No Port No Problem
A Ruby Marine barge at Ruby on the Yukon River in 2014.
The prices for fuel and food surprise many first time visitors to rural Alaska towns.
Alaska’s plane and barge driven rural shipping industry
The prices for fuel and food surprise many first time visitors to rural Alaska towns. In Fort Yukon, on the upper Yukon River 135 miles northeast of Fairbanks, a gallon of heating oil cost $6.35 this fall. A dozen eggs at Fort Yukon’s Alaska Commercial Company store cost $5.99.
But these prices seem less remarkable in light of all the work, fuel, and logistics it takes to transport these goods to remote Alaska towns and villages.
This time of year, the barges have finished their season traveling the Yukon River. Barge business Ruby Marine, the only major barge company on the Upper Yukon, serves Fort Yukon with three barge deliveries each summer in June, July, and August. By October, even if it’s been warm and the river is far from freezing, it’s not practical to operate large barges.
“The end of the season has stretched. Septembers and Octobers have been pretty damn nice, but it doesn’t help with water levels,” says Ruby Marine President Matt Sweetsir. “Whether it’s nice out or not, the mountains are freezing, so the runoff from the Tanana River stops about mid-August, end of August. Water levels are in steady decline from that point on. It’s really running out of water that drives us home.”
Items such as eggs and other groceries are mostly delivered by air cargo companies, which work all winter. But even for these companies, summer is the busy season because that’s when fishing and construction jobs are taking place. Air cargo allows people to get things delivered in as short a window as one day.
“Time sensitive items are needed all the time. We’re shipping boat motors, four-wheelers, household goods, drill rigs,” says Lee Ryan, vice president of Ryan Air, a major Western Alaska air cargo company that serves seventy-three villages from seven hub communities.
“We’re really busy in the summertime. And then when it freezes up, we’re [continuously] busy through PFD season.”
Getting the cargo to rural communities takes a network of jet and large turboprop mainline carriers like Alaska Airlines and smaller downline providers like Ryan Air. The downline airlines can deliver to bush communities and even remote camps with small piston-driven airplanes.
For communities with no road or ice-free sea access, air freight is the only practical way to bring in supplies during the winter. When rivers freeze and barge service stops for the year, plow trucks keep busy clearing runways at the dozens of state-owned airports around Alaska.
The Barge Business
The Ruby Marine tug MV Yukon and barge at Huslia on the Koyukuk River in 2014.
At Ruby Marine’s home port in Nenana, Sweetsir sounds matter-of-fact and not even particularly bitter as he talks about how air cargo has taken most of the rural cargo market share from the river barge industry in his lifetime.
Sweetsir has been in the river barge business for thirty-nine years. He founded Ruby Marine in 2006. The business started with three barges; it now has enough business for about between one and two barges, he says.
To get a sense of how dominant the aviation industry is in rural Alaska, Sweetsir recommends going to Fairbanks International Airport to count the Cessna 208 Grand Caravans out on the apron. The grand Grand Caravan is a nine-passenger airplane popular in rural Alaska. Fairbanks air carrier Wright Air, for example, operates eleven of these planes as part of a twenty-one-airplane fleet.
“When you figure each one of those costs about what I pay for a tug, you know how well aviation is doing relative to how we’re going,” Sweetsir says.
From the sternwheeler boats of the early 20th century to the barges Sweetsir operated in the first years of his career, riverboats used to carry a year’s worth of supplies to bush businesses. Stockpiles of goods were warehoused all winter until they were needed.
Barge businesses like Ruby Marine were traditionally located in Nenana because it was the main Yukon River system port on the Alaska Railroad line. Today it remains a good location for a barge because it’s on the Parks Highway and is a more convenient access point than the Dalton Highway Bridge for the trucks that carry most of the barge cargo.
But the importance of barge cargo diminished in the early 1980s with developments in the US Postal Service bypass mail system, which is a subsidy for bulk air cargo in Alaska. Under bypass mail, rural Alaska stores can order bulk cargo though the mail system that would be too heavy to count as mail in the rest of the United States. It’s called bypass mail because although shippers play postal service rates that are below the cost of shipping, the packages never enter United States Postal Service offices. The cargo bypasses the US Postal Service entirely, traveling from the large mainline planes to small bush planes to the door of the recipient.
Air cargo subsidies allowed rural business owners to order inventory as they needed it, Sweetsir says.
“In the past that was a large part of what these barge lines did was groceries and staples,” Sweetsir says. “But that’s gone away because just-in-time inventory is cheap. And that’s good business. They [rural stores] made the right decision I totally agree with them.”
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In Fort Yukon, today a town of 583 people, bed-and-breakfast owner and former teacher Ginny Alexander remembers the way the arrival of bypass mail changed the way people ate in the community. Bypass mail meant fresh fruits and vegetables became affordable for the first time.
Alexander has lived in Fort Yukon since 1968 and worked part time in different jobs at the town Alaska Commercial Co. store from the early 1980s to the early 2000s. Before bypass mail the Alaska Commercial Co. was a general store that sold bulk dry goods. Fewer people lived within the city then, but area trappers would come in to the store to sell their skins and buy supplies. People ate mostly meat and fish. Vegetables were available, but only periodically and at especially high prices. At that time, Fort Yukon only had air service three days a week.
“When they did get a box of lettuce or some tomatoes or something like that, the store manager would call the school and all the teachers would run down and buy fresh fruits and vegetables,” Alexander says.
Today prices at the Fort Yukon Alaska Commercial Co. store remain higher than in Fairbanks or Anchorage, but the store is set up more or less like a city grocery store with fruits and vegetables regularly available.
The Fuel Supply Chain
The Ruby Marine tug MV Yukon and barge on the Koyukuk River in 2014.
The one commodity that largely hasn’t moved over to air cargo is fuel. Liquid petroleum fuels like heating fuel, diesel for vehicles and power plants, and gasoline for cars, ATVs, and snowmachines are still largely transported by boat.
Ruby Marine barges on the Yukon River carry a variety of cargos on their decks, including construction materials, vehicles, and heavy equipment. But the main cargo is below deck, where there’s space for 186,000 gallons of liquid fuel. Generally a community of 200 people needs about 200,000 gallons of fuel per year, although demand for fuel varies enormously based on factors such as the efficiency of the community power plant, whether the community has a long road system, and whether people frequently travel long distances to hunt or fish, Sweetsir says.
Ruby Marine’s sixteen employees have a variety of maritime navigation qualifications, but all are certified as tankermen, which qualifies them to transfer the liquid cargo on the barges.
In the last six years, rural Alaska’s fuels have come mostly from oil refineries in Asia. That’s because most US refineries aren’t making fuels in the summer that Alaska villages can use in the winter, says Walt Tague, director of commercial operations for Crowley Fuels Alaska. Crowley Fuels Alaska is the largest fuel distributor in the state. With 300 employees, it delivers fuel to more than 280 communities statewide. Crowley—part of the larger Crowley Maritime headquartered in Florida—has operated in Alaska since the 1950s.
In the summer months, the federal Environmental Protection Agency regulates the Reid vapor pressure of gasoline, the tendency of gasoline to evaporate and cause a type of pollution called ground-level ozone. In the summer, oil refineries in the Lower 48 usually produce lower vapor pressure gasolines that don’t evaporate as much. But these gasolines don’t work well in the cold, especially not the extreme cold of Alaska winters, Tague says.
To get fuel to remote locations in Alaska, Crowley first loads it onto ocean-going tankers that travel across the Pacific Ocean. Crowley then uses its fleet of seven tugboats and ten barges to deliver fuel to remote locations during the three-month summer season.
Coastal barges travel up into the Arctic Ocean to reach Utqiaġvik and Kaktovik in Alaska’s for northeast corner. Other barges travel inland, heading up the Kobuk, Kuskokwim, and Yukon Rivers. The company estimates 62 percent of the cost of its fuel at rural Alaska retail locations is the product cost, 29 percent is the distribution cost, and 9 percent is overhead costs including employee salaries and the company’s profit margin.
Travel gets harder farther upriver. To reach McGrath, a town of about 300 people on the upper Kuskokwim River, Crowley carries between 250,000 and 300,000 gallons in a convoy of four barges so that the fuel can be transferred between barges at “crossings,” shallow spots in the river that are difficult to navigate, says Tague.
“You have to consolidate fuel on one barge, position an empty barge above the crossing and then move fuel on a smaller barge,” he says. “It’s kind of like portaging.”
For the Upper Yukon River, Crowley has gotten out of the fuel transportation business over the last two years, instead subcontracting delivery to towns including Galena and Fort Yukon to Ruby Marine. The Upper Yukon and the section of the Tanana River used to access the Yukon River are particularly challenging to navigate because they’re rocky and prone to flooding, says Tague.
“Ruby is comfortable operating in that river and has great assets to do the things to operate in that river that we don’t currently have. We had a fleet that we operated in the upper river and it was getting old and costly to maintain,” he says. “We made the commercial decision to go with Ruby.”
Air Freight in the Amazon Era
A Nome crew loads a John Deere for STG, Inc. at White Mountain.
One revolution in rural Alaska bush mail began with the start of bypass mail in 1972. Another big change is happening today with the growth of Amazon orders in rural Alaska.
Ryan of Ryan Air is a third generation pilot at his family’s business. Ryan says the use of Amazon to order household items like dog food and deodorant has taken off in the last two years as 3G mobile internet service has become more available in rural Alaska. Ryan describes Internet shopping as the biggest change he’s seen in the business since he became a pilot in 2001.
“When we first saw Prime and Amazon, people were slow getting on to it and the people who used it loved it. Now everybody uses it and loves it,” Ryan says.
Pilot Mike Gray, Lee Ryan, and Andrew Angstman ship dog food to Bethel musher Pete Kaiser.
For about $120 a year, Amazon Prime members receive free shipping on many Amazon purchases, which can be a dramatic saving for frequent shoppers in towns with high shipping costs.
However, even growth from Amazon packages hasn’t made up for an overall lag in the Alaska and rural economies, he adds. Rural air cargo volume dropped across the industry in 2015, 2016, and 2017, which Ryan attributes to a slowdown in big construction projects. Freight volumes have started to stabilize this year, he says.
In the Lower 48, two-day shipping is the standard free shipping for Amazon Prime members. When Prime first emerged in rural Alaska it was just a day or two behind the Lower 48 delivery speeds, Ryan says. These days free Prime delivery in rural Alaska often takes significantly longer, although users can still get faster delivery if they pay for it.
“If you pay for two-to-three days it’ll get there in two-to-three days. If you hit Prime, it could take up to seven days. In Anchorage it could go to another distribution center and get put in the mail system. I’ve been seeing that a lot more lately. Then it’s the regular mail delivery time,” Ryan says.
“Our goal is, as soon as we see that package, for it to be delivered as soon as possible,” he adds.
One theoretical criticism of Amazon is that it could potentially use low delivery prices to undercut local stores and then raise delivery prices once local shops have shuttered. But Ryan says so far people seem to be supplementing their local store purchases with Amazon shopping, not replacing their local shopping habits with Amazon. He says he hasn’t heard of any rural stores closing because of the arrival of Amazon.
But the rural stores are watching. In Fort Yukon, Alexander says the Alaska Commercial Co. store completed a renovation last year. While staff used to talk about Fred Meyer in Fairbanks as their main competition, they now talk about Amazon, she says.
In This Issue
Junior Achievement Turns 100
Locally, Junior Achievement of Alaska has been helping students better understand business and economics for forty-six years. Based in Anchorage with a staff of three, Junior Achievement of Alaska serves more than 14,500 students in fifty-five communities around the state. Many past Junior Achievement students have gone on to become successful professionals and continue to serve as classroom volunteers to help raise the next generation of business leaders.