NOVEMBER 2010 by Alaska Business

SPECIAL SECTIONS: MINING | BUILDING ALASKA

November 2010

$3.95

The Other Side of Pebble Q&A With John Shively Page 90

The Outer Continental Shelf On Again, Off Again Page 12

ABM Contractor of the Year Davis Constructors and Engineers Inc. Page 48 John Shively CEO Pebble Limited Partnership

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

D E PA R T M E N T S From the Editor . . . . . . . . . . . . . . 7 Inside Alaska Business . . . . . . . . 8 Right Moves . . . . . . . . . . . . . . . . 32 Events Calendar . . . . . . . . . . . . 36 Market Squares . . . . . . . . . . . . 126 Alaska Trends . . . . . . . . . . . . . . 127 Ad Index . . . . . . . . . . . . . . . . . . 130 R E G U L A R F E AT U R E S

ARTICLES (cont’d.)

VIEW FROM THE TOP

HEALTH & MEDICINE

Alaska Account Manager, Snap-On Industrial By Peg Stomierowski

Stay healthy! By Dianne O’Connell

ALASKA THIS MONTH

NATIVE BUSINESS

Crafts Weekend spotlights Alaska-made creations By Nancy Pounds

Creating unity, adding value By Julie Stricker

Walter G. Landgrebe. . . . . . . . . . . . . . . . . . . . . . . 11 Reduce the Cost of Health Care? . . . . . . . . . . . . . . . . . . . . 42

Artists, Authors Converge at Museum Event. . . 34 Native Corporation Partnerships . . . . . . . . . . . . . . . . . . . . 46 REGIONAL REVIEW

Southwest Alaska. . . . . . . . . . . . . . . . . . . . . . . . . 38 A vastly remote region By Tracy Barbour

SPECIAL SECTION: BUILDING ALASKA

HR MATTERS

Employees and the Bottom Line. . . . . . . . . . . . . 45 By Andy Brown ARTICLES PAGE

OIL & GAS The Outer Continental Shelf . . . . . . . . . . . . . . . . . . . . . . . . 12 Key to Alaska’s Oil future? By Jack E. Phelps

OIL & GAS Alaska Oil and Gas Winter Forecast . . . . . . . . . . . . . . . . . . 18 State estimates 2011 increase in jobs, capital expenditures By Heather A. Resz

2010 20 10 AAlaska laska k BBusiness usiness i M Monthly onthl hly CContractor ontractor off th the he YYear. ear . . . . . . 48 Davis Constructors and Engineers Inc. By Gail West

Contractor of the Year: Honorable Mention . . . . . . . . . . . . . . . . 52 Alaska Interstate Construction LLC By Gail West

Vision Fairbanks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

FISHERIES Alaska Commercial Salmon Fisheries Overview. . . . . . . . 22 Record pink runs in Prince William Sound By Tracy Kalytiak

PARTNERSHIPS Public-Private Partnerships . . . . . . . . . . . . . . . . . . . . . . . . 26 Popular for leveraging resources By Joette Storm

ENVIRONMENTAL Water and Wasterwater Projects . . . . . . . . . . . . . . . . . . . . . 30 Stimulus money funds needed projects By Tracy Kalytiak

A blueprint for downtown redevelopment By Julie Stricker

Mountain View Gets Financial Services, Housing. . . . . . . . . . . 58 Credit Union 1 and Cook Inlet Housing Authority build up Anchorage neighborhood By Gail West

Parker Smith & Feek . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Insuring most of Alaska’s big builders By Tracy Kalytiak

Pfeffer Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Firm keeps busy in Alaska, Outside By Peg Stomierowski

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

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NOVEMBER 2010 TA B L E O F C O N T E N T S SPECIAL SECTION: MINING

Alaska Mineral Industry Update . . . . . . . . . . . . . . . . . . . . . 68 By Steve Borell

Alaska 2010 - Mining in Review. . . . . . . . . . . . . . . . . . . . . . 70

PAGE

By Curtis J. Freeman

2010 ABM Mining Directory. . . . . . . . . . . . . . . . . . . . . . . . . 86 The Other Side of Pebble. . . . . . . . . . . . . . . . . . . . . . . . . . . 90 Q & A with John Shively By Debbie Cutler

Large Mine Permitting . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 Requirements make for lengthy process By Heidi Bohi

Women in Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

Training Alaska’s Next Generation . . . . . . . . . . . . . . . . . 114

Alaska Mining Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

Skagway Hands Across the Border . . . . . . . . . . . . . . . . 118

Economic Impacts of Mining. . . . . . . . . . . . . . . . . . . . . . 106

Southeast Mines Hit Pay Dirt. . . . . . . . . . . . . . . . . . . . . . 122

Technology, worker shortage create opportunity By Heidi Bohi Infrastructure, energy, permitting, listings By Heidi Bohi Alaska realizing gains By Heidi Bohi

110 Photos courtesy of Coeur d’Alene Mines Corp.

Preparing regional residents for work in the mines By Heidi Bohi Revitalized ‘Gateway to the Yukon’ By Dimitra Lavrakas

Producing mines enjoy high gold prices By Dimitra Lavrakas

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

THE

DITOR

Volume 26, Number 11 Published by Alaska Business Publishing Co. Anchorage, Alaska Vern C. McCorkle, Publisher 1991~2009

Debbie Cutler

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

Debbie Cutler Susan Harrington Candy Johnson Linda Shogren Janyce Nolan Goe Graphics & Design 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 Elaine Collins Mary Schreckenghost

501 W. Northern Lights Boulevard, Suite 100 Anchorage, Alaska 99503 (907) 276-4373 Outside Anchorage: 1-800-770-4373 Fax: (907) 279-2900 www.akbizmag.com Editorial e-mail: editor@akbizmag.com Advertising e-mail: materials@akbizmag.com 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, ©2010, Alaska Business Publishing Co. All rights reserved. Subscription Rates: $39.95 a year. Single issues $3.95 each; $4.95 for October. Back issues $5 each. Send subscription orders and address changes to the Circulation Department, Alaska Business Monthly, P.O. Box 241288, Anchorage, AK 99524. Please supply both old and new addresses and allow six weeks for change. Manuscripts: Send query letter or manuscripts to the Editor. Alaska Business Monthly is not responsible for unsolicited materials. Photocopies: Where necessary, permission is granted by the copyright owner for libraries and others registered with Copyright Clearance Center to photocopy any article herein for $1.35 per copy. Send payments to CCC, 27 Congress Street, Salem, MA 01970. Copying done for other than personal or internal reference use without the expressed permission of Alaska Business Monthly is prohibited. Address requests for specific permission to the Editor, Alaska Business Monthly. Online: Alaska Business Monthly is available online from Data Courier and online from Thomson Gale. Microfilm: Alaska Business Monthly is available on microfilm from University Microfilms International, 300 North Zeeb Rd., Ann Arbor, MI 48106.

A Time for Thanks A

t Alaska Business Monthly, we get Thursday and Friday off for Thanksgiving. This is just one of the many things I am thankful for this year.

I am also thankful most in Alaska who want jobs have jobs, and ask prayers for those who don’t. I’m thankful the recession did not hit us harder than it did, and pray for our future as a state. We may face some hard times as the Lower 48 recovers. But we will survive, God willing. I’m thankful for a great staff at ABM, and wonderful freelance writers and photographers who help put this magazine together. I am thankful for our advertisers and readers, who make our magazine successful. I am thankful for all we have here at ABM and in Alaska. I am thankful for oil and gas, stimulus funds, a strong government, mining, timber, fishing, Native corporations, the F.I.R.E sector (finance, insurance and real estate), manufacturing, utilities, retail, wholesale and construction. As well as nonprofits. I’m thankful for those who I have forgotten, the smaller players, too, that make this state great as well. I am thankful for strong leadership in our companies. I am thankful to be a part of the U.S. I am thankful for a world that is beginning to attend to its environmental issues, and develops wisely. I am thankful for a lot of things: for health, happiness, family and friendship. It could be much worse. But it isn’t. – Debbie Cutler Managing Editor

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

INSIDE ALASKA BUSINESS Junior Achievement of Alaska Business Hall of Fame

our outstanding Alaska business leaders have been tapped for induction into the Alaska Business Hall of Fame. Business peers selected The Brice Family of Brice Constructors, Harry McDonald of Carlile Transportation Co. and the Quinn Brothers of Capital Office Systems. Selected for posthumous recognition is Jim Bowles of ConocoPhillips Alaska Inc. These business leaders were selected based on their direct impact toward furthering the success of Alaska business, demonstrated support and commitment to Junior Achievement’s programs, and demonstrated commitment to Alaska business. The induction ceremony for the Alaska Business Hall of Fame will be held at the Dena’ina Civic & Convention Center on Jan. 27, 2011. Junior Achievement of Alaska Inc. and Alaska Business Monthly are the title sponsors of this event. Alaska Business Monthly will feature an interview and biography of each of the laureates in its January 2011 edition. In 1987, Junior Achievement of Alaska Inc. and Alaska Business Monthly started the Alaska Business Hall of Fame to honor outstanding individuals of Alaskan business. Since then, the Hall of Fame has become one of the state’s most prestigious events, inducting new laureates on an annual basis. This class joins more than 100 Hall of Fame laureates exemplifying the rich diversity of Alaska in terms of geographical regions, business and industrial heritage and cultures. In essence,

COMPILED BY NANCY POUNDS

the laureates represent the foundation upon which Alaska is built and continues to grow. The 25th annual celebration includes a reception beginning at 5:30 p.m., dinner and induction ceremony at 6:30 p.m., concluding by 8:30 p.m. The evening will also include a special recognition of the many past inductees who will be in attendance. Individual tickets are $150, with limited sponsorship opportunities available. Please call 344-0101 for more information.

the North Slope to Southeast Alaska. The National Safety Council chose winners based on 2009 statistics for lowest total accident/incident rates and employee work hours. The council honors companies that have reported injuries and illnesses involving days away from work equal to or less than 50 percent of the Bureau of Labor Statistics rate for their national industry classification and have had no fatalities during a year. NMS is based in Anchorage and employs 2,500 people.

Interest Bought in TekMate

Lynden Wins Industry Honors

laska Communications Systems Group Inc. acquired 49 percent of TekMate, an Anchorage-based information technology services company, paying $2 million in cash for the acquisition, company officials said. TekMate, which employs 40 people, reported 2009 revenue of about $5.5 million. The firm provides computer network services, managed information technology services, including desktop support, desktop and server hardware, operating-systems management, localarea network monitoring and security services. TekMate was founded in 2001.

NMS Lands Safety Award

ynden Transport was voted the top less-than-truckload Western Region carrier by Logistics Management magazine’s 27th annual Quest for Quality Awards. The award marks Lynden’s fifth consecutive annual honor from the magazine. Lynden Air Freight/ Lynden International earned a fourth place ranking among 10 freight forwarders. Lynden Transport has now received 14 annual Quest for Quality awards, and Lynden International has placed in the top five for 11 consecutive years. Lynden Transport led the regional LTL pack overall with the highest rankings in the information technology, customer service and equipment and operations categories.

ANA Management Services LLC received its second consecutive annual Occupational Excellence Achievement Award from the National Safety Council. NMS is owned by NANA Development Corp., which is part of NANA Regional Corp. The award recognizes the safety record at NMS’s 57 business locations statewide, from

UIC Merges Subsidiaries

M IAQ, a subsidiary of the Alaska Native village corporation . Ukpeagvik Iñupiat Corp., merged with sister company LCMF. The combined company, now called UMIAQ, offers architecture, engineering, surveying

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

INSIDE ALASKA BUSINESS and consulting services. UMIAQ is located at 6700 Arctic Spur Road in Anchorage. Richard Reich is general manager of UMIAQ. Amanda Henry serves as operations manager. Steve Chronic oversees the design division, which includes architecture, engineering and surveying. Edith Vorderstrasse manages the consulting division, which provides regulatory, community relations and geographic information services. “Combining our companies expertise allows us to build upon each other’s experience and offers our clients expanded capabilities for their professional services needs,” Reich said.

Talkeetna School Earns LEED Award

u Valley Junior/Senior High School near Talkeetna is Alaska’s first high school to receive the U.S. Green Building Council’s Leadership in Energy and Environmental Design certification. McCool Carlson Green Architects designed the school. The Anchoragebased firm has designed two LEEDcertified schools, and four other registered projects are currently seeking LEED certification. The Su Valley Junior/Senior High School received LEED Silver certification at the Council of Educational Facility Planners Pacific Northwest Regional Conference held this spring in Talkeetna. The Municipality of Anchorage and the Matanuska-Susitna Borough have ordinances requiring public schools to achieve LEED certification for all new construction.

The previous Su Valley Junior/Senior High School was destroyed by fire in June 2007. The new 50,750-squarefoot school is the same size as the original school, but includes changes to meet community needs, including a larger gym and a performing space. The school is designed for 225 students in grades seven through 12. Environmentally friendly school features include water-use reduction and energy-efficient fixtures, reduced light pollution, some locally manufactured building materials, and building materials with recycled contents.

AEA OKs Hydroelectric Project Loan

he Alaska Energy Authority board of directors approved a $9 million loan to Haida Energy Inc. to help finance construction of a new 5-megawatt hydroelectric project on Prince of Wales Island. The loan is part of AEA’s Power Project Fund, which provides loans for Alaska utilities, governments or independent power producers to develop or upgrade electric power facilities. Haida Corp. and Alaska Power and Telephone Co. Inc. formed Haida Energy to build and own the $17 million project at Reynolds Creek. The project already has received about $5 million in State and federal grants. Haida Corp. also is investing in the project.

Tech Firm Lands Contract

enture Ad Astra LLC, an Anchoragebased technology company, received a $4.7 million contract from

the Air Force Research Laboratory. The contract funds continued development of a precision timing and location technology that calculates position independent of global positioning systems. Venture Ad Astra’s subsidiary ZuluTime LLC began development of PhaseNet, and believes it has many potential applications for the military, homeland security and the consumer. Work on the contract will be done in Alaska and Oregon, where Venture Ad Astra has offices.

UAF Offers Gardening Manual

he University of Alaska Fairbanks Cooperative Extension Service has published a new sustainable gardening manual. “Sustainable Gardening: The Alaska Master Gardener Manual” was adapted for Alaska from similar publication from Oregon State University. The 490-page manual, which sells for $40, provides information on soils, fertilizers, berry crops, pruning, composting, flowers, greenhouses, lawns and plant diseases. Home gardeners may find the manual useful, UAF officials said. It also will be used in the Cooperative Extension’s master-gardener training programs. Alaska contributors include Michele Hebert, the Cooperative Extension Service’s Tanana District agriculture and horticulture agent, and other current and former Alaska Extension faculty. “It takes a minimal input of labor, water, fertilizer and pesticides, while building the soil into a healthy living system,” Hebert said. “A thoughtful balance is made between the resources used and the results gained.”

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

INSIDE ALASKA BUSINESS A copy of the manual can be ordered via the Cooperative Extension Service’s toll-free line at 877-520-5211.

High-Tech Map Shows Internet Availability

new interactive, online map of Alaska now provides details of high-speed Internet availability statewide. The site, www.connectak.org, was developed by the Connect Alaska initiative and the Alaska Department of Commerce, Community, and Economic Development. Connect Alaska is a subsidiary of the national nonprofit Connected. The Alaska website was developed with funds from the American Recovery and Reinvestment Act. Connect Alaska is funded through a $1.9 million award by the U.S. Department of Commerce’s National Telecommunications and Information Administration to launch the initiative in the state and carry out the work over a five-year period. A similar national map is due to be available in February. Alaska’s newly completed map shows great progress in spreading broadband across the state. Eighteen broadband providers offered data showing that 90 percent of Alaskans can access broadband. However, of those, only 77 percent of residents report using broadband at home. The Connect Alaska initiative will continue the process of getting Alaskans online and accessing the unlimited benefits and economic opportunity associated with broadband. “This newly completed map paves

the way for technology, which will create new jobs, increase Alaska’s economic competitiveness and deliver services that have been previously unavailable to rural areas of the state,” said Susan Bell, commissioner of the Department of Commerce, Community, and Economic Development. “No matter where you live in Alaska, high-speed Internet enables access to quality employment, information and vital services ranging from interactive telemedicine to distance-education opportunities. Broadband gives you the opportunity to work from home, take classes online and market products to the world – all of which have a positive impact on the local economy and quality of life.”

Alaska-Made Vodka Shipped to Lower 48

laska Distillery’s products are gaining popularity outside Alaska, and the company continues to add products. The company dispatched orders for its smoked salmon vodka to nine U.S. states this fall. Washington’s State Liquor stores were the first outside Alaska to receive the smoked salmon vodka, which could become part of those stores’ regular inventory based on successful sales, Alaska Distillery officials said. Alaska Distillery also was due to send orders to Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Kentucky and Tennessee. The company also recently produced new vodka flavors, including

blueberry, cranberry, raspberry and birch syrup, using ingredients and flavors from Alaska. The company’s vodkas are produced in small amounts and are made from glacier water harvested from Prince William Sound icebergs. Toby Foster founded Glacier Creek Distillery, later renamed Alaska Distillery, in 2005. Partners are Scotti MacDonald, Shawn Ansley and Winston Chelf.

Southcentral Foundation to Build Wasilla Facility

outhcentral Foundation received a $40 million federal loan to build a primary care clinic in the MatanuskaSusitna Borough. Funding comes from the American Recovery and Reinvestment Act. The new Valley Native Primary Care Center will be built in Wasilla and is expected to employ 250 people. State and federal officials believe the new facility will improve health care for Alaska Natives living in the Palmer-Wasilla area and create jobs for residents. The new facility will be 93,652 square feet, replacing a building that is too small to meet the health care needs of Alaska Native residents in the area, Southcentral Foundation officials said. ❑ Send company news in the body of an e-mail (not as an attachment) to editor@akbizmag.com for Inside Alaska Business. We’ll also post to ABM’s website – Alaska News online at www.akbizmag.com.

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

VIEW

FROM THE

TOP

COMPILED BY PEG STOMIEROWSKI

Walter G. Landgrebe Alaska Account Manager, Snap-On Industrial n avid outdoorsman, Minnesota native Walter G. Landgrebe worked with hand tools as an Army tank crewman in the 1980s and as a bicycle/ski mechanic upon moving to Alaska in 1991. He joined Snap-on Industrial in 2000 as manager of statewide accounts. The change, coupled with his earlier experience in the field of parks and recreation and in directing a community school, helped Landgrebe realize he liked sales and was good at it. At Snap-on Industrial, he works from a home office, toting and promoting new products and services when traveling to visit customers. He’s also responsible for day-to-day order processing, project development and finding solutions to customer needs.

PRODUCT FOCUS: Snap-On Industrial is a division of Snap-On Inc., whose products and services include hand and power tools, tool storage, diagnostics software, information and management systems, shop equipment and other solutions for customers in industry, government, agriculture, education, aviation and natural resources. Snap-on makes more than 50,000 hand and power tools, and our team of 400 engineers is dedicated to continuous product improvement. GLOBAL REACH: Snap-on Industrial has been in Alaska since the beginning of North Slope and pipeline construction days. In a testament to our product line, some Snap-On hand tools and storage devices purchased at startup still are found in use at Prudhoe/ Kuparuk production facilities. Our largest customers are in oil and military sectors. Snap-on emphasizes a direct sales relationship with customers. In Alaska, we have two industrial account managers: traditional and government. As the former, I handle commercial, State, borough, municipal and education business. Don Taylor handles all General Services Administration accounts, including federal government and military agencies. Today, Snap-on boasts almost 12,000 employees at 35 manufacturing facilities globally. RETOOLING: Tools are always needed. While Alaska is a strong market, 2009 was as difficult for Snap-on Industrial as it was for most industries; business in 2010 is better overall, and we’re seeing growth resume. Still, customers are discerning about what they want to accomplish. Our role is to be a solutioneer, providing the best tools for specific applications. Some of our products and services satisfy Six Sigma process improvement requirements and LEAN production efficiency initiatives. Tool Up projects, which support manufacturing lines, production modules and specific maintenance programs requiring standardization, are right up our alley.

GROWTH PLANS: Five points are worth stressing here: In Alaska, Snap-on Industrial traditional growth will still come from the oil and gas sector. 1. Snap-on also has been aggressive in the area of wind power generation, providing stan2. dardized kits to service wind turbines. Our Tools at Height program, developed by our United Kingdom office for oil platforms 3. in the North Sea, is available to U.S. customers, with a full line of tethered tools and tethering devices for working at height. Our Level V Tool Control Program creates standardization, enhances security and 4. reduces tool loss. Industrial Specials: Our engineers will redesign a tool to meet required specifications. 5. This removes the burden of liability from the employer, bolstering efficiency and safety standards. Education is growing, with more students attending maintenance technology programs such as auto/diesel and aviation. Full-time students/apprentices have the opportunity to purchase tools and storage units at special discounted prices under the Snap-on Student Education Program. We are, after all, in the business of creating customers for life! ❑ Walter Landgrebe www.akbizmag.com • Alaska Business Monthly • November 2010

OIL & GAS

Shell Oil Co. Kulluk platform being towed.

Key to Alaska’s oil future? BY JACK E. PHELPS

here is much at stake for Alaska in the ongoing discussion about oil and gas development in the offshore areas of the state. With new onshore oil field development stymied by congressional failure to authorize exploration in the coastal plain (Area 1002) of the Arctic National Wildlife

Refuge (ANWR), and by continued delays of new exploration in the National Petroleum Reserve-Alaska (NPR-A), several oil companies have focused recently on searching for oil and gas in the Outer Continental Shelf (OCS). Both BP and Pioneer Natural Resources Alaska have begun to develop

OCS oil in the Beaufort Sea by the use of manmade offshore production islands. The first such was the Endicott facility and its associated satellite drilling island, now renamed Tern Island, located northeast of Prudhoe Bay. Endicott began production in 1987. In 2009, BP extended Tern Island

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

to accommodate development of the Liberty Prospect, which it has been developing since the late 1990s. Liberty will utilize extended reach, directional drilling to tap approximately 100 million barrels of undersea oil reserves in the Beaufort, with production expected to begin in 2011. More recently, Pioneer built and developed the Oooguruk production island, also in the Beaufort Sea, to become the first independent oil company to begin production in the Arctic Ocean.

2008 LEASE SALE 193 In 2008, Shell Oil Co. significantly strengthened its interests in Alaska by purchasing $2.2 billion in leases in the Chukchi Sea, totaling 276 blocks, according to Shell’s Curtis Smith. In addition, Shell has invested another $1.3 billion making preparations to drill exploration wells in the Chukchi Sea. Shell also owns leases on 137 blocks in the Beaufort Sea. ConocoPhillips has likewise invested heavily in Chukchi Sea exploration. According to spokesperson Natalie Lowman, the company has purchased interests in 98 lease blocks in the Chukchi alone, at a cost of $506 million and has invested “tens of millions” in work to develop those leases. Another company with significant lease holdings in the OCS is Statoil, formerly Norwegian State Oil Co., which paid nearly $14 million for its successful bids in Lease Sale 193. Through its Statoil Alaska division, Statoil is the holder or joint holder of 16 lease blocks in the Chukchi Sea, in 14 of which Eni Petroleum holds a 40 percent ownership. Statoil, with 35 years experience in offshore development in the Norwegian continental shelf, is the operator on all 16 lease blocks. In addition, Statoil is a 25 percent partner with ConocoPhillips in the Devil’s Paw prospect in the Chukchi, said to company Consultant, Ken Boyd. This activity was made possible by the publication of the “Proposed Program, Outer Continental Shelf Oil and Gas Leasing Program, 2007-2012,” released in August, 2006, by the U.S. Department of the Interior then Minerals Management Service (MMS), since renamed the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE).

Our commitment runs deep. It takes solid teamwork to explore, develop and produce Alaska’s rich mineral resources. Alaska Air Cargo has been a dependable partner for mining operations in the Last Frontier for more than 75 years. Our local experts like Larry will get your packages where they need to go with same- and next-day ay service to 19 Alaska destinations and beyond. Knowledgeable. Reliable. Committed. mmitted. Trust your shipments to Alaska ka Air Cargo.

UNBEATABLE FREQUENCY ACROSS ALASKA

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The Proposed Program for 20072012 identified four areas off the coast of Alaska for oil and gas lease sales: Cook Inlet, North Aleutian Basin, the Chukchi Sea and the Beaufort Sea. The Proposed Program was preliminary to the release of the five-year program and Environmental Impact Statement required by Section 18 of the OCS Lands Act before oil and gas leases can be offered by the department. After the final program for 2007-2012 was approved, Arctic Lease Sale 193 was held in February 2008, prompting bids from Shell, ConocoPhillips, ENI, Statoil and others.

RDC MAJOR PROPONENT The Resource Development Council for Alaska (RCD) was a major proponent of this leasing activity. “Alaska’s offshore is home to some of the most prolific, undeveloped hydrocarbon basins in the world, reserves that would not only fuel Alaska’s economy for decades, but would provide the nation with much needed energy,” said RDC Executive Director Jason Brune. Pete Slaiby, Shell Alaska’s general manager, has stated OCS development in Alaska could result in 35,000 new direct and indirect jobs in the state. The prospect for Arctic offshore oil production is confirmed by BOEMRE’s estimate of potential reserves in the Beaufort and Chukchi Seas: 22.34 billion barrels of recoverable oil, 109 trillion cubic feet of natural gas. Of those totals, 15.4 billion barrels of oil are potentially recoverable from the Chukchi Sea alone. RDC board member John Sturgeon testified in support of OCS exploration before at an Interior Department hearing in April 2009, saying, “the United States has over 300 million people and we add 2 million every year. This large of a population generates a huge demand for oil and gas. Oil and gas is at the very heart of the wonderful lifestyle we all enjoy. Seventy-seven percent of Alaska residents and 61 percent of U.S. residents support exploration in the OCS.”

DELAYS AND UNCERTAINTY Despite this widespread support for development in the Alaska OCS and the significant investment by the industry, progress has been delayed and

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

uncertainty characterizes the drilling situation in the Arctic. The Village of Point Hope filed a lawsuit in Federal District Court alleging the Interior Department Minerals Management Service violated federal environmental laws when it approved the OCS lease sales in the Chukchi Sea. On July 21, the District Court ruled the agency had violated the National Environmental Policy Act (NEPA), but only on very narrow grounds. In a decision issued by Judge Ralph Beistline, the court enjoined activity under Lease Sale 193, pending action by the agency to remedy the faults of the Environmental Impact Statement. Shell Alaska was the most heavily affected party by the action and subsequently filed a motion with the court for reconsideration and relief. On Aug. 2, Beistline issued an order of clarification. It amended the injunction to allow seismic work, shallow hazards surveys and other scientific work necessary to establish baseline information in the Chukchi Sea. What continues to be prohibited, according to the order, is exploration drilling, thus sidelining

Shell’s drilling plans for the 2010 season. In accordance with the Aug. 2 order, activity in the Chukchi has continued this year, with Shell, ConocoPhillips and Statoil all doing pre-drilling reconnaissance work. These three companies have been conducting baseline science work, shallow hazards identification and some onshore geotechnical analyses. The first week in August, Statoil kicked off a 60- to 90-day program of seismic activity, in which soundings are used to help characterize the undersea geology of the field.

FURTHER COMPLICATIONS The blowout of the Deepwater Horizon well in the Gulf of Mexico on April 20 further complicated an already difficult situation. In early May, the Obama Administration initiated a moratorium on deep water drilling in the aftermath of the Gulf spill. Interior Secretary, Ken Salazar, specifically included Alaska offshore drilling in his announcement of the moratorium, even though all proposed exploration in the Arctic Ocean is in shallow water. Shell’s drilling plans were put on indefinite

hold as a result of what Smith calls the “paralyzed regulatory framework,” plus “confusion over the moratorium” and how it applies in Alaska. Brune points out the odd nature of any connection between the issues faced by drilling at water depths of 5,000 feet in the Gulf of Mexico and drilling at 150 or 200 feet in the Arctic. At a hearing in the U.S. House of Representatives, Salazar referred to the temporary nature of the moratorium, which he said is necessary for the government to review safety procedures and regulations to enable the “safe and responsible” continuation of offshore oil development in the future. The moratorium, Salazar emphasized, “is the pause button, it’s not the stop button, but it’s the pause button.” Unfortunately for Alaska, industry experts point out that delays, especially in the remote Arctic, are very expensive for companies that have already mobilized equipment for planned activity. Those expenses inevitably get factored into decisions about future work in the affected areas. As Sen. Lisa Murkowski pointed out in

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her comments at a July hearing of the Senate Committee on Energy and Natural Resources, at least one U.S. company has redirected drilling rigs to other parts of the globe in the aftermath of the government’s moratorium. In early September, Salazar visited the North Slope, including the Chukchi Sea. At the conclusion of that trip, in a press briefing in Anchorage, Salazar announced the DOI would not allow exploration drilling to take place in either the Chukchi or the Beaufort seas until “central questions” regarding reservoir pressures and spill response capabilities were answered. This clearly will affect Shell’s allocation of assets and could result in a lengthy delay before the first exploration well is drilled in the Chukchi Sea. Shell hopes to drill one or two wells in the Chukchi in 2011, according to Smith, but a go or no-go decision will be made before the end of the year.

GETTING PAST HURDLES

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The importance of getting past the regulatory and legal hurdles currently blocking further exploration and development of the oil and gas industry in the Beaufort and Chukchi seas can hardly be overestimated. According to RDC’s Brune, the health of the Alaska economy hinges to a large extent on the continuation of oil flowing down the trans-Alaska oil pipeline. State of Alaska estimates indicate that more than 80 percent of State revenue depends on the oil fields, a fact widely known in Alaska. What is also well-known is the quantity of oil flowing down the pipeline from the North Slope to Valdez is declining, due to the reduced reserves currently tapped in the Prudhoe Bay area and associated fields. In the mid-1980s, the pipeline was carrying 2.1 billion barrels per day to the world market. Present volume is estimated at between 630,000 and 650,000 barrels per day. According to State of Alaska estimates, production is declining at a rate of 2 percent per year, an estimate that most industry officials consider optimistic, according to RDC’s Carl Portman. New oil discoveries in Alaska’s Arctic OCS could infuse new life into the trans-Alaska oil pipeline by contributing new producing fields to offset the decline of existing onshore reserves. But here’s the rub: both industry and

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

©BP Exploration (Alaska) Inc./Courtesy of RDC

July 2009 Liberty barge arrival at the satellite drilling island now known as Tern Island in the Beaufort Sea northeast of Prudhoe Bay.

government officials estimate that when the pipeline throughput drops to a range of 300,000 to 500,000 barrels per day, the economics of continuing to pump oil to Valdez begins to get marginal. When the pipe can no longer pay for itself, industry will have little choice but to shut it down. According to federal law, when the pipeline is no longer operational, it must be removed and the corridor restored to pre-pipeline conditions. When this happens it will be the end of North Slope oil production and a serious disaster for the Alaska economy.

ALASKA’S OIL INDUSTRY FUTURE RDC and most industry watchers are in agreement that the next few years are critical times for the future of oil and gas in Alaska, and the Arctic OCS holds the key to that future. If Shell, ConocoPhillips and others are successful in locating and developing significant new fields in the Chukchi and Beaufort seas, the life of the pipeline can be extended for many years. But for that to happen, exploration drilling must begin soon, according to Boyd. He explains that Chukchi Sea oil, as well as oil from

the Beaufort Sea, would be piped to Prudhoe Bay and delivered to Pump Station One for transport to Valdez via the trans-Alaska oil pipeline. To make this happen will take both time and a serious new investment by the industry. Several industry experts suggested that to get from the exploration stage, where we are now, to oil production and shipment to Valdez will take 12 to 15 years. The outstanding questions are two: can the onshore and offshore island fields near Prudhoe Bay sustain the pipeline until OCS oil comes on line; and will the federal government allow OCS activity to move forward in a timely fashion? On these questions, the future of Alaska’s oil industry may depend. ❑ About the Author Jack. E. Phelps is a retired natural resources adviser for the State of Alaska. He is a former executive director of the Alaska Forest Association and has served as professional staff for the U.S. Senate Committee on Energy and Natural Resources. He presently owns ExecuSwift Consulting in Palmer.

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

OIL & GAS

Alaska Oil and Gas Winter Forecast State estimates 2011 increase in jobs, capital expenditures BY HEATHER A. RESZ

Charts courtesy of Alaska Department of Revenue

has had a chilling affect on the billions of investment dollars necessary to keep oil flowing through the trans-Alaska oil pipeline for the next 50 years. Davis said she’s familiar with the groups’ concerns, but State records show year-to-year growth in capital expenditures, jobs and State revenue. “I hear people saying that. But all I know is what the data shows us,” she said of industry claims.

IS ACES WORKING?

The progressive feature in ACES means that the state receives more production tax revenue when oil prices are high relative to underlying costs. Similarly, it significantly lessens the state’s share of revenues when per-barrel margins decline. This effect was illustrated in 2008, when oil prices reached a high of $140 per barrel in July, bringing in $900 million in production tax for the month, and later plunged to below $30 per barrel in December, producing a total of $50 million in production tax for the month. Over the course of the full year, ANS crude oil averaged over $92 per barrel, resulting in five times more revenue than would have been realized under the ELF system.

hough it’s still early too know what fiscal year 2011 might look like for the oil and gas industry – Department of Revenue won’t issue its 2010 Fall Revenue Forecast until December – some say they worry Alaska’s 2007 tax law change is stifling the industry. “The State has put exploration incentives in place, but our tax regime is so far out of bounds that it is discouraging new exploration,” said Jason Brune, executive director of the Resource Development Council for Alaska, a resource industry advocacy group. Alaska Department of Revenue Deputy Commissioner Marcia Davis said Alaska’s Clear and Equitable Share,

or ACES, was designed to encourage investment, and gives companies tax credits for a portion of their qualified capital expenses. Because Alaska’s tax is based on the “net value” of oil and gas production, rather than the “gross value,” producers pay tax only after all of their costs are taken into account,” she said. “ACES rewards producers who invest in Alaska, and is less rewarding to companies that want to treat Alaska as a cash cow,” Davis said. But advocacy groups like RDC and The Alliance say Alaska’s job and investment numbers are slipping in the oil and gas industry. They say the progressive tax structure in the 2007 law

According to the Department of Revenue’s January evaluation of ACES, capital expenditures were $2.047 billion in fiscal year 2007, $1.954 billion in 2008 and $2.212 billion in 2009. For 2010, Davis said the Department of Revenue expects capital expenditures to be about $ 2.5 billion, and estimates 2011 will be $2.9 billion. If these estimates hold true, that’s nearly a $1 billion increase in capital expenditures since ACES passed. “This report was prepared at the request of the commissioner of revenue in order to evaluate whether ACES is meeting its intended goals of providing a fair share of oil and gas revenue to the State, and encouraging investment in the exploration and development of new oil and gas resources in Alaska,” according to the Department of Revenue ACES status report. The tax law also generated more State revenue than its predecessors would have. It generated about $3.1 billion in State revenue in 2009. The Petroleum Profits Tax law passed in 2006 would have generated $2 billion and $858 million would have been generated under the earlier Economic Limit Factor tax law, according to the Department of Revenue report.

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

A further review of company tax returns indicates that the increase in capital spending is due primarily to an increase in drilling, seismic and other work, not maintenance or pipeline replacement spending, Davis said. Davis pointed out that the State has a huge economic interest in making sure ACES isn’t harming investment and employment. “We must continue to encourage future investment. It affects our throughput. It affects our future. It is our lifeline.”

Alaska monthly oil industry employment includes employment for NAICS Industries 211, 213111 and 213112. Due to data constraints at the national level, US monthly oil industry employment includes employment for NAICS Industries 211 and 213112 (excludes drilling employment). Since drilling is a relatively small percentage of national oil industry employment, the overall trend is the same and is considered an acceptable proxy for total national oil industry employment for this illustration. U.S. data for June 2010 not available. The U.S. Department of Labor’s Bureau of Labor Statistics has emplemented a change to the method used to produce statewide wage and salary employment estimates, which has resulted in increased monthly volatility in the wage and salary estimates for many states, including Alaska. Therefore, one should be cautious in interpreting any over-the-year or month-to-month change for these monthly estimates.

OIL & GAS EMPLOYMENT Annual oil and gas employment since the passage of ACES also is generally increasing, according to data from the Department of Labor. Its data lists employment in the oil and gas industry at 10,100 in 2006, 11,500 in 2007, 12,900 in 2008, 13,000 in 2009, and is estimated to average 12,700 in 2010. Davis said oil prices have a lot to do with companies’ decisions about capital expenditures and hiring. And Fiscal Year 2011 oil prices are forecasted to remain close to the Fiscal Year 2010 levels, she said. State economists with the Department of Revenue also compared oil and gas employment in Alaska from December 2007 to May 2010 with that of Wyoming, Texas and Louisiana. Employment grew 0.8 percent in Alaska, compared to Wyoming where employment was down 22.8 percent, Texas was down 3.2 percent and Louisiana was down 10 percent, according to the U.S. Bureau of Labor Statistics. In the oil and gas sector, from December 2008 to May 2010, the Bureau of Labor Statistics reports employment was down in the U.S. by 5.3 percent, in Alaska by 6.9 percent, Wyoming by 29 percent, Texas by 11.9 percent and Louisiana by 13.6 percent. High oil prices and the predominance of the oil and gas industry in Alaska are one reason why Alaska’s jobless rate has remained lower than the national rate for the past 22 months, according to Neal Fried at the Department of Labor. In August, Alaska’s jobless rate was 7.7 percent, while the national rate was 9.6 percent, he said. “And we have budget surpluses,” Fried said. “That’s all tied to oil and relatively high oil prices.”

DRILLING DELAYS It seems likely that some hoped-for jobs did evaporate this summer when drilling plans for three big projects were postponed in the wake of the Gulf of Mexico disaster. BP had planned to begin drilling at its Liberty oil field this year, but delayed it until 2011. And ConocoPhillips and Shell are still waiting to hear whether their plans to drill in the outer continental shelf will be allowed to move ahead.

“All we are doing now is looking for leadership from the administration as to a path forward to drilling in the Alaska offshore in 2011,” said Curtis Smith, a Shell spokesperson. “As of today, the suspension of Arctic drilling remains in place and there is no indication from Secretary Salazar as to when he and the agencies that work for him will re-engage on the topic of Arctic drilling.” He said the project would have

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

Economically Recoverable North Slope Oil and Gas Potential

employed 600 to 800 people this summer. The U.S. Department of Energy estimates the Chukchi and Beaufort seas contain 34 billion to 36 billion barrels of oil and 150 trillion cubic feet of gas, according to its 2009 report “Alaska’s North Slope Oil and Gas: A Promising Future or an Area in Decline?” That’s compared to Prudhoe Bay, which contained an estimated 25 billion barrels of oil, and Kuparuk with 2 billion barrels. Davis said she is excited about a new crop of players, including Brooks Range Petroleum, Eni, Pioneer Natural Resources and Savant, that are adding oil to the trans-Alaska oil pipeline. “Different companies bring new perspectives and different economic thresholds,” she said. “Savant is a real success story.”

CHALLENGES AROUND

THE

CORNER

Certainly, no industry in Alaska plays a bigger role in State and individual

finances: The wealth that flows through the trans-Alaska oil pipeline generates one in three jobs, most State tax and royalty revenue and the Permanent Fund Dividend. And oil revenues are projected to provide “87 percent of General Purpose Unrestricted Revenue through fiscal year 2019,” according to the Department of Revenue. More immediately, the trans-Alaska oil pipeline needs more throughput, according to Michelle Egan, corporate communications director for Alyeska Pipeline Services Co., which operates the pipeline system for the six companies that own the pipeline system. Since peaking in 1988 at 2.1 million barrels, throughput has declined about 69 percent. Now throughput averages around 660,000 barrels a day. And the Department of Revenue has forecasted a decline to 619,000 barrels a day in 2011. Alyeska expects production to drop below 500,000 barrels of oil a day around 2014, Egan said.

Alaska North Slope Production, FY 2009 and (1) Forecasted FY 2010-2019 (millions barrels per day)

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

Inside the pipe, that means the trip from the North Slope to Valdez that used to take an oil molecule four days, now takes 18 days, she said. At this velocity, oil temperatures in the pipe will drop below 32 degrees leading to wax and water buildup and potential ice plugs, Egan said. “The challenges of low throughput are right around the corner,” she said. Paul Laird, general manager of The Alliance, said investment in exploration is the only way to get more oil in the pipe. Developing North Slope gas also may add more oil to the pipe, he said. “Producing the gas is important because looking for one will inevitably result in more of the other over the long-term,” Laird said. But new oil takes time, Egan said. Even if a big project – like Shell and ConocoPhillips’ OCS developments – began drilling in 2011, the oil produced wouldn’t enter the pipe before 2014, she said. “We will have to take some measures in the 2014 area to get us through to a higher throughput,” Egan said. Alyeska’s engineers are working with pipeline owners’ engineers now to come up with solutions for how to operate the pipeline in sub-zero weather with low-flow. “How low can you technically operate the pipeline? The answer is how much will it cost.” Egan said. “What are the economics of solving that puzzle? At what point does it become unaffordable?”

company negotiated an agreement in 2008 with BP to try new drilling techniques to unlock in its Badami oil field. Production from the shuttered Badami plant resumed in September. ■ Pioneer Natural Resources became the first independent to produce oil on the North Slope in 2008. Production from the Oooguruk field’s 40 wells is expected to peak during 2011 at 15,000 to 20,000 barrels a day. ■ Brooks Range Petroleum Co. – a new player on the North Slope – is developing the North Shore field. Production of its 5 mil-

lion to 10 million barrels of oil is expected to begin in late 2012. The company also expects to drill in its Tofkat prospect in 2011. ■ Buccaneer Alaska LLC has plans to drill on its leases in Cook Inlet in 2011. ■ Talisman Energy/FEX: Based in Calgary, Talisman Energy conducted a 3-D seismic program in Smith Bay north of Teshekpuk Lake in 2008 and is considering resumption of exploration drilling during the winter 2010-11 season. ■ Wildcat Consortium drilled its first well during summer 2010 in the Nenana Basin ❑ near Fairbanks.

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■ Eni produced first oil from its Nikaitchuq offshore prospect this year. ■ ExxonMobil began drilling in 2010 at Point Thomson and plans to begin producing liquid condensate from the field by 2014. Point Thomson represents 25 percent of the known gas resources on the North Slope and is key to any gas pipeline project. The company plans to spend $3.1 billion developing the high-pressure gas field. ■ PTE Pipeline plans to begin construction in late 2011 of a 22-mile-long pipeline to connect the Point Thomson Central Pad to the existing Badami Sales Oil Pipeline. ■ Savant Alaska LLC is a new North Slope player that took advantage of the State’s tax incentives and BP’s existing infrastructure to enter the North Slope market. The

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

FISHERIES

Alaska Commercial Salmon Fisheries Overview Record pink runs in Prince William Sound BY TRACY KALYTIAK

Wild Alaska salmon spawning.

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

©Alaska Department of Fish and Game

he pink salmon fishery in Prince William Sound last year was a bust, so commercial fishermen entered this year’s fishing season with trepidation. They quickly received a happy surprise. “It was just very early in the season when the fish started returning in numbers in excess of what you’d expect for the date,” said John Garner, vice president and director of the salmon group for Trident, which had to rush four floating processors to the Sound and summon long-haul tenders to carry their bounty of pinks to Ketchikan and Kodiak. “The ocean survival rates were just extraordinary. There must have been extremely good ocean conditions for those fish.” The record-setting influx of pinks to Prince William Sound this summer is a key reason why the number of salmon caught in the state this year totaled more than 164 million – far exceeding the Alaska Department of Fish and Game’s 2010 statewide forecast of 137.3 million fish. Commercial vessels hauled in a total of 67.3 million pinks from Prince William Sound by mid-September; the previous record had been a 2007 harvest of 63.5 million pinks. A total of 108.2 million salmon were caught in the Central region, which includes Prince William Sound, Cook Inlet and Bristol Bay. Fish and Game’s forecast for 2010 had been 73.2 million salmon. “Bristol Bay was a remarkably smooth fishery this year for as large of a run it was,” Garner said. “It’s usually a very compressed run. Most of these big years you wind up putting fishermen on limits to prevent catching more than you can handle. This year, the fish were spread out over more days. It was a wonderful fishery.” Garner said the slow, steady flow of Bristol Bay fish enabled Trident and other processors to choose which product form to package them in – cans of varying sizes, filets or frozen headed-and-gutted salmon. “The filets have more value; you use tall cans because you have to,” Garner said. “When there are less fish in front of you, you’re able to pick the product form that brings back the most value.” www.akbizmag.com • Alaska Business Monthly • November 2010

SOUTHEAST Commercial fishermen in Southeast also saw an uptick in salmon catches, with a total of 35 million salmon caught. Approximately 23.4 million of those fish were pink salmon. Fish and Game’s 2010 forecast – based on historical averages – had been 32 million fish. “I was amazed we came as close as we did to the forecast,” said Scott Kelley, Southeast’s regional supervisor for Fish and Game’s commercial fisheries division. “The harvest is from approximately 2,500 pink streams. There are big streams in there, little Podunk trickles, a huge variety of habitats. Trying to estimate what they all do is difficult. Everything is telling us as far as pink salmon, all the signs are for a very big run in Southeast next year.” About 248,000 chinook salmon were caught in the region in 2010, as well as 8.9 million chum, 671,000 sockeye and 1.92 million coho – a number that was expected to rise since the coho fishery had not yet ended by presstime.

OTHER AREAS Areas of the state that did not fare as well with their salmon fisheries included the so-called Westward Region, which includes Chignik and Kodiak. The projected number of fish had been 30.4 million salmon, but commercial fishermen brought in only 19.4 million fish. Mark Witteveen, a research biologist with Fish and Game, said estimates of stock-specific harvests are not calculated until later in the fall when the fisheries have stopped and all of the department’s weirs are removed. “So our estimates of specific returns are pretty rough right now,” said Witteveen in September. Few of the key sockeye systems from the Westward Region came in close to forecasts, including Spiridon Lake and Chignik River. Bear River sockeye on the Alaska Peninsula came in substantially higher than forecast while Nelson River was substantially lower. Runs of Karluk, Ayakulik, Frazer and Upper Station sockeye were also lower than forecasted. “As a whole, our total harvest was substantially lower than forecasted,” Witteveen said. “Most runs were lower

than recent averages. It is difficult to determine the causes for these shortfalls. Most parent-year escapements were on track; any other stage in the freshwater or saltwater residence could have affected survival.” Wild-stock pink salmon runs in the Kodiak area were very close to forecasts but lower than average. Witteveen said this was likely due to poor winter survival conditions during 2008/2009 while pink salmon were in the rivers. “The hatchery portion of the Kodiak pink salmon run was lower than forecasted,” he said. “Alaska Peninsula and Chignik pink salmon harvests were low compared to the recent past and while these runs are not formally forecast, the causes are likely similar to those in the Kodiak area.” Salmon returns were sluggish in the region encompassing the Alaska Peninsula and Yukon and Kuskokwim rivers. The 2010 forecast had predicted a return of 1.6 million salmon; the catch totaled only 1.27 million. John Linderman, Fish and Game’s AYK region supervisor for the commercial fisheries division, said the season was difficult because escapement numbers didn’t meet expectations or Yukon River Salmon Treaty obligations. “By the time we got a better picture of the run being weaker than forecasted, all that harvest had already occurred,” before sufficient numbers of fish could reach Canadian waters, Linderman said. Downpours of rain and flooding on the middle and upper parts of the Yukon throughout July frustrated subsistence fishermen and skewed efforts to pinpoint harvest numbers. “Whether they’re using gillnets or a fish wheel, when there’s a lot of debris in the water, it reduces their fishing success,” Linderman said. “If the net is getting gummed up with logs or the fish wheel is stopped, your ability to be able to harvest will be significantly reduced. And, it’s difficult to use the same locations for fishing that you’re used to when there are high-water events.” Fish and Game staff in September were traveling from house to house in the region to solidify subsistence fishing

numbers and get a better picture of the total harvest. Linderman said it’s likely Fish and Game will shift back to a more conservative approach to management in the area, to ensure treaty obligations and escapement on both sides of the border are being satisfied. “We received funding from multiple sources to address this uncertainty in assessment programs,” he said. “We started initiating programs this year.”

2010 VALUE The value of 2010’s statewide salmon harvest had not yet been determined by presstime. Higher prices and the brisk pinks harvest, however, were expected to considerably boost the value of this year’s statewide salmon catch well above last year’s $417.2 million. The value of 2010’s statewide salmon catch will likely be established in the spring or early summer of 2011, said Geron Bruce, assistant director of Fish and Game’s commercial fisheries division. By April 1, 2011, processors, direct marketers and catcher-sellers are required to submit reports on their buying and production activities, Bruce said. In those reports, they detail average prices they paid for salmon of various species in different parts of the state. “Then we can come up with a pretty good estimate of what the final value of the salmon harvest was,” Bruce said. “It takes us a while to enter it, review it, do the calculations to come up with an estimate.” While some fisheries in the state encountered anemic returns, Bruce said he thought the Prince William Sound pink salmon fishery could be a record harvest in terms of value. “Prince William Sound and Bristol Bay were really the stars of the 2010 salmon season,” he said. “They were spectacular. Prince William Sound was just off the charts as far as the pink salmon they caught and they caught good numbers of sockeye and chum salmon. In Southeast, the catches weren’t really big but good prices there really helped a lot. Upper Cook Inlet did pretty well, too. It’s been a good season, I think people are going to ❑ make money.”

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

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Public-Private Partnerships Photo courtesy of Campbell Creek Science Center

Autumn view of the Campbell Creek Science Center off Elmore Road in Anchorage.

Popular for Leveraging Resources BY JOETTE STORM

he idea of cooperative collaboration to achieve desired results is firmly rooted in the myriad of public-private partnerships that are bringing businesses, government agencies and nonprofit organizations together across Alaska. Partnerships are becoming ever more popular as a means to enhance existing programs, address safety and health issues, or promote work force training. In Anchorage alone, there are more than 500 schoolbusiness partnerships; and across the state in communities large and small, dozens of new partnerships are formed every year.

SAVING COMMUNITIES Partnerships are popular, according to Mike Shiffer, assistant director of the Partnership Division, Alaska Department of Labor, because they leverage resources and expand the capacity of small organizations. This was especially true in the Delta region where

the population in the four communities was barely 3,600 in 2000. The forecasted closure of Fort Greely had caused a drop in jobs and population. When the Department of Defense proposed construction of a missile defense system, community leaders established the Partners for Progress in Delta Inc. (PPD) to stem the loss of local jobs in the region. Several small training strategies were in place though they lacked capacity to develop the level of training that could prepare residents for skilled trades, says Shiffer. By sharing resources among the Delta/Greely High School, the University of Alaska Tanana Valley Community College, Alaska Works Partnerships, trade associations and the Delta Mining Training Center, they developed a full-fledged Delta Career Advancement Center that produced workers with transferable industry-standard skills. It took several years to get up to

speed, but since 2003, 150 high school students and young adults completed training and earned certifications to gain access to apprenticeships and jobs.

CREATING CHANGE Combining forces also increases the ability to persuade and promote change. In 1995, Alaska’s reputation as a dangerous place to fly came to national attention with a string of fatal accidents. For decades, the Federal Aviation Administration (FAA) had promoted safe practices and decisionmaking with limited success. Then the agency, led by Regional Administrator Jacqueline Smith Burdette, reached out to industry leader Richard Harding, president of the Alaska Air Carriers Association (AACA) to form an Alliance for Aviation Safety. Speaking with one voice, they took on the task of persuading pilots and operators to change the “culture of risk.” Their Alliance created a platform for

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

discussing safety measures and company cultures. It fostered cooperation among competing air carriers. Harding made public his pilot decision-making system, a set of physical and objective criteria to guide landing on Bush airstrips and rural airports. Soon other carriers were adopting such guidelines and adding dispatcher support to the decision-making. The AACA eventually established the Medallion Foundation to create voluntary higher standards for maintenance, operations and training that exceed regulatory requirements. Former AACA director Karen Casanovas recalls the partnership changed the dynamics of the industry relations and made possible many collaborations, including the development of the Capstone program, a suite of equipment and tools that helped pilots navigate more accurately and gave them weather information delivered to the cockpit. “The Capstone project never would have been possible without a partnership,” Casanovas says. “It required a major shift in philosophy and a level of trust among government and industry.

The Alliance brought about improvements in safety and research, and a focus on Alaska as a test bed that attracted others to our state.” Over the course of the next decade, the accident rate fell as cooperation among industry groups improved. Industry leaders from the Alaska Aviation Safety Foundation, the University of Alaska and the State formed the Alaska Aviation Coordination Council, which fostered more innovation. The Council serves as a forum to share ideas and collaboratively focus attention on problems of mutual concern to the industry.

PROMOTING STEWARDSHIP A third attribute of partnerships that makes partnerships attractive is they create a sense of ownership that engenders mutual responsibility for the cause. The Bureau of Land Management (BLM) promoted the formation of a Friends association for the Campbell Creek Science Center for a number of reasons, not the least of which was the continuation of stewardship values so important to the agency’s mission of caring for public lands,

according to Gary Reimer, Anchorage district manager. “We also knew early on that some schools in the community might not be able to afford the programs and that some form of scholarships would be needed to assure broad access and a continuing income stream.” Emma Walton, local educator known for forging numerous partnerships during her career at the Anchorage School District, agreed to help. “It made sense to me because engaged users will feel they have a stake in the program or facility and will support it over the long-term.” Jeff Brune, center director, recalls he envisioned a group of local folks who could share ideas and energy with center staff, recruit volunteers and attract financial support. “That is what we have today. I can’t imagine running the center without the Friends group.” Inviting others into such an intimate relationship does take a bit of risk. Although BLM often uses advisory councils as sounding boards, a cooperating association that asks individuals to put their reputations and connections

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

Photo by Joette Storm

Federal Aviation Administration Safety Program Manager David Karalunas takes advantage of the partnership with the University of Alaska Anchorage to bring aviation campers into the mechanics bay for hands-on learning.

on the line creates different expectations for the level of involvement. The agency took steps at the outset to discuss values, roles and responsibilities. With help from the Foraker Group, the parties examined expectations and limitations before a charter was inked. All this was worth the effort, says Reimer, “The Friends involvement and its financial contribution is a tangible representation of the community support for the Science Center and its mission. There are many government programs that are popular, but when people contribute their time and talent as well as money it speaks to another level of how the community values an asset.” Six years into the relationship, Reimer and Brune nominated Friends of Campbell Creek Science Center for a national award, which they received in February 2010. The two men acknowledge having community support makes the district more competitive for funding from the Department of Interior. Friends have taken responsibility for making programs at the center accessible to low-income families by raising more than $100,000 to discount fees. They created an endowment and purchased supplies and equipment such as macroscopes, skis, snowshoes, hats and mittens to enhance the experience. They spend time creating and producing events at the center and attract even

more partners who expand capabilities and leverage resources. One example is a Science Saturday series cosponsored by 4H and Cooperative Extension Service. Another is a special program for parents of small children coaching them on how to take toddlers to the forest safely.

ENDURING PARTNERSHIPS Good partnerships usually have one or more individuals that nurture the relationship and maintain open communications among all the partners. Karen Cedzo, partnership development coordinator for the PPD, says it is a challenge to continue relationships over time when individuals move on. She credits professor Rick Caulfield of Tanana Valley College with nurturing the partnership from the beginning in 2003. Shiffer echoes that, saying both Cedzo and Caulfield invested time by listening to others and finding ways all the partners may benefit from the strategies. Over the course of the 16 years since the Alliance was created, a number of aviation leaders such as Felix Maguire of the Alaska Airmen’s Association and Leonard Kirk of UAA stepped in to facilitate and pass on the values. Just this year, the UAA and FAA’s continuing partnership brought recurrent training to 175 aircraft mechanics in locations

across the state, providing peer-to-peer knowledge sharing and passing on the culture of safety. From the FAA’s perspective, the effort has been long-lasting and worthy of note. John Warner, acting director of FAA’s Western Service Center, lauded the Alaskan “spirit of cooperation” at a recent AACC gathering. “My experience with Alaska is that you excel in fostering these partnerships,” he said. “As evidenced in this council, you have created a unique opportunity for industry and government to share common issues and ideas that enhance the important aviation experience in this state.” David Karalunas, Regional FAA Safety Team (FASTeam) manager and a lifelong Alaskan, agrees, “We understand that what the country wants is a community solution to problems, not necessarily a federal government solution. Community solutions, such as our partnerships with industry and private pilots and passengers are usually better and longer-lasting. Our Circle of Safety aviation consumer education program is built around the concept that all stakeholders should work together as partners to change the aviation safety culture. This is something we must continue to nurture over time.” Most recently, Alaskans joined in another effort that found competitors cooperating for a good cause. The Pick Click and Give campaign that encourages Alaskans to donate part of their Permanent Fund Dividend to charity, had hundreds of partners, said to Cassandra Stalzer, communications director for the Rasmuson Foundation, which initiated the donor drive. With the combined voices of nonprofit organizations and State government urging participation, the campaign netted just shy of $1 million dollars from 9,500 Alaskans, many of whom may never have donated money before. The cooperation inherent in the partnerships is paying dividends for communities and residents across Alaska. ❑ About the Author Joette Storm, APR, is a local facilitator and public relations practitioner who works with community groups and organizations to develop partnerships.

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

ENVIRONMENTAL

WATER AND WASTEWATER PROJECTS Stimulus money funds needed projects BY TRACY KALYTIAK

ACCELERATED WATER PROJECTS Other communities receiving stimulus help for their wastewater and water treatment projects include Craig, Dillingham, Fairbanks North Star Borough, Haines, Homer, Kenai, Ketchikan, Mat-Su Borough, North Pole, Seward, Sitka, Skagway, Soldotna, Wasilla and Wrangell, according to

Photos courtesy of the City of Palmer

arter Cole had just arrived home after a Palmer city council meeting in 2008 when he received an urgent phone call. A water main had burst under a street in the heart of town. “It came right through the road,” said Cole, the city’s public works director. “It was flooding the streets. There was a hole the size of a truck we ended up losing. We had to close Alaska Street because it was too dangerous to let people drive through it.” Twenty feet of aging steel pipe had rusted and literally popped open at its seam. The city lost 300,000 gallons of water in one hour and then other water mains began failing. Something had to be done immediately, but buying and installing steel pipe wasn’t going to be a cheap fix. Fortunately, Palmer received a portion of $40 million in American Recovery and Reinvestment Act money that was being used to move forward nearly 50 drinking water and wastewater improvement projects in the state. “I don’t know what we would have done without that stimulus money,” Cole said. “I don’t think the city financially could have done it. Palmer received the largest amounts: $2.5 million for fixing its water mains and another $2.5 million to bring its wastewater treatment plant into compliance with Environmental Protection Agency permit dictates.

Geyser-created hole in pavement of Alaska Street in Palmer.

the Alaska Department of Environmental Conservation. The stimulus money is being dispensed as low-interest loans, some with subsidies requiring only 10 percent or less of the original loan to be repaid. These communities need the help because they don’t qualify for the same financial assistance many villages in rural Alaska receive for wastewater and water quality-improvement projects, said Bill Griffith, facility programs manager for DEC. “These communities are middlesize communities that got a lot of the stimulus money through the municipal grant and loan program,” Griffith said. “Medium-size communities in Alaska actually are too big to qualify for the Village Safe Water Program, even though people in Anchorage think of them as rural communities.” The stimulus money accelerated a number of shovel-ready or ongoing projects that otherwise would not be funded.

“Now they’re able to go a little faster, do some of the phases a little sooner,” Griffith said. “In a lot of cases, it’s just a piece of an existing system that needs to be upgraded, replaced, expanded.”

NEEDED MONEY The City of Palmer needed stimulus money not only for water mains, but also for its wastewater-treatment plant. High ammonia levels there since 2001 had repeatedly exceeded requirements of the city’s EPA permit. “The city would see daily fines at the end of 2011 if nothing improved at our facility,” Cole said, adding that the fines would have been about $10,000 a day, and that the improvements were needed since 2006. “They just did not know what fix to do,” he said. Palmer’s wastewater treatment plant provides service not only to the city, but also to Mat-Su Regional Medical Center and buildings situated along the pipeline between the city and hospital.

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

Cole said revamping the plant would involve three phases. The first phase will be completed this year and cost $2.5 million. Ecological Engineering Group and CH2M Hill have been involved in the project. The second phase will cost about $25 million and increase the cityâ&#x20AC;&#x2122;s capacity to 4 million to 8 million gallons a day. The third phase will cost another $23 million. City workers installed covers for ponds at the treatment plant. Work began in May and is expected to be complete in December. Palmerâ&#x20AC;&#x2122;s water-main replacement project is progressing as well. North Star Paving and Construction replaced a main on Gulkana Street in April; subsequent road work was scheduled to be complete at the end of September. City crews began replacing a main on Bonanza Street in May and Granite Constructionâ&#x20AC;&#x2122;s work on subsequent road improvements started in August. Work is scheduled to be complete in the summer of 2011. Requests for proposals related to replacement of pipes near Sherrod Elementary School will go out this year, with work to be done next year, Cole said. The long-term benefit, Cole said, will be predictable, affordable rates for water and sewer: approximately $110 a month, total, for an average home.

Water bubbling out of pavement on Alaska Street in Palmer.

â&#x20AC;&#x153;There wonâ&#x20AC;&#x2122;t be any big surprises for businesses coming into the community,â&#x20AC;? he said.

KENAI IMPROVES SERVICES The City of Kenai received a total of $4.4 million in stimulus money, and is using it to install a sewer main and 16inch water main on Bridge Access Road. Pacific Star Seafoods is one company on that road that will benefit from the work. The plant first began operating in the late-1800s and is situated less than a mile from the heart of town. Wells supply water the plant uses to clean the millions of pounds of black cod, salmon and halibut it processes each year. Until recently, it had drawn city water from an unconventional source for its mess hall and bathrooms. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;ve been getting water from a fire hydrant,â&#x20AC;? said David Brindle, plant manager for Pacific Star Seafoods, which employs 150 people and uses approximately 10 million gallons of water at the peak of the fishing season. â&#x20AC;&#x153;The hydrant is a quarter-mile away, uphill. We meter and pay for our water usage.â&#x20AC;? Brindle said the improved water and sewer service might make it easier for someone to develop the old Dragnet Fisheries processing plant nearby. Wayne Ogle, the city of Kenaiâ&#x20AC;&#x2122;s public works director, said the stimulus funds covered 90 percent of the cost of the water-sewer project, with the city kicking in 10 percent. Installation of a lift station for the sewer line was expected to be complete after press time, at the end of September. The stimulus funding is making it possible to do more to extend city services to other places in town. Ogle said the city requested a $700,000 Alaska Department of Transportation grant to pay for extending city water to the dock and boat ramp. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;ll know in October how weâ&#x20AC;&#x2122;ve done on that,â&#x20AC;? he said, in a September interview. North Star Paving and Construction has been doing the work on the Bridge Access Road project. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;ll be a lot easier to connect in the spring when we open up,â&#x20AC;? Brindle said. â&#x20AC;&#x153;With this new water line, weâ&#x20AC;&#x2122;re in better shape. Itâ&#x20AC;&#x2122;ll cost us $70,000 to hook in. This will allow us to open earlier in â?&#x2018; the season and operate later.â&#x20AC;?

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

RIGHT MOVES ALASKA BUSINESS HALL OF FAME

Several Alaska businesspeople were chosen for the Alaska Business Hall of Fame. Honorees are The Brice Family of Brice Constructors, Harry McDonald of Carlile Transportation Systems and the Quinn Brothers of Capital Office Systems. Jim Bowles of ConocoPhillips Alaska Inc. was chosen for posthumous recognition. Junior Achievement of Alaska Inc. and Alaska Business Monthly will sponsor a Hall of Fame induction ceremony Jan. 27 at the Dena’ina Civic & Convention Center in Anchorage.

CIRI ALASKA TOURISM

Wacker

Val Wacker was hired as sales and marketing coordinator for CIRI Alaska Tourism, a subsidiary of Cook Inlet Region Inc. Wacker earned a bachelor’s degree in marketing from . the University of Alaska Anchorage.

ALASKA LEGAL SERVICES CORP.

Nikole Nelson was chose as executive director for Alaska Legal Services Corp. Nelson has worked for the nonprofit organization since 1998, serving as supervising attorney in the Anchorage office for the past six years.

HDR ALASKA

Murph O’Brien joined HDR Alaska as a senior transportation and community planner. O’Brien most recently worked as a private consultant handling renewable and alternative energy projects. Ryan Moyers joined the company as a senior civil engineer.

COMPILED BY NANCY POUNDS including commercial litigation. Mills was noted for work in bankruptcy and creditor-debtor rights law. Rosston was recognized for corporate law, mergers and acquisitions law and real estate law.

ASRC ENERGY SERVICES INC.

Butch Lincoln was chosen vice president of operations for Petrochem, a Vallejo, Calif.-based subsidiary of ASRC Energy Services Inc. Lincoln has worked for 10 years at Arctic Slope Regional Corp. companies. Geri Storer joined ASRC Energy Services as vice president, chief of staff. Storer most recently worked with Shell Oil in Alaska.

PACIFIC NORTHWEST UNIVERSITY

Several Anchorage residents have started studying at Pacific Northwest University of Health Sciences College of Osteopathic Medicine. They are Jillian Bartling, Toby Currin, Jacob Jensen, Jacob Templin, Mary Terra, Sean Thrush and Kathleen Song. Third-year medical students Owen Hanley, David Hoschek, Stephen Humpal, Andrew Peters and Anne Rutherford have begun communitybased health care training in area hospitals, physician offices, community health centers and long-term care facilities.

SOROPTIMIST INTERNATIONAL OF COOK INLET

Soroptimist International of Cook Inlet elected new board members. They are: Holly Parsons, The Wilson Agency, president; Connie Struempf, ASRC Energy Services Inc., first vice president; Roberta Degenhardt, second vice president; Linda Day, treasurer; Natasha Pope, First National Bank of Alaska, recording secretary; and Carma Reed, U.S. Department of Housing and Urban Development, corresponding secretary. Directors are Alison Kear, Covenant House, Kristy West, Arctic Slope Regional Corp. and Margaret Ibbotson, Alpha Omega Consulting Services.

INSTITUTE

OF THE

NORTH

The Institute of the North appointed Drue Pearce, Randy Hagenstein and Greta Schuerch to its board of directors. Hagenstein is executive director of The Nature Conservancy. Pearce recently served as federal coordinator for Alaska Natural Gas Transportation Projects. Schuerch is the Alaska Humanities Forum’s Sister School Guide for the Rose Urban Rural Exchange. A new executive committee was chosen: Leif Selkregg, chairman; Ira Perman, vice chairman; Gail Phillips, secretary; Duane Heyman, treasurer; and Mike Sfraga, member-at-large.

Bartling

Currin

Jensen

Templin

Terra

Thrush

Song

Hanley

Hoschek

Humpal

Peters

Rutherford

DORSEY & WHITNEY LLP

Robert Bundy, Michael Mills and Richard Rosston from the law firm of Dorsey & Whitney LLP in Anchorage were listed the 2011 edition of Best Lawyers. Bundy was cited for his specialties

PANGOMEDIA INC.

Craig Fisher was promoted to chief executive at PangoMedia Inc. Fisher, who joined the company in 2004, previously served as chief operating officer.

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

RIGHT MOVES CARLILE TRANSPORTATION SYSTEMS

G Grange

Kevin Grange was hired as an account manager for Carlile . Transportation Systems in Alaska. Grange recently worked as a program coordinator at the University of Washington facilities department.

UNIVERSITY OF ALASKA ANCHORAGE

Mike Halko was promoted to director of the University of Alaska Anchorage’s Environmental Health and Safety/Risk Management Support department. He served the past three years as a safety officer for the EHS/RMS department at UAA.

ARCTIC SLOPE REGIONAL CORP.

Ty Hardt was hired as director of communications at Arctic Slope Regional Corp. He previously served as news director, anchor and producer for ABC Alaska News, roles he had held for 11 years.

RE/MAX PROPERTIES INC.

Pfl i Pfleiger

Janelle Pfleiger was appointed to the Council of Residential Specialists’ board of directors for a two-year term. Pfleiger is an associate broker at RE/MAX Properties Inc. in Anchorage. She has been a council member since 1987.

MEGAWATT ELECTRIC LLC

Tamara Potter earned the Certified Construction Industry Financial Professional designation. Potter is controller at Megawatt Electric LLC of Anchorage. The Institute of Certified Construction Industry Financial Professionals reports Potter is the second Alaskan to have earned the designation.

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from UAF. He was honored for his service to the university, industry and community. Other alumni honored are: Paul Glavinovich, Jackie Stormer, Fredric Brown, Roger Burggraf, Marta Mueller and Eskil Anderson.

GENERAL

Randy Larson was appointed superintendent of Sitka National Historical Park. He has worked 26 years for the National Park Service, including several years of service as chief ranger at Glacier Bay National Park and Preserve. Bud Cribley was appointed state director in Alaska for the Bureau of Land Management. Cribley previously served as deputy assistant director for renewable resources and planning in Washington, D.C. He has worked various roles for BLM since 1975.

Gregory Fisher joined Davis Wright Tremaine LLP’s Anchorage office as a partner. He previously worked at Birch Horton Bittner & Cherot. He has 20 years of experience as a general civil and commercial litigator.

FEDERAL

COMMUNICATION INC.

Tina Pidgeon was appointed senior vice president of governmental affairs and senior counsel for General Communication Inc. Pidgeon, who joined GCI in 2003, most recently worked with the regulatory and legal department.

ALASKA SEALIFE CENTER

Lexie Mizeras joined the Alaska SeaLife Center in Seward as vice president of marketing and philanthropy. She is based in Anchorage, where she teaches marketing courses at the University of Alaska Anchorage.

UNIVERSITY OF ALASKA FAIRBANKS

Mark Myers was chosen to serve as the vice chancellor for research at the University of Alaska Fairbanks. He starts his new position in January. He is currently working as the Alaska Gasline Inducement Act coordinator for the State of Alaska. Cheryl Hatch, a war photographer, newspaper reporter and documentary filmmaker, was chosen to serve as the C.W. Snedden Chair in Journalism at the University of Alaska Fairbanks. As a reporter and photographer, Hatch covered conflicts in the Middle East and Africa, including the aftermath of the first Gulf War in Iraq. Hatch received the Pew Fellowship in International Journalism at Johns Hopkins University’s School of Advanced International Studies. Shirish Patil received the 2010 Distinguished Alumnus Award from the University of Alaska Fairbanks Alumni Association. He is a professor of electrical engineering. He earned master’s degrees in mechanical engineering, petroleum engineering and engineering management from UAF. In 2007, he earned a doctorate in mineral resource engineering

GOVERNMENT

USKH INC.

Kimberly Stengrim, Lisa Heath and Michael Worthy joined USKH Inc. in Anchorage. Stengrim serves as executive assistant to the president and vice president. Health and Worthy work as administrative assistants.

ALASKA RAILROAD CORP.

Christopher Aadnesen was appointed president and chief executive for the Alaska Railroad Corp. He relocated to Alaska from Georgetown, Texas. His career experience includes a recent role as chief executive of Aadnesen Estonian Railways. Aadnesen also has worked for other railroad companies, including Union Pacific Railroad Co., The Texas Mexican Railway Co. and Houston’s Port Terminal Railroad Association.

Submit Right Moves photos and press releases to editor@akbizmag.com.

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

OBE

OCT

ALASKA THIS MONTH

BY NANCY POUNDS

Artists, Authors Converge at Museum Photos courtesy of Anchorage Museum at Rasmuson Center

Crafts Weekend spotlights Alaska-made creations

Crafts Weekend at Anchorage Museum at Rasmuson Center on Thanksgiving weekend features 50 Alaska artists and more than 25 authors and illustrators.

magine Sydney Laurence standing beside his famous, massive McKinley painting at the Anchorage Museum at Rasmuson Center to explain his methods and inspiration. During Thanksgiving weekend at the museum, today’s masters – artists and authors – will answer questions about their creations of jewelry, pottery, woodwork and books. This year’s Crafts Weekend will feature 50 Alaska artists and more than 25 authors and illustrators. Booths fill the museum’s atrium, lobby and gallery areas, which are decorated for the holiday season. Live music resounds throughout the high-ceiling corridors. The 22nd annual Crafts Weekend at the Anchorage Museum runs from 10 a.m. to 6 p.m. Friday and Saturday, Nov. 26-27; noon to 6 p.m. Sunday, Nov. 28. “The museum loves hosting an event where the community can come out and meet Alaska artists and authors and learn where they get their ideas and about their techniques and materials,” said Sarah Henning, public relations coordinator for the museum. “A handmade object means that much more after you’ve met the creator and learned how much work went into it.” Artists scheduled to participate this year include Guitta Corey, Sonya Kelliher-Combs and Lisa McCormick. “This is the only juried holiday crafts show in Anchorage,” Henning said. “That means all the vendors are hand-picked by museum staff. That way, Crafts Weekend visitors are

guaranteed to find the best quality, most unique, handcrafted work made in Alaska. Crafts Weekend has always been a ‘buy-local’ event.” Crafts Weekend started in 1989 with six artists in the museum lobby, Henning said. Artists were added throughout the years as the event’s popularity grew, requiring expansion to other parts of the museum. Since 1994, the ReadAlaska Book Fair has been conducted alongside Crafts Weekend. The Book Fair features Alaska publishers, authors and illustrators signing and selling their work and answering questions. “For our artists and authors, Crafts Weekend is often a big portion of their income,” Henning said. “They depend on this event financially year after year.” Author Laurel Bill, who has penned four historical works of “Aunt Phil’s Trunk,” participated in the ReadAlaska Book Fair last year. “It’s a great way to showcase your books to people who might not go to another venue,” Bill said. “Museum members look forward to it every year.” Crafts Weekend is also a major fundraiser for the museum. “A portion of each sale helps fund programs and exhibitions at the Anchorage Museum,” Henning said. About 3,000 people typically attend the three-day event, she said. Museum members also receive a 10 percent discount on Crafts Weekend purchases. Also, Crafts Weekend attendees can visit the Andy Warhol art exhibit on display at the museum from November through January, Henning noted. The hibi ffor C f W k d visitors. ii cost is $7 to view the exhibits Crafts Weekend The event launches the holiday season in Anchorage Museum style, Henning said. “The Crafts Weekend always gets me into the holiday spirit,” Henning said. “The museum’s holiday exhibit always debuts that weekend; we’ve got festive music playing, and our halls are decked with garland and twinkling lights.” More information, visit www.anchoragemuseum.org. ❑

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

N OV E M B E R E V E N T S C A LE N D A R â&#x20AC;˘â&#x20AC;˘â&#x20AC;˘â&#x20AC;˘â&#x20AC;˘â&#x20AC;˘â&#x20AC;˘â&#x20AC;˘â&#x20AC;˘

N C H O R A G E â&#x20AC;˘â&#x20AC;˘â&#x20AC;˘â&#x20AC;˘â&#x20AC;˘â&#x20AC;˘â&#x20AC;˘â&#x20AC;˘â&#x20AC;˘

1 to 7 Alaska Miners Association Convention and Tradeshow Talk with experts and discover more about Alaskaâ&#x20AC;&#x2122;s mineral industry during the tradeshow and the rock and mineral show. Sheraton Anchorage Hotel. For more information, phone 907-563-9229 or visit www.alaskaminers.org. 5 to Jan. 30 Andy Warhol Manufactured The Anchorage Museum exhibition focuses on Warholâ&#x20AC;&#x2122;s artistic premise that the ordinary can be considered art, and the ordinary is usually a manufactured object. From soup cans to portraits of movie stars, all are constructs of a commercial world. This 5,000-square-foot exhibition employs Warholâ&#x20AC;&#x2122;s photographs, silk-screens and films to comment on manufactured objects and lives. For more information, phone 907-929-9231 or visit www.anchoragemuseum.org. 6 to 7 23rd Annual Holiday Food & Gift Festival A fun and family oriented event at the Denaâ&#x20AC;&#x2122;ina Civic and Convention Center, featuring a wide variety of unique gifts, handmade arts and crafts, clothing, jewelry, bath products, home decor, gourmet food and more. Admission is free. For more information, phone 907-2725634 or visit www.anchoragemarkets.com. 13 to 14 Anchorage Symphony Orchestra Enter an ethereal world where literary heroes are celebrated and tales are chronicled through music. From Debussyâ&#x20AC;&#x2122;s impressionistic Prelude to the Afternoon of a Faun to the Bardâ&#x20AC;&#x2122;s romantic Midsummer Nightâ&#x20AC;&#x2122;s Dream this concert immerses listeners into a spellbinding, fantastical state of mind. For more information, phone 907-274-8668 or visit www.anchoragesymphony.org. 20 to 21 Arts & Craft Emporium Anchorageâ&#x20AC;&#x2122;s premier showcase for Alaska artists and crafters to display and sell their products. This festive event strives to provide the Anchorage community and its visitors with a free winter holiday show at the Denaâ&#x20AC;&#x2122;ina Center. Features a large variety of Alaska made arts and crafts, sold by their creators. For more information, phone 907-272-5634 or visit www.anchoragemarkets.com.

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13 to 14 17th Annual Native Village of Eyakâ&#x20AC;&#x2122;s Sobriety Celebration Enjoy Native dance groups from around the state and participate in sobriety workshops and seminars. Feast on a sumptuous potlatch dinner, featuring local foods and recipes. For more information, phone 907-424-7738 or email belen@nveyak.org.

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5 to 7 Tuesdays with Morrie Written by Jeffrey Hatcher and Mitch Albom, Tuesdays with Morrie is the autobiographical story of Mitch Albom, an accomplished journalist driven solely by his career, and Morrie Schwartz, his former college professor. Starring Dick Reichman and Patrick Killorian, Tuesdays with Morrie is produced by Cyranoâ&#x20AC;&#x2122;s Off Center Playhouse in Anchorage, and will be presented on the Perseverance mainstage, 914 Third St. For more information, phone 907-3642421 or visit www.perseverancetheatre.org.

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5 Brundibar Folk opera originally performed by imprisoned Jewish children during the Holocaust. West Valley Performing Arts Center. For more information, phone 907-457-2780 or visit www.operafairbanks.org.

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

N OV E MBER E VEN T S C A L EN D A R

3ILENCE IS GOLDEN

7 Red Greenâ&#x20AC;&#x2122;s Live, One-Man Show Red brings his wacky perspective and home-spun, duct-tape wisdom to Hering Auditorium. You too can take the Manâ&#x20AC;&#x2122;s Pledge. For more information, phone 907-474-2673 or visit www.kuac.org. 12 to 14 Holiday Marketplace One-stop Christmas shopping extravaganza for Fairbanks and outlying areas. Hand-made soaps, beaded earrings, imported wool sweaters and more. At the Carlson Center, free parking. For more information, phone Kris Knutzen, KO Productions, 907-474-9082 or visit www.fairbankschamber.com. 27 Thanksgiving for the Birds Family and community fun event making bird feeders out of recycled materials and learning about winter birds. Creamerâ&#x20AC;&#x2122;s Field, 1300 College Road. For more information, phone 907-452-5162 or visit www.creamersfield.org.

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"USINESS #ONSULTING s 0ROJECT -ANAGEMENT s mYINGPIGS LAWESPMO COM s WWW LAWESPMO COM

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10 to 14 Alaska Bald Eagle Festival Celebrating the peak of the winter gathering of eagles, with educational seminars, tours and family special events. For more information, phone The American Bald Eagle Foundation at 907-766-3094 or e-mail info@baldeagles.org.

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U N E A U â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘

5 First Friday Gallery Walk Downtown Juneau hosts an art walk on the First Friday of each month. From 4:30 p.m. to closing, visit the shops and galleries of downtown Juneau. Meeting artists in person highlight these evenings. For more information, phone 907-586-9891 or visit www. juneauartistsgallery.net. 6 Veteranâ&#x20AC;&#x2122;s Day 8K Participate in an 8K with the Southeast Roadrunners, beginning at 10 a.m. at the Brotherhood Bridge parking lot. For more information, phone 907-789-9116 or visit www.southeastroadrunners.org. 26 to 28 Juneau Public Market Start your Christmas season with a visit to the â&#x20AC;&#x153;Public Marketâ&#x20AC;? at Centennial Hall, one of the largest indoor events in Southeast Alaska. Holiday market includes arts and crafts, imports, food products, photography, wearable art and much more. For more information, phone 907-586-1166 or visit www.metcomalaska.com.

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Stay on top of breaking statewide and government business news at www.akbizmag.com! Send in your press releases to editor@akbizmag.com to be posted online.

1 to 30 Native American Heritage Festival Plenty of activities throughout the month of November, including the annual fashion show and parade. For information on the wide variety of activities, please call the Sitka Tribe of Alaska at 907-747-3207, or visit www.sitkatribe.org.

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

Photo courtesy of the office of U.S. Senator Mark Begich

REGIONAL REVIEW

BY TRACY BARBOUR

A Vastly Remote Region

Sen. Mark Begich dropped in for an unscheduled tour of the new Association of Village Council Presidents Regional Housing Authority (AVCP-RHA) headquarters building during his recent visit to Bethel Oct. 5. The regional office building will serve as the central headquarters for the housing authority, which provides quality, affordable housing in 48 villages throughout Southwest Alaska. Of the $12.5 million total cost, AVCP RHA received $5 million in Stimulus funding for the project. The project has had 100 percent Native hire, created 30 jobs, and paid nearly $400,000 to date in wages. The building is expected to be completed in November 2011. The housing authority has benefited from $10 million in Stimulus funding for regional projects, creating well more than 60 jobs and contributing more than $2 million to date in wages to the local economy.

outhwest Alaska is a massive region stretching hundreds of miles from the Bering Sea coast to Cook Inlet. It has no definite geographic boundaries, but is generally associated with Alaska’s Bethel Census Area, Dillingham Census Area, Aleutians East

Borough, Aleutians West Census Area, Lake and Peninsula Borough and Wade Hampton Census Area. The southwestern region is dominated by an assortment of smaller, rural communities, many of which are lacking in infrastructure and industry. They

Bethel at a Glance Population: About 5,700 Location: Approximately 400 air miles west of Anchorage Key Contacts: Mayor Joe Klejka, City Manager Lee Foley Main Industries: Government, health care, natural resources, fishing Major Hospitals: Yukon-Kuskokwim Delta Regional Hospital Schools: Lower Kuskokwim School District (3,900 K-12 students in 21 villages), University of Alaska Fairbanks Kuskokwim Campus (Bethel) Airport: The Bethel Airport Port: Port of Bethel

are sustained in large part by government jobs, natural resources and subsistence activities. The Bethel Census Area is a prime example. The area, which has been home to the Yup’ik Eskimo for 3,000 years, is about the size of Kentucky. With a 2009 population estimate of 17,352, it is the regional center for transportation, retail trade, medical services and government. The Bethel Census Area has a small seasonal economic base fueled by natural resources, particularly salmon and herring roe, and subsistence activities. Government jobs – primarily public education and village organizations – account for almost 50 percent of the region’s payroll jobs, according to Alaska Department of Labor economist Alyssa Shanks. “Forty-one percent of all jobs and 33 percent of all wages in 2008 came from jobs for local governments, which include city and tribal government, and public schools,” Shanks says in an Alaska Labor Department November 2009 Alaska Economic Trends report.

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

HEALTH CARE BIGGEST EMPLOYER Health care is the largest segment of all private employment and wages in the census area, comprising 16 percent of employment and 25 percent of wages in 2008, according to Shanks. The Yukon-Kuskokwim Health Corp. is the largest private employer in the area and was the 16th largest in the state in 2008. It operates the 50-bed Yukon-Kuskokwim Delta Regional Hospital in Bethel, five regional clinics in the Wade Hampton Census Area and the Community Health Aide Program that provides primary health care in 47 village clinics in the Yukon-Kuskokwim Delta.

HIGH UNEMPLOYMENT AND COSTS The Bethel Census Area is marked by high poverty, high unemployment, high costs and low income. The area’s poverty rate has been around 21 percent since 2000, which is about 12 percent higher than the statewide rate. Poverty rates are strictly incomebased and do not take into account the impact of subsistence. In the Bethel Census Area, for instance, 10 years ago the average annual subsistence harvest in 2000 was 598 pounds per person – the fourth-highest for a borough or census area in the state. According to Shanks, the Bethel Census Area generates only about one payroll job for every three people living there. Statewide, the ratio is close to one payroll job for every two people. The monthly unemployment rates in 2008 were as high as 16 percent, and the average per capita income in 2007 was $26,990, compared to $40,042 statewide. “The high cost of living in the area compounds the difficulties for those with low incomes,” Shanks says in her report. “A recent McDowell Group study indicates that living in the Bethel/ Dillingham area costs 49 percent more than living in Anchorage.” As another distinguishing characteristic, the Bethel Census Area has the largest Native population – mostly Yup’ik – in the state outside Anchorage. It also has a particularly young populace. For example, 82 percent of the census area’s population in 2006 was Native; and 59 percent of its population was 18 or younger in 2008, compared to 29 percent statewide.

Interestingly, the Bethel Census Area had the state’s fifth-highest birthrate, with 26.3 births per 1,000 people; the statewide rate was 16.6. “Consistently high birthrates have served to offset population losses from other factors,” Shanks says. “More people moved out of the census area than into it during the 2002 to 2008 period.”

BETHEL ECONOMY The city of Bethel is Alaska’s largest rural community off the road system. Nearly one-third of the Bethel Census Area’s residents live there. Shanks, in an August interview, describes Bethel’s economy in mixed terms. Because Bethel is a hub for the region, it generates a considerable amount of economic activity. And compared to other rural communities, Bethel has a relatively diverse economy. But compared to other places in Alaska or the Lower 48, the city’s economy seems less diverse – considering its high concentration of local government jobs. Those government jobs are vital to Bethel’s economic health, Shanks says. That’s especially true, given the “multiplier” effect. “The folks who work for the government, they spend their dollars in Bethel, so that money stays in Bethel,” Shanks explains. Moreover, government employees tend to be more confident about their jobs and more liberal with their money. “They generally aren’t as afraid to spend,” Shanks says. “Bethel would look nothing like itself if it did not have all the government employment.” The Donlin Creek gold mine project, located about 120 miles from Bethel, would create a major economic boost for Southwest Alaska. During construction, there would be 1,500 to 2,000 jobs – many of which would be filled locally. There would be another 600 to 800 jobs during its expected 20-year operation. Donlin Creek is one of the world’s largest undeveloped gold deposits, and the mine prospect is expected to produce more than a million ounces of gold annually. The Donlin Creek project is currently in the permitting phase.

BETHEL’S RICH CULTURE In addition to its abundant natural resources, the city of Bethel has a rich culture. Bethel was first established by

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

Yup’ik Eskimos, who called the village Mumtrekhlogamute, which means “Smokehouse People.” It was named for the nearby fish smokehouse. About 40 people resided in Bethel during the 1880 U.S. Census – at which time, it was an Alaska Commercial Co. Trading Post. In 1884, the Moravian Church established a mission in the area. The community was later moved to its present location due to erosion. A post office was opened in 1905. Not long after, Bethel was serving as a trading, transportation, and distribution center for the region, attracting Natives from surrounding villages. Bethel was incorporated as a city in 1957. City Manager Lee Foley describes Bethel as a small community with a small-town atmosphere. “The nicest thing about it is the people,” Foley says. “Everybody gets along.” Foley says Bethel is the kind of place where people take the time to stop and welcome strangers to the city. They’re also willing to help stranded motorists – which there are very few of since hardly anyone owns a car there. Bethel has only one paved road, which circles around the town. “A lot of people here don’t even have vehicles; they use taxis to go pick up their mail or groceries,” Foley explains. Not being on the road system makes Bethel more isolated and less capable of building industry. That’s why the existence of government jobs is so important for the community. And turnover in local government jobs is relatively low, Foley says. “One of the things we strive to have here is continuity,” he says. “Our average employee (of the city) has been with the city for 10 years.” The lack of industry, high cost of living and other limiting factors make Bethel’s economy somewhat “strangled” and flat, Foley says. “It’s hard to get an economy to grow when there’s nothing you can bring in to make it drive,” he says. “Occasionally, we’ll have a slight spurt, but it’s not growing as if we were on a road system.”

WORKING TO IMPROVE LIVING CONDITIONS The city is involved in a number of initiatives to address social issues and improve living conditions. For example, Bethel recently rebuilt the

Tundra Women’s Coalition Center in March and received a $3 million grant to construct a new police station. The city is also completing a $2.2 million renovation of its fire station. The project will transform the leaky, dilapidated station into a modern building with a 30-year lifespan. Perhaps the most pressing concern for Bethel is lowering the cost of heating fuel, which runs as high as $11 a gallon. The city’s local utility is being purchased by another company, which Foley says is amenable to working with the community to address the high cost of heating. “They’re trying to find a way to bring wind energy into the mix as a way to bring our costs down,” Foley says.

CALISTA CORP. FOCUSING ON GROWTH As the regional corporation for much of Southwest Alaska, Calista Corp. holds a vast land entitlement consisting of about 6.5 acres in the Yukon-Kuskokwim River Delta and the Kuskokwim Mountains. Calista has subsurface resources that primarily generate gravel and sand sales through federal projects like airports, roads, ports and harbors. According to Christine Klein, Calista’s executive vice president and chief operating officer, the corporation is diligently working to develop its resources for the benefit of its 13,000 direct shareholders in more than 56 villages. “We have been trying to advocate for the region and our shareholders at both the federal and State level to inform policy makers on legislation that impacts funding to our region,” Klein says. Since a majority of its shareholders live a subsistence lifestyle, Calista strives to maintain a careful balance between its resource development activities and subsistence. The Donlin Creek project represents a major opportunity – and challenge. “It’s challenging making sure our subsistence activities are protected and any mining activities are done in an environmentally safe manner,” Klein says. Exploration for the Donlin Creek prospect began in 1995. Calista owns the subsurface rights to the land, while The Kuskokwim Corp. owns the surface rights. The original project

proposed an open-pit mine, measuring up to two miles long and one mile wide. The mine would also require the creation of additional infrastructure, including an airstrip, housing, roads and a port on the Kuskokwim River. Recently, Calista and Donlin Creek LLC amended the original mineral lease, adding additional acreage and extending terms to allow for further exploration, permitting, additional development and production activities. “In the last couple of years, they found that they needed to lease a larger portion of the land,” Klein explains. “The lease was amended to include an additional 12,000 acres.” One of Calista’s main missions is to identify businesses and activities that can provide jobs for shareholders and the region as a whole. As such, the corporation is working with entities like the Yukon-Kuskokwim Health Corp. to stimulate job growth. Calista has also completed strategic acquisitions to position itself to capitalize on a large-scale mining effort. Calista recently acquired Brice Construction and Yukon Equipment, both of which have long histories in the state. Brice Construction has been operating in Alaska for more than 40 years and is well known for its local and shareholder rate of hire. “It’s a very good match for us because we want to see our shareholders educated and trained and doing work in the region,” Klein says. “We’re very excited about this because we’re hoping it will make us very competitive to do the work, should a mine open up.” Calista, which operates 17 different businesses, is aggressively pursuing growth and diversification. With $203 million in annual revenue, its goal is to generate $350 million in revenue by 2015 while reducing its tax burden. Calista is in its 16th consecutive year of profitability and provides jobs to more than 1,500 people. In addition to creating jobs, Calista is also providing professional internships and educational scholarships for college students. This year alone, Calista awarded 13 internships and 172 scholarships to help students further their personal development. “They’re our future – the future of our corporation ❑ and state,” Klein says.

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

HEALTH & MEDICINE

Reduce the Cost of Health Care? Stay healthy! BY DIANNE O’CONNELL

mployers can slow the rising costs of providing health care for employees and their families through providing incentives for people to stay healthy. Private insurance companies, such as Premera Blue Cross Blue Shield of Alaska, are expanding such wellness initiatives in response to growing pressure arising from the nation’s new health care reform legislation and because studies show that health and wellness programs do substantially reduce medical costs. With these points in mind, two of Alaska’s largest employers, Providence Health and Services Alaska and the University of Alaska, have chosen to develop their employee wellness programs a step or two further.

Providence Health and Services Alaska launched its “I Choose Health” initiative in October 2009, according to Tamara Green, regional director, health management services, Providence Health, speaking of a new outcomebased incentive program Providence is integrating with its employee health insurance plan. Demographic studies show health care workers are actually less fit and less healthy than comparable groups within the general population. They often need a little extra nudge to work on their own physical well-being, in addition to caring for others. “Just like the airlines tell you, you’ve got to ‘put on your own oxygen mask first’ before you can effectively help anyone else,” Green says. During the “I Choose Health” project’s first year, employees were offered

Providence Health & Services Alaska personnel in Anchorage take time to walk the Providence sky bridge during break times. www.akbizmag.com • Alaska Business Monthly • November 2010

©Azimuth Adventure Photography/www.azimuthadventure.com

PROVIDENCE EMPLOYEES CHOOSE HEALTH

credit incentives against the cost of their 2010 health care premium for filling out a Stay Well Health Assessment (HA) and for voluntarily participating in biometric screenings for measuring blood pressure, cholesterol, body mass index and tobacco use. The credit was given for participation, not for what the employee values were. The program is part of Providenceâ&#x20AC;&#x2122;s effort to contain the costs of providing health care for its 4,000-plus employees and to promote wellness among employees and their families. Fifty-four percent of those covered by Providenceâ&#x20AC;&#x2122;s health care plan chose to participate and receive the credit. Providence Health and Services is the stateâ&#x20AC;&#x2122;s largest private employer. As a self-insured company, Providence believes it is able to exercise more impact on the costs of employee health care than an employer who purchases employee insurance through a third party. Providence does use a third-party administrator, but the administrator is the Providence Health Plan, a whole-owned not-forprofit insurance company, part of the

Providence family of health services. â&#x20AC;&#x153;We want to be leaders in all aspects of keeping people healthy, not just health care after a person becomes ill,â&#x20AC;? Green said. Providence also hopes to eventually share what it learns from the project with other employers. Moving into 2011, Providence employees will be encouraged to utilize multiple kinds of resources available to them through Providenceâ&#x20AC;&#x2122;s onsite Health and Wellness Center, as well as multiple telephonic and online services. These resources include such services as health coaching and chronic condition management, weightmanagement programs, telephonic health coaching and online education programs. The company also provides primary care to employees at its Health and Wellness Center. Providence sees its â&#x20AC;&#x153;I Choose Healthâ&#x20AC;? program as impacting an array of traditional management concerns, such as employee productivity, retention, turnover and absenteeism, all of which cost the employer money. Itâ&#x20AC;&#x2122;s just the beginning, as far as Green is concerned.

â&#x20AC;&#x153;We have a gym that is open 24 hours a day to employees,â&#x20AC;? she says. â&#x20AC;&#x153;We also encourage employees to take the stairs rather than the elevators, to walk from the far side of the parking lot, walk the sky bridge and enjoy the view â&#x20AC;&#x201C; any way to work a little more physical activity into their days.â&#x20AC;?

UNION NEGOTIATOR PRAISES WELLNESS PROGRAM â&#x20AC;&#x153;Participating in the University of Alaska wellness program is something you have to want to do for yourself,â&#x20AC;? Colin G. Clausson says. â&#x20AC;&#x153;We donâ&#x20AC;&#x2122;t at the moment receive cash or credit incentives for participation. However, if we avoid one heart attack, one instance of bypass surgery, or get one guy off insulin, everybody benefits.â&#x20AC;? Clausson is secretary-treasurer for the Alaska Higher Education Crafts and Trades, Local 6070, Alaska Public Employees Association, American Federation of Teachers, AFL-CIO. He is a union negotiator currently in contract talks with the University of Alaska and a member of the union-management Joint Health Care Committee.

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

“The university currently pays $1,200 per month to cover each employee and family member, with the individual employee paying the remaining portion. Our union represents 260 of those employees and their families,” Clausson says. “The cost of health care for both the employer and the employee is very important to us.” The actual percentage each party pays is currently on the bargaining table and therefore cannot be discussed at this time, he said. The university, like Providence Health Systems, is self-insured, which according to Clausson, is “the most efficient model out there, even with the 1.5 percent the university pays to Blue Cross to administer the program.” At the end of the year, the total cost for health care for the employee group is added up and divided by the number of covered lives. This is the number that the next year’s premium is based on. A reduction in the cost of health care one year through wellness efforts will be reflected in the premium for the following year. “It benefits you if your buddy on the job stays healthy,” Clausson says. “I don’t laugh if I see one of our plumbers doing tai chi during his break. But I may raise an eyebrow when I see a friend chow down a double-dripping cheeseburger with fries and barbeque sauce, followed by a cigarette and a couple of beers after work. Of course, the unhealthy lifestyle member has concerns about the costs of a healthy guy breaking his leg in a ski accident. Compare the cost of most one-time accidents against a chronic illness like diabetes or another lifestyle-related disease like cancer, and the one-time accident is far less expensive to the health care system.” There is no doubt that lifestyle choices – nutrition, smoking, obesity, alcohol, drugs, couch-potato status – are driving up the cost of health care. These are controllable components. Some things are less controllable. “When I started working for the university,” Clausson says, “the average age for my employee group was much younger; most of us were single and childless. Today, the average age is 55 and most of us have families. The average age for the university’s teachers is even higher – and the cost of health care skyrockets after the age of 50.”

The union leader says the university insurance program is recognized as one of the best plans in the state. It includes a wellness program, exercise programs and counseling. If an employee wants to get healthy, there’s a way, on the three main campuses in Fairbanks, Anchorage and Juneau, although some of the wellness services aren’t available on the more remote campuses. There could be changes on the horizon, however, and some of them are worrisome. “We have a ‘Cadillac plan’ now,” Clausson says. “As a result of the new health care reform bill, we may end up being taxed on some of the employer contributions to the premiums. If we don’t do everything we can to help contain costs, someday – and I hope it is a long way away – we may have to cut benefits. It’s a much better idea to keep people healthy.”

HEALTH CARE REFORM BILL PROMOTES HEALTH STATUS IMPROVEMENT Improving population and individual health is a major component of the Patient Protection and Affordable Health Care Act of 2010, otherwise known as the health care reform bill. In some ways, the nation, like Providence and the University of Alaska, will be reaping some of the cost-saving components of a self-insurance plan, while partnering with health care providers and insurance companies. “Providence Health Systems supported this legislation because we are mission driven and believe health care is a basic human right,” says Joel Gilbertson, vice president for government and public affairs, Providence Health and Services. “This bill will extend coverage to some 32 million Americans, bringing access to health insurance to 94 percent of our country’s legal residents.” Gilbertson says he recognizes the legislation is not a perfect bill, but rather a work in progress. A significant amount of regulations will need to be rolled out in the next four to five years to make it work. Working on passing and implementing health care reform legislation has been his main focus these days. Gilbertson worked for Providence in Alaska for five years before relocating to the company’s corporate offices in Seattle.

“There are a number of relatively fixed costs in health care: labor, technology, buildings,” he says. “Where we as employers and providers can become more efficient and save money is through improved quality of patient care, care coordination and utilization practices.” The health care reform act redesigns the financing of health care to provide incentives for such things as care management, shared information and coordination among providers, fewer emergency room visits, and fewer unnecessary or repetitive medical procedures. Right now, health care providers are only reimbursed when the patient comes in the door, already sick. Under the new law, providers can also be reimbursed for providing more coordinated care, as well as care management efforts that promote healthier people. Another incentive: reimbursement payments will be more directly linked to the quality of care. To put it bluntly, providers will receive less money if patient outcomes are bad; for example, if a patient is re-admitted to the hospital for reasons that could have been prevented, or if they experience a hospitalacquired infection. “The final legislation was largely an insurance-reform bill,” Gilbertson explains. “Private insurance companies will no longer be able to deny access to health insurance for people with pre-existing conditions or engage in other practices limiting access to insurance coverage. This component was pretty popular and had bi-partisan support. As a consequence, the individual mandate (providing subsidies for the uninsured to purchase required, but affordable insurance) was necessary so people don’t wait until the day they became sick to buy insurance. In order for an insurance system that guarantees coverage to work, be cost effective, everyone has to be in the system, even healthy people.” If controlling the rising costs of health care is the goal, all must partner together – from the individual choosing a healthy lunch, to an employer establishing a wellness incentive program, to a union representative at the bargaining table, to policy setters, insurance companies and health care providers. The year 2010 has brought some important ❑ first steps.

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

H R M AT T E R S

BY ANDY BROWN

uccessful businesses are always aware of one simple fact: it’s all about the bottom line. There are so many factors that affect the bottom line, an entire industry exists to evaluate ways to increase it. Frequently, however, those same businesses that are so conscious of the bottom line miss another simple fact: the most powerful influence on a company’s bottom line is not the market, economy or even customers – it is the employees.

HAPPY EMPLOYEES WORK HARDER Happy employees work harder and provide better customer service. Welltrained employees are more efficient, and function better as a team. Loyal employees find ways to save the company money. I don’t need to describe all the ways that unhappy or disgruntled employees can harm an organization. Even when an employer realizes the total impact employees have on the organization, the challenge remains of how to hire, retain and promote good employees. Part of that challenge stems for differing ideas of what makes a good employee. I personally know some employers who think a good employee is simply someone who shows up on time. There is a common misunderstanding that good employees are born, not made. Most employees will conform to effective policies and procedures, but employers need to spend time identifying areas where their employees can benefit from training because while some employees have inherent skills necessary for business, many do not. Those skills can be taught.

MANAGEMENT BUY-IN NEEDED Grooming your employees for supervisory, management or other roles

within your business pays huge dividends. Employees see the opportunity for growth and advancement, both of which are significant motivating factors, and employers benefit by having managers who know the business, are able to contribute on multiple levels, and who they have been able to see on the job. There are significant obstacles to effective training. The first is that any successful training program requires buy-in from existing management. There will always be an excuse to forego training. Time and money constraints are the most common. Management must support training or any reason will be sufficient to do without. Buy-in is also crucial for overcoming other obstacles. Without management support, even the most effective training program will fail. The second major obstacle is translating training into practice. Some sort of pushback against change is normal. Change is uncomfortable for most people and in the workplace – where employees earn a living – discomfort can seem extra painful. Management buy-in is necessary to calm fears and work through the discomfort caused by changes training brings.

UNREALISTIC EXPECTATIONS The third major obstacle is unrealistic expectations. This is particularly insidious because you must have some expectation of success for training to be effective. If you expect training to fail, it will; but if your expectations are unrealistic, you sabotage any future training before it takes place. One of the most frequent problems with expectation is the expectation of immediate results. We all know that change takes time, but we seem to forget this

Employees and the Bottom Line

Andy A d B Brown

fact when it comes to our businesses. We send an employee for training and when they return, we expect them to be perfect and when imperfection ensures, we blame the training as ineffective. Again, management’s buy-in becomes important here. Management must hold the employee accountable for the training while allowing the employee time as they put the skills they learned into practice. ❑

About the Author Andy Brown, J.D., SPHR, a labor and employment attorney who grew up in Alaska, left his law practice in the Lower 48 to return to Alaska as a senior consultant with The Growth Company Inc. Andy has more than 16 years of broad-based human resource experience, including legal compliance, compensation, salary surveys and collective bargaining agreements. Andy has extensive investigative experience and worked as an investigator for both the U.S. Army and the State of Utah Department of Workforce Services.

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

NATIVE BUSINESS

Native Corporation Partnerships LifeMed Alaska’s uses Learjets with a range of 2,000 miles and a cruising speed of 500 mph for some patient transport. The Learjets are operated by Aero Air Inc. of Hillsboro, Ore.

Creating unity, adding value BY JULIE STRICKER

usiness math isn’t the same as the arithmetic you learned in elementary school. In school, one plus one is always two. In business, if you take one healthy, competitive business and put it with a second healthy, competitive business, the whole is often greater than the sum of the parts. At least that’s the goal. Don’t try that in math class. In Alaska, business affiliations come in a variety of configurations: partnerships, joint ventures, mergers, subcontracting, but they all boil down to two, or more, companies working together for a common goal. The

benefits include reduced risk, expansion of knowledge about a particular industry, access to each others’ core competencies, increased revenue potential and more opportunities for Alaska workers.

AIR AMBULANCE VENTURE One such partnership is the melding of two of Alaska’s top air ambulance services in fall 2008. LifeGuard Alaska, owned by Providence Health and Services Alaska (PHSA), and Aeromed International, owned by the YukonKuskokwim Health Corp. (YKHC), joined to become LifeMed Alaska.

“When the shareholders formed LifeMed, they took advantage of economies of scale, “says Scott Kirby interim CEO of LifeMed Alaska. “Instead of competing against one another the partnership brought two companies together that shared similar experience and practices, resulting in a stronger service to Alaska. The company uses a fleet of fixedwing aircraft, helicopters, Learjets and ground ambulances to help deliver critical care to ill or injured people over the state of Alaska. It has bases in Anchorage, Bethel, Soldotna, Fairbanks, Wasilla and Klawock.

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

LifeMed Alaska is a stand-alone corporation, funded equally by PHSA and YKHC. Based in Bethel, YKHC is a Tribal Organization authorized by each of the 58 federally recognized Tribal councils in its service area to negotiate with the Federal Indian Health Service to provide health care services under Title III of the Indian SelfDetermination and Education Assistance Act of 1975, according to its website. LifeMed is governed by a sixmember executive board, three from each of the parent entities.

MUTUAL BENEFITS There are hundreds of partnerships between Alaska Native corporations or their subsidiaries and other businesses, and they bring benefits to both sides. Bering Straits Regional Corp. is working with Neeser Construction to build a new hospital in Nome. Ahtna Inc. teamed up with Raven Gold Alaska to search for minerals. Doyon Ltd. is part of a joint venture with ARAMARK to provide tours, activities and other services within Denali National Park and Preserve. NANA Development Corp. is part of an effort by Lockheed Martin to win the federal contract to oversee the U.S. missile defense program at Alaska’s Fort Greely and Huntsville, Ala.

COMMITMENT TO SHAREHOLDERS For NANA Development Corp., the business arm of Kotzebue-based NANA Regional Corp., partnerships with other businesses have been a key part of the corporation’s success, dating back to the corporation’s start in the 1970s, says John Rense, who has been with NANA for more than two decades. He is currently sector leader for construction, engineering and real estate. NANA Development’s first task was to acquire business knowledge, Rense says. It started working with established corporations such as the Marriott hotel chain, Lynden Transportation and Teck, allowing NANA to reduce its risk, use its capital wisely and focus on ventures that would create jobs and maximize benefits for shareholders. “When the regional corporations just got started, cash was not abundant,” Rense says. “There were a lot of needs.” A pressing need was the welfare of its shareholders. Alaska Native

corporations are unlike any other business. The legislation that created them in 1971, the Alaska Native Claims Settlement Act, mandated that the 13 regional and more than 200 village corporations not only create businesses to help shareholders financially, but also that they were to ensure that their social and cultural needs were met. Many lived in remote, isolated communities with few jobs. The first thing NANA looks at in every business venture is whether it offers opportunities for shareholder-hire or other benefits. “A partner needs to understand our absolute commitment to shareholders, both jobs and benefits,” Rense says. Rense says the relationship between business partners is like any personal relationship: honesty, integrity, trust and communication are key – the companies must make sure they’re in alignment and everyone knows the aims of the partnership. “If you’re not careful, you’ll share a bed but have different dreams,” Rense says.

ACHIEVING BALANCE NANA’s partnership with Teck Resources at the giant Red Dog zinc mine in Northwest Alaska is an example of the balance it tries to achieve. When NANA started looking at the potential of developing the mine 20 years ago, it had four goals: protect the environment, provide jobs, create revenue from mine royalties and build new business expertise to expand operations, says Robin Kornfield, vice president of communications and marketing for NANA Development. “We have achieved these goals,” Kornfield says. Over nearly 40 years, NANA has built up a resume of skills in oil field operations, hospitality, engineering and construction, facilities management and logistics, information technology and many other fields. It has 9,000 employees and projects located around the world. “We have a history of good operations,” Rense says. That history of success is the key to future partnerships. Alaska Native corporations have gotten heat the past couple of years because of their participation, and tremendous success, in government contracting. Under the Small Business Administration’s 8(a) business-development

program, companies that are considered small and disadvantaged are eligible for certain preferences when going after federal contracts. Federal agencies are allowed by bypass the competitive bid process and sole-source contracts directly with 8(a) businesses. Alaska Native corporations fall into this category and have been granted further benefits. While other small business owners can have only one 8(a) company at a time, and can stay in the program for only nine years, Alaska Native corporations can have multiple businesses in the 8(a) program, as long as they are in different sectors. They are exempt from caps on sole-source contracts. The corporations are also allowed to subcontract work to non-8(a) companies and can enter partnerships and joint ventures with non-Native companies to win sole-source contracts. The corporations say the provisions make sense because they serve thousands of shareholders, not just one or two business owners. “Native 8(a) is allowing Native entities across the Lower 48 and in Alaska and Hawaii to get a seat at the $500 billion federal-contracting table and get some parity for our businesses and our people,” Kornfield says. She notes that NANA has historically distributed more than 80 percent of its profits to shareholders. Critics say these preferences give Alaska Native corporations a disproportionate competitive advantage. Federal agencies have been accused of using the corporations as pass-throughs to award contracts to non-8(a) businesses without open competition. Sen. Claire McCaskill, D-Mo., held a series of hearings in 2009 to look into allegations that Alaska Native corporations are abusing the program. The panel has yet to issue any regulations, but is considering reinstating the cap on sole-source contracts and limiting subcontracting agreements. A ruling is expected by the end of the year. But Jonathan Widdis, president of NANA subsidiary Aqmaak, says companies don’t seek work with NANA because it’s an Alaska Native corporation. “It’s not at all about who we are,” Widdos said. “It’s about our quality ❑ of work.”

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

BUILDING ALASKA SPECIAL SECTION

2010 Alaska Business Monthly Contractor of the Year

Centerpoint Campus clockwise from center: ASRC Building; JL Tower; newly constructed Centerpoint West; Centerpoint Financial Center. Centerpoint Campus separates more than 800,000 square feet of Class A commercial office space developed by JL Properties and constructed by Davis Constructors using design-build contracts. All work completed without a single construction claim.

Davis Constructors and Engineers Inc. BY GAIL WEST

ontractor of the Year is an annual award presented by Alaska Business Monthly to a company recommended by a group of peers in the contracting business. Bases for the award include the size and scope of projects during the past year, the company’s contribution to the Alaska economy and the creation and maintenance of an environmentally sound and safe work place. For all these reasons, the award is a meaningful one to each of the contractors that receives it. This year, Davis

Constructors and Engineers Inc. joins this eminent group. Davis is owned by partners Josh Pepperd, president; Carl Swanson, vice president; and Idonna Pieper-Nelson, the company’s chief financial officer. “It was a smooth transfer of company ownership when Greg Romack retired, followed by Kyle Randich two years later,” Pepperd, said. “Davis was started in 1976 by Jeff Davis, a general contractor doing most of his work in the Bush. Then, he took the company into jobs all across the state.”

For a time, Davis had an office in Washington and was working outside Alaska; but after his death in a plane crash in the late 1980s, the company closed the Washington office and concentrated its efforts in Alaska. “At that time, Romack took over the company,” Pepperd said. “Ultimately, he and Randich really carved the company’s history, and are responsible for the culture that is Davis Constructors today.” One of the company’s first big jobs was the Kmart store in South Anchorage.

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“Davis has the most terrific group of professionals to work with. From small tenant improvements to large-scale, phased projects, they are nimble and they always ensure the goal is met.” — Micaela Jones Regional Director of Real Estate and Development Providence Health and Services Alaska “From there, we’ve grown steadily, and today, we have offices in both Anchorage and Fairbanks,” Pepperd said. “For the last 10 or 12 years, about 95 percent of our work has been in one of the two cities.” This year, the company ranked 23rd among the Top 49 Alaska-owned and -operated companies. Pepperd said he estimated the company does between $130 million and $200 million in work each year, and carries between 35 and 45 year-round, full-time employees. “In the trades, that will spike up to 180 during construction season, then fall to about 80 during the winter,” he added. According to Davis’ website, the company has completed more than 200 projects totaling more than $1 billion in its 34-year history. These projects span a wide range of material and methods, from cast-in-place concrete and structural steel to precast-concrete panels and wood-frame structures. Davis has built both urban and rural schools, special housing projects, hotels and retail stores, multi-story office buildings and

specialized construction of jails and hospitals. Military project locations include Fort Wainwright, Eielson Air Force Base, Fort Greely and Joint Base Elmendorf-Richardson. “We do both vertical and horizontal construction,” Pepperd said. “Mass Excavation Inc. is a wholly owned subsidiary.” Mass Excavation, a six-year-old business, is a site-earthwork contractor with approximately 30 employees and does about $10 million in work each year. “We work for a lot of different clients,” Pepperd added, “from military and the (U.S. Army) Corps of Engineers to JL Properties to Providence hospital. Probably about 80 percent or more of our work comes from repeat clients, and some of those relationships have lasted for more than a decade.” Pepperd said many of the Davis projects come to the company in a “napkinsketch” design. “Our challenge is in being able to give our client a realistic design and budget from their concept,” he said. “There really has to be an open and communicative approach.” Davis has an impressive string of recently completed jobs ranging from the new University Lake Springhill Suites in Anchorage to family housing at what is now Joint Base Elmendorf-Richardson to the Clark Middle School and Sand Lake Elementary schools. Work in progress includes an aeromedical clinic and two F-22 hangar facilities on Joint Base Elmendorf-Richardson and a medical office building at Providence. Two other projects completed within the past year include: ● The Ted Stevens Anchorage International Airport terminal connector and mechanical building for the State of Alaska Department of Transportation and Public Facilities. In addition to the new mechanical facilities, this project, completed in August 2009, at a combined 13,000 square feet, provides an enclosed walkway between the north and south terminals. ● Sand Lake Elementary School – just completed in August, this project demolished about two-thirds of the existing school and rebuilt. It is now a two-story, 26-classroom school with the multipurpose room connected to the gym.

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LONG-TERM PARTNERSHIPS Two clients with whom Davis has had long-term relationships are JL Properties Inc. and Providence Alaska Medical Center. According to Riley Snell, vice president of operations for JL Properties, Davis was the contractor for their first building, the Arctic Slope Regional Corp. headquarters building, on the developing JL Centerpoint Campus in midtown Anchorage. “The ASRC facility is a 10-story, 210,000-square-foot building,” Snell said, “and the project was accomplished with Davis as the designbuilder. Approximately a $40 million job, it came in on budget and on schedule. It was one of the first facilities JL and Davis undertook to develop from the ground up, and we think it’s one of the premier buildings in Anchorage.” Snell added that the most challenging project Davis and JL faced together was building the nearly $16 million National Park Service Alaska headquarters building in downtown Anchorage. Another design-build project, Snell said the challenge was the schedule. “We were awarded the contract in July 2002, and the facility was to be completed a year later. It required extensive winter work, and Davis came up with a very creative way to approach it – they fabricated a lot of the wall panels off site in an enclosed, heated environment and minimized the amount of work that had to be done outside during the winter,” Snell said. JL and Davis have also completed two projects in downtown Fairbanks, the renovation of the historic Northward Building and development of Block 13, Snell added. “We invested about $6 million in the Northward project,” Snell said, “with Davis acting as the construction contractor. We refurbished an eightstory building, about 40,000 square feet of commercial space on the first floor and 177 apartment units on the upper seven floors.” The Block 13 project became the new Springhill Suites by Marriott, an approximately $14 million project. In conjunction with several Native corporations, JL and Davis built a sixstory, 140-room hotel, which was the

first major block renovation project in downtown Fairbanks. “We’ve worked through three evolutions of senior management changes at Davis,” Snell said. “The succession of these changes was performed seamlessly and without lost of their core values as a company. “They hire well and their project managers and superintendents are some of the best we see in the industry. In our experience, they will go much further than any other contractor I know to make sure the customer is happy,” Snell added.

DAVIS TOP PROVIDENCE BUILDER Providence Alaska Medical Center holds the distinction of handing Davis its largest job. According to Pepperd, the string of projects Davis has done for Providence has added more than $150 million to Davis’ project list. “We’ve built the entire southwest campus expansion,” Pepperd said. “Three medical office buildings, a parking garage, the Hickel House, child care facilities and we rehabbed API (the old Alaska Psychiatric Institute) into administrative offices for Providence. Since 2006, when Davis built Tower T, a 110,000-square-foot medical office building with a skybridge, the company has completed eight additional projects for Providence. That same year, Davis renovated 128,000 square feet of office space, the former API, into the Providence Regional Building. The following year, Davis built Tower U, Providence hospital’s cancer center. This project added 115,000 square feet of hospital and medical office space. In 2007, Davis was also contracted to build Hickel House, a 31,000-square-foot, hostel-like building with a shared kitchen, dining and living area where patients and families from outside Anchorage can stay during long-term hospital care. In addition, Davis has completed an 886-space, covered-parking garage and added 365 surface-area parking spaces to the southwest campus. This year, Davis is again working for Providence – building Tower S, another medical office building housing the Providence Sleep Disorders Center, as well as the Ambulatory Surgery

Center. The Center for Child Development, an 11,000-square-foot facility in which Providence provides child-care services, was completed in May. “Davis has the most terrific group of professionals to work with,” said Micaela Jones, regional director of real estate and development for Providence Health and Services Alaska. “From small tenant improvements to large-scale, phased projects, they are nimble and they always ensure the goal is met.” Jones said the most challenging project was moving the Ambulatory Surgery Center, which was planned for the fourth floor in Tower S, to the first floor. “Given the nature of this area and its sensitivity to vibration, among other things, the engineering of the steel was critical,” Jones said. “Davis figured out a way, with steel on site, to reengineer what we had, and that mitigated both a timeline and budget impact. Their real strength is their people, who are extremely knowledgeable, professional and deliver outstanding customer service. I am confident in Davis’ abilities and would absolutely contract with them again.” And contract with them again is exactly what Jones and Providence have done. The next project – on the books for completion in 2014 – is the remodel of 100,789 square feet of space as well as an addition of 85,782 square feet for mother/baby services, operating rooms and ancillary support areas, a $100 million project.

COMPANY CULTURE Two things top off Davis’ long list of accomplishments. “We have never been in litigation with a client,” Pepperd said. “It basically goes back to our core philosophy and that’s to do for others what we would want done. It works well, especially in business.” The second accomplishment – collecting the 2009 Associated General Contractors of Alaska Safety Award. Pepperd attributes Davis’ success to the company’s employees. “We’re very blessed to have a great group here,” he said. “They are our greatest strength.” ❑

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

BUILDING ALASKA SPECIAL SECTION

CONTRACTOR OF THE YEAR: Honorable Mention

Alaska Interstate Construction LLC

Photos courtesy of Alaska Interstate Construction LLC

Alaska Interstate Construction LLC installed a galvanized sheet pile wall as part of the $33 million Shore Avenue erosion project in Kotzebue.

BY GAIL WEST

ompleting the packed 2010 construction season will be fulfilling for Alaska Interstate Construction LLC. The company’s roster of projects has included some of the most high-profile jobs across the state. “We’ve worked all over Alaska,” said Steve Percy, AIC’s president. “AIC has built ice roads, gravel road and pads, installed piling and done a variety of projects for a variety of clients from the North Slope to Southeast. “We do a lot of work for mining companies, as well as oil and gas,” he said. “We do pioneering access for initial mine development along with site grading, drainage and dam construction for the mine itself. We’ve done work at Pogo, Fort Knox, Kensington, Red Dog – almost every working mine in Alaska.”

Begun as a heavy, civil contractor in 1989 on Alaska’s North Slope, AIC has gone from an incorporated company to a limited-liability corporation owned, in equal shares, by Nabors Drilling Co. and Cook Inlet Regional Native Corp. Inc. Today’s firm encompasses three divisions: mining, public works, and oil and gas. According to Percy, the firm’s annual portfolio of work averages about $120 million a year, and that work supports 52 salaried staff, 37 hourly staff and about 350 craft employees during the peak construction season. High on AIC’s 2010 business list was the completion of the avenue named for Dr. Martin Luther King Jr. in Anchorage. At $25 million, this 7,500-foot, five-lane road linked Elmore Road to

Boniface Parkway and is part of an ongoing effort to ease traffic pressure on Tudor Road. Further afield, Kotzebue’s Shore Avenue erosion project – at slightly more than $33 million – consists of rebuilding approximately 4,400 feet of road which erosion had narrowed to less than two lanes in places. The new road will be paved and have sidewalks, a pathway, parallel parking and an open space on the seaward side. Ken Yockey, AIC’s vice president of construction, added that the company is installing a galvanized sheet pile wall along the street to protect it during breakup. “The final product will look something like a river walk in Savannah (Georgia),” he said.

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

Alaska Interstate Construction LLC is replacing the historic, 900-foot-long Tanana River bridge at Milepost 1,303.3 of the Alaska Highway near Tok as part of a $31 million project.

Near Tok, AIC is replacing the historic, 900-foot-long Tanana River bridge at Milepost 1,303.3 of the Alaska Highway. The original bridge was built in 1966, and the current project – at $31 million – will realign about a mile of the highway, relocate a boat ramp and parking area, and build a wayside with interpretive displays. The Juneau airport runway safety project, at $28 million, rounds out the big projects on AIC’s plate this past summer. The company is dredging 750,000 cubic yards from the existing float plane pond in preparation for future airport expansion projects. Over the years AIC has been in business, it has had international projects as well as local ones. Yockey said they’d worked in the oil fields in Kazakhstan and on Russia’s Sakhalin Island. “We had a $40 million project working on the Kashagan oil field development in the Caspian Sea,” Yockey said. “That was in 2005 to 2007, and was probably one of our biggest jobs.” Another challenging project in AIC’s history was the Hicks Creek job for the Alaska Department of Transportation and Public Facilities. AIC drilled and shot to create rock slopes and a throughcut with more than 600,000 cubic meters of excavated material. They also built a 300- to 400-foot bridge, constructing an ice platform to place the girders for the bridge. One of AIC’s strengths, through the years, is its safety record. “We stress safety and protecting the environment,” Percy said, “and we deliver quality projects to our clients.” ❑ www.akbizmag.com • Alaska Business Monthly • November 2010

BUILDING ALASKA SPECIAL SECTION

Vision Fairbanks A blueprint for downtown redevelopment

Photo by Julie Stricker

The new bridge across the Chena River linking the north end of town to Barnette Street is expected to be completed by the end of this year. Construction is expected to begin on the connector roads in 2011.

BY JULIE STRICKER

fter several years of record construction seasons, 2010 has been downright quiet in Fairbanks. No big new projects showed up on the books at the City of Fairbanks Building Department, says building official Steve Shuttleworth, a far cry from a couple of years ago when a building boom reshaped Fairbanks’ retail district on the north edge of town and added a major bank headquarters and the Morris Thompson Cultural and Visitors Center downtown.

About $40 million in permits have been approved in the city in 2010, well below the average for the five-year period between 2003 and 2008 when more than half a billion dollars worth of construction was permitted.

CONSTRUCTION ACTIVITY That doesn’t mean nothing is happening. Shuttleworth calls 2010 a “camouflage year,” in which several long-term projects are in the final stages of completion or deal with infrastructure instead of buildings.

The most visible is a new bridge over the Chena River at Barnette Street. The bridge is part of the Illinois Street Project, which was first proposed in the 1970s. While final designs haven’t been approved, downtown businesses are watching the project closely. Revitalizing downtown is a long-term goal for the community, says David van den Berg, executive director of the Downtown Association of Fairbanks. “A lot of community values are served by having a more vibrant downtown,”

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says van den Berg, “If our downtown is more attractive to more people, that boosts community recruitment.” In 2008, the Fairbanks North Star Borough Assembly adopted Vision Fairbanks, a blueprint for downtown redevelopment, as part of its Regional Comprehensive Plan.

REVITALIZATION EFFORTS Vision Fairbanks is an outline that seeks to lay the groundwork for economic development by developing the zoning and infrastructure to attract business and customers without taking away the qualities that make Fairbanks unique. It all begins with infrastructure, says van den Berg, whose office is in the same building that houses the Fairbanks City Museum. The plan calls for improved roads, better landscaping, on-street parking and better pedestrian and bicycle access. Zoning changes encourage retail businesses on the first floors of the buildings – with big windows to draw in shoppers – and professional offices above. Van den Berg is encouraged by a recent trickle of development. Several boutiques selling clothing, gifts, artwork and more have opened downtown. An artists’ co-op has found a home downtown as have several popular restaurants. The owner of vintage clothing and upcycle-artistic-reuse shop, Chartreuse, on the corner of First Avenue and Wickersham Street, recently marked its first anniversary. The owner commissioned a vibrant peacock mural on one side of the building to celebrate. “Those things are revitalization,” van den Berg says. “It’s setting the stage for additional development along with the energy and entrepreneurial spirit of the people who are downtown now.” Chartreuse owner Sheri Oleson said she has always loved downtown and the riverfront and never thought of opening her business elsewhere in town. She sees huge potential in the neighborhood. “If I invest in it, others will invest in it and pretty soon we’ll have a pretty awesome downtown,” Oleson says.

“Fanchorage” by one local blogger, has attracted the bulk of new commercial development in the past decade. It now hosts Home Depot, Wal-Mart, Lowe’s, Barnes and Noble, and Sports Authority, along with other national retail chains. A Holiday Inn Express and Hampton Inn and Suites opened in 2008 and 2009, respectively, and a bank and veterinary hospital are under construction. Although retailer Target had announced plans to open a 150,000-square-foot store in the

Northside Business Park off the Johansen, the retailer announced in January 2009 that economic conditions had forced them to delay the project. Neither Shuttleworth in the Fairbanks Building Department, nor Janet Davison with the Fairbanks North Star Borough had heard from Target officials in 2010. Although national retailers are drawn to the Johansen area, those aren’t the ones van den Berg is interested in. For the most part, he says, downtown businesses are locally

BIG BOX AREA The Johansen Expressway retail area on the northern edge of town, dubbed www.akbizmag.com • Alaska Business Monthly • November 2010

owned and cater to a different niche than national retailers.

DOWNTOWN DESTINATIONS The goal of Vision Fairbanks is to encourage more “destination retailers” to the downtown area, says van den Berg, citing as an example Big Ray’s Fly Shop, which opened in the basement of the longtime outfitting store in June 2010. People will come downtown to buy a fly rod or a pair of boots and then walk over to a nearby coffee shop for lunch or a jeweler’s to pick up an anniversary or birthday gift. Or vice versa. It’s the proximity of such varied businesses that makes downtown work, he says. For decades, downtown Fairbanks was saddled with a “wild West” image from the high-rolling days of the trans-Alaska oil pipeline construction when dozens of bars lined Second Avenue (then called Two Street.) Today, coffee shops outnumber bars, most of which are now closed. The Marriott SpringHill Suites, which houses popular Lavelle’s Bistro, takes up the blocks the bars formerly occupied. A longtime holdout, the Elbow Room, has recently been remade into the Music Room, which rents out space for band rehearsals. Construction of the new Mt. McKinley Bank building, an improved river walk linking the core downtown area to the new Morris Thompson Cultural and Visitors Center, and popular restaurants such as Lavelle’s, Gambardella’s Pasta Bella, Big Daddy’s Bar-B-Q, and Bobby’s Downtown, among others, have helped upgrade the area’s image.

ROADWAY RECONSTRUCTION A big piece of the puzzle is how the traffic flows through downtown, which now is criss-crossed by oneway streets. Van den Berg and many downtown business owners are advocating changing to two-way traffic. The Illinois Street Project, which has been talked about since 1970, is seen as a key strategic piece. Illinois Street, which becomes Cushman Street, is the northern approach to downtown Fairbanks. Illinois Street follows the same route

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Felix Pedro and Tom Gilmore walked in 1901 to meet the steamboat Lavelle Young when they were prospecting in the hills above the Tanana Valley. Their meeting with E.T. Barnette helped convince the latter to build his trading post on the banks of the Chena River. The following year, Pedro struck gold. The road today has a confusing lane configuration, lacks pedestrian and bicycle corridors and is a safety risk. Intersections at cross streets frequently cause traffic bottlenecks and the road surface is in need of repair. The Cushman Street Bridge is one of the busiest traffic points downtown. The reconstruction project, estimated at more than $25 million, would upgrade the road from College Road to the new bridge over the Chena River at Barnette Street. Preliminary plans drawn up by the Alaska Department of Transportation and Public Facilities will radically change it, according to engineer Barry Hooper, who helped design the project. The proposal would make the road four lanes from Minnie Street

south to First Street, including medians and a continuous sidewalk on the east side. “It will be a lot safer,” Hooper says. “It will also look dramatically different.” The first steps were taken in fall 2009 when a block of landmark buildings on the north side of the Chena River, including iconic Samson Hardware, were demolished. Only the Big International Bar, known locally as the Big I, was left standing. By midsummer 2010, the $4.2 million bridge to Barnette Street, which is being built by Anchorage-based Sandstrom and Sons Inc. spanned the river and is expected to be completed by the end of the year. The second stage is expected to begin in 2011, and includes upgrading intersections with Minnie Street, Terminal Street and the entrance to Doyon Ltd. headquarters. The whole project will take two to three years, Hooper says. Many details have yet to be decided and DOT hopes to finalize the plans this winter, Hooper says. In spring, DOT hopes to start moving utilities in

preparation for construction. Negotiations with landowners along Illinois Street are continuing.

OTHER PROJECTS Big changes are also under way a few blocks south of downtown where the dilapidated, partially condemned Fairview Manor apartment complex is being torn down to make way for upgraded low-income housing, called Weeks Field Estates, and the Raven Landing senior housing complex. The senior complex will be overseen by the nonprofit Retirement Community of Fairbanks and will include 40 rental units, 36 condominiums and a community center. Nearby, the $45.6 million Ruth Burnett Sport Fish Hatchery was completed in summer 2010, but problems with the water-treatment system delayed the delivery of the hatchery’s first batch of rainbow trout eggs. When the doors open, the hatchery will feature a 5,000-gallon aquarium stocked with Alaska fish species and featuring big windows to allow visitors to watch the hatchlings in the ❑ production facility.

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

BUILDING ALASKA SPECIAL SECTION

Mountain View Gets Financial Services, Housing

Credit Union 1 and Cook Inlet Housing Authority build up Anchorage neighborhood ©2010 Chris Arend Photography Carol Gore, president and chief executive officer, Cook Inlet Housing Authority, and community partners break ground in June 2009 at the old Wizard Car Wash site on Mountain View Drive in Anchorage. This site is currently under construction and will be a mixed-use building (retail and rental housing) known as Mountain View Village Lofts. Pictured. from left, Mary Jane Michaels, AECD; Clare Swan, Board Chair Cook Inlet Tribal Council; Lisa Valenta, aide to Rep. Max Gruenberg; Mark Fineman, senior manager project management, CIHA; Don Crandall, president, Mountain View Community Council; Bob Juliussen, senior manager construction, CIHA; Carol Gore; Darrel Hess, homeless coordinator, Municipality of Anchorage; Leslie Ellis, president and chief executive officer, Credit Union 1; Jeff Judd, EVP Real Estate, CIHA; Jewel Jones, executive director, Anchorage Community Land Trust; Sen. Bill Wielechowski.

BY GAIL WEST

een to Mountain View lately? Big changes are afoot in one of Anchorage’s pioneer neighborhoods, bringing with them savings accounts, upgraded housing, new paint and flowers – all of which are good for business. And business is blooming for Credit Union 1. “Mountain View has been on our radar screen for about three years,” said Leslie Ellis, president of Credit

Union 1. “There’s a tremendous need for financial services in this neighborhood and this credit union has a full range of services to offer.

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NEIGHBORHOOD

Opening this branch in June – bringing the total number of branches in Anchorage to eight and across the state to 15 – was not altogether an act of community service, Ellis said, although

that was certainly a consideration. “Since we opened, our new accounts have exceeded our expectations,” Ellis said. “They’re running parallel to some of our busiest branches, and the loan side is doing the same. This branch is coming up to speed faster than we thought it would.” Ellis acknowledged that establishing a branch in this neighborhood had its detractors.

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“Some said it was dangerous; we’d be robbed,” she said. “But we get robbed in all our locations. People said our building would be trashed, but this is the first branch opening I’ve attended that not a piece of landscaping was touched. It looks the same today as it did when we opened. “I think the people of Mountain View don’t want to let us down, and I believe they’ll self-police for us. Besides, Mountain View isn’t the sole keeper of all the problems in the city.” For the people who live in the neighborhood, the opening of the new Credit Union 1 branch was an opportunity to pull their life savings from under their mattresses and tuck it safely away in an interest-earning account.

AFFORDABLE HOUSING For those seeking attractive housing that’s affordable to a budget-minded family, Cook Inlet Housing Authority has built and is still building homes and condominiums to fill that need. The feel of the community is changing, and property values are beginning

to rise as the neighborhood changes. Michael Droege, incoming president for the Anchorage Board of Realtors and a Realtor for Prudential Jack White Vista Real Estate, runs property value numbers regularly. For Mountain View, Droege said the average home price in 2010 is higher than it’s been over the past 12-, 24and 36-month periods. He also said the inventory of homes for sale in Mountain View is down more than 30 percent from a year ago. Much of that change is due to the efforts of Anchorage Community Land Trust – which helps develop programs and projects for the neighborhood – and CIHA. “We’ve taken down properties that were beyond their useful lives and about to fall off the tax rolls, and we replaced them with properties that are paying taxes,” said CIHA President Carol Gore. So far, CIHA has created 216 units of housing in Mountain View since 2000, and invested more than $73 million. Another $10 million is committed to 2011 projects, Gore said.

“In addition to what we’ve done, I’ve seen people painting their homes, hauling off non-running cars, painting fences and paying attention to landscaping. That’s landlords and homeowners investing, not just us,” she continued.

REVITALIZATION PAYING OFF Credit Union 1 followed CIHA’s lead in helping to bring a community down on its luck back to its feet. The Anchorage Community Land Trust helped Credit Union 1 with cleanup of the building site before the branch was built. “When a financial institution moves into a neighborhood, it suggests they’re willing to put their own capital at risk because they believe the neighborhood is worthy of investment,” said Gore. “Where Credit Union 1 built its branch, on the corner of Bragaw Street and Mountain View Drive, is a key corner for the community. It’s a gateway for the neighborhood.” What does this new branch represent for community residents? It

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“We’re serving people who’ve never had a bank account before. A few weeks ago, a fellow in his 30s came to my office and wanted to make sure we had the products that would meet his needs. I asked where he was currently banking and he said ‘nowhere.’ He’d never had an account before.” — James Wileman Mountain View Branch Manager Credit Union 1

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means financial services most of them haven’t had for a generation – and many have never had. They have had to rely on check-cashers and pawn shops, and paid heavily for whatever service they needed. “We’re serving people who’ve never had a bank account before,” said Branch Manager James Wileman. “A few weeks ago, a fellow in his 30s came to my office and wanted to make sure we had the products that would meet his needs. I asked where he was currently banking and he said ‘nowhere.’ He’d never had an account before. “I learned that he’d had a good job for the past three years. He paid

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

Rendering by kpb architects/Courtesy of Cook Inlet Housing Authority

Bliss Street Village consists of five duplex buildings designed for five contiguous sites on North Bliss Street in the Mountain View neighborhood of Anchorage. The duplexes replace a blighted, abandoned and contaminated housing structure that has been abated and demolished by Cook Inlet Housing Authority. The duplex designs include the “Pintail” (above), “Swan” and “Raven.” These modern, light-filled designs feature floor plans that include two two-bedroom fully equipped flats, and six three-bedroom and two four-bedroom two-story townhomes.

10 percent of his paycheck just to cash it. We opened a savings account for him and now he keeps all his money.”

SERVING COMMUNITY NEEDS Before building their branch in Mountain View, Ellis said they did a lot of listening to the community. As a result, the branch has a police substation and a community room that’s available for use by neighborhood nonprofits free of charge. “In our lobby, we have six drop boxes for utilities so members can pay their utility bills here. Fifty percent of the people in Mountain View don’t have cars,” Ellis added, “so they were paying $30 to $40 every month to ride around Anchorage in taxis and pay their bills. Now, we check our drop boxes daily and deliver utility payments.” Also incorporated into the credit union lobby are two kiosks holding

computers with access to the Internet. Ellis said Mountain View residents can use these computers to look for and apply for jobs. “They are heavily used,” said Wileman. The bottom line for the credit union, however, is that its branch adds to the credit union’s bottom line. “We didn’t change anything, including pricing, for Mountain View,” he said. “We’re obviously in business to make money, but sometimes it means we work just a little harder to do that. Our members still pay for the services we offer.” Those customers were so eager for Credit Union 1’s arrival, Ellis said, that as soon as the foundation went in, they were calling asking: ‘When are you opening?’ ‘Will you have any jobs here?’ Today, the new branch provides a happy opportunity for Ellis to hear magic words such as: “Thanks ❑ for coming.”

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

BUILDING ALASKA SPECIAL SECTION

Parker Smith & Feek

Insuring most of Alaska’s big builders Photo by RISE Alaska LLC/Courtesy of Matanuska-Susitna Borough

The most prominent of Parker Smith and Feek’s insured projects now is construction of the $216 million, 435,000-square-foot, medium-security Goose Creek Correctional Center, located on 330 acres off Alsop Road near Point MacKenzie. In midSeptember, construction crews were pumping concrete for cell walls in general housing.

BY TRACY KALYTIAK

arthquakes, warming permafrost and icy, stormy weather can each seriously disrupt construction of buildings, roads, bridges and other large structures in Alaska. Insuring a project becomes even more intricate, however, when an Alaska company is building something massive in a war zone like Iraq. Parker Smith & Feek, a company specializing in construction insurance, recently provided coverage for West Construction Co.’s building of an opencell, sheet-pile dock in Umm Qasr, Iraq. “We had to secure insurance coverage for barges, cranes and other equipment coming from multiple locations in North America, Kuwait and Dubai,” said Dave Eckroth, senior vice president and Alaska division manager for Parker Smith & Feek. PS&F is a 73-year-old Seattle-based firm that has been doing business in Alaska for more than 40 years. The company opened its Anchorage office in 1987, with two employees. It now has

24 people working there, providing a full spectrum of property and casualty, surety and employee benefits programs to Alaska companies. Approximately 50 percent of Parker Smith & Feek’s revenue in Alaska is derived from providing insurance in the construction industry. Native corporations and their health care, energy, financial institution and food practice groups generate most of the company’s remaining revenue. The company offers insurance to just about all of the largest construction entities involved in projects taking place in Alaska and, as with West’s Iraq dockbuilding project, out of state. West and two additional PS&F clients, Bristol Bay Native Corp. subsidiary CCI Inc. and Anchorage-based Electric Inc., brought in employees from all over the world to the war zone, where full-time security protected them. “The employees had to effectively live on base, and so getting access to and from the site created some

unique exposure,” Eckroth said. The Iraq project ended successfully for West Construction, which is now working on another PS&F-insured dock at the Port of Anchorage extension. That project carries a different array of insurance concerns. “I think we have three barges and six cranes on site,” Eckroth said. “Environmental liability is one of the significant issues there – marine mammal protection of the beluga whales.”

SHIFT IN EXPOSURE Eckroth said there’s been a shift in contractors’ exposure regarding who is a responsible person within their organization when environmental or other rules are broken, awareness of the contractors of environment-related risks and increased interest in adequately insuring that liability. “From a contractor’s perspective, the pollution liability and professional liability have been two of the hot topics in construction insurance,” Eckroth said.

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

Professional liability concerns the increased use of alternative delivery or design-build – in which one company provides design and construction services for a project. Design-build is a trend that has escalated in the last five years, Eckroth said. Pollution liability has been an issue for many years, he said, but there have been a number of projects in the state in which contractors have encountered unexpected contamination. “This has created significant exposure to employees as well as project delays, which impact contractors’ profitability,” Eckroth said. PS&F provided insurance for what first appeared to be a routine family housing project on Fort Wainwright. Jim Watterson of Watterson Construction said his company had broken ground in 2005 on the $55.6 million, 128-unit project when a potential catastrophe surfaced. “That project was a disaster,” Watterson said. “The problem was that there was unexploded ordnance and contaminated soils that were not indicated in the (request for proposal) documents. We ended up having to evacuate the site several times.” At one point, the company had to evacuate the building site for almost a month, in August 2005. “At that point we were framing buildings, roofing, but we didn’t have any of them with heat or any that were enclosed yet,” Watterson said. A soil-screening specialist announced further bad news: PCBs and petroleum contaminated the soil at the site. A remediation contractor had to come in and screen the site for nearly two years, Watterson said, and the company reached a “very large changeorder” with the U.S. Army Corps of Engineers once Watterson’s role was completed in 2007. Even though the government, rather than insurance, ended up paying Watterson’s unanticipated added costs, PS&F gave the company peace of mind afterward. “They provided our insurance and even after we got into that mess, they still provided our insurance,” Watterson said. “We didn’t have any hiccups with our insurance.”

GOOSE CREEK PROJECT The most prominent of PS&F’s insured projects now is construction of the $216 million, 435,000-square-foot, medium-security Goose Creek Correctional Center, located on 330 acres off Alsop Road near Point MacKenzie. The Mat-Su Borough and State of Alaska are partners in the project, which will provide beds for 1,536 male prisoners and approximately 375 permanent jobs to people needed to operate the facility. PS&F is providing builders risk insurance, site environmental liability insurance and the project team’s professional liability insurance. The concern the borough had was about the design-build method of constructing the prison, which involved Neeser Construction Inc. taking on a huge scope of work – from the initial architectural drawings all the way to the final construction tasks. “It’s a very large, concentrated exposure to the borough,” Eckroth said. “The project team had to design and build within the budget provided by the borough. The borough didn’t want design errors that would lead to surprises and cause an issue with their budget.” That hasn’t happened to this point, Eckroth said, adding that construction of the prison is ahead of schedule and expected to be complete in early 2012.

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BIG PROJECTS CONTINUE Parker Smith & Feek is also involved in planning for the $100 million Providence Hospital Generations Facility, a new prenatal-delivery-infant care facility that Davis Constructors is slated to build on the Providence campus in Anchorage. And, Parker Smith & Feek clients are currently offering proposals for work on a hangar at Fort Wainwright, a $100 million range project, and a $200 million housing privatization project at Joint Base Elmendorf-Richardson. PS&F flourishes, Eckroth said, because the companies with which it works demonstrate a high degree of expertise in their field. “That’s why I think Alaska contractors are so successful on projects worldwide,” Eckroth said. “If they can master the logistics of a project in Nome, they can build something anywhere. Our success is tied to the quality of clients we’re fortunate ❑ enough to do business with.”

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

BUILDING ALASKA SPECIAL SECTION

Pfeffer Development

Firm keeps busy in Alaska, Outside

Photo by Amy B. Slinker/Courtesy of Pfeffer Development

Pfeffer Development completed a 30,000-square-foot medical clinic in the Matanuska-Susitna Valley this fall for Providence Health & Services Alaska. The facility consolidates other services in the Valley into a single building. It was designed by kpb architects and constructed by Howdie Inc.

BY PEG STOMIEROWSKI

feffer Development, an Anchorage commercial real estate development firm, is continuing to export niche know-how to municipalities in the Lower 48 while keeping busy with a handful of medical and retail projects in Anchorage, the Matanuska Valley and Fairbanks. Nearly two years after Venture Development Group LLC was rebranded as Pfeffer Development, Mark Pfeffer’s firm using the talent from Venture’s run, he points out continues to be a force in the local construction scene and beyond. Pfeffer’s emphasis, he said, will remain on development activities. Venture Development Group was for many years a notable collaboration between Pfeffer, who remains a

kpb architects principal, and Neeser Construction’s Jerry Neeser. The group was responsible for a litany of projects, including development and construction of a comprehensive rental car center at Ted Stevens Anchorage International Airport, completed in 2007.

BREAKING NEW GROUND Pfeffer describes the $62.8 million airport auto rental facility in Anchorage as the first of its kind in the private sector that is, the first U.S. rental car center built by a limited liability company under contract to rental car companies as individuals, rather than built by an airport as a capital improvement project. Pfeffer Development has since been invited

by auto rental industry representatives to consult in other airport auto rental facility projects, first in Seattle and then in Austin, Texas. In 2006, rental car agencies hired the firm to help facilitate the successful progression of the Sea-Tac Consolidated Rental Car Center development. After several years of challenges that threatened to stall the project, Pfeffer Development was able to assist the rental car agencies and the Sea-Tac Airport by working through negotiations to reach development resolutions. The Austin project would be similar to Anchorage’s AS the facility is located next to the terminal. As of late summer, the feasibility study phase approved by Austin’s city

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

council had been completed, and the final pricing and negotiations phase, which also was approved, was advancing. The Austin project would accommodate vehicles, fueling stations and car washes. If approved for the delivery phase, the project would commence in 2011 and be completed in 2013.

SERVICE ENVIRONMENT FOCUS At Ted Stevens Anchorage International Airport, the four-story, 618,000-square-foot facility across from the South Terminal, which has more square footage than the C Terminal and houses rental, cleaning and fueling functions, was a unique project in which the service environment was key, Pfeffer said. With air passengers’ luggage moving both ways across the space, the facility is an extension of the airport terminal for land-side transportation, he said, with all that implies. Efficiency and safety are important, as are time factors in what for Alaska is especially a highly seasonal business. The rental facility at the local airport has covered space for 1,200 cars and more than 200 employees, with 16 fuel pumps, 12 car washes, and nine vacuum stands. Free Airport shuttle buses travel between the South Terminal, North Terminal, and the Rental Car Center every 15 minutes. Questioned about the culture of the car rental business, Mark Pfeffer said dealers in Alaska and elsewhere have been hard hit in recent years by local and state taxes and fees that have been added on to rental agreements as a way of helping to support such large-scale projects as sports arenas and convention centers. This trend, he said, has been problematic for the industry in that in many cases costs to customers have been increased without necessarily any direct rental service benefit. With this project, the customer facility charge reportedly worked out to be $4.12 per car per day. The auto rental industry, while very competitive, requires from individual companies in many cases the ability to work together under one roof for the benefit of all. While in Anchorage the business is more

tourism related, he said, in Austin and elsewhere more corporate travel is involved. Today, the State-owned facility in Anchorage is managed by Pfeffer Development, and a variety of rental car agencies are concessionaires through the airport.

RETAIL

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MEDICAL PROJECTS

At summer’s end, Pfeffer also was completing two health care projects and constructing two retail centers being anchored by Alaska Communications retail stores, using signature

architecture branding designed by kpb architects. A 4,000-square-foot store is anchoring 9,000 square feet of retail space on 36th Avenue in Anchorage. A freestanding project a 2,500-square-foot store in front of Kenai’s Wal-Mart – is meant to eventually be a small retail center anchored by Alaska Communications. In September, Pfeffer Development was also considering building a similar project in front of Target in South Anchorage. Pfeffer Development is marketing additional

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

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space available for lease in each of the developments. On the health care front, in September, Pfeffer was wrapping up a $10 million, 30,000-square-foot medical clinic in the Mat-Su Valley for Providence Health and Services Alaska. The Class A medical clinic project consolidates other services in the Valley into a single building. In Fairbanks, the firm also was about a month from completing an ambulatory surgery center and adjacent medical office building. The project, at a cost of about $20 million and a total of about 38,000 square feet of space, was financed through First National Bank Alaska for a large group of doctors and investors, including Pfeffer himself. An open house was planned in October. The center includes two surgical rooms, an imaging center, an orthopedic surgeonâ&#x20AC;&#x2122;s office, a physical therapy center, a neurology office and a pain clinic.

INDUSTRIOUS PAIRING Pfeffer, who grew up in Des Moines, Iowa, has worked in the design and construction field for about 30 years. One of his first projects, he says, was a role in moving Anchorage City Hall in the early 1990s from the Hill Building. He has worked on numerous other Anchorage projects, including the downtown Fire Station No. 1, the $93 million Denaâ&#x20AC;&#x2122;ina Civic and Convention Center, the Linny Pacillo Parking Garage, F Street renovation, Alaska Regional Hospital Medical Office Buildings B and C, the Strawberry Village Cottages housing development, and the Alutiiq, Aleutian Pribilof Islands Association and Bristol Bay buildings. Trained as an architect, he came to realize he enjoys the broader process of moving ideas forward into fruition. That includes an umbrella of activities, he said, including coordinating land and financing activities along with design-build and commissioning issues. Construction management remains part of it. While the economy and the slowdown in construction and development has made things more unpredictable, he is gratified, but not surprised, that his nine employees have managed to stay busy,

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

Rendering by kpb architects/Courtesy of Pfeffer Development

Pfeffer Development broke ground on a retail development in Kenai this past summer. The building, designed by kpb architects, is being built by Boslough Construction.

with the firm bringing in $40 million to $50 million in work annually. He looks forward to developing

more projects at home and following rental car industry opportunities Outside, adding that track record counts.

“If you are good at what you do,” Pfeffer saiys, “you will get your fair share of the business.” ❑

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

MINING SPECIAL SECTION

Alaska Mineral Industry Update BY STEVE BORELL

ith the startup of the Kensington Gold Mine in June, Alaska now has six large mines – one coal mine (Usibelli) and five metal mines (Fort Knox, Greens Creek, Kensington, Pogo and Red Dog). Each of these continues to operate at a steady pace. Numerous smaller family placer gold mines are also in operation, and sand and gravel mines all around the state are operating to support local construction projects. The uncertainty for the Red Dog Mine in northwest Alaska was settled when the Environmental Protection Agency was able to assure Red Dog that the water discharge permit being issued was legally defensible. Environmental groups, representing a few disgruntled local residents, had appealed a minor technicality in an EPA permit that the mine had to have to continue operating. EPA determined that the mine could operate under criteria previously approved by a court decision. Teck then announced that it would begin development of the next mining area, thus preserving approximately 500 jobs in rural Alaska. Even with some metal prices improving, the worldwide recession forced the operating mines to tighten their belts and look for ways to improve efficiency. It now appears that the amount of mineral exploration in 2010 will return to the levels we saw before the worldwide financial meltdown of 2008-2009. In 2009 a total of 17 exploration projects each spent more than $1 million. This was down from 29 in 2008. All indications are that the level of exploration expenditures this year will return to the previous levels. During 2009, if the exploration

excellent geology and as home for a long list of world-class ore deposits. Another factor is that when compared with other states and most countries in the world, Alaska is effectively unexplored. There has been exploration here for more than 100 years, but there has been nowhere near the level of exploration seen in other locations. The reasons for this include climate, snow cover for much of the year, lack of roads, added cost of operation, and land tenure uncertainty for several decades following the 1968 discovery of oil at Prudhoe Bay. Finalization of Native and State land transfers has greatly reduced the land tenure uncertainty. The State of Alaska permitting and environmental systems are also a positive factor. The State systems are thorough and robust and the State has competent managers that know the science of their respective jobs and have had consistent political support from current and past Administrations. ❑ Steve Borell, executive director, Alaska Miners Association

companies did not have their financing in place by early spring, many were not able to begin field work until late in the summer, it at all. These companies had to manage their finances very judiciously to ensure they retained sufficient funds to make their lease payments (often to Alaska Native corporations) or claim-holding payments, and cover the environmental-monitoring requirements of their permits. The outlook for the future, both near-term and long-term, continues to be excellent. Alaska is known for

About the Author Steve Borell is executive director of the Alaska Miners Association, an industry support organization with more than 1,200 members. The AMA represents all aspects of the mineral industry before State and federal agencies, the State Legislature and U.S. Congress. He has more than 36 years experience involving exploration and operations in coal, placer and hardrock metal mining in various western and midwestern states, Canada and South America. He is a registered professional engineer in Alaska, Colorado and North Dakota.

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

MINING SPECIAL SECTION

ALASKA 2010 – MINING IN REVIEW BY CURTIS J. FREEMAN Gold bar from one of Alaska’s producing gold mines.

Dorothy, 100 percent) of the Borough’s tax revenue. The Fort Knox mine was the largest Fairbanks North Star Borough taxpayer in 2009, shelling out $2.8 million in property taxes while the Greens Creek mine was the largest City and Borough of Juneau taxpayer, contributing $1.4 million in property taxes. When the Kensington mine reaches full production, Greens Creek will fall to second place as the City and Borough of Juneau’s largest taxpayer. Another barometer of the rebound in the mining industry in the last year is the number of firms who acquired their first mineral interest in Alaska, a tally which stands at 12 new companies at last count. While mining’s impact on Alaska is both demonstrable and significant, just where Alaska’s mining industry fits into this global supply and demand puzzle is anything but clear. Professors, prognosticators and pundits have all weighed in with forecasts on the future of Alaska’s mineral industry. Unfortunately, all such forecasts seem to be couched in Nostradamus-like jargon that makes it hard for the rest of us to understand what’s being said, and equally hard for us to prove that the prognosticators were dead wrong! There is one thing even Sherlock Holmes would feel justified in theorizing: Alaska will continue to play a vital role in supplying the world’s growing demand for minerals.

WESTERN ALASKA Teck Resources Ltd. and partner NANA Regional Corp. announced year-end 2009 and first half 2010 results from its Red Dog mine. For 2009, the mine produced 582,500 tonnes of zinc in concentrate from ore grading 20.9 percent while mill recoveries decreased slightly to 82.4 percent. The mine also produced 131,500 tonnes of lead in concentrate from ore grading 5.9 percent while mill recoveries decreased slightly to 65.9 percent. These 2009 production figures records for the mine. The mine posted a $399 million operating profit during 2009 versus a $171 million operating annual profit for 2008. The mine shipped 1.020 million tonnes of zinc concentrate and 220,000 tonnes of lead concentrate during the 2009 shipping season. During 2009, the mine paid

significantly over 2009. With the exception of gold, commodities prices showed the same sort of trend with strongly depressed prices in 2009, followed by a slow but steady recovery to levels near and in some cases above all-time highs. And these increased commodity prices are being felt in villages, towns and cities across Alaska. In fact, here are some factoids from a recent Alaska Miners Association report: in 2009 the Red Dog mine paid the Northwest Arctic Borough $7.8 in property taxes, representing 100 percent (that’s right

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

herlock Holmes said “it is a capital mistake to theorize before one has data” but we now have the past year’s data on the world’s and Alaska’s mining industry so we can now look back with clarity and perhaps theorize a bit looking forward. As 2009 came to a close, worldwide exploration spending was off a whopping 42 percent over the year previous. However, by early 2010, exploration spending was on the upswing and we will likely see mine-site, late-stage and grass-roots exploration spending all up

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partner NANA Inc. and the State of Alaska royalties of $144 million versus royalties of $111 million in the yearprevious period. During the first half of 2010, the mine produced 270,800 tonnes of zinc in concentrate from ore grading 18.5 percent while mill recoveries dropped slightly to 82.4 percent. The mine also produced 66,300 tonnes of lead in concentrate from ore grading 5.8 percent while mill recoveries remained steady at 64.3 percent. The mine posted a $94 million operating profit for the quarter, down significantly from the $61 million profit in the year’s previous period.

The mine plans to ship 1.025 million tonnes of zinc concentrate and 235,000 tons of lead concentrate from the port facility this shipping season. Eleventhhour efforts finally brought resolution to the mine’s water-discharge-permit issues and production from the Aqqaluk deposit commenced in late May as planned. NovaGold Resources also announced year end 2009 results and 2010 plans for its Rock Creek gold project near Nome. During 2009, expenditures at the project totaled approximately $27.7 million. NovaGold

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

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worked to improve the project’s water management structures and action plan to ensure the project remains in compliance with all environmental regulations. The company has budgeted $19.1 million for 2010, primarily for water management and completing a detailed review to determine future developments at the project. Zazu Metals Corp. announced completion of a Preliminary Assessment study on its Lik South deposit. The study considered both Indicated and Inferred Mineral Resources in Lik South deposit amenable to open-pit mining. The life of mine open-pit production plan includes the production of 16 million tonnes grading 8.08 percent zinc, 2.57 percent lead and 47.9 grams of silver per tonne. The pre-production capital cost estimate was $352 million including 22 percent contingency for a 5,500 tonne per day mine and mill with an eight year mine life. The estimated life of mine operating costs were $75 per tonne. The operation demonstrated a pre-tax internal rate of return of 9 percent. This work was based on zinc recovery of 85 percent with silica levels less than 5 percent through standard froth floatation recovery. TintinaGold Resources also announced 2 00 9 and initial 2 010 exploration results at its Kugruk copper-gold-iron project on the Seward Peninsula. The property consists of a 15-kilometer-long magnetic high along the eastern margin of the Kugruk pluton where limited historic drilling returned magnetite with associated chalcopyrite and pyrite. Further east, a halo of silverlead-zinc prospects occurs and further outboard gold prospects ring the intrusive system. Activities in 2009 included 16.4 line kilometers of IP geophysics and 11 gravity profiles which helped target initial drilling at the Billiken prospect, a 3-kilometer-long magnetic anomaly with coincident high gravity, low resistivity, and high-induced polarization anomalies. Drilling encountered massive magnetite and copper-sulfide mineralization within prograde garnetpyroxene exoskarn, actinolite-chlorite retrograde alteration, endoskarn, and variably altered granodiorite dikes. Significant drilling results include 22 meters grading 0.065 parts per million gold, 2.6 parts per million silver, 0.44

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

percent copper and 48.8 percent iron in hole KU10-003 and an additional 31.3 meters grading 0.104 parts per million gold, 4.1 parts per million silver, 0.30 percent copper and 12.1 percent iron in hole KU10-003. NovaGold Resources Inc. and 50:50 JV partner Barrick Gold announced the results from 2009 work programs and plans for 2010 at its Donlin Creek project. During 2009, expenditures totaled approximately $25.3 million. Work focused on geotechnical drilling, environmental-baseline data collection, pre-permitting community advisory meetings and various optimization studies. For 2010, the partners approved a budget of approximately $47 million. The 2010 work program will complete the majority of the environmental and engineering studies required to review the feasibility of constructing a natural gas pipeline to supply energy for the project. The plan envisions construction of a 12-inch diameter underground pipeline over a 525 kilometer route from upper Cook Inlet to the project. Updated resources, based 1,740 drill holes totaling 370,000 meters of drilling,

include proven and probable reserves of 467.7 million tonnes grading 2.23 grams of gold per tonne, containing 33.59 million ounces, measured and indicated resources of 39.8 million tonnes grading 3.36 grams of gold per tonne, containing 4.29 million ounces and inferred resource totals of 58.4 million tonnes grading 2.35 grams of gold per tonne, containing 4.41 million ounces. This brings total Donlin Creek resources to 42.29 million ounces. To my knowledge, that makes Donlin Creek Alaska’s first more than 40 million ounce primary gold deposit and one of only a hand-full of more than 40 million ounce occurrences worldwide. Fire River Gold conducted extensive exploration and pre-development work at its Nixon Fork copper – gold project. The $1.25 million 2009 work program included confirmation of past geological work, confirmation of gold grade in the tailings pond. Additional metallurgical test work and re-assaying some previously drilled intervals. Significant results from this work include 4.2 ounces of gold per ton over 8.2 feet in hole N07U065, 3.15 ounces of gold

per ton over 9.8 feet in hole N07U063, 15.52 ounces of gold per ton over 9.8 feet in hole N07U061, 2.21 ounces of gold per ton over 22 feet in hole N07U049, 2.95 ounces of gold per ton over 14.8 feet in hole N07U056, 3.7 ounces of gold per ton over 16.7 feet in hole N07U048, 2.28 ounces of gold per ton over 15.8 feet in hole N07U050 and 1.47 ounces of gold per ton over 16.5 feet in hole N07U052. The company also plans to conduct 20,000 meters of underground drilling and 8,000 meters of surface drilling in 2010. It also announced it had recovered 900.5 ounces of gold worth $1.08 million from a cleanup of the ball mill at the project. A preliminary economic assessment for reprocessing mine tailings is evaluating three options: 1) use an existing thickener after the CIL process to recycle cyanide solution, 2) installation of a new filter to further increase cyanide recycle, and 3) assess the benefits of installing a Merrill-Crowe system for gold recovery. As this article was being compiled, the company began a preliminary economic assessment to determine the viability of bringing the

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

mine back into production. In February 2010, Northern Dynasty Minerals announced an updated mineral resource estimate for the Pebble deposit. At a 0.3 percent copper equivalent cutoff grade, the new estimates include measured resources of 527 million tonnes grading 0.33 percent copper, 0.35 grams of gold per tonne and 178 parts per million molybdenum, indicated resources of 5.4 billion tonnes grading 0.43 percent copper, 0.35 grams of gold per tonne and 257 parts per million molybdenum and inferred resources of 4.8 billion tonnes grading 0.24 percent copper, 0.26 grams of gold per tonne and 215 parts per million molybdenum. All-in the deposit contains 80.6 billion pounds of copper and 107.3 million ounces of gold. The partners are preparing a prefeasibility study under a $72.9 million 2010 budget. Total project expenditures include $180 million spent in 2001 to 2007 prior to formation of the joint venture and $250 million since 2007, bringing total project expenditures to $430 million.

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Kinross Gold announced year-end 2009 and first-half-2010 results from its Fort Knox mine. During 2009, the mine produced 263,260 ounces of gold produced at a cost of $546 per ounce with exploration more than replaced this production by moving 369,000 ounces of gold to the reserve category. For the first half of 2010, the mine produced 155,910 ounces of gold at a cost of $587 per ounce. Gold grades for mill-feed ore ranged from 0.71 to 0.76 grams of gold per tonne and mill recovery averaged 80 percent. Heap leach ore averaged 0.34 grams of gold per tonne and recovery on the heap leach pad was not released. Total tons processed in the first half of 2010 increased to 11.73 million tons with more than one-third of this tonnage going to the valley leach. The company also tabled year-end 2009 resource updates that included proven and probable reserves of 252.9 million tonnes grading 0.45 grams gold per tonne, equivalent to 3.7 million ounces of gold. An additional 105.8 million tonnes grading 0.50 grams gold per tonne, equivalent to 1.7 million ounces, are classified as measured and indicated resources. An

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

additional 12.8 million tonnes grading 0.55 grams gold per tonne, equivalent to 226,000 ounces, are classified as inferred mineral resources. The company also reached a milestone – three years and 3 million hours without a lost-time injury. Teryl Resources Corp. and joint-venture partner Kinross Gold Corp. announced 2009 and 2010 drilling results from their Gil gold project. Results from the Sourdough Ridge prospect from 2009 include 65 feet grading 3.42 grams of gold per tonne in hole GVR09-521, 105 feet grading 1.37 grams of gold per tonne in hole GVR09-523, 75 feet grading 3.08 grams of gold per tonne in hole GVR09-534, 105 feet grading 4.79 grams of gold per tonne in hole GVR09-540, 35 feet grading 3.42 grams of gold per tonne in hole GVR09-526 and 35 feet grading 3.77 grams of gold per tonne in hole GVR09-529. Significant results from its 16,000 foot 2010 program from the North Gil zone include 50 feet grading 0.0363 ounces of gold per ton in hole Pouring ingots at one of Alaska’s producing gold mines.

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

GVR10-569, 50 feet of 0.0458 ounces of gold per ton in hole GVR10-551 and 45 feet of 0.0427 ounces of gold per ton in hole GVR10-558. Sumitomo Metal Mining reported that the Pogo mine produced 389,808 ounces of gold in 2009, making it Alaska largest gold producer. The mine produced at a cash cost of $423 per ounce and is projecting 2010 production at more than 385,000 ounces of gold. International Tower Hill Mines Ltd. announced voluminous data on drilling, resource estimates, metallurgical work and preliminary economic analyses on its Livengood gold project. In mid-2010 the company announced results from its preliminary economic assessment which indicated that a combined milling and heap-leach facility would produce an average annual production of 504,000 ounces of gold for 21 years, at a 1:1.07 strip ratio (ore to waste), indicating a pre-tax net present value of $813 million and an internal rate of return of 15.4 percent using a $950 per ounce gold price. Average gold recovery was 76 percent for heap leaching and 81 percent for milling with an average processing rate of 81,000 tonnes per day. Cash costs came in at $560 per ounce and initial capital costs were pegged at $635 million without the mill and an additional deferred capital cost of $750 million with the mill complex. The combined heal leach â&#x20AC;&#x201C; milling analysis incorporates 420 drill holes totaling 121,212 meters. At the 0.3 gram per tonne cutoff, indicated resources now stand at 15.7 million ounces of gold in 788.9 million tonnes grading 0.62 grams of gold per tonne while inferred resources now total 4 million ounces of gold in 229.1 million tonnes grading 0.55 grams of gold per tonne. The most recent metallurgical tests indicate that an average 88 percent of the gold reported to the concentrates during initial combined gravity and flotation tests, resulting in an 80 percent reduction in the volume of material requiring further treatment. Initial tests of conventional milling using gravity-recovery combined with intensive CIL (Carbon in Leach) treatment of gravity-recovered gold concentrate and CIL leaching of the tails produced gold recoveries averaging 86 percent. All of this work was supported by a 20,000 meter winter-drilling campaign

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

and an ongoing 45,000 meter summer drilling program in the Core and Sunshine zones as well as new drilling in the Lillian Frontier and Olive zones. Alaska newcomer Contango ORE Co. announced it has acquired the option to conduct on approximately 580,000 acres of Alaska Native and State lands in Interior Alaska. The 2009 field program totaled $1.3 million and included collection of 1,076 rock, soil, pan concentrate and stream silt samples. Of this total, 567 rock and soil samples were taken over a 40-acre area of exploration interest, with 348 samples showing measurable amounts of gold and 30 samples with measured gold of 0.5 grams of gold per tonne or higher. The project has not been extensively explored for gold and covers several geologic terranes, which are prospective for gold, base metal and platinum group element deposits. The 2010 exploration program was directed toward additional rock sampling, trenching and core drilling. Trucking Red Dog ore from the mine to the port on the west coast of Alaska.

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ALASKA RANGE Usibelli Coal Mine released 2009 operating results from its coal-mining operations near Healy. Total permitted reserves at the mine are 30.6 million tons of sub-bituminous coal with total defined reserves of approximately 500 million tons. Total resources in the Nenana Basin are pegged at an amazing 7 billion tons of coal. During 2009 the mine produced 975,578 tons of coal for Alaska consumption and an additional 803,751 tons of coal for the export market, more than half of which went to Chile. Pure Nickel Inc. and joint-venture partner ITOCHU Corp. announced results from its 2009 exploration season and plans for their $7.5 million, 8,000-meter 2010 exploration program at the MAN project. The 2009 drill program completed 4200 meters of drilling in seven holes, a new Z axis Tipper electromagnetic airborne survey, geological mapping and a time domain ground electromagnetic survey. Significant drill results include hole PNI-09-24 which returned 1 meter grading 0.528 percent nickel, 0.302 percent copper, 110 parts per billion platinum and 60 parts per billion palladium and hole PNI-09-25, which returned 0.5 meters grading 0.455 percent nickel, 0.196 percent copper, 70 parts per billion platinum and 250 parts per billion palladium. The partners have commenced their 2010 drilling program and indicated their intent to explore the deeper source of the conductive bodies underlying the Alpha and Beta complexes. Millrock Resources announced preliminary chip-channel rock sampling results from its Estelle gold project. At the Shoeshine prospect, stockwork veining and pervasive alteration returned 1.2 grams of gold per tonne over 12.1 meters. A nearby zone of sheeted quartz veinlets returned grades of 11.7 grams of gold per tonne over 1.5 meters in one area and 9.9 grams of gold per tonne over 1.5 meters in another area. At the Oxide Ridge prospect, chip channel sampling returned 1.0 grams of gold per tonne over 22.86 meters. The zones appear to be structurally controlled and consist of quartz stockwork with arsenopyrite. The company later announced that it has signed a letter agreement with a subsidiary of Teck Resources

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

Ltd. for a private placement financing for further exploration of the project. Kiska Metals Corp. announced 2009 drilling and prospecting results from its Whistler copper-gold project in the western Alaska Range. Hole IM09-001 at the Island Mountain prospect returned 0.68 grams of gold per tonne over 382.9 meters including an upper interval of 150.0 meters grading 0.72 grams of gold per tonne, 2.37 grams of silver per tonne and 0.16 percent copper and a lower interval of 106.9 meters grading 1.22 grams of gold per tonne, 0.69 grams of silver per tonne and 0.05 percent copper. The upper gold-bearing intersection corresponds to a breccia targeted on surface, consisting of an actinolite-magnetite-altered hydrothermal breccia with pyrrhotite, pyrite and chalcopyrite mineralization. The deeper gold-bearing zone consists of net-textured and vein pyrrhotite. Drill hole IM10-004 intersected two zones, including an upper zone of 129.8 meters grading 0.70 grams of gold per tonne, 2.5 grams of silver per tonne and 0.16 percent copper and a lower zone of 151.6 meters grading 0.78 grams of

gold per tonne. At the Old Man Breccia target, saw-channel sampling returned 3.34 grams of gold per tonne over 28 meters As this article was being compiled, the company announced, subject to a retained royalty, it had acquired a 100 percent interest in the project from Kennecott Exploration Co. In late 2009, Full Metal Minerals announced it had entered into an option agreement with Alaska newcomer Harmony Gold Corp. on the Lucky Shot gold project. Significant results from 4,200 meters of drilling completed in 2009 include hole C09-152, which intersected 3.6 meters averaging 24.14 grams of gold per tonne; hole C09-153, which intersected 0.9 meters averaging 102.00 grams of gold per tonne; hole C09169, which intersected 3.7 meters averaging 19.23 grams of gold per tonne; and hole C09-171, which intersected 7.3 meters averaging 36.38 grams of gold per tonne. This drilling extended the high-grade mineralization in the Coleman block at least 50 meters up-dip of historic workings. The partners also began underground development and bulk sampling in the second quarter

of 2010 in order to complete engineering studies, metallurgical test work and environmental studies. Subject to positive results from this effort, the partners plan to construct underground access to the Coleman block, complete additional surface drilling, process a bulk sample within the Lucky Shot shear, complete a resource estimate for the Coleman deposit and complete all required environmental-baseline studies and engineering/metallurgical studies in preparation for submission of full mine permit applications.

NORTHERN ALASKA In early 2010 NovaGold Resources Inc. announced it had entered into an agreement to purchase a 100 percent interest in the Ambler polymetallic-sulfide deposit from Kennecott Exploration Co. Current resources at Ambler include indicated resources of 16.8 million tonnes grading 4.1 percent copper, 6 percent zinc, 0.94 percent lead, 0.83 grams of gold per tonne and 59.6 grams of silver per tonne and additional inferred resources of 11.9 million tonnes grading 3.6 percent copper, 5 percent zinc,

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0.80 percent lead, 0.67 grams of gold per tonne and 48.4 grams of silver per tonne. The company has budgeted $1.5 million at Ambler for 2010. Work at the property is focused on initiating the environmental and engineering studies necessary to complete a pre-feasibility level study to assess project economics. In late 2009, Goldrich Mining Co. announced the results of alluvial gold production at its Chandalar property north of Fairbanks. Pit-run gravel processed through the 500-to-700-cubicyard-per-day plant produced 522.3 ounces of raw gold bullion from 8,905 cubic yards of material for a recovered grade of 0.059 ounces per yard. Gold fineness was approximately 870. Gold recovery rates were estimated at 98 percent, partly due to the coarse nature of the gold and partly due to the lowvolume of associated heavy minerals. By mid-2010 the company had commenced full-scale commercial production and indicated that it expects to produce 5,000 to 7,000 ounces of gold by late September and reach 30,000 ounces of gold per year at full production. Drilled resources are in excess of 10.5 million cubic yards grading 0.02456 ounces of gold per cubic yard. The company also began a 20,000-foot diamond-core-drilling program to evaluate lode mineralization occurring in a stratabound structure estimated to be approximately 5 miles long by 1,800 feet wide by 300 to 400 feet thick. There has been historic hard-rock mining on some of the high-grade veins at various locations along this trend and seven placer deposits have been mined in streams draining this trend. The drill program will consist of approximately 40 holes averaging 500 feet deep.

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Hecla Mining announced yearend-2009 and first-half-2010 production results from the Greens Creek mine. For 2009, the total cash cost per ounce of silver produced at Greens Creek for the year was $0.35 per ounce with total production costs of $7.65 per ounce. The average grade of ore mined was 13.01 ounces of silver per ton and the mine produced 7.5 million ounces of silver, 67,278 ounces of gold, 22,253 tons of lead and 70,379 tons of zinc. Milled tonnage averaged 2,167 tons per

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

day. For the first half of 2010, the cash cost per ounce of silver was a negative $5.45 per ounce of silver and the average grade of ore mined was 11.7 ounces of silver per ton. The mine produced 3.4 million ounces of silver, 34,742 ounces of gold, 13,215 tons of lead and 39,161 tons of zinc. Total production costs were $2.48 per ounce of silver produced. Tonnage milled rose to 2,227 tons per day and capital expenditures totaled $5.75 million. The company announced revised resource estimates for the mine to include probable reserves of 8.3 million tons grading 13.9 ounces of silver per ton, 0.102 ounces of gold per ton, 3.6 percent lead and 10.3 percent zinc, mineralized material of 789,800 tons grading 4.1 ounces of silver per ton, 0.063 ounces of gold per ton, 2.0 percent lead and 4.6 percent zinc, and other resources of 2.4 million tons grading 11.5 ounces of silver per ton, 0.092 ounces of gold per ton, 2.7 percent lead and 6.8 percent zinc. On the exploration front, the mine completed approximately 39,000 feet of underground in-fill and exploration drilling in 2009 in the 5250, Deep 200 South and NWW-South area resulting in a replacement of all tons mined during 2009. Additional surface and underground drilling continued in 2010. Earlier this year, Alaska’s newest large mine producer, Coeur d’Alene Mines Corp., announced that production has commenced ahead of schedule at its Kensington gold mine. The company anticipates 50,000 ounces of gold production for 2010, with production of 125,000 ounces of gold annually over the mine’s 12.5 year life. Cash costs are expected to average approximately $490 per ounce. Coeur also announced it has entered into a contract with China National Gold Group Corp., China’s largest gold producer, for the purchase and processing of gold concentrates produced at Kensington. This agreement is the first of its kind between a state-owned corporation of the People’s Republic of China and a U.S. precious metals mine. Second-quarter production results indicate that the process plant is operating at design tonnage of 1,250 tons per day, ahead of schedule. Recovery rates during the initial month of ramp-up were consistent with plan and expected to climb as processing of higher-grade www.akbizmag.com • Alaska Business Monthly • November 2010

ore begins. Exploration at the mine was focused on the Horrible vein structure, a prominent gold-bearing quartz vein and vein swarm situated about 650 meters west of the current production. A total of 9,941 feet of core drilling was completed at Horrible in the second quarter. Drilling has cut multiple quartz-vein structures down-dip and on-strike of the known zone. In late 2009 the company discovered the Kimberly vein in the main production decline driven between the mill and the mine workings. Results of a 14 hole, 4,080-foot drilling program returned high-grade intercepts, including 2.8 feet grading 0.462 ounces of gold per ton in hole KMB-001, 26.9 feet grading 0.322 ounces of gold per ton in hole KMB-007, 5.5 feet grading 1.293 ounces

Photo by Debbie Cutler

Core samples from the Pebble copper, gold and molybdenum deposit in Southwest Alaska will help fully define the large project for 50-50 co-owners Northern Dynasty Minerals Ltd. and Anglo American plc. Northern Dynasty is headquartered in Vancouver, British Columbia, Canada; Anglo American is headquartered in London, England.

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

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LR International Corp (SLR) recently acquired Anchorage-based Hoefler Consulting Group (HCG), expanding its technical expertise and solidifying its presence in Alaska. HCG was a leading Pacific Northwest environmental consultancy to clients in the energy, mining and natural resource-management sectors. With offices in Anchorage, Fairbanks and Seattle, the company had a long, successful history in Alaska and the Northwest. HCG was established in 1995 by Brian Hoefler, who is now SLRâ&#x20AC;&#x2122;s Alaska Manager. SLR is an international UK-based environmental services firm with an excellent reputation for delivering highquality, customer-tailored services. With the acquisition of HCG, SLR has 300 employees working in 28 offices in North America, including 70 staff in Anchorage and 10 in Fairbanks. SLRâ&#x20AC;&#x2122;s U.S. operations are headquartered in Seattle. The July 1 acquisition of HCG effectively expands SLRâ&#x20AC;&#x2122;s services, according to SLRâ&#x20AC;&#x2122;s Alaska Integration Manager, Andy Dimitriou. â&#x20AC;&#x153;With the acquisition, we are a larger, more diverse industry leader, providing environmental services throughout Alaska,â&#x20AC;? he says. The acquisition, Hoefler says, also underscores SLRâ&#x20AC;&#x2122;s long-term commitment to Alaska and enhances its delivery of services. â&#x20AC;&#x153;We are integrating our respective staffs from SLR and HCG, delivering more expertise, increased cost efficiency and reduced risks to our clients,â&#x20AC;? he says. â&#x20AC;&#x153;We are already seeing the benefits of our merged operations through joint staff working together on projects for clients such as ExxonMobil, Pebble Limited Partnership, Alyeska Pipeline Service Company and the Alaska Department of Transportation.â&#x20AC;? SLR has been providing environmental services in Alaska since 2001, primarily in the energy, mining and planning sectors. Its services include air measurements, air-

5.4 #NCUMC /CPCIGT $TKCP *QGÄ&#x201A;GT NGHV CPF 5.4 +PVGITCVKQP /CPCIGT #PF[ &KOKVTKQW quality permitting, operational permitting support, spill planning and preparedness, hydrogeology, contaminated site assessment, contaminated site remediation and quantitative risk assessment. â&#x20AC;&#x153;We provide advice to our clients on how to comply with the air, water, land and subsurface environmental protection laws of the locations where they operate,â&#x20AC;? Hoefler says. In the past decade, SLR has experienced rapid growth in Alaska and globally. Since its inception, the company has constantly capitalized on opportunities to expand and diversify, both technically and geographically. Such expansion has enabled SLR to customize its services in response to the ever-changing range of business and regulatory drivers, leading to a high level of client retention and trust. â&#x20AC;&#x153;Our clients have continued to expand their work with us, as we have demonstrated a consistently superior quality of service,â&#x20AC;? Dimitriou says. â&#x20AC;&#x153;Half of our clients have been with us over seven years.â&#x20AC;? The key to SLRâ&#x20AC;&#x2122;s success is its employees. SLR â&#x20AC;&#x201C; an employee-owned and -managed firm â&#x20AC;&#x201C; focuses on maintaining high-caliber staff to meet clientsâ&#x20AC;&#x2122; needs. Dimitriou explains: â&#x20AC;&#x153;Our corporate focus is on recruiting and rewarding highly ÄŤÄ&#x153;Ä¤Ä&#x; Ä&#x153;Ä&#x;ÄąÄ ÄÄŻÄ¤ÄŽÄ Ä¨Ä ÄŠÄŻ

talented staff that understands the technical and business challenges faced by our clients.â&#x20AC;? SLR is looking forward to perpetuating its success and growth. â&#x20AC;&#x153;SLR will continue to grow throughout our network of offices, providing a strong focus on our energy and mining clients in Alaska and worldwide,â&#x20AC;? says Dimitriou, who is responsible for leveraging SLRâ&#x20AC;&#x2122;s Alaska experience into global growth. â&#x20AC;&#x153;We will continue our focus on supporting resource development projects and will also expand our significant expertise in permitting wind farm, hydroelectric, biomass, bio-diesel and wasteto-energy projects.â&#x20AC;?

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of gold per ton in hole KMB-007 and 4.6 feet grading 0.536 ounces of gold per ton in hole KMB-013. This drilling defined gold mineralization over a north-south strike length of 600 feet and nearly 600 foot down dip to the southwest. Constantine Metal Resources announced 2009 and initial 2010 drilling results and a new resource estimate for its Palmer copper-zinc-gold-silver project. The 10-hole, 4,643-meter 2009 drill program expanded the South Wall zone mineralization by 80 meters along strike, 90 meters vertically

down-dip, and 40 meters up-dip, for a total horizontal strike length of 380 meters and a total vertical extent of 410 meters. Drill hole CMR09-26 intersected 4 meters grading 2.09 percent copper, 9.19 percent zinc, 0.22 grams of gold per tonne and 22.0 grams of silver per tonne. Strongly oxidized and leached RW zone mineralization was intersected in the upper portion of hole CMR09-24, which returned 9.14 meters grading 0.23 percent copper, 3.08 percent zinc, 0.49 grams of gold per tonne and 46.8 grams of silver

per tonne. Significant 2010 results from the RW Zone include hole CMR10-35 which intersected 7.1 meters grading 2.10 percent copper, 1.52 percent zinc, 0.18 grams of gold per tonne and 16.8 grams of silver per tonne. The recently announced inferred resource estimate came in at 4.75 million tonnes grading 1.84 percent copper, 4.57 percent zinc, 0.28 grams of gold per tonne, and 29.1 grams of silver per tonne, using a royalty cut-off value of $50 per tonne. Niblack Mineral Development Inc. and joint-venture partner Heatherdale Resources Ltd. announced 2009 and 2010 drilling results from their Niblack massive sulfide deposit. The partners completed 25,000 feet of drilling since initiating their Phase 1 work program in the fall of 2009 and began a second phase of drilling designed to complete an addition 50,000 feet of drilling in 2010. Significant results include hole U29 which returned 61.4 feet grading 1.40 percent copper, 2.40 grams of gold per tonne, 2.81 percent zinc and 48 grams of silver per tonne, hole U30 which returned 32.7 feet grading 1.83 percent copper, 3.39 grams of gold per tonne, 2.56 percent zinc and 57 grams of silver per tonne, hole U31 which returned 143.9 feet grading 2.25 percent copper, 3.01 grams of gold per tonne, 5.52 percent zinc and 76 grams of silver per tonne, hole U35 which returned 51.5 feet grading 1.88 percent copper, 2.52 grams of gold per tonne, 1.56 percent zinc and 51 grams of silver per tonne and an additional 36.5 feet grading 1.24 percent copper, 3.53 grams of gold per tonne, 3.18 percent zinc and 43 grams of silver per tonne, hole U37A which returned 49.3 feet grading 1.23 percent copper, 1.53 grams of gold per tonne, 1.06 percent zinc and 22 grams of silver per tonne and hole U44 which returned 40 feet grading 1.51 percent copper, 2.14 grams of gold per tonne, 1.1 percent zinc and 41 grams of silver per tonne. Ucore Rare Metals Inc. (formerly Ucore Uranium) announced 2009 final reports and ongoing 2010 exploration results from its Bokan-Dotson Ridge rare-earth element project. Surface samples from the Dotson trend collected in 2009 returned total rare-earth element values ranging from 2.2 percent to 18.8 percent with maximum light rareearth element values of 5.9 percent and

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

maximum heavy rare-earth element values of 17.3 percent. The 2009 drilling program also included 2,840 meters of core drilling in 27 holes, mostly on the Dotson Trend with lesser footage on the Geoduck, Cheri, and Sunday LakeGeiger prospects. Significant results include hole LM09-56, which returned 1.2 meters grading 1.2 percent light rareearth elements and 0.6 percent heavy rare-earth elements; hole LM09-61, which returned 1.1 meters grading 0.9 percent light rare-earth elements and 2.0 percent heavy rare-earth elements; hole LM09-65, which returned 4.8 meters grading 0.1 percent light rare-earth elements and 1.73 percent heavy rareearth elements; hole LM09-68 which returned 1.68 meters grading 1.57 percent light rare-earth elements and 0.61 percent heavy rare-earth elements; and hole LM09-71, which returned 1.47 meters grading 1.11 percent light rare-earth elements and 1.02 percent heavy rareearth elements and an additional 1.59 meters grading 1.75 percent light rareearth elements and 1.37 percent heavy rare-earth elements. Mineralization at the Dotson Trend consists of multiple subparallel rare-earth element-bearing dykes and veins localized by shear zones. Mineralogical work completed by the company indicated that a wide variety of rare-earth element-bearing minerals have been identified, including apatite, iimoriite, kainosite, gadolinite, allanite, bastnaesite, parisite, brannerite, thalenite, xenotime, fergusonite, synchysite (Y), and monazite. The 2010 drilling program will consist of 4,000 meters of core drilling on the combined I&L and Dotson Shear zones and an additional 1,000 meters in shallow holes along the Cheri, Geoduck and Sunday Lake trends. The company hopes to complete a Canadian National Instrument compliant mineral resource esti❑ mate by the end of 2010. About the Author Curtis J. Freeman is president of Avalon Development Corp., a mineral exploration consulting firm based in Fairbanks (www.avalonalaska. com). He is a U.S. Certified Professional Geologist (CPG #6901) and a licensed geologist in the State of Alaska (Lic. #AA 159).

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MINING SPECIAL SECTION

Photos by Debbie Cutler

2010 MINING DIRECTORY

Jonathan Hobson, drillerâ&#x20AC;&#x2122;s helper from Nondalton, pounds core from a drilling rod into a core sample box at Pebble.

Tyler Clarke, driller, holds a piece of core from an exploration drill rig at Pebble.

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Pebble Drill Helper Vincent Amos holds up a handful of linseed soap, a lubricant used in exploration drilling.

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

2010 MINING DIRECTORY ! " *

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

MINING SPECIAL SECTION

2010 MINING DIRECTORY

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

MINING SPECIAL SECTION

The Other Side of Pebble

Controversy surrounds this development and the opposition is good at getting their message to the world, but what does Pebble Limited Partnership have to say? Photo by Debbie Cutler

BY DEBBIE CUTLER MANAGING EDITOR

BENEFITS OF PEBBLE Jobs Galore Revenue for State Monies to the Region A Healthier Economy Lower Energy Costs to Southwest Alaska Reduced Shipping Costs to the Bristol Bay Region

his is what Chief Executive Officer John Shively of Pebble Limited Partnership says of the potential mine. PLP was formed to explore the possibility of developing a copper/gold/molybdenum deposit in Southwest Alaska, where jobs come few and far between, and communities are torn between the growth this could mean to the economies in the region, and the message broadcasted everywhere that this mine, if developed, could destroy a beautiful region and their pride and joy: Bristol Bay fisheries.

But Shively has a kinder, softer message to tell. Read his words and make up your own mind about the Pebble project. ABM: What are the five core principals formed by the partnership between No r t h e r n D y n a s t y a n d A n g l o American? And what does this mean to Alaska? Shively: Pebble will benefit Alaskans; will co-exist with the fishery; will listen before it acts; will build sustainable communities; and will use the best

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

science. For Alaska, it’s a commitment for us to be a responsible company and so that Alaskans will know our values going forward. It’s also to stress that Pebble is not about pitting two industries against each other but rather about expanding economic opportunity in an economically challenged part of our state. ABM: Where are you headquartered? And how many employees are Alaskans? Shively: The Pebble Limited Partnership is headquartered in Anchorage with operations in Iliamna and Vancouver (British Columbia, Canada). About three-quarters of our employees are Alaskan. ABM: What other Alaska mining exploration plays are in the Bristol Bay region? How big are they? And why do we not hear of them? Shively: Rio Tinto is exploring near the Pebble site. Several others have claims on State land in the area with varying levels of activity. So far no one has announced a

discovery such as Pebble and that could be a reason few have heard of them.

saver for Pebble or done for environmental purposes?

ABM: If it comes down to a choice between Pebble and the livelihood of the Bristol Bay fishing industry, which will win out? Why?

Shively: We made a decision early on to minimize our environmental footprint via our exploration program at Pebble. It is much more expensive to use helicopters in support of our program. Helicopters are an important part of any mineral exploration project in Alaska. We’ve just taken it a step further to minimize our impact.

Shively: It is not about a choice. I have said many times that if it is a choice between fishing and mining, fishing wins every time. That is why we are stressing our message about co-existence and investing considerable time and resources on conducting environmental studies of the area around us. Alaskans should further understand that our permitting system will not allow one industry to advance a project at the expense of another. It is worth noting again that there are few economic opportunities in our rural communities and Pebble could change people’s lives in that area in a positive way. ABM: You use helicopters for all transportation into and out of Pebble. How expensive is this? And is it a cost-

ABM: How big of a footprint will Pebble, if developed, have on the region? Shively: Economically Pebble could have a significant impact via good paying year-round jobs. It will enhance public infrastructure via tax payments to the State and local government. It could reduce the costs of delivering goods and services in that area of the state. And, if we can get low cost electricity to our mine site, I will work with the State of Alaska to deliver low cost energy to Southwest Alaska communities. The mine’s physical footprint won’t be fully known until we have

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

a project fully defined. We do know Pebble will be a large project. ABM: Currently there are three parts to your studies at the potential Pebble mine site: exploration work, environmental studies and engineering work. How far are you along in your studies? Shively: We hope to conclude much of our environmental work via an environmental baseline document at the end of this year. That said, environmental studies such as monitoring water will continue. We should be conducting some level of exploration work for at least the next two years. Our engineering work will continue until we go into operation. We hope to conclude our prefeasibility study sometime next year. If that study is favorable we will advance into more detailed engineering via a feasibility study. ABM: The Pebble Development Project is on State of Alaska land. How important is this in regard to State and other taxes paid into government? Shively: Since Pebble is on State land, it will be subject to a royalty. This is in addition to the State mining tax and the State corporate income tax. Pebble will also be subject to local taxation via the Lake and Peninsula Borough. The project will also pay federal taxes. Once a project has been fully defined we should have more specific information about our tax footprint. ABM: As I understand it, you’ve never asked for the project to be supported, but instead, just be judged on its merits as a potential project for the area. What kind of response have you had from the public surrounding the area in regards to seeing if it is in fact a viable project? Approximately what percent support the project and why? Shively: Most of the communities closest to the project, including the local borough government, have expressed support for allowing Pebble to bring forward a project for stakeholders to evaluate. They want to know the full opportunity it could represent and how the company proposes to

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

meet Alaska’s strict environmental standards. A complete list of people supporting this position is listed on our website. It is worth noting that Pebble has not asked anyone to support our project because we have not yet brought forward our plan. ABM: You have provided little feedback in response to the opposition’s campaign to stop Pebble. Why not makes your case, when those against the development are making theirs? And who is the opposition?

round jobs in a region that does not have very many year-round opportunities. We anticipate Pebble could generate 800 to 1,000 jobs and I have a goal to exceed 50 percent local and regional hire. This goal will take a robust work force development program, but it is something I really believe in based upon my experience at NANA with their development of Red Dog. The region’s population is in decline and so is the school-age population. The economy and lack of opportunity are major reasons for this decline. We’re

also seeing declines in local participation in the commercial fishery. All of this points to the need for economic diversification for the region. Developing jobs and economic opportunity for rural communities has been a major goal of my career in Alaska. The potential for improving people’s lives in the region is one of the main reasons I took the job with Pebble. I think the people of the region and the state should at least have the opportunity to evaluate the potential this could bring to the region and to the state.

Shively: We respond in different ways. We prefer to have a more meaningful discussion of the issues with Alaskans via public presentations and tours rather than trading 30-second sound bites. Our television has largely focused on people from the region explaining what Pebble means to them directly and their concerns about the region and the economy.When we have a project we will likely adjust our communication strategy to ensure Alaskans are informed about what we propose so they can objectively evaluate the project. ABM: Who are your top 10 supporters? Shively: There are a lot of Alaskans who want to know what the full Pebble opportunity will be and others who want to know how we will ensure no harm to the fishery before establishing an opinion about Pebble. We have not asked for anyone to support our project and won’t until we have a project to present. That said, there are many who are already benefiting from our activities and are curious about what comes next for Pebble. ABM: I understand there was division to the region long before Pebble came onboard regarding fisheries. Can you explain? Shively: This is better asked of people from the region. ABM: What will Pebble mean economically to the region? And what are some of the demographics of the region? Shively:Pebble could provide yearwww.akbizmag.com • Alaska Business Monthly • November 2010

ABM: You’ve drilled about 900 holes, to date, around the deposit area. What are you finding? How important is this project to Alaska and the world? Shively: Pebble is a world-class copper, gold and molybdenum resource. Copper plays an essential role in electrical components and as such is critical to the transition to renewable forms of energy. There are five tons of copper in a 3MW wind turbine and hybrid cars require twice as much copper as regular vehicles. Worldwide demand for copper far outpaces known supply and we will need deposits such as Pebble for future economic growth. The Pebble deposit is estimated to contain 8 0.6 billion pounds of copper, 107.4 million ounces of gold, and 5.6 billion pounds of molybdenum. ABM: In what ways do you reduce the environmental impact? For example, I understand you fly all human waste out of the site to Anchorage. What else do you do? Shively: All of our activities are supported by helicopter and this greatly reduces our impact. We place our exploration drills on wooden platforms to minimize disturbance of the tundra and once our work is finished we immediately begin reclamation. We also recycle everything we can at our site headquarters in Iliamna. This year we stopped using bottled water and that has had a major result. We now have filtered water and provide each employee with a 24-ounce water bottle at the start of the season. ABM: If it is proved to be a viable project how will you get ore to market? Shively: The mined material will be transported as a slurry concentrate via pipeline to our port facility on the west side of Cook Inlet. There, it will be de-watered and placed onto tankers for transport to a smelter for further refining. ABM: What kind of animals are present in the area and how will they be impacted if development were to occur?

Shively: The large mammals are caribou, moose and bears. If one looks at the experience we have at Prudhoe Bay, Red Dog and even here in Anchorage, I think one finds that the animals adapt to the change in circumstances.

of next year. It really depends upon us completing our prefeasibility study and having a mine development plan we can share with stakeholders. I have said I want to take this plan to Southwest Alaska communities before we initiate permitting.

ABM: The site covers about 150 square miles? Where are the fishery tributaries in relation to this site?

ABM: The mine, if developed, will be a combination of open pit and underground. Can you explain? And what are the risks of this world-class discovery?

Shively: Our claims encompass the south fork of the Koktuli River and Upper Talarik Creek. We are also located near the north fork of the Koktuli River. The Koktuli River drains into the Mulchatna, which drains into the Nushugak, which flows into Bristol Bay some 220 river miles from the Pebble deposit. Upper Talarik drains into Iliamna Lake. The southwest part of Iliamna Lake flows into the Kvichak River that flows past Naknek into Bristol Bay. ABM: I understand this is the most environmentally studied piece of ground in the state at the moment, particularly when dealing with water and fisheries issues. Why? Is all this required? And what is your monetary investment to date? Shively: We have invested over $100 million dollars on environmental studies primarily focused on water and fish. In order to present a mine plan that does not impact the fishery, we need to know as much as we can about the area around our deposit. This information is critical for mine planning and for filing for permits. Additionally, it will be important information for long-term monitoring of the area. In order to develop a world-class mine at this site we need to have world-class information. We have contracted with premiere experts in all study fields and had a strong bias to have this work conducted by Alaskans. ABM: When do you expect the permitting stage to start? What is the price tag for getting to permitting? And all this, despite no promise of a project? Shively: At this time we’ve indicated permitting could begin near the end

Shively: A final decision as to what type of mine will be proposed for Pebble has not been made. The western part of the deposit will likely be developed via open pit and the eastern part will likely be developed via an underground style of mining called a block cave. Even the underground style of mining will have surface impacts. The biggest challenge for Pebble is that most of the material that is mined will need to be stored in a tailings storage facility – essentially an earthen dam engineered to hold back the processed rock with a water cap. ABM: This is a year-round operation, what difficulties do you face in the wintertime? Shively: Colder temperatures, whiteout conditions, and shorter daylight hours are the main challenges. We used to run our drilling operation well into November and have scaled that back to conclude by the end of October largely due to the extra challenge of winter exploration. ABM: Explain your process of using bear guards and medics at drill sites? Shively: We employ local bear guards to provide protection for our crews in the field. The bear guard’s role is to avoid an encounter with an animal. We’re quite proud to say we’ve never had to kill a bear. Our medics are on hand at our site headquarters and at our exploration rigs in order to ensure timely treatment should an injury occur. We spend a lot of time focusing on safety to ensure folks do not get hurt. But if they do get hurt we also want to ensure we can provide timely care. ❑

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

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MINING SPECIAL SECTION

Technology, worker shortage create opportunity BY HEIDI BOHI

Photo by Will Menheere/Courtesy of Fort Knox

With more large mines in production than any other state in the country, Alaska is likely to produce some of the world’s next women leaders in mining. Fairbanks Gold Mining Inc. Environmental Superintendent Bartly Coiley above Fort Knox Pit, Phase 6, in late September.

s the mining industry becomes one of Alaska’s biggest players and scrambles to fill thousands of jobs that will be needed within the next decade, what has traditionally been a male-dominated industry now has little choice but to make room for women. A shortage of workers in positions ranging from entry-level jobs, requiring minimal training, to top brass slots, calling for the experience and smarts of proven professionals, means more and more women are being relied on to solve a serious human resource shortage and mine administrators are seeing them as a critical corner piece of the puzzle. When it comes to getting the support of proposed mining projects from the hosting regions, filling these jobs with locals instead of Outsiders is going to be the difference between communities welcoming mega mining developments with open arms, or failing to see how the mines will benefit them. When Susie grows up she wants to be a crusher – or driller, mine

manager, resources attorney, truck driver, camp cook, geologist, engineer, human resources manager, construction foreman, machinist, accountant or chemical analyst. Historically, laborintensive field jobs are one of the reasons men have been first in line. But as mining relies more and more on technology, the industry advances even more quickly with opportunities for women. Of all Alaska’s industry groups, in 2006, women earned the most in natural resources and mining, which includes the oil industry, according to the Alaska Department of Labor gender and wages analysis. Women in natural resources and mining earned $51,808 in 2006, about 42 percent higher than the industry group with the next highest average wages. Yet, women made up 13.4 percent of natural resources and mining’s work force, the second-smallest percentage of any industry group. Mining companies are doing their best to make operations more womenfriendly and appealing to even little

girls, recognizing that if they are going to meet their production timelines by staffing operations with local hires, the sooner they show youth the opportunities and benefits of the industry, and how to be a part of it, the better. Women are making a name for themselves in mining. Cynthia Caroll, CEO of Anglo American, one of the largest mining companies in the world, launched her career as a geologist in Alaska. As the leader of the company that is a co-developer of the Pebble project, at 53, she is ranked by Forbes magazine as the fourth most powerful woman in the world, and makes about $2.2 million in annual compensation. With more large mines in production than any other state in the country, Alaska is likely to produce some of the world’s next women leaders in mining. Here are a few women in mining who are already contributing to the state’s industry.

BARTLY COILEY,

★ FORT KNOX ★

When Bartly Coiley goes to Capitol Hill with other members of the Women’s Mining Coalition (WMC) to talk to members of Congress about

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mining-related issues, she can immediately sense it’s not what legislators expect when they see women walking through the door. “We give a different face to mining,” she says from her Fort Knox office where she is the Environmental Superintendent. “It’s important to do that so people get away from the stereotypic, outdated view of mining.” Big, burley guys running around and lots of yellow iron – that’s the image most people have of those in the mining industry. And certainly, she admits, there are a lot of those, too. At the same time, women in mining can no longer be compartmentalized. “Women are all over the industry – from the warehouse to upper management, out in the field driving trucks, working at the mill – one of the top shovel operators at Fort Knox is a woman,” she says. “What most people don’t understand is that mining is also about the planning, paying careful attention to detail, and management, along with the efforts that go into safety and protecting the environment,” and these are all skill sets that women easily master.

Just ask her about her own professional experiences in the industry. Working for Usibelli Coal Mine for 14 years, she was involved in the permitting process there before joining the Fort Knox operation in July, where she is continuing to learn about hardrock mining. Most of her work centers around making sure the mine is in compliance with existing permits, applying for new permits and permit modifications, keeping up with new regulations, participating in the Alaska Miners Association, and sitting on the Alaska Minerals Commission, which makes recommendations to the governor and Legislature on ways to mitigate constraints, including governmental ones on the development of minerals. Coiley also tries to spend as much time in the field as possible to keep in touch with what’s going on. “There’s usually someone who wants something from me – some advice, or wanting to know what they should do about an environmental issue, what my recommendation should be. I never feel out of place – I always feel like part of the team.”

Even her children take it in stride: “Mom could be flying in a helicopter one day, then sitting in a board room meeting the next day – my children don’t find it odd,” she says. Whether she’s in the office, or on the site, and whether women are engineers or operating equipment, what it all comes down to is having a cohesive team of employees. “If a mine doesn’t have great teamwork and everybody’s not working together for the same goals, you’re not going to get anywhere, because you depend on each other to get your job done,” Coiley says.

JOSIE HICKEL,

★ THE PEBBLE PARTNERSHIP ★

Growing up in Moose Pass, Josie Hickel remembers panning for gold at her neighbor’s small mining claim. Although she didn’t know it at the time, this was her first foray into the mining industry. As a small girl, the prospect of finding a nugget was just enough to hold her attention on the creeks of the Seward Peninsula. Today, as vice president of human resources and administrative

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

Photo courtesy of Pebble Limited Partnership

Pebble Limited Partnership Vice President of Human Resources and Administrative Services Josie Hickel, in the Anchorage office.

services for The Pebble Partnership, the corporate entity responsible for advancing the prospective copper, gold and molybdenum mine 200 miles southwest of Anchorage, what she finds exciting

about mining is the rapidly advancing technology and the diversity of opportunities available to women in an industry that continues to be about 80 percent male.

Hickel’s job reflects the diversity of the industry, which is one of the reasons there are so many opportunities for women in mining, she says. In 2007, she was hired to build the Pebble team that now comprises 26 employees in management and administration; 17 staff in the engineering office in Vancouver, British Columbia, Canada; and field personnel averaging between 60 and 300 employees, depending on the season and the drilling program. She says her title doesn’t tell the full story of what she is involved in on a day-to-day basis, ranging from human resources issues, contracting, corporate safety, IT, insurance, community outreach and work force development, which currently takes most of her time. Technology innovations are one of the most exciting things about the industry, she says, especially because they are significant in helping advance women in mining, also a priority of Pebble’s. Because state-of-the-art instruments and equipment have made the industry less physical in nature and more academic, this is opening up new opportunities for women who want to

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pursue four-year university degrees. As part of the mining community, Hickel reaches out to young women as early as junior high to let them know what opportunities and choices there are for them in the industry. Although women geologists are not uncommon in the industry, some jobs may not appeal to women as much mainly because of outdated mindsets. To try and help change these, Hickel says she will continue to share her personal experience in the industry and educate women on why they should consider careers in mining.

Photo courtesy of Kelley Hegarty & Associates LLC

Photo courtesy of Solstice Advertising

TISHA WOOLLEY,

★ DONLIN CREEK PROJECT ★

Carharts, wind jacket, rain gear, hard hat, personal protective equipment, safety glasses, bright orange vest – though this hardly sounds like what most attractive 28-year-old women like to wear to work, for Tisha Woolley, a geologist for the Donlin Creek mining project, she doesn’t care if she looks a little goofy in her field wear as long as she’s safe and happy, and she’s always happy when she’s working in the field.

Geologist Tisha Woolley, Donlin Creek LLC, sampling water in the field, and (inset) in the office.

“It would be awesome to work my entire life here,” she says. “Some people

never get to see something like this.” Since becoming a mother, she has kinross.com

Our People Our Community Good employers attract good employees. And good employees stay working for good employers. That’s been Nik’s experience. He started at Fort Knox Gold Mine as a twenty-something, and has earned increasing responsibilities over the last decade. Now he’s Heap Leach General Foreman at the mine. Nik appreciates the beneﬁts and opportunities Fort Knox offers. He is proud of what he does - working for a local employer with a bright future that values people and gives them a chance to broaden their horizons and achieve their potential. As an employer, Fort Knox has earned Nik’s hard work and his loyalty. It’s a relationship that works well for Nik and for us, too.

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

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had to reduce the number of times she travels to the site, she says, but before that, she was just one of the boys, and as far as she’s concerned they saw it the very same way. “We’re not different than men,” she says from her Anchorage office. “We can do the job as well as any of them.” The first professional Yup’ik to be employed as an geologist by Donlin, Woolley started as a part-time intern before being hired as a contract geologist for the 2005 summer field season, then full-time that winter. Her interest in the sciences is what led her into mining in a roundabout way. As a high school student in Homer – she is originally from Bethel – Woolley wanted to major in marine biology, but changed to geology to satisfy her program’s requirements at Southern Oregon University before completing her degree at the University of Alaska Anchorage. In just five years, Woolley has had a variety of experiences in the industry that have built on her knowledge base. Working between the Anchorage office and the Donlin Creek exploration camp, her responsibilities have included core logging, geologic database maintenance, field surveying, assisting with surface and groundwater monitoring, and data management for the water-quality baseline studies. She is continuing to take online professional development courses as she considers more advanced opportunities available to her and decides what area she would like to specialize in, with environmental reclamation and geological chemistry being two areas she is giving serious consideration. Besides mining being her livelihood, Woolley says, as a descendant of multiple Calista shareholders, it is important to her to be able to contribute to her region where the mine project is located. In addition to the economic development benefits and jobs the mine will provide when it goes into production, the prospect provides locals to get onsite training without having to leave the region. Already, she says, she can see the difference in peoples’ lives as they learn new skills and make more money. “People working for the mine are generally just really happy for ❑ those opportunities,” she says.

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

MINING SPECIAL SECTION

Alaska Mining Issues

Infrastructure, energy, permitting, listings BY HEIDI BOHI

s 2011 peeks around the corner, the Alaska Miners Association (AMA) is setting out to identify issues that it will spend the next year trying to address, while at the same time looking back on its accomplishments from the past year, and inventorying what is still ahead of the state’s only trade association dedicated exclusively to mining. A detailed list of issues of concern are identified and distributed annually by the AMA membership, including critical priorities ranging from State and federal fiscal issues to land management, access and climate change. Depending on which mining projects are ramping up, which ones are in production, and prospects still in the exploration stages, various concerns may move to the front or the back of the line. In most cases, though, these issues of

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concern are simply nature-of-the-beast holdovers that will remain on the front burner as long as mining is a reality in Alaska. And based on the state’s long history with the industry, and indicators from policy makers, economists and industry experts, that will be far beyond the foreseeable future as it continues to grow as one of the state’s most promising sources of long-term, sustainable economic development, providing infrastructure and jobs in rural regions that might otherwise perish. The production value of the industry has been about $2.4 billion for the past two years and is growing rapidly, according to the Alaska Department of Commerce and Economic Development. As projected developments become success stories, this figure can only grow. AMA divides issues of concern into

four major areas: infrastructure, energy, integrity of the permitting system, and Endangered Species Act (ESA) and Essential Fish Habitat (EFH) listings.

THE ROAD TO NOME In the area of infrastructure, AMA advocates for funding and development to provide access to remote areas of Alaska so natural resource projects can be developed. The three main areas AMA is recommending the State advance are: 1) selecting a route from the Parks Highway to Nome and beginning development; 2) establishing an effective construction standard for pioneer roads; and, 3) constructing roads between communities. Overland access from the Interior Region to the Seward Peninsula has been a key element of Alaska’s

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transportation planning maps. Previous corridors developed for the Dalton, Parks and Glenn highways were built for economic development and improved community access to goods and services. The mining industry advocates extending road access to Western Alaska to realize similar benefits, says Steve Borell, AMA executive director. Development of four major copper deposits in this region hinges on having overland access to be able to haul copper concentrate out of the region. The copper deposits in this region appear to be large enough that they will be likely be feasible for development. If they were in the Lower 48 states or most other countries, Borell says, infrastructure would already be in place and the mines would be operating by now. AMA has identified this infrastructure improvement as one of its top priorities and continues to encourage the Legislature to fund the development. Early this year, a corridor planning report was prepared for the Alaska Department of Transportation and Public Facilities as part of the Western Alaska Access Planning Study, which is intended to provide a foundation for determining what tasks need to be completed to advance the Yukon River Corridor, which is about 500 miles in length and begins just outside of Manley Hot Springs on the Elliott Highway, terminating at the Nome-Council Highway. The corridor generally parallels the Yukon River for much of its length, giving it the designation of the Yukon River Corridor. The potential for a rail connection to Western Alaska was investigated, but the road corridor was determined to be more practical and cost effective to construct at this time. A rail would require a significantly different and longer alignment at a higher construction cost per mile than the road. An existing road in proximity to a future rail line, however, would contribute to substantially lower construction and maintenance costs for the rail. During its last session, the Legislature approved funding for conducting an access study for reaching the Ambler district by road. The project team examined and modified historical routes to target community and resource development access while

avoiding critical environmental and land-management restrictions to the extent practical. East-west routes were narrowed down to four alternatives and after careful analysis, the project team recommended the Yukon River Corridor, because it most directly meets the project purpose, has significant potential benefits, and minimizes environmental and land management impacts. The Yukon River Corridor provides the most direct access between Fairbanks and Nome, accesses numerous communities and resources along the

way, is well-suited for phased construction, has potential for intermodal links to barge traffic on the Yukon River and connections to Donlin Creek and the Ambler mining district, and avoids sensitive federal conservation lands. The Western Alaska Access Planning Study, conducted by engineering firm DOWL HKM, evaluates the location and benefits of various corridor alignments to Western Alaska and recommends the Yukon River Corridor. The estimated total project cost is $2.3 billion to $2.7 billion and includes

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construction costs for the road, bridges and maintenance stations, as well as engineering, environmental mitigation, right-of-way acquisition costs and a 20 percent contingency. It will likely be built in stages based on funding availability, with each stage having independent utility. In addition to direct mining support, primary benefits of the road would be improved efficiencies, sustainability and reliability of passenger transportation, fuel delivery, freight and mail delivery, and energy and power infrastructure.

ENERGY SAVINGS Transport costs for the six case study communities – Tanana, Ruby, Galena, Koyukuk, Koyuk and Nome – would decrease by about $19.1 million per year if road transportation were used. This is a savings of $3,900 per person per year if a road were available, which also includes savings to the U.S. Postal Service. The road would also support the exploration, development and operations of mining projects by providing a less expensive method of shipping supplies and fuel into the mines and transporting mining concentrates out of the mines. Case study mines include Ambler, Donlin, Illinois Creek and a placer mine example. Transport of freight and fuel into these mines and concentrate out could save an estimated $120 million per year. At the same time, conversion from barged diesel fuel to trucked propane would save an estimated $13.5 million per year for case study communities, or about $2,700 per person per year. A road corridor would also reduce the costs of building pipeline and electrical transmission infrastructure by 30 percent to 50 percent. For example, a road corridor could reduce the cost of a pipeline to Donlin Creek from Manley Hot Springs by about $1 billion and the cost of an electrical transmission line by up to $200 million. Communities along the pipeline or electrical route would see significant fuel and power cost reductions, and it would provide more affordable options for year-round passenger travel between communities and regional hubs, as well as to the Interior and Seward Peninsula Highway systems.

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The study provides a foundation for the State to advance the Yukon River Corridor such as advanced route mapping, engineering and environmental field studies, engineering analysis, project implementation planning and public involvement.

OTHER ISSUES The biggest potential danger to the development of mining in Alaska lies in unnecessary challenges to the integrity of the permitting system, Borell says. Because mining companies fund the development of their own infrastructure with little support from the government, this means these challenges to the permitting process run the risk of making these developments costprohibitive, as mining companies are forced to spend millions and millions of dollars to respond to erroneous accusations. They are potentially a “death blow,” he says. Borell points to the Pebble prospect in Southwest Alaska, one of the largest concentrations of copper, gold, molybdenum and silver in the world. Bob Gillam, a wealthy Alaska business owner who also owns a luxury lodge in the region, continues to lead the charge against the development, investing millions of dollars of his own money, saying the mine risks clean water, healthy habitats and the pristine wilderness setting. What’s bad for the advancement of the Pebble prospect is bad for the entire industry, Borell says, and AMA will continue to make one of its top priorities backing the permitting process. “Gillam has a limited view of the permitting process and uses scare tactics that are based on lies,” to kill the project before it ever gets going, Borell says. In its defense of the permitting process, AMA is working to ensure the integrity of the State’s rigorous sciencebased permitting process by lobbying for funding at a level that will continue to ensure its integrity and increase salary and benefits for State agency and personnel in minerals permitting so they are competitive with the private sector. Other efforts include correcting the ballot initiative process to ensure it is open, transparent and holds proponents accountable; working with the State to revise water-quality standards

to ensure they are scientifically supportable and use Alaska-specific criteria; and, enacting legislation to require public disclosure of all information relating to 501(c)3 contributions used to affect public policy. The ESA, passed in 1973, was designed to recover species to a level at which they are no longer considered endangered and therefore do not require the act’s protection. More than 1,900 species of plants and animals are currently considered by the federal government to be in danger of extinction. Once a species is listed, they are subject to a variety of conservation efforts, including federal recovery plans that can include a wide variety of measures including habitat protection. These conservation efforts seldom consider the costs of species recovery to federal, State or local governments, and especially to private landowners, and they subject millions of acres and millions of human residents to land-use regulations for a single protected species. As a result, AMA is also aggressively opposing ESA and EFH listings in the courts by petitioning the federal government to develop regulations that strictly follow the intent of those laws. On the State level, Borell says, “AMA couldn’t be happier with the tact the administration has taken,” which includes dedicating one attorney general to focusing entirely on filing suits against organizations such as the Center for Biological Diversity (CBD), a nonprofit known for its efforts to block all development based on its interpretation of science and the law, combined with what it calls “creative media” to protect the environment. Proponents of the ESA, such as CBD, cite species that have recovered due to the act, though these claims are exaggerated, Borell says. For example, the U.S. Fish and Wildlife Service officially claims 46 delisted species: 19 due to recovery, 17 due to data error, nine due to extinction, and one due to partial recovery or data error. “The State has been getting its lunch eaten by CBD,” Borell says. “The attacks made by CBD on the Alaska permitting process have adverse implications for resource development everywhere. We continue to encourage ❑ the State to put up a fight.”

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

MINING SPECIAL SECTION

In production June 2010

Map courtesy of Alaska Miners Association

Economic Impacts of Mining Alaska realizing industry gains BY HEIDI BOHI

he numbers supporting the case for the economic impact of Alaska’s mining industry are so big as to be almost mind-boggling: $160 million spent on exploration; $2 billion spent on exploration since 1981; $320 million spent on direct and indirect payroll expenses; 3,300 direct mining jobs in Alaska; 5,200 direct and indirect jobs attributed to Alaska’s mining industry; $262 million spent on mine construction on at least six developing and existing mines; $2.4 billion in gross mineral production value from Red Dog, Greens Creek, Fort Knox,

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Pogo, Kensington, Usibelli Coal mines, placer mines, and rock, sand, and gravel operations; 54,000 ounces of gold produced by more than 175 placer mines; $750 million in mining exports (21 percent of Alaska’s total exports); $12.3 million in local government revenues; $35 million in State government revenues; and $39.8 million in payments to Alaska Native corporations. Ask those whose lives are better because of the industry and they’ll sum all of the numbers up in two words that can be seen on bumper stickers statewide: Mining ROCKS!

RED DOG MINE As former Senior Vice President of NANA Development Corp., one of John Shively’s biggest accomplishments was his involvement in the development of the Red Dog Mine, one of the world’s largest zinc deposits. Prior to it coming online in 1989, for almost two decades working for the Alaska Native corporation most everything he did pointed to figuring out ways to provide jobs for shareholders in the Northwest Arctic Region. When the corporation did a regional assessment to try and

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determine what the possibilities were for improving quality of life in the 11 communities of the area, in fact, shareholders said they were opposed to the industry. But, Shively says, when they realized that there were not a lot of other opportunities for creating jobs, they decided to reconsider the possibility of mining in the region. Today there are 502 full-time mine employees, including major contractors, and 273 of those – 54 percent – are NANA shareholders. There are also 125 temporary positions, of which 111 – 89 percent – are NANA shareholders. But the numbers don’t tell the story that Alaskans live every day, Shively says. About two years after the mine was up and running, he could see peoples’ attitudes measurably changing. Shareholders who worked for Red Dog were content in their jobs because so many of their co-workers were friends and family. When children were asked what they wanted to be when they grew up, without hesitation they would say, “We would like to work at Red Dog.” “Prior to that most of them thought they would be teachers, or they didn’t

know what they would do,” he says, looking back on the beginning of the mining project that has since become a showcase example of how mining not only stimulates economic development in Alaska, but also improves the quality of life in rural regions where often there are limited opportunities. Besides the individual benefits that come from millions of dollars going into the pockets of locals, the project resulted in providing a tax base for the establishment of the Northwest Arctic Borough (NWAB) as a way to realize the benefits of a regional government and manage the new wealth resulting in benefits such as education and creating additional jobs for the government entity. Red Dog Mine is a key contributor to the NWAB regional economy, responsible for an estimated $66.1 million in total annual economic activity resulting from wages, taxes and payments to local businesses. As a major employer in Northwest Alaska, the mine has an annual payroll of more than $55 million Last year, it contributed $6.7 million as a payment-in-lieu-of-tax (PILT) to the

borough. Instead of taxes, a PILT is negotiated as an incentive for investment that creates a public benefit by limiting property taxes on the developer, in turning limiting tax payments from local residents. Red Dog contributes about $558 million to the statewide economy and directly and indirectly supports 2,800 Alaska jobs, totaling $166 million in compensation, the Alaska Department of Commerce, Community and Economic Development says. From 1990 to 2008, it provided $1.9 billion in benefits, including wages to shareholders, joint venture contracts, PILT to the borough and royalty payments to NANA. Another statewide benefit of the mine is that a subsidy from profits is distributed to all Alaska Native regional and village corporations, not just NANA. Royalties paid to NANA totaled $58.1 million in 2007, $212.2 million in 2008, and $38.8 million in 2009, a year marked by falling zinc prices. Of the payments NANA received, $33.6 million was paid out in 2007

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and $121.7 million in 2008 to other regional and village corporations through the section 7(i) revenuesharing requirements under the 1971 Alaska Native Claims Settlement Act, which provides that regional corporations must share revenues from timber and subsurface resources owned by them with all Native Corporations.

ALASKAâ&#x20AC;&#x2122;S NEXT MEGA MINE As the CEO of the Anchorage-based Pebble Partnership, a 50-50 alliance between Anglo American and Northern Dynasty Minerals, today Shively is responsible for overseeing efforts that he hopes will lead to bringing the prospective Pebble development online as the stateâ&#x20AC;&#x2122;s next mega mine. Just as there were those who doubted that Red Dog would ever become a reality, the project has faced the predictable opposition that comes with large natural resource developments. Just as Red Dog benefited the Northwest Arctic Borough, and considering the opportunities that have come with successful mining operations such as Fort Knox and Greens Creek, Shively

believes that community outreach efforts will help Southwest Alaska residents understand that the mine plan is environmentally responsible and its economic impact will result in sustainable infrastructure and community developments for one of the most depressed areas in the state. â&#x20AC;&#x153;Red Dog became a symbol of what could be done in the Arctic,â&#x20AC;? Shively says, looking back on the transformation of the region. â&#x20AC;&#x153;It gave people there something to be proud of.â&#x20AC;? There are many similarities between Red Dog and the Pebble project, as there are between the two regions, which is part of the reason why Shively hopes that when Bristol Bay residents consider the scientific data and positive economic impact that the developed mine would have, that the project will garner in-region and statewide support. While the Pebble Partnership is armed with its own impressive projections â&#x20AC;&#x201C; $5 billion to $6 billion in construction, 80.6 billion pounds of copper, 500 independent scientists on the job, hundreds of millions of dollars

in annual operating expenditures, local and State taxes that will support infrastructure and other services in the region â&#x20AC;&#x201C; whether itâ&#x20AC;&#x2122;s Pebble or any other mining project, for Shively the most important impact that comes from these developments is the positive effect it has on peopleâ&#x20AC;&#x2122;s quality of life, which may not always be measurable, but is no less significant. Mining provides high-skill, high paying jobs with an estimated average annual wage of $83,000, which is 85 percent higher than the state average for all sectors of the economy, and second only after oil and gas sector wages. Besides the direct and indirect benefits of that income, Shively points out other short- and long-term impacts resulting from mining developments including regional and Alaska-hire focus, workforce development programs, business opportunities, and education scholarships and opportunities. In the case of Pebble, infrastructure developments under consideration would also benefit local resources and communities. Although no decisions have been made yet, infrastructure

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options include an 86-mile industrial road that will allow villages to bring in fuel and goods at a lower cost, an electrical facility that would power mine operations and nearby communities, and a multimodal port site. At the same time, many businesses are expected to benefit as hundreds of millions of dollars are spent in the region on goods and services needed to support the mine: it is estimated that just to transport workers to and from the mine would require hundreds of additional seats on charter planes during the three-year construction phase and when it is fully operational.

REVERSING OUT-MIGRATION In a 2008, Department of Community and Regional Affairs report examining 22 rural communities statewide, the total population was about 139,000, which is almost the same as the population count in 1990, the result of a steady population loss. In Nondalton, one of the largest communities in Bristol Bay, the population declined from about 400 residents to 176, and Pedro Bay may lose its school for the

same reason. As this out-migration in rural Alaska increases, due to lack of job opportunities and high fuel prices forcing rural residents to move to urban areas where gas, electricity and heat are cheaper, community leaders watch helplessly. This population loss threatens the long-term sustainability of Alaska’s rural communities, while creating unexpected demands on social services in metropolitan areas. It also strains urban education systems because rural students come into city schools without the same level of preparation. In the case of NANA villages, the populations have been stable or growing since Red Dog came online more than 20 years ago. At the same time, Bristol Bay continues to struggle with the out-migration trend. This is one of the social challenges that Shively says mining can help improve, resulting from the new jobs that allow villagers to stay in their home communities, or give those who have left a reason to return. Besides benefiting the communities adjacent to Alaska mines, including those in the Pebble development

area, the economic impacts of mining have the potential to be felt statewide. Although the petroleum industry is in a state of decline, nothing compares to oil and gas, Shively agrees, and nothing will take its place in the state’s economy. Looking at the other top industries, though, the economics are much less promising. The fishing industry has the highest number of out-of-state workers because many permit holders and workers are from Outside and the work is seasonal. While tourism seems to hold steady, it’s biggest economic impact is limited to the four-month summer season and most of its employees are also from out of state. “Look at big mines and you will find mostly Alaskans working there,” Shively says. “Mining is the next big hitter after oil in terms of offering year-round, high-paying jobs, and the potential warrants taking a good look at it from an economic perspective,” Shively says. “If you want to look at growth, the one place you can see it is in the mining industry.” ❑

UAA SCHOOL OF ENGINEERING Applied Engineering and Innovative Design With applied design through hands-on learning at the core of its curriculum, the School of Engineering recently acquired new lab space to provide students the facilities needed to apply their design skills. With plans for a new UAA engineering building underway, the School has arranged for temporary space to house an exciting new type of lab for students. The 2,000-square-foot Rapid Prototype and Manufacturing Lab is equipped with milling and lathe machines, an injection molding machine, and several 3-D scanners and 3-D printers. Students learn and apply theory to design innovative projects that they manufacture in the new lab. The Lab will be a center for innovative design and manufacturing, teacher training and is a field trip destination for students of all ages.

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

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

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MINING SPECIAL SECTION

Below: Clyde Gillespie, Environmental Manager Kensington Gold Mine Coeur d’Alene Mines Corp.

Kensington mill facilities.

Photos courtesy of Coeur d’Alene Mines Corp.

Large Mine Permitting Requirements make for lengthy process BY HEIDI BOHI

laska’s permitting process for large mines costs several million dollars, and, depending on the project, it is not unusual for the process to take several years. The Large Mine Permitting group – large mines as opposed to smaller placer mines – within the Alaska Department of Natural Resources (DNR) is responsible for coordinating the permitting activities for large mine projects statewide, says Ed Fogels, director of the Office of Project Management and Permitting in Anchorage.

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KENSINGTON ‘PRODUCING AND PROTECTING’ Leading up to the permitting of the Kensington underground gold mine in Southeast, Coeur d’Alene Mines Corp. worked closely with federal, State and local agencies to develop a project that was protective of the environment and in the public’s best interest, Clyde Gillespie, environmental manager, says of the $400 million development that began production in June. The Kensington gold project is located north of Juneau and the mine site

is within the City and Borough of Juneau and the Tongass National Forest. It is the most recent example of how the permitting process can be unpredictable and threaten the development of mine prospects even in the eleventh hour. In Kensington’s case, a lawsuit brought by environmental groups to shut down the mine delayed the opening. The EPA urged the Corps of Engineers to take a second look at the lake disposal plan, recommending that mine operators turn the waste material into a paste before depositing

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

Photo by Purnell Photography

Ed Fogels, Director Office of Project Management and Permitting Alaska Department of Natural Resources

it on land on the other side of the mine. Eventually, the Corps approved an amended permit allowing the mine to dump its waste into a nearby lake below the mine. Although the permit was issued and the project got the go ahead for construction, the process was not complete. The permits can be appealed and litigated. For Kensington, this appeal and litigation process continued four years after the permits were issued. Construction was halted for three years while the litigation process continued until determining the agency was correct in issuing the Section 404 permit, pertaining to activities involving discharge of fill material into waters. Addressing concerns like these are necessary to ensure a project moves forward so that it protects the environment and public interest, Gillespie says, and while it can be challenging, it results in a comprehensive evaluation of all the different aspects of projects, including the extensive public review and comment periods, which are addressed by modifying permits where necessary. In the end, he says, the result is that Kensington is a good example of a project where resource development occurred in a manner protective of the environment, or what Coeur calls “producing and protecting.”

COORDINATING THE MANY PERMITS Numerous State, federal and local government permits and approvals www.akbizmag.com • Alaska Business Monthly • November 2010

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are required before construction and operation of any large mining operation in Alaska can begin. DNR is the lead agency for all matters relating to the exploration, development and management of mining, and coordinates all regulatory matters concerning mineral resource exploration, development, mining and related activities. Before a State agency takes action affecting mining projects, it must consult with DNR. When it comes to large mine permitting, think big three ring binders. Permits are required by several agencies in addition to DNR, including some of the larger ones such as the Departments of Environmental Conservation and Fish and Game. Federal permitting agencies include the U.S. Environmental Protection Agency (EPA), U.S. Army Corps of Engineers (ACE), Fish and Wildlife Service, National Marine Fisheries Service, Bureau of Land Management, Forest Service and National Park Service. The list of State permits, which is even more exhaustive than the list of agencies they come from, includes a plan of operations, reclamation and bonding, waste management permits and bonding, sewage treatment system approval, air quality permits, fish habitat and fish way permits, water rights, tidelands leases, cultural resource protection, and a monitoring plan for surface, groundwater and wildlife. “The process is a conglomeration of a lot of different processes – all using science-based decision-making to determine if the risks are low enough to issue the permits,” Fogels says. If one of the major permits is denied, the project is “dead” until the mining company can make modifications to bring the prospect into compliance, though it may take several attempts to meet the requirements mandated by the State or federal agency. In some cases, the modifications may result in significant changes to the project design that are cost prohibitive, which would be cause for abandoning the project altogether.

CHUITNA COAL PROJECT The Chuitna coal project is a classic example of how the process works, Fogels says. The proposed coal strip mine may be allowed to mine directly through 11 miles of salmon habitat

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if the agencies give the mine the goahead. In addition to DNR, several other State and federal agencies are working cooperatively with the project to help them submit an application that demonstrates how it would successfully reclaim the salmon stream. “It is in everyone’s best interests to help them submit a permit application that is as close to the final designs as possible,” Fogels says. “That is a key part of what we do.” Although the rigorous permitting process is one of the most stressful stages leading up to production, mining executives who have been through it agree it is in the State’s best interests and there are few other things they take as seriously.

FIVE STAGES The large mine permitting process comprises five stages. During the first preapplication phase, a mining company approaches the State to let it know that it plans on eventually applying for the required permits so that State agencies can begin to advise on application preparation, environmental baseline data collection, and applying for permits. Mining projects currently in this stage are Pebble, Donlin Creek, Livengood, Niblack and Jumbo Dome. During the second stage, the mining company submits the permit applications and works with State agencies to develop its Environmental Impact Statement. The Chuitna coal project in the Beluga Coal Field near Tyonek in Southcentral is currently in this stage. The third stage starts after the permits are issued, and construction starts, though currently, no mining projects are at this stage in Alaska, and Fogels says he does not expect any to be there for a few years. The fourth stage of permitting is when the mines are operating. The six large mines currently at this stage include Greens Creek, Kensington, Pogo, Fort Knox, Red Dog and Usibelli. The fifth and final stage occurs after the mine ceases operations, and reclamation and closure begins. This includes recontouring the land, making sure waste disposal facilities are properly capped, and monitoring air and water quality, which typically will last from 30 years to perpetuity.

COMPLIANCE ACTIVITIES After a mine becomes fully operational, mining companies continue to invest heavily in permitting compliance. Fort Knox Mine, permitted in 1994, is an open-pit gold mine northeast of Fairbanks. It has eight staff dedicated to permitting compliance for those in effect and for permit acquisition. “Compliance is as big of a chore as getting the permits to start with,” Delbert Parr, Fort Knox environmental manager says. “Failure to comply turns into every bit as rigorous process as getting them to begin with.” A few years ago, Fort Knox had a seep appear below its tailing dam, which could have put the mine out of compliance. Ultimately, it turned out there was no discharge, but the company spent $2 million addressing the potential problem, which raised scrutiny, resulting in additional monitoring and reporting requirements. “Rarely a day goes by that I’m not communicating with one regulator or another on an issue,” Parr says. “We have numerous permit requirements and things change on a regular basis. Keeping 500 employees pointed in the right direction with those permits is a major undertaking.”

PUBLIC PARTICIPATION ENCOURAGED At the same time, Parr says, what Alaskans need to know about the permitting process is that the more public participation there is, the more rigorous the process will be because they inevitably raise questions and issues that need to be addressed and are often more pertinent to the scope of the project than others. Encouraging this participation is a critical part of what the State contributes to the permitting process, says Jack DiMarchi, large mine coordinator in the Fairbanks DNR Office of Project Management and Permitting. “Mining is becoming more of a public process because the public wants to be more informed and involved in land management decisions, especially with large mines. Everyone benefits from being better informed about the permitting process and we recognize ❑ that need.”

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

MINING SPECIAL SECTION

Training Alaska’s Next Generation Preparing regional residents for work in the mines BY HEIDI BOHI

very large mining project in Alaska, whether it is currently in production or still working its way through the development stages, will ultimately be accepted or rejected by residents of surrounding communities and other local stakeholders according to its ability to be an economic boon to the region where the mine site sits. Jobs, jobs, jobs. This is the promise that mining companies make – and as history has shown, eventually follow through on – when giving stakeholders one more reason to support their development efforts. These rural areas typically have little else in the means of economic development opportunities, so even in the face of other uncertainties about the projects, eventually, the region’s residents and business community will rally behind advancing the mine. Dave Rees, a work force development consultant whose career was built on helping oil and gas industry companies shape the labor force needed for large projects, is currently working with Pebble Limited Partnership to help it develop a plan leading up to matching residents from the Bristol Bay region with entry-level and advanced professional positions needed for laborintensive construction and operational phases of the project. “How do you make the mine a good thing for the region?” Rees asks. Although a bit understated, this, he says, is the top priority of deep-pocket mining companies that know all too well that their only chance of garnering regional support for a mining project is by proving from the outset that they have a foolproof plan for putting multiple generations of the region to work for generations to come.

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PUT ALASKANS TO WORK

Photo by Lance Giddens, Action Learning Associates

Pebble Limited Partnership Technical Operations Manager Gary DeSchutter.

The immediate task at hand is to train locals for jobs at the mine, though the company maintains that job skills and education required in the mining industry are transferable to many other professional disciplines. Pebble does not expect those benefiting from the training to be tied to the mine necessarily, and hopes locals take full advantage of the skills and education available to them – even if it means their professional gain may become Pebble’s loss. “We’d like the local residents who contribute to the project work force to maximize their life experience, whether they are working at the project and living with their families nearby, working elsewhere in the state, or even traveling the world,” says Gary DeSchutter, technical operations manager for Pebble says. “We want to add to their working and life experiences so it can take them wherever they want to go.”

No two mines are alike. At the same time, they all share the philosophy that Pebble and Donlin Creek – currently the state’s two largest prospects – advocate: whether contract business, or employees, put as many Alaskans to work in the mine’s region as possible, with the first line of investment being in training and advancing those who live in communities adjacent to the mine. “The more you can have the local region involved, the less contention there will be about the whole project,” Rees says. In the case of Pebble, as is the case with comparable projects in both mining and other large industries, Rees says there is no shortage of the number of people who need work. The challenge is the number of locals who have skills transferable to the needs of the project does not begin to close the gap. Laborers, driller assistants, equipment operators, surveyors, crusher operators, cooks, mechanics, machinists, plumbers, welders, clerks, secretaries, mining technicians, maintenance foreman, safety officers, warehouse supervisors, geologists, nurses, human resources administrators, materials manager – industrywide, these are only a handful of the types of jobs available in mining, each requiring different skill sets, ranging among little or no training or previous experience to professional positions requiring advanced degrees and tenure. About 25 percent of the jobs available at large mines are professional, technical jobs for positions such as chemists, engineers and geologists, and most of this demand requires people with 10 to 15 years of experience in their

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

field. The remaining 75 percent of jobs are vocational in nature, inlcuidng core drillers, commercial drivers, administrative staff and kitchen help. Since training for these position requires much less time, mining companies can easily fill jobs that are needed today and in the next several years, while also working toward long-term opportunities. The last thing mining companies want is to be forced to fill jobs with candidates from Outside. Depending on the type of position and required skill set, there are different approaches to grooming Alaskans so they are qualified to work for a mine and in keeping with the project’s timeline. For jobs requiring formal education or advanced degrees, the industry faces a longer lead-time, which means mining executives must begin to focus more on collaborative efforts for filling these positions. In the case of Pebble, for example, it will be about 2015 before the mine goes into construction, which will require 2,000 bodies, then another three years before operations begin and 1,000 full-time, permanent jobs need to be filled. This means the

work force development plans need to consider children in elementary and middle school as potential employees by making them interested in mining now.

PREPARING ALASKANS FOR CAREERS The Alaska Process Industry Career Consortium (APICC) was established to create, connect, and enhance the quality of training and educational programs available to prepare Alaskans for careers. The process industry includes oil and gas production, transportation and refining, mining and power generation, with the focus being on the process and the idea that all industries use a variety of equipment, technology and processes from the point of extraction to refinement requiring similar skill sets. APICC develops curriculum according to what is needed in various areas of specialization to help ensure the availability of highly trained Alaskans sufficient to staff the process industry – of which mining is a part of – so that it is competitive. It does this through partnerships, leadership, awareness,

advocacy and alignment with education and work force development. One example of this is the agreement between APICC and the University of Alaska (UA), which have agreed to collaborate with the Alaska departments of Education and Early Development, and Labor and Workforce Development to plan, develop and support access to engineering academies for public high school students in Alaska. This initiative will help build a pipeline of highly qualified Alaskans to enter careers in science, technology, engineering and mathematics (STEM). Recognizing the need to increase the number of Bristol Bay and Southwest Alaska residents on career paths preparing them for leadership positions in STEM fields, Pebble committed to a five-year investment in UA’s Alaska Native Science and Engineering Program (ANSEP) to provide long-term career path opportunities for Alaska Native students in the fields of science and engineering, all with the hopes that they will one day use these degrees in their jobs at the mine. The program offers a stepby-step, structured platform leading

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participants through the education process, beginning in middle school and continuing through undergraduate studies, graduate school and into their professional lives. Part of the success of the program is that it increases retention rates through hands-on high school outreach initiatives, summer bridging programs, academic learning communities, networks of peer and professional mentors, community-based learning, professional internships and undergraduate research projects. The program is currently hosting 700 students statewide and 10 from Bristol Bay who are enrolled at the University of Alaska Anchorage campus, ranging from freshman through junior levels, with half of the participants studying biological science and the other half engineering.

LOCAL HIRE BENEFITS Besides being the right thing to do, operating a mine that economically benefits Bristol Bay residents and all Alaskans just makes good business sense, says Josie Hickel, Pebble’s vice president of Human Resources and

actually performing a greater amount of the work than any other sector,” says Hickel, adding that the goal is to steadily grow these numbers. At the same time, Pebble is working with Rees to develop a comprehensive work force development plan that inventories the jobs it expects to need filled once the mine is fully operational. Once those positions are identified, it will determine what requirements are needed to perform these jobs and the company will match them with the necessary educational and training requirements that need to be provided.

- Josie Hickel V.P. HR & Admin. Services Pebble Limited Partnership

TEACHING SOFT SKILLS Administrative Services, because local hire results in higher retention and lower costs from maximizing jobs in the local community. As of August, 27 percent of Pebble’s year-to-date project work force comprised residents from Bristol Bay, 77 percent of the total work force was Alaskan, and 41 percent of the total project work was completed by the region’s residents. “What that tells us is that our work force in the Bristol Bay Region is

But, first things first. Mining industry leaders agree that when it comes to providing training the process must start with teaching potential employees “soft skills” if locals are going to be set up for success. “We have to pay attention to the fact that it’s not just about those in the region having a lack of skills, but about having a lack of work history at all,” says Bill Bieber, Donlin Creek operations manager, explaining that most of

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

Photo courtesy of Donlin Creek LLC

Donlin Creek LLC Operations Manager Bill Bieber.

the project’s employees are Yupi’k and come to the site with work experience based on a subsistence lifestyle, not the Westernized employer-employee model. Coming to work on time, working away from home, having good communication skills, maintaining a positive attitude, learning from criticism and being flexible and adaptable to new situations and challenges are some of the soft skills Donlin focuses on developing before

moving job candidates into the core training curriculum. Cultural considerations are also a key matter the company takes into account so local employment can co-exist with the traditions of Alaska Natives and the Donlin project can gain support of the local communities. Although a lot of locals may be hesitant to apply because they do not have a lot of work history and they don’t think they have the skills necessary to work at a mine, in fact Bieber says, after 14 years of working with residents in the region, he has learned to help them realize that many of their life experiences and day-to-day activities require skills that are transferable to working in the mining industry and are the start of making them successful. School activities, hobbies, fishing and hunting, and experience running a household are some of the common personal histories that locals learn they can build on as they develop new skill sets. “We just have to help them refine their experience according to what we hire them to do,” Bieber says. “The local and regional potential is prob-

ably the most over looked resource that Alaska has and if it is focused on can produce a really viable work force.” DeSchutter finds the same thing to be true in the Pebble region. A can-do attitude, taking initiative and willingness to work are also some of the qualities he sees in employees who have successful work experiences with Pebble. That, combined with the flexibility and understanding that not everyone comes from the same culture, is what makes their training and employment model result in a work force that flexes with the region’s lifestyle. “Part of what we do here is take in job applicants who might not have a lot of experience in a formal work force environment. We need to be very patient and willingly accept some the challenges that may come with an inexperienced worker,” DeSchutter says from his Iliamna office. “If we’re not flexible and don’t do some things a little differently, we are not going to gain the support of the local communities. For Pebble, this kind of work force development is not the exception, it’s the rule.” ❑

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MINING SPECIAL SECTION

Skagway Hands Across the Border Revitalized ‘Gateway to the Yukon’ BY DIMITRA LAVRAKAS

ince the Klondike Gold Rush of 1898, Skagway has been the “Gateway to the Klondike.” Stampeders headed up the “Golden Stairs” and over the Chilkoot Pass or the White Pass hauling their ton of supplies to the Klondike, and came back through with their golden gains. Not much has changed.

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Photos by Dimitra Lavrakas

AN ECONOMIC ROAD NORTH Today, the Yukon’s bulk oil comes through Skagway’s port and, in return, the port ships out ore from the mines in Faro down the South Klondike Highway. When the highway was punched through in 1978, it joined the unconnected routes between Whitehorse, Yukon Territory, to Carcross and Skagway to the border of British Columbia. And while it opened a means to drive the Alaska Highway to Anchorage or the Lower 48, the White Pass & Yukon Route Railroad looked on with suspicion. It foretold a change in transportation modes, the company didn’t like it and with good reason. Without freight to haul to and from the Yukon, the railroad closed in 1982. It devastated Skagway, which always considered itself a railroad town. In 1986, the road originally built to boost tourism became a vital commercial transportation route, and Faro mine owners convinced British Columbia, the Yukon and Alaska to keep the road open year-round as the mines went into production again. Two years later, WP&YR reopened

Skagway News Publisher Jeff Brady hawks his historic visitors newspaper in the shadow of the ship loader on Skagway’s Ore Dock.

as a tourist attraction, and has been quite successful, being something of a golden goose for its owner ClubLink Enterprises Ltd. (formerly Tri-White Corp.) based in Toronto, Ontario. But it’s never forgotten its original purpose – freight hauling. And a new mine on the Yukon-Northwest Territories border, solid prices for lead-zinc ore, a demand for it from the Far East are driving a push to improve Skagway’s port facilities. On Aug. 24, the Yukon government approved work permits to Selwyn Chihong Mining Ltd. to expand exploration work on its large lead-zinc deposit at Howard’s Pass. Canadian company

Selwyn Resources Ltd. partnered in August with Selwyn Chihong Mining of China, which invested $100 million into the joint venture. While the company is considering Skagway, it is also looking at Hyder, which is further south on the coast next to Stewart, British Columbia. “AIDEA views that ore terminal as a strategic asset in the state and we want to partner with the municipality to make it grow,” said Jim Hemsath, deputy director of the Alaska Industrial Development and Export Authority. An added value in using Skagway as the port is the processing of the ore closer to the source.

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

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Eugene N. Hretzay, White Pass & Yukon Route president, in front of the No. 73, a 2-8-2 Mikado-type Baldwin Locomotive built in 1947 for White Pass.

Hemsath foresees no slow down in demand for ore. “Zinc-lead batteries have been in our cars forever,” Hemsath said. “Zinc air, a type of battery being developed by a Swiss company in Portland (Oregon), is a stable industrial metal for the foreseeable future.” ReVolt of Staefa, Switzerland, says it has developed rechargeable zinc-air batteries that can store three times the energy of lithium ion batteries, by volume, at a cost half as much as zinc/lead while costing only half as much.

GOING FOR THE MONEY Discussions about the Municipality of Skagway’s ore terminal have dominated the Ports and Harbor Commission’s meetings for some time as it applied for federal TIGER I grant and was turned down and as it applied again for a $13.5 million TIGER II Grant. Title I of the FY 2010 Appropriations Act appropriated $600 million, available through Sept. 30, 2012, for National Infrastructure Investments to be awarded on a competitive basis for projects with a significant impact on the nation, a metropolitan area or a region. Skagway’s Gateway Project is estimated at $41.6 million, and the Skagway Borough Assembly voted for a local match of 20 percent at $13.9 million. The Ore Terminal part is an estimated $12 million.

“We are willing to invest $15 million ahead of customers,” said Hemsath. That means AIDEA is confident that if you improve it, they will come. The Gateway Project, in cooperation with the Municipality of Skagway, AIDEA and the Government of Yukon will update Skagway’s port with a barge ramp, a modern container crane and will accommodate the larger cruise ships plying the Inside Passage route. “Whatever works with White Pass and the port makes it not only costefficient for the port but also gets that port turned around and gets that freight going in both directions,” said Hemsath. But that may be difficult – at least for the immediate future. “We would like to see it upgraded,” said Eugene N. Hretzay, WP&YR president, of the ore loader. “The current configuration interferes with berthing of cruise ships. By reconfiguring the ore handler, it would allow us to berth two cruise ships.” Hemsath reasons that if ore shipments rise dramatically the bottleneck will not be the loader. He disagrees that there’s a need to replace the loader and only agrees at this time to extend the shed roof, and the AIDEA board agreed with him. However, it doesn’t mean that the ore loader cannot be revisited. and in fact it’s replacement is included in the TIGER II grant.

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A RAIL LINE TO THE FUTURE Hretzay has big plans for the railroad – add a third rail on the U.S. side to allow for standard rail cars and then open the line to Whitehorse, Yukon

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Source: Government of the Yukon

“We’ll continue to talk to the Yukon mines to see if the expansion is ever needed,” Hemsath said. “The logistics are going to be worrisome in my mind when we get into concentrates day after day. We are looking at ways to operationally handle zinc/lead concentrates so as not to cause environmental issues based on our experience at Red Dog Mine.” Harvey Brooks, deputy minister of Yukon Economic Development, told the Skagway News that the Yukon government could get behind Hertzay’s proposal. There is a Catch 22 for AIDEA. The city’s and the State’s lease on the Ore Dock with the Pacific Railway and Navigation Co, the American subsidiary of WP&YR, expires in 2023. “It makes it complicated to make expansion and get it paid off in that amount of time,” Hemsath said. “We’ve asked the city get it extended to 2040, and for White Pass that would mean a higher rate as they make an attractive return on passengers, but for AIDEA it makes it less attractive for the mines. “There are a lot of variables, and this will be a nice outcome from what we do as it validates what the government of the Yukon is telling us and we’ll work with the Yukon for those mines to come to be.” In the summer, two to six trucks a day rumble down the road into Skagway and in winter, when the Yukon River freezes and there’s an ice road, the number jumps to 15 to 20 a day amounting to about 80,000 tons a year of ore copper concentrate for China. “The current contract with Mineral Services was for a seven-year period, but a mammoth discovery has been identified that could extend the mine’s life to 30 years,” said Joe Covino, foreman for Mineral Service’s Skagway Ore terminal, referring to the Minto Mine owned by Toronto-based Capstone Mining Corp. “There are aspects of the Gateway Project that will go directly to the ore terminal. The lease ends in 2023, and White Pass or AIDEA would need to justify the new expense, so they would need an extension.”

Territory, with standard rail all the way to Carmacks and perhaps over to Ross River (see map). It would allow closer access to ore from both the Klondike and the Faro mine region for transportation to tidewater in Skagway. Going to standard rail would save the company money with Hretzay commenting, “My suppliers hold me up for ransom.” “I need $200 million for the U.S. section and $300 million for the Canadian section,” he said. “If I ran a railroad to Carmacks from Skagway, I could carry 30,000 tons that would take 600 truckloads versus 20 trains. The shipper would pay $1 million less for a lower environmental footprint. The economics are compelling, the environmental savings are compelling. Then there are the backhaul benefits.” There has long been talk of extending the Alaska Railroad to connect to the Canadian National Railway in

southern British Columbia. Recently, President Barack Obama proposed a $50 billion in federal spending for railways, roads and runways that could make that happen. White Pass has always been a progressive company and at one time had an intricate intermodal system that included docks, trains, stagecoaches, sleighs, buses, paddle wheelers, trucks, ships, airplanes, hotels and pipelines. The railroad invented container shipment, but unfortunately did not patent it. “White Pass invented intermodal transportation – they gave a lot away,” said Eugene N. Hretzay, WP&YR president. “We had an empire here, now we’re just a shadow.” But that may change – in 1898, people scoffed at the initial idea of blasting a train route through the mountains, they thought the train died in 1982. But if funds come ❑ through, that may change again.

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

MINING SPECIAL SECTION

Southeast Mines Hit Pay Dirt Producing mines enjoy high gold prices

Photo by Van Gundy Photography/Courtesy of Hecla Mining Co.

Jumbo drill used at Greens Creek mine on Admiralty Island.

BY DIMITRA LAVRAKAS

outheast Alaska was built on a foundation of fish and gold. The constant question of why Juneau is the capital of Alaska is rooted in its mining history and who hit pay dirt first. In the late 1800s, Kowee of the Auk Tlingit Tribe received a reward from Sitka engineer George Pilz for bringing him ore samples. Later, Kowee directed prospectors Joe Juneau and Richard Harris to Snow Shoe Gulch where the main vein lay and Pilz grubstaked Juneau and Harris. It was a golden capital and they called it Juneau. Over the years, when mine names like Treadwell, A.J., Ebner, Nugget Creek and Perseverance have faded out new Southeast mines have stepped up, and with good reason – in mid-September, gold prices hit $1,275.60 per ounce.

GREENS CREEK MINE Hecla Mining Co. moved swiftly to take over full ownership of the Greens Creek

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Mine on Admiralty Island in Southeast Alaska after April 2008, jumping from a 29.7 percent ownership to 100 percent. It was a wise move at a golden moment, for in 2008, gold was a mere $650 an ounce. With headquarters in Coeur d’Alene, Idaho, the company oversees mining of silver, zinc, gold and lead on 17 patented lode claims and one patented mill site claim. In addition to the property leased from the U.S. Forest Service, Hecla has title to mineral rights on 7,500 acres of federal land nearby, according to its website, Hecla employs more than 325 workers, who take a 40-minute ride from Juneau to Admiralty Island to work in the underground mine. In 2005 Greens Creek reached an agreement to purchase excess hydroelectric power from Alaska Electric Light and Power Co. and completed infrastructure installation in 2006. When

available, the company has been using hydroelectric power instead of relying on the diesel generation units at the mine site since the third quarter of 2006, reducing production costs at Greens Creek. Thanks to new capacity installed by AEL&P in 2009, the mine expected most of its power to be hydroelectric generated in 2010. As of the end of 2009, the company recorded a $35.3 million asset retirement obligation for reclamation and closure costs and maintained a $30 million reclamation bond secured by the restricted cash balance of $7.6 million for Greens Creek. At that time, the net book value of the Greens Creek unit property and its associated plant, equipment and mineral interests was approximately $703 million. “The cash flow that it generates is nothing like Hecla has seen in its hundred-year history. This is by far the best mine we have ever owned,” says Hecla

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

CEO Phillips S. Baker Jr. in a video on Hecla’s Web site. “It is a mine that gives us some scale that allows us to grow our business in a way we never had before.”

KENSINGTON MINE Controversial from the get-go 15 years ago because of its location near Berners Bay, a recreational and fishing site in Lynn Canal north of Juneau and its tailings plan, Kensington Mine went into production in June ahead of schedule. Its parent company Coeur d’Alene Mines Corp. of Idaho received a favorable ruling after several years of litigation with local and national environmental groups over its tailings plan. The company reports it will mine 50,000 ounces of gold in 2010 and for the next 12.5 years, 125,000 ounces annually. At current prices that’s approximately $63.78 million dollars for this year and $1.9 billion within a dozen years. The Aurubis Group has entered into a contract for the treatment and refining of gold concentrates produced at Kensington. Aurubis is the largest copper producer in Europe and a major copper recycler, turning some 1.1 million metric

tons of copper cathodes annually into a variety of copper products. “Combined with the recently announced agreement with China National Gold Group Corp., the sale of Kensington’s gold concentrates are now secured by contracts with two firstclass smelting and refining companies,” stated Mitchell J. Krebs, chief financial officer of Coeur d’Alene Mine Corp., in a press release. The China National Gold Group, a state-owned corporation of the People’s Republic of China, operates 60 gold mines across China and accounts for more than 20 percent of China’s gold production. Meanwhile, Coeur has continued exploration on its Horrible site, resulting in some gold found in drilling sites, according to a press release issued by the company. “Favorable results were obtained: 6.5 feet of 2.39 gold ounces per short ton from core hole H10-016; 3.9 feet at 0.907 ounces per short ton of gold from core hole H10-029; and 3.5 feet of 1.069 ounces per short ton of gold from core hole H10-031. Many of the drill holes cut multiple quartz

veins which are typical of the style of mineralization seen at the nearby Kensington ore body. The company will be conducting additional exploration drilling to test the greater extension of the dip and strike, both of which remain open for expansion, and commence in-fill drilling on higher-grade zones defined by wide-spaced exploration drilling to-date.” According to Coeur’s Director of Corporate Communications Tony Ebersole, close to 200 people are employed at Kensington and when peak activity begins it jumps to 300, adding an estimated $16 million in wages and benefits to the local economy. Coeur Alaska will employ close to 200 workers during operations. The company states it works closely with Berners Bay Consortium, made up of Klukwan, Inc., Kake Tribal and Goldbelt Native Corporations on job training and supporting local and Native hire at Kensington.

TULSEQUAH CHIEF MINE It opens, it goes under, but it just might be resurrected again – British Columbia’s

reach new horizons. $ 0(0%(5 2) 7+( 8.3($*9,. ,f83,$7 &25325$7,21 )$0,/< 2) &203$1,(6

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

123

Photo by Van Gundy Photography/Courtesy of Hecla Mining Co.

Aerial view of the surface facility at the Greens Creek mine on Admiralty Island.

Tulsequah Chief Mine, 45 miles east of Juneau on a tributary of the Taku River, a significant salmon-bearing stream relied upon by Southeast fishers, has been controversial for its plan to barge ore.

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A hover barge experiment failed, a 96-mile road to Atlin was halted, and in 2009, its owner Redfern Resources, a subsidiary of Redcorp Ventures Ltd. of Vancouver, British

Columbia, went into bankruptcy. Tulsequah is in a remote roadless area. Although a permit was issued for a single-lane road with use restrictions, a 24/7 guard and a no-fishing,

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

no-hunting clause in workers’ contracts, the Taku River Tlingit First Nations of Atlin, where the road would cross, fought it. “We had rights and titles to our lands, and the government needed to include us in doing a joint land-use plan and negotiate a policy,” says John D. Ward, spokesperson for the Taku River Tlingit First Nation in Atlin. “Those need to be done first and then the road issue will be done.” Additional stumbling blocks include more than $77,850 in hover barge permitting fees owed to the State of Alaska and concerns about continued heavy metal drainage of copper, zinc, cadmium and arsenic into the river from previous mining between 1937 and 1957. Ward questioned who would invest in such a controversial project like Tulsequah. But with significant amounts of lead, zinc, copper, gold and silver, this is a mine that former Tulsequah owner Redfern Corp. CEO Terence Chandler does not want to walk away from, and he has formed a new company Chieftain Metals Inc., to try and bring it in.

YAKUTAT FORELANDS In October 2009, Geohedral LLC expanded its holdings of mining claims in the Yakutat Forelands district in Southeast, and Beard Co. of Oklahoma City upped its 23.16 percent equity interest in Geohedral, a private company, to 25.68 percent. Based on the strength of the finds at the site ventured at $34.5 billion based on gold prices of $990 an ounce in 2009, its value climbed higher in 2010. Wi t h 5 61 c l a i m s s t a k e d o n 10,420 acres plus an additional 48,000 block of staked claims, the company’s future sparkled. But that was last year – this year the enthusiasm for the project seems to have dropped sharply. “We’re conducting no exploratory work at this time,” said Herb Mee Jr., Beard Co.’s president and CEO. “When we have something to announce, we’ll announce it.” There was opposition to the proposed development of a mine in that area in resolutions passed by the Alaska Native Brotherhood and the National Congress of American Indians and the local Yakutat Tlingit Tribe Council also

expressed concerns and nonsupport. “The Yakutat Tlingit Tribe is definitely not in favor of it because it would be in our subsistence areas,” said Victoria Demmert, council president. “We value these higher than rocks in the ground.” But Demmert didn’t think the tribe’s opposition had anything to do with the slow-down in exploration. “There’s just not anything of a commercial amount there or wouldn’t someone have taken care of it a long time ago?” she said. Placer gold mining on the Black Sands Spit on the Yakutat Forelands began in 1886, so there is a history there. A 1972 report “Marine Gold Placers Along the Gulf of Alaska Margin” by Erk Reimnitz and George Plafker for the Department of the Interior’s Geological Survey Bulletin concluded that “Reconnaissance sampling of Gulf of Alaska beaches showed that, in general, these beaches have low gold content. Where values are comparatively high, the volume of beach material ❑ containing gold is small.”

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

ALASKA TRENDS BY JOEL AINSWORTH

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

Alaska Oil: Prices and Production A

t its peak in 1988, Alaska produced an average of 65 million barrels of crude oil a month. In 2010, the average is now around 18.5 million barrels. Since 2004 alone, Alaska crude production has decreased by approximately 32 percent. While there are numerous variables to consider, crude oil prices, proved reserves and regulation play a significant role in determining the level of production. While ANS production continues on a steady decline, crude oil prices have tended to inch upward, although with a high degree of variability. Alaska crude oil reached its peak in June 2008 with a price of $133.78 per barrel. By December of that year, crude had dropped to $37.70 before renewing its upward trend. Speculative behavior, increasing global demand and peak oil have all been listed as antagonists in the upward trend and spike in crude oil prices. It should be

noted, however, that Alaska North Slope crude oil prices are more closely correlated with global market prices ❑ rather than local production levels.

Sources: Alaska Department of Revenue: www.revenue.state.ak.us • U.S. Energy Information Administration: www.eia.doe.gov

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

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ALASKA TRENDS Indicator

Units

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

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Period

Latest Report Period

Previous Report Period (revised)

Year Ago Period

Year Over Year Change

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

1st Q10 1st Q10 1st H10 1st H10

“30,560” “12,167,340” 194.83 217.54

“29,409” “11,939,357” 190.032 213.139

3.91% 1.91% 2.53% 2.06%

Number Filed Number Filed Number Filed

July July July

65 51 6

98 73 20

91 72 15

-28.57% -29.17% -60.00%

Thousands Thousands Thousands Thousands Thousands

July July July July July

348.24 185.13 44.53 41.52 39.24

340.67 184.24 43.77 38.91 38.17

343.94 179.92 43.46 42.16 39.69

1.25% 2.89% 2.46% -1.52% -1.14%

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

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

351.3 63.8 287.5 17.7 17.3 12.0 19.9 26.2 19.3 67.9 6.9 38.3 7.0 10.4 22.7 5.7 3.1 6.4 4.2 14.1 25.8 40.5 29.0 40.1 11.6 22.6 11.0 81.7 18.8 25.2 5.7 37.7 17.3 4.1

344.1 54.5 289.6 17.5 17.1 12.0 19.0 18.0 11.9 67.3 6.7 37.9 6.7 10.0 22.7 5.6 3.0 6.4 4.2 14.0 25.5 39.9 28.5 38.0 10.4 22.0 11.1 87.4 19.2 25.5 6.1 42.7 22.9 4.1

345.5 57.3 288.2 15.9 15.6 13.4 19.7 21.7 17.8 68.8 6.8 37.7 6.7 9.8 24.3 6.5 3.4 7.2 4.7 15.1 28.2 38.9 28.5 39.5 11.5 21.8 11.7 78.8 17.8 24.7 5.6 36.3 16.7 3.8

1.68% 11.34% -0.24% 11.32% 10.90% -10.45% 1.02% 20.74% 8.43% -1.31% 1.47% 1.59% 4.48% 6.12% -6.58% -12.31% -8.82% -11.11% -10.64% -6.62% -8.51% 4.11% 1.75% 1.52% 0.87% 3.67% -5.98% 3.68% 5.62% 2.02% 1.79% 3.86% 3.59% 7.89%

Thousands Thousands Thousands Thousands Thousands

July July July July July

373.86 198.16 47.40 44.11 42.29

368.74 198.45 46.96 41.73 41.50

370.89 193.63 46.59 44.89 42.89

0.80% 2.34% 1.73% -1.73% -1.41%

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