On August 4, 2008, about 1550 Alaska daylight time, a twin engine Piper PA-31 airplane, N40YR, sustained substantial damage following a loss of engine power during takeoff/initial climb, about 1/2 mile north of Aniak, Alaska. The airplane was being operated as a visual flight rules (VFR) scheduled domestic commuter flight under Title 14, CFR Part 135, when the accident occurred. The airplane was operated as Flight 8606, by Frontier Flying Service Inc., Fairbanks, Alaska. The airline transport certificated pilot was not injured. One passenger received serious injuries, 2 passengers received minor injuries, and 4 passengers were not injured. Visual meteorological conditions prevailed, and VFR company flight following procedures were in effect. The flight was en route to Shageluk, Alaska. During a telephone conversation with the National Transportation Safety Board (NTSB) investigator-in-charge (IIC), on August 4, the director of operations for the operator reported that the airplane had just departed runway 28 at Aniak. The airplane was about 130 pounds below its maximum gross weight. About 200 feet above the ground, the pilot reported a loss of engine power in the left engine, and smoke was seen coming from the left engine by ground witnesses. The pilot indicated that he feathered the left engine, but the airplane was descending, and he elected to make an emergency landing on a gravel bar with the landing gear extended. During the touchdown, the nose landing gear collapsed. The airplane received structural damage to the fuselage and wings. Following the accident, the operator's maintenance personnel removed the left engine from the airframe and shipped it to an engine repair facility in Anchorage, Alaska. On August 15, 2008, the airplane's left engine, which was equipped with a turbocharger, was examined at the engine repair facility. The examination was overseen by an NTSB air safety investigator, and attended by representatives from the operator and the FAA. The engine was placed on a test stand where it was started and ran, but it would not produce power (measured in manifold pressure) above ambient pressure. The engine's turbocharger was removed and replaced. A second engine run, with the new turbocharger installed, resulted in the engine developing full power. The original turbocharger was disassembled and inspected. The inspection revealed that one of the turbine shaft bearings had failed, and the turbine shaft and blades were damaged. One thrust bearing had fractured and one half of the bearing was missing.