Thank you for the invitation to speak before your membership again. I want to especially thank the RDC for working with me to accommodate my schedule. You see I have been traveling to our villages as part of the preparation for our ASRC annual meeting which took place last Saturday in Nuiqsut. It doesn’t seem so long ago that I was in front of the Resource Development Council; you are making my tenure at ASRC fly by!
I want to thank both Marie and Matthew for sharing the podium with me today. Their corporations provide a very strong economic engine to the State of Alaska. The theme today is ‘Developing our Resources while Honoring our Past”. I like this theme and want you to know that the ‘…honoring our past’ is vital to us in the Alaska Native community and as corporate leaders in this state. Our past and our traditional values are what guide us each and everyday. And it is important for us to remember and stay grounded in our heritage and where we have come from.
At ASRC we aren’t focused only on our past; we are working toward adapting to the changes we see on the horizon, we are trying to position ourselves to be proactive in this change to ultimately benefit the economic freedoms of our shareholder base. Sir Winston Churchill once stated “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” These are good words to live by, and the Inupiat have always known this to be true, it is part of our values that have allowed us to survive in the Arctic through the millennia. We are eternal optimists but we are also realists. . . .
tThese are times when we need to be involved in the processes of change and the processes of the projects before us. Not as roadblocks and naysayers because we are afraid of change but as contributors to guide the changes on the way. We need to find ways to control how we can minimize, through mitigation, the impacts to our subsistence and traditional ways of life.
One of the reasons that ASRC participates so heavily in this Council is to try to change negative thinking about local resource development. It is through this forum that we bring to the resource development industry at-large the issues and concerns of our stockholders and local residents. To try to make you aware that while we see the benefits of resource development through revenue, jobs, and improved infrastructure that these benefits do not come without a cost to the Inupiat people who live off the land.
I want to talk to you today about a number of issues that are primarily taking place in some of the most remote and harshest parts of the State the North Slope. My perspectives are shaped both by the economic reality of growing a sustainable local economy in the area and by the fundamental human desire to ensure that my children and others after them will have a livable and prosperous natural habitat. The strategic plan of the Arctic Slope Regional Corporation sets forth the values of our people and the corporation. It states that we “blend Inupiat and business values in order to strengthen both.” That is our challenge as move forward to optimize the benefits for our shareholders. Thirty-plus years ago we were told that natives couldn’t be good business people; we have worked very hard over those years to prove that theory wrong. ASRC has become a major Alaskan-owned business with sustained profitability and gross revenues in excess of $1 billion working our way towards $2 billion.
One of the unique aspects of the Alaska Native Companies, that you as the resource industry need to be aware of, is our revenue sharing provision called Section 7(i). This provision allows all Alaska Native Corporation to benefit from resource revenues received by one region, providing direct benefit to all Alaskan Natives. Through 2006, ASRC has distributed $282,847,998 of 7(i) receivable revenue which is 37% of the total revenue shared by all ANC’s.. Villages on the North Slope have received $22 million over the same period of time. Over two-thirds of the revenue shared under Section 7(i) has been derived from two regions; Sealaska and ASRC, and 89% has been come from three regions, Sealaska, ASRC and CIRI. The fundamental result of Section 7(i) is that the ANC in the region where the resources are developed is in essence the managing partner on resource development for the other regions. This is an important point to understand because you need to realize when you are negotiating with an ANC for an exploration or development option on their lands that ANC is not receiving 100% of the benefit of the final agreement. Another aspect and in ASRC’s view is a disadvantage, Section 7(i) discourages the land-owning ANC from investing in its own resources. In this case, while the expense can be deducting against revenue you need to have a 7(i) revenue source to deduct those expenses against. This increases the risk and uncertainty for an ANC to invest in its own resources. As a result of this aspect of Section 7(i) you will find many ANC are passive on their own lands; when I say ‘passive’ I mean they generally enter into traditional lessee/lessor relationship but will put significant emphasis on other non-revenue bearing provisions of an exploration and/or development agreement.
Well enough of my Section 7(i) primer. The issues and events before us are going to determine the future economy of the state for many decades to come. What I want to share with you is my perspective and what we are planning at ASRC. They are my views and opinions; I am sure not all of you will agree and I may not be right in every instance. I do not want to bore you with studies, charts and numbers. So, this is my view from 71 degrees north, the home of the Inupiat.
There is a lot of talk and planning going on to commercialize the known North Slope natural gas reserves; in fact several projects are on the drawing board to move natural gas to market in some form. Once upon a time, the driver was the balance of payment, but today it is the need for clean energy in our own country and the growing need for electrical power. The shift that has occurred in the use of natural gas in the U.S. has prompted the recent discussions and legislation we are watching and participating in. Governor Palin now has the AGIA which provides a framework for applications to be received by the State of Alaska to receive a license to build a Natural Gas Pipeline. There is no doubt in my mind that moving gas from Alaska to the lower 48 is an uphill battle, but from where I stand in Barrow, I must say it looks all downhill from here.
The future and realization of a Natural Gas pipeline are based on the existing gas reserves of some 35 trillion cubic feet. Some folks peg the estimated reserves at more than 100 trillion cubic feet. This is where the excitement lies for the next several decades. The upside of more exploration for gas means more jobs and a long-term viable economy for Alaska. It could also mean some industrial opportunities and expansions made possible by the availability of plentiful, reliable and reasonably priced natural gas in the State.
As many of you are aware, there are substantial amounts of coal on the North Slope and a lot of it is on ASRC lands. These deposits are known to be in the millions and millions tons and may approach billions of tons. Most of the coal on ASRC lands is very high quality and likely would have been developed if it were located in a more advantageous environment. So it is as an understatement that I say, another project that provides a lot of excitement and energy within ASRC is our Western Arctic Coal project with BHP Billiton. Our agreement with BHP Billiton is something ASRC has worked many years on and was of special interest to my predecessor, Jake Adams and it remains so with me today. While our partner is focused on exploring and defining coal reserves and working on conceptual engineering studies for a mine and related infrastructure; what I am really excited about are the economic opportunities the communities of Pt. Lay and Pt. Hope are starting to realize as a result of our agreements with BHP Billiton. These communities are located far and away from the Prudhoe Bay infrastructure and so have never really directly benefited from the oil exploration and development that has occurred on the North Slope over the last 35 years. Our agreement with BHP Billiton requires them to enter into separate agreements with the two communities. It is our goal for BHP Billiton to build a strong tie to Pt. Lay and Pt. Hope which will thereby build capacity within both villages thus meaningfully contributing to local economic sustainability. We are watching the process closely but so far all we see is success.
For ASRC to finally have a partner to thoroughly evaluate this enormous resource is a significant step towards realization of new energy development from the North Slope. Important to the success of this effort is the expansion of the Delong Mountain Terminal near Kivalina. Cooperation has been the word used more often as ASRC, NANA, TeckCominco and the governments of the Northwest and North Slope Boroughs work together to develop and strengthen the economic stability of the region.
Development of this resource is important to our regions, and I include NANA in this statement. It has the capability of supplying many jobs to both regions. It will provide jobs in mining, power generation, administration, and opportunities in many other auxiliary areas. Jobs are the engine to an economy and a local economy is what will keep our communities healthy and happy. People often think that developing the ASRC coal resources is one of pure exploitation and this is wrong. I am here to tell you that developing the coal will have very slim economic returns to ASRC but it has the real potential to provide a long-term stable base economy to the Northwest Arctic region. That has is my mission and goal.
ASRC’s mission statement, in part, says that our plan is to ensure economic and cultural freedoms for our shareholders. In order to enjoy these freedoms, our people must have an environment and quality of life that allows just that to happen. The development that has taken place in the Arctic over the last thirty yeas has truly enhanced our lives. Certainly, life in our communities in the Arctic has improved with healthcare, housing, sanitation and education. I would like to tell you, that the habitat and the environment that we rely on for our subsistence resources has been well respected by the industrialists occupying some of that space with us. Not only have they respected the land, but they also respect the people who live there and work with them to solve challenges presented by the environment in which we live. Granted there have been some mistakes, but lessons have been learned. Technology and understanding has advanced significantly since the early days of Prudhoe Bay.
ASRC’s plans and my perspectives are obviously pro-development, but I actively participate with my family in our subsistence ways and provide for our communities and families. When I leave the office and travel out on the tundra and ocean, I take very seriously the future of these resources and the habitat we need to survive on. It appears to me that we ARE doing a good job of ensuring economic and cultural freedoms for the Inupiat people.