities may balk at the idea of becoming home to a quarry, times are slowly changing as gravel operators, land owners, Native corporations, and Alaska residents be-

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gin to focus on the benefits—instead of the drawbacks—of gravel mining. Not only do gravel mines provide jobs, but the industry is also helping Native village corporations make money on the land that they own. In addition to providing much needed material to Department of Transportation (DOT) projects, some quarries are also providing topsoil to local residents as well as accepting peat from other construction projects. Quarry sites are often reused as space for housing developments and

Alaska Business Monthly | November 2013

industrial space; in some cases, gravel pit owners are actually investing their time, money, and expertise to clean up locations with the future goal of creating a more pristine environment. “Everyone wants the product we make, but nobody wants a gravel pit near their house,” says Jim Winchester, sales manager, Granite Construction, Inc. “Yet there’s nothing worse than not having us. You don’t think about it much, but what we do is important to Alaskans’ quality of life. Imagine havwww.akbizmag.com

Above: Gravel is pumped from the pit onto the conveyor belt. Right: Gravel on the conveyor belt. Photos courtesy of Granite Construction Inc.

ing to park in muddy swamps or drive on dusty roads; it would be pretty miserable around here without asphalt. It’s ironic, but that’s probably why you don’t see a lot of cars with bumper stickers protesting the gravel industry.”

Benefitting from Shared Opportunities While no one can argue that having drivable roads is a plus, especially in Alaska’s rugged terrain, quarry owners are looking to expand even more on their services to local municipalities. “This year, we supplied the majority of gravel for upgrading and widening Eagle River Road, which was a major DOT project, but we also take import at our North Eagle River facility; contractors bring peat to us, and we make topsoil out of it,” explains Curtis J. McQueen, CEO, Eklutna, Inc. “We also serve as a snow disposal site for the city during the winter.” Eklutna, Anchorage’s Native village corporation, and Cook Inlet Region, Inc. (CIRI), the area’s Native regional corporation, have been gravel mining on Eklutna lands since the 1980s. www.akbizmag.com

Eklutna is the largest private landowner in Anchorage with ninety thousand acres within the municipality. In 2007, the companies formed Alaska Aggregate Products to begin actively mining a 117-acre site by the Eklutna River, and in 2009, the partners opened up a site near the Birchwood airport. Eklutna owns the surface rights to these lands

while CIRI owns the subsurface rights, including the sand and gravel. “We probably have three to four years left at Eklutna in material, but Eklutna and CIRI are always exploring; we own a lot of land with gravel resources,” says McQueen. “There is a lot of development going on—not just DOT projects, but our own projects that need roads

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Photo courtesy of Granite Construction Inc.

Gravel is loaded onto Alaska Railroad cars for transportation.

into residential developments or building pads for commercial buildings.” Beginning this year, Eklutna hired Davis Constructors & Engineers to manage operations at the Eklutna site. “To date, we’ve imported sixty thousand cubic yards of material at Eklutna, including peat, silt, and clay, and exported two hundred thousand tons of different materials such as asphalt

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wrap, D-1, and Type 2 rock,” explains Jenith Flynn, marketing coordinator, Davis Constructors and Engineers. “From the material we import, we make topsoil,” she adds. “So far we’ve sold a little, but we’ve got a lot more on hand for spring next year. We do try to cater to the locals; we’ve got a credit card machine on-site so that they can just drive in and get a truckload full.

Alaska Business Monthly | November 2013

We see a lot of customers from the Chugiak area, and people also come from the Valley who need topsoil or other materials.” According to Flynn, while the pit normally closes around October 15, it is construction driven. “If a customer needs a lot of D-1 or Type 2 rock, we’ll make it happen,” she says. While sand and gravel from the Birchwood project

www.akbizmag.com

Photo courtesy of Granite Construction Inc.

was specifically earmarked for Granite Construction to sell in the Anchorage construction market, the Eklutna pit is open to everyone and provides material for DOT, state, and municipal road jobs. Granite Construction has been mining in the Valley since the 1970s and provides a number of value-added products to the Anchorage market including specialty aggregates, asphalt concrete, construction aggregates, and specialty landscape rocks for retaining walls and similar projects. The company’s Palmer quarry also mines rock to be used to respond to ﬂood situations. “While we’re our biggest customer, DOT is the driver for all of the gravel pits around here,” says Winchester. “They provide a healthy infrastructure budget for this market; without gravel, there are no road projects.” Granite Construction works in conjunction with CIRI and Eklutna at the Birchwood site, where they are in the process of extracting approximately 4 million tons of gravel to be used for road and infrastructure development in the municipality of Anchorage. “So far, we’ve moved 3 million tons over

Gravel coming off a conveyor belt into a pile.

the past four summers; we’re winding down this fall,” Winchester says. While the Anchorage construction market is still strong, Winchester has seen demand drop over the years. “Basically, Anchorage is in a redevelop-

ment phase right now; there is still robust construction, but we’re not seeing a lot of new, big development jobs,” he explains. “Demand has shrunk from a peak of 3.5 million tons to now between 2 and 2.5 million tons.

November 2013 | Alaska Business Monthly

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Alaska Business Monthly | November 2013

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“The Alaska Railroad has done an effective job of dealing with this new reality, as gravel has long been a piece of their financial puzzle,” he adds. “They had three trains committed to the market for decades, but now they are down to two trains a day; one for Anchorage Sand & Gravel and one for Quality Asphalt Paving. They are a key partner in this market for all of us.” According to the Alaska Railroad website, the company plans to move 2.0 million tons of gravel in 2013, compared to 2.1 million tons in 2012, 2.3 million tons in 2011, 2.6 million tons in 2010, and 2.3 million tons in 2009.

Minimizing the Impacts of Gravel Mining The Alaska Railroad was a key player in the Birchwood project—a project that originally met resistance when it was first proposed. “Public meetings are never fun; when we first brought up the idea of production in Birchwood, the Community Council was skeptical,” says Winchester. “But over time, by the end of the process, we had a good relationship with that group; it was rewarding to see it through to the end.” Because the Birchwood site bordered a residential neighborhood on two sides, a major concern was the disruption of gravel trucks traveling through the area. To this end, Granite Construction partnered with the Alaska Railroad to construct a mining operation spur and supporting infrastructure that included a state-of-the-art conveyor system able to load eighty-three railroad carloads at the rate of two minutes per car. “For every train in, it keeps approximately 345 truckloads off of the Glenn www.akbizmag.com

Highway each day,” says Winchester. Granite Construction also constructed a twenty-foot-high berm to block the noise from the site, and project operators reduced daily operating hours and only worked six days a week. Loud backup alarms on equipment were replaced with “proximity” back-up alarms that created a white noise that couldn’t be heard off-site. A dust-control plan was also created and wells were monitored to make sure that water levels in the area were unaffected. The Birchwood project was so successful, in fact, that CIRI and Eklutna were awarded a Tileston Award, which recognizes businesses that advance economic development and environmental stewardship. “As Dena’ina Athabaskans, we are super hypersensitive to the environment,” says McQueen. “We are challenged to provide inventory for Anchorage to grow—to meet the commercial, residential, and industrial infrastructure needs of the city. Everyone looks to us to be good neighbor. But while we are supporting growth, we understand the importance of protecting the watershed and habitat. Through conservation easements, we’ve locked up almost seven thousand acres in north Anchorage for permanent conservation; we will own the land forever, but it will never be developed. “It is important to us to be really invested in the planning process so that we know that our gravel is going to great projects; when a road is being considered by DOT, for example, we look to see where our resources are; on occasion, we have walked away from projects.” Eklutna is currently involved in cleaning up Camp Mohawk, an old military camp at the Eklutna site, where old diesel is contaminating the gravel pits. They are also working with the Army Corps of Engineers on a future plan to restore salmon to the waters of the Eklutna River. “When the Eklutna River was dammed, it basically closed the spigot,” explained McQueen. “The river became too shallow for salmon to survive. Our goal is to dig it out and make it deeper, enabling fry to survive because it won’t freeze solid over the winter. We’re also considering a manmade lake or pond for recreation, but we haven’t pulled the trigger yet.” www.akbizmag.com

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Photo by Jerry LaVine, Connections Film & Video, courtesy of Eklutna, inc.

The Eklutna gravel pit is being managed by Davis Constructors and Engineers for Eklutna, Inc.

Creating Jobs and Industry While gravel mining has become more automated over time, there are still good jobs to be had in the field. “It’s not a highly labor intensive business, but it is capital intensive,” says Winchester, estimating that a gravel pit with a lifespan of twenty to forty years takes about a $20 million investment. “We’ve seen the number of jobs diminish over the years because of automation and technology, and the market is maturing and shrinking, but it still provides jobs that a person can raise a family on. You can make a decent, livable wage. And as the state puts money into infrastructure, it doubles the benefits. An investment in good infrastructure provides 110

good jobs, which creates a multiplier effect throughout the economy.” Some village corporations are also benefitting from entry into the gravel market. “There is a lot of synergy between regional corporations and village corporations regarding gravel; village corporations own the surface rights, and regional corporations own the subsurface rights,” said McQueen. “In this area, CIRI has been phenomenally proactive in supporting village corporations, including Ninilchik, Seldovia, and Salamatof, which are trying to raise income by utilizing their gravel resources.” Even after a gravel pit has been closed, the land can be reused to provide space for homes or commercial businesses.

Alaska Business Monthly | November 2013

Th e Birchwood site, for example, will become Birchwood Industrial Park, providing a level, industrial-zoned site adjacent to the airport and a railroad yard. “Two legacy gravel pits, Sand Lake and Lake Otis, are now housing developments,” says Winchester. “When we’re done with a project, it still has a second use,” he adds. “Properties can be reclaimed, redeveloped, and repurposed after we finish; it’s a value-added property when all is said and done.” 

Vanessa Orr is the former editor of the Capital City Weekly in Juneau. www.akbizmag.com

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special section

Mining

Alaska’s Coal A Clean burning and abundant By Gail West

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laska’s coal holds two critical distinctions in the world of energy production: it’s abundant and it’s one of the cleanest burning coals in the world, says Alaska Miners Association’s Executive Director Deantha Crockett. The state’s estimated coal resource stands at about 5.5 trillion tons, approximately half the nation’s resource, and much of that is locked up on the North Slope well beyond reasonable extraction at this point. The remainder lies

Alaska Business Monthly | November 2013

in Alaska’s Interior and Southcentral regions and companies today are looking seriously at ways to put it into use. With low sulfur emissions—the Environmental Protection Agency has said the coal produced by Usibelli Coal Mine (UCM) at Healy is among the lowest-sulfur coal in the nation—the sub-bituminous coal is a high demand commodity. Markets in the Pacific Rim are open and demanding an increased supply of energy as they grow. Japan, www.akbizmag.com

Left and bottom right: Usibelli Coal Mine’s ﬂ eet of trucks includes eight Caterpillar 785 dump trucks capable of moving 150 tons of cargo. Right: Usibelli’s dragline working the coal seam in the background. Photos by Chris Arend, courtesy of UCM

South Korea, and Chile are three primary markets for Alaska’s coal exports, and, says Bill Brophy, vice president of Customer Relations for UCM, there is speculation of 1 billion tons more being exported in the Pacific Rim fifteen years from now. “That would double where things are today,” he adds. Another benefit to coal addresses some of the environmentalists’ concerns: it’s safe to transport and non-toxic if it’s spilled. It also has a low nitrogen and high calcium www.akbizmag.com

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content and produces excellent performance in equipment designed to clean exhaust gas emissions, according to UCM’s website. Ash produced from the coal can be recycled into other products. Land is reclaimed after surface mining and put to other productive uses, and coal-industry jobs put many Alaskans to work. Today, only one coal mine in Alaska is producing coal—Usibelli. Since 1943, when Emil Usibelli founded the company, Usibelli has operated consistently moving coal from the mine to market. “Usibelli first came to Alaska in the 1930s and settled near Sutton, and worked in the Evan Jones underground mine,” Brophy says. In 1943, during World War II, Usibelli and a friend, Thad Sandford, went into the coal mining business at Suntrana and began providing coal to Ladd Army Air Field (now Fort Wainwright) at the rate of ten thousand tons a year. Five years later, Usibelli bought out his partner and in 1961 bought the neighboring Suntrana Mining Company. Over the years, the company has continued to operate and grow, and today it produces 2 million tons of coal a year.

“We can now deliver in one day what Emil delivered in one year,” Brophy says. Situated 115 miles south of Fairbanks and 250 miles north of Anchorage, UCM sits on the Railbelt and has all the infrastructure required to support its operations and workforce. “The Alaska Railroad passes adjacent to the mine and has a siding into the mine,” Brophy says. “The train moves about seventy hopper cars into the siding at a time and we load them. Our coal is being delivered southbound at the rate of about seventy-car trainloads two or three times a week. Northbound, we ship about forty-car trainloads five days a week.” “Coal mining, specifically at UCM, is an integral part of Alaska Railroad’s economic viability,” Crockett adds.

Long-Term Supply of Coal Usibelli has approximately thirty-five thousand acres of land under coal lease, most of that from the State of Alaska and the Alaska Mental Health Authority. Inside that area are five mine sites: Poker Flats, Gold Run Pass, Two Bull Ridge, Jumbo Dome, and Rosalie. Brophy says these sites produce an average

of 2 million tons a year, half of which is consumed in Alaska with the rest shipped to Pacific Rim countries. “Our coal goes to Fort Wainwright, Clear Air Force Station, and Eielson Air Force Base, the University of Alaska Fairbanks, and Aurora Energy in downtown Fairbanks,” Brophy says. “It also feeds the Golden Valley Electric minemouth power plant in Healy. Coal for export goes to the Port of Seward where it’s transported to South Korea and Chile.” In addition to the current mine sites, Brophy adds, is an additional site at Wishbone Hill in the Matanuska Valley. Wishbone is estimated to contain about 14 million tons of bituminous coal. No decision has been made yet about starting a mine at Wishbone Hill, according to UCM’s website, which also informs that future mining activity will largely depend on a feasibility study and market conditions. If the mine goes into production, Brophy says there are a couple of methods for delivery of the coal by truck. It could go straight to Port McKenzie or to some location along the railroad for transport by rail to the Port of Seward. “There’s a relatively limited amount of coal there,” he adds. “Based on what

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PacRim Coal plans to build a high-tech conveyor system to transport coal from the proposed mine site to Cook Inlet. Rendering courtesy of PacRim Coal LLP

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November 2013 | Alaska Business Monthly

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Usibelli Coal Mine’s Bucyrus Erie 1200W walking dragline, nicknamed “Ace in the Hole”, is the largest land-mobile machine in Alaska. It is capable of moving thirty-three cubic yards of material with each scoop of the bucket. Photo by Chris Arend, courtesy of UCM

we have permitted, if we mine about a half-million tons a year, there’s about a fifteen-year supply. However, with additional exploration and permitting, the mine life of Wishbone could be extended. In Healy, we’ve identified about 700 million tons of economically viable coal using surface techniques to mine. That’s about 350 years of available coal at our current rate of production.”

PacRim Plans There are three other companies currently in the exploration or permitting 116

stages of coal production. One of those is PacRim Coal LLP, which has applied for permits to surface mine in the Chuitna River area on the west side of Cook Inlet and approximately forty-five miles west of Anchorage. Dan Graham, PacRim’s project manager and a registered professional mining engineer, chuckles when he says that PacRim is currently seven years into a two-year permitting process. “This project was originally permitted in the 1980s,” he says. “An Environmental Impact Statement was

Alaska Business Monthly | November 2013

completed and the Environmental Protection Agency issued a series of water-discharge permits in 1990. Several state permits were issued, as well. After court challenges, the EIS and permit decisions were upheld in 1992. Following that, the Mental Health Lands Trust litigation with the state further delayed development. An agreement was reached with the Alaska Mental Health Trust Authority in 1995, but by then the market had tanked.” In 2005, though, the company’s owners saw an uptick in coal markets comwww.akbizmag.com

ing and began the permitting process again along with a supplemental EIS. The foresight was correct, Graham says, demonstrated by Usibelli setting consecutive production records between 2009 and 2012. “We’re still optimistic,” he adds. “We’re still pursuing permits and incorporating some design changes to help reduce potential project impacts. “We got caught up in the federal transfer of permitting from the EPA to the Department of Environmental Conservation which resulted in the SEIS being transferred from the EPA to www.akbizmag.com

the Corps of Engineers. There’s always time needed for a new agency to get up to speed,” he says. PacRim’s plans call for simultaneous reclamation and the company anticipates extracting about 300 million tons of sub-bituminous, ultra-low sulfur coal from the site. Production is expected to average 12 million metric tons a year for twenty-five years, depending upon market demand—the market, again, is Pacific Rim countries. “There’s well over 500 million tons of thermal coal sold by ocean freight,” Graham says. “That’s increased annually for the past five or six years and is expected to increase 30 to 40 million tons each year for at least the next decade.” At its peak production, PacRim anticipates providing 350 high paying year-round jobs in a camp situation, Graham adds. “It would be a one- or two-week rotation. In addition to those jobs, a lot of local suppliers would benefit, as well.” Graham points to a benefit of working with the people knowledgeable about the local area on designing the mining project: “The bar was set pretty high because of the fish, so we’ve done a lot of research on fish habitat and learned from staff at Cook Inlet Aquaculture Association about salmon populations and habitat. We’ve had a lot of discussions with all the agencies involved and tried to address their concerns. We’ve added a high-tech conveyor system above ground to alleviate the potential impact to wildlife populations,” he says. “It’s added to the timeframe, but it’s produced a solid project in the end.” In addition to PacRim, beneficiaries from the mine would include the AMHTA, “which will reap about $10 million a year, Tyonek Native Corporation, which owns adjacent land over which we’d need to cross, and the Kenai Peninsula Borough,” Graham says. “We hope a decision will be made on our permits within the next two years—by late 2014 or 2015—and then we’ll need to reevaluate the coal market before we go into construction.” “PacRim has done a good job of listening to concerns,” says Alaska Miners Association’s Crockett. “They even elevated a conveyor belt so there would be no footprint on the site and they did it because it’s the right thing to do.”

Newcomers from Down Under Crockett listed two other newcomers to coal exploration in Alaska: Riversdale Alaska LLC and Ranger Alaska. Riversdale Alaska, an Alaska subsidiary of an Australian company successfully bid for a lease agreement with AMHTA to explore approximately ten thousand acres in the Chickaloon area of the Matanuska Valley. Russell Dann, president of Riversdale Alaska, says his company has just completed a small drilling program which he expects to provide data for resource modeling and coal quality. He adds that Riversdale has placed a strong emphasis on keeping community and stakeholders informed about project activities and says the company is sensitive to concerns about potential impacts of a mine in the valley. “Emphasis,” he says, “has been placed on the early start of environmental baseline studies so impacts can be assessed based on current and real data.” Ranger Alaska, also an Alaska subsidiary of an Australian company, is currently exploring its options for coal production in the Jonesville mine area. In 2008 Ranger Alaska obtained the rights to the mine and to adjacent acreage—about 1,450 total acres. The most recent estimate for the area is that it contains about 131 million tons of coal. “Both companies are still in the early exploration stages,” Crockett says, “not yet ready for the permitting or pre-permitting processes. “Overall, our coal industry in Alaska is doing very well,” she adds. “We have one mine that’s been in operation for more than seventy years, and it was doing environmental reclamation even before the law required it. I think the majority of Alaskans have a lot of respect for the coal mining that’s been done here.” As for the future, Crockett says she’d really like to see more of Alaska’s coal go to families and businesses inside the state while still exporting to Pacific Rim markets. “Our coal is cleaner and better. It’s environmentally friendly and affordable—and we have hundreds and hundreds of years’ worth of coal here in Alaska.”  Gail West writes from Anchorage.

November 2013 | Alaska Business Monthly

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special section

Mining

ON THE ROCKS? Anglo American pulls out of Pebble project, but remaining partner perseveres By Wesley Loy

Mixed Reactions Anglo American’s departure seemed to come out of the blue, catching Pebble observers by surprise. “Anglo American’s choice to withdraw from development of the Pebble mine was a private business decision driven by a variety of economic factors. The company has stated its reasons and I have no reason to question the decision,” US Senator Lisa Murkowski said in a written statement. 118

Photo courtesy of Northern Dynasty Minerals

or a number of years now, the proposed Pebble project in Southwest Alaska has utterly dominated the state’s mining scene. That’s likely to continue, despite the bombshell announcement in September that a major partner in the project, global mining titan Anglo American, was bailing out. The news cheered Pebble’s energetic opponents and stunned Alaska’s economic development community. The decision was expected to force layoffs at the Anchorage-based Pebble Limited Partnership, which is spearheading work toward development of the rich copper, gold, and molybdenum deposit. Anglo America’s withdrawal left Northern Dynasty Minerals, a Canadian mining company, with sole ownership of Pebble. Ron Thiessen, chief executive of Vancouver-based Northern Dynasty, maintains an upbeat tone on Pebble’s prospects going forward. “Northern Dynasty and the Pebble Partnership have both the expertise and resources necessary to advance the Pebble project,” he says.

Drill rigs at the Pebble deposit.

“Northern Dynasty and the Pebble Partnership have both the expertise and resources necessary to advance the Pebble project.” —Ron Thiessen Chief Executive, Northern Dynasty

Noting she remained neutral on the project, Murkowski in July had challenged the Pebble partners to release a project description and firm timeline for seeking permits for the mine. She said years of waiting had created anxiety for Alaskans. As of Anglo American’s departure, however, project specifics remained unclear.

Alaska Business Monthly | November 2013

The mine site is located on remote state land north of Bristol Bay, about two hundred miles southwest of Anchorage and seventeen miles northwest of the village of Iliamna. Many commercial fishermen have come out against the Pebble mine as a potential pollution danger to the Bristol Bay watershed and salmon habitat. The Bristol Bay Regional Seafood Development Association, which represents commercial gillnetters, hailed the Anglo American withdrawal. The mining giant arrived at a business decision that “accurately reﬂects both scientific findings and common sense,” said Bob Waldrop, the association’s executive director. “Large-scale mining in the Bristol Bay watershed would threaten the world’s greatest salmon run and thousands of small businesses.” www.akbizmag.com

“Despite our belief that Pebble is a deposit of rare magnitude and quality, we have taken the decision to withdraw following a thorough assessment of Anglo American’s extensive pipeline of long-dated project options. Our focus has been to prioritize capital to projects with the highest value and lowest risks within our portfolio, and reduce the capital required to sustain such projects during the preapproval phases of development as part of a more effective, valuedriven capital allocation model.” —Mark Cutifani Chief Executive, Anglo American

Northern Dynasty shares on the New York Stock Exchange dropped 33 percent to $1.49 on September 16, the day of the Anglo American announcement.

Anglo American’s Considerations Anglo American is one of the world’s largest mining companies, headquartered in London. The company is going through something of a transition. A new chief executive, Mark Cutifani, took over in April. In a September 16 statement, Cutifani laid out a few of the company’s considerations in giving notice of its withdrawal from what was termed “the Pebble copper project.” “Despite our belief that Pebble is a deposit of rare magnitude and quality, we have taken the decision to withdraw following a thorough assessment of Anglo American’s extensive pipeline of long-dated project options,” he said. “Our focus has been to prioritize capital to projects with the highest value and lowest risks within our portfolio, and reduce the capital required to sustain such projects during the pre-approval phases of development as part of a more effective, value-driven capital allocation model. We wish the project well through its forthcoming permitting process and express our thanks to all www.akbizmag.com

November 2013 | Alaska Business Monthly

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SOURCE: Northern Dynasty Minerals

those who have supported Pebble and who recognize the opportunities and benefits that such an investment may bring to Alaska.” The Pebble Limited Partnership was formed in 2007 as a 50-50 partnership between a subsidiary of Anglo American and Northern Dynasty. Anglo American’s exit from the part-

He formerly was Alaska natural resources commissioner from 1995 to 2000, during the administration of Governor Tony Knowles. Shively was at his desk, working, the second Sunday after Anglo American’s stunning announcement. In an interview, he insisted it wasn’t all doom and gloom around the oﬃce. But Anglo’s departure presented a tough situation. “Obviously, we’re going to have to make adjustments to our work program,” Shively said. Those adjustments included planned layoffs. The Pebble Partnership had direct employment of about seventy people between Anchorage and Iliamna, where its field operations are based. The negative impact, however, will extend well beyond core staﬃng, as the Pebble Partnership makes extensive use of contractors for drilling, food service, and other services, Shively said. Pebble’s mineral deposits already have been “reasonably well-defined,” he said.

new mineral deposits and put together deals for development. Among shareholders in Northern Dynasty is Rio Tinto, one of the biggest names in global mining. Certainly, it’s possible to develop a major mine in Alaska, based on the fact that several are in operation now. These include the Red Dog open-pit copper and zinc mine near Kotzebue; the Fort Knox open-pit gold mine near Fairbanks; the Greens Creek underground mine near Juneau, which targets mainly silver; the Kensington underground gold mine south of Haines; and the Pogo underground gold mine northeast of Delta Junction. Minerals prices, of course, have a bearing on mining projects. Gold and copper prices saw substantial drops this year, but no one suggested this prompted Anglo American’s action on Pebble. Pebble features two contiguous deposits, one shallow and one deep. Thus, it’s possible the prospect could be developed as both an open-pit and an underground mine.

“Obviously, we’re going to have to make adjustments to our work program. There’s no question losing Anglo American is a loss to the project. They’re a great company. They brought an awful lot to the table in terms of their global mining expertise and, of course, their financing.” —John Shively Chief Executive, Pebble Partnership

nership will be costly. It leaves behind a $541 million investment in the Pebble project, which has seen years of planning, exploratory drilling, and other work. Northern Dynasty cited that investment as the silver lining in Anglo American’s departure. “Northern Dynasty will again own 100 percent of one of the world’s most important copper and gold resources and will have the benefit of $541 million worth of expenditures, which opens the door to a number of exciting possibilities for Northern Dynasty and its shareholders and the Pebble project and its stakeholders,” Thiessen said.

Layoffs Planned John Shively is chief executive of the Pebble Partnership, headquartered in the Calais building in Midtown Anchorage. 120

Northern Dynasty suggested the project might still enter the permitting process by year’s end. But Shively said the immediate focus was wrapping up the split with Anglo American. “There’s no question losing Anglo American is a loss to the project,” he said. “They’re a great company. They brought an awful lot to the table in terms of their global mining expertise and, of course, their financing.”

New Partner Required Building the Pebble mine is expected to take a capital investment of $6 billion to $8 billion, Shively said. It therefore will be necessary to bring in at least one major new partner to achieve such a large venture, he said. Northern Dynasty is what’s known as a “junior” mining company. Juniors are explorers that seek to find promising

Alaska Business Monthly | November 2013

Continuing Field Work This past summer saw continuing field work on the rolling tundra where Pebble is planned. The work included geotechnical drilling, which is a kind of drilling done in preparation for building, rather than to locate or further define mineral deposits. The drilling was below the project’s planned tailings impoundment facility, Shively said. Other field work included water quality and wind studies. The wind study relates to the potential for wind power at Pebble. Supplying power, a great deal of power, is one of the biggest challenges for the remote mine. Sharmon Stambaugh, large project coordinator with the Alaska Department of Natural Resources, says state inspectors made regulator visits to the www.akbizmag.com

Pebble site during the summer. To operate Pebble, the developer will need state permits to manage waste rock and tailings, and possibly water discharges. On the federal side, the major required authorization will be a wetlands fill permit from the US Army Corps of Engineers. In light of Anglo American’s exit, Stambaugh says she would expect “some regrouping” that could delay the schedule for permit applications. But even had Anglo American remained in the Pebble Partnership, actual mining would have been years off due to the time required for permitting.

EPA Scrutiny A wildcard for the Pebble project is the US Environmental Protection Agency’s controversial “Bristol Bay assessment.” The EPA launched the assessment in February 2011 after nine federally recognized tribes asked the agency to use Clean Water Act authority to bar major mine construction in the watershed. The idea of the assessment is to gain “a better understanding of the watershed and the potential impacts of largescale mining in the area,” according to the EPA. EPA has released two drafts of the assessment. Among other findings, the assessment says miles of streams known to provide spawning or rearing habitat for salmon and other fish could be lost under the Pebble footprint. The EPA said its goal was to finalize the assessment in 2013. The fear among mining supporters and some Alaska elected oﬃcials is that EPA could take the extraordinary action of blocking the Pebble project and the jobs it could create. Regardless of EPA’s ultimate stance, Pebble owners are facing a long and difficult struggle, given the project’s huge financial, logistical, and permitting challenges. But the prize is big enough to provide serious motivation. Northern Dynasty calls Pebble “one of the world’s greatest stores of mineral wealth,” with 81 billion pounds of copper and 107 million ounces of gold.  Wesley Loy is a journalist living in Anchorage. www.akbizmag.com

November 2013 | Alaska Business Monthly

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Mining

Rare Earth Metals Milestone

View of Moira Sound from Bokan Mountain in Southeast Alaska.

Moving forward with Bokan-Dotson Ridge project By Nicole Bonham Colby

ith the US Forest Service this summer approving permitting of Ucore Rare Metals, Inc.’s planned field program at its Bokan-Dotson Ridge project near Ketchikan, the Nova Scotia, Canada-based mine-development company says the federal agency’s approval marks a key milestone toward ultimate production. The ultimate end-goal in sight is an anticipated production level of 1,500 tons of unprocessed rock per day, with the project employing between 170 and 200 workers—a potential economic inﬂux and labor opportunity being monitored by the residents of southern Southeast. The fieldwork, which is divided into a late stage drill program and construction of an interim field camp for operations, will allow the company to gather information necessary to complete its final bankable feasibility study and to

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the site’s location in an area marked for resource development by the US Forest Service—as positive indicators of the site’s potential for success. A Juneau-based company is among those slated to conduct aspects of the engineering work to develop the mine’s — Jim McKenzie plan of operations. PND Engineering of President and CEO Juneau will work in cooperation with Ucore Rare Metals, Inc. Knight Piesold Limited and Tetra-Tech Incorporated, both of Vancouver, British Columbia, Canada. prepare the ultimate mine-construcThe Bokan-Dotson Ridge rare earth tion permit applications. elements mining project is located adja“Permission to build an on-site camp cent to Kendrick Bay on Prince of Wales to replace the company’s former barge- Island on federal land administered by based facility is a significant milestone the US Forest Service. It is accessible via not granted lightly by the US Forest boat, ﬂoat plane, and helicopter. In its Service,” said company President and environmental review of the field proCEO Jim McKenzie in announcing the gram, the federal agency found no signew development in September. He nificant impact to the Bokan area envicalled the milestone—together with ronment from the company’s planned

“Permission to build an on-site camp to replace the company’s former barge-based facility is a signiﬁ cant milestone not granted lightly by the US Forest Service.”

Alaska Business Monthly | November 2013

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Rare Earth Elements For long-time southern Southeasterners, monitoring the ebb and ﬂow of potential mining development on resource-rich Prince of Wales Island can, at times, seem like an ongoing news ﬂash. From the Gold Rush days forward, the lure of the mother lode has continued in these parts. More recently, however, observers are seeing a fastforward level of progress in the timeline toward development of perhaps the most unusual of the mined mediums— rare earth elements. Rare earth elements, with cumbersome names such as yttrium, europium, cerium, dysprosium, and others, are used by industry to manufacture items featured on hybrid vehicles, from the LCD screen to the motor and generator. In the communications industry, rare earth elements are used in the

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Ucore Rare Metals Inc. Plan of Operations, 2012

activities. Proposed activities include geotechnical drilling on the northwest side of Kendrick Bay and also in an area on the southwest portion of the bay, along with the temporary twelve-person camp on the bay’s western beach.

The Bokan Mountain rare earth elements mine proposed by Nova Scotia-based Ucore Rare Metals, Inc. is located southwest of Ketchikan on Prince of Wales Island.

manufacture of cell phones. The US Department of Defense has a strong need for rare earth elements for use in its technological applications. And there is a growing urgency by those in government to secure a ready domestic supply

of the materials, rather than to be dependent on overseas deposits. Rare earth elements are further subclassified as either heavy or light in nature, with the heavy rare earth elements considerably more valuable. It is

November 2013 | Alaska Business Monthly

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Bokan Mountain, located adjacent to Kendrick Bay on southern Southeast Alaska’s Prince of Wales Island, is the site of a proposed rare earth elements mine by Ucore Rare Metals, Inc. Photo courtesy of Ucore Rare Metals Inc.

that valuable resource that is the subject of the Bokan Mountain project. The Prince of Wales property is rich with heavy rare earth elements, including dysprosium, terbium, and yttrim. An estimated 40 percent of the elements discovered on the property are in the valuable heavy classification. The recent increased attention to the rare earth metals is a result of both a lack of domestic supply of rare earth elements, together with added demand for green energy and concern regarding China’s historic control of the rare earth market, according to the US Forest Service’s “Environmental Assessment, Ucore Bokan Mountain Mining Plan of Operations,” published in June and recent presentations held at local business gatherings in Ketchikan. With an eye to meeting such demand, Ucore Rare Metals, Inc., which holds claim to 512 federal lode claims within the Craig Ranger District of the Tongass National Forest, submitted a proposed Plan of Operations last summer. The agency approved that plan a year later this July. In a busy year for the Canadian company, Ucore Rare Metals, Inc., also 124

commented to the US House of Representatives’ Armed Services Committee this summer regarding an initiative to encourage the US Department of Defense to strategically secure a supply of rare earth elements, given that China currently supplying some 97 percent of the rare earth elements used globally. Bokan Mountain was historically mined in a separate area by the RossAdams uranium mine, which is located on a separate deposit. That operation is currently abandoned, is eligible for a National Historic Places designation, and is also the subject of a Comprehensive Environmental Response, Compensation, and Liability Act cleanup order, according to the agency. Archaeological considerations were among the topics addressed by the US Forest Service in its environmental assessment, along with the project’s potential impact on streams, wildlife, and cultural aspects. The Bokan property itself is particularly high profile as it contains the largest heavy rare earth deposit in the United States and also has a short anticipated timeline to production. From

Alaska Business Monthly | November 2013

a logistics standpoint, the southern Southeast Alaska site also offers Pacific Rim deep-water access and available power and labor resources. It also features the most high-demand heavy rare earth elements currently sought, the company’s community relations director Randy MacGillivray told members of the Ketchikan Area Chamber of Commerce earlier this year. In his presentation, MacGillivray told local business operators that the company prioritizes local hire for its operations to offset the turnover typical of the mining industry. “So as opposed to us bringing people from Nevada and Montana who are excited about coming to Alaska and seeing what Alaska’s all about and working here for a while, we want to make sure that we get local people who have families here who know the climate and the situation and are well-adapted to staying and becoming long-term employees,” he said.

In the News The decision by the US Forest Service in July to approve the Ucore Bokan Mounwww.akbizmag.com

tain Mining Plan of Operations identified certain modifications to the plan to minimize potential environmental effects. However, altogether, the decision allows for a five-year plan of operations for mining activities on the company’s Bokan Mountain claims, to include the requested drilling, camp facility and use of an existing gravel pit. Due to the finding of no significant impact, a more formal environmental impact statement is not required by the agency. Both the State of Alaska and the Southeast Alaska Conservation Council submitted comments and questions regarding the initial Environmental Assessment. The council had argued that the plan posed impact to returning salmon, impacts from road use, insuﬃcient analysis of disposal of waste water from the camp, and potential reduction in water supply to streams from the planned operations. Also this summer, Ucore announced results of additional testing of ore from the Bokan-Dotson Ridge deposit. The twenty-ton sample was sent to a Wedel, Germany, company that processed the sample using a large-scale X-ray transmission (XRT) ore sorter, finding that 96.3 percent recover of rare earth oxides. The test accomplished two benefits for Ucore: first, confirming that the method of using XRT technology is effective in regard to successively larger ore throughput volumes, according to the company, and also that the company can use a smaller mill facility as a result of the technology, which will cut cost. “The confirmation of XRT effectiveness at large scale is an important milestone in Ucore’s march to mine construction,” McKenzie announced in a prepared statement. “The company is the first in the rare earth industry to demonstrate XRT as a beneficiation technique... XRT shows the clear potential to dramatically reduce the volume of material feeding the mill facility and an equally dramatic increase in TREO ore grade without a great deal of processing.” The executive also pointed out the environmental benefits of such technology. “The addition of an XRT circuit prospectively reduces capital and operating costs, with a smaller processing footprint than is the norm for REE facilities, and with no tailings www.akbizmag.com

facility at surface upon mine closure,” he said. “A zero tailings footprint is a unique environmental objective, and we are aware of no other mine, rare earth or otherwise, that has accomplished such a design feature. ”

Northern Focus As a company that focuses on the development phase of mining, Ucore says it specializes in projects concerning rare metal resources with near-term production potential. Along with its 100 percent stake in the Bokan-Dotson

Ridge project, the company has interest across the north and Arctic regions, with other projects in the Ray Mountains region of central Alaska accessed by the Dalton Highway and barge from the Yukon River; Sandybeach Lake, Nunavut; Lost Pond, Newfoundland; and various claims across western Newfoundland and in Labrador.  Attorney and author Nicole A. Bonham Colby writes from Ketchikan.

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special section

Mining

Alaska’s Gold to Alaskans Dear What happens to the gold that leaves the Last Frontier? By Mari Gallion

ccording to the USGS, in 2011 Alaska produced 25,400 kilos of gold, second only in production to Nevada, which produced 172,000 kilos; Utah came in at a distant third place with 11,788. Rather than saying where gold can be found in Alaska, as it is found just about everywhere, it is more practical and direct to mention where it can’t (or rather, hasn’t) been found: Yukon Flats and the North Slope. According to the Resource Development Council’s website, approximately three hundred placer mines produced 85,000 ounces of gold, as well as platinum, in Alaska in 2012. Add to that the large mines, like Pogo, Kensington, Greens Creek, and Fort Knox, that have become household names, and anyone can see that there’s “gold in them thar hills”—as well as in the rivers, rocks, ﬂat lands, and back yards. Just like with oil, gold needs to be refined in order to be of virtually any practical use—that said, where does Alaska’s gold go when it leaves the ground?

The Minor Miners In a state of such vast size and opportunity, it would follow that there are many independent individuals and 126

small-scale placer miners out working these sites. “I meet a lot of the small scale miners, the one- to ten-person operations,” says Michael Robuck, owner of the Alaska Mint. “They sell us gold specimen pieces, which are pieces of quartz with a little bit of gold in them, and a wide variety sizes of nuggets, all the way down to dust.” “These miners are from all over the state,” Robuck says, and when he says “all over,” he means it. “From above the Brooks Range, Nome, all over Western Alaska, even to Canada and down into Southeast—from Ketchikan to the top of the state.” Robuck’s family has been in the Alaska jewelry business in Anchorage and Kenai since 1967, but he didn’t start the Alaska Mint until 1991. And mind his own business Robuck does, as he is not schooled on what the larger Alaska operations do with their gold. “We don’t buy direct from the big guys at all. What we do,” he continues, “is different. The miners will come in; miners, prospectors—even just guys with metal detectors—with their gold. We buy that gold as we can afford to, and then in our retail store the first thing we try to do is re-sell it in its natu-

Alaska Business Monthly | November 2013

ral state. We either package them up as specimens or make them into jewelry. The smaller ﬂake and dust we make into glass bottles and sell in increments of a hundred dollars at a time.” If Robuck accumulates a bunch of gold he can’t or doesn’t sell, he ships it to a refiner in Utah. “But in percentages of what we buy and sell,” he continues, “it’s probably 1 percent or less. My goal is to turn it around and sell it in its natural state.” The Alaska Mint also sells custom jewelry and medallions made from gold and silver acquired from refineries. The gold and silver that goes into the blanks that the Alaska Mint uses for their unique medallions comes from the bigger mining operations in Alaska or Canada, but is sent by those operations to Utah or Idaho where it is refined, made into the blanks, and then is shipped back up to Alaska.

Local Smelting Oxford Assaying and Refining Corporation is another Alaska business that deals directly with the little guys. According to Oxford Vice President Toni Goodrich and Manager Gene Pool, all of the precious metals mined in Alaska are sent outside for refining; it is unknown exactly what percentage of Alaswww.akbizmag.com

ka’s gold placer comes from the small operations versus the bigger miners, as the sources and markets are so diverse. “We specialize in servicing the small to medium-sized placer mining operations—not the big guys,” Pool says. “Approximately 50 percent of the gold we buy comes from medium sized operations (twenty or more employees), and the other 50 percent comes from smaller mom and pop operations.” “Placer gold and its byproduct silver is what we source to buy and refine,” Pool says, adding that hard-rock gold and platinum deposits are also sourced in Alaska. “Metals are commonly smelted in facilities like ours before being sent outside for further refining,” Pool says. “What little bit never leaves Alaska is predominantly used in gold nugget jewelry and specimen pieces.”

The Yellow-Brick Road Pool and Goodrich describe what exactly is done with the gold to prepare it for shipment to their refinery in New York: “Placer gold is initially smelted and fluxing agents are added to remove the non-metallic impurities. We use an induction furnace with a ceramic and graphite lined crucible for the initial smelting. While the gold is homogenous, a sample is taken to determine the purity and then the homogenous metal is poured into a graphite mold and allowed to cool forming a doré bar,” which is a gold bar of low purity to be further refined. Once at the refiner, the gold enters its final stage of purification: It is refined initially using what’s called the Miller process. “The Miller process uses chlorine gas to separate the gold from the other metals,” Pool says. “While the gold is homogenous, chlorine gases are injected into the gold which causes the metals besides gold to stick to the gasses and float to the top. The floating by-products can then be skimmed from the top leaving just gold that is 98-99 percent pure.” “At this point the gold is pure enough to be used for most industrial needs,” Pool continues. “If a higher purity is needed for things such as investment grade bullion products or medical equipment we can refine the gold to .999 pure using an electrolytic process. www.akbizmag.com

“Gold that we reﬁ ne is then sold on the world commodities markets as a well as distributed to mints and manufactures around the world. At Oxford’s stores in Anchorage and Fairbanks we sell investment grade bullion products to the general public as well as commercial clients and supply gold, both reﬁ ned 24 karat and natural nuggets, to jewelers who manufacture jewelry locally in Alaska.” —Gene Pool Manager, Oxford

“Gold that we refine is then sold on the world commodities markets as a well as distributed to mints and manufactures around the world,” Pool says. “At Oxford’s stores in Anchorage and Fairbanks we sell investment grade bullion products to the general public as well as commercial clients and supply gold, both refined 24 karat and natural nuggets, to jewelers who manufacture jewelry locally in Alaska.”

The Fever Robuck, Pool, and Goodrich have all seen increased activity in all arenas— buying, selling, prospecting—in the last few years. “A lack of trust in US Government as well as a weakened dollar have driven many investors to the gold and silver markets,” Pool says. “Gold and silver have become common things people are hoarding as they are prepping for the worlds next disaster. Some gold miners also choose to take payment for their placer gold in refined products rather than US currency.” However, it’s not just preppers and small-scale miners who are seeing security and opportunity in precious metals. “We have also seen some larger operations moving into the state as the price of gold has risen over the last few years and making the development of new mines feasible,” Pool says.  Mari Gallion is Associate Editor at Alaska Business Monthly. November 2013 | Alaska Business Monthly

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special section

Mining

Photo courtesy of Coeur Alaska Inc.

Kensington Mine concrete silo in the underground Paste Plant area.

ALASKA 2013: MINING REVIEW

By Curtis J. Freeman

aving enjoyed one of the warmest and driest summers on record, most of Alaska is now paying the piper as unseasonably cold and in many areas, snowy, weather takes hold of Alaska. With the termination dust comes news that is both good and bad, a common theme in what is turning out to be a year of significant cutbacks for exploration, development, and production plans. You will note that many of the projects summarized below were reporting 2012 activity that was released in late 2012 or early 2013,

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leaving a thundering silence hanging over much of Alaska during 2013. Now that the bulk of the 2013 exploration is completed or in the last stages of being completed, who did what, where, has become clearer. Here is what I can see in the rearview mirror: Of the 49 exploration projects I have been tracking around the state, the two largest (Pebble and Donlin), will account for about one-third of this year’s estimated exploration expenditures. The top five projects will account for almost 50% of this year’s estimated exploration expen-

Alaska Business Monthly | November 2013

ditures. Unfortunately, 30 of the 49 “active” exploration projects look to be on track for spending little or nothing on exploration during 2013. As far as actual dollars into the ground, it is looking like 2013 exploration expenditures are going to be in the $125-150 million range, down almost 50% over what we saw in 2012 and only a third of the peak exploration spending levels we saw in 2011.

Western Alaska

Teck Resources Limited and partner NANA Regional Corp. announced www.akbizmag.com

Our People Our Community Julie brings boundless energy and enthusiasm to her job at Fort Knox, and as a mother to her young, active family.

On arriving in Fairbanks, Julie and her family found a welcoming and friendly community. Their five children immersed themselves in school, scouting and youth sports, while Julie and her husband took up active volunteer roles. The family “was born to be Alaskan” she says now. Coming from a family of engineers, problem solving skills were in Julie’s DNA. From her first Fort Knox job in mine planning, Julie knew she’d found a collaborative work environment that gave her the flexibility to handle her active family life. Her current job as the mine’s Continuous Improvement Manager offers her leadership opportunities, access to new technologies and the chance to work with a dedicated team. “It’s a perfect fit,” Julie says. Harnessing Julie’s energy and enthusiasm has helped Fort Knox find ways to improve operations. She makes good things happen.

Fairbanks Gold Mining Inc. A Kinross company

kinross.com

year-end 2012 and first-half 2013 results from its Red Dog mine. For 2012 the mine produced 529,100 tonnes of zinc in concentrate. Zinc ore grade for the year was down slightly at 18.2% and mill recoveries were steady at 81.3%. The mine also produced 95,400 tonnes of lead in concentrate for the year. Lead ore grade for the year decreased slightly to 4.6% while mill recoveries increased significantly to 57.7% compared to 45.9% for 2011. Operating profit was $361 million, compared with $496 million in 2011. Revenue and production were down due to lower ore grades from the Aqqaluk pit, higher royalties, and slightly lower mill availability. Mill throughput for 2012 was 3,576,000 tonnes of ore compared to the record 3,673,000 tonnes the previous year. During 2012 the mine paid partner NANA Development, Inc. and the State of Alaska royalties of $137 million versus royalties of $129 million in the year-previous period. In addition, the net profits royalty paid to NANA Development, Inc. increased from 25% to 30% in the fourth quarter of 2012. In the first half of 2013 the mine produced 266,900 tonnes of zinc in concentrate. Ore grades were 17.8% and 16.9%, with mill recoveries of 82.3% and 85% for the first and second quarters, respectively. The mine also produced 47,900 tonnes of lead in concentrate. Lead ore grade were 3.9% while mill recoveries increased to 66.8% and 66.2 for the first and second quarters, respectively. The mine posted a $71 million operating profit for the first quarter and a $56 million profit for the second quarter. Sales during the quarter were up significantly year on year and the mine plans to ship 1,039,000 tonnes of zinc concentrate and 174,000 tons of lead concentrate from the port facility this shipping season. Zazu Metals Corporation announced that a second Cost Reimbursement Agreement had been signed with Alaska Industrial Development and Export Authority (AIDEA). The focus of this agreement is to evaluate the ore handling potential of AIDEA’s haul road and port that currently services Teck’s Red Dog mine. A second study will determine if modifications are required for handling Lik concentrate. Current resources at Lik include Lik South with an Indicated Mineral Resource of 18.74 million tonnes grad130

ing 8.08% zinc, 2.62% lead, and 52.8 grams of silver per tonne (gpt silver) plus an Inferred Mineral Resource of 1.23 million tonnes grading 6.80% zinc, 2.12% lead, and 35 gpt silver at a 5% zinc cutoff grade. Lik North is an additional 5.18 million tonnes grading 9.65% zinc, 3.25% lead, and 51 gpt silver of Inferred Resource at a 7% zinc cutoff grade. Graphite One Resources, Inc. pulled off a rare event in December 2012 at its Graphite Creek graphite prospect. After only one year of drilling, they announced the prospect’s first industry compliant resource. Using a 3% cut-off, the project has an inferred resource of 107.2 million tonnes grading 5.7% graphitic carbon containing 6,196,160 tonnes of graphite. The 2.2 kilometer long northeast striking, 60-degree northwest-dipping resource remains open along strike and down dip. Significant drill results include hole 12GC010 which intersected 216.67 meters of 3.13% graphitic carbon including 83.55 meters of 6.03% graphitic carbon and 21.55 meters of 11.0% graphitic carbon, hole 12GCH005 which returned 172.79 meters grading 5.39% graphitic carbon, including 54.87 meters grading 10.03%, and 42.0 meters grading 12.01% graphitic carbon, and hole 12GCH008 which returned 177.0 meters grading 3.0% graphitic carbon including 52.0 meters grading 6.02%, and 30.59 meters grading 7.07% graphitic carbon. Initial beneficiation tests demonstrated that a leaching process could produce graphitic carbon from a rough concentrate with a purity of 99.2%. Metallurgical test work is ongoing to develop a simple concentration and leaching process to produce an ultra-high purity (99.9%) graphite product. NovaGold Resources, Inc. announced that it has completed the sale of the Rock Creek gold project to Bering Straits Native Corporation for $6.265 million. The company also announced that the State of Alaska accepted completion of the initial phase of the Rock Creek closure plan and released $6.8 million of the $20.3 million financial assurance bond. The balance of the financial assurance has been transferred to Bering Straits which has

Alaska Business Monthly | November 2013

assumed full responsibility and liability for the remainder of the reclamation activities at Rock Creek. In October 2012 Millrock Resources, Inc. and funding partner Kinross Gold announced results from its 1,242 meter, 9-hole 2012 core drilling program at the Council gold project west of Nome. A new discovery was made at the Elkhorn prospect where hole COU12-023 cut 7.01 meters averaging 2.58 grams of gold per tonne (gpt gold) within a 14.02 meter interval averaging 1.45 gpt gold. The 2012 drilling consisted of seven core holes totaling 942 meters. At the Upper Ophir prospect two core holes totaling 287 meters were drilled with hole COU12025 intercepted 7.62 meters averaging 1.09 gpt gold. Following release of these data, Kinross Gold dropped its option on the Council project. NovaGold Resources, Inc. reported year-end 2012 results and reported on 2013 progress from its activities at the Donlin Creek project, a 50:50 joint venture with Barrick Gold on lands leased from Calista Corp. The project’s expenditures for 2012 came in at $33.6 million. These expenditures were directed primarily at its on-going permitting efforts to complete an Environmental Impact Statement (EIS). The approved budget for 2013 is $30 million for permitting, engineering, environmental, community development, and overhead. During early 2013 the company transitioned into the Preliminary Draft Environmental Impact Statement (PDEIS) phase of permitting. The company has already completed the Donlin Gold Public Scoping component of the NEPA process. The company submitted comprehensive Donlin Gold environmental and social baseline data to the US Army Corps of Engineers to enable preparation of the EIS. Permitting, which commenced in 2012, is expected to take 2 to 3 more years to complete. The partners anticipate that the Corps will draft the PDEIS in preparation for issuance of the draft EIS in 2014.

After struggling to reach designed commercial production levels for much of the last 2 years, Fire River Gold Corp. announced in mid-2013 that it www.akbizmag.com

Photo by Chris Arend/Courtesy of NANA

Red Dog concentrate being loaded on a Foss lightering barge to be taken to a larger ship for export.

had commenced the process of placing its Nixon Fork gold mine on care and maintenance. Although progress at the mine was made toward reaching commecial production, operations were negatively impacted by continued inclement weather, logistical challenges relating to air deliveries of key production supplies and fuel, and unscheduled downtime for equipment repair and lower than anticipated gold recoveries in the mill.

sults include 33.7 meters grading 1.09 gpt gold in hole VM1208, 29.3 meters grading 1.63 gpt gold in hole VM1210, and 85.3 meters grading 1.49 gpt gold in hole VM1213. Indicated resources now stand at 3.41 million tonnes averaging 1.48 gpt gold for 162,000 ounces, and inferred resources are 53.25 million tonnes averaging 1.05 gpt gold for 1,799,000 ounces of gold utilizing a cutoff value of 0.5 gpt gold. No drilling was conducted on the project in 2013.

Freegold Ventures Limited announced results from its 2012 drill program and an updated industry compliant Mineral Resource estimate at its Vinasale gold project near McGrath. A total of 13 holes (3425 meters) were drilled in 2012 on geochemical and geophysical targets in the Northeast and the Central Zones. Significant re-

Silver Predator Corp. announced that it has completed an option agreement with privately-held Plan B Minerals Corp. whereby Plan B can earn up to a 100% interest in the Illinois Creek gold-silver property. Under the agreement, Plan B will pay an aggregate $264,500 and a total of 2,000,000 common shares of Plan B through De-

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cember 2016. Silver Predator will retain a 0.5% net smelter returns royalty in the property, provided a feasibility study establishes a minimum proven resource of 500,000 ounces of gold. The property is centered on a 10-kilometer long east-west striking mineralized zone containing an open pit heap leach gold-silver mine that was productive in the mid-1990s. The news that has dominated the Alaska scene this fall is not the kind of news our industry was hoping to hear but here it is just the same. Northern Dynasty Minerals Ltd. announced that Anglo American has given notice under the Pebble limited partnership agreement that it has chosen to withdraw from the Pebble copper-molybdenum-gold project, leaving Northern Dynasty with 100% interest in the project. An-

November 2013 | Alaska Business Monthly

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glo American explained their decision to withdraw from the project as part of a corporate move to prioritize its advanced-stage investments in projects with the highest value and lowest risks. Anglo American has invested approximately $541 million in exploration expenses since it entered into the project. When added to Northern Dynasty’s initial $180 million contribution, investments in the project total $680 million, not counting that portion of the $80 million 2013 budget approved earlier in the year. This work included over one million feet of drilling in more than 1,000 drill holes since the deposit was discovered in 1988! Earlier in 2013 the partners had released economics and employment estimates indicating that during the 5-year construction period of the mining facility, the project would employ 2,525 people directly and supply an additional 925 indirect jobs in Alaska. In the Lower 48 states, the mine would employ an additional 6,250 indirect jobs. During the first 30 years of mine life, the operation would employ 915 people directly and an additional 1,175 indirect jobs in Alaska. During the same 30-year period in the Lower 48 states, the mine would employ an additional 305 people directly and an additional 6,070 indirect jobs. Average annual employee salaries estimated during construction and the first 30 years of operations average $63,500 and $72,500, respectively, which equates to wages that are 24% and 42%, respectively, above the Alaskan average annual income. It is estimated that 75% of the mine-based jobs would be held by Alaskan residents, generating some $400 million per year in contributions to the Alaskan economy during construction and $1.14 to $1.43 billion per year in contributions to the Alaska economy during operations. During the 5-year construction period the project would pay the State of Alaska $27 million per year in taxes and royalties. During the first 30 years of mine operations, the project would pay the State of Alaska $136 to $180 million per year in taxes and royalties. Federal government revenue generated in Alaska would average $54 per year during the 5-year construction period and $164 to $218 million per year during the first 30 years of operations. Estimated annual tax receipts to 132

the Lake and Peninsula Borough would range from $29 to $33 million per year the first 30 years of mine operations compared to the commercial fishing industry’s tax contributions of $1.5 to $2 per year. During the first 30 years of mine operations, the mine would churn out 150,000 to 300,000 metric tonnes of copper, 10 to 40 million pounds of molybdenum, 400,000 to 900,000 ounces of gold, 1.25 to 2.25 million ounces of silver, and commercially significant amounts of palladium and rhenium. This 30-year production schedule would consume only 17% of the Pebble deposit’s known resources, indicating the mine could be a part of Alaska’s economy for more than 100 years. Last October TNR Gold Corp. announced results from a 3-hole, 814 meter drilling program at its Shotgun gold project. Significant results include 242.2 meters grading 1.25 gpt gold in hole SR12-56, 209 meters grading 1.02 gpt gold in hole SR12-57, and 83 meters averaging 0.82 grams of gold per in hole SR12-58. Geophysical surveys indicate a correlation between resistivity and chargeability results that suggest mineralized zones continue to depth and along strike. The company also announced completion of an industry compliant resource estimate that included inferred mineral resource of 20,734,313 tonnes grading 1.06 gpt gold for a total of 705,960 ounces gold using a 0.5 gpt gold cut-off. This mineral resource estimate is based on 34 diamond drill holes totaling 4,932.3 meters. The mineralization at Shotgun Ridge crops out at surface on a topographic high point and is only defined to a vertical depth of 150 meters. Millrock Resources, Inc. announced that it had entered into an exploration agreement with Bristol Bay Native Corporation on approximately 650,000 hectares of land containing at least three known porphyry copper occurrences, Kawisgag, Mallard Duck Bay, and Bee Creek. At the drill-ready Kawisgag prospect there are two main centers of mineralization and alteration which locally contain disseminated and vein chalcopyrite, molybdenite, and pyrite at surface. The undrilled Mallard Duck Bay prospect is a zone of hydrothermal

Alaska Business Monthly | November 2013

alteration covering a +8 square kilometer area. Mineralization at the Bee Creek prospect is hosted in hornfelsed sediments intruded by a multiphase diorite stock containing mineralized veins and disseminated chalcopyrite, molybdenite, and pyrite. Drilling by Metallica Resources, Inc. and Full Metal Minerals Ltd. intersected 118 meters averaging 0.31% copper, 0.009% molybdenum, and 0.126 parts per million gold. Under terms of the deal, Millrock must incur exploration expenditures of $5 million and pay $725,000 prior to December 31, 2019. A sliding-scale Net Smelter Return royalty ranging from 1% to 2% is payable on gold with a 1.0% Net Smelter Return royalty due on production of all other metals. Full Metal Minerals Ltd. announced 2012 drilling results and an industry compliant mineral resource at Pyramid copper-gold-molybdenum project. At a 0.21% copper equivalent cut-off, total contained copper in the inferred resource category is estimated to be 1,338,000,000 pounds of copper, 74,000,000 pounds of molybdenum, and 488,000 ounces of gold. At a 0.21% copper equivalent cutoff, this near surface supergene enrichment zone hosts 93.7 million tonnes averaging 0.40% copper, 0.019% molybdenum, and 0.092 gpt gold, or 0.55% copper equivalent. This equates to 823,000,000 pounds of copper, 40,000,000 pounds of molybdenum, and 277,000 ounces of gold. The hypogene zone hosts 79.1 million tonnes averaging 0.26% copper, 0.020% molybdenum, 0.083 gpt gold, or 0.45% copper equivalent at a 0.21% copper equivalent cutoff. This equates to 514,000,000 pounds of copper, 35,000,000 pounds of molybdenum, and 212,000 ounces of gold. The mineral resource estimate shows that the hypogene mineral resource remains open to depth and along strike in most areas, and the higher grade supergene enriched mineralization, dominated by chalcocite and local covellite, is also open for expansion. The supergene blanket has a variable depth, extending to below 250 meters surface in some areas.

Interior Alaska

Kinross Gold announced year end 2012 results and first-half 2013 producwww.akbizmag.com

Photo courtesy of Avalon Development Corporation

CnC Drilling’s CS14 drill rig on Freegold Ventures’ Golden Summit project, Dolphin deposit, Fairbanks District.

tion results from its Fort Knox mine. The mine produced 359,948 ounces of gold in 2012 at a cost of $663 per ounce. The valley leach received 29,859,000 tonnes of ore grading approximately 0.31 gpt gold. The company also tabled year-end 2012 resource updates that included proven and probable reserves of 237,745,000 tonnes grading 0.47 grams gold per tonne, equivalent to 3,609,000 ounces of gold. The mine also tabled measured and indicated resources of 99,824,000 tonnes grading 0.43 grams gold per tonne, equivalent to 1,375,000 ounces of gold. Inferred resources at Fort Knox deposit included 13,605,000 tonnes grading 0.47 gpt gold, equivalent to 206,000 ounces of gold and inferred resources at the Gil deposit were 1,348,000 tonnes grading 0.75 gpt gold, equivalent to 33,000 ounces of gold. During the first half of 2013 the mine produced 195,992 ounces at a cash cost of $566 per ounce. During the first quarter the mine moved 7,361,000 tonnes of ore with the mill treating 134

2,894,000 tonnes grading 0.88 gpt gold with a mill recovery of 84%. The heap leach saw additions of 536,000 tonnes of ore grading 0.25 gpt gold. During the second quarter the mine milled 3,231,000 tonnes of ore grading 0.80 gpt gold and processed via valley leach an additional 10,261,000 tonnes of ore grading 0.30 gpt gold. Gold recovery in the mill averaged 84%. Gold recovery on the heap leach pad was not released but is rumored to be approximately 65%. During the first half of 2013 the mine continued pre-production stripping for its phase 7 pit expansion and valley leach expansion. Freegold Ventures Limited followed a full year of drilling in 2012 and a winter 2013 drilling program with a dramatic resource increase at is Golden Summit project. In addition, a first-ever oxide resource was calculated. The oxide cap is contained largely within the upper 60 meters of the resource. To date resource drilling has

Alaska Business Monthly | November 2013

been confined to a 300 meter by 1,500 meter area. The indicated resource using a 0.2 gpt gold cut-off for the oxide component is 25,026,200 tonnes grading 0.55 gpt gold (439,000 ounces). The inferred resource using a 0.2 gpt gold cut-off for the oxide component is 16,620,510 tonnes grading 0.47 gpt gold (253,000 ounces). The combined (oxide + non-oxide) indicated resource using a 0.3 gpt gold cut-off is 79,800,000 tonnes grading 0.66 gpt gold (1,683,000 ounces). The combined (oxide + non-oxide) inferred resource using a 0.3 gpt gold cut-off is 248,060,000 tonnes grading 0.61 gpt gold (4,841,000 ounces). This brings total resources in the Dolphin/ Cleary Hill area to 6,524,000 ounces of gold, making it one of Alaska’s largest gold resources. Preliminary bottle roll tests on the oxide material have indicated recoveries in excess of 85% in 24 hours. An extensive metallurgical program currently is underway. The company also announced additional drilling results from its summer 2103 infill www.akbizmag.com

and expansion drilling program at the Dolphin-Cleary Hill deposit. Significant results (not included in the above resources) include 574.2 meters grading 0.82 gpt gold in hole GSDL1311, including 31.7 meters grading 1.48 gpt gold and an additional 179.67 meters grading 1.13 gpt gold; 522.6 meters grading 0.68 gpt gold including 27.13 meters grading 3.00 gpt gold in hole GSDL1312 and an additional 66.14 meters grading 1.76 gpt gold, including 8.53 meters grading 7.49 gpt gold in hole GSDL1312; and 21.79 meters grading 1.15 gpt gold and an additional 26.82 meters grading 1.39 gpt gold Hole GSDL1313. Holes GSDL1312 and 1313 tested the deposit to the north where limited past drilling has been done and multi-ounce gold bearing veins crop out at surface. Alix Resources Corp. announced results from its 2012 exploration program at its Money Rock and West Pogo gold projects, the latter under joint venture with Corvus Gold, Inc. The 2012 drilling program consisted of two core drill holes on the West Pogo portion of the project and two at Money Rock

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for a total of 1,474 meters. Significant results from West Pogo drilling include 3.2 meters grading 1.10 gpt gold in hole WP12-02. Significant results from the Money Rock drilling include 1.6 meters grading 1.67 gpt gold in hole MR12-01. Gold in both holes occurs in quartz-arsenopyrite-pyrite veins associated with broad zones of patchy sericite-dolomite-silica alteration. The most surprising news of 2013 was the results of the Feasibility Study released by International Tower Hill Mines on its Livengood gold project. The study evaluated a 100,000 ton per day milling project that would produce 8 million ounces of gold over 14 years. Using the trailing three year gold price of $1,500 per ounce, the project did not generate a significant positive return. The study utilized proven reserves of 434 million tonnes at an average grade of 0.69 gpt gold (9.6 million ounces) and probable reserves of 20 million tonnes at an average grade of 0.70 gpt gold (454,000 ounces). The mine plan provides sufficient ore to support an annual production rate of approximately

577,600 ounces over an estimated 14 year mine life. Gold recovery is estimated at 80.3%. The design specifications include a conventional, owner-operated surface mine in a blast/load/haul operation with an average waste-to-ore stripping ratio of 1.34 to 1. Ore would be processed in a 100,000-ton-per-day comminution circuit consisting of a primary gyratory crusher, wet grinding in a single semi-autogenous mill and two ball mills, followed by a gravity gold circuit and a conventional carbon in leach circuit. Infrastructure costs came in at $708 million and included a lined tailings impoundment, two water reservoirs, an administration office/shop/ warehouse complex, and a 440 person camp. Project costs include construction of a $129 million, 50-mile electrical transmission line connected to the existing power grid near Fairbanks, Alaska. Initial capital costs clocked in at $2.79 billion with an additional $667 million in sustaining capital. Using the above parameters at the $1500 per ounce average gold price, the average life of mine pre-tax costs, including capital and operating costs, was $1,447 per ounce with

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Connors Drilling’s CS14 drill rig on the Peak zone, Contango Ore’s Tetlin project. Photo courtesy of Avalon Development Corporation

Left: Brad Juneau (left), President of Contango, and Curtis J. Freeman collecting pan concentrate samples on Contango Ore’s Tetlin project near Tok. Photo courtesy of Avalon Development Corporation

a net present value of negative $440 million at 5% discount rate, an internal rate or return on capital of 1.7%, and a 10.8year payback period. In December 2012, Contango ORE, Inc. announced the discovery of a new gold-silver-copper deposit at its Tetlin project. The $6.0 million 2012 exploration program included two diamond core drilling rigs and was followed up in 2013 by a $10 million, 3-rig drilling program, much of which was targeted at the newly discovered Peak zone. During 2012 the company completed 36,004 feet of core drilling in 36 holes. The 2013 136

Alaska Business Monthly | November 2013

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effort is on-going but includes at least 60 additional drill holes. Significant results from the Peak zone include 25.75 meters grading 7.832 gpt gold, 23.5 gpt silver, and 0.061% copper in hole Tet12016; 58.51 meters grading 14.452 gpt gold, 9.1 gpt silver, and 0.243% copper in hole Tet12018; 17.31 meters grading 21.766 gpt gold, 7.4 gpt silver, and 0.319% copper in Tet12035; 48.77 meters grading 14.717 gpt gold, 10.1 gpt silver, and 0.244% copper in hole Tet12036; 64.80 meters grading 13.101 gpt gold, 21 gpt silver, and 0.482% copper in hole Tet13062; 40.49 meters grading 16.550 gpt gold, 36.1 gpt silver, and 0.732% copper in hole 13063; 37.85 meters grading 4.366 gpt gold, 3.7 gpt silver, and 0.203% copper in hole Tet13079; 87.59 meters grading 4.025 gpt gold, 19.3 gpt silver, and 0.3% copper in hole Tet13082; and 138.02 meters grading 3.626 gpt gold, 11.4 gpt silver, and 0.113% copper in hole Tet13088. In general, all of the holes intercepted a 30 to 50-meter wide zone of retrograde skarn alteration and mineralization. The mineralization dips at a low angle to the north and trends northwest-southeast. In addition to gold, silver, and copper, other anomalous metals include arsenic, bismuth, cobalt, molybdenum, and tin with lesser, more sporadic anomalous lead and zinc. The mineralization has been extended over approximately 500 meters of strike. The company expects to complete its 2013 drilling program in early October, and hopes to release its initial industry-compliant resource estimate in early 2014. Endurance Gold Corporation announced that Liberty Gold Corporation has completed a $20,000 option payment and will continue with their option on the McCord Creek gold project near Livengood. As part of the 2013 program, 16 additional State of Alaska mining claims were recently staked and recorded, which increase the size of the property to 49 claims (7,820 acres). To date, 439 soil samples and 73 rock samples have been collected from the property. Previous programs identified seven multi-element soil anomalies, associated with multiple anomalous gold values (>100 parts per billion gold). The 2 largest multi-element soil anomalies are approximately 1500 by 400 meters and 1100 by 500 meters www.akbizmag.com

in size. Planning is in progress for the 2013 exploration program. In late 2012 Alaska newcomer Bluestone Resources, Inc. announced that they had acquired 100% of TriValley Corporationâ&#x20AC;&#x2122;s interest in the Richardson gold project and Shorty Creek copper-gold project, both in Interior Alaska. The projects were acquired for $200,000 from Tri-Valley through a Bankruptcy Court approved sale of assets. The company subsequently announced that it has terminated its leasehold interest in the Shorty Creek

copper-gold project but will continue to seek joint venture partnerships or financing opportunities for its Richardson. Several areas of the Richardson project have been targeted for drilling based on geological mapping, soil sampling, and ground geophysical surveys conducted in 2011. Welcome to Alaska, Bluestone Resources!

Alaska Range

Pure Nickel, Inc. announced results from its 2012 exploration program and plans for its 2013 at the MAN project,

HOW DO YOU get mOre OUt Of YOUr mine? JUSt ASK gOLDer. Complex geology, extreme weather and remote locations are challenges enough. Add to that, social, environmental and regulatory issues and you can appreciate why mining is a challenge. For over 50 years and working within six continents, Golder has developed unique expertise in open-pit and underground mining, delivering sound solutions that maximize value and minimize risk. engineering earthâ&#x20AC;&#x2122;s Development, Preserving earthâ&#x20AC;&#x2122;s integrity. Anchorage (907) 344-6001 solutions@golder.com www.golder.com

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Alaska. The exploration programs were funded by joint venture partner, Itochu Corporation. The $4.2 million 2012 program included collection of 3,010 soil samples, detailed mapping, 48 line kilometers of induced polarization geophysical surveys, and 2,233 meters of diamond core drilling. The work identified several new sulfide occurrences on the Alpha complex. Of the 8 drill holes completed, 7 targeted soil or geophysical anomalies, and 1 hole was drilled to investigate magmatic stratigraphy. Anomalous nickel-copper-platinum group element mineralization was intersected in in the southern part of the Alpha complex. Significant drill results include 80.95 meters grading 35 parts per billion gold, 106 parts per billion platinum, 174 parts per billion palladium, 0.17% copper, and 0.25% nickel hole PNI-12-063. A limited gold prospecting program also was completed and included a sample of glacially transported material assaying 14.0 gpt gold and 4.6% nickel. Earlier this summer the company announced commencement of its 2013 exploration program consisting primarily of a 2,200 meter drill program. The $3.5 million work program focused on a zone of nickel-copper- platinum group element mineralization, informally termed the Eureka zone, identified in the Alpha mafic-ultramafic complex in 2012. Rhyolite Resources Ltd. reported new assays results from 2011 drill holes at its Paxson gold project. Significant revised results from the Shalosky zone include hole WG11-12, which returned 1.5 gpt gold over 80.5 meters; hole WG11-02, which returned 1.8 gpt gold over 51.1 meters; and hole WG11-13, which returned 0.7 gpt gold over 46.8 meters. The results from the infill sampling suggest that the mineralization in the host schist may have stratigraphic controls as well as structural controls, in that the mineralization is now seen to continue beyond the limit of primary structures. The company also reported that surface sampling in 2012 identified a new volcanic massive sulfide occurrence located 6 kilometers northeast of the Shalosky gold zone. This occurrence, known as the HD-North, is exposed in outcrop and appears to be 2 meters thick striking N30E and dipping 45 degrees to the southeast. A 2 meter 138

by 2 meter chip sample from this zone returned 5.68% zinc, 2.80% lead, 0.48% copper, 65.6 gpt silver, and 0.53 gpt gold. In October 2012 Millrock Resources and partner Teck American, Inc. announced initial drilling results from 2012 exploration program at the Estelle project. Nine core holes (1,379 meters) were completed at the RPM, Oxide, and West Wing prospect. Significant results from the newly discovered RPM prospect include 102.11 meters interval averaging 1.04 gpt gold including 2.07 gpt gold over 21.94 meters in hole SE12-008, 1.14 gpt gold over 41.45 meters in hole SE12-004 from the Oxide Ridge prospect, and 1.01 gpt gold over 7.01 meters in hole SE12007 from the newly discovered West Wing prospect. Mineralization at RPM is hosted in sheeted quartz veins and stockworks exposed at surface. At the West Wing prospect drilling has defined a zone of strong hydrothermal alteration surrounding a diorite sill. Surface sampling suggests quartz veinhosted copper, iron, and arsenic sulfide mineralization with gold increases in intensity toward the lower contact of the sill. Additional follow-up exploration is planned for both of these new discoveries. Following their 2012 field programs, WestMountain Gold, Inc. announced an industry compliant resource update at its Terra gold-silver project in the Alaska Range and reported on its 2013 exploration and bulk sampling programs. Prior to the release of the resource estimate, joint venture partner Corvus Gold, Inc. agreed to sell all of its interest in the project, subject to a retained production royalty, for $6.2 million in cash over time and issuance of 1 million shares of WestMountain. Corvus will retain a sliding scale net smelter production royalty of 0.5% to 3% on precious metals and 2% on base metals. As for the resource, using a cut off of 5 gpt gold, the estimate includes indicated resource of 49,809 ounces of gold at 13.25 gpt gold and 112,723 ounces of silver at 29.98 gpt silver and inferred resource of 369,795 ounces of gold at 15.63 gpt gold and 653,884 ounces of silver at 27.63 gpt silver. Compared to previous estimates, tonnage increased 100%, in-

Alaska Business Monthly | November 2013

ferred and indicated resource increased by 150%, and gold grade grew by 25%. Results from a 23 ton surface bulk sample of the Ben and Fish Creek veins collected in 2012 returned a total of 75.1 ounces of gold and 28.2 ounces of silver The onsite milling and gravity recovery system yielded recoveries of 60% for gold and 15% for silver. The dorĂŠ bar from this work assayed 68.683% gold and 25.9% silver. Bulk sampling resumed in 2013 and assays received from samples taken from the Ben Vein open cut level 1338 graded 236.68 gpt gold and 520.17 gpt silver while samples from level 1336 returned 335.7 gpt gold and 623.41 gpt silver. This material has been mined and moved to the mill for bulk sampling. The company also reported that road construction from camp to the Ben Vein is complete, exploration drilling is ongoing, and surface construction of the underground mine portal is underway. Kiska Metals Corporation announced metallurgical results from its Whistler copper project. Locked cycle flotation tests on two composite samples returned average copper concentrate grades of 25.4% with recoveries averaging 91.9% for copper and 70.4% for gold. These tests indicate that the mineralization is amenable to standard froth flotation recovery techniques. Results from concentrate analysis also reveal low concentrations of deleterious elements and as a result no related smelter penalties are anticipated. Recoveries of 91.9% for copper and 73.1% for gold were obtained from locked cycle flotation tests on samples from hole WH08-08 (feed grade of 0.11% copper and 0.43 gpt gold). The test produced a concentrate grading 24.5% copper and 79.3 gpt gold. Recoveries of 91.9% were obtained for copper and 67.7% for gold were obtained from locked cycle flotation tests of samples from drill hole WH10-19 (feed grade of 0.22% copper and 0.53 gpt gold). This test produced a concentrate grading 26.2% copper and 46.5 gpt gold. Millrock Resources also announced acquisition of the Stellar copper gold project in the central Alaska Range. The project covers the old Zackly copper-gold skarn deposit with historical resource of 218,944 ounces of gold www.akbizmag.com

and 66.9 million pounds of copper contained in 1,244,000 tons grading 0.176 ounces of gold per ton and 2.69% copper. The company’s exploration crews have discovered porphyry copper-style mineralization at surface that has not been drill tested and soil sampling conducted by Millrock has extended anomalous zones substantially. Skarn mineralization has been traced over a strike length in excess of 3 kilometers with the resource occurring within a strike length of approximately 1 kilometer. The majority of the historical drilling occurred in the main resource area with the remaining trend, including extensive covered areas, seeing only limited drilling. The company began staking claims in the area in 2010 and since then has collected 388 soil, 199 rock, and 99 stream sediment samples that have led to discovery of 4 new copper and/or gold prospects. Of particular note is the Mars prospect, which is hosted in altered diorite intruding volcanic rocks with extensive gossan exposures that locally contain copper mineralization. Soil sample lines across altered zones consistently returned anomalous values including 950 meters averaging 763 parts per million copper and 1.2 kilometers averaging 462 parts per million copper. In mid-2013, the company announced that it had entered into a Letter Agreement with an as-yet to be named mining company whereby Millrock will grant a right of first refusal to the third party to enter into a Joint Venture Agreement concerning the Stellar project. The third party will fund an initial exploration program estimated to cost $200,000. The program will consist of regional geochemical sampling, geological mapping, and prospecting, which will be carried out in August. The joint venture partner will have an option to earn up to an 80% interest in the project if it exercises its right of first refusal.

Northern Alaska In early 2013 NovaCopper, Inc. announced additional 2012 drilling results and initial industry compliant mineral resource estimates for the South Reef and Ruby Creek zones of the Bornite deposit. At a 0.5% copper cutoff grade, the Ruby Creek Zone contains Indicated Resources of 6.8 www.akbizmag.com

million tonnes at 1.19% copper or 178.7 million pounds of contained copper. In addition, at a 0.5% copper cutoff grade, the Ruby Creek Zone contains Inferred Resources of 47 million tonnes of 0.84% copper or 883.2 million pounds of contained copper. At the base case 1.0% copper cutoff grade, the adjacent but deeper South Reef zone is estimated to contain an inferred resource of 43.1 million tonnes at 2.54% copper or 2.4 billion pounds of contained copper. Including the South Reef zone and the previously announced Ruby

Creek zone, the Bornite project is estimated to contain 179 million pounds of copper (6.8 million tonnes grading 1.19% copper) in the indicated category and 3.3 billion pounds of copper (90.8 million tonnes grading 1.64% copper) in the inferred category. The South Reef zone contains significant tonnages of very high-grade copper (+2%), suggesting parts of the South Reef zone could potentially be starter areas for an underground mining operation. Total expenditures for 2012 at Bornite were approximately $15.3 million. With

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announced budgets for 2013 coming in at $16 million. The 2013 exploration program is focused on expanding resources at the Ruby Creek and South Reef zones of the Bornite deposit. Significant results from recent drilling at South Reef include 50.6 meters at a grade of 3.41% copper in hole RC12-200, 69.6 meters at a grade of 2.01% copper in hole RC12-203, 71.2 meters at a grade of 3.66% copper in hole RC12-209, 73.8 meters at a grade of 2.69% copper in hole RC12-214, and 77.2 meters grading 4.27% copper in hole RC12-216. In April of this year the company announced the signing of a Memorandum of Understanding with the Alaska Industrial Development Export Authority (AIDEA) to investigate the viability of permitting and constructing an industrial access road to the Ambler mining district and the companyâ&#x20AC;&#x2122;s Upper Kobuk mineral project which encompasses both the Bornite and Arctic deposits. A further $8.5 million is included in the 2013 fiscal budget to support permitting activities for the Ambler Mining District Industrial Access Road. NovaCopper, Inc. announced the results of a preliminary economic assessment at its Arctic massive sulfide deposit, part of the larger UKMP project in the Ambler District. Highlights of the PEA study include an initial capital expenditure of $717.7 million and sustaining capital of $164.4 for total estimated capital expenditures of $882.1 million over the estimated 12-year mine life. In addition, closure and reclamation costs are estimated at $81.6 million. Pre-tax net present value at 8% was estimated at $927.7 million calculated at the beginning of the 2-year construction period and an internal rate of return of 22.8% for the base case. The after-tax net present value was $537.2 million and the after-tax internal rate of return was 17.9%. Estimated, pre-tax, payback of initial capital was 4.6 years and 5 years after-tax. A minimum 12-year mine life is envisioned, supporting a maximum 10,000 tonne-per-day conventional grinding mill-and-flotation circuit to produce copper, zinc, and lead concentrates containing significant gold and silver by-products. The life of mine strip ratio was 8.39 to 1. The average an140

nual payable production was projected to be 125 million pounds of copper, 152 million pounds of zinc, 24 million pounds of lead, 29,000 ounces of gold, and 2.5 million ounces of silver for life of mine. The estimated cash costs of copper came in at $0.62 per pound. The total â&#x20AC;&#x153;all-inâ&#x20AC;? cash costs clocked in at $1.26 per pound of copper. The project will require 15 megawatts of peak load electrical power for the 10,000 tonneper-day operation envisioned. Power will be generated on-site using diesel generators with an estimated power cost of $0.322 per kilowatt-hour. Access to the project is proposed to be via a road approximately 340 kilometers long, extending west from the Dalton Highway to the project. While the actual cost of this road remains unknown, the preliminary economic analysis assumed that a toll would be paid based on a $150 million, 30-year bond at a 5% interest rate, which would result in the project paying approximately $9.7 million each year for its 12-year mine life. The company plans to continue refining economic and operating parameters as it advances the project to the preliminary feasibility and feasibility stages. Despite a productive 2012 at its Sun volcanogenic massive sulfide project, Andover Ventures, Inc. recently filed for bankruptcy protection. Over the course of the 2012 program the company completed 20 core holes totaling 4,350 meters on the Sun, SW Sun, Stu, Sal, and Picnic Creek prospects. Significant results from the Sun deposit area 2012 drilling include hole 12-33 which returned 7 meters grading 2.31% copper, 3.03% lead, 8.55% zinc, 142.8 gpt silver, and 0.509 gpt gold; hole 12-29 which returned 6.2 meters grading 2.73% copper, 1.27% lead, 6.54% zinc, 116.4 gpt silver, and 0.396 gpt gold; hole 1238 which returned 6.2 meters grading 2.73% copper, 1.27% lead, 6.54% zinc, 116.4 gpt silver, and 0.396 gpt gold; and hole 12-42 which returned 2.2 meters grading 1.15% copper, 1.63% lead, 7.21% zinc, 157.6 gpt silver, and 0.320 gpt gold. In late 2012 Goldrich Mining Company announced it has sold on-site equipment at its Chandalar gold property for $900,000 to an affiliate of

Alaska Business Monthly | November 2013

NyacAU, LLC. The equipment will remain at the mine site and will be leased by Goldrich NyacAU Placer, LLC, a company owned 50/50 by Goldrich and NyacAU, LLC, for the production of gold at Chandalar. Approximately $8 million worth of equipment and supplies were transported to the property and operating commenced in the spring of 2013. The production goal for 2013 was 8,500 ounces of fine gold. In September of this year the venture received the necessary permits to expand its placer gold mining operations to accommodate multiple wash plants. Fabrication of a feeder capable of feeding 3 wash plants has been substantially completed. It will be shipped to Alaska this winter and will be commissioned for use with the existing plant in 2014. A second and third plant are planned to be added after 2014. The company has completed approximately 15,000 feet of drilling to date and have outlined a resource of 10.5 million cubic yards at an average head grade of 0.025 ounces of gold per cubic yard, for an estimated total of 250,000 contained ounces.

Southeastern Alaska

Hecla Mining announced year end 2012 and first half 2013 production results from the Greens Creek mine on Admiralty Island. The total cash cost per ounce of silver produced for the year was $2.70 per ounce versus negative $1.29 per ounce in 2011. The average grade of ore mined during the year was 11.13 ounces of silver per ton, down slightly from the average grade of 11.49 ounces per ton in the year previous. For the year the mine produced 6,349,235 ounces of silver, 55,496 ounces of gold, 21,074 tons of lead, and 64,249 tons of zinc. The 100,000 ounce decrease in silver production year-over-year is due to lower silver ore grade and higher mining costs, partially offset by higher mill throughput and lower milling costs. First quarter 2013 total cash cost per ounce of silver produced at Greens Creek for the quarter was $5.02 per ounce versus $2.24 per ounce in the year previous period, due primarily to lower by-product credits as a result of lower by-product production. Mining and milling costs per ton were up by 13% and 16%, respectively, in the first quarter compared to the same period in 2012. The increase in www.akbizmag.com

milling costs was primarily due to diesel fuel costs related to the generation of more power onsite due to lower availability of less expensive hydroelectric power. Both mining and milling costs were impacted by an increase in labor costs as a result of higher costs of medical and other benefits and higher salary costs. Higher mining costs are also the result of higher maintenance costs. The average grade of ore mined during the quarter was 12.74 ounces of silver per ton, up from the average grade of 11.08 ounces per ton that was mined in the first quarter of 2012. During the first quarter 2013 the mine produced 1,780,524 ounces of silver, 13,689 ounces of gold, 4,835 tons of lead, and 14,072 tons of zinc. The mill processed 197,823 tons of ore during the quarter. Silver production in the first quarter was 34% higher than the same period in 2012. This increase was due primarily to 20% higher tonnage and 15% higher grades compared to last year. Second quarter 2013 total cash cost per ounce of silver was $2.71 per ounce versus $1.03 per ounce in the year previous period. Mining and milling costs per ton were both up compared to the same period in 2012, primarily because of lower average head grades and increased use of on-site diesel generated power due to limited availability of hydroelectric power. The average grade of ore mined during the quarter was 13.72 ounces of silver per ton, up significantly from the average grade of 9.57 ounces per ton that was mined in the second quarter of 2012. During the second quarter 2013 the mine produced 2,018,961 ounces of silver, 15,486 ounces of gold, 5,778 tons of lead, and 15,538 tons of zinc. The mill processed 211,755 tons of ore during the quarter. Exploration results from late 2012 and the first half of 2013 continue to expand resources in the 200 South, NWW, Deep Southwest, 5250, and Gallagher ore trends. The Deep Southwest is a recently discovered zone which lies below and further west of the Southwest Zone. Significant intersections include 27.1 ounces of silver per ton, 0.39 ounces of gold per ton, 13.3% zinc, and 6.1% lead over 8.6 feet and 21.5 ounces of silver per ton, 0.31 ounces of gold per ton, 8.9% zinc, and 4.1% lead over 10.5 feet. Drilling at 5250 zone returned 21.9 ounces of silver per ton, 0.05 ounces of gold per ton, 5.8% www.akbizmag.com

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An outcrop at the Mallard Duck Bay porphyry copper-gold-molybdenum prospect near Chignik Lagoon. Photo courtesy of Millrock Resources Inc.

zinc, and 2.8% lead over 24.6 feet. At 200 South significant results included 50 feet grading 0.08 ounces of gold per ton, 35.9 ounces of silver per ton, 11.2% zinc, and 4.9% lead in hole GC3483 and 19 feet grading 0.49 ounces of gold per ton, 65.8 ounces of silver per ton, 7% zinc, and 3.5% lead in hole GC3490. The company also announced year-end 2012 reserves and resources for the mine including proven reserves of 12,000 tons grading 9.3 ounces of silver per ton, 0.095 ounces of gold per ton, 2.7% lead, and 7.8% zinc and probable reserves of 7,845,600 tons grading 12.0 ounces of silver per ton, 0.092 ounces of gold per ton, 3.4% lead, and 9.0% zinc. In addition, the mine contains 448,600 tons of indicated resources grading 5.9 ounces of silver per ton, 0.119 ounces of gold per ton, 3.2% lead and 7.0% zinc, and 3,784,500 tons of inferred resources grading 11.4 ounces of silver per ton, 0.100 ounces of gold per ton, 2.4% lead, and 6.2% zinc. I know we are not supposed to do this, but if you add up the silver in all categories, the mine is carrying over 140 million ounces of silver in resource! Coeur dâ&#x20AC;&#x2122;Alene Mines Corp. announced year-end 2012 and first half of 2013 production and exploration results for its Kensington mine. For 2012 the mine produced 82,125 ounces of gold. While cash operating costs for the year were up 25% year on year to $1,358 per ounce, cash operating costs in the fourth quarter were down 41% year on year to $1,065 per ounce and declined further in 2013. For the year, the mine processed 394,780 tons of ore grading 0.22 ounces of gold per ton. Recovery averaged 95.6%, a significant increase over the already impressive 92.7% recovery rate experienced in 2011. For the first quarter of 2013 the mine produced 25,206 ounces of gold at a cash cost of $1,055 per ounce and the mill processed 129,057 tons of ore averaging 0.20 ounces of gold per tonne, 13% lower than the fourth quarter 2012, but 11% higher than first quarter 2012. Mill recoveries came in at 96.2%. The gold grade is expected to gradually improve during the remaining quarters of 2013 as higher-grade stopes are mined and processed. Rebuilding of generators during the first quarter limited backfilling rates, which negatively impacted overall efficiency and costs. For the second quarter

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Alaska Business Monthly | November 2013

2013 the mine produced 23,162 ounces of gold, an 8% decrease from the first quarter 2013. Cash operating costs per ounce were $1,115, compared to $1,055 per ounce in the first quarter 2013. Total production costs were $1,687 per ounce, a reduction of over $100 per ounce from the year-previous period. Average mill head grade of 0.18 ounces of gold per ton was 10% lower than the first quarter 2013 due to the processing of lower-grade stockpile ore. Average recovery was 98.2%. The gold grade is expected to gradually improve during the second half of 2013 as higher-grade stopes are mined and processed, which we expect will lower unit operating costs 20% compared to the first half of the year. Additional cost reductions targeted for the second half of the year include reductions in contract services and lower underground backfill costs due to lower prices for backfill material. During 2012, the company spent $7.1 million on exploration at the mine, completing 143,796 feet of core drilling mostly devoted to in-fill drilling of Block K and the Raven veins. Additional drilling focused on other targets such as Kensington South, the Ann Trend, Elmira, and the historic Jualin mine. The total 2013 exploration program is expected to be $8.6 million with primary focus on definition and expansion drilling on Zone 10, Zone 50, Zone 30, Kensington South, Elmira vein, and Ann. In addition, drilling was performed in 2013 at the Comet target, which is situated about 5,000 feet southeast of the high-grade, narrow vein Raven deposit. Drilling results at the Raven vein, located approximately 2,000 feet from the main underground workings at Kensington, identified initial proven and probable reserves of 50,400 ounces contained within 151,000 tons, at an average gold grade of 0.33 ounces of gold per ton, 51% higher than the overall average reserve grade at Kensington. The mineâ&#x20AC;&#x2122;s proven and probable reserves at year-end 2012 totaled 1.0 million ounces of gold compared with 1.3 million ounces of gold in 2011. The mine is expected to produce 108,000 to 114,000 ounces of gold during 2013. In November 2012 Constantine Metal Resources Ltd. announced the signing of a non-binding letter agreement on the Palmer volcanogenic www.akbizmag.com

massive sulfide project with Alaska newcomer Dowa Metals and Mining Co., Ltd. of Japan. Under terms of the agreement, Dowa will have an option to earn a 49% interest in the project by making aggregate expenditures of $22 million over a 4 year period. Expenditures for each year shall not be less than $3 million with Dowa funding a minimum of $3 million in year one as a firm commitment. Included in the aggregate expenditure are cash payments to Constantine totaling $1,250,000 over four years. Constantine is expected to be the operator during the earn-in period. Initial results for the first 4 holes of the 4000-meter 2013 drill program focused on expanding the South Wall and RW Zones. Significant results include 10.63 meters grading 1.77% copper, 0.27% zinc, <0.01% lead, 13.8 gpt silver. and 0.15 gpt gold in hole CMR13-43; 21.71 meters grading 2.36% copper, 9.06% zinc,0.13% lead, 28.8 gpt silver, and 0.33 gpt gold in hole CMR13-45; and 12.9 meters grading 0.83% copper, 10.26% zinc, 0.37% lead, 63.3 gpt silver, and 0.44 gpt gold in hole CMR13-46. This drilling significantly expands an area of thick Zone II mineralization, and opens the potential to add additional tons between the base of Zone I and the currently defined top of Zone II. The company also reported that initial metallurgical test results indicate that sulfide mineralization has responded well to flotation with the initial series of rougher and cleaner tests yielding high grade copper and zinc concentrates. The project is host to an industry compliant inferred resource of 4.75 million tonne grading 1.84% copper, 4.57% zinc, 0.28 gpt gold, and 29 gpt silver. Welcome to Alaska, Dowa Metals and Mining!

averaging 20.29 gpt gold, hole 12J-3 which returned 79.41 gpt gold over 2.05 meters, including 192.5 gpt gold, 227 gpt silver, 1.0% lead, and 0.7% zinc over 0.8 meters, and hole 315E which returned 48.12 gpt gold over 1.13 meters. Using a cut-off of 2 gpt gold, the updated resource estimate contains an indicated resource of 821,100 tonnes grading 6.91 gpt gold for 182,400 ounces of gold in the Deep Trench and Main veins. The Deep Trench and 5 veins that have had limited drill testing contain an additional inferred resource of 51,600 tonnes grading 7.73 gpt gold for 12,800 ounces of gold. The average grade increased by 42.2% compared to the previous resource estimate. The resource remains open in multiple directions along the defined veins. Arrowstar Resources Ltd. announced that it had filed its application for a drilling permit on its Snettisham iron ore prospect located near Juneau. The drilling permit covers a proposed 3,600 meters of drilling consisting of 9 to 15 holes ranging in depth from 200 to 500 meters. Initial review has identified 3 high magnetic intensity areas over a 750 meter

distance with the largest area having a magnetic intensity greater than 78,000 nanoTeslas over a surface area of approximately 750 meters by 750 meters. The drilling program is designed to determine the extent of the mineralization at depth, the mineralogy and petrology, the contact rock, and the magnitude of the mineralization. Additional geophysics and geologic mapping would accompany the drilling in the proposed $1.2 million exploration program. Results from rock sampling completed conducted in 2012 returned an average grade of average 21% iron and 5.2% titanium while the sulfur, phosphorus, silicon dioxide, and aluminum oxide grades on samples containing high iron conformed with commercial grades. The company also conducted a series of magnetic separation tests using different grind sizes. At the 0.15 millimeter size, concentrate grades of ranged from 80.0% and 85.2% iron oxide. These high concentrate grades may be suitable for dry magnetic separation. Pure Nickel, Inc. announced assay results for the 2012 drilling program on the companyâ&#x20AC;&#x2122;s 100% owned Salt Chuck

Grande Portage Resources Ltd. announced year-end 2012 drilling results and a new industry compliant resource estimate for its Herbert Glacier gold project near Juneau. The 2012 drilling included 8,900 meters of core drilling in 62 holes. Significant drilling results include hole DDH 311A which returned 8.08 meters grading 55.53 gpt gold including 3.58 meters grading 108.86 gpt gold, hole DDH 311D which returned 3.42 meters grading 21.55 gpt gold, hole DDH 326B2 which returned 6.14 meters grading 24.37 gpt gold, hole 12G-5 which returned 3.55 meters www.akbizmag.com

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Photo courtesy of Sumitomo Metal Mining Pogo LLC

gold, 2.75% zinc, and 6 gpt silver. The company also announced the signing of a memorandum of understanding with the Ketchikan Gateway Borough over preferred infrastructure sites for its Niblack volcanogenic massive sulfide deposit. The Gravina Island Industrial Complex is the preferred site for mill and tailings facilities for the project. The understanding allows Niblack LLC to undertake a broad range of investigations to evaluate whether the site is both an acceptable and preferred location for siting such facilities. The investigations will include environmental, socio-economic, technical, financial, and engineering studies. In an ironic twist, the terminus of the much maligned and never built “Bridge to Nowhere” would have been Gravina Island.

A Pogo Mine employee works on a bar of gold doré.

copper-gold-silver-palladium property. The 2012 6-hole drilling program encountered high grade gold mineralization in a previously unidentified gold bearing structure in the North Pole Hill area of the property. High grade intersections include 127.8 gpt gold, 57.6 gpt silver, and 2.78% copper over 0.35 meters apparent width. The newly discovered mineralization is associated with previously untested soil geochemical and induced polarization geophysical anomalies which extend 1.5 kilometers along strike to the east and west. A second gold in soil anomaly splays southward and continues a further 1.7 kilometers. In addition to the remobilized gold-copper mineralization, broad zones of anomalous palladium concentrations were encountered at greater depths in the westernmost drill holes, including NPH-12-02 where a weighted 144

average concentration of 234 parts per billion palladium was intersected over 12.85 meters apparent width. Heatherdale Resources Ltd. announced late-season 2012 drilling results from a 10-hole, 15,500 foot of surface core drilling program on the Trio zone. The drilling intercepted 2 or 3 mineralized horizons separated by a unit called the ‘white rhyolite’. The white rhyolite unit (which is absent at Lookout zone) also resulted in the local development of a brittle-fracture network in-filled with sulfides to produce a classic stringer zone in a rhyolite flow dome sequence. Significant results from this drilling include hole S167 which intercepted 32.1 feet grading 0.27% copper, 0.29 gpt gold, 1.42% zinc, and 4 gpt silver and hole S172 which intercepted 20.3 feet grading 0.23% copper, 0.40 gpt

Alaska Business Monthly | November 2013

In late 2012 Ucore Rare Metals, Inc. announced its long-awaited Preliminary Economic Assessment (PEA) for the Dotson Ridge zone at its Bokan Mountain heavy rare earth property in Southeast Alaska. Highlights of the PEA Include a Net Present Value of $577 million at a 10% pre-tax discount rate, internal rate of return of 43% with a 2-3 year payback period, capital costs of $221 million including a complete on-site rare earth oxide separation plant, and a contingency provision in the amount of $25 million, a mining rate of 1,500 tonnes per day with 75% of mill feed eliminated via the use of dual energy X-Ray transmission sorting and magnetic separation resulting in approximately 375 tonnes per day reporting to the leach circuit. Average total rare earth recoveries are estimated at 81.6% with deployment of solid phase extraction technology to generate high purity individual rare earth oxides at the site. Annual rare earth oxide production is projected at 2,250 tonnes per during the first 5 years at full production, including 95 tonnes of dysprosium oxide, 14 tonnes of terbium oxide, and 515 tonnes of yttrium oxide. Mine life, using current resource estimates (5.3 million tonnes at an average grade of 0.65% total rare earth oxides) is 11 years with employment pegged at 170 full time employees. The design contemplates trackless mining with adit access and blast hole stoping with all tailings will be placed underground via cementwww.akbizmag.com

ed paste backfill. The processing plant will generate approximately 735 tonnes per day of tailings, significantly less than the mine requirement of approximately 1,030 tonnes per day. Nitric acid that is not consumed in the leach circuit will be recycled through the use of diffusion dialysis, reducing acid consumption by more than 75%. In July, 2013, the announced additional results from further bulk scale ore beneficiation testing on material from the BokanDotson Ridge deposit. A 20 tonne sample, collected from three locations within the Dotson Ridge deposit, was sent to TOMRA of Wedel, Germany. The sample was processed by a large scale x-ray transmission (XRT) ore sorter. Results show that 52% of the feed was rejected as waste, with 96.3% recovery of rare earth oxides, and a net increase in grade from a 0.77% rare earth oxide feed to a 1.56% output. At present, a 30 tonne bulk sample collected from Dotson Ridge in December 2012 is being prepared for XRT sorting. The output of that sorting process, scheduled to take place within the next month, will generate the final feed stock required by the company to conduct a comprehensive pilot plant for the project. In mid-September of this year, the company announced that the US Forest Service had approved permitting for the companyâ&#x20AC;&#x2122;s upcoming field program, designed to generate baseline information required for the completion of the final Bankable Feasibility Study, as well as the preparation of the mine construction permit applications. The planned work included infill resource drilling, geotechnical drilling and monitor well drilling as well as construction of an interim field camp from which to base operations. ď &#x2019;

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Jack DiMarchi: 907.378.1119 - Fairbanks Tim Reeves: 907.264.6714 - Anchorage

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Curtis J. Freeman, CPG #6901, is head of Avalon Development Corporation, PO Box 80268, Fairbanks, AK 99708. Phone: 907-457-5159. Fax: 907-455-8069. He can also be contacted by email at avalon@alaska.net or found online at avalonalaksa.com. www.akbizmag.com

November 2013 | Alaska Business Monthly

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ALASKA BUSINESS MONTHLYâ&#x20AC;&#x2122;S

2013 MINING MINING DIRECTORY DIRECTORY MINING COMPANIES Company Company

TopExecutive Executive Top

Avalon Development Corp. PO Box 80268 Fairbanks, AK 99708 Phone: 907-457-5159 Fax: 907-455-8069

Curt Freeman, Owner/Pres.

Bering Shai Rock & Gravel, LLC PO Box 196 Unalaska, AK 99685 Phone: 907-581-1409 Fax: 907-581-3409

Diane Shaishnikoff, Owner/Office Mgr.

Coeur Alaska Inc. 3031 Clinton Dr., Suite 202 Juneau, AK 99801 Phone: 907-523-3300 Fax: 907-523-3330

Wayne Zigarlick, VP/Gen. Mgr.

Donlin Gold LLC 4720 Business Park Blvd., Suite G-25 Anchorage, AK 99503 Phone: 907-273-0200 Fax: 907-273-0201

Stan Foo, Gen. Mgr.

FreeGold Ventures Limited 700 W. Georgia St., Suite 888 Vancouver, BC V7Y 1G5 Phone: 604-662-7307 Fax: 604-662-3791

Kristina Walcott, Pres./CEO

Goldrich Mining Co. 2607 Southeast Blvd., Suite B211 Spokane, WA 99223 Phone: 509-535-7367 Fax: 509-695-3289

William Schara, CEO

Kinross Fort Knox PO Box 73726 Fairbanks, AK 99707 Phone: 907-488-4653 Fax: 907-490-2290

Eric Hill, VP/Gen. Mgr.

Kiska Metals Corp. 510 Burrard St., Suite 575 Vancouver, BC V6C 3A8 Phone: 604-669-6660 Fax: 604-669-0898

Jason Weber, Pres./CEO

Liberty Star Uranium & Metal Corporation 5610 E. Sutler Ln. Tucson, AZ 85712 Phone: 520-425-1433

James Briscoe , CEO/Chf.Geologist

Millrock Resources Inc. PO Box 200867 Anchorage, AK 99520 Phone: 907-677-7479 Fax: 907-677-3599

Greg Beischer, Pres./CEO

NovaCopper Suite 1950 - 777 Dunsmuir St. Vancouver , BC V7Y 1K4 Phone: 604-638-8088 Fax: 604-669-6272

Rick Van Nieuwenhuyse, Pres./CEO

NOVAGOLD 789 W. Pender St., Suite 720 Vancouver, BC V6C 1H2 Phone: 604-669-6227 Fax: 604-669-6272

Gregory Lang, Pres./CEO

NTR Metals 5610 Silverado Way, Suite A7 Anchorage, AK 99518 Phone: 907-868-9017 Fax: 907-868-9018

Eric Prendeville, Anch. Office Mgr.

146

AK AK Estab. Estab. Empls. Empls. 1985

Mining District: Multiple Commodity: Precious Metals, Base Metals, Platinum Group Metals, Rare Earth Metals Recent Projects: Tetlin project, Golden Summit project, Richardson project, Vinasale project, Hajdukovich project.

2004

Mining District: Aleutian Chain Commodity: Spec rock, Rip Rap, Armor Stone Recent Projects: Barged Armor stone rock to Wainwright, AK; Building a solid fill dock/ sheet pile face on our water front property; Dump Truck and Equipment services.

1987

309

Mining District: Juneau Commodity: Gold Recent Projects: Key infrastructure projects have been completed including an underground paste plant, an Admin building, a new warehouse, and Phase II of the tailings dam.

2008

Mining District: Aniak Commodity: Gold Recent Projects: Started permitting process in July 2012.

1985

Mining District: Fairbanks,Goodpaster, McGrath Commodity: Gold Recent Projects: Golden Summit is the Company's flagship property. Located near Fairbanks, exploration activities in 2013 included 3,500 metres of diamond drilling as well as the updating of it's NI 43-101 compliant resource which was completed in June 2013.

1959

Mining District: Chandalar Commodity: Gold, Placer Gold Recent Projects: Chandalar.

1995

630

2009

Mining District: Goodpaster River Commodity: Gold, Copper, Silver Recent Projects: Metallurgy work done in 2012.

2003

Mining District: Iliamna Commodity: Copper, Gold, Molybdenum, Others Recent Projects: Big Chunk Super Project - Southwest Alaska Exploration for gold, copper, moly, zinc, and other metals. 413 State mining claims on 101 square miles in 2 blocks.

2008

Mining District: Alaska, Arizona Commodity: Base Metals, Gold, Precious Metals Recent Projects: Millrock Resources Inc. is an Alaska-based TSX Venture Exchange listed company focused on generating metallic mineral projects for joint venture exploration and development in Alaska and Arizona.

2012

Mining District: Ambler Commodity: Copper, Zinc, Lead, Silver, Gold Recent Projects: NovaCopper Inc. (TSX:NCQ, NYSE-MKT:NCQ) is a base metals exploration company focused on exploring & developing the high grade Upper Kobuk Mineral Projects in the Ambler mining district in Alaska-one of the richest and most prospective copper districts located in one of the safest geopolitical jurisdictions.

1998

Mining District: Kuskokwim Gold Belt, Nome Commodity: Gold, Placer Gold, Precious Metals, Base Metals Recent Projects: NOVAGOLD's 50%-owned flagship project, Donlin Gold in Alaska is a uniquely attractive asset which in terms of size, grade, exploration potential, production profile, and jurisdictional safety, is possibly the most important project in the world today.

2012

Mining District: Alaska Commodity: Gold, Silver, Platinum, Palladium Recent Projects: NTR Metals refines precious metals mined from all parts of Alaska.

avalon@alaska.net avalonalaska.com

Dianeshai@hotmail.com beringshairock.com

jtrigg@coeur.com coeur.com

info@donlingold.com donlingold.com

ask@freegoldventures.com freegoldventures.com

ggallagher@goldrichmining.com goldrichmining.com

anna.atchison@kinross.com kinross.com

info@kiskametals.com kiskametals.com

info@libertystaruranium.com libertystaruranium.com

info@millrockresources.com millrockresources.com

info@novacopper.com novacopper.com/index.asp

info@novagold.com novagold.com

ntrmetals.com

Alaska Business Monthly | November 2013

Mining RecentProjects Projects MiningDistrict District | Commodity Commodity | |Recent

Mining District: Fairbanks Commodity: Gold Recent Projects: 25 miles NE of Fairbanks, Kinross Fort Knox is the largest open pit gold mine in Alaska. In 2012, Fort Knox produced 359,948 gold equivalent ounces and had an operating budget of $309 million. The mine currently employs 630 Alaskans making it the 5th largest private sector employer in the Fairbanks North Star Borough.

www.akbizmag.com

Company Company

TopExecutive Executive Top

Oxford Assaying & Refining Corp. 3406 Arctic Blvd. Anchorage, AK 99503 Phone: 907-561-5237 Fax: 907-563-8547

Toni Goodrich, VP

PacRim Coal LP 1007 W. Third Ave., Suite 304 Anchorage, AK 99501 Phone: 907-276-6868 Fax: 907-276-2395

Dan Graham, Chuitna Proj. Mgr.

Polar Mining Inc. 5836 Poker Creek Cir. Fairbanks, AK 99712 Phone: 907-455-4198

Dan May, Pres.

Sumitomo Metal Mining Pogo LLC PO Box 145 Delta Junction, AK 99737 Phone: 907-895-2841 Fax: 907-895-2866

AK AK Estab. Estab. Empls. Empls.

Mining RecentProjects Projects MiningDistrict District || Commodity Commodity | |Recent

1980

Mining District: Alaska Commodity: Gold, Silver Recent Projects: We provide refining services to the many placer miners around the state of Alaska.

1980

Mining District: Beluga Commodity: Coal Recent Projects: In advanced permitting process.

1981

Mining District: Fairbanks Commodity: Base Metals, Gold, Placer Gold, Gravel Recent Projects: Placer mine on Goldstream Creek near Fox.

Chris Kennedy, Gen. Mgr.

2005

320

Mining District: Goodpaster Commodity: Gold Recent Projects: Pogo is a large-scale, hard-rock underground mine that produces roughly 350,000 ounces of gold annually.

Tower Hill Mines 506 Gaffney Road Fairbanks, AK 99701 Phone: 907-328-2800

Tom Irwin, Vice President

2006

Mining District: Livengood, Fairbanks Commodity: Gold Recent Projects: Livengood Gold Project.

Ucore Rare Metals Inc. 210 Waterfront Dr. Bedford, NS B4A 0H3 Phone: 902-832-5246 Fax: 902-491-4281

Jim McKenzie, CEO

2006

Mining District: Ketchikan Commodity: Rare Earths, Tantalum, Niobium Recent Projects: Bokan-Dotson Ridge.

Usibelli Coal Mine, Inc. 100 Cushman St., Suite 210 Fairbanks, AK 99701 Phone: 907-452-2625 Fax: 907-451-6543

Joseph Usibelli Jr., Pres.

1943

130

ZAZU Metals Corporation 885 Dunsmuir St., Suite 350 Vancouver, BC V6C 1N5 Phone: 604-878-9298 Fax: 604-568-9298

Matthew Ford, President

2006

www.akbizmag.com

facebook.com/oxfordmetals oxfordmetals.com

chuitnacoalproject.com

pmi@ak.net

info@ithmines.com www.ithmines.com

info@ucore.com ucore.com

info@usibelli.com usibelli.com

info@zazumetals.com zazumetals.com

Mining District: Healy Commodity: Coal Recent Projects: Current operations continue in Two Bull Ridge Mine and development of the Jumbo Dome Mine is in progress. Mining District: Northwest Alaska Commodity: Zinc, Lead Recent Projects: Lik Zinc Lead Project in NW Alaska. Large tonnage, high grade deposit adjacent to regional infrastructure. 50/50 Joint Venture with Teck.

November 2013 | Alaska Business Monthly

147

ALASKA BUSINESS MONTHLYâ&#x20AC;&#x2122;S 2013 MINING DIRECTORY

MINING COMPANIES

special section

Building Alaska

ÂŠ 2013 Ken Graham Photography

Alaska Airlines Center job site in Anchorage.

Busy season at urban and rural job sites Compiled by Susan Harrington, Managing Editor

he constant sound of heavy equipment, whether beeping while in reverse (safety first) or growling going forward and the twentyfour hour roar of trucks hauling gravel and various building materials has many Alaskans longing for the quiet fall of snow before the icy roads are too slick for summer tires. All along the coastline and everywhere in between, construction contractors and crews

148

have been busy putting things together for a better Alaska. We offer a tiny slice of all the work done over the summer and into the fall in this review of construction projects.

Anchorage For those wanting to see an impressive construction project in Anchorage, the new University of Alaska Anchorage sports arena, named the Alaska Air-

Alaska Business Monthly | November 2013

lines Center, which occupies ground beside the eastern edge of the Providence campus in the Anchorage U-Med district is a good one to drive by and see. Itâ&#x20AC;&#x2122;s a beautiful building. Cornerstone General Contractors was busy working on the Alaska Airlines Center this summer. By the end of September, the building was basically all enclosed, the roof was on, a lot of the curtain wall was glazed. Crews were www.akbizmag.com

prepping for finishes in the basement and doing the metal framing. The hanging of gypsum wallboard was progressing on the first floor, balcony, and mezzanine. The company added an Elmore Road roundabout this summer. They have turned on the boilers for heating the building and were testing the heat as well as other permanent mechanical items, which were being turned on. Much of the exterior zinc siding was up and being completed in early fall. The beautiful profile metal siding is one of the big ticket items for the arena. Contractors will be completing interior finishes through the winter and into the spring, at which time they will be looking to start some of the commissioning, along with paving the parking lots and landscaping. Estimated completion date is in July of 2014 for this $109 million project, for which construction began seventeen feet below ground level. As big as it looksâ&#x20AC;&#x201D;and it looks enormousâ&#x20AC;&#x201D;it is even larger than it appears. Seawolf fans will be able to enjoy basketball games and many other activities there; however, hockey will still be played at the Sullivan Arena. Also under construction at the UAA campus this summer is the new Engineering & Industry Building, going up south of the UAA Bookstore. Neeser Construction, Inc. began work on the building this summer. Structural steel started going up in mid-August. A sky bridge across Providence Drive will connect it to the UAA Health Sciences building. The four-story building is expected to cost nearly $80 million will add 81,500 gross square feet of teaching and laboratory space to the School of Engineering. Twenty-four labs, two eLearning classrooms, five seminar and breakout rooms, more than forty offices for faculty and staff, a commons with coffee shop, and a high-bay project design and assembly area are planned with completion expected for summer 2015. It is half-funded. Across from UAA, Davis continued work on the $150 million Providence Tower M, part of the multi-phase expansion on the Providence Hospital consisting of an eighty-two thousand-squarefoot extension of the existing hospital and sixty-eight thousand square feet of hospital remodel, including two patient care floors to house a sixty-six bed neowww.akbizmag.com

natal intensive care unit, thirty-one bed mother-baby unit, fourteen bed prenatal unit, ten labor delivery rooms, and ten triage rooms along with a basement and third floor mechanical penthouse with a medical gas bottle room. The project is 75 percent complete with core and shell plus the mother-baby unit and a portion of labor delivery completed in October 2012. The forty-two bed portion of the NICU was completed in April 2013. The pre-natal unit was to be completed in October, with the remainder of labor delivery complete in July 2014. The final phase will be complete in December 2014. Across town from the U-Med district, Cornerstone continues working on the Boney Courthouse interior remodeling, which is being done in phases. On the hillside, the company started the Service High Remodel Renewal, a two- to three-year project. In midtown, Neeser has made a lot of progress on the Natural Pantry. In southwest Anchorage Davis broke ground in the spring on the Resolution Pointe Subdivision immediately adjacent to Bayshore. The four-phased subdivision with 101 homes will connect Bayshore and Resolution with a common street: Chiniak Bay Drive. The JBER Housing Privatization project was the most recent housing project for Davis and provides military housing on the JBER Installation for the next fifty years. Davis built more than nine hundred thousand square feet of housing for families that serve our country. Three hundred fourteen homes and three miles of utilities were demolished to make room for the new construction. More than seven hundred thousand cubic yards of earth was moved, with five miles of new infrastructure, 195 home renovations, and 299 new homes constructed in twenty-six months.

Mat-Su Valley In September, Davis was just beginning work on the Government Peak Recreation Center. The chalet is located in the Hatcher Pass Recreational Area and will serve as a shelter for recreation area users and a staging area while waiting for public transit. A December finish is expected. Just prior to that Valley project, Davis began work in May and was substanNovember 2013 | Alaska Business Monthly

149

tially completed in early August on a $9.6 million Mat Su Athletic Complex project that provided and installed three artificial turf systems at the Colony, Wasilla, and Houston fields, three running tracks, and other improvements such as drainage systems, bleachers, lighting, and security at Wasilla, Colony, Palmer, and Houston High Schools.

tutka—helping build Alaska. With two locations and a staff of professional environmental scientists, engineers, geologists, chemists, biologists and technicians, we are readily available to perform projects across the State of Alaska.

• General Contractor/ Heavy Civil Construction • Environmental Cleanup and Consulting • Operations and Maintenance of Wastewater Pre-treatment Systems

All services are streamlined to ensure the highest level of regulatory compliance and cost controls.

(907) 357-2238 www.tutkallc.com SBA Certified HUBZone & EDWOSB/WOSB • State of Alaska Certified DBE 150

Alaska Business Monthly | November 2013

Tazlina Three and half hours north, northeast of Anchorage in the Ahtna region, the Robert Marshall Building, a regional health clinic for the Copper River Native Association, was nearing completion in Tazlina. The $14 million (construction cost), eighteen thousand-square-foot primary care facility was built by Dawson Construction and Copper River Native Association’s RISE Alaska, with design by Livingston Slone architects-utilities, structural, mechanical, and electric engineering by PDC. Started in summer 2012, completion was expected this fall. Engineers say there were challenges: even though on road systems, there was no infrastructure on site—no electrical, mechanical, or water systems. All utilities developed on site, water supply, well water treatment, water storage for fire protection requirements, on-site sewage disposal, etc. This was a fast-tracked structural package—the building was put up last summer, and the design was completed in the winter. Anderson Heading up the Parks Highway, near Anderson, the Clear Air Force Station $17 million High Altitude Electromagwww.akbizmag.com

Robert Marshall Building in Tazlina.

Transforming Challenges into Solutions Serving the Arctic for over 50 years

AnchorAge | FAirbAnks

www.pdceng.com

UAF Margaret Murie Life Sciences Building Fairbanks, AK

Photo courtesy of PDC Inc. Engineers

netic Pulse Upgrade project continued this summer. The Cold War BMUWES site has been there since 1958 and this project upgrades a portion of that infrastructure to protect the facility that houses the early warning radar system owned by the Air Force Space Command. Phased work started in 2012 with completion expected in 2015. PDC was the prime engineer on this summer-only project. Contractors Serco and Jaxon out of Colorado Springs, Colorado, and EPI out of Virginia are all responsible for the construction.

Fort Wainwright Work continued this summer on PDC’s design/build GSAB Hangar F3W357 at Fort Wainwright and will be ongoing until completion next October on the $70 million project being built by Watterson Construction. This general aircraft hangar will be for UH-60 Black Hawk and CH-47 Chinook air-

craft maintenance and has more than 159,000 square feet of maintenance and office area. With R-60 walls, an R-90 roof, incorporated photovoltaic systems, and translucent wall panels, the hangar is designed to reduce energy costs by 30 to 40 percent of present standards by lessening the amount of heat and electricity used. Also on Fort Wainwright PDC engineered two utilidor projects—North Post Phase II Utilidor Repairs and North Post Laterals Project—being done by the same team: Doyon Utilities and contractor CEI with subs Patrick Mechanical and CMI (a subsidiary of CEI). The $3.2 million project was started in June and expected to be done in October.

UAF Another impressive project underway is the new engineering building at the University of Fairbanks. Davis Constructors and Engineers is providing construction

Eva Creek Wind Farm Ferry, AK

Proudly serving our client’s Energy, Facilities, and Transportation project requirements in the North. Comprehensive services include Civil, Electrical, Environmental, Fire Protection, Mechanical, and Structural Engineering; as well as GIS, Land Survey, and Sustainability. The Alaska Highway MP 1222-1235

The new engineering building at UAF white on the curve. Image courtesy of Davis Constructors and Engineers

Chief Andrew Isaac Health Center Fairbanks, AK

©NBBJ

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November 2013 | Alaska Business Monthly

151

Photo courtesy of PDC Inc. Engineers

campus area and provide reliability for campus growth. The Westridge Utilidor wrapped up this year on campus, boosting capacity and enabling further construction.

Summer site work at the new UAF engineering building.

management and is the general contractor on the project. This new building will add about 120,000 square feet to the UAF campus. Designed by architecture firms ECI Hyer and NBBJ, the exterior features glass and steel and the interior will add forty new laboratories. The building is being designed to reach LEED Silver standards. It is the shape of a pie wedge and sandwiched in between the Duckering and Bunnell buildings in the original campus fore area on Tanana Loop where professor parking used to be. The engineering, education, and research facility is being built to help meet the university’s goal to increase engineering students and graduates 100 percent. It will be five stories tall when completed, including the basement and one unfinished story. There is a strong floor inside of a high bay that will allow the university to bring in full-size bridge girders to break and test. The design to withstand the pressure they are going to exert down on it to break girders required a three-foot thick heavily reinforced concrete floor with massive anchors set in. Actual bridge girders will attach to the anchors and then jacks will be placed on top of the girders and pushed down to stress them and see how they will crack; the anchors in the floor are to make it stress. The $109 million project is currently being worked with $30 million in “bridge funding” until full funding is 152

obtained. The practice of bridge funding is being utilized for the UAF and UAA engineering buildings so that engineering and construction could begin before full funding could be obtained. What that means is for these two projects, the structural design and foundation design are facilitated before all the design work is complete in order to fast track and reduce the time and costs of projects. PDC engineers on the UAF project say building with bridge funding requires close coordination with owner and architect because timing is such that they are constructing at the same time they are designing. The foundation was poured this summer and the steel frame was completed in late September. Work on the envelope and insulation continues with the shell expected to be enclosed by January 1, 2014—HVAC and LEED energy saving measures are in progress now. UAF is in the third of four years on the Critical Electrical Distribution Upgrades Project, known as UTER. PDC is the prime designer for the project and Kiewit is the prime contractor. This $30 million to $40 million infrastructure upgrade replaces aging electrical distribution with new conduits and new wiring and covers the whole campus to re-feed all the campus facilities at increased voltage. This will allow for improved efficiencies in the long-range fift y-year project life cycle in the core

Alaska Business Monthly | November 2013

North Pole In the nearby City of North Pole, PDC was prime, Stephl Engineering was subconsultant, and Frawner was the contractor on the $2.1 million Sewer Rehab of seven thousand feet of 1980s era sewer pipe. The project reduced infiltration in the city system and extended the life of the plant and sewer lagoon. In repairing the manholes, innovative solutions with a steel liner and blocking off a hole that let ground water rush in were successful. Maintenance personnel told the engineers that as soon as that was repaired flow meters in the downstream station showed improvements immediately. Work began in July and was completed the end of September. Salcha Kiewit continued work on the bridge substructure across the Tanana River for the Alaska Railroad Corporation. Construction of the bridge superstructure was schedule to begin before the end of the year. The Railroad anticipated construction would be ongoing May through November, twenty hours a day, six or seven days a week depending on weather. Pile driving was to be ongoing through fall, with piles being driven an average depth of 130 feet. Brown’s Hill Quarry has supplied more than one hundred thousand tons—and continues to supply—rip rap mined from a quarry near North Pole. More than two hundred thousand cubic yards of rip rap have been installed so far on the North and South bank levees. The temporary access trestle/causeway was completed this summer and allows access across the river to the South Bank. The Salcha Crossing is phase one of four phases of the Northern Rail Extension and is scheduled for completion in July 2014. It’s meant to bring Army personnel and equipment coming from Fort Wainwright across the river to the Tanana Flats Training Area. Barrow Farther north in the City and Borough of Barrow work continued on the Piuwww.akbizmag.com

Photo courtesy of PDC Inc. Engineers

Interior entrance of the Piuraagvik Recreational Center in Barrow.

raagvik Recreational Center by UIC Construction. Architects Bezek Durst Seizer did the design and PDC provided engineering services. The pilings were done last year in Phase 1, and this summer marked Phase 2 of the $3.2 million project that adds a twenty-four thousand-square-foot addition with an additional gym and basketball court. To save money prior to construction being done theyâ&#x20AC;&#x2122;re using a cold weather seal for the entire structure, which will be enclosed all winter and not heated. The plan is for construction next summer to finish the heating, electrical, mechanical, and all other components.

An Alaska Native Village Corporation Supporting Our Shareholders Through a Tradition of Excellence

561 East 36th Avenue | Anchorage, Alaska 99503 | Phone: (907) 278-4000 | Fax: (907) 278-4050 | www.tatitlek.com

Girdwood, Crown Point, Seward Work that began last year on the $1.6 million, six thousand-square-foot Girdwood Warm Sand Storage facility, the first of three such facilities, was expected to be finished last month by Bristol Construction. PDC is the prime and Architects Alaska is the sub on all three. Construction of the Seward Highway Maintenance Facility at Crown Point near Moose Pass began in May and is expected be finished by February 2014. The 8,400-square-foot facility will have garage space with offices, storage, vehicle maintenance, and sand storage in the yard. Bristol Design/Build Services and PDC worked on the project. Cornerstone expects to complete the AVTEC Dormitory project in Seward by year-end. Kodiak Located on the second largest inhabited island in the United States, Davis www.akbizmag.com

November 2013 | Alaska Business Monthly

153

Photos courtesy of PDC Inc. Engineers

Above and Left: Seward Highway Maintenance Facility at Crown Point.

Juneau In Juneau, construction of the Walter Soboleff Center began this summer. The $20 million, twenty-nine thousandsquare-foot building is designed for energy efficiency and to meet LEED Gold standards. Sealaska Corporation has helped fund this new home for the Seal154

tion was being poured in September. The project is being done by general contractor ASRC McGraw Hill Constructors, with design by MRV Architects, structural engineering by PDC, mechanical engineering by Murray & Associates, and civil engineering by R & M Consultants. The $11.5 million LEED Silver facility has sixty-four rooms and will house 120 first year students beginning in fall 2014. Those are just a few of the multitude of construction projects being built across Alaska this summer. Work continued in many villages on schools and other public infrastructure projects. Roads were being widened, repaired, and resurfaced throughout the state. Work has stalled out on the Port of Anchorage Expansion project until a new game plan is devised, but it is expected that demolition of the current sheet pile system will be the next step. ď &#x2019;

Photo courtesy of PDC Inc. Engineers

is currently building a new twenty-two bed Long Term Care Facility on Kodiak Island. The new duplex style skilled nursing facility will replace the current LTC building with a more homelike and code compliant space. At approximately 18,800 square feet, the new facility includes private bathrooms, two great rooms, a centralized tub room, laundry, commercial kitchen, garage, mechanical room, and other ancillary support spaces. Davis anticipates turnover in early spring 2014. Also on the Emerald Isle, work began this summer on the Kodiak High School, a multi-phase, $60 million project with a 2015 completion date and 114,000 square feet of new construction and just less than 60,000 square feet remodeling. The new four-story classroom tower has thirty-three classrooms, and the design was selected because, based on life cycle cost studies for expansion alternatives, it had the lowest life cycle costâ&#x20AC;&#x201D;and it fit on the site. Watterson Construction is the contractor, with PDC for the mechanical and electrical design services, and the architect Jensen Yorba Lott out of Juneau. Cornerstone finished up the Kodiak Library at the end of the summer.

aska Heritage Institute and continues to help raise the remaining 25 percent needed for completion of the project in 2014. The architect is Minch Ritter Voeckers, Dawson Construction is the general contractor, and PDC performed mechanical and electrical design in association with Murray Associates and Haight Associates in Juneau. This innovative building will utilize a wood-fired pellet biomass boiler for heating the museum quality space. Extensive use of LED lighting for maximized energy efficiency contributes to the LEED certification. The Soboleff Center will be a place where Tlingit, Haida, and Tsimshian cultures of Southeast Alaska can be learned, practiced, and shared in the state-of-the-art facility for ethnographic collections, archives, a library, and research. Site work began on the Juneau UAS Residence Hall in June and the founda-

UAS Residence Hall concrete work in Juneau.

Alaska Business Monthly | November 2013

www.akbizmag.com

BUILDING ALASKA’S

ECONOMY

From the Aleutian Islands to the North Slope, our 2013 projects span the state.

LOCATION: Kotzebue PROJECT: Runway Construction

LOCATION: Fairbanks PROJECT: Interior Energy Project LOCATION: Wainwright PROJECT: North Slope Borough Seawall LOCATION: Port MacKenzie PROJECT: Port MacKenzie

LOCATION: Seward

Peninsula PROJECT: GCI TERRA Northwest

Railroad Extension

LOCATION: Galena PROJECT: Galena Roads Project LOCATION: Anchorage PROJECT: Road Improvement

LOCATION: Saint Mary’s PROJECT: Saint Mary’s Native

Corp. Strategic Planning and Financial Management

LOCATION: Juneau PROJECT: Pedestrian Bridge

Replacement, Juneau Federal Building

LOCATION: Calista Region PROJECT: Yukon to Kuskokwim Freight

LOCATION: Newtok PROJECT: Newtok Relocation

and Energy Corridor Plan

LOCATION: Kodiak PROJECT: Multi-level Housing

LOCATION: Aniak PROJECT: Kolmakof (Former)

Mercury Mine Cleanup

LOCATION: Akutan and Akum PROJECT: Automated Weather

Observations Services

LOCATION: Ketchikan, Tyee Lake, Swan Lake, Petersburg and Wrangell

LOCATION: Donlin Creek PROJECT: Donlin Gold

PROJECT: Southeast Alaska Power Authority LOCATION: Kodiak PROJECT: Full Food Services for the

LOCATION: Donlin Creek PROJECT: Donlin Gold

United States Coast Guard

Camp Services

Calista Corporation, 301 Calista Court, Ste. A, Anchorage, AK 99518

★

t: (907) 279-5516

★

f: (907) 272-5060

LOCATION: Sitka PROJECT: Blue Lake Hydro Expansion

★

calista@calistacorp.com

special section

Building Alaska

Sitka’s New Dock is Old Sitka Dock Private infrastructure for public good By Will Swagel

itka’s status as a major cruise ship port has been slipping for more than a decade. The number of cruise ship passengers in 2013 barely topped 100,000, compared to nearly 300,000 just a few years before. Juneau and Ketchikan are visited by about 1 million passengers each year. One reason is location. Sitka is on the outer coast of the Panhandle facing the open ocean, while the other major Southeast ports are stretched along the Inside Passage. For a cruise ship, coming to Sitka can be a detour. Visitors have also been diverted by new attractions in other ports—most notably Icy Strait Point near Hoonah, which offers everything from bear watching to kayaking to zip-line riding in a controlled and branded atmosphere. But cruise industry representatives have long said that Sitka suffered from another handicap: the lack of a deepwater dock where the giant ships could tie up and their passengers disembark down gangways. Unlike those visiting Ketchikan, Skagway or Juneau, cruise ships visiting Sitka had to anchor hundreds of yards out and ferry their passengers to and from shore in small boats called “tenders” or “lighters.” While some passengers enjoyed the romance of lightering to shore, many others complained of long lines to board the boats and a choppy ride that could take twenty minutes each way. 156

For more than a decade, cruise industry representatives urged the construction of a deepwater dock off Sitka’s picturesque downtown waterfront, but Sitka voters rejected the idea despite promises of funding from private sources. Two major efforts to build a dock near downtown failed.

Taking the Plunge This is where Chris McGraw comes in. McGraw, thirty-four, is one of three sons of Chuck McGraw, the founder of McGraw Custom Construction. The company has built major projects like schools and hospitals throughout Southeast Alaska. Arctic Slope Regional Corporation purchased the construction portion of the business in January 2012. McGraw and his family are the owners of Halibut Point Marine, a boatyard in a five-acre piece of waterfront property about six miles from downtown Sitka, near a state historical site called Old Sitka. In 2008, Cruise Line Agencies of Alaska contacted Halibut Point Marine and asked if they could provide moorage to a paddlewheel-style three-hundred-foot long cruise ship, “The Empress of the North.” The Empress liked the moorage and ended up staying for the entire summer. “And that got us thinking about a larger dock,” says McGraw. “A deepwater dock had been an issue for a long time and had never gotten anywhere. I always thought it was a good idea.”

Alaska Business Monthly | November 2013

Re-Purposed Materials and Lots of Experience McGraw envisioned a large, floating dock that would function as both deepwater moorage and a breakwater for their existing dock and boatyard access. The facility could be used by larger cruise ships, fuel barges, freight transfer, and other large transient vessels like scientific or military ships working in the area. In 2009, McGraw began the year-long permitting process, which was complicated in Sitka by regulations banning waterfront construction between March and June so as not to disrupt the spawning herring and salmon. Large docks built on Sitka city-owned tidelands require voter approval, but the proposed dock would be constructed on state tidelands and no vote was needed. That was fortunate for the project—McGraw says that vote might well have failed. McGraw designed his floating dock and named it the Old Sitka Dock in recognition of its proximity to the Old Sitka historical site. The first big construction question: where would McGraw get the floats he wanted? Concrete floats resist corrosion better than steel floats, but concrete floats are much more expensive. McGraw located a company in Victoria, British Columbia, Canada, which had purchased the surplus concrete floats from the replacement of the SR 520 floating bridge over Hood Canal near Seattle. www.akbizmag.com

Photo courtesy of Halibut Point Marine

The Old Sitka Dock is a multipurpose facility providing Sitka with deep water moorage for large cruise ships. Passengers are then bussed six miles along the waterfront to downtown Sitka. Twenty-four cruise ships docked in 2013 and more are booked for 2014.

The floats were eighteen feet tall, ten feet of which was underwater. The huge concrete sections were towed to Sitka by tugboat. McGraw also managed to obtain surplus railings from the refurbishing of the O’Connell Bridge in Sitka. Similar public docks can cost between $30 and $40 million. McGraw stated that because of his family’s background in the construction business, they were able to build the facility for far less than what similar facilities cost. The dock is 470 feet long and 55 feet wide. Ashore, there is an eight-thousand-square-foot enclosed terminal area for tourists to wait out of the rain. The parking area and approaches are designed for the smooth loading and unloading of the busses that take tourists to town.

Getting Ships to Dock McGraw started offering cruise companies a chance to try out the brand new facility, but received a lukewarm reception. He redoubled his marketing efforts, attending a large cruise convention in Miami with Sitka Mayor Mim McConnell. www.akbizmag.com

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“We wanted to let people know Sitka had a dock that was available,” he says. The first nibble came in 2012 from Cruise Line Agencies of Alaska. They said Celebrity Cruises—which was already scheduled to come to Sitka—had decided to try out the dock. McGraw scrambled to arrange bus transportation with Alaska Coach Tours, which sent some of its busses to Sitka. The day was sunny and beautiful, not common for Sitka where autumn usually starts in August and with rain. Over the 2013 season, twenty-four cruise ships moored at Old Sitka Dock. The vessels ranged from 598 feet long to more than 800 feet long. The larger ships carried 1,800 passengers, most of whom left the ship and loaded efficiently onto busses. Passenger reviews were good. The road to town, Halibut Point Road, runs right along the edge of Sitka Sound, with the peak of the dormant volcano Mount Edgecumbe marking the half-way point.

More Good Reviews McGraw has accomplished one part of his goal, says Rick Erickson, the Ketchikan operations manager for Cruise Line Agen-

Sitka’s New Archangel Dancers greet visitors at the Old Sitka Dock. Photo courtesy of Halibut Point Marine

cies of Alaska. “All member lines that visit Sitka are [now] aware of the dock,” he says. McGraw says he wants to provide smooth service to ships and their passengers at what are now the lowest prices of any Southeast port. The Old Sitka Dock charges three dollars for each foot of length and three dollars for each passenger that crosses the dock. The city uses cruise ship head tax money to help subsidize the land transport, and passengers are bussed to

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downtown Sitka for free. Other ports may charge two or three times what Sitka charges per passenger. Erickson says McGraw made a good choice in putting in a floating facility, as opposed to a fi xed dock. “A floating dock is certainly desired by industry,” he says. “It makes it easier in the operations of the ship.” Evidence of this is that all three major Southeast ports use some floating docks. Next year, Disney cruises is scheduled to make a visit—a first for Sitka, since Disney will not go anywhere there isn’t a dock. Being at a dock allows ship crews to perform maintenance, such as window washing or painting, while the ship is tied up. Ships may take on tens of thousands of gallons of fresh water and amounts of groceries a normal shopper might find amusingly large—one hundred pounds of salmon, twenty dozen eggs, and thirty cases of beer, for instance. Over the 2014 cruising season twenty-eight cruise ships are already scheduled to make port at the Old Sitka Dock. The dock has also been used to unload thousands of tons of construction materials and million of pounds of fish. “We’re slowly growing,” McGraw says. “Our hope is that when other companies see [the dock], they will want to use it. If Sitka is going to grow our large cruise ship industry, the dock is going to be a part of that. The historic nature of the downtown district is part of that, too. The whole package is what we are trying to market.”  Alaskan author and journalist Will Swagel writes from Sitka.

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Alaska Business Monthly | November 2013

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ALASKA THIS MONTH By Tasha Anderson

DINING

Food Bank of Alaska

ovember is the perfect time to consider the abundances in one’s life and the needs of those in the community. Great Harvest Bread Company coordinates with Food Bank of Alaska to help gather turkeys: For almost a week before Thanksgiving, November 18-23, Great Harvest Bread Company will accept a turkey in exchange for a loaf or white or wheat bread. The turkeys are then donated to the Food Bank of Alaska. November is when Food Bank of Alaska has its biggest food donation event, according to Karla Jutzi, Food Bank of Alaska’s director of communications. “Thanksgiving Blessing is our biggest event of the year. We expect to be serving, in Anchorage and the Mat-Su Valley, 10,500 families this year… It’s a real example of how the community can come together to support our neighbors in need,” Jutzi says. For both the Anchorage and Mat-Su Valley events, Food Bank of Alaska provides turkeys while various distribution centers provide sides and fi xings as well as volunteer labor. “We appreciate the community’s support,” Jutzi says, “whether it’s food or funds or volunteering.” In Anchorage, Monday November 25, there will be seven locations where food will be distributed: Crosspoint Church; Faith Christian Community; Central Lutheran Church; St. Patrick’s Church; Alaska Native Culture Charter School; Mountain View Community Center; and the Joy Lutheran Church, in Eagle River. In the Mat-Su Valley, Thanksgiving Blessing will be Saturday, November 23, at six locations: Faith Bible Fellowship, Big Lake; Fellowship Lutheran Church, Trapper Creek; Wasilla Bible Church; Real Life Church, Palmer; Upper Susitna Senior Center, Talkeetna; and Willow United Methodist Church, Willow. “What’s so nice is that we get the news out in a comprehensive coordinated way so we can do the most good with the resources that the community provides,” Jutzi says. foodbankofalaska.org  160

Alaska Business Monthly | November 2013

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ALASKA THIS MONTH By Tasha Anderson

Dining

Harvest of Hope

arvest of Hope is the annual dinner and auction fundraiser for Lutheran Social Services of Alaska (LSSA). Funds raised support its many communityenriching programs. “Our largest program is our food pantry—we distribute about five hundred thousand pounds of food throughout the year,” LSSA Executive Director Alan Budahl says. Other programs include direct assistance, which helps those who are un- or newly employed with drivers licenses, clothing vouchers, and birth certificates; the Association for Stranded Rural Alaskan, which provides temporary lodging and transportation to those who are medevac’d into Anchorage, Fairbanks, or regional hospitals and then are unable to return home; and separate emergency housing for single, homeless men and women with long term behavioral issues. “Our newest program is the listening post located in Downtown, Anchorage. It’s a group of thirty-five trained individuals who just listen. It’s just a respite for people who are transiting to come up and have a cup of tea and talk to someone,” Budahl says. LSSA has been coordinating this fundraise more than fifteen years, which has both live and silent auctions, including a Napa Valley wine tour, Fast Tour of New York City, rooftop seats to Wrigley Field and Chicago experience, barbeque setup that includes the grill and chairs, a Mr. Prime Beef gift card, and other such items. “And then we do have, because a lot of our heritage is in rural Alaska, a Native Alaskan woman giving a prayer.” There will also be a young man performing “Alaska Hymn,” a song written by retired Pastor Bill Warren. Harvest of Hope will be held at the Sheraton Anchorage. Tickets are $100, and ticket sales will end at 4 p.m. Monday, November 11. facebook.com/LSSAK 

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ALASKA THIS MONTH By Tasha Anderson

trAvel

Alaska Bald Eagle Festival

Fairbanks

Kenai

Skagway

Anchorage

Whittier Kodiak

Juneau

Sitka

Haines

Petersburg

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n Haines, a natural phenomenon at the convergence of three rivers sets the stage for the largest gathering of bald eagles in the world. American Bald Eagle Foundation Director Cheryl McRoberts explains that as the weather cools, warmth that has seeped into the gravel rises “so that fourmile stretch of river does not freeze.” Since everything in the surrounding area is frozen, this is the best access spot for the eagles to feed on a late run of fish. “Salmon come down underneath the ice and then out into open water—and the eagles are waiting for them,” McRoberts says. “The eagles will stay until all the salmon are gone.” The Alaska Bald Eagle Festival celebrates the massive gathering through photography workshops, guided eagle viewing, a banquet, animal presentations, a chocolate buffet, and more. McRoberts says, “It’s thirty-five dollars a day for a pass. That’s gets you into [almost] everything that we have going on, including bus transportation” from the Foundation to the river. The photography workshops are not part of that day pass and are $500 per person for three days. Proceeds raised during the festival are used to support the Foundation, a “501(c)(3) educational foundation dedicated to the protection and preservation of bald eagle habitat through sponsoring and facilitating educational and research activities,” according to its website. The foundation cannot rehabilitate birds on site, but it does have twelve in-house raptors. “They’ve gone through rehabilitation and cannot be released into the wild so they live here,” McRoberts says. The Alaska Bald Eagle Festival takes place in Haines November 11-17, with the majority of activities at the American Bald Eagle Foundation. baldeagles.org  www.akbizmag.com

ALASKA THIS MONTH By Tasha Anderson

entertAinMent

MAJ Runway A MAJ Designs dress by designer Jamie Johnson. Photo courtesy of MAJ Designs

his November fashion reaches out to Abused Women’s Aid in Crisis (AWAIC), a nonprofit organization dedicated to domestic violence safe shelter and intervention, through MAJ Runway, a fashion show new to Anchorage featuring MAJ Designs, owned by Alaskan Jamie Johnson. “Jamie started sewing at twelve years old when her mother gave her a sewing machine. She’s a self-taught artist and fabric is her medium of choice for a creative outlet,” says Fran Andrews, event planner for MAJ Runway. MAJ Runway is the passing of a torch, in a way, as Johnson’s family has a history of support for AWAIC. “Johnson’s family has been connected to AWAIC the past thirty years. They’ve supported AWAIC annually in various ways. Jamie is happy to continue the family tradition of raising awareness and supporting AWAIC,” Andrews says. The runway show isn’t just about supporting AWAIC; it’s also an evening of beauty and entertainment. Andrews says, “Johnson’s design style is classic with a modern twist—fashion forward on classic colors, shapes, and designs. She designs evening gowns, prom dresses, and bridal gowns.” In addition, Elena Lukina, a classical violinist and composer, “will be providing a special runway composition she is writing especially for MAJ Runway and AWAIC,” Andrews says. There will be guest celebrities as well, but their identities remain a surprise. This fashion evening will also include a silent auction. For those that love the clothes as much as they love supporting a good cause, Andrews reports that “select styles from the collection will be available in select stores.” MAJ Runway is November 16 at the Anchorage Hilton Hotel. Doors open at 5 p.m., the show starts at 7 p.m. majrunway.com 

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Anchorage • Fairbanks • Kenai • Juneau • Sitka • Kodiak • Petersburg Whittier • Haines • Skagway

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163

EVENTS CALENDAR

By Tasha Anderson

Anchorage 15

Wear Art, Thou? Fashion Show

This show will feature contemporary and traditional wearable art— including clothing, jewelry, accessories, and footwear—created by Alaska Native Designers and showcasing traditional materials and techniques. Egan Civic and Convention Center, 6 p.m. to 9 p.m. alaskanativearts.org

Holiday Tree Lighting Ceremony

Participants of this annual event can expect free cookies, hot cocoa, music, the Dancing Tree, an appearance by Santa, and the lighting of the AT&T holiday tree. Town Square Park, 5 p.m. anchoragedowntown.org

The Howard Rock & Ted Stevens Smokehouse Gala

This is the second annual gala, an event which honors Alaska Native peoples and those who work to support the Native Alaskan communities. Proceeds benefit First Alaskans Institute. Hotel Captain Cook, 7 p.m. thehowardrockandtedstevenssmokehousegala.org

Douglas 11/8-12/8

Treasure Island

Perseverance Theatre presents this classic story as adapted by Ken Ludwig. Perseverance Theatre, 7:30 p.m. traveljuneau.com

for sale range from hand-made soap to imported sweaters. The marketplace features Alaskan artists and crafters. Carlson Center, Friday Noon to 8 p.m.; Saturday 10 a.m. to 7 p.m.; and Sunday 11 a.m. to 5 p.m. fairbanksevents.com

Haines 30

Juneau 11/29-12/1

Athabascan Fiddlers Festival

This year makes thirty-one years that Alaska Natives have gathered to Alaska Native fiddling, music, dance, and culture. Chief David Salmon Tribal Hall, various times. Find more information at The Athabascan Fiddlers Association Facebook page.

15-17

Fairbanks Holiday Marketplace

This is a kick-off to the Fairbanks community shopping season. Items

Juneau Public Market

This market features more than 150 vendors from Alaska and the Pacific Northwest and includes Alaska Native jewelry and arts, utensils such as knives and ulus, packaged foods, toys, books, custom-made garments, and a food court. Juneau Centennial Hall and Convention Center ($7 admission) and Juneau Arts and Culture Center (free), Noon to 5 p.m. Friday, and 10 a.m. to 5 p.m. Saturday and Sunday. juneaupublicmarket.com

Fairbanks 6-9

Lighting of the Library Fundraiser

Sponsored by the Friends of the Haines Borough Library, this fundraiser and includes music, refreshments, art project for kids, the lighting of the tree, and a silent auction and raffle—local businesses decorate small Christmas trees with art, jewelry, food, gift certificates, tools, etc. and guests can bid on the trees. Haines Borough Public Library, 3 p.m. to 5 p.m. haineslibrary.org

Ketchikan 11/29-12/1

Winter Arts Faire

This three day event includes the Gala Opening Reception, an opportunity to dress up and participate in an exclusive shopping experience of appetizers and live music. There are more than eighty local artisans selling goods from photography to metalwork, a holiday portrait station, and a craft room for children. Cape Fox Lodge and Ted Ferry Civic Center, Friday 5 p.m. to 8 p.m.; Saturday 10 a.m. to 5 p.m.; and Sunday 11 a.m. to 4 p.m. ketchikanarts.org

Petersburg 29

Festival of Lights

The lighting of the seventy-foot Community Christmas Tree is celebrated with a walk down Nordic Drive that includes Santa and hundreds of people carrying light sticks or candles. The tree lighting ceremony includes live music, and complimentary hot cider is available. petersburg. org/visitor/festivals.html

Sitka 9

Solstice

The theme for this year’s fundraising event is “Solstice’s Greatest Hits.” Proceeds benefit the Alaska Raptor Center, which rehabilitates injured Alaska birds of prey, educates the public, and conducts bald eagle research. The event includes a banquet, two silent auctions, one live auction, and an online auction that began on October 1. Alaska Raptor Center, 5:30 p.m. alaskaraptor.org

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Alaska Business Monthly | November 2013

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ALASKA TRENDS

By Michael Malone

Alaska Permanent Fund Dividend

This year’s $900 payment breaks decline

Alaska Trends, an outline of significant statewide statistics, is provided by the University of Alaska Center for Economic Development.

1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

n September, the Alaska Permanent Fund CorporaAlaska Permanent Fund Divident Payments tion (APFC) announced that approximately 640,000 1982-2013 Alaskans would begin receiving a nine hundred dol- $2,500.00 lar dividend payment in October. The Alaska Permanent Fund was established in 1976 through a constitutional $2,000.00 amendment to the Alaska State Constitution under Governor Jay Hammond. It was designed to be an investment where at least 25 percent of oil revenues to the state $1,500.00 treasury would be put into a dedicated fund for future generations who would no longer have oil as a resource. $1,000.00 The Alaska Department of Revenue Treasury Division managed the fund until 1980, when the Alaska $500.00 Legislature created the APFC. With oversight by the state Legislature, APFC manages the Fund by invest$0.00 ing in preferred and common stocks, real estate, and marketable debt securities. By law, the Fund’s principal cannot be spent and dividends can only be paid from source Rebate, since inception of the dividend program will Fund earnings. If the Fund’s earnings reserve is zero or nega- total more than $20.7 billion. tive on June 30, no money can be paid out that year. The chart displays the history of yearly Permanent Fund diviDividend amounts are formulated by state law and cal- dend payments since 1982. From 1983 through 2002 the amount culated based on a five-year average of the Fund’s income. of each year’s dividend payment increased. The chart shows that There are strict residency rules in order to qualify for a divi- the largest dividend payment was $2,069, paid in 2008, and ildend. This year marks the 32nd dividend paid to Alaskans. lustrates that for the ensuing four years the dividend amount An individual who qualified for all of the Permanent Fund declined. This year’s nine hundred dollar payment interrupted Dividends to date has received $35,143.41. the trend of lower dividend payments from the preceding four Following this year’s dividend payment, the total funds years. Future payments will continue to be determined by APdisbursed to Alaskans by the division, including the Re- FC’s investment performance and the Legislature’s oversight. Source: Alaska Permanent Fund Corporation

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165

ALASKA TRENDS

Indicator

By Michael Malone

Units

Period

Latest Report Period

Previous Report Period (revised)

Year Ago Period

GENERAL Personal Income—Alaska US $ 1st Q13 34420 34667 33342 Personal Income—United States US $ 1st Q13 13589477 13760443 13137224 Consumer Prices—Anchorage 1982-1984 = 100 1st H13 210.85 206.62 205.22 Consumer Prices—United States 1982-1984 = 100 1st H13 232.37 230.34 228.85 Bankruptcies Alaska Total Number Filed July 49 34 77 Anchorage Total Number Filed July 28 16 54 Fairbanks Total Number Filed July 4 5 12 EMPLOYMENT Alaska Thousands July 332.5 332.8 334.4 Anchorage & Mat-Su Thousands July 185.1 186.6 184.2 Fairbanks Thousands July 41.2 41 40.9 Southeast Thousands July 41.85 41.05 41.1 Gulf Coast Thousands July 36.7 35.7 35.3 Sectorial Distribution—Alaska July Total Nonfarm Thousands July 356.5 352.4 357.7 Goods Producing Thousands July 59.9 53.4 61.1 Services Providing Thousands July 296.6 299 296.6 Mining and Logging Thousands July 18.6 18.3 17.9 Mining Thousands July 18 17.7 17.5 Oil & Gas Thousands July 14.7 14.5 14 Construction Thousands July 20.7 19.9 19.7 Manufacturing Thousands July 20.6 15.2 23.5 Seafood Processing Thousands July 16.4 11 19.5 Trade/Transportation/Utilities Thousands July 69.2 68.8 68.4 Wholesale Trade Thousands July 6.3 6.1 6.5 Retail Trade Thousands July 38.1 38 37.5 Food & Beverage Stores Thousands July 6.5 6.3 6.6 General Merchandise Stores Thousands July 10.1 10.3 10.1 Trans/Warehouse/Utilities Thousands July 24.8 24.7 24.4 Air Transportation Thousands July 6.4 6.4 6.4 Information Thousands July 6.2 6.2 6.3 Telecommunications Thousands July 4.1 4.1 4.2 Financial Activities Thousands July 14.3 13.9 14 Professional & Business Svcs Thousands July 29.7 29.3 30.2 Educational & Health Services Thousands July 47.1 47.6 46.3 Health Care Thousands July 34.1 34.1 33 Leisure & Hospitality Thousands July 40.4 38.7 40.6 Accommodation Thousands July 11.5 10.6 11.3 Food Svcs & Drinking Places Thousands July 23 22.5 22.9 Other Services Thousands July 12.1 11.8 11.8 Government Thousands July 77.6 82.7 79 Federal Government Thousands July 15.4 15.4 17 State Government Thousands July 25.1 25.2 25.1 State Education Thousands July 6 6.4 5.9 Local Government Thousands July 37.1 42.1 36.9 Local Education Thousands July 17.5 22.3 17.9 Tribal Government Thousands July 3.7 3.6 4.3 Labor Force Alaska Thousands July 373.7 371.48 375.52 Anchorage & Mat-Su Thousands July 198.7 199.68 199.77 Fairbanks Thousands July 46.37 45.94 46.78 Southeast Thousands July 42.57 41.67 43.31 Gulf Coast Thousands July 43.55 42.53 43.47 Unemployment Rate Alaska Percent July 5.9 6.5 6.6 Anchorage & Mat-Su Percent July 5.3 5.7 6 Fairbanks Percent July 5.3 5.9 6 166

Alaska Business Monthly | November 2013

Year Over Year Change

0.032 0.034 0.027 0.015 -0.364 -0.481 -0.667

-0.006 0.005 0.007 0.018 0.040 -0.003 -0.020 0 0.039 0.029 0.05 0.051 -0.123 -0.159 0.012 -0.031 0.016 -0.015 0 0.016 0 -0.016 -0.024 0.021 -0.017 0.017 0.033 -0.005 0.018 0.004 0.025 -0.018 -0.094 0 0.017 0.005 -0.022 -0.140 -0.005 -0.005 -0.009 -0.017 0.002 -0.106 -0.117 -0.117 www.akbizmag.com

ALASKA TRENDS

Indicator

By Michael Malone

Units

Period

Latest Report Period

Previous Report Period (revised)

Year Ago Period

Southeast Percent July 5.1 5.7 5.8 Gulf Coast Percent July 5.9 6.7 6.8 United States Percent July 7.4 7.6 8.2 PETROLEUM/MINING Crude Oil Production—Alaska Millions of Barrels July 15.28 14.57 12.87 Natural Gas Field Production—Alaska Billions of Cubic Ft. July 5.53 5.87 8.93 ANS West Cost Average Spot Price $ per Barrel July 111.61 104.01 103.75 Hughes Rig Count Alaska Active Rigs July 8 7 6 United States Active Rigs July 1766 1761 1944 Gold Prices $ Per Troy Oz. July 1285.54 1342.53 1593.35 Silver Prices $ Per Troy Oz. July 19.71 21.11 27.43 Zinc Prices Per Pound July 0.92 0.92 0.93 REAL ESTATE Anchorage Building Permit Valuations Total Millions of $ July 35.91 79.24 30.62 Residential Millions of $ July 18.72 20.35 16.94 Commercial Millions of $ July 17.19 58.89 13.68 Deeds of Trust Recorded Anchorage—Recording District Total Deeds July 1153* 1142 1267* *GeoNorth Fairbanks—Recording District Total Deeds July 327 303 343 VISITOR INDUSTRY Total Air Passenger Traffic—Anchorage Thousands July 664.87 574.69 624.58 Total Air Passenger Traffic—Fairbanks Thousands July 122.07 95.38 119.08 ALASKA PERMANENT FUND Equity Millions of $ July 46018.3 44853.4 40856.7 Assets Millions of $ July 46803.9 46435.4 41648 Net Income Millions of $ July 112.5 134.7 64.5 Net Income—Year to Date Millions of $ July 1105.8 -832 464.6 Marketable Debt Securities Millions of $ July 34.9 -212.2 140.5 Real Estate Investments Millions of $ July 2.6 191.9 32.4 Preferred and Common Stock Millions of $ July 949.8 -690.2 173.9 BANKING (excludes interstate branches) Total Bank Assets—Alaska Millions of $ 2ndQ13 2186.18 2163.279 2100.47 Cash & Balances Due Millions of $ 2ndQ13 47.55 45.147 55.74 Securities Millions of $ 2ndQ13 133.58 135.906 163.91 Net Loans and Leases Millions of $ 2ndQ13 1185.98 1201.038 1153.64 Other Real Estate Owned Millions of $ 2ndQ13 6.38 7.309 8.21 Total Liabilities Millions of $ 2ndQ13 1907.74 1894.698 1832.07 Total Bank Deposits—Alaska Millions of $ 2ndQ13 1852.29 1837.362 1787.23 Noninterest-bearing deposits Millions of $ 2ndQ13 588.36 567.538 527.08 Interest- bearing deposits Millions of $ 2ndQ13 1263.92 1269.824 1260.16 FOREIGN TRADE Value of the Dollar In Japanese Yen Yen July 99.76 97.35 79.06 In Canadian Dollars Canadian $ July 1.04 1.031 1.01 In British Pounds Pounds July 0.66 0.646 0.64 In European Monetary Unit Euro July 0.77 0.758 0.81 In Chinese Yuan Yuan July 6.18 6.172 6.32 www.akbizmag.com

Year Over Year Change

-0.121 -0.132 -0.098

0.187 -0.381 0.076 0.333 -0.092 -0.193 -0.281 -0.011

0.173 0.105 0.257 -0.090 -0.047

0.065 0.025

0.126 0.124 0.744 1.380 -0.752 -0.920 4.462

0.041 -0.147 -0.185 0.028 -0.223 0.041 0.036 0.116 0.003

0.262 0.030 0.031 -0.049 -0.022

November 2013 | Alaska Business Monthly

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