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Providing coverage of Alaska and northern Canada's oil and gas industry
August 2009

vol. 14, No. 34 Week of August 23, 2009

AK-WA Connection 2009: Firms find ways to weather the storm

Drawing on experience, diversity and innovation, companies make the Alaska-Washington connection to offset effects of recession

By Rose Ragsdale

Alaska-Washington Connection

Businesses engaged in the Alaska-Washington trade, along with the rest of the nation, have spent recent months coping with challenges presented by the worst economic downturn in modern history.

They owe their survival, in part, to years and, in most cases, decades of experience meeting the needs of their customers while delivering quality and often unique goods and services.

“It’s easy to sell something,” said Buz Jackovich, owner of Fairbanks-based Jackovich Industrial & Construction Supply Inc. “But you need to be able to back up that product if something happens.”

Jackovich, like many other business owners in the Alaska-Washington trade, has successfully focused on the needs of customers who must operate in the arctic and sub arctic conditions presented by Alaska’s harsh winters.

Since Buz and his uncle, Joe Jackovich, purchased the Alaska stores of Seattle’s Western Tractor in Fairbanks and Anchorage in March 1969 and renamed the business Jackovich Tractor, the firm has provided critical support to oil and gas service companies that built the oil and gas infrastructure from the North Slope to Valdez that has served Alaska so well.

Jackovich, the son of a Yukon Territory gold miner, was born in Alaska in the 1940s and made his home in Fairbanks.

Today, three generations of Jackovichs make their home in the Interior city and the business is celebrating its 40th anniversary this year. In four decades, Jackovich Industrial & Construction Supply has grown into one of the state’s premier industrial vendors, supplying contractors not only in oil and gas but across the industrial spectrum in Alaska.

“We grew up with the oil and gas contractors, supplying them along the way,” said Buz Jackovich in a recent interview.

The firm employs 65-75 workers, including Jackovich’s son, Troy, and nephew, Ryan Barnett, and maintains more than $3.5 million inventory in three other stores besides Fairbanks - two in Anchorage and one in Wasilla.

“And all of our freight and consolidators come through Washington,” said Jackovich, who acknowledges the importance of the Alaska-Washington connection.

Surviving the ’70s and ’80s

Jackovich has fond memories of his first year in business when oil companies and their contractors scrambled to get men, equipment and supplies to the nearly inaccessible North Slope in the months after the discovery of the Prudhoe Bay oil field.

Then came construction of the 800-mile trans-Alaska oil pipeline in the 1970s and the major buildup of men and supplies that accompanied the $11 billion project.

It was after the pipeline was completed that many Alaska firms mistakenly geared up for construction of a gas pipeline in the late ’70s and then oil prices plummeted in the early ’80s, said Jackovich.

“That was the biggest downturn that we’ve ever experienced,” he recalled. “We were getting ready for a gas pipeline, and it never happened. We had a lot of surplus, and it took a long time to sell that inventory.”

Jackovich said the situation was so dire that some businesses did not survive. The challenge, he said, was how to get tooled back enough to stay in business.

“The answer for us was to diversify, to go into different product lines,” he said. We opened other stores, began supplying the military bases and began to do a lot of testing with the government.”

Diversify to dilute impact

Jim Blasingame, longtime executive for the Alaska Railroad Corp., said diversifying also saved that venerable Alaska institution.

In fact, it was after the railroad, long a financially ailing entity under federal ownership, was purchased by the State of Alaska on Jan. 5, 1985, that its business outlook brightened, said Blasingame.

“Since we came under state ownership, (former) Sen. (Ted) Stevens got us Federal Transportation Administration funds,” he said.

In exchange for much-needed federal aid, the railroad must provide year-round public scheduled passenger service. The $35 million to $38 million that the railroad receives annually from the FTA can only be spent on capital improvements such as new track and new equipment.

Blasingame said the FTA funds have made a big difference in a budget often stretched thin by unexpected expenses. For example, the money helps with covering the cost of annual repairs to the railroad’s more than 500 miles of track and with purchasing new locomotives for increasingly diverse and demanding services.

“We’ve done well because of diversity. We have freight and passenger services and more than 36,000 acres of real estate we can lease,” he said.

From real estate lease revenue alone, Blasingame said the railroad collects $13 million to $14 million annually.

“That helps us with the ups and downs of the economy,” he added.

Tenacity helps

Sometimes just sticking with the business can make the difference. Take Sampson Tug and Barge, for example. Samson Tug and Barge began as a horse and cart operation which delivered materials and goods to mining camps. Known as Baggen Transfer, George Baggen Sr. based the company in Juneau. In 1937, Baggen and his son George Jr. founded Samson Tug and Barge with a single tug providing freight hauling services throughout Southeast Alaska.

The Samson fleet expanded in the 1950s. The company hauled freight and a variety of cargo between Southeast Alaskan communities. By 1960, Sitka was home to Alaska Pulp Corp. and its mill which employed over 300 people. Samson Tug and Barge provided log raft and chip barge towing to the plant for about 20 years. Samson acquired bigger and more powerful tugs as the fleet saw more growth.

The 1980s were a time of transition for Samson Tug and Barge. The military contract for freight services to Adak was awarded to the company. when the pulp mill closed in Sitka in the early 1990s, Samson had already moved into the large-scale freight hauling arena. The addition of even more powerful boats, barges capable of transporting massive volumes of freight and fuel enabled Samson to service a route which encompassed the entire Pacific Rim of Alaska.

Throughout its 72-year history, the family-owned business has focused on providing outstanding service to its friends and neighbors in Alaska and coped with setbacks as they occurred.

One blow was the sudden death of George Baggen Jr., after which his son and successor, George Edward Baggen, took over running the business at age 21. When young Baggen stepped up, providing the operation with a third generation of leadership, he had little experience running a business. Fortunately, he earned his boat captain’s license at the age of 13 and spent his teenage years running tugs up and down the Southeast Alaska coast.

Drawing on what he knew, Baggen kept the business going, enabling it to change and grow as opportunities presented themselves.

Today, Samson Tug and Barge operates seven Alaska locations from Ketchikan to Dutch Harbor, along with several warehouse locations in Seattle. And the family’s fourth generation, through Baggen’s daughter, Cory, is instrumental in leading the Sitka-based firm.

“That’s the story of our company. We’re like salmon swimming upstream,” added Cory Baggen.

Reliable and flexible

Wostmann & Associates Inc., a Juneau-based information technology firm, is working hard to alleviate pressure that the recession has exerted on its revenue stream in 2009. Wostmann aims to refine, improve and enhance its existing services, while generating new business opportunities.

Ironically, 2008 was a particularly good year for Wostmann. The firm continued to grow in response to the demand for local IT services.

“I believe the Alaska economy lagged behind the Lower 48, because the recession did not hurt us as early as it did other businesses. But 2009 definitely has brought some changes. Declining oil prices has caused a corresponding drop in State of Alaska spending during the first half of the year,” said Sander Schijvens, Wostmann’s vice president of professional services.

Recently, the crunch eased as people have become more upbeat about the economy and the federal stimulus money has injected increased spending in some areas, Schijvens said.

Wostmann was able to maintain its 40-employee work force through the first half of 2009, and the second half looks stable, he said.

The firm opened a new office in Fairbanks at the beginning of 2009.

Schijvens said the firm is scouting the Interior city for potential clients, including oil and gas line providers.

“We’re also aggressively looking into new markets to ensure that we have a balance of work between state, federal and private companies, especially private companies, and there are some bright prospects,” Schijvens said.

As an example, he cited recent news that Coeur Alaska Inc. is moving ahead with preparation for gold production at Kensington Mine near Juneau. “We’re looking for possible work with them,” he said.

Delivering more than 100 percent

Wostmann is also focusing on enhancing its services to existing customers, including state, federal and private sector.

“We always strive to be a strong partner with our clients but realize that there is always room for improvement. One of the things we did to demonstrate our commitment in this economy is a customer satisfaction survey at the beginning of the year,” Schijvens said. “Even after being a primary contractor for clients for more than 10 years, we want to do what we can to improve and really differentiate ourselves in the marketplace by being a partner rather than just a service provider by providing good value to our clients.”

Opti Staffing Group is an employment services firm that is also working to distinguish itself in the marketplace by going the extra mile.

“We’re probably faring better than some in this economy,” said Opti Staffing co-owner Mike Houston. “We have a very diverse clientele which dilutes the impact of the downturn.”

Unlike competitors that do a high volume of employee placements, Opti Staffing focuses on effectiveness by presenting fewer candidates for job openings but ensuring that all placements offer a strong possibility of a long-term fit.

A micro-regional firm, Opti Staffing has two offices each in Washington and Oregon, one office in Alaska and a location it opened in Chicago in 2008.

After a lot of “hard work,” Houston said the Chicago office is up and running with five staffers and 40 contractors. At its five established offices in the Pacific Northwest, the firm has maintained about the same number of contractors this year but allowed attrition to trim several staff positions.

“We’re doing the same work with fewer people,” he added.






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