PULP MILL HISTORY STORY

 

By Dave Kiffer

For the Daily News

Twenty-five years ago, the community of Ketchikan received one of the worst economic blows in its history when the Ketchikan Pulp Company announced the closure of the Ward Cove pulp mill that had dominated the local economy for more than four decades.

The announcement, on March 25, 1997, was a not a complete surprise. The Southeast Alaska timber industry had been retrenching for more than a decade and the closure of the Alaska Pulp Corporation mill in Sitka had already occurred in 1993.

But the severity of the blow, which caused the evaporation of hundreds of direct and indirect jobs, sent the community into an economic downturn that lasted for a decade and caused the school district student population to permanently shrink by nearly 25 percent.

The financial and political realities of operating a large pulp mill in the Tongass National Forest had changed in the 1980s and 1990s. Louisiana Pacific, the owner of the mill, estimated it was facing more than $200 million in upgrades to the bring the mill - which first opened in 1954 - to modern production and environmental standards.

The community itself had been pondering the future without the mill since the early 1990s, and many saw growth in the visitor industry as possibly replacing some of the economic activity from the timber industry, even though there was a realization that the visitor industry would represent a future return to a more seasonal local economy similar to the salmon canning industry in the 1920s and 1930s.

But even that planning process didn't cushion the blow when the final bale of pulp rolled off the production line on March 25. Five hundred fourteen year-round pulp mill jobs and an additional 500 community jobs directly tied to mill operations were gone, according to a State of Alaska labor department report in 2001.

The ripple effect caused dozens of other jobs to be lost. One of the local shipping companies estimated that its revenues dropped 20 percent in April 1997 and the normally tight local housing market was flooded and prices dropped accordingly. Hundreds of "for sale" signs seemed to sprout up almost immediately.

Although the company offered severence packages based on years of service and many of the longer-term employees chose to retire, there was a large exodus of millworkers and their families, and the population dipped from more than 14,500 to just under 13,000 by 2003. School enrollmet dropped by nearly 30 percent and took more than a decade before it began to grow again.

As bad it was, it could have been worse. In the 1980s, when the industry was at its peak, state surveys estimated that a mill closure would cost Ketchikan nearly 40 percent of its population and would cut the school population in half. But by 1997, industry cutbacks had moderated the blow somewhat.

But if the effect on Ketchikan was significant, it was catastrophic to families in logging camps in the outlying areas. Hundreds of workers and their families found they were immediately out of work and their communities were gone. They faced the choice of either moving to the larger communities like Ketchikan or Craig or leaving Alaska all together. Many chose the latter and a way of life that had nurtured multiple generations since the early 1950s was gone. never to return.

Initially, there was belief that the industry could possibly weather the storm and maintain a smaller presence in the region. LP had reached an agreement with the federal government for a timber supply of 300 million board feet to keep two sawmills operating in the region long enough for another long-term harvesting plan dealing with second growth timber to be developed. But by the time the details of that plan were worked out, and then litigated, 15 years had passed, and it was clear that while some logging continued on private land in the region, the era of big timber was gone for good.

Meanwhile, Ketchikan soldiered on, much of its economy shifting from timber and pulp production into a service economy for the region. Tourism also grew, at a pace significantly greater than had been predicted back in the early 1990s, when the number of cruise passengers was less than 300,000. In 2019, nearly 1.3 million visitors came to Southern Southeast and, as the region rebounds from the COVID 19 pandemic over the next couple of years, predictions are for the cruise passengers to top 1.5 million.

Alaska US Senator Ted Stevens - the head of the powerful Senate Appropriations Committee - worked to get money to the region to offset the economic losses. His legislation sent $70 million directly to the communities most effected, Sitka, Wrangell and Ketchikan.

Initially, the federal government - through the Department of Agriculture - wanted to control the process of disbursing the grant money, but the Ketchikan Gateway Borough sued, demanding the money go directly to communities. The federal government settled the suit and $25 million went to Borough.

Over the next several years, the Borough disbursed the money a variety of ways and generated a significant amount of community controversy along the way. Sitka and Wrangell disbursed some of the money they received, but also retained some of the money for community "permanent funds" that continue to fund projects 25 years later.

In 2001, the State Department of Labor surveyed the situation four years after the closure, determined that 75 percent of the more than 1,000 directly displaced workers left the community. The DOL also determined that the shift to a service economy had predated the mill closure and even before 1997, government was the largest overall employer in the community, even though the mill was the largest single employer.

The DOL found that wages in the community dropped by 12 percent after the closure and the percentage of people working more than one job increased from five to 15 percent. The DOL determined that after 16 months 80 percent of the mill workers that had remained in Ketchikan had found new jobs.

Repurposing the mill site in Ward Cove also was a long and controversial process.

After LP announced the closure, it demobilized the property and began cleaning up the area. The Borough took the position that it wanted to "preserve" as much of the local timber industry as possible and therefore was not interested in a full remediation of the mill property. The Borough supported remediating the site to "industrial" development standards. As a result, when the demobilization of the Ward Cove property was generally completed by 1999, the community did not have a fully remediated site in the same manner that APC had left the Sitka mill property, a generally blank slate for future development.

Years later, some borough officials would concede that efforts to redevelop the Ward Cove property were significantly delayed by ongoing remediation that could have resolved earlier in the process.

It was only after the borough sold the property to a local developer in 2011 that redevelopment of the site began in earnest. It is now the location of a two-berth cruise ship dock that will initially service ships from the Norwegian Cruise Line.

For many in the community, the use of the $25 million in "Steven's money" was most controversial part of the process.

Nearly $1 million was paid to an Anchorage public relations firm for a film promoting a continued timber industry. The borough and the firm argued over the content of the film and it was never completed. Just under another million dollars was spent suing the federal government to provide more timber for harvest and for "damages" because of the cancellation of the long-term timber contract. Neither effort was successful.

The borough also disbursed a significant amount of the money in efforts to encourage or support new businesses in the community. Most notorious was $300,000 that went into a failed wooden bowl factory. Other proposals - none of them successful - including promoting light aircraft manufacturing and magnetic levitation technology development.

Meanwhile, there were efforts to come up with a large tenant to occupy the mill site. Sealaska and LP briefly considered a joint veneer mill operation. A medium density fiberboard plant was discussed as well.

In 1998, LP contacted the borough about a potential "loan" from the Stevens fund to support a veneer mill and discussions began. But then in 1999, a new corporation made up of former LP executives came up with a new veneer mill proposal to called Gateway Forest Products. The borough worked out a deal with GFP for a $7 million loan. A veneer plant was constructed but filed for bankruptcy contending there wasn't enough "timber supply" to continue operations.

The borough was asked for another $2.5 million loan for GFP which it granted with the mill site as collateral. Unfortunately, Wells Fargo bank held the paper on the veneer building and equipment. When Gateway gave up efforts to reorganized, the borough spent an additional $2.5 million to buy the building and equipment from the bank.

The borough also decided to spent more than $5 million to "make whole" various local businesses that were still owed money when Gateway closed. Most notable were payments to Southcoast Construction, which then went out of business not long afterwards. Overall, the borough spent about $17 million from the Stevens money to keep either LP or GFP operating in Ward Cove. When the borough later sold property in the Cove, it got back $12 million.

The bankruptcy proceeds were resolved in late 2004. The borough also worked out an agreement with LP for additional remediation of the site beyond the initial efforts.

In 2006, the Renaissance Ketchikan Group began operating the veneer mill. It closed in 2008 after running into more supply issues. The veneer mill equipment was sold off. After the veneer mill closed, the state marine highway system purchased the property for $2.5 million and moved most of its operations and administration staff to the site.

in 2011, David Spokely purchased a large portion of the pulp mill property for $2.1 million, finally ending the borough's involvement in the site after a decade. Initially, Spokely used the property as a base for his operations to supply outlying industrial activities around the region.

But in 2019, Spokely announced the Ward Cove Dock Group, a partnership with John Binkley of Fairbanks, to develop a cruise ship dock in Ward Cove. The two-birth dock, big enough to handle the largest ships in the market, was completed in the summer of 2021.

Meanwhile, the Ketchikan economy - with some hiccups along the way - continued to dig itself out from under the mill closure. In 2014, the state estimated that the local economy was back at the level it was before the mill closure in 1997. The borough population had rebounded to above 14,000, although the school population remained 25 below its 1990s peak. The local economy was now dominated by the tourism industry, although on the list of top employers in the community, eight out of 10 were government related.

The timber industry continued on in a much dimished state, mostly involving Native corportation work on their private lands. Lousisiana Pacific was completely out of the pulp business by 2002 and large mills in Prince Rupert and Washington also closed. In 2021, the Sealaska Native Corp the largest remainung timber producer in Southeast - announced it was closing Sealaska Timber and transitioning to other operations

The Southeast timber industry, which a territorial survey in the 1920s estimated would

last "indefinitely" because of its renewable nature, had lasted just over two generations. The survey hadn’t considered changing times and attitudes about timber harvest.