Year in Review: Shakeups lead top stories of 2018

  • Gov. Michael J. Dunleavy is seen touring damage at the Houston Middle School on Dec. 1, the day after a 7.0 magnitude quake rocked Southcentral Alaska and just two days before he was sworn into office in Kotzebue. (Photo/Courtesy/Tim Leach)

Several analogies can be drawn between the Nov. 30 Southcentral earthquake and the year in Alaska politics even without stretching them too far.

Earthquakes, even large ones, are an accepted and to a point expected part of life in Alaska.

Admittedly, the lead up to the election in the governor’s race was highly unusual. What was for months a three-way race between incumbent Gov. Bill Walker, Mark Begich and Michael J. Dunleavy suddenly shifted to a head-to-head matchup when Walker dropped out of the race with less than three weeks to go following the sudden resignation of Lt. Gov. Byron Mallott for unspecified inappropriate comments to a woman.

Similarly, even many of Alaska’s most ardent Democrats understand the demographic reality that their state’s politics generally lean red. To that point, Republicans retained a majority of seats in the Legislature as they have for years and Dunleavy’s Election Night victory over Begich — built on a broadly popular campaign of being tough on crime and larger Permanent Fund dividends — was widely predicted.

And while the earthquake struck just three days before Dunleavy’s administration was set to take over, the work of former Gov. Walker’s team in concert with Dunleavy’s people made for a smooth transition of power in the midst of a natural disaster.

One caveat to that was a request by Dunleavy Chief of Staff Tuckerman Babcock that upwards of 800 non-union executive branch employees tender their resignations and reapply for jobs with an expressed desire to work in a Dunleavy administration.

Such a resignation request is standard procedure for political appointees during an administration change, but the broader scope of Babcock’s demand was met with vocal disdain among many inside and out of government who felt it was a demand for a loyalty pledge.

Still, the largely smooth transition under difficult circumstances was a general reflection of how well Alaskans — from well-trained school kids to on-the-ground Department of Transportation personnel — handled the earthquake. Miraculously no one was seriously hurt or killed in the shaking, and damaged roads were repaired with amazing efficiency.

However, there is still much left unfinished in the aftermaths of Election and Earthquake day even though life for most Southcentral residents has returned to normal. Severely damaged schools in Eagle River and the Mat-Su Borough remain closed, as to many businesses in Eagle River. Countless homeowners across the region also still face daunting repairs.

On the political front, much is still unresolved as well more than six weeks after the election.

While Republicans have regained their usual position at the helm of state government, the state House is in disarray. House Republican leaders quickly formed a 21-member majority caucus a day after the election. However, that slim majority fell apart even before it had a chance to take office.

For starters, it relied on House District 1 Republican candidate Bart LeBon maintaining his 79-vote Election Night lead over Democrat Kathryn Dodge — which after counting absentee ballots, questioned ballot reviews and a recount has shrunk to a single vote. Dodge, unsurprisingly, is challenging those results in the Alaska Supreme Court.

Additionally, Kenai Republican Rep. Gary Knopp said Dec. 8 that he would be withdrawing from the caucus because the tenuous one-vote majority could be held hostage by the whims of any single member and as such was doomed to fail eventually.

Knopp instead has proposed a bipartisan House majority caucus comprised evenly of Democrats and Republicans.

At the time of this writing, who will be leading the House when the Legislature convenes Jan. 15 is anyone’s guess.

Things are more settled on the Senate side, at least structurally. Republicans retained control of the body, despite taking a blow in Republican Senate President Pete Kelly’s defeat to Democrat challenger Rep. Scott Kawasaki for his Fairbanks Senate seat.

Senate Republicans are aligned with Dunleavy on many policy items, but the size of future PFDs, at this point, is not one of them. Along with Walker, Senate Majority leaders last year led the charge to utilize Permanent Fund income to pay for government services and greatly reduce the state’s ongoing budget deficits in-lieu of new taxes; however, the consequence was likely reducing the size of future dividends.

Dunleavy used the historical dividend formula in his first budget proposal released Dec. 14, but he refrained as yet from requesting “back payments” from three prior years of reduced dividends at least initially, which was one of his campaign pledges.

On the surface both politically and physically, much has returned to normal, but many of the all-important underlying details remain unresolved.

2. Voters reject Ballot Measure 1

The intense statewide debate over whether Alaska should enact sweeping changes to its salmon habitat protection laws came to an abrupt end on Election Night, when voters rejected Ballot Measure 1 by nearly a 25-point margin.

What started as a promising year for measure backers, who in January submitted more than 42,000 signatures to the Division of Elections from Alaskans supporting the initiative, ended in disappointment.

The business-backed campaign group Stand for Alaska drummed up more than $10 million of support, led by contributions from Alaska’s “big three” oil producers as well as Donlin Gold LLC, which is planning a large gold mine in Southwest Alaska.

Stand for Alaska painted the issue as an attack on responsible development in the state.

Yes for Salmon backers insisted it was a way to update nearly 60-year old anadromous fish habitat permitting laws and prevent politics from influencing permitting decisions that could degrade salmon habitat over time and leave Alaska trying to restore lost habitat at great expense as other Pacific Northwest states are now doing.

Each side argued the other was driven by Outside interests; either activists wanting to “lock up” Alaska or corporate interests wanting nothing more than to fleece the state of its resources and leave.

In reality, the eight-page measure would have put strict sideboards on impact mitigation requirements for developments in salmon habitat, while establishing a public input process for the permitting decisions and provided Fish and Game officials with more authority to penalize permit violators.

Opponents argued the state permitting regime is already sound and that while adjustments may be needed, the initiative was overly broad and would threaten development.

In August the Supreme Court struck a key provision of the initiative as unconstitutional that would have mandated the ADFG commissioner reject any permit for which “major” impacts could not be mitigated on site.

Ballot Measure 1 proponents, who raised less than $3 million, or about 25 percent of what Stand for Alaska had to spend, said after the election that the funding disparity made it impossible for them to overcome Stand for Alaska’s messaging that included a barrage of television ads.

The opponents countered that they had the better message regardless of the funding disparity.

3. North Slope enjoys “renaissance”

ConocoPhillips started 2018 by going “six for six” with its exploration drilling program last winter. The company hit commercial quantities of oil in each of the greenfield wells it drilled, drastically adding to what was already a feeling of optimism among those in the oil industry.

Three wells were drilled to better delineate its $4 billion to $6 billion Willow discovery — another Nanushuk prospect — which was first announced in January 2017.

Preliminary estimates from the company put Willow at about 300 million barrels of recoverable oil, with production potential reaching 100,000 barrels per day.

Alaska oil experts believe the Nanushuk formation, which for decades hid in plain sight, is largely a western Slope phenomenon; it quickly peters out to the east of the Colville Delta.

ConocoPhillips’ westward push on the North Slope took reached another milestone Aug. 7 when the Bureau of Land Management began asking for public input as it drafts permitting documents for the company’s proposed multibillion-dollar Willow oil development.

The remote Willow prospect is west of the existing North Slope oil fields in the National Petroleum Reserve-Alaska.

ConocoPhillips’ initial development plan calls for a central processing facility and pad, up to five drilling pads with up to 50 wells each, access roads, an airstrip and a gravel mine within the NPR-A, according to BLM.

The proposal also contemplates a temporary island in state waters to facilitate module deliveries via sealift barges.

The company sent BLM a letter in May requesting authorization for the development, a BLM release states.

In October, oil production commenced from the company’s Greater Mooses Tooth-1 project in the NPR-A. ConocoPhillips also sanctioned GMT-2 and increased the peak production estimate to 38,000 barrels per day.

ConocoPhillips has been busy in Alaska — also trading its interest in a North Sea field for BP’s share of the large North Slope Kuparuk River field — but its activity is in addition to several other large developments that are underway.

Oil Search’s Nanushuk project, with the potential for 120,000 barrels per day, received a final EIS from the Army Corps of Engineers in November.

Hilcorp Energy’s manmade island Liberty project was also approved by the Bureau of Ocean Energy Management. It is a 60,000 barrels per day development, although environmental groups sued to stop it on Dec. 17.

Rough estimates put the cumulative potential production from these and smaller projects — with $13 billion of investment — at upwards of 400,000 thousand barrels per day.

4. POMV passes

Gov. Walker saw his signature piece of legislation passed May 8 when legislators approved an endowment-style formula to draw from the Permanent Fund Earnings Reserve with most of the money going to support government.

Hailed as a victory for drastically reducing the state’s multibillion-dollar budget deficits while maintaining the long-term value of the $63 billion Permanent Fund by proponents and as a “raid” on the fund by others, the Legislature’s vote on SB 26 cut across all party and caucus lines.

At the time, Senate Bill 26 was expected to cut the fiscal 2019 deficit from roughly $2.5 billion to $700 million. Oil prices and production will determine the final budget gap.

While each body passed a version of SB 26 in 2017, it languished on the sideline of budget debates for more than a year as the contrasting contingencies put on a POMV draw by the House and Senate made it a particularly touchy subject.

SB 26 was the culmination of three years of work by the Walker administration and a handful of legislators, most notably retiring Eagle River Sen. Anna MacKinnon who often sparred with administration officials on other budget issues, but helped shepherd the bill through the Legislature.

5. Oil tax credit resolution faces legal challenge

Gov. Walker’s other big legislative victory was supposed to be resolving the state’s $800 million-plus oil and gas tax credit obligation.

After contentious debate, the Legislature approved his administration’s unique but untested plan to sell bonds allowing the state to pay them up front while managing cash flow into the future, which is expected to require shoestring budgets for several years.

The plan relies on tax credit holders — small oil companies and banks — taking up to a 10 percent discount on the value of their credits to get them paid quicker. The state would turn around and use the discount to cover the cost of borrowing the money.

However, questions about the constitutionality of the scheme started early in the session when a Legislative Legal Services attorney issued an opinion suggesting it may fall outside the Alaska Constitution’s tight restrictions on allowing the state to contract debt.

Former University of Alaska Regent Eric Forrer put turned legality questions into action shortly after the Legislature passed the plan in House Bill 331 by suing the administration over it. Forrer actually sued before the bill was signed into law, but state attorneys declined to have it dismissed based on the timing issue, acknowledging that Forrer could just re-file the suit.

The Superior Court case that many wanted resolved quickly has been slow and winding. A ruling on the state’s initial dismissal motion was expected in early November; however, none has been issued as of this writing.

6. Pebble applies for permits

Pebble Limited Partnership finally made good on a long held promise to start the permitting process, which is seen by many as a way to settle the fight over the massive and divisive mining project. The Army Corps of Engineers kicked of the Pebble mine environmental impact statement scoping process last January.

Pebble leaders have touted a much smaller mine plan without the use of cyanide for gold recovery, a new transportation plan and revenue sharing payments for area village corporations and tribes as reasons for opponents to reconsider their stance.

Bristol Bay Native Corp. and other area opposition groups have been critical of the Corps’ handling of the EIS, which is being done on a two-year timeline for the huge and complex development.

In June, Gov. Walker’s administration called for the Corps to suspend the EIS until Pebble offered an economic review of their plan. CEO Tom Collier told the Journal in April that the company was working to develop a preliminary economic assessment on the project by the end of the year, but one has not been published to this point.

Pebble backers scored a two-part victory on Election Night when Ballot Measure 1, the salmon habitat initiative, was roundly rejected by Alaska voters and staunchly pro-development Gov. Dunleavy beat former Begich, who has long opposed the mine.

7. Tourism keeps booming

More and more people continue to want to come to Alaska.

Alaska’s tourism industry continues to record visitor numbers to the state — and more are predicted for 2019. It’s also been one of very few growth sectors in the state’s economy over the past three years.

Final numbers for the year are still being tallied, but the total of cruise passengers visiting Alaska was expected to be up 7 percent from the more than 1 million who came to the state in 2017, according to CLIA Alaska.

More cruise ships and bringing more people are coming in 2019 as well. According to Travel Alaska, 37 cruise ships will traverse the state’s waters next year. CLIA Alaska says those vessels will carry nearly 1.2 million passengers.

Passenger traffic at Ted Stevens Anchorage International Airport was up 3.1 percent through October, according to airport officials. The growth was 5.3 percent year-over-year in the third quarter.

In October, Gov. Bill Walker announced direct passenger service between mainland China and Alaska will begin in 2019.

TSAIA Manager Jim Szczesniak said in November that the outlook for 2019 is good as well with daily summer service to New York from United.

8. Roadless Rule reopened

Gov. Walker’s administration cracked the Roadless Rule code Alaska loggers and other development interests had been working on for years over the course of 2018.

In August, former DNR Commissioner Andy Mack and Interim Forest Service Chief Victoria Christensen signed in a working agreement that laid the foundation for the agencies to revise the Roadless Rule on the likely prospect of reopening more Tongass National Forest land to development of some kind.

The August agreement was borne out of a petition sent in January from former Walker’s administration to Agriculture Secretary Sonny Perdue requesting a full exemption from the sweeping Clinton-era Roadless Rule that timber companies in the state blame for crippling their industry.

By late November the 13-member Alaska Roadless Rule Citizen Advisory Committee picked by Walker had drafted four general options for revising the conservation measure and a list of recommendations for Forest Service officials to consider in their rewrite of the Tongass Management Plan.

Several committee members said they felt their work went well and incorporated input from members who spanned the various Tongass stakeholder groups.

The four proposed Roadless Rule options include maintaining all existing inventoried roadless areas, or IRAs, except for those with roads that pre-date the rule; removing previously roaded areas as well as areas identified in the management plan for timber production and others where a modified landscape has been deemed acceptable; removing areas in timber production and modified landscape IRAs identified by conservation groups as critical salmon habitat conservation areas in addition to the other exemptions; and, most broadly, removing all IRAs that are not currently designated with a non-development land-use priority, according to the committee’s report.

9. Rural health care funding fight

In May, the Cordova Community Medical Center received a shut-off notice from Alaska Communications for its broadband services unless a balance of nearly $1 million was paid by June 30.

Federal Communication Commission Chairman Ajit V. Pai stepped into the dispute and warned the Anchorage-based telecom provider that it’s against the Communications Act to shut down services.

However, the Cordova Hospital wasn’t the entity not paying its bill. At that time, Alaska Communications hadn’t received funding for going on 11 months through an FCC that bridges the high cost of bringing broadband service to rural Alaska, called Rural Health Care, or RHC. The Cordova hospital is just one of about 40 rural health care facilities that Alaska Communications supplies broadband services.

Alaska Communications and fellow in-state telecom GCI Liberty were owed millions from the RHC program through the first half of the year.

By law, Internet service providers have to serve rural health care clinics at the same cost they give to urban health care clinics, and to make up the difference, they can apply for funding through the RHC program.

The catch is that they have to justify the rates they’re charging for rural connections. After an investigation, the FCC found that two non-Alaska carriers were inflating their rural rates to increase their payments from the program in 2017 and fined the companies about $40 million.

The agency then requested more information from the participating companies to justify the rural rates they charged. That proved to be an issue for Alaska telecom providers, where Internet connections are notoriously expensive and limited outside urban centers.

The FCC announced Oct. 10 that GCI would receive $77.8 million in funding through the program. That’s about $28 million less than the company requested in its cost estimates.

GCI objected, saying in an Oct. 12 press release that the reduction from the funding request essentially forces the company to swallow $28 million in services that had already been provided.

The FCC emphasized the “fiscal responsibility” of the decision to reduce the funding to GCI in a prepared statement.

Alaska Communications previously outlined the difficulties in meeting the information request specifications for the FCC to approve its rural rates.

As of mid-October, most of the requests from the providers the company served in 2017 had been approved, but a handful had not yet been approved and therefore not funded, according to an Alaska Communications spokeswoman.

In June 2018, the FCC increased the available funding from $400 million to $571 million, which has since been scaled to $581 million for inflation, according to an FCC spokesman.

10. NPR-A plan revisions

Led by former Alaska Department of Natural Resources commissioner Joe Balash, in November Bureau of Land Management officials began the process of reopening the National Petroleum Reserve-Alaska Integrated Activity Plan on the prospect of opening more areas to oil exploration.

Now an assistant Department of Interior secretary, Balash said in a call with reporters that the emergence of the Nanushuk geologic formation since the last plan was written — the primary source for two discoveries with the potential to produce upward of 100,000 barrels per day each — as well as advances in drilling technology make it an appropriate time to rewrite the federal land-use plan. One of those discoveries, ConocoPhillips’ Willow prospect, is in the eastern part of the NPR-A. BLM is in the early stages of an EIS for the $4 billion to $6 billion Willow project.

The most prospective Nanushuk area, according to the U.S. Geological Survey, is in the northeast portion of the NPR-A around Teshekpuk Lake that was made off-limits to oil and gas leasing in the 2013 plan.

Last December the USGS dramatically increased its mean recoverable oil estimate for the reserve to nearly 8.7 billion barrels.

The Bureau of Land Management started a 45-day scoping period Nov. 20 to seek input on what should be considered in drafting the environmental impact statement, or EIS, that will drive the work.

State and local officials have also pushed BLM to reconsider the current land use plan for the reserve. The North Slope Borough is a major financial benefactor of oil development in the NPR-A as the local government, by federal law, is eligible to use up to half of the federal royalty revenue from oil production in the NPR-A for capital grant projects.

On Dec. 12 the agency held its annual NPR-A oil and gas lease sale. BLM received 16 bids over 16 oil and gas leases covering 174,044 acres, which netted a total of $1.13 million. Balash concluded that the relative lack of bidding compared to what has happened recently on nearby state lands “underscores the need for us to take a look at the NPR-A Integrated Activity Plan.”

Updated: 
12/21/2018 - 3:09pm

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