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FISH FACTOR: Private hatchery, personal use fish bills pre-filed for session

A fish bill that has already been prefiled would let Alaskans take fisheries enhancement efforts into their own hands. House Bill 220 by Rep. David Talerico, R-Healy, would allow “fisheries enhancement permits” as a “tool to support Fish and Game.” The permits would allow people to take eggs, grow them into smolt and release them wherever they want into the wild. The permit also would allow groups or individuals to “enhance habitat and augment nutrients” in state waterways to support fish,” according to the bill language. If many smaller facilities can do the work of a handful of larger, more costly facilities, it will help Alaska’s budget, Talerico told the Juneau Empire. The enhancement permits also would be available to Native organizations and sportsmen’s groups, Talerico said, adding, “Those guys know how to raise money in a hurry.” Another tool intended “to help fish managers” will resurface this year – “The Alaskans-First Fishing Act,” which aims to give personal use fisheries a priority over sport and commercial users when restrictions are imposed to achieve a management goal. As it stands now, the three fisheries all are on equal footing in the eyes and actions of state managers. The bill, Senate Bill 42, has been introduced during each of the last seven legislative sessions by Sen. Bill Stolze, but has gone nowhere. (A duplicate law, HB 110, has been filed by Rep. Mark Neuman, R-Big Lake). The bill states, “one thing all Alaskans can agree on is that we should have a priority over people coming from elsewhere in the country and the world to utilize and harvest our fisheries resources. Fisheries that are restricted to residents only are meant to enable Alaskans to access their fisheries resources for their personal use and consumption.” The United Fishermen of Alaska’s position on the personal use issue has remained the same: the Legislature should leave prioritization of fishery allocations to the Board of Fisheries and management to the Alaska Department of Fish and Game. Fish price places The first thing any fisherman wants to know is fish prices. Usually, that information is tough to come by during a fishing season, as final prices aren’t settled until months after the catch is sold. That’s a tough way to run a business. There are some helpful price resources, albeit after the fact. Each April the state Department of Fish and Game provides dock prices for 85 different fish species for the previous year, by gear type and region. It’s called the Commercial Operator’s Annual Report, or COAR, compiled from inputs by Alaska fish buyers. Here’s a 2014 sampler of prices for many of the species people seldom hear about: The statewide average herring price was 11 cents a pound. Octopus averaged 61 cents. Lingcod fetched $1.27 at the docks. Those billions of pounds of pollock in Alaska’s largest fishery averaged 15 cents a pound. For 11 different kinds of flatfish, rex sole was the priciest at 32 cents a pound. Those pesky arrowtooth flounder paid out at 6 cents. For Atka mackerel, the average price was a dime, and 17 cents for perch. Big skates brought 45 cents a pound dockside, and wolf eels were 94 cents. Sea cucumbers averaged $4.02, and catches of smelt brought 46 cents. The state tracks 22 different kinds of rockfish, with yelloweye, or red snapper, the priciest at $1.31 a pound, and red stripe the cheapest at 14 cents. The lowest priced fish of them all were sculpin and yellowfin sole, each at 2 pennies a pound. The priciest Alaska catch listed was spot prawns paying Southeast Alaska fishermen $8.65 a pound. For salmon, the state Department of Revenue three times a year provides first wholesale prices (what processors receive when they sell the fish) for products including fresh, frozen, fillets, roe and canned for each Alaska region. It’s called the Alaska Salmon Price Report and is listed under the Tax Division Why should you care about fish prices if you’re far from the coast? With Alaska’s commercial catches coming in at between 5 to 6 billion pounds every year, adding just one penny per pound makes a difference of nearly one million dollars in landing taxes for the state and local governments each. Ice sightings wanted We’ve all seen images of fishing boats in the winter, where the rigging, wires and wheelhouse are literally turned into a solid block of ice. That freezing ocean spray and heavy icing can capsize a vessel in the blink of an eye. Weather forecasters are in the fourth year of a project to fine-tune NOAA’s Watches and Warnings about heavy freezing spray We’re trying to understand more about the dynamics and the atmospheric conditions, and even the types of boats that might be impacted by freezing spray,” said Lt. Joseph Phillips at NOAA’s Ocean Prediction Center in Maryland. “What we are learning is that freezing spray is a very difficult thing to forecast. A lot of it has to deal with what direction a ship is moving in, the size and shape of the ship, the wind conditions, you can have warm waters and cold temperatures and still get freezing spray.” Forecasters from NOAA and Environment Canada are asking mariners for help in reporting icing conditions in Alaska, the Northeast and the Great Lakes regions. “Right now we just want to hear if there is freezing spray or not. But more information like the icing conditions, ice accretion rate, air temperature, sea and wind conditions, relative humidity all that information is great,” Phillips told KMXT. “Then we can start tweaking and understanding why we’re not forecasting or over forecasting, maybe adjust the models we are using here and there. And that will translate into a better forecast and warning system for this condition.”   Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.  

More quakes rattle Oklahoma but state avoids tough measures

OKLAHOMA CITY (AP) — In Oklahoma, now the country’s earthquake capital, people are talking nervously about the big one as man-made quakes get stronger, more frequent and closer to major population centers. Next door in Kansas, they’re feeling on firmer ground though no one is ready yet to declare victory. A year ago, the states had a common problem — earthquakes caused by the disposal of wastewater from oil and gas exploration. They chose different solutions. Kansas, following early scientific studies, decided to restrict how much and how fast the wastewater could be pumped back underground. Oklahoma instead initially concentrated on the depth of the wastewater injections. Developments since then haven’t been reassuring in Oklahoma, where a quake knocked out power in parts of an Oklahoma City suburb several weeks ago and where fears are growing that the worst is yet to come. On Friday, Jan. 15, about 200 unhappy residents packed a forum at the state capitol convened by critics of the state’s response. A governor’s task force is studying the problem but officials have so far avoided taking tougher measures. The quakes, which have been mostly small- to medium-sized, have caused limited damage, and no one foresees anything like the massive damage and deaths in the famous quakes in California, seismologists say. Still, “It’s a trend that’s unsettling,” said Cornell University geophysicist Katie Keranen, referring to the increasing number of quakes. Frequent small quakes can be a harbinger of bigger ones. “You have the ingredients you need to have a larger earthquake.” In Oklahoma, earthquakes of magnitude 2.7 and stronger increased by about 10 percent between the last half of 2014 and the last half of 2015, according to a data analysis by The Associated Press. Experts say 2.7 is a threshold at which monitors are reliable. In Kansas, earthquakes of that magnitude went down by 60 percent in the same period. According to earthquake experts, the pattern fits recent peer-reviewed studies that suggest injecting high volumes of wastewater could aggravate natural faults. In Oklahoma’s six most earthquake-prone counties, the volume of wastewater disposal increased more than threefold from 2012 to 2014. The past few weeks have been especially nerve-wracking. Eighty-eight quakes of 2.7 or stronger occurred this January as of Jan. 18 at noon central time, more than in all of 2012. The recent quakes have generally been more powerful, too, with eight of magnitude 4 or higher. “What concerns me is what is happening to our homes through all these earthquakes,” said Mary Beth McFadden of Fairview, a town about 100 miles northwest of Oklahoma City that has had six quakes of magnitude 4 since the start of the year. “It’s your home being put in that position that you have no control over.” Last week, the state told companies to reduce wastewater injections at 27 nearby disposal wells. For decades, drilling companies have disposed of oilfield wastewater — the subterranean saltwater that comes to the surface with oil and gas, and liquid drilling chemicals — by pumping it back underground. But in recent years, improved technology has allowed for injecting more wastewater faster so more oil and gas can be produced. Around here, above the Arbuckle geologic formation of limestone, water under pressure can set off a fault if there’s enough tension, according to interviews with 10 earthquake experts. “It’s a combination of putting fluid in fast enough and deep enough,” said Stanford University geophysicist William Ellsworth. “The higher rate wells are the ones where there are more hazards associated.” In 2014, scientists who looked at one swarm of earthquakes found the four highest rate wells were causing most of the pressure changes and problems. Then in June 2015, two different teams published studies pointing directly at volume and rate of injections as the main problem in such quakes. In March 2015, Kansas regulators ordered a dramatic reduction in injection volumes in the most vulnerable area. That same month, Oklahoma regulators directed the operators of 347 wells to check the depth of their injections, then three months later issued a broader order to avoid the Arbuckle’s “basement.” But by the end of November, the state had asked for volume cutbacks in fewer than 90 of the about 1,000 wells in a key area. Oklahoma Corporation Commission spokesman Matt Skinner said research suggested the biggest danger was in the crystalline basement below the porous underground Arbuckle formation. He said it was not proper to compare Oklahoma to Kansas, which has fewer wells and less wastewater. Oklahoma’s energy and environment secretary, Michael Teague, said Oklahoma’s approach — which now includes some volume reductions — is working in some areas but not others. “I like what we’ve been doing so far, but clearly we need to do more,” Teague said. But oil and gas operators in Oklahoma, where the industry is a major economic and political force, acknowledge their resistance to cutting back on their injections of wastewater. “A lot of people say we just need the earth to stop shaking, and I understand that, but the fact of the matter is that without the ability to dispose of wastewater, we cannot produce oil and gas in the state of Oklahoma, and this is our lifeblood,” said Kim Hatfield, president of Oklahoma City-based Crawley Petroleum and a member of Gov. Mary Fallin’s task force studying the earthquake problem. In Kansas, quakes have decreased from an average of nearly 11 earthquakes a month to about three. “Things are much better than they were; we haven’t had a 4.0 in quite a while,” said Kansas Geological Survey chief Rex Buchanan. “I don’t think anybody is going to declare victory yet.” Experts say the change over such a short time period could be a blip. But considering that southern Kansas and northern Oklahoma are identical in geology, what’s happening in the two states is “a very interesting experiment,” said U.S. Geological Survey seismologist Nicholas van der Elst. The most recent temblors, including the one that caused power outages and some damage in the Oklahoma City suburb of Edmond on Dec. 29, has exhausted some residents’ patience for a solution. When the quakes were mostly in thinly populated rural areas, it was “Who cares, right? It’s not in my backyard,” said Keith Gaddie, a University of Oklahoma political science professor. “But then you’re sitting in Edmond and all of sudden your $500,000 house starts to shake, shimmy and shutter. You’re noticing a lot more people are being affected by these, and more voices means more political demand.” Kissel reported from Little Rock, Arkansas, and Borenstein from Washington.  

Movers & Shakers 01/24/16

Alaska USA Mortgage Company Senior Mortgage Loan Originator Catherine Donaldson has been recognized as Affiliate of the Year by the Greater Fairbanks Board of Realtors. The board annually recognizes one affiliate member who has provided outstanding contributions to the board and the Fairbanks real estate community. Donaldson has been a resident of Fairbanks since 1983. She started her career in the financial industry more than 28 years ago and has experience managing all aspects of the mortgage loan process including originating, processing, underwriting and closing. Wells Fargo has named Jess Sarsfield as a business relationship manager serving customers in Homer and the southern Kenai Peninsula. He will focus on meeting the unique financial needs of business owners and managers in the southern Kenai Peninsula and helping their businesses succeed financially. Sarsfield joined Wells Fargo three years ago as an assistant store manager in Denver, Colo. He has spent the past two years serving as a store manager in Juneau and Craig on Prince of Wales Island. Sarsfield earned a bachelor’s degree in international business management from Brigham Young University in Hawaii. Sarsfield originally hails from England, and he is a certified scuba dive instructor. University of Alaska Fairbanks atmospheric chemistry professor Catherine Cahill is the new director of the Alaska Center for Unmanned Aircraft Systems Integration. Cahill has worked with unmanned aircraft at UAF since 2006. She has extensive experience developing payloads and conducting remote sensing, wildlife monitoring and emergency response activities. Cahill recently returned from Washington, D.C., where she worked for 19 months as a congressional fellow for the U.S. Senate Committee on Energy and Natural Resources. She received the 2013 Emil Usibelli Distinguished Service Award for helping the public and government officials understand air pollution across Alaska, especially in Fairbanks. One of Cahill’s first actions was to move ACAUSI’s offices to the Akasofu Building onto the Fairbanks campus, to facilitate collaborations with UAF researchers, natural hazard experts and emergency responders. Cahill replaces Marty Rogers, who will continue to serve as ACUASI’s business director. The center will also have a new director of its Pan-Pacific UAS Test Range Complex: John Nevadomsky. He replaces Ro Bailey, who retired this month. ACUASI is part the UAF Geophysical Institute. Anchorage Downtown Partnership, Ltd. announced the hiring of Jamie Boring as the new executive director. As executive director, Boring directs the actions of ADP staff and board to support and strengthen the organizations purpose of assuring a vibrant downtown. Additionally, Boring leads ADP’s multiple facets of operations including maintenance, security, membership, events, public policy and marketing for Downtown. Boring is a lifelong Alaskan who is passionate about the success of downtown. Having been a business owner in the Downtown Improvement District and board member of ADP, he is aware of the challenges and unique opportunities that face downtown. Boring has a strong background in all facets of construction, development and finance and served in the United States Marine Corps.  

As oil falls, US consumer prices down 0.1 percent in December

WASHINGTON (AP) — U.S. consumer prices fell in December and rose by the smallest amount in seven years in 2015, reflecting the toll of slumping energy costs. Consumer prices slipped 0.1 percent last month after a flat reading in November, the Labor Department reported Jan. 20. For the entire year, overall inflation was up just 0.7 percent, even smaller than a 0.8 percent rise in 2014. Both years were heavily influenced by plunging energy prices. It was the weakest annual increase since a 0.1 percent rise in 2008. Core inflation, which excludes volatile energy and food costs, edged up 0.1 percent in December. That was the smallest monthly gain since August. For the full year, core inflation was up 2.1 percent after a 1.6 percent rise in 2014. Energy prices and a stronger dollar have been major factors holding down inflation. The Federal Reserve, however, last month boosted a key interest rate for the first time in nine years, saying it believed inflation would eventually strengthen. The quarter-point increase pushed the federal funds rate from near zero to a range of 0.25 percent to 0.5 percent. Fed officials have stressed that the pace of future rate increases will be heavily dependent on signs that inflation is beginning to accelerate closer to the Fed’s target of 2 percent annual price gains. But since the Fed met last month, oil prices have declined further. That suggests it might take even longer for the Fed to hit its target. For December, energy prices fell 2.4 percent and are down 14.9 percent for the year. Food costs declined 0.2 percent and are up a modest 0.8 percent for the year. The nationwide average for a gallon of gasoline is down to $1.88, 12 cents lower than a month ago. But some analysts see the uptick in core inflation as a sign that inflation outside of energy and food is beginning to accelerate. The 2.1 percent rise in the core for the 12 months ending in December followed a 12-month rise of 2 percent in November. It was the largest 12-month gain in core prices since a similar 2.1 percent increase in July 2012. Driving core inflation in December were increases for shelter costs, medical care, home furnishings and education. Meanwhile, prices for clothing, airline fares and new cars declined in December. Laura Rosner, an economist with BNP Paribas, said that she is forecasting overall inflation will rise by 1.4 percent in 2016. The potential for further declines in energy and food costs, however, may pull her projection lower. The Fed next meets on Jan. 26-27, and private economists widely believe that the Fed will leave rates unchanged. Some economists say it could be June before the Fed raises rates again.  

BP to cut Alaska workforce by 13%

BP is cutting 4,000 jobs worldwide and some of those reductions will be in Alaska. An intra-company email obtained by the Journal sent to BP Alaska employees Jan. 12 states that the company plans to reduce its total in state workforce by 13 percent. All employees should know their status by early spring and the majority of layoffs will be conducted by mid-year, according to the email. BP directly employs about 2,100 people and has another 6,000 contract workers in Alaska, based on the company’s 2015 Alaska Hire report. The 13 percent reduction will come from the company’s direct employees, or about 270 people. “Today, the cash we generate from our business is not sufficient, meaning we have to borrow from the BP Group to meet our Alaska investment,” the email reads. “Improving our cost base is critical to maintaining our activity level at Prudhoe Bay and the long-term viability of the region.” In a formal statement BP said it plans to further reduce employee numbers in its upstream division to less than 20,000 — the Gulf of Mexico, Lower 48 onshore and Alaska in the U.S. — to simplify its business, cut cost and improve efficiency. “To reach this level we will need to reduce our current workforce of BP employees and agency contractors by at least 4,000 additional people,” the company said. BP’s restructuring comes as the price for Alaska North Slope oil has fallen to near $31 per barrel. At the same time, North Slope crude production and transportation costs are estimated at $46 per barrel, according to the state’s Fall 2015 Revenue Sources Book. BP cut 475 Alaska positions in late 2014 when it sold North Slope assets to Hilcorp Energy. About 200 of those employees ultimately transitioned to work for Hilcorp, a Houston-based independent. ConocoPhillips announced a 10 percent cut to its 1,200-employee Alaska workforce last September in a cost-cutting move. BP has incurred pre-tax damages upwards of $55 billion related to the massive 2010 explosion and subsequent oil spill from its Deepwater Horizon drilling rig in the Gulf of Mexico, according to the company’s third quarter financial report. Overall oil and gas industry employment was down 900 jobs statewide in November from a year prior, based on preliminary Labor Department numbers. Elwood Brehmer can be reached at [email protected]

Real estate market forecast sees softening in Anchorage

Anchorage’s commercial and residential real estate market looks to be relatively stable this year, although some softening is expected. Local realtors and brokers gave their best estimates for different segments of the Anchorage bowl real estate market at the annual Building Owners and Manager’s Association forecast luncheon Dec. 8. The overall office vacancy rate for Class A office space is projected to rise, on average, from 6.8 percent in 2015 to about 7.6 percent in 2016, but Anchorage is still doing well compared with the national average office vacancy a rate of 13.4 percent average, Per Bjorn-Roli, with Reliant LLC, told those at the BOMA luncheon. Lease rates are expected to remain stable 2016, at an average of $2.95 per square foot for all types of properties, Bjorn-Roli said. “The market will be a little softer, however, and tenants will be well positioned to ask for concessions like free rent periods and property improvements,” he said. “This happened in 2011, too,” when the local market was coming out of a mild downturn. About 157,000 square feet of new office space was added in 2015 in the Anchorage area with much of that in the Cook Inlet Region Inc. and Kuukpik Corp. new buildings in Anchorage’s Midtown. However, 30,000 square feet of the 157,000 square feet of space added in 2015 was absorbed by market growth, he said. Class A office space Downtown is actually tighter now than a year ago, he said, with 2.7 percent of space vacant now compared with 2.9 percent a year ago. In Anchorage’s Midtown, however, the vacancy rate for Class A space is up to 10.3 percent from 6.3 percent a year ago, with this mainly due to the CIRI and Kuukpik building additions, Bjorn-Roli said. Meanwhile, no major new commercial office projects are planned for 2016 and that should basically keep the market steady, with normal growth gradually absorbing the vacant space available. However, if the Legislature really follows through with its threat to cancel the lease on the new Legislative Information Office building on 4th Avenue it would open up a large block of Downtown space. Legislators are interested in moving the Anchorage  legislative offices to the state-owned Atwood Building on 7th Avenue, but this issue is far from settled. Many features of the new LIO building were custom-ordered by legislators, and that could impose conversion costs if there are new tenants. Bjorn-Roli said the financial shortfalls affecting state government won’t have any immediate effects on the commercial office space market because the state has the cash reserves to buffer shortfalls, at least for the next two years. “We see a two-year window for cuts and adjustments,” he said. “However, there is a dramatic increase in the ‘concern’ index.” But there is time for the adjustments and any impacts will be spread out. “State spending is a major driving force in the office market,” Bjorn-Roli said, so the magnitude of budget cuts will be watched closely. What may also cause effects would be reductions in oil and gas industry activity, but it’s hard to forecast this. BP has announced a workforce reduction, for example, but BP owns its office building in Midtown, so the reduction wouldn’t immediately affect the office market, he said. “We see few effects in 2016 but in 2017 it may become an issue,” he said. “Our conclusion overall is that the Anchorage area office market it healthy and stable, with some softening expected,” Bjorn-Roli said. It’s a similar story for markets for retail space market, Brandon Spoerhase, with BSI Commercial Real Estate, told those at the BOMA luncheon. Retail space markets are holding steady with lease rates overall averaging $1.55 per square foot in older buildings and a $2.65 per square foot average rate for newly-built space, said Spoerhase. The fourth quarter 2015 vacancy rate estimated at 5.5 percent compares very favorably with the national average of 11.3 percent, he said. Retail profit margins continue to be healthy, as demonstrated by national clothing retailer H&M’s 2015 opening in Dimond Center, which was the second most successful in the company’s history, Spoerhase said. Two major retailers still looking at Anchorage include Whole Foods, the upscale grocery chain, and Victoria’s Secret, the womens’ apparel chain. New arrivals include three national food chains, Smash Burger; Sonic Drive-In, Dave & Busters. One open space being eyed by national retailers is 40,000 square feet available at the former Carrs’ grocery store space in the Mall at Sears in Anchorage’s Midtown, Spoerhase said. Meanwhile, major malls like the downtown 5th Avenue mall, Glenn Square and Tikahutnu Commons in northeast Anchorage, have little or no remaining space, Spoerhase said.  “Glenn Square still has a couple of ‘pads’ still available, but the hunt is on for a food retailer that won’t compete with the existing food retail tenants,” Spoerhase said. The Fifth Avenue Mall is essentially full, and new retail growth has spilled out into adjacent space along 5th and 6th Avenues, he said. Meanwhile, Pfeffer Development’s U-Med retail development on Alaska Pacific University lands in the Midtown university and medical district is still set for a 2016 or 2017 groundbreaking, Spoerhase said. This is a build-to-suit development project, he said. Overall, BSI sees no significant change in the retail market in the next 12 months, Spoerhase said. In commercial construction, a number of small to medium-sized private and institutional new buildings and school projects are planned for 2016, Jonathan Hornak, of Cornerstone General Contractors, told those at the BOMA luncheon. Hornak ticked off a number of medium-sized projects expected to be underway this year, such as a $17 million Anchorage Museum addition. No major new projects are pending, he said. Four projects in the “rumor” category, which Hornak left unidentified, at least at the BOMA luncheon, include a reported 9,000-square-foot building in Wasilla and three buildings in Anchorage, one 6,000-square-foot facility, a second at 50,000 square feet and a third reported at 60,000 square feet.  Residential real estate meanwhile remains tight, as it has for some time. Speaking to both rentals and homeowner properties, Tyler Robinson, of Cook Inlet Housing Authority, said the apartment vacancy rate in Anchorage remains below 5 percent, but things are looser in the more expensive categories. “We haven’t seen many effects yet overall,” from low oil prices and tightening state budgets, “but we are starting to see impacts at the higher end of the market,” Robinson told those at the BOMA luncheon. Rents have been increasing for several years, with the average in 2012 for a two-bedroom apartment at $1,300 a month, up from $800 a month in 2000, he said. As for single-family homes, the average sales prices today is about $370,000, up from $188,000 in 2000. The tight supply is mainly a factor of inadequate building of housing. “Studies have indicated we need to be building 900 housing units a year, in all segments of the market, to keep up with demand. We’re actually building about 300 a year, so there’s a shortfall,” that translates to a very tight market, Robinson said. The Municipality of Anchorage hasn’t been a real help in this because developers get wrapped up in red tape and delays. One major apartment developer has struggled to get permits for a 36-unit project. In contrast, in other states, developers and working with local governments and nonprofits on a wide variety of projects that are often linked to green space and urban amenities and retail. Robinson mentioned an Oklahoma City riverwalk project that matched urban recreation and greenspace with mixed urban and retail development in an attractive project. Accomplishing that took partnerships, he said. In Anchorage, many private developers, “don’t feel welcome,” Robinson said.

Oil keeps falling, and falling — How low can it go?

DALLAS (AP) — The price of oil keeps falling. And falling. And falling. It has to stop somewhere, right? Even after trending down for a year and a half, U.S. crude has fallen another 17 percent since the start of the year and is now probing depths not seen since 2003. “All you can do is forecast direction, and the direction of price is still down,” says Larry Goldstein of the Energy Policy Research Foundation, who predicted a decline in oil in 2014. On Jan. 12 the price fell another 3 percent to $30.44 a barrel, its lowest level in 12 years. Oil had sold for roughly $100 a barrel for nearly four years before beginning to fall in the summer of 2014. Many now say oil could drop into the $20 range. The price of crude is down because global supplies are high at a time when demand for it is not growing very fast. The price decline, already more dramatic and long-lasting than most expected, deepened in recent days because economic turmoil in China is expected to cut the growth in demand for oil further. Lower crude prices are leading to lower prices for gasoline, diesel, jet fuel and heating oil, giving drivers, shippers, and many businesses a big break on fuel costs. The national average retail price of gasoline is $1.96 a gallon. On Jan. 12 the Energy Department lowered its expectations for crude oil and most fuels for this year and next. The department now expects U.S. crude to average $38.54 a barrel in 2016. But layoffs across the oil industry are mounting, and oil company bankruptcies are expected to soar. BP announced layoffs of 4,000 workers on Tuesday. Fadel Gheit, an analyst at Oppenheimer & Co, says as many as half of the independent drilling companies working in U.S. shale fields could go bankrupt before oil prices stabilize. There’s lots of oil A boom in U.S. oil production thanks to new drilling technology helped push global supplies higher in recent years. Other major oil producers and exporters in the Middle East and elsewhere have declined to reduce their own output in an attempt to push prices back up. Iran, trying to emerge from punishing economic sanctions, is looking to increase exports in the coming months, which could add further to global oil stockpiles. The Energy Department said U.S. crude oil inventories “remain near levels not seen for this time of year in at least the last 80 years.” It says global supplies exceed global demand by about 1 million barrels per day on average. Economists at the Federal Reserve Bank of Dallas believe excess inventories won’t begin falling until 2017. The higher supplies and lower prices haven’t stimulated a sharp rise in demand. Most of the increase in world oil demand over the past several years has come from China, but signs are pointing to much slower economic growth there, which in turn reduces demand for fuels made from crude. Disappointing reports last week about China’s manufacturing sector and a fall in the yuan’s value triggered a global stock sell-off and an even more dramatic decline in the price of oil and other commodities. The first five days of the year marked the worst start of a year for oil in history, according to S&P Dow Jones Indices, and oil has only fallen further since. Winners and losers Motorists are saving every time they fill up. The Energy Information Administration figures that the average U.S. household saved $660 on gasoline in 2015 compared the year before, and gasoline is expected to fall another 16 percent in 2016. On Jan. 12 the EIA forecast that gasoline will average $2.03 a gallon for 2016, the lowest since 2004, from $2.43 last year. Airlines, big users of jet fuel, have posted record profits, and shippers and other businesses are also saving from cheaper energy. But workers in the oil patch have paid the price. About 17,000 oil and gas workers in the U.S. lost their jobs in 2015, but if you include oilfield support jobs the number is about 87,000, according to Michael Plante, an economist at the Dallas Fed who has written about the effect of oil prices on the economy. Even so, economists say low oil prices are still a net benefit for the U.S. economy. “Consumers have more money in their pocketbooks,” says Amy Myers Jaffe, an energy consultant who teaches at the University of California, Davis. And for businesses, “I can hire more people or buy new equipment because I no longer have to spend that money on energy.” When does it end? Oil traders and Wall Street analysts expect further declines in oil prices in the coming weeks. Several have predicted that prices will fall below $30 a barrel and even approach $20 a barrel. But prices are expected to rise sooner or later. Tension between Saudi Arabia and Iran has increased in recent weeks, and Middle East turmoil often causes prices to rise because traders worry about a potential disruption in supplies in the world’s most important oil region. And just as $100 oil encouraged the new production that contributed to this plunge in prices, $30 oil is discouraging the big investment needed for exploration and production for the future. The number of rigs drilling for oil in the U.S. has fallen by more than two-thirds, to 516 last week from an October 2014 peak of 1,609, according to a closely-watched count by the drilling services company Baker Hughes. Eventually, analysts say, the supply will fall below demand and prices will rise. Oppenheimer’s Gheit thinks oil will eventually rise and settle into a range between $50 and $70 a barrel — but not anytime soon. “The longer it remains low, the more violent the reaction to the upside is going to be,” he says.

IG finds no bias in EPA Bristol Bay assessment

The Bristol Bay Watershed Assessment is on the up-and-up, at least according to the Environmental Protection Agency Office of Inspector General. Based on “obtainable records,” an Inspector General report issued Jan. 13 found no bias in how the EPA conducted its lengthy assessment of the potential impacts of mining within Bristol Bay watershed. The agency’s assessment process also met requirements for peer review and public involvement and followed appropriate procedures for verifying the quality of the information in the assessment before 1,000-plus page document was released to the public in early 2014, according to the report. While the report absolves the agency of misconduct regarding alleged bias, it notes that 25 months worth of missing government emails from the retired employee believed to be retired ecologist Phillip North could not be recovered and evaluated. Further, the IG notes that North used nongovernmental email to comment on a draft 404(c) petition submitted to the agency from tribes before it was officially submitted to the EPA. “We found this action was a possible misuse of position, and the EPA’s senior counsel for ethics agreed,” the report states. “Agency employees must remain impartial in dealings with outside parties, particularly those that are considering petitioning or have petitioned the agency to take action on a matter.” The 17-month IG review of the agency began in May 2014 and focused on the process used to develop the assessment. Its conclusion contrasts with a recent report authored by former Secretary of Defense William Cohen that was critical of the EPA’s process, finding the agency to be cozy with scientific and local Alaska Native groups that oppose Pebble Mine.  “EPA is pleased that the Inspector General’s independent, in-depth review confirms that our rigorous scientific study of the Bristol Bay watershed and our robust public process were entirely consistent with our laws, regulations, policies and procedures and were based on sound scientific analysis,” EPA Region 10 Administrator Dennis McLerran said in a formal statement. “We stand behind our study and our public process, and we are confident in our work to protect Bristol Bay.” The Bristol Bay Watershed Assessment ultimately determined that large-scale mining in the region would irreparably harm Bristol Bay’s world-class salmon fisheries that currently support much of the areas economy. Subsequently, the EPA used the assessment as its basis for using its Clean Water Act Section 404(c) authority to prohibit a large mine in the watershed, a proposal that would effectively kill the prospect of developing Pebble Limited Partnerships premier copper and gold deposits. The 404(c) action is on hold as a federal court tries to determine what the IG’s office and former Secretary Cohen could not agree on: whether the EPA conspired with Pebble opposition to reach the conclusion in the assessment. Pebble sought and received an injunction to halt the EPA’s work until the court case is resolved. Pebble CEO Tom Collier called the IG report an “embarrassing failure” and a “whitewash” in a formal statement. “Based on a limited number of documents received through (the Freedom of Information Act), we were able to place in front of the IG incontrovertible evidence that EPA had reached final decisions about Pebble before undertaking any scientific inquiry; that it had inappropriately colluded with environmental activists; that it had manipulated the scientific process and lied about its intentions and actions to both us and to U.S. Congress,” Collier said. “Just as importantly, our record shows that these abuses reach to the highest offices within the agency.” Officials from the EPA’s offices of the Administrator, Region 10, Water, Research and Development and a retired Region 10 ecologist, presumably Phil North, were interviewed for the IG report. Additionally, more than 8,300 emails sent or received by agency officials between January 2008 and mid-May 2012 were reviewed. North, who retired from the EPA in April 2013, has received national notoriety for his involvement in the Bristol Bay Watershed Assessment. Pebble supporters and general EPA critics have zeroed in on him as the likely link for the alleged collusion with mine opponents. Attempts by the IG to access North’s personal email through subpoena were unsuccessful, as his whereabouts are unknown, the report states. Because the IG could not find North, the office issued a subpoena to North’s lawyer, who refused to accept service on behalf of North. North also did not surface when subpoenaed for deposition last November in Pebble’s ongoing suit against the EPA in federal court. The IG recommended to the EPA that the agency incorporate examples of “misuse of position” in its ethics training as well as mandatory tribal training to define appropriate parameters for Tribal assistance by agency staff. Elwood Brehmer can be reached at [email protected]

Judge hits both sides in Anchorage LIO suit

A lawsuit challenging the legality of the Anchorage Legislative Information Office lease will continue, but neither side came out of a court ruling unscathed. Anchorage District Superior Court Judge Patrick McKay wrote in a Jan. 7 order denying a defendants’ motion for summary judgment that the filer of the suit, Anchorage attorney James Gottstein, waited an unreasonably long time to file the suit. At the same time, McKay found that the Anchorage LIO owners could in a roundabout way benefit from the building lease being voided. The building is owned by 716 LLC — the Downtown Anchorage LIO address — a real estate partnership in which longtime Anchorage developer Mark Pfeffer is a primary member. Gottstein filed the suit on March 31, 2015, claiming the 10-year, $281,638 per month lease the Legislative Affairs Agency agreed to is illegal because it is not 10 percent below market value, a requirement for state lease extensions that do not go through a competitive bidding process. Legislative Affairs and 716 West Fourth Avenue agreed to expand and renovate the old 23,600 square-foot Anchorage LIO in September 2013 and Gottstein became aware of the agreement a month later; however he did not file suit at that time despite expressing concerns over the legality of the agreement, according to court records. Construction commenced in December 2013 and the new 64,000 square-foot building was finished in January 2015. Gottstein contends on his office’s website that the lease, which he claims equates to $7.15 per square foot, is well beyond the market rate of about $3 per square foot for Downtown Anchorage office space. On a total square-foot basis, the monthly lease works out to about $4.40 per square-foot, while the usable square-foot lease rate is higher. Pfeffer told the Journal in a previous interview that the building was renovated specifically to meet the Legislature’s unique layout and on-site parking requirements and therefore has no equal in the market. The new Anchorage LIO has been appraised multiple times at $44 million by several banks who financed the construction and the long-term debt. Pfeffer, caught in the middle of what has become a political issue, has offered to sell the building to the Legislature for 716’s financial obligation on the building — about $37 million — or millions less than its appraised value. An appraisal of the LIO conducted by the Alaska Housing Finance Corp. estimated the value at $48.5 million. McKay’s order notes that Gottstein, president of the adjacent Alaska Building Inc., collected $25,000 in fees and rent from 716 and the contractor before filing the suit. “The court views Mr. Gottstein’s financial gains as acquiescence and, combined with the 17 months (he) waited to bring the lawsuit, this delay seems ‘unreasonable,’” the judge wrote. If the lease is found “illegal, null and void,” 716 and Legislative Affairs could renegotiate to a rate 10 percent below market value, which could force Pfeffer and his partners to refinance the building over a longer term and thus incur harm, the order reads. Additionally, the building’s unique characteristics may not find anyone to lease the full space on similar terms and incur harm that way. “On the other hand, in the event that the court declares the lease ‘illegal, null and void,’ and the parties are unable to reach a new agreement, 716 will be able to lease the building at a greater rate since it claims the current rate is 10 percent below the market value,” Judge McKay wrote. “Indeed, 716 may even benefit from a finding that the lease is ‘illegal, null and void.’” In its arguments, Legislative Affairs argued it could be harmed because of the $7.5 million the Legislature contributed to the building improvements. McKay wrote that if the lease is found null and void, “the Alaskan taxpayers will be saving potentially much more than the original $7.5 million. It remains a question of fact whether the LAA would ultimately forfeit the original $7.5 million it spent on improvements since the lease makes no specific mention of such a contingency.” Impact of LIO move The messy Anchorage LIO situation has become political, with Anchorage minority Democrats and legislators from outside the city saying the state should break its lease because it cannot afford the building when Alaska is facing a $3.5 billion annual budget deficit. During a Dec. 19 meeting at the Anchorage LIO, the Legislative Council, which directs the Legislative Affairs Agency, voted to move out of the building unless a lease rate equal to what the Legislature would pay in the state’s nearby Atwood Building can be negotiated. Breaking the lease would technically be legal because of a “subject to appropriation” clause that voids the lease if the Legislature votes to not fund it. Pfeffer, some legislators, and state financial experts have warned that walking away from a roughly $26 million remaining obligation would hurt the state’s credit rating at a time when Standard & Poor’s just downgraded Alaska’s debt rating because of its fiscal problems and current lack of a plan to address them. “716 has acknowledged that the State is in a different fiscal environment now than when the lease was legally signed in 2013. Mindful of this reality, 716 West Fourth Avenue, LLC has indicated its willingness to work with the Alaska Legislature to find a pathway to savings,” spokeswoman Amy Slinker said in a formal statement. Gabe Petek, Standard & Poor’s primary credit analyst for Alaska, told the Journal Jan. 8 that the state walking away from a subject-to-appropriation lease likely wouldn’t impact rating agencies’ view of Alaska because the action is a way to reduce spending in the larger budget picture. “In a perverse sort of way it can be a strengthening — (legislators) have the ability when push comes to shove to push things around a little bit. People on the other end of it may not like it, but from the standpoint of the investors and the bondholders it can actually be a protective attribute, I guess,” Petek said. “We’re primarily focused on (the state’s) ability to fund their debt payments in full and on time on their debt that’s out in the public debt markets.” Elwood Brehmer can be reached at [email protected]

Smaller budget means ADFG can’t fix faulty Susitna counts

The Alaska Department of Fish and Game cannot undo a set of Cook Inlet driftnet restrictions in place over the last 25 years. Cook Inlet driftnetters say restrictions unjustly keep them from millions of dollars of sockeye harvest based on faulty data. Protective measures for Susitna sockeye, a designated stock of concern, keep drifters in specific corridors in Cook Inlet from July 9 to 31. Fishermen say the decades have added up to thousands of available sockeye — and millions of dollars — they didn’t need to forgo.  The department, the fishermen believe, has no reason to continue the restrictions. ADFG managers say they have no money or resources to make the adjustments. “When they redid the sonar, they found out they were in effect, under harvesting those stocks and overescaping,” said Erik Huebsch, vice president of United Cook Inlet Drift Association, an industry group. “They knew they were managing way too conservatively based on that. Why didn’t they change the management to ratchet it up any more if they knew they were managing too conservatively?” The Alaska Department of Fish and Game, or ADFG, says the driftnetters’ concerns are well-founded. “They have a legitimate question and concern to have some restrictions removed when there’s going to be a surplus,” said Pat Shields, ADFG’s commercial manager for Upper Cook Inlet. However, apart from three lake-based escapement goals, though, Shields said there’s nothing on which to base new management. “Right now we don’t have a tool other than those three weirs. With the funding we’re looking at right now, we’re really challenged to find a new method.” The study A 2009 study presented to the Board of Fisheries discredited the basis for the drift fleet’s restrictions. In 1981, ADFG installed a Bendix sonar system at the mouth of the Yentna River, a Susitna River tributary. Susitna sockeye stock is particularly difficult to enumerate; the river is wide and murky, and a multitude of the other salmon species — pink, chum, coho, and chinook — fog the sonar numbers trying to pinpoint sockeye. To mitigate, ADFG based much of Susitna sockeye management on the Yentna River’s sockeye escapement, figuring the river accounted for roughly half the overall Susitna’s. Since the 1981 Yentna Bendix start date, the river’s measurements have always seemed off, frequently missing the sustainable escapement goal. During the 1989 Exxon Valdez oil spill, the Cook Inlet drift fleet was closed by emergency order, but the Yentna sockeye escapement remained largely unchanged from other years. By 2006, five of the last nine years had failed to make the sustainable escapement goal of 90,000 to 160,000 sockeye. Eventually, the department got curious enough about the chronic underperformance to question the method. Using extra funds from various sources including the Cook Inlet Aquaculture Association, the department stacked the Yentna with extra counting methods like fish weirs, DIDSON sonar, and mark-recapture studies, to compare the results to the Bendix sonar. The results punctured the decades of Yentna Bendix counts. “There is little confidence in the reliability of the Bendix sonar estimates,” the report reads. “Since 2006, when additional escapement studies began, Bendix sockeye salmon estimates have ranged from 56 percent to 76 percent of the DIDSON estimate, and just 31 percent and 32 percent of the Yentna River mark-recapture estimates in 2007 and 2008.” The board made a major change to the river’s management in 2008 by declaring Susitna sockeye a “stock of concern” just before the 2009 study came out. That year, the Bendix sonar counted 90,000 compared to more than 130,000 that both DIDSON sonar and weirs counted and well within the sustainable escapement goal. The stock of concern designation placed additional restrictions on the Cook Inlet drift fleet to protect the erroneously underestimated Susitna sockeye. After the report, ADFG changed the escapement goals from the Yentna River’s Bendix-based goal to a series of goals on nearby Chelatna, Judd, and Larson lakes. The stock of concern designation and its resulting drift restrictions, however, remained. “The department recommends Susitna River sockeye salmon remain classified as a stock of yield concern because: 1) five of the escapements (out of 15 total) have been below the minimum goal, and 2) harvests in Central and Northern districts from 2008 through 2013 were generally less than the long-term averages. Research studies are ongoing to better understand sockeye salmon abundance and distribution.” No change ADFG managers say they understand the frustration of the drift fleet, but that they have no workable solution to establishing a new management plan. Though the Bendix sonar has been discredited, they have no better system on which to base a new set of restrictions. “We just felt we couldn’t do it,” said Shields. “The Bendix sonar had a goal, and it became apparent that in some years those restrictions would not have been necessary because we were underestimating the escapement. We just didn’t have any way to come up with a correction factor.” The Bendix-challenging study was completed with extra-departmental funds, and ADFG’s budget is being reduced like many agencies in the fiscally embattled state. Without money for new DIDSON sonar or new weirs, the department doesn’t have any new information. Part of the issue is the lake-based escapement goals, derived from weirs on Chelatna, Judd, and Larson lakes. The lakes are far enough from the drift fleet — roughly two weeks, as the salmon swims — that day-to-day, adaptive management like the Kenai River’s would be impossible. Erik Huebsch, UCIDA’s vice president, said ADFG’s money problems offer a convenient scapegoat for apathy. It takes no money, he said, to delist Susitna sockeye as a stock of concern and remove Cook Inlet drifters from the consequent constraints. “The department gets stuck on these little tracks because they don’t want to do anything different,” Huebsch said. DJ Summers can be reached at [email protected]

EDITORIAL: Bundys, and the feds, need to be reined in

As the FBI seeks to end the citizen takeover of Oregon’s Malheur National Wildlife Refuge, it’s worth reflecting on what is behind the rising civil disobedience in the American West. The armed occupation of federal buildings is inexcusable, but so are federal land-management abuses and prosecutorial overreach. Activists on (Jan. 2) broke into an unoccupied building on the 187,000-acre federal refuge in eastern Oregon to protest the imprisonment of two Oregon ranchers. The group’s spokesman is Ammon Bundy, son of Cliven Bundy, a Nevadan who in 2014 came to national attention over his standoff with the Bureau of Land Management. The younger Bundy is a political grandstander, and many in Oregon oppose his illegal siege. The drama is bringing attention to legitimate grievances, especially the appalling federal treatment of the Hammond family. The Hammonds’ problems trace to 1908, when Theodore Roosevelt set aside 89,000 acres around Malheur Lake as a bird refuge. The government has since been on a voracious land-and-water grab, coercing the area’s once-thriving ranchers to sell. The feds have revoked dozens of grazing permits and raised the price of the few it issues. It has mismanaged the area’s water, allowing ranchlands to flood. It has harassed landowners with regulatory actions that raise the cost of ranching, then has bought out private landowners to more than double the refuge’s size. The Hammonds are one of the last private owners in the Harney Basin, and they have endured federal harassment over their water rights, the revocation of their grazing permits, restricted access to their property, and prosecutorial abuse. In 2001 the family told authorities it planned to set a managed fire on its land to fight invasive species. The fire accidently spread over 139 acres of public land before the Hammonds extinguished it. In 2006 the family tried to save its winter feed from a lightning fire by setting “back fires” on its property (a common practice), which burnt an acre of public land. Years later, in 2011, the feds charged Dwight Hammond and his son Steven with nine counts under the elastic Antiterrorism and Effective Death Penalty Act. A federal jury found them guilty only of setting the two fires they had admitted to starting, and federal Judge Michael Hogan sentenced the father to three months and the son to a year in prison. He said the federal minimum of five years would not meet “any idea I have of justice, proportionality” and would “shock the conscience.” The feds appealed the sentence and another judge ordered both Hammonds to serve the full five years. They also owe $400,000 in supposed fire-related costs. Many in rural Oregon view this as a government vendetta. Rusty Inglis, who worked for the Forest Service for 34 years and now runs a local Oregon farm bureau, recently told a trade magazine that it’s “obvious” that “the BLM and the wildlife refuge want that ranch.” The Oregon Farm Bureau called the sentences “gross government overreach.” The ideology of “national” land has become the club to punish private landowners who are the best source of economic stability and conservation. The Bundy occupation of federal land can’t be tolerated, but the growing Western opposition to government harassment of private landowners ought to be a source of political concern. Ted Cruz and others are right to caution the occupiers against their sit-in, but the federal bureaucracy also needs to be reined in.

FISH FACTOR: Mariculture industry hits milestone as sales top $1M

Alaska’s mariculture industry has passed some big milestones, and is getting set to head into the weeds. Aquatic farming, which was ok’d by Alaska lawmakers in 1988, topped $1 million in shellfish sales for the first time ever in 2014, coming in at $1.2 million. “This is the highest sales we’ve had since the inception of the program which is pretty exciting,” said Cynthia Pring-Ham, Director of Mariculture for the state Department of Fish and Game, adding that shellfish production increased 27 percent. That’s an average of $7,049 in sales per acre of active farm, most of which average about five acres. Combined production overall hit 8.3 million oysters and geoducks in 2014, along with 10,000 pounds of blue mussels and little neck clams. Pring-Ham added that 73 percent of the sales came from shellfish produced at 56 farms, and the remainder from the state’s seven nurseries and two hatcheries that sell seed to the aquatic farmers. Seventy percent of the shellfish farms are located throughout Southeast Alaska, 23 percent are in Kachemak Bay near Homer and seven percent are in Prince William Sound. Aquatic farmers also fetched a higher price for their bivalves: $9.60 per dozen for oysters, $5.74 per pound for blue mussels and $8 per pound for little neck clams. Several other mariculture milestones also were recorded, Pring-Ham said, including an 11 percent increase in jobs. “Although small, we have about 185 positions working on aquatic farms in Alaska,” she said. Based on the shellfish crops and seed stocks in the water now, Pring-Ham sees lots of potential for more production. It takes two to four years for oysters to grow to slurping size, depending on water temperatures, and 14.5 million are set to come online, along with millions of mussels, geoduck clams, little necks, and most recently, cockles. And plans for growing weed in Alaska extends beyond marijuana. Farming seaweeds, especially various kelps, is seeing a surge of interest, notably as Outside interests target Alaska products. Seaweeds, which can be harvested on 6-12 month rotations, are used in everything from sushi wrappers to biofuels to face creams to frothy heads on beer. Seaweed growers from Maine and California both made business pitches at the Alaska Shellfish Growers Association meeting last fall to convince Alaska farmers to grow seaweeds experimentally, and eventually contract to grow for their companies. Maine’s production of primarily rockweed is valued at $20 million annually, according to a 2015 report for the Ocean Sciences National Center for Marine Algae and Microbiota. The report said 30 to 35 countries are producing 28 million tons of seaweed crops globally, valued at $10 billion. Japan’s nori production amounts to $2 billion annually and is one of the world’s most valuable crops. According to the Cape Times, 30,000 seaweed products have been launched in Europe in the past four years alone. Pring-Ham said partnerships are “blossoming” between Alaska aquatic farmers, entrepreneurs and educators to test the waters for local seaweeds. A two-year Alaska Sea Grant project is underway at Oceans Alaska in Ketchikan that will create kelp hatcheries and provide seeded longlines to farmers to submerge on their acreage. “It will introduce the entire seaweed farming business to Alaska on a pilot scale and collect growing data,” said Julie Decker, director of the Alaska Fisheries Development Foundation. “And it will connect with buyers interested in purchasing seaweeds from Alaska.” Applications for aquatic farms are accepted by ADFG each year from January 1 through April 30 and Pring-Ham hopes more Alaskans will join the mariculture movement. “Alaska has a lot going for it in terms of aquatic farming,” she said. “We have clean waters, bountiful coastlines and one of the easiest regulatory processes for getting a permit to operate and utilize state lands in the country. This makes Alaska so appealing for anyone interested in starting this type of business and we will help people through every step of the process.” Fish on your dish Eating trends show some big plusses for wild seafood, but Americans are still eating far less fish than they should be. According to international market research firm NPD Group, the top trend going into 2016 is consumers want to know where their foods come from. The Group credits seafood for its improved traceability and move towards local sourcing, which will continue to boost sales. Good fats also are in. People now know that some fats are healthy, NPD said, such as those found in eggs, avocados and seafood. Consumers are seeking non-genetically modified foods “in droves” NPD said. Again, that will benefit wild seafood as people are demanding “authentic,” natural foods with fewer additives of anything, let alone genes. Watch for people to be reading labels like never before. Healthy and light entrees also are expected to grow at a faster rate through 2018, another opportunity for seafood. Technomic, another top market tracker, lists ‘trash to treasure’ fish as its #3 seafood trend, as more restaurants serve up bycatch and lesser known fish to appreciative diners. For decades more than 60 percent of Americans have eaten seafood while dining out, but market watchers said more are cooking fish at home. Maybe that will boost consumption, which has stalled in the U.S. at less than 15 pounds per person. A study last year by the U.S. Dept. of Agriculture showed only one in ten Americans follow recommendations to eat seafood at last twice a week. The USDA Dietary Guidelines for Americans released on Jan. 7 recommends eating at least eight ounces of a variety of seafoods with the aim to take in at least 250 mg per day of omega-3 fatty acids. Fish watch Hundreds of boats were braving harsh winds and high seas to bring home first of the year fish from the Bering Sea and Gulf of Alaska. Pacific cod starts the year off for fixed gears, meaning longlines, jigs and pots. The P-cod price is reportedly around 35 cents per pound, similar to last year. A lingcod fishery is underway in Southeast Panhandle; black rockfish is open there and at Kodiak, Chignik and the Alaska Peninsula. That tasty rockfish fetches closer to 45 cents for fishermen. Southeast trollers have taken about 30,000 winter kings at $7.23 per pound, according to fish tickets. Bering Sea crabbers are tapping away at a 35.5 million pound snow crab quota, 15 million pounds of Tanners and 6 million pounds of golden king crab along the Aleutians. Fisheries for trawlers targeting pollock, cod, flounders and other groundfish open Jan. 20. The state Board of Fisheries meets in Fairbanks Jan. 12-16 to take up Arctic, Yukon and Kuskokwim fish issues. On Sunday, Jan. 17 the joint boards of Fish and Game will meet again to hear more budget cutting ideas. All board meetings are streamed live on the web. The International Pacific Halibut Commission is holding its annual meeting in Juneau, Jan. 25-29. Alaska Sea Grant’s Sixth Young Fishermen’s Summit also will be in Juneau, Jan. 27-29 at the Baranof Hotel. Dates for the 2016 Alaska Symphony of Seafood are Feb. 10 in Seattle; Feb. 16 in Juneau and Feb. 19 in Anchorage, where all winners will be announced. See more at www.afdf.org. Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

Movers & Shakers 1/17/16

Long-time Alaska businessman Tom Tougas joined First National Bank Alaska’s board of directors. Tougas’ rich history with the state’s tourism industry started in the 1970s as a tour bus driver while studying in college. Today, he owns Seward-based businesses Major Marine Tours and the 90-room Harbor 360 Hotel, and has helped manage numerous other companies throughout the years. Joining Tougas on the board are Lawer, Vice Chair Lucy Mahan, Adm. Tom Barrett, USCG (ret.) Dr. Maurice Coyle, Perry Eaton, Margy Johnson, Jane Klopfer, Loren H. Lounsbury and Fran Ulmer. Alice Crow and Cody Troseth have joined the Calista Corp. team to lead the new shareholder enrollment effort. As Shareholder Enrollment director, Crow will work with ANCSA Stock Enrollment Project Manager Cody Troseth to develop and implement a program to enroll descendants of original shareholders and people who were eligible to enroll as Calista shareholders on Dec. 18, 1971, but did not. Crow will serve as a liaison and utilize collaboration, public relations and media coverage related to the expanded Shareholder program and will team with Troseth to create and deliver an appropriate multi-channel communication plan. They will also design a plan for a shareholder services program in Bethel and Anchorage, to include ongoing enrollment, shareholder relations, proxy management, dividend processing and shareholder benefits. An original shareholder of Calista and Bethel Native corps., Maar’aq Crow is also a member of the Orutsararmiut Native Council. Her experience includes work with small, rural and urban Alaska businesses and multinational companies, as well as with regional and statewide Tribal-focused entities. She graduated from Bethel High School and holds an MBA from the University of Alaska Fairbanks and an MFA from the Institute of American Indian Arts in Santa Fe, New Mexico. Troseth is a descendant and shareholder of Calista Corp. Troseth has experience in project management, including the construction and energy sectors. Most recently, he worked on the Shell Alaska Exploration project in the Chukchi Sea. Troseth has a bachelor’s degree in mathematics and a master’s degree in project management from the University of Alaska Anchorage. Dave Zimmerman, Timber and Special Forest Products program manager for the Rogue River-Siskiyou National Forest in Medford, Ore., was recently named the new Petersburg District Ranger. His arrival date has not yet been determined. Zimmerman worked for the Forest Service and private sector in both Juneau and Sitka for nearly two decades. In 1980, he became the first timber management assistant on the Juneau Ranger District and prior to that position he served as a supervisory forester at the Sitka Supervisor’s Officer. This was a time in the forest’s history when it was organized into three areas, which were the Ketchikan Area, Stikine Area (Petersburg) and the Chatham Area (Sitka). Zimmerman brings extensive knowledge and diverse experience to the Tongass and Petersburg Ranger District. He has worked in three regions, on five national forests, and seven ranger districts. He earned an undergraduate degree in forestry from the University of Missouri. He also attended a Forest Service-sponsored educational program called the Forest Engineering Institute at Oregon State University. Petersburg is one of 10 ranger districts located on the 16.8-million-acre Tongass. The U.S. business law firm Stoel Rives LLP announced that James E. Torgerson, a partner in the firm’s Anchorage office, has been appointed firm-wide managing partner, making him the first Alaska-based managing partner of a major law firm in U.S. history. Torgerson, whose appointment went into effect Jan. 1, 2016, succeeds Bob Van Brocklin who served as the firm’s managing partner from 2008 to 2015. Stoel Rives has nearly 400 lawyers in seven states and the District of Columbia. Torgerson joined the firm as a founder and managing partner of the Anchorage office in 2008. He also has served on the firm’s executive committee since 2012. Torgerson has helped to grow the Anchorage office to 15 attorneys representing nearly all of the Native Alaskan companies in the state. Credit Union 1 announced the promotion of Chad Johnson to information technology projects manager. Johnson was initially hired in 2004. Since then, he has served as a teller, senior teller, member service assistant, member service officer, credit solutions loan officer, staff trainer, marketing writer, information technology support assistant, and his most recent position of information technology business analyst. In his new position, Johnson will be responsible for managing and tracking components of multi-departmental projects that require the Information Technology Department. He will investigate new systems and software within the organization and how they interconnect with departments, vendors and members to ensure smooth and accurate integration. Additionally, Johnson will be responsible for incorporating feedback from staff and members who use credit union systems, mapping solutions and implementing custom programming, testing and production rollouts.

Supreme Court rules setnet ban unconstitutional

The Alaska Supreme Court overturned a lower court ruling on Dec. 31, declaring a ballot initiative to ban setnets in certain areas of the state unconstitutional. Calling the initiative a “give-away program” that was designed to appeal to the self-interests of non-commercial fishermen, the court issued an opinion that put an end to a lengthy legal process that began in late 2013. Lt. Gov. Byron Mallott certified the ballot initiative last August after the initiative’s sponsor, the Alaska Fisheries Conservation Alliance, submitted 43,000 signatures in support of the measure, 36,000 of which were declared valid by the Division of Elections. The initiative would have almost exclusively impacted the Kenai Peninsula, where 735 setnet permits are registered alongside a large guided angler industry. Alaska residents hold more than 80 percent of the permits. After the initiative was filed in November 2013, then-Lt. Gov. Mead Treadwell rejected it in January 2014 as an allocative measure, which is prohibited by the Alaska Constitution. AFCA appealed and won a reversal in Superior Court that allowed it to begin collecting signatures. “I’m still shaking,” said Resources for All Alaskans President Jim Butler. Resources for all Alaskans, or RFAA, is a relatively new group formed to combat the setnet ban. “I very much appreciate the court’s effort to very methodically and step-by-step analyze the constitutional issues as well as the vision of the framers of the Alaska Constitution to get to their decision.” RFAA weighed in on the argument in March 2014 supporting the state’s assertion that the initiative was a prohibited appropriation of state resources. At the time, Butler said the idea of banning setnetting at the ballot box was bad policy. “The proposal to ban setnetters is particularly destructive because it doesn’t address the real reasons for declining king salmon populations and would instantly destroy 500 small Alaska family businesses and hundreds of other jobs,” Butler said at the time. The Alaska Fisheries Conservation Alliance released a statement saying its members were disappointed by the decision and referring to the signatures of more than 43,000 registered voters who signed to have the ban put on the ballot. “We are disappointed with the court’s decision to deny voters an opportunity to weigh in on the method and means for harvesting,” said AFCA president Joe Connors in the written statement. Founding member Bob Penney is also quoted in the statement, he said he is “deeply disappointed because the Kenai Kings are the real loser here and it now seems their species will continue to decline. Maybe it’s time the federal government looked into this issue.” When reached by phone Jan. 2, Bob Penney said he was on vacation and had no comment on the decision. AFCA Executive Director Clark Penney, Bob Penney’s grandson, said the group is looking into the Endangered Species Act as another avenue to protect salmon caught by set nets. Clark Penney said the group’s focus was not just on Kenai River king salmon, but on protecting fish species that are targeted by ineffective means. “We see set nets as the least effective for taking their target fisheries,” Clark Penney said. Under the Endangered Species Act, a species can be listed as “endangered” or “threatened” when, according to the U.S. Fish and Wildlife Service, “it is determined to be endangered or threatened by destruction, modification, or curtailment of its habitat or range; overutilization for commercial, recreational, scientific, or educational purposes; disease or predation; inadequacy of existing regulatory mechanisms; other natural or manmade factors affecting its survival.” Unlike Pacific Northwest salmon stocks that do have ESA protection, the late run of Kenai River king salmon has never failed to meet its minimum escapement goal. The court’s case According to the court, commercial setnetters are a distinct user group who would be unfairly stripped of a public resource allocation — their part of the millions of salmon that return to Alaska each year — to another party’s benefit. Most of the members of AFCA are sportfishermen who would ostensibly see more salmon inriver where the commercial nets to be removed from the water; two board members, Connors and Derek Leichliter, are former set net fishermen. Banning setnets, the court wrote in its Dec. 31 ruling, would essentially devote salmon to a specific user group on the Kenai Peninsula, to the exclusion of another. “We concluded that the initiative in question was a give-away program because it was ‘designed to appeal to the self-interests of sport, personal, and subsistence fishers,’ in that those groups were specifically targeted to receive state assets in the circumstance of harvestable shortages,” the court wrote. The court also concluded that the ballot initiative would have narrowed the Legislature’s and Board of Fisheries’ ability to make allocations. “If (the initiative) were enacted, then neither the Legislature or the Board would be able to allocate any salmon stock to this significant, existing user group.” Much of AFCA’s legal justification for the ballot’s constitutionality rested on prior ballot initiatives that banned hunting or fishing methods and means. The court said the prior initiatives were either not equivalent to the setnet ban, or that their passage alone didn’t make them constitutionally sound. AFCA attorney Matt Singer had argued Alaska has a history of making resource-related ballot initiatives, such as aerial wolf hunting and bear baiting. The Supreme Court said the argument is invalid, as the user groups for salmon are more clearly defined. “Under the Limited Entry Act and its implementing regulations, commercial set netters must obtain gear-specific setnet permits, which are limited in number, hold significant value, and may be bought and sold,” the court wrote. “This makes commercial setnetters a far more cohesive, recognizable, and permanent group than individuals who hunt wolves using same-day aerial techniques and snares, or who hunt bears using baiting or feeding methods.” Singer had also argued that Alaska voters banned fish traps by voter initiative, which he said established both gear type restrictions and the resource as fair game for ballots. Indeed, voters did outlaw fish traps by ballot initiative in 1959. The Alaska constitution, however, had not been accepted at this point. “Ordinance 3 was approved before the Alaska Constitution went into effect and was thus not governed by the constitutional prohibition against appropriating by initiative,” the court wrote. Even subsequent resource initiatives are not equivalent to the setnet ban, the court ruled. Singer had cited several cases as evidence of the ban’s constitutionality. Two of these ballots, however, were held before salmon had been ruled a “public asset,” and therefore forbidden under the Alaska constitution’s ballot measure provision. Aftermath Several of the fishermen who weighed in on the Supreme Court decision said they are weary of Cook Inlet’s “Fish Wars.” But each blamed fishermen from opposing user groups for igniting tension between user groups. “I think there are many people in the sport fishery, the guided industry, the commercial salmon harvester and even the personal use fishery who want to collaborate and find a way to make things work in this complicated fishery,” Butler, a longtime Cook Inlet setnetter, said. “There are others who see that as a risk, because if we can collaborate and get along — their particular opportunity might not develop the way they want it to be. I think this (threat of a ban was) inherently a divisive approach at solving a complex problem.” Butler said Resources for All Alaskans and the commercial fishing community didn’t want a fish war. “We’ve existed in this community for 100 years. The concept of a fish war is new and it’s because of increasing demand and we need to talk about that because there are plenty of fish for everybody. We just need to cooperate and not put people out of business to accomplish that goal because there’s no need to,” he said. Connors, who is the President of the AFCA board as well as a fishing charter and lodge owner on the Kenai River, said he saw inflexibility and an unwillingness to change from many commercial set net fishermen in Cook Inlet. “Sooner or later people just have to kind of come to the realization that they can’t fish the same way they did 50 years ago,” Connors said. “I know when I commercially fished, I used to catch Dolly Vardens — the sea run ones — and keep pounds of them in my freezer on the boat. So there’s just a lot going on out there and it’s not good and it’s not conservation-minded. So unless the attitude of, ‘We should kill, kill, kill as much as we can, as quick as we can, changes ... the fight will keep going.’” Butler said he believed the people who spearheaded the effort to ban set nets in certain areas of the state would continue their fight. “I am under no illusion that the people who have promoted this (ban) are done by any stretch of the imagination. I just don’t see that,” Butler said. “It’s no news to anybody that there’s a few influential people who see this (ban) as a very important part of their life’s mission or their view of the world.” Despite his frustration with the set-net fishery, Connors said he saw promising changes being made by commercial set net fishermen in the Cook Inlet. He referenced large operations — like Gary Hollier’s family sites where more than 20 nets are typically in the water, or Greg Johnson’s family sites where 18 nets are typically fished. Both families cut nets on some or all of their sites to shorter depths in 2013 in an effort to reduce harvest of king salmon. Connors also spoke highly of Brent Johnson, who owns another large family operation in Clam Gulch, and Brent Johnson’s “selective harvest modules,” which are designed as a type of fish wheel that, in theory, allows Johnson to keep fish alive long enough for him to release those he did not intend to target. Connors said he is encouraged by those efforts to change the way set net fishermen target salmon. Many fishermen said they hoped a more fruitful dialogue between user groups could happen now that the threat of a ban had been lifted. Snug Harbor Seafoods Co-owner Paul Dale, president of the Alaska Salmon Alliance — a fisheries trade organization representing seafood processors and commercial fishermen on the Kenai Peninsula — said it had been difficult to have constructive conversations with users who wanted to abolish his way of life. “Who wants to negotiate when someone is holding a gun to your head? It really stymied dialogue between commercial and sportfishing,” Dale said. Connors said negotiations between the two groups had been difficult long before the initiative process began. “Now it’s gone, it’s gone. Now it’s not looming,” he said. “But that was out of frustration. We were totally frustrated in a sense because of what we were seeing. We were seeing incredible killing of king salmon. (Set netters would say), ‘Well, we’re allowed to kill all of those,’ and yes you are, but it’s not your money fish. Why not develop an incredibly efficient sockeye fishery and do everything you can not to kill the other fish? I think there will still be fish wars because what I’m thinking now is that (the decision) will only cause (set netters) to become more aggressive because they just won.” Despite their misgivings, Connors, Dale and Butler all said they hoped more normal dialogue could resume among competing user groups in the Cook Inlet. “We are so fortunate and so blessed to have this tremendous resource, the notion of a war is appalling if you think about it,” Butler said. DJ Summers can be reached at [email protected] Rashah McChesney can be reached at [email protected]

ADFG insists studies were used despite going unpublished

Use it, then lose it, was the fate of a long-delayed Kenai River habitat study until the Alaska Department of Fish and Game finally published it last fall. A 14-year publication delay on a Kenai River habitat study has made ripples through ADFG and the Cook Inlet fishing sphere as officials have acknowledged that taking so long to finalize the report was a mistake but insist they still used the report’s recommendations in management plans. Some commercial fishing stakeholders have alleged the report’s delay was politically motivated because it found adverse impacts to habitat caused by shoreside angling, while ADFG maintains it was a simple lapse. “It’s not uncommon for reports to get stacked up,” said ADFG Commissioner Sam Cotten. “There’s no knowledge of holding back information or anything other than a tardy report.” Cotten also dismissed speculation that Gov. Bill Walker had learned of the report and ordered its publication. “He would have had to act through me to do that, and that certainly didn’t happen,” said Cotten, who had a briefing from ADFG division directors prior to an interview with the Journal. Walker’s office also denies he had anything to do with the report being published. The study was part of a series that produced five annual reports from 1997-2001. Those between 1997-99 were published within the usual one- to three-year range, but the 2000 and 2001 studies weren’t published until October 2015.  The series was born into a tense political situation around the Kenai River’s user groups — commercial, sport, and personal use. Throughout the 1990s, the Board of Fisheries had been slowly changing Kenai River management plans for the growing sport fishing sector, partly instate and partly tourist driven. At the 1996 Board of Fisheries meeting, the board boosted the sockeye salmon share and slackened bag and possession limits for the in-river sport fishery and personal use fishery at the Kenai River’s mouth. The department and board said they would rethink liberalizations if there were evidence sportfishing contributed to habitat damage. According to the study’s authors, Mary King and Patricia Hansen, the 1997, 1998, and 1999 studies were less precise than the unpublished 2000 and 2001 studies. The cleaner data showed linkages between shore-based angling and riparian habitat degradation. King and Hansen presented the information at the 2002 Board of Fisheries meeting, which Hansen said partially explains the length of the publication delay. Ironically, with the best data having been already presented to the board, publication took a backseat to management. “People felt that that data had been put our there,” Hansen said. “That’s why it took so much longer. We had been improving our methods all along. Our data was less noisy. It was just better data towards the end.” Hansen and other ADFG biologists said the report moved to the bottom of the pile and stayed there. Department staff moved around or retired, so the report didn’t receive continual pressure for publication. Knowledge of the report’s delay surfaced at the Board of Fisheries’ 2014 Upper Cook Inlet finfish meeting. Lisa Gabriel, administrative assistant for commercial fishing industry group Kenai Peninsula Fishermen’s Association, submitted a statement to the board asking why the board had not completed any further habitat studies. Gabriel’s insistence prompted the department to move the report forward for publication. “We did want to get this out of our hair,” said Hansen. “It shouldn’t have taken that long, it was a bad thing on our part.” Forrest Bowers, director of ADFG’s Commercial Fisheries Division, said he’s familiar with the King and Hansen study. Bowers’ feelings on the report’s 14-year publication delay are mixed. ADFG often shelves studies; however, he said that betrays an obligation the department has to the public. “If we undertake a report or a study, it’s our intention and our obligation to the public to publish it for peers,” Bowers said. “But sometimes the timelines do get drawn out. I’ve been involved with reports earlier in my career where it took several years to get those reports out for one reason or another.” While he recognizes the need for timely publication, also knows studies can impact policy without being formally published. “Just because a report hasn’t been published, doesn’t preclude us from acting on any of the findings,” he said. The department maintains that the 2000 and 2001 studies weren’t published because the concerns were already beginning to be addressed. ADFG biologists said the department regularly considers habitat, and that the delayed reports don’t represent the totality of effort put into protections. “Everyone is aware of habitat issues,” said Hansen, who still works as a statistician for ADFG. “That’s just something everybody works with in mind. No habitat, no fish.” ADFG chief fisheries scientist Jim Hasbrouck said he couldn’t remember specifically which programs the department began as a result of the study. Habitat restoration projects were ongoing at the time and hard to tie to one origin in particular. “I don’t know that walkways were in specific response,” said Hasbrouck, referring to structures along riverbanks that were constructed to preserve habitat. “I think some of that was just a recognition that things like bank restoration projects would be good for the environment. There were stream bank closures that were done prior to 2001. I don’t know that there are specifics in Mary’s report, but there is a relationship there. It did provide information to the board.” According to Robert Begich, ADFG’s Kenai River area sportfishing manager, the department had already begun implementing some of the report’s recommendations by the time it was presented to the Board of Fisheries in 2002. “There’s a whole bunch of studies that aren’t published,” said Begich, “but the information is still used. Some of the properties the project was working on were closed. River Mile 25 was in the study, it’s a habitat closure now.” Begich said other habitat-related studies in the area were similarly used without publication. A study on Slikok Creek riparian habitats in the early 2000s wasn’t published, but ADFG nevertheless installed a recommended culvert in 2006. Continual water quality and habitat studies prompted the department to ban two-stroke engines in the Kenai River Special Management Area in 2008 along with assorted horsepower and length restrictions for powerboats. “These reports are all still germane to how the river is managed today,” Begich said. Unpublished scientific papers, called “gray literature,” are a divisive issue within the academic community. Without peer review, some question whether the studies meet the strictest scholastic muster. Former ADFG biologist Ken Tarbox said the delayed publication is evidence of ADFG shaving become less transparent. “They’re missing the purpose of science,” Tarbox said. “Science is supposed to put your information out there reviewed by peer reviewers and other scientists.” Even if ADFG uses the information in gray literature, Tarbox said the department does a disservice by ignoring the rest of the scientific community. “There are errors of omission,” he said. “You’re assuming you know everything that needs to be done, which is very arrogant.” DJ Summers can be reached at [email protected]

MEA says economics of single transmission co. overstated

Matanuska Electric Association is questioning the benefits of transferring regional transmission infrastructure to a single utility. In a Dec. 29 letter to the Regulatory Commission of Alaska chair T.W. Patch, MEA General Manager Joe Griffith cited eight reasons why the Southcentral electric utility believes forming a Railbelt electric transmission company could be unnecessary and possibly add costs to participating utility ratepayers. Among the issues raised by MEA is the utility’s belief that a $903 million estimate for needed performance and reliability upgrades to the Railbelt electric system is a “grossly inflated number,” the letter states. The hefty sum is based on reliability standards that don’t return a justifiable value, according to Griffith. He said in an interview that all the Railbelt utilities — there are six — could reap significant benefits from as little as $50 million invested strategically. “The ($903 million) study was done properly for the boundaries and conditions they studied it under,” Griffith said. “It isn’t a bogus study; it’s probably right, but the first question you have to ask is, ‘Do we need it?’” The Alaska Energy Authority commissioned the 2013 study that came to the $903 million conclusion. It was based on a single-loss contingency standard, known in the industry as N-1, meaning the entire Railbelt electric transmission system, from Fairbanks to Homer, would be able to absorb the loss of a single transmission line or substation without consequence. The authority is currently updating that study to include double contingency and status quo costs; that study is expected in March. MEA uses an N-1 standard in its system, Griffith said, and his letter noted that while system-wide planning for a single contingency is prudent, the utilities have consistently determined the cost of reliability improvements is not justified. The 173-mile, state-owned transmission intertie is a single line between Willow and Healy, and a lone connection ties Anchorage to the Kenai Peninsula. Adding redundancy to the interties would allow for the cheapest power to flow freely and continuously, but because each utility has its own generating capacity, improved reliability is not imperative. The utilities are working to finalize a set of system-wide reliability standards that will go a long way towards determining what level of contingency planning will be used where, according to MEA representatives. Griffith concurred with other experts in the field when he said loosening access to Bradley Lake, the 120-megawatt state-owned hydro project near Homer, is the Railbelt’s most pressing need. A lone upgrade of the single-line intertie between Anchorage and the Kenai Peninsula from the decades-old 115-kilovolt line to a 230-kilovolt line would de-constrain Bradley Lake and add needed capacity to the transmission system, not unnecessary reliability, he said. Griffith ballparked a southern intertie upgrade cost at about $50 million. AEA has estimated that full investment to add capacity and reliability to the system could save Railbelt ratepayers between $80 million and $240 million per year simply by accessing the lowest cost power through economic dispatch. MEA contends those cost savings are unsubstantiated. The RCA demanded the Railbelt utilities move to establish a united electric system last June. In a letter to legislative leadership, the commission stated it would seek the authority to mandate the utilities to take action if they failed to heed the warning on their own. In December 2014, American Transmission Co., or ATC, a Milwaukee-area transmission-only utility, inquired about the possibility of developing a Railbelt transmission company to spur investment in the system. The utilities ultimately signed a memorandum of understanding with ATC to investigate the feasibility of a Railbelt transmission company, or TRANSCO. A TRANSCO would centralize management of the transmission system and allow participating utilities to invest in, and thus benefit from, projects across the system, not just those in their service area. ATC has experience with the TRANSCO model and would provide access to capital through its Lower 48 investors. The utilities expect to apply for a license to form a TRANSCO in the third quarter of this year, according to a Dec. 22 update report to the RCA. Griffith also noted that adding another utility with its own workforce and rate of return to the Railbelt could actually increase costs to ratepayers. The progress report to the RCA estimates the net cost of a TRANSCO would be about $7 million per year once it is fully up and running. Beyond operational costs, a for-profit TRANSCO would also require a rate of return — another cost to ratepayers, Griffith said. ATC spokesman Eric Lundberg said the company currently earns a 12.2 percent return on its Midwest business, but added that the Federal Energy Regulatory Commission regulates any return in the Lower 48. Similarly, the RCA would set profit parameters for an Alaska Railbelt TRANSCO, Lundberg noted. ATC operates like most utilities in that it seeks long-term business, understanding its return will ebb and flow with market conditions and regulations, he said. “We don’t look to flip investments; we look to be there,” Lundberg said. The “weak link” of a TRANSCO is the inherent incentive to invest in infrastructure because each investment makes a return, Griffith said. A major selling point of a TRANSCO has been the prospect of a single transmission tariff across the Railbelt — the elimination of “rate pancaking” for power producers needing to cross multiple utility service areas to get power to a buyer. Independent power producers have argued the stacked transmission tariffs are an economic barrier to developing low-cost renewable energy in the state’s most populated region. Griffith said a postage stamp tariff would simplify the cost, but is not likely to lower it for everyone because each utility has a different tariff rate. The transmission tariffs are set by the RCA to allow the utilities to service debt on their transmission infrastructure. “You’ve got to recognize the legacy investment each utility has made. If you don’t do that it’s a dead-bang loser,” he said. Turning over transmission infrastructure to a TRANSCO through a lease or direct change of ownership also provides a disincentive for local reliability investments, according to Griffith’s letter to the RCA. “MEA members could be faced with bearing the burden of both the total cost of their own future transmission improvements while subsidizing the system-wide legacy assets largely serving the retail loads of others,” the letter states. System operator benefits MEA’s concerns about forming a TRANSCO do not mean the utility is averse to changing the structure of the Railbelt electric network. Organizing an independent, or unified, system operator, often referred to as an ISO or USO, along with transmission capacity upgrades, would reap the greatest benefits of economic dispatch without adding unnecessary costs, according to MEA representatives.  “(A system operator) is where all the money is because that lets you maximize the efficiency of the (generating) machines as well as the gas contracts and that’s got to be folded into all this because that’s millions and millions of dollars annually,” Griffith said. Southcentral utilities relying on Cook Inlet natural gas as their generating fuel source sign contracts with producers that have a tiered pricing structure — typically base load, swing load and peak load. When demand peaks a utility can pay a 50 percent to 65 percent premium for natural gas. In theory, a system operator acting as a central power dispatcher would work to distribute as much base load power as possible, regardless of which utility owns the generation. MEA spokeswoman Julie Estey said the new, more efficient power plants coming online in the Railbelt — Municipal Light and Power and Chugach Electric Association’s joint Southcentral Power Plant and MEA’s Eklutna Generating Station — have already started this coordination between the utilities in an informal “loose pool.” For example, the 10 small generators that power the 171-megawatt Eklutna Generating Station can be powered up and down to meet fluctuating demand more efficiently than some of the larger gas turbine generators at other power plants in the region, Griffith said, so the utilities purchase power amongst themselves without a structured agreement. MEA’s vision of a system operator would have each participant represented on a board of directors, with board seats for independent power representatives as well. Alaska’s independent power producers often contend that the utilities control the Railbelt system and have pushed for a system operator to make dispatch decisions separate from the utilities. Estey, of MEA, said other issues the independent power producers raise with the utilities, such as who pays for interconnection fees to independent power sources, would likely be solved with a system operator. “It seems to me there has been more unified support (from the utilities) around a system operator, but ATC has been doing such a good job of driving the utilities around the TRANSCO model that that seems to be making more progress and has more legs, but that’s because more resources have been put into it,” Estey said. Elwood Brehmer can be reached at [email protected]

After flooding, work continues to re-bury TAPS

Flooding of the Dalton Highway last spring caught a lot of attention, mainly because the vital road link to the North Slope oil fields was cut off for days. Hundreds of trucks delivering supplies and equipment were backed up and delayed. What got very little, if any, attention was that washed-out areas nearby exposed buried parts of the Trans-Alaska Pipeline System to the open air and moving water. There was never any danger to the integrity of the pipeline, Alyeska spokeswoman Michelle Egan said. However, it was something Alyeska had to respond to right away. In places, the gravel overburden and pipe insulation were washed away along with a gravel workpad that runs nearby. “The waters started to recede in June, and our baseline (contractor) folks started work immediately on moving ice, repairing access roads and cleaning up debris,” said Shaune O’Neil, Alyeska’s manager on the project. “Before work could start in August, we had to have survey crews locate and identify and map the damaged areas, and do some engineering work to facilitate the more complex repairs.” After the initial steps, work was started on the long-term fix but that has turned out to be a big challenge for Alyeska and its contractors, and it still isn’t finished. Flood repair operations had to be shut down in early December because a continuing flow of water proved difficult to manage. Work is scheduled to resume in February when the winter freeze sets in, which should diminish the water flow, O’Neil said.   The problem area, which also affected the Dalton Highway, was in the areas south of Deadhorse, the industry-service center for Prudhoe Bay and other oilfields, and there were two separate flooding events. An earlier flooding, in March, pushed large ice sheets, six to twelve feet thick, out of the Sagavanirktok River onto the road and blocked traffic. The ice created dams for the water, which compounded the early spring flooding. The ice was cleared away but the normal spring “breakup” a few weeks later brought more flooding, closing the road again and covering about 600 square miles of tundra lands mainly south of Deadhorse, O’Neill said. In the second flooding, in May, five feet of ground cover over the pipeline was washed out, exposing the pipe in six locations, with the longest stretches exposing 23 feet and 40 feet of pipe. Alyeska had to respond quickly but also in a measured way, O’Neil said. “We can’t just throw gravel on top of the pipeline. We must do a careful assessment, checking to make sure the pipe coating and the pipe weren’t damaged, along with the pipeline’s cathodic protection,” she said. That meant excavating around sections of pipe to a level below the pipeline, with the longest section being 80 feet. “We had to go two feet below the pipeline and to build side slopes, and since the pipeline was buried at five feet below the surface at these points it meant we had to excavate a trench to the 11-foot level,” before the pipe inspections could be done, O’Neil said. Most of the work was scheduled to be done in the fall through September, October and November, but the continued rush of groundwater complicated and slowed the project even with the 24-hour operation of two 10-inch pumps that were dewatering the trench. “The conditions were very challenging,” O’Neil said. “We had to do the excavation, check the tape wrap (around the pipe) and if the pipe was exposed we had to sand-blast down to bare pipe, do an ultra-sound inspection to ensure the pipe integrity, and then recoat the pipe.” It wasn’t just the main pipeline, either. Work had to be done on the small fuel gas line that runs parallel to the oil pipeline from Prudhoe Bay to Galbraith Lake, in the southern foothills of the Slope. The origin of the water was only partly the river. There was also unexpectedly high groundwater seeping in. “There are a lot of small tundra lakes in this area and we believe that damage and surface erosion from the flooding changed the hydrology,” O’Neil said. If the excavations and inspections were challenging, cleaning up all the broken pieces of insulation left scattered across the tundra by the flood was a labor-intensive nuisance, but it had to be done. Gravel also had to be back-filled around three vertical support members, or VSMs, that hold nearby above-ground sections of pipeline, but there was no damage, O’Neil said. Alyeska mustered four contractors to deal with the problem, with Athna Construction, subsidiary of Ahtna Inc., an Alaska regional Native corporation, handling some of the most difficult work, O’Neil said. Other firms mobilized were Houston Contracting, which is owned by Arctic Slope Regional Corp.; Price Gregory and Hamilton Oilfield Services, she said. Ahtna Construction, Houston Contracting and Price Gregory are under long-term service contracts with Alyeska, and Hamilton was added to the mix. They also needed a lot of material (gravel and rock) so Brice Construction, which was also working for the state on the Dalton Highway repair, was able to open a new gravel pit for both gravel and sand, and also to bring larger rock from a source near Atigun Pass, in the mountains south of the Slope. Hamilton’s part of the project was in mining and moving gravel and rock. O’Neill said the project required extraordinary coordination and cooperation among contractors who are also competitors for work on TAPS. The companies do specialize, however. Ahtna has been doing main-line inspections and repairs for TAPS for several years and has a lot of experience in that area, O’Neill said, and Houston and Price Gregory also do pipeline integrity work but Price Gregory also had to take on civil work, which it ordinary does not do, O’Neil said. There easily could have been resentment within these companies because they may not have gotten as much of the work as desired, but there was none on this job, she said. “People really stepped up to the plate,” she said. Through early December Alyeska and its contractors expended 48,000 man-hours of work, moved about 50,000 cubic yards of gravel; 10,000 cubic yards of large rock and 350 cubic yards of sand. Ahtna mobilized Aug. 29 and demobilized Dec. 9. Price Gregory mobilized Aug. 26 and demobilized Oct. 30. Houston is under a continuing maintenance agreement for the pipeline, so its crews were already mobilized. However, it isn’t yet complete. Tim Bradner can be reached at [email protected]

Support for using investment earnings, taxes after cuts

The idea of using a potion of Permanent Fund earnings to narrow the huge state budget gap is gaining traction in the Legislature. Two Senate leaders, Senate President Kevin Meyer, R-Anchorage, and Resources Committee Chair Sen. Cathy Giessel, R-Anchorage, say some way of using investment earnings has to be part of the equation, although both say additional spending cuts should come first. The Standard & Poor’s downgrade of Alaska’s credit rating issued Jan. 5, which also affects ratings of Alaska municipalities, will add momentum in getting consensus on at least the first step in solving the fiscal issue, which is use of investment earnings. Earnings of the Permanent Fund have been increasing in recent years in sharp contrast to oil income, which has declining sharply with the drop in crude oil prices. The principal of the Permanent Fund, now about $53 billion, cannot be spent, but the earnings, typically about $3 billion a year, have always been available for appropriation. Meyer was earlier reported to be asking for a state sales tax bill to be drafted but he said he has no intention of introducing the idea. “I’m not thinking of introducing anything (like a sales tax), but it may get to a point, after budget reductions, that we have to consider new revenues,” Meyer said. “I don’t like any form of tax but if it comes to it we have to have all options on the table, because we’ve got to do something.” Giessel said, “Overall, I’m on board with using Permanent Fund earnings. That’s why we created the Fund. Using investment earnings won’t cover the entire $3 billion to $4 billion budget gap but it will provide a start.” Giessel said the revenue and budget situation has become “much more dramatic,” in recent months. “Something has to be done. I agree that cuts have to be made, and we need to do that first, but at the same time we can’t make decisions that will decimate the private sector,” she said. She cited the debate over petroleum industry development incentive tax credits as an example of where unwise cuts could have very adverse consequences. “If we eliminate these completely we’ll be paying the price in five or seven years when the oil that would have been produced by new projects won’t be there,” Giessel said. As Senate Resources chair Giessel is chairing a working group of legislators probing the tax credit issue. Meyer said, “I think we will still have to rely on savings to cover parts of the deficit this year but we should also go toward some use of Permanent Fund earnings, either the governor’s strategy (laid out in a plan issued recently) or Sen. (Lesil) McGuire’s plan,” introduced last session. “This would be a way of bringing in some substantial revenues, after spending cuts, and we should look at this (revenue option) first before we go to a tax.” Meyer described an email sent to other senators on the sales tax, and reported in the press, as “internal,” and more aimed at starting the discussion than an endorsement of the idea, although it quickly leaked. Meyer said the idea of tapping Permanent Fund earnings was seriously considered by the Senate Majority last year when the Legislature was stalled over budget negotiations with the House minority Independent Democrat caucus, who had balked at providing votes needed to tap the Constitutional Budget Reserve, the state’s main savings account. Meyer said members of the House Majority supported the idea, “but Speaker (Mike) Chenault wasn’t sure he had all the votes needed.” A dissident group of House Republicans had signaled they would oppose it, complicating things for Chenault. “They called themselves the ‘Musk Ox group,’ over those animals’ trait of gathering in a tight, protective circle when a threat loomed,” Meyer said. Gov. Bill Walker has put forth a package of measures that would largely close the fiscal gap if they were all adopted. It includes a modest $100 million reduction of state general fund spending, a “replumbing” of the way oil royalty income flows, diverting it to the Permanent Fund and the annual dividend, a package of tax increases on businesses including the oil industry, and a personal income tax. One indirect effect of Walker’s proposal on the dividend would be to reduce it by half, approximately, compared to what it would otherwise be in 2017. Rep. Andy Josephson, D-Anchorage, a member of the House minority, said there is some concern in his caucus because the governor’s income tax in that it is not progressive enough and would be if it meshed more closely to the federal income tax. Also, any reduction of the dividend would be felt disproportionately by low income Alaskans, he said. If broad-based taxes are considered, the revenue impacts of different options vary. A personal income tax like that introduced by Rep. Paul Seaton, R-Homer, last year, in House Bill 182, would generate about $655 million to the state treasury and the tax would be deductable from federal personal income taxes. Also, 20 percent of the tax receipts would come from nonresident Alaskans who are working in the state, according to a revenue options white paper put together by the Department of Revenue in mid-2015. The tax would have little impact on low-income Alaskans, the Revenue Department said. A 3 percent statewide sales tax would bring in about $418 million. If food is excluded from the tax, which is a typical exemption, revenues to the treasury would be reduced by about 15 percent, the analysis said. Part of the tax would be paid by nonresidents, such as tourists, but a sales tax would also disproportionately affect lower-income Alaskans. Other effects of a sales tax are that if it is imposed on top of a municipal sales tax, and many Alaska cities and boroughs already have sales taxes, it would result in a high combined tax that could encourage more purchases made out of state. On the other hand, two of Alaska’s largest cities, Anchorage and Fairbanks, do not currently have sales taxes. Two business groups, the Anchorage Chamber of Commerce and Fairbanks Economic Development Corp., have endorsed a sales tax over a personal income tax, and also favor some use of Permanent Fund earnings, the groups said in separate announcements. Tim Bradner can be reached at [email protected]

AJOC EDITORIAL: Time for Penney to drop vendetta against setnetters

Bob Penney is now 0 for 2 at the Alaska Supreme Court in his efforts to reallocate Cook Inlet salmon stocks at the ballot box, but he’s not giving up the fight against commercial fishermen. It’s past time that he did after some three decades of dividing the community with his nonstop efforts to drive his neighbors out of business and turn the Kenai River into his personal playpen. After the court emphatically rejected his ballot initiative that would ban setnetting from Cook Inlet beaches on Dec. 31, Penney released a statement that, “Maybe it’s time the federal government looked into this issue.” Later, Clark Penney, the executive director of the Alaska Fisheries Conservation Alliance started by his grandfather to push the initiative back in November 2013, said the group is looking into pursuing an Endangered Species Act listing for Kenai River king salmon. Anyone can petition for such a listing, but AFCA will have no better luck with the ESA than it had at the Alaska Supreme Court. Abundance of the late run of Kenai River kings is no doubt at a low point, but the stock has never failed to meet its escapement goal and in fact returned in strong enough numbers to allow all user groups more liberal harvest opportunity in 2015. The early run of Kenai River kings, on the other hand, has failed repeatedly in recent years to meet minimum escapement goals and was closed to all sportfishing in the past two years. Notice it hasn’t been closed to commercial fishing. That’s because commercial fishermen haven’t been in the water during the early run for decades as the stock abundance cratered under heavy pressure from the guided angler industry. That’s something Penney and his like-minded friends don’t ever talk about because they can’t blame it on commercial fishing. Oh, but they can spin a fish tale, though, and never was Penney’s win-at-all-costs mentality more evident than last legislative session when his advocacy outfit led a misleading smear campaign against a well-respected member of the Kenai Peninsula community who’d been nominated to the Board of Fisheries. The successful effort by the Kenai River Sportfishing Association to defeat Soldotna habitat advocate Robert Ruffner by a single vote based on a made-up criteria about not living in Anchorage and a ridiculous accusation that he was some kind of Manchurian candidate of the commercial fishing industry was the last straw for many in the community who saw his candidacy as an opportunity to break up what had become a polarized board dominated by factions instead of facts. KRSA, which is based in Soldotna, claims to be a conservation organization. The words “Kenai River” are in its name. Yet they waged a public relations war against a neighbor and conservationist despite his widespread endorsements from the local legislative delegation, municipal governments, and chambers of commerce. And they won, as they often have in the Cook Inlet fish wars they keep fueling. A similarly dishonest campaign was waged two years earlier, and succeeded in getting board member Vince Webster booted by an identical 30-29 vote. At both the 2011 and 2014 Upper Cook Inlet meetings, KRSA was able to essentially write the management plan for the Kenai River. In 2011, the group’s proposal severed the historical split between setnetters and drifters, turning what had typically been a 50-50 ratio into a 2-1 gap amounting to millions of dollars in reallocation. In 2014, KRSA was able to go further, getting the board to adopt a plan that removed almost all discretion from the day-to-day fishery managers in favor of the arbitrary hours and so-called “paired restrictions” designed to render setnetting uneconomic. One of the most damaging provisions KRSA was able to push through was a rule that after Aug. 1 the Department of Fish and Game must still restrict commercial fishing if the king salmon escapement is projected to be less than 22,500. That is the mid-point of the escapement goal, or 50 percent above the minimum. Last year, with the king salmon escapement goal ensured of being met, the sockeye run showed up in force at record late dates, and millions of dollars worth of fish went unharvested in August because of a rule in the management plan that has no basis in science but instead reflects the political muscle of KRSA to get what it wants at the Board of Fisheries. Penney couldn’t influence the Supreme Court with campaign donations and a Kenai River Classic perk package, though, and this time he’s going to have to take “no” for an answer. Andrew Jensen can be reached at [email protected]

FISH FACTOR: Annual best and worst of the past year in state fisheries

2016 marks a quarter of a century for this weekly column that targets Alaska’s seafood industry. At the end of every year, I proffer my “no holds barred” look back at the best and worst fish stories, and select the biggest story of the year. The list is in no particular order and I’m sure to be missing a few, but here are the Fishing Picks and Pans for 2015: Most eco-friendly fish feat: The massive airlift/barge project led by the Department of Environmental Conservation that removed more than 800,000 pounds of marine debris from remote Alaska beaches. Best new fish service: “Print at home” fishing licenses (and more) by the Alaska Department of Fish and Game. Biggest fish fake: Genetically modified salmon — Frankenfish Best fish financial potential: Mariculture for more shellfish, sea “vegetables” —shrimp? Worst fish kick the can: The Department of Natural Resources’ stall on a salmon vs. coalmine water rights decision at the Chuitna watershed in Upper Cook Inlet. DNR awarded a small reservation to protect salmon while allowing more time for PacRim coal to prove that building Alaska’s largest coal mine won’t hurt salmon and the ecosystem. Biggest fish raised eyebrows: Pacific Seafoods Processing Association among the appellants in a lawsuit against DNR’s decision to grant water reservation rights for the first time to a private entity, the Chuitna Citizens Coalition (See above) Biggest fish hurry up: Electronic Monitoring Systems to replace fishery observers on small boats. Not much extra bunk space on a 40 footer. Biggest fish phonies: Kenai-based sportfish enthusiasts bankrolling an effort to ban setnet gear in “urban” areas in the name of conservation. Their claims that setnets are an “outdated gear and devastating, indiscriminate killers” ignore 10 years of ADFG data showing that 99.996 percent of setnet harvests is salmon. Best fish quick fix: The JDBeltz, by Anne Morris of Sand Point — a horizontal Vicky knife holder that prevents leg pokings. Best fish sigh of relief: Federal fish managers allowing the use of pots, instead of longlines, to catch black cod. The gear shift prevents whales from stripping the pricey fish from hooks, leaving only the lips. Fishermen call it “getting whaled.” Best fish visionary: Tidal Vision LLC of Juneau, for their eco-friendly method of extracting chitin from crab shells, a first in the USA. Uses for chitin range from fabrics to pharmaceuticals and are too numerous to mention. Best fish fighters: The Genuine Alaska Pollock Producers, or GAPP, for fighting tirelessly to get tasty, “kid approved” fish meals into school lunch programs, and for getting the pollock name corrected on federal food lists to guarantee the fish is top quality. Best fish energy booster: Bob Varness of Juneau for the first in the nation electric powered passenger boat, the E/V Tongass Rain, set to be out on the water doing eco-tours this summer. Next up: all electric fishing boats. Best fishing career builders: University of Alaska/Southeast, Kodiak College for low cost courses in vessel hydraulics, electronics, maintenance and repairs, fish technicians and more — most are available on-line; Alaska Sea Grant’s Marine Advisory Agents. Best Fish Givers: SeaShare, on its way to donating 200 million fish meals to food bank networks since 1994. Trickiest fishing conundrum: Sea otters vs. crab and dive fisheries in Southeast Alaska. Best fish boosters: Juneau Economic Development Council for ramping up visibility of the local fishing/processing sector, and envisioning big opportunities in mariculture and fish “co-products.” Fondest fish farewell: Ray RaLonde, who retired from Alaska Sea Grant after decades of creating and nurturing the state’s fledgling mariculture industry. Best fish informer: Julie Speegle, Communications Director, National Oceanic and Atmospheric Administration Fisheries/Juneau Saddest fish story: The sudden and untimely death of Greg Fisk, fisheries advocate and newly elected Juneau mayor. Most earth friendly fishing town: Kodiak, which generates nearly 100 percent of its electricity from wind and hydropower. Kodiak also turns its fish wastes into oils and meals at a “gurry” plant owned by local processors, and the city plans to turn its sludge water into compost. Best fish gadget: SCraMP iPhone app with vessel stability indicators. It’s free. Most encouraging fish pols: Rep. Louise Stutes, R-Kodiak, Rep. Jonathan Kreiss-Tomkins, D-Sitka Scariest fish story: ocean acidification. The corrosion of crab/scallop/oyster/snail shells is documented and happening fastest in Arctic waters. Biggest fish brush off: Alaska’s Congressional delegation, which has voted to tank every climate change/clean air/clean water measure that has come before Congress in favor of fossil fuels. No comments on the 200+ nation climate accord in Paris. How will that play in Kivalina? Best fish to kids project: The fabulous Fish to Schools Resource Guide by the Sitka Conservation Society. Best fish ambassadors: Alaska Seafood Marketing Institute, or ASMI. Best global fish story: The U.S. and other nations cracking down on Illegal, Undocumented and Unreported, or IUU, catches by fish pirates—more 20 percent of the global fish harvest. Best daily fish news site: Seafood.com; Pacific Fishing Magazine’s Fish Wrap Best fish watchers: Trustees for Alaska, Cook Inletkeeper Best new fish writer: DJ Summers, Alaska Journal of Commerce Best fish economists: Gunnar Knapp, ISER; Andy Wink, McDowell Group Worst fish travesty: Halibut catches for commercial and sport users slashed every year while fishing fleets take millions of pounds as bycatch. It’s getting better, but still a long way to go. Best fish assists: Every person at ADFG and NOAA Fisheries offices in Alaska. Best go to bat for fishermen/fishing towns: Alaska Marine Conservation Council, for its Caught by Alaskan for Alaskans programs which aim to expand statewide. Most ambitious fish dilemma: The plan to reduce bycatch in the Gulf of Alaska, which will include apportioning 25 different types of groundfish among all user groups. Tastiest new family fish products: Trident’s Ultimate Fish Sticks, Pickled Willy’s Smoked Black Cod Tips Best fish partnership: Golden king crabbers and state biologists teaming up to do the first stock surveys that span 800 miles along the Aleutian Islands Best fish show offs: Alaska Symphony of Seafood, hosted for 23 years by the Alaska Fisheries Development Foundation. Biggest fish story of 2015: 50 cents for reds at Bristol Bay and a nearly 70 percent drop in Alaska salmon prices across the board. The perfect storm of adverse global currencies, big inventories and record U.S. imports of farmed salmon could stoke a similar trend in 2016. Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

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