Proposal would put brand on Inlet sockeye, boost fishery

KENAI -- Back when making a small fortune hauling sockeye from Cook Inlet seemed commonplace, good fishing practices often amounted to filling boat holds with as many salmon as possible in the shortest amount of time.Little care went into preserving the best possible quality, because there was no pressure to do so from the marketplace.Those days are gone now. Prices are down, and many commercial fishermen are struggling. The advent of farmed salmon has flooded the world market with a high-quality product free of the kinds of blemishes that seining and drifting methods made common in Alaska’s annual fish harvest.To compete and still maintain the familiar lifestyle, Cook Inlet fishermen must be willing to handle their product much more carefully, said Kenai Peninsula Borough Assembly member Chris Moss of Homer, an Inlet seiner by trade.Then, they have to find a way to market the resulting high-quality fish as more desirable than the farmed variety, he added."Without a visible and credible presence in the market, Cook Inlet sockeye would fade into the rear echelons, attractive only to bargain hunters and serving merely as a backup in times of shortage, while farmed and branded wild salmon lay claim to customers and market niches," he said in a recent letter to the assembly.An ordinance sponsored by Moss and introduced Feb. 5 seeks to meet the problem head on. It would appropriate $305,550 to the Cook Inlet Sockeye Branding Project, a program recommended last fall by a committee of fishermen, processors, industry leaders, elected officials and borough staff. It would marry an intense quality-assurance policy to an Inlet brand and market Inlet salmon to high-end niche markets worldwide.The ordinance gets a public hearing March 12.Continuing to operate as the industry does today would be disastrous, Moss said. Prices would sink, fishermen would abandon the occupation, the Peninsula’s economy would suffer, all unacceptable outcomes as far as he’s concerned."A diligent effort to adapt to the modern seafood marketplace is the only available alternative," he said.The Kenai Peninsula Borough invested $95,000 last year, assessing needs, developing handling and quality guidelines, drafting certified quality specifications and developing a marketing strategy.A final program plan that grew out of that effort was adopted last fall.A steering committee formed to implement the plan, of which Moss is a member, believes the branding project will take three to five years to become firmly established.Several possible funding sources have been identified, including federal, state and local government grants, private corporate donations or loans and monetary support from the fishing industry itself. Three grant applications are in the works seeking start-up funding for the first year.However, the timing of any grant approvals is critical, Moss said Feb. 12.Paperwork could put actual money-in-the-hand funding off until April or May, delaying implementation of the quality-assurance program until too late in the season to produce a sufficient quantity of product for a planned test-marketing effort next fall.Hence, the borough is being asked to front the $305,550 in start-up funds needed by the program. Subsequent grants would be used to pay back some or all of the money, depending upon the success of the grant applications, Moss said.It may take effort, but raising the market-end quality of Cook Inlet salmon can be achieved, Moss said. Fishermen and processors will have to alter the way they handle fish, for instance, by putting fewer fish in each brailer bag, avoiding dropping fish and making shorter sets so the fish are alive when they’re hauled on board.In some cases, physical changes to vessels may be necessary, he said.What can’t be known for sure, Moss acknowledged, is whether the marketing necessary to compete effectively with farmed salmon or with established brands of quality wild salmon will be effective. But it’s worth a try, because the alternative is further decline of the industry, he said.Singing the praises of the Alaska salmon’s wild, free-roaming, deep-ocean, pristine-water life cycle may be one effective tool."What sells is a great story," Moss said. "Fish in a pen? There’s no story in that."Establishing a quality-control program and putting a better product before consumers isn’t likely to return the Cook Inlet salmon industry to the glory days. It may not even result in more money per pound. But it may help stabilize prices in the long run, and right now, that’s OK, Moss said.The branding project has been estimated to cost more than $1 million over three years, not including vessel-modification expenses fishermen would have to absorb.A source of future funding could be the raw fish tax, but that would require state legislative action, Moss said.

Aircraft accidents slip to five-year low, but fatalities up

Aircraft accidents in Alaska were down by 25 percent last year compared with 2000, and were the fewest in five years.But commercial airline crashes in Alaska accounted for 22 fatalities in 2001, the highest since 1997, according to Federal Aviation Administration statistics.Noncommercial aircraft, also known as general aviation aircraft, accounted for six deaths in 2001, bringing to 460 the number of people who have been killed in all aviation crashes in Alaska since 1990.The decrease in airplane accidents in Alaska is welcome news to a state that for decades has averaged a plane crash every other day and a fatality every 10 days, said Kent Adams, the FAA’s assistant division manager of flight standards in Anchorage."The numbers looked encouraging,’’ he said.Many factors probably contributed to the decreased accident rate last year, Adams said, including a slight decrease in air traffic, increased insurance costs and aviation safety programs.General aviation and commercial carriers combined racked up 102 crashes in 2001, down from 136 in 2000. The five-year average for aviation crashes in Alaska is 143 annually, according to the FAA.The FAA issued its year-end totals Feb. 2.General aviation accidents slid from 104 in 2000 to 80 last year, a 23 percent decrease. The five-year average for general aviation accidents is 114 annually, according to the FAA.Six people died in general aviation accidents in 2001, compared with 12 who died in such air cashes in Alaska in 2000. For the past five years, the state has averaged about 15 deaths annually in noncommercial aircraft.The six deaths last year resulted from three separate air crashes, according to the FAA. In 2000, there were nine fatal air crashes, which nearly mirrored the five-year average of 8.4.Air carriers in Alaska last year tallied 22 accidents, down from 32 in 2000. The five-year average for air carrier crashes is 36, according to FAA statistics.Five fatal air crashes resulted in 22 deaths last year on commercial aircraft compared with 2000, where 12 people died in five aircraft accidents in Alaska, according to the FAA.The deaths last year were the highest since 1997 when 28 people lost their lives on commercial aircraft.Also, 1997 was a deadly year for general aviation, which had 27 fatalities in noncommercial airplane crashes.The FAA’s year-end accident report said while the number of air carrier accidents decreased last year, the increase in fatalities was largely because of Peninsula Airways Inc. Flight 350, which crashed Oct. 10 just after takeoff from the Dillingham airport, killing the pilot and all nine passengers.The second worst air accident in the state last year was in July, where six people died in a Southeast-based L.A.B. Flying Service Inc. crash on a glacier 13 miles southwest of Haines, according to the FAA.PenAir’s crash was Alaska’s deadliest commercial aircraft accident in 14 years. Federal investigators have not yet determined the cause.Ironically, it was PenAir’s safety program that was used for a model for the Five Star Medallion Program, a federally funded volunteer accreditation program designed to decrease the number of accidents in Alaska by half over the next decade.

100 logging permits in Tongass nullified

SAN FRANCISCO -- A federal appeals court nullified as many as 100 logging permits Feb. 13, a decision mainly affecting tree harvesters in the Tongass National Forest in Southeast.The 9th U.S. Circuit Court of Appeals said environmentalists and others should have been given a legal forum to protest new rules allowing the companies to produce more wood waste in estuaries and coastal zones than previously permitted.At issue are the federal permits to run logging transfer facilities. The facilities are estuaries or other coastal areas into which harvesters dump their logs before they are shipped away. The logs are tied together to form log rafts and they are floated in the water to market, a process that can cause pollution from bark and other wood debris in coastal inlets.Two years ago, the Environmental Protection Agency issued new guidelines that permitted harvesters to increase the amount of waste, but did not give environmentalists an opportunity to oppose the new measures. The three-judge panel pointed out that, had the government imposed stricter rules, logging interests would be making the same argument."If the EPA had reached the opposite conclusion, and had added additional requirements to the final permits, Alaskan logging interests would surely have taken the position that notice and comment had been inadequate," Judge Sidney R. Thomas wrote for the San Francisco-based court.Sharon Buccino, a Natural Resources Defense Council attorney, said that the transfer facilities, which she called "logging dumps," kill marine life and ruin coastlines."The ultimate goal is to preserve the ability of Alaska Natives and others to continue to use these waters for a variety of uses: subsistence fishing, commercial fishing, recreation and ecotourism," she said. "The timber companies should not be allowed to monopolize this public resource."The permits in question will not be voided until the court’s decision becomes final in about a month. The court instructed the EPA to renew the permit-formulating process and allow the public the "ability to comment on whether the proposed permit complied with water quality standards."Bill Dunbar, an EPA spokesman in Seattle, said the agency was reviewing the decision and declined comment.John Peterson, a Ketchikan attorney representing the Alaska Forest Association, which opposed the environmentalists in the case, declined comment. John Tillinghast, a Juneau lawyer for logging concern Sealaska Corp., which sided with the forest association, did not return phone calls.Generally, under most of the previous permits, logging groups were allowed to cover one acre of an estuary’s floor with up to 10 centimeters of waste. The new rules eliminated the one acre rule and said the zone of deposit could comprise a company’s project area, which could be several acres.

Ketchikan hospital to debut MRI soon

Ketchikan General Hospital is renovating a room as part of its plans to debut a magnetic resonance imaging unit this spring.The MRI should be installed and operating by mid-April, said Rachael Morland, Ketchikan General’s manager of community relations.Patients now travel to Seattle for MRI procedures, she said. The new equipment also expands the hospital’s diagnostic services."It gives our local doctors a local resource for diagnostics," she said.The project represents a $1.1 million investment for Ketchikan General Hospital, said assistant administrator David Smith. The MRI, manufactured by Philips Medical Systems, is the Intera Power 1.0 model.Hospital officials have considered adding MRI equipment for eight to 10 years, Smith said. He has conducted four feasibility studies to gauge economics of purchasing the MRI.Finally, prices dropped on the equipment, and the numbers made sense, he said. Hospital officials identified the service as a growth area because residents could visit Ketchikan for an MRI rather than travel to Seattle, he said.An MRI in Ketchikan perhaps will boost early detection of disease, said Corrine Olson, nurse manager at the Ketchikan Public Health Center.Although the center doesn’t handle acute care, it does perform some analytical services like Pap smears. Olson knows the value of early detection for breast cancer among other conditions."This will definitely be easier access and hopefully that will promote earlier identification of a problem," she said.Travel to Anchorage or Seattle is a concern for community residents and can be costly, she said. Once the MRI is operating in Ketchikan, residents from area villages can benefit because they would have to travel a shorter distance to receive care, Olson said.Without the service in the community, Smith believes residents delayed diagnosis and treatment, in part because of travel. For some patients the distance to an MRI perhaps has been too cumbersome, Smith noted."I’m sure there’s times when the scan just doesn’t get done," he said.

Native claims act broke new ground in land settlement

What was the Alaska Native Claims Settlement Act? Enacted by Congress in December 1971, the law created 13 Alaska Native regional corporations following the major regions of Alaskan Eskimos, Indian and Aleut people and also provided for village corporations within each region. About 45 million acres of land was transferred to the Native corporations. Regional and village corporations selected lands through a complex process that is still under way 30 years later. Regional corporations can own surface lands and subsurface rights. Village corporations can own surface lands, with subsurface rights held by the regional corporation. Unlike other private corporations, shareholders in Native corporations cannot sell their stock unless the corporation shareholders agree to allow sales. So far no corporation has done so. The private Native corporations were to invest in business and development activities to create wealth, jobs and opportunities for their Native shareholders. Today Alaska’s Native corporations are some of the state’s biggest business enterprises. The principal purpose of the act was to resolve long-standing aboriginal claims to lands in Alaska, which by the 1960s had reached a point where a legal cloud on title of land in Alaska existed. Unlike Native Americans in the Lower 48 states, Alaska’s Native people had never been dispossessed of the use and occupancy of their traditional lands.

Tourism association hopes to lure Alaska visitors with Web specials

The Alaska Travel Industry Association has added a new feature to its Web site in an effort to promote Alaska tourism businesses and bring additional visitors to the state.In early February ATIA started offering a travel specials section at its Web site, (www.alaskatia.org)."This allows visitor businesses to post travel specials to a section of our consumer Web site aimed at visitors," said ATIA President Tina Lindgren.The promotion comes as ATIA research has shown early season bookings across most sectors of the tourism industry are down 30 to 46 percent.ATIA’s Web site averages about 90,000 visitors each month, which can provide exposure to Alaska tourism companies, Lindgren said.Other destinations around the country are offering similar Web-advertised specials, she said.ATIA officials started the service "to help motivate people to come to Alaska, especially those who are price sensitive," she said.Residents, too, may find travel ideas on the site."Of course Alaskans can choose to take advantage of it," she said.ATIA will also continue its advertising campaign through March to encourage Alaskans to support the industry by touring the state themselves or with visiting friends and relatives.ATIA also is advertising Alaska on the Internet via banner ads and e-mail messages, Lindgren said.The service is available to ATIA members for $100 per 30-day segments. Offers should be related to Alaska travel and available to all consumers. The organization recommends specials should discounted by at least 15 percent or a $50 price reduction to ensure a perceived value.For more information, contact ATIA cooperative marketing manager, Charlene Spadafore Vassar at 907-929-2842 or e-mail ([email protected]).

Best Buy takes contractor bids for new Anchorage store

In mid-February national retailer Best Buy Co. Inc. was lining up a builder to construct its first Alaska store in Anchorage. The electronics, personal computer and appliance retailer plans to tear down the former Alaska Marketplace at the Dimond Center and build its own facility, said company spokeswoman Connie Stelter.At press time four area general contractors were bidding on the project, and the contract was to be awarded later this month, she said."We will be demolishing the existing (former) grocery store which was attached to the mall and build a new store in its place which will be attached to the mall," she said.Best Buy is scheduled to open in Anchorage this fall, she said.The retailer now tallies 478 stores in 44 states and adds about 60 new stores annually. The Alaska addition is significant for the company, she noted.The Alaska store will be the first Best Buy store outside of the contiguous U.S. states, Stelter said. "We are always looking to meet our customers’ needs. Choosing a site is a combination of consumer research, the availability of the right site or building."In Anchorage the store will be near other major retailers Costco, CompUSA, Kmart, Sam’s Club, OfficeMax and Wal-Mart.The new store should measure about 45,000 square feet and employ 125 to 150 full- and part-time employees, Stelter said. The ratio of part-time to full-time employees differs for every store, she added.Best Buy, based in Eden Prairie, Minn., aims to have more than 550 stores nationwide by 2004. The company has a presence in Alaska with six Sam Goody stores in Anchorage plus two in Fairbanks and two Suncoast Motion Picture Co. stores in Anchorage.The new Best Buy in Anchorage will be one of the company’s larger versions. Best Buy operates half of its stores at a 30,000-square-foot model while the remainder are the 45,000-square-foot versions.In addition to Alaska the retailer plans grand openings in Idaho, West Virginia, Wyoming and Utah. Growth in the next two years also includes eight to 10 new stores in New York, including its first Manhattan store. Best Buy also plans to open a flagship store in downtown San Francisco.

Anchorage among first 15 airports with federal security employees

WASHINGTON -- The new federal office in charge of airline security announced Feb. 14 that 15 airports will be the first group to have government employees conduct passenger and baggage screening.The 15 airports, including Ted Stevens Anchorage International Airport, are being studied by the new Transportation Security Administration as it prepares to replace the private companies now handling security.By Nov. 19, passengers at all 429 commercial airports are to be screened by a higher-paid, better-trained federal work force.These steps were outlined as the new agency prepared to assume responsibility on Feb. 17 for protecting airline passengers. Under the airline security law enacted after Sept. 11, the agency will displace the airlines and the Federal Aviation Administration."This transition is not intended to be a dramatic event, but it is a very significant event," Deputy Transportation Secretary Michael Jackson said.Airline officials said a federal takeover of security was long overdue."When was the last time you heard anyone clamoring for private companies to perform customs or immigration functions?" said Michael Wascom, a spokesman for the Air Transport Association, the trade group for the major airlines. "Law enforcement and national security are federal government responsibilities."John Magaw, undersecretary for transportation security, said federal security officials would be in place on Feb. 17. The supervisors were to meet with airport and airline representatives to discuss the change.Those supervisors will remain on the job until the agency hires federal security directors for each airport, Magaw said. The directors, who must be U.S. citizens, will be paid between $104,800 and $150,000 annually.Magaw said he was hiring an ombudsman to handle complaints from passengers and others.

ANCSA's 30th anniversary is time for reflection

It seems unbelievable for those of us who were involved with the process, but 30 years has passed since hundreds of Alaska Native and other state leaders gathered at APU’s Atwood Hall on Dec. 18, 1971, to symbolically witness President Nixon signing into law the Alaska Native Claims Settlement Act. Now referred to as ANCSA, it was a historic accomplishment of national and international importance. Enactment of ANCSA became one of the country’s most significant pieces of social legislation in this century and certainly became watershed legislation for national policy related to Native Americans. In the years that followed, Congress enacted the Indian Self-Determination Act, The Indian Education Act, the Indian Finance Act and the Indian Child Welfare Act. How ANCSA was accomplished is a matter of importance to all who are interested in Alaska Native history, Alaska history and Native American policy. While several fine books have been written on this subject, the history is relatively little understood or studied. And perhaps most importantly, it is still evolving. To help capture this history, some of it fading as the original architects of ANCSA age, the University of Alaska Anchorage joined the Alaska Federation of Natives and Cook Inlet Region Inc. to host a celebration of the enactment of ANCSA. Elders and original architects gathered for an evening rich in oral history and reminiscing. UAA filmed that evening and captured individual interviews with ANCSA participants. UAA is also filming the series of four Saturday seminars, "ANCSA Revisited: A Fair and Just Settlement." The public is invited on the third Saturday of March and April to the remaining two free seminars to listen to panels of key players in ANCSA as they explore the intricacies of this legislation and its related politics. Organized by the UAA Alaska Native Studies program, with additional sponsorships from Koniag Inc., Arctic Slope Regional Corp. and the Henry M. Jackson Foundation, these seminars are also being filmed. Current plans call for the contents of the seminar panelists’ remarks to be posted on the UAA LitSite Web page. UAA’s Alaska Native Studies Program also offers full semester courses related to ANCSA. Aware of the pressing necessity of preserving Alaska’s young history, UAA is dedicating a room in its Library of the 21st Century to house documents and materials related to historic legislation. We intend to include a copy of the video of the ANCSA Revisited seminars and videos of the 30th anniversary celebration. I had the privilege to work with Native leaders from all regions of Alaska as they negotiated the final terms of the ANCSA legislation and began the awesome task of planning for its implementation. The list of required actions seemed almost insurmountable: Every Alaska Native of one quarter or more blood who was alive and born on or before Dec. 18, 1971 was to be enrolled as a shareholder in the yet to be formed village and/or regional corporations. Native leaders had to petition for villages to be certified as eligible to receive benefits under the act. They had to craft articles of incorporation and bylaws for their corporations and begin to organize themselves as functioning corporations. In short order they were to hold annual meetings, elect officers, and hire staff and consultants to carry out the work of the newly constituted corporations. They also had to set about selecting 40 million acres of land in conformance with terms and conditions prescribed in the legislation. Then came the challenge of making 200 plus villages and 13 regional corporations into profit-making entities. Few Native leaders had corporation experience, and many villages and regions had very few local role models to look to for guidance. All of the corporations went through serious growing pains. The initial capitalization was small, and land transfers were delayed. Many corporations lost money in the early years, though none went formally bankrupt, and Native lands remained under Native control. The infusion of new capital through the federally sanctioned sale of net operating losses to the Native corporations enabled many corporations to find sound financial footing. A number of Native corporations subsequently emerged to be among Alaska’s largest corporations today. Without question, ANCSA left much work to be done. It did not secure for Alaska Natives the desired right to fish and hunt in perpetuity, nor did it resolve numerous issues related to self-governance. Nonetheless, it was a historic accomplishment. It is our hope at UAA that those who played a role in ANCSA’s enactment and implementation will want to preserve its history by donating documents, materials and memorabilia to UAA’s Library of the 21st Century, which will have a groundbreaking this spring. It is our goal to help create a treasured legacy of ANCSA and its legislative history from which future generations will benefit. Lee Gorsuch is chancellor of the University of Alaska Anchorage.

Business Profile: Denali Park Resorts

Name of the company: Denali Park ResortsEstablished: 1978Location: 241 W. Ship Creek Ave., Anchorage plus office and operations at Denali National Park and PreserveTelephone: 907-264-4653Web site: www.denalinationalpark.comMajor focus of services: Denali Park Resorts operates national park concession contracts. The company runs the 350-room McKinley Chalet Resort, the 150-room McKinley Village Lodge, Alaska Dinner Theater and Alaska Raft Adventures. Denali Park Resorts also operates a 100-bus fleet to provide the only access into the park as well as shuttle service between operations. The company also handles retail and grocery services, reservations and housing for its seasonal employees.History of the company: In June 1978 Denali Park Resorts acquired the park concession contract from Outdoor World Ltd. Denali Park Resorts is part of Philadelphia-based Aramark Corp., which provides services to educational, health care and governmental institutions plus sports, entertainment and recreational facilities.In the late 1980s Denali Park Resorts acquired McKinley Village Lodge, a hotel outside the park. The concessionaire purchased the rafting company in 1993.Last year was the final season of operations for the 100-room McKinley Park Hotel. The original facility, located within the park, had burned during a fire and a temporary structure replaced it. Plans call for building a new, two-story visitors center replacing the hotel. Denali Park Resorts would handle retail and food court operations at the center, which could be complete by 2004.Also in 2001, Denali Park Resorts carried more than 300,000 visitors on its buses.During summer the company employs 750 full-time workers and has a year-round staff of 35. Park operations run from mid-May to late September.Top accomplishment of the company: Last year Denali Park Resorts gained recognition from parent Aramark for fulfilling goals of quality customer service, caring for employees and securing a profit. In 2001 the company tallied its highest rate of returning employees. Visitors come to see the national park’s stars: Mount McKinley, moose, grizzlies, caribou and Dall sheep, he said. However, visitors also enjoy meeting residents and employees. "One thing they’re still enamored with is Alaskans and people working in Alaska," said Reiss, who encourages employees to share their stories and love for the state. "That’s the best part of it for me, to ensure the customers have a lifetime experience and the employees have a good experience, too."Major player: Jack Reiss, vice president of operations, Denali Park Resorts.Reiss has worked for Red Lion and Doubletree hotels for 25 years. He marks his third season at Denali Park Resorts.

Air carriers see leap in insurance bills

Insurance premiums are skyrocketing for air carriers, and the number of companies willing to write policies in Alaska has dropped to just a handful in the past few years.High accident rates and repair costs, a slumping stock market, lawsuits and the terrorists attacks of Sept. 11 are just some of the reasons for soaring insurance costs in Alaska and elsewhere, air carriers and insurance officials say.The bottom line likely will be increased prices for airplane seats, as the costs will be passed on to passengers.Rates for Alaska air carriers have increased anywhere from 20 percent to more than triple in the past year, depending on the number of company claims, said Mike Salazar, a Ketchikan-based agent with Acordia Northwest, an insurance brokerage firm in Seattle."Most air carriers with a clean record had a 20 percent increase,’’ said Salazar, adding that those who had claims are seeing rates go up as high as 200 percent or more.Salazar is not unsympathetic to air carriers. For nearly 30 years before selling aviation insurance, he owned Ketchikan Air Service Inc., a company he sold in 1998."Certainly my time in the industry helped me understand the problems on their side of the fence," Salazar said.Mike Vanard, vice president of Seattle-based U.S. Aviation Underwriters Inc., said insurance his company offers generally has risen 18 to 30 percent in the last year."Insurance is cyclical, it has big, sweeping curves. Right now we’re at the opposite (high) end of that curve," Vanard said.Orin Seybert, president of Peninsula Airways Inc., has been in the commercial airline business since 1956. The longtime Alaska aviator agreed the rates are cyclical."I look at insurance like a pendulum, it goes in cycles, every four to six years it goes up,’’ Seybert said. "It’s been edging up there and it is absolutely the highest I’ve seen it."Seybert said insurance accounts for about 10 percent of his company’s overall costs.Vanard’s company is one of about five or six companies willing to offer insurance in Alaska. A few years ago that number was at least a dozen, according to air carriers and insurance officials.Nationwide, there also has been a decrease in the amount of companies willing to insure air carriers.When selling insurance, companies, whether aviation or otherwise, bet that they will not have to pay out a claim; those buying an insurance policy are betting they may have a claim, said Thomas Turner, an aviation author and former insurance broker based in Cleveland, Tenn.In the case of aviation, both sides are losing, Turner said, as accidents are up and so are claim amounts.That also has prompted many insurance underwriters to get out of the aviation business, Turner said.Key to understanding aviation insurance industry is what is called "loss ratio," the amount of money paid out in claims versus what is taken in by the insurer, Turner said.Aviation insurance companies, who write both general aviation and commercial policies, have paid out as much as $1.25 for every dollar taken in, but the company would still make money -- 30 percent or more -- in investments during a healthy economy, Turner said."Until a few years ago underwriters could operate at a loss, turn around and take the money and invest it in the stock market and make a small fortune out of it," Turner said.Seybert, who has operated in Alaska for 46 years, said he believes the economy more than claims is what drives insurance costs."Rates are not determined by losses as much as on the economy in general," Seybert said.Simply buying aviation insurance is not the problem, but the amount of coverage offered to many carriers may not be not sufficient to cover lawsuits, air carrier and insurance representatives say.Many air carriers in the state are operating at minimum liability coverage levels, but not by choice."Some operators are at a $250,000 per person limit, and in this day and age, that is unrealistic. The carrier is exposed," Seybert said.Most carriers in Alaska, according to Salazar of Acordia Northwest, carry insurance liability minimums of between $500,000 and $1 million per aircraft passenger seat."Most attorneys will almost always try to breach that," Salazar said.The threat of lawsuits scares underwriters, Turner said, and most insurance companies know they’ll lose a jury trial. Out-of-court settlements are typical, he said."From a legal standpoint, pilot negligence is easy to prove, because almost all accidents do have some sort of pilot error," Turner said.

Knowles seeks again to resolve decade-long subsistence impasse

JUNEAU -- Gov. Tony Knowles introduced a constitutional amendment on subsistence Feb. 14 that he hopes will break a decade-long stalemate over the issue.Knowles is proposing an amendment to bring the state into compliance with federal law and allow Alaska to regain control of subsistence on federal lands and waters."The vast majority of Alaskans are united in demanding the opportunity to vote to protect the subsistence way of life," Knowles said in announcing the measure.He called on the Legislature to vote to put the matter on the November ballot. And Knowles again said that the amendment he has offered up is a starting point for debate on the issue.At least one lawmaker who had been opposed to past constitutional amendments on subsistence voiced support for the plan.Sen. Jerry Ward, R-Anchorage, said the federal subsistence rules that grant a rural priority to subsistence is "discrimination by zip code." Ward expressed support for portions of Knowles’ plan, but said he still has reservations about it."Without a doubt, we will have some very interesting caucuses," Ward said.Because of a conflict between the state constitution and federal law, the federal government took over subsistence management on its lands in Alaska.Alaska’s constitution requires equal access to its fish and game resources, something that was important in the push for statehood."The passion involved in this subject is obviously very deep," Knowles said.To regain control over subsistence on the two-thirds of Alaska that is in federal hands, Alaska has to provide for a rural priority in such practices.Knowles, a Democrat in his last year in office, has made resolving the issue a top priority. He wants voters to decide on a constitutional amendment that gives rural residents first priority to subsistence resources.The measure also says the Legislature may grant a secondary priority for subsistence to urban residents who have a history of dependence on the resource.But administration officials concede it will be a tough sell before the Legislature, which has refused such an amendment despite five special sessions on the issue.This year’s efforts are made more difficult by an increasing frustration expressed by Knowles’ chief allies on subsistence, the Alaska Federation of Natives.The federation board of directors voted Feb. 12 to back Knowles’ efforts. But Albert Kookesh, a board co-chairman and state representative from Angoon, said some in the Native community don’t want a resolution to the conflict."The Native community is very satisfied in rural Alaska with the federal board, they are very satisfied with the response they get from the federal board," Kookesh said.He said Native organizations have spent $20 million over 10 years seeking a resolution to the dilemma. If there’s a resolution to the conflict, they want it soon.AFN leaders have vowed to push for amendments that make any state deal on subsistence closely mirror the federal management scheme, which allows for Native participation in deciding subsistence issues locally.Senate President Rick Halford, R-Chugiak, who has been a key opponent of changing the state constitution’s equal access provisions, could not be reached for comment.But Halford said earlier that he is considering proposing an amendment that would grant a local preference to allow Natives and others in urban areas with ties to subsistence to also participate.The House has passed a constitutional amendment in the past, but it has failed in the Senate."Having experienced the position of the Senate over the last several years, to hear them suggest this particular approach I think is a giant step," said House Speaker Brian Porter, R-Anchorage.Porter said both House and Senate legislative leaders plan to meet with the AFN officials "within the next month" to discuss several issues, including subsistence.

Stevens puts fish labeling into Farm Bill

WASHINGTON -- The U.S. Senate unanimously approved three amendments to the Farm Bill, which were authored by Sen. Ted Stevens, R-Alaska, and aimed at helping Alaska’s commercial fishing industry.The Farm Bill passed the Senate Feb. 13 and now must be reconciled with the House version of the bill.The first amendment requires that seafood be labeled with its country of origin and provide information on whether the product is farm-raised or caught in the wild. In the case of wild salmon, the state of origin must be included. Stevens said the measure will help consumers make better-informed decisions about the seafood they eat.The second amendment would make wild seafood eligible for an organic product promotion effort.The third measure calls on the aecretary of Agriculture to report to Congress on efforts to expand the marketing and purchase of canned salmon within the department’s food and nutrition programs.Stevens said using up existing inventories of canned salmon is critical to Alaska’s salmon industry.

Tourism bookings still down 24%

A poll of Alaska visitor businesses shows bookings for this summer are down 24 percent compared with last year, leading the state tourism group to continue its push for legislative funding.The Alaska Travel Industry Association dispatched GMA Research to conduct a poll tracking inquiries and bookings. The pollster received more than 300 responses during a six-day period in early February.A similar poll was conducted late last year with statistics released in December. Both surveys aimed to reveal the effects on Alaska tourism businesses from a lagging travel industry after the terrorist attacks in September."Clearly the problem is as big now as it was in December," said Dale Fox, ATIA board chairman. Tourism bookings are still significantly off, he said.As of early February bookings were down by roughly one-fourth for many types of visitor industry companies, the survey results showed. According to the research, air taxi bookings are off by 28 percent; backcountry tours, 27 percent; airlines, 23 percent; cruise bookings, 24 percent; hotels, 26 percent; and package tours, 20 percent.The December survey of about 300 Alaska tourism businesses showed an average decrease of 23 percent in bookings compared with the same period a year earlier."An initial poll conducted in early December presented clear evidence that Alaska’s tourism industry was in crisis," said Tina Lindgren, ATIA president. "For anybody hoping the situation would simply improve on its own over time, the new data is an unwelcome reality check for one of the state’s major industries."Some differences showed up in the February results, said Dale, who operates a tourism business, Birdwatching Tours of Anchorage. While a few types of businesses showed gains from the previous survey, others listed further decreases for aggregate figures similar to December’s statistics, he said. One tourism company, Denali Park Resorts, which operates 500 hotel rooms plus retail, rafting and reservations services, has experienced reduced bookings.Between Sept. 11 and December bookings came to a standstill, said Jack Reiss, vice president of operations. Although January was a strong month for bookings and February hit even with 2001’s mark, the results so far haven’t overcome the fall setback, he said.Cruise lines have found some success in filling ships by discounting cruise rates, he noted. However, some of those visitors might not pay for land tour packages which include Alaska businesses, he said.Such research is part of ATIA’s efforts to secure marketing funds from state lawmakers."The purpose of this research is to show the Legislature it is indeed a problem, and if the Legislature doesn’t act in short order it may be too late," Fox said.Late last year ATIA officials said they planned to ask the Legislature for $12.5 million for special marketing efforts. Gov. Tony Knowles has proposed spending $10 million for the effort, Fox said. The state House of Representatives approved $6 million for tourism marketing, and that bill now goes to the Senate for approval, he said. Meanwhile, the Senate has its own bill for $9 million in tourism marketing funds, Fox added.ATIA leaders are encouraging state senators to approve the funding appropriation swiftly. Waiting until the end of the session in early May could be too late, Fox said.Some tourism operators, anticipating a certain level of summer business, tell Alaska businesses like hotels to save blocks of rooms. This year, some of those operators have said they can’t fill some of those rooms and canceled some designated room blocks, leaving hoteliers and others needing to find replacement business, he said."We need to get more visitors to help fill those rooms," Fox said.Without the marketing funds "hundreds of businesses and thousands of jobs are at risk," Fox said.

Global warming may open Northwest Passage to shipping

For centuries, explorers have dreamed of sailing through Arctic passages as a shortcut between Europe and Asia.Lorna Knaus says the dream of navigating the Northwest Passage and the Northeast Passage has never been closer to reality.Knaus, chief executive officer of Pacific Rim Board of Trades, says global warming and instability in Panama, which took over control of its famous canal from the United States in 1999, will prompt or require the use of Arctic shipping routes.The 69-year-old Anchorage business consultant, who has an office in Taiwan, says she believes the routes will become viable in her lifetime and Alaska and the rest of the world must begin thinking about infrastructure that would support the shipping routes.The Northwest Passage winds through Canada’s Arctic archipelago and along the northern coast of Alaska between the Pacific and Atlantic oceans. The Northeast Passage goes around the top of the Arctic coasts of Norway and Russia.Knaus believes any coastal country along the routes will benefit tremendously by adding such things as port facilities and warehouses to accommodate the thousands of ships that would transit offshore. She believes Alaska could go as far as purchasing a state-owned icebreaker to help keep the ice-choked waters open.Now that the ice is melting, the possibilities are staggering, she said."I’m trying to get people to consider our future," Knaus said. "The weather is changing and we have the technology now to do this."Or, as Knaus likes to say to politicians, shippers and journalists, "Prove me wrong."She admits that her challenge of focusing on the Arctic routes generally has been met with a cool reception.But some Arctic experts believe Knaus’ ideas have at least some merit.Lawson Brigham, deputy executive director of the U.S. Arctic Research Commission in Alexandria, Va., has never met Knaus but said she’s "on the mark.""It sounds like she’s a visionary and taking a holistic view of our changing planet," said Brigham, who holds a doctorate in oceanography from Cambridge University in England and is considered an expert in Arctic navigation and sea ice. He is a former U.S. Coast Guard captain who commanded some of the service’s ice-breaking cutters.Brigham said that while scientist argue over what is causing global warming, they do agree that the rising world temperatures have caused the permanent ice cap over the North Pole to shrink in thickness by about 43 percent.That, he said, may allow the more popular Northwest Passage route to become navigable in the summer months in a few years, or even longer by midcentury, or earlier."We might see something within 20 years; the climate isn’t going to reverse itself anytime soon," Brigham said."A few years ago, no one would have dreamed of seeing a ship n the middle of the Arctic," Brigham said. "Since 1987 there have been 48 ships through or deep into the Arctic, most of them in the summer months."Ships traveling from Europe to the Far East via the Panama Canal must travel about 14,500 miles. The Northwest Passage cuts the distance to just more than 9,000 miles.It won’t be ice stopping ships from plying the Arctic, but economics or environmentalists, he said.Environmental concerns would be great, he said."The reality is a fair amount of folks would see ships plying Arctic waters as a negative thing," Brigham said. "The potential impacts to indigenous fishing grounds and the noise of the ships breaking ice would be great."He also said an oil spill in the Arctic would likely devastate the fragile ecosystem."All you have to do is look at the Exxon Valdez," Brigham said.Brigham said few of the world’s ships are built strong enough to handle even a watery Arctic passage, because of icebergs that would pierce all but the most durable double-hulled ice-breakers currently in use.Building ships with greater structural strength to handle icebergs would mean huge capital costs and additional fuel "to push that extra steel," Brigham said."If the economics are there, ships will sail," Brigham said.James O’Dell, a United States Coast Guard spokesman in Washington, D.C., said there are international concerns, too.Canada and Russia both believe the Arctic passages are waters within their countries’ boundaries. The United States believes them to be international waters.The Coast Guard’s new icebreaking cutter Healy, outfitted with special oceanographic equipment, successfully plied the Northwest Passage in 2000.Beyond researching the Arctic, the Coast Guard has no plans to keep the ice clear in either passage, O’Dell said."That decision will come from industry, not governments," O’Dell said."At this time, nothing seems to indicate it is being looked at as a viable source of transportation," O’Dell said."It’s a good concept just as several generations before us thought of it as a good concept," O’Dell said, pointing out many people over time have lost their lives attempting to navigate over the top of the world. "The Northwest Passage for centuries has been looked at as a possible transportation route, and that’s just what it remains today, a possibility."

Bush visits Alaska, calls for ANWR development

ELMENDORF AIR FORCE BASE -- President Bush, greeted by snowfall on his first presidential visit to Alaska, pressed his argument Feb. 16 for oil and gas drilling in the Arctic wilds here.The "Arctic warriors" stationed at this base some 650 miles south of the Arctic National Wildlife Refuge applauded Bush’s controversial call to open the preserve to energy exploration. His broad energy package is stalled in the Senate, where the Democratic majority fears the environmental impact of drilling in ANWR.Bush said dependence on foreign oil is a threat to national security."Folks, we got to find energy in our own country, and a great place to start is right here in the state of Alaska," he told troops in camouflage fatigues and fleece jackets.Stumbling a bit over his words after the seven-hour flight from Washington, Bush added that drilling at home is also in the nation’s economic interests."It’s good for jobs, it’s good for working people, it’s good for people to be able to put money on the plate -- money on the table -- so they can feed their families."With clear disdain, he brushed off environmentalist critics and summed up their opposition to Arctic drilling in this way: "Well you can’t do that; it’s going to ruin this or that.""Listen," Bush continued, "there’s no doubt in my mind ... there’s no doubt in the minds of people who take a sound scientific look at this, that we can do so without endangering the environment, that we can find energy for America’s people and at the same time preserve the beauty of Alaska."Bush was in Alaska on a refueling stop for Air Force One as it carried him, and an entourage including first lady Laura Bush and Secretary of State Colin Powell, overseas to a three-nation Asian tour.Bush, who briefly donned a bulky parka with massive fur-lined hood, boasted that he was the only U.S. president ever to call Alaska home. That was the summer of 1974, when he was 28 years old and working a desk job at a construction company in Fairbanks.In the 2 1/2 hours that Bush was in Alaska, he also scooped up $400,000 for the state Republican Party. He headlined a $1,000-per-plate luncheon where big spenders willing to part with $10,000 apiece also got their photo taken with the president.Acknowledging the novelty of such presidential politicking in the country’s northernmost reaches, Bush made brief mention of the 2000 election recount and Alaska’s role in putting him just barely over the top: "Who said your three electoral votes didn’t matter?"

Key ANCSA players take audience back in time

For aficionados of Alaska political history, four University of Alaska Anchorage seminars this spring on the 1971 Native claims settlement are a trip down memory lane.The first two of the seminar series, "ANSCA Revisited: A Fair and Just Settlement," were held Jan. 26 and Feb. 16 at UAA.The final two seminars are set for March 16 and April 20 at the Anchorage Museum of History and Art.On Jan. 26 former Democratic U.S. Sen. Mike Gravel and Robert Zelnick, one of Gravel’s major antagonists during his bid to defeat incumbent Sen. Ernest Gruening in 1968, shared the stage.Zelnick, who now heads the journalism department at Boston University, was a political columnist at the time for the Anchorage Daily News.Two well-known Alaska Native leaders, Joe Upicksoun of the Arctic Slope and Nels Anderson from Western Alaska, appeared with Gravel and Zelnick at the first symposium.In 1968 the sparring between candidate Gravel, who ultimately won, and reporter Zelnick, an admirer of Gravel’s opponent, Gruening, was a campaign highlight.The two have since made up, Zelnick told friends in Anchorage in January. But faint echoes of the 1968 battles could be heard at UAA as Gravel and Zelnick talked about Alaska politics and the claims settlement effort. "The 1960s was a time of political awakening for Alaska’s rural people. The Native land claims was both a cause and a result of that," Gravel said.Prior to the mid-1960s most Alaska politicians handn’t paid a lot of attention to rural voters. They had traditionally voted democratic and the state’s elected leadership, mostly democrats, largely took them for granted, Gravel told his audience.Now living in Virginia and active in public affairs, Gravel said he owes his election to the Senate in 1968 to Native voters who heavily favored him because he actively solicited their support.Zelnick spoke of his own experiences as a reporter learning about the cultural differences between rural and urban Alaska. The Daily News at the time had done a prize-winning series of articles on poverty in rural Alaska, which brought rural problems to many urban readers for the first time.Zelnick also defended the earlier generation of Alaska politicians, including Gruening, in their concerns and accomplishments for rural Alaskans.Joe Upicksoun, one of the founders of the Arctic Slope Native Association, spoke of the early frustrations of the North Slope people in seeing the state of Alaska take title to lands they thought was theirs and lease those lands to major oil companies. Major oil discoveries were ultimately made.Upicksoun was one of three Inupiats of the Arctic Slope who signed the first large aboriginal land claim in 1966. That triggered other large Native claims and started a move toward the 1971 settlement.Nels Anderson, a Native leader in the Bristol Bay region who helped form Bristol Bay Native Association and who served in the Legislature in the 1970s, spoke of the importance of education in fostering the political awakening of Alaska Natives.Education continues to be crucial to rural young people. Anderson’s daughter recently received a master’s degree in business administration from the UAA.Speaking at the February 16 conference were Esther Wunnicke and John Havelock. Both were influential in forming early state of Alaska positions toward land claims in the 1960s.Havelock was attorney general under Gov. William Egan in the late 1960s and early 1970s.The March 16 seminar will include Sam Kito and Janie Leask, two Native leaders; John Shively, who helped NANA Regional Corp. in its early development years; and Guy Martin, who was a staff member to Nick Begich, the Alaska Democratic congressman who played a prominent role in passing the claims act and who was later killed in a plane crash.The last seminar, April 20, will include Willie Hensley, who helped form NANA Regional Corp. and who was a major influence on the land claims movement; Bill Van Ness, who as staff to former Sen. Henry (Scoop) Jackson played a key role in claims legislation; Mary Kapsner, a Native legislator from Bethel; and Lee Gorsuch, chancellor of UAA and who was involved in working with the Native regional corporations in their years of early development.

Salmons packs more omega-3s than tuna's 'Viagra of the Sea'

KODIAK -- The omega-3 fatty acids found in fish have been credited with everything from reducing heart attacks and some cancers to improving eyesight. Now, the U.S. Tuna Foundation is gleefully comparing canned tuna to "Viagra of the Sea." The group was referring to a new book by dietitian Ellen Albertson, "Temptations, Igniting the Pleasure and Power of Aphrodisiacs," which claims that diet changes can "awaken a sleepy libido." Albertson says one way to improve your love life is to eat more tuna fish sandwiches. In reviewing the book, the February issue of Prevention Magazine said: "If you use white albacore tuna, you up your intake of omega-3 fats. More and more researchers now believe that omega-3s help ward off depression, surely one of the worst enemies of feeling sexy." Thus the conclusion that eating more canned tuna lifts your spirits, resulting in a better love life. Canned tuna is the most widely consumed seafood product in the United States. Alaska’s salmon industry could easily ride on the coattails of the tuna folks’ sexy claims. For more than a decade, reports by health scientists all list salmon as containing more omega-3s than tuna. International Health News, for example, states that all fish are not created equal, and it’s important to choose fish with high levels of polyunsaturated fat. "Salmon scores well here. By comparison, albacore tuna and cod have considerably less of the good fatty acids and may not produce the result you need," a recent report states. Fatty acids are basic units of fat molecules, arranged as chains of carbon, hydrogen and oxygen. Fats are mixtures of different fatty acids. Essential fatty acids are not made by the body, but must be supplied by the diet. Omega-3 fatty acids are highly polyunsaturated and are found mostly in higher-fat fish, such as salmon. It’s estimated that 85 percent or more of the people in the Western world are deficient in omega-3 fatty acids. If canned tuna can turn you on, eating canned salmon should result in a sexual revolution. Unwanted aliens Bio-invaders cost billions of dollars in damage to marine ecosystems, and if they take hold, in some cases, they can eliminate native marine and plant species. The unwanted aliens are, for the most part, tiny hitchhikers that are dumped along with the ballast waters of ships that traverse the world’s oceans. They are credited with being involved in 70 percent of native aquatic species extinctions in the last 100 years. Cornell University scientists reported three years ago that more than 30,000 non-native species cost the United States roughly $123 billion a year in economic loss. This includes $35.5 billion for alien weeds, $20 billion for insects, $19 billion for rats and $3 billion for zebra mussels alone. A more recent report by the Pew Oceans Commission said, "At least 7,000 different species of marine life are likely transported each day around the world. ... Ballast water carrying this wide array of non-native life arrives in the U.S. at the rate of 2 million gallons per hour." Studies around the world reveal a remarkable array of invaders, representing all of the major and most of the smaller groups of life. Certain viruses and the bacteria that cause cholera have also been detected in ballast water. The commission urged the government to quickly develop mandatory programs to attack the problem. There are some regulations already on the books to prevent introduction of exotic species into U.S. waters, but they are largely voluntary and mostly ignored. The Invasive Species Act of 1996 provided ships entering American ports with a three year window to undertake a voluntary program whereby coastal derived ballast water would be exchanged on the high seas, followed by re-ballasting with midocean water. The program went into effect in July 1999; however, during the first year only 12,170 of the 58,000 vessels arriving in U.S. ports had filed a mandatory reporting form. Attempts to stave off these stowaways have included in-hull filtration systems, heat treatments and biocides, all of which are either too expensive or harmful to the environment, or both. Now, the Fish Information Service reports that a group of industrial engineers at Sumitomo Heavy Industries in Japan has come up with a simple solution. The one element that sustains safe passage for the invasive stowaways, and which also promotes hull corrosion, is oxygen. Pumping nitrogen into the ballast tanks would displace the oxygen. One test showed that after introducing nitrogen for two days, the diminished oxygen environment resulted in significant population reduction: 79 percent of the tubeworms, 82 percent of the zebra mussels and 97 percent of the green crabs. On top of that, the rust and corrosion rate dropped by 90 percent, which translates to an average annual reduction in maintenance costs of $70,000. "It’s not perfect and it doesn’t kill everything," Mario Tamburri of the Monterey Bay Aquarium Research Institute told FIS. "But until international law mandates that ballast water contain no living organisms, why not require this technology that saves industry money and is also good for the environment?" Alaska’s waters are not exempt from the foreign invaders. "Up to a dozen species from Asia have been identified in the waters of Valdez and Prince William Sound from all the oil tankers over the years," said Bob Pierkowski, former head of Alaska Department of Fish and Game’s Mariculture Division. He added that state biologists are on the lookout for green crabs, which since 1990 have migrated from California to Washington. The tiny crab have wiped out all other crab they’ve encountered, including much larger species like Dungeness. "We expect to see them in Southeast Alaska. It’s not a matter of if, it’s a matter of when," Pierkowski said. Interestingly, the Pew report considers the thousands of Atlantic salmon escaping from fish farms in the Pacific Northwest among the bio-invaders.  

Business Profile: Anchorage Messenger Service

Name of the company: Anchorage Messenger ServiceEstablished: 1964Location: 1035 W. Fireweed Lane, AnchorageTelephone: 907-278-2736Major focus of services: Anchorage Messenger Service provides courier services either as part of its route deliveries within two to three hours or for rush orders delivered in 30 minutes to an hour. The firm also offers overnight delivery statewide or to Washington and Oregon as well as same day delivery to the Matanuska-Susitna area.History of the company: In the 1960s several lawyers urged Betty Hicklin, a court clerk, to start a courier service for filing legal paperwork. Anchorage Messenger Service originally operated from the courthouse, and Hicklin ran it as a side business. She built up the company, eventually serving about 200 clients, until she sold it to Mattson Investigations LLC in 1995.Other couriers had entered the market since Anchorage Messenger Service started, so the company had about 90 clients and four couriers by the mid-1990s.In 1999 Anchorage Messenger Service grew to 380 clients. Additional competition, including some firms run by former Anchorage Messenger employees, has affected the company, which now totals 320 clients.After working for Mattson Investigations for several years Victor Ratz acquired Anchorage Messenger Service in mid-2001. The courier service employs 12 drivers, and Ratz hopes to add two or three others this year to serve an expanding route system."What makes our type of courier messenger service different is that we specialize in court work," said managing director Ratz.Other clients include accounting, engineering and construction companies, physicians and state and city government.Routes are dictated by a computer-aided mapping program from Microsoft.Top accomplishment of the company: Ratz is pleased with the company’s customer service, which he describes as consistent, accurate and affordable. Customer retention is difficult, since Anchorage Messenger Service sells a service rather than a product, he said.Major player: Victor Ratz, managing director, Anchorage Messenger Service.While living in London Ratz ran a retail music store. He next worked for Trace Elliot, a sound equipment manufacturer, where he was European sales manager and artist relations manager for five years. In Hawaii he studied at Chaminade University of Honolulu. He moved to Alaska to live near his extended family and began working for Mattson Investigations in 1995.-- Nancy Pounds

Knowles says railroad could pay for gas line

Alaska Gov. Tony Knowles has proposed that the state of Alaska finance a $17 billion North Slope gas pipeline using tax-exempt bonds issued by the state-owned Alaska Railroad Corp. The railroad has special authority to provide tax-exempt economic development financing, granted by Congress in 1983 when the railroad was transferred from federal to state ownership.Congress took away most powers for states and municipalities to issue tax-exempt industrial development bonds in the 1986 tax reform act, but the special provision for the Alaska Railroad was one of three exceptions allowed in 1986, Knowles told the Alaska Gas Policy Council, a citizen advisory board, in Anchorage Feb. 7."Our state-owned railroad has the unique ability to do this kind of financing without limit as to amount or geographic scope," the governor said, meaning that sections of the pipeline built in Canada as well as Alaska could benefit from the arrangement.The railroad would issue "conduit" bonds to provide the financing, meaning that the credit of neither the railroad nor the state would be at risk. Similar conduit tax-exempt financing has been done for years in Alaska for various private projects that qualify under the Internal Revenue Service code."This is worth about $1 billion to the North Slope producers, in today’s dollars, off the financing costs of the project," Knowles said.The interest rate on tax-exempt debt would be about 2 percent below the cost of conventional taxable financing, according to Neil Slotnick, deputy commissioner of the Alaska Department of Revenue.Jeff Brown, a Goldman Sachs Co. vice president who works with Alaska on special financing, said the 2 percent difference could translate to about $150 million per year in lower annual debt service. He said that would translate into a possible reduction of 10 cents to 12 cents per thousand cubic feet on the tariff charge for transporting North Slope gas from northern Alaska to markets in the Lower 48 states.However, that might not be enough to substantially improve the marginal economics of the project. The tariff has been estimated at about $2.10 per Mcf for a northern partly offshore route to $2.40 per Mcf for a southern route through Interior Alaska in studies of a gas pipeline by three North Slope gas producers, BP Exploration (Alaska) Inc., ExxonMobil Production Co. and Phillips Alaska Inc.The state of Alaska favors a southern route, which is more costly. The state’s financing offer extends only to the southern route, according to the governor’s office. But the estimated 10 to 12 cent savings is only about a third of the difference between the gas transportation costs of the two routes.Knowles told the policy council that the railroad’s financing authority, which has never been used for a nonrailroad project, has long been known, but it was only in recent months that the governor asked the Revenue Department and the state’s bond counsel to research whether the railroad could finance a very large, unrelated project like a gas pipeline.The governor said the producers have been briefed on the state’s proposal, and that Alaska Lt. Gov. Fran Ulmer was in Washington, D.C., meeting with federal transportation officials."So far, their responses have been positive," the governor said.Gas producing companies involved in the pipeline acknowledged they had been briefed, but declined to comment. One senior manager, speaking on condition his name not be used, said any proposed tax-exempt bond issue for the project would need approval of the Internal Revenue Service before it would be considered in financial markets.The state’s studies of the idea have assumed that a project-financing approach to building the pipeline would be used, similar to that used with other major gas pipelines built in North America in recent years, Slotnick said.Project financing means that debt is linked to the project itself for repayment, rather than the credit of its owners. Bond holders look to the signing of contracts for use of the facility being financed, in this case contracts from producers shipping gas through the pipeline, as a financial guarantee.The assumption was also that the producers, or an independent pipeline consortium, would finance about 30 percent of the project as an equity investment, and then finance the remaining 70 percent through offerings of debt, he said.Essentially, the private pipeline consortium would borrow the money from the Alaska Railroad, which would in turn raise funds by issuing tax-exempt bonds. The pipeline itself would be privately owned, Slotnick said.Alaska has considered special financial arrangements for a North Slope gas pipeline in the past. In 1979 the state created a state gas pipeline authority to help finance the Alaska Natural Gas Transportation System, a previously unsuccessful effort to build a pipeline from the North Slope.The state has also carried out tax-exempt financing to build road and port infrastructure to support mine development, and docks and harbors, although none on the scale now envisioned for the North Slope pipeline.The Alaska Railroad’s special tax-exempt provision recognized that the federally owned railroad had not been adequately maintained in recent years and needed substantial investments in new track and other modernization.

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