BERING STRAITS NATIVE CORP.

From rags to riches, this Native corporation highlights its successes.

From the Nome headquarters of Bering Straits Native Corp., tomorrow is just over the horizon. Spread along the Norton Sound and Bering Sea coasts in Western Alaska, corporation lands border the International Dateline. For thousands of years, the region has been home to Inupiaq and Siberian Yup'ik peoples, who lived off the sea's bounty in some of the world's harshest weather.

It's an area best known to the outside world as the finish line of the rugged Iditarod Trail Sled Dog Race and as the site of one of North America's wildest gold rushes a century ago. Then Nome's golden beaches lured tens of thousands of wild-eyed prospectors, as well as legendary lawman Wyatt Earp.

Today, Nome is a rugged, sleepy town of 4,000 at the crossroads of two continents. But being at the edge of tomorrow has its business disadvantages and Bering Straits Native Corp. has ridden out its share of rough weather. Congress drafted the Alaska Native Claims Settlement Act in 1971 to settle aboriginal land claims and clear the way for construction of the trans-Alaska oil pipeline. It created 12 land-based regional corporations, which split nearly $1 billion and 44 million acres of land.

BSNC's share of the pot was $38 million and a total of 2.28 million acres of land. They went on a spending spree, building a hotel in Anchorage and buying a construction company, among other things. Financial disasters followed. The bank in which their land-settlement money was deposited failed. In 1986, Bering Straits filed for reorganization under federal bankruptcy laws.

BSNC blames inexperience and poor business decisions for its startup woes. "We're keenly aware of our corporate history," President Tim Towarak says. "We don't dwell on it. We try to turn it around ... and turn it into a strength. Our board of directors has used it as a learning tool."

Bering Straits wasn't the only Native regional corporation struggling in the mid-'80s. But BSNC lobbied hard for a congressional exemption that would allow them to sell their net operating losses (NOLs) to other companies that needed a tax write off. With the backing of U.S. Sen. Ted Stevens, the NOL bill passed and gave BSNC a ticket back to solvency.

"Bering Straits Native Corp. was the first Native corporation that was authorized by Congress for the sale of NOLs," says BSNC Comptroller Jerald Brown. "It was kind of a test case. The NOLs with Bering Straits were primarily based on the actual operating losses, instead of other regions, who were able to utilize the NOLs based on a decrease in values of timber resources."

The test was a success for BSNC. They reported a profit of $37 million in 1989 and their reorganization plan was approved.

"Without the NOLs we would have really had to struggle to find an easier way to get out of bankruptcy," Towarak says. BSNC has earned a profit every year since 1989, reporting a net profit of $1.59 million for the 12 months ending March 2000.

In 1995, BSNC established a $1 million permanent fund, which had increased to nearly $2.3 million in 2000. Brown says the permanent fund "was set up with the intent that they wanted to shield some of the assets of BSNC into a fund designed solely for the purpose of future dividends for shareholders." Since 1994, BSNC has been paying dividends of 50 cents per share. Its investment portfolio is now worth $17.03 million.

The corporation's investments today are consolidated primarily in the investment portfolio and real estate holdings in Nome, Unalakleet and Valdez. BSNC's Eagle Electric subsidiary in Anchorage recently expanded into Las Vegas, says Brown. It subcontracts electrical systems and installations for industrial, commercial and residential building construction.

"For the future, we're looking for opportunities in the Lower 48 with government contracts," through its 8(a) program standing, Brown says. Bering Straits Development Co. is the largest subsidiary, with assets of $8.66 million. It owns and operates a 200-space mobile home park in Valdez, a hangar in Unalakleet, rental units in Nome, as well as Nome's Old Federal Building.

When it's looking at potential investments, Bering Straits keeps the needs of its shareholders at the forefront, as well as the need to make a profit. "There is a blend that we have to consider instead of looking at profit," Towarak says. "We feel the responsibility to our shareholders much more than traditional corporations."

BSNC's 6,200 Inupiaq and Siberian Yup'ik shareholders live primarily in 17 villages along Alaska's windswept western coast. The corporation is helping build quality housing for teachers in the villages, with the assumption that better housing will mean lower teacher turnover and a better education for village children, Towarak says.

The Bering Straits Foundation maintains a scholarship fund for shareholders and supports a program that brings doctors into communities to work with elders. The corporation also is active in issues such as repatriation of Native artifacts and remains from the Smithsonian and other Native advocacy issues.

After the store in Brevig Mission was leveled by fire, Bering Straits Environmental Systems and Construction Inc. stepped in to help the Brevig Mission Native Corp. rebuild. Bering Straits provided the material and equipment, management and supervisory expertise, as well as architectural and mechanical and electrical installation. Brevig Mission supplied the manpower and the store was rebuilt late in 2000. The environmental service company also is working on cleanup of military White Alice sites in the area.

Bering Straits Development jumped into the tourism business when its 23-room, Victorian-style Aurora Inn opened its doors in Nome in May 1999. The inn has hosted notables such as Alaska Gov. Tony Knowles, football legend Larry Csonka and Wyatt Earp, grandson of the famous gold rush lawman of the same name.

About a quarter of Bering Straits' annual income is from a revenue-sharing clause with the other Native regional corporations. The 7(i) provision was written into ANCSA to create a common denominator between those regions rich in natural resources and those without. Section 7(i) mandates that 70 percent of net revenues received by each corporation as a result of development of timber, oil, gas and mineral resources on their original land allotments be redistributed annually among the 12 regional corporations, based on shareholder enrollment.

Although Bering Straits has large deposits of metals on its lands, including more than 2 million ounces of gold and a large tin deposit, Brown says developing those resources has been a problem.

Most mining is for rock and gravel sales through its Golden Glacier Inc. subsidiary, which also is monitoring three active mineral exploration efforts in the region. No large-scale mining is imminent, however. Low mineral prices have dampened interest from outside corporations and BSNC is far away from the markets, Towarak says.

"We've got potential for developing our minerals and the subsurface that we own, but we don't have a transportation system that would make it feasible," he says.

Bering Straits is distant from Western markets, but Siberia is just over the horizon. Towarak says BSNC is in a good position to move into untapped Russian Far East markets: The corporations' lands border the International Dateline and some shareholders have cultural ties on both sides of the Bering Strait.

Visionaries have proposed building a tunnel under the strait. Some would link the tunnel to railroads on both continents, which would open vast markets. Chukotka delegations have visited Nome to discuss trade. Many of the proposals are still multibillion-dollar pies in the sky, but Towarak is willing to listen. After all, if some of the visions become reality, Bering Straits Native Corp. will be at the head of the line. They're already standing on the doorstep.