Nikiski project shows promise

Posted: Sunday, October 13, 2002

Developing an industrial park and deep-water dock somewhere in or near Nikiski could cost from $12 million to $29 million, according to a study released Thursday. But a member of the Kenai Peninsula Borough Assembly expressed doubts Friday whether now is the right time to pursue such a project.

Northern Economics Inc. of Anchorage was hired by the borough earlier this year to take an in-depth look at markets and possible approaches to the development of an industrial park and dock. While the company provided basic information, including the results of an online public survey, it was not asked to render a conclusion about whether a facility should be built.

The borough assembly and the public who paid for the study will answer that question.

Assembly member Gary Superman of Nikiski, who chaired a feasibility study oversight committee, said as important as an industrial park may one day be, with so much of the borough's economy riding on the future supply of natural gas, the wisdom of launching an industrial park project without an assured supply was questionable.

"I believe anything that adds to the job market in North Kenai is a good thing," he said. "There is community support and boroughwide support for a dock out there. When the population reaches a certain point, we will see that happen. Until we get some hard and fast facts (about gas supply), I don't think it is reasonable for us as the borough or anyone else to jump out and pursue a big project like this."

In an executive summary of the study's findings, Northern's economists, analysts, engineers, planners and public process specialists reviewed the concept from several angles. Among other things, the company conducted an online Web survey to gauge public opinion and the level of business interest. The survey was completed Aug. 31 and garnered 81 responses. According to the study, respondents typically were associated with a diversity of business activities, except commercial fishing.

"Those businesses that indicated some interest in the industrial park were in the fields of oil and gas, manufacturing and retailing," the summary said.

Northern considered three possible general locations for the industrial park working from the general criteria that it be near Nikiski, within five miles of Cook Inlet and between Miles 15 and 30 on the Kenai Spur Highway.

Site 1, the most southern site, is Cook Inlet Region Inc. land adjacent to the highway south of the Agrium Plant.

Site 2 is the old Chevron asphalt plant to the north of Agrium's complex.

Site 3 is at the old Arness Dock near Nikiski High School.

Economic and market information were collected and analyzed by Northern. Engineers from the Anchorage-based firm of Tryck Nyman Hayes Inc. reviewed geotechnical data and environmental reports, according to a summary obtained by the Clarion early Thursday and later distributed by Northern at a public hearing in Nikiski on Thursday night.

The Kenai Peninsula has Alaska's "most diverse economy," Northern officials said, and many of the firms doing business in Nikiski today would fit well in an industrial park. Based on a review of market demand, Northern provided three possible levels of park development.

Initial, or "low," development could consist of five units of general office space of 1,000-square feet each, five units in commercial office buildings of 2,000-square feet each, and 5,000-square feet of covered and heated industrial buildings with another 15,000-square feet of open covered areas. That would cost an estimated $2.32 million at any of the three sites.

"Medium" and "high" levels of development included greater amounts of space in more of the same kinds of structures. Estimates put their costs at $4.65 million and $12.2 million, respectively.

Also associated with the overall cost of the three levels of development was the cost of a dock and support facilities. Costs were dependent upon the site chosen, but ranged from an estimated $9.76 million to as high as $17 million.

Thus, depending upon the site, level of development and the cost of dock facilities, price tags ranged from a low of $12.1 million to a high of $29.2 million, according to Northern's summary.

Fred Miller, an advising chemical engineer with Agrium, was another member of the feasibility committee. He said the study was like a health checkup.

"I believe there are some people who thought this was a bad thing to be looking at," he said. "My take is that the borough did something great. It's like being 50 and going for a medical check-up to see what an expert has to say about your overall health."

What the borough got, he said, was "a great evaluation by a professional organization."

He also expressed a cautionary note, saying the future supply and price of natural gas is very much a part of the overall economic picture, and thus an important consideration when it comes to an industrial park project.

"Certainly the two are tied together," he said.

Jack Brown, business manager of the borough's Community Economic Development Division, also sat on the committee. To him, the study made it clear that at the least the borough should find a way to preserve the opportunity for an industrial park and dock complex. Whether the borough does that itself, as by acquiring land, or presents the private sector with incentives to do it -- such as through a service area or some other municipal mechanism -- will be a matter of discussion, he said.

Brown said some businesses have expressed interest in an industrial park and deep-water dock facility. In addition, the CEDD is getting a record number of requests for copies of its quarterly reports and "Situations and Prospects" publication, which indicates there is growing interest in the peninsula. As yet, however, there has been no in-depth study of potential clients, Brown said.

He also noted that the volatility of the oil and gas industry must be considered in the equation.

Brown said he feels more comfortable with a "slow approach" to development of an industrial park.

"Perhaps one approach might be looking at acquiring land as a first phase," he said. "Then a second phase would be developing the park and leasing spaces. The third phase, when economically feasible, would be development of a dock facility."

Brown said such a project might be eligible for federal Economic Development Administration funding, but that would likely require some sort of municipal entity such as a service area.

Of the study itself, Brown said it contained no surprises.

"From my standpoint, it provided good information. But I think people will be very cautious about how we proceed. Certainly the assembly, mayor and the public will work on this together."

Cal Kerr, project manager for Northern Economics, said its studies show, "to no one's surprise," that the oil and gas and fertilizer industries look like good candidates, but he also acknowledged the concerns over the future supply of gas.

Kerr also said the study looked at smaller types of industrial activity for the three sites, such as combinations of light manufacturing and open warehousing.

"We do see some potential based on regional markets," he said.

Kerr said overall, the study got "generally supportive" comments to its online survey. He said the 81 responses did not make up a scientific cross-section but did shed light on public attitudes.

He said the company tended to agree with Brown, Superman and others that it would be wise to look for ways to preserve options.

Bruce Passe, Peak Oilfield Service Co.'s Cook Inlet area manager, said he believes a deep-water port is essential for continued growth on the peninsula.

"If we could get this into a free-trade zone, all the better," he said.

Passe said he had no particular preference for any of the three sites. Determining which might be best will take more study, he said.

Committee members said there were many things to be considered, including ongoing environmental cleanup at the Chevron land, Cook Inlet's treacherous winter ice flows, the sensitivity of wetlands around potential park locations, the depth of water at the dock sites, even the comparative length of trestle work that would have to be built.

These questions and more are likely to be part of the discussion when Northern Economics Inc. officials make a formal presentation of the study findings to the borough assembly Oct. 22.

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