Win Gruening: Rising freight cost stifle Southeast economy

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By WIN GRUENING

It’s no secret that Alaska’s geography makes our state especially susceptible to rising transportation costs. Many communities have only one or two options to import goods needed on a daily basis. With recent increased inflation and escalation of fuel prices, freight rates are wreaking havoc on local economies. 

According to Alaska Department of Labor’s July 2022 examination of Cost-of-Living statistics, because food must arrive by barge or air, Juneau’s grocery costs were 39% percent above the U.S. aver­age and third-highest in the country among urban centers. Only Honolulu and Manhattan groceries cost more. Likewise, housing is 40% above the national average. Home heating fuel and gasoline prices in Juneau both have soared past $5/gallon recently.

Southeast Alaska uses barge shipments and limited ferry service to supplement air cargo, which is extremely expensive. Despite that, the skyrocketing cost of barge service and unreliability of ferry service has forced many businesses to raise prices well beyond the annualized rate of inflation. This depresses economic activity and further stretches family budgets.

Furthermore, the imbalance between imported and exported goods hurts many communities. Large freight movement in both directions helps pay transportation providers’ fixed costs. Otherwise the majority of roundtrip costs are shouldered by incoming freight. Hence the importance of fostering local manufacturers like breweries and fish processors.

In Alaska, freight prices are overseen by the federal Surface Transportation Board. But the board doesn’t directly regulate how much shippers charge; it only reviews the reasonableness of rates if a consumer files a formal complaint. Southeast Alaska barge rate increases have averaged 4.5% annually since 2006.  Additionally, fuel surcharges routinely tacked on freight bills exceeded 20% during most of 2022.

The Juneau Chamber of Commerce commissioned a McDowell Group survey in 2017 addressing barriers to business development associated with freight transportation. Understanding its findings are critical to strengthening Juneau’s economy.

“Barge service is an essential component of Juneau’s freight transportation infrastructure, accounting for 95 percent of all in-bound freight, in terms of volume.” 

“The cost of in-bound shipping is an important aspect of the cost of doing business in Juneau, particularly for construction firms, manufacturers, food and beverage providers, and retailers, among others.”

“However, out-bound freight service is critical to Juneau’s manufacturers, who sell to outside markets and draw money back into the local economy, providing basic industry activity.”

“Several survey respondents identified other barriers to their business, including lack of road connection to Juneau, frequency and capacity of ferry service for moving freight, and expensive internet and telephone, among others.”

“As a community without road access, Juneau does not have the full spectrum of over-land, marine, and air freight transportation opportunities….businesses lack the opportunity to choose the shipping methods that best meet their specific needs.”

“Longer-term, Juneau can make commitments and take steps to build road and port infrastructure needed to support community growth in the future.”

Barge service companies will always remain an important part of our transportation network. But we shouldn’t be held hostage by them. Historically, municipal port infrastructure has catered to the cruise industry, fishermen, and recreational boaters but could be developed to address additional commercial freight options as well.

Long-ignored, the Southeast Alaska Transportation Plan also addressed this issue years ago by advocating putting roads where you can and ferries where you must. The planned Lynn Canal Highway project is a perfect example. But politics of extreme environmentalism and ferry unions have stymied that common-sense effort for decades.

Some naively continue to promote increased subsidized ferry service to coastal communities. This is not realistic. Ferry system subsidies (which are much higher relative to roads) will never be acceptable to many Alaskans until serious efforts succeed in “right-sizing” the ferry system, minimizing expenditures, and increasing efficiency by building road links where possible.

Adding trucking (via road, obviously) to our freight network options would place downward pressure on what many contend is a freight monopoly, providing businesses with another reliable method to ship goods in and out of Juneau. This, in turn, will lower freight costs to neighboring communities and moderate Juneau’s cost-of-living.

Restarting the Juneau road project should be an absolute priority for our congressional delegation, the Dunleavy Administration, and our region.

After retiring as the senior vice president in charge of business banking for Key Bank in Alaska, Win Gruening became a regular opinion page columnist for the Juneau Empire. He was born and raised in Juneau and graduated from the U.S. Air Force Academy in 1970. He is involved in various local and statewide organizations.

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49 COMMENTS

  1. Well… maybe they should’ve invested in their economies and spent less on men in dresses reading to children. Better yet, they should’ve lowered taxes through government attrition.

    • I agree with you, but it’s worse than you say and worse than what Win G. says. The Juneau Assembly spent 6 months debating and approving the Paris Climate Accord, but right now a big slug of them is attending the AML meeting in Anchorage – collecting airline miles at the expense of Juneau taxpayers. The school district over-spent its budget by millions of dollars but sends Assembly members and staffers on junkets. Not only does Juneau welcome the crossdressers reading to little children, but the Assembly gave a grant of taxpayer funds to “teach drag queen lessons.” They could not agree with breaking a sister city relationship with a Russian city long after Putin invaded Ukraine, and Putin himself made much of that. Juneau voted for Bernie Sanders every chance it got so it’s no surprise to anyone it supports Putin. A big part of the ranked choice voting dark money was solicited by Juneau socialists. Juneau exploits state funding of schools by keeping more schools open than needed; at lease one high school and one grade school too many. Yes, consolidation of freight companies has dramatically raised costs for the entire region, just as Win says, and yes, working people who don’t want to work a 37.5 hour week for government are leaving (or working for the mines and choosing to live elsewhere) but freight costs are as much metaphor as substance because Alaska’s capital city is the most woke city north of San Francisco.

  2. I agree about the road, but it will never happen. Our liberal leadership and utopian daydreams are more concerned with trees than people.

    They have no idea what’s going to happen to us once Biden kills the energy industry and the barges stop running.

  3. If we built a road from Skagway to Ketchikan (it can be done) we could redirect the ferries to serve the outer islands.

    But one can’t blame Ketchikan for wanting to make it as hard as possible for Juneauites to infest their community.

  4. The dems are cleaning us out. Then they’ll send the kids to war and we’ll be done unless salvation (saving us from evil) is delivered from God to the righteous. Have fun.

  5. Home heating oil and freighter fuel have risen by oil company’s joining together monopolizing, creating sharp increases in cost and corralling the free market for motives that may be political.,
    So restarting Alaska’s economic projects comes Lisa Murkowski and Dan Sullivan Alaska’s double barrel shotgun together with Mary Peltola to make it so., Happy Holidays Everybody 😉

    • Joe, One reason for the monopolization of BIG companies was little things like Government Regulations, you see Joe, only the BIG guys have the resources for filling out all those forms and spending all that Moolah on compliance.
      Smoke another bowl and get back to us, ok?

  6. When I think “economy” and “Southeast Alaska”, I think Juneau/government, tourism/cruise ships (summer), and fishing (pretty much also summer). That’s pretty much it.
    When I think groceries, fuel, and shelter for residents, I think SUBSISTENCE, which has been one of the biggest political words in Alaskan history, and has very little in common with the definition of the word worldwide.
    “Economy” and “subsistence” are political antoyms. You can’t have both………although those who are federally blessed with subsistence “rights” still clamor for an economy bestowed upon them.
    Maybe Southeast residents ought to consider boarding up and spending summer in Arizona or Hawaii like all those Disney-style ice cream shop owners in Skagway?

    • I can’t speak for the rest of SE, but you’re only partially correct.

      In Juneau we have a semi thriving convention/hospitality business that runs year round.

      We are also the consumables hub for most of SE. As well as secondary health care. Not everyone can afford to go to Anchorage, and most natives have family they can bunk with.

      And, of course, government. Sorry, but it’s sadly true. I’m happy for the state to take the Capital to the road system anytime.

      Except for Franklin St, the vast majority of all our businesses run year round. Or until CBJ taxes them out of existence.

      Plus and airport serving almost all of SE, including several places AK Air won’t go.

      The fishing industry never really closes. It just changes what’s being caught. Halibut and Herring always available to one degree or another. Plus Coho run into January in some places.

      Plus mining. Plus several very successful Native Corps.

      It would be stupid to board up during tourist season. Economic suicide. However in the smaller tourist areas many do.

      We are far more diverse in economic and cultural amenities than the mainland thinks. But we also get mainland/city arrogance drives this opinion. I had it myself until I moved here. Now there isn’t enough money on Earth to make me subject myself to Anchorage/Fairbanks/Kenai.

      Do we have the options you do? No. Do we have the same cultural and societal rot you do proportionally? No.

    • Reggie, think two world class mines. Greens Creek is incredibly rich ore and after 30 years is still going strong.
      In comparison what does Southcentral produce? Oh, yeah we fuel Transport Jets with fuel imported from the lower 48.

      We need more mines Reggie.

  7. Simple solution. Pass a Anchorage tax of say 20% on everything. Give the monies to Juno residence for their ”difficult situation” Pass a minimum wage for Southeast say 20 dollar an hour….There problem solved….oh and ban all logging by declaring all southeast a State Park.

    • Or put the fishing vessels to work on shipping. They can use big boats for main docks, and use small boats for hard to get to areas. Keep local logging. But no clear cutting. Beetle kill trees first.
      Some trees need to be cycled for more growth.

  8. That’s what you get when the government controls everything. Welcome to the politicians who consistently lie and tell you what a great job they’re doing. Rules politicians and unions brought this on. Continue to vote for incompetence and lies and this will only get worse. Costs are directly related to government policy’s. Let the free market set the price. What about the fuel costs for every village in Alaska who’s supporting that? The taxpayer of course.

    • When’s the last time you were in a village? Or even someplace like Nome or Bethel?

      The free market is very much at work.

      One way we could reduce the costs for everyone is if the state would do two things. Both of which will not happen in our lifetimes.

      1-Actually build Walker’s gas line dream, but have it terminate in Fairbanks. Have our own people be the primary customers. Part of the contract to the people building and running both operations should be a price that reflects reality, plus a decent profit.

      The leftists will stroke out before that happens.

      2-Build a rail line to Nome. Make delivery of goods and services to Western AK more affordable and year round.

      Same issues as above. Leftists will stoke out first.

      • I have been to every corner of the state except the chain. I had 20 years with company’s that worked in the bush. So don’t assume something you don’t.

      • Avenger, have you looked at the price of rail tickets lately? right now, its $838.00 round trip Anchorage to Fairbanks. Who knows what it would cost to go to Nome…

        Thanks, but I think it would be far better to stick to a road.

      • Masked Avenger, Free Market? BETHEL? Only free market in Bethel is that you have 5 Air Freight Carriers which service the biggest Welfare Plantation in Alaska via a thing called By-Pass Mail.
        Build a Rail Road to Nome for cheaper freight to Nome? That’s laughable, the only way that would work is IF there were a Mine that needed to sip mass tons of ORE out.
        Do you work in State Government?
        Do you really believe half of the Bravo Sierra that you post? I’m serious.

    • Alaska spent $Billions on natural gas storage and natural gas drilling subsidies in Cook Inlet. Spent about a $Billion on Susitna Dam studies. Spent $Billions on power for the road system. Rural Alaska gets subsidies for fuel instead because they did not get the benefit of all of the road system subsidies. How much State income and State sales tax did you pay last year?

      • And you support these politicians spending money foolishly. You support it you fund it. I did not make anybody live on the bush they did this on their own. You need to pay more to the state so the bush can continue to suck your money Down the rat hole. I need a new electric car and you need to pay for it.

    • Why keep trying to save Juneau or southeast? If it’s expensive and you can’t afford it then don’t live there. That’s what you do.. all over the country if you find one area that’s to spendy then you move somewhere that you can afford. Why shovel money at ferry systems so that people can afford to live in southeast? I’m not going to move to Palm Springs and expect the community to make it reasonable for me to live there because I can’t afford to. Juneau pays for ski hills and ice rinks gay lessons and whatever people want just so it’s a nice place to live. That’s not how life works. It’s unsustainable. Juneau is digging a hole let them sit in it and think about it.

  9. Adding trucking (via road, obviously) to our freight network options would place downward pressure on what many contend is a freight monopoly, providing businesses with another reliable method to ship goods in and out of Juneau. This, in turn, will lower freight costs to neighboring communities and moderate Juneau’s cost-of-living.
    maybe you could back this up with some numbers. Why are groceries more expensive in Haines where there is a road? According to numbers I have found a barge can move a ton of freight 647 miles on a gallon of fuel. For trucking one ton of freight can be hauled about 134 miles on one gallon of diesel. so how does adding a higher price option lower costs?

    • Haines is smaller and at the end of the road. There is less demand for goods and services, so the expense of bringing them a higher. That cost is passed to customers.

      A road from Skagway might or might now resolve this, since it’s a different terminus. However, a road down the cost would make it cost less to bring goods to Skagway, where they could be more easily accessed by Haines.

      Honestly it would have to be tried to know. Road system or not, Haines is isolated. Same factors apply to places like Sterling and Moose Pass. Goods and services are always more expensive is these places.

      Equally, trucks can run more regularly than the once a week barge. Volume of goods/services will force prices down.

    • Part of Juneau’s housing issues are simple. The people (mostly leftists) have zero interest in solving it. It’s too lucrative.

      Additionally we suffer from Air BNB syndrome. Too many people have pulled rentals off the market to AirBNB them.

      Win is (IMO) wrong in this respect. Our housing issues are a political problem, not a economic one.

    • Buy the old BP building and move the politicians to Anchorage. It would cost about 120 million dollars. Fairly inexpensive to get at the legislature.

    • It’s over two thousands road miles to the lower 48 border. How can it be posible to get lower freight costs with a road. You would think a banker would understand that.

  10. Hahahahaha!!Hahaha haha!!!
    Building roads in SE Alaska – that’s a good one.
    The climate alarmists won’t allow it. SE Alaska will be under water in 20 years anyway, right?

    • “……SE Alaska will be under water in 20 years anyway, right?”
      Supposedly, we all are going to be getting wet some magical day.
      Science dictates that water seeks its own level, but for my entire life, the ocean has maintained the same level as always despite all this supposed melting in Greenland, Antarctica, the Arctic, etc. I’m looking at tidewater from my bedroom, and my home is at 350′ elevation. According to my calculations, that water might reach my steps in just a few million years.

      • Reggie, Northern Southeast is jumping out of the water, at one inch per year in some cases. This due to something called Isostatic Rebound.
        So, melting ice fields actually allow for owners of Beach Frontage to gain acreage. 🤔 pretty cool…

  11. Container costs from China have gone down to $9,500 from $20,000 (July 2022) and will fall further. Gas at the pump is now less than a year ago. Even at peak energy prices and supply chain massive disruptions current ferry and air access is still far less cost than a road, particularly when you include life/cycle costs. The author’s opinion fails to explain how a road will lower housing costs in Juneau. Every else in the world housing costs are lowered through zoning and tax policies.

    • “…….Gas at the pump is now less than a year ago……..”
      Yeah, but a year ago it was twice the price as two years ago.
      Salvation is still at least two years away, unless Brandon croaks……..which only puts control in the hands of a bigger disaster.

      • In December 2020 unleaded was $2.59/gallon, today Alaska is at $3.90, about 50% higher, double would be $5.18/gallon

    • “……..Every else in the world housing costs are lowered through zoning and tax policies……..”
      What? Are you serious? If that’s true, what happened in California, the land of zoning and taxes?

      • California’s population and economy is growing, Alaska’s population and economy is shrinking. New highways do not lower housing costs, California is a good example.

        • Yes with illegals and tax dollars given away to the homeless. You’re so misinformed it’s fun to watch. CNN likes you.

  12. Win , thank you for your conscience recognition of real time effects on Juneau’s economy & cost of living realitys in a roadless community over many years of concern ! Most isolationist attitudes with unrecognized reality, always lingers ,until critical mass appears on the horizon, then something changes.
    Now is the time.
    Juneau needs to stop it’s protectionist views on it’s existence for selfish political reasons whereas All of Alaska & Alaskans can benefit from better access to our Capital city.
    Build the damn Hwy.
    The Dunleavy Administration needs to do something right for once, for all Alaska & it’s people instead bending to Juneau’s elitist Millionaires.
    At least one person at DOT understands Transportation economics : ” By building the road, says Jeff Ottesen of the Transportation Department, one or two mainliner ferries could be eliminated, and ferries are hugely expensive. Ottesen said that over a typical lifespan of 50 years, a mainline ferry costs the state $1.72 billion, with only 30 percent of that cost recovered through passenger fares. He says ferries also use more than half of the state’s transportation budget, yet they represent only 1 percent of miles.
    One percent , is this sound economics !
    The one resource that never really get’s enough attention is ” human existence ” in political sensualized locations and needs more focalization across Alaska.
    Win ” politics of extreme environmentalism and ferry unions….(that) have stymied …. common-sense effort for decades.” , what great observation !

    • If you do the math, buying and maintaining ferries would cost less than building and maintaining the highway, you fail to mention that the Juneau access plan still requires new ferries and new docks.

  13. I’ve lived in Barrow, Nome, and Kodiak (among other places) and I got sick of living off the road system, with the associated high cost of living, travel issues, etc. But instead of whining, I took some money that I had saved and moved back onto the road system, and somehow that solved everything.

  14. Efficient transportation is a cornerstone of any economy. I thank Win for this expository essay; it is a testament to the critical need for roads in Alaska. A need that is filled very well (where possible) in every state except Alaska. All commentary that diverts from this fundamental need is nothing more than a distraction.

  15. Masked Avenger, Free Market? BETHEL? Only free market in Bethel is that you have 5 Air Freight Carriers which service the biggest Welfare Plantation in Alaska via a thing called By-Pass Mail.
    Build a Rail Road to Nome for cheaper freight to Nome? That’s laughable, the only way that would work is IF there were a Mine that needed to sip mass tons of ORE out.
    Do you work in State Government?
    Do you really believe half of the Bravo Sierra that you post? I’m serious.

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