Principal or Spendable
Trust land generates two types of revenue. The Trust Land Office reinvests royalties it takes in from resources such as oil, gold, coal and timber, and other assets that are not replaceable and it invests in real estate projects that generate income that can be spent on programs for the Mental Health Trust. Revenue-generating uses of Trust land include land leasing and sales; real estate investment and development; commercial timber sales; mineral ex-
The Fort Knox gold mine pays royalties for gold it extracts from Trust land it leases. It has produced 6 million ounces of gold and an estimated 2 million ounces of gold in the ground awaits recovery. The Trust also leases 22,000 acres to International Tower Hill for its prospective Livengood gold mine. “They’re estimating 13 to 15 million ounces of recoverable gold are there,”
In Southeast, Alcan Timber Inc. is wrapping up a five-year timber harvest on 5,000 Trust acres east of Ketchikan at Leask Lake. “Timber provided most of (the Trust’s) revenue since the late ‘90s-almost $40 million total,” Jones says. “Since the settlement, it’s averaged $2.5 million a year. It’s by far the single largest source of principal revenue of all of our resources. The bulk of the timber has gone to Asia. It’s been very profitable for the Trust.”
Tower Hill’s Livengood gold prospect.
Logs at Viking Lumber Co. sawmill in Southeast.
ploration and production; coal, oil and gas exploration and development; sand, gravel and rock sales, and other general land uses. Rents, fees and 15 percent of timber revenue from Trust land uses are considered “spendable income” and are available to the Trust for use in the following fiscal year. The Trust Land Office is also involved in commercial real estate. In Anchorage, it owns a Midtown office building and is developing a medical office in the University Medical District, also known as U-Med. “It grows the asset base and also generates income,” said Greg Jones, executive director of the Trust Land Office. “Our target is to generate an 8-percent-range income. If we invest $20 million in real estate, our goal would be to generate $1.5 million to $2 million a year to go into The Trust.” Land sale revenue, hydrocarbon and mineral royalties, and 85 percent of timber revenue are considered “principal” and are deposited in the Trust corpus, which is held and managed by the Alaska Permanent Fund Corp. “We’re busy on all fronts,” Jones said. “We’ve ramped up activities on virtually all activities we manage.”
The Leask Lake timber is the last Trust source of so-called “noncontroversial” timber, Jones says. It has 20,000 acres of remaining timberbearing land situated in places like Douglas Island, Ketchikan, Meyers Chuck, Haines, Sitka, Petersburg and Wrangell. The Trust is working toward a 20,000-acre Prince of Wales Island land trade, because, “In most cases, most of those communities don’t want us to harvest that timber because it’s the viewshed of their community. They hunt, they fish, they hike on Trust land. It’s beautiful old-growth forest.” Jones says after the Trust was reconstituted in the mid 1990s, it spent 10 years generating income from “lowhanging fruit.” “We logged the easy timber, went after the stuff that was easy to get to,” he says. “Now there’s no more lowhanging fruit. Some of our current projects are controversial, technically harder to get out of the ground—underground coal gasification—there are regulatory challenges. But the value of Trust assets is huge. It’s billions of dollars. We’re focusing on developing information on resources, working closer with oil and gas, mining, forestry industries. We’re open for business.” q
Rig at Buccaneer Energy Kenai Loop No. 1.
Jones says. “They’ve drilled (more than 600) holes in the process of trying to find the edges of the resource.” The Trust has also leased 230 acres in Salcha to placer miners who, with the current high price of gold, are using modern techniques to try to pull gold from tailings mined in the past. The Chuitna coal resource is located on Trust land and there is also coal in the ground on Trust land in the Chickaloon area, Jones says. Natural gas is yet another resource that promises royalty income for the Trust. Buccaneer hit one well last summer near Wal-Mart in Kenai and is producing gas from that well. Seismic work was under way earlier this year by Buccaneer to determine the size and shape of the field. Apache is also seeking oil and gas in Trust acreage in the Cook Inlet region.
www.akbizmag.com • Alaska Business Monthly • April 2012
Published on Apr 1, 2012
Published on Apr 1, 2012
Alaska Business Monthly’s 2012 Corporate 100 annual special section begins on page 86. Top citizens of industry are highlighted in this annu...