Native Business: Sustainable Rural Development 

Alternative energy, natural resources offer options

By Julie Stricker for Alaska Business Monthly (June 2011)

The 2010 Census showed a troubling trend for rural Alaska: While the state’s urban areas and rural hub communities grew, that growth came in part from the state’s smaller, more remote areas. The population of the Yukon-Koyukuk region alone fell almost 15 percent.

While the reasons given for out-migration from villages can vary, three factors are most often cited: high cost of living, lack of economic opportunity and lack of access.

“One of the biggest challenges facing rural Alaska is that the population is small and scattered. There isn’t any base for viable economic development unless there are resource development projects that can bring new money in, and keep it in the community,” said economics professor Scott Goldsmith of the Institute of Social and Economic Research at the University of Alaska Anchorage.

Remote, Rural Alaska

Goldsmith defines remote, rural Alaska as the off-road portion of the state not served by the ferry system. It’s an area larger by half than Texas with a population of about 60,500, 78 percent of whom are Alaska Native.

The Community Development Quota (CDQ) program has been somewhat successful in bringing money from Bering Sea fisheries to coastal villages, Goldsmith said, but for the vast inland part of the state, resource development holds the most promise.

Natural resources present an opportunity, he said. “The question is how can the community take maximum advantage of the opportunity?”

In Northwest Alaska, NANA Regional Corp. aims to take full advantage of their resource opportunities, which include one of the world’s richest zinc deposits, Red Dog Mine. Until recently, Red Dog was the largest zinc mine in the world (a mine in India now claims that title). In operation since 1989, Red Dog produces 100 million tons of zinc concentrate annually and creates hundreds of high-paying jobs in a region where jobs of any kind are scarce.

Thirty percent of the Northwest Arctic Borough’s private jobs come from Red Dog, which had a $52 million payroll in 2009. NANA also collects royalties from the mine, which has helped it fund a variety of community and regional projects.

“Certainly, what has paid the bills to date is Red Dog,” said Lance Miller, vice president of resources for NANA Regional Corp. “Red Dog and minerals are to the Northwest Arctic Borough as the North Slope and oil is to Alaska.”

In 2010, NANA and Teck Alaska Inc., which operates the mine, opened the Aqqaluk Deposit, which is expected to extend the giant zinc mine’s lifespan by another 20 years. It also gives the region a broader foundation on which to build a regional economy, if it can solve a thornier problem: high energy costs, which Miller calls “the single biggest barrier to village economic development.”

The NANA region encompasses the Northwest Arctic Borough, which includes 11 communities, all above the Arctic Circle. The regional hub is Kotzebue, with a population of 3,200 it is the largest community. The others have populations of about 100 to 900. NANA, which was formed under the 1971 Alaska Native Claims Settlement Act, has more than 12,500 Inupiat shareholders.

All food and building materials, including fuel, is either barged or flown into Northwest Alaska communities, in some cases doubling the price seen in urban parts of the state. For instance, in early April, diesel was $8.49 per gallon and diesel was nearly $10 in Shungnak. The overriding goal is to create an economy “so people can afford to stay in the villages,” Miller said.

Alternative Energy Options

NANA is looking at prospects for geothermal energy and at expanding wind energy, which has been successfully used in Kotzebue for more than a decade. Selawik also has a wind farm and Kivalina, Deering, Buckland and Noorvik are planning projects.

Miller is looking at a variety of alternative energy projects such as wind, geothermal and hydropower on the upper Kobuk River.

Alternative energy has a place in rural Alaska, Goldsmith said. “I think it could play a role in reducing the overall cost of energy to consumers.”

Alternative energy projects are being discussed around the state, with wind and biomass energy garnering the most attention. Wind turbines now provide power in communities such as Kotzebue, Nome and Toksook Bay, among others, and is economically feasible in dozens of others, according to the Alaska Energy Authority. Anchorage-based Cook Inlet Regional Inc. wants to develop a commercial wind farm on Fire Island that would generate 54 megawatts of electricity, but hasn’t found a buyer for the power yet.

In Juneau, Sealaska Corp. switched the boiler at its headquarters to use biomass energy instead of fuel oil in November 2010, becoming the first commercial building to be heated by renewable bio-energy. It is hoping to develop demand for a biomass industry in Southeast Alaska.

Elsewhere in the state, Tetlin is seeking State money for a biomass project and geothermal energy prospects are under study at Pilgrim Hot Springs.

Abundant Natural Resources

Like NANA, other parts of the state are also blessed with abundant natural resources. But they are caught in an economic Catch-22: They need a source of inexpensive energy to develop natural resources, but they need the money from resource development to build regional infrastructure to support it.

“There’s an opportunity when you have resource development in the region (which) is that you can leverage the money,” Miller said. “Mineral development is the initial springboard to create the money. It brings funding to do some of the development projects that hopefully will be sustainable.”

Goldsmith said high energy costs influence the ability to develop big resource projects, such as the Donlin Creek gold mine in Southwest Alaska, which is on lands owned by the Kuskokwim Corp., a group of village corporations. The subsurface rights are owned by Calista Native Corp.

The giant Pebble prospect is located on State land, but could benefit villages in the vicinity.

In Northwest Alaska, Red Dog’s resources are well known, and Miller said there is potential for oil and natural gas in the Kotzebue basin as well as gold in the Upper Kobuk River area. NANA also has sand and gravel deposits, which play a large role in village economics where it is used for housing construction, airport expansion and other infrastructure projects.

NANA is working with partner NovaGold to explore the Arctic Deposit, which has rich reserves of copper, zinc, lead, silver and gold and Bornite, a large copper deposit, although still largely unexplored. Building a road to the Ambler Mining District is one of Alaska Gov. Sean Parnell’s priorities. With $4 million included in its 2011 budget, the Alaska Department of Transportation is studying potential transportation corridors. One would extend 211 miles from the Dalton Highway to Kobuk, where it would tie into the existing local road system.

The deposits could eventually be developed into mines along the size of Greens Creek near Juneau, Miller said, but the projects are years away from that. All development must be in accordance with the traditional subsistence lifestyle of the region, Miller said.

“Everything we do is tied to that,” he said. “We don’t want to compromise those values.”

It’s a complex problem that NANA is tackling in innovative ways.

In 2008, NANA created the Village Economic Development Committee to help address the region’s energy crisis. Dean Westlake, director of Village Economic Development, likens his department to a Leatherman multi-tool. “You have to use the right tool for the job, and you have to have a lot of tools at your disposal,” he says in NANA’s January shareholder newsletter.

“The challenges we face as a region are complex, so the solutions require a team effort regionally, as well as some out-of-the-box thinking,” he said.

Cooperating to Maximize Resources

One tool is cooperation through the Northwest Arctic Leadership Team.

NWALT is a partnership of Maniilaq Association, NANA Regional Corp., the Northwest Arctic Borough and Northwest Arctic Borough School District. Its goal is to maximize resources and avoid duplication of efforts to improve life for residents of Northwest Alaska.

Liz Moore is the regional government affairs manager for NWALT. The bottom line, she said, is to find public/private partnerships that will help villages keep their buildings open, and warm.

“We’re working to make sure we’re all moving in the same direction,” she said.

NANA has invested $860,000 in a public/private partnership to increase energy efficiency in individual homes. RuralCAP is training people in the communities to implement basic weatherization techniques. The program provides household kits that help people find ways to scale back energy consumption and increase efficiency. It’s paid for out of American Recovery and Reinvestment stimulus funds and is expected to create more than 100 jobs in the region.

NANA has made money available to each community for development projects endorsed by the communities and tribes. One proposal is to have multipurpose facilities in each community. The facilities would house offices, classroom space and space for housing trainers.

Moore said another need is fast, reliable Internet service. Northwest Alaska relies on satellite for its Internet service. “We don’t have (fiber-optic cable) this far north,” Moore said, adding that available bandwidth is limited and satellite coverage is spotty.

Local residents are unable to apply for online-only grants; stream news and movies; upload content in a timely manner; or participate in many educational opportunities.

“There are a lot of opportunities that are being missed because we don’t have broadband,” Moore said. “It’s very frustrating.”

Broadband Internet service is needed in order for residents of Northwest Alaska to participate in the global marketplace and for distance education. “That’s an opportunity we’re all talking about at the local level,” Moore said.

Moore said one project she’s working on with the Northwest Arctic Borough School District is the idea of creating a magnet school in Kotzebue encompassing grades 11 through 14 that would help train students in health care, resource development and education. “The idea of the school is to provide job training, immediately.”

What will the rural economy look like for workers in the next generation?

In 2007, Goldsmith published a study of the economy of remote rural Alaska.

His conclusion offers qualified optimism, “It is not obvious whether remote rural Alaska represents a sustainable community economy if we define that to be one where there are sufficient resources to provide for both the private economic needs of households and the publicly provided goods and services … the region is rich in opportunities, but that there are very real constraints as well.”

“I think there will be some winners and losers,” Goldsmith said in April, “but we don’t know ahead of time which will be the winners.”

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