ANCSA is bringing a big infusion of cash to Alaska, but its biggest contribution is in developing Alaska’s human resource

Second in a series. The 50th anniversary of the Alaska Native Claims Settlement Act is Dec. 21

Alaska Native corporations are bringing a big infusion of cash into Alaska’s economy.

Precise figures are unavailable but one indicator is that an official at one of the state’s largest banks, speaking on background, estimated that 25 percent of the money flowing through the bank in deposits and loans originated with Native regional and village corporations.

The estimate is not surprising considering the wide range of business activities that Native corporations are engaged in today. It include companies operating in Alaska owned by Native corporations that are major employers, but there are also businesses outside Alaska that are owned by Native corporations.

The corporations are enterprises formed under the 1971 Alaska Native Claims Settlement Act, or ANCSA.

ANCSA created regional development corporations in 12 regions of Alaska with distinctive Alaska Native ethnic identities as well as village corporation in communites within each region.

When Congress passed ANCSA in December, 1971, 50 years ago, 44 million acres of Alaska lands were returned to Native ownership from the 365 million acres in the state. Congress also appropriated $962 million in a cash settlement as compensation for the lands not returned to Alaska Natives.

The 12 regional and about 200 smaller village corporations were formed as private entities under state of Alaska laws. There was also a 13th regional corporation absed in Seattle that Alaska Natives living outside Alaska could choose to enroll in rather than their home region in Alaska.

The cash settlement was to provide t seed capital for the corporations to invest and grow.

By most accounts the experiment has been a success. Over 50 years the corporations have bought and built hotels and office buildings, most of these in the state’s larger cities, as well as starting or purchasing construction and industrial support firms.

Early on, one regional corporation, Cook Inlet Region, Inc. of Anchorage, was able to acquire lucrative telecommunications licenses. Others, like NANA Regional Corp., Doyon Ltd., Arctic Slope Regional Corp, Ahtna Inc. and later Bristol Bay Native Corp., provided support services to oil and gas companies operating on the North Slope.

These were first in joint-ventures with established service companies and then on their own after buying out the partners. Other corporations invested in seafood, with mixed results given the volatility of this industry. Others, with natural resources on lands they owned, moved to develop timber, mines and oil and gas.

Sealaska Corp., in Southeast Alaska, formed Sealaska Timber Corp. to harvest and sell timber from its forest land. NANA worked with a mining company to develop the Red Dog Mine on its Northwest Alaska lands. Red Dog is now the world’s largest zinc mine.

Cook Inlet Region had natural gas production on some of its land in Southcentral Alaska and then Arctic Slope began receiving royalties from oil production on North Slope lands where it was a part-owner of mineral rights, with the state, on North Slope lands.

Under ANCSA Arctic Slope was able to select some lands in the National Petroleum Reserve-Alaska where oil was discovered and subsequently developed. ASRC receives all of the royalty from these lands.

A unique feature of ANCSA, however, is that Native corporations lucky enough to find and develop resources on lands they selected are obliged to share 70 percent of the revenues with all other Native corporations. Congress included the revenue-sharing in Section 7i of the settlement act.

It was intended to ensure that the benefits of natural resources could be shared among corporations lucky enough to have natural resources on their lands and corporations without resources.

Another unusual feature of the Alaska Native Corporations, although this came after passage of ANCSA, is that the federal government chose to allow them to compete for federal support service contracts under special rules for minority-owned enterprises that allow federal agencies to negotiate contracts with ANCs rather than have them go through the normal competitive bid process.

The rule also opened up federal contracts worldwide for the Alaska Native corporations. Most regional and many of the larger village corporations jumped on this opportunity, and although the profit margins in these were very thin the size of the contracts made it very profitable for a period.

What’s interesting is that these special privileges for minority firms can last only for certain number of years, the intent being that it allows a period for the minority companies to gain experience to be able to get contracts without the no-bid provisions.

Today many of the Alaska Native corporations who were originally in federal contracting under the protected status have “grown out” of the program and now compete fully on their own, and continue to win contracts.

What’s interesting about this is the ANCs bringing their profits from out-of-state investments back to Alaska with much of this invested in the state in the Alaska-based businesses owned and operated by the corportions.

Over the years some of ANCs have been very successful, growing into multi-billion-dollar enterprises thanks to the skills of their management or sheer luck. Others have been less successful. However, information on the financial performance of Native corporations in aggregate is hard to come by.

Some of the most successful Native corporations have multi-billion-dollar annual revenues but are intensely private about their finances. Arctic Slope Regional Corporation, for example, one of the financially strongest of the ANCs, will not provide a copy of its annual report to non-shareholders. That is its right, of course, as a private business.

One source of information on financial performance of ANCs is from Alaska Business Monthly magazine, which includes the largest Native corporations in its annual rankings of businesses operating in the state.

The information is not fully vetted, however, because it is self-reported to the magazine and not independently verified. It is useful, however, in comparing ANCs with other major Alaska businesses on the list, although those are not independenty vetted either.

Another source of information, although its financial information is now dated, is from the Alaska Regional Association, which published ANCSA corporation data until 2018. This information is reliable, however, because it was independently verified by a third party financial analyst working under confidentiality agreements with the association and the ANCS contributing data.

The association published an annual report on performance of the 12 Native regional corporations and several of the larger village corporations for many years that included dividends paid to shareholders as well as the number of employees, Alaskan and non-Alaskan, employed.

The association dropped the report after 2018, however, and the report published that year included only some of the information, dividend distributions and scholarships, but not the full range of aggregate data pubished earlier.

But even the dividend data published in 2018 illustrated the financial heft of the dividends, which that year ranged between $200 and $3,700 for a typical regional corporation shareholder with 100 shares, according to the regional association report. In many Native households there would be two adults with 100 shares each.

Village corporations also pay dividends on their business profits and many Native people are shareholders in their regional and local village corporations. In many cases people get dividends from both the regional and village corporations.

The Alaska Regional Association data is at: https://ancsaregional.com/economic-impacts/

Although it is now a decade old, the most reliable, fully-vetted report on aggregate ANCSA performance is a U.S. General Accounting Office report. The report found that the top three ANCs in term of revenues and income in 2010 were Arctic Slope, earning $2.33 billion in revenues and $164.4 million in net income that year; Bristol Bay Native Corp., earning $1.66 billion in revenues and $43 million in net income, and NANA Regional Corp., with $1.59 billion in revenues and $41.1 million in net income.

Among these three ANCs, ASRC paid out 164.43 million in 2010 dividends, or 45% on net income; BBNC paid dividends of $43 million, or 17 percent of net income , and NANA paid dividends of $41.1 million, or 51 percent of net income.

The report was issued in 2012, just after the 40th anniversary of the settlement act. It was requested by then-U.S. senator Claire McCaskill who unhappy with the special minority preferences given the Alaska ANCSA corporations and who were in competition for federal contracts with non-minority businesses in her state of Missouri.

In addition to dividends, almost all the regional corporations provide monetary payments to elder shareholders. The GAO report found corporations make cash payments, often quarterly or annually, to their elder shareholders, starting at age 60, 62, or 65, depending on the corporation.

The regional corporations provide these payments—which ranged from $300 to $4,000 per individual during the 2010 reporting period—through various mechanisms, including from designated trusts, as a separate class of shares, or in cash payments authorized by the corporations’ boards.

Several corporate officials told the GAO that these payments often constitute an important source of income for elder shareholders, who may not otherwise have a retirement income. The GAO report is at: https:ww.gao.gov/assets/gao-13-121.pdf

One of the less quantified benefits of ANCSA, however, may be its impacts in higher education for young Alaska Natives and the development of professional and technical skills among shareholders working in the corporations and subsidiaries.

Almost all of the ANCs have scholarship programs but 12 have created formal education foundations funded by a share of corporate profits. Between 1971, when ANSCA was passed by Congress, and 2018, the last Alaska Regional Association financial report, these foundations have made $100 million available through 54,000 scholarships and grants, according to the association.

The most direct evidence of benefits of this can be seen in the many Native CEOs and COOs of ANCS, male and female, who bring MBAs and other advanced degrees, many from prestigious universities, back to their home state to build the Native corporations and the state’s economy.

Development of a skilled and educated Alaska Native workforce by the corporations, who are very likely to remain living and working in the state no matter who they work for, may be the most important benefit of ANCSA.