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Carrying on in Prince William Sound.

Carrying On In Prince William Sound

Turn the page. A new chapter in the saga of Prince William Sound began when the Exxon Valdez wrecked on Bligh Reef March 24, 1989. Like the earthquake 25 years earlier, the Good Friday catastrophe stands as a historic benchmark that introduced change at once sudden and slow, severe and subtle.

High hopes had characterized the pre-spill outlook for 1989: Prince William Sound communities anticipated increased tourism and record salmon harvests. But

the oil tanker's spilled North Slope crude, almost 11 million gallons, spoiled plans. Improvisation became the order of the day.

Now in the year after the spill, business and community managers are reassessing their positions. They're tallying gains and losses, speculating about the long-term impact of the benchmark event and setting new, corrected courses.

Michael Chittick, president of Chugach Alaska Corp., the Native regional corporation for Prince William Sound, says, "Last year we were predicting a multimillion dollar profit from a record pink salmon run. As it turned out, we had the worst loss in the history of our fishing operations. We lost $74 million in fisheries business."

Already operating canneries in Cordova and at Port Graham in Cook Inlet, the Chugach Alaska subsidiary, Chugach Fisheries, in 1988 had renovated and reactivated a second Cordova plant and bought another cannery on the west side of Kodiak at Uganik Bay. Says Chittick, "We acquired it (the Uganik Bay plant) to diversify outside of Prince William Sound and reduce our dependence on one fish run. But because the oil spill hit Prince William Sound and continued west, it turned out our diversification wasn't far enough away."

Closures of Kodiak and Cook Inlet salmon fisheries because of oil idled the Uganik Bay and Port Graham plants. Also lower prices for salmon caught in terminal fisheries - Prince William Sound pink salmon harvests were restricted to near the hatcheries and spawning streams-produced losses at the Cordova canneries. A large unsold inventory of canned pink salmon also will affect this year's prices.

"Given that situation and overall forecast of lower harvests and all the uncertainties, we're cutting way back on our fishing operations," says Chittick. Chugach Fisheries is shuttering one of its Cordova canneries and the Port Graham cannery this year. Chittick notes that unless things change dramatically, that Cordova cannery will be sold in favor of expansion in fisheries in other areas of the state.

"We always planned on further diversification, but the oil spill and big losses have put everything way back, at least a year and possibly as long as two years," Chittick says. Also delayed due to increased debt are plans to continue diversification in forest products and a new industry for the firm-tourism.

Chugach Alaska was able to turn a profit overall for 1989, in part because of revenues from a joint venture with NANA-Marriott. Chugach NANA-Marriott provided catering services for spill cleanup workers. The top-paid Alaskan vendor in the summer cleanup managed by Veco Inc. of Anchorage, the business grossed almost $24 million in contract services.

Many businesses operating in the sound earned revenues from unexpected sources. Stan Stephens, owner of Stan Stephens Charters and Cruises in Valdez, says in early 1989 he expected his best year ever. Although his enterprise gained equity as a result of oil-spill related work-income from an Alaska Department of Environmental Conservation contract was used to purchase a new vessel-Stephens estimates tourism revenue slipped 45-52 percent below a normal year. "We made money in one place and lost our butt in the other," he says.

Although 1990 bookings started with January reservations 50 percent below average, in mid-February "everything broke loose" and Stan Stephens Charters and Cruises finished the month slightly stronger than the year before. Stephens figures the long-term result of the sound's exposure in national media will be positive impact for tourism in the area. "Valdez and Prince William Sound definitely have put themselves on maps, and I think we'll see a plus effect," he adds.

John Kreilcamp, director of sales for Alaska Sightseeing Tours, says presales on Prince William Sound tours this spring were running ahead of last year's bookings and he expects a good season. Alaska Sightseeing continued to operate its one-way, nine-hour trips between Whittier and Valdez last year, despite shortages of hotel accommodations in Valdez that Kreilcamp says sometimes meant "putting people up in some interesting places."

VALDEZ. Because most of the city's hotel rooms were booked by cleanup and monitoring personnel, bed-and-breakfast lodgings spread like wildfire to meet the sudden demand. At the start of 1989, 27 bed and breakfast operations were licensed by the city. By August, that number had soared to 107. Early this year, only 50 were registered, but more were expected to reactivate their businesses.

Although many of the "rubber tire" or independent visitors rerouted trips last year to avoid the center for cleanup operations, 49 cruise ships docked at the port as scheduled. Cruise ships first began calling on Prince William Sound communities in 1982 and today use Valdez and Whittier to make land connections to Southcentral and Interior Alaska.

Valdez is the only Prince William Sound community connected by road to other parts of the state, and its accessibility as well as views along the drive have played an important role in developing the city's growing visitor industry. Says Ral West, marketing director of the Prince William Sound Tourism Coalition, "Part of Valdez's tourism product is the highway and trip through Keystone Canyon."

One air carrier, MarkAir of Anchorage, is counting on a share of that highway traffic to generate business for its new service to Valdez. Although the city's airport has had a microwave system capable of assisting low-visibility landings on the frequently fog-shrouded runway, no carriers have been equipped to use the navigational aid.

MarkAir was expected to start flying a new deHavilland Dash 7 outfitted to use the microwave landing system to Valdez on May 15. The airline plans scheduled service three times a day, six days a week, between Anchorage and Valdez.

Larry Anderson, vice president of marketing for MarkAir, says he expects a 30 percent improvement in flight completions to persuade Valdez residents who have driven rather than risk weather cancellations to start flying. The increased reliability also should help market the city's convention center, he notes. Aiming for its own piece of the Valdez visitor market, MarkAir is offering a selection of Prince William Sound tours in conjunction with Stan Stephens Charters and Cruises.

Anderson says continuing cleanup activity in Valdez - where flight operations soared from 12 a day typically to more than 300 daily last summer - was not the only inducement to add service to Prince William Sound. The market's commercial fishing industry has grown substantially, he adds.

Era Aviation has been the only year-round carrier into Valdez, with Wilbur's Inc. (doing business as Wilbur's Flight Operations) adding summer flights. Dave Baumeister, president of Era, says mid-summer 1989 traffic into Valdez was double normal passenger loads. But the company received an even bigger boost in revenues due to demand for spill-related transportation from its helicopter division.

Immediately following the spill through April, Era had 15-17 helicopters working for customers such as various media, Exxon, Veco, Alyeska Pipeline Service Co., U.S. Fish and Wildlife and Alaska Department of Environmental Conservation. Many of those choppers were already committed to other summer projects. But last winter, Exxon's use of Era helicopters generated revenue in a season when the equipment often is idle. Baumeister estimates spill-related work increased company revenues by about $10 million last year.

Valdez saw a busy 1989 by many measures. According to City Manager Doug Griffin, the community grew last summer from about 3,500 to 11,000 persons and likely had a population of about 4,000 people in spring. Although many costs were reimbursed by Exxon, Griffin notes uncompensated long-term expenses include wear and tear on roads and facilities and delays in comprehensive planning.

The city, which has a tax base supported - 94 percent - by revenues from the oil pipeline and terminal, has focused on diversification. For example, lower lease rates have helped to build the fish processing industry. Valdez now has three plants.

According to Vern Chase, marketing director for the City and Port of Valdez, efforts to attract boat builders likely will be rewarded with at least one new facility this year. He says that although the spill last year slowed the process of securing tenants, publicity also has increased awareness of the location.

Last year marine supply stores in Valdez struggled to meet the needs of boats working in cleanup or monitoring operations. Roger Smith, general manager of Southcentral Hardware, a store that carries fishing and general marine supplies, says sales volume was triple an average season. But the staff wasn't expanded to handle the job, because workers couldn't be found. Smith laments 39 employees came and went in 15 weeks, some never picking up their checks in the rush to sign on for more lucrative cleanup jobs.

The frantic pace last year took a personal toll on overworked staff and raised expenses such as freight and overtime wages, resulting in lower profit margins. "After all is sorted out, we're about where we were," he says. "Without the volume, we'd have gone broke."

CORDOVA. Employees were hard to find and keep in Cordova, too. Service suffered. So did morale and relationships. "We're not the quaint little fishing village we once were," says one resident of the 2,600-person city.

Bob Van Brocklin, mayor of Cordova, owns the Prince William Motel. He says some nights the motel's Club Bottle Shop simply closed for lack of help. "You never knew when you changed shifts if someone was going to be there. A few nights we gave up the battle and locked up. We experienced temporary insanity here. With all the employees leaving, there was a lot of strain on business owners and the existing workforce."

Chitina Air Service, which typically earns 90 percent of its revenues operating float and amphibious planes in fisheries-related freight and passenger hauling, generated only about 35-40 percent of 1989 income in that sector, according to owner Gary Graham. Revenues rose 300 percent, he notes.

The firm used the income to buy a general aviation terminal at the Cordova airport and two single-engine turbine aircraft, one of which is in California on a U.S. Bureau of Land Management contract. Graham says he hopes in the future to tap the tourism market in Prince William Sound, using both boats and planes to offer a new variety of tours.

But this year he's worried that fishermen may penalize him for concentrating in a different market last year and give their business to his competitors. Cordova, after all, is a fishing town where fishermen and fish processing workers are the breadwinners and the spenders.

"If it wasn't for fishing, you could probably tip this city on its side and dump it in the bay," says Van Brocklin. What the community really needs is additional winter business, employment to keep people in town, he adds. Seventy percent of his motel, lounge and bottle store business occurs in seven months; the other five generate only enough income to maintain. Many businesses lock up for the winter.

The proposed road following the Copper River and Northwestern Railway right-of-way would enhance Cordova's prospects as a visitor destination and help to diversify the city's economy. But Larry Hogan, vice president of the Alaska Road Opportunities for Access and Development and representative of its Cordova office, blames confusion about whether the city supports its completion on fear of offending the fishing industry.

Many who oppose the road are fishermen who spend winters in the Lower 48, and a 30-day residency requirement for voter registration gives part-time residents a strong voice in shaping city policy. Says Hogan, "The road has been such a subject of fear and loathing that we barely discuss it in Cordova. Many main street businesses won't say (they support the road) because they don't want to lose business - they fear economic reprisal."

In the '30s, Cordova was the gateway for an Alaska Steamship Lines tour of the state's Interior. But Cordova needs more than a road to revive its visitor status: In a typical quandary faced by many communities seeking to build a tourism industry, the city also lacks adequate visitor amenities.

Libbie and Phil Lian own Area E Fisheries, a fishing supply store, and The Powder House tavern. Libbie Lian says tourism not only would help boost their restaurant and lounge business, but also would spike sales of sport fishing equipment from their harbor's edge store.

Although Area E Fisheries grossed about what the owners expected last year, it lost net business and gained sales in accessory items such as rain gear. Because not as much gillnet gear was worn out last year, the business as of April had orders for only one-fifth the nets sold last year.

Adding to the confusion of long hours and short staff, the company was moving into a new building in the summer of 1989. Area E Fisheries grew out of a net-only business begun three years ago out of the Lian home. Today the owners are glad they began diversifying, adding hardware and general boating supplies.

Bill Webber, president of Webber Marine, also was completing an expansion of his boat repair and building enterprise. "I expected a real profitable year and it turned around on me after I'd already committed to go with expansion plans," says Webber.

He was unable to do his usual gillnet fishing because he was needed in the store due to the labor shortage. Although Webber says his business continued to grow at the same 30-40 percent climb in revenues it's seen over the last half-decade, he found himself short on capital to pay for the new construction. Webber had to sell his boat.

Ken Roemhildt, superintendent of North Pacific Processors Inc., a Cordova processing company owned by the Japanese conglomerate Marubeni, says he doesn't know if his troubles are over. Because oil displaced previous fisheries and harvests were restricted to hatchery areas, fish wasn't available a large percentage of the time. "Then, when we had fish, there were more than we could handle. That created much bigger problems for the industry than the shortage of labor," he adds.

Other problems were created by higher tender costs and the difficulty of finding tenders not employed in cleanup work. "We ended up putting out a lot more money than in a normal year and canned less fish than in a normal year. Expenses on everything were substantially higher. We're bleeding profusely at this point," Roemhildt says.

While he is concerned that oil could dislocate some fisheries again this year, Roemhildt says the Prince William Sound fishing industry has other possibly more serious problems. The predicted runs of pink salmon are 87 percent hatchery fish, only 13 percent wild stock. The dilemma is how to catch hatchery fish and preserve a large portion of wild stock. This could mean Alaska Fish and Game regulations will again order fishing close to terminal areas. And those harvests will sell at the low end of the price range.

"While not related to the oil spill, fishermen made a lot of money last year and they're going to be less satisfied this year with the prices. It's always easier to go up and harder to go down," Roemhildt notes.

He points out one good result of the oil spill was creation of the Salmon Harvest Task Force representing several user groups, Exxon and state agencies. He's hoping the group will continue to meet to work toward resolving some of the industry's problems.

Better communications are a benefit many business people cite as emerging from the oil spill. Contingency programs that include personnel training, logistical arrangements and strategically stored boom materials have been established at five sound hatcheries and in five Prince William Sound communities.

Also, the 15-member Regional Citizens' Advisory Committee was created to provide continuing dialogue with the oil industry. The group makes recommendations to Alyeska Pipeline Service Co. regarding monitoring and evaluating oil-spill response, impact of oil terminal operations and environmental consequences.

Another forum to share information is the Prince William Sound Science Center. Previously expected to open last fall, the center started up April 22 because of the immediate need for a logistical support center for scientific studies. Operating on $100,000 in loans from the City of Cordova, $50,000 in seed money from Conservation International, and $25,000 in donations from businesses and individuals, the center has begun creating a central database for information on Prince William Sound and is providing support services for studies on eagles and sea otters.

"The oil spill refocused attention for the need to collect and have data on hand so we'll know better next time how to respond to another disaster," says Nancy Bird, administrative coordinator for the center. The facility also is another source of community jobs and economic stimulus. "The most immediate opportunity for economic diversification in this town is bringing in people whose livelihoods are not dependent on the fishing industry," explains Bird.

Included in the state capital budget and expected to be approved by the legislature and governor was $250,000 to renovate the center's dockside Cordova building. When spruced up and fully functioning, the science center will provide a tourist attraction and draw experts doing related work to the community.

If Congress decides to fund the proposed Oil Spill Recovery Institute, the Cordova center is a likely candidate to become administrator. The proposal being considered would fund the institute with $23 million over 10 years. Whatever scale and whether alone or combined with the Copper River Delta Institute, as is being considered, the Prince William Sound Science Center offers a means of learning more about the subarctic region in and around the sound.

WHITTIER. The western gateway to Prince William Sound, Whittier has a year-round population of fewer than 300 people. Accessible only by train, boat or small aircraft, the city's largest employer is government; other sources of jobs are the state-owned railroad, tourism and fishing.

The city greets more than 50 cruise ships a year, but few visitors stay long enough to spend locally as they make connections with the Alaska Railroad. Last year, cleanup employees pumped more dollars into the local economy than tourists traditionally do. Property and sales taxes rose significantly, according to Cecil DePedro, financial officer for the City of Whittier. In particular, hotels, restaurants and service businesses fared well.

Gerry Sanger, a wildlife biologist who founded Whittier-based Sound Water Taxi in 1987 to offer marine tours and kayaker transport, estimates he could have tripled or quadrupled his earnings by working for Veco. Instead, he chose to put another year into building his growing business.

A road connecting Whittier to the New Seward Highway into Anchorage would increase the number of visitors and bring additional dollars to the Prince William Sound city. But Sanger, for one, is ambivalent about a change. He says, "The wilderness character of the sound exists because access is kind of difficult. A road would change its character forever. It would become like Resurrection Bay or Kachemak Bay."

All communities in Prince William Sound are struggling with the issues of growth and tourism. While providing new awareness for millions of potential visitors, the limelight is causing residents and businesses of the area to take another look at their home.

"To me, the most positive thing to come from the spill is increasing environmental awareness of people worldwide," says Sanger. "It's a terrible price to pay, but in the long run, as far as the health of the world, there's a positive effect. Were I God, though, and had the power to arrange things, I definitely would not have picked Prince William Sound."
COPYRIGHT 1990 Alaska Business Publishing Company, Inc.
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Title Annotation:includes related article about tourism in Prince William Sound
Author:Griffin, Judith Fuerst
Publication:Alaska Business Monthly
Date:Jun 1, 1990
Words:3308
Previous Article:Late '80s indicators spell relief.
Next Article:Cook Inlet's wrinkles.
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