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Southeast Alaska Maritime Economy Grows

Industries and jobs shift from forest to ocean


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Ketchikan Shipyard, now being operated by Vigor Alaska.

Courtesy of Vigor Alaska

If there’s an anchor to the economy in Southeast Alaska it’s the regional maritime industry, which ranges from fisheries, water transportation, cruise ship support, the state ferry system (itself one of the largest marine employers) to, finally, shipbuilding, the new bright spot for the region.

About a fourth of all Southeast Alaska wages stem directly from ocean-related “blue” jobs, which totaled 8,200 in the

region in 2013 and accounted for $475 million in wages. This is according to Southeast Conference, the regional economic development association, in its March2015 report, “The Maritime Economy of Southeast Alaska.”

The report relied on data compiled by Rain Coast Data, a Juneau consulting firm.

“We are a maritime economy. It is what marks our identity and what fuels our economic engine,” said Shelly Wright, executive director of the Southeast Conference.

The ocean is the most dominant feature of Southeast Alaska, the report said. The region is defined as stretching five hundred miles from Dixon Entrance near Ketchikan to Yakutat, on the Gulf of Alaska coast northwest of Juneau and the northern Lynn Canal communities of Haines and Skagway.

The mainland coast is defined, in most places, as a narrow strip of land between mountains and shore. There are 1,100 islands making up the Alexander Archipelago in Southeast, which creates a total shoreline of approximately eighteen thousand miles.

 

Long History

Southeast’s maritime tradition dates back ten thousand years, the report notes, and is rooted to the seafaring traditions of the original Tlingit, Haida, and Tsimshian peoples of the area. Russians were in the region in the 1700s after furs, and in the late 1800s there was gold mining and seafood processing, all dependent on waterborne trade.

The Tlingits in particular used the wealth of the sea to develop sophisticated trade relations and craft skills. They became skilled navigators along ocean trade routes using large, ocean-going canoes.

After the American purchase of Alaska from Russia in 1867, it wasn’t long until the natural beauty of the region came to the nation’s attention along with its mineral wealth. Conservationist John Muir wrote about the scenic splendor of the Southeast coast in the 1970s, and by the 1980s

steamships carrying freight and passengers, among them gold miners, were bringing the first cruise tourists. Today the number of visitors on cruise ships approaches 1 million, which has given rise to new ocean-related tourism businesses like whale watching and sea kayaking, as well as sports fishing.

 

Employment Growth

What’s striking is how steadily the Southeast maritime sector is growing, according to the information compiled by Rain Coast Data. From 2010 to 2013 maritime-related total wages in Southeast grew 24 percent across all components of the industry, an increase of $74 million in direct wages. Cycles in salmon harvests and earnings explain part of this, but the growth is striking in comparison to 5 percent growth in maritime earnings statewide, or $139 million, during the same period.

Direct employment also increased, up by 13 percent, or eight hundred jobs. “This includes a 49 percent increase in US Coast Guard jobs, a 24 percent increase in marine tourism jobs, a 12 percent increase in marine transportation jobs, and a 7 percent increase in seafood sector jobs,” the Southeast Conference said.

The Rain Coast Data report showed seafood processing and fish harvesting jobs increasing to 4,252; an increase in marine jobs related to tourism to 952; US Coast Guard jobs up to 761; marine transportation jobs were up to 450; and marine-related construction jobs were up to 51. Shipbuilding and repair dipped slightly, down 2 percent to 231, but this was prior to work beginning on new state ferries being built in Ketchikan.

Broad gains from 2012 to 2013 were reflected through the data. In 2012 there were 402 firms engaged in marine-related work in Southeast, employing 8,200 and paying $474.4 million in total wages, or $57,860 as an average annual wage, according to the data. Employment in maritime industries increased 12 percent between 2012 and 2013, while wages grew 12 percent.

Public sector maritime employment is big, through the Coast Guard and Alaska Marine Highway System, but private sector marine jobs still total 75 percent of the total, according to the Southeast Conference’s maritime report.

 

Welders on the bow of the F/V Arctic Prowler during construction of the longliner at the Ketchikan shipyard in September 2012.

Photo courtesy of Vigor Alaska

 

The bridge being moved over the deck during construction of the F/V Arctic Prowler by Vigor Alaska at Alaska Ship and Drydock at the Ketchikan shipyard in May 2013.

Photo courtesy of Vigor Alaska

 

The bridge being set into place on the F/V Arctic Prowler.

Photo courtesy of Vigor Alaska

 

The deck of the longiner F/V Handler as construction continued in July 2013 by Vigor Alaska at Alaska Ship and Drydock at the Ketchikan shipyard where the boat was christened October 5, 2013.

Photo courtesy of Vigor Alaska

 

Two Alaska Marine Highway System ferries berthed at the Alaska Ship and Drydock at the Ketchikan shipyard operated by Vigor Alaska.

Photo courtesy of Vigor Alaska

 

The F/V Handler, a Bering Sea crabber, rolled out at the Ketchikan shipyard in June 2014 after having maintenance done.

Photo courtesy of Vigor Alaska

 

The Handler was built by Hansen Boat Co. in 1991. Its hailing port is in Juneau.

Photo courtesy of Vigor Alaska

 

The Ketchikan shipyard is a key component of the growing Alaska maritime economy in Southeast.

Photo courtesy of Vigor Alaska

 

Alaska Governor Bill Walker at the historic Laying of the Keels ceremony at the Ketchikan shipyard December 13, 2014. The event celebrates starting construction on two new Alaska Class ferries. In the background, the M/V LeConte is visible inside the ship assembly hall where it was undergoing work by Vigor Alaska, operator of Alaska Ship and Drydock.

Photo courtesy of Vigor Alaska

 

Star Performer

If there is a star performer for Southeast’s growing maritime industry, it is in shipbuilding and repair. Ketchikan’s shipyard, long in development and with its ups and downs over the years, has now developed into a well-equipped vessel construction and major maintenance site. Most recently the Alaska Department of Transportation and Public Facilities has contracted with the shipyard to build two large “Alaska Class” ferries for the Alaska Marine Highway System.

But there are other Southeast communities that have developed local shipbuilding, support, and repair centers, particularly Sitka and Wrangell.

In Ketchikan, Vigor Alaska now has about 168 people at work with more being added every week, according to Doug Ward, Vigor Alaska’s development director.

Much of the new work is on the two “Alaska Class” ferries under construction in the Ketchikan Shipyard, which is operated by Vigor. The two sections for the vessels are built and work has shifted to fabrication of modules for the top sections, which will be built and then stored at the site until the installation, which will come later. American-made specialty steel, a higher-grade steel to ensure the watertight integrity of the hull, has also been ordered.

At the peak of activity, Vigor expects to have about 80 to 100 employees working full-time purely on the two new ferry vessels for four years, as well as about 150 employed in other work the yard will be doing. A workforce of 160 translates to an approximate $10 million annual payroll, Ward says.

 

Reinvigorating the Base

Ketchikan’s success with shipbuilding is the most striking example of how shipbuilding can reinvigorate a community’s industrial base. When the Ketchikan Pulp Mill closed in 1997, well-paying jobs were lost and the industrial base of the community was seemingly wiped out.

Community leaders began working with the idea of expanding ship maintenance in Ketchikan as a replacement industry as some of the skills of laid-off pulp mill workers corresponded to skills needed in ship repair. Ketchikan is also well located to provide maintenance on fishing and vessels engaged in marine transportation, so operators don’t have to send their vessels all the way to the Pacific Northwest for annual servicing.

State officials were interested in helping. In the 1970s the first nine ferry vessels of the Alaska Marine Highway System fleet were built, but there was no facility in Alaska capable for providing the annual maintenance these large, modern ships needed. The state Department of Transportation and Public Facilities stepped in to develop a shipyard in Ketchikan to support the ferry fleet and spent $30 million in the 1980s to develop the yard on what was originally a 16-acre site of an abandoned cannery (the yard has now grown to occupy 25.2 acres).

There was already a small ship maintenance facility in Ketchikan that began operating mainly on a seasonal basis in 1981. Ship repairs were done in winter, including maintenance on state ferry vessels, and employing skilled labor who worked on major maintenance projects on the pulp mill during summer.

 

Finding Success

The shipyard had its problems in the early years. Under an agreement with the state Department of Transportation and Public Facilities and the City of Ketchikan, the site was subleased for operation of the shipyard by private operators. However, each experienced operational and financial difficulties and the facility was closed for two years, reopening in 1994 with a new private operator, Alaska Ship and Drydock (AS&D). AS&D, locally-owned, straightened out the problems and the shipyard developed a long-term program for growth.

In 1997 the ownership of the shipyard was transferred to AIDEA (Alaska Industrial Development and Export Authority), the state’s development finance corporation, which still owns the yard. The AS&D lease continued.

The Alaska Department of Transportation and Public Facilities’ focus was mainly on support of the marine highway fleet, but AIDEA’s mandate is larger: to foster economic development. The idea of building ships at the yard was conceived at first as a way to even out the annual work. Winter was the maintenance season for existing vessels, but if there were orders to build ships it would keep skilled staff busy year-round.

Over several years the shipyard’s work was expanded to include, in addition to annual ferry vessel overhauls, work on vessels for the US Coast Guard, federal and state research agencies, and large fishing and tourism vessels. The shipyard was still critical to the ferry system, however, and in 2004 the headquarters of the ferry system was moved from Juneau to Ketchikan so that ferry system managers would be located in the same community as the shipyard.

With privately-owned AS&D as operator and AIDEA as owner, the shipyard was finally a success, growing from 21 employees and $2.4 million in revenues in 1994 to 120 employees and $37 million in revenues in 2012. In 2012, AS&D was strengthened through its purchase by Vigor Industrial, a major Pacific Northwest shipyard operator. Vigor added Ketchikan to Vigor’s existing six shipyards in the Northwest, retaining AS&D as a Vigor subsidiary with its name changed to Vigor Alaska.

Shipbuilding jobs pay well, too. “Nationally, average annual wages in shipbuilding and repair are 45 percent higher than the average for the private sector economy. Similar earnings ratios are reported in Ketchikan,” according to an industry workforce blueprint, the “Alaska Maritime Workforce Development Plan,” published in May 2014.

The seafood and marine service industries and the University of Alaska worked together on the report as part of the state’s 2012 Fishing, Seafood and Maritime Initiative.

 

Maritime Maintenance

Ketchikan isn’t the only community benefiting from increased ship maintenance and repair work. According to a September 2014 report on Alaska’s maritime support sector by the Alaska Department of Commerce and Economic Development, several coastal communities are moving to develop local ship maintenance facilities.

One is Wrangell, north of Ketchikan, which is host to a fleet of fishing, recreation, and work boats. The recent installation of two hydraulic lifts and a marine railway at Wrangell’s marine services center have allowed 300-ton vessels to be hauled out and worked on.

Petersburg, near Wrangell, has a large commercial fishing fleet and two hydraulic lifts that can also haul out 300-ton vessels for maintenance. Not to be left out, the smaller community of Hoonah, to the north, has a 220-ton lift.

An example of the benefit of having maintenance work done in the state was a case of a tug from Juneau which had its annual maintenance done in Wrangell: avoiding a trip south to Bellingham or Port Townshend, in Washington state, saved $20,000 in fuel, according to the state commerce department report.

The future looks good, too. “With Alaska state ferries under construction in the state for the first time, a rebounding tourist sector, and expected increases in 2015 seafood harvests, the outlook for the maritime economy is for continued growth,” the Southeast Conference said.

The demographics of the Alaska fleet, in which many vessels are aging, will mean work for regional ship builders and repair facilities. By 2025, in the Alaska small vessel fleet, of those sixty feet or under, 3,100 vessels will be forty-five years old or older. The smaller Alaska ship maintenance facilities will be ideal for work on these smaller vessels.

Today new maritime opportunities are emerging across Alaska, the Southeast Conference report said. “Retreating sea ice has increased the accessibility of the Arctic, generating new economic opportunities and an increasing US Coast Guard presence,” the report said. Even though the Arctic is far from Southeast Alaska the region’s maritime support industry as well as the Coast Guard, which has its Alaska headquarters in Juneau, will likely be engaged in vessel maintenance and other support work that may eventually develop.

It has been a surprising turnaround for a region that once had a strong industrial base rooted in the forest industry, with pulp and saw mills, but is now looking to a bright future in its oldest industry, the ocean.

This article originally appeared in the June 2015 print edition of Alaska Business Monthly.

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