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Inside Alaska industry.

Transportation

Who can keep up with the ever-changing air fare wars? MarkAir dropped its Phoenix route and announced new service to Newark, N.J., and San Diego, Calif. MarkAir's expansion continues despite bankruptcy proceedings and concerns raised by creditors.

Meanwhile, competitor Alaska Airlines announced its entry into the Dutch Harbor market. Beginning in April, Alaska plans daily flights to the fish processing center, hauling both passengers and cargo.

Alaska goes up against MarkAir, PenAir and Reeve Aleutian with its new combi (passenger/cargo combination) service, with cargo capacity of 30,000 pounds per flight.

How much longer can Alaska and MarkAir pummel each other? Some industry insiders say '93 will be the watershed year. In late December, Alaska Airlines gave lay-off notices to 140 pilots. In early January, the airline canceled construction of a $45 million hanger in Anchorage, eliminated 64 management jobs and dropped its jet service to Boise, Idaho.

More transportation trends:

* For the first time in 11 years, a Russian Far Eastern Shipping Co. (FESCO) vessel has sailed into the Port of Tacoma. FESCO officials say regular service between the U.S. and Vladisvostok may resume in the future.

* Air China is planning service between Beijing, Shanghai and New York, with a customs-clearing stop in Anchorage. The service is slated to begin this spring, with stops by Boeing 747 combis three times a week.

Oil and Gas

The tangled webs we weave.

The Hickel administration seemed close to securing an end to the ban on the export of North Slope crude oil as sympathetic White House staffers, supported by the Department of Energy, insisted the restriction could be lifted by executive authority.

Then along comes the Department of Justice. Its job: to defend the federal government against a state lawsuit that seeks to overturn the export prohibition. Citing research conducted in preparation for its courtroom showdown with Hickel, the Justice Department concluded the president does not have authority to allow North Slope crude exports without congressional approval.

State officials project that exporting oil to Asian markets could generate an additional $185 million annually in taxes and royalties. That would be quite a boon to a state facing oil price uncertainties and fiscal debate in the legislature -- especially as oil lease sales aren't what they used to be.

Although the state earned about $8.6 million in a recent North Slope sale, analysts note that many big industry players stayed away, further evidence of greater interest in exploring overseas. Arco Alaska Inc. bid heavily in the sale, and BP Exploration (Alaska) Inc. also participated, along with lesser risk-takers.

Other oil news:

* Exxon Corp. plunked down another $110 million toward satisfying its oil-spill obligations as spelled out in a billion-dollar court settlement with the state and federal governments. The Exxon Valdez Oil Spill Trustees Council is charged with managing the funds for use in oil spill restoration and mitigation projects.

Mining

Although Fairbanks Gold Mining Inc. forecasts no long-term environmental damage from development of the Fort Knox mine, others have raised concerns that the environmental assessment prepared by the Amax Gold Inc. subsidiary may not adequately address environmental concerns.

The Northern Alaska Environmental Center says the type of review required by the federal government for mining on its lands might be more appropriate for a project of the Fort Knox magnitude. Fairbanks Gold plans to extract 3.2 million ounces of gold from a daily scoop of up to 50,000 tons of low-grade ore.

But the state's mine project manager, Dick LeFebvre, says whether you call it an environmental impact statement or assessment, the state intends a thorough review of the project before allowing it to proceed.

More mining news nuggets:

* The Bureau of Land Management is preparing an environmental impact statement regarding changes of operations under the 1872 mining law. The BLM proposal would require plans of operations for sensitive areas identified in land use plans, where occupancy occurs or where leaching or other use of certain chemicals takes place. The agency also proposes a penalty section, revision of on-site inspection provisions and establishment of a deadline for duration of active notices and plans. Suction dredges of 4 inches or less would be classified as casual use.

Fishing

As if Alaska's salmon industry hadn't taken enough pounding from foreign competitors over the last few years, here comes Clem Tillion with new cries of alarm. The governor's special fisheries assistant warns that the Russian salmon industry is emerging as a potentially strong competitor.

With five new hatcheries opened by Russian-Japanese joint ventures, and more on the way, the Russians are poised to flex their new capitalist muscle in the marketplace.

Tillion predicts a "tremendous impact" on Alaska, given Russia's proximity to markets traditionally dominated by salmon from Alaska and the Pacific Northwest.

More fishing morsels:

* A Salmon Strategy Task Force, convened to help the industry regroup from the disastrous 1991 season, issued a number of recommendations.

Immediate steps: promote surplus salmon; grant loan extensions to fishermen; ensure adequate processing capacity in Prince William Sound.

Mid-term steps: better coordination of salmon product development through the Alaska Fisheries Development Foundation; more research on quality variations in returning hatchery stocks; incorporate product quality considerations in fish management decisions; and better quality-control education in the industry.

Long-range steps: Develop a comprehensive strategy involving industry and the public sector.

Tourism

According to world-renowned birdwatcher Roger Tory Peterson, St. George Island in the Pribilofs has the "greatest single bird cliff anywhere in North America."

With equivalent superlatives from National Geographic and the Audubon Society, St. George Tanaq Corp. is inviting tourists -- 16 at a time -- to its backyard. With a new, modern airport and plans to restore the historic St. George hotel, the Native corporation has joined with TravelWild Tours of Vashon Island, Wash., to develop a summer visitor program highlighting the birding attractions of the wind-swept Bering Sea island.

St. George is 250 miles north of Dutch Harbor and has always been difficult to reach. It has also been overshadowed by its more famous neighbor island, St. Paul. But with surging interest in adventure and wildlife tourism, and with better access, Tanaq Corp. decided to put the "greatest bird cities in North America" and the island's 250,000 northern fur seals and 170 flowering species of plants on the traveler's map.

Timber

Alaska Pulp Corp. has charged the U.S. Forest Service with "unilaterally" changing provisions of the company's 50-year timber supply contract. "We're damned mad about it, and the impacts on us have been substantial," says APC executive vice president Frank Roppel.

While renegotiation of the contract was mandated by the Tongass Timber Reform Act (TTRA) of 1990, Alaska Pulp says the government is not implementing the act properly and strayed too far from the company's original 50-year timber supply contract. APC sees three main problems with the TTRA:

* The Forest Service has ruled that Alaska Pulp must meet the average timber sale price paid by other buyers of Tongass timber, including premiums. Alaska Pulp says when the average price goes down, the company is being denied a similar break;

* The Forest Service is now counting utility logs, normally used only for pulp production, against the total volume calculation for any sale to Alaska Pulp. The company says this is contrary to the 30-year practice of counting only the sawlogs against the sale total and asserts the new practice is leaving its Wrangell mill short of supply; and

* APC says there should be a market value analysis conducted for upcoming sale tracts to ensure that timber as well as logging conditions are economically feasible and comparable to other Forest Service sales. APC says a simple USFS appraisal of each tract would be acceptable. The Forest Service says no such review is required.

Gary Lidholm, public affairs officer for the U.S. Forest Service in Juneau, says the Forest Service has been audited by the congressional General Accounting Office pursuant to requirements of the Tongass Timber Reform Act. He says the GAO found the Forest Service had correctly interpreted and implemented Section 301 of the TTRA, which governs rewriting of the timber supply contract.

Further forest dispatches:

* The Department of Natural Resources conducted an 8.9 million board-foot timber sale on a 389-acre tract in the Haines State Forest. Under new procedures intended to work around the complexities of the ongoing mental health trust lands issue, the sale will provide logs for export to Japan as well as chip supply for local pulp mills.

* Winter has complicated construction of a road on Montague Island in Prince William Sound that will access a new logging area on Native lands within the Chugach National Forest. U.S. Forest Service officials and representatives of Koncor Forest Products Co. of Anchorage are working to resolve erosion problems caused by heavy rains near the headwaters of a salmon-spawning stream.

The $10 million Montague project is expected to employ about 80 people and produce high quality logs over an eight-year period, mostly for export to Japan and China. Some of the timber may go to the Seward mill should it be re-opened.

Government

Paul Fuhs, commissioner of commerce and economic development, has been floating a draft blueprint to fire up Alaska's economic engines.

Entitled "Sustaining Alaska's Economy," the plan is a collection of goals, objectives and strategies intended to harness the authorities and resources of state government to diversify and expand the state's economy.

Devising such a plan is not a new idea in itself, and skeptics may see in the plan a simple compilation of initiatives-in-progress and ideas favored by Gov. Walter Hickel. A related mission statement, "Into the 21st Century," was issued from the office of resources commissioner Glenn Olds as part of his department's description of obligations and opportunities.

Cindy Roberts, special assistant to Fuhs, says the plan covers 120 potential actions and recommends the creation of 18 multi-agency work teams, many with private sector involvement, to get the jobs done. The purpose of the groups, says Roberts, is to "establish their own critical path, make the assignments and get it done in the next 24 months."

Who has commented on the circulating draft?

"A wide spread of people who don't think it goes far enough and a wide spread of people who think it goes way too far," says Roberts, noting that feedback from agencies and others has helped shape revisions of the strategy.

Next stop: Gov. Hickel's office, where the chief executive will probably put his fingerprints, and his blessing, on the document.

More news from the government grab bag:

* The National Park Service regional office in Alaska is trying to figure out how to survive with a 1993 budget that is 8 percent lower than last year's. Officials say cost-cutting measures will have little or no effect on service to the public.
COPYRIGHT 1993 Alaska Business Publishing Company, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Publication:Alaska Business Monthly
Date:Feb 1, 1993
Words:1799
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