Businesses should gird for computer attacks

Two of the nation’s top computer security specialists have grim news for any company that relies on computers and has a link to the Internet: You will be attacked."There are two kinds of organizations: those that have been hit and those that will be hit," said Gary Sullivan, president of Galaxy Computer Services Inc. of Manassas, Va. "Expect to be hit, and plan to survive."Sullivan made the comments during a morning-long conference Feb. 14 at the Egan Civic & Convention Center in Anchorage. The conference was sponsored by the Alaska Hi-Tech Business Council.Sullivan’s credentials include 20 years of management and security experience for large defense contractors like General Electric and Lockheed Martin.He was joined at the conference by Galaxy’s founder and chief technology officer, Lara Baker. Baker has been involved with top-level government security, including work at Los Alamos National Laboratory and as an adviser to the Central Intelligence Agency.Galaxy provides a variety of computer security consulting services. The company has more than 50 employees, most with federal government security clearances. Besides the government, the company advises corporate clients, specializing in the financial and health care industries.At the Feb. 14 conference, Sullivan explained how businesses can protect their information from attackers, alternating with Baker, who provided a series of computer security horror stories and detailed information on how intruders find security flaws and exploit them.Sullivan began the morning by pointing out that information is a business asset like any other."Businesses must take measures to protect that asset just as they would a more tangible asset," he said.He said protecting the integrity, accuracy and availability of information, what he calls information security, is more than safeguarding computers and networks. "If I get it out of your dumpster, information is information."But these days, most information doesn’t exist on paper, Sullivan said. So protecting computers and networks has become the way to protect information.To make the point, Baker urged managers to walk around and look at every computer for which they are responsible."You should ask what happens if the data on that computer goes away; what happens if the computer goes away; and what happens if the person running the computer and the computer go away," he said.Sullivan quoted a recent FBI report that found that 80 percent of organizations can improve their security, and that 20 percent of organizations have "significant security issues," meaning they can be crippled for days or longer. The study also found that most organizations do not have an electronic security professional on staff, relying instead on third-party vendors.Sullivan said that the Internet, and especially electronic commerce, has changed the rules of security and vastly increased the risks facing companies that rely on computers to conduct business."Pre-Internet, the role of security was to keep everybody out," he said. "Post-Internet, it’s let everyone in, but minimize the malicious effects."He said e-commerce adds to the risk because transactions have no delay time and there’s no direct control over the end users."You don’t really know who’s on the line, filling out a loan form," he said.Sullivan said another problem is the rate of technology change, where companies are often forced by vendors to upgrade to the latest version of software without time to assess any new vulnerabilities."There has to be a structure in the organization to manage change," he said.Sullivan and Baker were particularly critical of Microsoft Corp., whose operating systems suffer from numerous security flaws. They said it’s why 80 percent of all Web servers, the computers that actually store and serve information to visiting surfers, do not use Microsoft software.Sullivan quoted a 2001 survey of 40 community banks whose networks were scanned for vulnerabilities. He said the survey found that 28 were using Microsoft software and that of those, nine were susceptible to a virtually undetectable exploit that would allow retrieval and modification of account data.Microsoft routinely issues software "patches" that fix vulnerabilities once they’ve been discovered. But, Sullivan said, many companies fail to install them, leaving their systems open to attack."Security is not a one-time thing," Sullivan said. "It can’t be done once. It must be done daily as a business process."Building a secure networkSafeguarding a company’s information assets includes hardware and software, but it also must take into account the people in an organization, because, as both Sullivan and Baker pointed out, some of the worst computer attacks have been carried out by disgruntled employees.Sullivan said the main way to protect a network is to control who gets to see different types of information, with access defined by job function. The primary method of authentication is the password, which Sullivan said should be at least eight characters long, should never spell a word, and should include numbers and special characters. It should also be changed regularly.Sullivan said the most difficult part of using passwords is that if they get to be too long, or are changed too often, people start writing them down, thus defeating their purpose."The goal is security that is appropriate for the organization," he said."Passwords are like your toothbrush," he said. "Use them regularly; change them often; and don’t share them."As for protecting a network from outside intruders, the most common defense is a firewall, usually a combination of software and hardware that defines what parts of a company’s network are visible to the rest of the world. Unfortunately, many companies install a firewall and forget it. That’s dangerous, Sullivan said, because firewall software needs to be properly configured and regularly maintained."No firewall can protect against that which it is programmed to allow," Sullivan pointed out. "Your firewall rules are your external security policy."Other security measures include: Virus scanning software:. Again, Sullivan stressed the importance of regularly updating the software as new defenses are devised against the latest computer virus. Virtual private networks: These are highly encrypted links between different corporate locations. Sullivan said companies should use a single vendor for both ends of the link because not all systems work well together. Intruder detection software: Sullivan said this sophisticated approach, which evaluates patterns of traffic in a network, is difficult to configure and must be trained, or fine-tuned so it doesn’t constantly sound an alarm.Sullivan said a new challenge for security is wireless networking, since it works by broadcasting a network to anyone with the right receiver. That has led to what he called "drive-by hacking," which involves people driving up to a building and tapping into a corporate network from their car.He said the security of such systems is weak but is rapidly improving, especially in the health care industry, which makes extensive use of wireless technology within hospitals.Sullivan concluded by reminding the audience that hardware and software are only part of what’s needed to protect a company’s information assets. The others are: Physical control of access to data;Disaster protection and recovery; User education; and A security information plan.The security information planHelping companies plan for computer attacks is what Sullivan and Baker do for a living. Their approach is comprehensive, beginning with an audit of what information assets a company has, which are the most vital to its survival and the current state of the firm’s security.They then define what steps should be taken to protect the company’s information and how to do it.The next step is to put in place systems that detect attacks, ideally before a company’s information has been compromised.Then, the company must decide how to react to an attack. Baker said an organization can either fix the problem or go after the attacker. But, he warned, that pursuing and prosecuting requires a great deal of preparation. That includes making sure that the servers on a network save a record of everything that happens on the network, a feature Baker said many companies turn off to save on disk space."Are you collecting evidence on an ongoing basis?" he said. "You need to collect it to have forensics success."Baker said the plan should also define specific steps to take once an attack has occurred. They include notifying the appropriate law enforcement authorities and service providers; stopping or containing the attack; assessing the damage; eradication of any viruses; and recovery.The final phase on any plan should include a reflection phase: a post-mortem where the organization figures out what worked and what did not. Then, Baker said, "Go out and make the changes. Don’t just talk about it."

High court will review Native Wireless dispute

FAIRBANKS -- The U.S. Supreme Court has agreed to hear a dispute over the ownership of wireless phone frequencies, a conflict that has tied up millions of dollars belonging to several Alaska Native corporations.Conrad Bagne, head of Alaska Native Wireless in Anchorage, said his company welcomed the Supreme Court’s review."The Supreme Court’s decision to hear this case is a victory for the integrity of the Federal Communications Commission’s auction process and the wireless consumers the process was designed to serve," Bagne said.With the help of small business and minority preferences, Alaska Native Wireless won ownership of numerous frequencies in major U.S. cities in an FCC auction in January 2001.The sale was nullified when NextWave, a company that had previously bought the frequencies but did not pay for them, won a court decision in July.The FCC appealed to the Supreme Court, which decided March 4 to take the case.Doyon Ltd., Sealaska Corp. and managing partner Arctic Slope Regional Corp. put $260 million into Alaska Native Wireless. Doyon’s share was about $25 million.

Daschle promises support for gas line

JUNEAU -- U.S. Senate Majority Leader Tom Daschle has agreed to support financial incentives to spur development of an Alaska natural gas pipeline, Gov. Tony Knowles said Feb. 27.Daschle also supports a requirement that the pipeline follow the so-called Alaska Highway route and that Alaska residents and businesses be provided access to gas from the line.Knowles released a statement from Daschle’s office in which the South Dakota senator said he would offer amendments to the national energy bill to include those provisions, which Alaska officials have been pushing."This is, I think, a significant step forward for the project," Knowles said in a news conference.Alaska’s three major oil and gas producers, BP Exploration (Alaska) Inc., Exxon Mobil and Phillips Alaska Inc. have spent $100 million in the past year studying the feasibility of piping natural gas from the North Slope to markets in the Lower 48.While final results haven’t been announced, the preliminary analysis questioned whether the project would return enough profit.Phillips Alaska Inc. spokeswoman Dawn Patience said the company is encouraged by Daschle’s announcement, although officials there haven’t seen the proposed amendment. She could not say whether those provisions would ultimately lead to a project going forward."This project is very large and has a lot of challenges ahead of it," Patience said.A spokesman for BP said he could not comment on Daschle’s announcement without seeing the proposed legislation, and an Exxon Mobil spokesman did not return a phone call.Knowles asked Daschle to support federal tax credits if gas prices fall too low, with those credits to be repaid if prices rise above a certain level.Daschle’s statement did not specify what would be in the "financial safety net" he agreed to support, and Knowles said a specific trigger price for tax credits had not been determined.Phillips is seeking federal tax credits if the price of gas dropped below about $3.75 per million Btu.Phillips is the only one of the three producers that has come out in support of the Alaska Highway route.The producers have looked at two possible routes: one under the Beaufort Sea into Canada, largely bypassing Alaska; and one that follows the trans-Alaska oil pipeline to Fairbanks and then the Alaska Highway south.Alaska politicians oppose the Beaufort Sea route, saying it would not provide Alaskans the jobs and access to natural gas for in-state uses that the highway route would provide.A version of the national energy bill that passed the U.S. House prohibits the Beaufort Sea route, but does not include the tax credit provisions.

New convention center financing up for vote

Anchorage area residents will vote April 2 on raising the hotel bed tax from 8 percent to 12 percent with the difference allocated to financing a $100 million civic and convention center. Voters must approve the proposal by at least 60 percent, and debate on the issue has already begun.The increase would take affect Jan. 1. Construction of a new center could begin as early as 2005, aiming to open in second quarter 2007, according to a June 2001 feasibility study.The study showed the city could not expand the Egan Civic & Convention Center since it is surrounded by historic buildings and parks, and the building is not structurally designed to expand vertically. Underground expansion of the Egan Center would be too costly, the report said.The Anchorage Assembly approved the ballot proposition on Feb. 26. According to ballot language, if bonds for center construction are not issued by Jan. 1, 2008, the increased bed tax would automatically expire, and those dedicated taxes collected but not used would be deposited in the municipal trust fund. Property taxes would not be used to finance the acquisition, construction or operation of proposed center, the proposition reads.If approved, the accrued hotel tax would support revenue bonds with proceeds totaling $77.3 million, according to the study. The tax increase would also generate revenue of $12.5 million for design, site acquisition and other early costs before bonds are issued.The study estimated the total cost of the convention center at $100 million. To complete the project, the study identified other potential funding sources. They include: $10 million to $20 million from sale or lease of the current center; and $20 million to $30 million from state and federal grants.The city subsidizes the Egan Center operating costs, and the center recorded a net loss of $270,000 in 2000, the report said. A new center would also operate with net losses of $857,000 in its first year but declining to $661,000 by its fifth year.Project backers say a new, larger center is necessary to attract larger conventions and meetings to Anchorage, thereby bringing increased revenue to the community from delegate spending. It also can help diversify the economy, said Wilson Hughes, co-chairman of the Anchorage Civic & Convention Center YES Inc. He is executive vice president and general manager of General Communication Inc.Convention business has helped lengthen Alaska’s tourism season, he noted."Statistics show many delegates extend their stay and vacation in other parts of Alaska, building the visitor industry all over the state," he said.The current Egan Civic & Convention Center can host conventions with up to about 1,500 delegates while the proposed larger center could host roughly 5,000 delegates.The nonprofit organization leading the campaign, ACCCY, notes additional delegates could trigger about 700 new tourism jobs and $51 million in direct spending to area businesses.ACCCY officials reported campaign donations totaling more than $464,000 in a March 4 filing with the Alaska Public Offices Commission. Contributors included hospitals, hotels, oil companies, restaurants, small businesses, utilities and individuals.Project funding and facility details are still being discussed."The final project size and cost will be determined after the revenue sources are finalized," said Chris Swalling, ACCCY treasurer. Swalling, a certified public accountant, is president of Swalling & Associates PC."No state money may mean that the new center is built in two stages or is somewhat different if total scope or perhaps no state money will be required," he said.According to Hughes, the funding plan estimated possible funding exceeding the project cost, and state funds are "not crucial to the success of the project."However, some Alaskans are skeptical about the project, expressing concerns through various forums.ACCCY officials would not release polling results about the center. Anchorage pollster Ivan Moore said an October survey showed 35 percent support for the project.Callers to an Anchorage daily radio show have voiced opposition to the project, said Mike Porcaro, who hosts the show on KENI-AM.Although the business community generally supports the project, callers on the show believe they may end up paying for the convention center or other proposed projects, he noted."This is one of the more emotional issues I’ve seen," said Porcaro, who owns Porcaro Communications.Most callers oppose building a new convention center, he said. Amid state budget gap discussions and possible solutions, some Alaskans question this project and others, he said.Even though it’s an Anchorage issue, callers from around the state also sound off. "What people say from outside Anchorage is, ’Well, we’re the ones who (are going to be) paying for it,’ " Porcaro said.An increased bed tax would affect Alaskans staying in Anchorage for meetings.Of all conventions in Anchorage last year, 42 percent were Alaska groups, according to Anchorage Convention and Visitors Bureau statistics. The largest convention the city hosts is the annual Alaska Federation of Natives event in October.Alaskans living outside Anchorage often travel to the city, adding significant cost to doing business, said Juneau resident Pamela LaBolle, executive director of the Alaska State Chamber of Commerce. "It is very expensive for business people to travel around the state," she said.While non-Anchorage residents may balk at paying an increased hotel tax, Anchorage residents already pay similar taxes when visiting other Alaska cities, ACCCY’s Swalling said.Many Alaskans could benefit from the new center, not just Anchorage residents, Hughes said.

Business Profile: UIC Construction Inc.

Name of the company: UIC Construction Inc.Established: 1978Location: 5300 A St., AnchorageTelephone: 907-762-0100Web site: www.ukpik.comMajor focus of services: UIC Construction Inc. provides general construction contracting services, design-build services, project management, logistics support and facility maintenance. The company runs a construction equipment fleet and uses construction materials from its gravel pit operations.History of the company: UIC Construction is a subsidiary of Ukpeagvik Inupiat Corp., the Native village corporation for Barrow founded through the Alaska Native Claims Settlement Act.UIC Construction has completed more than $600 million in public and private projects including civil and mechanical construction, commercial buildings and utility work.During its tenure, UIC Construction has diversified its offerings of construction services. Also, company officials have shifted their market focus. While many projects have been completed for the North Slope Borough where its parent company is based, the borough’s capital budget has been declining, and UIC Construction has completed more than $80 million worth of projects in Northwest Alaska.In 2000 the company spun off its mechanical contracting department into a new sister company, Ukpik Mechanical, in order to meet federal regulations and qualify for work as a minority small business.UIC Construction employs between 150 to 300 workers at peak season depending on projects under way.Major projects: Last year the company finished building Buckland School. Current construction projects are schools in Kiana, Meade River, Noorvik and Selawik; store upgrades for Alaska Commercial Co.; and clinics in Shungnak and Noatak. UIC Construction recently finished work on a Kiana clinic and was awarded the contract to build the Golovin school. Ukpik Mechanical is handling mechanical contracting work for Barrow tank farm modifications; Point Hope and Atqasuk water and sewer connections; the Wainwright community center and power plant; an Elmendorf Air Force Base fitness center and the Koyuk school.Top accomplishment of the company: One of the goals for the parent company is to hire and train Barrow residents. UIC Construction also aims to employ people who live in other rural Alaska areas where its projects are under way. Once a project is finished, the company has invested in community residents through payroll and job experience to equip them for future jobs, said general manager Ed Byrne.Major player: Ed Byrne, general manager, UIC Construction Inc.Byrne, who came to Alaska in 1961, has experience in mechanical and general contracting work. He has worked for the company for 20 years, first through a joint venture with a firm he ran then later with UIC Construction.-- Nancy Pounds

Fiscal caucus develops gap-filling ideas

The Fiscal Policy Caucus, a bipartisan group in the state House, has developed several proposals for new state revenues, intended to cover projected budget deficits that will exceed $1 billion per year. They include: State personal income tax: The legislative group proposed a tax of 4 percent on a person’s federal taxable income, with the rate dropping to 2 percent if a surplus of $2 billion is in the state Constitutional Budget Reserve, a state reserve account. If a reserve of $2.5 billion is in the CBR account, the rate would drop to 1 percent.Gov. Tony Knowles has separately proposed an income tax of 20 percent of a taxpayer’s federal tax liability. The difference between the two approaches is that Knowles’ plan picks up deductions and tax credits allowed under federal law, while the legislators’ plan does not. An income tax could raise about $270 million per year. Business taxes: The Fiscal Caucus plan proposes a 10-cent a drink tax on alcohol, which would raise about $30 million yearly, and a $30 passenger tax on cruise ship visitors, which would raise about $17 million annually.Other business tax proposals include a hike in state motor fuel taxes proposed by Rep. John Davies, D-Fairbanks, which could bring about $15 million; and a change in corporate income tax rates proposed by Rep. Con Bunde, R-Anchorage, which could raise about $100 million yearly. State sales tax: Although it is not part of the Fiscal Caucus plan, some legislators favor a state sales tax, and one sales tax bill has been introduced by Rep. Drew Scalzi, R-Homer. Depending on the rate of the sales tax and possible exemptions, such as for food and medicine, a sales tax could raise about $200 million per year. Permanent fund income: The Fiscal Caucus adopted a proposal by the permanent fund’s Board of Trustees that would change the way the fund’s income is managed. The new method would be similar to that used today by most other large endowments.The trustee’s proposal is that 5 percent of the market value of the fund be distributed each year to the state. The Legislature would decide how those funds would be appropriated, either to the General Fund for public services, or to dividends.The fund can be expected to earn 8 percent yearly on a consistent basis, the trustees have said. The 3 percent difference between 8 percent earned and 5 percent distributed would be retained and reinvested to offset inflation.The Fiscal Caucus plan is for 7 percent of the fund’s earnings to go to the General Fund in fiscal 2004 (beginning in July 2003), 6 percent in fiscal 2005 and 5 percent in fiscal 2006 and thereafter. Of the money distributed to the state General Fund, half would be used to support public services and half used for dividends.This approach would result in substantial new revenues for the state General Fund but a reduction of the dividend to $1,256 in 2004, $1,049 in 2005 and $1,079 in 2006. After 2006 the dividend would begin to grow again.

Railroad, ferry object to legislation

State Sen. Jerry Ward says the Alaska Marine Highway System needs land and the Alaska Railroad to keep it afloat financially.Under a bill sponsored by the Anchorage Republican, the state-owned railroad would be linked to the ferry system and 500,000 acres of land would be made available for lease.Revenues from newly leased land would shore up the financially struggling ferry service and enhance the already profitable railroad, Ward said.Ward, a real estate agent by trade, says giving the ferry system land will make it self-sufficient and profitable much the same way profits from leased land keeps the Alaska Railroad Corp. in the black."It’s a shame a legislator from the Kenai Peninsula has to figure out something, but I don’t want me, my family or my constituents having to pay a state income tax or have our Permanent Fund dividends stolen to fund the ferry system," Ward told the Journal.While Ward and several fellow senators in Juneau think the idea of a state-owned Alaska Marine and Rail Transportation Authority is a good one, the bill is getting no support from railroad and ferry officials.Pat Gamble, president and chief executive of the Alaska Railroad, said that while the idea behind Ward’s Senate bill is "innovative and well intentioned," the railroad wants no part of it."The Alaska Railroad Corp. is not broken; it does not need fixing," Gamble said in a written statement to lawmakers. "We believe it most assuredly would ruin the viability and profitability of the Alaska Railroad."Gamble said combining the ailing state ferry system with the railroad, which has operated at a profit, would hurt railroad employees’ morale."Imagine the negative motivation if part of the employees’ hard-won railroad profit was siphoned off to reward a less successful division of the conglomerate, instead of being applied to a pay raise or to reduce the huge backlog of internal capital improvements," Gamble wrote.Bill O’Leary, Alaska Railroad’s vice president of finance, told the Senate Transportation Committee on Feb. 26 that the bill would kill the profitability of the railroad if it has to support the ferry system, too."It would create two agencies dependent on the state rather than one and spell disaster for the railroad, Alaska companies who use it and the residents it serves," O’Leary said.The Marine Highway system is seeking nearly $20 million over the next year in supplemental and general fund money to keep the state ferries running, said George Capacci, general manager of Alaska Marine Highway System.A special $40 million marine highway fund given the ferry system to keep it afloat over the last decade has dried up, Capacci said.Bob Doll, director of the state Department of Transportation and Public Facilities Southeast region, said that while giving the ferry system 500,000 acres of land was a "very generous offer, we are very skeptical of the usefulness of it ... we’re not sure it would be very beneficial."Doll said a positive impact to the ferry system’s budget likely would be years away since it would take time to select the land and lease it."If it doesn’t rapidly produce revenue, then we’re not sure it is a solution to the problem," Doll said.Immediate budget fixes planned for the ferry system include raising fares at least every couple of years, Doll said.Sen. Robin Taylor, R-Wrangell, a community served by the state ferry system, said fees already are too high.Taylor, too, believes the state should open up some of its land for development, but said it’s unlikely with a Democrat in the governor’s mansion."If we don’t take some of our 103 million acres off-line, we’re going to run into some very large transportation (funding) problems in the state," Taylor said.Taylor pointed out that a land transfer of 250,000 acres of state property to the University of Alaska was vetoed by Gov. Tony Knowles two years ago."This administration will kill any land transfer," Taylor said.Ward believes a big part of the problem with railroad and ferry officials not supporting his bill simply comes down to a turf war."I understand turf, but if an assistant director goes away, to me that’s not the end of the world," Ward said.Ward told the Journal that "the railroad is as much a real estate company as it is a railroad."When it comes to profitability, that’s true. The railroad has operated without a state subsidy because of its land holdings. It has some 17,970 acres along the 525-mile line that is either leased or available for lease, said Pat Flynn, the railroad’s public affairs officer.The railroad earns about $10 million annually from leasing land, or about 9 percent of its annual revenues. The railroad’s profits, just under $6 million last year, came entirely from its real estate holdings, said O’Leary, the railroad’s vice president of finance.About $4 million from the real estate earnings were paid out to expenses related to land leases, O’Leary said.The ferry system should have the same opportunity to make money off state land, or it will likely go under permanently someday soon, Ward said."I don’t want to hurt the railroad or the ferry system," Ward said, "but the value of the Marine Highway is not shared by the majority of Alaskans. And I can tell you that if it comes down to funding a school in my district or the Marine Highway System, the boats are going to lose."

AeroMap draws world with lens

If you walk through the halls of the Merrill Field headquarters of AeroMap U.S., you will see numerous large photos of places throughout Alaska, all with amazing detail, and all shot on perfect sunny days. While the pictures are pretty to look at, most of them aren’t maps. Turning a photograph into a map requires leading-edge technology that includes airborne global positioning satellite receivers, synthetic aperture radar, high-resolution satellite images, numerous powerful computers, and, in the end, many hours of painstaking human effort. All of this work is required because a map is designed to show exactly where something is located, typically within a few inches. Historically, that’s been done by surveyors on the ground who carefully measure dozens or hundreds of points and relate them to a known fixed point. From that information, a map can be drawn. That’s fine for building highways and subdivisions, but what if you want to map large, remote areas like Cape Yakataga or Adak? The solution is to take aerial photographs and use multiple systems to carefully monitor the location of each picture. The pictures are digitized and post-processed so the location information is tied to actual features on each photograph. The process is call photogrammetry, and it’s what AeroMap U.S. does. "It’s the art and science of making measurements from photographs," explained Bob Schweitzer, company vice president. The company, which has 65 employees in Anchorage, owns a fleet of four twin-engine aircraft, each with holes cut in the bottom so the big cameras can take pictures of the earth below. Schweitzer said that over time, the company has acquired progressively larger aircraft.

Naphtha sales good for bottom line at Williams, railroad

As far as petroleum products go, naphtha is more like rump roast than filet mignon.But the by-product of gasoline production accounted for about a sixth of the 31,000 rail cars of fuel shipped last year from Williams Alaska Petroleum Inc.’s North Pole refinery, according to the Alaska Railroad Corp.Joe Hufman, Williams’ manager of Alaska terminals in Anchorage, said his company topped off 11 tanker ships with naphtha last year bound for Asia from the Port of Anchorage.It was the largest annual export of naphtha for the company, Hufman said."In prior years we’ve had four to six ships, and we’re hoping for six or seven this year, at least," Hufman said.The first ship of the year, M/T Hightide, was slated to be in port March 8. It will be filled with 290,000 barrels, or about 12.2 million gallons, of naphtha, Hufman said.Williams for the past month has sent 527 tanker cars from its North Pole refinery to the company’s fuel storage facilities near the Port of Anchorage in preparation for the fuel tanker, Hufman said."It takes anywhere from 25 to 28 days to get the product in place, and about 24 hours to fill a tanker," Hufman said.Williams’ sole naphtha customer is Itochu Corp., a giant Japanese company that, among other things, is part owner of a plant in the Philippines that uses the liquid hydrocarbon for production of chemicals called monomers, which in turn are converted into resins for the manufacturing of various plastic products."It’s not your high-end cut, not your premium," Hufman said of naphtha. "It helps in the production of something else. It’s not the end product necessarily."Naphtha also is used for fuel and cleaning solvents, but the domestic market is lean. Without its large Japanese customer, or any other buyer, Williams would pump the naphtha back into its crude oil supply, Hufman saidJet fuel is made by blending naphtha, gasoline and kerosene."If nobody buys it, it goes right back into the pipeline," Hufman said.Pat Flynn, spokesman for the Alaska Railroad, said he’s glad that doesn’t happen, because as far as the railroad is concerned, a full fuel tanker car means revenue, whatever is in it.Some 711 million gallons of petroleum products were moved along rail from Williams’ North Pole refinery to Anchorage last year, a sixth of it being naphtha.Petroleum makes up most of the freight revenue for the railroad, about $35.7 million last year. Most of the petroleum product, about 1.7 million gallons a day, is jet fuel used at Ted Stevens Anchorage International Airport. Jet fuel is followed by diesel, which is transferred by barges to be used in the Bush for home heating and electrical generation.The railroad saw a spike in freight revenues thanks to its naphtha shipments."Every little bit helps, and naphtha was a big little bit, for sure," Flynn said.Fuel shipped from Williams’ North Pole refinery to Anchorage averaged more than 100 rail cars a day for July and August, the most ever, Flynn said. Naphtha contributed greatly to the mix, as two tankers, requiring more than 500 rail cars each, were loaded in those months.The railroad owns about 400 fuel cars, which are either coming to or from Anchorage, or being unloaded or loaded -- all at the same time.Naphtha prices are generally weak, fetching far below crude oil prices on world markets.But Hufman said naphtha, called gasoline blend stock by refineries, is worthwhile to his company’s bottom line, so long as there remains a market."The margins are pretty decent," Hufman said. "It started out as a spot sale but now it’s turned into a regular market."Williams hasn’t always made money selling naphtha, but kept shipping the product to keep its buyer happy, with hopes of rebounding prices."There have been times we shipped it just to keep our customer," Hufman said.Naphtha is one of the few products Alaska supplies to world markets, Hufman said."Naphtha is something that is actually made in Alaska and exported out," Hufman said. "There is a good market now and we’re planning on doing this for a long time."

Kenai guide offers wheelchair-accessible boat

It’s Dan McDowell’s wish to see anyone wanting to fish or sightsee on the Kenai River to be able to do so, especially those confined to a wheelchair.His wish is coming true but it hasn’t been by the wave of a wand or the clicking of heels. McDowell has sunk his life savings into building a boat that caters to the elderly and to those with disabilities, and to anyone else wanting to catch a monster salmon for which the Kenai is known.McDowell, owner of the Last Frontiersman, a charter boat operation on the Kenai, doesn’t want his $30,000 craft to be known as the "handicapped boat.""This is a boat for everyone and for everyone to enjoy. It’s not emblazoned with handicap signs," McDowell said.The 8-foot-wide by 25-foot-long flat-bottomed boat features wheelchair ramps, removable seating, special tie downs, tire-gripping decks and fishing rod holders.The boat can accommodate up to six wheelchairs.It also is equipped with lifesaving and first aid gear, making it the only rescue boat on the Kenai, McDowell said.For years, McDowell dreamed of building such a boat, and while the idea never languished, for one reason or another he never got around to it until last year.Part of his motivation and idea for the boat came from his son, Sean, whose job in the U.S. Navy is to ferry people by small boat to the Arizona Memorial at Pearl Harbor.Many of his son’s passengers are elderly and disabled war veterans, McDowell said.That was the inspiration he needed.He commissioned Mike Kunz of Mike’s Welding in Sterling to build the boat, which was modified from an existing aluminum hull.Kunz spent most of last winter working on the boat, putting about 200 hours into the craft."We snazzed it up, and I think it turned out pretty nice," said Kunz, who in addition to building boats, specializes in making aluminum snowmachine sleds and all-terrain vechicle trailers.He only charged McDowell for a fraction of his time, since he, too, believed in the project."Dan is a real genuine person and genuinely wants to help disabled people," Kunz said. "He went out of his way to try and make this thing work. I couldn’t have asked for a nicer customer."McDowell has received other accolades, as well. He won the Outstanding Business in Tourism award from the Soldotna Chamber of Commerce last year. He also won the state-sponsored Barrier-Free design award given annually to a builder or architect for innovative ideas for handicap accessibility.Awards are fine, McDowell said, but allowing people access to the Kenai is greater gratification."Just getting those folk on the river and seeing the fun they have and enjoying the day is the greatest reward for me," McDowell said.One of McDowell’s first customers last summer was Dianne Berthold of Park Ridge, Ill., who had polio as a child and uses a wheelchair.On her first trip to Alaska a decade ago, Berthold said she was disappointed with the state’s adherence to the Americans with Disabilities Act.Alaska has come a long way in the past 10 years with handicap access, Berthold said, adding that the most she expected on the trip to Kenai was to see the river from shore."I was surprised he was doing this," Berthold said of McDowell’s operation."He is very nice and has a lot of enthusiasm and very safety conscious," Berthold said. "I’d like to see him get more business."More disabled folks could be using the Kenai in the future with the Alaska Board of Fisheries’ action in February, giving disabled anglers who meet certain criteria increased hours for fishing.McDowell said he’d like to see regulations on the Kenai changed to allow larger engines than the 35-horsepower limit for boats hauling disabled passengers."This is an awful lot of boat to push with a 35 horsepower motor," McDowell said.McDowell charges $225 a day for a place on the boat, whether it’s for fishing or sightseeing. He said his rates are competitive with other guides along the Kenai.He would like to see other guides offering similar services and wants all landings along the river to be handicap accessible."I didn’t do this to be the only one on the river doing this. I want everyone to do this. I want to see Alaska opened up to everyone, not just a select few," McDowell said. "The resources belong to every one of us equally. I think this is an idea whose time has come. It is the 21st century."

Crop insurance could work for fishermen once industry's healthy

Can crop insurance be applied to commercial fisheries? The reality of doing so is proving to be more complex than anyone imagined.Farmers have a long history of being able to insure their crops against losses caused by drought, insects or other calamities, but fisheries have never been included in any insurance plans.Two years ago, Sen. Ted Stevens, R-Alaska, succeeded in getting salmon officially designated as a harvested food crop, and a $1 million federal subsidy was designated for fishermen to insure their catches. Risk management agents with the U.S. Department of Agriculture and researchers at the University of Alaska Fairbanks were asked to figure out how crop insurance might be applied for the first time to fisheries.They set out to determine what kind of risk management systems might be plugged into a pilot project that was originally set for Bristol Bay this summer. However, the complexity of the project, as well as the imminent changes the salmon industry is undergoing, are pushing back that timeline.The draft of the final report being reviewed by the agents was recently made available to the public. The report, "Wild Salmon Risk Management in Bristol Bay," by UAF’s Joshua Greenberg, Mark Herrmann, Hans Geier and Charles Hamel says the time is not right for applying a crop insurance program to commercial fishing."It’s not that we’re opposed to applying the risk insurance concept to commercial fishing. In fact, during the course of our work we came to appreciate its potential value for stabilizing cyclical downturns in rationalized fisheries," Hamel said. He added that the group recommends "revisiting the idea when it can be applied as part of a suite of remedial measures that address overcapitalization."In evaluating the appropriateness of a risk insurance program for the bay’s salmon fishery, there are two basic questions the researchers set out to answer: Can such a program be successfully adapted to this commercial fishery; and, is a risk insurance program an appropriate tool to be applied to this fishery at this point in time.The discussion is taking place at a time when Alaska’s salmon fishery is poised to undergo major restructuring, which will inevitably lead to management and operational changes. This raises the critical issue of whether crop insurance type programs could actually be detrimental to the industry right now.The report states: "A risk insurance program could frustrate rationalization efforts by encouraging fishermen to remain active in the fishery in poor fishing seasons in order to gain eligibility for indemnification."The UAF researchers strongly recommend that the concept of risk insurance be revisited at a time when good health has returned to the Bristol Bay fishing industry.The report is geared for use by those who would design the program for the bay, and the UAF team is seeking comments from the public that will be forwarded to the risk management agents.Startling bay statisticsThe UAF report reveals some eye-opening facts about the world’s largest sockeye salmon fishery: From the late 1980s into the ’90s, gross earnings topped $200 million, with average earnings for drift gillnetters approaching $100,000 and setnetters averaging more than $30,000. Prices to fishermen during this time peaked at $1.86 a pound.The estimated total 2001 earnings were $34 million. The price of 40 cents a pound was the lowest since limited entry began in 1973 despite a very weak run. Average drift and set net revenues were $17,597 and $8,884 respectively.The 2001 season was so poor that for the first time a significant number of Bristol Bay permit holders did not fish. The drift and setnet fleets were reduced by 14 percent and 16 percent, respectively.The number of total permits has been fairly constant over the years. In 1999 there were 1,903 drift gillnet permits and 1,014 setnet permits.Drift gillnet permit prices plunged from $80,500 in 2000 to about $30,000 in 2001. Just more than a decade ago drift permits were selling for nearly $250,000.Bristol Bay landings now make up less than 3 percent of the world’s total salmon supply. As farmed salmon supplies expand at an unprecedented rate, it is becoming increasingly difficult for bay sockeye salmon to garner premium prices. Since 1982, on average, 75.8 percent of all Alaska sockeye salmon has been exported fresh/frozen to Japan. In recent years that number has dropped to 43.8 percent.The bay’s malaiseSince June, one man has been leading a charge to change the way business is done in the bay. Bristol Bay fisherman Buz Ottem and a handful of others formed the Bristol Bay Marketing Association, and they’re now electing a board of directors and determining a course of action.Ottem believed that 40-cent reds would be the catalyst to cause hundreds of fishermen to rally around the effort, but he admits it’s tough going."We only have 55 members who’ve paid dues of just $200 each out of 2,700 permit holders," he said in a phone interview.Ottem attributes the low interest to a sense of defeat."Many are just leaving the fishery, while others think they’ll make money at any price if they just catch enough fish," he said.Ottem believes it’s time to "take the processors to task" as to why they are not developing new markets for bay sockeye."These are good businessmen, so why don’t they get creative? The market is there for the taking. But the processors are doing business the same way it’s been done for 100 years. They say it’s not working, but there’s no change," he said.Ottem believes the problem is not just the result of competition from farmed fish."Too many things don’t add up. At my local Safeway, a 7.5-ounce can of sockeye is selling for $4.29. That works out to $9 a pound, of which the fishermen are getting 1.5 percent. Where’s that money going?" he asked.But the beleaguered bay fisherman refuses to give up."Just like auto workers, truckers, pilots -- they’ve all made good lives because they united. As long as we have a defeated attitude, nothing will change," Ottem said.Kodiak-based free-lance writer Laine Welch can be reached via e-mail at ([email protected]).

Alpine, Kuparuk get chunk of Phillips' North Slope budget

Phillips Alaska Inc. says its will invest about $500 million to $600 million in new capital spending on Alaska exploration and development projects during each of the next two years, somewhat down from levels of spending in recent years.About $550 million to $600 million will be spent this year on new projects and development, split about evenly between drilling and new facilities construction, according to Chris Fuhr, a senior Phillips manager responsible for North Slope projects.Work in the near term will focus mainly in ongoing development of the Alpine oil field, including development of satellite pools near the producing field, and a planned expansion of Alpine production facilities, Fuhr said.Alpine is a new oil field in the Colville River delta west of the Prudhoe Bay-area oil fields. It began production in November 2000. The field is performing much better than expected, producing about 100,000 barrels per day compared with initial expectations of 60,000 barrels daily.The company will also be developing satellite pools in the Kuparuk River oil field, west of the Prudhoe Bay field and east of the Alpine field, Fuhr said, as well as investing in expanded enhanced oil recovery in Kuparuk and an expansion of production in the West Sak viscous oil deposit, which overlies the Kuparuk field.Phillips is spending about $75 million on its North Slope exploration program this winter and spring, and while the investment is down from levels last year the program is focused on getting more information about discoveries announced last year in the National Petroleum Reserve-Alaska."We’re still trying to figure out what those discoveries mean," in terms of commercial oil and gas development, Fuhr said. Several test wells drilled by Phillips two years ago found oil and gas, and this year’s drilling is focused on two of the most likely prospects, he said.Phillips will, in addition, drill two wildcat exploration wells aimed at making new discoveries away from places drilled previously. One will be in the NPR-A in an untested area southwest of the existing discoveries. The other will be south of the Kuparuk field, on state-owned lands.Fuhr said continued development work in the Alpine field area is presenting real challenges because the project is remote and not connected by the all-year road to the Prudhoe and Kuparuk field roads.This means winter ice roads must be built for all new projects, and all supplies and materials for construction must be brought in during the winter over the ice road, he said. Anything brought during the summer must come by air."This means we have to plan rigorously," to move all supplies for a new project during the winter, to keep costs down, Fuhr said.Lower oil prices also present challenges."At $15 to $17 per barrel oil prices, it’s tougher for us to generate acceptable (profit) margins on new projects. It was a lot easier when oil prices were $25 per barrel," Fuhr said.

Business Profile: The Flying Dutchman European Pastry Shop

Name of the company: The Flying Dutchman European Pastry ShopEstablished: 1982Location: 2101 Abbott Road, AnchorageTelephone: 907-274-1072Major focus of services: The Flying Dutchman European Pastry Shop creates specialty cakes, flans, cookies, pastries and chocolates.History of the company: Pastry shop founder Ben Koper trained as a pastry chef during an apprenticeship from 1948-1950 at a hotel in The Hague, Netherlands. Although he had a notion to travel to North America, the hotel chef urged Koper to stay at his post through the winter. That year Indonesia became independent rather than a Dutch colony. Once spring came the chef called a cruise line, finding Koper a job three days later. The chef admonished Koper before departing: "Whatever you do in life make sure it’s the best. It could be for the king or queen or your mother or father. Never, ever compromise."Koper worked two years aboard the New Amsterdam for the company now operating as Holland America Lines.Koper came to Alaska in 1963, first working in Fairbanks before moving to Anchorage two weeks before the 1964 earthquake. He worked at grocery store bakeries, then logged two years as a baker and pastry chef on the North Slope. Back in Anchorage, Koper worked two years at the Sheraton Anchorage Hotel and then one year at another area bakery.Koper had a desire to operate his own bakery. On July 2, 1982, he and wife Tina Koper opened The Flying Dutchman pastry shop in Midtown Anchorage. In 1986 they opened Cafe Amsterdam. Four years ago the Kopers sold the restaurant and moved the bakery to South Anchorage, closer to their home.Daughter Frieda Koper joins her parents for early morning baking, and they employ two part-time employees.Thanksgiving and Christmas seasons are typically busy times for the shop.Top accomplishment of the company: Ben and Tina Koper cited the enjoyment they gain from baking and selling their pastries."Unless you love what you’re doing, don’t even think about it," he said. Tina Koper noted the company’s longevity, which is the result of consistently high-quality products.Major players: Ben, Tina and Frieda Koper, owners, The Flying Dutchman European Pastry Shop.Ben Koper’s career as a pastry chef has spanned more than 50 years. He and Tina Koper have enjoyed operating their own business. Frieda Koper handled sales and other duties at the store until 1992 when she started baking, gleaning skills from her father, after an employee quit.-- Nancy Pounds

Coeur Alaska seeks approval for putting tailings into lake

Coeur Alaska Inc.’s new plan for developing the company’s Kensington gold mine project north of Juneau could bring the mine into production in the current range of gold prices, representatives of the company told the Pacific Rim Construction, Oil & Mining Expo in Anchorage Feb. 21.The big question is whether federal agencies, particularly the U.S. Environmental Protection Agency, will approve a key part of the plan, according to Rick Richins of Earth Technology Inc., a consulting company in charge of optimization planning and environmental permitting for the project.It calls for disposal of mine tailings in a small lake near the mine, rather than a previous proposal to build a costly tailings impoundment dam, Richins said.Coeur has received permits for its previous development plan, but it is too costly to develop with current gold prices.Under the new plan, construction costs would be lowered from $211 million to about $155 million, Richins said. Production costs would be lowered from $282 per ounce of gold mined to $225 per ounce.More higher-quality gold ore could also be developed under the revised plan, Richins said.Preliminary feasibility studies show the revised development plan could make the Kensington Mine economically viable at gold prices of $325 to $350 per ounce, and further work Coeur is doing to reduce costs could lower that threshold, Richins said.Gold prices recently hit $300 per ounce, although they have been about $260 to $270 per ounce in the last year. Coeur’s previous plan for Kensington required a $400 per ounce gold price.Although the U.S. Forest Service is the lead agency, in a supplemental environmental impact statement process that has been under way for two months now, EPA and the U.S. Army Corps of Engineers are co-sponsors of the impact statement.EPA approval of water discharge permits for the project is crucial, and there has been concern over the agency’s position because when Coeur first proposed the new plan last year, some EPA Region 10 staff made critical comments in the press."EPA is taking a positive approach" now to the proposal, Richins said. "They’ve designated people to work on the inter-agency permitting team and have retained a consulting company to evaluate the environmental issues, and we view that as positive," he said.Richins said the decision will probably hinge on whether Coeur can convince the agency that the new plan of tailings disposal in the lake is environmentally superior to the former plan of storing tailings behind a man-made dam."We believe we have an environmentally more attractive case," Richins said, mainly because the new plan would disturb an estimated 150 or 160 acres compared with 300 acres under the former plan.Tailings from the mine are essentially rock from which gold ore would be removed, Richins said. The ore contains no arsenic, unlike gold ore mined elsewhere, he said.Extensive studies by Coeur have shown that marine life will grow quickly over tailings deposited on the lake bottom. The lake would be shallower after tailings are deposited, with its depth decreased from about 40 feet to 20 feet, but it would also be enlarged to 40 acres under Coeur’s plan. It would also be restocked with fish.There is a small population of Dolly Varden trout in the lake, although it is not used, at least extensively, for recreational fishing.Other major changes in Couer’s development plan involve eliminating a planned 250-person construction camp and relying on helicopter transport for crew changes and supplies.The new plan envisions workers living in Juneau and commuting along the existing highway to Berner’s Bay, and crossing the bay on a passenger ferry. The total commute would be about an hour and 15 minutes, Richins said."Eliminating the helicopter support not only lowers costs but improves safety," an important consideration given Southeast Alaska’s often marginal weather for flying, Richins said.About 325 workers would be employed during construction, and 225 in production. The current reserves of the mine are sufficient for at least 10 years of production, but there is considerable potential for new ore deposits that could extend the life of the mine."I believe we’re looking at a 25 to 30 year mine life here, at least," said Steve Borell, executive director of the Alaska Miners Association.

Co-signers can get nasty surprise without liability release

In our everyday lives, and in the business world, we are constantly financially obligating ourselves to lenders. While our personal borrowing is fairly straightforward, it is not unusual for us to find ourselves in the role of a guarantor: a person who will step up and be personally responsible for another person or entity to the lending party.A not too infrequent example is when a son or daughter is out on their own and wishes to acquire an asset, perhaps a car. No financing is allowed unless Dad co-signs, or guarantees, the loan.Months pass; and then one blissful spring day, you receive a call: The loan is delinquent. Is Dad still on the hook?For personal debts, finality comes when the debt is paid and the obligation instrument you signed is marked satisfied, or paid in full. If you are a guarantor, you want a release from your guaranty of the satisfied obligation.So, what happens if the debt obligation is not fully satisfied, and you, as a guarantor want to be released from your guaranty? The first step is to ask the lender for a release. If that proves unsuccessful, perhaps a new guarantor or some collateral can be offered by the borrower to persuade the lender to release the guaranty.The lesson for guarantors in this situation is that until such time as there is a written "novation" from the lender, the guaranty liability remains. A novation means that the lender has agreed to release the guaranty in exchange for some other contractual commitment from the borrower or perhaps, a new guarantor.Over the years, I have seen many a guarantor exclaim that they assumed, or were told that they had been "released from that liability." Absent a written novation agreement from the lender, promises to take care of the guaranteed debt, while maybe sounding good, are close to meaningless unless the lender signs off on the new deal and issues the old guarantor a release from liability.In the world of small business, the law recognizes the legal distinctness of the business entity from its owners. Nevertheless, with many smaller, closely owned business entities, such as limited liability companies or corporations, most business lenders require personal guarantees from members, shareholders, officers and/or directors of the business entity.A business entity can legally assume debt, and, unless there is a personal guaranty of the business’ obligations, the owners are not automatically responsible for repayment, absent deceitful and/or fraudulent types of conduct by the owners, shareholders and other persons in control.Piercing the liability veil is not an easy task, and the proof requirements are rather rigorous. Nevertheless, the simple fact that one creates a business entity (LLC or corporation) is not a guarantee that the liability shield is impregnable.A potential way that creditors may pierce the liability shield was demonstrated in a fairly recent Alaska Supreme Court case. In International Investors vs. Business Park Fund, a limited partnership, the Alaska Supreme Court upheld the right of a creditor to the limited partnership to execute upon and compel payment from certain limited partners of unpaid capital contributions.While limited partners are commonly not liable for the obligations of the partnership, if the limited partners had obligated themselves in writing to make certain capital contributions, and they remain unpaid, they essentially are treated no differently than a partnership account receivable. Had the limited partners fully paid in their capital contributions, the liability shield would likely have withstood scrutiny from entity creditors.The International Investors case does not fully deal with all the circumstances that may be presented if a business investor, who has not fully paid in their capital contribution, can legitimately withdraw from the business enterprise.Nevertheless, under the law as it currently exists, if there are known business creditors when an investor seeks to withdraw from the limited liability entity, or if a guarantor wishes to be released from an existing commitment, then the way to be sure that liability does not follow the withdrawing person is to obtain a written novation agreement from the known creditors.The bottom line is that extrication from financial guarantees or commitments should not be treated in a cavalier manner, and reliance on promises alone can, if they are unfulfilled, lead to subsequent liability, liability that one assumed was long since satisfied.If you find yourself in a situation where someone other than yourself is offering to assume a personal liability, do your homework up front, and either get a novation or assure yourself that the assumed liability is or will be satisfied. I guarantee that doing this small bit will allow for much more restful nights.Jim Gorski is a member of the law firm of Hughes Thorsness Powell Huddleston & Bauman LLC. He can be reached via e-mail at ([email protected]).

Neptune asks to buy into Alaska Fiber Star

Neptune Communications LLC has filed with state utility regulators for approval to acquire controlling interest in Alaska Fiber Star LLC. Alaska Fiber Star is an affiliate of WCI Cable of Hillsboro, Ore., and its parent, Worldnet Communications, which filed for Chapter 11 bankruptcy reorganization in August.Alaska Fiber Star runs a terrestrial fiber-optic system between Anchorage, Fairbanks and Whittier plus a submarine fiber-optic cable linking Whittier, Juneau, Valdez and Nedonna Beach, Ore. It also offers intrastate and local telephone services.Neptune Communications also asked state regulators to step up the typical timeline for a ruling by about two months.Bankruptcy proceedings could conclude this spring, said Donald Schroeder, president and chief executive of Neptune Communications.Neptune Communications was chosen as high bidder during U.S. District Court procedures in Oregon for sale of assets from Worldnet, WCI Cable and its subsidiaries.Even though bankruptcy proceedings continue, the Fairfax, Va.-based Neptune Communications filed with the Regulatory Commission of Alaska in anticipation of successfully gaining controlling interest in Alaska Fiber Star, Schroeder said.Neptune Communications’ Feb. 8 filing with state regulators called for an expedited review of its application to acquire controlling interest in Alaska Fiber Star."We’re doing everything we can to protect the interests of the customers and keep the company going forward," Schroeder said.Neptune Communications asked for a review by April 30. Without a ruling by late April, Neptune Communications contended, there would be a risk of disrupting service to Alaska Fiber Star customers. Another reason for the request was that as part of its stock purchase agreement with WCI Cable, Neptune Communications might face monthly penalty payments of $250,000, the filing said.A comment period runs through March 13, said utility commission spokeswoman Agnes Pitts. Regulators would typically rule within six months of the completed application filing, she said.State regulators have not ruled on granting the expedited timeline, she said. State regulators would approve the request if they found compelling reasons for expedited treatment and if no other major utility issues conflicted with the timeline, she said.If Neptune is successful in its bid to acquire Alaska Fiber Star, according to the filing, "the operations of Alaska Fiber Star and its affiliates will be streamlined with a view to allowing the companies to become profitable." Neptune does not anticipate changes to the Alaska Fiber Star plant, according to the paperwork. For 2001 Alaska Fiber Star reported a net loss of $1.5 million.Schroeder, who has led Neptune for five years, also has been involved in international telecommunications projects. David Walker, Neptune Communications executive vice president, worked in Alaska with the predecessor to AT&T Alascom.The two men helped develop Alaska North Star, an Alaska-Lower 48 undersea fiber-optic cable, before selling it to WCI Cable in December 1997, Schroeder said.

Cossack Caviar attempts a comeback

Ron Decker, chief executive of Cossack Caviar Inc. of Arlington, Wash., has lost millions while trying something new in the Alaska fishing industry. If his idea gets the backing he needs, however, he could become a pioneer in eliminating waste in the processing of Alaska salmon.Decker and a partner, Dave Ederer, bought Cossack Caviar three years ago from its founder, Garry Shaw. For 30 years, Shaw had built up a successful business that bought salmon eggs from Southeast Alaska processors and fishermen and turned them into two products: frozen eggs for the Japanese market and heavily salted caviar for the American and European markets.Decker soon found that processors were becoming less willing to sell eggs, since they were the highest value part of the pink and chum salmon typically harvested in Southeast. He could buy salmon directly from fishermen, but that created a problem: What to do with the meat?Decker said he investigated producing fish meal, which is made by incinerating fish. The downside of fish meal is that it’s a low-value product, and Decker was looking for something else that would generate more revenue.He found it in a product called hydrolysate. Developed for use in the fishing industry by Canadian scientists, it’s created by grinding and heating the fish, then adding a natural enzyme to the fish and essentially digesting it, Decker said. The resulting product is high-quality protein with a shelf life of up to a year. It is used as animal feed, fertilizer and as feed for farmed shellfish.To commercialize the idea, Cossack formed a joint venture with a Canadian firm, Ocean Biosource Inc. of Vancouver, British Columbia, to build a floating hydrolysate plant on a barge. The concept was to process caviar at one end of the barge and create hydrolysate at the other.The barge, called the Alaskan Venturer, was ready by the 2000 fishing season. Capable of processing 450,000 pounds of fish a day, it was to be stationed at the fishing grounds near Juneau, Ketchikan and Sitka during the salmon openings in those areas."It was a disaster the first year," Decker said. The plant did not work right. "We bought millions of pounds of fish and didn’t produce a pound of good product."At that point, Decker says, Ocean Biosource pulled out of the joint venture. Cossack was on his own, with no markets for a product it couldn’t make. Decker wondered if the company should pull out, too.In February 2001, Decker decided to go for it. He spent the rest of the winter refitting the plant and headed north to the fishing grounds last summer. The plant still had problems, but they were finally solved near the end of the fishing season."By mid-August, it was running at full capacity," he said.By then, Cossack had spent a lot of money. Decker said the company had spent $4.2 million buying and outfitting the barge and the plant, plus about $2 million in what he called the "learning curve" of making it work. He said Cossack was left owing a total of $8 million to numerous creditors, including a bank and fishermen."We made some big mistakes and dug a big hole, financially speaking," Decker said.Without Ocean Biosource, Decker had no distribution channel and no customers for the hydosylate product."We had to learn the business," he said.Decker’s comeback plan was to locate investors willing to kick in about $2 million, enough to outfit the barge and buy fish this summer, along with paying off some creditors. He said he’s making the rounds of potential funding sources ranging from Native corporations to the state of Alaska.Decker has also been invited to make a presentation to investors during the InvestNet Capital Investment Conference later this month in Anchorage.In the face of all these difficulties, why is Decker still trying to make his venture work? He has several reasons.One reason is because his process doesn’t generate waste."The environmentalists like it because we use all the fish," he said. He said he also has support in Southeast from the state Department of Environmental Conservation and the Alaska Department of Fish and Game.Even more important is the lesson Decker learned when he visited the archenemy of the Alaska fishing industry: Chile’s fish farms. There, he observed a process that is fast, has extensive quality control, and which generates revenue from every bit of a farmed salmon in the form of bone meal, fish meal and fish oils.In other words, using all of the fish is efficient and makes it competitive on the world markets. Decker believes Cossack’s process can do the same for the Alaska salmon business, where currently 35 percent of the fish is not used."It speaks directly to an industry that’s dying," he said. "Waste isn’t a problem, it’s an opportunity."So Decker keeps knocking on doors and continues to work on selling the product he was finally able to make last summer so he can raise some cash."I’m selling the product to the shrimp farming industry in Thailand," he said. "Then we can come back to Alaska."

Polar routes not a factor in Anchorage's cargo business

Cross polar routes between Asia and North America that have cut by two-thirds the number of overseas passenger flights from Anchorage over the last decade pose little threat to cargo operations here, according to a Ted Stevens Anchorage International Airport official.Polar routes over the North Pole through Russian and Canadian airspace bypass Alaska and cut flight times by several hours between continents. But using the routes lessens the amount of cargo that can be carried in freighter bellies, according to Linda Close, marketing director at Anchorage International.In the aircraft cargo business it’s known as payload vs. range, the decision to top-off an airplane with fuel or go partially full and use the remaining capacity for cargo.Despite advances in long-range aircraft and more open skies over the North Pole, most air cargo carriers will chose cargo over fuel for many years to come, Close told business leaders at the Pacific Rim Construction, Oil & Mining Expo Feb. 21 in Anchorage.Anchorage International will remain one of the top five busiest cargo airports in the world, as airlines will continue to use the airport as a refueling pit stop between North America and Asia, Close said."We expect the impact to be minimal," Close said of the short-cut polar routes that overfly Anchorage.One pound of fuel -- about an eighth of a gallon -- costs an airline about 12 cents. Replacing that fuel with a pound of cargo earns the airline about $12, Close said.For airline accountants, the decision is easy, said Ray Keiser, an aviation consultant with Keiser Phillips Associates in Oakland, Calif."Airlines will use every possible economic advantage," Keiser said. "The more fuel you have, the less cargo you can carry. If they have to spend one or two hours in Anchorage to refuel in order to carry 20 more tons of cargo, they will."Anchorage International leads the nation in the amount of fuel pumped into cargo planes. The airport also ranks in the top five for passenger aircraft fueled, according to Signature Flight Support, the contractor that provides fueling services at the airport.It’s hard to get a perspective of Anchorage’s geographic advantage looking at a flat map of the world, but by looking over the top of a globe, it’s easy to see.Anchorage is less than nine hours by air from 95 percent of the industrialized world, including Asia, Europe and the rest of North America, according to Close."Location, location, location,’’ Close said. "If it wasn’t for that, we’d be dead in the water."Through the 1980s with Russian airspace off-limits, overseas flights had to pass through the Pacific or Europe, requiring a refueling stop in either Anchorage or Tokyo.The thawing of the Cold War opened up limited airspace over Russia, allowing straight-line polar routes, connecting points in North America and Asia.The shorter polar routes were appealing to airlines, which saved money and fuel, and to passengers, who saved time.A year ago, Russia permanently opened four polar routes to commercial airline traffic in return for airspace fees. The less circuitous Russian routes tied to polar routes in Canada would save airlines millions of dollars on fuel and other costs, according to a joint study by NAV Canada and the Federal Aviation Authority of Russia, counterparts to the United States’ Federal Aviation Administration.The study said that while the routes were feasible, $35 million was needed to improve Russian air traffic control facilities to make the polar routes safe.Even the limited use of polar routes began having an impact on Anchorage International beginning in the early 1990s, when the number of passenger stopovers began sliding from 1.5 million to about 555,000 last year, Close said.She believes the passenger numbers will remain stable now."I think passenger flights bottomed out a couple of years ago," Close said.Many of the world’s airlines still need long-range aircraft capable of flying 16 to 18 hours to take full advantage of the polar routes for passenger flights.On the cargo side, Close said, one long-haul jet that may have a small impact on Anchorage International is the Airbus A380, an airplane scheduled to make its first flight in 2004 and expected to enter commercial service in 2006.Close said the only air carrier that serves Anchorage taking delivery of the airplane is Federal Express, which is buying 10 of them over the next several years.The 555-seat airplane in passenger configuration still has tremendous space in its belly to haul cargo. But Close said airlines are looking more at installing duty-free shops and casinos in the huge airplanes’ bellies instead of using the space for cargo."They feel it will give them more revenue than will cargo," Close said.

This Week in Alaska Business History March 3, 2002

Editor’s note: "This Week in Alaska Business History" revisits events that shaped our past."Those who cannotremember the past arecondemned to repeat it."-- George Santayana, 1863-195220 years ago this weekAnchorage TimesMarch 3, 1982Wien-Western merger review startsBy Betty MillsTimes Washington BureauWashington -- With Administrative Law Judge William A. Kane Jr. promising his decision by June 14, the Civil Aeronautics Board launched its review of the planned takeover of Wien Air Alaska by Neil Bergt, chairman of the board of Western Airlines.Kane presided over a pre-hearing conference largely taken up with procedural matters. Kane said the board "has given me a short leash" in the acquisition bid. A decision by the full board is expected this summer, soon after the ruling by Kane.The CAB blocked the sale of Wien to Bergt’s Eagle Corp. on Dec. 31 and ordered a full review of the takeover bid.Anchorage TimesMarch 3, 1982Norton Sound oil, gas leases may bode ill for environmentBy Dave CarpenterTimes WriterNome would turn into a boomtown and spills would be likely if oil is discovered in a 2.4 million-acre area of Norton Sound targeted for a controversial federal lease sale next November.However, chances that commercial qualities of petroleum would be found are only 14 percent for oil and 26 percent for natural gas.Those findings are contained in the U.S. Bureau of Land Management’s final environmental impact statement for proposed Outer Continental Shelf Sale 57. The 2-inch-thick document was released last week, five months after public hearings in Western Alaska villages turned out a rash of opponents to the proposed sale.The petroleum industry has expressed strong interest in exploring the Bering Sea region, never before leased. Proposed federal offerings in the North Aleutian Shelf and Bristol Bay have drawn more attention, but the Norton Sound sale is seen as "a good first step," as one industry official put it.10 years ago this weekAlaska Journal of CommerceMarch 9, 1992Lucky trucker - he’s got a jobBy Margaret BaumanAlaska Journal of CommerceHeading out of Anchorage on a stormy day with tankers carrying 14,200 gallons of aviation fuel for a Fairbanks customer, veteran Dave McCloud knows he is a lucky guy.He’s a trucker with a job. For the past 17 years, McCloud, 45, has been driving trucks for James Doyle, now president of Weaver Brothers, one of Alaska’s top trucking firms. And McCloud, like others in the trucking industry, sees a tight year for the trucking industry in the face of decreased activity in Alaska’s oil patch.Although a flurry of activity is expected this summer, the outlook for the next few years will not bring growth, and more truckers have left the state since the start of the year, some trucking firms say."The traffic on the road from Prudhoe Bay is way, way down," said McCloud, as he completed his checklist before pulling his Kenworth out of the port area and onto the snow-covered road to Fairbanks.Alaska Journal of CommerceMarch 9, 1992Alaska wants control of navigable waterBy the Alaska Journal of CommerceState officials have filed suit against the federal government to protect Alaska’s interest in title and control of navigable waterways, says Gov. Walter J. Hickel.The suit, filed Feb. 27, was in direct response to the federal agencies’ takeover of important fishery areas and to assert the state’s authority over navigable waterways like the Colville, Alsek, Yukon, Copper and Chena rivers, Lake Iliamna and the waterways surrounding Afognak Island, Hickel said."The feds closed areas like Glacier Bay to subsistence and commercial fisheries that have been there a long time," the governor said. "This is clearly in violation of our statehood compact and the intent of ANILCA (Alaska National Interest Lands Conservation Act)."The suit was the first of a series of lawsuits against the federal government that Hickel said in his State of the State speech he planned to file.-- Compiled by Ed Bennett.

Russians praise Alaska worker training

As investment in oil and gas facilities in the Russian Far East continues, Russian officials from Sakhalin Island aim to boost local hire in the growing industry. The effort echoes sometimes similar goals in Alaska."We’re planning, in the coming weeks, to meet with companies to devise a strategy to increase Russian participation," said Galina Pavlova, shelf department director for the Sakhalin Regional Administration.Her department handles offshore oil and gas projects including regulatory compliance, overseeing contracting work and development of industrial infrastructure and environmental safety principles.Pavlova spoke Feb. 21 at the Pacific Rim Construction, Oil & Mining Expo at Sullivan Arena in Anchorage.She praised Alaskans’ efforts to create joint venture companies on Sakhalin."The Russian side really welcomes the formation of joint ventures which are usually Russian-based," Pavlova said through a translator.This year could see bustling construction activity on Sakhalin, according to plans proposed by oil development owners and the government’s goals for infrastructure work, she noted.Pavlova was pleased the Sakhalin I and II projects are advancing, since those efforts have been in progress for more than 10 years.Exxon Neftegas Ltd., owners of the Sakhalin 1 project, have proposed a 2002 budget of $700 million, four times larger than last year’s work, she said. Russian federal authorities are studying Exxon’s plans. Pavlova said her department aims to support the owners’ goal of beginning oil production in 2005.The Sakhalin II project, owned by Shell, Mitsui and Diamond Gas/Mitsubishi, began producing oil in summer 1999 at the Molikpaq offshore platform. Now owners are pursuing subsequent phases of oil field development. Last summer, owners laid the first stone for a 946 million ton capacity liquefied natural gas plant.Sakhalin government officials will review the Sakhalin II budget before approving it, Pavlova said.Russian leaders, including Pavlova, hope these oil development projects will employ Sakhalin and Russian Far East residents."We foresee in the coming years for both projects that 20,000 workers will be hired," she said.However, training is needed so Russians can be hired for those jobs, she said.Pavlova praised a recent training program in Alaska for Russians.The University of Alaska Anchorage American Russian Center conducted a small business management training program for Russian Far East business people Jan. 25-Feb. 22. The program was sponsored by the U.S. Agency for International Development."We are very grateful for the opportunity to train young engineers so they can work on Sakhalin," she said.Pavlova also commended Alaska for sending about a dozen government agency experts to Sakhalin to conduct an environmental survey and workshop, working with Pavlova’s department.Environmental issues are a key concern for Pavlova, who earned a doctorate in biology and chemistry from Moscow State University. Despite Sakhalin officials’ considerations for careful oil development, "the greens surely don’t let us sleep," she said.Her office is studying three methods for recycling drilling muds. Also, following the model in Alaska, Sakhalin officials are studying oil spill response plans, she said.Infrastructure development, needed for the oil industry projects, is a major issue for the Sakhalin region, Pavlova said. In this area, too, she hopes Russian companies take the lead in modernizing infrastructure. Despite tough discussions about financing, Pavlova said officials had reached an agreement and are now negotiating a timeline and specifics for project start-up.The goal is for upgrades to occur in the next two years, she said. Work would include roads, ports, bridges, the railroad and other projects necessary to complete Sakhalin’s oil projects, she said."I think this year both projects are looking at investing $70 million (for upgrades,)" Pavlova said.In other oil developments, Sakhalin III-VI are stalled while government officials consider approving production sharing agreements."President Putin promised that this question would be looked at. Unfortunately, nothing has taken place," she said.


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