GIRDWOOD -- Opportunity, opportunity, opportunity was the word uttered over and over again as international leaders, global financiers, national dignitaries, state officials and small-town Alaskans met here to discuss the economic and social future of Alaska's Arctic and near-Arctic north.
Everyone attending The Arctic Imperative Summit seemed to agree on the opportunity for oil and gas, the opportunity for rare-earth minerals, the opportunity for new shipping, the opportunity for jobs, the opportunity for almost everything. David Rubenstein, co-founder of a $107 billion global asset management company called the Carlyle Group -- and the husband of Alaska Dispatch publisher Alice Rogoff -- on Monday described the entire Arctic region as "the last (and final) emerging market."
Emerging markets are the "hot play," as it is called in today's investment climate. Emerging markets are riskier for investors than well-established ones; but with bigger risks come potentially bigger returns. And the Arctic is attractive now because of a wealth of undeveloped minerals and hydrocarbons, not to mention its potential as a new shipping route between Europe and Asia as the polar ice cap slowly but steadily succumbs to global warming.
U.S. isn't in the Arctic game
Once, Arctic Alaska was the really icy part of "Seward's Icebox" back in the 1860s, when Secretary of State William H. Seward talked President Abraham Lincoln into buying the massive, frozen territory from the Russians for 2 cents an acre. Rubenstein suggested that approval of that purchase might now rank right up there with the unification of the states in the litany of Lincoln's great achievements.
To date, Alaska has delivered America billions of dollars in gold, billions in seafood and trillions in crude oil. And there is a lot more in resource wealth just waiting to be developed if the state and the U.S. government are willing to engage development.
Whether they are or aren't is hard to tell.
"Right now, Russia is ahead of the United States," Rubenstein said. "Right now, we're not in the game. Russia is in the the game," along with the Scandinavian countries. Canada is moving to to get into the game. Meanwhile, the U.S. and Alaska are mainly (still) just talking.
Movers and shakers -- from retired Gen. Joseph Ralston, the former commander of NATO to Alaska Lt. Gov. Mead Treadwell to local community leaders -- question whether there is the collective, political will to move forward. Arctic communities hugging the northern seas, far from Alaska's limited road system, have for decades watched port projects languish, trapped in the realm of ideas, with actual construction elusive.
It has been the same story for most state infrastructure. The state's limited highway system hasn't seen major growth since the Dalton Highway was built in the 1970s to provide access to the North Slope for construction of the trans-Alaska oil pipeline. Port development has largely focused on a handful of communities with significant populations and connected to the road system, communities like Anchorage and Seward.
Important projects, Gen. Ralston noted, have often fallen victim to urgent projects. Both the state and federal governments have focused efforts on bringing clean water and sewer to rural Alaska villages sometimes lacking both -- with little thought to what sort of economy might be created in those places to support the new utilities.
The state of Alaska has spent a lot of money building vital, local schools while ignoring competing and important needs for roads and other facilities that might grow the economy. Oil revenues that might have funded much-needed infrastructure have instead been frittered away on agriculture projects doomed to failure. Or it's been tied up in the Alaska Permanent Fund Dividend program, the annual socialist handout from the state that rewards residents simply for living here.
The PFD program has been good for Alaskans. It has bought a lot of flat-screen televisions and plenty of trips to Hawaii. It has financed snowmachines, four-wheelers and boats.
It has not, however, been so good for Alaska. The PFD hand-out has diverted funds that could have otherwise been used to finance responsible development of state infrastructure. Funds that might help guarantee an economic future for Alaska as the oil is slowly but surely drained from the North Slope.
As things stand today, Alaska appears confronted with a perfect storm of impediments to future development: Federal funding is in a tailspin of deficit spending fears. State funding is hostage to populist politicians who argue that any revenue the state collects must either pay for government or else be diverted to the permanent fund -- to grow and pay those almighty dividends.
Subsistence -- the idea that people can still live off the land in Alaska as they did in the 1800s -- has given environmental interests a club with which to beat back most development projects. To them, development poses a dirty threat to rural residents, who are then co-opted as public relations campaigns in order to raise more money for the environmental fight.
All that's needed now by some national environmental organizations to spur a national fundraiser aimed at "saving the Alaska wilderness" or the "Alaska way of life" is a handful of people in a rural area to object to development.
The Alaska National Interest Lands Conservation Act of 1980 was supposed to have settled this. That law preserved more than 100 million acres of land in national parks, refuges and forests. The rest of the state was supposed to open to development afterward.
But that really never happened. Access problems have been one impediment, but another has been Alaskans. Outside of Anchorage and the Matanuska-Susitna Valley, which have mushroomed in the modern era, Alaskans have as often opposed development as embraced it. The shifting sands of public opinion make it hard to obtain big public projects in areas with few people.
There is no real constituency for Arctic development. Even if everyone in the Alaska Arctic wanted development -- and some clearly do not -- there would be only a comparative handful of supporters. Nome has been talking about the need for a deep-water port for 100 years. It has never been able to find funding. Now there is talk of public-private cooperation to create some sort of fund able to leapfrog the financial foot-dragging of the past.
"The idea of an Arctic investment fund is very interesting," said Denise Michels, mayor of the old, gold mining community. She wants to extend an existing causeway far enough into the Bering Strait to service deep-water ships. The dock at the end of the causeway now has 22 feet of water. It needs 35 feet. The port project, which includes other enhancements, has an estimated cost of $150 million -- money that Nome cannot wish into reality and that the community has little hope of raising without private investment, state subsidy or federal appropriation.
Rubenstein and Jared Carney from the Milken Institute pitched the Summit on creation of an Arctic
investment fund. Both seemed excited about the possibility of Alaska because of its near-Third-World status. "The final emerging market,'' Rubenstein gushed. "This is really God's gift to the world."
If only...
If only someone can produce some capital to finance the movement from opportunity to reality.
With the Arctic Ocean's ice melting, the U.S. Coast Guard and almost everyone else is saying in unison that it is in the nation's strategic interest to build a port near the Bering Strait. But nobody is volunteering any money to build it. The Department of Defense is among those stressing the importance of the port, but it isn't talking about funding anything until 2020.
The Defense Department has plenty of money, Ralston said, but it is still disengaging from a costly war in Iraq. And it's still tied down in a costly war in Afghanistan. And it's in the midst of helping NATO wage war in Libya. The U.S. Navy at one time maintained a sizable Arctic presence, but pretty much walked away from what had been the Naval Arctic Research Laboratory in 2004. The last words on leaving? "The need for enlightened leadership and prescient investment strategy is acute."
Ralston noted during a lunchtime address at the Arctic Imperative Summit that the Defense Department is saying much the same thing; only now, it's not offering to back any of the investment.
The thinking here is that state officials and private investors might be able to move in to fill the void. Mayor Michels said somebody needs to do something to help.
"How in the heck can a small community like ours fund a small project like that?" Michels said, adding that talk of building a harbor for Nome nearly a decade into the future is just so much talk. "We can't wait. We feel we can't wait that long."
But then Nome has been waiting a long time. Michels read to the conference from a U.S. government report more than 100 years old: "'Though it seems highly probable that with continued development of the Seward Peninsula regions, these harbors will eventually have railroad connections with the Nome Region; nevertheless, the lack of harbor facilities at present at Nome is embarrassing.'"
Hasty, jury-rigged Arctic development dreams
The railroad never got to Nome. Gov. Sean Parnell is now talking about a road instead, but even that faces a tough, uphill battle. Opposition is already stirring. The road would have to skirt federal refuges, and would cost an estimated $3 billion to $6 billion. It would also open a corridor that could make possible mining developments from Fairbanks west, across a broad swath of Interior Alaska.
In some corners of Alaska there is strong opposition to mining, though not everywhere. The Native community of Kotzebue, about 180 miles north of Nome, supports mining and the economy it brings. Kotzebue has flourished since the opening in 1987 of the nearby Red Dog Mine.
Kotzebue, like Nome, now yearns for a deep-water port to further future development and help lower the cost of living for surrounding villages.
"We have been working on our deep-water port for 40 years now," said Eugene Smith, Kotzebue's mayor. Because Kotzebue lacks such a port, large ships are forced to anchor 15 miles away. Small boats then ferry goods and people to and from shore, adding extra expenses that drive up already astronomical regional shipment costs.
A deep-water port would substantially cut costs for everything from bread to bottled water, while opening opportunities for other economic development. The Ambler mining district, inland from Kotzebue in the Brooks Range of mountains north of the Arctic Circle, is rich with minerals, Smith said. Imagine the potential if there was a road leading from that region to a deep-water port in Kotzebue, he said.
It's yet another Arctic opportunity. But it costs. To bring to reality a port at Cape Blossom some 10 miles out of town will take an estimated $70 million, Smith said -- as much as $40 million for the port and another $30 million to build the road to get there. Thus far, only $7 million has been raised. The money came to the state through a congressional earmark from Rep. Don Young, R-Alaska.
"It's still sitting there in the coffers. We're trying to free it up to at least get the project started," Smith said. In the meantime, earmarks have become a politically hot rock. They are all but extinct in the U.S. Congress, meaning that any future federal funds for Kotzebue first must navigate a Byzantine maze of budget appropriation.
But Kotzebue and other rural Alaskan communities must find the money, somewhere, to press ahead.
The infrastructure necessary to foster new economic muscle will not build itself. To make money, Smith, Michels and Rubenstein all agree, you have to spend money.
And you have to be willing to embrace change.
"I think we've been preserved too long," Smith said. "This state has been in its infancy forever. It's time to start developing it. We can hope. As long as there's enough inertia, things can happen."
There are many at this conference who agree. There are also many elsewhere in Alaska who disagree. And one of the big problems the state faces now is that it is in many ways easier to stop things from happening than to make them happen.
Contact Craig Medred at craig(at)alaskadispatch.com and Jill Burke at jill(at)alaskadispatch.com