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Alaska's key industries: a crystal ball into 2004.

Forecasting is a frustrating challenge at best; whether it is in the sports world or the business world, it takes a very knowledgeable and brave person to make predictions for an entire industry.

Leaders from 18 key industries in Alaska come forward and take their best shot at predicting what kind of year their business communities can expect to have in 2004.

Overall, most forecasts came in on the positive side, expecting this year to be a good one for business.


Liane Pelletier

President and CEO

Alaska Communication Systems

The model for "telecommunications of the future" is rooted in customer expectations that call for service that is seamless and consistent, whether home, work or elsewhere. If that is the customer's expectation, then the telecommunications company of the future must integrate its approach to customers. That takes both integration at the experience level as well as integration at the technology level.

Looking at the service experience fitting for home, work and elsewhere, we have to look to information processing, in the back office, that lashes together disparate environments and allow companies to recognize and treat the customer on an integrated basis. Looking at the technology that supports home, work and elsewhere activities, we have to look to wireless expansion, voice packetization, device miniaturization, increased battery life, sharper displays and operating systems that maintain seamlessness when users might be crossing networks such as cellular, DSL and WIFI. Such technology and service advancements will dramatically change the way we live. People want to be able to connect from wherever they are, and they want to be able to do what they normally do at home or at the office.

Given Alaska Communications Systems has assembled a broad asset mix--wireline, wireless, voice and data as well as an entertainment partner, we intend to be recognized as a future-proof telecommunications service provider.


Brigitta Windisch-Cole

Labor Economist

AK Dept. of Labor

In 2003, the construction industry turned in a stellar season. Performance was up in all divisions of the industry. A healthy mix of public, commercial and residential construction contributed to the industry's best season since 1985.

Activity should continue to be strong in 2004, although activity could head down to a lower but still sturdy level. Public construction is expected to remain strong because large projects such as the airport and multiple military projects will carry over to next season.

Higher mortgage rates could, however, put a damper on residential building. Commercial construction may not reach its 2003 performance because many projects were completed in 2003. But hotel construction and expansions will continue.

A few other larger commercial projects will start this year and the beginning of construction of the Pogo Mine remains a possibility. Although it is a high-dollar project, its impact will be soft at the start-up phase and gain strength in subsequent construction phases.

Fairbanks will remain a hot spot for construction activity and it is possible that performance locally will be up over the 2003 season. Military construction, the museum expansion, other projects and upcoming road jobs show the strength of public-sector involvement.

Retail, warehousing and hotel expansions are ongoing projects in the commercial sector. But as elsewhere, activity in residential construction will be influenced by mortgage rates.


Crystal Nygard

CEO, PSI Environmental & Instrumentation


The environmental and safety industries have more in common than some would like to comment on, besides the fact that for most of the time, one person with an organization, is responsible for both the safety and environmental programs. This is true for both the private and public sectors.

Whereas our government identifies problems, implements regulations and enforces them, they too realize the importance of compliance.

The local, state and federal governments govern the laws; either way they can fuel emotions that drive this industry both positively and negatively.

The regulations enacted will not disappear, but the education of people from the ground floor up will only increase. This means that at all levels of an organization, the emphasis of protecting the environment, and in a safe manner, is of the utmost importance to development; that means taking the time to plan, communicate and evaluate the process as a development proceeds.

The public will continue to receive information about the environmental and safety industries that are opinions, not fact, theory, not practical interpretations, all based on a fine line of interpretations and how their issue pertains to the regulations. Fortunately, this new administration, both at federal and state levels, values the opinions, and facts of progress, from these industries and is mandating the government to work with industry not against industry.

This means sitting down and talking about the federal regulations and how important it is to have the state of Alaska write exceptions and local interpretation to the federal protocol. For example, the transportation of hazardous waste must be completed 45 days from the time the generator signs until the final treatment, storage and disposal facility (TSDF) receives the material.

In the middle of summer when there are numerous shipments, it is unusually not a problem. However, in the middle of winter, when shipments are not as frequent, 45 days can be exceeded, and then the generator must send a letter to the Environmental Protection Agency as notification. This is one example of a regulation that needs to be re-examined by allowing industry to comment and have a dialogue with those who enact the laws.


By Marc Langland


Northrim Bank

Thanks to low interest rates and a strong economy, Alaska's financial institutions saw a banner year in 2003. We think that growth will continue into 2004, though possibly at a slower rate.

Near record-low interest rates last year enticed thousands of Alaskans to invest in new homes or to refinance existing loans. And because the economy is strong, Alaskans are demanding loans that are needed to fund growth in their businesses.

We don't expect interest rates to increase substantially in 2004, in part because it is an election year. However, much of the industry's continued success relies on how and when our state leaders handle the ongoing budget deficit, a key factor of current and future economic growth. The uncertainty of a sustaining budget adds a high degree of uncertainty in the minds of both individuals and business owners when making financial decisions.

Another key factor for continued growth lies in the natural gas pipeline. If this project is treated favorably in the Congressional Energy Bill, Alaska's financial institutions, as well as virtually every other industry operating in the state, could see long-term growth opportunities.


Gunnar Knapp

Professor of Economics


Institute of Social & Economic Research

Forecasting is notoriously difficult for the Alaska fishing industry.

Looking ahead to 2004, as every year, the only thing that we can be sure about is that there will be surprises. What matters most for the fishing industry each year are catches and prices.

As of mid-November 2003, the biggest catch change on the horizon is the possibility of a much larger sockeye salmon harvest in Bristol Bay. The Alaska Department of Fish and Game has projected a 2004 Bristol Bay catch of 34.7 million fish--which would be more than double this year's catch of 14.9 million fish.

In our federally managed groundfish fisheries, including the huge Bering Sea pollock fishery, the catch quotas for 2004 are about the same as 2003. Catch quotas and projections for other fisheries haven't been released yet: the best guess is that 2004's catches will be similar to 2003.

What about prices? Fish prices are volatile and difficult to predict. Markets could change a lot before next summer's salmon season. A big Bristol Bay catch--if it happens--could further depress sockeye salmon prices, throughout Alaska. The big 2003 pink salmon catch could lead to a buildup of canned pink salmon stocks, which would be a drag on next year's pink salmon prices.

On the positive side, in recent months the value of the Japanese yen relative to the dollar has been strengthening. That could help those Alaska's fisheries, which depend heavily on the Japanese market--including sockeye salmon, herring, sablefish and pollock, because it increases what Japanese buyers can afford to pay more in dollars.

Stewardship Council certification of Alaska pollock fisheries as "sustainable" could help industry efforts to market once-frozen "Genuine Alaska Pollock" in the face of competition from imported twice-frozen Russian pollock processed in China.

Over the past few years, processors have closed salmon processing plants in many Alaska communities, in response to difficult economic circumstances in the salmon industry. Industry rumors suggest that 2004 could see additional closures of one or more major salmon-processing operations. This would further reduce market options for salmon fishermen in those areas, causing a ripple effect on support industries such as transportation.

The industry should see substantial spending for new federally funded marketing initiatives for Alaska fisheries, through the state's salmon industry revitalization efforts and the new Alaska Fisheries Marketing Board. The board was established by Congress this year to fund grants for fisheries marketing.

Heated political development is likely to continue this year, over several major issues facing the fishing industry. This will include proposals for individual processor quotas in the crab and Gulf of Alaska groundfish fisheries, changes to the Alaska Seafood Marketing Institute, and proposals for changing the marketing and management of Alaska salmon.

GAS & OIL Judy Brady Executive Director Alaska Oil & Gas Association


On the Oil & Gas Menu for 2004: Holding oil production steady in Alaska's mature fields ... developing new oil and gas fields far from existing infrastructure on the North Slope ... developing new oil and gas reserves in the Cook Inlet. Reconfiguring the trans-Alaska oil pipeline ... developing heavy oil ... focusing on bringing Alaska's North Slope gas to market.

No matter what the issues are for the oil and gas industry in Alaska in 2004--the bottom line will be the bare bones, hard-core competition for investment dollars.

This is not bad news; it is simply the new fact of life.

Alaska companies are hammering the "cost factor" hard--with increased investments in technology and by concentrating on being more efficient.

The state is also taking a hard look on how to control costs and maintain fiscal stability on the public policy side. Gov. Murkowski is very clear in his intent to keep Alaska competitive for oil and gas investment dollars.

Today the industry is staying invested in Alaska. The outlook for 2004 is one of good news--if both the industry and the state "stay the course" on keeping Alaska competitive.

1. Oil and gas companies in Alaska are making huge investments in Alaska right now and are expected to continue to do so in 2004.

Capital budgets for the three largest companies--ConocoPhillips, ExxonMobil and BP, are over $1 billion in the Prudhoe Bay/Kapuruk fields alone. Multi-million dollar investments are being made in new ships, satellite fields and technology. New players on the North Slope, Anadarko, EnCana, TOTAL, Armstrong, Pioneer and Winstar, have all made new investments over the past three years and are expected to make additional investments in 2004. The Cook Inlet companies, UNOCAL, Marathon, XTO, Forest Oil, Evergreen, Aurora Gas and Andex continue to announce new investments.

2. Because of these investments new gas reserves are being found and produced in Cook Inlet and oil production on the North Slope has the potential of holding steady through the end of the decade, providing the time necessary for new fields to be developed.

3. Alaska has "good rocks." Reserves mean possibilities. If Alaska can stay competitive for investment dollars, we have the possibility for production for the next 60 years.

Great reserves, great possibilities, great challenges.

The goal is for the oil and gas industry to stay invested in Alaska--for 2004 and for the next 50 years.


By Pamela LaBolle


Alaska State Chamber of Commerce

The business of state government is a significant portion of the economic pie in Alaska, so the direction the legislature and administration will take in addressing the fiscal gap is a key is sue for business and for Alaska's economic future.

Stricter budget discipline, some use of the Permanent Fund, and taxes are the three elements of the fiscal-fix formula that have been under discussion for the past few sessions and will undoubtedly be so in the coming session.

However, 2004 is an election year, and the reality is that difficult and potentially unpopular political decisions are rarely, if ever, made in the year of an election. Although new revenue sources will have to be addressed in the next couple of years, it is unlikely that any major tax program will be enacted next year.

Over the last eight years, there have been budget cuts amounting to about $500 million, half of which were made by the Legislature during a five-year period in the late 1990s and the other half by the governor this year in line-item vetoes to the budget.

Although these cuts caused some reductions in state services and eliminated a few programs, for the most part reductions in force have been handled by attrition. Although some fine-tuning of the budget may be on the agenda this coming session, it is unlikely that major reductions, which would probably mean job losses, will occur.

Without action on new revenues, it appears that budget discipline will be the direction for the coming session. The importance of this is not to be understated. The governor has committed to spending less in FY 05 than in FY 04 (which is less than was spent in FY 03).

The administration is being aggressive in fine-tuning the budget in order to keep the draw on the Constitutional Budget Reserve at no more than $400 million. This demonstrated budget discipline has already improved Alaska's credit position in bond sales, which translates to savings for Alaskans in property taxes.

Anything that can be done to reduce the need for taxes is important to the economy. As has been demonstrated on the national scene, businesses use dollars saved in taxes to grow production and create jobs. Good jobs in Alaska will keep our young people in the state. Good jobs also reduce the demand and cost for social services. Good jobs provide more spending power, which grows the economy, which expands the tax base, which builds the infrastructure and supports a desirable level of government.


E. Al Parrish

Vice President-Chief Executive, Alaska Region, Providence

Health System


Health care has been a booming industry in Alaska for many years, and I foresee that this trend will continue. There are, however, some serious challenges facing this industry that could have a tremendous impact on not only the state's health care providers, but also on Alaskans and our communities as a whole.

We are indeed entering challenging times in health care. The cost of delivering care continues to skyrocket and the reimbursement continues to decline.

With budget deficits within both the federal and state governments, reimbursement and coverage for Medicare and Medicaid services continues to be at risk. In addition, those who are insured through employer plans are seeing rising costs.

This is leading to many people simply declining health benefits due to an inability to pay the premiums and reduced benefits at higher costs for those who continue to stay in their employer plans.

These issues are quickly leading to a growing number of uninsured and underinsured people in our state, and, in effect, limiting access to care for those who need it. Physicians, unable to maintain their businesses due to poor reimbursement, are being forced to turn away Medicare patients and those without insurance. Hospital emergency rooms are left to pick up this slack at a much higher cost to society. I, as well as other health care leaders around the state, am very concerned about the growing number of Alaskans without appropriate insurance coverage and therefore access to health care. This is a problem that affects all of us and one that will take all of us working together to fix, not to mention increased pressure on our legislators to put a heavy focus on this growing nationwide problem.

The convergence of these issues is leading us to a "perfect storm," which has the potential to change the face of health care in a very dramatic way. I believe that we will see a major shift in our nation's health care industry in the not-too-distant future. When this will happen is anyone's guess, but we are well on our way to seeing this occur, and we will not be immune in Alaska.

While these challenges will continue to affect us in 2004, I am also happy to report that we continue to see increased services, new physician specialties, and more advanced technology in our state, allowing Alaskans to receive state-of-the art care right here at home. Alaskans can be very proud of their health care system and the services that are available, and these services continue to grow in number and sophistication every day. The focus now must be on ensuring all Alaskans have access to these services when they need it. We, at Providence, will continue to do what we can to ensure this issue is properly addressed at all levels in 2004.


Rob Lapham

Marketing Manager, DataFlow/Alaska Inc.

In my view, the most significant information technology industry-related event in Alaska during 2004 (certainly with respect to IT services) will be the continuous ramp-up to provide IT professional services to state of Alaska agencies and, ultimately, to a majority of the other government or quasi-government organizations in the state--from the municipality to school districts to, say, the Alaska Railroad.

Last Thanksgiving the state published its IT standards document, a blueprint for state agencies. This provided both a direction and framework within which implementation of the state's evolving information technology infrastructures could proceed--and releasing IT acquisitions that had been on hold for months. Most of those procurements will flow through the Information Technology Professional Services contracts that the state has executed with 29 IT vendors and teams, both in Alaska and Outside.

The projected value of the IT services procurements alone is best left to state officials to estimate, but will be upward of $5 million during 2004, and will increase from there.

DataFlow/Alaska Inc., as a member of the Unisys Corp. team, is already seeing one result of the state's efforts. The company is hiring more technical and professional staff, and I believe this trend will continue. During 2004, I expect to see a continuing migration of the IT talent/labor pool in Alaska to those companies that have received contract awards from the state.

For a list of the state's various IT requirements, see local/akpages/ADM IN/info/taskorder/ categories.htm and for a list of the vendors designated by the state to receive contracts under this multiple-award procurement, see local/akpages/ADMIN /info/taskorder/ revisednoiaspreadsheet.xls.


Dick Lowell


Ribelin Lowell & Company Insurance Brokers Inc.

There likely will be substantial price increases for workers' compensation coverage, due to a substantial shortfall in the assigned risk pool.

The Alaska Insurance Guaranty Association for workers' comp is also under-funded by $10 million because of failed carriers creating additional reasons for price increases in workers' comp coverage.

The above action will likely force broad legislative action and reform that will put more control of workers' comp costs in the hands of the employer and put more of the burden of proof for claims on the backs of the claimants. Such reform will mean that carriers will have to be prepared to take workers as they are. Alaska currently has the second highest deficit in uncovered claims in the nation.

Pricing for remaining insurance (all types) will likely remain flat, a benefit for the consumer. This is because insurance companies have returned to some profitability due to better returns from the market.

In general, capacity will not be a problem. However, certain classes, such as liquor liability and home builders, are going to have price increases.


David Arnsdorf


Alaska Manufacturing Association

Manufacturing is a small part of the Alaska economy. On average in the U.S., manufacturing is 15 percent of the economy. It is 5 percent of the Alaska economy. There are many reasons for this.

Alaska has several structural issues that make manufacturing here difficult. The local market is small; Alaska is far from larger markets, and transportation to these markets is slow and in some cases expensive. In addition, there is no large-end item (typically called OEM) manufacturer in Alaska.

OEM manufacturers, such as Ford or Intel, buy huge amounts of manufactured parts and services from smaller suppliers, many located physically near to their plants. In Michigan, 30 percent of all manufacturing firms do at least some business with the auto industry. Alaska lacks any such large OEM, and thus is missing all the support businesses.

A look at where the jobs are in manufacturing in Alaska is interesting. The table on page 32 (opposite) is based on the 1997 Census of Manufacturers.

As you can see, seafood manufacturing makes up the bulk of manufacturing employment in Alaska.

The key question is how can manufacturing be grown in Alaska? What are the characteristics of successful manufacturing businesses in Alaska? There are essentially two kinds of manufacturing businesses in Alaska. The first sells to the local market only. Firms manufacturing and selling locally have some clear advantages over competitors from far away. They can respond quicker and can customize their product specifically for the local market. And in some cases, the buyers want to buy from local producers. When tourists come to Alaska, they want to buy souvenirs that are made in Alaska, not China or even North Dakota. This strategy has one big weakness-the local market is small and thus will only support a limited size, so the growth of these firms has a clear maximum.

The second kind of firm is expressly competing in a world market. In some cases, they are selling primarily in Alaska, but they are selling goods where being local is of little or no advantage. The market size is of course much larger here, but the competition is much tougher as well.

What kind of Alaskan finals can succeed here? There are basically two market strategies-commodity and unique. Commodity goods sell based on price. Unique goods sell based on their unique characteristics compared to potential alternative goods. It is very hard because of the distance and small local market to produce products that can compete as commodities.

So most successful manufacturers in Alaska who compete on the world market compete with unique products. And, what are the characteristics of successful unique products made in Alaska? Like unique products everywhere there is something that differentiates them from the competition. Alaska has one very unique resource-much of the only remaining undamaged wild seafood stocks. Thus Alaska should be able to create a number of high-value products using Alaska seafood that no competitors can match.


Steve Borell

Executive Director

Alaska Miners Association Inc.

International commodity prices are the main driving force for the metal and coal sectors of the mining industry. As a result, recent increases in prices of gold, silver, lead, copper, platinum and some improvement in the price for zinc, are being felt in Alaska. The mines already in operation, projects nearing development and grassroots exploration prospects will all benefit.

The Alaska metal and coal mines already in operation continue to produce and continue to search for and define additional ore adjacent to their operations and to cut costs wherever possible. The large mines currently operating are Greens Creek near Juneau, Red Dog north of Kotzebue, Fort Knox and True North near Fairbanks, and Usibelli Coal Mine at Healy. Numerous small family placer gold mines also operate on a seasonal basis.

Mines producing sand, gravel and stone are dependent primarily on local construction. In addition to work in and around villages and cities, the new resource roads being proposed have the opportunity to be an area of growth for this sector. These mines are excluded from business outside Alaska, due to the requirement for Jones Act vessels, but such vessels do not exist.

The next large metal mine to be developed in the state will be the Pogo underground gold mine, located about 40 miles northeast of Delta Junction. The Environmental Impact Statement has been completed, and once the final permits are issued, the mine is expected to go into construction sometime this winter.

TeckCominco is the project operator and they estimate construction will require two years and employ about 700. Once the mine goes into operation it will employ 250 full-time workers for at least 10 years.

The other projects, moving toward development during 2004, are Rock Creek at Nome and Kensington, 30 miles north of Juneau. Both projects will be gold mines.

Work in 2004 will include final feasibility studies and completion of permitting. Both projects could potentially be in construction by sometime in late 2005 or early 2006. Also, the Nixon Fork Mine near McGrath is now working to develop new reserves and by late 2004 should be working on a feasibility study.

Exploration continues on several exciting projects, with the two potentially largest, being Pebble in Southwest Alaska and the MAN Project along the Richardson Highway north of Paxson. Elsewhere all around the state grassroots exploration projects are being revisited as metal prices increase.


Vicki Otte

Executive Director

Association of ANCSA Regional Corp. Presidents/CEOs

Alexandra J. McClanahan

CIRI Historian

The impact Alaska Native corporations have on Alaska's economy continues to grow. And Alaska Native corporations are becoming Alaska's largest importers of revenues and profits back to Alaska from their investments outside the state. Observers suggest that for 2004, current trends will likely continue, with government contracts and related partnerships a key focus of initiatives in the coming year.

CIRI's chief operating officer, Mark Kroloff, has said that Alaska Native corporations are the biggest minority success story in the nation. The most recent economic impact study, published by the Association of ANCSA Regional Corporation Presidents/CEOs, shows that for 2001, the 13 regional corporations and 30 village corporations had combined revenue of $2.9 billion and assets of $2.9 billion.

Much of the focus on new business endeavors in 2004 will be on government minority and 8(a) contracts, according to Bob Poe, senior vice president Alaska operations for ASCG Inc., a subsidiary of Arctic Slope Regional Corp. Poe said that while margins for such contracts are thin, "having some margin is better than no margin, and the government is a good credit risk."

Poe said that the important trend in government contracting is that Alaska Native corporations are developing relationships with long-term Alaska businesses that have been mainstays in the economy in the past.

"It's not a displacement of the 'old guard,' but it has created an incentive for the old guard to work with Native corporations," Poe said. "We will all be much stronger for it."

The Native nonprofit sector's importance also is expected to continue its upward trend. "Alaska Economic Trends," August 2003 issue notes that Alaska's top 100 largest companies in 2002 includes 17 employers that are either Native Alaska nonprofit organizations or subsidiaries of one of Alaska's Native regional corporations.

There were only 12 on the list as recently as five years ago.

"The list keeps growing illustrating the increasing influence of Native Alaska institutions on Alaska's economy," according to the publication by the Alaska Department of Labor and Workforce Development.


Gabe Stephan

Residential Sales Manager

Prudential Jack

White Real Estate

Hooray, for real estate. The industry is continuing to enjoy much success, as it has for quite a few years now. This is due largely to low interest rates, a depressed stock market and a strong local economy.

Real estate values continue to climb at a very sustainable rate, and people find that in most cases they can purchase a property and pay less per month than if they were to rent. This is true in residential as well as the commercial market. Paying less, plus appreciation, plus tax benefits, plus pride of ownership, plus freedom and comfort, equals REAL ESTATE. The industry is strong and why not?

After enduring somewhat of a slowdown, as we settled in for the winter of '03 and the holiday season, January always brings us a tremendous flood of activity. With interest rates at near-record lows, the prospect for them to stay fairly low, and our local economy doing well, the demand for real estate will continue to be great in 2004.

Should this year play out as expected, it should bring another wonderful strong year for the real estate industry. If not stronger than '03, pretty darn close. My concerns for this coming year are typical however, and yes, I do have a few. The obvious are, rising interest rates, a local economy slowdown, government layoffs, tourism decline due to unforeseen national events, and maybe somewhat atypical, the national economy growing at such a rate that the Lower 48 lures our wonderful new additions to the city and state away from us to relocate back from whence they came. Here's looking to a great and wonderful 2004, and if you are a Cheechako, stick around-it's sure to get warm soon.


Mary Fairbanks

Marketing Director

Dimond Center

The retail industry is alive and well in Anchorage. Consumer confidence is up and due to tax rebates, low interest rates and Alaska's Permanent Fund Dividend, retail sales continue to increase. Job growth is anticipated to hold steady so this retail sales trend should continue into 2004.

Anchorage is seeing an influx of nationally known retailers entering this market, and this in turn drives sales up. Many of these chains have indicated that their Alaska grand openings have surpassed their openings in the Lower 48 in sales and volume. Having these stores locally also cuts down on catalog orders and keeps the money in Alaska.

Catalog sales account for about 6 percent of retail sales nationally, with the Internet picking up about 1.5 percent.

Music stores have been hit hardest by the downloading of music from the Internet. Fears that Internet sales would wipe out the "bricks and boards" stores have been unfounded. People still want to taste, touch and try on their purchases. And when you buy over the Internet or from catalogs, there are shipping and handling charges to pay.

The Internet has probably helped "in person" sales by making retailers more efficient with their inventories and more customer-service oriented.

Sales at the Dimond Center have risen steadily and consistently over the last five years. And with several new national chains opening in the Center in 2004, we anticipate another great year in retail in Alaska.


Owen Graham

Executive Director

Alaska Forest Association

Southeast Alaska road-building, logging and sawmill activity from the Tongass should each increase in 2004. This is a result of significant improvements the Forest Service made in its timber-sale program including:

A much greater focus on timber-sale economics for the timber-sale program. This includes the normal timber sales, timber-salvage sales and commercial thinning timber sales.

A number of timber sales have been partially "preroaded," decreasing the amount of time necessary for the construction of access roads.

The Forest Service has sold one 10-year timber sale mad plans two more for next year. This should encourage investments and will lessen the risk of further timber shortages from the endless environmental lawsuits and appeals.

The regular state's timber-sale program will be supplemented with some second-growth timber, from commercial thinning projects; the state is also helping to reestablish the veneer operations in Ketchikan.

The harvest from private timberlands is expected to continue at about the current level. This private harvest activity has provided about two-thirds of the timber industry employment in recent years.

Southcentral Alaska: The state timber-sale program is stalled in this region because the program is mostly focused on salvaging the beetle-killed timber. The timber has deteriorated too much to sustain a viable timber-sale program. Local operators have asked the Department of Natural Resources to refocus the future timber sales on green timber.

The private timberland harvests continue at about the same level as the last few years. Two of the chip operations on the Kenai are reportedly closing, but one new operation is also in the works.

Interior Alaska: The Division of Forestry provided the following summary for their 2004 plans for the Interior Region:

Fairbanks area plans to offer eight sales totaling 3.74 MMbf (million board feet). They also have about 25 sales of varying sizes, including some firewood sales, which have been offered in the past, but did not sell. Those are available "over-the-counter" to interested buyers.

Delta Area is currently advertising the two Keystone sales, which total 2.94 MMbf. In addition, another 1.5 MMbf (approx.) may be removed from the Pogo Mine road and powerline right of way. The Delta area also has five other timber sales, totaling more than 4 MMbf, ready to he sold whenever the market turns around, or when they get specific requests; however, that volume is not likely to be offered this fiscal year.

The Tok area is planning to offer the Tok River Wildlife Habitat Timber Sale, which contains more than 6 MMbf. This will be the Northern Region's first sale offered under AS 38.05.123 for "the local manufacture of high value-added wood products." The Tok area may also offer another sale of about 500 Mbf (thousand board feet) near Dot Lake. Valdez-Copper River Area is planning to offer the Plumb Bob Lake Sale containing 1.5 MMbf and one or two sales on Tolsona Ridge totaling 200 Mbf.


Ron Peck

President and COO

Alaska Travel Industry Association

Last year was another challenging year for Alaska tourism. Estimates for the 2003 summer season were 1.2 million visitors, approximately the same number as the 2002 summer season. The cruise industry experienced a slight increase in travelers, growing from 740,000 in 2002 to 760,000 in 2003.

As evidenced by a 2 percent drop in airport traffic and 1 percent reduction in border crossings, the independent traveler market decreased. We are encouraged by preliminary advanced bookings for the independent fly and vacation market based upon early initial bookings from hotels, lodges and tour operators. The outlook for increased road travel does not appear to be any better in 2004.

ATIA is working with its statewide community partners and tourism entities in Canada to identify why the long-haul road traffic to Alaska is decreasing in spite of a boom in RV sales in the domestic market.

The addition of the Alaska Marine Highway System's first fast-vehicle ferry, the MV Fair-weather, should have a positive influence on how people will travel throughout Alaska. It begins service this summer and will provide quicker access between the upper Lynn Canal and Junean, and between Sitka and Juneau.

ATIA believes that the international market will rebound through continued marketing efforts and if international terrorism does not escalate. In the German market, indications are that charter flights to Anchorage and Fairbanks will continue to grow.

Within the Pacific Rim, both Japan Airlines and Alaskan Vacations are considering increasing their nonstop charter flights from Tokyo to Anchorage by approximately 25 percent over last season. ATIA will continue to work with the Murkowski administration to obtain an increase in service from Taiwan to Alaska.

Although tourism in the United States and Alaska had been challenging the last three years, we believe visitor interest remains high for Alaska because of what research has told us for 25 years; visitors are inspired by Alaska's mountains, glaciers and wildlife.


David W. Haugen

Vice President

Lynden Inc.

We are predicting a flat economy for 2004. Alaska's economy is geographically a mixed bag. Southeast Alaska is currently at a low level of activity and expected to remain flat with no relief in sight, caused by the failure of its timber industry and a depressed fishing industry.

However, federal funding for construction projects has partially compensated for the losses of the timber and fishing industry.

The Alaska Railbelt economy is predicted to be flat in 2004. Federal and state funding for construction projects will provide a strong positive impact. However, fiscal problems for the state of Alaska as well as the major municipalities will result in reduced spending. Consumer spending is expected to be unchanged from 2003. We expect little if any growth in marine or highway freight volumes-to, and within, Alaska next year.

Southwest Alaska is depressed due to its dependency on the salmon industry. Bush Alaska is reasonably strong, led by transfer payments from both the federal and state governments, and heavy infrastructure spending due to the efforts of the Alaska delegation.

Alaska's oil patch will be experiencing divergent trends. The North Slope is expected to remain slow. Exploration drilling is expected to be limited in scope. However, prospects for the development of heavy oil are encouraging and will require significant amounts of drilling and field development activities. The Cook Inlet area shows signs of increased activities. Several companies are now prospecting for new sources of natural gas as well as oil. Independent oil companies are becoming more active throughout the Cook Inlet area and on the North Slope.

Potentially new, or revised, projects that can impact transportation requirements for 2004 include the possibility of new mines opening such as Pogo near Delta Junction, increased spending for the missile defense system and other federal spending that could translate into other new construction projects. Activity on the Kensington Mine, in Southeast Alaska, and Donlin Creek, on the Kuskokwim River, are likewise possible in 2004.

These forecasts are those of David W. Haugen, of Lynden, not of Lynden as a company.

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Title Annotation:2004 Industry Forecast
Author:Martin, Gary L.
Publication:Alaska Business Monthly
Geographic Code:1U9AK
Date:Jan 1, 2004
Previous Article:Success on tap at Great Alaska Beer and Barley Wine Festival: a beer-lovers paradise hits Anchorage Jan. 16-17 at the Egan Center.
Next Article:Technology, superior care available in Alaska: these days you don't need to travel to the Lower 48 for exceptional health care.

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