Digital Magazine: December 16, 2018

As goes Alaska, so goes TOTE

Grace Greene takes helm of Saltchuk subsidiary during a time of uncertainty and optimism for The Last Frontier state.

   You need only speak for a few minutes with Grace Greene, who became president of TOTE Maritime Alaska in August, to realize how fond she is of the state.   

As goes Alaska, so goes TOTE

Grace Greene takes helm of Saltchuk subsidiary during a time of uncertainty and optimism for The Last Frontier state.

As goes Alaska, so goes TOTE

Grace Greene takes helm of Saltchuk subsidiary during a time of uncertainty and optimism for The Last Frontier state.

 
Continued from previous page
   You need only speak for a few minutes with Grace Greene, who became president of TOTE Maritime Alaska in August, to realize how fond she is of the state.   
   A graduate of the U.S. Naval Academy, Greene met her husband in the Marine Corps, for which they were both helicopter pilots stationed in California. Her husband, Stuart, had a taste for adventure and decided when he left the service he wanted to climb Denali, the continent’s highest peak.
   “When he came off the mountain and got back in touch with me, he said, ‘We have to move to Alaska,’” she recalls. He got a job with a regional airline, and she moved to the state in 2008 to look for work. She ended up working as a financial adviser for Morgan Stanley, first in Alaska and later in Washington, D.C., when they moved there. She also had a stint at a government consulting firm while they lived in the nation’s capital.
   But the pull of The Last Frontier state remained, and after their daughter Claire, now 8, was born (She also has a 5-year-old son Patrick.), the family moved back to Alaska.
   “My husband got a job as the airfield safety manager in Fort Greeley, which is in Delta Junction,” about a two-hour drive southeast of Fairbanks, Greene says.
   “It was outstanding! When we moved there, it was February, and there were a record number of days of 40 below or colder,” she says. “I just loved it.”
   After a year in Delta Junction, she got a job at Shell Oil, for which she ran its aviation logistics program in Alaska and which took her family back to Anchorage.
   She joined Tote in 2012 as vice president and Alaska general manager.
   “Grace is a delightfully interesting person,” says Jim Jager, director of external affairs for the Port of Alaska. “When you call central casting and say … ‘Send me a typical shipping official,’ Grace is about as not that person as you are going to find. She breaks about every stereotype you can break and generally in a good way.”
   However, her new job will bring her down to the lower 48 — Federal Way, Washington, where Tote is headquartered, and near the Seattle headquarters of its parent, the Saltchuk group of companies.
   Tote operates two ships — North Star and Midnight Sun — that offer twice-a-week sailings between Tacoma, Wash., and Anchorage, Alaska’s major port.
   Unlike most of the ships operating in the general cargo business, they are roll-on, roll-off vessels, not containerships. The ro-ro configuration allows for rapid loading and discharging of freight carried in truck vans or on flatbeds, as well as vehicles. You can get a idea of what the process of turning those ships around in eight hours is like watching this TOTE video or this episode of the video blog LifeGoesNorth.

LNG Fuel Pioneer. The company is in the process of converting its two ships to operate with liquefied natural gas. Sister company TOTE Maritime Puerto Rico pioneered the use of LNG as ship fuel in its container service to Puerto Rico through the construction of two new LNG-fueled ships that started operating in 2015 and 2016.
   The conversion of the two Alaska ships is being done over a four-year period and will be completed in the spring of 2021.
   In the first phase — already completed on the North Star and to be done late next year on the Midnight Sun — tanks for the gas and associated piping are installed. The second phase “is more focused on the actual conversion of engines on the ships,” Greene explains.
   The eight-week dry dock period (the conversions are being done at Victoria Shipyards in British Columbia) occurs during the slack winter season. Last year TOTE reduced sailings from twice a week to once a week and supplemented its capacity by purchasing capacity from Matson.
   A Washington State utility, Puget Sound Energy, is building a natural gas liquefaction terminal at the Port of Tacoma adjacent to TOTE’s terminal in Tacoma that would provide LNG via a cryogenic pipeline to the ships. In addition to TOTE, customers could include other marine companies, truckers or for “peak shaving” — revaporizing LNG at times when demand for natural gas is high.
   A final environmental impact statement for the project in 2015 issued by Tacoma found “substitution of diesel and marine fuels with cleaner-burning LNG could reduce annual greenhouse emissions (including carbon dioxide, nitrogen dioxide, sulfur oxide and particulate emissions).”
   However, the Puget Sound Clean Air Agency has ordered a supplemental environment impact statement for the liquefaction plant with a “life cycle” analysis of greenhouse gas emissions, including emissions upstream during gas extraction, transmission, production of LNG and storage as well as end uses of LNG.
   A draft of that report released last month said compared to the use of other fuels, use of LNG “is predicted to result in an overall decrease in GHG emissions in the Puget Sound region.” It said its conclusion was “contingent on the sole source of the natural gas supplied to the facility being from British Columbia.”

As Goes Alaska … Greene takes the helm at TOTE Maritime Alaska at a time of uncertainty but also optimism that the state’s economy may improve in the next couple of years.
   “The state has been in a recession for several years, a recession as measured by change in year-over-year employment,” says Gunnar Knapp, professor emeritus of economics at the University of Alaska Anchorage.
   Neal Fried, an economist at the Alaska Department of Labor, says the state lost about 5,000 jobs in 2016, 4,500 jobs in 2017 and about 2,000 jobs through the first nine months of this year. Average monthly employment in October in the state was 323,900 — with 242,200 jobs from the private sector and 81,700 federal, state and local government jobs. There are also more than 21,000 uniformed military personnel in the state. Seasonally adjusted unemployment in Alaska in October was 6.4 percent, compared to the national rate of 3.7 percent. Fried notes that many jobs in Alaska are seasonal.
   The proximate cause of the job losses, says Knapp, “was the drastic drop in oil prices. It’s percolated through the economy in several stages,” he says, and led to a cutback in oil industry employment and spending.
   Writing on Northrim Bank’s Alaskanomics website earlier this month, Tim Bradner, co-publisher of the Alaska Economic Report, wrote, “In 2015, the state’s revenues took a nosedive after oil prices collapsed. Alaska’s oil revenues dropped from about $5 billion to $1 billion that year. It was a scary time.”
   Annual throughput of oil flowing through the Alyeska pipeline from the North Slope to Valdez has slowed. In 2017 it was 192.5 million barrels. While that is slightly higher than the prior three years, it is far below the peak annual throughput of 774 million barrels back in 1988. Daily throughput has fallen below the level when the pipeline first opened in 1977.
   Alyeska says it provides 90 percent of the unrestricted general fund revenue to the state, and Knapp said the reduced oil revenue led to a cutback in state spending, particularly for capital projects, and later for general government and then for the Alaska permanent fund dividend, which is a program that distributes money to Alaskans. That dividend was $1,600 in this year, but has fluctuated up and down — $2,069 in 2008 and $2,072 in 2015, but as low as $878 in 2012 and $900 in 2013.
   On Tuesday, Alaska Gov. Bill Walker proposed what he said was Alaska’s first balanced budget since 2012 and which would pay Alaskans a $1,800 permanent dividend.
   Alaska Public Media’s Andrew Kitchenman noted while that’s $200 more than this year, it is more than $1,000 less than the amount under the formula used to calculate the dividend that was used before 2016. Walker’s successor, Mike Dunleavy, will be sworn into office next Monday and “wants to offer the full amount under the formula.” But the Walker budget was prepared relying on a price of $75 per barrel, and an Alaska Department of Revenue website show oil prices dropped to around $60 per barrel this week.
   Knapp says in recent years, the recession led to a drop in retail employment and so a decline in the retail sector. “All of these things have differing kinds of effects on the shippers who ship to Alaska.”
   The Port of Alaska, owned by the city of Anchorage, says cargo moved in containers or in truck vans or on flatbeds amounted to 1,592,473 tons in 2017, down from 1,811,136 tons in 2014. Dry bulk goods such as cement fell to 97,223 tons last year from 140,684 tons in 2014. Overall volume at the port last year was about 3.5 million tons, the majority of which was petroleum products.

   About 60 percent of the state's residents live within a two-hour drive of the port, and 75 percent of Alaskans live on the Anchorage-connected road system.
   Jager says roughly, “if you look at all the inbound material coming into the state, about 90 percent of it comes in by marine vessel, either ship or barge.” Another 5 percent comes by road over the AlCan highway and 5 percent by air. “Of that 90 percent, about half of it, around 3.5 million tons a year (this includes petroleum products) comes across our dock.”
   Greene said while carriers have seen negative volumes for the past several years in Alaska, “it looks like we’ll end up flat for the year and probably a flat market into 2019.”
   Looking further out, there is optimism about growth. She said companies like ConocoPhillips and Oil Search have had some of the biggest budgets they’ve had in a long time for exploration and have had significant finds on the North Slope.
   “So we expect production to go up probably in the next two to seven years,” said Greene. “When oil and gas production is strong, we definitely see an increase in jobs.”
   That, in turn, could lead to increased shipments of “consumer goods, vehicles, heavy equipment and building materials and things that that go along with it. We always say as goes the Alaskan economy, so goes Tote.”
   Increased activity on the North Slope not only results in jobs in northern Alaska, but also in Anchorage, the state’s largest population center and where the majority of headquarters for major employers are located.
   Summarizing presentations at a conference held earlier in November by Alaska’s Resources Development Council (RDC), Alaskanomics said for the third year “presenters were optimistic about the future of resource development in Alaska. This year’s optimism was even stronger, especially in oil and gas, mining and tourism. Fishing is still a bit cautious because of the uncertainty around tariffs and imports/exports with China. The timber industry still has a lot of challenges with federal regulations. There are opportunities for timber, but it will take time to sort those out.”
   As recently as 2013, ConocoPhillips had projected its oil production in Alaska would be less than 200,000 barrels per day next year, declining to around 100,000 barrels barrels per day over the next decade. Speaking at the RDC conference, Joe Marushack, president of ConocoPhillips Alaska, said the company now believes that because of discoveries, acquisitions and new technology, its production will climb from more than 200,000 barrels per day next year to around 340,000 barrels.
   Another positive sign is the rising Anchorage Consumer Optimism Index, which hit 59.3 in the third quarter of 2018, a level not seen since 2014. Greene said the index is seen as “a good indicator that people are confident and that the market is kind of flattening out and hopefully growing again in the out years.”
   Expansion of the Eielson Air Force Base near Fairbanks is expected to bring construction activity and an additional 3,500 people to the region over the next several years. Fried said there are hundreds of millions of dollars tied to that expansion as well as projects at the Clear Air Force Station and Fort Greeley.
   Matson gave a similar reading of Alaska’s outlook when it discussed its third-quarter results (unlike TOTE, a private company, Matson is publicly traded). Matt Cox, the chief executive officer of Matson, says, “With respect to northbound volume, we continue to see signs of Alaska’s economy beginning to stabilize, but await further data to confirm that bottom in the recession has occurred.”
   He expects 2018 volumes to be “modestly higher than the level achieved in 2017,” in part, because the company benefited during the weeks TOTE dry-docked its ship for the LNG conversion. He added that volumes are southbound because of “weaker-than-expected seafood season, compared with the very strong seafood harvest levels in 2017.”
   Greene says some shippers are exclusive users of TOTE or Matson and some use both carriers.
   She says Alaska has a similar mix of retailers found in other parts of the U.S. — big-box stores like Walmart and supermarkets like Safeway.
   Fried says in the first nine months of the year Alaska lost about 900 retail jobs, but he says this had less to do with what’s happening to the Alaskan economy and more to do with the overall trends in the industry. For example, Alaskans have lost or will lose jobs as stores operated by Sam’s Club, Sears, Toys R Us and Bed Bath and Beyond close. And he says the Alaska retail economy is being reshaped by e-commerce.
   Greene notes logistics companies such as Carlisle Transportation, Linden and American Fast Freight “play a strong and important role in creating the quality of life, the consistency and the supply chain management that everybody in the lower 48 enjoys on a daily basis.” (In 2016 Matson Logistics acquired the logistics company Span Alaska.)
AAPA commends the decision to temporarily suspend another tariffs increase and supports and encourages steps focused on expanding exports rather than creating new import restrictions.
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