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YEAR IN REVIEW: Five-year transportation bill provides stable funding to Alaska

President Barack Obama signed the $305 billion Fixing America’s Surface Transportation Act Dec. 4, approving the nation’s first long-term transportation funding legislation in more than a decade. Known as the FAST Act, the bill provides five years of funding aimed at improving rail, road and marine infrastructure. It passed both the House and Senate by wide margins the day prior to being signed by the president. All three members of Alaska’s congressional delegation supported the legislation. Alaska is poised to receive more than $2.6 billion over the life of the FAST Act, with yearly allotment increases. The state took $483.9 million from the federal government for surface transportation programs in federal fiscal year 2015, which ended Sept. 30. In 2016, that figure jumps to $508.6 million; by the end of the FAST Act in 2020 it is $555.3 million, according to a release from Sen. Dan Sullivan’s office. The FAST Act also corrects a formula error in the 2012 MAP-21 transportation bill that cost the Alaska Railroad Corp. about $3 million per year in formula funding. The railroad should get $5 million more per year under the new law. Railroads across the country will also have the opportunity to compete for $199 million in federal grants to aid implementation of the federally mandated Positive Train Control safety system, which is expected to cost the Alaska Railroad nearly $160 million by the time it is fully in place in 2018. The previous year-end deadline for railroads to have Positive Train Control in place was pushed back to 2018 in a separate piece of legislation passed earlier this fall. The Tribal Transportation Program — $450 million per year under the MAP-21 extensions — will get an additional $15 million in 2016 and $10 million more in the following four years. A new federal freight program designed to fund freight-related highway improvements will send $80 million Alaska’s way over the duration of the legislation as well. 2. Ferry system cuts, new ships on way It was a year in limbo for the Alaska Marine Highway System. Early in the year, the Transportation Department, which manages the state ferries, increased fares by 4.5 percent on all but the system’s most expensive routes in an attempt to increase revenue and equalize its jumbled fare structure, which had not been changed since 2007. Ferry funding was again a hot topic in the Legislature as proposed budget cuts could have forced the Alaska Marine Highway System, or AMHS, to cancel summer sailings for which thousands of tickets had already been sold. In the end, lower oil prices — the cause of the budget crunch — left $5.5 million of fuel money unspent, which was reallocated to fund summer service. This fall, the AMHS and some legislators began holding meetings in coastal communities to discuss how to prioritize service during future lean budget years. The system is prepping for a 15 percent cut in fiscal year 2017 when compared to 2014 — the last year before its budget started falling. That cut could also deepen depending on what the Legislature allocates in its upcoming session. In fiscal year 2014, the Marine Highway System was appropriated $162.6 million by the Legislature. It will have a budget of about $137 million in the 2017 fiscal year, which begins next July 1, if the administration’s projection holds true. While dealing with funding struggles, the AMHS has been installing a new reservation system, which system leaders say should provide data to better inform future fare and schedule plans. On the positive, construction of the twin, Alaska class “day boat” ferries bound for service in Lynn Canal continued on schedule at Vigor Industrial’s shipyard in Ketchikan. The 280-foot ferries should be ready for water in October 2018. A final design for the M/V Tustumena replacement vessel is expected in January from Glosten, a Seattle-based marine engineering firm. 3. Corps selects Nome, then suspends Arctic port work It was a promising start to the year when the U.S. Army Corps of Engineers released a report in February outlining its idea for a reasonable deepwater port expansion for Nome. The $210 million plan would have dredged Nome’s expanded outer harbor to nearly 30 feet and added a large vessel dock. The plan was based on the perceived long-term need for more marine infrastructure in the region as Shell prepared to resume its offshore Arctic drilling program over the summer. Nome would have been home to smaller safety and support vessels for shipping through the Bering Strait and promising oil development in U.S. Arctic waters. That all came to an end in September when Shell announced the end of its offshore exploration in the Chukchi Sea — a $7 billion expenditure brought down by poor drilling results and onerous federal regulations, the company said. The fallout from Shell’s decision hit Nome in late October when the Corps suspended its work to expand the city’s port — no Shell, no drilling, no need for more infrastructure was the rationale. The Corps had been studying the prospect of a major Arctic port in Western Alaska since late 2011 through a cost-sharing agreement with the State of Alaska. 4. Matson closes Horizon deal, invests in Alaska Pacific shipper Matson Inc. wrapped up a $469 million deal to buy Horizon Lines Alaska business in late May and immediately began investing in its new business. In late July, Matson announced plans to purchase 2,000 new general purpose containers, 430 winter-insulated containers, a 65-ton gantry crane for its Kodiak terminal and two new tractors for container movement at the Port of Anchorage, altogether a $30 million investment. Three containerships operating in Alaska are also getting exhaust scrubber systems to comply with international treaty emission control regulations as part of Matson’s investment. The exhaust systems will eliminate nearly all sulfur dioxide and particulate emissions, according to the company. Kodiak’s new crane arrived Aug. 13. The ship renovations should be done in about a year. Matson provides twice-weekly containership service to Anchorage and Kodiak and weekly service to Dutch Harbor from Tacoma, Wash.

YEAR IN REVIEW: GCI completes wireless acquisition; Arctic fiber advances

Alaska’s two largest telecommunications companies are showing positive growth after shuffling the state’s wireless customers. In 2014, General Communications Inc. agreed to a $300 million deal with to Alaska Communications Systems Group Inc for all the latter company’s wireless subscribers and 33 percent of Alaska Wireless Network, a combination of both companies’ wireless infrastructure. ACS has used the proceeds from the deal to pay down its debt, and now focuses on its broadband business. The deal has yielded results for GCI’s balance sheet. GCI raised third quarter consolidated revenue by 7.4 percent from 2014, from $240.7 million to $258.6 million, and $10 million greater than second quarter 2015. GCI reported $19.9 million in net income in the third quarter of 2015 compared to $9.9 million in the third quarter of 2014. Alaska Communications revenue is down, but net income through nine months is up. Net income through three quarters of the year for Alaska Communications was $12.6 million compared to just $2.6 million for the same nine months of 2014. That is despite total operating revenues declining to $54.7 million from $78.4 million in the third quarter of 2014. 2. Quintillion lays fiber for northern Alaska Alaska’s Northwestern communities are one step closer to joining the worldwide data sphere. Alaska fiber optic provider Quintillion Subsea Holdings LLC signed a turnkey contract with French telecom Alcatel-Lucent for an undersea fiber optic cable network stretching across Nome, Kotzebue, Wainwright, Point Hope, Barrow, and Prudhoe Bay and will provide for future extensions to Asia and Europe. The undersea cable forms the coastal border of a broadband arc that will cover most of the populated Arctic by 2018. Quintillion, based in Anchorage, also plans to run a fiber optic cable from Deadhorse to Fairbanks, scooping most of the northern Alaska population into range of its overland and undersea cables. ASTAC, which provides broadband service and wireless coverage for Deadhorse, Kotzebue, Wainwright, Barrow, and Point Hope, will eventually have to upgrade each town’s broadband infrastructure to make full use of Quintillion’s fiber network. 3. Alaska Communications acquires North Slope fiber Efforts to bring data plans to rural areas and remote workspaces got another boost in 2015 with a ConocoPhillips broadband contract. Quintillion Networks also partnered with Alaska Communication Systems Group Inc., to operate the infield fiber optic cable on ConocoPhillips’ North Slope oilfields and begin a multi-year service provision contract for the oil company. Internet service to ConocoPhillips Slope operations was formerly available, but largely from older, expensive legacy installations of microwave towers and satellite relays. The fiber runs from Kuparuk River and Colville River units to Pump Station 1 of the Trans-Alaska Pipeline System. ConocoPhillips had installed the cable on its own, but decided the management of the cable’s high capacity, which was unfamiliar for the oil company, would better belong in a broadband expert’s hands. Alaska Communications has hired several supervisory positions to oversee the integration of the ConocoPhillips cable into its network, which should be complete by the end of 2015. ACS has also ordered new equipment to add to the cable’s existing capacity.   DJ Summers can be reached at [email protected]

YEAR IN REVIEW: Draft EIS for Donlin out; DNR issues Chuitna water decision

Donlin Gold reached a milestone Nov. 30 when the first draft of an environmental impact statement for the giant Western Alaska gold project was released by the U.S. Army Corps of Engineers. The draft EIS was 20 years in the making, as early resource definition work began at the Donlin claims in the Upper Kuskokwim River valley in 1995, according to Donlin Gold. A true mega-project, Donlin Gold’s $6.7 billion plan calls for a conventional open-pit mine 1.5 miles across and up to 1,200 feet deep about 10 miles north of the village of Crooked Creek in the Upper Kuskokwim River drainage. A tailings facility, large power plant, workers’ camp and 5,000-foot airstrip would accompany the mine. Also supporting the mine operation would be 315-mile, 14-inch diameter natural gas pipeline originating on the west side of Cook Inlet that is needed to fuel the 227-megawatt capacity power plant. The mine itself would produce more than 33 million ounces of gold from about 500 million tons of ore over an initial 27-year operating life, or more than 1 million ounces per year. It would process 59,000 tons of ore per day, according to the draft EIS. However, Donlin General Manager Stan Foo said shortly after the release of the EIS that gold prices would have to rise above current levels — less than $1,100 per ounce — to make the project feasible. Donlin Gold submitted its EIS application to the Corps in July 2012. A final EIS and subsequent record of decision are expected in mid- to late 2017. Foo estimated the draft EIS at over 7,000 pages, a compilation of information rarely matched for any resource development project, he said. During three to four years of construction, the mine would employ about 3,000 workers; once in operation the workforce would average about 800 employees. Calista Corp., the regional Alaska Native corporation, holds subsurface mineral rights for the mine. The Kuskokwim Corp., the area village corporation, holds surface rights. The draft EIS examines five project alternatives beyond Donlin Gold’s preferred alternative and the requisite no-action alternative. Of those, three would change the project in an effort to reduce barge traffic — specifically diesel barges — on the Kuskokwim River, which area residents rely heavily on for travel and subsistence salmon harvests. —Elwood Brehmer 2. DNR issues unprecedented water rights decision As PacRim Coal’s proposed Chuitna Mine is still early in the permitting process, the company, the state and stakeholders are haggling over who’s allowed to be involved. In October, the Alaska Mental Health Trust Authority appealed a Department of Natural Resources decision to grant certain water reservation rights to a non-state entity for the first time ever. Chuitna Citizens Coalition received an instream flow reservation, or IFR, for the lower portion of Middle Creek, a salmon spawning stream in the proposed mine’s area. Only Chuitna Citizen’s Coalition’s IFR for the lower section was granted by DNR. The coalition had also filed IFR requests for the middle and upper reaches. The coalition characterized DNR’s decision as a “dodge,” and a concession to the coal industry at the expense of Alaska salmon. The trust, which is overseen by the Department of Natural Resources and has large land allotments from which revenues are to support mental health needs, called the DNR decision “arbitrary” in its October appeal, and a dangerous precedent for allowing private parties to derail resource development. The Chuitna Citizens Coalition IFR is the first granted to a private group, rather than state organizations. PacRim is also filing an appeal of the DNR’s decision. —DJ Summers 3. Usibelli halts exports Usibelli Mine Inc., Alaska’s sole producing coal mine, has seen a long run of coal exports come to an end, at least until the end of 2015. For years the company routinely exported 600,000 tons to 800,000 tons of coal, although there were periodic dips in Pacific coal markets. In 2014 and 2015 coal prices dropped again in line with prices for other commodities, and competition for the available Pacific coal market stiffened. What has also complicated matters is a new tax in imported coal levied in South Korea, a prime customer for Usibelli. Adverse swings in currency values, with the U.S. dollar now at high levels compared to those of other nations, make imports from the U.S. including coal very expensive. Usibelli has also shipped to Japan, which it did in 2015, as well as to China and Chile. Coal has been mined by Usibelli at Healy and shipped by rail to Seward, a south Alaska coastal port city. A loading facility there loaded to coal on ships bound for overseas ports. The company’s exports dropped to about 200,000 tons in 2015 and so far there are no sales planned fro 2016, the company said. However, the core market in Alaska for the company remains firm at about one million tons of coal yearly and this will increase a bit in 2016 as the Healy Unit No. 2 coal-fired power plant at Healy becomes fully operational. The plant can produce 50 megawatts. The plant is owned and operated by Golden Valley Electric Association, the Interior power utility. Golden Valley also owns the smaller Healy Unit No. 1, a 25-megawatt plant. Usibelli supplies coal to both plants along with power plants in Fairbanks and at Interior Alaska military installations. Export prospects for Usibelli may improve if coal prices turn up, however. Usibelli’s long-term prospects remain positive, however. Coal is abundant in Alaska and it is the least-expensive source of energy for power generation, and the special quality of Alaska’s coals, with an ultra-low content of sulfur, ease any environmental problems caused by emissions. In addition the Healy 2 plant has new-technology emissions control equipment. Usibelli’s coal resources are also ample. At the present rate of production the company has about 1,000-year supply. — Tim Bradner    

Study: Broader strategies needed for over-prescribing painkillers

There’s a prescription drug abuse problem sweeping the United States, but fixing it will require a systematic change focused on how most health professionals prescribe drugs, rather than changing the practices of a few bad apples. At least, that’s the recommendation put forth in a research letter published Dec. 14 in JAMA Internal Medicine. Researchers examined Medicare claims from 2013 to see which doctors prescribed opioids — a class of drug that includes OxyContin, morphine and codeine — and how many prescriptions they filled. They found that the drugs are prescribed by a broad cross-section of medical professionals — including doctors, nurse practitioners, physicians’ assistants and dentists — rather than concentrated among a small group of practitioners. That means overprescribing opioids, they suggested, is a problem to which a majority of health professionals are contributing, not the work of a small minority. “You need to address everyone, or at least a larger amount of prescribers than a few deviants,” said study author Dr. Jonathan Chen, who is also an instructor at the Stanford University School of Medicine. “If you want to come up with a solution, you need to take that into account, or nothing will be effective.” Abuse of prescription painkillers has become a national concern, raising alarms among public health experts, policymakers and law enforcement officials. According to the federal Centers for Disease Control and Prevention, almost 19,000 people died from prescription painkiller overdoses in 2014, the most recent year for which data are available. Previous research suggested that as much as 80 percent of opioids are prescribed by a small subset of medical professionals. But the authors of this research letter provide a nuanced assessment. They found that 57 percent of these prescriptions are filed by 10 percent of doctors, nurse practitioners, physicians’ assistants and dentists. That figure demonstrates that patterns for opioid prescriptions are consistent with those for other medications, even ones that aren’t commonly abused. Generally, 10 percent of doctors are responsible for 63 percent of medical prescriptions overall. That’s noteworthy, Chen said. It suggests that there aren’t a few errant or villainous doctors single-handedly fueling the opioid crisis. Instead, the frequency of doctors who prescribe these painkillers is almost the same as that of doctors who recommend any kind of medicine. Whenever you look at any medication trend, the top prescribers will account for more than other people, he said. But if a few doctors were driving the opioid crisis, he said, you’d see a smaller proportion of them responsible for a larger amount of drugs compared to other medication. “What this told us is opioids aren’t special in any way,” Chen said. That’s why public health initiatives intending to address prescription drug abuse needs to account for all doctors, he said. That kind of systematic approach is essential, said Dr. Caleb Alexander, co-director of the Johns Hopkins Center for Drug Safety and Effectiveness, who was not affiliated with the study. “We’re taking our eye off the ball if we’re focusing on a very small subset of doctors alone,” he said. And the proportion of opioids prescribed by the top few is still a worry, he said. “Opioid prescriptions are skewed. It’s a little bit immaterial; it’s a second-order question how skewed prescribing is.” The study also doesn’t account for the length of individual prescriptions are or their strength: whether, for instance, the prescription is for two weeks or 30 days; or 30 milligrams of a drug versus 60 milligrams. It’s possible and even likely, he said, that the 10 percent of prescribers highlighted in the JAMA study could be writing longer prescriptions and consequently fueling the drug abuse. Alexander’s research, which isn’t yet published, analyzed pharmacy claims in Florida over a single year, finding there that 4 percent of providers made 40 percent of opioid prescriptions — a proportion that translated to 67 percent of all the drugs when accounting for the prescriptions’ sizes. Some differences between studies are probably the result of the people being studied, Chen said. Medicare beneficiaries have diverse backgrounds in a number of ways, for instance, but skew older. What matters, he said, is recognizing the role a number of doctors may play in getting patients easy access to opioids. “Going after deviants, ‘pill mills’ or bogus pain clinics — it feels good to do that, because you have a villain. You feel that if you get rid of them, the problem is solved, and what we’re trying to say is, ‘I don’t think that’s going to be enough,’” Chen said. “Maybe all of us are contributing to this problem, even if we don’t realize it.” Kaiser Health News is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

Beijing and Delhi: 2 cities and 2 ways of dealing with smog

NEW DELHI (AP) — Two cities. Two very polluted cities. And two very different ways of dealing with twin public health crises. When Beijing’s air was forecast to reach hazardous levels for three straight days earlier in December, the government issued a smog red alert. The result: Half the city’s cars were off the roads within hours, schools were closed and construction sites shut down. Less than three days later, pollution levels had dropped by 30 percent. When New Delhi’s winter air grew so bad that a high court warned that “it seems like we are living in a gas chamber,” the city’s top official declared that cars would be restricted starting Jan. 1, with odd and even license plates taking turns on the roads. But police officials quickly announced they hadn’t been consulted, and said they’d have trouble enforcing the rule. Plus, no one could fully explain how the already overstretched public transit system could absorb millions of additional commuters overnight. So, well, maybe the whole plan will be scrapped. “If there are too many problems, it will be stopped,” New Delhi Chief Minister Arvind Kejriwal said in a speech a couple days after his announcement. “We will not do anything which will cause inconvenience to the public.” Long famous for its toxic air, Beijing is struggling to lose that reputation, bowing to pressure from a growing middle class to keep pollution under control. Traffic is regularly restricted in the city, factories have been moved and the central government is anxious to ratchet down the country’s use of coal-burning power plants. And New Delhi, which by many measures now has far more polluted air than Beijing? So far, the environmental court — which has only quasi-legal powers — has ordered that no diesel cars be registered in the city for the next few weeks, and has discouraged the government from buying diesels for government fleets. Officials, meanwhile, have suggested everything from car-free days to planting more trees to dedicated bus lanes. It amounts to little more than vague promises, and is resulting in increasingly angry headlines. “As Delhi debates, Beijing declares war on pollution,” the Times of India sneered on its front page last week, when Beijing announced the red alert. “Delhi has started very late” in the fight against air pollution, said Vivek Chattopadhyaya, who studies air quality for the New Delhi-based Centre for Science and Environment. “Many people in Delhi are not even aware that what they see in the morning is not fog, it’s smog. They don’t realize what kind of pollutants they are breathing.” Only in the past couple of years has air pollution become an issue at all in India, except for a tiny circle of scientists and environmental activists. Desperate to grow its economy as quickly as possible, environmental concerns are still largely ignored until the impact makes life uncomfortable for the wealthy and the powerful. In New Delhi, that time has come. In winter, when winds die down in northern India, a cloud of pollution now often clings to the capital. Blue skies are rarities. Respiratory illnesses have spiked, doctors say, and the stink makes it impossible to confuse pollution anymore with fog. “It is not safe at all,” said Ankur Jain, a 35-year-old father of two whose New Delhi neighborhood is regularly rated the most polluted in the city. A government employee, Jain is looking for work elsewhere, worried that pollution will cut short the lives of everyone in his family. Changing attitudes, experts say, may finally bring change. “In China, whenever you talk about PM2.5 (one of the most dangerous forms of airborne particulate matter), everybody knows what that is, it’s pollution. But once you raise the same questions in Delhi, it seems like not many people care about that. And yet, the level of pollution in Delhi is more than five times” higher than in Beijing, said Yann Boquillod, a longtime Beijing resident who co-founded Air Visual, a startup that crunches pollution data and weather information to predict air quality. “The population is going to demand higher standards for air quality,” said Boquillod, who is French, adding that “we are not there yet for Delhi. Delhi has so few monitoring stations. They have a lot of work to be done in the near term.” Like New Delhi, Beijing long ignored its own pollution crisis. It only instituted a four-tier air-quality system in 2013, largely in response to increasing pressure from the country’s growing middle class, and about the same time the government began posting reliable air quality numbers. Before that, officials were reluctant to even discuss the issue, and were furious when the U.S. Embassy in Beijing began independently posting its own air quality readings. Fixing the problem, though, is complicated. The pollution in New Delhi comes from multiple sources across northern India — vehicles, factories in neighboring Uttar Pradesh and Haryana states, farmers burning their fields in Punjab, dirt blown in from the Rajasthan deserts. Officials from different states have already started fighting about where the responsibilities lie, and who will have to pay to clean things up. In China, an authoritarian system makes policy changes much more straightforward than in India, where a chaotic and widely corrupt government makes it easier for polluters to avoid regulations. “China has made a very serious and concerted effort to fight air pollution in the past few years,” said Lauri Myllyvitra, Greenpeace’s global campaigner on coal. She said Beijing’s success came when it realized the problem had to be addressed regionally, not just in the city. “Our greatest hope is that India will not waste a decade trying to address a regional problem locally ... but will move much faster to put in place regional action plans for cleaner energy sources and fuels, as well as meaningful emission standards and enforcement.” In Beijing, families wrestle with a pessimism that comes from years of breathing dirty air, and hope that the problem is finally being addressed. In some ways, they have learned to change how they live: They check their smartphones for air quality updates, they buy air purifiers, they wear masks, they avoid going outdoors when things get really bad. Li Ming, a 35-year-old stay-at-home father, said he welcomed Beijing’s red alert, despite the inconveniences of car restrictions and school closings. “You could tell, just on the second day, you could feel that the air quality was improving,” he said. “I think the future will be better, because the control in Beijing is getting more and more strict.” Associated Press journalists Aritz Parra and Chris Bodeen in Beijing and Rishabh R. Jain in New Delhi contributed to this report.

Movers & Shakers 12/20/15

Larry Gluck was hired as Northrim Bank’s AVP-lending quality assurance officer. Gluck joins Northrim Bank’s Credit Administration Department with 28 years in banking. He has most recently worked for regional and community banks in Florida and has held numerous positions in Credit Administration as credit analyst, credit officer, credit manager and senior credit officer. Gluck moved to Alaska to be closer to family. He has also worked as an internal auditor, accountant and controller while in New Jersey and Florida. Gluck holds a bachelor’s of science in accounting from Fairleigh Dickinson University in New Jersey. Sixteen-year-old Charles Franznick of Palmer was randomly selected to win a $25,000 scholarship account in the UA College Savings Plan and four more young Alaskans have won $2,500 scholarship accounts. All Permanent Fund Dividend applicants who answered “yes” to question number six of their PFD application were automatically entered into the annual scholarship account drawing. The PFD check-off asks residents if they would like to automatically contribute half of their dividend to their UA College Savings Plan account. The winners of the $2,500 scholarship accounts are: Andrew Gifford, age 14, Anchorage; Grace Newman, age 14, Juneau; Timothy O’Rourke, age 17, Palmer; Aaron Campbell, age 14, Wasilla. More than 13,500 residents contributed to the UA College Savings Plan through the PFD check off this year, an increase of 700 people from the prior year. The plan has seen a 71 percent increase from the number of contributors since 2009, before the giveaway began. Credit Union 1 promoted Nicki Gardepe to the position of branch manager at the credit union’s Mountain View Branch. Originally hired in 1999 as a consumer loan officer, Gardepe later held the positions as the member services center assistant manager, member service center manager, credit solutions loan officer and branch assistant manager at the credit union’s Mountain View Branch, the position she held prior to this promotion. Credit Union 1 also promoted Miri Bardello to member assistance manager in its member assistance department. Bardello was initially hired in 1999 as a teller at the credit union’s Midtown Branch. Since then, she has served as a switchboard operator, member service assistant, real estate loan servicer, member service officer trainee, member service center assistant manager, assistant branch manager, and her most recent position of consumer loans assistant manager. Alaska Permanent Capital Management welcomed Kirsten Halpin to its institutional team. Halpin was hired as an investment analyst to work primarily with the Balanced Portfolio team. She earned her BBA in business administration with a concentration in finance, and MBA with a concentration in capital markets from the University of Alaska Fairbanks. The Alaska State Council on the Arts and the Alaska Humanities Forum are pleased to announce the eight recipients of the 2016 Governor’s Awards for the Arts and Humanities. The annual awards are co-presented by the Alaska State Council on the Arts and the Alaska Humanities Forum in coordination with the Office of the Governor. The awards ceremony will take place Jan. 28, 2016 at the Juneau Arts and Culture Center. The 2016 awardees are — Lifetime Achievement Award: June Rogers, Fairbanks; Individual Artist Award: Pat Garley, Palmer; Arts Advocacy Award: Nancy DeCherney, Juneau; Margaret Nick Cooke Award for Alaska Native Arts and Languages: Vicki Soboleff, Juneau; Distinguished Service to the Humanities: Cyrano’s Theatre Company, Anchorage; Steve Henrikson, Alaska State Museum Curator of Collections, Juneau; Lucy “Ahvaiyak” Richards, Iñupiaq Language Instructor, Barrow. The Alaska Studies Educator of the Year is Marc Swanson, Kenai Mountains-Turnagain Arm National Heritage Area Curriculum Developer, Seward.

New and bigger taxes, reduced PFD in gov’s plan

(Editor's note: This story has been updated to include remarks from legislators as they become available.)   Ready or not Alaskans, here comes reality: higher taxes, more of them and a smaller dividend. Gov. Bill Walker unveiled his long-range fiscal plan for the state Dec. 9, which includes a personal income tax as well raising nearly every state industry tax in the face of yearly budget deficits approaching $3.5 billion. The Legislature will have its say when it convenes in January, but under the Walker administration’s proposal, the State of Alaska would adopt federal code for its income tax and levy the tax at 6 percent of ones federal liability. That equates to about 1.5 percent of an individual’s annual income. An income tax allows the state to capture revenue from nonresident workers — about 20 percent of Alaska’s workforce, according to the state Labor Department — as well as profits from S-corporations and partnership businesses. The relatively small income tax would generate an estimated $200 million for the state every year. Withholdings would begin in January 2017. Alaska has not had an income tax since 1980, and three attempts to reinstate a tax during the fiscal disaster of the late-1980s all failed. Along with the income tax, Walker formally proposed shifting how the state manages its money towards a “sovereign wealth fund” model, an idea first floated by the administration in late October during a presentation to the Legislature by Attorney General Craig Richards. The concept would stabilize state revenue by filtering it through the Permanent Fund, thus allowing the money to make an investment return, before lawmakers could spend it. More specifically, the Walker administration’s plan would put half of the state’s resource royalty revenue and all of its oil and gas production tax income into the Permanent Fund each year. The earnings, or investment return, made by the fund would then be allotted to the Permanent Fund Earnings Reserve account and spent to run state government. The state could sustainably draw $3.2 billion from the Earnings Reserve each year under the plan. That projection holds up under 97 percent of scenarios and is based on roughly $50 per barrel oil, according to the administration. Permanent Fund Dividend checks, which have historically come from the Earnings Reserve, would then come from the remaining 50 percent of annual resource royalties. Alaskans would no longer get a Permanent Fund Dividend; rather they would get a resource royalty dividend, pegged to be about $1,000 in the coming years. A $3 billion infusion from the Constitutional Budget Reserve, or CBR, account into the Earnings Reserve would be needed to jumpstart the plan, according to the administration. The CBR currently holds about $9.1 billion, while the Earnings Reserve will hold about $6.5 billion at the end of fiscal 2016, according to Alaska Permanent Fund Corp. projections. The Permanent Fund held $51.3 billion in total assets at the end of the third quarter. That money cannot be accessed by the Legislature without a constitutional amendment. The Earnings Reserve can be spent with a simple majority vote. The whole plan is based on continuing status quo unrestricted state spending in the $5 billion range. The fiscal plan “keeps the Permanent Fund permanent,” Walker said while unveiling his proposal. Combining a small, progressive income tax with a smaller dividend, which is an impact to all Alaskans, is an imperfect way to spread the burden of now directly paying for government services across all residents, while minimizing the impact on low-income Alaskans, the administration says. Walker’s proposed taxes and fiscal plan will all be vetted, dissected and reflected upon during the upcoming legislative session. Any action will have to be approved by the Legislature. “This is a work-in-progress; this isn’t an edict or a mandate,” Walker said. “The main message is that we have to fix the problem.” Doing nothing — not really an option — would require the state to draw $33 billion from savings, money the state does not have, over the coming years while dividend checks would disappear in about 2020, the administration says. A large natural gas pipeline, which would generate billions in revenue annually, cannot itself save the state’s finances and is still far from a certainty. How quickly things change. Less than a year-and-a-half ago Alaska North Slope crude was selling for $101 per barrel. On Dec. 7, the price for Alaska oil fell below $40 per barrel for the first time since February 2009. The second half of this year is the first time oil prices have consistently held below $50 per barrel since the end of 2004. Alaska’s state revenue history looks much the same. The Department of Revenue’s annual fall revenue forecast released Dec. 8 projects Alaska will take in just less than $1.6 billion in unrestricted general fund revenue in the current 2016 fiscal year. That would be the lowest income level for unrestricted funds the state has seen since oil was below $20 per barrel in 1999. Just a few years ago in 2013 the state took in nearly $7 billion of discretionary income; a year prior that number was $9.5 billion. The problem this time is declining North Slope oil production will not allow the state to refill its coffers once oil prices rebound, whenever that may be. As a result, the state must wholly shift its financial structure. Further government spending cuts totaling $100 million are proposed in the governor’s operating budget, Office of Management and Budget Director Pat Pitney said at a press briefing Dec. 9. Unrestricted government spending has fallen by nearly $1 billion over the last couple years. Additionally, about 600 state employees have been laid off as a result of those budget cuts. Senate President Sen. Kevin Meyer, R-Anchorage, said he has not had a chance to fully review the administration’s proposal, but his initial reaction is that the spending cuts do not go far enough. “A $100 million reduction (proposed by the governor) is not acceptable to our Senate Majority if we’re asking for $400 million in new taxes on Alaskans,” Meyer said. The majority caucus will be meeting soon to iron out priorities, but Meyer said a likely target for Senate Republicans is a 5 percent to 10 percent reduction. House Speaker Rep. Mike Chenault, R-Nikiski, said he disagrees with the governor over not proposing a state sales tax. There are problems with how it would relate with municipal sales taxes, even in his own Kenai Peninsula Borough, the Speaker said, “but I still think a sales tax is a fair tax across the state, although it won’t be liked in rural Alaska.” Chenault added that he is concerned about the administrative costs associated with implementing new taxes. Walker said a sales tax was considered but not chosen based on the disproportionate impact on rural Alaska, where higher costs of goods would generate a higher sales tax. House and Senate Democrats commended Walker for not ignoring the state's fiscal bind in formal statements, but said the governor's plan pushes the burden of paying for government onto low-income Alaskans. "The oil companies, and the wealthiest Alaskans will be thrilled with this proposal because three-fourths of what the government takes will come from hard-working Alaskans, many of whom rely on their Permanent Fund checks to cover the basics," Anchorage Democrat Sen. Bill Wielechowski said. "The whole plan is skewed to have the least impact on the rich and powerful, while dumping the burden on those who can least afford it. This is a reverse Robin Hood plan that robs from those wo need, and spares the rich." Oil and gas tax credits — brought into the limelight by Walker’s partial deferment of $200 million of the the state’s $700 million refundable credit obligation in the current year’s operating budget — would be transformed into a loan program, with interest rates tied at least partially to what percentage of a project’s workforce is Alaskan. That would be a drastic shift away from the current refundable credit system, which pays, particularly small producers, dollar-for-dollar on many exploration and development capital expenses. Industry representatives have pushed back on major changes to the state’s oil and gas tax credit program, and a report released Dec. 1 by the Senate Majority urged against wholesale changes to the program, fearing a sudden retraction from the industry in the state when low oil prices are already challenging bottom lines. The Alaska Oil and Gas Association panned Walker’s plan to change the tax credit program. “At a time of low oil prices, now is not the time for the state to increase taxes or reduce incentives to the oil and gas industry in Alaska,” said AOGA President Kara Moriarty in a statement. “Unfortunately, Governor Walker is proposing to do both. We support the governor’s goal to put more oil into TAPS. However, increasing taxes and removing important incentives will not lead to more production.” Moriarty noted that prices have now slid to less than $40 per barrel and cited fiscal year 2014 figures of $46.42 per barrel for transportation, operating and capital costs. The administration’s tax plan would also harden the oil production tax floor for legacy oil from large producers to prevent operating losses from eliminating a company’s tax obligation, a recommendation made by the Senate Oil and Gas Tax Credit Working Group report, but also bump the floor up from 4 percent to 5 percent. The oil and gas tax credit changes would not necessarily generate much revenue, but rather would save the state upwards of $500 million per year that it is currently spending. “There’s no one that won’t be impacted in some way by what we’re going to propose,” Walker said. “I guarantee, everybody in Alaska will find something about this plan they don’t care for.” State motor vehicle fuel taxes —the lowest in the nation at 8 cents per gallon— would be doubled to 16 cents; the marine fuel tax would also double to 10 cents per gallon; and the 3.2 cents per gallon aviation fuel tax would go to 10 cents. Those increases would raise $45 million, according to Walker administration projections. Most other major industry taxes would be raised between 1 percent and 2 percent to generate another $12-$20 million annually from the tourism, fishing and mining industries, the administration says. A change to tourism taxes would eliminate a deduction that has allowed cruise companies to deduct local head tax payments from their state obligations, primarily in Juneau and Ketchikan. Additional sin taxes would include a 10 cents per drink alcohol tax to collect $40 million and a $1 per pack increase to tobacco products and e-cigarettes. The regulated marijuana trade — new in fiscal 2017 — should generate about $12 million in its first year, according to the Revenue Department. Elwood Brehmer can be reached at [email protected]

AGDC, producers approve 2016 spending

Alaska Gov. Bill Walker said he gave the OK Dec. 3 for the state to vote “yes” on continuing work on the Alaska LNG Project after receiving commitments from two North Slope producing companies that they would not withdraw from the project without negotiating to sell their gas. That same day the partners in the project, BP, ConocoPhillips, ExxonMobil and the state, voted to approve a $230 million 2016 budget and work plan to complete preliminary engineering work. The state’s share of that is 25 percent, or about $57 million. BP and ConocoPhillips signed the agreement making the assurances on a withdrawal to Walker Dec. 4, a day after the partners’ vote to approve 2016 spending. ExxonMobil, the third partner in Alaska LNG and the project manager, did not sign on to the agreement. The company did vote to approve the 2016 budget along with the other partners, however. Walker was previously worried that an exit from the project by one of the Slope producers at a critical time could leave the project stranded without enough assurance of throughput for financing and construction. Costs are estimated at $45 billion to $65 billion. In a briefing Dec. 4, Walker said having assurances from two of the three producers is good enough. He said he had spoken by telephone with senior officials at ExxonMobil, the holdout in joining the withdrawal agreement, and was given verbal assurances similar to those from BP and ConocoPhillips.  “Now we know we have gas committed to the project, and this is critical. A piece of pipe without gas is no good,” Walker said. On ExxonMobil, the governor said, “it is still a partner and is continuing to work in good faith,” on the Alaska LNG Project.  The withdrawal agreement between the state, BP and ConocoPhillips was released Dec. 8 and states that good faith efforts to sell gas to the “state or its designee” will be made by either company withdrawing, and that gas would be made available under “mutually agreed commercially reasonable terms.” The agreement states that what is “commercially reasonable” shall be at the sole discretion of each party. It also has a “no liability or damages” section that states no party is required to enter into an agreement and cannot be held liable for any sort of damages to the project, including loss of actual or potential profits. Sources familiar with the exchanges said the phrase “reasonable terms” implies agreement from both buyer and seller on prices and other terms. It is similar to language that now exists in state oil and gas leases under which an oil company lessee has an obligation to develop and sell resources if reasonable terms are offered. This is the “duty to produce” covenant that the governor and Attorney General Craig Richards have often spoken but it has proven difficult to enforce in lawsuits brought in other states involving similar language in leases, the source said. Walker originally pushed for more definitive terms of a potential sale agreement from a withdrawing partner, which might have involved setting a price, but appears to have backed away from this, possibly because of the complexities of the issue and the uncertainties it would have raised for the entire gas project. In his Dec. 4 briefing the governor said the state itself might be willing to buy gas from a withdrawing partner, and then resell it. “This is one option we’re looking at,” Walker said. The state’s gas corporation, the Alaska Gasline Development Corp., has the authority to purchase and sell gas, acting as a gas aggregator, through a subsidiary company formed last fall for that purpose. AGDC’s intent with this, for now, is to buy and sell gas to Alaska communities, its officials told a legislative committee during a special session of the Legislature in November. Legislators on the committee pointed out that the legal charter for the subsidiary appears to be broad enough so that the state could resell gas, as LNG, in international markets. Purchasing gas from a withdrawing partners would be a big financial undertaking for the state that would be on top of the state’s current commitment to finance 25 percent of Alaska LNG Project construction costs that could exceed $50 billion. Alaska now owns 25 percent of the North Slope’s known 35 trillion cubic feet of gas and now owns the same percentage of the Alaska LNG Project after completing the purchase of TransCanada Corp.’s share of the pipeline and North Slope gas conditioning plant. Previously, the state held 25 percent of the large natural gas liquefaction plant at the southern end of an 800-mile pipeline planned to be built from the North Slope. Having bought out TransCanada, the state how holds 25 percent of the pipeline and North Slope gas treatment plant, bringing its share of those into alignment with ownership in the LNG plant and the state’s own gas reserves. Meanwhile, the approval of the 2016 project budget will allow the pre-front end engineering and design, or pre-FEED, to be completed, with a target date by mid-year. Commercial negotiations are meanwhile underway among the partners on several agreements still needed, and these have to be completed before the next step is taken on the technical work, the final engineering or front end engineering and design, or FEED. Steve Butt, the ExxonMobil manager heading the technical work on the Alaska LNG Project, said the latest target date for a decision on FEED is mid-2017. Butt said the project is still on schedule in terms of the original agreements among the companies. There had been hopes previously that the FEED decision could have been made in late 2016. The commercial negotiations include several issues including a complex gas “balancing” agreement among the producers who are part of the Alaska LNG Project which sets out how gas will be made available if there are technical upsets in one of the two fields supplying gas, Prudhoe Bay and Point Thomson. A second important negotiation, on a so-called “governance” agreement, is on the legal and commercial structure for managing the project as it moves through the FEED process to a Final Investment Decision, construction and operation. Currently the commercial structure in place, where ExxonMobil is project operator on behalf of itself and other partners, governs only the pre-FEED work now underway. Eventually a stand-alone operating company similar to Alyeska Pipeline Service Co. might be formed to operate the project in its construction and operation phases, as Alyeska did for the Trans-Alaska Pipeline System. Also pending is a deal to fix the state’s fiscal terms, on royalty and tax, for a period of years, very likely equal to the terms of LNG sales contracts. This will require an amendment to the state constitution that must be voted on by the public in a state general election. The next general election is in November 2016. If the negotiations are not completed in time for the Legislature to approve the amendment by June 24, 2016, the next general election is in 2018, effectively delaying the Alaska LNG Project by two years. The negotiators’ schedule currently calls for the agreements to be completed by spring in time for a special session of the Legislature following the end of the regular session.  If things proceed as planned and the voters approve the amendment, a decision on final engineering, or FEED, in 2017 will allow the partners to make a Final Investment Decision in 2019, after which construction could start. The project could then be in operation in 2025 and could export up to 20 million tons of LNG yearly. Tim Bradner can be reached at [email protected]

Cook Inlet fish meeting to stay in Anchorage

The 2017 Upper Cook Inlet meeting of the Alaska Board of Fisheries will be held in Anchorage, as planned and as usual. The board made the call by a 5-2 vote at the tail end of its Bristol Bay finfish meeting, also in Anchorage. Only two board members, commercial fishermen Sue Jeffrey and Fritz Johnson, voted in favor of a proposal moving the meeting from Anchorage to Kenai Peninsula, where the board hasn’t held an Upper Cook Inlet meeting since the last millennium.  “Maybe next time,” said member John Jensen of Petersburg, drawing an outraged cry from the audience. “Why maybe?” called John McCombs, a Peninsula fisherman and board member of United Cook Inlet Drifters Association. Board director Glenn Haight and others quietly warned McCombs to be quiet while member Sue Jeffrey began making her comments, “hopefully without feeling threatened,” she added. “Threatening” was the exact term Jensen used to characterize the Upper Cook Inlet meeting issue after the matter had closed. “I’m glad to have it behind us,” he said. Member Robert Mumford said he had no compunction against moving the meeting to the Peninsula, but ended up voting against the move, not wanting to “upset the apple cart.” Mumford hinted that he felt pressured.  “I feel like we’re in the middle of a soccer game, and at least I’m the ball,” said Mumford. Walker appointed Mumford to the board in May following the failed appointments of Roland Maw and Robert Ruffner. Mumford has not yet been confirmed by the Legislature. Board members listed fears of influence peddling, political perceptions, security, convenience, and fairness. Jensen said the board goes through pains to make meeting agendas so stakeholders can time their visits to the 14-day meeting. The board’s consensus was that Anchorage, at the center of the Upper Cook Inlet area, is the logical choice. “If we’re going to be fair to the majority of users, it’s having a meeting in Anchorage,” said Jensen. “The user groups don’t have to spend that much time up here. If they have to come for one part of the meeting, they know where it is.” Peninsula residents have long argued that the board process is too complex and nuanced to go for only one day, and that the process is therefore skewed against those who can’t make the trip. Ed Schmitt, the chairman of the Kenai Area Fishermen’s Coalition’s board, said the vote is a blow to the Kenai Peninsula. Two weeks in Anchorage is prohibitively expensive for those without large financial interest in meeting outcomes, so many people who use the fisheries are not heard, he said. “The community is centered around the Kenai River,” Schmitt said. “It’s in our back yard. It’s what we use. It’s a very frustrating process for the people who are most affected by it.” A potential meeting relocation has been in spotlight since November, when two letters supporting a meeting relocation made their way to the board, including one from Gov. Bill Walker. The board had scheduled the meeting for Anchorage last year, and voiced resentment at being made to consider it again. The Bristol Bay meeting, board members said, suffered from the “distraction” of the Upper Cook Inlet relocation issue. “All this went on during another region’s meeting,” said board member Orville Huntington. “I don’t think it’s fair to the people of Bristol Bay.” Walker wrote a letter to the board Oct. 21, asking it to consider changing the location and promising to attend if it were held on the Peninsula. “There has been much attention given to the controversies surrounding the Cook Inlet fisheries, and I feel we should attempt to improve the communication and exchanges among the many interested parties,” wrote Walker. “Holding a meeting on the Peninsula, possibly Soldotna, may show a willingness to consider points of view from local residents who may not have been able to participate over the past five board cycles.” After Walker’s letter, public officials flooded the Board of Fisheries with written comments either supporting or condemning a meeting relocation. Mat-Su Sens. Mike Dunleavy and Bill Stoltze jointly scorned Walker’s “rather forceful letter,” accusing him of “inappropriate” commercial fishing favoritism. “It appears to (our constituents) that you continue to receive bad advice and provide preferential treatment to one user group, commercial fisheries,” the letter states, “to the potential detriment of tens of thousands of Alaskans that participate in recreational and personal use fisheries.” A second letter offered the board financial benefits, which some board members later equated with a corrupting bidding process. In a Nov. 16 letter, Kenai Peninsula Borough and City of Kenai mayors Mike Navarre and Pat Porter, and Soldotna Mayor Pete Sprague offered the board over $60,000 in service savings by volunteering local venues, transportation, and coffee service. “In my opinion, this is a procurement issue,” said member Reed Morisky, a lodge owner. “We’re on a slippery slope here. I don’t recall a public notice saying that offers would be entertained for free venues and free coffee. The board meeting becomes a low bid situation, I think it pollutes the process.” Peninsula residents said they are down, but not out, and already looking to the board cycle beyond 2017. Rick Koch, the city manager for the city of Kenai, said he was disappointed in the decision but not intending to give up. “I’m disappointed, obviously,” he said. “My focus and the focus of others will shift in 2020 to the UCI meeting as well as being able to take advantage of the work session that will be held down here in 2016.” Peninsula Clarion reporter Elizabeth Earl contributed to this report. DJ Summers can be reached at [email protected] Elizabeth Earl can be reached at [email protected]

Donlin environmental impact statement released

Twenty years in the making, the first draft of an environmental impact statement for the Donlin Gold mine proposed for Western Alaska was released Nov. 30. “It’s still a long path ahead of us, a lot of challenges ahead of us, but (the EIS) is a significant milestone,” Donlin Gold General Manager Stan Foo told the Resource Development Council of Alaska Dec. 3. Early resource definition work at the site began in 1995. A true mega-project, Donlin Gold’s $6.7 billion plan calls for a conventional open-pit mine 1.5 miles across and up to 1,200 feet deep about 10 miles north of the village of Crooked Creek in the Upper Kuskokwim River drainage. A tailings facility, large power plant, workers’ camp and 5,000-foot airstrip would accompany the mine. Also supporting the mine operation would be 315-mile, 14-inch diameter natural gas pipeline originating on the west side of Cook Inlet that is needed to fuel the 227 megawatt capacity power plant. To the south and east, a 30-mile road would connect the mine to a new barge port on the Kuskokwim. Further down the Kuskokwim, port cargo landing facilities would be expanded in Bethel, and new diesel storage tanks would be needed Dutch Harbor. In all, the direct supply chain in Donlin’s proposal from Cook Inlet to Dutch Harbor would cover approximately 1,050 miles. Donlin Gold is a joint venture between Barrick Gold Corp. and NovaGold Resources Inc. The natural gas pipeline would initially be only about half full as the average load of the power plant will be about 150 megawatts, according to Foo, leaving potential capacity for natural gas that could be used by local communities to offset high-cost, diesel-sourced heat and power. Assuming the cost of using Donlin’s pipeline and developing natural gas infrastructure in the region would be the responsibility of a third-party developer, Foo said. He said the scope of the Donlin project meant compiling a stock of information rarely matched in scale, much like the project proposal. The draft EIS, which is primarily shared in electronic form, would surpass 7,000 printed pages, he surmised. The mine itself would produce more than 33 million ounces of gold from about 500 million tons of ore over an initial 27-year operating life, or more than 1 million ounces per year. It would process 59,000 tons of ore per day, according to the draft EIS prepared by the U.S. Army Corps of Engineers. “Very few mines in the world produce more than 1 million ounces of gold each year,” Foo said. However, gold prices will need to improve between now and the time Donlin decides whether or not it plans to move forward with construction. Foo said the mine would not be feasible at today’s gold prices of less than $1,100 per ounce. The tailings storage facility, which would be the first full-lined facility in Alaska, he said, would cover approximately 2,300 acres. During three to four years of construction, the mine would employ about 3,000 workers; once in operation the workforce would average about 800 employees. Calista Corp., the regional Alaska Native corporation, holds subsurface mineral rights for the mine. The Kuskokwim Corp., the area village corporation, holds surface rights. Both have been “very supportive of the project,” Foo said. Donlin Gold submitted its EIS application to the Corps in July 2012. A final EIS and subsequent record of decision are expected in mid- to late 2017. The draft EIS examines five project alternatives beyond Donlin Gold’s preferred alternative and the requisite no-action alternative. Of those, three would change the project in an effort to reduce barge traffic — specifically diesel barges — on the Kuskokwim River, which area residents rely heavily on for travel and subsistence salmon harvests. The reduced barging options include using liquefied natural gas-powered equipment at the mine, thus reducing the need for diesel fuel; constructing an 18-inch diesel pipeline from Cook Inlet to the mine, which would replace the natural gas line; and moving the port site from Jungjuk Creek 69 miles downstream to Birch Tree Crossing to reduce the distance freight and diesel would travel on the Kuskokwim. An alternative that would use a dry stack method of tailings storage instead of the tailings pond and dam proposed by Donlin would avoid the risk of a tailings dam failure. The tailings under this option would be dewatered in a filter plant and saturated into a compactable cake material, according to the draft EIS. That material would then be spread into thin layers with bulldozers in a dry stack tailings area. The last alternative would shift the natural gas pipeline route slightly through the South Fork Kuskokwim valley. Comments on the draft EIS can be submitted to the Corps through April 30.

$305B transportation bill grows annual outlays for Alaska

President Barack Obama signed into law the nation’s first long-term transportation funding bill in more than a decade on Dec. 4. The $305 billion Fixing America’s Surface Transportation, or FAST, Act provides five years of funding aimed at improving rail, road and marine infrastructure. It passed both the House and Senate by wide margins the day prior to being signed by the president. All three members of Alaska’s congressional delegation supported the legislation. Alaska is poised to receive more than $2.6 billion over the life of the FAST Act, with yearly allotment increases. The state took $483.9 million from the federal government for surface transportation programs in federal fiscal year 2015, which ended Sept. 30. In 2016, that figure jumps to $508.6 million; by the end of the FAST Act in 2020 it is $555.3 million, according to a release from Sen. Dan Sullivan’s office. Passage of the five-year bill gives funding certainty needed to make infrastructure investments in Alaska, Sullivan said. “The bill also includes reforms to our permitting system, which will help cut through project-killing red tape and streamline regulatory burdens,” he said in a formal statement. “This bill amounts to a big win for Alaska as it will allow us to not only address our infrastructure needs, but also promote and sustain economic growth throughout the state.” The legislation establishes a council of relevant federal permitting agencies tasked with determining best practices and modeling timelines for evaluation of major transportation projects in an effort to speed up federal regulatory approval, according to a conference committee summary. A pilot program will also allow up to five states to substitute their own environmental regulations in place of the National Environmental Policy Act, or NEPA, given the states’ laws and regulations are at least as stringent as those in NEPA. The FAST Act is a win for Alaska, as Sullivan noted, at least when it comes to dollars per Alaskan. A large, young state with limited transportation infrastructure, the $2.6 billion equates to more than $3,500 per Alaskan, while the rest of the country averages $956 per citizen. “We all recognize that Alaska is in the midst of a budget crisis, so being able to rely on federal funding for critical infrastructure projects, whether it be on roads, bridges, or ferries, is key to our state,” Sen. Lisa Murkowski said in a release. Murkowski served on the conference committee that resolved the final transportation bill. Rep. Don Young noted in a statement from his office that the last long-term surface transportation bill, SAFETEA-LU, was legislation he authored as chair of the House Transportation and Infrastructure Committee in 2005. He said the FAST Act is “far from perfect,” but, like Sullivan, added it makes several important reforms to streamline federal permitting. “The success of any state’s economy directly depends on their ability to move people and products safely and efficiently,” Young said. “That is especially true in a developing and geographically unique state like ours, which is why I worked so hard to secure numerous provision specifically beneficial to Alaskans — including $31 million annually for the Alaska Railroad, ample funding for our ferry program, and significant increases for the Tribal Transportation Program.” An error in the funding formula in the 2012 MAP-21 transportation bill that cost the Alaska Railroad Corp. $3 million per year is corrected in the FAST Act, which also grew the pool of passenger railroad formula funding. In all, the Alaska Railroad will get a $5 million increase in federal funding annually, according to a railroad spokesman. Railroads across the country will also have the opportunity to compete for $199 million in federal grants to aid implementation of the federally mandated Positive Train Control safety system, which is expected to cost the Alaska Railroad nearly $160 million by the time it is fully in place in 2018. The state-owned Alaska Railroad has spent more than $70 million to install Positive Train Control over several years and the Legislature authorized it to sell bonds earlier this year to further the work. Railroad spokesman Tim Sullivan said the railroad will likely apply for federal assistance, but added how that would play into the current PTC funding plan is still unclear. The previous year-end deadline for railroads to have Positive Train Control in place was pushed back to 2018 in a separate piece of legislation passed earlier this fall. The Alaska Marine Highway System, hit hard by state operating budget cuts, gets a little more for its capital improvement program. The state ferry system will receive $18.6 million annually for major work on its vessels, which equates to a $2.4 million increase over the five years of the FAST Act. Earlier versions of surface transportation legislation changed the funding formula for state ferry programs, which could have lessened Alaska’s take and caused concern in the Alaska Department of Transportation. The Tribal Transportation Program — $450 million per year under the MAP-21 extensions — will get an additional $15 million in 2016 and $10 million more in the following four years. A new federal freight program designed to fund freight-related highway improvements will send $80 million Alaska’s way over the duration of the legislation as well. As Alaska and other states legalize the sale of marijuana for recreational use, the FAST Act requires a feasibility study be done to investigate impairment standards for drivers under the influence of marijuana, according to a House Transportation briefing.

State working on flatfish tax fix to capture foregone revenue

A state tax rate glitch let groundfish trawlers off the hook for more than $10 million of fishery taxes in the last half decade, and there’s no concrete fix just yet. The fishery resource landing tax taxes groundfish based on ex-vessel price. Processors turn flatfish caught as bycatch into low-value fishmeal, so the only known ex-vessel price for certain flatfish species is artificially low. Nine species have this price uncertainty, but most flatfish volume comes from yellowfin sole and Atka mackerel. By only having an ex-vessel value based on the price paid for bycatch turned into fishmeal, the state has no idea what the ex-vessel value is for the direct flatfish fishery that has annual harvests measured in hundreds of thousands of metric tons. According to state research estimates, the state has lost out on $1.8 million to $2.5 million per year, or more than $10 million over the last five years. Researchers haven’t yet looked back further due to paucity of data, but the fishery resource landing tax has existed since 1994. Lori Swanson, assistant executive director of groundfish trawler group Groundfish Forum, did not say whether the industry knew it had been underpaying since the tax’s birth. “They pay what the state tells them to pay,” she said. The state doesn’t really know The Department of Revenue, however, hasn’t been calculating a realistic view of fleet’s tax rate, and is only starting to rework the system. The state began this tax specifically for factory trawlers and catcher-processors, but overlooked a systemic flaw from the beginning. “It’s actually two things,” said Kurt Iverson, a research analyst with the Alaska Department of Fish and Game. “First, a very small amount of the total harvest is in the (Commercial Operator’s Annual Report), and on top of that, that harvest is not representative of a true ex-vessel valuation because it’s coming in as bycatch.” Anna Kim, the Department of Revenue chief of revenue operations, said she can’t speculate why the issue went for so long without being noticed. Iverson said the problem isn’t intentional. The Department of Revenue simply attached the tax to shoreside sales, which don’t happen for some species.  “There’s nothing wrong, just an artifact of data,” Iverson said. “How do you get at the price when very little ever crosses the dock as a shoreside sale?” The federally managed Exclusive Economic Zone sits from three to 200 miles off the coast. Groundfish — which includes pollock, Pacific cod and flatfish — makes the bulk of the volume pulled from the federal waters off Alaska’s coast, and is instrumental in making Alaska the most voluminous and valuable fishing region in the nation. All fish landed at an Alaska port owe some kind of tax, even if caught in federal waters. The fishery resource landing tax retroactively tallies federal fishermen’s haul before it was processed and taxes the unprocessed value, using unprocessed volume and the price at which it sold from fisherman to processor, or ex-vessel price. Flatfish are caught in bulk by bottom trawlers, mainly by what’s known as the Amendment 80 fleet based in Seattle (the name derives from the amendment to the Bering Sea Aleutian Islands fishery management plan that rationalized the bottom trawl fleet by assigning harvest quotas). These trawlers are catcher-processors; they process flatfish right on the boat. Catcher-processor flatfish don’t make the handoff from fisherman to shoreside processor, so the only ex-vessel price is when harvest actually crosses the dock. Flatfish only make a shoreside sale as bycatch. Trawlers offload loads of pollock or cod and happen to have some yellowfin sole or Atka mackerel in the net. Pollock or cod processors can’t do anything with it besides grind it up for fishmeal, and so they only pay fishmeal prices of just pennies per pound. Commercial fishermen fill out Commercial Operator’s Annual Reports, or COAR reports, that detail who sold what, and at which price and volume. According to COAR reports, processors paid an average of two cents per pound for yellowfin sole in 2014, and only a penny per pound in 2013. Atka mackerel must have had more shoreside action to raise its price from fishmeal, but still came in very low at 10 cents per pound in 2014 and two cents per pound in 2013. At this price, even flatfish caught by the hundreds of thousands of metric tons, doesn’t add up to much in the state coffers. The tax Alaska fisheries management aims to safeguard coastal communities, and its taxes do too. “I think (the Commercial Fisheries Division of ADFG) is really concerned about a lot of money leaving the state,” said Kim. The state enacted the tax in 1993 to be effective the next year. Immediately, the American Factory Trawler Association challenged the tax as unconstitutional. It withdrew the challenge in 1997, and the state declared it constitutional anyway for good measure. The list of allowable tax credits is coastal Alaska’s wish list; donations for vocational schools and two or four-year colleges, annual intercollegiate sports tournaments, Alaska Native cultural or heritage programs, and in 2011 a very specific allowance for a “facility in the state that qualifies as a coastal ecosystem learning center under the Coastal American Partnership.” The state splits the income 50-50 with the municipality and borough where the landings occurred. If landed outside a municipality, the Alaska Department of Commerce, Community and Economic Development doles out half the taxes through an allocation program. Iverson reviewed ex-vessel prices for the past five years and made a range of estimates for how short the state had taxed. He arrived at over $10 million, between $1.8 and $2.5 million per year. Iverson hasn’t yet gone back another 15 years, and isn’t sure the records are around to do so. With a $3 billion-dollar deficit, $10 million or even a potential $40 million of forgone revenue might seem like short change, but it makes a large percentage of the narrow-based fishery resource landings tax. After credits cut over a million dollar from the total, 2013 and 2014 collected $13.4 and $12.6 million. The uncollected amount is between 13 percent and 20 percent of the total tax. But it’s trying The Department of Revenue knows it needs a more complete tax rate, but getting one is laborious. Kim and Iverson, and their respective departments, are working together to come up with a better metric for flatfish. The priority, she said, is making sure people know the rate’s origin. “It’s not as simple as just taking whatever the highest (listed ex-vessel) price is,” said Kim. “If we do something outside what we’ve normally done, we need to plainly explain why we chose a certain price.” Groundfish industry simply wants “a seat at the table” when coming up with a new formula. Swanson said the industry is waiting to provide what information the state needs. She said she doesn’t know how ADFG derives COAR ex-vessel prices, and wouldn’t know how to make a shoreside equivalent in the absence of reliable ex-vessel data. “There’s just no good way of making a comparable value to shoreside sales,” Swanson said. “I’m sure economists have a way of addressing this, but I’m not an economist.” The state might normally fill in spotty information with federal research, but in this case the feds are no better off. Federal reports from the National Marine Fisheries Service have had equal trouble nailing down an ex-vessel price for flatfish species, according to Iverson. “The federal government has struggled with the same problem when it tries to estimate the value of those fish,” said Iverson. “For groundfish, they produce an economic (Stock Assessment and Fisheries Evaluation report), and they gather as much economic information as they can. When they boil it down to the ex-vessel value, they’ve struggled.” The department could link the value to something other than ex-vessel price, but would have to make regulatory changes to do so. Swanson said linking the fishery value to wholesale price wouldn’t work, either. Between federal reports and COAR reports, ADFG and the Department of Revenue have to find a more realistic price. In Kim’s eyes, the complexities of fisheries management makes some proposals seem “convoluted,” but Iverson said he’s trying to loop enough extra data into the formula to compensate for COAR ex-vessel prices. “I proposed giving them not only the COAR, but in addition getting them data from fish tickets, and from the COAR production side,” said Iverson. “I’ll give them data from fish tickets as well. You’d be able to put those numbers side by side and see how much the value was.” Iverson also said taxes could be derived from processed value, perhaps, or calculated under any one of hundred different ways. With any luck, Iverson hopes 2016 could see a more complete tax plan for trawlers. “The governor’s budget is coming out soon,” Iverson said. “We’re shooting for that to come up with something.” DJ Summers can be reached at [email protected]

Board of Fisheries rejects permit stacking for Bristol Bay

One permit, one person will still be the norm for Bristol Bay. The Alaska Board of Fisheries voted against a fistful of proposals that would have allowed a single person to hold multiple Bristol Bay permits. Taking care of the coastal communities, the board said, trumps the business sense of reinvestment and increased efficiency. “There’ll be fewer people able to participate,” said board member Fritz Johnson, a Dillingham resident and commercial fisherman in Bristol Bay. “It’s a rational business decision, but I think the board needs to take a view of this...based on what’s best for coastal communities and what’s best for the resource.” Half a dozen proposals submitted by the public offered variations of permit stacking options for driftnet and setnet operations, under which fishermen could hold and fish two permits under the same name and/or the same vessel in the case of drift permits. The board voted unanimously against each. Bristol Bay fishermen in attendance were evenly divided on permit stacking, which the board allowed in the area in 2009 but with a sunset clause for 2012. Opponents said permit stacking would consolidate the fishery into fewer hands, echoing concerns over crab fishery rationalization a decade prior. Bristol Bay set and drift net permits cost $38,600 and $150,500 in June 2015, respectively. Those without the capital to buy a second permit will be pushed out of the fishery by bigger bankrolls. Permit values would rise, opponents said. “This is just going to make the rich richer and the poor poorer,” said Robin Samuelson, Dillingham resident and former chief executive officer of the Bristol Bay Economic Development Corp., or BBEDC. According to Commercial Fisheries Entry Commission data, the value of a Bristol Bay driftnet permit dropped from an average $89,800 in 2008 to $78,300 in 2009. Between 2009-2012, the value peaked at $160,600 in August 2011. This price was matched or exceeded in the winter months of 2014 up until May 2015, with a high of $169,900 in March 2015. For a Bristol Bay setnet permit, the price peaked in dual permit allowance years at $42,500 in September 2012. The next highest price afterward was $41,800 in April 2015. Fishing is the Bristol Bay watershed’s primary source of employment, but many Bristol Bay permits are owned by Alaskans from other areas or Outsiders who come into the Bay only to fish in summer. Norm Van Vactor, who replaced Samuelson as BBEDC CEO in 2012, said permit stacking would drain permits away from his organization’s 30 villages, 17 of which filed similarly worded letters of opposition to permit stacking proposals. “One of the single largest issues we have is the continued loss of permits by watershed residents,” said Van Vactor. “Permit stacking was an experiment that exacerbated this issue.” Proponents viewed the practice as a wise investment for savvy fishermen, and a necessary one. Bristol Bay fishermen received half their usual price per pound in 2015, a market situation that will be slow to change due to a complicated array of international and domestic factors. Fishing several permits’ worth of sockeye could cut into the losses. “We’re all looking at an economic crisis,” said Abe Williams, president of the Bristol Bay Regional Seafood Development Association. “We have a condition of market that is going to require us to do some innovative thinking. Let’s cut through the rhetoric of the haves and the have-nots, of the rich getting richer and the poor getting poorer. That’s nothing but emotional rhetoric.” In the end, the board agreed with Samuelson and Van Vactor. Members recalled consolidating the crab fishery when it was first put on a quota system, and feared a similar result in Bristol Bay. Permit stacking doesn’t “align with original legislation” that emphasizes equal access to resources for Alaskans. Members said they agree that permit stacking is indeed a wise business practice, but in the board’s eyes its main concern is protecting communities. “I understand the business aspect,” said member Reed Morisky. “It would make some businesses more viable. But it would also make other businesses more marginal.” “I do think permit stacking is not a tool we should use at this time. With this particular proposal, it allows the 977 permits to be in the hands of 488 people,” said member Sue Jeffrey. “ Our job is to allow fair access to all people, not just in the watershed. Reducing the number of permits by half is not good public policy.” Currently, dual permit use is allowed in Upper Cook Inlet. Driftnetters may have two permits fished by their respective users from the same vessel and setnetters are allowed to hold two permits. At the 2014 Upper Cook Inlet Board of Fisheries meeting, Tom Kluberton, now the board’s chair, said the board has no business going back and forth on fishing regulations from year to year. “I think it’s just wrong for this board to tumble these business plans over every three years,” he said. “We walk in, we put a regulation in place, come back three years later and tip it upside down…I just find that I can’t buy into that. I can’t put an individual, a family, any group through that much instability in their business for some benefit that’s perceived by some.”

Gun control and ‘no fly’ lists won’t fix this

The day before Thanksgiving, President Obama assured Americans all was well and he knew “of no specific and credible intelligence indicating a plot on the homeland” based “on the latest information I just received in the Situation Room.” A week later, in San Bernardino, California, America experienced the most serious terrorist attack on American soil since September 11, 2001. Yet, during his Oval Office speech December 6, President Obama appeared more upset about his unattained ideological dream of gun control than what happened in San Bernardino. Those watching his speech in the room I was in corporately exhaled a sigh of relief that President Obama finally joined the FBI and the majority of Americans to call the attack for what it was, an act of terrorism. What a low bar we’ve set that we are overjoyed that our president just called a terrorist attack a terrorist attack. During his speech, President Obama seemed to spend too much time talking about potential discrimination against Muslims, echoing his Attorney General, Loretta Lynch, who earlier in the week threatened legal action against Americans participating in whatever the Obama administration’s definition is of hate speech. To heck with the First Amendment apparently. During a Sunday news show, Lynch also cautioned Americans against jumping to any conclusions regarding the shooters regarding their motives or ties to ISIS, despite evidence showing it was at least an ISIS-inspired attack. The nearly 15-minute speech offered more of the same with really no new strategy, leaving Americans no assurance that anything of significance is being done to prevent another San Bernardino or worse. Instead and quite disturbingly, Obama offered the distraction of gun control, reiterating his relentless ideological silliness that utilizing America’s “no-fly” list for gun control would help. Given that California has some of the most stringent gun control laws on the books and that apparently neither of the San Bernardino terrorists were on the no-fly list, it makes absolutely no sense that more gun control or a no-fly list background check would have done anything to prevent what happened. Anyhow, it’s public knowledge that many law-abiding Americans are mistakenly on the no-fly list. If Americans give in to this, who’s to say that other innocent Americans would not be placed on that list which National Public Radio reported back in April includes hundreds of innocent people who had no idea they were on it or how they got there? Especially if the definition of who should be on the list is determined by liberals. Remember years back, the Obama administration’s Department of Homeland Security compiled their own “list” of dangerous people in a report they titled “Rightwing Extremism: Current Economic and Political Climate Fueling Resurgence in Radicalization and Recruitment.” Their list pretty much included half of America. You know, all those scary, hard-working, Constitutional-championing, pro-life-embracing, capitalism-espousing, Second Amendment-supporting, legal immigration-defending, Bible-believing Americans. Even returning war veterans made the list. Now let’s get real. Would a jihadist go through legal means to purchase a gun? Reports say the long guns the San Bernardino shooters used were purchased by someone else. In addition to the guns, investigators say the two terrorists were living in a proverbial bomb factory, finding 12 pipe bombs and a vast array of bomb making tools. I’m surprised the left doesn’t call for a ban on pipes. America does not have a gun problem. America has a leadership problem, thanks to those who are obsessed by political correctness and behave as if the NRA is more of an enemy than terrorists. America also has a heart problem. Uncontrolled hearts cannot be fixed by controlling guns. Take away guns and evil will find another way. Ask the San Bernardino victims’ families. Fix the heart and you fix the problem. Or rather, if God fixes the heart he fixes the problem. Until then, praying Americans will continue to pray as we wait for new leadership to help us out of this mess. Susan Stamper Brown Susan is a recovering political pundit from Alaska, who does her best to make sense of current day events using her faith. Her columns are syndicated by CagleCartoons.com. Contact her by Facebook or at [email protected]

FISH FACTOR: Halibut stock shows signs of stability after decade of cuts

Despite some encouraging signs that Pacific halibut stocks are stabilizing after being on a downward spiral for nearly two decades, catches could decrease slightly in most regions again next year. That’s IF fishery managers accept the catch recommendations by halibut scientists, which they don’t always do. At the International Pacific Halibut Commission interim meeting Dec. 1-2 in Seattle, the total 2016 catch, meaning for the West Coast, British Columbia and Alaska, was recommended at 26.56 million pounds, down from 29.22 million pounds this year. For Alaska, which always gets the lion’s share of the annual halibut harvest, the total take would be 20.32 million pounds, a decrease of less than 1 million pounds. Halibut catches for all but two Alaska regions would drop slightly, with Area 3B, the Western Gulf, and area 4CDE in the Bering Sea seeing slight increases. Here are the 2016 recommended catch limits for the six Alaska regions where halibut is harvested, with comparisons to the 2015 catches in parentheses: • Area 2C (Southeast Alaska): 4.63 million pounds (4.65M) • Area 3A (Central Gulf of Alaska): 9.37 million pounds (10.1M) • Area 3B (Western Gulf of Alaska): 2.67 million pounds, (2.65M) • Area 4A (Alaska Peninsula): 1.39 million pounds (1.3M) • Area 4B (Aleutian Islands): 910,000 pounds (1.14M) • Area 4CDE (Bering Sea): 1.44 million pounds (1.29M) There are several encouraging signs for the Pacific halibut stocks, according to IPHC staff biologist Ian Stewart. “Both the data and the models indicate the stock is relatively stable, and we are seeing some positive trends in some of the catch rate information,” Stewart said in his presentation. “Generally, what we have seen is the yields we have been taking out of the stock over the past five years appear to be pretty consistent with the amount of production available from the stock. We are getting a flat trend, so what we are taking out must not be too far in excess of what is available to be taken out and still maintain roughly the same biomass level.” Other good news showed that female halibut appear to be shifting towards higher weights, after decades of declines. A 16-year-old fish today averages 20 pounds, compared to 50 pounds in 1975, but the weights seem to be slowly moving towards more normal “weight at age” sizes. Also, halibut bycatch by Bering Sea trawlers and freezer longliners dropped this year by more than 1 million pounds, but is still pushing 8 million pounds in the region that abuts the Pribilof Islands. Final decisions on halibut catches, season start/end dates, and regulation changes will be made by the IPCH at its annual meeting set for Jan. 25-29 in Juneau. Five regulation changes are proposed for consideration at the January meeting. The Fishing Vessel Owners’ Association is requesting that the halibut size limit be reduced from 32 inches to 30 inches. Based on reports from the 2013 fishery observer program in the Gulf of Alaska, FVOA stated that, “the directed halibut fleet is releasing 8.7 million pounds of undersized halibut (less than 32 inches). New reports suggest that with a two-inch reduction in size limit, the fleet could reduce handling by 58 percent, and reduce wastage from 1.35 million pounds to 0.58 million pounds.” Another proposal by KC Dochtermann, a Kodiak fisherman, recommends a maximum size limit of 60 inches for all halibut caught by commercial and sport users. “An established maximum size limit would serve the objective of protecting large halibut that are the spawning biomass. Providing protective status for this class of fish would hopefully help the total biomass recover at a faster pace,” Dochtermann wrote, adding that the change should be implemented for a five to ten year test period to monitor its effectiveness. In other halibut news, Jeff Kauffman, a commercial fisherman from Wasilla was chosen for one of six Halibut Commission seats (split between Americans and Canadians). Kauffman, whose selection drew positive responses from the industry, replaces Don Lane of Homer who will remain as an alternate. (Editor’s note: Kauffman is also the CEO of the Central Bering Sea Fishermen’s Association, the Community Development Quota group for the island of St. Paul.) Aging of the fleet Alaskans often talk about the ‘”aging of the fleet” in terms of resident fishermen growing older (the average age is 47), but the adage also applies to Alaska’s boats. According to a state Dept. of Commerce report aimed at identifying what services are needed by the fleet that could be done in-state instead of Outside, roughly 9,400 boats over 28 feet in length makeup Alaska’s maritime fleet.  Of those, 69 percent are in the fishing and processing sector, 15 percent are recreational boats; freight carriers, sightseeing and oil and gas vessels make up the rest. Over 90 percent of the Alaska fishing fleet is less than 100 feet long; 74 percent are under 50 feet. The bulk of the boats were built between 1970 and 1989; nearly 1,000 are over 50 years old. The older boats soon will be required to comply with new safety requirements as part of the 2010 U.S. Coast Guard Authorization Act. “The Alternate Compliance Safety Program is aimed at vessels that are 25 years old by 2020 and greater than 50 feet in length, and operating beyond three nautical miles.  So this is a new program,” said Troy Rentz, Alternate Safety Compliance Coordinator for the USCG 13th District. “The requirements won’t become mandatory until Jan. 1 of 2020 for most vessels. However the Coast Guard needs to proscribe the program by Jan. 1 of 2017,” he added. Coming up faster: By Feb. 16, 2016 a new law will require that survival crafts must keep all parts of the body out of the water, meaning floats and other buoyant apparatus will no longer be legal. The intent is to prevent hypothermia and effects of cold water that lead to drowning, Rentz said, adding that “there may be some exceptions for unique operating environments.” Gunnar goes Gunnar Knapp, one of the most recognized names in Alaska’s salmon industry, is retiring from the University of Alaska at the end of the academic year next June. Along with his work as a fisheries economist, Knapp is director of the University’s Institute of Social and Economic Research, or ISER. In a letter to colleagues, Knapp said: “I have worked at ISER for 35 years—my entire career. I feel immensely lucky at the opportunities I have had to work with so many talented and dedicated colleagues, to study so many fascinating and important issues, and to spend the final three years of my career as Director. I can’t imagine a more interesting and rewarding career than studying and teaching about Alaska’s resources, economy and society.” His retirement is a long-planned decision, he said, which will give him more time to focus on other projects and interests. He will continue research work at ISER on a part time basis, focusing on Alaska’s fiscal challenges, and his decades-long research on Alaska’s salmon industry and markets. That includes finishing his book titled “The Economics of Fish” and delving into other writing and consulting projects. “Most importantly, I need to spend more time with my family,” Knapp said. “Before I get too much older and slower, I want to do a lot more skiing, biking, hiking and enjoying the beauty of Alaska which so entranced me when I first came here. And I want to play a lot more music.” Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

GUEST COMMENTARY: Fiscal crisis is a pivotal moment in Alaska’s history

This moment in Alaska’s history is pivotal in determining what our future as a state will look like. The sudden drop in oil prices and the broken promises of increased oil production in return for excessive tax cuts and credits have resulted in a nearly $3.5 billion budget gap that must be closed. Alaska is required by law to produce a balanced budget. However, a budget is more than just numbers on a page. It should reflect the basic values of the people.  We value Alaska’s children and their opportunity for success. That’s why we are committed to supporting Alaska’s schools and hard-working teachers. It is unfair to short-change our future generations by cutting public education based on the fluctuating price of a commodity like oil. We value a strong economy with abundant job and business opportunities. That’s why we are committed to protecting Alaska’s economy from the harm that can come by cutting vital services. It’s hard to open your business or get to work on time if the roads are not plowed. Now, with the low price of oil and declining production, it is more important than ever that we act rationally to keep from triggering a downward spiral and economic disaster. A “cuts only” strategy would gut critical services and jeopardize our future. We are committed to asking the tough questions and acting in the best interest of all Alaskans. By working together, we can solve our state’s fiscal crisis and build an economy that works for all of us. Alaskans have faced and successfully addressed challenging situations in the past. We constructed one of the world’s largest pipelines, fostered the finest fisheries in the world, united together to rebuild our communities devastated by the Good Friday earthquake, and overcame the Great Alaska Recession in the 1980s. We must tighten our belts, realize efficiencies in how we deliver state services, and make wise investments in our future. If we expect to build a sustainable future for current and future generations of Alaskans we cannot afford to lay off thousands of employees, starve public schools, cut back public safety, and stop developing our resources. For too long, Alaska’s political leaders, and powerful special interests have looked out for themselves, their wealthy friends, and big corporations rather than looking out for average Alaskans. The extravagant Anchorage Legislative Information Office, frivolous anti-Medicaid expansion lawsuit, high-priced travel, and infeasible mega projects are examples of wasteful spending that needs to stop. For most of us, incomes haven’t kept up with the cost of living. Hardworking Alaskans should be able to afford to heat their homes, pay their bills, see a doctor when they are sick, educate their children, and take care of their families. We must develop a budget that puts Alaskans first, rather than makes it harder for average Alaskans. Alaskans rightfully deserve their fair share from our incredible resource wealth. In fact, our Constitution requires that our resources be managed for the maximum benefit of all Alaskans. Oil companies should not be the only ones held harmless as we seek to build a sustainable budget and future. It’s wrong that we currently pay out millions more in oil tax credits than we receive in production taxes. It’s also wrong that the current oil tax structure is so flawed that Alaska will never again benefit from budget surpluses when oil prices inevitably rise again. We know that working together, having a dialogue, and listening with an open mind is the best way to solve our fiscal problems and move Alaska forward. The current fiscal environment demands that we thoughtfully evaluate all responsible options as we consider how to develop a sustainable budget. We must not ignore our responsibility because an election is coming up. Cuts to our budget alone will not be adequate to solve our fiscal problem. There is no single solution to this challenging situation but we are committed to protecting Alaskans’ interests, supporting a strong economy and promoting safe and healthy communities. We will evaluate all options through the lens of these questions: How does it affect average Alaskans, will it result in a stable economy and is it the least harmful path forward? As Alaskans, we are all in this together. We stand ready to work with the Governor and our legislative colleagues to address these challenges and move Alaska forward. By working together, we can solve our state’s fiscal crisis and build an economy that works for all of us. The authors are Democrat representatives from districts in Fairbanks (Kawasaki), Juneau (Kito) and Anchorage (Josephson and Drummond).

GUEST COMMENTARY: To supporters of censorship: Free speech is social justice

A recent Pew Research Survey found 40 percent of Americans from ages 18 to 34 support the notion that the government should limit speech that is offensive to minorities. Older Americans were less favorable to the idea, while Democratic voters were twice as likely to support the idea than Republicans. As a member of the American left’s libertarian wing, and a vocal proponent of free speech, I find any support for state censorship disturbing, especially coming from the political left. I have long sympathized with younger generations and find their support for equal and fair treatment for racial, religious and sexual minorities to be a positive thing. Furthermore, I have long associated desires to censor free speech with the religious right, older generations, and the reactionary and authoritarian wings of conservatism. To see people who are traditionally sympathetic to causes I support now expressing support of government censorship is frustrating and saddening. State censorship is not only morally repugnant, it is counterproductive. In the age of the internet, one does not have to search far to find bigots, xenophobes, homophobes, reactionaries, neo-nazis, raging anti-feminists, and countless other species of hateful characters. The desire to silence them is understandable, but ill-founded. The best way to de-legitimize bigots and reactionaries is to let them speak and allow the world to see how genuinely evil and stupid they are. Censoring bigots only legitimizes their claims that they are the ones being persecuted and victimized. It also implies that we are afraid to deal with their rhetoric openly and honestly. Thus, it allows social justice advocates to be painted as authoritarians. Furthermore, it makes it possible for the bigots of the world to blur the distinction between those who wish to criticize what they have to say and those who wish to silence them through force. Reactionaries are already arguing this, and will continue to do so until we vocally disavow such tactics. Many on the political right are happy to conflate criticism of their position with censorship. Let’s not make such conflation easier. Instead of censorship, let’s demonstrate the superiority of our ideas via free exchange and debate. In a free and open market of ideas, truth ultimately wins out. When censorship is used, those on its receiving end understandably double down and become more righteous in their indignation, in which case, they have a point. There is no reason why society cannot be pushed in a more just and compassionate direction through voluntary means. The use of authoritarian means contradicts and compromises a just and accepting society. When sticking up for the systematically disadvantaged, let’s not turn ourselves into the bad guys by denying the rights of others. Free speech is meaningless if it only applies to those we agree with. Let our commitment to justice complement our commitment to freedom and opposition to arbitrary authority. There is no social justice without free speech. They are one and the same.

Interior gas project finalists narrowed to two

Interior residents will have to wait a little longer to hear who their new supplier of natural gas will be, but the Alaska Industrial Development and Export Authority has narrowed its project partner options to two: Spectrum LNG and Salix Inc. AIDEA Interior Energy Project manager Bob Shefchik said during the authority’s Dec. 3 board meeting — when a private Interior Energy Project partner recommendation was expected — that pushing the decision back about six weeks to late January would allow the project evaluation team to more thoroughly vet the best and final offers from Salix and Spectrum. The final offers by five project finalists were submitted in late October and Salix and Spectrum quickly separated themselves from the other proposals, Shefchik said. AIDEA’s project evaluation team then reached a consensus that more time was needed to fully vet the finalists’ cost projections to make sure the best plan is chosen. Specifically, he said the evaluation team will further review commercial and financial terms of the plans Salix and Spectrum have put together, as well as fully cross-examining the capital and operating cost projections that will weigh heavily on the success of the project. “To some extent this is work that would have gone on had even one been selected,” Shefchik said. “We doubled our workload to make sure we’re doing it with two to bring (the AIDEA board) the best project with the best information.” The delay should not have much impact on the timeline of the project. Spectrum has touted an ability to get natural gas to Fairbanks early in 2017, while Salix has said it could be ready for production by January 2018. While the race to supply Interior Alaska with liquefied natural gas is too close to call, the leading companies have plans coming from opposite ends of Alaska. Salix Inc., a subsidiary of the Pacific Northwest utility company Avista Corp., is proposing a Southcentral LNG plant with an initial liquefaction tolling fee of $2.87 per thousand cubic feet, or mcf, of natural gas. Costs for wholesale gas, trucking to Fairbanks, regasification of the LNG and final distribution to customers would still have to be added to the tolling fee. The goal of the Interior Energy Project is to supply Fairbanks residents with natural gas at a final, burner tip price of roughly $15 per mcf, which is the energy equivalent of fuel oil at about $2 per gallon. Salix would finance its Southcentral plant, pegged at $68 million, with a $30 million appropriation from AIDEA, a $28 million low-interest loan from the authority and $10 million of its own equity. Spectrum LNG vied to participate in the first go-round of the project early in 2014, but with a different financing plan for its North Slope LNG plant. This time, the Tulsa, Okla.-based company is proposing a North Slope LNG plant that would produce LNG — wholesale gas cost included — for $5.06 per mcf, leaving a $10 gap available for trucking and distribution costs to still meet project goals. Spectrum CEO Ray Latchem estimated trucking costs from the North Slope at about $5 per mcf during a Nov. 4 town hall meeting in Fairbanks. AIDEA has said regasification of the LNG and distribution to customers should cost between $4 and $5 per mcf. Spectrum would pay for its plant, estimated to cost about $85 million, also through a $30 million grant from AIDEA, a $50 million low-interest loan and a $5 million equity investment. The loans and grants proposed to finance LNG plant construction in each plan would come from the $332.5 million state grant-loan-bond package approved by the Legislature in 2013 for the Interior Energy Project. Shefchik said the expectations for capital costs on the Slope are more positive than the first attempt of the project, which was doomed by high plant construction costs. Wholesale natural gas on the North Slope costs roughly half to one-third of what it does currently from Cook Inlet; however, working on the Slope also includes higher capital, operating and trucking costs, which keep Cook Inlet options competitive. Spectrum leadership helped develop Fairbanks Natural Gas’ LNG supply chain in the late 1990s. The company currently operates a small LNG plant in Arizona that supplies LNG for vehicle use. By going with Salix or Spectrum — LNG plants only — AIDEA steered away from more complex plans by others in the group of five project finalists that wrapped gas supply, liquefaction and delivery to the Interior in an “all-in-one” price. Phoenix Clean Fuels, a consortium of seven companies including Crowley LNG, General Electric Oil and Gas and Alaska utility company TDX Power, had proposed delivering North Slope-sourced LNG to the Interior at $10.60 once the project was up and running for several years. Phoenix Clean Fuels reached its price estimate partially on the back of a trucking cost of $3.86 per mcf, significantly less expensive than other projections to get LNG down the Dalton Highway. Irvine, Calif.-based WesPac Midstream LLC claimed it could deliver Cook Inlet-sourced LNG to Fairbanks for $12.25 in its plan summary released in September. That price, which would strain the project once distribution costs were added, was based on an assumption that feedstock, or wholesale, gas would be about $1.20 per mcf lower than the forecasted market in 2018. WesPac owns the working interest in natural gas from the small Cook Inlet Cosmopolitan field being developed by BlueCrest Energy Inc. and has said it will continue to pursue a Southcentral LNG plant whether it partners with AIDEA on the Interior Energy Project or not. Hilcorp Energy, which owns most of the Cook Inlet gas supply, had proposed three options through its LNG subsidiary Harvest Alaska LLC: an LNG plant, a gas supply and plant and its own bundled, delivered option. Harvests privately financed options forecasted the most expensive LNG prices of all the Interior Energy Project finalists. Elwood Brehmer can be reached at [email protected]

Withdrawal agreement would allow state to buy Slope gas

Gov. Bill Walker released the agreement signed Dec. 4 by the state, BP and ConocoPhillips regarding the companies’ willingness to sell North Slope natural gas if either firm withdraws from the Alaska LNG Project. The nine-page agreement states that the sales offer will be made to the State of Alaska if “mutually agreed commercially reasonable terms can be reached between the relevant party (the withdrawing company) and DNR (the state Department of Natural Resources).” In a statement issued Dec. 8, Walker praised the companies for providing the letters: “This agreement ensures that there will be gas for a gasline if either partner withdraws from the project.” However, whether that actually happens depends on whether “commercially reasonable terms” can be agreed on and whether the state would be able to finance such a large transaction before the Alaska LNG Project is built and operating. Still, the fact that the two companies agreed to make the offer to sell gas and to negotiate in good faith, if needed, has given the governor the assurances he felt he needed, even if the letters are not binding. Still, if such a purchase were ever made the costs would be huge. In an analysis, Janek Mayer and Nikos Tsafos, of the firm enalytica, estimated that if the state were to purchase ConocoPhillips’ 22 percent share of the 35 trillion cubic feet of North Slope gas reserves, the cost, at $4 per million British Thermal Units, would be $19.2 billion. If ExxonMobil’s 32 percent share if North Slope gas were purchased, the cost would be $28 billion. ExxonMobil — the project manager for Alaska LNG — was the only one of the three Slope partners to not sign on to the withdrawal agreement. Those would be on top of the $13 billion the state will pay for its 25 percent share of the Alaska LNG Project construction. It might seem implausible that a company’s withdrawal would happen after so much has already invested heavily in the project — nearly $5 billion for all three firms if Point Thomson gas project costs are included. Point Thomson is nearing completion of an initial phase to produce a limited quantity of liquid condensates starting in 2016, but the project is actually intended to be part of the larger gas pipeline and LNG project. But despite sunk costs, things do happen. “Preparing for failure is a fact of life, and Governor Walker is right to be concerned about the possibility that one (or more) producers choose to not pursue Alaska LNG. Several LNG projects have seen partners depart even at late stages of the project development,” consultants Mayer and Tsafos said in a paper presented to the Legislature. Mayer and Tsafos made comments and presented their paper during closing days of a November special session of the Legislature, when word first circulated of Walker’s idea that the state purchase gas from a withdrawing party. The consultants warned against attempting to have a sales agreement actually in place as a contingency, however. “Withdrawal terms are common in most joint-venture agreements; however, there is no clear benefit in securing a detailed sales and purchase commitment from the producers at this stage of the project,” the two consultants said in their analysis. An alternative they suggested is apparently what Walker has done. “The state can explicitly set a framework for such an eventuality (a withdrawal) by creating a process by which the state and a reluctant producer enter into exclusive negotiations, in good faith, for the state or another nominated party to purchase the producer’s gas,” Mayer and Tsafos said. The agreement with BP and ConocoPhillips appears to just commit the parties to good-faith efforts, and nothing more. Walker was still happy, though. “The gas availability agreement is the result of months of negotiations between the state and its partners, and brings the state closer to delivering North Slope gas to the world market and lowering energy costs for Alaskans,” he said in his statement. In a briefing Dec. 5, the governor said, “We no longer will have to worry about (the companies’) competing projects around the world. This is absolute assurance that the gas will be available,” to the Alaska LNG Project. Tim Bradner can be reached at [email protected]

Annual revenue forecast a bleak picture for production take

The state released its annual forecast for state revenue and oil production Dec. 8, and the news wasn’t good. Unrestricted general fund revenues, a measure of funds available for appropriation by the Legislature to support public services, is now forecast at $1.6 billion for fiscal year 2016, the current budget year, compared with $2.26 billion for the last fiscal year that ended June 30. This will likely balloon a projected deficit for the year from $2.7 billion estimated last spring to more than $3 billion. Some good news, however, is that income from Alaska’s investments, mostly the Permanent Fund, will be sharply increased in the current year to $3.77 billion compared with $2.58 billion last year. Within that total, the Permanent Fund’s “realized” earnings — funds received through asset sales, bond interest or rentals, and which are available for appropriation — are estimated at $3.35 billion for this year, up from $2.93 billion last year. The Revenue Department report also listed a gain in the Fund’s unrealized earnings, or its market gains, of $349.8 million, but those are not available for appropriation. Right now the increases in Permanent Fund earnings don’t help the immediate state budget outlook because the Legislature has avoided spending these, preferring to let them accumulate in an earnings reserve account of the Permanent Fund. The annual Permanent Fund Dividend paid to citizens is funded by part of the fund’s annual earnings but the total income far exceeds what is spent on the dividend. A plan to use part of the fund’s annual earnings to help support the state budget is expected to be among new revenue options the Legislature will consider in 2016. The annual dividend is expected to be retained although it may be modified in some way. Other parts of the revenue forecast had more sober news, however. Overall Alaska production from the North Slope declined by about 5.6 percent in the state’s current fiscal year, state revenue Commissioner Randy Hoffbeck said. “While there was a 13.6 percent increase in production from the Cook Inlet, that was not sufficient to offset a 5.6 percent decrease on the North Slope,” Hoffbeck said in a statement. North Slope production is now expected to average 500,200 barrels per day for the current fiscal year, down from 519,500 barrels per day estimated in the forecast made last spring. “We are forecasting North Slope annual production to remain above 500,000 b/d until 2018,” Hoffbeck said. Cook Inlet production is rising, however. Previously estimated at 14,700 barrels per day in the spring forecast, it is now expected to average 17,800 barrels per day for this year, according to the forecast. Meanwhile, a bump up in North Slope production to 504,900 barrels per day is expected in fiscal year 2017 beginning next July 1, due to new projects recently completed or that now under development and soon to be completed. However, Slope output is expected drop again in fiscal year 2018, to 506,600 barrels per day, according to the forecast. The decline in oil revenues has had on other effect, although it is just an accounting measure. Oil revenues are sharply down, which means that the contribution of non-petroleum revenues, small as they are compared to oil, are having a larger impact. This year, 74 percent of Alaska’s revenues are being paid by petroleum taxes and royalties, compared with as much as 90 percent in previous years when oil prices were higher. Meanwhile, the state budget still exceeds revenues by a large measure. The state has been tapping cash reserves to pay hefty budget deficits, which are now exceeding $3 billion a year. The state has sufficient reserves to pay the deficits for three more years, after which earnings of its $55 billion Permanent Fund, an investment fund of past oil income, could be tapped.   Alaska’s forecast of revenues, oil production and operators’ expenditures is done annually, typically in early December, and is updated in the spring, usually in early April. Tim Bradner can be reached at [email protected]

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