Vitus Energy sourcing fuel from a chartered tanker offshore.
Courtesy of Vitus Energy
While the experience leading Vitus Energy stems from men working in Western Alaska since roughly the turn of the century, the company as currently structured was founded in 2009 and began operations in 2011. According to Vitus Energy CEO Mark Smith, the company did $32 million in sales within its first year of operation. For this year’s Top 49ers, Vitus Energy reports that in 2014 its gross revenues were $69 million. Smith says that Vitus Energy focuses on two areas that are absolutely necessary for this kind of success in Alaska’s fuel delivery industry: providing the best possible value and delivering the kind of service that customers appreciate.
Vitus Energy’s earliest roots began with Smith’s great uncle, who was part of the Nome gold rush around the turn of the twentieth century and eventually migrated to the Bristol Bay area in the 1920s. In the 1930s, looking for opportunities in Alaska (which was generally unaffected by the Depression) and having been invited up by Smith’s uncle, Smith’s grandfather traveled north, bringing his experience in the marine and logging industries with him. In 1934 he founded Smith Lighterage Company, providing tug and barge services and operating out of Dillingham and Aleknagik. Smith’s father and uncle worked for Smith Lighterage, purchasing it themselves in 1961.
Smith bought out his dad and uncle in the 1980s, operating the tug and barge company until 1999 when it joined the Northland Group under the subsidiary Yukon Fuel Company. Yukon Fuel Company was purchased by Crowley Marine in 2005. In 2009 Vitus Energy was formed with Smith and two other former Yukon Fuel Company executives Justin Charon and Shaen Tarter. Vitus Energy’s entry into the market began with a management agreement to construct and operate two tug and barge sets for Alaska Village Electric Cooperative.
View from a Vitus Energy ship as it pumps fuel.
Courtesy of Vitus Energy
Smith’s Alaska Upbringing
Smith himself has participated in the business all his life. He was born in Salem, Oregon, while his father was in Oregon at law school. When Smith was about a year old they returned to Alaska to the family homestead in Aleknagik, which had a population just under two hundred in the 2010 census. Growing up in a rural Alaska community definitely impacted Smith. “When you live out there you need to be self-sufficient. If you want anything done, you need to do it yourself. So, I think we all grew up very independent-minded and developed skillsets and capabilities that kept us self-sufficient,” Smith says.
Additionally, the majority of the students that Smith went to school with were Yupik Eskimo. More of their culture rubbed off on him than his rubbed off on theirs, Smith says. “It’s been helpful because I speak a smattering of elementary school type Yupik, and I definitely have a feel for the local customer base and the issues that are important in small villages. I certainly have a well-rounded view of what life is like in rural Alaska.”
At the time that Smith was being educated, many rural villages didn’t have high schools, and so for four years of high school and four years of college he lived in Walla Walla, Washington, during the school year, coming home every summer to work on the family boats. “Literally on the last day of school I was on the plane back to Alaska and back on a boat… as my dad’s deckhand,” Smith says.
Today’s Fuel Provider
Today Vitus Energy provides fuel and its delivery to communities in Western Alaska, including shallow draft and ocean direct fuel delivery, wholesale petroleum, freight, and aviation services. Vitus Energy consists of five divisions: Vitus Marine, Central Alaska Energy, Great Circle Flight Services, Pacific Fishing Assets, and Vitus Terminals.
“Primarily we ship our product via tank ships that we charter and control, and those tank ships act like floating tank farms. For our rural customers we come alongside these tankers with our small tugs and barges and then go to each individual village for final delivery,” Smith says. How frequently Vitus Energy or one of its subsidiaries visits a village depends generally on the size of the community: small villages may only be visited once a year, while large villages will get several deliveries a year. The majority, Smith says, see Vitus Energy in the spring and the fall.
“Many of our Western Alaska customers have very unique requirements in terms of the product they need, when they need it, [or] how they’re able to schedule maintenance for their fuel infrastructure,” Smith says. “That’s the advantage of a small company. We’re able to give our customers a lot of personal attention.”
Vitus Energy’s status as an Alaska company run by Alaskans certainly helps in handling Alaska’s array of opportunities to solve problems. “We’re ultimately very focused on local issues,” Smith says. “There’s a lot of understanding of what the needs and the community are that surrounds those customers—being able to find solutions that give them what they value. When you deal with folks that are out of state, they’re very anxious to pitch their services, but their understanding of your individual requirements generally isn’t as accurate as what our knowledge is of the situation.” One example is how the price of fuel is determined. Customers may want to assume that fuel prices in Alaska in February will be based on current fuel prices in Puget Sound, Los Angeles, or Texas, but Vitus Energy’s prices are based on when the product is acquired in the summer, which drives the price through the winter.
Good, Safe Employees
In addition to the owners and founders being Alaskan, the majority of the employees are as well.
“We all have a lot of experience; we’ve all been selling and delivering fuels pretty much all of our adult lives, at least the owners and founders of the company have. And, because Alaska is a small state when it comes to service providers, we have been able to pick folks from our experience that we think are the most capable and hire them to work for us,” Smith says. “Those are the keys to our success: good people that have relevant Western Alaska experience.”
Further, once Vitus Energy finds employees, they rarely lose them. Smith estimates the company has an employee retention rate of about 95 percent. “We don’t see turnover as much as we see: Where do we need to hire the next position,” Smith says.
Additionally, safety is a huge priority to Vitus Energy, and that standard of safety is maintained throughout the company. Smith says employees are instructed to never “sacrifice your body. Don’t jump, don’t try to kick things, don’t try to muscle things that are heavier than you. Approach a job with the attitude that you’re irreplaceable.” Vitus Energy is part of the Responsible Carrier Program administered by the American Waterways Operators. That means the company has a safety management plan, which is audited and includes any number of things that are ultimately preventative: safety meetings, fire drills, equipment checks, key safety drills if someone falls overboard, and trainings to make sure all employees can get into their survival suits.
Smith says that the company also keeps a strict eye on safeguarding the environment they work in. “All of us have grown up in the fuel industry and we’ve had a lot of experience and [environmental safety] is absolutely imperative: it’s not just the responsible thing to do, it’s the right financial thing to do, it’s the best thing for our customers and community, and it’s a matter of maintaining good relationships with regulators,” Smith says. When the company first started up, one of their very first hires was an environmental and safety manager, “and that was one of our best decisions,” Smith says. Vitus Energy is the shipper that coordinated the historic emergency fuel deliveries to Nome in 2011 and 2012, and the company “had to do a tremendous amount of environmental work for that because what we were doing had never been done,” he says.
Vitus Energy vessel pulled right up onto the beach.
Courtesy of Vitus Energy
“We do our best to be local participants in the economy, focus on local hire, focus on finding local vendors to do what we need, and being flexible when we find those vendors,” Smith says. “We pay a significant premium to do business where we do business. Most of the projects that go on outside of the Anchorage hub ship their materials, right down to your bag of Cheetos,” in addition to skilled laborers that may be flown around the state. Smith emphasizes that whenever possible Vitus Energy doesn’t just contract with local welders or electricians but also buys groceries in Dillingham or other regional locations.
In fact, Vitus Energy’s presence in a community provides several financial benefits. According to Smith, when the company began services in Kotzebue, offering commercial and residential services as well as opening a gas station, the price of gas dropped a dollar a gallon. Smith says. “In Dillingham, we opened there last October, and immediately the entire community saw a seventy-five cent per gallon benefit.” He estimates that since 2011, when Vitus Energy began operations, there was a fifteen cent drop in the marine transportation rate.
“The message that we really have is that we can provide a competitive service; we can provide a competitively priced product. Our money does go back to the community. So, if you have a choice between A, B, and V, we’d like you to choose the V option.”
Tasha Anderson is an Associate Editor at Alaska Business Monthly.
This article first appeared in the October 2015 print edition of Alaska Business Monthly.