Ruth St. Armor of the Division of Community and Business Development speaks about small business issues at a forum hosted by the Kenai Peninsula Economic Development District Inc. several years ago.
Clarion file photo by M. Scott M
Quarterly reviews of the Kenai Peninsula Borough's economy conducted over the past year have noted slow but steady growth and credited that generally healthy trend to the economy's diversity.
But recent events, such as the December announcement by Agrium that it will close its Nikiski fertilizer plant by the end of this year and the continuing high cost of energy, spell trouble ahead.
Agrium's plant closure will end some 230 full-time, high-paying jobs and have ripple effects through the economy, including the immediate loss of significant property tax revenues.
Meanwhile, increases in the cost of natural gas, gasoline, diesel, coal and electricity are expected to impact the bottom lines of businesses large and small.
Countering that trend and boosting the mix of business active on the peninsula is a prime concern of the Kenai Peninsula Borough and, specifically, its Community and Economic Development Division, the entity charged with attracting new business to the peninsula. The CEDD was established in 2000 to promote and market the peninsula to business.
As noted on the CEDD's Web site, the division is "responsible for creating economic opportunities and improving the quality of life on the peninsula through job creation and retention, development of new business opportunities, and economic research and analysis."
Its functions are limited to areas beyond the borders of the borough's incorporated cities, which typically have their own economic development sections, programs or initiatives. This often brings the CEDD in contact with resource-based enterprises in fishing, timber and oil and gas.
Jack Brown is the business development manager with the division. It is his job to assist new businesses, network with government agencies and corporate foundations and leverage borough and community investments through state and federal grant programs.
Brown said the CEDD helped facilitate efforts by private investors to bring three fish production plants on line this year, including a project by a group of fishers who are buying the old Dragnet Seafoods Plant in Kenai and a buying station in Kasilof where they intend to emphasize Kenai Wild salmon production and enter into a profit-sharing program with fishers. Kenai Wild is the trademark of Cook Inlet Salmon Branding Inc., which markets high-quality, value-added salmon products.
Meanwhile, the old Ward's Cove in Kenai is turning to custom processing for Kenai Wild and sportsfishers, and Alaska Salmon Purchaser Inc. is locating a new plant in Nikiski exclusively for Kenai Wild product.
Brown said the borough and CEDD are assisting Kenai Wild in leveraging a $725,000 grant for ice equipment and noted that Kenai Wild has just been awarded a $302,000 federal grant to buy equipment and product tracking software.
On another front, the CEDD has been lending aid to aerospace technology companies looking at the Kenai Peninsula. Brown said it was too early to go into details, but did note that one company was working to develop new aviation engine technology that would be able to use lower-cost fuel, among other plans. Another firm, European Aeronautic, Defense and Space Company, the second largest in the world, is discussing possible future projects in the central peninsula area, Brown said.
Finally, Brown noted ongoing efforts that may lead to a future timber cooperative in the Kasilof area. He said an organization interested in the idea has asked for the CEDD's help.
The CEDD's grants-management program has led to some success stories. An example is Cook Inlet Salmon Branding Inc. Other grant funding acquired through the CEDD include money for riverbank restoration at the Kenai River Center, the 2006 Arctic Winter Games and spruce bark beetle infestation mitigation measures.
Nonprofit agencies that enhance economic development also benefit or have benefited from borough grants. Examples include the Central Area Rural Transit System, the Kenai Peninsula Economic Development District, the Kenai Peninsula Tourism Marketing Council, various senior citizen organizations and the Kenai Peninsula Small Business Development Center.
The division's efforts also extend into the field of oil and gas. Bill Popp serves as the borough's liaison to the oil and gas industry. In an interview last month, he outlined some of the efforts to promote the Cook Inlet Basin and the Kenai Peninsula to oil and gas developers and producers and get the industry kick-started again.
While construction of a natural gas pipeline from the North Slope has garnered borough support, so have efforts to promote further oil and gas drilling in and around the inlet, Popp said.
There are at least four known offshore oil prospects that need a second look, he said, and exploration is the only way to know if geologists are right or wrong. But that would require the presence of a jack-up drill rig, which carries with it a significant $20 million risk in mobilization and de-mobilization costs, he said.
"That's a major roadblock," Popp said. "We are working directly with the oil and gas industry through the state trying to get the industry's input to see what they need to balance the equation."
The borough, through the CEDD, is working directly with the legislative delegation, and in particular with Sen. Tom Wagoner, R-Kenai, chair of the Senate Resources Committee, who is investigating what would be required in the Cook Inlet region to develop the necessary incentives and regulatory changes to encourage responsible development, Popp said.
"We don't have a clear picture of what's needed yet," he said.
As for gas, Popp noted that Unocal, Marathon and Aurora Gas are involved in gas exploration and development projects mostly onshore as they work to fulfill their gas supply obligations.
"Onshore, they're out there working hard," Popp said. "We believe there is a lot more to be done offshore."
Industry players often must determine who their customers will be before committing to drilling, and much depends on how much of that demand is from industrial users. Popp said the borough is "trying to get our hands around how to deal with that issue."
Providing incentives such as tax breaks are the purview of the state. The borough has little to offer in that respect, but can provide political advocacy for such moves. Popp said the borough would work with peninsula delegates to support proposed initiatives that would enhance the chances of further exploration and development of gas or oil in and around the inlet.
"Our concern is that it will all get lost in the gas pipeline effort at the Legislature," Popp said.
The CEDD's efforts to promote the peninsula to the oil and gas industry don't stop at contact with existing players.
Popp said the borough has been in discussions with the Alaska Division of Oil and Gas, which he said has provided help with the borough's oil and gas Web site cookinletoilandgas.org that has provided information about what is available in the Cook Inlet Basin, its resource potential, the availability of support industries, its work force and the general community.
The CEDD has participated in recent energy conferences, such as the Alaska Gas Pipeline Conference in Texas in December. Popp provided an overview of the Cook Inlet region, which he said led to direct inquiries from two companies, one interested in Cook Inlet itself as a possible region for exploration and investment, and another eyeing Bristol Bay and looking at the peninsula as a support zone.
Beyond that, Popp noted that the gas industry is watching closely the Pebble Mine development efforts of Northern Dynasty Minerals Ltd. because the energy needs of that operation could be significant, perhaps as much as 200 megawatts. That would likely require burning a lot of natural gas, Popp said.
The CEDD has facilitated talks between NDM and the Nikiski oil and gas support industry, Popp said, adding that there was a "natural crossover" between support for oil and gas operations and mining operations.
Finally, Popp noted ongoing efforts to promote the peninsula as a leader in work force training. He said several thousand new jobs could be anticipated between 2008 and 2012, which is incentive to make the Kenai Peninsula Borough a training center.
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