This Week in Alaska Business History May 20, 2001

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 TimesMay 21, 1981Valdez refinery plans fall throughFinancing problems blamedThe Associated Pressand Times staffJUNEAU -- Alaska Oil Co. informed state officials today it has scrapped plans to build a 100,000 barrel-per-day oil refinery at Valdez because financing cannot be obtained.The announcement, which many lawmakers and state officials had been expecting, means the state will have an extra 75,000 barrels per day of royalty oil to sell as soon as new contractors can be arranged.However, state Commissioner of Natural Resources Bob LeResche said selling the oil may not be easy because of a world oil glut and a buyer’s market for oil.Valdez officials express disappointment this morning when learning of Alaska Oil’s plans."Initially we were disappointed that the project cannot be built. But we understand the situation that Alaska Oil finds itself in with the current glut on the oil market," said Valdez Mayor Stephen McApline.Anchorage TimesMay 21, 1981Crab quota upsets Japan’s ambassadorBy Patti EplerTimes WriterAction by the Regional Fishery Management Council calling for a zero quota on tanner crabs for Japanese fishermen is a disappointment to the Japanese people, Japan’s ambassador to the United States says."It may be difficult, I realize," said Yoshio Okawara, "for Americans to understand how important the Alaska fisheries are to the predominantly fish diet of the Japanese people."Okawara said about 12 percent of the total Japanese catch is gathered in Alaska waters, making a substantial part of the Japanese food source dependent on Alaska fisheries.10 years ago this weekAlaska Journal of CommerceMay 20, 1991Prudhoe Bay’s last hurrahBy Ray TysonFor the Alaska Journal of CommerceNorth Slope oil production is on the decline for the second time and may never again exceed daily output of 2 million barrels, in spite of more field projects of the kind that helped to boost production after the supergiant Prudhoe Bay field lapsed into its initial decline three years ago."Prudhoe Bay’s last hurrah was in the third week of November," said Dudley Platt, a petroleum economist for the Alaska Department of Revenue.Alaska daily oil production has averaged 1.845 million barrels during the current fiscal year, exceeding the 2 million barrel mark only 46 times since last year after the GHX-1 gas-handling project came on line at Prudhoe Bay, North America’s largest oil field.Platt said North Slope oil production hit its most recent peak of 2.1 million barrels a day about Nov. 21.Alaska Journal of CommerceMay 20, 1991Alascom to cut serviceAlascom wants to stop providing international and interstate telex and telegram service, and it wants to discontinue its Medium Frequency marine radio service in several coastal locations.The reason, says spokesman Tom Jensen, is declining demand for the services.In case of MF service, "In 1991 we expect that message traffic will be even less than in 1990 when we carried only 252 messages during the entire year. With the expansion and improvement of VHF radio-telephone service for coastal operations, MF service has become an increasingly underutilized and unprofitable service."Jensen said the development of Alascom’s rural earth station telephone network across Alaska has reduced MF use to near zero. "People now can simply pick up the phone and call anywhere," he said.The telex and telegram services have also been left in the dust technologically, Jensen said.-- Compiled by Ed Bennett.

Insurance claims bill passes

Several bills of interest to the business community passed the Legislature in the closing days of the 2001 session, which ended May 8. House Bill 113, requiring health insurers to pay claims within 30 days or pay interest, was given final approval on May 7, as was House Bill 184, a comprehensive, largely technical rewrite of state insurance laws. House Bill 121, clarifying laws relating to charitable gift annuities, was given final approval on May 8. One business-related bill that did not pass in the final two days of the session was Senate Bill 176, relating to wholesale distributorships. The bill, introduced late in the session, attempts to prevent coercive activity by distributors against retailers and had passed the Senate and the House Labor and Commerce and Judiciary committees. SB 176 was pulled back to the House Rules Committee on May 7, after some business groups voiced concerns that it went too far in interfering in contractual relationships between distributors and retailers. The Senate Labor and Commerce Committee, chaired by Sen. Randy Phillips, R-Eagle River, had introduced the bill. A bill setting out missions and measures for state agencies, House Bill 250, also passed. This is a continuation of a recent practice of the Legislature in setting specific agency missions and quantifiable performance measures into law so lawmakers can judge the performance of an agency when setting budgets the following year. One controversial proposal that did not pass was an increase in state taxes on alcoholic beverages, pushed by Rep. Lisa Murkowski, R-Anchorage. The bill was stopped in the House Finance Committee by Rep. Bill Williams, R-Saxman, co-chairman of the committee. Another bill of interest to business that did not pass was House Bill 8, sponsored by Rep. Norm Rokeberg, R-Anchorage, which would set up a Legislative Road Development Task Force to make recommendations on needed new highways and road upgrades. Rokeberg and other lawmakers complained that the state Department of Transportation and Public Facilities develops the state long-range surface transportation plan without consulting lawmakers. The bill passed the House and advanced through the Senate to the Senate Rules Committee. Rokeberg said he will continue work on the bill next year.  

Understand airfare logic

What is the secret to saving on airfares? You need to understand the basic rules on how airfares are filed and what airlines are trying to accomplish. It seems so radical for airfares to go up and down; however, it is very systematic if you know the rationale behind them.The goal of an airline is not to fill every single seat but to maximize "yield" on each flight. Here are some of the factors that affect your fares: Excess capacityWhen airlines have excess inventory to certain city pairs, you will see a drop in airfares. When advance-booking figures are weak, airlines will file special discounted fares to fill the seat with restrictions. Airlines nowadays are using the Internet as a vehicle to salvage excess capacity at the last minute for specific flights on specific dates. You need to be flexible in your travel plans to take advantage of these offers.CompetitionWhen one carrier files special fares for no reason, other airlines will match with a moment’s notice. It takes only one airline to start this domino effect. Unless the market is served by one airline, this is a daily occurrence. Restrictions may vary by each airline. We have multiple airlines serving Anchorage-Seattle market for red-eye service. It’s not the time of day that makes the fares low, but the competition that makes the fares low.MistakesDaily changes to airfares are countless. Through this process, you may run into a fare that is extremely low. We have seen fares so low that we cannot afford not to travel. When you see a fare like that, jump on it. It won’t be there tomorrow or even later that same day. More than likely, it was priced wrong. Once you book, confirm and purchase tickets, airlines will honor the fares.Advance purchaseWhen you cannot meet advance purchase requirements, chances are that you will be paying higher fares. When you have to go, you have to pay what is available. I have seen advance purchase requirements for three days, seven days, 14 days and 21 days. If you have less than seven days to book, expect much higher fares.But just because you have longer lead-time to book, it does not guarantee the best fare in the market. If you need to travel at the last minute for medical or bereavement reasons, airlines can offer "compassion" fares to assist families in need.Minimum stayThe key to saving airfare is advance purchase and Saturday night stay. Saturday night stay is one of the most powerful qualifiers in saving airfares. Do you know why? This requirement sifts business travelers from vacation travelers who are very price sensitive.I don’t know of many business travelers who want to spend a weekend in a hotel room. If you have a distant relative to visit, you may want to incorporate weekend stay if your corporate travel policy allows.Travel datesWhen you travel to international destinations, fares are categorized in the following manner in general.* High season summer and holiday peak travel* Shoulder season between peak and low season* Low season winter low season* Midweek travel Monday through Thursday* Weekend travel Friday, Saturday and SundayDon’t expect super low fares for weekend travel during the high season. High season is different from country to country.ChartersCharter fares are not necessarily the lowest. However, fares are generally attractive. Charter services are introduced in the market to meet the demand for travel to Alaska in the summer. Alaskans can take advantage of the schedule and fares as many charter operators offer fares from Alaska to fill the excess capacity.New marketWhenever a new market or new airline is introduced, you will see introductory fares. Airlines need to jump-start these new services. In Alaska, new services are introduced for the summer period. However, if the new service performs well for the airline, the seasonal service can potentially lead to a year-round service.ItineraryTo get the best airfare, consider a single destination trip. If you try to incorporate two or more cities to visit, the fares will go up substantially. Many airlines do offer a free stopover in their hub city, for example Northwest in Minneapolis, Delta in Salt Lake City, Alaska in Seattle, and so on. When you consider multiple destinations, know the airline’s route structure to take advantage of a free stopover provision.Through fares vs.point-to-pointNot all through fares are the lowest. What I mean is that airfares are filed from an originating city to your destination. Flying to a highly competitive city and adding another fare from that city to the final destination may get you a better combined fare. In the case of Southwest Airlines, they will not "interline" checked baggage, meaning you will have to retrieve and check in your baggage again at the connecting airport. If you are using multiple airlines, check to see if those airlines have "interline" agreement.Group and conference travelIn general, if you have more than 10 people traveling together, airlines will consider group airfares and/or relaxing of restrictions. Or, if you have more than 10 people traveling from multiple cities to a particular city for conferences or conventions, airlines will negotiate special discount for this type of travel.Yoshi Ogawa is president of ITC Travel & Tours. He can be reached via e-mail at ([email protected]).

Business Profile: Pacific Alaska Forwarders Inc.

Name of the company: Pacific Alaska Forwarders Inc. Established: Alaska service began in 1961 Location: 431 E. 104th Ave., Anchorage Telephone: 907-336-2567 Web site: www.pafak.com Major focus of services: Pacific Alaska Forwarders Inc. provides freight transportation via less than truckload or truckload services as well as intermodal transportation. History of the company: Founder Rex Sears started Alaska operations in 1961 and by the mid-1960s had leased warehouse space for the company. In the late 1960s Pacific Alaska Forwarders built its first warehouse in downtown Anchorage followed by construction of a warehouse in Fairbanks. In 1966 Joe Smith started with Pacific Alaska Forwarders, running it for Sears. By 1994 Smith’s son Alain Smith, who had operated Southern Alaska Forwarding Inc. of Kodiak, took the reins for Pacific Alaska Forwarders. In the late 1990s the Joe Smith purchased the company from Sears, and by the end of the decade Alain Smith had acquired Pacific Alaska Forwarders. The corporate headquarters is in Fife, Wash., with Alaska locations in Anchorage, Fairbanks and Soldotna. Pacific Alaska Forwarders has updated its facilities and fleet. In 1998 the company relocated its Washington office to a newly built facility in Fife. In 1999 Pacific Alaska Forwarders moved to a new location in Anchorage. This summer the company plans to build a new, larger facility in Fairbanks. "For the past three years we have been having double digit (revenue) growth," said Bill Meszaros, vice president of Alaska sales. The company employs between 40 to 50 people. Top accomplishment of the company: Meszaros is most pleased with Pacific Alaska Forwarders’ investment in new facilities and vehicles. Another landmark is the company’s addition of a new service, full load trucking service, which the company began in January, he said. Major player: Bill Meszaros, vice president of Alaska sales, Pacific Alaska Forwarders Inc. Meszaros moved to Alaska in 1970. He spent 11 years as cargo manager for MarkAir. He started work for Pacific Alaska Forwarders in 1994 as Anchorage terminal manager. He later was appointed director of Alaska operations with responsibility for Fairbanks and Soldotna facilities. He was next promoted to his current title. -- Nancy Pounds  

Sitka firm builds five ferries for N.Y. waters

A Sitka-based ship building company has built five new ferries for high-speed commuter use on New York City water routes.New York Waterway has some of the new boats in service on new routes, including the East River, New York Waterway President Arthur Imperatore Jr., announced in early May.In a unique trans-continental partnership, New York Waterway, the largest privately operated commuter ferry service in the United States, has taken delivery of four catamaran ferries from Allen Marine of Sitka and is expecting delivery of a fifth catamaran ferry in the next few weeks."We are proud that NY Waterway recognizes the quality of the work done by the men and women of Allen Marine," said David Allen, president of Allen Marine Inc. "In Sitka, we take safety and reliability very seriously."The new Sea Otter class ferries carry 97 passengers at speeds of more than 30 knots, about 35 mph. They are single-hull boats with three water jet engines and include the bow-loading feature unique to New York Waterway ferries, allowing safe, efficient passenger loading and unloading.The cost of the ferries is $1 million each, according to New York Waterway sources.New York Waterway ferries built by Allen Marine are shipped by ocean-going freighter specially built for shipping yachts and will transit through the Panama Canal to New York.

Sale of fiber-optic cable capacity puts GCI quarterly income figures in the black

General Communication Inc. posted first quarter net income totaling $2.4 million, compared with a net loss of $5.5 million for the same period last year.The Anchorage-based telecommunications provider attributes the net income to a sale of fiber-optic cable capacity that closed early in the quarter.Including the fiber capacity sale, GCI reports revenue for the quarter totaled $96.9 million. Revenue totals excluding the fiber sale reached $77.4 million for the first quarter, up from $68.3 million for first quarter 2000.The telecommunications company listed revenue growth in all lines with the largest gains in the long-distance services area.Excluding the effects of the sale of fiber capacity, long distance and related revenues for the first quarter of 2001 increased 10.2 percent to $50.8 million as compared with $46.1 million for the first quarter of 2000.Cable television revenues for the first quarter increased 13.2 percent to $18 million from $15.9 million in the first quarter of 2000.Local telephone service revenues for the first quarter increased 33.3 percent to $6 million compared with $4.5 million in the first quarter of 2000.GCI reports local telephone service added 3,000 access lines during the quarter, for a total of 65,000 access lines in service, representing a 33 percent market share in the Anchorage area.GCI’s statewide Internet platform now serves more than 65,000 customers, adding 2,000 new customers during first quarter. About 18,500 of these customers are using GCI’s cable modem service, more than double the amount using cable modems in first quarter last year. GCI now provides cable modem service in Anchorage, Fairbanks, Juneau and Valdez.

Cruise lines tout economic impact, growth, environmental care

The cruise industry represents a significant economic impact to Anchorage and passenger numbers are expected to grow this year, one industry official said.In 2001 cruise passengers to Anchorage should climb 5 percent to 7 percent, said Al Parrish, vice president of government and community affairs for Holland America Line.Parrish spoke May 10 at the Anchorage Convention & Visitors Bureau monthly membership luncheon at the Egan Civic & Convention Center. His speech came a handful of days after Gov. Tony Knowles called for a special legislative session on cruise ship emissions legislation.Parrish said the industry in Alaska continues to develop new technology to treat wastewater and has adopted new standards for discharging wastewater."As an industry we are proud to aggressively market Alaska and even more aggressively monitor ourselves so the pristine product remains a viable market," he said.The Alaska cruise market represents an annual 600,000-passenger business for several cruises lines serving the state, he said. About 300,000 of those passengers visit Anchorage, Parrish said, quoting a economic impact study released in February. Forty percent of cruise visitors to Anchorage continue on to see other parts of Alaska, typically via tour packages, he said.The McDowell Group of Juneau prepared the report for the North West Cruise- Ship Association. The report studied results from 1999.In 1999 the cruise industry spent $103 million in direct expenditures in Anchorage, the report showed. This figure includes purchase of goods and services, payroll for industry employees, cruise passenger air travel to and from Ted Stevens Anchorage International Airport, government revenue and estimated spending by cruise passengers while in Anchorage.The McDowell Group estimates cruise passengers spent $100 per person in Anchorage in 1999 for an estimated total of $28 million.In 1999 the industry paid $2 million in local, state and federal government taxes and fees for services in Anchorage.Also part of direct spending in Anchorage, the industry spent $45 million for goods and services plus $21 million in activity at Anchorage International Airport.The North West CruiseShip Association represents nine cruise lines bringing 98 percent of all cruise visitors to Alaska, he said.The industry reported spending $7 million on its payroll in Anchorage, the report said.Direct industry summer employment peaked with about 600 jobs, according to the study. Fall, winter and spring employment dropped to a seasonal low of 50 jobs.Indirect economic cruise industry impact totaled $65 million to the city, the study said.The report is available at the association Web site, (www.alaskacruises.org) under the heading Alaska’s economy.

$1.5 billion capital budget approved

Except for controversial cruise ship pollution-control legislation, state legislators adjourned in a relatively orderly manner a few minutes before their legally mandated deadline of midnight May 8. Lawmakers passed several bills affecting business in the closing days of the 2001 session. Among the more significant were authorizations for about $1.5 billion in capital spending, mostly construction, for the state’s fiscal 2002, the budget year beginning July 1. They include the regular state capital budget of $1.33 billion including federal funds; a separate bill authorizing $110 million in construction to be funded by proceeds from tobacco litigation settlements; and other bills authorized specific projects through lease-back financing, where a third party builds a structure and leases it to the state. Lease-back financing facilities approved this year include a $41 million new Alaska Psychiatric Institute and a $90 million new private prison near Kenai. The fiscal 2002 state capital budget is $237.2 million more than current year spending. While the bulk of the state capital budget is for construction, mainly highways and other transportation projects financed mostly with federal funds, the capital budget also includes other specific appropriations. They include $30 million for an upgrade to the supercomputer at the University of Alaska and one-time funding for the Power Cost Equalization program, which provides a subsidy for rural electric utilities. The rural utility subsidy program is supposed to be self-funding following the planned sale of four state hydroelectric dams to local utilities. Money from the sale is to be placed in an endowment to support future PCE payments. New construction financed by the tobacco litigation settlements includes $75 million for three new rural schools and major reconstruction on other schools around the state, $21 million for a new University of Alaska Fairbanks museum and $13 million for major maintenance on harbor facilities in several coastal communities. Another construction measure, a bill authorizing about $400 million to advance federally funded transportation infrastructure projects around the state, failed to pass the Legislature, however. Also, a proposed $12 million new state food safety laboratory in Anchorage failed to win approval of legislators. However, $1.3 million was appropriated for design work for the facility. Overall, legislators increased fiscal 2002 state general fund spending, funded by state revenues, by $123.7 million more than the current budget year, including the operating and capital budgets. State general fund spending for fiscal 2002 will exceed revenues by $626.7 million, requiring a withdrawal of the same amount from the state’s reserve account, the Constitutional Budget Reserve. The CBR fund now contains about $2.9 billion, according to the state Department of Revenue.  

Around the World May 20, 2001

STATECentral Peninsula hospital administrator resignsSOLDOTNA -- The Central Peninsula General Hospital administrator instrumental in designing the hospital’s portion of the new Kenai Health Center resigned May 11 to pursue new opportunities."I’m working on a couple of projects. I think it’s a good time to be looking at new things," said Martin Richman, outgoing hospital chief executive."I’ve been asked not to talk about them, and I’m kind of a private guy. I certainly like the community."I’ve made friends here -- hospital employees, doctors, the administration. They’re just a super-hard-working group I’m going to admire forever."CPGH Inc., the nonprofit corporation that runs the Kenai Peninsula Borough-owned hospital in Soldotna, announced Richman’s resignationMay 11, effective immediately.Diana Zirul, president of the CPGH Inc. board, said the interim administrator will be Jay Seigfreid, an employee of the hospital’s consultant, Quorum Health Resources.Southeast intertiegains state fundsJUNEAU -- The Southeast Alaska electrical intertie -- a long-range, multiphase power project intended to connect the region’s communities -- is getting a boost from the state.Southeast Conference will receive almost $50,000 to study legal and legislative options for the intertie, according to Executive Director Loren Gerhard. Southeast Conference is a nonprofit regional development organization made up of communities and other groups in Southeast Alaska.The grant will be used to study what type of operating entity might be appropriate for the intertie and what powers it would have. Eventually, the hope is to have such an entity take over the project, allowing Southeast Conference to bow out, Gerhard said. The organization hopes to start the research by the end of the month, he said.The first phase of the intertie would connect Swan Lake near Ketchikan with Lake Tyee near Wrangell. Other links could connect Petersburg and Kake, Juneau and Hoonah, Sitka and Kake, and Sitka, Angoon and Hoonah. Eventually, Prince of Wales Island and Metlakatla would fit into the system, Gerhard said.NationFactory output fallsfor seventh monthWASHINGTON -- Industrial activity fell in April for the seventh month in a row, dashing hopes that the beleaguered sector was turning a corner.The Federal Reserve reported May 14 that output at the nation’s factories, mines and utilities declined by 0.3 percent last month, providing fresh evidence that the economy continued to slow in the spring.While April’s performance was weaker than many analysts expected, what was particularly disappointing to them was a big change in how the industrial sector did in March.At Sprint headquarters,geese know their placeOVERLAND PARK, Kan. -- Sprint Corp.’s latest hire makes some guests at the company’s new, multimillion dollar campus a little nervous.But then, that’s her job.Shayla the border collie joined Sprint in early May as its designated goose hater, er, herder. Her job: Find Canada geese and make life miserable for them.So far, the dwindling goose population at the lush 240-acre world headquarters in suburban Kansas City seems to show that Shayla’s doing her job -- and then some.Sprint, the nation’s No. 3 long-distance carrier, is building a large wetlands area in a corner of the campus. When it’s finished next fall or winter, Canada geese and other wildlife will be welcome in that area. And that’s where Shayla will keep them.Mailers coalition callspost office mismanagedWASHINGTON -- A coalition of mass mailers issued a blistering report on U.S. Postal Service productivity May 14, criticizing the agency for driving up stamp prices with shoddy management practices.The Mailers Council, a group of businesses and organizations that accounts for 70 percent of the nation’s mail volume, based the report on data collected from the first quarter of 2001.The group concluded that the country’s post offices are overstaffed and that the Postal Service is not doing enough to integrate technology into the mail sorting process.Postal Service spokesman Greg Frey said the agency appreciates helpful criticism, but noted that the agency’s mission sometimes runs counter to productivity considerations.WorldEU to open energy markets, just not nowBRUSSELS, Belgium -- European energy ministers May 14 reaffirmed their commitment to opening the European Union’s gas and electricity markets to more competition, but failed to move any closer to setting a date for speeding the process."There is a very strong commitment to opening energy markets, but different views on the schedule for this process,’’ said Lars Rekke, state secretary at the Swedish Industry Ministry, who chaired the meeting of ministers from the 15 EU nations. "We don’t want 15 markets that are open to competition, but one single market’’, he added.In a tacit admission that the EU was unlikely to reach an agreement on speeding up the liberalization before early next year, Rekke said Belgium and Spain would continue Sweden’s work on the issue when they take over the EU’s six-month rotating presidency through June 2002.Compiled from business wire services.

Lease sales run hot, cool

Industry response to two Alaska oil and gas lease sales in Anchorage May 9 ran the gamut from cool to red hot, depending on the sale.While a lease sale of tracts in Cook Inlet generated just $1.2 million in apparent high bids, the first-ever North Slope Foothills Areawide Oil and Gas Lease Sale attracted 184 bids from eight bidders for 170 tracts. Apparent high bids totaled $10.7 million for 979,200 acres, the most ever purchased in an Alaska state lease sale, state Oil and Gas Division Director Mark Myers said."The results of this sale were real encouraging, and we’re excited to see some new players coming into Alaska," Myers said.A subsidiary of Petro-Canada and a 50-50 partnership of Alberta Energy Co. and Anadarko Petroleum led the bidding even though Unocal Corp. offered the highest bid of the sale, $850,982.40, for tract 119. That acreage is directly south of the western North Slope near the Kuparuk River oil field.Petro-Canada (Alaska) Inc. offered 56 apparent high bids totaling $2.5 million. Anadarko and AEC Co. Inc. joined forces to make apparent winning bids of $2.2 million on 36 tracts. Anadarko, AEC and BP Exploration (Alaska) Inc. already control nearly 2.5 million acres in the Foothills area. Anadarko spokesman Mark Hanley said having other companies join in exploring the Foothills will be "good for everybody.""The more companies that are looking, the sooner people can find out about the trends," he said.A Houston, Texas-based investor group, 5051 Alaska Inc., took third place with 32 apparent high bids totaling $2 million. Alaska officials said little is known about 5051 Alaska except that it shares a Houston, Texas, address with Louisiana Land & Exploration Co., according to state records.Unocal made 18 apparent high bids in the Foothills sale totaling nearly $3 million; Chevron, bidding alone, took 16 tracts with apparent high bids worth $551,635, and bidding in a 50-50 partnership with Phillips Petroleum Co., made apparent high bids on nine tracts with offers totaling $449,856.Independent R3 Exploration Corp. and investor John W. Sutherland Jr. apparently won one tract each with bids of $31,569.40 and $37,115.20, respectively.Myers, who was recently appointed director of the Alaska Division of Oil and Gas, said the Foothills sale took Alaska officials five years to organize, and they did it without knowing of the considerable interest that would develop in gas exploration on the North Slope in recent months."The division took a substantial risk to start the process for the areawide lease sale five years ago," he said. "It’s primarily a gas area, and nobody was talking about a gas pipeline back then. I think it took a lot of insight."The Cook Inlet Areawide Oil and Gas Lease Sale was a reoffering of acreage that the industry bid on last year. It attracted 31 bids for 30 tracts with apparent high bids totaling $1.2 million. Despite the weak interest, Myers said he felt the sale results were positive when one considers limitations placed on areas of potential high interest to protect the dwindling beluga whale population in Cook Inlet. Industry and environmental groups differ on the cause of the decline of area belugas.Only two established Cook Inlet companies participated in the Cook Inlet sale, offering a single bid each. Forest Oil Corp. offered $30,055.20 for tract 276 adjacent to leased acreage in the northern part of Cook Inlet; and Unocal bid $29,664 for tract 790 on the southeastern Lower Kenai Peninsula.The most active bidder in the sale was independent Escapeta Production-Alaska Inc., which offered apparent high bids for 14 tracts totaling nearly $800,000 and the sale’s high bid of $97,863.40. Saddleback Resources LLC came in second with five apparent high bids. The remaining bids were offered by small investors.

Knowles calls legislators back to finish cruise ship regulations

State legislators go back to Juneau in a special session June 7 to consider a bill regulating cruise ship discharges that was bottled up in the Senate Transportation Committee in the closing days of the regular 2001 legislative session. Gov. Tony Knowles called the special session after the regular session adjourned without action by the Senate on House Bill 260. The bill passed the House May 1 by a wide majority, 35 to 3. Knowles, cruise firms operating large vessels and Republicans and Democrats in the House reached agreement on the legislation, which was introduced late in the session by the House Finance Committee. "As it passed the House, the bill includes everything we set out o get," in cruise ship regulation, said Michele Brown, state environmental commissioner. Operators of smaller cruise vessels still had some problems with the bill, Brown said, but these would have been resolved by amendments that were to be put on the bill in the Senate, she said. But Sen. John Cowdery, R-Anchorage, the chairman of the Senate Transportation Committee, would not consider the amendments when he held a brief hearing on HB 260. Brown said she’s baffled by Cowdery’s intransigence on the bill. "None of his arguments against it make any sense," she said. Cowdery has had the governor’s bill in his committee since March but has held no hearings. Cowdery had complained the bill adversely affects smaller cruise operators, but the amendments proposed would have solved this, Brown said. He had charged that the legislation unfairly hits cruise vessel operators with new regulations where other types of vessels and onshore facilities, including municipalities, aren’t regulated, at least to the same degree. Brown said onshore facilities that discharge into the marine environment receive site-specific permits tailored to local environmental conditions. The cruise industry wanted to avoid permits linked to local or regional conditions because the vessels move from area to area. "What they wanted were performance standards, requirements for discharges or pollution control that they would meet," she said. Cowdery also had objected to costs the legislation would have imposed on the state ferry system, but Brown said those costs would come down substantially if the amendments were adopted that would help small cruise vessel operators. In any event, it’s important that the state’s own ferry system be in compliance with rules the state sets for private vessel operators, Brown said. How the Senate will deal with the issue when legislators return June 7 is unclear. Senate President Rick Halford, R-Chugiak and others in the Senate leadership are interested in imposing a state passenger tax on the cruise lines, using HB 260 as a vehicle. The bill now contains a $1 per passenger permit fee, intended to defray costs of environmental regulation, but it is not a tax, Brown said. The issue is also colored by personal considerations. Republicans were angry at Knowles for calling the session at a time when Cowdery’s wife is scheduled to have surgery. Knowles later accommodated Cowdery by delaying the start of the special session to June 7. Although large cruise ship operators agreed with the terms of the House-passed bill, Brown said small vessel operators had problems with a requirement prohibiting treated discharges within one mile of shore. Large ships have bigger holding tanks. What is being discussed with the small cruise operators, Brown said, were requirements to immediately begin monitoring of discharges and a three-year deadline for installation of onboard discharge treatment and other pollution-control equipment. Knowles had introduced bills to regulate cruise ship discharges in both the House and Senate early in the session, but the Legislature, controlled by Republicans, ignored the governor’s bills. Then Rep. Beth Kerttula, D-Juneau, proposed her own version of the administration’s bill, in HB 183. Kerttula worked with cruise operators, as well as Republican House members, and the bill advanced through House committees to the House Finance Committee. Then Rep. Eldon Mulder, co-chairman of the committee, introduced the original version of HB 260 on April 26, proposing an alternative that was weaker. Kerttula and other House Democrats cried foul and charged Mulder and other Republicans with attempting an end-run around a compromise that was being developed around her bill. In the days that followed, Knowles talked to cruise industry officials and Republican House members. The result was adoption of a toughened version of the bill that was close to the governor’s, and Kerttula’s, proposals. Brown said the key sticking points on the weak version on HB 260 introduced by Mulder were that the state would not adopt its own standards for discharges, relying instead on federal standards that are not yet worked out; that the bill would not have covered other pollutants besides treated "gray water" (sink and laundry discharge) and "black water" (sewage); and that there was no access to samples being tested by independent laboratories. The toughened version that passed the House allows the state to set its own standards but through a process of negotiated rule making that will include the industry. It also covers other pollutants and provides for independent analysis, Brown said. Alaska is one of the nation’s most popular cruise destinations. The 680,000 passengers the vessels bring to the state in a typical year, many of whom stay in Alaska on land tours, are considered the backbone of the state’s tourist industry. But large cruise ships that carry 1,000 or more passengers are like floating cities that produce hundreds of thousands of gallons per day of shower runoff, sewage and chemicals, such as laundry detergents.  

Federal, UAF research brings commercial fishermen closer to harvest insurance

Commercial fishermen are a step closer to being able to insure against losses caused by poor harvests. 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. However, that could soon change, if all goes according to plan.Last year, Sen. Ted Stevens, R-Alaska, succeeded in getting salmon officially designated as a harvested food crop. That meant a salmon provision was tagged onto crop insurance and a $1 million federal subsidy was designated for fishermen to insure their catches. Now, to figure out how crop insurance might be applied to fisheries, meetings are being launched this month by researchers from the University of Alaska Fairbanks and risk management agents with the U.S. Department of Agriculture.In light of poor fishing seasons in Western Alaska from 1997 through 1999, and at the request of the U.S. Congress, the two groups will examine the feasibility of providing a pilot program during next year’s sockeye salmon fishery at Bristol Bay."The bay was selected because it’s been a notorious case of failure and so many harvesters are involved from all over Alaska," explained UAF economist and program manager Joshua Greenberg. "It presents a pressing case to adjust the risk, and it certainly highlighted the risky nature of fisheries."And without having the government involved, it’s not possible to get private insurers in there and offer premiums at rates that people can afford to purchase."The pilot program in the bay will be modeled after other insurance programs in place for crop failures. The initial study will determine what kind of specific risk management systems will be plugged into the Bristol Bay project."An insurance program could involve average harvest levels across the fleet, a trigger point in the overall catch, or some system tied to adjusted gross revenue," said USDA insurance management specialist Jay Garner. "The whole basis of risk management is to look at probability and severity of risk -- you look at how often and how big. Add biological events and things get very interesting."Greenberg explained that if a seasonal sockeye catch were entirely lost, for example, the bill calls for replacement of about 25 percent of a fisherman’s annual income."There are a variety of programs, from catastrophic to alternative programs that would insure at various trigger levels," he said."You’d have a trigger harvest, and say, if 85 percent of the average didn’t come in, then the trigger would be reached and, depending on the level of coverage a fisherman purchased, they’d get a certain payment." Greenberg said options that are likely to be available include group, individual and revenue-based programs. "So the trigger is a revenue base or a production base," he said.The UAF researchers will provide background to the USDA agents, who will then determine the best type of pilot program for Bristol Bay. Greenberg said background information will be about the fishery itself, the type of hazard that is present, and the characteristics of commercial fishing that are not analogous to farming."There are some substantial differences, so there are some features of fishing that may lend themselves well to the traditional format that USDA has used, and some which may take special consideration," he explained. Insurance will be provided by private insurers, and the government will provide the subsidy on the premiums.Greenberg said that in order for next summer’s pilot program to work, it’s critical that harvesters provide as much input as possible. "We want this to be useful and appropriate to fishermen, and offer them a business tool that they can use to help in their operations," he said.Greenberg added that if the Bristol Bay project is "deemed useful" by fishermen, the intent is to extend it to other fisheries, such as crab.Meetings will be scheduled in early and late June in Naknek and Dillingham. Greenberg can be reached at 907-474-7189 or via e-mail at ([email protected]).Eco-labelsLast September, Alaska salmon was the first U.S. fishery to be certified as sustainable by the Marine Stewardship Council, making Alaska salmon eligible to bear the MSC’s sustainability eco-label. It remains to be seen how marketers will use the new label, but many view it as part of an emerging strategy to target more environmentally concerned customers."We went through MSC’s chain of custody certification for the main reason it offers us another opportunity to reach another group of customers," Brian Amend, sales manager for fresh products at Norquest Seafoods told WorldCatch News Network.Norquest was the first salmon supplier to complete MSC’s certification process. The Alaska Seafood Marketing Institute reportedly has at least a dozen promotions that include mention of the MSC label.Once a seafood company has received a chain of custody certificate, which can cost a few thousand dollars, it must enter into a licensing agreement with MSC before it can use the eco-label.Labeling halibutSenate Bill 208 has been introduced by Sen. Jerry Ward, R-Anchorage, that would require that farmed halibut sold in Alaska be labeled as such. Existing state law requires the labeling of farmed salmon.Besides labeling farmed halibut, the bill would also allow a party that sells wild halibut or salmon to label it "wild," "antibiotic-free" or "hormone-free," and that it is free from "colors and additives" if the fish or the fish product is "harvested from a river or an ocean and has not been raised in captivity or under control for its entire life."Ward also introduced a resolution that calls on the Department of Environmental Conservation to petition the U.S. Food and Drug Administration to adopt labeling requirements for farmed salmon "using antibiotics, dyes and other chemicals." According to the weekly legislative newsletter "Laws for the Sea," the resolution also requests the University of Alaska to perform the research necessary to support such a petition.Kodiak-based free-lance writer Laine Welch can be reached via e-mail at ([email protected]).

Shelter firm now from worker shortage

When you turned off the lights today it seemed like any normal day in 2001. But when you awake tomorrow things are going to be different. You will find your life has been fast forwarded by six years. Just like Rumpelstiltskin you are now living in year 2007. The economic downturn of 2001 is a distant memory compared with the crisis you now face. In only six years the entire employment and economic landscape has been turned upside down. The economy is strong. Businesses are growing, but unemployment is almost nonexistent. There are help wanted signs in every industry. The 45- to 65-year-old workers is the fastest growing demographic. The 25- to 34-year-old age group is shrinking by 25 percent and the baby boomer generation is heading for retirement. For the first time in history our annual birth rate is not growing, and by 2015 the growth rate in the labor force will turn negative. As a nation we have increasingly become more high-tech and much, much older. The fastest growing occupations are computer engineers, computer support specialists, system analysts as well as home health aides and medical assistants to take care of the rapidly growing retirement population. By year 2020 there will be 27.7 people aged 65 and older for every working age adult, a 28.5 percent increase from 1980. People are afraid to go to the hospital because of a nursing shortage. Nursing turnover and burnout is as high as 50 percent in most hospitals. The nurses who remain are primarily in administrative roles relegating actual hands-on care to lower skilled personnel. Learning Spanish in high school is now mandatory. Eighty-five percent of the new work force is Hispanic, Asian or other minority. Thirty percent of the age group 18 and younger (Generation Y) is born outside the United States. The fast-food industry, facing a 12 million worker shortfall, is now using robots and hiring interpreters at fast food restaurants. Local, state and federal governments are unable to compete with pay and benefits and have begun to close offices and reduce services. Seventy percent of their work force is facing retirement and they are unable to attract people into government service. In place of full-time employees, local governments are using parolees and prisoners to answer the phone and deliver the mail. The Federal Aviation Administration cannot keep enough air controllers on-duty to manage the increase in air traffic. They are forced to change the mandatory retirement age from 56 to 65. As relationships with China deteriorate, the U.S. military is facing increasing difficulty maintaining readiness. Service personnel tired of constant deployments and family separations are leaving in droves for higher paying jobs. Congress is beginning to talk about reinstating the draft. Businesses are spending millions of dollars to train their work force both in technical skills and in basic skills like reading and writing. Businesses that start planning today will be better off in the future. By looking at, changing and updating your recruitment and retention strategies you can help stem off the crisis of tomorrow. Gregory P. Smith leads the management consulting firm called Chart Your Course in Conyers, Ga.   

Fiscal caucus seeks backing

An informal "fiscal caucus" of state legislators that includes both Republicans and Democrats hopes to forge a new long-range state fiscal plan and will be seeking public support through the summer and fall. Twenty-five members of the 40-member state House, a majority of that body, and three senators of the 20-member Senate have participated in seven meetings of the caucus during the 2001 session, said Rep. Bill Hudson, R-Juneau. Hudson helped organize the caucus in March and now heads the effort along with Rep. John Davies, D-Fairbanks and Sen. Alan Austerman, R-Kodiak. Leaders said the group will meet in late May with Alaskans United Against the Cap, a citizens group that helped defeat a statewide initiative imposing a cap on municipal property taxes, Hudson said. "Members of our caucus are returning to their home districts to present ideas at local community meetings. There will also be a number of larger meetings around the state," he said. "In order for any long-range fiscal plan to succeed, the citizens of the state must understand and agree that there is a problem and the time to act is now," Hudson said. Subcommittees of the caucus have been formed to focus on specific topics: Austerman heads a subcommittee examining state spending limits; Rep. Drew Scalzi, R-Homer, heads a group that will examine broad-based taxes, like a sales tax; Rep. John Harris, R-Valdez, chairs a subcommittee looking at targeted taxes, such as a tax on cruise passengers or higher taxes on alcohol; and Davies heads a panel looking at how to use state reserve funds, such as the Permanent Fund’s earning reserve surplus. Also Rep. Andrew Halcro, R-Anchorage, heads a committee considering ideas for miscellaneous revenues, such as land sales; Rep. Jim Whitaker, R-Fairbanks, heads a group examining corporate taxes; Rep. Hugh Fate, R-Fairbanks, chairs a panel investigating economic growth opportunities; and Rep. Vic Kohring, R-Wasilla, heads a subcommittee looking at possible government efficiencies. Rep. Lisa Murkowski, R-Anchorage, will help Hudson and Austerman coordinate efforts of caucus subcommittees.  

Flights bring tourists north, carry Alaska cargo south, keep shipping costs down

Direct flights from major U.S. cities to Anchorage for the summer tourist season are holding down costs to shippers using air freight."There is definitely no lack of capacity for northbound and southbound freight," said Dave Beach, manager of freight forwarder Movers Inc. "Tourism to Alaska has more than one benefit to Alaska."Direct passenger flights by Alaska Airlines, America West Airlines, Continental Airlines, Delta Air Lines Inc., Northwest Airlines, United Airlines and Trans World Airlines will offer seafood shippers direct flights to major urban markets, according to Beach.Movers Inc. and other freight forwarders will enjoy direct service to major U.S. cities using belly cargo holds on aircraft making flights from Anchorage to Atlanta, Chicago, Denver, New York, San Francisco, Phoenix, Minneapolis-St Paul, St. Louis and Salt Lake City.The flights come at a time when air freight prices, hiked in part due to fuel surcharges, are at a three-year high, according to industry officials and freight forwarders."The abundance of capacity has certainly stabilized air freight prices," added Beach. "The big plus is for the fishing industry. This big increase in lift helps the quality of the fish when it gets to market."The just-in-time delivery trend has forwarders shopping for options among carriers, according to Beach.But what will happen when the fights drop off in the fall?"If the price goes up too far, it’s true we are looking at trucking fish, mainly halibut down the Alaska Highway," Beach said. "In the fish business saving 15 to 20 cents per pound can save a lot of money."But the quality of the fish can suffer on the longer trips, says another forwarder."Quality is everything in the fish business," said Bill Meszaros, general manager of Pacific Alaska Forwarders. "If you ship by air you can get fish to market in three hours; by truck it takes three days. The cost is less but so is the quality of the fish."How the fish is packaged is also a factor, with gel packs or dry ice the preferred methods for shipping on longer delivery times, according to Meszaros. "Everyone is trying to save a buck," he said. "The trucking option doesn’t surprise me. There are a lot of ... truckers headed south empty."The rates have stabilized for now, according to Beach, but trucking options from Alaska to the lower 48 states will be revisited if air freight prices spike upward this winter.Beach said he is also interested in the possibilities opened up by new flights to Europe from Anchorage. They include a flight to Stamstead airport near London by British Airways; direct passenger charter flights from Anchorage to Dusseldorf and Frankfurt, Germany, by Condor; and Balair charters to Zurich, Switzerland. They all offer options for direct service to major European markets, he said.

As halibut comes in, prices slip at dock, not at store

Huge catches of halibut continue to cross Alaska’s docks since the fishery opened in mid-March. On April 25, for example, more than 726,000 pounds of the prized flats were delivered, the highest daily volume since a few days after the season opened on March 15. Starting on April 16, nearly 2.5 million pounds were landed throughout the state, for a total of nearly 9 million pounds delivered through April 27. That’s 15 percent of the Alaska catch limit of roughly 58 million pounds. The influx of fish has had a downward press on prices. In Kodiak, for example, prices at the start of the halibut fishery ranged from $2.85 - $3.25 per pound, then after the first week dropped to between $2.10 - $2.25. As of April 24, prices had dipped again to $1.75 1.80 for fish weighing 10-20 pounds, $1.90 - $2 for those weighing 20 to 40 pounds and $2.10 - $2.25 for fish weighing more than 40 pounds. Prices in Homer and Seward are usually at least 20 cents a pound higher, reflecting the fact that those ports are on the road system. Southeast prices are usually also somewhat higher than Kodiak due to closer proximity to Lower 48 markets. Conversely, prices at Westward Seafoods in Dutch Harbor were at $1.50 for fish under 40 pounds and $1.55 for larger sizes. While those prices might still seem respectable, they’re well below last year’s average price of roughly $2.60 a pound. The usual laws of supply and demand, however, don’t appear to be applying to Alaska halibut at most retail counters. There’s more halibut, prices to fishermen are lower -- but prices to American consumers have skyrocketed. Urner-Barry, the nation’s oldest tracker of prices for seafood and other commodities, reported prices through April 28 for fresh halibut steaks at major supermarket chains in Chicago at $10.79 a pound, Los Angeles at $7.99, Florida at $9.99 and Boston at $7.99. Closer to home, 10th & M Seafoods in Anchorage was selling steaks at $6.25 and fillets at $6.95, and at New Sagaya, halibut steaks were retailing at $6.99 and fillets at $7.99. Kodiak’s Safeway was continuing to sell halibut fillets at a whopping $9.99 a pound. "There’s no connection between what’s going on between retail and wholesale," grumbled one longtime buyer. "There are so many buyers and so many middlemen, they can simply go elsewhere (to buy fish.) They’re really holding our feet to the fire. Wholesalers try to work at a 3 to 5 percent profit margin and deal in high volumes, but now most of us are at zero. But we have no choice because we’re dealing with a perishable product, and we have to sell it. We’re all at the mercy of the guy buying the most fish and selling it the cheapest." What can be done about the apparent inequity between prices paid to fishermen and wholesalers and what’s seen in supermarkets? "Nothing," according to two Kodiak processors. Both said "retailers are the ones making the bucks with halibut, not the fishermen or wholesalers." Retailers could not be reached for comment. The lower prices will also be reflected in lower raw fish taxes paid to communities where the halibut is delivered. Meanwhile, Homer retains its lead as the nation’s No. 1 halibut port with just more than 2 million pounds crossing those docks at nearly 23 percent of the total Alaska catch. Seward follows at 1.85 million (21 percent), Kodiak at 1.2 million (13.5 percent), Juneau at just under 800,000 pounds (8.88 percent), Cordova at 636,000 pounds (7.13 percent), Petersburg at 572,000 pounds (6.4 percent) and Sitka at 467,000 pounds (5.24 percent). Alaska’s halibut fishery runs through Nov. 15. Omega-3 news Despite the Food and Drug Administration’s recent decree that more research is needed before health claims can be made about Omega-3 fatty acids found in many fish, studies in every country continue to find proof that eating such fish leads to a healthier life. In recent years researchers have claimed that eating fish lowers the risk of heart attacks, reduces depression, improves eyesight and even boosts mental capacity and eyesight in babies. An article in The New York Times revisited the American Heart Association’s recommendation that people should eat at least two servings of fish per week, claiming that doing so may prevent cardiac arrhythmia, as well as heart attacks caused by clotting. Another study examined 80,000 women and found that those who ate fish once a week reduced the risk of strokes by 22 percent, compared with those who ate fish just once a month. More than a dozen anti-inflammatory studies have shown that people with rheumatoid arthritis experience relief with regular eating of seafood, and fish oils were found to be especially effective in reducing joint stiffness and fatigue. A recent study in the New England Journal of Medicine showed that more than half of the patients with Crohn’s disease and chronic irritable bowel syndrome remained symptom-free if they took Omega-3 supplements along with medication. Kodiak-based free-lance writer Laine Welch can be reached via e-mail at ([email protected]).  

Business Profile: American Tire Warehouse

Name of the company: American Tire Warehouse Established: 1974 Location: Anchorage and Fairbanks Telephone: 907-336-7878 Major focus of services: American Tire Warehouse sells and services vehicle tires plus provides other automotive services on shocks and struts, brakes and alignments including recreational vehicle alignments. History of the company: Ronald and Valda McMahan started the company with a store on Fifth Avenue in Anchorage after running a Chevron gas station and a tow truck fleet. In 1976 they opened a store in Fairbanks at a rented site before purchasing its current location in 1978. Also that year the McMahans bought its site at Fourth Avenue and Ingra Street. "It has been our philosophy to own our own buildings because this is a family operation and we look forward to continuing with our own children," said American Tire president and chief executive Valda McMahan. Four of the couple’s five children work for the company. During construction of the trans-Alaska oil pipeline American Tire was chosen as a major supplier for Alyeska Pipeline Service Co. In April 2000 American Tire completed construction of a new, larger facility at 7835 Old Seward Highway in Anchorage. The company also operates a main office in Fairbanks plus a retail branch and a commercial wholesale center, located separately in downtown Anchorage. From an initial five employees, American Tire has grown to employ typically between 35 to 40 permanent workers, although additional workers are added during peak spring and summer seasons. Top accomplishment of the company: "What I am proud of is the fact that we started small and worked hard," said Rawn Marie McMahan, assistant regional manager in Anchorage. The company offers competitive pricing and holds its own in the market despite competition from discount retailers, she said. "It just goes to show that the mom and pop (business) is alive and thriving." Major players: Mark McMahan, regional manager, Rawn Marie McMahan, assistant regional manager, Valda McMahan, president and chief executive, and Ronald McMahan, executive vice president. Ronald McMahan has lived in Alaska since 1946, and Valda McMahan came to the state in 1954. For 12 years they represented independent Alaska tire dealers to the National Retreaders and Tire Association where Valda McMahan was one of three women. Mark McMahan and Rawn Marie McMahan lead the Anchorage stores. -- Nancy Pounds  

This Week in Alaska Business History May 13, 2001

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 TimesMay 14, 1981As confidence builds, space gets tighterBy Mary MillsTimes WriterOptimism about the resource development of Alaska under the Reagan administration may be partially causing an economic expansion that has created a shortage of prime office space in Anchorage.The vacancy rate has dropped between 1 and 2 percent, which means there is virtually no top quality, Class A, space to be found.A year ago the vacancy rate stood at 9 percent.The demand has forced prices higher, with the cost of Class A space jumping 19 percent in the last year."It’s just the turnaround that has occurred in about six weeks," said Ron Bunn, Anchorage manager for Shorett and Riley, a Seattle-based commercial real estate and appraising firm.The election of Ronald Reagan as president and the subsequent appointment of James Watt as interior secretary sparked optimism about the future of developing the state’s resources, Bunn said.Anchorage TimesMay 14, 1981Large office complex planned off TudorBy Mary MillsTimes WriterTwo longtime Alaskans are developing what they say may be the largest office-business construction project in Alaska’s history on 76 acres adjacent to the Alaska Pacific University.Tudor Centre, off Tudor Road, will eventually cover an area nearly as large as the business core of downtown Anchorage, the developers say. Construction of the first street is now under way.Two years of intensive planning have gone into the project. It will be developed in several phases over a 20-year period.The master plan for the complex resembles a small city, complete with a high-rise hotel and possibly a 2,000 seat auditorium.Dick Rapp and Les Pace, associates at Area Realtors, are property managers and also are among the investors in Tudor Centre.The project is being developed by the Tudor Fund, a limited partnership composed of about 225 people from Anchorage, Fairbanks, Dillingham, Soldotna and other Alaska communities.10 years ago this weekAlaska Journal of CommerceMay 13, 1991Tax plan targets foreignersBy Tim BradnerAlaska Journal of CommerceJUNEAU -- In what may be the first shot in a battle to tax the state’s tourist industry, the House Finance Committee has voted to disallow a special tax exemption for foreign vessel operators doing business in Alaska. The change is in the latest version of a bill making changes in the state’s corporate income tax system.Although aimed at Alaska cruise ships bringing tourists north to Alaska, the provision may also affect other foreign vessel owners operating here.Alaska Journal of CommerceMay 13, 1991Timber outlook unevenBy Alaska Journal of CommerceTimber prices are still in the doldrums on world markets. The slump that has hit Alaska’s forest industry may well continue through 1991, Alaska forest analysts report.Frank Seymour, timber specialist with the state Department of Commerce in Juneau, said a price recovery normally expected in the second quarter of the year has yet to appear although pulp prices, important to the two pulp mills in Sitka and Ketchikan, are showing some improvement.Behind the slack market, however, is a gradually tightening inventory, Seymour said. When the housing market in Japan, which is where Alaska sells its timber, begins to improve, the available inventory will be quickly absorbed.-- Compiled by Ed Bennett.

Denver firms envision Internet server farm powered by Slope gas

Two Denver-based firms see a possible opportunity to serve the needs of North American companies using the Internet from, of all places, Alaska.What’s more, they hope to do it with a large data center, what’s known in the industry as a server farm, on Alaska’s North Slope.It’s a visionary idea, admits Mike Caskey, vice president for lands for Fidelity Exploration and Production Co. in Denver, one of the companies involved."In Alaska you can’t think small, or else things will never get done," he said.What attracts Fidelity and its partner, Andex Resources, also of Denver, to northern Alaska are the huge stranded natural gas reserves.These could provide cheap fuel for generating large quantities of electricity needed to power banks of computers in a server farm, according to Caskey.Caskey is the project manager for Netricity LLC, the Alaska company formed by Fidelity and Andex to pursue the server farm idea. Fidelity holds 75 percent of Netricity, with Andex owning 25 percent.Both companies have links to Alaska, Caskey said. Fidelity is owned by the same parent firm, MDU Resources Group Inc., that owns Anchorage Sand and Gravel through a construction materials subsidiary.Andex Resources, a privately held firm, has been active in southern Alaska oil and gas exploration for several years, Caskey said.Netricity has been working quietly on the idea of the North Slope project for about six months, Caskey said, holding discussions with state Department of Natural Resources officials about buying a quantity of state royalty gas on the North Slope.In mid-April, resolutions were introduced in the state House and Senate in Juneau, asking the Legislature to support the concept. Hearings were held in both the House and Senate Resources Committees.Netricity’s plan is to build a server farm and a 500-megawatt gas-fired power plant on the North Slope which would require a $1 billion investment. Data to and from the facility would flow through a fiber-optic cable built to the North Slope that is now operated by General Communication Inc. of Anchorage.From southern Alaska, the company would rely on fiber-optic cables connecting Alaska with the Pacific Northwest.Caskey said only preliminary discussions have been held with GCI on using the fiber-optic cable. Sections of the cable connecting the North Slope with Fairbanks would need upgrading, he said.Caskey said he was aware of the troubled history of the fiber-optic cable to the North Slope, which has gone through multiple owners and which Alyeska Pipeline Service has refused to use, citing its lack of reliability.Caskey acknowledged that in order to provide the necessary level of reliability for customers of a server farm, a second fiber-optic cable would eventually be required as a backup in the event of a failure of the first line. But he said the cost of a second line would be only a small part of the billion-dollar price tag for the complete project.Caskey said the proposed 500-megawatt generator would be sufficient to run 500,000 servers -- computers delivering Web pages and other information over the Internet -- at once. He said he knows of two companies in the Lower 48 that run in excess of 200,000 servers, and said that other companies would like to do so but there is insufficient power available to do so.In addition to reliable high-speed access to the Internet, a server farm requires large amounts of very reliable electricity to run computers and air conditioning. That electricity is becoming unavailable in many parts of the United States, Caskey said, pointing to California’s energy woes, which have spread to the Pacific Northwest and may spread to the Northeast this summer.Those difficulties, combined with the continued demand for more servers as the Internet continues to grow, led to the concept of a gas-fired power plant on the North Slope."We’re thinking outside the box," Caskey said. "The grid is too saturated to accommodate new server farms. Our project is a nongrid solution for grid problems."Many details of the proposal are still confidential but material distributed to legislators in Juneau show a business case in which the company would acquire state royalty gas for 36 cents per thousand cubic feet.While North Slope producers are working on plans for a natural gas pipeline to the Lower 48, the server farm’s requirements for energy would still leave most of the gas for the pipeline, Caskey said.The demand would be large by present Alaska standards, however, about the same amount of gas used for residential and commercial space heating in Southcentral Alaska. A 500- megawatt power plant to serve the data center would need about 118 million cubic feet of natural gas per day, Caskey said.Meanwhile, the feasibility of the gas pipeline to the Lower 48 has yet to be determined, Caskey said. If it isn’t built, the state’s royalty gas, and that of the producing companies, will remain stranded on the North Slope, he said."Instead of exporting molecules, we want to export photons," Caskey said.Caskey said he envisions employees at the generating plant and the server farm working the two weeks on, two weeks off schedule that is common on the North Slope. He said he would like to hire and train Alaskans -- especially Alaska Natives -- to operate the facility. "They’re used to the climate," he said.Even if the pipeline goes ahead it will be several years before it is completed. Netricity’s project could be up and running before that, giving the state a way to sell royalty gas before the pipeline is complete, Caskey said.He acknowledged that if a gas pipeline were built, the price of gas on the Slope might be higher, possibly $1 or more per thousand cubic foot. Netricity might, after it got started, be able to pay that higher price for royalty gas, Caskey said.The company has not contacted the producing companies about gas purchases, he said. Caskey said that if he can acquire the gas at a low enough price, construction of the project could begin as early as next summer.Journal Managing Editor Ed Bennett contributed to this report.

Grummans to highlight aviation show

Promoters of the 2001 Alaska Airmen’s Association Statewide Aviation Trade Show say it should be the biggest and best to date. The show will be at the FedEx hangar in Anchorage on May 19 and 20. The Grumman aircraft depicted on this year’s trade show poster are the theme and are featured as static displays for spectator viewing. The display of amphibious aircraft features the recently refurbished and rebuilt J2F Grumman Duck, a vintage 1947 aircraft. "This year we are going to feature the Grumman amphibians," said Dee Hanson, executive director of the Alaska Airmen’s Association. "We will have an Albatross, Goose, Mallard, and Widgeon parked outside and Ketchum Air Service’s Duck will be parked in the hangar." The Grumman Duck, a pre-World War II biplane, had two designations during its use in World War II: the J2F-6 for the Navy and the OA-12 for the Army Air Corp. The plane has a fuselage/float under and forward of the Wright R-1820, 1,000 horsepower engine, with a wing high over the cockpit, and another at midfuselage. It was a challenge to fly, according to local experts. FedEx donates the use of its maintenance hangar and ramp at Ted Stevens Anchorage International Airport for the trade show. This year’s show features all varieties of aircraft, including ultralight flex-wing trikes, Super Cubs, new Cessna aircraft, air cargo jets and military attack and fighter jets flying at Elmendorf and Eielsen Air Force bases. Last year’s two-day show attracted 15,000 spectators, a number that Alaska Airmen’s Association event organizers hope to see grow. The nearly 200 vendors on hand will include Alaska Husky LLC, David Clark Inc., Textron Aviation Financial Services Division, Textron Financial Corp., Cessna Aircraft Co., F. Atlee Dodge, Maule Air Alaska, UPS Aviation Technologies and Wipaire Inc. Three state chapters of the Experimental Aircraft Association will also be in attendance to offer advice to Alaskans interesting in building their own aircraft. This year’s featured speakers will include Alaska aviators with knowledge of northern flying.  

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