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Dreaming big: 6 Alaska boondoggles

Craig MedredAlaska Dispatch

Grand plans envisioned. Magnificence expected. When it comes to projects, Alaskans have never had a problem of thinking big. Sometimes, perhaps, too big. Today, we look at a few Alaska projects that have come to be considered boondoggles. Got another that fits the bill? Let us know

Stephen Nowers photo

Point MacKenzie Dairy Project — early 1980s

Tipsy on a strange brew of Alaskan pioneering spirit, burgeoning oil revenues and Soviet-style top-down ambitions, the state set aside 15,000 acres of mostly well-drained forest and spent millions installing a grid of new roads and power. More than 2,000 people bid on 31 tracts, including 19 slated to be working dairies with 100 to 150 cows each.

The goals? At least 30 to 40 families would ultimately make a living milking cows and growing feed — reviving the flagging local dairy industry while providing a sure market for barley grown at the 10,000-acre sister project near Delta Junction and a quality product for a struggling local dairy. It didn’t happen.

“Most went under in just a few years, victims of crushing debt brought on by diving milk prices and the high cost of reshaping wilderness into viable dairies,” wrote Alaska journalist S. J. Komarnitsky here.

By one estimate, the state sunk at least $9.6 million directly into Point MacKenzie farms. The New York Times later reported that the state lost up to $120 million for its agricultural hubris, ultimately foreclosing on $40 million in loans by the early 1990s.

"You want to know how to lose money in a hurry?" said Harvey Baskin, the last of the original farmers and a stubborn, hard-working man who held on until his death in 2002, in this story.  "Become a farmer with the State of Alaska as your partner. This is what you call negative farming."

by Doug O'Harra

Alaska Boondoggles

 

Stephen Nowers photo illustration

Prinz Brau Brewery

Back in the good old days, Alaskans knew how to do a boondoggle: Sucker some foreigners into wasting a pile of money here. In 1976, it was a German beer company called Prinz Brau. Alaska business and political leaders lured the Germans with visions of beer-swilling northerners.

Construction on the trans-Alaska Pipeline was just getting underway. Pipeline workers were pouring into the state from all over the country. Beer consumption statewide went up 16.2 percent even before the first pipe was buried in the ground. The Anchorage Daily News reported at the time beer sales skyrocketed by 51 percent in Fairbanks, the jumping-off point for construction to the north.

Alaska pitched Prinz Brau on the rosy future in the 49th state, and sweetened the deal with a 56-cent-per-case tax break for beer brewed in the plant Prinz Brau’s was building in South Anchorage. “Assessing the future, (Prinz Brau general manager Gerhard) Konitzky sees few clouds,’’ the Daily News wrote. “Although it will take a few years to repay the investment, Alaska beer consumption has been jumping and will probably continue to increase.’’

For the state of Alaska, Prinz Brau was arguably a good deal. Alaska likely got more of an economic bang out of the deal than it lost in tax revenue. Prinz Brau reported investing $11.7 million “of German money in Alaska” and putting some 40 Alaskans to work. The only problem was that the big, government-supported plan to make Alaska the beer-brewing capital of the north never materialized. The state never even got the dreamed-of chance to sell Prinz Brau the beer-brewing grain from the Delta Barley Project, a more-than-$200 million, wholly state-backed boondoggle that didn't get started until 1978.

By then, Prinz Brau was already struggling. By 1979, it was gone.

The first beer it produced was mediocre. Though it soon got better, there was a bigger problem -- brand loyalty. Most of those pipeline workers had been drinking some other brew somewhere else, and they wanted to drink it in Alaska, too. Beer in cans is a pretty easy product to ship, and for a while beer companies battled for a share in the small but thirsty Alaska market. Olympia Brewing, makers of what Alaskans called "Oly Pop,'' went so far as to sign on as the major sponsor of the Iditarod Trail Sled Dog Race in 1984.

By that time, of course, Prinz Brau was already on its way to being buried in the dustbin of Alaska boondoggles. The company went under in 1979, only three years after opening its doors. Alaska wouldn't be home to another brewery until 1986. That one, the Alaska Brewing Company, didn't get anything in the way of government support. Why would it? Who the hell would open a brewery in Juneau, the state's isolated state capital, and expect it to succeed?

Geoff and Marcy Larson, that’s who. Two years after they started Alaskan Brewing Company, the company’s “Alaska Amber’’ was declared the best beer in the nation. A decade later, the federal Small Business Administration named the Larsons Alaska Small Business Persons of the Year. Alaska Amber is now a recognized national brand despite the difficulties the Larsons faced as a start up. They once confessed they were warned it would be difficult to get financing for any sort of brewery because of the “grand failure.’’ That would be Prinz Brau.

Despite Prinz Brau’s failure, Alaska proved to be fertile ground for brewers. The Brewers Guild of Alaska says there are 15 breweries in Alaska today

by Craig Medred

Alaska Boondoggles

 Point MacKenzie Dairy Project | Anchorage Seafood Plant | Prinz Brau Brewery | Healy Clean Coal Project | Airport Railroad Depot | Milk & Barley

 

Stephen Nowers photo

Railroad Depot at Anchorage's international airport

Here's how an Anchorage visitor’s guide website touts the services of the Alaska Railroad's terminal located at Anchorage’s Ted Stevens International Airport: “Hop off the plane and directly onto the Alaska Railroad.” It adds, “it's just about that easy.”

“Just about” are the operative words there. The terminal -- which opened for business in 2003 at a cost of $28 million in federal funds secured by the airport's namesake Alaska senator -- was projected to serve as many as 200,000 passengers a year, many of them tourists starting out or wrapping up an Alaska vacation.

In 2009, the airport served around 20,000 -- a tenth of the projected total -- of those potential passengers, according to a 2010 Anchorage Daily News article.  The depot’s other source of revenue, serving as a venue for large events like weddings, was unavailable during the winter of 2009-10. The terminal shut down completely as a cost-saving measure.

Perhaps the low ridership in recent years can be attributed to lackluster tourism figures as the U.S. continues to ride out the recession -- but the number of projected summer visitors to Alaska has still increased by nearly 200,000 in the years since the depot opened, from 1.3 million in 2003 to 1.5 million in 2010.

Like so many other projects here, the federal dollars poured into the railroad terminal has made it easier for Alaskans to swallow. At the railroad’s grand opening, then-Sen. Ted Stevens best summed up the attitude in those bountiful years when Alaska grew fat with federal pork. Responding to criticisms -- well-founded criticisms, when viewed through a modern-day lens -- that the depot could prove to be another classic Alaska boondoggle, Stevens said: “It doesn’t have to pay for itself. It was a grant from the federal government.”

by Ben Anderson

Alaska Boondoggles

 Point MacKenzie Dairy Project | Anchorage Seafood Plant | Prinz Brau Brewery | Healy Clean Coal Project | Airport Railroad Depot | Milk & Barley

 

 

Robert Lype photo

Healy Clean Coal Project

In the town of Healy is an experimental coal power plant that has cost more than $300 million, yet produces no electricity. Called the Healy Clean Coal Project, the 50-megawatt plant had the support of Alaska's congressionional delegation, the state's biggest coal mine, and the second-largest electric company back in the late 1980s and 1990s.

The U.S. Energy Department granted the Healy project $117 million under the condition that it test a new kind of coal combustor. If it worked, the combustor would break new trail for reducing pollutants and perhaps become a mainstay in other coal plants. The Alaska Industrial Development and Export Authority, a state development agency that tries to ignite economic growth through financing sometimes-risky projects, supported the concept by selling $85 million in bonds. The Alaska Legislature kicked in $25 million. And more money was spent on cost overruns, testing and litigation.

Today, the plant sits mothballed on the banks of the Nenana River. The plant costs AIEDA $1.75 million a year even as it sits idle.

The owners threw the off switch after a performance test gave the plant mixed reviews in late 1999 and the main customer balked at buying more of its electricity. Critics said the plant cost too much to run, was unsafe and unreliable, and didn't even pollute the air any less than conventional equipment.

The latest attempt to get the Healy plant working involves a deal between AIEDA and Golden Valley Electric Cooperative in Fairbanks. An AIEDA official says the state agency and electric utility -- once at odds over the Healy plant -- have signed an agreement for Golden Valley to buy the plant for $50 million. They hope to close the deal next year, with the plant burning coal and making electricity in 2013. But "a critical component to this closing is the renewal of the Title V Air Permit," said Karsten Rodvik, a project manager at AIEDA, in an email. "The renewal process has been longer than expected, but we are hopeful that the end of this process is near so we can move forward."

AIEDA and Golden Valley officials have unsuccessfully tried in the past to revive the Healy coal plant. Here's to hoping they succeed this time at turning one of Alaska's biggest boondoggles into a functioning and economical project for the state.

by Tony Hopfinger 

 


Kathy Hough, NOAA photo

Anchorage seafood plant

The stench of dead fish is part of life in a state that's home to some of the nation's richest fisheries, but this deal stunk to high heaven.

What started out as a grand idea to diversity the state's oil-trapped economy quickly began to rot and finally ended when Alaska Seafood International's huge seafood plant went belly up in 2003.

The Alaska Industrial Development and Export Authority gambled and lost on this mega-monster. Working with ASI founder Howard Benedict and Taiwanese investors, the state development agency blew $50 million to build the plant and millions more in failed attempts to save it.

The 202,000-square-foot Anchorage processing plant was supposed to employ hundreds of workers churning out frozen seafood meals, largely salmon and halibut. But for many reasons -- including distance from the fishing grounds and trouble lining up buyers -- production stank. The state never got paid rent.

But, hey, look what it spawned: A nondenominational Christian group, Grace Alaska, bought it with food distributor Sysco for $25 million after borrowing millions from AIDEA. Now it's ChangePoint church, a cold-storage distribution center and indoor soccer fields.

by Alex DeMarban

Alaska Boondoggles

 Point MacKenzie Dairy Project | Anchorage Seafood Plant | Prinz Brau Brewery | Healy Clean Coal Project | Airport Railroad Depot | Milk & Barley

 


Photo by Ben Townsend via Flickr

Dreams of milk and barley

Given the size of past Alaska dreams, and given that Alaska was rich beyond its wildest dreams, Gov. Jay Hammond’s ideas seemed down-home practical: Build businesses that sustain themselves and last through the ups and downs of oil prices.

One of the big ideas at the time was to establish a vibrant dairy and barley business in the subarctic, supplying residents with fresh beef and dairy produced in Alaska. A report, issued at Hammond’s request by University of Alaska agricultural professors, allowed a convinced Hammond to proclaim: “(I)t is in fact possible that Alaska will be the prime agricultural state in the not so distant future.”

And so the state held a lottery to give away land for those who wanted to develop dairy farms -- 14,000 acres deep in the heart of muddy, alder-packed, bear-infested moose country. Investors needed only about 25 percent collateral to qualify for up to a $2.4 million in credit to build and run farms with 50 cows.

Because the cows needed something to eat, the state started a lottery to sell off another 70,000 acres of the Interior, on which barley would be grown.

Grain was planted, and the state bought nearly a million dollars worth of railroad grain cars -- 20 of them painted bright blue with the words, “Alaska Agriculture Serving Alaska and the World.” Then it began building an $8.5 million grain terminal in Seward. Valdez, the town with the deep-water port and the terminus of the trans-Alaska oil pipeline, was envious. So it built an even bigger and better grain terminal that ended up costing the city upwards of $30 million.

As it turned out, Alaska cows need a different kind of handling than those in the Midwest. You have to keep them warm, and that’s expensive. The subarctic land was too muddy for cows. The grain to feed them was another problem. Barley didn’t grow well in Alaska. There was the short growing season to start with. Then came a series of events out of the Old Testament -- a drought, a grasshopper infestation, and finally roaming bison stomped through the fields – stomped on Hammond’s dream. It might not have mattered much anyway.

The barley that did grow was puny. Dairy cows went hungry. There were already a few small dairy farmers in Palmer, a town near Anchorage, who sold their milk to a state-subsidized creamery, and they were struggling. Milk imported from the West Coast was cheaper than Alaska milk.

When things got bad for the Matanuska Maid Dairy, it began buying cream from Seattle to mix with its own Alaska milk to lower the price. Something had to be done. And so the state took over the creamery. Millions of dollars later, the state-owned Matanuska Maid Dairy and a handful of emaciated, disease-ridden cows.

Eventually all the farms had failed. The federal government began paying the farmers in Alaska’s Interior, primarily in the area around the scrappy outpost of Delta Junction, not to farm. The railroad grain cars sat idle and lonely. All told, the state invested more than $100 million in 1982 dollars on agriculture in Alaska, and as of 2011, Alaska still imported about 95 percent of its food. 

by Amanda Coyne

Alaska Boondoggles

 Point MacKenzie Dairy Project | Anchorage Seafood Plant | Prinz Brau Brewery | Healy Clean Coal Project | Airport Railroad Depot | Milk & Barley