Sealaska’s move from timber to kelp may signal a wider shift in how Native corporations invest

Last in a series on the Alaska Native Claims Settlement Act at 50: An investment in Barnacle Foods, while small, is a potent symbol of the corporation’s new vision. Other corporations are taking similar steps.

Last in a series. This story is part of a reporting collaboration between Alaska Public Media, the Anchorage Daily News and Indian Country Today on the 50th anniversary of the Alaska Native Claims Settlement Act. Funding for the project was provided by the Alaska Center for Excellence in Journalism.

JUNEAU — Joe Nelson floated his boat along a reef just outside Juneau on a drizzly September day.

With his rifle onboard, he eyed the shore for deer as he steered with the tide. But this was a business trip: He was also looking for a new product that could boost the fortunes of the Alaska Native corporation whose board Nelson chairs.

The boat drifted past dark curls in the water. Nelson reached over and grabbed a greenish tendril, hauling it into the boat: bull kelp.

The species is found up and down the Pacific Coast and can grow as long as 100 feet.

It’s also edible, in products like salsa and hot sauce. And Nelson’s corporation, Sealaska, recently bought a stake in a locally grown company, Barnacle Foods, that sells kelp products across the country.

Nelson, who is Tlingit, grew up hunting and fishing in the remote Southeast community of Yakutat. He’d harvested seaweed. But not kelp — this was a foreign object to him.

“Like, literally from ‘Aliens,’ the movie,” Nelson said, pondering the kelp’s fronds and rubbery, tubular stalks. “I wouldn’t have thought to eat it.”

[Read the other articles in the series]

While Nelson was new to kelp harvesting, he’s been eating it for years, as an early and avid buyer of Barnacle’s salsa.

Barnacle was founded in 2016 by a Juneau couple with a shared love for Southeast Alaska lands and waters, and their bountiful harvests.The company has grown spectacularly, and is on track this year to sell more than $1 million of its largely kelp-based foods.

Sealaska and its more than 20,000 Indigenous shareholders are now helping to fuel that growth.

The company’s investment in the relatively climate-friendly kelp industry highlights a shift in its business philosophy that’s played out over the past eight years.

For decades, the Native-owned regional corporation sustained its business with profits from logging old-growth timber from lands it received through the 1971 Alaska Native Claims Settlement Act, which turns 50 years old this month. It also invested in other, far-flung businesses with little relevance to Sealaska shareholders.

The vast majority of Sealaska’s hundreds of millions of dollars in yearly revenue still comes from its comparatively unglamorous holdings in seafood processing and environmental services like maritime drilling and construction.

[From Indian Country Today: Cheat sheet: Alaska Native Claims Settlement Act 101]

But its investment in Barnacle, while small, is a potent symbol of the corporation’s new vision. In the past few years, Sealaska has announced that it’s selling its old-growth logging business. It has sold carbon credits on its remaining uncut timber. And it has narrowed the focus of its other businesses around the theme of “ocean health,” an acknowledgment of global warming’s growing impact on Sealaska’s ancestral lands and around the world.

Sealaska is not the only Native corporation to take similar steps into conservation and sustainability. At least two others have gotten into the carbon credits business, and another, in the Bristol Bay region, has struck a nearly $20 million deal with a conservation group to place Native corporate lands out of reach of the proposed Pebble mine.

[Part 1: A historic settlement turns 50, but questions linger over whether it was fair]

[Part 2: Many see the Red Dog mine as an ANCSA success story. What happens when the ore runs out?]

[Part 3: Proposed Ambler project underscores promise and peril of the Alaska Native Claims Settlement Act]

[Part 4: ANCSA made only Natives born before December 1971 corporate shareholders. Those born after want change.]

Sealaska officials are careful not to tout their new ideas as a prescription for other corporations, some of which remain heavily invested in extractive industries like oil and gas and mining.

But Sealaska leaders seem to agree that, after nearly a half-century of struggle to meld Indigenous values with their for-profit business, the corporation has finally hit on a formula that works for them. The corporation, Nelson says, has moved away from what he describes as “false paradigms” embedded in the land settlement — that, as Natives, “we’re going to be Indigenous culture bearers on the weekends, but from Monday to Friday, we’re going to be in the boardroom doing business, capitalists.”

Native people, Nelson said, are “not here all for pure resource extraction or pure conservation. Sustainability is built into our thinking.”

“You really shouldn’t separate those things,” he added. “You get to better outcomes, the world is realizing now, by having some of your groundedness and Indigenous thinking embedded in what you’re doing.”

Polarizing timber harvests

Sealaska was born out of the 1971 Native claims settlement act, which granted the corporation what it says is less than 2% of shareholders’ traditional homelands: 360,000 acres, a tiny slice amid the 17 million-acre Tongass National Forest that stretches across much of Southeast Alaska.

After the act’s passage, Sealaska and Southeast Alaska Native village corporations got into the timber business. Old-growth logging helped fuel their expansions and programs and, in some cases, generated dividend payments for shareholders that topped $50,000.

Indigenous Alaskans outside the region also benefited, as the land claims settlement requires each regional Native corporation to redistribute 70% of their natural resource revenues to the other corporations.

The harvests were polarizing, pitting the Native corporations against conservationists and tribal groups, and even family members against each other. Critics objected to the damaged salmon streams and threatened deer populations that clear cuts could sometimes leave behind.

But even as some Sealaska officials said they felt conflicted about the harvests, they also said their surveys showed shareholders in support.

Timber cutting “looks like hell,’’ a former Sealaska chief executive, the late Byron Mallott, told the Anchorage Daily News in 2001. But, he argued, leaving the trees standing would be ‘’ludicrous’' for the business, and the profits bettered shareholders’ lives.

‘’We can make some harsh judgments now,” Mallott, the father of current Sealaska chief executive Anthony Mallott, said at the time. “But it was done under the existing regulations.”

[From Indian Country Today: Alaska Sen. Lisa Murkowski: ‘ANCSA continues to evolve’]

With a finite amount of timber to cut, Sealaska looked to diversify its business, with investments in industries like limestone mining, gaming and wireless communications. But those efforts produced mixed results.

Anthony Mallott said that in their early decades, Sealaska and other Native corporations had a “heavy mantra” that Indigenous values should be kept at arm’s length from business decisions.

“Your fiduciary duty was just to make money — don’t let the community stuff or the value stuff get in the way,” Mallott said in an interview. “We called it hiding behind the fiduciary shield.”

Nelson, Sealaska’s chair, arrived on the board in 2003, after Sealaska had invested in a plastics business. The manufacturing enterprise had facilities in Mexico, Alabama and Iowa, making products like Brita water containers and laundry detergent caps.

Nelson grew up spending a month at a time off the grid at fish camp. He lived in Southern California during college and law school, going to the beach and eating organic food. He said he arrived back in Alaska with a “different level of consciousness” that gave him other ideas about Sealaska’s direction.

“All my life, I saw plastic washing up on the beaches, and it didn’t work for me personally. Philosophically, it didn’t fit,” he said. “But I never won any arguments based on my philosophy, really, in the boardroom.”

Ultimately, business imperatives forced Sealaska into a restructuring. In 2013, it reported $35 million in losses, largely attributable to a heavy construction subsidiary in Hawaii that underbid a major project. The plastics investment and others had underperformed, and Sealaska had cut down almost all of its easily accessible timber, said Anthony Mallott.

Current Sealaska leaders say the corporation’s early decisions are understandable when seen as artifacts of colonization and assimilation.

Some of Sealaska’s original leaders attended government-run boarding schools that U.S. Interior Secretary Deb Haaland, who is Native American, describe as “an effort to eradicate our culture and erase us as a people.” Those early corporate leaders were also testing a capitalist business model with little basis in Native culture.

“They were living an assimilated life, and attempting to uplift that the best that they could,” said Barbara Blake, a Sealaska board member. “This current leadership is more in tune with who we are as Indigenous people, because we’re in a privileged space to be able to reawaken that without fear of being harmed, or being seen as less than.”

A changing model

The financial crisis, Mallott said, gave Sealaska leaders a “full mandate” to change the corporation’s business model.

Mallott said nearby all of the corporation’s other lines of business — roughly a dozen — were sold off, with logging a notable exception.

The board began developing a new vision around Haa Aaní, their ancestral homelands. The “ocean health” theme for Sealaska’s businesses emerged from the threats posed by climate change, and the corporation expanded into seafood, an industry that Mallott describes as “relevant and meaningful” to board members and shareholders — many of whom are fishermen themselves.

The timber business, however, gradually became less viable amid a decline in Southeast Alaska’s logging industry, Mallott said. Instead, over the past few years, Sealaska has been paid more than $100 million to keep its timber unharvested, for use as carbon offsets.

By 2019, a few years into Sealaska’s pivot, the owners of Barnacle, the kelp foods company, had already identified it as their best-case business partner and investor when a chance dinner encounter set off formal discussions.

Barnacle’s potential

As Nelson searched the Inside Passage for seaweed in September, Barnacle co-founders Lia Heifetz and Matt Kern were onshore a few miles away, making one of their most popular products.

Inside Barnacle’s commercial kitchen, in an anonymous warehouse not far from Juneau’s landfill, employees first scrubbed and sanitized equipment. Then, they used an industrial-sized food processor to chop frozen kelp — collected locally earlier in the year — and mixed it with garlic and fermented serrano pepper in a huge kettle to cook.

In a few hours, they’d bottle it as “bullwhip” hot sauce.

Kern and Heifetz, who are engaged, both grew up in Juneau and left for college. When they returned, they reconnected around locally harvested foods.

“Every food preservation hobby that we did together was always borderline out-of-hand,” Kern said. “We wouldn’t go out to just pick a batch-of-muffins-worth of blueberries. We’re going to hike into the alpine, and we’re not coming back until we’re sweating.”

Barnacle grew out of that enthusiasm. It started with kelp salsa, which Heifetz and Kern first encountered as a distraction from slow fishing: If nothing’s biting, at least you can come home with something else to eat.

Each year, they found themselves bringing larger and larger vessels to fill with more kelp for home cooking parties.

“To the point where we were bringing out Rubbermaid totes and 50-gallon barrels and filling up our kitchen with jars and overflowing the cupboards into cabinets and garages,” Kern said.

Heifetz, Kern and business partner Max Stanley are not Native, and they’re not Sealaska shareholders.

But they’d worked on projects with Southeast Alaska tribal organizations. The vision for their business – elevating Southeast Alaska’s environment and culture through sustainably harvested foods – also seemed to dovetail with Sealaska’s new direction.

Nelson, the Sealaska chair, was one of Barnacle’s first customers at a local food festival. And in its first year operating, Barnacle won a $40,000 economic development grant from a Sealaska-funded group, Spruce Root.

The company’s salsas and pickles made it a quick sensation with locals and Juneau tourists. It has since expanded into larger markets, with attractive labels and wild ingredients that have helped Barnacle’s business double or triple every year after its founding.

Eventually, owners Heifetz, Kern and Max Stanley realized they needed an investor to finance Barnacle’s growth, and Sealaska was at the top of their list. Conversations started after Heifetz ran into the corporation’s chief operating officer at a downtown Juneau pub.

Barnacle’s relatively small size meant that it wasn’t a perfect match for a Sealaska investment. But everything else about it seemed to fit, Nelson said.

The startup came with potential local jobs, out on the water, for Sealaska shareholders. It helps boost Southeast Alaska’s regional economy, aligns with Sealaska’s ocean health theme and taps into a sustainable resource from the ocean, Nelson said.

“If you just contrast this product, which you’ll find in all the stores and my cupboard and my refrigerator, with the products that we were involved in in the late ‘90s — Philly cream cheese cups and Tide bottle caps — I would say there’s a definite contrast and a different sense of affinity,” Nelson said. “And this salsa, this hot sauce is actually pretty darn good.”

Early last year, Sealaska bought a 30% stake in Barnacle for $1.5 million, which the company’s founders say will be invested directly into its growth, and equipment and processing capacity.

While it’s a tiny sum on the scale of Sealaska’s overall operations — it reported $697 million in revenue last year — leaders say it’s an important symbol of the corporation’s direction and vision.

Sealaska still contends with a group of disaffected shareholders, though. And some who fought Sealaska’s logging business are skeptical that the corporation’s transition out of the industry will last.

Asked about Sealaska’s announcement that it’s ending harvests of old-growth timber, Wanda Culp, a longtime critic of the corporation’s logging business, said she remains unconvinced.

“‘Yeah, we’ll see,’ is the way I felt about it,” Culp said in a phone interview. “Because, where’s their approach coming from? Their approach isn’t coming from within — it’s not coming from our Indigenous point of view, or grassroots.”

Sealaska leaders, though, say they don’t envision a return to old-growth timber harvesting any time soon.

The corporation has opened its shareholder base to younger Natives born after the original December 1971 deadline for receiving stock. And many of those newer shareholders place a higher value on land stewardship and cultural revitalization than they do on corporate profits.

Nelson, the board chair, described the old-growth timber industry as being in Alaska’s “rearview mirror” in a recent letter addressing a logging controversy in his home village of Yakutat.

But even as Blake, the board member, largely agreed, she also said she understands shareholder skepticism about the staying power of Sealaska’s shift.

“It’s fully warranted,” she said.

“It took a long time to get to this place of distrust within our shareholder base. And it’s going to take a long time to regain that trust,” Blake added: “But I don’t think we’re going to go back to the way things were any time soon. We’ve still got a long ways to go, but we’re head over feet closer to a better path than we were, even 10 years ago.”