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Fuel delivery to Nome, Alaska: A mission of economics or humanitarianism?When Alaska Gov. Sean Parnell urged the federal government to green-light an exceptional sea voyage in the depths of an unusually cold Alaskan winter, he spoke ominously of what would befall the remote community of Nome, Alaska -- isolated and off the road system -- if it didn't happen. But as justification for the saga was compressed into sound bites, one important detail was lost: people were not in immediate, if any, jeopardy; enough fuel was on hand to keep homes heated. Also unmentioned was the need to keep up a construction timeline for shuttering a nearby gold-mining operation -- work that required 150,000 gallons of the dwindling fuel supplies. Parnell told the U.S. Coast Guard that without the sea-driven load of 1.4 million gallons of fuel, fuel prices would skyrocket and "many families would soon be forced to choose between paying for heating oil or buying food." Relief for Nome residents must be a top priority, he said. The city of Nome suggested if supplies got too low, school buses would stop running and police cars wouldn't have enough gas to answer every call for help. Alaska's congressional delegation shared the same sense of urgency, and pressured government agencies, like the Department of Homeland Security, to give the mission an "all clear." From the streets of Nome to the offices of high-level officials in Washington, D.C., cries to avert oncoming doom were sent and heard. Yet at its core, the extraordinary mission was a business decision, not one of humanitarian relief -- which is not to say one comes without the other. "I think they are intertwined," said Jason Evans, a chief proponent of the "Alaska Ice Mission" and chairman of Sitnasuak Corp., the largest of the 16 Alaska Native village corporations in the Bering Straits region. "We couldn't just say we ran out of fuel and stop selling it. We have 800 to 1,000 customers that rely on us," Evans said. Had the fuel tanker never arrived in Nome, the resulting fuel shortage would have undoubtedly caused hardship. But the 3,500 people who live on the shore of Norton Sound were getting by, and early assessments showed enough fuel was on hand to keep homes warm and city services running until March. Two companies sell fuel to people and businesses in Nome. Only Bonanza Fuel, owned by Sitnasuak, was short on supply. Bonanza's competitor, Crowley Marine, had enough to service its own customers all winter long and had extra on-hand to sell to Bonanza -- an additional 300,000 gallons of diesel and gasoline. "I think it's serious," Crowley's Bob Cox said from Anchorage earlier this month. "I don't think the Renda is the only option, but that's the one they chose to go with." Without delivery by sea, Bonanza would have been forced to charter planes to bring in additional fuel, a last resort many view as more costly, more cumbersome, more risky. A DC-6 aircraft that could carry about 4,500 gallons of fuel per trip might have to make 300 trips to bring in the estimated 1.4 million gallons. Cost of coastal livingMany families throughout Alaska warm their homes with home heating oil, a fuel similar to diesel. Because winters in Alaska can be cold, long and harsh, the state monitors local supplies before winter settles in to ensure communities have what they need for chilly months ahead. Because fuel costs more in Alaska -- and it costs the most in places where people can least afford it -- there is also perennial concern about whether people can buy what they need to survive. Per-capita income in Nome is a little more than $32,000, according to the U.S. Census, much less than Anchorage and lower than the national average. Four percent of Nome’s residents live in poverty, according to census figures. Beyond the statistics, though, more people than that likely have a hard time making ends meet. Poverty numbers would rise if adjusted for the true cost of living in Alaska and, then again, for living in rural Alaska, said Neal Fried, an economist with the Alaska Department of Labor. "Russia to Build Six New Icebreakers": http://www.barentsobserver.com/russia-orders-six-new-icebreakers.4940947-117495.html "Russia, Finland to build icebreakers for Arctic region": http://www.barentsobserver.com/russia-finland-to-build-icebreakers-for-arctic-region.4865122-16334.html It seems to me that this whole fuel thing was/is a good thing in that we found out that we could break ice for 300 miles through very thick ice. There were no major problems. These two crews seemed very good at their jobs. All in all it seems to me that we found out many things as well as getting the fuel to Nome. Delta Western should be held responsible for all the costs of replacing it's missed deliveries. I'm a resident of Nome. I spent the better part of my day on Saturday watching the Healy and the Renda maneuver around the harbor getting into position. Everyone in Nome realized that we had enough heating fuel, though none of us welcomed the thought of rationing gasoline or diesel when those stores ran out. Neither did we like the idea of $9 or $10/gallon fuel if Bonanza had it flown in-either on their own or purchased from Crowley.But certainly we would have bucked up and survived, with or without the ruel shipment. We've also been waiting for a news outlet to cover some of these known economic realities. The Nome Nugget had a decent piece last week, and I commend the Dispatch for this article. I can be pretty cynical about these things, and I'm friends with both detractors quoted in the article. But I have to say, is it outrageous for the Healy provide support for this mission? I saw a scientist speak last week about his research. He's been on the Healy many times during winter trips in the Bering Sea and he quoted a $50,000/day price tag. I have no idea how accurate that is for this trip, but when I did the math, I figured that even in that range, if Sitnasuak paid for the Healy, it still would be cheaper than flying it in. And so what if the taxpayers foot the bill? Don't we pay for a variety of business/private enterprise support, as well as humanitarian aide all over the world? The state of Alaska paid for the road to the mine that now needs this fuel to shut it down. Why wouldn't the state lobby the feds to allow this delivery? My tax money pays for way worse things than a Healy escort, like maybe endless war? And an oil war at that. Sitnasuak made a business decision, and did what just about every single corporate entity does in our "free market" society, they took advantage of government support.(Think tax break, infrastructure, regulation side-stepping, or in this case, the Healy). No doubt Sitnasuak will plan better in the future. Here in the Bering Straits we're often host to a variety of adventurous firsts-crossing the sea to Russia by foot, ski, floating sled, or row boat, to name a few. This winter, it's the Healy and the Renda, two big red boats plowing through the ice. The Healy support is completely justified. Not only is it US code that USCG vessels can provide assistance in US waters to foster maritime commerce, it's not that great of an expense compared to all the money the USCG spends on constantly flying training runs in their C-130s. It's not logical to lend a blind eye to all of the tax money they spend on 'training runs' and then loudly complaining about an assist operation You brought up some very interesting things for me. I live in Middle Tennessee. I am a long way from your home town of Nome. Ditto, right on. Besides the federal taxes which the average income in Alaska puts us in the top bracket, we also contribute 3200 dollars each in royalty money from our oil. We also provide jobs to Seattle with its Jones Act protection. Without the Jones Act Alaska would have the economy of the west coast to push through railroads to Canada and Nome to haul Asian things to Canadian and American markets. So in lieu of that protection support the Healy. Sitnasuk can now tell shippers they have Russian competition now and if they can't deliver on time we will go elsewhere. The University of Washington Library's Guide to the Wesley L. Jones Papers 1896- 1932 http://digital.lib.washington.edu/findingaids/view?docId=JonesWesleyLivsey0157.xml;brand=defaul states in the Biographical Note: "Jones rose to become the Republican whip and served as chairman of the powerful Appropriations and Commerce Committees. Jones unflaggingly promoted federal investment in the Pacific Northwest; he led the development of the Puget Sound Navy Yard at Bremerton, successfully championed several federal irrigation projects in the region, and drafted the Jones Merchant Marine Act of 1920, which stipulated that only American ships could carry cargo between American ports (which made Alaska dependent on Seattle-owned shipping firms)." The Jones Act is a dinosaur. The only reason the Jones Act exists is because a guy from Seattle found himself in an opportunistic position in the federal government that he could exploit to suck money out of Alaska. Otherwise, the Jones Act would never have been created. You can drive in a foreign built car or bus from one U.S. town to another; you can fly in a foreign built plane from one U.S. place to another, you can ship yourself or your freight in foreign built trains from one U.S. place to another, but you can't ship yourself or your freight in foreign built ships from one U.S. port to another. This act is flagrantly protectionist and irrational, and it is also one of the reasons Alaska is a more expensive place to live in (especially in places like Nome). I think it is sad and pathetic that the State of Alaska had to request permission from the Federal Government in order to use a foreign built ship to transport fuel from one Alaska port to another-- apparently, under the Jones Act, the only reason Alaska was allowed an exemption to the Act was because this was an exceptional emergency situation. This is asinine. Here is another scenario-- what if an exemption of the parasitic Jones Act hadn't been requested? Then what would the federal government have done? Would it have ordered the Coast Guard to intercept and seize the tanker and cut off a humanitarian fuel delivery to an American town? Just because the tanker is foreign flagged? The United States can't afford to maintain a seaborne presence in its arctic regions year round. Russia can maintain a presence. Many of their ice rated ships have been built in Finland-- they don't have a Jones Act. A friend of mine calls Seattle the "Gateway to Alaska." I call Seattle the Tollgate to Alaska. Jones was from Seattle and he was one of their tollgate guys. Thanks Jill for getting some missing numbers, asking intelligent questions, and framing this as it should be. I did some back of the envelope cost/benefit analysis, based on bits picked out of prior coverage, looking things up on the net, and making reasonable stabs at interpolation. The benefit, using the earlier reported difference between flying in 300 loads and delivering the like amount by sea is ~$3.00 a gallon cheaper fuel for 1.3 to 1.4 million gal to an extremely small faction, very roughly 1 in 60,000 of the nation’s population, that will see a savings of $3.9 to $4.2 million, or $780 to $840 per person. (This is using 5,000 beneficiaries, which is likely a bit high. Others buy fuel in Nome but don’t live in town, and the benefit is not just to the buyers of the fuel. It’s also using a difference in retail fuel cost that isn’t at all clear about what air delivery is compared with.) The publicly born cost is overwhelming for the use of the Healy, and that, in turn, is almost all for the fuel she uses to do the deed. At $98,000 per day (about 85-90% power at 1,000 gph, 24 hrs per day, $4 per gal) for 21 days of ice breaking and ~$4,000 ($50 per day, 85 people) for 5 weeks of the Healy crew’s extension of sea duty yields a cost of $2.1 - 2.2 million. That’s cost to the whole US population of about 3/4 cent per head. Using 15,000 gpd instead of 24,000, which I think is closer to right, and the cost is ~1/2 a penny per person in the US, and burning 10,000 gpd to operate the Healey from Dutch to Nome and back as well as hanging around Dutch waiting for the Redna costs everyone roughly 1/3 of a cent. This is about twice what I thought before reaching for an envelope to scribble on. The 18.4 fed fuel tax the users of the gasoline will pay, if 250,000 gal of this delivery is taxable gas is $46,000; for 500,000 gal it’s $92,000; for 750,000 gal it’s $138,000; for 1,000,000 gal it’s $184,000. For diesel at 24.4 cents per gal the tax using the same quantities it's $61,000; $122,000; $183,000; and $244,000. The fuel users will likely end-up paying some where within that range, with the 750,000 gal and above level as taxable covering the extra crew cost. One thing I gather from some comments on this event over the days of coverage, and I think is a hugely important role for government, is keeping as best it can, the playing field fairly level for all contestants in the market. Both the market and government are wonderful servants and terrible masters. Don't get me wrong here, I dislike the Jones act and would love to see it abolished. I would, however, like to point out that circumventing it is not a process that is available to any American. Here's hoping the author follows up on this story and uses FOI to obtain the records and find out what the public investment in this boondoggle really was. My bet is that the public portion is well over a million. I can't wait to see how much it cost to have the Healy participate in this fake emergency. Yes, flying fuel in would have been expensive--but more than Healy being there? I doubt it. Good thing we passed those costs on to the taxpayers. Don't forget to subtract from your cost what ever the Healy would be doing in its off season. Oh how many research things does it do that people would consider pork? Alaskans pay 3200 each to Uncle Sam in royalty oil money, need to have that spent on something worthwhile for Alaskans. The Healy doesn't get an off season. She should be home about now getting minor maintenance issues taken care of, and fitting to receive a fresh and rested crew. She's not. She's smashing her way through the arctic ice pack with a crew on double overtime duty to save the City of Nome, and she still has to smash her way back out. Add to your costs the expenses of deferred maintenance in the light of unexpectedly extended hard duty, grub and stress for a crew who should by now be eating dinner at home for a bit and the expenses of re-scheduling whatever "research things" were planned, but were interrupted by this ultimately easily preventable sideshow, and on and on and on. Also, the taxes paid by the oil producers to the State government does provide something "worthwhile" for Alaskans. It is called the Permanent Fund, and unless you are advertising your disgust with the PFD, it is a pretty good thing for Alaskans. The taxes oil producers pay to the Federal government aren't all bad for Alaska either as the last time I looked the Federal government sends roughly $1.84 back to Alaska for every $1.00 in Federal income taxes Alaskans pay. All of this combines to setup the nearest thing to a free lunch I have ever seen, and now you're demanding free beer, too? Good luck. Finally, a proper piece of explanatory journalism about this situation. Thanks. Nome was not short of fuel, Bonanza was. Crowley offered to sell Bonanza 150,000 gallons of gasoline and 150,000 gallons of diesel from Nome stocks. They also offered 100,000 gallons of gas from Kotzebue. The Kotz gas would have to be flown in but it's not a long flight. Bonanza turned down Crowley's offer. There was never a shortage of heating oil. I don't think anybody has been lying or trying to pull a fast one, it's just that the reporting from some sources has not always been real thorough. There's been some monkey business, for sure. But it's minor monkey business. The reason the Coast Guard got involved is certain senators saw an opportunity....for something. I'm not sure what. On the upside, the arrival of the Renda represents a step toward better integration of the economies of Alaska and the Russian Far East. That integration, or more accurately, re-integration, will benefit both regions. I just hope the ships can get out to the open sea. It will become a problem if they are both stuck. No sled dogs to eat! Where they are now they can walk to town for a burger. I think some of the crew is already. Your right about the Russian connection. To bad they are the only reliable people to deliver fuel. I don't think that the Russians are the only people that could deliver the fuel. They seem to be the ones that won the contract to do so. Like the article stated, the Coast Guard was urged to help out by the Senators to help support their case for asking to build a new fleet of icebreakers. They have been pushing that point for years now with very little positive response from the rest of the country. This provided a convenient opportunity to show one of the many uses that they could have. The whole thing was very sensationalized by most involved, likening it to the serum run and all. It probably worked just as the Senators wanted. It brought a lot of attention to a potential need for icebreakers. What they are finally catching on to now is that it wasn't nearly as "critical" as it was made out to be. It was never a life or death thing like the media was portraying it to be. If the tanker couldn't get there and IF they actually ran out of fuel (which probably would not have happened anyway), they could have just flown it in as they have done before. It would just have cost a bit more for a short while until they could restock by barge again in the spring. It seems that we have three more ice breakers. One of which is being used to update and repair the other two. You fly it in for yourself. Fuel has gone up at a rate faster than salaries. Food or fuel decisions are already being made. People are adaptable though and training my family to close doors between loads. Building better cunnytuks (arctic entries for you southern folks) Putting foam in windows, finding all the air leaks, venting dryers inside, not throwing heated water down the drain, piling snow up the outside of the house,setting the thermo lower etc. etc. Compared to four or five years ago fuel has gone up 300% and stays there all year long. So fuel storage capacity was maxed out and the fuel presently being pumped has no place to go? In any case, if what you say is true, that Crowley offered to sell their "fuel stocks", then, shucks, Crowley just learned that their fuel monopoly tactics are awash. Mae - Nobody said the fuel storage capacity was maxed out, just that there was still enough in storage to get them through the winter. It doesn't take full tanks to get them that far along. It was more a case of there being multiple suppliers and one of the suppliers did not have enough in their storage to handle their contracted customers. The others had enough supply to supplement their quantities to get everyone through. Add in that there was one project that is expected to be a major consumer of fuel, the mine closure, that could have easily been suspended for the season if things got critical. That alone was/is slated to use 150,000 gallons. |
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