JULY 2010 by Alaska Business

Sweet

Alaska! Increasing visitor impact Page 56

Mid-Year Mid-Year Economic Economic Forecast Forecast How H ow is ow is the the state state faring? faring? Page Pa e 12

Alaska’s Alaska’s Ports Ports Economic E cono onomic engines engines of of growth. growth. Page Pa e 88

Talent Talent Shortage Shortage Gearing Gearing up up for for a future future in in h health ealth alth care. care. Page 100 P

SPECIAL PECIAL SECTION ECTION Conventions/Meetings Conventions/Meetings Successful S uccessful ttrade rade s shows, hows, directory a directory and nd m more. ore. Page 50

J U LY 2 0 1 0 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 Events Calendar . . . . . . . . . . . . 47 Market Squares . . . . . . . . . . . . . 49 Right Moves . . . . . . . . . . . . . . . . 98 Alaska Trends . . . . . . . . . . . . . . 103 Ad Index . . . . . . . . . . . . . . . . . . 106 R E G U L A R F E AT U R E S

VIEW FROM THE TOP Sean Siegel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

ARTICLES (cont’d.) Photo courtesy of Davis Constructors

Castable Ceramics. By Peg Stomierowski.

HR MATTERS Fourteen Steps to Better Management. . . . . . . . . . . . 32 Don’t take risks; know the law. By Andy Brown.

LEGAL SPEAK Health Care Reform and Small Business . . . . . . . . . . 44 New requirements greatly affect businesses. By Jeff Waller.

ALASKA THIS MONTH Salmon Star in Cordova Festival. . . . . . . . . . . . . . . . . 46 Music, marathon, cook-off enliven summer event. By Nancy Pounds.

PAGE

REGIONAL REVIEW Pacific Northwest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 Ahead of the game in nation’s recovery. By Tracy Barbour. ARTICLES

CONSTRUCTION Project Roundup. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Busiest season under way. By Peg Stomierowski.

ECONOMY Alaska Mid-Year Forecast . . . . . . . . . . . . . . . . . . . . . . 12 TECHNOLOGY Latest Cell and Satellite Phones . . . . . . . . . . . . . . . . . 68 Economy continues to rebound. Compiled by Heidi Bohi. WHAT INDUSTRY LEADERS ARE SAYING

✔ Construction (Commercial). By John MacKinnon. ✔ Construction (Military). By Chris Tew. ✔ Environmental. By Jim Ayers. ✔ Financial Services. By David Lawer. ✔ Fisheries. By Glenn Reed. ✔ Health Care. By Annie Holt. ✔ International Trade. By Greg Wolf. ✔ Jobs. By Neal Fried. ✔ Mining & Minerals. By Steve Borell. ✔ Native Corporations. By William Anderson Jr. ✔ Oil & Gas. By Marilyn Crockett. ✔ Real Estate (Commercial). By Michael James. ✔ Real Estate (Residential). By Helen Jarratt. ✔ Telecommunications & Technology. By Mike Felix. ✔ Timber. By Owen Graham. ✔ Transportation. By Roger Wetherell. ✔ Travel & Tourism. By Ron Peck.

Much more functionality offered. By Tracy Barbour.

OIL & GAS LNG Importation on the Horizon for Cook Inlet. . . . . 72 $3 billion in storage, development costs needed in next decade. By Heather A. Resz.

OIL & GAS SIDEBAR Seven Recommendations From Commonwealth North . . . . . . . . . . . . . . . . . . . . . . . . . 73 By Heather A. Resz.

OIL & GAS Alaska OCS Shuttered by Interior. . . . . . . . . . . . . . . . 78 BP Gulf accident delays Chukchi, Beaufort drilling. By Tracy Kalytiak.

NATIVE BUSINESS Tyonek Native Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Looking beyond subsistence. By Julie Stricker.

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

(continued on page 6)

J U LY 2 0 1 0 TA B L E O F C O N T E N T S

HEALTH & MEDICINE Avoiding the Health Care Talent Shortage . . . . . . . . 100

Photo courtesy of Aleut Management Services LLC

Tips and strategies that work. By Sara LaForest and Tony Kubica.

CONVENTIONS/MEETINGS SPECIAL SECTION Invest in Trade Shows . . . . . . . . . . . . . . . . . . . . . . . . . 50 Payback depends on you. By Heidi Bohi.

11 Steps to a Successful Trade Show .SIDEBAR . . . . . . . . . . . . 52 Be prepared before you go. By Heidi Bohi.

Venue Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

PAGE

Tips for getting the best deals. By Karen Zak.

Logistics LLC Increases Visitor Impact . . . . . . . . . . . 56 NATIVE BUSINESS The Aleut Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

High-end corporate client incentives pay off. By Dianne O’Connell.

2010 Conventions/Meetings Directory . . . . . . . . . . . . 59

Capitalizes on diversified business model. By Blythe Campbell.

TRANSPORTATION Alaska Ports and Harbors . . . . . . . . . . . . . . . . . . . . . . 88 Economic engines of growth. By Peg Stomierowski.

CORRECTIONS In the June 2010 issue, the “Business Plan Basics” byline was incorrect. The source of the information was David J. Kennedy, Alaska communications manager, Wells Fargo Bank.

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

FR Volume 26, Number 7 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 Photo Consultant Photo Consultant

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

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

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

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

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ALASKA BUSINESS MONTHLY (ISSN 8756-4092) is published monthly by Alaska Business Publishing Co., Inc., P.O. Box 241288, Anchorage, Alaska 99524; Telephone: (907) 276-4373; Fax: (907) 279-2900, ©2010, Alaska Business Publishing Co. All rights reserved. Subscription Rates: $39.95 a year. Single issues $3.95 each; $4.95 for October. Back issues $5 each. Send subscription orders and address changes to the Circulation Department, Alaska Business Monthly, P.O. Box 241288, Anchorage, AK 99524. Please supply both old and new addresses and allow six weeks for change. Manuscripts: Send query letter or manuscripts to the Editor. Alaska Business Monthly is not responsible for unsolicited materials. Photocopies: Where necessary, permission is granted by the copyright owner for libraries and others registered with Copyright Clearance Center to photocopy any article herein for $1.35 per copy. Send payments to CCC, 27 Congress Street, Salem, MA 01970. Copying done for other than personal or internal reference use without the expressed permission of Alaska Business Monthly is prohibited. Address requests for specific permission to the Editor, Alaska Business Monthly. Online: Alaska Business Monthly is available online from Data Courier and online from Thomson Gale. Microfilm: Alaska Business Monthly is available on microfilm from University Microfilms International, 300 North Zeeb Rd., Ann Arbor, MI 48106.

THE

Enjoy July

DITOR

But keep climate change in mind.

t’s hard to remember, while basking in July sun, the past winter across the U.S. where ice and snow storms ruled, and freezing temperatures and floods and other natural disasters were as common as rain in Southeast Alaska. As we enjoy our finest season, perhaps one warmer than usual, we forget our own winter was mild compared to the good ol’ years when Anchorage saw weeks of below zero temperatures, even weeks of below 20 degrees Fahrenheit. I’ve been here long enough to know Alaska winters are cold; and I’ve been here long enough to know this one was a nice exception. So how do I feel about climate change? Notice, I don’t say global warming, but climate change, which Webster’s New World College Dictionary (Fourth Edition) does not define, and dictionary. com describes as “any long-term significant change in the weather patterns of an area.” That means some areas get warmer, some get colder, some get wetter, some drier. Some get more snow, some less. There’s more tornadoes and fewer tornadoes, and on and on. Some say it’s because of man, some say it’s due to natural rhythms of the environment. I’m not going to debate. I’m just going to admit, it is happening.

SO WHAT DOES THIS MEAN TO ALASKA?

If you don’t visit the University of Alaska Anchorage’s Institute of Social and Economic Research website (www.iser.uaa.alaska.edu/), you should. There are always new studies, research and data relevant to Alaska industry and other topics. It’s got a plethora of information, which is based on fact, based on an incredible amount of research, and based on the efforts of people like Peter Larsen and Scott Goldsmith, who together wrote a report titled “How Much Might Climate Change Add to Future Costs of Public Infrastructure?” Mind you, this report is three years old, but right on target. Three years ago, when climate change was a darkening shadow on the hearts and minds of worldwide leaders, these Alaskans reported a warmer Alaska that would result in a 10 percent to 20 percent increase in costs to maintain and build public infrastructure in Alaska between then and 2030. The reason, permafrost thaws, floods increase and coastal erosion worsens. It will wreak havoc with our roads and airports. It will wreak havoc in Arctic communities. It will wreak havoc in Barrow, where sea ice is melting and polar bears are at risk.

WHAT’S THE STATE HAVE TO SAY?

The State goes beyond climate change to describe global warming the issue, mainly due to manmade greenhouse gas emissions, but also by natural processes and activities, its website stated. In a report titled “Climate Change in Alaska,” it stated globally 2005 was the warmest year on record, when looking back to records as old as 1880. The Arctic was especially hard hit, with “perennial sea ice decreasing by 9 percent per decade since 1979.” The report goes on to state that “Less ice means more open water – which means greater absorption of solar energy – which leads to increased warming in the ocean, and in turn accelerates more ice loss.” Four points were addressed: ■ Melting Glaciers, Rising Sea Levels and Flooding of Coastal Communities ■ Thawing Permafrost, Increased Storm Severity ■ Loss of Subsistence Way of Life ■ Forest Fires and Insect Infestations Whether climate change, or global warming, is manmade, a change in the ecosystem, or a combination of both, it is happening, despite the Lower 48’s unusually bitter winter. So while you are basking in July’s warmth, think of ways to address the situation, inform yourself, and above all, don’t ignore it. – Debbie Cutler Managing Editor

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

INSIDE ALASKA BUSINESS Alaskan Brewing Lands Awards

laskan Brewing Co. of Juneau earlier this year earned awards for its products. Alaskan Barley Wine earned a bronze award in the 2010 World Bear Cup’s barley wine-style ale category. Alaskan Brewing has been aging its vintages of Alaskan Smoked Porter for nearly 20 years. The 1998 vintage won gold at the 2010 World Beer Cup. This vintage also won silver in the smoked beer category the year it was first released. This year’s World Beer Cup drew its largest number of entries, totaling 3,330 beers from 642 breweries in 44 different countries. The competition has been conducted every two years since 1996. In other news, Alaskan Brewing was listed for the second time on Outside magazine’s annual Best Places to Work list. Alaskan Brewing was ranked 17th out of 50 companies. It is the only company from Alaska to make the list. The full list and story were published in the May issue. A separate company compiled the entries and narrowed down the final list. Companies were selected based on efforts to enhance employees’ enjoyment of active activities, and environmental and social involvement. In May, Alaskan Brewing debuted a new specialty beer called Alaskan Raspberry Wheat Ale. It is part of the new Alaska Pilot series, a rotating collection of beers packaged in 22 ounce bottles. Alaskan Brewing plans to release two more Pilot Series beers later this year. A black imperial India Pale Ale

will be released in October, and Alaskan Barley Wine, which just won a bronze medal at the 2010 World Beer Cup in April 10, will be released in late December.

Alaska Regional Adds MR System

laska Regional Hospital in Anchorage has installed a new Signa HDxt 1.5T magnetic resonance system. This high-definition system produces detailed images of the human body faster and with improved resolution. The new system provides shorter exams and greater comfort for patients, while providing high-tech images for physicians, according to Annie Holt, Alaska Regional chief executive. “One feature of this new system is the ability to do dual-breast scanning,” Holt said. “In the time it normally takes to image just one breast, we can now image both breasts simultaneously. The system also tolerates patient motion very well during brain scans, which reduces retakes.”

Museum Shows Washburn Exhibit

n exhibit at the Anchorage Museum features the black-and-white Alaska landscape photography of Bradford Washburn. The exhibit will be displayed until Sept. 19. The exhibition “Bradford Washburn: Glories of the Greatland” features more than 40 Washburn images taken in Alaska between 1930 and 1979.

COMPILED BY NANCY POUNDS Washburn, who died in 2007, was an expert aerial photographer and cartographer. He made more than 50 trips to Alaska during a 70-year career. Many of his earliest photographs were created as he hung partly out of an airplane, tethered by straps and buffeted by wind as he directed the pilot while aiming his camera. Washburn’s aerial photographs of mountains have been exhibited around the world. His work was included in a 1988 exhibition of the 20th century’s master photographers at the New York International Center of Photography.

ACVB Hands Out Honors

he Anchorage Convention & Visitors Bureau honored members and volunteers at the Seymour Awards banquet in April. The Westmark Anchorage Hotel was chosen Member of the Year. The Westmark was one of the 10 founding companies of ACVB and has been deeply involved in ACVB and the community ever since, ACVB officials said. ACVB volunteers Lucy Burger, Clyde Bloker and Billie Bloker were recognized as ACVB’s volunteers of the year. Burger serves at the downtown log cabin visitor information center. The Blokers serve at the Ted Stevens Anchorage International Airport, where ACVB has three visitor information centers. The Alaska Native Education Association and the RAISE Program was chosen Meeting Champion of the Year. The award recognizes the groups’ efforts to attract the National Indian Education Association’s Annual Convention to Anchorage in 2014. The group’s 2,000 delegates will meet in Anchorage

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

INSIDE ALASKA BUSINESS with an estimated economic impact of more than $2 million. Alaska Step-On Guides received the Member Contribution to the Visitor Industry award. The guides provide visitor information about Southcentral Alaska. The Anchorage Museum received the Community Organization award. Alaska Tour & Travel NMS Lodging received the Member Contribution to the Bureau award. NMS Lodging was recognized for its support of ACVB publications, volunteer, and events including the fall business exchange and sales missions, among other ACVB activities. Alaska Latin Tours LLC was chosen Tour Operator of the Year. The company’s efforts have opened the doors to many new sales opportunities for ACVB and member businesses in Latin America, ACVB officials said. Glacier City Snowmobile Tours received the All Alaskan Award. The company has taken many ACVB guests and clients on snowmachine tours. A special award plaque was presented to Anchorage Fur Rendezvous marking its 75th anniversary.

Credit Union 1 Earns Honors

redit Union 1 received a Diamond Award from the Credit Union National Association. The award honors Credit Union 1 for developing its social service website, www.oneforallalaska. org, and recognizes outstanding marketing work statewide. Credit Union 1 won the community program category of the Diamond competition. The website features a community-issues blog, event calendar and an area for website visitors to request help with Anchorage

social projects. The site also includes many financial education resources, such as finance-oriented games and a financial discussion forum. Credit Union 1 also received a Merit Award in the Diamond competition for organizing first annual Mountain View Street Fair in 2009. This street fair drew more than 3,000 Anchorage families for food, music and celebration as part of Mountain View’s neighborhood revitalization efforts.

Tourism Companies Earn Certification

ight Alaska tourism businesses earned certification from Adventure Green Alaska, which recognizing companies’ environmentally friendly methods. Adventure Green Alaska was started in 2008 through the Alaska Wilderness Recreation & Tourism Association, a nonprofit organization for ecotourism businesses. Last year Adventure Green Alaska awarded certifications to nine other companies. Adventure Green Alaska is a tourism-certification program focusing on sustainable businesses practices. Gold-level certified businesses are: Agate Inn, Harvey and Sandy Bowers, Wasilla; Kayak Adventures Worldwide, Wendy and David Doughty, Seward; Orca Island Cabins, Dennis and Susan Swiderski, Seward; Pike’s Waterfront Lodge, Jay Ramras, Fairbanks; and Sunny Cove Sea Kayaking, John Page, Seward. Silver-level certified businesses are: Great Alaska Adventure Lodge, Kent and Laurence John, Sterling; and Spirit Walker

Expeditions, Stephen Van Derhoff, Gustavus. Kodiak Island Charters, owned by Chris and Jai-Nan Fiala of Kodiak, was certified at the bronze level. Tour operators respond to online application questions about their commitment to the environment, participation in community and village events, awareness of climate-change impacts, and green business practices.

Carrs Safeway Donation Supports Providence

arrs Safeway employees and customers raised more than $300,000 for Providence Health & Services Alaska and the Cancer Center. The funds were raised during October, Breast Cancer Awareness Month. The donation was presented in April at the Cancer Center. During April Providence Imaging Center offered free breast cancer screenings age 40 and older, who also demonstrated financial need. Carrs Safeway sponsored the free screenings. In 2009, these free screenings served 202 women. The motor coach provided screenings to 1,364 women throughout Southcentral. Since 2004, Carrs Safeway has contributed more than $1 million to help fund a mobile mammography motor coach, breast cancer screenings and research at Providence.

Klawock Clinic Receives Honor

he Alicia Roberts Medical Center in Klawock received the Outstanding Rural Health Organization Award

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

INSIDE ALASKA BUSINESS as part of the Alaska Rural Health Conference in Anchorage. The award was presented in May. The center is part of the SouthEast Alaska Regional Health Consortium. The award honors a group that has improved access to health services and information for rural people through innovative, comprehensive approaches. The center has grown and expanded over the years. Today the clinic provides telepharmacy services, various wellness programs, including women’s health, diabetes prevention and management and culture camps to promote traditional Native lifestyles.

Nerland Wins Ad Awards

erland Agency Worldwide Partners received gold and silver District XI ADDY Awards for the campaign for the Pick.Click.Give. program. The gold-winning YouTube video qualifies the campaign for entry into the national ADDY Awards advertising competition. The gold award was in the public service broadcast/electronic TV category. The silver award was in the public service campaign mixed/ multiple media category. The Rasmuson Foundation hired Nerland Agency to promote Pick.Click. Give, in collaboration with a team that included Kathy Day Public Relations; Conversify; and Foraker Group, with consultant Suzanne Lagoni. The program encourages Alaskans who submit their application online to donate all or part of their Permanent Fund Dividend to charities of their choice.

Ahtna Inks Gold Exploration Agreement

htna Inc. has signed an exploration agreement with Raven Gold Alaska Inc., a subsidiary of International Tower Hill Mines Ltd. of Vancouver, British Columbia. The agreement is the first step in exploration and development of a copper-gold project on Ahtna-owned land. The Alaska Native corporation’s land adds 75,520 acres to the existing 87,940 acres of Alaska State mining claims held by Raven Gold Alaska that make up the Chisna project. Exploration work planned for this year includes airborne surveys, geochemical soil and silt sampling, geological mapping and core drilling. The Chisna Project is located in the Chistochina mining district of Southcentral Alaska.

CH2M HILL Receives School Award

H2M HILL received an Anchorage School Business Partnerships STAR Award. Lake Otis Elementary School nominated CH2M HILL for their outstanding partnership in the school through the SBP program. Last year employees helped Lake Otis school students during the winter holidays by gathering gifts for children and adults in need and providing a meal for a needy family – a large breakfast or turkey dinner. CH2M HILL employees also conduct coat and clothing drives, volunteer as science fair judges collect bikes and helmets for students and coordinate Family Science Nights.

COMPILED BY NANCY POUNDS The School Business Partnership Program began eighteen years ago, in 1991. The STAR award was initiated in 1996 to recognize an outstanding partnership. Today there are more than 540 partnerships, influencing 48,440 students, 900 school staff and more than 1,000 business people.

Coastal Villages Goes Live

eoNorth LLC, an Alaska-based Information Technology solutions provider headquartered in Anchorage, added in late May to its everexpanding list of website clients with the announcement of the Coastal Villages Region Fund going live at www. coastalvillages.org. The Coastal Villages Region Fund’s mission is to provide the means for development of their communities by sensibly creating tangible, longterm opportunities that generate hope for all residents who want to fish and work. CVRF has grown to be the largest seafood owner/operator headquartered in Alaska as they manage the Kuskokwim Delta and Bering Sea seafood resources. Communities served include Chefornak, Chevak, Eek, Goodnews Bay, Hooper Bay, Kipnuk, Kongiganak, Kwigillingok, Mekoryuk, Napakiak, Napaskiak, Newtok, Nightmute, Oscarville, Platinum, Quinhagak, Scammon Bay, Toksook Bay, Tuntutuliak and Tununak. For more information, please visit www.geonorth.com, or search for ❑ “GeoNorth” on Facebook.

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

VIEW

FROM THE

TOP

BY PEG STOMIEROWSKI

Sean Siegel

Castable Ceramics

ABM: How’s the view from the top at Castable Ceramics? Siegel: I’m extremely optimistic. My role is to continually support Alaska’s preeminent dental professionals using all available resources. Our goal is to expand the number of dentists we work with directly. Staying ahead of technology is at the core of my business approach. While our direct focus is on dental professionals, our real customers are those they serve: all people in Alaska.

ABM: Your esthetic dentistry business was started in hard times; what has enabled you to succeed? Siegel: Perseverance. Castable Ceramics has packaged a quality product line along with exceptional customer service and simply become a mainstay in Alaska. While 1986 wasn’t an easy time economically, we embraced it as a starting point. We have since grown a remarkable business, with 11 full-time, well-qualified, highly trained technicians. ABM: Why is so much restorative dentistry work exported? Siegel: We’re constantly working to dispel the notion that work done Outside is better; it is not true and has not been true for years. Castable offers top-of-the line products and services, with the bonus of local accessibility. Sending dental restorative work outside the state has been, unfortunately, a long-standing practice. We simply need to change this habit. Some of the finest technicians in the country are found right here. ABM: How can you uniquely serve Alaska clinicians and dental professionals? Siegel: Our partnership with Alaska’s dental professionals means we can accomplish everything locally. Whatever the request, our answer is yes. We’re here – we share an area code with those we service. The efficiencies and reduced production time we offer is critical to growth of their businesses and ours. ABM: What are the drivers in your field? Siegel: Technology. State-of-theart means everything to us. Mastering dental technology earns you the business. Castable acknowledges this and exceeds industry standards. Our core product line is headlined by allceramic esthetic dentistry or metal-free

ean Siegel is president of Castable Ceramics, an Anchorage-based certified dental laboratory that provides Alaska’s dentists with esthetic crowns, bridges, veneers and other products. The firm, with 60 clients, also offers such specialized services as custom tooth-color matching. Siegel, who has a bachelor’s degree in psychology from Montana State University, came to Alaska with his family in 1982. When Castable Ceramics was started four years later, he was a high school freshman who’d been around dental offices and laboratories for most of his life, doing odd jobs while learning the business. While putting himself through college, he also worked in travel and tourism, cooking on trains, driving motor coaches, and eventually serving as Southcentral regional manager for Cruise West. Castable Ceramics was born when three lab owners – Strad Brady (Sean’s stepfather), Margie Chavious and Charlie Brown – combined efforts during Alaska’s poor economy of the mid-80s. After Siegel had taken over operations as vice president in 2005, Brady worked his way into retirement and Siegel purchased the business out-right in 2009. Siegel and his wife, Erika, have three daughters: Brady, Marina, and Bailey. His other interests include professional football and HarleyDavidson motorcycles.

Sean Siegel

restorations, such as zirconia or e.max, and many dental-implant options. ABM: Describe your approach to “dental coaching” and continuing education. Siegel: Continuing education is vital in forming partnerships with dental professionals in Alaska. Such industry leaders as Ivoclar Vivadent, Biomet/3i and Nobel Biocare partner with us to ensure that our clients can benefit from ongoing coursework and seminars. ABM: What’s in store for your 25th anniversary? Siegel: We plan to play an active role at the Alaska Dental Society’s annual meeting next May, bringing such speakers as Dr. Bill Blatchford, a premier dental practice coach; Dr. Gary Morris, a prosthodontist from Chicago; and Dr. Lee Walker, a California oral surgeon who will highlight implant dentistry. We’ll also have year-long promotions, including allowing our clients to earn Alaska Airline miles through our “Miles for Smiles” program. ❑

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

ECONOMY

Alaska Mid-Year Forecast Economy continues to rebound. COMPILED BY HEIDI BOHI

ne thing is certain: in varying degrees, directly or indirectly, the recession has impacted almost every industry in the country. And while Alaska has always been insulated from what goes on in the rest of the world, in many sectors, this time there is a crack in its glass bubble. As the state looks back on the first half of 2010 and ahead to the remaining six months, even the number of jobs in Alaska, which has not shown a decline in more than 21 years, dropped – not by much, but a downward movement nonetheless. The environmental sector, no stranger to contesting almost every move from the pro-development front, is holding its breath as elected officials desperately reach for that brass ring again while also slashing funding sources. New mining projects have been put on hold and may not happen at all. Although oil and gas remains unaffected by the recession, at the same time, everyone in the industry will tell you that more than any other time in history, the state’s largest industry faces a bleak future. We picked top leaders in their respective industries and asked them to help us determine where the pencil mark lands for Alaska six months into the year, and what changes – for better or worse – we can expect to see as we head into 2011.

One thing is certain: in varying degrees, directly or indirectly, the recession has impacted almost every industry in the country. 12

We asked three questions: ● How are things looking in your industry for the latter half of 2010? ● Has the worldwide recession affected your industry? ● What trends do you expect to see in your industry over the next two years? Here are their answers.

CONSTRUCTION (COMMERCIAL)

By John MacKinnon Executive Director Associated General Contractors of Alaska

hings look every bit as good or better as our forecast indicated at the beginning of the year. This will be a very good year for civil work, with plenty of projects under construction or out to bid. Building construction

Editor’s Note: The views expressed in this article are those of the authors and do not necessarily reflect the views of Alaska Business Monthly.

may pick up in the second half of the year as a result of the 2011 capital budget. For example, the crime lab and the governor’s deferred maintenance package have immediate effective dates and can get under way as soon as signed. The $397 million bond package needs voter approval in November, and most of the projects in it will need a year to be ready to go to bid, leading into a good 2012. The recession has been a significant factor in the reduction in private commercial buildings, though it cannot take all the blame. In Alaska, after 20 years of uninterrupted growth, there was bound to be a need for demand to catch up with supply because we overbuilt and now it has been exacerbated by the recession. On the civil side, I expect the next two years to resemble 2010: good for dirt and paving contractors as the industry wraps up the end of the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU), the stimulus and the 2008 State transportation bond projects. Reauthorization of the SAFETEA-LU highway program may present a whole new picture. Building construction should improve somewhat with the continuation

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

AT ALASKA’S RED DOG MINE, 200 MILES NORTH OF THE ARCTIC CIRCLE, EXTREME CONDITIONS LEAVE NO ROOM FOR ERROR. HOW DID FOSS RESPOND?

90-110 ice-free days to work – Managed. 17 years of open ocean lighterage – Accomplished. 260 barge deliveries each year – Completed. 1.4 million tons of zinc ore concentrate each year – Delivered. In one of the world’s most remote environments, Foss provides the only open ocean lighterage operation in the world, managing transportation of ore from a shallow-draft port to ships anchored three miles offshore in unprotected arctic waters. Safely, on-time and on-budget. Every day, our high-powered tugs, barges and people are at work—close to home and in some of the harshest environments around the world—helping our customers succeed in a changing market. Foss. Always Safe. Always Ready. Learn more. Call 1.206.281.3800, or visit our web site at www.foss.com

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of the governor’s deferred maintenance package – $100 million a year for five years – as he proposed last November, the passage of the $397 million general obligation bond package in November, and building projects that were part of the federal stimulus that are just starting to hit the street. We do need to see an increase in private commercial investment in part due to the slow recovery nationwide. There’s no indication from Washington that defense spending in Alaska will subside anytime soon. Right now, oil and gas spending is anyone’s guess. I’m concerned that with the recent events in the Gulf Coast there will be a regulatory reaction in Washington that will not be good for Alaska. ■

CONSTRUCTION (MILITARY)

email: bespeland@arcticoffice.com Toll free: (800) 478-2322

www.arcticoffice.com

By Chris Tew Chief of Contracting U.S. Army Corps of Engineers, Alaska District

he U.S. Army Corps of Engineers, Alaska District, continues to manage one of the largest military construction programs in the nation, while helping to provide economic stability on the Last Frontier. For fiscal year 2010, the district’s military program consists of 17 projects valued at $333.5 million. The vast majority of these projects were awarded by the end of March to capitalize on the

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

optimal construction season in Alaska. The district still plans to award an additional $30 million in military construction contracts by the end of September. This year’s Army program features 11 projects worth $231.2 million, including five projects funded at $59.6 million on Fort Richardson, and six projects at $171.6 million on Fort Wainwright. The Air Force program shows construction of six projects totaling $102.3 million in fiscal year 2010. Elmendorf Air Force Base has two projects funded at $37.6 million, Eielson Air Force Base has three projects at $40.4 million and Clear Air Force Station has one project at $24.3 million. Meanwhile, under the American Reinvestment and Recovery Act (ARRA) of 2009, the Alaska District awarded contracts for an additional 47 military construction projects at $20.3 million. It was the first in the Corps to successfully obligate all of its ARRA funding by March 2010. By spending these dollars as quickly as possible, the district helped put hundreds of local contractors to work and is contributing to the nation’s economic recovery. In some cases, these new jobs will endure for the next two years. Turning to fiscal year 2011, the Alaska District’s military construction program estimates 12 projects funded at $391.7 million. For the Army, the Corps anticipates nine projects at $348.4 million. For the Air Force, the outlook calls for three projects at $43.3 million. Since federal spending has remained high in an effort to both stabilize and stimulate the economy, the U.S. Army Corps of Engineers, Alaska District, has maintained a robust workload for its military construction program in spite of the recession. Most notably, the economic downturn has sparked greater interest in business opportunities with the Corps. Given the general contraction of construction spending in other sectors of the economy, firms that typically did not pursue work with the district are now bidding on these projects. The shift has increased competition for Corps projects, leading to better pricing and increased value for its clients. The near-term forecast for the U.S. Army Corps of Engineers’ military

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ur business is conservation of the worldâ&#x20AC;&#x2122;s oceans: maintaining the health and biodiversity of marine ecosystems and sustaining the resource while maintaining coastal communitiesâ&#x20AC;&#x2122; way of life. The health of the ocean environment and marine ecosystems â&#x20AC;&#x201C; which is dismal â&#x20AC;&#x201C; affects the longterm health of the economy. To this end, our work continues to be a matter of stewardship in three areas: overfishing, carbon emissions and pollution. Overfishing is devastating our oceans, which could be rectified by establishing an ecological-sustainedyield principle rather than the current maximum-sustained-yield principle. Carbon emissions from humans are causing climate change demonstrated by the melting polar ice and glaciers. Perhaps worse, carbon is causing increased acidity of our oceans, which threatens many species, including fish, and particularly shellfish. The ocean supports the life of about 50 percent of

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

all species on earth and helps sustain that life, providing 20 percent of the animal protein and 5 percent of the total protein in the human diet. One of every six jobs in the United States is marine-related. Climate change and ocean acidification can be remedied by reducing carbon emissions through alternative energy, and home and business weatherization, along with a commitment to using mass transportation. That trend has begun. Pollution is destroying our oceans, killing marine life and ultimately threatening the planet’s well being. Oil development, spills and ocean debris are killing marine life and threatening the health of many species. This can be rectified by moving to alternative forms of energy and reducing, reusing and replacing plastic containers. Although this trend has started, the change in behaviors is not happening quickly enough. A more complex and challenging problem is the amount of chemical compositions being poured into the world’s oceans, which is evidenced by mercury being found in species such

as tuna and swordfish. Resulting health effects include damage to the central nervous system, heart and immune systems, and the developing brains of young and unborn children. This is being addressed by sanctioning and controlling known chemical producers and regulating polluters such as chlorine plants and coal-fired generators, the latter being a major contributor to carbon problems. The world recession is affecting the environment in two ways. The recession has caused a relaxing of stewardship values and the mantra “drill baby drill” without forethought or regulation has become pervasive in consideration of development projects. Many have used the economic recession as rationale to take big risks irrespective of environmental consequences. We need look only to today’s headlines of devastating effects like the Gulf BP oil spill. The recession has also caused a pullback from funding sources and philanthropists who provide the major source of revenue for conservation. Over the next two years there is likely to be continued reduction in revenue as most

are managed funds that contribute on a five-year rolling average of earnings, which are down. The trends in America and parts of Europe and Asia of privatizing profit, but socializing risks and loss will continue making the environmental community’s job tough and further threatening the ocean environment. Short-term, big, unsustainable economic gains from industrial pollutants, over fishing and offshore drilling will be followed by long-term environmental disasters. These disasters will result in serious economic consequences as can be seen with salmon fishing in the West, or the devastation of the Gulf of Mexico communities from the recent BP oil spill. This means the environmental sector will face tougher challenges over the next two years. Political corporate protectionism policies will continue the trend of permitting high-risk development until disaster occurs over the next two years and that will continue the roller-coaster economy. Big oil companies don’t want to be regulated or taxed. But they want to control the nation’s energy for profits

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

and have the public pay the price for any environmental disasters or economic failures. The recent Supreme Court decision allows them to invest heavily in congressional elections (to try and stop any tax or regulatory improvements). Hopefully, the public is waking up to the reality that good stewardship means regulating big oil corporations to prevent costly environmental disasters and taxes on common property oil that belongs to everyone is a fair and reasonable way to do business in a democracy. ■

FINANCIAL SERVICES

By D B David id LLawer Senior Vice President First National Bank Alaska

t appears to me that the most likely scenario is that the Alaska economy will remain relatively flat with no changes and that the same dynamics that have been in effect will still apply during the last half of this year. Largely, this is because there has been no improvement in the economy on a national and international level, or in Alaska. Nationally, we hear about an increase of 200,000 jobs as being improvement, but it’s incidental and the benefits are not taking hold across the board. In Alaska, there is no new construction going on and the scenario is the same on the national level. What’s happened has happened – and nothing has happened to change that.

The recession initially had a dramatic impact on the financial industry in general, but it seems to have rallied from that with help from the American taxpayer in the form of stimulus funds, and injections of capital that have enabled a lot of the largest financial institutions to survive. Now it appears, as if by reason of continually poor economic conditions, that Congress is intent on punishing the financial industry and it is going to have a serious effect, generally speaking. Smaller banks and institutions benefited greatly from additional insurance deposit guarantees. Those that have been identified as part of the steps taken by Congress, intended to be an economic stimulus, have had a beneficial effect in respect to almost the entire financial services industry. On the other hand, the worldwide recession continues and the financial services industry has not, as a consequence, enjoyed any increase in business, or had the opportunity to expand on its lending and investments. There will be one overwhelming trend and it will be consolidation. You will see more and more smaller financial services companies going out of business, merging with others, or being acquired by the larger financial institutions. That’s strictly a consequence of regulation and taxation measures that are intended to punish the largest financial institutions, but it will have a much more dramatic effect on the smaller ones. The same regulations that Congress is debating now, in so far as financial services regulations are concerned, will result in the same cost – in terms of compliance – to the largest banks and the smallest ones. The difference is that the larger ones will have the opportunity to spread the cost of that additional regulations over millions of customers and the small banks won’t be able to pass it onto more than a few. The small ones will have to go out of business or merge with others to realize an economy of scale, or be acquired by very large institutions. At the consumer level we will see smaller financial institutions reducing the number of consumertype products. They are not going to be able to offer them at a price that can successfully compete with the larger financial institutions. ■

FISHERIES

By Glenn Reed President Pacific Seafood Processors Association

his has been a difficult year with generally soft markets for higher value products. In Alaska’s largest fishery, Bering Sea pollock, demand has seen some increases for what is a relatively lower-value range of products. Some seafood-market experts are suggesting this situation will change, with markets improving as we move toward the end of the year. The global economic situation has been difficult for everyone, including the seafood industry. Issues that have affected us include the worldwide credit crunch, inexpensively produced farmed salmon, and large supplies of Russian seafood products. Weak economies in Asia and Europe also have impacted the industry because of the resulting lower consumption. At the same time, high energy and fuel prices have increased the cost of production for many firms. Seafood is bought and sold as a commodity in global markets so we can feel greater impacts from the supply versus demand side. The lower quotas have created some demand benefits for pollock, which as an inexpensive seafood protein tends to weather tough economic times better than some higher value products. We are fortunate that Alaska’s fishery resources are healthy and abundant,

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

though some are impacted by a soft world market. Alaska’s cod fisheries are experiencing an up-cycle in abundance, and the world famous Bristol Bay sockeye fishery is predicted to have another very strong year in 2010. The health benefits of wild seafood become more obvious and well-reported every day, and consumers are paying more attention to what they eat, especially in the United States where the aging population is very concerned about maximizing quality of life. Alaska’s wild fisheries offer healthy protein choices to a hungry world. This has served our industry well for more than 100 years through a wide variety of economic times. This well-managed Alaska fishery is expected to continue to provide healthy food options for many years to come. The State and federal fisheries off the coast of Alaska provide about 60 percent of all the seafood harvested in America, and Alaska seafood has an enviably strong position in the world market. Because of our strong commitment to sustainable management, this is expected to continue well into the future. There is nothing static in the seafood industry; stock abundance always has fluctuated over short periods of time. But, in the long run, it is expected that there will be continued strong demand for the sustainable seafoods produced in Alaska and the Pacific Northwest. ■

HEALTH CARE By Annie Holt Chief Executive Officer Alaska Regional Hospital

ealth care – the actual encounter between a patient and a physician, nurse or other caregiver – is something that people will always require. An economic downturn doesn’t change the basic human need for health care. However, it can affect a person’s ability to access and pay for that care. Our concern is that people will avoid seeking health care (especially preventive) in times of economic hardship. This choice can lead to more acute and more expensive health issues down the line. The second half of 2010 for the health care industry looks pretty much

the same as the first half of the year: it will continue to care for approximately the same number of patients, though it may be paid less as more and more uninsured people require health care. To counteract this situation, the industry will have to further refine processes and increase efficiency in areas outside of direct-patient care. No industry has been immune to the worldwide recession, but it’s affected health care a little differently. Health care providers and hospitals remain very active. The demand is constant, but patients are less able to pay for services, so the industry has had to develop ways to run hospitals more efficiently and deliver care more resourcefully. Preparations for health care reform changes will be ramping up, but until it is successfully and completely implemented, providers will be caring for more and more people who don’t have insurance and cannot afford to pay their medical bills. We will continue to focus on delivering high-quality, safe and compassionate care, and I expect that we will see closer alignment of hospitals with physicians and payers. I anticipate in the next couple years we’ll see increased involvement of patients in planning and evaluating their health care services. There are many resources currently available to do this, but more and more people are taking their care into their own hands and making informed decisions about their lives. Additionally, health care moves very quickly, so we’ll continue to evaluate and adopt new technologies to benefit our patients and community. ■

INTERNATIONAL TRADE

By Greg B G W Wolflf Executive Director World Trade Center Alaska

or Alaska’s export industries, the second half of 2010 may prove somewhat challenging. The major markets for Alaska are in the Pacific Rim, concentrated heavily in Asia. China is the economic locomotive of the region, and this year, so far, growth has been robust. The economy of the Middle Kingdom has been growing at about 9 percent, helping to lead the world out of the 2008-2009 recession. China’s strength bodes well for Alaska as the country has become the state’s second-largest trading partner. There are concerns, however, about the Chinese economy overheating and the government there has taken steps to cool down, for example, the real estate market, in an effort to avoid a bubble. On the other hand, the sovereign debt crisis spreading across parts of Europe will likely lead to austerity measures in those countries, which may put a damper on the economic performance of those countries. Alaska’s export markets have become increasing diversified over recent years and European markets do play an important role for several of the state’s export industries, such as seafood. One particularly positive note this year has been the rise of prices for precious metals. Gold and silver prices are reaching record levels as investors seek refuge from currency and debtrelated assets. Mining-sector exporters in Alaska should benefit from the rise in these prices even if production levels remain relatively the same as last year. Looking ahead, growth in emerging

www.akbizmag.com g com • Alaska Business Monthly y • July 2010

Asia, especially in countries like China and India, should support strong export results for Alaska. Also, growing appreciation of Alaska’s wild-caught seafood products, also should benefit the state’s largest export sector as consumers seek the healthy and safe characteristics of Alaska’s high-quality seafood products. ■

JOBS By Neal Fried Labor Economist State of Alaska

t’s interesting, it’s complicated, it’s not clear and maybe that’s a good thing. It’s not clear because the changes in jobs here are relatively subtle compared to other places. Last year, for the first time in 21 years, the number of jobs declined, though it was still only very slight – less than one-half percent. In 2010, it’s not completely clear what will happen. We’re relying on estimates, not actual data, and because the way we do our estimates has changed, I can’t tell right now whether the number of jobs is higher than last year or lower, but my

guess is i the th numbers b are very close l tto last year’s because Alaska’s experience has been very different than of the rest of the country. Over and over again, when ranking labor markets, Alaska is often toward the top of those lists. The labor market is certainly better off than anywhere else and the reason we have come through this better than so many other

states is we simply have a much different economy than those in other states across the country. The federal government is a huge player in Alaska and it is relatively stable with all the stimulus funding. We also have a big military presence that has been on a growth path and is thriving right now. Alaska has very little manufacturing in the state – it’s all seafood processing and has nothing to do with anything other than the number of fish we catch, so it hasn’t gotten negatively hit like the rest of economy has. It even amazes me: 2008 was a great year, we felt some effects in 2009 but very modest ones. For 2010 we won’t know until the end of the year when the first quarter numbers are made available. In every national recession since statehood, we didn’t follow the national trend – we’ve had our own recession, but we have not followed the rest of the country. In fact, during other national recessions, we just kept growing. A lot of people think Alaska is countercyclical, but that is not true. What’s good for us may not be what’s good for the rest of the country. ■

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MINING & MINERALS

By Steve Borell Executive Director Alaska Miners Association

spring, many were not able to begin fieldwork until late summer, if at all. All exploration companies had to manage finances judiciously to ensure they did not expend funds that would be needed to make their lease or claim holding payments, and to maintain the environmental monitoring requirements of their permits. The outlook for the future, shortand long-term, is excellent. Alaska continues to be known for its excellent geology and as being home to a long list of world-class ore deposits. When compared with other states and most countries in the world, Alaska is effectively unexplored. There has been exploration here for more than 100 years, but there has been nowhere near the level of exploration seen in other

venues. There are many reasons for this, including climate and snow cover for much of the year, lack of roads, added cost of operation and for two decades following the 1968 discovery at Prudhoe Bay, there was tremendous land tenure uncertainty. Another positive factor for mineral development in Alaska is that the State has a robust permitting and environmental system with competent managers that know the science of their respective jobs and have had consistent political support from current and past administrations. The mineral industry in Alaska is expected to experience a continuation of the steady growth it has seen for the past 20 years, creating jobs and economic diversification in all corners of the state. ■

NATIVE CORPORATIONS

diversity of operations and strong balance sheets, collectively they have fared well in this economic environment. They have not been unaffected, however, due to market pressure and increasing competition in all sectors. Future trends are likely to include declining profitability, due to challenges in developing resources and increased competition for contracting opportunities. ANCs will need to rely heavily on almost 40 years of business experience to weather an economic slowdown that is affecting all American companies. Any slowdown in activity nationally is likely to affect ANC operations in Alaska, as about 14,000 of the 35,000 worldwide employment for the regional corporations is in the state. Collectively, regional corporations represent one of Alaska’s largest private-sector employers, and this has the potential of bringing home the effects of the national economic slowdown. Continued external pressure could lead to reduced investment and employment pullbacks here at home. ANCs, as well as Alaskans, have been fortunate during this downturn. This has been largely due to diverse operations and a conservative business philosophy. However, the severity of the slowdown has affected even the largest companies. Time will tell if ANCs can stay insulated from the global markets. ■

laska’s five large mines continue to operate at a steady pace. This summer these mines will be joined by a sixth operation, the Kensington Gold Mine, located north of Juneau. Several smaller family placer mines have their permits in place and will begin operating as the ground thaws. Sand and gravel mines statewide are operating to support local construction. There was a major cloud on the horizon for the Red Dog Mine in northwest Alaska. Environmental groups, representing a few disgruntled local residents, appealed a minor technicality in an EPA permit the mine needed to continue operating. However, Teck and EPA concluded the mine could operate under criteria previously approved by the court. Teck then announced it would begin development of the next mining area, thus preserving approximately 500 jobs in rural Alaska. It appears that the amount of mineral exploration will increase this summer. In 2009 a total of 17 exploration projects each spent more than $1 million. This was down from 29 projects in 2008. It is expected that the 2010 expenditures will return to the previous level. The worldwide recession forced the operating mines to tighten their belts, but it hit new operations and exploration extremely hard. During 2009 if the exploration companies did not have their financing in place by early

By William Anderson Jr. President, Koniag President, ANCSA Regional Association

laska Native corporations (ANCs) are characterized by diverse operations, with business activities across a broad spectrum. Included in operations are government contacting, resource development and passive investing in areas such as real estate. In addition to the diversity of operations, ANCs are well capitalized and maintain good liquidity. Due to the

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

OIL & GAS

B Marilyn By M il Crockett C k tt Executive Director Alaska Oil and Gas Association

hile investment levels onshore Alaska have declined, three projects sanctioned prior to the new State production tax, are under way. Construction at Eni’s Nikaitchuq development is continuing and first production from onshore is projected by the end of this year. Eni will be the fourth operator of North Slope production. BP is continuing development of the Liberty prospect, which will use ultra-extended-

reach drilling from shore to reach the reservoir located in the federal outer continental shelf (OCS). ExxonMobil, operator of the Point Thomson unit, continues to move forward with drilling at that location, which is estimated to contain 25 percent of the North Slope natural gas resource. Offshore, Statoil will conduct a seismic survey in the Chukchi Sea in the summer of 2010 and Shell is mobilizing its drilling fleet to drill up to three wells total in the Beaufort and Chukchi seas. Finally, the first open season for the Alaska Gasline Project under the Alaska Gasline Inducement Act (AGIA) is scheduled to conclude at the end of July. Denali has filed its open season plan with the Federal Energy Regulatory Commission (FERC) and expects open season to begin on July 6. As has been the case during past economic recessions, Alaska industries have been largely unaffected by the recent recession, and this is true for the Alaska oil and gas industry as well. Perhaps more than in any other time in recent history, the Alaska oil and gas industry faces an uncertain future. Fed-

eral initiatives related to climate-change legislation, increasing taxes and decisions to be made on OCS development create a high degree of uncertainty that will affect investment decisions, which need to be made in the near-term to sanction projects which could move forward in the next two years. The cost to operate in Alaska’s remote and challenging environment is extremely high even before factoring in these additional costs. For those projects already under way, the Nikaitchuq development is projected to see its first production from offshore in 2011, and peak production is projected to be 28,000 barrels per day (bpd) by 2015. First oil from the Liberty project is expected in 2011, with peak production projected to reach 40,000 bpd. It is always difficult to provide expectations for an industry that is so dramatically and directly impacted by swings in commodity prices. But it is especially hard to predict what the industry will look like in Alaska given the unknown outcomes of the open season and the unknown nature of potential federal regulations and decisions. ■

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

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REAL ESTATE (COMMERCIAL)

Byy M B Michael ichhaell JJames ames Commercial Associate Bond, Stephens & Johnson

n our industry, it can take several months to close a commercial real estate transaction, with some taking less time than others. Based on the line of work in the pipeline, the third quarter of 2010 appears to be very promising. Anticipating output beyond three or four months is difficult, since in the sales and leasing industry it is about identifying opportunities, effort and massaging the negotiation. Cold calls and referrals are what drive the business. Investing the time and paying attention to these items now are what generates the volume of our future transactions. Reviewing numbers from 2009, volume was of course down, but have to keep it in perspective: 2008 was one of the best years on record. Then, upon reviewing and averaging the years 2006 and 2007, the numbers for 2009 proved to be right in line. I travel annually at the end of May to meet with national clients. Last year there was a cloud of stagnation for the real estate committees for clients. Alaska development decisions were being impacted by the national concerns of these corporations, as they began circling their wagons, with projects were being cancelled, disposition of certain questionable sites, and putting off growth to curb expenses. Looking ahead to 2010, based on our client base and their expansion plans, there appears to be an

awakening. Clients are eager to meet and discuss the potential of new markets such as Alaska. For Alaska, a lot will be influenced by the federal government and financial institutions. Several federal offices are expanding and possibly relocating in the near future, which will lessen the overall vacancy rate and possibly drive development into other parts of Anchorage beyond midtown, into areas such as the central business district in downtown. Loose lending standards were a factor in the overall economic downturn and have now become quite stringent. Nationally, getting back to the five C’s of credit – character, capacity, capital, collateral and conditions – will move us into the proper direction the economy needs to migrate toward. It appears national bank policies are influenced by anxiety from being too aggressive with capital. We need to be able look at a transaction and consider if it makes long-term sense for all parties involved and, only then, provide a reasonable way to fund the project. The Title 21 Rewrite should be a concern for future development within Anchorage. It will modify the current land use-code dictated in the municipal charter, imposing certain changes in land use, such as revised applicable uses under zoning districts that can devalue land, increasing the cost of development from items such as more strenuous landscaping and parking requirements, requiring a larger footprint of ground to service a building. Medical office space continues to be an area for growth, both on and off the medical campuses. Retail development has shifted down, and while a few new national retailers will come into the market, the expense of new retail development will be difficult for local retailers to absorb. New development will become somewhat stagnant in the office market as companies tighten their belt, realizing that relocating and living with less is probably more efficient that having to terminate employees, only to later re-hire and train new ones. Future modifications to the 8(a) businessdevelopment program for Alaska Native corporations could most definitely impact our economy. From the space

they lease or develop to own, to the payroll of local hire, to economic drivers of funding in rural bush communities, they have a direct impact on the economic health of Alaska. ■

REAL ESTATE (RESIDENTIAL)

Byy Helen B Helen l JJarratt arratt tt President Elect Alaska Association of Realtors

esidential real estate has just come off of a few months of somewhat brisk sales due to the federal tax credit expiring the end of June. This program may have caused some people that might have bought later this year to have already purchased a home. The latter half of 2010 will be about the same as 2009. Alaska has somewhat of a stable housing market right now. Now is a great time to purchase a home as prices are affordable and interest rates are still very low. The main affect on residential real estate from the worldwide recession was the 2008 stock market plunge causing a decline in sales of homes during the previous two years. Also, this recession has caused a loss of confidence in what the future holds, causing families and businesses to pullback in purchasing when it might be a good time for them to go ahead and buy, whether that purchase is a house, car or business expansion. First, we’ll have to see a stabilizing of our national and local economy. Alaska is still very fortunate with the excess of oil revenue, but we do need exploration or the gas pipeline to restore muchneeded confidence to bring about more

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

home sales. Interest rates will also play a large role in what people can afford to purchase. We will also see our industry move more toward social media to connect with the consumer. ■

TELECOMMUNICATIONS & TECHNOLOGY By Mike Felix President AT&T Alaska

s for AT&T, we got off to a great start to the year with first-quarter results, and our fundamental outlook for the business continues to be quite positive. AT&T continues to set the pace in mobile broadband, the industry’s No. 1 growth driver, and our wireless business continues to perform at a high level, with improved margins, lower churn and overall revenues growing at a healthy clip. Our business has been pressured, but we also have growth areas – including in Alaska – where we’ve recently opened new retail stores and in the last year expanded our wireless 3G network

to Anchorage, Juneau and Fairbanks. This year we are also completing Alaska’s only fully self-healing broadband network, connecting those three population centers with the rest of AT&T’s national network. All of AT&T services, wireless and wireline, will enjoy the ultra-high reliability of this network backbone. On a national level, wireless broadband growth, further advances in IP-based services, and strong margins and cash flow highlighted AT&T’s first-

quarter 2010 results. AT&T gained a total of 1.9 million total wireless subscribers – the highest first-quarter total in the company’s history – to reach 87 million in service. Over this same period our company also experienced a 10.3 percent increase in wireless service revenues, and robust growth in revenues from wireless data services, which were up $947 million, or 29.8 percent, versus the year-earlier quarter. In first-quarter 2010, we also saw a 255,000 net gain in wireline broadband connections, as well as a 14.9 percent growth in revenues from strategic business services such as ethernet, virtual private networks (VPN), hosting and applications services. So, we truly believe AT&T got off to a great start to the year. AT&T is pioneering the industry’s most critical growth area, which is mobile broadband. Customer demand is surging. According to Cisco, mobile traffic will increase from 90,000 terabytes in 2009 to 3.6 million terabytes in 2014. Along with this demand, AT&T offers the country’s best and most innovative portfolio of smartphones and

Leading the Way... Delivering Remote Medical Care

www.fairweather.com www.akbizmag.com • Alaska Business Monthly • July 2010

mobile phones, connecting customers to their favorite people, content and applications. Along with that exciting lineup of devices, AT&T has embarked on an aggressive plan to further enhance our mobile network capabilities. From 2007 through 2009, AT&T’s total capital investment in our Alaska wireline and wireless networks was more than $185 million. In 2010, company-wide, we plan to invest between $18 billion and $19 billion, a 5 percent to 10 percent increase, assuming a positive regulatory environment. ■

TIMBER

The Interior timber industry is doing well and the Southeast industry is limited only by the supply of timber. We expect to see continued growth in the Interior where the State is providing an increased supply of timber in response to local demand. In Southeast Alaska the U.S. Forest Service has committed to preparing at least four 10-year timber sales as a means of providing a reliable supply of timber for mills in Southeast. The agency expects to have at least two of these sales completed within the next two years. ■

TRANSPORTATION

B O By Owen G Graham h Executive Director Alaska Forest Association

By R B Roger W Wetherell th ll Chief Communications Officer Alaska Department of Transportation and Public Facilities

The timber industry in the Interior should do well because the State is supplying a reliable supply of economic timber, and because the federal government is encouraging new investment in biofuel facilities. The industry in the Southeast is struggling to get sufficient timber to keep a few mills operating. The federal government controls 95 percent of the timberlands in the region and is able to supply only about 10 percent of the timber volume that should be available under their new plan. Alaska is working with the United States Forest Service as a cooperating agency in an effort to increase the timber supply from federal lands.

Aviation – The Alaska International Airport System continues to notice that recovery is occurring. It’s difficult to speak of recovery at the State-owned rural airports due to the high fuel costs making it difficult to rebound. The Ted Stevens Anchorage International Airport experienced a 20 percent to 25 percent drop in traffic, primarily due to a decrease in cargo traffic. Passenger traffic showed a slight drop in the latter part of the summer of 2009. It is too early to predict how this summer’s passenger traffic will fare, but based on the carriers who’ve decided to operate here, they appear to think there will be increased demand. We

have also seen slightly more than half of the lost cargo traffic return. There is a sense of cautious optimism that the Alaska aviation system will continue to witness moderate recovery. Recently, Frontier Airlines initiated its inaugural flight in Fairbanks. This flight between Fairbanks and Denver was made possible by the Small Community Air Service Development Grant. Frontier’s new route to Fairbanks in Alaska will connect the city with Denver four times a week this summer. Marine – While the Alaska Marine Highway System (AMHS) saw a decrease in ridership in 2009 compared to 2008 as a result of the recession, the impacts on ferry ridership were not as severe as many other transportation and visitor industry operators. Moving into the summer of 2010, ferry riders for the month of April and the first week of May have shown increases over 2009 numbers and pre-bookings on mainline routes continue to look favorable. The two principle cost drivers affecting AMHS’s ability to deliver service are labor costs and bulk fuel purchases. AMHS currently has collective bargaining agreements in place with the three vessel employee unions, which do not expire until July 1, 2011. AMHS has watched fuel prices rise during the first part of 2010 and expects this to continue throughout the rest of the year. As a consumer of approximately 10 million gallons per year, an increase of a dime in delivered cost affects AMHS by $1 million.

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

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These are costs that cannot currently be passed onto the traveling public due to the overall economic conditions. The primary effect of the worldwide recession has been on the softening of the independent traveler market. Although other tourism-based businesses have been negatively impacted by up to 30 percent in comparison to previous years, AMHS suffered substantially less. Because of the worldwide recession, AMHS management elected to forgo tariff increases for the previous two years. This has had a negative impact on the ability to operate with fewer subsidies while providing consistent levels of service. However, it is management’s contention that increases in tariffs will dramatically soften demand curves. Consumers remain cost conscious even though the travel industry is slowly beginning to recover from the recession, and are remaining vigilant in seeking discounts and exploring independent and cost-efficient means of travel. Most economists expect the price of bulk fuel to gradually increase in the future. The cost of replacing aging vessels has been on an upward curve lately, which is tied into the increased cost of labor and steel. In recent years, the price of labor has increased at a rate higher than Consumer Price Index-type increases and higher than management has raised tariffs. Shipyards in this business sector have also found it more difficult to place bonding. Surface – For road and airport construction, the latter half of 2010 should be pretty good. The legislature passed a large capital budget with a healthy amount of transportation projects. Many of these projects will go out the architect and engineering sector for design. Some of the projects funded in this year’s capital budget will require several years to complete the permitting, design and engineering, and right-of-way acquisition needed before starting construction. We are continuing to work on projects funded by the American Recovery and Reinvestment Act such as resurfacing Dimond Boulevard in Anchorage. The Federal Highway Administration and the Federal Aviation Administration

provide a significant amount of funding for transportation projects in Alaska. Both of these funding sources are in reauthorization phases, awaiting work by Congress to determine future funding amounts. However, the programs continue to be funded at current levels, resulting in federally funded transportation projects in the works. We will continue to focus on our $1.5 billion program. We are seeing great competition on our bids with firms from Outside jumping into Alaska’s market. Prices have decreased considerably on some items. Airport traffic though has been hit hard with significant reductions of heavy cargo into our international airports.

Alaska’s transportation construction sector has been very fortunate not to have experienced significant downturns in the economy. We do see much more competition for projects and that results are better in a greater value for our construction dollars. The hyper inflation in the cost of steel and other materials used in construction has stopped, resulting in a greater certainty for the costs of materials, and that allows the department to receive competitive bids. We will have a good construction program over the next couple of years with general bond projects, regular federal program and State funded projects. ■

TRAVEL & TOURISM

lost 140,000 cruise visitors because of ship redeployments. Last year, we lost 125,000 independent travelers. So, even if we are up by as many as 200,000 independent travelers, the net result is still not great because of the loss of cruise visitors. I hope that the industry will be up by 2 percent to 3 percent, representing about 30,000 to 45,000 more visitors. The worldwide recession affected the visitor industry in terms of the inbound Japanese market, but not terribly. We are hopeful that our major international markets of Japan, Australia and Europe will hold steady – or improve slightly – this year. Given the changes to the ballot initiative, we are hopeful that we will see a rebound in cruise redeployments. Two lines – Disney Cruises and Oceania Cruises – have announced they are planning to bring ships to Alaska in 2011, which is encouraging. The industry is also hopeful that some of the operators presently in Alaska – Holland America, Princess Cruises, Carnival, Royal Caribbean International, Celebrity and Norwegian Cruise Line – will consider increasing ship deployments to Alaska in 2012 and beyond. We are also encouraged by the substantial increase of new Gateways to Alaska for the 2010 season by United Airlines, USAir, Continental Airlines and Frontier Airlines, and that this trend will continue beyond 2011, which improves access for the ❑ independent traveler.

By Ron Peck President/Chief Operating Officer Alaska Travel Industry Association Our four-month summer season that runs from May to September is well under way. Anecdotally, we are hearing from businesses that independent travelers – those visitors coming to Alaska via air or the highway – appear to be up over 2009, which is an encouraging indicator. At the same time, they also agree that the numbers are still not back to 2008 levels. Nonetheless, we are mildly optimistic. At this point I believe that we will in aggregate be up slightly over 2009, though not significantly, for several reasons. This year we have

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

H R M AT T E R S

BY ANDY BROWN

Fourteen Steps to Better Management

Don’t take risks; know the law.

Andy Brown

f it is indeed human to err, then the workplace is certainly fertile ground for many of those errors. Some of the more common errors I see in the workplace stem from simple misunderstandings or no understanding of the laws, rules and regulations that govern employment. They include: 1. Language. What we say, as well as how we say it can make or break a business. Words alluding to any protected class such as “boy,” “girl,” “young,” etc. should be eliminated. If you question something, err on the side of caution and re-word or remove it. 2 Illegal interview questions get people into hot water frequently. In Alaska there are 11 protected classes and many of the mistakes employers make are inadvertent violations of those

classes. The classes are race, color, religion, age, gender, national origin, pregnancy, disability, parenthood, marital status and changes in marital status. You cannot ask questions about any protected class, but you are allowed to ascertain whether or not a candidate can perform the job. Asking if an individual can do the job with their disability is illegal; asking if there is any reason they would not be able to perform the job is not. 3. Inaccurate job descriptions that are vague, unrealistic, omit duties or include benefits that do not manifest for years cause significant issues for HR, supervisors and employers who must deal with angry, disgruntled employees who are more likely to leave. This causes disruption in the workplace and more expense in re-hiring. The magic phrase “other duties as assigned” is not always a getout-of-jail-free card. 4. Inadvertent contractual promises can come back not only to haunt you but also could potentially seriously affect the bottom line. Contracts may be made in writing or verbally. Avoid language that might be construed as a contract either in writing or when speaking to an employee. Statements such as “your job is safe” or “annual salary” have been construed as a contract. 5. Inappropriate terms in the workplace can be seen as discriminatory and hostile regardless of intent. References or jokes that refer to any of the protected

classes can open you and your company to liability. 6. Wage and Hour. Ensure your employees are correctly classified. Misclassification is a common error and can land you in hot water. Just calling someone a manager does not make him or her exempt. The duties, authority and impact on company operations are only some of the criteria the State labor department and the courts look at when determining if an employee is exempt or not. Start with this website for the federal FLSA guidelines: www.dol.gov/whd/regs/compliance/fairpay/fs17g_salary.htm. Another common misclassification is independent contractor versus employee. Many times an employee (or employer) will want the status of an independent contractor when the individual is actually an employee. The best test for independent contractor status is the control test: if it’s completely up to the worker to decide how and when work will get done, then they can most likely be classified as an independent contractor. 7. Requiring employees to maintain confidentiality of wage information seems like good business practice, but it violates the National Labor Relations Act. Look at your company policy and “request” the information remain confidential or ask employees to “use discretion.” 8. Privacy. Possibly due to the prevalence of technology in the modern workplace, this is a rapidly growing area of

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

Performance Matters Conducting Effective Performance Reviews & Resolving Performance Problems

July 14, 2010 8:30 a.m. to 12:00 p.m. Presented by Andy Brown, JD, MPA $99 with Pre-enrollment lawsuits. Many employees have an expectation of privacy in the workplace. How prominent is your company privacy policy? Do you even have one? If you asked your employees “Whose computer is that?” What would they say? Consider a quick and easy pop-up message that comes on when a user logs in that says, “You are using the company’s computer. Anything you do on this computer is accessible by the company.” Monitoring improperly or without notice can cause issues. Ensure that if you choose to monitor employees electronically, you have a clause in your policies that states employees may be monitored and ensure you have that employee sign the policy when they are hired. Inadvertently disclosing private employee information is a violation of a number of laws. Employers have a substantial amount of sensitive information, from Social Security number to medical records.

10.

11.

12.

Simply discussing what to do when an employee returns after an operation can be a violation of privacy laws – even if it is well-intended. Training. Great supervisors aren’t born, they’re grown. Failure to properly train your supervisors results in them being trained improperly. Improperly trained supervisors cause problems, and the entire company is on the hook for their actions. It’s easy to ignore problems when times are good and tough to find the resources when times are bad. Invest in them up front, the benefits more than make up for it in the long run. Do not give misleading performance evaluations. If you try to discipline an employee for something that was not on an evaluation, you may be out of luck. Make the evaluations matter and remember that just because one area of performance may be lacking, another might be quite good. Evaluate the evaluations with the aim that they become more effective. Communication. Work to keep communications lines open. You should keep employees in the loop on any changes that will affect them. Policy changes are common areas for this mistake to occur. Some policy changes require employee notification; in Alaska, changes to an existing drug policy require a period of time for employees to review before the new policy can be implemented. Failure to notify employees of the results of an investigation, disciplinary or behavioral discussion also breaks down morale. Do not ignore requests for information. Be as open and honest with your employees as you can without violating confidentiality

or fiduciary duties and encourage other supervisors and managers to do the same. When an employee inquires about a confidential matter, don’t ignore the request, but tell them you cannot discuss the matter and explain why. 13. Accommodation. This is not just about disabilities. Know the legal requirements for accommodation. You are required to try and accommodate for one of the protected classes as long as the accommodation is “reasonable.” The best-ranked employers are those who try to accommodate employees when they make reasonable requests, even if those requests are beyond what the law requires. 14. Non-compete agreements. If you are going to employ a noncompete agreement, understand the limitations the law has set on them. Those limitations are broken down into three categories:  Scope of skill – you can’t stop a former employee from earning a living at all but you can restrict direct competition in the same field.  Time – how long you restrict a former employee from competing varies greatly from stateto-state and even city-to-city. Consult an attorney.  Area – this is becoming more and more difficult to enforce due to the Internet’s affect on business. Again, consult an attorney. Additionally, for a contract to be valid there must be “consideration.” Consideration means there is an exchange of one thing for another, in employment, usually work in exchange for a paycheck. With non-compete agreements, if the employer does not give anything in exchange for the noncompete, it may be ruled invalid. ❑

About the Author

Andy Brown, a labor and employment attorney who grew up in Alaska, left his law practice in the Lower 48 to return to Alaska as an HR consultant with The Growth Company, which provides management and employee training as well as HR on-call services for companies without an HR department. Brown has more than 16 years broad-based human resource experience and worked as an investigator for both the U.S. Army and the state of Utah Department of Workforce Services. www.akbizmag.com • Alaska Business Monthly • July 2010

CONSTRUCTION

Project Roundup Busiest season under way.

Davis Constructors and Engineers Inc. completed renovations at Fairbanks International Airport in 2009.

BY PEG STOMIEROWSKI

he construction business in Alaska overall has been close to level for several years in the wake of the recession, with some projects not advancing as quickly as anticipated and, to some extent, residents and communities, with the help of federal stimulus monies, concentrating on taking care of what they have. Most of the public projects included in this year’s legislative capital budget won’t go to bid and result in more jobs until after 2010, said John MacKinnon, president of the Associated General Contractors of Alaska, a nonprofit construction trade association. Even if the $397.2 million education bond issue prevails in November, he said, 2011 primarily will see design work. Much of the street work, with the exception of the deferred maintenance projects,

he said, won’t be visible until after the projects go to bid in 2011. AGC’s 2010 forecast of construction spending from all sources totaled about $6.9 billion, down about 3 percent from the 2009 forecast of $7.1 billion (upwardly revised at year-end to $7.2 billion). In residential and private commercial investment, a slow employment decline that began in 2006 was continuing. Excluding the oil and gas sector (estimated at 43 percent of the total), overall construction spending was expected to come in about $4 billion, down about 4 percent from 2009. Some sectors have been up in the forecasts – health 57 percent, utilities 23 percent and military 9 percent from 2009 – while many have been down, MacKinnon said. Overall residential construction plunged and commer-

cial construction dropped over several years, with projections of private residential construction falling from $750 million in 2007 to well below $200 million. Much of this can be attributed to the impact of the recession in the face of aggressive building trends in the years leading up to it. Technology is a huge driver of construction work in Alaska, fueling health-, military- and education-related construction spending. Health-related construction has been a bright spot, he said, mostly because of the need to keep up with technological advances. A trend away from lengthy hospital admissions and invasive surgeries has resulted in more outpatient service facilities. Many small facilities are going up in the health care sector, including a new clinic in Fairbanks.

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

MacKinnon says construction is Alaska’s third-largest industry, pays the state’s second-highest wages and employs about 21,000 workers, with an annual payroll of more than $1 billion, accounting for 20 percent of the state’s economy. Although construction continues year-round, even in Alaska, for about 500 companies that bring in annual receipts of $2.1 billion, summer is good for more than tourists; many Alaskans earn the lion’s share of their livelihood in summer. Here are some of the projects various building sources described: In Anchorage, construction was inching along this spring at Tikahtnu Commons, a $100-million-plus retail and entertainment center on a 95-acre parcel of CIRI land at Glenn Highway and North Muldoon Road. A Regal 16 Cinema there constitutes a new prototype for Regal Entertainment Group’s theaters nationwide and is ushering in Alaska’s first IMAX screen, according to Josh Pepperd, president of Davis Construction. The 140,000-square-foot structure, which was expected to be ready by mid-summer, was to have

15 auditoriums in addition to the IMAX and an enhanced food court. Completed last winter in Anchorage were the eight-story Centerpoint West office building, north of the 14-story JL Tower off C Street and a 360-space parking structure west of the building. Elsewhere, in Big Lake, the Lions Club is leading an initiative to see construction of an indoor ice rink/recreational center using grants, donations and community funding. Envisioned is a 26,000-square-foot metal building with a 20-foot ceiling. In Juneau, a new, locally funded aquatic center is expected to open next year. Large port expansions continue in Anchorage and Mat-Su and work was being done at less busy ports in other areas. A $5.5 million restoration of administrative offices for the Alaska Railroad, which broke ground in spring, is slated for completion in January and federal stimulus monies assisted in restoration of the historic freight shed, completed in spring. PCL last spring completed an upgrade on A and B concourses at Ted Stevens Anchorage International Airport South Terminal.

Work was completed last November on terminal redevelopment at Fairbanks International Airport, which Pepperd said was one of Davis Construction’s largest projects. Indeed, most civil construction sectors were doing well, MacKinnon said, demonstrated by work going on along Minnesota Drive and the Glenn Highway, aided over the past 16 months by $250 million in federal stimulus funds for road and airport runway projects. The state will likely continue to see stimulus funds at work in these and other highway and airport projects for a couple of years more, he said. Alaska Interstate Construction was finishing a bridge replacement on the Tanana River south of Fairbanks, a runway safety area extension at the Juneau airport, and shoreline and Shore Avenue reconstruction in Kotzebue. Kiewit Construction was building the new Anchorage fish hatchery at Ship Creek and Alaska Mechanical was working on the Fairbanks sport fish hatchery. Here are other noteworthy building projects in various sectors across the state:

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

Photo courtesy of Davis Constructors

Davis Constructors and Engineers Inc. completed the Providence Medical Office Building in Anchorage this summer.

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Hardly was one expansion finishing than plans for another were being rolled out at Providence Alaska Medical Center. This spring Providence revealed details of “Generations,” an expansion program with an eye toward modernization of the Newborn Intensive Care Unit (NICU), prenatal and mother-baby units, cardiac surgery programs and other areas of the hospital. Davis Constructors, which already had a role in preliminary planning, learned in mid-May it had been selected to receive a general-construction/ construction-management contract, with details pending. The project is slated to run January 2011 through December 2014, and is awaiting State approval. Plans are to remodel 100,789 square feet of space within the hospital and construct a new 85,782-square-foot building at a projected estimated cost of $150.3 million. The NICU would go from 47 to 66 beds, a second dedicated operating room for cardiac surgery would be opened, with one of the rooms equipped with imaging technology, the surgical services area would be renovated and technologically upgraded, and several ancillary services would be relocated. At Providence Health Park on the southwest campus, meanwhile, tenants were being welcomed into a new five-story steel structure – a $53 million project and the last of three design-

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

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build efforts begun in 2005 by Davis Constructors and Engineers. A hub building allows common access to such centralized features as elevators. The “S Building” contains 106,429 square feet of medical office space. Tenants in the new suites were to include the Anchorage Fracture and Orthopedic Clinic, the Sleep Disorders Center, Anchorage Neurosurgical Associates and Providence Surgery Centers LLC. Work also was being completed on the Providence Center for Child Development behind the Providence Regional Building. The shell was completed last November, and the building opened May 21. In another building project, Kiewit was finishing the $67 million, 190,000-square-foot Veterans Affairs clinic constructed in a joint venture with Cornerstone. In Nome, Neeser Construction (NCI) is working on the $171 million Norton Sound Regional Hospital, a bigger facility replacing a more than 50-yearold hospital operated by the Norton Sound Health Corp., a tribally owned nonprofit. The project is benefiting

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from $146 million in federal stimulus funding from the American Recovery and Reinvestment Act (ARRA), about $15 million from the Denali Commission and $10 million from the Indian Health Service (IHS). Nome is a hub facility, serving, in addition to the local community, many Native villages in an area the size of Indiana. It offers a diversity of services, including dental and telemedicine. Construction of the hospital was going well, senior project manager Nicholas Francis, of Dowl HKN, reported as Norton Sound Health Corp.’s project representative. Structural steel work at the new site began in April and the entire steel package was expected to be completed in June. The 160,000-square-foot facility would more than triple the size of the old facility, portions of which date back more than 61 years. It is expected to be completed by November 2012. The primary contractor is InuitNCI, a joint venture of Inuit Services Inc. and NCI, with their portion of the contract about $90.5 million, according to NCI.

Francis said the fate of the old facility was uncertain and transition planning was under way to determine how the move from the 39,000-square-foot structure would be accomplished. About 100 workers will be laboring on the project at peak times and the facility was expected to add 100 jobs. Several health-related uses for the old facility have been mentioned. Almost all project materials must be brought in by barge, so advance planning is key, he said; he was expecting the first barge to show in the middle of June and the steel used to date had been brought in last year Cliff Gray, former project manager for the Norton Sound Health Corp., which owns and operates the hospital, has been quoted as saying that the hospital should help stabilize the economy in Nome. In Barrow, a replacement facility was under design and construction for Samuel Simmons Memorial Hospital, built in 1964. The $82 million construction contract is a joint venture of UIC Construction LLC and SKW/ Eskimos, both Alaska Native regional

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corporation-owned businesses. Arctic Slope Native Association (ASNA), a nonprofit, manages the hospital and construction of the replacement hospital, said John Muir of ASNA. At 100,000 square feet, the new hospital will be more than four times the size of the old facility. The project is scheduled to be complete in December 2012. More exam rooms, patient beds and dental support are envisioned, along with 140 new employees. In Fairbanks, plans for a new $75 million medical center project were advancing this spring after the Tanana Chiefs Conference reportedly agreed to a land deal with the city, according to the Fairbanks Daily News-Miner. Envisioned is a 100,000-square-foot complex, the Chief Andrew Isaac Medical Center, to replace a 23,000-square-foot clinic. Construction was to be funded by bonds. The Denali Commission, a federally funded agency that attends to infrastructure needs in rural areas, listed in its fiscal year 2010 appropriations plan a number of care-related construction projects. Four primary health care clinics were identified for funding this year: a 1,600-square-foot primary care clinic in Igiugig, at an estimated construction cost of $2.7 million; a 1,704-square-foot clinic in Ekwok, at about $2.5 million; a 2,058-square-foot clinic in Kaltag, at about $2.8 million; and a small clinic in Kasaan, at an estimated $1 million (a pilot project for communities with less than 100 population); there also was a six-unit elder supportive housing project in Soldotna, at a cost of about $1.6 million. www.akbizmag.com â&#x20AC;˘ Alaska Business Monthly â&#x20AC;˘ July 2010

Photo by Chris Arend/Courtesy of Cornerstone General Contractors

The atrium of the UAA ConocoPhillips Integrated Science Building completed in August 2009 by Cornerstone Construction.

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The University of Alaska, which hopes to build a new sports arena at the Anchorage campus, was awaiting allor-none approval from Gov. Parnell and Alaska’s voters in November of a $397.2 million general obligation (GO) bond package that includes $60 million for the project to supplement the previous fiscal year funding of $15 million for design and site preparation. The GO bond also includes many projects, including: Kenai Peninsula College Career and Tech Center, $14.5 million; Kenai Peninsula College Student Housing, $16 million; Mat-Su Valley Center for Art and Learning, $23.5 million; Prince William Sound Community College R and R, $5 million; University of Alaska Fairbanks Life Sciences Building, $88 million. The UAA ConocoPhillips Integrated Science Building, a $70 million project started in 2007 by Cornerstone Construction, was finished in August 2009. A $46.5 million Health Science Building is under construction. LSI was the principal for the design, using several local subcontractors and Cornerstone was building it. Subcontractors included Renegade Equipment LLC, Alaska Steel Co., Alaska Professional Construction, Alaska Trailblazing, Anchorage Sand and Gravel, McKinley Concrete Pumping, Northern Reinforcing Placers, K’s Construction, Allied Steel, Swanson Steel Erectors, Pac West, Anchorage Roofing and Contracting, Summit Windows and Doors, Alaska Glazing, BEK of Alaska, Pacific Partition Systems (PPS), Excel Construction, General Mechanical, ThyssenKrupp

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

Photo courtesy of Neeser Construction

Elevator, Last Frontier Mechanical, Big Sky Fire Protection, Alcan Electric and Engineering, and Carlile Transport. Cornerstone started late last summer with the footings and foundations package and then UAA approved the balance of the construction in January. Cornerstone began on-site construction activities in March, putting in the underslab utilities, then placed floor slab in April and early May and started hanging steel in mid-May. Also in Anchorage, exterior work was nearing completion on a $17 million renewal project at Sand Lake Elementary School by Davis. Interior work was completed over spring break. The project included demolition, construction and renovation. In Marshall, NCI was general contractor for a $24 million K-12 school to replace the current school that burned two years ago. The project began in 2009. The owner is the Lower Yukon School District. The school, about 42,257 square feet, features prefabricated structural insulated panels, with the exterior finish including metal siding and roofing.

Work is progressing on the multi multiyear, multimillion dollar Goose Creek Correctional Facility across Cook Inlet from Anchorage.

CRIMINAL JUSTICE In the Matanuska-Susitna Borough, Goose Creek Correctional Center, which has been under construction for more than a year and is slated for completion in 2011, pending resolute of utility challenges, has helped lift the building side of the construction equation, MacKinnon said. So will a new crime lab in Anchorage as it gets under way, he said. Planning was still largely in the www.akbizmag.com â&#x20AC;˘ Alaska Business Monthly â&#x20AC;˘ July 2010

Photo courtesy of Davis Constructors

preliminary stages in May for the crime lab, which was slated to be built by NCI using $75 million in State funds. Despite uncertainties surrounding financing of the new water and wastewater systems, a separate private contract with the Matanuska Susitna Borough for the $240 million project, Gary Donnelly, project administrator for NCI, the design and construction contractor, expressed confidence that as of May, the prison project at a remote Port MacKenzie location was going well overall. With four of the five buildings enclosed, it was more than a third done, he said, and could well finish ahead of schedule. The facility is being built to house more than 1,500 inmates. The firm started on construction of the Support and Visitation Center – the most complex building – first, he said and was moving swiftly in May through the interior of the 140,000-square-foot structure. It includes two cellblocks for prisoners needing extra supervision, dining and kitchen, medical and laundry facilities. Three other buildings – Outside Administration, Warehouse and Vehicle Maintenance – also were undergoing interior completion. The final building to be constructed was the General Population Housing building, which is to be erected and enclosed this summer, comprising five housing units and an indoor recreational facility. Subcontractors on the project include Alas-Co, Alaska Glazing, Alaska Industrial Insulation, Alaska Professional Construction, Alaska Quality Fire Protection, Alcan Electrical, Arthun-Alaska Custom Construction, Automated Laundry, CML Specialties, Door Systems of Alaska, Otis Elevator, Penn Line Services, Refrigeration and Food Equipment, Siemens and Universal Roofing. In Kodiak, the community was getting ready to embrace a new state-of the-art police station. Roger Hickel Contracting built the 28,030-squarefoot facility designed by USKH, an Anchorage-based firm. The work, with a construction budget of $21 million, began in March 2009. The police station was completed May 1 and the jail portion was awaiting approval of funding. Opening was expected in July, according to Karen Deason, a project manager.

Davis Constructors and Engineers is working on design-build projects at Elmendorf Air Force Base in Anchorage.

MILITARY At Anchorage military facilities, meanwhile, both PCL and Watterson construction companies had Warrior in Transition projects, PCL at Fort Wainwright and Watterson at Fort Richardson. These projects aim to provide housing for soldiers recuperating from injuries sustained fighting overseas. After demolition, PCL was taking on design-build responsibilities for several buildings in the $21 million Fort Wainwright complex, which includes the primary facility – a 20,000-square-foot, 32-bed barracks, an 8,200-square-foot administrative and operations facility and a 6,600-square-foot soldier and family assistance center with counseling offices and a day care center. Construction was expected to be finished by the end of summer 2011. Fort Richardson’s $26 million rehab facility, a Watterson Construction project, also was to have barracks for recovering soldiers. Slated for completion next year, the complex includes four buildings: a two-story, 45,000-squarefoot dorm for 80 people; a single-story, 8,500-square-foot battalion headquarters; a one-story, 9,200-square-foot operations facility; and a single-story, 7,500-square-foot space where soldiers and families are reunited. At Fort Wainwright, Watterson broke ground in April for a $22 million vehicle-maintenance facility slated for completion in July 2011. There are 27,500 square feet on the first floor and 6,500 square feet on the second floor, which is dedicated to administrative

offices. The project includes an overhead crane and solar panels in the metal siding and will be surrounded by an 11-acre concrete parking lot. Davis also had a couple of designbuild projects at Elmendorf Air Force Base. A $20 million, two-story addition to the base hospital at Elmendorf should be completed by September. It will house aero-medical (flight) and mental health services. An ambulance garage also is part of the two-story clinic project. The Superior Group and Alcan Electrical Engineers are major subcontractors; PND, Schneider and Associates, and HZA are providing civil, structural and mechanical engineering support, respectively; and Earthscape is doing the landscape architecture. Davis also was finishing steel work this spring on Elmendorf 297, a six-bay F22 maintenance hangar under construction next door. The 35,000-square-foot, six-bay steel hangar and squad operations center, with a three-story, 48,000-squarefoot office building, is expected to be completed in 2011. Project 306 is a $12 million, singlestory, 18,000-square-foot weapons load and crew training facility, expected to be completed by July 2011. The project includes a one-bay F22 hangar and small office building, with construction expected to take place from June 2010 to June 2011. Engineering support is by PND (civil), HZA (mechanical), Tuazon (fire protection) and Schneider (structural), and Superior and Alcan are ❑ major subcontractors.

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

LEGAL SPEAK

Health Care Reform and Small Business New requirements greatly affect businesses. BY JEFF WALLER

BENEFITS??? The health care reform laws are expected to benefit small businesses with lower insurance costs, reduced insurance administration expenses, making health insurance available through the business, providing a tax credit, and expanding the available labor pool. According to the White House, small businesses pay on average 18 percent higher premiums per employee than large businesses, and incur three to four times the administrative costs to establish and maintain a health

care plan. The health care reform laws are intended to reduce these costs by allowing businesses to pool together in purchasing health insurance. Because the insurance will ultimately be provided through the Small Business Health Options Programs (“SHOP Exchange”), this is expected to reduce administrative costs, arguably saving businesses money and making them more competitive.

ccording to news reports, Pres. Obama argued that the only fair way to make insurers cover everyone was to require every individual to have health insurance. While this may be fair to the insurance companies, will it be fair to small business, which comprises 78 percent of Alaska businesses? The five most feared words from the government used to be “we’re only here to help,” but now the most worrisome phrase may be: “mandatory health insurance for employees.” Earlier this year, Pres. Obama signed the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010. The new laws are complex and promise to give birth to voluminous regulations. Like any change in the law, there are benefits and liabilities. The new laws also contain several non-insurance requirements that will greatly affect businesses.

LLC AN ANSWER? For many Alaska small businesses, including the self-employed, the new laws provide the benefit of being able to obtain health insurance through your business. However, this benefit does not apply to sole proprietorships, one of the most common forms of small business. As a consequence, many such businesses will either incorporate or form a limited liability company (“LLC”) so that the business can pay for the health insurance. Forming a corporation, or LLC, will be an additional expense to the business and will require additional time and specific recordkeeping that is required for a corporation or LLC.

HIGH WAGES HURT? The health care reform laws include a small-business tax credit of 35 percent of health insurance premiums paid to cover employees. However, as a practical matter, the tax credit may not be available to many businesses in Alaska. To qualify, the average annual wages per worker must be less than $50,000. This may be troubling

Jeff Waller

for businesses in Alaska where costs of living and wages are typically higher. In addition to the wage limit, the business must have less than the equivalent of 25 full-time employees. If the business employs part-time employees, the amount of service/work provided by the part-time employees is examined in respect to equivalent full-time work. Thus, a business could have full- and part-time employees that number more than 25 and still qualify. As with any tax issue, consult your tax expert to ensure that your business qualifies.

LABOR POOL EXPANDS FOR SMALL BUSINESS An outgrowth of the required, and hopefully more affordable, health insurance for small businesses is a potentially broader labor pool. Historically, many qualified members of the work force may have been limited to working for a large company because of the unavailability of health insurance at

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

smaller employers. Each of us probably knows of a relative or friend who was working for a large company primarily for health insurance for his or her family. With the availability of supposedly affordable health insurance, small companies may be able to compete on a more level playing field in pursuing such employees.

YET PENALTIES PREVAIL In contrast to the above noted benefits, the health care reform laws contain penalties and liabilities, including a penalty to employers that fail to provide health insurance to employees. The real possibility is that the costs of health insurance premiums will be increased over the next four years until the SHOP Exchange is created, the likelihood that the SHOP Exchange may actually eliminate competition thereby increasing health insurance premiums, the inclusion of a 40 percent tax on employers that purchase higher-priced health insurance, and the practical elimination of part-time employees.

Exchange to lower the costs of insurance, increasing insurance rates over the next four years is a perfect mechanism to influence the ultimate rates four years from now.

LESS COMPETITION, HIGHER PRICES? Additionally, the SHOP Exchange would appear to reduce competition (how competitive will insurance companies remain when businesses are basically being forced to purchase insurance through the exchange?). History has shown that less competition typically leads to higher prices. Beginning in 2018, businesses that provide what is referred to as a “Cadillac” plan (insurance costing more than $10,200 annually for an individual and $27,500 for a family) will pay a 40 percent tax on the excess cost of the premium. It is strange to penalize a business for providing better insurance to its employees. Apparently, the purpose of this provision is to force small businesses to purchase health insurance through the SHOP Exchange and penalize those that do not.

A SINKING SHIP? By this point in time, it is no secret that the new laws will require a business with more than 50 employees to provide health insurance for its employees in 2014 or to pay a fine. Each business will make the determination of whether to insure or pay the fine based upon its own situation. However, if similar-sized competing businesses are offering health insurance to their employees (rather than paying the penalty), an equivalent business and even smaller businesses (those with less than 50 employees) may find if they fail to match the competing employer, their employees may be leaving faster than creatures from the proverbial sinking ship. In the next four years, there is nothing to prevent health insurance rates from skyrocketing while businesses await the creation of the SHOP Exchange. Currently, there is no indication exactly how the SHOP Exchange will work, which companies will be providing insurance, the extent of regulations, and most importantly, what insurance rates will be in 2014. If the government expects the SHOP

PART-TIME EMPLOYEES THING OF PAST? An unintended consequence of the health care reform may involve the practical elimination of part-time employees. It does not take a financial genius to understand that providing health insurance for two part-time employees will cost twice as much as for one full-time worker. Unfortunately, some businesses in Alaska, especially those that cannot afford to pay higher hourly wages, rely primarily on parttime employees. Employing a substantial number of part-time employees could increase labor costs beyond what can be supported by a business.

NURSING ROOMS MANDATORY Lastly, the new laws contain many other requirements, including two that are unrelated to insurance but should be noted. The first involves employees that are nursing mothers. The second involves a new 1099 tax form requirement. Employers will be required to provide reasonable break time and private facilities for nursing mothers for a period of one year after a child’s birth.

The breaks must extend to each time the employee has a need to express milk. Additionally, the employer will be required to provide “a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public.” This provision applies to all employers. However, employers with less than 50 employees may not be required to comply if “such requirements would impose an undue hardship by causing the employer significant difficulty or expense when considered in relation to the size, financial resources, nature or structure of the employer’s business.”

1099 FOR PURCHASES ABOVE $600 If your business purchases more than $600 per year of goods or services from any one person or business, you will now have to provide a 1099 for those purchases. That’s correct, if your business buys a computer from a computer store costing more than $600, you must file a 1099 for that computer-store purchase. If your business purchases company lunches throughout the year that total more than $600 from one restaurant, a 1099 is required. Businesses will need to monitor purchases from every source to determine if a 1099 is necessary for a company or person you purchase goods from. This could add thousands of dollars in administrative costs to the operation of each business. The above are merely a few excerpts out of more than 2,400 pages of text contained in the new laws. Complying with the many sweeping changes will require diligent attention to the law and careful consideration of how your business operates. Fortunately for the most part, businesses will have a few years to consult with their attorney and their ❑ tax expert.

About the Author Jeff Waller is a senior associate attorney at Holmes Weddle & Barcott P.C. in Anchorage. His practice includes litigation, construction law, employment law, insurance defense, and real estate matters. Prior to becoming an attorney, Waller owned and operated several businesses.

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

8-10

ALASKA THIS MONTH

BY NANCY POUNDS

Salmon Star in Cordova Festival Music, marathon, cook-off enliven summer event.

he Copper River Wild! Salmon Festival began with a run – a run of now famous salmon to the Cordova area. Twenty years ago, organizers started a summer running race, including a marathon and half-marathon. Now runners from around the country converge on Cordova, alongside local residents, for the race and then relish live music and salmon entrees during the festival. This year’s festival is set for Thursday through Saturday, July 8-10. It features the Salmon Jam Music Festival, the Taste of Cordova Copper River salmon cook-off, and a local arts and crafts festival. Cordova, located in Prince William Sound, is accessible via airplane or the Alaska Marine Highway from Whittier or Valdez. Organizers started the Copper River Wild! Salmon Festival in 2005 after gleaning ideas from the Alaska Oceans Festival in Anchorage, said Kate Alexander, festival coordinator. They wanted to spotlight the area’s salmon fishery and celebrate residents making a living from salmon. “We’re really fortunate to have a healthy salmon run,” Alexander said. “Not all Northwest areas can say that. We take great pride in that.” Alexander also works as project and membership coordinator for the Copper River Watershed Project. Youth activities have been added to the festival, and State Department of Fish and Game officials transport a trailer or mobile aquatic classroom to teach children about various creatures gathered from the Cordova area.

The arts and crafts festival, set for Friday and Saturday, joined the July celebration in recent years. It serves as a venue for Cordova artists who don’t own stores to sell their pieces. The Salmon Jam Music Festival started 10 years ago as a fundraiser for the Cordova arts council. Musical entertainment runs Friday and Saturday. The Taste of Cordova salmon cook-off continues to expand, and the salmon filet competition is a demonstration of speed and skill with divided fish headed for the grill. “There’s a lot of salmon food throughout the weekend,” Alexander said. “Chefs put together different seafood recipes. You get to try salmon a lot of different ways.” This year’s Taste of Cordova will raise money to help build the Cordova Center, the anticipated performing arts and visitors center. Plans have been in the works for seven years for and construction is due to begin this year, Alexander said. The running races, held on Saturday, include a marathon, half-marathon, 10K, 5K and a one-mile walk and fun run. The marathon course follows the old Copper River railroad route, which extended to the Kennicott copper mines. The course is mostly flat with the first half-run on a gravel road. The race attracts runners nationwide looking to complete a 26.2-mile marathon in every state, Alexander said. “I am continually blown away by people who make their plans around the festival,” she said. “It’s an amazing community collaboration. The festival shows Cordova’s best side.” ❑

For more information, visit www.copperriverwild.org

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

J ULY E VE N TS C A L E N D A R •••••••••

N C H O R A G E •••••••••

Potter Marsh Bird Walks

1 to 31

Walk on the Potter Marsh boardwalk (mile 117 Seward Highway) to learn about the area’s bird life. This family friendly event is for the beginning birder as well as those that know their way around a bird’s wing. Binoculars and spotting scopes are available. Walks will take place rain-or-shine, so dress accordingly. Meet your guide at the boardwalk entrance kiosk at Potter Marsh. Sponsored by the Alaska Department of Fish and Game and the Anchorage Audubon Society. For more information, phone 907-267-2281 or visit www.wildlife.alaska.gov/.

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E L T A

U N C T I O N • • • • •

Deltana Fair

30 to Aug 1

The Deltana Fair is held with all the usual fair fare, including an old fashioned tractor pull, motor-cross racing and mud-bog competition along with carnival rides and livestock, garden and craft exhibits. For more information, phone 907-895-FAIR, visit www. deltanewsweb.com or contact the Deltana Fair at P0 Box 408, Delta Junction, AK 99737.

• • • • • • •

A I R B A N K S • • • • • • •

Tanana Valley Farmer’s Market

3 to 31

The market offers a great variety of Alaska-grown produce as well as crafts, baked goods and art. Decorative plants, interesting rock and gem vendors, as well as great food. Held every Wednesday, Saturday and Sunday at the corner of College Road and Caribou Way. For more information, phone 907-456-3276 or visit www.tcfmarket.com.

• • • • • • •

A I N E S • • • • • • •

Independence Day Celebration

Mount Ripinsky run, parade, barbecue, mud volleyball, pie-eating contest and more. For more information, phone 907-766-2202 or e-mail chamber@haineschamber.org.

Southeast Alaska State Fair

29 to Aug 1

Four fun-filled days with live music, a parade, exhibits, food, logging show, entertainment and more. For more information, phone 907766-2476 or visit www.seakfair.org.

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O M E R • • • • • • •

Homer Arts & Crafts Street Faire

Features booths with local arts, crafts, demonstrations, educational opportunities, music, food and entertainment. Stroll along the street and enjoy the great buys, camaraderie and opportunities to buy local and support Homer Business. Great fun for kids, families and people of all ages. Attendance is free. No pets please. The Faire will be held on Hazel Avenue. For more information, phone 907-235-4288. www.akbizmag.com • Alaska Business Monthly • July 2010

J ULY E V E NT S C A L E NDA R Concert on the Lawn

31 - Aug 1

An annual rite of summer wrapped in a social event, connecting a vibrant community with a vital community resource – Public Radio KBBI AM 890. For more information, phone 907-235-7721 or visit www.kbbi.org.

• • • • • • •

U N E A U • • • • • • •

Midsummer Night Run

Distances 10K and one mile runs, starts 6 p.m. at False Outer Point parking area on North Douglas Highway. This race is included in the Empire Cup Series. For more information, phone Sharon Buis 907-586-4384 or visit www.southeastroadrunners.org.

• • • • • • •

E T C H I K A N • • • • • • •

2010 Walk MS

Walk MS is the rallying point of the MS movement, a community coming together to raise funds and celebrate hope for the future. The MS movement believes that every person in our community can play a role in improving the lives of those affected by MS. Proceeds from the walk support research and local programs for people living with multiple sclerosis. For more information, phone Amanda Berube, 247-0208 or visit www.walkmsnorthwest.org.

• • • • • • •

FOR SALE: Commercial Business Property – Sitka, Alaska 1.12 acres, currently operating as a 22 unit mobile home park – Offered at $800,000

E W A R D • • • • • • •

Mount Marathon Race

83rd running of the annual footrace featuring a climb and descent on Mount Marathon. Participants race a mile and a half up and a mile and a half down, including cliffs, waterfalls and spectacular views. Runners from around the world are drawn to this signature event. For more information, phone 907-224-8051 or visit www.sewardak.org.

• • • • • • •

A L K E E T N A • • • • • • •

Moose on Parade

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The 5th annual Moose on Parade was inspired by the example and spirit of Wild Salmon on Parade (Anchorage) and Cows on Parade (Chicago). The large, uniquely designed and decorated four-foothigh to life-size moose will take part in the July 4th parade and will be auctioned off to the highest bidder after the parade. The proceeds will go to Talkeetna Chamber of Commerce, the Talkeetna Artists’ Guild and the Talkeetna Historical Society. For more information, phone 907-733-2710 or 907-733-7929.

• • • • • • •

A L D E Z • • • • • • •

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Bill Rome

Enjoy an evening with the filmmaker watching his amazing footage of nature, Prince William Sound, Alaska’s skies, glacier hazards and more. Rome will be there to share his experiences in cinematography. Admission is free and held at The Maxine and Jesse Whitney Museum, 303 Lowe St. For more information, phone 907-834-1690. ❑

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

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

CONVENTIONS/MEETINGS SPECIAL SECTION

Invest in Trade Shows Payback depends on you. BY HEIDI BOHI

Photo By Bill Zervantian/Bill Z Photography

All of this adds up to an exciting buying environment, but it is still important to remember it is unlikely you will actually sign on the dotted line in a convention center swarming with thousands of other attendees. Instead, marketing experts say, each show needs to be approached with a plan based on the idea of being able to burn steady for the life of the show, instead of flaming out as quickly as it started burning.

A BUYER’S WORLD

oes sweat start to roll down the back of your neck when your boss asks you to go over what you accomplished when attending the recent industry trade show the company spent $5,000 to send you to? You’re not alone. But at a time when every business expense needs to be justified, it’s more important than ever to make sure costly, time-consuming trade shows bring home the goods if they are going to remain as a line item in the marketing budget. Although it depends on the trade show – local venues are obviously less expensive to attend, and international events are much higher – on average, plan on spending about $5,000 for a four-day event and that doesn’t include entertaining clients, hand-out materials and promotional give-away items.

FEAR NOT At first glance, the price will send you into sticker shock – especially for a small business or startup company.

If you don’t have a strategy for working the floor, you may as well drive down the road tossing $100 bills out the window. But if you have a practical plan and invest time in preparing for the show, these business-development opportunities can be much less expensive than other marketing tools and will add value to the company with residual benefits that continue for many years. In fact, trade shows cost 38 percent less than sales calls and are the No. 1 business-to-business marketing out-buy for supporting sales teams, beating out promotions, public relations and even the Internet. More than 85 percent of decisionmakers say attending trade shows saves their company time and money by bringing vendors together under one roof, and 91 percent of attendees say trade shows impact their buying decisions because the competition is in one place, allowing them to become aware of new products and services and to comparison shop in real time.

Photo © Chris Arend 2010

Clarissa Quinlan of Marsh Creek LLC talks to potential clients about services and products during a rural energy conference, held in Fairbanks last spring.

Whether you’re working a booth or walking the floor, the first thing to do is adjust your thought process so you always remember it’s usually a buyer’s environment, says Mario Altiery, president of Upside Group, a national marketing firm that provides client coaching. “As you spend more time there, a momentum is created that can often be misleading – you need to look out for

Convention goers at the Alaska Federation of Natives Convention in Anchorage in 2009.

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

Photo By Bill Zervantian/Bill Z Photography

false excitement early on. You can’t go in and try to do business from start to finish – as much as excitement is good because it gets the juices flowing, it needs to be kept in perspective,” he says. Instead, Altiery recommends preparing and having a set plan before the show starts. “All you should be doing is trying to create a stable reason for making contact with prospects later. You can’t try too hard.” It’s a numbers game, he says, especially if you’re in a position where you are trying to sell. And, time is critical: 39 percent of all trade show attendees spend less than a total of eight hours visiting a show, and booth exhibitors have even less time available. As a result, the strategy is to plan on speaking with as many prospects as possible so you have the opportunity to place them in your sales funnel and follow up appropriately. However, Altiery reminds, you don’t want to inundate them with so much information the prospect feels they have no reason for follow-up in the future. It is critical, too, that the follow-up has some sort of exclusive appeal, because every attendee and booth presenter

Taking a break from a conference, these gentlemen gather by the booths to network. This type of interaction is key to successful trade shows.

meets with hundreds of people during the course of the show. A follow-up that is nothing more than a name on the other end of the phone will be ineffective. Instead, Altiery recommends setting an expectation by picking a specific date and time, along with specifics that refer back to the original meeting.

“Point out your benefits, tell them you’ll be calling to speak later, let them know what the process is and what they can expect. Get them to let you know what they’re interested in that you offer and how it benefits them and set the appointment for a more formal meeting right then,” Altiery says. ❑

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

CONVENTIONS/MEETINGS SPECIAL SECTION

11 Steps to a Successful Trade Show Be prepared before you go. BY HEIDI BOHI

ttending trade shows sponsored by vendors or 5. Do your homework – Using the exhibitor’s handindustry associations is a sizeable investment book, find out what new products and services are for any company, whether you send someone to available to help you expand your business and inwalk the floor, or sponsor a booth where staff presents crease productivity and profitability. products and information to potential buyers. The 6. Bring the right attitude – Make sure both your benefits, though, can far outweigh any reason not to verbal and nonverbal behaviors send out a message attend, as each show presents a unique opportunity of approachability. When having conversations, disto give buyers and sellers the chance to meet existing cover the common point of interest with the person suppliers, conduct business meetings, network with you’re talking to – people are drawn to those they others, and investigate new products and services. feel are like them. Ask creative, specific, open-ended Like each component of the company’s marketing questions to develop a more meaningful connection mix, if participation is carefully planned according to in less time. Remember: in the eyes of every person the overall business-development strategy, you can you meet, you are the company. maximize your company’s investment and turn this 7. Exchange ideas – Talk to show managers, associaprospect into on-the-books business. The key is to tion executives, seminar leaders and other industry know what you want to accomplish before, during experts to obtain their perspective on your industry’s and after the show. Here are several professional tips future. Arrange meetings with owners, managers and to consider when preparing to get the most out of atsuppliers to ask what they are doing in their compatending a trade show. nies and what they see in the future of your industry. 1. Pick the show – Find the venue that helps you meet 8. Meet the competition – If your competition is an your business objectives by researching different exhibitor, investigate and learn as much as you can trade associations: even if the association doesn’t about them in advance by going to their booth and host shows, they will know which ones are the most asking questions. Also take advantage of this opporsuccessful in their industry. Less is more: it is better tunity to ask other attendees what they know about to attend one highly targeted show a year than to your competitors. spend the money on those not in keeping with your 9. Take good notes – Make specific notes on a small business-development strategy. Ask the company notepad, or use the back of business cards to write putting on the trade show for information on who down specifics about conversations with that person attends and who exhibits, then ask the organizer for including the time and date for a follow-up meeting, references. Two websites to reference for listings of what they expressed interest in, and any other inforindustry trade shows are Trade Show Exhibitors Asmation that will remind you of your conversation with sociation and Exhibitor Magazine. them days after the show. 2. Get the word out – Let potential clients and others 10. Consider speaking – Trade show organizers are in your industry know your company will be there always looking for industry representatives to speak through direct mailings, phone calls and publicity. and host roundtable forums. Because you are prePlan in advance – Register and get your badge besented as the authority during these sessions, you fore the show opens, sign up for seminars you want are likely to walk away with at least half a dozen new to attend, make appointments with customers and customers. The resulting business will more than pay prospects you want to meet with, and make a list of for the travel time and costs. what you want to learn. 11. Evaluate your attendance – Success at a show is only as good as your follow-up. Record what you’ve 3. Set objectives – Make a list of goals. Why are you learned, rethink your business strategy focusing on attending this show? What will make it successful? how to get new business, look for opportunities to How many promising leads would you like to leave form strategic alliances with another business, conwith? Who are specific people you want to meet? sider ways to diversify, and honestly compare yourself 4. Arrive early – If possible, arrive before the show to the competition. This is when to ask yourself if you officially opens so you can walk through the venue had not attended the trade show, what would have quickly and undisturbed. This will give you a good been the cost and time to achieve the same amount lay of the land so you can maximize your time once of business? the show begins. ❑ www.akbizmag.com • Alaska Business Monthly • July 2010 52

CONVENTIONS/MEETINGS SPECIAL SECTION

Venue Value Tips for getting the best deals. BY KAREN ZAK

hotography.com

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end Photo by Chris Ar ok Hotel Captain Co Cour tesy of The

Photo courtesy of the Alaska Native Heritage Center

SPACE THE DATE The first rule of thumb is to never broadcast a firm date before you have secured space or at minimum know from preliminary research that you have options. On occasion I am contacted by organizations in a panic because they have advertised the dates for

their next conference, agreed upon in a board meeting, only to find out there is no space available to accommodate the group due to a “city wide” (mega-event that takes all the space) or numerous competing events already on the calendar. It is possible to still locate space, but you are not in the driver’s seat and may be forced to accept a higher rate or change the dates. The most advantageous position to be in is to select several dates that will work for your event. Communicate with the facility that you are flexible if one of the dates will provide you a better value.

and actually chart all the responses in an apples-to-apples comparison matrix and consult with you on the best value. They will also conduct additional negotiations and request considerations on your behalf based on their experience of rates and special offers during that time period.

ASK FOR BIDS Competitively bidding out the meeting or event with several locations and venues will also yield the best value. A good place to start is with your local convention and visitors bureau (CVB) or a professional meeting planner. They will both develop a profile of your group, distribute a RFP (request for proposal) to all the facilities that meet your criteria and collect competitive bids. The CVB will provide you with a nice neat package of all the responses for your review and evaluation in an unbiased manner. A meeting planner will go the extra step

here are many ways to approach negotiations when selecting a meeting facility or hotel for your next meeting or event, but a few tricks of the trade to consider may save you time and money. Most cities have a peak season or reoccurring special events that utilize all the venue space and hotel rooms in town. Knowing these dates to avoid can save you money, as space will be at a premium. On the other hand, if you are trying to draw participants nationwide, you may view these special events in your desired area as an enticement for participants to enjoy the festivities and therefore increase attendance. It depends upon the purpose of the event and your overall budget. The local chambers of commerce and visitor bureaus provide online calendars of events that can be helpful in determining what is taking place in your desired location.

Karen Zak, general manager of Visions Meeting and Event Management, a division of USTravel.

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

If you decide to do the work yourself, do your homework before contacting hotel and venues. Be prepared to provide the number of people that may utilize sleeping rooms and how much money you plan to spend in catering, for example. If you can quote several years of event history, even better. The hotel will take all potential revenue into consideration when quoting rates, and the more you know what you bring to the table, the better deal you can expect for your business in return. For instance, if you have a one-day event and are occupying the meeting space with no room nights and minimum food and beverage revenue, then you can expect to pay room rental fees. On the other hand, if you have a three-day conference with a substantial amount of food and beverage revenue and hundreds of room nights, then you are in a position of negotiating power. And again, if you choose a time period that is traditionally slower for the venue, you can expect the best value. Many resorts and out-of-the-way places that are perfect for a retreat may be open year-round. Considering their slow

period will afford you their undivided attention and many extras.

ESTABLISH A RELATIONSHIP Another aspect of value may come from establishing a long-term relationship with a venue by offering year-round business, not only from your annual event, but also from potential visitors who stay in town to conduct business on your behalf. Smaller board meetings, luncheons, dinner banquets and referral business also need sites yearround. Make it your business to know the front-line staff and sales staff and for them to know you. They will get to know your business and expectations and you never know when you will need a big favor. When conducting an annual event, consider a multi-year contract with a venue. The venue or hotel will appreciate the long-term commitment and may be able to lock in rates allowing for longterm budget planning for the event. Many hotels also offer rewards programs by offering points for utilizing room nights at a hotel. When in the contracting stage, be sure to provide

your rewards number so you can earn reward points that can be used later for complimentary room nights or other hotel offerings. Many hotels also offer limited time promotions that may include a free coffee break or light reception and a discount off the total bill, but be aware the promotions only run for a short window of time and you must sign on the dotted line at the right time to take advantage of these promotions.

UNDER CONSTRUCTION There is a well known fact in the industry that hotels and venues are always remodeling. This can also be to your advantage in negotiating, especially if it causes noise, dust, construction obstacles, and the pool or bar is closed. Find out before placing a meeting or event if the venue is undergoing renovation during your event. Several years ago, I placed a conference at a luxury resort at a budget price because the hotel divulged that they were undergoing renovations, but stipulated the bulk of the work would be in the evening and not disrupt the meeting space. I talked it over with the client

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

And lastly, be aware of new venues and facilities that are being built and know that committing to a meeting or event before the doors even open can afford you some advantages as well. If you are willing to take the risk of the hotel running into delays or new staff practicing on your event, you can negotiate the rates and the venue is pleased to get the business on the books.

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and they decided that replacing carpet in the lobby at night, changing out the curtains and the pool being closed was not a deal-breaker for their meeting. The hotel bent over backward to minimize the disruption and the client got a great value they could not have otherwise afforded.

PRE-BOOKING And lastly, be aware of new venues and facilities that are being built and know that committing to a meeting or event before the doors even open can afford you some advantages as well. If you are willing to take the risk of the hotel running into delays or new staff practicing on your event, you can negotiate the rates and the venue is pleased to get the business on the books. Overall, don’t be afraid to ask a venue what you can do to receive the best value for your meeting or event. All the aforementioned suggestions may not be applicable to your event, but more than likely one of them will, and they will be pleased to let you know how and when they can best fit your budget and accommodate your needs. ❑

Call for Reservations 800.842.1950 or 907.276.6000

939 W. 5th Ave., Anchorage, Alaska CAPTAINCOOK.COM

About the Author Karen Zak is a 20-year professional meeting and event planner and general manager of Visions Meeting and Event Management, a division of USTravel, in operation since 1998. Visions manages events ranging from corporate retreats to complex international conferences and incentives worldwide. www.akbizmag.com • Alaska Business Monthly • July 2010

CONVENTIONS/MEETINGS SPECIAL SECTION

Logistics LLC Increases Visitor Impact High-end corporate client incentives pay off.

Photos courtesy of Logistics LLC

BY DIANNE O’CONNELL

Logistics LLC provided turn-of-the-century décor to greet Dare to Care supporters at this Marriott Anchorage Downtown dinner.

participants will spend four days at the Alyeska Resort and 600 participants will spend three days there, where they will enjoy a private train charter, private glacier cruise, exclusive hosted activities and dine-arounds that have bought out eight restaurants in the Girdwood and Seward areas. The 700-person group will then join the 600 participants on a private seven-day Inside Passage Cruise departing from Seward to Vancouver. “It should be a very good year,” Walker says. “Even years are always better than odd years for some reason. But even so, I’ve been in business for 15 years and 2009 was the worst year of those 15 and 2010 is promising to be the best. “Companies are not sending their people to overseas destinations right now because of the higher costs, poor exchange rates and the negative perception. This makes Alaska a very attractive alternate overseas destination.” When a company contracts with Logistics for an incentive event, the program might include a customized tour, themed parties, a pub crawl, or Alaska entertainment, such as Alaska Native dancers, dog-mushing demonstrations, gold-panning, or can-can girls. Logistics provides such services as advance event registration, hotel accommodations, ground transportation, tour activities and staffing. Participants might go home with such Alaska gifts as ulus, smoked salmon or whalebone carvings. Logistics’ services are explained in full on their website at www.logisticsllc.com. A girl from the small farming community of Cuba, Ill., south of Peoria, Walker came to Alaska 22 years ago, following her high school sweetheart.

“It’s the top incentive trip they offer in the company and Logistics will be handling all the details from the time they arrive until they depart,” says Toni Walker, owner of Logistics LLC. “A regular convention brings an economic impact to the city and/or state of about $700 to $900 per participant into the local economy,” Walker says. “But a high-end, corporate incentive event or program brings in three to four times that amount per person. These companies spend a great deal to provide a unique, high-quality, once-in-a-lifetime experience for their top-producing employees, important clients and associates.” Allstate Insurance is sponsoring three different incentive programs in Alaska through Logistics, for a total of 1,600 participants. Three hundred

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

t’s convention season again, and 2010 looks promising. While past years have seen a slowdown, this is one of Alaska’s best. Logistics LLC, a destination management and meeting and event planning company based in Anchorage, also with an office in Seattle, has eight major incentive programs in the planning for this summer. For one, Brother International, the provider of home and office printers, electronic stationery and sewing machines, is bringing 80 members of its Presidential Club to Alaska for a five-night program at the Alyeska Resort that will include a chartered train and glacier cruise experience, private dinner event at the Alaska Native Heritage Center and many exclusive activities.

She soon transferred from a community college in Champagne, Ill., to Alaska Pacific University to complete her degree in business management with emphases in the hotel/food industry and travel and tourism. She worked for Phillips Cruises and the Anchorage Hilton before striking out on her own 15 years ago to establish Logistics. The company is now among the top four event/destination planning companies in the city (the others being Art Services North, Visions and Alaska Destination Specialists). Walker is active in the community and currently serves on the Alaska Travel Industry Association Marketing Committee and board of directors, and on the boards of the Anchorage Convention and Visitor’s Bureau, the Alaska Wildlife Conservation Center and the Alaska Aviation Heritage Museum. In addition, she serves or has served on several different community committees such as the Visitor Industry Charity Walk, Hospice’s annual fundraising event, Dare to Care and the Eva Foundation. Today, the Logistics staff includes Walker, president and owner; Christy Andresen, finance and administrator manager; Mickela Olsen, tour coordinator; Lindsey Durelle, tour and program associate; and Mimi Brothers, tour and program manager. In addition to the incentive programs, the Logistics staff has successfully coordinated during the past 15 years

hundreds of meetings and events, including destination weddings and receptions, Special Olympics, Summer and Winter Games, Visitor Industry Charity Walk, the Governor’s Health and Safety Council and Alaska Travel Industry Association’s annual convention and travel auction to name a few. Venues utilized have included the Alaska Native Heritage Center, the Alaska Aviation Heritage Museum, Crow Creek Mine, Fox Island, various wilderness lodges, as well as the traditional hotel and convention center locations. “The new Dena’ina Civic and Convention Center is absolutely fantastic,” Walker says. “I’ve traveled all over the world and they definitely understand the clients’ needs, provide first-class service and offer creative menus and, quite surprisingly, great food for a convention center. It’s just a great addition for Anchorage.” She says the Alaska Aviation Heritage Museum by Lake Hood is one of the best kept secrets in Anchorage as far as venues go. “It’s rental fees are quite reasonable, and you are allowed to bring in outside caterers for all events,” Walker says. “In addition, their staff is absolutely wonderful to work with and always have a can-do, positive attitude.” The city does need additional event facilities, however. The Alaska Railroad Depot is no longer running events, in part, because of the costs associated with keeping it open.

The ConocoPhilips Atrium was the venue for this lovely blue-light Anchorage Mental Health annual fundraising auction/dinner. www.akbizmag.com • Alaska Business Monthly • July 2010

As a result the Alaska event market will continue to thrive.

Hold your next meeting in picturesque Juneau, Alaska and receive 25,000 Alaska Airlines Mileage Plan Miles*. • Daily jet service on Alaska Airlines • Top-notch dining and catering services • 20,000 sq. ft. Centennial Hall Convention Center • Comfortable and affordable lodging and meeting facilities for up to 600 attendees

Not only will you enjoy all of the GLACIERS, WHALES and WILDERNESS Juneau has to offer, but you will also be rewarded with enough Mileage Plan Miles to come back and visit again!

*Call today for mileage program details and your FREE Juneau Meeting Planner Guide

“People don’t realize what it costs in staff and maintenance to run a facility. We are limited in the groups we can accommodate because of the size of the facilities we have. Most are limited to a maximum 150-person capacity,” Walker says. Logistics is one of 72 members of Global Event Partners (GEP), a worldwide destination management association that selects its participating partners based on a stringent set of criteria, including financial and insurance requirements, service and performance measurements, safety and risk management standards and so forth. This year Global Partners is bringing the 2010 GEP Summit to Alaska and the Alyeska Resort, which hosts between 100 and 125 high-end meeting and incentive clients, GEP partners and GEP staff to a five-day program that includes two days of one-half day meetings, afternoons showing what Alaska has to offer with activities and offsite events, pre-FAM tour in Anchorage and several post-FAM tours, familiarization trips that bring clients to a destination to host them on a trip and show case products. The Summit is being sponsored by Logistics, the Anchorage Convention and Visitors Center, Alaska Travel Industry Association, Alyeska Resort, CIRI Tourism, Alaska Airlines, Premier Alaska Tours, BAC Limousines, 26 Glacier Cruise, the Alaska Railroad, Kincaid Grill, Tordrillo Mountain Lodge along with numerous other tour companies, entertainers, caterers, hotels and restaurants. “In exchange, we hope to book many clients for future programs to Alaska,” says Walker. As a result the Alaska event market ❑ will continue to thrive.

Juneau Convention & Visitors Bureau • 1-800-587-2201 • www.traveljuneau.com www.akbizmag.com • Alaska Business Monthly • July 2010 58

ALASKA BUSINESS MONTHLY 2010 CONVENTIONS/MEETINGS DIRECTORY Convention and Meetings Tidbits â&#x20AC;&#x201C; Information from Jack Bonney/Anchorage Convention and Visitors Bureau ď&#x201A;ˇď&#x20AC; ď&#x201A;ˇď&#x20AC; ď&#x201A;ˇď&#x20AC;

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ACVB has met its goals for meetings sold and meetings held for 2009, with $98 million in conventions held and $97 million in future conventions sold. ACVB expects to meet their goals again this year. Theyâ&#x20AC;&#x2122;ve maintained a constant sales push throughout downtown, and are well positioned to attract future business as meeting planners start exploring again. Big national and international events are booked years in advance and Anchorage has already got some great success for 2012 through 2014. State and local meetings and conventions tend to operate on a shorter timeline, so itâ&#x20AC;&#x2122;s harder to say how those will fair. But with the Chamber of Commerce luncheons and Native Youth Olympics as just two examples, the Denaâ&#x20AC;&#x2122;ina Center is not just a place for big national/international events. Some major conventions coming to the state include: IEEE International Parallel & Distribution Processing Symposium, May 2011 (600 attendees); International Society of Hair Restoration Surgery Annual Scientific Meeting, September 2011 (600 attendees); Lions Club International, September 2011 (3,000 delegates approximately); Avionics Maintenance Conference, April 2012 (about 750 participants); American Astronomical Society, May 2012 (1,100 people); The American Avalanche Association September, 2012 (about 900 delegates); American Indian Science & Engineering Society, October 2012 (approximately 1,800 delegates), and more. ÂŠK KenGrahamPhotography.com KenG eenGrah Gr haamP amP Phhhotog oogr g aph phy.com ph co

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ALASKA BUSINESS MONTHLY 2010 CONVENTIONS/MEETINGS DIRECTORY CATERERS #

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

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

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

ALASKA BUSINESS MONTHLY 2010 CONVENTIONS/MEETINGS DIRECTORY FACILITIES $% " $

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TECHNOLOGY

Latest Cell and Satellite Phones Much more functionality offered. BY TRACY BARBOUR Photo courtesy of AT&T

s the demand for wireless technology steadily increases, Alaska communications providers are offering more advanced cell and satellite phones to help business users enhance their mobility and productivity. One of the latest cell phones from AT&T is the Motorola Backflip. Released in March, the Backflip is a revolutionary smartphone powered by Google’s Android operating system for mobile devices. Android gives users access to built-in Google applications, including GoogleTalk, Google, Maps and Gmail. The Android operating system is used to power a variety of mobile phones and is becoming an increasingly popular operating system. In the first quarter of 2010, Android-based phones accounted for 28 percent of all smartphone shipments, according to global market research firm NPD Group.

■ Wi-Fi support ■ Access to thousands of apps ■ A home screen that provides access to all the user’s information in one place ■ Full HTML Web browser ■ Dynamic phonebook that automatically populates and updates contacts from the user’s Social networks, including status and pictures ■ G P S c a p a b i l i t y w i t h AT & T Navigator ■ 5 megapixel, autofocus, LED camera with built-in flash and video ■ Stereo Bluetooth wireless technology

HTC HERO STAYS CONNECTED Google’s Android operating system also powers one of the latest smartphones offered by Alaska Communications Systems (ACS). The phone,

Photo courtesy of AT&T

Motorola Backflip

Patrick Fraser, director of sales at AT&T Mobility Alaska, says AT&T is excited about adding the Backflip to its portfolio. “The Motorola Backflip was our first device on the Android platform, and we will be launching more Android devices throughout the year,” he said. Besides offering Google connectivity, the Backflip comes with Motoblur, which is an online social networking service. Motoblur automatically delivers and organizes conversations, friends and favorite content from multiple sources directly to the phone. It brings together contacts, e-mail, messages, photos and status information from Facebook, MySpace, Twitter and other accounts. Then it instantly updates all of the accounts whenever a change is made. “You get all of your updates on the screen,” Fraser said. “It’s really fascinating.” Perhaps the most distinguishing feature of the Backflip is its unique design. It merges a reverse-flip design with a full touchscreen on one side and a qwerty keypad on the other, making it easy for business users to send messages. The phone’s rear navigation pad simulates a PC experience, allowing users to view Web pages or photos without having their fingers get in the way. Also, the phone’s exclusive design can be used in a tabletop, multimedia mode for watching presentations, movies and other content on its 3.1-inch display. According to Fraser, the Motorola Backflip has been a very popular device for AT&T. Features include:

Patrick Fraser, director of sales, AT&T Mobility Alaska.

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

the HTC Hero, was launched earlier this year with great fanfare at the ACS flagship store at 600 Telephone Ave. in Anchorage. Bright green robots – Google’s Android logo – were on display everywhere, even on top of the building’s awning. The HTC Hero is the first in a series of Android-powered devices ACS will be launching this year, according to ACS Director of Corporate Communications Heather Cavanaugh. Like many smart phones, the HTC Hero is designed to offer users a rich, mobile Internet experience. They can access all Google services in a small-format, hand-held device, such as Google Search, Google Maps, Gmail and YouTube, as well as thousands of other apps built for the Android platform. Customization and personalization also are important elements of the HTC Hero. The device’s seven-panelwide home screen can be customized to fit a user’s individual needs. For example, a work screen could be set to include work e-mail, calendar and stock updates. A play screen might feature games, music and Facebook, while a travel screen could include maps, the weather and the local time. The HTC Hero also allows users to place all their favorite content on the home screen with widgets that can be customized to reflect their personality. Users can also launch searches through Twitter, their contact list, e-mails and their calendar. Cavanaugh says cell phones have moved beyond a means of voice communication to become tools for just about everything we do. She said, “I think one of our Facebook fans said it best in a recent post: ‘I heart (love) my Android. I do everything on it!’ We are seeing that sentiment echoed by general users and businesses alike. Especially now, with so many different customized wireless devices; there is really something for everyone.” With its array of features, the HTC Hero is clearly aimed at offering something for everyone. Its features include: ■ Easy access to social networking sites ■ Microsoft Outlook integration to support corporate and personal e-mail accounts

■ Voice navigation for quick access to Web content and telephone contacts ■ Internal GPS ■ 5-megapixel camera with autofocus and camcorder ■ Visual voice mail ■ 3.2-inch touch screen

Just because you live and work in the Last Frontier doesn’t mean you have to be out of touch.

The HTC Hero also is one of the newest phones carried by Matanuska Telephone Association and GCI.

BLACKBERRY, SMARTPHONE PIONEER In addition to the HTC Hero, GCI also recently launched the Blackberry Tour. The phone is equipped with Wi-Fi and GPS, as well as a qwerty keyboard for quick and easy texting. It also features a 3.2-megapixel-autofocus camera, a memory-card slot and stereo Bluetooth. Sporting a slim profile, the Tour offers enhanced multimedia features, world phone capabilities, and GPS and Blackberry Maps. A pioneer in smartphone technology, Blackberry has built a reputation for offering business- and industryspecific applications that make it easier for individuals to do their jobs, says GCI Director of Commercial Marketing Rochelle Marshall. Blackberry – which has essentially become synonymous with smartphone technology – gives users access to information on the go, including e-mail, phone, maps, organizer, applications, games and the Internet. “The Blackberry is the preferred phone for users who like the buttons,” Marshall said. “It’s still one of one the most intuitive devices available today.” The Blackberry Tour also is available through ACS, while AT&T features the Blackberry Bold as another new addition to its line of smartphones.

PREFERENCES AND TRENDS Business people tend to be migrating away from standard voice phones – many of which are available for free or at a lower cost – to smartphones, according to Marshall. Smartphones have their own operating system, access to the high-speed-data networks, larger screens and higher-resolution cameras. “With a smartphone, you’re essentially getting a computer,” she said.

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

management. Other advanced features include global-social networking and online location-based services.

Photo by Greg Martin Photography/Courtesy of ACS

“The applications that are supported by the devices are a lot more robust; they’re a lot more useful.” Most people like the devices because of their functionality. But when it comes to the type people choose, Marshall says, it comes down to personal preference. Many people go for brand loyalty or the form factor. GCI is seeing increasing demand for the HTC Hero and Blackberry Tour because of the access to many of the features people want: e-mail and instant messaging, the Internet and applications. The touch screen also is another important driver. However, people also choose phones based on their size and construction. For example, some users prefer flip phones, while others would rather have the candy bar style. Marshall says cell phone technology is rapidly advancing. Every three to four months, new phones are being manufactured with enhanced capabilities. The newer models offer access to mobile-banking applications, as well as business-specific applications, such as sales-force automation and asset

NETWORK CONNECTIVITY Another growing trend is the ability of cell phones to connect to a company’s network. “Global workers can access the company’s information while they’re out of the office or on the road,” Marshall said. “It’s all encrypted. Blackberry uses AES (advanced encryption standard) encryption, the highest level of encryption that is available.” Marshall adds that even though business customers employ cell phones for work, they also enjoy using the fun applications that are available. A growing number of people are using Facebook to upload images of their business or rapidly post new products, services or promotions. This allows them to use Facebook as a marketing venue and receive almost instant feedback. Fraser says more of AT&T’s business customers prefer smartphones. Eight out of 10 of its business customers are using smartphone devices, with 78 percent of

In celebration of the Android-powered HTC Hero launch, ACS adorned its headquarters entry at 600 Telephone Ave. in Anchorage with a giant Android.

those customers use them to check their e-mail, according to a recent internal AT&T survey. “Smartphones are in high demand because they are useful in terms of managing your e-mail, managing your calendar and accessing the Internet,” Fraser said.

DEVICES MATCH DESIRES There are a wide range of mobile devices available from different providers. Customers often base their phone selection on the features and tasks they want to accomplish. The Motorola Backflip, for example, may be preferred by someone who wants quick access to their social network online. It syncs contacts, posts, messages and photos, giving users an easy way to connect to their favorite people, content and applications. On the other hand, the LG 9250 Ellipse, available from MTA, is ideal for quick messaging. The phone features a full qwerty keyboard that makes texting and sending e-mail quick and easy. Other features include a 3-megapixel camera with autofocus and a video recorder. The Motorola Quantico is another example of a phone that serves a niche market. Cavanaugh of ACS says the demand for rugged devices like the Quantico has exploded in the past few years. “They have become incredibly popular in the construction and tourism industries where people tend to

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

be tougher on handsets,” she said. The Motorola Quantico, which just became available from ACS, is water resistant in up to 3 feet of water for up to 30 minutes. It has a military-style construction is designed to withstand extreme pressure, temperature, dust, shock and vibration. Motorola Quantico’s features include text and picture messaging, a Web browser, music player, video capture, Bluetooth, USB, expandable memory, voice memo, calendar and hearing aid-compatibility.

SATELLITE OPTIONS

network when AT&T’s cellular wireless network is unavailable. Customers will be able to access expanded voice and data coverage in the United States, Puerto Rico, the U.S. Virgin Islands and in territorial waters. According to Fraser, the TerreStar cell/satellite phone represents the ideal solution for government, energy, utility, transportation and maritime users. It can also provide a critical communications back-up capability that is essential for public safety agencies, first responders, emergency

services and disaster recovery groups. The AT&T integrated cellularsatellite solution will soon be available for enterprise, government and small-business customers. The company also is working on a similar solution for consumers. “It will give customers the best of both worlds,” Fraser said. “They will have an integrated solution from a wireless perspective. But if they’re in a remote area or where wireless service is not available, they can still link up ❑ with connectivity.”

Satellite phones are becoming increasingly popular for business, according to GCI’s Marshall. Satellite phones tend to provide a broader range of service than cell phones. This makes them ideal wireless phone solutions in remote locations or where cell phone connectivity is unavailable. Satellite phones are typically used by the military, construction, transportation industry and other industries that require durable handsets. They’re also popular with people who engage in recreational activities in outof-the-way areas where cell and landbased phones don’t work. GCI offers pre-paid satellite phone service. Customers purchase the phone for about $1,200 and a pre-paid batch of minutes. Alaska Telecom Inc. also offers satellite phone service on a nocommitment basis. Customers pay activation and monthly access charges and receive service on a month-to-month arrangement. Alaska Telecom offers the Iridium 9555, which features a sleek, user-friendly design. It has an internally-stored antenna, an integrated speakerphone, improved SMS and e-mail messaging capabilities, and an upgraded mini-USB data port. Also, AT&T is working with TerreStar Networks to offer an integrated smartphone mobility solution that will combine primary cellular wireless connectivity with the ability to connect to a satellite network as a backup – using one phone number and one smartphone device. The dual-mode phone, the TerreStar Genus, is smaller and more feature-rich than previous satellite devices. It runs on the Windows Mobile operating system and will give users the option to access the TerreStar satellite www.akbizmag.com • Alaska Business Monthly • July 2010

OIL & GAS

LNG Importation on the Horizon for Cook Inlet $3 billion in storage, development costs needed in next decade. Photo courtesy of ConocoPhillips.

BY HEATHER A. RESZ Kenai LNG plant.

RCA OKs gas supply contract between Chugach, Marathon BY HEATHER A. RESZ The Regulatory Commission of Alaska approved a contract May 17 between Marathon Alaska Production LLC and Chugach Electric Association to supply a portion of the utility’s natural gas for the next two years. “Based on the record presented in the tariff proceeding, we find that the public interest is served by approval of the Chugach-Marathon GSA,” according to the letter of approval RCA Chairman Robert M. Pickett sent to Lee Thibert senior vice president of Chugach Electric. “It’s excellent news,” Thibert said. At a minimum, Marathon will provide gas for the utility from April 1, 2011, through March 31, 2013, but the contract contains provisions for two extensions, one through the end of 2013 and a second through the end of 2014. This contract provides Chugach Electric with half of the natural gas it needs during the years covered, and a contract between Chugach and ConocoPhillips was approved by the RCA in 2009 that will supply the other half the gas, he said. “The contract uses a pricing mechanism tied to the New York Mercantile Exchange Index of futures gas contract prices. The price varies by contract period, type of gas (base, swing or excess) and deliverability commitment. The contract contains a price collar (which sets a floor and ceiling price), initially established at $5.90 to $8.90 per thousand cubic feet, or MCF. Chugach’s current average price for gas is around $4 per MCF, but in 2009 ranged from $4.89 to $6.64 per MCF,” according to a press release from Chugach announcing RCA approval. “We now have some regulatory certainty in Cook Inlet,” Thibert said. “We hope this sends a strong signal to the industry that we can negotiate gas contract and reach agreements.” Chugach is the largest electric utility in Alaska and uses natural gas to generate about 90 percent of the electricity it sells, with the other 10 percent coming from hydroelectric projects, Thibert said.

or the next 18 to 24 months, State and industry experts estimate Cook Inlet has enough natural gas to meet demand, but beyond that point, additional gas supplies from new production or LNG (Liquified Natural Gas) imports will be required to meet demand. “We are going to need additional gas. It’s either going to come from additional drilling in Cook Inlet, or we are going to have to start importing LNG,” Lee Thibert, senior vice president of Chugach Electric, told the Regulatory Commission of Alaska commissioners at its April 13 meeting. “We can keep up through 2018 with the completion of 13.5 wells per year. But that’s a lot of wells.” A State Department of Natural Resources Division of Oil and Gas review completed last fall states there is natural gas in Cook Inlet – more than a 10-year supply. But Cook Inlet producers will have to spend billions to get the gas, according to a second report commissioned by ENSTAR Natural Gas Co., Chugach Electric Association and Anchorage Municipal Light and Power. The Petrotechnical Resources Alaska study says it could cost as much as

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

$3 billion to keep Cook Inlet gas flowing to customers for the next 10 years – some $2.8 billion to develop 185 wells, and about $250 million to add third-party storage, according to ENSTAR’s estimates. But it’s unlikely that producers can deliver Cook Inlet’s remaining natural gas fast enough to entirely avoid the need for LNG imports, General Manager Jim Posey, of Municipal Light and Power, told regulatory commissioners at their April 13 meeting. “We’re not at a crisis point yet, but if we don’t kick it in high gear with drilling, we will have problems starting in 2013,” he said. Posey said utilities have an 18- to 24-month window to figure out what role LNG imports will play in bridging the gap until Cook Inlet production can catch up with demand, or until North Slope gas is available in Cook Inlet. But even on an accelerated schedule, Bill Popp, president and chief executive officer for the Anchorage Economic Development Corporation, said he anticipates some LNG importation will be required. “Given the current time require-

ments to develop new gas reserves in Cook Inlet, LNG imports are likely the only short-term alternative solution,” he said. Some LNG ships have built-in regasification equipment that could hook up to a receiving terminal and put gas into the pipeline system for delivery to storage facilities, Popp said.

SUPPLY AND DEMAND ARE IN BALANCE For the past several winters, utilities have warned that rolling blackouts or a failure of the gas-delivery system are possibilities during winter periods of peak natural gas demand. But a mild 2009-10 winter spared Southcentral from executing the energy-conservation drill people in Anchorage, Mat-Su and the Kenai Peninsula practiced last fall for times of shortage, Popp said. Deliverability is the rate natural gas can be supplied from Cook Inlet producers’ wells. And most days, the inlet’s gas supply is sufficient to meet local needs with some gas left for export as LNG, said ENSTAR spokesperson John Sims.

But when the mercury sinks to the bottom of the thermometer and stays for days or weeks, in winter demand for natural gas increases as much as 12-fold, he said. Because supply and demand are so nearly in balance, on the coldest days, gas has been from the LNG plant ConocoPhillips and Marathon own in Nikiski to keep the lights and heat on for utilities’ residential and business customers, Sims said. Operators have announced plans to seek renewal of the LNG export license, which expires in March 2011. Popp, Posey and Thibert are among those voicing support for renewal of the LNG export license because it’s a useful tool to help meet peak demand. Now, when demand overwhelms supply, gas is diverted from the LNG plant to utility customers. And no LNG plant equals no gas to divert, Popp said. In the Lower 48, there is almost 4 trillion cubic feet of natural gas storage and tens of thousands of miles of pipe connecting the continent’s gas suppliers and users, Sims said.

Seven Recommendations From Commonwealth North BY HEATHER A. RESZ ommonwealth North commissioned Black and Veatch to study and evaluate solutions and facilitate dialogue relevant to energy policy throughout Alaska and develop guidelines and recommendations for a secure energy future. After extensive discussion and debate with involved and knowledgeable citizens, Commonwealth North made seven recommendations regarding Cook Inlet energy in its April 1 presentation to the House Energy Committee titled “Energy for a Sustainable Alaska: the Railbelt Predicament.”

• Assess the potential of a gas deliverability disruption in the near future due to the extreme load on the system coupled with potential deliverability constraints. • Address immediate deliverability and cost issues in

both Railbelt and rural areas by leading implementation of stop-gap measures to encourage conservation, alternative energy and efficiency. • Make gas storage available as soon as possible to help utilities meet deliverability challenges. • Establish a clear regulatory standard for review of gas-supply contracts. • Implement a policy of fuel diversification with the long-term goal of reduced dependence on diesel for much of rural Alaska. • Adopt a strategy to diversify Alaska’s energy portfolio within the next 15 years to include other viable energy alternatives including hydro, coal, propane, wind, geothermal and other renewable energy projects. • Encourage development of oil and natural gas potential and the construction of a natural gas pipeline.

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

So gas produced in one place can be shipped, stored and used as needed. But getting gas from the well to the market in Cook Inlet is different. Cook Inlet has no third-party storage to hold gas once it’s produced and no pipe to deliver gas to or from elsewhere in the state or continent if customer demand exceeds supply or deliverability, Popp said. What’s the difference between supply and deliverability? Supply is gas in the fields. Deliverability is how much gas can be supplied by the producers’ wells at any one time. By 2013, industry experts say Cook Inlet will have a supply problem. As soon as this winter, customers could experience deliverability problems, including rolling brownouts or failure of the whole gas system. “We were very concerned about the potential of interruption this winter. And next winter will be even tougher in terms of the deliverability of gas,” Popp said.

WHAT’S THE GAS WORTH? Cook Inlet’s isolated natural gas market also creates a pricing challenge:

What’s gas worth if it’s produced? Local utilities are now the biggest buyers of Cook Inlet gas, and contracts between producers and utilities that affect customer rates require approval from the Regulatory Commission of Alaska, according to Alaska law. In the past five years, the Regulatory Commission denied two separate contracts negotiated between ENSTAR and Marathon. “Regardless of the Commission’s internal justification for rejecting the contracts, fact of the matter is, companies will not invest without a competitive market outlet,” said Carri Lockhart, Alaska Production Manager for Marathon Oil Co. Marathon – one of the largest producers of natural gas in Cook Inlet – operates nine fields and produces, on average, about 140 million cubic feet a day, or about 40 percent of the gas produced in Cook Inlet, Lockhart said. She said Marathon drilled enough wells in 2009 to meet its contractual obligations. And the company expects any additional drilling and capital work beyond this will be limited until there’s

a clear line of sight on the ability to freely negotiate and successfully secure approvals where required on new gas contracts, Lockhart said. The overall lack of investment activity is prompted by many challenges including burdensome regulation, market dysfunction, access and capital limitations, Lockhart said. Only Armstrong, Chevron, ConocoPhillips Alaska and Marathon are producing natural gas in Cook Inlet. Other companies working in Cook Inlet are Aurora Gas, CIRI Production Co., Cook Inlet Energy, Escopeta, Pacific Energy Resources, Pioneer Natural Resources Alaska and XTO. Popp said passage of House Bill 280, the Cook Inlet Recovery Act, will help make Cook Inlet competitive again. Gov. Parnell signed it into law May 12. HB 280, sponsored by Representative Mike Hawker and House Speaker Mike Chenault, provides the legal framework and financial incentives for developing large-scale natural gas storage facilities throughout the state. The legislation is aimed at providing benefits for consumers not only in Southcentral but

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also in Fairbanks, where gas could be shipped from the North Slope. The bill adjusts Cook Inlet tax credits to encourage exploration for and development of new gas. And the Regulatory Commission of Alaska is now required to consider the negative impacts to consumers when denying applications for gas-supply contracts. “By encouraging more gas development and the creation of storage facilities, consumers, utilities and producers will all benefit,” Gov. Parnell said. “Alaskans will have a more consistent supply of natural gas – both in the summer and in the long, unpredictable winter months.” HB 280 allows a gas storage income tax credit of $1.50 per 1,000 cubic feet of capacity up to a maximum of $15 million or 25 percent of the cost to create the storage. The legislation also increases the production tax credit from 20 percent to 40 percent for drilling-well-related costs within existing oil and gas fields outside the North Slope. Beginning July 1, capital and exploration production tax credits and the new 40 percent well cost credit will be fully available in the year they are incurred for all non-North

Slope costs. These two changes are similar to those proposed by the governor in separate legislation.

RCA APPROVES NEW MARATHON NATURAL GAS CONTRACTS The RCA approved Marathon’s new contracts with ENSTAR and Chugach Electric in May. The two contracts will supply all of Chugach’s unmet gas needs for the next two years and most of ENSTAR’s, Sims said. Chugach Electric’s new contract assumes that gas storage will be available prior to Oct. 31, 2012. Sims said ENSTAR is aggressively working to have its storage ready by the winter of 2012-13.

NEW OPPORTUNITIES FOR ALASKA New opportunities opened up for Alaska two years ago when oil prices shot up while gas prices fell. “It’s huge. It’s never been seen before,” Popp said. “It changed the global chemical industry.” Pacific Rim companies tend to use petroleum-based feedstock, which now

costs two to three times more than natural-gas-based feedstock, which most North American companies use. The shift means North American companies now spend less on feedstock costs, which make up 60 percent of the cost of finished goods, said Popp. He said costs have changed enough that manufactures in countries like Japan, Korea and China are looking worldwide for locations to drop new plants near gas supplies. “We are starting to get some notice,” Popp said. “We have Asian companies looking at Alaska right now.” He said Alaska Natural Gas Development Authority has contracted with Anchorage Economic Development Corp. “to promote petrochemical investment in Alaska based upon the proposed availability of 1.5 billion cubicfeet-per-day of methane, ethane and propane delivered to the region via the proposed ANGDA pipeline project.” A trade mission to Asia is under consideration for this summer to continue talks with manufacturers. “We need new manufacturers putting new dollars into Cook Inlet,” Popp

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Photo courtesy of American Marine Corp.

July 1, 2011, with the goal of first gas flowing by Dec. 31, 2015. American Marine Corp. dive team leader Steve Stuart prepares to dive down to a work site in Cook Inlet. Divers must perform their work by feel in the black, roiling, silt-laden water of Cook Inlet.

said. id “We “W need d industrial i d t i l users att the th end of the pipe.” Sims agrees. He said large industrial customers provide more demand for gas and more incentive for producers to keep limited capital dollars and equipment working in Cook Inlet. “The biggest thing that Southcentral Alaska struggles with is that our demand is small,” he said. “The costs are substantial, but the users are few.” A long-term source of new gas for Cook Inlet also will take a significant step forward when both the Denali –

The Th Alaska Al k Gas G Pipeline Pi li and d TransT Canada Alaska Pipeline have their open seasons in 2010. The goal of open season is to secure enough committed shipping volume to justify construction. As for building an in-state line to provide natural gas to Alaska communities, the governor signed new legislation April 26 creating a Joint In-state Gasline Development Team within the Alaska Housing Finance Corp. The team is responsible for bringing a development plan and financing options to the Legislature by

Work planned this summer in Cook Inlet includes: ● Marathon has planned exploration and development at the Ninilchik field, and the Chevron operated McArthur River over the remainder of the year. ● Marathon, Chevron and ConocoPhillips will be active in investing capital in Cook Inlet as well as Armstrong Oil and Gas, which has signed a contract with ENSTAR to supply gas. ● ENSTAR will extend its gas pipeline from Ninilchik to Anchor Point in 2011 at an estimated cost of $22 million. It will connect with a line there and add Anchor Point Energy’s North Fork gas to the pipe. ● Escopeta also has plans to bring a jack-up rig to Cook Inlet to drill during the summer. ● Cook Inlet Energy, a subsidiary of Tennessee-based Miller Petroleum, has restarted four wells in the west McArthur River fields it acquired in December from Pacific Energy Resources. ❑

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

OIL & GAS

Alaska OCS Shuttered by Interior BP Gulf accident delays Chukchi, Beaufort drilling. BY TRACY KALYTIAK

Photo courtesy of Shell International Ltd.

Shell’s Frontier Discoverer, the drill rig proposed for 2010 activities in the Chukchi Sea, will have to wait at least until next year due to BP’s Gulf of Mexico spill.

n 1982, U.S. Interior Secretary James Watt used a secretarial order to create the Minerals Management Service, consolidating all of the department’s outer continental shelf (OCS) leasing responsibilities into one agency. The order gave the MMS authority over assessing the nature, extent, recoverability and value of leasable minerals on the OCS. The MMS collected more than $13 billion in revenue annually over the following 28 years, until a catastrophic oil spill in the Gulf of Mexico spotlighted conflicts between its revenuegathering and regulatory functions. The April 20 explosion and subsequent sinking of the Deepwater Horizon drilling platform in the Gulf of Mexico killed 11 people and resulted in an oil spill of massive, still-undetermined proportions. BP owns the well, Transocean

owns the rig and Halliburton served as a contractor on the rig. Despite three reports warning of difficulties associated with deep-water well control, the MMS last year granted BP’s Deepwater Horizon drilling operation a “categorical exclusion” from all environmental reviews required by the National Environmental Policy Act (NEPA). The exclusion was one of hundreds MMS has granted each year to drilling operations in the Gulf.

MMS BROKEN UP U.S. Interior Secretary Ken Salazar on May 19 officially broke the 1,700-employee MMS into three new agencies immediately prior to the release of a federal report revealing how MMS employees accepted hunting and fishing trips, college football and golf tournament jaunts, skeet-shooting

invitations, meals and other perks from industry representatives in the Gulf region. An MMS inspector there even conducted four inspections of one oil company’s platforms while in the process of negotiating and later accepting employment with that company. “Of greatest concern to me is the environment in which these inspectors operate, particularly the ease with which they move between industry and government,” Acting Inspector General Mary Kendall wrote in the report she submitted to Salazar on May 24. Kendall noted she was encouraged by MMS’s response to her report. She said MMS officials told her they would enhance ethics training for inspectors and establish a two-year waiting period to prevent conflicts of interest. Salazar’s secretarial order separated the MMS’s revenue-collecting,

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

enforcement and energy-development functions into three new structures. ● The Bureau of Ocean Energy Management will oversee management of oil and gas and renewable energy evaluation, planning and leasing. About 700 of the current MMS employees will be shifted to this agency. ● The Bureau of Safety and Environmental Enforcement will, according to the secretarial order, “inspect, investigate, summon witnesses and produce evidence, levy penalties, cancel or suspend activities, and oversee safety, response and removal preparedness.” About 300 MMS employees will be moved to this agency. ● The Office of Natural Resources Revenue’s 700 employees will oversee the royalty and revenue management functions of MMS, including royalty and revenue collection, distribution, auditing and compliance, investigation and enforcement, and asset management for both onshore and offshore activities. The Ocean Energy and Safety and Environmental Enforcement bureaus will be supervised by Wilma Lewis, Interior’s secretary for land and minerals management. The Office of Natural Resources Revenue will be ensconced in a different Interior division and headed by Rhea Suh, Interior’s assistant secretary for policy, management and budget.

ALASKA MMS FAUX PAS An MMS Alaska Region all-hands meeting took place in the wake of Salazar’s announcement of the proposed MMS changes. The regulators’ meeting featured a cake emblazoned with the words “Drill, Baby, Drill.” John Goll, MMS’s Alaska regional director, on May 20 e-mailed an apology to MMS employees after news of the cake promptly made it into the New York Times. “This was simply wrong to have,” Goll stated in his e-mail. “I failed in preventing this from happening in my office.” A March 2010 U.S. Government Accountability Office report highlighted www.akbizmag.com • Alaska Business Monthly • July 2010

problems occurring in MMS’s Alaska Region, which provided oversight for OCS leasing in the Bristol Bay area until those leases were canceled earlier this year. MMS also provided oversight for Shell’s leases in the Beaufort and Chukchi seas. Shell planned to begin exploration in July, but those plans changed with the May 27 announcement that the Interior Department would postpone drilling in the Arctic until at least 2011. The GAO report stated that although MMS has, over the years, faced delays that were largely out of its control, it can control the quality and integrity of its environmental analyses. The Interior Department directs its agencies to prepare NEPA handbooks providing implementation guidance. MMS has not issued such a handbook, the GAO report stated. “As a result, the agency cannot ensure the consistent implementation of NEPA within or across regional offices,” the GAO report stated, “and it leaves itself vulnerable with regard to litigation and allegations of scientific misconduct.”

NO SHARING The report went on to say that MMS directs its OCS regions to share industry data and proprietary reports with staff involved with NEPA-mandated environmental analyses, and discuss management revisions to an analysis with relevant subject-matter experts. The report claimed the Alaska OCS Region does not share information in accordance with this policy, and that some of its own scientists have alleged that their findings have been suppressed. “Comprehensive, detailed NEPA guidance, along with full implementation of its 2008 information-sharing policy,” the report stated, “could strengthen MMS’s NEPA analyses and enhance the agency’s credibility among stakeholders as it strives to achieve balance between oil and gas development and environmental protection.” The GAO recommended the MMS set a deadline for issuing a comprehensive NEPA handbook, and update it as needed. “Such guidance should detail procedures for conducting and documenting

NEPA-required analyses, including how determinations of significance are to be made and how scientific findings are to be reviewed,” the report stated. The report also recommended steps be taken to ensure the Alaska OCS Region follows the policy for sharing or making available information – including proprietary information – to all staff involved in the technical or environmental review of that information. Interior’s Wilma Lewis reviewed the GAO draft report and its recommendations. “The Department generally agrees with your findings, fully concurs with your two recommendations, and will implement them as indicated,” Lewis wrote in a letter to Mark Gaffigan, the GAO’s director of Natural Resources and Environment.

CULTURAL CHANGE Representatives of environmental groups say the overhaul of MMS is long overdue. Marilyn Heiman, director of the Pew Environment Group’s U.S. Arctic

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Program, has worked around and with MMS for a long time in Alaska. She says the agency has a strong pro-industry culture that favors moving forward as quickly as possible on new oil drilling. “The kind of access the industry has to them couldn’t be touched by the public or the conservation groups,” Heiman said. “I’ve never seen a project MMS didn’t like. I feel like my concerns have been dismissed by them.” Heiman says she hopes Salazar thoroughly reforms MMS and that Congress reworks laws related to leasing. “Even if you split (MMS) up, if you don’t change the way it’s managed, that culture is still there,” she said. Heiman said the gas blowout on the Deepwater Horizon rig was frightening in light of Shell’s plans to drill on the Arctic OCS because so many people had insisted such a disaster could not occur. The federal suspension of exploration and development in the Arctic region will enable a probe of what went wrong in the Gulf and prevent that caliber of disaster from occurring in the Beaufort or Chukchi seas.

“The Arctic is a very vulnerable ecosystem,” she said. “They could not mount the kind of response (to a potential Arctic disaster) they’ve been mounting in the Gulf. There’s the remoteness, weather limitations, ice, 20-foot seas and 30-knot winds that can occur in the summer. You’d better be very precautionary in your approach if you’re going to a frontier place that’s virtually untouched right now. You have a responsibility to take those extra steps.”

INDUSTRY MUM Alaska MMS spokesman John Callahan did not immediately return a phone message seeking comment about the reorganization proposal and claims that the MMS in Alaska is too close to the oil and gas entities it is supposed to regulate. Shell’s spokesman, Curtis Smith, did not immediately respond to a message requesting information about Shell’s reaction to the proposed MMS reorganization or the status of its exploration and development plans in Alaska. Representatives of other large oil

companies that do business in Alaska – including BP, ExxonMobil and ConocoPhillips – declined to discuss the impending breakup of the MMS, referring calls to the American Petroleum Institute, the oil and gas industry’s trade organization. “The administration has a good working relationship with America’s oil companies,” said Juan Palomo, spokesman for the American Petroleum Institute. “The administration recognizes the important role the companies play in providing the energy security and jobs the country needs.” Palomo added that his organization does not have enough details about the MMS reorganization to be able to offer any assessment of how well it will work in the future. “Our priority is producing the oil and natural gas the United States will need today and in the future,” Palomo stated via e-mail. “We will continue to work with Secretary Salazar and others in his organization to help us do that, however MMS is restructured. It is too early to tell what other reforms will come or to assess their practicality.” ❑

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

NATIVE BUSINESS

Tyonek Native Corp. Photo courtesy of Tyonek Native Corp.

Aerial view of Tyonek on the western shores of Cook Inlet.

Looking beyond subsistence. BY JULIE STRICKER

Tyonek Native Corp. (TNC) is actively promoting a series of multimillion-dollar energy and development projects on the west side of Cook Inlet that would bring thousands of jobs, and residents, to the area. The corporation has about 800

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

rom the west coast of Cook Inlet, you can see the lights of Anchorage only 39 miles away. It doesn’t work the other way. Fewer than 300 people live on a 120-mile stretch of shoreline. But that may be about to change.

shareholders, 193 of whom live in Tyonek village. TNC would like to see more shareholders come home, says TNC Consultant John McClellan. “That’s sort of a goal for us to move back to the village, but there’s no way to make a living,” McClellan says. “We’re

working to develop a mechanism for employment and have people move back to their Native lands.” TNC is a for-profit village corporation established under the 1971 Alaska Native Claims Settlement Act. It oversees subsidiaries in such fields as defense manufacturing and engineering, aircraft maintenance, information technology services, construction, oilfield support services and tourism. It owns more than 190,000 acres of land, primarily on the west side of Cook Inlet in Southcentral Alaska. It is aggressively pro-development, a stance often at odds with tribal officials of the Native Village of Tyonek, a Dena’ina Athabascan community with a subsistence-based economy. But in today’s energy-hungry world, TNC’s holdings are prime real estate, surrounded by potential energy sources – coal, hydropower, geothermal – only miles from Alaska’s largest and fastest-growing communities. The corporation doesn’t own the resources directly, but would benefit from development that would need access across TNC lands or employ

shareholders. TNC shareholders also are well positioned to offer solid waste management, water and communications services to west Cook Inlet communities. The corporation has a multi-pronged plan for development, including a new community, Nakacheba, with 700 home sites situated six miles north of the current village of Tyonek. Shareholders would receive a 1.5-acre plot of land in the planned subdivision. “That will give those people who want to return to the area some land they can settle on,” McClellan says. It also provides a place for workers on the various projects to live. Scott Ruby of the Alaska Division of Community and Regional Affairs says the State has already signed off on the subdivision. “In four or five years, we expect over 10,000 people to live on the west side of Cook Inlet,” McClellan says. In the process, access to the Native Village of Tyonek would be restricted. It would become a gated community to protect and preserve the traditional culture.

IMPROVING REGIONAL ACCESS TNC is looking at two access projects. One is a ferry, which is being built in Ketchikan and is expected to start serving the community next year. Villagers now must fly out on a small plane, which costs $180 round-trip to Anchorage. If they want to bring back groceries, they pay 37 cents per pound. Gasoline is $7.50 per gallon. Once the ferry is in place, residents would be able to drive their vehicles to Anchorage via the ferry. “That’s going to have the most dramatic impact on quality of life,” McClellan says. The second is a proposed bridge over the Susitna River that would link the main Alaska road and railroad system to the Tyonek road system. Only a 22-mile gap separates the two, but the sprawling Susitna River lies within that gap, and spanning it would be a multi-million State and federal project, McClellan says. It is a project that the corporation believes is already overdue. “We think that the driver for it will be all the economic development projects in West Cook Inlet,” McClellan says.

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Without the bridge, lack of access to the region “will be a crisis in five years.”

COAL PROJECTS A main economic driver is the Beluga coal field located in upper Cook Inlet. PacRim Coal is proposing a $600 million surface coal mine on the upper drainages of the Chuitna River. The Chuitna coal project would employ 500 workers during the construction phase and 180 workers for the forecast 25 year life of the mine. Up to 12 million tons of coal annually would be moved to ships off the Ladd Landing facility via a 10,000-foot conveyer belt and exported. No permits have been awarded, but the corporation is hopeful the project will get under way in the next year. The project has come under fire by conservation groups, who oppose PacRim’s plans to mine through a creek that feeds into the salmon-rich Chuitna River. Conservation group American Rivers named the Chuitna one of its 10 most endangered rivers in 2007 because of the Chuitna coal project. Native Village of Tyonek tribal officials also strongly oppose the project,

citing its potential impact on fisheries and other subsistence resources. They have circulated a letter to State officials and Alaska’s congressional delegation outlining their opposition.

“We’re finishing up our first round of test drilling,” he said. CIRI would drill into deeply buried coal seams below the freshwater aquifer and inject oxygen, which would enable

“That’s sort of a goal for us to move back to the village, but there’s no way to make a living. We’re working to develop a mechanism for employment and have people move back to their Native lands.” – John McClellan • Consultant • Tyonek Native Corp. Southcentral Alaska’s main energy source for the past decades has been natural gas from Cook Inlet. Supplies are running low, however, and Anchorage residents could see energy shortages by 2013 or sooner. McClellan says three energy projects in west Cook Inlet could meet the region’s energy needs. Cook Inlet Region Inc. has extensive holdings on west Cook Inlet and is working on a project to use coal from the vast Beluga coal field to produce energy in a process called underground coal gasification. The project is the most promising of the proposed energy projects in the region, says Jim Jager, CIRI’s director of communications.

the coal to combust and become liquid syngas. The gas would be burned to generate electricity at a new 100 megawatt power plant built near the site. Similar plants have been built in Australia, Africa and Eastern Europe, but it would be one of the first such plants in North America. CIRI expects it to go online in 2014.

ALTERNATIVE ENERGY A hydropower project at Lake Chakachamna has been discussed for years. Touted as a smaller, less-expensive option to a hydroelectic dam on the Susitna River, the $2 billion project would tap Lake Chakachamna through a 10-mile tunnel and generate 300 megawatts of electricity from renewable sources. It could replace the power generated by the aging Beluga Power Plant, which supplies electricity to the Railbelt. “There wouldn’t really be a net increase in electricity,” McClellan says. “But the hydro project is renewable energy – completely disconnected from oil and gas prices.” A $3 billion project would tap geothermal energy from Mount Spurr, an active volcano just across the valley from the Chakachamna project. The state recently issued leases to an Israeli firm, Ormat Technologies Inc. The project, which is in its infancy, could generate from 150 megawatts to 400 megawatts of power. The corporation also is touting its North Foreland dock facilities and opportunities for a 1,000-acre industrial site. Even one of the projects would bring big changes to the west Cook Inlet region. And if the corporation’s projections come to pass, a decade from now, people in Anchorage may be able to look across the inlet and see the lights ❑ of Nakacheba.

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

NATIVE BUSINESS

The Aleut Corp. Capitalizes on diversified business model. BY BLYTHE CAMPBELL

“Though we pursue many paths to success, our common goal is the welfare of our shareholders. Our priority is to maximize dividends, benefits and choices.” – Thomas Mack • President and Interim CEO • The Aleut Corp. Photo by Angela Bourdukofsky

The Aleut Corp. President Thomas Mack overlooking the village of St. Paul.

he Aleut Corp. has a simple mission – to maximize dividends and choices for its shareholders. As one of the 13 regional Native corporations established in 1972 under the terms of the Alaska Native Claims Settlement Act (ANCSA), The Aleut Corp. received a settlement of $19.5 million, 66,000 acres of surface lands, and 1.572 million acres of subsurface estate. Today, The Aleut Corp. employs 850 people in diverse business lines including government operations and maintenance contracting, fuel delivery, sales and storage, commercial and residential real estate properties and gravel operations. The corporation recently acquired an oil-well testing company in Bakersfield, Calif., and Alaska Instrument Co. LLC, a manufacturers’ representative of instrumentation and control products in Anchorage.

Diversification plays a key role in The Aleut Corp.’s success. The corporation’s diversified business interests produced gross revenues of $146 million and net income of $43.5 million in FY 2009. Net income increased by 19 percent over 2008’s record performance of $36.6 million. The corporation’s assets are now at $187 million, a 40 percent gain over 2008.

ALEUT LEADER “Our strategy is focused on creating a structure that provides gains in shareholder value, even when economic conditions are not optimum, and ensures our success is sustainable,” said Thomas Mack, Aleut’s president and interim CEO. Mack was raised in King Cove, which is located on the tip of the Alaska Peninsula. He is one of the youngest of the original 3,249 shareholders of

The Aleut Corp. After graduating high school, Mack attended the University of Nevada-Las Vegas and the University of Alaska Anchorage where he earned a bachelor’s degree in education. He spent summers commercial salmon fishing on his father’s boat during his high school and undergraduate years, and taught in the Anchorage School District for 10 years. While teaching, Mack received a Master of Science from Western Oregon University. He also holds a Master in Business Administration from Alaska Pacific University. As president, Mack is a key member of The Aleut Corp.’s executive management team. He actively promotes the corporation’s positions on culture, education and economic-development issues. He communicates key Aleut messages to essential audiences, and conveys policy recommendations to

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

Photo courtesy of Aleut Management Services LLC

Aleut building in Colorado Springs, Colo.

government leaders. He aims to effectively distribute corporate funds, helps increase outside funding for regional programs and projects, and works with community leaders, legislators, staff and other advocates on Aleut-related legislation and policy issues.

LONG HISTORY OF 8(A) BUSINESS Like many other Alaska Native corporations, The Aleut Corp. has significant business operations in government contracting, so the corporation closely follows the national policy debate around the Small Business Administration’s 8(a) program. Mack gave a presentation at the Native American Contractors Association 8(a) workshop in April, describing The Aleut Corp.’s long history in government contracting and sharing lessons learned with other Native American organizations. The Aleut Corp. entered into the government-contracting business 20 years ago. Its first successful contract award, and a contract it still holds today, was a competitive bid at the Air Force Academy in Colorado Springs where the incumbent was displaced. In 1997, The Aleut Corp.’s first

government-contracting subsidiary “graduated” from the 8(a) program, and the corporation started a second government-contracting subsidiary to meet the requirements for 8(a) competition. “After a few years, it became apparent that the two subsidiaries were competing for the same types of contracts,” Mack said. In 2004, The Aleut Corp. consolidated the two companies and formed a holding company, Aleut Management Services LLC, to provide back-office-support services, such as accounting, payroll, human resources and purchasing, for all of their government-contracting companies. To provide continued growth, it created four new companies, each with individual primary NAICS codes. The lines of business were selected to complement the corporation’s government contracting experience, but give each subsidiary a different market niche. “It probably doesn’t make sense to have a primary NAICS code in aerospace engineering and a secondary code in laundry services,” Mack said. Aleut Management Services has four active 8(a) companies, and two non-8(a) companies under its umbrella.

“It’s important to ensure that your primary line of business – the NAICS code – will provide growth not only in the SBA program but in a full and open competitive market,” Mack said. “We’ve had to adjust our business plans over the years based on market changes, and we are always looking for growth opportunities.” The Aleut Corp. has worked with a number of joint-venture partners, and has learned to carefully evaluate the many proposals they receive from companies looking to take advantage of the corporation’s 8(a) status. “We set a strategic focus and ensure that our partnerships support that focus,” Mack said. “And as our culture and heritage are very important to the way we do business, we look for partners that have the same culture and ethical standards as we do.” Mack credits exceptional customer service for the corporation’s success in landing, and keeping, government contracts. “In service industries, if you put profit first above serving your customer, your company will not survive very long,” he said. The Aleut Corp. has developed robust financial-management policies and practices to ensure their government-contracting ventures are successful. They learned that managing accounts receivable – from timely and accurate billings to assertive collection efforts – is key to providing steady cash flow to cover payroll and other current liabilities. In its 20 years of government contracting, it has learned to bid competitively, and win contracts that produce the profits to match its business strategy. “We try not to get caught up in bragging rights about how much revenue we generated because at the end of the day, we need profits to fulfill our mission and vision for the corporation and its shareholders,” Mack said.

EARLY AND CONTINUAL DIVERSITY The Aleut Corp. has had 20 years of success with government contracting, both within and outside of the 8(a) program, but they also recognized the value of diversification early on. Aleut Real Estate, a wholly owned subsidiary, was established in 1996 as a holding

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

company for buildings and properties owned by The Aleut Corp. The corporation’s direct investments include residential and commercial properties in Alaska, Oregon and Colorado. Aleut Real Estate also manages lands and resources for the corporation, including sand, gravel, minerals and rock aggregates as part of its subsurface rights within the region from quarries in Unalaska, King Cove, Sand Point and St. Paul, all of which are managed by local village corporations. Another subsidiary, Aleut Enterprise LLC, was established in 1997 as the Aleut Enterprise Corp. and converted to a limited-liability corporation in 2004. Aleut Enterprise is a fueling company with fuel terminals in Adak and Cold Bay. It also provides bulk-fuel sales to customers, as well as the opportunity to store bulk fuels for third parties, with fuel tank capacity of approximately 20 million gallons at Adak. In 2009, Aleut Enterprise purchased a tugboat to provide tug and barge services for fuel deliveries. In 2009, The Aleut Corp. formed Aleut Industrial Services LLC, a new company focused on nongovernment

industrial products and services, to serve as a holding company for new growth of diversified lines of business. Last year, The Aleut Corp. acquired Alaska Instrument Co. LLC, which became the first company in Aleut Industrial Services LLC. Alaska Instrument Co. is an Anchorage-based manufacturers’ representative firm specializing in industrial instrumentation and controls. The corporation also acquired C&H Testing Service LLC, a California-based service company specializing in oil and gas well-testing services. “We are in the due diligence process with several other potential acquisitions and joint ventures that will complement and expand on Aleut Industrial Services capabilities,” Mack said. “The addition of these new companies not only diversifies our sources of income, but also adds real growth to the bottom line.” The Aleut Corp. works closely with other entities in its region to provide services to its shareholders, descendants and other residents of the Aleutians and Pribilof Islands. The “A Team,” the name the collaborators use to describe their group, includes The Aleut Corp.,

Aleut Foundation, Aleutian Pribilof Islands Association, Aleutian Housing Authority, Aleutian Pribilof Island Community Development Association and the Eastern Aleutian Tribes. The group has published a services directory encompassing children’s services, culture and heritage, education, employment, training, elders programs, environmental services, health, utility assistance, housing, public safety, scholarships and social services. The Aleut Corp. also participated in an April 2009 Energy Summit, which brought together people representing Aleutian/Pribilof Island communities, tribes, nonprofit and for-profit organizations, business leaders, political representatives and the public to address the critical energy issues of the region, including adopting a comprehensive energy policy and implementation plan for fuel purchases and storage, conservation and renewable energy. “Though we pursue many paths to success, our common goal is the welfare of our shareholders,” Mack said. “Our priority is to maximize dividends, ben❑ efits and choices.”

“Employers love to see that students have leadership skills and hands-on experiences.” • Anna Marie Ferntheil Junior, Civil Engineering

UAA SCHOOL OF ENGINEERING Hands-on learning for tomorrow’s engineers Engineering is a very hands-on discipline and it’s critical for students to gain practical experience before entering the engineering workforce. With hands-on learning at the core of its curriculum, the School of Engineering recently acquired new lab space to open up a multitude of new activities for students to engage in applied engineering and innovative design. The Engineering Design Studio and Rapid Prototype and Manufacturing Lab equip students with the tools they need to design and fabricate a wide variety of projects for classes, industry and national competitions.

UAA School of Engineering • Engineering Alaska’s Future Today • www.engr.uaa.alaska.edu • 786-1900

UAA IS AN EEO/AA EMPLOYER AND EDUCATIONAL INSTITUTION.

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

TRANSPORTATION

Photo by Lilly Kelly/ACVB

Passengers disembark Holland America Line’s ms Amsterdam at the growing Port of Anchorage in May. The Amsterdam also makes calls in Ketchikan, Skagway, Sitka, Homer, Kodiak, Juneau and Victoria, British Columbia, during its 14-day Alaska journey.

Alaska Ports and Harbors Economic engines of growth. BY PEG STOMIEROWSKI

ovement of people and goods at Alaska’s ports involves some challenging choreography by a cast of diverse transportation managers. They work together to make many of the coordinated movements, connections and transitions seem smooth and easier than they are. After a couple of slow years, business is starting to improve, said port transportation sources who generally expressed an air of cautious optimism.

Much of the on-loading and off-loading at Alaska’s busier docks remains largely invisible to the public – at least to those folks who aren’t debarking from ships or picking up friends, family members or consumer goods that are unloaded, one-by-one, from ships and barges. Nowhere is this more the case than at the Port of Anchorage, which processes 90 percent of the commodities that enter the state for 80 percent of the population. Port employees who

watch the transportation interplay probably recognize the consumer and strategic importance of integrated port operations, managers observed, more than the average state resident does. Rail and cargo transportation haulers who service this hub and smaller ports around the state are responsible for the movement and distribution of goods, including heating oil, jet fuel, gasoline, groceries, clothing and more, from incoming ships to local retail

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centers including Wal-Mart, Costco, Sam’s Club and Fred Meyer, as well as grocers, gas stations and military bases. At the Port of Anchorage, an economic engine with an annual benefit exceeding $1.3 billion, “a lot of moving parts have to fit together” to make things work as well they do, says Steve Ribuffo, deputy port director. “Everyone involved here does take their job seriously.” Their goals involve a hefty degree of cooperation among firms and agencies involved in maritime, air and ground transportation, including rail, trucking and road traffic.

MAJOR PLAYERS AND PLANS Besides the Alaska Railroad, major players in the general port transportation scene include Horizon Lines, Totem Ocean Trailer Express (TOTE), Tesoro, Chevron, Flint Hills Resources, Aircraft Services International Group, Alaska Basic Industries and the Alaska Trucking Association. The latter does a lot of heavy lifting for the major hubs as well as for ports at Skagway, Haines and Valdez.

“Alaska has as much or more intermodal activity as anywhere in the country,” said Aves Thompson, director of the Alaska Trucking Association. Water, rail and air carriers, he said, must work together efficiently. Containers offloaded in Anchorage may be taken by rail to Fairbanks and again by truck to other destinations from there. At one point or another, 90 percent of the freight that comes into to the Port of Anchorage from the Port of Tacoma in Washington is moved by truck or van, he said. And 50 to 60 of the communities in Alaska (e.g., Tok, Delta Junction and Glenallen) are serviced exclusively by trucking companies. While some freight and trucking interests have taken a wait-and-see attitude toward changes related to port expansion plans, economic factors may play the largest role, Thompson said. As in many things, he said, “much as we do like to think government decides, it’s the economics that will drive the project.” Economic development forces in Anchorage and the Matanuska-Susitna (Mat-Su) Valley have been supportive.

Overall, Thompson said, Alaska has been less impacted by the effects of the global recession than many states in the Lower 48, with business down generally 10 percent to 12 percent and the impact of the downturn felt mostly in the state’s oilfields. On the freight side, with oilfield companies not doing a lot of drilling, it’s not been busy, said Steve Silverstein, vice president of business development for the Alaska Railroad. Shell’s eventual entry into the Chukchi and Beaufort Sea areas, he added, should help bring new business to the state. And with freight operations starting to pick up at ports in Tacoma and Anchorage, Thompson said, port-trucking sources are cautiously optimistic. As new efficiencies have been instituted, vans traveling by road or rail, in Alaska as elsewhere, now serve a warehousing function that used to be served by retail stores, he said, cutting down on the old inventory levels. For the most part, there’s not a lot of consumer goods warehousing in Alaska, port managers said. The state only stays five to seven days ahead of demand. Big-box grocery and retail

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

ANCHORAGE PORT FACTS Some of what passes through the Port of Anchorage: ❖ 90 percent of all consumer goods for 85 percent of Alaska’s population ❖ Fuel and cargo for more than 140 villages ❖ More than 5 million tons of goods ❖ 100 percent of the fuel used at Elmendorf Air Force Base ❖ 80 percent of the fuel used at Ted Stevens Anchorage International Airport

✔ Some key players in the port’s transportation:

● Alaska Railroad ● Horizon Lines ● Totem Ocean Trailer Express ● Tesoro ● Chevron ● Flint Hills Resources ● Aircraft Services International Group ● Alaska Basic Industries ● Alaska Trucking Association establishments store many of their consumer goods in vans parked behind their outlets, with goods offloaded directly onto the stores’ shelves. Often these vans have brought the goods directly from these ports, while others have traveled by rail. Freightwise, Silverstein said, some new pipe shipments coming from Asia instead of Texas have resulted in a savings for BP. Trucking and steamship companies use the railroad to haul trailers and containers offloaded from barges and from TOTE and Horizon ships to Fairbanks for transportation by rail or truck to Interior villages or to the North Slope and to road-system towns closer to Fairbanks than Anchorage, he said. For the most part, Silverstein said, these operations tend to be smooth, but alignments could be in store eventually as tonnage grows. At the largest hub, the Port of Anchorage, average daily traffic, according to Ribuffo, is around 895 vehicles of all kinds. On Sundays and Tuesdays, when the big container ships are in port, the numbers swell to 1,000 to 1,425 respectively, he said.

A national strategic port, the Port of Anchorage serves all five of Alaska’s military bases and provides thousands of jobs. Port users have a tremendous investment in the state, including new ships totaling $400 million for Horizon Lines and $300 million for TOTE. While he can’t describe security procedures in detail, Ribuffo said they don’t include long vehicle screening checklines. The port does work within U.S. Coast Guard and Homeland Security regulations, he added, and visitor control measures don’t allow wandering off into restricted areas.

RAIL CHANGES

rail cars, saving millions in handling costs every year. As for air travel, military helicopters have been flying in and out of Anchorage’s port for years. And the port is (only eight miles) from Ted Stevens Anchorage International Airport, which minimizes greatly the cost and inconvenience for anything being flown to the Interior, he said, especially during the winter months when the rivers are frozen to barge traffic. Most anything going to the Interior by air comes into the port first, he said, and is trucked to the airport. Aviation gasoline is delivered to the Interior by barge.

Rail travel is another element of the transportation mix at Anchorage, MatSu and other ports. It is the sole means of bringing refined petroleum products into Ted Stevens Anchorage International Airport terminal from Flint Hills’ North Pole refinery, Ribuffo said. From the port, fuel goes out by truck to gas stations on the state’s road system, or by barge to remote villages in the Interior. Aircraft International Group (ASIG) fuel only goes to Anchorage International Airport and only by pipeline, he said. Rail service at the Anchorage port was upgraded in 2004, and military bases are the predominant users. Equipment for deployment is moved into the port from Fort Wainwright to be loaded from railcars to waiting transport vessels, Ribuffo said. When redeployment occurs, the process is reversed. With a road that connects the base and port directly, he said, military equipment movements to and from Fort Richardson to the port are executed without interruption to city traffic flow. As the expansion matures, he said, containers may be loaded onto waiting flatcars right on the port, rather than driven to the rail yards for transloading. Depending on funding, this step is likely to be phased in by 2015 or 2016, he said. Additionally, one of the on-port rail tracks will be extended to the far north end of the new expanded port and terminate in the barge berth area. That way, depending on the commodity, equipment and materials can be offloaded directly from barges onto

And while this sophisticated transportation system, for the most part, functions smoothly, the choreography that makes it happen is mainly a one-facility act at the Anchorage port, owned by the municipality and elsewhere as well. In Alaska, there exists no Port Authority or port-related oversight agency. “I don’t expect one to be started up any time in the near future,” Ribuffo said. The Anchorage port generates around $14 million to $15 million a year in revenues, with profits in the range of $4 million to $5 million, he said. No property taxes go into the port’s support, he added, and the port’s revenues pay all of its bills and payroll. Revenues and profits also fund the port’s own capital improvements and Anchorage takes a portion of the revenues, approximately $900,000 annually, to help cover the costs of the city’s government. Historically, he added, docks at diverse ports around the state are owned by various groups, including municipalities, businesses and/or transportation entities. While they do represent revenue-generating tools for all of these private entities, he said, none rival the Port of Anchorage in generated income, and there are probably a few ports that make little or no significant amount of money. Expecting current port owners to divest themselves of these facilities and any associated revenues for central management under a single entity would be a large expectation.

TOGETHER BUT SEPARATE

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

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At the Anchorage port there’s a goodness and practicality asking Anchorage to consider giving away an enterprise of the port’s size would involve a huge financial decision. The question is largely philosophical, Ribuffo said in April, and he knew of no efforts in that direction. It has been hard enough, he said, just trying to get a regional transportation authority cobbled together between Anchorage and the MatanuskaSusitna (Mat-Su) Borough to institute a commuter-rail system. As reported March 3 by Rosemary Sinohara in the Anchorage Daily News, the Alaska Railroad depot at Ted Stevens Anchorage International Airport had been envisioned as a beehive for rail commuters from the Valley and cruise ship passengers heading to or from the airport, but with no commuter rail service and declining cruise traffic, it had served just 20,000 rail passengers in all of 2009 and had been mothballed for the winter. It had been named after Gov. William Sheffield, former railroad and now Port of Anchorage director.

While the Trucking Association’s Thompson said economic factors will play the largest role in sorting out Alaska’s port expansion and use issues, he said he could see there being future discussion of Southcentral and Southeast regional port authorities. “They seem to have worked in other parts of the world,” he said of regional arrangements, although he expressed that such talk in Alaska is premature for now.

PORT MACKENZIE Another significant deep-water and dock expansion initiative has been under way at Port MacKenzie, where managers were seeking support for a rail spur and eventually rail loop, to help facilitate heavy cargo movement and natural gas pipeline support in the future. They and Mat-Su economic development officials were seeking state funding and making a case that the government should be investing in new infrastructure to make transportation easier and to spur future resource development. Former Anchorage Mayor Rich

Mystrom has been on a talking tour for the borough’s Economic Development Department, extolling a time of many energy development and economic uncertainties as the right time to spend hundreds of millions of dollars to connect the port with the Alaska Railroad system. Meanwhile, the port’s capacity to handle deepwater ships was being tested. Dave Hanson, economic development director for the borough, said the port’s unrivaled depth and 9,000 acres set aside for industrial use are key factors in bulk natural resource development, in addition to changes underfoot with the rail spur push. Mystrom told the Anchorage Chamber of Commerce at a February appearance, as reported in the Anchorage Daily News, that it’s even more imperative in a slow and unsteady economy for the State to invest in such projects as the rail line to provide jobs for residents and take advantage of lower materials and labor costs. As for development of more formalized joint planning in the future, Hanson said, “we’re just in the early stages.” ❑

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

REGIONAL REVIEW

Pacific Northwest Ahead of the game in nation’s recovery. BY TRACY BARBOUR

Pacific Northwest States at a Glance ● Alaska Capital: Juneau Population: 698,473 Rank by Population: 47th Per Capita Income: $42,603 ● Washington Capital: Olympia Population: 6,664,195 Rank by Population: 13th Per Capita Income: $41,751

● Oregon Capital: Salem Population: 3,825,657 Rank by Population: 27th Per Capita Income: $35,667

Washington State car and passenger ferry approaching Bainbridge Island in the early morning sunrise. Part of downtown Seattle skyline and Cascade Mountains visible in the distance.

he Pacific Northwest is an immense region spanning from the United States to western Canada. The region is generally associated with Alaska, Washington, Oregon, Idaho and Montana, as well as the western Canadian provinces of British Columbia and Alberta. In Alaska, Washington, Oregon and Idaho – which this article will focus on – several interesting economic trends are unfolding. Compared to the rest of the country, these states are seeing fairly stable employment levels, according to San Francisco-based economist Todd Johnson, who works for the western office of the Economic Analysis and Information branch of the U.S. Bureau of Labor Statistics (BLS).

For example, Alaska’s total privatesector employment was 223,500 in February 2009 and 224,900 for February 2010. In Washington, there were about 2.3 million private employees in February 2009 and 2.2 million in February of this year. “These four states seem a little bit ahead of the game,” says Johnson. “Their job losses are decreasing faster than the U.S. as a whole.” These Pacific Northwest states also have similar industry employment concentrations. Washington, Oregon and Idaho rank identically for the largest industries in terms of jobs, with trade, transportation and utilities at first place; education and health services at second; leisure and

● Idaho Capital: Boise Population: 1,545,801 Rank by Population: 39th Per Capita Income: $31,632 Source: U.S. Department of Commerce Bureau of Economic Analysis

hospitality at third; professional and business services at fourth; and manufacturing in the fifth spot. “Alaska follows the pattern for the first four industry groups, but construction beats out manufacturing,” Johnson says. “Alaska also is unique in that mining and logging employment is above manufacturing, while mining and logging is dead-last in the other three states.” In terms of location quotient – the measure of the concentration of an industry compared to another area – Alaska has the highest concentration of leisure and hospitality. This, essentially, means more people are employed in that industry than in the other three states.

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

Johnson says the consistency among the industries across the four states is somewhat surprising, yet not entirely implausible. “These are large states physically, particularly Alaska,” he says. “There has to be an infrastructure for moving goods across the states.” As another economic trend, unemployment rates are somewhat improving for Alaska, Washington, Oregon and Idaho. Preliminary, seasonally adjusted March unemployment rates for Alaska, Washington and Idaho were 8.6, 9.5 and 9.4 percent, respectively. However, Oregon’s preliminary unemployment rate stood quite a bit higher at 10.6 percent, mainly due to the loss of manufacturing and logging jobs. “With the exception of Oregon, the financial meltdown in the U.S. did not appear to have as devastating affect in those states,” Johnson says. “It appears these areas may be leading the nation in coming out of the recession.” The following sections provide a closer look at various elements of the economies of Alaska, Washington, Oregon and Idaho:

STATE OF ALASKA Alaska is North America’s largest state, and it’s growing more rapidly than the rest of the nation. From 2008 to 2009, the state’s population grew by 10.3 percent or 64,781 people to 692,314, according an April 2010 Alaska Economic Trends article by demographer Elisabeth Mercer and State demographer Gregory Williams. By comparison, the U.S. population overall increased 8.8 percent. These numbers are based on estimates released in January by the Alaska Department of Labor, which

publishes Alaska Economic Trends. Much of Alaska’s growth is concentrated in the Southcentral region. Since 2000, Anchorage has grown more than 11 percent and the Matanuska-Susitna Valley has jumped more than 42 percent. Despite the growth, Alaska is still the 47th most populous state – larger than North Dakota, Vermont, Wyoming and the District of Columbia. The economy in Alaska is driven by government, oil, tourism and fishing industries. Government – federal, State and local – represents about 22 percent of all jobs in the state, according to Alaska Department of Labor Economist Alyssa Shanks. In terms of dollars, a third of Alaska’s jobs are supported by oil industry-related money. But only about 6 percent of the jobs in the state are directly related to the oil industry. Alaska has suffered job losses during the recession, Shanks says, but it’s doing considerably well compared to Washington, Oregon, Idaho and elsewhere. Between December 2007 to December 2009, Alaska lost 3,400 jobs. During the same period, Washington lost 136,300 jobs; Oregon dropped 120,900; and Idaho lost 46,400. “When you compare us to other states, it’s really not that bad,” she says. Shanks added that Alaska’s job losses could have been much greater if the state’s economy were structured differently. The manufacturing industry had major job losses nationwide, but Alaska was virtually unaffected in this area because its economy is built on more stable sectors, such as oil and government. Like many places across the country, Alaska’s unemployment numbers are higher than they were last year. Part of the reason is there are simply more people entering Alaska’s work force. “We have people who move into the state because Alaska is doing so much better than where they came from; then they are counted as being unemployed (here),” Shanks says. Still, Alaska’s unemployment rate is lower than that of the nation – something that hasn’t happened in the last 20 years. The state’s jobless rate is usually higher than the nation’s, primarily because Alaska has a higher population of seasonal workers.

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In the past, when the national unemployment rate has exceeded 7 percent, a significant number of people have relocated to Alaska in search of greener pastures. However, Shanks says, in 2009, when the national average unemployment rate hit 9.3 – considerably above 7 percent – fewer people migrated into the state. “The net migration (the number of people moving in versus moving out) was 2,900,” she says. “Alaska’s unemployment rate was 8 percent. We think the reason that number was so low and the unemployment rate was so much higher is the housing crisis. People couldn’t sell their homes. “Even in the early ’90s when the national unemployment rate was 7.3, the net migration was 6,300,” Shanks added. “In 1983, when the national average unemployment rate was 8.3 percent, 23,934 people moved into the state.” With higher unemployment nationwide, many states are struggling to keep their unemployment insurance trust funds afloat. Shanks says Alaska’s government is well funded, thanks to its huge savings account from oil revenues.

“We have a healthy unemployment insurance fund,” she says. “Our State government is in a good position to act as a stabilizing force.” Workers in Alaska earn relatively higher wages than those in other parts of the country. Alaska’s 2009 per capita personal income was $42,603, according to the Bureau of Economic Analysis (BEA), an agency of the U.S. Department of Commerce. Alaska’s per capita or per person wage may be higher than in other places, Shanks says, but Alaskans pay higher costs for goods and services. Also, Alaska Permanent Fund Dividend payments are counted as part of the per capita income. Alaska’s higher wages and other economic factors point toward a higher quality of life. That may be why Alaska was ranked as the 11th happiest state in research recently published in Science magazine. The study by economists Andrew J. Oswald of the University of Warwick, England, and Stephen Wu of Hamilton College in Clinton, N.Y., compared the happiness ranking with studies that rated states on a variety of criteria ranging among availability of

Adak Island and Mt. Moffett from Lake Andrew.

public land to commuting time to local taxes. The happiness ratings were based on a survey of 1.3 million people across the country by the U.S. Centers for Disease Control and Prevention. It used data collected over four years that included a question asking people how satisfied they are with their lives. Their report in Science magazine found the happiest people tend to live in the states that do well in quality-of-life studies. Incidentally, Idaho, Oregon and Washington respectively ranked 14, 30 and 36 on the list of happiest states.

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STATE OF OREGON Located between Washington and California, Oregon had a 2009 population of 3.8 million. Many of its residents live in Portland, its largest city. The capital of Oregon is Salem, which is the state’s third-most populous city. Oregon’s unemployment rate – though higher than other Pacific Northwest states – has improved since last year. According to an April 13 press release by the Oregon Employment Department, the state’s seasonally adjusted unemployment rate was essentially unchanged at 10.6 percent in March compared with 10.5 percent in February. The

STATE OF WASHINGTON In 2009, Washington had a population of nearly 6.7 million and ranked 13th in the nation. Washington’s economy gained an estimated 1,600 jobs in March, while its unemployment rate edged up to 9.5 percent, according to a report from the Washington State Employment Security Department. Washington’s March job gains indicated the second time in three months that the state has posted positive job numbers. That’s following 13 consecutive months of job losses stretching from the end of 2008 to the end of 2009. “This recovery is going to take time, but the latest job gains are another positive indicator that we’re on the right track,” Employment Security Commissioner Karen Lee stated in an April 13 press release about the report. Industries that added jobs in March were professional and business services, up 1,500; retail trade, up 500; leisure and hospitality, up 500; government, up 400; wholesale trade, up 300; transportation, warehousing and utilities, up 300; information, up 300; and mining and logging, up 200. However, construction dropped an estimated 1,400 jobs in March. The financial activities sector was down by 700, while education and health services lost 300 jobs. The labor force grew by nearly 6,000 people in March. “It’s likely that many of them previously grew discouraged, stopped looking for work and are now jobhunting again,” says Dave Wallace, an economist at the Employment Security Department. While Washington was shedding thousands of jobs in late 2008 and early

2009, high-paying and minimum-wage jobs, and the median wage all increased, according to a report released May 3 by the Employment Security Department. The report indicates: ● The median hourly wage increased to $20.80 per hour the first quarter of 2009, up from $20.01 the third quarter of 2008. The increase was caused mostly by the large number of low-paying jobs that were lost during the recession – while the number of high-wage jobs ● Jobs paying more than $50 per hour increased 6 percent from the first half of 2008 to the first half of 2009. ● About one in five minimumwage jobs was cut as the state slid into recession in 2008, then the number grew sharply again in 2009. The minimum wage was $8.55 per hour in 2009, and remains the same in 2010.

Historic Heceta Light House on Oregon coast at dusk.

rate has been essentially unchanged for the most recent five months. Oregon’s unemployment rate was 11.2 percent in March 2009. In March, all but two of the state’s major industries performed at their normal levels. Manufacturing rose by 1,100 jobs on a seasonally adjusted basis, reaching a total of 162,400 jobs. Educational and health services cut 400 jobs during a month when it typically would add 600 due to normal seasonal changes. Government added 1,500 jobs in March when a gain of 900 is the normal seasonal pattern. And leisure and hospitality displayed slight signs of improvement in recent months. Even though Oregon’s seasonally adjusted unemployment rate has been holding relatively steady over the past five months, the civilian labor force has been expanding for the first three months of 2010. The Oregon Employment Department attributes this largely to an increase in labor force participation. In other words, a higher proportion of adults are joining the labor market. Oregon’s seasonally adjusted civilian labor force hit a recent low of 1.93 million in December 2009. By March 2010, it had risen to 1.96 million.

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

STATE OF IDAHO With a 2009 population of 1.5 million, Idaho ranks 39th in the nation for its population. Boise is its capital and most populated city. According to the Idaho Department of Labor, the state’s jobless rate recently dropped for the first time in more than 30 months. Job gains across much of the economy eased Idaho unemployment a 10th of a point to 9.4 percent in March – the first decline in the jobless rate in 32 months. New jobs exceeded new job seekers for the first time in three years, providing another sign that Idaho’s economy may be in recovery. “Six key economic indicators – labor force, new hires, total employment, unemployment, job gains and weekly benefit payouts – are all headed in the right direction,” stated Idaho Department of Labor Director Roger B. Madsen in an April 2 press release. “I’m very encouraged and optimistic.” The number of Idaho workers without jobs eased up from February’s record 71,600, slipping under 71,000 for the first decline in the number of people unemployed since March 2007. While Idaho’s labor force grew another 2,200 from February to March – the 10th monthly increase in a row – total employment at 686,700 rose 2,700. That’s the highest one-month jump in the number of people working in six years. The last time more people found work in a single month was February 2004 when 3,000 workers landed new jobs during the early days of Idaho’s record-setting economic expansion. Idaho’s highest unemployment rate was 9.6 percent from December 1982 through February 1983 during the depths of a double-dip recession. ❑ www.akbizmag.com • Alaska Business Monthly • July 2010

RIGHT MOVES ASRC ENERGY SERVICES

Greg Wohrle joined ASRC Energy Services as manager of project controls for the engineering . and construction division. Wohrle has more than 25 years of project management experience. Steve Teeter was hired as technical authority for ASRC Energy Services’ mechanical engineering g r o u p . Te e t e r h a s more than 34 years of Teeter design and engineering experience, including wor k related to the Gulf Coast and on the Teeter North Slope. He previously worked for NANA Worley/Parsons LLC.

COMPILED BY NANCY POUNDS FIRST NATIONAL BANK ALASKA

Josh Lowman joined First National Bank Alaska as manager of the Eastchester branch. Lowman has 10 years of banking experience, including four years as a branch manager for another financial institution in Alaska. Cameron Poindexter was appointed loan officer at the Homer branch. Poindexter joined the bank as a management associate after earning a bachelor’s degree in business administration from the University of Alaska Fairbanks. Meghan Clark also was appointed loan officer. She earned a bachelor’s degree in business administration from the American University of Rome, and then joined the bank as a management associate.

NORTHRIM BANK

Darci Ornellas rejoined Northrim Bank as assistant vice president, branch administration operations officer. She was a branch manager and worked in commercial cash management at Northrim from 1995 to 2007. She returned to Northrim in June 2009. Jim Miller was promoted to senior vice president. He also serves as senior credit officer. Miller has worked at Northrim for 13 years. Dawn Hoxie was promoted to branch manager at Northrim’s Eagle River branch. She is also an assistant vice president. Hoxie has worked at Northrim for 17 years.

. UKPEAGVIK IÑUPIAT CORP. .

Garbowicz

Monique Garbowicz was appointed director . of quality for Ukpeagvik Iñupiat Corp., the Alaska Native village corporation for Barrow. Garbowicz, a civil engineer, has held posts as principal consultant for UMIAQ, a UIC subsidiary, and as program manager for ASRC Energy Services.

KEYBANK

Curry

Darr yl Curr y was promoted to business banking relationship manager for KeyBank in Alaska. Curry joined KeyBank in 2006 as a branch manager at the Benson branch in Anchorage. He has more than 10 years of banking and management experience.

NAC CAN make air cargo easier!

Lowman

Poindexter

Clark Miller

Kyle Bellnap, Rick Henningsen and Travis Joel were chosen Anchorage business specialists for Wells Fargo. Bellnap works at the Russian Jack branch. He joined the bank in 2007 as a personal banker. He most recently worked as a sales development consultant for service managers and tellers statewide. Henningsen works at the 1500 W. Benson Blvd. branch. He has 15 years of financial services experience in Alaska. Joel works at the Northern Lights Boulevard and C Street branch and has more than 11 years of sales and customer service experience.

THE ALEUT CORP.

Mack

Thomas Mack was appointed interim chief executive officer for The Aleut Corp. Mack has served as president since 2006. He will serve as president and CEO until The Aleut Corp.’s search committee hires a new CEO.

BUSINESS INSURANCE ASSOCIATES INC.

Bellnap

Henningsen

Joel

Geoffrey Willis completed the Alaska insurance licensing exam and now works as a licensed property and casualty broker at Business Insurance Associates Inc. He serves as an administrative assistant at the company.

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Hoxie

WELLS FARGO

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

RIGHT MOVES UMIAQ

Arlene Thomas was appointed community relations specialist for Umiaq,. a subsidiary of Ukpeagvik Iñupiat C o r p. T h o m a s h a s more than 11 years of community and infrastructure planning experience. She has previously worked community planner for the Thomas North Slope. Russell Renk was chosen senior project manager. Renk has more than 20 years of experience in construction, permitting, wastewater treatment and environmental remediation.