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Measure aimed at Pebble narrowly passes, 280-246

Voters in the Lake and Peninsula Borough of southwest Alaska narrowly passed a ballot initiative that attempts to block the large Pebble copper/gold mine planned by Anglo American and Northern Dynasty Minerals, officials of the Lake and Peninsula Borough announced late Oct. 17. Voters in 17 borough communities returned 526 ballots in the Oct. 4 election conducted by mail, but the ballots weren’t counted until Oct. 17. According to the unofficial election results, 280 ballots were cast in favor of a “Save Our Salmon” ballot proposition, and 246 ballots were cast against it. The borough mailed 1,192 ballots to registered voters, borough clerk Kate Conley said. Results of the election will be certified Oct. 24, Conley said, but there could be challenges. Even with the initiative approved, legal challenges by the state of Alaska and the mining companies will continue in state court. Alaska Superior Judge John Suddock had put a challenge to the initiative on hold until Nov. 7, and with the vote now held the legal proceedings will get under way. If it is developed, Pebble could be a combination underground and surface mine, said Mike Heatwole, spokesman for the Pebble Partnership, a joint-venture company formed by Anglo American and Northern Dynasty. The mine has sparked a sharp local controversy. A major concern of opponents is that the mine and its tailings storage could result in contamination of local streams which flow into rivers where salmon spawn. The Bristol Bay region is one of the world’s largest commercial and sports salmon fisheries with annual harvests of salmon that range between 20 million and 40 million fish.   Heatwole said the project, if it is developed, will be subject to strict state and federal regulatory controls. The mine would be located in an area that would affect only a few streams, he said, and not major river systems that largely support a rich salmon fishery in Bristol Bay, which is to the southeast of the mine. Under the ballot proposition, which was put forth by local opponents of the Pebble project, any mine that affects salmon streams and is larger than 640 acres would be banned. State of Alaska officials argue it is illegal for a municipality to block development of a project on state-owned lands where the project is located, and have filed suit over the ballot initiative, along with the Pebble Partnership.  In a statement, the Pebble Partnership said, “This was a very close election and we are appreciative of the many voters from the Lake and Peninsula Borough who dedicated time to understand the true risks presented by this ill-conceived ordinance and the very real impacts it could have regionally.”  “The State of Alaska has stated that this ordinance is unenforceable as a matter of law and will not withstand the legal challenge that continues in Alaska’s Superior court next month. We agree and will continue our legal challenge for the reasons we have stated throughout this process,” the statement said.  Supporters of the initiative urged Anglo American to drop the legal challenges. "Anglo American CEO Cynthia Carroll has repeatedly claimed the company will not proceed in communities that are opposed to mine development," said Lane and Peninsula Borough resident Jackie Hobson in a statement. "Local residents have made their opposition to the development of the Pebble Mine crystal clear with the passage of the SOS Initiative. We hope that Ms. Carroll and Anglo American keep their promise and let the voice of local Alaskans stand unchallenged." In a statement, Northern Dynasty CEO Ron Thiessen said his company and the partnership remain committed to preserving the Southwest Alaska fisheries, but, “Unfortunately, this initiative would also halt economic development throughout the Lake & Peninsula Borough, and represents yet another misuse of Alaska’s democratic processes by paid opponents of the Pebble Project, whose goal is to stop the project before it receives comprehensive and objective review by federal and state regulators. “What’s most important is that the rule of law in Alaska and the United States is clear and reliable, such that this unconstitutional attempt by narrow self-interests to restrict economic development in a region the size of South Carolina will not stand. We believe the State of Alaska’s constitutional obligation to manage natural resources on its land for the benefit of all Alaskans will ultimately be acknowledged by the courts.” The Pebble Partnership statement said, “Voters in the Lake and Peninsula Borough have been subjected to a prolonged advertising campaign of fear-mongering and misinformation about the Pebble project. We believe this has done a disservice to the people of Southwest Alaska and we will continue our efforts to share our perspective that Pebble can be done safely to co-exist with clean water, healthy fisheries and traditional ways of life, while generating decades of economic and social benefits for the people of the region.”   Exploration and engineering work has meanwhile continued on the Pebble project with about $90 million being spent in 2011 on drilling and technical work, Heatwole said. A pre-feasibility study for the mine is expected to be completed in the third quarter of 2012, and late this year the results of several years of environmental baseline studies will be made available to state and federal agencies, he said. Last month, a Alaska Superior Court judge rejected challenges by Pebble opponents that alleged the state exploratory permit regime was unconstitutional and stated there was no evidence of harm to the environment after 20 years of exploration at the site. Separately, Northern Dynasty is soliciting offers to purchase its 50 percent share of the project. The company, based in Vancouver, B.C., is largely an exploration company that specializes in finding and developing projects and then bringing in partners. Pebble was originally discovered by Cominco in the mid-1980s but was later purchased by Northern Dynasty, which then brought in Anglo American as a partner. Northern Dynasty has always indicated its intention to eventually sell its share of Pebble.   

Utility costs will go up almost across-the-board in Anchorage

Anchorage building owners and managers got the glum news Thursday that costs for most utilities will be going up almost across the board in the Anchorage area. Only Enstar Natural Gas Co. is unsure of its plans at this point. At the monthly luncheon of the Buildings Owners and Managers Association, or BOMA, the five utilities serving Southcentral Alaska discussed their plans and 2012 rate increases. Jim Posey, general manager of Municipal Light and Power, said the Anchorage municipal-owned utility will be asking for a 6.75 percent rate increase to help fund a major capital investment program. ML&P has a $457 million seven-year capital program that includes $274 million in new power generation projects. ML&P is funding its 30 percent share of the $369 million new Southcentral Power Project now under construction, in a partnership with Chugach Electric Association. ML&P’s downtown and midtown Anchorage service area includes most of the major commercial and institutional buildings in the city. The utility will benefit from lower natural gas costs, however. Posey said M&P’s cost for gas, which comes from its one-third ownership in the Beluga gas field, is $3 per thousand cubic feet. Chugach Electric Association is funding its 70 percent share of the new power plant as well as other improvements, and is projecting that electricity costs in its Southcentral Alaska service area will rise three percent to five percent in 2012. When the new power plant begins operation its higher efficiency will result in substantial savings of natural gas use, Arthur Miller, Chugach’s regulatory affairs manager, told those at the BOMA meeting. Chugach will also begin taking power generated by wind at Fire Island late in the year and while this will be more expensive in the near-term wind power costs will be stable over the long-term, Miller said. Miller said Chugach’s customers will likely be asked to pay 3 percent to 5 percent more for electricity in 2012, but that the final plan isn’t set yet. Enstar Natural Gas Co. can’t project its 2012 rates now because the utility is in the middle of the “indexing” period on its gas contracts, according to John Sims, its public affairs manager. Enstar is now benefiting from lower natural gas costs, however, under one of its contracts that is pegged to the Henry Hub gas trading index in Louisiana, where prices are very low, Sims said. The utility expects to pay between $6 to $8 per thousand cubic feet for most of its gas in 2012, he said. The utility is purchasing gas from major Cook Inlet producers Marathon Oil, ConocoPhillips and Chevron as well as independents Anchor Point Energy, Aurora Gas and Cook Inlet Energy. In December a fourth independent, Buccaneer Energy, will begin deliveries from a new gas well on the Kenai Peninsula. Two other utilities will post rate increases, too. Anchorage Water and Wastewater Utility said it will seek a 6 percent increase for water service and an 11 percent increase in wastewater, or sewer, rates as the utility continues its ongoing capital improvements, which range from $30 million to $60 million per year, file  Beau Disbrow, its manager, said. A big change the utility is dealing with is that in the past about half of its capital improvements were funded by federal and state grants. That money is less available now so the annual capital program must be paid for by ratepayers, Disbrow said. Alaska Waste will also seek a 3 percent to 5 percent increase this year to offset its higher costs, and the utility, which is privately-owned, may have to impose fuel surcharges as well, Jeff Jessen, its manager, told those at the BOMA lunch.

Murkowski, Begich split on jobs bill vote

Alaska's senior senator voted to kill President Barack Obama's jobs plan Tuesday, saying it is not the "solid, comprehensive plan that our country needs." Sen. Lisa Murkowski was among 46 Republicans and two Democrats voting against advancing the jobs bill. Alaska's Democratic senator, Mark Begich, voted in support. Begich said the American people have made clear that they want something done to create jobs and jumpstart the economy. He said members of Congress "can't continue to stall progress simply to make a political statement." Murkowski said the plan fell far short of what is needed to have a significant impact. She said a "long-term, responsible" approach is needed to get the country on solid footing. That's why she said she's supporting such things as tax, tort and regulatory changes.  

State rebuffs Johansen recall attempt

JUNEAU, Alaska (AP) — The backers of an effort to recall Ketchikan state Rep. Kyle Johansen will decide whether to take the issue to court after the state rebuffed their attempt. Dick Coose said Wednesday that he and other members of the recall effort do not agree with the state's assessment and will likely meet in the coming days to decide whether to pursue the matter in court or work to keep Johansen from being re-elected, should he decide to run again. The Republican Johansen was targeted for recall by a group of District 1 Republicans after losing his position as majority leader. Johansen and Anchorage Rep. Charisse Millett walked out of the GOP-led caucus over organizational issues last fall. The caucus voted not to readmit them. The committee cited the dustup and what it called a "demonstrated incompetence and lack of integrity" and dereliction of duties in pursuing the recall effort with the state. It said Johansen had been noticeably absent from the district and unavailable to constituents for the past year. But Division of Elections Director Gail Fenumiai said she concluded, in consultation with the Department of Law, that the recall application failed to state a legally sufficient ground for recall. She said the application contained no information or allegation that Johansen engaged in unlawful conduct, the legal standard for certifying a recall petition. Johansen expressed relief in a blog posting entitled "Moving Ahead." "I realize I have work to do with a number of District One constituents who supported the recall," he wrote. "I started that process quite a while ago and have had several personal discussions with former supporters of that effort. All I can do is continue to communicate, work hard for District One and move ahead on issues and challenges we face." Fenumiai said she notified the recall committee of the decision Monday and that it has 30 days from that time to file an action in state court, if that's what it chooses.

Senator pitches brief tax exemption for gas line

JUNEAU, Alaska (AP) — An Anchorage Democrat plans to introduce legislation exempting a natural gas pipeline project from state property taxes until gas flows through the line. Sen. Bill Wielechowski says this could save the line's owners $600 million, improve a project's financials and help make a line more attractive to potential investors. Wielechowski says the proposal is aimed at bringing a gas project of some sort to fruition though he said he has his doubts about the economic feasibility of a smaller, in-state gas pipeline. TransCanada Corp. has been pursuing a large line that would carry gas from Alaska's North Slope to market. But more than a year into negotiations, it has yet to announce agreements with shippers. Wielechowski says his proposal could be one way to move the project along.  

Movers and Shakers Oct 2011

Air Force returns 170 grounded F-22s to service

                        JOINT BASE ELMENDORF-RICHARDSON — The nation's F-22 fighter jets went back into service Wednesday, four months after they were grounded over pilot complaints about a lack of oxygen. Air Force instructor pilots began flying the stealth jet fighters at six bases across the U.S. This followed a stand-down order, issued in May, and imposed over hypoxia issues reported by at least 12 pilots in the past three years. Hypoxia is when the body does not receive enough oxygen. "It's Day One on a road to get our F-22s back in the air and back to their full operational capability," said Lt. Col. Derek France, 3rd Operational Group commander at Alaska's Joint Base Elmendorf-Richardson. Forty of the 170 F-22 Raptors are stationed at the Anchorage base. In the past four months and even before, the aircraft's oxygen related systems have been the focus of an ongoing safety investigation, France said. "While they never pinpointed, or have yet to pinpoint, an exact cause of these incidents, they got to a point where they felt that we could, based on risk mitigation, training of air crews and inspection of the aircraft itself, get to a point where we can safely fly again," he said. "And so that's the decision, we passed a safety line where senior Air Force officials said that we can go ahead and train again." He couldn't provide additional information about what led to the decision. "I can't go into the real details," France said after the first four Raptors raced down the runway and took off on a training run over Alaska. "They did a thorough investigation of some of the life support systems in there and some minor modifications within the cockpit to ensure the safety of the pilot," he said. Air Force Chief of Staff Gen. Norton Schwartz announced the end of the stand-down order in a statement issued earlier this week. "We now have enough insight from recent studies and investigations that a return to flight is prudent and appropriate. We're managing the risks with our aircrews, and we're continuing to study the F-22's oxygen systems and collect data to improve its performance," he said in the statement. Each $143 million plane was thoroughly inspected before being allowed to fly and will be subject to daily inspections. Pilots will also undergo physiological testing. The first pilots to fly are instructors, who will then train other pilots once they shake off four months of inactivity. France said no pilots have expressed concern to him about flying the F-22s, since the investigation has yet to determine the cause for the hypoxia-like symptoms. "I think they are all fired up and ready to fly," he said. France expects it to take a few months before crews are back to pre-stand-down functionality. The F-22 Raptor was introduced in 2005, and the Air Force said it has flown more than 300 homeland security missions but none in combat. The fleet is stationed at five other bases besides Alaska: Joint Base Pearl Harbor-Hickam, Hawaii; Joint Base Langley-Eustis, Va.; Nellis Air Force Base, Nev.; Holloman Air Force Base, N.M.; and Tyndall Air Force Base, Fla.   Associated Press writer Pauline Jelinek in Washington contributed to this report.  

Tug boat reattaches to loose fuel barge off Alaska

Calmer weather allowed a tugboat to reattach a tow line Wednesday to a fuel barge that had that broken loose off Alaska's west coast, the Coast Guard reported. The 82-foot tug Sinuk was able to hook up a tow line to the rear of the barge when winds dropped to 27 mph Wednesday afternoon, Petty Officer 3rd Class Jonathan Lally said. The tug has resumed pulling the 173-foot barge toward its original destination of Port Clarence, near Nome. There's no reported damage to the barge and no evidence of pollution, Lally said Wednesday evening. The tug had shadowed the barge overnight after it broke loose Tuesday evening in 15-foot waves and winds that reached 46 mph. It was about 46 miles north of the Kinugmiut Eskimo village of Wales at that point. The Crowley Marine-operated vessel is carrying 140,000 gallons of aviation fuel and 5,800 gallons of gasoline. The Coast Guard sent a C-130 airplane to assess the situation earlier Wednesday and was keeping in close communication with the tug. Lally said a second 82-foot tug, the Siku, had also been sent out to assist when the barge was loose. The Sinuk had been able to maintain some control by pushing the loose barge while crew members waited for the weather to improve. The incident was first reported by KINY-AM. By 11 a.m. Wednesday, the barge had drifted to 11 miles north of Wales. The village is on Cape Prince of Wales, which marks the Alaska side of the Bering Strait, a roughly 50-mile wide body of water that separates Alaska from Russia and the north Pacific Ocean from the Arctic Ocean. Before it was recaptured, the Coast Guard had estimated the drifting barge would stay close to Alaska's mainland, possibly passing within eight miles of Fairway Rock, located about 216 miles northwest of Nome.  

Department working to strengthen tax cut position

JUNEAU (AP) — Alaska's Revenue Department is working to strengthen the Parnell administration's argument for cutting oil production taxes. Revenue Commissioner Bryan Butcher said that since the Legislature adjourned, considerable work has gone into studying how Alaska's tax structure compares to those of similar jurisdictions, like North Dakota and Alberta, Canada. He said the focus should be on places that face production challenges similar to Alaska's, not on places like Iraq or on states with very little production. The analysis so far bolsters Gov. Sean Parnell's position that Alaska's tax structure is out of whack, Butcher said. The tax debate is expected to resume when the Legislature returns in January, but the administration must win over senators, who earlier this year refused to act on Parnell's tax-cut plan, saying they didn't have the information necessary to make a sound policy call. Sen. Bill Wielechowski, D-Anchorage and vice-chair of the Senate Resources Committee, said he hasn't heard of "any new, persuasive arguments being made" that would sway many minds; he himself doesn't consider the current tax structure broken. "It's just the same old arguments," he said. "I don't think that will be enough to get it through the Senate." Wielechowski said the proposal, as it stands now, probably wouldn't even get past the Resources Committee, one of three it likely will need to get through to get a vote by the full Senate. The Senate Labor and Commerce Committee recently held hearings on North Slope and oil industry jobs but no hearings have been held during the interim on the tax proposal itself. The House passed a version of Parnell's tax cut bill during the last regular session. It was during that session that some lawmakers criticized Butcher's department as not being as prepared as it should have been to pitch a plan that could have a significant impact on state revenues. Butcher was confirmed as commissioner — after floor debate, which is unusual for appointees of the governor — in April. Butcher said he looks forward to laying out for lawmakers the information the department has, which he said makes clear that Alaska's tax rate is high. He and Parnell have each stood behind the governor's proposal for changing the tax regime but have also expressed an openness to entertain other ideas so long as they boost production and investment.  

Two new leases approved for Port MacKenzie by the Mat-Su Borough

A second new lease in a month was approved for Port MacKenzie at Tuesday night’s Assembly meeting. Central Alaska Energy LLC will lease 5.5 acres for tank farm and truck operations. The developing transportation infrastructure at Port MacKenzie is drawing the interest. Also approved, in early September, was the lease for a trucking, marine, logistics company, PacArctic Logistics LLC. The tank farm lease is for 25 years and is consistent with the Port Master Plan, and the Economic Development Strategic Plan. It will enhance the port district and increase services at Port MacKenzie. “This project is good for port development and also provides increased competition in the fuel markets, which benefits the people of the Borough,” said Central Alaska Energy CEO Justin Charon. Tremendous dirt work has been accomplished in recent summers with a haul road and road/rail loop got underway. The barge dock was expanded from eight to nearly 16 acres. A project to reducing the slope of the port access road is under construction now. The Borough awaits a Record of Decision on a 32-mile rail link from the port to the Alaska Railroad’s mainline. For more information email Emerson Krueger at [email protected]

Officials float idea of using Susitna in AMHS

@font-face { font-family: "Times"; }@font-face { font-family: "Cambria"; }p.MsoNormal, li.MsoNormal, div.MsoNormal { margin: 0in 0in 0.0001pt; font-size: 12pt; font-family: "Times New Roman"; }div.Section1 { page: Section1; } JUNEAU — While the Matanuska-Susitna Borough tries to find a way to get its innovative $78 million ferry Susitna into operation, it sits unused at a Ketchikan dock at a cost of $1.4 million a year. Now, some members of the Juneau legislative delegation and others are wondering why the boat the public paid for can't be used in the Alaska Marine Highway System. "Every time I go to Ketchikan and see that poor ferry just sitting there, I think there ought to be some way to utilize it," said Sen. Dennis Egan, D-Juneau. The AMHS fleet is mostly older vessels, but it also has some newer, albeit problem-plagued fast ferries. Egan said he wasn't suggesting a specific run for the 195-foot Susitna, but said it might be able to play a variety of roles. "Hey, it's not an ocean-going ship, but it sure can travel the Inside Passage," he said, and might be used in Prince William Sound as well. Egan and other members of the Juneau delegation recently met with Mike Neussl, deputy commissioner for marine operations with the Alaska Department of Transportation & Public Facilities, to discuss the possibility. At a Marine Transportation Advisory Board meeting last week in Skagway, Juneau resident Chip Thoma made a similar suggestion, saying the AMHS staff ought to develop a report on whether it was possible for the state to use the Susitna, and what the costs might be. "I think that's a real opportunity for the Marine Highways to at least develop a paper to see if there are any opportunities there," he said. Neussl said bringing the Susitna into the AMHS fleet presented a number of potential problems, including training crews for the specialized vessel, and figuring out how to get its unique ramps to match Alaska ports' own ramps and docks. Complicating the issue is that somebody else owns it, and the state can't afford to invest substantial sums in reconfiguring docks or additional crew training for a temporary ferry. "It's really not our decision how or when that vessel gets used," Neussl said. Mat-Su Borough spokeswoman Patty Sullivan said the borough has considered multiple options for use of the Susitna until it can get dock facilities built on both sides of Knik Arm and it can be put into regular service. She said the borough probably wouldn't rule out use by the state ferry system in the interim. "We do need to find a use for it," she said. At a recent meeting, she said, a borough port commission member suggested the possibility of using the Susitna to expand the Alaska Marine Highway System. "If the state had it, they'd run it from Homer to Kodiak, nobody runs from Homer, Kenai, Anchorage, Tyonek. That's where this boat's going to shine," said David Cruz, the longest serving port commissioner and a ferry advocate. One option the borough is now considering is using its available money to build a pedestrian-only dock at Port MacKenzie, which could later be expanded to a vehicle dock when additional money becomes available. Building the pedestrian dock would give the borough a place to store the Susitna, but that would still cost more than continuing to store it in Ketchikan, the assembly was told. Sullivan said she rode the Susitna on a trial run earlier this year and was thrilled by how well it handled. "It's a fabulous ship," she said. The Susitna is already painted the same blue as the AMHS fleet, it was noted at the MTAB meeting. State officials appeared reluctant to try to use the Susitna, while not ruling it out entirely. "It's just not that easy," Neussl said. "We could find ourselves doing an awful lot of work and using an awful lot of staff time, and it may just go back to its original owners and its original intended purpose." The board was also warned the unique vessel would likely require some specific U.S. Coast Guard approvals for passenger transport as well, and it was not clear how long it would take to obtain them. The idea if taking the Susitna into the state ferry system resulted in some interesting board discussion, but no strong support for using the Susitna. "I'm not an advocate for adopting that orphan," said MTAB member Robert Venables of Haines. Egan is in Ketchikan today for a Southeast Conference meeting. The Susitna was built there at Alaska Ship & Drydock, and remains there waiting for the Mat-Su Borough to take possession of it. "It's an incredible ship," Egan said. "Seventy-eight million dollars and it's just sitting there."   

Fish Bytes: A chat with IPHC biologist Gregg Williams

@font-face { font-family: "Cambria"; }p.MsoNormal, li.MsoNormal, div.MsoNormal { margin: 0in 0in 0.0001pt; font-size: 12pt; font-family: "Times New Roman"; }div.Section1 { page: Section1; } Welcome to the Fish Bytes blog on the new and improving Alaska Journal of Commerce website. As a fisheries reporter, the main advantage of working at a weekly publication is having the time to sit through days of regulatory meetings or spend hours reading through discussion papers and analyses that typically number in the hundreds of pages. The big disadvantage — until now — was the inability to provide fresh daily content about a global industry in which Alaska plays a vital part. A perfect example came yesterday morning on “press day.” We send our latest issue to the printer every Wednesday, which means copy is pretty much set by early morning if we’re not dealing with breaking news. So with my latest story on the proposed halibut catch sharing plan already on the page when International Pacific Halibut Commission biologist Gregg Williams called around 8:30, I wasn’t able to update with his insights on the latest statements from charter operators opposed to the rule. Before the launch of the new website, I would have had to wait more than a week to get a new story up. Now, I can share Williams’ thoughts with you today. As I discuss in the story that will publish to the web Friday, Alaska Charter Association board member and longtime operator Richard Yamada argued to the Alaska House Special Committee on Fisheries at a Sept. 1 hearing that the IPHC has been allowing the commercial sector to overharvest halibut in Southeast. In an argument that’s been gaining traction among the charter sector lobbying for changes in the rule, Yamada pointed to IPHC data that shows a harvest rate of greater than 50 percent for several recent years in Southeast. The target harvest rate of the exploitable biomass for IPHC is 20 percent. The Southeast charter operators contend that while they are often blamed for going over their allocation (which they have for every year since 2004), it is actually the commercial sector that has been allowed to overharvest the stock while it is in a declining trend. Williams said that comparing the target harvest rate to the actual harvest rate is “kind of an apples to oranges comparison” and that it was “a bit of a red herring” to point to high harvest rates as being evidence of IPHC allowing the commercial fleet to overharvest the stock. Williams also talked about the change in 2011 to the “slow up, full down” approach versus the previous “slow up, fast down” policy, the talk of changing the legal commercial size to 30 inches (from 32) and what will happen at the interim IPHC meeting in November if the halibut CSP is not yet in place.    Williams said delays in data collection (such as the previous season unguided and subsistence estimates from Alaska Department of Fish and Game) and revisions to the stock assessment over time are contributing factors to the high harvest rate in Southeast: “There is some lag in the data being reported. There’s also an issue of fish stock assessments in which the most recent year is frankly the most poorly estimated one because you don’t have as good a look at the younger age classes that you do as you do down the road when those age classes get to be larger components in the stock.  “That’s why we have this sort of retrospective pattern in our assessment of what we estimate for say, this year is like 313 million pounds for coastwide biomass, five years from now what we estimate for 2011 will be a much lower number because we have a better look at the strength of those age classes coming in. “We also have this target harvest rate and the subsequent look at what that rate is and how it gets calculated out tends to bump that value up quite a bit as well. “It’s a bit of a red herring to look at those high exploitation rates as being commercial overharvest. It’s more appropriate to look at each year on a stand-alone basis.” Williams also explained how the change to a “full down” policy from “fast down” contributed to an even greater reduction in commercial allocation for Southeast in 2011 (it was cut from 4.4 million pounds in 2010 to 2.33 million in 2011): “The difference is from ‘slow up, fast down,’ in periods of declining biomass, the staff recommendation would be for 50 percent of the difference between last year’s catch limit and this year’s available yield. In other words, it wouldn’t go all the way down to what the assessment said the available yield is for the current year. “What we changed this year was to go ‘full down,’ to actually take that available yield from the assessment as our recommendation. As we looked at this in hindsight, when you have a declining biomass as we do now, you end up chasing your tail all the way down. You never catch up. “The other reason for only bringing it 50 percent down is, like anything you estimate, are the error bounds on those estimates. There is some error or variability around the estimate.” Williams said about half the drop in quota for Southeast this year was because of the change to “full down” in policy: “If we’d gone ‘fast down,’ we might have been up in the 3 (million pounds), something along that line.” Williams said the previous “fast down” policy charter groups are pointing to as the IPHC allowing the commercial sector to overharvest the stock was not based on economics:    “The 50 percent is not necessarily from an economic argument, it’s more of a recommendation of the assessment process that we’re using. Guys are saying we’re trying to save the commercial industry, or that we’re giving them more fish when they don’t need it. I can see where they say that, but it’s not even part of the thinking.” Williams said the IPHC will most likely come to its interim meeting in Anchorage Nov. 30-Dec. 1 with two options for management in 2012 because of uncertainty over whether the CSP will be in place: “At the interim meeting, we’ll be discussing and making public the status of the stock after this year’s fishery, survey results. Usually we have our catch limit recommendations in that presentation also. People will be able to see what those look like. But with this catch sharing plan on the horizon, not knowing if that will be implemented next year or not, we’ll have to do a Plan A and Plan B.  “In case it is, we’ll have a combined catch limit for charter and commercial. If not, it would be as we’ve done before with the straight commercial catch limit and GHL for the charter industry.” At the Sept. 1 hearing, Yamada from ACA also raised the possibility of lowering the legal commercial sized halibut from 32 inches to 30 inches. The number of halibut in the Gulf of Alaska is healthy, but the commercially exploitable stock of 32 inches or longer is in a declining trend. Williams said the idea has been discussed for the last few years, but that the IPHC is “uneasy” with it. “The market is set up for 10 pounds and up (a 32-inch halibut net weight). If for whatever reason, guys don’t retain those small fish and throw them back, you have mortality for those small fish. What goes along with changing the size limit is you’ve expanded the exploitable biomass. You’re exploiting a larger portion of the stock. That technical increase in the stock, you increase the harvest rate proportionally. “So you have a higher catch limit, but if the fishermen don’t target those small fish but instead shift to areas where they’re catching bigger fish, you’ve exacerbated the problem because now they’re putting even more effort on the large fish when they should be moving away from by virtue of having more pounds of small fish to retain. “That could have serious ramifications. The fishermen’s behavior is the big unknown on that.” Andrew Jensen can be reached at [email protected] 

State delays Slope lease sale, hoping to add acreage

The state will delay a North Slope lease sale planned for Oct. 26 for a few weeks with hopes that more acreage can be added and more companies can be enticed to bid for leases. A new date for the sale will be announced very soon, state Natural Resources Commissioner Dan Sullivan said. It is expected that it will be held in December, however. Sullivan said there are two main reasons for the decision. One is that there is currently litigation affecting some state leases, settlement discussions that are under way, and the possibility that some leases may expire and become available for inclusion in the lease sale. The sale is an area-wide sale, which typically includes all unleased state lands. Sullivan wouldn't identify the specific lawsuit or leases involved but the state has had a long-standing court case under way with the Point Thomson Unit that includes ExxonMobil Corp., BP and Chevron are major leaseholders.  

Gold prices spur prospectors of all sizes around state

Picks and pans are flying off the shelves and helicopters are in short supply as prospectors — from mom-and-pops to multi-national corporations — try to cash in on record-high gold prices. It is certainly a good time to open a gold mine in Alaska. Nixon Fork mine restarted operations in July and expects to be cash flow positive by the fourth quarter of 2011 with sales contracts lined up for gold and silver bars and for copper concentrate. Production at the mine, now owned by Fire River Gold of Vancouver, was suspended in 2007. Fire River Gold bought Nixon Fork from Pacific North West Capital in August 2009 for $3 million in cash and shares. In Juneau, Kensington mine is in its first full year of production after producing 43,143 ounces of gold in the last few months of 2010. Owner Couer Alaska projects an average annual production of 125,000 ounces from Kensington. Kensington is the second major production operation in Southeast, joining Greens Creek. Greens Creek, owned by Hecla Mining Co., produced about 68,000 ounces of gold in 2009 and in 2010. During 2010, Greens Creek also produced 7.2 million ounces of silver, 74,496 tons of zinc and 25,336 tons of lead. Permits issued by the state Department of Natural Resources for small placer mines have tripled, with 321 permits issued for the 2011 fiscal year that ended June 30 compared to 107 for the 2010 fiscal year. Since Jan. 1, DNR has issued a combined 573 hard rock, placer and suction dredge permits. That’s up 14.3 percent from the 501 the department issued during all of calendar year 2010 and 29.6 percent from 442 in 2009. About 200 placer mines around the state produced about 60,000 ounces of gold in 2010. “I wouldn’t be at all surprised to see it 10 or 15 percent higher amount of gold produced this year,” said Steve Borell of the Alaska Miners Association, “and that’s just from the smaller companies. From a statewide standpoint, it should have a fairly significant increase.” Nothing can compare to the revenue the state receives from oil taxes, but both state and local coffers should enjoy a nice boost from the run-up in prices. The mining industry paid an estimated $13 million to local governments in 2010 and about $59 million to the state in royalties, fees, rents and taxes. The state revenue was up 40 percent from 2009. Fire River Gold projects Nixon Fork will produce 50,000 ounces of gold per year, and holds additional promise owing to its location in the Tintina Gold Belt stretching across Interior Alaska that also includes deposits at Donlin Creek, Fort Knox and Pogo. While Donlin Creek is still in the development stage, Fort Knox and Pogo are major gold producers. Fort Knox owner Kinross Gold Corp. reported about 350,000 ounces of gold equivalent production in 2010; Pogo owner Sumitomo Metal Mining of Tokyo is now producing about 385,000 ounces per year, general manager Todd Roth told Business Excellence magazine in September 2010. Fort Knox produced its 5 millionth ounce earlier this year; Pogo produced its 1 millionth ounce in October 2009, according to Roth, and the company announced a major gold and silver vein discovery in a claim it owns near Pogo June 9. Between Pogo, Fort Knox, Kensington, Greens Creek and placer mining, the state produced about 907,000 ounces of gold in 2010. With Nixon Fork and Kensington at full production in 2012, Alaska could begin to average more than 1 million ounces of gold production per year if it doesn’t cross that milestone this year. At current prices (crossing $1,900 per ounce Aug. 23), that level of production would be worth nearly $2 billion. While gold is in the headlines now, mineral exploration and development is under way for coal, copper, zinc and lead prospects as well. Borell said at least 25 projects around the state attracted at least $1 million or more in capital expenditures during 2010 and he expects that number to be even higher once 2011 is over. The level of activity has put critical labor and equipment in short supply. “It has been extremely difficult to get drills, drilling crews and to get helicopter support this year,” Borell said. “Companies that didn’t have helicopters and drills lined up early, they may get some drilling in at the end of the season and they may not.”  Hundreds of new jobs at producing operations will provide wage increases and benefit local economies, Borell said. In Southeast, the opening of Kensington and other prospects in the exploration stage are attracting support sector businesses with good-paying jobs in Juneau and Ketchikan.   Andrew Jensen can be reached at [email protected]  

Political Cartoons

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NANA, Nova may partner on Northwest mine projects

@font-face { font-family: "Cambria"; }@font-face { font-family: "Helvetica-Condensed-Bold"; }@font-face { font-family: "ACaslon-BoldItalic"; }@font-face { font-family: "Bodoni-Book"; }p.MsoNormal, li.MsoNormal, div.MsoNormal { margin: 0in 0in 0.0001pt; font-size: 12pt; font-family: "Times New Roman"; }p.Byline1, li.Byline1, div.Byline1 { margin: 0in 0in 0.0001pt; line-height: 14pt; font-size: 10pt; font-family: Helvetica-Condensed-Bold; color: black; font-weight: bold; }p.Byline2, li.Byline2, div.Byline2 { margin: 0in 0in 0.0001pt; line-height: 120%; border: medium none; padding: 0in; font-size: 10pt; font-family: ACaslon-BoldItalic; color: black; font-weight: bold; font-style: italic; }p.Bodytext, li.Bodytext, div.Bodytext { margin: 0in 0in 0.0001pt; text-align: justify; text-indent: 12pt; line-height: 12pt; font-size: 10.5pt; font-family: Bodoni-Book; color: black; letter-spacing: -0.15pt; }div.Section1 { page: Section1; } By Tim Bradner Alaska Journal of Commerce   NANA Regional Corp. is close to an agreement with NovaGold Resources Inc., of Vancouver, B.C., on a partnership to jointly explore and possibly develop copper and zinc resources in the Ambler mining district of Northwest Alaska. The plan was approved in concept by NANA’s board last January but final details are still being worked out, said Lance Miller, NANA’s vice president for natural resources. NovaGold and NANA would combine resources owned by the Kotzebue-based Native regional corporation in the Bornite and Ruby Creek prospects on the upper Kobuk River with NovaGold’s Ambler project, in the Ambler mining district in the same region. NANA owns patented mining claims at Ruby and Bornite, as well as lands in the immediate area. Kennecott Exploration Co., the previous owner at Bornite and Ruby Creek, has estimated there are about 50 million tons of ore with grades of copper ranging from 1.2 percent to 4 percent. NovaGold’s Ambler project is estimated to hold 16.8 million tons of ore indicated by drilling with average values of 4.1 percent copper and 6 percent zinc, and an additional 12 million tons of ore that are inferred, or estimated by wider-spaced drilling, with an average grade of 3.5 percent copper and 4.2 percent zinc. NovaGold took over the Ambler project from Kennecott after that company had spent several years on exploring the deposit. Miller said the region is mineralized and contains a number of volcanogenic massive sulfides deposits, a kind of metal sulfide ore deposit, similar to that in the Greens Creek Mine in Southeast Alaska, and which can contains copper, zinc and lead and also precious metals. “The Arctic deposit (held by NovaGold) is a significant deposit and the copper and zinc in the ground there is estimated to be very high grade material. Bornite, south of the Ambler Mining District, may also be a source of copper,” Miller said. Exploration is under way at both sites this summer, with camps at Dahl Creek at the Arctic deposit and at Bornite. About 45 people are employed on the exploration, half of them NANA shareholders, Miller said. NANA has been engaged with zinc and lead mining at the large Red Dog Mine, in the DeLong Mountains north of Kotzebue, since 1989, but the decision to form the partnership with NovaGold is a strategic move to get involved and influence development in the Ambler Mining District, an area of mostly state-owned lands east of Kotzebue. What is significant about this is that it signals willingness to consider road access to the Ambler district, and potentially other parts of the region. A road connection to the Ambler region has been discussed for years but the villages of the region have seen concerned about any road that would more access to the region by sports hunters and fishermen, possibly affecting local subsistence resources. The issue is being discussed with villages in the region, Miller said, and leaders will take its cue on a road policy with advice from its shareholders. Attitudes are changing, however.  “In our 2009 shareholder survey, there was strong support for roads, with 77 percent supporting road development. This was a drastic change from 1989, when the majority of our shareholders were opposed to roads,” Miller said. “A lot has changed since then. The energy crisis is affecting our region, raising the cost of everything from food to fuel. It is 61 percent more expensive to live in Kotzebue than in Anchorage. NANA is actively working to address this. “The discussion is being held at the village and regional level, and we are happy with the  approach being taken by the state Department of Transportation and Public Facilities with regional outreach,” Miller added. “No route has been selected yet and it is premature to select one. The department is consulting with the communities and we are committed to that consultation process.” Road access to the region will be a challenge. The area is essentially blocked from the east by federal land units and although there is a provision for a transportation corridor across federal lands in the Alaska National Conservation and Lands Act passed by Congress in 1980, whether one can actually be obtained is uncertain. An alternative is a more southern route that skirts the federal lands, but this adds distance and costs. Road access from the west, up the Kobuk River valley, is another possibility. Miller said that more higher-grade ore would have to be found at both the Arctic and Bornite deposits to support a road. The ore grades at Arctic and possibly Bornite are high enough to support mining and trucking of ore concentrates, but substantially more resources will be required. At the Red Dog Mine, for example, the zinc and lead ore are rich enough to support trucking and there are substantial ore reserves of about 150 million tons. “We’re not there yet with the Arctic deposit. We need more,” Miller said. In theory, the best transportation mode to use with development of base metals mines like copper and zinc are railroads, and a railroad to Northwest Alaska also has been discussed for years. Railroads have some advantages because they also allow for more control of public access, an idea that finds acceptance among Northwest Alaska residents who are concerned about access to local fish and game by sports hunters and fishermen. However, the capital cost of a railroad means that even more ore, and mines, will have to be discovered. “It would take production from four mines the size of Red Dog to support a railroad,” Miller said.

Charter sector faces changes, but not like Canada

@font-face { font-family: "Cambria"; }p.MsoNormal, li.MsoNormal, div.MsoNormal { margin: 0in 0in 0.0001pt; font-size: 12pt; font-family: "Times New Roman"; }div.Section1 { page: Section1; } Charter halibut operators concerned about how a proposed rule to divide the harvest between their sector and the commercial fishery can take solace in one thing: at least they’re not in Canada. The Canadian Department of Fisheries and Oceans closed the recreational halibut fishery effective Sept. 5 because sport fishermen have reached their harvest allocation for the season. Alaska charter operators have long and successfully resisted in-season management measures such as changes in bag limits — and especially closures — designed to keep them within their allocation. The DFO closure in Canada is the result of the recreational fishery, which includes charter and unguided anglers, exceeding its allocation for five of the last six years. This hasn’t proven to be a problem in Southcentral Alaska, which has stayed within the charter allocation of 3.65 million pounds for every year but one since 2004 while managed under a two-fish of any size daily bag limit. That hasn’t been the case in Southeast, a triangle-shaped regulatory area called 2C with the panhandle as one side and a horizontal border with Canadian waters as another. The charter sector in Southeast has exceeded its allocation ever year since 2004, more than doubling up in 2008 with 1.9 million pounds while on an allocation of 930,000 pounds. In 2008, the North Pacific Fishery Management Council approved a plan to split the halibut harvest as a percentage between charter and commercial and set default bag limits based on the amount of halibut available. The plan also provides for charter operators to lease pounds from the commercial sector to provide additional fishing opportunity for their clients if the rule requires a bag limit of one fish or a size limit. Now that the proposed final rule has been published and the National Marine Fisheries Service is taking comments through Sept. 6, much of the attention has focused on what it would have meant for the charter sector were it in place for 2011. The biggest effect on Southcentral anglers would be a cut from a two-fish to a one-fish bag limit, in addition to a likely cut in allocation of about 1 million pounds. Southeast has already gotten a taste of the rule, known as a catch sharing plan, in 2011. The International Pacific Halibut Commission, or IPHC, placed a 37-inch size limit on Southeast guided anglers in addition to the one-fish daily bag limit put in place by the North Pacific council in 2009. Through June, the Southeast charter sector had harvested about 120,000 pounds of halibut with an average weight of 9 pounds each, compared to 350,000 pounds and an average weight of 27 pounds in 2010. Looking back What are always contentious allocation fights among sport and commercial fishermen of all species is exacerbated by the current low levels of halibut of the commercially legal size of 32 inches or longer. Commercial allocations of halibut have declined 79 percent in Southeast since 2005 and by 43 percent in Southcentral, which makes the chronic problem of charter overages in Southeast even harder to take. While there remains a large biomass of halibut in the Gulf of Alaska, it is taking longer for fish to recruit into legal size, and concerns about localized depletion are being raised in Southeast from both commercial and subsistence users. However, despite the heartburn about how the charter sector would have been affected in 2011, it’s likely there wouldn’t have been nearly as much of a fight had the rule taken effect in the season following the 2008 council action. In 2009, under the proposed rule, Southcentral charter anglers would have received an allocation of 3.55 million pounds, (nearly identical to the current 3.65 million) and been on a two-fish bag limit with one required to be less than 32 inches. In Southeast, the charter sector would have received an allocation of 900,000 pounds (larger than the actual 2009 charter allocation of 788,000 pounds) and would have been on the same two-fish bag limit as Southcentral with one less than 32 inches. According to commercial harvest data, 2011 is the only year since 1983 when Southcentral anglers would have been under a one-fish bag limit. In only eight of the last 27 years would the two-fish bag limit have been required to have one less than 32 inches. Southcentral’s halibut biomass has also been remarkably resilient. Since 1984, it has rebounded quickly after declining trends. If the proposed catch sharing rule had been in place, Southcentral charter anglers would have been on a restricted two-fish bag limit for no more than two consecutive years (1984-85; 1995-96; 2000-01; 2009-10). Looking at Southeast, charter operators would have also faced mostly liberal harvest rules under the plan up until the point where the IPHC began cutting commercial allocations to address declining legal-sized halibut in 2008. At any commercial harvest greater than 8.5 million pounds, the charter allocation would be about 1.5 million pounds, which is nearly identical to where the North Pacific council set the guideline harvest level in 2000. The commercial harvest for Southeast was at least 8.5 million pounds in all but one year from 1985 to 2007. Even at low levels of abundance in Southeast during 2010, under the proposed rule the charter sector would have been on a restricted two-fish bag limit as long as they were projected to stay within their upper allocation range of 960,000 pounds.   Andrew Jensen can be reached at [email protected]  

August-Issue-1 2011

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Alaska Journal of Commerce

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