Top Alaska Business Stories of 2016
Tumultuous year for the 49th state
Point Thomson airstrip.
Photo courtesy of ExxonMobil
Compiled by Alaska Business Monthly Staff
Alaska has had a tumultuous year in 2016 and Alaska Business Monthly has shared many of the top stories in its magazine and on its website throughout the year. We’ve compiled a sampling to share with our readers. Many of the stories are from the northernmost reaches of the state and are preludes to big changes coming to the last frontier.
As of December 1, America’s northernmost community, previously known as Barrow, has a different name—residents voted 381 to 375 to change the name to Utqiaġvik, the Iñupiaq word meaning “a place for gathering wild roots.” On October 27, Lieutenant Governor Byron Mallot approved the change and made it official. For more than a thousand years, the community is said to have been known as Ukpiaġvik, the Iñupiaq word for “a place for hunting snowy owls.” The name change reflects the community’s desire to recoup and preserve its Alaska Native language, an action that may lead to more changes in 2017.
In more news of the community, Arctic Slope Regional Corporation was named the No. 1 Top 49er by Alaska Business Monthly for the twenty-second time, this year on 2015 gross revenues of more than $2.5 billion. The company is headquartered in Utqiaġvik, as is the No. 9 Top 49er, Ukpeaġvik Iñupiat Corporation. See the October issue of Alaska Business Monthly for all of this year’s Top 49ers.
Not too far away, more top stories emerged on the North Slope.
ExxonMobil Starts Production at Point Thomson
In April, ExxonMobil started production at its Point Thomson project, the first company-operated project on Alaska’s North Slope. Central pad facilities are designed to initially produce about 5,000 barrels per day of condensate and 100 million standard cubic feet per day of recycled gas. The recycled gas is re-injected for future recovery. At full rate production, the facility is designed to produce up to 10,000 barrels per day of natural gas condensate and 200 million cubic feet of recycled gas. It is anticipated to reach that level when the west pad well is online in a few months.
The Point Thomson reservoir holds an estimated 8 trillion cubic feet of natural gas and associated condensate – a high-quality hydrocarbon similar to kerosene or diesel. The resource represents 25 percent of the known gas on the North Slope. Potential future development will depend on a range of factors such as business considerations, investment climate, and the fiscal and regulatory environment.
ExxonMobil and the working-interest owners have invested approximately $4 billion in the development of Point Thomson production facilities through 2015. About 100 Alaskan companies have contributed to the success of the project, and thousands of people worked onsite and around the state during peak construction activity. Point Thomson is located on state acreage along the Beaufort Sea, 60 miles east of Prudhoe Bay and 60 miles west of the village of Kaktovik. exxonmobil.com (See articles in May pg, 78 and March pg. 108 issues of Alaska Business Monthly)
Caelus Confirms Large-Scale Discovery
Caelus Energy Alaska, LLC announced that its subsidiary, Caelus Energy Alaska Smith Bay LLC, made a significant light oil discovery on its Smith Bay state leases on the North Slope of Alaska.
Based on two wells drilled in early 2016 as well as 126 square miles of existing 3D seismic, Caelus estimates the oil in place under the current leasehold to be 6 billion barrels. Furthermore, the Smith Bay fan complex may contain upwards of 10 billion barrels of oil in place when the adjoining acreage is included.
The Smith Bay development has the potential to provide 200,000 barrels per day of light, highly mobile oil which would both increase Trans Alaska Pipeline System (TAPS) throughput volumes and reduce the average viscosity of oil in the pipeline, extending its long-term viability.
Caelus is currently planning an appraisal program which will enable Caelus to confirm reservoir continuity, optimize future drilling locations, and ultimately increase reserves. caleusenergy.com
ConocoPhillips Sets Alaska Drilling Record
ConocoPhillips Alaska Inc. announced September 29 that it achieved a drilling record for Alaska at drill site CD5 in the Colville River Unit (Alpine) on Alaska’s North Slope. CD5 is the first commercial oil development on Alaska Native lands within the boundaries of the National Petroleum Reserve-Alaska (NPR-A).
Doyon Rig 19 drilled a horizontal injection well 26,196 feet, a record for overall measured length of a well for the state. The well was drilled to a true vertical depth of approximately 7,400 feet and had a horizontal leg of 17,228 feet. The well took twenty-four days to drill and encountered Alpine “A” sands.
ConocoPhillips Alaska announced in April that funding had been approved for additional wells and associated on-pad infrastructure at the CD5 drill site. The additional wells and infrastructure will bring CD5 to its full permitted well capacity. CD5 is exceeding its original production target of 16,000 BOPD gross and is currently producing approximately 20,000 BOPD gross average, year to date. alaska.conocophillips.com
New Arctic Regs
The Bureau of Ocean Energy Management issued new rules for the Arctic in July. “A Regulatory Shellacking: BOEM finalizes rules for Arctic OCS operators” by R. Isaak Hurst gives us an intelligent and informed perspective in the October issue of Alaska Business Monthly, page 46; it’s also online at akbizmag.com.
Ahtna’s Tolsona No. 1 Gas Exploration Well Rig Mobilizes to Drill Site
Tolsona Oil & Gas Exploration LLC, an Ahtna, Inc. subsidiary, mobilized the Tolsona No.1 gas exploration well rig in mid-September. The 2 million pound drill rig, required materials, and rolling stock equipment was transported from the Kenai in over forty truckloads by Lynden Transport to the Tolsona four-acre drilling pad location north of Milepost 175 of the Glenn Highway and about 11.5 miles west of Glennallen.
One exploratory well was to be drilled at depths between four thousand and five thousand feet during a thirty-six-day drilling program searching for natural gas. Drilling was scheduled to wrap up and demobilization of the rig was to take place near the end of October with test well results expected early this winter. ahtna-inc.com (See story in November issue of Alaska Business Monthly, page 104.)
Big Three Pass on Alaska LNG Project
Exxon Mobil Corporation has decided not to invest in the next stage of a proposed natural gas export terminal in Alaska and said it would work with its partners to sell its interest in the project to the state government.
The company’s decision comes amid a global glut of natural gas that has depressed prices and follows the release of a Wood McKenzie report concluding the Alaska project “is one of the least competitive” of proposed LNG (liquefied natural gas) plants worldwide.
Bill McMahon, a senior commercial adviser on the project, testified [to the Alaska Legislature’s Joint Resources Committee] that Exxon would no longer participate in the proposed LNG plant but is open to supplying gas from the North Slope if the state proceeds on its own. Those comments were echoed by executives at BP and ConocoPhillips in their testimony before the committee.
(Excerpted from “Exxon Mobil Backs Out of Proposed Alaska LNG Project: Decision comes amid low prices for natural gas and follows Wood McKenzie report” by Chester Dawson, Wall Street Journal, August 26, 2016. wsj.com/articles/exxon-mobil-backs-out-of-proposed-alaska-lng-project-1472263173)
Governor Walker is pursuing state takeover of the Alaska LNG project through the Alaska Gasline Development Corporation, a story we’ll be covering in 2017 as more details emerge.
Land into Trust
In August, Alaska Attorney General Jahna Lindemuth announced that the State of Alaska will not pursue further litigation in Akiachak Native Community v. U.S. Secretary of the Interior. That case affirmed the ability of the Secretary of Interior to take land into trust on behalf of Alaska Tribes and also acknowledged the rights of Alaska Tribes to be treated the same as all other federally recognized Tribes. The State’s decision to not seek Supreme Court review ends years of protracted litigation and ushers in a new era for Alaska Tribes. narf.org
Crowley Maritime Corporation’s LNG services group has been awarded a contract to supply Alaska LNG from the Titan Pt. Mackenzie plant to Alaska Power & Telephone Company’s Tok power plant. The contract, executed through subsidiary Crowley LNG Alaska, includes both the product supply and technical services required to successfully leverage the benefits of LNG at the Tok power plant.
Crowley will facilitate the transportation of LNG in a safe and reliable manner from liquefaction facilities in Alaska to the plant in tank trailers authorized by the US Department of Transportation. Once at the plant, the LNG will be re-gasified and piped to a dual fuel kit supplied by ECO/AFS for power consumption. Alaska Power & Telephone is a leading provider of local power, telephone, and communication services in forty rural Alaskan communities. At AP&T’s Tok plant, ECO/AFS will install its bi-fuel technology to support LNG usage in the rural Alaska community. crowley.com
Largest Commercial Fishery in USA
Across the nation, US fishermen landed 9.7 billion pounds of fish and shellfish valued at $5.2 billion, a volume and value similar to recent years according to “Fisheries of the US: 2015” issued by NOAA in October. The highest value US commercial species were lobster ($679.2 million), crab ($678.7 million), shrimp ($488.4 million), salmon ($460.2 million), and Alaska (walleye) pollock ($441.7 million).
By volume, the nation’s largest commercial fishery remains Alaska (walleye) pollock, which had landings of 3.3 billion pounds (up 4 percent from last year), trailed by Atlantic and Gulf menhaden, which accounted for 1.6 billion pounds (up 29 percent).
The report shows that for the 19th consecutive year, the Alaska port of Dutch Harbor led the nation with the highest amount of seafood landed—787 million pounds, valued at $218 million. noaa.gov
GCI Builds More Towers
GCI announced that it has completed tower construction in Buckland, Selawik, Noorvik, St. Michael, Golovin, Elim, and Koyuk, and expects to bring high-speed internet service to local clinics and schools in these communities in early 2017.
GCI announced that residents in Mountain Village, St. Mary’s, Quinhagak, and Tununak will soon experience a faster and improved mobile internet connection as they are upgraded to GCI’s 3G service.
One year after bringing 4G LTE coverage to Ketchikan, GCI is expanding its coverage area by adding three new cell towers to the Ward Cove, Saw Mill, and Cranberry Road areas, which now completes a ten-site cellular coverage area.
GCI and Teck Red Dog Operations announced an agreement that will bring high-speed broadband internet service to Red Dog Operations and the community of Noatak. gci.com (See also stories in Alaska Business Monthly: December, page 64; September, page 82; and July, page 30.)
Quintillion Lays Fiber Optic
Quintillion, an Anchorage-based telecommunications company, is building a high-speed terrestrial and subsea fiber-optic network that will connect Alaska’s Arctic communities with networks in the Pacific Northwest.
This summer, Quintillion constructed the first phase of the project, which includes a subsea fiber-optic cable from Prudhoe Bay to Nome with spurs to Barrow, Wainwright, Point Hope, and Kotzebue. A new fiber-optic system from Prudhoe Bay south to Fairbanks will join existing networks in Anchorage and the Pacific Northwest. Eventually, Quintillion plans to link with subsea fiber-optic cables to both Europe and Asia.
PenAir Invests in Rural Alaska
PenAir invested $27 million in five Saab 2000 aircraft—bigger, faster aircraft—to expedite and increase passenger and freight loads to Unalaska and Dutch Harbor as well as the Pribilof Islands and Bristol Bay. PenAir is now flying more people on fewer flights with the Saab 2000 than on the Saab 340—from 1,600 flights last year to 900 flights in the coming year. Those fifty-five thousand people flying to Dutch Harbor every year will gain time; instead of flying three or four hours it’s a two-hour non-stop flight. (Excerpted from the July issue, page 8.) penair.com
Alaska Welcomes 1 Millionth Cruise Ship Visitor
For the first time in seven years, Alaska welcomed its 1 millionth cruise ship visitor.
Wendy Yoisten from St. Albert, Alberta, Canada with her husband John, arrived on the Holland America Line MS Zaandam, which docked in Juneau September 22. Native dancers greeted the couple and Mrs. Yoisten received a medallion, plaque, and basket of gifts from Alaska businesses. The industry is expected to bring even more visitors next year as Alaska continues to increase capacity. cliaalaska.org
Overall, total visitors to Alaska via air, land, and sea is expected to exceed 2 million in 2016.
Alaska Airlines made several announcements throughout the year including a merger between Alaska Air Group and Virgin America; launching flights to Havana, Cuba; and making history with the first commercial flight using the world’s first renewable, alternative jet fuel made from forest residuals. newsroom.alaskaair.com
Alaska Airlines is investing heavily in Alaska and broke ground in August with Kiewit and McCool Carlson Green on a new $40 million hangar in Anchorage with additional plans to spend $60 million on terminal upgrades in Alaska. Alaska Air will also convert three 737-700 passenger aircraft to cargo freighters. (Story in September issue, page 94.)
The US Air Force announced that Eielson Air Force Base would serve as home to two F-35 Joint Strike Fighter squadrons, a move that is expected to bring about half a billion dollars to the Interior over the next four years. alaskaf35s.com
There were many mergers and acquisitions announced throughout the year and here is a partial list
- Arctic Slope Regional Corporation acquired Builders Choice and Restoration Services, Inc.
- Stantec acquired MWH Global
- Matson Logistics acquired Span Alaska
- Bristol Bay Native Corporation purchased Katmailand
- Chugach Alaska Corporation acquired Rex Electric and Technologies
- Northern Lights Media acquired Fairbanks television stations
- Tyonek Services Group Inc. acquired Selex Galileo’s Avionics System Integration facility
- Cooke Aquaculture acquired Icicle Seafoods, Inc.
- Saltchuk acquired NANA Oilfield Services Inc.
- Municipal Light & Power and Chugach Electric Association purchased ConocoPhillips’ one-third working interest in the Beluga River Unit natural gas field
- Avitius Group acquired Swan Employer Services last year and merged operations this year
- Viad Corp acquired CIRI Alaska Tourism Corporation
- Hub International Limited acquired Gwaltney & Associates
- Ahtna, Inc. acquired AAA Valley Gravel
- Philippine Red Cross acquired the Susitna Ferry from the Matanuska-Susitna Borough.
Worth the wait? Smashburger has been packed since its August opening in south Anchorage and Krispy Kreme Doughnuts has frequent lines into the parking lot after its September opening in east Anchorage. Earlier in the summer, the 49th State Brewing Company opened downtown to a never-ending crowd; the company was featured on the August cover of Alaska Business Monthly and won a coveted Best of Alaska Business Award in July in the Best New Alaska Startup category, along with Bambino’s Baby Food and Odd Man Rush Brewing, which also won in the Best Brewery category.
See all of the Best of Alaska Business Awards categories and winners in the July issue and look for the 2017 BABA contest announcement in January.
Mouhcine Guettabi, an assistant professor of economics at ISER, wrote the first in a series of short papers that will examine economic and fiscal issues important to Alaska. “What’s Happened to the Alaska Economy Since Oil Prices Dropped?” was released in November. A combination of declining oil production and low oil prices has left the state budget billions of dollars in the red. But how has that big drop in oil prices affected the Alaska economy so far? Guettabi examines that question in Alaska Snapshot No. 1.
In this paper, the author assesses economic changes by looking at changes in numbers of jobs from March 2014 through March 2016, the most recent time for which reliable employment figures are available. Among other things, he found:
Alaska lost close to 1 percent of its wage and salary jobs—nearly 2,300 jobs—from March 2014 to March 2016. Those losses could reach 2 percent by the end of 2016.
An estimated one-third of all local government revenues in recent years have been from the state—which raises questions about how vulnerable local governments are, as the state looks for ways to balance its budget. In some areas of the state, as many as half of all jobs are in local government. The full report is available online at iser.uaa.alaska.edu.
This article first appeared in the December 2016 print edition of Alaska Business Monthly.