Around the World October 14, 2001

STATEArctic Power readies for ANWR fight KENAI -- Before Sept. 11, the possibility that Congress would authorize oil and gas exploration on the coastal plain of the Arctic National Wildlife Refuge seemed remote, said former legislator Mike Navarre of Kenai."Now, because of the energy security issue ... there’s a renewed interest and maybe opportunity, in terms of strategy in the U.S. Senate particularly, that might allow some opportunities to have a vote to have ANWR legislation passed," said Navarre, a board member of the pro-development group Arctic Power. "I don’t know how many votes have changed since then. But I think some people’s -- in Congress and in the public around the country -- eyes may have been opened a little bit."Arctic Power received $2.8 million from the Legislature this year, he said. It has been spending that for advertising and to send Alaskans to lobby Congress.Navarre said this is a critical time. President George W. Bush’s energy package, which includes provisions to allow ANWR oil and gas development, has passed the Republican-controlled House. However, it has not cleared the Democratic-controlled Senate."Time-wise, they’re pushing to take it up before the end of the year," Navarre said.Oil flowing again through trans-Alaska oil pipelineFAIRBANKS -- Crude oil resumed flowing through the trans-Alaska oil pipeline Oct. 7 after workers welded over a bullet hole in the line that caused 285,600 gallons of oil to spew onto the Alaska wilderness.The pipeline, which carries about 17 percent of the nation’s oil production, or about 1 million barrels a day, had to be shut down after the line was shot Oct. 4. The line was repaired by welding a plug in place.Crews now are focusing on the massive cleanup."Our plan is to remove gross contamination before freezeup, and we anticipate it will take literally years to get the area free of contamination," said Bill Howitt, an Alyeska vice president based in Fairbanks.By Oct. 7, Alyeska had collected 88,541 gallons of spilled crude. Response officials said about two to three acres were contaminated by the spill.Daniel Carson Lewis, 37, is charged with felony assault, weapons misconduct, criminal mischief and driving while intoxicated in connection with the shooting. He is being held in Fairbanks on $1.5 million bail.Though the pipeline was shut down, tanker loading at the Valdez Marine Terminal continued using oil from storage tanks. Oil companies on the North Slope were asked to reduce their production by 95 percent during the shutdown.BP to pay state $36 million in back taxesJUNEAU -- BP Exploration (Alaska) Inc. agreed to pay the state $36 million to settle back taxes for Atlantic Richfield Co., which it bought last year, the governor’s office said Oct. 3.The funds covered the tax years of 1994-98, according to a statement issued by the governor’s office. Terms of the settlement were kept confidential."I appreciate BP’s willingness to come to the table to resolve this matter, and I am pleased with the terms of the settlement," Gov. Tony Knowles said in a statement announcing the deal.BP was granted Federal Trade Commission approval to buy Arco in April 2000. As part of the $27.6 billion purchase price, the company was required to sell Arco’s Alaska assets to Phillips Petroleum Co. out of anticompetitive concerns.Also part of the deal was BP’s agreement to resolve the company’s outstanding tax liabilities in Alaska."At the present time, we have brought BP and Arco current," said BP spokesman Ronnie Chappell.NATIONNordstrom lays off 1,600 employeesSEATTLE -- Nordstrom Inc. has laid off 1,600 employees nationwide in the past 30 days, including about 250 at the retail clothing chain’s downtown headquarters.The layoffs, representing 3.6 percent of the company’s 45,000-person work force and 7.9 percent of the corporate headquarters staff, are the result of slumping sales since the terrorist attacks Sept. 11, spokeswoman Brooke White said Oct. 2."This has been a difficult process for us," White said. "We have had to make adjustments in the past," she said. "We have had to make sure the staffing levels are right, but this is the first time in a long time -- and outside the holiday shopping season." She would not give a regional or store-by-store breakdown of the layoffs.Nordstrom has 126 outlets in 25 states, including a store in Anchorage.-- Compiled from business wire services.

State ponders investment

A citizen committee asked by Gov. Tony Knowles to evaluate possible state investment in a natural gas pipeline has reached a tentative conclusion to advise against the idea, unless there is some compelling and overriding public interest.However, the group also said that a public authority, such as the Alaska Gasline Port Authority put together by three Alaska municipalities to finance or own part of a gas pipeline, has considerable merit, as long as the authority tapped private markets for financing.The committee investigating state ownership is part of the governor’s Natural Gas Policy Council, a 28-member council formed last spring to consider state policy issues presented by a proposal to build a natural gas pipeline from the North Slope to the Lower 48.Conclusions reached by the committee at an Oct. 3 meeting in Anchorage are still tentative, and are being finalized by the group for presentation to the full gas policy council. The chairman of the state ownership committee is Bill Corbus, who heads Alaska Electric Light & Power, the Juneau electric utility.Also at the committee’s Oct. 3 meeting, the port authority presented the latest versions of its proposal to finance and build parts of the pipeline that are in Alaska, but came up against tough questioning by committee members and state Department of Revenue officials.Rigdon Boykin, with O’Melveny & Myers, a New York financial services company working with the port authority, told the committee that building a pipeline through Interior Alaska to the Lower 48, with a spur to a liquefied natural gas plant in southern Alaska, would make the project profitable.The tax-exempt status of a public authority would allow for substantial payments, about $900 million per year, to the state of Alaska and municipal governments in the state, he said.Boykin said the authority’s base case is a $22 billion project that ships about 6 billion cubic feet of gas per day from the North Slope, about half going to the Lower 48 through an all-land pipeline and half going to an liquefied natural gas plant in southern Alaska through a spur pipeline either to Valdez or Kenai.The group’s work so far has led it to conclude that a "stand-alone" pipeline to an LNG plant in southern Alaska isn’t economic because it won’t create economies of scale large enough to overcome high costs.Likewise, a pipeline to the Lower 48 is now considered uneconomic because of high costs and a now-uncertain outlook for Lower 48 prices.However, the Lower 48 pipeline and LNG export project can work well together, sharing the cost of a 52-inch trunk pipeline from the North Slope and selling gas in different markets, which mitigates risks of price volatility, he said.Gas sales contracts over five years will be difficult to get in Lower 48 markets, but long-term contracts of 20 and possibly even 30 years are possible in Asian markets, particularly if the Alaska LNG project can offer a slightly lower price to lock in long-term customers, Boykin said.The economies of scale in shipping large volumes of gas for both the Lower 48 and export sales will lower costs enough to make LNG exports profitable for the authority even with a price break. The security of the long-term export contracts will mitigate the risk if prices in the Lower 48 will drop to very low levels.The authority used an assumed sales price of $2.75 per million British Thermal Units at the LNG plant in Valdez in its analysis, Boykin said. Producers on the North Slope would be paid 75 cents per thousand cubic feet for the gas, Boykin said.On the strength of the export sales, the project could ride out gas price slumps to below $2 per Mcf in Lower 48 markets, he said.Members of the committee and the Department of Revenue questioned some key assumptions in the analysis, however.One committee member, Ron Duncan, president of General Communication Inc., questioned whether there are enough proven reserves of natural gas on the North Slope to support 6 billion cubic feet a day of gas production for the long term.Boykin said he and others from the port authority group had met with senior BP officials, and were told that more gas would be discovered on the North Slope once a pipeline is constructed, and that there is enough gas to support both a Lower 48 pipeline and an LNG export project.Bill Walker, an attorney working with the authority, told the committee that the gas producers themselves are working with a project that would begin at 4 to 4.5 billion cubic feet per day and eventually increase to 6 billion cubic feet per day of throughput.Larry Persily, Revenue deputy commissioner, told the committee that the department is skeptical whether such a large project can be financed 100 percent by debt, without a cash contribution as equity by the authority.Boykin responded that his firm has worked on several multi-billion dollar financings in the Lower 48 undertaken by municipal or state authorities, which are 100 percent debt-financed.Roger Marks, an economist with the revenue department, said his research indicates that LNG buyers in Asia are moving away from long-term contracts, to shorter-term contracts.Boykin replied that there are potential new LNG buyers in Asia who would commit long term if they could get a break in the price. He cited examples such as Enron and El Paso Natural Gas, two U.S. firms, who are building new power plants in Korea and Japan, and potential customers in China.Ken Thompson, a retired senior Atlantic Richfield Corp. executive who is a member of the advisory committee, said he questioned the viability of the port authority to build the entire project, but felt it could play an important role in owning part of a gas pipeline.Thompson said if the authority could own the pipeline from the North Slope to a hub in Fairbanks or Delta, it could ship gas to in-state users at preferential rates, lowering energy costs and encouraging industrial development based on natural gas.

Anchorage company discovers potential new drug

Arctos Pharmaceuticals Inc., an Anchorage-based start-up company formed to search for Alaska plants and other organisms with medicinal properties, may have struck gold. Maureen McKenzie, the company’s chairman and chief executive, told the Journal the firm has found an organism with both antibacterial and anti-fungal properties -- and which also might act as a powerful anti-cancer drug. "We’re about 80 percent sure it’s a new species," McKenzie said. Other antibiotics, including penicillin come from the same family of organisms, she said. "It was quite a surprise," said company co-founder Claudia Mark, who serves as the firm’s cultural historian and archivist. "It does some wild things. We’re quite excited about it." The organism, a tiny fungus, was found in a sample of sand gathered in mid-July by a diver in the shallow waters off an island in the Aleutians. Because the sample contained many organisms, it took some time to isolate the fungus. Company officials knew they had something when they grew the fungus in a petri dish with bacteria and yeast. The fungus killed everything around it, leaving a clear circle in the middle of the dish. "We may have a powerful antibiotic, a possible anti-fungal agent, and it may also be anti-tumor," Mark said. McKenzie said its anti-tumor properties are based on the way the fungus is killing the other cells, by interfering with cell division. Cancer is runaway cell division, so anything that blocks it has potential value as a medicine. The next step for the company was to determine if the fungus was a unique new specie. McKenzie said a laboratory in Vermont is working to identify it, and that so far, lab officials have told her they haven’t seen it in their research. Then comes the expensive part: identifying the molecule or molecules which cause the antibacterial and anti-fungal actions. If the molecules are different from all others -- even by one atom -- then the fungus will be patentable, McKenzie said. McKenzie said her company is working to raise the capital needed to identify the molecules. She said researchers with whom she has been working in the San Diego area told her she couldn’t afford not to carry out the study. "For the money men, it’s potentially millions of dollars," she said. "For the doctors, it’s saving lives. And for scientists, it will increase our understanding of living things." Even if the fungus or its molecules turn out not to be unique, the discovery will be good for Arctos Pharmaceuticals, said McKenzie, who has been attempting to find venture capital support with little success. "Clearly, it’s a business now," she said. "We might have to do this a number of times, but now it’s just a matter of numbers and odds. "A lot of naysayers have said these things don’t exist in Alaska, and even if they did, we would never find them," McKenzie added. "This is proof they do exist -- and that we can find them."  

Salmon farms sink prices

This may have been one of the worst seasons in history for Alaska salmon fishermen and processors.Salmon farmers, mainly in Chile, are producing at full throttle and flooding markets in the United States, Asia and Europe. Farmed salmon prices are plummeting, dragging down prices for wild salmon as well."They’ve finally glutted the salmon market," said Gunnar Knapp, a University of Alaska fisheries economist who closely follows salmon.Most of the blame is focused on Chile, where salmon farmers have increased production of farmed coho salmon by an estimated 40 percent in the last year. "They’re now suffering the consequences of declining prices. Farmed salmon prices have crashed in Japan, the U.S. and Europe," Knapp said.If there’s any good news out there for salmon, it’s that the overall productivity of the Alaska fishery appears stable, except in certain regions."We’re likely to see an overall harvest around 170 million salmon this year, up from 140 million last year," said Garon Bruce, deputy director of the state Division of Commercial Fisheries."Much of this year’s harvest is pink salmon, but overall we’re right on the five-year average," he said.One bright spot in fisheries overall is in halibut, where fishermen are doing well, Bruce said. The longer halibut fishing season has allowed for development of new, fresh halibut markets, and prices have been strong, Bruce said.The consequences of the salmon glut for Alaska fishermen are severe. Many Chilean salmon farmers are reported to be selling at below cost, Knapp said."No one expected the spike in production in Chile earlier this year," said Laura Fleming, of the Alaska Seafood Marketing Institute. "It’s having a profound effect on our industry.""A gillnet coho fishermen in Cordova two years ago was able to get $1.20 per pound for coho salmon he caught," Fleming said. "Last year, he received 60 cents per pound. This summer he got 30 cents.""Imagine your own family income being cut by half one year and then by two-thirds in the following year," she said.Alaskans who fish for sockeye salmon also felt the impact of farmed salmon this summer when processors in Western Alaska paid prices of 40 cents per pound for sockeye in Bristol Bay and 55 cents per pound in Kodiak. Those are well below last year’s prices and about half what was paid two years ago.Knapp said a significant indicator is that 15 percent of Bristol Bay sockeye fishermen with permits failed to turn up this year.Japan is flooded with farmed Chilean coho salmon, which has been priced well below Alaska sockeye salmon for some time.Alaska sockeye prices in Japan have dropped as farmed salmon has taken over the market, but the volume now purchased by Japanese importers is also so low that Alaska sockeye has become a kind of specialty item, Knapp said. Alaska used to supply the bulk of Japan’s imported salmon.Japan’s salmon farmers are also feeling the heat. Fleming said a delegation of Japanese salmon farmers went to Chile in September to ask Chile to cut back exports of farmed salmon to Japan.Meanwhile, U.S. prices for farmed Atlantic salmon, from Chile and Norway, have dropped from $2.20 per pound to as low as $1 per pound in the last two months, Knapp said.This follows a more gradual decline of farmed Atlantic salmon prices as the industry has expanded, from about $3 per pound to $2 per pound over seven years.The price drop undercuts efforts to sell frozen Alaska sockeye and coho salmon in domestic markets, Knapp said. "It’s really a rough year for anyone trying to sell Alaska frozen salmon in those markets," he said.Chris McDowell, who monitors markets for the Alaska Seafood Marketing Institute, said that while the big-money sockeye salmon industry is reeling, pink salmon fishermen are more or less holding their own.The pink salmon harvest was large, particularly in Southeast Alaska, and a $16 million purchase of canned pink salmon by the U.S. Dept. of Agriculture helped hold prices steady, McDowell said.Pink salmon prices paid to fishermen remained in the range paid last year, he said. It’s not a highly profitable fishery such as sockeye fishing has been in the past, but experienced and well equipped pink salmon fishermen can still make money if they catch enough volume, McDowell said.Some of those troll fishing for coho salmon later in the season also made out reasonably well, he said. While prices paid to gillnet fishermen for cohos are down because of farmed salmon, troll fishermen, who mainly serve a different, higher-end market, were paid prices that were generally on par with last year, McDowell said.In the bigger picture, Alaska salmon have now become a niche player in the world market, ASMI’s Fleming said. While this presents opportunities, Alaska’s salmon industry has to get its act together, she said."Even if the Chileans cut their production in half, we still have to improve our quality and respond better to market demand. We’re a niche supplier, but there are still opportunities; and it’s up to us to respond to them."McDowell said an example for the industry is that of troll salmon fishermen in Southeast Alaska who have carved out a good niche market in Europe, where wild-caught Alaska salmon is gaining distinction.The long-established Seafood Producers Cooperative in Sitka should be given a lot of credit for developing this new market, he said.Kate Troll, a fisheries consultant in Juneau who has done work on salmon marketing, said the local cooperative efforts between processors and fishermen in Cordova in selling Copper River sockeyes to high-end markets, and the "Arctic Keta" effort to sell chum salmon from the Kuskokwim, offer other examples of what can work.An important part of their success are the quality standards processors and fishermen have agreed on, and third-party verification that the standards are being met, which is important for buyers. So far, the major salmon processors have been unwilling to invest in developing uniform quality standards for the industry and in obtaining third-party inspection and verification, she said.

Developers set sights on popular flapjack eatery in Midtown

Alaskans will be able to pull up a chair at national pancake favorite IHOP Restaurant this winter, once a new franchise premiers in Anchorage. Builders of the 5,000-square-foot International House of Pancakes eatery were due to break ground by mid-October, said Randy Kaer of Kaer Craft, an Anchorage general contractor. The restaurant should open in January or early February at the Midtown Anchorage site at the corner of Tudor Road and Denali Street near Home Depot, said Mel Tipton, one of three partners in Goldrush North LLC. The company acquired franchise rights to build three Alaska IHOPs in the next three years, depending on performance, he said. Tipton and his family have operated businesses in the state since 1953. He founded Anchorage Bedding and Furniture, and Tipton Interiors. He now works as a contractor and developer. The new IHOP, capable of seating 176 diners, will feature more than flapjacks. The menu includes lunch and dinner choices from hamburgers to entrees like herb roasted chicken. At mid year, IHOP reported 965 locations in 41 states and Canada. Last year, the Glendale, Calif.-based company tallied $35.3 million in net income. Although plans in Anchorage are under way, an IHOP spokesman said no final decisions have been made to develop other franchises in the state. Patrick Lenow, director of public relations and communications, did note that an existing franchise operator had been considering sites for a possible Alaska IHOP. "We think it would be a great market," he said. The Alaska franchise will be led by operating partner Mike Miles, who owns and operates IHOPs in California and elsewhere in the United States, Tipton said. "We are well managed from a technical point of view," he said. Miles had investigated possible sites in Alaska for two or three years. The men met last December through a mutual friend, and Miles visited Alaska in January or February when he formed Goldrush North with another partner, 30-year Alaskan Samantha DeLay-Wilson. By summer, they had secured financing for the $2.5 million project through GE Capital of Bellevue, Wash. The partners also located a site for the Anchorage IHOP. "The demographics are very good," Tipton said. Traffic pattern studies from the site, near major retailers Home Depot and Lowe’s, reveal a concentration of customers similar to IHOP’s target market, DeLay-Wilson said. For new franchises, IHOP requires a lot size between 40,000 square feet and 50,000 square feet to accommodate either a 4,022-square-foot or a 4,999-square-foot building. The lot also must have a minimum of 60 parking spaces. Anchorage IHOP operators are still considering whether the eatery will be open round the clock, Tipton said. "If we are open 24 hours, we will have 70 employees," he said. However, IHOP officials may close the restaurant for three to four hours daily for cleaning, he said. IHOP in Anchorage would employ a minimum of 60 workers if it is closed for a period, Tipton said. The businessman believes "IHOP is one of the leading restaurants of its kind" and has sampled menu offerings during his travels recently. "What I like about IHOP is everything you order is generally fresh and not made ahead of time," he said. Spreng Associates Inc. of Anchorage was the store architect, and Bob Bell was the engineer. Construction will continue during winter, and the project should be enclosed in Visqueen by the first snowfall, Tipton said.  

Dot-com with funders' data nears profitability

An Alaska-based dot-com business, which derives its revenues solely from a Web site, has gone national and expects to see its first profit this month. The company, GrantStation.com Inc., provides a comprehensive database of funding sources for nonprofit organizations.The company is tapping into an enormous amount of nonprofit giving in this country. Last year, some 50,000 foundations and corporate givers made $34 billion in grants to nonprofits, according to company officials.The concept for GrantStation.com came from Cynthia Adams, the company’s president and chief executive, who has worked in the nonprofit funding arena in Alaska for 30 years. Ten years ago, she started a business called Alaska Funding Exchange, which provides consulting, training and other fund-raising assistance to nonprofits."In so doing, we built up a large database of funders who would give to Alaskans," Adams said. "We realized we had a valuable asset."In 1997, she put the database online and made it available to paying subscribers in Alaska. The response was so good that she immediately began thinking about creating a national site with information about all 49 other states.She soon realized that would be an enormous, and very expensive, task, and that her database already contained most of the big national funders, enough to go with right away.So she pulled together partners and investors, hired a staff, and formed GrantStation.com. When its Web site rolled out in August 1999, it contained all the national funders and specific funders for 11 states in the Pacific Northwest and the West Coast; that number has since risen to 15.The site also included a wide variety of information helpful to nonprofits looking for funding. "We wanted a complete grant-seeking toolkit," Adams said.A subscription to the site costs $299 per year for access to the national funding list; organizations also wishing to see their local state information pay $499 per year.Steven Schellong, Adams’ cofounder in the business and vice president for technology and business development, said GrantStation has not sought venture capital funding, partly because there was little interest in a company based on nonprofit corporations. "The (venture capitalists) expect a quick turnaround -- and nonprofits don’t spend money very quickly," he said.Instead, the company has relied on several "angel" investors from Alaska, a loan from First National Bank Alaska, and "lots of sweat equity," Schellong said. Five of the company’s seven employees are shareholders, he said.Both Adams and Schellong say the response to the Web site was good. But they soon ran up against the classic marketing dilemma: How to reach the customers out there who would buy the product if only they knew about it.They settled on two approaches: affiliate marketing and channel marketing. Affiliate marketing, which Adams said has proven to be the most successful business model for subscriptions on the Internet, pays referrers a percentage of each subscription actually received.Channel marketing gets the GrantStation.com brand distributed by other companies and organizations already serving nonprofits. Here, content has proved useful, with GrantStation providing continuously updated news about the nonprofit world to other Web sites. They also send the content to their partners, who include it in their e-mail newsletters."It puts our name in front of tens of thousands of people," said Adams. "The provider gets compelling content and the viewer gets vital information." She said GranStation has lined up 10 national channel partners so far. In Alaska, all state libraries are now full subscribers, she said.Another technique the company is using is to offer a discount to members of nonprofit trade groups. They also will make volume sales to organizations at a discount. Those organizations turn around and sell them to their members. In one case, a large national foundation is giving subscriptions out as mini-grants as a way of encouraging nonprofits to get funding from other sources.The affiliate and channel marketing systems made a reworking of the Web site necessary. They all rolled out in mid-September. So far, "Things are looking good," Adams reported. "I feel like we’ve turned the corner financially, and product-wise."Indeed, Adams said she expected the company to be in the black for the first time this month.Meantime, the research continues in other states to add them to the database. The company has even received a request from a New York bank for information about nonprofits in Africa, so the beginnings of an international version of GrantStation is now in the works.All of which caused Schellong to be as optimistic as his partner. "We feel in our heart of hearts it’s going to work," he said. "But we want to see it in black and white -- it’s what our investors want."

Divers start seasonal deep-water seafood search; Alaska elbows rivals for sales

With the onset of fall, divers in various parts of Alaska start heading down to the icy depths to begin harvesting sea cucumbers, urchins and giant geoduck clams. The fisheries, most of which began Oct. 1, are somewhat small in scale and usually only last a month or so; but each year, the pricey products pump lots of money into local economies.Southeast Alaska is the primary region for the state’s dive fisheries, most of which have been converted to limited entry in the past few years. Divers there have a 5.6 million pound quota for red urchins this year, and are hopeful the price will be well above last season’s disappointing 42 cents a pound to the roughly 40 fishery participants. Southeast divers also harvest sea cucumbers, which last year was the region’s most valuable dive fishery. Around 190 divers last October scooped up 1.56 million pounds, and this year they’ll compete for a 1.4 million pound cuke catch in 13 different areas.Added to that was the region’s 404,107 pound geoduck clam harvest, which added another tidy sum into Southeast coffers. The colossal clams are the largest in the world. They weigh on average two to three pounds, but can reach an awesome 20 pounds.Live gooeys fetch up to $10 per pound in Asia, whereas frozen ones, which are sold only to Japan, bring half that price. Prices to Southeast divers last year averaged $2.40 a pound, with some receiving a whopping $4.25/lb. for product going to the fresh market. Last year, the Southeast geoduck fishery opened the day after Thanksgiving, but a regional task force may delay the season until sometime next spring.There may be other parts of Alaska besides Southeast where geoducks are abundant; however, there is no budget appropriated by legislators to assess the potential for other commercial fisheries throughout Alaska.Gooeyduck clams are also harvested in British Columbia under a quota system in which 55 divers split the catch. But the state of Washington by far leads all others. There, the clams are planted on tidal flats where they can be tended and harvested when the tide goes out. The gooeys make it from the dock to the live market in just four hours, packed in cartons of ice.Washington leases sites to the highest bidders, and the state makes between $7 million and $10 million a year on the giant clams, which grow to market size in about 40 months. Two large farms in Washington are reportedly growing enough clams to provide roughly 15 million pounds to the world market.Elsewhere in Alaska, dive fisheries for sea cucumbers occur in Kodiak, which has a catch quota of 140,000 pounds, Chignik at 25,000 pounds, along the Alaska Peninsula, the Aleutian Islands and in a small portion of the Bering Sea, which all have a harvest quota of 5,000 pounds. The Kodiak region attracts the most interest, with 12 to 13 divers each year competing for cukes. Last year, the price averaged $1.50/lb., but went as high as $2/lb.In the Kodiak region, divers operate three days a week for a season that usually lasts about a month. Working three to a boat, the divers as in all dive fisheries, use a breathing system of surface-supplied air, and hunt for cukes at depths ranging from 30 to 120 feet."There are walkers and finners," explained long-time diver Brian Vitt. "It’s like hunting Easter eggs that you put into a net or goodie bag, which can hold from 100 to 800 pounds." Vitt said divers go for cukes day and night during the brief openers, and it can be risky."You can only stay down for 10 minutes at 120 feet. Then you have to surface and wait until your nitrogen levels decrease before you can go down again," he said. Vitt added that sea cucumbers "are very tender and taste like a cross between sweet clams and good calamari."A handful of Kodiak divers also target green urchins in October. Last year, a total of 22,800 pounds were harvested at an average price of $1/lb. Virtually all of the dive products are sold to the Asian market.It’s National Seafood MonthThe Alaska Seafood Marketing Institute is using the opportunity to differentiate wild salmon from farmed varieties. In a press release being distributed far and wide, ASMI says: "Alaska Salmon has the distinct advantage of offering consumers the best-tasting salmon on the market today. It has a firmer texture and a richer, more complex flavor than industrially produced farmed salmon."To further the cause, perhaps ASMI should add that wild salmon are not given food additives to enhance color, or antibiotics to keep them free from diseases common to fish held in large pens.Kodiak-based free-lance writer Laine Welch can be reached via e-mail at ([email protected]).

Railroad fields flurry of phone complaints on fall gravel trains

As termination dust sprinkles the mountain tops, complaint phone calls to the Alaska Railroad Corp. increase.The railroad is approaching its 1999 record of pulling more than 36,000 100-ton hopper cars, part of the annual fall rush of gravel trains coming from Palmer to Anchorage so that rock can be stockpiled for the winter.The increased gravel train traffic lasts from late August though mid-October, prompting gripes from some folks who live near the tracks, said Patrick Flynn, Alaska Railroad’s public affairs officer.As many as six, 80-car gravel trains run daily from Palmer-area rock pits owned by Central Paving Products, Anchorage Sand & Gravel, and Quality Asphalt Paving. The three pits are within a mile of each other along the Glenn Highway.More trains mean more blasts from train whistles at at-grade crossings, something railroads are required to do by law. And trains hauling gravel are heavier than others, causing more vibration, sort of a mini-earthquake every time a train goes by."That’s what people notice," Flynn said.The railroad has spent millions of dollars over the years to hush train noise, including replacing 35-foot rail sections with 80-foot sections that lessens the ’clickity clack’ sound by half, Flynn said.The railroad also has installed miles of track near residential areas called "continuously welded rail," where the gaps in the steel rails have been filled with metal, creating a steady, less annoying sound, Flynn said.Trees and bushes have been planted along some residential areas to create buffer zones to further lessen train noise, Flynn said."Anywhere we can get foliage in place, we will," Flynn said.Train whistles are required by federal law to be at least 96 decibels, and Alaska Railroad meters its horns at just above that level, Flynn said.Despite significant steps to silence the trains, they will still be noisy by nature, especially gravel trains, Flynn said."It’s the biggest, heaviest thing we move," Flynn said.Rock is an essential commodity in Alaska. Without it, there would be no streets, shopping malls or subdivisions, said Mike Harned, sales manager of Anchorage Sand & Gravel."You couldn’t build anything without it," Harned said."Literally and figuratively, gravel is the foundation of Alaska’s construction business," said Flynn. Trains keep big gravel trucks off the Glenn Highway, reducing traffic and causing less wear and tear on the state’s roads, where much of the gravel ultimately ends up in asphalt, Flynn said.Sam Giammalva, marketing manager for Central Paving Products, said his company has been mining rock in Palmer since 1979. The company runs two 80-car trains a day during the peak of the gravel hauling season, usually from August to late September. The rock, which ranges from 12 inches in diameter to sand, is about as good as is found anywhere."Rock in Alaska is a pretty hard compound," Giammalva said. Flynn said the railroad hauled 40 percent less gravel last year than its benchmark in 1999."There were fewer construction projects in the state," Flynn said.But this year looks good for gravel, the second largest revenue generator for the railroad behind fuel, which was shipped in record numbers this summer, sometimes averaging more than 100 cars a day from Williams Alaska Petroleum Inc.’s North Pole refinery. How much the railroad makes on its gravel hauling operation is proprietary, Flynn said. But hauling gravel did account for a significant portion of the railroad’s $94 million in revenues last year, he said.

Stores plan options to capture South Anchorage grocery shoppers

Starting this month, a South Anchorage corridor will see the emergence of new grocery retailers. The increase in grocery-stop choices comes one year after the closure of Alaska Marketplace, the company which acquired six stores Safeway was required to divest as part of its purchase of Carrs Gottstein Foods Co. Alaska Marketplace had operated a store in the Dimond Center, part of the area with growing grocery options. Changes to the city’s grocery market in a roughly one-mile area include Kmart adding groceries this month alongside nearby Sam’s Club, which recently completed renovations, while Fred Meyer plans to open a new store on Abbott Road in early 2002. Reports also note that Safeway may build a new store in the area, at Abbott Road and E. 88th Avenue. Safeway Inc. spokeswoman for Alaska Cherie Myers did not return phone calls at press time. Fred Meyer spokesman Rob Boley has said the new Fred Meyer store -- the company’s fourth in Anchorage -- should open early next year with a gas station. Fred Meyer is owned by grocery giant Kroger. Kmart launches its bid for the grocery market at four of its five Alaska stores Oct. 20, said Alaska district manager Mike Wilson. The Troy, Mich.-based retailer converted existing stores into Super Ks at its two Anchorage stores plus ne each in Fairbanks and Juneau, he said. The Kenai store was not included in the conversions. The South Anchorage Kmart is located on the New Seward Highway and near Dimond Boulevard. "It’s a prototype store that’s never been done before. All eyes are on us," he said. Kmart is converting other existing stores, including one each in Englewood, Colo., and Thousand Oaks, Calif., into Super Ks following blueprints similar to the Alaska stores, he said. The Alaska stores will differ because they will offer fresh seafood and a sushi bar, a new Super K option, both added based on customer requests, Wilson said. The transformation to a Super K did not include an expansion to make space for groceries, but required whittling of products such as solar lights which are carried at other Kmarts but were not relevant to Alaska, Wilson said. The Alaska stores were chosen for the upgrade since they were built larger than typical Kmarts, he said. Alaska stores average about 140,000 square feet compared to Kmarts in the Lower 48, which measure on average between 48,000 square feet and 90,000 square feet, Wilson said. Super Ks total about 180,000 square feet. Adding Super Ks in Alaska parallels a retail trend toward one-stop shopping, he said. "We have to do this. It’s what the customer wants," Wilson said. Work began in June to add groceries, including fresh produce, and was due to wrap up in time for another retail season spurred by Alaskans spending Alaska Permanent Fund dividend checks. "We wanted to be done before Thanksgiving," he said. Officials at corporate headquarters planned the renovations without knowing about Alaska’s fall retail spending spree, Wilson said. "They know about it now." Final dollar figures for the four-store upgrade were unavailable at press time. Renovations include the addition of four self-scan registers at each Super K. Sam’s Club, located in the same retail complex as a new Super K but owned by competitor Wal-Mart of Bentonville, Ark., recently completed renovations at its South Anchorage store. The change added new services like a pharmacy, and store officials said some merchandise is geared to reach shoppers buying smaller-scale items not just bulk items. However, Kmart district manager Wilson believes the retailers differ despite an upcoming overlap in merchandise. "We’re open to the public. Only members can shop at Sam’s," he said. Also, according to Wilson, Kmart offers smaller grocery item units whereas Sam’s Club handles large-sized offerings. Renovations at the South Anchorage Sam’s Club began in May. The $4 million upgrade did not increase store size, said Patty St. John, metro marketing manager at the store. A similar renovation is under way in Fairbanks and should be completed later this year, she said. Renovations at a second Anchorage store should begin in spring although a new location also may be under way. The South Anchorage project, planned two years ago, was not related to Kmart’s move, St. John said. Improvements were scheduled to start in spring 2000, but company officials did not secure permits in time, she said. New services include an optical center with an Anchorage optometrist, a pharmacy and additions to food lines. According to St. John, the produce section now offers more seasonal varieties, and the gourmet food section, which includes fresh pasta, sauces and dips, has been expanded. Sam’s Club installed new freezers for additional chicken and prepared meal items, and roasters now slow cook rotisserie chicken and ribs. The goal is "to be a little bit of something to everyone," regardless of income or total household size, she said. Store operators expect increased customer traffic drawn to the updated warehouse retailer to lead to additional sales, she said. New services at Sam’s Club would more closely match warehouse retailer Costco, she said. "It puts us on the same playing field as the competition," she said. Total sales volume was up in early October when the renovations were unveiled, even compared to last year’s figures, which included dividend sales, St. John said. Sam’s Club expects to add 50 new jobs as a result of the upgrade, said storegeneral manager Ray Brautigan. The store now employs about 180 people.  

This Week in Alaska Business History October 14, 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 TimesOctober 14, 1981State control of fish processors urgedby Lyn PeddlesTimes Washington BureauWASHINGTON -- A federal official and Alaska’s fish and game commissioner told a House panel today that states should have the power to control foreign fish operating within their boundaries.Alaska processors are protesting any federal action which might result in competition from their foreign counterparts who are not subject to the same stringent safety, health and labor standards. The processors are also worried that increased foreign activity will make domestic operations less willing to invest in expanding their facilities.The House Fish and Wildlife Subcommittee is considering amendments to the Fisheries Conservation and Management Act, the 1976 law which established a 200-mile fisheries limit for the U.S. That law does not permit state regulation for foreign processing vessels.Anchorage TimesOctober 15, 1981Gas line waivers sent to Congressby Betty MillsTimes Washington BureauWASHINGTON -- President Reagan formally submitted to Congress today a package of waivers of federal law which hinder private financing of the Alaska natural gas pipeline.The clock now begins ticking for congressional approval of the package, with both houses required to accept it within 60 days. Hearings open in the House Friday, and in the Senate next week, with Alaska Gov. Jay Hammond expected to lead the state fight for approval of the package.The package must be approved by Congress in its entirety without amendment. Reagan submitted the waivers to Congress in virtually identical form to the package proposed last summer by the project’s sponsors.The most controversial waiver would allow consumers throughout the Lower 48 to be billed for the gas before the project is completed.10 years ago this weekAlaska Journal of CommerceOctober 12, 1991Alaska Pulp has timber for winterForest Service sale provides 15 million board feet for Wrangell MillBy the Alaska Journal of CommerceAlaska Pulp Co. in Sitka acquired 15 million board feet of timber two weeks ago in a U.S. Forest Service sale on Wrangell Island in Tongass National Forest. The company says it now has sufficient supply to keep APC’s sawmill in Wrangell operating through the winter.There had been reports that supply problems would force the company to cut back operations, but APC has "no plans at all to curtail Wrangell sawmill operations," company spokesman Rollo Pool said.APC, which operates a major pulp mill in Sitka as well as the Wrangell sawmill, is a major employer in the northern Southeast region. Communities in the region have the jitters because logging activity is down, and sawmills in Haines and Klawock are now shut down, mainly due to supply problems.Alaska Journal of CommerceOctober 14, 1991Pace of North Slope permit activity picks upBy Ray TysonAlaska Journal of CommerceOil companies are gearing up for an unusually busy exploration season, judging from the large number of state permits being sought by companies to drill this winter."I don’t think they will drill all the wells this winter, but there’s no doubt it’s unusual relative to the past few years," said Bill Van Dyke, petroleum manager for the Alaska Division of Oil & Gas.The field also includes an unusually broad number of players: ARCO Alaska, Conoco, Unocal and Chevron.The most active explorer in recent years, ARCO, is seeking permits for five exploratory wells on the North Slope: Cirque No. 1, Iceburge No. 1 and Tarn No. 1 between the Kuparuk and Colville Rivers; Fiords No. 1 on the Colville River Delta; and Kalubik No. 1 located offshore of Colville Delta east of Kupigruak Channel.-- Compiled by Ed Bennett.

Agency outlines 5-year lease program

KENAI -- Some 5.3 million acres of sea floor, from Afognak Island and nearly reaching Kalgin Island, could be up for oil and gas leasing under plans being developed at the U.S. Minerals Management Service.Minerals Management will include the entire Cook Inlet planning area, but not Shelikof Strait, in its five-year plan for oil and gas lease sales, said spokesperson Robin Cacy. The proposed plan also includes the entire Beaufort Sea, Norton Basin and the Chukchi Sea-Hope Basin planning areas.Later, Minerals Management likely will reduce the areas to be offered for lease."Each sale will be focused down to the areas with the most potential for oil and gas and the areas industry is interested in," Cacy said.However, the agency will not start narrowing its focus until it begins writing environmental impact statements for individual sales. Nor will it begin considering mitigation measures, to avoid conflicts between oil and gas development and commercial fishing, for example, until then.Minerals Management is currently developing the five-year plan, Cacy said.For Alaska, that includes:* A sale in 2003 from the 25-million acre Norton Basin planning area.* Sales in 2003, 2005 and 2007 in the 62-million-acre Beaufort Sea planning area.* Sales in 2004 and 2006 from the 5.3-million-acre Cook Inlet planning area.* Sales in 2004 and 2007 from the Chukchi Sea and Hope Basin planning areas, which total 40 million acres.Minerals Management does not contemplate sales in the Gulf of Alaska, Cacy said.The agency has been working for about two years on the draft environmental impact statement for the five-year plan.

Airlines rush to protect pilots with crossbar locks on cockpit doors

AIM Aviation Inc. has been marketing fortified cockpit doors to airlines and aircraft manufacturers since the early 1990s.Business has been good in Europe, said Philip Fields, AIM’s vice president of sales.But since the Sept. 11 East Coast terrorist attacks, the Renton, Wash.-based company has experienced a bittersweet boon, filling some 750 orders for at least two domestic carriers, with other airlines set to place orders soon for the cockpit security system, Fields said.Alaska Airlines is outfitting its entire fleet of 102 airplanes with AIM’s crossbar locking devices on cockpit doors to protect pilots and ease the fears of passengers.President George W. Bush recommended fortifying cockpit doors shortly after the terrorist attacks. A formal directive by the Federal Aviation Administration Oct. 3 said that airlines should begin installing stronger cockpit doors within 30 days.Seattle-based Alaska Airlines began reinforcing the doors Oct. 2, and expects to have all of its airplanes equipped with the cockpit security devices in the next few weeks, said Jack Walsh, Alaska Airlines spokesman.Alaska Airlines pilots had input in the decision to keep the cockpits secure, Walsh said."They are definitely in favor of it," Walsh said.

Two Alaska sisters go national

Two Alaska sisters have built a company offering a set of software tools which could help everything from planning trails to keeping track of refugees. Lisa and Amy Johnson bring some powerful credentials to their company, IBIS Software. IBIS stands for Internet Based Imaging Systems. Both have bachelor’s degrees in computer science. Lisa Johnson has a master’s degree in remote sensing, while Amy Johnson has a master’s degree in applied mathematics. The sisters, who moved to Alaska with their family in 1976, went their separate ways after college. Lisa Johnson worked on satellite images for Batelle Labs in Hanford, Wash., and then moved back to Alaska to work as a programmer for ARCO Alaska Inc. Meanwhile, Amy Johnson held a series of jobs including working as a graphical information systems specialist for the Municipality of Anchorage and for BP Exploration (Alaska) Inc. She then helped develop three-dimensional models of a potential underground nuclear waste disposal site for Sandia National Labs in Albuquerque, N.M. After a brief stint with an Internet startup, she helped design server software for one of the nation’s leading database providers, Oracle Corp. When the two sisters were in the same room, ideas flowed. "Every time we got together, we pulled out our notebooks and brainstormed," said Lisa Johnson. About three years ago, they came up with the idea that eventually became IBIS Software. Amy Johnson had noticed a problem with graphical interface systems, which are complex and expensive mapping systems tied to multiple databases of information about the area on the map.

State eyes e-signatures

The state of Alaska is looking seriously at how electronic signature technology can enhance their service to the Alaska community. Complete electronic-commerce transactions execute business dealings as legitimate agreements, and include all the information about that action together with an electronic signature.Currently, most electronic transactions with the state require a paper process to finalize the agreement. On-line forms are available, but after they are filled out on-line, you need to print, manually sign, and mail the form to complete the transaction. The state has been developing a plan to support complete e-commerce transactions, including electronic and digital signatures, and expects to have several test projects completed by 2003.E-commerce transactions that require authentication of both the document and the author’s identity can create complex issues. According to Larry Walsh, the state’s director of information technology, as the state studies and resolves these issues, its implementation of electronic and digital signatures will provide a credible, secure and efficient method of doing business with the state.Like many other states, Alaska is shifting to the e-commerce world and in 1998 approved the use of electronic and digital signatures. However, in June 2000, President Clinton set the bar for electronic government by signing the Electronic Signatures in Global and National Commerce Act, known as the e-Sign Act for short. This legislation requires federal government agencies to accept electronic or digital signatures by the end of 2001.Although the e-Sign Act is vague and open to technical interpretation, it does provide some legal direction that previously didn’t exist and outlines some exemptions. However, this legislation is just the beginning and is far from being comprehensive. The states that have passed electronic commerce legislation have just as many differing interpretations and all are facing the same cultural, procedural and technical issues as Alaska.First, there are levels of authorization. Are manual signatures necessary for some types of transactions? There may be current situations where manual signatures are being used as a type of personal identification, but aren’t really necessary. Will an electronic signature be sufficient or will a digital signature, which are different, be required?Unlike a scanned electronic signature or other recognizable record that identifies who you are, the digital signature is designed to prevent fraud, signature forgery or stolen identity.Most commercial transactions require the amount of authentication provided by digital signatures, where neither party can later deny the transaction or the signatures.Second, there needs to be a clear and intentional move to a digital environment. Let’s use the State of Alaska’s Department of Banking, Securities and Corporations as an example. Their current technology is unable to support easy electronic document storage and access to records. Their current records are on paper and microfiche, requiring a bridge between the old and new files and ease of access to both.Third, this isn’t a departmental problem; it’s a statewide issue that requires acceptance of process and standards throughout the state’s governmental agencies. Instead of every department choosing its own type of authorization method or technology, e-commerce guidelines would be prescribed at the state level.Let’s use the securities department as an example of how a digital signature or authentication could take place. You file the articles of incorporation of your newly formed business with the state. You normally use a notary to verify your identity with their stamp and signature on the paper document.How do you sign the electronic version of the document? According to the e-Sign Act’s definition of electronic signature, it could be an "electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record."That leaves your signature open for some interpretation. The state may require you to sign the electronic document using a digital signature otherwise known as digital certificate, one that you have registered with a third-party certification authority. Unlike a scanned electronic signature or other recognizable record that identifies who you are, the digital signature is designed to prevent fraud, signature forgery or stolen identity.The certification authority is somewhat like the notary; your digital signature is registered, and it can be proved it is yours and that only you can use it. Public key cryptography defines the digital signature in two parts: One is the public key that anyone can access, and the second is your private key, which is known only by you.When the digital signature, which contains the private key, is sent with your articles of incorporation, the receiver of the document has the ability to verify your identity through the public key issued and managed by the certification authority.The other authorization has to do with the security of the electronic document. Unlike its paper counterparts, it is very easy to modify. There must be proof that the articles of incorporation you sent electronically weren’t altered in any way after they were sent.The digital certificate uses a one-way hash algorithm, and if the original document has changed in any way, the digital signature is negated and the certification authority does not verify it.Digital Signature Trust, owned by Zion Bancorp of Salt Lake City, is the only certification authority that has registered with the state, but others have been invited and also are expected to register.There are many types of digital signatures available today, including biometrics -- the use of fingerprints and retinal scans for identification. What’s important is that before we implement them, we understand how and when they should be used.Melody Milliken is president of ken Corp., an information technology, project management and business consulting firm based in Anchorage. She can be reached via e-mail at ([email protected]).

Gladiator leaders prep companies for future economic upswing

Remember the heart-pounding, soul-stirring message of last year’s critically acclaimed movie, "Gladiator"? Remember how Maximus, the Russell Crowe character, rallied his men around him and led them to victory, even in the face of almost certain defeat? Remember his "envision the goal" technique for getting through the horrors of battle?Now, consider the leadership in your own company. Are there any gladiators in the ranks? Are you a gladiator? The time is right for a more heroic style of leadership. Desperate times lend themselves to the rise of gladiators. Instead of seeing today’s economy as a negative, executives should view it as an opportunity in disguise -- a chance to position their organizations for the inevitable economic upswing. Here are eight virtues of gladiator leadership.1. Gladiators have a mission for which they feel real passion. Call it a purpose, an obsession, a calling. Whatever the terminology, good leaders have a defining mission in their lives. A mission, above all other traits, separates managers from leaders. In "Gladiator," Maximus lived for the mission of killing the evil usurper Commodus and restoring Rome to the values that made her great.2. Gladiators create a vision. Having and communicating a clear picture of a future goal will lead to its achievement. Dare to think great! Maximus helped his fellow gladiators see they could overthrow their enemies and survive the horror of the battles in which they were forced to participate. In business, a leader may create an "enemy" -- the economy, the competition, inefficiency -- to challenge the energies of his or her people and give them something for which to fight.3. Gladiators lead from the front; they don’t dictate from the back. In the movie, when Maximus was a general and a gladiator, he fought up front where the firestorm was heaviest. So does a good business leader. Working "in the trenches" shows that you’re not afraid to get your hands dirty, it helps you fully understand the issues your "soldiers" are facing, and inspires loyalty in your troops.4. Gladiators know there is strength in teams. Where would Maximus have been if he hadn’t trusted his men to fight with him and cover his back? Likewise, where would you be without your employees? While the gladiator leader has the skills to draw people together, he doesn’t hog the spotlight. He has care and compassion for his team and wants every member to be recognized for his or her efforts.5. Gladiators encourage risk-taking. In the Roman Empire, gladiators were expected to die with honor. Refusing to lie down and let one’s opponents win was bucking the status quo. If a company does not examine its way of doing things, if it does not push out its boundaries, if it never makes mistakes, it may become road kill.6. Gladiators keep their heads in a crisis. Maximus had to think on his feet and refuse to give in to terror and panic. He faced the most formidable foes calmly and with focus. Business leaders must do the same. They must take a position and defend it when things go awry. Being graceful and brave under fire is the surest way to build credibility -- a necessity for sound leadership.7. Gladiators prepare for battle 24 hours a day. Essentially, a Roman gladiator was a fighting machine. To stay alive, his mind had to be constantly on the upcoming battle. Business leaders, likewise, must be obsessed with training and developing their people in good times and bad.8. Gladiators are teachers and mentors. Maximus taught his men the lessons they would need to survive in their new role as gladiators. In today’s rapidly changing environment, leaders must also teach and train those who may soon replace them. We are not necessarily talking about formal classroom training. We need leaders talking to people in the hallway, in the restaurant ... everywhere. Everyone should be mentoring someone.Gregory P. Smith leads the management consulting firm called Chart Your Course in Conyers, Ga. He can be reached via e-mail at ([email protected]).

State puts off telecommunications contract award, cites long evaluation process

State officials have delayed the announcement of a vendor for a $26 million annual contract to provide state government telecommunications. Administration department Commissioner Jim Duncan had hoped to award the contract by Oct. 1, but he now believes the contract award will be announced by Nov. 1.By mid-October, Duncan hoped to finalize negotiations with the contract award vendor, then legal experts would review the contract, he said.When state officials declare a contract award winner, documents and other bidders, proprietary during the process, will be made public, he said."It really does put us in a place where we’re able to talk about the benefits to the state and the public," Duncan said.Also, after the vendor is announced the state kicks off a 10-day period during which protests can be filed, he said.The contract announcement will spell out impacts for employees in the state information technology department, Duncan said.When state officials issued the bid for the telecommunications contract in August 2000, they estimated that 42 state employees would be laid off as a result of the new contract. However, many of them might be hired by the winner of the contract, officials said.The State of Alaska received three proposals for the new contract which went out for bid last August, Duncan told the Journal earlier this year. He was unable to list names of vendors since the procurement process was ongoing.Start-up dates for providing service are part of negotiations, but Duncan hopes to implement the services as soon as possible after the award date.In December, representatives from major Alaska telecommunications players AT&T Alascom, Alaska Communications Systems and General Communication Inc. told the Journal they submitted bids.Originally, state officials had planned to award the contract in mid-March. However, once they started evaluating the proposals, officials determined the process would take longer than expected, since the proposals were more complex than anticipated, Duncan said.The new contract aims to streamline state telecommunications services.The request for proposals calls for a vendor, possibly including a consortium of companies, to run the state’s telecommunications networks for four years, with two optional one-year renewal periods.The contract covers service for wired telephones, data networks, video, paging, cellular, satellite transport, tech support, including a help desk, and operating and maintaining the state’s microwave system.Until now, services, including telephone, data, Internet, radio, paging, cellular, satellite and videoconferencing, have been provided either directly by state employees or by 357 vendors at a cost of $21.5 million per year. Five of those vendors do more than $1 million per year in business with the state, and 46 do more than $50,000 per year, according to a press release issued last year by the governor’s office.

Business Profile: Craig Taylor Equipment Co.

Name of the company: Craig Taylor Equipment Co.Established: 1954Location: 733 E. Whitney Road, Anchorage, plus branch locations in Fairbanks, Soldotna and WasillaTelephone: 907-276-5050Web site: www.craigtaylorequipment.comMajor focus of services: Craig Taylor Equipment Co. provides construction equipment sales, service and rental. The company also sells parts for the products it carries from 15 manufacturers, including John Deere and Bobcat.History of the company: Fairbanks residents Craig and Thelma Taylor started the company in 1954, and Craig convinced the John Deere equipment manufacturer to appoint the firm as its Alaska distributor.In the 1960s, Craig Taylor Equipment opened an office in Anchorage. That office now serves as corporate headquarters. After Craig Taylor died in 1989, Thelma Taylor took the post as owner and chief executive. She now lives in San Diego. Lonnie Parker, a 19-year employee, was appointed general manager two years ago. Today, the company employs roughly 60 people at its four Alaska locations and maintains a rental fleet valued at $12 million. Craig Taylor Equipment employees also travel to rural Alaska to service products.In the last decade, Craig Taylor Equipment officials have seen their industry swing from a focus on sales to contractors to more of a rental and leasing trend in construction equipment.One of the leading products at the Alaska company is Bobcat’s small loader. Craig Taylor Equipment maintains a rental fleet of 45 and also sells about 100 loaders each year.Top accomplishment of the company: "I would say one of our biggest accomplishments has been maintaining our company image in light of national rental companies that have come to town," said Lou Holzknect, sales manager and vice president. "We’ve still been able to grow in light of the competition."Major player: Lou Holzknect, sales manager and vice president, Craig Taylor Equipment.Holzknect started in the industry in 1976 selling small Bobcat loaders in Seattle. Later, he worked for another company, handling more products. In 1983, Holzknect moved to Alaska to lead the opening of a new Wasilla branch. Two years ago, he was appointed to his current post.-- Nancy Pounds

Palmer adds antique plane

Abbe Air Cargo Inc. of Palmer has started business with a versatile vintage airplane, designed to move awkward and heavy cargo on short, unimproved runways.The company’s airplane is a Douglas DC-3C, owned by Thomas Abbe Sr., Thomas Abbe Jr., and Kevin Frohling. It is the only air cargo business operating at the Palmer Municipal Airport, Abbe Jr. said.The company employs six people, including two pilots, Abbe Jr. added.The airplane, built in 1944, was purchased from Frontier Flying Service Inc. in Fairbanks, where it saw service for several years.The airplane had been mothballed for about 18 months, but was brought back to life this summer by Abbe and his father, both of whom are certified aircraft mechanics."It needed a good cleaning," Abbe Jr. said.The World War II-vintage airplane, originally built under the military designation of C-47, can carry up to 7,000 pounds of cargo, Abbe Jr. said, adding that he sees great potential in hauling building materials, groceries, and fuel to rural Alaska villages from either Anchorage or Palmer.Abbe Jr. said he expects a large part of the company’s business will include hauling hunters and their game out of the Bush.The airplane has four separate 1,000 gallon fuel tanks, allowing the company to deliver diesel, heating or aviation fuel to the Bush, and the airplane can land or take off on an airstrip of 2,500 feet or a little less, Abbe Jr. said. "I don’t know of any other airplane out there that can get in and out of the Bush as well," Abbe Jr. said.

Cost method can lead business astray

Many companies use very simple methods to calculate costs. These techniques track some base cost that is usually easy to track, and allocate overhead based on how much of this base each job or product uses. While this approach works in some cases, it can badly mislead in others. An example of this is demonstrated in a newspaper article about the cost of food in restaurants. On March 10, 2000, the Wall Street Journal printed an article about the cost of food at restaurants. They noted that overhead in a typical restaurant is 300 percent, and said the base is the cost of the food. This means that the raw material, or the food, is about 25 percent of total costs. The article then used this data to help explain meal costs, and to describe some pricing dilemmas with which some of the restaurants struggled. One example was the Sunset Grill. The Sunset Grill owner agreed the overhead figures were right for his restaurant and went on to describe the problem he has. His least and most expensive dishes, in terms of food cost, were the grilled vegetable plate at $1.55, and the beef tenderloin at $8.42. The owner noted that adding the 300 percent overhead to each dish meant the grilled vegetable plate cost $6.20 and the beef tenderloin cost $33.68. He then complained that he could not have two entrees on the menu that differed that much in price, so he set the price of the grilled vegetable plate at $9 and the price of the beef tenderloin at $25. He went on about how painful it was to serve the beef dish, and said he wished he could only sell vegetable and pasta plates. At first glance, this cost analysis sounds reasonable; but on closer look, it has some serious flaws. It assumed that overhead should be apportioned to each meal based on the raw material costs of that meal, and calculated the overhead costs by multiplying the raw material costs by a constant percentage. Thus, meals that had large raw material costs, like the beef tenderloin, were shown to be money losers because the restaurant could not charge the full 300 percent mark-up. Low-cost entrees, such as the vegetarian entrees, were shown to be very profitable because it was easy to charge at least the 300 percent mark-up. This method of spreading overhead costs signifies that the dollar amount of overhead is significantly different between the two meals, depending on the cost of the raw materials. This means that the beef tenderloin dinner costs a little more than four times as much in overhead costs as the grilled vegetable plate. Does this make sense? What does the beef dinner do to use four times as much overhead as the vegetable dinner? Consider what activities occur in a restaurant. It buys the ingredients, prepares the food, seats patrons, takes orders, serves the meals, bills the patrons, cleans up after the meal, and receives the payment. Only the ingredients and food preparation will vary based on what meal is served, and it does not seem likely that it would cost any more to perform these same activities for the beef dinner than it would for the vegetable dinner. In fact, there is probably very little relationship between the raw material costs and the amount of overhead activities. A better approach to determining costs would assume that all meals use the same dollar amount of each activity. If the grilled vegetable plate, at $1.55 raw materials cost, and the beef tenderloin, at $8.42 raw materials cost, are the extremes, then the average cost of raw materials is about $5. Adding a 300 percent mark-up to that is the same as adding $15. If each meal uses the same dollar amount of overhead, then we should add about $15 to each meal instead of 300 percent. That means the grilled vegetable plate costs $16.55 ($1.55 + $15) and the beef tenderloin costs $23.42 ($8.42 + $15). Based on this analysis of costs, the restaurant is charging about the right price for the beef tenderloin at $25, and undercharging considerably for the grilled vegetable plate at $9. If the owner was successful at selling nothing but pasta and vegetables as he wished, he would probably go out of business. This is a very different picture of costs than that shown in the initial analysis, and is an example of the problems that occur in many industries. Clearly, the method by which overhead is apportioned makes a big difference in the cost calculated for each product. For example, manufacturing companies typically use the cost of direct labor as a base. The alternate approach described above is called activity-based costing. It throws out the concept of a base and overhead, and instead analyzes all costs based on activities. This allows a company to accurately calculate the cost of very different kinds of products and services, and helps them to make better pricing decisions. This kind of approach to costing can be a significant help to many companies. Many companies are making bad decisions daily and losing money because of inaccurate cost data. David Arnsdorf is president of the Alaska Manufacturers’ Association in Anchorage.

Anchorage company wedges Buffalo into Bush cargo market

If a government employee needs to get five tons of big, wide widgets to a Bush town with an impossibly small, bumpy airstrip, and it has to get there quick, there’s a new option. Public Service Aircraft Inc., an Anchorage-based airline, began service in September with its DeHavilland DHC-5 Buffalo airplane.The airline is unique in that it caters only to government entities, on an on-call basis.The company is owned by Jim and Kim O’Meara, who also run Greatland Laser, a company that specializes in laser lighting for runways and rescue applications.The couple purchased the $2 million airplane, 17 spare turbine engines, and a warehouse full of parts earlier this year from Andrews University in Berrien Springs, Mich., a Federal Aviation Administration-approved maintenance school.Along with the airplane came Dan Snyder, the new company’s director of maintenance. Snyder has been working on and flying the airplane for the last five years while he was employed at the university."I’ve been chasing this airplane for five years and I finally got it," said Jim O’Meara, who has more than 18,000 hours of flying and 30 years flying experience in Alaska. Kim O’Meara, the company’s president, has a long background in accounting and business management.The Buffalo is a twin-engine, turboprop airplane that can carry 10,000 pounds of bulky cargo, and can land and take off on strips of less than 1,300 feet. The O’Mearas say their mission with the new airline is to provide service only to government agencies in normal and emergency situations that can’t be handled by other commercial air carriers.Jim O’Meara said he sees the aircraft hauling everything from construction vehicles and equipment to fuel and law enforcement personnel.Its short takeoff and landing capabilities, along with its cargo capacity and huge rear door, make it ideal for the Bush, the O’Mearas said.The Canadian-built airplane was manufactured in 1963 for the U.S. Army. The airplane saw service in Vietnam, where its steep descent and pull-up capabilities enabled it to avert enemy fire, according to the O’Mearas. The airplane has a storied history of ownership, being transferred from the Army to the Air Force, then to the Navy and back to the Army. It was donated to the university in Michigan in 1996.The airplane looks nearly new."It’s an absolutely beautiful, cavernous airplane that the government has thrown million of dollars at over the years, and it shows," Jim O’Meara said.Only four of the airplanes were built for the United States. Military procurement policies changed, prohibiting the purchase of foreign aircraft to protect the domestic airline industry, the O’Mearas said.In all, 126 of the airplanes were built through 1986 for airlines and governments around the world.The airplane cruises at more than 230 miles an hour, and can gain altitude quickly, setting six time-to-height records in 1976.

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