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Royal Dutch Shell stored its Kulluk drill rig at a specialized berth in Unalaska, where it was towed after it ran aground toward the end of Shell's 2012 drilling expedition.Lauren Rosenthal
UNALASKA, Alaska — This faraway spot in the middle of Alaska’s windswept, rocky Aleutian Island chain has long stood for seafood.
Unalaska is a stone’s throw from rich fishing grounds in the Bering Sea. The local port of Dutch Harbor is tops in the United States in terms of the sheer volume of seafood that passes through it.
But it isn’t seafood that has this town of about 4,300 people buzzing — and some even planning multimillion-dollar investments.
After a one-year break, Royal Dutch Shell is expected to resume its controversial Arctic exploration program this summer and base some of those operations in Dutch Harbor.
If Shell finds the reserves of oil it is anticipating in the Arctic, other companies with leases in the region will follow. In the absence of other deep ports on Alaska’s western coast — or anywhere near the Arctic Ocean — their search for oil will bring them straight to Dutch Harbor.
For better or worse, oil will leave its mark on this town.
Bill Shaishnikoff saw his first million-dollar check when Shell Oil came to town in 2010.
The company brought its new Arctic drill rig to Unalaska for upgrades and repairs. Shell couldn’t find enough dock space, but it was willing to pay a premium to get it.
Shaishnikoff, who owned a small quarry down the road from the shipyard, snagged the contract.
“That was when we really got up and running,” Shaishnikoff said.
He is descended from the Unangan people, who originated in the Aleutian Islands. He has run Bering Shai Rock and Gravel out of his family’s 30-acre Native Land Allotment for the past 10 years, supplying material for docks and roads all over the state.
The business is in a remote area called Captains Bay, several miles off Unalaska’s main road. Lately, Shaishnikoff has realized the strategic value of his land.
“The location of that Native Allotment is perfect,” Shaishnikoff said, referring to the remote area that is seldom visited by anyone but workers. “There’s some customers who don’t want to be right downtown where everybody who’s passing by can look and see something out of place and hold them up.”
He hopes Shell will be one of them.
According to exploration plans that Shell filed with federal regulators last fall, the company will keep five tugboats and supply boats in town this summer, along with the crew to run them. It will also store a backup drill rig here, in case anything goes wrong with the primary ship in the Arctic.
Shaishnikoff wants to get in on that business.
“But if I say, ‘What do you want me to build you? Do you want a dock today, do you want a ramp, do you want housing? Shall I buy a bunch of trucks and rent you trucks as well? What do you need?’” he said. “They say they can’t tell me.”
And they’re not telling the city of Unalaska, either, according to government officials here.
“It’s like chaos,” Shaishnikoff said, “because nobody knows what they need.”
Fishing for dollars
Unalaska wasn’t always a booming fishing community. It was home to just 342 people before the king crab harvest took off in the 1970s.
Suzi Golodoff, a 40-year resident of Unalaska, said the shellfish success didn’t translate to the city.
“For a long time, millions and millions of dollars went through the town and it didn't stick,” she said. “It went straight to companies in Seattle.”
City councillor Dennis Robinson said the city had to stick its neck out and borrow money from the state and federal governments just to meet the canneries’ demands for sewer service and water. King crab eventually went bust, but other harvests took its place. The pollock fishery is the largest commercial fishing harvest in the country, having brought in 2.8 billion pounds in 2013, and is valued at more than $1 billion annually. The vast majority of it is landed and processed in Unalaska.
Over the years, Unalaska wrangled the fishing industry into a stable tax base. The city levies a tax, projected to be $5.3 million this fiscal year, on the value of the raw seafood that passes through the port. The state also collects taxes on fish processors and exporters, and on special floating factories that process fish at sea to avoid paying municipal landing taxes. Of all the payments made in 2013, Unalaska expects to get $9.3 million. Some $14.6 million — more than half the city’s 2014 budget — comes directly from fisheries taxes.
But it hasn’t gotten away from old problems. Unalaska will spend more than $50 million over the next few years on critical upgrades to its water, sewer and power plants.
That is why Unalaska lobbied hard to be included in Republican Sen. Lisa Murkowski’s offshore oil revenue-sharing bill. If it’s passed, Unalaska and other towns affected by drilling on the Outer Continental Shelf will get a small share of tax revenues.
“It might only be a million or two (million) dollars a year for us, but we’re going to need it,” said Mayor Shirley Marquardt.
Marquardt is extremely friendly to the prospect of oil development. It would bring business to existing marine support shops in town, new jobs and a higher profile for the port.
So Marquardt and other city officials are talking about partnering with such “a large industrial company” to develop Captains Bay, the burgeoning industrial zone. Nothing is set in stone, but it would save both sides money and get the work done faster.
For now, Marquardt said, “what we’re trying to do is put plans on paper for the expansion of utilities, roads and housing — how we would go about doing it.”
She said she’s spent the past few years trying to get to know the subcontractors and executives who will be involved. It has been a success, she said, but in some ways Shell has lived up to its reputation for being “notoriously close-mouthed about what they’re going to do.”
“It’s a business,” Marquardt said. “They’re in competition. It’s going to be very difficult to move through the permitting process as is. Moving through it with a giant bull’s-eye on your chest makes it more difficult.”
Troubles for Shell
More things went wrong than right for Shell in 2012.
The company didn’t get to drill into oil-bearing rock because it couldn’t get its spill response equipment certified by the federal government. On its way out of Alaska at the end of the year, the Kulluk drill rig crashed into a remote island. That triggered a risky rescue mission, criticism from environmental groups the world over and a scathing federal inquiry.
Unalaskans watched with interest — just as they did when Shell’s Noble Discoverer drill rig broke anchor in town in July 2012 and drifted ashore along the city’s main road.
“There was part of me that was glad they messed up so badly,” said Golodoff, the longtime resident, an avid naturalist who opposes Arctic drilling. “They didn’t do any major damage, but I thought maybe people would see they’re not ready.”
Golodoff said she’s not just concerned about what oil exploration will do to the environment. She’s watched Unalaska turn into a “working town” since the fishing industry took off.
Now, thousands of transient workers pass through the city every few months for seasonal work. Wages are high and the overtime opportunities are abundant, but a two-bedroom apartment rents for about $2,000 a month. Many people live in dormitories provided by their employers — local fish processing plants or longshore companies — instead of making a home or bringing their families here.
Unalaska’s inhabitants are young and diverse as a result. But you wouldn’t know it from the low voter turnout and sparse attendance at public meetings.
“Sometimes I think if we had a more resident population, if things came knocking, we’d ask them to tell us what they’re doing here,” Golodoff said. “But we've just taken the door off the hinges.”
'You build it, they'll come'
The Shaishnikoff family has been planning to make its entrance into the maritime support industry this week.
“We’re going to push a pad out in the water,” said Bill Shaishnikoff, flipping through engineering sketches. Bering Shai Marine, as the family’s new business is called, will create nearly 3 acres of flat land. It will tack on a ramp to service freight barges, which Shaishnikoff hopes to rent to Shell this summer.
And in a year or so, the family will expand to a full 1,125-foot dock, attached to 11 acres of new land.
Shaishnikoff filed for the federal permits to build the Bering Shai Marine Terminal a few months after Shell ended its last troubled trip north. Last fall, he petitioned the city of Unalaska to rent out tidelands — municipally owned waters. The 75-year lease went through a full public process, with multiple hearings and opportunities for public testimony. There was none.
Bering Shai Marine is paying for some of the construction using revenue from its flagship gravel business, which it intends to keep. The last chunk of the dock will cost $3,000 per foot to build.
“It’s going to take some creative thinking and financing,” Shaishnkoff said.
Yet he’s the first to point out that any Arctic oil boom in Unalaska will eventually trail off. A port will be built closer to the Chukchi and Beaufort seas in time, and the sea ice that locks boats out of the region until midsummer will continue to melt away.
But that will bring other opportunities for the port of Dutch Harbor. Shipping companies are expected to start sending cargo “over the pole” after the Arctic experiences several ice-free summers in a row. It’s a shorter, more cost-effective route, and it could lead vessels in search of fuel and a tune-up to Dutch Harbor.
That is why Shaishnikoff said he has “no fear” about his leap from gravel to oil — and perhaps to shipping.
“I’m trying to be proactive rather than reactive,” he said. “Our point of view is, whether they come or not, we’ve got to build this. We need more space.