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Arctic Slope Regional Corp.

Arctic Slope Regional Corp.

After first taking root through enterprises that seized development opportunities in its own backyard, the northernmost Alaska Native regional corporation began to branch out into more diversified activities. Arctic Slope Regional Corp. of Barrow now operates numerous and varied subsidiaries doing business throughout the state and increasingly in the Lower 48. Future corporate expansion likely will include trade with Pacific Rim and European nations.

Since Alaska Business Monthly first began its survey of Alaskan-owned, Alaska-based businesses in 1985, ASRC has doubled its revenues and employees. Last year the firm's gross revenues rose 20 percent, reaching $112.8 million in 1989.

Preliminary figures for ASRC's fiscal year 1990, ending June 30, indicate revenues of $215 million. Employment for 1990 rose 50 percent from the prior year to 1,500 persons.

Owner of approximately 5 million acres of North Slope lands, Arctic Slope has more than 3,700 Inupiat Eskimo shareholders. The corporation anticipates adding another 2,500 shareholders next year when it issues new stock to children born to shareholders since December 1971.

Created by the Alaska Native Claims Settlement Act of 1971, ASRC began about the same time the North Slope Borough was being established. The corporation found niches in providing services for borough infrastructure construction and for North Slope oil exploration.

In the intervening years, the firm has expanded into tourism, engineering, architectural design, lodging, transportation, communications, environmental services and petroleum refining. ASRC's corporate organization now branches out into 14 wholly-owned subsidiaries and 20 operating divisions.

"We've been pretty dedicated and aggressive in going after opportunities to diversify," says Jacob Adams, president and chief executive officer of ASRC.

Conrad Bagne, chief administrative officer of Arctic Slope Regional Corp., notes that the Native corporation pursues dual goals: profitability and shareholder hire. Although the desire to create employment does not justify money-losing operations, it has kept ASRC in lines of business with thinner and sometimes erratic profit margins.

The most obvious example is construction. ASRC has explored several construction specialties, unsuccessfully; electrical contracting, for example.

"Construction is an area in which we can put shareholders to work fairly quickly without a lot of training," Bagne says. He adds that the drawback is the fickle nature of the construction business: "It has its ups and downs, and it's a high-risk industry."

The ASRC subsidiary Eskimos Inc. was one of the first ventures of the corporation, formed from the acquisition of a Barrow fuel company in the early '70s. That business branched into oil-field service work under the name Eskimo Oilfield Services and into construction of state-owned facilities under the name Inupiat Builders.

In the mid-70s, Eskimos joint ventured with a an established construction firm, SKW Clinton, to pursue public works projects. ASRC bought out the other half of the venture, making the operation a wholly owned subsidiary, SKW/Eskimos, in the early '80s.

Similarly, to become established in oil patch construction, ASRC joint ventured with Alaska General. The Native corporation later bought out its partner and made Arctic Slope/Alaska General a wholly owned subsidiary. ASRC later sold the struggling company.

In 1985, ASRC acquired Houston Contracting Co., a well-established pipeline construction firm, which became Natchiq Inc., a holding company for several oil-field service and construction enterprises. Among those businesses is Alaska Petroleum Contractors, formed in 1987 as a non-union division. More recently Natchiq acquired GSL Oilfield Services, a contractor with experience in offshore oil exploration; VRCA Environmental Services, a specialist in oil-field cleanup services; and Entech, an incinerator manufacturer.

Says Bagne, "That was an early pattern of business in the initial stages of the corporation: Start a small business; enter a joint venture with a company that has experience; learn the business; buy out the partner."

Nowadays the corporation's management has the skills and confidence to enter new fields more aggressively. Adds John McClellan, vice president of international business development for ASRC, "We've gained the experience needed to make direct acquisitions."

He says that although the complicated corporate structure maintaining identities of many acquired businesses does provide some protection from liability, the configuration chiefly allows ASRC to isolate activities. The separateness of the enterprises, McClellan explains, allows each to focus on a specific market and customer base.

Subsidiaries other than those operating primarily in oil-field or construction arenas also are multibranched. They, too, in many cases were built from various acquisitions that brought new management on board as well as new sources of revenue.

Refining. ASRC's acquisition of the balance of Petro Star -- it formerly owned about 40 percent of the North Pole refinery and fuel distributor -- is responsible for the corporation's huge increase in 1990 revenues. This summer, Petro Star bought Cold Foot Truck Stop, a service station on the Haul Road between Fairbanks and Prudhoe Bay. Bagne explains the acquisition provides a location from which to serve future tourism expansion as well as an outlet for fuel distribution.

Transportation & Tourism. ASRC's Tundra Tours subsidiary began as a hotel operation in Barrow, the Top of the World Hotel. Later its Tundra Tours Bus Co. began seeking school busing contracts. The bus company currently has transportation contract with the Fairbanks North Star Borough and the Matanuska-Susitna Borough and offers summer tours in Barrow. Tundra Tours is expected to add more visitor offerings in the future.

Communications. ASRC's first communications ventures were largely unsuccessful. Although it still operates a cable television station in Barrow, the firm quit several joint ventures it had entered in the mid-70s. Management re-examined communications in the mid-80s and decided the field offered important avenues for diversification.

In 1988 ASRC acquired Executone of Alaska and invested in an Oregon television station. Executone of Alaska is an independent distributorship of Executone Information Systems Inc., a national provider of communications systems and equipment.

An Executone office was opened in Ketchikan last year, expanding operations to Southeast Alaska and supplementing service centers in Anchorage, Fairbanks and Barrow. According to Bagne, ASRC has added product lines and new capabilities in system designs and in voice and data transmissions. He says new locations targeted for expansion include Juneau, Kodiak and the Kenai Peninsula.

Manufacturing. Recently Spenard Builders Supply became the statewide distributor of System 3 building panels manufactured by Natchiq Inc. Designed for homes or small buildings up to three stories in height, the panels can be used to create a frameless building. They offer a less costly alternative to conventional exterior standard wall construction that also offers advantages for quick erection in remote areas.

The energy-efficient panels are suitable for use in walls, ceilings, floors and roofs. According to McClellan, the System 3 panels are the only frameless insulated panels approved by the International Conference of Building Officials. He notes that the Soviets, Indonesians and Panamanians have expressed an interest in using the technology.

Entech, a manufacturer of incinerators for treatment of solid wastes acquired by ASRC subsidiary VRCA, is a second manufacturing endeavor.

Design Consulting. In 1977, ASRC began joint venturing with firms specializing in petroleum and cold region design. Interested in opportunities to diversify into other engineering fields, the corporation in 1982 created a wholly owned subsidiary named Arctic Slope Consulting Engineers that tapped management experience gained from previous alliances.

The firm acquired Ocean Technology Ltd. in 1987 to further diversify its engineering and surveying skills. The combined entity was renamed Arctic Slope Consulting Group. Continuing to broaden its capabilities, the subsidiary added architectural and environmental assessment expertise in 1989.

Oliver Leavitt, ASRC first vice president who oversees the firm's land department, says the Native corporation's consulting subsidiary has positioned itself to take advantage of growth in both the private and public sectors of Alaska's economy. Although the oil industry remains a major customer, the consulting group has found work in projects for diverse clientele from Southeast to the North Slope and westward to the Aleutians

With offices in Anchorage; Barrow; Fairbanks; Juneau; Seattle, Wash.; and Albuquerque, N.M., Arctic Slope Consulting Group has grown to be one of Alaska's largest engineering firms. Also one of ASRC's fastest growing subsidiaries, the consulting group is ranked among the top 500 U.S. design firms by the trade publication Engineering News Record.

R. Suzen Shaw, division manager of Arctic Slope Consulting Group's Environmental Risk Management Division, says the subsidiary is finding opportunities working for Native groups in the Lower 48 to manage cleanup of hazardous waste sites. A consultant to the subsidiary on various projects since 1985, Shaw joined its management in February, attracted by the consulting group's and the regional corporation's management staff and rapid growth.

"The striking thing about Arctic Slope is the belief that the people have in the company and the vision for the future," she says. "Diversity has caused other companies to collapse, but in the last five years this company certainly has proven its ability to operate in many fields."

Looking Ahead. As an operating company and as a land owner, ASRC has potential for sustaining growth. Long-term plans of the corporation focus on developing the firm's natural resource assets -- metals, coal and oil. Field work is under way to identify and evaluate base metal prospects, particularly those closest to the road and port constructed to serve the Red Dog Mine in Northwest Alaska.

Recent small-scale demonstration mining from the corporation's Western Arctic coal fields was intended to prove the feasibility of the using the bituminous coal in regional power plants. ASRC's McClellan has represented the firm in meetings with potential international buyers in Japan and Korea. Although the coal is an extremely high-quality grade that's highly volatile and low in sulfur, the lack of a roads and ports and the shipping limitations of the often ice-locked northern location are obstacles likely to delay development of the resource for some time.

ASRC's 92,000 acres of land on the Coastal Plain of the Arctic National Wildlife Refuge include large geologic formations that have been identified among those likely to contain large quantities of recoverable oil. A vocal proponent of exploration and development on the Coastal Plain, the corporation has campaigned actively in Alaska and Washington, D.C., to open ANWR. Although earlier this year the discussion seemed to have been mothballed by reactions to the Exxon Valdez spill in March 1989, recent developments in the Middle East have revived interest in the potential energy source.

According to ASRC's Bagne, the corporation, recognizing the importance of its role as a land manager, considers long-term development of its natural resources an important priority. "We think of ourselves as a construction and oil-field service company and as a natural resource development company," he says. "In some ways we have positioned ourselves to be a small integrated oil company, and the only piece lacking is production. We even refine and sell petroleum. ANWR fits the picture."

In the more immediate future, ASRC's management expects to continue to expand the corporation's service area. "We see ourselves going outside Alaska in a rather significant way to fuel growth in this decade," says McClellan. "The challenge to management of this company headquartered in Barrow will be to operate in other parts of the country and the world."
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Title Annotation:The New Forty-Niners
Author:Griffin, Judith Fuerst
Publication:Alaska Business Monthly
Article Type:company profile
Date:Oct 1, 1990
Previous Article:Veco International.
Next Article:Doyon Ltd.

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