June 2011 - Alaska Business Monthly by Alaska Business

June 2011

$3.95

CLOUD COMPUTING Peony Heaven Alaska makes mark on the world flower industry

Page 18

Prudhoe Bay Life at Deadhorse

Page 58

Alternative IT infrastructure Page 36

We brought Natural Gas to Anchorage 50 years ago.

Natural Gas fueled Anchorageâ&#x20AC;&#x2122;s economic growth.

All our energy goes into our customers. When we brought Natural Gas to Anchorage 50 years ago, it transformed the South Central economy. Natural Gas helped large corporations to locate in Anchorage and helped small businesses to grow and prosper. We are proud of our role in the growth of South Central Alaska and look forward to another 50 years of fueling Alaskaâ&#x20AC;&#x2122;s economic growth.

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

D E PA R T M E N T S From the Editor . . . . . . . . . . . . . . 7 Inside Alaska Business . . . . . . . . 8 Events Calendar . . . . . . . . . . . . 16 Right Moves . . . . . . . . . . . . . . . . 64 Market Squares . . . . . . . . . . . . . 76 Alaska Trends . . . . . . . . . . . . . . 111 Ad Index . . . . . . . . . . . . . . . . . . 114 R E G U L A R F E AT U R E S

Cloud computing is a new way to provide storage and other services safely off premises. Read about pros and cons of this technology on page 36 of this issue.

ARTICLES

VIEW FROM THE TOP

TECHNOLOGY Cloud Computing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Alaska Bone & Joint Institute. By Peg Stomierowski

A growing information technology alternative. By Tracy Barbour

ASSOCIATIONS

TECHNOLOGY Cloud49 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Tim Kavanaugh, M.D., Owner . . . . . . . . . . . . . . . . . . . 11

Alaska Air Carriers Association . . . . . . . . . . . . . . . . . 12 Working to Improve Alaska’s aviation industry. By Tracy Barbour

Alaska is in the cloud. By Heidi Bohi

ALASKA THIS MONTH

NATIVE BUSINESS Sustainable Rural Development . . . . . . . . . . . . . . . . . 42

Event marks 40 years of classical serenades in Southeast. By Nancy Pounds

ENVIRONMENT NEPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

HR MATTERS

A primer on the National Environmental Policy Act. By Vanessa Orr

Business email etiquette. By Lynne Curry

HEALTH & MEDICINE Occupational Medicine . . . . . . . . . . . . . . . . . . . . . . . . 54

Sitka Music Festival Salutes Founder . . . . . . . . . . . . 14

Please … Don’t Hit the Send Button. . . . . . . . . . . . . . 22

RIPE FOR REDEVELOPMENT

Loussac Manor Razed . . . . . . . . . . . . . . . . . . . . . . . . . 24

Alternative energy, natural resources offer options. By Julie Stricker

Protecting employees in the workplace. By Tracy Kalytiak

First mixed-income housing project in works. By Gail West

OIL & GAS Prudhoe Bay and the North Slope Oilfields . . . . . . . . 58

REGIONAL REVIEW

Taking a look at the ‘big oil’ community. By Jack E. Phelps

Where fishing is king. By Tracy Barbour

OIL & GAS New Players on the North Slope . . . . . . . . . . . . . . . . . 66

Alaska Peninsula . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

TOWNS IN TRANSITION

Fairbanks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Resolving energy issues. By Heidi Bohi

ARTICLES

AGRICULTURE Peony Farms Thrive . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Some companies willing to take the risk. By Vanessa Orr

UTILITIES ENSTAR 50th Anniversary. . . . . . . . . . . . . . . . . . . . . . 70 Company expects to keep gas flowing. By Louise Freeman

INTERNATIONAL TRADE Global Food Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Growing annual conference. By Peg Stomierowski

Alaska only world market for late-summer blooms. By Heidi Bohi

TRANSPORTATION SPECIAL SECTION

SMALL BUSINESS Understanding the Role of Succession Planning for Small Business Success . . . . . . . . . . . . 26

Logistics in Alaska. . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

Steps for better business. By Sara LaForest and Tony Kubica

Era Alaska is ‘Flying Wild Alaska’. . . . . . . . . . . . . . . . 84

FINANCE Commercial Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Documentary lands in Unalakleet. By Tracy Kalytiak

Business as usual in Alaska. By Gail West

1889 rowboat investment keeps growing. By Stephanie Jaeger You Can Get There From Here. . . . . . . . . . . . . . . . . . . 88 Span Alaska excels in shipping freight to Alaska. By Vanessa Orr Transportation & Shippers Directory . . . . . . . . . . . . . 90

INTERNATIONAL TRADE Alaska 2010 Exports Valued at $4.2 billion . . . . . . . . 34 Seafood and minerals top commodities. By Greg Wolf

ABOUT THE COVER

Moving mission-critical freight. By Jack E. Phelps

Foss Maritime Company . . . . . . . . . . . . . . . . . . . . . . . 86

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

THE

DITOR

One Man’s Vision Volume 27, Number 6 Published by Alaska Business Publishing Co. Anchorage, Alaska Vern C. McCorkle, Publisher 1991~2009

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

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

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

Jim Martin Charles Bell Anne Campbell Bill Morris Ann Doss Mary Schreckenghost

501 W. Northern Lights Boulevard, Suite 100 Anchorage, Alaska 99503 (907) 276-4373 Outside Anchorage: 1-800-770-4373 Fax: (907) 279-2900 www.akbizmag.com Editorial e-mail: editor@akbizmag.com Advertising e-mail: materials@akbizmag.com Pacific Northwest Advertising Sales 1-800-770-4373 ALASKA BUSINESS PUBLISHING CO., INC. ALASKA BUSINESS MONTHLY (ISSN 8756-4092) is published monthly by Alaska Business Publishing Co., Inc., P.O. Box 241288, Anchorage, Alaska 99524; Telephone: (907) 276-4373; Fax: (907) 279-2900, ©2011, Alaska Business Publishing Co. All rights reserved. Subscription Rates: $39.95 a year. Single issues $3.95 each; $4.95 for October. Back issues $5 each. Send subscription orders and address changes to the Circulation Department, Alaska Business Monthly, P.O. Box 241288, Anchorage, AK 99524. Please supply both old and new addresses and allow six weeks for change. Manuscripts: Send query letter or manuscripts to the Editor. Alaska Business Monthly is not responsible for unsolicited materials. Photocopies: Where necessary, permission is granted by the copyright owner for libraries and others registered with Copyright Clearance Center to photocopy any article herein for $1.35 per copy. Send payments to CCC, 27 Congress Street, Salem, MA 01970. Copying done for other than personal or internal reference use without the expressed permission of Alaska Business Monthly is prohibited. Address requests for specific permission to the Editor, Alaska Business Monthly. Online: Alaska Business Monthly is available online from Data Courier and online from Thomson Gale. Microfilm: Alaska Business Monthly is available on microfilm from University Microfilms International, 300 North Zeeb Rd., Ann Arbor, MI 48106.

Hispanic newspaper in the works

osé Peguero has a vision: to create a monthly Hispanic newspaper for the Anchorage community focusing on education, health, employment and housing among other issues relevant to the growing community. Peguero, who has attended or graduated from vo-tech, college and university programs in Alaska, New Mexico, Puerto Rico and the Dominican RepubJosé Peguero lic, has a diverse background, to include working at a laundry mat, on the Alaska Marine Highway and as a directional driller; dredging for gold, in construction technology, as a legislative aide; buying real estate; and his current position as school district custodian.

A LONG WAY FROM HOME He was born and raised in the Dominican Republic, which is on an island that includes Haiti. He left when he was 16 and arrived in New York City. By his mid-20s he was in Alaska, where he has spent most of his adulthood, sans a trip down to New Mexico where he attended college and worked in the oilfields in what he calls “cactus drilling,” and a stint in Puerto Rico where he had 18 apartments. One of his fondest memories is as a legislative aide for Betty Cato, who was from Valdez and led the House Transportation Committee. “She taught me a lot,” he said. “She said old age and trickery overcome youth and skill.” But there are no tricks in his bag, other than to make his dream happen. “I’ve always been an avid reader,” he says. “I like to write also.” He’s seen several attempts at Spanish newspapers come and go, but he is determined, his, “Hispanic Alaska,” is here to stay. As editor and publisher, he hopes to utilize talent from high school and college journalism students, as well as reporters he

Ethnic groups at the Anchorage School District

Courtesy of ASD

knows from out of state. He plans to print the publication, which will have a look much like the “Anchorage Press,” through a nonprofit university press. With nearly 40,000 Hispanics living in Anchorage, about 30,000 of those from Mexico, 5,000-6,000 from the Dominican Republic and the rest from Puerto Rico or other Spanish-speaking countries, he believes he has an audience, and a growing one at that. “The Korean community has two newspapers and there are about 5,000 Korean people in Anchorage,” he said. “I think now is the time to have a viable Spanish publication. The Hispanic population doubles every 10 years in Anchorage.” By 2020, he expects 60,000 to call Alaska home, mainly due to immigrants migrating out of California to Alaska for jobs and better opportunities.

REACHING OUT He will distribute the bilingual publication through about 20 Hispanic churches, wordof-mouth, Mexican restaurants and those listed on a Hispanic directory. He plans to charge $2 an issue, with the first issue coming out this month. He expects start-up costs will be about $2,000, and he has some background in journalism. A lot is learn-as-he-goes, but he’s not afraid. “I’ve had the idea for three years,” he said. “Now is the time to make it happen. I think the Hispanic community needs a voice. No?” I wish him luck. Newspapers face hard times these days. But with his determination, he just might make it. — Debbie Cutler Managing Editor

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

INSIDE ALASKA BUSINESS Doyon Outlines Nenana Seismic Studies

oyon Ltd. plans to pursue oil and gas seismic studies near Nenana in winter 2012. The Fairbanks-based Alaska Native corporation expected to file permits with State agencies this spring. Doyon will conduct the 2-D seismic testing on State lands where it holds an oil and gas exploration license. Doyon, Rampart Energy Co., Arctic Slope Regional Corp., Usibelli Energy LLC and Cedar Creek Oil & Gas Co. hold the rights to the State exploration license. Doyon owns the largest percentage and operates daily management of the venture. Only Doyon has committed to participate in the proposed 2012 seismic studies. In 2005, the companies gathered more than 200 miles of 2-D seismic data, drilled the 11,000-foot Nunivak No. 1 exploration well in 2009 and funded other studies. Results from the well drilled in 2009 revealed an active petroleum system in the Nenana basin, although the Nunivak No. 1 well did not prove economically feasible.

contract runs for one year with four options not to exceed $100 million. Work will include new construction, demolition, repair, renovation of buildings, systems and infrastructure, and other services.

MSI Communications Wins National Award

SI Communications of Anchorage won a Silver Pollie Award at the 20th Annual Pollie Awards Ceremony in Washington, D.C. The award honored a television commercial MSI Communications produced during its Alaskans Standing Together campaign last fall, an effort that supported Alaska Republican Sen. Lisa Murkowski’s write-in campaign. The television ad entitled “They’re Back,” focused on political action groups from outside Alaska that were supporting Murkowski’s chief opponent Joe Miller. The Annual Pollie Awards Ceremony and Conference is sponsored by the American Association of Political Consultants and recognizes excellence in political communications.

Bristol Design Build Lands Federal Contract

ristol Design Build Services LLC was awarded a U.S. Navy multipleaward construction contract for work at Marine Corps facilities in North Carolina. Bristol Design Build, a subsidiary of Bristol Bay Native Corp., will handle general construction for the project. The company was one of six small businesses to be awarded the contract. The

Independent Lift Truck Honored by Cat

ndependent Lift Truck of Alaska was chosen as a Cat Lift Trucks 2011 Quest for Excellence Dealer of the Year. The Anchorage company was honored for outstanding sales and service and knowledge of Cat Lift Trucks. “To be recognized as a dealer of the year during a down economy is a great

COMPILED BY NANCY POUNDS honor,” said Wayne Dick, president of Independent Lift Truck of Alaska. “We are proud to be a part of the Cat lift truck dealer network and are looking forward to much success in 2011.”

AEA Awards Hydro Project Engineering Services Contract

he Alaska Energy Authority awarded a two- to five-year contract to MWH for hydropower engineering services for possible projects along the Alaska Railbelt electrical grid. The proposed hydropower projects would be a key component to help achieve the State’s goal of producing 50 percent of electrical power from renewable sources by 2025. Projects include an updated project concept for the Susitna River in the Interior. Last year, AEA focused on two large hydropower projects for the Railbelt, including the Watana site on the Susitna River and Chakachamna, across Cook Inlet from Anchorage. Last November, AEA announced its decision that the Watana site should be the primary hydroelectric project for the Railbelt, and Chakachamna should be considered as an alternative. The Susitna project could have an installed capacity of up to 600 megawatts, enough to provide nearly half of the current electricity demands of Railbelt communities, including Fairbanks, Palmer-Wasilla, Anchorage and Kenai. The State Legislature appropriated $10 million for initial project efforts. Another $5 million may be allocated in fiscal year 2011. MWH is an international company providing technical engineering and

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

INSIDE ALASKA BUSINESS construction services. The firm has about 40 Anchorage-based employees handling water, wastewater, and oil and gas projects, and has provided engineering services for the Susitna and Bradley Lake hydropower projects.

St. Paul Project Garners Award

ssociated General Contractors of America chose the seal observation facilities on St. Paul Island as one of the most significant construction projects of 2010. The project’s contractor, WPC, was one of 20 firms to receive the association’s Aon Build America Award. WPC was honored for best renovation of a federal construction project. The company repaired a series of towers and walkways NOAA uses to observe and count the island’s seal population. The project required replacing seven towers and 1,000 feet of walkways in the small window of time the seals migrate from the island. Despite average daily temperatures below zero, strong winds and frequent whiteout conditions, WPC employees completed the project with no accidents or lost-time injuries. The Aon Build America Awards recognize the nation’s most significant construction projects.

Firms Earn Governor’s Safety Awards

CL Construction Services Inc. Alaska Operations received the 2011 Governor’s Safety Award of Excellence. The Alaska Safety Advisory Council honors groups for safety

excellence and health systems that protect employees in the workplace and promote corporate citizenship. PCL’s Alaska Operations recently completed a four-year seismic and security upgrade project at Ted Stevens Anchorage International Airport. Current projects include renovation of the Alaska Railroad Corp.’s Historic Anchorage Depot, the Warrior in Transition Complex at Fort Wainwright, the Seward Community Library and Museum and the State Library Archive Museum in Juneau. Hawk Consultants LLC received the 2011 Governor’s Safety Award of Excellence, presented by the Alaska Safety Advisory Council. The award honors the firm’s achievement of 1 million work hours without an injury or lost-time accident. Hawk Consultant officials report no lost-time accidents since beginning work in the Alaska oil industry in 1985.

Koniag Sells East Coast Firms

oniag Inc. has sold Washington Management Group and its subsidiary FedSources Inc. to Deltek Inc., a software and information technology company. Koniag officials reported the companies were financially strong, but Koniag decided to sell when Deltek made an offer. Koniag acquired the Washington, D.C.based WMG, a consulting service specializing in federal contracts, in 2000. FedSources, based in McLean, Va., provides government market data useful to federal procurement companies. WMG and FedSources employ about 140 people.

Phillips 26 Glacier Cruise Adds New Engines

hillips Cruises & Tours, operator of the 26 Glacier Cruise out of Whittier, has replaced engines on the Klondike Express catamaran with more efficient engines. The 137-foot highspeed catamaran was at the Seward Shipyard this winter for the upgrade. The new engines also will provide decreased emissions. Phillips Cruises is also considering biodiesel options for the future. “We pride ourselves in being environmental stewards of Prince William Sound,” said Bob Neumann, owner of Phillips Cruises. The five-hour cruise runs May 1 through Sept. 30.

Fred Meyer Donation Benefits Providence Cancer Center

red Meyer donated more than $19,000 to the Providence Alaska Foundation in Anchorage to support cancer research and clinical trials at Providence Cancer Center. Donations from employees and customers – deposited in coin boxes at Fred Meyer check-out stands – tallied $19,850.29 between Aug. 14 and Nov. 5. Employees chose to combine their quarterly donations to the Fred Meyer Fund – Fred Meyer’s corporate foundation – with the donation for Providence. In a three-month period, Fred Meyer customers in Alaska, Idaho, Oregon and Washington donated $246,815 in change to local cancer awareness and research organizations.

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

INSIDE ALASKA BUSINESS Credit d Union 1 Collects National Honors

redit Union 1 received a Diamond Award from the Credit Union National Association Marketing and Business Development Council. The award, in the public relations category, honored Credit Union 1’s 2010 fundraising event called Pour, which raised $30,000 and benefited Bean’s Café and The Children’s Lunchbox. The credit union also garnered a Merit Award in the retail-merchandising category for its Mountain View branch.

Northern Air Cargo Earns Safety Designation

orthern Air Cargo earned a Medallion Foundation Shield Safety Award. The company earned the award for establishing and implementing higher safety standards than those required by the Federal Air Regulations. An airline must pass five separate levels of safety before it is eligible for further safety and procedure audits. After passing these tests, and extending a safe flying record, the airline may be awarded a Medallion Shield award. “The award of Medallion Shield to our company is the culmination of years of hard work by our team, but ultimately it is validation of NAC’s ongoing commitment to safety and worldclass operational integrity,” said Dave Karp, president and chief executive of Northern Air Cargo. The nonprofit Medallion Foundation promotes aviation safety through training and support to the aviation industry.

Anchorage Airport Lauded for Cargo Service

ed Stevens Anchorage International Airport scored high ratings for cargo service airports by Air Cargo World magazine. Airline customers rated airports based on performance, value, facilities and regulatory operations. The magazine published its annual Air Cargo Excellence Survey, which showed Anchorage airport as one of the top three highest-scored airports for airports that process 1 million or more tons of cargo annually in North America. Airport officials say the facility is consistently rated in the top six of the world’s largest cargo airports, processing more than 4.4 million pounds of cargo in 2009. “This is a tremendous accomplishment and huge team effort considering the volume of cargo that passes through our airport,” said Steve Hatter, deputy commissioner of aviation for the Alaska Department of Transportation and Public Facilities. “The airport’s ground handling, fuel, and maintenance companies, regulatory agencies and airport employees working together earned this recognition,”

Disney Cruises Plan First Alaska Sailings

isney Cruise Line ventures to Alaska for the first time this year, and the company plans more voyages for 2012. Next May the Disney Wonder will sail 14 seven-night cruises from the Port of Seattle to Skagway,

Juneau, Ketchikan and Victoria, British Columbia. Disney Cruise Line works with other companies to offer family friendly port adventures including gold panning, and wildlife and glacier viewing. State officials estimate the Disney ships will bring about 38,400 passengers, providing nearly $40 million in direct and indirect spending for Alaska businesses.

Federal Officials Honor Point Lay Residents

he U.S. Fish and Wildlife Service Alaska Region presented an Outstanding Partner Award to the Alaska Native Village of Point Lay. The work honors work by village residents last September to protect walruses. Last fall thousands of migrating Pacific walruses hauled out on the Chukchi Sea barrier beach within sight of Point Lay. Fish and Wildlife officials called it “an event unprecedented in living human memory,” which attracted worldwide media attraction. Point Lay residents took the initiative to protect the resting walruses from disturbance that could have resulted in stampedes that could have injured or killed young and weakened animals. They issued a news release and walrus photographs to inquiring news media organizations, but also requested that media crews not travel to Point Lay. When media did arrive, the leaders participated in interviews and showed North Slope hospitality, while advising visitors on how to get the stories they needed without disturbing the animals. ❑

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

VIEW

FROM THE

TOP

COMPILED BY PEG STOMIEROWSKI

Tim Kavanaugh, M.D. Owner

Alaska Bone and Joint Institute

r. Tim Kavanaugh of Alaska Bone and Joint Institute has been practicing orthopedic surgery since 2002, and has served as past president of the Anchorage Orthopedic Society. Kavanaugh came to Alaska after post-residency fellowship training in New Mexico, believing Alaska needed someone capable of operating a high-volume joint replacement/revision practice. Up to 85 percent of surgeries in his practice involve total joint replacement, he says, while about 15 percent involve revision, or repeat procedures. “It’s not unrealistic to expect to get 20 years of use from an artificial joint,” he says. Kavanaugh holds board certification in knee and hip care, his specialties. Outside of work, he enjoys outdoor activities, cooking and rare books.

JOINT PRACTICE: Our focus is on care of the body’s major joints when they are injured or worn from overuse. Joint degeneration often accompanies aging. As knees carry more weight and hips tend to increase in girth, pain and stiffness may result, causing difficulty in walking, sitting, standing, dancing and running. COMING TOGETHER: In 2009, our practice expanded when Dr. Brian Carino, a shoulder and elbow surgical specialist who trained (fellowship level as well) in Hawaii and New York, moved to Alaska with his wife and two children to join our practice. While our patient load has expanded, this collaboration has also enabled us to help a wider range of people. TRENDS OF AGING: We offer surgical services in joint replacement, less invasive arthroscopy procedures, and injections to relieve joint pain. Alaskans tend to be very active, and many find their joints wearing out earlier than expected. Many of our patients are aging baby boomers, around 57 or 58 years old. With the aging population, and a third or more of people obese, osteoarthritis is expected to become even more prevalent here in Alaska. QUALITY OF LIFE: Artificial joints are improving the quality of life for people with arthritis, so more people are wanting help. These surgeries are typically the last resort for people suffering degenerative joint disease in which cartilage deteriorates, causing joint injury. People feel pain and stiffness and notice loss of movement as bone rubs bone. Affecting close to 21 million Americans, osteoarthritis of the knee and hips is the most common cause of arthritis-related disability in the country, with shoulder discomfort a close third. TESTIMONIALS: Besides our normal caseload, we often receive calls from friends and family members of former patients who are themselves experiencing pain, stiffness, and limited mobility. After they come in to see a physician or physician assistant, a course of treatment is recommended, involving either surgery or such alternative measures as medications or therapy. ©2011 Chris Arend

PREVENTATIVE PREV PR P REV EVEN ENTA EN TATI TA TIVE TI VE C CARE: ARE: AR E: O Onn th thee pr prev prevention even ev entitition en on ffront, ront ro nt,, ke nt keep keeping epin ep ingg on in one’ one’s e’ss we e’ weig weight ight ig ht ddown ownn ow eases pressure on joints, especially in the lower extremities. It also is important not to neglect pain and injury around major joints.

Drs. Tim Kavanaugh and Brian Carino of Alaska Bone and Joint Institute.

BIGGER PICTURE: While I do 95 percent of my surgeries at Alaska Regional, Dr. Carino works there as well as at Providence and the Alaska Surgery Center. Our challenge in this field will be to take care of the skyrocketing numbers of baby boomers and others who need this kind of care. As health reforms take root, something will have to be done to pay for such care through both public and private insurance as demand for the procedures rises. ❑

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

A S S O C I AT I O N S

BY TRACY BARBOUR

Alaska Air Carriers Association Working to improve Alaska’s aviation industry

he Alaska Air Carriers Association (AACA) operates under a distinctive objective: “to foster and support a stable commercial aviation industry founded upon the principles of safety, professionalism and longevity.” AACA was established March 10, 1966, as the Alaska Air Taxi Operators to help operators in Southwest Alaska have an organized aviation “voice” in aviation regarding State legislation and workers’ compensation insurance premiums for high-risk businesses. At the time of its inception, the group focused on several important pieces of State legislation, including the development of the Alaska Transportation Commission. Over the years, AACA has experienced strong, steady growth. It has expanded not only in membership, but also in prestige, funding and the ability to command the attention and respect of the industry, governmental agencies and the public, according to Executive Director Joy Journeay. In 1974, AACA began an annual convention in addition to its annual meetings. “This venue continues to provide an opportunity for the industry to gather, speak to common problems, meet with government agencies, and set new goals,” Journeay said. The nonprofit AACA also has added training programs to enhance the safety of aviation operations and business management, as well as a trade show to facilitate further business opportunities. This past February, AACA held its 45th Annual Convention and Trade Show in Anchorage at the Hotel Captain Cook. The successful event featured educational sessions, training, networking, new products and opportunities for attendees to gain a broader perspective about the aviation industry. Today, AACA is continuing to advocate on behalf of aviation companies with State and federal legislative bodies and regulatory government agencies.

It also is developing additional training programs and support to serve its membership. For example, AACA offers an active health insurance package. Members can choose from multiple types of employee health benefit packages, including bridge insurance, which pays 100 percent of high deductibles and co-pays for other health care. Journeay says AACA plans to increase its membership benefits as it continues to move forward. She said, “As we move into the future, AACA shall continue to seek further avenues of service and support to our members to insure the vigorous health and financial viability of Alaska’s aviation industry.”

In fulfilling that role, the organization supplies resources for insurance, security, personnel issues, safety, airspace and weather forecasting. It also provides a platform for members to express their views, such as the Alliance for Safety Forum, its annual convention and trade show, and public speaking events. The association strives to be a facilitator of accurate and reliable aviation-related information and serves as a vital link between government and industry leaders. Its office – located at Anchorage’s Merrill Field Airport – consistently advocates for the passage of prudent federal and State regulations that affect its membership.

MEMBERSHIP BASE AACA’s 160 members carry more than 98 percent of the passengers and cargo in Alaska. These members help support an industry that has a major economic impact on the state. The Alaska aviation industry is the state’s fifth-largest employer; it generates 10 percent of all jobs in Alaska. AACA is comprised of an assortment of active and associate members. Active members fall into four main categories: commuter/air operator/scheduled operators; scheduled air carrier operations; guide and lodge owners; and certified repair stations. The organization’s roster of active members ranges from Alaska Airlines, PenAir and Northern Air Cargo to Wright Air Service and Wings Airways. Associate members of AACA are entities providing services, equipment or instrumentation to other members. This group also includes students who are pursuing careers in aviation. One of AACA’s newest associate members is Staples Advantage, which partners with the organization for office products. As part of its mission, AACA works to provide safety and educational training, as well as support for its members.

INDUSTRY ISSUES AACA is focused on a variety of regulatory and legislative issues that impact Alaska’s aviation industry. Throughout the year, its staff members work diligently to provide data to help legislators make informed decisions and to inform members of proposed and potential impacts from regulations or government actions. “The AACA board and staff vigorously advocate for air carriers with the State of Alaska, federal government agencies and our federal delegates,” Journeay said. “This last year saw the introduction of an increased number of proposed regulations, reinterpretations, clarifications and other government actions that will have farreaching impacts upon aviation here in Alaska.” For instance, millions of compressed gas cylinders have been transported for decades in aircraft throughout Alaska with no incidents or accidents, according to Journeay. But a regulation came down from the Federal Aviation Administration requiring bulky, fireresistant overpacks for compressed oxygen cylinders.

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

Photo by Azimuth Adventure Photography/www.azimuthadventure.com

For years, Era Helicopters LLC has been the leader in Alaskan helicopter operations. The search for minerals has taken Era into the most rugged and remote areas of Alaska.

H E L IC OP T E R S L L C a SEACOR company

Safe,

Professional, Experienced

& Ready to Fly

Joy Journeay, executive director, Alaska Air Carriers Association.

“The overpacks make the shipment almost nine times bigger and two times heavier, were not commercially available when the regulation went into effect, and truly do not offer any increased level of safety,” she said. Journeay emphasizes that Alaska residents are widely dispersed across 586,000 square miles and air travel is the only means of access for emergencies, medical personnel and medical supplies for almost 170 communities in Alaska. She adds: “The health and safety considerations of these communities have been drastically impacted without such an exemption, and we continue to fight a battle to allow Alaska communities to not be required to economically pay nearly five times more for the transportation of a necessary product. Freight loads per capita in Alaska are 39 times higher than the highest freight load for a rural community in the Lower 48.” AACA is also speaking out against the federal government’s growing use of resources outside Alaska. “The federal government has used aviation resources from the Lower 48 or foreign countries in order to (supposedly) save

money,” Journeay said. “According to our carriers, they are escalating this practice and taking contracts for work in Alaska away from Alaska’s aviators. The economic impacts on aviation are being felt especially deeply in the current economy. “It is obvious the aviation industry must avoid hardships resulting from government action. The managerial and economic impacts have the potential to ruin the financial viability of both large and small carriers in Alaska.” In broader areas, AACA continues to seek funding for the Medallion Foundation, a nonprofit organization that works to reduce accidents in aviation. Other areas of involvement for AACA this year include issues related to weather, subsidies and protections. The association is asking for agency partnership to get adequate weather information into the cockpit for pilot decision-making. AACA also is supporting the necessity of Essential Air Services subsidies for Alaska’s communities and requesting protection from proposed military operations area expansion without adequate user and ❑ State input.

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

JUNE

3-24 A L A S K A T H I S M O N T H

BY NANCY POUNDS

Sitka Music Festival Salutes Founder Photos by ©Clark James Mishler for Sitka Summer Music Festival

Event marks 40 years of classical serenades in Southeast

Midnight Sun light over the ocean and mountains. “This is a huge year for the festival,” said Roberta Rinehart, festival executive director. “We have so much celebrating to do this year that we are adding many concerts and special events to our usual roster. This year there will be something happening every day.” New events include the Music in the Morning Series, which begins at 9 a.m. each Friday at downtown Sitka’s Highliner Coffee Co. A noontime Bach’s Lunch concert is set for every Monday at Harrigan Hall. These events and several others at less-traditional locales are offered for free or with a donation. Festival organizers scheduled 10 evePerformers serenade audience members framed by the Sitka Summer Music ning concerts, up from eight last year, Festival’s signature backdrop at Harrigan Hall. Rinehart said. All concerts will include a pre-concert lecture. longtime classical music event builds to a crescendo One special event, the tribute to Rosenthal, called Music this month to honor its outgoing founder and artistic and Martinis, is set for June 19 at The Loft and features an director with a finale. The 22-day Sitka Summer accompaniment of Rosenthal’s signature martini variety and Music Festival also welcomes its next artistic director, in- musical performances. ternationally acclaimed cellist Zuill Bailey. The Sitka Summer Music Festival commemorates its HUMBLE BEGINNINGS 40th anniversary with added events and a tribute to founder Violinist Rosenthal founded the Sitka Summer Music Paul Rosenthal, who is retiring. The annual classical music Festival in 1972. He favored Sitka as an idyllic location for extravaganza features world-class musicians framed against Sitka’s mountainsmeet-ocean setting. This year’s event runs June 3 through June 24 with performances at various venues throughout the Southeast town. Strains of Beethoven, Brahms and Mozart will reverberate from various Sitka venues, from concert hall to coffee shop. One concert is held aboard a tour boat, which settles in a quiet bay for the performance. The Allen Marine Boat Party and Concert on June 12 includes wildlife viewing, wine and hors d’oeuvres. Other performances are set for Sitka National Historic Park Visitors Center Theatre and Larkspur Café. Evening concerts staged at Harrigan Centennial Zuill Bailey, left, is the incoming artistic director for the Sitka Summer Music Hall spotlight the performers and walls Festival. This year’s event honors founder, Paul Rosenthal, right, who is retiring. of massive windows to reveal June’s

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

informal concerts with fellow accomplished musicians. Some Alaskans scrambled to collect money to buy one-way airline tickets for the performers that first year. Concert attendance tallied enough money to buy return-trip tickets. The musicians have performed for free since the first concert. In 1980, festival organizers began offering other concerts, Autumn Classics and Winter Classics, held in Anchorage. These musicians also tour statewide with support from the National Endowment for the Arts. Rinehart says the festivalâ&#x20AC;&#x2122;s impact resonates beyond Sitka. â&#x20AC;&#x153;The festival is important to Sitka, Anchorage and the rest of the state,â&#x20AC;? Rinehart said. â&#x20AC;&#x153;Since our first series in 1972, more than 100 artists have performed for the festival in Sitka, Anchorage Juneau and throughout Alaska â&#x20AC;&#x201C; from Dillingham to Dutch Harbor and Pelican to King Salmon. Being able to see this caliber of artist in Alaska is unusual, especially in the smaller communities.â&#x20AC;? Last year summer festival organizers added Music Movie Night, which will be held this year at Sitka National Historic Park, and Classics at Larkspur Cafe.

NEXT-GENERATION FESTIVAL Rinehart attributes the festivalâ&#x20AC;&#x2122;s longevity to supportive patrons, who are attracted each year to enticing musical offerings coordinated by Rosenthal, whose 40-year leadership role wove together consistency and creativity. â&#x20AC;&#x153;Heâ&#x20AC;&#x2122;s provided super strong artistic direction,â&#x20AC;? she said. Rosenthal chose incoming artistic director Bailey, who has served as artistic director designate for nearly two years, Rinehart said, adding that the two men are good friends and have charismatic personalities. Baileyâ&#x20AC;&#x2122;s focus is helping schoolchildren appreciate classical music. Bailey also serves as artistic director of El Paso Pro Musica in Texas, and cello professor at the University of Texas in El Paso. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re thrilled to have him,â&#x20AC;? Rinehart said. For more information, visit www. â?&#x2018; sitkamusicfestival.org.

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

J U N E E V E NT S C A LE N D A R • • • • • • •

6/1-6/30

N C H O R A G E • • • • • • •

Anchorage Market & Festival

Local farmers and artisans sell their goods on Saturdays and Sundays in this festival atmosphere. Enjoy free, lively entertainment and great food while browsing through more than 300 booths at Third Avenue and E Street throughout the summer on Saturday and Sunday from 10 a.m. to 6 p.m. Contact: 9070-272-5634.

6/3-6/12

Three Barons Renaissance Fair

Come join the Three Barons in revelry and merriment as they meet once more to shape the fate of nations. Held at Tozier Memorial Track. Contact: 907-868-8012.

6/4

Barenaked Ladies in Concert

Chilkoot Charlie’s brings in the Grammy-nominated Canadian alternative rock band Barenaked Ladies. Come see them perform in concert under the windmill in Spenard. This is a one night-only performance held in the Chilkoot Charlie’s parking lot. Show time is 6 p.m. Tickets are available online at www.koots.com or by email from promo@koots.com.

6/4

Festival of Flowers

Come and see the Festival of Flowers in Downtown Anchorage, Town Square. Enjoy educational seminars, flower sales and auction, live music, plant a marigold, art fair, face painting, stilt walkers and much, much more! Celebrate our City of Flowers in Downtown Anchorage, No Charge. Noon to 6 p.m. Town Square. Contact: 907-279-5650.

6/11

Alaska Run for Women

Get fit for a cause! Join more than 6,000 serious runners and casual walkers, unite in a spirit that inspires women, both young and old, to do something healthy for themselves while raising funds for breast cancer research and awareness. Information: www.akrfw. org. Contact: 907-566-3151.

6/11

Potter Marsh Discovery Day

Discover Potter Marsh and some of Alaska’s wildlife at Anchorage’s most popular wildlife-viewing area. This family friendly event brings you nature-related games and prizes, invertebrate sampling, birding stations along the boardwalk, captive birds from Bird TLC, educational animals from the Alaska Zoo, kid-friendly archery range, release of a rehabilitated wild bird and more. Potter Marsh Board Walk, 11 a.m. to 4 p.m. Visit: wildlife.alaska.gov.

• • • • • • •

N C H O R A G E • • • • • • •

6/24

AWAIC’s Golf Classic

Golf tournament to benefit AWAIC Women’s Shelter at the Anchorage Golf Course, 1 p.m. shotgun start. Contact Nicki Shinners at AWAIC: 907-743-5704.

• • • • • • •

A G L E

6/5

I V E R •••••••

Tour de Cure

Individuals and teams help raise funds for 66,000 people in Alaska with diabetes on this fully supported bike ride that includes rest stops, and mechanical assistance. Three cycling distances starting from Eagle River, including 25K, 50K and a 100K ride to Kincaid Park in Anchorage and back. Contact: 907-272-1424.

• • • • • • •

A I R B A N K S • • • • • • •

6/16-6/18

Alaska State HOG Rally

The 2011 Alaska State HOG Rally will take place in Fairbanks. These rallies are great way to experience areas of the United States on your bike. With many activities planned, it is sure to be a fantastic time. Visit www.akstatehogrally.com. Contact: call 907-776-5223.

• • • • • • •

I R D W O O D • • • • • • •

6/15

Women’s Midweek Ski Clinic

Started more than 25 years ago and still going strong. The clinic includes lunch and lots of fun and learning from 10 a.m. to 5 p.m. Visit www.girdwoodchamber.com. Contact: 907-754-2280.

• • • • • • •

6/11

U N E A U • • • • • • •

Family Day at the Lakes

The Juneau-Gastineau Rotary Club hosts this annual day of fishing and games at Twin Lakes on the Glacier Highway from 10 a.m. to 3 p.m. Fishing poles and bait are provided free. Staff from State and borough agencies will be on hand to provide instruction and guidance to young anglers. Refreshments available.

6/10-6/11

Juneau Relay for Life

Mayor’s Marathon

The American Cancer Society Relay for Life gives everyone a chance to remember and celebrate the lives of people who have been touched by cancer. Teams camp out at a local facility and take turns walking or running around a track. Each team should have a member on the track at all times because cancer never sleeps. Held at Riverbend School in Diamond Park. For more information or to register a team, contact Julie Lawrenson at 907-523-9783 or julesveg@yahoo.com; or Beth Rhoden at bethrhoden62@hotmail. com or 907-273-2066.

The yearly Mayor’s Marathon and Half Marathon attract runners from all over the world. Organized by UAA and Anchorage Parks & Recreation, the five running races are held simultaneously and include a marathon (26.2 miles), half marathon (13.1 miles), a fivemiler recreational event (5.61 miles), a marathon relay (four 6.5 mile legs) and the youth cup (1.6 miles). Visit: www.mayorsmarathon. com or call 907-343-4562.

The food and music festival celebrates the culinary arts in Alaska, offering great food, as well as live music, fun contests and tasty samples. This family event begins at 11 a.m. Admission is $10, free for youth under 18. Visit www.mycreativation.com. Contact: 907-321-3094.

6/11-6/12

Garden Fair and Art Show

Explore the Alaska Botanical Gardens and enjoy music, food, plant and crafts vendors amid the blooms at the 14th annual event at 4601 Campbell Airstrip Road, Saturday, 11 a.m. to 6 p.m. and Sunday, 11 a.m. to 5 p.m. Tickets $7 at the gate or $5 in advance. Kids age 2 and under are free. Contact: 907-770-3692.

6/18

Downtown Summer Solstice Festival

Come celebrate the longest weekend of the year in Downtown Anchorage, noon to midnight, at Fourth Avenue and Town Square. Live music, children’s activities, cultural performances and much more. Visit: www.anchoragedowntown.org or call 907-279-5650.

6/11-6/12

6/25-6/26

Taste of Juneau

Gold Rush Days

Juneau celebrates its heritage with two fun-filled days of events at Savikko Park. Featuring logging and mining skills, competitions, food and fun activities for the whole family. Contact: 907-780-5131.

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

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6/7-6/10

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Sitka Fine Arts Camp

Join the fun and education at Sheldon Jackson Campus. Since June 1972, the camp has attracted students ages 12-18 from Alaska and beyond to study the fine arts of theater, dance, music, visual arts, writing and Alaska Native arts. First-class professional artists and skilled teachers are recruited throughout the country. Visit www.fineartscamp.org, email rschmidt@fineartscamp.org or call 907-747-3085.

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6/18-6/25

Alaska High Seas Rally

Board the worldâ&#x20AC;&#x2122;s only rally on a cruise ship. Alaska High Seas Rally is already taking reservations for their third return to the most awesome adventure rally ever. This seven-day biker cruise leaving from Vancouver, Canada, views some of Alaskaâ&#x20AC;&#x2122;s most beautiful scenery. Stops are in Juneau, Skagway and Ketchikan. Cruising through Tracy Arm Fjord, Glacier Bay and the Inside Passage will take your breath away, all the while enjoying the convenience of a luxury cruise ship. Visit www.highseasrally.com or call Dean or Debbie Anderson at 1-800-444-8795.

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6/2-6/5

Yakutat Tern Festival

Every Alaska community has a claim to fame regarding its natural resources. Yakutat is no exception. One of the largest and southernmost known breeding colonies of Aleutian Terns exists here; a stronghold for a suspected declining worldwide population. The Yakutat area is currently at the forefront of Aleutian Tern research, including studies on population trends, nesting ecology and migration patterns. Festival includes field trips, viewing Aleutian terns, childrenâ&#x20AC;&#x2122;s activities, Native cultural events, art show and a â&#x20AC;&#x153;Salmon in the Treesâ&#x20AC;? exhibit by Amy Gulick. Visit www.yakutatternfestival.org.

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MONDAY, JULY 4TH, 2011

LIVE MUSIC! GREAT FOOD! BEER GARDEN! VINTAGE AIRCRAFT! SPECIAL GUEST!

AV E

July 1-3

T H E

Further details at: www.colestrailercourt.com

AT E â&#x20AC;˘â&#x20AC;˘â&#x20AC;˘â&#x20AC;˘â&#x20AC;˘â&#x20AC;˘â&#x20AC;˘

Girdwood Forest Fair

Family fair is an annual event in the resort town of Girdwood, located 36 miles south of Anchorage. This yearâ&#x20AC;&#x2122;s fair is Friday and Saturday, July 1-2, 11 a.m. to 8 p.m., and Sunday, July 3, 11 a.m. to 6 p.m. The Forest Fair features Alaskan artists, hand-crafted items, exotic foods and entertainers from all over Alaska. The Forest Fair Parade is Saturday, July 2 at 10 a.m. The fairgrounds are located at Mile 2.2 on the Alyeska Highway in the community park area. Limited parking is available at the Alyeska Resort Daylodge with shuttle service provided. Car pooling is encouraged. There is no admission fee, only good times. Camping will be allowed in Forest Fair Campgrounds only and is $25 per person per night with a camping permit required. Public camping is prohibited in the town of Girdwood during Forest Fair Weekend. Law enforcement personnel will be patrolling the Girdwood Valley. Visit www.girdwoodforestfair.com for more information.

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July 4

T A T E W I D E â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘

Independence Day Celebrations

Across Alaska are local events planned for Independence Day celebrations. â?&#x2018; www.akbizmag.com â&#x20AC;˘ Alaska Business Monthly â&#x20AC;˘ June 2011

AGRICULTURE

Dr. Alexander Fleming peony variety.

Photos courtesy of Glacier Peonies LLC

New peony field layout in 2009; and one year later with first-year peony plants, under the rainbow at Glacier Peonies in Homer.

Peony Farms Thrive Alaska only world market for latesummer blooms BY HEIDI BOHI

f Alaska was a flower, the peony would be best appointed to stand in as its metaphorical double. Known for its sturdy stem, dramatic bloom and affinity to cooler temperatures and precipitation, this low-maintenance, flamboyant variety can best be described as the Klondike Kate of the horticulture world. Analogies aside, in fact, Alaska and peonies are starting to develop quite the reputation in the cut-flower industry as word gets out that the state – never famous for its farming – is the only place in the world that can deliver peonies during the July to September growing season due its northern latitudes. And, like most things that come out of the earth here, these coveted blooms are bigger and bolder than their Outside counterparts.

BUDDING INDUSTRY From Homer to Delta Junction, commercial distributors worldwide are watching Alaska’s budding industry with an optimistic eye, ready to buy every stem of white, red, pink and fuchsia blooms that the midnight sun can shine on. Although no one expects peonies

to be the next gold rush, horticulturists believe they are the first agricultural export with significant potential. For several Alaskan peony farmers, many who are already in production, the industry holds promise of six-figure incomes, and support services such as the transportation and supply chain industries also stand to benefit. Dr. Pat Holloway, associate professor of horticulture at the University of Alaska Fairbanks and manager of the Georgeson Botanical Garden there, is credited for first researching the idea of commercially growing peonies in Alaska and has since become the resident expert on the topic. About 10 years ago she became interested in experimenting with planting peonies to see how they would do in Alaska and also began talking to fellow colleagues and gardening enthusiasts such as Ron Illingworth who had recently planted several at his house in North Pole. “She was interested in how they did from a research-scientist point of view, I approached it as ‘if they don’t grow well with minimal attention then I don’t want to bother with them,’” he says. For the next couple of years, Hol-

loway planted several varieties and reached out over the Internet. Almost immediately, she received an inquiry from a distributor in England hoping to buy 10,000 cut peonies – a week. “We had to explain to him that we couldn’t come up with that many flowers in the whole state,” Illingworth says, adding that the best they had to offer were simply the results of ongoing experimental plantings from the botanical garden to try and find out what varieties would supply the best stems and buds, and what the industry standards were. As the supply and demand of the peony market became very apparent, Illingworth and Holloway brought others into the fold from the University and the Alaska Department of Natural Resources Division of Agriculture. While continuing to focus their efforts on learning about the growing and distribution sides of the industry, Holloway hired a graduate student from the School of Management to help determine the potential of selling Alaskagrown peonies. What they found was rich. In addition to peonies going through a resurgence in popularity – both Martha Stewart and

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

Oprah Winfrey featured them on their shows – at the same time they learned that nowhere in the world are the flowers grown between July and September, a critical time for weddings when peonies are in peak demand, especially the white variety. While Alaska’s climate and short growing season present challenges for most cut flower varieties and other crops, in the case of peonies, below-freezing weather and 100 to 300 chilling hours during winter months is a requirement for prolific roots. Leading up to harvest, the plants do best in cool climates and soil with a pH between 6.5 and 7.0, which is common in many parts of the state. While most economic development efforts take years to reach fruition, Illingworth, who dedicates two acres of land to his business, North Pole Peonies, points to several farmers in Homer and the Interior who, after only three or four years, are ready to make commercial quantities available. There are more than 40 growers who produce peonies and of those, 13 have 500 or more peony plants. Plants are started from purchased root stock and take about five years to mature to produce

Shelley Rainwater, owner of Glacier Peonies in Homer.

cut flowers for the commercial market. Each stem sells for $4 to $5 depending on the color and the buyer. White peonies command the highest price and imported ones may often retail for as much as $17 a stem.

Last year, Illingworth and his wife Marjorie sold 250 flowers to Outside distributors and another 200 through the local farmer’s market. This year they are expecting to sell about 1,500 flowers – they have been

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

taking orders since January – with an added focus on the high-demand white variety. Although farming always comes with unknowns, he estimates the couple can make about $80,000 a year in their retirement. Currently, their business is one of the largest in the Interior.

Photo courtesy of Kennicott Brothers Co. Inc.

HIGH DOLLAR INDUSTRY Although Alaska does not yet have data on the potential impact of the peony industry, cut flowers are a multi-billion industry in the United States. Despite the economic downturn in recent years, it continues to thrive, in part because flowers are an emotional purchase. In California, the industry there returns 92 cents of every dollar back into the economy and effects every segment of the state’s economy, according a study funded by The California Cut Flower Commission. The research also indicates expenditures by growers, wholesalers, retailers and affiliated businesses create a ripple effect of economic activity that generates about $3.3 billion in gross wages. Besides sweat equity, the start-up

Harrison “Red” Kennicott and son, Stephen Kennicott, in a peony field in Illinois.

investment in peony farming is modest, says Shelley Rainwater, owner of Glacier Peonies in Homer. As little as a half acre of land could hold up to

3,500 plants, which can live a productive life of 15 to 25 years, with the most prolific varieties yielding 30 blooms after five years. There are costs to prep

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

Photo courtesy of Glacier Peonies LLC

the land, including equipment rental, fertilizer, lime and weed control products. Once in production, a chiller is needed to store Sword Dance the fresh cut flowpeony variety. ers until they are shipped. The biggest investment is the root stock. In her case, Rainwater says, she spent $10,000 for 3,000 plants, though this price varies according to the varieties purchased. She will increase the number of plants this fall after evaluating the results of the summer season. Currently in her second season, this year she is hoping to cover her expenses by making about $25,000. Harrison â&#x20AC;&#x153;Redâ&#x20AC;? Kennicott is chief executive officer of Kennicott Brothers Co., a floral importer, grower, distributor and wholesaler of fresh cut flowers and supplies based in Chicago since 1881. Origins of the company date back to a federal land grant his great-great-grandfather Dr. John Kennicott took out in 1836 to develop land 20 miles northwest of Chicago. A family doctor, he started a nursery, growing fruits, vegetables and flowers. Dr. Johnâ&#x20AC;&#x2122;s son, Robert Kennicott, explored Russian America in the 1850s and 1860s. His findings were used to support â&#x20AC;&#x153;Sewardâ&#x20AC;&#x2122;s Folly,â&#x20AC;? the purchase of Alaska by the U.S. Kennecott Copper Mining was named after him, though the name was incorrectly spelled. Peonies came online in the mid1850s. Red and his son, Stephen, operate nine peony farms in the Lower 48 states and farms in Chile. They are expanding into Alaska, partnering with statewide growers including Rainwater who is growing plants from their root stock. Alaskaâ&#x20AC;&#x2122;s late growing season means their company can now capitalize on the market potential that has remained untapped, allowing them to distribute peonies year-round and capitalize on the market potential. At this stage, Rainwater and her partner, Chris Graupe, perform as much of their own labor as possible and, like most peony farmers, take responsibility for all of the cutting because it is one of the most critical steps in the operation

and requires understanding the art of choosing those stems that are the right size and at the right stage of the blooming cycle so the buds do not open in the box during transit. Although the growing season is only four months, marketing is year-round and she relies on Internet and leads from other growers she knows through the Alaska Peony Growers Association. â&#x20AC;&#x153;There are so few of us and the potential is huge,â&#x20AC;? she says. â&#x20AC;&#x153;We have a long way to go before we saturate the market.â&#x20AC;? It would be impossible

to meet the demand from the Lower 48 states and that doesnâ&#x20AC;&#x2122;t count requests from other countries, including Japan, China, Canada, England and the Netherlands. She is well aware of the romantic notion most people have about the idea of peony farming. When she mentions her business, â&#x20AC;&#x153;They get these dreamy looks and say, â&#x20AC;&#x2DC;Hey, maybe Iâ&#x20AC;&#x2122;ll do that.â&#x20AC;&#x2122;â&#x20AC;? More than once she is quick to point out: â&#x20AC;&#x153;It may be flowers, but itâ&#x20AC;&#x2122;s still farming â&#x20AC;&#x201C; and â?&#x2018; there are no guarantees.â&#x20AC;?

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

H R M AT T E R S

BY LYNNE CURRY

Please … Don’t Hit the Send Button Business email etiquette

EMAILS AREN’T SPEECH Because emails stream from our fingers quickly, we treat them like speech rather than written documents. Unlike spoken words, which eventually dissipate even if remembered and passed on from one person to another, emails last forever, forwarded in their original

DON’T ABUSE YOUR SEND POWER

lease … don’t hit the send button – the consequences may bury you. Written in haste, emails memorialize typos, misspellings, hastily written accusations and snippy retorts to their authors’ later regret. Before you press your finger, consider – what if your email takes an unintentional cyber-detour? Do you really want what you just wrote going out the way it looks? Ticked off at his boss, “Mike” spent 20 minutes composing a “Letterman list” detailing his boss’s top 10 flaws, smiling as he hit send. Only minutes later he got the reaction he wanted when he heard hysterical laughter from his co-workers. Unfortunately, the boss chose that minute to walk past, asking: “What’s so funny?” When an unprepared co-worker choked, the boss glanced at the co-worker’s screen, said: “Print that for me,” and invited Mike in for a chat. Jean experienced her own version of a Freudian send. When she received a lengthy email from a lucrative but difficult-to-manage client, she wrote: “what an SOB,” forwarding her comment and the offending email to her co-worker. Unfortunately, she hit reply rather than forward. After she lost the client, she said “Okay, so he learned I couldn’t stand him – it was the truth.” Despite her brave front, Jean paid for her moment of truth with a lost client. If you’ve experienced the sudden heartbeat cessation or whoosh of air from your lungs with the realization you sent an awkward email, remember these safer truths:

glory. Save yourself embarrassment by letting all emotional emails “sit” at least four hours before pressing send.

EMAILS REFLECT YOU You wouldn’t wear a stained shirt when you want to look your best. Don’t then send emails to relative strangers with typos, misspellings and grammar gaffes. Add politeness to your emails with “thanks” and “please.” Particularly if you work in customer relations, remember to start with a friendly: “Thanks for your inquiry,” rather than an officious: “Re: your email of 7/5.”

When you email others, don’t send unannounced large attachments without compressing them or they may take forever to download, overloading your recipient’s in box, bouncing all their other email. Photos right off your camera are more than 1,000 pixels in width and transmit best when minimized to less than 600 pixels. If you use Return Receipt Request for all the emails you send, realize many view this as intrusive. Save RRR for times you absolutely need to know your recipients opened your email. When you receive an email sent to others, reduce email clutter by replying directly rather than “reply all” unless “all” need to know.

FORGIVE When you receive a harshly worded or sloppy email, give the other person a break. Realize they hit send hastily and probably didn’t mean to come across as they did. Avoid responding with a retort that makes you look equally juvenile.

STOP SHOUTING IN PRINT

And please … don’t hit send until ready.

Lured by a false sense of security, many write in emails what they wouldn’t dare say in face-to-face interactions. Unfortunately, you can’t hit undo once you hit send and your provoking comments can lead to a unilateral “end of discussion.” I recently received an email from a candidate applying to an executive position for one of our client companies. Although he’d only sent his resume 10 days earlier and we’d thanked him for his resume, this antsy applicant sent: “SINCE I HAVEN’T HEARD FURTHER FROM YOU, I’LL ASSUME YOU ARE N’T I NTE RE STE D.” Whoa – who said we hired for a $150K job within 10 days? If you’re an “all capper” guy because you feel it makes a point, beware the point you make.

About the Author Local management/employee trainer and consultant and the author of Managing Equally and Legally, Won By One, and Solutions, Dr. Lynne Curry regularly provides managerial, leadership and board-training seminars, as well as public seminars. Curry’s company, The Growth Company Inc., offers a free monthly “breaking news” HR/management newsletter and two seminars (70 minute and three hour) monthly. For more information on The Growth Company Inc.’s training and HR On-call services to companies needing help with recruiting, team-building, strategic planning, management or employee training, mediation or HR troubleshooting, please visit www.thegrowthcompany.com. ❑

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

RIPE

FOR

REDEVELOPMENT

BY GAIL WEST

Rendering by kpb architects

Loussac Manor Razed

Site view of the 120-unit Loussac Place under construction in Midtown Anchorage.

First mixed-income housing project in works

ix-and-a-half acres of prime Anchorage real estate in Midtown – near downtown and between A and C streets – is set this summer for one of the state’s largest housing redevelopment projects. Loussac Manor, an Alaska Housing Finance Corp. 62-unit, public-housing complex built in 1967, has been razed and will be completely rebuilt into nearly twice as many rental units. This redevelopment has a projected cost of more than $35 million. According to Doc Crause, AHFC’s director of construction, a recent study by Anchorage engineering firm USKH, showed Loussac Manor had outlived its effectiveness for the corporation and for residents. With that, AHFC went to the public and sought proposals from developers to convert the property – receiving six responses from local and Lower 48 firms. After close scrutiny, AHFC chose an all-Alaska team for the project. Led by Cook Inlet Housing Authority, the development group

includes kpb architects and Olberding White, an all-woman architectural firm, GMC Contracting, The Peterson Group and F-E Contracting.

including $18.6 million in Low-Income Housing Tax Credits and $3.3 million in corporate receipts. CIHA pledged nearly $6 million of its own resources and will be seeking loan financing from AHFC.

A WOMAN’S TOUCH

PUBLIC/PRIVATE MIX

“We have a tremendous amount of expertise and innovation with the talent here in Anchorage,” said Carol Gore, president and chief executive officer of CIHA. “We paired a highly experienced architectural firm with a young, all-woman firm to leverage innovative ideas and smart, local knowledge. We also paired the contractors – GMC Contracting will do the horizontal, The Peterson Group will do the residential vertical, and F-E Contracting will do the commercial work for the community building. By doing this, we leverage the best skills of each contractor while meeting an aggressive delivery timeline. yuAHFC brought about $29 million of the development costs to the table,

“This is a great example of a public/ private partnership, and demonstrates how housing authorities across the country are using conventional financing to create more affordable housing,” said Dan Fauske, chief executive officer and executive director of AHFC. “We look forward to working with Cook Inlet on this important project for Anchorage. It’s a model we intend to use again.” The new development will carry the name Loussac Place, and will include one-, two-, three- and four-bedroom units. Approximately 37 percent of the units will be work force housing, targeting working individuals and families above 60 percent of the area median income. The other 60 percent will be

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

Photo ©Clark James Mishler

incomes within the mixed-income development.” Gore also said there was an “amazing alignment of understanding” between CIHA and AHFC that Anchorage needs work force housing, not just affordable housing. “This project wouldn’t take place at all if AHFC hadn’t dedicated an entire annual allocation of LIHTCs to it,” Gore said. “It was up to us to find the investors to purchase those tax credits, as well, and we’ve attracted six proposals.”

Aerial view of Loussac Manor in September 2010, before being demolished to make way for construction of the $35 million mixed-income Loussac Place housing development.

OPEN HOUSE With the old housing razed and the new development begun, CIHA is beginning to look ahead toward filling the new units. “We’ll be opening the development in phases,” Gore said, “and hope to start putting families into their homes by July 2012. The final phase should be completed by December of that year.” Families who want to apply for homes in the new Loussac Place can contact CIHA in spring 2012. “Although the original families in Loussac Manor will be given the first opportunity to move back,” Gore said, “there is certainly room for more. We expect the demand to be very high if our Grass Creek development is an indication – we took almost 600 applications for 80 housing units there.” To bring this affordable work force housing to Anchorage took a bit of creative genius, according to Fauske. “It was difficult to build this many layers of financing,” he said. “It took the cooperation of a lot of people. AHFC has good financial strength, so we can

bring more to the table than most.” Fauske added that although putting the deals together to create the housing is hard, it’s wonderful to see how cherished it is once it’s built. “We’d like to do more, but everything has to be perfectly aligned to make it do-able,” he said. “We’ve had about 7,000 people on our waiting list for housing, but it’s hard to make a dent in the need. The population of Anchorage has topped 290,000 and many of those new residents are going to be low income. They all need housing. “You’ve got working poor, the single parent trying to make ends meet. The housing market just keeps two steps ahead of them. Many of them work. They are contributing, they just can’t catch up.” With the new Loussac Place, however, there soon will be 120 units of family housing to help meet the need ❑ of the Midtown work force.

Rendering by kpb architects

rent- and income-restricted to individuals and families below 60 percent of the median income. All units will have energy-efficient appliances and meet the highest rating under Alaska’s Building Energy Efficiency Standard. Mark Romick, AHFC’s director of planning and program development, said: “One of the primary goals of this project, is to create a mixed-income neighborhood; to reflect a neighborhood feel that is good for families as well as for individuals working downtown. Virtually all the proposed designs were for townhouse-style housing on no more than two or three floors. “When you have this neighborhood feel, people take care of their properties better and they watch out for each other,” Romick added. “It will be up to CIHA to make sure the development is maintained properly.” Romick also said CIHA and its partners did a good job designing the development to meet AHFC’s goal – courtyards will be included and houses will face each other, cars enter and exit from behind the houses, and garages are in the back of most units. Gore agreed with Romick about mixing families with different income levels and using design elements to create a neighborhood feel. “Segregating families for any reason just doesn’t work,” she said. “Communities need diversity. We learn from each other and we can rely on each other. Think about the location, too. It’s so close to jobs downtown. Why be exclusive? When it’s done, it will be the first mixed-income work force housing development in the state, and I think it will embrace families of all

Rendering of the Z.J. Loussac Community Building being built at Loussac Place in Midtown Anchorage through a partnership between Alaska Housing Finance Corp. and Cook Inlet Housing Authority. www.akbizmag.com • Alaska Business Monthly • June 2011

SMALL BUSINESS

Understanding the Role of Succession Planning for Small Business Success Steps for better business BY SARA LAFOREST AND TONY KUBICA successors for the company’s present and future key roles, aligned with the talent and ambition of its current employees and its talent network. For example, if you are in the construction or transportation industry, a logistics manager may be critical for the success of your business. Having a vacancy in this position could result in a decrease in service and an increase in customer complaints and possibly a decrease in customer retention.

Photo courtesy of Kubica LaForest Consulting LLC

SMALL BUSINESS VULNERABILITY

Tony Kubica and Sara LaForest, founding partners of Kubica LaForest Consulting LLC.

uccession planning is most often associated with replacing the CEO and key executives within (a usually larger) business. This is a limited definition and application, which does not serve small businesses well. We find few companies with an up-to-date succession plan. When a change occurs in key positions or when there is a need to identify leaders to support growth initiatives, organizations are often caught “off guard.” And it doesn’t matter the size of the organization. Bank of

America was ill-prepared to find a replacement for Kenneth Lewis.

A ROBUST DEFINITION

Succession planning is about having an identified plan to fill key positions (and we believe, not just executive positions) within your organization, whether this is due to someone leaving or due to new positions being required to support growth. Succession planning is the process of identifying, developing and transitioning potential

Small businesses are especially vulnerable. Oftentimes we find the owner (or president) doesn’t believe there is a need for a succession plan. Their stated arguments are, “we’re too small,” “we’re too new,” “we have good people in place,” or “I’m not going anywhere soon.” In (an unlikely) static environment where no one leaves, no one gets sick (including the owner/ president), growth isn’t that important, and performance is exceptional – these arguments may hold true. But the reality is – we don’t live in a static business environment: people do leave, they do get sick, the owner/president wants to grow the business, the employees are not all good performers, and some roles are hard to fill. There is also a tendency to hold on to marginal performers because there is no clear plan on how to replace them. The impact: the business suffers, the owner/president suffers, employee morale and productivity decreases, and the customers become less than satisfied with their service. And if the customers have other options, they’ll take them. Another argument we hear is that small businesses do not have the internal talent pool nor do they have a large number of employees to choose from when there is a need to either fill a vacancy or identify an employee to lead a growth initiative. While yes, this is a reality for many small businesses, reality doesn’t have to make your destiny. Business plans are filled with hopes and dreams of rapid growth. Yet they are lean on the people strategy to support that growth. This

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

a healthcare “ Managing enterprise as diverse as ours in bush Alaska can be quite a challenge. Thanks to our team at Parker, Smith & Feek who provide exceptional expertise supportive of our unique business model.

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is one reason why business plans fail to meet expectations. It is simply unrealistic to assume that businesses can grow and thrive without a clear plan on how to identify, train and place people in critical positions to support growth. It has often been said you can’t grow by cutting. And, similarly, you can’t sustain well (for long) with a gap (talent shortage) that ensures delivery of your promise to your customers.

CHALLENGES AND CONSEQUENCES

The key challenges businesses face are: ■ Not having a people-related plan to support the growth initiatives ■ Not having current and relevant job descriptions to establish expectations and role clarity and accountability ■ Low or no identified talent pipeline (candidates for your key positions) ■ And, no process or structure in place for identifying and developing those high potential – “promising” employees that fill the talent pipeline And these challenges left unaddressed, result in: ■ Knee jerk replacements – either unsuitable hires or “not ready for prime time” promotions that end poorly due to lack of development and transition support ■ Retention challenges – the best talent leaves to pursue growth and other opportunities as they do not sense an opportunity at your company to advance ■ Unnecessary costs in crisis recruiting and training ■ Disruption to the work culture/environment, meaning that a sense of stress, discord, competition and posturing for position manifest in employees and could embed in your culture with a perpetual lack of clarity

RIGHT-SIZING AND SUCCESSION PLANNING

Every business owner/executive should spend time on proactively right-sizing the company. Unfortunately, right-sizing over the past few years has taken on a negative connotation. It’s often seen as a euphemism for firing people. But appropriate right-sizing is simply matching the work force with the work load so the business is supported and grows in a cost-effective manner. And it is because a business is not right-sized as an ongoing operating approach that it can find itself in the position where it needs to “right-size” for economic reasons. An up-to-date and well-managed

succession plan is a prerequisite to right-sizing your company and supporting growth. And we see it as a key leadership initiative and responsibility to and for their organization.

WHAT TO EXPECT

First and foremost, succession planning is a process and not an event. And the process involves eight steps. 1. Assigning responsibility for succession planning to the owner or the top executive. (It should be a responsibility in the job description and part of the performance review.) 2. Explicitly identifying key roles that are needed currently to run the company and that will be needed to support growth initiatives in the future. 3. Developing and using methods/ tools/techniques to identify employee competencies and aspirations. 4. Implementing a structure and process for developing (building skills in) potential successors. 5. Implementing a process to transition successors into their new role. 6. Identifying an emergency or interim process if there is an emergency absence of a key position or if for some reason a potential successor does not work out. 7. Aligning your recruitment initiative to succession planning by forecasting key needs and interviewing for growth potential and adaptability (the ability to adapt and adjust to new situations and challenges). 8. And, evaluating your plan’s effectiveness and updating the plan as required (at least annually)

FINDING AND DEVELOPING SUCCESSORS

So the question is now: how do we find and how do we develop candidates for our succession plan? We recommend seven steps you can take to identify and build your talent pool: 1) Keep a pulse on the talent network in/of your industry 2) Develop and maintain a learning organization to promote a growth mindset among employees 3) Hire candidates not only for the job they will do today but also for the jobs that will develop in the future 4) Create a formal and informal educational initiative for high-potential candidates (i.e., targeted courses, seminars, conferences, professional association sponsored programs and E-learning) 5) Give assignments that require

demonstration of skills (enable the candidate to learn new, develop and apply skills that will be required by managers in your company. (It is important for the candidate to have an opportunity to make and “live” with their recommendations.) 6) Conduct semi-annual reviews (stay in touch with the candidate’s performance) that should also include selective 360 degree reviews – to focus on: Skills learned, skills demonstrated, skills to be learned, what went well, what can be done better, professional/ career goals and how the colleagues see the candidates performance and behavior, derived from the 360 degree review. 7) And, actively provide development opportunities including, personality and job performance assessments (indicators) to understand individual work strengths/assets, preferences, career derailers and underlying career drivers (motivators) and mentoring and/ or coaching.

IMPORTANT COMPONENT TO GROWTH

While often overlooked or misunderstood, succession planning is an important component to business growth. Whether you have a formal plan or an informal plan is less important then that you have a plan; and, a plan that you work on throughout the year. The recession was hard on many businesses. Staffing levels were decreased and the talent pool depleted in some organizations. The economy is recovering for many businesses, and growth is starting to occur. But growth needs people to support it, and defining whom you need now and in the future and who will replace key positions is an important and necessary growth support strategy; as people (the right talent in the right roles) are really what carry forth and manifest your business strategy. ❑ About the Authors Sara LaForest and Tony Kubica are founding partners of Kubica LaForest Consulting LLC. They are management consultants, executive coaches and business improvement specialists serving clients nationwide. Together they have mope than 60 years of combined experience as employees, managers, executives, consultants and small business owners. They specialize in leadership strategy, organizational development, and transition management and performance improvement. Find them online at ww.kubicalaforestconsulting.com.

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

ICRC Business Profile

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

FINANCE

Wells Fargo Senior Business Relationship Manager Cindy Jobe, left, and Business Banking Manager Bond Stewart, right, work with customers such as Tony Gatts, center, president of motorcycle dealership Alaska Cycle Center, to finance expansions, inventory, new equipment and many other business ventures.

Business as usual in Alaska BY GAIL WEST

espite the recent recession and upheaval in the banking world, Alaska’s commercial lenders are operating in a business-as-usual mode – ready and willing to lend to all good borrowers. The caveat, of course, is the term “good borrowers.” Asked what a good borrower would look like, lenders at First National Bank Alaska, Wells Fargo Alaska and Alaska Growth Capital all agreed. A good borrower is a business that meets the five Cs of credit: character (integrity), capacity (sufficient cash flow to service the obligation), capital (net worth), collateral (assets to secure the debt), and conditions (of the borrower and the overall economy). “As Dan Cuddy defines our philosophy on lending,” said Senior Vice President at FNBA Doug Longacre, “a viable business has to have three things: A good idea, good management and

capital invested in the business. If you have those three things, you’ve likely got a good business.” The review process for a commercial loan is essentially the same as it’s been for many years, said Longacre and Bond Stewart, Wells Fargo’s business banking manager. “Loan decisions depend upon the risk – whether it’s acceptable to the lender or not,” Stewart said. “If we can figure out how the bank is going to be repaid and the other four Cs of credit are met, we’ll likely be interested in making the loan,” Longacre said. “That was the way it was 20 years ago, five years ago and it’s still the same today.”

LOANS

FOR

BUSINESSES

A commercial loan covers a myriad of business purposes, from business start-up to expansion, from equipment

or inventory purchase to the buyout of a partner. “Customers come to us needing working capital, money to do tenant improvements, finance construction or lease a property,” Stewart said. “It’s our business to understand their business well enough to match them with the right loan. We might use a Small Business Administration loan-guarantee program or we might put the loan into our own portfolio. We may provide a line of credit. It all depends on what fits our customer the best.” At Wells Fargo, commercial banking is split into two parts. “There’s no hard and fast rule,” said Sam Mazzeo, Alaska commercial banking manager at Wells Fargo, “but in general, our business banking team often works with customers with less than $10 million or $20 million in annual gross revenue. Our commercial team

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

works with customers that have annual revenue that exceeds $20 million.” Mazzeo said mergers and acquisitions in the Alaska business market are relatively active right now, and his team is putting together credit packages to help businesses purchase other businesses. “I would say that activity really picked up in 2010 and is a driver in commercial lending in 2011,” Mazzeo said. “Part of it is that Native corporations have been successful in the last few years and are in a position to purchase other entities. Because of their financial condition and the volatile equities market, many smaller businesses are seeking to reduce their exposure and increase their operating capital by selling or merging. “Native corporation businesses also have come under fire. Many of them have one client – the federal government. If their ability to service that client is impaired by legislation or political will, these companies are going to be motivated to diversify into commercial lines of business that are non-government,” Mazzeo said.

The father-son team of Dr. Phil Priebe, right, and Dr. Derek Priebe opened Priebe Dental and Priebe Orthodontics PC, a joint-office venture, at The Shops at O’Malley Centre complex in South Anchorage in summer 2010 with some financing assistance from First National Bank Alaska.

RURAL LENDING At Alaska Growth Capital, a Stateregulated business unlike Federal banks, lending is slightly different. Alaska Growth Capital is a subsidiary of Arctic Slope Regional Corp., and has a mission to reach out to rural businesses. “We lend to both urban and rural, but our passion is for lending to rural,” said Chris McGee, vice president of lending. “We use the SBA 7(a) loan-guarantee

Photo reprinted with permission from First National Bank Alaska, Priebe Dental and Priebe Orthodontics PC

program and the U.S. Department of Agriculture Rural Development’s Business and Industry Program. With those two programs, we make loans to smalland medium-sized businesses all over the state.” Alaska Growth Capital President Hugh Short says the company is the largest Community Development Financial Institution in Alaska and the only lender to use New Market

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

Tax Credits. Both are U.S. Treasury programs established to promote economic revitalization in low-income communities through investment. “We’re using 2009 allocations now,” Short said. “That was about $50 million, and we sell those to investors to help capitalize our loan funds.”

THREE YEARS

GROWTH

Across the board, lenders feel Alaska has eased through the banking problems that impacted so many institutions Outside. “When the secondary market closed, when the stock market crashed,” Short said, “we weren’t taking in loan applications. As soon as we started coming out of that, our loan volume picked up and went off the board. Some other financial institutions tightened their credit policies, so being an SBA lender in our position we had more applications coming in than we might have otherwise. That number has held steady through December and January. First quarter is usually a slow quarter, but I’d say activity in March has picked right back

up. We feel strong about the markets as of March.” Well Fargo’s Mazzeo reflected that their peak commercial loan output was in 2008, and that correlated to $140-dollar-a-barrel oil. “That was before a lot of the other pressure we’re facing,” he said. “Our new loan production dropped a little in 2009, then rebounded in 2010. It appears that 2011 will surpass 2010,” he added. “That’s three straight years of new-loan production growth; and that’s new money, not refinances.” All three lenders – Alaska Growth Capital, Wells Fargo and First National – can use SBA loan-guarantee programs, in the case of Wells Fargo and FNBA those are mixed with portfolio loans, and all lend statewide. SBA Deputy Director Sam Dickey said it’s common for loan requests to wane in the early months of the year. “It usually picks up again in April,” Dickey said. “We operate on a federal fiscal year beginning October 1,” Dickey said, “and we generally do 15 percent to 20 percent of our loans in that first quarter.

In the first quarter of 2008, we saw a significant drop in the number of SBA loans, and at the end of the year were down about 20 percent.” SBA’s Alaska office totaled 141 loans in 2008 and 138 in 2009. “It wasn’t a huge drop,” Dickey said. “It held pretty steady, but we did see a huge decline in the dollar amounts. We went from just more than $53 million in guarantees at the end of 2008 to just more than $29 million in 2009. That’s almost a $24 million drop.” Dickey credited that drop to tightening credit and trepidation on the part of prospective borrowers. Today, however, Dickey said lending seems to be back to normal. “The numbers are where we expect to see them,” he said. “People are feeling better about the future. “Of the 144 loans we guaranteed in 2010, 34 were new-business loans, 10 were for an expansion; 11 went to veterans and 65 to businesses with female ownership. Forty-six loans were made to businesses that were more than 50 percent owned by women. “There’s almost an even split,” he added, “in loans to rural and urban businesses.” Dickey is optimistic about loan growth in FY 2011. “This year we’re way ahead of our historical pace. I think overall, the economy is making a nice recovery. We were really lucky that we dodged a bullet, but Alaska lenders as a whole were very responsible.” Looking ahead at loan prospects for the future, both Mazzeo at Wells Fargo and Longacre at FNBA said they’re concerned about the State’s lack of fiscal and environmental policies. “They’re road-blocking projects,” Mazzeo said, “and that’s having a dampening effect on our economy. Clearly, we need to do something, as a State and country, to encourage development of our vast resources in Alaska.” Longacre added: “The strong driver of this state is the petroleum industry, and our bank is concerned about the long-term oil production. It’s been in a gradual decrease for the past 15 to 20 years, and we need new, responsible development. We also need a fiscal plan ❑ to provide long-term stability.”

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

INTERNATIONAL TRADE

Alaska 2010 Exports Valued at $4.2 Billion Seafood and minerals top commodities BY GREG WOLF

SEAFOOD TOPS EXPORT COMMODITIES Seafood has been and remains Alaska’s largest export commodity. In 2010, seafood exports totaled $1.8 billion. Minerals, predominantly zinc and lead, was the second largest export category, totaling $1.3 billion last year. Energy exports, consisting of LNG and coal, ranked third at $418 million. Precious metals (gold and silver) shipments totaled $213 million followed by forest products (mainly whole round longs) at $117 million. The increase in mineral prices enabled the value of these exports to grow from $853 million in 2009 to $1.3 billion last year, a new record. Zinc prices,

which averaged approximately $0.75 per pound in 2009 rose to an average of $0.98 in 2010, a 31 percent increase. Lead prices, too, also experienced a price increase, from an average of $0.78 per pound in 2009 to $0.97 last year, a 24 percent improvement. Rising prices also benefited precious metal exports as both gold and silver prices rose in 2010 versus the prior year. Gold rose from an average of $972 per ounce in 2009 to $1,224 in 2010. Likewise, silver prices increased from about $14 an ounce in 2009 to just over $20 last year.

Photo by Azimuth Adventure Photography www.azimuthadventure.com

010 was a banner year for the state’s exporting companies as the value of shipments to overseas markets surged to $4.2 billion, an alltime record. While Japan maintained its long-standing rank as Alaska’s No. 1 trading partner, continuing significant growth in exports to China accounted for a sizable portion of the increase last year. Another factor fueling the record year was the higher prices received for the state’s natural resource exports, especially minerals. Markets in the Pacific Rim, mainly found in Asia, account for approximately 75 percent of the state’s total overseas exports. Japan, China and Korea, respectively, rank as Alaska’s top three markets, followed by Canada. These four nations alone account for 70 percent of Alaska exports. Five European countries (Switzerland, Germany, Spain, the Netherlands and Belgium), along with Australia, round out the top 10 markets for Alaska exports.

JAPAN LARGEST TRADING PARTNER For the past five decades, Japan has been the state’s largest trading partner. The country is a significant customer of most categories of Alaska exports, including seafood, minerals, energy and forest products. For example, Japan has been and remains, the No. 1 overseas buyer of Alaska seafood. In 2010, buyers from Japan purchased some $523 million, accounting for 29 percent of the state’s total seafood exports. Japan has been the sole customer of LNG (liquefied natural gas) from Alaska since 1969. However, these shipments are scheduled to end this year, according to an announcement in February by ConocoPhillips and Marathon Oil Corp., operators of the LNG exporting station at Nikiski on the Kenai Peninsula. The companies cited the inability to secure sales and supply agreements as the reason for the closure of the plant after more than 40 years of operation.

CHINA QUICKLY GAINING GROUND Japan’s ranking as Alaska’s No. 1 export market is being seriously challenged by China, the state’s fastest

World Trade Center Alaska Executive Director Greg Wolf.

growing trading partner. Alaskan exports of seafood and natural resources to the Middle Kingdom have risen rapidly, from just $103 million in 2000 to a record $923 million in 2010. This decade of sustained and dramatic export growth to a single nation is unprecedented for Alaska. It reflects the dynamic growth that is leading China to be the world’s largest economy by as early as 2016, according to the most recent World Economic Outlook report of the International Monetary Fund. China’s seafood purchases of Alaskan seafood now rival those of Japan (China’s $517 million versus Japan’s $523 million). While a percentage breakdown is not available, a sizeable amount of the seafood exported

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to China is for processing and then re-export to markets elsewhere, while another portion is for domestic consumption in the country. In addition, China was a larger buyer than Japan of both Alaskan minerals and forest products in 2010.

SOUTH KOREA, CANADA AND EUROPEAN MARKETS South Korea continues to be an important and steady customer for Alaskan exports. Last year, Alaska shipments to the country amounted to $477 million, a slight increase from the previous year. Seafood is the main export category to Korea, totaling $237 million in 2010, followed by minerals and forest products. Alaska’s neighbor, Canada, is not only a significant destination for the state’s exports but also a major investor in Alaska, especially the mining sector. Last year, shipments from Alaska to Canada totaled $385 million, consisting primarily of minerals and seafood. Canadian firms are active investors in Alaska’s natural resource development projects. In the mining sector,

for example, Canadian firms operate a number of major mines across the state and Canadian firms are the most active in seeking new minerals and metals deposits. Teck Resources, for example, a Vancouver-based company, is the operator of the Red Dog Mine in Northwest Alaska. Over the past several decades, Canadian mining prospectors have accounted for the majority of the total exploration dollars in Alaska, in some years accounting for 90 percent of the money expended in pursuit of new deposits. European markets tend to be focused on a specific commodity export from Alaska. For example, Switzerland’s imports from Alaska consist almost exclusively of precious metals. Belgium is another example; this small country imports minerals used by its metal refiners. Other European markets are focused on purchasing Alaska seafood.

EXPORTS OUTLOOK FAVORABLE Looking forward, the outlook is very positive for Alaska’s exports to grow both in volume and value. Three important attributes play into Alaska’s

favor: first, Alaska is blessed with world-class deposits of minerals, metals and energy that the world needs. Alaska is also blessed with an abundance of high-quality seafood to help provide sustenance to growing populations. Essentially, Alaska sells the building blocks of economic growth and prosperity. Second, Alaska is located on the Pacific Rim, home to some of the fastest growing economies to be found. In just 10 short years, China, for example, has become a vital customer of Alaska exports and the country continues on an impressive growth trajectory. Efforts are now under way to introduce customers in India, another rapidly growing market of 1 billion citizens, to the natural resources and other goods and services Alaska offers. Finally, as part of the United States, Alaska offers political stability that is important for buyers who rely on imported energy or food supplies. As the global economy continues to recover from the Great Recession, Alaska is well positioned to play a ❑ leading role.

• JOIN the Alaska State Chamber of Commerce “to promote a positive business environment in Alaska.” • NETWORK with Alaska’s top business leaders.

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The Alaska State Chamber is an invaluable institution that fosters dialogue and cooperation between Alaskan businesses and policymakers. ExxonMobil is proud to be a partner with the Chamber and to help the organization promote a positive business environment in Alaska. – Bill Brackin

www.alaskachamber.com www.akbizmag.com • Alaska Business Monthly • June 2011

TECHNOLOGY

Cloud Computing A growing information technology alternative BY TRACY BARBOUR

Photo courtesy of Arctic IT

bout seven months ago, Peak Oilfield Service Co. was facing a serious information technology dilemma. “My Microsoft Exchange servers were loading up; we were running out of space,” said Purchasing and IT Manager Guy Hegerberg. “It would have cost us additional equipment and licenses to get more servers.” So Hegerberg turned to a cloud computing service: Microsoft Business Productivity Online Suite (BPOS). The comprehensive solution includes Microsoft Exchange Online for email and calendaring; Microsoft SharePoint Online for portals and document sharing; Microsoft Office Communications Online for presence availability, instant messaging and peer-to-peer audio calls; and Microsoft Office Live Meeting for Web and video conferencing. BPOS proved to be the ideal solution. It gives Peak plenty of storage space and the ability to extend the life of its existing servers.

Todd Clark (left) of DenaliTEK shown with Kevin Prater in front of the “demo wall” at the Anchorage Cisco office.

“BPOS is relatively inexpensive for the amount of productivity that we get out of it,” Hegerberg said. “It works out very well.” Peak is among a growing number of Alaska organizations leveraging cloud computing for their operations. With up to 800 employees, the Anchoragebased firm provides construction, maintenance, industrial cleaning, power generation and transportation services for resource development companies all around the state. Cloud computing is an emerging technology in Alaska, but it’s not a new phenomenon, says Mark Mathis, account executive of infrastructure with Arctic Information Technology. “It’s a rebranding of an approach that we’ve been using for decades,” said Mathis, who cites Microsoft Hotmail Mark Mathis, account executive network and AOL as earlier examples of cloud infrastructure, Arctic IT computing.

So exactly what is cloud computing? Definitions vary widely, but the term is generally used to describe a variety of subscription-based tools – mostly for messaging and collaboration – that let businesses avoid the need to invest in, deploy and maintain software and hardware on their premises. The broad concept of cloud computing centers around moving IT infrastructure and solutions from behind corporate firewalls onto the Internet. Cloud services give users on-demand, pay-as-you-go access to a shared pool of configurable computing resources. Users can conveniently and easily access cloud services with a Web browser or other simple front-end interface. Mathis compares cloud computing to a utility model, where customers pay a predictable monthly cost for the power they use. “You’re renting access to technology on a monthly basis,” he said.

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

BENEFITS OF THE CLOUD The topic of cloud computing is becoming more commonplace in the conversations among Alaska businesses, Mathis says. It’s no wonder why, given the compelling benefits of the cloud. Not only do cloud services allow businesses to lower capital expenses, but they give users more functionality and capability than they previously had access to with predictable costs. “With the traditional approach, there are a lot more cost variables,” he said. With Internet-based cloud computing, vendors assume the responsibility for almost everything: the servers, storage, operating system, database, software, updates, power and cooling, data center space and support service. This allows cloud users to minimize their upfront and ongoing IT costs, letting them conserve cash and focus resources on their business. As a result, cloud computing shifts the IT burden from the customer to the cloud-application vendor. Cloud computing also offers another key benefit: It allows smaller organizations to access IT solutions that only larger organizations could previously afford. For example, in the past, if a business with a 10-person office wanted to leverage Microsoft Exchange, it would have required a sizeable investment of $15,000 to $20,000 to purchase hardware, software and the professional services required to deploy it. It could cost another $300 per month for ongoing upgrades and maintenance. Today, the cost could be as low as $50 a month for a cloud-based solution, plus a few hundred dollars for deployment. “Cloud solutions can provide a real financial benefit for many companies,” Mathis said.

7 DNH , 7 W R W K H &OR X G

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CLOUD COMPUTING MODELS There are three types of cloud services models: private clouds, which are essentially a redesign and reorganization of a company’s IT infrastructure; public clouds, where customers move their IT infrastructure and resources to an external, hosted location; and hybrid clouds, where some systems are hosted remotely and others reside on the customer’s premises. Users can access cloud computing through three main service models: www.akbizmag.com • Alaska Business Monthly • June 2011

Infrastructure as a Service (IaaS), Platform as a Service (PaaS) and Software as a Service (SaaS). IaaS consists of servers, storage and network resources that are billed according to the level of usage. With this model, customers receive an empty container in which they can install their own operating systems, applications and storage data. This allows the business to significantly minimize its investment in equipment and network connections. Examples of IaaS include Amazon’s Elastic Compute Cloud (EC2) and Simple Storage Service (S3) and Microsoft’s Windows Azure. PaaS is a type of cloud solution geared toward the application development community. It supplies all the tools, operating system platforms and storage required for creating Web applications, enabling programmers to quickly develop new applications. Force.com and Microsoft’s SQL Azure investments are good examples of PaaS. With SaaS, software applications are made available in the form of a network-based service that users can access across a wide-area network. SaaS allows businesses to avoid having to buy software licenses, load software on their own infrastructure and keep up with patches and product updates. This fully managed option presents a simpler and more affordable solution than traditional on-premises IT resources. Examples of SaaS are Microsoft’s BPOS and CRM Online, Google Apps, SalesForce.com and social networking applications like Facebook.

HOW ALASKA COMPANIES USE THE CLOUD In Alaska, the most common type of cloud computing service being used is SaaS, according to Todd Clark, president of DenaliTEK. Cloud-based email is particularly popular, especially among smaller companies. Email is a critical component in business, yet a traditional email system is expensive to implement and requires regular maintenance. A typical project to implement an email server could run $15,000, Clarks says. On top of that, the company would need to replace the server every four or five years to minimize the likelihood of a hardware failure. However, Microsoft has a cloud-

based email server that gives companies access to email for just $5 per person per month. This allows customers to obtain more functionality at a lower cost and with better reliability. “Without cloud computing, our clients have to invest in more infrastructures to have this same level of functionality,” Clark said. “For $5 a month, you’re getting all the features you couldn’t afford before.” Customers may have to make slight adjustments when operating in the cloud. With cloud-based email, for example, there appears to be a delay when sending an email with a large attachment. The sender has to wait for the attachment to move from their work station to the cloud-based email service. As another example, using Internetbased file storage instead of a local server often necessitates different procedures for saving and retrieving files. “The quality of the experience is dependent upon the cloud service provider,” Clark said. Hegerberg, for instance, is having a positive experience with the Microsoft Office Outlook Web Access he’s using for Peak Oilfield Service Co. “The Outlook Web Access has to be 50 times quicker and more productive than if we locally hosted,” he says. “I’m getting nothing but positive results.” In addition, Microsoft’s BPOS is making communication quicker and easier at Peak. Now, instead of relying on a collection of individual websites, the company uses a secure portal for document sharing, storage and communication. “There had to be 30 different sites for 30 different things we were doing,” Hegerberg says. “Now we have a single place to go. Everyone has their username and password, and everything is all right there for them.”

PROCURING CLOUD SERVICES Companies typically purchase cloud services directly from providers with the support of provider partners like DenaliTEK or Arctic IT. These vendors – both Microsoft partners – provide a full range of services to help businesses move into the cloud, such as a needs assessment, deployment plan, migration and technical support. Of particular value to many

companies is how cloud services can be deployed much faster than the equivalent traditional service. For instance, a conventional IT solution might take 20 hours to 30 hours to set up, including ordering a server, buying a user license and scheduling deployment. The typical cloud-based service, however, can be deployed in as little as three hours. Further, during transition, a company’s data often must be migrated and, in some cases, converted – which can present a challenge. Consequently, many businesses opt to use an experienced vendor to facilitate the process. The length of the migration process varies according to the service and size of the company involved, according to Clark. A small business can be transitioned to cloud-based email in a day; a very large company might require a gradual migration over the course of several weeks. Mathis emphasizes that moving into the cloud doesn’t have to be an all-ornothing deal. Companies can opt to shift only a portion of their business processes. Microsoft’s cloud offering allows customers to leverage the technology in one of three ways: on their premises, in the cloud or through a co-existence model, where they can have some of their employees in the cloud and the rest using traditional, on-premises IT resources. “You don’t have to dive all the way in,” Mathis said.

CLOUD SECURITY CONCERNS While cloud services are valued for their ease of use, agility, scalability and cost efficiency, not everyone is rushing to embrace the concept. Some companies are wary of entrusting their sensitive data or important applications to the public cloud. For instance, 51 percent of IT departments that haven’t adopted SaaS say security concerns contributed to their decision, according to a recent Forrester Research survey of North American and European enterprise software decision-makers. Clark maintains that cloud computing services are a safe alternative. In the cloud, customers’ servers and data are dispersed geographically, which creates redundancy. There’s also 24-7 support, which means security issues get addressed promptly. And as added protection for customers, cloud data

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

centers are designed to be compliant with the Health Insurance Portability and Accountability Act (HIPAA). â&#x20AC;&#x153;In so many ways, the security is so much better,â&#x20AC;? Clark said. â&#x20AC;&#x153;With cloud computing, we can hook them up, and itâ&#x20AC;&#x2122;s secure â&#x20AC;&#x201C; and we can make it work from day one.â&#x20AC;? Companies with security concerns should read the â&#x20AC;&#x153;fine printâ&#x20AC;? from their cloud provider to understand what safety measures are in place. They can closely examine the security sections of the cloud services providerâ&#x20AC;&#x2122;s contract and first-level agreement. They also can ask clarifying questions. But the challenge, Clark says, is in knowing what questions to ask. He said, â&#x20AC;&#x153;Instead of asking â&#x20AC;&#x2DC;What sort of firewall do you have?â&#x20AC;&#x2122; it would be better to ask, â&#x20AC;&#x2DC;Does your infrastructure meet security requirements and how do you verify that?â&#x20AC;&#x2122;â&#x20AC;? Cloud vendors tend to be forthcoming about their general approach to security, but are less likely to discuss the technical details. Microsoft, however, discloses nine layers of data security that include filtering routers, firewalls, an intrusion-detection system, system

level security, application authentication, application level countermeasures, virus scanning, separate data networks and authentication data.

CLOUD COMPUTING RISKS The risk of cloud services can be quite different from those involving on-premises IT solutions. Cloud systems have to be secured against multiple angles of attack: from the Internet, from other cloud tenants and from the cloud computing providerâ&#x20AC;&#x2122;s staff â&#x20AC;&#x201C; who might pose the risk of an insider attack, according to Cloud Security Alliance (CSA). CSA is a nonprofit organization promoting the use of best practices for providing security assurance within cloud computing, and its membership includes major companies like Dell, Intuit, eBay, DuPont and Salesforce.com. CSA says insider attack is one of the top threats to cloud computing. Other threats include abuse and nefarious use of cloud computing; insecure application programming interfaces; shared technology vulnerabilities; data loss/ leakage; and account, service and traffic hijacking.

The types of attacks being used with cloud computing often relate to the type of service involved. For instance, PaaS providers have traditionally suffered from attacks associated with the abusive use of cloud computing, according to CSA. But recent evidence shows hackers are beginning to target IaaS vendors through malicious Trojan horses and botnets (robots) commonly used for spamming, key logging, phishing and identity theft. Regardless of the risks, cloud vendors maintain that their services are a viable option for leveraging technology. Mathis encourages organizations searching for IT solutions to be openminded and consider cloud-based services. He also points out that cloud services arenâ&#x20AC;&#x2122;t suitable for everyone. Thatâ&#x20AC;&#x2122;s why businesses should align themselves with a solutions partner that can help them understand which cloud services would be the most appropriate, he says. â&#x20AC;&#x153;Thereâ&#x20AC;&#x2122;s no one-size-fits-all,â&#x20AC;? he adds. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s incumbent upon an organization to explore the many options available in order to find one that fits â?&#x2018; their needs.â&#x20AC;?

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

TECHNOLOGY

Cloud49 Alaska is in the cloud

s cloud computing stands poised to become more dominant than the desktop in the next decade, with industry projections indicating that worldwide revenues from these public IT services may grow from $16 billion in 2009 to $56 billion in 2014, it is no surprise Nathaniel Gates is on cloud nine as he enters his second year as president and founder of his company Cloud49. “The entire IT industry understands it’s going to cloud computing,” Gates says. “Some say it’s five years away, some say it’s last year, but nobody debates it’s going to happen.” Although the industry phenomena is just starting to catch on in Alaska, the rest of the world is already enabling this model for on-demand network access to a shared pool of computing resources, including networks, servers, storage, applications and services. Gates and other technology experts predict by about 2014 most people will access software applications online and share and access information through the use of remote server networks, rather than depending on tools and information housed on individual personal computers, making it the dominant mechanism for IT infrastructure and application delivery.

PHASING OUT INFRASTRUCTURE “In just a few years, the thought of purchasing infrastructure will be passe,” Gates says. Although he didn’t know it at the time, as the former IT executive for some of Alaska’s largest businesses, Gates has been implementing cloud computing fundamentals for several years. After a six-year stint as IT manager at Arctic Slope Regional Corp. (ASRC), in 2006 he became director of technology for Chenega Corp., which at the time was quickly becoming a showcase example of how Alaska Native corporations could profit from contracts through the 8(a) program.

The problem, though, was the corporation did not have the infrastructure to keep up with the growing pains that came with increasing its revenues from $50 million to $800 million in only five years. At the same time, he says, it had 30 new business subsidiaries, many with their own IT group. “Infrastructure is often an afterthought in business development. ‘Let’s get the business, then deal with the problems of having too much business later,’ seems to be the thinking,” he says. Hired to consolidate the 8(a) subsidiaries separate IT groups and systems into a single unit, Gates says that connecting remote locations to a centralized data center using Internet technologies such as multi protocol label switching (MPLS) to simplify and networks, instead of traditional leased lines, “Was similar to building a private cloud at Chenega, even though it’s not what we called it then.” The term “cloud” is used as a metaphor for the Internet. The two most significant components of cloud computing are known as the front end and the back end. The front end is the part seen by the computer user and includes the network – or computer – and the applications used to access the cloud via a user interface such as a web browser. The back end is the cloud itself and comprises various computers, servers and data-storage devices.

RELIABLE SECURE SERVICE After then serving as chief information officer (CIO) for Chenega and its subsidiaries, in 2010 Gates developed a plan for Alaska companies to offer infrastructure and cloud-based solutions, which are built on a pay-as-yougo demand model, much like an electric utility, so users have the tool available without ever having to pay until they use it.

Photo by Greg Martin/Courtesy of Cloud49

BY HEIDI BOHI

Nathaniel Gates, president, Cloud49

“I could see the wave of cloud computing was coming and I wanted to be in a position to take advantage of that and to educate Alaska businesses on what the new possibilities were for leveraging the cloud,” Gates says, recognizing the state has a history of lagging behind on the technology curve. As he looked at the business community, it quickly became apparent that many companies could benefit from the three-pillar concepts of cloud computing: centralization, standardization and access. In the case of Cloud49, the physical data centers are currently in the Washington, D.C., area and on the opposite coast in San Jose, Calif. Overcoming the ambiguity of the cloud concept is one challenge when it comes to educating the business community. “Where are my servers? Where is my data?” These are some of the first questions businesses ask. “We need to cut through that ambiguity so they know there are real buildings where their data lives,” Gates says. “We need to educate businesses that the focus should not be on the physical location of their infrastructure, but rather the assurance of a reliable secure service that is always available.” The first industry he is targeting is ANCs because the work force is located nationwide, making the business

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

model perfect for cloud computing. In the case of one client that is a large ANC, Gates says Cloud49 is developing a data archiving plan that is easy to manage using cloud-based storage. Instead of buying a giant tape library, the company subscribes to the storage pool and is charged only for as much data as it stores, and the savings is adding up to almost $1,000 a month. It also eliminates the risk and liability, as well as the need to buy a new tape library that would have cost $100,000.

Introducing Gary Shaw

RAPIDLY EVOLVING TECHNOLOGY In the Lower 48 states, Gates says, CEOs say their No. 1 priority is cost savings and their No. 2 is to adopt cloud computing. In Alaska, the cost savings associated with cloud computing and increased operating efficiencies only adds to the urgency of businesses and organizations wanting to implement the rapidly evolving computing and communication technology. In addition to the pay-as-you-go model that reduces operating expenses, meaning users do not have to bare generation and distribution costs, Gates says there are several other examples of how Cloud49 saves clients money – often up to 50 percent – when they switch from the traditional on-premise infrastructure. In the case of a medium-size client in the health care industry, Gates says the company is migrating from having servers on its physical premises to cloud-based servers so its IT is a service instead of a physical asset that needs to be managed. This saves them $200 to $400 a month by replacing servers that cost $7,500 to $12,000, in addition to labor and storage expenses. More importantly, he says, “They decided to make the shift because they wanted to be out of the business of IT and focus on what they do.” Technology itself is no longer a competitive differentiator in the marketplace, Gates says. Everyone has email, networks and reliable technology, but that doesn’t make a company’s product better. “Applying that technology in a creative and efficient way is the sole differentiator in the marketplace and that’s what cloud computing enables.” ❑

The Alaska Native Tribal Health Consortium proudly announces Gary Shaw as Administrator of the hospital at the Alaska Native Medical Center. Gary has more than 30 years of health care experience and a lifetime of community service, which began as a youth in Alaska. Gary’s father ran a Bush pilot company out of Merrill Field in the ‘60s, instilling Gary’s passions for the outdoors, piloting, Alaska business and helping others. Gary has served as a military ofﬁcer and worked at hospitals in rural and urban communities around the world. From being a leader as a board certiﬁed Fellow in the A American College of Health Care Executives to his Chamber of Care Commerce activities, Gary believes Com mm m in m ma making a the places he lives better. Pleass join us in welcoming Gary to Please the Alaska business community. A

The Alaska Native Tribal Health Consortium and Southcentral Foundation jointly own and manage the Alaska Native Medical Center under the terms of Public Law 105-83.These parent organizations have established a Joint Operating Board to ensure uniﬁed operation of health services provided by the Medical Center.

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

NATIVE BUSINESS

Sustainable Rural Development

Alternative energy, natural resources offer options Photo by Shelly Wozniak/Courtesy of NANA Regional Corp.

Noatak fuel storage tanks. Fuel is barged to the NANA region every summer during the annual shipping season. Any fall or winter price reductions in urban Alaska don’t affect Alaska’s rural communities.

BY JULIE STRICKER

he 2010 Census showed a troubling trend for rural Alaska: While the state’s urban areas and rural hub communities grew, that growth came in part from the state’s smaller, more remote areas. The population of the Yukon-Koyukuk region alone fell almost 15 percent. While the reasons given for outmigration from villages can vary, three factors are most often cited: high cost of living, lack of economic opportunity and lack of access. “One of the biggest challenges facing rural Alaska is that the population is small and scattered. There isn’t any base for viable economic development unless there are resource development projects that can bring new money in, and keep it in the community,” said economics professor Scott Goldsmith of the Institute of Social and Economic Research at the University of Alaska Anchorage.

REMOTE, RURAL ALASKA Goldsmith defines remote, rural Alaska as the off-road portion of the state not served by the ferry system. It’s an area larger by half than Texas with a population of about 60,500, 78 percent of whom are Alaska Native. The Community Development Quota (CDQ) program has been somewhat successful in bringing money from Bering Sea fisheries to coastal villages, Goldsmith said, but for the vast inland part of the state, resource development holds the most promise. Natural resources present an opportunity, he said. “The question is how can the community take maximum advantage of the opportunity?” In Northwest Alaska, NANA Regional Corp. aims to take full advantage of their resource opportunities, which include one of the world’s richest zinc deposits, Red Dog Mine. Until recently, Red Dog was the largest

zinc mine in the world (a mine in India now claims that title). In operation since 1989, Red Dog produces 100 million tons of zinc concentrate annually and creates hundreds of high-paying jobs in a region where jobs of any kind are scarce. Thirty percent of the Northwest Arctic Borough’s private jobs come from Red Dog, which had a $52 million payroll in 2009. NANA also collects royalties from the mine, which has helped it fund a variety of community and regional projects. “Certainly, what has paid the bills to date is Red Dog,” said Lance Miller, vice president of resources for NANA Regional Corp. “Red Dog and minerals are to the Northwest Arctic Borough as the North Slope and oil is to Alaska.” In 2010, NANA and Teck Alaska Inc., which operates the mine, opened the Aqqaluk Deposit, which is expected to extend the giant zinc mine’s

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

lifespan by another 20 years. It also gives the region a broader foundation on which to build a regional economy, if it can solve a thornier problem: high energy costs, which Miller calls “the single biggest barrier to village economic development.” The NANA region encompasses the Northwest Arctic Borough, which includes 11 communities, all above the Arctic Circle. The regional hub is Kotzebue, with a population of 3,200 it is the largest community. The others have populations of about 100 to 900. NANA, which was formed under the 1971 Alaska Native Claims Settlement Act, has more than 12,500 Inupiat shareholders. All food and building materials, including fuel, is either barged or flown into Northwest Alaska communities, in some cases doubling the price seen in urban parts of the state. For instance, in early April, diesel was $8.49 per gallon and diesel was nearly $10 in Shungnak. The overriding goal is to create an economy “so people can afford to stay in the villages,” Miller said.

ALTERNATIVE ENERGY OPTIONS NANA is looking at prospects for geothermal energy and at expanding wind energy, which has been successfully used in Kotzebue for more than a decade. Selawik also has a wind farm and Kivalina, Deering, Buckland and Noorvik are planning projects. Miller is looking at a variety of alternative energy projects such as wind, geothermal and hydropower on the upper Kobuk River. Alternative energy has a place in rural Alaska, Goldsmith said. “I think it could play a role in reducing the overall cost of energy to consumers.” Alternative energy projects are being discussed around the state, with wind and biomass energy garnering the most attention. Wind turbines now provide power in communities such as Kotzebue, Nome and Toksook Bay, among others, and is economically feasible in dozens of others, according to the Alaska Energy Authority. Anchoragebased Cook Inlet Regional Inc. wants to develop a commercial wind farm on Fire Island that would generate 54 megawatts of electricity, but hasn’t found a buyer for the power yet. www.akbizmag.com • Alaska Business Monthly • June 2011

In Juneau, Sealaska Corp. switched the boiler at its headquarters to use biomass energy instead of fuel oil in November 2010, becoming the first commercial building to be heated by renewable bio-energy. It is hoping to develop demand for a biomass industry in Southeast Alaska. Elsewhere in the state, Tetlin is seeking State money for a biomass project and geothermal energy prospects are under study at Pilgrim Hot Springs.

ABUNDANT NATURAL RESOURCES Like NANA, other parts of the state are also blessed with abundant natural resources. But they are caught in an economic Catch-22: They need a source of

Photo by Tara Loyd/Courtesy of RurAL CAP

The RurAL CAP Energy Wise crew members gathered in Selawik in 2010 as part of a pilot program. NANA Regional Corp. recently contributed $860,000 to roll-out the program region-wide. The project not only helps reduce the cost of energy, but simulates village economies. Ten people will be trained and employed in each village to implement the program.

inexpensive energy to develop natural resources, but they need the money from resource development to build regional infrastructure to support it. “There’s an opportunity when you have resource development in the region (which) is that you can leverage the money,” Miller said. “Mineral development is the initial springboard to create the money. It brings funding to do some of the development projects that hopefully will be sustainable.”

Goldsmith said high energy costs influence the ability to develop big resource projects, such as the Donlin Creek gold mine in Southwest Alaska, which is on lands owned by the Kuskokwim Corp., a group of village corporations. The subsurface rights are owned by Calista Native Corp. The giant Pebble prospect is located on State land, but could benefit villages in the vicinity. In Northwest Alaska, Red Dog’s

RESPONSIBLE DEVELOPMENT Our people. Our land. Our companies.

Enriching our Native way of life.

Learn more. View Responsible Development, a video showcasing BBNC’s land and resource vision at www.bbnc.net.

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

resources are well known, and Miller said there is potential for oil and natural gas in the Kotzebue basin as well as gold in the Upper Kobuk River area. NANA also has sand and gravel deposits, which play a large role in village economics where it is used for housing construction, airport expansion and other infrastructure projects. NANA is working with partner NovaGold to explore the Arctic Deposit, which has rich reserves of copper, zinc, lead, silver and gold and Bornite, a large copper deposit, although still largely unexplored. Building a road to the Ambler Mining District is one of Alaska Gov. Sean Parnell’s priorities. With $4 million included in its 2011 budget, the Alaska Department of Transportation is studying potential transportation corridors. One would extend 211 miles from the Dalton Highway to Kobuk, where it would tie into the existing local road system. The deposits could eventually be developed into mines along the size of Greens Creek near Juneau, Miller said, but the projects are years away from that. All development must be in accordance with the traditional subsistence lifestyle of the region, Miller said. “Everything we do is tied to that,” he said. “We don’t want to compromise those values.” It’s a complex problem that NANA is tackling in innovative ways. In 2008, NANA created the Village Economic Development Committee to help address the region’s energy crisis. Dean Westlake, director of Village Economic Development, likens his department to a Leatherman multi-tool. “You have to use the right tool for the job, and you have to have a lot of tools at your disposal,” he says in NANA’s January shareholder newsletter. “The challenges we face as a region are complex, so the solutions require a team effort regionally, as well as some out-of-the-box thinking,” he said.

sėĥĢ İĪĞįı ĴĞĶ ıĬ ğĲĦĩġt • Pre-engineered steel buildings • Warehouses • Shops • Hangars • Bridge cranes • Riding arenas • Insulated foam panels

ĖĲĭĭĩĶĦīĤ Ğīġ ĢįĢĠıĦīĤ İıĢĢĩ ĞĠįĬİİ ĄĩĞİĨĞ ģĬį ĶĢĞįİ

COOPERATING TO MAXIMIZE RESOURCES One tool is cooperation through the Northwest Arctic Leadership Team. NWALT is a partnership of Maniilaq Association, NANA Regional Corp., the Northwest Arctic Borough and Northwest Arctic Borough School www.akbizmag.com • Alaska Business Monthly • June 2011

District. Its goal is to maximize resources and avoid duplication of efforts to improve life for residents of Northwest Alaska. Liz Moore is the regional government affairs manager for NWALT. The bottom line, she said, is to find public/private partnerships that will help villages keep their buildings open, and warm. “We’re working to make sure we’re all moving in the same direction,” she said. NANA has invested $860,000 in a public/private partnership to increase energy efficiency in individual homes. RuralCAP is training people in the communities to implement basic weatherization techniques. The program provides household kits that help people find ways to scale back energy consumption and increase efficiency. It’s paid for out of American Recovery and Reinvestment stimulus funds and is expected to create more than 100 jobs in the region. NANA has made money available to each community for development projects endorsed by the communities

and tribes. One proposal is to have multipurpose facilities in each community. The facilities would house offices, classroom space and space for housing trainers. Moore said another need is fast, reliable Internet service. Northwest Alaska relies on satellite for its Internet service. “We don’t have (fiber-optic cable) this far north,” Moore said, adding that available bandwidth is limited and satellite coverage is spotty. Local residents are unable to apply for online-only grants; stream news and movies; upload content in a timely manner; or participate in many educational opportunities. “There are a lot of opportunities that are being missed because we don’t have broadband,” Moore said. “It’s very frustrating.” Broadband Internet service is needed in order for residents of Northwest Alaska to participate in the global marketplace and for distance education. “That’s an opportunity we’re all talking about at the local level,” Moore said. Moore said one project she’s

working on with the Northwest Arctic Borough School District is the idea of creating a magnet school in Kotzebue encompassing grades 11 through 14 that would help train students in health care, resource development and education. “The idea of the school is to provide job training, immediately.” What will the rural economy look like for workers in the next generation? In 2007, Goldsmith published a study of the economy of remote rural Alaska. His conclusion offers qualified optimism, “It is not obvious whether remote rural Alaska represents a sustainable community economy if we define that to be one where there are sufficient resources to provide for both the private economic needs of households and the publicly provided goods and services ... the region is rich in opportunities, but that there are very real constraints as well.” “I think there will be some winners and losers,” Goldsmith said in April, “but we don’t know ahead of time ❑ which will be the winners.”

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

REGIONAL REVIEW

BY TRACY BARBOUR

Alaska Peninsula Where fishing is king

Photo by Glen R. Alsworth Jr.

Brown Bear chasing red salmon in Katmai National Park and Preserve.

he Alaska Peninsula is home to some the most copious natural resources and wildlife in the state. The peninsula stretches about 500 miles to the southwest from Alaska’s mainland down to the Aleutian Islands, and separates the Pacific Ocean from Bristol Bay – the world-famous, easternmost arm of the Bering Sea. A number of rivers flow into the bay, including the Kvichak, Cinder, Egegik, Igushik, Meshik, Ushagak, Naknek, Togiak and Ugashik. These rivers support the largest run of sockeye salmon in the world, along with an abundance of king, silver, chum and pink salmon, and rainbow trout, Arctic char, grayling, northern pike, trout and Dolly Varden.

The Bristol Bay watersheds include several large pristine lakes, such as Lake Becherof and Lake Iliamna – one of only two lakes in the world supporting a resident population of freshwater seals. The area is also home to caribou, moose, bear and walrus, as well as small game such as beaver, porcupine, otter, fox and various waterfowl. In terms of its landscape, the northern side of the Alaska Peninsula is flat and marshy, mainly due to years of erosion. The southern side is rugged and mountainous. A major mountain range – the Aleutian Range – runs along the entire length of the peninsula. This highly active volcanic group of mountains extends from Chakachamna Lake, which is

King Salmon at a Glance Population: Approximately 500 Location: 280 air miles southwest of Anchorage Main Industries: Local government, fishing, transportation, and hospitality and leisure Government Structure: Assembly-manager form of government Tax Base: 2 percent raw-fish tax, 6 percent bed tax Hospital: Bristol Bay Area Health Corp. (in Dillingham) Schools: University of Alaska Bristol Bay Campus (in Dillingham)

about 80 miles southwest of Anchorage, to Unimak Island, which sits at the tip of the peninsula. The peninsula is also home to Wood-Tikchick State Park, the largest state park in the country. The Alaska Peninsula is organized as four boroughs: the Bristol Bay Borough – which was incorporated as the State’s first borough in 1962 – the Lake and Peninsula Borough, Kodiak Island Borough and Aleutians East Borough. The most populated communities in the Bristol Bay and Lake and Peninsula boroughs are Dillingham, Naknek, King Salmon and Nondalton. Dillingham, with about 2,500 residents, is the service, transportation and retail center of Bristol Bay. Naknek, the seat of the Bristol Bay Borough, has a population of around 700. It has a seasonal economy as a service center for the huge red salmon fishery in Bristol Bay. King Salmon, with a population of about 500, is an important air transportation hub for Bristol Bay. Interestingly, King Salmon – which is located in the Bristol Bay Borough – is the seat of the Lake and Peninsula Borough. Nondalton is the largest city in the Lake and Peninsula Borough. Situated on the west shore of Six Mile Lake, it has about 220 residents.

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

LAKE AND PENINSULA BOROUGH The majority of the Alaska Peninsula’s territory lies within the Lake and Peninsula Borough. The borough has a total area of about 30,900 square miles, about 23,800 of which is land. This makes the area larger than San Bernadino County, Calif., the largest county in the contiguous Lower 48. The borough has the distinction of being the second-least-densely populated organized “county” in the United States. Only Alaska’s vast Yukon-Koyukuk Census Area, which is unorganized, has a lower density. The 2010 Census shows the borough’s population shrank by 192 people, according to Alaska Department of Labor Economist Mali Abrahamson. Lake and Peninsula has the fourthlowest population in the state, with 1,631 people in 2010. “Of the 16 census designated places or cities, all but four – Port Alsworth, Chignik City, Iliamna and Newhalen – lost population in the last decade,” she said. Like much of Southwest Alaska, communities in the Lake and Peninsula Borough rely heavily on a subsistence lifestyle. Local government is the main industry there. In 2009, it employed more than 50 percent or an average of 377 of the area’s workers, Abrahamson said. Other top employers in the borough (ranked by number of workers) are Bristol Bay Area Health Corp., Iliamna Development Corp., Bristol Bay Native Association and Kokhanok Village Council. The average unemployment rate for Lake and Peninsula in 2010 was 8.1 percent. Employment follows a seasonal pattern throughout the year, falling in the summer and rising in the winter. “The long-term trend isn’t creeping up like some other Southwest areas; however, annual averages have hovered between 6 percent and 8 percent for the last 20 years,” she said. The Lake and Peninsula Borough experiences extreme seasonal shifts in employment, and although the 2009 annual average was 735, it can increase to more than 1,000 in peak summer months and drop below 600 in January. “Jobs in seafood processing spike to more than 300 in July, but remain near zero for most of the year,” Abrahamson said.

Commercial fishing and fish processing are major drivers of the borough’s economy, with the area’s fisheries based around sockeye salmon. In the past few years, salmon runs have been overall good, according to Lake and Peninsula Borough Mayor Glen Alsworth Sr. “They’re faring well as far as the number of fish returning, but they’re not faring as well as far as the price per pound,” he said. “There are market issues that are not within in our fishermen’s control.” Two years ago, so many fish crowded the area that they exceeded the amount processors could handle and fishermen were limited in the number of fish they could catch. “The loss of economic opportunity from the fishing limits had a negative impact on residents,” Alsworth said. The borough’s commercial fishing season is extremely short and intense, with the major run of fish June 20 to July 15. “We have four or six weeks at most where it’s incredibly busy,” Alsworth said. During that time, the area experiences a large fluctuation in population, due to the spike in seasonal employment. Alsworth says a growing number of the borough’s commercial fishermen are not local residents, but people from outside the area buying permits and fishing during their summer vacations. However, sport fishing is still a big attraction – although fewer hunters are coming to the area. “The abundance of animals, such as moose and caribou, is not like it used to be,” Alsworth said.

TOURISM GROWING Leisure and hospitality is another important industry for the Lake and Peninsula Borough where tourism is steadily increasing. The borough is home to two national parks and preserves (Katmai and Lake Clark), Aniakchak National Monument and Preserve, and two national wildlife refuges: Becharof National Wildlife Refuge and Alaska Peninsula National Wildlife Refuge. “Increasingly, there’s been wildlife viewing, particularly bear viewing,” Alsworth said. “People want to watch bears catch salmon in a natural environment.” The leisure and hospitality sector has seen considerable growth in summer employment, particularly in the

last four or five years. Abrahamson credits the growth to park service staff and an increased number of private lodges and nature guide services. The tourism and fishing industries provide substantial support for the Lake and Peninsula Borough’s tax base. Most of the borough’s revenue comes from a 2 percent raw-fish tax. There also is a 6 percent hotel/motel room tax, and a tax on the harvest of certain natural resources within the borough. In addition, anyone who conducts guided activities in the area must purchase a guiding permit.

FISCALLY CONSERVATIVE The borough takes a conservative approach to budgeting by practicing a “forward funding” method, which prevents adopting a general fund exceeding the general fund balance of the previous year-end. “From day one, we decided our borough would be funded based on what we had in the bank, not on what we expected to receive,” Alsworth said. The borough has established several funds to protect its schools and benefit the community, including a school endowment fund, permanent fund and capital improvement funds. A recent project in Kokhanok features two wind turbines and upgraded controls to the village’s electric utility, enabling it to capitalize on new wind-diesel hybrid technology. “It may be the first such system that shuts the diesel generator off when the wind gets to a particular speed,” Alsworth said. “We expect there will be incredible savings.” The TERRA-SW Hybrid Fiber Optic Microwave Broadband Network is another major project reaching into the area. GCI, through its wholly owned subsidiary United Utilities, is extending terrestrial broadband service for the first time to Bristol Bay and the YukonKuskokwim Delta. Currently, no village in the region has access to broadband service (as defined by the Broadband Stimulus Act) – phone, television and Internet are delivered over high-cost, high-latency satellite connections. As part of the project, 22 communities in the Bristol Bay Region will receive new terrestrial-based telecommunications facilities, which GCI expects to begin ❑ offering service to in early 2012.

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

Photo courtesy of HDR Alaska Inc.

ENVIRONMENTAL

A primer on the National Environmental Policy Act HDR engineer Bob Butera in the field conducting a hydrology study for a proposed rail-extension project.

BY VANESSA ORR

o protect the environment, the economy and the people who are affected by both, states have many rules and regulations in place to monitor development. Since the 1970s, however, the National Environmental Policy Act, or NEPA, has been at the forefront of examining how new projects may impact the areas in which they are constructed on a federal level. The Act was signed into law Jan. 1, 1970. “Title I of NEPA contains a Declaration of National Environmental Policy, which requires the federal government to use all practicable means to

create and maintain conditions under which man and nature can exist in productive harmony. Section 102 requires federal agencies to incorporate environmental considerations in their planning and decision-making through a systematic interdisciplinary approach. Specifically, all federal agencies are to prepare detailed statements assessing the environmental impact of and alternatives to major federal actions significantly affecting the environment,” according to the U.S. Environmental Protection Agency’s website (www. epa.gov/compliance/nepa).

NEPA compliance requires an evaluation to determine whether or not a project may significantly affect the environment, resulting in either a categorical exclusion determination (CE), preparation of an environmental assessment (EA), or preparation of an environmental impact statement (EIS). The Council on Environmental Quality, established as part of the Executive Office of the President by the Act, oversees NEPA. “NEPA involvement requires a federal nexus – for example, the project uses federal land, requires federal

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

funding or needs federal approval or permits,” said Brian Lawhead, a senior scientist with ABR Inc. Environmental Research and Services, an Alaska firm with offices in Fairbanks and Anchorage. “It is not that uncommon in Alaska to get involved in the NEPA process because many of the projects here are fairly large and require federal input. You don’t often see a new 90-mile road going in somewhere in the Lower 48, but because of Alaska’s frontier aspect, we often have larger projects that create greater impact.” “NEPA is all about full disclosure; it’s all-encompassing,” said Mark Dalton, senior project manager and department manager, HDR, Inc., an architecture, engineering and consulting firm with four locations in Alaska. “It requires those involved to look at all of the potential impacts of a project – everything from how it affects the people in the area and the economy, to physical impacts including erosion and coastal processes, to biological issues like wetlands, surface water quality and wildlife habitat.”

Photo courtesy of HDR Alaska Inc.

M k Dalton, Mark D lt senior i project j t manager and department manager, HDR Alaska Inc.

NEPA 101 If a proposed project has met certain criteria a federal agency has previously determined to have no signifi-

cant environmental impact, it may be categorically excluded from a detailed environmental analysis. “A lot of federal agencies do categorical exclusions themselves for minor actions that don’t require the greater scrutiny of an EA or EIS,” Lawhead said. The second level of analysis requires the federal agency to prepare a written EA to determine whether or not a federal undertaking would significantly affect the environment. If the answer is no, the agency issues a finding of no significant impact (FONSI) which may also address measures the agency will take to mitigate potentially significant impacts. If the EA determines there may be significant environmental impacts, an EIS is prepared, which must include input from the public, other federal and State agencies and outside parties. “Statewide, very few EISs happen on an annual basis – probably less than 10 a year,” Dalton said. “Environmental impact statements are often triggered by larger projects that may be controversial because they have so many impacts. Most require public

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

NAVIGATING NEPA There are a number of companies in Alaska that can help make navigating the NEPA process easier, including R&M Engineering Inc., HDR Alaska and ABR Inc. “Most of R&M’s clients are either public entities or are utilizing public funds in some way to implement their projects,” said R&M Senior Geologist and Environmental Specialist Kevin J. Pendergast, CPG. “As a full-service firm, we help our clients take their projects from the planning stages through final design and construction administration; this usually includes an environmental analysis process followed by permitting. Approximately 80 percent to 90 percent of our larger projects require some sort of analysis under NEPA and perhaps 25 percent to 50 percent of our smaller projects do. For the types of clients we serve and the projects that we help them build, including highways, airports, hydroelectric projects, defense installations, water and wastewater, site development, schools and other public facilities, this analysis usually takes

the form of an EA or a documented categorical exclusion.” NEPA practitioners begin with a scoping phase to determine which issues need to be explored and what resources are available. “We engage with the public and with interested agencies and stakeholders early in project development to scope out their interests and concerns, and to inject them into the project as the concept takes shape and the design moves forward,” Pendergast said. “Once preliminary input is received, we identify data gaps and move forward with studies such as water quality, wetlands mapping, cultural resources surveys and threatened and endangered species research to document the existing or ‘affected’ environment. The analysis then shifts from data gathering to analyzing how the proposed action would affect the existing environment, often including various intangible resources such as social fabric, recreational value and historical context.” “Many important issues can be determined during the scoping phase, such as how the public perceives the project, and what kinds of issues different agencies have,” Dalton said. “Projects that involve the U.S. Fish and Wildlife Service, for example, must comply with the Endangered Species Act. If you’re planning to build a bridge over waters where there are threatened species like the beluga whale, it requires a lot of consultation with federal agencies before an action can be approved.” Dalton gives the example of an EIS that HDR conducted for the Alaska Department of Transportation and Public Facilities. In the 1990s, a project was proposed that would enable direct vehicle access into Whittier that would require new bridges and a new road to be constructed, as well as redesigning a tunnel section to make it a dual-purpose deck. “The Railbelt spur south of Girdwood that went into Whittier was originally built by the military in World War II to provide access to an ice-free, deepwater port – an 11,000foot tunnel was the city’s only access,” he said. “We were asked to create an EIS addressing the impacts of allow-

Photo courtesy of R&M Engineering Inc.

input. Most EIS’s tend to be multiyear processes, averaging two-and-ahalf to five years in duration, but a lot depends on who the applicant is. For example, if the applicant has already done a lot of public outreach and consulted with State and federal agencies before beginning the EIS process, it can go fairly quickly. If the company or agency is starting from scratch, it can take longer, depending on how much is known about the proposed project and how much controversy surrounds it.” Even if a project was once on the drawing board, that doesn’t guarantee it will move quickly through the NEPA process. “If you’re restarting a project that hasn’t been dealt with for some 15 years, like the Juneau Access Project or moving the State capital to Willow, it’s almost like starting over,” Dalton said. “For example, the State is considering a scaled-back Susitna Hydroelectric Project, but all of the research was done in the early 1980s. That means they’ll have to start all over again, reaching out to the public and all of the agencies involved.”

R&M Senior Geologist and Environmental Specialist Kevin J. Pendergast

ing greater access to Whittier, and in turn, Prince William Sound. The EIS had to address not only direct effects, such as how a bridge would affect hydrology and fish passage, but also the indirect effects of increased visitation to the Prince William Sound area for recreational use.” While ABR normally gets involved in the NEPA process as a third-party contractor, they may also work as a consultant for a project’s proponents. “We work both on the agency side and the proponent side, depending on the project,” Lawhead said. “ABR is currently involved in the Foothills West Transportation Access EIS as a subcontractor to AECOM, who are contracted by the U.S. Army Corps of Engineers. We may also work with a project’s proponents who know that they will need to go through a NEPA review at some point.” Depending on the situation, the company may or may not be able to work on a NEPA EIS after working for a project’s proponents. As a consultant to a project proponent, ABR will prepare a NEPA surrogate document, such as an environmental report or environmental baseline document, tailored to match what is needed for NEPA. “While this is not a formal NEPA document, it can help to expedite the

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

process,” Lawhead said. “It’s important to get a good environmental consultant involved early in the process for a large project. We put some effort into training our staff to work on NEPA because it’s such a specialized area of practice. What a firm like ours brings to the process is this depth and breadth of knowledge.”

OBSTACLE OR OPPORTUNITY? While the effort to comply with the NEPA process may be timeconsuming and often expensive, there are also many benefits to having the act in place. “It’s not like NEPA limits or precludes development – it’s just part of doing business,” Lawhead said. “NEPA requirements formalize the process we follow in project planning and give the public and stakeholders established opportunities for comment, which is beneficial to the project result,” Pendergast said. “The process is somewhat fluid and can be hard to quantify and schedule, which does add time and expense to project development and which can be difficult to account for in the early stages when budget and schedules are set. As a firm, however, we have to be very careful to point out to our clients not only the potential delays and pitfalls in the process, but also the ways in which time might be saved or how the project could be modified to avoid a sensitive resource. Overall, the NEPA process likely slows the pace of development in the state, but it does cause development to occur in a more deliberate and thoughtful way.” “NEPA is challenging for applicants, who are always concerned with scheduling and budgets,” Dalton said. “When special studies need to be done, such as determining what types of fish live in certain streams, it takes additional time. Applicants are further constricted by a fairly limited field season in Alaska. We have to collect data in narrow windows; if we don’t identify the correct questions in time, it can delay work for a whole year. Still, it’s a pretty amazing act – it allows an applicant to state their case, consider all of the effects of a project, and disclose them to the public and agencies, which is good. But you have to go into it with eyes wide open; it’s naive to think that you can skip through ❑ it quickly.” www.akbizmag.com • Alaska Business Monthly • June 2011

HEALTH & MEDICINE

Occupational Medicine Protecting employees in the workplace

BY TRACY KALYTIAK

in four locations, provides diagnosis and treatment of work-related injuries, performs screening services and assesses fitness. “This mutual effort and respect for the same goal had not coexisted as consistently in the past.” Occupational health involves identifying and either preventing or controlling risks arising from physical, chemical, and other workplace hazards, to establish and maintain a safe, healthy working environment, according to the National Institute of Environmental Health Sciences.

Photo courtesy of Dr. Bruce Kiessling

ccidents and injuries are an everyday fact of life in workplaces throughout Alaska. People fall, vehicles and heavy objects strike them, they suffer burns, wrench their backs, breathe in substances that might be toxic, toil amid loud sounds that gradually erode their hearing. Fortunately, a growing number of employers are doing more to prevent on-the-job accidents, injuries and fatalities as well as protect the health of men and women who work for them. “Employee advocacy groups have worked alongside employers to help ensure injured workers get the appropriate care,” said Dr. Bruce Kiessling, founder and medical director of Primary Care Associates, a full-service medical practice established more than 40 years ago that now has 22 providers

WORKPLACE HAZARDS These hazards may include chemical agents and solvents, heavy metals such as lead and mercury, physical agents such as loud noise or vibration, and physical hazards such as

Dr. Bruce Kiessling, founder and medical director of Primary Care Associates.

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

electricity or dangerous machinery. In 2008, 33 fatal workplace injuries occurred in Alaska, according to statistics available from the Alaska Department of Labor and Workforce Development. The following year, that number decreased 48 percent, falling to 17 fatal injuries in 2009. A few of the most recent of these accidental fatalities are listed on the State Division of Labor and Safety Standards’ “Fatalgram.” ■ Jan. 25: An employee of a logging outfit on Afognak Island received fatal injuries after a 2,000-pound spool of banding wire slipped off its anchor point and fell, asphyxiating him. An Alaska Occupational Safety and Health investigation revealed the job task was intermittent and not a primary job task for the victim. It was considered a routine job task by the company and, as a result, there was inadequate job task training, written standard operating procedures and hazard assessment. ■ Sept. 8, 2010: An employee of a company in Anchorage received fatal injuries when she lost her balance while working alone on a 14-foot mobile stair ladder with a badly worn rubber stop cap and struck the back of her head against a concrete floor. In spite of the manufacturer’s recommendations, a failure to do a pre-use ladder inspection was a contributing factor for the accident. Another contributing factor was the lack of employee training on the importance of what to look for during a ladder inspection prior to use. ■ Aug. 19, 2010: An employee of a company working in Arctic Village was electrocuted when he reached into the 7,200-volt side of an electrical distribution system that was feeding a power transformer he was working on. An investigation determined that the fuse connecting the primary voltage to the power transformer had fallen out of the bottom fuse holder. The victim apparently came into contact with the primary voltage line while putting the fuse back into the bottom part of the fuse holder while working off a fiberglass ladder. ■ July 20, 2010: An employee was fatally injured when a bulldozer overturned as he was loading it onto a tiltbed transport trailer. The bulldozer slid off the transport trailer onto its side,

causing the victim to fall outward from the bulldozer’s cab. He landed on his back and the bulldozer landed on him, pinning him between the bulldozer’s overhead canopy and the ground. An investigation determined the equipment lost traction on the ascent of the transport trailer, causing the bulldozer to slide from the trailer. The man apparently was not belted into the seat of the bulldozer. Nationwide, fatal injuries were down in 2009 to 4,340, from 5,214 in 2008, a 17-percent decrease.

OSHA Workplace health and safety measures began to gain more stature when the Occupational Safety and Health Act took effect April 28, 1970. That year, the annual workplace fatality rate was 18 deaths for every 100,000 workers. More than 40 years later, the rate has been reduced to about three deaths for every 100,000 workers, according to a State press release. More fatal work injuries resulted from transportation incidents than from any other event, and highway incidents alone accounted for one out

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

of every five fatal work injuries in 2009. Fairweather LLC is one of the companies working to enhance health conditions for workers on the job, providing remote medical coverage for the oil, gas, environmental and mining industries in Alaska. It employs 100 people, including 60 to 70 medical employees. “We kind of backfill ConocoPhillips sites,” said Jim Lipinski, a physician assistant who serves as Fairweather’s health team manager. “What happens there is what we call compliance screening, medical surveillance.” Medical surveillance, Lipinski said, means his company tests employees to ensure they’re protected from jobrelated noise or easily inhaled particulates that could harm their hearing or respiratory health. “Our occupational health techs actually work in clinics on the North Slope,” Lipinski said. “Clinics here in (Anchorage) do the screening and associated blood work. The bottom line is: industry wants to protect their employees.” That begins with the pre-employment process, Lipinski said, which establishes that a person is in good health

before he or she comes to work for a company and that work duties won’t adversely affect that person’s health. Lipinski said drug and alcohol testing is a key component of occupational health screenings. “You protect the public with drug and alcohol testing,” he said. “The (State Department of Transportation) physicals, you’re doing physicals for both the trucking industry and people who are driving our buses, operating our public vessels. You can’t even be a six-pack captain without getting a Coast Guard-approved physical.” Remote medical care is a cornerstone of services Fairweather offers. Not having an appropriate level of medical provider and equipment on location at a job site can be dangerous for employees who require immediate aid, Lipinski said. “In Alaska, the game’s different, you’re very far away from medical help,” he said. “If an employee operating remotely has a heart attack, you need to have the right people on scene who are used to people with critical illness, have the right equipment and can

get them stabilized and transported on the right air provider to Anchorage.” Lipinski says Fairweather personnel can be working anywhere between five and more than 20 sites at a time, with as few as 20 client employees and as many as 2,000 in places like the North Slope and Prudhoe Bay. The sites are supported by volunteer emergency medical service providers as well as mobile intensive care paramedics. Sponsoring physicians travel to the North Slope to teach and review charts. Fairweather is set up to support these operations in various ways with its remote, transportable clinics. “It’s not the actual four walls of a clinic, but everything that goes into a clinic,” Lipinski said. “A person sets up shop wherever. We provide training, logistics, medical supplies. X-rays are sent electronically to Anchorage. In our operation, we’re taking a picture, communicating by email and phone.”

BEST-CASE SCENARIO It’s critical for individuals and businesses to be knowledgeable about occupational health, Kiessling said, because

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

the best-case scenario for employer and employee alike is quickly returning a worker to the workplace. “We know well who are the best specialists and where are the most costeffective, competent referral facilities,” Kiessling said. “Timely, conscientious, quality medical care accurately assesses

injury, speeds recovery, determines fitness to return to full or modified duty, controls injury costs and lost work time. We are accessible to employers to answer questions about work accommodations, facilitating a timely return to work of an employee.” Beginning in 1974, Kiessling said,

PCA was an innovator in early returnto-work programs, injury prevention and wellness education. “We believe the combination of these services produces a more productive work force that both employees and employers appreciate,” he said. It’s important for employers and employees to realize emergency rooms work best for severe emergencies. Otherwise, they are very costly and care becomes fragmented as the worker is referred for follow-up and further care, Kiessling said. “Business owners and employees can speed recovery, shorten the duration of the case and help control their workers’ comp costs by seeking providers who have expertise in treating work-related injuries, and who are available and accessible when they are needed,” he said. “Also, it has been shown repeatedly that the faster the initiation of treatment is coordinated, including notification of the insurer, the more quickly the injured worker recuperates, the more closely their progress is monitored and the less likely that an attorney ❑ is sought to pursue a claim.”

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

OIL & GAS

Prudhoe Bay and the North Slope Oilfields Taking a look at the ‘big oil’ community

BY JACK E. PHELPS

Deadhorse aerial in summer looking south.

ontemplating Alaska’s natural beauty and diverse geography, someone once said: “The only thing Alaska lacks is a good desert.” In the popular sense of a hot, arid, sandy region, this may be a true statement. But the reality is quite different. While the etymology of the word “desert” leads us back through the Latin to the idea of an uninhabited region, the scientific definition of a desert actually revolves around precipitation. According to the U.S. Geological Survey, arid lands (deserts) by definition receive less than 10 inches of annual precipitation. Alaska’s North Slope fits this definition and is therefore an Arctic desert. Of course, being 250 miles north of the Arctic Circle, this desert is anything but hot. The highest recorded ambient

air temperature was 83 degrees, and that was 20 years ago. On the other hand, it can get cold. On Jan. 27, 1989, the Weather Service recorded still air temperature of minus 62 degrees Fahrenheit. The next day, the temperature had risen to minus 54 degrees, but the wind had picked up and was blowing at 31 knots. This, according to the Weather Service, produced a wind chill factor of minus 135 degrees Fahrenheit. The landscape on most of the North Slope appears barren. But instead of sand dunes and sagebrush, it is covered by moss, lichens and other low-growing tundra plants. And lots of water; there are lakes, ponds, streams and rivers everywhere. North of Atigun Pass, there are no trees at all. State Representative Reggie Joule, who has represented the

North Slope in the Alaska Legislature for more than two decades, once jokingly remarked, “I don’t like clear cuts. Many years ago, we clear cut our forests on the North Slope and they never grew back.” For centuries, the desert region north of the Brooks Range was home to scattered villages of Inupiat-speaking Eskimos, grizzly and polar bears, Arctic fox and snowshoe hares. The Central Arctic caribou herd, consisting of only about 5,000 animals at the time oil production began, wandered in and out of the Prudhoe Bay area, and the Porcupine caribou herd occasionally spent summers on the coastal plain of what is now the Arctic National Wildlife Refuge to the east of Prudhoe Bay. Inupiat whalers plied the Chukchi and Beaufort

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

seas, based out of places like Barrow, Point Lay and Point Hope, working in the region’s only industry.

NORTH SLOPE CHANGES All that began to change in 1968. That year, Arco (newly formed by the merger of Atlantic and Richfield Oil Co.) drilled the Discovery Well at Prudhoe Bay, revealing the existence of North America’s largest oilfield. This set in motion a series of events that would change the landscape and the economic fortunes of the North Slope forever. Plans were made for major investments in oilfield development around Prudhoe Bay, for an access road and for a mammoth pipeline project that would transport crude oil from the North Slope to the yearround, warm water port of Valdez, 800 miles to the south. Those plans necessitated resolving long-standing land claims for Alaska’s Native people, culminating in the Alaska Native Claims Settlement Act (ANCSA), which was signed into law Dec. 23, 1971, by then-President Richard Milhous Nixon. This created

Prudhoe Bay Post Office.

12 land-owning Alaska Native regional corporations, including Arctic Slope Regional Corp. (ASRC), which has, since the beginning, been involved in the oilfields and associated developments on the North Slope. The activities not only transformed the landscape of the area, but brought jobs and

prosperity to the indigenous people and many others throughout Alaska.

THE OILFIELDS TODAY Today, the area is a constant beehive of activity. While exact population figures vary, thousands of residents, contractors and shift workers are busily

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

stay mobile Peak’s All Terrain Vehicles can carry loads of up to 50 tons witho without hout an an impact on the environment, and they are recognized as “Summer Approved” for tundra travel by the State of Alaska’s Division of Natural Resources. Our ﬂeet of ATV’s are an investment toward protecting the environment and supporting the petroleum industry in its effort to explore and develop Alaska’s Arctic Regions. We are mobile when you are ready to explore.

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employed in the oil, gas and support industries on a year-round basis. The lion’s share of Alaska’s economic wellbeing, including nearly 85 percent of the State’s annual unrestricted revenue, derives either directly or indirectly from oil and gas exploration, development and production. The majority of that activity centers around Prudhoe Bay. In the immediate vicinity of Deadhorse, there are several active oilfields producing crude for shipment down the trans-Alaska oil pipeline. Among the biggest are Prudhoe Bay itself and Kuparuk to the west. Other important contributors are Milne Point, north of Kuparuk; Point McIntyre, northeast of Prudhoe; and some offshore island facilities, including Endicott, Northstar and Liberty. Since 1989, ongoing exploration has caused development to spread beyond the original expectations of the early 1970s. Among these newer developments are Alpine, across the Colville River to the west; and Badami, far to the east. Badami is currently not producing, but Point Thomson, even farther east, is in the development stage and will eventually tie into collector pipes already in place at Badami.

OILFIELD OWNERSHIP The ownership of the oilfields in this widespread complex is spread across a variety of well-known oil companies, dominated by the so-called big three: BP, ConocoPhillips and ExxonMobil. In addition, two independents, Eni Petroleum and Pioneer Natural Resources, are currently working to bring new fields into production. Access to the oilfields at Prudhoe Bay is restricted. The oil companies have strong security measures in place to protect their important assets on the North Slope, and permission must be granted for anyone to be within the perimeter. These restrictions have increased since the terrorist attacks on the U.S. took place Sept. 11, 2001. Visitors used to be able to visit Pump Station 1, and have their pictures taken at the beginning of the pipeline, but this is no longer the case. Tour companies are still able to bring tourists into the fields, but the only allowed stop is at the East Dock on the shores of the Beaufort Sea, according to security company personnel.

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

WHEN CAPABILITY COUNTS...

...COUNT ON FUGRO www.fugro.com

Welcome to Deadhorse sign.

THE HAUL ROAD Deadhorse, Alaska, is a small town just outside the gates to the oilfields. It lies at the end of the Dalton Highway, constructed at a cost of $150 million, which runs from Livengood to Prudhoe Bay. The Dalton was, for many years, known simply as “the haul road,” and a permit was required to drive on it to Deadhorse. In 1995, it was opened to public traffic, but the gravel highway is still dominated by big rigs hauling goods to the North Slope. It is reached from Fairbanks, via the Elliott Highway. The Dalton officially begins at Livengood, where the Elliott intersects it. Deadhorse is approximately 500 miles from Fairbanks. Driving a private vehicle to Deadhorse is not a prospect for the faint of heart. One issue is the trucks. They are big and they are heavy, especially on the north-bound run. The good news is the dust clouds let you know they are coming. The bad news is there aren’t a lot of turnouts. So you just have to get over and be prepared to peer through the dust cloud for a few seconds after they pass. The second factor is the lack of facilities. American drivers are generally a spoiled bunch. We have come to expect gas stations every few miles, rest stops, restaurants and all kinds of services to be available on our travels. That’s just not the case on the Dalton Highway. Once you leave Livengood, heading north, be prepared to go all the way to Coldfoot before you need to stop. Two hundred forty miles south of Deadhorse, Coldfoot is located very close to the halfway mark between Fairbanks and Prudhoe Bay. A very old mining www.akbizmag.com • Alaska Business Monthly • June 2011

supply station formerly known as Slate Creek, it has been revitalized by the oil boom on the North Slope. Coldfoot does not have a real post office. Only 13 people call the place home year-round. But it does have its own State Trooper, a café truck stop, a gas station and four telephones. Lodging can be obtained at the Arctic Circle Inn or at Coldfoot Camp. The latter also offers an RV parking facility, tent sites and showers. It is also the jumping off point for visits to Gates of the Arctic National Park and the historic mining town of Wiseman.

DEADHORSE Compared to Coldfoot, Deadhorse is a veritable metropolis. Besides a post office with its own zip code, there are four hotels, two gas stations, a NAPA auto supply store known as Brooks Range Supply, and the Prudhoe Bay General Store. There isn’t much else. Prudhoe Bay Hotel is one of the places to stay in Deadhorse, but most of the rooms are usually occupied by oilfield workers, mostly contractor employees working on projects for the oil companies, according to Joree, one of the managers. The original Prudhoe Bay Hotel burned to the ground nearly 30 years ago. The current buildings were constructed and put into service in 1984. Of the four hotels, only one – Arctic Caribou Inn – does a significant portion of its business with tourists. The others, although sometimes available to tourists, cater specifically to workers on assignment in the area and it can be difficult to obtain a reservation. At least two major tour companies provide bus tour packages to Prudhoe Bay. Holland America and Princess Tours bring visitors to Deadhorse every year. An arrangement with Arctic Caribou Inn provides accommodations, and trips to dip a toe in the Arctic Ocean at East Dock are included. Approximately 25 percent of the inn’s rooms are in use by tourists during the summer months. The hotel also provides Native culture information to the tourists by regularly scheduling “Heritage Hour” presentations for its guests, and runs its own tour business, called Tatqaani Tours. A few Alaska companies dominate business at Deadhorse. The Arctic Oil Field Hotel was operated by the giant

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

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Joe and Deb Bernhardt have worked at the Prudhoe Bay General Store for nearly 30 years.

oilfield service company Veco for many years. It was acquired by CH2M Hill when that company bought the assets of Veco a few years ago. The Chevron service station is owned by NANA Regional Corp., the Alaska Native corporation with territory in Western Alaska south of Arctic Slope Regional Corp. territory and north of the Seward Peninsula. NANA also owns and operates the Arctic Caribou Inn. Brooks Range Supply, Prudhoe Bay General Store, Colville Waste Management Services and the Tesoro station are all owned by Colville Inc. The company also provides fuel services to oilfield locations in the greater Prudhoe Bay area. The Aurora Hotel in Deadhorse is the newest accommodation in town. Built just two years ago, it is a thoroughly modern facility. According to Derrick Honrud, an engineer with PND Engineering of Anchorage, it is a very pleasant place to stay while working on the Slope. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s modern and comfortable,â&#x20AC;? Honrud says. A spacious living room area with a central fireplace dominates the first floor. A modern kitchen area and snack bar makes goodies available to guests, which are included in the price of the room. A summer motor trip to Prudhoe Bay is probably not high on everyoneâ&#x20AC;&#x2122;s vacation plans. But if you want to see some amazing country, abundant wildlife and the throbbing heart of Alaskaâ&#x20AC;&#x2122;s economy all at the same time, there is no other alternative. Besides, you cannot drive to any other place on the North American continent that is as far to the north and still within the United States. Give it a try. One thing you will certainly see is lots of caribou. Remember that little Central Arctic herd that numbered only 5,000 in 1975? It is now more than 66,000 strong. â?&#x2018;

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

RIGHT MOVES ANCHORAGE ATHENA SOCIETY

Jane Angvik received the 2011 ATHENA Award from the Anchorage Chamber of Commerce and the Anchorage ATHENA Society. Angvik, a former Anchorage Assembly member, is principal of Angvik & Associates. She was Angvik honored for her example of excellence and efforts to encourage women in professional endeavors.

ALASKA COMMUNICATIONS SYSTEMS GROUP INC.

Dave Karp was appointed to the Alaska Communications Systems Group Inc. board of directors. Karp is president and chief executive of Northern Air Cargo Inc.

FEDERAL GOVERNMENT

Blair Flannery, Ora Schlei and Cara Lewis of the U.S. Fish and Wildlife Service Alaska Region received the federal Rachel Carson Award. The trio is the Conservation Genetics Laboratory Mixed-Stock Analysis Rapid Response Team. They received the USFWS award for innovative efforts to aid in international salmon fisheries management.

HEART OF ANCHORAGE AWARDS

Anchorage Downtown Partnership Ltd. presented the 2011 Heart of Anchorage Awards, which honor individuals, businesses and organizations for outstanding service. Award winners are: Chugach Mountain Award – Kelley Montgomery, Starbucks, and David Rivera, Consumer Credit Counseling; Dena’ina Award – Snow City Café and Anchorage Chamber of Commerce; Ship Creek Landing Award – Jared Tyler, South; Spirit of Alaska Award – Jason Easter, Trick or Treat Street and Positive Damage, NeighborWorks; George M. Sullivan Award – Raquel Edelen,

COMPILED BY NANCY POUNDS Hotel Captain Cook and Julie Saupe, Anchorage Convention and Visitors Bureau; Captain James Cook Award Ginger, Matt Gill; and 2011 Heart of Anchorage Award – Zak Kaercher – zAKs Boardroom (posthumously).

STATE GOVERNMENT

O’Halloran

Vigue

Bill O’Halloran was appointed director of Northern Region Maintenance and Operations for the Alaska Department of Transportation and Public Facilities. O’Halloran has served as Northern Region Aviation Maintenance and Operations superintendent for the past 12 years. Mike Vigue was appointed the State Department of Transportation and Public Facilities’ chief of surface transportation planning in Statewide Program Development in Juneau. Vigue’s career began with DOT&PF, where he worked in highway data and Alaska Marine Highway System planning. He later served the Maine transportation department and the State’s Federal Highway Administration office. Lt. Gov. Mead Treadwell was chosen chairman of the Aerospace States Association. The group promotes safety, education, work force development and national security in the aviation and aerospace industries.

UNIVERSITY OF ALASKA ANCHORAGE

Nicolas Dighiera was hired as a safety officer for the University of Alaska Anchorage Environmental Health and Safety/Risk Management Services. He previously worked as health and safety compliance manager for Alaska Powder Co. He also served as an explosive ordinance craftsman with the U.S. Air Force.

UNIVERSITY OF ALASKA FAIRBANKS

Kyong Hollen was honored as the University of Alaska Fairbanks School of Management’s business leader of the year. Hollen was honored for her leadership, business excellence and community service. Hollen spoke little English when she came to the United States in 1986. She later started her own business, K-Janitorial, and worked part time at Santina’s Flowers and Gifts. In 1999, she purchased Santina’s Flowers from the retiring owner.

SOUTHEAST ALASKA REGIONAL HEALTH CONSORTIUM

Smith

Crochelt

Dr. Donna Smith was hired at the SouthEast Alaska Regional Health Consortium S’áxt’ Hít Mt. Edgecumbe Hospital in Sitka as a specialist in obstetrics and gynecology. In 2010 she served as a visiting specialist at the hospital. Earlier in her career, Smith worked in private practice and at PeaceHealth Ketchikan General Hospital for 13 years. Dr. Robert Crochelt was hired as a general surgeon at the Sitka hospital. Crochelt has been elected chief of staff in Ketchikan, and chief of surgery at White Community Hospital in Aurora, Minn., and Davis Memorial Hospital in Elkins, W.V. Smith and Crochelt are married. Gary Weglarz was hired as behavioral health clinician at SouthEast Alaska Regional Health Consortium’s Juneau Behavioral Health Clinic. He previously served as a behavioral health clinician with the North Slope Borough in Barrow and with Chugachmiut Inc. in Port Graham.

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

RIGHT MOVES U.S. S ARMY CORPS OF ENGINEERS ALASKA DISTRICT

David Gerland was promoted to deputy chief of construction operations division with the U.S. Army Corps of Engineers Alaska. District. He most recently served as Denali resident engineer where he managed the growing program for International and Interagency Services and provided support for the environmental and special programs branch. Jackie Fabrizzio was promoted to branch chief for military technical engineering in the engineering division. Fabrizzio previously served as chief of the Alaska District’s construction support branch.

ALASKA VOLUNTEERS OF THE YEAR

First Lady Sandy Parnell honored several Alaskans as 2011 Volunteer of the Year recipients. A committee of Alaskans selected the honorees. The First Lady’s Volunteer of the Year Awards were presented to: Marilyn Freitag, Anchorage; Heidi Haas, Fairbanks; Debby L. Hudson, Anchorage; Brianna Jeffers, Nenana; Bobbie McCready, Ketchikan and Rebecca Steadman, Valdez.

CRW ENGINEERING GROUP LLC

Van Le was hired as a senior planner at CRW Engineering Group LLC. She specializes in land use, transportation and park planning. Le previously worked as a transportation planner for the Municipality of Anchorage Community Development Department.

THREE PARAMETERS PLUS INC.

Sally Morsell was hired as a senior aquatic scientist at Three Parameters Plus Inc. She has more than 20 years of experience in environmental project management. Morsell has worked for Northern Ecological Services and HDR Alaska.

SPONSORED RESOURCE DATA INC.

Amanda Klapstein joined Resource Data Inc.’s Anchorage office as geographic information systems programmer and analyst. Her career experience has focused on natural resource science, data analysis and cartography. Michael Juvrud was hired as a senior GIS programmer and analyst, also in Anchorage. He earned a bachelor’s degree in international business from Hamline University.

NORTHERN AIR CARGO

served as the presiding judge of the Third Judicial District of the Alaska Superior Court in Anchorage, a position she has held since 2009.

NANA MANAGEMENT SERVICES LLC

GENERAL COMMUNICATION INC.

Megan Delany was hired as vice president of federal governmental affairs and counsel for General Communication Inc. She most recently worked as founder and president of Delany Advisory Group LLC, a Washington, D.C.-based consulting firm specializing in telecommunications and technology issues.

SEN. LISA MURKOWSKI’S OFFICE

Matthew Felling was appointed as communications director for Alaska Republican Sen. Lisa Murkowski. Felling most recently worked as lead political reporter and anchor for CBS 11 News Anchorage. He has also worked 10 years in Washington, D.C., as a TV news reporter also handling political commentary and analysis.

Dickens

Matt Dickens was hired as vice president of sales at NANA Management Services LLC. He has more than 15 years of experience in senior sales and management positions. Thomas Gilbert was appointed vice president of staffing. He has more than 15 years of experience in the staffing industry.

WHPACIFIC

DR. RAYMOND WILSON

Rheumatologist Dr. Raymond Wilson has opened a private practice in Fairbanks to treat patients with arthritis. He previously operated a private practice in Baltimore, which he opened in 1992.

TUNISTA INC.

Craig von Holdt was promoted to general manager and director of operations at Tunista Inc. Von Holdt previously served as project manager for the furnishings management office and moving/ relocation services contracts on Joint Base Elmendorf-Richardson.

FEDERAL GOVERNMENT

Sharon Gleason was nominated to serve as a judge with the U.S. District Court for Alaska. Gleason has

Gilbert

Caperton

Joe Caperton was hired as manager of WHPacific’s architectural department in Alaska. He has more than 40 years of architectural design and management experience, including 19 years handling projects in Alaska.

WELLS FARGO

Andy Petro was appointed Alaska commercial real estate manager for Wells Fargo. During his 20-year career with Wells Fargo, Petro has served as a commercial leasing officer, store manager and business relationship manager in Ketchikan. Sig Casiano was chosen senior commercial real estate industry specialist. Casiano has 14 years of financial services experience in retail and business banking sectors. Jennifer Davis-Hile was appointed Anchorage ❑ business relationship manager.

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

OIL & GAS

New Players on the North Slope Some companies willing to take the risk BY VANESSA ORR

Photo by ©Judy Patrick 2011

A close-up view of Badami facilities without a drilling rig.

s another drilling season gets under way, a number of familiar and not-so-familiar faces are staking a claim on Alaska’s North Slope. Even as the amount of oil produced in the area continues to decrease at a rate of 6 percent per year, some companies are willing to take the risk there is still plenty of oil to be had.

REPSOL In March 2011, for example, Repsol, Europe’s fifth-largest oil company and one of the 10th largest oil companies in the world, announced an explora-

tion joint venture with Armstrong Oil & Gas subsidiary 70 & 148 LLC, and GMT Exploration LLC, to explore and develop an area of roughly 2,000 square kilometers on the North Slope. “We think that Alaska is a very attractive area,” explained Kristian Rix, deputy director for Media Relations for Repsol. “We believe that there is less exploration risk than in other areas and a greater chance of finding resources.” Repsol, which is privately owned, currently operates in more than 34 countries with its main operations in the U.S. taking place in the Gulf of Mexico.

Repsol owns 93 exploratory blocks offshore in the Chukchi Sea and holds a 20 percent stake in 71 offshore blocks in the Beaufort Sea, along with Shell Offshore Inc. and Eni Petroleum. In 2009, studies were performed to determine that area’s exploratory potential. “We have been interested in the United States for some years now, and have also been looking at opportunities in the whole of North America,” Rix explained. “Our strategy is to invest more in OECD countries, and we think that in the U.S., Alaska is an exciting area and has a lot of potential which we are

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

willing to go to considerable expense to explore.” Organisation for Economic Cooperation and Development (OECD) countries, which include the United States, Canada, Australia, Japan, the United Kingdom, France, Spain and 27 others, are dedicated to the pursuit and preservation of democracy and the market economy. According to its website, www.oecd.org, one mission of the organization is to create foundations for economic growth that can be sustained long term. As part of the agreement, Repsol will fund a broad-reaching exploration and development program on leasehold held by 70 and GMT, with Repsol and 70 collaborating on all apects of the program. Repsol’s working interest in the transaction will be 70 percent. “It’s a fairly simple joint venture; they hold the assets on which we will operate,” said Rix. “We have agreed to an investment commitment of at least $768 million, with exploration beginning this coming winter. Depending on the outcome of the first exploration period, we may make further investments.”

According to a Repsol press release, the company has significantly boosted its onshore and offshore exploration activities in the last five years, resulting in some of the world’s largest oil and gas discoveries. Repsol’s upstream unit in 2010 posted a record reserve replacement ratio of 131 percent and incorporated resources that significantly boosted the company’s future prospects. The company, which has 36,000 employees worldwide, has not yet decided if it will establish an office in Anchorage.

ARMSTRONG OIL AND GAS Armstrong Oil and Gas first entered Alaska in late 2001. Though the company’s first focus was oil, they shifted their attention for a number of years to the Kenai Peninsula’s natural gas reserves, where this year they successfully brought the North Fork unit into production. After selling off its northern Alaska leases in 2005, Armstrong decided to re-enter the oil market in 2008 as the largest bidder in both the 2008 North Slope and Beaufort Sea areawide lease

sales. In 2009, the company also went big, bidding as 70 & 148 LLC, taking 68 of 80 tracts for $7.6 million in apparent high bids, including substantial acreage on the west and southwest side of the North Slope. With the acreage from the sale, the company’s state oil and gas lease acreage now totals roughly 475,000 acres. Based out of Denver, Colo., Armstrong has a successful track record, having been involved with its partners in the development of the Oooguruk, Nikaitchuq and Tuvaaq prospects. After entering the state in 2001, the company introduced other explorers to the area including Pioneer Natural Resources, Kerr-McKee and Eni Petroleum. This year, the company’s subsidiary, 70 & 148 LLC, which is named for the latitude and longitude of Prudhoe Bay, is hoping to develop another successful prospect through its relationship with Repsol.

SAVANT ALASKA LLC Savant Alaska LLC, a subsidiary of Denver-based Savant Resources, has been in Alaska since 2006. In Novem-

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ber 2010, the company restarted the small Badami oil field east of Prudhoe Bay as a farm-out arrangement with leaseholder BP Exploration Alaska. The project is a joint venture with Arctic Slope Regional Corp., which has a 10 percent stake in the new wells; Savant has a 90 percent stake. The Badami field had been shut since 2007 when oil production dropped to 900 barrels per day. According to Greg Vigil, executive vice president of Savant Alaska, there are currently five producing wells onsite, producing approximately 1,500 barrels of oil a day. “This is still low,” said Vigil. “Our goal is to bring one more well online, then evaluate whether or not we’ll do more drilling.”

ENI PETROLEUM

907.278.1877

In early February 2011, Eni Petroleum, who first entered the Alaska market in 2005, began production at the Nikaitchuq field. The offshore field, which is the Milan-based company’s first operated Arctic project, is expected to produce for more than 30 years with peak production of 28,000 barrels of oil per day. Recoverable reserves are estimated at 220 million barrels of oil. The field is 100 percent owned and operated by Eni. According to a company press release, when the field is fully developed, it will include 52 wells; 22 onshore and 30 offshore. To date, 12 onshore wells have been drilled and the processing facility has been completed. The remaining wells, including the offshore wells which will be drilled from a pad near Spy Island, are expected to be drilled by 2014. Eni is applying several of its proprietary technologies to drill its wells, which will combine a vertical depth of 4,000 feet with a horizontal reach of up to 20,000 feet. The offshore facilities will be connected to the onshore facilities by an undersea bed pipeline bundle, which the company says will be the heaviest bundle ever installed in the Arctic. According to Eni’s press office, the company is working to minimize the impact on the environment through the use of technology that includes zero flaring, pipe-in-pipe technology for hydrocarbon transportation, spill

containment devices in all modules and low emission turbine generators. In addition to its interest in the Nikaitchuq field, Eni also owns lease interests in the Gulf of Mexico and in Texas. The company holds 151 leases on the North Slope, which includes 30 percent of the Oooguruk oil field, which is operated by Pioneer Natural Resources, and federal Chukchi Sea leases.

GREAT BEAR PETROLEUM LLC Similar to Armstrong Oil and Gas’ play for land in 2009, Great Bear Petroleum LLC, based out of Austin, Texas, got a lot of attention at the Oct. 27, 2010, Alaska North Slope areawide lease sale, taking 105 tracts, or more than half a million acres, with more than $8 million in apparent high bids. The tracts are primarily located south of Kuparuk and Prudhoe. The company is also attracting attention for its promotion of hydraulic oil fracturing – fracking – as a way to tap into oil reserves. According to a presentation made to the House Resources Committee in February of this year by company principals, Great Bear’s vision is “to lead the industry toward the development of unconventional oil and gas resources from known, prolific rocks on the North Slope.” Great Bear hopes to launch an aggressive program that supports 250 wells per year for 20 years, starting in 2013. The company estimates that it can deliver minimum steady state oil production of approximately 150,000 barrels of oil per day with a significantly higher peak production rate. One of the ways in which it might do this is by fracking, the process of creating small cracks or fractures in underground geological formations to allow oil or natural gas to flow into the wellbore and on to the surface. These cracks are made as a result of water, sand and chemicals being pumped into a well arm at great pressure until the arm shatters and tiny fractures are created for the oil to flow through. According to Great Bear President and Chief Operating Officer Ed Duncan, fracking will enable the company to pull oil from the “source rocks” in Prudhoe Bay. He estimates approximately 20 percent has already been pumped, leaving 80 percent of the resource still available.

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

After the rock cores are analyzed, Great Bear will design a fracture injection test for the vertical wells ... “What might surprise people is that oil fracturing has actually been taking place in Alaska for about 20 years,” said Duncan. “The technology is already here.” Great Bear is moving “at a blinding pace,” according to Duncan. In April, the company contracted with SolstenXP for Arctic operations planning and ASRC Energy Services, a subsidiary of Arctic Slope Regional Corp., for permitting and regulatory services. “The permitting of the first four wells is under way, and right now we’re just waiting for groundmelt so that we can review locations,” said Duncan. “Plans have shifted forward about four months from what we had originally planned,” he added. “We expect to begin drilling in as early as October of this year.” Plans have also changed with respect to the drilling plan. Great Bear originally planned to drill relatively small diameter cores, but now plan to drill four full-scale vertical test wells. “After receiving a lot of input from our service company providers, we have decided to drill full-scale vertical boreholes through the Shublik formation to approximately 10,000 feet that will allow us to do more sophisticated rock mechanics studies,” said Duncan. At the time of this article, Duncan was hoping to receive permission to drill

from small gravel spur roads off of the Dalton Highway, which were originally been constructed when the highway was built. After the rock cores are analyzed, Great Bear will design a fracture injection test for the vertical wells, which will be followed by the drilling of a 5,000 foot lateral well in the Shublik. “The first full production test will likely happen in the first or second quarter of 2012,” said Duncan. Though the project is moving quickly, Duncan said that the company is committed to going forward in a reasonable and responsible manner. To this end, Great Bear is working to keep the lines of communication open with all interested parties. “We got a very supportive reception from members of the legislature, who wanted to know more about the project,” said Duncan. “We also recently met in Anchorage with the Alaska Conservation Alliance; there were at least 10 different organizations there either in person or by phone, including the Sierra Club, National Wildlife Federation and regional environmental groups. We provided them with as much detail about our plans as they wanted; we believe in being very open about the challenges we face, and about the technology we will use as it applies to Alaska.” As for why Great Bear has decided to make such a big commitment to Alaska now, Duncan said that it was simply the right time. “As a small company, you have to be fast in order to win,” he explained. “Alaska has some of the best source rocks in North America, the fracturing technology is available, and the leases were avail❑ able. So we moved.”

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

UTILITIES

ENSTAR

50th Anniversary Company expects to keep gas flowing BY LOUISE FREEMAN

Photos courtesy of ENSTAR Natural Gas

Historical photos of crews laying pipeline for natural gas distribution in Southcentral Alaska.

line broke at Seventh Avenue and Post Road, shutting down the city’s main power plant at 5 p.m. on March 27. The company that rushed to remedy this situation was Anchorage Gas, a young company, just three years old. In only

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

n 1964, when the largest earthquake ever recorded in North America hit Anchorage, one of the things most vital to the functioning of the downtown area was disrupted – the supply of electricity. The natural gas

30 hours, they managed to restore the supply of gas to the two gas-turbine generators that provided downtown with electricity. They accomplished this quick repair by running a temporary pipeline aboveground with the help of

equipment and manpower from several power companies in the Pacific Coast Gas Association in Seattle. Anchorage Gas, now known as ENSTAR Natural Gas Co., began as a small operation in 1961 and is marking its 50-year anniversary this year, with a current total of 180 employees. The gas transportation and distribution company got its start in 1959 when a group of investors in Texas saw the potential market for gas-generated electricity in a growing city that had, until then, supplied its energy needs with fuel oil and coal. In 1960, Anchorage Gas started laying pipeline to Anchorage from a Kenai Peninsula gas field owned by producers Ohio Oil Co. (now Marathon) and Union Oil of California (now UNOCAL). Anchorage Gas encountered a significant challenge in laying pipe across nine-mile-wide Turnagain Arm, which experiences the second highest tidal changes in North America. The first attempt failed; a better way had to be found than using tractors and tugboats to haul the pipe across the challenging expanse. The pipes had been pulled into place on float bags, which were then popped. In theory, the concreteweighted pipes would then sink into place; it didn’t work. Anchorage Gas met with better success when they brought in a 240-foot pipe-laying barge. Sections of pipe were welded together on deck and then lowered into a ditch formed by high-pressure water and air pumps. Simultaneously, Anchorage Gas had been laying a network of 28 miles of distribution lines to business and homes throughout Anchorage. Natural gas began to flow through the completed system in July 1961. The first customer to receive a meter and have gas delivered to their building was Rice Bowl Restaurant, now the oldest Chinese restaurant in Anchorage, which was then on Fifth Avenue.

took on this test of its capabilities. Although electricity was quickly restored to downtown Anchorage, it took several months to test the distribution grids and customer gas pipes and appliances so that service could be restored throughout the rest of the city. The late-1960s was a period of rapid expansion for Anchorage Gas as they began providing gas to both Fort Richardson and Elmendorf Air Force Base, now Joint Base Elmendorf Richardson. New gas lines were built from gas fields across Cook Inlet, and service was expanded to include most of Southcentral Alaska. In 1967, Anchorage Gas was acquired by Alaska Interstate Co. and renamed Anchorage Gas and Service Co. in 1972. In 1982, the name was changed again, to ENSTAR Natural Gas Co. ENSTAR was sold to Seagull Energy Corp., an exploration and production firm based in Houston, in 1985. In 2000, ENSTAR was purchased by SEMCO Energy Corp., based in Port Huron, Mich.

TODAY’S VIEW ENSTAR now has 131,000 customers, with offices in Wasilla and Soldotna in addition to its headquarters in Anchorage. To meet the needs of their growing customer base, the company has contracts to buy approximately 30 billion cubic feet of gas this year from Marathon Oil Co., Unocal Corp. and Anchor Point Energy. Landing contracts to buy this much gas from area producers has become increasingly difficult over the years. This year was the first year ENSTAR did not have contracts in place to meet their full anticipated needs; the anticipated shortfall in future years may be as much as one-third of projected needs.

The present shortage of gas is caused by a lack of additional wells being drilled in Cook Inlet, said John Sims, manager of corporate communications and customer service for ENSTAR. To meet present demand an average of 13 successful wells a year need to be completed for the next 10 years. This year only five wells are currently planned for development. ENSTAR is evaluating all possibilities, including the importation of liquid natural gas. “There is no quick solution,” Sims said. “One thing that will help will be storage. It allows us to purchase gas in summer and inject it into a storage facility. Storage will go a long way to help, but is not the beall-and-end-all solution.” ENSTAR has a $180 million contract with Cook Inlet Natural Gas Storage to inject gas into the ground in the summer of 2012, which will then be available for withdrawal in the winter of 2012-13. Storage will help need the fluctuating needs throughout the year; wintertime demands can be as much as 12 times the amount of gas required in the summer. “If a bullet line comes to fruition that will definitely help. But we need something to bridge the gap for the next 10 years. Everything’s on the table at this point,” Sims said. ENSTAR has put a significant effort into educating their customers that, when there is peak demand during a cold snap, they may be called upon to conserve gas. “If they are educated about it, I think Alaskans are willing to help out,” Sims said. “We’ve done our best to keep gas flowing for the last 50 years and we expect that to continue for an❑ other 50 years.”

CHALLENGING TIMES In 1962, Anchorage Gas began providing gas to the City of Anchorage, which had bought several gas-fueled generators, converted from WWII submarine engines, to create electricity from natural gas. Two years later, the quake of 1964 was a big challenge for the young company, but Anchorage Gas willingly www.akbizmag.com • Alaska Business Monthly • June 2011

TOWNS

TRANSITION

BY HEIDI BOHI

Photo by Craig Cheledinas, “Ice Art Joust” sculpted by Craig Cheledinas, Kevin Roscoe and Steve Brice

This massive ice sculpture at the World Ice Art Championships demonstrates how intricately detailed and larger-than-life these beautiful sculptures can be.

Fairbanks

Resolving energy issues

ou know you’re from Fairbanks if you’ve driven own the road and seen a sign that says “Mushers Crossing.” You know you’re from Fairbanks if the 365-mile trip to Anchorage is a weekend trip. You know you’re from Fairbanks if 68 percent of your energy budget goes to heat your home. Okay, so the last one isn’t a joke. And it’s especially no laughing matter if you’re one of more than 31,000 residents in the community who, for the past 20 years, have continued to

brace themselves against energy costs that are on average 10 times higher than Anchorage and add up to a $618 million annual tab for fuel and electricity needed to heat and light homes and buildings and transport people and products coming in and out of the community. Besides the crippling heating bill, 16 percent of these energy costs go to electricity and the remaining 16 percent to transportation. In January, the coldest month of the year, it is not unusual for temperatures to dip between -30 and -60 degrees during the long winter season, and then

shoot up into the 90s during the summer. With heating oil at almost $4 per gallon and electricity at more than 18 cents per kWH, it is easy to see how monthly operating costs can quickly eat up business profits, contributing to a cost of living that is almost 30 percent higher than the national average.

ENERGY DRAIN Besides the drain on locals’ wallets, the energy crisis that plagues Alaska’s second largest community – along with 70,000 other residents in the surrounding North Star Borough com-

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NEW PHOTO TO COME

munities – results in a host of other problems in terms of both economic development and quality of life. Local

leaders and elected officials repeatedly point to this as the No. 1 obstacle facing the community.

“Ninety percent of every dollar spent on energy leaves the community,” says Jim Dodson, president and chief execu-

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the summer wildfire season as fine particles build up in the air. The Environmental Protection Agency (EPA) designated the Fairbanks area as one of 31 nationwide that have not attained the fine particle standard of 2.5 to protect public health from harmful levels of particulate matter. Although the borough is developing a plan to reduce pollution so it can be reclassified as meeting attainment standards, until the community comes up an alternative form of energy, there is not much that can be done by the 2014 deadline.

Photo courtesy of Fairbanks CVB

tive officer of the Fairbanks Economic Development Corp. says. “It has almost no multiplier effect.” As the cost of fuel continues to increase, increasingly, locals rely on burning wood as a major source of affordable heat, creating air quality issues in the bowl-shaped area. It is not uncommon for the borough to ask people to voluntarily stop wood burning when the air quality in the area drops below federal standards. During the coldest part of the winter, air pollution levels are often higher than readings during

Deb Hickok, president and chief executive officer, Fairbanks Convention and Visitors Bureau.

“We are under the gun with EPA,” Dodson says. Fairbanks also struggles with one of the highest unemployment rates in the state, consistently coming in at about 7.5 percent – it 8.8 percent nationwide – but it is difficult to attract new businesses to the community because of the high operating expenses resulting from energy expenses. With energy impacting every aspect of Interior living from private and public transportation to home construction, after years of optimistically banking on the potential gas pipeline, city, borough and FEDC are taking matters into their own hands. To date, most agree the best bridge solution for lowering energy costs in the near future is a natural gas trucking operation proposed by the borough’s port authority. If the plan gets the $250 million in State support it is requesting, it would be even more economically feasible. The borough also has agreed to contribute $300,000 to help launch the project. If the proposed project becomes a reality, Dodson estimates it could reduce the city’s current energy costs by 45 percent to 60 percent, or about $50 million. Although it is not a new idea, Mayor Jerry Cleworth says, “I sense an urgency that I have not felt in the past.” Delaying a solution could also put local military bases under scrutiny (cont’d on page 76)

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Alaska Wild Berries Higher in Antioxidants Fairbanks aims to align academics and entrepreneurs BY HEIDI BOHI

s Fairbanks explores different ways to help advance economic development, the University of Alaska Fairbanks continues to work with the community on these efforts by aligning academics with entrepreneurship to find ways to turn research and innovation into jobs and economic development that benefit both the school and local residents. Harvesting wild Alaska blueberries is one of the most recent ideas. Research shows berries in the Interior, and statewide, have up to 100 times more antioxidants than blueberries from more temperate climates. These antioxidants and other bioactive compounds protect cells from the unstable molecules that may cause cancer or Alzheimer’s by slowing or preventing the development of these diseases, as well as the effects of aging, such as memory loss. Why are Alaska berries better? Soil and environmental pressure are two of the biggest contributing factors. “The more the plant is pampered, the more it loses its beneficial components – a lot of the molecules that protect the

plant, also protect us if we add these to our diet,” Tom Kuhn, UAF associate professor of chemistry and biochemistry says, explaining some of the results of his research. Although the idea for developing a blueberry industry is just starting to get attention, Alaska has the largest acreage of wild blueberries anywhere in the country, including top producer Maine, which with only 60,000 acres generates about $250 million and 8,000 jobs during harvest season. Kuhn and local economic development leaders believe the labor intensive industry could result in thousands of statewide jobs in Alaska, too, ranging from beekeepers, land managers and botanists, to engineers, mechanics and supply-chain managers. Looking ahead, Kuhn says it is now a matter of continuing to draw attention to the idea by meeting with economic and business development leaders, Alaska Native corporations, government and philanthropists and get them to commit to moving ahead with a plan. ■

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(cont’d from page 74) for being shut down if the Department of Defense decides that energy cost would make operations economically prohibitive. The Alaska Gasline Port Authority, a joint venture of the borough and the City of Valdez, would buy Fairbanks Natural Gas, a private company that holds a contract to purchase North Slope natural gas from ExxonMobil. The port authority would expand the company’s fleet of trucks, which now haul gas from Cook Inlet, and supply North Slope gas to Fairbanks gas customers and the Golden Valley Electric Association (GVEA) power plant in North Pole. The authority would fund the purchase and expansion by issuing bonds, which would be paid off by local gas customers and GVEA.

VISITOR INDUSTRY Not unlike the rest of the state’s tourism industry, Fairbanks has had some slumps relative to the recordbreaking numbers in 2008 before the recession and change in cruise ship deployments, though it continues to be a mainstay of the economy there.

Most of this decline can be attributed to the reduction in the number of cruise-land tours featuring the Gulf of Alaska. Unlike the roundtrip Inside Passage voyages, the Gulf routes land tours typically begin or end in Fairbanks where passengers shop and take tours before returning home. “The reports from Fairbanks-based tourism businesses vary dramatically,” Deb Hickok, president and CEO of the Fairbanks Convention and Visitors Bureau (FCVB) says of about 400,000 visitors who make their way north during the summer. Larger companies not as diversified still report their numbers are down, while those operators with more of a mix of independent, international and local visitors are reporting slight increases. The winter tourism market attracts about 60,000 visitors a year and has grown slightly over the past five years, in part Hickok says, because it comprises tourism, as well as business and convention travel, and it may also be benefiting from the organization’s shoulder-season marketing efforts. Bed tax figures indicate that from 2009 to 2010 there was a 9 percent increase, but from 2008 to 2009, there

was a 13 percent decrease. Based on anecdotal information, she expects the cruise market to be flat this year, but there should be a slight increase in the number of independent and international travelers along the Railbelt. Princess will return a ship to the Gulf of Alaska in summer 2012, which is welcome news for Fairbanks tourism businesses that rely heavily on cruise passengers. One of the largest international inbound markets is Japan, and Fairbanks is serviced with direct flights from there in August, as well as winter, though she says it is too soon to see how the recent earthquake and tsunami disaster will affect recreational travel this year. Although Fairbanks has its share of challenges, the locals strongly support the visitor industry and other key business sectors that contribute to the economy and quality of life. “Fairbanks has always come through severe economic cycles and there’s a can-do attitude that impresses me,” Cleworth says looking back on his 59 years living there. “No matter what comes our way we always just ❑ make things work.”

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

INTERNATIONAL TRADE

Global Food Alaska Growing annual conference BY PEG STOMIEROWSKI

Photo courtesy of Merrill Sikorski Sikorski, Sikorksi Consulting Consulting, Kenai

s tourism ramps into high gear, seasonal currents are luring supply chain managers this month to the Kenai Peninsula to mingle – and create new jingle – at the biennial Global Food Alaska conference and showcase in Soldotna, a grassroots production initiative for decision-makers that is growing up into more of a permanent sustainability network. Participants are rubbing shoulders June 8 and 9 at an exposition both days at the Sports Center and a dinner and awards ceremony June 9 at Kenai Landing Resort. An optional, full-day site tour is set up for Homer June 10, visiting the Auction Block (live seafood auction), Bear Creek Winery and Kachemak Shellfish Growers. Select commercial buyers/purveyors will visit Bristol Bay to explore sustainable wildlife fisheries. Formally and informally, these food business professionals will be hooking up to discuss issues of certification, security, self-sufficiency, sustainability and economies of scale in regard to production, transportation, packaging, refrigeration, marketing, distribution and tracking issues involving Alaska’s food, beverage and agricultural products. To name a few, these include hay, taco shells, potato chips, cheese, honey ciders, candies, coffee, biscotti, chocolate, jams, syrups, mustards, pickles, dog treats, beer, wine and vodka. Event registration for suppliers ranges from $525 to $625. Global Food Collaborative, the event organizer, was started in 2007. While development of such astute communication channels among buyers and sellers might seem quite progressive, this movement has been around for 20 years in the Last Frontier. It was in part the brainchild of Robin Richardson after her early experiences working with Alaska businesses.

Greg Hawthorne, vice president of marketing, ACE Air Cargo, at the 2009 Global Food Alaska conference and showcase in Soldotna.

A DIFFERENT TRACK Even back then, Richardson was not new to any of this. She had been thinking about these issues for a long time, ever since she was a teenager growing up in Anchorage. John McManamin was the father of a friend and she recalls being mesmerized by his living-room lectures in business and economics in ways that other girls might have curled up for Mary K sessions. “I just never let it go,” she says. McManamin is remembered for his role in starting local Army-Navy Surplus retail operations and also, she says, for being an early investor in Kenai Peninsula oil development. Richardson, who has a master’s degree in global supply chain management, once headed the World Trade Center Alaska. She also was Anchorage director of Alaska’s Small Business Development Center (SBDC) program and even wrote the grant for the original statewide SBDC network.

She believes, as her friend’s father did, that Alaska’s future is all wrapped up “in the bounty we have in the ocean and on land,” … and, she adds, “we’re not maximizing the opportunities it represents.” Given Alaska’s geography and demographics, that’s not to say there’s anything easy about these issues. She is the first to acknowledge that “we probably have the world’s most complicated supply chain.” What she brings to the table is a forthright appreciation for the intricacies of getting business connections accomplished in the most direct way, even if it isn’t always the best “public relations” way. There is big money involved and discretion plays a role in who gets linked up with whom. To hear Richardson tell it, planning for the networking event is a process of attracting buyers and certain vendors with varying interests to sign up on their website, then providing an efficient

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vetting and/or pre-qualifying process to maximize the potential of valuable connections for busy professionals willing to take time off, for two days more, in a busy time of year, to resourcefully build up their networking efforts. The event’s planners are mindful of cultivating sensitivity to the many demands on buyers. Especially at this time of year, Richardson says, these are busy people. Offline and online, Global Food Collaborative LLC (GFC-Connect), a for-profit network whose sponsors help with the event in many ways, has been facilitating these connections for years. It does so with unique awareness of time, location, confidentiality and other needs commercial buyers have come to depend on, for instance, if they already are involved in invisible bidding. GFC-Connect was designed to cater to purveyors of food, beverage and agricultural products; they are invited to confidentially register at no charge and with no commitment. That gives them access to information about independent suppliers and potential supply chain partners that may not be so easy to come up with on their own. The event is attended by chefs, restaurateurs, retailers, distributors, institutional buyers and secondary processors who welcome the opportunity to experience Alaska’s market during production season. Guests also include retail food buyers, caterers, product development specialists, food technologists, institutional buyers, policy makers, food distributors and brokers.

to success. By design, the inside perimeter of displays at the event “is like a grocery store of what Alaska has to offer,” Richardson says. Mainly, she observes, these are private companies representing value-added quotients to the state’s supply chain. Some organizations and agencies that support these players – groups like the Alaska Seafood Marketing Institute, the Department of Environmental Conservation and small business interests – also are available to answer questions and help fill in the blanks. Attendance ranges around 400, which represents a shot in the arm for the local economy that observers speculate may add up to more than half a million dollars. Participants stay with relatives or at hotels, B&Bs and RV parks in the area. While in 2007, Richardson says, an estimated $2 million in business was transacted at the event, by 2009, even as fear remained that the prolonged economic downturn hadn’t yet bottomed out, more than $2.3 million in business was done. She attributed the boost to an environment where businesses increasingly feel

comfortable to create new solutions; they are gaining trust, she says, in the process and in one another. Most are doing business in Alaska, she says, while about 30 percent are representing other national business outlets and up to 10 percent international outlets. Besides the site visits to Homer or to Bristol Bay sustainable wild fisheries, best practices are being demonstrated for lean and prudent manufacturing processes. Besides private companies showcasing lean and green solutions, AMEP was planning to host a “Pizza Lean” simulation, where attendees can experience setting up a manufacturing process and, by way of the simulation, realize cost savings (for example, from layout, ingredient, or staff position or functioning factors). And by the time everyone goes home, the hope is that a lot of the time and energy it takes to build ever stronger statewide connections will actually have been spared by having so many key players come together and put faces and numbers with names ❑ and functions.

PROACTIVE SPONSORSHIP A key sponsor of Global Food Alaska is the Alaska Manufacturing Extension Partnership (AMEP), whose business is implementing best practices with local companies. Besides commercial seafood and manufacturing interests, other sponsors include the Alaskan Brewing Co., Lynden, WUSATA and the Mat-Su Farm Bureau; affiliate sponsors include the Alaska Culinary, Livestock and School Nutrition associations. For these managers, GFA is attracting product and service professionals who can help their businesses grow and bringing them together for two days under one roof. It happens every two years and the logistical connections that are built in between are key www.akbizmag.com • Alaska Business Monthly • June 2011

TRANSPORTATION SPECIAL SECTION

Logistics in Alaska Moving mission-critical freight BY JACK E. PHELPS

sk just about any Alaskan who has lived here more than a few years about nearly any topic and you can provoke the person into telling you why things are different here. Alaskans are more outdoorsy. We are more independent. We are more adventuresome. We are not bound by the kinds of schedules people in the Lower 48 keep. We have more airplanes and more people who fly them. Maybe it’s true and maybe it isn’t, but we certainly tend to think so. One place where it is undoubtedly true is in the transportation sector. Freight issues in Alaska are decidedly different than they are elsewhere. Take the likes of the Alaska Railroad, American Fast Freight, Everts Air Cargo, Span Alaska Consolidators, Carlile Transportation Systems, Crowley Maritime Corp., Foss, Alaska Air Cargo, American Marine/PENCO, TransGroup Worldwide Logistics, Bowhead Transport, The ERA Family of Companies, Pen Air, Lynden Transport, Northern Air Cargo, Alaska Marine Lines, Alaska West Express, Horizon Lines, Totem Ocean Trailer Express, Pacific Pile and Marine, and oh so many more. There are too many to mention, too many to

describe. But all have a huge impact in Alaska – whether it be by air, ship, train, truck or a combination of the four. When it comes to moving freight, “most everything in Alaska is intermodal,” says Aves Thompson, executive director of the Alaska Trucking Association. The vast majority of the goods coming into the state come across the water. Freight comes by barge or it comes by oceangoing vessels. It comes in containers, it comes in bulk, it comes in railcars or it comes in truck trailers. Or maybe it is heavy equipment and it comes in a roll on/roll off (Ro/Ro) configuration. But, regardless of packaging, it arrives across the ocean. There are, of course, two other modes. Some goods arrive by air, and some are trucked up the Alaska Highway through neighboring Canada. Herein lies a major difference from America’s other noncontiguous state, Hawaii. No one is hauling 53-foot semitrailers or 40-foot doubles overland to the 50th state. Moreover, no other state receives interstate shipments that have to leave the country before they arrive. Alaska really is different, and the pride so often expressed by many Alaskans is justified in this regard.

Air freight is a major activity at Ted Stevens Anchorage International Airport (TSAIA). The city currently plays host to two of the largest air freight companies in the world, FedEx and United Parcel Service. Due to its geographical position on the polar routes, Anchorage is uniquely situated to meet the needs of an international air shipper. It takes 9.5 flying hours or less to reach 90 percent of the industrialized population of the world from Anchorage. Since 1991, air cargo landings at TSAIA have increased at a rate of 9 percent per year. In the 1990s FedEx moved into Alaska in a big way. At the turn of that decade, the company opened a new 500,000-square-foot hub near the north end of the airport. In 2010, the company invested $38 million in upgrading and expanding the facility. FedEx employs more than 1,300 people at the hub and it is capable of processing 15,000 packages per hour, according to a company spokesperson. Approximately 60,000 packages come into and out of the location every day. Just north of the FedEx hub is the UPS facility, built in 1996-97. A smaller hub, it is capable of processing approximately one-third of the volume handled

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next door. UPS has been expanding its presence in Alaska over the past decade, notably by its 2001 acquisition of Mail Boxes Etc. In addition to the international shippers, TSAIA is host to several air cargo companies who specialize in delivering air freight to remote Alaska locations. One of these is Northern Air Cargo (NAC), which has been operating in Alaska since before statehood. NAC flies to many points in western, northern and Southcentral Alaska. These include Kodiak, King Salmon and Dillingham in Southwest, Nome, Kotzebue and Red Dog in Northwest and Barrow and Deadhorse in the north. In addition, the company has agreements at each rural hub, providing for transshipment to additional “flagstop” locations throughout Interior and coastal Alaska. Among the smaller air carriers serving Western Alaska, the Alaska Peninsula and the Aleutian Islands is ACE, also located near the north end of TSAIA. The company also flies freight to five locations in Southeast Alaska. ACE operates a fleet of Raytheon Beech 1900C, twin turboprop aircraft, capable of landing on dirt, grass and gravel runways, in addition to paved strips. Several companies provide waterborne freight service to Alaska from the Lower 48 and between various ports-of-call within Alaska. These include Lynden Transport, which provides barge service through its subsidiary, Alaska Marine Lines (AML), and regular steamship service to major ports, such as Anchorage. Lynden also provides direct trucking service to Alaska via the Alaska Highway. Other companies running trucks up and down the Alaska Highway are Carlile Transportation Systems and Alaska West Express, according to Thompson. Horizon Lines is strictly a container transport company. It delivers containers to Alaska from the Port of Tacoma, using container ships. Containers are delivered to the Port of Anchorage and then are moved to customers and distribution centers in Anchorage and Fairbanks by rail or by truck. Containerized goods are also hauled by truck to the www.akbizmag.com • Alaska Business Monthly • June 2011

North Slope oilfields via Prudhoe Bay. The company also services Kodiak and Dutch Harbor with container vessels, according to a company spokesman. From Dutch Harbor, containerized goods can be transshipped by barge to the Bering Sea islands of St. Paul and St. George, and the Bristol Bay communities of Port Moller and Naknek. Totem Ocean Trailer Express, better known as TOTE, on the other hand, uses only truck trailers to provide intermodal service to Alaska customers. The company uses a fleet of Ro/Ro cargo ships to move goods in truck trailers from Tacoma to the Port of Anchorage. From there, TOTE’s fleet of diesel tractors haul the trailers and deliver freight to all points on Alaska’s road system. In addition to goods packed into dry van trailers, freight is also moved on flatbed trailers when appropriate. TOTE’s Ro/Ro ships are also equipped to handle passenger vehicles, RVs and heavy equipment. Because of Alaska’s vast length of coastline and because many small communities on the coast are not connected by road, barge service is also crucial to moving freight within the state. Samson Tug and Barge, based in Sitka, is one company that specializes in this kind of service. Current President George Baggen Jr., and his father, George Sr., started the company in 1937 in Juneau. Because Alaska Pulp Corp. became a major customer in the late 1950s, the company relocated to Sitka, where its headquarters remain today. According to Director of Sales Jerry Morgan, the company moves freight to communities as far flung as Dutch Harbor, Kodiak and Cordova, as well as Railbelt locations via Alaska Railroad access at Seward. Samson also serves Fairbanks and the North Slope by transshipping through the Prince William Sound Port of Valdez. “We’ve moved oil field equipment both through Valdez and Seward,” Morgan says. Samson’s barges use containers to transport most of the freight it handles, but the Ro/Ro mode is also available as needed. “At one time or another, we’ve moved just about everything you can imagine,” says Morgan. The list of goods moved by trucks, trains, ships, barges and aircraft in Alaska is endless. The Alaska Railroad,

for example, moved more than 2.5 million tons of gravel in 2010, according to ARR records. To move that volume of gravel required 290 trips with two six-axle locomotives pulling 80 to 90 100-ton hopper cars. The majority of the runs were between gravel pits in the Mat-Su Valley and Anchorage Sand and Gravel’s (AS&G) south Anchorage location off Klatt Road. Another commodity regularly delivered to Klatt Road is cement. It does not arrive by rail, however. It is delivered by truck from the Port of Anchorage. According to Thompson, dry-bulk cement arrives in Cook Inlet by vessel and is pumped from the ships’ holds through a pipeline to dry storage tanks above the port. From there, it is loaded on trucks as needed and hauled across town to AS&G. At Klatt Road, it is wet-mixed, placed in rotating drum trucks and delivered to whatever job site requires it. The rotating drum trucks are a regular feature on roads around Anchorage during the summer months. There are no railroad tracks running to the North Slope and no cargo ships calling at the Arctic Ocean port of Prudhoe Bay. Major equipment, like drill rigs and production modules can be economically delivered by barge. But all other goods needed at the remote oil fields of Alaska’s North Slope must either be flown in or hauled by truck up the Dalton Highway. One such commodity now being hauled to Prudhoe Bay is ultra-lowsulfur diesel. This low-polluting fuel has been required on newer over-theroad trucks for several years, and as of December 2010, it is the only diesel that can be sold even for off-highway equipment, such as bulldozers and front-end loaders. As a result, 10 to 12 doubletrailer truckloads per day of ultra-lowsulfur diesel are delivered to the North Slope, according to Thompson. The product is hauled from refineries near Fairbanks, 500 miles up the Dalton Highway to Deadhorse. A product especially important to Alaska’s economic well-being is fish. Although production is confined to the summer months, fish are among the top freight items leaving Alaska through a variety of transportation modes. AML President Kevin Anderson says,

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“Southbound fish in the summer is one of our major sources of revenue. We move a lot of salmon. Some of it is canned, some is frozen and some is fresh. We move other products, of course, but it’s mostly salmon.” One trucking company makes deliveries of fresh Alaska salmon to Boston nearly every week in the summer, according to Thompson. The trucks leave Kenai and drive down the Alaska Highway to the Lower 48 and go straight into New England. “The trip takes only four to five days because they use teams of drivers,” Thompson says. Fish comprise a major part of Samson’s summer operations as well, according to Morgan. “Salmon out of Prince William Sound is a significant part of our business. We also move fish from Kodiak and King Cove to Dutch Harbor,” he says. At Dutch, the container loads of salmon are loaded onto ocean-going vessels along with fish cargo originating at the peninsula port, and are delivered to Asian ports around the western Pacific. So what would happen if all of this moving of freight were to come to a halt for whatever reason? Thompson was quick with an answer. “The highly visible effects would include every service station in the state running out of gasoline and diesel in a matter of days,” he says. “In addition, most grocery stores would have empty shelves within two weeks. Those are two life-sustaining activities that would be severely disrupted almost immediately.” “Another problem would be that the North Slope oil fields would be crippled in a very short time. They would be out of diesel in just a few days,” Thompson says. Beyond that, consider what would happen to construction activities, whether for roads or buildings, if the gravel trains were to shut down. Without gravel, you can’t build much of anything in Alaska. Roads and building sites aren’t built on dirt or unfilled marshes. Freight transportation isn’t something most people think about every day. But without it, every man, woman and child in Alaska would have a big problem. It’s a good thing so many companies are committed to providing freight services here. Without them, ❑ we would be lost. www.akbizmag.com • Alaska Business Monthly • June 2011

TRANSPORTATION SPECIAL SECTION

Era Alaska is ‘Flying Wild Alaska’ Documentary lands in Unalakleet BY TRACY KALYTIAK

Photo by Blair Madigan/Courtesy of Discovery Channel

loon flies into the engine of a flying aircraft, scattering blood and feathers and prompting a recently hired Era Alaska pilot to land immediately and check for damage. Airline workers solemnly slide a suicide victim’s wood casket and rough-hewn cross into the back of a plane. Era’s chief operating officer, Jim Tweto, expounds on the perils of flying around blind corners in mountains near Rainy Pass while passing over mute testimony to his words: the scattered metal skeletons of planes far below. These stark scenes each are vivid features of “Flying Wild Alaska,” a documentary series airing since January on the Discovery Channel. The show features Unalakleet-based Tweto; his wife, station manager Ferno Tweto; their daughters, ground crew members Ariel and Ayla, and other Era pilots throughout the state. Tweto was born in Wichita, Kansas, in 1954 and moved to Unalakleet in 1980 to start building fishing boats. Four years later, he began flying for a small airline in Unalakleet. That is how he met Ferno – her father owned that airline and she cleaned and loaded planes for the business. Ferno earned her pilot’s license in 1981 and she and Tweto married in 1988 on a sand bar outside Unalakleet. One of their daughters, Ayla, lives in Anchorage while studying to be a paramedic, but returns to Unalakleet every weekend. She has her private pilot’s license. Tweto launched his own business and, in 1990, joined with Mike Hageland to form Hageland Aviation. Hageland combined with Frontier Flying Service in 2008, creating HoTH, a holding company that acquired 61-year-old Era Aviation in April 2009 and then all the common stock of Arctic Circle Air Service in October 2009. In January 2010, all HoTH carriers began doing business as Era Alaska.

Era Alaska terminal in Unalakleet.

WILD IDEA The idea for “Flying Wild Alaska” germinated two years ago while Ariel Tweto was appearing on ABC’s “Wipeout.” Tweto is a communications major at Chapman University in Orange County, Calif., and the only member of the family who is still working toward the goal of earning a pilot’s license. She travels between California and Unalakleet to help with the airline’s business. “Someone who worked on ‘Wipeout’ had been up here before and was really interested in getting a show started,” Ferno Tweto said. “They filmed the pilot here in Unalakleet and someone picked it up. It just seemed like it had been a dream for Ariel, that’s the reason why Jim and I are in this whole thing is because of her. It’s been a fun experience, though. We just want to show people the real Alaska up here.” Taping of the first season’s 10 episodes of “Flying Wild Alaska” began in August and continued through November. Taping of the second season was under way at press time, in late April. “The crew rents out an apartment

building and all of them manage to fit in there,” Ferno said. “There are 15 here at a time. They follow us. Where they go depends on where a likely story might pop up, what’s going on today. They follow a specific pilot or two from each (Era Alaska) hub.” “Flying Wild Alaska” shows why it’s not easy making a home in Bush Alaska – that only a few of those who dream of living in remote parts of the state are actually capable of successfully handling the cold, dark and isolation. “It isn’t always upbeat and happy,” Ferno said. “There are negative sides to living out here. Right from the beginning we didn’t want to do any oddball stuff, just the normal things that we do, that the pilots do. It’s nothing that we dream up. We didn’t want to do any kind of acting. It was tough getting used to the cameras being around but we ended up being friends.” Ferno said the saddest show for her was the second episode, which highlighted the tragedy of suicide among young people in rural Alaska. “That was so touching, gentle on the

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

Photo by Tommy Baynard/Courtesy of Discovery Channel

Era Alaska and ‘Flying Wild Alaska’ Tweto family, from left, Ayla, Ariel, Jim and Ferno.

families,” Ferno said of the show’s handling of the painful subject. “It didn’t abuse the situation. There was such beautiful emotion. The producer who did that one brought it out so sensitively. I want people to see that this happens out here and we can’t sugarcoat it. It happens everywhere, but it’s tough when it happens close to home.”

FLYING FANS The show has created a loyal legion of fans in the Lower 48 and here in the state. Kevin Wilson, a resident of Rogers, Ark., first began flying 24 years ago. “I’ve only seen (‘Flying Wild Alaska’) five times; wish I could see all the shows,” Wilson said. “I’ve hauled freight before, but to designated airports. I thought it was neat how versatile that particular company is, hauling passengers to remote areas, hauling medical supplies, chemical supplies, then the Bush flying, hauling hunters, freight. I’ve known all that existed in Alaska, but the show gives a good perspective what it’s like landing on ice or a river, what benefits the landing.”

Erik Anderson and Lisa Rodgers live in Palmer. Anderson works in construction; Rodgers is an executive officer for the Valley Board of Realtors and a commercial fisher. They began watching the show after seeing a promo for it while watching another Alaska-themed show about gold mining. “I thought, ‘Great, I’ll record every one,’” said Anderson, who has been interested in Alaska aviation for years, and at one point even took flying lessons. He says his favorite episode was one in which Jim Tweto flew a couple out to their homestead in the Arctic National Wildlife Refuge. “I was kind of shocked at how far he flies in a day in his Cessna 180,” Anderson said. “I also liked the episode where they were flying the harpoon projectiles with explosives, where they had to get close to Russian airspace. They picked them up from Barrow and took them to the St. Lawrence Island whaling community. They had to get approval from the federal government. I think Jim said it took three months for the logistics of it, the permits.”

Tweto inspires him, Anderson said. “The thing about him that earns my respect is he’s more than willing to go above and beyond the business side to cater to the rural communities,” Anderson said. “It’s not just a business for him; it’s a way of life. Without having roads or any other means of transportation, it’s respectable to know he’s willing to put aside business and pick up the slack, transportation-wise, when they need it.” Rodgers agrees, and says she finds it impressive how hard he works. “He’s not sitting back somewhere in New York City in some high-priced apartment,” she said. “He’s at the hub. He’s there from the time it opens to the time it closes and even after the time it closes. That’s pretty cool, shows why he’s so successful.” Rodgers, an Alaska Native, is excited that the show portrays Alaska Natives in a realistic way. “There’s an episode where the three of them took off to their cabin and Ariel cooked up stink flipper,” Rodgers said. “I liked it because it goes to my roots.” ❑

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

TRANSPORTATION SPECIAL SECTION

Foss Maritime Company 1889 rowboat investment keeps growing BY STEPHANIE JAEGER

Photo by Katie Wixom

Stacey Foss and barge Kivalina near Red Dog Mine port, summer 2010.

used rowboat was the first vessel used by Foss, now an international transportation enterprise. Trying to increase her family’s income in 1889, Thea Foss, a Norwegian immigrant living in Tacoma, Wash., bought a used rowboat, repainted it and then traded it for several smaller boats. She rented these out to fishermen, hunters and ferrying customers. Thea’s fleet increased to 200 boats when she began to transport logs with towboats. During World War I, her business expanded

and she bought interests in a Seattle towboat company. Thea died in 1927, but members of the Foss family continued to develop her business. In 1987, Saltchuk Resources Inc. bought the company. Foss Maritime Company, still an independent firm, operates around the world providing maritime services to places as diverse as the Pacific Rim, Europe, South America, Latin America, Alaska, the Russian Far East, all major U.S. West Coast ports, including the Columbia and Snake River systems.

The company also has Atlantic and Gulf of Mexico operations. Foss operates many types of barges, including deck, commodities, dredging, petroleum, crane and rail barges. Their fleet employs many types of ocean and tractor tugs. Foss transportation services include ship assists and escorts, bunker and petroleum transport, ocean and harbor towing, LNG (liquefied natural gas) operations, construction support and lighterage (the loading and unloading of ships using barges).

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

GOING GREEN Working on the cutting edge of maritime technology, Foss recently built the world’s first Green Assist® Hybrid Tug. Named the Caroline Dorothy, the hybrid uses diesel fuel when sailing and plugs into an electrical outlet while anchored to decrease its fuel consumption during harbor work. Foss also developed and built the ASD Z-Drive and Voith Schneider Propulsion (VSP) cycloidal tractor tugs that can control the world’s largest tankers and freighters. Two full-service shipyards, one in Seattle and the second in Rainier, Ore., maintain and repair Foss’s equipment, as well as build and service many types of vessels for other companies. Foss also provides naval architecture, marine engineering, project management, global transportation and logistics to its customers.

FOSS HAS BEEN RECOGNIZED FOR ITS ENVIRONMENTAL CONSERVATION EFFORT BY THE U.S. COAST GUARD, THE PORTS OF LOS ANGELES AND LONG BEACH, THE CHAMBER OF SHIPPING OF AMERICA AND THE U.S. ENVIRONMENTAL PROTECTION AGENCY. FOSS WAS ACCEPTED INTO THE EPA’S SMART WAY TRANSPORT PARTNERSHIP FOR ITS DEVELOPMENT OF THE HYBRID TUG AND ITS VOLUNTARY FLEET-WIDE CHANGE TO ULTRA-LOW-SULFUR FUEL.

ALASKA BOUND

draft harbor to ships in the open ocean five miles offshore.

In addition to tug and barge operations, Foss has developed innovative solutions for transportation problems in areas without developed harbors and in extreme Arctic conditions. When GPS (global positioning system) became the primary means of navigation, rendering low-frequency radio transmitters obsolete, Foss helped remove several decommissioned LORAN (long-range navigational) stations from remote areas of Alaska. Foss routinely delivers cargo to Sitka in Southeast Alaska, and also operates one of the largest railcar barges in the world. The tug Barbara Foss and barge Aquatrain supports Canadian National Railroad’s service from Prince Rupert, B.C. to Whittier, through Alaska’s Inside Passage. Foss towed prefabricated silo components for a contractor building ground-based defense missile projects in Alaska. In 1989, Foss began working with Alaska’s Red Dog Mine, located 200 miles above the Arctic Circle, 82 miles north of Kotzebue and 46 miles inland from the Chukchi Sea. Teck’s Red Dog Mine transports more than a tons of lead and zinc concentrate across a specially built 52-mile road to the Red Dog Port. A gigantic building, 500 yards long and 11 stories high, holds the ore near the port until summer when Foss transports it from Red Dog’s shallow-

Foss developed two specialized selfloading barges with boom arms and conveyor belts to transport the ore to the ships. These barges are designed to allow cargo discharge under sea conditions previously considered too rough for discharge in open water. Arctic weather and ice conditions limit the shipping season to only 90-100 days to remove an entire year’s production of iron and lead concentrates. In order to do this, Foss invented the world’s first and only open-roadstead loading of dry cargo (an area near the shore where vessels anchor with relatively little protection from the sea). Once loaded onto the ships, the ore is transported to smelters in Canada, Europe and Asia. Foss also has worked in the extreme environmental conditions of Sakhalin Island in the Russian Far East. The southern tip of Sakhalin Island is located about 100 miles from the northernmost shore of Japan. The company transported modules that were 280 feet long by 45 feet wide by 85 feet tall on heavy-lift barges from Ulsan, South Korea, to Sakhalin Island. Three Foss harbor tugs navigated the barges through the narrow channel entrance where they were placed in the shallowwater basin. Foss ballasted the barges

BIG BOOM

onto the bottom and helped complete transport of the modules. The modules were then used to support construction of an oil and gas production facility. Foss also transports booster cores for the Boeing Delta IV rocket program on its supply ship the M/V Delta Mariner. Built to travel in both shallow-inland waterways and the open ocean, this ship carries rocket components 550 miles from the Boeing factory in Decatur, Ala., down the Tennessee-Tombigbee waterway to Mobile Bay and into the Gulf of Mexico. From there, the ship continues on to either Cape Canaveral or to the western-range Delta IV launch facility at Vandenberg Air Force Base in California. Foss is equipped to respond to maritime emergencies with rescue towing and emergency repairs. They are a member of the International Salvage Union and the American Salvage Association. Their staff is trained in incident command systems and safety procedures and precautions. Foss can help with salvage operations including lighterage, blowers, ballast pumping, fire fighting, rescue craft, boom deployment and tending, and barges for waste materials. The company can dispatch a mobile response unit repair team from Seattle to anywhere in North America within 24 hours. This team can do repairs at the dock or while the ship in need of repair is under way.

HELPING THE ENVIRONMENT In addition to its groundbreaking work in innovative ship building and remote area transportation, Foss also is making strides in its approach to the environment. Foss has been recognized for its environmental conservation effort by the U.S. Coast Guard, the ports of Los Angeles and Long Beach, the Chamber of Shipping of America and the U.S. Environmental Protection Agency. Foss was accepted into the EPA’s Smart Way Transport Partnership for its development of the hybrid tug and its voluntary fleet-wide change to ultra-low-sulfur fuel. Foss also has worked to decrease the waste streams produced by its harbor tugs by using a vacuum truck service to remove oily waste instead of dumping it into the water. Foss continues to work on an energy management plan to conserve fuel on its vessels. ❑

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

TRANSPORTATION SPECIAL SECTION

You Can Get There From Here Span Alaska excels in shipping freight to Alaska BY VANESSA ORR

ne of the qualities that brings people to Alaska is its remoteness; the chance to get away from it all. But sometimes living off of the beaten path is a logistical challenge. It’s not always easy to get things shipped from the Lower 48 to the Last Frontier and it can be prohibitively expensive. Span Alaska Transportation Inc., with headquarters in Auburn, Wash., has spent years refining the art of getting goods to Alaska. Started in 1978 by Ray Landry, the business is now run by a second generation of Landrys, aided by a staff that has spent years in the shipping business. “Ray worked in the industry for a number of years before seizing the opportunity to start his own business,” said Kathy Lorec, vice president of sales. “He wanted to do things differently – to offer top-of-the-line personal service

Span Alaska is now run by the second generation of the Landry family. Pictured are Paul Landry, Jackie (Landry) Norton, Tom Landry and Mike Landry.

backed by a great deal of knowledge and integrity.” “What he created was a great company to work for and with,” said COO Tom Souply. “Our culture and values still revolve around the ideas of integrity, empowerment and respect – doing the best job we can for customers and rewarding our employees for their efforts.” Of its 115 employees, the average length of time on the job is 12 years; many have worked for the company between 15 and 20 years.

Whether a customer needs to move huge oilfield equipment or a small amount of office furniture to Alaska, Span Alaska can find the most efficient and affordable way to get it there. The company’s logistics department works with carriers all across the country, finding the best prices and services to meet each customer’s needs. “We can transport any size shipment, but what we specialize in is less-than-

A Span Alaska truck on the Seward Highway along Turnagain Arm between Anchorage and Girdwood. www.akbizmag.com • Alaska Business Monthly • June 2011

truckload (LTL) freight; we move more LTL than any other carrier to the state,” Lorec said. “If a customer uses a common carrier and has three or four shipments of 500 pounds each, they end up paying for each individual bill of lading. At Span Alaska, we load their shipment together with other customers’ freight to make full truckloads. By providing this economy of scale, we can provide better pricing and service.” Span Alaska has also invested in the latest technology to make sure customers know where their freight is and when it will arrive. “Our online information system ensures customers know where their freight is at all times,” said Lorec. “Alaska has become a ‘just-in-time’ state when it comes to inventory – the shorter time freight is on the water, the better. By using Span Alaska, customers are cutting their transit times and carrying less inventory, which saves them money.” Once customers have registered in the online system, they are able to track all their shipments in real time. “They know within a couple of minutes when we have received their goods in Auburn, and they know everything about the shipment from its weight to if there are shortages or damages,” Lorec said. “They can not only retrieve their own reports, but we also send out an email or fax telling them what freight made the ship when it sails.” Using this knowledge, customers can better plan their own workload in Alaska. “If a customer knows their shipment sailed on Friday night, they know they can expect delivery on Wednesday or Thursday of the next week,” Lorec said. “For a flooring company, this means they can go ahead and set up installation dates with their clients. If a company sees that a shipment critical to them didn’t arrive at our warehouse, they can get on the phone with their suppliers and figure out a solution.” Span Alaska ships from Auburn directly to their terminals in Anchorage, Wasilla, Kenai, Fairbanks and Southeast Alaska, as well as loads containers on the barge lines to travel directly to the Bush during the summer months. The company has more than 200 pieces of equipment in its fleet, including 50 tractors that can transport almost anything, anywhere.

Span Alaska’s 99-door warehouse in Auburn, Wash.

“One of the interesting things about Span Alaska is that we have a very diverse customer base,” Souply said “We transport everything from foodstuffs, to carpet to ceiling tiles, to oil and gas equipment. Think of almost anything that goes into Alaska, and we carry it.” Last year, Span Alaska transported more than 200 million pounds of goods into the 49th state. “The only items that we don’t ship are those that are refrigerated, or household goods such as when someone is moving a home,” Lorec added. “Because the state imports almost all of its finished goods and exports most of its raw materials, our customer base includes virtually everyone. It makes our lives fairly exciting.”

CUSTOMERS ARE KEY Being able to ship almost anything has earned Span Alaska an extremely loyal customer base. “I’ve been here for 29 years, and there are customers who have been here longer than me,” Lorec said. “We do spoil our customers with the level of service we offer; we recognize their voices on the phone and consider them part of our family.” “You could sum it up with the phrase, ‘no surprises,’” Souply said. “Our goal

is to meet or exceed customer expectations every time, and we take pride in our level of detail. As a result, customer flight is very small.” This level of detail even extends to events outside of Span Alaska’s scope that might affect the way its customers do business. “In today’s environment, information is critical to our customers, so we try to manage every aspect that we can,” Lorec said. “For example, if there is a snowstorm in the Rockies, we let our customers in Alaska know about it because it may interfere with their suppliers’ ability to get a shipment to Auburn. We go beyond the pale. “Shipping to Alaska can be very complicated, but we make it appear very simple to our customers,” she added. “A lot of things have to happen just right in order to get a carpet installed in a house in Alaska before the closing date and we do all of those things – just behind the scenes. To our customers, the process is seamless.” It is this consultative relationship with customers that has helped Span Alaska succeed in business for more than 30 years. “Things have changed tremendously since the company started, but we’ve always focused on taking care of our customers,” Lorec said. “It is the key to our growth.” ❑

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

ALASKA BUSINESS MONTHLYâ&#x20AC;&#x2122;S 2011 TRANSPORTATION DIRECTORY AIR CARGO

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www.akbizmag.com â&#x20AC;¢ Alaska Business Monthly â&#x20AC;¢ June 2011

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www.akbizmag.com â&#x20AC;¢ Alaska Business Monthly â&#x20AC;¢ June 2011

ALASKA BUSINESS MONTHLYâ&#x20AC;&#x2122;S 2011 TRANSPORTATION DIRECTORY AIR CARGO &

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www.akbizmag.com â&#x20AC;¢ Alaska Business Monthly â&#x20AC;¢ June 2011

ALASKA BUSINESS MONTHLYâ&#x20AC;&#x2122;S 2011 TRANSPORTATION DIRECTORY AIR CARGO &

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

ALASKA BUSINESS MONTHLYâ&#x20AC;&#x2122;S 2011 TRANSPORTATION DIRECTORY AIR CARGO !

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Pen Air Business Profile

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ALASKA BUSINESS MONTHLYâ&#x20AC;&#x2122;S 2011 TRANSPORTATION DIRECTORY LAND: RAIL and TRUCK (

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www.akbizmag.com â&#x20AC;¢ Alaska Business Monthly â&#x20AC;¢ June 2011

ALASKA BUSINESS MONTHLYâ&#x20AC;&#x2122;S 2011 TRANSPORTATION DIRECTORY LAND: RAIL and TRUCK %

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www.akbizmag.com â&#x20AC;¢ Alaska Business Monthly â&#x20AC;¢ June 2011

ALASKA BUSINESS MONTHLYâ&#x20AC;&#x2122;S 2011 TRANSPORTATION DIRECTORY LAND: RAIL and TRUCK

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ALASKA BUSINESS MONTHLYâ&#x20AC;&#x2122;S 2011 TRANSPORTATION DIRECTORY LOGISTICS %

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104

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www.akbizmag.com â&#x20AC;¢ Alaska Business Monthly â&#x20AC;¢ June 2011

ALASKA BUSINESS MONTHLYâ&#x20AC;&#x2122;S 2011 TRANSPORTATION DIRECTORY MARINE ! )

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110

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

ALASKA TRENDS

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

Alaska’s Mining Industry Metal Prices (2000-2010)

hile the oil industry is the most prominent industry within the Alaska economy (providing approximately 90 percent of State revenues in 2010), the Alaska mining industry also has a significant impact on the State’s financial outlook (providing approximately 0.69 percent of State revenues in 2010). Despite its small contribution to State revenues, the Alaska Department of Commerce reports that Alaska’s mining industry is valued at more than $1 billion annually and is growing rapidly. In addition, the Alaska Department of Labor reports that during February 2011, the mining industry employed approximately 15,100, substantially more than the oil and gas industry’s 12,900. The graph shows metal prices for gold, silver and zinc from 2000 to 2010, indexed to 100 in the base year 2000. Although the rising gold prices have received significant amounts of press coverage, the percentage of increase in the price of silver has outpaced the percentage of increase in the price of gold since 2000, increasing 493 percdent versus 339 percent for gold. The price for zinc, although fluctuating widely between 2005 and 2008, increased 92 percent since 2000. Based on the categorization of Alaska’s mining industry as a success story

by the Department of Commerce, the industry’s rapid growth, and substantial price increases in metals shown in the graph, the importance of the mining industry for Alaska’s economy seems as though it will only increase. However, actual results in the mining industry are also reliant upon demand for the metals, State and federal regulations, tax policy and a variety of other variables, ❑ which cannot be predicted.

Sources: Crude Oil Production: http://doa.alaska.gov/ogc/ Spot Price: http://www.tax.alaska.gov/programs/oil/prevailing/ans.aspx

ALASKA TRENDS HAS BEEN BROUGHT TO YOU THIS MONTH COURTESY OF AMERICAN MARINE/PENCO

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111

ALASKA TRENDS Indicator

Units

GENERAL Personal Income – Alaska Personal Income – United States Consumer Prices – Anchorage Consumer Prices – United States Bankruptcies Alaska Total Anchorage Total Fairbanks Total EMPLOYMENT Alaska Anchorage & Mat-Su Fairbanks Southeast Gulf Coast Sectoral Distribution – Alaska Total Nonfarm Goods Producing Services Providing Mining and Logging Mining Oil & Gas Construction Manufacturing Seafood Processing Trade/Transportation/Utilities Wholesale Trade Retail Trade Food & Beverage Stores General Merchandise Stores Trans/Warehouse/Utilities Air Transportation Truck Transportation Information Telecommunications Financial Activities Professional & Business Services Educational & Health Services Health Care Leisure & Hospitality Accommodation Food Services & Drinking Places Other Services Government Federal Government State Government State Education Local Government Local Education Tribal Government1 Labor Force Alaska Anchorage & Mat-Su Fairbanks Southeast Gulf Coast

112

Period

Latest Report Period

Previous Report Period (revised)

Year Ago Period

Year Over Year Change

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

4th Q10 4th Q10 2nd H10 2nd H10

31,760 12,701,052 195.46 218.58

31,554 12,582,051 195.46 218.58

30,559 12,228,649 193.456 215.935

3.93% 3.86% 1.03% 1.22%

Number Filed Number Filed Number Filed

February February February

77 52 17

52 8 64

85 68 14

-9.41% -23.53% 21.43%

Thousands Thousands Thousands Thousands Thousands

February February February February February

330.04 184.34 42.72 34.81 33.66

328.62 185.23 42.32 34.26 33.39

324.29 181.32 42.26 30.02 33.15

1.77% 1.67% 1.09% 15.97% 1.53%

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

February February February February February February February February February February February February February February February February February February February February February February February February February February February February February February February February February February

315.8 39.7 276.1 15.3 15.1 12.9 12.2 12.2 8.7 60.6 5.9 34.0 6.0 9.9 20.7 5.4 3.2 6.4 4.2 15.2 25.6 43.5 31.2 28.3 6.2 18.5 11.4 85.1 16.4 26.3 8.6 42.4 25.4 3.5

310.5 38.6 271.9 15.1 14.9 13.0 12.3 11.2 7.5 60.6 5.9 34.2 5.9 9.8 20.5 5.1 3.0 6.3 4.2 15.0 24.8 42.8 30.9 27.6 6.3 17.4 11.4 83.4 16.2 25.2 7.5 42.0 24.7 3.5

307.2 38.5 268.7 14.2 14.0 12.0 12.7 11.6 8.3 58.6 5.9 33.7 6.1 9.7 19.0 5.3 2.9 6.3 4.1 14.5 25.1 41.2 29.5 26.9 6.0 17.2 10.9 85.2 16.5 26.2 8.5 42.5 25.3 3.6

2.80% 3.12% 2.75% 7.75% 7.86% 7.50% -3.94% 5.17% 4.82% 3.41% 0.00% 0.89% -1.64% 2.06% 8.95% 1.89% 10.34% 1.59% 2.44% 4.83% 1.99% 5.58% 5.76% 5.20% 3.33% 7.56% 4.59% -0.12% -0.61% 0.38% 1.18% -0.24% 0.40% -2.78%

Thousands Thousands Thousands Thousands Thousands

February February February February February

360.52 199.02 46.16 38.26 37.70

359.66 200.13 45.88 37.84 37.47

358.45 198.14 46.20 33.01 37.67

0.58% 0.45% -0.08% 15.88% 0.07%

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