January 2011 - Alaska Business Monthly

2011 Economic Outlook | Special Section: ANCSA 40th Anniversary

January 2011

Brice Family B BBrice Incorporated H Harry MacDonald CCarlile Transportation Systems Q Quinn Brothers CCapital Office Systems Capital Office Supplies JJim Bowles ((posthumously)

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JANUARY 2011 TA B L E O F C O N T E N T S

D E PA R T M E N T S From the Editor . . . . . . . . . . . . . . 7 Inside Alaska Business . . . . . . . . 8 Right Moves . . . . . . . . . . . . . . . . 44 Market Squares . . . . . . . . . . . . . 55 Alaska Trends . . . . . . . . . . . . . . 103 Ad Index . . . . . . . . . . . . . . . . . . 106

ABOUT THE COVER: Junior Achievement Alaska Business Hall of Fame 25th Annual Celebration of Laureates begins at 5:30 p.m. Jan. 27 at the Dena’ina Center in Anchorage. Our Junior Achievement Special Section begins on page 12.

Cover photo ©2011 Chris Arend.

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

ARTICLES

OIL & GAS Toby Foster. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Oil Executives Outline Production Challenges . . . . . 50

VIEW FROM THE TOP

Fiscal, bureaucratic issues lead organizations’ list

By Tracy Kalytiak

Alaska Distillery

By Peg Stomierowski

ASSOCIATIONS

OIL & GAS Alaska Support Industry Alliance . . . . . . . . . . . . . . . 46 Fracking Alaska. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Advocating for Alaska’s resource industries

By Tracy Barbour

Unlocking more oil and gas

By Mike Bradner

BUSINESS BASICS

EDUCATION Your Organization’s Path to Success . . . . . . . . . . . . 65 MBA Options for Alaskans . . . . . . . . . . . . . . . . . . . . 60 Four strategies that work

By Eric Britten

Going on-site and online for grad school

By Vanessa Orr

HR MATTERS

TRANSPORTATION No Surprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 Heavy Haul Trucking . . . . . . . . . . . . . . . . . . . . . . . . . 84 Making third party investigations pay off

By Lynne Curry

MARKETING WORKS What Marketing Plan?. . . . . . . . . . . . . . . . . . . . . . . . 91

Transportation challenge in Alaska

By Tracy Barbour Photo courtesy of Lynden

PAGE

Better have one or you’ll get left behind

By Ron ‘Cat’ Mason

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ALASKA THIS MONTH Anchors Aweigh, Sailors . . . . . . . . . . . . . . . . . . . . . . 92 Boat show makes watercraft owners think spring

By Nancy Pounds

Photos courtesy of Alaska Marine Dealers Association

FINANCIAL SERVICES Tax Advisors View Future with Caution . . . . . . . . . . 94

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92

Previous cuts, new legislation on congressional plates

By Tracy Kalytiak

FILM INDUSTRY Spotlight on State’s Seward Peninsula. . . . . . . . . . . 97 Making Movies in Alaska . . . . . . . . . . . . . . . . . . . 100

REGIONAL REVIEW

Western Alaska offers rich culture, history and potential

By Tracy Barbour

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Tax incentive program improves economy

By Heidi Bohi (continued on page 6)

www.akbizmag.com • Alaska Business Monthly • January 2011

JANUARY 2011 TA B L E O F C O N T E N T S

SPECIAL SECTION: JUNIOR ACHIEVEMENT A 21st Century View of the Work Readiness Talent Gap. . . . . . . . . . . . . . . . . . . . . . 12 Taking on the challenge of educating youth

By Flora Teo and Rick Whitbeck

SPECIAL SECTION: ANCSA 40TH ANNIVERSARY PAGE

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Distinguished Donors. . . . . . . . . . . . . . . . . . . . . . 13 Photo by Rob Stapleton/ANCSA@40

Past Laureates . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 25th Annual Celebration . . . . . . . . . . . . . . . . . . . 14 Jim Bowles (posthumously) . . . . . . . . . . . . . . . . 16 ConocoPhillips Alaska Inc.

By Tracy Kalytiak

Brice Family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Brice Incorporated

By Peg Stomierowski

The Tundra Times bi-weekly newspaper helped unite Alaska Natives and change the future of Alaska.

Harry McDonald . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Carlile Transportation Systems

By Peg Stomierowski

Women Behind the Act . . . . . . . . . . . . . . . . . . . . . . 66

Quinn Brothers . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Capital Office Systems/Capital Office Supplies

By Peg Stomierowski

SPECIAL SECTION: ECONOMY Alaska 2011 Outlook . . . . . . . . . . . . . . . 28 Continued stability expected Compiled by Heidi Bohi

Alaska Native Corporations .

Construction – Commercial .

Construction – Military . . . .

Employment . . . . . . . . . . .

Financial Services . . . . . . .

Fisheries . . . . . . . . . . . . . .

Health Care . . . . . . . . . . . .

Mining . . . . . . . . . . . . . . .

Oil & Gas. . . . . . . . . . . . . .

Real Estate – Commercial . .

Real Estate – Residential . . .

Telecommunications & Technology . . . . . . . . .

Timber . . . . . . . . . . . . . . .

Transportation . . . . . . . . . .

Travel & Tourism. . . . . . . . .

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Alaska Native women key to ANCSA

By Vanessa Orr

Tundra Times, Howard Rock and ANCSA. . . . . . . . 70 The birth of Native power in Alaska

By Julie Stricker

ANCSA Opened Education’s Doors. . . . . . . . . . . . . 76 Local schools, higher education for Alaska Natives

By Julie Stricker

Prudhoe Bay Oil Discovery Expedited ANCSA . . . . 80 . . . . . . . By Carl Marrs . . .By John MacKinnon . . . . By Reinard Koenig . . . . . . . By Neal Fried . . . . By Richard Strutz . . . . . . By Glenn Reed . . By Bruce Lamoureux . . . . . . By Steve Borell . . . . . By Kara Moriarty . . . . . . . By Lee Henry . . . . . By Helen Jarratt .. .. .. ..

By Anand Vadapalli . . By Owen Graham . By Roger Wetherell . . . . . . By Ron Peck

Pipeline required settlement of land claims

By Vanessa Orr

CORRECTION

The December 2010 alternative energy article, “Powering Alaska: Renewable alternatives,” incorrectly referenced a Susitna River hydro project. The large, dam-based hydro project on the Susitna River at Watana was endorsed by the Alaska Energy Authority and Governor Sean Parnell in late November. Supporting documentation, including reports prepared by HDR Alaska Inc., R&M Consultants/Hatch Acres and Seattle-Northwest Securities Corp. can be accessed by visiting Alaska Energy Authority’s home page at www.akenergyauthority.org.

A Request for Proposal (RFP) for Solicitation AEA11-022, Alaska Railbelt Large Hydro Engineering Services closed Dec. 15.

AEA will hold a series of public workshops on the Railbelt Large Hydro Project in February. The workshop schedule will be published on AEA’s website in January.

AEA requests written comments, which can be e-mailed: large hydro@aidea.org; faxed: (907) 771-3044 Attn: Large Hydro Project; or mailed: Large Hydro Project/Alaska Energy Authority, 813 West Northern Lights Blvd., Anchorage, AK 99503.

www.akbizmag.com • Alaska Business Monthly • January 2011

FR

OM

THE

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DITOR

Helping Youth Help Alaska

Volume 27, Number 1 Published by Alaska Business Publishing Co. Anchorage, Alaska Vern C. McCorkle, Publisher 1991~2009

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

Debbie Cutler Susan Harrington Candy Johnson Linda Shogren Chris Arend Judy Patrick Azimuth Adventure Photography

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

Jim Martin Charles Bell Anne Campbell Bill Morris Ann Doss 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 Pacific Northwest Advertising Sales 1-800-770-4373 ALASKA BUSINESS PUBLISHING CO., INC. ALASKA BUSINESS MONTHLY (ISSN 8756-4092) is published monthly by Alaska Business Publishing Co., Inc., P.O. Box 241288, Anchorage, Alaska 99524; Telephone: (907) 276-4373; Fax: (907) 279-2900, ©2011, 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.

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W

hen Julie Eberly of Houston, Texas, walks into a room and talks about Lemonade Day, to be held Sunday, May 1 in Anchorage for the first time ever in Alaska, the whole room lights up with her big smile and amazing enthusiasm.

“It’s a learning journey,” she says of the program, geared toward children in kindergarten through 12th grades, which teaches these youngsters and teens about entrepreneurship, and a whole lot more. Students in Anchorage, Eagle River, the Mat-Su Valley and possibly Fairbanks will set up lemonade stands, learning business skills while earning money with a three-part mission: some goes to self, some goes to savings and some goes back to the community. Eberly is working with the University of Alaska Center for Economic Development (led by Christi Bell, director), and other leaders who generate interest in the program, as well as teach youngsters and teens how to run a business. They are in partnership with Junior Achievement of Alaska.

“We have this crazy quest to have a million kids a year learn about business in 100 cities across America by 2014,” she said.

The Anchorage goal for this year is to have 1,000 participants. “We need teamwork to make that happen,” said Bell. The eventual goal is going to have every child in the state participate.

“It’s going to be amazing to watch,” added Eberly.

Last year they had 67,000 participants in 14 cities across the U.S. This year the numbers are expected to double. They enlist the help of teachers, school leaders, lenders, Boy Scouts, Girl Scouts, Big Brothers/Big Sisters, YMCA, businesses, building suppliers, and much more.

They are working to expand the program into Native villages, and seeking the help of Native organizations throughout the state.

There are several steps involved in the program: ■ Set goals ■ Create a business plan ■ Establish a budget ■ Find investors (which they pay back with profits) ■ Choose a site ■ Market and sell the product

■ Save for the future ■ Give back to the community (Last year $4.2 million was raised in Houston alone, and children there donated more than $1 million to charities of their choosing.)

Stories about children’s success are amazing.

One youth in Houston set up his stand at a racing event and soon learned racers didn’t want lemonade, they wanted water. So he charged $1 for lemonade and $2 for water.

Quick thinking.

For another girl, it was a life-altering experience. She was in the fifth grade, should have been in seventh. She had low self-esteem and didn’t have a proper role model as both parents were in prison. She used some of her lemonade stand profits, more than $100, to buy a new dress and get a haircut for fifth grade graduation, a rarity for her and something she desperately wanted.

“She had a new confidence,” said Eberly.

“She said, ‘I did it; I can do anything.’”

She realized it was in her power to become independent. Now she is back up to her proper grade level.

“It changed her for life,” said Eberly. “It was something easy she could do that she could have success with.”

A homeless child learned the lesson of self-sufficiency through the success she had at Lemonade Day and told Eberly, “My parents gave me up because they were homeless. You can’t imagine what we went through. I will never give up my kids. I will be sufficient.”

“The stories all have the same theme. ‘I can’t believe I’m an entrepreneur today. I set a goal and was successful.’ Whether Native communities or right here downtown, the common theme of how use money, how give back to community are great things to celebrate.

Something sparks inside of them.

“And it is long-lasting,” she adds. “The earlier you expose kids to sound business practices it literally changes the perspective of their life. It’s not only in theory. It’s in action.

“I’m excited to be here. I like that your leaders say: ‘you will see Alaska will have a mark, a significant mark.’ It is amazing.”

– Debbie Cutler Managing Editor

www.akbizmag.com • Alaska Business Monthly • January 2011

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INSIDE ALASKA BUSINESS ©2010 Jonathan Nafzger

Institute Receives Historical Recordings

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Juneau Author Publishes Book of Grandmothers’ Wisdom

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usan Stark Christianson, a Juneau writer and owner of Christianson Communications, an advertising and public relations firm, recently completed a three-year effort to publish her first book: “Women’s Voices: The Wisdom of the Grandmothers.”

The book set out to find answers to important life questions, Christianson said. The author and the three women who traveled with her on a north-tosouth journey interviewed mothers and grandmothers from the Sakha Republic (Yakutia), Alaska and across the United States. A portion of the proceeds from the book will go to help fund a women’s center in the Sakha Republic.

“We set out to ask grandmothers to share what they have learned from their life experiences with younger women,” she said.

The160-page book contains interviews with more than 30 grandmothers.

It is available online at www.atlasbooks. com, www.WomensVoicesProject.com, and at selected bookstores. It will soon also be available at www.amazon.com.

ealaska Heritage Institute recently received a collection of audio recordings of Alaska Native elders and leaders. Southeast radio host Cy Peck Jr. donated the collection, which includes recordings from 1978 to 1985 and includes a history of First American Emphasis Week. The celebration was first celebrated in Juneau in 1978, and organizers were surprised to welcome about 1,500 people from across Alaska and the Lower 48. The collection of audio recordings has been digitized and is available to institute visitors.

International Economic Development Council. The Excellence in Economic Development Award was presented at the IEDC conference in Columbus, Ohio, last fall. Anchorage-based marketing firm Walsh Sheppard designed the annual report, which was printed in Anchorage by PIP Printing.

Grant Supports Rural Vegetable Gardening Course

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nchorage will host the 2011 Neighborhoods USA, national conference, May 26-29. The Federation of Community Councils organizes the conference, which will feature the theme, “Great Land, Great Neighborhoods.” Iditarod champion Martin Buser will present an opening speech on teamwork. The conference will feature workshops on health, community safety, environmentally friendly initiatives, recreation, grassroots development, multicultural/multigenerational community building, leadership and innovative housing.

he University of Alaska Fairbanks Cooperative Extension Service received a $411,256 federal grant to develop and deliver a course to help rural Alaskans grow food. The three-year U.S. Department of Agriculture grant is through its Beginning Farmer and Rancher Development Program. The course, called Alaska Growers School, will provide knowledge and skills necessary for participants to grow enough food for themselves and 10 other families, according to project director Heidi Rader, tribes extension educator at the Tanana Chiefs Conference.

“This could have a big impact on villages where food is very expensive and fresh vegetables are limited,” Rader said.

Part of the curriculum will be adapted from the existing Alaska Master Gardener online course. The course will be offered initially through several distance-delivery methods to evaluate the preferred method for rural Alaska.

AEDC Earns National Award

NAC Adds New Aircraft, Route

Anchorage to Host National Conference

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nchorage Economic Development Corp. received an award for its 2009 annual report from the

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orthern Air Cargo added a 737-300 aircraft to its fleet in late 2010. The aircraft will serve the company’s Alaska

620B East Whitney Road Anchorage, AK 99501

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www.akbizmag.com • Alaska Business Monthly • January 2011

INSIDE ALASKA BUSINESS business and its expanding U.S. and international business. The larger aircraft will carry approximately 10,000 pounds more freight and is more fuel-efficient than the company’s 737-200 fleet.

“The 300 represents the next step for our company as we seek to continue modernizing our infrastructure and the services we can provide our customers,” said David Karp, NAC president and chief executive.

The company also resumed jet service between Anchorage and St. Paul Island in late 2010. The route was shuttered in 2002 since economic conditions could not support the service. A Boeing 737-200 cargo aircraft will fly to St. Paul twice weekly.

Chevron to Sell Cook Inlet Properties

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hevron plans to sell its Cook Inlet oil and gas assets, which include properties owned by Union Oil Co. of California and Chevron U.S.A. Inc. Chevron was one of the original explorers and developers of the Cook Inlet oil and gas fields. The company employs about 450 people and contractors in Alaska.

“We believe that finding a company that views the Cook Inlet as a vital, core asset will benefit the employees, the community and the state in the long run,” said John Zager, general manager for Chevron in Alaska.

The assets Chevron intends to divest include interests in the Granite Point, Middle Ground Shoals, Trading Bay and MacArthur River Fields; interests in 10 offshore platforms; interests in

onshore gas fields including the Ninilchik Unit and the Beluga River Unit; and two gas-storage facilities. Current net production from the assets is about 4,000 barrels of oil per day and 90 million cubic feet of natural gas per day.

Chevron also will include the divestiture of its interests in the Cook Inlet Pipe Line Co. and the Kenai Kachemak Pipeline LLC.

Princess Adds Ship for 2012

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rincess Cruises plans to add another cruise ship to serve Alaska in summer 2012. The company had operated three ships on its Voyage of the Glaciers route for the past two years. The one-way route is the company’s most popular Alaska itinerary, company officials said. It runs between Vancouver, British Columbia, and Whittier, and includes a visit to Glacier Bay and stops in Southeast towns.

Providence Lands Bike-Friendly Workplace Honor

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rovidence Alaska Medical Center received a bronze award in the Bicycle Friendly Business Program of the League of American Bicyclists.

Providence was honored for its efforts to promote biking as transportation.

Providence has promoted Bike-to-Work Day with incentives for participants and provided more than 150 spots for bike parking, and leaders have set an example by biking to work regularly.

“Biking to work is a great way to integrate exercise into our daily routines and ensure that exercise becomes a

regular part of our workday,” said Dr. Richard Mandsager, chief executive of Providence Alaska Medical Center.

ASRC Subsidiary Acquires Technology Firm

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SRC Federal Holding Co., a subsidiary of Arctic Slope Regional Corp., acquired Mission Solutions Engineering of Crystal City, Va. Mission Solutions is a systems and software engineering company with operations in Moorestown, N.J. It employs more than 500 employees and serves clients that include the Missile Defense Agency and U.S. Navy. Mission Solutions will be a subsidiary of ASRC Federal.

“The acquisition of MSE continues to help diversify the capabilities and market presence within our family of companies,” said Carl Werner, ASRC Federal president and chief executive.

Company officials did not disclose the price for the acquisition.

Credit Union 1 Garners Awards

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redit Union 1 received the Association of Fundraising Professionals Alaska Chapter’s National Philanthropy Day Award. The award was presented for outstanding corporation. In 2010, Credit Union 1 raised about $64,000 for nonprofit agencies and contributed more than 765 volunteer hours. The credit union serves Alaska food banks, shelters, schools and other organizations.

Credit Union 1 also received honorable mention in the Desjardins Youth Financial Education Award. The award,

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www.akbizmag.com • Alaska Business Monthly • January 2011

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INSIDE ALASKA BUSINESS presented by the Credit Union National Association, honors Credit Union 1’s Cyber Branch at West High School. The branch offers financial education classes, provides online account access to students, and provides various instant services such as debitand credit card issuing.

Credit Union 1 employees teach several career development classes for West High students through a school-business partnership.

Wal-Mart Supports Food Bank of Alaska

Whales.” The study shows how scientists and Native hunters can work together to develop management strategies of endangered marine mammals. Participants included: the Alaska Eskimo Whaling Commission, North Slope Borough, Department of Fish and Game, Department of Fisheries and Oceans – Canada, Greenland Institute of Natural Resources, Aklavik Hunters and Trappers Committee – Northwest Territories, Canada and Tuktoyaktuk Hunters and Trappers Committee – Northwest Territories, Canada.

Anchorage Climbs in Economy-Ranking List

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al-Mart Foundation donated $100,000 to Food Bank of Alaska in late 2010. The grant will help the Food Bank purchase food to serve the 55 communities it serves statewide.

Wal-Mart Foundation’s donation is part of its Associate Choice Program, an online campaign, which allows employees to vote on a nonprofit to receive funds in their home state. The six-week voting program awarded $5 million in grants to statewide organizations around the country.

Fish & Game Project Wins Award

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he State Department of Fish and Game received an award for efforts studying Alaska Native hunting knowledge and practices with high-technology science. The U.S. Department of the Interior presented the award for the project, “Satellite Tracking of Western Arctic Bowhead

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nchorage was ranked No. 8 in the Milken Institute’s Best Performing Cities 2010 index, up from 40th in 2009. Milken Institute ranks U.S. metropolitan areas based on creating and sustaining jobs and economic growth. Long- and short-term growth in jobs, salaries and technology are key factors measured to create the index. Anchorage was ranked higher in 2010 than Dallas, Seattle and Oklahoma City.

“Anchorage has proven itself stable and poised for growth, and I think the jump we made in these rankings is proof,” said Bill Popp, Anchorage Economic Development Corp. chief executive and president. “Our population keeps growing because Alaskans and Americans can see the opportunities here. By 2025, Anchorage will be the number one city in America to live, work and play.”

Grant Funds Expansion at Haines Clinic

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he SouthEast Alaska Regional Health Consortium received a $1.3 million grant to expand and renovate its Haines Health Center. The center provides primary medical care, dental services, physical therapy and emergency services. SEARHC will add 700 square feet to the clinic and renovate 928 square feet of existing space.

“The grant will be used to increase clinical space as well as add administrative offices,” said Marcia Scott, SEARHC Haines Health Center administrator. “We will expand our physical therapy room, add a hospital room for our extended-stay patients as part of our Frontier Extended Stay Clinic service (this room can double as an exam room when not used for extended care), and update/renovate two of our older exam rooms.”

Firm Wins Design Awards

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ere Donovan Creative garnered three 2010 Silver Davey awards for work on websites for the Talkeetna Alaskan Lodge, Kenai Fjords Tours and the Anchorage Convention and Visitors Bureau. The international awards honor big ideas from small companies – such as the biblical David defeating Goliath with a big idea and a small rock. The International Academy of the Visual Arts judged the awards. The advertising and marketing firm has offices in Anchorage and Portland, Ore. ❑

www.akbizmag.com • Alaska Business Monthly • January 2011

VIEW

FROM THE

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COMPILED BY PEG STOMIEROWSKI

Toby Foster Chief Executive Officer

Alaska Distillery A

laska Distillery’s Toby Foster started making Permafrost Vodka in his backyard in Wasilla, moving to an airline hangar nearby within a year. Foster, a former medevac pilot and the father of four, says a plane crash in 2003, in which he was hurt, led to his career change.

He began “thinking distillery” in 2004, started the firm in 2006, incorporated the next year, then brought on partners and built the distillery in 2008, going to market that December.

His partners in the enterprise are Scotti MacDonald, Shawn Ansley and Winston Chelf. While first-year revenues were a modest $20,000, sales were $270,000 in 2009 and were topping a million, with a handful of employees, by last November. Foster anticipates exceeding $7 million in sales this year.

FAST FORWARD: We started up as the recession was beginning. We’ve done well, all while living within our means, not taking on extra debt, and cautiously exploring new markets.

We have a strong team and are wise with our resources.

COMPETITIVE EDGE: For us, it’s our team and our innovation. We offer products at many price points, and such unique spirits as Smoked Salmon Vodka. We’re planning a spring release for something even more unique and are negotiating for a national release.

CORE DISCIPLINES: Alaska Distillery has product in eight states, with another 11 coming online. Despite incredible growth, we have not lost sight of our business model. We deviate little from specific strategic goals. The customer who orders one bottle is as important as the customer who orders a thousand. Relationships are important; I personally answer every e-mail and phone message.

FORTUITOUS PAIRING: I like smoked salmon and I like making vodka. My drink of choice is a Bloody Mary. At a dinner party, the host had garnished mine with an olive, a cocktail onion and a piece of smoked salmon skewered on a toothpick. I loved the taste of the smoked salmon bathed in the Bloody Mary. It seems like a natural combination. Our sales show people agree.

TEAM PROMOTION: I know my limitations, and we seek out needed expertise. Walsh Sheppard, who handles our marketing and advertising, does a phenomenal job getting our message out. K&L Distributors, which represents our brands in Alaska, is another strong link in getting our products placed.

©2010 Chris Arend

FOOT ON BRAKE: What’s surprised me most is our growth pace. We’re three years ahead of projections and have even had to apply the brake here and there. We want to assure that when we move into a market, we can provide the quality and customer service we’re known for. I think some companies fail in rapid growth when they forget what it was in the first place that helped them grow.

Toby Foster

GLOBAL GROWTH: It’s about economy of scale. As we open up new markets and our sales volume increases, our material costs per unit decrease. The more we sell, the greater our profit margins. This allows for more spending on such essentials as advertising and equipment.

That helps drive sales and boost efficiency, and thus profitability. I love Alaska, and I believe in the potential of a manufacturing industry here. Alaska needs more industry and exports.

While there are challenges in exporting goods or services, it can be done profitably. ❑ www.akbizmag.com • Alaska Business Monthly • January 2011

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SPECIAL SECTION:

2011 Junior Achievement Alaska Business Hall of Fame

A 21st Century View of the Work-Readiness Talent Gap Taking on the challenge of educating youth BY FLORA TEO, JA PRESIDENT RICK WHITBECK, JA CHAIR Fl Flora T Teo, P President id t

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poll of registered voters revealed that an overwhelming 80 percent think the skills students need to learn to prepare for 21st century jobs are different from those needed 20 years ago. And a majority of respondents believe schools aren’t doing enough to keep up with these changing educational needs. They’re right on both counts – but it’s not the fault of our already over-burdened education system.

What does “work ready” mean today? How are businesses going to find competent workers from among a generation of teens whose dedicated teachers had to pay more attention to test scores than their students’ future pay checks?

Employers expect potential employees to be work-ready before applying for jobs. In their view, today’s teens are ill-equipped to succeed at work, but they’re not talking about getting tough on the three Rs. Teens lack the necessary social and workplace skills needed to land the jobs they desire.

This is the talent gap that needs to be bridged – the distance between what prospective employees know and what they need to know to succeed.

According to the Partnership for 21st Century Skills – an organization that brings together the business community, education leaders and policymakers to advocate for the infusion of 21st century skills into education – the skills have already been identified. In addition to being skilled in the three Rs, science and technology (baseline skills for admission to a company’s employment office), teens need to know more about the world. They need to know how to be creative and innovative, and have the ability to think across disciplines. With the Internet now an essential tool in the workplace, and information overload proliferating at a scale unimaginable just 10 years ago, 21st century workers need to be smarter about information – finding it and distinguishing good from bad. People skills have always been a requirement, but in the 21st century workplace that means teamwork, communication and working across cultures.

Junior Achievement believes the solution lies with organizations such as ours, which is a member of the Partnership for 21st Century Skills, as well as with educators and businesses that support our vision of preparing

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Rickk Whitb Ri Whitbeck, k Ch Chairi

kids for 21st century jobs. We are invited into the classroom by teachers who recognize the value of JA curricula and understand that, while meeting State standards, our programs include age-appropriate activities that model 21st century skills with real-life examples from our volunteers.

For example, NANA Development Corp. has teamed with Junior Achievement locally to offer JA Economics for Success, which helps teens answer the age-old questions, “What do I want to be when I grow up?” and “Why should I stay in school?” In addition to providing financial support, NANA encourages its employees to volunteer to teach the program in all of the villages in NANA’s region.

In Alaska, local businesses support JA financially, and provide more than 350 volunteers to schools statewide to reach over 8,400 students annually. Through JA, this investment helps Alaska “Grow our own Business Leaders,” and help prepare the future work force in Alaska. Together, JA can continue its mission of educating and inspiring students to succeed in a global economy.

JA’s other work-readiness programs include JA Job Shadow and JA Success Skills, both of which are sponsored by the Office of Juvenile Justice and Delinquency Prevention, Office of Justice Programs, U.S. Department of Justice. These programs teach effective oral and written communication, teamwork and leadership skills, problem-solving and decision-making, and building self confidence. These are all skills employers cite as crucial to an employee’s ability to succeed in today’s workplace.

Junior Achievement programs are the solution to the challenges businesses face in bridging the work-readiness and talent gaps. By partnering with educators and businesses, JA helps students prepare for the future work force, focusing on 21st century skills. Such preparation is no longer the ticket to success for new workers – it is simply the price of admission.

JA hopes you will join with fellow supporters as we celebrate the past, present, and future of Alaska Business at the 25th Annual Alaska Business Hall of Fame. This event is JA’s largest fundraiser and helps implement programs statewide in Alaska. Hope to see you there! ❑

www.akbizmag.com • Alaska Business Monthly • January 2011

SPECIAL SECTION:

2011 Junior Achievement Alaska Business Hall of Fame BUILDING UP ALASKA’S YOUTH FOR THE FUTURE Distinguished Donors

Platinum Plus Investors – ($10,000 + ) 3M Company Alaska Business Monthly Alaska Communications Allstate Foundation Alyeska Pipeline Service Company AT&T BP CIRI ConocoPhillips Alaska, Inc. ExxonMobil Production Company First National Bank Alaska GCI NANA Development Corporation Northern Lights Bingo Wells Fargo

Platinum Investors – ($5,000 + ) Alaska Airlines Alaska National Insurance Company Calista Corporation Tom Corkran Crowley Marine Services, Inc. Flint Hills Resources KeyBank KPMG LLP McKinley Capital Management Inc. Minnesota Mining & Manufacturing Northrim

Gold Investors – ($2,500 + ) Alaska Commercial Fishing and Agriculture Bank Bailey’s Furniture Outlet, Inc. Doyon Ltd. Era Aviation, Inc. Harbor Enterprises, Inc. Katmailand, Inc. Odom Corporation Watterson Construction Co.

Silver Investors – ($1,000 + ) Alaska Growth Capital BIDCO, Inc. Alaska USA Federal Credit Union Arctic Information Technology Association of the ANCSA Regional Corp. President Benefit Brokers CH2M Hill, Inc. Dave Cook

Credit Association of North America Denali Alaskan Federal Credit Union Donlin Creek LLC Andrew Eker Eni Petroleum Company, Inc. Fred Meyer George A. Gates Holland America Line Inc. Jim Jansen Kodiak Lions Club Leonard & Martens Investments LLC Linford of Alaska Lynden David Marquez Matanuska Valley Federal Credit Union Keith D. McGranahan Mikunda Cottrell & Company Morris Communications Petro Star Inc. Port of Anchorage Shell Oil SKW/Eskimos, Inc. Southcentral Foundation Elizabeth Stuart Taco Bell, Inc. The Halcro Family Foundation Udelhoven Oilfield System Services, Inc. Usibelli Foundation David Wilson Wells Fargo – Fairbanks

Bronze Investors – ($500 + ) Alaska Newspapers Inc. Alaska Rubber & Supply, Inc. Alaska SeaLife Center Associated General Contractors of Alaska Avis Rent A Car Logan Birch Chris Arend Photography Dick Randolph Insurance Agency, Inc. William B. Eckhardt First Bank – Ketchikan Rick Fox George F. Gates Robert Halcro David Heafer Hughes Foundation

Hughes Pfiffner Gorski Seedorf & Odsen, LLC NANA Management Services Matthew Nicolai Peak Oilfield Service Company Edward B. Rasmuson Rie Muñoz Gallery Grace B. Schaible Maureen Strawn The Alaska Club Dean Thompson Totem Ocean Trailer Express, Inc. University of Alaska Anchorage Joe Usibelli George J. Vakalis Beverly Walsh

Green Investors – ($250 + ) Afognak Native Corporation Alaska Heritage Tours Alaska Railroad Corporation Alaska USA Federal Credit Union – Wasilla Alps Federal Credit Union APICDA – Juneau Joseph M. Beedle Birchwood Homes Copper Valley Telephone Cooperative, Inc. John Delano Diversified Tire, Inc. James K. Erickson Great Northwest, Inc. David Lenig Carl Marrs Mt. McKinley Mutual Savings Bank MTA – Palmer David C. Nicolai Polaris Services, Inc. William Popp Rotary Club of Fairbanks Marilyn G. Sarvela Shee Atika, Inc. Stan Stephens Glacier & Wildlife Cruises Subway of Alaska, Inc. The Coast International Inn Venneberg Insurance, Inc. Larry Wells Lyn Whitley

www.akbizmag.com • Alaska Business Monthly • January 2011

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SPECIAL SECTION:

2011 Junior Achievement Alaska Business Hall of Fame

ALASKA BUSINESS HALL OF FAME

Past Laureates Don Abel, Jr., 1996 Jacob Adams, 2002 Bill Allen, 1995 Bob & Betty Allen, 2001 Eleanor Andrews, 2001 Robert Atwood, 1988 The Bailey Family, 2010 Bernard M. Behrends, 1987 Earl H. Beistline, 1998 Jim Binkley, 1989 Bill Bishop, 1994 Carl Brady, 1990 Carl F. Brady Jr., 2004 Alvin O. Bramstedt, Sr., 1991 Charles H. Brewster, 1999 W. Brindle, 1993 Margie Brown, 2009 Edith Bullock, 1987 Jim Campbell, 2006 Larry Carr, 1988 Richard Cattanach, 2008 Frank Chapados, 1991 John B. “Jack” Coghill, 2006 Jack J. Conway, 1995 William A. Corbus, 1999 Ron Cosgrave, 2007 D. H. Cuddy, 1993 Don Donatello, 1995 Ron Duncan, 2007 Oscar & Peggy Dyson, 1992 Ken Eichner, 1990 Andrew Eker, 2009 Carl Erickson, 1999 Arnold G. Espe, 2001 Al Fleetwood, 2005 Conrad Frank, 1999

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

Milt Odom, 1992 Pam Oldow, 1990 Tennys Owens, 2005 E. Al Parrish, 2006 Raymond Petersen, 1988 Elmer Rasmuson, 1987 Edward Rasmuson, 2000 Frank M. Reed, Sr., 2000 Robert Reeve, 1987 David Rose, 2003 Jim Sampson, 2008 Helvi Sandvik, 2006 Grace Berg Schaible, 2004 Leo & Agnes Schlotfeldt, 1993 Orin D Seybert, 2006 Gov. Bill Sheffield, 200 Merle (Mudhole) Smith, 1993 Charles Snedden, 1989 Sen. Ted Stevens, 2010 William G. Stroecker, 1997 Bill & Lilian Stolt, 1998 A. C. Swalling, 1987 Cliff Taro, 1992 Walter & Vivian Teeland, 1997 Morris Thompson, 2001 William J. Tobin, 2004 Joseph Usibelli, Sr., 1988 Lowell Wakefield, 1990 Leo & Beverly Walsh, 1996 Pat Walsh, 2008 Chuck West, 1991 Noel Wien, 1989 Richard A. Wien, 2003 Lew Williams, Jr., 1994 William Ransom Wood, 1996

25th Annual Celebration The 25th annual Junior Achievement Alaska Business Hall of Fame celebration on Jan. 27, 2011, includes a reception beginning at 5:30 p.m., dinner and induction ceremony at 6:30 p.m., concluding by 8:30 p.m. The evening will also include a special recognition of the many past inductees who will be in attendance. Individual tickets are $150, with limited sponsorship opportunities available.

People may call 344-0101 for more information.

In 1987, Junior Achievement of Alaska Inc. and Alaska Business Monthly launched the Alaska Business Hall of

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Fame to honor outstanding individuals of Alaskan business.

Since then, the Hall of Fame has become one of the state’s most prestigious events, inducting new laureates on an annual basis.

“This class joins more than 100 Hall of Fame laureates exemplifying the rich diversity of Alaska in terms of geographical regions, business and industrial heritage and cultures,” said Flora Teo, president of JA in Alaska. “In essence, the laureates represent the foundation upon which the state of Alaska is built and continues to grow.”

www.akbizmag.com • Alaska Business Monthly • January 2011

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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SPECIAL SECTION:

2011 Junior Achievement Alaska Business Hall of Fame

Jim Bowles

(posthumously)

ConocoPhillips Alaska Inc.

BY TRACY KALYTIAK

F

ive years ago, ConocoPhillips helped Camp Fire USA Alaska Council buy a van to safely transport the children it serves.

Afterward, Camp Fire Chief Executive Officer Barbara Dubovich and a group of her young charges traveled downtown in the new van to thank ConocoPhillips Alaska President Jim Bowles.

“Jim talked to the individual kids,” Dubovich said in an interview just days before Bowles’ Feb. 13, 2010, death in an avalanche near Spencer Glacier. “He engaged them in conversation about who they were, what their interests were. Not everyone takes individual time with kids and he did. I really appreciated that very much.”

Bowles’ enthusiasm, compassion for other people and the well honed combination of business acumen and philanthropy he demonstrated in his life and career are key reasons why Junior Achievement Alaska members named him posthumously to the organization’s 2011 Alaska Business Hall of Fame.

JA members also selected the Brice family of Brice Construction, Harry McDonald of Carlile Transportation Co. and the Quinn brothers of Capital Office Systems.

“These business leaders were selected based on their direct impact toward furthering the success of Alaska business, demonstrated support and commitment to Junior Achievement’s programs and demonstrated

commitment to Alaska business,” said Junior Achievement Board Chairman Rick Whitbeck.

The induction ceremony for the Alaska Business Hall of Fame will be held Jan. 27 at the Dena’ina Civic & Convention Center in Anchorage. Junior Achievement of Alaska Inc. and Alaska Business Monthly are the title sponsors of this event.

WELL TRAVELED Bowles’ life began in Fayetteville, Ark., and he later graduated from the University of Arkansas in 1974, his obituary stated.

He joined Phillips Petroleum upon graduation and moved to Odessa, Texas, where he met his wife, Kathy.

The couple married in 1977 and moved to Norway, where their two daughters, Jennifer and Rebecca, were born. Over the following years, the family moved to Texas, Montana, Oklahoma, back to Norway and then to Houston, Texas.

Bowles retired as president of Phillips’ Americas Division in 2002 and spent time at his ranch near Kerrville, Texas, and with family in Pagosa Springs, Colo. In 2004, he emerged from retirement to become president of ConocoPhillips Alaska.

A GIVING NATURE

©2010 Chris Arend

Bowles immediately reached out to others in the community, involving himself and ConocoPhillips in a bevy of charitable and conservation endeavors. He played a critical role in ConocoPhillips’ funding of the Providence Cancer Center, the Integrated Science Building at the University of Alaska Anchorage and upgrading of the Anchorage Coastal Wildlife Refuge’s Potter Marsh access and facilities. He also supported the efforts of United Way of Anchorage, Covenant House, Camp Fire USA of Alaska and the Nature Conservancy.

“Jim largely set the tone for his organization, with respect to his relationship with companies like ours,” said Ken

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The late Jim Bowles was posthumously named a 2011 Junior Achievement Alaska Business Hall of Fame laureate. www.akbizmag.com • Alaska Business Monthly • January 2011

Photo courtesy of Camp Fire USA Alaska Council

Sheffield, president and chief executive officer of Pioneer Natural Resources’ Alaska subsidiary. “That tone was cooperation and good business relationships. Jim was a great storyteller, a guy who could always see the glass half full.

Whether he was playing cards around the table or netting your fish for you, he always had a smile on his face and could always make you laugh. He was just a fun guy to be around.”

Sheffield’s company has been working with ConocoPhillips since he arrived in the state in 2003. Pioneer operates the Oooguruk field adjacent to ConocoPhillips’ Kuparuk field on the North Slope. The companies, several years ago, negotiated the first third-party processing agreement on the North Slope between two independent parties.

“It requires a lot of cooperation between Pioneer’s and ConocoPhillips’ operations,” Sheffield said. “We have an excellent rapport with one another. We’ve made something that could be very challenging take place in a very straightforward manner. They provide processing and support. We’re just good neighbors.”

The late Jim Bowles Bowles, who helmed ConocoPhillips Alaska from 2004 until his death in an avalanche in February 2010, recently was named to the Junior Achievement Alaska Business Hall of Fame for his business and philanthropic achievements. In this 2006 photo, Bowles, right, poses with Nancy Schoephoester, director of philanthropy and community services for ConocoPhillips, a youth participant at Camp Fire’s community center program, and Barbara Dubovich, CEO Camp Fire USA Alaska Council.

of Anchorage, said Bowles served at the forefront of charity efforts and even went so far as to don a Donald Trump wig, a muscleman costume and even a hula skirt at events, to raise morale and money for the United Way’s charitable endeavors.

“He has always been available,” Brown said before Bowles’ death. “He

chaired our de Tocqueville society one year, to make sure members get what they need and encourage new people to give. I met with him several times.

He personally has shown a great deal of commitment, as well as members of his leadership team. He’s very responsive; it’s not like this is at the bottom ❑ of his priority list.”

SHAPING ALASKA Sheffield says Bowles and ConocoPhillips have contributed significantly to Pioneer’s success on the North Slope.

“Jim always made time to see me,” Sheffield said.

Randy Hagenstein, Alaska state director of the Nature Conservancy, said before Bowles’ death, his organization had enjoyed a long relationship with ConocoPhillips and its predecessor companies.

“ConocoPhillips has been a very important partner in Mat-Su, where it has been helping with a variety of salmon restoration projects – mostly culvert replacement to enable fish travel,” Hagenstein said.

ConocoPhillips then lent the Nature Conservancy college interns who helped replace vegetation adjacent to the replaced culverts.

Bowles served on the Nature Conservancy’s voluntary board of trustees.

“They’ve been very, very helpful in terms of guidance to the chapter in a board capacity,” Hagenstein said.

Michele Brown, president and chief executive officer of United Way www.akbizmag.com • Alaska Business Monthly • January 2011

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SPECIAL SECTION:

2011 Junior Achievement Alaska Business Hall of Fame

Brice Family Brice Incorporated

BY PEG STOMIEROWSKI

T

he Brice family, recognized in the 2011 class of Junior Achievement of Alaska Business Hall of Fame laureates, has left a large footprint in rural Alaska. Those included in the family legacy are second generation Brice brothers Sam Richard, Al, Andy and Tom; and first generation parents helenka (she preferred the lower case ‘h’) and Luther (now deceased); Company president (third generation, Al’s son) Sam Robert will be present at the awards, representing current management and employees.

In 2010, Brice Construction and related companies were purchased

by Calista, an Alaska Native regional corporation that’s expanding its construction reach. Third-generation Brices (headed by Sam Robert) and extended family members still manage the five Brice companies as a consolidated Calista subsidiary.

Not one employee lost his or her job, and key aspects of the company culture continue, gratifying to cofounder Sam Richard. Anchoragebased Calista represents more than 13,000 shareholders and encompasses 56 villages in western Alaska.

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Photos courtesy of Brice Inc.

Sam Richard Brice, Thomas Liston Brice, Luther Alba Brice and Andy McNutt Brice.

ROOTS IN THE BUSH For a long time, Brice Construction had enjoyed a strong sense of institutional history, a storehouse of early Alaska statehood knowledge and connections, and a reservoir of good will with many Native communities in the region.

Even before the Native corporations came into being in 1971, observed Northrim Bank President Joseph Beedle, the Brices had a reputation for business networking with Bush communities along the Yukon and Kuskokwim rivers. They’d been at it since 1962.

“They established contacts with the Native villages before it was popular to do so,” said Beedle, who considers this a compelling tale of Alaska-style karmic growth. From very early on, they mobilized and networked in rural communities, even staying in schools to get some jobs done. Over the years, he said, the family built its operation to a pinnacle, and then was able to gracefully pass it on to another generation.

“Our jobs traditionally were in a half moon — west, north and east around Fairbanks,” Sam Richard reflected. In such remote communities as Kivalina, Huslia and Savoonga, they tried to preserve any infrastructure and enhance local economies, he said, conducting themselves as guests who left things a little better when they buttoned up their work – trucks, tugs and barges – at job completion to go home.

Luther and helenka (sic) Brice in the early 1990s. www.akbizmag.com • Alaska Business Monthly • January 2011

Sam Richard, like his mother, helenka, before him, Beedle reflected, believed that success in rural heavy construction depended on owning and managing their own tug and barge company to ensure timely transport of materials and equipment. He was instrumental, Beedle said, in designing the articulating tug barge equipment that continues to define best practice and efficiency for ocean/river combination, shallow-draft freight transport today.

FAMILY WORK ETHIC Along with their work ethic in village settings, the Brice business ethic was extended to competitors as well, Sam Richard said. Alaska Bush contractors are a tough breed and support one another as well as competing. In the Bush, “if you’re up a river and another contractor’s boat gets stuck,�

Sam Richard said, “you help that guy and he will do the same for you.� In remote-site contracting, “Mother Nature is our biggest challenge.�

By all accounts, another key ingredient in their success was the character of their commanding family matriarch, the late helenka Brice. She was president of the company until the day she died, and set the tone for how it was run. “Mother was the dynamo� Sam Richard related, “and Dad (the late Luther Brice) was the glue. Although Luther’s education had ended in the sixth grade, his son said, “he was the most sophisticated and charming man I ever knew. “My mother was the best we ever (could have) had,� he said. In the state’s business/political sectors, helenka was a power to be reckoned with. When she died, the late Sen. Ted Stevens presented the family with the flag that had flown that day over the U.S. Capitol.

She always had been results driven.

Whenever he’d been tempted to whine or make excuses for a hard day’s tribulations, he said, his mother would tell him, “I don’t want to hear about your labor pains. I just want to see the baby.� “Al, Andy and I figured we would be called helenka’s boys forever.�

drives between “the older group� and “the younger group� within the company and its leadership. The younger group, he said, aspired to do bigger projects. “The older group understood that you have to let go at a certain period of time.�

Still, “if we didn’t have consensus,� he said, “you’d never know about it. We operate as a team and a family.�

The company has long been known for paying its bills on time, working with local leaders, supporting local hire, and having little turnover because it

was a good place to work, family members said. Revenues at the time the firm sold were in the $40 million range. “Contracting is a tough business,� Sam Richard said, “and to survive in it for nearly a half century is something to be proud of.�

SANDBARS AND SOURDOUGH An unusual subcontract occurred when Brice Marine transported gravel to Guantanamo Bay in Cuba in support of a Knik Construction paving project – exemplifying Alaska

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BETWEEN GENERATIONS During the period when Brice was being sold to Calista, Sam Richard remembers the interplay of goals and

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www.akbizmag.com â&#x20AC;˘ Alaska Business Monthly â&#x20AC;˘ January 2011

19

The Brice boys (left to right, Tom, Andy, and Sam Richard, with Al standing) are shown as they were going off to school. The photo was published in 1936 in the Crescent City newspaper in Florida. Sam and Al were going to Columbia, while Tom and Andy were going to Trinity Pawling, a private school in upstate New York.

They were all getting new shoes for the school year.

construction competitors working cooperatively to get a job done.

Father Luther first came to Alaska after World War II, and liked it. From this experience, he planted the seed for the eventual family move to the state.

Sam Richard now regards that as the family’s best decision ever.

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Al started work on the Dew Line in 1957, and the rest of the family came north to their new home.

Their construction life started when Al heard of a clearing contract being put out by Peter Kiewit Sons on Chena Hot Springs Road for a total sum of $12,500.

Sam and his father began the job with a GI pickup on airplane tires, and Al supported the job by landing his Stinson airplane on Chena River sandbars.

To this day, Sam Richard fondly remembers working with his dad on this first Brice contract. They started out in a tent, but a miner took them into his cabin when the temperatures dipped well below zero. Sourdough starter was imported from the Bettles mining area, and hot sourdough pancakes were the first order of every day. Brice brothers Al and Andy joined their father and brother at the job site on their days off.

Civility is another lesson he learned from his parents, Sam Richard said, and it’s not a whit less important today in a family business. Not only civility, but showing good manners to one another on an everyday basis – his mother and father, after all, always expected that.

“I can’t recall the last time I’ve heard a harsh word around here,” he said.

“People think that because you’re in a family, you don’t need to do the courtesies. But actually, you need more ❑ courtesies. It’s more critical.”

www.akbizmag.com • Alaska Business Monthly • January 2011

SPECIAL SECTION:

2011 Junior Achievement Alaska Business Hall of Fame

Harry McDonald Carlile Transportation Systems

BY PEG STOMIEROWSKI career honor. In reality, he added, success, as a destination, has never seemed clearly delineated to him from the road leading up to it.

Photos courtesy of Carlile Transportation Systems

EARLY TRANSITIONS

Harry McDonald in December 2008 at the Carlile terminal in Tacoma, Wash., as the firm embraced use of the new heavy-duty Kenworth hybrid tractor.

H

arry McDonald, chief executive officer of Carlile Transportation Systems and a member of the 2011 class of Junior Achievement of Alaska Business Hall of Fame laureates, credits an oldfashioned formula of hard work and perseverance with keeping his career wheels turning. The company celebrated 30 years in business last summer, and yet there are many signs that the business has fresh appeal.

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McDonald is known for being straightforward. Listening to him talk frankly about his work, one surmises he hasn’t fully shaken off the sense of creative tension from when he was a young man and just starting out in business with a few hundred dollars in his pockets.

With growth and success, “people have the impression that somehow you get over the hump,” he reflects, mulling this new Junior Achievement

For McDonald, the firm’s growth has been paved with hard work. That’s something he wants young people to know. And while, to hear him talk, it would seem he hasn’t slowed down much with age, even as a young man, he felt nothing could be as hard as the tugboat work he grew up doing with his dad.

McDonald grew up in Seward and bought his first tug, which was 65 feet long, after high school. Then, in 1974, he brought on three trucks to haul logs and chips out of the Anchor Point and Homer areas of the Kenai Peninsula for Louisiana Pacific Sawmill. That was the year the ice didn’t break up on the North Slope, and trucking was the only option.

Flotillas of barges had to be brought back and unloaded in Seward, and their cargo trucked out to the North Slope from Seward. McDonald then started driving for Lynden Transportation, and found that he like the change.

His earlier experience running tugs had exposed him to “a hair-raising business.” He never forgot what it was like. It always has been challenging, but back in those days, there weren’t the electronic communications that tug owners use today.

“As soon as I found out how easy trucks were,” McDonald said, “I never looked back.”

SEIZING AN OPPORTUNITY He was down to a truck and a couple of trailers hauling milk from the Matanuska Valley when he had the notion to start Carlile in 1980 with his brother, John. His idea, really more of an impulse, was in response to a trucking opportunity he’d learned about – one that

www.akbizmag.com • Alaska Business Monthly • January 2011

Community involvement at Carlile happens almost on a daily basis, McDonald said, whether it’s supplying hay for an animal park or working with young people through the Boy Scouts or other youth organizations. The firm donates an average of a couple of rides a week to Prudhoe Bay. McDonald, himself, is president of the Alaska Pacific University Board of Trustees and was recently honored by his alma mater, APU, with the Lawrence J. Carr Distinguished Volunteer Award.

Harry McDonald with Nordic racer Tazlina Mannix, whose ski team enjoys substantial Carlile support.

would require adding trailers to expand his capacity. But if trucking wasn’t in his blood, hauling, in general, was.

While his dad had been in tugs, his uncle was head of Consolidated Freightways in Alaska. McDonald came to feel there was greater economic opportunity in trucking. He’d found that trucks, after all, were easier to capitalize. While a tug today could cost $100 million in one shot, trucks and trailers were easier to accumulate incrementally in building up a business.

McDonald’s brother, John, has been in charge of maintenance and equipment from the start. “He could take a transmission apart and put it back together when he was 9 years old,” McDonald was quoted as telling a KTUU interviewer, “and I still can’t do it.”

Carlile is John’s middle name, and the brothers always were looking for opportunities. In 1994, they bought K&W Transportation out of Minnesota, which doubled the size of their operations.

In 30 years of doing business together, McDonald said, he and his brother have never had a serious issue with one another. “In our family,” he said, “we don’t count pennies.” They don’t sweat the small stuff, he said, and no one worries about the other guy getting a little more or less.

For the last couple of years, McDonald says, they have been doing about $125 million in business annually. They have about 300 trucks, 1,500 trailers and 650 employees in Alaska, Texas, Minnesota and Alberta, Canada, with a long reach extending from Alaska across North America and even to Hawaii.

Characteristically, McDonald feels they spend about the same as they take in. It has been hard to maintain volumes during the prolonged recession, he said, and “we’re trying to stay positioned for things to turn around.”

LEADERSHIP CHALLENGE Setting goals is a major part of his leadership role, he said. He sees Carlile as employee-driven. While he may share hints or suggestions, he tries not to tell employees what to do, but rather to project confidence that things will get done.

Although early on, salary ruled in attracting good employees, employees today expect health and retirement benefits and a share in the wealth, he said, but mostly “they want to feel a part of the team and appreciated.”

He tries to stay connected by being out among them. Often, he gets into a railcar or truck to help with the day’s demands. His employees and customers reward him with loyalty, says Annette Skibinski, who has known him for 14 years and worked at Carlile for two.

“If he says ‘yes’ or ‘we can get it done,’ then we will. A handshake confirms his word, and a compliment from McDonald is genuine.”

“He takes care of them and they take care of him,” she said of employees.

“He truly is out in the yard and behind the wheel getting a blister to earn a buck; his orange vest is always nearby, and jeans are in the dress policy.”

Carlile’s president, Linda Leary, started out as a secretary, and was quoted as telling KTUU her experience at the firm taught her that anything is possible.

RUGGED INDIVIDUALISM While McDonald knew from a young age that he’d be in business for himself, it isn’t for everyone, he cautions. The entrepreneurial spirit isn’t enough; you must have a certain comfort level with assuming risk, and the reality is that often you’re enslaved to your schedule. On the hard days, you don’t have a choice about whether to go to work. He knows a lot of smart people, he said, who aren’t cut out for it.

On the other hand, he added, you’ll need a lot of intelligent people helping you out. McDonald says having gone to college himself was a huge advantage. Besides basic skills, he said, ideally it teaches young people how to think for themselves.

Last fall, Carlile rolled out a dynamic new website stressing top-notch training programs and conveying something of the romance of the open road. The site seems designed to appeal to people looking for the kind of rugged individualism that transportation in The Last Frontier connotes. It has a modern relational thrust, displaying images of attractive young men and woman promoting a no-nonsense message about transporting goods and services with professional know-how.

Carlile’s trucking business to Prudhoe Bay, which has been featured on the History Channel show “Ice Road Truckers,” also has helped Carlile be seen far and wide as a logistically savvy operation. This spreading image of unlimited possibilities is a long, long way from his old days on the tug boat. And in a sense, it represents how ❑ far McDonald has traveled.

www.akbizmag.com • Alaska Business Monthly • January 2011

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SPECIAL SECTION:

2011 Junior Achievement Alaska Business Hall of Fame

Quinn Brothers Capital Office Systems/Capital Office Supplies

©2010 Chris Arend

BY PEG STOMIEROWSKI

(Left to right) Ted, Lewis and Bryan Quinn are being honored as 2011 Junior Achievement of Alaska Business Hall of Fame laureates.

A

key ingredient of the Quinn brothers’ success in their commercial interiors and office supply empire in Alaska comes from knowing and balancing their individual talents as well as any three members of a seasoned symphony.

Lewis, Ted and Bryan Quinn, as the siblings behind the synergy at their two Capital Office ventures, Capital Office Systems and Capital Office Supplies, are being honored as 2011 Junior Achievement of Alaska Business Hall of Fame laureates.

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The parent company for these office enterprises is Qub’d (pronounced Cubed) International, while 1 Workplace, another in the Quinn stable of workspace providers, primarily features commercial interior design services for Capital Office Systems. A Steelcaseauthorized furniture dealer, Capital Office Systems offers commercial interiors, architectural product solutions, and services and repairs to businesses or nonprofits in Alaska via three locations in Anchorage, Juneau and Fairbanks. Under the Capital Office Systems’ banner,

furniture and design now account for the bulk of the Quinn companies’ sales.

Capital Office Supply, the original flagship of the triumvirate, dates back to 1946 when, the brothers say, it was in the business of supplying pens and pencils to the provisional government of the Alaska territory. While the firm previously operated from storefronts in Juneau, it now sells consumable office supplies to businesses, primarily in that local market, through its catalog and website, www.capital-office.com.

The Quinns say business has improved

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since they closed their retail outlet.

They pegged full time employment these days at 45-50, with figures doubling during busy times when temps help swell the ranks.

FAMILY NURTURED The Quinns’ father, Terry Quinn, who moved to Alaska in 1972 from Arizona, ran the phone company in Juneau for a time. He bought into Capital in 1976 and became sole owner a decade later.

Lewis came into the family business after a foray into financial services. Ted came on board with the Office Systems expansion, and Bryan with further growth. The sons acquired the company in 1994.

Today, Lewis and Bryan live in Anchorage, while Ted still resides in Juneau. Bryan, who studied business and history for about three years, is the only brother who went to college.

Although the brothers were fortunate, both in having an entrepreneurial role model in the family and in being similarly driven to create their own business, Bryan cautioned rising Junior Achievement entrepreneurs “at some point, you

might hit a ceiling without it (a college education).” Ted and Lewis agreed.

Their business, which trains employees to be customer focused, is driven by the needs of value-focused consumers, they said. Over the years, growth often has involved recognizing their limits and hiring wisely.

Lewis, currently Qub’s president, is described as the big-picture person, dreamer or visionary. While Lewis always was driven, his brothers said that even he has “softened up” with age since the early days and “settled into success.” Ted, general manager of Juneau operations, often is seen as the “people” person, and Bryan, VP of operations and finance, scrutinizes details of various Capital Offices initiatives.

“It really is “the synergy of our strengths, coupled with a robust (but informal) checks-and-balances system among us three, that has allowed Capital to successfully manage growth,” Lewis added.

A UNIQUE CONTRIBUTION A large part of the Quinn brothers’ role in fostering economic growth in Alaska,

they believe, can be traced to their influence in fostering the growth and productivity of other businesses. The Capital Office trio helps their customers create, shape and supply attractive and efficient workspace environments, which helps these businesses compete for and attract prime employees. It is not an unreasonable stretch for them to conclude that this influence, “backed by literally billions of dollars in research into how people work, collaborate, and socialize in their work environments,” improves bottom-line results for customers.

As business owners themselves, they know how hard others are striving to keep up with changing technology. And evolving technology, as Lewis reflected, has led to the creation of knowledge, workers with skill sets and motivations somewhat different from the traditional, cubicle-bound, stereotypical work force of the baby boomer generation. For the first time in history, he added, workplaces routinely include up to four generations of employees, laboring side-by-side in the same work spaces.

Yet, each generation approaches and discharges its daily responsibilities in

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decidedly different ways. One of Capital Office’s fortes, they said, involves productively integrating boomers with Gen X, Y, and Z members.

SUCCESS FACTORS AND CHALLENGES Outside of work, the brothers said, the stability of their family lives – they’ve each been married for more than 20 years – might also have contributed stability to their business lives.

“We’re fairly conservative fiscally,” Ted added. Progress has come, he said, step by baby step, through hard work.

“You don’t overextend yourself,” he added, sage advice for up-and-coming JA entrepreneurs. Their greatest challenge, the brothers said, has been assuring consistency in quality while expanding from Juneau to Anchorage and Fairbanks.

Among external challenges facing businesses such as theirs, they list a handful of concerns: the economic slowdown, greater competition, taxes, regulation and credit availability. National natural resource policy looms big, along with sustainable fiscal policy.

“In the end, happy customers write checks, not some extraneous, intangible force that we ultimately cannot control.”

– Lewis Quinn • Capital Office Systems/Capital Office Supplies While theirs and Alaska’s success depends on the latter, they said, they don’t sit idly by hoping for the best. “In the end,” Lewis observed, “happy customers write checks, not some extraneous, intangible force that we ultimately cannot control.”

Neither are they flashy about their stewardship tradition, which they describe as a way of life. Ted, for instance, has been active in leadership of the Juneau and statewide business chambers, and was honored in 2008 as a small-business champion by the state branch of the National Federation of Independent Businesses.

Giving back to the community also has meant giving monetarily to charities, donating office equipment and installation services to nonprofits, and quietly encouraging employees to col-

lectively volunteer their time and talents.

They try to concentrate on causes “that eliminate situations in … young people’s lives that jeopardize their chances of success later on.” They also try to help employees educationally, they said, by funding a tuition-assistance and intern program.

In business, flexibility is a useful art.

At times it’s important to stick to your guns, and at other times to be able to change gears quickly. At one point, during their current growth and expansion, they had to stand back and decide what it was that they tended to do best. They went back to their core competency, they said, and decided to focus on their furniture component.

After all, Ted observed, “Why do it ❑ if you can’t do it great?”

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www.akbizmag.com • Alaska Business Monthly • January 2011

ECONOMY

Alaska 2011 Outlook Continued stability expected COMPILED BY HEIDI BOHI

S

ome Alaska business leaders and government agency representatives shared their outlooks on the economy for the new year. We’ve compiled their comments in our annual economic outlook.

While most sectors of the economy desire continued stability and some semblance of growth, uncertainty remains due to the lack of definitive State and federal tax and regulation changes conducive to a more positive business model.

It is with much resiliency and resolve those doing business in Alaska continue to do so. The questions we asked and the answers we received follow.

• How are things looking in your industry for the first half of 2011?

• What trends do you expect to see over the next two years?

• What is the most significant thing going on in your sector?

• Is there anything being done to prepare for 2011?

ALASKA NATIVE CORPORATIONS

By Carl Marrs Chief Executive Officer Old Harbor Native Corp.

One of the top priorities of Old Harbor Native Corp. and other Alaska Native corporations (ANCs) continues to be the 8(a) program and our ability to continue to rely on this in the future because it brings money from the Lower 48 states to help fund Alaska Native social programs in Alaska, whether it’s for health, education or providing dividends, which all are very helpful to Alaska Natives. Maintaining the program is the No. 1 priority, though Sen. Claire McCaskill is trying to cut the program, but only for Alaska Natives

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– not for other tribes or benefactors.

Why only Alaska Natives? That’s the million dollar question. It is unclear

how much of a problem she presents because the bureaucracy will continue to function as it was intended to until the law is changed. What will happen with the legislation she has introduced?

I don’t want to predict anything about Washington, D.C., but I hope that most of those on Capitol Hill understand the importance of the program and all the good it does for Alaskans and all other minority groups such as the Hawaiians.

The Native community is trying to put together program changes that help how the 8(a) program is being administered and to make sure there aren’t any abuses within the program. It is coming up with self-policing actions McCaskill may or may not accept and put into legislation. In the past, there have been abuses in the program, but not very many and to throw the baby out with

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the bathwater is a terrible thing to do when you have so many needy people who are so dependent on it. Historically, too, there have been problems with government contracts with others besides the minority groups, but they didn’t throw the whole thing out – yet they want to throw Native corporations under the bus. The argument is that we are costing taxpayers money. It is the opposite because fewer people in Alaska are on welfare programs – more people are being educated because of Native corporations and programs like this. The fact is the government is going to contract this work out either way. We are just a very small piece of the overall contracting, including the Department of Defense programs. The returns Native corporations get on these contracts are very slim, 2 percent to 5 percent on the average, so the argument we are costing taxpayers money is ridiculous, it is a net benefit – American Indians can prosper and bring to their members pride and self-determination.

Although business is going well for the ANCs, because of these issues being raised it is harder and harder to negotiate contracts. Those that participate in the 8(a) program are doing okay, but there are still plenty of village corporations not participating because they are not big enough to be able to do anything.

In terms of the state’s economy, I am very worried about where Alaska is headed, especially as it applies to the investments of ANCs statewide.

Resource development is pretty much non-existent for several reasons. Alaska does not have a stable tax policy, so companies that invest millions of dollars do not know what their future costs are going to be from a tax standpoint.

This can be seen especially with the oil industry, which is withdrawing from continued exploration. The same holds true with the projected gas pipeline.

Unless there is long-term stability in our tax structure, companies will be discouraged from investing.

In general, resource development is being held hostage by Alaska’s permitting process, which can be seen in mining, timber, and oil and gas – basically all sectors of business. Because it takes so long and requires the developer to jump through so many hoops, the costs

are not conducive to encouraging new business in the state. If at the end of the day a company has to spend $100 million to get through the permitting process, chances are they are not going to be able to afford to develop it. The federal permitting process is no better.

Here, too, we need to have some sort of stability built into the system. Governor Sean Parnell is working on that, but it’s going to take time. ConocoPhillips is going elsewhere, which means the state’s largest industry will not be opening new development and providing jobs – a sure sign the economy is going to be in trouble in the future, if we can find a solution to stabilize it. The State tries to send a message to consumers and businesses we’re open for business, but once again, CNBC ranked Alaska at or near the bottom state for business due to the high cost of living, high cost of doing business, and weak infrastructure. To Outside companies wanting to do business in Alaska, this is a dismal message on the future of the state. ■

COMMERCIAL CONSTRUCTION

B JJohn By h M MacKinnon Ki Executive Director Associated General Contractors of Alaska Alaska’s highway program will be as robust as last year, the last of the stimulus projects will be completed, and the construction industry has its federal aid program, which is more than $425 million. Several of the 2010 highway projects are also ready to go out to bid.

Several projects from the 2008 $315 million bond package are also ready to begin, so there will be signs of those hitting the streets statewide, including the Dowling Road connection, Port of Anchorage, Seward Highway, Fairview Loop in Wasilla, Dalton Highway improvements, and bridge repairs. It’s going to be a good time in Alaska to be a dirt contractor.

On the building side, things are also looking up. The governor committed to spending $500 million worth of deferred maintenance on State facilities over the next five years. Almost $400 million worth of education facility bonds passed in November and we may see some of that hitting the street this summer, or at the very latest it will be under construction by 2012. This helps the building side, which has been down for a few years, and supplements the loss of private investments.

President Obama’s announcement to open up exploration in the outer continental shelf will eventually lead to platforms, pipelines and production, which could mean a considerable amount of new work for the construction industry. Projected activity on the North Slope is still uncertain, though: for the second year in a row ConocoPhillips announced it won’t be doing anything and BP Alaska is suspending construction of its Liberty oil field project in the Beaufort Sea, with no timeline for resuming it, which all adds up to reduced Slope activity that the construction industry relies on. At the same time, the U.S. Defense Department spending will continue to be good, along with mineral exploration, which comes with the hope of additional development.

It is expected there will also be some action in the legislature this year to try and address ACES legislation that has had a negative impact on oil exploration, though if the legislature spins it around could turn out to be a positive.

In terms of mining-related construction, we’ve seen some very responsible development with Kensington Mine, which was built almost exclusively with Alaska contractors. There are also several other small and large mine projects going through exploratory and prepermitting phases, which bodes well for further development.

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The recent election was important for the construction industry. The election of Governor Sean Parnell means a lot of positives for the construction industry as he makes significant changes in his administration and continues to see a healthy capital budget as an investment, while tightening up the operating budget. Looking ahead, 2011 is going to be just as good if not better than last year. â&#x2013;

MILITARY CONSTRUCTION

B CCol.l RReinard By i dW W. KKoenigi Commander â&#x20AC;&#x201C; Alaska District U.S. Army Corps of Engineers

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The U.S. Army Corps of Engineers program in the Alaska District remains strong for 2011. Military programs will be strong through Fiscal Year 2013 and then begin decreasing â&#x20AC;&#x201C; civil works programs are already tapering down.

Midway through Fiscal Year 2011, the Alaska District is executing a total of 336 projects and activities worth $696.7 million. The military program consists of 18 projects valued at $427 million. Our goal is to have all these projects awarded to general contractors by March 31.

A military project of interest is the Aviation Task Force Complex at Fort Wainwright, which supports the modular Army conversion to an Aviation Task Force (ATF) by constructing permanent facilities meeting Army standards for approximately 1,300 additional soldiers. Phase IIA, to be awarded this fiscal year, includes an aircraft maintenance hangar and rotarywing parking apron.

Another large Army program is the

www.akbizmag.com â&#x20AC;˘ Alaska Business Monthly â&#x20AC;˘ January 2011

Maneuver Enhanced Brigade (MEB) Complex at JBER-Richardson. This program begins with Phase I in FY11.

Additional Brigade Combat Team (BCT) projects are programmed for JBER-Richardson between FY12-FY16.

The Alaska District’s FY11 civil works program consists of 66 projects and activities totaling $88 million. Ongoing construction projects include a new harbor at Akutan and adding new floating breakwaters to two existing harbors at Unalaska and Douglas Harbor in Juneau. We are proposing to award additional coastal erosion work at Unalakleet and a contract to install a new water intake at Buckland.

Investigations for studies continue for Homer Harbor modification, Kotzebue Small Boat Harbor, Matanuska River Watershed, Valdez Harbor Expansion, Whittier Harbor and Yakutat Harbor flood damage reduction.

Maintenance dredging at Anchorage, Dillingham, Homer and Nome continue on a regular basis.

The Alaska District has several projects on the Chena River Lakes Flood Control Project near Fairbanks as a

result of a nationwide safety review of Corps-owned dams.

The Formerly Used Defense Sites (FUDS) program for environmental cleanup will increase to $40 million in FY11. Remediation activities are ongoing at Northeast Cape on St. Lawrence Island, Unalakleet and Umiat Test Well 9 on the North Slope among other locations around the state. New investigations and/or removal actions are scheduled to begin at Navagapak on the North Slope, Caton Island off the Cold Bay coast, and Fort Pierce near Sitka, to name a few.

An unusual new program for the Alaska District is Humanitarian Assistance in Southeast Asia for the Pacific Command and U.S. State Department. The Alaska District is managing 65 projects valued at $47 million in Vietnam, Cambodia, Laos, Bangladesh, Sri Lanka and the islands of Maldives.

Projects range from military master planning to design and construction of medical facilities, schools and cyclone shelters. The district uses local contractors in these countries as much as possible. ■

EMPLOYMENT

B NNeall FFried By id Economist State of Alaska Nobody really knows what lies ahead in terms of employment numbers for 2011 – in fact, we won’t even have solid numbers for 2010 until about the middle of this year. So much changes that we are forecasting on top of numbers that are not yet clear. kinross.com

Our People Our Community Good employers attract good employees.

And good employees stay working for good employers.

That’s been Nik’s experience.

He started at Fort Knox Gold Mine as a twenty-something, and has earned increasing responsibilities over the last decade. Now he’s Heap Leach General Foreman at the mine.

Nik appreciates the benefits and opportunities Fort Knox offers. He is proud of what he does - working for a local employer with a bright future that values people and gives them a chance to broaden their horizons and achieve their potential.

As an employer, Fort Knox has earned Nik’s hard work and his loyalty.

It’s a relationship that works well for Nik and for us, too.

www.akbizmag.com • Alaska Business Monthly • January 2011

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The last couple years have been interesting, though. In 2009, it was the first time Alaska experienced a relatively small decline in unemployment and it appears 2010 started with slightly negative numbers and became increasingly more positive, though we still don’t have actual third-quarter figures for 2010, which is the biggest quarter.

We are assuming the year ended up being a positive year. Although we have not finished our forecast, just from looking at numbers, 2011 could be another year that’s slightly positive for employment. This is in contrast with the national economy, which started to decline in 2007 when we saw millions of jobs lost before it began to recover in 2009. The term “recovery” may not even be appropriate for Alaska, because it begs the question, “What are we recovering from?” We were effected by the national recession – the visitor industry got hit, international cargo declined, and even psychologically we were effected as the numbers turned to slightly negative ones in 2009.

There is no clear definition of “recession” as it applies to Alaska. We were certainly affected. All the numbers say we got through this period in much better shape than the rest of the country and 2011 is not likely to see any big changes. When it comes to the rest of the country, we are looking for news and information and tell-tale signs of recovery, but we are not necessarily looking for the same thing here. The story is different. It is not nearly as exciting, but in this case, boring is good.

For those out there looking for a job, or looking to change jobs, there is no doubt here in Alaska it is more difficult to find work because it is a more competitive job market. Three years ago, it was better. Last month’s unemployment rate was the 24th month when we came in under the national averages.

Despite that fact, our unemployment rate is higher than what we’ve seen historically. We are in good shape, but it’s a relative thing: 2008 was significantly lower than it is today – it was a very good year – and that was also the year the national economy declined rapidly and the country lost millions and millions of jobs. That’s how different it was in Alaska and the rest of the country.

When looking at different industries,

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there is a different story occurring for each. The oil industry was down some in the beginning of 2009 and most of 2010 and it is not expected to rebound in 2011. On the other hand, the mining industry is one of the state’s shining stars and will continue to grow, though it is smaller than the petroleum industry. Construction is expected to lose ground and has been since 2005. Retail is a big player and it will be interesting to watch because it gauges what kind of confidence the consumer has.

Transportation is expected to be better because we got hit hard in the cargo and visitor industries, but both of those are beginning to recover and we think transportation will improve considerably this year. Commodity prices in general have been good in 2010 and that is expected to continue in 2011.

At the same time, if it weren’t for health care and government, our numbers in 2010 probably wouldn’t have ended up on the positive side. Those two industries helped keep our numbers above water in 2010. What health care will do in 2011 is yet to be seen. It is expected to grow, though maybe not as robustly. Government will play less of a stabilizing role. The State government is expected to remain flat, though on the plus side of the ledger we are financially in very good shape. We are not suffering from the deficits that so many states are and that has been one of our strengths during the recession: oil prices have remained relatively high and budgets are strong. Local government will likely end up in the negative, though it is not expected to decline much. ■

FINANCIAL SERVICES

By Richard Strutz Alaska Regional President Wells Fargo Bank N.A. The financial services industry remains healthy and strong in Alaska. We continue to see steady growth in business and consumer deposits. According to the latest FDIC market share report, deposits are up 12 percent in Alaska, which is strong for 2010. Wells Fargo has had even better growth than most in the industry – excluding credit unions

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– up 17 percent, with a market share of 49 percent. Consumers are more focused than ever on building savings and reducing debt, which is a very positive trend.

Customers also saw their “secure” investments fair poorly and as a result are now going with banks, which are traditionally a safer place to put money.

They don’t want to take the risk like they did in the past. Many business

owners are paying down debt as well, so small-business lending is down slightly. As the economy recovers, it is anticipated that demand for loans will increase, especially with interest rates at record lows. Business bankers are also working to find solutions to help Alaska businesses as the economy begins to recover.

The Alaska economy is stronger than other places. State government is in good fiscal shape and unemployment is low. At the same time, there is not likely to be a lot of job growth in banking because there are so many unknowns that are causing the entire industry to be careful.

Looking ahead, the industry will continue to invest in technology and increasing efficiency with features such as envelope-free ATMs. Online services will get more robust as a way to improve both customer service and cost efficiency. Consumers will also see more banking options using mobile devices such as iPhones, Blackberrys and Androids, as consumers enjoy the convenience of accessing their accounts and transferring money on the go. On-

line banking is a great way for people to stay on top of their finances with free budgeting and savings tools at their fingertips.

The Dodd-Frank Financial Reform Bill includes 300 new regulations and 90 studies to see how it is going to impact the industry. There are a lot of unknowns about the bill and how it will affect financial institutions. One potential change could be that banks may be restricted in how much they charge merchants for credit card processing in 2011, which would decrease bank income. Another change could be that banks will begin to keep some portion – about 5 percent – of mortgages on their books, which may cause banks to do business more conservatively.

Foreclosure rates in Alaska are the second lowest in the country at 1.1 percent and the state has the fourth lowest rate for mortgage delinquencies at 4.9 percent, so Alaska is also doing well in this area. Again, the economic downturn did not affect us like it did elsewhere and we’ve rebounded quickly from what we did experience. As the recession ends, the state’s economy

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is poised to grow. Opportunities will abound in the years ahead, especially here in Alaska with prospects for a gas pipeline and other resource development projects on the horizon. I’m very optimistic about Alaska’s future. ■

FISHERIES

By Glenn Reed President Pacific Seafood Processors Association Although 2011 is looking to have some positive news for the fishery resources in Alaska, market conditions are difficult to forecast. Predictions two years out are not dependable due to many factors including the unpredictable nature of markets, weather, and environmental conditions.

The forecast for Alaska’s salmon runs are generally good for 2011, while the farmed salmon producers are expected to increase worldwide production, adding to the market uncertainty.

The groundfish resources off of Alaska (i.e., cod, pollock, halibut, mackerel, sole and others) are well-managed with 2011 trends in biomass showing a mixed bag. This will result in some fisheries harvests being reduced, and some increased. Notably, both cod and pollock biomass are on the rise.

Significant issues that effect Alaska’s fisheries include the existing and additional restrictions to fishing as a result of area closures designed to protect the Steller sea lion, which is listed as an endangered species. These closures

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cost Alaska communities and the fishing industry millions each year without evidence that they are resulting in benefits to sea lions. Over the past 10 years, sea lion populations have been increasing in the area where they are listed as endangered, causing further concern about the additional restrictions placed for 2011.

President Obama’s initiative on Ocean Policy and Marine Spatial Planning is another issue that Alaska fisheries, as well as other resources, managers will be watching closely next year and the years to come. This is a federal initiative that requires State of Alaska involvement to ensure the use of the ocean resources off of Alaska’s coast are used to the benefit of the state and region.

Forecasts for the 2011 fisheries are out and preparations are under way.

One example of preparations involves the pollock industry working under new salmon bycatch cap requirements implemented by the North Pacific Fisheries Management Council in April. This involves one of the most aggressive bycatch reduction efforts ever undertaken in the Bering Sea. Individual vessels unable to minimize bycatch can be shut down, and the industry is responding with incentive programs designed to reduce bycatch.

Many other annual preparations are under way that involve moving supplies and thousands of workers into position for the 2011 season. ■

HEALTH CARE

By Bruce Lamoureux Chief Operating Officer Providence Health & Services Alaska Continued escalation in consumer outof-pocket costs for health care during 2011 is likely to temper demand for services. This increase in consumer burden is resulting from employer shifts in benefit offerings due to overwhelming growth in health plan and provider costs. Moreover, government-funded programs such as Medicare and Medicaid are not pacing reimbursement with cost growth.

Gaining some element of control over health costs requires consumers accept greater responsibility for leading

healthy lifestyles. Health care is a personal responsibility. Costs and usage can be dramatically reduced if individuals accept that belief. Through proper diet, exercise and lifestyle habits, individuals can experience a higher standard of living and health care costs can be reduced – both for the individual and for society as a whole. This is only one of many areas needing attention but this is the one that each of us has the ability to change. As an example, obesity in Alaska is among the highest in the United States. The impacts of obesity can include heart disease, diabetes, cancer and a host of other issues.

Over the next two years, the health care industry will busy itself with efforts to improve quality and therefore value. Additionally, considerable investment will be made to anticipate the impacts of payment reform, though these activities in Alaska will evolve more slowly than for the rest of the nation. The impact of reform on government funding of health care could be most significant for the short-term in the Medicaid arena. Also, Alaska will become more challenged in meeting the needs of Medicare subscribers, which will be rendered still more acute both by growth in this demographic and if physician reimbursement remains unaddressed by Congress.

The most significant development in health care is a focus on enhancing quality being created by the confluence of provider efforts, evolving technologies, consumer interest and reimbursement incentives. Consumers are increasingly interested in value pur-

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chasing of health care as their personal resources are at stake. Taming the affordability of health care is a shared responsibility for consumers, buyers and providers. The best means to bend the cost curve for health care are through personal lifestyle changes (e.g. smoking cessation, weight management) and improved quality.

State efforts to prepare for 2011 vary among stakeholder groups. Institutional providers such as hospitals and longterm care facilities are working collaboratively with each other to improve quality. Activities such as adoption of evidence-based care protocols and use of electronic health records are examples of how providers are seeking to impact the quality, cost and experience of care. ■

MINING

B Steve By S Borrell B ll Executive Director Alaska Miners Association Alaska’s six large mines will continue their stable production in 2011. This follows a period of extreme uncertainty for the Red Dog zinc/lead mine north of Kotzebue and the Kensington gold mine north of Juneau. Red Dog finally received its federal permits for the Aqqaluk deposit May of 2010, thus averting a mine shutdown. Mining has now begun in that area which will provide ore for the next 20 years. At Kensington, it took a U.S. Supreme Court decision to allow that mine to

begin production, and the first gold concentrate was produced in June of 2010.

The number of small family placer gold mines will increase in 2011 as a result of the steadily increasing price of gold. Many of these mines operated in 2010 while others have already been permitted but for various reasons did not operate. Still others are now in the permitting process.

Coal production should continue its steady growth. Increased coal demand from the Pacific Rim and the prospect of two new coal mines within the next few years has the opportunity to increase coal production and create new jobs.

Mineral exploration has rebounded after the economic collapse of 20082009 and is driven by market demand.

In 2009 a total of 27 projects each spent more than $1 million exploring for minerals. That number should be even higher in 2011. Strong demand from China and India continues to be the primary driving factor for base metals (copper, zinc, lead, nickel, iron). Economic uncertainty and the weakness of the U.S. dollar are the primary factors for gold and silver prices and there is every reason to believe these forces will continue, if not accelerate.

Production of industrial minerals, primarily sand and gravel, will remain steady and is closely associated with local construction projects.

The long-term outlook for metals and coal are tremendous. Alaska is effectively unexplored when compared to any other state and to most countries.

However, there are three major unknowns. The first is whether the new congress will be able to reign in the over-reaching power grabs, especially those of the Environmental Protection Agency. For the past several years EPA has worked to expand its authorities to control nearly every aspect of American business, not to reduce pollution, but to expand its control. The second unknown is whether anti-development use of the Endangered Species Act will be allowed to continue. Just like EPA, the ESA has expanded far beyond the original intent of congress and this must be corrected. The third is whether the unfair and Draconian enforcement approach now being

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taken by the Mine Safety and Health Administration (MSHA) will be allowed to continue. All mines, including ones with excellent safety records, are nonetheless being cited and fined for extremely trivial items. ■

OIL & GAS

B KKara M By Moriarty i Deputy Director Alaska Oil and Gas Association The outlook for 2011 is a continuing pattern for oil and gas development in Alaska – declining production, great offshore potential, small-field development, natural gas pipeline study, uncertain future and looming challenges.

Production from the North Slope has declined by 38 percent in the last 10 years, as currently production hovers at about 650,000 barrels per day.

The Department of Revenue predicts that production in 2011 will decline by 4 percent and then go up slightly in 2012. However, this forecast anticipates production from fields currently under development, so continued investment is crucial.

Well activity is also down in Alaska.

Since the passage of ACES, there has been a 20 percent decline in the number of wells drilled in Alaska, and very few exploration wells were drilled in 2010.

It is estimated that offshore waters in the Arctic contain more than 30 billion barrels of oil and 132 trillion cubic feet of natural gas which is one-third of the nation’s total offshore reserves.

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That is almost two Prudhoe Bay fields.

Progress must continue in developing Alaska’s offshore waters.

Alaska had one of the most successful lease sales in 2008 in the Chukchi Sea, but due to various regulatory and litigation set-backs, not a single exploratory well has been allowed to be drilled. The Interior Department continues to take a cautious approach to offshore, but ruled on Dec. 1, 2010, that they will allow the permit Shell has applied for to continue the approval process for an exploration well to be drilled in the Beaufort Sea in 2011. This is important, and will set the standard and tone for future work in both the Beaufort and Chukchi seas beyond 2011.

Alaska will have production from its newest field by the end of 2010 or beginning of 2011. Eni Petroleum has spent the last few years developing a field known as Nikaitchuq. Production is expected to peak around 40,000 barrels per day.

The Alaska Pipeline Project by TransCanada and ExxonMobil and the Denali Pipeline Project by BP and ConocoPhillips each conducted an open season in 2010 for commitments to ship gas on a large pipeline to Canada. Both projects are currently evaluating the bids that were received, and conducting negotiations with the potential shippers. TransCanada hopes to file an application with the Federal Energy Regulatory Commission in October 2012 and, assuming success, would construct the natural gas pipeline between 2015-2020, with first gas in 2020-2021. Denali hopes to release the information about their potential shippers in the first quarter of 2011, and will evaluate their steps forward based on commitments by those shippers.

The State of Alaska is currently studying the potential and costs associated with developing an in-state gas pipeline and those results are expected in July 2011.

There are several federal initiatives that could have a significant impact on operations in Alaska, such as endangered species listings, critical habitat designations, a new integrated activity plan being developed for the National Petroleum Reserve-Alaska, a comprehensive review of the Arctic National Wildlife Refuge (ANWR), and national

ocean policy. Each initiative could only add to already long lead times for development.

On the State side, one of the major challenges facing the industry is fiscal regime. Major reform to ACES (production tax) is crucial. The State is making strides, and industry is hopeful, that litigation surrounding Point Thomson will be resolved in 2011. And finally, to maintain a fair and timely permitting regime, the Alaska Coastal Zone Management Program needs to be retained in its current form. ■

REAL ESTATE, COMMERCIAL

Photo courtesy of Chris Sollart Photography

BBy LLee H Henry, CCIM Associate Broker RE/MAX Commercial Properties Things look good in the commercial real estate industry compared to what they . could look like. In the late 1980s we lost jobs, businesses and banks. Our economy was devastated back then, but the recent downturn hasn’t done nearly the damage we faced in that era. That said, it looks like it will be slow going for a little while longer. Most of the commercial real estate industry is still struggling to see their way through to the other side of this economy.

One bright spot is the extraordinarily low interest rate environment. Some local commercial loan rates are still hovering around 6 percent and are fixed for 25 years. While interest rates have inched up a bit it looks like they should

www.akbizmag.com • Alaska Business Monthly • January 2011

stay in this vicinity for a while longer.

Another strong sector is the commercial property user who is willing and able to buy a facility for their company. Many of these buyers want to buy property now, even in the face of an uncertain future. This is mostly because owning today is so much less expensive than renting.

Finally, many folks that own commercial real estate bought when purchase prices and lease rates were a lot lower. Without much new speculative construction over the last 15 to 20 years, commercial property owners have been able to move rents up during the period from the early 1990 through about 2007. When the downturn came, rental rates flatted out and decreased in some cases. However, most property owners still had sufficient equity to carry their properties without a great deal of difficulty. The investors that had deep equity have buoyed the market by tapping that equity to buy other properties.

Trends coming over the next two years are a mixed bag. The good news is it appears the availability of credit for commercial property loans is continuing to improve. Quality properties with good occupancies and strong borrowers are drawing competitive bids from both local banks as well as from national lenders. More good news is that commercial property rents will probably start moving up, after having been depressed for the last two years. Rental rates have been moving up for multifamily properties for a while now and this should start to prove true for good quality commercial real estate as well.

The bad news is that rents will have to go up quite a bit more to support much in the way of new construction for most types of office, warehouse and retail. There are a few exceptions, notably Tikahtnu Commons retail mall in north Anchorage and Pfeffer Development’s strip retail developments. Otherwise, new commercial development has been, and in all likelihood will continue to be, pretty flat. New multifamily construction appears to be on the horizon but it is hard to predict whether tenants will pay for new construction.

Finally, we will continue to see more new construction of medical office buildings. One local lender recently suggested that as much as 80

percent of their commercial real estate lending activity over the last year had been in this area. And we aren’t getting any younger.

On local, State and national levels, the political landscape is by far the most significant driver of influence in the commercial real estate industry today.

On a local level, the powers that be are revamping the Municipality of Anchorage’s Title 21, the part of the city zoning code dictating land-use practices and acceptable general construction/site design practices. The proposed changes

have created quite a bit of controversy.

The people who have been reviewing it have had to stop and start the process repeatedly as various factions debate the need for, or the lack of the need for, changes in the final document. While the need for some change is clear, the political elements that control the document and process for adopting it will undoubtedly shape the Anchorage of our future for decades. They will make decisions which may impose unnecessary and expensive requirements that will be difficult to satisfy, or changes

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www.akbizmag.com • Alaska Business Monthly • January 2011

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which will help our city become more attractive and functional or, as is usually the case, all of the above.

At the State level the single greatest contributors to the success of the commercial real estate industry are those who make political decisions effecting mining, oil and gas, and government contracting industries. The decisions made will directly impact commercial real estate values.

As an example, it is highly likely that if the press reports of BP’s decision to exit the state are correct then this will result in a new investor in Prudhoe Bay. If this happens then whatever decisions are made by political regulators about the acquisition will color a new investor’s perception of the value of the real estate they are acquiring. A higher cost for dealing with regulations at Prudhoe will undoubtedly result in a lower value for the midtown high-rise BP office building in Anchorage.

Finally, at the national level it is clear that the impacts of capital gains treatment, health reform, and banking reform will change the world as we know it in very short order. Each of these areas, individually, has the capacity to create significant change for commercial property owners and their tenants. Together, the combined effects of these three levels of change are difficult, if not impossible, to estimate.

Additionally, the fate of the government contracting procurement process favoring minority contractors, known as the 8(a) provision, will have an impact on most Alaska Native corporations in the event the federal government tries to limit or eliminate that subsection of the government procurement code.

This provision has helped Alaska Native corporations fund social welfare programs, put large scale infrastructure construction into place, and it has generally provided much needed cash flow for our economy.

All of these political influences have the ability to significantly change the commercial real estate industry. We need to be prepared for these changes and accept them. In short, we face a changing world that has provided us with opportunities and obstacles that we will need to adapt to so that we can ensure our continued success.

Carpe diem! ■

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REAL ESTATE, RESIDENTIAL

BBy Helen H l Jarratt J President Alaska Association of Realtors Last year rapidly came to an end and all of us are wondering what 2011 will bring. How will the changes in congress effect the housing industry? I believe the word for 2011 in Alaska, or at least Southcentral, is that Alaska real estate will be stable. We are so fortunate here in Alaska. Since we did not have the huge upswing in values, due to investors and flippers, we have not had the huge plunge in prices and the huge numbers of foreclosures. Yes, it’s harder to see a home purchase go through as we are held to tighter and continual changes in the financial regulations due to the recession in the Lower 48 and because of that some qualified buyers are not able to make a purchase. Either because they do not have enough money to put down or their credit rating is just a bit higher than it now needs to be.

Yes, with so many questions on our national and state economies, there are qualified buyers just waiting for a change to feel confident enough to purchase their first or next home. Our total volume of home sales are down but only by 2 percent. At the beginning of 2010, we had a 17 percent decline in real estate licensees across the state.

All indications are the number of real estate licensees will remain the same.

We are one of the few states nationwide in this position.

During the first half of 2011, I anticipate our industry will most likely remain stable if the national and state

economies continue as they are today. The key to what will happen is employment. If the national and state economies pick up, then so will the housing industry. So, if the gas line is a go or more exploratory wells start to be drilled, we should see an increase in home sales. Another factor is interest rates and they should continue to remain low, but we may see an increase by mid-year.

Over the next two years, our industry will be headed even more so into mobile technology. We need to provide the consumer with the most accurate and timely information. A lot of this will happen through smart phones. “There’s an app for that!” Right now, if you have a smart phone and the realtor.com app, you can be in any subdivision and ask to find the closest homes for sale and it will bring up a list with the price and photos.

Have you heard of quick response, or QR codes? These two-dimensional bar codes bridge paper-to-web instantly.

Pick up a house flyer with a QR code, scan it and you instantly have the property information on your smart phone.

Another trend over the next couple of years as building resumes is we will be looking at density building, especially in Anchorage where there is a shortage of buildable land.

There are a few dark clouds out there. With the looming deficit, congress is looking to make cuts. Presently, the mortgage interest deduction is being reviewed and could be severely diminished or even completely removed. Also, congress is taking a serious look at Fannie Mae and Freddie Mac. We agree adjustments need to be made, but the public needs to be aware that should these two entities go away, home sales will be dramatically affected. Since lenders no longer keep their home loans, but instead sell them to FNMA and FDMC, it would be very hard to obtain financing for a home without them. The National Association of Realtors is keeping a close eye on the events and will notify us to contact our elected officials to help with these issues as they come up during the congressional session.

It’s still a good time to buy a home – interest rates are the lowest they have been in many years and there is a good selection of homes for sale. ■

www.akbizmag.com • Alaska Business Monthly • January 2011

TELECOMMUNICATIONS & TECHNOLOGY

A d Vadapalli Anand V d lli Chief Operations Officer Alaska Communications The communications industry is marked by a constantly accelerating pace of change – change in technologies, change in service provider capabilities and change in customer behaviors.

We are seeing an insatiable need for

bandwidth and phenomenal growth of data consumed by users – whether it is video, e-mail or Internet use – whether on your mobile phones or your laptops and computers.

These create opportunities for service providers, like Alaska Communications, to find new and innovative ways to help customers navigate a rapidly evolving technology space while meeting their growing needs all within the customer’s budget.

We are seeing two trends for consumers: one, it is all about mobile data – a customer wants to have access to their content when and where they want. Being able to access e-mail and Facebook is becoming more important than being able to place a call to talk to someone. Two, almost all content a consumer wants is on the Internet – you no longer need to have cable to watch the TV you want – you can get almost all of that over the Internet.

Similarly, we are seeing two trends for businesses: one, again mobility – with the security that is paramount for business applications. Two, the growth in cloud computing – where most busi-

ness applications from e-mail to video conferencing to financial accounting capabilities are available as “cloud” services – where businesses no longer need to maintain in-house and expensive IT infrastructures.

I think the biggest challenge for communications providers is to match and outpace this pace of change, recognizing important trends and keeping our business models relevant not just now but five and 10 years from now.

At Alaska Communications, we have been at the forefront of technology in the mobile space – from bringing the first 3G wireless network to Alaska five years ago – to recently launching fleet management services that allow our customers to remotely manage their fleet of vehicles from Ketchikan to the North Slope using our wireless network.

Our investment in the Alaska-based IT company, TekMate, also allows us to provide cloud-based infrastructure and IT services to our customers. We are known for the robustness and quality of network – and now we are ready for the next generation of cloud services to ride this network. ■

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TIMBER

B O By Owen GGraham h Executive Director Alaska Forest Association Although there are about 126 million acres of timberland in Alaska, most of these lands support low-productivity forests.

In the Interior region, the 1.8 million acre Tanana Valley State Forest contains more than 1 million acres of productive forestland. The State manages a small but growing timber program in this forest and on other State lands near Fairbanks. Although there are currently only about 100 direct timber jobs, we expect continued growth in this region both from sawmill activities and from wood-energy operations – mostly firewood and pellets. Nearly all of the timber harvested and manufactured in this region is sold locally.

The State also provides timber for a small but stable sawmill industry in Anchorage and the Kenai Peninsula. Local sawmill operators are hampered by a shortage of larger sawlogs and the timber industry in this region will continue to languish until there is an improved timber supply. Like the Interior Region, timber harvested and manufactured in this area is mostly sold locally. About 100 direct jobs are provided by the timber industry in this region.

The coastal forests from Kodiak to Ketchikan have the best timber growing sites in the state and these forests have seen timber harvest and manufacturing activities since the early 1900s.

Since the 1960s, State and private timberlands between Kodiak and Yakutat have supported annual timber harvest operations ranging from about 1,000 acres to 3,000 acres. Currently much of the timber in this region is immature

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young-growth, but we expect timber harvests of about 1,000 acres in 2011.

With a small population and a relatively small harvest level, this region does not support much local manufacture and most of the timber is sold overseas.

2011 timber operations in this region will provide another 100 direct jobs.

The timberlands in Southeast from Haines to Ketchikan are primarily U.S. Forest Service lands. The federal timber sale program in this region has been in decline since 1990 and the decline continues. Prior to 1990, the federal timber sale program provided more than 12,000 acres of timber sales on highly productive timberlands annually. The timber supply from the 17 million acres of the Tongass supported a fully integrated manufacturing industry with year-round employment. The road builders in the industry constructed more than 200 miles of logging roads annually. These roads eventually connected many of the remote communities and many of these roads have been upgraded and, along with the marine highway system, provide the bulk of the transportation opportunities for the remote communities. Less than 10 percent of the federal lands have been developed in this region and the timber sale program has declined to less than 1,000 acres annually.

Native corporations formed by the Alaska Native Claims Settlement Act were granted title to several hundred thousand acres of timberland in Southeast. Most of these timberlands have been harvested and the new crop of timber is not yet mature. Sealaska Corp. still manages a significant timber program in this region, but that harvest activity will decline over the next three to five years unless congress allows Sealaska to make its final land selections from more productive timber growing sites.

State, University of Alaska and Mental Health Trust timberlands in this region have also supported many timber jobs. The State timber sale program is small but reliable, and we hope to see additional timber sales next year from the University and Mental Health Trust.

Road building, logging and manufacturing activities have declined commensurate with timber harvest and consequently the Southeast region has

lost more than 85 percent of its direct timber employment over the last 20 years. The industry hopes to sustain the current employment (about 500 jobs) in 2011, but the uncertain timber supply is a constant worry. When a third of the federal lands in this region were legislatively designated wilderness and national monuments in 1980, the federal government promised to manage about 10 percent of the federal timberlands for a perpetual timber supply; that promise was broken in 1990; currently the federal government is managing only about 1 percent of the forest for growing and harvesting timber. Many people now believe the State should take over management of 10 percent of the federal timberland in this region in order to restore the 1980 timber supply promise. ■

TRANSPORTATION

B RRoger W By Wetherell h ll Chief Communications Officer Alaska Department of Transportation and Public Facilities Aviation The Alaska International Airport System (AIAS), comprised of Ted Stevens Anchorage International Airport and Fairbanks International Airport saw modest recovery in 2010.

Cargo traffic continued to increase toward pre-recession levels. DOT&PF held an Air Cargo Transfer Summit in August for cargo air carrier executives to discuss the unique economic opportunities afforded international

www.akbizmag.com • Alaska Business Monthly • January 2011

cargo carriers in Alaska through liberalized cargo transfer laws applicable in Alaska. Summer 2010 passenger traffic rose slightly despite a reduction in cruise ships sailings coming to Southcentral Alaska.

New air service from Long Beach, Calif., to Anchorage begins this summer on JetBlue Airways. Based in Switzerland, Edelweiss Air begins new international service to Anchorage from Zurich. New air service to Fairbanks by Frontier Airlines from Salt Lake and Denver also begins in 2011.

Alaska Marine Highway System Traffic rebounded well in 2010. Passenger embarkation in 2010 is expected to have reached 333,000 passengers, five percent above 2009. 2010 vehicle traffic numbers indicate a five percent increase at 115,000 vehicles. Passenger and vehicle embarkation increases are attributed to early and consistent schedules publically available.

New in 2011: AMHS will offer the Cross Gulf Express - twice monthly summer service from Bellingham to Whittier. The service will cover two major population areas in the Puget Sound area in Washington with Anchorage and Fairbanks. This is a highly sought after schedule from independent. AMHS expects great ridership from this service.

AMHS has begun using a modern fuel savings technology. The new computerized, electronic power and speed control system is currently installed aboard the Aurora and Tustumena.

Reports indicate an annual 12 percent average fuel savings for Aurora and Tustumena since the systems became operational. The vessels Columbia and Matanuska are expected to be utilizing this system soon. Fuel savings are expected to be higher on vessels sailing on longer routes with less frequent port calls.

AMHS will call on Gustavus with new, regular weekly service in 2011.

In the summer of 2010, DOT&PF purchased land in Ketchikan’s Ward Cove for use by the AMHS. The purchase opens opportunities for future AMHS growth. The AMHS will be able to consolidate the ferry system’s warehouse, headquarters building, working berth and other building spaces. www.akbizmag.com • Alaska Business Monthly • January 2011

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Highways & Public Facilities In 2010, DOT&PF focused on roads to resources, highway safety and improvement projects including the elimination of rutting conditions on the Glenn Highway between Anchorage and Palmer.

DOT&PF has identified about $2 billion worth of needs on State-owned infrastructure from culvert repairs, to reconstructing segments of road and the need to construct passing lanes on the Dalton Highway. DOT&PF places great importance for infrastructure upgrades on the Dalton Highway. DOT&PF has lined up 36 highway, bridge and facility projects totaling $1 billion for the Dalton. In the last three years, $84 million dollars has been spent improving the Dalton Highway.

For 2011, DOT&PF has compiled $500 million worth of work on 100 projects. Transportation funding remains an important facet to DOT&PF’s goal of providing for the safe movement of people and goods and the delivery of State services. If congress doesn’t address reauthorization until after 2012, Alaska could possibly see a high level of funding continue for two more years.

Access to State lands remains an important goal for DOT&PF. Funding is in place for environmental work on a road to Umiat, potentially home to oil and gas resources. The Foothills West Transportation Access Project proposes to construct a road from the Dalton Highway to Umiat. The project is designed to provide access to oil and gas resources both along the Northwestern foothills of the Brooks Range, and within the national petroleum reserve in Alaska.

Five reasonable corridors have been selected based on topography and discussions with other governmental experts and industry leaders. The project’s environmental process is expected to take 18-24 months to complete. Construction covering a 24-36 month period could possibly begin as early as winter 2012.

Two additional Roads to Resources projects on the move include Western Alaska Access Planning Study (WAAPS) and the Ambler Mining District Access project. WAAPS was initiated to find the most direct route to the Seward Peninsula highway system while supporting community and resource development.

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The WAAPS study identified resources and communities in Western Alaska that would benefit from a road corridor. Several routes were evaluated. The recommended route is Yukon River Corridor. The Yukon River Corridor is about 500 miles long, roughly parallels the Yukon River. The Ambler project is designed to evaluate potential transportation corridors serving the Ambler Mining District. This is expected to provide all season access for exploration and development of potential resources within this district.

In Southeast Alaska, DOT&PF continues extending the road from Juneau to Cascade Point.

The next few years should be exciting times for DOT&PF, the State of Alaska and the construction industry as infrastructure continues to grow. That growth will include major road, bridge and facility projects including the new State crime lab in Anchorage. ■

TRAVEL & TOURISM

By Ron Peck President Alaska Travel Industry Association Estimated visitation for the 2010 summer season is more than 1.48 million visitors. The cruise sector experienced a decline of about 140,000 passengers due to a reduction in ship deployments, while air, highway and ferry traffic was up slightly. The estimated 2009-2010 total winter visitor numbers is 245,000, bringing the estimated year total to 1.73 million. Direct expenditures by out-of-

state visitors is estimated to be $1.43 billion in Alaska between May and September 2010. This does not include the amount visitors spent to get to Alaska on airline tickets, cruises or ferry tickets.

The total direct and indirect economic contribution from the visitor industry for this past summer is estimated to be more than $2.5 billion.

Estimates for 2011 summer season are continued increases in independent, non-cruise travel, while cruise traffic will be essentially flat. Even though Disney, Oceania and Crystal cruises are coming to Alaska in 2011, the major cruise lines are redeploying vessels and the net for next year is slightly above 2010 (by 7,500 berths). Therefore, the outlook is for continued modest growth, but still not back to historic 2008 levels.

There are also several encouraging trends in the visitor industry. In 2009, Alaska’s marketing budget was $11.7 million, compared to Hawaii’s budget of $74 million. Hawaii and other destinations are outspending Alaska dramatically. The competition for the traveler dollar is fierce. If Alaska is to maintain and grow its visitor industry, there must be adequate funding for tourism marketing. In 2010, the State Legislature appropriated a one-time increase of $9 million to ATIA’s marketing program.

This was a step in the right direction and the administration and Legislature are to be commended for their efforts.

However, Alaska needs a consistent marketing budget to compete annually in the global travel market place.

The increase of additional gateway markets and air carriers from Lower 48 destinations such as Philadelphia, Phoenix, Denver and Portland aided in capacity and availability of service to Alaska aided in growing the independent air market in 2010. A number of these carriers have announced their intentions to return in 2011, which is a good sign.

The continued loss of value by the dollar against other currencies (e.g., Australian dollar, British pound and the euro, continue to bode well for international travel. Japan Airlines and Condor are returning again with summer charters next summer while a new entrant, Eiedelweiss Air, has announced intentions to begin service to ❑ Alaska from Zurich in 2011.

www.akbizmag.com • Alaska Business Monthly • January 2011

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SHEILA WYNE STUDIOS

Sheila Wyne received a National Association for the Self-Employed grant through the group’s business development program. Wyne, who owns Sheila Wyne Studios, plans to use the funds for marketing efforts, including professional photographs and . videos about art pieces to complement an exhibition.

WELLS FARGO

Wells Fargo Home Mortgage hired eight mortgage processors in Anchorage. Beth Brouillet, Sonja Dupuis, Tammy Krison and Mark Stoneburner work at the midtown Anchorage office in the Calais building, 3201 C St. Juliann Burreson, Issa Otten, Lorrie Pinkley and Pamela Ricketts work at the mortgage office at Minnesota Drive and Benson Boulevard. Lisa Dallas and Jodi Meyer work as mortgage processors in Juneau.

ALASKA TRAVEL INDUSTRY ASSOCIATION

The Alaska Travel Industry Association elected its new board of directors. They are: Deb Hickok, Fairbanks Convention & Visitors Bureau, chairwoman; Ken Dole, Waterfall Resort, vice chairman; Julie Saupe, Anchorage Convention & Visitors Bureau, chairwoman of marketing; Patti Mackey, Ketchikan Convention & Visitors Bureau, chairwoman of government relations; Kirk Hoessle, Alaska Wildland Adventures, chairman of tourism

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©2011 Chris Arend

ALASKA BUSINESS MONTHLY

Bill Morris came onboard at Alaska Business Monthly in August 2010 as an account manager.

Prior to coming to ABM, he worked as a factory representative for 13 years and was in the print advertising field for M i Morris 10 years. He brings with him marketing, sales, leadership and other great qualities and is a welcome addition to the staff. He enjoys boating out of Prince William Sound, and is also a member of the Coast Guard Auxiliary so he can stay involved with boating year round.

planning; Paul Goodwin, Holland America Line, secretary; Bill Pedlar, Knightly Tours, treasurer; Stan Stephens, Stan Stephens, Glacier & Wildlife Cruises, past chairman; and Ron Peck, ATIA president and chief operating officer, ex-officio. Board members are: John Binkley, Alaska Cruise Association and Riverboat Discovery; Roark Brown, Homer Ocean Charters/Otter Cove Resort; Bruce Bustamante, Princess Cruises; Janet Buckingham, Kodiak Island Convention & Visitors Bureau; Deb Call, Alaska Native Heritage Center; Ann Campbell, Aurora Consulting; Brett Carlson, Northern Alaska Tour Company/Coldfoot Camp; Peter Grunwaldt, Premier Alaska Tours; Scott Habberstad, Alaska Airlines; Paul Landis, CIRI Alaska Tourism Corp.; Tim McDonell, TEMSCO Helicopters; Bonnie Quill, Mat-Su Convention & Visitors Bureau; Fred Reeder, Cruise Line Agencies of Alaska; Scott Reisland, Denali Grizzly Bear Resort; and Catherine Schultz, Sophie’s Station Suites by Fountainhead.

BOWHEAD HOLDING CO.

Dave Otterson was hired as president and general manager of Bowhead Holding Co. in Huntsville, Ala. Bowhead Holding is a subsidiary of Ukpeaġvik Iñupiat Corp. Otterson has worked in the defense and aerospace industries for more than 20 years.

PROVIDENCE ALASKA MEDICAL CENTER

Kim Pakney was appointed to the board of directors for the National Association of Medical Staff Services. Pakney has served as manager of Providence Alaska Medical Center’s Medical Staff Services Department since 2005.

ALASKA CONGRESSMAN DON YOUNG

Rep. Don Young, R-Alaska, received the Denali Award at the Alaska Federation of Natives convention. The award honors contributions by a nonNative to the Alaska Native community.

ANCHORAGE CONVENTION & VISITORS BUREAU

Jeffrey Miller was chosen as the Anchorage Convention & Visitors Bureau’s meeting champion.

Miller is a professor of computer systems engineering at the University of Alaska Anchorage. He helped Anchorage secure four separate Institute of Electrical and Electronics Engineers meetings with an estimated economic impact of more than $3 million.

PROVIDENCE PEDIATRIC GASTROENTEROLOGY CLINIC

Dr. Gregory Semancik joined the Providence Pediatric Gastroenterology Clinic in Anchorage.

He works with The Children’s Hospital at Providence.

He previously served as chief of pediatric gastroenterology for Madigan Army Medical Center at Fort Lewis, Wash.

PACIFIC TOWER PROPERTIES INC.

Bart Garber was appointed president of Pacific Tower Properties Inc. He is a former chief executive of Tyonek Native Corp. Garber has 30 years of experience in commercial law, government policy, business development, finance and management.

GREAT CLIPS INC.

Brent Brickman joined Great Clips Inc. in Alaska as chief executive of the seven-store franchise with operations in Anchorage, Eagle River, Palmer and Wasilla.

Brickman has 21 years of experience with Great Clips, starting as a stylist Brinkman in Minneapolis. He most recently served as Great Clips’ director of education for the United States and Canada.

COEUR D’ALENE MINES CORP.

Dennis Wheeler received the Alaska Miners Association’s Distinguished Service Award. The award was presented at the group’s annual convention in November. Wheeler is chief executive of Coeur d’Alene Mines Corp. Wheeler was honored for his role in helping operations begin at the Kensington Gold Mine near Juneau. The mine, which employs 200 workers, began production in July.

www.akbizmag.com • Alaska Business Monthly • January 2011

RIGHT MOVES SOLSTICE ADVERTISING

Worrell

Christy Worrell was hired as an account executive at Solstice Advertising.

Worrell . most recently served as an account executive for AlaskaDispatch.com.

Jennifer Castro and Teeka Ballas joined Solstice Advertising as staff copywriters. Castro

SPONSORED BY NORTHERN AIR CARGO programmer and analyst. Belinda Whitman joined the firm as a senior geographic information systems programmer and analyst. They work in the company’s Anchorage office.

FIRST ALASKANS INSTITUTE

Denise Morris was chosen president and chief executive of the First Alaskans Institute. Morris most recently served as president and chief executive of the Alaska Native Justice Center Inc., where she worked since 1999.

RIM ARCHITECTS

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CENTER FOR ALASKAN COASTAL STUDIES

Castro

Ballas

Gretchen Bersch and Mike Warburton joined the Center for Alaskan Coastal Studies as board members. Other members are Dave Aplin, Karen Marquardt, Ben Gibson, Duncan Wanamaker, Patricia Kane and Jack Regan.

WILEY BROOKS CO. INC.

Laura Brooks Cantrell was appointed regional vice president of the Institute of Real Estate Management. She is serving a two-year term for the region that includes Alaska, Idaho, Montana, Oregon, Washington and Wyoming. Cantrell is a broker with Wiley Brooks Co. Inc. Cameron Moss previously worked at KTUU Channel 2, where she produced the 5 p.m. newscast. Ballas has worked as a freelance writer for 10 years.

Walter Cameron was hired as web developer technician. He has worked as a laser technician and web master for the Great Alaska Bowl Co. and as the web and data specialist for the Alaska Volcano Observatory. Breann Moss joined the firm as account coordinator. She also works for the Alaska Aces.

RESOURCE DATA INC.

Phil Block was hired as a technical writer at Resource Data Inc. Tim Risi was hired as a

and a State regulator. Gov. Sean Parnell appointed attorney general Dan Sullivan to serve as commissioner of natural resources. Sullivan was appointed attorney general in June 2009 and received unanimous confirmation by the Legislature during its 2010 session.

PHILLIPS CRUISES & TOURS

Ethan Tyler was hired to handle Alaska, national and international sales for Phillips Cruises & Tours.

Tyler has more than 10 years of experience in Alaska tourism management.

STATE GOVERNMENT

Richard Saville was hired as the Division of Alaska Pioneer Homes administrator of the Anchorage Pioneer Home. He has 18 years experience in the assisted-living field, including posts as a directcare provider, an assisted-living home manager

Stacy Hansen earned her professional architect license in the state of Alaska. Hansen was promoted to associate at RIM Architects, where she has worked for six years. She earned a bachelor’s degree in architecture from Hansen California Polytechnic State University, San Luis Obispo.

SOUTHEAST ALASKA REGIONAL HEALTH CONSORTIUM

Dr. Robert Thomas was hired as family physician at the SouthEast Alaska Regional Health Consortium’s Alicia Roberts Medical Center in Klawock. He most recently served at the Craig Clinic, where he worked for three years. Thomas previously worked at the Klawock medical center in 2007.

UNIVERSITY OF ALASKA ANCHORAGE MATANUSKASUSITNA COLLEGE

Ping-Tung Chang received the 2010 United States Professor of the Year from the Council for Advancement and Support of Education. Chang is a professor at the University of Alaska Anchorage Matanuska-Susitna College, where he has worked for 22 years.

BRADLEY REID + ASSOCIATES

Brooke Kopecky was hired as account executive at Bradley Reid + Associates. Her previous experience includes six years of work in the Anchorage television broadcast industry. ❑

www.akbizmag.com • Alaska Business Monthly • January 2011

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ASSOCIATIONS

©2011 Andrew Johnson

Alaska Support Industry Alliance Advocating for Alaska’s resource industries

BY TRACY BARBOUR

T

he Alaska Support Industry Alliance is a nonprofit trade association representing Alaska businesses whose livelihoods depend on a healthy oil and gas industry and investment climate. As indicated by its slogan, the Alliance is a staunch advocate for the responsible development of Alaska’s oil, gas and mineral resources.

46

“We do that in four ways: by messaging within the general public, by having a strong government-relations program, by helping our members maintain a well-equipped work force and by providing our members with a competitive business edge,” explains General Manger Rebecca Logan.

The Anchorage-based Alliance

represents nearly 500 companies and 40,000 Alaska workers, providing goods and services to the oil, gas and mining industries. These supportindustry members run the gamut, ranging from architects and engineers to construction and transportation workers. Logan characterizes the Alliance as a “great” organization with a “very

www.akbizmag.com • Alaska Business Monthly • January 2011

much respectedâ&#x20AC;? list of members.

Longstanding members include Udelhoven Oilfield System Services, Carlile Transportation Systems and Lynden Logistics Inc. Recent additions to the group are AAA Fence Inc., United Rentals Northwest Inc. and Fairbanks Fuel Distributors Inc. In addition to having a strong membership base, the Alliance has an extensive history in Alaska. It was founded in 1979 by Paul Harding, Dave Harbour, Bob Ryan and Joe Mathis, who envisioned creating an organization that could effectively unite oil patch businesses to deal with industry challenges.

Their successful legacy thrives today.

Michelle

Anchorage, American Red Cross

LEADERSHIP CHANGES The Alliance has undergone several recent changes within its membership.

Logan officially assumed the general managerâ&#x20AC;&#x2122;s position in November, replacing retiring Paul Laird. A University of Oklahoma graduate, whoâ&#x20AC;&#x2122;s lived in Alaska for 20 years, Logan served as president of the Associated Builders and Contractors of Alaska from 2004 until recently. The former small-business owner is currently completing a term on the Chugach Electric Board. Now at the helm of the Alliance, Logan says her job is to continue keeping the organization on its current path and to make it even better than it already is.

In October, the Alliance also elected four Alaska business leaders to new three-year terms as directors. They are Reed Christensen, general manager of Dowland-Bach Corp.; Bob Dickson, past director of the Alliance and a member of Atkinson, Conway & Gagnon; Doug Smith, president of LRS Corp.; and Scott Stewart, president and cofounder of Arctic Controls.

The 21-member board of the Alliance also re-elected Dave Matthews of Price Gregory Inc., Dallas Rhodes of M-I Swaco and Denette Romano of Wells Fargo Advisors. And by unanimous vote of all 35 active and emeriti directors, the board elected Maynard Tapp of Hawk Consultants an emeritus director of the organization. It was only the second time in history an Alliance member was bestowed emeritus status without first serving as president of the board. Maynard had just completed his fourth elected, three-year term on

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TACKLING INDUSTRY ISSUES The Alliance is actively involved in major issues all around the state. In 2011, the organization will be focusing on grassroots advocacy. Logan feels it’s particularly important for employees who work in the oil, gas and mining industries to understand the issues that affect their jobs. She says, “It’s about advocacy at the federal and State level … trying to educate people Rebecca Logan General Manager Alaska Support Industry Alliance

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www.akbizmag.com • Alaska Business Monthly • January 2011

© 2010 Azimuth Adventure Photography/http://www.azimuthadventure.com/

the board. The award was very fitting, according to Logan. She says, “He’s been involved with and extremely dedicated to this organization for years.”

In addition, the Alliance’s newly elected president of the board is Mark Hylen of Beacon Occupational Health and Safety Services. Tom Hendrix of Carlile Transportation Systems holds the position of vice president of government and public relations. “Those two are quite a dynamic duo,” Logan says.

“They are full of energy and ready to go.”

about policies which help and hurt.”

The organization strives to convey a variety of industry concerns to a broad audience. Over the years, it has forged relationships with oil and gas producers, the contracting community, elected officials and peer organizations in Alaska and Canada. Issues currently on the organization’s radar screen include ENSTAR’s Anchor Point Energy LLC gas-supply agreement, Shell’s Chukchi Sea air-quality permit and OuterContinental Shelf oil and gas leasing.

The Alliance has expressed strong support for these issues. For example, in Laird’s Sept. 25, 2009, testimony to the Environmental Protection Agency, he said: “Issue the air-quality permit Shell needs in order to explore for oil and gas on its Chukchi Sea leases. Issue it now.

Our livelihoods depend on a healthy Alaska oil and gas industry and investment climate.” He added: “The entire Trans-Alaska Pipeline was built in less time than it’s taking the EPA to issue a single air-quality permit for drilling that will generate temporary emissions 60 to 100 miles from the nearest shore. We’re tired of waiting. Alaskans are ready to go to work. It’s time for the Environmental Protection Agency to do the same.”

According to Logan, permitting and regulation are two of the major issues hurting the oil, gas and mining industries now. She feels the permitting process has become so intrusive it’s impossible to accomplish anything in a timely fashion.

“We appropriated $750,000 to do another study of the Pebble Mining project,” she says. “We are doing nothing but making it harder to get permitting. It’s a slippery slope.”

Logan adds Alaska has long been recognized as having the most stringent permitting process of any of the states.

The issue is highly political and divides everyone in the state. However, she says, discussions also need to include how to get more oil into the Trans-Alaska Pipeline. “We’re continuing to spend like crazy, and we’re not doing anything to help producers get more oil into the pipeline,” she says. “We need to create a better environment for drilling.”

In the future, Logan would like to see the Alliance focus on its messaging for the general public. “The first step in developing messaging,” she says, “is listening to ❑ people who have concerns.” www.akbizmag.com • Alaska Business Monthly • January 2011

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OIL & GAS

Oil Executives Outline Production Challenges Fiscal, bureaucratic issues lead organizations’ list

BY TRACY KALYTIAK

Source: U.S. Department of the Interior

T

easing out the future of Alaska’s foremost resource industry isn’t an easy task at a time of economic turbulence – especially when the state is also beset with environmental, legal and bureaucratic challenges.

“Clarity in the oil patch? Let’s see,” joked Marilyn Crockett, who has worked for the Alaska Oil and Gas Association for 40 years and has served as its executive director since 2007. She then illustrated her point to the audience at the Alaska Resource Development Council’s annual conference the November by displaying a Ouija board and crystal ball.

Luminaries from the state’s most prominent oil and gas companies put forward their views of the future during conference presentations, offering glimpses of obstacles and opportunities

50

they will face in the short and long terms.

These leaders included John Mingé, regional president, BP Exploration (Alaska) Inc.; David A. Moles, Alaska representative and development manager, Eni Petroleum; Michael Wilems, facilities manager, Alaska and Gulf of Mexico, Statoil USA E&P; Emma Cochrane, manager, Business Planning and Analysis, ExxonMobil Gas and Power Marketing Co.; Trond-Erik Johansen, president, ConocoPhillips Alaska Inc.; and Peter Slaiby, vice president, Alaska Exploration and Appraisal, Shell Alaska.

Crockett outlined the most pressing challenges the oil and gas industry faces in Alaska: ■ The Outer Continental Shelf moratorium and directive from

Washington, D.C., which is still in place. “There still has been no lifting of that, Shell has not been able to move forward yet with its permits for its drilling program,” Crockett said.

■ Endangered Species Act listings, which are “going to continue to plague not only oil and gas but any developer who is trying to undertake activities in areas where either a critter has been listed or critical habitat has been designated,” she said. “We’re going to see a lot more of that.”

■ The U.S. Bureau of Land Management’s revision of its integrated activity plan for National Petroleum Reserve-Alaska. “One would hope that the outcome of that would be the continuation

www.akbizmag.com • Alaska Business Monthly • January 2011

Interior Secretary Salazar announced a revised OCS leasing program with a revised map and specifics for Alaska on Dec. 1, 2010.

Offshore drilling in Alaska is under careful review and consideration by the Department of the Interior and Bureau of Ocean Energy Management, Regulation, and Enforcement (BOEMRE).These efforts include scientific and environmental studies, public meetings, and additional analysis of oil spill response capabilities in the Arctic.

BOEMRE will soon begin to hold public meetings in Alaska to gather important public input and information for an environmental impact statement that will help inform Secretary Salazar’s decision on whether and where to schedule Alaska lease sales under the 2012-2017 program. The public meetings will cover the Beaufort, Chukchi, and Cook Inlet planning areas.

Decisions about the 2012-2017 program will be informed by an ongoing United States Geological Survey (USGS) assessment of resources, risks, and environmental sensitivities in Arctic areas, and input from other federal agencies, including the National Oceanographic and Atmospheric Administration (NOAA).

Though no further lease sales in the Chukchi and Beaufort Seas will be held under the 2007-2012 program, BOEMRE will continue to honor existing leases in the Arctic. Currently, one application to drill (APD) in the Arctic is pending before BOEMRE. The APD, submitted by Shell, proposes to drill one exploratory well in the Beaufort Sea in the summer of 2011.

BOEMRE is processing that permit request. The Bureau is preparing additional environmental analysis of the area in light of Shell’s permit application, which it will release for public comment prior to making a final decision on the application.

BOEMRE is working closely with other federal agencies that also must approve aspects of the proposed drilling activity, including NOAA and the Environmental Protection Agency.

If Shell’s proposed drilling operation is approved, BOEMRE would have safety personnel on site throughout the drilling operation to monitor the operation and hold them accountable for compliance with BOEMRE’s drilling safety and environmental regulations.

of oil and gas leasing within the NPR-A, but we’re seeing some pretty frightening indicators that they also may be looking at wilderness designations and other designations for this area,” Crockett said. “That is going to further reduce the interest in this area.

■ The U.S. Fish and Wildlife Service’s revision of the comprehensive conservation plan for the Arctic National Wildlife Refuge.

“I know probably everyone in this room has seen the press traffic and e-mails, especially from RDC, about the potential the outcome for this could be very, very disappointing,” Crockett said. “There’s discussion of wilderness review and wilderness designation. There is consideration of designating wild and scenic rivers within the ANWR coastal plain. So it will take all of us to remain engaged, but that’s very serious.”

■ National Ocean Policy: “The implications of what could happen if the policy is enacted, moves forward in a way that zones off areas of the state’s oceans to certain activities or prohibits certain activities, would be huge, especially for Alaska,” Crockett said.

■ Long lead times, up-front investments: “There is so much time

involved, obviously, in staging equipment and staging materials, and getting your personnel and getting boats ready. You have to make those investments when you have no certainty the day before you have to send those ships out you’re going to get your permits, and that’s an issue that really, really needs to be addressed,” Crockett said. “It’s particularly alarming that governments are willing to hold lease sales, they’re willing to let us buy the opportunity to drill, but the staffing resources in the agencies that have to issue the permits that we must have in order to conduct our activities are insufficient. And we’re becoming increasingly concerned the levels, the number of bodies filling chairs and the expertise of those individuals is not sufficient to fill the needs of the permitees.

So that’s an issue that really needs to be addressed.”

■ Fiscal regime: “There’s been an awful lot of attention paid to ACES (Alaska’s Clear and Equitable Share) over the last six to 12 months,” Crockett said. “We have continued to advocate for changes to the program to improve the investment climate here. When so much is taken on the up side,

it simply impacts investment decisions for Alaska in an extremely negative way.”

■ Legal challenges: A number of legal challenges remain unresolved, including the five-year leasing program from the U.S. Department of the Interior, Chukchi sale 193 litigation and Point Thomson litigation. Crockett also mentioned ESA listings. “What will happen with those is that even if the agency issues you authorization to conduct your activities, history has shown that third-party groups will come in and challenge that because you’re in polar bear-critical habitat. We’ll continue to see more of that.” And, the Alaska Coastal Management Program is set to sunset in July 2011 unless the Legislature takes action. “We’ll be following that very closely because we believe the program that’s in place today is operating efficiently,” she said.

■ New U.S. Environmental Protection Agency air rules: “We’re seeing a lot come out of EPA, out of Washington, D.C.; and like so many rules, they’re not a good fit for Alaska because we have rural communities that are run on diesel power, we have our oil and gas activity. There’s an awful lot of that that’s coming up (that will) cause

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51

an awful lot of concern and probably delay.” There will be delay for Point Thomson, Crockett said.

“We’re all aware that the (U.S. Army Corps of Engineers) has indicated that it will be taking more time to develop that permit, so we’ve lost a year at Point Thomson. And of course CD-5, (ConocoPhillips) has lost at least another season on development of that area.”

MOVING FORWARD But opportunities for exploration and production still nestle in Alaska’s North Slope and its bordering seas. And the specter of a natural gas pipeline could take shape once fiscal and bureaucratic hurdles are surmounted.

Eni’s Nikaichuq field on the Beaufort Sea is ahead of schedule and, as of November, was expected to come online with new production by the end of 2010 or early 2011. Savant Resources and Arctic Slope Regional Corp. have successfully restarted the Badami oil field east of Prudhoe Bay, which connects to the trans-Alaska oil pipeline via a 25-mile pipeline. That project is being done with the cooperation of Badami’s original developer and current leaseholder, BP Exploration (Alaska).

Rachael L. Moore, spokeswoman for upstream public and government affairs for ExxonMobil Corp., in November said progress at Point Thomson continues on schedule, consistent with then-Department of Natural Resources’ Commissioner Tom Irwin’s conditional interim decision in January 2009, as well as the Point Thomson plan of operations approved in March 2009.

Initial drilling and testing of the PTU15 and PTU-16 development wells at the Point Thomson Central Pad were completed ahead of the company’s year-end 2010 target. The drilling rig is scheduled to move off the central pad when the winter ice road construction is completed in the first quarter of 2011.

“While there is no onsite construction work planned for this winter season, engineering design, procurement and permitting of facilities and infrastructure will continue offsite,” Moore said in an e-mail. “Construction work at Point Thomson is scheduled to resume following approval of the environmental impact statement and corresponding permits.”

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EXPLORING GAS OPTIONS ExxonMobil’s Emma Cochrane, said at the RDC conference the company is focusing attention on locating and extracting unconventional gas supplies, which include shale gas, tight gas and coal-bed methane.

Cochrane said demand in the U.S. is expected to grow 1 percent per year from now through 2030, with declines in conventional gas supplies but an increase in unconventional gas supplies – from 40 percent of the supply mix today to 65 percent by 2030.

“Technology improvements in locating and extracting these unconventional supplies will underpin much of this growth,” she said.

Alaska gas can be an important part of the U.S. energy mix in upcoming decades, she emphasized.

“The North American market can accommodate Alaska gas and unconventionals. It’s not an either-or situation,” Cochrane said. “To help fulfill this potential, the State of Alaska and the federal government need to promote and sustain policies that encourage the exploration required to expand the known 35 (trillion cubic feet) of discovered resources in Alaska to an even higher volume, to fill the proposed (natural gas) pipeline for decades to come.”

The Alaska natural gas pipeline project involves investment of about $40 billion, Cochrane said.

“In addition to gas resources from Prudhoe Bay and Point Thomson, we’ll need to create an environment where the Alaska North Slope will be fully explored for natural gas,” she said. “The search should be expanded to the Beaufort and Chukchi seas. These undeveloped prospects could fuel the Alaska economy for decades. New gas discoveries need to be brought to bear in order to keep this pipeline full for 30 years and keep tariffs down.”

Cochrane said the project requires fiscal predictability and durability, and Point Thomson gas is a critical underpinning for the proposed pipeline.

ExxonMobil is working with the Parnell administration to establish predictable financial terms to make the pipeline project possible, Cochrane said.

www.akbizmag.com • Alaska Business Monthly • January 2011

“Producers need to know the rules of the game before the project will move forward to completion,” she said.

“Public and private cooperation and coordination are also essential, including alignment and participation by all of the North Slope producers, TransCanada (Corp.) and the State of Alaska.”

ARCTIC DRILLING MORATORIUM Shell’s Peter Slaiby said his company had great aspirations for what was going to happen in 2010.

“I think if you had actually put your head under a rock for a year and come back, you’d see that it really looks pretty much the same,” Slaiby said.

On March 31 of last year, President Barack Obama announced limited access for drilling in the Beaufort and Chukchi seas and, also on that day, U.S. Interior Secretary Ken Salazar committed to submit supplemental science to a Washington, D.C., circuit court to complete Chukchi lease sale 193, Slaiby said. In light of those developments, he said, it appeared Shell would be able to move forward with a drilling plan for 2011.

On April 20, however, the Deepwater Horizon drilling platform at BP’s Macondo well in the Gulf of Mexico exploded, killing 11 workers and spewing an estimated 200 million gallons of oil into the Gulf of Mexico.

Obama, on May 26, announced a one-year suspension of Arctic drilling.

A moratorium enacted on drilling in the Gulf of Mexico was lifted, but the status of what goes on in Alaska remains in question, Slaiby said.

“So permits are backlogged and things continue to drag on,” he said.

In October, Shell filed for a Bureau of Ocean Energy Management, Regulation and Enforcement permit to drill in the Beaufort Sea for a well on its Savoolik project in 2011. “It’s a carbon copy of the plan we produced last year, the one that withstood the test of the Ninth Circuit Court, and it comes with a few improvements,” he said.

Shell is now engineering an Arctic oil-spill containment system and blowout preventer modifications. It also towed a second drilling rig to Dutch Harbor, which could later be employed in 2012 in the Beaufort Sea.

Shell is making a point of reminding decision-makers in Washington, D.C., that there is a sense of urgency moving forward, he said.

“We need clarity in 2011 because we really can no longer afford to wait for a prolonged decision before we move forward,” Slaiby said. “The cost of keeping this option open simply becomes just too prohibitive.”

Shell has spent half a billion dollars on studies in the Beaufort and Chukchi seas. Drilling can be done in an environmentally responsible, scientifically sound manner, with close interplay between the oil companies, communities, environmental groups and other stakeholders, Slaiby said.

“If we look, as an oil and gas company, at the Beaufort and Chukchi as an opportunity to drill quickly, lower our finding cost, test out what we’ve got and then begin negotiations, we will lose,” he said. “We won’t be able to make that happen. We have to sit down with these stakeholders and look at this in a longer term.”

Slaiby says the Alaska congressional delegation and the governor’s

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53

office have offered valuable support to Shell’s efforts.

“I think that’s going to continue to push us forward as we move into 2011,” he said.

ALTERNATIVE OIL PRODUCTION BP Exploration (Alaska) and ConocoPhillips are confronting declining production and other industry challenges by trying to find an economically feasible way to extract viscous and heavy oil from places such as West Sak and Ugnu. A potential 2 billion

barrels of heavy oil could be produced from the North Slope.

“Competitive development of the heavy-oil resources will require significant technology,” according to a speech

by BP’s John Mingé. “ In 2010, Mingé said, BP completed a $100 million pilot project at Milne and, in the first- quarter 2011, will be producing the first three wells of that pilot program.

“Ultimately some combination of the technologies and improvements in the tax regime are going to be needed for

these projects to compete,” Mingé said.

Heavy oil is akin in consistency to molasses, while viscous oil is closer in consistency to maple syrup.

“We looked at what would be possible if we could find a way to develop viscous oil at scale – and what technologies would be required,” Mingé’s speech stated. “A project like this would require on the order of 2,000 more wells on 50 pads with a new gathering center and 100 miles of new pipelines. By using economies of scale, a project like this has the potential to flatten North Slope production.”

Mingé says Alaska needs a more balanced tax structure, because the current tax structure takes away too much reward in the so-called risk/reward equation.

“We all need to work together on this, and any changes that are made need to be transparent and fair,” his speech stated.

The following are necessary to make Alaska’s tax structure more competitive and certain: ■ A reduction in progressivity and the introduction of tax brackets, much like the way federal income tax works ■ Lower the overall base tax ■ Align the revenue/cost accounting treatment ■ Simplify and clarify confusing implementation rules Trond-Erik Johansen of ConocoPhillips said 2010 was the first year since 1965 the company had not drilled an exploration well, and that it would not be drilling one in 2011 either. ConocoPhillips is looking toward the Chukchi Sea for opportunity, and toward products that will require more technological aggressiveness and patience to wrest out of the ground.

“The ‘easy oil’ is what we drilled in the past,” Johansen said. “We go for the more difficult oil now.” ❑ Videos and PowerPoint presentation photos and documents used by leaders in Alaska’s oil and gas industry during the Alaska RDC’s annual conference are available at its website: http://www.akrdc.org/membership/ events/conference/2010/presentations/ index.html

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www.akbizmag.com • Alaska Business Monthly • January 2011

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OIL & GAS

FRACKING ALASKA Unlocking more oil and gas

BY MIKE BRADNER

C

ould the world’s – and Alaska’s – petroleum industry be on the cusp of one of those leaps in technological advances that turns conventional thinking upside down?

Could those advances suddenly make our long-planned Alaska gas pipeline an obsolete idea? Alternatively, could they also usher in a new era of growth for Alaska’s petroleum industry? Both of these outcomes are possible.

Periodically, just when things seem to be winding down, when oil fields are mature and the technology is old, human ingenuity comes up with a new idea and what seemed old and tired suddenly has a fresh face.

Remember the Club of Rome’s gloomy prognosis in the 1970s? It was that world’s nonrenewable resource base would be depleted soon.

Then there was “peak oil,” the more recent variant of the theme. Resource supplies did indeed tighten, but the resulting increase in prices unleashed a wave of technical innovation that resulted in huge new supplies of oil and gas and minerals.

The newest idea on the block is that a 60-year-old idea, the fracturing of underground rocks through the injection of high-pressure liquids, is now combined with newer technologies.

This is unleashing a flood of new petroleum supplies.

Just in time, too. The nation’s supplies of conventional natural gas from mature fields is declining. Suddenly,

56

however, the U.S. is awash with natural gas extracted from the tight rocks of shale deposits through drilling and fracturing. The nation now has a 50year or more surplus of gas.

Now the same ideas are being applied to oil, and U.S. domestic oil production is on the increase again after decades of decline, thanks partly to liquids being produced through the shale fracturing. That petroleum production from tight shale rocks might be economically possible seemed far-fetched just a few years ago. No longer.

There are two implications for Alaska. One is that the flood of gas into North American markets may have taken the market once thought possible for a North Slope natural gas pipeline. A second is that these new approaches – fracturing combined with new well technologies – might make it possible for a lot of new oil to be produced from Alaska, particularly the North Slope.

PRODUCTION TECHNOLOGY ADVANCES The fracturing of rock through highpressure injection of fluids is a longestablished practice in the industry and it has been done for decades in Alaska. The concept is that the fluids, pumped down under high pressure, force cracks in the rocks that make it easier for the oil and gas fluids to flow to the producing wells.

There’s a lot of science behind this. The companies have to be able

to calculate the extent of the cracks they want, the quantities of water and chemicals they need to inject, and at what pressures. Sometimes the cracks may close, so small particles, sand or ceramic pellets, are often injected to help keep the cracks open.

This long-established practice is now being married to a technological innovation, horizontal production wells drilled laterally though rock formations.

The horizontal wells, an advance of just the last 20 years or so, have made a quantum leap in the amount of oil- or gas-bearing rock reached by the well compared with the conventional “vertical” wells. It also makes a lot more of the rock available for fracturing.

North America, and also the world, has huge volumes of shale and other tight, dense rocks that contain petroleum that was unproduceable until the new fracturing and horizontal-drilling techniques were available.

How serious a threat is this to the Alaska gas pipeline? It’s uncertain.

The three major risks facing this huge, $40 billion-plus project are that construction costs might exceed estimates, that Alaskans, unwilling to pay taxes themselves, may load new State taxes on gas as oil production and oil revenues decline, and finally that unforeseen competition might develop for the Lower 48 markets an Alaska gas pipeline would serve.

The market risk is difficult to judge.

The threat of imported liquefied natural gas, or LNG, was always there –

www.akbizmag.com • Alaska Business Monthly • January 2011

the world is awash with liquefied gas looking for markets – but there was always the worry of some future technological breakthrough that could take the market away.

Has the future arrived early? Gas being extracted from the huge shale formations spread across huge parts of the continental U.S. is a competitive threat simply not foreseen two or three years ago.

ENVIRONMENTAL CHALLENGES There are intense debates now going on over whether shale gas and the intensive drilling and fracturing it requires is just a flash in the pan or whether it will become a long-term supply source to the point of upending the market for the Alaska gas pipeline.

Mark Myers, the State’s former oil and gas director, a former director of the U.S. Geological Survey, and soon to be the University of Alaska’s vice president for research, believes shale gas will be an important, but not dominant, supply source for the nation.

Myers believes there are problems with the intensive drilling and fracturing

technologies that will eventually catch up to the industry. The process requires large quantities of water and chemicals to be injected under intense pressures to fracture the tight rock. There are already concerns being expressed by local communities over where the water will come from, and what eventually happens to the chemicals injected underground. Do they stay deep underground, or do they seep back toward a surface to endanger water aquifers that supply fresh drinking water?

The drilling is also intensive. Because the volume of gas produced through a well drilled into shale tends to drop off fairly quickly, the way producers sustain the production is by drilling more and more wells, and injecting more chemicals and more water. Myers believes that over time the public issues – land-use conflicts, pressure on local water supplies, concerns for chemical contamination – will become limiting factors.

In fact, there is intense controversy in several states where shale gas drilling is going on. Fluids used in fracturing include kerosene, benzene, toluene, xylene and formaldehyde,

and other compounds that include carcinogens and heavy metals. The public is very worried that some of these compounds may leak into drinking water supplies.

Compounding the controversy is the fact that many service companies argue the composition of their fracturing fluids are trade secrets and refuse to make the information available to the public. Wyoming has now required this information to be public and other states may follow suit.

The U.S. Environmental Protection Agency has embarked on a study of whether fracturing constitutes a threat to the environment and whether it should be regulated more carefully.

There is also legislation in Congress.

If there are new rules, there could be some effects on the practice in Alaska, but most of the impact would be on the Lower 48 shale gas industry, says Cathy Foerster, a commissioner on the Alaska Oil and Gas Conservation Commission. The AOGCC has been delegated authority by the EPA to regulate the underground injection of chemicals.

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Economics will also take a toll.

Myers, who is a geologist, believes that the more accessible and, perhaps better quality, shale rock is being tapped now, and as the shale producers are forced to drill more and more, going deeper with more expensive and possibly less productive wells, the costs will rise. That will make gas from shale less of a bargain.

Whether that will happen is a huge question for the North Slope producers hoping to build the gas pipeline.

North American natural gas prices have been extremely low in recent months but the rate of shale gas drilling hasn’t abated.

However, what is now reinforcing the view shale gas is here to stay is that major companies such as ExxonMobil and Chevron are buying companies with major positions in this new industry. Steve Kirchoff, ExxonMobil’s vice president for gas in the Americas, told a November energy conference in Houston that the company believes “unconventional” gas, mostly from shale, will provide 70 percent of U.S. supplies by 2030.

Gas being extracted from the huge shale formations spread across huge parts of the continental U.S. is a competitive threat simply not foreseen two or three years ago.

SHALE GAS AND ALASKA’S PIPELINE How do ExxonMobil and other companies now view the Alaska gas pipeline?

All the major owners of North Slope gas have shale gas holdings, but they also have an incentive to market their Alaska gas. With their own knowledge of shale gas, do they believe Alaska gas can compete?

We’ll get our first signals of the answer this spring when the two pipeline consortia competing with each other – TransCanada Corp. and ExxonMobil Corp. in one and BP and ConocoPhillips in the competing Denali project, will announce results of “open seasons” held in 2010 for gas shipping contracts.

Whatever contracts are signed will still be preliminary, and contingent on a fis-

cal agreement with the State of Alaska, but it will be an important sign as to whether the major owner companies believe Alaska gas can compete with shale gas.

Myers believes in the long run, the companies will gamble that a largediameter pipeline will be an efficient and competitive supplier of gas to North America because it will open up the huge Arctic gas potential. Myers believes the Arctic, and particularly northern Alaska, contains immense quantities of gas that can be developed once a gas pipeline is available. The initial design of both consortia is for a pipeline moving 4 billion to 4.5 billion cubic feet of gas daily, but the designs also allow for relatively low-cost expansions.

What is exciting is that the same techniques that are now unlocking unconventional gas in the Lower 48 will also be available in Alaska, and this could further increase Alaska’s petroleum resource base.

Many geologists, for example, believe oil can be produced directly from the deeply buried rocks that are the source of the large conventional oil reservoirs

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www.akbizmag.com • Alaska Business Monthly • January 2011

of the North Slope and even in Cook Inlet. Some companies may be prepared to make this bet, too. Great Bear Petroleum, a small Texas-based independent company, was the sole major bidder in the State’s areawide North Slope lease sale last fall, acquiring a large block of acreage south of the main producing fields on the Slope.

The company told State Division of Oil and Gas officials that it has a new “theory” of how oil could be produced on the Slope. The company may attempt to drill down to the deeper source rocks, which are tight and without the conventional oil reservoir “traps,” the source of conventional oil production.

It’s likely these rocks lack the permeability of rocks in conventional reservoirs, the tiny connections between pores that allow oil and gas reservoirs to flow. However, hydraulic fracturing could artificially create permeability.

This could be a game changer for the North Slope, says Bob Swenson, director of the Division of Geologic and Geophysical Survey and the State geologist. There are immense quantities of oil in the source rocks that underlie the North Slope, and from which oil and gas seeped up over geologic time to become trapped in shallower reservoirs.

Oil from shale is now being produced, through fracturing, in the Lower 48, an offshoot of the shale gas produced by fracturing. If this is possible on the North Slope, it could be a major new source of oil.

The opportunity for Alaska is not without challenges, however. One of those challenges is fracturing of shale, or other tight rock, typically must be done again and again in the same well, and it’s an expensive process. The North Slope is an expensive place to operate. Whether costs could be reduced for fracturing as well as for the large number of needed wells is probably the major obstacle. Another is the environmental challenge of safely handling and disposing of the larger volumes of chemicals needed for fracturing on this scale.

The possibilities are clearly there, however. Alaska is blessed with huge petroleum resources locked in its rocks, both in northern and southern Alaska.

Human ingenuity is what’s needed to ❑ unlock those resources.

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EDUCATION

Photo courtesy of the University of Alaska Anchorage

MBA Options for Alaskans

BY VANESSA ORR

Going on-site and online for grad school

UAA’s College of Business and Public Policy (CBPP), housed in Rasmuson Hall, is a dynamic academic resource that both serves and reflects Alaska’s largest metropolitan community. Accredited by the Association to Advance Collegiate Schools of Business (AACSB), the College offers a range of degrees.

I

n these tough economic times, many people are trying to decide whether a return to school for an advanced degree could help them move forward in their careers or provide more job security. Businesses are debating whether to send their employees on to graduate programs with the hope they come back with fresh ideas and ways to make companies run more efficiently.

Earning a Master of Business Administration requires a large investment of both time and money;

Photo courtesy of University of Alaska Southeast

Anselm Staack, MBA, JD, CPA Interim director, MBA Program University of Alaska Southeast

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and for universities offering such programs, this means making sure what students learn in those programs propels them, and the companies for whom they work, to a higher level.

“There are a number of reasons to get an MBA, which in many business circles is becoming the ‘new normal,’ ” explained Anselm Staack, MBA, JD, CPA, interim director of the MBA Program at the University of Alaska Southeast. “As businesses become more complex and employees find themselves competing against others from around the world, they need to find a way to set themselves apart; to compete with other employees with advanced skills.

“In Alaska, the job market is as much about globalization and global competition as it is about working for companies within Alaska,” he stressed.

Employees who go back to school to earn a MBA not only show a willingness to develop more skills, but also show employers they have the discipline and drive to invest in themselves as a way to move forward in their jobs.

Employers who support employees who want to enter an MBA program, whether through scheduling flexibility or even monetary incentives, benefit from having less turnover and a more skilled staff.

“The majority of people are quite loyal, so when a company invests in

them and in their education, it shows them that they are valued as employees and that the company wants to provide opportunities for growth,” said Rashmi Prasad, Ph.D., MBA, director of Graduate Programs at the University of Alaska Anchorage.

For Alaska residents, there are many opportunities to earn an MBA, whether at an Alaska or Lower 48 university, on-site; online through distance-learning programs, or through hybrid programs that combine the two.

Photo courtesy of University of Alaska Anchorage

Rashmi Prasad, Ph.D., MBA Director of Graduate Programs University of Alaska Anchorage

www.akbizmag.com • Alaska Business Monthly • January 2011

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THE UNIVERSITY OF ALASKA SYSTEM While the University of Alaska Anchorage, University of Alaska Fairbanks and University of Alaska Southeast all offer MBA programs, each is very different from the others. The UAA MBA, which is a two-year, 36-credit program, is largely a part-time program designed for students who work full time. “Our course delivery is fairly flexible, with most classes held in the evenings, weekends and early mornings,” explained Prasad. “We also offer some courses online.”

The school offers a general MBA that provides flexibility for students to seek out electives focused on special interests. “It is not a major, per se, but students can take electives to get an emphasis in areas such as public health and informatics,” said Prasad. “We are also flexible in that we can work with other colleges in the university system and outside; for example, we had one student who worked at Providence hospital who took a health-care class from Northwestern University online.”

Like most MBA programs, UAA values work experience in its applicants, though it will accept high achievers with fewer professional qualifications. “In the past, our ratio tilted toward people with a lot of work experience, but since we’ve grown, we are now seeing people with a year or two of work experience, or with more varied backgrounds, such as military experience,” said Prasad.

Most students are from the Anchorage area, though UAA also hosts a number of foreign students, including a fair number from the Russian Far East. The cost to earn an MBA is approximately $12,000, which attracts quite a number of applicants. “Our MBA program is an excellent value, so even though the economy has been tough, we’re seeing more people applying,” said Prasad.

“Our students also tend not to have buyers’ remorse; they are not only happy with the experience they’ve had, but also they come out of our program without huge debt, which helps to leave their professional options open.”

The University of Alaska Fairbanks offers two MBA concentrations in general management and capital markets, and most courses are offered on-site.

“We do use videoconferencing fa-

62

cilities to deliver our courses to other sites in Alaska so that every student can interact with his or her classmates in real time,” explained Ping Lan, director of the MBA program. “I consider our courses ‘hybrid’ on-site.”

Although the majority of UAF students come from the Fairbanks area, there are also a considerable number of students from other parts of the state, the Lower 48 and many foreign countries. About half of the student body is already in the work force. Students with undergraduate business degrees pay $10,140 in-state and $20,730 outof-state tuition and must take 30 credit hours; students without undergraduate business degrees pay $14,196 in-state and $29,002 out-of-state tuition and must take 42 credit hours.

According to Lan, UAF’s MBA program is undergoing a dramatic increase in enrollment, which he credits to the school’s high-quality faculty and students and its Association to Advance Collegiate Schools of Business-accredited programs. Both the School of Management and its accounting program are simultaneously accredited through the AACSB International, an honor only been achieved by 171 universities worldwide. The UAF School of Management is the only university in Alaska to earn this distinction.

While both UAA and UAF have residence-based MBA programs, University of Alaska Southeast offers a distance-delivered MBA program.

“Our program, which is complementary to those offered at UAA and UAF, is designed to fill a need in Alaska for students who can’t take time off to do a residency program,” explains Staack. “We serve students from all over Alaska and the Yukon Territory.”

UAS offers a two-year, 36-credit MBA program in service management that provides flexibility to students outside Alaska’s major residence areas who normally might not have the opportunity to pursue an advanced degree.

“We place a very high premium on non traditional students; those who have significant work experience as well as a successful background in business courses as an undergrad,” explained Staack. The UAS degree costs approximately $22,000.

UAS MBA courses are very struc-

tured and require weekly assignments, extensive exams and written papers.

“At least several times a week, students have graded work and participate in a discussion board,” explained Staack. “There is a website for each course, and telephone help is also available.”

Staack estimates that students put in a minimum of 10 to 12 hours each week per course.

“It takes quite a bit of discipline to be able to get an online MBA degree; students must really know how to structure their lives and schoolwork to make it work,” he said.

ALASKA PACIFIC UNIVERSITY Alaska Pacific University offers a number of MBA programs including MBAs with a concentration in health services administration, finance or entrepreneurship, and executive MBAs in information and communication technology and strategic leadership.

Beginning in June of 2011, the university will be introducing these courses in a hybrid format, which will enable students to finish their degrees more quickly. Courses can be completed in less than two years by taking three courses each trimester, during which students meet for three full days in-person on campus. Students have the option of attending additional classes throughout the trimester in person, live through a webcast, or by watching an archived

Photo courtesy of Alaska Pacific University

Dale Lehman, Ph.D., MA Director, MBA Program Alaska Pacific University

www.akbizmag.com • Alaska Business Monthly • January 2011

the more remote areas of the state is that they wanted to continue in their education, but they needed the option online,” added Carl Hild, Ph.D., MS, director of the Health Services Administration program. “The benefit of the hybrid program is that it also gives them the opportunity to interface with other members of the business world in person, and our small class sizes allow for more personalization. What we’ve designed is a reflection of what we’ve heard from employers, students and our business advisory board.”

WAYLAND BAPTIST UNIVERSITY Nationwide faith-based Wayland Baptist University, with one campus each in Anchorage and Wasilla, and two on Joint Base Elmendorf-Richardson, offers onsite and online programs and a combination of both. “Approximately 3 percent of Wayland’s MBA students are located in Alaska, with the majority of our total applicants already serving in the work force or in the military,” explained Otto Schacht, dean of the School of Business.

“Because we are fairly well connected to military installations, our numbers

Photo courtesy of Alaska Pacific University

Carl Hild, Ph.D., MS Director, Health Services Administration Program Alaska Pacific University

Photo courtesy of Wayland Baptist University

recording of the class. Courses will also use asynchronous reading discussions and assignments, and most involve an individual or group project. The cost of an APU MBA is approximately $22,000.

“We believe that this hybrid format offers the best of both worlds,” explained Dale Lehman, Ph.D., MA, director of the MBA program. “While completely online classes are popular, there is too much lost without the personal component. We can use technology for reach and convenience, but didn’t want to lose what is gained in a personal setting.”

“What we heard from students in

Otto Schacht Dean, School of Business Wayland Baptist University www.akbizmag.com • Alaska Business Monthly • January 2011

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Photo by Steve Million/Courtesy of Wayland Baptist University, Anchorage Campus

Wayland Baptist University, a private faith-based school, offers an MBA program, which caters to military and civilians. Pictured is the main campus on Muldoon Road in Anchorage.

don’t change a great deal, regardless of the economy.”

Through the school of business, MBA students can specialize in general business administration; health care administration; human resources management; and management information systems. The MBA consists of 36 semester hours of core courses and nine semester hours of graduate courses in selected areas of specialization. The cost is $249 per semester hour in Alaska or $285 per semester hour online.

and can then customize the second half of the program,” said Erin Ernst, MBA Admissions director. “They have the ability to choose the electives that they want to take, including classes outside of the Business School.” Students can also take a concurrent degree option, combining two degrees at the same time.

UW’s Executive MBA program, which boasts 27 Alaska alumni, is a gen-

UNIVERSITY OF WASHINGTON One out-of-state school popular with Alaskans is the University of Washington, which offers both full and parttime on-site programs and an Executive MBA (EMBA) program.

“With our full-time and evening MBA, students take a core curriculum

all over the world,” explained Louise Kapustka, executive director, Executive MBA program.

While most students in the traditional MBA program are in their late 20s and may have three to five years of work experience and are looking for different careers, Executive MBA students tend to have 10 to 15 years of work experience and are looking to land a leadership or executive level position within their organizations, according to Kapustka. The cost of the traditional MBA is $37,419 for out-ofstate students, and $25,101 for in-state students, and students who choose to live in Washington while in school can establish residency in their first year to enjoy the lower tuition the next year.

The cost of the EMBA is just under $80,000 and includes food and lodging, but not the cost of transportation to and from Seattle.

IS IT WORTH IT?

Photo courtesy of University of Washington

Louise Kapustka Executive Director, Executive MBA Program University of Washington

Photo courtesy of University of Washington

Erin Ernst MBA Admissions Director University of Washington

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eral integrative management program that requires students travel to Seattle once a month to take three to four days of coursework, and includes an online component. “Students fly to Seattle, attend three or four days of classes and then go home where they continue to have weekly homework and interact with study groups with students from

“There has been a lot of press lately about the value of a MBA,” said Lehman, “with the main criticism being that the academic study of business is so far removed from real business.

For that reason, it’s important to seek out schools and professors that have experience outside of academia. Our students demand courses that are relevant to their working lives. Better skills translate to better jobs and more pay.”

“It’s really essential that students do the research to determine which school is best for them,” says Ernst. “While its helpful to look at a website, there’s no substitute for visiting a school and getting a feel for its culture. Meet the students and sit through a class. Then decide what program is right for you.”❑

www.akbizmag.com • Alaska Business Monthly • January 2011

BUSINESS BASICS

BY ERIC BRITTEN

Your Organization’s Path to Success Four strategies that work

T

here have been volumes written about how to successfully manage a business or organization.

Yet focusing on four basic elements can help private, public-sector and nonprofit organizations steer a closer course toward success.

services in a cost-effective manner consistent with their organization’s mission and goals. Nonprofits serve their own constituencies. Like the public sector, they are responsible for delivering those services in a cost-effective manner consistent with their organization’s mission and goals.

DEVELOP CLEAR GOALS

CREATE ACCOUNTABILITY Linking employees to organizational goals and operational targets through their job functions, and providing them with periodic updates on progress toward those goals, builds an atmosphere of accountability. Written procedures also contribute significantly to this. Accountability is a critical key to success, not just in the private sector, but also in public and nonprofit sectors.

Private-sector organizations work toward their goals to deliver results to their customers and to the company’s owners. Public-sector organizations deliver results to the public, but are also responsible for delivering those

MEASURE PROGRESS In order to know how a particular organization is progressing toward fulfilling its mission and meeting its goals and targets, clear measures and milestones need to be in place at various levels within the organization. Some measures can gauge strategic progress, while others inform managers how well the organization is functioning. Developing a way to gauge your customers’ needs and satisfaction should be a part of your organization’s performance management. Monthly financials may have their place, but monthly operational indicators should be forgone in favor of daily or weekly indicators.

Creating the right metrics and milestones is more easily said than done.

They need to be more qualitative than quantitative so that the metrics “tell a story.” They must pass rigorous tests to ensure they are aligned with desired outcomes. They need to be meaningful, not only to program owners, but also to others as well. Generating the data to feed metrics should not consume extensive time or resources.

Often, similar types of metrics or indicators are assembled together in a dashboard. This provides a single place for managers to monitor tactical and/ or strategic progress, or lack thereof. A dashboard can be something as simple as a spreadsheet or as complex as an integrated software application with graphically enhanced displays.

©2010 Chris Arend

Experts have noted that organizational success happens when everyone is focused on the same goals. There are several important elements that must be present to enable this focus. First, everyone needs to hear what the organization’s mission, vision, values and goals are — and hear about them repeatedly. The second part includes a plan for everyone in the organization to follow so they understand how performing their job successfully helps the organization meet its objectives. Everyone from top to bottom should feel as though they own a piece of the organization. Finally, employees need regular feedback about how the organization is doing and about the contribution of their efforts to organizational success.

MAKE ADJUSTMENTS If the milestones and metrics indicate that acceptable progress is not being made toward mission, goals and operational targets, managers need to analyze the reasons for this. They should adjust tactics, activities, processes and operations to achieve their goals and targets. There are an infinite variety of tools available for managers to analyze why their organization is not meeting operational, tactical or strategic targets. Still, nothing replaces the need for managers to know how and why their company or operation functions the way it does. Assuming they were developed properly, adjustments should not be made to the goals, metrics, targets or milestones themselves.

Each organization is different, so each organization will address these four elements differently. The constant is that each of the four elements needs to be addressed by every organization, large or small. ❑ Eric Britten is president of Britten & Associates LLC, a management-consulting firm based in Anchorage. Additional information is available at www.Britten Associates.com.

www.akbizmag.com • Alaska Business Monthly • January 2011

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SPECIAL SECTION: ANCSA 40th ANNIVERSARY

Women Behind the Act Alaska Native women key to ANCSA

BY VANESSA ORR

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Photo by Mark Kelley/Courtesy of Sealaska Heritage Institute

W

hile Alaska Natives today enjoy the benefits that come from belonging to village, urban and regional corporations created through the Alaska Native Claims Settlement Act, this was not always the case. It took years of efforts on behalf of Alaska Natives to ensure that their ancestral lands were protected, and that they would be able to support themselves, and their families, into the future.

A number of Alaska Native women, including Brenda Itta Lee, Marlene Johnson, Nettie Elizabeth Peratrovich and Irene Rowan, were integral to the ANCSA fight. “Traditionally, Alaska Natives are a peace-loving people who have been taught to resolve conflicts internally and externally,” explained Itta Lee. “But while peace-loving is our nature, before ANCSA was settled, many of us became rather militant in a positive way. It’s almost like we became warriors in order to fight for the land-claim settlement, which was a good way to be in light of the opposition at that time. We drew on our inner strength and on the strength of our people to keep going. It’s a feeling that I’ll never forget.”

Itta Lee was living in Washington, D.C., and working for Sen. Ernest Gruening when the first piece of legislation related to ANCSA was introduced. After Gruening lost the election, she moved back to Alaska to work for RurAL CAP (Rural Alaska Community Action Program), where she worked closely with other Native leaders, particularly those in the Arctic region, to lobby for Native land.

“In my region, the Arctic Slope, there were many discussions about protecting our traditional lands because the government planned to build a pipeline that would cross our camping grounds and affect the caribou and fish;

Marlene Johnson first became politically involved in Hoonah over child welfare because there was no childcare for working parents.

everything we relied on to live. Our lifestyle was at stake,” she explained.

“The government had already taken prime lands in the Arctic and across the state, so we became passionate about protecting our civil rights,” she added.

Despite being a woman in a time period when women were considered less than equal, Itta Lee said that she

was not treated differently from the men. “We really didn’t think of male/ female at the time,” she said. “Only a handful of Alaska Natives knew both the Alaska Native tongue and the English language, and only a handful had traveled outside of the villages and had gained exposure to the western America way of life. Anyone at that

www.akbizmag.com • Alaska Business Monthly • January 2011

SUPPORT FROM HOME While Itta Lee may have been one of the more visible women in the ANCSA movement, she says that she couldn’t have done what she did without the support of the people in the villages.

“Both men and women at home were pushing ANCSA, and a lot of people were involved in a statewide effort at the village level,” she said. “Those of us who went ‘out into the world’ to Washington, D.C., and Juneau received a lot of support.

“At the time, there was not a lot of cash available because we lived in a subsistence economy,” she added, “so many villages held fundraising events so that we could travel. It was quite frequent to see women in Barrow, for example, baking breads and pies and holding cakewalks to raise money for our travel, hotels and meals.”

Marlene Johnson first became involved in politics, and later in ANCSA, as a single mother living in Hoonah. “I

became concerned about the welfare of children in the village, because there was no childcare available when their parents were working at the crab or salmon canneries,” she explained. “I contacted Governor William Egan, who was a friend of my mother’s, and he sent state employees out to look into the issue. Then the War on Poverty happened, and Governor Egan asked me to serve on the board of directors of the Alaska State Community Action Program (ASCAP). After a year, I became its president.”

ASCAP later changed its name to RurAL CAP, and Johnson stayed on as its president for three years.

“About that time, there was a lot of talk about building the pipeline, and young Native leaders began talking about protecting our areas of land,” she explained. “No one really had money at that time to get together, so we formed an advisory group to RurAL CAP that brought advisors in from all over the region. We paid for them to come to Anchorage for regular RurAL CAP business meetings and to learn more about our outreach

Photo courtesy of Arctic Slope Regional Corp.

time who knew both languages and had ties to the land was utilized. The cause surpassed being a female.”

Brenda Itta-Lee worked closely with Alaska Native leaders for Native land.

programs.” According to Johnson, after the meetings these Native leaders would meet independently to work on the land-claim agenda.

Johnson also served as an elected delegate to Tlingit Haida Central Council, which had just been organized, and

our land

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was elected to serve on its executive committee. “I was the only female on the executive committee for many years,” she said. “We would go to D.C. with other Native leaders over and over to lobby and work on the land claims.

I don’t know how many times we traveled back there.”

When ANCSA was finally passed in 1971, Johnson was happy but also had other priorities on her mind. “It was Christmas Eve before I could get back to Hoonah, and I had four children,” she explained. “It was a very worrisome time for me because I didn’t think that my kids would have a Christmas with me gone so much. But my son, who was 12, had already gotten the tree.

The babysitter had taken care of other things, so it all worked out fine. And it was a very wonderful feeling to go home knowing that we’d won.”

Johnson was one of the incorporators of regional corporation Sealaska and served on its board until 1996. As for her experience during the ANCSA fight, she remembers the camaraderie well. “The men really didn’t treat me differently; they treated me like one of the boys,” she said. “I’m fairly outspoken and usually have an opinion, and I express it. And they respected that.

“I was treated fairly; they listened to me. Of course, we’d talk about the need to do this or that, and then they’d say, ‘Marlene, you do it,’” she laughed.

“But that was okay, because I’m a doer.”

NATIVE LAND ISSUES Nettie Elizabeth Peratrovich remembers hearing about the land issues that Native people were facing from a very young age. “If you were an Alaska Native, you knew about the land issues that our people had been working on for years; even before I was born,” she said.

“The Alaska Native Brotherhood and Alaska Native Sisterhood in Southeast Alaska had been working for a long time to get payment for our land in the Tongass National Forest that President Roosevelt set aside.”

According to Peratrovich, a number of different issues added to the problem, including the state’s tentative approval of Project Chariot, in which the Navy would be allowed to detonate a subsurface nuclear bomb near Cape Thompson; and the Barrow Duck-In,

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Photo by Rob Stapleton/ANCSA@40

Nettie Peratrovich at an ANCSA@40 committee meeting, talking about the women of ANCSA and their missing chapter in history.

a protest staged by Alaska Natives in answer to a federal wildlife official arresting an Alaska Native for shooting a duck out of season.

“Alaska Natives were aware of what was going on; we knew that we were in danger of losing everything,” she said.

“At that time, Alaska was still treated like a colony; in the early days, Natives couldn’t own land unless they lived in villages – if they moved to cities, they couldn’t get a job or own property.

There were separate schools for Natives, and when I was married 48 years ago, we had to get married in a separate church. That’s just the way it was.”

“We would meet other Alaskans at the airport when they arrived and take them to the hearings; nobody knew anything about Washington, and most of them had never been to a hearing before.”

– Nettie Elizabeth Peratrovich

Peratrovich became involved in Native education to try to prevent Native children from being sent outside the state to attend Indian schools. “My husband worked for the Department of Labor, and was transferred to Fairbanks from Southeast, which is where I got involved in Native education,” she said. “When he was sent to Washington, D.C., on a government training program, we became part of a group called Alaskans on the Potomac. We would meet other Alaskans at the airport when they arrived and take them to the hearings; nobody knew anything about Washington, and most of them had never been to a hearing before.”

After a year, the couple returned to Fairbanks where Peratrovich’s husband took a job with the Department of the Interior, and in 1971, ANCSA was passed. “I think we should celebrate the passage of the land claims act because we are surviving very well,” said Peratrovich. “Alaska Natives are much better off today than anyone could have imagined 40 years ago, when we didn’t even know what a corporation was.”

ENACTING THE CLAIMS Irene Rowan was also involved in lobbying for Alaska Native land claims from an early age. “As a child, I grew up believing in the Tlingit and Haida land settlement claims,” she explained.

“I went door-to-door with my mom, talking with other Alaska Natives about the importance of the lawsuit.”

Rowan later became a teacher in Bethel, where residents were not as aware of what was happening to Native lands in Alaska. “Not a lot of people spoke English, and it was a real frontier way of life,” she explained. “We didn’t have a radio station or phones, and the only reception we could sometimes get was from a radio station in Russia. We had no TV, no newspapers, and very little contact with the outside.

“When the Tundra Times began showing up with teachers who traveled to Anchorage and brought it back, it opened up a whole new world for us,” she added. “We became aware of what was happening with Project Chariot, and the State’s selection of lands in Alaska, and how it was changing the lives of individuals. It brought it all to life.”

www.akbizmag.com • Alaska Business Monthly • January 2011

Photo by Rob Stapleton/ANCSA@40

Irene Rowan directing a recent ANCSA@40 committee meeting in Anchorage.

When Rep. Mike Gravel of the Alaska House of Representatives visited Bethel to hold a hearing on vocational high schools, Rowan and her husband were impressed by his belief in ANCSA and decided to move to Anchorage to help in his campaign to become a U.S. senator. â&#x20AC;&#x153;After he was elected, we moved to Washington, D.C., where I became

a member of Alaskans on the Potomac,â&#x20AC;? said Rowan. â&#x20AC;&#x153;We provided t whatever w support Alaskans who were coming to Washington to lobby for ANCSA A needed.â&#x20AC;?

Rowan clearly remembers the jubilation t in Washington when ANCSA was passed. p â&#x20AC;&#x153;We all breathed a big sigh of relief r â&#x20AC;&#x201C; weâ&#x20AC;&#x2122;d finally done it; it was over.

I remember talking to other individuals, wondering w what the next steps would be,â&#x20AC;? b she said.

After returning to Alaska, Rowan enrolled in the village corporation Klukwan Inc., and later became its president. p She returned to Washington a number of times to lobby on behalf of the corporation. As for ANCSA itself, she is proud to have helped in a movement that made such a difference in the lives of Alaska Natives. â&#x20AC;&#x153;I have seen a great change in the number of Alaska Natives educated; corporations are offering scholarship programs to allow shareholders to attend schools beyond high school,â&#x20AC;? she said. â&#x20AC;&#x153;Before ANCSA was passed, the average level of education for an Alaska Native was third grade. Today,

â&#x20AC;&#x153;We became aware of what was happening with Project Chariot, and the Stateâ&#x20AC;&#x2122;s selection of lands in Alaska, and how it was changing the lives of individuals. It brought it all to life.â&#x20AC;? â&#x20AC;&#x201C; Irene Rowan an amazing number of Alaska Natives hold positions as doctors, dentists and professors â&#x20AC;&#x201C; they have entered into professional fields that didnâ&#x20AC;&#x2122;t even exist for us prior to the claims act. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re now seeing natural resources developed on Native land, which provides jobs to shareholders and other Alaskans and puts money into the economy,â&#x20AC;? she added. â&#x20AC;&#x153;Native corporations are even involved in global markets â&#x20AC;&#x201C; and thatâ&#x20AC;&#x2122;s an incredible story.â&#x20AC;? â?&#x2018;

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8.3,. &20 www.akbizmag.com â&#x20AC;˘ Alaska Business Monthly â&#x20AC;˘ January 2011

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SPECIAL SECTION: ANCSA 40th ANNIVERSARY

Tundra Times, Howard Rock and ANCSA The birth of Native power in Alaska

Bear Ketzler Photograph Collection; UAF-1992-202-11; Archives, University of Alaska Fairbanks

BY JULIE STRICKER

Howard H dR Rock, k T Tom S Snapp and d Th Theodore d H Hetzel, t l appear tto b be di discussing i th the ititems on th the ttable bl iin ffrontt off th them, which appears to be printer’s type blocks and plates.

W

hen Irene Rowan moved to Bethel in 1964 to teach school, she said two things struck her about the quiet village in Southwest Alaska. One was the lack of trees; the other was its extreme isolation.

“It was very different going from Southeast Alaska with its beautiful trees to Bethel with its one tree,” Rowan said.

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“There was no telephone, no television, no radio, no real communication with the outside world.”

In fact, the only radio station was a shortwave broadcast from across the Bering Sea. “We couldn’t see Russia from our front porch, but we could hear it,” Rowan said.

RURAL DISCONNECT Bethel was not alone in its isolation.

Few people in rural Alaska had access to telephones, television or newspapers. Rural Alaska Natives were largely unaware of the Alaska Statehood Act, under which the State had received a dowry of 104 million acres and was claiming that land in areas used for

www.akbizmag.com • Alaska Business Monthly • January 2011

generations by Alaska Natives. Natives were unaware of laws that made them “instant criminals” for hunting migratory birds. They were also largely unaware of the repercussions of a plan to excavate a harbor in Northwest Alaska using nuclear bombs.

In region after region, Alaska Natives began to realize they were losing the rights to the land and the culture they took for granted would always be theirs. They created regional organizations, but land rights was a topic that had to be addressed on a statewide level. The question was how to get the word out.

“If you wanted to hold a statewide meeting, how would you let everybody know?” asked journalist Lael Morgan. “The newspapers did not carry Native news, unless a Native won a dogsled race or jumped off a high building or shot someone. They didn’t cover the Native scene at all.”

The answer was to create a newspaper to cover Alaska Native issues.

The first edition of the Tundra Times rolled off the presses Oct. 1, 1962. At the helm was an Inupiat artist named

Howard Rock, who had no newspaper experience whatsoever. The bi-weekly, statewide paper was chronically understaffed and underfunded, but under Rock’s leadership, it helped unite Alaska Natives and fundamentally change the future of Alaska.

Morgan worked off and on for the Tundra Times in the 1960s and ’70s and wrote a 1988 biography of Howard Rock: “Art and Eskimo Power: The Life and Times of Alaskan Howard Rock.”

“The circulation when I was there was never over 500,” Morgan said, “but it went to every office in the state and the pass-around in villages was huge. If you saw that paper after it had been out a week or so in the villages, it would just be pretty well used.”

Former reporter Tom Richards said the Tundra Times is the only newspaper he knows of that had fundraising banquets. Morgan said there were many times getting the paper printed and distributed seemed almost miraculous. A check would arrive just in time to pay the postage bill or a timely donation would keep the press running. Still, Rock’s influence was incalculable.

“He’s more responsible than any individual I can think of for everything we’ve achieved on the land grants,” Richards said.

ROCK’S ROAD TO ACTIVISM Rock was an unlikely newspaperman. He was born in 1911 in Point Hope, an ancient Inupiat village in far Northwest Alaska. His family had been whale hunters for generations, but Rock was more interested in school and art and frequently felt like an outsider in his village.

When he was 15, he was sent to the boarding school at White Mountain, near Nome. Teachers there encouraged him to continue his education and he moved to Washington to study art at the University of Seattle.

After serving in World War II, Rock stayed in the Seattle area, largely estranged from his family in Alaska. He worked as a commercial artist, but began to drink heavily and his career foundered. In 1961, he returned to Point Hope, defeated and ready to give up.

Instead, he found artistic inspiration in village life and started painting anew.

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www.akbizmag.com • Alaska Business Monthly • January 2011

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Photo courtesy of Lael Morgan for ANCSA@40

and issues of statewide interest, Rock also wrote about the everyday experiences of Alaska Natives. He brought widespread attention to situations such as the Interior Department’s refusal to let Pribilof Island residents leave the remote island where they were used as a work force to kill fur seals.

The Tundra Times helped unite a burgeoning group of Alaska Native activists, most of whom had been educated at boarding schools such as Mt. Edgecumbe in Sitka or federally funded schools such as the one in White Mountain that Rock attended.

One result was that youth from Athabascan, Inupiat, Yup’ik, Tlingit and other cultures mingled and became friends.

Native soldiers returning from World War II and Korea added a broader perspective. In the 1950s as issues of statewide interest began to surface, a group of Native leaders emerged from the schools with a focus on Alaska issues as a whole, not just on those from their regions.

CREATING A BROTHERHOOD Mary Jane Fate, from the Athabascan village of Rampart, attended Mt. Edgecumbe in Sitka.

“We really didn’t have homes,” Fate recalled. “We didn’t go to school with non-Natives until we got into Howard Rock became involved in Alaska Native issues after returning to Point Hope college. It was very hard to be away from the family. We had to become amidst Project Chariot. He helped stop a nuclear bomb at Cape Thompson. very political.”

Their ties to the land were a central He also found controversy. called Inupiat Paitot, it was agreed that The Atomic Energy Commission a newspaper was needed to keep ev- part of their heritage. Fate recalled an was preparing to carry out an experi- eryone informed on the issues. To his elder telling the village children that ment by Edward Teller to carve out a surprise, Rock was appointed to run it. they would have to work to own the new harbor by detonating a nuclear It was an apt choice, according to land, which made them giggle.

“We always thought it was ours forbomb at Cape Thompson near the vil- former Alaska legislator Willie Hensley. ever,” Fate said. “He always told us to lage. Rock was one of the few people in the village who could read English and FINDING HIS VOICE prepare to own our land but you have he started studying the reports about Many Alaska Natives were reluctant to to go to C.D. Washington — that’s how the project. What he found out alarmed upset the status quo. Rock, however, he always said it, C.D. him. The villagers were not told of the spoke out through the Tundra Times.

“Nobody touched our traplines or our possible risk of fallout from Project “ I t t o o k a s u p e r h u m a n e f - muskrat or our fish camps, our salmon.

Chariot to themselves or the plants fort, really, to say that it was not It was ours, and we always shared.” and animals on which they subsisted. right,” Hensley said of challenges They soon realized, that they would He wrote letters on behalf of the vil- to State land claims. “That was have to fight to keep their lands. lagers protesting the project and soon a David-and- Goliath moment.”

A pivotal moment occurred in 1966. came to the attention of the American With help from Tom Snapp, a Emil Notti, then president of the Association of Indian Affairs. That group reporter from the Fairbanks Daily Cook Inlet Native Association, was in was involved in a protest over migra- News-Miner, and many others, such Fairbanks planning a statewide meeting tory hunting rights in Barrow. The AAIA as Dr. Henry Stone Forbes of Massa- of Alaska Native leaders. He expected called for a meeting of Inupiat leaders in chusetts who provided much of the about a dozen people to attend and Barrow to discuss common issues and capital funding in the first years, the mentioned it to Rock. invited Rock. At the end of the meeting, paper got out. In addition to politics “Notti went back to Anchorage and

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www.akbizmag.com • Alaska Business Monthly • January 2011

was utterly astonished to get the Tundra Times that week with the headline saying he was chairing the first statewide meeting of Natives,” Morgan said, laughing.

About 300 people showed up for what was the birth of the Alaska Federation of Natives.

At the meeting, they passed around a research paper that Hensley had written about Native land claims for a graduate class taught by Jay Rabinowitz at the University of Alaska. The paper, titled “What Rights to Land have the Alaska Natives: The Primary Issue,” laid the groundwork for Alaska Native claims and the shape of the Alaska Native regional corporations created under the Alaska Native Claims Settlement Act in 1971.

“Until I wrote that paper, I was in the dark,” said Hensley, who served 10 years in the Alaska Legislature and helped found NANA Regional Corp.

“They couldn’t just extinguish underlying aboriginal rights without some form of compensation.

“That little paper just confirmed in Native peoples’ minds that it was our land.”

MOVING MOUNTAINS While serving in the Legislature, Hensley had access to more information and kept an eye on the issues. He passed news to Rock, who published it in the Tundra Times to keep the villages informed.

“Howard’s paper never had a very large circulation, but the circulation it did have fell on very powerful ears,” Hensley said.

Rock was a quiet man, Morgan said.

He was also persuasive. Morgan had won a grant that enabled her to work in Alaska for Rock for a year. Afterward, she moved on to the Los Angeles Times with great success. Then Rock called.

“He called me and said ‘you must come back,’” Morgan said. “And I said, Howard you can’t pay me what I’m making here. And he said, ‘no you’ll take a cut.’ So I came back.”

Rock typically worked long days.

When he wasn’t at the office, he could be found at a table just off the bar at Tommy’s Elbow Room in Fairbanks. The Elbow Room became his second office and it’s where a steady stream of people went to meet Rock and exchange news.

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“You could come and you could sit at Howard’s table,” Morgan said.

“You didn’t have to say a word; you’d just sit there, have a drink or not. So that was kind of central before there was a central organization. At least you knew who was in town and other people sitting at the table, they knew of other people who were in town and they knew where to find them.”

By 1967, Rock had victory in sight.

Secretary of the Interior Stewart Udall had frozen all land claims in Alaska until Alaska Native claims were settled. The discovery of oil at Prudhoe Bay added to the urgency.

On Dec. 18, 1971, President Nixon signed the Alaska Native Claims Settlement Act, dividing 44 million acres of land and $962.5 million among Alaska’s Native peoples in the form 13 regional corporations (land wasn’t granted to the 13th Regional Corp., which represented Alaska Natives who were not permanent residents of one of the 12 regions on the date they applied for enrollment under the act) and more than 200 village corporations.

Rock and the Tundra Times continued to follow the progress of ANCSA, although he was diagnosed with cancer in 1973. He worked until his death in 1976.

The Tundra Times went bankrupt in 1997.

The Ukpeagvik Inupiat Corporation of Barrow acquired the archives and copyrights of the Tundra Times, including more than 15,000 black-andwhite photographs, which are housed in the Tuzzy Consortium Library (www.tuzzy.com).

“Howard, the most amazing thing was he was unflappable,” Morgan said.

“I realized years later as I researched the book that he’d seen just about everything a human could see.

“Sometimes Native leaders would screw up while we were working on claims and he never got angry with them. I realized later because he’d screwed up so much himself.

He never expected perfection out of anybody but what he wanted was what I wanted; something better than we had already. And if the claims hadn’t passed, I don’t know what ❑ would have happened.”

www.akbizmag.com • Alaska Business Monthly • January 2011

SPECIAL SECTION: ANCSA 40th ANNIVERSARY

ANCSA Opened Education’s Doors Local schools, higher education for Alaska Natives

Photo by Rob Stapleton/ANCSA@40

BY JULIE STRICKER

Mary Jane Fate and her husband Hugh “Bud” Fate dedicated themselves to improving educational opportunities for Alaska Natives. She is pictured at the September 2010 ANCSA@40 panel discussion.

M

ary Jane Fate grew up in the Koyukon Athabascan village of Rampart on the Yukon River. She recalls a childhood in which winters were spent trapping, and spring was the season they caught muskrats on the open lakes. Then they would build rafts of logs, float down the river to sell them to the steamboat operators and spend the summer at fish camp.

For most Alaska Native children in the villages, what formal education they received ended in the eighth grade in schools run by the Bureau of Indian Affairs. Students were taught English and discouraged from speaking their native languages. The few who were

76

encouraged to attend high school were sent to boarding school hundreds or thousands of miles from their families.

“There wasn’t any education close to home with family involvement,” Fate said. “This was very important to us because we had so much respect for our elders.”

Fate left Rampart and attended Mount Edgecumbe School in Sitka. She is one of the few Alaska Natives of her generation who graduated from high school and college in the 1950s and ’60s.

After moving to Fairbanks, she and her husband, Hugh “Bud” Fate, dedicated themselves to improving educational opportunities for Alaska Natives.

They helped found the Fairbanks Native Association, and Mary Jane went on to become co-chair of the Alaska Federation of Natives and a member of the University of Alaska Board of Regents.

She was also president of the Rampart Village Corp., which was created under the Alaska Native Claims Settlement Act of 1971. And it was the issue of land claims, and ANCSA, that ultimately re-wrote the book on education in Alaska, although education was not written into the legislation, nor was it mentioned in the discussions leading up to it.

In short, ANCSA set the framework for a community-oriented education system, said Clara Anderson, director of the University of Alaska Fairbanks Interior-Aleutians Campus.

“I can’t begin to explain how transformative ANCSA was and what a huge change that was,” Anderson said.

“Education became a very hot-button issue after ANCSA was passed,” said Ray Barnhard, professor of crosscultural studies at the University of Alaska Fairbanks.

GAINING LOCAL HIGH SCHOOLS In 1970, there were about 120 village schools in Alaska operated by the Bureau of Indian Affairs. Almost all ended in the eighth grade. Although high schools were provided in communities with white student populations, Alaska Native students who wanted to attend high school were sent to boarding schools or boarding home programs.

Dropout rates were high and reports of neglect and abuse were common. Statistics provided by Anderson show only about 2,000 Alaska Natives graduated from high school in the 1960s.

www.akbizmag.com • Alaska Business Monthly • January 2011

In 1971, the village of Kivalina in Northwest Alaska asked the Alaska Legal Services Corp. to help get it a local high school. Its request was granted and other villages clamored to be included.

A class-action lawsuit was filed on behalf of all Alaska Native children living in villages without high schools. The first name on the list was of 27 plaintiffs was Molly Hootch, a 16-year-old from Emmonak. In 1972, Hootch vs. Alaska State-Operated School System was filed.

The process of getting the legislation passed conferred a great deal of political clout to Alaska Native organizations in the early 1970s, said Miranda Wright, head of the Department of Alaska Native Studies and Rural Development at the University of Alaska Fairbanks.

Under ANCSA, Alaska Natives had received 44 million acres of land and $962.5 million. ANCSA also set up 12 regional corporations and more than 200 village corporations to administer it. They had money, they had land and the process of settling the land claims had led to greater awareness of Alaska Native communities and issues to the outside world.

Attorney Stephen E. Cotton wrote in “Educational Research Quarterly” in 1984 that for the first time, villagers were asked what educational opportunities they wanted instead of someone coming in from outside and telling them what they could have. Almost all chose to have a school built in the community.

The State replied that it could not afford to build schools in every community, but the villages refused to back down.

Alaska Native leaders and corporations took on education as a top issue, Barnhardt said, and they had the means to back it up and evidence of racial discrimination in educational opportunities.

In 1976, the case commonly referred to as the Molly Hootch case, was settled by consent decree under the title of Tobeluk vs. Lind. In the next decade, 121 new high schools were built at a cost of $140 million.

At the same time, Senate Bill 35 in the Alaska Legislature dismantled the Alaska State-operated school system.

“Those two steps alone had huge impacts on education in Alaska,” Barnhardt said.

Cotton noted that although the media had focused on the cost of the schools, two other features of the settlement may have more lasting effects on education and culture in rural Alaska.

“The first of these features is the decision-making processes spelled out in the consent decree – in short, the political power that accrued to villages as a result of the settlement. That power may or may not prove to be short lived.

The second feature of the settlement flows from the overwhelming exercise of power by the villages in favor of local high schools: For the first time in the history of the state, a generation of village leaders is likely to emerge from among students who are today being educated through high school in traditional villages, not in boarding programs.”

COLLEGE BECOMES REALITY As post-secondary education spread, it opened doors with the College of Rural Development and outreach into rural communities, Wright said. The State began to create a series of community colleges and vocational schools around

www.akbizmag.com • Alaska Business Monthly • January 2011

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the state to bring higher education opportunities to the village regions.

In the 1980s, undergraduate programs and university programs were instituted. In the 1990s, master’s programs were created, and today students can earn a doctorate under the rural education programs.

“There’s been a pretty steady decade-by-decade expansion of educational opportunities for Alaska Native students,” Barnhardt said.

Those opportunities came at a time of great need in rural Alaska.

The ANCSA corporations are unlike other businesses. Along with their mandate to support their shareholders financially, they are also tasked with maintaining their social and cultural well-being. The people running the corporations not only had to be business savvy, but they needed to know something about their shareholders’ history and culture. Much about modern business practices was unknown in rural Alaska only 40 years ago.

Journalist Lael Morgan remembers reading one of the first annual reports from a regional corporation. It included explanations for basic business terms, such as interest: If someone loaned you a salmon because you were on hard times and then your fortunes turned around and you gave them two salmon, one would replace the salmon they gave you and the other would be interest.

In many ways, the corporations were starting from the ground up, and although they could hire managers and accountants with a general business background, the corporations needed to find people to fill positions who knew something about the history and cultural context of the corporations, Barnhardt said.

The corporations themselves have been at the forefront of providing opportunities for shareholders and their descendants. The regional corporations and many of the village corporations offer millions of dollars worth of scholarships, as well as vocational training and mentoring programs.

High school graduation rates have risen exponentially and more college programs are being created, with the Internet and other distance technology playing a big role. They allow

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KEEPING THE CULTURE

“There’s been a pretty steady decade-bydecade expansion of educational opportunities for Alaska Native students.”

– Ray Barnhard, Professor CrossCultural Studies University of Alaska Fairbanks students access to quality programs while allowing them to stay in touch with their culture.

Anderson, director of the Interior-Aleutians Campus, grew up in Fairbanks and earned a sociology degree from the University of Alaska Fairbanks campus. She has watched as the first generation of students graduated from community schools and entered college.

“It wasn’t until the 1990s we had enough high school graduates that college really became doable,” said Anderson.

What impresses her, though, is seeing the students’ connectivity to their villages. She said she was at the Alaska Federation of Natives’ convention in Fairbanks in October watching a large group of youths from Tanana dancing as part of Quyana celebration.

“That was just a beautiful example of community strength that those students were able to carry on the cultures of the community,” she said. It is a culture that they are learning from their elders, and the only place they can do that is at home.

“Students can always catch up on the academics, but where else are you going to learn intergenerational culture?”

Anderson asked.

Challenges remain, however. Providing education in rural areas is expensive and there’s a constant tension between preparing students to live in today’s world while preserving village traditions. Population is falling in many Alaska villages, to the point that schools are closing or losing funding because of a shortage of students.

Alaska Commissioner of Education Larry LeDoux noted that school is the center of community life, especially in the smaller villages.

“In a rural Alaska community, the children are connected to almost everybody,” LeDoux said. “When you send them away, all those connections are severed.”

He also noted the difficulty of maintaining quality programs, services and facilities in small, remote schools. Dropout rates are still much higher in rural Alaska than in urban Alaska. The Internet and improvements in distance technology are helping to close the gap, but much remains to be done.

LeDoux said his goal is to help students develop an attitude of success.

“It’s a challenge to change,” he said.

“I would like to have a greater sense of ownership in communities.”

The past four decades have been a time of incredible change in Alaska’s education system.

“The kids all have a dream, and it’s up to us adults to find a way to help ❑ them achieve it,” LeDoux said.

www.akbizmag.com • Alaska Business Monthly • January 2011

SPECIAL SECTION: ANCSA 40th ANNIVERSARY

Prudhoe Bay Oil Discovery Expedited ANCSA Pipeline required settlement of land claims

BY VANESSA ORR

“To this day, I think that with the high unemployment rates in Alaska villages – sometimes 60 percent or more – that more could be done by the State and the oil companies to provide training and hiring on the pipeline.”

– Emil Notti

©2011 Roger Asbury

The trans trans-Alaska Alaska oil pipeline pipeline, as it zig zig-zags zags across the landscape landscape. Image taken north of the Alaska Range Range.

F

in June of 1977, the pipeline today transports approximately 11 percent of the nation’s domestic oil production across 800 miles of tundra, mountains and rivers from the North Slope to Valdez – a route almost as rugged as its path to fruition.

According to a timeline established by the PBS series, American Experience: The Alaska Pipeline, in 1966, Interior Secretary Stewart Udall imposed a land freeze in Alaska prohibiting

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or more than 30 years, the transAlaska oil pipeline has been a part of the Last Frontier’s landscape. But it wasn’t until a diverse group of people, including Alaska Natives, oil companies, environmentalists and business owners all compromised that the project could come to pass.

In an almost perfect storm of events, a number of complex and contentious issues were resolved in order for the $8 billion project to happen. Opened

the federal government from giving the State of Alaska land titles as agreed under the Statehood Act. The federal government had already given out provisional titles to 12 million acres, including Prudhoe Bay, where a massive oil field was later discovered. The freeze was put in place to allow Alaska Natives time to settle outstanding land claims.

“When Secretary Udall ‘froze’ the land, it resulted in a freeze on rightsof-way, which meant the pipeline could

not go forward,” explained Jack Roderick, an attorney who worked with the Alyeska Pipeline Service Co. during the time of the Alaska Native Claims Settlement Act, and author of the book, “Crude Dreams: A Personal History of Oil & Politics in Alaska.”

“One of the conditions was that the freeze wouldn’t be lifted until the land claims were settled, so Congress had to act on the claims, or permits wouldn’t be issued and the pipeline couldn’t proceed.”

CREATING TAPS The companies that discovered the Prudhoe Bay oil field – Atlantic Richfield Co. and Humble Oil and Refining Co. (now Exxon) – joined with British Petroleum (now BP) to form the transAlaska oil pipeline in the hopes of moving the project forward. In 1969, they announced plans to build the pipeline underground, and filed for federal rightof-way permits.

“One of the interesting things at that time was that some of the oil executives weren’t even aware of the issues facing them – it came as quite a surprise,” said Roderick. In his book, he shares the story of oil lobbyist Hugh Gallagher who, in 1969, asked Clive Hardcastle, the young president of BP North America, how they’d dealt with the landfreeze issues and Native land claims.

Gallagher responded, “What are Native claims? What’s a land freeze?”

It wasn’t until the president of Alyeska, Edward Patton, stated to the Anchorage Chamber of Commerce in September of 1970 that there would be no pipeline permits without a landclaims settlement that Big Oil, and the state’s business people, realized what had to be done.

“My recollection is that the business community in Anchorage and the Chamber of Commerce were very upset, but it all came to a breaking

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“It all came to a breaking point when Ed Patton stood up and said that without a land claim settlement, there would be no pipeline.”

– Jack Roderick

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I

www.akbizmag.com • Alaska Business Monthly • January 2011

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point when Ed Patton stood up and said without a land-claim settlement, there would be no pipeline,” said Roderick.

“There was a lot of pressure on us that we were holding up progress and holding up jobs, and we weren’t trying to hold up anybody,” said Emil Notti, a key participant in ANCSA negotiations and former president of the Alaska Federation of Natives. “I personally thought the oil companies would be able to do whatever they wanted to do; when they wanted the oil pipeline to go, if we were holding it up, they’d find a way to do it.”

NATIVE CLAIMS, ENVIRONMENTALISTS STALL PIPELINE

Photo BY Rob Stapleton/ANCSA@40

While it seemed that the oil companies were aligned with the State and Alaska Natives to settle the land claims, Notti remembers it differently.

“The oil companies didn’t want to get involved, for or against,” he said.

“Their stand to us was, ‘we don’t care, just solve the problem.’ ” Even as the fight to settle land claims

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continued, those hoping for a quick solution to the pipeline problem were facing other obstacles. In 1970, a suit was filed by five Native villages against the oil companies and the Department of Interior claiming the pipeline failed to honor a previous agreement to hire Native contractors and laborers for the project, and another suit, against Walter J. Hickel, demanded that the government not begin any construction until Alaska Natives along the pipeline’s route gave consent.

At the same time, a number of environmental groups, including the Wilderness Society, Friends of the Earth, and the Environmental Defense Fund filed a suit claiming Alyeska violated the Mineral Leasing Act of 1920 and the National Environmental Policy Act. “Environmentalists were raising questions about the pipeline, and the fact the oil companies wanted to bury most of it,” said Roderick.

While it was originally estimated that one-sixth of the pipe would have to be elevated, eventually half of the entire pipeline had to be put on steel pilings.

Today’s pipeline traverses three mountain ranges, three major earthquake faults and more than 500 rivers and streams, and includes more than 550 crossing areas for wildlife.

The original Environmental Impact Statement provided by the Department of Interior, which was 196 pages, eventually grew to fill nine volumes. In 1972, it was determined the State, Alyeska and the Department of Interior had met all of the legal requirements and the temporary injunction was dissolved. In 1973, additional environmental legal issues were settled, allowing the pipeline to move forward.

HIGH COST OF HOLDUPS “All of these delays in the project were very costly; a lot of Alaska businesses lost a lot of money,” said Roderick.

“When TAPS was originally formed in 1968, companies around the state geared up and got ready to go, but then nothing happened for more than three years.” In Valdez, $100 million worth of pipe shipped from Japan lay rusting for more than five years.

In the meantime, Alaska Natives had continued in their fight to claim their traditional lands, which resulted in the passing of ANCSA, signed by President Richard Nixon in 1971. The law gave Alaska Natives the right to select 44 million acres of land and nearly $1 billion, half of which would come from oil production royalties.

Provisions of ANCSA included the formation of 200 local village corporations and 12 Native-owned regional corporations, plus a 13th corporation made up of Alaska Natives who had left the state.

“In return for the release of the rightof-way through the pipeline corridor, the oil companies were expected to provide jobs for Alaska Natives – a guaranteed percentage of jobs in the construction and operation of the pipeline,” said Notti. “This has not been as beneficial as it should have been; it was almost 30 years before the companies achieved the percentage of Native-hire that they promised, and that only happened during the two to three years prior to the companies having to reapply to extend their right-of-way.

“To this day, I think that with the high unemployment rates in Alaska

Emil Notti reflects on a question during the September ANCSA@40 panel discussion in Fairbanks. www.akbizmag.com • Alaska Business Monthly • January 2011

villages â&#x20AC;&#x201C; sometimes 60 percent or more â&#x20AC;&#x201C; that more could be done by the State and the oil companies to provide training and hiring on the pipeline.â&#x20AC;?

SOLVING THE RIDDLE While there is no way to be sure, Roderick believes it is because of the need for the trans-Alaska oil pipeline the Alaska Native Claims Settlement Act was passed as quickly as it was. In 1935, the first time Alaska Natives sued to be compensated by the federal government for setting aside areas of the Tongass National Forest, the case took 33 years to resolve. â&#x20AC;&#x153;I donâ&#x20AC;&#x2122;t believe the Alaska Native land claims would have been settled when they were except for the pipeline needing the right-of-way,â&#x20AC;? he said. â&#x20AC;&#x153;Whether it would have been settled 10 years later, or 20 years later, I have no idea, but I do believe that TAPS was the reason it was more fast-paced.â&#x20AC;?

As part of the Alaska Native Claims Settlement Act, 80 million acres of significant federal lands were also withdrawn from development potentially to be made available by Congress to serve as national parks, wildlife refuges and national forests. According to the National Parks Conservation Association website, these areas, called â&#x20AC;&#x153;d-2 landsâ&#x20AC;? for their placement within the Act, were earmarked in response to concerns from the environmental community that Alaska was being carved up with too much emphasis on development. These lands, which later grew to include 104 million acres, became the crux of ANILCA, or the Alaska National Interest Lands Conservation Act, which President Jimmy Carter signed in 1980.

Alyeskaâ&#x20AC;&#x2122;s website documents the pipeline timeline. â&#x20AC;&#x153;Construction began March 27, 1975, and was completed May 31, 1977. First oil moved through the pipeline June 20, 1977. First tanker to carry crude oil from Valdez was the ARCO Juneau, August 1, 1977.â&#x20AC;?

Twenty-eight thousand men and women were employed at the peak of construction in October 1975; 70,000 over the life of the project. To date, the pipeline â&#x20AC;&#x201C; a model of engineering, negotiation and cooperation â&#x20AC;&#x201C; has carried more than 15 billion barrels of crude oil over its 800-mile route. â?&#x2018;

FINALLY, A RUGGED PHONE FOR RUGGED WORK. (:;(* IYPUNZ `V\ [OL :VUPT ?7 8\LZ[ 7YV [OL [V\NOLZ[ WOVUL VU [OL THYRL[ â&#x20AC;˘ Resistant to petroleum oils and other chemicals â&#x20AC;˘ Extreme temperature resilience â&#x20AC;˘ Drop impact resistant â&#x20AC;˘ Submersible in fresh/salt water for up to 30 minutes â&#x20AC;˘ Extra long battery life â&#x20AC;&#x201C; up to 18 hours â&#x20AC;˘ Three-year unconditional guarantee > 0 9 , 3 , : : 0 5 ; , 9 5 , ; + (;( 7 / 6 5 ,

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www.akbizmag.com â&#x20AC;˘ Alaska Business Monthly â&#x20AC;˘ January 2011

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TRANSPORTATION

Heavy Haul Trucking

Photo courtesy of Lynden Inc.

An Alaska West Express truck hauling a missile silo in Alaska.

Transportation challenge in Alaska

BY TRACY BARBOUR

H

eavy haul trucking is a specialized and demanding business that presents a unique set of challenges – especially in Alaska.

The most common heavy haul moves in Alaska involve “overweight and oversize” equipment, including excavators, dozers, loaders and cranes.

More specialized moves entail bridge girders, mobile drill rigs, wind mill generators, houses and even airplanes. Some of the heaviest shipments in the state have included transporting 446,000 pounds of module units for Prudhoe Bay and moving a 416,000-pound refinery reactor from Anchorage to Kenai, according to Dan K. Breeden, director of the Alaska Department of Transportation and Public Facilities, Division of Mea-

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surement Standards and Commercial Vehicle Enforcement.

“I generally think of overweight or over-dimensional loads as anything over the legal weight or over the legal size of 8 feet 6 inches wide, 15 feet high, or greater than 75 feet long,” Breeden says.

In the Municipality of Anchorage, for example, weight restrictions for legal axle loads may apply to all vehicles over 10,000 gross vehicle weight. These restrictions – designed to reduce pavement damage to roads during spring breakup – are normally required from March/April through May. The duration of the restrictions depends on the weather and temperature. The existence and condition of bridges along heavy haul routes can also impact weight restrictions.

“Anything over 428,000 pounds is pretty much a show-stopper on all routes, if there are bridges involved,” Breeden says.

SPECIAL HANDLING For Carlile Transportation Systems, heavy haul trucking equates to more than moving things that are extremely large, long or heavy. It also involves special handling requirements, says Gene Carlson, Carlile’s vice president of special projects.

Typical heavy haul freight for Carlile includes machinery, oil field materials (pre-fab modular buildings weighing up to 110 tons), construction materials and refinery materials for expansions and upgrades. The company also provides special handling for helicopters and

www.akbizmag.com • Alaska Business Monthly • January 2011

other high-value pieces. When moving these items, special provisions can be made to ensure extra protection during transport, including a securement plan, tarping and limited speed. In addition, Carlile uses powerful Kenworth tractors to support heavier loads.

“We order them with a larger radiator (to dissipate the heater), larger rear ends (for more weight capacity), a stranger frame, a larger transmission and a larger motor,” Carlson says.

For Carlile, heavy haul trucking helps its clients solve complex logistical problems. The company’s wholly-owned terminals serve Alaska from Anchorage, Fairbanks, Kenai, Kodiak, Prudhoe Bay and Seward, as well as Seattle; Houston; Blaine, Minn.; and Edmonton, Alberta Canada. Heavy haul shipping constitutes about 15 percent of the company’s gross revenue, Carlson says. Carlile has 27 heavy haul drivers transporting overweight and over-dimensional items throughout Alaska. Some of these drivers, incidentally, are gaining national attention on the popular History Channel series Ice Road Truckers.

Heavy haul shipping also represents a significant amount of business for the Lynden family of companies.

The company’s service area includes Alaska, Washington state and Western Canada, with additional service extending throughout the United States and internationally, via land, sea and air. Lynden strives to combine the right people with the right tools and the right experience to solve complicated transportation problems for its clients. Lynden’s corporate umbrella is made up of multiple companies that all work together to facilitate heavy haul moves in Alaska.

The company’s heavy haul division transports everything from large machinery and oilfield modules to wind generators and missile defense-related shipments. The freight can weigh from 35 tons to 110 tons, with the typical size being 65 tons, according to Steve Willford, project manager heavy haul.

“We have a large array of special equipment and trailers to handle oversize loads,” Willford says. “It’s very specialized.”

Lynden’s special equipment includes trucks with three drive axles and lower gearing. When needed, assist trucks that push and pull help propel super-heavy www.akbizmag.com • Alaska Business Monthly • January 2011

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loads over steep grades. The company also combines multimodal capabilities, such as barge, steamship and air to transport overweight and oversize items from the Lower 48 and international origins to Alaska. To meet the needs of complex heavy haul moves where terrain poses challenges, Lynden can, for example, employ barge landings, rolling off oil modules to meet with trucks and specialized trailers to move the cargo to final destination.

Lynden has completed heavy haul jobs for major oil companies, contracting companies and government agencies in the state.

PERMITTING REQUIREMENTS The transport of overweight and oversize loads on Alaska’s highways is regulated by the Alaska Department of Transportation and Public Facilities, Division of Measurement Standards and Commercial Vehicle Enforcement.

Located in Anchorage, the agency is responsible for issuing permits for all overweight and over-dimensional loads moved within the entire state.

“We issue about 18,000 to 20,000 permits a year,” Breeden says.

Trucking companies are required to complete an oversize and overweight permit application for all commercial vehicles that carry larger loads. For trucks carrying overweight items, they also have to attach a “Bridge Condition” form specifying axle weights, tire tread width and other details. Carriers also must indicate the exact route their truck will take.

“When we get an application for an oversize/overweight move, we do everything we can to make it happen, with safety and protection of infrastructure being our main concerns,” Breeden says. “We review the route to make sure the vehicle and load can clear obstacles (utilities, roadside structures, etc.). And if the vehicles and/or loads are overweight, we do a bridge analysis on each bridge to make sure they will not be impacted.”

Carriers can choose their own routes, but they must travel on designated highways. In Anchorage, for instance, trucks with double loads are restricted to larger roadways such as the Seward Highway and Tudor, Muldoon and International Airport road. These routes provide

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access to and from the municipal boundaries and major industrial areas, as well as ports of entry, such as Ted Stevens Anchorage International Airport and the Port of Anchorage. When traveling downtown, trucks hauling heavy freight have to stick to the main routes that are closest to their destination.

Emergency vehicles are an exception. They normally don’t need to obtain permits prior to moving heavy loads. They can transport large cargo with a verbal approval and apply for a permit later, according to Breeden.

This typically happens in cases where heavy equipment is required to responded wildfires, flooding and other emergencies. Some examples include the extensive flooding in Valdez and the recent rock slide that closed off the town of Whittier.

“We are reactionary to assist in any way we can for natural disasters,” Breeden says.

As another exception, certain long combination vehicles are not required to have a permit. A truck tractor and two trailing units don’t need a permit, while a truck tractor with three trailing units does need a permit. In either case, drivers must have a commercial driver’s license and comply with state laws and regulations.

Oversize and overweight permits are available for a single trip or an extended period, with fees varying. Permit fees increased by an average 22 percent in April 2009. The fees had been at the same level for many years and the increase was long overdue, Breeden says.

“The cost of doing business was going up, and we needed to continue to pay for our program,” he said. “I made the decision to increase fees to their current levels, which was an honest representation of what was needed to bring us in line with our costs.”

“Everyday wear and tear and age on our infrastructure makes it challenging,” Breeden said. “One year a move can be approved, and the next year that same move can’t happen until repairs or replacement of a structure is completed.”

Weather is a chief safety concern for Carlile. Alaska’s weather is much more severe, which dictates challenging road conditions, Carlson says.

“The grades of the hills that we climb are much more excessive than what’s typically done in the states,” he says.

“You’re always fighting the cold weather.”

Maintaining traction in snowy or muddy conditions is a risky situation, which the company solves with the use of chains. The company also uses frequent tire changes and maintenance to ensure the safety of its vehicles.

“We put a larger amount of stress on the equipment by moving heavy weight,” Carlson says. “Because of that, we check each truck after every trip to make sure we are not developing a problem.”

Having well-trained drivers is also a critical factor in safely moving heavier,

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SAFETY FIRST In some ways, Breeden says, Alaska’s extreme climate and geography make heavy haul trucking more difficult to manage than in other states. But in other aspects, hauling heavier loads is easier because Alaska has less congestion and overbuilt infrastructure. Changes in the state’s infrastructure, however, have an impact on how heavy haul freight gets moved around the state.

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www.akbizmag.com • Alaska Business Monthly • January 2011

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longer and wider loads. Heavy haul trucking is more management intensive and more labor intensive than normal trucking, Carlson says. It requires a different thought process and specialized equipment. To effectively do heavy haul work, drivers need to have a clear thought process, more hours behind the wheel and plenty of patience. Heavy haul work is also physically demanding, as drivers sometimes assist with loading and unloading of freight.

Safety is also a major area of concern for Lynden. Perhaps the biggest issue is traffic. Overweight and oversize moves often involve multiple lanes of traffic, icy roads in winter and thawing roads in spring. This makes it an even bigger challenge for drivers to get loads safely to their destination.

“The geography and climate are pretty extreme in Alaska,” Willford says.

“You’ve got to exercise caution with regard to everything else that’s around you, whether it’s the motoring public or the environment we operate in.”

As part of its safety efforts, Lynden maintains a thorough training program for drivers. The company has an Alaska

training center that instructs drivers on the importance of safety. In addition, Lynden’s employees stay up-to-date on heavy haul requirements to ensure its customers are satisfied and equipment is operated in a safe manner, according to Willford. “We want to make sure our drivers are safe, the motoring public is safe and the cargo we’re hauling for our customers is safe and intact,” he says.

NEW REGULATIONS A number of changes are taking place to enhance the safety of the trucking industry. Changes in equipment designs are making it more conducive to haul larger dimensions and heavier weight loads, according to Carlson. They also make it a little safer for heavy haul drivers, he says.

Recently, the U.S. Department of Transportation passed new regulations to improve the safety of truck drivers nationwide. The Federal Motor Carrier Safety Administration launched Comprehensive Safety Analysis 2010 (CSA 2010) to increase large truck and bus safety and ultimately reduce crashes, injuries and fatalities involving

commercial vehicles. The initiative, in part, holds drivers responsible for moving violations for carrying overloaded cargo. In the past, the trucking companies – not the drivers – were generally held accountable for overweight limits.

Carlson says Carlile is conducting special training to ensure its drivers are up to speed on the requirements of CSA 2010.

“The company as a whole is doing a larger amount of education – and not just with heavy haul drivers – to make sure they understand the impact these violations will have on our employees,” Carlson said.

Breeden doesn’t feel CSA 2010 will have a significant impact on Alaska’s heavy haul carriers. “These guys are topnotch professionals, and their operations are conducted within the parameters of well thought-out plans,” he says. “Most carriers in Alaska are very safety-conscious and run their operations to the letter of the law. We have a very open and honest relationship with industry, and with the good communication that comes with that kind of relationship, we can work our way though the issues.” ❑

Natural resources continue to be the cornerstone for Alaska’s economic development and diversification. AIC is proud to provide the equipment and construction services to the resource development industries.

AICLLC.COM AIC, LLC.

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301 W. NORTHERN LIGHTS BLVD., STE. 600

ANCHORAGE, AK 99503

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

www.akbizmag.com • Alaska Business Monthly • January 2011

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H R M AT T E R S

BY LYNNE CURRY

No Surprises: Making third party investigations pay off

Y

ou receive a letter from a former employee accusing your company of a racially hostile environment. The letter quotes comments allegedly made by two of your staff. You know your employees wouldn’t make those comments and consider the letter an extortion attempt.

A newly hired employee corners you in the hallway. She says a female coworker sexually harassed her when they traveled together on a company project. Too much information – and what do you do with this hot potato?

INVESTIGATE RIGHT AWAY According to attorney Tom Van Flein, a partner with Clapp, Peterson, Van Flein, Tiemessen and Thorsness LLC, “Investigating serious allegations is good business and good legal protection.” Without the investigation, you don’t know where you stand or what you’re up against.

By promptly investigating issues, management shows both good faith and adherence to anti-discrimination and fair-treatment policies.”

USE A NEUTRAL THIRD PARTY Although you could investigate the situation yourself, “You’ve got to use an independent investigator,” says attorney Nelson Page with Burr, Pease & Kurtz PC. “If you don’t, every conclusion drawn from the investigation is subject to question by those involved and by enforcement agencies. In any except the most simple or basic situations, you need to find someone who is both independent and perceived as independent.”

COULD YOUR HR OFFICER, LAW FIRM INVESTIGATE? “Unless the employer has a large human resources department,” says Kim Colbo, an attorney with Hughes, Thorsness, Powell Huddleston &

90

Bauman LLC, “it may not have anyone experienced enough to conduct a quality investigation. Employers who use their own staff to handle complaints internally may face additional allegations their investigation was neither neutral nor fair. If the complaint ends up in litigation and an independent investigator conducted the investigation, a jury may view an independent investigator’s testimony as more credible. Also, if we as attorneys conduct the investigation, we risk becoming a necessary witness and disqualified from representing our client in litigation.”

Attorney Lee Holen agrees.

“Although the HR department can sometimes investigate in less complex matters, the attorney needs to consider how close the investigator is to the individuals to be investigated and the incident. If there is any doubt that the interviews and investigation appear completely impartial, it is better to use an independent third-party investigator.” Also, notes attorney Van Flein, “neutral third-party investigators can be direct and honest without worrying about offending management.” Further, says attorney turned HR consultant with The Growth Company Andy Brown, interviewees interviewed by a non-attorney are often relaxed and offer more information to someone not presented as an attorney.

AVOIDING UNPLEASANT SURPRISES When you select a third-party investigator, use caution. “Pick someone experienced,” says Brown. “You can’t afford the learning mistakes a green investigator makes.”

Experienced investigators know how to get sufficient rapport to get most interviewees talking, how to probe harder when necessary, how to ask questions without putting ideas into an interviewee’s head and how to recognize

©2010 Chris Arend

Knowing how to handle allegations aids employers in court

when a manipulative interviewee plays a game, and how to make the dozens of judgment calls necessary to do a thorough, unbiased investigation.

Experienced investigators know how to let those requesting confidentiality know they can’t promise it without scaring interviewees into silence. Most importantly, experienced investigators know when and with what to contact your legal adviser to ensure you’re protected if the information uncovered reveals unpleasant surprises.

Finally, in terms of unpleasant surprises in the above situation, the sooner management knows what happened, the more effectively management and its attorney can assess the problem and resolve it before litigation results. If litigation occurs despite management’s best efforts, the neutral third-party’s detailed, factual report and findings ❑ may vindicate the company.

Author Lynne Curry, PhD., SPHR, regularly conducts third-party investigations for Alaska attorneys and also serves as an expert witness on workplace issues. Although not an attorney, Curry is a member of the Alaska Bar Association’s employment law section and author of “Managing Equally and Legally,” McFarland and Co., 1990.

www.akbizmag.com • Alaska Business Monthly • January 2011

MARKETING WORKS

BY RON “CAT” MASON

What Marketing Plan?

Better have one or you’ll get left behind

“Dig the well before you are thirsty, not after.”

M

y friend “Bill” and I were talking about his business over a cup of coffee last week. I noticed he seemed worried about something. When I asked Bill what was bothering him, he told me his business was consistently losing money. He said even though his regular customers were still using his business, no new clients were showing up, nor did he see any in the foreseeable future.

I asked Bill what type of marketing plan he was using and if I could take a look at it since building marketing plans was a big part of my consulting business. His response to my inquiry was not totally unexpected; Bill said that he has never had one, and that he relies strictly on word-of-mouth alone to bring in customers.

Bill’s situation is a common occurrence I encounter when working with businesses, from start-ups to large businesses. Since a marketing plan is a necessary component of a business plan, I am not surprised to find an absence of business plans as well. I have found that many small business owners are not sure what a business plan looks like — not to mention a marketing plan.

With the bigger companies, I find the chief marketing officer may not have reviewed the company’s marketing plan in more than a year.

NOW IS THE TIME For a company to be successful, whether it is a small one-person business or a conglomerate, the marketing plan needs to be constantly evaluated and updated. The marketing plan needs to be monitored frequently since the customer market changes so often that

it is easy for a business to be left behind.

With the current world economic situation, businesses tend to shy away from spending money on marketing.

Now, more than ever, is the time to increase marketing or at least continue marketing to stay in the public’s mindshare. When businesses inform me they are unable or unwilling to develop or revise their current marketing plan, I tell them they might as well hang up the “Gone out of Business” sign because I guarantee their competitors are updating and implementing their marketing plans.

The objective of a marketing plan is to act as a roadmap for marketing the business, to assist in management control, and in monitoring the implementation of the marketing strategy.

The marketing plan informs new participants of their roles and functions to obtain resources for implementation, to stimulate thinking, and to make better use of resources. Employees need to be aware of the marketing goals of the business.

ON THE RIGHT PATH The marketing plan places a business on the path to meet its marketing goals which, in turn, enables the company to meet its current and future goals. The ever-changing business environment requires the constant re-evaluation of the marketing plan on a regular basis.

Aside from the fact it gives businesses a path to follow, the marketing plan forces an accountability of action. A marketing plan is a “must have” component of any business plan; this applies to start-up businesses as well as established ones.

©2010 Chris Arend

— Proverb

Because of our conversation, Bill has since developed and implemented a marketing plan for his company, and the company has seen a dramatic increase in new business. Bill also knows to constantly revisit the company’s marketing plan to stay ahead of his competition.

An old proverb I use about marketing plans, especially when dealing with start-up businesses, is this: “Dig the well before you are thirsty, not after.”

In other words, build your marketing plan before you start the business. For existing businesses happy with referrals only, or which have an outdated marketing plan, a quote from Mark Twain says it all: “Even if you are on the right track, if you are just sitting there, someone will pass you.” ❑ Ron “Cat” Mason is the founder and chief executive officer of CM&A Consulting, a business and marketing consulting company. For more information about CM&A Consulting and to read more on marketing planning go to www. cmamarketing.info.

www.akbizmag.com • Alaska Business Monthly • January 2011

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JAN

27-30

ALASKA THIS MONTH

BY NANCY POUNDS

Photos courtesy of Alaska Marine Dealers Association

Anchors Aweigh, Sailors

Boat show makes watercraft owners think spring Anchors Aweigh Boat Show will run Jan. 27-30 at the Dena’ina Civic & Convention Center and the Northway Mall in Anchorage.

F

or the past 27 years, the annual Anchors Aweigh Boat Show has stirred the hearts of Alaska boating enthusiasts during the lull of deep winter, and this winter the show will run Jan. 27-30 at the Dena’ina Civic & Convention Center and the Northway Mall in Anchorage.

Up to 6,000 people attend the boat show annually, with vendors coming from Fairbanks and the Kenai Peninsula, as well as Anchorage.

Visitors can troop through dozens of boats perched indoors at the Dena’ina Center and the mall. The centerpiece of this year’s show will be a new sailboat displayed at the convention center by Sailing Inc. of Seward. The boat show has not featured a sailboat for several years.

“It’s kind of a kickoff to beat the winter doldrums by thinking about spring,” said Tom Anderson, executive director of the Alaska Marine Dealers Association. Anderson’s job includes promoting and coordinating the annual boat show.

Each boat show features seminars, and this year’s agenda includes safety classes from the U.S. Coast Guard and repair clinics for inflatable vessels, among others. A cedar-strip canoe maker will be a guest speaker, and representatives from the Wasilla-based Alaska Transportation Museum

92

will display vintage marine engines, some dating back to the 1920s, Anderson said.

INCREASING WINTER SALES The annual event provides marine dealers with an economic boost from winter sales at the show, and dealers are willing to offer discounts for orders at the show because they don’t have to keep the vessel in stock, he noted. Boat-show vendors generate interest in products, and attendees can order customized vessels at a typically lower rate than they can get during summer, Anderson said.

“It’s a real win-win for the customer and the dealer,” he said.

The Northway Mall venue offers new boats from previous years, for “real bargains,” Anderson added.

Marine dealers have seen a jump in boat-show sales of larger ocean-going vessels in the past several years since the opening of the highway tunnel to Whittier. Highway traffic began traveling through the converted railroad tunnel in summer 2000, and this new route lured boaters to Whittier and Prince William Sound as a port closer to home than Seward or Homer.

www.akbizmag.com • Alaska Business Monthly • January 2011

“It’s a real win-win for the customer and the dealer.”

– Tom Anderson Executive Director Alaska Marine Dealers Association BOAT SHOW HISTORY The first boat show was held at the Sullivan Arena in the mid1980s. Anderson recalls the history from his role as manager of the Sullivan and the Egan Civic & Convention Center.

Later boat shows were conducted at malls and wherever space was available.

This year’s boat show marks the third year at the Dena’ina Center.

“The exhibition floor is 50,000 square feet and is so perfect for the boat show,” Anderson said.

The Dena’ina Center’s large doors help vendors carefully ease their vessels inside, including some measuring up to 30 feet long. Anderson’s previous post as Egan Center and Sullivan Arena manager for 17 years equipped him with tradeshow and venue expertise. The Alaska Marine Dealers Association recruited Anderson two years ago after a 10-year retirement. Now Anderson thoughtfully orchestrates the timing and order of setup for the show.

He cited the industry association members’ camaraderie as a key ingredient.

“Everybody knows each other. It’s a real smooth show in that respect,” he said. ❑ Visit www.anchorsaweighboatshow.com. www.akbizmag.com • Alaska Business Monthly • January 2011

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FINANCIAL SERVICES

TAX ADVISORS VIEW FUTURE WITH CAUTION Previous cuts, new legislation on congressional plates

BY TRACY KALYTIAK

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he 2010-2011 tax-planning season so far has been an unusual one for Chad Estes, tax manager for Mikunda, Cottrell & Co. in Anchorage. The Bush tax cuts, as of November press time, were due to expire at the end of 2010, and Congress had not yet taken action on those or other unfinished tax issues that could potentially affect business owners.

“The uncertainty right now is a scary prospect for a lot of folks,” Estes said. “The giant shift of the election, all the expiring tax breaks, the struggling economy, it’s just kind of a very uncertain time for people and nobody likes uncertainty. The overwhelming issue is thinking it’s going to change, but until you see it in writing and that the president signed it, it’s hard to advise clients on how to proceed.”

Tax rates were set to rise about 4 percent at the end of 2010, if Congress did not act to extend or modify the Bush-era tax cuts.

“In order to grow the economy, raising taxes is not a viable option,” Estes

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said, adding that the cuts could be extended for a year or two. “Something could happen retroactively in 2011 if Congress can’t get through the lameduck session by the end of (2010). It could be January, February, before they get around to passing something.

There’s been big changes in the past, but this late in the year is a new twist.”

HOW TO SAVE ON TAXES With that uncertainty in mind and an eye on what’s ahead in Washington, D.C., Estes discussed with business clients before the end of 2010 options that could save them money. Foremost among those options were the following, as listed and explained by Mikunda Cottrell in the company’s tax-planning guide: ■ Enhanced Section 179 depreciation deductions: Under Section 179 of the Internal Revenue Code, a business can currently deduct the cost of qualified property placed in service during the year, within an annual limit. Prior

©2011 Rob Friedman

to enactment of the Small Business Jobs and Credit Act, which President Barack Obama signed into law Sept. 27, the limit for 2010 was $250,000, although the maximum deduction was subject to a phase-out for annual purchases above $800,000. The new law increases the maximum deduction to $500,000 for 2010 and 2011 with a phase-out threshold of $2 million. Eligible assets include computers, office equipment and furniture; most vehicles, construction and manufacturing equipment also qualify.

Certain real estate improvement costs now qualify for Section 179 deductions of up to $250,000.

Estes said in November that he had been telling clients it would be a good idea to recognize more income for 2010 rather than 2011, because of the tax rate uncertainty pertaining to individual tax rates as well as taxes on long-term capital gains and dividends, which (as of November press time) were expected to go up.

“It’s better to recognize more income (for 2010) and take a tax hit at

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a lower rate,” Estes said in November.

“Clients can structure deals and speed things up to get done by year-end, just in case those rates don’t get extended.”

The new law also restores the bonus depreciation tax break, which expired after 2009. A business may claim a deduction equal to 50 percent of the cost of qualified assets, which include vehicles. An additional year of bonus depreciation through 2011 is allowed for property with a cost-recovery period of 10 years or longer and certain transportation property.

Qualifying new assets had to be placed in service by Dec. 31, 2010.

“There is a tax-saving opportunity for businesses that are able to take advantage of both the Section 179 deduction and 50 percent first-year bonus depreciation,” the guide stated. “These two breaks can be combined to offset a large part, or perhaps all, of a company’s major acquisitions for the year.”

DEPRECIATION RULES While larger businesses may be ineligible for the Section 179 deduction, 50 percent, first-year bonus depreciation is available to any business, regardless of size, according to Mikunda Cottrell.

■ S corporation disposition rules are eased: After a C corporation converts to S corporation status, it may be liable for the “built-in gains” tax if it sells or otherwise disposes of appreciated property within a specified time period. The normal recognition period of 10 years was shortened to seven years for dispositions in tax years beginning in 2009 and 2010. The new law reduces this period still further to only five years for dispositions in tax years beginning in 2011.

■ Start-up expense deductions increase: Prior to the new law, a taxpayer could deduct up to $5,000 of qualified business start-up expenditures for new ventures just getting off the ground. The maximum $5,000 deduction was phased out for expenses more than $50,000.

The new law doubled the maximum deduction for 2010 to $10,000 with a $60,000 phase-out threshold. The figures were scheduled to revert to their prior amounts in 2011.

■ Restrictions on business credits removed: With limited exceptions, general business credits cannot be

used to offset a taxpayer’s alternative minimum tax liability. The new law removes this restriction for “eligible small businesses.” To qualify, average annual gross receipts of a non-public corporation, partnership or small proprietorship for the prior three years can’t exceed $50 million. In addition, beginning in 2010, an eligible small business could carry back general business credits for five years instead of one year.

■ Qualified small business stock gets better tax treatment: Assuming certain requirements are met, an investor in “qualified small business stock” may exclude part of the gain from the sale of the stock after a five-year holding period. Normally, the tax exclusion is 50 percent for QSBS, which is taxed at the 28 percent rate, but the 2009 stimulus law increased the exclusion to 75 percent for acquisitions after Feb. 17, 2009, and before Jan. 1, 2011. Now the new law allows a 100 percent exclusion for acquisitions from the date of enactment through Dec. 31, 2010.

“That’s going to be gone,” Estes said, in November.

■ Cell phone recordkeeping is less burdensome: Previously, cell phones were treated as “listed property” for tax purposes, therefore triggering the same strict substantiation rules that apply to business use of vehicles. In other words, in order to claim deductions, you had to track your business and personal use. The new law removes these requirements for cell phones and similar communication devices, and treats employer-provided devices as tax-free fringe benefits. “That’s something that’s probably a benefit to most businesses since everyone has a cell phone now,” Estes said.

■ Self-employed taxpayers get a break on health insurance costs: A self-employed individual must pay self-employment tax comparable to the Social Security tax paid on employee wages. For 2010, eligible self employed people can deduct health insurance premiums from the self-employment income subject to employment tax.

This tax break is a limited one-year window of opportunity.

■ Contributions to Roth accounts are made easier for some taxpayers:

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Beginning in 2011, estates worth more than $1 million are going to be slammed with a 55 percent tax rate, unless Congress does something to stop it.

Roth lRAs provide tax-free treatment for qualified distributions. Beginning in 2011, participants in State and local government-operated 457 plans (other than employees of nonprofits) can contribute deferred amounts to designated Roth accounts. Participants in 401(k) and 403(b) plans already have this ability. Also, participants in 401(k), 403(b) and 457 plans can roll over account balances to a Roth, subject to tax on pre-tax contributions and earnings.

This provision takes effect on the date of enactment. For rollovers in 2010, you can opt to have the taxable income split between 2011 and 2012.

SUCCESSION PLANNING One of the most prominent unresolved tax issues, Estes said, is the estate tax for 2010. It’s relevant to owners of small businesses who want to do succession planning.

“It’s a big issue, especially for people who want to pass their business on to their kids,” Estes said. “There was no estate tax in 2010.”

Beginning in 2011, estates worth more than $1 million are going to be slammed with a 55 percent tax rate, unless Congress does something to stop it. In 2004-2005, the exclusion was $1.5 million; from 2006-2008, the exclusion was $2 million; in 2009, the exclusion was $3.5 million.

The value of an estate includes all assets, including a house and proceeds from insurance policies on the taxpayer’s life, unless the person has set up things so he or she is not considered to own the policies.

“There’s talk it’s going to be changed, moved up to $3.5 million,” Estes said.

“If nothing is done, people are going to get hit hard. 2010 was the year to die if you had money.”

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Estes advises clients to start now on setting up succession planning, to minimize the impact of estate tax, whatever it turns out to be.

“If you end up on your deathbed and plan at the last minute, things can be pulled back into your estate,” he said.

Without Congressional action and Presidential approval, current tax rate brackets of 10, 15, 25, 28, 33 and 35 percent will be replaced in 2011 by pre-Bush brackets of 15, 28, 31, 36 and 39.6 percent, translating into acrossthe-board tax rate hikes for taxpayers.

The current 0 and 15 percent rates on most long-term gains are scheduled to rise to 5 and 20 percent in 2011. The current 0 and 15 percent rates on dividends will be replaced by ordinary income rates scheduled to be as high as 39.6 percent.

HEALTH INSURANCE PROVISIONS The Patient Protection and Affordable Care Act, enacted last March, enabled qualifying small businesses with fewer than 25 full-time employees to claim up to 35 percent of employee health-care costs. Qualifying nonprofits could claim up to 25 percent.

“There’s a new reporting requirement for employer-provided health insurance,” Estes said. “They’ll be reporting it in 2012 for the 2011 tax year.”

Estes said he expects that the new Congress “is going to tear some of (PPAC) apart.” And that effective dates for some provisions in PPAC extend out to 2018.

“What we’ve been telling clients is that there are major things in PPAC. They need to be aware they’re there and follow them closely going forward to see if they come to fruition,” Estes said.

One thing Estes believes will “go away” are Form 1099 reporting requirements set to take effect in 2012, mandating that companies report each expenditure that is greater than $600.

“We would have to track all the purchases made from Costco, Target, Office Depot, and report that to the IRS at the end of the year,” Estes said. “There’s a lot of talk about that provision being done away with completely. It would be a nightmare for small businesses to add that level of reporting requirement.

That’s going to be a pain.”

Other PPAC-related tax issues include: ● Additional 0.9 percent Medicare tax for high-earners (2013); ● Additional 3.8 percent Medicare tax on net investment income for high-earners (2013); ● $2,500 limit on health care FSA contributions (2013); ● Higher floor (10 percent of AGI) for itemized medical expense deductions (2013); ● Disallowance of deductions for retiree drug plan subsidies (2013); ● Excise tax on medical devices (2013); ● Deductable compensation limit for health insurers (2013); ● Increase in minimum estimated tax payments for corporations (2014); ● New insurance reporting requirements for all providers of insurance (2014); ● Penalties for individuals without “adequate” coverage (2014); ● Penalties for large employers that do not provide “qualified” coverage (2014); ● Health insurance cost-sharing subsidies for qualified low-income individuals (2014); ● Increase in health insurance tax credit for small employers (2014); ● Requires employers to provide “free choice vouchers” to eligible employees (2014); ● Excise tax on health insurance providers (2014); ● Additional increase in health insurance tax credits for small employers (2015); ● Increase in penalties for individuals without “adequate” coverage (2015); ● Increase in penalties for large employers that do not provide “qualified” coverage (2014); ● Additional increase in penalties for individuals without “adequate” coverage (2016); ● Excise tax on “Cadillac” health ❑ plans (2018).

Mikunda Cottrell is a locally owned accounting firm that serves approximately 1,500 individual clients and 1,500 business clients, as well as nonprofits. It launched its office in Anchorage in 1977.

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REGIONAL REVIEW

Spotlight on State’s Seward Peninsula Western Alaska offers rich culture, history and potential

BY TRACY BARBOUR

Photo by R.H. Sargent/Courtesy of U.S. Geological Survey

T

he Seward Peninsula is an expanse of land that stretches about 200 miles from Western Alaska into the Bering Sea. Situated just below the Arctic Circle, the region is mostly treeless tundra and it has long, frigid winters. Cape Prince of Wales occupies the western tip of the peninsula, the most western point in North America. Nome, the area’s largest city, sits on the southern coast. Other cities on the peninsula include Shismaref, Buckland, Koyuk, Brevig Mission, Elim, Teller and White Mountain – all with populations ranging from 250 to 600. The region also includes the mining towns of Council, Solomon, Candle, Haycock and Taylor.

Like many places in Alaska, the Seward Peninsula has an abundance of wildlife and open spaces to support subsistence activities and outdoor recreation. Several rivers, including the Koyuk, Kuzitrin and Niukluk, carry

Native Eskimo baskets, Bering Sea, Alaska, circa 1925.

fresh supplies of salmon, Dolly Varden, Arctic Grayling, whitefish and Northern Pike. Beautiful flora and fauna make a scenic backdrop for summer pastimes, such as fishing, hiking and

Nome Census Area at a Glance Population: Approximately 9,500 Location: Western Alaska Total Area: 28,283 square miles (23,001 square miles of land and 5,282 square miles of water) Largest City: Nome Main Industries: Government, health care, fishing and mining Top Employers (by number of workers): Bering Strait School District, Norton Sound Health Corporation and Kawerak Inc. Hospital(s): Norton Sound Health Corp. and Nome Health Center Airport: Nome Airport Port: Port of Nome

bird-watching. During winter, snow machining, skiing and ice fishing are popular pursuits.

The Seward Peninsula has a number of distinctive geologic features. The Devil Mountain Lakes on the northern portion of the peninsula are the largest maar lakes (volcanically created depressions filled with standing water) in the world. They were formed more than 21,000 years ago as the result of an underground steam explosion. In addition, the peninsula was once part of the Bering land bridge, a 1,000-mile-wide stretch of land connecting Siberia with mainland Alaska during the Pleistocene Ice Age. The land bridge facilitated the migration of humans as well as plant and animal species from Asia to North America.

ECONOMY IN THE NOME CENSUS AREA Much of the Seward Peninsula is encompassed in the Nome Census Area which has a population of just less than 10,000.

The area’s economy – like that of many

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Photo by W.C. Mendenhall/Courtesy of U.S. Geological Survey

high as in some other rural locations in Alaska. For example, September’s unemployment rate was 14.8 percent in the Bethel Census Area, 18.9 percent in the Wade Hampton Census Area and 13.7 in the Northwest Arctic Borough.

CITY OF NOME

Nome’s bustling Main Street in 1900.

Photo by R.H. Sargent/Courtesy of U.S. Geological Survey

rural places in Alaska – is driven by local government and health care jobs, according to Alaska Department of Labor Economist Alyssa Shanks. Fishing, mining and tourism are also important drivers of the economy.

Local government, as a whole, represents about 38 percent of all the employment in the Nome Census Area, Shanks says. Within that category, education is the biggest piece of employment and public administration is the second-largest source of jobs. Private health care makes up 18 percent of all jobs in the Nome Census Area and two of the largest employers are Norton Sound Health Corp. and public schools.

The Nome Census Area also has a significant number of retail and service jobs, which tend to be part-time and lower-paying. Still, the area’s annual

wage for 2009 for all jobs was $37,700.

“That’s higher than the average for a lot of other communities in rural Alaska,” Shanks says. “The health care jobs are mostly what’s pulling up that average.”

The higher-paying government jobs are an important stabilizing element to a high-cost area that is bolstered by subsistence. While other places in Alaska have lost jobs, employment in the Nome Census Area has been trending upward – ever so slightly. The growth has been so small that it’s almost flat, Shanks says.

For September 2010, the area’s unemployment rate was 12.7 percent. That’s higher than the area’s 10 percent average, but considerably lower than the August rate of 14 percent.

The unemployment rate for the Nome Census Area wasn’t nearly as

The City of Nome plays a significant role on the Seward Peninsula. Not only is it a regional transportation, supply and service hub for the Bering Straits region, it’s also the final destination of the legendary Iditarod Trail Sled Dog Race that draws visitors from all around the world. A city of about 3,500 residents, Nome receives about 7,500 to 8,000 visitors a year, according to Mike Cavin, director of tourism for the Nome Convention and Visitors Bureau.

Nome’s plethora of birds continues to attract large numbers of people, primarily from mid-May to mid-June, when bird watchers can catch sight of unusual species.

“Spring and early summer are very exciting times to see migrations of Sandhill Cranes, swans, geese and other avian life,” Cavin says. “The BristleThighed Curlew is one highly sought after species for those keeping life lists of bird sightings.”

Visitors can also watch their fill of larger wildlife in the area, including wild herds of musk ox, as well as bear, reindeer, wolves and caribou. With jet service available three times daily from Anchorage, Nome offers tourists easy access to an authentic Alaska experience of wildlife-viewing or other pursuits. Visitors can explore 350 miles of roads along the coast, tundra and mountains and see reminders of the city’s early history as a gold rush town.

Artifacts such as gold dredges, steam locomotives and other remnants are still a very visible part of the landscape.

Increasingly, people are visiting Nome for more than sightseeing. Rising gold prices have created an influx of individuals frequenting the city to participate in off-shore dredging. Consequently, the city is working with the industry to create land-use policies to prevent conflicts between subsistence fishing and outdoor activities, such as swimming.

NOME’S CULTURE AND PEOPLE

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Native Eskimo in kayak, Nome, Seward Peninsula, Alaska, 1904.

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Photo by G.K. Gilbert/Courtesy of U.S. Geological Survey

its rich culture, according to Mayor Denise Michels. Nome is a culturally diverse region with three main Eskimo cultural/linguistic groups: Inupiaq, Yupik and St. Lawrence Island Yupik.

Nome has one of the richest and oldest Eskimo cultures documented in Alaska, with artifacts found in the region dating back 9,000 to 10,000 years.

“These artifacts showcase the ingenuity and creativity of our ancestors,” she says. “We have amazing Alaska Native arts and crafts that are worldclass. Many visitors come to Nome to conduct ancestry research because of the wonderfully preserved documents and photos of Nome and the region.”

Nome’s rich culture is accented by a spirit that makes it a wonderful place to visit and reside. Michels characterizes Nome as a business-savvy, resilient community.

“Nome was incorporated in 1901 and has survived many economic booms and busts, and we continue to adjust with these times,” she said.

Michels also says the City of Nome is working hard to improve the quality of life for its residents and others who live in the region. She adds that economic development, community development, work force development and education must all tie in for a global economy to work.

“We continue to invest in our community to improve our economic base and to pursue and develop long-range projects that will provide stable employment for our citizens,” she says. “These projects improve the quality of life for the citizens of Nome, visitors and for the surrounding villages who view Nome as the center for many of their needs.”

Nome strives to create strong partnerships to diversify and strengthen its economy. This includes collaborating with the private sector and building on its strengths. A prime example of public-private partnership to lower the cost of energy is that between Nome Joint Utility System and Banner LLC. Nome conducted a study with the Department of Energy in partnership with the Alaska Energy Authority and the Denali Commission that identified a 3 megawatt wind- generation prospect that would help displace the use of diesel fuel for power. As

Steamer “Dora”. Nome district, Seward Peninsula region, Alaska, 1899.

a result, a power-purchase agreement was signed with Banner LLC.

DEVELOPMENT IN NOME Nome has a number of other important projects under way, including the construction of a new $8.1 million public safety building. The facility, scheduled to be completed by the end of November, will help the city continue to provide quality services in support of Nome and the region, Michels says.

Another major construction project is Norton Sound Health Corp.’s new hospital, which will create hundreds of jobs for the area.

The City of Nome also is busy making navigation improvements, including constructing a breakwater, sediment management, enhancing harbor access by commercial fishing boats, and improving cargo. The Port of Nome is very active, and Michels has seen an increase in more ocean vessel traffic in the Bering Sea with the opening of the Northern Sea and the Northwest Passage routes.

Arctic shipping also has increased with more cruise ships and exploration vessels going through the Bering Straits. In 2009, there were more than 300 dockings at year end, with vessels stopping in Nome after crossing the Northwest Passage, Michels says.

Things were just as busy in 2010.

Because Nome is in a strategic location for national defense and environmental response protection, Michels says, the city needs to have the infra-

structure and response capability to accommodate both private and government sectors’ ocean-going vessels. The closest harbor for large ocean vessels is Dutch Harbor/Unalaska.

“Nome is the best location to build on our current infrastructure to meet the needs of the ever- growing Arctic,” she adds. “The Port of Nome is a logical location to serve the vast area from Unalaska to Barrow and beyond in the U.S. Coast Guard’s efforts to patrol and monitor the Arctic Ocean.

Nome is currently advocating for the U.S. Corp of Engineers to complete a study to extend the existing causeway, so the city can cater to vessels with drafts of greater than 22 feet. Expanding the existing causeway would allow the Port of Nome to serve as a port of refuge for larger ocean-going vessels, according to Michels. It would also better enable the country to protect its expanding economic fisheries interests.

As an immediate and important benefit, the investment in Nome’s infrastructure would increase efficiency in rural Western Alaska logistical support, Michels says.

“Furthermore, with improvements of the port and infrastructure, resource development may become more economical and provide a continued stimulus to the regional and State economies,” she says. “Finally, an increased port infrastructure would increase our capability to provide our nation with critical nodes of homeland defense in the ever-growing Arctic domain.” ❑

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FILM INDUSTRY

Making Movies Tax incentive program improves economy

BY HEIDI BOHI

S

hortly after the movie “Everyone Loves Whales” began filming in September, Uptown Blossoms, a popular flower shop in midtown Anchorage, had its own brush with fame when the set decorator called to talk about flower needs for various scenes in the movie.

“When we first met him we were sort of nervous, but really he’s just a person like you and me,” shop owner Carol Trout says, adding that her business was recommended to the studio coordinators. “Wherever there was a need for flowers, we supplied them.”

Set in Cold War-era 1988, the film tells the true story of a small-town news reporter and a Greenpeace volunteer, played by Drew Barrymore, who enlist

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the help of rival superpowers to save three gray whales trapped under the ice of the Arctic Circle as they made their way to Mexico for the winter. The national media, environmental activists, and the United States and Soviet Union – then in the middle of the Cold War – quickly descended on Barrow in an effort to escort the whales into open water.

Trout says flower needs all had to be designed to reflect what was in style in the 1980s, and included centerpieces and arrangements for various scenes in the film. Some of the flower orders required working with the production person responsible for props any of the actors or actresses touched.

What it meant for Uptown Blossoms

was about $4,000 in orders. Although Trout says her business is fortunate to have a steady stream of customers year-round, it was nice to have the extra bump.

ALASKA’S NEWEST INDUSTRY Since beginning to offer financial incentives to studios that decide to film their movies in Alaska, as is the case with “Everybody Loves Whales,” the State’s resurrected Film Office is optimistically watching what is being dubbed as Alaska’s newest industry. The hope is the economic development initiative will attract projects that mean millions of dollars in economic impact resulting from increased receipts for small and large businesses and local hire,

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in Alaska

of the industry, especially during the off-season months. “Everybody Loves Whales” filmed for 12 hours a day, five days a week for almost three months.

(It takes about one day to shoot two to four minutes of film.)

As the preferred hotel for 200 cast and crew, the Captain Cook cannot discuss its agreement with Universal Pictures, though it has been estimated the property had 12,100 bed nights booked from September to December, which is historically a slow time after the peak visitor season. Add meals and incidental expenses, along with side trips that crew took on their days off, and it is easy to see how a film project can quickly contribute to the state’s economic development.

EVERGREEN FILMS

A frame from Evergreen Films work in progress, WALKING WITH DINOSAURS 3D, which will be co-produced with BBC Earth and shot in Alaska beginning next year.

Frame courtesy of Evergreen Films

which in the case of “Everyone Loves Whales,” meant hiring 3,000 Alaskans statewide, though most were hired in the Anchorage area. Other businesses that stand to measurably benefit are airlines, hotels, freight handling and air cargo, along with smaller enterprises that include everything from courier businesses to seamstresses.

About 30 productions have been prequalified by the State Film Office, meaning studios have submitted applications, estimated budgets, distribution plans and script treatments for the projects. With $100 million available and a minimum spending requirement of $100,000, most projects qualify, including films, documentaries, commercials and video productions.

According to the legislation behind the Alaska Film Production Incentive Program, up to a 44 percent transferable tax credit is awarded within weeks once a rough-cut of the production is submitted and an Alaska-licensed CPA has audited the project. In addition to the 30 percent base rate, additional percentages are awarded for local hire, off-season production and filming in rural areas.

Although final numbers are still being tabulated to determine how much Alaska benefited from the recent production’s use of local crew and services, after 10 weeks of watching those associated with the project frequent local restaurants, shops and hotels, Alaskans are seeing the potential contributions

“It’s been a long time since there was a new industry in Alaska trying to build from the ground up,” said Kate Tesar, business development director for Evergreen Films.

Evergreen, though not associated with “Everyone Loves Whales,” is one of the industry’s most watched developments. The Anchorage-based production company continues to make substantial investments in Alaska and is positioning itself to take advantage of the growing industry.

It has several productions in the works, one which will likely be the Kate Shugak television series based on Alaska author Dana Stabenow’s mystery novels, including “A Cold Day for Murder,” which won the Mystery Writers of America’s Edgar Award. Other titles that will be made into the series are “Whisper to the Blood,” which made the New York Times bestseller list, and “A Night Too Dark,” which is the 17th in the series.

Based in Anchorage with offices in Los Angeles, Calif., Evergreen was founded by Mike Devlin and Pierre De Lespinois. Devlin has a computer engineering background and Lespinois is an award-winning television and film director. Devlin fell in love with Alaska and decided to build his Anchorage Hillside film editing studio after selling his software company. The team also has a yacht in Seward with adaptations that can accommodate filming both on and under water.

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Another of Evergreen’s biggest market advantages is the company’s state-of-the-art digital and 3D studios, including 3D camera systems, groundbreaking LIDAR scanning technology, photo-real 3D Computer Generated Imagery (CGI), and an integrated 3D post-production workflow. The technology allows them to create a realistic portrayal of any location. This technology will also be used in “Walking With Dinosaurs,” the Alaska-scripted and – produced, live-action dinosaur feature.

That production will highlight photorealistic 3D dinosaurs immersed in real, live-action 3D environments. This will launch in 2013 with 20th Century Fox securing the distribution rights. Evergreen is partnering with BBC Earth to produce the $65 million feature film.

Devlin says most of the live action for “Walking with Dinosaurs” will be filmed in Alaska to take advantage of the beautiful exteriors and the State’s film incentives. The franchise model of the film means a new movie will be produced every two to three years.

Evergreen and BBC are also partnering on the production of the $25 million feature film “Africa 3D.”

NANA PARTNERING Responsible for helping create the incentive legislation, Tesar says Evergreen is committed to developing the industry statewide so that many communities benefit from the economic boost. To that end, it recently partnered with NANA Development Corp., an Alaska Native corporation based in Anchorage, which offers infrastructure and services that will help grow the industry and employ more Alaskans, including NANA shareholders.

“We are thinking it will take 10 to 15 years to build the industry in Alaska and NANA has the same long-term vision,” Devlin says. “Together, the two of us are making a mutual investment to build the industry – we focus on film, they focus on building the service industry, and we will involve them in every production we’re doing.”

By making a financial investment, NANA is about a one-third owner and the company’s partner in films that are shot in the Arctic environment, meaning it is the preferred vendor for those services it offers. The partnership is

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“We are thinking it will take 10 to 15 years to build the industry in Alaska and NANA has the same long-term vision.”

– Mike Devlin Evergreen Co-Founder

©2011 Kristian de Lespinois

Mike Devlin co co-founder founder of Evergreen Films Films, with offices in Anchorage and Los Angeles.

expected to create a lot of opportunity for shareholders – whether they are hired to work on a film project, or they simply benefit from dividends resulting from this newest investment.

When Evergreen approached NANA in 2009, it was looking for corporate involvement in specific highbudget films. NANA was less interested in being involved in specific films and more likely to invest in the company as a whole, says Robin Kornfield, vice president of communication and marketing for NANA Development Corporation. Although being involved in the film industry is not an area NANA has experience in, as it researched the opportunity it quickly became apparent that many of the services it had built up over the past 38 years are the same ones required in film production, including remote camp services, food service, security, transportation and staffing services.

“We already provide many of the back-of-the-house things that make it possible for those in the front to get their work done,” Kornfield says. “We realized it was a better fit than we thought when we first went in – with just one phone call the industry can access all the film support services it needs.”

Although the idea of partnering with Evergreen may seem like a big stretch to the business community, Kornfield says that, in fact, the board of directors was not completely unfamiliar with the benefits of the film industry. The group

travels to Vancouver, British Columbia, Canada, regularly for business associated with Red Dog Mine and is used to seeing film crews shooting in the middle of the street. “The prospect of doing something in Anchorage was not foreign to them at all,” Kornfield says.

One big draw for NANA was that the film industry offers more opportunities in areas younger shareholders will be interested in such as computer graphics.

Although acting is an obvious opportunity for shareholders, Kornfield says, the greater opportunity is for them to be involved in the service industries, which is the backbone of the corporation’s success. Although the partnership will evolve over time, Kornfield says NANA will do whatever it takes to make film support services available, and at the same time will offer these same services to other film production companies that come to Alaska.

“Every time a shareholder gets a paycheck – that’s part of what we do,” Kornfield says, adding that part of NANA’s plan is to eventually develop a line of services specific to the film industry that shareholders can be trained in.

Partnerships like the NANA-Evergreen one embody the intent of the original incentive legislation, which was designed to develop new business opportunities in Alaska by pairing the supply with the demand. From there, Tesar says, the jobs and on-the-job train❑ ing for Alaskans will follow.

www.akbizmag.com • Alaska Business Monthly • January 2011

ALASKA TRENDS

BY WILLIAM COX

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

Exchange Rate Trends – January 2000-November 2010

T

he ever increasing importance of currency exchange rates is a critical part of maintaining economic prosperity and competitiveness against international competitors.

Companies with overseas operations earn their profits in foreign currencies and must then repatriate these profits into U.S. Dollars.

This repatriation can have a large effect on the company’s profitability, magnifying or reducing the company’s overall earnings in tandem with the fluctuation of the exchange rates.

The chart shows the indexed exchange rates of five major currencies relative to the U.S. Dollar using a base month of January 2000 = 100. Index Values represent the amount of foreign currency received in exchange for $1 of U.S. currency, indexed to the base month. An increased index value would indicate the company would receive more of the foreign currency per dollar of U.S. currency exchanged, suggesting the U.S. Dollar had appreciated in relation to the foreign currency. In contrast, a decreased index value would indicate the opposite, depreciation of the U.S. Dollar in relation to the foreign currency.

As displayed in the chart, all of the foreign curren-

cies except the British Pound have appreciated against the U.S. Dollar since January 2000, thereby making the U.S. Dollar less valuable than these currencies. This helps U.S. exporters in these countries as their products are relatively less expensive than domestic products to foreign consumers, but hurts U.S. importers of products from these countries as the foreign products become ❑ more expensive to U.S. consumers.

Source: www.oanda.com/currency/average

ALASKA TRENDS HAS BEEN BROUGHT TO YOU THIS MONTH COURTESY OF AMERICAN MARINE/PENCO

www.akbizmag.com • Alaska Business Monthly • January 2011

103

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

104

Period

Latest Report Period

Previous Report Period (revised)

Year Ago Period

Year Over Year Change

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

2nd Q10 2nd Q10 1st H10 1st H10

31,153 12,462,673 194.83 217.54

30,865 12,341,249 194.83 217.54

28,631 11,959,177 190.032 213.139

8.81% 4.21% 2.53% 2.06%

Number Filed Number Filed Number Filed

September September September

114 87 17

90 61 19

103 74 19

10.68% 17.57% -10.53%

Thousands Thousands Thousands Thousands Thousands

September September September September September

337.73 182.95 42.81 39.37 36.69

343.67 183.04 43.17 41.74 39.11

331.42 179.30 42.50 38.88 35.32

1.90% 2.04% 0.74% 1.27% 3.87%

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

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

335.1 50.7 284.4 17.9 17.4 11.7 18.8 14.0 10.3 64.6 6.7 36.3 6.4 10.1 21.6 5.3 3.1 6.4 4.1 13.8 25.5 40.7 29.1 35.5 9.8 20.6 11.3 86.6 17.5 26.6 8.1 42.5 24.4 3.8

346.5 60.7 285.8 17.9 17.5 12.0 20.1 22.7 18.3 67.5 6.9 37.8 6.7 10.5 22.8 5.6 3.3 6.4 4.2 14.0 25.6 40.0 28.7 39.8 11.7 22.5 11.1 81.4 18.3 24.7 5.9 38.4 19.5 3.9

335 49.5 285.5 15.5 15.3 13 19.1 14.9 11 66.5 6.8 36.3 6.3 9.6 23.4 6.4 3.2 7 4.5 14.9 27 38.6 28 35.5 10 205 11.3 84.7 17.1 26.1 7.6 41.5 23 4

0.03% 2.42% -0.39% 15.48% 13.73% -10.00% -1.57% -6.04% -6.36% -2.86% -1.47% 0.00% 1.59% 5.21% -7.69% -17.19% -3.13% -8.57% -8.89% -7.38% -5.56% 5.44% 3.93% 0.00% -2.00% -89.95% 0.00% 2.24% 2.34% 1.92% 6.58% 2.41% 6.09% -5.00%

Thousands Thousands Thousands Thousands Thousands

September September September September September

364.51 196.74 45.79 41.98 39.91

369.56 196.28 46.07 44.34 42.18

359.17 193.55 45.63 41.66 38.68

1.49% 1.65% 0.34% 0.77% 3.19%

www.akbizmag.com • Alaska Business Monthly • January 2011

SPONSORED

Indicator

Units

Unemployment Rate Alaska Anchorage & Mat-Su Fairbanks Southeast Gulf Coast United States

BY

AMERICAN MARINE/PENCO

Period

Latest Report Period

Previous Report Period (revised)

Year Ago Period

Year Over Year Change

Percent Percent Percent Percent Percent Percent

September September September September September September

7.3 7 6.5 6.2 8.1 9.2

7.1 6.8 6.3 6 7.4 9.5

7.7 7.4 6.9 6.7 8.7 9.8

-5.19% -5.41% -5.80% -7.46% -6.90% -6.12%

Millions of Barrels Billions of Cubic Ft. $ per Barrel

September September September

18.41 9.78 75.27

16.69 9.65 75.78

16.87 10.34 69.20

9.13% -5.42% 8.77%

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

September September September September September

7 1655 1,271.22 2054.98 1.08

6 1638 1,214.64 1835.71 1.02

8 1097 996.42 1638.95 0.94

-12.50% 50.87% 27.58% 25.38% 14.39%

Millions of $ Millions of $ Millions of $

September September September

25.53 16.37 9.16

31.64 18.39 13.25

23.88 12.63 11.25

6.92% 29.60% -18.54%

Total Deeds Total Deeds

September September

1023 374

1054 343

829 387

23.40% -3.36%

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

Thousands Thousands

September September

421.23 87.44

628.22 116.55

419.86 87.51

0.33% -0.08%

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

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

September September September September September September September

36,340.60 36,700.40 255.5 $1,852.7 60.2 16.6 1,629.4

34,425.40 34,811.00 45.2 ($397.0) 94.6 -1.9 (646.7)

33,313.40 33,477.70 (56.0) $978.6 114.6 12.6 743.4

9.09% 9.63% 556.25% 89.32% -47.47% 31.75% 119.18%

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

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

3rd Q10 3rd Q10 3rd Q10 3rd Q10 3rd Q10 3rd Q10 3rd Q10 3rd Q10 3rd Q10

2,068.99 37.35 131.40 1,110.96 15.76 1,823.80 1,785.53 479.89 1,305.64

1,997.42 38.04 136.91 1,115.36 17.78 1,757.70 1,720.30 453.48 1,266.82

1,924.56 42.13 93.50 1,183.18 13.28 1,687.97 1,658.77 429.20 1,229.57

7.50% -11.34% 40.52% -6.10% 18.65% 8.05% 7.64% 11.81% 6.19%

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

Yen Canadian $ Pounds Euro Yuan

September September September September September

84.48 1.03 0.64 0.77 6.75

83.32 1.02 0.63 0.73 6.69

91.47 1.08 0.61 0.69 6.83

-7.65% -4.17% 5.40% 11.27% -1.19%

PETROLEUM/MINING Crude Oil Production – Alaska Natural Gas Field Production – Alaska ANS West Cost Average Spot Price Hughes Rig Count Alaska United States Gold Prices Silver Prices Zinc Prices REAL ESTATE Anchorage Building Permit Valuations Total Residential Commercial Deeds of Trust Recorded Anchorage – Recording District Fairbanks – Recording District

Data compiled by University of Alaska Center for Economic Development.

www.akbizmag.com • Alaska Business Monthly • January 2011

105

ADVERTISERS INDEX Alaska Aerospace Corp. . . . . . . . . . . . . . . . 73

Carlile Trasportation Systems . . . . . . . . 19, 89

Alaska Air Cargo . . . . . . . . . . . . . . . . . . . . . 81

Chris Arend Photography . . . . . . . . . . . . . 106

Northwest Iron Workers Employers Association . . . . . . . . . . . . . . 49

Alaska Growth Capital. . . . . . . . . . . . . . . . . 37

Chugach Alaska . . . . . . . . . . . . . . . . . . . . . 77

Pacific Alaska Freightways . . . . . . . . . . . . . 39

Alaska Interstate Construction LLC . . . . . . 88

Construction Management Industrial . . . . 107

Alaska Rubber & Supply . . . . . . . . . . . . . . . 20

Crowley . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Alaska USA Federal Credit Union. . . . . . . . 43

Deltek . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Alutiiq Oilfield Solutions LLC. . . . . . . . . . . . 52

Dowland-Bach Corp. . . . . . . . . . . . . . . . . . . 49

American Fast Freight . . . . . . . . . . . . . . . . . 86

ERA Aviation . . . . . . . . . . . . . . . . . . . . . . . . 47

American Marine/Penco . . . . . . . . . . . . . . 103

ERA Helicopters . . . . . . . . . . . . . . . . . . . . . 74

Anchorage Opera . . . . . . . . . . . . . . . . . . . . 93

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

Arctic Fox Steel Buildings . . . . . . . . . . . . . . 59

GCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Arctic Office Products . . . . . . . . . . . . . . . . . 48

Great Originals . . . . . . . . . . . . . . . . . . . . . . 30

Arctic Controls. . . . . . . . . . . . . . . . . . . . . . . 54

Judy Patrick Photography . . . . . . . . . . . . . . 17

Arctic Slope Telephone Association . . . . . . 83

Kinross Fort Knox . . . . . . . . . . . . . . . . . . . . 31

ASRC Energy Services. . . . . . . . . . . . . . . . 59

Lynden Transportation. . . . . . . . . . . . . . . . . . 2

Azimuth Adventure Photography. . . . . . . . . 35

Mikunda Cottrell & Co. . . . . . . . . . . . . . . . . 95

UAA School of Engineering. . . . . . . . . . . . . 61

B2 Networks . . . . . . . . . . . . . . . . . . . . . . . . 32

MSI Communications . . . . . . . . . . . . . . . . . 30

Ukpeagvik Inupiat Corp. . . . . . . . . . . . . . . . 69

Brice Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

MT Housing Inc. . . . . . . . . . . . . . . . . . . . . . 53

Washington Crane & Hoist . . . . . . . . . . . . . 41

Bering Straits Native Corp. . . . . . . . . . . . . . 67

NANA Regional Corp. . . . . . . . . . . . . . . . . . 79

Waste Management . . . . . . . . . . . . . . . . . . 85

Bristol Bay Native Corp. . . . . . . . . . . . . . . . 71

Nenana Heating Services . . . . . . . . . . . . . . 52

Wells Fargo . . . . . . . . . . . . . . . . . . . . . . . . 108

CareNet Inc. . . . . . . . . . . . . . . . . . . . . . . . . 55

Northern Air Cargo . . . . . . . . . . . . . . . . 44-45

Western Steel Structures Inc. . . . . . . . . . . . 57

106

Pacific Pile & Marine . . . . . . . . . . . . . . . . 8-10 Parker Smith & Feek . . . . . . . . . . . . . . . . . . 15 Pen Air . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Princess Tours. . . . . . . . . . . . . . . . . . . . . . . 41 Rosie’s Delivery . . . . . . . . . . . . . . . . . . . . . 55 Ryan Air . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Span Alaska . . . . . . . . . . . . . . . . . . . . . . . . 33 Stellar Designs Inc. . . . . . . . . . . . . . . . . . . . 55 Superstar Pastry & Design . . . . . . . . . . . . . 55 The Growth Company . . . . . . . . . . . . . . . . . 26 Tobacco Prevention Council . . . . . . . . . . . . 27 TOTE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Trailer Craft/Freightliner. . . . . . . . . . . . . . . . 86

www.akbizmag.com • Alaska Business Monthly • January 2011

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