Number of inquiries to borough indicate businesses still see opportunity here

Diversity backbone of healthy economy

Posted: Friday, November 29, 2002

An increasing number of inquiries about conditions on the Kenai Peninsula are coming from industries, businesses and individuals considering relocating here, testimony perhaps to the relative vitality and variety of opportunity to be found in one of Alaska's more diverse economies, an official with the Kenai Peninsula Borough's Community and Economic Development Division said this week.

Those inquiries include requests for the borough's quarterly reports and for copies of its periodic "Situations and Prospects" publication, which details various elements of the economy, including demographics, employment and the relative influence of different industries.

"There's been a lot of interest from a business standpoint and from folks just interested in relocation on the peninsula," said CEDD Business Manager Jack Brown.

"I think this trend will continue. My expectation is that the (peninsula's) economy in 2003 will see a big surge ahead, based on interests, not only from oil and gas, but also from fishing, timber and tourism."

Activity in the petroleum industry has been evident even as the Cook Inlet basin's oil and gas fields mature. Several companies are exploring for pockets of product to exploit.

But long term, industries such as Agrium and the Phillips liquefied natural gas plant that are dependent on steady supplies of natural gas will need gas from elsewhere in Alaska to survive.

The borough is actively promoting a gas pipeline to bring North Slope natural gas to the peninsula.

"The healthier the oil and gas industry is the more other support industries will develop," Brown said.

While the peninsula's economy is heavily influenced by the impact of petro-salaries and the operations of municipal government are equally reliant on the tax revenues derived from the oil and gas industry's infrastructure, that economy is not one dimensional.

It is, by-and-large, fairly diverse, and trends within the other sectors show promise for a bright future, Brown said.

He noted that fish processors are looking seriously at producing value-added seafood products in addition to supplying whole fish to foreign and domestic markets.

Timber companies likewise are eyeing ways to turn the peninsula's dying forests into finished products.

The tourist industry, too, continues to grow.

"The whole area of ecotourism is just starting to get off the ground here," he said. "That's definitely a growth industry for the future."

Sparks also can be found in the manufacturing and retail sectors, Brown suggested.

Take Allan Norville, a local developer. He said he's optimistic about the near-term future of business and development on the peninsula.

"I'm looking for the peninsula to grow," he said.

Norville recently renovated a large warehouse in Soldotna and Alaska Communications Systems is expected to occupy half of it. Meanwhile, he is negotiating with other possible tenants. He recently told the Soldotna Planning and Zoning Commission that the project there would bring employment to the city.

In Kenai, meanwhile, Norville has built a new 16,000-square-foot, 13-unit building just west of Carrs.

Other new commercial retail spaces are being opened in Homer, Soldotna and Kenai, and some existing spaces also are being filled. For instance, in Homer the Save-U-More is building a new facility along the Homer Bypass, and The Salvation Army recently moved into a brand new store on Pioneer Avenue.

In August, peninsula residents learned that the European Aeronautic Defense and Space Company, an international defense company, would build a 25,000-square-foot plant at the Kenai Airport that should be up and running by the fall of 2003. EADS will assemble, test and maintain the company's HELLAS helicopter laser obstacle warning and avoidance system.

Husky Lumber Inc., currently building a lumber mill in Nikiski, will produce kiln-dried, graded structural building materials. When the mill is in full operation sometime next year, it will be one of Alaska's larger mills producing kiln-dried building materials. Its kiln is capable of drying about 150,000 board-feet of lumber every 72 hours, according to Mark Powell, who has been a timber buyer for the company for about two years.

With the help of the CEDD, Husky was successful in obtaining a federal grant through the U.S. Department of Agriculture to help cover the costs of moving the company's kiln from Seward to Nikiski.

"The consolidation of our operations in Nikiski will definitely benefit Husky Lumber," Powell said. As many as 40 jobs may be created by the time the mill is up and running.

"Our intention is to take raw materials and create a finished product," he said.

There also may be potential use for the mill's waste products. Powell said the recent International Seafood Byproducts Conference held in Anchorage earlier this month included discussion of combining fish waste and sawdust to make fertilizer. Husky has no plans currently to explore such potential, but if markets develop, it could. After all, the byproducts of the sawmill are bark chips and sawdust, he said.

Powell said the timber industry in Alaska is facing difficult times, and the industry is always looking for new efficiencies and markets.

One possible market could be the Alaska Railroad Corp., which currently buys its rail ties from outside Alaska. According to Patrick Flynn, public affairs official for the railroad, the company is engaged in an accelerated tie replacement program. The system's 611 miles of mainline track, sidings and spurs have about 1.9 million ties that have life expectancies of from 40 to 50 years, Flynn said.

Ken Kilborn, who works for the U.S. Forest Service Wood Utilization Center in Sitka, said funding is being sought to test treated ties made from three different species of Alaska trees. That test would be done at a facility in Pueblo, Colo., a 4-mile circular track on which researchers run a fully loaded train for 350 days a year, the equivalent of 30 years of use in the real world.

Supplying a program to replace 100,000 ties a year would require 5 million board-feet of timber annually, Kilborn said.

Tom Wilkinson, owner of Kenai Kayak Co., is a kayak builder and a guide. He also has been on borough task forces looking at development prospects on the west side of Cook Inlet.

The borough owns some 10,000 acres in the Kustatan Ridge area, a place ideal for fishing and wildlife viewing, and perfect for businesses engaged in ecotourism.

Luring visitors there could reduce the pressure on peninsula rivers, he said.

"It's a vast area. Totally wilderness," he said. "There are 11 rivers there. Fish and Game did a nine-year study ending in 1994 and found all five species of salmon there."

There is also plenty of wildlife, the kind of viewing ecotourists seek.

"That's really a growth industry," Wilkinson said. "The potential is very big for things like kayaking. It has low impact on the environment and it is healthy for you."

Kenai would be the logical gateway to the west side of the inlet, he said. Ecotourists also would spend money in hotels, bed-and-breakfasts, restaurants and souvenir shops, he said.

Dru Garson, acting executive director of the Kenai Peninsula Tourism Marketing Council, said the council's Web site is getting quite a few hits from people and tour operators both from the Lower 48 and abroad interested in the peninsula. Operators are looking to add the peninsula to their tour package portfolios.

"People are looking for educational type programs that are not only fun but where you can learn about Alaska in the process," he said.

Garson said there are still residual effects from the 2001 terrorist attacks and the slow economy, but he anticipates a good season next year.

"I hope all the outside forces cooperate in our favor," he said.

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