Alaska Business Monthly November 2014 by Alaska Business

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November 2014

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November 2014 TABLE OF CONTENTS

ABOUT THE COVER Father and son miners, Paul (right ) and Rusty Gibson, both work underground at the Pogo Mine near Delta Junction, Alaska. Paul is the mine trainer, and Rusty is a Jumbo operator. Our annual Mining special section begins on page 104.

DEPARTMENTS From the Editor �� 7 Market Squares ��147 Right Moves �� 148 Inside Alaska Business ��150 Agenda ��153 Alaska This Month ��154 Events Calendar ��157 Alaska Trends ��158 Ad Index ��162

Photo © Judy Patrick Photography/Courtesy SMM Pogo

ARTICLES

Arctic Ideas

14 | Crystal Cruises Plans Port of Anchorage Departure Booking now for the Northwest Passage cruise to New York City By Nichelle Seely

Leadership

16 | ‘Leaning In’ with Alaska Leaders By Diane Kaplan, Janet Weiss, Karen Hagedorn, Linda Leary, Morgan Christen

Financial Services

44 | Preparing For Retirement First Step: Business Succession Planning By Mel B. Bannon

46 | Starting Early with Year End Accounting Helps Businesses Prepare for Tax Filing By Tracy Barbour

HR Matters

49 | Control Is an Illusion How to create alignment and engagement By Kevin M. Dee

Construction

50 | Mat-Su’s Continuous Growth Facilities, roads, subdivisions expand with population By Rindi White

Transportation

56 | Northern Region Roads Ice, gravel, and paved By Julie Stricker

Energy

64 | New EPA Rule 111(d) Alaska rich in opportunity for compliance By Chris Rose 66 | Alaska’s Energy Future Now is the time to move forward By Anne Seneca

8 | Time for U.S. and Alaska to Ramp Up Arctic Infrastructure In a dance to the music of time By Sourabh Gupta and Dr. Ashok K. Roy

Oil & Gas

68 | Legal Loopholes in U.S. Crude Export Regulation By Isaak Hurst

Mary Ann Pease at home.

60 | Charter Operators Provide Clients Access to Remote Areas By Vanessa Orr

72 | Alaska’s Big Pipeline and LNG Project Work continues, more decisions to be made By Mike Bradner

Iconic Alaskans

78 | Mary Ann Pease By Shehla Anjum

Correction A paragraph in the September issue of Alaska Business Monthly needs clarification. The Dena’ina Wellness Center, completed this year in Kenai, is owned and operated by the Kenaitze Indian Tribe. The October print edition has three Arctic typos: page 6, page 14, and page 178. Also in October, another typo in reporting on a Top 49er survey caused a ripple in the Top 49ers and throughout the October print edition—the Top 49ers rankings from 5 to 34 were off one because of an extra 1. Sitnasuak Native Corporation had gross revenues of $93,147,344 in 2013, not $931,147,344. This changed the rankings and the overall charts and figures. Total Alaska Native Corporation gross revenues in 2013 were $10.97 billion. Overall Top 49er gross revenues in 2013 were $15.25 billion. The akbizmag.com Top 49ers articles and press, as well as the October Issu version found on our website’s Archives tab, reflect the corrections. We were notified after the Top 49ers Awards Lun-

cheon on October 1; the magazine had already been printed and the presentation materials already completed. We applaud Sitnasuak for alerting us to their reporting error. The corrected 2014 Top 49ers rankings are: 5 Lynden, Inc., 6 Chugach Alaska Corporation, 7 Afognak Native Corp./Alutiiq, 8 Calista Corporation, 9 Alaska USA Federal Credit Union, 10 Ukpeaġvik In~upiat Corporation (UIC), 11 Doyon, Limited, 12 Chugach Electric Association, Inc., 13 The Wilson Agency LLC, 14 Bering Straits Native Corporation, 15 Olgoonik Corporation, 16 Cook Inlet Region, Inc., 17 Koniag, Inc., 18 Ahtna, Inc., 19 Udelhoven Oilfield System Services, 20 Sealaska , 21 Davis Constructors & Engineers, Inc., 22 Ravn Alaska, 23 Goldbelt, Incorporated, 24 Three Bears Alaska, Inc., 25 Construction Machinery Industrial, 26 First National Bank Alaska, 27 The Tatitlek Corporation, 28 Cruz Companies, 29 Aleut Corporation, 30 Colville, Inc., 31 Matanuska Electric Association, Inc., 32 Usibelli Coal Mine, Inc., 33 MTA, Inc., and 34 Sitnasuak Native Corporation.

Alaska Business Monthly | November 2014 www.akbizmag.com

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special section

Manufacturing

Mining

CONTENTS

22 | Manufacturing Alaska’s Future By Samuel Callen 26 | AlumaSki: Alaska-Born, World Bound Manufacturing the future of adventure and rescue By Russ Slaten

Courtesy of GripAll

GripAll on ambulance.

28 | GripAll By Tasha Anderson 30 | Alaska Distilleries Creating unique products for locals and visitors By Russ Slaten 32 | Alaska Glacier Products Exports Value-Added Water Sea Lion subsidiary roars with Eklutna Glacier melt success By Nichelle Seely 36 | Barrow Inventor Receives His Second Patent Lining up a solution By Lisa Maloney 38 | KeV LLC Innovation and invention on Kodiak Island By Rindi White 40 | Accelerating Innovation in Alaska Protecting and developing new opportunities By Adam Krynicki 6

108

The Greens Creek Mine in Southeast Alaska is the fifth largest silver mine in the world. Photo courtesy of Hecla Mining Company

104 | Celebrating Mining in Alaska Alaska Miners Association marks 75 years By Deantha Crockett

120 | Red Dog Mine Celebrates 25 Years Unique partnership between NANA and Teck sets it apart By Julie Stricker

108 | Producing Mines Prosper Extracting gold, silver, zinc, lead, and coal By Julie Stricker

124 | Mining Jewels, Gems, and Ore It’s ‘lode’ out time for the Diamond Gold Corporation By Tasha Anderson

112 | Rare Earth Elements Exploration and Development Gaining ground in Southeast mining venture By Margaret Sharpe

128 | Pebble Update Northern Dynasty seeks partners, fights for due process By Louise Freeman

116 | Equipping the Mining Industry in Alaska N C Machinery and Construction Machinery Industrial fill niche market By Amy M. Armstrong

130 | Alaska 2014 Mining In Review By Curtis J. Freeman 146 | Alaska Business Monthly’s 2014 Mining Directory

ARTICLES

Natural Resources 82 | Alaska’s Natural Resource Industries A checkup on 2014 health and issues of concern By Judy Griffin

Safety

88 | Safety in Natural Resources Extraction Industry trends in occupational fatalities By Brian McKay

Insurance

90 | Affordable Care Act Impacting Alaska Businesses in Significant Ways By Tracy Barbour

Science & Technology

96 | CH2M HILL Polar Services Supporting scientific research throughout Alaska By Tasha Anderson

Telecom & Technology

100 | Verizon in Alaska Three years in the making and growing By Russ Slaten

Small Business

102 | Market Share: J&S Steamway and Thermax The polished touchstone in surface cleaning By Russ Slaten

Alaska Business Monthly | November 2014 www.akbizmag.com

FROM THE EDITOR Follow us on and

Volume 30, Number 11 Published by Alaska Business Publishing Co. Anchorage, Alaska Jim Martin, Publisher 1989~2014

EDITORIAL STAFF

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

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

BUSINESS STAFF

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

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

501 W. Northern Lights Boulevard, Suite 100 Anchorage, Alaska 99503-2577 (907) 276-4373 Outside Anchorage: 1-800-770-4373 Fax: (907) 279-2900 www.akbizmag.com Editorial email: editor@akbizmag.com Advertising email: materials@akbizmag.com Pacific Northwest Advertising Sales 1-800-770-4373 ALASKA BUSINESS PUBLISHING CO., INC. ALASKA BUSINESS MONTHLY (ISSN 8756-4092) is published monthly by Alaska Business Publishing Co., Inc., 501 W. Northern Lights Boulevard, Suite 100, Anchorage, Alaska 99503-2577; Telephone: (907) 276-4373; Fax: (907) 279-2900, ©2014, Alaska Business Publishing Co. All rights reserved. Subscription Rates: $39.95 a year. Single issues of the Power List are $15 each. Single issues of Alaska Business Monthly are $3.95 each; $4.95 for October, and back issues are $5 each. Send subscription orders and address changes to the Circulation Department, Alaska Business Monthly, PO Box 241288, Anchorage, AK 99524. Please supply both old and new addresses and allow six weeks for change, or update online at www.akbizmag.com. Manuscripts: Send query letter to the Editor. Alaska Business Monthly is not responsible for unsolicited materials. Photocopies: Where necessary, permission is granted by the copyright owner for libraries and others registered with Copyright Clearance Center to photocopy any article herein for $1.35 per copy. Send payments to CCC, 27 Congress Street, Salem, MA 01970. Copying done for other than personal or internal reference use without the expressed permission of Alaska Business Publishing Co., Inc. is prohibited. Address requests for specific permission to Managing Editor, Alaska Business Publishing. Online: Alaska Business Monthly is available at www. akbizmag.com/archives, www.thefreelibrary.com/ Alaska+Business+Monthly-p2643 and from Thomson Gale. Microfilm: Alaska Business Monthly is available on microfilm from University Microfilms International, 300 North Zeeb Rd., Ann Arbor, MI 48106.

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Alaska to Scale

Expansive and expensive

e all know Alaska is the largest state in the United States and that the abundance of natural resources has fostered an economy dependent on the development of those resources. Once developed, those resources play out, with further exploration and additional development needed to keep production up to speed and generate more money for an ever-present and constantly growing population with expansive and expensive needs, much like the industries making up the economy. Expansive and expensive—that is Alaska to scale. So much so that partnerships are needed, collaborative investments to enable progress in the growth and development of industries as well as to pay for and build needed infrastructure supporting all that progress. Some of these investments come from business and industry, some from government, some from foreign lands. Alaska’s economy is built on partnerships between and among many private and public domestic and multinational corporations, nations, and governments. Canada has long been a source of many long-term and ongoing collaborative natural resources partnerships. Northwest Territories Premier Bob McLeod has some new ideas for collaboration and partnership with Alaska, now that the Northwest Territories has undergone devolution and the federal government of Canada has now transferred responsibility for managing public land, water, and resources to the territory. Much like when Alaska became a state in 1959, apparently, devolution with the Northwest Territories has taken decades to accomplish, with the federal government of Canada transferring some powers over time, such as responsibility for everything except managing public land, water, and resources, which was finalized in April this year. Now, the territory is more like a province in Canada, or a state in the United States. It will receive 50 percent of resource revenues generated within its boundaries of 440,500 square miles, nearly two-thirds the size of Alaska, which is 663,300 square miles. One thing much smaller is the population, 43,537 people according to 2013 estimates, compared to Alaska’s 2013 estimated population of 735,132—far fewer people there to provide services for, also a much smaller pool for workforce needs and infrastructure development. However, the Northwest Territories holds vast reserves of energy yet to be developed. One of McLeod’s ideas is for a pipeline to the Beaufort Sea, where oil would be loaded onto tankers and shipped to world markets via the Northern Sea Route and the Northwest Passage. Ready to test out devolution and before Northwest Territories stranded oil is developed or a new pipeline is built, McLeod has an immediate idea to ship Alberta oil by rail and then barge to the Beaufort Sea, beginning in 2015. He is bullish on resource development, including distribution, and ready to form mutually beneficial partnerships. Asia, a continent with 4.4 billion people that is reaching out to the rest of the world for natural resources, is a likely market and partner—with China as a prime source of investment capital for Alaska and the Northwest Territories. The country has nearly 1.5 billion people and a growing need for energy. China’s needs are expansive and expensive. This is a developing story. We have several more in the November issue of Alaska Business Monthly and the team has put together another really great magazine. Enjoy! —Susan Harrington, Managing Editor November 2014 | Alaska Business Monthly

ARCTIC IDEAS

Time for U.S. and Alaska to Ramp Up Arctic Infrastructure In a dance to the music of time By Sourabh Gupta and Dr. Ashok K. Roy The opinions expressed herein are the authors’ own and not those of the University of Alaska System, Samuels International Associates, Inc., or Alaska Business Publishing Co., Inc.

“Every day is a journey, and the journey itself is home.” —Matsuo Basho 18th century Japanese poet “And now the sun had stretched out all the hills, And now was dropped into the western bay; At last he rose, and twitched his mantle blue: Tomorrow to fresh woods, and pastures new.” —John Milton

t long last, the US government appears poised to seize—if at times, fitfully—its Arctic Destiny. Earlier this year, in January, the federal government released its Implementation Plan for the National Strategy for the Arctic Region, following on to its May 2013 release of the National Strategy which articulates the US government’s strategic priorities for this vast untapped frontier. In quick succession, the Department of Defense too issued its Arctic Strategy document in November 2013 and its Arc-

tic Roadmap in February 2014 to realize the strategy over the 2014–2030 timeframe. The Roadmap charts out a series of focused activity areas in the sphere of operations and training, science and technology, environment observation and prediction, safe navigation, and maritime domain awareness, among others, over the next couple of years. This sense of urgency is welcome. It is also belated. The United States has important—and oftentimes shared— national interests at stake in the Arctic and, despite the recent burst of high-level attention, still lags its Arctic neighbors on a number of fronts.

Arctic Multilateralism Six major national interests, organized along three major effort lines, drive the US Arctic policy. These are: national security, environmental protection, resource conservation, accommodation of

the interests of indigenous populations, scientific research, and international cooperation. The three major activity lines are advancement of US national security interests, pursuit of environmental protection and resource conservation, and the development of stronger bilateral and multilateral cooperation. Of the three, multilateral cooperation appears to have made the greatest progress. In May 2008, the states bordering the Arctic Ocean signed the Ilulissat Declaration, which commits the countries to observe the principles of the United Nations Convention on the Law of the Sea as the appropriate legal framework for cooperation in the Arctic. An Arctic Search and Rescue Agreement as well as a Marine Oil Pollution Preparedness and Response Cooperation agreement has also been signed. Multilateral cooperation notwithstanding, the potential for a variety

Multilateral cooperation notwithstanding, the potential for a variety of inter-state threats and tensions in this vast and lightly policed frontier persists.

Alaska Business Monthly | November 2014 www.akbizmag.com

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of inter-state threats and tensions in this vast and lightly policed frontier persists. These include (a) potentially excessive continental shelf claims, and unilateral enforcement measures, by Arctic littoral states that impinge on the resources of their neighbors; (b) the staking of unilateral jurisdiction claims to seabed resources inconsistent with international law by non-Arctic states in the shared central area of the Arctic Ocean; and (c) quarrels over migrating fisheries resources. The progress of Arctic multilateralism also serves to spotlight the extent to which the United States remains a relative laggard in resourcing its Arctic infrastructure—both hard and soft.

Arctic Council Chair In 2015, the United States is due to assume the chairmanship of the Arctic Council—a voluntary inter-governmental forum of the eight Arctic states that also includes a variety of indigenous

of a new Congressional Arctic Working Group on the Hill bodes well too. But the establishment of a congressionally approved US ambassador to the Arctic Council would be an unambiguous statement of the US government’s intent to proactively pursue its Arctic destiny. Going forward the Administration, and the State Department in particular, must develop a whole-of-government strategy so as to successfully chair the Arctic Council agenda and activities during the two-year cycle beginning in 2015 as well as deepen the nation’s engagement with that body. The Arctic Policy Group, the informal interagency group which discusses Council issues and oversees implementation of the US Arctic policy, must outline a clear direction and identify the resources needed to sustain this effort. Alaska officials, meantime, too must push their federal counterparts hard so as to ensure that the state’s interests within this inter-agency set-up are

The absence of specified funding for Arctic Council-related work is a serious impediment, as is the lack of an ambassadorial-level representative to the Council. All other council members except the United States have nominated an ambassadorial-level representative to the body. organizations and related stakeholders. The Council typically meets in working group, task force, and expert group formats and produces documents such as scientific assessments and guidance. While the Council’s workload has expanded significantly in the past few years, the same cannot be said of the State Department’s staffing level dedicated to these issues. As of February 2014, only two employees at the State Department worked full-time on Arctic Council issues. The absence of specified funding for Arctic Council-related work is a serious impediment, as is the lack of an ambassadorial-level representative to the Council. All other council members except the United States have nominated an ambassadorial-level representative to the body. The recent appointment of a retired coast guard admiral as special representative to the Arctic constitutes a useful first step forward, and the formation

neither sacrificed nor misaligned with the state’s priorities. The Alaska Arctic Policy Commission, which released its preliminary report this January, could perhaps serve as a coordinating point to ensure that the federal government’s buy-in and follow through on Alaska-related interests does not taper off for want of dedicated personnel or lack of structured implementation mechanisms.

Deficient Infrastructure If the nation’s soft infrastructure on Arctic policy issues still leaves something to be desired, its rollout of hard infrastructure, particularly in the area of marine requirements, remains woeful. There is no US Arctic deep-water port, and the harbors and coastal ports north of the Aleutian Islands are not sufficiently deep to support larger commercial vessels. There are no federally maintained navigation aids along the northern

Alaska Business Monthly | November 2014 www.akbizmag.com

coast of Alaska, and only nine fixed aids exist north of the Bering Strait. The Coast Guard operates just two functioning icebreakers—one of them, the USCGC Polar Star, seven years past its service life—when its requirements demand that it operate at least three heavy and three medium-size such vessels. A 2010 Coast Guard commissioned report had in fact recommended six heavy and four medium-sized such vessels. Finally, less than 1 percent of the US navigationally significant Arctic waters have been surveyed with modern technology. Clearly, hard infrastructure build-up in the Arctic region is still at a stage of infancy in Alaska and thus, the United States. The lack of infrastructure has not been a serious deficiency so far; in the years ahead however, this constraint will bite—imperiling safety and security in these vast maritime spaces. With the Arctic being increasingly linked to global markets by the development of offshore natural resources; as changes in Arctic sea ice thickness, extent, and character enable ever-longer seasons of trans-Arctic tanker and bulk-carrier shipping; and as large cruise ships and other specialized tourist vessels start operating for extended periods through the summer and beyond, this deficiency in hard infrastructure will become apparent. Should the waters north of the Bering Strait in the US exclusive economic zone, which include the Beaufort and Chukchi seas, be opened for commercial fishing, and should drilling in the Alaska Outer Continental Shelf be given a thumbs-up, this deficiency will become acute. Going forward, as a first step to rectifying these shortfalls, the federal government must make an immediate down-payment in building up select aspects of Alaska’s marine infrastructure. These include: (a) strengthening the state’s Arctic marine domain awareness systems and search and rescue capability, (b) developing an Arctic deep-water port in northern Alaska, (c) mapping the entire US maritime Arctic to international navigation standards, and (d) finally, investing in the state’s polar class icebreaking vessel capacity.

domain awareness systems, which requires investing in the capability to obtain, organize, and integrate information on personnel, cargo, and vessels across this broad and remote expanse of maritime territory. Investment in maritime tracking technologies and communications networks to monitor and surveil activities in real-time is of the essence. Equally, accompanying search and rescue assets that are shipbased and mobile rather than shorebased—given the vast remoteness of the area—need to be appropriated. Second, with a new era of demand for Arctic resources by global markets unfolding, the federal government must embrace the recommendations of a March 2013 US Army Corps of Engineers-Alaska Department of Transportation and Public Facilities study and fund strategic investments in an Alaska Deep-Draft Arctic Port system. A separate and brief US Coast Guard study earlier this year too had concurred that a deep-draft seaport would furnish a variety of benefits, including economic development, intermodal transit, energy independence, national security, and mariner safety.

Modernization of the polar icebreaking capacity would mean building both heavyduty vessels as well as shallower-draft, ice-capable cutters able to operate along Alaska’s coastal areas. Third, the federal government must map the entire US Maritime Arctic to international navigation standards, both the emerging high-density usage of Arctic shipping routes and the lack of binding international navigation rules related to the Arctic or polar waters. Such mapping, including hydrographic surveys, shoreline surveys, and geodetic referencing in Alaska, will require quantitatively greater resourcing of the National Oceanic and Atmospheric Administration’s Office of Coast Survey. Finally, the United States must overcome its embarrassing ice-breaker vessel capacity shortfall. Tiny Finland is better resourced in this regard (it has four icebreakers) than the United

Marine Domain First, the federal government must strengthen the nation’s Arctic marine www.akbizmag.com

November 2014 | Alaska Business Monthly

States. The United States owes it to itself and the wider region to equip itself with a larger and more modern inventory. Modernization of the polar icebreaking capacity would mean building both heavy-duty vessels as well as shallowerdraft, ice-capable cutters able to operate along Alaska’s coastal areas. Legislative efforts by US Senators Lisa Murkowski, Mark Begich, Maria Cantwell, and Patty Murray in this regard are gaining support. Equally, modernization of the federal polar icebreaking capacity also means that the new federal government vessels should not preempt the scaling up of the domestic manufacture of privately-owned

ice-breaking vessels. As has been noted, the use of privately-owned ice-breakers for a variety of purposes in the US Maritime Arctic is a sure path to compelling economic opportunity. Federal agencies would be well advised to incentivize such private participation rather than shut it out. We have written several articles previously on the sweep of the Arctic, including “The Arctic Ocean Up for Grabs,” “Ratify the Law of the Sea Treaty,” “Between Strait and Sea,” and others, and interest on this topic continues to grow. We see the future of the Arctic as clearly as Cassandra previsioned the fall of Troy. There is a geometry of fate

which makes straight line intersect parallels always at equal angles. For most of the journey, the route of a railway train is firmly dictated by the rails. From time to time, however, comes a junction from which various directions can be taken. Then the train can be turned in one direction or another by means of the small expenditure of energy necessary to set the point. Looking through our expert prism, the Arctic train has reached such a junction and the United States can, and should, turn it in the direction of its long-term national interests by implementing the notions enunciated in our article. Here, all ends and begins. R

Dr. Ashok K. Roy is the Vice Sourabh Gupta is Senior Research President for Finance & Associate at Samuels International Administration/Chief Financial Associates, Inc. Washington, D.C. Officer of the University of Alaska He holds two graduate degrees System and Associate Professor of from Syracuse University and Business Administration at UAF. Georgetown University and was Roy holds six university degrees and an East Asia Forum Distinguished five professional certifications. He Fellow. Gupta has widely published has authored more than eighty-one on international relations, foreign policy, and policy analysis. Landye_S M M_AKBusMon_2013_Layout 1 12/20/12 11:03 AM Page 1publications. Roy has worked at three other universities.

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ARCTIC IDEAS

Crystal Cruises Plans Port of Anchorage Departure Booking now for the Northwest Passage cruise to New York City By Nichelle Seely

New Kind of Cruise But now there’s something different on offer: Crystal Cruises is advertising a new kind of cruise, starting in August 2016. According to their press release, the luxury vessel Crystal Serenity will leave from the Port of Anchorage (or maybe Seward) and travel north and then east through the Northwest Passage, arriving thirty-two days later in New York City. Along the way, they plan to stop at Kodiak, Dutch Harbor, and Nome, Alaska; Ulukhaktok, Northwest Territories; Cambridge Bay and Pond Inlet, Nunavut; Ilulissat, Sisimiut, and Nuuk, Greenland; Bar Harbor, Maine; Boston, Massachusetts; Newport, Rhode Island; and finally New York City. This ambitious trip isn’t their longest— that would be the 108-day world cruise beginning and ending in Miami; nor is it the company’s only Alaska cruise—but it is by far most expensive when viewed on a cost-per-day basis. The website advertises rates beginning at $22,755 per person, which pencils out to more than $700 a day. For that kind of outlay, one expects a one-of-a-kind experience, which is exactly what Crystal Cruises promises. 14

Source: Crystal Cruises

il, fish, gold… these are the muchtouted resources of Alaska. But there is another natural resource, another commodity that retains its luster through the waxing and waning of politics and environmentalism. It is the idea of who and what we are, the wild landscape, the romantic history—the legend of Alaska, if you will. This is what brings thousands of visitors flocking to our shores and communities every summer and what inspires the multitude of cruise ships that can be found clustered on the docks in the summertime. Princess, Royal Caribbean, Holland America—these companies have found a way to mine the ultimate renewable resource: tourism. We’re all familiar with the sight of these gigantic floating luxury hotels and the fleets of branded vehicles carrying their passengers to and from our national parks. The itineraries are controlled like clockwork—they’ve got it down to a science, without a lot of room or necessity for innovation—or so it appears.

The first thing I wondered about regarding this trip was what people were going to do during their thirty-two days at sea? The ports-of-call aren’t exactly metropolises teeming with hundreds of tourist activities, unless you count all the individual bars along Front Street in Nome. The Crystal Serenity has room for over a thousand passengers and more than five hundred crewmembers. There’s likely to be more people on board the boat than actually live in several of the more remote communities the ship plans to visit. The second thing that occurs to me is that the ship is going where very few have gone before—and many of those with less than triumphant homecomings. One thinks of HMS Erebus and Terror, entombed within the crushing sea ice. Crystal Cruises is undoubtedly banking on the fact that intrepid travelers will want to boldly go where no one has gone before, but the fact remains that infrastructure along the Arctic Rim is almost nonexistent. How will they dock where there are no deep-water ports? What if there’s an emergency? And what of the impact of a boatload of tourists on the Inuit villages and untouched landscapes on which they propose to descend? How will the ship dispose of waste or take on supplies?

These and other questions occurred to me as I followed the proposed itinerary with my finger on a polar-centric map.

Intriguing Journey Intrigued by the press release and by the unheard-of nature of the journey, I trolled through the depths of the company’s website. At least some of my questions were answered in a very informative Q&A summary. In between stops, to supplement the on-board dinner shows, casinos, shops, and restaurants, which are par for the course on any cruise ship, the Crystal Serenity will have a series of speakers on everything from climate change and Arctic ecology to indigenous culture. They have plans for outside expeditions, utilizing a Zodiac to ferry interested guests to shore in order to experience the tundra and remote landscape first hand. The press release states that “Crystal will introduce ‘Wilderness Adventures’ that take guests across polar tundra, up ice-strewn fjords, and into scenic coves to explore areas in and near maiden ports-of-call. Travelers will also be able to respectfully visit the small, remote communities and uninhabited, unscheduled spaces/lands/waterways en route—often with champagne waiting at the other end.” Presumably that won’t

Alaska Business Monthly | November 2014 www.akbizmag.com

be in a “dry” town, and I hope that the trip guides will remember to pick up their trash. They won’t be alone up there—an escort vessel will accompany the ship at all times. This vessel will have a helicopter as well as ice-breaking capabilities and should be able to contact either the US or Canadian Coast Guard for help if that becomes necessary. This ship will also be able to facilitate shore landings where there is no dock by using a portable pier system—whatever that is—although it probably works, since the tour company has been preparing this voyage for two years.

Green Voyage? Some garbage may be incinerated en route, but the company claims it will dispose of no garbage or food waste at sea. (One wonders if that statement also includes wastewater.) Waste will be retained on board the escort vessel. According to the website, “This waste will then be offloaded outside of the Arctic communities into specific collection facilities that are equipped to handle waste.” I admit to being a little skeptical about that statement, if what they are referring to is a village landfill. It wouldn’t take too many cruise ships to completely overwhelm the dump site of a small town, and what about animals

attracted to a new influx of edibles? Cruise ships aren’t known for stinting on the food. Despite those niggling doubts, the company seems to be taking an environmentally and socially responsible stance, as much as they can, while still providing luxury travel. They say they have been working with community leaders to create a positive impact, and the trip description stresses that this voyage isn’t going to be a round of constant entertainment but a chance for those on board to get a taste of the way life is really lived in this area. I can only applaud their commitment to educate their clients on the issues facing the Arctic and hope that their passengers disembark with a greater knowledge and appreciation of this remote region. Will the new cruising route be a benefit to the places it plans to stop? Like most other things, it will probably be a mixed bag. One cruise ship isn’t going to have a huge impact on Kodiak, Dutch Harbor, or Nome. I’m not familiar enough with the other destinations to offer an informed opinion, but I’d like to think that the remote Inuit settlements in Canada have a robust enough culture to withstand a few hours with a few hundred tourists. Those towns may even enjoy the economic boost and hopefully sympathetic interest of their visitors.

However, if this new route proves popular and other cruise companies jump on the bandwagon, we could start seeing multiple ships and tens of thousands of visitors in an area where up to now there’s been none. While Arctic nations argue about borders, sovereignty, and who gets to be an observer or sit on the council, private companies are pushing ahead and development is sure to follow. These companies may not be sensitive to the deceptive fragility of the landscape or respect the traditions of the people. The governments of Arctic nations need to start thinking seriously about infrastructure and emergency situations. Are five icebreakers enough to patrol the hundreds of miles of our northern coastline? Are six enough for Canada? Do we need more deepwater ports in the Arctic, a stronger Coast Guard presence, or would that just invite more wildcat companies operating on a shoestring into the region, expecting to be rescued when things go bad? One thing is certain: change is coming, and the Crystal Serenity may only be the tip of the iceberg. R Anchorage-based architect Nichelle Seely writes from across Alaska.

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7/17/14 November 2014 | Alaska Business Monthly

5:31 PM 15

LEADERSHIP

‘Leaning In’ with Alaska Leaders Editor’s Note: Facebook’s Chief Operating Officer Sheryl Sandberg wrote “Lean In” after giving a TEDTalk in December 2010 entitled “Why we have too few women leaders.” She focused on how women inadvertently hold themselves back. By now the TEDTalk has been viewed more than 4.7 million times, and the book is a bestseller. “Lean In: Women, work and the will to lead” encourages women to take more risks in their professional development and shares her journey to the top as well as statistical data about women in leadership roles.

e asked several successful Alaskan leaders, all women, a few questions about Lean In and some of its basic concepts, as well as what advice they have for young people in business today. Here are the responses from Diane Kaplan, Rasmuson Foundation President and Chief Executive Officer; Janet Weiss, BP Exploration (Alaska) Inc. Regional President, Alaska; Karen Hagedorn, ExxonMobil Alaska Production Manager; Linda Leary, Alaska Communications Senior Vice President of Sales; and Morgan Christen, US Court of Appeals Ninth Circuit Judge. What does “lean in” mean to you? Why do you think women need to be urged to lean in? DIANE KAPLAN: Women want to assume their appropriate and deserved role in community leadership. Often, that means having to be assertive in terms of having her voice heard. Women, by nature, like to be liked. We are

Diane Kaplan Rasmuson Foundation President and Chief Executive Officer

Janet Weiss BP Exploration (Alaska) Inc. Regional President, Alaska

raised that way. Sometimes, behavior that is considered normal for men is viewed as pushy or aggressive in a negative way. Nevertheless, if women want to be players at the leadership/policy level, this is something they must do.

us, this style is not how we were raised, so we need to be reminded.

JANET WEISS: It is about taking on big challenges and growing through those experiences, enabling you to take on even bigger challenges. My first role leading a business was one of those big challenges I had to step up and step into. I had many challenges with opportunities to give up, but “doubling-down” during the challenging times was crucial to gain the experiences needed to go to the next level. We all need encouragement to step up and step in when waves of self-doubt start crashing across the mind. I’ve found that having some insightful, encouraging counsel around you helps you see what could be, helping you to lean in. Focusing on the goal helps you to lean in with purpose, improving your effectiveness. KAREN HAGEDORN: I think you could say “lean in,” “step up,” or a number of other ways to say the same thing. I see this as meaning women need to take responsibility and take action to meet our career goals—go well beyond our comfort zone and do not wait for opportunity to come to us. For many of

LINDA LEARY: “Lean in,” to me, means that you participate, engage, and add value. I think at times women are contemplative and take time to be thoughtful in their responses and that gets misread as not contributing. Women have equal opportunities to contribute and make their viewpoints heard. Sandberg writes about the “imposter syndrome” and feeling like a fraud, fearing discovery with each success. Have you felt this way? If so, how have you overcome it? DIANE KAPLAN: One night I had a dinner at my home with friends and colleagues—all Alaskans or temporary Alaskans. I realized that, sitting at my table were a MacArthur Genius, a Pulitzer Prize winner, and a Nobel Laureate. Of course, I thought, “Holy cow! What am I doing at this table?” I’ve won awards and kept it secret because I wonder if I’m really deserving. I think that’s normal and okay. JANET WEISS: Leadership is not about doing everything yourself; it is about bringing the right team together to accomplish the strategic goal. I’ve found

Alaska Business Monthly | November 2014 www.akbizmag.com

Karen Hagedorn ExxonMobil Alaska Production Manager

Linda Leary Alaska Communications Senior Vice President of Sales

that those “imposter feelings” dissolve when you pull your team around you to collectively solve that big challenge. Take a chance, get in there, and yes, lean in. Step up, step in, and don’t beat yourself up when things don’t go right. Your little voice is the biggest limiter, and it is okay to make a mistake. Step up and step in and learn from those mistakes. I think that with the right team and the right dream, you can really make an impact.

or situation that they are unsure of or is unfamiliar. I think that confidence in your abilities helps you overcome that feeling, and often you really know so much more than you give yourself credit for.

KAREN HAGEDORN: I can’t say I have felt what Sandberg describes specifically as an “imposter.” But, sometimes I see successes or recognition as more of a pleasant surprise as opposed to the entitlement that others (often men) may consider them. However, I think this question points to a well-established truth—men are often judged on potential, women on performance. We need to be careful not to judge ourselves that way. If we are in a role that is perhaps a bit of a stretch for us, we need to look not at our CURRENT ability to do the job, but at our POTENTIAL to do it. Then you just figure out what you need to do to close skill gaps or to gain confidence and go do it. In the meantime, surround yourself with people you trust to cover for whatever you perceive as your gaps. LINDA LEARY: Perhaps people feel that way when they are in a new role www.akbizmag.com

Morgan Christen US Court of Appeals Ninth Circuit Judge

MORGAN CHRISTEN: When I was a child, I remember thinking that there was a certain age when I would reach adulthood and have everything figured out, probably because my parents seemed to know everything. But I realized a long time ago that there is no point at which any of us have all the answers. When I hear people talking about the “imposter syndrome,” I am a little puzzled. It seems to me we are all in the same boat: no one can reasonably expect that a colleague will know everything or never make a mistake. What we can expect of each other is that we approach our work with care, that we prepare diligently, and that we give it our best effort. Those things are entirely within our own control, so I try to focus on those items. If I paid too much attention to what others think, I’d be in real trouble. There is usually someone on the losing end of a judicial decision who is bound to be unhappy. Sandberg believes that there are times when you can reach for opportunities even if you

are not sure you are quite ready to take them on—and then learn by doing. Have you ever tried this? What have you tried? What was the result? DIANE KAPLAN: When I was eight years old, I went to summer camp for the first time. I grew up with a single mother and two older brothers so this is something we could never afford, but scholarships were available for families like ours. On the first day, they took us down to the lake and asked who could swim in water over their head. One other girl and I raised our hands. They took us out to the deep water and she easily swam a lap. Then it was my turn. I didn’t know how to swim but it didn’t seem that hard of a thing to do. I jumped in, sank to the bottom, and waited down there until I was fished out. It made me a little scared but I never had a fear of dying. I guess I’ve approached life that way. JANET WEISS: Being the first woman to serve as regional president for BP in Alaska is a great opportunity. It is right up there with being the first longtime Alaskan to serve as BP’s Alaska regional president. When I stepped into this position, I started learning at a much faster pace due to the demands of the role; learning is thrilling. I’m bet-

November 2014 | Alaska Business Monthly

ter at my job today than I was yesterday, and I’m quite confident I’ll be better tomorrow. Take a look around Alaska and you’ll see there are more women in leadership positions. And when I look at women in our industry, I see fantastic examples of inspiring women stepping up and accomplishing great things through great teams. KAREN HAGEDORN: I have done this many times—most of my job changes have been a combination of lateral and upward (“jungle gym”) so that I’ve never been fully prepared to just step into the next role. The critical step is to prioritize what you need to learn and when and what you can have staff cover so you don’t end up “cramming” so much you miss the big picture. The result for me has been opportunities I never would have gotten without taking some career chances. LINDA LEARY: Yes, I have always tried in my career to raise my hand and volunteer for new opportunities to learn and be out of my comfort zone. I love learning and find that it enriches your life to try new experiences and always be in a mode of learning. For me the results have been to broaden my life experiences and grow my career. I have been very fortunate. MORGAN CHRISTEN: Once when I was a young lawyer, I wrote to a federal judge asking whether there was an admiralty rules committee because I had a question about admiralty law and I wanted to know who the local practitioners were. I received a letter in response appointing me to serve as chair of the Admiralty Rules Revision Committee. I was no expert in admiralty law, but I found some practitioners who were and formed the committee and rolled up my sleeves and hit the books. I don’t think there is any way to avoid doing a lot of homework when tackling a new project area, but a lesson I learned early on is that asking for help can be a huge strength. Some people seem to think it is a sign of weakness; I think it’s a sign of competence. Effective people recognize that joint work product is often much richer because every member of a team brings a different perspective. What is your take on Sandberg’s suggestion that we 18

think of the path to a satisfying career as a jungle gym rather than a ladder? DIANE KAPLAN: Paths to success are not necessarily straight up. They can be circuitous. Standing out from the crowd might mean taking risks and occasional detours or alternative routes. JANET WEISS: Sandberg’s suggestion is an insightful analogy. The challenges are not linear and straight-forward; they are multi-dimensional. Not only does a leader need to deliver the desired, current result, but also build the team and the ability for tomorrow’s challenges. I’ve spent twenty-one of my twenty-nine years in the oil and gas industry in Alaska; reflecting on the change from the mid-80’s to now helps us all see how far we’ve come. During my career, I also led the Gulf of Mexico operations with 150 production platforms and ran BP’s western Wyoming gas fields. Sometimes it was an issue to be the only woman on an offshore oil platform, but leadership has responded to change. There is more to do, and we will get there faster as companies see the value in what diversity brings regarding solutions and insights. At BP we work to attract, motivate, develop, and retain the best talent, and that is a diverse talent pool; our ability to be competitive and to thrive globally depends on it. KAREN HAGEDORN: Absolutely true. The best opportunities (and often the most distinguishing ones) are usually not linear. LINDA LEARY: I think that you have to try paths in your career to increase your value and knowledge. I like a broad range of experiences to make me a much more rounded employee/business owner. Experiences in all aspects of a business give you a broader overall view of your business and the market in general that you would perhaps not have if you stayed in one field or role. MORGAN CHRISTEN: I always tell young people that I hope they dream big dreams and set big goals—but not to forget to watch for opportunities that pop up along the way. I like the

“jungle gym” metaphor very much. Opportunities can come along at unexpected times and in unexpected ways, so it’s good to keep an open mind. In my case, I really loved my private law practice, but I received a call out of the blue urging me to apply for a superior court judgeship. I was really surprised because I was not looking to make a change at all. But I liked the idea of public service very much. I thought about it and mulled it over with family and a few close friends and decided to apply. Becoming a judge was a huge change in my day-to-day work life, but with the exception of parenting, my career on the bench is the most rewarding work I have ever done. The people I know who have had the most interesting careers have not necessarily had linear career paths. What they do have in common is that they work hard and they have followed their hearts; they do work they feel passionate about. Sandberg argues that taking risks can be important in building a career. How have you approached risk-taking in your life? DIANE KAPLAN: As I’ve gained more experience and had the benefit of advice from valued mentors, I’ve learned that I can’t take on every situation I find unjust or unfair or just plain wrong. Each of us can only do so much if we want to be effective at the important things. That means choosing our battles—taking risks when the stakes are high but the potential pay-off is even higher. JANET WEISS: When taking risks, I’ve found that I need to think through the range of outcomes, planning that next move, analogous to the game of chess. I’ve made decisions with adverse outcomes and lived with the consequence of those decisions; it does help me make better decisions in the future. There are a lot more women at the top. And women are being recognized for what they bring to the table. It is not just for those traditional skills of bringing people together to resolve conflict. Women are doing amazing things about taking risks, setting goals, and changing performance.

Alaska Business Monthly | November 2014 www.akbizmag.com

KAREN HAGEDORN: I ask myself what is the worst that could happen versus the reward and I have a backup plan. I don’t let setbacks be the end of the world—because I have a backup plan. LINDA LEARY: I recently answered this question saying that I was not a big risk taker, but after re-thinking it that was more in a financial context and not really in life/career context. As I look back at my career starting back when I first moved to Alaska at the age of twenty-two, one week out of college in Maine with no job lined up—that was a first big risk. I ended up almost thirty years in the trucking business working with some wonderful entrepreneurs that taught me about risk taking and growing a business. Part science and part intuition. I then took another risk and left an industry that I had been comfortable in for many years to grow and expand my experiences by working for a publicly traded company in the telecom industry. It has been a tremendous experience and one where I hope that I have added as much value to them

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as they have enriched my life learning. So yes, I guess I am a risk taker! MORGAN CHRISTEN: I expect that if you asked a psychologist, he or she would tell you that judges are a pretty conservative, risk-averse group of people. But in any field, I suppose it is inevitable that we encounter some risk. Perhaps the key is what we consider to be a “risk” in the first place. I often hear from people who think they would like to work in my field but say they are afraid to apply because they are afraid they will not be selected. I always give the same response, which is: “Well, if you don’t apply, in one sense, you will have nothing to worry about— because you surely won’t be selected. But of course, playing it that safe is entirely self-defeating.” There are all sorts of very talented lawyers who apply for judgeships but are not selected for any number of reasons. And there are lots of judges who applied multiple times before being appointed. This does nothing to diminish their professional stature. In my view, it only identifies them as people who are willing to serve our

communities. I certainly do not encourage people to take risks just for the sake of taking risks, but we can really get in our own way if we convince ourselves that we should only pursue sure things. Sandberg argues that mentorship relationships rarely happen from asking strangers to mentor you, but rather from an opportunity to engage with someone in a more substantive way. How has mentorship worked in your own experience? DIANE KAPLAN: Several mentors have made a huge difference in my professional life. In every case, it was an organic process where I was lucky enough to connect with someone who had a genuine interest in helping me succeed. JANET WEISS: My experience lines up with Sandberg’s observation. For me, the most leveraging mentor, or rather “sponsor,” relationships were about me really delivering for a leader in a distinctive way, then that leader

November 2014 | Alaska Business Monthly

stepping up to advocate for me for an important opportunity. That is what opened some critical doors for me. Another aspect of mentoring is sharing stories to learn from each other. You know, you’re not alone. Take a look around at the amazing women that are here in Alaska. You can share the journey, share your war stories, and go forward. At BP we have a voluntary women’s international network, where we get together to discuss issues, swap war stories, and try to improve the environment through our experiences. We also talk about the challenges of home/work balance. KAREN HAGEDORN: I had very good mentors early on in my career, but it has been more difficult to establish a good mentoring relationship as my career has advanced. I do agree that the most effective mentoring relationships develop naturally, not by arrangement. However, if you do want to approach someone to mentor you, I believe you as the “mentee” have to do all of the heavy lifting. You have to set objectives, make arrangements around the mentor’s schedule, and show that you value their time and wisdom enough to put the effort into it. One thing I have had even when mentoring was scarce was sponsors—someone that supported my career even if we didn’t have much one-on-one interaction. I think these sponsorships come from taking calculated risks, working with integrity, communicating honestly and openly with those above you when you have the chance, and just doing the job you have to the best of your ability. LINDA LEARY: To me I have always worked to build a network of people that I can learn and share with, being careful to not take more than I give. People want to work with those that help them and add value, and I have found when I am mentoring someone I usually learn just as much from them as they may learn from me! MORGAN CHRISTEN: I have been blessed by mentors all along the way. Here in Alaska, that has been especially true because this is an exceptionally welcoming community. Maybe this is because there are so many of us who fell in love with this state and transplanted our20

selves here. In my professional field, and in my volunteer nonprofit work, it was not necessary to be a third- or fourthgeneration Alaskan in order to be a contributor. People here were welcoming and willing to give me a chance to show what I could do. My mentors are not people I asked to mentor me in a formal way. They have been people with whom I had common interests and people who worked with me on particular projects. Once we discovered that we got along well, and liked the way we approached our work, the mentorship followed. What advice do you have for young people in the workforce? DIANE KAPLAN: Develop your oral and written communication skills to their full potential if you want to stand out. Work hard. Be willing to sacrifice. Always have a few good jokes to tell. Say thank you often—write it if you can. Have a sense of humor. Find something to right your ship when it needs an adjustment. Plan regular vacations away from work—REALLY away. Be kind. Help someone who reminds you of YOU a few years ago. If you give your word, others should be able to take it to the bank. For young women who want to be taken seriously in the workplace— act and dress professionally. No cleavage showing at work. No super short skirts. No crazy shoes, crazy piercings. No showing up for job interviews in torn jeans, heavy perfume, wrinkled blouses, or in your face tattoos. Do I really care about those things? Not that much. But you are telling me that you have poor judgment and this could extend to other workplace situations. I say this only because I’ve seen it all. JANET WEISS: I have a few suggestions for those that might be aspiring to leadership from my own experiences: 1) As you solve problems, really try to identify which problems drive value and put your energy into those issues. A lot of times we get enamored with something that is actually not going to make a difference. We need to develop the skill to figure out what is going to make a difference to that bottom line and what is really going to bring value. 2) Step up and step in, take on responsibility, and

follow through. And, don’t beat yourself up about the mistakes along the way. 3) There is power in community; connect with other women in industry. It is a whole lot more fun that way. 4) Enjoy life, and realize there is balance, both inside and outside the workplace. KAREN HAGEDORN: First and foremost, do the best job you can in whatever job you are in—even if it isn’t your dream job. You never know who is watching and what opportunity they might bring your way. Second, know where you want to go, but be open-minded about how to get there. The most rewarding path between two points may not be a straight line. Finally, take a chance that is out of your comfort zone, but then do what it takes to deliver on the job. LINDA LEARY: Always raise your hand to learn more, to increase your value and learning. Have a great attitude and work on developing goals both personal and for work; it is amazing what you can accomplish when you actually write it down and commit to a date. One message from Lean In was the importance of real domestic partnership, of men (or whatever partner choice) leaning in too. What role has this played in your life and your career? DIANE KAPLAN: I am so lucky to have Mel Sather as my husband. He is my best friend, gives me honest but kind criticism, has my back at all times, is my editor, my mentor, and keeps me laughing. JANET WEISS: I am quite fortunate to have a partner that makes me better. My husband of twenty-eight years teaches me every day about “iron sharpens iron,” and I enjoy it and grow because of it. This critical relationship certainly influences our ability to deliver or perform. LINDA LEARY: Having a supportive partner is key to the success of high achieving individuals. I could not have been successful without the support of my husband and children. It has been a wonderful journey that we have

Alaska Business Monthly | November 2014 www.akbizmag.com

shared together as a family. They have put up with my travel, meetings, helped me host large dinner parties, testified with me at hearings, brainstormed on new names for a service or a tag line, designed flyers for me, attended rallies and fundraisers—they have done it all! I owe them a big “Thank you.” MORGAN CHRISTEN: This is huge! Easily, the most important decision I have ever made was the decision to marry Jim. His support of my career is unfailing, but that’s only part of the story. I think the real test is the stuff that happens along the way that no one can possibly prepare for or even anticipate. I think it is very important to select a partner who is willing to hang in there, no matter what happens, because life does throw curve balls. For us, it was receiving a devastating diagnosis for our special needs child. I remember holding her on my lap and hearing the news. It was crushing, but honestly, the first thought I had was: thank God I married Jim. I remember that moment so vividly, even though it was many years ago. The medical experts were completely pessimistic. But I knew we would work through it together, and we did. At home and at work, it has meant the world to me that I have never had to doubt that Jim and I are a team. What is your favorite metaphor, take away, or “lean-in-ism” from the book? DIANE KAPLAN: The Heidi/Howard study where people judge men positively and women negatively when displaying the same behaviors. KAREN HAGEDORN: I think the most powerful take away for me is her comments regarding equality in the home, or at least outside the workforce. In my opinion, we as women can never expect to be treated truly equal in the workplace if we continue to accept inequality at home. And we are more in the driver’s seat at home than we were when we started to demand equal treatment at work years ago. It can be done, but our mindset has to change if we are to make a real step change difference in real equality, especially for the next generation. R www.akbizmag.com

November 2014 | Alaska Business Monthly

special section

Manufacturing

Manufacturing Alaska’s Future

hen people think of business in Alaska, manufacturing is often the last thing that comes to mind. Yet, in the 49th state, manufacturing is serious business. While not as prevalent an industry as it is in other states, Alaska’s manufacturing industry still accounts for 4 percent of the state’s total Gross State Product and about the same share of the state’s total employment. However, an organization in the state, the University of Alaska Center for Economic Development (UACED), has led a coalition of organizations in an effort to grow this industry beyond its current successes.

The Project To bolster the US manufacturing industry and its capabilities, the federal government has long sought to provide small and medium-sized manufacturers with the tools needed to compete in the global marketplace. The Manufacturing Extension Partnership (MEP) program, funded by the US Department of Commerce, National Institute of Standards and Technology, is a network of technical assistance centers throughout the country. Just as agricultural extension programs serve the nation’s farmers, MEP centers provide a variety of services to manufacturers ranging from operational improvements to streamline processes, energy efficiency, and business development. The MEP program operates these assistance centers in every state in the country, with one exception: Alaska. However, this will change next year. MEP in Alaska The MEP program, while lacking an Alaska presence, has operated in the state in the past. Ultimately the program was closed in recent years, but not for a lack of interest within the business community. As a result of this, the UACED, through a cooperative agreement with the MEP program, undertook an exhaustive seven month study that became one of the most in-depth investigations on Alaska manufacturing ever conducted. This study lays 22

By Samuel Callen the groundwork for the reinstitution of an MEP center in Alaska. The study attempted to identify the unique needs of manufacturers in the Last Frontier and the best methods for assisting them.

The Project Team One of the most important contributors to the success of the project was the assembly of the core project team to work on the planning study. The lead organization on the study was UACED, an entity housed under the Business Enterprise Institute at the University of Alaska Anchorage. For years, UACED has served the economic development needs of communities statewide, often working on client engagements with the State of Alaska, Alaska Native Corporations, tribal and village governments, and private industry. When the opportunity presented itself to work on a project aimed at assessing the state’s manufacturing industry, UACED welcomed it. “To have the chance to take an in-depth look at Alaska manufacturers, and learn about their challenges, opportunities, and barriers to growth…as economic development professionals, that was an opportunity we couldn’t pass up,” says Associate Vice Provost Christi Bell, who directs the UAA Business Enterprise Institute. The planning study also featured regional economic development experts who provided valuable assistance on the project. The Juneau Economic Development Council, World Trade Center Alaska, Green Star Incorporated, and the Anchorage Economic Development Corporation all provided essential expertise throughout the project. These organizations helped to conduct interviews and focus groups with manufacturers all throughout the state. “Having the assistance of those organizations [the project partners], who are the experts in their respective regions, made a world of difference. I don’t think without them we would have been able to cover the state as well as we did,” says UACED Director Nolan Klouda, who led the project.

Methodology Over the course of six months, the project team conducted sixty-seven interviews with Alaska manufacturers, nearly 12.6 percent of the state’s approximately 533 manufacturers, and conducted interviews with dozens of other key stakeholders including shipping companies, venture capital fund managers, angel investors, and large oil companies. The team augmented this by holding focus groups centered on specific industry or geographical themes. A private sector advisory group also helped to provide an industry perspective throughout the study. One initial question the project team asked was, “Who are the state’s manufacturers?” Lacking large-scale factories that produce automobiles or consumer goods, the team found a surprisingly diverse and innovative set of companies. Fish processing, which accounts for three-fourths of manufacturing employment, is the largest sector, although much of that employment is low-wage and seasonal. Breweries constitute one of the fastest growing segments, with many operations scaling up quickly and exporting a growing share of their output. Specialty metal fabrication, much of it serving the oil and gas and aviation industries, is another. Windows, snack foods, soaps, marine vessels, prefabricated buildings, and bottled water are other examples of products made in Alaska. The Results When the final interview results were compiled and examined, the team observed a few key takeaways. Many of the state’s manufacturers (63 percent) were successfully achieving sales out of state, with an average of 38 percent of total sales coming from markets outside Alaska. “Usually when you hear about Alaska manufacturing, you hear about how it’s impossible to compete out-of-state due to our high shipping and labor costs, so this came as a big surprise to us,” Klouda says. “The study showed us that there are

Alaska Business Monthly | November 2014 www.akbizmag.com

Manufacturers Interviewed by Sector Alaska Manufacturing Companies Apparel Beverage Boat Building and Repairing Chemical Computer and Electronic Product Electrical Equipment, Appliance, and Component Fabricated Metal Product Food Furniture and Related Product Leather and Allied Product Machinery Millwork Miscellaneous Nonmetallic Mineral Product Paper Petroleum and Coal Products Plastics and Rubber Products Primary Metal Printing and Related Support Activities Textile Mills Textile Product Mills Transportation Equipment Wood Product

# In Total study # 0 5 9 25 2 0 0 2

4 4

5 13 0

50 160 25

0 2 18 3

9 0 43 39

0 0

2 24

0 2

3 42

0 2 2 5 67

1 11 34 32 533

growth opportunities for Alaska manufacturers, and with the right tools in place, capturing additional outside market share may be a realistic opportunity.â&#x20AC;?

Discoveries One of the most revealing discoveries came when the team had a chance to oversee a Lean Manufacturing assessment of an Alaska manufacturer. The company had established its historical production level and wanted to identify possible areas for improving its output abilities. www.akbizmag.com

November 2014 | Alaska Business Monthly

Interviewed Manufacturers at a Glance Total number of manufacturers interviewed? Average length of time in business? Did you have a background in manufacturing before your current role? Average number of employees? Is manufacturing your primary line of business? Do you earn sales outside of Alaska? If yes, average % that comes from out of state? Have you tried to access markets in the Lower 48 or Hawaii? Have you tried to access international markets? Has your business ever employed the services of a consultant? Has your company ever done a thorough review of Lean Manufacturing principles? “What we found at the end of the assessment was that with minimal shopfloor improvements, and only small capital investment, the company could increase its daily production runs by nearly 80 percent with roughly its current number of employees,” Klouda says. “To me, this is a game changer. To see a company that could nearly double its production with a relatively small investment…that is a major opportunity for us in Alaska. Manufacturers have a great opportunity to reduce their conversion costs per unit, allowing them to reduce their total production costs. Higher efficiencies lead to lower costs to the end user, which means that Alaska companies can be more competitive in the marketplace, and that benefits everyone,” he adds. As part of the study, Alaska manufacturers were asked if they have ever done a review of Lean Manufacturing principles. Only 14 percent said they

67 20 years 31% Yes 23 employees 58% Yes 63% Yes 37.74% 39% Yes 39% Yes 52% Yes 14% Yes

have and many of those surveyed were unfamiliar with the term. Interviewed manufacturers identified a number of problems preventing them from competing globally. Unsurprisingly, most cited high shipping costs as a major barrier. High business costs in general formed a major theme, from labor to energy, and these affect manufacturers’ ability to enter new markets out of state where they must compete with lower-priced competitors. Furthermore, since the manufacturing community in Alaska is so small and isolated, many are unaware of best practices, like Lean, that are common elsewhere. In addition to identifying challenges, the study also identified successful manufacturers operating within the state. One thing that became quite clear throughout the study was that Alaska manufacturers are focusing on much more than simply import substitution, as is often thought.

“We found manufacturers selling products to Germany, Switzerland, Africa, New Zealand, Iraq, and Australia. Alaska manufacturers have been making sales to nations all around the globe. It was really interesting to see,” says Iuliia Chepurko, a UACED research assistant who assisted with the project.

Next Steps With UACED and its team having completed the planning study, the next step is to find an organization willing to host the next Alaska MEP Center. It is anticipated that a request for proposals will become available at the end of the year, with the goal of establishing a new center during the summer of 2015. At this point, it is uncertain to say which organizations may be interested in operating a center, although a few have expressed interest in the idea. One thing that is certain is that the project team has done its best to help Alaska manufacture a bright future. Read the full report online at uaa. alaska.edu/bei. R Samuel Callen is a Management Consultant at the University of Alaska Center for Economic Development. In this role, he develops feasibility studies, market analyses, strategic plans, and other technical assistance projects.

Primary Barriers to Growth, Alaska Manufacturers Shipping costs Input costs Competition in the market Regulatory or environmental challenges Workforce gaps Need for operational upgrades Technological gaps Entering new markets Obtaining capital Other

# of Responses 24

Alaska Business Monthly | November 2014 www.akbizmag.com

BusinessPROFILE

Stantec

Stantec and USKH—Better Together!

arrow. Ketchikan. Anchorage to Quinhagak. USKH Inc. has been creating communities in Alaska for more than 40 years. In June 2014, USKH merged with global design firm Stantec. Now it is Alaska to Florida. London. Dubai. With a long-term commitment to the people and places we serve, Stantec has the unique ability to connect to projects on a personal level and advance the quality of life in communities across the globe. We’re active members of the communities we serve. That’s why at Stantec, we always design with community in mind. The Stantec community unites more than 14,000 employees working in over 230 locations. Our work—professional consulting in planning, engineering, architecture, interior design, landscape architecture, surveying, environmental sciences, project management, and project economics—begins at the intersection of community, creativity, and client relationships. Stantec’s local strength, knowledge, and relationships, coupled with our world-class expertise, allow us to go anywhere to meet our clients’ needs in more creative and personalized ways. Stantec was founded in Edmonton, Alberta, in 1954 as a one-man firm. Similarly, Gordon Unwin started USKH in Anchorage in 1972. Over the years, aggressive leadership grew USKH to 130 employees providing a unique blend of multi-disciplinary design services that has produced some of Alaska’s most important projects. Rarely would you find two consultants more perfectly matched. “We’ve worked hard to create an inspiring workplace for our people and deliver exceptional projects for our clients by offering a strong suite of services,” says Tim Vig, Stantec senior principal and former USKH president. “Joining Stantec allows our team members to expand their professional experiences by

working with a broader team, while bringing additional expertise to serve existing clients and develop new opportunities.” Stantec’s Alaska design teams are bringing new schools to Quinhagak, Kwigillingok, Nightmute, Kwethluk, and Koliganek. We are supporting Doyon Utilities with utility upgrades at multiple Alaska military installations. We have ongoing highway projects in the Matanuska-Susitna Borough, Juneau, and Homer. We designed more than 18 sports complexes in the past few years, giving our local athletes the opportunity to perform on state-of-theart, long-lasting artificial turf fields. We have worked at dozens of airports around Alaska, performing aviation design and aeronautical surveying to enhance safe operations. Stantec is currently ranked among the top 15 national design firms for federal, state, and local government; healthcare; K-12 and university; industrial; transit facilities; sports facilities; science and technology; office; multifamily; retail; and reconstruction design. –

P A I D

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

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“We will continue to provide highquality, Alaska-appropriate consulting for architecture, landscape architecture, planning, surveying, environmental, and engineering—civil, structural, transportation, mechanical, and electrical,” Vig said. “We are excited about our expanded resources to provide healthcare, industrial, office, and multifamily architectural design. We look forward to providing additional support to the Alaska mining, oil and gas, and power and energy industries.” While the name is changing to Stantec, our local offices are run by the same people, doing business in similar but exciting new ways, and committed to providing the highest level of service to our Alaska clients. We are better together!

Tim Vig, Senior Principal 2515 A Street Anchorage AK 99503 (907) 276-4245 Timothy.Vig@stantec.com

special section

Manufacturing

AlumaSki: Alaska-Born, World Bound Manufacturing the future of adventure and rescue

Photos © Russ Slaten

By Russ Slaten

MacKinnon Marine Founder and President Brian MacKinnon, with his daughter Miley MacKinnon, ride the AlumaSki on Wasilla Lake in July. Inset: MacKinnon Marine General Manager Slavic Lund prepares the AlumaSki for the next rider.

laska is built on adventure, and the AlumaSki is the embodiment of adventure. The AlumaSki is a personal watercraft with the engine of a jet ski and a body made of aluminum. Owner and founder Brian MacKinnon says it is perfect for hunting, fishing, and exploring lakes, streams, and hard to reach waterways due to depth. It was built to operate in water as shallow as two inches, is able to reach speeds of forty-five miles per hour, and can carry a total of one thousand pounds. “The AlumaSki is like a three-boatin-one combination where you can run it like an airboat in very shallow water, you can run it on lakes like a recreational jet boat, and its versatile design allows you to run it on the ocean,” says Slavic Lund, general manager for MacKinnon Marine Technologies, Inc. Alaska-based MacKinnon Marine 26

engineered and built the first prototype AlumaSki in Anchorage in 2011. The lightweight, aluminum hull, with a nearly flat underside, delivers responsive handling and great turning performance while remaining remarkably stable, Lund says. In celebration of the launch of the AlumaSki, MacKinnon Marine held a public introduction and demonstration in July at Wasilla Lake in the Mat-Su Valley. The company put up the third prototype for public testing after it went through two prototypes in two and a half years, undertaking transformations and upgrades to make the watercraft more buoyant, stable, and powerful, Lund says. AlumaSki’s third prototype, a colorful neon green, is as bright as it is unique. It is powered by an ultra-lightweight, water-cooled, 4-cylinder, 1052cc Yamaha engine. Electronic fuel injection makes

it the most fuel efficient engine in the industry, as it provides high-power output with low fuel consumption and exhaust emissions, MacKinnon says. “Yamaha has some the greatest engines for motorsports, and that’s why we made the decision to use Yamaha, and it’s a 100 percent Yamaha-powered machine,” Lund says. The base model runs for $24,995. The custom model is $30,000, which includes the capability to reverse, a 12volt outlet, an internal and electronic bilge pump, and 6,500 color options, MacKinnon says. “I like it better than any jet ski I’ve ever been on,” said Jason Phelps, an Anchorage hunter and fisherman at AlumaSki’s first demonstration in July.

Military Support The AlumaSki began as a watercraft

Alaska Business Monthly | November 2014 www.akbizmag.com

meant for outdoor enthusiasts—Mac Kinnon himself is an Alaska outdoorsman. But, interest from state and federal agencies, intending to use it for search and rescue and special mission efforts, helped start the AlumaSki business, MacKinnon says. MacKinnon began building his first prototype in 2011 with help from the Alaska Manufacturing Extension Partnership, which provided him shop space in Anchorage. MacKinnon says he self-funded the project in the beginning, but with an early visit from the military, the tides quickly turned. “The [US] Air Force came in to talk to me about my fueling system. And they said ‘Oh my god, what is this thing, we need this for air-dropping out of C-130s!’ And about two or three weeks after that, SOCOM [Special Operations Command] came in to talk to me. And I called my advisors and said, ‘Hey, I think I accidentally started a company,’” MacKinnon says. After the operation grew, MacKinnon moved the manufacturing out to Hylite Fabrication in Palmer. “Hylite Fabrication has been great to us; the new design is amazing. They worked really close with me, and they’re real easy to work with. So they will be involved for the long run,” MacKinnon says. MacKinnon Marine saw additional support in the form of an angel investor group, the Alaska Accelerator Fund, in April. The Alaska Accelerator Fund is the state’s first early-stage fund that not only uses funding from the 49th State Angel Fund but also uses funds from private investors who want to encourage entrepreneurship in Alaska. Ky Holland, Alaska Pacific University professor and partner in the Alaska Accelerator Fund, says MacKinnon Marine “is an interesting comparison” and “has been started up on a virtual shoestring of money at this point, probably about less than $300,000 so far. There’s another product on the market, an ATV/fourwheeler, and that business has almost $100 million put into it, and they’ve taken two years trying to develop their all-terrain vehicle. The AlumaSki has been developed in a matter of months.”

Funding Local Success “The Alaska Accelerator Fund is using money very quickly, very wisely, and is strategically looking at what the chalwww.akbizmag.com

lenges of the business are to be able to help them get through those challenges. And ultimately we want the business to be successful so they could be located here in Alaska,” Holland says. Two custom AlumaSkis were sold in September, and, by the end of October, MacKinnon expected to complete fabrication and delivery of four more, including one for the Eagle River Fire Department. MacKinnon says interest continues to grow, mostly from recreational users, and is being generated from a TV spot on the Discovery Channel in Canada and a centerfold in a Japanese water sports magazine. “It’s a fantastic feeling that this product has so many different uses, and people are starting to notice that it’s the one boat that does everything. It can be this fun, amazing hunting rig, it can just be used to explore new places along rivers and streams, or it can be the best response boat on the river right now,” MacKinnon says. Starting in October, MacKinnon and Lund planned to take the AlumaSki on the road to show it off to prospective buyers in Canada and the Lower 48. In January 2015, MacKinnon Marine plans to take the AlumaSki to Las Vegas for the Shooting, Hunting and Outdoor Trade Show, which has more than 1,600 exhibitors and an international audience of over 65,000 law enforcement and armed forces industry professionals. The AlumaSki is currently sold at Marita Sea and Ski in Anchorage. With the growth in interest and sales, Mac Kinnon says he plans to keep the company in Alaska for the long-haul. “I stuck to my gun when I said we’re going to stay in Alaska. I actually turned down offers because investors wanted me to move to Oregon,” MacKinnon says. “Everything that starts here that’s good tends to leave, and they end up in Oregon, Seattle, or some place that’s easier to operate, and Alaska loses out on the taxes, the jobs, everything. We said since the beginning that we were going to stay here, and we plan on still doing that, and I hope it starts a movement. I hope more people stay solid and dedicate their business to the state. The state was good to me, so I’m going to be good to the state.” R Russ Slaten is the Associate Editor for Alaska Business Monthly. November 2014 | Alaska Business Monthly

special section

Manufacturing

GripAll By Tasha Anderson

n 1996 Michael Cook woke from a dream, ran to his kitchen, and cut up a soda can to create the first prototype of what would eventually be XtremeGrip, the flagship product of GripAll, a manufacturing company located in Fairbanks, Alaska. “What we manufacture here is antiskid products,” says Dan Cook, Michael Cook’s son and GripAll general manager. “The main line, XtremeGrip, is not like anything else out on the market today.” The product that emerged from Michael Cook’s original dream is a nonslip peel-and-stick mat which can be easily cut down to fit any work space or area. “XtremeGrip consists of rust resistant studs in offset rows embedded in high-friction polyurea,” according to GripAll’s website. The polyurea is similar to a Rhino lining, Cook says, and “it gives you a different level of traction than any of the other aggregate products that are out on the market. It interacts with the treads that you have on your shoe to create an interlocking connection so you don’t slip and fall.” XtremeGrip was specially designed to have use in any industrial field, but is specifically suited to oil and gas worksites, as “our product can have oil, dirt, snow, ice, and other contaminants on top of it,” and still prevent slippage, Cook says. GripAll also produces LavaGrip, which provides a high-traction surface that is still suitable for kneeling on or walking across with bare feet, a great solution for pools or surfaces with multiple uses. LavaGrip is sold by the roll, and LavaGrip can also be easily cut and customized for any workplace.

Building the Business But of course, fully functioning manufacturing facilities simply don’t pop up overnight, and that certainly wasn’t the case for GripAll. Michael Cook passed away suddenly in 2011, before he was 28

Photo courtesy of GripAll

GripAll leadership Chris Huffman, Owner, (left) and Dan Cook, General Manager, (right).

able to mass produce his non-slip products; what he could make on his own was sold to the North Slope. “The product was basically hand-made, which really limited who he could actually take it to,” Cook says. After his father’s passing, Cook inherited the company. He wanted to increase production. In 2013, he and his good friend Chris Huffman, who has a history of working in the oil and gas fields and is the owner of Black Gold Oil Services, agreed that Huffman would purchase GripAll while Cook would remain with the company as the general manager. “The first thing that we built when Chris purchased [GripAll] was a fabrication shop [inside the facility built by Michael Cook]… a spray alley, a manufacturing booth, and all of the animatronics by hand,” Cook says. Huffman adds, “We engineered a robotic, or pneumatic, arm that sprays the grip, so it’s not hand-sprayed; it’s the same every time instead of having a little bit different coating due to human error or other factors.”

A Unique Workforce The GripAll facility, located in Fairbanks, employs approximately seventeen people, perhaps a quarter of which are part-time employees.

“Part of what Chris and I wanted to do here is hire a lot of disabled veterans and a lot of guys that are out of prison and have begun rehabilitation from drug addiction or other problems,” Cook says. The managers that Cook and Huffman hire are generally part-time or ex-pastors. “It’s a really cool mix,” Huffman says, “because we have guys that need help and then guys who give great advice managing them, so it’s really a neat set up.” Cook and Huffman also work with a local nonprofit called Joel’s Place, a center for at-risk youth, to “hire them and give them a chance and a job,” Huffman says. “[The experience] isn’t always positive,” Cook says. “There are always issues, but we feel like it’s our mission to give these guys a second chance… We really get more than just monetary enjoyment, we get a big satisfaction out of helping people out.” From all accounts, their hiring practices are working. In 2013 GripAll produced 831 units; as of October 2014, GripAll had produced 16,340 units with 7,000 scheduled; and the company has projected a figure of 81,000 units in 2015.

Getting Quality Products Out Once the products are made they need to be distributed, which is a huge part of any Alaska business. “A lot of our

Alaska Business Monthly | November 2014 www.akbizmag.com

Examples of GripAll’s two main product lines: The yellow mat is XtremeGrip, sold in sheets, and the black is LavaGrip, sold in rolls. Photo courtesy of GripAll

customers want to have it right now, so we actually end up shipping a surprising amount of it out by airplane, or Goldstreak,” Cook says. GripAll no longer distributes to just the North Slope but internationally, with products being sold through Grainger, U-Line, Amazon.com, Airgas, Fastenal, and Interline Brands, Inc. GripAll products are also stocked in local Alaska stores like Alaska Industrial Hardware. “Oil and gas is where we got our start, but pretty much anywhere you see that sandpaper grip, whether it’s on a boat, in a facility, on a wheelchair ramp, in an ambulance or fire truck, or any kind of equipment at all, that’s where our market is,” Huffman says. The average lifespan of GripAll products is five to ten years, Cook says. “That’s really the selling point,” Huffman says. “You spend a lot less time replacing them.” This is in part because GripAll products do not have a paper or cotton back, which is easily damaged by weather and work environments. Cook likes to explain its durability: “You know that sandpaper stuff that’s always peeling up all the time or curling in the sun or because it’s wet? Well, we’re not that.”

To Move, or Not To Move For most Alaskan entrepreneurs, and especially manufactures, the inevitable question is if, or when, to leave Alaska. For Cook and Huffman, that option isn’t currently on the table. “We really like the fact that we’re in Alaska. We have other goals than just making a ton of money, although that is one of the goals,” Cook laughs. Huffman adds, “It’s so cool for things to be created here and stay here. I’m rewww.akbizmag.com

ally excited about diversifying the Alaska economy.” Beyond a love for Alaska and its economic health, Cook and Huffman say Alaska is the best place to monitor the quality of their product, which is its best-selling point. “I personally can’t imagine trying to maintain the same type of quality overseas that we have here,” Cook says. “Frankly, just to make sure that we aren’t insane, we’ve actually run the numbers in making [the products] overseas. To be honest, it really doesn’t save us any money,” Huffman says. One of the ways Cook and Huffman have made it work is through getting creative when dealing with shipping costs, one of the largest obstacles to any Alaska business. “It’s a little more legwork on our part, but we’ve found the cost is not a hurdle that we can’t get over,” Cook says.

Quick Advice For other entrepreneurs, of the manufacturing persuasion or not, Cook and Huffman do have some advice. Basically, invest time in new products and procedures, not in re-inventing a process that someone else has already ironed out. “We had never done any manufacturing; we’d never done any distribution; we’d never done any sales,” Huffman says. “The oil field services industry is so different from the manufacturing industry that it was a huge hurdle to figure it out. It almost took us out just because it was so much to learn. My advice is to find somebody to get advice from.” R Tasha Anderson is the Editorial Assistant at Alaska Business Monthly. November 2014 | Alaska Business Monthly

special section

Manufacturing

Alaska Distilleries Creating unique products for locals and visitors By Russ Slaten

laska microbrews have been a star on the scene of beverage manufacturers in the state, but with a new law in place, Alaska distilleries will have some of the same opportunities.

Parity for Alaska Distillers Sales in Alaska from craft breweries— companies that produce less than 6 million gallons of beer a year—have more than tripled over the last ten years from 1 million gallons to 3.6 million gallons. For local microbrews, that number has increased four times over the past ten years, according to the Alaska Department of Labor and Workforce Development in the Alaska Economic Trends April 2014 issue. Growth in craft distillers liquor sales has seen a relatively slow and steady increase of about 25 percent over the same period of time. But the challenge lies in selling locally produced distilled spirits. On July 14, state House Bill 309 (HB309)—sponsored by Representative Chris Tuck of Anchorage—was signed into law by Governor Sean Parnell. From its first reading in mid-February, HB309 poured through the House and Senate in record time, picking up several co-sponsors along the way. Representatives Jonathan Kreiss-Tomkins, Steve Thompson, Lynn Gattis, Mia Costello, Harriet Drummond, Scott Kawasaki, and Andy Josephson all added their names as co-sponsors by the time it passed the House April 11. In the state Senate, HB309 advanced like white lightning; Senators Hollis French, Lesil McGuire, Berta Gardner, Click Bishop, Dennis Egan, Peter Micciche, and Bert 30

Stedman cross sponsored the bill where it passed unanimously April 17. The bill updates Title 4 Statutes in state law governing distilleries in Alaska and went into effect October 12. Tuck says it brings laws in line with those that regulate breweries and wineries in Alaska, adding, that HB309 “is about jobs for Alaska; it’s about manufacturing; it’s about local people being able to compete with huge national brands and about having something unique and Alaskan that we can bring our family and friends visiting from the Lower 48 to see and try.” Wineries and breweries are allowed to sell up to five gallons of product, and customers are able to taste up to thirty-six ounces, but because of a high concentration of alcohol in distilled products, the measurements are a bit lower, Tuck says. The law allows a customer to purchase up to one gallon at the facility and sample up to three ounces of the spirits on site. Following the laws that oversee breweries and wineries, HB309 amended the bill to also require employees at distilleries to hold a Techniques of Alcohol Management Card, or TAM Card, before serving alcohol.

Distiller’s Guild of Alaska Tuck says HB309 began when Alaska distillers started working together to expand their opportunities and formed the Distiller’s Guild of Alaska this year to represent their industry. So far, the Distiller’s Guild of Alaska is comprised of five distillers located throughout Interior, Southcentral, and Southeast Alaska. Ursa Major Distilling

Port Chilkoot Distillery’s vodka, gin, and moonshine made in Haines, Alaska.

is based in Fairbanks, High Mark Distillery is in Sterling, Alaska Distillery is out of Wasilla, Bare Distillery is based in Anchorage, and Port Chilkoot Distillery is in Haines. “The guild coming together was a big reason [HB309] was able to pass. A unified voice from the craft distilleries saying they all wanted it—and then hearing it from different angles—had a higher impact,” Tuck says. Shipping raw materials and Alaska state excise taxes are two things that make it harder to produce alcohol in Alaska, says Heather Shade, owner of Port Chilkoot Distillery and president of the Distiller’s Guild of Alaska. “We will now have the opportunity to sell our products directly to someone who visits our location. The amount of direct sales we do will be limited, but that extra margin we get to keep on those sales will help offset all the other difficulties and expenses of operating in Alaska,” Shade says. Compared to the Lower 48, Alaska distilleries face challenges with high transportation and high energy costs, along with high taxes, Tuck says. He says he hopes to address the excise taxes in the next step of the process. And although nothing new has yet been introduced to the Legislature, he says that HB309 was aimed at increasing marketing opportunities for distillers. “The distilling industry starting off now is made up of small craft distilleries. We don’t have the economy of scale, so we need to be able to promote our brands by bringing people in to understand why it’s so special. And while they’re here,

Alaska Business Monthly | November 2014 www.akbizmag.com

they will understand that we own the distillery and we’re making the mashes and fermenting and rolling around the barrels every day,” Shade says.

Port Chilkoot Distillery Shade owns Port Chilkoot Distillery with her husband Sean Copeland in Haines, a town of only 2,508, according to the 2010 census. Beginning in 2012, Shade and Copeland restored the former Fort Seward Bakery to house the distillery, Shade says. Copeland is a carpenter and woodworker by trade and used his more than twenty years of experience to build the distillery; he then added the 125-gallon copper pot still, custom-built in Kentucky. Shade considers herself the head distiller and has gained her knowledge through reading stacks of books on the process and going to distillers across the nation, she says. Located in the historic Port Chilkoot area of Haines, the distillery is a short walk from the water, making Port Chilkoot Distillery a stop on the map. The changes to the law, and the ability to serve and sell in her distillery, Shade says, allow her to grow her business. “My distillery is in a small community, so the effect that just one business has on the entire economy of the area is huge. I’m going to hire my first employee going into winter, and it’s relatively unheard of for someone to start a winter job [in Haines],” Shade says. Shade is currently aging her bourbon and whiskey in barrels, but Port Chilkoot Distillery has produced and sold its Icy Strait Vodka, 50 Fathoms Gin, and 12 Volts Moonshine since October 2013. These spirits are also available in many communities in Southeast Alaska along with Anchorage and Fairbanks. Bare Distillery Located in Anchorage, Bare Distillery also sells top shelf Alaska vodka products. After seven years in the making, Bare Distillery launched Truuli Peak Vodka into the market in October 2011. A year after hitting the market, Truuli Peak Vodka won a Gold and Silver medal in the MicroLiquor Spirits Awards. This year Truuli Peak Vodka was awarded a bronze medal in the Berlin International Spirits Competition and a Double Gold medal in April at the Wine & Spirits Wholesalers of America Convention in its Spirits Tasting Competition. www.akbizmag.com

“The Double Gold in the spirits competition was exciting for me. I know people in Las Vegas that were hammering at it and calling me up: ‘I’m seeing your product, oh my goodness, where can I get it?’ It’s really exciting to see that reaction,” says Jeremy Loyer, founder and part-owner of Bare Distillery. As Bare Distillery continues to win awards, its reach grows, Loyer says. Truuli Peak Vodka gained twelve significant points of distribution in June, including New Hampshire, New Jersey, Connecticut, Delaware, Maryland, and Washington, D.C. Even with national distribution, Loyer says he wants to make producers in Alaska excited about manufacturing and agriculture by continually sourcing his ingredients from within the state. “When we first started, we got the hobbyists that were harvesting honey to grow with us, so we can be flourishing with honey,” Loyer says. Five percent of Bare Distillery’s trademark product is made with Alaska wildflower honey. To complete the equation, the 80 proof vodka is made from 95 percent Delta barley with pure Alaska glacial melt from Eklutna Lake. “The farmers in Delta Junction and in the [Mat-Su] Valley were dwindling because nobody was actually buying their farmed product,” Loyer says. “We’ve helped out with agriculture, and now the University of Alaska Fairbanks is growing winter wheat, and now we even have rye available in Alaska. [Bare Distillery] is hoping to help with glass manufacturing and steel manufacturing in the future. If everybody understands how Alaska works, they would know there’s not much produced in Alaska, and we want to help bring things to Alaska.” Bare Distillery anticipated the growth and effects on different industries, and Loyer says the distillery is ready to introduce Alaska to the world. “We did things a little differently, we built the cart before the horse, and we are building up to capacity. Thanks to [HB309], we can bring people into the distillery,” Loyer says. “We can have them taste the cocktails, come in and observe the process, and now when they buy a bottle it means so much more to them.” R

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Russ Slaten is the Associate Editor for Alaska Business Monthly. November 2014 | Alaska Business Monthly

special section

Manufacturing

Photo courtesy of Alaska Glacier Products

Alaska Glacier Products Exports Value-Added Water

The Alaska Glacier Products water bottling factory and distribution center.

Sea Lion subsidiary roars with Eklutna Glacier melt success By Nichelle Seely

n a nondescript metal building just off the Eklutna exit on the Glenn Highway, a few miles north of Anchorage, the rumble of a robotic assembly line echoes between the walls. A handful of workers monitors the process, keeping careful watch on the snaking lines of plastic bottles as they are expanded, sterilized, labeled, filled, and grouped for bulk packaging. Welcome to one of Alaska’s few value-added manufacturing facilities and one of the few beverage bottling plants in the state. Welcome to Alaska Glacier Products, where high quality bottled water is processed and packaged for domestic and international markets.

Value Added When most people think of Alaska, they think only of Alaska’s natural resources: oil, fish, and minerals. They imagine shipping containers and tankers filled with raw material being transported to other states or nations for 32

refinement and processing. They don’t think of factories or manufacturing plants. They don’t think of value added products. But the owners and operators of this particular facility aren’t stuck in that mindset. Nor are they ignorant about what it takes to market and promote the product. CEO Greg Galik and Plant Operator Joe Van Treek are both veterans in this particular game. Years ago, Matanuska Maid established the first foray into preparing beverages for export. In the 1990s, that now-defunct company launched a bottled water operation to take advantage of equipment that was already in use for milk. However, the product line never quite took off, and in 2007 Matanuska Maid ceased operations and filed for bankruptcy. Both Galik and Van Treek had experience working with Matanuska Maid’s bottled water venture. When the bottling equipment went on the auction block, Galik and his wife Lynn Alingham saw

an opportunity and purchased it. The couple believed in the product and observed the increasing markets for bottled water, especially in Asia. Due to the deep recession in 2008, it took a few years for them to raise the capital to begin operations as Alaska Brands. Alingham had left her career in law and become a certified plant operator, and Galik handled the marketing end, promoting Alaska bottled water in California and in Asia under the name Clearly Alaskan. Meanwhile, in 2011, Sea Lion—an Alaska Native Corporation based in Hooper Bay—purchased a derelict plant at the base of Eklutna for the purpose of making bottled water as Alaska Glacier Products. In 2013, Sea Lion negotiated with Galik and Alingham to merge with their company. It was a friendly takeover—both enterprises saw the advantages of cooperation instead of competition. Greg Galik became the CEO of Sea Lion’s subsidiary. Now, in 2014, the company is a world-class provider of

Alaska Business Monthly | November 2014 www.akbizmag.com

bottled water and the only such company in Alaska. It is also one of the few manufacturers exporting a value added product from the state.

Pure Glacier Water As any entrepreneur knows, a successful business requires a successful product. The water sold by Alaska Glacier Products comes from Eklutna Lake, the same source utilized by the Municipality of Anchorage for city drinking water. Unlike most surface water sources, Eklutna Lake receives most of its contents from the melting of Eklutna Glacier. According to Galik, the water that comes from the glacier is old, the runoff from snow and ice laid down thousands of years ago. The ancient precipitation was frozen long before the pollutants and chemicals of industrial civilization saturated the atmosphere and the aquifers. It’s a demonstrably purer source than non-glacial lakes, groundwater, or artesian springs. Water is siphoned from the lake via hydrotube, which is located below the depth of the winter ice. It is pressure fed to the Anchorage Water & Wastewater Utility (AWWU) plant, where the particulates are removed by flocculation and filters. At this point, the water destined for the city is treated with chlorine and injected with fluoride, all according to government rules. Alaska Glacier Products purchases water from AWWU after the initial treatment but before the chemicals are added. Tankers drive down the road to the Eklutna bottling plant. The water is then run through additional purification via ozone infiltration, arguably better than chlorine for disinfecting purposes. In addition, the only waste product is oxygen—ozone is simply three oxygen molecules, a more unstable form than the normal steadystate of two molecules, which is in the air we breathe. When the ozone breaks apart, it releases only oxygen gas. After the ozone treatment, the water is piped to where it is injected into bottles. The bottles themselves have already gone through rigorous preparation before reaching this point. They arrive in boxes from the Lower 48 in the form of finger-like molds with a screw top. The molds are heated to soften the plastic and then inflated into the required size and shape. Coming out of the inflator, www.akbizmag.com

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they look like the familiar bottles you find on the grocery store shelves. The bottles are directed to a giant hopper for interim storage. From there, they are poured into a descrambler, which turns them upright and sends them down the line for disinfecting, labeling, and filling. Individual bottles are grouped into cases of twenty-four, shrink-wrapped, and stacked on a pallet. A pallet holds seventy cases, and twenty pallets fill a shipping container. An observer who moves quickly can follow the process from mold to case. At half speed, the assembly line can generate seven thousand finished bottles per hour. The conveyors, mechanical arms, and moving lines of bottles are almost hypnotic. Employees are stationed at key junctures to keep an eye on the process and exercise quality control, but the system is fully automated. At this point in time, the plant is operating below capacity. They have plenty of room to grow and expand as their markets increase and demand drives up production.

Above: The automated line at the Alaska Glacier Products factory. Right: Computerized monitoring of operations. Photos courtesy of Alaska Glacier Products

Highly Recyclable Bottled water has gotten a bit of a bad rap in recent years. The fact that plastic bottles have entered the waste stream in ever-increasing numbers has drawn the attention of trash-conscious consumers. When I mentioned this to Terry Clark, the chief operations officer for Alaska Glacier Products, he pointed out that the PET plastic is highly recyclable. “Everything comes in plastic bottles these days—soda pop, detergents, salad dressing—it’s only bottled water that is getting the flack.” According to Clark, that’s because some people have the idea that bottled water is no different than the stuff that comes out of the tap at home. There have been companies that have misrepresented their bottled water product as something it isn’t—large, successful beverage companies eager to cash in on the new popularity of bottled water by simply taking a municipal water source and putting it into containers. None of this is true of Alaska Glacier Products. Although purchased directly from AWWU, the water has never been near a tap. Eklutna Lake, while open for recreational purposes, doesn’t allow motorized watercraft, so there’s no chance of petrochemical pollution. As mentioned earlier, the glacier itself is

Alaska Business Monthly | November 2014 www.akbizmag.com

Photo courtesy of Alaska Glacier Products

Inside the Alaska Glacier Products factory.

composed of highly pure material. Very few companies can claim this kind of inherently clean source. In addition, the processing plant itself generates very little waste: packaging materials and defective product containers make up the lion’s share: cardboard, paper, and plastic. Everything that can be recycled—which is most of it—is recycled. The plant even pays the local recycling company a fee to come and pick it up. In the Alaska tradition, the plant itself is largely self-sufficient. The nearest manufacturer’s equipment mechanic is down in the Lower 48; waiting weeks for a part or a repairman doesn’t make practical sense. Therefore, all maintenance is done in-house; a full machine shop is on site to fabricate needed parts. The workers are taught how to maintain and fix the machines they oversee. They have a stake in the productivity of the equipment.

Changing Market The market for food and beverages is changing, with a greater focus on sustainability and accountability. “It’s not like when I was growing up. Back then, we just ate what was put in front of us. Now, people are becoming more aware www.akbizmag.com

of what they put in their mouths. Today’s consumers want to know where their food comes from, how it’s delivered, and how it was made. They’re a lot more savvy, and they know what they want,” Galik says. He points out that this product has no chemical additives. The presence of chlorine and fluoride in municipal drinking water is becoming a source of concern to certain consumer groups. Regional sourcing of food is a movement that is sweeping the nation. The bottling plant is only twelve miles from the source and twenty-five miles from the port. “Does it make sense to import water from thousands of miles across the ocean?” he asks, referring to competing product Fiji Water. “We couldn’t be more local.” To put the frosting on the cake, Alaska water is shipped out in containers that would otherwise leave the state empty. “The carbon cost is already there. Ships and trucks are bringing goods to Alaska all the time and taking nothing back. We’re not adding much, if anything, to the waste stream.” According to Galik, there’s a growing market for portable, potable water. Alaska Glacier Products is selling in California; to China, Japan, and Korea; and is nudging into India. “Develop-

ing countries have contaminated their drinking water,” Galik says. “They need another source, and we’re in the perfect location to give it to them. We’re providing a necessary product.” It’s obviously something he feels passionately about. And in Alaska, he feels that a local source of bottled water contributes immeasurably to food security, which is an issue of concern for this state. And the water isn’t going to run out any time soon. Coming as it does from a glacier, the product isn’t part of the seven-year cycle of evaporation and precipitation. The source is drought resistant and not dependent on rainfall. The amount pulled out of the lake for drinking purposes doesn’t even come close to the amount of melt generated by the glacier every year. Galik would like to see more Alaskans become entrepreneurs, rather than expect to get jobs from Outside companies. He says it’s time to diversify the Alaska economy away from an over-reliance on raw material extraction, and companies like this are leading the way. R Anchorage-based Architect Nichelle Seely writes from across Alaska.

November 2014 | Alaska Business Monthly

special section

Manufacturing

Barrow Inventor Receives His Second Patent Lining up a solution By Lisa Maloney

ulian Ferreras invented a tool for cutting pilings perfectly level, with such precision that he could follow a pencil mark or split a tiny nail hole in half. “When I was building my own house, I wasn’t pleased with how [a different tool] was cutting the piling,” he says. He received a patent for his tool, the Ferreras pile cutter, in 1992—making it the second patented invention ever to come out of Barrow. Now sixty-nine, Ferreras, an unabashed tinkerer who just can’t help but spot ways to do jobs better or more efficiently, has done it again. His newly patented tool—the third patent to come out of Barrow—is a jig that helps workers drill perfectly straight holes through piling or glulam on the first try. Ferreras received the patent for his “Drill Alignment Tool” in June of this year. “Necessity is the mother of invention... I used to do that work,” Ferreras says. Construction workers need to drill a hole through piling to install the column cap on every project. But when they do, Ferreras knows from personal experience that a missed try can mean hitting the metal plate on the other side of the piling, twisting the operator’s arms or moving the drill up and down to find the right exit point, wasting time and creating a sloppy hole. “With this one, the drill goes perfectly straight. So the hole is perfect,” Ferreras explains. “There’s no tool like it in existence.” But first he had to convince the United States Patent and Trademark Office that his tool, which works on rectangular or round pilings of concrete or wood that are four to sixteen inches in diameter, wasn’t just a larger version of the jig used to cut holes for doorknobs. Ferreras says that the critical difference was the fact that, unlike a doorknob 36

Photo by Jesse Darling

Inventor Julian Ferreras on his back deck in Barrow holding his patented Drill Alignment Tool.

jig, his tool is made to place the hole in the exact same place on the piling every single time. Fine details like that are one of the reasons he’s recruited the help of a patent lawyer for both of his applications, even though the process can be expensive for a solo inventor working on his own without corporate backing. “Inventing is for rich people,” Ferreras says ruefully about the cost of securing a patent. “It costs a lot of money to put the lawyers to work.” He’s spent more than $11,000 so far, not counting the fees he’ll have to pay to maintain the patent. Still, he says, it’s worth it to keep a patent from going up in smoke as a result of not using the right words to describe the tool.

Meet the Drill Alignment Tool The tool itself is a simple, elegant solution—an F-shaped steel frame with a couple of bushings to guide the drill. The lower crossbar of the “F” slides back and forth to accommodate pilings of different sizes between the bushings. In its current form, the Drill Alignment Tool can be used with a 1/2-inch

or 3/4-inch drill, but Ferreras says the bushings can easily be customized to whatever bit size you want; depending on your drill bit, his tool can guide drilling on wood, concrete, and glulam. Construction workers only need to adjust the tool to fit the target and screw the bushings into place. “We found this fellow’s tool to be fairly ingenious,” says Mike Salzbrun, president of Salzbrun Services and Drilling in Bethel, upon viewing a video of Ferreras demonstrating the tool. “It is almost impossible to drill a straight hole through a piling of that size and line it up on the other side. It’s one of those moments where you think, ‘Why didn’t I think of that?’” Pete Tester, owner of Tester Drilling in Anchorage, also saw the video. He says that the value of a tool like this really comes down to how much more efficient it makes the job. “It’s the kind of tool everyone would want to try to see how much time it saves, because it’s all about labor,” he says. There’s a possible worldwide market for the drill, since pilings are used not only

Alaska Business Monthly | November 2014 www.akbizmag.com

in the Arctic but also in seaside communities around the world—anywhere that the ground won’t support a more conventional foundation. Before Ferreras can sell his tools, he has to have them made.

A Difficult Hurdle With his first pile-cutting invention, Ferreras fabricated every unit himself by hand in his Barrow shop, selling them to companies throughout the United States. “I had really good opportunities when people wanted to work with me, but I turned them down because it was my baby. I wanted to do it all myself,” he says. Ferreras’ circumstances changed when he lost his sight to diabetes in the late 1990s. He found himself unable to keep operating the bulldozer he ran in Barrow and unable to keep fabricating his pile cutters. He sold his business, and the patent on the pile cutter expired. “When I went blind the plug pulled out. I wasn’t able to do anything,” he says. A couple of years later, Ferreras recovered partial sight after an operation in Miami. “I bump into things, but I don’t use the cane anymore,” he says. Now he can see well enough to travel by himself and, perhaps best of all, get back to inventing. He even machined the prototype Drill Alignment Tool himself, although he admits that his limited sight made the process dangerous. “I wasn’t able to see what I was welding,” he says. “I worked by touch. I bumped my hand so many times.” The end result may be a little rougher than Ferreras’ usual exacting standards, but the important thing is that it works. “The contractors in the field will appreciate this tool; they will understand how this tool works with the first look at it,” Ferreras explains. But if he’s going to get the tool into their hands, he needs a partner—a company that will license the patent and machine the tools, preferably in Alaska. “It could be mass-produced in a factory. The price would be really low,” he says. “It’s nothing electric... just a tool, all steel.” What’s Next Inventing comes naturally to Ferreras. He’s been tinkering constantly since he was a child living in the Dominican Republic, where a cousin predicted his fate: “She told me, ‘You’ll be an inventor when www.akbizmag.com

you grow up’ because I was [constantly] in the backyard making explosions, blowing things up,” he says with a grin. In between explosions, he built his own “pirate-style” gun, and by his teens he was lending his know-how to his brother-in-law’s rubber factory, spotting and solving problems others might not think to fix. “People are sometimes satisfied the way it is. They don’t try to improve it,” he says. But where others see “good enough,” Ferreras sees a chance to innovate. Case in point: knowing that there had to be a better way to drill into pilings was all it took for him to dream up the solution. “When I find a problem I start thinking about it,” he says. “Sometimes I can’t sleep because I’m thinking how to do it.” Ferreras’s training as a gunsmith and his eclectic background—everything from gold mining to construction— helps too, giving him not only the technical skills to create his own tools but the flexible, inventive mind it takes to visualize them. “In my mind I go piece by piece... and when I start working on that it goes one-two-three-boom, no problem, because I have already done it so many times in my head,” he explains. When inventing runs in the blood as strongly as it does in Ferreras’s, it is difficult to stop coming up with ideas; the hard part is choosing just a few at a time to bring into existence. Ferreras doesn’t provide many details about future projects for fear of invalidating a future patent. “The details cannot be published because, after making it public, it cannot be patented,” he explains. He did, however, reveal that one project would improve on an existing tool, while the other would revolutionize how in-building sewer drainage systems are created. But first, he has to bring his formidably eclectic background and bright, inquisitive mind to bear on one more aspect of the Drill Alignment Tool. He’s already fixed the problem of how to make drilling easier and more precise; now he just needs to find someone to build his tools so that he can get them into the workers’ hands. R Lisa Maloney is a freelance writer based in Anchorage. November 2014 | Alaska Business Monthly

Manufacturing

Photos by Father Joshua Resnick

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KeV LLC

Above: An old Bluebird bus is being transformed into a diesel-electric vehicle with a 215-kilowatt generator. Far left and left: The prototype inverter and power-dense motor developed by Father Joshua Resnick and Seraphim McGann were installed in a 1991 Eagle Talon.

Innovation and invention on Kodiak Island

hat started out as frustration with the standard technology found in inverters and generators used by Kodiak fishermen has become a multi-faceted project that could change how rural power is delivered and how fishing vessels are powered. Using a $247,000 grant from the Alaska Emerging Energy Technology Fund, Seraphim McGann and Father Joshua Resnick are building a 215 kilowatt generator using technology that the pair says is significantly more fuel efficient, more reliable, and more powerful pound for pound than traditional generators. Just don’t ask them how—at least not right now. “How, exactly, we’re doing that is proprietary information,” Resnick says. The men are applying for two patents and, as the application has not yet been filed, they are reluctant to discuss specific details about their projects. They hope this period of relative silence about the project will yield great results.

By Rindi White “That being stated, we have successfully demonstrated our proof-of-concept generator. We are currently building a 215 kilowatt generator using our technology and once that’s done… we are beginning the process of looking for investment,” Resnick says.

Frustration Generated New Ideas The two men began their project to update generator technology a few years ago while working on Kodiak fishing vessels. “We both worked at a repair shop in Kodiak which did a lot of work on fishing vessels. One of the projects I had when I was there was to try to repair an inverter,” says McGann. The inverter was from a small-scale hydroelectric power installation. “I was really dissatisfied with the technology. It seemed there was probably a better way to approach the inverter design,” he says. “Struggling with that project definitely planted the seed, and I think

we have come up with a project that is very powerful and not readily available.” The men applied for an Emerging Energy Technology Fund grant in 2012, about a year after they started designing a better inverter. Although fishing boats were the genesis of the idea for an updated inverter, Resnick and McGann say the application would work well for rural or remote power installations. The generator they’re building will be housed in an old Bluebird school bus that has been retrofitted to include a mechanical room, similar to the engine room on a fishing boat, where the generator can be demonstrated. “The generator will actually power the bus and we can move the bus to different sites to do pilot tests,” Resnick says. “If you have a small village and are paying too much for fuel, we could get our bus shipped to that village and plug into the village power supply … and they could actively see how much they could save using our technology.”

Alaska Business Monthly | November 2014 www.akbizmag.com

The demonstration could be done at a remote industrial site or before a team of investors, he adds. The two men hope to bring their demonstration bus to ComFish, the commercial fishing expo that happens yearly in Kodiak, so fishermen could come on board and see the new technology in action.

Emerging Energy Technology Fund Driving Innovation The Alaska Legislature set up the Emerging Energy Technology Fund, or EETF, in 2010. In its first year, the project was jointly funded by the state and the federal Denali Commission. State EETF Program Manager Alan Baldivieso says the state fund grew from a Denali Commission program with a similar name created in 2009 to fund projects that improved energy production or increased efficiency. “Projects can either test new technology or improve existing technology or just deploy in Alaska technology that has not been demonstrated here yet. It targets technologies that have a reasonable expectation of being commercial in Alaska in five years,” Baldivieso says. Since being managed by the state, there have been two rounds of technology grants distributed. McGann and Resnick’s project was part of the first round of awards. In that round, Baldivieso says, $8.9 million was available for grants. The state received seventy project abstracts; about half that number was invited to submit full grant applications and, of those, sixteen were chosen for funding. Less money was available in the second round of funding, he says, and as a result only twenty-seven abstracts were received, of which five were ultimately selected to receive grant funding. A governor-appointed advisory committee made up of seven members with deep technological backgrounds scores the projects. Each is scored on a range of criteria including technical feasibility, potential benefit for Alaskans, and innovation. The goal of the grant fund, Baldivieso reiterates, is not to be a research and development tool, but to provide a way for applicants to prepare their project to enter the commercial market. Baldivieso says the Kodiak team scored relatively high because they already had a prototype in development and had a clear, doable plan of action for getting the project to a commercial-ready phase. www.akbizmag.com

“They did have an aggressive schedule where they outlined how they were going to develop the technology in discrete stages and how they were going to get it to market. The project is really a great example of home-grown innovation,” he says. The team showed the project’s community support through its work with a school, St. Innocent’s Academy, an Eastern Orthodox church school for young men at risk of dropping out of high school. The power electronics being tested also holds a lot of potential for many applications in the state, Baldivieso says.

Community Project, Community Support The Emerging Energy Technology Fund emphasizes community support. McGann and Resnick only actually obtained $250,000 from the state—the team received nearly an equal amount in the form of in-kind matches from local supporters. St. Innocent’s, the school at which Resnick and McGann teach, is a significant donor. The school’s shop space has been valuable research space for the project, and students in McGann’s science classes have worked on the project pretty much from its inception. “We try to involve the students in very interesting and cutting-edge projects,” McGann says. “We’ve done other projects, but this is really the only one that has taken off. So they’re doing some cutting-edge research, along with traditional instruction.” The students helped transform a 1991 Eagle Talon with a destroyed engine into a hybrid electrical vehicle that looks smart and runs smoothly. The Talon was the team’s first project using a powerdense motor and their revised inverter. “The vehicle now… has around 250 horsepower, continuous. That’s quite a bit of oomph,” Resnick says. “We don’t know the top speed of the vehicle—we were afraid to drive it faster than we were driving it.” Kodiak doesn’t have a lot of long, open stretches of road to test newly minted sports cars on, unfortunately. But it did allow the team to understand how much life they could expect from the 25 kilowatt-hours of lithium iron phosphate batteries they installed. It ran for between fifty and seventy-five miles before needing to recharge. And while a recharge to 80 percent battery levels could take less than half an hour, a full recharge from

the charger McGann and Resnick developed took about eight hours. The students will also help with the bus project. It’s a full-sized bus, Resnick says, and it’s being converted to a diesel-electric drive train. “It has the same type of drive-train that could be installed in a fishing boat,” Resnick says. “It will demonstrate the diesel-electric drive-train and will also showcase the high efficiency generator.” The pair says the bus project should be complete within a year. Once all the testing data is turned in, the project will be complete and the focus will be on finding investors to move to commercial production. Resnick and McGann say it’s difficult to pinpoint how much it would cost to build one of their generator units commercially. But they are confidant that it will be affordable enough for rural power companies and fishing vessel operators to take notice. “With these boats, the generators are extremely important. If your generator fails and you’re out of town, you pretty much don’t have any recourse—you have to pretty much come back to town and get it fixed,” McGann says. “I see that all the time in my line of work,” says Resnick, who still works on fishing vessels. “I get people calling me, saying they had to stop fishing because the generator broke down, and the failure point is usually in the generator head.” The generator head is where McGann and Resnick’s design is so different. Instead of an open head with moving parts vulnerable to dirt and grime, the head is fully enclosed, and the rotating windings and diodes are no longer present. The two men say they are currently putting together cost estimates for villages and remote power installations to get a better idea which communities might be a natural fit for their new generator technology. The generator design will also benefit communities installing wind, hydro, or solar power systems because of its unique features. “It’s safe to say the return on investment could be as fast as a year. That’s based purely on fuel savings,” Resnick says. “It doesn’t include the reduced cost of maintenance due to the novel features of our design.” R Rindi White is a freelance journalist living in Palmer.

November 2014 | Alaska Business Monthly

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Manufacturing

Accelerating Innovation in Alaska Protecting and developing new opportunities wo software programmers leaned over a laptop, opened their web-browser, and experienced the future of flight with their feet firmly planted on the ground. In a neighborhood of cabins flanked by boreal forest, this two-person flight crew proved that their unmanned aircraft software works, making a short flight toward a big opportunity. The team, comprised of Bruce Crevensten and Rayjan Wilson, realized the potential for unmanned aircraft while working with the Alaska Center for Unmanned Aircraft Systems Integration at the University of Alaska Fairbanks (UAF). They are creating a platform technology—a technology that allows users to automate a variety of processes when flying unmanned aircraft. “Like your personal computer, tablet, or mobile phone, unmanned aircraft are just an appliance—a tool that extends human potential,” says Wilson. Crevensten adds, “Imagine if people could safely operate drones by using apps, just like on their phones, that can perform routines like ‘Inspect Pipeline, ‘Search and Rescue’, or ‘Map Construction Site.’” With such a variety of applications for unmanned aircraft, Crevensten and Wilson point out that businesses, professionals, and consultants will need easyto-use software to gather data from these aircraft and that there is a big opportunity for the team who provides it. Forecasts by the Association of Unmanned Vehicle Systems International estimate that unmanned aircraft and related industries will create seventy thousand jobs in the United States with an economic impact of more than $13.6 billion in the first three years of integration into the national airspace. Through their research at UAF, Crevensten and Wilson are preparing to meet the demands of this new market with technology created right

Photo courtesy of Todd Paris

By Adam Krynicki

UAF inventors have developed software to easily and safely fly unmanned aircraft.

here in Alaska. The question is, how can the University help these inventors turn technology into business opportunities?

From Concept to Product Solving societal problems through research underlies the mission of many universities, but a wide gap exists between early stage concepts and the production of useful products. Even if discoveries are lauded on the pages of journals and showcased at conferences, a company’s employees don’t become more productive if an invention never becomes a reality. Engineers can’t build better infrastructure if materials never make it out of the lab, and patients remain sick if medical treatments don’t make it into a clinical setting. As history shows, bridging the gap between academic discovery and marketable product is difficult without the market drivers of capitalism and private sector investment. Prior to 1980, the US federal government owned all patents resulting from university research and would license the patents non-exclusively to all-comers. Under this structure, a company that made no investment in the technology could license the technol-

ogy on the same basis as a company that had made a risky investment to prove the viability of the technology. The lack of incentive led to less than 5 percent of government-owned patents being used by the private sector, according to “The Bayh-Dole Act: Selected Issues in Patent Policy and the Commercialization of Technology” by Wendy H. Schacht. Recognizing the need to do more with research, the US Congress passed the Bayh-Dole Act in 1980. The legislation enabled universities to own intellectual property (IP) and granted the institution the ability to transfer IP rights to private sector companies under contracts called licenses. Among other provisions, the bill required that the inventor be compensated and the remainder of the royalty be used to support the mission of the university. The legislation made the incentive clear: private companies, the inventor, and the university could all benefit from transforming discoveries into products. By enabling private and public sector collaboration, the Bayh-Dole Act transformed the US innovation economy. According to a study funded by the Biotechnology Industry Organization and headed by Dr. David Roessner of the

Alaska Business Monthly | November 2014 www.akbizmag.com

Jeff Rothman showcases his hockey puck sized infrasound sensor. Photo courtesy of Adam Krynicki

Georgia Institute of Technology, the economic benefit of university technology from 1996 to 2007 was staggering: the licensing of university technologies had a $187 billion impact on US gross domestic product and created 279,000 new jobs. Scientific breakthroughs have led to numerous technologies with societal benefits, including the technology underlying Google’s search engine, the hepatitis B vaccine, Pepcid Complete heartburn medicine, the software for the EnergyPlus program, and the Honeycrisp apple, to name a few. In addition to these technologies, the Association of University Technology Managers has identified several hundred inventions that have had a major impact on society, and the list is ever-increasing as universities continue to invent.

Alaska’s Innovation Pipeline Acting upon the potential within Alaska to create innovative new products, UAF formed the Office of Intellectual Property and Commercialization (OIPC) in October 2010. The purpose of OIPC is to help UAF inventors turn their scientific breakthroughs into licensable intellectual property and new products. OIPC engages UAF researchers to let them know about opportunities for intellectual property development as well as the right to receive royalties from their work. OIPC negotiates non-disclosure agreements and licenses, protects intellectual property, creates commercialization plans, and markets inventions to private companies. “It’s a unique level of support and flexibility not found at many academic institutions,” says UAF faculty member Dr. Robert Coker, who is developing and commercializing nutritional formulations for obesity and alcoholism. Additionally, OIPC provides venues for www.akbizmag.com

collaboration. UAF Inventors’ Forums bring inventors and industry representatives together to discuss real-world problems and showcase new technology. These forums cover a variety of fields including biotechnology, unmanned aircraft systems, big data, remote sensing, hydrokinetic energy, and petroleum, resulting in new technologies and research avenues. The goal is to show that UAF inventors can be academic, inventive, and entrepreneurial—all at the same time. “More UAF staff and faculty are seeing an opportunity to get their inventions out of the lab and into the private sector,” notes Dr. Keith Cunningham, a UAF researcher. This heightened awareness has resulted in OIPC seeing an increase from six inventions in fiscal year 2011 to seventy-five inventions being reported last fiscal year. For the first time in its history, UAF is receiving invention disclosures on par with other institutions that perform a similar amount of research, including Kansas State University, the University of Notre Dame, North Dakota State University, and the University of Oregon. The result is that UAF is protecting more inventions than ever before. From July 2011 to July 2014, three patents were granted by the US Patent and Trademark Office, and as of August 2014, OIPC has filed sixteen new provisional and non-provisional patent applications.

UAF inventors have big plans for these technologies. UAF inventor Jeff Rothman is exploring the creation of a startup company that can scale up the production of his reduced-size infrasound sensor. Rothman’s invention is less than a third of the size of its predecessors and monitors ballistic detonation, wildlife poaching, and illegal timber cutting from miles away. He filed a patent last year and is continually improving his prototypes in Fairbanks. Dr. Kelly Drew is also marching her invention toward commercialization. Drew has created a pharmaceutical adjunct to prevent neurological damage associated with stroke. Drew’s research has determined that cooling the body is the best neuro-protective treatment found to improve outcomes following insufficient blood flow to the brain. Through her work with hibernating ground squirrels, she hopes to induce the same cooling effect in humans. She recently filed a non-provisional patent application on a therapeutic hibernation technique which lowers the body temperature without shivering or cardiovascular side effects. She is working with OIPC to find licensees for the patent while continuing to perfect the technology. OIPC is also protecting and marketing software, including a product that predicts mineral locations, another that detects property changes for assessment surveys, and one that displays large amounts of imagery data. The wide variability in inventions has created a need to be nimble, and OIPC is adapting to the market needs for each invention.

A Launchpad for Technology To provide flexibility in licensing efforts, most universities in the United States have developed structures outside their institutions. In 2012, the nonprofit Nanook Innovation Corporation (NIC) was Dr. Kelly Drew showcases her patent-pending invention at a UAF Inventors’ Forum. Photo courtesy of Melissa McCumby

November 2014 | Alaska Business Monthly

A Proof of Concept Center Recently, UAF and NIC began providing a new service named “UAF Launchpad” to get cutting edge research into the marketplace faster. Under this new initiative, software developers can license their software using an e-commerce platform to test whether it is something consumers want. This method reduces the time it takes to bring software to market and allows the developer to rapidly assess the marketability of new products. One inventor has already started using the service. Walker Wheeler of the Office of Information Technology is market testing his software that allows faculty to manage multiple online courses at the same time and streamline their communication with students. Although the

Photo courtesy of JR Ancheta

formed as a supporting organization to commercialize intellectual property from research. In this new way of doing business, UAF assigns intellectual property to NIC, which then markets and sells the technology. NIC returns revenue to both the inventors and the university, and licenses patents, software, and proprietary data in cooperation with OIPC. Recently, NIC licensed a proprietary method for conducting as-built surveys of gas pipelines to CR Inspection, several signal processing technologies to Northrop Grumman, and a patented pinbone pulling technology to an instate manufacturer. The “Pinbone Wizard,” as some may know it, pulls bones from all species of fish, including salmon, without ruffling or damaging the meat. The small machine pulls approximately 98 percent of pin bones reliably, and NIC licensed this technology to Freeman-Bell Machine shop in Juneau, which is now selling the machines. Since inception, OIPC and NIC have licensed forty-seven technologies and datasets, with the majority of these technologies going to companies in Alaska. To improve upon this initial success, OIPC and NIC are increasing the options inventors have to bring their technologies to market.

Chancellor Rogers presents a royalty payment to several inventors. The royalty payment was made by V-ADAPT, Inc., the first startup company based on UAF technology.

software was developed for UAF, Wheeler can help other universities solve the same problem by licensing his software using the e-ecommerce platform. “Other institutions need this, and I think this program will help both the university and myself,” Wheeler asserts. In addition to using the UAF Launchpad, inventors are rapidly prototyping new inventions with 3D printers. For example, Link Olson, Kyndall Hildebrandt, and Aren Gunderson designed a new cryovial to double the amount of storage space for specimens at the UA Museum without added infrastructure cost. The prototype was made with a 3D printer. The 3D printers allow UAF inventors to turn a concept into a schematic and see if the device works. If it does, OIPC can use the schematic in its patent application, the inventor can show the printed prototype to companies interested in the technology, and NIC can license the technology. This makes the invention development process more efficient than ever before and greatly reduces the time to market.

A Startup Accelerator While licensing may be the preferred route for many technologies, some inventions represent a new sector of the mar-

Inventors at the UA museum have designed a compact, interlocking cryovial. The prototypes (shown in blue) were made with a UAF 3D printer. Photo courtesy of Adam Krynicki

ket untapped by current businesses and therefore do not easily fit into the traditional licensing model. In these cases, the community should look to create startups. To facilitate the startup of local businesses, Nanook Tech Ventures (NTV), a for-profit company, was created in 2013. Instead of requiring an upfront licensing fee, NTV licenses UAF technology in exchange for equity in the new company. NTV’s first startup, V-ADAPT, Inc., is based on over twenty years of volcano research at the UAF Geophysical Institute. The startup specializes in understanding the risk of airborne particulates, such as volcanic ash, sand, and industrial pollutants. Started just last year, the company has already made its first sale and its first royalty payment to the university. UAF disbursed the royalty checks to the contributors whose software was integral in the creation of V-ADAPT. On July 2, 2014, Chancellor Brian Rogers joined Associate Vice Chancellor for Research Dan White in congratulating the inventors of this software during a ceremonial royalty check presentation. Owning a private company, like VADAPT, provides inventors/entrepreneurs the flexibility to pursue small business grants such as Small Business Innovation Research and Small Technology Transfer Research grants to improve the technology. V-ADAPT is collaborating with Mobile Mapping Corporation (another UAF faculty owned company) on a Phase II Small Business Innovation Research Grant. The grant will pay for the next stage of development of soft-

Alaska Business Monthly | November 2014 www.akbizmag.com

ware that can be used by airplane manufacturers to assess damage to engines from sand storms, volcanic ash, and other airborne particulates. Other faculty at UAF are following suit and building their own high-tech companies based on UAF inventions and intellectual property. Dr. Robert Coker, a researcher in UAF’s Institute of Arctic Biology, has founded Essential Blends LLC to provide nutritional products and to ensure that these products are tested in a clinical setting utilizing small business grant funding. Dr. Tom Kuhn, also of UAF’s Institute of Arctic Biology, is launching Cereon Biotechnology, LLC, to develop nutraceutical treatments using Alaska plants.

preneurship at UAF and across Alaska.” Most importantly, UAF inventors can continue to grow this technology right here at home. “Made by Alaska for the world,” as ArcticFire’s President Bruce Crevensten proudly puts it. With the assistance of UAF’s OIPC, NIC, and NTV, innovators are bridging the gap between discovery and product. The next step is to build closer relationships with Alaska industry and increase the amount of investment at home, so that we all can proudly increase the number of products made by Alaska for the world. R

Adam Krynicki is the Business Development Director for the Office of Intellectual Property and Commercialization at the University of Alaska Fairbanks. Krynicki serves as Vice President of the board for Nanook Tech Ventures and is a graduate of Duquesne University School of Law. To learn more visit uaf.edu/oipc, nanookinnovation.org, and nanooktechventures.com.

North to the Future The unmanned aircraft software team is also launching a company. Crevensten and Wilson recently founded ArcticFire Development Corporation and will be releasing their first product, “Routinely,” which will make unmanned aircraft flight a simple routine for anyone. To scale up their operation, Crevensen and Wilson can work with NTV and private investors, if needed, and the corporate structure provides Crevensten and Wilson with the flexibility to pursue bigger opportunities, bring on business partners, and further develop the software under Small Business Innovation Research grants. Once their first product is released, ArcticFire may need investment to scale up their operations, and Nanook Tech Ventures is preparing for that day. By working with entities across Alaska, NTV is amassing a suite of options for potential investors. NTV can connect potential investors directly with a startup company or will provide an opportunity for accredited investors to diversify across multiple NTV-sponsored businesses. According to NTV President Scott Bell, “When one of our portfolio companies is purchased or goes public, Nanook Tech Ventures will return a significant share of the proceeds to UAF to compensate the inventors of the technology and the unit which sponsored it. The remainder will be used to help future companies get started and to reward NTV shareholders. By rewarding innovators and early-stage investors, NTV will help grow the culture of entrewww.akbizmag.com

November 2014 | Alaska Business Monthly

FINANCIAL SERVICES

Preparing For Retirement First Step:

Business Succession Planning

By Mel B. Bannon

f you’re like many business owners, you’ve spent a good portion of your working life building a successful company, but it’s unlikely that you’ve spent much time planning for the continuation of your business in the event of your absence. Failing to plan ahead for succession, however, can result in the abrupt demise of a once-thriving enterprise should you die or become disabled or gravely ill. Fortunately, there are some easy steps you can take now to help ensure that succession occurs seamlessly—enabling your business to continue to provide income and purpose for your family and your employees. One of the most common reasons entrepreneurs fail to plan for their succession is the belief that no one can run the business as well as they can. With a family business there is the fear that the children will take over and run it into the ground and the parent will have to come back out of retirement to run things. While the fear of letting go is understandable, if the business is to survive, someone has to manage it. A logical place to begin looking, despite the frequent fears, is within your own family. Also look around at some of your key managers, since trusted lieutenants often make some of the best successors. It does not have to be one person who can take over for you. Often it is a team of people—each with a separate skill— who, working together, can run things as well as the owner—and often better. Identifying and grooming successor management is perhaps the most critical task you face if you hope to ensure the long-term survival of your business. The right successor must be both able and willing to take over. Owning a business is a major responsibility that not 44

everyone wishes to have. Don’t assume that just because you have capable managers on hand that they will necessarily want the job—or that a son or daughter who wants the job is necessarily capable. Spend time discussing your ideas and intentions with candidates to gauge their talents and commitment for taking on the responsibilities of ownership. The hard part of succession planning is deciding who will run the business after you’re gone. Once you’ve made this tough decision, you can move on to the mechanics of ensuring a smooth and orderly transition. In order to effect a change in ownership, you may need to have a buy-sell agreement in place that details the terms of the transaction. This will include a valuation for the business—a rather subjective process. Common valuation methods include book value and capitalization of earnings. It’s a good idea to have a professional appraiser arrive at a value so that it withstands IRS scrutiny for estate tax purposes. The buy-sell agreement will also need to be funded in some way so that you—or your non-active family members—can get paid for your equity. This is typically accomplished with a life insurance policy, although other possibilities include cash flow from the business or bank loans. Buy-sell agreements can also be funded with disability income insurance to cover the possibility of a disability. As is the case with any type of estate planning, it’s advisable when leaving substantial sums to family that you make use of the benefits of trusts. This way, you protect the funds—and the business itself—from the damaging impact of events like divorce or bankruptcy. The equitable distribution of proceeds from a sale among family members is another common issue. One way to navigate this

is to leave stock equally to family with the understanding that if one member is a successor, he or she can buy out other members at an agreed-upon price. It is also important to have enough funds on hand for your family to run the business through the transition process and, if necessary, to wait for a good sale price. You can do this through Key Person insurance and by maximizing the amount of money you can accumulate in deferred compensation plans. By beginning to tackle some of the key issues associated with succession planning now—before it becomes an emergency—your business and your family can thrive for years to come. Begin the process today by discussing your unique situation and needs with your advisor. R Mel B. Bannon, CLU, ChFC, RFC, is a registered representative and investment advisor representative of Lincoln Financial Advisors Corp., a broker-dealer (member SIPC) and Sagemark Consulting, a registered investment advisor (1500 W. 33rd Ave., Ste. 210, Anchorage, AK 99503 907-522-1194 and 31111 Agoura Rd., Ste. 200, Westlake Village, CA 91361 818-5406950), offering insurance through Lincoln affiliates and other fine companies. This information should not be construed as legal or tax advice. You may want to consult a tax advisor regarding this information as it relates to your personal circumstances.

Alaska Business Monthly | November 2014 www.akbizmag.com

FINANCIAL SERVICES

Starting Early with Year End Accounting Helps Businesses Prepare for Tax Filing

By Tracy Barbour

ear the end of each year, businesses face the inevitable—and sometimes dreaded—task of getting their books in order for income tax planning and filing. Preparing for “year end” involves whipping myriad records into shape for an in-house accounting expert or outside certified public accountant (CPA) firm to process. Although December 31 marks year end for most businesses, many companies close their books at the end of January. However, businesses should be thinking about tax planning as they go throughout the current year, says Kevin Van Nortwick, Anchorage tax managing partner for BDO USA LLP. “During the year and before year end, keep your taxes in mind,” he says. “Accumulate the information you need so that you don’t have to go back and search for it later.” Businesses that need help keeping current with their recordkeeping might consider seeking outside assistance. “If your small business does not have a fulltime controller, it’s a good idea to bring in a contract bookkeeper every quarter, so that when it comes to the end of the year you have better numbers,” he says. CPA Joseph Moore, a principal with Altman, Rogers & Co., advocates making ongoing preparations for year end. Most businesses find that year end closing activities go more smoothly if they pay more attention to closing out each month, he says. This can entail preparing reconciling accounts and updating records such as inventory, bad debt reserve, commission accruals, and tax provisions on a monthly basis. It’s never too early to consider items related to year end accounting, Moore says. That’s because there are things that can happen during the first month of the year that can have year end implications, he says. “Start preparing in the fourth quarter, and keep an eye on year end needs throughout the year,” he says. Moore adds that the more work busi46

nesses put into year end preparation, the more they will benefit on their tax bill. To John Letourneau, CPA, managing director and shareholder of Thomas, Head & Greisen PC, businesses should start preparing for year end before the year begins. He says, “It is a lot easier to do things right throughout the year than it is to catch up.” So what should businesses be doing throughout the year to facilitate year end accounting? In general, Letourneau says, they should establish good record retention and accounting systems. They should also review the output of the accounting system during the course of the year and develop an expectation of what the reports of the accounting system should show. These steps can translate in the company having predictable information for taxing authorities, as well as creditors, at the end of the year. “In my view, the best outcome of the year end process is no surprises,” Letourneau says.

Procedures and Records Vary A key task for accounting professionals when preparing for year end is to review all of their activity for the year. Then they should make note of any unusual or nontypical transactions that may require additional information, such as major asset purchases or sales. Other year end activities can range from compiling information for the accurate preparation of forms 1099 and W2 to making bonus and fringe benefit calculations to making estimated tax payments—if required. Of course, every business is unique and will have different procedures for closing out their books. For sole proprietorships and other small businesses, year end preparations often involve an internal bookkeeper using software like QuickBooks. Larger companies like C and S corporations tend to have an internal controller or chief financial officer using a more sophisticated system tied to Generally Accepted Accounting Principles.

Van Nortwick says smaller businesses, in particular, need to ensure their accounting system yields an accurate balance sheet. “If you get the assets, liabilities, and equity correct, by default the bottom line on the the profit and loss statement will be correct,” he says. If the balance sheet isn’t accurate, an outside accountant will have to spend a significant amount of time cleaning it up. Businesses need to work through all balance sheet accounts, cash accounts, and make sure depreciation is recorded. They also need to keep up with the assets they have acquired or sold during the year. “We’re really trying to get small businesses to do all of this on their own or before the end of the year, and it saves the client money in the form of professional fees,” he says. Van Nortwick points out that sole proprietorships who file a Schedule C with their personal return don’t have to worry about keeping a balance sheet for tax filing purposes. They can use a check book, Quicken, or a spreadsheet to keep up with this information for their accountant. Some of the specific records businesses might need to include—regardless of size—fixed asset detail to show assets acquired or sold during the year, payroll tax return copies, details about fines or penalties paid during the year, any nondeductible political contributions, or premiums paid for key employee life insurance policies. Businesses may also need to provide documentation for special situations, according to Van Nortwick. For example, companies involved in manufacturing, construction, engineering, and architecture may be able to submit Form 8903 to receive a domestic production activities/ Section 199 deduction. Partnerships or corporations that had a change in ownership or sold shares will want to provide their accountant with the appropriate schedule. Businesses operating on ac-

Alaska Business Monthly | November 2014 www.akbizmag.com

Haugeberg

Letourneau

crual basis will need to provide information about accrued vacation and bonuses and when they were paid after year end. Also, companies should let their accountant know if they have nexus or a presence in another state. If they operate in other states—either physically or online—they may have to file income tax forms for those states. And at the end of the year, companies with employees will need to provide their accountant with the appropriate wagerelated information for their W-3 form in January. “Needless to say,” Nortwick

Moore

Nortwick

says, “there is a lot to do to get ready for tax time and closing your books.” The records that companies deal with for year end preparations can vary considerably among different business structures, Letourneau says. For example, the process of making distributions to equity owners is different for corporations and limited liability companies (LLC). In a corporation, the board of directors declares a dividend, while the manager might authorize a distribution in an LLC. The process of paying equity owners for their services to the entity can also

differ. In a corporation, for instance, a shareholder who is also an employee receives a W-2 for wages or a salary paid for their services. But in an LLC, a member who provided services to the LLC normally has the compensation payments reported on a Schedule K-1. Letourneau adds that the difference in how these payments are reported also changes the responsibility for the payment of associated payroll and income taxes. For example, a corporation paying an employee wages/salary withholds the employee’s share of Medicare, income

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November 2014 | Alaska Business Monthly

taxes, and Federal Insurance Contributions Act payments (FICA). In addition, the corporation, as the employer, is obligated to pay to the IRS the withheld taxes in a timely manner and pay the employer’s share of FICA and Medicare.

Reconciliation and Inventory CPA Jerry Haugeberg, of Fairbanks-based Cook & Haugeberg LLC, stresses the importance of reconciling accounts, among other year end activities. Reconciliation is important because it involves comparing transactions and activity to support documentation. This could involve reconciling the account balance to the source document. Haugeberg explains: “Your bank account should reconcile with your monthly bank statement. Your loan balances should agree with the balance you show in your general ledger.” Accounts receivable should also be reconciled so that the detail schedule is consistent with the total in the general ledger. The same type of comparisons should be done with balances for credit cards, loans, cash, and savings, he says. Inventory is another important year end area for companies with goods and other assets to address. Haugeberg advises making a physical count of the inventory and adjusting the general ledger balance to agree with it. Companies should also pay attention to their calculation and recording of depreciation. If assets are sold or purchased during the year, they may need to change the estimated depreciation. Once businesses have gone through the key accounts that need reconciling and adjusting, there may be miscellaneous assets or accounts that are on the books. “For example, you might have made a deposit on the purchase, but when you completed the purchase, your books didn’t show the initial deposit,” Haugeberg says, “or an advance for an employee that is sitting there as a receivable needs to be reconciled at some point.” Companies often make end-of-the-year decisions for strategic reasons. They may look at their financial standing or profit level and determine they need to make a change for tax purposes. For example, they might purchase equipment before the end of the tax year to capitalize on accelerated depreciation. Or businesses experiencing growth could implement a retirement plan or bonus for key employees. 48

Another tax-planning move to make before year end could involve selling one asset at a loss to offset the capital gain from the sale of another asset. This can help a company match income and expenses to minimize its tax liability. “Sometimes a business will have a net operating loss, coming off a bad time,” Haugeberg says. “That’s a time when you want to look at utilizing those losses if you can.”

Managerial Review of Information Letourneau says the best possible step that a company could take would be to have their information internally reviewed by management. However, he frequently finds that management either doesn’t have current financial information, or uses information in a different format than the typical year end financial statement to make day-to-day decisions. But not having the best information at hand can hamper decision making. “The theoretical model of financial reporting is that the information is prepared to allow decisions to be made,” Letourneau says. “So, given the nature of business, the more current the information is the more useful it is.” He added that year end information is often viewed as a being a historical report. “We certainly agree that we can learn from history, but what we hope to do is make better more informed decisions in the future,” he says. However, an internal review of this information by operating management typically isn’t done, Letourneau says. But this may not result in the best information for making decisions about the company’s future. “If the process of preparing for year end is left entirely to the accounting/finance staff and there is no interaction with operational management, the utility of the year end information is greatly reduced,” he says. Ideally, the process of preparing for the next year is the time for reflection on the types of information that is anticipated to be useful to management for making decisions. It’s also a time to look beyond the current year end process and consider future needs. Letourneau says, “The question I would pose is what information would be useful for future decision making, and what are the steps involved and costs to obtain this information?”

Leveraging Year End Information Year end is a good time for businesses to consider any changes they want to make to their accounts and the reports they wish to generate. However, they should consider these kinds of adjustments early. For example, if their accounting system doesn’t provide enough detail to run the business, they could generate reports for individual departments. But the account for this should be set up at the beginning of the next year to capture a full year of operation. For instance, if the business had one operation that was split into three departments at the start of the year, it could see a full year of profit margins. “In the following year, you’ve got comparative information for the three departments,” Haugeberg says. “That stand-alone information will help you decide what you want to do to improve a certain department in the coming year.” Year end accounting information can also serve as a financial compass. It can reveal if expenses are getting out of line and if the company is hitting certain benchmarks. “It’s comparative financial reports on a monthly basis that the owner can use to evaluate performance and make adjustments,” Haugeberg says. Moore also values the collection and evaluation of information on a regular basis, including monthly general ledger reconciliations and quarterly in-house or CPA-compiled financial statements. “The benefits are good information to make good, well-informed decisions,” he says. He adds that year end can be a good time to reflect on the past year and prepare goals for the next year. Budgets and projections for the following year are normally started prior to year end, he says. “Hindsight is 20/20,” Moore says. “Learn what worked and what didn’t, and plan accordingly.” Haugeberg reminds businesses that their accounting system is a tool to help them manage their operations. It should provide information to help them evaluate their success so they can improve their business. If it doesn’t, the system should be modified to meet their needs. “You want to make it tell you as much as it possibly can about your business,” Haugeberg says. “You want to have it help you run the business.” R Tracy Barbour is a former Alaskan.

Alaska Business Monthly | November 2014 www.akbizmag.com

HR Matters

By Kevin M. Dee

Control Is an Illusion How to create alignment and engagement

ontrol is an illusion often perpetuated by authoritarian management over willing and unwilling employees. The truth is—no one can make another person do something that they do not on some level consent to do.

Engage and Align There is an exercise I love to do in organizations. It involves me placing a pen on a table and requesting the group members to try different verbal methods to get me to pick it up. The usual methods attempted include the polite method, the demanding method, the bribery method, the direct method, the indirect method, the angry method, the manipulative method, and a whole host of others. There’s usually a lot of laughter as we identify the methods used to try to get me to pick up the pen, which I steadfastly refuse to do. The purpose of this exercise is twofold. The first is to demonstrate that you can’t make someone do something that they don’t want to do. Secondly, it shows the many ways that people act and the methods they use to coerce people. Most of these methods when used in the workplace don’t leave either party feeling very good about the interaction. Groups will often come to that “Aha!” moment when they realize they have more power than they knew. Managers will often realize that they need the buy-in and engagement of all their employees in order to get the job done. This is especially true in evermore competitive workplaces and industries. Managers who do not engage and align their people around a common set of outcomes seem to wind up playing “whack a mole” www.akbizmag.com

all the time. In business the moles are problems. Managers and teams whose workers are not invested and aligned spend most of their time putting out fires or lighting them under floundering employees.

Goals and Outcomes It’s not just about setting a goal and holding someone accountable to it. It’s all about the “why” of the goal or the “What’s in it for me?” that really matters to individuals and teams. By taking the time to identify and communicate the benefits, purpose, and needs that drive goals and activities, employees and teams are more likely to buy in and commit to their achievement. Great managers and teams know and communicate the reason and relationship of goals and outcomes that they are committed to achieving and will uniformly outperform their competition. Years ago, I was salmon seining in Prince William Sound. I had a crew that took every opportunity to eat and sleep—especially when I was driving the boat and looking for fish. I pulled the crew together and told them that we had a very limited window to catch as many fish as possible which translated directly to dollars in their pockets. I told them I had only one set of eyes to spot fish and that more eyes scanning for fish would translate to more fish caught. I told them I needed them and their eyes to help find fish. The mindset of the crew shifted once they knew why all eyes were needed. From then on everyone was looking for fish and we had a great year as a result. Achieving Significance Today workplaces are experiencing

an ever-increasing amount of changes in both the workforce and the workplace rules. Gone are the days in the oil patch and construction trades in Alaska where corrective discipline was sometimes meted out behind the connex or disliked employees were run off from the worksite. Today respect and fairness are demanded as a minimum. But if you want to be the best at what you do then everyone must be fully engaged and contributing to that result. This means managers become more of a coach than a fireman playing “whack a mole.” When individuals realize that every voice counts and everyone begins to listen to one another, a wonderful transformation takes place. People naturally engage. They see and experience their individual contribution in a common shared experience of success. We all want to be on great teams with people we respect. We want to do work that we love in a place where we have the tools and opportunities to succeed. This is the type of workplace where we get to pick up the pen and go from achieving success to achieving significance in our world. R Kevin M. Dee has a master’s degree from Vanderbilt University and is the president of KMD Services & Consulting. He has more than thirty years of experience providing leadership development, organizational development, and human resource services in Alaska and internationally. Contact him at mail@kmdconsulting.biz.

November 2014 | Alaska Business Monthly

CONSTRUCTION

The Benteh Nuutah Valley Native Primary Care Center.

Mat-Su’s Continuous Growth Facilities, roads, subdivisions expand with population By Rindi White

rowth. It’s the ever-present undercurrent fueling life in the Matanuska-Susitna Borough. The population has exploded by 50 percent between 2000 and 2010; school children attend classes in portable buildings due to a lack of space inside the schools and everywhere are construction projects—new medical centers, new roads, new subdivisions. With growth comes challenges: how to evaluate whether enough different types of housing are available; how to make the steadily increasing flow of traffic move smoothly; and how to ensure that the growing population has access to adequate medical care.

New Medical Center to Serve Growing Alaska Native Population In Mat-Su, the medical picture continues to evolve as population growth drives new dentists’ offices, imaging centers, pediatric care providers, and medical supply stores to build or expand. One dramatic new addition to the medical offerings in the Valley popped up recently in Wasilla. The Benteh Nuutah Valley Native Primary Care Center (VNPCC), a Southcentral Foundation facility, opened a ninety thousand-square-foot medical building near the intersection of Palmer-Wasilla Highway Extension and

Knik-Goose Bay Road in August 2012. “The plans for the Benteh Nuutah Valley Native Primary Care Center were conceptualized in collaboration with the Chickaloon Village Traditional Council and the Knik Tribal Council after careful review of the data and listening sessions with our customers from the Matanuska-Susitna Borough,” says Southcentral Foundation President and CEO Katherine Gottlieb. Southcentral Foundation previously leased 5,457 square feet of space in a strip mall in Wasilla. But the Alaska Native population in the Valley is expected to grow quickly—to nearly dou-

Alaska Business Monthly | November 2014 www.akbizmag.com

ble, says Allison Knox, public relations director for Southcentral Foundation. Expansion was needed. The $56 million project was a collaborative effort. The IHS awarded Southcentral Foundation a Joint Venture Construction Agreement and the US Department of Agriculture gave $40 million in direct loan financing. The Alaska Legislature awarded $5 million toward the project in FY 2013, and the Rasmuson Foundation awarded $1.2 million to furnish and equip the facility’s twenty-one-chair dental clinic. Mat-Su Health Foundation granted money to build a playground, an exterior gathering place, and a walking path, and Wells Fargo provided $10 million in guaranteed funding. Neeser Construction was the general contractor for the project, assisted by Seattle-based design firm NBBJ, DOWL HKM, and kpb architects. The building has two connected medical clinics with sixty exam rooms, nearly half of which are “de-medicalized talking rooms.” There are fourteen behavioral health consultation rooms, three optometry clinical rooms, an audiology booth, a hearing aid fitting room, a wellness center with fitness machines, aerobics studio, and limited physical therapy spaces, as well as a pharmacy, a large lobby, and public café. The building is LEED (Leadership in Energy and Environmental Design) certified and aims to save money and resources and promote renewable, clean energy while having a positive impact on the health of occupants. “Before the expansion of the VNPCC, the number of customer-owners seen was about five thousand [each year],” says Knox. “The current number is approximately eight thousand.” Knox says VNPCC currently employs about 130 people and its workforce will expand to 200 as more services are added.

Gateway Visitor Center Prepares to Build For several years, the Mat-Su Convention and Visitors Bureau has been looking for a new home. It appears that Mat-Su Convention and Visitors Bureau, or MSCVB, is making headway. This year the borough agreed to buy from MEA (Matanuska Electrical Association) a nearly fifty-acre tract of land, the former home of Homestead RV www.akbizmag.com

Park. The park has been closed for a few years, and MEA purchased the property to secure a route for new transmission lines linked to a new generation facility the cooperative is building in Eklutna. But the electrical cooperative didn’t need most of the land, so it agreed to sell the property to the Mat-Su Borough, which oversees MSCVB operations. MSCVB Executive Director Bonnie Quill says the borough recently began seeking requests for proposals for a new visitor center design. A feasibility study done in 2010 gives the organization an idea of what it can afford: a twelve thousand-square-foot facility that includes a small auditorium and a lot of interpretive information about the area. Quill says only about ten acres of the property are on a bluff overlooking the Palmer Hay Flats; the rest of the acreage is on the Flats, and the design will likely include trails leading down to the flats and a boardwalk trail leading to a salmon spawning stream so visitors can watch nature in action. “We know that the salmon habitat below is a perfect example of why people would want to stop there,” Quill says. Quill says the new visitors’ center won’t have the MSCVB name on it. Instead, it’s being called the Mat-Su Gateway Visitors Center. The broader name is a nod to the fact that this project is a partnership between MSCVB and other groups, from the Alaska Department of Fish and Game to land conservation group Great Land Trust and several others. The Alaska Legislature has assisted with funding for the land acquisition phase of the project and for the design phase. Construction—estimated at $7 million—is next and Quill says borough leaders will be asking for $5 million from the state. The borough expects the additional $2 million to come from the sale of the Visitors Center’s hospital-adjacent location. If construction funding is granted in the next legislative session, Quill says the new visitors’ center could be open by 2017.

Growth Drives New Road Projects Traffic congestion comes with population growth. Nearly one-third of the Valley’s workforce commutes to Anchorage for work. That spells high traffic on a few traffic arterials at peak times.

One notorious bottleneck is at the intersection of Parks Highway and KnikGoose Bay Road in Wasilla. It’s the only north-south road connection crossing the Parks Highway in the city’s small downtown area. Final design is expected in 2016 with construction from 2017 to 2019. Meanwhile, near Palmer, the state is getting ready for another significant project that will add lanes to the busy Glenn Highway between Palmer and the Parks Highway interchange. That project has an anticipated construction cost of $60 million. State Department of Transportation and Public Facilities spokeswoman Shannon McCarthy says it’s in final design now and should be headed to construction in 2017. The Glenn Highway Mile 34-42, between Palmer and the Parks Highway, has changed little since it was paved. But the land on either side of the highway has transformed from farmland into multiple subdivisions and a scattering of commercial properties, meaning a growing number of people who stop on the highway, waiting to turn onto a subdivision road. The route is busy, particularly at peak commute times, and McCarthy says the daily traffic count averages about twenty thousand vehicles. The new project will create four lanes with a depressed median along the eight-mile route. Five new traffic signals will be added, and a frontage road will provide local access in a portion of the area. McCarthy says a separated path along the route will also be built. That project will end at Arctic Avenue in Palmer, which is the beginning of another significant project under way in the Valley. The Bogard Road Extension East will provide an east-west connection from Palmer to Wasilla that will allow drivers to avoid using the PalmerWasilla Highway, one of just two eastwest routes connecting the two cities. The Mat-Su Borough is leading the Bogard East construction project, which is in construction now and expected to be completed in 2015. The project punches a new road from Colony Schools Drive at its intersection with North 49th State Street to Arctic Avenue, near Palmer High School. The $22 million project is in phase one of two phases; the second, $7 million phase will improve access for the Colony Schools and add signal-

November 2014 | Alaska Business Monthly

ized intersections for pedestrians to access nearby subdivisions. Paired with the Seldon Road extension project near Wasilla, also in construction, the two projects will allow drivers to travel from Palmer to Meadow Lakes north of Wasilla while skipping the congestion of the PalmerWasilla Highway and the Parks Highway through Wasilla. The Seldon Road extension project is also in two phases. The first phase, which began construction this summer, will result in a new two-lane road across 2.25 miles from the intersection of Seldon and Church Roads in Wasilla to Beverly Lakes Road in Meadow Lakes. A future project will revamp Beverly Lakes Road to Pittman Road. The firstphase project cost is estimated at $3.5 million and is expected to be complete in fall 2015. The second phase is waiting on additional funding. The Seldon Road extension project is one of a dozen projects that are at least partially paid for by Mat-Su voter-approved road bonds.

Where People Live The Mat-Su Borough is the only government entity for most of the residents who live in this Pennsylvania-sized borough. Wasilla, Palmer, and Houston are incorporated cities, but only about seventeen thousand residents, or just less than one-fifth of the population, live in an organized city. Mat-Su Chief of Planning Lauren Driscoll says Mat-Su went through a period in the early 2000s where large subdivisions were being built—the Ranch subdivision, south of the Parks Highway near Wasilla, was the largest, platted with around 850 lots. That subdivision is slowly growing and filling in. After the housing slowdown made it less likely contractors would build “spec” houses, Driscoll says the average size of subdivisions being submitted to the borough’s platting office has shrunk. Most subdivisions average 15 to 20 units, though a few go as large as 50 or 75 lots, she says. “Developers know that’s the sellable amount at the moment,” Driscoll says. In the April 2014 edition of Alaska’s Economic Trends, state labor economist Karinne Wiebold stated that MatSu led the new-construction list with 52

Alaska Business Monthly | November 2014 www.akbizmag.com

23,919 new homes built between 2002 and 2012. The borough also added nearly thirty thousand new residents in that span of time, she wrote. Why? Because Mat-Su has a higher number of large, undeveloped tracts of land, while Anchorage’s growth is restricted to “infill sites that restrict growth and increase costs,” Wiebold wrote. Mat-Su has a large number of singlefamily homes. But Driscoll says what is less clear is how many other housing options Mat-Su has, and how much demand there is for those higher-density housing options such as multi-family condo and apartment complexes, townhouses, duplexes, and the like. There is a demand for affordable housing outside the “single-family home” mold. Entities that typically help fund affordable housing, Driscoll says, have not launched many projects in Mat-Su because there isn’t data that demonstrates a need for “workforce housing” and other affordable housing options. The Mat-Su Borough planning staff recently launched a data-gathering exercise that aims to provide some of those details.

Terrace on the Lake rentals have direct access to Wasilla Lake. Photo courtesy of Butch Moore/Alaskaland.com

“It’s an issue that weaves among many other issues; whether you’re talking about economic development or transportation, there’s a constant discussion of housing. We’re finding we are lacking a picture of what our housing picture looks like,” she says. Driscoll is quick to say that the borough is not gathering the data in an attempt to steer development. Instead, she says, borough planners want to provide the data to groups who are interested and already asking for it—realtors, private developers, housing entities—so a current housing picture can begin to take shape.

High-End Rentals and Gated Getaways While the availability of, and demand for, affordable housing is examined, a few developers are tapping into a relatively new market for Mat-Su—higherend, short-term, business-class housing. A development of several four-unit, three and four bedroom townhomes near Palmer, called Bella Vista East, went on the market this summer and was occupied within a matter of weeks. More units are planned at that site and another, a twelve-unit development called Bella Vista West, will be open this fall in Wasilla near Creekside Mall and Alaska Club.

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November 2014 | Alaska Business Monthly

Butch Moore, manager of Alaskasland.com, in September said twelve of his sixteen-unit Terrace on the Lake development on Wasilla Lake had been rented, before construction was finished. Moore says his clients tend to be nurses, doctors, executives, and administrators. He says he’s been told by numerous clients that developments like his, where residents have tasteful accommodations as well as private lake frontage, are difficult to find in Anchorage, much less the Valley.

Moore is also the developer of two other high-end projects, both aimed at people looking for weekend getaways or recreational property. Since 2007 he has been working on the roughly one hundred-acre Susitna Shores development north of Willow. It’s a gated subdivision with underground power lines at Mile 84 Parks Highway, on the big Susitna River. About half of the one- to two-acre lots have been sold, he says, and the development has remained busy even through the economic slowdown. Moore has

agreed to build another gated development on Deception Creek in Willow, similar to Susitna Shores but with five and ten acre lots. Moore isn’t the only developer building with security and recreation in mind. Eugene and Jeff Johnson, owners of Johnson Investments, have been building recreational-themed subdivisions with gated access and underground utilities for about fourteen years. Their popular Eagle’s Nest at Kashwitna has roughly 120 lots and, like Susitna Shores, about half of the lots are sold. Johnson Investments is also developing two other subdivisions nearby, each with around one hundred lots and a slightly different take on recreational property. Its Preserve at Sheep Creek development has seventy-five acres of land set aside as open space. Johnson says his company built hiking trails throughout that acreage, and in the winter the trails become groomed cross-country ski trails. Falcon’s Ridge, a development at Mile 91 of the Parks Highway, has a boat ramp for residents to use to access the big Susitna River. The company has a fourth development in the works—The Point at Two Rivers. It’s at Mile 83 of the Parks Highway, Johnson says, with the Kashwitna River on one side and the big Susitna River on the other. That development includes a common area with a gazebo and fishing hole on the Kashwitna River, he says, and cross-country ski trails will be going in as well. Although a few of the landowners there are from the Valley and a few hail from outside Alaska, most are from Anchorage, Johnson says, and most are building a second home. Johnson says his father has been building recreational subdivisions for about forty years. But the company has only been building gated recreational subdivisions with underground power since 2000. “The gated [access] provides security. They don’t have everyone driving by their place,” Johnson says, “and the underground power looks cleaner and nicer.” R Rindi White is a freelance journalist living in Palmer.

Alaska Business Monthly | November 2014 www.akbizmag.com

TRANSPORTATION

Northern Region Roads Ice, gravel, and paved By Julie Stricker

Photos courtesy of Alaska Department of Transportation and Public Facilities

n January 2014 an avalanche thundered down the slopes of a narrow canyon north of Valdez, burying a portion of the Richardson Highway, the lone road access to the town, under a massive debris pile. It also dammed the Lowe River, creating a half-mile-long lake that submerged more of the highway. Steve Potter, maintenance manager for the Alaska Department of Transportation and Public Facilities’ (DOT&PF) Northern Region, was on scene as cleanup began. It took the combined efforts of the DOT&PF and private contractors to clear the avalanche and get the road reopened. “It was pretty impressive,” he says. “It took six days of actual round-the-clock effort to reopen the road. When those types of things happen, you’ve got to bring in the right equipment.” Record rainfall in Interior Alaska this summer also caused erosion prob56

The two-year $17 million Goldstream Road project north of Fairbanks included insulation below the roadbed to keep permafrost from thawing.

lems along the rivers and led to washed out culverts and bridge abutments and huge potholes. It also delayed routine projects such as marking pavement and cutting brush, Potter says. Even routine weather this far north means heavy winter snowfall and high winds and drifting snow on mountain passes.

Northern Region DOT&PF The state’s Northern Region is responsible for overseeing 3,385 centerline miles of road—70 percent of the state’s total—and 104 airports. It encompasses about 370,000 square miles, or the

size of California, Nevada, and Arizona combined, in the most seismically active state in the country. About forty often-remote work camps maintain specific areas of road. The region includes all the roads paralleling the trans-Alaska oil pipeline and the area north of the Alaska Range. About 56 percent of the roads are paved. The state rarely builds ice roads, Potter says, although private companies often do so to reach remote areas over fragile tundra on the North Slope. “Ice roads are ephemeral by nature,” he says. “A lot of times that’s preferable from an environmental standpoint.”

Alaska Business Monthly | November 2014 www.akbizmag.com

Several views of the completed Goldstream Road project.

That doesn’t mean ice isn’t a problem on Interior Alaska roads. Ironically, warm winter weather is the culprit. For the past decade, warm Chinook winds have blown into the Interior multiple times in the winter months, dumping rain on hardfrozen ground before temperatures fall back to well below zero. The roads turn into skating rinks, schools are closed, and everything comes to a standstill. “Last year, there were four rain events on top of twenty below,” Potter says. “It warms up, rains, and freezes, and you get a layer of ice that just doesn’t peel off the road. You can’t use chemicals either at those temperatures. You’re trying to sand and scrape and trying to get as much traction as possible on those icy roads. “There’s just no easy way and speedy way to change that from ice to dry pavement.”

Unpaved vs. Paved But even dry pavement can be a problem in the Northern Region. One of the reasons 44 percent of the roads are unpaved is because it’s simply less expensive to maintain dirt roads in those areas than to have to pave, patch, and repave them year after year because they’ve heaved, cracked, and settled from thawing and freezing ground, says Jeff Currey, a materials engineer for the Northern Region who designs road projects in an attempt to reduce impacts from permafrost. “By academic definition, permafrost is any ground that stays below freezing year-round for more than two years in a row,” Currey says. “My boss used to say we don’t want to study it, we want to fix it. We’ve found that studying it helps us avoid it. There’s no place in the Interior where you can just look at the ground and say there isn’t permafrost.” Some of that ground may be mostly rock or dry gravel, which is usually not an issue, he says. “The problem when we talk about permafrost is ice-rich permafrost. Too much moisture: when it melts it turns into a mucky swamp. Or has massive ice wedges in it, which when it melts it drains out and there’s nothing there.” Currey says engineers have several strategies to deal with permafrost, but “the single best way to deal with it is to avoid it.” That isn’t always feasible. In much of the Northern Region, permafrost is discontinuous, but most of the ground above the Brooks Range is frozen. www.akbizmag.com

Photos courtesy of Alaska Department of Transportation and Public Facilities

“The choices are either to keep it frozen or try to thaw it out in advance or just build on it and try to live with the consequences,” Currey says. “In some cases, that’s actually a cost-effective technique, if it’s cheaper to maintain it.” The Dalton Highway, over which most of the supplies for the North Slope oilfields travel, is mostly unpaved, he notes. “You can make a pretty good argument for just building a road over the permafrost,” he says. “But if you want to pave it, it’s not a good strategy when the pavement starts buckling. When it’s a gravel road, you can just grade it and keep it going.”

Stabilizing Roadbeds over Permafrost In other areas, it’s not possible to avoid permafrost areas, so the issue becomes how to stabilize the roadbed, says Andrew Schultz, a construction group chief for the Northern Region. Usually, when crews build a road, they start by stripping away the vegetation, but that changes the thermal equilibrium over frozen ground. “The initial idea is to get rid of all this vegetation because it’s squishy and soft and not a good foundation to build on,” Schultz says. “We’ve found over the years if you remove all that vegetation, it removes all the insulation. When you strip the insulation, you start thawing the permafrost right away. You can end

up with a bloody pond right where you want the road.” Ideally, a road construction project will mimic the insulation that was there before the ground was disturbed. “Insulation is the key,” Schultz says. “Try to keep the heat from going down into the cold. You’re really just trying to slow down the melting.” The permafrost in much of the area around Fairbanks is relatively warm, just under the freezing mark, so it only takes a little bit of heat to thaw it, Currey says. DOT&PF has been working with the University of Alaska Fairbanks to develop road construction techniques in permafrost areas. “Folks who have been up here a while know enough to know it’s an issue,” he says. “We’re trying to develop techniques of building on it so it’s lower maintenance.” One example is Goldstream Road, which runs through permafrost-rich ground north of Fairbanks. Driving portions of the road was like navigating a roller-coaster riddled with frost heaves, potholes, and cracks. Maintenance workers had to repair portions of it every year. In August, a two-year, $17 million project to rehabilitate 10.5 miles of the road was completed. Workers dug up part of the roadbed, installed polystyrene insulation 5 feet below the surface, covered it with rocks and gravel, and then repaved it. Geotextile fabric

November 2014 | Alaska Business Monthly

was also used to reduce erosion and increase the stability of the embankment. Two bridges were replaced. Overall, more than 13,000 feet of foam was used at a cost of $2 million. “We did the final inspection last week,” Currey said in mid-September. “I’m knocking on wood. Usually it settles so badly. I drove through it at 55 mph on Sunday and there was only one little itty-bitty whoop.” Currey notes that people are frequently misinformed about the purpose of insulation.

“What insulation does is reduce the heat flow,” he says. “It’s a barrier to heat moving.” Insulation was placed under the large culverts on Goldstream Road to keep the permafrost frozen. Elsewhere, it was used to keep the subgrade from freezing in the winter to prevent frost heaves. “So we actually use the same exact product for very different purposes,” Currey says. Another technique is an air-circulating embankment, in which an embankment is built using large rocks

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above the original road. In the winter, when the temperatures are much colder than the permafrost, the air circulates through the rocks and supercools the permafrost. That technique was used on Thompson Drive, which leads to the University of Alaska Fairbanks campus and sections of the Taylor Highway near Chicken Creek. So far, the technique has proven to be effective, Currey says, but it can be relatively expensive unless there’s a lot of rock available nearby. Another technique is the use of thermosiphons, large rods that use natural passive heat exchange to radiate warm out away from frozen ground. They’re used extensively along the trans-Alaska oil pipeline, but a test project using thermosiphons has successfully kept a part of Chena Hot Springs Road stable over a creek crossing for more than fifteen years. More typically, thermosiphons are used on building projects to keep the foundations frozen, Currey says.

Construction Challenges Alaska’s limited construction season also poses a challenge, but sometimes it makes more sense to build roads in the winter when there’s little chance of having the ground thaw, Schultz says. One particularly difficult project was the extension of Lower Madison Avenue in Barrow, he says. “It was really short, but for being that short of a road, it was very challenging to construct,” Schultz says. “It had a really limited right of way, so you couldn’t build as big of an embankment as you’d like because the taller you go, the wider you need, and you didn’t have the right of way.” Construction also took place in the winter, when it’s harder to keep equipment going and to keep workers safe. Safety gear, like the yellow vests the workers have to wear, has to be worn on the outside of winter gear, “so now you look like a puffy clown walking around,” he says. Another project was building a road to the dump in Galena to replace one being eroded by the Yukon River. “Out in Galena, there’s extensive swamp area, and where you have swamp, you have permafrost because of all the vegetation,” Schultz says. “That’s more of a winter project.”

Alaska Business Monthly | November 2014 www.akbizmag.com

The materials source was a sandbar in the Yukon River. “You’re trying to mine the sandbar in the river,” he says. “You’re dealing with water in the river and that’s never good when you’re dealing with equipment. It wears it down more. And the cold wears it down. Wears the crew down. “Cold weather: you’re dressed up in all the winter gear trying to move and keep productive, and then you throw rain there in the winter and everything is covered with ice and you have safety concerns.” The logistics can get pretty intricate, he says. For example, Schultz says he was amazed by the Brice construction manager’s knowledge of the barge system. “He knew the date he had to put a crusher on a barge at Adak so that it would show up at the job site in Galena on time,” he says. “It’s pretty impressive the coordination that has to take place on these construction projects up here.”

A Coming Disaster In addition to avalanches, blizzards, winter rain, permafrost, and the other normal hazards of roadwork in Alaska, DOT&PF engineers have also been closely watching a slow-motion disaster scenario unfold in the Brooks Range, Schultz says. It’s a lobe of frozen debris, a slow-moving landslide of rock, ice, trees, and soil creeping down the mountainside above Mile 219 of the Dalton Highway and the trans-Alaska oil pipeline. The blob of materials is more than 80 feet thick, and the leading edge is 65 feet tall and 560 feet wide, according to a 2013 DOT&PF publication. It’s moving from half an inch to an inch per day and in June 2014 was 142 feet from the highway. At that rate, it could engulf the highway within five years. DOT&PF’s plan? Move the road out of the way of the encroaching blob. A realignment project is scheduled to get underway in 2017. In the Northern Region, it’s just another day at the office. “We have so many roads that cross such varying terrain,” Schultz says. “It’s never going to end up here.” R Julie Stricker is a journalist living near Fairbanks. www.akbizmag.com

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November 2014 | Alaska Business Monthly

TRANSPORTATION

Char ter Operators Provide Clients Access to Remote Areas By Vanessa Orr

ver the last few months, American Fast Freight has been moving some unusual freight to the bush through their Fairbanks terminal. Using their connections via barge and air freight, they’ve been able to move some oversized and unusual trailer mounted truck heaters to the North Slope. These heaters were moved originally via their freight terminal in Fife, Washington. The heaters are used typically in the construction industry or for remote heating needs and can be pulled behind a pickup truck and used on location to heat everything from a remote shop to a newly built warehouse. Places like Barrow, Wainwright, Kaktovik, and Point Lay are all benefiting from this new equipment delivered by American Fast Freight. In order to get this unique equipment to these bush communities and to comply with door-lift restrictions, American Fast Freight had to work with the equipment vendor to provide the freight disassembled at the vendor’s location and moved via multiple pieces onto the airplanes that American Fast Freight had chartered. Once the heaters reached their destinations, they were reassembled on location and were ready to be put to work. These unique challenges and others are tackled every day by the AFF Logistics division and their knowledgeable transportation consultants who work directly with vendors and consignees to figure out the best solutions for delivering goods to bush communities like those on the North Slope. Looking at a map of Alaska it may seem impossible to transport people and goods to all the remote destinations. The fact is there are a quite a number of charter operators available every day. American Fast Freight, Alaska Marine Lines, Lynden Air Cargo, Everts Air, and Ravn Alaska are just a few of the many companies operating in Alaska that provide access solutions to seemingly inaccessible locations. 60

Photo courtesy of American Fast Freight

American Fast Freight was recently chartered to ship oversized heaters to the North Slope.

Alaska Marine Lines “Typically, our charters go to remote areas where there is no regular maritime service,” explains Dave Curtis, vice president, Alaska Marine Lines. “Either that, or we’re called on to haul a large quantity of goods that a full barge charter can transport better than piecemealing it on a regular maritime service.” Alaska Marine Lines carries a variety of different cargos, ranging from bulk goods that get loaded directly to the deck, like gravel, salt, or full loads of limestone, to construction materials and machinery. The company also transports oil drilling rigs, which, depending on their size, can make up a complete barge load or travel in conjunction with other materials. “In some cases, companies need a specific, dedicated vessel to haul goods that will not fit in with containerized freight,” explains Curtis. “For example, we recently hauled a load of very large, concrete bridge girders that weighed

150,000 pounds each and were 150 feet long. While these particular girders were going to Juneau, we often move materials to build roads, bridges, dams, and other infrastructure projects into remote locations. Contractors aren’t going to be able to do this with a regularly scheduled service.” In addition to charter work for the oil and gas, mining, and construction industries, Alaska Marine Lines also provides transportation services to the government. “We are often hired to transport contaminated soil from remediation projects on military bases and other remote sites,” says Curtis. Other military-type charters include supplying installations on Shemya Island at the end of the Aleutian Chain, taking equipment to Midway Island in the Hawaiian Islands, and taking construction equipment into Guantanamo Bay, Cuba. “The Shemya Island charter is always interesting because it takes twenty-plus days to get there, so when you depart,

Alaska Business Monthly | November 2014 www.akbizmag.com

there’s no possible way to know what the weather is going to be like when you arrive,” says Curtis. “It’s not a very protected harbor, and the weather has to be just right for us to get in there. Many of these remote locations with uninproved beaches or landings are a bit of a challenge, but we’re able to manage it because we have very capable boats with very experienced crews.” Because Alaska Marine Lines is part of the Lynden family of companies, which includes trucking, logistics, and air freight aspects, Curtis adds that clients are also able to take advantage of these other services as needed. “When someone charters a barge, there’s usually a lot more that goes with it,” he says. “We have the capabilities to provide them with whatever their project requires.”

Lynden Air Cargo Lynden Air Cargo also provides charter services for clients, including customers in the oil and gas, mining, fishing, and construction industries. “We operate a fleet of six Hercules (L382g) aircraft, which is the commercial version of a C-130, that specialize in hauling

large, oversized freight to remote locations. We haul equipment such as rock crushers, loaders, excavators, dozers, and pavers for construction projects, as well as large processing equipment, generators, and building materials for seafood producers,” explains Vice President of Marketing and Sales Jim Davis, adding that the air carrier’s commodities vary by destination. “Depending on where the resources are located—whether minerals, oil, or natural gas—the logistics of how to get the product out, and supplies in, begins,” Davis adds. “In some cases, this will require the building of runways to accommodate planes as large as ours if a runway doesn’t currently exist. When building a runway for our plane, it is critical that we are involved during the planning stage; there are many variables that go into maximizing the loads into and out of certain locations.” According to Davis, landing in remote areas requires having two things—the right equipment and the right people. “Our captains have an average of sixteen thousand hours of experience; some of them are ex-military and have

Your stuff will make it to port, even if you can’t.

flown the Hercules aircraft their entire careers,” he says. “It requires a lot of training and a very unique skill set to land this size aircraft on some of the runways that we use.” The Hercules aircraft is also unique because of its capability and size. “We have the ability to load up to a fiftythree-foot sea container in this plane and land on a short five thousand-foot gravel, dirt, or ice runway,” says Davis. “That’s pretty impressive.” The Hercules is also unique in that it can haul both fuel and freight at the same time, or straight fuel with a bulk tank system that can carry up to 6,400 gallons. “This allows customers to keep the steady flow of freight going along with much needed fuel in remote locations, where once the barge season stops, air is the only way to bring fuel in,” says Davis. The Hercules’ ramp doors open to forty-two inches off the ground, or the ramp can be put on the ground to enable equipment to be driven on and off. “Other aircraft, which have high side cargo doors, require a forklift to unload cargo,” says Davis. “By building pipe loads up on our skids, we are literally able to drag a

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Meeting yours is everything else. November 2014 | Alaska Business Monthly

load off the aircraft down the ramp and onto the ground where a loader can then pick it up. We can also use our onboard winch system to pull loads of up to forty thousand pounds into the aircraft, which means we need little to no ground handling equipment. The Hercules aircraft is ideal for most Alaska projects.” A good example of the aircraft’s capabilities—and the ingenuity of Lynden Air Cargo’s staff—is a project in Kongiganak where the landing strip was too short for the Hercules to land. “It was a logistical challenge; we had to come up with a solution for the customer, which turned out to be building an ice runway, and we had to beat the spring weather to get everything in there,” says Davis. “We had to find a way to get into a place where you would not typically take a Herc load, and our team made it happen.”

Ravn Alaska Having the right type of aircraft available for customers is also a hallmark of Ravn Alaska, which provides statewide charter services to a variety of customers, including oil and gas companies and state agencies.

“We provide Dash 8 charter service from Anchorage to the North Slope for the major oil companies to facilitate crew change-outs as well as community visits,” says Dispatch Manager Marty Case. Ravn’s clients include ExxonMobil, Shell Oil, Repsol, and Linc Energy. “We also transport prisoners for the Alaska Department of Corrections, as well as serve the US Interior Department of Land Management and the [Alaska] Division of Forestry by transporting fire-fighting crews in Dash 8s and B1900s. Forest fires throughout the state require crew movements to and from various rural villages to fire incidents,” he continues. “Smaller Ravn Connect aircraft, primarily C-207 Sleds and C-208 Caravans, will shuttle six to nine person crews to rural hubs where larger Ravn aircraft then transport them to the incident.” Using this same hub-and-spoke approach, Ravn Alaska regularly brings school districts together, transporting teachers for in-service, athletes for various sports, and even students for classes. “In one day, we’ve transported more than 240 students from fifty dif-

ferent communities to the Galena Interior Learning Academy,” says Case. “Every two to three years, we also commit all of our charter assets to supporting Kivgiq, the North Slope Borough’s messenger feast.” Ravn Alaska operates a fleet of more than seventy-five aircraft with eight different aircraft types, and all are available for charter. “On cargo charters, the majority of our customers are construction companies, along with governmental agencies,” says Director of Cargo/Logistics Don Singsaas. “Destinations range from the southeast part of Alaska, such as Dry Bay near Juneau, to Dutch Harbor in the Aleutians, to Barrow on the North Slope, and everywhere in between.” According to Singsaas, one of the biggest challenges facing charter cargo operators is communications—making sure that all of the items are available on the day that the charter is scheduled. “Many times, the materials are arriving from different distributors on different days and must be consolidated into one load for the aircraft,” he explains. “We spend a great deal of effort coordinating shipments and ascertaining that

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all of the expected materials have been delivered.” Ravn also takes a hands-on approach when it comes to customer service. “A couple of years ago, there was a new hospital being built in Barrow, and we received a frantic call from the siding distributor in Seattle,” says Singsaas. “Some of their materials and packing boxes had been damaged en route, and no other carriers would take on the task of moving the bundles of siding, which were up to thirty feet long. We sent some of our personnel to inspect the multiple truck trailers containing the siding, and the decision was that with a little extra care, we could move it without any additional damage. We accomplished moving all the materials in our Sherpa cargo aircraft, and the hospital looks great with its siding in place.”

Everts Air Everts Air also offers both passenger and cargo charter services in addition to scheduled freight service to thirteen major hubs in Alaska. “We specialize in serving the unique needs of our customers who reside in the larger Alaska cities,

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as well as small villages in remote locations,” says Paul Abad, sales and marketing manager. “Our primary business is transporting freight and mail, including the movement of oversized freight, hazardous materials, small packages, and most anything else that fits through the cargo door, and we offer charter and flag stop services to any city or village where suitable runway conditions exist.” The Everts Air Cargo fleet consists of one C-46, eight DC-6, three DC-9, two EMB-120 freighters, and one MD-80 freighter aircraft. According to Abad, the vintage C-46 and DC-6 aircraft are especially well-suited to the many shorter, unimproved gravel or ice runways in Alaska. “Because of the multitude of aircraft we have in our fleet, we have a lot of flexibility and can provide more options to our customers,” he says. “We can land directly on more than one hundred-plus runways in Alaska, even gravel or unpaved, with a length of at least 3,500 feet. “With the type of aircraft we have, we can go to places that our competitors can’t,” he adds. “And our pilots are very familiar with all of our destinations because they’ve been flying in Alaska for decades.”

The majority of the company’s passenger charters originate out of its Fairbanks location, with oil, gas, and mining employees heading out to remote sites. Everts also transports a number of hunters, who get dropped off at remote locations and picked up a week later with their game meat. “Most charters normally go to places north of Fairbanks such as Umiat, Arctic Village, Barrow, Deadhorse, Point Lay, and Point Hope, as well as northeast locations like Eagle, Chicken, and Circle City,” says Abad, adding that about 10 percent of the company’s charter business comes from passengers, with 90 percent resulting from cargo. “Almost every charter we do is interesting,” says Abad. “We recently carried twenty-foot pipes that took ten people five hours to load and offload from the aircraft. We’ve also carried large generators, vehicles, horses—we’ve even moved a whole dead whale that [Alaska] Fish and Game needed for testing purposes. I can’t imagine what we can’t move.” R Vanessa Orr is the former editor of the Capital City Weekly in Juneau.

November 2014 | Alaska Business Monthly

ENERGY

New EPA Rule 111(d) Alaska rich in opportunity for compliance

By Chris Rose

n early June, the Environmental Protection Agency (EPA) released a new draft rule under the Clean Air Act intended to, for the first time, regulate the emissions of carbon dioxide from electric power plants in the United States. The rule applies to plants that are twenty-five megawatts or larger that send at least 30 percent of their power into the grid. Known now by many as simply “111(d),” the proposed rule is intended to bring down national CO2 emissions by 30 percent by 2030, compared to 2005 levels. Though 111(d) is based on the reduction of carbon emissions at power plants per megawatt hour produced, the EPA is providing broad flexibility to the states to develop plans to comply with the rule. To guide the states, the EPA has established four blocks of “best systems of emission reduction,” or BSERs. Those four BSER blocks are: 1) improving the heat rate at existing fossil fuel plants; 2) shifting generation from coal to combined cycle natural gas plants; 3) increasing the use of zero emission renewable energy and nuclear power; and 4) increasing energy efficiency. While states that are heavily dependent on coal fired electric generation will undoubtedly have to consider closing some of those plants, Alaska could comply with the proposed rule with a combination of more energy efficiency, renewable energy, and more efficient electric transmission systems.

Room to Do More Alaska’s clean energy programs are already saving consumers money while reducing emissions, and there is room to do much more. Since 2008, the residential energy efficiency programs administered by the Alaska Housing Finance Corporation have retrofitted nearly fifteen thousand homes, saving Alaskans the equivalent of an estimated 22.5 mil64

lion gallons of fuel oil every year. So far, only about 15 percent of the state’s homes have been weatherized, leaving a huge opportunity for Alaska to pick more low-hanging fruit. Meanwhile, the state’s Renewable Energy Fund is estimated to be saving the equivalent of roughly 13 million gallons of diesel equivalent every year as communities dependent on diesel and natural gas construct wind, hydro, biomass, and other renewable projects. As more projects get built each year, this annual savings is growing steadily. Another opportunity for Alaska to comply with 111(d) is by making electric transmission systems more robust and efficient. Today, the Alaska Energy Authority and a number of Railbelt utilities are considering the creation of an Independent System Operator (or “ISO”) for the Railbelt. An ISO would be a quasi-governmental, independent, non-asset-owning entity that would set reliability and open access rules for the grid and conduct transmission planning to determine what upgrades are necessary. A possible transmission company, or TRANSCO, is also being discussed. A TRANSCO would consolidate ownership of transmission grid assets that are now owned by a number of Railbelt utilities and the State of Alaska, as well as improve and operate the grid under the ISO’s rules to achieve the most economic dispatch of power across the Railbelt as possible. The Alaska Energy Authority and the Railbelt utilities that are now seeking reform of the grid are estimating that the current un-economic dispatch of the region’s electricity is costing Railbelt consumers tens of millions of dollars every year. Throughout the initial public comment period for the proposed rule, many states have been holding formal and informal meetings to gather stakeholder input before submitting

comments. While the rule will likely be modified by those comments, legal efforts to challenge the EPA’s basic authority to regulate carbon emissions are not likely to succeed. In 2007, the US Supreme Court ruled that the EPA had the authority to regulate carbon dioxide and other greenhouse gases as pollutants under the Clean Air Act in Massachusetts v. EPA. This summer, seven of the nine justices again validated that authority in another case called Utility Air Regulatory Group v. EPA. Greenhouse gas regulation has a legal basis in the Clean Air Act and is here to stay. Nor does the public seem to be against EPA’s attempt to rein in emissions. A Wall Street Journal poll this summer showed that 67 percent of Americans support EPA’s proposed rule. The EPA is scheduled to issue the final 111(d) rule in June 2015. It will then be up to each state to devise and submit a draft plan by June 2016. States can choose their respective strategies depending on their interests, resources, and energy policies. If a state chooses to ignore the proposed rule and fails to complete a plan, the federal government will step in to draft a compliance scheme for that state.

Modernizing Electric Power Many energy industry analysts see EPA’s proposed regulation of carbon emissions as an opportunity to modernize an aging US electric power sector by using advanced energy technologies and services that will also spur competition, accelerate innovation, create jobs, stimulate economic growth, offer consumers new ways to meet their energy needs, and ultimately reduce the cost of energy. In Michigan, Gerry Anderson, the CEO of DTE Energy, a large, diversified energy company that provides both electric and gas service across the country, said that the proposed rule will lead to the largest period of investment in energy infrastructure since the oil crisis of the 1970s and “fundamentally transform and modernize the power generation fleet in Michigan…and across the US.” And a report released in July by the Analysis Group that looked at states that already have experience regulating carbon concluded that those

Alaska Business Monthly | November 2014 www.akbizmag.com

states have so far seen net increases in economic output and jobs. Having some certainty about how the country is going to deal with carbon emissions from the electric power sector will provide the finance community the assurance it needs to step up investment in renewable energy and energy efficiency. Though some states that depend heavily on coal may see short-term price increases, the shift to more energy efficiency and non-fuel based renewables is likely to bring down electricity costs in the longer term. In Pennsylvania, the Keystone Energy Efficiency Alliance recently told the Scranton TimesTribune editorial board that that state could achieve $22 billion in savings and create sixteen thousand jobs while meeting Pennsylvania’s targets under the rule.

Alaska Assets If Alaska continues on the path it has embarked on to support renewable energy and energy efficiency development, it will not have a problem complying with 111(d). Our state has some of the best renewable energy assets in

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the nation, including vast wind, hydro, geothermal, and ocean energy resources. Two private sector wind farms in the Railbelt are currently attempting to expand their capacity and new hydro projects are on the drawing board. In Cook Inlet alone, it’s estimated that there are hundreds of megawatts of potential tidal power capacity. As that technology continues to improve toward commercialization across the globe, the Railbelt has the potential to tap into a massive local, predictable, flat-priced, clean source of electricity before the compliance period ends in 2030. Alaskans are some of the biggest per capita energy users on the planet, but we don’t have to be. The people who have taken part in Alaska Housing Finance Corporation’s home weatherization programs have on average been saving 30 percent on their heating bills. Commercial and public buildings need to follow suit. Indeed, there is no reason that Alaska should not declare a goal of being the most energy efficient place on the planet. Why not? Such an effort could include designing and building structures that use a fraction of the

energy we’re using now, as well as constructing transmission and transportation systems that save energy and keep precious dollars circulating in Alaska’s economy. A goal to be the most efficient place on earth would also attract attention and people from all over the world and would likely stimulate additional private sector investment in the state, creating jobs and diversifying our economy. As state revenues continue to decline, increased investments in clean energy technology will not only help Alaska reduce emissions and comply with the new EPA regulation, it will help the state remain competitive in an increasingly competitive world. R Chris Rose is the Executive Director of the Renewable Energy Alaska Project, better known as REAP. Contact him at 907-929-7770 or chris@realaska.org.

November 2014 | Alaska Business Monthly

ENERGY

Alaska’s Energy Future Now is the time to move forward By Anne Seneca

Alaska’s Resource Decline Alaska’s numbers have dropped for various reasons, like years-long environmental reviews, excessive and unnecessary litigation, new management plans, and regulatory uncertainty. Because 62 percent of Alaska’s land is controlled by the federal government and all waters 66

SOURCE: EIA

he rapid rise of shale energy production in the Lower 48 has broken records and shattered expectations of “peak oil.” Headlines frequently tout the new American energy powerhouse. Thanks to shale production, a country with a perceived shortage of domestic energy supply just a few years ago is now less dependent on imports and more energy self-sufficient— making the nation far more competitive on a global scale. Accordingly, the United States is now the largest oil-and-gas producer in the world, and its resulting economic and employment contributions are being felt throughout the once-weakened US economy. Household incomes are up, as is trade, manufacturing output, and job creation. Seemingly left behind in the midst of the record-breaking boom in the contiguous United States is Alaska, the once and future cornerstone of the US energy landscape. Whereas the Lower 48 has seen energy production shoot up 77 percent in the last five years, due largely to state and private ownership of mineral rights, Alaska’s oil production has plunged from more than 2 million barrels per day in the late 1980s to fewer than 400,000 today, dropping the state to No. 4 nationwide in oil production. Even California—the state has considered banning fracking and said “no” to offshore drilling—produces more oil than Alaska.

US domestic crude oil production by source, 1990-2040 in millions of barrels per day.

more than three nautical miles offshore are also federally owned and managed, our state’s energy development has been stymied by the federal government’s inability—or unwillingness—to lease and permit expanded development on federal lands. According to the Congressional Research Service, crude oil production on federal lands has slipped by more than 6 percent since 2009. In contrast, production on non-federal lands has grown by 60 percent. As a result, Alaska’s competitiveness has drastically diminished, the Alaska Oil and Gas Association says. Alaska oil production, for instance, now accounts for less than 10 percent of US domestic production, a dramatic decline from the more than 20 percent the state accounted for between 1980 and 2000. Yet, Alaska’s abundant resource potential has never been greater. The Obama Administration’s hesitation and unwillingness to allow greater development on federal lands has been especially devastating in Alaska where

oil and natural gas development remains a vital component of Alaskan prosperity. The petroleum industry supports nearly one-third of the state’s jobs and 90 percent of the state’s discretionary spending, and increases in exploration of the Alaska Outer Continental Shelf could generate more than 35,000 Alaskan additional jobs, but only if the federal government would allow it. The decline in Alaska’s North Slope oil fields is also troubling for the transAlaska oil pipeline, which is operating at only one-third of its capacity, due to a 39 percent decline in its carrying load in the past ten years. If production slows too much, it’ll be hard to keep oil moving, and the pipeline could be compromised.

Looking Offshore In order to further the nation’s energy and national security objectives, exploration of Alaska and its Arctic waters must remain a dominant figure in the nation’s energy equation. The state’s vast deposits of natural resources en-

Alaska Business Monthly | November 2014 www.akbizmag.com

able economic growth, bolster trade, reduce the nation’s debt, lower consumer energy costs, and ensure safe, affordable energy for all Americans, even those in the Lower 48 states. Alaska’s lands and waters hold tremendous opportunities for energy development. Three reserves—the Chukchi and Beaufort seas, the Arctic National Wildlife Refuge, and the National Petroleum Reserve-Alaska—collectively (and conservatively) hold 35.5 billion barrels of oil and more than 150 trillion cubic feet of natural gas in areas open to development. That’s enough oil to fuel California’s entire energy economy—the ninth largest economy in the world—every day for fifty-five years. According to very conservative estimates by the US Energy Information Administration, Alaska has reserves of about 3.3 billion barrels of oil and 9 trillion cubic feet of natural gas onshore. Offshore, the possibilities are even more appealing. The Alaska Outer Continental Shelf, with an estimated 27 billion barrels of oil and 132 trillion cubic feet of natural gas, remains one of the world’s largest untapped reserves. More onshore and offshore production, accompanied by the right balance of policies and regulations, could mean that new Alaska production might reach 1.6 million barrels of energy per day by 2030. Offshore development could also generate $193 billion in new revenue and fifty-five thousand jobs nationwide. To illustrate the magnitude of these resources, consider this: 30 billion barrels of Alaska oil could fuel every domestic flight for more than 120 years. And 141 trillion cubic feet of natural gas could heat every American house for 34 years. Simply put, American consumers need Alaska. Given these abundant resources, it’s disappointing that the United States continues to import about 40 percent of its crude oil. Meanwhile, the Obama Administration has moved forward on new plans and regulations that could limit or prevent energy development in the Arctic National Wildlife Reserve, the National Petroleum Reserve-Alaska, and the Chukchi and Beaufort seas. And when it isn’t additional red-tape cutting off access, opposition groups are increasingly utilizing litigation to seek to stall or derail development plans. www.akbizmag.com

Impacts for Alaska and the Lower 48 However you look at it, the United States will continue to consume about 18 million barrels of oil per day—even while making laudable strides to develop alternative fuels and utilize energy more efficiently. As a result, if these limitations continue to stifle development for Alaska, millions of consumers in the Lower 48, particularly those on the West Coast, could lose a reliable source of American energy. Take Oregon for example. Unlike other Western states, Oregon lacks refineries and crude oil resources and imports 100 percent of its petroleum. More than 80 percent of the oil eventually used in Oregon originates in the Alaska North Slope oil fields. Yet, as Alaska production has dwindled, so has the amount of oil the transAlaska oil pipeline supplies to refineries in western states. West Coast imports of crude oil have more than tripled since the early 1990s, and increasingly a share of these imports comes from unstable countries. Notably, imports from Russia and OPEC (Organization of the Petroleum Exporting Countries) nations to western states have increased fivefold, from 11.2 percent in 1988 to 42.1 percent in 2012, despite a reduction in overall consumption. In 2011, a brief closure of the Alaska pipeline scuttled shipments of Alaska crude to refineries in Washington and California. How did refineries make up the difference? They imported Russian crude oil. In a span of less than twenty years, the West Coast has changed from being a region of the country that exported oil to the rest of the United States to a region that depends on OPEC for a quarter of its demand. Working Together for Our Energy Future While most Alaskans have been up-inarms about the Alaska energy shutout, the rest of the United States has remained either silent or unaware. As an organization with chapters in Alaska and across the Lower 48, Consumer Energy Alliance (CEA) believes that we must educate all US consumers on the benefits of Alaska energy and motivate them to advocate for a sound, “all-of-the-above” energy policy that includes Alaska. Con-

sumers must lead the conversation with our policymakers on the importance of Alaska to our energy future. That’s why CEA, in conjunction with its Alaska chapter and its nationwide network of consumer-advocates, has continually championed Alaska energy, emphasizing the role these resources play in providing affordable energy to consumers. CEA recently announced that it submitted more than 128,000 letters from consumers to the Bureau of Ocean Energy Management, or BOEM, calling for an expansive 2017-2022 Outer Continental Shelf Oil & Gas Leasing Program that includes leasing opportunities in the Atlantic, Western, Central and Eastern Gulf of Mexico, and off of Alaska. CEA President David Holt remarked, “We urge the BOEM to listen to the more than 128,000 consumers and 150 companies and organizations who have joined CEA in calling on the federal government to allow access to our resources. We can protect our environment and develop our domestic energy resources.” CEA has long said, “The road to US energy security runs through Alaska!” That has never been truer than it is today. Let’s develop our potential, make our nation more secure, and develop jobs and economic prosperity through a sensible, sustainable energy policy. Alaska’s natural resources and pristine environment are a great benefit to the entire nation. We can have a secure environment AND responsible production. Alaska stands ready. Let’s go to work! R Anne Seneca is the Executive Director of Consumer Energy Alliance (CEA)-Alaska. An Alaskan for almost twentyfive years, Seneca has a passion for safe and economical energy development both within Alaska and nationally. With experience in marketing and public relations, Seneca serves as the key liaison in reaching out to large groups of Alaskans with a strong, succinct message of the benefits of responsible resource development and consumer advocacy.

November 2014 | Alaska Business Monthly

OIL & GAS

Legal Loopholes in U.S. Crude Export Regulation By Isaak Hurst

n June 25, 2014, in an historic moment, the US Department of Commerce gave two Texasbased companies, Pioneer Natural Resources Company and Enterprise Products Partners, permission to load four hundred thousand barrels of condensate (a type of unrefined crude oil) onto the Singapore-flagged Bw Zambesi. The tanker’s destination: Busan, South Korea. The value of the cargo: $40 million. This incident was historic in that it marked the first export of unrefined American oil to Asia since 1970. However, the above incident has ignited a flurry of legal questions about whether or not the US government has changed its position on crude oil export regulations. Indeed, recent advances in oil and gas exploration and production technology have fueled arguments about whether or not the United States should start exporting its crude oil and other fossil fuels to foreign countries. Naturally, Alaska would benefit enormously from such exports. Unfortunately, however, exporting crude oil is highly restricted and politically polarized. Let’s take a closer look at the key federal laws that govern the export of US crude oil in order to answer the question: Has the United States changed its position on crude oil exports?

Background In 1975, Congress passed the Energy Policy and Conservation Act (EPCA). EPCA was originally enacted in the aftermath of the oil embargo imposed against the United States in 1973 and 68

1974 by certain petroleum-producing countries—OPEC. As one Congressional House Report commented: “The 1973-74 Arab embargo resulted in a 2.2-million-barrel-per-day reduction on imports of crude oil and petroleum products—an interruption equal to about one third of the United States’ imports and [to] about 12 percent of overall petroleum supplies. The embargo was accompanied by a 7 percent decrease in real Gross National Product for the first quarter of 1974, and an increase of unemployment of approximately 425,000 persons for that quarter. Dependence of the United States on petroleum products has risen since September 1973, from 33 percent to approximately 36 percent in December 1974… Continuing dependence on foreign petroleum, and the economic consequences of another em-

bargo, requires that the United States take steps to effectively reduce its vulnerability to future import interruptions.” H.R. Rep. No. 340, 94th Cong., 1st Sess. 20 (1975), the above Congressional Report, vividly illustrated the serious longterm economic and national security problems that continued dependence on foreign sources of energy would create. To meet these challenges, President Ford called for “the strongest and most farreaching energy conservation program we have ever had,” in 11 Weekly Comp. Pres. Doc. 40, 41 (Jan. 20, 1975). In response, Congress enacted EPCA, a wide-ranging statute establishing a comprehensive national energy policy, which authorized the President to “promulgate a rule prohibiting the export of crude oil and natural gas produced in the United

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States,” per 42 U.S.C. §6212(b)(1). However, it has been forty years since Congress enacted EPCA and it is safe to say, things are different now.

The Emergence of Saudi-America The world is going through a revolutionary change dictated by the shale boom in the United States and technology adaptations learned from shale drilling to geological structures previously thought to have been uneconomical. Indeed, for the first time in nearly four decades, the United States is importing less oil than it is producing domestically. In fact, it is estimated that the United States could produce as much as 12 million barrels per day by 2020, which means the United Sates could finally be free of any foreign crude oil imports and their political influences therein— a dream long held by many American political figures. Yet, as we have seen above, the export of unrefined US crude oil is still largely prohibited under EPCA. Or is it? Indeed, if EPCA is still good law, then how did Pioneer and Enterprise export four

hundred thousand barrels of condensate to South Korea without an export license? The answer: Well, that depends on what the definition of “crude oil” is. Put another way, or as former President Clinton famously stated, “It depends on what the meaning of the word ‘is’ is.”

Defining Crude Oil The Bureau of Industry and Security, which is an agency within the US Department of Commerce, administers the prohibitions and exemptions mandated by EPCA. Under this authority, “crude oil” is defined as: “A mixture of hydrocarbons that existed in liquid phase in underground reservoirs and remains liquid at atmospheric pressure after passing through surface separating facilities and which has not been processed through a crude oil distillation tower. Included are reconstituted crude petroleum, and lease condensate and liquid hydrocarbons produced from tar sands, gilsonite, and old shale. Drip gases are also included, but topped crude oil, residual oil, and other finished or unfinished oils are excluded,” according to 15 C.F.R. §754.2.(a).

Based on the language above, it is safe to assume that hydrocarbons that have been minimally processed through a distillation unit will not fall under the authority of EPCA. This statement is a supported by a recent quote from Jim Hock, spokesperson for the US Commerce Department: “There has been no change in policy on crude oil exports… Consistent with the [existing] regulatory definition, crude oil that has been processed through a distillation tower, which results in the crude becoming petroleum products, is no longer defined as crude oil. Petroleum products can be exported without a license, except in very limited circumstances.” Make no mistake, this little legal proviso has become central to the crude oil export argument because, as the law stands, there is no regulatory definition of “processed” or “distillation tower.” Naturally, this statutory ambiguity has left many oil and gas CEOs scratching their heads as to what exactly is the definition of “processed” crude oil; or more specifically, what is the definition of a “distillation tower.”

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10:52 AM

Defining a Distillation Tower In an oil refinery, primary distillation occurs in a crude distillation tower, also known as a crude distillation unit or an atmospheric distillation unit. There, unrefined crude is fed into a distillation tower; the unrefined crude is then heated, separated into its vital components (butane, naphtha, kerosene, distillate, heavy gas oil, etc.), then stored and further refined if necessary. Importantly, once these components are refined, they can be exported legally.

The issue, however, is that condensate does not pass through a typical distillation tower. Rather, it passes through a “stabilization unit,” which effectively does the exact same thing as a distillation tower, but at a much smaller level— heating the oil, separating, and storing for further use if necessary. Naturally, condensate stabilizers and crude distillation towers are very different pieces of equipment, but legally speaking they do the same thing. Consequently, the fact that these two pieces of equipment do the same thing

has created a tremendous amount of ambiguity surrounding the definition of a “distillation tower,” which in turn has created a tremendous amount of ambiguity surrounding the definition of “crude oil.” In effect, the US Department of Commerce has stated that the processing of condensate in a “stabilization unit” qualifies as a “distillation tower,” which means the crude oil being processed through a stabilization unit does not fall within the legal jurisdiction of EPCA and is therefore legal to export.

Conclusion Although the US Department of Commerce might be giving the appearance that it is easing restrictions on crude oil exports, the reality is that our government has simply added some legal ambiguity to the definition of what qualifies as “crude oil.” After all, the success of Pioneer and Enterprise was not because of the type of oil they were exporting (condensate); rather, their success was due to an aggressive interpretation of what constitutes as “processing” under EPCA. Naturally, for oil companies looking to replicate the success of Pioneer and Enterprise’s exports, several serious questions still remain. For example, what is the minimum required level of “distillation” before the oil can be exported? Can the stabilization process be applied to other crude and not just condensate? Can distillation occur for mixed crudes at an export facility and still qualify for the exemption? Indeed, the answers to these questions could open the door to hundreds of thousands of barrels being exported to Asia, but unfortunately, until a legal definition of “processed” and “distillation tower” is either refined by Congress or a court of law, there will continue to be a certain amount of ambiguity surrounding the legality of crude oil exports. R 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. Contact Hurst at Isaak.Hurst@ InternationalMaritime.net

Alaska Business Monthly | November 2014 www.akbizmag.com

OIL & GAS

Alaska’s Big Pipeline and LNG Project Work continues, more decisions to be made By Mike Bradner

hings are rolling on the big pipeline and liquefied natural gas (LNG) project. A lot happened last spring and summer—all of it positive—but there are more big decisions to be made in 2015 and 2016. It’s still far from certain that the giant project can be competitive against fierce competition in the Pacific LNG market. However, important steps are being taken. Last spring the state Legislature passed Senate Bill 138, authorizing the state to participate financially in the project with the North Slope producers and TransCanada Corporation, a pipeline company. With the Legislature’s blessing, the Alaska Department of Natural Resources signed preliminary agreements with the producers and TransCanada.

Agreement Review First, the state agrees to take its royalty and production tax in the form of gas, or “in kind.” Taking royalty in-kind is common (the lease form provides for it, and the state has traditionally taken most of its oil royalty in kind, selling it to in-state refiners). Taking the tax share in-kind is new, however, and to accomplish it the state had to convert its net-revenues tax on gas production to a gross revenues tax and set a tax rate, which was put at 13 percent. The combined royalty and tax share of gas works out to 25 percent. Second, the state signed a preliminary agreement with TransCanada to ship the state’s gas through parts of the project that TransCanada would finance and build. TransCanada’s share of the gas treatment plant and pipeline is 25 percent, in line with the state’s 25 percent share of gas that would be shipped. 72

TransCanada will finance, and own, 25 percent of the gas conditioning plant and pipeline, enough to be able to process and ship the state’s in-kind gas, which will be 25 percent of the total production. Third, Alaska Gasline Development Corporation (AGDC), the state’s gas pipeline company, would finance and own 25 percent of the liquefaction plant at Nikiski, on the Kenai Peninsula. AGDC would process the state’s share of gas into LNG. TransCanada will own no part of the LNG plant. In terms of the state’s financial commitments during construction, the state will pay only its 25 percent share of the LNG plant, which it will own. TransCanada will fund its 25 percent share of the construction costs of the gas conditioning plant and eight hundred-mile pipeline. The state will pay TransCanada for processing and shipping state-owned gas, which will be TransCanada’s revenue from the project (the pipeline company will have no gas production) although much of TransCanada’s revenues will go toward paying the costs of financing its share of the pipeline and gas treatment plant. The state’s main source of revenue will be from the sale of the state’s gas as LNG. Preliminary estimates are that the state’s annual revenue, net of payments to TransCanada for shipping its gas and payment of debt service on its 25 percent share of the LNG plant, could total about $4 billion a year. Since Senate Bill 138 was passed last spring, here is what has happened: In late June the signing of preliminary agreements began the pre-Front End Engineering and Design (pre-FEED) effort for the project. About $500 million will be spent on the pre-FEED, with the

state shouldering its share, which will do more detailed engineering and feasibility work and new cost estimates to set the stage for a decision in 2016 on proceeding to the next step, full FrontEnd Engineering and Design (FEED). The revised cost estimates will be very important. Early cost figures, based on conceptual studies, range between $45 billion and $65 billion. The pre-FEED will attempt to narrow that range to a figure on which there can be more confidence. Hopefully, costs will not increase beyond $65 billion. The full FEED will be approximately a $2 billion undertaking, would be complete by 2018, and would produce yet another, more final cost estimate. That will set the stage for the final decision on constructing the giant project, which is to be constructed and in operation by 2024. Meanwhile, several important regulatory steps have been taken. Most important, the Alaska LNG Project (the formal name for the industry/state consortium) filed its application to the US Department of Energy for an LNG export license. A few weeks later US Energy Secretary Ernest Moriz, while visiting Alaska, said the Alaska project would essentially get streamlined review. This is important because the many Lower 48 LNG export projects, some competing with Alaska, are being required by DOE to complete their respective Environmental Impact Statement (EIS) analyses prior to the agency issuing the export license. Alaska’s export license will be processed and an interim license issued while the EIS is in the works. This is an important, and positive, signal to potential LNG buyers. The next step was the “pre-application” to the Federal Energy Regula-

Alaska Business Monthly | November 2014 www.akbizmag.com

tory Commission (FERC) by the project group. FERC is the agency that actually licenses the project, and the pre-application step basically starts the EIS. The “pre-app” allows the sponsors to begin work on several studies that FERC will require and allows staff from federal regulatory agencies to begin work with the sponsor group. The formal application to FERC comes in 2016, but the EIS work, which FERC will lead, will meanwhile be underway. A lot of information from the resource reports will be used by Alaskans, such as information on expected community impacts, which will be useful to a municipal advisory group formed for the project. Also, there was the first formal marketing outreach to potential buyers in Asia. Alaska Department of Natural Resources Commissioner Joe Balash and BP Exploration (Alaska) Inc. President Janet Weiss made the first joint marketing trip to Japan to meet with potential buyers. This was a lot about symbolism, a demonstration that the state is truly aligned and partnering with industry. That is also important to the potential buyers.

What’s Next The Municipal Advisory Group, led by mayors of local governments in regions the project will be built, is to have a report and recommendation on a PILT (payment-in-lieu-of-tax) in December. The PILT provision would be enacted in legislation during the 2015 regular session. This is important because it will set the terms for payments to municipalities by the project in lieu of traditional property taxes as well as provisions for early payments during construction to offset community impacts. The producers and TransCanada have agreed in the “Heads of Agreement” document to compensate communities for impacts created during construction. The PILT will spell out details. The PILT will be the only legislation in the regular 2015 session of the Legislature. Three other complex agreements will be presented to legislators during a special session, probably held in late 2015. The first of these is the “balancing” agreement among the gas producing parties, which include BP, ConocoPhillips, Exxon, and the state. This agreewww.akbizmag.com

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ment provides the mechanism as to how the different parties will be compensated if there are changes, for operational reasons, in the volumes of gas taken from different fields where there are varying ownership percentages. For example, BP and ExxonMobil have big shares of Point Thomson gas, but ConocoPhillips has a small share. In Prudhoe Bay ConocoPhillips has a larger share of the gas. The state is affected too because the royalty rate (which is now taken in kind, in the form of gas, under the agreement) varies between Prudhoe Bay, where it is one-eighth of production, and Point Thomson, where it is one-sixth. It is assumed now that Prudhoe will supply most of the gas because its reserves are larger, but Point Thomson may supply more gas in the beginning so as to preserve the gas pressure in the Prudhoe field to produce more oil. Operational issues, such as unexpected problems in field production facilities, can require shifts in gas “offtake” from one field to the other. The balancing agreement spells out the rules for keeping track of whose gas is being produced and sold (including the state’s) because that may vary. TransCanada and the state’s AGDC are not parties to this agreement because they are not gas producers. The TransCanada/state transportation contract is a big one. This is a binding contract with TransCanada for the pipeline company to process and ship the state’s in-kind gas (25 percent of the total) through its share of the gas conditioning plant and eight hundred-mile pipeline, which is also 25 percent. This is a long-term firm transportation agreement, “take or pay,” meaning that the fees must be paid under any event. It is a multibillion-dollar financial commitment by the state. The state is TransCanada’s customer, and the pipeline company needs the state contract to finance its multi-billion-dollar share of the gas plant and pipeline. This is customary in the gas and pipeline business. Legislative approval is needed for this. The state will have a similar agreement with the state-owned AGDC to process the state’s gas, once delivered by TransCanada, into LNG. Since AGDC is an independent state corpora-

Alaska Business Monthly | November 2014 www.akbizmag.com

tion, an agreement is needed between the corporation and the Department of Natural Resources, which is representing the state’s resource interests. It’s not certain that legislative approval is needed for this. Finally, the agreement on fiscal “stability” is important. The gas producing companies need certainty on fiscal terms, which include the production taxes and the royalty administration for gas. The decision to take the royalty and gas tax share in-kind (as gas) solves the royalty part of this. The royalty problem is that under the traditional oil and gas lease, the state has the option of taking its royalty in cash, or “in value” paid by the producers, or in kind in the form of natural gas. If the state takes royalty in value, a number of royalty administration issues arise, mainly a “higher of” provision in the law where the royalty payment is based on the highest sales value reported by any of the several producers. This introduces an element of uncertainty because the producer will never be certain what the royalty payment will actually be. If one company, producing from the same field, happens to get a better price, the royalty for all other producers is increased. When the state takes its royalty in kind as gas, this problem is solved because the state sells its gas to a buyer and there is no later quibbling over the transaction. The in-kind arrangement solves other royalty administration problems also, such as the state’s auditing the producers’ sales transactions if royalties are paid in value. This agreement largely eliminates the kind of disagreements, disputes, and litigation over oil royalty values that followed the start of the Trans Alaska Pipeline System in 1977. It took years of lawsuits and huge legal expenses for both sides for a settlement to eventually be reached (the lawsuit was known as the “Amerada Hess” case because Amerada Hess Corporation, then a producer, was one of the companies involved). Of note is that the state now takes most of its oil royalty in kind, selling state oil to third parties, usually in-state refiners. The gas-in-kind arrangement also addresses the tax issue, at least in an indirect way. In theory, the Legislature www.akbizmag.com

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can increase the gas production tax rate beyond the 13 percent tax rate now in statute, but if it did this additional pipeline capacity would have to be found to ship the added “tax gas.” There would likely be contractual problems with securing additional pipeline capacity. The headache this would present would discourage the Legislature from changing the tax rate. However, the producers would still like to have additional protection, a “what if” provision, and this will probably take the form of a contractual penalty of some kind if the tax rate were changed. The problem here is that the state Constitution prohibits one Legislature from “binding” (limiting) a future Legislature, which means, essentially, that there is no legal way to really fix the tax terms, even by contract. The best that might be done is to propose some form of penalty if terms do change. There may be legal problems with that approach. This provision will be closely scrutinized by the Legislature. So far, however, there is no discussion about linking the tax provision for natural gas to oil production taxes, which the industry sought in a deal with former Governor Frank Murkowski in 2006 in a previous gas pipeline negotiation. Murkowski initially resisted including oil tax freeze in the deal but agreed, reluctantly, after the industry agreed to a new form of production tax, the Petroleum Profits Tax, a net revenues tax. The controversy that ensued over including oil taxes in the deal helped doom the Murkowski gas pipeline proposal, however. While there are still many hurdles, the big Alaska gas project seems off to a good start. Meanwhile the AGDC, which is representing the state’s interest in the large project consortium, is also continuing work on the “fallback” plan, the state-led thirty-six-inch pipeline from the North Slope to Southcentral Alaska. At this point engineering and planning on that project, including a Supplemental EIS, are underway in parallel with the work on the large project. R Mike Bradner is publisher of the Alaska Legislative Digest.

Alaska Business Monthly | November 2014 www.akbizmag.com

ICONIC ALASKANS

Mary Ann Pease By Shehla Anjum

eople who know Mary Ann Pease speak about her tenacity and focus while on some of Alaska’s important projects. She coped with high stress jobs calmly and finished tasks on time. But few know one of the ways she learned to cope with stress so well was by turning down dates from coworkers at Disneyland, where she played the role of Snow White for four summers while attending Albertus Magnus College in New Haven, Connecticut.

Prince Charming Also while attending college she met someone she didn’t want to turn down dates from. At a college dance she noticed David Pease, a tall, good-looking Yale football player wearing team colors. “He was just this big hulking, massive guy and I told my friend Muffy I was going to check him out,” she says. She walked over and, as she went by him, intentionally tripped over his feet. “He looked up, then he looked down, and then he said, ‘Hey, you wanna dance?’” That led to a four-year courtship and a June wedding in 1985. The following year Pease and her Alaskan husband moved to Anchorage. They now have two sons, Teddy, twenty-four, and Thomas, eleven. Teddy works with his mother at Resources Energy Inc. (REI), a Japanese company working on a project to export LNG (liquified natural gas) from Alaska to Japan. Pease joined REI in 2012. She is a vice president and the Alaska general manager for the project. Pease, fifty-four, born in Connecticut, now calls Alaska home. She has a Bachelor of Arts in Economics from the allwomen Albertus Magnus College and an MBA in Finance from Bridgeport University. The only sister of three older 78

Iconic Alaskan Mary Ann Pease at home in Anchorage.

brothers, she was raised in Milford, Connecticut. Her father owned a landscaping business and emigrated from Ireland. Her mother grew up in New York City. She began competitive figure skating in elementary school and continued

through high school. Daily practice made her so skilled at skating that after high school the Ice Capades and Ice Follies tried to hire her. “I chose college and continued to skate but not competitively, instead I taught figure skating to

Alaska Business Monthly | November 2014 www.akbizmag.com

hockey players at a New Haven rink,” she says. She is, however, glad that she skated and said it taught her structure, perseverance, and competitiveness.

Gaining Experience In the years since 1986 Pease has worked on large telecommunications and utility projects in the state. But she already had five years of experience working for United Technologies Corporation as a financial analyst and on handling various defense contracts, including missile systems. At United Technologies Pease not only gained experience in financial analysis but also obtained her MBA from the University of Bridgeport, paid for by the corporation. She stayed at United Technologies for five years but moved to Alaska in 1986 when her husband graduated from Yale Law School. Her skills and five-year experience at United Technologies helped when she looked for jobs in Alaska. “I was immediately hired by the Anchorage Water and Wastewater Utility [AWWU] and began working on its financial management system,” she says. That job began her association of eleven years, and three positions, with the Municipality of Anchorage in two utilities— AWWU and Municipal Light & Power (ML&P)—and in the Mayor’s office. In 1989, after three years at AWWU, she moved to the municipality’s Office of Management & Budget as a budget officer and fiscal planner, responsible for analyzing and making policy recommendations for various utility budgets. She travelled to Juneau to lobby for the municipality’s capital budget. One project she helped realize was a firing range for the Anchorage Police Department. Moving to ML&P She was still at the Office of Management & Budget when she caught the attention of Tom Starr, the head of ML&P, who noticed her lobbying skills and her presentations on projects. “Tom came to me and said, ‘I am going to steal you from the city, and you are coming over to ML&P. I want you as my finance director, and I want you to acquire a gas field.’” It was the mid-1990s and Shell was leaving Alaska, selling its assets that included its one-third share of the Bewww.akbizmag.com

luga field. The municipality’s decision to acquire Shell’s interest in that field was both controversial and innovative and required a thorough financial and geotechnical analysis. The enthusiasm that the team at ML&P felt was not shared by the city’s administration, and others also voiced uncertainty. One of those was Joe Griffith, the present general manager of Matanuska Electric Association, who was then Chugach Electric Association’s chief financial officer. Griffith said Chugach was also interested in the Beluga field. But Chugach chose not to bid because, he says, “my consultants valued the asset much less than did ML&P, hence I could not bid as much as did they.” Griffith also felt troubled with the idea of “government competing with the private sector.” But Pease believed in the project. Undaunted by the reluctance, she forged ahead on a complex financial and technical evaluation of the field and the structuring of the purchase. Mike Donnelly, a geotechnical and energy consultant, who now assists Pease with the REI project, worked with her on ML&P’s Beluga field purchase. He lauds Pease’s determination. “It was a bold move in terms of financial commitment, but it came at a perfect time for the municipal owners to step in. Shell wanted to reinvest its money, and Beluga was a big gas field, with very good economy of scale. It was right-sized for a municipal load and had all kinds of potential gas storage advantages,” Donnelly says. The mayor appointed a task force to examine the purchase and it recommended in its favor. Pease left ML&P before the sale was finalized, but was pleased with the outcome. “I loved the Beluga project. Because never before had a utility owned its working interest in a gas field, and it would help save money.” In late 1995, ML&P acquired Beluga for $125 million. The field has now produced money and benefits and paid about $128 million in fees, dividends, and taxes to the city, according to Jim Posey, who retired as ML&P general manager in late 2013. After leaving ML&P, Pease continued her work in energy. Aurora Power Resources, Inc., a Texas gas and mar-

keting company, hired her to open up its Anchorage office. Pease helped Aurora negotiate gas supply contracts with electric utilities in the state and secured long- and short-term contracts with gas suppliers.

Energy Hiatus She took a hiatus from energy, but continued in the utility sector when she joined Alaska Communications Systems, Inc. in 1999. She first worked in their finance and investor relations and later became the company’s vice president for corporate communications and handled external, community, and governmental regulations. Her time there coincided with the deregulation of the telecommunications industry. “ACS (Alaska Communications) was going through an initial public offering and also acquiring some rural local exchange companies [LECs], such as the Fairbanks Municipal Utility System,” Pease says. She traveled often to Juneau and Washington, DC, to appear before the Federal Communications Commission. Those who have seen Pease work in public settings, before government agencies, and in community meetings speak of her knowledge of her subjects. Lana Johnson, senior vice president at MSI Communications, knows Pease as a friend, client, and colleague. They have worked on several projects, including the gas pipeline project and Knik Arm Bridge, she says. “Mary Ann is always full of positive energy, a quality engrained from her days as a figure skater. She is tenacious but reasoned and not afraid to take risks,” Johnson says. Johnson also points to one more attribute: How well-turned out Pease is at any gathering. “Mary Ann is a fashion hound. When ACS was trying to buy MTA [Matanuska Telephone Association] it decided to send her on a road trip through MTA territory. Mary Ann prepared for her visit by shopping at Nordstrom. Her new wardrobe selections were—to put it delicately—more appropriate for Fifth Avenue than main street Cantwell in the rain. But Mary Ann pulled it off with aplomb, as she always does,” Johnson says. Working with Government Since leaving ACS in 2005 and before tak-

November 2014 | Alaska Business Monthly

the National Historic Preservation Act, which required coordination with national, state, and local government and the Eklutna and Knik Tribes.” Pease also helped coordinate the “public-private partnership,” or P-3, financing for the Knik Arm bridge. Although that is no longer in the plan, she remains optimistic that the bridge will be built someday. “It is an infrastructure project that is needed, but it has to make sense. I was a fan of P-3 financing, but I would be glad to see the project proceed with conventional state and federal financing,” she says. At ANGDA, which no longer exists, Pease directed the overall communications strategy for the public and the Legislature for a proposed in-state gas pipeline project.

Mary Ann Pease.

ing on management of REI’s global LNG project, Pease became part of Governor Frank Murkowski’s administration and also formed MAP Consulting, LLC, her own company. She served as the governor’s gas pipeline advisor and later became a consultant to the Alaska Natural Gas Development Authority (ANGDA). During that time she also worked with the Knik Arm Bridge and Toll Authority. Kevin Hemenway, the chief financial officer for the Knik Arm Crossing Project, has known Pease since 1999. Pease helped the Knik Arm Bridge and Toll Authority conduct hundreds of events with community, tribal, and environmental groups, he says. “She is poised and at ease presenting complex issues to a large audience,” Hemenway says. He singled out one complicated project to highlight the point: “Mary Ann helped us negotiate an agreement under Section 106 of 80

Earthquake Spurs LNG Market In 2011, months before ANGDA’s demise, Japan suffered a magnitude 9.0 earthquake in March 2011 that led to a failure of the Fukushima Nuclear Power Plant. In the aftermath of the earthquake, Japan began looking for alternative sources of energy, and a task force examined options for import of an alternate and reliable source of energy. Shun-ichi Shimizu, REI president, became involved in that effort. Shimizu, a former Nippon Steel executive, knew Alaska’s gas potential. Nippon Steel supplied the pipes for the transAlaska oil pipeline and Shimizu spent time here during its construction. The task force considered coal and gas supply from other regions such as Africa, Middle East, or Oceania, but those were deemed too risky or expensive. “Alaska’s vast reserves made it attractive and we also have a strategic alliance with the United States,” Shimizu says. REI looked for a point person in Alaska and contacted the US Department of Energy, which recommended ANGDA. Shimizu and other REI officials had a meeting with ANGDA, which Pease also attended. ANGDA dissolved shortly after, but REI decided to hire Pease as its point person in Alaska. What Pease brings to REI, Shimizu says, is an understanding of natural gas marketing, valuable contacts with Alaskan politicians and business leaders, and experience with the issues. “She is a good bridge for us between

Alaska and Japan. We rely on her suggestions for the project.” REI proposes a small LNG plant using Cook Inlet gas, and Pease is optimistic production can begin in 2018 or 2019, with initial shipments of 1 million tons. “The market [Japan] has never been here at the doorstop of Alaska. This is the biggest project of my life, global in scale. Everything I have worked on my entire life is driven by this desire to have a challenge and an opportunity. I’m the type of person who wouldn’t have so much invested in a project if I didn’t believe in it,” Pease says. Lori Glazier, a childhood friend, now an attorney in Connecticut, knows how Pease likes a challenge and says that “when she makes up her mind about something, she goes all the way.” Glazier remembers how, in the sixth grade, the two friends collaborated on a science project. “Mary Ann wanted a ribbon badly. Our project was about communicable diseases such as measles, mumps, and chicken pox. Mary Ann was not afraid about the scope or presenting it to the judges.” The project got an honorable mention and a ribbon.

Community and Family Values The demands of her work are many, but Pease has always found time to give to the community. She has served on many boards, including a stint as the board chair for the Anchorage Chamber of Commerce. She is also active in the Alaska State Chamber, Anchorage Economic Development Corporation, Commonwealth North, and Athena. For the last twenty years she has been involved with AK Child & Family (formerly Alaska Children’s Services), which operates residential treatment centers for children with severe mental issues, many from disadvantaged backgrounds. Dennis McCarville, who heads AK Child & Family, is glad to have Pease at his side as the organization’s treasurer and chair of the finance committee. “Mary Ann is always there when we need her bright, good ideas. Her strong business sense helps us keep our costs down,” he says. Pease always makes time for her children, however. “She is often rushing in for our board meetings or our fundrais-

Alaska Business Monthly | November 2014 www.akbizmag.com

ers and often rushing out for her son’s hockey games,” McCarville says. In the years since moving to Alaska, Pease has become known as “a quintessential planner, analyst, leader, project manager, and political pundit as well as a great mother and entertainer,” says MEA’s Joe Griffith. He believes that “she should be governor.” Her younger son, Thomas, plays for the Pirates of Abbott-O-Rabbit Baseball League. Pease says, “On Wednesday nights in spring and summer I am often working at the snack shack on the baseball fields; that is, if I am not on the phone with Japan.” Pease also takes regular vacations with her family in December and during spring break. Earlier this year the family went on a cruise from Vancouver to Seward. “I work hard,” Pease says, “but I also look forward to time with my sons and husband, who are, of course, the most important part of my life.” R Writer Shehla Anjum is based in Anchorage.

Mary Ann Pease with the family dog, husband David, and younger son Thomas in the garden.

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November 2014 | Alaska Business Monthly

NATURAL RESOURCES

Alaska’s Natural Resource Industries A checkup on 2014 health and issues of concern By Judy Griffin

he natural resource industries are widely recognized as the major economic driver for revenue and employment in Alaska. When much of the nation suffered through declining jobs in recent years, the overall vitality of these industries helped state residents maintain healthy employment levels. The year 2014 likely will be recounted as a pretty good year for oil and gas, tourism, and fisheries and another year of struggle for the forestry industry. Here’s an overview of how these natural resource industries are faring in 2014 and the challenges affecting future prospects.

Forestry Still Straddling Timber Supply Issues The Alaska forestry industry has been reduced to a sliver of its former dimensions. It’s tough to observe a shrinking economy in which jobs have declined precipitously, mills have been shuttered, and communities have lost residents as well as the former commerce generated by logging and manufacturing. Says Owen Graham, executive director of the Alaska Forest Association, “I worked here when we had pulp mills and saw mills and everybody was working.” Graham explains that the timber industry in Alaska continues to cope with the “economic dilemma” created by federal government administration and policies affecting timber land. The forestry industry is seeking to curb the declining harvests and loss of value-added operations in Southeast Alaska. The much smaller segments in Southcentral and the Interior are faring better. As recently as 2000, three mid-sized sawmills operated in Southeast; today only Viking Lumber Company, Inc., in the town of Klawock on Prince of Wales Island, remains. A press release from the office of Governor Sean Parnell in 2012 described the losses: “In the past decade, Southeast Alaska timber jobs declined from 1,500 to roughly 200, the region’s 82

Photo courtesy of Alaska Forest Association

Governor Sean Parnell tours the Viking Lumber Company sawmill in Klawock.

population dropped 12 percent, and six schools closed.” It’s no comfort to the forest industry that markets for timber products are favorable. Viking Lumber, which currently has only enough timber to get through to February of next year, would double production if the raw materials were available, according to Graham. Although the US Forest Service (USFS) has promised to create an efficient and sustainable industry, the federal management of the timber natural resource in Alaska today is viewed by the forestry industry as being characterized by limited timber sales, offerings for which yields are associated with higher operating costs, and unreliable execution of agreements. The Tongass National Forest, the largest national forest in the country and the dominant source of Alaska timber, formerly supplied several pulp mills and sawmills in Southeast. It was the dominant contributor to a 1973 harvest from nation-

al forests of about 590 million board feet. Several events and changes of course in federal policies have whittled away at the federally managed resource harvests. The 1990 Tongass Timber Reform Act increased wilderness and roadless area in the Tongass and eliminated the guaranteed annual timber supply to the mills. An estimated four thousand timber industry jobs at pulp mills, sawmills, and logging operations in 1990, primarily in Southeast, were reduced by more than half by 1999, according to an October 2010 article in Alaska Economic Trends, a publication of the Alaska Department of Labor and Workforce Development. The 1990 Tongass Timber Reform Act also gave the USFS authority to make unilateral contract modifications to the two long-term timber sales. In 1997, USFS imposed harvest constraints that resulted in large increases in the cost of harvesting national forest timber. The agency adopted a new land management

Alaska Business Monthly | November 2014 www.akbizmag.com

plan for the Tongass and announced an emphasis on “ecosystem management.” New harvesting constraints included requirements that 30 to 50 percent of the timber be left standing in most previously developed areas and establishment of larger buffers on non-fish streams and beaches. In addition, a system of old-growth reserves removed the highest value and least-cost-toharvest timber lands from potential sales. Graham says that in place of providing timber sales, the USFS has indicated a willingness to soften the economic transition from removal of harvestable resource with spending on environmental restoration. A May 26, 2010, letter from the USFS to the Tongass Futures Roundtable identifies intent “to develop a ‘Transition Framework’ program to help communities transition to a more diversified economy by providing jobs around renewable energy, forest restoration, tourism and recreation, subsistence, and fisheries and mariculture.” Graham says, “We don’t want a subsidy. We want the opportunity to harvest mature timber. The timber industry has only harvested 10 percent of total commercial land on the Tongass, or 450,000 acres of more than 5 million acres of commercial timber land that had been

previously identified for timber sales. “The Tongass Transition Framework abandons traditional timber sales in favor of young growth harvest and restoration activities, which to date, is a failed alternative for sustaining Southeast communities,” Graham adds. He argues that the Tongass does not need restoration—even if loggers were to prefer restoration labors in place of harvesting—and the young-growth trees are not yet economically viable to harvest. The Alaska Forest Industry Association considers the state government and the Alaskan congressional delegation to be strong allies in its struggle to retain a place as a viable natural resource industry. “The state has been trying to help the industry. It is doing what it can to help with supply, putting up as much as it can off state lands,” says Graham. The 2012 Alaska Timber Jobs Task Force prepared recommendations for actions to promote job creation and economic development. One avenue sought is to pursue withdrawal of 2 million acres from the Tongass as state-selected lands promised under the Statehood Act. The intent is for the state to manage those lands to support an integrated timber industry. In 2014, the Alaska forestry industry

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seeks to retain employment and business opportunities by working to provide economically viable harvests. Survival continues to be a struggle.

Oil and Gas Celebrating Tax Stability while Dealing with North Slope Production Decline and Layoffs “Overall, 2014 has been a pretty significant year,” says Kara Moriarty, president and CEO of the Alaska Oil and Gas Association. “We have seen increased investment, which increased production, which increased the number of rigs, which increased royalties, which increased the amount going into the Permanent Fund.” As an example, she cites a 25 percent jump in capital investment by BP from 2013 to 2014. Particular cause for celebration was the August defeat of Ballot Measure 1, which would have repealed the More Alaska Production Act that had restructured taxation of the industry. Maintaining the new tax structure has been regarded by oil patch players as an opportunity for continuing recent gains in employment, support service revenues, and most importantly, capital investment of exploration and production entities.

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November 2014 | Alaska Business Monthly white globe and text

A Hilcorp drilling rig operated in Ninilchik is part of a projected total 2014 investment in Cook Inlet of about $375 million. Photo courtesy of Hilcorp Alaska, LLC

Two events in early September drove home the reality that prospects for the oil and gas industry may not be as rosy as some pre-election advertising suggested. BP announced the layoff of 475 employees and direct contractors. That figure includes 200 employees who have been offered positions by Hilcorp Alaska, LLC, which is acquiring North Slope BP assets in a $1.5 billion sale expected to be completed later this year. The layoff announcement came just after ExxonMobil told the Regulatory Commission of Alaska that oil production is predicted to decline 5.3 percent in 2014 from 2013, resulting in reduced volume of oil shipped through the trans-Alaska oil pipeline. In addition, several industry

principals have stated that the production decline is expected to continue. In the first half of 2014, jobs in categories other than the oil and gas industry had been positively affected by the bolstered activity. According to Moriarty, three hundred more Teamsters were working on the North Slope in January 2014 than in January 2013, and small businesses such as Little Red Services, which provides a variety of well services, have seen significant growth in 2014. A net growth in oil field employment is still likely for 2014. The January issue of Alaska Economic Trends forecast an increase of about five hundred jobs for the oil industry in 2014 and noted that

continued implementation of planned oil field investment is anticipated to bolster economic impact in future years. Dawn Patience, a BP spokesperson, told APRN after the layoff announcement, “BP’s operations may be shrinking in Alaska, but we announced $1 billion of additional investment in Prudhoe Bay, and the addition of two rigs—one this year and one the year after—and those commitments stand.” According to Lori Nelson, manager of External Affairs for Hilcorp, the company has extended offers to about two hundred employees currently with BP on the North Slope at Endicott, Northstar, and Milne Point. “Our final headcount is still a work in progress,” she adds. Hilcorp similarly hired “the vast majority of field personnel” following two Cook Inlet acquisitions. Nelson says, “Just as our work in Cook Inlet demonstrates, Hilcorp has a successful track record growing production with increased investment when given the opportunity to operate legacy assets such as these. Doing so has allowed us to extend field life and develop energy that may have otherwise been lost.” With greater political stability assured for the immediate future, some oil field projects under evaluation stand a better

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shot of being funded, explains Moriarty. “The economics of projects have certainly been improved by keeping the new tax structure in place.” Industry advocates can now focus on the plethora of other concerns. Among legal and regulatory access issues being carefully watched, the findings of the Supplemental Environmental Impact Statement being prepared by the Bureau of Ocean Energy Management for the Chukchi Sea lease sale that is the focus of Shell’s 2015 exploration plan are anticipated this fall. Other legal issues pertain to habitat rulings for polar bears and bearded seals. “The industry needs a stable, predictable process to access, explore, and develop the resources,” says Moriarty. To ensure future access to the resource, Alaska Oil and Gas Association is working to keep the Outer Continental Shelf lease sales in progress. The federal government is now planning the next lease sales for 2017 to 2022, as required by the Outer Continental Shelf Lands Act. In the gas arena, plenty has happened in 2014 as well. Senate Bill 138 established the framework for advancing a large-diameter natural gas pipeline project from the North Slope. Moriarty notes that sev-

eral hundred thousand dollars have been spent on feasibility studies and the application to the Federal Environmental Regulatory Commission for an environmental review seeking federal approval. In early September, project prospects were further bolstered by the signing of a memorandum of understanding between the Alaska Department of Natural Resources and the Japanese government to communicate about liquefied natural gas demand in Japan and business opportunities. “These are all steps in the right direction toward 2015 when the owners determine whether to sanction the project,” says Moriarty. “A series of gates, one after another, has been opening.”

Tourism Enjoying a Swell in Visitors A growing number of visitors portends a healthy 2014 for the tourism industry in Alaska. Sarah Leonard, president and CEO of the Alaska Travel Industry Association (ATIA), says, “ATIA members from around the state have communicated that business is strong and bookings from both domestic and international markets have increased.” According to a July 2014 report prepared for the Alaska Department of Commerce,

Community, and Economic Development by the McDowell Group of Anchorage and Juneau, Alaska visitors from out of state for the year May 2013 through April 2014 reached 1.96 million visitors, the largest number of visitors in history and an increase of 6 percent over the previous twelve months. The report states that the tally represents the most significant single-year growth since 2005–2006 and marks the third consecutive year of growth after the recession area slump experienced from the years 2008–2009 to 2010–2011. “Those results are what we needed to see,” says Gideon Garcia, chief operating officer for CIRI Alaska Tourism. “The recession took a hit on visitors’ discretionary spending, and we felt that. We’re optimistic that the current trend will continue.” “Alaska still seems to be really hot in the marketplace,” says Julie Saupe, president and CEO of Visit Anchorage. “Travel intention surveys are encouraging.” Saupe points out that cruise capacity contributed to the strong summer visitor season. Also, in Anchorage, a higher number of summer convention visitors were attracted than in previous years, primarily because of the available capacity in facilities and new hotels.

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November 2014 | Alaska Business Monthly

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Photo courtesy of CIRI Alaska Tourism

From the deck of the Talkeetna Alaskan Lodge, tourists observe and photograph Denali.

Garcia says Princess Cruises will bring a fourth cruise ship to Alaska next year. The marketing of the major cruise lines and the visitors delivered to Alaska ports are a big boost to independent companies like CIRI Alaska Tourism, he adds. Maintaining the visibility of Alaska as a visitor destination requires ongoing commitment to marketing. ATIA’s Leonard attributes the growth in tourism to continued investment in tourism marketing and strong leadership in government at the state and national levels. Current events the trade association ATIA is closely watching include pending federal legislation, specifically the JOLT Act and Brand USA reauthorization, which has the potential to increase travel by international visitors to the United States. Alaska’s visitation is currently made up of about 10 percent of visitors from other countries, including Canada, Leonard explains. A January 2014 report on economic impact of tourism by McDowell Group for the Alaska Department of Commerce, Community, and Economic Development showed that spending by visitors in the 2012–2013 season infused $3.9 billion for visitor activities, transportation, and related expenses. “With strong visitor numbers, Alaska can continue to see important economic benefits for businesses and communities,” Leonard says.

Fisheries Sustaining the Resource and the Reputation Seafood is the number one category of exports from Alaska. Fish and other marine products accounted for $2.3 billion, more than half of the total $4.5 billion for merchandise exports from Alaska in 2013, according to the Office of Trade and Economic Analysis in the US Department of Commerce. On balance, the fishing industry in Alaska is being described as more than satisfactory. “Overall, statewide the salmon harvest

in 2014 has been decent,” says Julianne Curry, executive director of United Fishermen of Alaska, an association representing commercial fishing interests. “The industry has probably fared a little better than the forecasts of the Alaska Department of Fish and Game. That’s always a pleasant surprise.” Tyson Fick, communications director for the Alaska Seafood Marketing Institute, cautions that prices for the year won’t be known until all product has been sold. As of early September, however, he notes, the commercial fishing industry appeared to be “poised to harvest more than 5 billion pounds for the fourth year in a row.” The 2014 market is expected to be similar to those for the years 2011, 2012, and 2103, each of which exceeded a wholesale value of at least $4.5 billion. One bright spot of note was the Bristol Bay harvest of 28 million sockeye salmon, compared to an expected 17 million fish. Fick also reports improved prices for the cod harvest relative to 2013, slightly depressed prices for halibut and black cod, and recovering prices for Pacific cod. United Fishermen of Alaska and Alaska Seafood Marketing Institute are on the same page about the most important concern for a healthy commercial fishing industry. Both cite sustainability. Curry says, “Commercial fishermen understand that sustainability is the primary foundation of our business model. Without sustainable fisheries, we don’t have a career in the future. It is important that sciencebased management is a core principle for decision-making.” Among other concerns, Curry cites increasing tensions among user groups over access to the resource. This summer a judge permitted a ballot initiative that would ban commercial setnets in urban areas of Alaska, including most notably Cook Inlet, to move forward. If sufficient signatures are obtained, the ballot measure would appear on the 2016 primary ballot. “It’s a

Alaska Business Monthly | November 2014 www.akbizmag.com

devastating blow that the judge allowed the initiative to move forward. A ballot initiative is not an appropriate way to manage a resource,” Curry remarks. The entities governing commercial fishing in Alaska include the North Pacific Fishery Management Council and the Alaska Board of Fisheries. Fishing industry advocates recognize the importance of staying informed and in contact with decision-making bodies. “The regulatory climate can change every day,” says Curry. “We are so impacted by various regulatory bodies that it’s hard to keep your feet underneath you.” Fick adds, “It’s a dynamic and interesting ride when having to worry about geopolitical issues.” He says that Alaska’s dependence on the global marketplace— with 60 to 70 percent of seafood product exported—means that world events affect the commercial fishing industry. “For example, when Russia stops buying roe products, other markets have to be relied on,” says Fick. “Alaska producers will sell every bit, but trying to maximize value is our job.” Diversified markets help weather the changes. The Alaska Seafood Marketing Institute is engaged in efforts to diversify markets, improve quality, and diversity marketing formats. “They are starting to bear fruit, and we continue to see a long-term trend of increased value in our seafood,” notes Fick. Curry points out that in promoting a healthy commercial fishing industry, it’s also important to engage the public. “The public has started to become concerned about where seafood is coming from and how those fisheries are managed. Increasingly menus are identifying where fish came from along with naming the farms and locations that provided produce,” she explains.

The Sum of the Matters The viability of natural resource industries in Alaska relies on access to the resource, political and regulatory stability, and advocacy to manage issues and maintain support. Proponents of all natural resource industries in Alaska can identify with the following observation from United Fishermen of Alaska’s Curry: “It’s hard to build and run a business when management decisions are not based just on science—and politics come into play.” R

Fishing for opilio crab in the Bering Sea. Photo by Chris Miller, courtesy of Alaska Seafood Marketing Institute

Sean Glasheen Production Engineer BP Alaska

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Judy Griffin is a freelance writer in Anchorage. www.akbizmag.com

November 2014 | Alaska Business Monthly

SAFETY

Safety in Natural Resources Extraction Industry trends in occupational fatalities

By Brian McKay

atural resources play an important role in the economy of Alaska. According to Scott Goldsmith, professor emeritus of economics at the Institute of Social and Economic Research (ISER) of the University of Alaska Anchorage, the extraction of natural resources accounts for approximately 66 percent of Alaska’s economy. Professor Goldsmith describes the Alaska economy as a three legged stool: one leg representing the oil and gas sector contributing about 31 percent; another leg representing government, which contributes approximately 35 percent to the economy; and the final leg representing all other resources, which includes the fishing, logging, mining, transportation, and tourism industries, approximately 34 percent. The 49th state is home to a non-seasonally adjusted workforce of about 340,000, according to the Alaska Department of Labor and Workforce Development; as many as 127,000 of these jobs are related to the oil industry and its associated services, according to the Resource Development Council for Alaska. Similarly, fishing and its associated activities have historically provided about 60,000 seasonal jobs in Alaska (or approximately 8,061 monthly full-time equivalent jobs), mining has provided approximately 4,600 jobs, while logging supplies a modest 300 or more additional jobs in Alaska, down from approximately 4,600 jobs in the early 1990s. With well over half of the state’s employment coming from the extractive resources industry, and much more coming from the support of these industries, these jobs are here to stay and are the lifeblood of this state. In other words, Alaskans make money the old fashioned way; they work for it, digging, drilling, cutting, processing, and transporting in some of the harshest of conditions ever dreamt of in a reality TV show. As a matter of fact, many Alaska industries provide occupational injury voyeurism for many in the “safe states” through television shows including The Deadliest Catch (fishing), Ice Road Truckers (transportation), Bering Sea Gold (mining), and a few others, all with a common theme: working in Alaska is hard and it is dangerous. So dangerous, in fact, that there are trends in occupational fatalities in Alaska and there are key occupations contributing

to the most risk at work.

Trends

Using data from 2011 Bureau of Labor Statistics (BLS) Census of Fatal Occupational Injuries (CFOI), the overall occupationallyrelated fatality rate in the United States was 3.5 deaths per 100,000 workers; this includes all types of work across all sectors. Job specific fatality rates demonstrate 24.9 per 100,000 workers in agriculture, forestry, fishing and hunting; 15.9 per 100,000 in mining; 15.3 per 100,000 in transportation; and 9.1 per 100,000 in construction. In 2011, CFOI reported the occupational fatality rate in Alaska as 11.1 per 100,000 workers; that’s a little over three times the US average of 3.5 for the same time period. Rates of specific industries in Alaska are in line with what was reported nationally with a startling exception; the rate of occupationally related deaths in agriculture, forestry, fishing, and hunting were reported as 171.4 per 100,000 workers (6.8 times the national average), transportation and utilities at 20.8 per 100,000, and 20.5 per 100,000 workers in the leisure and hospitality industry, a category not highlighted in the national data. In 2013 there were thirty-two occupationally related fatalities reported in Alaska, with the majority of these coming from the expected industries: agriculture, forestry, fishing, hunting, and transportation, using preliminary data provided by the BLS. Rates have not been calculated with this data, but in 2012 the occupational fatality rate was 3.4 per 100,000 nationally and 8.9 per 100,000 in Alaska, continuing a long trend in the decrease of occupationally related fatalities in the United States and specifically in Alaska. The state has enjoyed over twenty years of declining occupational fatality rates, but the fact that occupational fatalities and other serious occupationally related events occur at all is a concern for the well-being of the workforce and the Alaska economy. According to research by Liberty Mutual, the nation’s largest workers’ compensation insurance agency, the direct and indirect costs of workplace injury and fatality is from $150 billion to $300 billion annually—clearly a number that hits American business on the bottom line.

Oil and Gas

Arguably the state’s largest employment sector behind government, the oil and gas sector, follows national trends. The three main classifications in this business sector, according to the North American Industry Classification System (NAICS), are oil and gas extraction (211 NAICS), drilling oil and gas wells (213111 NAICS), and support activities for oil and gas operations (213112 NAICS), which are found commonly throughout Alaska. Despite the large numbers of personnel and the categorical factors of risk, fatalities in this sector, let alone Alaska, are rare.

Fishing

According to a report from the National Institute for Occupational Safety and Health, or NIOSH, entitled “Fatal Occupational Injuries in the US Commercial Fishing Industry: Risk Factors and Recommendations, Alaska Region,” there were an average of 13 fishermen who lost their lives each year for a total of 133 for the decade between 2000 and 2009. While most of these fatalities occurred within the salmon fisheries, the highest risk fishery remains that of the king crab season in the Bering Sea. The majority of fatalities resulted from a disaster accounting for 50 percent of total deaths. The deaths were dependent on a sequence of events, including being struck by a large wave, unstable vessel conditions, and bad weather, reported by 67 percent as a factor. Falls overboard accounted for 31 percent of the fatalities and were most commonly found in the salmon fisheries. The most significant risk factors found in the NIOSH study suggest that 61 percent of those fatalities were in people working alone on deck. The fatality rate in Alaska’s commercial fishing industry has significantly decreased since the 1990s, according to the report “Workplace Deaths in Alaska: Long Term Decline in Fatalities Continues” in the December 2013 issue of Alaska Economic Trends published by the Alaska Department of Labor and Workforce Development Research and Analysis Section. In this report, Alaska Research Analyst Sara Varelli states that the total occupational death rate in Alaska has decreased by two-thirds, largely as a result of decreases in the frequency of fatalities in the commercial fishing sector. The

Alaska Business Monthly | November 2014 www.akbizmag.com

development and implementation of fishing quotas in the late 1990s seems to have lessened the frequency of fatalities, since the combination of a short season, fierce competition, and limited weather flexibility are factors in these types of workplace incidents.

Transportation

Regardless of sector, workers usually have to travel to get to their jobs in Alaska. Therefore, transportation remains the number one cause of occupational fatality in Alaska across all occupational and industrial sectors according to the December 2013 Trends report. In contrast to the Lower 48, where a majority of the transportation deaths occur on freeways, 69 percent of transportation fatalities happen on boats or aircraft in Alaska. The unpredictable and extreme Alaska weather plays a significant role in these workplace fatalities although the rate and frequency of these events have lessened over decades due to improvements in technology and communication.

Workplace Violence

Second only to transportation, workplace violence is responsible for approximately 30% of the occupationally fatalities in Alaska. Acts of personal violence such as homicide and even suicide, while at work, and fatalities as the result of animal attacks are occupationally related if they occur at work. This is a significant problem in Alaska and, in general, the United States as a whole. Common factors in this type of violence in the workplace may include interpersonal relationships that have gone bad and acts of violent robbery with the use of weapons.

State Plan

The Occupational Safety and Health Administration, or OSHA, is the federal body responsible for the administration of the Occupational Health and Safety Act of 1970. The goal of this act was to ensure that employers provide a work environment free from recognized hazards and that, if hazards exist, the personnel work-

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ing with these hazards are both trained and prepared. This act is the law of the land in occupational safety, but states can chose to enforce their own standards, as long as those standards are at least as stringent as federal law. Alaska is one of those states. Initial approval for the Alaska State Plan came in 1973, final approval in 1984, and the Alaska Occupational Safety and Health Section (AKOSH) became part of the Alaska Department of Labor. There are two main divisions in AKOSH: Enforcement and Consultation and Training. Enforcement is responsible for site inspections and the execution of the stateâ&#x20AC;&#x2122;s occupational health law; and Consultation and Training provides no-cost services to employers reaching out for assistance. Consultation and Training administers many programs, including the Voluntary Protection Program, the Safety and Health Achievement Recognition Program, and other partnership programs. AKOSHâ&#x20AC;&#x2122;s main goals remain aligned for the prevention of occupational injury and their suite of no-cost services to employers include training, site evaluation, consultation, and advice, in order to achieve a safe and healthy workplace. More information can be obtained through the Division of Labor Standards and Safety by reaching out to the Consultation and Training Division. Alaska remains a state with great economic opportunity, albeit one exposed to a great variety of risks. Employers in Alaska have been addressing these challenges head on for many years with increasing success. Increased productivity demands have met up with a declining rate of occupational injury within the state. R Brian Mckay has a post graduate degree in Public Health and is a Certified Safety Professional (CSP) and Certified Industrial Hygienist (CIH). He is the Director of Quality, Health, Safety and the Environment for Fairweather, LLC. Contact him at brian.mckay@fairweather.com

November 2014 | Alaska Business Monthly

INSURANCE

Affordable Care Act Impacting Alaska Businesses in Significant Ways By Tracy Barbour

he Patient Protection and Affordable Care Act, commonly called Affordable Care Act (ACA), was enacted in 2010 to expand healthcare to all Americans. The law, in part, requires businesses with more than fifty full-time equivalent employees to provide health insurance for their full-time employees or face stiff penalties. The ACA also provides for a Federally Facilitated Marketplace, or “Marketplace,” where individuals can shop for health insurance. In 2015, employers will be able to purchase insurance from a section of the federally-run exchange known as SHOP, an acronym for the Small Business Health Options Program. Those that do so can take advantage of federal tax credits and other benefits if certain criteria are met. While some people praise the ACA for making medical care more accessible, others protest that it is making health insurance more complex and costly. Unique perspectives about the ACA’s impact on businesses in Alaska are gained from different stakeholders—including government agencies, a business advocacy group, an employee benefits firm, and an insurance company and brokerage.

US Department of Health and Human Services When sharing her perspective of the ACA’s impact on Alaska’s business climate, Susan Johnson paints a picture Susan Johnson, regional director of US Department of Health and Human Services, Region 10 Photo courtesy US Department of Health and Human Services

in broad strokes. Johnson is Alaska’s regional director of the US Department of Health and Human Services, which oversees administration of the federal Marketplace. The ACA, Johnson says, has helped improve competition, availability, and choice, as well as bringing a new level of transparency and fairness to healthcare. Now, since qualified health plans have to provide certain coverage, it’s much easier to make an apples-toapples comparison between plans. According to Johnson, people are a company’s biggest asset, and providing health coverage is an investment that pays off for businesses in multiple ways. “If you have healthier people, they will cost you less,” she says. “You’re going to have a lower absenteeism rate, lower turnover, and a more stable group of employees that will be more productive workers.” So far, the ACA has served Alaska well, Johnson says. During the first year of the enrollment that was completed in 2014, almost thirteen thousand Alaskans chose Marketplace plans. In addition, up to forty-three thousand Alaskans can’t be denied coverage for pre-existing conditions. About nine thousand young adults have gained or retained insurance because they can stay on their parents’ plans until age twenty-six. And in the first ten months of 2013, two thousand seniors and disabled individuals saved an average of $877 on medications. One aspect of the ACA Alaska is not experiencing is Medicaid expansion. However, hospitals—and other businesses—would benefit tremendously from expanding Medicaid, Johnson says. Broadening the program would enable them to provide less uncompensated care, which would provide downward pressure on healthcare costs. “For

example, with Medicaid expansion in Washington state, Seattle-based Harborview Medical Center, the area’s largest safety-net provider, saw its proportion of uninsured patients decline from 12 percent in 2013 to 2 percent this past spring,” she says. “The drop off is expected to increase revenue by $20 million in 2014.” Johnson says the ACA is bringing about improvements to healthcare in Alaska, and those improvements will make things better for businesses overall. “Although some business owners may initially see higher insurance premiums, we hope to see increased competition, lowered costs, and improved choices for consumers and businesses over time,” she says. Currently, only thirty-six plans are offered in Alaska’s individual Marketplace, and those are provided by only two companies: Premera Blue Cross Blue Shield of Alaska and Moda Health.

Alaska Division of Insurance The ACA impacts all employers that are providing a health insurance plan, according to Lori Wing-Heier, director of the Alaska Division of Insurance. But Wing-Heier can’t say to what degree Alaska businesses are being affected because her office doesn’t maintain data on the larger companies that are mandated to offer insurance coverage. That’s because larger employers tend to self-insure and aren’t required to file their plans for review with the division. One thing Wing-Heier can say about the effect of the ACA is: “It’s probably having a bigger impact on the smaller employers because their plans may not have been as rich as what has been mandated.” Many of Alaska’s smaller employers don’t have ACA-compliant plans. They

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were able to renew their existing plans on December 31, 2013, and the federal government is allowing them to renew with non-compliant or grandfathered plans until up to 2016. Smaller businesses that do offer health insurance coverage aren’t necessarily motivated by federal tax credits, Wing-Heier says. They’re doing so for retention and recruitment purposes— a move that’s good for employees and business. One ACA-related issue Wing-Heier feels is especially relevant to Alaska employers are the ten Essential Health Benefits. These mandated items—the minimum requirements for ACAcompliant plans—include “ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care,” according to the law. “It’s

a pretty high threshold,” she says. “It really doesn’t allow for choice for the employer or employee.” Employers are struggling to cope with the higher cost of ACA-qualified health plans. They’re generally trying to hold the line in what they contribute, WingHeier says. But in some cases, employers have had to look at the amount they contribute and have the employees help make up the difference. “I think they are doing the best they can to keep it equitable,” she says. “But there is coming a time when the employer cannot just absorb the cost.” Wing-Heier says she expects there to be some dialogue and concerns during open enrollment this year. “I hope it will be smoother than last year, but I don’t know how that will go,” she says. Incidentally, the Alaska Division of Insurance announced September 4 that rates for health insurance plans covering nearly sixteen thousand Alaskans will increase as much as 37 percent in 2015 due to the ACA. The hardest hit will be the six thousand Alaskans who pay for their own health insurance and do not receive federal subsidies through

the exchange. The increases are due to the small number of Alaskans on the individual market. Premera says the recently-announced rate increases do not relate to employer plans. “Small group rates are different,” Premera Blue Cross Blue Shield spokeswoman Melanie Coon said in a September 8 interview. “Rate increases are going to depend on the group demographics, but the average rate increase for small groups was in the single-digit range.”

Premera Blue Cross Blue Shield Regarding the ACA, Coon says the law changed the industry as we know it, adding a layer of complexity that required employers to quickly get up to speed on the changes and requirements. The individual and small group markets are impacted most significantly by new restrictions ACA imposes on rating and underwriting. The effect on the large group market is primarily in the area of benefit limit, so much less impactful. Alaska has a comparatively volatile market and high care costs compared

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to other states because of its size and geography, Coon says. The amount employers pay for insurance depends on a number of variables, including plan type and amounts employees pay in out-ofpocket cost sharing such as copays, coinsurance, and deductibles. This makes it difficult for Premera to cite an average premium cost for Alaska employers; however, Coon says group coverage with Premera is very competitively priced. The ACA did a great job at expanding access to care, Coon says, but it didn’t do much to bring down the rising cost of healthcare. Consequently, many small businesses are searching for cost relief and some have stopped providing employer-sponsored coverage. “Most groups want to continue coverage as long as they can afford it, but every year premiums are rising, so they are definitely strategizing to see what options make the most sense,” she says. For example, some groups are asking Premera to offer employee-only group plans so dependents can qualify for subsidies and purchase individual plans through the Exchange. And a notable percentage of employees are participat-

ing in wellness programs to earn a rate discount and promote healthier habits among employees. “These wellness programs help individuals to become more aware of their risk factors for illnesses such as heart disease and diabetes,” Coon says. “Early understanding of these risks allows individuals to take preventive action and improve their long-term health.” More employers are also incorporating high-deductible health insurance plans, which give them a more cost-efficient way to contribute as well as benefit employees. “A health savings account can be linked to the plan, which is an attractive feature to people who are interested in setting aside tax-free dollars to pay for healthcare,” Coon says.

National Federation of Independent Business Danny DeWitt, the Alaska state director for the National Federation of Independent Business, has strong feelings about the ACA and its effect on the business community. He says the ACA is driving up the premiums for businesses that are in the fully insured market, which impacts most small employers.

Health insurance premiums are up substantially, with some businesses seeing up to a 50 percent increase in their rates, DeWitt says. “Small employers are trying to provide benefits, but the government is making it to the point where they can’t afford it,” he says. The National Federation of Independent Business hasn’t conducted any official research on how the implementation of the ACA is playing out with Alaska businesses, but DeWitt has a sense of the impact based on anecdotal information. He says Alaska businesses are taking creative steps to compensate for higher premiums. Some are leaving positions open to reduce their employment-related expenses. Others are using mechanization to replace employees. For example, more businesses are using computers to take orders from customers and reduce their costs. “iPads don’t require health insurance and they don’t call in sick,” DeWitt says. The practice of not filling positions and replacing employees with computers is changing employment opportunities on many levels, according to DeWitt. There are fewer entry level

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November 2014 | Alaska Business Monthly

jobs for young people who want to work during or after high school, as well as fewer opportunities for seniors needing to supplement their retirement income. DeWitt also thinks the type of health insurance that the ACA implemented is a tax that goes right through insurance companies directly to small businesses trying to provide healthcare to their employees. “When you tax only the insured side, those costs go right through to small businesses,” he says.

Alaska USA Insurance Brokers Senior Account Executive Benefits Manager Craig Kestran Photo courtesy Alaska USA Insurance Brokers

Craig Kestran of Alaska USA Insurance Brokers feels most employers are viewing the ACA negatively since it is raising their cost to provide healthcare. ACA-compliant plans include the added costs to remove the pre-existing condition limitation, covering adult children up to age twenty-six, no life-time or annual dollar limits on essential benefits, no cost sharing on preventive services, no waiting periods greater than ninety days, limits on out-of-pocket maximums, and coverage for routine patient care costs for clinical trial participants. “The ACA enhancement has broadened coverage and services to more individuals; yet, it is at the expense of employers and employees,” says Kestran, a senior account executive benefits manager. The added cost for complying with ACA, he says, has forced employers to increase employee costs share through plan design changes and/or increased employee contributions. Specifically, employers are increasing out-of-pocket limits, participants’ cost share, in-network deductibles, copayments or coinsurance, employee share of dependent coverage costs, and prescription costs. Kestran says most small employers who currently don’t offer coverage are considering it by very carefully weighing the cost versus benefit. “In my experience, not many small employers have qualified for the federal tax credits,” he says. “They are very difficult for small businesses in 94

Alaska to qualify for since our payrolls tend to be higher than the Lower 48.” Some small business owners have expressed little interest in growing their company over fifty full-time employees due to the ACA’s “Pay or Play” rule, says Kestran, referencing the requirement for employers to provide health insurance or pay a penalty. He adds, “Some are reducing employee hours to parttime so they do not have to offer these employees coverage as a way to manage the tight bottom line margins.”

The Wilson Agency Margery Pratt CEBS, RHU, REBC, Client Services Manager Photo courtesy The Wilson Agency

In general, the ACA makes the future uncertain for all employers, according to Margery Pratt of The Wilson Agency, which advises businesses on employee benefits. “The full impact of the regulations has yet to be realized,” she says. “So much of what the average consumer sees in the media is biased or incomplete, leaving employees with raised expectations of free healthcare,” the client services manager says. Pratt adds that determining the rate impact of changing to an ACA-compliant plan is difficult because the underwriting methodology is totally different for these plans. “Healthy groups with a large number of young males no longer get the discounted rates they used to enjoy so they may see their rates increase a great deal,” she explains. “Unhealthy groups with a large number of older females may see their rates impacted favorably, masking some of the impact of the additional benefits.” Terry Allard CEBS, Sr. Benefits Advisor Photo courtesy The Wilson Agency

Senior Benefits Advisor Terry Allard says the ACA is causing employers to

In the future, the excise tax known as the “Cadillac” tax will be a major issue for Alaska employers. think about their reasons for providing benefits. It’s also forcing them to be more strategic in making decisions around plan design and funding. For instance, many employers with fewer than one hundred employees are now considering self-funding as a way to have more control over benefits and costs, as well as minimize taxes. “More employers are offering more than one plan option to allow employees more choices and more are using wellness incentives, with the incentive being tied to a higher employer contribution or access to a richer plan design,” Allard says. Mike Humphrey MLHR, Sr. Employee Benefits Advisor Photo courtesy The Wilson Agency

In the future, the excise tax known as the “Cadillac” tax will be a major issue for Alaska employers, according to Senior Employee Benefits Advisor Mike Humphrey. The 40 percent tax will be imposed on the value of annual health insurance benefits exceeding $10,200 for individual coverage and $27,500 for family coverage. “When the Cadillac tax takes effect in 2018, most Alaska plans will exceed the cap and employers will have to pay the excise tax,” he says. Federal Marketplace coverage for 2015 has a proposed Open Enrollment Period of November 15, 2014–February 15, 2015 for eligible individuals, which would include employees working for small businesses with fewer than fifty employees not offering insurance benefits or planning to drop coverage at the end of 2014. Full implementation of the ACA is now scheduled through 2020, barring more changes and delays. R Tracy Barbour is a former Alaskan.

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SCIENCE & TECHNOLOGY

CH2M HILL Polar Services Supporting scientific research throughout Alaska By Tasha Anderson

ypically when people think of the valuable resources available in Alaska, they think of removable resources—oil and gas, gold, silver, coal, timber, fish—or they think of Alaska experiences, such as sightseeing, hunting, hiking, or exposure to culture. But Alaska is also the only form of access to the Arctic from the United Sates. Many are aware that this access is important for shipping lanes and infrastructure, but the science industry, though perhaps with a smaller budget, also finds much of Alaska invaluable in terms of research. Part of the reason that Alaska is ideal for research is access to the Arctic as well as large swaths of land minimally touched, if at all, by human influence. Of course, these benefits to research are also hindrances in terms of keeping researchers warm, fed, and moving to optimal locations. Since 1999 CH2M HILL Polar Services, or CPS, has been a services and support company for Alaska research funded by the National Science Foundation. “In November, 2011, CH2M HILL Polar Services was awarded a third consecutive Arctic Research Support and Logistics Services contract for the National Science Foundation. The contract spans eight years and is estimated at approximately $325 million,” says CH2M HILL Communications Director Bill Doughty.

CH2M HILL Polar Services staffers assist EM (electromagnetic) bird flight operations unloading research equipment in Barrow. Photo courtesy of the Eicken Project

CH2M HILL Polar Services CPS is a collaborative organization consisting of CH2M HILL, Polar Field Services, Inc., SRI International, and UMIAQ. Alaska Science Support Manager

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Photo courtesy of the Osterberg Project

A researcher loads core sample taken from Mount Hunter glacier for first leg of trip to the National Ice Core Laboratory in Denver, Colorado. The full surface-to-bedrock core, a record 205 meters (224.19 yards), allowed researchers to determine precipitation levels in Alaska over the last one thousand years.

Marin Kuizenga says, “CH2M HILL is the prime that holds the contract with the National Science Foundation; my company, Polar Field Services, does the field logistics for the contract; and then Stanford Research Institute, or SRI, does the communications component. UMIAQ Science Provides Barrow area logistics support.” According to Doughty, the scope of the contract includes logistics planning and operations for science projects; procurement and inventory management; aviation services; engineering and design services; facilities planning, constructions, maintenance, and operations; information technology and communications support; field safety and risk management; quality management; and stakeholder coordination. Kuizenga says, “I see us as an equipment and services cooperative. We hold inventory of equipment and professionals that are there to assist [researchers] www.akbizmag.com

to implement their field plans. Some groups only want a satellite phone, and for some projects we’re doing full-on staffed field camps.”

Matching up Researchers and Support Researchers obtain the services that CPS provides as a portion of their National Science Foundation proposal funding. “The National Science Foundation funds research grants, and a portion of those funds go to the researcher [directly] for their salary or overhead, whatever the researcher requested. But then researchers can request, and in fact the National Science Foundation encourages, that a portion of their grant award come through us to optimize shared resources,” Kuizenga says. In addition researchers often approach CPS for information and feedback on feasibility of logistics and research plans.

CPS Support Scope Annually, CPS supports “up to 177 science projects and one thousand scientists and field team members working throughout Alaska, Greenland, Canada, Russia, Iceland, Norway, the Arctic Ocean, and the North Pole,” Doughty says. He continues, “Of the 155 CPSsupported science projects in 2013, about half were located in Alaska.” Kuizenga says that currently, CPS is supporting 152 projects Arctic-wide, with 75 located in Alaska. “Of the 75 field projects in Alaska, 31 funded projects in the Barrow area [41 percent] are supported through CPS with on-theground expertise from UMIAQ Science. Twenty-seven are worked in the Toolik area [36 percent] at the Toolik Field Station. Four were CPS staffed field camps with seasonal camp managers.” Other than those two concentrated areas, the projects are located throughout the state. “We really have to go

November 2014 | Alaska Business Monthly

Photo courtesy of the Crowell Project

Camp at Disenchantment Bay near Hubbard Glacier in Yakutat Bay.

wherever the research is,” Kuizenga says. “We use a broad range of vendors in the state, including a number of small village vendors.” Because many of these projects are so remote, one of the largest segments of support that CPS provides is air transportation. Kuizenga says, “We do a lot of flight support… we’re doing a lot of contracting with many of the small air contractors in the state from mom-andpop size to Ravn to many of the helicopter companies in-state.” CPS spends approximately $1 million dollars annually in-state on air charters, according to Doughty.

Areas of Concentration The majority of the projects that CPS provides support for are multi-year projects of three to five years, though a few are one-year projects. Kuizenga says that, although projects range from helicopter projects in the Aleutians to Southeast to Kaktovik, there are two areas of concentration in Barrow and Toolik. The Toolik Field Station is operated and managed by the Institute of Arctic Biology at the University of Alaska Fairbanks. The station provides housing, meals, laboratories, and other support such as GIS and mapping services, technical and IT assistance, and a collection of standardized environmental data. 98

Toolik Field Station’s website states the station’s mission is “to support research and education that creates a greater understanding of the Arctic and its relationship to the global environment.” Fairbanks is also the base of operations for Polar Field Services’ eight Alaskan project managers as well as an operations manager and a warehouse manager. The Fairbanks location is an office/warehouse space for equipment. “We maintain the four-wheelers and snow machines, and we repair and store the tents, and we have a fleet of trucks for traveling up the haul road and things like that,” Kuizenga says. The employees in Fairbanks are the “on-the-ground” support that’s out in the field working with both researchers and vendors, ensuring that vendors have the capabilities to support the work that’s needed. The other area of concentration is in Barrow. In terms of far north Arctic research, one either lands in Barrow or Prudhoe Bay, but “there’s a beautiful lab facility,” in Barrow, Kuizinga says. According to the Barrow Bulletin, which contains “Information for NSF funded research in the Barrow area,” the National Science Foundation leases space on the NARL campus from UIC. This space supports scientific research and includes offices, laboratories, storage and staging areas, and cold rooms.

Boon to Economies While the science industry doesn’t have the largest economic presence in Alaska, it is certainly a presence, and can be a boon for some remote locations, such as Barrow. “When we go to talk to the Borough, they talk about the science industry, and the history of science in the community. Maybe that’s eclipsed a bit lately by other interests, but Barrow is astute and recognizes that this is a revenue source for the community… it’s certainly advantageous for them from a jobs perspective, as well,” Kuizenga says. Kuizenga says that CPS works through local vendors, wherever in the state operations may be taking place, as often as possible, “including a number of small village vendors.” According to Doughty, it’s estimated that CPS spends approximately $6.8 million in the state, which includes the $1 million spent on air transportation, annually. Of that, approximately $3.2 million is spent in the Barrow area. Alaska is a valuable resource to the scientific community, and the research industry is developing as a valuable resource for Alaska. R Tasha Anderson is the Editorial Assistant at Alaska Business Monthly.

Alaska Business Monthly | November 2014 www.akbizmag.com

TELECOM & TECHNOLOGY

Verizon’s new smart store in Anchorage at the Tikahtnu Commons.

Verizon in Alaska Three years in the making and growing

By Russ Slaten

fter three years of building its network, its offices, and its stores, Verizon has arrived in Alaska. Verizon launched its Alaska network and stores September 19, the same day as the iPhone 6 release. Verizon invested more than $120 million dollars in Alaska to build its operations in the state, says Verizon Retail District Manager Chris Fitzgerald. At its launch, Verizon opened a smart store in East Anchorage, a kiosk in the Dimond Center, a smart store in Fairbanks, and offered its products and services at more than thirty additional retail locations through a network of agent partners across the state. As Verizon moves forward in its distribution plan, every new corporate store will be a smart store, Fitzgerald says.

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At the grand opening celebration of the Verizon Wireless store in the Tikahtnu Commons in East Anchorage, Fitzgerald explained the interactive smart store setup. “These stores were designed to be very customer-focused. Everything on display is live and interactive so our consumers can touch, feel, and test all of our products and services,” Fitzgerald says. Broken into four “lifestyle zones,” the store caters to wireless users looking to accessorize their phones for music, fitness, health and home efficiency/productivity. The smart stores give customers a chance to find connected electronics which enable the smartphone to control the thermostat or light switch, even when traveling. The store also provides a space for people desiring to learn more about

the products and how to use them with the ‘Wireless U’ learning table in the center of the store, and it brings the HD voice services and other advances in the market for Alaskans to experience themselves.

Nationwide Rates in Alaska Verizon will offer the same prices in Alaska as they do in the Lower 48, Fitzgerald says. The More Everything plan starts at $40 per month and includes unlimited talk and text, international messaging, free personal hotspot, twenty-five gigabytes of cloud storage, and the option to add other users with paid sharable data— for More Everything on a smartphone with 2GB of data add $50 per month. The business plans offer many discounts as competitors do, but Verizon says its network separates it from the

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others with greater reliability, faster speeds, and the largest 4G LTE footprint, both in Alaska and the entire United States. The 4G LTE network is ten times faster than 3G. Alaska is Verizon’s first LTE-only market. Additionally, Verizon offers global services spanning more than two hundred countries. Verizon’s More Everything plan, which includes unlimited talk and text with cloud storage and accompanied data plans, works for business users and offers up to one hundred devices on a plan. In addition to voice and data plans for smartphones and tablets, Verizon is also focused on emerging Machine-toMachine, or M2M, devices and sensors for business customers. Asset Tracking is one example. Verizon provides detailed Asset Tracking that combines satellite and wireless. Currently Verizon customers are tracking vehicles and shipments from the Aleutian Islands to the North Slope. When it comes to innovating new products, Verizon’s Partner Program allows entrepreneurs, startups, and emerging companies to create, develop, and market their technology with help from Verizon technicians. Verizon is currently working with five technology partners in Alaska with plans to develop new products and services, Charlston says.

Taking on Domestic Violence At the September grand opening, Verizon donated $10,000 to the AWAIC (Alaska Women’s Aid in Crisis) shelter in Anchorage and $10,000 more to the Interior Alaska Center for Non-Violent Living in Fairbanks. “One thing that’s great about this money is its flexibility because we don’t have a lot of money for direct client assistance, which allows us to do whatever we can for victims. We do relocations, fixing doors, tenant rent, and utilities… so they don’t even have to be in shelter to receive assistance,” says Suzi Pearson, executive director of AWAIC. Abused women may not be the breadwinners in their relationships, so giving them financial assistance allows these women to set their own boundaries without being dependent on the abusive partner, she says. “Supporting victims of domestic violence and educating the community on www.akbizmag.com

domestic violence is one of Verizon’s core values, which you don’t often see in a business,” Pearson says. “That’s an incredible thing for a business to commit to, especially when domestic violence isn’t always popular to talk about. They have been out in the forefront for over a decade.” Besides monetary donations to shelters like AWAIC, Verizon provides cell phones to victims of domestic violence through its own program and partnerships. “Verizon has a proud history of supporting domestic violence shelters. And it is central to our mission as a company to do what we can to make our communities a better place to live and work whether it be through free phones, cash grants, or volunteering at local shelters to make their job a bit easier,” Charlston says.

MTA and Verizon In Alaska much of the network coverage lies in the cities of Anchorage, Fairbanks, Juneau, Cordova, and communities along the Glenn and Parks Highways, like the Matanuska-Susitna Valley. Mat-Su residents will see a larger offering through the partnership between Verizon and Matanuska Telephone Association (MTA). In September, the Palmer-based telecommunications provider partnered with Verizon as an authorized retailer through Verizon’s LTE in Rural America program, Charlston says. MTA is one of twenty participants in the LTE in Rural America program launched in 2010. The goal is to more broadly deploy 4G LTE wireless speed in Alaska, Charlston says. The newly enhanced MTA network covering 1,552 square miles connects to Verizon’s LTE core network. “In the case of MTA, it helps us expand into much larger territory without the

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need to build towers and connects them to our network, the largest LTE network in the United States and now the largest LTE network in Alaska,” Charlston says. The partnership will also create four MTA and Verizon stores in the Mat-Su but still allow customers of both service providers to choose their network, Charlston says. MTA has offered services for over sixty years including voice, broadband, wireless, business solutions, directory, and digital television, allowing Verizon customers to purchase other MTA products and services whether they use MTA Wireless or Verizon Wireless. “The new relationship simply offers more for customers. Now shoppers will have another choice in the market. For some consumers, MTA Wireless phones and service will be the best match. For others, Verizon Wireless will be a great option. And instead of going to a new retail outlet to investigate that other option, consumers can return to their trusted, locally-owned cooperative. MTA has spent years of providing innovative communications products and services to our customers and we are very excited about this relationship,” says Carolyn Hanson, MTA director of Marketing and Sales. In addition to MTA, Ketchikan Public Utilities and Copper Valley Telecom in Valdez have joined Verizon’s LTE in Rural America program. Verizon will expand its geographic footprint, currently exploring the Kenai Peninsula. “We are continuing to look at and evaluate expansion opportunities to build out the network every year,” Charlston says. “We’re here to stay in Alaska.” R Russ Slaten is the Associate Editor for Alaska Business Monthly.

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SMALL BUSINESS

Market Share: J&S Steamway and Thermax The polished touchstone in surface cleaning

Mike Matthews, senior tech manager for J&S Steamway/Thermax checking pressure and setting rinse levels on van-mount steam cleaner.

with the formation of Thermax Carpet Cleaning in 2005 with business partner Francis Farrell, he says. The company began with a home-based rental machine from J&S Steamway and then

grew with the purchase of a van mount cleaning system, operated from the bed and breakfast. “The whole idea was—since I owned a bed and breakfast—I was never happy

Photo courtesy of J&S Steamway/Thermax

laska is known for its family businesses growing into companies that represent the industry standard, and in carpet cleaning the result is no different. J&S Steamway has cleaned carpets in Anchorage since 1979, says J&S Steamway Owner Troy Roberts. As a general manager since 1985, Robert Reynolds purchased the company in 1993. Reynolds specialized in carpet cleaning along with water and fire restoration. In 2005, Reynolds opened in Anchorage an affiliate of Interlink Supply, a national distributor of cleaning and restoration supplies; in 2010, it changed hands to his daughter Vanessa Kitchen. Reynolds began to cut back on water and fire restoration services in 2006 to spend more time with his family. A little farther west from J&S Steamway’s current location in South Anchorage, Roberts ran a bed and breakfast from his home in the Jewel Lake neighborhood starting in 1999. Roberts made a switch into carpet cleaning

By Russ Slaten

Before and after comparison of carpeting and stairway cleaning by J&S Steamway. 102

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Photo courtesy of J&S Steamway/Thermax

with the people coming and cleaning it. And I thought, if we can vacuum the house faster than the carpet cleaner, what were they really doing? And I didn’t like the fees they were charging, so we decided to do it ourselves,” Roberts says. “We did a little bit of research and found out J&S Steamway sold equipment in town. And after a few weeks of learning at J&S, we decided to use the same equipment since [Reynolds] was equipped with mechanics on hand, and we decided to use the same chemistry because J&S was the biggest and best in town, so we had no reason to reinvent the wheel.” A before and after comparison of upholstery cleaning by J&S Steamway. Roberts adapted J&S methods and cleaning supplies in his own operation [cleaning systems] with more innova- low us to give high quality area rug at Thermax and even went out with J&S tive features,” Farrell says. turnaround,” Troy Roberts says. “Some crews for the first few months to learn people grow attached to their rugs, and the equipment. Roberts attained certiInnovative Products when we can clean these rugs without fication from the Institute of Inspection With the new merger between J&S damage, and actually in better condiCleaning and Restoration Certification, Steamway and Thermax, the company tion, it’s a phenomenal process.” a standard-setting non-profit organiza- has invested in many new products inCommercial Clients tion for the inspection, cleaning, and cluding the RugBadger and RugRevoluThe commercial volume and customer restoration industries accredited by the tion from the RugBadger company. The RugBadger is basically a duster base may be at a lower percentage from American National Standards Institute. “I practiced trial and error on friends that is capable of removing 95 percent residential contracts, but Farrell says and family for the first six months and of dust from a rug, Roberts says. It is the company’s capabilities can handle learned how to do it. I applied the skills designed to shake loose dry, heavy, clients of all sizes. Some clients include in the manuals and then applied it to damaging soil trapped in the founda- Club Paris in Downtown Anchorage, the Double Musky in Girdwood, and the the residential homes and started our tion and in between the rug fibers. “RugBadger machines are innova- Abbott Medical Center in Anchorage. business that way. Now it’s just never tive not only because it cleans quickly Thomas Hipsher, DDS, part-owner stopped,” Roberts says. In 2007, John Frey of Crystal Clear Car- and thoroughly but because they does of Abbott Medical Center, says he hired pet Cleaning, an Anchorage-based carpet not use bleaching agents that damage J&S Steamway to clean the offices and cleaning company in operations for near- rugs as they did in traditional methods common area for the first time. The twoly twenty years, was looking to sell, Rob- of cleaning area rugs. RugBadger prod- story building had offices floored with erts says. Thermax bought the company, ucts use the most ecologically-friendly carpet and linoleum and tile in the comprocess, also making them safe for your mon areas. Hipsher says it was the first growing its fleet by two more vans. After thirty-eight years in the busi- rugs,” says RugBadger Owner and Pres- time the common area has been professionally cleaned. J&S Steamway techs ness, Reynolds came to Roberts and Far- ident Stephen “Dusty” Roberts. The RugRevolution is a centrifuge cleaned the black grout between tiles to rell about selling his business to spend more time with his family. After talking wringer built for area rug cleaning and reveal the original light gray color. “They did a great job. They came in, it through, they bought J&S Steamway water extraction, Dusty Roberts says. in January from Reynolds, Roberts says. The quiet and low vibration spinner ex- gave us a great quote, and arrived when “He approached us to buy, and we tracts moisture from the rug in a matter they said they would, and that’s all that said no, because we were happy work- of minutes and almost eliminates the you ask of a contractor,” Hipsher says. ing on [Thermax]; everything was go- need to groom and fringe detail, mak- “They compared their cleaning to mine, ing great; we weren’t interested. But he ing it one of the most efficient pieces of and that’s a pretty high standard they was persistent and said he didn’t know equipment on the market, Dusty Rob- have to meet, because my standard is who else he wanted to own it, he didn’t erts says. The RugRevolution implant probably higher than most dental pracwant to lose the reputation and [wanted system was in the process of being built tices in town. They met the standard, to] keep the same quality,” Roberts says. at J&S Steamway in September, with the and I would definitely go with them in R The two companies now operate under machine coming in from the manufac- the future.” turing plant in Birmingham, Alabama. one roof through Roberts and Farrell. “This $50,000 machine is going to “We are going to follow in Bob [Reynolds’] tradition, but build on that be able to dry and clean rugs beyond Russ Slaten is the Associate Editor with our own line of new truck mount anything possible in town and will al- for Alaska Business Monthly.

special section

Mining

Celebrating Mining in Alaska Alaska Miners Association marks 75 years

By Deantha Crockett

n 2014, the Alaska Miners Association (AMA) is celebrating its 75th Anniversary. Of course, mining roared to life much earlier than 1939 in the land now organized into the state of Alaska. Somewhere along the line, miners across Alaska began to see value in uniting efforts to promote their livelihoods, a fact that couldn’t be more true 75 years later. We have much to celebrate. Alaska is rich with mining history, and I am faithful that our future will be too. Many of the Alaska Business Monthly readership has either seen me deliver a presentation or read an article I’ve written that starts out with discussion of the importance of minerals in our lives. Now, I may sound like a broken record, but I continue to be amazed by the common disconnect between using mined products, yet opposing mineral extraction. Without question, every one of us depends on minerals each day. Look at the platinum, aluminum, copper, gold, and silver used to construct an iPhone and the rare earth elements that make it vibrate. Look at the zinc used in something as simple as sunscreen and as complex as the galvanizing of guardrails. One cannot dispute that mining has something to do with everything. The amenities and necessities in our lives will ensure the demand for minerals remains constant, so no doubt mining activity will resume for years to come. Alaska has one of the strongest and most stringent permitting processes in the world, which ensures that minerals developed in the state will supply the world from a domestic source with an excellent environmental and safety track record. It is also a crucial part of Alaska’s economy. Alaska’s six largescale mines and hundreds of small placer operations all provide Alaskans with good jobs, contribute to local and state government revenues, benefit Alaska 104

Native Corporations, and support hundreds of Alaska small businesses.

Examining Barriers I am often asked what it will take to further Alaska’s mining industry and increase the amount of operating mines in the state. I will be honest. Right now, we have a lot of barriers that keep Alaska from being a top jurisdiction for investment dollars. These barriers are worthy of examination. Access to capital investment dollars is limited across the globe. Large global mining companies and other investors have limited capital, and in the last few years, I’ve become quite familiar with the term “tightening the belt” in reference to mining investment. A limited amount of capital available to invest in exploration and development ensures that investors are taking very reluctant steps and examining decisions under the proverbial microscope. I’m sorry to say that Alaska is commonly coming up short in the examination, due to some other major challenges facing our industry. The challenges are also worthy of examination. Unpredictable federal regulation is plaguing the mining industry, and in fact, all resource development sectors. A compelling and unfortunately picture perfect example of unpredictable regulation is the Environmental Protection Agency’s (EPA) actions at the Pebble Project. Here, a project proponent has spent nearly two decades and over $600 million in studies to understand the environment at the large copper, gold, and molybdenum deposit in Southwest Alaska. These studies are a crucial step in gathering the information needed to design a mine plan for the submittal of a formal permit application, which the company has not yet done. EPA has entered the equation with an “assessment” of the area, hypothesizing a mine design that the state of Alaska has said it would not permit, and concluding that the environment would be

undoubtedly compromised and therefore the agency will step in to block the project. These actions, preemptive and ignoring our nation’s environmental laws, have raised giant red flags in front of every potential investor, mining or otherwise, that is contemplating a venture in Alaska. Federal regulation is also changing, without notice, in more subtle ways. The EPA is proposing to change the definition of what constitutes a “water of the United States,” which will force not only industrial projects, but residential areas as well, to manage waterbodies, drainage ditches, man-made ponds, etc. in a highly technical and expensive fashion while providing no additional benefits to the environment. The US Forest Service is issuing new guidelines that govern exactly what you can and cannot do in the nation’s forests, right down to picnics and photography. I could fill this entire November issue with examples of the punitive and unreasonable federal regulation changes this country is seeing, and frankly, it is causing those considering investing in our country to think twice.

High Cost of Mining Navigating the ever-changing-for-theworse federal regulations is just one component of why Alaska is such an expensive place to do business. The high cost of operating Alaska’s mines has put a tally in the “con” column, so to speak, when potential investors look to develop here. Alaska, with its relatively young age, lacks all the amenities of many other jurisdictions. Extensive road networks, power grids and a constant supply of affordable energy, and large populations participating in the labor pool just aren’t the reality in Alaska. Mineral deposits are more often than not located in remote areas with no road or port access and require expensive helicopter exploration. If a mine does move forward, a road or port must be constructed to move goods and

Alaska Business Monthly | November 2014 www.akbizmag.com

supplies in and the mined product out. Also, all Alaskans know that energy costs in the state are astoundingly high. This is especially true for mines, with power needs rivaling small cities. The energy costs for mines even on the road system are high; for remote mines, they are staggering. Finally, Alaska has a shortage of trained employees available to fill mining positions, which drives the cost of labor up and adds to the already bleak operating cost situation. Some of these barriers to the future of mining are simply out of our control. However, some of them are absolutely not, and we must address what can be done to attract the economic investment our state needs for a successful future. We can start by advocating for predictable regulation and permitting that offers certainty for project proponents and continue to examine what incentives can be adopted to posture Alaska among competing jurisdictions. So, it’s not all gloom and doom. I said at the beginning of this article that I believe our future will be bright, and I believe that. We do have several tallies in our “pro” column that do bode well for the future of

mining in Alaska, and these opportunities are certainly worth examination.

Statewide Support Mining has statewide support! The state of Alaska, under the administration of Governor Sean Parnell, and the Alaska Legislature are great supporters of Alaska’s mining industry. With a predictable permitting structure, access to regulators and legislators to discuss mining issues, and programs like the Alaska Industrial Development and Export Authority and the Department of Commerce Community, and Economic Development Minerals Marketing, the state of Alaska has shown it is willing to both attract investment to Alaska, promote our mineral potential to the world, and showcase that Alaska is indeed open for business. What’s more, polling has shown that over 80 percent of Alaska residents support a healthy mining industry; no doubt due to the economic benefits of mining seen in each area of the state. Alaska has made workforce development a priority. The state has funded training entities and put a focus on identifying labor needs across all industries.

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AMA has ramped up efforts pertaining to workforce development and will complete its plan, focusing on training Alaskans to fill jobs in current operations and potential jobs that will come with future mining operations, by the end of this year. AMA will wrap up its 75th year at our Convention the first week of November, held at the Dena’ina Center in Anchorage. The issues discussed in this article, and many more, will be examined over the course of the week. We’d love to have you there with us, celebrating such an important milestone and identifying how to flourish over the next 75 years. Please visit alaskaminers.org for more information. R Deantha Crockett is the Executive Director of 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.

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special section

Mining

Producing S Mines Prosper Extracting gold, silver, zinc, lead, and coal By Julie Stricker

tep onto one of Alaska’s six producing mines, and the first thing people hear is a talk about safety procedures as they’re being handed a hard hat. Safety is a serious topic at workplaces that employ hundreds of people, many of whom are handling explosives, driving oversize trucks and shovels, and moving tons of rock, dirt, and ore daily. So when Sumitomo Metal Mining’s Pogo gold mine northeast of Delta Junction recorded its 365th day without an injury on August 28, it was cause for celebration. That’s a total of 750,000 injury-free man-hours, says Pogo External Affairs Manager Lorna Shaw. “We’re very excited,” she says. Pogo is part of a network of underground

mines in the United States Northwest that are members of a central mine rescue. Kensington and Greens Creek mines in Southeast Alaska are also members. “Every underground mine is required to have a mine rescue team,” Shaw says, noting Pogo has more than one to accommodate off-camp rotations and vacations. If staff at a mine happens to be short when an incident such as an underground fire occurs, safety teams from other mines will travel to help out. “Should a situation arise, our priorities are people,” Shaw says. “We’re going to take care of them before anything else. Having this expertise on staff is critical.” Mining continues to be a major economic player in Alaska. Although only six large mines are in production, they account for some of the state’s highest-paying jobs, averaging $100,000. The mines directly employ about 4,800 workers. Pogo is the largest of the three producing gold mines in the state. The other two are Coeur Mining’s Kensington mine forty-five miles northwest of Juneau and Kinross’ Fort Knox mine east of Fairbanks. Hecla Mining Company’s Greens Creek mine is a lead-zincsilver-gold mine on Admiralty Island in Southeast Alaska; Teck Alaska’s Red Dog mine in Northwest Alaska produces zinc and lead; and Usibelli near Healy is the state’s only producing coal mine.

Pogo Pogo is a remote underground mine that produced 337,393 troy ounces of gold in 2013, with similar production expected Greens Creek Mine, Admiralty Island. © Hecla Mining Company

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for 2014, Shaw says. Of the mine’s 308 employees, 227 are from Alaska communities. They live on-site during their shifts. The ten-member management team has an average of eighteen years in Alaska and twenty-four years in mining, she says. Another 80 permanent contracts for camp services and about 100 projectspecific contractors are also at Pogo. The most recent reserve report notes the mine has 13.594 million short tons of ore with an average gold grade of 0.366 ounces per short ton and gold content of 4.973 million ounces. The current mine life is planned through early 2019, but Shaw says the operators are confident the plan will be extended because of recent exploration results showing further deposits in an area called East Deep. The mine has a total of four portals, the most recent of which, the 2150 portal, has been advanced 2,200 feet to access the East Deep ore. Pogo is also continuing to mine the original deposit, the Liese Zone. Pogo’s capital budget for 2014 was a little more than $30 million, Shaw says. A water treatment facility is under construction and work is underway to install under-

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ground services such as power, heat, and ventilation to the new 2150 portal. The mine also had a $17 million exploration budget for 2014, and work continues to define the boundaries of the North Zone and the area between the North Zone and East Deep, Shaw says. Work is also underway to expand the mine to the south, an area called South Pogo. Further on the horizon is yet another mineralized zone called the 4021 deposit that offers future promise. Pogo found itself wrestling with regulatory challenges this summer related to its operation of a solid waste incinerator that falls under specific standards under the Clean Air Act, although the incinerator was installed in 2010 and the new rules didn’t take effect until 2013, Shaw says. A scrubber was installed to comply with the regulations, but it changes the volume of wastewater, which means Pogo must file for a new permit. In the meantime, trash is being hauled 135 miles to the Fairbanks North Star Borough landfill, and Pogo has spent more than $200,000 on transportation and disposal of waste that would normally go into the incinerator. That has also

introduced a safety issue, as “bear activity has increased around camp since we started storing food waste,” Shaw says.

Fort Knox 2013 was a banner year for Fort Knox gold mine twenty-five miles northeast of Fairbanks, so while results to date this year are lower than last, they’re not unexpected, says external affairs manager Anna Atchison. For the second quarter, the mine, operated by Kinross subsidiary Fairbanks Gold Mining Inc., produced 91,316 ounces of gold, versus 102,740 for the second quarter of 2013. Production prices in 2014 were significantly higher, $834 per ounce, compared with $575 per ounce in the previous year. Total gold production in 2013 exceeded 428,000 ounces. Although record rainfall fell over the region in summer 2014, Atchison says it was manageable. “It kept us pretty wet,” she says. “It definitely always makes for a little bit of challenge on the roads. More than anything, it dampened everyone’s spirits.” Fort Knox continued to add capacity to its heap leach and tailings facility,

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ounces in 2013. The underground mine employs 323 people and has estimated reserves of 902,000 ounces. Kensington began operations in 2010, reducing operations to complete additional projects in 2011, and resumed full production in 2012. Mill throughput rose significantly, offsetting the lower ore grades, with 2014 exploration efforts targeted at areas with higher grade potential. The mine aims to keep average grade at or above 0.18 per ton; focused approach yielded grades of 0.26 in the fourth quarter of 2013. Currently, mining efforts are focused on the high-grade Raven deposit. In the fourth quarter of 2013, Kensington tested an ore sorting machine, which removed 90 percent of low-grade pebbles while reclaiming 65 percent of high-grade rejected pebbles. The sorting process has the potential to increase mill recovery to as high as 98 percent, according to a Coeur report to investors.

Operations facilities at Greens Creek Mine, Admiralty Island.

says Eric Hill, vice president and general manager of Fort Knox. The tailings dam is being raised to 1,530 elevation, and Hill notes that the lake beyond the tailings is full of very large, healthy grayling. The addition of another large shovel at the end of 2013 and two 237-ton haul trucks brought Fort Knox up to about 650 employees. “It seems to be very on par for historic production, and we’re continuing work on keeping that going,” Hill says. Further exploration is being done on the Gill property nearby and on the pe110

riphery of the current mine site, he says. “We’re just coming in on the tail end of the season; we’re just getting our results back, and we’ll be tallying those,” Hill says. “Positive results pending,” he adds, laughing.

Kensington Mine Gold production in 2014 is about on par with 2013 at Coeur Alaska’s Kensington Mine forty-five miles north of Juneau, according to Coeur. Kensington is expected to produce from 105,000 to 112,000 ounces of gold in 2014, compared with 114,821

Greens Creek Mine The Greens Creek Mine on Admiralty Island in Southeast Alaska is the fifth-largest silver mine in the world. In the second quarter of 2014, the mine produced 1.7 million ounces of silver at a cost of $3.25 per ounce. In 2013, the mine produced 2 million ounces of silver in the second quarter at a cost of $2.71 per ounce. Overall, Greens Creek accounted for 7.4 million ounces of silver production in 2013 and is expected to produce 6.5 million to 7 million ounces in 2014. The mine also produces zinc, lead, and gold as byproducts. It employs about four hundred people. Lower silver production levels buffered lower energy costs, driving up the perounce cost, according to a Hecla report to investors. While lower energy costs were expected to continue due to the availability of hydroelectric power. Overall, mining costs increased 12 percent because of lower production and higher labor costs. Milling costs decreased 6 percent because of the lower energy costs. All changes were within expected ranges, the report says. Greens Creek holds reserves of 92.5 million ounces of silver and 713,000 ounces of gold in addition to 256,000 tons of lead and 678,000 tons of zinc. Exploration is continuing to find more mineralized belts, with promising results seen at 5250, West Wall, and Deep Southwest. Drilling at Deep 200 South uncovered a bench of mineralization

Alaska Business Monthly | November 2014 www.akbizmag.com

Usibelli Coal Mine Usibelli Coal Mine is Alaska’s only operating coal mine. It employs about 130 people, most live in nearby Healy, just outside Denali National Park and Preserve. The mine, which was founded by Emil Usibelli in 1943, is still familyowned. It produced 1.6 million tons of coal in 2013, which supplies six Interior Alaska power plants that generate 40 percent of Interior Alaska’s electricity. Half of Usibelli’s annual production is transported by rail to ships docked at Seward, where the ultra-low-sulfur coal is exported to South America and Asia. www.akbizmag.com

sidering the challenging conditions in which we work every day,” he states. “Operating and maintaining heavy equipment and conducting mining operations—essentially twenty-four hours a day, seven days a week, all year long in rain, snow, extreme wind conditions, the dark of winter, and in many cases very remote locations on the mine property are not easy tasks… It is an impressive accomplishment.” R Julie Stricker is a journalist living in Fairbanks.

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Red Dog Mine The Red Dog zinc mine in Northwest Alaska celebrated its 25th year of production in 2014. The mine, one of the world’s largest zinc mines, is owned by Teck Resources Limited and operated by subsidiary Teck Alaska in partnership with landowner NANA Regional Corporation. In 2013, Red Dog produced 551,300 tonnes of zinc in concentrate and is expected to produce 500,000 to 525,000 tonnes of zinc in concentrate in 2014, in addition to 95,000 to 100,000 tons of lead in concentrate. Mining continues in the Aqqaluk Deposit, with an expected mine life of 2030. Red Dog is an open pit mine 106 miles north of the Arctic Circle. Zinc concentrates are trucked 52 miles to the Chukchi Sea coast, where they are stockpiled until barges can pick them up during an approximately one hundred-day ice free period in the summer and fall. Red Dog generated $874 million in revenue in 2013. More than five hundred workers are employed at Red Dog, 60 percent are NANA shareholders.

Current leases hold as much as 700 million tons of coal. The focus of the mining has been in the Two Bull Ridge area, but emphasis will move to Jumbo Ridge in the near future. Safety is also a chief consideration at Usibelli, which recorded no lost time accidents in the 2013 calendar year. On April 26, 2014, the mine tallied one year and nine months without an accident. Safety briefings are conducted daily, notes Alan Renshaw, general manager, in a press release touting the achievement. “This is a significant achievement con-

that provided “some of the widest and highest grade intercepts in recent history at the mine,” the report states. Drilling showed areas of 85.1 ounces of silver per ton, 0.18 ounces of gold per ton, 10.2 percent zinc, and 4.8 percent lead. About a mile from Greens Creek, drilling at Killer Creek also showed broad zones of mineralization. In November 2013, Hecla was given the Mine Safety and Technology Innovations Award by the US National Institute for Occupational Safety and Health after the mine implemented a collision avoidance system to improve access to the underground mine.

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special section

Mining

Photo courtesy of Ucore Rare Metals

Rare Earth Elements Exploration and Development Gaining ground in Southeast mining venture By Margaret Sharpe Paul Holder, left, and Nate Page, right, both geologists with HydroGeo Inc., of Crested Butte, Colorado, approach the helicopter while Trent Tiviotdale, Mustang Helicopters aircraft engineer from Terrace, British Columbia examines the main rotor blades.

uck is what happens when preparation meets opportunity. One lucky company is poised for success in Southeast Alaska with an extremely lucky discovery on Prince of Wales Island. Enter Ucore Rare Metals, Inc., a mining exploration company headquartered in Halifax, Nova Scotia, Canada. They may be lucky, but their preparation has positioned them in the best of all worlds: largest deposit of high grade heavy rare earth metals in the United States; anomalous skew toward three critical, highdemand rare earth metals; green technology for extraction; excellent logistics for accessing and exporting; and a small environmental footprint.

Concentrated REEs Rare earth elements (REEs) are actually not that rare. They are abundant in the earth’s crust and ubiquitous the world over. What is rare is finding them in economic concentrations. “You need a really select set of circumstances to 112

mine rare earth,” says Jim McKenzie, CEO of Ucore. “They have to be concentrated and you need to skew toward the valuable ones in order to make things work economically.” Those circumstances, and then some, exist at their Bokan-Dotson Ridge site at the southern end of Prince of Wales Island. “When Ucore originally got into business eight years ago, we were looking for uranium,” McKenzie says. “So we optioned the Bokan Mountain site from the prospectors with a view to exploring the former Ross-Adams mine.” The RossAdams mine produced the highest-grade uranium on US soil from the late 1950s until the early 1970s, when demand for uranium waned. Ucore began exploring south of the former mine in 2008 and found the area was teeming with REEs. “With most discoveries, it is not a matter of the discoverer saying ‘eureka,’ but rather the discoverer saying, ‘Hmm, that’s funny.’ We just kept pulling REEs out of the ground and thinking, ‘Jeez,

it’s too bad there wasn’t more demand for that right now.’ It turns out that we had all these assays that were very high grade REEs for Dotson Ridge.”

High Grade Deposit Then in 2011, China announced cutting back exports of REEs to the international community, and the values of REEs escalated significantly. “We thought the timing was sort of a mixture of good fortune and good exploration skills. We sort of stumbled across a very high grade REEs deposit with the discovery at Dotson Ridge,” McKenzie says. So Ucore shifted their attention from uranium to rare metals, which includes REEs and other metals, such as niobium, zirconium, and scandium. Interestingly the Bokan-Dotson Zone has remarkably low concentrations of uranium, and despite the proximity to the Ross-Adams mine site, it is in a separate area and a distinct geological zone. Looking to expand on their serendipitous discovery of REEs in Southeast

Alaska Business Monthly | November 2014 www.akbizmag.com

Photo courtesy of Ucore Rare Metals

carbon emissions and also for military applications. They’re high on the list of priorities for the US to keep us competitive versus our international rivals.”

John Gleason, Aurora Geosciences logging geologist from Juneau, Alaska, examining rock core in the logging tent.

Alaska, Ucore targeted another area indicated as prospective for REEs in geological survey reports—a Ray Mountains claim block in central Alaska. “Again, ‘eureka’ becomes ‘that’s funny,’ as our initial analysis of the area found a great deal of cassiterites—minerals that are very prospective for containing tin,” McKenzie says. Tin is a rare metal that is used extensively around the world for many applications, such as soldering, electronics, and coating other metals to prevent erosion. Coincidentally—and again luckily—there is currently a worldwide tin shortage, and tin prices have tripled since 2005. “Although Ray Mountains possibly has REEs, that is almost overshadowed by its prospective for tin,” McKenzie says. “So, to characterize things, we went to Bokan looking for uranium and found REEs. And we went to Ray Mountains looking for REEs and found tin. Another stroke of luck.”

International Domination China still dominates the REEs supply internationally, with over 95 percent of rare earths mined within its borders. “Less than ten deposits in the world outside of China have any hope of going to production because it is so difficult to find these materials in economic concentrations,” McKenzie explains. “It’s almost like ‘unobtainium,’ a phrase used for the last century to describe materials that are almost impossible to get your hands on. The rare earths are amongst www.akbizmag.com

the most rare, the most sought-after, and the most valuable metals known to man outside of the precious metals group—and extremely hard to find in mineable concentrations.” REEs are considered critically important to the future of the United States relative to energy development. “REEs are indispensable because dysprosium is used as a doping compound for permanent magnets, which are used in green technology for hybrid and electric vehicles and wind turbines,” he says. “Terbium is critically important to energy because it is used as an input component to energy-efficient lighting. Yttrium is very useful for energy as well.” Above and beyond energy, the US Department of Defense, in its Strategic and Critical Materials 2013 Report on Stockpile Requirements, listed dysprosium as a critical material for military applications, citing important defense uses as nuclear control rods, magnets, and ceramics for electronics. Dysprosium, a miniaturization compound, is very lightweight, strong, and heat-resistant, making it useful in theaters of war, particularly aerospace and remote control and guidance weapons. “Without dysprosium, it is very difficult to have lightweight drones, an upand-coming industry now,” McKenzie says. “The bottom line is some of the materials we have at Bokan—the headline materials dysprosium, terbium, and europium—are very critically indispensable to energy technology for decreasing

Luck and Ingenuity The REEs deposit at Dotson Ridge has a zebra stripe configuration, which houses high-grade material in a dark band of granite and then light bands of gangue material (non-REE waste rock). McKenzie explains how this is a mixture of luck and ingenuity. Ucore came across a technology called x-ray sorting or x-ray technology (XRT). The x-ray sorting—pioneered in the recycling state for the separation of plastic from tin cans—senses certain types of metallic materials versus those without any metal. As the material is mined and crushed down to golf ball-size pellets, the x-ray sorting can distinguish the good from the bad, will blow the gangue material off to one side with compressed air, and blow the high-grade material off to another circuit for processing. The ability to immediately remove the waste rock using XRT allows it to be placed back in the mine, eliminating tailings (defined as any byproduct of the mining process considered noneconomic or that needs to be disposed of). Because the Bokan-Dotson Ridge waste rock is benign (standard granite aggregate), it can be safely placed back in the mine or even sold to road builders in the northwest United States and Canada to be used as “hard aggregate.” Ucore will exploit another innovative process, using “paste backfill” mixed with cement to put benign waste rock as well as all tailings into the mined-out stopes. “We are very lucky in that we have the zebra configuration, and also because we’ve figured a way to use this XRT technology as well as this backfill process to put our tailings right back in the subsurface— that’s a very unique thing,” he says. “As strange as this might sound, or unlikely, we think that we might be the first mine in the world to have a zero tailings footprint at surface upon closing of the mine.” Bokan mine is truly smaller than the smallest of small mines, and so the footprint is going to be small for Bokan, which is going to be an underground mine. “Bokan mine is actually shaping up to be one of the most environmentally discreet and functionally elegant mines

November 2014 | Alaska Business Monthly

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Photo courtesy of Ucore Rare Metals

Mike Craft, More Core drill helper from Hyder, Alaska working with a core tube on the A5 drill on the Dotson Ridge with Bruce Thompson, More Core driller from La Ronge, Saskatchewan in the background.

in the world. With no tailings footprint at surface on closure and nominal daylight expression, because it is underground, this mine plan is fairly unique in the world of rare earth mining.”

Bokan Deposit Access Another select circumstance, Bokan deposit is the only rare earth deposit in the world—heavy or light—that is on immediate deepwater access at Kendrick Bay. “That’s a huge thing, because we don’t have to build a lot of long haul roads to access materials. Most mines on land are, by definition, inland, and a great deal of them are inaccessible,” McKenzie says. “So you have to build hundreds of miles of long haul roads to access them, resulting in a huge environmental footprint. We can basically take the material out of the mine and, with minimal processing, ship it anywhere in the world for $20 or $30 a ton.” 114

In June Alaska Governor Sean Parnell signed Senate Bill 99 into law “authorizing the Alaska Industrial Development and Export Authority [AIDEA] to issue bonds to finance the infrastructure and construction costs of the Bokan-Dotson Ridge rare earth element project and the Niblack project.” Karsten Rodick explains: “SB99 gives AIDEA the ability to issue bonds for two Southeast mining projects: up to $145 million for Bokan-Dotson, and up to $125 million for Niblack. Under this legislation, AIDEA could own portions of the projects, or do direct financing. Before any AIDEA involvement, however, the projects would go through our rigorous due diligence process, just as we do with any project that involves AIDEA financing. “It is important to keep in mind that SB99 does not guarantee that the projects will go forward. The bill is a good

move by the Legislature now, to assure that AIDEA has the bonding authority in place should it be needed. If we determine that the projects are good investments for AIDEA, and if capital from SB99 bonding authority is needed, we would then sell bonds to raise money to either invest or loan. AIDEA would be repaid by revenue from the projects.” What the money might be used for: “The proposed on-site infrastructure includes a process plant, permanent camp with administration offices, an emergency vehicle building with vehicle maintenance shop, a storage laydown area, power generation units [through 2 megawatt LNG generators], a main substation and power distribution, a potable and fire water storage and distribution, plant and camp sewage treatment facilities, a laydown and container storage yard, a paste backfill plant, management facilities for tailings, mine water, and waste rock, a water treatment facility, and access and site roads,” according to Ucore’s Preliminary Economic Assessment, which as the project progresses could change. When does construction start? “The list of pre-construction deliverables continues to shorten,” McKenzie says. Ucore’s timeline for the project includes feasibility study completion in early 2015, permitting completion in 2016, and production beginning in 2017. The Bokan facility has been highlighted as a forward-thinking mining scenario by the Massachusetts Institute of Technology Think Tank MIT3, which monitors progressive mine technology. It has the best of all worlds in terms of environmental footprint and the technologies that will be used to access the materials. “The REEs are the backbone of the clean [green] energy and environmental movements. You can’t have certain types of high wind turbines without dysprosium. You can’t have the best-of-breed hybrid and electric vehicles without dysprosium and without permanent magnets,” McKenzie says. “Not only is the methodology we are using to extract these materials very environmentally friendly, the very materials that we’re extracting have a view to promoting a small carbon footprint for industry—so it’s a win-win type situation.” R Margaret Sharpe writes from Palmer.

Alaska Business Monthly | November 2014 www.akbizmag.com

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special section

Mining

Equipping the Mining Industry in Alaska N C Machinery and Construction Machinery Industrial fill niche market By Amy M. Armstrong

ining operations in the state of Alaska require heavy-duty, specialized equipment that simply is not available at just any dealership or even readily available on the showroom floors of those that do. It is a niche that only two firms fill in the Last Frontier: N C Machinery and Construction Machinery Industrial (CMI).

Friendly Competition Both have corporate offices in Anchorage and outlets throughout the state with a significant portion of their day-in, day-out parts and maintenance departments equally located in Anchorage and in Fairbanks near the action of the Fairbanks Mining District. Both are also in a friendly competition with one another as each represents different manufacturers, providing equipment with similar,

met Lowman years ago when Lowman worked as the regional representative for Hitachi, one of the equipment lines CMI represents and services. Today it is Lowman representing Caterpillar, or CAT, and its extensive mining equipment line-up. N C Machinery strengthened its long-standing relationship with the heavy equipment manufacturing giant based in Peoria, Illinois, in May of this year by acquiring the expanded CAT Mining equipment distribution and support business from Caterpillar Global Mining. This was a major solidifying move for N C Machinery and CAT in regards to mining in Alaska because it represents improved access to CAT’s exclusive Bucyrus-originated equipment. Purchased by CAT in 2011, Bucyrus has been a leader in the manufacture of min-

“Between us and N C Machinery, we represent more than 95 percent of the equipment in use in mines in the state of Alaska.”

—Bob Gerondale COO, Construction Machinery Industrial

yet proprietary, technology aimed at giving mining operators greater accuracy and precision in extraction. “Between us and N C Machinery, we represent more than 95 percent of the equipment in use in mines in the state of Alaska,” Bob Gerondale says. In his role as CMI’s chief operating officer, Gerondale often competes against his long-time acquaintance Wayne Lowman, the current mining manager for N C Machinery operations in Alaska, Montana, and Washington. Gerondale 116

ing equipment since 1880 with its steam shovel design that was used in 1904 to dig the Panama Canal. Its late twentieth century stripping shovel and walking dragline designs quickly became industry standard and made it an attractive addition to CAT’s product line. “We are very excited about the expanded product mix and the acquisition by N C Machinery of the distribution of the Bucyrus line and the capabilities this represents for mining operations in Alaska,” Lowman says.

As of the 2014 mining season, only legacy CAT products are in use in Alaska mines, but Lowman hopes the coming ordering season will change that fact.

Purchasing New Products It is the reality of the mining industry. Major equipment purchases are made anywhere from six months to two years in advance. Ordering in 2013 came long before N C Machinery inked the expanded deal with CAT. But that doesn’t mean Alaskan miners aren’t behind the wheel of a CAT product—especially when it comes to haul trucks and dozers. CAT’s D-10 dozer is a mainstay work horse in Alaska’s mining industry. Since its pilot testing in the Lower 48 in 1973 and later introduction to the sales line-up in 1977, the D-10 dozer and its elevated sprocket drive system, which helps to reduce wear and tear, has provided a consistent answer to the need to move significant cubic feet of materials with its thirty-five-yard blade capacity. Various D-10 models are in use at the Fort Knox Gold Mine. The D-10T, a very popular model, features the C27 engine with a full-rated power of 580 horse power and 1,800 rotations per minute (rpm). According to CAT online product specifications, the D-10T uses a multiple fuel injection delivery system to lower emissions and optimize fuel efficiency. The next generation of the D-10, the D-10T2, was unveiled by CAT in February of this year. Again, this was too late for this year’s mining season in the Last Frontier, but it is available for purchase in preparation for the 2015 season. Using two versions of the C27 engine,

Alaska Business Monthly | November 2014 www.akbizmag.com

“We are always hopeful that mine expansion will allow us to provide bigger and better and more efficient equipment to the mining operations than is currently in service today.”

—Wayne Lowman Mining Manager for Operations in Alaska, Montana, and Washington, N C Machinery

company product materials assert that fuel emissions from the D-10T2 meet Environmental Protection Agency Tier 2 standards at minimum with certification of EPA Tier 4 requirements in the model with greater emissions control. It continues the D-10T’s Autocarry system providing blade control during the carry segment of the dozing cycle by measuring ground speed and track slip with a Global Navigation Satellite System receiver. Lowman would like to get one of these on the ground in an Alaska mine. “We are always hopeful that mine expansion will allow us to provide bigger and better and more efficient equipment to the mining operations than is currently in service today,” he says. Gerondale echoes that thought in his representation of not only Hitatchi products but also the equipment lines from Atlas Copco and Volvo.

Supplying Industry Standards While dozers and haul trucks supplied by N C Machinery dominate the scene at Fort Knox Gold Mine, it is hydraulic shovels from Hitachi supplied by CMI that are loading the trucks. Currently CMI has three of Hitachi’s EX5500 hydraulic excavators and two EX3600 loading shovels in service at the Fort Knox Gold Mine. CMI also supplies the mine’s entire inventory of Atlas Copco DML series blasthole drills. Blast hole drilling involves drilling a series pattern of holes to a predetermined depth to deliver explosive charges to that depth. At Fort Knox, it is a mainstay every day protocol used to speed the process of separating gold ore from dirt. The AC DML blasthole drills are mounted on a crawler machine and drill to depths between 175 and 205 feet. Since their introduction in the 1980s, the DML series has dominated the fulfillment of blasting needs at mining operations around the world, including Alaska. The Hitachi EX5500 hydraulic excavators supplied by CMI are an industry www.akbizmag.com

standard in large mining operations. Its front-end loading shovel bucket and its rear backhoe bucket, each weighing 1,150 pounds, have capacities of 35.5 and 38 cubic yards, respectively. The front-end shovel is specifically designed to enhance its scooping ability. Its Cummings diesel engine complies

with EPA Tier 2 emissions requirements and features a computer-aided engine-pump control capable of sensing load demands to maximize engine output efficiency. These machines represent a significant financial investment. The manufacturers’ online brochures don’t list

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 earth’s Development, Preserving earth’s integrity. Anchorage (907) 344-6001 solutions@golder.com www.golder.com

November 2014 | Alaska Business Monthly

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“Our real bread and butter in mining really are in the parts and service. That is what keeps our employees working year-round.”

—Bob Gerondale COO, Construction Machinery Industrial

prices. Clearly, if buyers are in the mining business, they already have a darn good clue, and the “you can’t afford it if you have to ask,” principal applies. However, a Google search in midSeptember for a used Hitachi EX5500 found a 2006 model with an unspecified amount of hours of usage listed online at MachineryTrader.com for a cool $1.75 million. A 2012 CAT D-10T with 5,017 hours on it listed at $1.07 million and a 2011 model with 4,580 hours was advertised for $995,000. Based on those used pricings, it is no stretch of the imagination when Lowman indicates N C Machinery’s average yearly sales for mining equipment in Alaska is between $20 million and $30 million.

Bread and Butter Yet, that isn’t even where the real money is mined when it comes to supplying the needs of the mineral extraction industry. The real mother lode is in parts, service, and training. For N C Machinery, Lowman estimates that end of the business adds anywhere from $40 million to $50 million to the firm’s cash flow. For Gerondale as well, the sale of a piece of mining equipment is only the beginning. “Our real bread and butter in mining really are in the parts and service,” he says. “That is what keeps our employees working year-round.” At present, CMI has a $9.5 million inventory in parts to meet the needs of its mining and construction industry clients. He knows much of that will go to the various mining operations CMI services. Gerondale says the mines order continuously on a week-to-week basis. “Mining is a very intense and abusive mechanical operation,” he says. “These machines are at work in hard, challenging work sites, which creates more wear and tear than compared to what occurs at construction sites.”

For instance, mine operations run equipment seven thousand-plus hours a year on average, Gerondale says, whereas a construction contractor most likely only logs one thousand hours per year on the most used pieces of heavy equipment. That consistent need for parts and service may just be a saving grace for the mining equipment dealers. Trends in the ordering of new equipment are more like a rollercoaster ride than a highway drive. Both Gerondale and Lowman know even having a proposal to bid on is highly dependent on the budgets of mining operations. The past couple years have seen a bit of dip in new equipment sales. As gold prices dropped $600 an ounce between September 2011 and today, so has the pace of equipment sales for those types of placer, above ground mining operations. “Going from $1,800 to $1,200 is a big deal,” Gerondale admits with a detectable empathy for mine operators. “It just all goes back to economics, budgets, and the profitability of the mines.” R Freelancer Amy M. Armstrong writes from Eagle River.

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special section

Mining

Red Dog Mine Celebrates 25 Years Unique partnership between NANA and Teck sets it apart By Julie Stricker

NANA Regional Corporation, Inc. Board Chairman Don Sheldon of Noorvik and President and CEO Marie Greene at the Red Dog Mine.

isit the dining hall at the Red Dog Mine in Northwest Alaska and one can get a taste of what sets the mine apart from all others in Alaska. At Red Dog, workers are as likely to be dipping a piece of dried fish into seal oil as dunking a French fry in ketchup. Caribou, muktuk, and other traditional Iñupiat foods are often preferred instead of more common camp food such as steak and hamburgers. The mine, 80 miles north of Kotzebue and 106 miles north of the Arctic Circle, is the second-largest zinc mine in the world. It sits on land owned by NANA Regional Corporation, which has forged a unique partnership with Canadian company Teck Resources Limited. Teck Resources subsidiary Teck Alaska operates Red Dog, which is held up as a positive example of corporate and indigenous cooperation. Sixty percent of the mine’s 500 workers are NANA shareholders. The mine captures and celebrates the culture of the Iñupiat people, says Shelly 120

Wozniak, senior director of corporate communications for NANA. Sixty-five percent of Red Dog employees live in the region. Schedules are flexible so workers can participate in subsistence activities. “It’s a very unique place,” she says. “People live there two weeks out of every month for the large part, so it’s like a second home.” Instead of heading back to their rooms after their shift is done, workers at Red Dog can often be found playing basketball, doing yoga, taking sewing classes, and playing music, says Lance Miller, vice president of natural resources for NANA. “Red Dog is really a special place,” Miller says. “It’s a sense of community you don’t really find in a lot of remote camps. There’s a sense of family, and people care about each other.”

with the mandate to create economic opportunities for its Iñupiat shareholders, which now number more than thirteen thousand. It also works to protect its lands and traditional culture, a task that may seem to be at odds with large-scale mining. But, from the beginning, NANA has worked with shareholders, listening to their concerns and working in cooperation with them and Teck on general oversight of the mine, subsistence protection, and shareholder employment, Miller says. It’s been a successful partnership from both sides of the table. The zinc deposit at Red Dog was discovered in the 1950s by pilot Bob Baker and named after the family pet. NANA claimed the land under ANCSA and in 1982 began talks with Cominco Ltd. and NANA shareholders about their goals for mine operations.

The Backstory NANA was created under the 1971 Alaska Native Claims Settlement Act

The agreement states that the mine will: n Protect subsistence and the Iñupiaq way of life

Alaska Business Monthly | November 2014 www.akbizmag.com

n Create lasting jobs for NANA shareholders n Provide opportunities for NANA youth n Act as a catalyst for regional economic benefits One of the first items they discussed was the route of the fifty-two-mile road between the mine site and shipping facilities, taking into account fish spawning, caribou migration, and waterfowl nesting sites. The road may be closed during caribou migrations to reduce the risk to the herds. In addition, shipping schedules are designed to minimize impacts on whale and seal hunts. Whale hunters and mine representatives meet annually. When concerns were raised about dust blowing from trucks along the haul road, millions of dollars were spent to study the potential health effects of the zinc dust. A fleet of steel-covered selfdumping trailers was ordered to transport the ore, as well. Red Dog went into production in 1989 and marked its 25th anniversary this summer. In July, a celebration at the mine drew in special guests such as former Alaska Governor Bill Sheffield; NANA Regional Chair Don Sheldon; Teck President and CEO Don Lindsay; former NANA President Willie Hensley; and past chair Christina Westlake, many of whom helped create the partnership.

Economic Engine The mine’s effects are felt from Barrow to Metlakatla, Wozniak says. “Red Dog is to Northwest Alaska what Prudhoe Bay is to Alaska,” she says. “That is its importance in economics.” In 2013, at least 586 NANA shareholders worked at Red Dog, earning $29.4 million. NANA has received a little more than $1 billion in proceeds from the mine since it began operations. Of that, $608 million has been distributed to the other Alaskabased Native corporations through the Alaska Native Claims Settlement Act’s 7(i) resource-sharing clause. The clause requires Alaska Native corporations to share about 60 percent of revenues from resource development with the other corporations. NANA retained at least $392 million of revenues, of which $199 million has been distributed to shareholders www.akbizmag.com

as dividends, Wozniak says. According to the Alaska Department of Commerce, Community, and Economic Development, “Red Dog Mine contributes an estimated $558 million to the statewide economy. Overall, Red Dog Mine directly and indirectly supports 2,800 Alaska jobs and $166 million in compensation.” It is the economic engine for Northwest Alaska, enabling the establishment of the Northwest Arctic Borough, funding it through Payment in Lieu of Taxes that fund a variety of services for residents, Miller says. “Another interesting trend is high school attainment, which has increased since 1980,” Miller says. “It grew at a faster rate than the statewide trend.” In the village schools, middle schoolers post on the wall what they want to be when they grow up. “In Shungnak, over half of them, 60 percent, wanted to work at Red Dog,” Miller says. “We’re encouraging more students to go into the science and engineering fields as well. Now there are upwards of three generations who have worked at the mine. We’re hopeful there will be many more.”

Vast Reserves Red Dog still holds vast reserves. Production began in 1989 on the Main Deposit, which contained 77 million tonnes of ore containing 17 percent zinc, 5 percent lead, as well as a smaller amount of silver. Main Deposit was mined out and operations switched in 2010 to the Aqqaluk Deposit, which is estimated to contain 51.6 million tons of reserves containing 16.7 percent zinc and 4.4 percent lead. It is mined using an open pit, truck, and loader operations, using conventional explosives to break up the ore. A third deposit, Qanaiyaq, also has been identified. The ore is crushed and zinc and lead concentrates are produced on site through a flotation process and shipped to the Chukchi Sea coast, where they are stockpiled until they can be barged out during a short, ice-free summer window. The mine operates year-round and is self-reliant, with its own airport, power generation facility, shipping facilities, and worker housing. In 2013, Red Dog produced 551,300 tonnes of zinc in concentrate and is expected to produce between 500,000 and 525,000 tonnes of zinc in concentrate and November 2014 | Alaska Business Monthly

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95,000 to 100,000 tonnes of lead in concentrate in 2014. The mine provides 70 percent of US zinc production and a significant percent of Alaska mineral exports. Under current projections, the mine is estimated to be in operation through 2030. The concentrates are shipped to Teck’s metallurgical facilities in Trail, British Columbia, and customers in Europe and Asia. Miller enthusiastically ticks off some of zinc’s uses: 60 percent of zinc is used for galvanizing steel to prohibit rust, making buildings and equipment more sustainable. “What used to last ten years now goes thirty to fifty,” he says. “You used to be able to look through the floorboard of the car.” It is also used for plating for roofs, vulcanizing rubber to make tires, fertilizer, treating colds, and to help prevent diarrhea deaths of zinc-deficient children in developing countries.

‘Fascinating Metal’ “It’s a fascinating metal because it’s so important for industrial growth, for society, and for health,” Miller says. “As far as the future, prices are up right now. The large zinc mines around the

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“Over time, NANA will get a bigger share... It’s not just pure profit, it’s the net profit. Any expansion of the mine—NANA also has to help fund that as well.”

—Shelly Wozniak Senior Director of Corporate Communications, NANA

world are closing because they’re depleting their resources.” The mine is also a leading producer of lead, which is used in lead-acid batteries. Stocks of zinc are at a multi-year low, Miller says. “There’s a demand that’s growing,” he says. “There’s clearly a supply. All the experts agree there is a gap and we’re seeing zinc as one of the stronger and higher-priced metals.” That’s all good news for NANA because of the way the corporation receives net proceeds from the mine, Wozniak says. “Over time, NANA will get a bigger share,” she says. “It’s not just pure profit, it’s the net profit. Any expansion of the mine—NANA also has to help fund that as well.” In addition to mining operations, NANA works closely with Teck to safe-

guard subsistence-related issues on its lands. Many NANA shareholders rely on traditional subsistence foods such as marine mammals, fish, caribou, and berries to stock the freezers in the dining hall. “What’s unique about Red Dog is the mine life that’s published out there is 2030,” Miller says. “In mining terms, that’s a long time. It’s been around twenty-five years; we have another sixteen years in the books. Speaking as a geologist, there’s a few great mineralized zinc areas in the world, and the Red Dog area is one of them. The opportunity for continued production, for more work into the future for more generations is good, we hope.” R Julie Stricker is a journalist living near Fairbanks.

Alaska Business Monthly | November 2014 www.akbizmag.com

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special section

Mining

Photos courtesy of Diamond Gold Corporation

Mining Jewels, Gems, and Ore

Ed Ellis, president of Diamond Gold Corporation, mining by hand at the North Yenlo Hills in the Yentna Mining District.

It’s ‘lode’ out time for the Diamond Gold Corporation By Tasha Anderson

ining in Alaska can have huge payouts, but every operation starts with a potential discovery and a lot of work. Anyone with the determination and knowledge can try to make a go of mining in Alaska, much like Ed and Ann Ellis are doing at North Yenlo Hills in the Yentna Mining District. The Yentna Mining District is located approximately forty miles west of the Parks Highway south of the Alaska Range, eighty-five miles northwest of Anchorage. Looking north from the property, one can see Mount McKinley

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approximately sixty miles away. Diamond Gold Corporation has more than 3,000 acres of minable ground in increments of 40 to 160 acres each in an area between the Kahiltna River and the Yenlo Hills. It operates two mines, manages a milling site, and is building a town site. The two mines are Fire Brick Mine and Sable Elegance Mine, which are approximately seven miles apart.

Fire Brick Mine Diamond Gold announced the opening of Fire Brick Mine, a hard rock lode de-

posit in the Yenlo Hills, this last March. It’s an underground gold, silver, and copper mine. In March, an upper adit at an elevation of 2,489 feet was driven into the vein using overhand stoping methods. “This year we opened up a lower level following the vein system; that’s at a lower elevation so we can have access to it all winter,” Diamond Gold Secretary/ Treasurer Ann Ellis says. That area of Southcentral has a high level of snow up in the hills, so the lower elevation equates to less snowfall, easing access to the mine.

Alaska Business Monthly | November 2014 www.akbizmag.com

Our People Our Community What’s family friendly? A supportive workplace and a flourishing community.

Daniel and Aileen Valdez know firsthand what “family friendly” means. Eleven years ago, Daniel started as a Mill operator; now he’s the mine’s Ore Processing Reliability Engineer. When he’s not parenting, hunting, snowboarding or restoring his ’51 Chevy pickup, he’s hard at work. What’s great about Fort Knox is the “opportunity for on-the-job training and a chance to advance in the company,” says Daniel. For Aileen, a Fort Knox Accountant Tech, it’s all about numbers. But outside of work? It’s all about volunteering with the American Heart Association, taking courses at UAF, and caring for their young daughter. “We work close to home,” Aileen says. “Fairbanks is awesome, Fort Knox is family friendly, and you can’t beat the competitive wages and benefits.” The Valdez family is a prime example of how a flourishing community and a supportive workplace go hand-in-hand.

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Ed Ellis, president, says, “The Fire Brick veins averages 0.0875 opt [ounces per tonne] gold, 21 ppm [parts per million] silver, and 3 pounds copper per tonne. The upper vein runs a highgrade zone: 0.338 opt gold, 2 opt silver, and 3 pounds copper per tonne. Cobalt and bismuth occur in the veins, and elevated bismuth tracks closely with high gold assays. Sulfide stringers in the rock below veins carry palladium values.” Fire Brick is estimated to contain a total of 107 million tons of sulfide ore; 2 million ounces of gold; 50 million ounces of silver; 300 million pounds of copper, and palladium at an undisclosed amount. For now, the ore from Fire Brick is being stockpiled, waiting completion of the mill facilities. Ann estimates that the mill site construction will be completed and milling will begin in the winter of 2014-2015. The mill site is approximately three quarters of a mile from the Fire Brick mine. The initial milling process will incorporate “fine grinding and gravity separation, after which the sulfide minerals will be collected, dried, and bagged for shipment,” Ann says. In time, she says, Fire Brick will “ramp up” to using flotation cells as well. Diamond Gold will also produce gold and silver doré bars. The company is currently soliciting buyers for the bagged sulfide copper ore concentrates.

Sable Elegance, Phase I and II The second mine is the Sable Elegance Mine, or as Ed refers to it, a “world-class gem field.” Operations at Sable Elegance include Phase I and Phase II. “Phase I is placer mining Sable Creek gem gravels,” Ed says. According to the 2007 Mine Plan submitted for the Sable Elegance mine, mining will begin at the lowest one mile of Sable Creek, a section which “contains a measureable proven placer reserve of 350,000 cubic yards of gem gravels grading six carat per cubic yard of color gemstone and diamond.” Ann says that the Yentna Gem field deposit in which the Sable Elegance project is located contains an estimated 375 million rough carats colored gemstone and diamond in approximately 75 million cubic yards of placer gem gravels. The placer colored gemstone resource is valued at more than $6 billion; the cut-gem value exceeds $32 billion. Gemstones in the deposit include facet-able opal, sapphire, ruby, garnet, 126

and diamond. “Stones cut in cabochon are opal, emerald, agate, jade, red and green jasper, and opalized wood,” according to the 2010 report “Alaska’s Yentna Country Gemstone Deposits.” Phase II of Sable Elegance will take place at the completion of Phase I, which Ann estimates will take five years. Ed says Phase II is “hard rock mining of the Sable diamond pipe.” The expected life of Sable Elegance is approximately fifty years. The Sable Elegance phases will have a byproduct of gold concentrates. In addition, the mine will produce rare earth oxide sands and industrial abrasives, “which are emery, garnet, and diamond dust. There is an industrial use beside the gem use,” Ann says.

Powering the Mine One obstacle every remote mine faces is how to get power. Diamond Gold has several solutions to that problem. It mapped coal seams near Skwentna in 1998. Ed and Ann have discovered and mapped other coal seems with the hopes of being able to mine them, providing power to Fire Brick, Sable Elegance, and the town site. Alternatively, Diamond Gold may purchase coal from Usibelli and is exploring alternative energy options such as hydroelectric from Sable, Kimberly, or perhaps Crystal Creek. They estimate that they will need to produce 5 megawatts of power to operate the mill and camp at Sable Elegance mine. They are currently using portable diesel generators, which require on-site fuel storage of thirty thousand gallons of diesel. Setting up Camp Right now, Ann and Ed are the miners, the marketers, the road and runway builders, and the surveyors for Diamond Gold. “Right at this time we’re using our mining tools, which are just hand tools,” Ann says. “It’s all pretty much done by hand at this stage.” While Diamond Gold has had industrial equipment in to work the mine in the past, road access issues have made it difficult to have such equipment as a consistent resource. With that in mind, the amount of work that Ann and Ed have accomplished is a little staggering. “[In the Fire Brick area] we have a little cabin; we have a helicopter pad; we’ve hand built a road… it’s four wheel able—a

little dangerous, but you know how it goes. We did make it in,” Ann laughs. Last year Ann and Ed completed a seven-mile road between Fire Brick and the Sable Elegance mine, which was also done by hand and can be accessed by four wheelers. “Because of the lack of road access, we are currently maintaining two runways: one at our Kahiltna Camp, which is where we are processing gems, and at the Sable town site,” Ann says. They are currently building the Sable town site, which is located between the two mines. It’s intended to house miners and their families, an issue Ann is passionate about. “Our whole objective of setting up this corporation was to provide Alaskans with jobs… [where] their families can be with them,” she says. “I’m tired of families being separated all the time for a workforce in Alaska. That’s our goal and we’re sticking to it.” In the town site, Ed has already surveyed out fourteen lots which are 50 feet by 150 feet and are located on the east side of the 1,500-foot runway. Those lots “will be for employee housing with water and sewer service,” Ann says. They currently have several wood structures with tarp walls which will receive plywood walls as soon as possible. The current runway will be expanded to a final paved size of 5,500 feet by 500 feet, a goal of Ed’s, Ann says. Diamond Gold is planning an estimated workforce of three hundred employees with a collective annual payroll of $28 million a year. While the Ellises are the driving force behind the company, they aren’t the only ones involved. “Right now we have a ‘support force,’” Ann says. “They help me in town, they help me with various stages—it’s not twenty-four/seven and it’s not eight hours a day—when Ed and I need a little help, we can get it.” Ann feels strongly about the responsibility to ensure that lands leased for mining are being productive. “I’m not to just take land and tie it up,” she says. “This is the right time, the right location, the right mine.” R Tasha Anderson is the Editorial Assistant for Alaska Business Monthly.

Alaska Business Monthly | November 2014 www.akbizmag.com

special section

Mining

Pebble Update

File photo courtesy of the Pebble Partnership

Deposits of copper, gold, and other minerals have been defined, and the proposed Pebble mine is seeking a new partner to continue to the permitting stage.

Northern Dynasty seeks partners, fights for due process By Louise Freeman

he Pebble Project mineral deposit could include 26 billion to 55 billion pounds of copper, 2.3 billion to 3.3 billion pounds of molybdenum, 40 million to 67 million ounces of gold, and palladium, silver, and rhenium in commercially viable amounts. It’s a project that could generate a billion dollar a year operating budget. The status of Northern Dynasty Minerals Limited’s (Northern Dynasty) copper-gold-molybdenum Pebble Project has undergone rapid change in the past year. In September 2013, Londonbased Anglo American plc announced it was withdrawing from the Anchoragebased Pebble Limited Partnership (Pebble) after investing $560 million in the project over a period of six years.

Sole Financier Lost At that time, Northern Dynasty not only lost a key partner but the sole financier of the Pebble Project. Anglo had originally committed to funding 128

up to $1.49 billion. Anglo and ity with news breaking every Canada-based Northern Dyfew months. The latest was the nasty each owned 50 percent announcement in early Sepof Pebble, which was created tember that the Environmento permit, build, and operate tal Protection Agency (EPA) the mine. is being investigated by the “That [Anglo’s withdrawHouse Oversight and Governal] required us to downsize ment Reform Committee and pretty significantly in the fall Heatwole the Environment and Public of last year. Pretty dramatic, Works Committee to deterwe had eighty-five full-time employees mine if the Natural Resources Defense between Anchorage and Iliamna. We’re Council (NRDC) had undue influence down to a fraction of that. That was a over the EPA’s drafting of its “Assessment major impact [on us] and had a signifi- of Potential Mining Impacts on Salmon cant impact on the contracting commu- Ecosystems of Bristol Bay, Alaska.” nity, and on a lot of firms doing our enThe House Oversight Committee vironmental studies, engineering work members wrote in a letter to the EPA that was contracted out, a whole range that documents obtained by the comof those things—those went down to mittee “confirm that the NRDC signifia minimal presence then, too,” says cantly shaped EPA’s decision to severely Pebble’s Vice President of Public Affairs limit the operation of the proposed PebMike Heatwole. ble Mine in Bristol Bay, Alaska under Since Anglo’s withdrawal from the section 404(c) of the Clean Water Act. It project, there has been a flurry of activ- appears that NRDC’s unprecedented ac-

Alaska Business Monthly | November 2014 www.akbizmag.com

cess to high-level EPA officials allowed it to influence EPA policy decisions and achieve its own private agenda. Such collusive activities provide the NRDC, and their financial backers, with an inappropriate opportunity to wield the broad powers of the executive branch.” At press time the investigation was ongoing.

Regulatory Process Initiated In February, EPA Region 10 announced it was initiating a regulatory process under a seldom-used section of the Clean Water Act, Section 404(c), to determine whether to veto or place restrictions on the development of the Pebble Project. In April, Pebble submitted a comprehensive response in which it claimed the EPA’s action—before the permitting process has been initiated—goes well beyond its statutory authority as established by Congress and would have the effect of undermining the regulatory authority of the State of Alaska and the US Army Corps of Engineers, which has the authority to issue wetlands dredge and fill permits under the Clean Water Act, although the EPA can veto the permits. Hanady Kader, who works in Public Affairs at the EPA Region 10 office in Seattle says that “initiation of this 404(c) review process does not prevent the Pebble Limited Partnership from applying for a Section 404 [wetlands] permit. The Pebble Limited Partnership is free to submit a permit application at any time. However, now that the 404(c) process has been initiated, the Army Corps cannot issue a permit for fill in wetlands or streams associated with mining the Pebble deposit until EPA completes the 404(c) review process.” The EPA Region 10 214-page Proposed Determination, released in July, did not move to veto the project but rather to restrict all discharge of dredged or fill material related to mining the Pebble deposit that would result in loss of streams, wetlands, lakes, and ponds or streamflow alterations, with the intention of protecting the Bristol Bay fisheries. Pebble immediately cried foul, claiming that the restrictions amount to a de facto veto. Restricted Dredge and Fill According to an EPA Region 10 report, the Proposed Determination sets rewww.akbizmag.com

strictions on the placement of dredge and fill material from only a narrow geographic area surrounding the Pebble Deposit. EPA’s initial conclusion states mining the Pebble deposit would affect the South Fork Koktuli River, North Fork Koktuli River, and Upper Talarik Creek watersheds. The restrictions in the Proposed Determination are based on the construction and operation of a 250,000 ton mine; this was the smallest of the three mine scenarios EPA analyzed in the multi-year Bristol Bay Assessment. The Proposed Determination allowed for public comment over a sixty-day period that ended September 19. Public meetings held over a four-day period in August, in places ranging from New Stuyahok to Anchorage, attracted more than nine hundred attendees. The public comment period concluded step two of the four-step 404(c) Review Process. EPA Region 10 is reviewing several hundred thousand public comments and may move toward a Recommended Determination to the EPA Assistant Administrator for Water. Step four will conclude with a Final Determination, not expected until after January 2, 2015. “There is absolutely no environmental harm to allow the project to go through the NEPA [National Environmental Policy Act] process, which is held up by the environmental community as the magna carta of environmental laws for its scientific rigor. Everyone knows the rules of the game, and it is a critically important process for evaluating projects. That’s our core message: we want the opportunity to have that thorough and objective review of our project,” Heatwole says.

Next for Pebble In February there was a major change in leadership at Pebble as long-time CEO, John Shively, stepped aside to take over as chairman of the partnership’s board of directors. The new CEO, attorney Tom Collier, gained expertise in the federal environmental permitting process as former chief of staff for former Department of the Interior Secretary Bruce Babbitt and through his extensive work on several Alaska projects—TAPS reauthorization, Alpine, and CD-5.

Northern Dynasty is currently looking for a partner or partners so they can advance to the next stage of the process. To aid potential partners in assessing the Pebble project, Northern Dynasty has created a “data room” where companies can go and review all the work that has been done. Heatwole calls such an approach “kicking the tires” before a company makes the decision to invest. “There remains a significant interest in [the data room] and there are companies that are actively looking at this time,” says Heatwole. “[But] investors want to know if they invest in a project, what’s the time window to know if they will be able to advance it and if there is some level of stability and assurance, otherwise investment will go somewhere else.” This past spring, global mining giant Rio Tinto Copper announced it was divesting its 19.1 percent shareholding in Northern Dynasty by way of gifting its 9 million shares to two Alaska charitable foundations: Bristol Bay Native Corporation Education Foundation and Alaska Community Foundation. In June, the nonprofits both liquidated the gifted stocks for close to $13 million in total. Rio Tinto’s withdrawal has had no direct financial impact on Pebble because it was not contributing money to the project. The company had invested in Northern Dynasty in 2006 before the establishment of the Pebble Limited Partnership in 2007 and had held that position even after Anglo American withdrew. A 2013 study authored by IHS Global Insight found the Pebble Project has the potential to support fifteen thousand jobs and contribute more than $2.5 billion annually to US GDP over its expected lifespan of twenty-five years. “I think it is important for the Alaska audience to know that the development of our major projects up here has major benefits down south,” Heatwole says. “Once we’re in operation, we’ll need large dump trucks, light vehicles, process chemicals—a whole host of things and that is where you start to see the spin-off economic effect in other parts of the country.” R Louise Freeman writes from Anchorage.

November 2014 | Alaska Business Monthly

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special section

Mining

ALASKA 2014

MINING IN REVIEW By Curtis J. Freeman

he news from Alaska’s mining industry in 2014 was decidedly mixed, with most operating mines doing well on softer but still reasonable metals prices. The Fort Knox mine poured its 6 millionth ounce of gold in late 2013 while Red Dog is celebrating 25 years of continuous production (1989-2014). New mine development expenditures were down significantly in 2014 while Alaska’s mineral exploration industry experienced its third consecutive year of declining expenditures with total exploration spending likely falling to the lowest level in a decade. The exploration turn-around that was being predicted in early 2014 did not materialize, leaving only a few projects with budgets

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above the maintenance level. This mixed bag of fruit also was present on the regulatory front with EPA’s heavy-handed regulatory threats at Pebble in stark contrast to the State of Alaska’s progressive infrastructure support for projects like Bornite, Niblack, and Bokan-Dotson Ridge and the steady permitting progress enjoyed by the Donlin project over the course of the last year.

WESTERN ALASKA Teck Resources Ltd. and partner NANA Inc. announced year-end 2013 and first half 2014 results from its Red Dog mine. For 2013 the mine produced 504,100 tonnes of zinc in concentrate. Zinc ore grade for the year

was 17.0% and mill recoveries were up slightly to 84%. The mine also produced 96,700 tonnes of lead in concentrate for the year, levels that were up over full year 2012 production. Lead ore grade for the year decreased to 3.96% while mill recoveries increased slightly to 64.9% compared to 2012. Operating profit after depreciation, amortization, and price adjustments for 2013 was $364 million, compared with $384 million in 2012. Mill throughput for 2013 was a record 3,850,000 tonnes due in part to softer ore, which also contributed to the better recoveries for zinc and lead. During the first half of 2014 the mine produced 293,200 tonnes of zinc in concentrate. Zinc ore grade decreased slightly to

Alaska Business Monthly | November 2014 www.akbizmag.com

16.7% while mill recoveries were down slightly to 82.9%. The mine also produced 56,100 tonnes of lead in concentrate. Lead ore grade increased to 4.3% while mill recoveries decreased significantly to 61.2%. The mine posted a $168 million operating profit for the first half, up significantly from the $127 million profit in the year previous period, partly due to rising zinc and lead prices. Zinc and lead production in the second quarter increased 2% and 7%, respectively, due to the processing of softer ores, which substantially increased tonnes milled in the period. These items were partially offset by lower zinc ore grades and recoveries. The mine plans to ship 996,000 tonnes of zinc concentrate and 184,000 tonnes of lead concentrate from the port facility during the 2014 shipping season. Congratulations are also in to partners Teck Resources and NANA Inc. on the 25th anniversary of operations at Red Dog!

proximately 22 kilometers from Teck/ NANAâ&#x20AC;&#x2122;s Red Dog mine. At $0.92 cent zinc average price and an 8% interest rate, the post-tax internal rate of return was 9.7% with a net present value of $25 million. The study shows that the depositâ&#x20AC;&#x2122;s economics is sensitive to the price of zinc: an average zinc price of $1.00 more than triples the net present value and pushes the internal rate of return to 13.4%. As modeled, an open pit operation at Lik South would have average annual production of 234,000 dry tonnes of zinc concentrate and 55,800 dry tonnes of lead concentrate. In total, 17.1 million tonnes of ore would be milled at a rate of 5,500 tonnes per day at an average grade of 7.7% zinc, 2.6% lead and 47 grams of silver per tonne. The study estimated a total capital cost of $352 million including a 20% contingency for a 2 million tonne-per-year mine and mill with an initial 9 year mine life.

conduct infill drilling at approximately 50 meter spaced centers, with the goal being to convert a portion of the industry compliant inferred resource of 284.71 million tonnes at 4.5% graphite to the indicated and/or measured category. The resource represents drilling along 4.8 kilometers of an 18 kilometer long conductor. The 2014 drilling is designed to continue to demonstrate the continuity of the mineralization both along strike and down dip. The company also plans to collect a small metallurgical bulk sample from both surface exposures and existing drill core. Previous mineral beneficiation tests using a leaching process yielded results exceeding 99.9% carbon from a rough concentrate produced from floatation which had an initial 92% carbon head grade. Mineralization on the property is characterized by coarse crystalline graphite (greater than 80 mesh) within graphite-bearing schists.

Zazu Metals Corporation announced positive results from the Preliminary Economic Analysis (PEA) completed at its Lik property ap-

Graphite One Resources Inc. announced commencement of drilling at its Graphite Creek property. The company plans to

Fire River Gold Corp. announced that Waterton Global Value, LP has taken full and unrestricted ownership of the Nixon Fork

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gold-copper mine due to a default by Fire River on the terms of a credit agreement with Waterton. Waterton will accept all rights to the property as full and final satisfaction of the indebtedness. As part of the final settlement agreement Waterton also agreed to pay to Fire River approximately $250,000. Waterton’s immediate plans for Nixon Fork were not released. NovaGold Resource Inc. and 50:50 joint venture with Barrick Gold Corp. made significant permitting progress at their Donlin Gold project over the last 12 months. The company has held public scoping meetings in various Yukon-Kuskokwim villages and has continued its workforce initiatives, community outreach, and social engagement efforts throughout the region. In 2013, project expenditures were $29.2 million compared to $33.9 million in 2012. During the first half of 2014 the US Army Corps of Engineers, and cooperating agencies, completed identification of project alternatives, including variations on certain mine site facility de-

signs, local transportation options, and power supply options. Preparations of the remaining components of the preliminary draft EIS are expected to be completed over the next two quarters. The partners also submitted a right-of-way lease application for a proposed liquefied natural gas pipeline to the site of the proposed Donlin mine project. The 14-inch diameter pipeline would originate at the west end of the Beluga natural gas field approximately 30 miles northwest of Anchorage and run 315 miles to the proposed mine site. The planned pipeline will cross a variety of lands, with about 207 miles located on State of Alaska lands. A feasibility study completed in 2011 envisions a 53,500-metric-ton-per-day mill producing an average of 1.1 million ounces of gold annually at a cash cost of $585 per ounce for 27 years. The mine would consume roughly 85 megawatts of electricity, enough power for a city of around 120,000 people. The partners expect to spend approximately $24 million at Donlin in 2014 for agency review and in preparation for issuance of the draft EIS for public review in 2015.

Southern Crown Minerals Ltd., an Alaska newcomer, announced acquisition of the LunaQuicksilver, Kisa, and Chilly goldsilver +/- copper projects near Bethel. The company was planning a 1,200 meter drilling program for fall 2014 to follow up ground geophysical surveys completed earlier in the year. The key Luna–Quicksilver prospect contains two large un-drilled outcropping semimassive sulfide stockworks 1.2 kilometers distant from each other. Rock chip and channel sampling of Luna stockwork outcrop has returned up to 64.7 grams of gold per tonne and 74 grams of silver per tonne. Rock chip and channel sampling of Luna East sulfide outcrop has returned up to 1.2% copper and 90 grams of silver per tonne. The Luna-Quicksilver veins are hosted in quartz-carbonate stockwork veins in altered sediments and intrusive with anomalous gold, silver, antimony, bismuth, arsenic, molybdenum, tellurium, and tin with Luna East also highly anomalous in copper with values up to 1.2%. Kisa, drilled with 6 holes by Gold Crest Mines in 2007, intersected gold in

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a breccia pipe with best intercept of 126 meters grading 0.65 grams of gold per tonne from hole K07-05. Chilly hosts a 500 meter long gold anomaly (>100 part per million gold) with a larger coincident arsenic anomaly (>250 parts per million arsenic). Northern Dynasty’s Pebble gold-copper-molybdenum project has been in the news all year as they continue their battle with the US Environmental Protection Agency’s (EPA) planned, precedent-setting, preemptive, pre-permit prohibition of the porphyry project. The EPA’s actions were predicated on their flawed Bristol Bay Watershed Assessment (BBWA), an initiative launched by the EPA in February 2011 to assess the effects of current and potential future development on the natural resources of Bristol Bay. EPA released their final product to widespread criticism about the report’s flawed methodology and findings. Joining Northern Dynasty in condemning the report and the planned actions were the State of Alaska, Alaska Native groups, and expert Peer Reviewers

commissioned by the federal agency. The EPA’s claim that their precedentsetting proposal is specific to the Pebble deposit and would not affect other deposits or claims was met with immediate and extreme skepticism by mining companies, mining advocacy groups, and natural resource industry representatives. EPA’s credibility in this matter was further damaged when the Washington Times reported that internal EPA memos dating back to at least 2008 were urging this never-before attempted pre-emptive veto of Northern Dynasty’s right to develop Pebble. The EPA did not announce their review of the Bristol Bay watershed until 2011. The Washington Post reported that, despite EPA’s claim that the Bristol Bay watershed study was prompted by requests from Alaska tribal entities, internal EPA memos that long pre-date the study showed that “EPA officials had regular contacts with potential opponents of the mining project, coordinating activities with environmentalists and even coaching local tribes on how they could strengthen their case opposing the project.”

Millrock Resources Inc. and funding partner First Quantum Minerals Ltd. announced completion of the field exploration work on its Alaska Peninsula project. Initial work consisted of 1,140 line kilometers of high-resolution airborne magnetic and radiometric data collected over the Bee Creek, Mallard Duck Bay, and Kawisgag prospects. The second phase consisted of geological mapping along with rock and a soil geochemical sampling. Combined results from the $600,000 effort will be utilized to outline and prioritize drilling targets for 2015. First Quantum retains an option to earn up to an 80% joint venture interest in the property through a twostage option agreement. The project is comprised of mineral lands owned by and leased from Bristol Bay Native Corporation. Welcome to Alaska First Quantum Minerals Ltd!

Redstar Gold Corp. had a busy year at its flagship Unga gold project near Sand Point. The company announced that it has completed purchase of a 100% ownership Shuma-

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gin property from Magnum Hunter Exploration. It then acquired the remainder of the property rights from Full Metal Minerals Ltd. by assuming its Full Metal’s obligations on its Option to Lease with the Aleut Corporation, an Alaska Native-owned Regional Corporation. Redstar is the first company to consolidate land holdings at Unga, a volcanic-hosted, intermediate-sulfidation epithermal vein system with over 22 kilometers of documented mineralization on two parallel gold trends. Past production from the Apollo and Sitka vein systems from 1891 to 1922 is estimated at 150,000 ounces of gold at an average grade of 10.3 grams of gold per tonne. The company then launched a two month 2014 surface mapping and sampling program that includes select, continuouschip, and gridded rock sampling along the project’s two principal mineralized structural trends, Shumagin and Apollo. The overall objective of the 2014 surface program will be to delineate diamond drilling targets with the potential to host high-grade underground mineable gold bearing structures.

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Full Metal Minerals Ltd. announced early in 2014 that it had re-acquired 100% interest in the Pyramid copper-molybdenum-gold porphyry project by acquiring Antofagasta Minerals S.A.’s 51% interest in in the project by paying an aggregate $5.5 million over time. Full Metal then entered into a tripartite letter of intent with International Enexco Inc. and Choice Gold Corp. to consolidate the Contact copper project in Nevada and the Pyramid copper project in Alaska. The Full Metal shareholders are expected to own approximately 19% of the combined company, which is expected to be renamed CopperBank Resources Corp. with the shareholders of Choice, Enexco and the subscribers to the private placement owning approximately 6%, 60%, and 16% of CopperBank, respectively. It is also anticipated that CopperBank will complete a five for one share consolidation upon closing of the transaction. Full Metal’s contribution to this transaction is only contemplated to include the subsidiary holding the Pyramid copper project. The immediate

impact to the Pyramid copper project was not discussed. The inferred resource for Pyramid now stands at 173 million tonnes grading 0.35% copper, 0.02% molybdenum and 0.088 grams of gold per tonne.

INTERIOR ALASKA Kinross Gold announced year-end 2013 and first half 2014 results from the Fort Knox mine near Fairbanks. Total 2013 production was up significantly over 2012 totals. The mine produced 421,641 ounces of gold at a cost of $561 per ounce versus 359,948 ounces of gold produced at a cost of $663 per ounce in 2012. During 2013 the mill processed 21,634,000 tonnes of ore grading 0.82 grams of gold per tonne. Mill recoveries were 83.7% for the year. During 2013 the mine placed 29,751,000 tonnes of ore grading 0.29 grams of gold per tonne on the valley leach facility. The 17% increase in total production was due primarily to higher mill head-grades and an increase in ounces recovered from the leach pad as a result of the commissioning and ramp-up of the second carbon-

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in-column plant, partially offset by a decrease in tonnes of ore processed. In a fitting end to a stellar 2013, the company announced that the mine pored its 6 millionth ounce of gold on December 18! When the mine poured its first ounce of gold, in late 1996, the deposit had a little over 4 million ounces of gold in its total resource. Of that, a little less than 3.5 million ounces was expected to be recoverable over its 10-year mine life. So here they were, 17 years down the road, pouring ounce number 6 million. Congratulations to all the employees and contractors that made it happen! For the first half of 2014 the mine produced 174,904 ounces of gold at a cost of $684 per ounce in the second quarter versus 195,992 ounces of gold at a cost of $566 per ounce in the year previous period. In the first quarter of 2014 the mill treated 3,307,000 tonnes of ore grading 0.66 grams of gold per tonne with a mill recovery of 84%. The valley leach saw additions of 2,790,000 tonnes of ore grading 0.27 grams of gold per tonne. During the second quarter the mine milled 3,241,000 tonnes of ore grading 0.50 grams of gold per tonne

and processed an additional 6,638,000 tonnes of ore grading 0.29 grams of gold per tonne via valley leach. Gold recovery in the mill averaged 84%. Gold recovery on the heap leach pad was not released. The mine’s production decline and cost increases are primarily due to lower ore grades. Freegold Ventures Limited announced that it has engaged Tetra Tech Inc. to complete its initial Preliminary Economic Assessment (PEA) on its Golden Summit project located near Fairbanks. The PEA will examine potential for a standalone heap leach operation in the current Dolphin-Cleary Hill resource area and will also include a comprehensive review of the current sulfide resource using different cut off grades. Currently industry compliant indicated resources at Dolphin-Cleary Hill are 79,800,000 tonnes averaging 0.66 grams of gold per tonne for 1,683,000 ounces, and an inferred resource of 248,060,000 tonnes averaging 0.61 grams of gold per tonne for 4,841,000 ounces using 0.3 grams of gold per tonne as a possible open pit cut

off. Since 2011, Freegold has increased indicated resources by 867% and inferred resources by 820%. Overall discovery costs since 2011 are estimated to be under $2.00 per ounce of gold in the Dolphin-Cleary Hill resource area. The company also announced initial cyanide leach results from metallurgical tests indicating that oxide material averaged 88% recovery, transition material averaged 57%, intrusive material averaged 56%, and hornfels-sulfide material averaged 45%. In addition a series of tests using a variety of methods were completed with the highest overall recovery coming from pressure oxidation-carbon-in-leach, with recoveries greater than 94.3%, and averaging 98.1%. Cyanide consumption was lowest under pressure oxidation- carbonin-leach requiring 0.5 to 0.7 kilograms of sodium cyanide per tonne. International Tower Hill Mines Ltd. announced that it continues to investigate a number of opportunities for optimization and cost reduction for the Livengood project. The mine plan outlined by its 2013 feasi-

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bility study was reviewed and modified to include changing pit slope designs, improvement of scheduling ore release, waste mining, and stockpile management. The metallurgical test work was reviewed to identify opportunities for optimization that may be confirmed by additional test work. Power supply alternatives were reviewed to determine how changing energy supply dynamics might impact the project assumptions regarding electrical generation. Construction and operations camp alternatives were reviewed to better define the costs of supporting the manpower requirements for the project. Environmental baseline efforts are continuing in order to prevent any significant delays in future permitting. The company also indicated that it remains open to a strategic alliance to help support the future development of the project, while it considers all other appropriate financing options. Sumitomo Metal Mining (85%) and Sumitomo Corp. (15%) recently updated future plans for their Pogo gold mine. In 2013 the mine

produced 10.5 tonnes of gold (approximately 337,500 ounces) and the partners are projecting 2014 production of approximately 10.7 tonnes of gold (344,000 ounces). The partners also indicated that commencement of production from the East Deep zone was planned for the first quarter of this year. The year-end 2013 resource/reserve estimates at Pogo total 59 tonnes of reserve and an additional 85 tonnes in resource for a total of 144 tonnes of gold (approximately 4.629 million ounces) in the Liese Zone and East Deep zones. Total production from commencement of commercial production to year-end 2013 is 2,472,632 ounces of gold at average head grades of 13 to 17 grams of gold per tonne (0.38 to 0.49 ounces of gold per ton). Average mill recovery over life of mine to date is approximately 87%. Earlier in 2014 the mine released a socioeconomic impact study of the mine that indicated the mine employed 329 workers in 2012, 70% of which were local residents. Average salary of these workers was $116,916, more than twice the State-wide average salary. The mine generated another 335 induced and indirect jobs, 215 of which

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were in the local area. These jobs contributed an additional $26 million to the Alaska economy. The mine spent $127.2 million with 290 Alaska-based vendors and contractors. The mine paid $24.3 million in taxes to State government, including $5.9 million for the Alaska Mining License Tax and $4.8 million in Alaska Production Royalty payments. The mine also contributed $811,000 to 40 Alaskan nonprofit organizations, $353,000 to the University of Alaskaâ&#x20AC;&#x2122;s Mining Engineering Research Endowment, and $300,000 to the city of Delta for various capital and special projects. Freegold Ventures Limited announced that it acquired the Shorty Creek copper gold porphyry project from Fairbanks-based Gold Range Limited. In the mid 1980â&#x20AC;&#x2122;s soil sampling identified significant gold, copper, and pathfinder elements. Limited shallow drilling (6,843 feet in 20 holes) was completed in 1989 and 1990. Significant drill intercepts include 220 feet grading 1.22 grams of gold per tonne in hole RH89-08, including 25 feet grading 4.59 grams of gold per

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tonne and 55 feet grading 1.03 grams of gold per tonne in hole RH90-19. A small soil and rock sampling program was completed in 2005. In addition to the geochemical signature, widespread alteration is associated with small bodies of biotite granodiorite, quartz porphyry, and aplite are present throughout the property. An area of extensive alteration associated with quartz porphyry and granodiorite porphyry intrusives was previously identified over a 4 kilometer by 4 kilometer area. The best exposure of the altered intrusive rocks is reported to be in the middle reaches of Shorty Creek 835 feet below mineralized outcrops on Hill 1835 and 335 feet below the bottom of the deepest drill hole on the property. The company recently completed a ground geophysics program on the project. Contango ORE Inc. announced its first resource estimate at Alaska’s newest gold discovery, the Peak zone, on its Tetlin gold project. At a 0.5 grams of gold per tonne cutoff, initial indicated resources came in at 5,970,000 tonnes grading 3.46

grams of gold per tonne, 11.0 grams of silver per tonne, and 0.25% copper. Using the same cutoff, initial inferred resources came in at 3,850,000 tonnes grading 2.07 grams of gold per tonne, 14.28 grams of silver per tonne, and 0.235% copper. Significant drill results were also released in late 2013 included 84.43 meters grading 4.988 grams of gold per tonne, 16.7 grams of silver per tonne, and 0.167% copper in hole TET13098; 95.92 meters grading 5.748 grams of gold per tonne, 6.9 grams of silver per tonne and 0.140% copper in hole TET13100; 159.25 meters grading 7.010 grams of gold per tonne, 6.6 grams of silver per tonne, and 0.102% copper in hole TET13107; 96.93 meters grading 9.060 grams of gold per tonne, 4.3 grams of silver per tonne, and 0.093% copper in hole TET13110; and 134.83 meters grading 4.848 grams of gold per tonne, 2.9 grams of silver per tonne, and 0.084% copper in hole TET13117. Initial metallurgical test results released in 2014 indicate that both gold and sulfide minerals respond to standard gravity and froth flotation treatment and that gold is not refrac-

tory in nature. The company has been reviewing acquisition offers since early 2014.

ALASKA RANGE Usibelli Coal Mine released some interesting information during 2014. The mine has been in continuous operation since 1943 and currently produces about 2 million tons of coal per year using an employee base of 130 people. Approximately one-half of its production is exported to Chile, South Korea and Japan. About 30% of the employee work force is second, third and fourth generation employees. An analysis that looked at eliminating coal from Interior Alaska’s electrical generation facilities indicated that eliminating coal, currently our lowest cost energy producer, would result in Interior rate payers absorbing an additional $200 million per year in new energy costs. On a per Btu basis, coal is half the cost of natural gas, one-third the cost of naphtha, and one-sixth the cost of diesel. Coal accounts for 85% of the energy generated by the University of Alaska but only 44% of the university’s annual energy

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costs. If the military facilities in Interior Alaska switched from coal to natural gas for energy generation, their energy costs would rise by at least 250%. For the months November through March, Usibelli accounts for one-sixth of the entire employment base of the Denali Borough. In 2012, Usibelli spent $72 million with 400 different organizations in Alaska. Interior Alaska enjoys 577 jobs and $44 million in annual payroll as a result of the mining, distribution, and consumption of coal from the mine.

Pure Nickel Inc. announced that partner ITOCHU Corporation has withdrawn from the MAN project joint venture after contributing over $23 million to exploration on the project over the last five years. The company indicated that it has retained 100% interest in the project. The company also announced results for a nickel deportment study completed for the Eureka Zone occurrence. The results indicate that the 73.5% of the nickel in the Eureka Zone mineralization is hosted by potentially recoverable nickel-iron sulfides

(63%) and nickel-iron alloys (12.3%). Only 20% of the nickel is unrecoverable in silicate mineral hosts, primarily olivine and serpentine. The 126.6 meter long composite sample was collected from hole PNI-13-069 and averaged 30 parts per billion gold, 50 parts per billion platinum, 150 parts per billion palladium, 0.28% nickel, 0.12% copper, and 0.5 grams of silver per tonne. The central 5.7 kilometer-long portion of the 15 kilometer-long Eureka zone grades 0.23% nickel, 0.08% copper, 0.02% cobalt, 170 parts per billion gold + platinum + palladium, and 0.51 grams of silver per tonne over 203 meters. Miranda Gold Corp. announced in late 2013 that it had signed an agreement with Alaska Hardrock Inc. on the Willow Creek project in the Willow Creek District near Anchorage. Historic production from land now controlled by Miranda is estimated at 500,000 ounces of gold. In 2014 the company announced that it has signed a Letter of Intent on the project with Alaska-newcomer Gold Torrent, Inc. Gold Torrent plans to develop a small scale-underground mine operation and to bring the currently known mineralization into production, funded by its initial $10 million contribution. After adequate access has been developed underground, expansion and exploration drilling will be conducted to expand mineralization beyond the current levels. The company also announced an initial resource from historic drilling on the Coleman zone, which included measured and indicated resource of 62,100 ounces of gold contained in 78,700 tonnes grading 24.6 grams of gold per tonne using a cutoff of 7.0 grams of gold per tonne. An additional 4,100 ounces of inferred resources at the same cutoff are contained in 5,300 tonnes grading 24.2 grams of gold per tonne. The Coleman resource is characterized by a central quartz vein and several subsidiary hanging wall and footwall sub-parallel shallowly dipping, northwest striking quartz veins hosted within a quartz diorite intrusion. The veins intercepted by drilling average less than a meter thick and can be separated by up to 20 meters and tend to merge and splay. Disseminated native gold, tetrahedrite,

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telluride minerals, pyrite, arsenopyrite, and chalcopyrite are the primary metallic minerals in the veins. Welcome to Alaska Gold Torrent, Inc.! WestMountain Gold, Inc. provided an update on its highgrade Terra project in western Alaska Range. Surface trench work and bulk sampling at the rate of 5 to 10 tons on the Ben and Fish veins has extended the strike length of both veins. This work follows on the company’s 2013 bulk sample program which netted 275 ounces of gold from a 75-ton bulk averaging 5 ounces of gold per ton. In 2014 the company plans to collar an adit below the Ben vein, process a 2,000 ton bulk sample, complete mill and access/infrastructure upgrades, complete an airborne aeromagnetic survey over the project, and continue exploration of the Ben vein and other known veins. The company also announced that it acquired 100% ownership of the Terra gold project from Corvus Gold Inc. for $1.8 million in cash and 200,000 shares of WestMountain Gold.

NORTHERN ALASKA NovaCopper Inc. in a bellweather announcement that went virtually unnoticed by the financial markets, announced an updated resource estimate at its Bornite deposit on its Upper Kobuk Mineral project, a partnership with NANA, Inc. The new resource estimate incorporates results from 216 diamond drill holes including 17 new holes totaling 8,142 meters drilled by the company during the $14.4 million 2013 program, as well new assays from 42 historical Kennecott drill holes comprising 14,457 meters that could not be used until re-assayed in 2013. The deposit now contains 5.7 billion pounds of copper in the Inferred category and 334 million pounds of copper in the Indicated category. In-Pit Indicated Resources include 14.1 million tonnes at an average grade of 1.08% copper containing 334 million pounds of copper at a 0.5% copper cutoff. In-Pit Inferred Resources include 109.6 million tonnes at an average grade of 0.94% copper containing 2.3 billion pounds of copper at a 0.5% copper cutoff. BelowPit Inferred Resources include 55.6 million tonnes at an average grade of

2.81% copper containing 3.4 billion pounds of copper at a 1.5% copper cutoff. The partners are in the process of re-logging and assaying 12,918 meters of historic drill core from the prospect. The company also indicated that the Alaska Industrial Development Export Authority (AIDEA) was continuing to engage with the communities in the vicinity of the Ambler Mining District Industrial Access Road project. In late April 2014, AIDEA’s board of directors approved a resolution authorizing AIDEA to proceed with an application

for the Ambler road to the federal agencies that have jurisdiction over the Ambler road project and to engage a firm to prepare the environmental impact statement for the project. The State of Alaska approved $8.5 million for use by AIDEA for this purpose during the 2015 fiscal year. In addition, AIDEA has made significant progress on the Interior Energy Project which would involve the production, transportation and distribution of liquefied natural gas (LNG) from the North Slope of Alaska to end users in Fairbanks and possibly

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the Upper Kobuk Mineral project. AIDEA and its contractors are finalizing the estimated costs of the Interior Energy Project and expect first delivery of trucked LNG to end users commencing before the end of 2016. Goldrich Mining Company and partner NyacAU, LLC provided a summary of 2013 results and a 2014 update on its 50/50 placer gold mining joint venture on the Chandalar project in the Brooks Range. In 2013 placer gold mining operations began in May and gold production commenced in late August. The partnership produced approximately 680 ounces of gold after 330 hours of plant operation at an average processing rate of 125 cubic yards per hour. Approximately 40,000 cubic yards were processed through the plant and 540,000 cubic yards were stripped or moved for construction during the 2013 mining system. The overall estimated stripping ratio for life of mine is 0.89:1 with over-all recovered grade of 0.017 ounces of gold per cubic yard (approximately $22/cubic yard at $1,300 per ounce gold prices). During 2014 the primary piece of equipment delivered to the mine site was a feeder for an expanded wash plant, to be completed in stages through 2016. The upgrade will take the plant capacity from 125 to 600 loose cubic yards per hour. The partners indicated that they will focus on plant construction in this year and do not intend to mine new gravels until 2015. All-in development costs incurred to the end of 2013 total about $13.7 million and the forecasted investment for 2014 is estimated to be about $4.5 million.

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SOUTHEAST ALASKA Hecla Mining announced year-end 2013 and first-half 2014 production results from the Greens Creek mine on Admiralty Island. The total cash cost per ounce of silver produced for 2013 was $4.42 per ounce versus $2.70 per ounce in 2012. The average grade of ore mined during the year was 13.04 ounces of silver per ton, up significantly from the average grade of 11.13 ounces per ton in the year previous. For the year the mine produced 7,448,347 ounces of silver, 57,457 ounces of gold, 20,114 tons of lead, and 57,614 tons of zinc. The mill operated at an average

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of 2,206 tons per day in 2013, which is the highest daily average since the mine began operations in 1989. The year-end 2013 reserves and resources for the mine included proven and probable reserves of 7,797,000 tons grading 11.9 ounces of silver per ton, 0.09 ounces of gold per ton, 3.3% lead, and 8.7% zinc. In addition, the mine contains measured and indicated resources of 767,000 tons of indicated resources grading 12.2 ounces of silver per ton, 0.09 ounces of gold per ton, 3.3% lead, and 7.3% zinc. The mine also reported inferred resources of 2,385,000 tons grading 13.3 ounces of silver per ton, 0.09 ounces of gold per ton, 2.7% lead, and 6.5% zinc. For the first half of 2014, the total cash cost per ounce of silver produced at Greens Creek was $2.52 per ounce versus $3.79 per ounce in the year previous period. Mining costs per ton were up slightly compared to the same period in 2013, and were partially offset by lower milling costs. The average grade of ore mined during the first half of 2014 was 12.24 ounces of silver per ton, down significantly from the average grade of 13.24 ounces per ton that was mined in the first half of 2013. During the first half of 2014 the mine produced 3,476,320 ounces of silver, 29,940 ounces of gold, 9,869 tons of lead, and 30,329 tons of zinc. The mill processed 403,861 tons of ore during the quarter, down from 409,578 tons milled in the year-previous period. Definition and pre-production drilling continued to upgrade the 5250, West Wall, and Deep Southwest resources. Drilling of the Deep 200 South confirmed the resource model provided some impressive intercepts, including 85.1 ounces of silver per ton, 0.18 ounces of gold per ton, 10.2% zinc, and 4.8% lead over 12.9 feet, and 44.3 ounces of silver per ton, 0.40 ounces of gold per ton, 23.1% zinc, and 12.4% lead over 3.2 feet.

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Coeur Mining, Inc. announced full-year 2013 and first-half 2014 results the Kensington mine. For the full year 2013, the mine processed 553,717 tons of ore grading 0.21 ounces per ton with an average recovery of 96.6%. The mine was forecasting 2014 production of 105,000 to 112,000 ounces of gold. In early 2014 the mine announced updated resource estimates including proven and probable

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reserves of 6,016,000 tons grading 0.163 ounces of gold per ton (981,000 ounces), additional measured and indicated resources of 2,686,000 tons grading 0.211 ounces of gold per ton (566,000 ounces), and additional inferred resources of 1,014,000 tons grading 0.259 ounces of gold per ton (263,000 ounces). For the first quarter 2014 the mill processed 159,697 tons, or nearly 1,800 tons per day, a significant increase over previous quarters. The mine produced 25,428 ounces of gold grading 0.17 ounces of gold per ton with an average recovery of

94.5%. All-in sustaining cost of production was $1,005 per ounce compared to $667 per ounce cost in the year previous period, due to lower gold grades and production levels. For the second quarter of 2014 was 28,089 ounces of gold, a significant increase over the 23,162 ounces of gold produced in the second quarter of 2013. The mine processed 163,749 tons of ore grading 0.18 ounces of gold per ton during the quarter. Average recovery was 94.5%. Mill throughput was steady at 1,800 tons per day average. The increased produc-

tion was the result of a 10% higher gold grade during the quarter, including an average grade of 0.22 ounces of gold per ton during June. Exploration efforts in 2014 included expanded drilling at the Jualin mine area, which is located south of the Kensington mine. Drilling targeted the Number 4 vein, one of several, discrete gold-bearing zones at Jualin. Consistent with historic results, occurrences of visible gold and highgrade mineralized intervals were intersected with the first five holes completed this year. Significant results include 1.4 meters grading 40.5 grams of gold per tonne and 1.4 meters grading 53.9 grams of gold per tonne. Underground drilling was conducted on the new Ann zone situated less than 200 feet to the east of the main Kensington deposit. Significant intercepts in this zone include 0.85 meters grading 76.5 grams of gold per tonne. Exploration to define and expand known mineralization on the southern margins of upper Zone 10 and Zone 20 in main Kensington returned 4.4 meters grading 41.5 grams of gold per tonne and 0.64 meters grading 66.9 grams of gold per tonne with mineralization remaining open to the south. Estimated 2014 total production from Kensington is 105,000 to 112,000 ounces of gold. Constantine Metal Resources Ltd. and funding partner Dowa Metals and Mining Company Ltd. announced initial results from a 10,000 meter, $6.2 million 2014 drilling program on its Palmer volcanogenic massive sulfide project near Haines. The initial 2014 drilling has intersected a thick lens of high-grade massive sulfide 150 meters down dip of the lower edge of the South Wall Zone. Drill hole CMR14-54 returned 22.1 meters grading 2.48 percent copper, 4.05 percent zinc, 24.0 grams of silver per tonne, and 0.39 grams of gold per tonne. The intersection represents a significant expansion of the zone to depth. The hole was designed to test a large conductive geophysical target projected to be southwest of and down dip of the existing deposit. CMR14-54 confirms that the conductive zone is associated with significant grade massive sulfide which has now been defined over a vertical distance of over 600 meters and remains open to expansion at

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depth and along strike. This promising new intercept has caused the company to re-prioritize drilling on its $6.2 million program in order to rapidly assess the size and grade potential of the South Wall zone. Shortly after these results were released, the company announced that Japan Oil, Gas and Metals National Corporation (JOGMEC) has entered into a funding agreement with Dowa that would allow JOGMEC to fund up to 45% of Dowa’s required earn-in amount to earn 45% of Dowa’s interest in the project. Dowa can earn 49% in the Palmer project by making aggregate expenditures of $22 million over four years. Constantine’s right to retain 51% majority interest in the Palmer project remains unaffected by JOGMEC’s participation in the project. The project currently hosts a drill inferred resource of 4.75 million tonnes grading 1.84% copper, 4.57% zinc, 0.28 grams of gold per tonne, and 29 grams of silver per tonne. Heatherdale Resources Ltd. announced Alaska Governor Sean Parnell has signed into law a bill authorizing the Alaska Industrial Development and Export Authority to provide up to $125 million in financing for infrastructure and construction costs at the Niblack volcanogenic massive sulfide project on Prince of Wales Island. The bill allows the Alaska Industrial Development and Export Authority to issue bonds to help finance the cost of constructing key infrastructure, including facilities at the project site on Prince of Wales Island as well as a mineral processing mill and an associated dock, loading, and related infrastructure facilities at the Gravina Island Industrial Complex near Ketchikan. The passage of the bill does not commit Alaska Industrial Development and Export Authority or the State of Alaska to any action. Alaska Industrial Development and Export Authority must still go through its conventional project evaluation and due diligence process prior to authorizing infrastructure financing for the project. Since 2009, the company has invested some $37 million and drilled more than 200,000 feet of core to define 5.6 million tonnes of indicated and 3.4 million tonnes of inferred mineral resources at Niblack. While

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possessing significant potential for expansion, the known mineral resources provide a solid basis for the initiation of engineering, environmental baseline, and other technical studies necessary for project planning and permitting. Pure Nickel Inc. announced results from their 9-hole, 1700-meter drilling program at the North Pole Hill prospect on their Salt Chuck copper-gold-silver-palladium project. The program is designed to test the continuity of high grade gold-copper mineralization encountered in 2013 when drill hole NPH-12-04 intersected 29.1 grams of gold per tonne, 14.1 grams of silver per tonnes, and 0.79% copper over 2.58 meters. Best results came from 4 step-out holes around NPH-12-04, including hole NPH-14-07 which intersected 14.1 grams of gold per tonne and 0.74% copper over 0.5 meters apparent width, hole NPH-14-05 which intersected 1.3 grams of gold per tonne over 1.1 meters apparent width, and NPH-14-10 which intersected 1.3 grams of gold per tonne over 1.0 meters apparent width.

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Ucore Rare Metals announced a progress report for its 2014 exploration at its Bokan – Dotson Ridge rare earth element project on Prince of Wales Island. The company has contracted with SRK Consulting to compile baseline data and qualitative results from ongoing engineering studies to produce a formal Plan of Operations for the project. The Plan of Operations will be submitted to the United States Forest Service to facilitate delivery of an Environmental Impact Statement and initiate the review process set out in the National Environmental Policy Act. The company also reported that two drills are operating, one focused on infill drilling for the purpose of upgrading the existing inferred resource to the indicated category. The other drill rig is testing multiple targets with the goal of expanding the existing resource at depth. This rig will also drill a number of geotechnical holes and groundwater monitoring wells to obtain supplementary data for use in the engineering and permitting of the project. The company also announced that Alaska Governor Sean Parnell has signed into law a bill

Alaska Business Monthly | November 2014 www.akbizmag.com

authorizing the Alaska Industrial Development and Export Authority to provide up to $145 million in financing for surface infrastructure and construction costs at the project. The Bokan provision of the bill authorizes Alaska Industrial Development and Export Authority to issue bonds to finance the construction of key infrastructure for the project, including processing and above ground facilities. The company indicated that the funding arrangement would shift almost two-thirds of the projectâ&#x20AC;&#x2122;s capital costs off the companyâ&#x20AC;&#x2122;s books and into an 11-year pay-back period, thereby improving short and longterm project economics. The passage of the bill does not commit Alaska Industrial Development and Export Authority or the State of Alaska to any action. Alaska Industrial Development and Export Authority must still go through its conventional project evaluation and due diligence process prior to authorizing infrastructure financing for the project. The company also announced an upgraded resource estimate for the project. Using a total rare earth oxide cut-off of 0.4%, the revised estimates include an Inferred Mineral Resource of 2.0 million tonnes grading 0.61% total rare earth oxide and an Indicated Mineral Resource of 2.9 million tonnes grading 0.61% total rare earth oxide. The ratio of heavy rare earth oxide to light rare earth oxides is 60:40. The resource update is based on a database of 80 diamond drill holes totaling 16,000 meters and 56 surface channels totaling 200 meters. The company plans to incorporate the results of this upgraded resource estimate, together with additional resource modeling, in a Feasibility Study to be released in late 2014. R Curtis J. Freeman, CPG #6901, is head of Avalon Development Corporation, PO Box 80268, Fairbanks, AK 99708. Phone: 907-457-5159. Fax: 907-4558069. He can also be contacted by email at avalon@alaska.net or found online at avalonalaksa.com. www.akbizmag.com

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

November 2014 | Alaska Business Monthly

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

2014 MINING DIRECTORY MINING COMPANIES

AK AK Company Top Executive Estab. Empls. Company Top Executive Estab. Empls. Alaska Aggregate Products LLC 301 W. Northern Lights Blvd., Suite 600 Anchorage, AK 99503 Phone: 907-562-2792 Fax: 907-562-4179

Steve Percy, President

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/Mgr.

Clark Wiltz Mining PO Box 327 McGrath, AK 99627 Phone: 907-733-2488 Fax: 907-733-2488

Douglas Clark, Pres.

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

Wayne Zigarlick, VP/Gen. Mgr.

Diamond Gold Corp. HC 89 Box 5601 Willow, AK 99688 Phone: 907-232-7719

Ed Ellis, Pres.

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

Graphite One Resources, Inc. 160, 1209 Ă? 59th Avenue SE Calgary, AB T2H 2P6 Phone: 403-455-5641

Anthony Huston, President & CEO

Heatherdale Resources Ltd. 1040 West Georgia St. Vancouver, BC V6E 4H1 Phone: 604-684-6365 Fax: 604-684-8092

Pat Smith, President/CEO

Hecla Greens Creek Mining Co. PO Box 32199 Juneau, AK 99803 Phone: 907-789-8114 Fax: 907-789-8128

Scott Hartman, Gen. Mgr.

Kinross Fort Knox PO Box 73726 Fairbanks, AK 99707 Phone: 907-490-2218 Fax: 907-490-2290

Eric Hill, General Manager

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

Grant Ewing, President/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, President & CEO

Mining District | Commodity | Recent Projects Mining District | Commodity | Recent Projects

2006

Mining District: Historically Statewide - Current projects in S Central District Recent Projects: AAP and AIC have provided civil earthwork infrastructure and support services to the AK mining industry for several decades with projects at Fort Knox Gold Mine, Pogo, Kensington, Red Dog, Rock Creek & Ambler.

1985

Mining District: Multiple Commodity: Precious Metals, Base Metals, Platinum Group Metals, Rare Earth Metals Recent Projects: Tetlin, Golden Summit, Vinasale, Duke Island, Union Bay, New Horizon, Hajdukovich, Shorty Creek, Livengood.

2004

Mining District: Aleutian Chain Commodity: Spec rock, Rip Rap, Armor Stone, Gravel Recent Projects: Located on the waterfront, we're able to load barges quickly and directly from the quarry. We recently sent barge loads of armor and rip rap to Wainwright, of rip rap and spec gravel to Perryville, and of rock to Akutan.

1992

Mining District: Mt. McKinley Commodity: Gold

1987

320

1978

Mining District: Yentna Mining District Commodity: Gemstones, Abrasive pkg, Gold, Silver, Copper, and Palladium Recent Projects: Fire Brick Mine- Yenlo Project Hardrock-Lode Gold, Silver, Copper and Palladium.

2008

Mining District: Aniak Commodity: Gold Recent Projects: NEPA review process underway.

1985

Mining District: Fairbanks,Goodpaster, McGrath, Tolovana Commodity: Gold Copper Recent Projects: Golden Summit Project - Preliminary Economic Assessment currently underway. Newest project is the Shorty Creek Project-gold-copper porphyry target. Geophysical program undertaken this summer.

2007

Mining District: Cape Nome Commodity: Graphite Recent Projects: Graphite Creek Project is the US's Largest known Flake Graphite Deposit.

2010

Mining District: Alaska Commodity: Gold, Copper, Zinc, Silver Recent Projects: June 18, 2014: Alaska governor signs bill for AIDEA financing of Heatherdale's Niblack project up to $125 million in infrastructure.

deb.engles@aicllc.com ak-gravel.com

avalon@alaska.net avalonalaska.com

Dianeshai@hotmail.com beringshairock.com

ganescreek@yahoo.com

jtrigg@coeur.com coeur.com

diamondgoldcorporation@yahoo.com

info@donlingold.com donlingold.com

ask@freegoldventures.com freegoldventures.com

anthonyh@graphiteoneresources.com graphiteoneresources.com

info@hdimining.com heatherdaleresources.com 1988

~400 Mining District: Admiralty Mining District Commodity: Silver, Zinc, Lead, Gold Recent Projects: In 2013, drilling at Greens Creek replaced reserves and made progress in realizing the potential of the Deep 200 South and 200 South trend.

1995

630

2009

Mining District: Goodpaster River Commodity: Gold, Copper, Silver Recent Projects: Whistler. Copper Joe - Recently signed option agreement with First Quantum. Goodpaster.

2003

Mining District: Iliamna Commodity: Copper, Gold, Molybdenum, Others Recent Projects: As August, 2012 Liberty Star has commenced exploratory drilling on the Big Chunk Super Project, south block. The phase 1 drilling plan retrieved core from depths extending to 1,696 feet.

2008

Mining District: Alaska, southwest USA, and Mexico Commodity: Base Metals, Gold, Precious Metals, Uranium Recent Projects: Millrock has recently purchased a portfolio of 11 high-quality exploration projects in Mexico.

hecla-mining.com

anna.atchison@kinross.com kinross.com

info@kiskametals.com kiskametals.com

info@libertystaruranium.com libertystaruranium.com

info@millrockresources.com millrockresources.com

Mining District: Juneau Commodity: Gold Recent Projects: Coeur Alaska achieved record production in 2013 with full year 2013 gold production rising 40 percent from 2012 to a record 114,821 ounces. Focus for 2014 remains on safety, cost control and delivering a sustainable level of production.

Mining District: Fairbanks Commodity: Gold Recent Projects: On December 18, 2013 Fort Knox hit a milestone when it poured its 6 millionth ounce of gold!

146 Business MonthlyRick | November 2014 www.akbizmag.com NovaCopper,Alaska Inc. Van Nieuwenhuyse, Pres./CEO 2012 varies Mining District: Ambler Commodity: Copper, Zinc, Lead, Silver, Gold Suite 1950-777 Dunsmuir St. Vancouver , BC V7Y 1K4

info@novacopper.com

Recent Projects: Upper Kobuk Mineral Project.

Phone: 520-425-1433

libertystaruranium.com Greg Beischer, President & CEO

Anchorage, AK 99520

info@millrockresources.com

NovaCopper, Inc. Suite 1950-777 Dunsmuir St. Vancouver , BC V7Y 1K4 Phone: 604-638-8088 Fax: 604-638-0644 Company

Rick Van Nieuwenhuyse, Pres./CEO

2008

AK Phone: 907-677-7479 Fax: 907-677-3599 millrockresources.com Company Top Executive Estab. Empls. info@novacopper.com

novacopper.com/index.asp Top Executive

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

Chris Kennedy, Gen. Mgr.

Teck Alaska-Red Dog Mine 3105 Lakeshore Dr., Bldg. A, Suite 101 Anchorage, AK 99517 Phone: 907-754-5116 Fax: 888-900-1179

Henri Letient, Gen. Mgr.

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

Jim McKenzie, CEO

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

Joseph Usibelli Jr., Pres.

WestMountain Gold, Inc. 120 East Lake St., Suite 401 Sandpoint, ID 83864 Phone: 208-265-1717 Fax: 208-906-8621

Gregory Schifrin, CEO

2012

Mining District | Commodity | Recent Projects

varies Mining District: Ambler Commodity: Copper, Zinc, Lead, Silver, Gold Recent Projects: Upper Kobuk Mineral Project.

AK Estab. Empls.

Mining District | Commodity | Recent Projects

1980

Mining District: Beluga Commodity: Coal Recent Projects: Continued permitting efforts for the project.

1981

Mining District: Fairbanks Commodity: Base Metals, Gold, Placer Gold, Gravel Recent Projects: Operates placer gold mine near Fox, AK.

2005

320

Mining District: Goodpaster Commodity: Gold Recent Projects: 2013 production was 337,393 troy oz. of gold. 2014 production is expected to be similar. Pogo has 320 FTEs with up to 175 contractors. Production from East Deep began in 2013; production from the Liese Vein continues as well.

1989

550

Mining District: Noatak Commodity: Base Metals, Lead, Zinc Recent Projects: Exploration.

2006

Mining District: Ketchikan Commodity: Rare Earths, Tantalum, Niobium Recent Projects: Ucore has advanced its Bokan-Dotson Zone project by completing a 5000 meter diamond drill program in Sept., expanding and upgrading our current NI-43101 compliant resource. Permitting activities are under way on site.

1943

120

Mining District: Healy Commodity: Coal Recent Projects: Usibelli Coal Mine will produce 1.7 million tons of sub-bituminous coal during 2014. The preponderance is utilized in six coal-fired power plants in Alaska and the remaining quantity is exported to Pacific Rim destinations.

2007

chuitnacoalproject.com

pmi@ak.net

pogominealaska.com

reddog.info@teck.com reddogalaska.com

info@ucore.com ucore.com

info@usibelli.com usibelli.com

mlangway@westmountaingold.com westmountaingold.com

Mining District: McGrath Commodity: Gold Recent Projects: The Terra Project is a high grade vein system that WestMountain is developing into a low cost underground mine.

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CA LL TO DAY ! November 2014 | Alaska Business Monthly

147

2014 MINING DIRECTORY

Millrock Resources, Inc. MINING PO Box 200867 COMPANIES

depths extending to 1,696 feet.

RIGHT MOVES Seldovia Native Association, Inc.

Seldovia Native Association, Inc., the Native Village Corporation for Seldovia, announced Tony Cange as the new Chief Executive Officer in August. Cange, a life-long Alaskan, was most recently the President of Aleut Real Estate LLC. Cange Prior to that, he was senior business analyst for Koniag Development Corporation.

CRW Engineering

CRW Engineering Group LLC announced Jessica Smith, Planning & Public Involvement Officer, will serve as the 2014-2015 Vice President of the American Society of Civil Engineers. Smith earned a BS in Civil Engine ering from the University of North Carolina Charlotte and a MS in Civil Engineering, Transportation Smith Systems, from North Carolina State University.

Ukpeaġvik Iñupiat Corporation

Strong

Itchoak

Gregory Strong, PhD, joined the UIC Executive Team in August as the Vice President of Operations for UIC’s commercial entities. Strong has over thirty years of experience in real estate development and executive management. Most recently, Strong was President and CEO of the Ouzinkie Native Corporation. Gray Karlin Itchoak joined UIC as the Director of Legal Affairs in August.

Compiled by Russ Slaten Previously, Itchoak was the Alaska Arctic Rural and Indigenous Program Director for the Institute of the North. Itchoak earned a BA in Political Science and Alaska Native studies from the University of Alaska Fairbanks and earned a Juris Doctorate from Gonzaga Law School in Spokane, Washington. Don Gray joined UIC in August as the Director of UIC’s Quality, Health, Safety, Environmental, and Training (QHSET) programs. Gray is a seasoned QHSET professional with fifteen years of experience leading various operating units across North America. Most recently, Gray served as the Vice President of QHSET with ASRC Energy Services.

Turnagain Marine Construction

Jason Davis joined Turnagain Marine Construction in August as President. A former vice president and general partner of Pacific Pile & Marine and twelve-year professional in Alaska marine construction, he brings a wealth of experience. Davis graduated from the University of Montana with a Davis Masters in Construction.

Aleut Corporation

Aleut Corporation Assistant Controller Joe Kashevarof received his graduate certificate in the Alaska Native E xe c u t i ve Le a d e r s h i p program, designed to meet the specific needs of Alaska Native Corporations by providing future executives with the foundational knowledge to excel in today’s competitive business climate. Kashevarof Kashevarof plans to pursue his MBA in the near future.

NANA Management Services

NANA Management Services promoted Bruce Lane in August to Vice President of Operations for Staffing and Recruiting. Lane has been with NANA companies since 2011 and joined NMS as executive director of staffing and recruitment last year. His expertise includes business development, talent acquisition strategies, and maximizing revenue and profitability.

Wohlforth, Brecht & Cartledge

Wohlforth, Brecht & Cartledge announced in August the promotion of William Earnhart to the firm as a Senior

Attorney. Earnhart’s practice focuses on labor and employment law, litigation and appeals, and municipal law.

Ahtna, Inc.

Tisher

Dunlap

William “Matt” Tisher joined the Ahtna management team as Chief Financial Officer in August. Tisher joins Ahtna from the Ukpeaġvik Iñupiat Corporation, or UIC. While at UIC, he performed financial, budgeting, and auditing projects at the executive level. Prior to UIC, Tisher was the CFO at Adak Fisheries and Coastal Villages Regional Fund. Ahtna, Inc. promoted Vicky Dunlap as the new President of subsidiary company Ahtna Support and Training Services LLC, or ASTS, in August. Dunlap was first hired by Ahtna Development Corporation in 2006. In 2008 she became the Vice President of Business Administration for ASTS, a position she held until she was asked to be Interim President in March.

RurAL CAP

J a cq u e l i n e D a i l ey o f Juneau was elected Board President for the Rural Alaska Community Action Program, Inc., or RurAL CAP, in July. Dailey, representing the Alaska Native Brotherhood and Alaska Native Sisterhood, brings h e r e x te n s i ve h u m a n resources experience to Dailey the leadership role. Dailey previously served as the Secretary/Treasurer on the RurAL CAP Board.

Northrim Benefits Group

Northrim Benefits Group announced in August the promotion of Joshua Weinstein as its President. Previously, Weinstein served as Northrim Benefits Group’s Senior Vice President, Employee Benefits Consultant. In 2002, Weinstein joined ICL Financial. As the benefits arm of the company grew and expanded, Northrim Benefits Group was formed and Weinstein worked directly with the group as a lead producer.

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Alaska Business Monthly | November 2014 www.akbizmag.com

RIGHT MOVES Alaska Spine Institute

The Alaska Spine Institute in Anchorage welcomed Dr. Jared R. Kirkham in August. Kirkham’s training is quite vast, including a health and fitness certification from the American College of Sports Medicine and personal training for a comprehensive, multidisciplinary weight loss program at the PRO Sports Club in Bellevue, Washington. Kirkham Kirkham earned his Doctorate of Medicine from the University of Washington. He completed his internship in medicine and surgery at the Virginia Mason Medical Center in Seattle, Washington, and his residency in Physical Medicine and Rehabilitation at the University of Utah.

Compiled by Russ Slaten Emergency Response Stakeholder Database and public safety initiatives, as well as with BP’s incident management plan harmonization initiative.

GCI

Stewart Title of Alaska

Whitney

Scholl

Builders Choice welcomed back Gretchen Kenney as the Inside Sales Manager at their Anchorage headquarters in August. Kenney is returning to a company where she has over five years of history, having started as a Purchasing Director in 2005. At Builders Choice she has worn a variety of hats ranging from Office Manager to Sales Coordinator. Kenney She most recently spent three years as the Executive Director at the Alaska Hotel & Lodging Association.

GCI announced in August the promotion of employees Duncan Whitney and Susannah Scholl. Whitney was promoted to Vice President for Product Management. He joined GCI in 1993 and most recently has served as vice president of data services in product management and as a program manager for GCI’s Hybrid Fiber-Coaxial Initiative, a program that will enable GCI to provide gigabit cable modem service in Anchorage by next year. Whitney earned his bachelor’s degree at Brigham Young University and holds an MBA from Alaska Pacific University. Scholl was promoted to Vice President for Information and Technology. She has been with GCI since 2002 and until her promotion was employed as Director of Business Services in IT. Scholl holds a bachelor’s degree from Seattle Pacific University as well as an MBA from the University of Washington.

UMIAQ

R&M Consultants, Inc.

Builders Choice

Carolyn Thompson joined UMIAQ LLC in July as the new Office Manager in Barrow. In her recent position as Senior Project Manager for WHPacific, Thompson represented the North Slope Borough under a Professional Placement contract with CIPM. Thompson has extensive experience in evaluating project lifecycles, Trapp finances, and contracts. Cynthia Trapp joined UMIAQ in August as an Associate Scientist in the Environmental Department. Trapp has over sixteen years of experience in the petroleum industry with expertise in emergency response and management, regulatory compliance, and stakeholder engagement. Most recently Trapp was engaged in Shell Canada Ltd.

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utility main extension projects. He earned a BS in Civil Engineering from the University of Alaska Anchorage and is a professional civil engineer registered in Alaska. Marc Frutiger, PE, PTOE, Project Engineer in R&M’s Surface Transportation Group, passed the Professional Traffic Operations Engineer exam, earning his PTOE certification in September. This certification provides recognition of the requisite knowledge, skill, and ability in the specialized application of traffic operations engineering.

Stewart Title of Alaska welcomed Christy Shilling as a Business Development Officer in August. Shilling has a background in real estate and commercial insurance. She has extensive customer service experience and has worked as an account executive by marketing and selling commercial Shilling insurance for eight years.

Alaska USA

Alaska USA announced in September the promotion of Wayne Bailey to Chief Lending Officer. Bailey earned a BS in Finance from the University of Colorado and has more than twenty years of experience in the financial industry. In his twenty years with Alaska USA , B ailey has risen through the ranks, holding Bailey the positions of Vice President of Financial Planning and Analysis, Senior Vice President of Financial Planning, and Analysis and Chief Risk Officer.

Anchorage Convention Centers

Garrett

Frutiger

Tom Garrett, PE, joined R&M’s Surface Transportation Group as a Senior Project Engineer in June. He has fifteen years of experience in civil engineering design in Alaska and has spent the last thirteen years as a Civil and Transportation Engineer. Garrett has worked on site development, road reconstruction and resurfacing, grading and drainage plans, retaining wall design, and

Phyllis Rice was promoted in September to the Director of Sales and Marketing at the Anchorage Convention Centers managed by SMG of Alaska, Inc. She has been with SMG for thirteen years, leading the team as the Convention Services and Sales Manager, and she is a Certified Professional Catering Executive. R Rice

November 2014 | Alaska Business Monthly

149

INSIDE ALASKA BUSINESS

TDX Power, Inc.

DX Power, Inc. received an investment of approximately $1.2 million from the US Department of Energy in September. Headquartered in Anchorage, TDX will engineer, design, simulate, and build a microgrid control system on Saint Paul Island, an island located in the Bering Sea more than three hundred miles southwest of Anchorage. The system will incorporate a wide range of energy resources in grid-connected and islanded modes to support the island utility’s existing generation facilities while advancing microgrid architectures and technologies to strengthen the resiliency of the electric infrastructure, lower energy costs, and reduce emissions.

Elliott Bay Design Group

lliott Bay Design Group, or EBDG, announced in September the completion of the M/V Columbia repower. For nearly forty years the Columbia has been the Alaska Marine Highway System’s flagship vessel, linking a number of inside passage communities. EBDG provided design services and ongoing owner support services for the ferry’s repower, which was performed by Vigor Marine in Portland, Oregon. The Columbia was designed for the Alaska Marine Highway System by EBDG’s predecessor firm, and EDBG is intimately familiar with the vessel and its systems, says EBDG Project Manager Matt Williamson. The main engines were at the end of their useful life and the Alaska Marine Highway System opted for replacing them, along with replacing or upgrading drive train components and auxiliary systems where it made eco-

Compiled by Russ Slaten

nomic sense, he says. Replacing the main engines is a significant undertaking in the life a vessel. The company’s strong familiarity with the Columbia made EBDG the natural choice as the designer for this repowering project, Williamson says. The 418-foot vessel accommodates 625 passengers and features two vehicle decks with capacity for 134 vehicles.

NovaGold Resources, Inc.

ovaGold Resources, Inc. announced in September that it will invest in the National Fish and Wildlife Foundation’s Alaska Fish and Wildlife Fund conservation initiative designed to protect, conserve, and restore fish and wildlife in Alaska.

Arctic Spine

rctic Spine, led by Harvard-trained neurosurgeon Dr. Marius Maxwell, has opened two new locations in Southcentral Alaska in September. The two neurosurgery and spine care clinics are located at Alaska Regional Hospital, 2751 DeBarr Road, Suite B360 in Anchorage and in the Wasilla Surgery Center, 3035 East Palmer-Wasilla Highway, Suite 501 in Wasilla. Maxwell studied at Cambridge University, Oxford University, and Harvard Medical School and brings more than two decades of experience in the field of neurosurgery to Anchorage and the Mat-Su. Maxwell is board certified with the American Board of Neurological Surgeons and is the sole expert reviewing neurosurgeon to the Board of Medicine for the state of Alaska. Maxwell will be in the Wasilla office every Monday and by appointment. Bringing more than two decades of experience in the field of neu-

rosurgery to Alaska, Maxwell allies with local chiropractors, acupuncturists, physical therapists, physiatrists, and massage therapists to manage pain relief, enhance recovery, and supplement procedures both pre- and post-operative.

NordAq Energy, Inc.

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

Port of Anchorage

he Port of Anchorage successfully completed a week-long collaborative Concept Planning Charrette on August 22. Three concept design alternatives will move forward for development to a 15 percent design level for the Anchorage Port Modernization Project. Three concept designs were selected

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INSIDE ALASKA BUSINESS by approximately fifty charrette participants who considered project goals, evaluation factors, and constraints. Each concept meets the project goals of replacing Terminals 2 and 3, modernizing infrastructure, improving seismic resilience, and providing continuous operations for Port users during construction. The Port and the Project Management Team, led by consultant CH2M HILL, will develop the three concepts to a 15 percent design level this month, after which a recommended alternative will be presented to the Municipality.

Wells Fargo

laska Pacific University (APU) received a $50,000 grant from Wells Fargo to support its Growing Alaska’s Farmers project on APU’s Kellogg Campus, which is located on an eight hundred-acre hay farm outside of Palmer. The grant is funding a new tractor to expand current farming production from one to four acres, as well as greenhouse upgrades, to provide more produce for farmers’ markets and APU’s Community Supported Agriculture program. Growing Alaska’s Farmers will support local farmers through educational programs on sustainable food systems and successful regional growing techniques that have the potential to extend Alaska’s growing season and provide fresh, organic, locally-grown produce throughout the state. Wells Fargo volunteers helped harvest vegetables and presented a check to APU at the Kellogg Campus on September 12. APU is one of three Alaska organizations to receive a total of $125,000 through the 2014 Wells Fargo Environmental Solutions for Communities grant program.

Compiled by Russ Slaten

Wells Fargo awarded $50,000 to the Alaska Zoo for its polar bear exhibit expansion and $25,000 to the Anchorage Park Foundation for its Youth Employment in Parks greenbelt restoration project.

Anchorage 5th Avenue Mall

nchorage 5th Avenue Mall proudly welcomed LUSH in late August. The cosmetics store is Alaska’s first and only LUSH location. Known for its upscale handmade cosmetics and bath products, LUSH offers a wide selection of organic shampoos, facial cleaners, masks and shaving cream, body soaps, lotions, and perfumes. The new 5th Avenue Mall store is located on level two, across from Bebe. LUSH opens in the wake of other exclusive retailer additions to the mall, including Buckle, Michael Kors, and Sephora, all of which are the first and only locations in Alaska.

Alaska LNG Project

he Alaska LNG Project reached a major milestone in September with the submission of a formal request to the Federal Energy Regulatory Commission, or FERC, to start the pre-file process for the major natural gas project. The FERC pre-file milestone sets the stage for the activity associated with the environmental review required for the siting, design, and permitting for construction of the proposed project. This is another important step in the progression of the Alaska LNG project. This process is supported by a second season of summer field work, which is part of the project’s $500 million pre-front-end engineering design, or pre-FEED, phase. The 2014 summer field work employed

approximately 250 people. The primary objective of the summer field work was to collect the data necessary to support requisite environmental permitting for the project and to support the routing and siting of project facilities. The majority of the work was focused along the pipeline route from Livengood to the proposed LNG liquefaction facility site in Nikiski. The Alaska LNG Project participants are the Alaska Gasline Development Corporation and affiliates of ExxonMobil, TransCanada, BP, and ConocoPhillips. An application for an LNG export license to the US Department of Energy was submitted in July for the project.

Mt. Edgecumbe Hospital

t. Edgecumbe Hospital hosts “Doc Talks,” a free, health-related speaker series on Wednesday evenings from 7 p.m. to 8 p.m. presenting a different topic each week with providers available to answer questions from the audience. Community members may choose which topics are of interest and attend as many as they like. In order to ensure ”Doc Talks” is accessible to as many people as possible, these presentations are open to the entire community at no cost. As an added convenience, there is no requirement to register in advance. The series of weekly presentations began in September and will run through November 19 and will be held at the Hames Center (121 John Brady Dr.). Healthy snacks and refreshments will be provided beginning at 6:30pm with the educational session starting at 7p.m. This month’s Doc Talk schedule is: November 5: Jessica Holland, RD, LD— Heart healthy eating to help reduce high blood pressure and high cholesterol; No-

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INSIDE ALASKA BUSINESS vember 12: Dr. Kristen Widmer—Contraception options; and November 19: Dr. Valerie Edwards—Type 2 diabetes.

R&M Consultants, Inc.

&M announced in September that it relocated its Fairbanks office to 212 Front Street, Suite 150. The move is to accommodate planned growth. R&M plans to continue adding staff to its currently five-person team, keeping with its core business of engineering, earth sciences, surveying and mapping, construction administration, special inspection, and materials testing. R&M is co-located with one of its teaming partners—Bettisworth North Architects and Planners. R&M opened its Fairbanks office in 2009, as the firm celebrated its fortieth anniversary. They had the opportunity to hire Karen Tilton, PLS, R&M’s Group Manager of Right of Way Services, and made the decision to open a Fairbanks office.

ANTHC

he State of Alaska successfully sold Certificates of Participation, much like bonds, to individual investors in September, so it can provide $35 million in funding to the Alaska Native Tribal Health Consortium (ANTHC) to build the 170-room Alaska Native Medical Center (ANMC) Patient Housing facility on the Alaska Native Health Campus in Anchorage. The bonds closed on the week of September 15. ANTHC leadership partnered with the State of Alaska Department of Revenue, Wells Fargo, J.P. Morgan, and Acacia Financial to complete these transactions. The ANMC Patient Housing project will improve access to high quality care and services at the ANMC hospital for

Compiled by Russ Slaten

more than 143,000 Alaska Native and American Indian people living in Alaska, as well as provide appropriate travel lodging and support while they receive care and recover. This 170-room facility plus pre-maternal home will be connected to the ANMC hospital via sky-bridge and will alleviate many of the lodging problems for traveling guests, while also providing a culturally appropriate home-away-from-home environment. With funding in place, construction work for the housing facility was anticipated to go out to bid by October. By press time, the project was near the end of the design phase and had a tentative groundbreaking date of May 2015. ANTHC hopes to complete the project in spring or early summer 2016.

SBA

he Small Business Administration’s online portal is now accepting 2015 National Small Business Week Awards nominations including the annual Small Business Person of the Year award. The improved and dedicated web portal at awards.sba.gov provides all the guidelines and has made it much easier to submit and track submissions of nominees for National Small Business Week. SBA Awards given in celebration of National Small Business Week include the following awards: National Small Business Person of the Year (chosen from among state award winners from each of the 50 states, the District of Columbia, Puerto Rico, the US Virgin Islands, and Guam); Phoenix Awards (recognizing outstanding accomplishments during disaster recovery); Small Business Prime Contractor of the Year; Small Business Subcontractor of the Year; The Dwight D. Eisenhower

Award for Excellence (recognizes large prime contractors who have used small businesses as suppliers and contractors); SBA 8(a) Graduate of the Year (for recent graduates of the SBA’s 8(a) Business Development Program); Exporter of the Year; Small Business Development Center (SBDC)Excellence and Innovation Award (nominations of SBA-funded SBDC Service Centers); Women’s Business Center (WBCs) of Excellence Award (nominations of SBA-funded WBCs); Veterans Business Outreach Center Excellence in Service Award (nominations of SBA-funded Veterans Business Outreach Centers); and Small Business Investment Company of the Year. All nominations must be submitted to the SBA no later than 11 a.m. Alaska time on Monday, January 5, 2015. For contact information and other District Office information sba.gov/ak, call 800755-7034, or visit in person at 420 L Street, Suite 300, Anchorage, Alaska.

GCI

ree upgrade doubles upload speed, download speed jumps 25 percent in GCI’s continuing quest to re:DEFINE broadband in Alaska. GCI upgraded its re:D service to up to 250 megabits-persecond download speeds (Mbps) and 10 Mbps upload speeds. These upgraded broadband speeds are now available in most re:D service areas, including Anchorage, Fairbanks, Juneau, Ketchikan, Mat-Su Valley, and Sitka. This improvement also brings GCI another step closer to providing onegigabit broadband service to Anchorage in 2015. Customers will receive the upgraded speeds at no additional cost. re:D service is available for residential as well as enterprise customers. R

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AGENDA November AMA Fall Convention: Celebrating 75 Years!

November 3-7—Dena’ina Center, Anchorage: The theme for the annual convention is “Celebrating 75 Years!” The event includes short courses, technical sessions, history night, the AMA banquet, an expanded trade show, and MSHA surface and underground refresher courses. alaskaminers.org

Associated General Contractors of Alaska Annual Conference

November 12-15—Anchorage: AGC of Alaska is a non-profit construction trade association dedicated to improving the professional standards of the construction industry. agcak.org

YWCA Alaska/BP Women of Achievement Awards

November 13—Performing Arts Center Discovery Theatre, Anchorage: The Women of Achievement Awards Ceremony recognizes and honors women who have demonstrated qualities of leadership and excellence in their professional and personal endeavors, as well as their contributions to the community. The event includes a purse auction.

Compiled By Tasha Anderson Alaska Bird Conference

January Meet Alaska

November 17—Hilton Anchorage, Anchorage: The annual conference of the Alaska Children’s Alliance, a not-for-profit 501(c)3 dedicated to improving community responses to child maltreatment. alaska.nationalchildrensalliance.org November 17-18—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 November 17-21—Anchorage: Joint conference of the Alaska Municipal League and the Alaska Conference of Mayors. akml.org

RDC Annual Conference: Alaska Resources

November 19-20—Dena’ina Center, Anchorage: 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

December ALASBO Annual Conference

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

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January 23-25—Dena’ina Center, Anchorage: Featured presenters include Doug Fisher, Austin Buffum, Anita Archer, Tricia McKale Skyles, Catlin Tucker, Lexie Domaradzki and Gary Whiteley. The small and rural schools preconference will take place on Friday, January 23. asdn.org/2015-alaska-rti-conference/

Anchorage AEYC Early Childhood Conference

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

Alaska Peony Growers Association Winter Conference

Annual Local Government Conference

January 19, 2015—Anchorage: Scientists, researchers, and students from Alaska, the Pacific Northwest, and beyond come to communicate research activities in the marine regions off Alaska. alaskamarinescience.org

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

Sustainable Agriculture Conference

AOPA Crime Conference

February

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

AFCCA Annual Child Care Conference

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

NEA Alaska Spring Conference

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

May

January 30—Dena’ina Center, Anchorage: Junior Achievement of Alaska is a non-profit organization whose purpose is to inspire and prepare young people to succeed in a global economy. juniorachievement.org

Alaska Society for Technology in Education

March 3-5—Fairbanks: Held every year in Fairbanks, this conference brings together farmers, ranchers, researchers, extension agents, and members of the agriculture support industry to find ways to improve the agriculture industry in Alaska. uaf.edu/ces/ah/sare/conference/

April

Junior Achievement’s Alaska Business Hall of Fame

February 22-28—Engineers Week—the only event of its kind—is a time to: Celebrate how engineers make a difference in our world; Increase public dialogue about the need for engineers; and Bring engineering to life for kids, educators, and parents. The professional engineering societies who organize National Engineers Week activities in Anchorage honor one engineer each year with the Engineer of the Year award, nominated and voted on by a panel of their peers made up of members of many of the Southcentral Alaska area societies. eweekak.org

March

Alaska RTI Conference

AMMA Annual Business Meeting

January 8-9—Dena’ina Center, Anchorage: Hosted by the Alliance, this annual energy conference includes educational forums and a tradeshow. alaskaalliance.com

Alaska Marine Science Symposium

technology conference of ASTE. This year’s theme is “Game On! Games in Education; Game Based Learning; Gamification.” aste.org

Engineers Week

E nd Calendar Year 2015 B egins

Transcending Adversity: 2014 Alaska Child Maltreatment Conference

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

AWWMA Annual Conference

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

APCOM 2015

February 21-24—Hotel Captain Cook, Anchorage: ASTE promotes access to technology, connectivity to information resourced, and technology integration for all Alaskan learners. This is the educational

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

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ALASKA THIS MONTH By Tasha Anderson

DINING

Photos courtesy Better Together AK

Better Together AK

etter Together AK is an interfaith action coalition that is committed to strengthening the Alaska community, “adhering to the truth that by working together we can better serve Alaska,” says Jodi Taylor, a volunteer with Better Together. She says that in early 2014, several religious groups and faith-based nonprofits were brought together by the Rasmuson Foundation to find opportunities to collaborate in service to Anchorage: “After this meeting, the groups independently decided to form Better Together to serve Alaska.” In September of this year, Better Together organized the Alaska Feeding Our Neighbors Food Drive, which was timed to remember the events of 9/11, emulating the service provided on that day in 2001. Taylor says, “The food drive was the largest one-day food drive Alaska has ever had, with 31,304 pounds of food donated. More than 50 congregations participated. There were 385 volunteers who donated 765 volunteer hours, and 1,744 households donated food.” That doesn’t even include contributions from Eagle River. Food gathered by the drive was donated to the Food Bank of Alaska. Those who do not participate in any religious group can certainly volunteer in any activity that Better Together organizes, Taylor says. Starting in December, Better Together will use justserve.org, a website which allows nonprofits to post ongoing or one-time events, connecting volunteers to projects, free of charge. “Community members can also mark their calendar for September 13, 2015, to participate in the food drive,” Taylor says. facebook.com/bettertogetherak R

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ALASKA THIS MONTH By Tasha Anderson

TRAVEL

Photos courtesy Christmas in Ice

Christmas in Ice

t will be a shock to absolutely no one that there’s ice in North Pole. What’s awesome about the ice in North Pole is the way it’s being used from November 29, 2014 through January 6, 2015, to make the Christmas season a little more active and a lot more fun. “Our goal is to provide outdoor activities and family entertainment when the winter’s cold normally keeps us indoors,” says Marilyn Fye, publications and marketing director for Christmas in Ice, a 501(c)(3) nonprofit organization. Now in its eighth year, Christmas in Ice takes place annually next to Santa Claus House and features the Elf’s Icy Playground with a couple of one hundred-plus-foot tandem slides to race down, twirlers, kiddie slides, and a full-size maze. “We even provide sleds for everyone to use on the slide in keeping with the Christmas spirit,” Fye says. Christmas in Ice attracted more than sixteen thousand attendees last year over the six weeks of the event. There’s a guest book available for anyone to sign; in last years’ book, forty-three states and thirty-three countries were represented, making this much more than just an event for Alaskans. Events include single and multi-ice block carving competitions with blocks of ice ranging from 53 to 160 cubic feet that can reach the height of a two-story building; Christmas Around the World, which is a view into how other cultures celebrate Christmas; Christmas Day with Santa; and a New Year’s Even Spectacular Event that includes fireworks. BP also sponsors a “Picnic under the Stars” evening that encourages food donations and has free admission and hot dogs and cocoa for dinner. For parents thinking practically, an indoor area with concessions and bathrooms is open throughout the event. christmasinice.org R www.akbizmag.com

Fairbanks Anchorage

Skagway

Kenai Haines Whittier Sitka

Kodiak

Petersburg

Juneau

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ALASKA THIS MONTH By Tasha Anderson

ENTERTAINMENT

Lights Out

ometimes, as the sun is dwindling and the cold is settling in, it’s necessary to go do art projects, play with lights, eat and drink, and have a party in the middle of the night at the Anchorage Museum. Fortunately for anyone feeling just such an urge, the Anchorage Museum’s fall fundraiser is taking place again this year with the theme “Lights Out” from 8 p.m. to midnight on Friday, November 14 at the Anchorage Museum. “This is the fourth year we’ve held a fall fundraiser for grown-ups,” says Anchorage Museum Marketing and Public Relations Manager Sarah Henning. “It’s at a lower price point and is much more casual than our spring gala so that everyone can have a fun night and support the museum.” The events are designed to allow adults to explore science and be creative with the happy disregard of children. Fantastic Fluorescents, which are hands-on activities that illuminate the science behind black lights and fluorescence, includes guests painting “invisible” patterns on their skin with sunblock, trying to figure out the “real” color of objects, getting insight into insect vision, and seeing which drinks offer “something extra in special light.” History’s Secrets and Mysteries “investigates paintings CSI-style using UV lights.” Films will be projected around the museum, as well as planetarium shows and other arts and science activities. “Our Lights Out: Polar Lab event celebrates the North in all its complexity,” says Julie Decker, Anchorage Museum director. “We know up here the extreme qualities of the outdoors are compelling, so we will stay open late to bring the outside in, to recognize that our ‘wild’ places inspire us to think big.” Tickets are $30, and proceeds support Anchorage Museum exhibitions and educational programs. anchoragemuseum.org R

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Anchorage Museum’s grown-ups only fundraiser is popular.

EVENTS CALENDAR 7-8

Compiled by Tasha Anderson

ANCHORAGE

Bad Girls of the North Bazaar

Don’t miss the amazing collection of artists at this unique craft show. Shop for art, a variety of jewelry, handcrafted soaps, silk scarves, handmade clothing, pottery, leather purses, metal art, gourmet foods, home decor, and one-of-a-kind artwork. Millennium Alaskan Hotel: Friday 4 p.m. to 9 p.m. and Saturday 10 a.m. to 5 p.m. badgirlsofthenorth.com

8-9

Annual Holiday Food & Gift Festival

The Holiday Food and Gift Festival is a fun and family-oriented event featuring a variety of unique gifts, handmade arts and crafts, clothing, jewelry, bath products, home decor, gourmet food, and more. Dena’ina Center: Saturday 10 a.m. to 6 p.m. and Sunday 11 a.m. to 5 p.m. anchoragemarkets.com

11/21-12/21

Christmas Belles

workshops, tours, and presentations. There are also visits to the Alaska Bald Eagle Preserve to witness the “Gathering of the Eagles,” where usually more than three thousand eagles can be found during this time of year. baldeagles.org/festival

28-30

JUNEAU

Juneau Public Market

This market features more than 150 vendors. Items for sale include jewelry and Alaska Native arts; custom made garments, decorations, and utensils like knives and ulus; gift-quality foods such as wild berry products, smoked salmon, herb teas, and salad dressings; holiday gift packages; a selection of toys; and recently published books, as well as a food court. Juneau Centennial Hall and Convention Center. Friday Noon to 7 p.m.; Saturday 10 a.m. to 5 p.m.; Sunday 10 a.m. to 5 p.m. juneaupublicmarket.com

28-30

KETCHIKAN

Winter Arts Faire

At Christmas in the small town of Fayro, Texas, the Futrelle Sisters are not in a festive mood. Frankie is weeks overdue with her second set of twins. Twink is in jail, and hot-flash-suffering Honey Raye is desperately trying to keep the Tabernacle of the Lamb’s Christmas Program from spiraling into chaos. But in true Futrelle fashion, the feuding sisters find a way to pull together. Anchorage Community Theatre. Reserve tickets by phone at 907-868-4913. actalaska.org

The Winter Arts Faire kicks off with the Opening Gala from 5 p.m. to 8 p.m. on Friday. There’s a no-host bar, appetizers, and live music; guests dress up to participate in the exclusive shopping event. The fair continues at Saturday and Sunday and includes the Wearable Art Show. Ted Ferry Civic Center, 10 a.m. to 5 p.m. ketchikanarts.org

18 -19

Holiday Flower Show & Tea

The Anchorage Garden Club is hosting its 54th Annual Holiday Flower Show November 18 and 19. Anyone is welcome to enter. A copy of the rules and categories can be found on the Anchorage Garden Club’s website. Holiday Tea will take place November 18 from Noon to 2 p.m. Alaska Heritage Museum at Wells Fargo Bank on Northern Lights and C Street. alaskagardenclubs.org/anchorageclub.htm

22-23

Christmas Arts & Crafts Emporium

A showcase for Alaska artists and crafters to display and sell their products during the holiday season, this festive event provides a free winter holiday show featuring a large variety of Alaska made arts and crafts, sold by their creators. Dena’ina Center: Saturday 10 a.m. to 6 p.m. and Sunday 11 a.m. to 5 p.m. anchoragemarkets.com

Holiday Tree Lighting

Meet Santa and his reindeer and watch the ceremonial lighting of the tree in Town Square. Enjoy a concert with free hot cocoa and cookies. Anchorage Town Square, 5 p.m. anchoragedowntown.org

11/28-12/22 Alexander and the Terrible, Horrible, No Good, Very Bad Day

This musical was commissioned and premiered by the John F. Kennedy Center for the Performing Arts and is based on the bestselling book. This fun musical is hilarious, fantastic, joyous, and a gift for any family group. This unfortunate twenty-four hours in the life of a six-year-old brims with all the magical energy of the very best theatre. Cyrano’s Theatre Company, Thursdays, Fridays, and Saturdays 7 p.m.; Sundays 3 p.m. cyranos.org

PETERSBURG

Festival of Lights and Community Tree Lighting

The lighting of the 70-foot Community Christmas Tree is celebrated with a walk down Nordic Drive with Santa by hundreds of people, large and small, carrying lightsticks or candles. A local citizen is honored to “Light the Tree” with a magical wave of the hand and the High School Band and Chorus perform Christmas carols. Complimentary hot cider is available. Downtown Petersburg. petersburg.org

6-9

SITKA

Sitka WhaleFest

This is a program of the Sitka Sound Science Center. The event hosts a unique science symposium blending local knowledge and scientific inquiry concerning the rich marine environment of the North Pacific. The festival includes many community and cultural activities such as the science symposium lectures, interactive student sessions, marine wildlife cruises with scientists, a marine themed artisan market, music, local foods, a banquet, art, and a fun run/walk. sitkawhalefest.org

Sitkans Can Dance

The Greater Sitka Arts Council and Sitka Studio of Dance present Sitkans Can Dance. The program will be based on the two popular TV shows Dancing with the Stars and So You Think You Can Dance. Performing Arts Center, 7 p.m. thinkartthinksitka.com

FAIRBANKS

Hope Floats Wine Tasting and Auction

Proceeds from the wine tasting and auction benefit the Circle of Hope campaign, a Greater Fairbanks Community Hospital Foundation campaign that supports breast cancer patients and their families at Fairbanks Memorial Hospital. Pike’s Waterfront Lodge, 7 p.m. fairbankshospitalfoundation.com

10-16

HAINES

Alaska Bald Eagle Festival

This event is hosted by the American Bald Eagle Foundation and the city of Haines. Many events are located at the American Bald Eagle Foundation museum, where guests can attend wildlife www.akbizmag.com

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ALASKA TRENDS

By Amy Miller

WILD ALASKA SEAFOOD An important natural resource

hen it comes to natural resource development in Alaska, most Alaskans think first of oil and gas— and for good reason. The oil and gas sector provides more than 80 percent of the state’s general fund revenues. While not as big a contributor economically, however, Alaska’s commercial fishing industry packs an unrivaled punch when it comes to its role in the global supply of wild seafood, especially salmon. Alaska is responsible for nearly 80 percent of the world supply of wild king, red, and silver salmon, making the industry an important contributor to the world food supply as well as a significant source of jobs and economic activity in Alaska. According to the Alaska Department of Labor and Workforce Development, the commercial fishing industry directly employed 53,500 people in 2009. Many of these jobs are in parts of Alaska that don’t have a lot of other employment opportunities. For example, the Aleutian Islands region depends most heavily on the seafood industry, which isn’t surprising considering that the Port of Dutch Harbor is the largest fisheries port in the United States by volume. During the peak months of activity in 2009 in Unalaska (where the Port of

Dutch Harbor is located), 78.6 percent of the workforce was involved in the industry; even at its lowest level of activity, the industry still employed 64 percent of the local workforce. Earnings in the industry are also impressive. In 2013, ex-vessel earnings, or the price earned by fishermen at the point of landing, were nearly $1.8 billion, according to the Alaska Commercial Fisheries Entry Commission. Salmon was the most valuable species at $679.6 million in ex-vessel value, followed closely by a category the CFEC calls “other groundfish,” which includes pollock, Pacific cod, and rockfish, among others, at $665.6 million. In 2013, Alaska saw its largest salmon harvest ever with more than 272 million fish caught in total, according to the Alaska Seafood Marketing Institute. The huge harvest was attributable largely to pink salmon, which made up more than 80 percent of the total harvest. The landmark season was the second most valuable in the state’s history, second only to the 1988 harvest. R Alaska Trends, an outline of significant statewide statistics, is provided by the University of Alaska Center for Economic Development.

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ALASKA TRENDS

By Amy Miller

Statewide Alaska Monthly Fish Statewide Alaska Monthly Fish Harvesting Statewide Alaska Monthly Fish Harvesting Harvesting Employment by Year Employment by Year, 2001-2012 Employment by Year, 2001-2012

2001-2012

9000 9000 8000 8000 7000 7000 6000 6000 5000 5000 4000 4000 3000 3000 2000 2000 1000 1000 00 2001 2001

2003 2003

2005 2005

2007 2007

2009 2009

2011 2011

■ Average ■ Monthly Monthly Average Source: Alaska Commercial Fisheries Entry Commission;National NationalMarine MarineFisheries Fisheries Service; Service; and Alaska Research andand Analysis Section Source: Alaska Commercial Fisheries Entry Commission; Alaska Department Departmentof ofLabor Laborand andWorkforce WorkforceDevelopment, Development, Research Analysis Section

Alaska Seafood Industry Earnings by Species, 2013 $109,718,629

2010 Global Sockeye Salmon Production

$230,138,988 3%

$110,701,636

■ Crab $679,570,521

■ Salmon

■ Other

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25%

■ Other Bristol Bay ■ Fraser River, B.C. ■ Alaska Peninsula ■ Kodiak Island

■ Kamchatka Peninsula, Russia ■ Kenai River/Cook Inlet

■ Halibut ■ Other groundﬁsh

Source: Alaska Commercial Fisheries Entry Commission

5% 6

$665,598,457

■ Bristol Bay’s Kvichak & Nushagak River Systems

% 2% 3 2% 2 %

■ Skeen River, B.C. 6% 11%

26%

■ Copper River & Prince William Sound ■ Other B.C. ■ Other Russia

Sources: Nature Conservancy; Ruggerone et al 2010. Abundance of adult hatchery and wild salmon by region of the North Paciﬁc. Univ. of Washington, School of Aquatic and Fishery Sciences, Report SAFS-UW 1001, Seattle WA; Pinsky et al. 2009. Range-wide selection of catchments for Paciﬁc Salmon conservation. Conservation Biology (23) 681-691.

November 2014 | Alaska Business Monthly

159

ALASKA TRENDS

Indicator

GENERAL Personal Income—Alaska Personal Income—United States Consumer Prices—Anchorage Consumer Prices—United States Bankruptcies Alaska Total Anchorage Total Fairbanks Total EMPLOYMENT Alaska Anchorage & Mat-Su Fairbanks Southeast Gulf Coast Sectorial Distribution—Alaska Total Nonfarm Goods Producing Services Providing Mining and Logging Mining Oil & Gas Construction Manufacturing Seafood Processing Trade/Transportation/Utilities Wholesale Trade Retail Trade Food & Beverage Stores General Merchandise Stores Trans/Warehouse/Utilities Air Transportation Information Telecommunications Financial Activities Professional & Business Svcs Educational & Health Services Health Care Leisure & Hospitality Accommodation Food Svcs & Drinking Places Other Services Government Federal Government State Government State Education Local Government Local Education Tribal Government Labor Force Alaska Anchorage & Mat-Su Fairbanks Southeast Gulf Coast Unemployment Rate Alaska Anchorage & Mat-Su Fairbanks 160

By Amy Miller Previous Report Period (revised)

Year Ago Period

Year Over Year Change

Units

Period

Latest Report Period

US $ US $ 1982-1984 = 100 1982-1984 = 100

1stQ14 1stQ14 1st H14 1st H14

37,534 14,360,913 214.78 236.38

37,179 14,251,060 213.91 233.55

34,420 13,589,477 210.85 232.37

9.05% 5.68% 1.86% 1.73%

Number Filed Number Filed Number Filed

July July July

41 30 9

29 24 3

49 28 4

-19.51% 6.67% 55.56%

Thousands Thousands Thousands Thousands Thousands

July July July July July

353.89 188.46 43.13 41.65 41.58

348.63 188.91 42.98 39.26 40.65

332.50 185.10 41.20 41.85 36.70

6.43% 1.82% 4.68% -0.48% 13.30%

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

July July July July July July July July July July July July July July July July July July July July July July July July July July July July July July July July July

359.0 65.6 293.4 19.4 18.7 15.0 18.8 27.4 22.4 71.0 6.8 39.6 7.3 10.8 24.6 6.9 6.2 4.1 12.5 31.0 46.0 33.7 38.6 9.6 23.1 11.7 76.4 15.5 24.7 6.0 36.2 17.1 4.4

353.5 56.1 297.4 19.0 18.4 14.8 18.0 19.1 14.6 70.1 6.7 39.2 7.0 10.6 24.2 6.8 6.3 4.1 12.2 30.9 46.3 33.9 37.8 9.1 23.1 11.5 82.3 15.5 25.3 6.2 41.5 22.3 4.2

356.5 59.9 296.6 18.6 18.0 14.7 20.7 20.6 16.4 69.2 6.3 38.1 6.5 10.1 24.8 6.4 6.2 4.1 14.3 29.7 47.1 34.1 40.4 11.5 23.0 12.1 77.6 15.4 25.1 6.0 37.1 17.5 3.7

0.70% 9.52% -1.08% 4.30% 3.89% 2.04% -9.18% 33.01% 36.59% 2.60% 7.94% 3.94% 12.31% 6.93% -0.81% 7.81% 0.00% 0.00% -12.59% 4.38% -2.34% -1.17% -4.46% -16.52% 0.43% -3.31% -1.55% 0.65% -1.59% 0.00% -2.43% -2.29% 18.92%

Thousands July Thousands Thousands Thousands Thousands

377.06 199.49 45.67 43.97 44.28

373.80 201.26 45.67 41.49 43.47

373.70 198.70 46.37 42.57 43.55

0.90% 0.40% -1.51% 3.29% 1.68%

Percent Percent Percent

6.1 5.5 5.6

6.7 5.9 6.1

5.9 5.3 5.3

3.39% 3.77% 5.66%

Alaska Business Monthly | November 2014 www.akbizmag.com

ALASKA TRENDS

Indicator

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

By Amy Miller

Units

Period

Percent Percent Percent

Latest Report Period

Previous Report Period (revised)

Year Ago Period

Year Over Year Change

5.3 6.1 6.2

6.1 6.7 6.1

5.1 5.9 7.4

3.92% 3.39% -16.22%

Millions of Barrels Billions of Cubic Ft. $ per Barrel

July July July

13.09 9.00 107.63

14.53 7.91 110.76

15.28 5.53 111.61

-14.33% 62.75% -3.57%

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

July July July July July

9 1876 1311.98 20.92 2.31

10 1861 1278.48 19.78 2.12

8 1766 1285.54 19.71 0.92

12.50% 6.23% 2.06% 6.14% 151.09%

Millions of $ Millions of $ Millions of $

67.0 27.9 30.4

35.91 18.72 17.19

86.58% 49.04% 76.85%

Total Deeds Total Deeds

July July

846 251

768 223

1153*GeoNorth 327

-26.63% -23.24%

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

Thousands Thousands

July July

664.73 128.26

554.10 116.61

664.87 122.07

-0.02% 5.07%

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

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

51729.70 51012.70 245.40 -264.80 11.85 6.08 -334.70

51213.70 53220.50 222.00 721.20 -6.10 76.50 413.00

46,018.30 46,803.90 112.5 1105.8 34.9 2.6 949.8

12.41% 8.99% 118.13% 123.95% 66.05% -133.85% 135.24%

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

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

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

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

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

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

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

Yen July Canadian $ Pounds Euro Yuan

101.65 1.07 0.59 0.74 6.17

102.05 1.08 0.59 0.74 6.16

99.76 1.04 0.66 0.77 6.18

1.89% 2.88% -10.61% -3.90% -0.16%

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

Notes: 1. Source of Anchorage Deeds of trust (GeoNorth) is cited in the data field. 2. Banking data has been updated to include Alaska State Banks and Alaska’s sole federally chartered, Alaska-based bank, First National Bank Alaska

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November 2014 | Alaska Business Monthly

161

ADVERTISERS INDEX AE Solutions...........................................74 Alaska Air Cargo....................................59 Alaska Dreams Inc.............................109 Alaska Earth Sciences.......................106 Alaska Executive Search (AES)........ 121 Alaska Interstate Construction (AIC).131 Alaska Logistics...................................122 Alaska Park............................................. 33 Alaska Printerâ&#x20AC;&#x2122;s Supply.........................31 Alaska Railroad......................................62 Alaska Rubber.......................................137 Alaska Traffic Co................................... 37 Alaska USA Federal Credit Union.... 91 Alaska USA Insurance Brokers..........93 American Fast Freight............................ 3 American Marine / Penco.................158 APC Services.......................................106 Arctic Controls Inc................................ 75 Arctic Office Products........................65 Arctic Technology Conference......... 75 ARCTOS................................................... 73 ASRC Energy..........................................83 AT&T........................................................... 9 Avis Rent-A-Car....................................155 Bering Air Inc....................................... 156 Berry Company......................................15 Black Gold Oilfield Services................71 Blood Bank of Alaska......................... 163 Boart Longyear....................................123

162

BP Alaska.................................................87 Brand Energy & Infrastructure.......... 77 Builders Choice......................................23 Carlile Transportation Systems...... 105 CH2M HILL.............................................85 Chris Arend Photography.................162 Construction Machinery Industrial....2 Crowley Alaska Inc..............................119 Cruz Construction Inc....................... 118 CRW Engineering Group..................... 53 DanTech Services............................... 101 Delta Leasing........................................ 132 Delta Rental Services.........................143 Delta Western.....................................145 Donlin Gold...........................................145 Dowland-Bach Corp............................ 70 EDC Inc....................................................54 F. Robert Bell & Assoc........................ 84 First National Bank Alaska................... 5 Fountainhead Hotels......................... 144 GCI...................................................74, 164 Global Services Inc............................ 144 Golder Associates Inc.........................117 Granite Construction...........................89 Greer Tank...............................................11 HDL ..........................................................54 Historic Anchorage Hotel................. 156 Holmes Weddle & Barcott................. 33 Homer Marine Trades Assoc...........147

Implus Footware...................................27 Inspectorate / Acme Labs................134 Island Air Express................................154 JENNMAR............................................. 139 Judy Patrick Photography...............140 Kinross Fort Knox...............................125 Landye Bennett Blumstein LLP......... 12 Lynden Inc.......................................58, 115 Magtec Enegy........................................ 73 Matanuska Electric Assoc. (MEA)....52 MFCP Motion & Flow Control Products...........................142 Microcom................................................99 Modern Dwellers Chocolate Lounge..........................155 N C Machinery....................................... 55 Nalco Energy Services.......................143 Nana Regional Corp........................... 127 Northern Air Cargo.................. 148, 149 Northrim Bank......................................111 Orica Mining Services........................ 141 Oxford Assaying & Refining Inc.............................135, 157 Pacific Alaska Freightways Inc..........29 Pacific Pile & Marine........ 150, 151, 152 Paramount Suppy Co.........................147 Parker Smith & Feek............................95 PDC Inc................................................... 10 PenAir.......................................................63

Personnel Plus.....................................154 Pisten Bully..........................................140 PND Engineers Inc............................... 76 Pogo Mine............................................. 136 Premera Blue Cross/Blue Shield AK...92 Ravn Alaska............................................ 21 RE/MAX Dynamic Properties............31 Resource Development Council.... 107 Ritchie Brothers Auctioneers............69 Samson Tug & Barge............................43 Seekins Ford Lincoln Mercury Fleet....81 SGS Environmentsl Services............ 141 Span Alaska Transportation Inc.......133 State of Alaska Dam Safety Program...138 Stellar Designs.....................................147 Taiga Ventures....................................... 76 The Plans Room.....................................52 Thomas Head & Greisen.....................47 Total Safety.............................................89 Totem Ocean Trailer Express............. 61 Turnagain Marine Construction......142 UMIAQ.................................................... 84 URS Corp...............................................142 US Travel Services................................86 Usibelli Coal Mine.................................43 USKH/Stantec........................................25 Washington Crane & Hoist................ 19 Wealth Strategies of Alaska...............45 Wells Fargo..............................................13

Alaska Business Monthly | November 2014 www.akbizmag.com

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