Alaska Business Monthly by Alaska Business

Environmental Special Section | Building Alaska

Alaskaâ&#x20AC;&#x2122;s Healthy

Real Estate Industry Commercial and residential market status Page 64

Stimulus Funds What happens when the money runs out? Were we given the boost needed? Page 56

AUGUST 2010 TA B L E O F C O N T E N T S

ABOUT THE COVER

D E PA R T M E N T S From the Editor . . . . . . . . . . . . . . 7 Inside Alaska Business . . . . . . . . 8 Events Calendar . . . . . . . . . . . . 26 Right Moves . . . . . . . . . . . . . . . . 32 Market Squares . . . . . . . . . . . . . 45 Alaska Trends . . . . . . . . . . . . . . . 95 Ad Index . . . . . . . . . . . . . . . . . . . 98

Stimulus funds boosted the economy for the last year and this trend is expected to continue, but will it be enough? Read the story in our Building Alaska Special Section, beginning on page 56. Cover photo ©2010 John Bale.

R E G U L A R F E AT U R E S

ARTICLES (cont’d.)

HR MATTERS Fatal Attraction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Possession becomes obsession

Photo by Heather A. Resz

By Lynne Curry

VIEW FROM THE TOP Mike Craft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Alaska Environmental Power

By Peg Stomierowski

ALASKA THIS MONTH Alaskans Savor State Fair Flavors . . . . . . . . . . . . . . . 24 Four big events in August celebrate community spirit

PAGE

By Nancy Pounds

OIL & GAS REGIONAL REVIEW Northwest Arctic Borough. . . . . . . . . . . . . . . . . . . . . . 28 North Slope Conditions Test Workers. . . . . . . . . . . . . 78 Progressing through unity

By Tracy Barbour

Days and nights in Deadhorse and the oilfields By Heather A. Resz

TOWNS IN TRANSITION Valdez . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 OIL & GAS Not just for supertankers By Heidi Bohi High Taxes, Expensive Exploration, Delayed Development . . . . . . . . . . . . . . . . . . . . . . . . . 82 Photo by Larry Weaver, Public Works Director for the City of Valdez

Man-made obstacles may close trans-Alaska oil pipeline by 2014 By Mike Bradner

EMPLOYEE BENEFITS Evolving Employee Benefits . . . . . . . . . . . . . . . . . . . . 90 New options for insurance and retirement plans By Peg Stomierowski PAGE

ENVIRONMENTAL & RECYCLING SPECIAL SECTION Mining with Minimal Impact . . . . . . . . . . . . . . . . . . . . 34 Industry seeks to become better environmental stewards By Vanessa Orr

ARTICLES

FINANCIAL SERVICES Corporate Capital Planning . . . . . . . . . . . . . . . . . . . . 12 Debt restructuring and refinancing free up cash By Peg Stomierowski

Alaska Waste and Green Star innovate leaders By Louise Freeman

Endangered Species Act . . . . . . . . . . . . . . . . . . . . . . 42

TOURISM Fly-Fishing for Women Only . . . . . . . . . . . . . . . . . . . . 16 Executive stress reliever

Going Green . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Impacts of compliance in Alaska

By Tyson Kade

Environmental & Recycling Directory. . . . . . . . . . . . 46

By Heidi Bohi www.akbizmag.com • Alaska Business Monthly • August 2010

(continued on page 6)

AUGUST 2010 TA B L E O F C O N T E N T S

BUILDING ALASKA SPECIAL SECTION Stimulus Funds: What happens when the money runs out? . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Were we given the boost needed?

By Heidi Bohi

Rural Alaska Construction . . . . . . . . . . . . . . . . . . . . . 60 Transportation projects dominate spending

By Heidi Bohi

Alaska’s Healthy Real Estate Industry . . . . . . . . . . . . 64 Commercial and residential market status By Rachel Kenshalo

Equipment Management Strategies . . . . . . . . . . . . . . 70 How two Alaska contractors boost profits By Blythe Campbell

PAGE

PCL Construction Services . . . . . . . . . . . . . . . . . . . . . 74 North American company here to stay

By Heidi Bohi

Photos by Blaine Galleher/Courtesy of Alaska Department of Transportation and Public Facilities

CORRECTIONS Mary Sattler’s name was misspelled in an article in the June 2010 issue titled “Alaska’s Biggest Mines.” In a story titled “Multimodal Cargo Transportation,” featured in the June 2010 issue, American Fast Freight, a consolidator that handles a large volume of freight to and from and within Alaska, was omitted from a list of other transportation companies featured. AFF is one of the leading freight Alaska forwarders and consolidators serving the state.

www.akbizmag.com • Alaska Business Monthly • August 2010

FR Volume 26, Number 8 Published by Alaska Business Publishing Co. Anchorage, Alaska

THE

DITOR

‘It Can Happen to Anyone.’

Vern C. McCorkle, Publisher 1991~2009

EDITORIAL STAFF Managing Editor Associate Editor Art Director Art Production Photo Consultant Photo Consultant Photo Consultant

Debbie Cutler Susan Harrington Candy Johnson Linda Shogren Chris Arend Judy Patrick Bill Zervantian

BUSINESS STAFF President National Sales Mgr. Account Mgr. Account Mgr. Traffic Coordinator Accountant

Jim Martin Charles Bell John Page Anne Campbell Elaine Collins Mary Schreckenghost

501 W. Northern Lights Boulevard, Suite 100 Anchorage, Alaska 99503 (907) 276-4373 Outside Anchorage: 1-800-770-4373 Fax: (907) 279-2900 www.akbizmag.com Editorial e-mail: editor@akbizmag.com Advertising e-mail: materials@akbizmag.com

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ALASKA BUSINESS MONTHLY (ISSN 8756-4092) is published monthly by Alaska Business Publishing Co., Inc., P.O. Box 241288, Anchorage, Alaska 99524; Telephone: (907) 276-4373; Fax: (907) 279-2900, ©2010, Alaska Business Publishing Co. All rights reserved. Subscription Rates: $39.95 a year. Single issues $3.95 each; $4.95 for October. Back issues $5 each. Send subscription orders and address changes to the Circulation Department, Alaska Business Monthly, P.O. Box 241288, Anchorage, AK 99524. Please supply both old and new addresses and allow six weeks for change. Manuscripts: Send query letter or manuscripts 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 Monthly is prohibited. Address requests for specific permission to the Editor, Alaska Business Monthly. Online: Alaska Business Monthly is available online from Data Courier and online from Thomson Gale. Microfilm: Alaska Business Monthly is available on microfilm from University Microfilms International, 300 North Zeeb Rd., Ann Arbor, MI 48106.

‘It can happen to you.’

remember a friend, who went from working on a master’s degree to living on the streets, once telling me, “Debbie, be careful. It can happen to anyone. It can happen to you.” He ended up dying on the streets – not here, but in a community far away where he lived part-time homeless and part-time with his mother. Those words have always haunted me, and they do even more today. Recently, I met a bright, vibrant woman full of ideas and vigor. She had a past life of purpose and professional success. But at 59, even with age discrimination laws in place, she found herself in a situation where few would hire her. She did manage to find part-time work, but still, the walls crumbled down around her. She did not make enough to afford the rent, no matter how hard she tried, and neighbors complained about her pets and other tenant-related issues. She soon found herself without a home and four animals to take care of. Trying to find temporary homes for her dogs, at least until she could get herself back on her feet and into an apartment, seemed futile. One dog had issues only she was willing to deal with. An animal lover, she did not want to see her precious dog put down. So as I write this, here we sit. Four dogs, a harried lady, and no place to put them. It’s a sad story. And even sadder when I learn more than 20 have died on the streets in Anchorage in about a year’s time. I wonder what will happen to her. In Alaska, in 2008, 3,311 were homeless, according to statistics put out by the Alaska Justice Forum, which is part of the University of Alaska Anchorage system. We rank as one of the highest states in the nation for our homeless population. And according to the report, titled “A Look at Homeless in Alaska,” in January 2009, based on a single-night count, the figures are even more astonishing. There were 4,583 homeless, 93 percent sheltered. About 7 percent were unsheltered (cars, parks, sidewalks, abandoned buildings, streets). Of the unsheltered, the report went on to state, 23.5 percent were households with children. Anchorage has the highest homeless population, the report stated, nearly 65 percent. In 2009, the count of Anchorage homeless was 2,962. “It can happen to anyone. It can happen to you.” Those haunting words come from the grave and into my heart. There’s only so much I or anyone can do. I feel for this woman who right now is packing boxes to go who knows where and who knows when. I feel for her dogs. I feel for the dozen or so who have reached out their hands to help her, only to find a dead end. I offer her a room for a few nights, sans dogs, but know even that must stop. Then I wonder. What if it happened to me, to my children, my family? Would there be help? Or would I be like this woman. A billion boxes, four dogs (her family) and nowhere to go, no place to call home. – Debbie Cutler Managing Editor

www.akbizmag.com • Alaska Business Monthly • August 2010

INSIDE ALASKA BUSINESS Sitnasuak Native Corp. Opens Anchorage Office

itnasuak Native Corp. (SNC), the village corporation for Nome, opened an Anchorage office earlier this year at 420 L St., Suite 505. Company offices will remain fully operational in Nome. SNC owns and operates numerous businesses and properties in Nome and has multiple operations throughout the United States and Puerto Rico.

DenaliTEK Brings Cloud Computing to First Rate Financial

nchorage company DenaliTEK Inc. announced that it has finished rolling out a successful deployment of its newest cloud-based solution at First Rate Financial. The offering is designed to provide reliable and secure networked e-mail, file storage, sharing, communications and desktop management without the use of on-site servers. It advertises cost savings by replacing the purchase and upgrade IT cycle with hosted services not requiring constant maintenance. DenaliTEK is employing Microsoft’s global network of geo-redundant data centers, professional Cisco hardware and redundant internet access to offer guaranteed uptime and is partnering with Sophos and Venyu to offer a full suite of data protection services. “Technology has finally matured to where we can offer small business owners more functionality than ever while significantly minimizing their costs,” said DenaliTEK Chief Operating Officer Todd Clark.

The company is now expanding its cloud computing initiative across Anchorage. It also is leveraging campaigns in unified communications solutions, long-term strategic technology planning, risk assessment services and electronic medical record systems. DenaliTEK has a decade-long track record providing industry with leading technology solutions to small and medium businesses.

Anchorage Film Office Now Open

eady to share the city’s 365 million acre back lot with productions, the new Film Anchorage office at the Anchorage Convention & Visitors Bureau (ACVB) opened in June. Working in concert with the Alaska Film Office, the Alaska Film Group and other visitors bureaus, the Film Anchorage office markets Alaska to feature films, commercials, documentaries, stills shoots, reality shows or TV series considering production locations. The office will also aid projects once work begins, providing local knowledge, referrals and liaison services. Visit the Film Anchorage website at www.Anchorage.net/film for more information.

Yukon Equipment Revamps Website

ukon Equipment Inc. upgraded its website at www.yukoneq.com. The company has locations in Anchorage and Fairbanks. The new website allows visitors to locate information on

COMPILED BY NANCY POUNDS new and used inventory and customers can request a quote on available equipment, search for parts and browse showrooms for Case, Trail King and Link Belt Excavators. Links are also available to manufacturers of products sold by Yukon Equipment.

RIM Architects Works on Asia Projects

IM Architects of Anchorage was chosen to work on housing and hospitality projects in several Asia locations, including China, Taiwan and Okinawa. RIM Architects is working with Asian firms to produce concept, schematic and design development services. RIM officials have discovered their Asian counterparts are often eager to incorporate Western designs. Also, Asian architects often face design challenges akin to Alaska, RIM officials said.

Seward Hotel Earns Accolades

eward Windsong Lodge received a top award and ranking for 2009 from the international tour operator Studiosus. The lodge ranked No. 1 and was one of four North American hotels to receive the 2009 award. Studiosus selects hotels based on client evaluations, which rate facilities for atmosphere, comfort, cleanness, breakfast and service. Studiosus is a cultural and educational tour operator, running more than 1,000 routes in about 100 countries. The company gears its tours chiefly to travelers between the ages of 45 and 65. The 180-room Seward Windsong Lodge, owned by CIRI Alaska

www.akbizmag.com • Alaska Business Monthly • August 2010

INSIDE ALASKA BUSINESS Tourism Corp., operates from mid-May to mid-September. “We are pleased to have been a part of the public-private partnership that brought this route to Alaska,” said Emil Notti, commissioner of the state Department of Commerce, Community and Economic Development. “It provides a valuable transportation service to residents of the Interior, and also brings jobs and economic opportunity to the visitor industry.”

USKH Climbs in U.S. Rankings

SKH Inc. of Anchorage improved its ranking in the annual Engineering News-Record Top 500 Design Firms survey for 2009. USKH moved up to No. 379 from its previous rank of No. 423. Rankings are based on annual revenue across several market sectors. “The fact that we ranked better than ever despite the overall slowdown in our industry is something that I am very proud of,” says Tim Vig, USKH president. Design revenue for the Top 500 firms fell nearly 12 percent to $80 billion in 2009, down from nearly $91 billion in 2008, according to Engineering News-Record.

Kendall Opens Kia Dealership in Fairbanks

endall Automotive Group opened a Kia Motors dealership in Fairbanks in June at 3419 S. Cushman St. The dealership is part of Kendall Auto Alaska, which currently represents Kendall Toyota/Scion, Lexus and Land Rover in Anchorage; Kendall Ford in

Wasilla; and Kendall Toyota/Scion, Subaru, Mazda and Honda in Fairbanks. Kendall Automotive Group is based in Eugene, Ore. Kendall expects to have 10 to 15 full-time employees at the Fairbanks Kia location. “We are very excited to be able to bring the Kia product back to the community of Fairbanks,” said Kendall Automotive Group President Dave Blewett. The company represents 15 automotive manufacturers and is one of the largest privately held auto dealership groups in the Northwest. Kendall owns and operates automotive dealerships in Oregon, Idaho and Alaska.

Fairbanks Lands New Frontier Flights

federal grant helped Fairbanks add new summer flights between Denver and Fairbanks by Frontier Airlines. Denver-based Frontier was due to fly the nonstop flights four times a week from mid-May through Sept. 12. Airport officials aim to expand the flights from seasonal operations to year-round flights. The grant included $500,000 from the federal government and $100,000 from the Fairbanks Convention and Visitors Bureau, which served as the community partner. Fairbanks International Airport received the grant as part of a 2006 Small Community Air Service Development grant awarded by the U.S. Department of Transportation. The grant was administered by the state Department of Commerce, Community and Economic Development.

GeoNorth Designs New Websites

eoNorth LLC of Anchorage completed work on two new Web design and development projects. All Dream Properties Real Estate provides real estate tools for buyers, sellers and agents to list or find property listings. All Dream Properties aims to work with Multiple Listing Service’s search service and locate listings outside of MLS. The website is www.alldreamproperties.com. GeoNorth also developed Team Up World, an online marketing tool designed to connect business owners via a referral network. The website is www. teamupworld.com. GeoNorth was able to create this site in less than a day by reusing the theme – with minor modifications – from the existing site, All Dream Properties Real Estate.

Grant Aids Kodiak Cattle Ranchers

perators of the Sitkinak Cattle Ranch near Kodiak were chosen to receive a $131,749 federal grant to develop a new value-added product. The U.S. Department of Agriculture included the Alaska ranchers in its Rural Development Value Added Producer Grant program. The Alaska ranchers expect to add at least 10 new jobs as part of the project. The Alaskans plan to process their own livestock on the ranch and deliver fully cooked, shelf-stable beef products to local, statewide and national markets. The Value-Added Producer Grants total more than $22.5 million nationwide. The grants will be used to create

www.akbizmag.com • Alaska Business Monthly • August 2010

INSIDE ALASKA BUSINESS higher value meat products such as fully cooked steaks, stew meat, summer sausage and snack sticks. The value-added processing and packaging method will solve the problems remote livestock producers have of getting their product to market. Meat will be processed into retort pouches, steam cooked and sealed into foil pouches, providing a long shelf life and removing the need for refrigeration.

Red Dog Turns To New Deposit

ANA Regional Corp. Inc. and Teck, operator of Red Dog Mine, are pursuing plans to develop the Aqqaluk Deposit. Ore from Aqqaluk is needed to supplement ore from the Main Deposit, which is almost mined out. Teck officials are working to begin mining at Aqqaluk. Red Dog Mine, located in Northwest Alaska, is situated on land owned by NANA and operated by Teck. The mine is one of the world’s largest producers of zinc concentrate. Operators have faced an uncertain future for the mine since the Environmental Protection Agency pulled certain water-quality provisions from the National Pollutant Discharge Elimination System Permit it issued in respect of the main water discharge from the Red Dog Mine in February. The EPA ruling was in response to an appeal filed by two environmental law firms representing two environmental groups, Indian Reorganization Act Councils for two villages, and five individuals. Teck officials have stated plans to develop Aqqaluk with methods to protect water quality and the environment.

Red Dog Mine is an important economic engine for Northwest Alaska. About 58 percent of Red Dog’s 500 employees are NANA shareholders. NANA subsidiaries provide goods and services for the mine.

Steffys Honored by University of Alaska

niversity of Alaska officials have named a Kenai Peninsula College building after long-time resource industry educators Dennis and Ginger Steffy. The Steffys have supported vocationaltechnical education in Alaska’s mining and petroleum industries. Since the founding of UA’s Mining and Petroleum Training Service in 1979, the Steffys have helped train an estimated 100,000 students in everything from underground mine safety training to oil and gas drilling technology. UA officials dedicated the MAPTS building on the Kenai Peninsula College as the Dennis and Ginger Steffy Mining and Petroleum Training Center of Excellence in June. Dennis Steffy has nearly 40 years of continuous service to the oil, gas and mining industry. He’s been director of MAPTS since 1979, when it was known as the Petroleum Extension Program at KPC. He’s perhaps Alaska’s most internationally recognized expert in oil and gas drilling technology, mining and health safety education, having helped establish and operate the Sakhalin-Alaska College in Russia. Ginger Steffy retired as director of Kenai Peninsula College in 2002, a position she held for 15 years.

Previously, she served in various positions at KPC, including teaching physics, physical science, math and energy. She also developed courses in energy resource technology. She retired after 29 years of service to the university with emeritus director status. Ginger Steffy also was instrumental in creating the Alaska Process Industries Careers Consortium in 1999.

ABM Takes First Place in National Communications Contest

laska Business Monthly took first place in its category in The National Federation of Press Women Inc. Communications Contest, for a story written by Managing Editor Debbie Cutler titled “Ice Road Truckers: The Reality Behind ‘Reality’ TV.” The article also took first place in its category in the statewide contest, put on by the Alaska Professional Communicators. National awards will be presented in Chicago Aug. 26-28. ❑

www.akbizmag.com • Alaska Business Monthly • August 2010

Smith & “ Parker, Feek understands the complexity of our company and excels, in coordination with our employee benefits team, at providing outstanding service to our employees.

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Parker, Pa P arke ark rrk ke err, Smith SSm mit ith & Feek ith Fee Fe ek k combines co om m mb biin b ne e ess a collaborative coll co llab abo orra attiv ive ive te te team ea am a am approach pp p pro roac ach to ach to client clliien ent service sse errvviicce with wiith h 73 73 years ye ear ars of e of experience xper xp eriie en enc nce to to create cre reat ate lasting lla ast s iin ng value v lu va ue for for businesses fo bu b usi sine ess sses sses es like li like ke A Ahtna, httna h na, Incorporated. In nco corp orrp p po orra or ated ate at ed. That’s Tha Th ha att’’ss why why hy over ove er 97% 97% 97 7% of our of our ur clients cli lien nts ts retain re ettai ain our ou o ur firm firm year fir yye ear ar after aft fter er yyear. ea e arr..

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FINANCIAL SERVICES

Corporate Capital Planning Debt restructuring and refinancing free up cash BY PEG STOMIEROWSKI

Photo courtesy of Alaska Capital Growth

Hugh Short Chief Executive Officer Alaska Growth Capital

ing the possible terms and doing the necessary negotiation. Since managing debt, with its high stakes, can be a stressful process, finding the right institution to work with is important.

MATCHING CAPITAL NEEDS WITH SOURCES The 11 member staff at Alaska Growth Capital (AGC) has been busy. Small business loan volume is at an all-time high and expected to continue that way well into 2011, said Chief Executive Officer Hugh Short. Annual lending at the state’s only business and industrial development corporation (BIDCO) is expected to triple over 2009, to more than $35 million in 2010, Short said, including a diversity of clientele who visit its small office environment to explore their options. A niche lender, AG C offers government-guaranteed loans in an attempt to maximize use of Small Business Administration (SBA) and U.S. Department of Agriculture (USDA) programs. Short says his staff sees many clients who have failed to achieve the credit solutions they sought from more traditional lenders and have been referred by banks that turned them down. Additionally, AGC has been building a significant new markets tax credit portfolio, with AGC receiving $50 million in allocation from the U.S. Department of Treasury in 2009. Sources of financing assistance for larger firms also include the Alaska Industrial Development and Export Authority (AIDEA), observed Brian Nerland, president of Alaska

Photo courtesy of KeyBank

ompanies in Alaska, as elsewhere, whether weathering the financial storm well or under duress, are considering debt restructuring and refinancing strategies. They are looking for ways to help them hang tough in a troubled economy, keep their doors open, and free up cash for various purposes, including acquiring weaker competitors. These capital planning approaches are expected to continue for at least a year. Besides the potential to restore cash flow, renegotiating debt at historically low interest rates can allow a company to stretch out payments, sometimes at more favorable rates and terms. Some firms will seek the consultation of financial management specialists in review-

Brian B i N Nerland l d President, Alaska Operations KeyBank

operations for KeyBank. While he was seeing more uptick in loan demand than debt restructuring, he said, KeyBank representatives have been talking to clients about areas of risk to be mindful of, including interest rates. He says relief may be available either through fixed-rate loans or interest rate swaps, which allow companies to lock into interest rate at their lows. With some clients, KeyBank uses bond financing, private placement of debt and debt syndication. With some of these methods, there’s a single party providing the debt financing, he said, but on a more institutional structure. In debt syndication, the lender takes the lead in helping more than

www.akbizmag.com • Alaska Business Monthly • August 2010

one borrower at once place the debt. At Wells Fargo Alaska, business demand for financing has slowed from a peak in 2008, when the institution provided more than $800 million in aggregate business and commercial lending – probably two-thirds of it, commercial, said Sam Mazzeo, commercial banking manager. After 20 years of business growth, with oil-related and tourism sectors down, there’s a fear factor affecting Alaska’s economy, he reflected, and consumers have pulled back. Weaker and more leveraged borrowers are more affected by the trend. Since they are less experienced and less capitalized, Mazzeo said, they tend to be more vulnerable to the stress. Wells Fargo customizes credit solutions based on cash flow, assets and the purpose of any given loan. At Wells Fargo, restructuring primarily implies credit agreement changes, whereas refinancing may only imply taking advantage of a lower rate. While restructuring generally involves changing the terms, amortization, collateral, etc., he said, restructuring a balance sheet might mean fundamentally changing investment philosophies or debt preferences. In general, Mazzeo said, the costs of borrowing money are related to the level of risk. The lower the risk in extending credit, the lower the cost of the loan is likely to be. Cost also tends to be a function of the overall business relationship with the bank, he said, and deposit accounts and other non-credit business often matter. Mazzeo said many solid businesses here with the capacity to easily borrow money in 2008-2009, borrowed for the first time in a long while just to bolster their liquidity and/or to be ready to take advantage of business opportunities in the lagging economy. Alaska Native corporations, he noted, have been particularly active. Many Alaska companies raised cash by refinancing or leveraging assets, he said. They wanted to be ready for opportunities. Some were looking for companies to buy, he said, or eyeing weaker competitors. In general, they’ve been trolling for business opportunities provided by economic downturns. Even without looming cash needs, many corporate borrowers have taken

advantage of low short-term interest rates for the last several years and now are looking to lock in rates and refinance to create liquidity, he said. Again, they want to have cash on hand in order to move quickly when opportunities arise.

PROACTIVE CREDIT AND DEBT MANAGEMENT Ideally, structuring credit effectively is best done before an emergency, Mazzeo observed. “Banks don’t want to go through a fire drill, and borrowers

don’t either,” he said. “Borrowers need to try to be proactive instead of forcing themselves and the bank to react behind the curve. It’s much better to be proactive.” Good accounting and finances support allowing a business to create accurate projections of internal financial conditions a year or two ahead of time, including projections of expected cash flow. Quality projections provide borrowers with sensitivity in their analysis of future events. That, he said, can help the borrower react in a more timely

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www.akbizmag.com • Alaska Business Monthly • August 2010

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“Banks don’t want to go through a fire drill, and borrowers don’t either. Borrowers need to try to be proactive instead of forcing themselves and the bank to react behind the curve. It’s much better to be proactive.” – Sam Mazzeo Commercial Banking Manager Wells Fargo Alaska way to changing economic conditions. In general, costs of borrowing are related to the level of risk, he said. The lower the risk in extending credit, the lower the cost of the loan is likely to be. Cost also tends to be a function of the overall business relationship with the bank, he said, noting that deposit accounts and other non-credit business can be important.

TIMING CAN BE EVERYTHING As this handful of lenders individually discussed their services in early summer, interest rates, which are tied to the prime rate, were running a maximum of 6.25 percent. Guaranteed loans were available for a maximum of $1.6 million guaranteed under the SBA, Short said, and $10 million with the USDA Business and Industry program. For the second half of 2009 and the first half of 2010, the U.S. government increased loan guarantee levels by the SBA from 75 percent to 90 percent (from $750,000 to $900,000 for a $1 million loan), and this has proven to be a huge boon, Short said. Banks are more comfortable with the risks associated with some loans because there’s less cash investment on their parts, he said. As a preferred SBA lender, Short said, AGC can underwrite loan applications internally. While waiting for missing or incomplete documentation is probably more typical, it is possible, he said, that someone coming through

www.akbizmag.com • Alaska Business Monthly • August 2010

the doors with all of their documents perfectly in order could be approved in a matter of weeks. Under the more complicated USDA underwriting, the process tends to take longer. Whomever the preferred source might be, Nerland echoed, a borrower needs to have realistic expectations of how fast any traditional or nontraditional lender can effectively respond. If you need money by the end of July, be sure to approach the lender by early June so thereâ&#x20AC;&#x2122;s time for an appraisal and other review processes; traditionally, 30 to 60 days is not an uncommon time frame, he said.

CLEAR PURPOSE ESSENTIAL Restructuring can be successful, Nerland said, when it supports a companyâ&#x20AC;&#x2122;s business plan, when the growth in revenues effectively offsets a planned expansion, and when improved efficiencies and infrastructure make the effort worthwhile. Even for smaller requests, when making a proposal, the owner should have a purpose behind it, he said. Overall, the merits of borrowing still

depend in part on what the funds are used for, Nerland says, and financing equipment, with relatively shorter depreciation rates of three to seven years, might make sense. Companies also are looking at equipment leasing, which doesnâ&#x20AC;&#x2122;t require a down payment. Some are looking at technology or infrastructure upgrades. Or it can come down to just staying afloat, better managing basic business processes in these times, and avoiding such dire and potentially expensive processes as bankruptcies. While managers should always be watching the financials, in reality â&#x20AC;&#x153;when times are bad, thatâ&#x20AC;&#x2122;s when people pay attention to the balance sheet and income statements,â&#x20AC;? said Issac Vanderburg, Southcentral region director of the Small Business Development Center (SBDC). As sales began to level off or decline and lending requirements tightened, some firms, especially retail firms, were having trouble meeting such short-term demands as replenishing inventory, making payments on short-term lines of credit from vendors or banks, and

renewing their lines of credit, he said. They are realizing â&#x20AC;&#x153;they need to do some first aid,â&#x20AC;? Vanderburg said, possibly renegotiating terms with vendors, reducing inventory levels, or improving accounts receivable management. Still, he said, a surprising number of would-be entrepreneurs, mostly women and minorities, are getting into business, when â&#x20AC;&#x153;we were expecting new business starts to drop off.â&#x20AC;? Some are acquiring other businesses and hoping to inject some new efficiency into them, including anything from better accounts management to more efficient use of assets. â&#x20AC;&#x153;There are still a lot of people out there with money who are looking for opportunities,â&#x20AC;? he said, including people who have some money and maybe a career behind them. These are not so much hostile takeovers, he said, as seeing opportunity in the struggles others are having to stay afloat. The trend is seen across all sectors, Vanderburg said. Those doing best in this economy, he said, tend to be in the service sector. â&#x20AC;&#x153;Those are my stars right now.â&#x20AC;? â?&#x2018;

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TOURISM

Fly-Fishing for Women Only

Photos courtesy of Cecilia “Pudge” Kleinkauf

Women attending the annual Women’s Flyfishing school in Cordova admire the eagles in the trees along the creek.

Executive stress reliever BY HEIDI BOHI

o phones, no computer, no walls – and no men. This, flyfishing guru Cecilia “Pudge” Kleinkauf says, is the perfect prescription for women executives who need a little stress relief from a lot of job. And it’s exactly what she has been offering working women for the past 25 years, instructing and guiding female-only flyfishing trips on some of the state’s most remote and remarkable waterways in areas such as Brooks River, Lake Clark, the Denali Highway, Cordova, Nome, Wood Tikchik State Park, Kodiak and the Kenai Peninsula. Although her clients are all ages, skill levels and from all walks of life,

including mothers, divorcees, widows, and those battling health problems or other personal issues, one thing they all agree on, she says, is how soothing fly-fishing is. “It’s wonderful to be outside with no telephones ringing, no subordinates needing their help, no pressing deadlines, or any of the other things that cause stress in the working world. These trips allow them to be somewhere all of those things aren’t,” Kleinkauf says. As far as Pam Finnesand is concerned, whether she catches fish on the annual trips she takes with Kleinkauf’s company, Women’s Flyfishing, has little to do with whether she considers

the outing a success – though she can only remember one time when she went home empty-handed, the trip was still the highlight of her year. As president and chief executive officer of Ahtna Support and Training Services, where she averages 60-hour workweeks, Finnesand says, just as much as the fly-fishing, she relishes the one time of the year when she’s not thinking of business. Even when going on a cruise, she says, there was an Internet connection so the temptation to check in with the office was too great. But on Kleinkauf’s trips, the locations are so remote it’s impossible to have any contact with the outside world.

www.akbizmag.com • Alaska Business Monthly • August 2010

“Women and men learn differently and communicate differently.” – Cecelia “Pudge” Kleinkauf Women’s Flyfishing Owner

Women’s Flyfishing client, Mimi, with a super silver salmon caught fly fishing out of Cordova.

“It gives me a real chance to renew, rejuvenate and have a week of self-reflection because when I’m out fishing, I’m pretty much on the water in a world by myself.” As she prepares to go on Kleinkauf’s Nome trip this month – one of her favorites because of the trophy-size Arctic grayling that average 20 inches – looking back Finnesand says she sought out Kleinkauf’s expertise 15 years ago after a fishing trip on the Kenai River when she saw another angler land a fish on a fly rod in just under 15 minutes, while those around him had been casting for hours. Although she talked to another local business that offered fly-fishing lessons, it was Kleinkauf who encouraged her and had a less intimidating style. “She

didn’t make me feel stupid,” she says. Besides going on her trips to relieve stress, Kleinkauf says, her clients who are business women tell her that one of the things they enjoy the most is simply the opportunity to be with only women, especially when they spend most of their working lives with men. Since most of the women are like-minded and come from similar backgrounds, over the years, she has seen many of them forge lifelong friendships and later return on the same trip together, whether they are from Alaska or somewhere in the Lower 48 states. They also enjoy a competitive work environment replaced by camaraderie. Kleinkauf encourages the women to do the best they can, while still doing everything she can to make sure everyone catches fish.

Which is not to say these women are not also serious anglers. On a trip to Brooks Lodge, Finnesand remembers Kleinkauf working with everyone individually and the group ended up outfishing the men around them, which she says is not the first time that has happened. “There was a tremendous sense of pride,” Kleinkauf says, “especially for those who had never fished before. You can pull your car over and go fishing anywhere, but when you’re a woman – especially if you’re the only woman – it can be kind of intimidating. This is the opportunity to be out in a safe location, learning new things and being comfortable knowing that I can hold my own.” Fly fishing also can be a good teambuilding exercise, she found. Although Klienkauf stakes out the best location for the day at 5 a.m., holding the spot so that other anglers do not move in requires cooperation. “We’re normally the only women out there, so when someone catches a fish we move in as a group to hold their spot so it’s still there when they come back,” Finnesand says. Besides women executives joining a fly-fishing trip individually, or organizing a group of friends, the corporate world also uses her for corporate retreats, executive work sessions, incentive trips to reward top producers in a company, and to promote staff and client loyalty. A fly-fishing “staff meeting” or fishing tournament, Kleinkauf says, is commonly organized by large businesses, mixing fishing and staff development time. One company had her put together a fly-casting afternoon for its employees. The business had pizzas delivered to the local lake where they were fishing and after an hour of practice, they held a fly-fishing competition where a few employees from each department competed with other groups by fly-casting into hula hoops. Many women in business are

www.akbizmag.com • Alaska Business Monthly • August 2010

A client and Womenâ&#x20AC;&#x2122;s Flyfishing Owner Cecilia â&#x20AC;&#x153;Pudgeâ&#x20AC;? Kleinkauf (right) show off a fly fishing catch.

motivated to learn to fly fish so they donâ&#x20AC;&#x2122;t feel left out when they participate in various out-of-the-office meetings and fishing lodge retreats when they want to be able to hold their own with the men. Although Kleinkauf

emphasizes the relaxing wilderness environment where the only thing her clients have to focus on is the beautiful surroundings and catching fish, she does not mean to undermine why they are fishing with her to begin with:

to learn to catch fish from any lake or river. And to this end, she says, she makes it her job to make sure that at the end of the day everyone has hooked, played, and, hopefully, caught a fish. Kleinkauf attributes some of her success to being a woman and knowing how to explain the techniques in a non-threatening environment and in a way that women can relate to. â&#x20AC;&#x153;Women and men learn differently and communicate differently,â&#x20AC;? she explains. â&#x20AC;&#x153;For years I have heard them tell me, â&#x20AC;&#x2DC;Oh, is that what my husband was trying to teach me? Why didnâ&#x20AC;&#x2122;t he just say that?â&#x20AC;&#x2122;â&#x20AC;? No competition, no pressure, no hierarchies, and the chance to hang out with only other women â&#x20AC;&#x201C; this, Kleinkauf says, is why Womenâ&#x20AC;&#x2122;s Flyfishing continues to appeal to female executives who are anxious to find ways to get out from behind their four office walls. â&#x20AC;&#x153;I caught the biggest fish, I caught the most fish â&#x20AC;&#x201C; you almost never hear women say that,â&#x20AC;? Kleinkauf says. â&#x20AC;&#x153;Women cheer each other on rather than being jealous and competitive. â?&#x2018; The competitiveness is gone.â&#x20AC;?

of Alaska Inc.

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H R M AT T E R S

BY LYNNE CURRY

Fatal Attraction S

he seemed like any other employee, but she wasn’t. She was an employer’s worst nightmare. Within a three-month period, four employers called me reporting run-ins with “fatal attraction” employees. In each case, the story plays out like a television drama. Said one, “This employee literally turned on me. We’d had a good work relationship and I’d pretty much allowed her to define how she’d handle her office-management job. I trusted her with everything. Then, when she didn’t get her way on a minor matter, she turned it into a royal battle. Suddenly I could do nothing right. I was the worst manager she’d ever seen. We agreed she’d leave, but she begged to have two last weeks here. What I didn’t know until later was that during those weeks she copied every file and every disk. She later concocted a bogus lawsuit with the material she stole.” Said another, “It was pure vengeance. I couldn’t get her out of my life. She’d been my assistant for a year, and done a good job, but I needed to expand my business and she couldn’t handle any other employees in her ‘space.’ When I told her she had to work with a second employee, she created an ugly scene and resigned. Then things got weird. It was as if she became obsessed with me. She called every former employee I’d ever supervised to see what ‘patterns’ she could find. She even followed my car when I drove home from work.” Although none of the four managers who called me agreed to be identified or taped, all agreed to answer questions. After conducting hour-long interviews, I learned each scenario shared similar features. In each case, a single, attractive female employee with good job skills and few nonwork interests worked for a charismatic manager. In each case, an intense, productive work relationship founded on mutual support became “a little too close” until it ended with a pivotal event that the employee considered a betrayal.

Each situation contained an element of perceived “possession.” Said one employer, “This employee seemed to feel she ‘owned’ me in some unhealthy way. When I didn’t do what she wanted, she got really cold for a day or two.” Said another, “She acted as if I was obligated to act as she dictated.” Said a third, “She obsessively criticized any other employees who were loyal to me. She drove other employees away.” According to each manager, they’d ignored initial trouble clues. Said one, “I was uneasy about how much time and energy she needed from me. At the same time, I was so grateful for everything she did that I felt I owed her that time. It wasn’t until later I realized her needs were out of line.” Said another, “She was obsessed with her physical appearance. Even though she worked long hours, she exercised for at least three hours daily. She dressed exquisitely well, yet occasionally showed up in an outfit that was risqué.” Said a third, “She vacillated between judgmental and servile behavior toward others. She was hard working but a touch ‘off’ around others.” If you would like to avoid starring in a made-for-television workplace drama, try these guidelines.

INSTINCT – HEAR IT AND MOVE FAST

Trust your instincts. If you feel uneasy about an employee, investigate. While most successful managers possess a keen intuition, the ones who called me reported they hadn’t listened to their intuitive feelings that things were soured beyond redemption. Instead, absorbed in other business matters, they’d looked the other way. Says psychologist Tom Robinson, “Ask questions from the beginning of a potential

Possession becomes obsession

Lynne Curry

problem. Don’t wait for a major deterioration. Uneasiness needs to be discussed.” Delay can cost managers money, the loss of crucial files or other employees – and sleep.

TOO MUCH OF A GOOD THING

Exercise caution when you supervise an employee for whom personal and work life becomes totally meshed. While initially an employee’s excessive overwork benefits an employer, such a situation may contain the seeds for later disaster. An employee with no life other than work may try to get all his or her personal needs met at the office. When these needs aren’t met, the employee may feel betrayed and hold the employer accountable. An obsessive work focus can contain the side of violence. If work is the only calm in the storm of an otherwise lonely or unstable life and the employee’s and employee’s “life” is threatened or taken away, this undermines the very essence of the employee’s identity and the employee or ex-employee may resort to violence.

www.akbizmag.com • Alaska Business Monthly • August 2010

REMEMBER, ANY EX-EMPLOYEE WITH A COMPUTER CAN SUE

Remember that any ex-employee with a computer and an attitude can sue. Follow employment laws to the letter. While termination may be the only way to end an employee relationship containing revengeful or obsessive-compulsive characteristics, if the termination isnâ&#x20AC;&#x2122;t done in a letter-perfect manner, it results in the ex-employeeâ&#x20AC;&#x2122;s revenge mechanism. Because Alaska laws require employers to operate in good faith and fair dealing, managers should follow consistent and fair steps when terminating any employee. When dealing with a â&#x20AC;&#x153;fatal attraction typeâ&#x20AC;? employee, remember your employee may know those policies better than you, and may be looking for one slight careless mis-step to exploit. Before firing the employee, document in writing the actions of the employee that justify the termination.

CANCEL LAST TWO WEEKS

If your termination policies now require you to give two weeks notice, consider a change. If you have objective reasons to terminate a genuinely vengeful employee, you may want them out of the office immediately. Establish a policy allowing you to pay the employee instead of termination notice. Once the employee is out of the building, change your locks and your computer passwords. If you have a remote access computer network, modify it.

OTHER SAFEGUARDS

Establish a policy that prohibits employees from removing confidential documents from company premises and provides for termination for violations of the policy. If the ex-employee files a lawsuit protesting termination, and the employer learns that the exemployee violated the policy, the employers

policy may limit what the ex-employee can use.

DONâ&#x20AC;&#x2122;T BECOME DEAD STATISTIC

Finally, donâ&#x20AC;&#x2122;t assume the situation wonâ&#x20AC;&#x2122;t get worse, and fast. Employers dealing with obsessive ex-employees or employees need to take action immediately. If you feel the police need to be called, do so. Would you rather not become the target of an obsessive former employee? Listen to your intuition â&#x20AC;&#x201C; if a situation doesnâ&#x20AC;&#x2122;t feel right, it often isnâ&#x20AC;&#x2122;t. If you sense a working relationship beginning to sour beyond redemption, ask questions. Exercise caution in any work situation that breeds unrealistic expectations. If you sense, the potential for violence, take precautions. Learn and operate according to the letter of all employment laws â&#x20AC;&#x201C; so that if an employee becomes vengeful, youâ&#x20AC;&#x2122;ll be able to protect your rights. â?&#x2018;

About the Author Dr. Lynne Curry runs an Alaska-based management consulting firm with 3,500 clients in 14 states and three countries. Her company specializes in management training and provides HR on-call services to clients. Her team includes a J.D. (attorney), an MPA (Master in Public Administration) and an SPHR (Senior Professional in Human Resources). For details, check out www.thegrowthcompany.com or call Lynne, Andy or Jennifer at 907-276-4769.

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www.akbizmag.com â&#x20AC;˘ Alaska Business Monthly â&#x20AC;˘ August 2010

VIEW

FROM THE

TOP

BY PEG STOMIEROWSKI

Mike Craft

Alaska Environmental Power

ABM: How’s the view from the top at AEP? Craft: I am concerned about the quality and costs of living and working in Alaska. Fairbanks has for at least 10 years failed to meet the clean air standards of the Environmental Protection Agency. We have done a poor job of securing future energy resources in Alaska. We are facing

a 10-year planning gap, with no real sustainable energy resources in sight, such as gas and hydro power or clean coal. My role is to be part of the solution. By putting as much as 20 percent (174 MW) wind power on the Railbelt grid (870 MW), we can have stable rates and good jobs. My family lives in Alaska and I’d like them to stay. ABM: How have economic/environmental challenges affected AEP’s efforts? Craft: The impacts of substandard air quality in the Fairbanks area have strengthened the need for renewable energy development, and the EPA has forced the local government to begin to address the issue. With the high avoided cost of fuel and electricity, in conjunction with the 30 percent capital reimbursement opportunities offered through the federal stimulus package, it is possible to compete with the avoided cost of diesel-generated electricity. Golden Valley Electric Association (GVEA) currently produces 60 percent (137 MW) of power with fuel oil. ABM: Share some community successes and primary obstacles. Craft: The Sustainable Natural Alternative Power farm in Healy has proven our capability of developing renewable energy on the Railbelt grid. It has been producing electricity for two-anda-half years, leading to development of the Delta Junction wind farm. AEP has two turbines, totaling a megawatt, on a 320-acre plot there. Our local utility, GVEA, has developed an experimental power-sales agreement for the 1 MW on line now. The Alaska Energy Authority was instrumental in awarding a matching grant to move forward with the 900-kW EWT (Emergya Wind Technologies) turbine. Success led AEP to take formal steps toward a 24-MW wind farm, with completion planned in 2011.

Photo courtesy of Alaska Environmental Power

ike Craft, part owner of Alaska Environmental Power (AEP), came to Alaska in 1981 from Virginia with his wife Kathy. With $16 dollars between them, they drove into Delta Junction and flipped a coin: Would it be Anchorage or Fairbanks? Fairbanks won. At first, Craft worked as a line cook and sous chef, then moved into construction. The oldest of five in a military family, he’s lived across the United States, in Germany and Okinawa. While here, Craft’s family flipped homes every two years, eventually purchased tracts of land for subdivisions, developed a gravel pit and bought excavation equipment. Craft figures he has recorded a dozen subdivision plats, and built dozens of houses and more than 10 miles of roads For several years, he’s studied the Alaska energy market and renewable energy. Given his construction background, developing a 24-megawatt Delta Junction wind-farm project wasn’t such a stretch. He credits his success to his family and in part to his two Fairbanks business partners, Richard Clymer and Marvin Hall. He says he also garnered substantial support from Sen. Mark Begich and his staff in resolving Federal Aviation Administration issues relating to the Alaska military complex. Craft also appreciates the Army and the Air Force for being a part of the environment-impact solution facing Fairbanks and the Interior.

Mike Craft on site as the foundation is being put in for a wind turbine in February 2009.

ABM: In the renewable energy debate, what’s most at risk? Craft: Besides the air quality in Fairbanks, sustainable lifestyles and stabilized power rates; also, the creation of hundreds of jobs. We can’t continue to produce power in the Interior solely with hydrocarbons and expect to expand and enhance our community. ABM: How would renewable energy use affect power rates here? Craft: It would stabilize rates in the short term and eventually lower rates. ABM: What are your other enterprises? Craft: We operate a gravel pit, are involved with a gold-mining venture and have several real estate projects. We are developing emerging technologies relating to renewable energy production using tidal power, and also a new battery system. We also are looking at several other wind sites across Alaska. ❑

www.akbizmag.com • Alaska Business Monthly • August 2010

AUG

UST

ALASKA THIS MONTH

BY NANCY POUNDS

Alaskans Savor State Fair Flavors

Photo by Susan Harrington

Eris Rodgers enjoys the bumper cars in her “fair hair” at the Alaska State Fair in Palmer.

Four big events in August celebrate community spirit

tate fair food – from powdered-sugar elephant ears to savory gyros – indulges the palate. Renewing friendships and etching family memories satisfies the heart. August marks state fair season, with the larger events set for this month. Alaska has nine state fairs held every summer in Copper Center, Delta Junction, Fairbanks, Haines, Kodiak, Nenana Valley, Ninilchik, Palmer and Salcha. “All the fair (organizers) get together once a year and help each other out,” said Randi Carnahan, general manager of the Tanana Valley State Fair Association. For example, organizers ensure fair dates don’t overlap since each event relies on shared services like the carnival, she said. Regional fairs will conduct Alaska’s Got Talent competitions and send winners to the finals at the Alaska State Fair in Palmer to compete for the $5,000 first prize.

SOUTHEAST ALASKA STATE FAIR HAINES – JULY 29-AUG. 1 WWW.SEAKFAIR.ORG

take it all in: music, arts and crafts, logging contests, food booths, children’s stage and carnival, puppet shows, lowstress rides, animals and sporting events,” Hostetler said.

The state fair in Haines combines food, contests and critters in the dramatic setting of mountains and coastline. “The Southeast Alaska State Fair offers a summer cultural convergence that draws thousands from Alaska and the Yukon each year,” said Kelly Hostetler, fair executive director and events coordinator. About 11,000 people attended the fair last year. Attendees come from the Haines area, Skagway, Juneau and Whitehorse, Yukon Territory, Canada. But Southeast Alaska fair-goers trek to the venue via different routes than their other Alaska counterparts. “Much of our audience is rural, with visitors traveling to Haines via the Alaska Marine Highway, the Haines Highway or the two Bush air carriers,” Hostetler said. The Southeast fair has been a social draw and seasonal highlight for more than 40 years, Hostetler said. The 2010 fair in Haines will feature a half-marathon trail race, new food vendors, mechanical bull rides and musical entertainment. The smaller-scale of the Haines fair cultivates its regional flavor. “Without the midways and commotion of big festivals, there’s room in Haines for fair-goers to breathe and try to

TANANA VALLEY STATE FAIR FAIRBANKS – AUG. 6-14 WWW.TANANAVALLEYFAIR.ORG

The Tanana Valley State Fair in Fairbanks is the state’s oldest fair, marking its 79th anniversary this year, and the northernmost state fair in the nation. “It’s a pretty traditional, down-home kind of fair,” Carnahan said. Organizers are spotlighting Interior-based entertainers and artists for the fair, rather than drawing national performers. Old-time contests also are on tap this year, including bubble-gum blowing contests. “They were a huge hit last year,” Carnahan said. Fair planners watch U.S. trends closely and try to include popular events like food and cooking shows, but Carnahan also aims to schedule longtime favorites. “What we’re trying to do is breathe excitement into old traditional events like a bake-off” where a stove was the grand prize, she said, recalling a past contest. More than 100,000 people attended the 2009 Tanana Valley fair. Fairbanks residents treasure the fair, planning

www.akbizmag.com • Alaska Business Monthly • August 2010

their two-week vacations around fair dates or just popping in during lunch hour, Carnahan said.

KENAI PENINSULA STATE FAIR NINILCHIK – AUG. 20-22 WWW.KENAIPENINSULAFAIR.COM Organizers at the Kenai Peninsula State Fair in Ninilchik are bringing back the popular Backwoods Girl competition this year. Alaska women will demonstrate skills in fire-building, wood-cutting, water-hauling, egg-frying and changing the baby’s diaper. The winner’s prize this year is a chainsaw, said Katie Schollenberg, fair office assistant. Organizers are planning new children’s events for the mini stage, including story time, acting workshops and building classes. A few more experiment stations will be added to the Sight, Sound and Motion exhibit, a hands-on children’s science center. The new Matti’s Farm will feature interactive agricultural exhibits and demonstrations – imagine milking cows, collecting eggs and harvesting vegetables. The farm is dedicated to Matti Martin, a boy who was killed in an accident last year. Last year about 8,100 people attended the Kenai Peninsula fair. The fair features a parade, rodeo, 5-kilometer beach run,

arm-wrestling competition, hula-hoop contest and musical entertainment. The pig races are another fair highlight. “Of course we will be running a new crop of racing pigs, and they are already looking like the best we’ve seen in several years,” Schollenberg said. “The small, home-grown feel of our fair makes us unique,” she said. “We don’t do things on the grand scale that some of the larger fairs do, but instead focus on our agricultural roots, great local entertainment and good, clean, family fun.”

ALASKA STATE FAIR PALMER – AUG. 26-SEPT. 6 WWW.ALASKASTATEFAIR.ORG This year fair-goers can plan their fair-food strategy with an online food guide. The 2010 Palmer fair will offer more than 70 food vendors, including three new entries, according to Dean Phipps, marketing director. The Snak Shack will sell pocket bread with Thai or Mediterranean filings. Ed’s Eats showcases barbecue-glazed chicken wings and salmon chowder. Why Not and What Not will offer various pronto pups. Original Gourmet Ice Cream Bars plans to sell a new item: chocolate-covered bacon. Organizers attracted several national entertainers this year, including Kenny Rogers, Howie Mandel, Boys II Men, Ricky Skaggs and 38 Special. ❑

www.akbizmag.com • Alaska Business Monthly • August 2010

A U G US T E V E NT S C A LE ND A R

2010-2011

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1 to 15 Art Potpourri Help your summer visitors find beautiful, Alaska-made treasures or treat yourself at this annual juried art sale. The Anchorage museum hosts a revolving roster of Alaska artists. For more information, phone 907929-9262 or visit www.anchoragemuseum.org. 1 to 29 Port of Anchorage Tours Sundays 11 a.m. to 3 p.m. Bring your friends and family to the port for a free tour and hot dogs. A bus will depart every 30 minutes from the Alaska Railroad corporate office, 321 W. Ship Creek Ave. For more information, phone 907-343-6230. 4 to 7 Music Machine A fast-paced musical revue featuring 100 local children, ages 6 to 18. Colorful costumes, highenergy dancing, lots of great voices and smiling faces. Features the talented Dance Machine kids. For more information, phone 907-263-2787 or visit www.myalaskacenter.com. â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘

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9 Summer Session & Lifelong Learning Ann Knowlton of UAFâ&#x20AC;&#x2122;s Alaska Summer Research Academy presents â&#x20AC;&#x153;Squidding Around: Adaptations to Life in the Ocean,â&#x20AC;? an evening discovering how squid are suited to life in the oceans. Begins at 7 p.m. in the Reichardt Building, room 201,UAF campus. For more information, phone 907-474-7021 or e-mail elfranich@alaska.edu. â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘

O M E R â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘

6 The Germany Retrospective Composed of a variety of media, including (but not limited to), original paintings, sketches, photographs, prose, poetry, video and audio from the Homer High School Concert Choir/Kenai Peninsula Community Chorus trip to Germany, Austria and the

www.akbizmag.com â&#x20AC;˘ Alaska Business Monthly â&#x20AC;˘ August 2010

A UG US T E VEN TS C A L EN D A R Czech Republic. Homer Council on the Arts, 355 W. Pioneer Ave., Suite 100. For more information, phone 907-235-4288 or visit www.homerart.org. • • • • • • •

U N E A U • • • • • • •

13 to 15 64th Annual Golden North Salmon Derby Spend the weekend in pursuit of kings, cohos and the chance to compete for the prizes generously donated by local businesses and individuals. For more information, phone 907-321-8000 or visit www. goldennorthsalmonderby.org. • • • • • • •

• • • • • • •

28 14th Annual Soup Supper & Auction Enjoy gourmet soups in hand-crafted pottery bowls created by local potters. Proceeds go to Empty Bowl and the Kenai Peninsula Food Bank. Begins at 5:30 p.m. at Kenai Central High School. For more information, phone 907-262-3111 or visit www. kpfoodbank.org. • • • • • • •

E T C H I K A N • • • • • • •

6 to 8 Blueberry Arts Festival A Ketchikan original, featuring more than 70 arts and craft vendors, food, games, battle of the bands contest, Gigglefeet Dance Festival, special juried art exhibition, slug races, pie-eating contests and more. For more information, phone 907-225-2211 or visit www.ketchikanarts.org. • • • • • • •

A L K E E T N A • • • • • • •

6 to 8 Bluegrass & Music Festival Alaska’s greatest camp-out celebrates 29 years with more Bluegrass bands than before. Bring the family, as there are new campgrounds to accommodate the more conservative crowd. For more information, phone 907-488-1494 or visit www.talkeetna bluegrass.com. • • • • • • •

A L D E Z • • • • • • •

1 to Sept. 11 Celebrating Valdez Artists This exhibit features artwork in all mediums by local Valdez artists. The museum has created a turn-ofthe-20th-century parlor to enhance the exhibit and to add historical interest for the visitors. For more information, phone 907-835-2764 or visit www. valdezmuseum.org. ❑ www.akbizmag.com • Alaska Business Monthly • August 2010

REGIONAL REVIEW

Northwest Arctic Borough

Progressing through unity Courtesy of NANA Regional Corporation/ Photo by Brian Adams

The river system ties the NANA region together. The Village of Selawik is located on the 140-mile-long Selawik River.

BY TRACY BARBOUR

he Northwest Arctic Borough is one of the most remote and sparsely populated areas in the state. The second-largest borough in Alaska, the Northwest Arctic Borough spans about 39,000 square miles along the Kotzebue Sound, Wullik, Noatak, Kobuk, Selawik, Buckland and Kugruk rivers. The borough’s climate is marked by long, cold winters and cool summers; temperatures range from -52 to 85 degrees Fahrenheit. Communities in the Northwest Alaska Borough aren’t connected by roads. Consequently, the main modes of transportation are by plane, snow machine, four-wheeler and dog sled.

During winter, some people travel in vehicles across improvised ice roads. The Northwest Alaska Borough has been occupied by Inupiat people for at least 10,000 years. It’s comprised of 11 communities: Ambler, Buckland, Deering, Kiana, Kivalina, Kobuk, Kotzebue, Noorvik, Selawik, Shungnak and Noatak. Kotzebue, with about 3,100 residents, is the borough’s largest city and the hub of Northwest Alaska. Kotzebue lies on a sand spit at the end of the Baldwin Peninsula in the Kotzebue Sound where the Noatak, Kobuk and Selawik rivers end. Kotzebue Sound was named after Otto von Kotzebue, who “discovered” it while

Northwest Arctic Borough at a Glance Population: About 7,400 Key Contacts: Borough Mayor Siikauraq Martha Whiting, Kotzebue Mayor Eugene Smith, and NANA Regional Corp. President and CEO Marie Greene Main Industries: Government, health care and mining Major Hospitals: Maniilaq Health Center Schools: About a dozen schools are located throughout the borough, and both the University of Alaska and Alaska Technical Center operate campuses in Kotzebue. Airport: The Ralph Wien Memorial Airport in Kotzebue Port: The borough’s largest city, Kotzebue, does not have a natural harbor. Deep-draft vessels must anchor about 15 miles out, and cargo is transported to the docking facility.

exploring on behalf of Russia in 1818. The site was a trading location for area Natives for hundreds of years. In 1899, a post office was established in Kotzebue. The local name for the site is Kikiktagruk, which means “almost an island” in Inupiaq.

BOROUGH’S ECONOMY STEADY Major industries that drive the Northwest Arctic Borough are government, health care and mining. And, as with many other remote places in Alaska, the residents depend on subsistence hunting and fishing to augment their wage and salary jobs. The area’s largest employers are the Northwest Arctic Borough School District, Maniilaq Association, which operates the Maniilaq Health Center in Kotzebue, and Red Dog Mine. Alaska Department of Labor Economist Alyssa Shanks describes the borough’s economy as fairly stable, with no big growth and no big declines. The borough’s future movements, in terms of jobs, she said are highly correlated to Red Dog and the Northwest Arctic Borough School District. “Since it’s such a young borough, I don’t think that the school district is in danger,” she added. The Northwest Arctic Borough is

www.akbizmag.com • Alaska Business Monthly • August 2010

Courtesy of NANA Regional Corporation/Photo by Brian Adams

the second-youngest borough or census area in the state. According to Shanks, the 2008 median age of population in the borough was just under 23 years old. The young borough population translates to higher birthrates. In 2008, the borough’s birthrate was the highest of all Alaska boroughs and census areas at 29.1 births per 1,000 residents. In comparison, the birthrate for Anchorage Municipality was 15.8. Despite the borough’s high birthrate, its population has remained relatively constant from 2001 to 2009. The reason it hasn’t grown significantly could be due to the lack of economic opportunity in the area. “If there were loads of jobs, I think you would see more people moving there,” Shanks said. “But it’s also a harsh environment, so even if there were an explosion of jobs, you might find a situation more like on the North Slope, where people work there, but don’t live there.” The Northwest Arctic Borough is renowned for its extremely high cost of living. In Kotzebue, for example, the cost of living is 61 percent higher than in Anchorage. Because of its northern location, there is only a 100-day period that barges can enter or leave Kotzebue’s docks. The short shipping season translates into higher costs for heating oil, gasoline, groceries and other goods for the entire region. Most goods and services pass through Kotzebue on their way to the borough’s other 10 communities. The borough is also facing a scarcity of payroll jobs, particularly in the remote villages. The lack of payroll jobs causes the borough to have a high percentage of transfer payments, income received for which no services are performed. Transfer payments – like the Alaska Permanent Fund Dividend, retirement checks, Social Security checks, Medicare benefits, family assistance and food stamps – made up 32 percent of the borough’s personal income in 2007, compared to 16 percent for the state overall, according to Shanks. The lower job opportunities are reflected in the borough’s unemployment rate, which typically runs much higher than the statewide rate. The borough’s preliminary unemployment rate for April – the most recent figure

Iñupiat culture plays a huge role in the lives of the residents of Northwest Alaska. Here children from the Noorvik Aqqaluk School learn traditional dances.

available – was 14.5 percent. In contrast, the statewide unemployment rate for April was 8.5 percent.

RED DOG DEVELOPMENT PROGRESSES Red Dog Mine – the world’s secondlargest zinc and lead mine – provides hundreds of mining jobs to the borough. In May, the mine received permission to move forward with the development of its Aqqaluk Deposit. The development is vital for the region, as ore from the Aqqaluk Deposit is needed to supplement ore from the Main Deposit, which is almost depleted. Red Dog Mine is operated by Teck Alaska, a U.S. subsidiary of Vancouver Canada-based Teck Resources Ltd. The mine, located about 90 miles north of Kotzebue, is situated on land owned by NANA Regional Corp. Inc. NANA – whose name was derived from the Northwest Arctic Native Association – is one of 13 regional Native corporations created under the Alaska Native Claims Settlement Act (ANCSA). It is the regional corporation for Kotzebue and the 10 other villages in the Northwest Arctic Borough. NANA Regional Corp. President and CEO Marie N. Greene expressed relief over receiving the green light for the Aqqaluk Deposit. Previously, there had been months of uncertainty surrounding the opening of the new deposit. “This was a major concern, and we are grateful we are able to proceed,”

she said. “Overall the most important thing that has come out of all this is we do take responsible resource development seriously. We don’t want to take any shortcuts. “We are excited to move forward with this next phase at Red Dog Mine,” Greene said in a May 20 press announcement. “NANA and Teck have worked very hard to ensure that the social, cultural, environmental and economic benefits of Red Dog will remain in place for our people and our region.” Red Dog is a critical source of economic stability and growth for the Northwest Arctic Borough. It creates high-paying, steady jobs that help to fund local government, support schools and sustain important social and cultural programs that help preserve the Iñupiat way of life for NANA’s more than 12,000 shareholders. Nearly 60 percent of the mine’s more than 500 employees are NANA shareholders, and many NANA subsidiary companies provide millions of dollars worth of goods and services annually to the mine. From a broader perspective, Red Dog also adds tremendous value to Alaska. Due to the revenue-sharing provision of ANCSA, profits from Red Dog benefit other regional corporations throughout the state. “Red Dog is to the region like Prudhoe Bay is to Alaska,” said NANA Vice President-Resources Lance Miller.

www.akbizmag.com • Alaska Business Monthly • August 2010

NANA is also engaging in a variety of other efforts to develop its resources in the Northwest Arctic Borough. This summer, the corporation is doing some exploratory work for gold and base metals, as well as reconnaissance work for coal, Miller said. NANA also has an agreement with an independent oil and gas company to drill some exploratory wells in the region. “As far as the mineral work, the results could come soon, in about a year,” Miller said. “As far as the oil and gas work – that depends on the funding. With luck and funding, in the next few years, there could be a well drilled.” In addition, NANA subsidiary WHPacific is under contract with the Kotzebue Electric Association to install two larger turbines that will expand the Kotzebue Wind Farm. In partnership with the Northwest Arctic Borough and the State of Alaska Energy Authority (AEA), WHPacific is moving forward with final assessments for wind power prospects in Buckland and Deering. Once research is complete,

information will be presented to the communities, so the village can decide how they would like to proceed. At Red Dog Mine, meteorological towers are already in place, with three different sites monitoring for wind. Starting in the fall, further resources will become available to explore possibilities for a transmission and energy corridor between Kivalina and Red Dog. WHPacific is also exploring several hydropower and geothermal projects. One of the projects – a partnership that includes Alaska Village Electric Cooperative (AVEC) and AEA – involves field work studying the potential of hydropower in the Kobuk River system. Pre-feasibility reports have already been done, as have village meetings in Shungnak, Ambler and Kobuk. This summer, the team is scheduled to work on mapping, fisheries, a desktop archeological review (of historical documents), and hazard and geotechnical studies.

ENERGY CONSERVATION A KEY CONCERN As part of an Energy Efficiency and Conservation Block Grant, NANA is

Courtesy of NANA Regional Corporation/Photo by Chris Arend

MORE EXPLORATION EFFORTS UNDER WAY

NANA Regional Corporation works with local energy groups as well as tribal, State and federal agencies to help mitigate the energy crisis in Rural Alaska. Wind farms, like the one in Selawik, help reduce the cost of fossil fuel energy for villagers.

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www.akbizmag.com • Alaska Business Monthly • August 2010

also involved in a program to promote the efficient use of energy. WHPacific is conducting energy audits in nine of the 11 NANA villages this summer. “We’ve been going to the villages and collecting data to figure out how we can minimize and conserve energy,” said NANA Project Manager Sonny Adams. “We came up with all the concepts to find out which renewable energy is applicable to which building.” Each village is deciding which buildings to audit, while tribal councils and leaders will determine which upgrades will be made. The program is expected to be completed in about a year, Adams said. As a corporation, NANA’s primary goal is to maintain a subsistence priority to the region and create economic opportunities for its shareholders. Often economic benefits receive a great deal of emphasis, Miller says, but it is health services, education and other things that make the region sustainable for the future. “Sometimes people just think about the dollars,” he said. “I think NANA has done an awesome job rolling those dollars into

health care, education and other benefits for the region.” Adams is a prime example. Thanks to NANA and Red Dog, he was able to complete college and receive a degree in engineering.

TEAMWORK AND CONSULTATION CRITICAL TO SUCCESS NANA is involved with numerous projects and companies, Miller said, but it’s all about the people and the region. “It’s about balancing development, subsistence lifestyle and culture, and this requires input from the villages,” he said. “We want everybody’s view, so there’s consensus in moving ahead.” Consulting with the villages, Greene says, is an essential step. “Consultation is in everything that we do,” she said. “We must continue to practice consultation.” NANA also focuses using teamwork. The corporation prides itself on its unique ability to work with different entities. Long-range planning for the future is also key. That’s why being a member of the Northwest Arctic Leadership Team is so important to Greene.

The group represents a collaborative team formed by various regional organizations, including NANA, the Northwest Arctic Borough School District, Maniilaq Association and Northwest Arctic Borough. The Northwest Arctic Leadership Team concentrates on identifying and prioritizing regional needs, whether it’s alternative energy, jobs or education. The members represent one voice when presenting issues to the governor, federal agencies or Washington, D.C. Teamwork has been a key factor in the success of the Northwest Arctic Borough, according to Greene. Members of the team work together to maximize resources and minimize duplication, promote strategies through grassroots efforts, examine various regional issues, and recommend policy and resource allocation. “We have a region that really works together,” Greene said. “We have to come together for the benefit of the people that we serve. What has made us accomplish what we have today is the unity of working together in our region.” ❑

One People

One Region

One Future

www.nana.com www.akbizmag.com • Alaska Business Monthly • August 2010

RIGHT MOVES

COMPILED BY NANCY POUNDS ADAMS & ASSOCIATES

SITNASUAK NATIVE CORP.

Sitnasuak Native Corp. (SNC), the village corporation for Nome, with offices in Nome and Anchorage, recently announced corporate. appointments. William E. “Bill” Humphries, chief operations officer, brings more than 25 years of business experience to SNC with a focus in program management for federal and state contracting programs. Humphries’ previous association with other Alaska Native corporation subsidiaries resulted in significant 8(a) and competitive contract growth for the organizations. Lenn Doran, chief financial officer, joins SNC with 35 years of financial experience in diverse multi-state and multi-national companies holding executive leadership positions as CFO, vice president and treasurer. Larry Sullivan, human resource director, has more than 25 years human resources experience in recruiting, benefits and compensation, labor and employee relations, training, safety, risk management, continuous process improvement and change management. Denise Burger, executive administrator, comes to SNC with 16 years experience in executive office management, having served as the director of the Anchorage mayor’s office under two mayors, the director of the University of Alaska Anchorage Office of the Chancellor, the director of operations at Rasmusen Foundation, and as the senior executive administrator at Akmaaq LLC. SNC owns and operates numerous businesses and properties in Nome and has multiple operations throughout the United States and Puerto Rico.

. .

Humphries

Doran

FLINT HILLS RESOURCES ALASKA

Brose

Mike Brose was appointed vice president of Alaska operations and refinery manager of Flint Hills Resources Alaska’s North Pole refinery. Brose oversees operations at the 220,000 barrel-perday crude oil refinery. In 2009, Brose transferred to the North Pole refinery from the company’s plant in Rosemount, Minn.

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Sullivan

Burger

NEW YORK LIFE INSURANCE CO.

Glen Bobo joined the Anchorage office of New York Life Insurance Co. as an agent. He recently served as director of wealth management for The Wilson Agency LLC.

FIFTH THIRD LEASING CO.

Steve Isaacson was chosen as equipment leasing manager for Fifth Third Leasing Co.’s northwest U.S. region, including Alaska, Idaho, Montana, Oregon and Washington. Isaacson previously served as national marine sales leader for GE Capital Solutions. Fifth Third Leasing Co. is part of Cincinnati-based Fifth Third Bancorp.

Courtney Bliss was hired as manager of outside sales and business development for the Anchorage office of Adams & Associates. Bliss has more than six years of sales, customer service and recruiting experience.

BETHEL NATIVE CORP.

Bethel Native Corp. elected three directors at its annual shareholders meeting: Robert Lekander, Gregory Hoffman and Robert Hoffman. Officers were elected to the board: Lyman Hoffman, chairman; Mary Kenick; vice chairwoman; Eugene Peltola Jr., treasurer; Louise Charles, secretary; and Gregory Hoffman Sr., assistant secretary.

PRINCE WILLIAM SOUND REGIONAL CITIZENS’ ADVISORY COUNCIL

The Prince William Sound Regional Citizens’ Advisory Council elected officers for its board. They are: Walter Parker, president; Dorothy Moore, vice president; Sheri Buretta, treasurer; and Thane Miller, secretary. The members at large are Blake Johnson, Kenai Peninsula Borough; Pat Duffy, Alaska State Chamber of Commerce; and Cathy Hart, Alaska Wilderness Recreation and Tourism Association. Two new board members were added: Rochelle van den Broek represents the city of Cordova, and Paul Selanoff represents the community of Chenega Bay.

DESIGN ALASKA

John Rowe joined Design Alaska of Fairbanks as a landscape architect. The firm added landscape architecture services earlier this year. Rowe has eight years of experience designing landscapes in Alaska and another 14 years of experience in Michigan. His Alaska work includes the first two phases of Fairbanks’ new Tanana Lakes Recreation Area, tourist viewing areas at the Large Animal Research Station, – known as the Musk Ox Farm, – and a master plan for the Georgeson Botanical Gardens at the University of Alaska Fairbanks.

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www.akbizmag.com • Alaska Business Monthly • August 2010

RIGHT MOVES KEYBANK

Delores Siah was promoted to assistant vice president of retail for KeyBank in Alaska. She is responsible for sales, service and leadership in 14 KeyBank branches in Alaska. . Siah has more than 11 years of retail banking experience. She joined Keybank in 2000 as a teller.

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ALASKA TRUCKING ASSOCIATION

The Alaska Trucking Association elected officers at its annual meeting in Anchorage earlier this year. Officers are: Lisa Marquiss, Carlile Transportation Systems Inc. of Anchorage, president; Art Reed, Sourdough Express Inc., first vice president; Scooner Rice, NC Machinery Co., second vice president; and George Lowery, Totem Ocean Trailer Express, secretary/treasurer. All officers are based in Anchorage. New board members are Lowery and Scott Hicks, Alaska West Express.

STOEL RIVES LLP

Evans

John Evans joined the law firm of Stoel Rives’ Anchorage office as part of the litigation group. Evans handles real estate and construction issues, primarily for oil and gas industry clients. Evans also worked as an associate at Sonnenschein Nath & Rosenthal LLP in St. Louis, Mo.

Scott

Michael Scott was appointed senior business relationship manager and vice president for Wells Fargo’s Alaska Commercial Banking Group. Scott has seven years of financial services experience as a risk analyst and investment banking analyst.

NORTHRIM BANK

Gary Conatser has joined the Northrim Bank lending staff in Fairbanks. Conatser is senior vice president, commercial loan manager and is responsible for managing lending activities in Fairbanks and is a member of the Northrim’s Conatser senior management group. He comes to Northrim with more than 25 years of financial institution experience. Conatser is an alumnus of the University of Louisiana Graduate School of Banking and also completed the American Bankers Association School of Bank Marketing. He is a Rotarian, serves on the Fairbanks Chamber of Commerce Membership Committee, is the board vice president for the Downtown Fairbanks Community Services and is president of the board of directors for the Downtown Fairbanks Association.

BETTISWORTH NORTH ARCHITECTS AND PLANNERS

Bettisworth North Architects and Planners now provides landscape architecture and interior design services. Mark Kimerer and Jonny Hayes serve as landscape architects. Judie Bunkers and Abigale Kron handle interior design services. Kimerer and Hayes have 20 years of combined landscape design experience. Bunkers has certifications from the National Council for Interior Design. Kron has experience in designing commercial office interiors, space planning and furniture selection.

STATE GOVERNMENT

Jesse VanderZanden and John Johansen earned the Certified Member designation from the American Association of Airport Executives. VanderZanden is manager of Fairbanks International Airport. Johansen is engineering, environmental and planning manager at Ted Stevens Anchorage International Airport. Melissa Osborn earned the designation as Airport Certified Employee from the American Association of Airport Executives. Osborn is airport operations officer at Fairbanks International Airport. Airport officials report Osborn is the first Fairbanks airport employee to earn the designation. Marc Luiken was appointed deputy commissioner of aviation for the Department of Transportation and Public Facilities. Luiken recently retired as a U.S. Air Force colonel after a 30-year military career. Luiken previously served as the vice commander, 11th Air Force, Elmendorf Air Force Base in Anchorage. ❑

Did someone in your company receive a promotion or award? Please submit information, for possible inclusion in Right Moves, to editor@akbizmag.com. Information received is published, space available, two months after receiving the press release. Right Moves is compiled by Nancy Pounds of Anchorage and sponsored by Northern Air Cargo.

www.akbizmag.com • Alaska Business Monthly • August 2010

ENVIRONMENTAL SPECIAL SECTION

Mining with Minimal Impact Industry seeks to become better environmental stewards

Photo courtesy of Red Dog

BY VANESSA ORR

Aerial of Red Dog Port. The two large buildings at the top are concentrate storage facilities. Shipping is only done in the summer when the ice is gone so it has to be stored the rest of the year. To the right of the buildings is the Port Road that connects the Red Dog Mine site to the port site. Trucks haul the concentrate from the mine to the port using this road year-round.

eave it better than how you found it. In Alaska, that refrain is often used to encourage those who enjoy the outdoors to make sure they leave no trace of their forays into the wilderness. What may be surprising, however, is that the mining industry also is beginning to follow this same tenet. For many years, the industry left a large, and often indelible footprint,

on the landscape. Yet as mining has evolved, more and more companies have begun to embrace the idea of environmental stewardship – impacting the land, water and wildlife as minimally as possible, and in some cases, even improving the areas in which they work. “I’ve been with the Red Dog Mine for 22 years, and I’ve seen the concept of environmental stewardship steadily evolve,” said Jim Kulas, manager,

environmental and public affairs. “The idea of taking care of the environment really escalated in the early 1990s, and it’s continued to grow. I think it’s a healthy view, and there is definite acceptance and recognition in the industry of the importance of being good environmental stewards.” According to Tony Ebersole, Coeur spokesman, “producing and protecting” summarizes that organization’s operating policy. “Coeur emphasizes an environmental and safety focus, all while producing for the benefit of our shareholders,” he said. “Our culture is to provide the safest environment for our workers. Additionally, we can’t produce without an unwavering commitment to environmental stewardship.” “Environmental stewardship is more than a buzzword at Fort Knox, it’s how we do business,” says Lorna Shaw, community and government affairs manager, Kinross Fort Knox. “Through years of inspections and audits, we have shown our commitment to high environmental standards. Only one notice of violation has been issued to Fort Knox in the operating history of the mine, for an improperly labeled used oil container. Our outstanding record is a credit to the hard work, the commitment and the environmental ethic among the employees at Fort Knox.”

SUCCESS STORIES Kulas cites the management of Red Dog Creek as an example of how a mine can make a difference. “Red Dog Creek runs through the middle of the mine’s ore body, and in its pre-mine history, it was polluted by metals leaching from natural deposits,” he said. “A baseline study document showed a high rate of fish mortality downstream. Fish would travel through the harmful toxicity of the water and be overwhelmed, resulting in fish kills.

www.akbizmag.com • Alaska Business Monthly • August 2010

Photo by Bill Zervantian/Bill Z Photography

Kinross Fort Knox Community and Government Affairs Manager Lorna Shaw pointing to the mill and administrative facilities in a 1996 aerial photo and describing changes that have occurred since the photo was taken.

placer mining disturbance as wetlands, created high-quality spawning grounds and habitat for native fish species, and improved the water quality of the Fish Creek drainage,” she said. “In 1993, a 10-year goal was established to create a viable Arctic grayling population in the water supply reservoir from fish trapped upstream of the dam. Through concurrent reclamation, the goal was attained only two years after the construction of the water supply reservoir. Wildlife use of the lower Fish Creek valley has also increased.”

Jointly with the Alaska Department of Fish and Game, Fort Knox received the prestigious Tileston Award in 2009 for the Fish Creek reclamation project, presented by the Alaska Conservation Alliance and the Resource Development Council to recognize projects good for both the environment and the economy. Even when a mine doesn’t come to fruition, companies make sure the land is returned to its natural state. “On the exploration side of things, we’ve taken a different approach to protect the

“When we started our operation, we put the creek into a manmade containment system to protect it where it came through the mine area,” he continued. “We collect all site-impacted water, and treat and remove metals. The combination of metal-free water and creek improvements has resulted in better downstream water quality. Now fish are spawning and rearing in that same stretch of creek.” Red Dog staff are advised by a subsistence committee made up of elders from two local communities who provide oversight and regular guidance. “We know the importance of running an operation with minimal impact on the environment,” Kulas said. “We operate in an area where there is a huge reliance on the subsistence harvest, including marine mammals, caribou and berries.” The Fort Knox Mine, located in the Fish Creek drainage of the Fairbanks Mining District, also has made a positive difference on its environment. The mine is owned and operated by Fairbanks Gold Mining Inc. (FGMI), a wholly owned subsidiary of Kinross Gold Corp. “As a result of historic mining activity, the Fish Creek Valley suffered substantial habitat alteration,” Shaw said. “Several tributaries in the headwaters of Fish Creek were affected and fish access to Barnes and Pearl creeks had probably not existed for at least 10 years prior to development of the Fort Knox project. “Although FGMI never mined in Fish Creek, the company completed extensive reclamation of pre-existing www.akbizmag.com • Alaska Business Monthly • August 2010

environment by having all of our work supported by helicopters,” said Mike Heatwole, vice president, public affairs, The Pebble Partnership. “We build no roads or permanent infrastructure; when we’re done with our drill sites, they are immediately reclaimed. A year later, you’d be hard-pressed to find any evidence of where we were. This was a decision made early on. Even if a project doesn’t make it through all of the hurdles, we still require that its impact on the environment be minimal.” “From a company perspective, environmental commitment can be the difference between company success and failure,” Shaw said. “In order to continue developing and operating mines, we need to be sure we exhibit not only environmental stewardship, but also environmental leadership. We want to be the operator of choice. That’s a position that can’t be attained without a great record of environmental performance.”

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While many mines monitor the ways they affect the environment, there are also hundreds of State and federal rules and regulations they must follow. “It’s really important big mining operations have a system in place that allows them to manage all of the regulations,” Kulas said. “We counted, and there are 162 permits, agreements and bodies of regulatory requirements we are required to follow. These 162 requirements have 6,000 related tasks, which total 26,500 things that we must do, including everything from writing reports to collecting samples to making environmental observations. It’s a very extensive list.” To ensure nothing slips through the cracks, the Red Dog Mine has an environmental managing system. “We are an ISO140001-certified operator, which means our system meets all of the requirements of an ISO organization, which include supporting environmental protection, preventing pollution and fostering improvements in environmental performance.” Red Dog also tracks any incidents that do happen, and issues alerts to make sure the company and its employees are following through with corrective actions. “It’s a very robust system,” Kulas said. “Our intent is to

take the responsibility for being environmentally sound and spread it throughout the work force; to put it into the hands of those people who are closest to each task, instead of having a satellite group manage it.” Training seminars are provided on-site for Red Dog employees, and if an individual needs to go outside for training, that is provided as well. “When a new employee is hired at Fort Knox, in addition to comprehensive safety training, we provide training on our environmental procedures from things as simple as disposing of food waste in covered trash cans to what to do in the event of a spill,” Shaw said. “In addition, employees attend quarterly environmental training sessions.” At Coeur, the company routinely performs internal and third-party environmental audits on its operating mines. “All of our operating plans include provisions that require environmental training for fisheries and wildlife protection and management, spill prevention and response, and safety and water management,” Ebersole said. “Certain environmental training programs are offered at the mine on a regular basis, both at the site and by off-site conferences and trainers.”

INVESTING IN THE ENVIRONMENT Of course, none of this comes cheap. “Before opening Kensington, the mine was evaluated under three separate Environmental Impact Statements (EIS), each involving different operating scenarios,” Ebersole said. “The final constructed alternative also required about 35 separate permits to cover air, water quality, solid waste, water management, fish passage, water rights, housing, marine, transportation – the list goes on. In total, about $30 million was spent in environmental and engineering studies, including the three major EISs. This included over 1,000 individual studies and designs.” Adding to expenses are Kensington’s three water-treatment plants, which cost about $12 million in capital. “This amount does not include the cost of ongoing operating and monitoring at the facilities for the life of mine and into closure,” Ebersole said. “It does not include the cost of the tailings-treatment facility, or all the

www.akbizmag.com • Alaska Business Monthly • August 2010

storm-water detention and treatment facilities, or environmental personnel.” In the last 10 years, Red Dog has spent $125 million on capital improvements to address environmental impacts and issues. “On water monitoring alone, we spend $3 million annually. Treating it and discharging it is another $10 million annually,” Kulas said. “This is significant, because it requires an operation have the wherewithal to do it. It has raised the standards for what it takes to be a successful mine in the U.S., as opposed to a political jurisdiction that does not have the same regulations.” Mining companies must ensure their existing mines are environmentally sound and any new mine they open will adhere to the same high standards. “Opening a mine requires land, air and water disturbance,” Ebersole said. “For example, Kensington will impact or disturb about 190 total acres of land and habitat, which include timber, nonforest brush, musky wetlands, rock outcroppings and more. This disturbance requires immediate stabilization and interim reclamation to preclude runoff with high-suspended solids, given the 85-plus inches of average annual precipitation, which could adversely impact the local fishery. Our projects must meet all environmental standards from day one of construction.” According to Ebersole, the Kensington project will require streams to be rerouted via newly constructed channels that must accommodate fish passes and storm-water design flows. Engineered facilities, including the three water-treatment plants, must be in place and fully operational in advance of startup. Air quality mitigation measures, like chemical suppressants, must be applied to new roads from day one of construction and diesel generators must be equipped with selective catalytic-reduction devices to reduce emissions. “Environmental performance was important even in the planning stages for development of the mine,” said Shaw of the Fort Knox facility. “For example, the mill and shop facilities are located upstream of the tailing facility. The tailings storage facility (TSF) at Fort Knox is a zero-discharge facility, which means no water is released into the environment. Rather, any seepage

is captured through a water-collection system and returned to the TSF. The newly built heap leach facility was constructed not only as a stand-alone zerodischarge facility, but also it is located upstream of the TSF.” According to The Pebble Partnership, the Pebble prospect, located in Southwest Alaska, is currently in a prefeasibility and pre-permitting research stage, and is conducting some of the most extensive environmental studies ever undertaken in Alaska. The Partnership is an Alaska limited partnership between Anglo American PLC and Northern Dynasty Minerals Ltd. “We are not yet at the stage where we’re ready for permitting, though we have made significant investments in environmental studies; approximately $120 million to date,” Heatwole said. “These studies, which mainly focus on water and fish, are looking at quality, quantity, service water, groundwater and seasonal fluctuations among other things to meet the high standards Alaska has when it comes to the environment.” The mine will be required to meet more than 67 types of State and

federal permits, as well as a number of State and federally mandated environmental requirements. More than a dozen State and federal entities will provide agency oversight. By the end of the year, The Pebble Partnership will take all of its environmental studies and turn them into an environmental baseline document that characterizes the area around the mine. “We will also be putting together a preliminary project plan that shows how we would mine and where the infrastructure would go, among other details,” Heatwole said. The Pebble Partnership won’t be filing for a permit until 2011, after it hears from the communities around the region. “Right now, people are focused on the completion and rollout of the environmental baseline document and our preliminary plan,” Heatwole said. “Our CEO is committed to presenting the preliminary plan to the Southwest Alaska region for consultation before initiating the permitting process. “There’s a good track record for larger mines in the state, and obviously, we want to be on a par with them in ❑ our environmental practices.”

www.akbizmag.com • Alaska Business Monthly • August 2010

ENVIRONMENTAL SPECIAL SECTION

Going Green Alaska Waste and Green Star innovative leaders

Photo courtesy of Alaska Waste

BY LOUISE FREEMAN

Alaska Waste’s recently instituted promotional campaign features Anchorage residents such as Nurse Sara, saying “I choose to recycle, do you?”

s local businesses become more attuned to the green economy, many are trying out new ways to make their products and business practices more earth-friendly by reducing waste, recycling and curbing pollution. Alaska Waste is at the forefront of innovative recycling efforts in the Anchorage area.

NEW PROGRAMS In one of the bays at their Anchorage facility, a cylinder 32 feet long and 10 feet in diameter continually rotates at slow speed, converting waste into a rich organic soil additive in seven days. The composting service, a new pilot program, is not offered to area households because Alaska Waste has to carefully monitor what goes into the

composter. Two local grocery stores provide waste produce, which is mixed with shredded paper, cardboard, wood chips and horse manure. Another new development at Alaska Waste is their biodiesel processing plant. Used cooking oil from local restaurants is processed into biodiesel for use in their fleet of 50 trucks. The three-part goal is to save money, reduce carbon emissions and make use of a renewable resource, according to Jeff Jessen, renewable resources program administrator.

CURBSIDE EXPANSION In addition, curbside recycling through Alaska Waste has expanded over the last three years and is now available to 40,000 households in Anchorage,

Eagle River and on Elmendorf Air Force Base. Four thousand households currently participate in the optional program. Even with only 10 percent participation, 2.5 million pounds of waste were diverted from the landfill in 2009. Alaska Waste’s goal is to get participation up to 25 percent. “Our hope is that the curbside makes it a lot more convenient. It’s in their home, they can get kids involved,” said Katy Suddock, recycling coordinator at Alaska Waste. “We haven’t gotten as many people as we would hope. It’s interesting we don’t get the take rates as in Lower 48. It’s an educational process.” The Municipality of Anchorage has a similar recycling program, which covers 20 percent of the households and commercial establishments in Anchorage. Their service area is north of Tudor Road, with pockets in a few other neighborhoods. In the spring of 2008, Alaska Waste expanded their paper-only recycling program to include co-mingled waste such as aluminum and tin cans and some plastic bottles and jugs (PET No. 1 and HDPE No. 2 only). No sorting is necessary for the customer – it all goes in one 96-gallon tipper cart provided by Alaska Waste.

BUSINESS WASTE Alaska Waste offers two programs for the business community. The office recycling program picks up mixed paper and shredded paper, as well as waste generated in company break rooms, such as aluminum cans and plastic bottles. Pickup is available weekly, every other week or on call. “It’s a great way for businesses to promote recycling and to educate their employees to recycle, and it diverts it from their waste stream,” Suddock says.

www.akbizmag.com • Alaska Business Monthly • August 2010

“A lot of businesses are starting to get on the recycling bandwagon. It’s great.” There are currently 250 participants in the office recycling program.

COMMERCIAL PROGRAM Another service provided to businesses is the commercial recycling program, which provides a dumpster for pick up of mixed paper and cardboard. The cost varies with the size of the dumpster and the frequency of pick up. Like the other materials, the mixed paper is shipped to the Lower 48. It is used to make paper towels, toilet and facial tissues, and paperboard for such items as cracker and cereal boxes. Currently 634 businesses, schools and other organizations participate in the commercial recycling program. As part of its ongoing educational effort, Alaska Waste works closely with schools in the Anchorage area. Company representatives give talks at the schools and participate in the school district’s yearly Earth Day celebration. They also go to home shows and other local events and provide a substantial amount of educational info on their website. But Alaska Waste’s recycling efforts don’t stop there. They practice what they preach: They have an internal program for recycling and reducing their own waste. In February 2009, they received their Green Star Award in recognition of their earth-friendly business practices.

AT&T Stays Green AT&T Recycle & Reuse To help eliminate electronic waste, consumers are invited to bring unwanted wireless phones, smartphones, accessories and batteries (regardless of the manufacturer or carrier) to AT&T company-owned retail stores for recycling. AT&T has a long-standing history of supporting Cell Phones for Soldiers – an initiative that uses funds from recycled cell phones to buy prepaid phone cards for active duty military members to help connect them with their families. Drop-off sites are located in all AT&T company-owned retail stores. More information: http://www.wireless.att.com/learn/ articles-resources/community-support/recycling.jsp

Slimmed Packaging AT&T announced in March it is working with suppliers of mobile phone accessories to use less plastic and paper in packaging. More information: http://www.att.com/gen/press-room?p id=4800&cdvn=news&newsarticleid=30599&mapcode=

GREEN STAR HELPS Green Star is a nonprofit organization that offers education and technical assistance to help businesses go green by reducing waste, conserving energy and preventing pollution. “Anyone can say they’re green,” said Kim Kovol, executive director of Green Star, “but to get a Green Star Award, you have to prove to an assessment committee of your peers that you’re making a difference within your organization, like a positive return on investment, and a positive impact on the community and environment.” Green Star members include businesses from all sectors, including health, travel, transportation, hospitality, construction, manufacturing, www.akbizmag.com • Alaska Business Monthly • August 2010

retail and waste management. Many municipal, State and federal agencies, nonprofits and schools also have become members. Even a single-person business, such as a contractor or a computer consultant, may work toward a Green Star award. Currently, half of the organization’s 242 members have earned a Green Star Award for meeting the required standards. The 10 standards include such goals as reducing solid waste disposal through waste reduction and recycling, minimizing energy and water consumption, and cutting down on vehicle pollution. Benefits to the company include not only economic benefits, but also reduced environmental liabilities and public recognition for being a responsible member of the community. Awardees also find making these changes yields an unexpected bonus. “We’re getting feedback that it improves employee morale,” Kovol said. “People make fewer mistakes when there’s better lighting, for example, and it’s creating a more productive environment, not only by providing a healthier environment

but by improving physical health.” Green Star is invited to present one award a month at the Anchorage Chamber of Commerce luncheon, which, Kovol noted, “can spark some business for the company receiving their award.” Businesses sometimes choose to receive the award at a work meeting or an employee potluck. “We leave it up to the business on how they choose to be recognized.”

EARTH-FRIENDLY CHANGES To receive the Green Star Award, Alaska Waste made many changes in their work areas, including sealing up windows and doors, regulating heat in their shops, plugging vehicles in overnight and establishing new policies on idling. The company made great strides in reducing its own internally generated waste, switching to all biodegradable plates, cups and utensils, and encouraging the use of reusable cups and water bottles. Some waste generated in their break room, such as cups and plates, goes next door to their new composter. The janitorial service is now required to use earth-friendly cleaning products.

All printers have been set to black and white double-sided, and post-it notes are used instead of fax cover sheets. The company newsletter and calendars are distributed by e-mail. Alaska Waste also is adding electronic bill-pay so customers can cut down on paper use, too. Anchorage Waste recently instituted a promotional campaign with the slogan: “I choose to recycle, do you?” Along with the slogan, their trucks display photos of Anchorage residents and celebrities, such as Olympic crosscountry skier James Southam. The earth-friendly changes Alaska Waste and other Green Star awardees have made are essential for future growth. “For younger employees and consumers, the green culture is ingrained already and they value that,” Kovol says. “They look at a business in the hospitality industry, for example, and ask, ‘Are they saving water? Are they using corn-based products or traditional plastic spoons in the restaurants?’ Businesses must respond to consumer demands because customers are making greener purchases and decisions in higher quantities.” ❑

www.akbizmag.com • Alaska Business Monthly • August 2010

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Ç¤ Â&#x2018;Â?Â&#x2022;Â&#x2013;Â&#x192;Â?Â&#x2013;Â&#x17D;Â&#x203A; Â&#x2020;Â&#x192;Â&#x2019;Â&#x2013;Â&#x2039;Â?Â&#x2030; Â&#x2013;Â&#x2018; Â&#x2013;Â&#x160;Â&#x2021; Â&#x192;Â&#x201D;Â?Â&#x2021;Â&#x2013;Â&#x2019;Â&#x17D;Â&#x192;Â&#x2026;Â&#x2021;

merald Alaska Inc., the stateâ&#x20AC;&#x2122;s largest Alaska-based environmental services firm, is constantly adapting to the needs of the marketplace. Emerald was founded on high-quality petroleum recycling services that include transforming used oil, oily water and mixed fuels into custom blended fuel products for energy recovery. Today, the company offers the widest variety of environmental and recycling services available in Alaska. Emerald helps businesses reduce their environmental risk and comply with ever-increasing environmental regulations. Clients include government agencies and private companies in oil, mining, transportation, engineering and other industries.

([SDQGLQJ 6HUYLFHV /RFDWLRQV DQG (TXLSPHQW Headquartered in Palmer, Emerald Alaska has expanded its expertise, services, locations, and equipment to better serve its Alaska clients. Currently, the company is constructing a new Kenai facility at Mile 17 Kenai Spur Highway to support the Cook Inlet region. In Fairbanks, Emerald has relocated its operations to a larger, more efficient facility at 1350 Queens Way. Additionally, Emeraldâ&#x20AC;&#x2122;s Tacoma, Wash treatment, storage and disposal facility recently received an expanded EPA permit to accept a broader array of hazardous waste. Emeraldâ&#x20AC;&#x2122;s service offerings are centered around its fleet of high-powered vacuum trucks. The company operates various vehicles, from standard liquid vacuum units to high-performance Vactor/Guzzler air moving and hydro-excavating systems. Emerald routinely services underground oil/water separators; sump and catch basins; sewer and stormwater lines, safely removing sludges, mud; ground water and industrial wastewater.

Industrial and marine cleaning is another area of growth for the company. Emerald offers high-pressure hydroblasting to help clients decontaminate processing equipment, storage tanks, and other machinery. The company also provides bilge pumping/cleaning; barge cleaning; ventilation; liquid pumping, product transfer, filtration services, as well as statewide emergency spill response and clean-up. Emerald excels in all types of waste treatment and disposal. It manages ignitable liquids, corrosives, batteries, paint, rags, sludges, solids, pesticides, contaminated soil, spent lamps, and off-spec and surplus chemical labpacks. Emerald helps companies improve their processes and materials so they can generate less waste. Automotive services is another key product line for Emerald. The company provides full-service automotive fluids waste management â&#x20AC;&#x201C; from parts washer solvents to antifreeze and coolants â&#x20AC;&#x201C; with available processing or reuse of almost all automotive fluids waste. Emerald is the Alaska distributor for Orange-Sol, an environmentally-friendly cleaner with a proven record of removing tough petroleum residues. Emerald also operates a large fleet of vehicles that transports hazardous waste, used oil, fuels, wastewater, drilling muds, and contaminated solids.

5HFHQW 0DMRU 3URMHFWV Emerald is proud to have been re-awarded the Defense Logistics Agency contract to manage hazardous waste for Alaskaâ&#x20AC;&#x2122;s mili-

tary installations. The contract â&#x20AC;&#x201C; which the company has successfully performed since 2000 â&#x20AC;&#x201C; is a testament to its strong ethics, expertise and service. Emerald also recently supported the U.S. Coast Guardâ&#x20AC;&#x2122;s closure of the LORAN station at Port Clarence. The project involved removing hazardous waste from the complex in support of the demolition of Alaskaâ&#x20AC;&#x2122;s tallest manmade structure: a 1,300-plus-foot antenna. Additionally, Emerald also assisted with the spring 2010 shutdown and maintenance of North Poleâ&#x20AC;&#x2122;s Flint-Hills Resources refinery. Emerald Alaska can tackle the toughest, most challenging project with sophisticated technology and safe, well-trained personnel.

For more information, contact: Emerald Alaska Inc. W. Paul Nielsen III, Sales Manager 425 Outer Springer Loop Rd. Palmer, AK 99645 Phone: 907-258-1558 x107 Fax: 907-746-3651 Website: www.EmeraldNW.com

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ENVIRONMENTAL SPECIAL SECTION

Endangered Species Act Impacts of compliance in Alaska BY TYSON KADE

Tyson Kade is an attorney with Van Ness Feldman P.C. in Seattle.

with 10 additional species currently being considered for protection. Several of these species have been proposed recently based on the anticipated effects of climate change on their habitat, such as declining areas of sea ice coverage. While Alaska is no stranger to the ESA, the recent listing actions will bring increased federal involvement and oversight to activities and land use in the state. In response, the State of Alaska has filed lawsuits to challenge the federal government’s listing of polar bear and Cook Inlet beluga whale under the ESA. For landowners and companies seeking to do business in the state, the ESA carries compliance obligations that must be understood prior to conducting activities that may affect a threatened or endangered species. Due to the large

amount of federal lands in Alaska and the types of development projects, such as natural resources exploration and extraction that require federal permits the number of projects subject to ESA requirements will increase in the future as more species are listed under the ESA. As application of the ESA becomes more widespread, the associated compliance-related delays and project modifications could well increase the cost of doing business in Alaska. In order to successfully manage these potential impacts, it is important to understand these federal actions in advance.

WHAT IS THE ESA? The ESA, administered by the United States Fish and Wildlife Service (USFWS) and the National Marine

Photo courtesy of NOAA

laska is beginning to experience the emerging application of the federal Endangered Species Act (ESA), with effects that are likely to increase in the coming years. While much media attention has been paid recently to addressing climate change on a global and national scale, advocacy groups have turned to an existing environmental law, the ESA, to address the impacts of climate change on plant and animal species in the Lower 48 states, as well as in Alaska. The effects of the application of the ESA to climate change issues could be felt acutely in Alaska, far more than other states. Currently, there are 20 Alaska species listed under the ESA, ranging from polar bear and bowhead whales in the north to beluga whales and sea otters in Southcentral and Southeast,

Scientists tagging a beluga whale in Cook Inlet near Anchorage.

www.akbizmag.com • Alaska Business Monthly • August 2010

taking into consideration the economic impact, and any other relevant impacts, of specifying any particular area as critical habitat. Only activities involving a federal permit, license or funding are affected by a critical habitat designation. Currently, NMFS and USFWS are considering final critical habitat designations for Cook Inlet beluga whales and polar bears, respectively.

WHAT IS CONSULTATION AND WHEN IS IT REQUIRED?

Fisheries Service (NMFS), has been called by its proponents “the pit bull of federal environmental law” for its single-minded requirement to place federally required species conservation as a priority over all types of economic activity. In general, the ESA requires the conservation of listed threatened and endangered species and the protection of the habitat on which the species depend. The ESA defines species broadly, including subspecies and distinct population segments of vertebrates, which allows the USFWS and NMFS to protect discrete populations of listed species in portions of their range. Once a species has been listed, the ESA prohibits private or public actions that harm or harass the protected species.

HOW ARE SPECIES LISTED UNDER THE ESA? To be protected under the ESA, a species must be “listed,” either as endangered or threatened. An endangered species is a species which is in danger of extinction throughout all or a significant portion of its range. A threatened species is a species likely to become endangered within the foreseeable future throughout all or a significant portion of its range. Additionally, a species can be designated as a candidate for listing. While this does not implicate

ESA protections, a candidate species is eligible for conservation agreements that may prevent a future listing. Under Section 4 of the ESA, the listing process is triggered upon petition by a private citizen or on the initiative of USFWS or NMFS. In determining whether listing is warranted, one of the following five factors must exist: (1) present or threatened destruction, modification, or curtailment of habitat or range; (2) overutilization for commercial, recreational, scientific or educational purposes; (3) disease or predation; (4) inadequacy of existing regulatory mechanisms; and (5) other natural or manmade factors affecting continued existence. For example, the polar bear was listed as threatened based on the declining amount of sea ice in the Arctic, its principal habitat. The listing determination must be based upon the best scientific and commercial data and take into account other efforts being made to protect the species. If a species is listed, the ESA typically requires the designation of critical habitat. Critical habitat includes specific areas containing features essential to the conservation of the species and that may require special management considerations or protection. The designation of critical habitat must be based on the best scientific data available after

Of the impacts associated with the listing of a species, the consultation requirement can have the greatest effect on businesses and landowners. Under Section 7 of the ESA, every federal agency has an obligation to ensure that its actions do not jeopardize the continued existence of a listed species or result in the destruction or adverse modification of a listed species’ critical habitat. To fulfill this obligation, a federal agency must consult with USFWS or NMFS when its action may affect a listed species or its critical habitat. For example, consultation can be triggered if a private action requires a federal permit, occurs on federal land, or involves federal funding. The consultation process can result in the preparation of a biological opinion, which may impose additional terms and conditions upon the proposed project. Consultation, in effect, creates a second permitting requirement, since, in addition to the federal permit already required, the applicant would also have to comply with the requirements of the biological opinion. For example, the biological opinion will contain an incidental take statement, which allows for the take of listed species in conjunction with otherwise lawful federal actions. The liability protection provided by the incidental take statement is only applicable so long as there is compliance with the biological opinion’s terms and conditions. Any such terms and conditions must be designed to minimize the amount or extent of the anticipated take of the listed species. The consultation requirement, and the imposed terms and conditions, have the potential to significantly impact a proposed project. The consultation itself is typically a laborious process that involves the collection and review of

www.akbizmag.com • Alaska Business Monthly • August 2010

Second, the ESA allows Alaska Natives to take any endangered or threatened species if the taking is primarily for subsistence purposes. Third, a person may take a threatened or endangered species in defense of his own life or the lives of others. The self-defense exception is typically not available for the protection of property or pets. In addition, as discussed above, a lawful taking can occur subject to an incidental take statement contained in a biological opinion. detailed, scientific data, which, along with the preparation of the biological opinion, can delay the anticipated start of a proposed project. In addition, depending on what additional conditions are required for the protection of the listed species or its critical habitat, the biological opinion can impose significant costs and alterations on a proposed project by, for example, prohibiting certain activities in specified areas or requiring the inclusion of expensive technological modifications.

WHAT IS PROHIBITED TAKE? Once a species has been listed as endangered, Section 9 of the ESA prohibits any person, including government agencies, from “taking” any endangered species. The term “take” is defined broadly to mean “harass, harm, pursue, hunt, shoot, wound, kill, trap, capture or collect, or to attempt to engage in any such conduct.” Importantly, a take can occur if a species is impacted directly or if significant habitat modification or degradation occurs, which actually kills or injures wildlife by significantly affecting essential behavioral patterns, including breeding, feeding or sheltering. Examples of these types of activities include: the discharge of pollutants; the removal or alteration of rocks, soil, gravel, vegetation or other physical structures; and constructing, maintaining or using inadequate bridges, roads or trails on stream banks or unstable hill slopes adjacent to or above a listed species habitat. The ESA imposes substantial civil and criminal penalties on any person who “knowingly” violates the prohibitions on take. For threatened species, Section 4(d) of the ESA provides the USFWS and NMFS with greater flexibility when

determining what activities constitute a taking. Instead of the complete prohibition on take that applies to endangered species, the USFWS and NMFS are able to promulgate regulations that are “necessary and advisable” to conserve threatened species. These “4(d) rules” allow the federal agencies to adopt less-restrictive measures to ensure the protection of threatened species. Importantly, the development of a 4(d) rule is a public process, allowing interested parties to participate and provide comments on the proposed measures. The recent 4(d) rule for polar bear, while currently the subject of a legal challenge, provides an example of the type of protection from take liability that can be provided under section 4(d).

ARE THERE EXCEPTIONS TO THE PROHIBITION ON TAKE? While the ESA’s prohibition on take can be onerous, the ESA provides several exceptions that can allow take to occur in certain specified circumstances. First, a party can take a listed species if they have received, and complied with the terms and conditions of, a Section 10 incidental take permit. The USFWS or NMFS can issue an incidental take permit if the contemplated taking is incidental to, and not the purpose of, the carrying out of an otherwise lawful activity. To apply for a permit, the party must submit a description of the activity sought to be authorized, the species sought to be covered by the permit, and a habitat conservation plan. The habitat conservation plan must describe the likely impact of the taking, the measures the applicant will employ to minimize or mitigate any such impact, and any procedures for resolving problems posed by unforeseen circumstances.

HOW SHOULD ESA COMPLIANCE OBLIGATIONS BE ADDRESSED? While the impacts of ESA compliance can be significant, entities in other regions of the country, such as the Pacific Northwest, have successfully addressed similar requirements. In general, landowners and companies that take a proactive approach regarding ESA compliance are better able to effectively and efficiently manage their ESA obligations. For example, when considering an action that may affect a listed species, the landowner or company should actively engage the appropriate federal agency early in the project-development process. The applicant should also work cooperatively with the federal agency to ensure that the best available science is used to assess any impacts to listed species. Finally, landowners and companies should design their projects to minimize any impacts to listed species to the greatest extent possible. These actions, coupled with an understanding of the relevant regulatory requirements, will help landowners and companies avoid some of the costs and delays usually associated with ESA compliance. For entities that do not fully appreciate the role of the ESA or that do not proactively attempt to address their compliance obligations, the ESA can serve as a significant barrier to project ❑ permitting and construction. About the Author Tyson Kade is an attorney with Van Ness Feldman P.C. in Seattle. His practice focuses on federal and state environmental and natural resources law. Kade recently gave a presentation on “Arctic Species: Incidental Take Compliance Strategies” at the Endangered Species Act – Impacts on Alaska seminar in Anchorage.

www.akbizmag.com • Alaska Business Monthly • August 2010

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A Green Star CertiďŹ ed Alaskan Business Rethinking the Daily Commute By conducting a quarterly employee-owned vehicle efficiency and safety check and implementing policies that favor car-pooling and bicycle commuting, Alaska Chadux is promoting an energy efficient and safe commute to work.

www.akbizmag.com â&#x20AC;˘ Alaska Business Monthly â&#x20AC;˘ August 2010

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ALASKA BUSINESS MONTHLY 2010

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ALASKA BUSINESS MONTHLY 2010 ENVIRONMENTAL/RECYCLING DIRECTORY ENVIRONMENTAL FIRMS &

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www.akbizmag.com â&#x20AC;¢ Alaska Business Monthly â&#x20AC;¢ August 2010

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+0:1; *:7?6 5?0/47*)4 +75 ??? 5?0/47*)4 +75

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www.akbizmag.com â&#x20AC;˘ Alaska Business Monthly â&#x20AC;˘ August 2010

ALASKA BUSINESS MONTHLY 2010 ENVIRONMENTAL/RECYCLING DIRECTORY ENVIRONMENTAL FIRMS (

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www.akbizmag.com â&#x20AC;¢ Alaska Business Monthly â&#x20AC;¢ August 2010

ALASKA BUSINESS MONTHLY 2010 ENVIRONMENTAL/RECYCLING DIRECTORY ENVIRONMENTAL FIRMS %#& $.

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www.akbizmag.com â&#x20AC;¢ Alaska Business Monthly â&#x20AC;¢ August 2010

ALASKA BUSINESS MONTHLY 2010 ENVIRONMENTAL/RECYCLING DIRECTORY ENVIRONMENTAL FIRMS #

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UAA SCHOOL OF ENGINEERING Hands-on learning for tomorrowâ&#x20AC;&#x2122;s engineers With hands-on learning at the core of its curriculum, students in the UAA School of Engineering engage in applied engineering and innovative design. Students design and build projects, and participate in national competitions against students from around the world. A team of engineering students created an all-terrain vehicle this spring. The team, â&#x20AC;&#x153;Midnight Sun Racing,â&#x20AC;? traveled to Washington State in May to compete in the 2010 Society of Automotive Engineers Baja International Design Competition.

â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s awesome to be able to take what youâ&#x20AC;&#x2122;ve learned in your classes, apply it to real world applications and build something tangible, not to mention compete against other students from around the world!â&#x20AC;?

â&#x20AC;˘ Michael Maryjanowski Junior, Mechanical Engineering UAA School of Engineering â&#x20AC;˘ Engineering Alaskaâ&#x20AC;&#x2122;s Future Today â&#x20AC;˘ www.engr.uaa.alaska.edu â&#x20AC;˘ 786-1900

UAA IS AN EEO/AA EMPLOYER AND EDUCATIONAL INSTITUTION.

www.akbizmag.com â&#x20AC;˘ Alaska Business Monthly â&#x20AC;˘ August 2010

ALASKA BUSINESS MONTHLY 2010 ENVIRONMENTAL/RECYCLING DIRECTORY ENVIRONMENTAL FIRMS ! " )

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www.akbizmag.com â&#x20AC;¢ Alaska Business Monthly â&#x20AC;¢ August 2010

BUILDING ALASKA

COVER STORY

SPECIAL SECTION

Stimulus Funds What happens when the money runs out?

Photo courtesy of Alaska Department of Transportation and Public Facilities

Were we given the boost needed? in the meantime aligning herself with other very conservative governors who also rejected the money. By now, of course, everyone knows the punch line to the story. In May 2009, House and Senate finance committees held almost 20 public hearings to discuss and debate the stimulus legislation. In the end, the federal economic stimulus appropriation bill, HB 199, was signed. Palin did not accept the $28.6 million for energy funds and vetoed this portion, but the Alaska State Legislature then voted 45-14 to override her veto.

ARRA ARRA Stimulus funds paid for $ $7.7 million of Alaska Department of Transportation and Public Facilities $17 million causeway and dock project in Gustavus, meant to improve marine access in and out of Gustavus and Glacier Bay National Park.

BY HEIDI BOHI

Photo courtesy of Sen. Mark Begich

hen former Gov. Sarah Palin originally vetoed $28.56 million in American Recovery and Reinvestment Act (ARRA) funds to help improve the energy efficiency of public and private buildings statewide, most Alaskans were ready to posse up and escort her out of town. In announcing the acceptance of only 69 percent

Sen. Mark Begich

of the estimated $930 million slated to flow into Alaska, Palin said she was acting in the best interests of Alaskans. She said she would only accept “timely, targeted and temporary” money that did not create strings binding the State in the future, adding that any kind of obligation would simply lead Alaska into a deeper hole. “A good time may be had by all, but the hangover the next day, and the consequences of what you did while you were drunk, may be with you for a long, long time,” Sen. Con Bunde said, supporting Palin’s decision. Democrats rebuked her and the conservative Republican minority in the Senate saying the governor was breaking with a long tradition of Alaska going after as much federal money as possible to help create infrastructure and build the state. At the same time, many Palinantagonists said her motives behind the decision were completely selfish and that she was making decisions with an eye toward a future presidential campaign,

Congress passed the American Recovery and Reinvestment Act (ARRA) of 2009 at the urging of President Barack Obama, who signed it into law last year. A direct response to the economic crisis, the act has three immediate goals: to create new jobs and save existing ones, spur economic activity and invest in long-term growth, and foster unprecedented levels of accountability and transparency in government spending. To do this, nationally, the act provides $288 billion in tax cuts and benefits for millions of working families and businesses; increases federal funds for education and health care as well as entitlement programs (such as extending unemployment benefits) by $224 billion; makes $275 billion available for federal contracts, grants and loans; and requires recipients of ARRA funds to report quarterly on how they are using the money. In addition to offering financial aid directly to local school districts, expanding the Child Tax Credit, and underwriting a process to computerize health records to reduce medical errors and save on health care costs, ARRA targets infrastructure development and enhancement. For instance, the act includes investment

www.akbizmag.com • Alaska Business Monthly • August 2010

BUILDING INFRASTRUCTURE Construction and repair of airports, roads and bridges, as well as scientific research and the expansion of broadband and wireless service, are also included among the many projects in the recovery act. While many of these projects focus more immediately on jump-starting the economy, others – especially those involving infrastructure improvements – are expected to contribute to economic growth for many years. To date, a total of about $1.6 billion came to Alaska, with the last payouts arriving this year, according to Sen. Mark Begich. Of that, about 30 percent went to stimulus construction projects for highways, airports and defense, with the remainder going to tax relief and small-business incentives. Alaska fared well, ranking 36th in terms of most absolute dollars. For overall transportation

and infrastructure spending, the state came in No. 42. Per capita comparisons are difficult with the stimulus money because it specifically directs much of the money to some of the hardest-hit states and large urban areas, according to the Center for American Progress. What is most significant about the windfall was the timing. “The money came in at the right time,” Begich says, adding that while the rest of the country was sinking fast and deep into the recession, Alaska was still holding strong and the stimulus funds prevented the state from losing its hold by funding important projects that also created good paying, long-term jobs. “The timing held off the deeper recession Alaska could have faced – even though we were behind that curve, it was so fast and furious that we were next on the list, but we were able to fend it off.” Now, he adds, while the rest of the country is still witnessing unprecedented rates of unemployment, Alaska has dropped three-tenths of a point. Undeniably, the resulting projects are critical for both the quality of life of people and future development of commu-

Photo courtesy of AGC of Alaska

in the domestic renewable energy industry and energy improvements, and the weatherization of 75 percent of federal buildings and more than 1 million private homes nationwide.

John MacKinnon Executive Director Associated General Contractors of Alaska

nities statewide. Alaska’s military bases alone received $250 million through the Department of Defense for making the upgrades that will allow them to restore and modernize facilities and continue their mission in Alaska and the Pacific Rim, reaffirming Alaska is strategically valuable from a military perspective.

www.akbizmag.com • Alaska Business Monthly • August 2010

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In transportation, there was about $170 million in highway construction and $80 million in aviation stimulus projects, says John MacKinnon, executive director of Associated General Contractors (AGC) of Alaska. “There is no question the ARRA projects have been a boost to the construction economy, especially those projects on the civil or horizontal side of the business. Add to that the normal annual highway and aviation construction program and $315 million in State transportation bonds that Alaska voters approved just four months before Congress passed ARRA, and there has been a lot of project money on the street,” MacKinnon says. “The building or vertical sector of construction was down 15 percent in 2009, and this year we’re starting to see some of the building projects that were part of the stimulus.”

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One of the first projects through the Alaska Department of Transportation and Public Facilities (AKDOTPF) is the construction of a new $17 million causeway and dock in Gustavus – funded in part with $7.7 million in stimulus funds – which is expected to employ 30 people. The new pier and causeway replaces a wood structure built in the early 1960s and will be a roll-off and roll-on marine transfer facility capable of mooring freighters, freight and fuel barges, transport vessels, and sightseeing vessels. It is expected to greatly improve marine access in and out of Gustavas and Glacier Bay National Park. In Ouzinkie, a $15 million airport was constructed from part of the $1.1 billion in stimulus money available for nationwide airport improvements, providing a critical transportation link for residents of the island who have relied on flying to the grocery store or taking a 40-minute skiff ride across the Ouzinkie Narrows to Kodiak. The villages of Allakaket, Akiachak and Fort Yukon also received the maximum stimulus grant for airport projects. The new $171 million Norton Sound Hospital project in Nome also is being paid for in part with $146 million in ARRA money. The 150,000-squarefoot building will replace a 61-year-old

www.akbizmag.com • Alaska Business Monthly • August 2010

hospital. Currently under construction, it will employ more than 100 construction workers up until its completion in 2012. In Kotzebue, the reconstruction of 4,400 feet along Shore Avenue from Lake Street through the primary commercial downtown area will include paving, new sidewalks, a pathway, parallel parking, and open space on the seaward side. A badly needed erosion protection revetment also on the seaward side is also a major component of the project. The list of projects goes on and on. In the meantime, the focus is starting to be on what will happen to the construction industry when stimulus funds run out in the next couple of years. Much of the $787 billion stimulus appropriated nationally has been spent, creating jobs for some and extending jobless benefits for others. Concerns are beginning to rise about how to prevent another recession from happening once the stimulus funds have been spent.

you don’t dump $250 million into transportation projects and another $250 million into military projects in the state over a four-year period and not have it be a positive impact,” MacKinnon says. Begich agrees that nothing but benefits will remain as a result of the ARRA money, which is intended to be a shortterm, stimulus, not an ongoing flow of money. Referring back to some of the confusion brought on by Palin, he says her claims were politics, but he has faith that Alaskans’ opinions about the program are reality-based.

At the same time, Begich says, the State’s extensive capital budget is strong and because it’s at the end of the fiscal year and money that needs to be spent will dovetail nicely with the stimulus funds. “This won’t be boom or bust,” Begich says. “It will be a manageable flow. Some people assume (stimulus funding) did nothing, but that’s incorrect. It’s creating real jobs for needed projects. The long-term effect was not just to create jobs, but at the end of the day to have operational activities for ❑ decades to come.”

NO SLUMP ANTICIPATED NO BOOM OR BUST Because projects do not stop and start by the calendar year like funding does, MacKinnon says, he does not expect there to be a sudden slump when stimulus projects begin to come to an end. The two years of stimulus spending will translate into work over four years. “I don’t think it’s an issue of whether the economy is strong enough to pick up the slack after ARRA,” he says. “The question is: ‘Will State revenue be strong enough to keep up a healthy capital budget and address the state’s transportation and facility needs?’ “There’s not a transportation project that doesn’t offer a significant benefit to the people of the state,” MacKinnon says. With only 680,000 residents living in 395 communities spread over 660,000 square miles – 258 airports and less than 16,000 miles of road – the state’s basic transportation needs are neverending. In addition, Alaska’s climate is hard on infrastructure. Pavement and roadway rehab alone could consume much of the budget, MacKinnon says, because no sooner is a project completed than it’s time to start reconstructing again. “As far as ARRA being a benefit, www.akbizmag.com • Alaska Business Monthly • August 2010

BUILDING ALASKA SPECIAL SECTION

Rural Alaska Construction Transportation projects dominate spending BY HEIDI BOHI

n rural communities across Alaska, there is a buzz of excitement coming from the buzz of construction projects that are changing the quality of life and potential for growth for the first time in many decades. The streets of tiny villages known for their sleepy, small-town atmosphere are bustling, and everywhere there are hard hats, cranes and crews of construction workers, long awaited signs of progress.

In transportation, health care, education and energy-related industries there are airport and dock construction projects, boat harbors, clinics, hospitals and new schools that mean those living in the Bush are starting to have some of the same conveniences and critical services their urban neighbors have. Although it may seem like all of this activity came out of nowhere, in fact rural construction has been steady

for several years, says John MacKinnon, executive director of Associated General Contractors (AGC) of Alaska, mainly the result of government funding, as opposed to a greater percentage of privately funded construction projects in urban areas. As always, numbers don’t tell the whole story. And as is typically the case, the influences on Alaska’s economic sectors and industries are exclusive to the state’s economic climate and often independent of what’s going on in the rest of the country.

Photo by Blaine Galleher/Courtesy of Alaska Department of Transportation and Public Facilities

PUBLIC CONSTRUCTION FORECAST DOWN Despite the steady level of activity in Rural Alaska, in fact, projections show public construction spending – which funds most of this work – will be down 5 percent, dropping to $2.6 billion, and this even with the cash infusion from the American Recovery and Reinvestment Act (ARRA), according to the 2010 construction spending forecast produced by University of Alaska Institute of Social and Economic Research (ISER) for AGC and its sister organization the Construction Industry Progress Fund. Spending will increase in the utilities and hospitals categories, but will decline in mining, residential, other commercial and the other rural basic sector categories, the report says. A second round of ARRA stimulus funds may be undertaken later this year, but it is too soon to speculate on how that might impact construction spending, ISER says, adding it is assuming there will be no further support from the federal government. In comparison, private-sector construction spending will be down only 1 percent from 2009, dropping to $4.4 billion. The total value of

Alaska Interstate Construction (AIC) is the contractor on the $33 million Kotzebue Roads Shore Avenue project, which includes erosion protection from the Chukchi Sea and roadway improvements along 4,400 feet of Shore Avenue. www.akbizmag.com • Alaska Business Monthly • August 2010 60

TRANSPORTATION SPENDING UP Frank Richards, deputy commissioner of highways and public facilities for the Alaska Department of Transportation and Public Facilities (DOT&PF), says when it comes to transportation construction, undeniably, the rural areas have continued to fare very well recently. “We have had a very robust transportation construction program over the past couple of years and the $278 million in stimulus funding was a big boost for us,” Richards says, explaining that the money funded highway and road projects and five rural airport developments. This year, DOT&PF will have another $110 million to $130 million in additional federal highway dollars for rural

and urban improvements because of continuing federal resolutions under the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU). The Act, signed into law by President George W. Bush in August 2005, established extensive new resources and opportunities for advancing highway safety throughout the country. Several major transportation construction projects include roads and highways in rural areas that are also critical to the rest of the state’s economic activity. In the Northern Region alone, more than $230 million will be spent on upgrades – a big increase from $172 million last year. This includes work on the Dalton Highway, a remote 414-mile stretch that parallels the trans-Alaska oil pipeline, heading north from Livengood through the Arctic ice fields to Prudhoe Bay. It carries 160 trucks daily in the summer and 250 trucks daily in the winter, and is critical to operations in the oil patch. Recent road improvements between MP 260 and MP 321 include culvert replacements and grade increases at

Photo courtesy of Alaska Department of Transportation and Public Facilities

construction spending “on the street” in Alaska in 2010 will be $7 billion, down 3 percent from 2009. In terms of wages and salaries in the construction industry, this means there will continue to be a slow decline, which began in 2006, but the level remains above the long-term average for the industry.

Frank Richards Deputy Commissioner, Highways and Public Facilities Alaska Department of Transportation and Public Facilities

six stream crossings, replacing a culvert crossing with a new bridge, and raising the grade of the highway between MP 311.7 and MP 314 near the Sagavanirktok River. The improvements will preserve and extend the service

www.akbizmag.com • Alaska Business Monthly • August 2010

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life of the highway, enhance highway safety, provide adequate fish passage and improve localized drainage. Other rural road construction projects include a $31 million replacement of the Tanana River Bridge near Tok and a $17.3 million improvement project on the Alaska Highway near the Canada border. In Gustavas, the construction of a new $17 million causeway and dock is expected to employ 30 people. The new pier and causeway replaces a wood structure built in the early 1960s and will be a roll-off and roll-on marine transfer facility capable of mooring freighters, freight and fuel barges, transport vessels, and sightseeing vessels. It is expected to greatly improve marine access in and out of Gustavas and Glacier Bay National Park. In Kotzebue, the reconstruction of 4,400 feet along Shore Avenue from Lake Street through the primary commercial downtown area will include paving, new sidewalks, a pathway, parallel parking and open space on the seaward side. A badly needed erosion-protection revetment on the seaward side is a major component of the project. In Ouzinkie, a $15 million airport was constructed from part of the $1.1 billion in stimulus money available for nationwide airport improvements, providing a critical transportation link for residents of the island who have relied on flying to the grocery store or taking a 40-minute skiff ride across the Ouzinkie Narrows to Kodiak. “Rural Alaskans, like all Americans, need transportation to get to medical facilities, schools, sporting events and even to travel to communities to see relatives, so these rural transportation projects are key to having a safe transportation network for getting to these places,” Richards says.

MEDICAL FACILITIES In health care, rural Alaska also stands to benefit from funds being leveraged between private, State and federal dollars, with more than half of these projects being new construction and the remainder being renovations. Primary care clinics, completed in the last two years between June 2008 and June 2010, are in 18 communities: Tuntutuliak,

www.akbizmag.com • Alaska Business Monthly • August 2010

Selawik, Kodiak, Hooper Bay, Chignik Bay, Teller, Fort Yukon, Hughes, Goodnews Bay, Levelock, Perryville, Kotlik, Akhiok, Craig, Kake, Skagway, Pilot Point and Brevig Mission. Several other communities have recently been approved for health care facility funding, says Nancy Merriman, health facilities senior program manager for the Denali Commission, including: Nunapitchuk, Kasigluk, Mountain Village, McGrath, Ouzinkie, Hydaburg, Noorvik, Ekwok and Igiugig. One of the largest in the state is the new $171 million Norton Sound Hospital project in Nome. The 150,000-squarefoot building will replace a 61-year-old hospital. Currently under construction, it will employ more than 100 construction workers up until its completion in 2012. The $4 million Family Service Center in New Stuyahok, scheduled to be complete by the end of 2011, integrates a primary care clinic that is 3,000 square feet, a domestic violence shelter that is 1,325 feet, and a family resource center that provides advocacy services. The $2.57 million 6,132-square-foot

Harris Sub-Regional Clinic in Chignik Bay is especially significant because it serves communities based on the commercial fisheries, a high-risk industry and one that involves a lot of employees moving around the region. An example of the Denali Commission working with other State and federal funders, Merriman says the project, completed last summer, also involved a lot of local hire. The facility will have one doctor, at least one mid-level practitioner, six exam rooms, dental labs, and a procedure and trauma room.

K-12 FUNDING CONSISTENT Rural schools statewide also will see consistent funding for new construction resulting from the passage of Senate Bill 237, aimed at improving educational facilities outside major cities and boroughs, which provides about $38 million a year for construction projects in Rural Education Attendance Areas. The Alaska Department of Education and Early Development list of capital improvement projects for fiscal year 2011 includes 35 schools statewide, amounting to a $412 million

for the State’s share of construction costs. Major projects include a $47 million K-12 replacement school in Alakanuk, a $56 million renovation and addition to the Kipnuk K-12 school, and a $41 million replacement to the K-12 school in Napaskiak. While recognizing the uncertainty associated with the economy this year, the ISER report says there is little downside risk to the forecast because private construction spending will be dominated by the petroleum industry, which invests strategically and is not overly influenced by the current recession. Public construction spending will be driven by money from the ARRA and estimates are complicated by delays in passage of the budget for the federal fiscal year, which is October through September. Because projects often take two or more years to complete, estimating the cash on the street is difficult because it never flows in a predictable fashion “We are confident in the overall pattern of the forecast – but as always, we can expect some surprises as the year progresses,” the report says. ❑

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800-866-8394 www.akbizmag.com • Alaska Business Monthly • August 2010

BUILDING ALASKA SPECIAL SECTION

Commercial and residential market status

Photo courtesy of Anchorage Economic Development Corp.

t’s been impossible to avoid hearing about the mortgage crisis plaguing our nation’s lenders and homeowners for the last several years. It can be seen on the news, on infomercials promising to save the consumer from home foreclosure, and in the partially finished luxury condo developments found in many major cities. According to the Mortgage Bankers Association,

the national association representing the real estate finance industry, the delinquency rate for mortgage loans increased to 10 percent of all outstanding loans by the end of first quarter 2010. In Alaska, however, real estate industry leaders and economic experts all seem to have the same message: the current situation may not be ideal, but things could be a lot worse.

“We just haven’t seen the real estate market tank like it did elsewhere in the country,” says Bill Popp, president and CEO of the Anchorage Economic Development Corp. Popp attributes Alaska’s healthy real estate market to sobering lessons learned during the statewide recession in the late 1980s. During that time, oil prices dropped to less than $10 per barrel and Anchorage saw 14,000

Photo courtesy of McDowell Group

Bill Popp President and Chief Executive Officer Anchorage Economic Devel. Corp.

Jim Calvin Mark Filipenko Principal and Senior Economist Associate Broker McDowell Group Bond, Stephens & Johnson www.akbizmag.com • Alaska Business Monthly • August 2010

Photo courtesy of Bond, Stephens & Johnson

BY RACHEL KENSHALO

‘UP IN THE AIR’

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home vacancies, 8,000 foreclosures, and 29,000 people simply packed up and left the state, devastating the economy. â&#x20AC;&#x153;Alaskans benefit from having more anticipation and being better prepared for times of economic slowdown,â&#x20AC;? Popp says. â&#x20AC;&#x153;Construction companies, lending institutions and property developers remember those times and therefore are much more cautious than the rest of the United States. The rest of the country didnâ&#x20AC;&#x2122;t experience the recession we had, so perhaps they were more prone to fiscal irresponsibility.â&#x20AC;?

rates, most landlords are not feeling the pinch of a slow economy, but landlords who have had a vacancy have typically had the space on the market for over six months. We are starting to see some of these landlords give concessions or slightly soften their lease rates to try and encourage a tenant to move.â&#x20AC;? He points to Alaskaâ&#x20AC;&#x2122;s economic diversity and our most important industries, such as oil and gas, health care, the military and publicly funded projects remaining stable, thus keeping our commercial vacancies low.

â&#x20AC;&#x153;Alaskans benefit from having more anticipation and being better prepared for times of economic slowdown. Construction companies, lending institutions and property developers remember those times and therefore are much more cautious than the rest of the United States. The rest of the country didnâ&#x20AC;&#x2122;t experience the recession we had, so perhaps they were more prone to fiscal irresponsibility.â&#x20AC;? â&#x20AC;&#x201C; Bill Popp â&#x20AC;˘ President and CEO â&#x20AC;˘ Anchorage Economic Development Corp. Jim Calvin, principal and senior economist with the McDowell Group, a statewide economic research and consulting firm, agrees. He points out that low oil prices in the 1980s created a drastic decline in employment, which led to tanking real estate values and a decline in construction. â&#x20AC;&#x153;In times of economic change,â&#x20AC;? Calvin says, â&#x20AC;&#x153;the real estate market is the most responsive to that change, and therefore itâ&#x20AC;&#x2122;s a great indicator of overall health of an economy.â&#x20AC;? If real estate markets are an indicator of overall economic health, then all signs point to Alaskaâ&#x20AC;&#x2122;s economy remaining strong.

COMMERCIAL MARKET On the commercial side, the market is fundamentally sound, with low vacancy rates across all sectors (retail, office and warehouse) and stable lease and sale prices, according to Mark Filipenko, an associate broker at Bond, Stephens and Johnson. â&#x20AC;&#x153;We are seeing a very low number of transactions, both for lease and sale. In Anchorage, we have not seen a dramatic increase in vacancies; it is the lack of demand that is affecting the market,â&#x20AC;? Filipenko said. â&#x20AC;&#x153;With low vacancy

Filipenko says the Anchorage commercial real estate market has been largely unaffected by the nationwide recession. â&#x20AC;&#x153;In the Lower 48, it was not unusual for an investor to buy a property with a 5.75 percent capitalization rate and have a mortgage with a 6 percent interest rate. The investor was speculating that lease rates would continue to increase and that they would have a positive cash flow in a year or two,â&#x20AC;? he said. â&#x20AC;&#x153;Well, we all know what happened. The economy slowed, lease rates went flat or declined, and properties decreased in value â&#x20AC;&#x201C; so we began to see foreclosures across the country.â&#x20AC;? Although the Anchorage commercial market might not have been directly affected by the national recession, Lower 48 retailers scaling back have caused a bit of a pinch. Companies such as Gottschalkâ&#x20AC;&#x2122;s, which once had a presence in the Anchorage market and has since gone bankrupt and closed their doors, have had an impact the local economy. â&#x20AC;&#x153;Because of the Lower 48â&#x20AC;&#x2122;s recession, we are seeing national brokers for these stores expecting concessions and reduced lease rates from the landlords.

www.akbizmag.com â&#x20AC;˘ Alaska Business Monthly â&#x20AC;˘ August 2010

The Anchorage market has been stable, so there is a disconnect between the national brokers and our local landlords, and transactions are taking two to three times longer to complete,” Filipenko says. “Another aspect of the Anchorage market affected by the Lower 48 is financing. Outside lenders have severely tightened their requirements, not only by reducing the loan to value, but also by requiring borrowers to have better credit and more experience with commercial property and are looking farther back into borrowers’ credit histories.” It seems as though Outside lenders can afford to be selective. In fact, the demand for refinancing current commercial loans is about five times higher than the supply of money through commercial lending institutions, according to Jason Baer, a mortgage loan originator with Alaska USA. National retailers that are unable to refinance loans carrying undesirable interest rates may be forced to reduce overhead in other ways, which could potentially mean closing their doors. Still, Filipenko predicts continued

stability for the Anchorage commercial real estate market, and says it is a good time for both buying and selling. “With low interest rates and stable prices, I think it’s a good time to buy,” he says. “And if you are thinking of selling in the next five years, now is the time to do it. Capital gains tax cuts will expire at the end of 2010, increasing the rate from 15 percent to 20 percent.”

RESIDENTIAL FARING WELL The Anchorage residential real estate market seems to be faring even better than the commercial market. Popp and Calvin both cite local lenders’ reluctance to engage in subprime lending as one of the main reasons for Anchorage’s low foreclosure rate. Subprime is a blanket term used to describe almost any type of loan with a higher-than-usual risk of default, due to the borrower’s poor credit history or a low capacity for repayment. This type of loan was rampant during the housing bubble in 2006 and 2007. In fact, subprime became such a popular term that it was actually designated Word of the Year by the

American Dialect Society in 2007. Other consumers hoping to cash in on the housing bubble took out adjustable-rate mortgages believing they would quickly gain equity as home prices rose, and could then refinance at more favorable rates. Unfortunately, as we all learned, supply soon overtook demand, and housing prices plummeted. Homeowners were left with little to no equity and were often unable to repay mortgages. Alaska lenders have tended to be more conservative in issuing these types of loans, perhaps because the recession suffered in the 1980s remains fresh in their minds. Alaska also didn’t see a huge surplus in new housing developments found in many suburban areas across the country. “Lenders here have been very prudent and sensitive about not making speculative investment, and we have a very well-balanced market,” Popp says. “There is no dramatic oversupply of houses, and our foreclosure rate is very modest. In fact, Alaska is ranked second lowest for foreclosures nationwide.” Another factor helping to keep the

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Anchorage real estate market healthy is the limited supply of land suitable for housing development. We are geographically situated between mountains on one side and water on two sides. “The rest of the country has seen foreclosures nearing 10 percent or 15 percent, but we simply haven’t suffered that badly,” Popp says. Jack Little, real estate specialist with Prudential Jack White/Vista Real Estate, says the local residential marketing is holding steady so far in 2010, and remains quite active, especially in the $200,000 to $499,000 price range. This is ideal for young families looking to purchase starter homes. Little says that homes priced in this range take an average of 3.32 months to sell, and the average residential price for a home this year so far is $326,585, only a 1 percent increase from last year, although homes are generally taking longer to sell. Little says it is an excellent time to purchase a home, with interest rates at around 4.8 percent as of May. With homes on average taking longer to sell, buyers can often negotiate in their favor and receive concessions from

sellers. He also predicts even more homes coming on the market throughout the summer. All sources surveyed predict continued stability in the Alaska housing market, and good news for the economy in general.

ECONOMY HOLDING Fourth quarter 2009 marked Anchorage’s first decline in employment in 20 years, but Popp insists that in general, our markets are quite healthy. He reports hearing anecdotal evidence through other industry folks that vacancy rates are fairly low in strip malls, which is a great sign that small businesses are flourishing. “And of course big-box stores have had phenomenal growth in the past several years, with the addition of stores like Target, Kohl’s, and stores like Walmart and Walgreens expanding their presence,” Popp says. Baer agrees Alaska has a bright future in real estate. “As Alaska continues to expand its resources and people want to move here to take advantage of our growing opportunities, our state

will continue to develop,” Baer said. Calvin is keeping an eye on national trends. He predicts increased stability for us as the national economy recovers, and emphasizes we benefit a great deal from tourism and seafood, industries greatly affected by economic conditions outside Alaska. When it comes to federal dollars, he says “Alaska does receive a lot of federal money – largely because of our military bases, and we will likely benefit from spending some of the economy recovery funds.” Calvin is quick to caution, however, that in the long-term, Alaskans will have to face the imminent decline of oil production, but in the meantime, high oil prices and increased economic diversification are keeping our economy from failing. “We may not have seen the incredibly booms some communities saw in 2005 and 2006, but we also did not see the bust,” Filipenko said. “Our real estate market has had long, steady growth over the last 20 years, just like the rest of our economy. Just like the old fable: ‘The Tortoise and the Hare,’ I will take slow and steady any day.” ❑

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www.akbizmag.com • Alaska Business Monthly • August 2010

BUILDING ALASKA SPECIAL SECTION

Photos courtesy of STG Inc.

Equipment Management Strategies

An STG Kobelco crawler crane makes headway during transport down the Yukon River to one of the company’s remote job sites.

How two Alaska contractors boost profits BY BLYTHE CAMPBELL

laska contractors rely on equipment to build the $7 billion in projects forecast for Alaska in 2010. Making the right decisions about acquiring, moving and maintaining equipment around Alaska affects contractors’ clients, the public – and the companies’ profits. Two Alaska companies, STG Inc. and Granite Construction, are among those managing equipment with an eye to the bottom line.

STG INC. At STG’s headquarters in south Anchorage, a 250-ton Kobelco crane towers over the yard. The crane is one of the larger pieces of equipment STG owns, along with a large inventory of other heavy construction equipment, including dozers, loaders,

dump trucks, cranes, cement mixers, excavators and pile drivers. STG also has dozens of four-wheelers and hundreds of pieces of smaller equipment. STG focuses on projects involving utility-scale wind farms, tower construction and pile foundations, along with power generation, distribution and bulk-fuel storage facilities. For the 2009 season, STG had projects in 29 villages from the Aleutians to Barrow. Owner Jim St. George started STG in Kotzebue in 1991 and bought Alaska Crane in 2001. “That purchase was a great thing for us,” said St. George, who had been working out of his house. “It gave us a place to work, access to equipment we needed, and a good line of business on its own.” The Alaska Crane fleet is rubber-tired for road use, while the cranes used by

STG are tracked, but there are synergies between the two businesses. St. George says although it’s a different business, there’s a good interface. STG prefers to own equipment rather than lease or rent it. “We’re working in remote areas, and need to control our own destiny,” St. George said. In 2009, there were significant tax advantages to purchase new equipment as a part of the economic stimulus plan, and STG accelerated some of their equipment purchases to take advantage of that opportunity. “We definitely invested more heavily,” St. George said. St. George works with local dealers for much of his equipment, but the crane market is a world market, with new and used cranes bought and sold by people all over the world. “The Internet has really changed the market,”

www.akbizmag.com • Alaska Business Monthly • August 2010

St. George said earlier in the year. “Last week I watched a bidding war between a buyer from South Africa and one from Dubai.” The Internet also has made the market more stable, as the value and price of equipment is agreed through trades. With the worldwide recession, new and used equipment is readily available today, whereas a few years ago it was scarce and expensive. St. George keeps up with equipment trends through contacts with dealers, trade publications and construction equipment trade shows. He attends several big trade shows in the U.S. and Europe, including the BAUMA international trade show in Munich and ConExpo in Las Vegas, which features more than 2 million square feet of the latest construction equipment. He doesn’t make buying decisions at trade shows – his equipment purchases are planned in advance – but he does use the opportunity to learn. Most of the equipment STG purchases must be modified for Alaska conditions. Common upgrades include installing radiator covers and heaters, along with building and modifying equipment for the unique construction conditions the company faces. “If there’s enough work for a custom piece of equipment, or it gives us an advantage in winning a job, we’ll invest in it,” St. George said.

With all of that equipment and projects in multiple locations, moving equipment around efficiently is important. STG tries to keep its investments in people and equipment working all year, with fall, summer and winter work. “The goal is to keep equipment and people as busy as you can,” he said. The company plans two major stagings per year, getting spreads of equipment in place for the upcoming work, and St. George says he used to plan those in head. Now that the company has grown, the company started scheduling on a spreadsheet. Staff gather around a large screen in St. George’s office to plan project logistics, including equipment moves. The spreadsheets list all equipment needed for a job, where the equipment is currently located, where and when it needs to move, and how it will be transported. Much of the equipment is transported around Western Alaska by barge, and the logistics are complex. With fuel and transportation costs both increasing dramatically in the last several years, careful planning pays off. STG does most repair and maintenance in the field, with equipment returned to Anchorage only for major overhauls. The cost of moving equipment back and forth, and the time involved, makes it more cost-effective

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to leave it staged closer to the work in the company’s two yards in Nome and Bethel. Through the strategic management of equipment purchases and staging, STG has experienced relatively strong growth over the past five years, employing a skilled work force of operators across Alaska. Making smart decisions about the company’s equipment has contributed to the company’s success. “It’s like a giant chess board,” said St. George. “We have to move the pieces around strategically.”

GRANITE CONSTRUCTION In 2000, Granite Construction first invested in Wilder Construction, completing in 2008 the acquisition of Wilder, which had worked in Alaska since 1974 on heavy civil, highway and paving construction, site development and environmental remediation for public agencies, private-sector developers, industrial, commercial and institutional owners. Granite uses a wide range of large equipment, including bulldozers, cranes, excavators, pavers, compactors, loaders, motor graders and scrapers, as well as both on- and off-highway trucks. The company also owns portable rock crushers and asphalt plants to service remote projects. Granite has one of the largest equipment fleets in the country, with more than 7,000 pieces of rolling stock. Before going to the new or used equipment market to acquire equipment for new projects, the company looks to Graniteowned resources first before renting or leasing. Granite typically owns its equipment and bases decisions to buy or lease equipment on utilization – the number of hours per year or per project it will operate the specific piece of equipment. The company constantly evaluates the size and makeup of their fleet in order to right-size its asset base for business opportunities. Granite’s Alaska equipment department is based at its newly built shop facility in South Anchorage, and also has a Small Tools department in Anchorage to better manage traffic control devices and highly utilized tools like air compressors, jackhammers and more. “In Alaska, we have highly experienced equipment superintendents and

www.akbizmag.com • Alaska Business Monthly • August 2010

mechanics who are familiar with the state’s wide-ranging weather conditions, and our staff understands the logistics challenges of remote work,” said Joe Spink, Alaska branch manager. Granite has very high standards for equipment maintenance, which result in minimal project down-time and increased job efficiencies. Detailed maintenance schedules minimize shop time and maximize return on equipment investments. Don Pryor is Granite’s equipment manager in Alaska, supporting the company’s projects from one corner of the state to another. Although Granite performs most preventative maintenance activities at its shop facility in Anchorage, its mechanics are equipped to perform almost every maintenance task in the field if necessary. “We place our newer, most reliable equipment at remote jobs and keep our older gear closer to town,” Pryor said. In June, Granite was running two 10-hour shifts with 12 mechanics at the shop in Anchorage, and had three mechanics on the Dalton Highway job just south of Prudhoe Bay, one in Gakona

and three in the Matanuska Valley. “It’s a close-knit group,” Pryor said. A core group of eight mechanics returns year after year – one has 15 years with the company – and Granite adds more during the construction season. In the winter, the maintenance crew is busy with preventive maintenance and repairs. Granite also works closely with the high-quality, Alaska-based equipment vendors and rental companies to provide both scheduled maintenance tasks and/or major rebuilds. “I’d say that 300 days out of 365 we have a piece of equipment in NC Machinery’s shop for preventive or other maintenance,” said Pryor. Granite’s work on the Glenn Highway repaving project starts at 7 p.m. and runs until 6 a.m., so Pryor needs mechanics on duty to respond to any equipment problems. Project budgets and timelines are critical, and when equipment goes down it’s expensive. Diagnosing the problem and getting the right parts to the job site requires good communication. “Nine times out of 10, when my phone rings, it’s a problem,” Pryor said.

“You need to make sure you understand exactly what piece of equipment needs work, and what needs to be fixed.” Granite keeps a supply of parts at the job site, but if parts must be shipped or trucked, Pryor must make sure the right part gets there as soon as possible. One of Granite’s greatest strengths is the resource allocation between their operating groups. “If I need something, it’s just a phone call away,” Pryor said. Mechanics need specialized training and advanced skills to work with the wide variety of equipment Granite uses, so the company sends them to Caterpillar and other schools, Pryor said. One large piece of equipment used to grind road surfaces for recycling asphalt and repaving has five onboard computers to manage grade control, the engine, track speed and the conveyors. Depending upon the needs of the individual groups, Granite routinely shares equipment between regions, according to Spink. “Recently, Granite has moved asphalt plants, paving equipment, mobile sweepers and service trucks both into and out ❑ of Alaska.”

www.akbizmag.com • Alaska Business Monthly • August 2010

BUILDING ALASKA SPECIAL SECTION

PCL Construction Services North American company here to stay BY HEIDI BOHI

SOUTHEAST Two views of PCL’s Fort Wainwright Warrior in Transition project, designed by Tetra Tech and kpb architects. Images courtesy of Tetra Tech and kpb architects

NORTHWEST

hen PCL Construction Services entered the Alaska market in 2005, after winning the contract for seismic and security retrofitting of the Ted Stevens Anchorage International Airport (TSAIA), it was not the first time the company had contributed to one of the state’s most important construction transportation projects. Forty-eight years earlier, in 1957, PCL – then known as Poole

Construction Ltd. – was contracted to carry out the first paving of the Canada section of the Alaska Highway. Although a lot has changed since then, today PCL is regarded as one of the largest and most-experienced construction firms in North America, management says, this year ranking No. 31 on Fortune magazine’s “100 Best Companies to Work For” list. As PCL develops relationships with the state’s

community of vendors, and commits resources to making a long-term investment, one thing remains the same, PCL executives say: The company “aspires to be the most respected builder, renowned for excellence, leadership and unsurpassed value.” Ernest Poole originally founded the PCL family of companies in 1906. His first job was to build a large farmhouse in Stoughton, Saskatchewan, and Edmonton became the site of the corporate office in 1932. In 1977, employees purchased the company from majority shareholders John Poole and George Poole, sons of the founder, and today the business remains 100 percent employee-owned. The name of the company changed to PCL Construction Ltd. in 1979.

IMPRESSIVE PROJECT LIST Today, PCL has evolved from building four-room brick schoolhouses, banks and town halls to building almost any

www.akbizmag.com • Alaska Business Monthly • August 2010

structure imaginable across North America, ranging from general and specialized building to industrial, highway, marine and heavy civil construction. Some of the firm’s more familiar projects are Staples Center in Los Angeles, Calif., and the Mall of America in Bloomington, Minn. Alaskans who are familiar with the construction surrounding the Seattle airport in the past are familiar with the Central Link Light Rail system, of which PCL completed more than five miles of elevated track and the SeaTac Rail Station. For nonstandard building challenges, PCL has a special projects division. In addition, PCL Construction Group operates through a number of subsidiary companies in different construction sectors and geographic areas across North America with full-service district offices in 25 locations, including Florida, Minnesota, Arizona, California, Hawaii and Washington state. Operations offices are located in Alaska and North Carolina. PCL Enterprises, headquartered in Denver, Colo., since 1975, is the parent company for all U.S. operations in more than 36 states, totaling more than $3 billion in annual U.S. construction volume.

RETURN TO ALASKA As the price of oil hovered around $60 and $70 a barrel between 2003 and 2008, PCL realized the Alaska economy was again “firing up,” says Scott Ivany, Alaska construction manager. Since entering the market, the company has learned there is also a lot of construction opportunity not driven by the petroleum industry, including the development of sustainable- and renewable-energy resources being looked to for helping Alaskans lower the cost of energy, especially in rural communities. “Construction development is something that will continue in Alaska and the ups and downs of the industry are something of the past,” Ivany says of the company’s decision to open a regional office in Anchorage, which has 21 fulltime staff – only one is from Alaska – and employs up to 40 subcontractors, depending on the project. The first project PCL took on was the TSAIA South Terminal Seismic and Security Retrofit, which was completed in June. The four-year, $140 million project consisted of the remodel and www.akbizmag.com • Alaska Business Monthly • August 2010

retrofit of the A and B concourses. It is the company’s mastery of technically complex projects like the airport that offer the extra challenges where PCL excels, and it is this technical expertise that sets the company apart from other competition in Alaska, Ivany says. “The majority of competition in Anchorage only works in the Alaska market, which can limit the technology and expertise that is brought to the state,” Ivany says. “We can bring technologies to Alaska that the state hasn’t seen before, along with different ways of doing things.”

CURRENT PROJECTS One of the most significant and visible projects PCL is working on is the Alaska Railroad Historic Depot Renovation. Restoring the white building currently used to house some of the Alaska Railroad Corp.’s administrative offices, rail passenger lobby and tenant rental spaces involves everything from installing modern conveniences and environmental controls to moving outdated mechanical and electrical systems housed on the roof into basement spaces that originally housed one of the city’s first morgues. The $5.5 million project is slated for completion in January 2011. Besides practical improvements, PCL says it will restore the character of building to its full 1940s glory as much as the budget will allow, including the roof and windows. While the upstairs will be renovated so it can continue to be used for administrative offices, the downstairs passenger areas will be restored so construction activity does not affect the railroad’s visitor season. “It is these not-so-run-of-the-mill projects – the ones that present extra challenges – where we excel,” Ivany says. Other PCL projects currently under way in Alaska include the design-build delivery of three separate buildings for the Warrior In Transition complex at Fort Wainwright, providing housing for soldiers recuperating from injuries sustained fighting overseas. The $21 million complex includes the primary facility, a 32-bed barracks that is 20,000 square feet, an administrative and operations facility of 8,200 square feet, a soldier and family assistance center that is 6,600 square feet, counseling offices and a day care center. Construction will be finished by the end of summer 2011.

www.akbizmag.com • Alaska Business Monthly • August 2010

aircraft. Project elements of the steel frame structure include a concrete foundation that meets Alaska seismic and frost heaving requirements, insulated metal skin and a standing seam roof. The facility will include secure

Photo courtesy of PCL

The F-22A Field Training Detachment Facility at Elmendorf Air Force Base involves constructing a 13,000-square-foot training facility for maintenance crews to support the bed down of the new F-22A Raptor fighter

Part of PCL’s work at the Alaska Railroad Depot in Anchorage included putting a roof-top tank in the basement.

and unsecured offices, classrooms and two high bay maintenance-training areas. The scope of work also includes fire suppression and detection features, an intrusion-detection system, environmental controls, communications, utilities, pavements, parking force protection, site improvements and contaminated soil remediation. The $4.7 million project broke ground this spring and is expected to be complete March 2011. Looking ahead, Ivany says the firm hopes to get more projects through the U.S. Army Corps of Engineers, in the health care sector, and with the Alaska Department of Transportation and Public Facilities, as well as with private developers, building on its success at TSAIA. PCL also has its eyes on several projects in Southeast and rural Alaska. The company has significant experience working in remote areas across the Arctic and in Canada and will continue to build relationships with Bush communities. “We’re here for the long haul,” ❑ Ivany says.

Where the road ends…

Our Work Begins

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OIL & GAS

North Slope Conditions Test Workers

Days and nights in Deadhorse and the oilfields BY HEATHER A. RESZ

Photos by Heather A. Resz

A visiting dog chases a local fox through the heart of Deadhorse, the service center for Alaska North Slope oil fields.

t takes folks of the hardiest mettle to handle working and living inside Mother Nature’s cold, dark, Arctic icebox all day and night for weeks at a time. But every day – and every night – thousands of people get up and go to work in Alaska’s remote North Slope oilfields. They work 12 hours a day, seven days a week, for two-, three-, fouror six-weeks at a time. They endure brutal weather where the mercury can sink to minus 68 degrees with a wind chill of minus 115 or colder for days or weeks. They cope with nearly two months of darkness when the winter sun never crests the horizon, and 75 days in the summer when the sun never sets. Yet the wealth generated by these 4,000 or so hardy souls generates one in three jobs in Alaska, most State tax dollars and the Permanent Fund Dividend, according to a study by the Institute for Social and Economic Research. Alaska currently supplies 12 percent of the nation’s domestic oil production, 3.4 percent of the country’s oil consumption, according to U.S. Department of Energy data published in June.

‘WE DO IN ONE WEEK WHAT MOST PEOPLE DO IN TWO’ It’s June 1 and breakup season is nearing its end. The thermometer in Deadhorse reads 32 degrees. But the birds are coming back, and soon the water, grass and musk ox will follow. “We do in one week what most people do in two,” says Celeste Rose, expeditor for CH2M Hill Construction. For the next 21 days, she’ll work from 6 a.m. to 6:30 p.m., picking up materials and people in Deadhorse and driving them down the 16-mile dirt road to BP’s Liberty Field. Speed limits on the road vary from 25 to 45 miles per hour and are strictly enforced, Rose said. She’s one of two expeditors for CH2MHill Construction that make about four trips a day ferrying materials and people back and forth between Deadhorse and Liberty. “We’re construction. We’re here to do the project and when it’s done, we’re out of here and on to the next one,” Rose said. In her former life, she was a nurse’s aide at Providence Hospital for five

years. She got her first taste of construction work two summers ago working for Quality Asphalt Paving. “I really enjoyed being outside and doing physical work, so I started applying for Slope jobs,” Rose said. She’s worked on the North Slope for two years. And like the rest of the people here, Rose works more overtime hours in a pay period than she had of regular time when she worked for Providence. “We work 84 hours a week,” Rose said. “And everyone but the 18- to 22-year-olds are in bed by 8 p.m.”

CAMPS INCLUDE VARIETY OF AMENITIES Field operators like ConocoPhillips, BP Alaska and Pioneer Natural Resources Alaska Inc. provide comfortable living quarters and good food to help ease the stress of rotating shifts and the restless, hemmed-in feeling workers can experience in the dark, sub-zero winter, according to Paul Dubuisson, manager of North Slope operations for ConocoPhillips Alaska. The majority of workers are housed

www.akbizmag.com • Alaska Business Monthly • August 2010

at oilfield camps at Prudhoe Bay, and at Kuparuk, Alpine, Milne Point, Endicott, Northstar and Badami. All of the camps include dining rooms, 24-hour snack centers and a television lounge with satellite TV. Dubuisson said camps also include a variety of recreational facilities, ranging from exercise rooms and saunas in even the smallest facilities to movie theaters, basketball courts and a swimming pool at the largest facility. However, some contract companies like CH2MHill Construction and Carlile Transportation Systems house their employees outside of the field operations areas at the Prudhoe Bay Motel, Arctic Oilfield Hotel, the Arctic Caribou Inn or at Deadhorse Camp. Rose gets a different lodging assignment each time. She said workers usually share a room with a person who works the opposite shift and share a bathroom with the room next door. Or, in some cases, use a common dormitory style bathroom. “You have to pay for nothing,” Rose said. “The only thing you’d have to buy is if you forgot your toothpaste or underwear.” When that happens, Brooks Range Supply is the only store in Deadhorse and sells everything from necessities to souvenirs. For many years, it was also home to Denver, the camp’s only cat.

IN THE ZONE When Barbara Stoll flew out of Deadhorse in May, it was zero degrees and there was snow and ice everywhere. As she was leaving, she noticed a few geese huddled together in the snow for warmth. When she returned two weeks later at the end of her time off, the snow was almost gone and geese were everywhere. People headed back to work packing small, folding fishing rods is another sure sign of spring, Stoll said. For the next few weeks, these determined anglers will spend their free time fishing for Dolly Varden. “Deadhorse isn’t really a town. It’s a camp. It’s where we work,” said Stoll, warehouse manager for Carlile’s Deadhorse terminal. She shares a room at the Prudhoe Bay Hotel with the other warehouse

manager who works the opposite twoweeks-on and two-weeks-off schedule. And their room shares a bathroom with the room next door. Stoll said she is lucky to have luxuries like her own room, a coffee pot, Internet and cable TV. “I’m in my own room, but I’m not home. I’m not sleeping in my own bed.” She’s up by 4:30 a.m. And showered, fed and at work by 6 a.m. By the time she gets off work at 6 p.m., her face is black from 12 hours of loading, sorting and reloading cargo for delivery to various North Slope clients. Unless the weather is horrendous, Stoll walks the 100 yards from the Carlile terminal back to the Prudhoe Bay Hotel where she spends 30 minutes on the elliptical machine. She finishes her day with a salad, hot shower and bed. “You get in a zone,” Stoll said. “You get up. You go to work. Come home. Have supper. Every night you take the best shower you ever took. And in the morning, you get up and do it all over again.” That’s been her schedule for the past two-and-a-half years. Before that, she worked at Fred Meyer for eight years as the food-receiving clerk. “I needed something new to do,” she said. “And I wanted the two weeks off thing.” She does similar work in Deadhorse, but with an added element of adventure and 44 hours each week of overtime. “Normally, it’s really hard to get a job up here,” Stoll said. “You have to know someone or be lucky.” She said some job openings receive 300 to 400 applicants.

‘IT’S LIKE RUNNING A SMALL COMPACT CITY’ ConocoPhillips has learned a lot in the last 40 years about working in the Arctic’s challenging conditions, according to Dubuisson, who spends three days a week at Kuparuk. “Even the types of hoses used on the vehicles are different than you’d find on cars in Anchorage,” he said. ConocoPhillips, Alaska’s largest oil and gas producer, has self-contained camp facilities for its crews at Alpine and Kuparuk, Dubuisson said. The facilities have their own power, water and

www.akbizmag.com • Alaska Business Monthly • August 2010

a TV and computer and use the GCI cable and Internet service provided in their rooms. Feeding workers well is an important part of keeping them happy, Dubuisson said. For Kuparuk alone, ConocoPhillips ships 9,000 to 10,000 pounds of food up the Haul Road each day, he said.

EXTREME WEATHER REQUIRES EXTRA SAFETY PRECAUTIONS

Barbara B b St Stoll, ll warehouse h manager ffor C Carlile lil T Transportation t ti S Systems’ t ’ Deadhorse terminal, helps unload cargo from a trailer at the Deadhorse terminal.

wastewater systems as well as medical staff, volunteer firefighters and emergency response teams, he said. “It’s like running a small compact city of 1,200 people or so.” ConocoPhillips has many employees who’ve worked on the Slope a long time and experience has taught the company that happy workers tend to stick around longer. “We put a lot of focus on providing

for the safety and quality of life of our personnel,” Dubuisson said. The main camps include amenities like aerobics, yoga and jazzercise classes, weight lifting, pool tables, a movie theater, one racquetball court and even a piano room at Kuparuk, Dubuisson said. Employees also organize events like racquetball tournaments and summer Fun Runs, he said. And workers are invited to bring

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More women work on the North Slope these days than in the 1970s when the pipeline was built. Today there still are far more men than women who work in Alaska’s oilfields. From processing engineers to drillsite people, Dubuisson said ConocoPhillips has women working in every job classification. A wide variety of workers are needed to keep the North Slope oilfields functioning, Dubuisson said. Jobs include administrative and IT help, expeditors, warehouse workers, housekeeping, food service, forklift operators, office assistants, accounting, bookkeeping, receiving clerks, materials coordinators, drillers, pipeline and drill-site operators, commercial truck drivers and a variety of support positions. “There are more women then you think up here,” said Stoll, warehouse manager for Carlile. The percent of female employees in the North Slope work force varied among 7.2 percent, 10 percent and 17 percent with the three Alaska companies that responded to the question. Rose offered cautionary words for women who think the wages and time off sound inviting. “The women who work out in the field, the men don’t cut you any slack,” she said. “You get dirty. You work hard. You work in the weather. If you can’t pull your weight, you don’t belong out in the field.” Productivity in general can suffer when temperatures in the sub-zero icebox plunge to 65 below to 75 below and stay for a month, Dubuisson said. “It takes time to dress-up and dress-down.” North Slope employers provide employees with top-quality coldweather gear and insulated boots, he said. “We’ve learned a lot about proper clothing over the years.”

www.akbizmag.com • Alaska Business Monthly • August 2010

But even with the best gear available, crews can only be outside for 30 minutes at minus 50, Dubuisson said. “We have to take quite a bit of precaution to take care of people in those conditions.” ConocoPhillips has rules, called “phase conditions,” that govern what kind of work can be done, depending on the weather. Phase I – No work is done along roadsides and crews have to carry Arctic gear in their vehicles. Phase II – Only essential work is done and all vehicles travel in convoys. Phase III – No one travels except in an emergency, and then only as part of a convoy led by a piece of heavy equipment, such as a bulldozer.

SUBTLE NORTH SLOPE REWARDS When it’s 65 and it’s been sunny in Wasilla for days, Stoll said it’s hard to board her 90-minute Shared Services Aviation flight from Anchorage to Deadhorse. BP and ConocoPhillips jointly own Shared Services Aviation, which flies parts, people and equipment to the North Slope. Operated by ConocoPhillips, Shared Services uses Boeing 737 jets and smaller aircraft exclusively to transport employees and the contract work force. North Slope oilfields have a zerotolerance, no drugs or alcohol policy. And it’s strictly enforced. “If you fly up with alcohol on your breath you’ll be terminated; one guy was two days ago,” Rose said. For those who can handle the tough rules, remote conditions, long hours and unforgiving weather, working on the North Slope also offers some subtle rewards. “If a goose is standing in the middle of the road you wait for it. This is the animals’ land,” Rose said. “Animals have the right of way here.” Stoll said sometimes drivers wait for an hour or more while caribou, musk ox, geese or other of the North Slope’s abundant wildlife cross the road. When she drives out into the field this time of year, she said she sometimes sees newborn caribou and musk ox calves moving with their herds. “Even if they block the road for hours, you have to wait until the animals move,” Stoll said. “Most of the ❑ time you don’t mind.” www.akbizmag.com • Alaska Business Monthly • August 2010

OIL & GAS

High Taxes , Expensive Exploration , Delayed Development

A jack-up drilling rig over a producing platform.

Man-made obstacles may close trans-Alaska oil pipeline by 2014 BY MIKE BRADNER

hings aren’t looking so good in Alaska’s oil patch these days, but there are pockets of industry activity, mostly smaller projects by small companies. State officials and legislators are worried. Oil pays for about 90 percent of the State budget, and without it Alaskans would be faced with steep reductions in public services, ruinous taxes and a likely end to the popular Permanent Fund dividend.

That’s according to studies by the University of Alaska Institute of Social and Economic Research, a respected Alaska think-tank. What’s more, one way or another, oil production accounts for about a third of the state’s economy, again according to studies by ISER. Given that, all Alaskans have a stake in what happens in the oil patch. The good news is that companies are still active and State leaders are

beginning to recognize the problem and are looking for ways to help. State legislators stepped up to the plate last spring and approved new exploration and drilling incentives, though mainly for Cook Inlet, a smaller producing area in Southcentral. Gov. Sean Parnell signed the bills and said he would push for more incentives for the North Slope next year. Alaska now has some of the world’s most generous incentives for petroleum

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development. One new incentive for Cook Inlet, for example, would have the State pay $20 million to $25 million cash toward the cost of each of the first three exploration wells drilled with a jack-up rig. This is now attracting serious interest.

WORLD’S HIGHEST TAXES The not-so-good news is that despite the incentives the State’s overall fiscal structure imposes some of the world’s highest taxes on oil production, and that’s a touchy issue State leaders have yet to grapple with. The combination of high taxes, the high cost of working in remote areas, modest prospects for discoveries at least onshore, and what is said to be one of the nation’s toughest regulatory regimes may have created the perfect storm in driving off new industry investment. A grim scenario, but the news isn’t all bad. As beset as it is with financial pressures from the Gulf of Mexico oil spill, BP is pushing ahead with its new Liberty oil project on the Slope. This is an offshore field to be reached by longdistance, extended-reach wells drilled from shore, some as long as eight miles drilled laterally from the surface location of the drill rig. Another Alaska project for BP this year is a test production program for heavy oil the company is conducting. For years the major companies have looked for ways to develop massive heavy oil resources known to overlie the existing fields. BP has adapted a heavy oil production technology developed in Canada and has drilled test wells to try the technique on the North Slope. In another project, Exxon Mobil Corp. continues with its development of a gas-cycling and condensateproduction project at Point Thomson, 60 miles east of Prudhoe. The company has completed two wells drilled into the high-pressure gas field and plans three more. The goal is to produce, by 2014, 10,000 barrels per day of liquid gas condensates while injecting the produced gas back into the underground reservoir. While it will produce the condensates and move them to Prudhoe Bay by pipeline, where they will be mixed with crude oil in the trans-Alaska oil

pipeline, ExxonMobil also hopes this project will show that condensate production can be expanded. If it can’t, the facilities can be used to support natural gas production for a gas pipeline.

BADAMI REDEVELOPMENT Also east of Prudhoe Bay a small independent, Denver-based Savant Resources, is redeveloping the small Badami oil field. BP developed Badami originally, but the field did not reach production expectations due to reservoir problems. Under an arrangement with BP, Savant and Arctic Slope Regional Corp., as a minority partner, are redeveloping some of the Badami wells and plan to restart production this autumn. Savant also drilled an exploration well nearby, which was successful, the company said, which will contribute production that will be processed in the Badami production facility. West of Prudhoe Bay, a new exploration well is planned by Brooks Range Petroleum, the operating company for several small independent firms. The company will drill a new well southwest of the Kuparuk River field. Brooks Range drilled exploration wells last year north of the Prudhoe Bay field and is now assessing those results.

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ANADARKO FOOTHILLS GAS South of Prudhoe Bay, Anadarko Petroleum Corp. is still evaluating its natural gas prospects in the foothills area. Gas has been discovered, but additional testing is required, which may need a drill rig and construction of an ice road to the remote area. Those will be expensive undertakings. Anadarko owns rights to the Gubik gas deposit, a discovery made years ago that was recently tested by Anadarko. It isn’t known yet whether there is enough gas at Gubik for commercial development, however, and Anadarko’s plans are also contingent on a large natural gas pipeline moving forward, or, alternatively, the construction of a smaller 24-inch gas pipeline being investigated by the State.

UMIAT, NPR-A In the same region, Renaissance Umiat LLC, a small independent based in Houston, is working on commercial development of a small oil deposit at Umiat, on the border of the National

www.akbizmag.com • Alaska Business Monthly • August 2010

Petroleum Reserve-Alaska. Oil was discovered at Umiat decades ago in early U.S. Navy exploration, but was never developed because of the small size of the deposit. Renaissance believes it can develop and produce the field using new drilling technologies. A proposal by the State to build a resource road to the area from the Dalton Highway has boosted prospects for the Umiat project because the road would provide the key infrastructure for a small pipeline taking oil to the trans-Alaska oil pipeline. The company’s plan is to place the pipeline in gravel alongside the road, the company says. The State recently approved an appropriation for an Environmental Impact Statement for the road. If the road is built it would help Anadarko’s exploration for gas because the annual construction of expensive ice roads would no longer be needed.

COOK INLET GAS In Cook Inlet, the new State incentives have prompted new interest by companies. Apache Oil and Gas, a major

U.S. independent, has expressed interest in buying acreage, as have other companies. One is a Tennessee-based company, Miller Petroleum, which has acquired the small Redoubt Shoal and West MacArthur River fields. The new interest is sorely needed because Cook Inlet’s existing oil and gas fields are decades old and nearing depletion. Of immediate concern: there may not be enough gas produced from the region’s aging gas fields to meet total gas demand by 2014. There does not appear to be enough new drilling under way this year to assure that gas supply. New drilling for gas is actually down this year compared to last. Unless new gas discoveries are made or until a gas pipeline can be built from the North Slope – 2017 or 2018 is the most likely date – the most likely source of new gas to assure supplies for the region is, ironically, imports of liquefied natural gas from Asia. Geologists have said there is more oil and gas to be found in Cook Inlet, but the discoveries are likely to be modest and the costs high. Still, the Legislature has bet State cash on the prospects, in

the form of the new incentives, and companies are showing interest.

TAPS FOR TAPS IN 2014? For the North Slope, the underlying problem is that production from the big producing fields is continuing to decline at rates of 5 percent to 6 percent a year. There’s insufficient exploration to find enough new oil to flatten the decline. Projects like Shell’s offshore program, or ConocoPhillips’ development of known deposits in the NPR-A, could provide needed oil, but they are now delayed by federal restrictions and permitting problems. There are worries that the amount of oil moving through the trans-Alaska oil pipeline may approach the point within just a few years where the pipeline will begin experiencing operating problems. Alyeska Pipeline Service Co., which operates the pipeline, says the point at which operating problems set in is a throughput of 500,000 barrels per day. The pipeline now moves about 640,000 barrels daily, but the rate is expected to decline to 500,000 barrels per day by 2014.

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www.akbizmag.com • Alaska Business Monthly • August 2010

Ironically, the geologic potential of the North Slope is huge. Geologists say that the Slope is one of the world’s greatest hydrocarbon-generation systems, so the oil and gas are clearly there. With a pipeline running at a third of its capacity, it’s puzzling as to why there isn’t more exploration. Even outside the North Slope, the state’s large Interior basins have seen very little exploration. What drilling that has been done, such as recent exploration in the Nenana Basin west of Fairbanks and the Copper River Basin near Glennallen, shows indications there is petroleum to be found even if the wells did not result in commercial discoveries.

23-million-acre tract set aside in 1923 for its oil and gas potential. Exploration has been only modestly successful in NPR-A so far, but the huge reserve is still considered lightly explored. Even so, modest discoveries have been made. Now, however, the federal government may impede access to discoveries that have been made, an action that will further chill investment. ConocoPhillips has been working for more than five years to get permission to build a road and pipeline bridge across the Colville River to reach

discovered oil on the west side, which is within the NPR-A. Federal agencies have refused, so far, to give permits for the bridge to be built and have attempted to impose their own solution, an underground pipeline crossing and no road access, which the industry feels are uneconomic solutions. Given the rich geologic endowment of both the North Slope and Cook Inlet, the solutions to the problems of declining production seem so near at hand. But the problems, many of them man❑ made, loom large as well.

MAN-MADE OBSTACLES One can’t change the facts of geography and high costs, but some of the biggest impediments to new oil development are government-made. Taxes aren’t the only obstacle. There is the federal government. It’s widely agreed that the best chances for getting new oil into the trans-Alaska oil pipeline relatively soon lies with several prospects Shell wants to drill in the Beaufort Sea off the northern coast of Alaska. Shell also plans exploration in the Chukchi Sea, where the prospects are even better, but the remoteness of this area means years of lead-time in developing pipelines. The Beaufort prospects, in contrast, are nearer to shore and nearer to existing pipeline. Shell wanted to drill in 2007 but was stopped by lawsuits. The company was primed again to drill in 2010, but was again stopped when President Obama ordered a one-year moratorium on Arctic offshore drilling, part of a broader moratorium on all offshore drilling in response to the Gulf of Mexico well blowout and spill. Shell hopes the delay will be only one year, but it could easily slip to two years, company officials worry. Meanwhile, two other unexplored, but inviting, onshore North Slope areas are also closed to development. One is the coastal plain of the Arctic National Wildlife Refuge, east of Prudhoe Bay, which geologists believe has best prospects for major discoveries of any onshore U.S. area. The other, surprisingly, is the NPR-A, the huge www.akbizmag.com • Alaska Business Monthly • August 2010

TOWNS

TRANSITION

Valdez

Not just for supertankers

Photo by Larry Weaver, Public Works Director for the City of Valdez

In August 2009, “The World” docked at the John Kelsey Municipal Dock in downtown Valdez for a day during an international excursion. Managed by ResidenSea Ltd., “The World” cruise ship is a luxurious private community at sea featuring residential options and rentals. City of Valdez officials continue discussions with several cruise operators about port improvements that would better accommodate larger ships.

BY HEIDI BOHI

hile the entire state anxiously watches the petroleum industry reduce its investments on the North Slope – which in turn adds to the continuing decline of oil production that has been on an unsustainable trajectory for the past two decades – Valdez, more than almost any other community in Alaska, is especially nervous about the harsh reality of what it will mean for this seaside town of 4,498 residents if the industry does not make the capital investments needed to support future oil and gas developments. Valdez is the southern terminus of the trans-Alaska oil pipeline. Supertankers navigate the deep, ice-free waters of Valdez Arm each day, handling

more than 1.5 million barrels of crude oil. Without long-term commitments, it is not out of the question the reduced throughput would result in the transAlaska oil pipeline not being able to efficiently operate the pipeline and pump stations because it would be carrying far below the daily number of barrels it was designed to carry, requiring fewer employees for the Valdez operation.

BIGGEST CHALLENGE “The biggest challenge for Valdez is that we’re still too comfortable with the amount of tax revenue and the jobs the oil industry provides to make us want to look as seriously as we need to at economic diversification in the community,”

says Lisa Von Bargen, community and economic development director for the city of Valdez. “The oil industry provides 85 percent of our tax base and if that dwindles, being able to maintain a community infrastructure and basic services will be very difficult.” Although the petroleum industry is considering how it can approach the future strategically, Von Bargen says the city does not know what this will ultimately mean for Valdez in terms of jobs. Developing a strategic plan for the community’s future is one step the city needs to take to prepare for the possibility of losing its largest source of taxes and employment. “We knew in 1977, when the first

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barrel of oil came down the pipeline the mainstay would probably only last 20 years,” she says. “Here we are 33 years later and Valdez still doesn’t have a strategic plan for its future. At some point we need to recognize that oil is not going to be around forever.”

IMPROVING COMMUNITY In the meantime, Valdez is taking a number of smaller steps to improve the quality of life and make the community more appealing to companies doing business there. Known as the “salt-water playground” for the Interior, the city harbor is a significant economic engine for the community. Marine-related improvements, though still in the early planning stages, are some of the most important economic development projects, says Bert Cottle, Valdez mayor for 10 years. The small boat harbor, which was built to service 500 vessels, accommodates up to 800 boats by rafting them together or “stacking” them, currently has a seven-year waiting list with 150 boat owners from the northern region waiting to get a slip. Working with the

U.S. Army Corps of Engineers, the city is looking at building a new harbor, which will end up being a 10-year process – start to finish – with a price tag of about $50 million. The city currently has $5 million dedicated to this improvement. Even with this 330-slip expansion, Cottle says the city still anticipates having to start another wait list in five years. To date, the feasibility study has been completed and is out for review, while the city is working on putting a local, State and federal funding package together.

PORT IMPROVEMENTS At the same time, the city also has improvements to the Valdez container terminal on its to-do list as a way to increase port usage. Valdez is the farthest north ice-free port in the country with the best access to Alaska’s Interior and to the Pacific Northwest, northern Canada and Pacific Rim trade routes, making shipping and transportation one of the largest industries in the community. Port improvements also will help the community continue to court the cruise ship industry, Von Bargen

says. At one point, the community had more than 90 dockings a year until this number first started declining in 2003. When the economy collapsed and cruise lines deployed ships to other destinations, Princess Cruises was forced to cancel the remaining nine dockings scheduled for this summer. The city remains optimistic, though, as it continues discussions with several cruise operators about port improvements that would better accommodate larger ships. Cruise companies have indicated they would also like to see the community expand the number of shore excursions available to passengers. While many entrepreneurs are considering these businesses, Von Bargen says few people are willing to bank only on what’s possible. “It’s difficult to build a business to accommodate cruise ship passenger if you don’t know if they’re going to come and if they’re going to stay,” she says. “With them not being here right now, business owners would have to depend on the road and group traffic the community has,” which can be more difficult to quantify.

www.akbizmag.com • Alaska Business Monthly • August 2010

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Valdez is known as the North Shore of heli-skiing. As tourism continues to be one of the mainstays of the economy, and one of the most promising industries for economic diversification, Von Bargen says the community also is looking at developing Valdez into a winter-resort destination, with the main attraction being the unrivaled downhill skiing and snowboarding. The World Extreme Skiing Championships, hosted by Valdez in the early 1990s, are expected to return to the community. At the same time, heli-skiing operators continue to bring clients from around the world for winter events such as Tailgate Alaska, an extreme-snowboarding competition that is one example of the types of events that are drawing attention to Valdez as a winter resort destination similar to Whistler, British Columbia, Canada. Although still in its infancy, Von Bargen says those involved are working diligently on a development that would capitalize on what is regarded as some of the best extreme skiing and snowboarding in the world.

IN THE MIX Under the cityâ&#x20AC;&#x2122;s direction, Valdez is also investigating the feasibility of incubating a training and testing platform in the community, based on successful results hosting military personnel training and equipment testing exercises in the past. The tall coastal mountains mean the community can concurrently host alpine and maritime training and testing year-round. The feasibility analysis for this program is getting under way. Although the Valdez hospital was completed in 2004, the community is now working toward securing funding for a major addition, including expansion of the long-term care and physical therapy sections, the addition of an assisted living facility, and adding an MRI unit to accommodate locals and those from surrounding communities. The initial feasibility work is complete and a design team selected. The expansion is expected to cost several million dollars and the city will work with the hospitalâ&#x20AC;&#x2122;s operator (Providence Valdez Medical Center) to develop an operations and funding plan.

â&#x20AC;&#x153;Fixing what we already haveâ&#x20AC;? is also high on the priority list, Cottle says, including roads. Working with the Alaska Department of Transportation and Public Facilities (DOTPF), the city is lobbying for improvements to get bridges and load weights along the Richardson Highway improved so it can be used as another route that feeds into the Interior. As is the case with most things, though, it all comes down to money, which puts Valdez in the second seat as it competes with other transportation routes, such as the Parks Highway, one of the most traveled roads in the state. Cottle is also working on improving city roads that need paving, and water and sewer improvements. The $5 million Kelsey City Dock uplands project includes improvements to Ruth Pond, about the size of a small lake, which recently re-opened as a park after several upgrades were made to the popular recreational area. The project included cutting away brush, dredging the pond so it increased from eight feet deep to 20 feet deep, providing a healthier ecosystem for the fish, installing more picnic facilities, and upgrading the bathrooms. Another potential recreation improvement is the proposed ice skating rink, which would be covered and refrigerated. The city is still in the process of developing pro forma financials for the facility, though Cottle says he expects it to be a big number. Petro Star is also expanding its refinery to produce ultra-low-sulfur diesel fuel that will result in 24 new permanent full-time jobs and 350 contractors working on the expansion, which is scheduled to be finished in October. Silver Bay Seafoods also recently opened in Valdez, further supporting the commercial fishing industry. Looking ahead, Von Bargen says while most people move to Valdez for only a short period of time â&#x20AC;&#x201C; typically five to seven years â&#x20AC;&#x201C; making it difficult for locals to have a long-term perspective on the communityâ&#x20AC;&#x2122;s future, she believes in the potential of Valdez and the minority of residents who are committed to investing in the communityâ&#x20AC;&#x2122;s well-being. â&#x20AC;&#x153;My hope for the future,â&#x20AC;? Von Bargen says, â&#x20AC;&#x153;is that we can live â?&#x2018; up to that potential.â&#x20AC;?

www.akbizmag.com â&#x20AC;˘ Alaska Business Monthly â&#x20AC;˘ August 2010

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EMPLOYEE BENEFITS

Evolving Employee Benefits

Photo by Chris Arend/Courtesy of Wells-Fargo

Matt Larkin, right, vice president for Wells Fargo Insurance Services, discusses changes associated with the Patient Protection and Affordable Care Act with Bosco Baldwin, HR executive for the Alaska Commercial Company.

New options for insurance and retirement plans BY PEG STOMIEROWSKI

mployers reviewing and assessing employee benefit options in a period of prolonged recession and federal health care reform may be experiencing some sweaty palms. Besides the rising cost of health insurance premiums, companies are bracing for the challenge of complying with changing rules and regulations – some haven’t yet come on line – and learning to adjust to new ambiguities. Matt Larkin, vice president of employee benefits for Wells Fargo Insurance Services in Alaska, explained many of the changes are to be phased in over a period of years – some not until 2014. His department, with offices in Anchorage, Soldotna and Homer, is one of several broker services that offer to review and compare bids, then advise businesses on how best to arrange insurance programs. After salaries and

wages, health and retirement plans tend to top the expectations of prospective employees, and small businesses also hoping to recruit top talent find it hard to compete with the benefits that larger companies can offer. Recent insurance industry research suggested while traditional benefits offered by large employers remained key factors in employee loyalty – health coverage more so than retirement benefits – advancement opportunities and company culture had yielded importance. While employee benefits showed resilience in the wake of the recession, for employers, controlling the associated costs seemed to have become a greater priority by 2010 than employee retention. Attention remained trained, in the meantime, on productivity. The need to cut costs has led some firms to accept higher deductibles for

core health plans – and to offer voluntary benefits a la carte-style, including disability, life and dental insurance, as well as supplemental insurance to help with the costs of accidents, hospital stays or critical illness, according to “The Value of Voluntary Benefits,” an April Entrepreneur magazine article. While the pending changes are expected to have widespread effects, larger firms are more likely to be already turning to consultants and educating their employees about navigating the changes, Larkin said, while it’s the smaller employers that might be expected to feel more stressed and confused about what it all means. Small businesses face premiums that are 18 percent higher on average than large businesses pay for the same coverage, according to the Small Business Administration (SBA). Sam Dickey,

www.akbizmag.com • Alaska Business Monthly • August 2010

ALASKA FACES ADDITIONAL COST CHALLENGE Businesses long challenged by rising costs are under growing pressure, under the federal health reforms, to offer expanded coverage. One reform, for instance, allows offspring to remain on their parents’ health insurance plans until age 26. Some businesses, according to Forbes research, aren’t waiting to move in these new directions. In the last decade, employer healthcare costs have risen about 150 percent, according to a study of company health and wellness programs issued in February by Healthways. More than 60 percent of Americans, it reported, obtain health insurance through an employerbased plan. At Premera Blue Cross Blue Shield of Alaska, Jeffrey Davis, president, says having a sustainable health care system is especially challenging in Alaska, where care tends to cost more than in the Lower 48. About 87 percent of the premiums Premera receives go to pay medical claims, he reported, and here, “we know the cost issue is critical based on conversations with our customers.”

Photo courtesy of Premera Blue Cross Blue Shield of Alaska

SBA spokesman in Anchorage, said changes associated with the health reform act should allow some of these smaller businesses to pool together to achieve greater economies of scale and thus more affordable plans. A health care tax credit also is expected to play a role in alleviating cost pressures. While the ability to provide health benefits has been a primary concern of small employers for at least 25 years because of the multifaceted nature of the changes, many nuances probably weren’t on the radar of many small- to mid-size employers yet – certainly not enough to be causing jitters, Dickey reflected at mid-year. “I doubt many will be closing their doors because of it,” he said, of new responsibilities in regard to expanding access to benefits. Nationwide, figures show only about 10,000 to 12,000 small businesses are likely to be heavily affected by the reforms, since most of the 200,000 that employ more than 50 people, a key threshold under the legislation, are probably already providing benefits, Dickey says.

Jeffrey Davis President Premera Blue Cross Blue Shield of Alaska

Other carriers in Alaska include Aetna, Celtic and Golden Rule. Besides expanding its wellness initiatives, as a not-for-profit company operating on a slim margin of about 1.5 percent, Premera is working to keep

www.akbizmag.com • Alaska Business Monthly • August 2010

administrative costs down, Davis reported. It also is trying to be proactive, he said, “given the incomplete work of federal reform,” in partnering with such providers as Providence Alaska Medical Center and emphasizing payment for quality of outcomes rather than volume of services delivered.

WELLNESS APPROACH DRAWS NEW INTEREST In the United States, while 58 percent of employers offer some type of wellness coaching or other benefit – sometimes Web-based – to control costs and improve productivity, the percentage of larger firms (200 or more workers) offering at least one such program rose from 88 percent in 2008 to 93 percent in 2009, according to Healthways. It reported that for every dollar spent on wellness programs, medical costs fell by about $3.27. While employer health and wellness programs have helped curb the rise in costs, there are wide variations in performance. Newer approaches are being designed to serve a wider crosssection of people and needs, including consideration of the role of stress in reduced productivity. Communication and incentive strategies were considered key drivers in employee engagement in such programs. According to the Healthways study, lifestyle factors play a role in health costs, especially smoking and obesitiy, two factors cited for rising U.S. health care costs. “While 70 percent of smokers say they want to quit and 40 percent try each year, almost 20 percent of American adults still smoke,” the study found. “While 55 percent of Americans say they would like to lose weight and 27 percent are making a serious attempt, 67 percent of adults are overweight or obese. In five years, health care costs for obese Americans grew 82 percent; for overweight Americans, 36 percent and for normal-weight Americans 25 percent,” according to Healthways data. In Alaska, Vivacity was launched by Premera as an independent company to address employer demand, according to Dr. Dave Johnson, Vivacity president. He pointed to poor lifestyle choices, rising technology costs and greater use of services as drivers of

Photo courtesy of Vivacity

Dr. Dave Johnson Dr President Vivacity

According to the Healthways study, lifestyle factors play a role in health costs, especially smoking and obesitiy. medical costs, and said health care costs for employees engaged in such programs average 30 percent lower than those who don’t participate. While wellness programs traditionally have been limited to larger employers, Johnson said, Vivacity is offering services to companies ranging in size from 25 to 499 employees.

401(K) LEADS RETIREMENT BENEFITS In the retirement arena, a recent survey of more than 350 companies, designed by Wells Fargo Institutional Retirement and Trust, suggested most employers had failed to embrace what Wells Fargo managers consider to be an increasingly central role in helping Americans achieve more secure retirement though company-sponsored 401(k) plans and other tax-qualified plans. As the responsibility for retirement increasingly is shifted from traditional company pension plans to employees

themselves, 401(k) savings are getting more attention. “Plan sponsors need to embrace their role in helping employees focus on maximizing their retirement plan,” Joe Ready, co-director of Wells Fargo Institutional Retirement and Trust, was quoted as saying. Meanwhile, more companies that once had waiting periods for enrollment have switched to automatic 401(k) enrollment. Other sources of retirement savings include 403(b) plans for educators and Roth IRAs. While private-sector employees have been in the midst of a significant shift from earning a pension for life to managing retirement on their own, a company news release noted, the survey found that most employers have been slow to realize the magnitude of what’s at stake for their employees. Most responses, it noted, indicated belief that the 401(k) program was central to attracting and retaining employees and that attaining company 401(k) matching funds was more key to employee participation than the motivation of saving enough money to retire comfortably. When employers were asked about their primary goal for retirement plan participants in 2010, about a third of respondents listed educating employees about retirement saving, 22 percent noted increasing participation and another 22 percent said their focus was to increase savings amounts. And asked about primary challenges and concerns, 26 percent noted “impact of market volatility on account balances,” 25 percent said participant use, and 20 percent indicated “providing employees with the financial ability to retire.” “It is a concern to Joe and me,” Laurie Nordquist, co-director of Wells Fargo Institutional Retirement and Trust, said, “that one in five companies today see their role as supporting and giving their employees the best opportunity to create a financially viable retirement. In our minds, this should be the number one concern,” she said. “Volatility is certainly an issue, but it is a component of a bigger picture.” Ready and Nordquist also noted the need for greater measurement and analysis of retirement education programs effectiveness.

www.akbizmag.com • Alaska Business Monthly • August 2010

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Almost half of the companies surveyed reported they don’t measure results and a slim 10 percent said they help employees forecast anticipated retirement income and compare it to expected retirement savings needs. Rod Shipley, Wells Fargo Institutional Retirement and Trust vice president and Alaska regional director, says many companies have cut back on their 401(k) match in an effort to save money or to help offset rising health care costs. Fortunately, this has not been the experience for most Alaskabased employers, he said, but many employees working for companies headquartered outside of Alaska have been impacted. While public-sector employees, including military and teaching personnel, tend to enjoy the most retirement security, “pension plans for privatesector employees have been disappearing quickly,” Shipley said. Today, only 33 percent of the private-sector workers with a retirement plan have a defined benefit pension plan, compared to 84 percent 30 years ago, he said. At the same time, no one can be sure what Social Security will look like in the future. While there likely will be a benefit, Shipley said, Social Security was never intended to be employees’ sole source of retirement funds. The projection, said Shipley, is that by the year 2030, Social Security will replace only 28 percent of preretirement income for retirees who are 65 and older – if benefits aren’t further diminished. As for volatility and investment allocations, employees tend to tighten up as they are approaching retirement, and despite the economic downturn, many might still have a chance of getting back to where they once were, he said, if they aren’t too conservative in their allocations. Older workers aged 55 to 64 have a median balance of only about $50,000 in their retirement savings accounts, Shipley said, and even with a pension and Social Security, for many that won’t come close to securing a comfortable retirement. Consequently, more older people – especially those hard hit when stocks in their financial portfolios plunged – are ❑ returning to the work force.

www.akbizmag.com • Alaska Business Monthly • August 2010

ALASKA TRENDS BY JOEL AINSWORTH

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

Alaska Median Income Rises from 2000 to 2008

Juneau remains highest, Bethel lowest

ach May, the U.S. Department of Housing and Urban Development (HUD) releases the median family incomes for U.S. residents by state and census area. The measurement income is used to set annual income limits, which determine eligibility for housing assistance through the Section 8 program. However, the median income measurement also can be useful when analyzing the changes of income over time within a state. When comparing income levels, median income is generally the most reliable measurement, as income tends to have a skewed distribution. The graph illustrates the change in median family income from 2000 to 2008 using the 10 most populous boroughs in Alaska and state median. The graph reveals widely varied income growth patterns across the state. On average the 10 boroughs saw a 32.9 percent (16.4 percent inflation-adjusted) rise in median income over this period. During both 2000 and 2008, Juneau City and Borough maintained

the highest median income in the state. Conversely, the Bethel Census Area tended to lag in median income growth, despite its population size. The Fairbanks North Star Borough had the largest marginal gain ❑ of all census bureaus at 19.08 percent over this period.

SOURCE: U.S. Department of Housing and Urban Development

ALASKA TRENDS HAS BEEN BROUGHT TO YOU THIS MONTH COURTESY OF PACIFIC PILE & MARINE

www.akbizmag.com • Alaska Business Monthly • August 2010

ALASKA TRENDS Indicator

Units

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 Sectoral 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 Truck 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 Government1 Labor Force Alaska Anchorage & Mat-Su Fairbanks Southeast Gulf Coast

Period

Latest Report Period

Previous Report Period (revised)

Year Ago Period

Year Over Year Change

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

4th Q09 4th Q09 2nd H09 2nd H09

30,051 12,099,289 193.46 215.94

29,371 12,037,360 191.335 216.177

2.32% 0.51% 1.11% -0.11%

Number Filed Number Filed Number Filed

April April April

89 70 5

106 82 12

86 60 25

3.49% 16.67% -80.00%

Thousands Thousands Thousands Thousands Thousands

April April April April April

331.74 185.38 43.09 35.70 34.49

328.26 184.51 42.40 34.40 33.70

324.92 182.10 41.81 36.05 32.62

2.10% 1.80% 3.07% -0.97% 5.73%

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 Thousands

April April April April April April April April April April April April April April April April April April April April April April April April April April April April April April April April April April

316.7 41.5 275.2 15.7 14.6 12.6 14.5 11.3 7.4 61.8 6.2 35.7 6.2 10.1 19.9 5.7 3 6.3 4.1 13.8 23.8 40.3 29.1 29.1 6.5 18 11 89.1 17.7 26.6 8.1 44.8 25.4 3.6

313.6 42 271.6 15.3 14.9 12.6 13.3 13.4 8.4 61.2 6.1 35.2 6.4 10 19.9 5.7 3 6.4 4.2 13.8 23.7 40.4 29.1 27.8 6.1 18 11.1 87.2 17 26.3 8 43.9 25.1 3.7

313.6 41.1 272.5 15.4 15.2 13.2 14.4 11.3 7.6 61.4 6.2 34.7 6.2 9.7 20.5 5.9 3 6.6 4.3 14.4 25.5 38.8 27.8 28.1 6.3 17.7 11.4 86.3 17.1 26 8.1 43.2 24.7 3.4

0.99% 0.97% 0.99% 1.95% -3.95% -4.55% 0.69% 0.00% -2.63% 0.65% 0.00% 2.88% 0.00% 4.12% -2.93% -3.39% 0.00% -4.55% -4.65% -4.17% -6.67% 3.87% 4.68% 3.56% 3.17% 2.82% -3.51% 3.24% 3.51% 2.31% 0.00% 3.70% 2.83% 5.88%

Thousands Thousands Thousands Thousands Thousands

April April April April April

362.57 200.89 46.56 38.91 38.43

363.18 202.26 46.22 38.23 38.06

354.76 196.54 45.11 39.41 36.50

2.20% 2.22% 3.20% -1.27% 5.27%

www.akbizmag.com • Alaska Business Monthly • August 2010