Where there is no vision, high taxes will prevail

Often, I am asked why the Mat-Su does not have more high-tech and manufacturing businesses. Answer: Alaska has had three barriers to industrial/high-tech development.

1. Long distances from sources of raw materials or sub-assemblies. Impact: High shipping costs that make Alaska goods less competitive.

2. High energy costs. Impact: High production costs that make Alaska goods less competitive.

3. Limited skilled workforce. Impact: High labor costs (if you can find the personnel) that makes Alaska goods less competitive.

Because of these limitations, investors have rarely brought these types of enterprises to Alaska. But in the near future, with ready access to a source of cheap, clean energy, these barriers will fall like the Berlin Wall.

I attended the Meet Alaska Conference on Jan. 10 where Gov. Sean Parnell announced that the state wants to be an investor/partner in liquefied natural gas production and transportation from the North Slope to local and export markets. For me, what was most remarkable was the silence that followed the announcement. There was a lot of whispered discussion, and the darkened room was lit up like a rock concert with hundreds of people typing into their smartphones. Even the governor commented at the podium on the lack of applause.

Finally, after the crowd had time to process their thoughts, the applause kicked in. The impact of this move will be profound, as many post-speech discussions revealed. Whether you think it is a good idea or not, Governor Parnell deserves everyone’s applause for making such a bold move. That’s leadership, and it will catalyze ideas into action. History rarely remembers the cautious.

One thing is sure: the economic pressure for delivering a statewide LNG export project is very high. As the populace and the policymakers realize our oil-based budget’s vulnerability to speculative prices and falling production, diversifying the state’s cash flow will steadily climb the priority list.

Natural gas is one solution. With two natural gas pipeline projects in process, the Mat-Su is geographically positioned to become the industrial focal point of Alaska as both projects have their pipeline routes through the Mat-Su Borough. What that means for Mat-Su residents is high paying jobs and prosperity during the construction period — like during the construction of the oil pipeline. This will be followed by the creation of thousands of family-wage jobs after the construction is over.

Most Alaskans get the first part of that equation: projects = jobs. But how does the end of a project create thousands more jobs than the project itself?

There are hundreds of ways this can unfold. One is the “wind turbine” version. The completion of the Port MacKenzie Rail Extension will make it possible for numerous copper mines to become active in Alaska’s Interior. They will transport copper ore concentrates via rail to barges at Port MacKenzie for export to Asia. (Zinc concentrates now ship from the Kensington mine in Juneau to China every two weeks.) Yes, these are high-paying mining jobs at work.

But what would happen if we took this industry a step farther? What if we used natural gas to smelt the copper ore concentrates to into raw copper right here in the Mat-Su? What if we used the raw copper to produce copper wire right here in the Mat-Su? What if we used the copper wire to produce wind turbines right here in the Mat-Su?

I’m not trying to sell wind turbines. This is only one of hundreds of possibilities. The system I have illustrated is called a value-added economy, because each step in the process adds value to the commodity (in this example, copper).

With a localized, value-added system, the three Alaska barriers mentioned almost fall out of the production cost equation. Barrier No. 1 is solved because of the very short/localized supply chain from raw material to finished goods. Barrier No. 2 is solved by readily available natural gas for applications that need inexpensive heat and electricity. Barrier No. 3 is removed by training in the school system and vocational training programs.

Right now, our youth (and our future) leave Alaska in pursuit of good jobs. Value-added industries give them a future and a reason to stay. Add good public transportation infrastructure, like the Knik Arm Bridge, and the workforce issues we now have are a thing of the past.

Did you know that each one of those big wind turbines on Fire Island contains 3,000 pounds of copper wire? Did any of it come from Alaska? Not one ounce.

So I ask, why not build wind turbines right here in the Mat-Su? Why not any one of hundreds of other value-added copper-critical export industries right here in the Mat-Su? What’s your wind turbine?

Some people may say, “Yeah, Don, but all of that is years away.”

To that I say today’s seventh-graders will be tomorrow’s workforce at Port MacKenzie. Time flies. Get positioned now. Start the conversation about the business opportunities that you envision.

What does this have to do with taxes? When I was a youth in Los Angeles, I went to a great local community college and took a full load for $50 a semester. This was due to the support of the aerospace industry for local education and the share of the tax base that it carried. There were dozens more community amenities that were supported by this industry. I will talk more about these in a later column.

Walt Disney is credited with saying, “If the vision is clear, the decisions are easy.”

One place that will expand and sharpen your vision is the International Trade Boot Camps we are sponsoring. Visit matsugov.us and click on the banner to learn more.

Your possibilities are only limited by your vision. The time is now.

As economic development director for the Mat-Su Borough, Don Dyer is charged with the execution of the borough’s Economic Development Strategic Plan, which can be reviewed at matsugov.us/economicdevelopment.