Alaska Business Forum – The New Arctic Paradigm

The Seattle Chamber’s Dec. 2 business forum covered the subject of, “What does a changing Arctic hold for the Washington business community?”


Rep. Gail Tarelton (D-WA) – former president of the Seattle Port Commission, current representative for the Seattle’s Ballard section (a neighborhood with strong ties to Alaska’s fishing industry) in the Washington State Legislature—opened the forum.


Tarelton is focused on developing the fisheries dialogue between Washington and Alaska. Seattle is the home of much of the North Pacific’s fishing fleet and the headquarters for most of Alaska’s seafood processing industry.


The collapse of the New England fisheries provides the motivation for proactive fisheries management in Washington and Alaska, Tarelton said. Alaska has the benefit of a relatively young commercial fishery. Building upon the common base shared by the two states will allow them to avoid New England’s fate, she added.


That base can include a transition to more sustainable industries, she concluded.


Jenifer Samuelson Nelson—Aleut Corporation vice president, GCI Telecom rural marketing manager, and member of the Arctic Council’s telecom task force—focused her remarks on Alaska’s many opportunities in continued Arctic development.


One of the Aleutian region’s key assets is the Port of Adak, which is being transformed into a transshipment hub. It has deep water (18m), ice-free waters, and 49,000 acres of land, most of which is open to development.


Both the Northern Sea Route, through Russia’s Arctic waters, and the Great Circle route, from the U.S. West Coast to Asia, transit the Aleutian region. With Arctic shipping forecasted to increase in the near future, Adak’s port has great potential and could offer a better development location than the Port of Nome.


With current low fuel prices, Nelson said, Adak is more advantageous to shipping routes than Nome. Nome, in turn, is a more strategic location for offshore oil development. Adak also already has a lot of infrastructure, albeit old infrastructure.


Nelson’s work at GCI is another integral part of Arctic development. GCI  is working to connect people in the North with telephones and broadband internet, which will enhance education, health and economic development.


The Arctic Council’s (AC) telecom group is assessing the existing infrastructure and determining what is missing. The group also works with the other working groups, such as the Search & Rescue group, that would also use telecom infrastructure, and asks for their input.


Hugh Short—the founder of PT Capital, former board member of the Alaska Energy Authority and Alaska Industrial Development & Export Authority, and former mayor of Bethel, Alaska—focused his talk PT Capital’s role and activities. PT Capital, an investment firm based in Alaska, forecasts that Arctic GDP, currently around $200 billion, will grow to $550 billion for the entire Arctic region by 2030.


Most of this investment will occur in Alaska, Canada, Iceland, and Greenland. Investment firms and high net worth people are interested in developing the region and, in the case of Alaska, enjoying the safety U.S credit practices.


Short said that natural resources (oil, gas, mining, and seafood) are the Arctic’s main economic drivers, with Asia generating much of the demand. Short said that fisheries are a great investment because they are not correlated to the price of oil, and will always have a high value because of Asian demand.


Short also described his involvement with Alaska development projects. Alaska Gov. Bill Walker had asked him to join the Alaska Gas Line Development Commission. When completed, the gas pipeline will account for 10 percent of the world’s LNG exports, in addition to being the country’s largest infrastructure project.


An LNG processing plant is currently the most critical need. As oil prices decline, LNG has increased in importance. The oil companies have found that gas extraction has become more profitable than reinjecting the gas to increase oil well flow.


Short said mining projects are occurring on Alaska Native lands, where is where the most potential can be found for future projects. Minerals are very difficult to develop on federal land.


Short attributed the majority of current Arctic Development projects in Alaska to tax credits. He expects the Alaska Legislature to cut these tax credits in response to the current state deficit. Unless the situation is reversed, the state will soon run out of savings. Short said Alaska is in a “transition period” as its financial bubble pops.


Responding to audience questions, Short said President Obama’s focus on climate change and sustainable development can be attributed to legacy that he wants to leave when he exits the White House. The Arctic Council’s current focus on emissions reductions is a “headwind in terms of development,” Short said.


Short’s solution for Alaska’s fiscal problems is to use the Permanent Fund to not only pay dividends, but also fund state government operations until oil prices recover. Short said the oil market will require five years to recover rather than two or three.