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LEGISLATIVE PRIORITIES ■ FISCAL REFORM ■ ALASKA OIL POLICY

January 2013

$3.95

2013 Economic Outlook Read what Alaska’s leaders say Page 42


FROM THE EDITOR Follow us on and

Volume 29, Number 1 Published by Alaska Business Publishing Co. Anchorage, Alaska Vern C. McCorkle, Publisher 1991~2009

EDITORIAL STAFF

Managing Editor Associate Editor Editorial Assistant Art Director Art Production Photo Consultant Photo Contributor

Susan Harrington Mari Gallion Tasha Anderson David Geiger Linda Shogren Chris Arend Judy Patrick

BUSINESS STAFF

President VP Sales & Mktg. Senior Account Mgr. Account Mgr. Survey Administrator Accountant & Circulation

Jim Martin Charles Bell Anne Campbell Bill Morris Tasha Anderson Mary Schreckenghost

501 W. Northern Lights Boulevard, Suite 100 Anchorage, Alaska 99503-2577 (907) 276-4373 Outside Anchorage: 1-800-770-4373 Fax: (907) 279-2900 www.akbizmag.com Editorial email: editor@akbizmag.com Advertising email: materials@akbizmag.com Pacific Northwest Advertising Sales 1-800-770-4373 ALASKA BUSINESS PUBLISHING CO., INC. ALASKA BUSINESS MONTHLY (ISSN 8756-4092) is published monthly by Alaska Business Publishing Co., Inc., 501 W. Northern Lights Boulevard, Suite 100, Anchorage, Alaska 99503-2577; Telephone: (907) 276-4373; Fax: (907) 279-2900, ©2012, Alaska Business Publishing Co. All rights reserved. Subscription Rates: $39.95 a year. Single issues of the Power List are $15 each. Single issues of Alaska Business Monthly are $3.95 each; $4.95 for October, and back issues are $5 each. Send subscription orders and address changes to the Circulation Department, Alaska Business Monthly, PO Box 241288, Anchorage, AK 99524. Please supply both old and new addresses and allow six weeks for change, or update online at www.akbizmag.com. Manuscripts: Send query letter to the Editor. Alaska Business Monthly is not responsible for unsolicited materials. Photocopies: Where necessary, permission is granted by the copyright owner for libraries and others registered with Copyright Clearance Center to photocopy any article herein for $1.35 per copy. Send payments to CCC, 27 Congress Street, Salem, MA 01970. Copying done for other than personal or internal reference use without the expressed permission of Alaska Business Publishing Co., Inc. is prohibited. Address requests for specific permission to Managing Editor, Alaska Business Publishing. Online: Alaska Business Monthly is available at www.akbizmag.com/archives, www. thefreelibrary.com/Alaska+Business+Monthly-p2643 and from Thomson Gale. Microfi lm: Alaska Business Monthly is available on microfi lm from University Microfi lms International, 300 North Zeeb Rd., Ann Arbor, MI 48106.

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s we venture into 2013—having made it through the end of the Mayan calendar—we’ve got some tough decisions to make (since the world didn’t end after all). In order to successfully go forth, we need to rein in a bit—quite a bit, actually. As we’ve held our breath through the D.C. fiscal cliff politics, what stands out most are the bitter arguments for reductions: spending reductions, tax-break reductions. In Alaska, phenomenal oil revenues have spurred the State Legislature to spend at an unsustainable level. Add to that the ACES effect and we are approaching an Alaska fiscal cliff of Denali proportions. One parallel with the feds is the need to reduce spending, and we’re working on that. Where we branch off down another trail though is with taxes: Some folks in D.C. want to raise taxes, but in Alaska some folks want to reduce taxes, specifically ACES taxes. Otherwise, well, we all know what’s happened since ACES—Alaska’s Clear and Equitable Share—passed. The ACES effect has caused big oil to take a big pause and instead of drilling for oil in legacy fields to fill up the trans-Alaska oil pipeline (as they were doing before ACES), drilling has stepped up in other states and other countries. Instead of investing the ACES windfall revenues into a sustainable future, the State Legislature has spent much of it. Instead of recognizing the long-term harm ACES is causing the state, the Legislature has been too blinded by the short-term gains of high oil prices to notice, apparently, that ACES has shut things down a bit. Instead of reforming ACES, we haven’t yet—but we have another chance to change things around this session. The ACES effect is the denial by the Alaska State Legislature—with respect to the Alaska economy—to recognize the need to change petroleum tax policy that has proven instrumental in declining petroleum production, threatening the future of the pipeline and jeopardizing the state’s economy. The ACES effect begs for tax policy reform. I’ll get off my soapbox now and let you in on a bit of the January issue. We are always proud to be a sponsor of Junior Achievement Alaska and have a special section about the organization, which is celebrating 40 years in Alaska this year (begins on page 12). The president and chair have extended an invitation to everyone to attend this year’s event to support JA, and we hope to see you there. The 2013 Economic Outlook is infused with 18 of Alaska’s leaders’ comments on the coming year’s economy (begins on page 42). The team has put together another really great issue of Alaska Business Monthly magazine—enjoy! —Susan Harrington, Managing Editor

www.akbizmag.com • Alaska Business Monthly • January 2013

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Januar y 2013 TA BLE OF CONTENTS dePArtments

About the cover

The looming fiscal cliff casts an eerie aura on economic planning, even in Alaska, where the state economy functions a bit differently than the national economy. However, Alaska faces an abyss of its own with declining North Slope petroleum production, the promise of fewer federal dollars, and the ACES effect.

From the Editor. . . . . . . . . . . . . . . . . . . . . . . . . 3 Inside Alaska Business . . . . . . . . . . . . . . . . . 6 Right Moves . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Agenda. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Alaska This Month. . . . . . . . . . . . . . . . . . . . 74 Events Calendar . . . . . . . . . . . . . . . . . . . . . . 77 Market Squares. . . . . . . . . . . . . . . . . . . . . . . 78 Alaska Trends. . . . . . . . . . . . . . . . . . . . . . . . . 79 Ad Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

Feature Articles

special section

VIEW FROM THE TOP

POLITICS

48 | 2013 Legislative Priorities Alaska State Chamber of Commerce

10 | David McCormick, Owner Hillside Music Compiled by Mari Gallion

TRANSPORTATION & ENERGY 50 | Arctic Infrastructure Needed for Resource Development and Delivery By Paula Cottrell

OIL & GAS

© 2013 Chris Arend

58 | Fiscal Reform Reducing budget growth and lowering oil taxes critical By Mike Bradner

HEALTH & MEDICINE 32 | Health Workers Needed, STAT! By Susan Sommer

OIL & GAS

© 2012 Ken Graham Photography.com

CONSTRUCTION

Setting sun on JBER construction (UNIT Company’s Motor Pool project).

36 | Winter Construction Photo Essay by Ken Graham

LEGAL SPEAK

41 | Internships Benefit to both company and intern, if done correctly By Renea Saade

ECONOMY

OIL & GAS

66 | Alaska Oil Policy Achieving alignment By Bradford G. Keithley

OIL & GAS

68 | History of Oil & Gas Production and prices Compiled by ABM Staff

FINANCIAL SERVICES

71 | Financial Planning Begin with a cash flow projection By Bond Stewart

TELECOM & TECHNOLOGY

42 | 2013 Economic Outlook Leaders share positive forecasts Compiled by Mari Gallion

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62 | Alaska’s Refineries Battling high crude prices, low demand By Zaz Hollander

72 | Big Data By Ed Arthur

Junior Achievement Special Seciton 12 | Junior Achievement Alaska Celebrates 40 Years Serving Alaskan students and the economy By Flora Teo and Logan Birch 14 | Junior Achievement Alaska Marks 40 Years Business education project changing to meet today’s bottom line

2013 ALASKA HALL OF FAME LAUREATE INDUCTEES & PAST LAUREATES 18 | Mark Eliason By Will Swagel

20 | Byron Mallott By Will Swagel 22 | Rick Mystrom By Rindi White 24 | Joe Usibelli Jr. By Zaz Hollander 26 | Junior Achievement’s Influence Helping fill Alaska’s skills gap By Susan Sommer 28 | NANA and Junior Achievement Team Up 29 | 2012 JA Sponsors 30 | The Common Core & Junior Achievement 31 | Junior Achievement Presents Are you smarter than a 6th grader?

www.akbizmag.com • Alaska Business Monthly • January 2013


INSIDE ALASKA BUSINESS

R&M Consultants Inc.

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&M Consultants has expanded their service offerings in Fairbanks to include civil engineering, and has expanded their service offerings in Anchorage to include hydrology and hydraulics services. Until now, R&M’s Fairbanks office has consisted entirely of surveying and right of way staff. Since opening the Fairbanks office in 2009, the firm has planned to add other staff to provide services within their core business lines. R&M in Anchorage now offers a full spectrum of hydrology and hydraulics services in support of surface transportation, airport engineering, site development and industrial projects. R&M’s hydrology team provides expertise across all stages of project development—from pre-project planning and concept development through design, construction and post-construction monitoring. The R&M team offers a wealth of Alaskaspecific hydrology experience, having worked on projects in literally every major geographic region of Alaska—from the Aleutian Chain to the North Slope to the Interior to Southeast.

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Coastal Villages Region Fund

he reality of parking Coastal Villages Region Fund’s 100 percent owned and controlled fishing vessels in Alaska has moved a step closer with CVRF’s decision to park five of its salmon and halibut tender vessels in Seward this winter: the Wassilie B (107 feet), the Camai (115 feet), the Kelly Mae (135 feet), the Hawk (73 feet) and the Gildy Logger (150 feet).

Compiled by Mari Gallion

As for CVRF’s larger deep draft vessels that fish for pollock, crab, and cod—the Northern Hawk (341 feet), the Arctic Sea (135 feet), the North Sea (126 feet), the Bering Sea (110 feet), the Lilli Ann (141 feet), the Deep Pacific (130 feet), and the North Cape (123 feet)— the parking space and services are not yet available in Alaska. The City of Seward was awarded $400,000 to begin a relocation study in 2011 that was completed in early 2012. An additional $10 million is tagged for Seward’s port project in the $453 million transportation bond package that passed Nov. 6, 2012. The study revealed that substantially more than $10 million is needed to adequately construct the port to meet Coastal’s growing and potential needs.

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PDC Inc. Engineers

n a surprise announcement to its employees, Ron Gebhart, PDC’s board of directors chair, informed staff that the existing owners of the firm have sold the company—to them! As an Employee Stock Ownership Plan, the program transfers ownership to each and every qualifying employee at PDC. A full service engineering, planning and survey firm, PDC has built its reputation by providing value-added client service and superior cold region design expertise. With a current staff of 80 professionals, split evenly between PDC’s Anchorage and Fairbanks offices, the firm has experienced significant growth during the past few years which is reflected in several recent awards. In 2011 and 2012, PDC placed on the Zweig Letter Hot Firm List of the 100 fastest grow-

ing architecture and engineering firms in the country—out of an industry made up of over 80,000 firms. Additionally, PDC ranked within the top 100 firms nationwide for the Consulting & Specifying Engineer magazine’s “MEP Giants” program. PDC is the only Alaskan-owned firm to make this prestigious ranking.

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Fugro EarthData

ork is now under way by Fugro EarthData to develop new elevation mapping over a large area in Southeast Alaska. The contract was awarded to Fugro by Dewberry as part of an ongoing effort to update Alaska’s decades-old topographic base maps. The Southeast project continues Fugro’s earlier work on the Statewide Digital Mapping Initiative. As in the past, the company is accomplishing the elevation mapping using its GeoSAR airborne radar mapping system. Unique in its ability to penetrate both clouds and foliage, GeoSAR is considered an ideal tool for mapping Southeast Alaska given the region’s rainy climate and dense forests. Data acquisition for the project commenced in mid-August with processing ongoing now. Final products are scheduled for completion early this year and will include digital surface models, digital terrain models and orthorectified radar imagery. In addition to economic and infrastructure development, the new elevation data will support emergency response, resource management, homeland security and transportation safety applications among others. In Southeast Alaska, this data will also en-

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www.akbizmag.com • Alaska Business Monthly • January 2013


INSIDE ALASKA BUSINESS able more accurate storm surge analysis and enhanced floodplain and tsunami inundation studies.

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Koniag Inc.

oniag Inc. acquired Anderson Construction, one of Kodiak’s most established and successful heavy construction companies. Anderson Construction began operations nearly 32 years ago and has been involved in many of Kodiak Island’s large civil construction projects. Currently, Anderson Construction is involved in helping Koniag develop a promising granite quarry at Shakmanof Cove on the northern end of Kodiak Island. Anderson Construction has eight full-time employees and more seasonal workers. The company has participated in projects such as the Pillar Mountain wind turbines, the Terror Lake Hydro project, road construction and underground utility work. Anderson also operates a gravel quarry on Near Island in the City of Kodiak. As the Shakmanof project expands, Koniag expects it will provide opportunities for shareholders and nearby communities such as Ouzinkie and Port Lions.

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University of Alaska

eventeen student residents—sophomores through grad students— moved into the four homes in the University of Alaska Fairbanks Sustainable Village in August. The cluster of homes is a partnership between the University of Alaska Fairbanks and the Cold Climate Housing Research Center to en-

Compiled by Mari Gallion

gage students in the design of sustainable housing and demonstrate energy efficient building techniques. It is now a living laboratory for CCHRC researchers and UAF students to study the energy performance, economics and environmental impact of building systems in hopes of applying the technology in construction around the state. Four 1,400-square-foot homes were constructed last summer, each with a unique combination of wall assembly, foundation, and heating and ventilation system. CCHRC researchers will monitor things like construction cost, energy use, electricity use, indoor air quality and ground temperature to compare different designs. Students are developing a competition among houses to see who can use the least water and electricity. The homes were finished on budget at roughly $200,000 each and represent the lowest price-perbed that UAF has paid in recent years. The monthly rent resembles the cost of a mortgage for an equivalent singlefamily home in Fairbanks.

install a wind turbine and use the data, along with a national curriculum, to teach science, engineering and math concepts. College students offer technical support and build their workforce readiness skills solving hands on problems and helping schools. The Alaska Center for Energy and Power at the University of Alaska Fairbanks leads the Wind for Schools program in Alaska under the leadership of the Department of Energy’s National Renewable Energy Lab. The installation also highlights a partnership between the school district and the U.S. Coast Guard, which provided the turbine and technical expertise. This is the third Wind for Schools turbine the Coast Guard has worked on. The program is also coupled with a new K-12 Energy Efficiency curriculum from Alaska Housing Finance Corp. that helps youths understand where their energy comes from and what steps they can take to reduce their consumption.

Kodiak Island School District

he Anchorage Museum has expanded its collection through major purchases and donations. “Recent Acquisitions,” on view through Feb. 10 at the Anchorage Museum, showcases more than 140 new museum holdings, including paintings, ethnographic objects, photographs, sculptures and historical objects. Rare objects include unique skin masks made by the Nunamiut people of Anaktuvuk Pass using a technique they invented: casting wet caribou skins on wooden molds and staining them with raw caribou liver. The masks depict human faces trimmed with the ears, noses and fur of wolf, fox, caribou and lynx.

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he Kodiak Island School District installed the state’s seventh schoolbased wind turbine as part of the Wind for Schools program. Local teachers, the school district, the borough government and community members have worked on the project for more than two years. The Wind for Schools program is a nationwide effort that offers hands-on science education for K-12 and college students. Schools and school districts

Anchorage Museum

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From critical lifts to platform support, PPM is sufficiently resourced to deliver a wide range of construction services. 620B East Whitney Road I Anchorage, AK 99501

www.akbizmag.com • Alaska Business Monthly • January 2013

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INSIDE ALASKA BUSINESS Exhibition highlights also include: Jones-Breu Collection, the items teacher Etta Jones took in her suitcase in June 1942 when the Japanese military invaded her home on Attu island and took her prisoner for three years; a child’s parka cover which was one of two made by Vera Roberts Giese (1900-1985), born in Unalaska, for her sons Don and Harold Roberts; an Inupiaq harpoon made by Ted Mayac Sr. under the instruction of Paul Tiulana; and a Japanese sword and rifle obtained in the Philippines during World War II similar to those used by the Imperial Japanese Army in its Aleutian Islands campaign.

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Bass Pro Shops

ass Pro Shops plans to open a 100,000-square-foot Bass Pro Shops Outpost store in Anchorage in time for this year’s fishing season. The new store will be located on Glenn Highway at Mountain View Drive, adjacent to Merrill Field Airport. The store will initially generate approximately 200 jobs. Approximately three to four acres adjacent to the store will be developed as a wetlands nature center and it, as well as the store, will pay tribute to Alaska’s great outdoor heritage.

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Bering Straits Native Corp.

SNC purchased the Alaska Gold Company LLC from NovaGold Resources Inc., a Canadian precious metals company, in late 2012. The purchase culminated negotiations between BSNC and NovaGold, which initially focused on the reclamation of the

Compiled by Mari Gallion

Rock Creek Mine, and subsequently expanded to include the purchase of AGC and its substantial assets in the Nome area. The assets of AGC include the Rock Creek Mine facility, all patented mining claims in the Rock Creek and Big Hurrah project areas, certain real estate within the city limits of Nome, and gravel and sand resources in and around Nome. The Rock Creek Mine facility was constructed by AGC beginning in 2006. Recently, NovaGold successfully concluded Phase I of the reclamation plan, including settling all environmental issues at the mine site with the Alaska Department of Environmental Conservation. BSNC is currently working with an outside engineering firm to evaluate future mining potential at Rock Creek and Big Hurrah.

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Port MacKenzie

new international export for Alaska is moving across the docks at Port MacKenzie and drawing the interest of global buyers from Japan and South Korea. Billesborg, a Singapore-flagged vessel with two cranes capable of 100-ton lifts each, was at Port MacKenzie in November loading some 8,000 tons of scrap steel bound for South Korea. Two gold dredges from Fairbanks, a local barge, and 11 200-300-ton fishing boats from Seward were also among the cargo. Dockage and wharfage fees generated for the Borough amount to some $30,000. A few dozen local jobs were created. The ship left Nov. 15 for South Korea. The effort is a test shipment to see if Alaska can export the product directly to South Korea. Presently scrap exports go straight to Seattle. By exporting directly from Alaska to Asia the shipping

time is reduced by some 10 days, reducing transport costs. If proven viable through this diagnostic trip to South Korea, the borough projects 50,000 to 100,000 metric tons of scrap metal will go through Port MacKenzie each year.

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NOAA Fisheries

OAA Fisheries will implement a new fisheries observer program for Alaska’s commercial groundfish and halibut fisheries beginning Jan. 1. Observers are trained biologists who collect detailed biological and operational information while aboard vessels and at shoreside plants during commercial fisheries. The information is then used by fisheries managers, scientists and policymakers in making decisions critical to sustainably managing Alaska’s billion dollar fisheries industry. Vessels and processors in the full observer coverage category—required to have at least one observer at all times— will retain the current funding and observer deployment system, and will continue to contract directly with observer provider companies and pay the full cost of their own observer coverage. Vessels and processors in the partial observer coverage category—not required to have an observer at all times—will have a new funding and deployment system and will pay a fee for their observer coverage based on the ex-vessel value of their groundfish and halibut. NOAA Fisheries worked closely with the North Pacific Fishery Management Council, fishermen, processors, and other stakeholders to restructure the observer program. A robust public comment process was vital to helping shape the new program. R

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Dutch Harbor - Unalaska, Alaska

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620B East Whitney Road I Anchorage, AK 99501

www.akbizmag.com • Alaska Business Monthly • January 2013


View from the Top

Compiled by Mari Gallion

David McCormick, Owner Hillside Music

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hroughout his youth, what David McCormick most wanted to be was a member of the Rolling Stones. Recognizing the unlikelihood of this dream being realized, he settled instead for a career as a newspaper and magazine correspondent and ended up working in Washington, D.C., as national editor for the Newhouse Newspapers chain.

Enchanted with Alaska after a vacation visit, he moved to Anchorage in 1994 with the intent of establishing himself as a freelance writer while playing music around Alaska’s many campfires in his spare time. He never imagined that music would become his business until he decided to place a tiny classified ad offering guitar lessons. The phone rang, and a second career was born. After several years of teaching solo, David opened Hillside Music as a commercial teaching studio in 2005. He relocated in 2007 to the O’Malley Centre area, which was just beginning to develop its present concentration of retail and services businesses. Today, Hillside Music has 12 teachers and an enrollment of more than 350 students. The school offers lessons in piano, guitar, violin, bass, cello, mandolin, banjo, ukulele and more. HONING IN When I first opened, I imagined being sort of a cultural center for the folk music community I’d always been a part of. I sold and rented instruments, promoted a couple of concerts and workshops, and tried a few other sidelines that didn’t quite work out. The core of the business was always lessons, and for the past several years that’s been all we’ve done. SELLING PLAY My goal for students was for them to have fun playing their favorite music, whatever that might be. After years of students and parents telling me that this was exactly the approach they were looking for, I realized that there was value in creating a curriculum that emphasizes modern American music for modern American kids. I’d like to think a recreational approach to music—as opposed to competitive discipline—is what we’ve become known for. HIGH TOUCH I tell teachers every day that we’re not in the information business, we’re in the companionship business. Our biggest competitor is the Internet, which is choked with information. To compete with that, we’ve got to become friends and models to students, and encourage lots of the questions that the Internet can’t answer. LIFETIME VALUE We grew steadily throughout the recent recession because parents realize the value of an activity that can be enjoyed for a lifetime—and adults who’ve decided, correctly, that it’s never too late to play are at least 25 percent of our clientele. Parents, kids and boomers—that’s a pretty big market. PASSION PAYS I want teachers with a passion for music, who show up every day bursting with enthusiasm. To get that, I pay them conspicuously well—and pay is based entirely on commission. It makes for a little more bookkeeping, and a whole lot more customer service. Like me, the teachers here are generally pinching themselves at having discovered that there’s a livelihood to be had from what they’d expected to remain just a hobby. More people should take a closer look at their hobbies! R © 2013 Chris Arend

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www.akbizmag.com • Alaska Business Monthly • January 2013


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special section

Junior Achievement

Junior Achievement Alaska Celebrates 40 Years Serving Alaskan students and the economy BY FLORA TEO AND LOGAN BIRCH

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Flora Teo, JA President

his year, Junior Achievement of Alaska Inc. is celebrating its 40th anniversary of providing economic and entrepreneurial education in the great state of Alaska. Since 1973, Junior Achievement has served K-12 students statewide from Barrow to Ketchikan. As we begin to celebrate this important milestone, we kick-off the year by inducting four business leaders into the Alaska Business Hall of Fame, where they will join a group of more than 100 Alaskans previously recognized with this honor. In 1987, Junior Achievement began the Alaska Business Hall of Fame to honor outstanding individual leaders of Alaskan business. Since then, the Hall of Fame has become one of the state’s most prestigious events, inducting new Laureates on an annual basis. These individuals are honored for their direct impact toward furthering the success of Alaska business, support for Junior Achievement’s mission and programs, and demonstrated commitment to the Alaska economy.

You’re Invited

Logan Birch, JA Chair ■ 12

It is our privilege to invite you to attend Junior Achievement’s 2013 Alaska Business Hall of Fame, presented by Alaska Business Monthly. This year we are honored to induct Mark Eliason, president and chief executive officer, USTravel; Byron Mallott, director, Alaska Air Group; Rick Mystrom, business owner and former Anchorage Mayor; and Joe Usibelli Jr., president and CEO, Usibelli Coal Mine—congratulations to you all! The Alaska Business Hall of Fame is annually attended by nearly 500 guests,

including many previously inducted Laureates, leaders from the business community, and supporters of Junior Achievement. We are again pleased to have Gen. Mark Hamilton emcee the event along with actual Junior Achievement students.

Critical Support

Your support of Junior Achievement and the Alaska Business Hall of Fame is critical to the 8,000 statewide Alaskan students we serve. Junior Achievement’s financial literacy programs deliver a pro-business message of entrepreneurship and personal responsibility that is needed now more than ever. Proceeds from the Alaska Business Hall of Fame go directly to Junior Achievement and help us meet the demand for our Alaska programs, which increased 45 percent in 2012 alone! For table reservations, or to inquire about the limited remaining sponsorship opportunities, we encourage you to call Junior Achievement at 907-3440101 or visit www.ja-alaska.org/hof. Tables of ten are $1,500, or individual reservations can be made for $150 per ticket. Junior Achievement of Alaska is a registered 501(c)(3) and the majority of your purchase may be tax deductible. The 2013 Alaska Business Hall of Fame will be held on Thursday, Jan. 24 at the Dena’ina Civic & Convention Center. Doors open at 5:30 p.m. for a no-host reception with the formal program and dinner following at 6:30 p.m. From the board, staff and students of Junior Achievement of Alaska, we wish you the very best in 2013 and we look forward to seeing you on January 24! R

www.akbizmag.com • Alaska Business Monthly • January 2013


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special section

Junior Achievement

Junior Achievement Alaska Marks 40 years Business education project changing to meet today’s bottom line

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s Junior Achievement celebrates this milestone anniversary, here is a look at the impact the organization has had on students, educators, and the business community over the past 40 years.

Connecting Students with Learning

JA has served an estimated 300,000 K-12 students in Alaska over its 40 year history, impacting schools and classrooms statewide. During the 2011-12 school year, JA reached schools in 43 communities with support from businesses and volunteers. JA’s programs are routinely updated ■ 14

In recent high school program evaluations, an average of eight out of 10 students reported that Junior Achievement helped them see the importance of staying in school. to keep the material current and cutting edge. To this end, over the past five years more than 96 percent of JA’s programs have undergone comprehensive evaluations to assess their effectiveness and impact. As a result, according to 60 third-party evaluations, students who have participated in Junior Achievement developed the skills they needed to be successful in the global marketplace.

In addition, Junior Achievement reinforces the value of an education. In recent high school program evaluations, an average of eight out of 10 students reported that Junior Achievement helped them see the importance of staying in school. More than nine out of 10 teachers and volunteers, 91 percent agree or strongly agree that Junior Achievement programs connect what is learned in

www.akbizmag.com • Alaska Business Monthly • January 2013


the classroom to the outside world. “Through my participation in JA, I discovered that if you want to be a successful business woman or man you have to stay focused and stay in school so you can become what you want to become,” a JA Job Shadow student says. JA has a plan to continue to build on this track record of success. With the support of the business community, volunteers and schools, JA is on track to reach 10,000 students during the 201415 school year.

Helping Educators Achieve Goals

Educators are tasked daily with molding the minds of tomorrow’s leaders. This is challenging for many reasons,

Core standards, which have been newly adopted by ASD and are satisfied by Junior Achievement’s curriculum, will create consistency between Alaska school districts and the Lower 48. As community interest in improving the graduation rate has grown, programs like JA are more important than ever. According to longitudinal studies, JA students were significantly more likely than their peers to believe that they would graduate from high school, pursue post-secondary education and graduate from college. Seventy-five percent of teachers and volunteers agree or strongly agree that Junior Achievement programs help students realize the importance of staying in school. “Junior Achievement positively affected my

posed to 7 percent of the comparison group and 10 percent of the general population. Junior Achievement students score significantly higher—at least 10 percent—than their peers on assessments that measure financial literacy. They understand the importance of money management.

The Next 40 Years

Junior Achievement of Alaska is on track to serve 10,000 students by 2015. JA plans to accomplish this with a focused plan for growth, through community partnership and resource development. Part of JA’s plan for growth is to expand the JA in a Day program, a popular delivery model in

Junior Achievement students score significantly higher—at least 10 percent—than their peers on assessments that measure financial literacy. They understand the importance of money management. including the pressure to meet curriculum standards and benchmarks, a transient student population, and a renewed call from the community to help students graduate from high school. JA has positioned itself as a resource to help educators address these challenges. All of JA’s lessons correlate to Alaska State Learning standards and are designed to help educators meet benchmarks. Additionally, many of the topics covered in JA’s lessons are not covered anywhere else in required courses for students such as ethics, taxation, insurance and budgeting. Alaska’s transient population makes it challenging for educators to ensure transfer students learn all required material. Junior Achievement’s standardized curriculum for each grade level helps eliminate this problem and reinforces core learning objectives. Furthermore, the national Common ■ 16

future by giving me the confidence to know that I can achieve my dreams,” a JA alum says.

Junior Achievement Enhances Communities with Entrepreneurship Education and Financial Literacy

Junior Achievement is an innovative partnership between the business community, educators and volunteers. As the world’s largest organization dedicated to empowering young people to own their economic success in the global marketplace, JA provides its partners with a skilled future workforce, awareness opportunities and a heightened profile in the community as a leader in corporate social responsibility. In addition, Junior Achievement students are more likely to become entrepreneurs. In a recent JA alumni study, 20 percent of respondents indicated that they own their businesses, as op-

other states. For the past four years, JA has worked to develop the JA in a Day program in Anchorage and MatSu schools. Th is program provides business representatives in every classroom in a school to presents JA lessons in one day. During 2011-12, JA reached more than 2,200 K-6 students through JA in a Day partnerships with the help of 90 volunteers. Also, JA is in the third year of the Rural Alaska Initiative, a program which focuses on bringing economic education to students in rural village schools. With the financial support from local businesses, volunteers fly out to rural villages to present JA programs that include lessons on building job interview skills, balancing a check book, writing business plans and much more. By continuing to develop innovative delivery models and programs, JA will be able to continue to develop Alaska’s greatest resource: its people. R

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special section

Junior Achievement — 2013 Alaska Hall Of Fame Laureate Inductee

PAST LAUREATES ■ Don Abel Jr., 1996 ■ Jacob Adams, 2002 ■ Bill Allen, 1995 ■ Bob & Betty Allen, 2001 ■ Will Anderson, 2012 ■ Eleanor Andrews, 2001 ■ Robert Atwood, 1988 ■ The Bailey Family, 2010 ■ Bernard M. Behrends, 1987 ■ Earl H. Beistline, 1998 ■ Jim Binkley, 1989 ■ Bill Bishop, 1994 ■ Jim Bowles, 2011 ■ Carl Brady, 1990 ■ Carl F. Brady Jr., 2004 ■ Alvin O. Bramstedt Sr., 1991 ■ Charles H. Brewster, 1999 ■ Brice Family, 2011 ■ W. Brindle, 1993 ■ Margie Brown, 2009 ■ Edith Bullock, 1987 ■ Jim Campbell, 2006 ■ Larry Carr, 1988 ■ Richard Cattanach, 2008 ■ Frank Chapados, 1991 ■ John B. “Jack” Coghill, 2006 ■ Jack J. Conway, 1995 ■ William A. Corbus, 1999 Continued—page 20 ■ 18

Mark Eliason BY WILL SWAGEL

M

ark Eliason refers to himself as a “serial entrepreneur,” and his resume bears out his claim. He is the owner (with his wife Linda) of USTravel, a corporate travel management agency with more than a dozen offices in Alaska, Washington and Oregon and $200 million a year in sales. The company employs 165 people. Among USTravel’s customers are familiar names like Trident Seafoods, Starbucks and the State of Alaska. It is the largest privately owned travel management company in the Pacific Northwest, with a regional headquarters in Seattle. Eliason’s early experiences were quite colorful and included working construction on the trans-Alaska oil pipeline, retail sales in a men’s clothing— later advancing to controller of the five-store company, and running an insulation panel factory. He also has built commercial buildings on the North Slope and rented them out to oilfield service firms. Eliason holds a bachelor’s degree in business management from Iowa State, graduating in 1978. The entrepreneurial bug bit early, back in Iowa, where Eliason joined the Junior Achievement chapter at his high school. Iowa has a lot of pigs— hence a lot of flies—so perhaps it was no wonder that Eliason’s JA chapter manufactured flyswatters and made “a lot of money.” Eliason is the middle of seven children—all of whom, he says, are entrepreneurial types. His father Kay Eliason was the manager of pipeline construction for Alyeska Pipeline Service Co. Mark, who was then an exchange student in Sweden, was lured north when his parents moved to Fairbanks in 1974. He worked construction on the pipeline for three summers. “The timing was just perfect,” he says. “I graduated college with money in the bank.”

Eliason’s parents had moved to Anchorage and he followed them there. When construction jobs became scarce in the later 1970s Eliason took a sales job with Stallone’s Men’s Store clothing chain and was assistant manager in six months. He was already teaching accounting at the old Anchorage Community College and was named Stallone’s controller a year later. “Alaska had a lot of opportunity for someone with some education back then,” he remembers. Next Eliason ran a factory in Prudhoe Bay which made insulation

“Do you want a $100-an-hour engineer spending 45 minutes booking a round trip flight to Cleveland? We can always equal or do better than what you could find on your own. Otherwise, we wouldn’t exist.” —Mark Eliason Owner, USTravel

boards to reduce the amount of gravel needed to build on permafrost. His exposure to the North Slope led him and a friend to realize that there was a need for rental space for small oilfield service companies. “In 1982, we put up our first building on the Deadhorse Airport property we had leased the previous year,” he says. “In 1983 and 1984 we built several more buildings.” One of Eliason’s tenants was a travel agency and Eliason said he hung out there while in Deadhorse. Mark had married Linda in 1984, and the couple took a round-the-world trip in 1985. After that, they knew they liked to travel. Eliason bought into the business as a

www.akbizmag.com • Alaska Business Monthly • January 2013


way to make money and still have the freedom to travel. “We wanted the ability to come and go freely,” he says. “(The travel industry) was never supposed to be a career for me. It was an investment.” As the Alaska economy took a nose dive, the financial realities compelled Eliason to get involved in the day-today operations of the agency. In 1987, he sold the agency to US Travel Systems Inc., which was just going national. He agreed to stay with US Travel Systems for 90 days, but he ended up working for them for 10 years. As a regional manager, he commuted regularly between Seattle and Anchorage. He felt he was spending too much time away from his family. In 1997, when US Travel Systems downsized, he bought the Alaska and Pacific Northwest portion of US Travel Systems and the name “USTravel.” Eliason says he is constantly asked how he has built a successful company while the introduction of the Internet has resulted in travelers booking online by themselves and the closing of many travel agencies. He explaines that many of those agencies that closed were smaller ones that had survived primarily on airline ticket commissions, which the airlines ultimately stopped paying. Eliason says USTravel has a very different client base. The company deals with many large fi rms that may buy hundreds—if not thousands— of tickets in a year, along with other travel services. USTravel also negotiates and manages contracts on behalf of clients, performs cost accounting and strengthens policy compliance. A fi rm with 500 employees or more could have employees flying without any coordination of company travel policies or costs. USTravel can help those fi rms gain control of those issues and others, he says. “Do you want a $100-an-hour engineer spending 45 minutes booking a round trip flight to Cleveland?” Eliason asks. “We can always equal or do better than what you could find on your own. Otherwise, we wouldn’t exist.” Eliason’s active role in the Alaska economy and his decades-long support for Junior Achievement explain why he was chosen as Junior Achievement

honoree, says JA President Flora Teo. Although no longer active in planning the event, Eliason was a long-time organizer of the Three Club Scramble golf tournament, a major fundraiser for Junior Achievement for more than two decades. A former board member of the Resource Development Council, he says he hopes Alaska can mount a large project that would provide youths of today with the type and number of opportunities he had as a young man. Eliason lives in Anchorage with his wife Linda—another serial entrepreneur—who was born and raised there.

USTravel has offices in Prudhoe Bay, Dutch Harbor, Anchorage, Kodiak, Juneau and Ketchikan, as well as Portland, Oregon, and Seattle, Bremerton, Woodinville and Tacoma, Wash. The company also operates a call center in Des Moines, Iowa. USTravel has several subsidiary companies; Visions Meeting & Event Management, Air Fulfi llment Services and Explore Tours. www.ustravel.com R Will Swagel is an author living in Sitka.

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special section

Junior Achievement — 2013 Alaska Hall Of Fame Laureate Inductee

PAST LAUREATES—Continued ■ Ron Cosgrave, 2007 ■ D. H. Cuddy, 1993 ■ Bob Dindinger, 2012 ■ Don Donatello, 1995 ■ Ron Duncan, 2007 ■ Oscar & Peggy Dyson, 1992 ■ Ken Eichner, 1990 ■ Andrew Eker, 2009 ■ Carl Erickson, 1999 ■ Arnold G. Espe, 2001 ■ Al Fleetwood, 2005 ■ Conrad Frank, 1999 ■ Clyde Geraghty, 1999 ■ Barnard J. Gottstein, 1989 ■ The Green Family, 2012 ■ Robert & Barbara Halcro, 2008 ■ Ernie Hall, 2002 ■ Lloyd Hames, 1998 ■ Carl Heflinger, 1999 ■ Michael Heney, 1995 ■ Willie Hensley, 2009 ■ Walter Hickel Sr., 1988 ■ August Hiebert, 1989 ■ Roy Huhndorf, 1992 ■ Robert Jacobsen, 2006 ■ Jim Jansen, 2009 ■ John Kelsey, 1991 ■ Bruce Kennedy, 2007 ■ Herbert Lang, 1994 ■ Marc Langland, 2001 Continued—page 22 ■ 20

Byron Mallott BY WILL SWAGEL

B

yron Mallott says he began developing a social consciousness in the 1960s while still a young student in Southeast Alaska. He was born and raised in Yakutat, his ancestral Tlingit village at the very top of the Southeast Panhandle. Mallott said that at Pius X Mission, a small Catholic boarding school he attended in Skagway, and later, at Sheldon Jackson School in Sitka—where Mt. Edgecumbe boarding school is also located—he met Natives from throughout Alaska at a time when Native issues were on the front burner. Many of the people he befriended at school became civic and business leaders, implementing the Alaska Native Claims Settlement Act and the birth of the Alaska Native Corporations. Mallott’s mother was a member of the pink salmon, Kwaash Ki Kwaan Clan. His father, Jay B. Mallott, was a successful local merchant and the mayor of Yakutat. “Alaska is huge in terms of distance and diversity, but the Natives who worked on ANCSA bridged those divides,” Mallott says. “That group of Alaska Natives knew each other as school kids and grew up together. Bonds and relationships formed as school kids typically last a lifetime.”

Early Action

In 1963 while in college, the 22-yearold Mallott had to put his consciousness into action when his father died. Mallott had championed many human rights issues, such as the integration of the Yakutat Native school and the nonNative school into one school for all the town’s children. “I felt a compulsion to come back home and help finish what my father felt was important for our community,” he says, naming one top local issue. “The local salmon cannery had been a monopoly for decades. There was a strong feeling

in the community that there needed to be competition. Salmon fishing and processing was the economic underpinning of the community.” In 1965, Mallott was elected mayor of Yakutat. Byron Mallott had watched his father over the years, but he had no training in politics or civil administration. Nonetheless, he mobilized a group of people who successfully lobbied the federal government to help fund a fish processing plant that would be owned by the municipality. “It was a time,” Mallott says, “when the federal government very aggressively reached out to the less fortunate and those in the lower economic strata and made a significant effort to bring all people the opportunity to achieve the American Dream.”

Long-Time Leader

Mallott was appointed the first commissioner of the Department of Community and Regional Affairs by Gov. William A. Egan, the State of Alaska’s first governor. He served as executive director of the Alaska Permanent Fund Corp. from 1995 to 2000. At various times, he has been a director, chairman and president and chief executive officer of Sealaska Corp. He has served as a director of the Federal Reserve Bank of San Francisco. He is the longest-serving director of Alaska Airlines, has served on the boards of five commercial banking institutions, and was a founding director of the Alaska Commercial Fisheries and Agriculture Bank. He was elected mayor of Juneau and served as the president of the Alaska Federation of Natives. He is clan leader of the Kwaash Ki Kwaan, the pink salmon people of Yakutat, which Mallott said was the most important of all his titles. Mallott is retired now, although he still serves as a Director of Sealaska,

www.akbizmag.com • Alaska Business Monthly • January 2013


“I felt a compulsion to come back home and help finish what my father felt was important for our community.” —Byron Mallott

Alaska Air Group and on several other boards and with such diverse nonprofit groups as the Polynesian Voyaging Society—a relationship resulting from the gifting of huge spruce logs by Sealaska Corp. to Native Hawaiians to build an open ocean double-hulled voyaging canoe. He divides his time between Juneau and Yakutat. His wife, Toni, is a retired teacher, having taught for many years in the Yakutat and Juneau school districts. The couple has five grown children, seven grandchildren and a great grandson. All of Mallott’s skills and experience seemed very pertinent in his last post—as a founder and president of the First Alaskans Institute, which promotes leadership development within

the Alaska Native community. Mallott stepped down in 2006, but still serves on the Board of Trustees.

Truly Diverse

A major theme of Mallott’s life has been the mixing of public and private roles, with both social justice groups and forprofit firms, in both Native and nonNative organizations. He believes that Alaska’s future success hinges on the leaders of diverse groups understanding each others’ positions and beliefs. He advocates the coming together of all segments of Alaska society to understand, support and share values common to making Alaska a unique and diverse place. “I’ve served in Alaska government, business and philanthropy in many different capacities,” he says. “Yet, I’m always referred to as a Native leader, which is fine, but I feel passionately that we need to build an Alaska society in which we better know and understand one another.” These values and his personal vision prompted Mallott and the other founders of the First Alaskans Foundation, established by the Alaska Federation

of Natives, to approach the CEO of Alyeska Pipeline Services, Bob Malone, to ask for significant funding for the renamed First Alaskan Institute. “The result was commitment of $20 million from the owner companies of the Trans-Alaska Pipeline System—and it was done on a handshake.” First Alaskans created the think tank Alaska Native Policy Center, and there is a Community Engagement Program, which works with communities to advance long-term initiatives that have strong local support. First Alaskans and AFN jointly finance and operate the Youth and Elders Conference, which takes place at the AFN convention every year. Says Mallott: “Alaska is going to realize its potential when every single person—particularly young people who are just embarking on their life—can feel `I can go anywhere and do anything without fear of being misunderstood, without fear of having less opportunity.’” R Will Swagel is an author living in Sitka.

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special section

Junior Achievement — 2013 Alaska Hall Of Fame Laureate Inductee

PAST LAUREATES—Continued ■ Austin Lathrop, 1988 ■ Betsy Lawer, 2007 ■ Pete Leathard, 2003 ■ Dale & Carol Ann Lindsey, 1997 ■ Suzanne (Sue) Linford, 2002 ■ Loren H. Lounsbury, 2002 ■ Zachary Loussac, 1989 ■ Richard Lowell, 2005 ■ Harvey Marlin, 1999 ■ Carl Marrs, 2005 ■ Vern McCorkle, 2010 ■ Harry McDonald, 2011 ■ James A. Messer, 2000 ■ The Miller Family, 2005 ■ Robert Mitchell, 1999 ■ William G. Moran Sr. & William G. Moran Jr., 2004 ■ Les Nerland, 1987 ■ Matthew Nicolai, 2010 ■ Milt Odom, 1992 ■ Pam Oldow, 1990 ■ Tennys Owens, 2005 ■ E. Al Parrish, 2006 ■ Raymond Petersen, 1988 ■ Quinn Brothers, 2011 ■ Elmer Rasmuson, 1987 ■ Edward Rasmuson, 2000 ■ Frank M. Reed Sr., 2000 ■ Robert Reeve, 1987 Continued—page 24 ■ 22

Rick Mystrom BY RINDI WHITE

W

hat does it take to make a businessman or woman successful? Openness to new ideas, a good work ethic and the ability to make work fun are all common suggestions for business success, and former Anchorage mayor Rick Mystrom has those in spades. Mystrom is among four Alaskans being honored this month by being added to the Alaska Business Hall of Fame. These business leaders join a group of more than 100 honorees who, according to information from Hall of Fame sponsor Junior Achievement, have made a direct impact toward furthering the success of Alaska businesses, have a commitment to Junior Achievement’s programs and who have demonstrated a commitment to Alaska business. “It really is an honor. I’ve got a lot of awards for community service but this is a pure business award. I’m very honored that they considered me,” Mystrom says. “Look at the people who have won this award in the past and they’re really characterized by their success and integrity.” Mystrom might be best known for his service as the Anchorage mayor from 1994-2000. He helped cut crime in Alaska’s largest city by nearly half and created an organization aimed at bridging differences between Anchorage’s diverse cultural groups. But he set down roots in Anchorage years before, in advertising and marketing.

Selling Alaska

A risk-taker all his life, Mystrom drove to Alaska from California with his wife, Mary, and their 8-month-old baby. There was no job waiting for him in Anchorage and, when they arrived, he had about $200 in his pocket—not much to start a new life. Watching the evening news, where the newsman was less polished than those Mystrom was used to seeing, he says he turned to his wife and said, “There’s a

job opportunity.” So, in suit and tie, he visited the news station the next day and asked to see the company president. Mystrom hit it off with the company president and although he didn’t become a news anchor, he did land a job selling advertising, which paid better. Mystrom says he quickly became the station’s top salesman, filming commercials and making new jingles. It wasn’t long before he was the sales manager, he says. After a couple of years in the television business, advertising company owner Larry Beck hired Mystrom as vice president of his four-man advertising agency. Mystrom bought Beck out in 1976, right when the trans-Alaska oil pipeline construction was really going. “We really started booming,” Mystrom says. Called Mystrom Advertising, the company had 45 employees and vied with another company for the title of the largest advertising agency in the state. Mystrom branched out into community service. He was elected to the Anchorage Assembly in 1979 and in 1982 was selected as one of the top three small businessmen in the United States by the Small Business Administration, an honor that included a trip to the White House and a chance to meet the president.

Olympic Dreams

Mystrom was still in advertising when he was watching the 1984 Winter Olympics, held in Sarajevo; and said he thought that if Sarajevo could host the Olympics, Anchorage certainly could. “That started about a six-year voyage that was a real life experience,” he says. Mystrom pitched the idea at Rotary and Chamber of Commerce meetings and the idea quickly became popular. A committee to focus on the Olympic bid was formed, with Mystrom as chairman. The group competed in 1985 with Salt

www.akbizmag.com • Alaska Business Monthly • January 2013


—Rick Mystrom former Anchorage mayor

“It happened during the time that the Alaska economy was tanking and there was bad news over and over. Anchorage lost 13 percent of its population. We lost 25 percent of the assessed valuation of the city in two years,” Mystrom says. On the heels of the Olympic bid, Mystrom sold Mystrom Advertising— now the Nerland Agency—and began buying apartment buildings. That’s what his primary business is today. His family owns about 400 units in Anchorage and Kenai.

Lake City, Lake Placid and Lake Tahoe, and swept the votes to become America’s candidate for the 1994 Winter Olympics. Mystrom worked for five years to promote Anchorage as the best host city for the games. “Ultimately we got beat by Lillehammer in a very close competition,” Mystrom says. He believes Anchorage will host the Winter Olympics eventually—maybe in 2026—and although Anchorage didn’t win the bid, the competition gave everyone something to hope for when life was a little bleak.

Throughout it all, Mystrom has been involved in the community. He started Big Brothers Big Sisters in Alaska and helped out numerous community groups while in advertising. He coached more than 20 sports teams, is a founding director of the Alaska Sports Hall of Fame and has been involved in numerous other community endeavors. One of the groups Mystrom is most proud of is Bridge Builders of Anchorage, which he founded while mayor. The group aims to build a community of friends among minorities in

“Look at the people who have won this award in the past and they’re really characterized by their success and integrity.”

Building Cultural Bridges

Anchorage, one of the nation’s most diverse cities. He invited 45 couples from 15 cultural groups in Anchorage to an international potluck at his home. Each couple pledged to be matched with another from a different culture and, over the course of a year, get to know the couple better. Malcolm Roberts, a former special assistant to Mystrom while he was mayor, was given the task of overseeing the effort. “Our theme grew to be making Anchorage the first city without prejudice,” Roberts says. Bridge Builders holds five events each year, including marching in the July 4 parade and holding an international fair called “Meet the World” where participants can get a passport and learn about the different cultures in Anchorage. Roberts says Bridge Builders was a key reason Anchorage was selected as an All-American City in 2004, another effort Mystrom chaired. R Rindi White is a writer living in Palmer.

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special section

Junior Achievement — 2013 Alaska Hall Of Fame Laureate Inductee

Joe Usibelli Jr. PAST LAUREATES—Continued ■ David Rose, 2003 ■ Jim Sampson, 2008 ■ Helvi Sandvik, 2006 ■ Grace Berg Schaible, 2004 ■ Leo & Agnes Schlotfeldt, 1993 ■ Orin D. Seybert, 2006 ■ Gov. Bill Sheffield, 2003 ■ Merle (Mudhole) Smith, 1993 ■ Charles Snedden, 1989 ■ Sen. Ted Stevens, 2010 ■ William G. Stroecker, 1997 ■ Bill & Lilian Stolt, 1998 ■ A. C. Swalling, 1987 ■ Cliff Taro, 1992 ■ Walter & Vivian Teeland, 1997 ■ Morris Thompson, 2001 ■ William J. Tobin, 2004 ■ Joseph Usibelli Sr., 1988 ■ Lowell Wakefield, 1990 ■ Leo & Beverly Walsh, 1996 ■ Pat Walsh, 2008 ■ Chuck West, 1991 ■ Noel Wien, 1989 ■ Richard A. Wien, 2003 ■ Lew Williams Jr., 1994 ■ William Ransom Wood, 1996 ■ 24

BY ZAZ HOLLANDER

J

oe Usibelli Jr. grew up around his family coal mine—literally, in the thick of it. The family home of the 54-year-old president of Usibelli Coal Mine Inc. sat in the middle of the mine camp. This year, Usibelli marks his 25th year as president of the company, located near Healy. He represents the third generation of his family to run the state’s only working coal mine. His Italian-born grandfather, Emil, started the company. His father, Joe Usibelli Sr., took over at 25 after Emil died in a mine accident. But Joe Jr. always felt that he had a choice of professions growing up. He and his wife, Marilyn, are giving their 9-yearold daughter, Lexi, the same freedom. “I had my choice. Even as late as the start of college I had my choice what I wanted to do,” Usibelli said in a November interview. “We’ve always had our choice. You chose to stay.” Making the right choice about a profession is also one of the lessons Usibelli brought to the classroom when he participated in elementary and junior high visits through Junior Achievement. The Alaska nonprofit brings community volunteers into the classroom to educate students about workforce readiness, entrepreneurship and financial literacy. That combination of business acumen and dedication to Junior Achievement’s programs won Usibelli a spot in the Alaska Business Hall of Fame. Nominated by their peers, Usibelli and three other business leaders will be inducted Jan. 24 at the Dena’ina Civic & Convention Center. Junior Achievement of Alaska Inc. and Alaska Business Monthly sponsor the annual event.

Deep Roots

Usibelli’s roots start in Italy. His greatgrandparents, grandfather and grandmother’s family immigrated to the United States just after the turn of the 20th century, during a period when Italians streamed to the U.S.

They came through Ellis Island and moved to Washington state, working mines in the Renton and Cle Elum areas. Emil Usibelli came to Alaska in 1935, working the Evans Jones Mine in Sutton for about a year before moving to the Healy coal mine then operated by Austin “Cap” Lathrop. An injury ended that job. However, Emil, described by his grandson as a hard worker—started a business cutting timbers for mine supports in the Suntrana mine. During World War II, he got a government contract to mine 10,000 tons of coal per year to increase military supplies beginning in 1943. The contract included a license to mine on property in the Healy area. That’s where the Usibelli Coal Mine began. Usibelli will celebrate 70 years of operation during 2013 and now produces 2 million tons per year. Emil Usibelli built the company from that first contract, starting the first surface coal mining technique in Alaska, his grandson says. “I think there were probably some pretty skinny years there,” Usibelli says. Emil Usibelli died in a mine accident in 1964, just hours before the Good Friday Earthquake. His son, Joe, a grad student at the time, took over operations that year.

Loyalty

Joe Usibelli Sr. built the mine from there. From that 10,000-ton contract, the Usibelli mine has grown to become the only operating coal mine in Alaska, a significant producer on the state’s energy scene. Production averages more than 2 million tons of subbituminous coal per year. Usibelli coal is transported to six Interior Alaska electrical power plants: Fort Wainwright; Eielson Air Force Base; Clear Air Force Station; Golden Valley Electric Association; Aurora Energy, a wholesale supplier of electricity and provider of district heat in Fairbanks; and the University of Alaska Fairbanks power plant.

www.akbizmag.com • Alaska Business Monthly • January 2013


“Even today, I conduct business in an office but I can go out in the field and see things happening, see dirt being moved, coal being moved, and heavy equipment busy at work. Certain days of the week I can go and see a blast go off with explosives.” —Joe Usibelli Jr. President of Usibelli Coal Mine Inc.

The company has also exported coal to South Korea since 1985 and to Chile since 2004 through the Seward Coal Terminal. Over the years, Usibelli has also provided test shipments to Russia, Taiwan, China and Japan. The Usibelli Foundation funds numerous scholarships and provides grants to more than a hundred organizations annually. Usibelli also operates a number of business enterprises, among them a Napa Valley vineyard, an investment company and a real estate development company. Others focus on natural resources: Usibelli Energy LLC, which focuses on exploration and development for coal bed methane and natural gas; Aurora Energy; and Aurora Energy Services, which operates the Seward Coal Terminal Facility. The Usibelli family’s loyalty to the business is clear, but some of the company’s employees have also kept the coal mine in their families. Usibelli Coal employs 144 people, according to company information provided by Bill Brophy, a Usibelli vice president who handles customer relations. Of those men and women, more than a quarter are second-, third- or fourthgeneration employees. The average has more than nine years of service. Twentynine have logged more than 20 years of continuous employment. Several recent retirees started working at the mine straight out of high school and retired as managers after more than 35 years.

of operations before becoming president. He still loves the job. “Well, it’s familiar, growing up with it. It’s challenging. It’s multi-disciplined,” Usibelli says. “Even today, I conduct business in an office but I can go out in the field and see things happening, see dirt being moved, coal being moved, and heavy equipment busy at work. Certain days of the week I can go and see a blast go off with explosives.” His induction in the Business Hall of Fame is the latest in a long line of awards including the William A. Egan Outstanding Alaskan Award in 2012 and the George Nehrbas Award from the Greater Fairbanks Chamber of Commerce in 2009.

He served eight years on the UA Board of Regents as well as on the boards of numerous statewide organizations and businesses. In fact, Usibelli’s involvement in Junior Achievement started with his time on the board there, first the local board in Fairbanks, then the statewide board. Usibelli says he tried to educate students on workplace surprises. He encouraged them to weigh prospective jobs based on sometimes hidden costs, such as an office job’s expensive wardrobe or pricey tools for a trade. Of course, some of his instruction focused on the basics, such as the theory of supply and demand—knowledge Usibelli says he didn’t get exposed to until high school or even college. His experience with Junior Achievement tracks with his personal philosophy about learning. “Education can come in many forms,” Usibelli says. “Every day is an education.” R Zaz Hollander is a journalist living in Palmer.

‘Every Day is an Education’

Joe Jr. has served as company president since 1987. His father serves as board chair. Usibelli graduated in 1981 from the University of Alaska Fairbanks with a civil engineering degree. He moved up through the Usibelli corporate structure, holding various positions from assistant superintendent to vice president

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special section

Junior Achievement

Junior Achievement’s Influence Helping fill Alaska’s skills gap

I

BY SUSAN SOMMER

magine getting to meet two of America’s most famous business people when you’re only 18. That happened to one Junior Achievement Alaska student and it changed his life. More on that later. Junior Achievement of Alaska, a branch of the national organization started in 1919, is a private nonprofit whose mission is to inspire and prepare youth in grades K-12 to succeed in a global economy. Through hands-on programs, it educates students about entrepreneurship, work readiness and financial literacy. Founded in 1973, JA Alaska has influenced kids in more than 43 communities across the state. The organization reached over 8,440 students during the 2011-12 school year. It is supported by special events, local corporations, individuals and grants, and all of the funds raised locally support local programs. The JA program wouldn’t work without the help of numerous volunteers from Alaska’s business community and beyond: business owners, college students, parents and retirees. Volunteers spend time teaching JA’s curriculum in K-12 classrooms while also passing along knowledge and experience from their own lives as business or community leaders. Professionals also serve on the JA board of directors and offer administrative support. Flora Teo, president of JA Alaska, says a core group of volunteers have been active in Alaska for years, but the organization does actively recruit new volunteers from the community. JA representatives sometimes present an overview of the programs to a business that’s likely to provide volunteers, such as Fred Meyer, Wells Fargo and Credit Union 1. JA also helps prepare new volunteers to present JA classes. Since 1987, an Alaska Business Hall of Fame gathering is held each year to recognize and honor those who’ve ■ 26

made great strides in the Alaska business community and their commitment to the JA mission. Inductees for 2013 are Mark Eliason, USTravel; Byron Mallott, Alaska Air Group; Rick Mystrom, business owner and former Anchorage Mayor; and Joe Usibelli, Jr., Usibelli Coal Mine Inc.

JA Programs

JA programs are free to everyone involved—students, teachers and volunteers. In-school and after-school programs are age-appropriate for elementary, middle and high school levels. “The sooner you reach the kids, the better,” says Teo. Neither tests nor grades are given; it’s a non-threatening environment. For example, a kindergarten-level class includes stories read aloud by the volunteer, along with hands-on activities to demonstrate helping, working, earning and saving. Skills involve coin recognition, decision-making, following directions, listening and teamwork. Fifth graders participate in a simulated community where students assume the roles of workers and consumers after they’ve completed a series of classroom sessions about business and jobs. This program is held during school hours and includes teacher-led activities as well as pre- and post-on-site experience. Kids learn how to apply information, budget, collect data, negotiate, plan and set goals. A middle school program called JA Economics for Success explores personal finance, and education and career options based on the students’ skills, interests and values. It also demonstrates the economic benefits of staying in school. Skills include critical thinking, math calculations, oral and written communication, problem-solving, role-playing, self-assessment and working in groups. The high school programs are more complex. An example is the JA Be Entre-

preneurial series, which focuses on challenging students, through interactive classroom activities, to start their own entrepreneurial venture while still in high school. Skills include business planning, categorizing data, evaluating alternatives, expressing multiple viewpoints, presenting information, reading for understanding and weighing consequences. JA’s capstone program is called Job Shadow and it introduces students to careers through one-day, on-site orientations in the workplace. Skills include analyzing situations, applying information, asking questions, effective communication, public speaking and taking responsibility.

Filling the Skills Gap

The national graduation rate is about 75 percent. In Alaska, however, it’s only about 68 percent, meaning nearly onethird of the state’s students don’t graduate on time or they drop out altogether. Though the state’s graduation rate has been steadily increasing in recent years, students who don’t finish their education are at a distinct disadvantage when trying to find a job. And employers with positions to fill often have a hard time finding skilled workers. Additionally, as baby boomers gradually leave the workforce to retire, this skills gap will become more pronounced. According to a 2010 report published by the Alaska Department of Education and Early Development, Alaska Department of Labor and Workforce Development and the University of Alaska, about 8,000 students graduate each year in Alaska. The report states that “of the graduates, less than half transition into college and only 18.5 percent will still be in school by age 19. Although some high school graduates will go on to non-collegiate postsecondary training, anecdotal evidence suggests that the number is not large.

www.akbizmag.com • Alaska Business Monthly • January 2013


Alaska ranks fifth in the nation for teens not in school and not working… The current educational system is best described as a ‘leaky pipeline,’ losing a significant portion of its students without imparting the skills necessary for successful lives and careers.” Since the overall number of jobs is expected to increase, where will employers find the skilled employees they need? And what will become of disengaged youth? That’s where JA Alaska helps fill the gap, by getting students excited about life’s opportunities while still in school and by giving them the chance to learn and practice skills that will help them be successful adults, not just in the workforce but in all aspects of their lives. JA focuses on making their lessons relevant to real-life situations. Through hands-on exercises, students learn concepts of banking, taxes, marketing, customer relations, ethics, product development, profit, inflation, supply and demand, personal finances, risk management—the list goes on. Teo says that all of the JA classes correlate to the Alaska State Learning Standards as well as to the national core standards. For teachers, this means that when they request a JA volunteer for their classroom, it’s not an extra lesson they need to fit into their already busy day. Rather, it aligns with what they’re currently teaching their students. Teo says there’s a “huge demand for JA programs in rural Alaska.” Alaska Native Corporations are active in sending volunteers into rural classrooms as a way to foster a higher graduation rate, and hence more opportunity for their shareholders. NANA Regional Corporation Inc. was the first ANC to partner with JA; they send volunteers into every sixth grade classroom throughout their region in northwestern Alaska. Each subsidiary of Arctic Slope Regional Corp. sponsors classes at all grade levels across their area on the North Slope. Kodiak’s involvement in JA has been more of a grassroots effort, with local business leaders, nonprofits, the school district and government entities such as the Coast Guard banding together to support the mission and engage the island’s youth.

Success Stories

When Rick Whitbeck moved to Anchorage while in high school, he didn’t know

anybody. So he signed up for some JA classes and besides making new friends, he was immediately hooked on learning about business. He was one of 80 students interviewed for 25 spots to set up a business; this after-school JA program was sponsored by ARCO (now ConocoPhillips). Whitbeck chose a leadership role right away and the team proceeded to raise capital, sell stock, research the market, make a product, sell it locally, repay investors, pay themselves and publish an annual report. Whitbeck attended the national JA conference that year; his team placed fourth. “It was an amazing opportunity to really learn everything you need to know about business at one event,” he says. The next year, as a senior, he again went to the national conference, where his team won third. That’s when he got to meet Donald Trump and Lee Iacocca. Business and economics have been his path ever since. Whitbeck joined the board of JA Alaska while he was in college and is still there. He’s spent hundreds of hours volunteering in classrooms and says it’s been very empowering. He says that having a successful first foray into

business and having mentors has been invaluable. He’s worked as a member of GCI’s team now for 20 years. Making an impression on students is not always apparent right away, as Whitbeck learned. He remembers a class he taught in which one boy was especially quiet while most of the other students asked and answered questions and participated in the discussion. After class, Whitbeck could only hope the boy had absorbed some of the knowledge he’d tried to share. Several months later, the boy recognized Whitbeck in public and approached him, thanking him for helping him understand that sometimes you have to give up something to get something else. The boy had put that realization to good use. He’d been doing odd jobs for neighbors for weeks and had saved his hard-earned money to buy a brand new bike, a tool that would help propel him—literally and figuratively—into one of youth’s milestones: starting middle school. R Susan Sommer is a freelance writer and editor living in Eagle River.

Our name has changed, but our mission remains—Uniting Talent with Opportunity . ®

Adams & Associates is now

STAFFING

PROFESSIONAL

REEMPLOYMENT

3201 C Street, Ste. 304 · Anchorage, AK 99503

907.561.5161 www.sosemploymentgroup.com

www.akbizmag.com • Alaska Business Monthly • January 2013

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special section

Junior Achievement

Photos courtesy of NANA Development Corp.

NANA and Junior Achievement Team Up

NDC business leaders brought the Junior Achievement program to Kivalina and the 10 other NANA region villages where students took part in personal finance and career planning workshops.

S

tudents in all eleven NANA Region villages got a taste of the business world last April when NANA Development Corp. (NDC) business leaders teamed with Junior Achievement to bring economic education to future NANA leaders. Last April, more than a dozen volunteer teachers from NDC and Junior Achievement traveled to each of the 11 NANA region schools as part of the annual Junior Achievement NANA Region School Outreach Program. NANA provided organizational support including airline miles, meals and lodging for the volunteers. “Junior Achievement is proud to be partnered with NANA to educate middle school students in the region on work force readiness, financial literacy, and entrepreneurship,” says Flora Teo President of Junior Achievement of Alaska. “This is the third year of the partnership, and the level of dedication NANA has for its young people is visible at all levels of the corporation. NANA’s investment will help ensure that the future shareholders in the NANA region are educated and inspired to succeed in a global economy.” The 2012 program focused on personal finance, education and career goals, as well as the benefits of staying in school. Students in sixth through eighth grade participated in fivehour workshops that helped them draw connections between education, career options and personal finance and think about how they can translate their interests to successful careers. Students compared different jobs’ salaries to see how their education and career choices impact their spending power, and they learned the basics of cash, credit and insurance.

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Kivalina student’s thank you note.

“It was such a great experience going to Noorvik and back to Selawik and seeing familiar faces,” says NANA Management Services’ Director of Human Resources Information Services and Compliance Dana Tuimalealiifano, who grew up in Selawik. “It felt like I was a role model to these students, helping them get excited about the future.” R

www.akbizmag.com • Alaska Business Monthly • January 2013


Junior Achievement

special section

2012 JA Sponsors Platinum Plus Investors ($10,000+) Alaska Business Monthly Alaska Communications Allstate AT&T BP ConocoPhillips Alaska Inc. ExxonMobil First National Bank Alaska GCI NANA Development Corp. Northern Lights Bingo Wal-Mart Foundation Wells Fargo Platinum Investors ($5,000+) Alaska Commercial Co. Alaska National Insurance ENI US Operating Co. Era Alaska Flint Hills Resources Kendall Auto Group KeyBank Taco Bell Tom Corkran Gold Investors ($2,500+) 3M Company Alyeska Pipeline Service Co. Anchorage Economic Development Corp. Capital Office Systems Carlile Transportation Dave Marquez Fred Meyer Harbor Enterprises Inc. Katmailand Inc. Koniag Lynden Matanuska Valley Federal Credit Union NANA Management Services Northrim Odom Corp. STG Inc. Rasmuson Foundation Udelhoven Oilfield System Services Silver Investors ($1,000+) Action Security Alaska Railroad Allen Marine Tours Arctic IT Avis Rent A Car Logan Birch Brice Inc. Calais CH2MHill Dave Cook Credit Union 1

David Green Master Furrier Kelly Dindinger Bob Dindinger Doyon Ltd. Andrew Eker and Mary Hughes George Gates Haven Harris Holland America Line International Aviation Services John Hughes Foundation KPMG LLP Pebble Partnership Petro Star Inc. Shell Oil Beth Stuart Taco Bell Usibelli Coal Mine Mary Olszewski Bronze Investors ($500+) Alaska Rubber & Supply Inc. Sam Brice Andy Coon Cruz Construction, Inc. Mike Kaupp Kodiak Lions Club Steven R. Krohn Linda Leary Little Red Services Inc. Morris Communications Greg Stubbs Kevin Thomas Rick Whitbeck, Jr. Green Investors ($250+) Afognak Native Corp. Allure Day Spa & Hair Design AmeriGas Bagoy’s Mary Beth Carr Diversified Tire Inc. Wayne Graham Gen. Mark Hamilton Edward & Robin Kornfield David Lenig Mark Mathis MCN Construction Inc. MTA Michele Schuh Belinda Shipman The Alaska Club The Shimizu Foundation James Udelhoven Ret. Col. George Vakalis Derrell Webb Lyn Whitley Bruce Williams Edward Wing Xerox

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special section

Junior Achievement

The Common Core & Junior Achievement T

his is what you need to know about of assessment and curriculum by utithe new standards in the Anchorage lizing consistent assessment items and School District, and how JA can help. curriculum materials. ■ Provide the ability to compare the perAfter all… kids are our future. formance of ASD students to students in Background other states and the nation. The Common Core State Standards InitiaHow Junior Achievement tive is a state-led effort coordinated by the Supports the New Common National Governors Association Center for Core Standards Best Practices and the Council of Chief State School Officers. The Standards were devel- JA’s educational programs are aligned with oped in collaboration with teachers, school and support the Common Core standards. administrators and experts to provide a clear The strongest direct alignment between JA and consistent framework to prepare young and Common Core can be found with Social people for college and the workforce. To date, Studies standards where economics is intro45 of 50 states have adopted the Common duced. Correlation is also found with many Core Standards for English/Language Arts Language Arts and Math standards. JA proand Mathematics. States that have adopted grams provide students with opportunities to the standards will receive additional funding. read, write and research across curriculum, States that have not adopted the standards including history and science, in support of are required to provide the Department of the Common Core standards. Education with a plan to accomplish the same Math goals presumably achieved through Common The Common Core Math standards were Core. The Common Core Standards are rigorous developed specifically to improve mathand evidence-based and provide clear and ematics skills. There are fewer standards consistent expectations that are aligned with but they are focused and aim for clarity and specificity, which limits any non-math procollege and career requirements. gram from aligning. Common Core in ASD JA’s curriculum best correlates with elAlaska is one of five states that has not adopted ementary and middle school expectations the Common Core standards statewide—but in where computation skills are emphasized. spring 2012, the Anchorage School Board voted High school math standards emphasize more to implement the standards so that Anchorage complex thinking, which is well correlated students are able to be more competitive at the with JA Exploring Economics and JA Econational level. The Common Core standards nomics curricula. All of JA’s programs embed are the most rigorous in the nation. Adminis- fundamental mathematical skills aimed at trators say the standards will help them meet understanding finance, budgeting and ecotheir goals of boosting graduation rates and nomics. All of these are critical for success in getting students prepared for both college and both the workforce and college. the workforce. Language Arts & Reading The Common Core Standards aim to do the The Common Core Standards expect stufollowing: dents to build knowledge, gain insights, ■ Ensure that all students, no matter where explore possibilities, and broaden their perthey live, are prepared for success in post- spectives. JA’s elementary school programs secondary education and the workforce. such as JA Our City, JA Our Region and JA ■ Ensure that students are receiving a con- Our Nation are designed to contribute to the sistently high quality education from accomplishment of the language arts and school to school and state to state—an reading standards. JA programs also help issue that is critically important for An- educators accomplish the growth of stuchorage, which has a steady population dents’ vocabularies through a mix of conof people regularly moving in and out of versation, direct instruction and reading— state. all included in the new language standards. ■ Greatly improve the scope and quality JA programs provide increasingly complex ■ 30

text providing opportunities to help students develop literacy skills through history, social studies, science and technical subjects in support of the new language arts standards. Additionally, JA programs help educators create opportunities to address speaking and listening standards by creating academic discussion in one-on-one, small-group and wholeclass settings.

JA Helps Make Education Relevant for K-12 Students in Alaska

JA programs feature complexity that help students bridge the gap between what high school students can do and what they need to be able to do for success in college and the workforce. JA programs provide educators opportunities to help students prepare for real-life experience at college and in 21st century careers. The JA high school programs allow students to apply their learning in relevant ways. Students prepare business plans and start companies in the JA Be Entrepreneurial program as well as JA Company Program. These programs, which are provided at no cost to teachers and schools thanks to JA’s financial supporters, expose students to the full life cycle of a business, from start up to liquidation, and are done with the experience and support of a knowledgeable volunteer from the business community. JA programs benefit younger elementary school students by structuring conversations with an adult in response to written text read aloud. JA’s upper elementary and middle school programs introduce concepts and present relevant examples that engage students and volunteers in a deeper understanding of the work world. Students explore credit scores, budgeting, needs versus wants, jobs, taxes, STEM skills (science, technology, engineering, and math), and much more—all with the guidance and instruction of a JA volunteer who partners with the classroom teacher. In addition, Junior Achievement USA has been serving on a review committee in partnership with the Council of Chief State School Officers to represent our perspectives on the Common Core standards. A detailed list of correlations can be obtained by contacting the local JA office, or by visiting ja.org. For more information about the Common Core stanR dards in Anchorage, visit asdk12.org.

www.akbizmag.com • Alaska Business Monthly • January 2013


Junior Achievement

special section

Junior Achievement Presents

J

Are you smarter than a 6th grader?

unior Achievement delivers age-appropriate, activity based programs at no cost to Anchorage schools. We thought it would be fun to test adults on the subject matter that is taught in the classroom by a volunteer in middle school classrooms all over the state. Good luck! The programs featured are selected randomly for the six 40-minute lessons from JA Global Marketplace. This program provides practical information about the global economy and its effect on students’ daily lives. Q: What is the WTO? A. Professional Wresting league B. Radio station in Wyoming C. Court that oversees trade disputes Q: Which of these items is not intellectual property? A. An idea B. Chemical formula C. Business method D. Lawn mower E. Industrial process Q: Which of the following would you need to learn when doing business with another country? A. Language B. Currency C. Business practices D. All of the above

Q: Which trade barrier is being used in this scenario? “Country Z will not import poultry products from Asia because of an outbreak of disease on chicken farms.” A. Quota B. Tariff C. Subsidy D. Embargo E. Standard Q: Which trade barrier is being used in this scenario? “Country M will tax imported apples to protect its apple growers.” A. Quota B. Tariff C. Subsidy D. Embargo E. Standard

Q: When you permanently leave your country to live in another country, you are an: A. Immigrant B. Emigrant Q: Why was NAFTA created? A. To export US manufacturing to Mexico B. Increase the awareness of hockey and soccer in the U.S. C. To lower trade barriers between Mexico, Canada, and the U.S. D. To get President Clinton re-elected Q: NAFTA is a good thing for the U.S. A. True B. False

Why Should YOU Teach a JA Class? 1. It’s for the kids! 2. To help our teachers 3. To create conscientious business professionals 4. To see the kids smile when they understand the material and share

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heAlth & medicine

Health Workers Needed, STAT! BY SUSAN SOMMER

G

ood news for anyone training now in the health industry: Jobs will be abundant! Alaska’s aging population and projected population growth in general means a greater need for health services across the state. Also, many employed in Alaska’s health workforce today are approaching retirement age and their positions will need to be filled. So who’s training our future healthcare workforce?

Workforce Training

The University of Alaska system offers more than 90 health programs statewide in allied health, public health, nursing and nurse practitioner, nutrition and dietetics, behavioral health, health information and management, and medical billing and coding. Partnerships with other universities include additional programs, about half of which are provided online. UA awards more than 800 degrees in the health field annually. The University is also part of the WWAMI partnership, a collaborative medical school among universities in five states—Washington, Wyoming, Alaska, Montana and Idaho—and the University of Washington School of Medicine in Seattle. Alaska’s WWAMI students complete their first year of medical school at the University of Alaska Anchorage, then attend second-year courses at UW Medical School. The third and fourth years are spent doing rotations in various medical specialty areas. These can be taken in any of the WWAMI states. Students who choose the “Alaska Track” can do almost all of their rotations in Alaska, a boon to students who already live here or plan to make Alaska their home. AVTEC-Alaska’s Institute of Technology is part of the Alaska Department of Labor and Workforce Development. It maintains an allied health campus in Anchorage and offers training to be■ 32

come a certified nurse assistant (CNA), licensed practical nurse (LPN) or registered nurse (RN). AVTEC partners with Cook Inlet Tribal Council to help increase the presence of Alaska Natives in the nursing field. Alaska Career College in Anchorage has programs for medical assistant, phlebotomy technician, insurance coding and billing, and massage therapy, and with classes on the fast track students can be done in about a year or less. The Health Career Academy was created in 2009 as a partnership between the Anchorage School District and the Alaska Department of Labor and Workforce Development when the entities recognized the growing need for a trained health workforce. The academy partners with more than 30 other groups, including hospitals and other businesses, and prepares high school students for entry level jobs in health care. Students attend workshops and receive one-on-one assistance to learn about interviewing, resume building and work ethics.

umbrella of health care; however, three of the four remaining occupations are also health-related: personal care aides, health care educators, and medical records and health information technicians. The average annual income for health care practitioners and technical health workers is more than $84,000, while health care support workers average about $38,000 per year. The highest job growth rate for any single occupation is projected at 40 percent for personal care aides—workers who help the elderly with daily activities so they can live in their own homes longer before moving to a nursing home, and sometimes until their final days. Personal care aides, however, are some of the lowest paid members of the health industry; the average annual wage in Alaska is barely $29,000. The highest overall number of jobs for a single occupation between 2010 and 2020, factoring in both growth and replacements, is for registered nurses; about 2,300 will be needed.

Job Growth

“Health workforce is and will continue to be the fastest growing industry in Alaska,” says Kathy Craft, Alaska Health Workforce Coalition coordinator. AHWC is a public-private partnership created to develop, implement and support a statewide approach to ensure a robust workforce to address Alaska’s growing health care needs. The coalition’s 2012-2015 action agenda focuses on the following priority occupations: primary care providers, direct care workers, behavioral health clinicians, nurses, physical therapists and pharmacists. As an example, the University of Alaska, one of several coalition core group members, has partnered with an outside university to provide distance education pharmacist training, making it easier for Alaskans to practice in

Alaska’s population is projected to exceed 800,000 by 2020, with the 65-andolder crowd nearing 105,000, an 89 percent increase from 2010. Alaska’s Labor Department predicted a 31 percent increase in health care and social assistance jobs between 2010 and 2020, including 5,860 new jobs in ambulatory health care (practitioners, outpatient care centers and home health services); 3,600 jobs in Alaska hospitals; and 2,400 jobs in social assistance (vocational rehabilitation, child day care and nonmedical home care). Health workers will represent a larger share of the state’s total employment, growing from 12.8 percent in 2010 to 15 percent in 2020. Of the top 25 occupations for percentage growth, 21 fall under the broad

Alaska’s Health Workforce Future

www.akbizmag.com • Alaska Business Monthly • January 2013


Alaska once they’ve received their degree and license. In reality, though, things are not based simply on supply and demand. One of the biggest challenges that Stephanie Evenstad, a pharmacist in Alaska for over 20 years, sees is with staffi ng reductions in pharmacies. “Because our reimbursement rates have been cut so much from third party payers (insurances), we must in turn make reductions in our costs,” she says. “Nobody wants to wait in line for a prescription when they are sick.” Staffi ng cuts can result in longer hours for remaining employees and a less flexible schedule. Besides focusing on specific occupations, the coalition core team realizes the importance of making systems changes and of capacity building; it developed initiatives for training and professional development, health professional loan repayment and incentives, aligning regulatory policies that impact the health workforce, engage and prepare Alaskan youth for health careers, health workforce recruiting and health workforce data. The Alaska Health Care

Commission commended the coalition’s efforts in its 2011 annual report. The national Area Health Education Center program, known as AHEC, dates back to 1971; the Alaska AHEC program, established in 2005, is unique in that it was the fi rst in the nation to be awarded through a school of nursing instead of a school of medicine. The focus of this statewide university-industry partnership is on strengthening Alaska’s health workforce. Working with students in K-12, college and beyond, AHEC’s mission is to “help strengthen systems to deliver comprehensive and culturally relevant health care to Alaskans.” Alaska AHEC, with five centers around the state, works in three main areas: recruiting Alaskans from disadvantaged backgrounds into health careers, coordinating clinical rotations for health industry students in rural areas or with underserved populations, and providing continuing education in underserved areas as a way to retain existing health workers. Despite challenges such as weather, geography, Internet access, video-

conferencing capabilities and decreasing operating budgets, Alaska AHECs are a “very reasonable investment for our state with a demonstrated return. The successes keep us going!” says Katy Branch, associate director of Alaska AHEC. “On an individual level, we have students that participated in AHEC-sponsored summer camps and are now in medical or PA school. One student from the Interior region just started medical school and plans to return to the Northwest to practice family medicine. She actually worked for a regional AHEC for a year between college and medical school. Another student participated in the Allied Health Camp and subsequent job shadows at Providence and plans to enter a health program in college. Another in the Yukon-Kuskokwim region is now working as a nurse for the Yukon-Kuskokwim Health Corp. Amazing stories. AHECs touch lives—and fi ll vacancies in our hardest to fi ll communities.” R Susan Sommer is a freelance writer and editor living in Eagle River.

Alaska WWAMI School of Medical Education Excellence in medical education right here in Alaska

Through the Alaska WWAMI School of Medical Education, students interested in a career in medicine have the opportunity to complete three of their four years of medical school right here in Alaska. WWAMI is a collaborative medical school among universities in Washington, Wyoming, Alaska, Montana and Idaho and the top ranked University of Washington School of Medicine. Classes are small so students receive individualized attention and access to faculty, research opportunities, local physicians and Alaska’s health care community.

Find out more about Alaska WWAMI and other college and high school premed advising and educational opportunities offered through WWAMI at:

w w w. u a a . a l a s k a . e d u / w w a m i .

WWAMI School of Medical Education

www.akbizmag.com • Alaska Business Monthly • January 2013

33 ■


RIGHT MOVES Credit Union 1

Gustin

Schnider

Compiled by Mari Gallion Benchmark Construction

Marya Pillifant was promoted to the position of Vice President at Benchmark Construction. Pillifant was the 2011 recipient of Construction Woman of the Year from the National Association of Women in Construction. Pillifant

Denali Alaskan FCU

degree in accounting from Brigham Young University and a master’s degree in international management from the University of Texas.

Alaska Regional Hospital

Alaska Regional Hospital announced the recent hiring of five staff members: Heather Plucinski and Angelina Caterinichio join the hospital as Physician Liaisons, John Brassell is the new Director of Business Development, Carla Logan, RN, BSN, is the new Women’s and Children’s Services Director and Lanise Taunton-Rigby accepted the position as Nursing Director for the Emergency Department and LifeFlight Air Ambulance.

R&M Consultants

Bennett

Wileman Leigh

Johnson

Rampke

Credit Union 1 announces the following hires and promotions: Shane Gustin has been promoted to the position of Anchorage Area Branch Manager, Heather Schnider has been promoted to the position of Branch Operations Manager, Lorraine Bennett has been promoted to the position of Vice President of Branch Operations, James Wileman has been promoted to the position of Branch Member Services Manager, Brooke Johnson has been promoted to the position of Branch Manager at the DeBarr branch and Steven Rampke has been promoted to the position of Branch Manager at the Mountain View Branch.

Olsen

Chrysti Leigh, Central Operations Manager at Denali Alaskan Federal Credit Union, received her Accredited Automated Clearing House Professional certification from the National Automated Clearing House Association. As Johnson the Central Operations Manager, Leigh is responsible for directing the growth and development of ACH services, including related reports processing, tracking and project management. David Olsen joins Denali Alaskan Home Loans as a Senior Loan Originator. Olsen will be originating loans at the new Denali Alaskan Home Loans Juneau office in Juneau. Olsen has more than 14 years in the mortgage industry and holds both a BA and MBA in Finance. Lance Johnson has joined the Denali Alaskan Federal Credit Union staff as Vice President of Internal Audit. Johnson received a bachelor’s

Bredlie

Arnett

R&M Consultants has recently moved Phoebe Bredlie, P.E., to its Fairbanks office. Bredlie holds a B.S. in Geological Engineering from the University of Alaska Fairbanks. Bredlie is a Professional Civil Engineer registered in Alaska. Hans Arnett has been moved to the Anchorage team. Arnett holds an M.S. in Geology from the University of Alaska Fairbanks and a B.S. in Geology from Montana State University.

Koniag, Inc.

Koniag, Inc. announced that Ron Unger was elected Chairman of the Board by the company’s Board of Directors immediately following its Annual Shareholders Meeting last month. Unger has served on the Koniag Board of Directors since 2004. He Unger

OH MY! ■ 34

www.akbizmag.com • Alaska Business Monthly • January 2013


RIGHT MOVES

Compiled by Mari Gallion

replaces Chris Johnson who had served as the company’s Chairman for the past nine years. Johnson will continue to serve as Vice Chairman of the Board.

Wilson has an extensive background with a fellow Alaska Native Corporation; the Chenega Corp.

member of the Juneau Chamber of Commerce and Southeast Conference.

SEARHC

The Anchorage Economic Development Corp. recently promoted Jon Bittner to Vice President and hired Valerie Lindstam as Communications Director. Bittner’s previous work as New Business and Economic Development Director makes him uniquely qualified for the position of Vice President. Prior to joining AEDC, Lindstam was an Account Executive at MSI Communications.

AEDC

Alaska Community Foundation

Widmer

Douglas

Kristen Widmer, MD, has joined the medical staff at the SEARHC S’áxt’ Hít Mt. Edgecumbe Hospital in Sitka. In addition to providing care for families in Sitka, Widmer will provide itinerant care for SEARHC patients living in Hoonah. Widmer earned her Medical Doctorate from the Medical School for International Health, a collaboration between the Columbia University Medical Center in New York City and Ben-Gurion University of the Negev in Beer-Sheva, Israel. The SouthEast Alaska Regional Health Consortium has hired Michael E. Douglas as the consortium’s general counsel. Douglas earned his J.D. from the University of Washington Law School in Seattle, and his Bachelor of Arts degree from Fairhaven College’s Law and Diversity program at Western Washington University in Bellingham, Wash.

GeoNorth

GeoNorth has just announced the hiring of three new key personnel as additions to its development team: Jason Kettell was hired as a Senior Level Programmer/ Analyst, and both Kevin Traver and Shaun Wilson have joined GeoNorth as Programmer/Analysts. Kettell has a Bachelor’s Degree in Computer Science from the University of Alaska and comes to GeoNorth with more than eight years of application development experience. Traver is currently pursuing a Bachelor’s Degree in Computer Science from UAA, and was a former Systems Administrator with GeoNorth’s parent company, the Tatitlek Corp.

Yukon Equipment Inc.

Yukon Equipment Inc. welcomes Jarrod Taylor as the Rental and Equipment Manager. Taylor’s career in equipment began more than seven years ago.

Dorsey & Whitney

Lopez

Beaty

Ricardo Lopez has joined ACF as a program officer with a focus on supporting the community Affiliates. Lopez holds a Bachelor of Science in Biological Sciences with a minor in art from the University of Alaska Fairbanks. Heather Beaty has joined ACF as the program manager for Pick.Click.Give. Before joining ACF, Beaty served as the Senate Rules Committee Aide and Chief of Staff to the Senate Majority Leader.

PND Engineers Inc.

Peterson

Richards

Dorsey & Whitney LLP announced that Sara Peterson has joined the corporate practice as Of Counsel in Dorsey’s Anchorage office. She received her Bachelor of Arts in International Business from Alaska Pacific University and a J.D. from Hamline University School of Law. Rachel Richards has joined the litigation practice as an Associate. She received her Bachelor of Arts in French from the University of Texas at Austin and a J.D. from the University of Michigan.

Alaska Division of Economic Development

Lorene Palmer has been selected to lead the Division of Economic Development. She holds a Bachelor of Business Administration from the University of Hawaii and has been an active

John W. Pickering, P.E., M.B.A., was recently appointed as the firm’s new President. Pickering has been with PND for more than 22 years, and has more than 35 years of professional engineering experience as a field and design engineer, construction manager and senior project manager. PND Engineers Inc. also announces that PND Vice President Todd Nottingham, P.E., recently returned to the PND Anchorage Office after spending 18 years with PND’s Seattle Office. Nottingham has been with PND since 1986.

Northwest Strategies

NWS has hired Charles Fedullo as Public Relations Director. Fedullo is as an award-winning journalist, a former press aide for Governor Tony Knowles, a professor at the University of Alaska, Fairbanks and owner of a public/media relations business. Fedullo

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construction

Winter Construction

© 2012 Ken Graham Photography.com

PHOTOS BY KEN GRAHAM

The combined 58,200-square-feet Brigade and Battalion Building with Classrooms on Joint Base Elmendorf-Richardson is a $23,154,800 project under construction by KICC-Alcan General JV, a joint venture between KIC Construction LLC and Alcan General Inc. Construction on the multi-year project began in May 2012 and is shown here in early December 2012. Counting subcontractors, 30 to 40 construction workers are employed on the project, with 60 to 70 workers anticipated during interior construction. Completion is scheduled for this December. ■ 36

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© 2012 Ken Graham Photography.com

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www.akbizmag.com • Alaska Business Monthly • January 2013


SANDVIK EQUIPMENT — READY TO DIG ROCK, ROADS, PIPELINES, MINES & MORE!

Work on the $40 million Seward Highway Tudor Road to Dowling Project began in 2012 and is expected to be completed in 2014 by Quality Asphalt Paving, the general contractor. The project will increase lanes from four to six and replace two bridges over Campbell Creek and is shown under construction in early December 2012. Above, one construction worker is venting the exhaust from a concrete saw operated by another construction worker in a tented enclosure, which enables winter construction work to progress. About 15 construction workers are employed in the winter. QAP and subcontractors average 50 to 60 workers during the construction season. Seven to nine field engineers work the project as inspectors.

Now Alaska Dealer for Sandvik DELTA Construction & Mining Equipment INDUSTRIAL SERVICES, INC. 1229 Richardson Hwy. Delta Junction, AK 99737 (907) 895-5053

3458 Truck St. Fairbanks, AK 99709 (907) 452-5053

deltaindustrial.com

www.akbizmag.com • Alaska Business Monthly • January 2013

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© 2012 Ken Graham Photography.com

Concrete work was underway in early December 2012 on the $110 million UAA Seawolf Sports Arena. the 196,000-square-foot facility will seat 5,600 with parking for 600 vehicles. It was designed by McCool Carlson Green and is being built by Cornerstone General Contractors Inc. ■ 40

www.akbizmag.com • Alaska Business Monthly • January 2013


Legal Speak

By Renea Saade

Internships Benefit to both company and intern, if done correctly

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hether it is called an internship, externship, cooperative learning experience, clerkship, apprenticeship or rotation, a hands-on training position can be a tremendously rewarding and beneficial endeavor for both the trainee and the organization providing the training. Indeed, many schools and educational programs require some form of handson work experience as part of their curriculum. And many students select a school or program based on whether it offers hands-on experiences and the scope and quality of such experiences. Training programs have also been a way for folks to re-enter the workforce in a new field after having lost their previous job as part of the economic downturn. There is no question that these programs are an integral part of our society’s educational system and workforce. But these programs cannot succeed without the willing and active participation of companies and other organizations that serve as host “employers.” Companies generally embrace the idea of low or unpaid labor (which most internships equate to). Many organizations, particularly in the nonprofit and public sectors, rely upon it.

Avoiding Risk

However, legal risks can arise from these sorts of training arrangements. With appropriate planning and the correct administration, these risks can be easily managed, if not avoided altogether. This planning and effort can also greatly increase the benefit that both participants receive from the arrangement, making it an even more rewarding experience. The most significant risk is that a company can be found to owe an intern wages. Unless an internship is deemed exempt from federal and state wage and hour laws, an intern must be paid

at least minimum wage for all hours worked and any applicable overtime. To be exempt from federal (and most state) laws, internships within the for-profit sector must meet these six criteria: (1) the training, although it includes the actual operation of the company, is similar to what a vocational school would give; (2) the training is for the interns’ benefit; (3) the interns do not displace regular employees, but work under the close observation/supervision of them; (4) the company derives no immediate advantage from the interns’ activities, and the training may, at times, interfere with operations; (5) interns are not entitled to jobs at the end of their internships; and (6) both parties understand and agree that the interns are not entitled to be paid. Internships within the public and nonprofit sector have less stringent criteria.

Insurance & Policy Provisions

Another often overlooked issue is insurance coverage. Even if an intern is exempt from pay, the hosting company should confirm that he or she is adequately covered by all applicable insurance. The intern may need to be added to the company’s policies for workers’ compensation, professional liability or other coverage implicated by the activities the intern will be performing. Another issue that many companies fail to adequately address is the intern’s adherence to the company’s existing policies. Since interns are usually only at a company for a short period of time, the company often fails to take steps to ensure that they understand and agree to its confidentiality policy; non-compete policy; equipment, software and social media use policies; non-harassment/non-discrimination policy; and so forth. This oversight can result in lost property and profits or other harm to the company’s business operations.

Renea Saade

Win-Win Internships

Despite the risks, internships can be a win-win situation. Former interns stand out from other job applicants and enter the workforce already having a good handle on how to perform the job they are hired to do. And hosting companies or organizations are able to introduce potential employees and community members to their business or mission, and can use their interns to obtain a fresh perspective on their operations and likely helpful feedback on their informal and formal training programs. If the internship turns into a long-term employment relationship, that’s icing on the cake. R Renea Saade is a partner with the law firm Stoel Rives LLP. She regularly assists companies with their employment law needs and contract disputes. Contact her at risaade@stoel.com or 907.263.8412. Please note that this article is not an adequate substitute for legal advice.

www.akbizmag.com • Alaska Business Monthly • January 2013

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economY

2013 Economic Outlook COMPILED BY MARI GALLION ALASKA Alaska’s budget position is solid. We have a Triple AAA bond rating, more than $16 billion in budget reserves, and nearly $43 billion in the Permanent Fund. With plans for paying down our unfunded liabilities, and having been named the sixth best-run state in the nation, we will remain solid because we are committed to being a responsible and responsive state. As we prepared the budget for Fiscal Year 2014, we had to face the facts: oil production is down, and oil prices too, have decreased. That profoundly impacts Alaska’s revenue. For Fiscal Year 2014, I have proposed a budget fully $1.1 billion dollars leaner than the current year. —Governor Sean Parnell

ARCTIC POLICY Increasing change and activity in the Arctic has resulted in added emphasis on and attention to northern issues. Alaska is in a key, strategic position to respond and take a leadership role in next steps and future development. 2013 will see the first meetings of the Alaska Arctic Policy Commission, the beginning of the Canadian Chair of the Arctic Council, and continued participation in the Pacific Northwest Economic Region Arctic Caucus. We can expect to see progress made on an International Maritime Organization Polar Code and the signing of the Arctic Marine Oil Pollution Preparedness and Response Instrument. All of this means that Alaskans must work to fully understand Arctic issues, challenges and opportunity. —Nils Andreassen Executive Director, Institute of the North

CONGRESSIONAL DELEGATION While there are positive economic signs—such as an unemployment rate on the decline and increased housing starts—I am still concerned about the direction of the American economy. The Obama Administration continues to impose burdensome and excessive regulations that will hamper development, kill resource production, and ultimately make it more difficult for Americans to start businesses. These regulations are yet another ‘fiscal cliff’ for this country.

I’m very optimistic going into 2013. I expect Shell Alaska’s offshore development to move forward, which represents jobs and opportunity for Alaskans in the region and in our cities. I’m working with federal regulators and permitting agencies to make sure good projects like this get developed. Our mining industry is also strong. The tourism sector continues its steady growth year-over-year and Alaska has the best fishing industry in the world. Alaska has one of the lowest unemployment rates in the country and we need to make sure we keep the state’s business climate friendly to development of all kinds.

—U.S. Rep. Don Young

—U.S. Sen. Mark Begich

Alaska has some big opportunities on the horizon. Shell will return to the Arctic this coming summer to finish the two wells it started in the Chukchi and Beaufort seas. If Shell is successful in finding oil, it will bring major economic benefits to the state in the form of employment, a new source of oil for TAPS, and hundreds of millions of dollars in investment. As for our fisheries, we look forward to improved research that will make our waters not only more plentiful for our people, but a more robust economic engine and provider for the nation. —U.S. Sen. Lisa Murkowski ■ 42

www.akbizmag.com • Alaska Business Monthly • January 2013


BANKING Alaska’s stable state economy, healthy housing market and responsible lending practices helped Alaska bank deposits grow by $800 million from 2011 to 2012, home loans exceeded $1.5 billion for all mortgage companies in Alaska, and Wells Fargo provided a record $500 million in loans to Alaskan businesses. As the economy recovers, we anticipate that demand for loans will increase, especially with interest rates at record lows. Looking ahead, the industry will continue to improve the customer experience with innovative services such as check deposits via mobile device. —Joe Everhart, Alaska Region President, Wells Fargo Bank

CONSTRUCTION: COMMERCIAL There will be a substantial decline in Defense spending for 2013 that is partially mitigated by state bonds and capital spending for the building sector. Civil construction sector continues to be healthy. All sectors of construction are highly competitive and contractors’ margins are thin. Smart project owners see this as an opportunity and are advancing their construction projects to take advantage of the competitive market. —John MacKinnon, Executive Director Associated General Contractors of Alaska

FORESTRY We expect to harvest a total of about 180 million board feet from State, federal and private lands in 2013. The State forests will provide about 17 million board feet, the federal lands another 55 million board feet and the rest from private timberlands. This is about the same as 2012, but we expect the timber harvesting to increase over time as the Governor’s Timber Task Force recommendations are implemented and begin to take effect. —Owen Graham, Executive Director, Alaska Forest Association

INTERNATIONAL TRADE We forecast 2013 to be another solid year for Alaska’s international trade economy, with exports to overseas markets in the $4.5 to $4.7 billion range. Not a record year, but still at historically high levels. Alaska continues to benefit from the Three Rights: the Right Place with our geographic proximity to fast growing emerging markets in Asia-Pacific; the Right Time in History as hundreds of millions of people move up economically and join the middle class; and, with us being blessed with the Right Commodities for export, an abundance of vital natural resources that are the building blocks of economic expansion and modernization. —Greg Wolf, Executive Director, World Trade Center Alaska Consultant, U.S. Department of Commerce

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CONSTRUCTION: MILITARY & CIVIL WORKS The Alaska District’s program is rapidly changing with a declining military workload, evolving civil works mission, continuing environmental program, and growing but volatile opportunity for providing services overseas. After a decade of work valued at close to $500 million, fueled mainly by military construction, the district is returning to previous levels of approximately $300 million per year, or less. With a national policy of no new starts in civil works, the district is reshaping its workload toward assisting other federal, state and local governments with their projects, while building support for the U.S. Pacific Command in Asia where the district currently is working on a $150 million project to design and construct infrastructure facilities for the Indian Air Force’s C-17 aircraft bed-down at Hindan Air Force Station near New Delhi. —Col. Christopher D. Lestochi, Commander Alaska District, U.S. Army Corps of Engineers

TRANSPORTATION I have polled a number of our members and we are cautiously optimistic subject to passing legislation this session with meaningful tax reform that reverses the decline in oil production. —Aves Thompson, Executive Director, Alaska Trucking Association

www.akbizmag.com • Alaska Business Monthly • January 2013


B U S I N ESS

PROF ILE

FSBO System “All the help you need to sell your home and save the commission”

©2013 Chris Arend Photography

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ith more than 3,000 satisfied clients, FSBO System knows how to help do-it-yourself home sellers succeed. Anchorage-based FSBO (For Sale by Owner) System is the only company in North America that provides professional consulting services to help individuals sell their homes on their own. Since its inception in 1995, the company’s average client has outperformed the average real estate agent listing in terms of days on the market and chance of closing. And they save about $15,000 compared to paying the typical 6 percent agent commission. Over the past 17 years, FSBO System has worked for almost 80 percent of its clients. “We know what people need to sell their home and save the commission,” said Manager Kirk Wickersham, a real estate broker and lawyer with more than 42 years of experience. Wickersham’s background includes being a graduate of the University of Alaska and Yale Law School. In addition, he is a member of the University of Alaska Board of Regents, former chair of the Alaska Real Estate Commission, member of the Executive Committee of the Yale Law School Association, and Trustee of the University of Alaska Foundation. His unique consulting business provides a complete package of resources for a single, up-front fee—regardless of the price of the seller’s home. These services include a market analysis, complete marketing program, preparation of the purchase and sale agreement, help throughout the closing, and unlimited professional support. “Once someone is committed to us, we want them to call every time they have a question,” Wickersham said.

The company recently expanded to serve customers throughout North America. In the spring of 2012, it launched FSBOSystem.com, featuring an online tutorial and Web-based program that anyone in North America can use to sell their home. The online program walks users through the home selling process in seven steps: planning ahead, putting the home in show condition, pricing, preparing marketing materials, showing the home and keeping track of marketing results to make mid-course corrections, negotiating the deal and closing. A prospective user can try the first step for free, and the program comes with a money-back guarantee process. Sellers can use the tutorial whenever they want and for as long as they want— with unlimited customer service. The online tutorial is a comprehensive tool that took more than two years to create. So far, users of the Web-based program are also performing better than agent listings based on the number of days on the market and chance of success. PAID

ADVERTISEMENT

Now, Wickersham is expanding into other markets to establish that his homegrown Alaska technology can work anywhere. The company will be opening a new office in Denver in the spring of 2013. Denver has a strong housing market and extensive military and retiree populations, successful market segments for FSBO System in Alaska. Whether in Alaska or Colorado, the success of FSBO System is based on the success of its clients, according to Wickersham. That’s why the company goes above and beyond to consistently deliver on its motto: “All the help you need to sell your home and save the commission.” For more information contact:

FSBO System Kirk Wickersham, Manager 280 W. 34th Ave. Anchorage, Alaska 99503 Phone: (907) 561-3726 Kirk@FSBOsystem.com www.FSBOsystem.com


ENERGY I expect clean energy development in both renewable generation and energy efficiency to grow in 2013, with an emphasis on heating solutions. As diesel fuel prices remain high or even increase, there will be continued renewable energy activity in non-hydro rural areas of the state, with dozens of wind, biomass and heat recovery projects supported by the Alaska Renewable Energy Grant Fund in the planning, design or construction phases. In the Railbelt, increasing natural gas prices will drive demand to increase the size of the Fire Island wind farm, explore for geothermal resources near Mount Spurr and study large hydro options, all of which could provide stably priced electricity. There will also be continued strong demand to cut energy costs through energy efficiency, using the state’s popular weatherization and rebate programs and other financing mechanisms to make buildings more efficient. —Chris Rose, Executive Director, Renewable Energy Alaska Project

ECONOMIC DEVELOPMENT For Anchorage, the indicators continue to lean positive. Unemployment rates should continue at near record lows while overall employment should continue to see steady growth. Professional services, retail, construction, tourism, health care, transportation, oil and gas should continue to see growth in jobs while state, local and federal government employment will likely remain flat or decline in the coming year. —Bill Popp, President and CEO Anchorage Economic Development Corp.

TOURISM We’re coming off gains in 2012, and with expectations that both domestic and international visitation will be up, the outlook for 2013 is positive as well. Cruise capacity in Alaska is expected to increase in 2013. We will have new flights from Icelandair, JetBlue and Alaska Airlines adding to robust returning service. It will be even easier to visit Anchorage specifically and Alaska as a whole. —Julie Saupe, President and CEO Visit Anchorage ■ 46

The economic outlook in Juneau is positive. Government jobs look to remain steady while we see growth in the private sector. In 2013, we look for continued improvement in mining and mining support services. Tourism will benefit as cruise passenger arrivals continue to rebound after recent declines. The seafood industry will continue as an important contributor to our economy, as more value-added opportunities are captured by local firms. Population in Juneau is growing again, which provides additional opportunities for entrepreneurs to pick up on increased demand for services. —Brian Holst, Executive Director, Juneau Economic Development Council

TOURISM Assuming that the U.S. economy does not take a downward trend and is fairly stable or slightly improving, which will allow for consumers to continue making discretionary spending, I estimate the total visitors will increase from the summer of 2012. My estimate for next year’s summer travel season is that actual numbers we will be up about somewhere in the vicinity of 4 percent to 5 percent from a total in 2012 of 1,586,600 visitors to about 1,650,000 visitors in the summer season of 2013. In my estimation, the two main reasons for the growth will be because of: 1) a strong tourism marketing budget by the State of Alaska which continues to raise the awareness and interest in Alaska as a destination, and 2) the additional cruise ships coming to Alaska because of the reduced tax burden on the industry. —Ron Peck, President and COO, Alaska Travel Industry Association

EMPLOYMENT The Alaska Department of Labor and Workforce Development had no comment on the 2013 economic outlook for Alaska except 2013 jobs forecast numbers were unavailable at press time in mid-December.

www.akbizmag.com • Alaska Business Monthly • January 2013


OIL & GAS The harsh reality is this: Alaska continues its accelerated decline in oil production, currently about 6 to 8 percent per year—or about 40,000 barrels per day. The newer fields are producing about half that amount, so while important, they are not making up the current rate of decline. And, even though exploration is expected to occur this year on the North Slope, this exploration does not guarantee production. Whatever the respective oil and gas companies decide to invest in the future, we need to be laserfocused on what those investments will do to oil production in the short term because, as has been well-established, Alaska needs production from fields currently under development or evaluation, or our production could dip below 300,000 bpd in just 10 short years. With the oil and gas industry providing almost 90 percent of our state spending, Alaska needs to implement a tax policy that encourages not only exploration, but also production from all fields, especially existing fields as those fields will provide more oil sooner rather than later. We look forward to the 2013 legislative session, and encourage lawmakers to craft a new tax policy for Alaska to allow for the maximum long-term development of our natural resources. —Kara Moriarty Executive Director, AOGA

TELECOMMUNICATIONS 2013 promises to be an exciting year for telecommunication users in Alaska. Two significant trends will occur in the wireless and wired Internet segments. In wireless, a national carrier will initiate facilitiesbased services in major metropolitan areas. This added competition will prove beneficial to consumers as the two major Alaska-based carriers will combine their wireless assets to compete head-on against the national carriers. This new entity will continue to deploy a seamless wireless network across the state with LTE, 4G, 3G and 2G services. In the wired Internet segment, consumers will receive greater access to high-speed broadband services. In rural Alaska, terrestrial connectivity will be extended for the first time to Nome. Kotzebue will receive the same connectivity the following year. In Anchorage, broadband services will get considerably faster, with the roll-out of 50 Mbps services in the Anchorage bowl. Other regions are being evaluated for the super fast Internet connections.

Fueling the Trident Cannery in Akutan, the City of King Cove and warming the home of Tom and Annie Hume. As Alaska residents, we know what it takes to keep the home fires burning, no matter how far away they are. So we developed a barge distribution network that allows us to provide reliable, costeffective fuel and freight delivery to homes and businesses even when rivers are running low. Now folks like the Humes can count on having the fuel they need, when they need it. And knowing that Delta Western will do whatever it takes to keep Fueling Alaska Safely.

For all of your quality fuel needs, call us toll-free at 800.478.2688

—Ron Duncan, President & CEO, GCI

www.akbizmag.com • Alaska Business Monthly • January 2013

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Politics

2013 Legislative Priorities ALASKA STATE CHAMBER OF COMMERCE

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he Alaska State Chamber of Commerce (Alaska Chamber) held their annual Legislative Policy Forum Oct. 4, 2012, at the Egan Center in Anchorage. The purpose of the policy forum is to establish legislative priorities of the organization for the upcoming year based on proposals submitted by the general membership of the Alaska Chamber. The Legislative Affairs Committee brought forward 49 proposals at the Policy Forum with 25 approved by the members and board of directors. Of the priorities approved, Alaska Chamber members voted for the top three state priorities and top three federal priorities.

2013 Federal Priorities

1. Support Oil and Gas Exploration and Development in Alaska’s Federal Arctic; Outer Continental Shelf (OCS), National Petroleum Reserve-Alaska (NPRA), and the Arctic National Wildlife Refuge (ANWR) The Alaska Chamber strongly supports oil and gas exploration and production in Alaska’s federal Arctic areas; including the Beaufort Sea, Chukchi Sea, NPRA, and the 10-02 area of ANWR. The Alaska Chamber encourages Congress to enact revenue sharing for Alaska and local communities. The Alaska Chamber also encourages the Alaska Congressional Delegation, the Alaska Legislature and Governor to support and strongly advocate for responsible development of these valuable resources, while the Alaska Chamber commits to actively support and participate in the education and advocacy efforts to open these areas. 2. Oppose Implementation of the Emission Control Area in Alaska by the EPA The Alaska Chamber will oppose the implementation of the ECA regulations in Alaska. 3. Oppose Any Further Federal Land Withdrawals in Alaska, Other Restrictive Land Management Designations, and Preemptive Actions by Regulatory Agencies The Alaska Chamber will oppose any further federal land withdrawals, marine protected areas, Antiquities Act designations and wilderness studies on federal lands in Alaska. The Alaska Chamber will further oppose unreasonable critical habitat designations under the Endangered Species Act and other restric■ 48

tive land management areas. Finally the Alaska Chamber will oppose preemptive actions by regulatory agencies that make premature decisions outside the context of well-established permitting processes. The Alaska National Interest Land Conservation Act (ANILCA) sought to strike balance between preservation and multiple use activities on lands in Alaska by setting aside over 100 million acres of federal lands in conservation system units. Additional federal land withdrawals and wilderness designations would violate the “no more” provision of ANILCA. The Alaska Chamber opposes any new federal land withdrawals, marine protected areas, Antiquities Act designations, wilderness study areas, and other new excessive or restrictive designations. Recent actions by the Environmental Protection Agency (Bristol Bay Watershed Assessment and consideration of a 404(c) veto) demonstrate an additional threat to an appropriate land use balance, outside the traditional context of land use withdrawals and protections through legislation, executive order or the federal agency planning process.

2013 State Priorities

1. Reform Oil Tax Policy to Encourage New Oil Production The Alaska Chamber is deeply concerned by the continued, accelerated decline in Alaska oil production. Because Alaska’s oil and gas industry supports more than onethird of the state’s economy, it is vital that the Alaska State Legislature adopt regulatory and taxation policies that stimulate increased oil production from all fields. State spending continues to outpace new production, which is unsustainable and bad fiscal policy. The Alaska Chamber encourages the Alaska State Legislature to adopt policies that apply to current producers and new explorers during the 2013 Legislative Session. 2. Reduce the High Cost of Energy The Alaska Chamber encourages the Alaska State Legislature and the Governor to support initiatives that lower the cost of energy and ensure adequate and reliable deliverability in Alaska. The high cost of energy is causing financial hardship and limiting economic growth statewide. To alleviate this situation, we

encourage the support of initiatives that lower energy costs and that advance the State’s renewable energy goals. 3. Increase Responsible Natural Resource Development by Improving the Efficiencies of the Permitting Process and Gaining Access to Resources The Alaska Chamber supports a significant increase in responsible natural resource development and encourages the Alaska State Legislature and Administration to uphold Alaska’s strong regulatory and permitting laws and policies that will facilitate additional exploration, site development, employment, infrastructure, research and natural resource production in Alaska.

2013 Policy Positions

1. Support Small Business Administration Native 8(a) Contracting Program Support Native 8(a) Contracting by demonstrating the impact the program has on the Alaska economy and the benefits to Alaska Native Corporations and tribal entities across the country. 2. Bypass Mail Program Preserve the Bypass Mail Program by demonstrating the impact the program has on the Alaska economy and the benefits to rural Alaska. 3. Oppose National Ocean Policy (NOP) Implementation in Alaska, Particularly Coastal and Marine Spatial Planning (CMSP) NOP in Alaska will disproportionately impact Alaskans with overly burdensome policy, as Alaska has more coastline that all other states in our nation combined. The Alaska Chamber will oppose the implementation of the NOP and CSMP regulations on Alaska. 4. Support for Overturning the Application of the Roadless Rule in Alaska The Alaska Chamber supports efforts to overturn reapplication of the Roadless Rule to the National Forests in Alaska. 5. Support the University of Alaska The Alaska Chamber urges the Alaska State Legislature and the Governor to maintain strong support and funding for cost effective and responsive programs at the University of Alaska. A healthy university is vital for the development of a highly trained workforce, the education of our citizenry, and the research and development endeavors necessary to address the state’s critical challenges.

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6. Support Workers’ Compensation Exclusive Liability Statute The Alaska Chamber supports current Alaska law making compensation benefits an injured worker’s exclusive remedy for on-the-job injuries. 7. Support Legislation to Reduce Workers’ Compensation Medical Costs The Alaska State Chamber of Commerce supports legislation to reduce workers’ compensation costs. In order to reduce workers’ compensation medical costs in Alaska, the Alaska Chamber supports adoption of medical treatment, billing, fee schedule, and utilization guidelines for Alaska workers’ compensation that are consistent with national guidelines. The Alaska Chamber supports the development of exclusive provider organizations (EPOs) and prescription benefit managers (PBMs) as a source of medical treatment. 8. Support for Litigation Reform Relating to Resource Development Projects in Alaska The Alaska Chamber supports efforts to bring accountability to the appeals and litigations processes for community and resource development projects. The Alaska Chamber will support changes to the public litigant legal environment such that frivolous lawsuits are discouraged. 9. Continue to Strengthen the Military Presence in Alaska The Alaska Chamber encourages the Legislature and Governor to work with the U.S. military to not only maintain current military investment and force structure in Alaska, but to increase military missions, staffing, activity, and investment. 10. Royalty Oil Sales The Alaska Chamber supports state administrative and Legislative approval of royalty oil contracts that uses the same net back value if the oil was sold out of state. Additionally, the Chamber supports completion of these approvals of the Flint Hills contracts by the end of the 2013 Legislative session. 11. Support Development of Environmental Policies Based on Sound Scientific Basis Over Precautionary Method The Alaska Chamber supports protecting public health and the environment through reasonable, carefully considered programs that are developed and implemented based on sound scientific arguments, credible, reproducible studies and economic analysis. The Alaska Chamber opposes efforts to implement the “precautionary prin

ciple” in developing or implementing environmental programs. The precautionary principle presumes that many activities pose a risk to health and the environment, even without the presence of any scientific evidence that such risks are in fact present or related to a specific activity, and requires that precautionary measures be adopted or implemented to mitigate those assumed risks. 12. Support for Establishing a State Forest from about two million acres of the Tongass National Forest The Alaska Chamber supports efforts to establish a state forest from two million acres of timberlands on the Tongass National Forest. 13. Support Creation of the Susitna State Forest The Alaska Chamber encourages the Alaska Legislature to enact legislation establishing the Susitna Forest, which would be the fourth state forest in Alaska, benefitting local economies, creating and sustaining much needed jobs in the forest products industry while providing many other opportunities for Alaskans. 14. Support Reduction of Spending to Sustainable Levels It is the position of the Alaska Chamber that current state spending levels are unsustainably high and damaging to future Alaskans. Based on projections, which take into account the decline in oil production, the Alaska Chamber will support a state budget with total General Fund spending (exclusive of PFD disbursements) of $5.6 Billion or less, which is higher than in years before the last two, but significantly below spending levels approved in the last two years. 15. Privatization of Construction Projects The Alaska Chamber supports the reduction of state government involvement in areas that can be better served by the private sector. Privatization can result in an increase in efficiency and thus assist in balancing the state’s budget - setting a long-term fiscal plan into motion. Specifically, the Alaska Chamber supports the state removing itself from the construction business. 16. Oppose All New Unfunded Property Tax Exemptions as Introduced on the State Level The Alaska Chamber on behalf of their membership will work with the Governor and all State Legislators who introduce unfunded property tax exemptions in an

effort to educate them on the effect of the proposed exemption on those of who the exempted burden is shifted to. 17. Establish a State Fund for Transportation The Alaska Chamber encourages the Alaska State Legislature and the Governor to create a funding mechanism for maintenance and capital improvements for investment in Alaska’s land, water, and air transportation systems. Alaska’s transportation infrastructure is pivotal to the State’s economy to access markets, supplies and resources. Improving and investing in its transportation system will enhance the competitiveness of businesses and economic opportunities for its people. 18. Affordable Energy for Alaska’s Rural Communities The Alaska Chamber encourages the Alaska State Legislature and Administration to support and expand efforts to reduce energy costs in our State’s Rural Communities. The Chamber expresses general support and encourages continued funding for Alaska Energy Authority’s Power Cost Equalization and Renewable Energy Grant Fund programs, and requests increased funding to expand Alaska Housing Finance Corporation’s Enhanced Weatherization program and Alaska Energy Authority’s Emerging Energy Technology Fund. Through these actions, the Alaska Chamber encourages the State of Alaska to adopt a long-term, affordable energy plan that reduces the immediate financial burden on rural citizens, while developing sustainable infrastructure for our rural communities. 19. Cruise Ship Wastewater Point of Discharge Currently, because of the language in a 2006 initiative, wastewater discharges from cruise ships have to be measured at the “point of discharge.” This would be similar to measuring air quality standards at the end of a tailpipe. Wastewater discharged from cruise ships is already substantially cleaner than any other wastewater discharged, including municipalities and other industrial users. The Alaska Legislature should change the “point of discharge” standard to something that is both attainable and protects the environment. The Alaska State Legislature should work with the Alaska Congressional Delegation to address the multitudes of federal laws that adversely impact natural resource development in Alaska and elsewhere.  R

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trAnsPortAtion & energY

Arctic Infrastructure Needed for Resource Development and Delivery BY PAULA COTTRELL

©Gazprom

Gazprom reported that the Ob River liquefied natural gas carrier chartered by Gazprom Group successfully completed the world’s first LNG supply via the Northern Sea Route Dec. 5, 2012, making it possible to supply Russian LNG to AsiaPacific and the European market via the Northern Sea Route. The Russian Federation owns controlling interest in Gazprom, a global energy company headquartered in Moscow.

O

ffshore drilling in Alaska’s Outer Continental Shelf became a reality when Royal Dutch Shell began drilling exploratory wells in the Chukchi and Beaufort seas in summer 2012. In 2009, the National Energy Technology Laboratory of the U.S. Department of Energy released an addendum to “Alaska North Slope Oil and Gas: A Promising Future or an Area in Decline?” that was released in 2007. The addendum was prepared for NETL/ DOE by Charles P. Thomas and Walter B. North of RDS LLC/SAIC and consultants Tom C. Doughty and David M. Hite. In the abstract it was noted that “The future for Alaska North Slope (ANS) oil and gas ranges from very promising to limited depending on how many of the following assumptions apply: (1) the ■ 50

1002 Area of ANWR is opened for exploration and development, (2) exploration is allowed in the most prospective areas of NPRA, (3) the Beaufort Sea OCS and Chukchi Sea OCS are available for exploration and development without major restrictions on area or timing, (4) an ANS natural gas pipeline for major gas sales (referred to as a gas pipeline in the remainder of the abstract) is operational by 2018 to 2020, (5) oil and gas prices recover to favorable high values in the near future, and (6) State of Alaska and federal fiscal policies remain stable and supportive of the huge investments that will be required. The future prospects become progressively less promising as these assumptions are removed.” Oil and gas reserve estimates were given—with a caveat.

“In the long term, 2018/2020 to 2050, exploration success and development is expected to involve activities in all five sub-provinces under the optimistic assumptions and is estimated to total 28 billion barrels of economically recoverable oil and 125 trillion cubic feet of economically recoverable gas. The expected oil and gas reserve additions are widely distributed in all the geographic areas.” The five sub-provinces referred to are ANWR, the Central Arctic (area between the Colville and Canning Rivers), NPRA, the Beaufort Sea OCS and the Chukchi Sea OCS. Although many of the assumptions have not yet occurred, many are expecting oil and gas development in Alaska’s Arctic region to provide an economic boom to Alaska, along with enough oil to keep the

www.akbizmag.com • Alaska Business Monthly • January 2013


trans-Alaska oil pipeline operational. Extracting OCS resources comes with the need for Arctic infrastructure.

Biggest Challenge

According to Robert Dillon, communications director for the United States Senate Energy and Natural Resources Committee, the biggest challenge to developing Arctic infrastructure is paying for it. “The cost will be substantial and the federal government is not exactly awash in cash. It will be an uphill slog to get Congress to fund infrastructure in the Arctic without a new revenue source to pay for it,” Dillon says. “If oil companies can prove-up the oil reserve estimates in the Arctic, it will provide both justification and the revenue to invest in infrastructure that will be needed not just for energy production, but also shipping and other future activities.” Some of the infrastructure needed is the construction of offshore/onshore pipeline—680 miles from the Chukchi Sea, 235 from the Beaufort Sea— to bring OCS oil to the Trans-Alaska Pipeline System, according to Northern Economics Inc. and Institute of Social

and Economic Research in “Potential National-Level Benefits of Alaska OCS Development,” prepared for Shell Exploration & Production, February 2011. Key findings from the executive summary of the report include revenues: “Commercialization of oil and gas resources in the Beaufort OCS and the Chukchi OCS could generate $97 billion and $96 billion (in 2010$), respectively, in revenues to federal, state and local governments, over a 50-year period;” and jobs: “Economic activity resulting from OCS development in the Beaufort Sea and Chukchi Sea could generate an annual average of 54,700 jobs nationwide, with an estimated cumulative payroll amounting to $145 billion (in 2010$) over the next 50 years. It is estimated that about 30,100 jobs would be generated from the Beaufort OCS development and 24,600 jobs from development of the Chukchi Sea OCS.”

Infrastructure to Support the Growth

“Arctic development is going to require ports and infrastructure statewide,” says Sen. Mark Begich. “Development on this

scale will have substantial impacts on Arctic communities and the whole state.” This infrastructure—airports, roads, ports, pipelines and facilities—presents some unique challenges in the Arctic. “There is a lot of shallow water along the Arctic coastline,” says Henry Huntington, Arctic science director of Pew Environment Group, a nonprofit organization that works to establish science-based policies. “This presents some serious limitations on what kind of vessels can be used.” Deepwater ports, while clearly a necessity, aren’t ideally suited for the soft shorelines in the Arctic, he says. “There are no areas along the Arctic Coast that are suitable for a real harbor or port,” says Huntington. “Everything is exposed and shallow.” The Alaska Deep Draft Arctic Ports Study by the U.S. Army Corps of Engineers, the Alaska Department of Transportation and Public Facilities, and RISE Alaska/ARCADIS is expected to be published this month and is an evaluation of potential port locations along Alaska’s western and northern coasts. Among its several components, nana.com/regional

Building on past success for

future generations

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www.akbizmag.com • Alaska Business Monthly • January 2013


Table 1. Summary of Development Scenarios in the Beaufort and Chukchi OCS Areas Beaufort OCS

Chukchi OCS

5.97 15.94

8.38 34.43

47 31

43 27

7 235

4 680

yes no yes yes

yes no yes yes

2019 2029 7

2022 2036 4

6.34 5.0 6.96

6.16 4.79 7.78

1,165,707 883

565,472 1,421

Resource Size (Mean) Oil and condensates (billion barrels) Gas (trillion cubic feet)

Exploration Exploration/Delineation Wells Exploration Rig Seasons

Aviation Upgrades Needed Now

Development No. of offshore production platforms Offshore/Onshore pipelines (miles) Shore bases / facilities Marine terminal Liquefied natural gas (LNG) facility Production facility Support base

Production Year 1st oil flows Year 1st gas flows No. of producing fields Total cumulative volume produced (through 2057) Oil & gas (billion barrels of oil equivalent) Oil & condensates (billion barrels) Gas (trillion cubic feet) 6.96 7.78 Daily peak production Oil & condensates (barrels per day) Gas (million cubic feet per day)

the study includes establishing siting criteria and identifying potential sites. One possibility is the Chukchi Sea Port Site being used by the Red Dog mine (see sidebar on page 54).

Data source: NEI and ISER, 2009.

Note: The resource size estimates are from the 2006 BOEMRE Resource Assessment. The numbers shown in the table are the mean undiscovered economically recoverable resource estimates (UERR) assuming resource commodity prices of $60 per barrel of oil and $9.07 per thousand cubic feet of natural gas. Table source: NEI and ISER“Potential National-Level Benefits of Alaska OCS Development,” 2011.

To support increased Arctic development, aviation infrastructure as well as marine infrastructure is needed. While Beaufort Sea OCS development is reasonably close to facilities at Deadhorse, infrastructure is needed for operations in the Chukchi Sea. The Wainwright airport is a strategic aviation logistics hub for Chukchi Sea OCS staging and operations because of its proximal location. Owned by the North Slope Borough, the Wainwright airport has a 4,494-foot-long by 90-foot-wide gravel runway. “To be effective, the existing runway would have to be upgraded or a new runway would have to be built to accommodate more traffic and a cargo jet,” says Huntington. “Right now the closest bigger airports would be Kotzebue or Barrow.”

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53 ■


DeLong Mountain Transportation System

T

he Red Dog mining area contains some of the world’s most significant zinc deposits. AIDEA owns the DeLong Mountain Transportation System that connects the Red Dog Mine to the AIDEA transshipment facility at the Chukchi Sea Port Site via a 52-mile all weather haul road. This key infrastructure enabled Teck, the operator, to develop the Red Dog Mine and thus provide significant economic activity to the region. The opportunity for a sustainable future is present with the Aqqaluk Deposit, a rich ore deposit that will produce 20 more years of operating life for the Red Dog Mine and continuing jobs for the region. AIDEA continues to work with Zazu Minerals to develop a new zinc deposit in Northwest Alaska. If developed, Zazu would join Teck in using the DeLong Mountain Transportation System to get their product to market. SOURCE: Alaska Industrial Development and Export Authority

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“Public infrastructure to support the development—like roads, airports, housing, public schools and community facilities—would have to be paid for by the state, and meanwhile, under current law, Alaska gets zero share of offshore development,” Begich says. “Revenue sharing is crucial to making sure we’re not continuing the colonial legacy of Alaska development, where outside firms make money in our state and leave with it shortly thereafter.” Many agree and feel revenue sharing is the logical answer to fund the infrastructure necessary to support Arctic resource development. Because offshore drilling operations are taking place in federal waters, the federal government would be the recipient of most of the money from successful operations. Revenue sharing would allow Alaska to receive a percentage of these proceeds. “Right now, the five states that border the Gulf of Mexico receive 37.5 percent of the federal revenue from energy development off their shores,” says Dillon.

www.akbizmag.com • Alaska Business Monthly • January 2013


“Sen. Murkowski is proposing that we expand that to all coastal states, including Alaska, with production directly off their coastlines. “The state will need to make huge investments in infrastructure and response capabilities in the Arctic. Ensuring the state receives a fair share of the federal revenue—royalties, bonus bids and rents—from energy developing in federal waters off our coastline will help pay for those costs,” Dillon continues. “It’s not just roads and docks either: Offshore development also increases the need for schools, recreational facilities, hospitals, police and all types of other services supplied by state and local municipalities.” According to Begich, it’s time for the state to invest. “We’ve always been a state that dreams big and it’s time to dream big once again,” he says. “We want the boom that’s coming—and there is a boom coming—to benefit Alaskans. We need Alaskans doing these jobs and reaping the benefits. All of this will take money and our state leaders need to stop playing regional politics and start seeing the big picture of Alaska’s future.” That big picture encompasses not just Alaska, but the entire Arctic region.

merfest in Norway Nov. 7, 2012, and was escorted by three Russian icebreakers, according to Gazprom. OCS exploration and development and increased shipping across the top of the world underscore the need for cohesive Arctic policies and strategies.

Arctic Policy

There are state and federal agencies as well as nongovernmental organizations focused on developing Arctic policy and strategy. The U.S. Arctic Research Commission is one. An independent federal agency chaired by Fran Ulmer, the

USARC recommends Arctic research that needs to be conducted to the president and Congress. In late November 2012, Inupiat leader and former North Slope Borough mayor Edward Saggan Itta was appointed to the USARC. “It is certainly an honor and a privilege to be part of the commission and to be appointed by President Obama,” Itta said in a telephone interview from Barrow in early December 2012, days after his appointment. “Having been born and raised here in the Arctic, I’m humbled and intend to do my best to represent the north and Alaska.”

Increased Marine Traffic in the Arctic

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In the last two years, the Northern Sea Route has seen a tenfold increase in traffic, according to the Barents Observer, which reported four vessels made the journey in 2010, 34 in 2011 and 46 as of Nov. 23, 2012, with two Finnish ice breakers en route from Alaska to Denmark expected to be the last two vessels of the season. Barents Observer reported that the main cargo being transported across the Northern Sea Route is natural resources, led by petroleum products and followed by iron ore and coal. On Dec. 5, 2012, Gazprom announced that the “Ob River, a liquefied natural gas carrier chartered by Gazprom Group, successfully completed the world’s first LNG supply via the Northern Sea Route when it arrived at the regasification terminal in the Port of Tobata in Japan, delivering a Gazprom Group-owned LNG cargo to Japanese consumers.” The carrier, operated by the Greek shipping company Dynagas, left the Port of Ham-

www.totemocean.com 800.426.0074

www.akbizmag.com • Alaska Business Monthly • January 2013

55 ■


Itta not only takes his responsibilities seriously, he sees his seat on the commission a necessity for Alaska. “It’s critical for Alaska to be part of the dialogue because we are the only state that’s in the Arctic,” Itta says. “The information we provide to the president is important in making sure we have a say about what happens to our local communities.” Those local communities—Barrow, Wainwright, Point Lay, Kaktovik, Point Hope and others—have strived to adapt to the growing changes in the Arctic. Itta is an Inupiat whaler and hunter from Barrow and was also responsible for

keeping a remote area of Alaska thriving as the mayor of the North Slope Borough. He brings thousands of years of Arctic knowledge to the table. For Itta, his recent appointment was not a complete surprise. He says he was first approached by Begich’s office about his interest in the position more than a year-and-a-half ago. “I was immediately interested,” Itta says. “I think it’s important to have a seat for the indigenous people. I think it gives an opportunity for local input and insight to the USARC.” The Institute of the North is another organization involved in Arctic policy,

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education and research. The Anchoragebased think tank, founded by former Governor Wally Hickel, collaborates at local, national and international levels. One of its programs is the Arctic Maritime and Aviation Transportation Infrastructure Initiative, a platform for addressing Arctic marine and air transportation infrastructure challenges and opportunities. The Arctic Council’s Sustainable Development Working Group met in Reykjavik, Iceland Dec. 3-6, 2012, for a workshop addressing transportation challenges in an increasingly busy Arctic region. The workshop “Arctic Transportation Infrastructure: Response Capacity and Sustainable Development” was one of three components of AMATII. The Arctic Council is a high level intergovernmental forum established to promote cooperation, coordination and interaction among the Arctic countries on common issues such as sustainable development and environmental protection in the Arctic, according to its website. The eight member states of the Arctic Council are Canada, Denmark (including Greenland and the Faroe Islands), Finland, Iceland, Norway, Russian Federation, Sweden and the United States. The consensus is that Arctic ports and airports are critical for acting as a gateway to support search and rescue, resource extraction and development activities, pollution prevention, environmental safety, and community health and security. To assess the capabilities of existing air transportation and marine infrastructure in the Arctic countries, another component of AMATII is the Arctic Maritime and Aviation Infrastructure Database, which was previewed by the Arctic Council at the Iceland workshop. The database has the capability to show infrastructure, connectivity, weather patterns, navigational aids, communications data and traffic in an online searchable map, according to the Institute of the North. This information database is meant to be a tool to assist the Arctic countries in responding to any emergency that might arise in the remote region by sharing information about current resources. Additionally, the database will serve as a baseline for future growth opportunities among the countries, independently and internationally.  R

www.akbizmag.com • Alaska Business Monthly • January 2013


AGENDA

Compiled By Tasha Anderson training and information through keynote speakers in plenary sessions covering: climate change, emergency response, environmental regulations, fish and wildlife populations, rural issues, energy, military issues, business issues, solid waste, contaminants, contaminated site cleanup and coastal communities’ issues such as tsunami impacts, marine debris and coastal erosion. Registration required. akforum.com, info@akforum.com 1-888-301-0185

JANUARY

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Lessons from Iceland—Energy Policy from Our Arctic Neighbors Jan. 9, 2013—Anchorage Museum Auditorium, Anchorage: Free monthly forum. Speakers: Nils Andreassen, Executive Director, Institute of the North. Contact: Katie Marquette alaskarenewableenergy.org katie@realaska.org

Meet Alaska Conference & Tradeshow Jan. 11, 2013; 8:30 a.m. to 5:30 p.m.— Dena’ina Civic & Convention Center, Anchorage: 30th Anniversary of Meet Alaska! info@alaskaalliance.com alaskaalliance.com

Statewide Economic Forecast Luncheon Series Jan. 15-17, 2013—Fairbanks, Anchorage, Juneau: This is an opportunity to gain a statewide perspective on the prospects in 2013 for Alaska’s major industries, state and federal government spending, and how this will affect communities and jobs as well as how international relationships will affect Alaska. Jan. 15-Fairbanks; Jan. 16-Anchorage; Jan. 17-Juneau. www.wtcak.org

Legislative Fly-In Jan. 23-24, 2013—Juneau: This event is designed to give members the chance to influence public policy effectively by meeting directly with state legislators and the administration, to seek support for the priorities and positions established at the Legislative Policy Forum and get to know your elected officials personally. Registration required. www.alaskachamber.com

■ ■ ■ ■

Junior Achievement of Alaska’s 27th Annual Alaska Business Hall of Fame Jan. 24, 2013; 5:30 p.m. to 8:30 p.m.— Dena’ina Civic & Convention Center, Anchorage: Four new Alaskans will be inducted and recognized with this prestigious award. Attended by over 400 business representations, the program consists of a networking reception, dinner and awards ceremony. ja-alaska.org/hof

Economic Forecast Lunch Jan. 30, 2013; 11:30 a.m. to 1 p.m.— Dena’ina Civic & Convention Center, Anchorage: The Business Confidence Index report and the Economic Forecast report are presented by AEDC President & CEO Bill Popp and for 2013 the featured speaker is Richard Florida, author of “The Rise of the Creative Class.” Contact: Meaghan Gould mgould@aedcweb.com, members.aedcweb.com

FEBRUARY

Alaska Forum on the Environment Feb. 4-8, 2013— Dena’ina Civic and Convention Center, Anchorage: The forum offers

Updates from Fire Island and Eva Creek Feb. 13, 2013—Anchorage Museum Auditorium, Anchorage: Free monthly forum. Speakers: Jim Jager, Director of Corporate Communications, CIRI; Michael Wright, VP of Transmission & Distribution, Golden Valley Electric Association. Contact: Katie Marquette alaskarenewableenergy.org katie@realaska.org

Alaska Miners Association Conference Feb. 13-15, 2013—Juneau alasksminers.org

Engineers Week Feb. 17-23, 2013 anc-aspe.org/eweek.html

AkPhA Convention Feb. 15-17, 2013—Anchorage Downtown Marriott, Anchorage: The Alaska Pharmacists Association convention includes various lectures, literature reviews and an awards reception. Registration required. alaskapharmacy.org

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Feb. 19, 2013—Location TBA: This half-day event takes a fresh look at potential business opportunities between Alaska and the Russian Far East region. It will feature six speakers, a mix of both U.S. and Russian trade specialists. www.wtcak.org

Arctic Ambitions II

SWAMC Annual Economic Summit Feb. 20-22, 2013—Hotel Captain Cook, Anchorage: This year’s conference will include a one-day regional energy workshop on Feb. 20th. Other topics on the program include a transportation carrier roundtable, a processor/community needs discussion, shipping and logistics in SW Alaska, a regional broadband report, CDQs and a debate on maximum benefit resource extraction featuring UAA’s award-winning debate team. www.swamc.org

Southeast Conference 2013 Mid-Session Summit Feb. 25-March 1, 2103—Centennial Hall, Juneau: The Summit is an opportunity for Southeast leaders to discuss issues vital to the region including energy, resource development, transportation, tourism and economic development, and provides members a chance to meet with lawmakers. www.seconference.org

MARCH

A New Look at AlaskaRussian Far East Opportunities

Feb. 20-21, 2013—Location TBA: This conference concentrates on the theme of international trade and business opportunities that flow from commercial development in the Arctic. Panel discussions address issues such as supply chains, innovation, markets, commerce, and transportation. www.wtcak.org

ASTE Conference Feb. 23-26, 2013—Hotel Captain Cook, Anchorage: Join the Alaska Society for Technology in Education at this year’s conference which will emphasize classroom practices that combine technology with educational standards. The theme this year is: Mobile Me, Mobile You, Mobile Us. Contact: Jill Rusyniak jill.rusyniak@aste.org 907-957-2783 www.aste.org

2013 AWRA Alaska Section Annual Conference March 4-7, 2013 —BP Energy Center, Anchorage awra.org

Rural Alaska Landfill Operators (RALO) Training March 12-14 & April 23-25, 2013—BP Energy Center, Anchorage: Course is for designated landfi ll operators and administrators in villages with a Class III landfi ll or open dump; focuses on landfi ll operator duties, their personal safety, and the safety of the village. No cost to attend training. Limited travel scholarships of up to $500 may be available. Registration required. Contact: Peter Melde 907-351-1536 pmelde@akforum.org akforum.com

Governor’s Safety and Health Conference March 18-20, 2013—Egan Center, Anchorage: This year’s theme is “$afety Pay$ at Work, Home and Play.” Sponsored by the State of Alaska, Department of Labor & Workforce Development. Registration required. labor.alaska.gov/lss/asac.htm

APRIL

Alaska Rural Energy Conference April 29-May 1, 2013—Sheraton Hotel, Anchorage: Large variety of technical sessions covering new and ongoing energy projects in Alaska, as well as new technologies and needs for Alaska’s remote communities. Registration Required. Contact: Amanda Byrd agbyrd@alaska.edu, akruralenergy.org

Send business happenings to Tasha at surveys@ akbizmag.com at least two months prior to event.

www.akbizmag.com • Alaska Business Monthly • January 2013

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oil & gAs

fiscal refor m! Reducing budget growth and lowering oil taxes critical

T

BY MIKE BRADNER

he Alaska State Legislature is back in Juneau this month for the 2013 session. There are new faces in the Capitol following the elections, but critical issues facing the Legislature—reforming the state’s petroleum tax laws and restraining the growth in the state budget—haven’t changed. The last Legislature wasn’t able to dent these problems, but new leaders in Juneau hope things will be different this year. The thorniest question legislators face is changing the state’s oil production tax in light of continuing declines in oil production and stagnant industry investment, at least in onshore development where new production would re-

■ 58

sult in revenues to the treasury. Yet another challenge is containing growth in the state budget, which is difficult even as oil production and revenues decline. The main problem is the operating budget where health and education spending face huge pressures to increase. Operating budget spending has increased steadily in recent years despite the efforts of governors and legislators to institute controls. The state capital budget, spent on projects, is easier to manage because it can be throttled down if revenues are not available. The State of Alaska will spend about $12 billion total in the current budget year, Fiscal Year 2013, including the op-

erating budget, the capital budget and other expenses. Revenues are expected to total about $15.3 billion in the current fiscal year, including federal funds administered by the state. Oil revenues are expected to total $8.04 billion in the current year. For this year a surplus is expected, which could be added to the state’s reserves at the end of the fiscal year.

Future Not So Bright

The revenue and budget picture for the upcoming FY 2014, which begins July 1, isn’t a lot different than FY 2013 except that oil revenues are expected to be down about $700 million, a result mainly of production decline. Oil pro-

www.akbizmag.com • Alaska Business Monthly • January 2013


duction is expected to continue to decline at rates of about 5.5 percent a year over the next five years, according to the Alaska Department of Revenue. The bulk of the state’s oil income is from the state production tax, plus there is additional income from royalties (the landowner share on oil produced from state lands) and other special taxes on oil. In the Legislature, attention on the tax change is focused on the production tax. The production tax was rewritten in 2006 and again in 2007 and the most significant change, which had the effect of really ratcheting up the effect of the tax, came in 2007. By 2011, sensing that the tax had been increased too much and that new investment was impaired, Gov. Sean Parnell proposed a reduction in the tax. Parnell’s proposal, in House Bill 110, passed the State House but stalled in the State Senate. The question is now back before the Legislature. The governor has a new proposal to put forth, and the bill must go to the State House and Senate. There are worries about how all this will affect the state’s economy. University of Alaska studies have shown govern-

ment spending, including state and federal, accounts for a third of the Alaska economy, and the oil industry accounts for another third, directly or indirectly. Federal spending will likely decline as Congress deals with huge federal deficits, and if state spending also declines the state’s economy will feel the effects. Alaska’s short-term outlook appears healthy because the state has substantial savings of surplus oil revenues—about $15 billion, not including the $40 billion Permanent Fund—that could be used to sustain the budget as revenue declines. These funds could be drawn gradually over several years as a short-term measure until a long-term solution takes effect. However, absent a long-term solution the savings would be eroded, the production will be that much lower, and absent real discipline in controlling spending growth, the budget will be larger.

Best Solution

The best long-term solution is more oil production, the governor argues, because there aren’t a lot of other sources of revenue for the state. If Alaska were to have taxes like other states, with a re-

imposed state income tax (the previous income tax was repealed in 1971) and a statewide property tax, there would be some revenue but not enough. Diverting some of the annual income of the Permanent Fund, perhaps by capping or eliminating the annual citizen dividend, could make more funds available. This wouldn’t really solve the problem either. The real danger is that the steady decline in production would cause the Trans Alaska Pipeline System to shut prematurely, a possibility if the flow of oil is seriously diminished. Current thinking is that this minimum level of oil “throughput” for TAPS is about 300,000 barrels a day (about 550,000 b/d, on average, will move through the pipeline this year). At the current decline of about 5 percent to 6 percent yearly, the minimum-flow level would be reached in about 10 years. Some look to a natural gas pipeline and commercial gas production as a solution. Pipeline construction would indeed stimulate the state’s economy and there would be some new revenues when gas production begins (under the best scenario this is about 2022), but the pipeline wouldn’t be finished until 2022 or 2023. However,

www.akbizmag.com • Alaska Business Monthly • January 2013

59 ■


the amount of revenue from gas would be very modest compared with oil.

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Precarious Situation

Is there enough undiscovered oil on stateowned and onshore lands to solve the problem? There are good prospects for new onshore oil discoveries on the North Slope but they are modest compared with past large discoveries. However, companies argue the economics of new oil development are not attractive mainly because of the state tax. They can show how industry investment is now flowing to states like North Dakota and Texas where the taxes are lower and the prospects for new oil are at least as good as the North Slope. The state’s situation is precarious, some believe. There are alternative sources of revenue but none of them sufficient to replace oil. We have meanwhile created a state oil tax structure–ACES– designed for large, prolific and very profitable oil fields. But the oil fields are no longer as large or profitable, and the tax structure should be changed to fit the times, the governor argues. The future of the oil industry is now wrapped up in the tax debate in the Legislature. What are the issues? The main one is that the rate of tax is too high. To induce more investment, industry argues the tax should be reduced. Much of the oil that is known but still undeveloped on the North Slope—about 4 billion barrels, the companies say—is within the large fields that are now producing. Some of this is “viscous” oil, thick oil that is difficult to produce, but also a lot of it is conventional “light” oil in small pockets bypassed in earlier production. This oil will be expensive to develop and the quantities are smaller. These developments are simply uneconomic when the high tax rates are applied. There is a lot of talk about unconventional oil like heavy oil and shale oil development, but there are technical problems and unknowns facing these. An exploration company is pursuing shale oil but it is not yet known whether oil can be technically extracted from North Slope shale and, if so, whether it can be done economically.

Oil Tax Reform

There are different views among Alaskans on all this, and in the Legislature. Many worry that even if taxes are reduced there might not be enough added production to

www.akbizmag.com • Alaska Business Monthly • January 2013


offset the revenue decline. Critics say the state is being asked to bear what could be substantial near-term reductions in revenue, a billion dollars or more annually, for the long-term prospect of more production at some time in the future. Elected officials meanwhile have to face constituents with real needs and explain why program cuts now are worth it to guarantee more oil and stable budgets in the future. To be able to rationalize a reduction many lawmakers are looking for some kind of mechanism to guarantee an investment in return for an oil tax reduction. One approach that is actually widely supported is giving a reduced rate to entirely new oil finds outside currently producing fields. However, this would not provide a tax reduction for the known undeveloped deposits within the existing fields. This is where the real potential lies for substantial new oil, the companies argue. Another approach, explored in the state Senate last year, is to give a reduction on “new” oil developed within the existing fields but leaving the current tax rate in place for “old” oil. The complications in this are in how to define new from old oil. An attempt to do this will be inevitably be complex, which means that its administration will have uncertainties. When there are uncertainties in the tax code, with interpretations to be made by bureaucrats, companies assess the risks and often will discount the benefit of a tax reduction. This essentially nullifies the point of providing the incentive in the first place. A better, simpler approach may be to reduce the overall tax rate, eliminating the need to distinguish between new and old oil and all of the complications and that come with such a system. The Legislature may be more sympathetic in 2013 to reducing the tax on industry but they are still confronted with two key questions: One is whether the tax change can be enough to make a significant difference for the industry (and not just a token reduction); and, two, whether the change will be simple enough for effective administration, and will not set up some new mechanism that will just raise new uncertainties. R

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oil & gAs

AlASka’s REfINERiES

Battling high crude prices, low demand BY ZAZ HOLLANDER

Photo courtesy of Tesoro

Tesoro’s Nikiski refinery.

I

t’s a real head-scratcher for Alaska drivers—gas prices flirt with $4 a gallon while one of the country’s prime sources of crude bubbles from the North Slope. Alaska’s got the oil. But it’s not cheap, even to in-state refineries. Plus cooler crude coursing through the Trans-Alaska Pipeline System necessitates higher energy bills for refineries that must heat the raw product to separate it into petroleum products. We also don’t have many refineries. Just two produce gasoline for retail markets, and only one in serious quantity—Tesoro Petroleum Corp.’s Kenai facility produces the majority of gas consumed in Alaska. And we have seriously low demand, given the state’s small population. Alaska sits at the bottom of the list when it comes to state by state gas demand, especially in winter. Think Alaska’s supply of crude oil

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should make for cheaper prices at the pump? Think again, the state’s refiners and economists say. A combination of pricey crude and limited markets means it is unlikely Alaska can refine its way to lower gas prices, they say. “It’s a cost-driven decision,” says Joyce Lofgren, a petroleum economist with the state Tax Division. “Just refining more isn’t going to be helpful. If they refine more than is demanded, then they end up having to store or ship or find other markets for the products.” There are actually six refineries in Alaska: Tesoro at Nikiski; Flint Hills Resources at North Pole; Petro Star Inc. which operate refineries at North Pole and Valdez; and two small refineries operated by ConocoPhillips and BP on the North Slope that supply products only

to support equipment and operations at the Kuparuk and Prudhoe Bay units. Here’s a quick look at Alaska’s three commercial refining companies and the market factors driving operations.

Alaska’s Gas Supplier

Tesoro opened Alaska’s first oil refinery in Nikiski in 1969 to process Cook Inlet oil. Things have changed since then. Tesoro Corp., headquartered in San Antonio, Texas, is a Fortune 150 and Global 500 company with 5,200 employees scattered across seven refineries in the West, plus North Dakota and Hawaii. The company’s Kenai refinery employs 550 people in refining and marketing, according to corporate information. North Slope crude arrives via tankers from Valdez. A 75-mile, 10-inch

www.akbizmag.com • Alaska Business Monthly • January 2013


pipeline traverses Cook Inlet from Nikiski to Tesoro’s Port of Anchorage terminal to move jet fuel for use at the airport. But the 72,000 barrels-per-day capacity refinery doesn’t specialize in Cook Inlet crude any more. Today, the refinery processes mostly North Slope crude due to declines in Cook Inlet production. Crude oil runs by source break down this way: North Slope crude, 60 to 70 percent; Cook Inlet crude, 20 percent; and light foreign crude, 10 to 20 percent. Gasoline makes up about a quarter, or 24 percent, of the Kenai refinery’s product yields, according to corporate information. Tesoro supplies the “vast majority” of the gasoline sold in Alaska, according to James Tangaro, vice president, Kenai refinery. Tesoro sells almost all of its production of gasoline, diesel and jet fuel in Alaska. The company adjusts the amount of crude it processes due to seasonal swings in demand, from 65,000 barrels a day in summer to 45,000 barrels per day in winter. Jet fuel makes up about 35 percent of the refinery’s yield. It serves about 40 percent of the total monthly jet fuel for sale at Ted Stevens Anchorage International Airport, according to the most re-

cent annual refining sales report available from the Division of Oil and Gas. Asphalt produced at Nikiski is sold in Alaska, but nearly all the remaining residuals from refining get exported to other states. Tesoro capitalizes on its various refineries by shipping heavy vacuum gas oil to Anacortes, Wash., for use as a feedstock to produce gasoline, according to the report. The biggest market factor facing Tesoro is availability of Cook Inlet oil and gas. Shortages of Cook Inlet gas have left Tesoro paying higher prices for energy to power its operations, Tangaro says. But sometimes, the company can’t get gas at any price. “We have to supplement our heat by burning components we’d normally sell as propane or gasoline,” he says. “We end up burning some very highcost material for heat.” Another factor influencing Tesoro’s bottom line—as well as that of all the state’s refineries—is the cost of Alaska North Slope (ANS) crude. With prices set on world markets, ANS crude was selling for roughly 46 cents per gallon higher than U.S. benchmark West Texas Inter-

mediate (WTI) at the end of November. High oil prices pad the state’s budget surplus. But don’t help the price at the pump, refiners say. Tesoro and other companies support oil-tax reforms proposed by Gov. Sean Parnell to increase production. Increased oil supply usually drops the price of crude, Tangaro says. “What we’re really watching is Cook Inlet producers,” he says. “We’re really hoping they’re successful and we can get some more crude and gas. It’s just right in our backyard.”

Cool Crude

Petro Star, owned by Arctic Slope Regional Corp., was founded in 1984 to process light fuels for heating homes and operating businesses in rural Alaska, according to the Division of Oil and Gas report. Today, jet fuel makes up the refinery’s biggest sector, accounting for about three-quarters of product. The company’s North Pole refinery has a throughput capacity of 22,000 barrels per day and produces mostly jet fuel and home heating oil sold to military bases and markets in the Interior,

www.akbizmag.com • Alaska Business Monthly • January 2013

63 ■


according to Jim Boltz, senior vice president, engineering and refining. The Valdez facility can process 60,000 barrels per day, producing primarily jet fuel and ultra-low sulfur diesel. The jet fuel goes to the Anchorage military or commercial airlines, Boltz says. Diesel is primarily sold to the marine industry through distribution facilities in Kodiak and Dutch Harbor. Both refineries are located adjacent to the Trans-Alaska Pipeline System. This gives Petro Star’s facilities ready access to ANS crude, but also means that the company doesn’t have the option of buying cheaper crudes. Additionally, since 2005 Petro Star has been subject to what company officials call “excessive charges” levied against the lower-quality oil they put back in the pipeline after refining. These “quality bank” payments go to the North Slope producers, and indirectly, to the State of Alaska through higher royalties and taxes. Petro Star, too, would like to see crude volumes flowing through TAPS increase again—for lower potential cost, sure, but also to reduce the chill factor. The temperature of the oil moving at lower volumes through TAPS has dropped to more than half of historic levels at refineries, two operators said. As the flow of oil slows through the pipeline, its temperature drops. That, in turn, forces refinery companies to use more energy heating the crude to the high heat— more than 600 degrees Fahrenheit—where the raw crude separates in a process known as “fractional distillation” into different, vaporized fractions recovered as different products. So the cooler the oil, the more it costs refineries to get it hot. “It used to come to our refineries like at 100 degrees,” Boltz says. “Now it comes to our refineries at 40 degrees.” He couldn’t address the increased cost of refining cooler crude in the current challenge of rising energy costs. But the only way to recover such costs is to pass it on to the consumer. The only way to increase oil temperatures? Start pumping more down the TAPS line, Boltz says. “The cooler it gets, the slower it takes to get to Valdez and the more it cools down.”

Different Kind of Bank

Flint Hills deals with the cool crude problem, too. ■ 64

“ANS crude came into our refinery at about 110 degrees when I started here 18 years ago,” says Jeff Cook, a spokesman for Flint Hills at its North Pole refinery. “It now comes during the winter at 40 degrees and sometimes a bit cooler.” Flint Hills doesn’t have natural gas to provide energy to heat crude, Cook says. So the refinery’s cost of energy varies with the price of ANS, “and is definitely in the high cost range now,” he says. Flint Hills acquired the North Pole refinery—Alaska’s largest—from Williams Alaska Petroleum Inc. in 1994, according to the Division of Oil and Gas. The company also owns a 700,000-barrel fuel terminal in Anchorage and a 20,000-barrel jet fuel terminal in Fairbanks. The North Pole refinery gets crude via TAPS; its capacity is 226,500 barrels per day but the facility actually refines far less into gasoline, jet fuel, heating oil, diesel, gas oil and asphalt—roughly 60 percent going to aviation markets, according to the state. Flint Hills closed down two of their three processing units due to lack of demand so their output is significantly reduced from capacity. Due to what Cook called changing demand and refining economics, the company idled two crude units, one in 2010, the other in August 2012, leaving one in operation. The company cites various factors. Imported jet fuel has chipped away at Flint Hills’ bottom line. Flint Hills must also pay the state a “quality bank” cost to compensate for lower-grade processed crude injected back into TAPS—basically, the stuff that Flint Hills doesn’t use or sell but instead returns to the pipeline after refining. That cost changes with the value of crude and various cuts in the crude. The company is exploring a natural gas trucking project and this year completed a project that recovers more heat from processing crude, Cook told the state Senate Alaska Energy Working Group in a written statement provided during a fuel price hearing in Fairbanks in September. “However there are actions that the state can take to make all refineries in Alaska more competitive and there are actions the state should definitely not take,” Cook wrote. Actions the state can take, according to Cook’s testimony: change the pricing

structure for royalty oil that sells crude at a premium, basically a profit. Flint Hills in 2011 paid $11.6 million more than the state received for the balance of its royalty oil, he said. State officials say doing away with that premium would cost the state 98 cents per barrel of crude, according to a report presented to the Senate working group by Bill Barron, Oil and Gas Division director.

Priming the Pump

Periodically—often during election years—the question of price gouging comes up in Juneau. This year, state Sen. Bill Wielechowski led the charge. Wielechowski last session introduced price-gouging legislation; it died in the Senate Finance Committee. He held hearings in September on the topic. Wielechowski and others point to several state investigations into gas prices in recent years, most recently in 2009, according to a report in the Anchorage Daily News. An assistant attorney general found that refiners have done nothing illegal. Still, margins increased dramatically in recent years. Between 2004 and 2007, Alaska refinery margins were 19 percent higher than Washington state refiners. Between 2008 and March 2012, margins jumped to 106 percent above Washington state’s. Asked about the jump in margins, Tesoro’s Tangaro says he’s seen the data but can’t speak to it in detail. He said he doesn’t know what assumptions researchers used: are all refineries running at normal rates? are there any supply or demand issues? He also says it’s “overly simplistic” to look at margins alone. “Increased margin implies there’s all this money being made,” Tangaro says. “If refineries were making all this money, they wouldn’t be shutting down units.” Still, things could turn around in the high cost of crude if there are new discoveries on the North Slope, offshore, or in Cook Inlet, he said. Tesoro has operated successfully in Alaska for 43 years and plans to continue, Tangaro said. “I’m just saying it’s not as easy a business as some people might think it is.” R Zaz Hollander is a journalist living in Palmer.

www.akbizmag.com • Alaska Business Monthly • January 2013


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oil & gAs

Alaska Oil Policy Achieving alignment BY BRADFORD G. KEITHLEY

T

he last column in this series (“Out of Alignment,” Alaska Business Monthly, November 2012) focused on the reasons why Alaska oil policy is misaligned with the objective of maximizing the development of the state’s oil and gas resources. The column discussed the state’s attempted use of two tools—tax credits and direct regulatory intervention—to steer investment to Alaska and why those tools have failed to produce significant results in terms of increased production. As I explained, the state’s use of the tools has been similar to backseat driving—and just about as successful. The column also briefly mentioned a potential solution to the state’s alignment problem—developing a means for the state to co-invest alongside industry in the development of the state’s oil and gas resources. This month’s column further explains that concept.

What is co-investment?

Simply stated, co-investment is the direct investment by the state as a partner in the development of the state’s oil and gas resources. The state assumes an ownership share as a working interest owner, bears a proportionate share of the investment and operating cost required to develop the resource, and receives, as a partner, a proportionate share of the production. The reason that the approach better aligns the interests of the state with the other owners and the development of the resource is because the state directly sees the economics of various projects and responds, as do the other owners, to those that produce the greatest economic returns. It also positions the state to help drive those projects from the inside, as an owner, by putting its own investment on the line. ■ 66

Under Alaska’s current approach, the state does not see those economics and even if it did, frankly does not have the incentive to promote those that produce the best returns. Instead, as I explained in the previous column, Alaska’s efforts are heavily influenced by political considerations. As a result, the state and industry often work at cross purposes, with each somewhat stymied by the actions of the other. Government co-investment in the development of Alaska’s oil and gas resources is not novel. In 1996, Anchorage’s Municipal Light & Power, a division of the municipality, purchased Shell Oil Co.’s interest in the Beluga Gas Field, located in Cook Inlet. Since that time, ML&P has acted as an owner in the field, contributing its share of the required investment and operating costs, and receiving its proportionate share of production in return. ML&P’s involvement in the Beluga field has been a success. Through its ownership share, ML&P has brought a focus to the continued development of the Beluga field that otherwise might not have occurred. While Cook Inlet gas supplies have reached dangerously low levels, that point might have been reached much sooner had ML&P not been positioned to encourage, identify and participate in continued investment in the development of one of Cook Inlet’s largest gas fields. The co-investment model also has been successfully adopted in other countries where, as in Alaska, the state owns the resource. In the early years following the discovery of oil in Norway, for example, the country used a royalty model, similar to that used currently in Alaska, to derive the state’s take from production. As a member of the Ministry of Petroleum and Energy explained last year, however, after a few years the government realized that the

approach misaligned the interests of government and industry and resulted in suboptimal investments. While the royalty model resulted in the government receiving some cash with little risk, it also caused underdevelopment of the nation’s resources. The government decided that it achieved a better return from realigning its interests and becoming an investor in the development of its own resources, even though it meant bearing some of the risk. While there are additional factors that also contribute, today Norway maintains a much stronger production and investment profile than Alaska, despite also having one of the highest production tax rates in the world. The Norwegians, at least, attribute that significantly to their involvement as an owner. Co-investment does not mean that the state becomes an operating oil company. ML&P certainly is not an operating oil company. ConocoPhillips operates the Beluga field. While in the early years of co-investment Norway did manage its co-investment share with an operating oil company, in 2001 the government reformed the approach significantly. Today, Norway’s co-investment share—called the State Direct Financial Interest—is managed by Petoro, a small investment company of 60 employees. Co-investment also does not mean that the state assumes ownership of entire fields. ML&P owns only the onethird interest in the Beluga field that it acquired from Shell. On average, Petoro only owns approximately a 20 percent interest in each of Norway’s oil fields.

How could co-investment be implemented in Alaska?

There are several ways that co-investment could be implemented in Alaska. ML&P’s approach to becoming an own-

www.akbizmag.com • Alaska Business Monthly • January 2013


er in the Beluga field suggests one—the state could simply buy a share of the working interests in various fields. Others have suggested that Alaska could gradually adopt the co-investment model by including the option in future leases. Neither of these is likely to be successful, however. The cash levels required to purchase enough of an interest in enough fields to make a difference is prohibitive.

The easiest way to adopt co-investment is simply to provide for an opportunity to convert that royalty interest to a coinvestment, or working interest. Such a conversion cannot be achieved by government fiat. The terms governing the royalty share are established in contracts between the lease owners and the state. In Norway, however, the state was able to negotiate the conversion of its interests in its legacy fields from a royalty to a working interest once it

Isn’t it Socialist?

When I have discussed the potential for Alaska co-investment with others, their final question is usually, “Isn’t this approach socialist?” The answer is no. This is not a situation where the state is displacing private industry. Last year, Department of Natural Resources Commissioner Dan Sullivan estimated that Alaska needs, “at a minimum,” $4 billion of investment per year if it is to arrest and stabilize

Injecting political objectives into the process— such as setting as a criterion the number of jobs created by any given investment—will undermine the process and largely produce the same dissonant result as the current Alaska approach. Limiting implementation to new leases also would not achieve the overriding objective of increasing production. As I explained in another of these columns (“Ships Passing in the Night,” Alaska Business Monthly, July 2012), a significant share of the known remaining oil and gas on the North Slope is located in existing fields, which are covered by existing leases. Limiting co-investment to new leases would miss the opportunity to reap the benefits of alignment in these fields. Moreover, it might do more harm than good, by causing the state to tilt its policies even more in favor of new leases over the old. Finally, that approach would violate one of the basic precepts of investment. Co-investing only in new leases would concentrate the state’s investment— and risk—in the most speculative opportunities. To provide the greatest opportunity, and alignment, the state’s investment should be spread among all fields. In Norway, for example, Petoro holds an ownership interest in each field in the country. The way to achieve this result is simple. Alaska already owns an interest—the royalty share—in each of the existing fields located on state lands.

decided that was a better policy course. Alaska can do the same. There also is the question of where the responsibility for co-investment should be housed in state government. This is an important issue. Co-investment only works if the focus remains entirely on economics and achieving the best returns. Injecting political objectives into the process—such as setting as a criterion the number of jobs created by any given investment—will undermine the process and largely produce the same dissonant result as the current Alaska approach. Because the focus should be on achieving the best economic return on investment, the Permanent Fund Corp. likely is the best home for the effort. That corporation already is skilled in co-investment. A portion of the Permanent Fund, for example, is co-invested in various real estate ventures throughout the country, with the corporation acting as a co-investor along with industry partners skilled in operating such ventures. Creating an additional investment arm within the corporation, with a similar skill set focused on co-investing in oil, is doable and has strong precedent in Norway’s Petoro.

the state’s production decline. Interpreted liberally, current industry investment levels are around $1.5 billion per year and there are few who believe those numbers are likely to increase to the levels mentioned by Sullivan even with oil tax reform. Moreover, this is not a situation where the state is creating a role for itself in an industry where it otherwise is not involved. Alaska owns the oil and gas resources located on the state’s lands; it inevitably is integrally involved in their development. The question is: what management approach best develops the resource? Co-investment is a proven way to achieve that objective. R Bradford G. Keithley is a Partner and CoHead of the Oil & Gas Practice at Perkins Coie, LLP. He maintains offices in both Anchorage and Washington, D.C., and is the publisher of the blog “Thoughts on Alaska Oil & Gas” (bgkeithley.com).

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oil & gAs

History of Oil & Gas production and prices

U.S. Refiner Acquisition Cost of Crude Oil: 1974-2012 in Dollars per Barrel $140

U.S. Crude Oil Composite $120

U.S. Crude Oil Domestic U.S. Crude Oil Imported

$100

Alaska Field Production of Crude Oil: 1960-2012 in Thousands of Barrels per Day

$80

2,000 $60 1,500 $40

1,000

500

2012

2010

2006

2002

1998

1994

1990

1986

1982

1974

Data source: U.S. Energy Information Administration

1978

$0

2012

2006

1999

1993

1986

1980

1973

1960

1967

0  

$20

Data source: U.S. Energy Information Administration

Annual Production Summary: 1919-2012 800,000,000 Oil (BBL)

700,000,000

Natural Gas Liquid (BBL) 600,000,000

Dry Gas (MCF)

500,000,000 400,000,000 300,000,000 200,000,000 100,000,000

2012

2007

2002

1997

1992

1987

1982

1977

1972

1966

1961

1956

1951

1931

1926

1921

1919

0

Data source: Alaska Oil & Gas Conservation Commission

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www.akbizmag.com • Alaska Business Monthly • January 2013


Unrestricted Revenue in Millions of dollars FY 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Oil 3.1 9.9 4.2 26 27.8 14.9 16.5 21.6 21.5 43.8 34.5 938.9 47.1 48.3 50.2 80.2 90.4 391.5 477.6 441.5 821.6 2,256.50 3,304.30 3,574.80 3,026.60 2,861.60 2,743.50 2,657.40 1,394.50 1,949.60 1,840.40 2,121.30 2,571.10 2,007.40 1,967.80 1,292.70 1,617.20 1,664.80 2,010.20 1,332.60 913.2 1,642.30 1,886.30 1,320.10 1,639.10 2,054.10 2,849.60 3,699.20 4,481.40 9,956.00 5,181.00 4,912.90 7,048.90 8,857.80

Total 25.4 48 40.5 68.9 71.6 67 83 86.4 86.6 112.7 112.4 1,067.20 220.5 219.1 208.2 254.9 333.4 709.8 874.4 764.9 1,133.00 2,501.20 3,718.20 4,108.40 3,631.00 3,390.10 3,260.00 3,075.00 1,799.40 2,303.90 2,184.20 2,505.20 2,984.50 2,460.50 2,362.40 1,649.80 2,080.50 2,130.50 2,492.20 1,823.50 1,348.40 2,081.70 2,281.90 1,660.30 1,947.60 2,345.60 3,188.80 4,200.40 5,158.60 10,728.20 5,831.20 5,513.30 7,672.90 9,485.20

% Oil 12% 21% 10% 38% 39% 22% 20% 25% 25% 39% 31% 88% 21% 22% 24% 31% 27% 55% 55% 58% 73% 90% 89% 87% 83% 84% 84% 86% 77% 85% 84% 85% 86% 82% 83% 78% 78% 78% 81% 73% 68% 79% 83% 80% 84% 88% 89% 88% 87% 93% 89% 89% 92% 93%

Data source: Tax Division, Department of Revenue, State of Alaska

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69 ■


Total Alaska Government Petroleum Revenue History 1959-2012 In Millions of dollars 12,000

10,000

Total Unrestricted Petroleum Revenue Total Restricted Petroleum Revenue Total Petroleum Revenue

8,000

6,000

4,000

2,000

0 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Data source: Tax Division, Department of Revenue, State of Alaska

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www.akbizmag.com • Alaska Business Monthly • January 2013


FinAnciAl services

Financial Planning Begin with a cash flow projection BY BOND STEWART

A

common question we hear from business owners is, “What can I do to plan for a successful 2013?” My answer: Understand your cash flow. Cash flow basically means, “Given the cash I have now, and the cash I expect to come in, will I have enough cash in my bank account to pay my expenses as they come due?” Sounds simple, but if a business owner overestimates their income and underestimates their expenses, they may not see a shortage coming and may run out of money. So to help you have a successful 2013, here’s how to create a cash flow projection.

Projecting Cash Flow

Even healthy businesses run the risk of owing more than they can pay in a month. Spending less than 45 minutes each month on a cash flow projection can help you identify potential shortfalls. Start by identifying cash flow assumptions in two areas: Receivables: Outline how quickly you receive payment from your customers (i.e., if most of your customers pay you within 30 days, an assumption could be: 90 percent of sales will be collected the month after the sale). Payables: Outline when your payments are due (i.e., if your vendors require payment within two weeks of delivery, an assumption could be: payables are due within 14 days of purchase).

Operating Cash, Beginning—The amount of money you’ll have at the beginning of each month. Sources of Cash—All money coming in each month (i.e., receivables, direct sales, loans, etc.). Total Sources of Cash—Add the amounts in the “Operating Cash, Beginning” row to the amounts in the “Sources of Cash” for each month. Uses of Cash—List every likely expense your business may incur, such as payroll, accounts payable, rent and loan payments. Total Uses of Cash—Tally all your expenses so you can see what will be going out the door each month. Excess (Deficit) of Cash—This is the number that counts. If you see positive numbers across the board, you may have extra dollars to invest. If you see a negative number for one of the months—don’t panic—you have time and options to prepare your business. As the months pass, compare your monthly cash flow statements to your projections for each month. If the numbers don’t match up, revisit your key assumptions. Don’t worry about small differences—typically less than 5 percent. To make sure your projection stays accurate throughout the year, be sure to consider these variable expenses:

TIP: Don’t let optimism factor into your key assumptions. Only the most likely numbers should appear on your spreadsheet.

■ Months with three payrolls ■ Months when insurance premiums are due ■ Increased estimated taxes due to increased sales

With these assumptions, begin drafting your cash flow projection. Create 12 columns across the top of a spreadsheet, representing the next 12 months. On the left-hand side, list the following categories:

TIP: In the “Total Uses for Cash” section, set aside 10 percent of revenues to be used for “other expenses” so you’ll have some cushion for unforeseen costs.

Track your projections by creating a rolling 12-month plan that you update at the end of each month. By adding a new month to the end every time a month is completed, you’ll always have a year-ahead grasp of your business’s fi nancial health. However, don’t try to project more than 12 months into the future as there are just too many variables. Once you’ve gotten into the habit of using a cash flow projection, it should give you a clearer picture of your company’s ongoing financial health. And it’s a great tool for meeting with your banker. When you meet with your banker (always a good idea at the beginning of the year) you’ll be in a better position to ask important questions such as: ■ How can I save money to increase my cash flow? (i.e., more efficient payroll services; getting paid more quickly with merchant services; less expensive business insurance; and possible debt consolidation) ■ How can I invest surplus cash to make it grow? (i.e., try monthly automatic transfer to an interest-bearing account.) ■ How can I fund any expansion plans? ■ How do I prepare for a cash crunch – a month when my cash flow projection includes a deficit? A cash flow projection is an essential tool to keep your business healthy and growing. Use it and you’re more likely to have a stress-free 2013! R Bond Stewart is Wells Fargo’s Anchorage Business Banking manager. Contact him at 907-265-2014 or bond.stewart@wellsfargo.com.

www.akbizmag.com • Alaska Business Monthly • January 2013

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telecom & technologY

BY ED ARTHUR

W

hat is “big data”? How is it used? What does it mean to business, to you? Confused by the possible definitions? You are not alone. Here’s a nutshell overview. Chris Herbert, a former IBM executive and special projects director, says there is some logical confusion about a definition for the term “big data” because of the practical lack of separation between collecting, storing, and analysis and use of information. In an e-mail response to questions, Herbert states, “The term Big Data really refers to the vast volume of data (information) in existence. Big data is, therefore, simply, collected information. When used for good, along with algorithms (instructions) that give computers the ability to listen, interpret and act when tasked by humans. Use of big data can save money, time and even lives. The same data, however, can allow your every purchase and recordable action to be followed and used to put together a profile of you for advertisers, potential employers, or governments.

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Big data users can know their customers and their shopping habits better than many of those customers may know themselves. Not only are your purchases and other interactions with retailers, utilities, banks and service providers tracked, but with newly emergent algorithms, your habits, purchases, use of sales coupons and how you pay are analyzed to get a bigger and better picture of who you the consumer are and what products you might jump at the chance to buy. Portland Oregon Savory Spice Shop owners Anne and Jim Brown have carefully chosen their social media advertising to the get the best of big data’s offerings for the launch of their new boutique business. “With our Facebook ads we’re routed to target those groups of buyers and potential customers most likely to want our high-end specialty products,’’ says Jim. “We just had to invest in the ad and then Facebook algorithms and analysis sort through mountains of consumer data to find those that most closely match our buyer profile. Those poten-

tial customers then get targeted ads and special announcements from the store.” The Browns estimate the service saves hundreds of hours of work that would otherwise be done by hand and possibly having to add, or contract for, highly specialized staff to work through all the available information collected on consumers. “The time and cost saving has been real and with every sale the data mined from our big data pile becomes more and more accurate,” says Anne, Jim’s wife and partner in Savory Spice. Closer to home, Alaska businesses large and small are also tied in to Internet-based data collection analysis and distribution systems. Sales and stock are reported and the information stored for later decision-making. We’ve seen an explosive growth (e.g., Internet-based data, databases in business, unstructured data in the form of text) in this available information over the past decade primarily because of the tremendous growth of the Internet. To leverage and use the vast amount of data to gain insight,

www.akbizmag.com • Alaska Business Monthly • January 2013


meaning and more information requires analysis—thus the connection between the two thoughts, and the confusion. As an aside (but relevant), IBM’s Watson computer, which came into the national spotlight by winning Jeopardy, can “read” unstructured data and “understand it.” It then can help direct human actions. Watson’s biggest potential? Medical diagnosis. By looking at data and sets of parameters, Watson assists in diagnosis and treatment recommendations for health care providers and, hopefully, patients. Internet entertainment provider Netflix uses big data and analytics to determine viewing patterns and decide what types of offerings to promote to its customers. Big data use even affects a person’s financial life. It affects such things as mortgage terms and pension well-being. How? Data determines what is traded and when on the world’s stock exchanges— the related algorithms work, in microseconds, to buy and sell millions of shares of stock. If one is just a few microseconds slower than the next guy, tens of millions of dollars can be lost. The data? What stock and how much of it has just been sold. How important is it? Important

enough that entire buildings in large trading hubs have been, and are being, transformed from living and working spaces into massive computer server centers as close to Internet sources as possible. Fibre optic cable trenches are being constructed to move big data even faster. As an example, a fibre optic link has been created between New York City and Chicago that will allow the transfer of data just three microseconds faster than previous “traditional” satellite or dedicated copper lines. What does that mean? In a 2011 talk to a TED (technology, entertainment, design) conference, business design consultant and lecturer Kevin Slavin stated that it takes about 500,000 microseconds to click a mouse. “(In stock trading) if you’re five microseconds behind, you’re a loser.” So, food for thought: big data can be a blessing when combined with the right algorithms. Big data has the potential to save lives and treat disease faster. Big data allows business and industry to make previously limited, labor-intensive calculations about supplies and likely customers so more of what people want will be available on retail shelves. Big data can also be a nuisance (and worse) when it inspires unwanted and

unsolicited advertising, phone calls and email; or misinterpreted, causing denial of credit, incorrect charges, or in serious cases, the damaging reality of identity theft. What’s it going to be? Probably some of both—the good and the bad. The optimistic view is that good will reign, that reduction in labor and increase in speed of personal and business transactions is worth taking a chance on the existence of so much information, stored, ready for use by humans, but also by the magic machines we’ve created, computers. The cautious view: that our privacy is endangered, that now more that ever Orwell’s Big Brother is closer to reality because of big data and that soon computers will make daily decisions in our lives and report us when we fail to follow the instructions made to other humans whose sole job will be enforcement. For now, from a business point-ofview, the good is winning. The benefits of having big data available for analysis and use are outweighing the potential for abuse. R Journalist Ed Arthur writes from Anchorage.

Anne Campbell Advertising Account Manager anne@akbizmag.com

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www.akbizmag.com • Alaska Business Monthly • January 2013

73 ■


ALASKA THIS MONTH Compiled By Tasha Anderson

dining

Jack Sprat: Girdwood Eatery

Jack Sprat: Girdwood Eatery

Jack Sprat at the base of Mount Alyeska, lit up for winter.

F

or those feeling the stifling effects of winter, a fresh and imaginative meal in just a short drive away in Girdwood. Jack Sprat, an eatery locally owned by Frans and Jennifer Weits, makes a point of sourcing local, sustainable produce and meats. “We change our menu seasonally—so there are always new things,” Frans Weits says. The Weits’ founded the restaurant in 2001, in the first year after moving north from Michigan. “I came up to Alaska thinking there wasn’t one of everything yet, so there’s good opportunities to try and start a business,” Frans says. The name and concept were Jennifer’s, he added, saying she “always thought Jack Sprat was a good name for a restaurant because you could say fat and lean, just like the rhyme. And we both always thought that was lacking in the restaurant world, you either had to go to a place that was all deep fried or that had really good vegetable dishes and salads but they forgot about the meat eaters.” The current menu features Alaska ciopinno—a San Francisco-based Italian seafood dish made Alaskan style with local fish, shellfish and prawns; braised short ribs with butternut squash risotto; and a vegetarian baked ricotta cavatelli with marinara and pine nut pesto, all made fresh in-house under the direction of the chef de cuisine, Chris Rattaro. But don’t worry about the menu changing too much; “We keep the mainstays like yam fries or we’d have a revolt,” Frans says. jacksprat.net R ■ 74

www.akbizmag.com • Alaska Business Monthly • January 2013


ALASKA THIS MONTH Compiled By Tasha Anderson

trAvel

Photo courtesy of Tsaina Lodge

Tsaina Lodge: Fun, Food and High-Flying Services

Guests enjoy fine dining at Tsaina Lodge.

T

hompson Pass, located just outside of Valdez, has long been known for its brilliant vistas during any Alaskan season. The Tsaina Lodge is the only privately owned property in the Thompson Pass area and grants access to both winter and summer activities. Such activities drew owners Jeff and Ingrid Fraser to Alaska in the first place. “Ingrid and I lived in Jackson Hole and migrated to Valdez annually to ski after the Jackson Hole Ski area closed—for many years,” Jeff Fraser says. “When we visited during the summer, we knew this was the place we had to be.” The Tsaina has housed the Valdez Heli-Ski Guides, Alaska’s oldest heli-ski guide service, for 20 years. In March and April these guides provide skiers and snowboarders with access to “long adventurous ski runs with as much as 5,000 vertical feet and the Chugach’s legendary deep powder,” Marketing Director David Hudacsko wrote in an email. This summer the Tsaina will be the first and exclusive Valdez operator offering aerial services to include unexplored heli-accessed fishing locations. Jeff, a life-long fisher, sums up his experience: “We caught over 100 fish per fly rod... for myself having fly fished for 30plus years, my son who has fished more than me, and a 20plus year fishing guide, it wasn’t only the best fishing that each of us has ever had, it was the best fishing that any of us have ever heard of anyone having.” Any season, visitors can take in the sights of Thompson Pass and indulge in the luxury of the newly renovated Tsaina Lodge that features a fine dining restaurant and the Tsaina Bar, both of which are open to the public. tsaina.com R

www.akbizmag.com • Alaska Business Monthly • January 2013

75 ■


ALASKA THIS MONTH Compiled By Tasha Anderson

entertAinment

© Jamie Lang

Jack Dalton: Retrospectives and Premieres

Jack Dalton performing.

T

his Jan. 17-20, Jack Dalton, playwright and storyteller, revisits his first epic storytelling production, “Raven Returns: The Story of the Human Beings,” which premiered in 1999 and was met with critical acclaim. It covers the history of the Yup’ik culture from creation legends to historical facts to current affairs and some insights to the future. Dalton’s storytelling style, as referenced by the Out North Contemporary Art House website, is both “heartbreaking and funny.” Dalton is also premiering a new autobiographical storytelling performance April 11-14, in which he talks about his path as a storyteller and performer. As he puts it, he didn’t find his way into storytelling, “it bashed itself over my head.” Dalton’s involvement in the arts extends beyond his storytelling into traditional theater. “I really fell into writing plays; I didn’t say, ‘I’m a playwright now,’” Dalton says. Two of his plays will be performed at Out North in the upcoming months: The Last of His Kind, the story of the last indigenous person on Earth locked in a laboratory dedicated to “saving his people,” Feb. 7-17; and Assimilation, an account of the experiences of Alaska Natives in boarding schools, May 2-12. “I used to act in everything that I wrote, but now I don’t,” Dalton says. “Now I really enjoy the collaborative process, to write (a play) and then to have a director, actors, a lighting person and a sound person put their spin on it—that is what’s really powerful about theater.” outnorth.org R

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www.akbizmag.com • Alaska Business Monthly • January 2013


EVENTS CALENDAR

Compiled By Alaska Business Monthly Staff

Anchorage 12

Bridal Spectacular

Events include three unique fashion shows, more than 150 beautiful gowns—never modeled more than once before, new tuxedos, prom dresses and other formal evening attire. Sheraton Anchorage Hotel, 11 a.m. to 5 p.m. donnascornerak.com

17-27

Anchorage Folk Festival

This two-week festival is free to the public and includes music from local musicians. This year’s guest artists are Blue Moose and the Unbuttoned Zippers, and Cahalen Morrison and Eli West. UAA Wendy Williamson Auditorium, various times. anchoragefolkfestival.org

25

Alaska Kennel Club Dog Show

This show is an opportunity to watch the competition and talk to knowledgeable people about specific dog breeds to make an informed decision when adding a dog to your family. Egan Civic & Convention Center. alaskakennelclub.org

1/25-2/3

Bigfoot and Other Lost Souls

This is a World Premiere musical written by Adrien Royce and Tony Award-winning composer Mark Hollmann set in 1981 about Bernie Bernstein, novice scriptwriter. She takes the only job she can get: writing a Bigfoot documentary. The quest launches her into the woods where she meets a fugitive weatherman, a Bigfoot expert and his wife, a Scottish cable-access camera crew, and the sheriff of Mt. Shasta and her dog. Alaska Center for the Performing Arts, various times. alaskapac.centertix.net

25-27

and Emma’s affair with Jerry, Roberts best friend. It is an “intricate, intimate unveiling of the moments leading to the ultimate break in trust.” Perseverance Theatre, 7:30 p.m. perseverancetheatre.org

25

26

Ketchikan 1/31-2/2

Cirque Mechanics: Birdhouse Factory

Subtitled “A Love Story on a Flying Trapeze,” this show includes a contortionist performance on a turntable powered by unicyclists, a trapeze artist, a trampoline wall artist, comedic characters and acro-dancing. Hering Auditorium, 4 p.m. fairbanksconcert.org

Kodiak 12

Telluride Mountainfilm on Tour

Mountainfilm is dedicated to educating and inspiring audiences about issues that matter, cultures worth exploring, environments worth preserving and conversations worth sustaining. Alyeska Resort Sitzmark Bar & Grill, 7 p.m. to 9:30 p.m. alyeskaresort.com

Haines 18-19

Ruthie Foster and Her Trio

A 2010 Grammy nominee, Foster blends soul, blues, folk, rock and gospel genres for her performance. Vagabond Blues, 6 p.m. centertix.net

19

Polar Bear Jump-Off

Participants dressed in costume plunge into the near-freezing waters of Resurrection Bay. Other events during the weekend include silent auctions, turkey bowling, a carnival, seafood buffet and parade. Proceeds go to the American Cancer Society. Seward Small Boat Harbor, Jump-Off at 12:30 p.m.; more events at various locations and times. community.acsevents.org

Soldotna 26

Peninsula Winter Gad

This winter event draws families from all over the peninsula area, featuring entertainment, games and food. Soldotna Sports Center, various times. visitsoldotna.com

Wasilla

Juneau Betrayal

This play, written by Nobel Prize winner Harold Pinter, takes place over nine years and concerns the marriage of Robert and Emma,

Palmer 13

Alcan 200 Road Rally

This annual snowmachine road rally has taken place on the Haines Highway for the last 42 years. Racers begin at mile 42 and travel up to Dezadeash Lake and back, approximately 160 miles. The race is followed by an awards banquet and dinner. Race starts at 10 a.m.; banquet at 6:30 p.m. at Elks Lodge. alcan200.org

1/11-2/3

Matt Anderson

Acclaimed Canadian singer-songwriter and blues guitarist Matt Andersen performs with his slide guitar. Kodiak Harbor Convention Center, 7 p.m. kodiakartscouncil.org

Seward

Girdwood 12

Wearable Art Show

Artists in the Ketchikan community and beyond create original wearable wonders out of duct tape, foam, sequins, trash bags, wood, milk jugs, etc. which are then modeled on the runway to music. The Wearable after party features the Bizarre Bra contest after the final performance. Ted Ferry Civic Center, evening shows 8 p.m.; matinee on Saturday 3 p.m. ketchikanarts.org

Fairbanks 25-26

The Tender Land

Conducted by Kyle Pickett, American music is the theme of this program which includes Copland’s popular “Appalachian Spring,” the Shaker hymn “Simple Gifts,” and Bruch’s “Violin Concerto No. 1” with the Juneau Youth Solo Competition winner David Miller. Juneau-Douglas High School Auditorium, 8 p.m. on Saturday and 3 p.m. on Sunday. juneausymphony.org

Tosca

Composed by Giacomo Puccini, this classic is set against the backdrop of Napolean’s invasion of Italy. It is a story of love, political intrigue, betrayal, assassination and death. Alaska Center for the Performing Arts, various times. alaskapac.centertix.net

WorldQuest 2013

This is the primary annual fundraising event for the Juneau World Affairs Council. The main event is a quiz game played by teams, featuring questions about geography and world affairs. Other events include an international buffet, a no-host bar and silent auctions. Centennial Hall, 6:30 p.m. jwac.org

1/11-2/3

Sense and Sensibility

The Valley Performing Arts puts on this Jane Austen classic. Machetanz Theatre, 8 p.m. valleyperformingarts.org

www.akbizmag.com • Alaska Business Monthly • January 2013

77 ■


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ALASKA TRENDS

By Paul Davidson

Alaska Trends January 2013

T

US Trade

Alaska Trends, an outline of significant statewide statistics, is provided by the University of Alaska Center for Economic Development.

2011

2008

2005

2002

1999

1996

1993

1990

1987

1984

1981

1978

1975

1972

1969

1966

1963

1960

he U.S. Census Bureau is the only official U.S. Trade and Top Trading Partners source of monthly sta1960-2011 tistics on U.S. exports and is 2500 also a source of import statistics. The data consists of trade valued at $2,500 and above 2000 and is used by the government to analyze trade policy and Exports 1500 its effects. Businesses use the Imports industry specific and country specific trade statistics to anaCanada 1000 lyze the foreign and domestic China markets. Currently the top 500 Mexico three trading partners with the United States are Canada, China and Mexico, making 0 up 16.2 percent, 13.7 percent and 12.5 percent of total U.S. trade, respectively. The chart shows the U.S. import and export of goods (in billions of U.S. dollars) mostly increasing from the be- growing faster than exports, generally. International trade ginning of the dataset in 1960. The data for 1975 shows declined in 2001 and 2002, with imports decreasing sigU.S. exports exceeding imports by $9.55 billion; imports nificantly more than exports during the recession of 2008. have exceeded exports since then. The late 1990s show the The chart shows Chinese trade overtaking Mexico in 2006, beginning of a more pronounced trade gap, with imports becoming the No. 2 U.S. trading partner. R SOURCE: U.S. Census Bureau

ALASKA TRENDS HAS BEEN BROUGHT TO YOU THIS MONTH COURTESY OF AMERICAN MARINE/PENCO

www.akbizmag.com • Alaska Business Monthly • January 2013

79 ■


ALASKA TRENDS

Indicator

GENERAL Personal Income – Alaska Personal Income – United States Consumer Prices – Anchorage Consumer Prices – United States Bankruptcies Alaska Total Anchorage Total Fairbanks Total EMPLOYMENT Alaska Anchorage & Mat-Su Fairbanks Southeast Gulf Coast Sectoral Distribution – Alaska Total Nonfarm Goods Producing Services Providing Mining and Logging Mining Oil & Gas Construction Manufacturing Seafood Processing Trade/Transportation/Utilities Wholesale Trade Retail Trade Food & Beverage Stores General Merchandise Stores Trans/Warehouse/Utilities Air Transportation Information Telecommunications Financial Activities Professional & Business Services Educational & Health Services Health Care Leisure & Hospitality Accommodation Food Services & Drinking Places Other Services Government Federal Government State Government State Education Local Government Local Education Tribal Government Labor Force Alaska Anchorage & Mat-Su Fairbanks Southeast Gulf Coast Unemployment Rate Alaska Anchorage & Mat-Su Fairbanks

■ 80

By Paul Davidson Previous Report Period (revised)

Year Ago Period

Year Over Year Change

Units

Period

Latest Report Period

US $ US $ 1982-1984 = 100 1982-1984 = 100

2nd Q12 2nd Q12 2nd Q12 2nd Q12

34,271 13,370,344 205.22 228.85

33,971 13,236,324 202.58 226.28

32,846 12,944,090 200.28 223.60

4.34% 3.29% 2.47% 2.35%

Number Filed Number Filed Number Filed

September September September

58 45 9

42 33 9

78 56 14

-25.64% -19.64% -35.71%

Thousands Thousands Thousands Thousands Thousands

September September September September September

341.87 183.82 44.74 39.73 37.67

346.10 182.89 44.24 42.27 39.56

344.34 185.26 45.02 39.91 37.62

-0.72% -0.77% -0.62% -0.44% 0.12%

Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands

September September September September September September September September September September September September September September September September September September September September September September September September September September September September September September September September September

342.9 46.5 296.4 17.3 17.0 13.5 15.3 13.9 11.8 66.5 3.9 35.9 6.3 9.9 23.7 6.2 6.4 4.0 15.2 28.9 46.0 32.3 36.2 8.9 21.6 11.0 86.2 16.4 26.7 8.4 43.1 25.2 4.3

351.8 53.2 298.6 17.4 17.0 13.5 16.0 19.8 17.7 69.3 7.0 37.2 6.4 10.4 25.1 6.4 6.5 4.1 15.4 29.1 46.1 32.6 40.3 10.5 23.4 11.1 80.8 16.8 25.2 6.6 38.8 20.5 4.3

342.0 48.0 283.7 16.5 16.3 13.4 17.7 13.8 10.2 66.0 6.2 36.4 6.3 10.0 23.4 6.0 6.4 4.2 14.9 29.0 44.7 31.7 36.2 9.6 21.2 10.6 86.2 17.4 26.7 8.4 42.1 24.2 4.0

0.26% -3.13% 4.48% 4.85% 4.29% 0.75% -13.56% 0.72% 15.69% 0.76% -37.10% -1.37% 0.00% -1.00% 1.28% 3.33% 0.00% -4.76% 2.01% -0.34% 2.91% 1.89% 0.00% -7.29% 1.89% 3.77% 0.00% -5.75% 0.00% 0.00% 2.38% 4.13% 7.50%

Thousands Thousands Thousands Thousands Thousands

September September September September September

366.42 195.60 47.48 42.19 40.60

370.65 194.67 46.97 44.73 42.49

369.03 198.18 47.26 42.00 40.95

-0.71% -1.30% 0.45% 0.44% -0.87%

Percent Percent Percent

September September September

6.4 5.7 5.4

6.5 6 5.8

6.9 6.3 6

-7.25% -9.52% -10.00%

www.akbizmag.com • Alaska Business Monthly • January 2013


ALASKA TRENDS Previous Report Period (revised)

Year Ago Period

Year Over Year Change

Units

Period

Latest Report Period

Percent Percent Percent

September September September

5.6 7.1 7.6

5.4 6.8 8.2

6 7.5 8.8

-6.67% -5.33% -13.64%

Millions of Barrels Billions of Cubic Ft. $ per Barrel

September September September

15.06 8.49 111.97

12.54 8.23 110.79

17.54 8.60 113.74

-14.15% -1.26% -1.55%

Active Rigs Active Rigs $ Per Troy Oz. $ Per Troy Oz. Per Pound

September September September September September

7 1859 1,743.19 33.6 0.96

6 1913 1,667.25 28.69 0.91

7 1978 1,776.25 38.15 1.04

0.00% -6.02% -1.86% -11.94% -7.93%

Millions of $ Millions of $ Millions of $

September September September

28.16 19.34 8.82

29.67 17.09 12.58

45.60 8.76 36.84

-38.24% 120.85% -76.06%

Total Deeds

September

No Data

No Data

No Data

N/A

VISITOR INDUSTRY Total Air Passenger Traffic – Anchorage Total Air Passenger Traffic – Fairbanks

Thousands Thousands

September September

409.40 85.34

590.55 119.20

435.91 83.53

-6.08% 2.17%

ALASKA PERMANENT FUND Equity Assets Net Income Net Income – Year to Date Marketable Debt Securities Real Estate Investments Preferred and Common Stock

Millions of $ Millions of $ Millions of $ Millions of $ Millions of $ Millions of $ Millions of $

September September September September September September September

42,272.70 42,978.00 312.9 762.0 34.5 0.20 585.5

41,450.80 42,130.80 251.9 547.9 (1.2) 0.70 374.3

36,971.70 37,537.60 56.3 (1,989.0) -114.2 21.5 (1,719.0)

14.34% 14.49% 455.77% -138.31% -130.21% -99.07% -134.06%

BANKING (excludes interstate branches) Total Bank Assets – Alaska Cash & Balances Due Securities Net Loans and Leases Other Real Estate Owned Total Liabilities Total Bank Deposits – Alaska Noninterest-bearing deposits Interest- bearing deposits

Millions of $ Millions of $ Millions of $ Millions of $ Millions of $ Millions of $ Millions of $ Millions of $ Millions of $

2nd Q12 2nd Q12 2nd Q12 2nd Q12 2nd Q12 2nd Q12 2nd Q12 2nd Q12 2nd Q12

2,100.47 56.74 163.91 1,129.26 8.21 1,832.07 1,787.23 527.08 1,260.16

2,085.52 38.36 138.30 1,124.51 7.98 1,820.76 1,775.89 509.26 1,266.63

2,105.62 49.64 156.23 1,097.05 7.05 1,847.06 1,800.05 543.72 1,256.33

-0.24% 14.30% 4.92% 2.94% 16.48% -0.81% -0.71% -3.06% 0.30%

FOREIGN TRADE Value of the Dollar In Japanese Yen In Canadian Dollars In British Pounds In European Monetary Unit In Chinese Yuan

Yen Canadian $ Pounds Euro Yuan

September September September September September

78.20 0.98 0.62 0.78 6.33

78.68 0.99 0.64 0.81 6.33

76.84 1.00 0.63 0.72 6.39

1.77% -1.88% -1.67% 7.38% -0.88%

Indicator

Southeast Gulf Coast United States PETROLEUM/MINING Crude Oil Production – Alaska Natural Gas Field Production – Alaska ANS West Cost Average Spot Price Hughes Rig Count Alaska United States Gold Prices Silver Prices Zinc Prices REAL ESTATE Anchorage Building Permit Valuations Total Residential Commercial Deeds of Trust Recorded Anchorage–Recording District

By Paul Davidson

www.akbizmag.com • Alaska Business Monthly • January 2013

81 ■


Advertisers Index Alaska Air Transit.......................................75 Alaska Enterprise Solutions................19 Alaska Rubber . ...........................................63 Alaska Tobacco Control Alliance..... 15 Alaska USA Federal Credit Union...........................11 Allen Marine..................................................53 American Marine / PENCO.................79 Anchorage Opera......................................76 Arctic Controls............................................47 Arctic Office Products (Machines).................................................73 Capture the Fun Alaska LLC...............78 Carlile Transportation Systems........83 Chris Arend Photography...................82 Construction Machinery Industrial LLC............................................ 2 Cruz Construction Inc...........................70 Delta Industrial Services.......................39 Delta Western.............................................47 Donlin Gold....................................................25

■ 82

Dowland-Bach Corp............................... 69 ERA Helicopters....................................... 60 First National Bank Alaska.....................5 For Sale By Owner System..................45 GCI ....................................................................... 9 Global Services Inc. .................................61 Granite Construction..............................37 Historic Anchorage Hotel.....................75 IMPLUS Footware LLC.......................... 29 Judy Patrick Photography....................23 Landye Bennett Blumstein LLP........21 Lynden Inc. .................................................... 51 MagTec Alaska LLC................................. 60 Microcom........................................................ 13 Mowat Construction Co...................... 38 N C Machinery............................................65 NANA Regional Corp..............................52 Northern Air Cargo.........................34, 35 NTCL . ...............................................................61 Olgoonik Development Corp.............59 Oxford Assaying & Refining Inc.......76

PacArctic Logistics................................... 54 Pacific Alaska Freightways................40 Pacific Pile & Marine..............6, 7, 8, 56 Pacific Rim Media/ Smart Phone Creative........................78 Paramount Supply.....................................78 Parker, Smith & Feek............................... 17 Pen Air ............................................................ 54 Personnel Plus.............................................74 PistenBully.....................................................39 Rotary District 5010................................74 SOS Employment Group.......................27 Stellar Designs Inc.....................................78 Totem Ocean Trailer Express (TOTE).......................................55 Ukpeagvik Iñupiat Corp........................43 University of Alaska Anchorage WWAMI..................................................... 33 Usibelli Coal Mine Inc............................ 69 Washington Crane & Hoist.................. 31 Wells Fargo ..................................................84

www.akbizmag.com • Alaska Business Monthly • January 2013


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Jan-2013-Alaska Business Monthly  

The looming f scal cliff casts an eerie aura on economic planning, even in Alaska, where the state economy functions a bit differently than...