November 2011 - Alaska Business Monthly

Magician Eric Giliam ■ Military Impact ■ Rare Earth Elements

November 2011

$3.95

SPECIAL SECTION:

MINING Begins B i on page 722

Fort Knox Reaches Milestone 5 millionth ounce of gold in 2011

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

ABOUT THE COVER

D E PA R T M E N T S From the Editor . . . . . . . . . . . . . . 7 Inside Alaska Business . . . . . . . . 8 Right Moves . . . . . . . . . . . . . . . . 64 Market Squares . . . . . . . . . . . . . 68 Alaska Trends . . . . . . . . . . . . . . 127 Ad Index . . . . . . . . . . . . . . . . . . 130 R E G U L A R F E AT U R E S

A worker pours gold ingots at the Fort Knox Gold Mine mill in Interior Alaska where the company reached a milestone this year by pouring its 5 millionth ounce of gold. Read more about Fort Knox and the rest of the Alaska mining industry in ABM’s annual Mining Special Section beginning on page 72. Photo by Judy Patrick.

ARTICLES

Financial Services 14 | Alaska Financial Institutions Banking on local advantages

By Gail West Technology 18 | Business Phone Service Trending how we talk today

By Kent L. Colby

Eric Giliam

Military 28 | Military Money in Alaska Colossal contributor to the economy

By Louise Freeman

11 View From the Top 11 | Eric Giliam Corporate Entertainer

By Peg Stomierowski

Oil & Gas 32 | Alaska’s Natural Gas Pipeline Market changes make plans uncertain

By Mike Bradner

Associations 12 | Resource Development Council Statewide group advocates for governor’s bill to boost production

By Tracy Barbour

Oil & Gas 40 | Alaska’s Exploding Oil and Gas Activity Most by independents, new to the state

By Mike Bradner

Regional Review 22 | Prince William Sound Southern pipeline terminus

By Tracy Barbour

Transportation 44 | Remote Mobilization in Alaska Hybrid transportation and logistics

By Tracy Kalytiak

Towns in Transition 38 | Deadhorse A company town

By Heidi Bohi Alaska This Month 68 | Great Alaska Shootout State to start funding the tradition

By Nancy Pounds Legal Speak 126 | Master Service Agreements Knock-for-knock indemnity

By Jeff Waller

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BUILDING ALASKA SPECIAL SECTION

50 50 | Allen Marine

Retail 66 | The Alaska-Juneau Public Market Southeast shoppers throng to annual three-day event

By Vanessa Orr Environmental 70 | FUDS Clean Up Progress in Alaska Almost half of Formerly Used Defense Sites finished

By Vanessa Orr

2011 ABM Contractor of the Year

By Julie Stricker 54 | Landmark Buildings by

AMC Engineers Company celebrates 30 years in Alaska

By Louise Freeman 58 | UNIT Company’s Continued Success Adapting flexibility, public sector focus

By Stephanie Jaeger 62 | Kulis is Open for Business

Prime real estate for Alaska film industry

By Julie Stricker

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

NOVEMBER 2011 TA B L E O F C O N T E N T S ARTICLES (cont’d.)

MINING SPECIAL SECTION

LOST & FOUND Pocket-sized digital camera found at the ABM Top 49ers luncheon last month on Oct. 5. Camera has only one photo in storage. Call ABM General Manager Jim Martin at 907-276-4373 or email him at jcmart@akbizmag.com and describe the camera and we will be happy to return it to its owner.

CORRECTIONS In the September 2011 issue, on page 77 in the “2010 ANCSA Regional Corporation Overview” we stated incorrectly that Calista Corp. distributed $78,000 in scholarships.

Actually, Calista Corp. spent $78,000 on its internship program during the 2010-2011 academic year and paid out $293,500 in scholarships.

In the October 2011 issue, on page 62 in the Top 49ers introduction, we stated incorrectly that 34 of the Top 49ers came in with 2010 gross revenues of more than $1 million.

Actually, 34 of the Top 49ers came in with 2010 gross revenues of more than $100 million.

Also in the October 2011 issue, on page 30 in the Regional Review of the Pacific Northwest, we incorrectly listed Washington state’s non-farm employment at 284 million in 2007 and 2,835,000 for the same month this year. The correct numbers are 2.97 million in 2007 and 2.84 million in 2011.

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84 72 | Alaska Miners See

102 | Steve Borell

Growth Ahead Call for metals spurs exploration, development

By Steve Borell

Heart and soul of Alaska mining

By Tracy Kalytiak 104 | Abandoned Mine Reclamation

74 | 2011 Alaska Mining Review

Restoring Alaska’s lands

By Brigitte Yuille

Operating at full throttle

By Curtis J. Freeman

110 | Donlin Gold Project Feasibility

84 | Fort Knox:

New study under way by Barrick Gold and NovaGold

By Brigitte Yuille

5 Million Ounces Strong Interior gold mine exceeding expectations

By Julie Stricker

114 | Linc Energy

88 | Penny Schwegel:

116 | Kensington Gold Mine

Fort Knox Gold Miner Operating Alaska’s largest hydraulic excavator

By Joette Storm 92 | Rare Earth Elements

Alaska may fuel future development

By Stephanie Jaeger

New player from Down Under

By Julie Stricker Boon to Southeast economy

By Vanessa Orr 119 | Pebble Environmental Studies

A 20,000-page, five-year research legacy

By Ken Taylor 120 | Mining the 49th State

96 | Innovations in Metal

Mining Technology Health and safety focus of NIOSH and MSHA

By Brigitte Yuille

High minerals prices pushing exploration

By Vanessa Orr 124 | Mining Directory

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

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Volume 27, Number 11 Published by Alaska Business Publishing Co. Anchorage, Alaska Vern C. McCorkle, Publisher 1991~2009

Tourism Numbers Stable Journalists visit or inquire about state in high numbers

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

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

BUSINESS STAFF President Vice President Sales & Mktg.

Account Mgr. Account Mgr. Traffic Coordinator Accountant

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

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t a conference in Talkeetna in midSeptember a gentleman from the area told me tourism numbers were down at his tourism-related business.

At a seminar in Anchorage, Dee Buchanon, director of marketing for CIRI Alaska Tourism, told me more media than ever was here to tour and write about the Alaska experience.

It made me curious what has happened this year in the tourism industry.

So I made a couple of calls: Jack Bonney, public relations manager for the Anchorage Convention and Visitors Bureau; and Ron Peck, president and chief operating officer for the Alaska Tourism Industry Association. Here’s what I learned.

“I can tell you anecdotally we’re hearing from many businesses that it has been a solid summer for Anchorage,” said Bonney. “Hotel occupancy is up compared to 2010, with rates remaining stable or even increasing; that’s just one facet of the industry, but provides some insight into the summer.”

And as far as journalists are concerned, he confirmed many were visiting Alaska. “Every year, dozens of journalists visit Anchorage researching assignments or future stories on Alaska,” he said. “When you include the number of journalists researching stories from afar, and the number of journalists we pitch possible story ideas to remotely, that number is much greater.”

Peck agreed. “You know, I can tell you from an ATIA standpoint, we

impacted more than 500 journalists (this year), assisted them in fact-finding, statistics research, where to go, and in some cases travel arrangements ….” The good news: this will have a $40 million to $50 million estimated impact due to editorial articles coming out now and in the future.

Peck added tourism was up or down statewide, depending on how you looked at it: Cruise ship passengers were up slightly, with a 60,000 projected increase for 2012. International and independent air travelers were up, especially tourists from China, India, Japan, Korea and Europe, in part thanks to Condor, Korean and Japan airlines. The number of Alaska Highway and ferry travelers were down, due to the high price of gasoline, said Peck.

But the future looks rosy. The State Legislature, in the 2010 session, reduced the cruise ship tax, which is increasing the number of ships coming to Alaska in 2012. Funding also was increased by the Legislature for tourism promotion, and a portion of that impacted ATIA’s public relation and media efforts.

“We believe we’ll see an overall increase in visitor numbers for this year,” Peck said. “I want to reinforce that we appreciate the Legislature for promoting tourism (through decreased taxes and increased funding to tourism programs).”

– Debbie Cutler Managing Editor

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

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INSIDE ALASKA BUSINESS Alaska USA Mortgage Earns Honor

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laska USA Mortgage Co.’s Oak Harbor, Wash., office was chosen top mortgage lender in the 2011 Best of Whidbey list in the Whidbey NewsTimes. The list is compiled based on reader input.

Alaska USA Federal Credit Union owns and operates Alaska USA Mortgage. The company opened the Oak Harbor office in 2001. Last year’s poll listed Lyn Bankowski, assistant vice president and senior mortgage loan originator, as best mortgage originator.

This year, the Whidbey News-Times changed the name of the category to recognize mortgage companies.

IT Firm Gains Industry Honors

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rctic Information Technology Inc. of Anchorage was included on Everything Channel’s 2011 Computer Reseller News Next-Generation 250 list. The recognition honors the company’s work as a cloud-services provider.

The CRN Next-Gen 250 is an annual listing of North American businesses providing cloud computing, mobility and other technology services. Arctic Information Technology has offices in Anchorage, Seattle and New Jersey.

“Being recognized in the 2011 CRN Next-Gen 250 list is truly an honor for Arctic IT, and it validates our mission of delivering value to our clients through cloud-based solutions,” said Steve Dike, president of Arctic IT. “Arctic IT prides itself on continually providing innovative solutions to ongoing challenges that businesses face on a daily basis.”

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Value Village Opens Wasilla Store

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alue Village thrift store opened a store in Wasilla this fall. The international chain has 270 locations in the United States, Canada and Australia. The new store, which is located at 503 West Parks Highway, debuted in August. Value Village also has two stores in Anchorage and one store in Fairbanks. The store benefits its nonprofit partner, Big Brothers and Big Sisters of Alaska. Value Village pays Big Brothers Big Sisters of Alaska for every donated item, turning otherwise unused goods into sustainable revenue that supports their programs and services in the community. The 19,238-square-foot store includes a Community Donation Center, where area residents can drop off reusable clothing and household goods. Value Village’s parent company, Savers Inc., is a privately held company founded in 1954 that employs more than 15,000 people.

ConocoPhillips Alaska Supports Technical School

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onocoPhillips Alaska Inc. donated $25,000 to support the new Star of the Northwest career and technical education school being built in Kotzebue.

Star of the Northwest is a career and technical educational effort between the Northwest Arctic Borough School District, the Alaska Technical Center and the University of Alaska Fairbanks Chukchi Rural Campus. Construction is due to be complete in early 2014.

“Our long-term magnet school project is designed to position Kotzebue

COMPILED BY NANCY POUNDS as a statewide education and training hub that provides high school and postsecondary students the career and technical education options needed by our Alaska business and industry partners” said Annmarie O’Brien, Northwest Arctic Borough School District assistant superintendent.

When complete in early 2014, the Star of the Northwest CTE magnet school will include a secondary residential dormitory and will be accepting applications on a statewide basis from students in grades 11 through 14.

The ConocoPhillips Alaska grant will support the school’s process technology curriculum, which aims to train students to enter careers in the gas, oil and mining industries.

“We are creating a seamless pathway of regional career training options for careers in industries based at Western Alaska,” said Cheryl Edenshaw, director of the Alaska Technical Center.

The grant was presented at the annual Arctic Economic Development Summit Conference held in August in Kotzebue.

Health Center Earns Accolades

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he Seldovia Village Tribe Health Center was honored for its tobacco cessation program by the American Academy of Family Physicians and Ask and Act: A Tobacco Cessation Project.

The health center received the recognition after completing the American Academy of Family Physicians Tobacco Cessation Office Champions Project.

A full-page ad in the August issue of American Academy of Family Physicians journal recognized the health

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

INSIDE ALASKA BUSINESS center. Beckie Noble, health center director, praised the education and outreach activities efforts of Darlene Moore, a health educator and certified tobacco-treatment specialist.

In December, the Seldovia Village Tribe will open a wellness center, offering behavioral health, naturopathic, nutritional and complementary services.

Providence Frames New Tower

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xterior steel framing was completed this fall at the new tower at Providence Alaska Medical Center.

The $150 million project in Anchorage will include an expanded and updated newborn intensive care, prenatal, mother-baby and labor and delivery units. The project will also include renovation and expansion of the cardiac surgery program, surgical services and some support services. Completion is expected in 2014.

Providence and construction officials commemorated the placing of the final steel I-beam with a ceremony Aug. 25. Workers from Davis Constructors and Engineers Inc. also participated in the event.

NANA Opens New Kotzebue Hotel

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ANA Development Corp. opened a new 78-room Nulla vik Hotel in Kotzebue this fall. The hotel replaces the original Nulla vik Hotel, which debuted in 1975. The new facility includes seven suites, a restaurant, a meeting room for up to 100 people, a fitness center and an observation center. Build-

ers spent two years constructing the hotel, which opened Aug. 29. NANA Development is a subsidiary of NANA Regional Corp. Project participants included WHPacific, architectural and interior design; NANA WorleyParsons, mechanical design; DOWL HKM, civil engineering; and NANA Construction, which provided construction oversight of SKW Eskimos Inc. NANA Management Services manages the new hotel and operates various services, including the restaurant.

Networking Group Marks Milestone

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he Anchorage chapter of Business Networking International marked a milestone this fall when the group tallied $1 million in business referrals in a year. The BNI Group - Business Pipeline Chapter in Anchorage meets weekly to learn about each other’s businesses and to give and receive business referrals.

Members report on successful business transactions based on the referrals at weekly meetings. The group, which began in 2007, has 32 members, most of whom are small business owners.

GCI Company Lands Gulf of Mexico Contract

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CI Industrial Telecom, a division of General Communication Inc., has been awarded a multiyear contract to provide on-call emergency communication services to oil companies and other agencies throughout the Gulf of Mexico. GCI Industrial Telecom

employs more than 70 professional telecommunication engineers, project managers and technicians in Alaska, Louisiana and Texas. The Rapid Response Communications Services contract includes providing satellite-based voice and data services.

“We continue to expand our Houston and Gulf of Mexico presence,” said Russ Doig, GCI Industrial Telecom vice president. “These response trailers integrate nicely into our recent successes in the Gulf of Mexico. We have a growing team of professionals in our Houston and Lafayette offices, and this is another excellent opportunity to grow our business.”

Alaska Growth Capital Supports Broadband Project

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laska Growth Capital helped secure financing for Unicom’s project to build broadband facilities to serve rural Alaska. Waveland Ventures, Travois New Markets and U.S. Bank also worked with Alaska Growth Capital to secure New Markets Tax Credit financing for the TERRA-Northwest project.

The New Markets Tax Credit Program provides tax credit incentives to investors for equity investments in economic development efforts in low-income communities nationwide. These equity investments provide financing to economic development projects that would not otherwise be financially feasible.

Construction is nearing completion of TERRA-Southwest, a project that features building infrastructure to support terrestrial broadband service to 65 communities in Bristol Bay and

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

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INSIDE ALASKA BUSINESS the Yukon-Kuskokwim Delta. The project, due to be finished this year, would inaugurate broadband service to 9,000 households and nearly 750 businesses in Bethel, Dillingham and King Salmon, among other towns. United Utilities Inc. is managing construction.

The TERRA-Northwest would extend terrestrial broad service to other Alaska communities. Alaska Growth Capital is a subsidiary of Arctic Slope Regional Corp. Alaska Growth Capital, Waveland Ventures and Travois New Markets are Community Development Entities, a designation certified by the U.S. Treasury. U.S. Bank provided a key investment that made the project possible.

Seven Glaciers Earns Wine Magazine Honor

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even Glaciers Restaurant at Alyeska Resort received Wine Spectator Magazine’s 2011 Best of Award of Excellence Honor. The complete list was published in the magazine’s August 2011 Dining Guide Issue. The restaurant wine list award program has three distinct levels: Award of Excellence, Best of Award of Excellence and Grand Award. Seven Glaciers in Girdwood was among more than 800 other honorees in its category.

Seven Glaciers has received several of Wine Spectator’s Award of Excellence honors, and restaurant officials were pleased to be recognized at the next level.

The restaurant’s wine cellar currently holds more than 10,000 bottles, representing more than 700 selections. Eric Myers serves as Alyeska Resort’s wine director and sommelier. Myers instituted

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a new wine menu format this year to help diners more easily identify wines and featuring a special monthly wine.

Other Alaska restaurants to earn this honor are Marx Bros. Café and The Crow’s Nest, both in Anchorage.

UAA Ranked as Military Friendly School

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he University of Alaska Anchorage was listed as a “Military Friendly School” by G.I. Jobs magazine for the third consecutive year. The list honors the top 20 percent of colleges, universities and trade schools which best serve U.S. military service members and veterans as students.

More than 1,500 students at UAA are military or veteran students, out of an enrollment of about 20,000 students.

The list includes 1,518 colleges, universities and trade schools, which prioritize the recruitment of students with military experience. These military friendly schools offer scholarships and discounts, veterans clubs, full-time staff, military credit and other services for U.S. military service members and veterans.

The list was compiled from a survey of more than 8,000 institutions and is available at www.militaryfriendlyschool.com.

UAF Accepts Sustainability Rating

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he University of Alaska Fairbanks earned a gold rating in the Association for the Advancement of Sustainability in Higher Education’s evaluation program. The program, called the

Sustainability, Tracking, Assessment and Rating System, evaluates universities on education and research, operations and planning, among other criteria. Schools earn additional points for innovation.

Four UAF efforts were recognized: a program to install power-saver cords on UAF-affiliated vehicles; The Sustainability Art Show; a program that funds student-initiated sustainability efforts and a green talk-radio show.

“This rating attests to the collaborative efforts made by our students, staff, faculty and community members to continue pioneering sustainable solutions,” said UAF Chancellor Brian Rogers. “We see STARS as a meaningful way to benchmark our progress for continual improvement toward sustainability and meeting future goals.”

The gold rating is the second highest in the STARS scale. Platinum is the top rank available. The University of Alaska Anchorage also participated in the rating and earned a bronze rating.

Nearly 265 higher education institutions are registered as STARS participants.

Galena Facility Garners Special Financing

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he Yukon-Koyukuk Elder Assisted Living Facility in Galena received more than $2 million in New Markets Tax Credit equity through the efforts of two financing groups. U.S. Bancorp Community Development Corp., a subsidiary of U.S. Bank, and Travois New Markets, a community development entity dedicated to investments in Indian Country, worked together to obtain the financing. ❑

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

VIEW

FROM THE

TOP

COMPILED BY PEG STOMIEROWSKI

Eric Giliam

Corporate Entertainer

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ric Giliam, an Anchorage West High grad, discovered the road less traveled and hasn’t looked back. Giliam announced he wanted to be a magician after watching a stage show by David Copperfield. He was 15. Five years later, magic and entertainment have vastly expanded his world. He won the title of World Teen Magic Champion in Las Vegas and has since performed at conventions in Las Vegas, Nashville, Dallas, Atlanta and San Diego.

OVER THE TOP: Companies and individuals, despite hard times, remain willing to budget for entertainment.

Whether I’m at a company event in a hotel ballroom or a corporate retreat out of town, I aim to give my audience a sensational evening – one they’ll never forget.

MAGIC FORMULA: Live shows before sit-down audiences light my fire – such venues as big halls, ballrooms, banquet rooms, even school auditoriums, where I can be at one end of the room, elevated slightly on a riser or stage with the audience in front of me. Dinner theater is another new interest. At least once a year I sponsor my own show.

While I used to do more “close-up” or “in-your-face” magic, which can be quite effective as an ice breaker, the stage show, with professional sound, lighting and backdrops, is where my creativity is focused now. I bring the theater to your event.

OUT OF THE CUBICLE: Experiencing something magical can provide release from the daily grind and bring out one’s inner child. I’ve done a corporate retreat in Homer, and at some shows, the audience is laughing for five minutes straight.

Everyone needs to escape to “that place” once in awhile, and perhaps especially so during hard times. ©2011 Chris Arend

MOTIVATIONAL FORCES: Looks of astonishment in the audience often are priceless. Magic is a stress reliever for me, too. When I am alone practicing, I feel rejuvenated. My main inspiration is magician Criss Angel, who struggled, but stopped at nothing to get to the top. I met him earlier this year. He said don’t let anybody get in your way, and work as hard as you can.

Eric Giliam

NEW ILLUSIONS: Building a loyal following means I have to continually keep my material fresh by creating new illusions and acts. Audiences want to see variety and originality. Each audience is different, and I have to be observant. Some things I learn from trial and error! ❑

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

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A S S O C I AT I O N S

BY TRACY BARBOUR

Resource Development Council Statewide group advocates for governor’s bill to boost production

Photo by Azimuth Adventure Photography/www.azimuthadventure.com

industries, as well as Native corporations, local communities, organized labor, industry support firms, financial institutions, utilities, land and air carriers and many other entities.

RDC’s current membership includes 250 companies, many of which have thousands of employees that are also members of RDC. It also has about 190 members at the individual level. These members all work together under the slogan: Growing Alaska through Responsible Development.

MAJOR ISSUES

Tom Maloney, president, Resource Development Council for Alaska.

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esource Development Council for Alaska Inc. has a history that stretches back more than 35 years. It was originally formed as the Organization for Management of Alaska’s Resources in 1975. After three years of working to obtain a transAlaska oil pipeline, the organization assumed the RDC appellation to reflect its broader agenda of education and advocacy on all resource issues in Alaska.

Today, the statewide nonprofit links a variety of interests together to encourage a strong, diversified private sector in Alaska and expand the state’s economic base through the responsible development of its natural resources.

RDC is comprised of individuals and companies from Alaska’s oil and gas, mining, timber, tourism and fishing

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The primary concern for RDC’s members, regardless of industry, is the ongoing decline in the output of the Trans-Alaska Pipeline System, according to RDC President Tom Maloney.

“TAPS is now running at one-third capacity in what I would call a selfinduced production decline,” he says.

“Although 17 billion barrels of oil have been produced in Alaska over the past 35 years, at least 40 billion barrels likely exist in the Alaska Arctic. More than half of that quantity is in the federal offshore and most of the remaining oil is in federal onshore areas such as the National Petroleum Reserve-Alaska and the Arctic National Wildlife Refuge. Meanwhile, there are an estimated 5 billion barrels remaining to be produced in State producing fields and an additional 2 billion barrels in known or possible State fields.”

Tapping into the federal oil will require access to highly promising federal areas such as the outer continental shelf, Maloney says. However, gaining entrance into these areas is currently hotly debated in Washington, D.C., and environmental groups have launched a wave of litigation to prevent exploration. Yet, the long-term

sustainability of TAPS and Alaska’s economy will largely depend on some combination of oil production from federal areas – which represent the nation’s best onshore and offshore prospects for major discoveries.

“While potential oil production from the OCS is a long-term prospect – at the earliest sometime in the next decade – the best opportunity to increase TAPS throughput in this decade is from new infield drilling in currently producing State fields,” Maloney says. “However, infield drilling has steadily fallen since 2007, the year Alaska’s oil production taxes were sharply increased.”

This is a major concern for RDC’s members because more than 50 percent of the total North Slope production in 2020 is forecasted to come from new oil. However, most of that production will require a huge investment from the industry – which is currently not happening, Maloney says.

In an effort to attract major industry investment back to Alaska to promote infield drilling and stem the production decline, RDC is encouraging legislators to pass Gov. Sean Parnell’s HB 110, which would dramatically modify the State’s oil production tax structure. Maloney says the passage of the governor’s bill would be a big step toward restoring Alaska’s competitiveness in attracting the investment needed to put new oil into the pipeline.

“New production is essential to keep TAPS operating to the point when oil from the OCS or other federal areas enters the pipeline sometime in the next decade,” he says. “Alaskans must do everything they can to keep the pipeline in operation because it is absolutely the lifeblood of our economy. It would be a devastating blow to Alaska if the pipeline were to shut down prematurely.”

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

Citing a report by the University of Alaska Anchorage Institute of Social and Economic Research, he adds, “Without the pipeline, Alaska’s economy would be half its current size and so would the work force.” Other sectors will be important for Alaska’s economy in the future, but oil will remain the state’s main economic driver, so Alaska needs new oil production.

“Nothing else can replace oil in the state’s economy,” Maloney says.

Another significant issue facing Alaska industries and RDC members in those sectors are ongoing petitions and litigation associated with the listing of species under the Endangered Species Act, which Maloney describes as additional regulatory and permitting requirements that will, at the very least, delay projects and increase costs. RDC is also concerned about a number of federal initiatives that will create more uncertainty and put Alaska projects and jobs at risk. Examples include ocean zoning through the proposed National Ocean Policy, which has the potential to impact every industry in Alaska, and new federal wetlands guidelines. These guidelines will hit Alaska especially hard, given that it has more wetlands than the entire U.S. combined, according to Maloney.

“These guidelines could place an additional 40 percent of Alaska’s wetlands and non-navigable waters under federal jurisdiction,” he says.

by its diverse membership is the key to success in influencing policy decisions at the State and federal level.

For example, Maloney says, RDC is proud to be able to mobilize miners, loggers, organized labor and tourism representatives to attend public hearings to advocate in favor of opening Alaska’s OCS to oil and gas development. In addition, the organization is frequently asked to meet with high level State and federal officials.

“When we do, RDC brings diversity to the table and consensus among broad interests to help influence and shape public policy, as well as educate policy makers on Alaska and why a one-size-fits-all federal policy does not work here, given our state is so unique and different from all others,” Maloney says.

As part of its educational efforts, RDC maintains an extensive amount of resource-related information online. The organization’s website (akrdc.org) includes RDC comment letters on dozens of issues as well as action alerts, videos of keynote presentations at its special events and

newsletters dating back to the 1970s.

“It’s a great site to learn about Alaska industries and the issues facing our economy,” Maloney says.

GOALS FOR THE FUTURE RDC’s key objectives for the future include educating policymakers and the general public about the role of resource development in sustaining Alaska’s economy, supporting probusiness legislation and administrative actions, building consensus among broad interests to influence public policy, encouraging investment in Alaska and advocating for a competitive and stable taxation policy.

However, the organization’s primary priority will continue to be arresting the decline in TAPS throughput, which Maloney says is best done by reforming Alaska’s oil production taxes to attract the industry investment needed to increase oil production. He adds that RDC will also persist in leading the effort to open highly prospective federal areas to oil and gas exploration and development, including the OCS, ❑ NPR-A and ANWR.

ADDRESSING CHALLENGES RDC is taking a number of steps to address important resource-related concerns. In regard to major federal and State issues, the organization helps its members by facilitating communication among diverse interests and encouraging them to support one another.

“State and federal laws mandate a process that every industry must follow, whether it’s mining, fishing, oil and gas, forestry or others,” Maloney says. “All of these industries must comply with the same standards under the Clean Water Act and other federal laws. When these diverse interests find common ground and stand together as one, we are more successful at influencing public policy and important decisions on the regulatory and permitting front.”

In fact, RDC feels that participation www.akbizmag.com • Alaska Business Monthly • November 2011

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FINANCIAL SERVICES

Alaska Financial Institutions Banking on local advantages

BY GAIL WEST

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Photo courtesy of Denali State Bank

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inancial institutions from Alaska’s panhandle to the North Slope are a diverse lot – from one of the nation’s largest banks to home-grown, rooted-in-Alaska banks and credit unions – and they do, in truth, cover the state with a full range of banking products. Alaska is fortunate to have them.

The state itself is 52 years old this year, but several of these banks and credit unions predate statehood – some by a significant number of years. First National Bank Alaska is celebrating its 90th year of business; Alaska Pacific Bank, based in Juneau, is counting its 76th year; Alaska USA Federal Credit Union and Denali Federal Credit Union have served Alaskans for 63 years each; and Credit Union 1 counts 59 years.

The youngsters of the group are Denali State Bank, based in Fairbanks and celebrating 25 years, and Northrim Bank, in business for the past 21 years.

At First National – a bank which opened its doors at Fourth Avenue and G Street in Anchorage, 90-yearold President D.H. Cuddy continues oversight of the bank he stepped into upon his father’s death 60 years ago.

Doug Longacre, a senior vice president, said Cuddy jokes about being the longest-tenured employee without a promotion. “He works all day every day,” Longacre said about Cuddy, “and everyone is important to him. His office is always open.”

Alaska Pacific Bank began as Alaska Federal Savings and Loan Association in Juneau in 1935. Tom Morgan, the local owner of a plywood mill, wanted to sell more lumber, said bank President and CEO Craig Dahl, and there were no local institutions interested in making home loans in the area. “The federal government had just passed the savings and loan act so Morgan started

Denali State Bank sign outside a Fairbanks branch during a winter day in Fairbanks.

to open savings accounts and finance home loans in Southeast Alaska. Many of us still have our original passbooks,” Dahl said. Over the years, though, Alaska Pacific grew and changed and in 1999 Alaska Pacific went public and issued stock to customers and outside investors.

Alaska USA Federal Credit Union was chartered in 1948 in Anchorage to serve the federal civil service personnel recently transferred to Alaska. Founding members began to pool their savings and extend credit to one another as well as volunteer their time to operate the credit union. During the ensuing

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

years, the credit union expanded its membership to personnel in remote Air Force and Navy stations, then to companies building the trans-Alaska oil pipeline and to shareholders of 10 of Alaska’s regional Native corporations. Alaska USA is the only one of the Alaska financial institution to have extended its branch network outside the state.

“We have locations in Washington and California,” said Dan McCue, senior vice president of corporate administration. “It’s part of our overall strategy to grow. We’ve done a good job covering the state and had to look for other possible growth opportunities. It complements what we’re doing here.”

Credit Union 1 was originally Anchorage Teachers Federal Credit Union and was formed in 1952. According to President and CEO Leslie Ellis, the credit union went through a series of name changes and brought in several other credit unions through mergers.

“Now, our membership is open to anyone who lives and works in Alaska,” she said.

Denali State Bank was formed in Fairbanks during the tumultuous 1980s when Alaska was losing banks, said Steve Lundgren, executive vice president. Nearly 50 investors pooled their money and expertise and opened a bank with the mission of always putting the customer first. All those shareholders were from the Interior. “Today, we have five offices – four in Fairbanks and one in Tok,” he said. “We’re proud to consider ourselves a locally owned community bank, and that’s how we make our banking decisions.”

numbers, but I think one of the measures that indicates how well a bank is serving its market is to look at the loanto-deposit ratio,” said Alaska Pacific Bank’s Dahl. “How much of our deposit dollar amount is loaned back out into the community as opposed to buying securities or other assets that may not benefit our market speaks to the commitment to the community. In our case, we have typically maintained a higher loan-to-deposit ratio, while watching the mix of our loans. Of course, our individual customers and small-business

owners are our bread and butter. One of our other measures is the stability of our deposit base.”

Like Alaska Pacific, Denali State Bank also measures its strength by its net income, its delinquencies and other financial requisites, but Lundgren added that he was inclined to provide a less traditional measure – a measure of the number and types of customers that bank at Denali. “We measure our strength by the new accounts we’re opening, by our involvement in community, by requests we

Helping Alaska B Businesses es Grow w

FINANCIAL SOUNDNESS All the banks and credit unions are regulated by federal overseers and all have the requirement that they measure up under the CAMELS ratings – capital, asset quality, management, earnings, liquidity and sensitivity. These ratings help determine a financial institution’s safety and soundness and are confidential. They also help assure Alaska’s financial institutions will have futures – to be certain they’ll be here to help pave the way for the future of the state.

There are additional ways to measure a financial institution’s stability, as well.

“We’re driven by a lot of regulatory

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15

Photo courtesy of Paul Younger

Credit Union 1 employees employees, from left left, Chrissy Bell Bell, Leslie Ellis (president/CEO) and Lisa Monsen, celebrate the third annual Mountain View Street Fair.

get to help support our community,� he said. “If a school comes to us and asks us to support their efforts to teach finance and we can meet that need, then we’re strong. Our board has an expectation that our bank will be involved in our community.�

Capital strength is one of First National’s primary measures of soundness, said Longacre. “We’re one of the strongest banks for our size in the nation and that’s a major strength for

our customers,� he added. “That has helped us weather the financial storms in Alaska – 13 banks went away in the 1980s and there were only three banks left. Now, we’re the only one of those three still here.�

Longacre also said First National measures its strength by its people. “Several senior management staff have worked at the bank for many years and we have an excellent efficiency ratio.

We’re profitable and we’re nationally

ranked for safety and soundness. We’re small enough to be nimble but large enough for economies of scale.�

Alaska USA’s McCue said credit unions are regulated by the National Credit Union Association and also are measured by their CAMELS ratings. “We’re very strong and we continue to be strong despite the economic conditions. Our capital is strong, our assets are growing and our membership, deposits and loans are increasing,� he said. “All those drive a credit union.�

Ellis, at Credit Union 1, agreed and added: “The main strength is net worth and the retained earnings percentage.

We’re well capitalized and that’s important. It means we can sustain any rough times.� Like Alaska USA, Credit Union 1 also looks to its membership to define its strength. “We want our members to do as much business as possible with us, so we measure how many multiple relationships each customer has – we have some customers with more than five relationships. We also measure our growth in customers,� she added. “This year, the permanent fund dividend figures were just released, and

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

our direct deposits increased by 5.5 percent over 2010. That’s significant.”

INVESTING IN ALASKANS Alaska customers are fundamental to the state’s banks and credit unions, and each of the financial institutions focuses on meeting its customers’ banking needs. In all cases, those needs revolve around deposits, loans and community involvement. Because all are based in Alaska, these banks and credit unions have the ability to be more nimble and faster to respond to both customers and the state’s economy.

Most of the home-grown financial institutions have a smaller line of savings and loan products than the larger Outside banks, but they also have the ability to tailor those products to individuals and small businesses, as long as basic requirements are met.

“We offer several different types of loans,” said Longacre at First National. “But there’s a distinct advantage to being local. We have flexibility in that lending.”

Alaska USA’s McCue said his credit union has a “baseline to work from but we recognize that each person is unique.” Ellis agreed with that philosophy and took it a step further. “We have a full array of products, but we also have a program that’s designed to work with people with no or impaired credit.

“We call it ‘colorful’ credit,” Ellis said.

“We work with them to establish or reestablish credit, to get their first car or their first credit card. At our Mountain View location, we see a lot of people who have never had a banking relationship before or had one a long time ago and had a bad experience. They’re cautious about coming in, and there are people like that all over this state.”

Community involvement is another benefit financial institutions offer, from monetary contributions to teaching financial literacy to putting on a painter’s apron and picking up a paintbrush during a local nonprofit’s Paint the Town event. “We have an annual meeting for all staff and employees. We put sheets of paper across the wall of our main office and every employee has the opportunity to sign up for a variety of community efforts,” said Lundgren of Denali State Bank.

Credit Union 1 makes it a priority to

teach financial fitness, including hosting a branch at West Anchorage High School that is set up like a learning lab for students.

Each of the banks and credit unions also puts a significant focus on being customer friendly. Many have chosen to eschew the automated phone systems opting instead for personal attention. All have branch networks that welcome customers with convenient hours and, again, personal attention. Lending decisions are made in state and are often provided within a day or two of the loan request.

“Our customer service is really the largest competitive factor that we have over the large, out-of-state banks,” said Lundgren. “They may provide a larger variety of services, but our shareholders, our managers, our decision makers live here in Alaska. Their children go to the same schools as the children of our customers. Our employees are involved in community governance. We work side-by-side with our customers to make their lives better and to make our community a better place.” ❑

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

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TECHNOLOGY

Business Phone Service Trending how we talk today

BY KENT L. COLBY

BlackBerry Curve

iPhone 4s

Photo courtesy of Research in Motion

T

here was a time, since the invention of the telephone, when one party called another at home. If they were there, they answered. If not, the only option was to try later or wait until the office opened the next day and the discussion picked up there. Then we added answering machines. “Leave a message; I will call you back…” When that wasn’t fast enough, pagers were added to the mix. “Stop what you are doing, call me now…”

The advent of the cell phone now allows business to interact across the world 24/7. Smart phones enable documents, files and sales receipts to be accessed anywhere. With the advent of texting, voices are silenced by the almost imperceptible tapping of a virtual keyboard in the most

18

Samsung Galaxy S2 Photo courtesy of GCI

Photo courtesy of Apple

obscure locations. From pew to potty, connectivity is ubiquitous, or nearly.

LOCAL TELEPHONE COMPETITION For the past century or so, Alaskans have been served by local telephone companies for both household and business use. The fact of the matter is: we had no choice. During that time, the state’s long distance service was, for the most part, provided by AT&T Alascom and GCI. State regulators controlled and regulated the monopolies.

Local public switched telephone (PST) companies, private and municipally owned, were heavily regulated on rates and services. As a result, the companies were not willing to take much risk in their business model. Rates remained relatively high and little evolution oc-

curred in either service or technology.

In the 1980s and after deregulation, according to a September 2010 Federal Communication Commission report “Trends in Telephone Service,” competitive access providers (CAP) were allowed to market services over wired networks to business customers. There was some penetration into the local market, but that phenomenon did not start to really move until the 1990s and, it could be said, the next level of phone service evolution.

A variety of companies, including cable television providers and local service divisions of long-distance companies, began to offer local telephone services to a broader range of customers. Initially the new services were available to larger businesses, but eventually

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

trickled down to smaller businesses and residential accounts. These competitors to the local phone monopolies are often called competitive local exchange carriers (CLEC).

The Telecommunications Act of 1996 cultivated three ways for competitors to enter local telephone service markets.

“First, CLECs may resell the services of the incumbent local exchange carriers (ILEC). Second, CLECs may make use of ILEC facilities, such as leasing ILEC unbundled network elements (UNEs) loops and transport. Third, CLECs may build a complete set of facilities to directly compete,” according to the Commission’s report.

The natural provider with an existing infrastructure was the cable provider.

Since about 2002, cable companies have jumped on that bandwagon. Utilizing voice over internet protocol (IP) or interconnected VoIP, cable service providers, owning their own networks, began offering voice communications over a broadband connection. This allows users both to receive and place calls to the public switched network, just like traditional phone service.

CHANGING TELEPHONE SERVICE

Photo courtesy of GCI

Today there are primarily two types of telephone providers in Alaska: Phone companies that have been around for a long time and now cable companies with an increasing market share and a presence in almost every Alaska city.

Many of the providers for the new services did not have an ILEC regulatory status. These providers were

David D id M Morris, i Vi Vice P President, id t General Communication Inc. (GCI) www.akbizmag.com • Alaska Business Monthly • November 2011

19

Photo courtesy of MTA

Carolyn C l H Hanson, Director Di t off M Marketing k ti and Sales, Matanuska Telephone Association Inc. (MTA)

required to report to the FCC basic information about their local telephone and interconnected VoIP services.

This lack of local operations and price regulation changed the way companies did business. Instead of being priced through regulation and indirectly subsidized in many areas, the new ventures were private and the investors took the risk. That risk has paid off. Generally speaking, those new arrivals into the century-old business have done well, if the price of company stock is any indication. Better yet, the consumer is now offered more choices and a new level of technology. An office telephone is no longer just a telephone. It comes equipped with multiple lines, voice mail, caller ID and a host of other whistles and bells.

WIRELESS CONNECTS BUSINESS GLOBALLY With all the changes in wired service, no other technology has impacted the way Alaskans utilize the telephone the way cellular has done. This service did not come without a price tag. Only a dozen years ago, cellular phones cost the Alaskan user between $0.50 and $1 per minute for incoming and outgoing calls. And, the phones were phones.

That is, the user received or placed calls. At the same time, in-state long distance call rates were $0.14 a minute.

Improved technology and competition has reduced the cost of both landline phones and cellular price packaging. Cost-per-minute pricing

20

is giving way to unlimited call plans.

“Unlimited is the easy way to bill,” says GCI Vice President David Morris.

As Alaska grows, the number of telephones in use has historically increased proportionately. Maybe the smartphone is to blame, but now the number of telephone customers – that is, individual accounts or phone numbers – has grown disproportionately.

There are nearly 120,000 people in Matanuska Telephone Association’s (MTA) service area of Palmer, Eagle River and Wasilla – or about 10,000 square miles. MTA’s director of marketing, Carolyn Hanson, tells us the company has close to 100,000 wireless users. As an example, she says her family of five used to have a single landline.

Now, every member of the family has a phone. And that phone travels with them wherever they go, while the landline is still at home.

The smartphone technology allows Alaska business to stay in touch and work smarter. These new phones are mini computers providing most every and in some cases more, application traditionally available on the company workstation in the office.

The smartphone is not just the iPhone. In fact, smartphone technology was around for years prior to the iPhone.

It was, however, that single Apple device that caused the explosion in wireless phone usage. The first big name in what today we call a “smartphone” was the BlackBerry from Research in Motion (RIM). Most every business with company phones capable of email used a BlackBerry. Pundits are suggesting the BlackBerry is “auguring in” and unless the company performs some sort of sensational technological comeback that device may soon share the shelf with the likes of the Motorola Brick phone.

Both Hanson and Morris say the smartphone is the device of choice. According to figures released by comScore Inc., a global provider of digital marketing intelligence, U.S. smartphone subscribers for those 13 years of age and older was 84.5 million in August (averaged over a three-month period).

Of those figures, 36.9 million used the Google (Android) platform, 23 million used Apple (iPhone), 20.7 million used RIM (BlackBerry), 4.8 million used Microsoft and 1.5 million used Symbian.

PHONES USED FOR MORE THAN TALKING Comparing the demographics of today’s phone (cellular or wireless) user, it is easy to see how the phone’s usage changes with age. Morris says the older customer uses a cell phone to talk – basically what it was originally designed for. The medium-aged user takes advantage of the phone’s email and browsing attributes. Morris says he is not sure if the next generation owner of a cellular phone will even know how to talk on the device. Texting appears to be the communications mode of choice now and in the future for the newest set of users.

Today’s texter has a new list of slang and it is evolving as you read this. LOL is laughing out loud or some variant.

Such shortcuts are not limited to the English language. MDR in French translates to died laughing. Consider TNOP: totally not our problem – and the list goes on. For more, check out: Internet Slang Words and Computer Slang at www.internetslang.com.

IS WIRELESS REPLACING WIRED? Morris at GCI says that company is seeing about a 3 percent annual decline in the company’s wired service, which is offset by big growth in cellular.

Over at MTA, Hanson says cellular is growing disproportionately to the area’s population; but the company is not seeing any decline in its wired connections. This may be a result of the provider’s requirement for a phone hookup for the customer to have a DSL or high-speed Internet connection. She says more than 70 percent of homes served by MTA have 30 megabytes of broadband speed.

“Wireless is where the growth is,” Hanson says.

Are landlines going to be replaced by wireless? Quoting market observer Brian Prows on an Internet blog: “If all U.S. landlines (122 million) were ported to cellular, the carrier’s network would collapse due to insufficient wireless spectrum. Until some bright person invents a new way to compress voice and data bandwidth on assigned cellular frequencies, it’s impossible to port all landlines. So will cell phones replace landline telephones in the U.S.? Un❑ likely and not very soon.”

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

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REGIONAL REVIEW

BY TRACY BARBOUR

Prince William Sound

© 2011 Lori Campbell/Courtesy of Valdez Convention & Visitors Bureau

Southern pipeline terminus

The newly renovated Kelsey Dock in Valdez.

A

laska’s Prince William Sound is an intriguing blend of tidewater glaciers, rainforests, mountains and wildlife. Geographically located off the Gulf of Alaska, it sits on the east side of the Kenai Peninsula.

Prince William Sound’s largest city is Valdez, which is located at the southern terminus of the trans-Alaska oil pipeline. Other significant communities on the Sound include Cordova and Whittier, as well as the Alaska Native villages of Chenega and Tatitlek.

The bulk of the land surrounding Prince William Sound is part of the Chugach National Forest – the second-largest national forest in the country. Prince William Sound is heavily accented by the massive Chugach Mountains and several barrier islands along the coastline, including Montague Island, Hinchinbrook Island and Hawkins Island.

Early in its history, in 1778, Prince William Sound was explored by British

22

navigator and Captain James Cook.

Cook initially named it Sandwich

VALDEZ

AT A

Sound, after his patron the Earl of Sandwich; however, the editors of Cook’s maps changed the name to Prince William Sound in honor of the man who would later become King William IV. A variety of significant events have shaped Prince William Sound’s history and changed its landscape throughout the years. For example, a 1964 tsunami resulting from the Good Friday Earthquake killed villagers in Chenega and virtually destroyed the original town of Valdez. And in 1989, the Exxon Valdez oil tanker bound for Long Beach, Calif., struck Prince William Sound’s Bligh Reef and spilled from 260,000 to 750,000 barrels of crude oil. The spill caused massive environmental damage, killing numerous seabirds, otters, seals, bald eagles and whales. The residual effects of the spill still linger today, altering some marine species and human lives forever. The Valdez spill was the largest ever in U.S. waters until the 2010 Deepwater Horizon oil spill, in terms of volume released.

GLANCE

● Population: 4,350 ● Location: Approximately 300 miles from Anchorage ● Government structure: Mayor-Council form of government ● Key Contacts: Dave Cobb, mayor of Valdez; Sheri Buretta, chairman and acting CEO of Chugach Alaska Corp.; and Barney Uhart, president of Chugach Alaska Corp. ● Key Industries: Oil and gas; local and State government; trade, transportation and utilities; hospitality and leisure; and seafood ● Tax Base: Oil and property taxes ● Major Hospital: Providence Valdez Medical Center ● Airport: Valdez Pioneer Field Airport ● Port: Port of Valdez

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

Alyssa Shanks, economist with the Alaska Department of Labor.

ECONOMY OF THE REGION As a region, Prince William Sound’s economy varies from other parts of Alaska. Many areas of the State are driven by only a few industries; Prince William Sound has more economic diversity.

“Prince William Sound is kind of

a microcosm for Alaska,” says Alyssa Shanks, an Alaska Department of Labor economist who specializes in the employment and wages of the Interior, Gulf Coast and Northern economic regions. “It has oil and gas, seafood and tourism. The only thing it’s missing is the big military component.”

Most of the Sound’s residents live and work in Valdez and Cordova, making the Valdez-Cordova Census Area a prominent place within the region.

According to research by the Alaska Department of Labor, the CordovaValdez Census Area’s main industry in 2009 was trade, transportation and utilities. That sector employed more than 20 percent of the area’s workers that year.

Other major industries for the Sound in 2009 were local and State government (28 percent); hospitality and leisure (10 percent); and education and health services (8 percent). More workers were employed as construction laborers than any other occupation in 2009. Major employers in the ValdezCordova Census Bureau Area include Alyeska Pipeline Service Company,

Valdez Mayor Dave Cobb.

the State of Alaska, the cities of Valdez and Cordova, Valdez and Cordova city schools, Trident Seafoods Corp., Copper River Native Association Inc., and University of Alaska.

The economy of Valdez is significantly more diverse than that of Cordova, where seafood is the chief industry. However, the seafood industry has a hit-or-miss aspect that creates a

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23

certain level of uncertainty for Cordova residents, according to Shanks. “Over the course of the year, it can feel like feast or famine, depending on the season,” she says.

In contrast, oil is king in Valdez – supported by a variety of other sectors. In fact, one-third to half of the city’s revenue can be attributed to the oil industry. The pipeline’s presence in Valdez creates an unusual situation: “There’s a large contingent of people in Valdez who are there to work and sleep; then they leave,” Shanks says.

Pipeline personnel frequently work two weeks on and two weeks off. When not working, they return home for rest and relaxation, taking their healthy paychecks with them. While some of their earnings are spent locally on food and other necessities, Valdez pipeline workers typically don’t buy homes and other big ticket items that can have a deep impact on the local economy.

Over the years, the population – and work force – of the Valdez-Cordova Census Area have been slowly declining. The area’s population declined 5.5 percent from 2000 to 2010, going

from 10,195 to 9,636, according to the U.S. Census Bureau. But comparing other places to Alaska, a 5.5-percent decline seems very stable, Shanks says.

However, a decrease of 559 residents is significant for a small place like Valdez.

Shanks says she doesn’t know exactly what’s driving the population decrease, but a shrinking population doesn’t bode well – for any area.

“Population and employment tend to go together,” she says. “A declining population isn’t the best thing if you’re looking for economic growth.”

Valdez Mayor Dave Cobb has a theory about why the area’s population is declining: “I think what’s happening is you’re looking at an older population.

A lot of people work for the pipeline, and when they retire, they leave to go back to their home state.”

CITY OF VALDEZ With about 4,350 residents, Valdez is the population and activity center for Prince William Sound. Like many seasonal places, it has a large population spike in the summer during the height of the fishing and tourism seasons.

Cobb, a fisheries biologist, originally from Washington state, characterizes Valdez as a great place to work and live.

“I think it’s the people,” he says. “We have a highly educated group of people who are concerned about a lot of things.

They step forward and provide some good commentary and discussion.”

Cobb says Valdez’s economy has gone down a bit, but the city is faring better than other parts of the State and nation. However, there is always room for improvement. “We’re always looking for ways to increase jobs and have a more diverse economy,” Cobb says, currently serving his third term as mayor.

As a recent positive change, Cobb has seen an increase in the value of the area’s commercial fishing industry.

New processors in Cordova and the revitalization of the processing plant in Valdez are just two examples.

Commercial fisheries are making a living for a change, Cobb says. Prices have been as low as 9 cents a pound, but this year the prices were in excess of 43 cents per pound.

“We’ve recovered in the world

©The Valdez Museum and Historical Archive

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market, so we are getting higher prices,” he said. “I think it’s the great marketing by the State of Alaska. We also see local marketing here in Valdez and Cordova.”

As another positive economic factor, Valdez’s tourism industry is holding steady this year, according to Dave Petersen, executive director of the Valdez Convention and Visitors Bureau. With an average 60,000 visitors annually, the city hasn’t had a significant reduction in visitors this year.

“Most of the bigger companies and RV parks are pretty much in line with what they’ve been in the past,” he says.

“We didn’t have huge declines.”

However, Valdez did lose a port of call this year from the Princess Cruises ship Connoisseur of Alaska. But the impact was only slight because Valdez relies heavily on RV and independent travelers, many of whom are long-haulers that come up from Canada and the Lower 48.

Lately, Petersen says, he has noticed an interesting trend among visitors: more people seem to have less time for vacation. Rather than drive their RV

26

the entire trip, they fly into Anchorage and then drive the rest of the way to Valdez. “They’re trying to compact their trip into a shorter stay,” Petersen says.

Tourists visit Valdez for a wide variety of reasons. Many are drawn by the legendary pipeline terminal, firstclass sport fishing, rugged Peter Toth Indian Head Carving, and easy access to tidewater glaciers and wildlife.

“You’ve got kind of this amazing mix of a small-town atmosphere and access to some of the largest mountains in North America,” Petersen says. “It’s heaven.”

There are also unique exhibits in the Valdez Museum and Historical Archive, as well as the Maxine and Jessy Whitney Museum. Visitors can view highlights of the 1964 Earthquake and watch an engaging video entitled “Between the Glacier and the Sea.”

COMMUNITY IMPROVEMENTS Valdez has a number of construction projects under way to improve the city for both visitors and residents. One of the most recent projects is a new 300,000-pound cold-storage facility.

The regional facility will make it easier and more cost-effective for commercial fisherman to store, process and ship their catch.

The cold-storage facility will be especially beneficial to the area’s burgeoning smoked fish market. It will enable fishermen to avoid the expense of shipping their smoked fish to Anchorage.

“It’s cost us about five cents a pound to ship it to Anchorage and five cents to ship it back,” Cobb says.

“When you’re saving that much on a product that you’re getting $1 a pound for, it’s significant.”

In addition to saving money, the facility should result in about a dozen new jobs annually, Cobb adds.

As another improvement, Valdez recently updated Kelsey Dock. Officially called the John Thomas Kelsey Municipal Dock, the city’s beautiful port has been referred to as the “Switzerland of Alaska.” Valdez is also in the process of looking at constructing a new junior high school.

“We continue to be progressive and meet the needs of our citizens,” ❑ Cobb says.

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

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MILITARY

Military Money in Alaska Colossal contributor to the economy ©Ken Graham Photography.com

A $39 million F-22 Squad Operations consolidated maintenance hangar on JBER was completed in early 2011.

BY LOUISE FREEMAN

A

lthough the gold rush put Alaska on the map at the turn of the twentieth century, it was the military that built Alaska. From the 1940s to the 1960s, the military not only constructed roads, ports, airfields, bases, and naval stations, but also built up the population by bringing thousands of airmen, soldiers, sailors and contract workers to the undeveloped territory, many of whom stayed to raise their young families.

The military dominated the Alaska economy for two decades, after which it entered a period of what many people assumed was a permanent decline

28

in the late 1960s. Radar sites closed and the number of military personnel shrank while other industries such as gas and oil and seafood boomed.

STRATEGIC POSITION After 9-11, everything changed. Suddenly, Alaska’s strategic position was once again recognized and a build-up began, with both money and personnel pouring into the state. This build-up accelerated in 2004-05 with the start of the Iraq War. Today, more than 8 percent of the population of the state is military, including dependents. In Fairbanks, home to Fort Wainwright Army Base

and Eielson Air Force Base, military personnel and their dependents make up 22.9 percent of the population; in Kodiak, home to Kodiak Coast Guard Station, it is 18 percent, and in Anchorage, home to Joint Base Elmendorf Richardson ( JBER), it is 10.7 percent.

“One in four or five Alaska residents has a tie to the military – either they are in the military, are a veteran, or have a family member in the military. This rate is unmatched anywhere else in the U.S.,” said Uriah Orland, public affairs officer for the Alaskan Command.

Although there has been some dropoff in defense expenditures since 2007,

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

the military is still a major player in Alaska and is currently the single largest employer in the state. Nationally, the military accounts for only 1 percent of the work force, but in Alaska it is 6 percent.

HIGHEST PER CAPITA The over-all economic impact of the military on Alaska is impossible to determine, but in 2009 (the latest year for which statistics are available) Alaska was number one in the nation in per capita defense spending, with $8,652 per Alaska resident versus the national average of $1,711. In 2009, the U.S. Defense Department spent $2.3 billion on payroll and $3.5 billion on procurement of materials, equipment and supplies in Alaska.

The Fairbanks Economic Development Corp. (FEDCO) estimates the nearby presence of the two bases there contributes $3.9 billion to the area economy each year, including not only direct dollars such as payroll and local expenditures, but also through a spinoff effect that generates billions in additional sales revenues for the community.

“The military is a significant part of our economy,” said Jim Dodson, president and chief executive officer of FEDCO. “Including civilian employees, 30 percent of the work force in Fairbanks is military; however, these 15,900 jobs account for 38 percent of the total payroll,” said Dodson, indicating that the jobs on base – averaging $72,000 – pay a higher wage than the Fairbanks average.

“It’s a monster industry in Fairbanks.

They feel it in a major way when there is a deployment,” said state labor economist Neal Fried. Over 4,000 soldiers of the Stryker Brigade – approximately half the total number of active duty personnel on the two bases – were deployed in April and are now serving a one-year tour of duty in Afghanistan.

Many local businesses such as restaurants and barber shops experience a sharp drop-off in business after the soldiers leave. However, businesses that sell large-ticket items experience more of a slow decline in sales. They are much more affected by the return of the soldiers when there is a rebound in sales owing to pent-up demand.

“There is a huge rush for us, a huge bounce-up in sales,” said Dave Cavitt, owner of Furniture Enterprises of Alaska, which includes Sadler’s, Ashley and other furniture stores around the state. At the Fairbanks Sadler’s, military account for 12 percent of sales; in Anchorage it is 6 percent. At the Anchorage Ashley store – part of a nationwide network of 400 stores – 25 percent of sales are to military customers. Cavitt attributes this high percentage to Ashley’s name recognition for newly arrived military families who already may be familiar with chain.

IMPORTANT TO ANCHORAGE Anchorage’s size and more diverse economy allows it to be less dependent on the military than Fairbanks and they are better able to absorb swings in military population when there is a deployment.

However, said, Bill Popp, President/ CEO of Anchorage Economic Development Corp, “There is a noticeable impact when the troops return.”

The most recent redeployment to JBER was in March 2010, when 3,500

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29

soldiers returned from a one-year tour of duty in Afghanistan.

“We had feedback from the Port of Anchorage that you could track sizable tonnage changes when the troops returned,” Popp said. “It’s a good measure of just how important they are to our community. They have a substantial impact on car dealerships, furniture, electronics and other retailers, professional services and other businesses.”

JBER, with 3,000 employees, is the sixth largest direct employer in Anchorage and accounts for 8.3 percent of the work force. JBER has 10,500 active duty personnel, as well as 18,500 dependents. JBER is comprised of the previous Elmendorf Air Force Base and Fort Richardson Army Post, which were merged to allow for efficiencies in scale for many services, such as food, recreation, and road maintenance – a process completed in October 2010.

Approximately 50 percent of JBER military personnel live off-base, some by choice and others because there is a waiting list for on-base housing. With the average age of military personnel between 25 and 34, many have families and are looking for a home in the Anchorage area.

Speaking of the impact on the local real estate market, Helen Jarratt, president of the Alaska Association of Realtors, said: “It is high in the valley, especially Eagle River, because it is more affordable than in Anchorage. A lot of them (military personnel) rent, but the higher the rank, the better chance they would have to buy a home.”

BIG CONSTRUCTION BUDGET Compensating in large part for the downturn in the construction industry since 2008, the military has accounted for the majority of construction within the state for the last two years.

“There has been a tremendous amount of military construction,” Fried said. “We’ve seen dramatic changes, with major investments in the military.

Most Alaskans don’t know that because it happens behind the gates.”

The 2011 forecast for federal money to be spent on national defense construction in Alaska is $555 million, according to the 2010 Institute for Social and Economic Research at the University of Alaska Anchorage. The bulk

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

of the money is dedicated to military construction, but civil works such as flood control and environmental remediation are included in the total as well. This reflects an increase of one percent over 2010.

In the fiscal year that ended in September, according to figures provided by the Army Corps of Engineers, the Alaska District had a military construction program consisting of 15 projects valued at $325 million. Recently completed projects include the $33.8 million Military Police barracks project on JBER-Richardson and the $39 maintenance hangar on JBER-Elmendorf.

Currently under construction are the $16.4 million Fort Greely Fire Station, the $23.9 million barracks project at JBER-Richardson, and the $67.6 million hangar at Fort Wainwright.

No major construction projects are planned at Kodiak Coast Guard Station, where there are 600 active duty personnel. The station has a sizable effect on the economy of the small town. “We have a strong partnership with the community,� said Sara Francis, public affairs officer. “There is a lot of participation in nonprofits and associations, and a lot of families contribute to the economic base through the labor force or consumer activities.�

Approximately 115 civilians are employed at the station.

temporary training assignments will have a positive impact on the Fairbanks economy. The project is currently in the Environmental Impact Statement phase, a process anticipated to be completed by March 2012.

Despite the tremendous growth in military spending Alaska has enjoyed in the last decade, such growth cannot be expected to continue, with the possible exception of special projects such as JPARC. Cutbacks are inevitable in the current political and economic climate. Although Fried declined to

comment on possible future cutbacks for Alaska, he pointed out total federal expenditures in the state in 2009 were $14.2 billion, including $6 billion for the Department of Defense. “When you look at federal expenditures, there is a certain vulnerability out there because we are more heavily reliant on federal dollars than other places,� Fried said. “That discussion that is happening at the federal level is pretty important to Alaska because it is more important to our economy than � any industry.�

FUTURE GROWTH One possible area of future growth for the military in Alaska is the proposed Joint Pacific Alaska Range Complex ( JPARC), 32 miles south of Fairbanks.

Plans include the expansion and/or establishment of new military operations areas, airspace corridors, ground maneuver training areas, and training complexes. Alaskan Command’s assertion is that advances in weaponry and communications have made it necessary to upgrade and expand their training facilities and available airspace to better train troops for actual conditions they are likely to face in future combat situations.

JPARC will benefit Alaska economically both in the construction phase and, over the long-term, by bringing additional troops to the state for training, Orland says. The presence of additional military personnel for

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31

OIL & GAS

Market changes make plans uncertain

BY MIKE BRADNER

ALASKA Pipeline Project

Proposed Pipeline Route

Map: TransCanada/ExxonMobil

A

laskans and oil and gas companies have worked on getting a natural gas pipeline built from the North Slope for decades. Several times the pipeline appeared on a solid course toward approval and construction, only to be sidetracked by changes in market or political developments.

The idea has progressed in the last

32

year further than it ever has before.

However, the curse of the project, changes in the market, may have occurred once again. What may be different now is the State of Alaska, with its financial strength, seems to be committed to making sure something happens, at last.

Whatever “something” is – several

ideas are on the table. The base case is still a large-diameter pipeline carrying large volumes of gas from the North Slope to continental North American markets by way of Interior Alaska and Canada and it is the furthest along in terms of engineering and feasibility work, but it may be now undercut by the entry into the North American

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

market of inexpensive gas produced from shale.

In spite of this, there are substantial companies leading this initiative: TransCanada Corp., a major pipeline company, and ExxonMobil Corp., one of the world’s largest oil producers. TransCanada and ExxonMobil, with support from the State, propose a 48-inch pipeline moving about 4 billion cubic feet of gas a day. The project is massive in scale, with cost estimates ranging above $40 billion.

The State is also backing the TransCanada/ExxonMobil project with a contract signed with TransCanada under the State’s Alaska Gasline Inducement Act, or AGIA. The pipeline company has agreed to meet certain requirements the State has set out in terms of timing, tariff structure and financing. In return, the State has committed $500 million in funding for the initial engineering, environmental and other feasibility work.

A discouraging note is the demise of the Denali pipeline project, a competing plan to that by TransCanada that was put forth by BP and ConocoPhillips. Denali’s management cited lack of sufficient market commitments for its project, which has caused many to worry the same fate awaits TransCanada and ExxonMobil.

IN-STATE OPTIONS Meanwhile, the Alaska Gasline Port Authority, a municipal group, is still carrying the flag for an “all-Alaska” pipeline from the North Slope to Valdez, a route parallel to the existing trans-Alaska oil pipeline. The engineering and feasibility work on the first half of this, from the Slope to Interior Alaska, has already been done by TransCanada and ExxonMobil. Some engineering and feasibility work has been done on the southern half, from the Interior to Valdez, as well as on a large liquefied natural gas (LNG) plant at Valdez.

The Port Authority has access to work done previously by Yukon Pacific Corp., and TransCanada, as part of an agreement with the State, did work on a Valdez pipeline to offer in its “open season” held in 2010 to solicit customers. The result of that is unknown.

There are major companies interested in this option, too. Mitsubishi Corp., a

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

large Japanese company, and Sempra Energy, a major U.S. company, are interested in LNG from Alaska and are working with the Port Authority.

Finally, the “fallback,� in case both of these options fail to move forward, is the State’s initiative with its “Alaska Stand Alone Pipeline,� or ASAP. This is seen as an alternative, a 24-inch gas pipeline from the North Slope to Southcentral Alaska that could make gas available to Fairbanks, in the Interior, and the Anchorage area if the large 48-inch pipeline planned is seriously delayed or cancelled. The pipeline is proposed to follow the trans-Alaska oil pipeline from the Slope to the Interior and then branch off to Southcentral with a route generally following the Parks Highway.

Under a directive from the State Legislature, the project is being led by the Alaska Gasline Development Corp., or ADGC, an independent State corporation organized as a subsidiary of Alaska Housing Finance Corp., also an independent State corporation. ADGC picked up the project in mid-2010 after an earlier State

group, led by the governor’s office, completed two years of initial feasibility work. That work was led initially

by Harry Noah, a former State natural resources commissioner, and then

by Bob Swenson, director of the State Geological and Geophysical Survey.

Dan Fauske, the chief executive officer of AHFC is also now the CEO of the new State gas corporation.

MORE PIPELINE IDEAS There are two other initiatives in the mix. One is the Alaska Natural Gas Development Authority, or ANGDA, also an independent State corporation separate from ADGC, the company led

by Fauske. The second is a proposal for a small 10-inch to 18-inch pipeline from the North Slope to Fairbanks only.

Energia LLC, a local firm, is working on this as a fall-back for the Interior if all of the other initiatives fail.

Energia now operates a small pipeline connection that moves crude oil from the trans-Alaska oil pipeline to the Flint Hills refinery and Golden Valley Electric Association’s oil-fired generating plant at North Pole, near Fairbanks.

The principals of the company, including founding partner Alex Gajdos, are experienced and well-respected in the Fairbanks community. Energia’s concept is to build a smaller pipeline based on the existing known demand load for the Fairbanks, mainly the refinery and GVEAs, with an allowance for expansion to serve the local space-heating market most likely through Fairbanks Natural Gas Co., a small utility that serves Fairbanks with LNG trucked from Southcentral.

Harold Heinze, a retired senior Atlantic Richfield Co. executive and also a former State resources commissioner, is the CEO of ANGDA, which was formed by a Statewide ballot initiative in 2002 with a directive to work on a Valdez LNG project and, secondarily, to facilitate getting natural gas to Alaska communities. ANGDA did some work on the Valdez LNG option, but because others were also working on this, mainly the Port Authority, ANGDA’s board decided early on to focus on its second mission, getting gas to communities.

The key project pursued was a “spur�

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line, a 20-inch or 24-inch pipeline that would branch off a large pipeline built through Interior Alaska, assuming one is built, and go to Southcentral. A considerable amount of work has been done on this project, which would follow a route from a connection with the 48-inch pipeline at Delta and then follow the trans-Alaska oil pipeline south to Glennallen, and then go southwest along the Glenn Highway to connect with the existing Enstar Natural Gas Co. pipeline system in the MatanuskaSusitna Valley.

The Glennallen route was chosen because, assuming a large pipeline is built, moving gas as far as Delta in a large pipeline offers economies for natural gas ultimately destined for Southcentral.

Also, the Glennallen route preserves the possibility of a spur to Valdez to an LNG project. If a large-diameter pipeline were built to Valdez, the spur line would be the leg along the Glenn Highway from Glennallen to the Mat-Su. With all of these options in play, the major emphasis is still on the 48-inch pipeline to move gas from the Slope to the Lower 48 via Canada. If this were built it is assumed there would be a spur line to Southcentral built by along one of two routes being studied by the State corporations, either ANGDA’s Glennallen route or ADGC’s Parks Highway route.

NATURAL GAS LIQUIDS All of the proposed pipelines, with the possible exception of Energia Cura’s smaller pipeline, would operate at a high pressure, approximately 2,500-poundsper-square-inch, so natural gas liquids (NGLs) such as ethane, butane and propane could be moved along in gaseous form along with the methane, the main component of natural gas. Methane’s primary use is as fuel, which propane is also mainly used for, but natural gas liquids are actually more valuable as feedstocks for the petrochemical industry.

If is hoped, for example, that if NGLs can be moved economically to the Interior or Southcentral, the availability of these valuable liquids could lead to the creation of local industries using them as feedstock. Alternatively, the NGLs could be exported from Southcentral to buyers overseas, most likely in Asia.

As a sidenote, the possible movement

36

of the NGLs through the 48-inch pipeline to Canada, and through Interior Alaska, in the TransCanada/ ExxonMobil pipeline, is causing concerns among Fairbanks community and business leaders. TransCanada argues there is a ready market with petrochemical companies in Alberta for these liquids, who are really short of NGLs now. The Fairbanks leaders would like these NGLS, or at least some of them, taken off in the Interior for local use. TransCanada’s response has been that if all or some of the NGLs are taken off in Alaska it will reduce the value of the gas mixture delivered to the end of the pipeline – possibly impairing the economics of the project, which are difficult enough.

OPEN SEASON RESULTS CLOSED TransCanada has not been able to release any information about proposals it received from potential shippers in its 2010 open season, either for the pipeline to Alberta or the option of a pipeline to Valdez. The company is obligated in its AGIA contract with the State to continue working toward a Federal Energy Regulatory Commission license for the project, even though there are not any customers as of yet. TransCanada will apply for the license in late 2012 and expects to receive it in 2014.

Alaska legislators are impatient to learn more about results of the open season and the potential viability of the project, but TransCanada has remained firm that it is bound by confidentiality restrictions. There are also concerns

pipeline and those may require more than 500 million cubic feet a day of gas. If the TransCanada project is alive until the time FERC licenses it, possibly in 2014, the State’s hands are tied in finding large industrial customers that would make the 24-inch pipeline possible. The State could, of course, retain the 500 million cubic feet per day limit and just subsidize the pipeline, but legislators would rather avoid that outcome.

If that provision is violated, however, the State could face a treble damages penalty with TransCanada. It is possible, of course, that TransCanada and the State might renegotiate the AGIA contract if the project is not moving forward any time soon. TransCanada may want to be a part of the smaller 24-inch in-state gas project, also. Additionally, there are proposals that this project might be expanded to “prebuild” a 48-inch pipeline to Fairbanks in anticipation of an extension someday to Alberta or Valdez. Such pre-builds are unusual but have occurred elsewhere.

A problem faced for the 24-inch pipeline, however, is whether the State will fund the money needed to complete enough engineering for an open season, now seen as possible in 2013. About $400 million needs to be invested in engineering and environmental work for a cost estimate potential shippers will have confidence in. Much of that will have to be appropriated over the next two years, although the Legislature has already set aside $200 million.

An open season on this project is the truth test, of course, just as it is with the 48-inch pipeline to Alberta and its

Alaska legislators are impatient to learn more about results of the open season... by legislators, however, over contractual provisions the State has agreed to with TransCanada as part of the AGIA contract to prohibit shipping of more than 500 million cubic feet a day of gas through a “competing” pipeline (one the State has financially assisted, such as the 24-inch in-state line) could doom the viability of that project.

It is likely that large industrial customers will be needed for the 24-inch

alternative route to Valdez. The larger question is what will happen if the open season is held and there are not enough customers signing up. Will the State be willing to step in to underwrite the project, possibly to the tune of several billion dollars? The 24-inch pipeline appears to have substantial support in the Legislature and at least some support from the governor, but the depth of that backing has yet to be tested. ❑

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IN

TRANSITION

BY TRACY BARBOUR

Deadhorse A company town

WORKING COMMUNITY Deadhorse is a remote area that focuses on supporting oil exploration, development and production. Essentially a gigantic industrial site, it provides services to the thousands of people who work on Alaska’s North Slope.

“It’s hard for many Alaskans to imagine what it’s like,” says Alaska Department of Labor Economist Neal Fried. “It’s probably one of the biggest work camps in the world in such an isolated place.”

Technically, Deadhorse is an unincorporated community in Alaska’s North Slope Borough near the Arctic Ocean. The “town” primarily consists of a general store, post office and a

38

Photo courtesy of Steffanie Reed

F

or nearly 13 years, Mike Kunkel has been working in the legendary place known as Deadhorse.

Kunkel, an operations manager of Brooks Range Supply, works for two weeks and takes two weeks off. Then he heads home for Idaho until it’s time to repeat the cycle.

Everyone does the two-week work cycle known as a “hitch.” It’s a demanding schedule. “You work every day you’re here, 10- and 12-hour days,” Kunkel says. “It’s constant. You work 14 days in a row.”

But the most challenging aspect of his job isn’t the schedule, he says. It’s the employees. “When people work every day for two weeks, they can get a little grouchy sometimes,” says Kunkel, who manages about 20 workers at a time.

During rare moments of down time, Kunkel says he watches movies, otherwise, there’s not much to do in Deadhorse. There are no theaters, bars or other places to relax, but there is a workout room and satellite TV. “Nobody lives here,” he says. “There are only camps where people stay.”

Tourists peer out at the Arctic Ocean.

few hotels that provide lodging for the workers of companies operating at the nearby Prudhoe Bay oil fields. Deadhorse buildings are prefabricated modules resting on man-made gravel pads.

Brooks Range Supply, which houses (and owns) the general store and post office is a key fixture in Deadhorse.

The only store of its kind in the area, Brooks carries industrial and oilfield supplies, hardware, auto parts, tools and even lumber. “We’re not like a typical auto parts or hardware store,” Kunkel says. “We try to stock whatever people might need.”

The General Store, located above Brooks Range Supply, stocks a wide variety of general merchandise along with Alaska Native crafts and souvenirs.

Another critical business is Deadhorse Camp, which provides “rustic”

hotel accommodations for workers and adventurous tourists.

DEADHORSE MYSTIQUE Deadhorse is accessible by the James Dalton Highway from Fairbanks or the Deadhorse Airport. Its far-flung location and uniquely built infrastructure make it one of the most intriguing places in Alaska.

Outside Alaska, Deadhorse is generating broad interest through several television shows. It’s been featured on the History Channel’s Ice Road Truckers, a reality TV series that often dramatizes trucking on the Dalton Highway. The town has also been spotlighted in episodes of America’s Toughest Jobs and the BBC’s World’s Most Dangerous Roads.

Part of the intrigue people have for

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

Deadhorse relates to its geographic location, climate and wildlife. Located about 250 miles north of the Arctic Circle, Deadhorse is a prime spot to experience the midnight sun and gain access to the Arctic Ocean when it’s thawed during summer.

The climate of Deadhorse is one of extremes. Wind speeds can exceed 100 miles per hour, while winter temperatures can plummet to 50 degrees Fahrenheit. Daylight hours are scant during winter, with the shortest of days lasting slightly more than an hour. Summer days can stretch for almost 24 hours – but summertime is fleeting. “You only really have a month and a half of summer,” Kunkel says.

Deadhorse is home to a variety of wildlife, including grizzly bears, polar bears, musk ox, caribou, and Arctic hares, squirrels and fox. It also has an abundance of waterfowl, such as geese, swans, seagulls and eagles, for bird watching and hunting.

ARCTIC TOURISM Alaska’s North Slope is a unique destination for adventure-seeking tourists.

Many visitors to Deadhorse take tour buses from Fairbanks over the Dalton Highway. A variety of tours are available from organizations like Northern Alaska Tour Company, HAP AlaskaYukon, 1st Alaska Outdoor School and Alaskan Arctic Turtle Tours.

Other Arctic tourists prefer to travel independently in cars and RVs. Recently, there’s been a noticeable surge of motorcyclists, as well as a few bicyclists and hikers, according to Deb Hickok, president and chief executive officer of the Fairbanks Convention and Visitors Bureau.

There’s no official count, but up to 4,000 people visit the DeadhorsePrudhoe Bay area each year, Hickok says. Visitors run the gamut, from seniors on tours and adventure travelers to domestic and international travelers. “A unifying characteristic may be that they have a higher propensity to get off the beaten path,” Hickok says.

Northern Alaska Tour Company offers a number of guided tours to help people enjoy Alaska’s Arctic.

The company’s Arctic Ocean Adventure gives travelers access to the

Arctic Ocean via Prudhoe Bay. During the three-day excursion, guests travel by van from Fairbanks to the community of Coldfoot. Along the way, they stop by the Arctic Circle Trading Post located in Joy, travel the rugged Dalton Highway and experience the mighty Yukon River. “It gives people a contemporary look at rural Alaska,” says Marketing Coordinator Matt Atkinson.

The next day, tour guests make the 240-mile trip to Deadhorse, traveling on a completely gravel road with virtually no towns or villages along the way.

On the final day of the tour, guests visit the Prudhoe Bay oilfield, get a chance to dip their toe in the Arctic Ocean, and return to Fairbanks by air.

Making the classic land trek up the Dalton and walking on the shores of the Arctic Ocean are major draws for tourists. But the journey, Atkinson says, is 80 percent of the fun. “The route between Fairbanks and Prudhoe is a world-class wilderness route,” he says. “It’s some of the most undeveloped land that you can access by road ❑ in Alaska.”

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39

OIL & GAS

Most by independents, new to the state

BY MIKE BRADNER

A

laskans are seeing almost an explosion of activity by independent oil and gas companies, most of them new to Alaska. These companies come in various sizes. They include very small, locally owned firms like UltraStar, managed by Jim Weeks, a former Arco Alaska senior manager, exploring on the North Slope; and Nordaq Energy, headed by Bob Warthen, another industry veteran, exploring on the Kenai Peninsula.

There are a range of larger firms, like Brooks Range Petroleum and Cook Inlet Energy, which are Alaska-based and working only in Alaska but owned mostly by out-of-state owners. There are the much larger independents like Apache Corp., an experienced company relatively newly arrived to Cook Inlet, to Anadarko Petroleum Corp., a large independent active in exploration and production for many years, mostly on the North Slope.

There is a long list of other independents, most small- to medium-sized and most newly arrived, who are trying out new ideas. Some of these have the potential to fundamentally change the oil business in Alaska.

By definition, independent oil and gas companies are those doing business in a segment of the petroleum industry, usually “upstream,” in exploration or production, but sometimes

40

“downstream,” in refining and marketing. Independents focusing on upstream exploration and production are not “integrated” companies, such as the large oil companies, which have their own refining and marketing. The upstream independents find and produce oil or gas and sell to others, typically companies that own refineries, either major companies or independent refiners – downstream refiners and marketers that do not own oil and gas wells, but buy from firms that do. Owners of Alaska refineries such as Tesoro Petroleum Corp., owner of the refinery near Kenai, are examples of independent refining and marketing companies.

Flint Hills Resources, which owns a refinery at North Pole, near Fairbanks, also fits this category although Flint Hills does not own its marketing outlets but has, among other customers, long-term contracts with the Holiday Express retail gasoline station chain in Alaska. Petro Star, which owns refineries at North Pole and Valdez, owns some retail outlets, but mainly sells its products through others.

To complete the loop there are independent companies that own pipelines that connect the upstream and downstream, the “mid-stream” so to speak. TransCanada Corp., for example, is working on the large Alaska gas pipeline as an independent

pipeline company. TransCanada also owns and operates oil pipelines, although not in Alaska.

VARIED PAST PERFORMANCE The arrival of the independent exploration and production companies has been under way for some time, and actually with a mixed track record. In fact, several independents have arrived and left already. Force Energy, which arrived several years ago, sold to Forest Oil which sold to Pacific Energy, which went bankrupt.

Its assets are now owned by Cook Inlet Energy, which is redeveloping them.

On the North Slope, FEX LLC, the U.S. subsidiary of Talisman Energy, a major Canadian independent, came to the North Slope to explore on the National Petroleum Reserve-Alaska, made discoveries, but has now sold or abandoned its properties, a move partly caused by a change in corporate policy and partly by discouragement over high costs and a stifling regulatory regime in NPR-A under the U.S. Bureau of Land Management.

New arrivals have quickened in recent years, partly in response to a set of generous State exploration incentives, but also because the large oil and gas companies that have long dominated the Alaska industry are leaving or changing their focus. That has

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

a healthcare â&#x20AC;&#x153; Managing enterprise as diverse as ours in bush Alaska can be quite a challenge.

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created opportunities for new players.

For example, Chevron Corp., long a Cook Inlet producer on its own and through its subsidiary Unocal, which Chevron acquired in 2005, is selling its Southcentral assets to Hilcorp, a large Texas-based independent. Chevron is still retaining its interests in leases on the North Slope, however, although it is not an operating company there.

Meanwhile, the three major North Slope producers, BP, ConocoPhillips and ExxonMobil, remain active in new development work in the existing oil fields, but are not engaged in new exploration, at least onshore.

ConocoPhillips is actively planning offshore exploration in the Chukchi Sea, but is no longer engaged in onshore exploration. BP and ExxonMobil are not doing exploration onshore or offshore, but are deeply engaged in developing new oil and gas in deposits already discovered but not developed, such as the Ugnu heavy oil accumulation in the case of BP and the large Point Thomson gas and condensate field in the case of ExxonMobil.

This trend, of major companies exploring and developing fields in new areas and then retrenching as the oil and gas fields mature, is commonly seen in the industry. It has happened in the Gulf of Mexico and the North Sea, where the opening provided opportunities for companies like Apache, allowing them to grow. It is happening now in Alaska, and new companies are coming in.

COOK INLET DEVELOPMENT The list of independents who are already producers in Cook Inlet includes Armstrong Oil and Gas, an exploration company that has now become a producer with gas wells at the small North Fork gas field near Homer, and Cook Inlet Energy, which purchased and restored oil production assets of bankrupt Pacific Energy, at the formerly shut-in Osprey platform in Cook Inlet as well as the nearby West MacArthur River field. XTO Corp. was an independent that purchased from Shell and then operated two long-producing oil platforms in Cook Inlet in the Middle Ground Shoal, but XTO has been purchased by ExxonMobil, a major company.

An independent explorer in Cook

42

Inlet that will soon be a producer is Buccaneer Energy, an Australian independent, which discovered gas earlier this year on the Kenai Peninsula. Buccaneer plans to be producing gas and selling to Enstar Natural Gas, the Southcentral gas utility, by the end of this year. There are independents that are still explorers in Cook Inlet and hope to become producers, such as Apache Corp., a large company that now owns substantial acreage in the region and is exploring. There also is Escopeta Oil, a smaller firm that moved a jack-up rig to Cook Inlet this summer and is now drilling in the inlet. Linc Energy, which has a primary focus for now on the North Slope, also is exploring in Cook Inlet as a conventional well. Buccaneer, which drilled the onshore gas well near Kenai, plans to have a jack-up rig in the Inlet next summer drilling offshore prospects, too.

NORTH SLOPE INDEPENDENTS

company that has been exploring prospects north of the Prudhoe field. UltraStar drilled one well two years ago and hopes to drill a second test in the area this winter.

Anadarko Petroleum, a major independent, is a producer (the company owns a minority share in the producing Alpine field, with ConocoPhillips), and has been an active explorer in recent years. Anadarko has recently been drilling for gas in the southern “foothills” area of the Slope on lands owned by Arctic Slope Regional Corp.

The company acquired the Gubik gas deposit, a small discovery made years ago but not developed, and drilled a new exploration well at Gubik to delineate its reserves and a separate well nearby, Chandler, that also found gas. The results of the production test at Gubik are still confidential, and the Chandler well must still have a production test, which Anadarko will conduct this winter.

On the North Slope, several independents are at work. The largest is Pioneer Natural Resources, which is the first independent to actually develop a new producing field, the small offshore Oooguruk field. Pioneer is now working on tapping nearby undeveloped oil accumulations.

Savant Resources, a small Denver independent, has redeveloped the small, shut-in Badami field east of Prudhoe Bay, a field initially developed by BP but then shut in when production did not meet expectations. Savant took the project over, drilled a successful exploration well and several “sidetracks,” or new lateral wells, drilled from the wells BP drilled. Badami is now producing about 1,400 barrels per day, according to Savant.

Several independents are exploring.

Brooks Range Petroleum has been very active over the last several years, drilling exploration wells just north of the Prudhoe Bay field and, most recently, west of the Kuparuk River field. Oil was discovered in the tests drilled north of Prudhoe, but not enough has been found to develop a production project.

A well drilled west of Kuparuk last year also discovered oil, but Brooks Range must go back to do a production test this winter. UltraStar, as previously mentioned, is a small, Alaskan-owned

There are two other very exciting projects being pursued by independents this year. One is an exploration project to determine if oil can be produced from the shale rocks that also are the “source” rocks for oil that has accumulated in the large conventional oil fields. This is being pursued by Great Bear Petroleum, a small independent. The other is a project by Linc Energy, the Australian independent also active in Cook Inlet, to develop the small Umiat oil field, a discovery made decades ago in the early North Slope exploration but, like the Gubik gas find, considered too small to develop at the time.

Umiat is a known oil deposit that is within NPR-A. Shallow, high quality oil was discovered there in the early years of exploration of NPR-A by the U.S. Navy (it was formerly a naval petroleum reserve), and Umiat also became a base camp and staging area for other exploration in the region. Umiat has an excellent air field and camp facilities.

Linc Energy acquired federal leases held by Renaissance Umiat, a small independent company, and launched an aggressive program to drill new exploration wells and, it is hoped, add to the known reserves. The company planned to move a rig to Umiat this fall to drill

SHALE, GUBIK AND UMIAT

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

several wells. What could enhance this project is the State of Alaska’s plan to build a natural resources road to Umiat from the Dalton Highway, a distance of about 90 miles.

An Environmental Impact Statement for the road is now under preparation by the Alaska Department of Transportation and Public Facilities.

The road could allow for less costly year-around surface access to Umiat as well as the Gubik gas field, which could be developed if a gas pipeline is built. Linc Energy would use the road to build a pipeline to carry oil from Umiat to the trans-Alaska oil pipeline.

Great Bear Petroleum’s shale oil project has created substantial interest within the state’s oil and gas industry. Great Bear plans four exploration wells this winter to test the feasibility of producing oil from shale and, if this is successful, a test production project would be built next year. If this, too, is successful, the first commercial-scale production, involving several producing pads, would be built in four to five years.

What Great Bear envisions is similar to the shale oil projects being done successfully in North Dakota and Texas.

Like those projects, the fracturing of the shale through injection of fluids at high pressure would be required, a process known as “fracking” that has attracted opposition in some Lower 48 areas because of environmental problems.

Shale oil development also requires a large number of wells, pads and surface facilities, and large amounts of water to be used in the fracturing fluid.

Because of that, Alaska shale oil development could be challenged because of the high-cost environment of the North Slope, and potential problems in securing adequate amounts of water, although Great Bear believes it will be able to tap an underground source of brackish water for its project. There will be many permit issues related to the scale of the surface “footprint,” however. The State has formed a special task force to work on these problems.

Despite the challenges, the potential North Slope shale oil resource appears to be immense, and it could be a game-changer for the Alaska industry ❑ if problems can be solved.

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

43

TRANSPORTATION

Remote Mobilization in Alaska

Photos courtesy of PRL Logistics Inc.

No dock exists at Cape Lisburne, so PRL and Samson Tug and Barge performed a tactical beach-landing of a ramp barge during load-out operations of contaminated soil.

Hybrid transportation and logistics

BY TRACY KALYTIAK

A

t about noon on Dec. 6, 2004, the Selendang Ayu was carrying a load of 60,000 tons of soybeans, 440,000 gallons of bunker fuel and 18,000 gallons of diesel oil from Seattle to Xiamen, China, when the captain ordered the main engine stopped so a glitch with a cylinder could be examined.

The 738-foot Malaysian freighter

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with a crew of 26 had recently passed through Unimak Pass, into the Bering Sea, 120 nautical miles from Dutch Harbor.

That decision to stop the engine seemed insignificant, routine, but swelled into a matter of huge consequence when it wouldn’t restart.

Two days later, the stalled ship had drifted onto the north shore of Unalaska Island, despite efforts to

anchor and tow it. Six of its crew were dead, killed after a massive wave inundated the engine of a rescue helicopter, forcing it to crash into the churning dark sea. Rocks tore the Selendang Ayu in half, spilling 360,000 gallons of its fuel cargo into the water and touching off an 18-month cleanup.

Containing the aftermath of catastrophes like the Selendang Ayu wreck

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

and spill is just one of the many facets of what remote-mobilization companies do in Alaska.

LOGISTICAL EXPERTISE Smaller companies specialize in moving people and equipment to remote construction, mining and drilling sites.

Others, like Ron Hyde’s Anchoragebased PRL Logistics Inc., formerly known as Pacific Rim Logistics, can do that as well as take up enormous challenges like the Selendang Ayu spill, which it did seven years ago.

“Logistics has always been a passion,” said Hyde, who launched PRL in 2002. “I grew up in the Bush, Goodnews Bay, so I was always on the receiving end of logistics.”

Hyde worked for Jacobs Engineering Group for 10 years.

“While I really enjoyed my career at Jacobs, logistics wasn’t the core competency, core mission, of that company. It’s an important element of what they do, but wasn’t their primary focus. PRL enabled me to refine logistical tools, planning, on ways to be able to move quickly and support very complex projects.”

PRL acts as logistical support contractor for Gallagher Marine Systems as well as a first responder for the State of Alaska when a crisis like the Selendang Ayu wreck and spill occurs. Hyde received a call at three in the morning after the ship started drifting toward the island.

“We worked as initial incident commander and our company was used to provide logistical procurement of helicopters, fuel, passenger jets, housing in Unalaska and Dutch Harbor, organize daily flights, dispatch for passenger transport,” Hyde said.

“Dutch Harbor was the closest hub so we deployed there, set up a command center, secured local services, local labor, and daily were monitoring the vessel’s position and working with other teams to support emergency response and recovery efforts.”

The team at PRL has worked in nearly 800 locations around the state – among the Aleutians to Southeast, the North Slope, Interior and Western Alaska.

“You need to have currently trained staff that you need to have simmering,” www.akbizmag.com • Alaska Business Monthly • November 2011

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Hyde said, referring to his staffâ&#x20AC;&#x2122;s readiness for mobilizations. â&#x20AC;&#x153;There has to be a dependable way of communicating, electronically by both data and voice, you need to have a good subcontractor and manpower database. Weâ&#x20AC;&#x2122;re fortunate to have good relationships with the main transportation carriers in Alaska.â&#x20AC;?

PRL uses NOMAD, an in-house web-based logistics and planning system, to enhance its communications capability, and has worked with companies that include PenAir, Lynden, Carlile, Bristow Aviation, Sourdough Express, Bighorn Transportation, DHL, Naniq Global Logistics, Alaska Marine Lines, Samson Tug and Barge, Crowley, Foss Maritime and Bowhead Transportation. â&#x20AC;&#x153;We either have pre-existing agreements in place or develop an agreement on a per-project basis,â&#x20AC;? Hyde said. â&#x20AC;&#x153;The companies are sensitive to the need to mobilize quickly, especially in an emergency.â&#x20AC;?

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Another example of PRLâ&#x20AC;&#x2122;s more complicated work took place in Kamchatka, Russia, where the company rapidly mobilized a soft-sided camp, supplies, equipment, and personnel from Fairbanks to Kamchatka in support of an exploration project. PRL completed all customs documentation; set up camps and provided on-site support camp operations; managed multiple camps for up to 160 people; tore down and reconstructed camp as the exploratory rig moved to new locales and set up and provided operations assistance for the clientâ&#x20AC;&#x2122;s adjacent camp. â&#x20AC;&#x153;It was very difficult because many things were coming from outside Russia so we had customs issues to deal with,â&#x20AC;? Hyde said. â&#x20AC;&#x153;We had locals and noncitizens and there were complexities because they werenâ&#x20AC;&#x2122;t able to communicate. It was extremely remote, operated year-round for three years.

Operating in that environment, you need to keep your people safe through training in a culture of safety. It was important to have staff on site, your companyâ&#x20AC;&#x2122;s leadership on site.â&#x20AC;?

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On another project, in Cape Lisburne, PRL supported a construction and

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

environmental services company with planning marine logistics, as well as transporting approximately 12,000 tons of PCB- and fuel-contaminated soil and extensive heavy machinery, vehicles and project supplies.

The contaminated material had to be transported from Cape Lisburne to Seward and then on to Seattle, involving mobilization and demobilization of more than 300 ISO bulksoil containers, 500 soft-sided 12-ton containers, and ISO bulk-fuel tanks.

PRL provided management, field labor, dedicated chartered tugs, barges, beach landing preparation and equipment, staging and crane work.

FACILITATING SUCCESS While PRL handles complex, largerscale mobilizations in remote areas of the state, another company, Horst Expediting, is an example of a company that hurdles small- and medium-sized logistical obstacles.

Josh Horst founded Horst Expediting and Remote Operations with a half-ton pickup, an iPhone, and a computer out of his dry cabin

outside Fairbanks in January 2008.

Horst moved to Alaska in 1997 to study business management at the University of Alaska Southeast. He graduated in 2001 and launched into field work in the summer of 2006 – first as a deck hand on a Bristol Bay fishing boat and later as a geo-tech at a minerals exploration project in the Brooks Range. In 2007, he returned to the Brooks Range as camp manager for the exploration project.

“It was during that year that I really learned firsthand how deeply these remote projects depend on having someone in town who can keep them supplied,” Horst said. “There were several other companies in the field services market that are extremely good at what they do, but the feeling I got as the guy placing the orders was that our project was too small to really be important to them. In my mind, a half-million or million-dollar project seems huge, but to others if it’s not big gold, big government, or big oil it’s not really that big of a deal.”

Horst decided to start a company that would, he said, “facilitate success”

for small- to medium field-based projects serviced out of Fairbanks.

HELPING THE LITTLE GUY “The ‘little guy’ was a niche that seemed underserved and desperate for help and that’s who we wanted to help,” Horst said.

Horst said 2008 was a “total flop” as economic uncertainty tightened the investment market and projects that were sure deals in 2007 vanished overnight.

“I made just enough money to buy enough heating oil and Top Ramen to get me through the winter,” he said.

In December 2008, he decided he would offer an in-kind expediting sponsorship to the Yukon Quest. He landed a contract to provide logistics and guiding services to a Japanese production company doing a tourism show on Alaska and the Yukon, centered on the Yukon Quest.

“It was an excellent project and it carried me through to spring when things took off like mad, and we haven’t looked back since,” Horst said.

Horst Expediting has two major components – expediting and remote operations.

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

47

PRL arrives at Cape Lisburne with containers and equipment for packing and transport of PCB-contaminated soil and debris.

The expediting services keep camps and crews stocked with everything from groceries to tools and parts.

“We source products and repairs from vendors throughout Alaska, then the Lower 48, and tackle the logistics required to get what our customers need quickly and accurately,” Horst said.

The remote operations component varies.

For camps, the company rents completely outfitted tent camps for crews

of one to 24 people, rents camp equipment, constructs tent camps owned by its customers, and provides procurement services for customers who prefer to own their own camp but need help getting the right equipment.

Guiding can range from what Horst refers to as “bear guiding” – keeping a crew out of harm’s way in bear country, “marmot guiding” – which involves mammal watching, and film guiding – doing such things as

supporting two Japanese production companies’ efforts to film the Yukon Quest. Field work involves putting just a few people out in the field for a project, doing soil sampling, carpentry, cooking or claim staking.

As Horst’s company has grown, it has added two more vehicles, about a dozen tents of various sizes and styles, tons of camp equipment, a shop, an office with a shipping and receiving hub adjacent to the Fairbanks airport, and, most importantly, it has added employees and developed crucial subcontractor and vendor relationships.

DEVELOPING RELATIONSHIPS Horst uses technology as its primary tool for the work it does.

“Five years ago, a small camp wouldn’t have any communications at all except for maybe a satellite phone,” Horst said. “Today, Hughes Net has changed everything. We’ve developed systems utilizing simple technologies from Google docs to place, track and complete orders through shared documents stored

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online. It’s streamlined our ordering without costing anyone any money and has improved communications drastically. Internet in these smaller field camps is a game changer.”

Aside from Horst’s ordering system, the company has expanded relationships with the people who fly freight out to its camps, which has helped the company get priority freight moved quickly from its trucks, onto the planes, and up to the camps.

“Again, it goes back to people and relationships,” Horst said.

Horst Expediting has performed services for companies that include Goldrich Mining Company, Black Rock Drilling, Cruz Construction, Alaska Gold Company, UCore Minerals, AuruMar, State of Alaska, University of Alaska, Marsh Creek, NHK Japanese television, Yukon Quest, Wild and Free Mushing, Cedar Mountain Exploration, Iniakuk Lake Wilderness Lodge, Spirit Lights Lodge and Brooks Range Aviation.

For the short run, Horst said, economic uncertainty will likely keep gold prices high, resulting in increased exploration from companies of varying sizes.

“We work with a couple of big boys, but more and more of the smaller outfits are trying their hand at it and that’ll likely expose us to more opportunities to help them get the ball rolling,” Horst said. “Those customers are showing up with a small amount of investment dollars and often with little experience working out of Fairbanks. They know their rocks and they know how to mine, but they don’t necessarily know where to get the right type of steel, fittings, parts, tools, tents or clothing they require, nor how to get it out to their site.

That’s where we come in.”

Horst says the weak U.S. dollar seems to be creating a more attractive investment community in Alaska.

“It’s no coincidence that I’m sending invoices to Canada and South Africa almost as often as I’m sending them to Alaska and Lower 48 companies,” Horst said. “Money is coming to Alaska from all over the world now that we’re ‘cheap’ and that’ll likely help my company. The local knowledge we offer is ❑ very valuable in Alaska.”

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

49

BUILDING ALASKA SPECIAL SECTION

Photos courtesy of Allen Marine Inc.

Allen Marine designed and built a floating shallow draught drydock, which offers a cost-effective alternative to hauling boats out for maintenance and can be used in rural Alaska where traditional drydock facilities are scarce.

Allen Marine 2011 ABM Contractor of the Year

BY JULIE STRICKER

M

inutes after U.S. Airways Flight 1549 crashed into the Hudson River in January 2009, boats from the U.S. Coast Guard and New York ferry system surrounded the plane, plucking all 155 aboard to safety. Although it happened thousands of miles from Alaska, it was Alaskan ingenuity that played a role in the success of the rescues.

About half of the boats involved in the rescue were designed and built in Sitka, by Allen Marine Inc. The fast, highly maneuverable ferries were built specifically for New York Waterways, which carries 35,000 passengers daily across New York’s congested rivers

50

and harbors. Their design showcases Allen Marine’s specialty, which is designing and building boats to meet the specific demands of their owners. Over its 40-year history, Allen Marine has built one-of-a-kind boats for tourism in Southeast, commuters in crowded cities, ocean-based petroleum exploration and to ferry workers to remote job sites.

In the process, the family owned company has pioneered many improvements in Alaska water travel, such as a four-engine/four-jet catamaran that ferried workers to Greens Creek Mine three times a day for 10 years without missing a trip. It builds structural components such as bridges, ramps and

floats. Allen Marine recently designed and built a custom shallow-draught floating drydock that can be towed to areas in rural Alaska lacking drydock facilities, creating the potential for new jobs and industries in remote regions.

“He’s probably built more boats in Alaska than anyone,” John Litten, owner of Sitka Tours said of company founder Bob Allen. “There is an incredible difference in styles, from riverboats they can bolt together and go up rivers to the catamarans in New York.”

FAMILY BUSINESS The family owned company, started by Bob and Betty Allen in 1967, is powered

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

by Bob Allen’s favorite saying, “Just because it hasn’t been done before, doesn’t mean we can’t do it.”

Allen had no formal engineering training, but he was an experienced boat operator and was very observant, Litten said.

“He’s always had ideas,” Litten said.

Allen first used wooden boats bought from Seattle to take tourists on trips to Silver Bay, but constantly talked about building a big boat that would be more comfortable for tourists and offer better wildlife viewing opportunities.

Litten said Allen took the original plans for a wooden boat and modified them to meet his exacting specifications, with wider passageways and bubble windows so passengers could see up as well as out. The St. Maria, built in 1985, was made of steel, although Allen then switched to aluminum. The company has built more than 50 boats since then.

The company says the 19 vessels it sold to the New York ferry company are “the largest single export of manufactured products in the history of the 49th state.”

“It’s absolutely tremendous what, as a family, they’ve accomplished,” Litten said.

Locally, Allen family’s impact on Sitka has been “huge,” said longtime friend Fred Reeder, who works for Cruise Line Agencies of Alaska. He also credits the Allens as the pioneers of modern tourism in Sitka.

“He started with just one boat 40 years ago and has grown it into a huge business,” Reed said.

Allen Marine was born out of disaster. The family was living in Kodiak when the 1964 Good Friday earthquake struck, said Jamey Cagle, vice president of Allen Marine and grandson of Bob and Betty Allen.

Allen was a fisherman and his boat was anchored on the far side of the island when word came over the radio of the quake and tsunami warning. After the danger was over, he headed back to Kodiak, picking up survivors as well as the bodies of some who didn’t make it.

His family was fine, but the tsunami had devastated the fishing industry. In the meantime, Allen, who in earlier years had helped build rural air stations and had experience working with heavy equipment, bid on and received a

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contract to salvage underwater telegraph cables around Kodiak. â&#x20AC;&#x153;By himself, he was able to design equipment to pull up submerged cable,â&#x20AC;? Cagle said, adding that Allen would pull up two or three miles of cable at a time, working alone. â&#x20AC;&#x153;He built a smelter and was able to smelt out the metal, mostly zinc, and was able to sell that off and got seed money for the family to relocate to Southeast Alaska.â&#x20AC;?

SITKA & TOURISM The return was a homecoming for Betty Allen, a Tlingit from Juneau. The Allens settled in Sitka, where they bought an existing boat repair shipyard and started servicing local vessels, mostly fishing vessels and pleasure craft, as well as chip barges for the nearby pulp mill. Allen kept his eyes open for other opportunities.

Although tourists had been traveling to Alaska for nearly a century, the cruise ship industry was still in its infancy.

Sitka is a deep-anchor port, Cagle said, which meant ships had to anchor out in the harbor and send the passengers ashore in small boats.

Allen approached the cruise ships and offered to take over the shuttle service. He took out a piece of dock to help the passengers disembark more comfortably and then took them ashore. â&#x20AC;&#x153;They got efficient at it,â&#x20AC;? Cagle said, but at the time there wasnâ&#x20AC;&#x2122;t a lot for tourists to do ashore in Sitka. So Allen asked the cruise ship if they would offer passengers the opportunity to go on his familyâ&#x20AC;&#x2122;s guided wildlife tour.

The family had started doing tours after Bob Allen heard about a boat for sale that had been damaged when the tide went out at its anchorage and a submerged piling punched a hole in it.

Allen bought the boat from the insurance company at a discounted rate, hauled it back to Sitka, repaired it and started doing wildlife tours of Silver Bay for independent travelers. The tour was a family affair, with all five kids pitching in.

The tours were a success, and Allen Marine expanded its operations even as it continued serving other vessels at its 400-ton steel drydock. By the mid80s, Bob Allen decided he needed a new boat and started the companyâ&#x20AC;&#x2122;s shipbuilding arm. At first, most of the

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

Allen Marine has been leading wildlife tours in Southeast Alaska since the early 1970s. Most of its boats were designed and built in Allen Marine’s Sitka shipyard.

boats were built to serve Allen Marine’s rapidly growing tourism business.

CATAMARAN CONSTRUCTION In 1986-87, Allen Marine started building the catamarans the company is known for today. The first was the 78foot M/V St. John, powered by a pair of diesel engines and waterjets. The following year, Allen Marine won a contract to ferry workers from Juneau to the Greens Creek mine on Admiralty Island.

Under the contract, the ferry had to maintain a minimum speed, Cagle said. Allen built a 105-foot aluminum catamaran called the Alaskan Dream.

“It was the first in the world with four engines and four waterjets,” Cagle said, and Allen went with waterjet systems on his catamarans for very specific reasons. “Bob was a commercial crabber. He was also around the logging industry. A lot of the trips to the mine would be in the dark, especially in the winter. He didn’t want to worry about hitting a log or sucking up a crab pot and shutting the engines down.”

The focus on speed and reliability was also behind the decision to use the unprecedented system of four independent propulsion systems on the Alaskan Dream. Three engines were enough to meet the minimum speeds, so the fourth was a spare. Allen also bought a fifth engine so he could change one out on the run if necessary.

“We operated Greens Creek for 10 years,” Cagle said. “The only trip it missed was due to a storm that wiped out the dock on Admiralty Island. The boat made it, but the dock was gone.”

That attention to detail is behind the company’s success in engineering ways to handle the sometimes unique needs of people for whom Allen Marine builds boats, including its own tourism business, which today employs more than 300 people and covers Southeast Alaska and Prince William Sound.

“You could see the evolution of our boats from year to year,” Cagle said.

“We learned a lot. A lot of the guys who built the boats also operated them during the summer,” which gave Allen Marine direct feedback on what worked and what didn’t. And what worked for Allen Marine also could be applied to the needs of other customers.

In addition to the New York ferry company, Allen Marine has also built a boat for the National Park Service for rangers at its Brooks Camp and an all-aluminum landing craft for the California Park Service at Angel Island in San Francisco, among others. Like many of its other products, the floating drydock was built because it met a need that Allen Marine itself had.

“We didn’t have the facilities to haul out our own vessels,” Cagle said. “The drydock was built to meet our needs as well as meet the needs for other vessels ❑ in this region.”

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BUILDING ALASKA SPECIAL SECTION

Image courtesy of McCool Carlson Green and University of Alaska Anchorage

Preliminary design concept of the new 189,000-square-foot Seawolves Sports Arena at the University of Alaska Anchorage by McCool Carson Green architecture firm. The arena features seating for 5,000 spectators in the performance gymnasium, which is being designed to NCAA standards and will accommodate television broadcasts for basketball, volleyball and other venues.

The new facility also will house an auxiliary gymnasium, gymnastics practice facility, athletic fitness center and multiple support spaces. The complex will host sporting events, UAA graduation ceremonies, speakers and traveling musical concerts.

Landmark Buildings by AMC Engineers Company celebrates 30 years in Alaska

BY LOUISE FREEMAN

A

MC Engineers recently held an open house to celebrate its 30th anniversary and to recognize the appointment of new President J. Pat Cusick and the recent expansion of its board of directors. AMC’s awardwinning work ranges from small projects – a new electrical service at the Bear Tooth Theatre in Anchorage, to enormous and complex projects – a $686 million oil production facility for BP Exploration. AMC’s staff of 13 mechanical engineers and 10 electrical engineers and a skilled support team regularly tackle work in the fields of transportation, education, medicine, industry and public buildings. Theuir work includes the $82 million, 196,000-square-foot-foot UAA Seawolves Sports Arena now under design with architect McCool Carlson Green, and the new $92 million Alaska Scientific Crime Detection Laboratory with architect Livingston Slone Inc., now under construction in Anchorage.

AMC’s roots reach back to 1981, when Dave Adams, an electrical engineer, and A. Boyd Morgenthaler, a mechanical engineer, launched the business, then known as Adams,

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Morgenthaler and Co. Inc. In 1996, the company was renamed AMC Engineers.

After Adam’s sudden death in a car accident in 2004, the ownership of AMC was expanded when Morgenthaler brought on board several other engineers.

EXPANDED LEADERSHIP AMC expanded its board of directors from two to five in June, another significant change. Cusick has worked for AMC for 28 years, leading the electrical engineering department since 2004. Former president and co-founder Morgenthaler now holds the position of vice president, and Chief Financial Officer Sandy Houlihan continues in her role as secretary-treasurer. The other two new board members are Dave Shumway, principal mechanical engineer, and Ken Ratcliffe, principal electrical engineer.

AMC has an industry-wide reputation for quality engineering. Cusick says the company earned this distinction by having its senior engineers not just lead major projects, but also be involved hands-on in the day-to-

day development of the projects. The company boasts a distinguished portfolio of high-profile clients, among them the State of Alaska, Providence Hospital, Anchorage and Mat-Su Borough school districts and the University of Alaska. Such clients require a long-term vision, meaning AMC continually takes into consideration the life-cycle cost of what they call “50-year buildings.”

Company leaders recognize the bulk of a project’s cost comes not from design and construction, but maintenance and operation of the facility over its 30-year to 50-year life span.

“Taking the extra effort and attention to detail to get the engineering right up-front pays huge dividends throughout the life of a building,” Cusick said.

“That’s why our clients really value our services and we have long-term relationships with them.”

PROJECT PERFECTION AMC strives to perfect a project before the first nail is driven. Their engineers take great care in the design phase so little needs to be modified during construction.

“One thing we really pride ourselves

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on is the low change-order costs on our projects,’’ Cusick said. “We’ve proved on project after project our ability to bring in jobs with a relatively low percentage of change orders.”

Cusick also says the company’s track record of having a low change-order rate is especially remarkable, given the complexity of many AMC projects.

The redevelopment of the Ted Stevens Anchorage International Airport, for example, took 10 years to design and complete; a massive undertaking that included 40 to 50 individual projects.

Construction of the new C Concourse involved not only demolishing the old concourse, but also building temporary administrative offices, relocating the staff, moving the terminal’s main telecommunications room, building new ticket counters and boarding gates for commuter airlines, and rebuilding electrical infrastructure serving the entire airport. McCool Carlson Green led the design of the Terminal Redevelopment Project.

ESSENTIAL EXPERIENCE Only a large and experienced firm such as AMC would be up to the task of designing the mechanical and electrical systems for a building with such strict specifications as the Alaska Scientific Crime Detection Laboratory in Anchorage, now under construction.

Air pressurization has to be meticulously controlled to limit the migration of airborne contaminates. For example, the DNA testing laboratory must be positively pressurized to prevent the contamination of DNA specimens from outside sources.

AMC recently completed Alaska State Public Health Virology Laboratory located on the UAF campus, included both Biohazard Level II and III laboratory suites. The building’s central ventilation systems provides safe, reliable and stable temperature, pressure and zoned humidity control for a building located in a climate which experiences outside temperatures ranging from -60 F to 100 F. Livingston Slone was the architect for this $20.8 million, 28,710-square-foot project.

Matt Tanaka, the State of Alaska project manager for both the Virology Laboratory and the Crime Detection

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AWARD-WINNING FIRM AMC has been an industry leader in Alaska in the use of sustainable construction principles and energyefficient technology. AMC designed the mechanical and electrical systems for both the first community building and the first school in Alaska to receive silver LEED (Leadership in Energy and Environmental Design) certification from the U.S. Green Building Council. The Homer Library, designed with ECI/Hyer, was the first community building; and the Fred and Sara Machetanz Elementary School in Wasilla, designed with McCool Carlson Green, was the first school.

AMC has completed hundreds of medical construction and renovation projects, many under the leadership of Architects Alaska. AMC is currently in the construction phase of a $40 million upgrade of the emergency power supply and electrical distribution systems for Providence Alaska Medical Center in Anchorage. AMC is replacing the existing 3.2 megawatt plant with a new 8 megawatt plant, which includes

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Photo by Kevin Smith/Courtesy of AMC Engineers

Laboratory, said, “AMC is good at mechanical systems for complicated designs. I’ve worked with them for a long time and they are very competent engineers. They do typically have low change orders and that’s a good thing.”

The recently completed 65,162square-foot UAA Health Sciences Building, designed with Livingston Slone, was a challenging project, said Ratcliffe, project manager on this $46.5 million project. Four different health sciences departments had to be combined into a single facility. A complex electrical infrastructure with a centralized control room was required to support high-tech simulation laboratories.

The key to creating a functional, easy to maintain facility, Cusick said, is listening to suggestions and concerns of the building’s entire facilities staff.

“We don’t assume we know better than they do,” said Cusick. “We really appreciate the input of the electricians and the mechanics, the guys who have to deal with our work and we’ve learned a lot of valuable lessons working with these people. It makes us better engineers and allows us to deliver better projects consistently.”

The lobby of the Kodiak National Wildlife Refuge Visitor Center serves as the portal to visitors’ experiences. Multiple layers of lighting and contrast were utilized to create a sense of wonder and expectation.

four new 2 megawatt diesel generators.

AMC’s design includes new generation closed transition transfer switches that allow the transfer of power between the utility and the generators with no interruption of power when both sources are available.

AMC’s work has been recognized with awards in lighting, electrical, technology and security system design.

Their lighting designs, in particular, have been singled out with awards from both the International Interior Design Association and the Illuminating Engineering Society. “Lighting is an art,” said Ratcliffe. “We think of illuminating what the architect creates. They put together the surfaces and we illuminate them and make them all flow together.

That’s the fun part. It’s where we get to be a little creative.”

Although much of AMC’s work is large scale, they also take pride in doing their best on smaller scale projects, such as the Kodiak Island Borough

Swimming Pool, designed with ECI/ Hyer. The building has an inventive mechanical heating and ventilation system that distributes air through concealed under floor ductwork and disperses it through perforations in the interior wall cladding. Without exposed ductwork, the building has an attractive open look, which is enhanced by indirect lighting, allowing the lifeguard to see the bottom of the pool without distracting reflections.

Upcoming projects for AMC include new engineering buildings at the UAA and UAF campuses, designed

by Livingston Slone and ECI-Hyer respectively. AMC is also designing the new $90 million State Library and Museum Archives building located in Juneau with ECI/Hyer and THA Architecture. Construction funding for this 118,000-square-foot project with an additional 36,000-square-foot (61 stall) underground parking garage is ❑ still pending.

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

BUILDING ALASKA SPECIAL SECTION

©2011 Ken Graham Photography.com/Courtesy of UNIT Company

Exterior of the F22 Corrosion Control Hangar/LO Maintenance Facility at Joint Base Elmendorf Richardson.

UNIT Company’s Continued Success Adapting flexibility, public sector focus

BY STEPHANIE JAEGER

S

ince the recession in 2007, in Alaska, as elsewhere in the U.S., the economic slowdown has caused the loss of many private construction contracts. Anchoragebased UNIT Company has continued to be successful by demonstrating its ability to be flexible, switching its main source of income to large State and government projects. But Unit still does private work such as building and remodeling grocery stores throughout Alaska.

“The economy has slowed down and this has caused a slowdown of private sector contracts,” said Michael Fall, president and major shareholder of

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Unit. “Public sector construction offers a different type of contracting and challenges. The government gives us more time to complete projects, but they are particular about how they want things done. The government holds us to a higher level of scrutiny during construction.”

COMPANY STRUCTURE Derald Schoon founded Unit, a general contracting firm, in 1977. Michael Fall joined the company in 1993, and today leads Unit after Schoon’s retirement.

Currently employing 25 year-round administrative staff members, Unit is internally structured so many of its

year-round staff members have crossover roles and specialties. Estimators work with proposal writers, managers supervise workers and assure quality control, and financial officers work with project managers. In addition, Unit hires many subcontractors and craft workers throughout the construction of its projects. The name “Unit” comes from this cooperation and sharing of roles between the architects, owner, management, labor and subcontractors.

Hal Froehle, vice president, works as chief estimator and Melissa Meyers is chief financial officer.

“Unit’s relationship with its subcontractors has remained the same over

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the years,” Fall said. “We have really established ones we work with year in and year out. We know the people who operate well and are familiar with the ones who work in Alaska. We are always open to new subcontractors.

Occasionally we have to look outside of Alaska for special skills, but most of our subcontractors are local Alaskans.”

© 2011 David Little Photography/Courtesy of UNIT Company

EVOLVING BUSINESS Since 2004, Unit’s client base has shifted to public institutions such as the Army Corps of Engineers, Anchorage School District and the Alaska Department of Transportation. Unit is a participant in the federal government’s Multiple Award Task Order Contract (MATOC) program. Under this program, the government puts out a master contract for a building program that spans a five-year period. In Alaska, seven contractors currently compete for projects under these contracts. Unit is now in its fourth year of projects awarded under this system.

Because their clientele has changed, the way Unit operates has also changed.

“We aren’t doing many design-bid projects now,” Fall said. “We have shifted to design-build for most of our projects.”

Under the design-build concept the contractor is responsible both for the design and construction of the project.

Design-build reduces risks and costs for the building owner and allows faster completion of construction because the design and building phases of the project overlap – one team carries out both functions. The Army Corps of Engineers, which sometimes does its own architectural designs, is an exception to their usual design-build contracts.

U.S. Coast Guard Cordova Family Housing project aerial view.

A New w Era in i Remote Site Access

CHALLENGING WORK Two Army Corps of Engineers projects recently participated in by Unit include the F-22A Aircraft Shelter and the F-22 Corrosion Control Hangar at Elmendorf AFB ( JBER) near Anchorage. The seven-bay Aircraft Shelter is a 45,341-square-foot facility for aircraft parking, fueling and light maintenance of F-22s, built at a cost of $29.35 million. The two-bay F-22 Corrosion Control Hangar, a design-build project, is a facility for maintaining and replacing the stealth coating of F-22 fighters.

This project was particularly challenging because the adjacent two-bay

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

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facility was actively servicing F-22 aircraft throughout its construction. Specialized subcontractors were utilized to design, engineer and construct this 23,000-square-foot facility, which cost just over $21 million.

In November 2010, Unit participated in the U.S. Family Housing Project at Cordova. This project involved the construction of 13 duplexes for U.S. Coast Guard families stationed in Cordova. Building these units required vertical construction on a small piece of land with challenging topography.

The $24.8 million project included the construction of a playground shelter, an outdoor playground and a handicapped accessible ramp to the housing’s community building.

Safeway remains one of Unit’s private sector contractors. A new $10.7 million, 57,740-square-foot grocery store was constructed on a 376,968-square-foot site in Palmer in July. The building was made of insulated precast panels that had to be erected on the site.

“The recession has increased competition here and brought in people from out of state,” Fall said. “But we have continued to stay busy. It has not really affected our volume or bottom line. We manage to stay busy either on or off the road system.”

Fall says he is also confident the recent stock market fluctuations and credit downgrading of the U.S. economy are not going to decrease the company’s workload or income.

“We are dependent on State, federal, military and municipal contracts,” he said. “We already have work through the 2012-2013 season and are looking at work for 2013-2014.”

STEADY AHEAD

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

ĖIJĭĭĩĶĦīĤ Ğīġ ĢįĢĠıĦīĤ İıĢĢĩ ĞĠįĬİİ ĄĩĞİĨĞ ģĬį ĶĢĞįİ 60

Unit’s gross income has fluctuated over the past three years, but Fall says he expects it to remain steady in 2012. In 2009, its gross revenue was $59 million; in 2010, $69 million; and in 2011, things have flattened out at around $50 million. With several large projects coming up, Fall says he predicts gross revenues will grow again. Because Unit’s work is predominantly in the public sector, availability of loans and the current low interest rates have had no affect on the company’s business.

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

©2011 Ken Graham Photography.com/Courtesy of UNIT Company

Alternate Power Unit (APU) heat recovery duct in the F22 seven-bay aircraft shelter at Joint Base Elmendorf Richardson.

Over the years, Unit has won several awards for their quality of work and safety. In 2004, Alaska Business Monthly named Unit “Contractor of the Year.” They have won the Alaska General Contractor Excellence in Construction Award six times in previous years. And Unit was nominated in 2009 for an Army Corps of Engineers, Alaska District safety award for their work on the FTG 134, Missile Field No. 2 Site Development project in Fort Greeley.

Unit’s philosophy continues to be to get every project done in as short a time as possible.

“With government projects, we are not as worried about the customer spending money while we build, like we are with private companies,” Fall said.

“We have to build everything fast because of the climate we live in. We have limited time to get in the ground and get a building shell constructed. Then we have to finish the outside and landscaping. We have such a short building season with basically only two seasons – spring-summer-fall and then winter.”

Fall says Unit is one Alaska company expecting to deal with the upcoming changes by staying as flexible as possible. “We are trying to stay in tune and to adjust to what is out there,” he said.

“We are in a fortunate situation with the State and hope the people we elect can figure out how to correct the deficit in Washington, D.C. Everyone needs to be nimble on their feet to accommodate to what is happening.” ❑

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

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BUILDING ALASKA SPECIAL SECTION

Kulis is Open for Business Prime real estate for Alaska film industry

BY JULIE STRICKER

I

t’s been a long-standing rite for Alaskans to try to identify where on earth Alaska-themed movies were filmed. It was seldom in Alaska, although that is changing. And as more movie producers look north, they are seeking support facilities and locations for their productions. The recently shuttered Kulis Air National Guard Base in Anchorage is one location that is generating a lot of interest.

“We have had lots of film producers touring it and looking at it as a good place to base productions in,” said Katie Gage, land manager at the Ted Stevens Anchorage International Airport. She is in charge of leasing the property.

“We’ve had quite a bit of interest,” she said, adding that she cannot release names of interested parties. “It’s looking pretty good.”

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Photo courtesy of Dowl HKM

HOME OF THE BRAVE For 50 years, Kulis played a key role in helping keep Alaskans safe. The home of the 176th Wing of the Alaska Air National Guard was a shelter and aid distribution center in the aftermath of the 1964 Good Friday Earthquake.

Kulis Guard members deployed to Fairbanks to help that community bail out from the 1967 flood, evacuating many residents to Kulis and flying dozens of loads of food and supplies to the devastated community.

In 1990, the 210th Rescue Squadron was added to Kulis, which strengthened its role as a hub for hundreds of search and rescue missions over the years.

But in 2005, the Base Realignment and Closure Commission recommended Kulis be closed. The 176th Wing moved to new quarters at Joint Base Elmendorf-Richardson in 2011 and the shuttered base was turned over to the State of Alaska. After decades in the military arena, Kulis is now open for civilian business.

An aerial view of the facilities at the former Kulis Air National Guard Base in Anchorage. Some of the structures in the northeast corner have been removed by the Air National Guard.

PRIME REAL ESTATE “Basically, all comers are welcome,” said Wanetta Ayers, division director of the Office of Economic Development. “The airport is taking lease applications and they’re engaged in a process of determining what the lease rates will be and about what (the lease) process looks like.”

Kulis is a 127-acre facility just south of and adjacent to Ted Stevens Anchorage International Airport. The Alaska Department of Transportation

and Public Facilities took over the keys to the facility on Sept. 15, which means they will be assuming operating costs for the property. Over time, the property will be used for aviation. But in the short-term, there isn’t enough aviation interest for the entire facility, so other uses are being suggested.

The land-use plan recommends the airport offer the properties for longterm lease or sale. The State would retain ownership of the land.

“Properties like this are rare,” said

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

“We have a number of film productions that are considering Alaska as a film venue, but their productions are contingent on a soundstage being there.”

– Katie Gage Land Manager Ted Stevens Anchorage International Airport Bill Popp, executive director of the Anchorage Economic Development Corp. It includes tens of millions of dollars worth of infrastructure on the property, including hangars, office and warehouse facilities, a medical clinic and a dining hall. In all, there are 46 buildings, including a 1963 hangar listed on the National Register of Historic Places.

Popp said AEDC’s role is to promote the property to national and international companies that may be interested.

“We believe there are multiple potential uses for the property,” he said.

Because of its location abutting the Anchorage airport and history of aviation-related activities, the property is largely tagged for aeronautical uses. A land-use plan drawn up by Dowl HKM for the State Transportation Department divides the property into sections based on immediate aeronautical uses and interim uses for areas that won’t be feasible for aviation for the next 20 years. Public meetings were held with nearby residents, who expressed some concerns with aircraft noise and traffic impacts. The land-use plan tries to mitigate those issues.

The northwest portion of the site, which is immediately adjacent to the airport, already contains two large hangars, parking space for large airplanes and other facilities ideal for aviation use. The northeast corner of the property would be available for aeronautical use within the next 20 years.

FILM INDUSTRY INTEREST The south side of the property is being eyed for short-term uses. Gage said private companies and State and federal agencies looking to consolidate their offices in Anchorage have been interested in the southern portion of the property, which includes three office buildings and a warehouse.

“We have a number of film productions that are considering Alaska as a film venue, but their productions are contingent on a soundstage being there,” Ayers said.

Although a couple of producers expressed concern about the noise levels in a soundstage because of the nearness of the airport, Ayers said others have indicated the levels are acceptable.

Ayers said Alaska’s Film Production Incentive Program is generating a lot interest from producers, who would need facilities to build sets, provide meals, house offices and for many other tasks. Kulis is ideal for the creation of a film campus.

“All of them are essentially large buildings with clear spans, with no columns interrupting the space, and ceiling heights in excess of 30 feet,” Ayers said. “Those are features that are very attractive to the film industry.”

The State film production incentives provide up to 44 percent transferable tax credits to qualifying projects. In the meantime, word is getting out about Alaska as a movie location.

Sean Penn’s 2007 movie “Into the Wild” featured sweeping scenics of Interior Alaska. The movie, “Big Miracle” (titled “Everybody Loves Whales” initially), starring Drew Barrymore and John Krasinski, was filmed on location in Anchorage in 2010. Another movie, “Frozen Ground,” starring Nicolas Cage, John Cusack and Vanessa Hudgens started filming in Anchorage in October. A movie based on “The Cruelest Miles” about the Nome diphtheria epidemic is slated to begin filming in 2012.

All three productions need the proper facilities, Ayers said, and Kulis is ideal.

“Those producers are at least talking to Alaska as a venue,” she said. “The productions have been coming to us to find the facilities they need.” ❑

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RIGHT MOVES ALTMAN ROGERS

Altman, Rogers and Co. CPA’s named Joseph L. Moore a shareholder of the firm according to Tim Altman, managing partner. Moore is the manger of the Soldotna office for the company and has been with the firm since 2004. He is a council member of the City of Kenai and has served as a board member on various nonprofit organizations on the Kenai Peninsula. He is a member of the American Institute of Certified Public Accountants, the Alaska Society of CPA’s and both the Kenai and Soldotna Chambers of Commerce. He holds a bachelor’s degree in Business Administration from the University of Oregon.

WELLS FARGO

Wells Fargo honored employees Kim McFaddenDowling and Madeline Jones by donating $2,000 to the Pancreatic Cancer Action Network. McFaddenDowling and Jones volunteered for the group with Wells Fargo’s $500 for 50 hours program. The two women are commercial banking business associates in Anchorage. The bank awarded McFaddenDowling $1,000 for the Volunteer Service Award. The pair volunteered 50 hours of community service in 2011 and earned $500 each for the organization.

McFadden-Dowling and Jones represented Alaska during Pancreatic Advocacy Day in Washington, D.C., where they urged lawmakers to support a bill to help combat the disease.

SALVATION ARMY ALASKA

Majors George and Jeanne Baker were transferred to serve as divisional leaders for at the Salvation Army Alaska division headquarters in Anchorage. They previously served five years at the Intermountain Division in Denver. George Baker The Bakers served as divisional secretary or business administrator, and Jeanne Baker was divisional women’s ministries secretary.

In Alaska they oversee the Salvation Army’s work in 16 Alaska communities, from Klawock to Fairbanks.

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COMPILED BY NANCY POUNDS RESOURCE DATA INC.

Andrew Gilbert was hired as a geographic information system programmer/analyst. He earned a bachelor’s degree in geography from Brigham Young University. He completed a GIS internship with the City of Los Angeles. Ariane Lee joined the company as a programmer/analyst. Lee has five years of experience in Web development. Bear Remien was hired as a system administrator. He has more than eight years of networking experience and five years experience as a consultant.

ALASKA POWER ASSOCIATION

Ron Bergh received the Mason LaZelle Achievement Award from the Alaska Power Association. The award honored Bergh’s contributions to the state’s electric utility industry. Bergh has served 31 years as a director on the Golden Valley Electric Association board. The award was presented at the association’s annual meeting. The association also awarded Mike Chenault with the David P. Hutchens Public Service Award. Chenault, who served as Speaker of the State House of Representatives, was honored for his work on energy issues, including supporting construction of an in-state gas pipeline. Joe Gallagher received the Hatcher-Williams-Turkington Employee Award from Alaska Power Association. Gallagher is public relations coordinator for the Homer Electric Association. Gallagher was honored for his service to the electric utility and community.

GOLDER ASSOCIATES INC.

Thomas Krzewinski was elected American Society of Civil Engineers Region 8 Governor.

Krzewinski is a principal and senior geotechnical engineering consultant for Golder Associates Inc. in Anchorage. He will serve a three-year term.

Krzewinski The region includes Alaska, Arizona, Hawaii, Idaho, Montana, Nevada, Oregon, Utah and Washington state.

U.S. SMALL BUSINESS ADMINISTRATION

Wilfred Ryan was appointed to the U.S. Small Business Administration’s Region 10 Regulatory Fairness Board. Wilfred is president of Ryan Air Inc., an air-freight carrier based in Anchorage.

NORTHRIM BANK

Joe Beedle was appointed chief executive of Northrim Bank. He also serves as Northrim president. Beedle was also elected to the bank’s board of directors. Beedle has served as president since 2009.

STATE FARM INSURANCE

Randy Rhodes joined State Farm Insurance as an agent in Anchorage. His office is at 5915 Lake Otis Parkway. He graduated from the University of Alaska Anchorage.

LINC ENERGY

Colleen Richards joined Linc Energy as stakeholder relations manager for its Alaska operations.

Richards previously served as a business development director for CH2M HILL Inc. in Anchorage.

CREDIT UNION 1

Katey Manglona was promoted to branch manager for Credit Union 1’s Midtown Anchorage branch.

Manglona began working at the credit union nine years ago as a clerk in the research department.

Hemant Sisodia joined the credit union as sales and service manager for the consumer lending department. He has several years of previous banking experience.

UNIVERSITY OF ALASKA FAIRBANKS

Robert McCoy was chosen director of the University of Alaska Fairbanks Geophysical Institute. McCoy has more than 15 years research experience as a space scientist at the Naval Research Laboratory and 15 years administrative experience at the Office of Naval Research in Arlington, Va. He previously served as technical director for the Operationally Responsive Space Office in Albuquerque, N.M.

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

RIGHT MOVES CRW ENGINEERING C GROUP LLC

Lauren Panasewicz was hired as a staff engineer at CRW Engineering Group .

LLC. Panasewicz earned a master’s degree in civil, environmental and architectural engineering from the University of Colorado at Boulder. Brian Looney was chosen as one of the Panasewicz 2011 class of National Society of Professional Engineers Fellow Members. Looney is project manager and engineer of civil engineering projects at CRW Engineering Group. The honor recognizes society members for their outstanding service to their community and profession.

RIM ARCHITECTS

Samantha Emmal was hired as director of finance and administration for RIM Architects. Emmal has 15 years of financial management experience. She earned a bachelor’s degree with an accounting emphasis from the University of Alaska Anchorage.

ANCHORAGE CHAMBER COMMERCE

SPONSORED BUSINESS INSURANCE ASSOCIATES

The Society of Certified Insurance Counselors honored Angela Pobieglo for 10 years of successfully maintaining the Certified Insurance Counselor designation. Pobieglo is vice president of Business Insurance Associates in Anchorage.

DENALI ALASKAN FEDERAL CREDIT UNION

Naomi Vanover-Piggott was chosen director of call center operations for Denali Alaskan Federal Credit Union. She has worked more than 15 years for the credit union, most recently serving as outbound division manager at the Member Contact Center.

NORTHERN AIR CARGO UMIAQ

Michael Wolski was chosen civil engineering project manager for UMIAQ. He has more than 20 years of designing, managing and coordinating civil engineering projects throughout Alaska. UMIAQ is a subsidiary of Ukpeagvik Iñupiat Corp.

ALTMAN, ROGERS & CO.

Joseph Moore was appointed a shareholder at Altman, Rogers & Co. Moore is manager of the accounting firm’s Soldotna office. He has worked for the firm since 2004.

DOYON EMERALD

MSI COMMUNICATIONS

Maria Ekstrand-DesGranges was hired as senior account manager at MSI Communications. EkstrandDesGranges has 15 years of advertising and marketing experience, serving tourism, seafood, construction and oil and gas industries. Leah Burkes joined the firm as account executive. Burkes has experience in public and governmental communications. Daniel McKay was hired as account coordinator. McKay earned a master’s degree in business administration from the University of Alaska Anchorage.

OF

MT. MCKINLEY BANK

The Anchorage Chamber of Commerce hired Magen James as events coordinator. She earned a bachelor’s degree in business administration from the University of Alaska Fairbanks. Caleb Kreuzenstein was chosen membership services coordinator. He is completing an associate’s degree in computer information and office systems at the University of Alaska Anchorage.

Bart LeBon was appointed executive vice president and chief credit administrator for Mt. McKinley Bank in Fairbanks. LeBon has worked for the bank for 11 years and has more than 35 years of banking experience. Patty Mongold was promoted to executive vice president and chief operations officer. Mongold has worked for the bank for 35 years.

GENERAL COMMUNICATION INC.

Erin Sedor. was chosen director of risk management for Ukpeagvik Iñupiat Corp. Sedor has 18 years of risk management experience. She previously worked in risk management for Cook Inlet Region Inc. Ryan Taylor was appointed director of health, safety, environment and training. He most recently served as health, safety, environment and training manager for UMIAQ, a UIC subsidiary.

Jessica Graham joined General Communication Inc. as deputy general counsel and vice president of state governmental affairs. Graham previously served as executive vice president for administration and general counsel for Afognak Native Corp. and Alutiiq LLC.

BY

.

UKPEAGVIK IÑUPIAT CORP.

Pollock

George Pollock joined Doyon Emerald as project services manager. He has served as North Dakota operations manager for the Wood Group Production Services. He also has worked as Alaska operations manager for Baker Energy.

ALASKA PERMANENT CAPITAL MANAGEMENT

Jason Roth was hired as senior vice president and senior portfolio manager for Alaska Permanent Capital Management. Roth previously served 32 years at First National Bank Alaska, where he held posts including senior vice president and chief financial officer.

UNIVERSITY

OF

ALASKA

Mike Hostina was hired as general counsel for the University of Alaska in Fairbanks. He has served as associate general counsel since 2002. He joined UA in 1998 as director of labor relations. Donald Smith was appointed executive director of labor and employee relations. Smith has worked as director of labor relations for the Alaska Railroad Corp. for 10 years. Chris Christensen was hired as associate vice president for state relations.

Christensen previously served as deputy administrative director of the Alaska Court System. He will work in Juneau and Anchorage. ❑

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

65

RETAIL

The Alaska-Juneau Public Market Southeast shoppers throng to annual three-day event

Photo courtesy of Metcalfe Communications

BY VANESSA ORR

It ttakes k a tteam tto manage th the Al Alaska-Juneau k J P Public bli M Market. k t St Standing di iin ffrontt off S Santa t Cl Claus, S Sandy d (h (holding ldi niece i M Maggie) i ) and Peter Metcalfe are surrounded by most of the crew who worked the 2010 Public Market.

F

or almost three decades, the Alaska-Juneau Public Market has been welcoming shoppers to Juneau. Held on the three days following Thanksgiving, it is an event almost as eagerly anticipated as the coming of St. Nick. Now in its 29th year, the Public Market attracts around 175 vendors, close to 500 people working the venue, and a substantial portion of Juneau and Southeast shoppers.

“While the exact number of people who attend the market is proprietary information, I will say that it is the best attended event in Southeast by a long shot,” said Peter Metcalfe, owner and organizer of the yearly event. “We use the entire Centennial Hall facility, and even have a Public Market annex that we fill up as well.”

The family affair is run by Metcalfe and his wife, Sandy, who handles the finances, and nephew Luke Metcalfe, now 26, who has been working at the market since the age of 7 and is in charge of operations. Approximately half of the merchants are from Juneau, 25 percent are from Southeast, and 25 percent are from the rest of the state or Outside.

“All of the vendors must fit into the theme, ‘Only at the Public Market,’” Metcalfe said. “We encourage vendors to do demonstrations, or to bring in artists from out of

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town, or to bring products that are being shown for the first time. We want to avoid having people pay admission to see retail businesses they could see outside the market for nothing.”

The market features everything from handmade knives and stained-glass windows to Alaska Native artwork. Highquality handicrafts include jewelry, handmade soaps, candles and carved burl bowls.

“Our goal is to always have something fresh, new and interesting,” Metcalfe said. “If you came to the Public Market last year, 35 percent of the vendors will be new to you this year. About 25 percent will be brand new, and 15 percent rotate in and out. The market has a revolving cast, which is a good thing for it.”

SUCCESS FROM THE START The Public Market was one of the first events to be held in Juneau’s “brand new” Centennial Hall in 1983 and immediately found success.

“I’d been doing music promotion on the side and planned to bring big music acts into the new hall, but at the time, it had a formula that worked against that,” Metcalfe said.

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

“However, the hall had favorable rates for holding a public event, and since I was a big fan of the Pike Place Market in Seattle, it sparked the idea.”

The first Public Market was held in the summer, during Thanksgiving weekend and again in spring.

“At the time, there wasn’t much to do in Juneau, so when the market pulled in a huge crowd, I knew I was on to something,” Metcalfe said. “Unfortunately, it became too much of a good thing. I was building my business as a writer, publisher and video producer, so I decided to only hold the market once a year.”

While the market initially set up on a Friday, with doors opening to the public at 4 p.m., vendors now set up the day before Thanksgiving and the market opens on Friday at noon.

“The first time we opened the doors, we were blown away,” Metcalfe said. “There were 200 people in line to get in and they were ready to shop.”

Attendees pay $7 for the whole weekend, which is a change from previous years.

“We used to have one-day rates, two-day rates, etc., but I finally bit the bullet and decided to do a single weekend price,” Metcalfe said. “This increased our attendance by quite a bit, because people don’t have to think about paying again to get in.”

The market recently expanded to include an annex located in the Juneau Arts and Culture Center. Unlike the Public Market itself, there is no admission cost to visit vendors in this space, which includes products like Mary Kay Cosmetics and late entries.

“We stay at a local hotel and eat in local restaurants – I’d say a good 10 to 20 percent of the income we make at the show goes right back into economy,” he said. “If you add in sales tax, it’s probably another 5 percent.”

Elaine Garrett, owner of Sagebrush Dry, comes in on the ferry from Kake, where her business is located. “The Public Market is an excellent show that is very well-run; we sell a lot of our waterproof bags there, as well as berry baskets, which are always a big hit,” she said. “It is a unique show because a lot of the products are made in Alaska, and every year, 10 to 20 percent of the vendors are different, so it’s not the same old, same old. It’s a fun place to shop for Christmas – I usually end up spending money there, as well as in town. Juneau has restaurants and Kake doesn’t – more than one, actually. We also grocery shop before we head back. “ Bridget Milligan, owner of the Kodiak Coat Company in Juneau, finds that the market helps her business even after it is over. “A lot of people will come by my booth and say, ‘that’s what I want for Christmas,’” she said. “Then my store gets hit really hard by customers who were at the market saying, ‘this is what my wife, sister, etc. wants.’”

Now turning 60, Metcalfe plans to take on a new challenge: the Southeast Alaska Sports and Recreation Show, which will be held in Juneau on March 23-25, and will be modeled on the success of the Public Market.

“The Public Market is really a phenomenal event – it just took on a life of its own,” he said. “It’s a very fun event that ❑ really contributes to town, and now it’s a tradition.”

BOON TO THE ECONOMY In addition to providing jobs for many Juneau youth, the Public Market also provides vendors with an enthusiastic market for their products and sales revenue to the city. About 30 young people are employed during the three-day event, doing everything from bussing tables to securing doors, to taking tickets and selling admission.

“The Public Market is a great way to introduce young people to the work ethic,” Metcalfe said. “Even after college, a number of the young adults we’ve employed continue working for us.”

According to Metcalfe, the event pays more in rent to Centennial Hall than any other event, and pays “a heck of a lot” of sales tax to the city.

“We bring in at least 75 individual vendors from outside of Juneau, and each of those brings in two or three more people,” he added. “Roughly 50 to 60 hotel rooms are rented that otherwise would be empty.”

And vendors appreciate the opportunity to showcase their wares to a willing audience. “I’ve been doing the Public Market for 10 or 11 years, and it’s our best show,” said Ted Bodley, owner of Eagle River Knife Company. “Peter cares if the vendors are happy and make money; if we’re successful, he’s successful. It’s a hard show to get into for that reason; spaces sell out fast.”

Bodley, who sells hand-assembled knives, ulus and ulu bowls, flies all of his products into Juneau, and brings two or three people to town to help. www.akbizmag.com • Alaska Business Monthly • November 2011

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NOV.

22-26

ALASKA THIS MONTH

BY NANCY POUNDS

Great Alaska Shootout

State to start funding the tradition he State of Alaska is banking on upholding the tradition of the University of Alaska Anchorage’s Great Alaska Shootout. UAA organizers of the longtime Thanksgiving week basketball tournament have plans to use State-approved funds to inject new energy for future Shootouts.

This year’s Great Alaska Shootout will be held Nov. 22 to 26 at the Sullivan Arena in Anchorage. The UAA women’s team will play the University of Miami, and South Florida University will take on Central Michigan. Men’s teams include UAA, University of California Irvine, Central Michigan, Dartmouth, New Mexico State, Murray State, San Francisco and Southern Mississippi.

In June, Gov. Sean Parnell approved a capital budget, including more than $2 million to help UAA buoy the struggling tournament.

The funds won’t be applied to the 2011 Shootout, but will boost tournaments over three years, from 2012 to 2014, said Steve Cobb, UAA’s athletic director.

Funds would be used to increase the amount UAA pays teams to participate in the tournament, Cobb said. Also, UAA officials are developing a plan to use part of the funds to provide travel incentives for Alaskans to visit Anchorage for the Shootout, he said.

The Shootout serves as a revenue jolt for Anchorage in winter.

The tournament has an economic impact of more than $5 million, Cobb said.

“The Shootout has become a significant Thanksgiving week tradition to many Anchorage residents and has a tremendous economic impact for our city and state,” Cobb said.

The tournament also provides national media attention for the state and UAA. “It greatly helps recruiting and is a significant source of revenue for UAA,” Cobb said. “It is also a great competitive experience for our men’s and women’s basketball teams.”

The Shootout was recognized as one of the nation’s premier college basketball tournaments, according to a 1996 study by UAA’s Institute of Social and Economic Research. Alaskans got the opportunity to

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see top-ranked college teams play the hometown squads, and UAA players gained experience against players from a different division.

The tournament’s turn in fortune is a result of NCAA changes to scheduling requirements for early season games. Also, other tournaments now compete to draw top teams.

Bob Rachel, UAA’s first basketball coach, started the Shootout, called the Sea Wolf Classic, in 1978. Rachel noted that a 28-game limit set by the NCAA applied to games played in the contiguous 48 states and offered Alaska as a destination for additional games in a strong competition. Major college basketball teams responded eagerly, according to the ISER study.

Games were played at the Buckner Fieldhouse on Fort Richardson until 1983, when the event was moved to the Sullivan Arena.

Cobb easily recalls top Shootout memorable moments. He remembers seeing NBA star Dwayne Wade of the Miami Heat play his first college basketball game as a Marquette University freshman.

“But obviously my favorite moments involve the Seawolves,” Cobb said. “In 2004, UAA’s men’s team played at 10 a.m. on Saturday versus High Point. Our Seawolves scored the last 15 points unanswered to win by one point. At the time it was the most courageous effort I had seen demonstrated by one of our teams.”

Cobb also recounted a power play by the UAA women’s team to win the Shootout title.

“In 2007, our women’s team trailed Santa Clara by 12 points with a little more than three minutes to play. The Seawolves scored the last 13 points unanswered and won the championship when Rebecca Kielpinski scored at the buzzer with a beautiful left-handed fingertip roll layup to secure the victory and another Shootout championship for our women’s program.”

Cobb will be studying this year’s tournament with an eye toward developing stronger upcoming Shootouts. He’s also anticipating an exciting competition.

“We hope our Seawolves will pull off an upset or two,” Cobb said. ❑ For more information, visit www.goseawolves.com.

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

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69

ENVIRONMENTAL

FUDS

Clean Up Progress in Alaska

Almost half of Formerly Used Defense Sites finished

BY VANESSA ORR

70

Photo courtesy of the Army Corps of Engineers

W

hile Alaska is often admired for its pristine environment, there are places in the state that still bear the scars of war. The good news is these Formerly Used Defense Sites, or FUDS, are being cleaned up at a steady rate.

“A lot of these properties date back to World War II,” said John Halverson, Environmental Program Manager, Alaska Department of Environmental Conservation (AKDEC), who is responsible for overseeing Department of Defense (DOD) clean up in Alaska.

“Airports and coastal defense sites were built, and there were even battles fought in the Aleutians when the Japanese occupied Kiska and Attu.”

Some of the more recent FUDS facilities also date from the Cold War. To date, the Army Corps of Engineers has identified 75 FUDS properties that have current or future work needed, and on those properties, there are about 300 different projects to be completed. Sixty-four properties have been successfully remediated. The Army Corps of Engineers is responsible for a number of these projects; others that were not transferred out of the DOD before 1986 are the responsibility of the Air Force or the former owners of the properties.

Since the mid-1980s, FUDS Installation Restoration Programs (IRPs) have been going on throughout the state for the clean-up of debris and solid waste. In 2002, an additional component – the Military Munitions

A site inspection this summer found discarded military munitions on Kiska Island at a FUDS site.

Response Program (MMRP) – was added to FUDS requirements. This program focuses on discarded military munitions, munitions constituents and unexploded ordnance.

“Approximately 275 IRPs still require work, with completion costs estimated at $600 million,” Halverson said. “There are 24 MMRPs to complete, with the cost estimated at $500 million. Those sites are still being researched, however, so that number will probably increase.”

The bulk of work at IRP sites revolves around petroleum-contaminated soils and groundwater, though a large number of sites also have PCBs and chlorinated solvents. The method used to clean each site depends upon the contaminants found.

“Petroleum-contaminated soils and

groundwater can be cleaned up on site through viral remediation,” Halverson said. “Because many of the sites are located in remote areas that are expensive to travel to and don’t have support facilities available, it is sometimes more cost-effective to haul the waste out.”

Because PCBs are harder to break down and there are not good on-site treatment technologies available, these sites are typically excavated and the waste backhauled to treatment facilities, often in the Lower 48.

“In most cases, the Corps is able to return sites to unrestricted-use levels, though this is sometimes not feasible because of the types of contaminants,” Halverson said. “For example, it is not practical to remove landfills on sites, and chlorinated solvents in groundwater cannot feasibly be cleaned up in

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

short period of time, so land use would remain restricted.”

Northeast Cape on Saint Lawrence Island is a recent FUDS clean-up project. The White Alice Communication System site was decommissioned and closed and the land was transferred to the local Alaska Native corporation.

“FUDS program work has been going on there for several years,” Halverson said. “In 2011, contractors working for the Corps of Engineers removed over 7,000 tons of petroleumcontaminated soil, over 4,000 tons of PCB-contaminated soil, and several tons of metals-contaminated soil and other solid wastes.”

Eielson Farm Road near Eielson Air Force Base is another example.

A former anti-aircraft artillery site with fairly extensive petroleumcontaminated soil and groundwater, its surrounding area is becoming developed for residential use. Contractors are currently excavating and treating approximately 16,000 cubic yards of petroleum-contaminated soil.

Funds to clean Formerly Used Defense Sites are appropriated by Congress and in FY2010, $27 million was budgeted for Alaska. “In FY2011, the Corps did get a budget increase through a one-time movement of funds from Army programs equaling $50 million,” Halverson said.

As to when clean-up of the sites will be completed, the focus is still long-term.

“The Department of Defense recently updated their goal of having responses completed at 95 percent of FUDS – excluding MMRPs – by 2021,” Halverson said. “In the next 10 years, the goal is to get traditional contaminated sites’ remedies in place, though there may still need to be longterm monitoring.”

Federal and State laws now exist to prevent sites like this from occurring in the future; laws that were not in place before 1986.

“Standard practice used to be to take waste out and dispose of it onsite instead of hauling it to an off-site location,” Halverson said. “There has since been a vast improvement in waste management not only on the federal agency level, but in the general ❑ public at large.” www.akbizmag.com • Alaska Business Monthly • November 2011

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SPECIAL SECTION:

MINING I NTRODUCTION

Alaska Miners See Growth Ahead Call for metals spurs exploration, development

BY STEVE BORELL

BIG MINES OPERATING The state now has one large coal mine and six large metal mines operating.

The Nixon Fork mine near McGrath became Alaska’s sixth large metal mine July 4 when it resumed operations after being idle for several years. That mine now has a newly defined resource base and an upgraded mill that will provide higher recovery of gold and copper. All of the major metal mines continue to operate at design capacity with a sharp eye on costs.

This follows a period of extreme uncertainty for the Red Dog zinc/lead mine north of Kotzebue and the Kensington gold mine north of Juneau. Red Dog received its final permits for the Aqqaluk deposit, and mining of that deposit began last summer and will provide ore for the next 20 years. At Kensington, it took a U.S. Supreme Court decision to allow the mine to begin production and it began operating in July 2010.

FAMILY MINING The number of permits for small family placer gold mines and for small-scale/ recreational-level placer mining has increased significantly with the higher

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gold prices. More of these mines are operating now than for many years. These individuals and families are salt-of-theearth Alaskans with an entrepreneurial spirit and are investing their time, energy and money to become their own bosses and improve their lives while creating new wealth for the nation.

Clark James Mishler

A

laska’s mining industry continues the steady growth we have seen for more than a decade and the number of new permits for exploration and small family mines has grown significantly. One more major metal mine has begun operating and exploration appears to be at a recent high. Both mining and exploration are responding to strong metal prices and Alaska’s stable tax and regulatory policies.

PRODUCTION UPSWING Coal production continues its steady growth. Usibelli Coal Mine Inc. produced a record 2 million tons last year and should produce more than that amount this year. Increased coal demand from around the Pacific Rim and the prospect of two new coal mines within the next few years will significantly increase coal production and create hundreds of new jobs.

Mineral exploration has also increased over last year. Although the Lower 48 states, and the world in general, are in an economic crisis, exploration in Alaska continues to grow.

In 2010 a total of 24 projects spent more than $1 million each exploring for minerals. That number should be even higher in 2011. Strong demand from China and India continues to be the primary driving factor for demand in base metals, including copper, zinc, lead, nickel and iron. Political unrest and the weakness of the U.S. dollar are the primary factors for high gold and silver prices. There is no indication these factors will improve in the foreseeable future.

Production of industrial minerals, primarily sand and gravel, remains steady due to a strong local privateand government-driven economy and the associated construction projects.

Steve Borell, executive director, Alaska Miners Association

LONG-TERM PROMISING The long-term outlook for metals and coal remains very promising. Alaska is still effectively unexplored when compared to any other state and to most countries.

The greatest unknown for the future continues to be the over-reaching power grab by the U.S. Environmental Protection Agency. EPA has administratively expanded its authorities to control nearly every aspect of American business – not to reduce pollution, but to expand its control. ❑ About the Author Steve Borell is executive director of the Alaska Miners Association, an industry support organization with more than 1,300 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 37 years of experience with exploration and operations in coal, placer and hard-rock 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 2011

SPECIAL SECTION:

MINING O VERVIEW

2011 Alaska Mining Review Operating at full throttle

BY CURTIS J. FREEMAN

D

espite shaky economic conditions in parts of the globe, Alaska’s mining industry operated full throttle in 2011, enjoying strong metals prices and relatively stable goods and services costs. The operating mines and major development projects steal the show in the following paragraphs, but dozens of other projects were active during 2011 with a wide range of commodities under scrutiny including rare earth metals, platinum group metals, nickel, copper, lead, zinc, silver and gold. With my original draft running to five times the size of this summary and space limited, my apologies to those who do not appear below, some of whom will be next-generation mines in Alaska.

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©2011 Chris Arend

WESTERN ALASKA Teck Resources Ltd. and NANA Regional Corp. announced 2010 and first-half 2011 results from its Red Dog mine. For 2010, the mine produced 538,000 tonnes of zinc from ore grading 18.2 percent along with 109,900 tonnes of lead from ore grading 5.4 percent.

Mill recoveries were 82.8 percent for zinc and 57 percent for lead. Operating profit was $548 million. In 2010 the mine shipped 1.04million tonnes of zinc concentrate and 235,000 tonnes of lead concentrate. During the first half of 2011 the mine produced 285,800 tonnes of zinc from ore grading 18.7 percent along with 42,500 tonnes of lead in concentrate from ore grading 4.8 percent. Mill recoveries were 82.1 percent for zinc and 47.6 percent for lead. Weathered ore from the newly opened Aqqaluk pit negatively impacted the recovery of lead in the mill.

The mine posted a $139 million operating profit for the first six months of 2011. The mine plans to ship 990,000 tonnes of zinc concentrate and 135,000 tonnes of lead concentrate from the

NANA shareholder, Josh Hadley, helps on the rig that is defining the Aqqaluk Deposit at Red Dog.

port facility this shipping season. The mine paid partner NANA Inc. and the State of Alaska royalties of $197 million during 2010 and $21 million in the first half of 2011.

NovaGold Resources and Barrick Gold are expected to complete a revised feasibility study for the Donlin Gold project in the second half of 2011.

The study will include the use of natural

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

gas, which would provide a lower-cost fuel source for on-site power generation. The natural gas option would require building a 315-mile-long 12inch buried pipeline from Cook Inlet to the mine site. The partners then plan to prepare and file construction and operations permit applications for the project, now estimated to carry a capital cost of about $6 billion. The proven and probable reserves at the project now stand at 33.59 million ounces in 467.7 million tonnes grading 2.23 grams per tonne (gpt) gold. Additional measured and indicated resources include 4.29 million ounces in 39.8 million tonnes grading 3.36 gpt gold and an additional inferred resource of 4.41 million ounces in 58.4 million tonnes grading 2.35 gpt gold. Let me save you the trouble: total Donlin Creek resources in all categories tally up to a galaxy-class 42.29 million ounces.

Fire River Gold Corp. announced results from preliminary economic assessments and began limited operations at its Nixon Fork gold project. The gravity and flotation circuits began operating again on July 4. By

late August the mine had shipped more than 30 tonnes of copper concentrate containing 18 percent copper, 779 gpt gold, and 398 gpt silver. Gravity separation has recovered approximately 500 additional ounces of gold. Total gold recovery has averaged 78 percent.

Underground mining operations currently are producing approximately 170 tonnes per day at a grade of 18 gpt gold. The mine and mill should be fully operational and near capacity at 150 tons per day by the end of October.

Other activities underground include extending the Crystal Ramp to access the down-dip extensions of 3000 and 3300 zones and a shallow ramp is being driven from the Crystal Mine to the Mystery Mine. Significant 2011 development drilling results from the 3300 zone included hole N11U-038 with 17.56 gpt gold over 4.18 meters, hole N11U-041 with 28.92 gpt gold over 3.14 meters, hole N11U-052 with 107.13 gpt gold and 36.26 gpt silver over 8.42 meters, Freegold Ventures Ltd. announced updated mineral resources for its Vinasale gold project under

option from Doyon Ltd. At cutoff value of 0.5 grams of tonne per tonne, the project contains inferred resources of 37.3 million tonnes averaging 1.11 gpt gold, or 1.33 million ounces of gold.

The resource is based on 72 drill holes containing 8,711 gold assays within the Central, Northeast and South Zones. Gold assays were capped at 22 gpt gold. To date, mineralization in the Central Zone extends over a strike length of 400 meters and remains open to the north, south and at depth. These resources were based in part on late 2010 drilling that included 71.3 meters grading 1.52 gpt gold in hole VM10-01 and 56.1 meters grading 2.58 gpt gold in hole VM10-02. In 2011 the company completed an induced polarization geophysical survey and recently finished a diamond drilling program aimed at both upgrading and expanding the current resource.

Earlier in 2011 Northern Dynasty Minerals Ltd. and partner Anglo American announced the results from a preliminary assessment report for its Pebble copper-goldmolybdenum project near Iliamna.

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The preliminary assessment considered three mine development cases comprising 25, 45 and 78 years of open-pit mining and a nominal processing rate of 200,000 tons per day. The 45-year Reference Case processes 3.8 billion tons of material with a strip ratio of 2.1:1 and an average grade of 0.46 percent copper, 0.011 ounces of gold per ton (opt) and 214 parts per million molybdenum.

This yields a 14.2 percent pre-tax internal rate of return, a 6.2-year payback on initial capital investment of $4.7 billion and a $6.1 billion pre-tax net present value at a 7 percent discount rate. At current prevailing metal prices, the 45year Reference Case yields a 23.2 percent pre-tax rate of return, a 3.2-year payback on initial capital investment and a $15.7 billion pre-tax net present value. The 45-year Reference Case produces 31 billion pounds of copper, 30 million ounces of gold, 1.4 billion pounds of molybdenum, 140 million ounces of silver, 1.2 million kilograms of rhenium and 907,000 ounces of palladium while mining only 32 percent of the mineral resource.

Cash costs after by-product credits

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come in at a negative $0.11 per payable pound of copper. Copper-gold concentrate produced at the mine would be transported via a slurry pipeline to a new deep-water port on Cook Inlet where it is de-watered and bulk shipped to offshore smelters. Other products of the process plant are gold dore, which would be flown to market and molybdenum concentrate, which would be bagged and trucked to the port for shipment. The potential exists for underground block cave development at a mining rate of 150,000 tons per day to emerge as the preferred mining method for phases of development beyond 25 years. The process plant employs conventional crush-grind-float technology as well as secondary gold recovery. Average mill throughput for the first 25 years would be 219,000 tons per day, rising to 229,000 tons per day for the 45-year and 78-year cases.

Other required project facilities and infrastructure, included in the project capital cost quoted above, include a 378 megawatt natural gas-fired turbine power plant at the mine site, an 86-mile transportation corridor to Cook Inlet

for road and pipeline rights-of-way and a new deep-water port on Cook Inlet.

Construction of the Pebble project would take four years, and employ a peak labor force of 2,080 people. The operations work force averages 1,120 people over the first 25 years of mining.

The project budget for 2011 is $91 million, with the objective of completing a Prefeasibility Study for the project in 2012 and initiating permitting after that point. Activities to be undertaken at the Pebble Project in 2011 include: engineering studies, including 45,000 feet of drilling; finalizing an Environmental Baseline Document; mine closure and reclamation plans; and local community relations. By year-end the Pebble Partnership will have expended $410 million since the partnership was established in 2007.

INTERIOR ALASKA Kinross Gold announced year-end 2010 and second-half 2011 results from its Fort Knox mine. In 2010 the mine produced 349,729 ounces of gold at $550 per ounce. The mill processed 25.735 million tonnes of ore grading

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

Photo by Judy Patrick

between 0.71 and 0.96 gpt gold. Mill recoveries ranged from 77 percent to 82 percent. The heap leach pad received 12.53 million tons of ore grading 0.28 gpt gold during 2010. The company also tabled year-end 2010 resource updates that included proven and probable reserves of 3.58 million ounces of gold contained in 253.43 million tonnes grading 0.44 grams gold per tonne. For the first half of 2011 the mine produced 142,774 ounces at a cash cost of $655 per ounce. During the first quarter of 2011 the mill processed 3.47 million tonnes of ore grading 0.66 gpt gold with a mill recovery of 77 percent. During the second quarter the mill and heap leach processed 10 million tonnes of ore which included 6,552,000 tonnes grading 0.37 gpt gold placed on the heap leach pad and 3.35 million tonnes grading 0.59 gpt gold processed by the mill. Gold recovery in the mill averaged 79 percent. Fort Knox also passed a major safety milestone in reaching an amazing 4.1 million man-hours over a four-year period without a lost-time accident. In the process they poured their 5 millionth ounce of gold.

Greens Creek Mine near Juneau, Alaska

Teryl Resources Corp. and JV partner Kinross Gold announced new resource estimates for their Gil deposit. For heap leach only scenario, at a 0.015 opt gold cutoff, the deposit contains measured resources of 2.28 million tons grading 0.0304 opt gold (69,499 ounces), indicated resources of 9.57 million tons grading 0.0279 opt

gold (267,408 ounces) and inferred resources of 8 million tons grading 0.0222 opt gold (178,009 ounces). The total gold resource in the heap leach scenario is 514,916 ounces. If a mill-only scenario is considered at a 0.0225 opt gold cutoff, the deposit contains measured resources of 1.31 million tons grading 0.0394 opt gold (51,483 ounces),

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indicated resources of 4.65 million tons grading 0.0382 opt gold (177,870 ounces) and inferred resources of 2.54 million tons grading 0.0314 opt gold (79,949 ounces). The total gold resource in the mill scenario is 309,303 ounces.

A follow-up preliminary economic assessment envisioned moving 6,000 tons of ore per day over a five-year mine life.

With an average ore grade of 0.029 opt gold, the mine would produce 45,675 ounces of gold per year. Using a $1,500 per ounce gold price the mine would have a net present value of $83 million using a 5 percent discount rate. No capital cost estimate was given.

Freegold Ventures Ltd. announced updated mineral resources at the Dolphin deposit on its Golden Summit project. Using a 0.3 gpt gold cut-off, total indicated resources came in at 7,790,000 million tonnes grading 0.695 gpt gold (174,000 ounces).

Total inferred resource at the same cutoff grade came in at 27.01 million tonnes grading 0.606 gpt gold (526,000 ounces). The resource was based on 49 drill holes (5,966 meters) in the Dolphin stock, a pervasively sericite-

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altered granodiorite hosting multiple zones exhibiting polyphase quartzsulfide sheeted veins and sulfide-only veinlets. Significant intervals from its 2011 drilling program hole GSDC1106 which intersected 166.4 meters grading 0.81 gpt gold and hole GSDC11-47 with 149.2 meters grading 1.03 gpt gold at the bottom of the hole. Additional drilling and ground geophysical surveys are underway on other targets.

Sumitomo Metal Mining Pogo LLC provided a year-end 2010 summary of production from its 100 percentowned Pogo gold mine. During 2010, the mine treated an average 2,467 tonnes of ore per day and produced 383,434 ounces of gold at a cash cost of $449 per ounce. This equates to a recovered grade of 14.6 gpt gold. Total 2009 production was similar at 389,808 ounces of gold at a cash cost of $423 per ounce. The mine also conducted drilling, geophysical surveys, a LIDAR survey and soil sampling on its holdings including 1,737 meters of underground drilling in 10 holes and an additional 22,632 meters of drilling in 76 holes from surface. The current mine operating life now extends to 2017.

International Tower Hill Mines Ltd. had a busy year, releasing updated resource estimates, a revised Preliminary Economic Assessment and a lot of drilling results at its Livengood gold project. Highlights of the updated preliminary economic assessment include a processing rate of 91,000 tonnes per day with average annual production over the first five years of 664,000 ounces of gold and 562,000 ounces gold per year over a 23year life of mine. Cumulative pre-tax cash flows came in at $3.1 billion with a net present value (NPV) of $1.2 billion (at a 5 percent discount rate). The internal rate of return was 14.1 percent with a payback period of 4.9 years using a gold price of $1,100 per ounce.

The estimated initial capital cost was $2.19 billion, including $323 million in contingency and ownerâ&#x20AC;&#x2122;s costs and an additional $585 million in sustaining capital costs. Average cash cost of production was $557 per ounce over the first five years of production and an average life of mine cash cost of $703 per ounce. As for the new resource estimate, at a 0.22 gpt gold cut-off, the

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

Photo by Judy Patrick

project contains measured and indicated resources of 933 million tonnes grading 0.55 gpt gold, containing 16.5 million ounces of gold. The deposit contains an additional inferred resource of 257 million tonnes grading 0.50 gpt gold, containing 4.1 million ounces of gold. The combined resource at the Livengood deposit now totals 20.6 million ounces of gold, making it only the second Alaska gold deposit to reach this world-class status (Donlin Creek is the other). The current surface mine resource remains open to expansion.

Significant 2011 drill results include hole MK-RC-480CT which intercepted 92.3 meters grading 1.57 gpt gold, hole MK-RC-500CT which intercepted 49.9 meters grading 1.35 gpt gold and hole MK-11-116 which intercepted 92.9 meters grading 1.62 gpt gold, hole MKRC-0485 that intercepted 93.0 meters grading 1.24 gpt gold.

ALASKA RANGE Usibelli Coal Mine Inc. reported that for 2010 its Healy coal mine produced approximately 2 million short tons of coal, 1 million tons of which

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were supplied to six Alaska power plants and the other 1 million tons exported to Pacific Rim destinations as far away as Chile. The mine currently employs 130 full time employees and carries permitted reserves of 30.6 million tons of sub-bituminous coal with total defined reserves of approximately 500 million tons. Total resources in the Nenana Basin coal field are pegged at an amazing 7 billion tons of coal.

In late 2010 Corvus Gold Inc. announced results from their initial diamond-drill program at the Chisna project in the Chistochina District. The program included 2,926 meters of diamond drilling. At the POW target, hole PW-10-02 returned 23 meters of 0.38 percent copper, 0.43 gpt gold and 7.5 gpt silver. Surface exploration in 2010 discovered the Golden Range prospect and follow-up work in 2011 extended this gold-in-soil and bedrock target to over 9 kilometers of strike. A total of 152 of the 897 samples returned greater than 1 gram of gold per tonne and 34 samples returned greater than 10 gpt gold with a high of 79.8 gpt gold. Gold mineralization occurs in

sheeted quartz-sulfide-bearing vein systems ranging up to 20 meters thick.

Two drills currently are at work on this project.

In early 2011 Kiska Metals Corp. reported a revised mineral resource estimate on its Whistler project. Using a 0.3 gpt gold-equivalent cut-off yields an indicated resource of 79.2 million tonnes at 0.51 gpt gold, 0.17 percent copper and 1.97 gpt silver and an inferred resource of 145.7 million tonnes at 0.40 gpt gold, 0.15 percent copper and 1.75 gpt silver. The new estimate also reduces the strip ratio from 1.93 to 1.32. Significant results from its 31,000 meter 2011 drill program include hole WH11-033 that returned 218 meters averaging 0.55 gpt gold, 3.87 gpt silver and 0.11 percent copper at Raintree West and hole WH11-034 returned 77.3 meters averaging 0.58 gpt gold, 1.6 gpt silver and 0.19 percent copper at Raintree North.

NORTHERN ALASKA NovaGold Resources announced results of a preliminary economic assessment at its Ambler polymetallic

project in the Brooks Range. Indicated mineral resources stand at 16.85 million tonnes grading 4.14 percent copper, 6.02 percent zinc, 0.94 percent lead, 0.83 gpt gold and 59.62 gpt silver while the inferred mineral resource stands at of 12.09 million tonnes grading 3.53 percent copper, 4.94 percent zinc, 0.79 percent lead, 0.67 gpt gold and 48.04 gpt silver. A 4,000 tonne-per-day underground operation is envisioned with 25-year mine life using a conventional flotation circuit to produce a copper concentrate with gold byproduct, a lead concentrate with silver and gold byproducts and a zinc concentrate with silver byproduct. Initial capital costs rang in at $262 million and sustaining capital of $134 million. Operating costs were $99.32 per tonne milled with cash cost of $0.97 per pound of copper net of byproducts. The pre-tax and post-tax Net Present Value and Internal Rates of Return came in at $2.2 billion at 59 percent and $1.6 billion, at 50 percent, respectively. The $10 million 2011 budget includes drilling and environmental and engineering studies.

Andover Ventures Inc. an-

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nounced initial assay results from 1,500 meters of drilling in seven drill holes at its Sun project in the Ambler District. Significant results from the Sun deposit include hole Sun 11-24, which returned 16.5 meters grading 1.6 percent copper, 3.49 percent lead, 10.25 percent zinc, 86.6 gpt silver and 0.24 gpt gold. Significant results from the SW Sun deposit include hole Sun 11-25, which returned 3.86 meters grading 1.13 percent copper, 1.27 percent lead, 4.88 percent zinc, 46.3 gpt silver and 0.23 gpt. Drilling expanded the known strike length at SW Sun to at least 500 meters. Drill hole Sun11-27 was drilled 300 meters northeast of the main SW Sun zone and returned 3.58 meters grading 2.1 percent copper, 0.35 percent lead, 1.23 percent zinc, 231.1 gpt silver and 0.62 gpt gold.

Photo by Judy Patrick

SOUTHEAST ALASKA Hecla Mining announced year end 2010 and first-half 2011 production results from the Greens Creek mine.

The total cash cost per ounce of silver produced at Greens Creek for 2010 was negative $3.90 per ounce. Total

Tree Planting at True North Mine, reclamation is being done by Fort Knox.

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Photo by Judy Patrick

Fort Knox’s heap leach project.

September 2011.

production costs for the year were $3.36 per ounce of silver from ore grading 13.30 opt silver. For the year the mine produced 7.21 million ounces of silver, 68,838 ounces of gold, 25,336 tons of lead and 74,496 tons of zinc. The mine is working to optimize mill capacity and has successfully increased throughput by approximately 10 percent since 2008 to 2,200 tons per day. During 2010 Greens Creek mined 800,000 tons of ore containing 9.8 million ounces of silver and added 728,800 tons containing 8.6 million ounces of silver to reserves.

The company also announced year-end

2010 resource estimates which include probable reserves of 8.24 million tons grading 12.1 opt silver, 0.092 opt gold, 3.5 percent lead and 9.3 percent zinc, mineralized material of 789,800 tons grading 4.1 opt silver, 0.063 opt gold, 2.0 percent lead and 4.6 percent zinc, and other resources of 2.34 million tons grading 11.8 opt silver, 0.089 opt gold, 2.9 percent lead and 4.4 percent zinc. For the first half of 2011 the total cash cost per ounce of silver produced was negative $1.64 per ounce. Actual operating expenses were up 22 percent year-on-year due to higher cost power generated on-site and higher labor fringe benefit costs. The average grade of ore mined during the quarter was 11.49 opt silver. During the first half of 2011 the mine produced 3.16 million ounces of silver, 28,856 ounces of gold, 10,208 tons of lead and 32,595 tons of zinc. The mill processed 379,250 tons of ore during this period. On the exploration front, the East Ore Zone reserves contain 683,000 tons grading 13 opt silver and 7.89 percent zinc while resources consist of 1.2 million tons at 12.6 opt silver and 7.14 percent zinc.

Results from the $8 million 2011 definition and exploration drilling program in the western and southern extensions of the Gallagher zone include 15.3 feet grading 16.56 opt silver, 0.291 opt gold, 7.75 percent zinc and 3.45 percent lead.

Additional surface and underground drilling continue at the 200 South, Lower West Wall, East and Cub zones. Since 1987 Greens Creek has produced a total of about 173 million ounces of silver and approximately 1.35 million ounces of gold and currently has more than 150 million ounces of silver reserves and resources.

Coeur d’Alene Mines Corp. reported operating performance from Alaska’s newest major mine, the Kensington gold mine near Juneau. This mine commenced commercial production on July 3, 2010, and produced 43,143 ounces of gold during that year.

For 2010, capital expenditures totaled $92.7 million including costs required to complete construction and commence production ahead of schedule.

Year-end proven and probable reserves at the mine totaled 1.4 million ounces of gold, including 478,245 ounces of

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gold in measured and indicated gold resources, and an additional 121,182 ounces of gold in inferred resources.

During the first half of 2011 the mill processed 227,385 tons of ore grading 0.23 opt gold. Mill recoveries averaged 92.7 percent to produce 49,434 ounces of gold at a cash cost of $955 per ounce and a total production cost of $1,344 per ounce. Production since the end of the second quarter has been up 15 percent due in part to the mill processing 1,400 tons of ore per day, 150 tons per day over its design capacity. Exploration results from the Horrible vein system include 6.5 feet of 2.39 opt gold from hole H10-016 and 3.5 feet of 1.069 opt gold from hole H10-031. Additional drilling is under way on the Comet and Raven structures.

In late 2010 and early 2011 Niblack Mineral Development Inc. and joint-venture partner Heatherdale Resources announced new drill results from its 2010 underground drilling program at the Niblack volcanogenic massive sulfide project on Prince of Wales Island. Significant results include 28.4 feet grading 2.12 percent copper,

1.49 gpt gold, 2.01 percent zinc and 16 gpt silver in hole U064, 47 feet grading 1.74 percent copper, 3.73 gpt gold, 2.47 percent zinc and 75 gpt silver in hole U083, and 38.3 feet of 3.76 percent copper, 5.36 gpt gold, 14.33 percent zinc, and 111 gpt silver in hole U103.

More recently the company announced results from a new zone, between the Lookout and Trio deposits, where hole 123 intersected 7.8 feet grading 1.67 percent copper, 3.32 percent zinc, 19.51 gpt gold and 263 gpt silver. Additional drilling is in progress.

In early 2011 Ucore Rare Metals Inc. announced initial resource estimates for its Bokan Mountain rare earth element project. Resources were generated from 143 holes (8,728.76 meters) drilled at the Dotson Ridge and I&L zones. At a cutoff grade of 0.5 percent total rare earth oxides (TREO), the deposit hosts an inferred mineral resource of 3.67 million tonnes grading 0.746 percent TREO, with 39 percent of the TREO being the higher value heavy rare earth oxides. Individual light rare earth element grades, in kilograms per tonne (kg/t) were 0.77

kg/t lanthanum oxide, 2.2 kg/t cerium oxide, 0.26 kg/t praseodymium oxide, 1.08 kg/t neodymium oxide and 0.28 kg/t samarium oxide. Individual heavy rare earth element grades were 0.03 kg/t europium oxide, 0.27 kg/t gadolinium oxide, 0.05 kg/t terbium oxide, 0.29 kg/t dysprosium oxide, 0.06 kg/t holmium oxide, 0.15 kg/t erbium oxide, 0.02 kg/t thulium oxide, 0.11 kg/t ytterbium oxide, 0.01 kg/t lutetium oxide and 1.88 kg/t yttrium oxide. The $8 million 2011 budget includes 12,000 meters of drilling, subsurface work via a proposed adit in the Dotson zone, metallurgical work via bench-scale testing, environmental baseline work and a 60 ton bulk sample from the Dotson Zone. â?&#x2018; About the Author Curtis J. Freeman, CPG #6901, is head of Avalon Development Corp., P.O. Box 80268, Fairbanks, AK 99708. Phone: 907-457-5159, Fax: 907-455-8069. He can also be contacted at avalon@alaska.net or found online at www.avalonalaska.com.

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SPECIAL SECTION:

MINING

Fort Knox: 5 Million Ounces Strong

Photos courtesy of Julie Stricker

Interior gold mine exceeding expectations

Overlooking the pit at Fort Knox gold mine, 25 northeast of Fairbanks. Each step in the pit is 30 feet tall. The mill buildings and ore processing facilities are shown to the right. Behind them is the heap-leach facility.

BY JULIE STRICKER

T

he Fort Knox gold mine reached a milestone in 2011 that wasn’t even on the radar when the mine went into production in 1996: it poured its 5 millionth ounce of gold on April 6.

When production began, the mine, owned by Canadian mining giant Kinross Gold Corp., had only identified 4.1 million ounces of provable reserves.

Operations plans called for operations to cease in 2009. Today, thanks to further exploration and gains in technology, Fort Knox has far exceeded those early projections and nearly doubled its expected lifespan.

Another 3.8 million ounces of gold reserves have been identified – on top of the 5 million already poured. That means mining operations are slated

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to continue through 2018, with ore recovery continuing through 2021, according to community affairs director Lorna Shaw.

HISTORICAL MINING DISTRICT The open-pit mine is located 25 miles northeast of Fairbanks in the Fish Creek valley, which has been mined for more than a century. The 12-square-mile site, a third of which is actively being mined, is dominated by the huge pit, which falls in 30-foot-high benches to a depth of 1,400 feet. From the top, the mine’s fleet of giant trucks and outsized dozers look like children’s toys.

It’s mining on a huge scale.

“Everything is measured in tons and millions, all very big numbers, until you get to the final product,

which is measured in ounces,” Shaw said. “The economics of scale are what makes it possible to operate here.” Fort Knox produced 349,729 ounces of gold in 2010.

Across the valley is the Walter Creek heap leach facility, which went online in 2009. To the southeast is the tailings pond, bounded by a 338-foot-tall dam, which is being raised another 52 feet.

Behind the dam is a lake full of grayling and burbot. A steady stream of outsized trucks rumbles by on the left side of the berm-bordered roads, moving ore from the pit to the ore stockpile to the crusher or the heap leach facility.

MICROSCOPIC GOLD One thing you can’t see at Fort Knox is the gold, which is microscopic. It takes

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a ton of ore to produce 0.025 ounces of gold. Each giant truckload of ore contains between five ounces and seven ounces of gold. The mine has a fleet of about 30 ore trucks – the smallest is 150 tons and the largest is 240 tons. The tires alone are 13 feet tall and the drivers sit high above the ground. “It’s like driving a two-story house from a secondstory bedroom window,” Shaw said.

The huge scale of operations teamed with precision cutting-edge technology is helping mine workers streamline workflow to keep production costs, now about $600 per ounce, as low as possible, said General Manager Dan Snodgress.

High-precision drill rigs, accurate to centimeters, expose the ore, which is tested and mapped on a computer so operators know exactly how much gold they are getting with each shovelful of ore. The trucks are equipped with GPS devices that keep track of where each vehicle is in real time and where it needs to go next. It even takes drivers’ bathroom breaks into account.

A worker tracks the workflow from a network of computer screens in the mill building. It’s one of the quietest rooms in the operation, punctuated only by occasional radio chatter.

Shaw says the GPS tracking system “really increased the efficiency and made it possible to move 200,000 tons of ore every day.”

SIMULATOR ALLOWS TRAINING A custom-programmed simulator that looks like a giant computer game allows the mine to train haul-truck drivers with real-world scenarios. For instance, changes in the mining pattern in the pit meant that instead of trucks hauling the ore up out of the pit, they were hauling it downhill, said Bob Boyarsky, who operates the simulator. That meant a noticeable increase in wear on brakes.

The problem was re-created on the simulator and drivers were trained on how to avoid the problem. The simulator also helps drivers learn to deal with icy roads, engine fires and other potential problems.

EXPENSIVE OPERATION Like everything else at the mine, expenses are huge. Fort Knox employs 533 workers and about 200 contractors with an average wage of $70,600.

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The semi semi-autogenous autogenous grinding (SAG) mill at the Fort Knox gold mine mine, uses five-pound steel balls to crush the ore before gold can be extracted. It is run by two 7,000 horsepower motors.

Loader tires cost $80,000 apiece, and the price could rise – Snodgress said the tires are in short supply. The mine uses 33.5 megawatts of power and has a monthly electric bill of about $3.2 million. It uses nearly 27,000 gallons of diesel fuel daily.

In a bid to increase efficiency and decrease fuel consumption, crews are working on a road project that will change traffic patterns at the entrance of the mine and cutting the distance trucks must drive to access the heap leach system, another way the mine is trying to improve efficiency and cut expenses.

Snodgress is also working on a “maintenance health care system” that will remotely keep track of vehicle performance, such as fuel use and brake wear, and catch problems before they materialize.

DUAL RECOVERY METHODS The gold is recovered in one of two ways: through the carbon-pulp mill or the heap-leach facility, which processes lower grades of ore.

In the mill, the ore is screened and ground in mills by heavy steel balls.

About 20 percent of the gold is recovered through a gravity circuit. The rest is moved into chemical tanks where cyanide liquefies the gold, which is recovered in carbon filters made of shredded coconut shells. The gold is separated from the carbon fibers and melted down into bars. The carbon and the cyanide are recycled.

The heap leach is used to extract the gold from lower-grade ore. Shaw

equates the process to brewing a cup of coffee. The ore is piled up and cyanide is poured over it using what looks like agricultural irrigation equipment. The cyanide drips through the ore, removing the gold and creating a gold-bearing “pregnant solution.” The solution is piped to the mill where the gold is removed in the carbon tanks. The process continues until no more gold leaches into the cyanide.

The cyanide is recycled. The process is contained in a zero-discharge facility, Shaw said. Water in the tailings pond tests well below federal standards for cyanide levels, on the rare occasions cyanide is detected at all.

PURE GOLD One thing the mine has in its favor is that the gold is relatively pure, untainted by arsenic and antimony, Shaw said. The presence of impurities likely would make the mine unprofitable because it would require more chemicals and a more complex milling process, she said.

In the past, ore from satellite field True North was also processed in the mill, but mining ceased there in 2004 and the area is being reclaimed. Exploration is continuing at the Gil prospect, about 6 miles from Fort Knox.

What effect Gil may have on the mine operations has yet to be determined, Shaw said.

“We don’t mine the way we did 10 years ago, certainly not the way we did 100 years ago,” Shaw said. “No pickaxes, no gold pans. Who knows what this will look like in another 10 years?” ❑

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

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SPECIAL SECTION:

MINING

Penny Schwegel: Fort Knox Gold Miner Operating Alaska’s largest hydraulic excavator

BY JOETTE STORM

88

Photos by Judy Patrick

M

ining is a big part of Alaska’s history. The miner with a pick axe and shovel is still an iconic image often adorning logos and brochures – despite the fact the labor of the majority of people working in modern-day mining is highly mechanized. Today’s miner also wields a shovel, but it is more often a giant vehicle with computerized controls. Penny Schwegel, one of the 533 employees at Fort Knox Gold Mine northeast of Fairbanks, operates the largest hydraulic excavator in Alaska. She is one of the many women who have found their place in mining over the last 20 to 30 years, according to Steve Borell, executive director of the Alaska Miners Association. Only a few others operate the big shovels, however.

As a utility operator, Schwegel’s tools are mechanized vehicles. She currently drives a Hitachi 5500, a 1.1 million-pound-behemoth, moving thousands of tons of rock and dirt scoop after scoop into a continuing lineup of trucks that transport the material for processing. Like those early day miners who worked long, hard days to make the most of summer’s extra hours of daylight, Schwegel and her colleagues work long hours too, and not just in the summer. Fort Knox

Shovels are still the miner’s tools today, but they are bigger and more powerful, such as this 2,600-horsepower Hitachi 5500 excavator with a 40 cubic yard bucket that can really move dirt in the quest for gold.

operates 365 days a year, 24 hours a day to make the most of the low-grade ore at the mine, says Lorna Shaw, spokesperson for Kinross Gold Company, the Canadian firm that owns Fort Knox.

JUST ANOTHER DAY Round-the-clock rotations are at least 12.5 hours long.

“My typical day begins at 4:30, either in the morning or afternoon depending upon which shift I am working,” says

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

Schwegel, whose husband, Dave, also works at the mine. With nearly 16 years at Fort Knox, both Schwegels have worked in a variety of jobs. She had experience as a truck driver at a family owned mine, started driving trucks at Fort Knox and literally worked her way up to the heavy equipment she now operates or directs as a dispatcher.

It’s a 25-mile commute from their homestead to the mine where “line out” begins at 6:45 a.m. That’s when the “shifter” or shift supervisor assigns each operator to equipment.

“It is an opportunity for the operators to share with their relief what is going on with the equipment and any concerns they have about conditions at the mine face,” Schwegel says.

“During line out, the shifter and others will remind one another about safety measures such as using blinkers, wearing vests and who gets the rightof-way in the mine.”

This time is one of the few when an operator has the chance to talk with coworkers. Once in their trucks and shovels, each operator must remain alert and ever-conscious of safety. There’s no

time for idle chatter about kids or what’s going on in the world outside the mine.

“These are massive machines. One misstep and I could hurt someone on the ground, so I must be aware of my surroundings and remember the safety practices such as honking and waiting a few seconds before I move the shovel,” she says.

STARTING THE DAY By 7 a.m. she and the other operators are in a van headed to the current dig face where the shovel will be operated.

Schwegel will walk around examining the area and her equipment. She will assess the type of material to be excavated and climb the 28 feet up to the 8-by-10-foot cab that will be her work station for the entire day.

While much of the work is about controlling the highly specialized bucket, her skill is a combination of reading the texture of the dirt to be excavated and her deft touch at manipulating the equipment. The gold at Fort Knox is hosted in granite, probably from the late Cretaceous period and is a diverse mix of textures.

“If we have ‘sugar’ material, the digging will be easy,” she says. “If it is hard, I may have to chip away at the surface.

And if the material is soft, I have to be careful that the shovel isn’t buried, causing me to use more power to release it.

Sometimes the consistency of the face will change as we dig and the crew may have to re-blast it.”

When there is enough material to begin digging at once, Schwegel will work until lunch, a brown-bag affair right there in her cab. The routine continues for another four hours or so until break time – 10 minutes to walk around, stretch and use the restroom. Then the operators finish up the day’s mining until 6:30 p.m. when they head back to the offices to brief the next crew.

The work seems as if it could be tedious, but Schwegel says each day is different – conditions at the dig face differ and the shift boss varies the equipment and assignments. She has some techniques to keep herself alert, such as listening to the radio – country and western music her favorite tunes.

“When I work the night shift, I may set goals for moving from one point on

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the mine face to another specific point that keeps me concentrating, “she says.

Shifters also vary the placement of equipment and can move drivers around. If anyone feels he or she is tiring and needs a break, the operator calls upon the shifter to lend a hand or bring in a replacement. If on a particular day, Schwegel is working as a shifter, she will put in a 14-hour day, overseeing about 50 drivers and operators. She will continually move around in a pickup truck observing the operations, assuring operators are alert and anticipating any problems. As a dispatcher she will oversee the operation, choreographing movements and coordinating with the shift supervisor.

The routine varies on those days when new material must be blasted from the mine face. Schwegel works as part of the team that prepares the floor of the mine for the drillers and blasters. With a dozer, she will flatten the area and create a protective berm to surround the blast area. After the blast, she may walk around the dig face, eyeballing it to determine what other steps are necessary and examining the texture of the new material.

WORKING ROTATION By the end of the day, the crew has wrestled thousands of tons of dirt and rock from the earth. Schwegel is ready for the last drive back to Gold Stream Valley where she can spend some time unwinding with her horses and dogs.

As with other round-the-clock operations, crews at Fort Knox work a nontraditional rotation schedule. The Schwegels and the other drivers and operators work four 12.5-hour shifts in a row and have seven days off. That is followed by four night shifts with three days off. Next they work a threeday rotation with one day off and then three night shifts followed by three days off. All this amounts to 14 work days each month, but the total hours range from 175 to 190, depending upon any extra duties.

It takes some getting used to, but with this rotation, Schwegel says she is more rested than if she were to work a swing shift. Also, she can have extended time to train her five horses and serve as president of the Northern

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

Utility operator Penny Schwegel is a modern-day miner who performs several tasks at Fort Knox Gold Mine. Here she is serving as dispatcher, choreographing the movements of 50 other workers who drive various vehicles and heavy equipment at the dig face.

Horseman’s Association. However, there are times when she wishes she did not have to work any nights or that she and her husband had the same schedule more often. He usually works back-to-back shifts with her and turns his hand to boat building while away from the mine.

“We are a busy family with a homestead and hobbies,” she says.

Originally drawn to mining by the money, Schwegel says she likes the challenge of operating the big rigs and the camaraderie that goes with the intensity. “We spend so much time there, the mine is like a second home and people become like family.”

She was recently recognized for her work ethic with a Kinross “Putting People First” award.

Dan Snodgrass, vice president and general manager of Kinross Fort Knox, says, “Penny’s a talented operator and we’re pleased to recognize her for her contributions to the mine. She is a great example of one of the Kinross core values: a high performance culture. Penny lives this value and demonstrates it on ❑ the job daily.”

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SPECIAL SECTION:

MINING

Rare Earth Elements Alaska may fuel future development

BY STEPHANIE JAEGER

I

Photos by Shaun Lowe Photography/Courtesy of Ucore Rare Metals Inc.

n our modern world, rare earth elements are found all around us. They are in our cell phones, DVDs, computers, rechargeable batteries, lasers and MRI scanners. REEs are a crucial component in modern military equipment such as night goggles, guidance systems, communications and precision-guided weapons.

Yet, there is not a single rare earth element mine in operation in the United States. China, which produces more than 95 percent of the world’s REEs, is drastically reducing exports. Without our own supply of REEs, America’s ability to be competitive at producing many high-tech instruments and alternative-energy devices such as hybrid vehicles and wind turbines will be seriously compromised. Development of Alaska’s Bokan-Dotson Ridge REE property and new discoveries resulting from the exploration of more than 70 mineral occurrences with reported REEs in Alaska may provide an answer to this dilemma.

RARE EARTH ELEMENTS The group of metals commonly referred to as rare earth elements includes 17 little known elements such as lanthanum, cerium, praseodymium, neodymium, europium, dysprosium and gadolinium. Rare earth elements are not really that rare. They occur in many places in nature. You might have tiny amounts of them in your backyard.

What makes them rare is that they are usually found in very small quantities and not in large deposits such as coal or oil. They are also rare because they are difficult to extract from their naturally occurring ore minerals and from one another. Only in the late 1950s and early 1960s were procedures developed to extract these minerals in quantities large enough to use in industry. These procedures are difficult and time consuming and make REEs much more expensive than other minerals.

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Jennifer Milholen, a Ucore employee from Fairbanks, examining and running tests on drill core samples.

The battery in a Toyota Prius contains 20 pounds of the REE lanthanum.

A large wind turbine may have a battery that contains 500 pounds of the REE neodymium. The red color in TV screens comes from europium and the catalytic converter in your car’s exhaust system contains cerium and lanthanum.

Alaska possesses a significant number of REE deposits, but most of these have not been studied much. The two most well-characterized deposits are on Prince of Wales Island in Southeast Alaska. UCore Rare Metals, a Canadian company, has begun exploration at the Bokan-Dotson Ridge REE project near

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the former Ross Adams uranium mine on Bokan Mountain. The project is 45 miles southwest of Ketchikan and has direct ocean access to the west coast and an existing road network. This location should decrease the costs of development of the mine. The Bokan Mountain area is known to have high levels of the REE dysprosium, one of the most frequently used REEs.

CHINA’S ADVANTAGE China has had a monopoly on the sale of REEs since 2002, when the Mountain Pass Mine in California shut down because of environmental problems and its inability to compete with China’s cheaper production of REEs. With cheap labor, government support and few environmental regulations, China was able to undercut the cost of REE production in the rest of the world. In 2010 China temporarily stopped exporting REEs to Japan during a diplomatic dispute. China also has reduced its exports of REEs by 72 percent in 2010 and announced a 35 percent reduction in the first half of 2011. Now China is expected to continue to decrease its

Jeff Green (left) listens to Ucore President and CEO Jim McKenzie (center) and Jim Barker, Ucore project manager, describe the project at a meeting at Cape Fox Lodge in Ketchikan with Senator Mark Begich (not pictured), who joined Ucore management for a presentation and dinner.

export of REEs in order to preserve them for its own industrial use. The cost of REEs has risen sharply because of China’s actions. Dysprosium, used in computer hard drives, now sells for

$212 per pound, up from $6.77 eight years ago, and the cost of cerium has increased more than 450 percent.

Although China has 48 percent of the world’s deposits, the U.S. has 13

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percent, and Russia, Australia, Canada, India, Malaysia, South Africa, Sri Lanka and Thailand also have deposits. The mines closest to production in these countries include two in Canada: Thor Lake in the Northwest Territories and Hoides Lake in Saskatchewan; along with Steenkampskraal in South Africa and Mount Weld in western Australia.

In the U.S., the mine closest to production is the Mountain Pass rare earth mine in California. Until 2002, this was the worldâ&#x20AC;&#x2122;s largest REE producing mine.

Now owned by Molycorp Minerals, it is expected to produce 3,000 tons to 5,000 tons of REEs this year from its stockpiled ores. Molycorp plans to expand and modernize the Mountain Pass mine and reopen it in 2012. They expect to be able to meet the U.S. demand of 15,000 to 18,000 tons of REEs per year and hope to eventually make the U.S. independent from other REE exporters.

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ENVIRONMENTAL HAZARDS Although REEs are prized for their use in green technologies, their mining and production is fraught with many environmental risks. Many REEs are associated with radioactive elements such as uranium or thorium. This means any waste from these mines (water, rock and air pollution) is often radioactive.

The runoff from Mountain Pass mine in California caused many radioactive water spills totaling about 600,000 gallons of radioactive water.

The largest REE mine in the world near Baotou, China, has had severe problems with air and water pollution, as well as damage to the land from acids used in the extraction of REEs from their ores. In one estimate from China, each ton of REEs mined sterilized 200 square yards of vegetation and 300 square yards of soil because of this acid treatment. Any mine in the U.S. is expected to have many more environmental regulations than mines in China, but environmental protection comes with a significant economic cost.

Japan has been exploring the possibility of recycling REEs, but currently less than 1 percent of REEs are obtained through recycling. Alternatives for REEs are also being explored but are far from being produced.

Other elements might possibly be

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developed to replace REEs in modern technologies, but they might be more expensive and not perform as well. Currently, the biggest emphasis is on exploring and developing new sources of REEs in the U.S. and other countries.

ALASKA’S POTENTIAL “In July 2011 Gov. Sean Parnell budgeted $498,000 for the Department of Geological and Geophysical Sciences to conduct an initial assessment of Alaska’s REE potential,” said Melanie Werdon, chief of DGGS Mineral Resources Section. “This summer, DGGS conducted geologic mapping and regional stream sampling in the Moran area, located about 25 miles west of Tanana in Interior Alaska. The DGGS also collected samples from several reported REE occurrences near William Henry Bay in Southeast Alaska to assess the area’s REE potential. Private industry will need to spend many times the investment made by the State of Alaska in order to explore for, locate, evaluate and develop REE properties in Alaska.”

UCore is in the preliminary phase of the permitting process, ascertaining from State agencies what baseline environmental data needs to be collected as part of the development process. “The status of the fisheries in the area is the first step in the State’s review of the project,” according to the Department of Natural Resources Office of Project Management and Permitting.

UCore also has staked a claim to 11,400 acres of land in the Ray Mountains in Central Alaska. This area is on State land, north of Tanana and south of the Kanuti National Wildlife Refuge and is also thought to be a good source of dysprosium.

Contango ORE, a subsidiary of Contango Oil & Gas Co., holds the rights to the Salmon Bay project, also on Prince of Wales Island. Kenneth R. Peak, the company’s and CORE’s chairman and CEO, says their REE exploration of this area is in the early or “idea” stage and they are uncertain what its ultimate potential will be.

Alaska is well-positioned to serve an important role in the future mining and production of rare earth elements – vital components to popular consumer goods and green technol❑ ogy equipment. www.akbizmag.com • Alaska Business Monthly • November 2011

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SPECIAL SECTION:

MINING

Innovations in Metal Mining Technology Health and safety focus of NIOSH and MSHA Photos by Justin Srednicki/Courtesy of NIOSH Office of Mine Safety

BY BRIGITTE YUILLE

A traditional miner LED cap lamp (left) and the NIOSH LED cap lamp (right). Note that the NIOSH LED cap lamp (right) uses up to 50 percent less power yet provides better lighting of hazardous areas. The NIOSH LED cap lamp was named a “Secretary’s Pick” winner in the HHSInnovates program in September and the technology is expected to crossover from mining to other industries, benefiting other workers that use personal lighting.

W

hether introducing new monitoring devices for gas and dust or safeguarding miners in enclosed or protected spaces, the U.S. mining industry has greatly invested in the safety and health of its workers. New studies conducted by the National Institute for Occupational Safety and Health (NIOSH) and approvals from the Mining Safety and Health Administration (MSHA) are introducing simple to complex technologies that have or will soon reach miners and mining operators.

SHOTCRETE Several workers have been injured or fallen to their death in underground mines because of the weak rock beneath them. The government has worked with diligence to alleviate these poor conditions and secure ground support. One

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way has been a high velocity of concrete, sometimes mortar, sprayed on exposed openings; otherwise known as shotcrete. The construction technique is also applied with bolts and mesh when areas of the ground are in need of extensive support as in the case of some gold mines in Nevada, stated authors of the NIOSH study, “A Shotcrete Adhesion Test System for Mining Applications.”

Shotcrete works by adhering to rock steadying its movement where both it and rock within the mine, or host rock, are joined. Even though, shotcrete is stiff, it can still bend under pressure. How much weight the shotcrete can withstand is what researchers at NIOSH have placed their interest. They have analyzed shotcrete’s strength properties, especially the sturdiness of the adhesion. This way they can better determine its ability to

support the immediate ground near the surface of the mine.

Shotcrete failures have occurred.

At times, it hasn’t been able to bend under the weight of additional loads, or it’s incompatible with the minerals constituting the host rock, such as shale and mudstone.

Researchers at NIOSH have developed a way to test the flexibility of the shotcrete rock through an inexpensive portable “direct tensile test system.”

This system consists of a stand-mounted core drill and a pulling unit that has a precision pressure gage. This system measures the adhesion strength of freshly applied shotcrete that has hardened within 24 hours. The system can be used during the application process and conducted at any location because the epoxy stud pull anchor is installed after the shotcrete is applied.

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or more than two decades, Engineered Fire and Safety (EFS) has been providing premium life-safety and asset-protection solutions throughout Alaska. EFS is an industry leader in Clean Agent Fire Suppression, as well as industrial and commercial fire alarm and flame and gas-detection systems. The company also facilitates the design, installation and servicing of these systems, offering clients a complete solution. â&#x20AC;&#x153;We are extremely customer-focused,â&#x20AC;? says General Manager Matt Atkins. â&#x20AC;&#x153;We do a very good job of working with our clients to help solve their problems and supply their needs.â&#x20AC;?

EFSâ&#x20AC;&#x2122; experienced engineering staff is also strong in the area of project management. They are very cognizant of project restraints and routinely provide clients with the type of feedback they need to effectively manage their project. â&#x20AC;&#x153;We not only design systems and provide technical expertise, but also we are able to leverage our project management familiarity and background into the jobs,â&#x20AC;? Atkins says.

NO PROBLEM TOO BIG With an expert team of application engineers and technical staff, EFS is equipped to address an array of fire-protection and safety needs. Many of its employees have more than 10 years of experience designing, servicing and managing projects for telecommunication, data-processing, powergeneration, mining, and oil and gas clients. Each member of EFSâ&#x20AC;&#x2122; engineering and field service team is certified through the State and registered with the National Institute for Certification in Engineering Technology (NICET). In addition, they are constantly training to enhance their skills. Atkins says, â&#x20AC;&#x153;I think we have one of the strongest groups of fire-protection specialists in Alaska.â&#x20AC;?

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GLOBAL LEADER EFS is a business unit of UTC Fire and Security, a global leader in fire fighting products and fire-protection systems and services. This relationship makes it possible for EFS to have access to some of the industryâ&#x20AC;&#x2122;s strongest product lines, including Chemetron Fire Systems, KiddeFenwal Suppression Systems, National Foam, Detector Electronics Corp. (DetTronics), Marioff (HI-FOGÂŽ Water Mist Fire Protection System), Kidde-Sentinel Vehicle Protection Systems and Siemens Building Technologies (fire alarm systems). â&#x20AC;&#x153;These are some of the most advanced, efficient and robust platforms in fire protection,â&#x20AC;? Atkins says. â&#x20AC;&#x153;There isnâ&#x20AC;&#x2122;t a fire-protection design or need that canâ&#x20AC;&#x2122;t be addressed with these systems.â&#x20AC;? ÄŤÄ&#x153;ĤÄ&#x; Ä&#x153;Ä&#x;ÄąÄ Ä­ÄŻÄ¤ÄŽÄ Ä¨Ä ÄŠÄŻ

As evidence of its expertise, EFS has received a variety of honors for its work, including a Best Overall West Territory Performance award from Siemans, numerous Outstanding Performance awards from Det-Tronics, and client recognition for its dedication and support of the Oil Transit Line Renewal project. In the future, EFS will continue expanding on its achievements and capabilities. That future will involve the increased integration of automation and control solutions. â&#x20AC;&#x153;We will focus more and more on the interoperability of systems that control devices that sense, operate, detect, communicate and manage facilities and buildings,â&#x20AC;? Atkins explains.

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Photos courtesy of NIOSH Office of Mine Safety

Battery back-up and air conditioner unit in the rear of the Strata 12-man Mine Refuge Chamber.

Strata Rear Chamber

DUST MONITORING AND CONTROL Cutting down exposure to miners inhaling toxic dust is the topic of many federal mining studies. Thousands of lives have been lost. Haunting the industry are chronic, debilitating and fatal lung diseases.

Coal Worker’s pneumoconiosis, or “black lung disease” is caused by a buildup of coal dust in the lungs due to long-term exposure. This inflames the organ’s tissues and fatal when the disease is severe.

Silicosis, or “Potter’s rot” results from exposure to excessive amounts of dust containing crystalline silica, such as quartz, commonly found in most rock beds. Exposure to this disease can lead to swelling, scarring lungs and nodes in the organ’s lobes. Ailments, such as shortness of breath and weight loss, can lead to death.

The coal and silica dust is especially an issue for underground coal operations, long wall face workers, continuous miner operators and roof bolter operators. All are at high risk of overexposure, claimed NIOSH’s report, “Dust Monitoring and Con-trol Highlights.”

NIOSH researchers have been reviewing a directional spray system.

Tests have occurred in the full-scale long wall dust gallery at Pittsburgh. This is where a long wall of coal is cut up into a single slice at NIOSH’s research laboratory. The application of the spray on the tailgate end of the shearer was evaluated. The goal was to limit the dust exposure of the tailgate shearer operator and jack setter during tail-to-head cutting passes, explained the report.

The agency also realized water spray systems used to confine and control dust clouds to reduce needed an adjustment. The sprays have been ineffective for controlling methane gas. A tracer gas injection and monitoring system

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have been employed to analyze gas levels while monitoring dusts. This was done at the full-scales continuous miner gallery in Pittsburgh. The performances of different water systems were evaluated. This occurred when they were operated with flooded bed scrubbers during the extraction of extended cuts with exhaust face ventilation. It was determined that blocking sprays mounted on the sides of the miner helped control dust and methane gas levels, specifically when the miner’s were in the slab cut position, the report described.

Companies are also taking an innovative approach to dust control. Midwest Industrial Supply Inc. explores dust control solutions. “The way we consider dust is another major factor,” said CEO Bob Vitale. Although, dust is often viewed as a nuisance and an environmental hazard, dust is an “extraordinarily important ingredient to a good road, whether it is a mine haul road, a mine access road, or a community road,” explained Vitale.

When that dust blows away, what’s witnessed “is a road that a mining company has spent a fortune building in order for that road to have the strength and properties to be a good production platform for the mining operation.”

Vitale’s company has come up with a proprietary system as a solution, undergoing the registered trademark of FINES Preservation. “Fines, being the stuff you see blowing away,” he explained.

“The object is to keep the road intact and keep it from blowing away, which means you are going to have the best road to work on, you’re going to have the least amount of recurring maintenance cost, and as a by-product there’s not dust,” said Vitale.

Above: Interior of 12-man chamber with active carbon dioxide scrubber.

CONTROLLING DIESEL PARTICULATE MATTER Solids, liquids, and vapors consisting mostly of carbon components and other particulates, such as sulfates and ash, shot out from diesel engines are known as diesel particulate matter (DPM). When inhaled it can to asthma-like symptoms, lung cancer, premature death from cardiovascular, cardiopulmonary and respiratory causes, explained the MSHA. The agency decided to cut back on workers exposure to DPM. In 2008, it ruled miners can’t be personally exposed to DPM beyond “an average eight-hour equivalent full shift airborne concentration of 160 micrograms of total carbon per cubic meter of air.”

Filters have become popular for controlling DPM emissions for underground vehicles. These trap tiny pieces of soot in the exhaust. However, some obstacles have gotten in the way of their use, such as their complexity, issues with implementation and their cost, explained authors of the NIOSH study, “Aerosols Emitted in Underground Mines Air By Diesel Engine Fueled with Biodiesel,” Federal researchers have been considering changing the fuel supply from petroleum diesel to higher concentration biodiesel blends. Biodiesel is environmentally-friendly having the potential to lower greenhouse emissions and pollution. Researchers of the study identified some reasons for its use. First, the number that measures the

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

ignition quality of diesel fuel, the cetane number, is higher. Second, biodiesel appeared to drop the balance point temperature of passively regenerated diesel particulate filters, which is a filter that’s undergone the process of burning off accumulated soot at a raised temperature. Ultimately, this can help the regeneration and the implementation of diesel particulate filter systems in underground mines.

The study’s researchers compared soy methyl ester biodiesel, a soy-bean based oil, with ultra low sulfur petroleum diesel. A “naturally aspirated diesel engine equipped with a muffler and a diesel oxidation catalyst” was used, the study stated. A diesel oxidation catalyst often uses a chemical process to breakdown particulate matter, such as carbon dioxide or hydrocarbons.

The authors discovered when the engine was fueled with biodiesel fuels, the engine put out less elemental carbon concentrations for all engine operating modes and exhaust configurations, but one drawback was the increased fractions of volatile organic

carbon concentrations and the amount sprayed, even when the engine operated at a light-load.

REFUGE CHAMBERS Disasters occurring between 2006 and 2007 resulted in 28 fatalities, and this triggered new technologies in mining safety, such as refuge chambers.

These steel or inflated, movable chambers or tents provide underground miners safe shelter from dangerous events, like the build-up of methane gas. It provides breathable air, toilet, food and water for up to 96 hours.

Strata Products Worldwide, LLC, headquartered in Atlanta, Georgia is a global leader in the design and manufacturing of emergency refuge chambers.

“Strata has always been able to customize chambers to suit each application. This can include the physical structure as well as the operation of the chamber,” explained Paula Gunnels, marketing and events manager for Strata.

“For example: some mines have compressed mine air and the chambers

are fitted with filtration systems. If the mine does not have mine air, Strata provides all breathing air on-board, along with a purge air system in the air lock entrance compartment,” said Gunnels adding that its inflatable units are used in mines with very restricted movement and/or ceiling heights.

Currently, Strata’s improving its chambers by investing a significant amount of resources improving cooling and air scrubbing processes to keep chambers at comfortable temperatures and harmful gases at safe levels. In addition, it’s minimizing the maintenance, keeping labor and costs low, and simplifying the training process, said Gunnels.

NIOSH has developed a multimedia training system to increase miners and mining operator’s knowledge of how to operate, transport and inspect the refuge chambers. This includes preparing for the psychological and physical effects within the chamber, such as difficulty breathing, sleeping, rapid heart rate and sweating. The training helps to decide when to deploy the chamber and how to activate

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the oxygen. It consists of publications, photos, audio and interviews from miners who’ve used the chamber in response to a fire in Canada.

PROXIMITY DETECTION SYSTEMS Preventing miners from being entangled, struck or run over by mine machinery and/or mobile equipment is another goal at NIOSH. “On average, severe accidents that involved a worker and machinery or haulage equipment comprised 42 percent of all severe accidents at mining operations,” explained Todd Ruff, author of the NIOSH report “Innovative Safety Interventions. “ Conveyors have been at fault for most common machinery involved in severe accidents.

Mishaps have also occurred during machine maintenance in repair, he added.

One new technology researchers have been investigating to better detect hazardous situations is intelligent video.

Cameras connected to computers recognize people in predefined zones within the camera’s field of view. They also detect items left behind, removed and when a worker is down.

NIOSH researchers are looking at monitoring disabled machinery and preventing its start-up if someone is detected in a hazardous area, providing alarms to alert plant operators during production of dangerous situations, and using multiple cameras at a scene for three-dimensional information.

OTHER INNOVATIONS In addition to these technologies and techniques is a NOISH software program for blast design.

“If you’re not careful about the way you do the blasting in underground mines, then the ground will tend to break up a lot more than want it to, and it will cause you ground control problems. You will have loose rock around the circumference of the opening,” said Senior Scientist Mike Jenkins.

Researchers are trying to resolve vision in underground mines with better lighting, and their looking at “cap lamps, personal lamps that miners use and also lighting is on equipment underground,” explained Jenkins. Miners not only slip, trip and fall in low light, but they also get crushed or pinned

by approaching machinery. The traditional lighting method has been a narrow beam of bright light fixed on a single location; however, researchers are identifying alternative lighting methods. They’ve explored the effectiveness of a light-emitting diode cap lamp. It adjusts lighting distribution and intensity and reduces disability glare.

Finally, improved communications that not only withstand events, such as an explosion, but also track miners as they go through their work day are under review. MSHA approved the first and only through-the-earth, two-way voice and text wireless communication system. The MagneLink™ Magnetic Communication System (MCS), from the global security company Lockheed Martin in Bethesda, Md, uses magnetic waves to send signals through layers of solid earth, explained the company’s July news release. Trapped miners and rescue workers can talk to one another during a disaster, and they can activate an automatic beacon signal to help rescuers find the miners locations.

Meanwhile, the U.S. mining industry continues to consider a wide range of new technologies. ❑

First Things First At Fort Knox, our top priorities are simple.

Our people.

Our community.

Our environment.

We invest in our people, so they are trained to do the best job possible.

We support our community with charitable donations, volunteer hours and local purchases.

We adhere to the toughest standards to protect water and air quality.

These are our priorities.

Because at Fort Knox, it’s about putting first things first.

Fairbanks Gold Mining Inc. A Kinross company

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

kinross.com

SPECIAL SECTION:

MINING

Steve Borell Heart and soul of the Alaska mining industry

BY TRACY KALYTIAK

W

hen Steve Borell was a 7-year-old growing up in the Swedish community of Lindsborg, Kan., his father took him to a local rod and gun club where a couple of men were showing home movies of their recent moose-hunting trip on the Kenai Peninsula.

“For a young boy who loved to hunt and fish, this looked like the place to go,” Borell said.

Borell fulfilled his boyhood wish.

He first arrived in Alaska while serving with the U.S. Air Force and later returned to craft a life embracing his passion for the outdoors and, over the past 22 years, enabling him to ably represent the state’s mining industry as executive director of the Alaska Miners Association.

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Photo by Azimuth Adventure Photography/www.azimuthadventure.com

ADVOCATING FOR MINES Borell advocates on behalf of the state’s seven large mines – Usibelli, Greens Creek, Red Dog, Fort Knox, Pogo, Kensington and Nixon Fork – as well as the state’s numerous smaller mining enterprises. Borell also has worked to steer trained people from places like the University of Alaska into well-paying jobs in the mining industry and provided information on endeavors like the immediate-horizon Chuitna coal project, which he says will provide jobs for 300 people to 350 people and produce 12 million metric tonnes of low-sulfur export coal per year.

“Steve is such a knowledgeable guy, with decades of federal and state mining knowledge,” said Alaska Sen. Cathy Giessel. “He has a way of explaining technical things, bringing information

Steve Borell

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down to the average person. He knows a lot about geology and of course he has a passion for mining, discovery, new technologies that are out there.

He’s also been really helpful to me understanding what mining contributes to the state economy. It’s not all about the State treasury, but the impact of mining on people’s lives. Mining discoveries are what built our communities, brought in the shopkeepers, built roads. It’s mind-boggling what it has contributed over 100 years.”

IMPROVING THE BUSINESS CLIMATE Obstacles exist now for mining companies looking to launch an operation in Alaska. Borell says those who don’t like mining are correct when they look to the past for examples where mining has left a mess.

“There was a time when there were no regulations regarding water quality discharges, reclamation. That’s a fair criticism,” he said. “It’s not fair, however, to say there are no regulations in this state now. There have been varying reclamation requirements since 1969.

People say mining leaves a mess, but now under State law if you leave a mess, your bond is going to be taken and you will be charged for the cost.”

Borell says there have been numerous improvements in the regulatory and business climate over the past 22 years.

“Various statutes have been changed, regulations have been improved to make it such that industry knows what the ground rules are,” Borell said.

“Once industry knows what the rules are, they can meet them. Logical rules that make scientific sense improve the business climate in the state and remove uncertainty. Business needs certainty. It needs to know what it’s supposed to do and then can follow a certain set of rules to get permits and operate.”

Uncertainty is the reason why there’s not more oil and gas exploration in the state, Borell said.

“It’s absolutely terrible for any kind of business,” he said. “It has been extremely satisfying to see we have improved the business climate on numerous fronts.”

Borell compared the permitting process to a dirt or gravel road.

“What has been done is that we

have replaced a couple bridges on that road, straightened out some curves, put some guardrails in places where there are steep embankments, filled potholes,” he said. “Did we build a superhighway? No, but it’s a good road, less dangerous.”

THE RIGHT APPROACH Borell says he often gets calls from individuals who are butting up against barriers while trying to establishing a business.

“They think they’re being mistreated

by State or federal government, but oftentimes it’s because they don’t know how to approach it,” he said. “We set them on a track that gets them talking to the right people in the agencies, minimizes wasted time going down dead-end rabbit trails.”

Borell recently talked to a man who wanted to start placer mining. On his list of places to stop was the U.S. Forest Service.

“I said the U.S. Forest Service doesn’t have land it manages there,” Borell recounted. “I help them not waste their time checking out things they don’t need to check, going from office to office and wasting a couple hours. In two minutes I told him what he needed to know.”

Borell told the man how to get information on land status.

“Here’s the office, but you can do it on the Internet from your hotel room,” Borell said. “When you get to the Atwood building, go to DNR’s public room and you’ll find 20 different handouts on mining, reclamation – pick up every one.”

Borell said he walked the man through other information he would require on his quest.

“If you come green to Alaska without any knowledge of this, you’ll flounder around many, many, many days,” he said.

HELPING SUPPLIERS Another facet of Borell’s job involves helping supply companies wanting to sell items to the mining industry.

“I sit down with them, walk through a list of companies, find out what product or service they want to sell,” Borell said. “I walk through this list. This one you should contact, that one no, they

don’t have a need for what you have.

Out of a list of 30 companies, they will walk away with five companies. And off they go, very satisfied. It’s satisfying to me, personally, to know I helped people like that.”

Borell sees continued – and increasing – industry for mining in Alaska.

“The industry is not a flash in the pan,” he said. “You don’t end up with a big nugget, but what you do end up with is steady growth. We’ll see that as long as regulatory requirements and the business climate are reasonable. It’s a carefully calculated, science-driven industry that goes out and explores.

It will continue to grow – not on an exponential curve, not a gold rush.”

NEW OPPORTUNITIES Borell says the AMA is interviewing candidates to be his successor.

“There’s a search going for this position, we’re hoping to have someone in place very soon,” he said. “My expectation is that person and I will visit sites together, go to (Washington,) D.C., for a week or so, learn who our contacts are, learn about the National Mining Association; they do a great job keeping track of issues. When the phone rings, they’ll know what the person looks like because he or she will have been in their office before.”

The greatest challenge about his job, Borell says, is recognizing you can’t get everything done.

“There’s so much opportunity in the state, so many things that need to be worked on,” he said. “My in basket is always overflowing. I’m dealing with so many different topics. I’m a Christian and every morning I pray for wisdom.”

Borell, just before his interview, had returned from a moose-hunting trip in which he traveled by boat from Nenana to Galena and beyond – 1,000 miles from the Tanana to the Yukon to the Koyukuk River – the kind of trip he had dreamed of as a boy back in Kansas.

“We shot the only bull we saw, a 36-rack bull,” he said. “The rut was just beginning and the moose weren’t coming out on the beaches. The moon was against us; it was a full moon.

Hunting them at night was very difficult, but it was beautiful meat. Tonight when I get home, I’ll have the last ❑ piece to cut up.”

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SPECIAL SECTION:

MINING

Photos courtesy of Alaska Abandoned Mine Lands Program

Abandoned Culross Mine adit in Prince William Sound, before the Alaska Department of Natural Resources Division of Mining, Land and Water’s Abandoned Mine Lands Program installed a bat gate to close off the 190-foot adit portal. The gold and silver mine operated sporadically between 1910 and 1940.

Abandoned Mine Reclamation Restoring Alaska’s lands

BY BRIGITTE YUILLE

T

he federal government has provided the State of Alaska more than $2 million in funds to help restore abandoned coal mine lands and State reclamation specialists are planning to use it on some long-awaited major projects promoting safety.

“Primarily, we are filling shafts or re-grading dangerous high walls,” said Justin Ireys, a State reclamation specialists of the Alaska Abandoned Mine Lands Program. “Or maybe tearing down dilapidated buildings, which are posing risk to the public.”

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COAL MINING FEES Alaska is among more than two dozen States and tribes with coal mining communities to receive funding to fix environmental damage from past mining and eliminate any health and safety hazards.

The money for the grant originates from funds from a per ton reclamation fee levied on all coal produced in the United States. States are given funds based upon the amount of coal produced.

Steep and unstable slopes are

recovered; water is treated for acid mine drainage, and the water supplies are restored; and jobs are created within local economies which helps create an economic multiplier effect, according to an Office of Surface Mining Reclamation and Enforcement (OSMRE) news release.

NATIONAL RECLAMATION PROGRAM HISTORY The Abandoned Mine Lands Program (AML) is part of the federal Surface Mining Control and Reclamation Act,

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

also known as “the strip mine bill.”

President Jimmy Carter signed the Act into law on August 3, 1977.

Congressional members who supported the law considered it necessary since 80 percent of the Western coal at that time was owned by the federal government, and surface coal mines were increasing, according to “The Surface Mining Control and Reclamation Act Requirements and Implementation.” a 1978 University of Wyoming law review.

“In 1976, coal, served 17 percent of the nation’s total energy consumption and provided 55 percent of its electrical power generation,” wrote the review’s author Marilyn Kite. “Coal production has increased from 457 million tons in 1953 to 671 million tons in 1976. Even more striking, the percentage of coal produced by surface mining methods has increased from 23.4 percent in 1953 to 55.9 percent in 1976.”

The Act created the Abandoned Mine Reclamation Fund. The fund is administered by the U.S. Secretary of the Interior. It generally required operators of coal mining operations to pay a fee of 35 cents per ton of coal produced by surface mining and 15 cents per ton of coal produced by underground mining or 10 percent of the value of the coal at the mine, whichever is less, for at least 15 years, according to the 1978 document. (However, Alaska’s AML program presently reports it at 31.5 cents per ton at surface mines and 13.5 cents per ton for underground mines.)

Lignite coal had a rate of 2 percent for the value of the coal at the mine or 10 cents per ton, whichever less.

The lands eligible for reclamation were those where the coal was mined or affected by coal mining. Half of the reclamation fee must go back to the state with an approved reclamation program from which it was collected. The Secretary of the Interior determines whether all or part of that money can go to the construction of public facilities in communities impacted by coal development.

Currently, 28 coal-producing states and tribes have received millions of dollars to restore abandoned land mines. More than $395 million dollars in grants were distributed to the communities for the 2011 fiscal year,

Bat gate at the abandoned Culross Mine in Prince William Sound. The Alaska Abandoned Mine Lands program designed the adit portal closure to keep people out while preserving the hibenacula for bats such as the Keen myotis and Big Brown Bat.

which saw an increase of more than $25 million. So far they’ve received more than $7 billion to reclaim more than 285,000 acres of hazardous highpriority abandoned mine sites. More than 3,000 jobs have been established, estimated the OSMRE.

ALASKA’S PROGRAM Alaska is known as a “minimum program.” It’s sole operating coal mine, Usibelli, located in the Interior outside of Healy, produces about 1.5 million tons of coal per year. In comparison with some of the other states that produce large amounts of coal and get large amounts of money, such as Wyoming and Pennsylvania, which receive between $25 million and $30 million dollars per year to work on projects, Alaska doesn’t produce very much coal, Ireys says.

Usibelli, currently is the only coal

mine generating revenue that’s taxed and goes into the federal fund.

“So if we mine 2 million tons, depending on the year, probably $70,000 to $100,000 is an estimate; $6,000 or $7,000 in tax will leave Alaska to go into the AML fund,” saidAlan Renshaw, vice present of operations at Usibelli Coal Mine. “The fund gets divied up and money comes back to the State.

COAL MINING IN ALASKA “The Alaskan coal industry grew rapidly during and immediately after World War II and leveled off after 1953 to an annual production fluctuating between 650,000 and 850,000 tons,” according to “Coal Resources of Alaska,” a 1967 Interior Department geological survey bulletin.

World War II sparked a tremendous demand for coal, said Stephen Borell, executive director for the Alaska

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Abandoned Culross Mine shaft in Prince William Sound, looking straight down the 370-foot shaft after the alder patch obscuring it was cleared. The first two platforms were measured at 26 feet and 48 feet. The shaft had platforms at each level with offset access holes, presumably to keep a dropped tool, rocks, etc. from plummeting the entire depth unchecked.

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Miners Association “It was the most economical source of energy. In the Healy area, I think there were three or four different mines at that time. The coal was initially used by the railroad, but for the War it was used for heating and power generation in Fairbanks.

“After the war, the military converted from coal fire plants to oil or gas power plants and so the demand for coal went down. Oil and gas became more economical.”

In addition to its low cost, natural gas had another advantage; a turbine could be added without the need of a whole new power plant. At some point, “the railroad converted to diesel fuel,” Borrell added.

“The Healy Valley was significantly mined, from 1920 through about 1970, so there was a period of about 50 years where there was a lot of activity back up in this valley, including the Alaska Railroad,” Ireys said. “There was so much mining and so much coal production in that area that the Alaska Railroad actually built a spur off their main line that went back up into that valley so that they could load coal and take it to the market.”

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As gold production in Alaska declined in the 1950s, interest in coal and other minerals rose. The state’s thenlargest gold producer, U.S. Smelting Refining and Mining Co., didn’t expect to continue operating beyond 1963 according to a January 1959 article in the New York Times. The mineral was of interest to the American corporations as well as the Japanese. By the following year, coal had overtaken gold “as the state’s most productively valuable mineral,” the paper noted in September.

“Prior to 1943 all coal mining in Alaska was done by underground methods,” the geological survey bulletin said, “but by 1961 all mining was done by stripping. By the 1960’s competition from oil and gas and to some extent from hydroelectric power was forcing coal operators to search for ways to decrease the cost of production, such as the installation of minemouth power plants to save the cost of transporting the coal.”

Once the demand for coal tapered off, it came down to which coal operator could survive, “and that was Usibelli,” Borell said. In addition, Usibelli Coal

Work crew mixing foam to plug the abandoned Culross Mine shaft. The Alaska DNR Abandoned Mine Lands Program installed a foam plug and culvert with a bat grate to close off the exposed shaft. Total cost of both closures (190-foot adit portal and 370-foot shaft) was $96,878 in 2003. AML cannot use funds for non-coal abandoned mines unless “you can fall into it, fall off of it, or it can fall on you.” The Culross Mine qualified as a physical hazard.

Mine Inc., which became an operator in 1943, bought out other operators too, such as Austin Eugene “Cap” Lathrop, former owner of the Healy River Coal Co. and community investor.

Ireys said all of the mining that happened in the Healy Valley was before

1977, it all ended in 1970. Some mines “went bankrupt, some mined through their reserves, and for whatever reason, the mining ceased or there became more economical reserves in other parts of the state,” Ireys said.

“And so, slowly but surely, all of the

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mining in Healy Valley died out and what was left behind was a series of old abandoned buildings, load-out facilities, a series of strip pits, and other mining-related stuff.â&#x20AC;?

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RESTORING THE LAND The Abandoned Mines Land (AML) program started in Alaska in 1983 and 455 coal sites were identified. Most donâ&#x20AC;&#x2122;t pose any hazard, said Joseph Wehrman, AML program manager for the State. Though, the ones remaining require a multimillion dollar effort, he says.

The AML program can only work on sites abandoned before August 1977, at which the company is no longer operating, or sites the program couldnâ&#x20AC;&#x2122;t contact, Wehrman says.

Extreme physical-hazard mitigation can occur on non-coal sites, and by that he says, â&#x20AC;&#x153;if you cannot fall into it, off of it, or have it fall on you, we cannot do anything on the site.â&#x20AC;? Old coal mine sites can be addressed for environmental issues if the program â&#x20AC;&#x153;encounters when doing those physical hazard mitigation â&#x20AC;&#x201C; shafts, tunnel openings, structure demolition â&#x20AC;&#x201C; under some rather stringent limitations.â&#x20AC;?

Ireys says the amount of work Alaskaâ&#x20AC;&#x2122;s AML program could accomplish on any given year has been limited because of its status as a â&#x20AC;&#x153;minimum program state.â&#x20AC;? In prior years, the State received $1.5 million in federal funds. This year, the State received $2.4 million. â&#x20AC;&#x153;Five or six hundred thousand of it was spent for administrative costs,â&#x20AC;?

Ireys said. â&#x20AC;&#x153;And so weâ&#x20AC;&#x2122;d be left with about $900,000 or around $1 million, and thatâ&#x20AC;&#x2122;s the money that would actually go directly toward the projects. So, weâ&#x20AC;&#x2122;d have to figure out which projects were of priority to us, which projects represented the most danger, and weâ&#x20AC;&#x2122;d prioritize all these projects. â&#x20AC;&#x153; The Alaska AML program strategy has been to start with mine sites closest to communities and less-expensive projects â&#x20AC;&#x201C; given the initial small size of their grant â&#x20AC;&#x201C; and work on largerscale projects as the program gets more money and nears its sunset date of 2023. â&#x20AC;&#x153;The 2006 amendments to SMCRA set the formula for grant amounts and repayments of past fees

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

withheld for some states that took our annual grants off-budget,” Wehrman said. “Under this scenario, Alaska saw gradual grant increases from the past $1.5 million up to $3 million that starts next July 1.”

The program has used a bidding process for its projects, awarding contracts to the lowest bidder.

“In Alaska’s history we’ve probably cleaned up three contaminated sites, and that was only because we had to get the stuff cleaned before we could get in there and work on the main task or problem,” Ireys said.

AML has targeted the Healy area for more than 20 years where coal mining occurred about three miles to 10 miles to the east of the main Parks Highway.

Tons of remnant mining equipment was either discarded or had fallen into the area’s stream – scrap steel eroded on the bank and ended up in the stream, Ireys says.

The AML program has demolished old buildings, cleaned creeks and closed up potential old mining holes, Renshaw said. “In the past decade, a lot of that money has gone to the Wishbone Hill area where they re-did the old surface mine pits.”

Last year, several acres of abandoned equipment was hauled to landfills. Debris in the valley has mostly been cleaned. A few buildings will likely be removed or remediated in coming years.

Federal funds for this year are going toward the development of a bridge to better access coal mining areas for future reclamation projects, such as a three-mile-long line of open surface strip pits with 350-foot-high walls on the south side of Healy Creek. AML plans to lay the pits back to a threeto-one slope for people to safely walk down, Ireys said. He doesn’t expect all the federal funds will be spent this year; therefore, the money would be rolled into the next year and used to construct the bridge.

Healy’s not the only area the program has placed its focus. Historic coal mining also took place in the area east of Palmer near Sutton and projects this year extinguished fires from tailings rich with coal that has smoldered for years. The effort was to eliminate health ❑ threats and forest fires.

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SPECIAL SECTION:

MINING

Donlin Gold’s existing camp located in the upper Kuskokwim River Valley of Southwestern Alaska. The company is continuing air monitoring, water sampling and wildlife surveys.

Photo courtesy of Donlin Gold

Donlin Gold Project Feasibility New study under way by Barrick Gold and NovaGold

BY BRIGITTE YUILLE

T

he completion of a revised study that determines whether the parent companies of the world’s largest undeveloped gold deposit will move forward or not is expected by the end of the year.

The Donlin Gold Project, formerly the Donlin Creek Project, is currently under review by two publicly traded, Canadian mining companies, NovaGold Resources Inc. and the Barrick Gold Corp. If an agreement is made to

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move forward, Donlin Gold will proceed with the State and federal mine permitting process to operate.

The project is located in the upper Kuskokwim River Valley in Southwestern Alaska. It’s a large-scale open-pit mine that uses a conventional truck and shovel operation, and uses “flotation, pressure oxidation of the concentrates followed by conventional leaching to recover the gold,” said Greg Lang, regional president of Barrick’s North

America business unit, at the September Investor Day presentation. Donlin Gold is expected to produce annually 1.3 million ounces of gold during its more than 25-year mine life.

Project plans include a power generation plant, water treatment plant, access road, housing, two ports, a natural gas pipeline and a 5,000-foot airstrip. The exploration potential at the site is high, added Lang, “and several areas have been identified, which

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have the potential to extend the mine life. The deposit is open to the north and east and is limited only by the current drilling.”

All aspects of the project, with input from the parent companies, are overseen by Donlin Creek LLC, which changed its name to Donlin Gold in July. NovaGold Resources Inc., located in Vancouver, British Columbia, Canada, and Barrick Gold Corp., the largest gold mining company in the world, based in Toronto, Canada, both equally own the enterprise, 50/50. The partnership arose in a negotiated settlement to resolve contractual disputes and lawsuits.

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FEASIBILITY STUDY Donlin Gold completed a feasibility study in 2009. An array of heavy machinery at the site is expected to require 127 megawatts of electricity, it claimed in its recent project update. Power costs represent about 25 percent of the projected total operating costs at Donlin Gold under the 2009 feasibility study, according to a NovaGold press release, and the company began exploring ways to cut the operating costs.

“We looked at everything from running a power line to the sites from the Rail Belt enterprise; we looked at burning peat; we looked at wind generation; we looked at even nuclear, every option that seemed possible, including diesel, which is what we settled on, a diesel option,” said Kurt Parkan, the company’s spokesman and external affairs manager. “The diesel option would have also included a small wind farm.”

In April 2010, board members approved an additional budget for the year of $18.7 million, adjusting the total 2010 budget to $47 million, according to a NovaGold press release.

The money allowed the company to proceed with changes to the feasibility study.

The new study is expected to finalize capital cost estimates, update operating costs, and revise economics, such as reserves and resources and cash flow estimates, based on longterm forecasted gold prices A revised National Instrument 43101 compliant technical report by AMEC Americas Ltd., an engineering and project management consulwww.akbizmag.com • Alaska Business Monthly • November 2011

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tant for the study, is expected as well.

This is a Canadian protocol. It instructs mining companies on how to disclose scientific and technical information to the public about their mining projects.

The new study also includes a proposed natural gas pipeline. The company considered this an affordable, environmentally sound and socially responsible option to help with power generation.

BILLION-DOLLAR PIPELINE Parkan says Donlin Gold initially settled on the option of using diesel fuel for power, but it looked at the large traffic required to move up to 100 million gallons of diesel every year to Kuskokwim.

It considered the environmental impact and the costs associated with the diesel prices and decided to take a look at the possibility of providing natural gas to the site. The benefits included a reduction in the amount of barge traffic on the Kuskokwim River and less diesel fuel transported along the river.

Donlin Gold’s decision prompted environmental and engineering studies to learn whether it’s possible to produce the electricity needed to power the mine by bringing natural gas to the site. The gas would be transported via a 312-mile, 12-inch, steel pipeline buried four feet to five feet below ground beneath streams and rivers, according to the company’s project update. It would run from the Cook Inlet region over the Alaska Range to a power plant at the site. The pipeline would include leak detection systems and built-in processes to ensure safety, in addition, a manual check of valves every 20 miles accessed by helicopter.

The potential for horizontal-directional-drilling crossings were among the studies conducted between the months of May and August, according to Parkan. The company was trying to identify suitable sites because the drilling method allows the pipe to be fed through a hole drilled deep below the region’s major streams and rivers. The company also conducted wetland and cultural studies, which involved sending a crew of archeologists to venture along the pipeline route and conduct cultural surveys.

The capacity of the pipeline itself may be greater than what the company

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needs, Parkan said, “and depending on what interested parties can put together in terms of a sort of financial plan, it’s possible that people could tap into that pipeline.”

The idea is not part of the main process, he added; it would likely require the company to become a gas distributor, but “it’s conceivable that there would be a low-cost energy source for parts of the Interior with this pipeline.”

Donlin Gold determined that building the natural gas pipeline will cost approximately $1 billion.

“The capital cost of the pipeline could be partially offset by cost savings from elimination of the wind cogeneration facility, the potential for a shorter access road, and a significant reduction in requirements for diesel storage, with some additional cost reduction opportunities,” according to a NovaGold press release.

Preliminary capital costs now stand at approximately $6 billion, with an additional $1 billion for the natural gas pipeline. The changes related to the increased capital have been general, Lang said when questioned during the Investor Day presentation, “we’ve seen inflationary pressures in all areas of the Project.”

Nova Gold President and CEO Rick Van Nieuwenhuyse stated in a company press release that the capital cost increase is in line with industry trends.

Capital costs for the Donlin Gold Project will be finalized for the updated feasibility study.

PRICE OF GOLD Another significant update influencing the study is the price of gold.

“Mineral reserves and mineral resources for Donlin Creek have been estimated using a long-term gold price assumption of $825 per ounce and $900 per ounce, respectively,” according to a NovaGold press release. However, the price of gold has doubled since investors have fled to “safe-haven” investments during the worldwide economic slowdown.

“During late 2008/early 2009, safehaven buying was at its peak and the immediate negative effects of the credit crisis had abated, in particular selling by institutions needing to raise cash and the index-related sell that followed

the sharp fall in commodity prices,” according to the World Gold Council in its February 2010 “Gold Demand Trends” report. The price of gold averaged at $972.35 per ounce in 2009.

In March 2010 the gold price of $825 per ounce was used to arrive at a new reserve or resource estimate of 33.6 million ounces proven or possible at a 100 percent basis, 4.3 million ounces of gold that’s measured and 4.4 million ounces of gold that’s inferred. Incorporated into this estimate were “62 new drill holes totaling 25,094 meters,” according to a NovaGold press release. This was a 15 percent increase over the 29.3 million ounce reserve estimate reported in the feasibility study approved by the parent companies in 2009.

During the second quarter of 2011, soaring commodity prices and concern about Western economies shot the price of gold to a high of $1,541 per ounce in early May, according to the World Council’s quarterly report. It reached another high of $1,552.50 per ounce toward the end of that quarter. At that point, European policymakers grappled with a possible Greek default and equity prices around the world dropped.

“The increase in the price of gold from approximately $900 per ounce in 2009, when the previous study was conducted, to $1,800 per ounce now, the value of the 38 million ounce gold resource has increased substantially,” Nieuwenhuyse was quoted as saying in a September NovaGold.

Meanwhile, activities such as coordinating capital estimate reviews between independent consultants, peer reviews and a final review by AMEC Americas Ltd. have been under way. Barrick will also provide three-party reviews of the costs to AMEC and Donlin Gold.

NEXT STEPS Donlin Gold anticipates moving forward with the State and federal permitting process once an agreement is reached at the completion of the feasibility study. The permits it presently has are general permits to do studies.

“We’ll have probably a good 100 or more permits that we will have to receive before we’ll have permission to operate the mine,” Parkan said. “If we were to go permitting, this next March, for example, or in the first or second

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quarter of 2012, and the permitting process lasted three to four years, and the construction lasted another four years, so let’s say eight years. We’re talking 2019 or 2020 when we’ll be actually operating. Construction would start in 2016, perhaps.”

During that time of operation an estimated 1,000 jobs would be created.

The majority of the jobs, 90 percent, would go to Alaska Native Regional corporation Calista Corp. shareholders and descendants from the YukonKuskokwim region. Construction is expected to create 3,000 jobs.

“One of the things that we’re really proudest of and, well, we’ve had a high degree of success in is our high level of local hire, of people who live in the Yukon-Kuskokwim,” Parkan said. “We’ve put a lot of effort into that. It is one of the more economically challenged areas in the entire country, and we want to see that people who have an interest and an ability to work at Donlin Gold have that opportunity, and so we’ve been training people and assisting them in bidding for jobs with us.”

More than two dozen employees participated in the pipeline field work over the summer. Donlin Gold had been heavily focused on completing environmental work, which Parkan said included conducting fish surveys of Crooked Creek, studies examining the effect of barge wakes, sediment sampling and noise observation.

One way the company is being environmentally responsible is by designing the project in order to avoid discharge of mine-contacted water.

“So, water that touches the mine won’t be discharged,” Parkan said.

“If it had come into contact with the facility, it will either be used in the milling process or stored offsite. And then, any permitted discharge of water will be treated to strict water quality standards.”

The company will be the first gold mine with a saline facility, and its parent company, Barrick Gold, has pending patents on techniques to capture mercury emissions.

Donlin Gold remains active while the feasibility study is under review, and plans to continue air monitoring, water sampling and wildlife surveys ❑ throughout the rest of the year.

HOW DO YOU GET MORE OUT OF YOUR MINE? JUST ASK GOLDER. Complex geology, extreme weather and remote locations are challenges enough. Add to that, social, environmental and regulatory issues and you can appreciate why mining is a challenge.

For over 50 years and working within six continents, Golder has developed unique expertise in open-pit and underground mining, delivering sound solutions that maximize value and minimize risk.

Engineering Earth’s Development, Preserving Earth’s Integrity.

Anchorage (907) 344-6001 solutions@golder.com www.golder.com

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Linc Energy New player from Down Under

BY JULIE STRICKER

I

n the past couple of years, a new player has appeared in Alaska’s energy sector. Linc Energy, based in Brisbane, Australia, is an independent firm with an entrepreneurial reputation that has pioneered techniques to turn “stranded” coal reserves into valuable cleaner energy. Linc Energy is working to commercialize its technology and has projects in Australia, Vietnam and the United States. In Alaska, Linc Energy is involved in gas, petroleum and coal exploration.

“They’re all over the place,” said Rick Fredericksen, mining section chief with the Alaska Department of Natural Resources. “Their primary interest is underground coal gasification and a gas-to-liquids plant to produce highquality diesel and aviation fuel.”

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Photos by Judy Patrick Photography

UNDERGROUND COAL GASIFICATION Underground coal gasification, or UCG, is the process of converting coal to a gas through a process using heat, oxygen, coal and water. The UCG process uses the coal where it lies underground.

The synthetic gas, or syngas, that results can be used to produce liquid fuels when combined with gas-to-liquids technology. The low-emission syngas also can be used to power turbines to create electricity and as feedstock for other petrochemical processes.

The technology has been around for decades, but Linc Energy has found success linking it with gas-to-liquids technology at its Chinchilla Demonstration Facility in Queensland, Australia.

“The technology holds a great deal of promise for Alaska because it would take a lot of the coal that is essentially uneconomic and turn it into a valuable resource – energy,” Fredericksen said.

He says most of the coal Linc Energy is interested in is too far underground to be mined using con-

Linc Energy drilled its first natural gas exploration well in fall 2010 near Point MacKenzie.

ventional techniques, and that the company also has active interests in Wyoming and Colorado.

“We’re excited that they’re up here

and hope that they’re successful,” Fredrickson said.

Wanetta Ayers says the direct investment into Alaska from a foreign

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company is welcome. “It’s interesting to have a company with their portfolio and broad base invest in Alaska,” she said of Linc Energy’s promising track record in new technology to develop cleaner energy. “That’s how a lot of industries got their start in Alaska.”

ALASKA OPERATIONS The company has opened an office in Anchorage to oversee its Alaska operations, which include onshore oil and gas leases in Cook Inlet and significant coal deposits. Earlier this year, Linc Energy bought controlling interest in oil and gas leases at Umiat on the North Slope, as well as 181,414 acres of coal exploration licenses in Southcentral and Interior from the Alaska Mental Health Trust Authority.

While the Umiat and Cook Inlet leases may provide for short-term opportunities to bring new oil and natural gas sources to market, the company is taking the long view for its Alaska operations. It believes its UCG technology can become an important energy producer for the state, as well as the United States market.

One of Linc Energy’s goals is to provide less expensive, cleaner fuels for the Interior region and villages off the road system, said Corri Feige, Alaska project manager.

“Linc’s technologies fit Alaska’s energy needs and energy markets very, very well,” said Feige, who lived off the Alaska road system for several years.

“Linc in Alaska is critical to providing energy to the state.”

EXPLORATION PLANS The company is planning aggressive exploration programs for its three main holdings in Cook Inlet, Interior Alaska and the North Slope.

The company acquired the Cook Inlet lease from GeoPetro Resources in March 2010, along with acreage in the Trading Bay Block, marking its entry into Alaska.

“Linc Energy has been studying the potential of Alaska resources for some time and we have been quietly looking for the right opportunity to enter the region,” Linc Chief Executive Officer Peter Bond was quoted as saying in a 2010 news release.

In 2010, the company drilled a wildcat natural gas well, LEA No. 1, off Point

MacKenzie in upper Cook Inlet. Although the well failed to discover commercial quantities of natural gas, Linc officials said they did find a coal seam that could be ideal for UCG. Feige said Linc has a good relationship with Alaska agencies, which helped them complete the permitting process and drill its exploratory gas well in Cook Inlet in six months.

“We have found out the State of Alaska and the agencies to be very experienced, very professional and very open and forthcoming when we come to them with questions,” Feige said.

Linc is also planning an aggressive drilling program for late 2011 to assess the extent of petroleum reserves at Umiat oil field in National Petroleum Reserve - Alaska. The remote field in the southeast corner of NPR-A on the Colville River has long been known, but has generally been considered to be uneconomical to develop using conventional technologies.

Linc is working with the State to build a 92-mile road from the Dalton Highway to Umiat. An environmental impact statement for the proposed road is under way.

The company planned to begin its exploration drilling program this fall on the coal lands west of Cook Inlet it acquired through the Mental Health Trust and will explore its lands near Healy around the beginning of 2012.

OVERALL OBJECTIVE Its entrance into Alaska is part of Linc Energy’s overall objective to become a world leader in cleaner energy, said Don Schofield, president of American operations for Linc Energy. The American market is one of the world’s largest energy consumers.

“Over the last few years, we’ve been evaluating the best locations to become involved in the American energy market,” Schofield said. “As you investigate the opportunities in the U.S., Alaska starts to stand out.”

Alaska contains half of the total coal reserves in the United States. “The opportunities in Alaska are outstanding when you look at the nature of the deposits and the quality of the coal seams there,” he said.

Of particular interest to Linc are the deposits that lend themselves to a UCG

Linc Energy Drill Manager Nick Scales at the Point MacKenzie drill site.

project, such as those they hope to find while exploring the Mental Health Trust lands. The size and availability of those lands lend themselves to longterm projects, Schofield said.

Linc Energy is a small-to-medium company, with about 360 employees worldwide in 2010, according to its annual report, and Schofield says that’s an advantage when working in Alaska.

“It’s our initiative and our medium size that gives us the ability to do the groundwork that a major won’t do,” Schofield said.

On the other hand, the company is large enough to have access to capital and the trained personnel needed to work in highly technical fields. In the case of Umiat, a long-known field that has never been developed, Linc sees many opportunities.

“It is a very significant undeveloped reservoir,” Schofield said. “We’re the right size company, with the right ambition and the right get-it-done attitude to help get this project to fruition.”

Schofield said Linc prefers to hire locally. “We’ve deliberately gone out and selected Alaskans to run this project and all our projects up there,” he said.

“As a corporation, we provide the support and the guidance, then we stand back and let the local people do what they need to. We’re very happy with ❑ the way things are going so far.”

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MINING

Kensington Gold Mine Boon to Southeast economy

Photos courtesy of Coeur d’Alene Mines

BY VANESSA ORR

Inside the Kensington Gold Mine plant in Southeast Alaska.

M

ore than a century ago, Richard Harris and Joe Juneau discovered gold in what is today Alaska’s capital city. Now

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the Kensington gold mine is finding riches in the rocks of Southeast, and is sharing the wealth with surrounding communities.

In June 2010, the Kensington gold mine began production, bringing jobs, tax revenue and cash to Juneau and other Southeast cities. During construction, the mine employed 287 workers at its peak; approximately 200 full-time workers operate the mine year-round.

More than 370 direct and indirect jobs have been created by the project, making the Kensington gold mine the second largest private employer in Juneau in terms of payroll. The mine is owned

by Coeur d’Alene Mines Corp., parent company of Coeur Alaska.

“Juneau was a big supporter of the mine in large part because of the jobs and economic opportunity it could bring,” said Tony Ebersole, director of corporate communications for Coeur d’Alene Mines Corp. “Capital costs alone were $430 million, with $150 million flowing through the Juneau economy during the construction process through payroll, contracts and purchases.

“The mine has made a huge impact economically,” he said. “Kensington provides over $25 million in direct annual payroll and $7 million in indirect payroll, as well as approximately $2.15 million in annual property and sales tax paid by the mine and its employees to the City and Borough of Juneau.”

The mine is not without its issues, though. Litigation by the Southeast Alaska Conservation Council (SEACC), Lynn Canal Conservation and the Juneau group of the Sierra Club threatened to delay or even stop the mine’s opening; a recent accident in which a worker was killed closed a portion of the mine for a short time. To date, however, Kensington is meeting its production numbers and looks to continue operating at full capacity.

A CENTURY OF MINING The Kensington gold mine, located about 45 miles north of Juneau and

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35 miles south of Haines, is at the northern extension of the Juneau Gold Belt.

Gold was first discovered in the area in 1886, and at least 16 mines operated within five miles of the Kensington site between 1890 and 1910.

Coeur Alaska acquired the property in 1987 and entered into a joint venture with Echo Bay Mines in 1988. In 1995, the company acquired 100 percent interest in the area, where it now serves as the mine’s owner and operator.

While the major permitting process was completed in 2005, a lawsuit filed in 2006 put plans for the Kensington mine on hold. At issue was whether Coeur Alaska could put 4.5 million tons of tailings into Lower Slate Lake, which environmentalists believed was contrary to the Clean Water Act of 1972. The battle moved from district court to the 9th U.S. Circuit Court of Appeals in 2007, when environmentalists won on appeal. Coeur appealed to the U.S. Supreme Court in 2008, winning the case and laying the groundwork for the mine’s opening on June 24, 2010.

“Litigation delayed the opening of the mine, but the real story there is the strong community support that went on at that time and continues today,” said Ebersole. “People in this region understand that the mine provides high-paying jobs and real economic benefits.”

possible mine and we are working with the Mine Safety and Health Administration to figure out exactly how the accident transpired while still maintaining the highest safety standards,” Ebersole said in late September, adding that Coeur is working in cooperation with MSHA in investigating the incident.

“Subsequent to the accident on September 7, the mine is now operating at full capacity in all areas including advancing development headings and full blasting operations.”

If production levels remain stable,

the Kensington gold mine is expected to remain open for approximately 12 years under current reserves.

“The mine has 1.4 million ounces in proven and probable resources, and we are continuing with exploration, hoping to expand that base,” Ebersole said.

According to Coeur’s website, new vein systems were discovered in 2010, and drill work continues around the additional 478,245 ounces of measured and indicated gold resources. There are a total of 121,182 ounces of inferred gold resources at Kensington.

RECENT OPERATIONS Since starting production last year, Kensington produced 43,143 ounces of gold during its first half-year of production, and is expected to meet the planned annualized production estimate of 125,000 ounces of gold a year.

“As a company, we anticipate reaching our targets for production of gold and silver,” said Ebersole, adding that the numbers are not broken down in terms of individual mines. “We are estimating production of 240,000 to 250,000 ounces of gold this year for the entire company, which includes production at Kensington and our mines in Nevada and northern Mexico.”

In September 2011, part of the mine was shut down when a blast sent a rock through a drill hole, killing 30-year-old Joe Tagaban of Juneau.

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INNOVATION While cyanide can be safely used to recover gold, public concerns prompted the Kensington mine to instead recover resources using a flotation process. This process involves the use of flocculants, detergents and air to produce bubbles to which the gold minerals attach, and are then removed. The final flotation concentrate is then shipped to an offsite processing facility.

“Coeur also invested in a $20 million water purification system, which results in the water coming out of the processing facility being cleaner than stream water,” Ebersole said. “The technology being used at Kensington is state-ofthe-art in terms of the plant, and the mining methods that are being used are as state-of-the-art as exist.”

This innovative approach is also seen in how Coeur is finding a market for its product. In 2010, the company entered into a contract with China National Gold Group Corp., China’s largest gold producer, for the purchase and processing of gold concentrates.

“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,” Ebersole said.

The contract with China National Gold relates to approximately half of the concentrates to be produced at Kensington.

“The concentrate, which looks like gray sand, contains about 20 ounces of gold per ton of concentrate,” Ebersole said. “It is put into bags and shipped on barges to Seattle where China National Gold takes possession of it. They then take it to their refineries to refine it to a more purified state.”

A state-owned enterprise head-

Some of the equipment inside the plant at Kensington.

innovative program to train future mine workers by partnering with the University of Alaska Southeast (UAS), Mining and Petroleum Training Service and the Alaska Department of Labor and Workforce Development.

“Our strong partnership with the University of Alaska Southeast for mine training has a ripple effect in terms of jobs and money going into the city beyond just payroll,” Ebersole said.

“These new employees need housing

“Our strong partnership with the University of Alaska Southeast for mine training has a ripple effect in terms of jobs and money going into the city beyond just payroll. These new employees need housing and spend money with local merchants – it all has a great impact.”

– Tony Ebersole ■ Director of Corporate Communications ■ Coeur d’Alene Mines Corp. quartered in Beijing, China National Gold operates approximately 60 gold mines throughout China, representing more than 20 percent of China’s total gold production.

Coeur has also worked within the local community to help create an

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In 2009, the UAS School of Career Education entered into a partnership with Coeur to provide entry-level, heavy-duty diesel mechanics to work at the Kensington mine with successful students being given preferential entry into the work force.

and spend money with local merchants – it all has a great impact.”

As production at the Kensington gold mine continues to increase, so do the opportunities for Alaskans – especially those in Southeast – to ❑ succeed.

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MINING

Pebble’s Environmental Studies A 20,000-page, five-year research legacy

BY KEN TAYLOR, OP-ED

A

s part of its 2011 ongoing exploration and prefeasibility efforts, the Pebble Limited Partnership plans to publicly release its environmental baseline document (EBD) in 2011, a compilation of extensive scientific research conducted at the Pebble study area between 2004 and 2008.

The body of work represents a rigorous environmental studies program that historically is one of the most robust for a mining project in Alaska. Documenting five years of data collection, the research was conducted by more than 40 globally recognized independent scientific firms – including many premiere Alaska companies – representing more than 100 environmental field experts.

The Pebble deposit is recognized as a significant, world-class copper discovery, located on State land designated for mineral exploration. While companies interested in developing large natural resource projects often select a single firm to conduct environmental research for a particular project, the Pebble EBD includes the work of more than 40 global environmental firms recognized as experts in their respective fields. Several organizations were sought specifically for their Alaska knowledge and experience.

Covering a wide range of scientific disciplines from fish, surface and groundwater hydrology and water quality, to seismic activity and wildlife, the EBD documents the physiology, biology and socio-economic conditions in a study area encompassing several hundred square miles.

The 20,000-page compilation of data offers a previously unrecorded breadth of scientific study that will be a legacy for the region whether or not the Pebble project moves forward.

Work associated with the EBD took place year-round. Winter temperatures, which regularly drop below -10 F, presented particular challenges for researchers. Hydrology data collected on a monthly basis at streams, for example,

often required digging through five feet of snow and augering through several feet of ice to collect samples. Likewise, summer challenges included field work conducted in densely vegetated areas supporting a significant brown bear population. Consequently, the Pebble Limited Partnership established a bear guard program that moves people away from bears, rather than the more standard practice of using noise to move bears away from people. This program, along with transporting all equipment and crews to and from the study areas as well as throughout the deposit, via helicopter, are just two examples of the Pebble Limited Partnership’s commitment to environmental stewardship.

The EBD itself is specifically a baseline characterization of the environment that presents multiple years of data for fish and wetlands, meteorology, surface and groundwater hydrology and water quality. This information will help shape a potential future mine plan.

Alaska mining laws require that, in addition to a reclamation bond from developers that is held in security by the State, all mine plans submitted for permitting include closure plans that ensure the area be reclaimed to a stable state that will not pollute the environment and that meets predetermined land-use goals. Understanding the current physical geography of the region will help Pebble engineers integrate reclamation opportunities into the overall future project plan – a modern mine designed in advance specifically for closure.

During the last several decades, Alaska has adopted some of the most stringent environmental regulations in the world. Mining projects like Fort Knox and Red Dog, developed during this era of environmental regulation, have proven Alaska mines and healthy fisheries can co-exist. Considered a global leader in the management of its natural resources, Alaska has a

unique understanding of protecting the environment while maximizing its economic engines to the benefit of its residents as directed by the State Constitution. Modern technology plays a critical role in advancing these tandem goals that allow multiple natural resource industries to thrive side-by-side.

Once final, the EBD will be made available for public review online and through public presentations of key areas of emphasis. For more information regarding the Pebble Partnership and exploration work currently being conducted at the Pebble deposit, visit ❑ www.pebblepartnership.com.

Ken Taylor After graduation from Colorado State University in 1970, Ken Taylor began his career in Alaska the following summer as a Fisheries Technician in Bristol Bay. He worked for the Alaska Department of Fish and Game as a wildlife biologist for most of his career with the State in a variety of positions throughout Alaska, including 11 years as the Area Wildlife Biologist in Northern Bristol Bay and six years as a management coordinator for Interior Alaska. He served as the Deputy Director of the Wildlife Division, Director of the Habitat and Restoration Division and Deputy Commissioner for the Department of Fish and Game before retiring from State service to work for the Pebble Partnership as the vice president for the Environmental Department.

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MINING

Photo courtesy of Ron Prasad

The newly built Whiskey Bravo Camp at the Kiska Metals Corp. Whistler project.

Mining the 49th State High minerals prices pushing exploration

BY VANESSA ORR

W

hile the Gold Rush originally brought many miners to Alaska, over the years the quest to find what riches lay underneath the state’s lands has waned.

But with the price of metals increasing every day, more interest is now being paid to unearthing the Last Frontier’s natural resources.

“Alaska has a lot to offer; it is effectively unexplored,” says Steve Borell, executive director, Alaska Miners Association. “While there has been mining in the state for more than 100 years, compared to anywhere else in the world, very little work has been done here. Nevada is one-fifth the size of Alaska and has 55 major mines.

“Part of the reason for this is because

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most areas have no road access,” he added. “Combine this with the high cost of flying to get to remote locations, and the fact that most sites only allow a six-month exploration season, and it all contributes to making mining here more difficult.”

Still, there are a number of companies willing to take the risk. Approximately 17 of the state’s 34 largest mining and exploration companies will be drilling in 2011 in the hopes of taking advantage of rising metals prices.

“Metal prices drive exploration,” Borell says. “Copper and gold are two primary targets, and right now, copper prices are above $4 per pound, and gold prices are plus or minus $800 per ounce.”

“The industry is still riding high on

outstanding metal prices, particularly gold prices,” said Robert McLeod, vice president of exploration for Full Metal Minerals. “In addition to our already established sites, we’re prospecting elsewhere in the state, looking for new projects.”

EXPANDING MINES According to Borell, a number of mines are expanding beyond existing properties. Teck for example, is not only drilling in the pit area of the Red Dog Mine, but also in adjacent ore bodies and on adjacent lands. Fairbanks Gold Mine Inc. is expanding its existing pit laterally and at depth at Fort Knox, and also looking for other potential ore bodies to mine.

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“At Hecla Greens Creek Mining Co., they are doing both surface drilling and underground drilling for additional ore,” Borell said. “In the past, the company typically found as much ore-grade material as they have mined each year. This year, their objective is to increase the amount of known ore material so they can better plan for the future.”

The Greens Creek property, which produces 11 million ounces of gold per year and 60,000 ounces of silver per year, is the largest silver mine in the U.S. “If the company does no additional exploratory drilling, it is estimated they have approximately 12 years of mining in front of them,” Borell said. “With exploratory drilling, that could change to 20 years ahead.”

Exploration continues on areas adjacent to the Pogo Mine and in its existing 72-square-mile claim block, while the Pebble Limited Partnership, a joint venture of Northern Dynasty Mines and Anglo American, is continuing with geotechnical drilling at its site northwest of Iliamna.

“Right now, Pebble is taking part in condemnation drilling to ensure they do not build facilities on top of an area where they want to mine in the future,” Borell said. Condemnation drilling tests areas of a mine site to make sure there are no valuable minerals located where buildings, roads, power lines, pipelines and other infrastructure will be built.

LIVENGOOD GOLD International Tower Hill Mines Ltd. is expected to lead the largest exploration project in the state this year at Livengood, located 70 miles northwest of Fairbanks.

“In 2011, we focused our fieldwork on two areas: resource confirmation to validate the integrity of our resource estimates, and areawide geotechnical drilling to evaluate the bedrock structural conditions and groundwater regimen so we can better plan our facilities,” said Karl Hanneman, general manager of the Livengood project.

The company had up to nine drills operating during the 2011 drilling season with crew size peaking at 168 employees.

“We completed an IP (induced www.akbizmag.com • Alaska Business Monthly • November 2011

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polarization) geophysical survey to understand how alterations in the areas of known resource might respond to an IP survey,” Hanneman said. “This could then be used to do regional exploration to find an extension of the deposit or a repeat of the deposit within the district.”

Ongoing studies also include groundwater monitoring.

An August 2011 preliminary economic assessment (PEA) at Livengood indicates a surface mine resource of 15.8 million ounces of gold. The estimated capital cost of the mine is $1.6 billion, with a mine life of 23 years.

It is expected to provide long-term jobs for approximately 500 Alaskans. The mine’s pre-feasibility study will be completed in November 2011, with a feasibility study to immediately follow.

MORE GOLD PROJECTS The Donlin Gold project, a joint venture of NovaGold and Barrick Gold Corp., is currently in the design phase to define the ore pocket and determine what it will take to recover the resource, according to Borell. “This is arguably one of the largest undeveloped gold projects in the world, with an estimated resource of 32 million ounces,” he said.

Fire River Gold, which began operating Nixon Fork Gold Mine on July 4, 2011, after it sat idle for several years, is continuing to do underground and surface exploration drilling.

In September 2010, Kiska Metals Corp. took 100 percent ownership of the Whistler gold-copper deposit, which it was previously working on through an agreement with Kennecott Exploration.

“After completing 8,300 meters of drilling, it became obvious that the Whistler property would be a gold project, and Kennecott, a copper company, chose not to continue,” said Drew Martel, manager of corporate communications for Kiska.

The company drilled 15 holes at Island Mountain before the season ended last year. “On the third to last hole, we drilled into a classic, fairly high-grade porphyry equaling 1.74 grams of gold equivalent, which is a great number in Alaska,” Martel said.

After the season ended in October, the company relocated its camp from the northern part of the property the center near the Whistler Deposit, where

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it can now continue exploration yearround. Kiska also was the first company to create an ice trail (built by Cruz Construction Inc.) from Anchorage to the property 100 miles northwest.

“Our end game is to move this mine to a major gold company, and being able to show we have ground access is a major plus,” Martel said. “Moving supplies by air costs $2 to $3 a pound to a remote site; the ice trail allows us to ship supplies for 30 cents a pound.”

At its peak, Kiska was operating five drills on the Whistler property.

“The bulk of the work is in the central part of the property; we’re planning 17,000 meters of drilling in that area, as well as 11,000 meters on Island Mountain at the southern part of the site. At this stage, we’ve proven to the market that there is more than one gold/copper porphyry there, and we’ve just started.

The area is so large, and the potential is huge; our goal now is to prioritize.

Almost every time we put a drill into the ground we are getting alterations or mineralization.”

ADDITIONAL ACTIVITY According to Borell, Heatherdale Resources is continuing to drill at Niblack on Prince of Wales Island, and that project looks promising. NovaGold, which is a 50 percent owner in Donlin Gold, also has an agreement with Alaska Native corporation NANA to explore on its land looking for copper. Full Metal Minerals is working with a number of Alaska Native village and regional corporations including Doyon Ltd. and Aleut Corp.

“Full Metal Minerals is exploring Doyon lands around Chicken, Alaska, where there is a significant concentration of zinc, lead and silver,” McLeod said. In June 2011, the company created a spin-off company, Full Metal Zinc, to better advance the 40 Mile Project.

The company also recently entered into a joint venture with Antofagasta, a company based out of Santiago, Chile, to explore the Pyramid property located on the Alaska Peninsula. “Chile is the largest producer of copper in the world, and we are very pleased to have the expertise of Antofagasta in advancing this project,” McLeod said.

Full Metal Minerals completed a 12hole drilling program with the goal of

defining the limits of mineralization.

“We just received the results of the assay, and while I can’t yet release the information, I can say that we are very encouraged by the results,” McLeod said. In early 2012, the company will make an announcement about the resource. To date, they have spent $4.5 million on the property, including $3 million this season.

This fall, Full Metal is considering doing more drilling on-site, dependent upon Antofagasta, who is funding all of the exploration work, gives the goahead. The company also has a small drilling program in eastern Alaska near Chicken as a joint venture with Georgetown Capital Group.

Pure Nickel/Nevada Star is continuing to explore for potential copper, nickel and PGE (platinum group elements) porphyry at the 260-squaremile MAN property. Corvus Gold Inc. is expected to have two to three drills on its properties, which include Slate Creek, according to Borell. “Millrock Resources has been drilling in a number of areas, including Estelle, Humble, Council and Bluff,” he added, “and Zazu Metals Corp. has been exploring a zinc and lead property at Lik, northwest of the Red Dog Mine.”

HEAVY METALS In Bokan Mountain, southwest of Ketchikan, things are happening at a very rapid pace. One hundred percentowned by Ucore Rare Metals, the site is home to heavy rare earth elements (REEs), which are extremely valuable and extremely rare.

“Heavy rare earth elements, which are used in energy, military and technical applications, are highly sought after, especially since China recently came out with a five-year plan in which they are withdrawing their heavy rare earths from world markets,” said Jim McKenzie, president and chief executive officer, Ucore Rare Metals. “Because these materials are absolutely essential to the U.S., we recently received priority permitting from the U.S. Department of Agriculture.”

The permitting approvals, given in August, will allow the Bokan project to proceed significantly faster than previously anticipated, reducing project development time by a year or more.

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

“Bokan Mountain has been described as one of two projects in the country that could make the U.S. independent of China for rare earth elements,” Borell said. The other project is Mountain Pass in California, which contains light rare earth elements.

“With permitting going as quickly as possible, we hope to be producing within the next four years or so,” McKenzie said. There are currently two drills on-site for what McKenzie calls their most ambitious drilling program to date. “We are targeting 8,000 meters, with the goal of taking the resource from an inferred status to an indicated status by the end of this year,” he said. The company expects to invest approximately $8 million in the drilling program.

While historical estimates of the mine’s resources is 374 million pounds of rare earth oxides, 11 million pounds of uranium, 96 million pounds of niobium and significant collateral mineralization (beryllium, zirconium and thorium), McKenzie estimates these numbers could be much higher. “The U.S. Bureau of Mines believes that this deposit may be at least six times as big as what we’ve so far established, and that is not extrapolating at depth,” he said. “We believe that there is at least four times the deposit at depth, which if you add to the six times the deposit at breadth, means that there is the possibility of 10 times the estimated product.”

The value of the deposit keeps rising as well. Originally estimated at $3.7 billion, the value of the rare earth elements, which are used in cell phones, flat screen TVs and electric cars, has multiplied to a value of $10 billion in the last four months as a result of China’s announcement to cut off the supply. “Dysprosium, with was trading at $100/kg last year, was up to $600/kg in April, and is $2,900/kg now,” McKenzie said. “It is an extremely valuable product.”

As metal prices continue to rise, so will interest in mining the 49th state.

“Since 1989, we have seen exploration gradually increase to where it is today,” Borell said. “Even in an unhealthy economy, we continue to see more investment money going ❑ into commodities.” www.akbizmag.com • Alaska Business Monthly • November 2011

123

MINING SPECIAL SECTION

Photo courtesy of Coeur dâ&#x20AC;&#x2122;Alene Mines

2011 MINING DIRECTORY

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

Photo courtesy of Julie Stricker

2011 MINING DIRECTORY

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

125

LEGAL SPEAK

BY JEFF WALLER

Master Service Agreements Knock-for-knock indemnity

A

business acquaintance recently mentioned that her company was considering entering into a Master Service Agreement (MSA), which included a “knock-for-knock” provision. The unfamiliar clause made her wonder if something was missing from the agreement.

A company uses an MSA to create a blanket contract to cover an entire operation. The MSA sets forth how the two entities will function collectively.

Like any contract, an MSA typically defines services, responsibilities, obligations and rates. The MSA may also limit or expand liability beyond what is typical in other contracts.

The MSA allows parties to conduct future business by setting forth the general terms between the parties. This provides a framework where the parties can undertake various future transactions without the need to define the general provisions addressing services, billing, invoicing, termination, breach, or penalties because these are spelled out in the MSA. These agreements are used in a variety of fields, including government contracts, the communications industry, maritime, mining, and the oil and gas industry.

RECIPROCAL INDEMNITY CLAUSE For a company that has never entered an MSA or has rarely been a party to such an agreement, the contract may seem overwhelming. MSAs are rarely shorter than a dozen pages of single-spaced type and can easily include more than 70 provisions. But where these contracts can differ greatly from a standard form contract is the use of a reciprocal indemnity clause – commonly known as the knock-for-knock provision.

A knock-for-knock provision provides that each party to the agreement agrees to indemnify the other (and their respective contractors) for claims arising from their own company’s employees, regardless of who is at fault. In simple terms, that means your company

126

insureds), your company could be liable to pay out of its own pocket the costs for a claim, including an attorney to defend the indemnified company.

ALASKA WRINKLE

© Chris Arend 2011

Jeff Waller

is contractually liable for any claim your employee may have from an injury caused by the other company or one of its contractors. This is true even if the other company’s contractor injures your employee and your company was not at fault in any manner. Your company bears the risk and pays for any damages because you promised to indemnify the other company.

Reciprocal indemnity clauses are commonly used because the provision can reduce costs by eliminating legal disputes between the companies when a claim is made. Additionally, each company to the contract is aware it is taking on the obligation and receiving the same benefit and can budget accordingly.

LIABILITY INSURANCE CONSIDERATIONS Considering that your company is promising to indemnify another for claims by your own employees, your company should make sure that its liability insurance covers the other company and everyone else indemnified. If your current insurance does not cover this risk (and it probably would not without notifying the insurance company and having the policy changed to include the other company and its contractors as

In Alaska there is an additional wrinkle to this situation because when a knock-forknock provision is in place, a company can end up being exposed to double costs when its employee is injured on the job by the acts of a company covered by the knock-for-knock indemnity. For example, if Company A’s employee is injured on the job by acts of a Company B employee, then Company A’s workers’ compensation insurance will be required to pay benefits because the injury arose in the course and scope of employment. However, if the employee sues Company B, which is covered by the knock-for-knock provision, then Company A has the obligation to indemnify Company B. That means Company A will pay for any damages the employee can prove in the lawsuit against the indemnified contractor and for an attorney to defend Company B. Thus, Company A and its insurance carriers end up paying twice. That is why it is important to make sure Company A’s insurance provides coverage for this situation.

If your company is thinking about entering into an MSA, consult your attorney. Make sure you understand your obligations, liabilities and benefits. Check with your insurance carrier to make sure you have adequate protection for the ❑ risk being agreed to in the MSA. About the Author Jeff Waller is a senior associate attorney at Holmes Weddle & Barcott P.C. in Anchorage. His practice includes litigation, construction law, employment law, insurance defense, and real estate matters. Prior to becoming an attorney, Waller owned and operated several businesses.

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

ALASKA TRENDS

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

Alaska State Banks – Select metric trends

I

n light of the high number of bank foreclosures, numbering 73 so far in 2011, according to the Washington Post, and the high visibility of seemingly ever-evolving new banking regulations how are Alaska banks performing? This month, Alaska Trends focused on Alaska state banks, those which are chartered by the State of Alaska, including Denali State Bank, First Bank, Northrim Bank and Mt. McKinley Bank.

As shown in the chart, many of the metrics Alaska Business Monthly tracks each month have changed very little during the last three-and-one-half years; specifically total bank assets, total bank liabilities, net loans and leases, and total bank deposits. None of these metrics have changed either positively or negatively more than 8 percent since the first quarter of 2008.

Within these figures, the total assets and total liabilities seemed to move closely together, with assets increasing 8 percent and liabilities increasing 6.5 percent since the beginning of 2008.

Notably, the change in noninterest-bearing deposits far outpaced that of interest-bearing deposits with the former increasing 88.1 percent and the later decreasing 13.8 percent. The large increase in the noninterest-bearing deposits is most likely due to business deposits; individual customer deposits are interest-bearing. One explanation could be that businesses are continuing to increase their reserves until they feel more certain about the turbulent economy; another possible explanation could be that businesses have increased their efficiencies and costs and are simply more profitable. There are other feasible explanations for the large increase in noninterest-bearing deposits and it will be interesting to watch this trend evolve over time. ❑

Chart Source: State of Alaska Department of Commerce, Community, and Economic Development

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

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

127

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 Government Labor Force Alaska Anchorage & Mat-Su Fairbanks Southeast Gulf Coast

128

Period

Latest Report Period

Previous Report Period (revised)

Year Ago Period

Year Over Year Change

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

1st Q11 1st Q11 1st H11 1st H11

32,413 12,915,008 200.28 223.60

31,709 12,686,624 195.46 218.58

30,853 12,334,336 194.834 217.535

5.06% 4.71% 2.79% 2.79%

Number Filed Number Filed Number Filed

July July July

85 65 13

85 66 10

65 51 6

30.77% 27.45% 116.67%

Thousands Thousands Thousands Thousands Thousands

July July July July July

349.60 185.66 44.79 42.04 39.48

343.28 185.65 43.73 39.00 38.50

348.24 185.13 44.53 41.52 39.24

0.39% 0.29% 0.58% 1.24% 0.61%

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

355.3 61.0 294.3 17.4 16.7 13.6 19.1 25.0 17.7 69.3 6.7 37.9 6.6 10.3 24.8 6.4 3.7 6.6 4.5 15.0 28.3 42.4 31.7 41.3 8.3 24.5 11.6 79.1 17.7 24.9 6.0 36.4 17.8 3.9

349.5 53.0 296.5 17.0 16.5 13.5 18.9 17.1 10.8 68.1 6.5 37.6 6.5 10.4 24.0 6.3 3.6 6.5 4.4 14.9 28.0 43.1 31.8 39.1 8.1 23.4 12.1 84.7 17.7 25.7 6.4 41.3 23.1 3.9

348.2 58.6 289.6 16.4 16.0 13.3 19.6 22.6 18.8 67.4 6.7 37.2 6.7 10.2 23.5 6.1 3.4 6.5 4.3 15.4 27.6 41.8 30.3 38.1 10.9 21.7 11.9 80.9 18.9 25.0 6.0 37.0 18.1 4.2

2.04% 4.10% 1.62% 6.10% 4.38% 2.26% -2.55% 10.62% -5.85% 2.82% 0.00% 1.88% -1.49% 0.98% 5.53% 4.92% 8.82% 1.54% 4.65% -2.60% 2.54% 1.44% 4.62% 8.40% -23.85% 12.90% -2.52% -2.22% -6.35% -0.40% 0.00% -1.62% -1.66% -7.14%

Thousands Thousands Thousands Thousands Thousands

July July July July July

375.28 198.37 47.70 44.59 42.60

372.56 200.13 47.07 41.96 42.07

373.86 198.16 47.40 44.11 42.29

0.38% 0.10% 0.62% 1.08% 0.75%

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

SPONSORED

Indicator

Units

Unemployment Rate Alaska Anchorage & Mat-Su Fairbanks Southeast Gulf Coast United States

BY

AMERICAN MARINE/PENCO

Period

Latest Report Period

Previous Report Period (revised)

Year Ago Period

Year Over Year Change

Percent Percent Percent Percent Percent Percent

July July July July July July

6.8 6.4 6.7 5.7 7.3 9.3

7.7 7.2 7.1 7 8.5 9.3

6.9 6.6 6 5.9 7.2 9.7

-1.45% -3.03% 11.67% -3.39% 1.39% -4.12%

Millions of Barrels Billions of Cubic Ft. $ per Barrel

July July July

14.04 8.54 114.47

16.60 8.31 111.08

17.04 9.48 76.53

-17.65% -9.92% 49.58%

Active Rigs Active Rigs $ Per Troy Oz. $ Per Troy Oz. Per Pound

July July July July July

6 1900 1,570.67 37.92 1.19

7 1863 1,528.52 35.79 1.11

6 1573 1,194.48 17.96 0.92

0.00% 20.79% 31.49% 111.11% 29.66%

Millions of $ Millions of $ Millions of $

July July July

32.00 11.63 20.37

36.92 16.36 20.56

19.79 11.86 7.93

61.75% -1.91% 156.93%

Total Deeds Total Deeds

July July

No Data No Data

674 No Data

755 414

N/A

VISITOR INDUSTRY Total Air Passenger Traffic – Anchorage Total Air Passenger Traffic – Fairbanks

Thousands Thousands

July July

No Data No Data

415.52 105.22

538.92 105.53

N/A N/A

ALASKA PERMANENT FUND Equity Assets Net Income Net Income – Year to Date Marketable Debt Securities Real Estate Investments Preferred and Common Stock

Millions of $ Millions of $ Millions of $ Millions of $ Millions of $ Millions of $ Millions of $

July July July July July July July

40,137.50 40,705.80 287.0 (67.0) 132.9 0.2 (339.3)

40,140.20 41,622.60 218.7 246.2 -40.9 92.9 (439.7)

34,765.30 32,336.00 -9.4 $14,748.0 93.2 21.9 1,253.4

15.45% 25.88% 3153.19% -100.45% 42.60% -99.09% -127.07%

BANKING (excludes interstate branches) Total Bank Assets – Alaska Cash & Balances Due Securities Net Loans and Leases Other Real Estate Owned Total Liabilities Total Bank Deposits – Alaska Noninterest-bearing deposits Interest- bearing deposits

Millions of $ Millions of $ Millions of $ Millions of $ Millions of $ Millions of $ Millions of $ Millions of $ Millions of $

2nd Q11 2nd Q11 2nd Q11 2nd Q11 2nd Q11 2nd Q11 2nd Q11 2nd Q11 2nd Q11

2,050.03 51.85 158.58 1,098.51 6.21 1,796.24 1,758.69 643.96 1,114.74

2,098.95 43.60 155.42 1,123.90 12.37 1,849.81 1,809.77 528.42 1,281.35

1,961.82 32.13 137.69 1,156.64 20.34 1,727.68 1,690.30 428.10 1,262.20

4.50% 61.40% 15.17% -5.03% -69.48% 3.97% 4.05% 50.42% -11.68%

FOREIGN TRADE Value of the Dollar In Japanese Yen In Canadian Dollars In British Pounds In European Monetary Unit In Chinese Yuan

Yen Canadian $ Pounds Euro Yuan

July July July July July

79.44 0.96 0.62 0.70 6.45

80.45 0.98 0.62 0.70 6.48

87.61 1.04 0.66 0.78 6.78

-9.32% -8.49% -5.45% -10.85% -4.77%

PETROLEUM/MINING Crude Oil Production – Alaska Natural Gas Field Production – Alaska ANS West Cost Average Spot Price Hughes Rig Count Alaska United States Gold Prices Silver Prices Zinc Prices REAL ESTATE Anchorage Building Permit Valuations Total Residential Commercial Deeds of Trust Recorded Anchorage – Recording District Fairbanks – Recording District

Data compiled by University of Alaska Center for Economic Development.

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

129

ADVERTISERS INDEX Alaska Executive Search Inc. . . . . . . . . . . . . . . . . . . 87 Alaska Air Cargo. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Alaska Dreams Inc.. . . . . . . . . . . . . . . . . . . . . . . . . 123 Alaska Growth Capital . . . . . . . . . . . . . . . . . . . . . . . 15 Alaska Housing Finance Corp. . . . . . . . . . . . . . . . . . 51 Alaska Photobooth . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Alaska Rubber & Supply Inc. . . . . . . . . . . . . . . . . . . 93 Alaska USA Federal Credit Union. . . . . . . . . . . . . . . 21 Ameresco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 American Marine/PENCO. . . . . . . . . . . . . . . . . . . . 127 Amerigas Propane . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Anchorage Sand & Gravel . . . . . . . . . . . . . . . . . . . . 55 Arctic Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Arctic Foundations Inc. . . . . . . . . . . . . . . . . . . . . . . . 78 Arctic Fox Steel Buildings . . . . . . . . . . . . . . . . . . . . . 60 Arctic Office Products (Machines) . . . . . . . . . . . . . . 13 ASRC Energy Services. . . . . . . . . . . . . . . . . . . . . . . 95 AT&T Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 ATCO Pipelines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Azimuth Adventure Photography . . . . . . . . . . . . . . . 30 Bell Tech . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Boart Longyear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Calista Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 Carlile Transportation Systems . . . . . . . . . . . . . . . . . 37 CCI Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Chris Arend Photography . . . . . . . . . . . . . . . . . . . . 130 City of Seward. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Cloud49 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Colville Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Construction Machinery Industrial LLC. . . . . . . . . . 131 Craters and Freighters Franchise Co.. . . . . . . . . . . . 43 Crowley. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Cruz Construction Inc. . . . . . . . . . . . . . . . . . . . . . . . 89 Delta Western . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 Design Alaska. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Dowland-Bach Corp.. . . . . . . . . . . . . . . . . . . . . . . . . 43

130

Doyon Emerald . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 EDC Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Engineered Fire & Safety . . . . . . . . . . . . . . . . . . . . . 97 ERA Aviation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 ERA Helicopters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Everts Air Cargo . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Fire River Gold Corp. . . . . . . . . . . . . . . . . . . . . . . . . 76 First National Bank Alaska . . . . . . . . . . . . . . . . . . . . . 5 Fugro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 GCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Golden Valley Electric Assoc. . . . . . . . . . . . . . . . . . . 46 Golder & Associates . . . . . . . . . . . . . . . . . . . . . . . . 113 Granite Construction. . . . . . . . . . . . . . . . . . . . . . . . . 53 Great Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 Judy Patrick Photography . . . . . . . . . . . . . . . . . . . . . 34 Kakivik Asset Management LLC. . . . . . . . . . . . . . . . 79 Kendall Ford Wasilla . . . . . . . . . . . . . . . . . . . . . . . . . 29 Kinross Fort Knox . . . . . . . . . . . . . . . . . . . . . . . . . . 100 Last Frontier Air Ventures . . . . . . . . . . . . . . . . . . . . . 67 Lynden Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Microcom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 MT Housing Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 NALCO Energy Services . . . . . . . . . . . . . . . . . . . . 113 NANA Regional Corp.. . . . . . . . . . . . . . . . . . . . . . . . 73 NCB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Northern Air Cargo . . . . . . . . . . . . . . . . . . . . . . . 64, 65 Northrim Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Northwest Ironworkers Employers Association . . . . . . . . . . . . . . . . . . . . . 60 Orica . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Oxford Assaying & Refining Inc. . . . . . . . . . . . . . . . . 77 Pacific Alaska Freightways . . . . . . . . . . . . . . . . . . . . 25 Pacific Pile & Marine. . . . . . . . . . . . . . . . . . . . . . 8,9,10 Paramount Supply . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Parker Smith & Feek. . . . . . . . . . . . . . . . . . . . . . . . . 41 Pebble Partnership . . . . . . . . . . . . . . . . . . . . . . . . . 101

PenAir . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Petro Star Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 PND Engineers Inc. . . . . . . . . . . . . . . . . . . . . . . . . 121 Polar Supply Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 PSC Environmental Services . . . . . . . . . . . . . . . . . 106 Resource Development Council . . . . . . . . . . . . . . . . . 3 Richmond Steel Recycling Ltd.. . . . . . . . . . . . . . . . 108 Rosie’s Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 RSA Engineering Inc. . . . . . . . . . . . . . . . . . . . . . . . . 60 Ryan Air . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Seekins Ford Lincoln Mercury Fleet . . . . . . . . . . . . . 35 SGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Shaw Environmental & Infrastructure Group . . . . . . 90 Shoreside Petroleum . . . . . . . . . . . . . . . . . . . . . . . . 94 Sitka CVB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Spenard Builders Supply . . . . . . . . . . . . . . . . . . . . . 57 State of Alaska - DNR Dam Safety Program . . . . . 107 Stellar Designs Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . 69 Sundog Media. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Superstar Pastry Design. . . . . . . . . . . . . . . . . . . . . . 68 The Growth Company. . . . . . . . . . . . . . . . . . . . . . . . 26 The Superior Group . . . . . . . . . . . . . . . . . . . . . . . . . 52 The Tatitlek Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 Totem Ocean Trailer Express . . . . . . . . . . . . . . . . . . 49 TransGroup Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 TTT Environmental . . . . . . . . . . . . . . . . . . . . . . . . . 121 Tutka LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 University of Alaska Fairbanks College of Engineering & Mining . . . . . . . . . . . . . . 81 UMIAQ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 URS Corp.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Usibelli Coal Mine Inc. . . . . . . . . . . . . . . . . . . . . . . . 95 Washington Crane & Hoist . . . . . . . . . . . . . . . . . . . . 39 Waste Management . . . . . . . . . . . . . . . . . . . . . . . . . 71 Watterson Construction . . . . . . . . . . . . . . . . . . . . . . 55 Wells Fargo. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132

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

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