Alaska Thrives Thanks to Geography and Resources
01 Aug, 2012
By Rachel Duran
In Alaska, economic development officials have made the development of the state’s natural resources priority No. 1. The attraction of an automobile assembly plant is not among the development opportunities the state is looking at. “I think we have such a tremendous opportunity based on our natural resources,” says Wanetta Ayers, director of the division of economic development for the Alaska Department of Commerce, Community & Economic Development. “Growing internally and developing small business and being more efficient are great opportunities for Alaska.”
That said, Ayers also points out that companies with business focused in Asia, North American and/or Europe look at an Alaska location based on its time zone advantages to conduct business 24 hours a day.
The state’s natural resource industries were strengthened during the recent legislative session, where incentives focused on existing industries, such as oil and gas and fisheries.
The “Middle Earth” tax incentives, which applies to interior Alaska north of the Cook Inlet and south of the North Slope, support exploration. The incentive applies to all qualifying exploration expenses, starting with 30 percent, and in some cases, up to 100 percent, depending on qualifications describe in the legislation.
Additional incentives to support oil and gas activities benefit the startup and construction of liquid gas storage facilities. There is also a tax credit for seismic exploration, the lesser of $7.5 million or 75 percent of the total qualifying expenditures, Ayers says.
In other industry activity, House Bill 121 creates loans to support the state’s small businesses in accessing capital. The funds include the Mariculture Revolving Loan Fund, the Alaska Microloan Revolving Loan Fund, the Commercial Charter Fisheries Revolving Loan Fund, and the Community Quota Entity Revolving Loan Fund.
Ayers also notes the creation of military facility zones, which are funded by the Alaska Industrial Development and Export Authority, and/or the Alaska Housing Finance Corp. or federal New Market Credits. The funds would be available to communities to support projects within a zone.
Moreover, the state’s film production tax incentive was reauthorized through 2013 with $200 million in funding.
Industries And Innovations
Alaska’s natural resources and geographical location are best suited to support small businesses, seafood companies, mineral production companies, oil and gas production companies, and activities emerging in the Arctic Region’s nations, where melting polar ice has increased opportunities for trade and shipping.
Ayers says the state’s position in the global marketplace is a logistical advantage. For example, Anchorage is strategically located just 9.5 hours from 90 percent of the industrialized world. The state’s location in the Arctic Circle enables carriers to significantly increase cargo volume and revenue on flights from Asia to the United States by refueling in Anchorage.
The Ted Stevens Anchorage International Airport ranks high as an international air cargo hub, and is home to hubs for UPS and FedEx. “We expect to remain stable, if not continue to grow as the global economy begins to stabilize,” Ayers says. “Volume has returned in the last 18 months.”
“Another of the state’s greatest opportunities deals with the opening of the Arctic, and as the only Arctic U.S. state, we are the country’s frontier,” Ayers says. International trade policies and accords are in development to support the increase in activities. The uptick in traffic moving through the Bering Strait offers tremendous economic opportunity, including in the development of infrastructure and safety services, such as the need for a port of safe harbor on the American side.
The expansion of economic development into the Arctic Region is expected to support offshore oil and gas development; increase activity at fisheries; increase tourism; and increase marine transportation. “One of the more exciting and important developments in Alaska is the approval for the Shell Oil Co. to drill offshore in the Arctic,” Ayers says. The company has spent nearly $4 billion in finalizing permits and making preparations for drilling; it was expected to be on site July 15, continuing the program through early September.
The increased economic activity in the Arctic Region is also putting the state’s expertise in consulting and operating in the region and environmentally sensitive areas to work as other Arctic Region nation’s look to the state’s talent to develop their industries and infrastructure.
In other industry sectors, Alaska has an almost $4 billion annual wholesale market for its seafood. China has now surpassed Japan as Alaska’s largest export market for seafood.
The minerals industry, which depends on risk capital to conduct exploration, has remained strong during the past few years, Ayers says. She says companies are on the precipice of finding gold, which means gold mines will move into development and production in the next year or two.
“We have tremendous foreign direct investment, particularly in mining,” Ayers says. “This includes some of the largest mine investors in the world, such as Anglo American and Rio Tinto, as well as a number of large Canadian investors.”
As evidenced by the loan programs passed by the Legislature to support small businesses, Alaska’s small business sector is vital to the state. It is comprised of 16,000 businesses, and another 50,000 people that are self-employed; significant numbers in a state of just more than 720,000 population. (The state’s land mass is one-fifth of the size of the continental United States.) Entrepreneurship has been strong in this natural resource based state; which is now putting in place the building blocks to support high-tech industry growth.
In Anchorage in June, the Anchorage Economic Development Corp. hosted its first Hackathon. The corporation partnered with the municipality of Anchorage and the Anchorage Community Land Trust to provide government and nonprofit datasets that developers could use to create apps, databases, Web-based services and more.
On the startup front, Ayers says one social media startup working out of Alaska has partners in Romania and another country. Economic development officials hope when the business achieves the growth it is hoping for that it will actually locate its headquarters in Alaska.
In other technology industry activities, officials at Alaska Pacific University are discussing a possible incubation facility in order to support more programming, social media and application developments.
Talent And Education
The size of Alaska presents a “formidable landscape for a university,” according to the University of Alaska’s Web site. The system features campuses in Fairbanks, Anchorage and in Juneau (University of Alaska Southeast).
Says Patrick Gamble, university president, in a letter posted to the University of Alaska system’s Web site: “As a university system, the value we bring to Alaska depends on the quality of our graduates at every level. Our success in offering premier workforce development, education and a world-class research opportunity will substantially drive Alaska’s future.”
The state’s higher education system also consists of a few private colleges and institutions; as well as a few two-year state colleges.
In regard to tax considerations, Alaska does collect corporate income taxes, but does not collect any other state taxes, such as a personal income tax. “We consistently rank as one of the top one or two states with regard to having the lowest tax burden in the nation,” Ayers says. “This provides definite advantages for most businesses that are reviewing operating environments.”
Ayers says Alaska’s live, work and play factor is very often a lifestyle choice, which includes access to activities such as fishing, mountain climbing, whitewater river rafting and so much more. Alaska’s low population density means there isn’t any crowding and that there is less traffic congestion on the roads.
What’s more, telecommuters or lone eagles as they are sometimes called, find that whether their passion is cross country skiing, fishing and so forth, they have all of those options literally out their back doors.