DJ Summers

Sockeye output blows previous seasons out of water

For the third season in a row, the world’s largest sockeye salmon run featured above-average numbers, a late run, and sub-average prices for the fishermen. Unlike last year, however, the fishermen’s pockets so far aren’t as empty in 2016, and the overall market outlook seems to have improved. In terms of output, the summer of 2016 blew previous sockeye seasons out of the water, second only to last year's run of 59 million. “The 2016 inshore Bristol Bay sockeye salmon run of 51.4 million fish ranks 2nd out of the last 20 years (1996–2015) and was 46 percent above the 35.1 million average run for the same period,” according to a season summary from the Alaska Department of Fish and Game. Along with being above average run, the 2016 Bristol Bay sockeye harvest surpassed ADFG forecasts. “The 37.3 million sockeye salmon commercial harvest was 26 percent above the 29.5 million preseason forecast,” the summary reads. “All escapement goals were met or exceeded, with a total sockeye salmon escapement of 14.1 million fish. A total of 29,545 chinook salmon were harvested in Bristol Bay in 2016.” The 2016 season repeated that of 2015 not only in quantity, but also in run particulars that made last year’s harvest so strange, including timing and fish size. “The 2016 sockeye salmon run timing was similar to 2015 as it was one of the latest on record, approximately seven days late,” reads the report. “Fish weights and lengths were smaller than the historical average with an average sockeye salmon weight of 5.4 pounds, but overall fish were slightly larger than 2015.” The ex-vessel price for the salmon — what processors pay the fishermen — was above the final price for the 2015 season but still 25 percent below average. Processors paid 76 cents per pound for Bristol Bay sockeye. Only the run’s volume made contributed to the overall value’s health. ADFG estimates the ex-vessel value at $156.2 million, which is 40 percent above the 20-year average of $111 million. This marks the fourth and largest in a series of high volume years for Bristol Bay, part of a confluence of factors leading to depressed ex-vessel prices in 2015. In that year, fishermen received 50 cents per pound, half the average of 99 cents. The U.S. dollar’s strength against key export markets collided with oversupply for Alaska processors. Tyson Fick, communications director for the Alaska Seafood Marketing Institute, or ASMI, said this year’s situation differs, though some of market particulars are similar to last year. “Some of the same factors are still there like the value of the dollar, the strength of the dollar being difficult in export markets,” said Fick. “That alleviated somewhat in Japan, so that’s done well for us. Our marketing efforts were pretty successful in stimulating more demand to match that supply, and we should see a nice increase in domestic demand throughout the year as people bring on refresh programs nationwide.” ASMI is a collaboration between industry and the state to increase the value and markets for Alaska seafood. Fick said ASMI has aggressively focused on expanding domestic consumption over the last year, and the results have been paying off for processors looking to move stockpiled salmon. The U.S. Department of Agriculture also helped with a series of purchases of canned salmon, the last of which neared $6 million. “(Strategies) would include promotions that are very much focused on moving volume, partnered with retailers and distributors, and also the USDA canned salmon buys,” Fick said. “They’ve been trickling in pretty regularly over the last couple of years. There’s also interest in frozen portions. It’s a large customer. It’s millions of dollars. It goes a long way in correcting the market by using some of these programs that farmers have been using for years.” Alaska processors also had less supply to compete with from other sockeye producing regions, notably Canada’s Fraser River, which harvested far below average. “Places like the Fraser River, that just didn’t happen,” Fick said. “That’s big for us. That was part of the multi-year lead up to the prices last year, that huge batch of supply from the previous year in Canada on top of prices.” Tim Sands, the area management biologist for Bristol Bay’s commercial fishery, said despite the off timing and the fish’s small size, the 2016 sockeye run was successful for the overall health of the system. “The run timing being so much more protracted and later is definitely a twist that took some getting used to,” he said. “Biologically, all our escapement goals were achieved or exceeded. That’s the best we can hope for biologically speaking.” Fishermen themselves adjusted better than in 2015, when processors sent many fishermen home after the run passed its historical midpoint. In several Alaska fisheries, weird is the new normal, and in Bristol Bay the fishermen remembered to roll with it. “Certainly, industry was better,” said Sands. “They didn’t send their boats out too soon, there wasn’t the big stretch of limits we had in 2015. That made a big difference in what the escapements ended up being and what the harvest ended up being. I think the fishermen weren’t as surprised as they were in 2015 when things were so late.” Editor's note: This article ealier misstated that the 2016 Bristol Bay production surpassed that of 2015, when in fact 2015 was a higher volume. DJ Summers can be reached at [email protected]

Senate and House Judiciary Committees address hot topics related to marijuana

Welcome to the conversation, legislators. Senate and House Judiciary Committees called a joint informational meeting at the Downtown Anchorage Legislative Information Office on Sept. 14 to discuss the hottest and longest running topics in the Alaska marijuana industry: namely timeline, board politics, banking, unlicensed sales, and marijuana social clubs. The Legislature, which has been mostly absent from discussions surrounding recreational legalization, bowed under the weight of the state budget crisis. Cannabis issues have spun into larger problems as several necessary legal fixes went unaddressed by legislators, including marijuana social clubs and removing marijuana from the state’s list of controlled substances. During the meeting, members of the Judiciary committees expressed concern about some of industry’s complaints, mainly focused on difficulties in the licensing process and the struggle with federal laws that keeps banks out of the business. "I am pleased to see progress in moving the initiative forward," said Rep. Gabrielle LeDoux, R-Anchorage, chair of the House Judiciary Committee. "However, I am concerned that lack of staffing may be causing problems that may put unnecessary obstacles in the path of fledgling businesses and Alaskan entrepreneurs, thus impeding the will of the voters who passed the initiative." Legislators express support for marijuana consumption outside the home Social clubs were central to the conversation, including allegations of misconduct against Marijuana Control Board Executive Director Cynthia Franklin and broad support for the concept from legislators. Franklin and the Marijuana Control Board have struggled with how to address marijuana social clubs, which allow dues-paying members to consume personal cannabis on the club’s premises not to sell any product. The board decided in December 2015 that it has no authority to either ban or allow them, and asked the Legislature to do one or the other. The Legislature didn’t, and some clubs continued to operate. On Aug. 31, Attorney General Jahna Lindemuth issued an opinion at the urging of the Department of Community, Commerce, and Economic Development Commissioner Chris Hladick. The opinion argues that because marijuana social clubs qualify as a business, a place of amusement, and a place to which a substantial number of the public has access, they meet the definition of a public place and therefore are illegal under regulations barring public consumption. Rep. Charisse Millett, R-Anchorage, Sen. Lesil McGuire, R-Anchorage, and LeDoux each argued largely in favor of allowing some kind of venue for marijuana consumption, not only to give Alaska’s tourists a place to consume their products but to give Alaskans a place to consume outside their own homes, where they might not want to do so around children. Legislators’ disagreements with elements of the AG’s opinion mainly surrounded the way she interpreted the legal definition of a public place. LeDoux argued banning marijuana consumption in public carried a different intent than the AG interprets. “You’re outside,” she said. “You’re someplace that everybody can be, that you can just walk around in. I’m not sure these marijuana clubs meet that kind of public definition other than through the regulations. I’m troubled that the regulations are making the law rather than the Legislature making the law.” McGuire agreed and wants the Legislature to act on the issue. “I think this area needs to be cleared up in state statute,” she said. Schulte alleges ‘coercion’ against executive director Gov. Bill Walker fired Bruce Schulte as the Marijuana Control Board chair in July, but the commercial pilot said he “isn’t going anywhere.” Among other suggestions to committee about how to clean up board policies and regulations, Schulte testified that Franklin has not been transparent about earlier attempts to take action against marijuana social clubs. Schulte said that in late 2015 Franklin, who is also the director of the Alcohol and Marijuana Control Office, attempted to deny liquor licenses to individuals based on the owners’ involvement with marijuana social clubs. In one case, according to Schulte, she has tried to compel the eviction of Anchorage marijuana club Pot Luck Events through the liquor license process. Franklin only granted a liquor license to Pot Luck Event’s landlord, Robinson Garcia, for a party upstairs from Pot Luck on the condition that he and his attorney Dan Coffey planned to evict the club.  Franklin had already denied a liquor license at 440 W. 3rd Ave. in November for a concert. Garcia was told the alcohol board would not grant any liquor licenses to that address because Pot Luck Events is a tenant of the building. When Garcia filed for another liquor license for Dec. 26, 2015, Franklin granted the license, noting at the bottom: “approved only in light of ongoing litigation to evict illegal pot club still located in same building.” “It seemed to be denying that business owner a lack of due process,” Schulte said. He characterized Franklin’s actions as “looking like coercion.” “This is not the way to go about enforcing regulation,” he said. Franklin had left the meeting by that point and did not have the opportunity to respond. No eviction notice has ever been filed for Pot Luck Events. Neither Coffey nor Garcia have responded to email and telephone attempts by the Journal to contact them. In a January interview about the liquor license, Franklin said it’s her job to enforce marijuana law. In the absence of municipal or state police action against the club, she had to get creative. The state budget being what it is, she said, authorities may not have the resources to prosecute what they otherwise would. The fact that neither the municipality nor the state has taken direct legal action against Pot Luck Events does not mean the club is legal. “I understand that saying something is illegal and letting it go on looks counterintuitive,” said Franklin. “We can’t count on criminal law for everything. There are other ways to get rid of illegal businesses.” ‘Please don’t break our backs’ Franklin has long maintained that AMCO doesn’t have enough staff to answer questions, oversee licensing and enforce regulations against unlicensed parties. Testimony from industry representatives supported requests for more funding to help grease the skids for license applicants, but also criticized the process as expensive and red-taped.   Like industry, legislators wanted some explanation for timelines. “Are you, as far as the initiative is concerned, is the board where it’s supposed to be as far as issuing licenses?” LeDoux asked. “Yes,” Franklin said. “The idea of the timing…was to get a marijuana industry up and operational two years from the date. We will see a very rapid rollout of the other license types once the lab is operational.” License applicants, however, expressed concern with some of the more expensive particulars. Jana Weltzin, a cannabis business attorney, praised AMCO staff for their professionalism and agreed with Franklin’s call for more staff, but had a host of concerns about the complexities of the licensing process. Many of her clients have been paying leases for nearly a year, which is problematic for an industry when sales have not yet begun. Dual licensing between municipalities presents hundreds of thousands of dollars in compliance costs, and even state fire marshals don’t know how to proceed with marijuana buildings. “We are two years into this,” Weltzin said. “I just don’t understand how we can still not have an answer.” Weltzin said she understands the nuances of regulations but would appreciate solutions to streamline the industry’s sticking points. “We’re willing to bend over,” she said, “but please don’t break our backs.” In response, Franklin defended some of AMCO’s and the board’s policies, including the leasing issue, as necessary to ensure state control. “A lot of the applicants seem to be in shock that they asked for a regulated industry and now they’re getting a regulated industry,” she said. Legislators seemed to side with Weltzin. “Think of some ways where we could make this system of a little bit less cumbersome,” LeDoux told Franklin. “Think about that and maybe get back to me.” DJ Summers can be reached at [email protected]

Conference committee begins hearings on energy bill

The U.S. Congress began a conference committee on Sept. 8 to reconcile the first energy reform bills in a decade. Bipartisanship was the hope of the day, as disagreements between House and Senate versions ignite party line battles the GOP has fought with the White House. Alaska is well represented on the committee, with Sen. Lisa Murkowski serving as chair and Rep. Don Young as a committee member.  “Our task now, which our staffs began over the long recess, is to develop a final bill that can be signed into law,” said Murkowski in her opening statement to the committee. “That’s my goal here. My goal is to update our energy policies in this country and get a conference report, a bill that can be signed into law by the president.” The conference committee did not consider any bill text or amendments at the meeting, which took place during the first full week of session since Congress went into recess after the conference committee was set in July. Thus far a schedule has not yet been set for meetings. The Senate is expected to be in session through the first week of October, and the House through September. Staff level negotiations on the bill itself will be ongoing according to Murkowski’s Energy and Natural Resources Committee Communications Director Nicole Daigle. The bill — the first energy policy overhaul since 2007 and the first conference committee hearing on energy since 2005 — includes provisions for renewable energy production for wind, solar, hydro, and geothermal energy, and to ease Alaska’s oil and mineral development processes. The Secretary of Energy would have to decide on any liquefied natural gas export application within 45 days after completion of environmental review. Similar permitting revisions are included for mineral development. House additions by Young included provisions to curtail the recent U.S. Fish and Wildlife Service regulations assuming primacy over management in national refuges in Alaska, and ease the permitting process for Native energy projects. Democratic Party leadership has criticized the House version of the bill as being partisan enough to endanger the bill becoming law. In the House version, certain bill additions have attracted seven veto threats from President Barack Obama, including provisions to give more water rights to California farmers and to cut National Institute of Standards and Technology spending beneath the president’s request. Murkowski, who is the chairman of the U.S. Senate Committee on Energy and Natural Resources, implored the committee members to temper their individual needs to get the bill passed quickly and without friction from the White House. “I’m also here to listen to you: to your goals, your preferences, and your expectations. We all know that we are going to be down in the weeds on legislative text, so I want to quickly point to the big picture, so we won’t forget why we are here,” Murkowski said. “This is our chance to modernize our energy policy. It is our opportunity to update policies that have not been updated in nine years.” The Senate version of the bill passed that chamber by an 85-12 vote, a number often used to display the kind of bipartisan support Murkowski hoped for since taking the chair in 2015. “Even saying that, I don’t think it’s a perfect bill that we passed out of the Senate. But it was a very conscious decision to work jointly on a path that moves us forward, so I hope that this conference committee will do the same thing, because that is how we got great results,” said Sen. Maria Cantwell, D-Wash., the ranking minority member of the Energy and Natural Resources Committee. “I think all of us can agree that modernizing and securing our energy infrastructure is key to our nation’s competitiveness, particularly in a global economy,” Cantwell said. Murkowski chairs the conference committee that has six other senators: John Barrasso, R-Wyo.; Jim Risch, R-Idaho; Sen. John Cornyn, R-Texas; Cantwell; Sen. Ron Wyden, D-Ore.; Sen. Bernie Sanders, I-Vt. The House conferee list of 24 members includes Young; Energy and Commerce Committee chairman Fred Upton, R-Mich.; and Natural Resources Committee chairman Rob Bishop, R-Utah. DJ Summers can be reached at [email protected]

Unresolved legal issues, bans still loom for cannabis industry

Courts, cops, lawyers and the Legislature are each holding one piece of the Alaska cannabis puzzle that doesn’t yet fit together. The industry is partially divided over how to deal with a rash of unlicensed pot shops, which touches on high-profile drug distribution cases the state has pursued since 2015. Meanwhile, the Mat-Su Borough found itself on the receiving end of a lawsuit regarding the petition to ban commercial cannabis in unincorporated areas of the borough, and the Kenai Peninsula only barely gathered enough signatures for its own such ban, which has yet to be scheduled. Open cases Enforcement staff from the Alcohol and Marijuana Control Office, or AMCO, asked the Marijuana Control Board to look for ways to prosecute a half-dozen unlicensed retail shops selling product in Fairbanks, Anchorage and the Kenai Peninsula. Cannabis business attorney Jana Weltzin penned a letter to the board asking it to do everything possible to protect the industry players who have spent time and money to go through the licensing process. The quickest fix would be for the Legislature to take marijuana off the state’s controlled substances list, allowing AMCO to bring charges of selling a regulated substance without a license as in alcohol regulations. “The promptness of the resolution of these problems is 100 percent dependent on the industry itself,” wrote AMCO and board director Cynthia Franklin in an email. “The industry needs to protect themselves from illegal competition by working to get a legislative solution.” Peter Mlynarik, the Marijuana Control Board chair and Chief of Soldotna Police Department, said law enforcement agencies may not have either the resources or the will to investigate and enforce the many complaints against unlicensed sellers.  “Let’s say local enforcement said it’s not a priority,” he said. “You would have to quadruple the staff at AMCO to have all those complaints investigated. All those things take time. If it’s non-commercial, you’re talking search warrants and all these other things, reasonable suspicion, to get in there and do something. It’s a lot more time consuming.” Franklin said AMCO would need triple their current staff to properly take care of the unlicensed shops. Given law enforcement’s lack of enthusiasm, others under state criminal charges cry foul over their own cases. Charlo Greene, whose legal name is Charlene Egbe, voiced concerns about why law enforcement has chosen to prosecute her operation, Alaska Cannabis Club, but not the unlicensed sellers discussed during the Sept. 7 Marijuana Control Board meeting. “It’s not a shortage (of law enforcement), they’re just picking and choosing who they feel like punishing,” she said. Greene’s operation, Alaska Cannabis Club, was raided by police twice in 2015 following her well publicized on-screen and profane departure as a broadcast reporter for KTVA. Greene insists her club never sold cannabis and is more akin to a marijuana social club — which were recently declared illegal in an opinion from Attorney General Jahna Lindemuth but no owners have yet been charged with any criminal wrongdoing — than either an unlicensed retail shop or two alleged marijuana delivery services charged around the same time in 2015. “We never publically stated that we sell any marijuana,” she said. “Period, point blank. That’s the main difference. These other organizations have.” Despite Greene’s distinction, the state is charging her with drug distribution along with the marijuana delivery companies. This brings up a matter of legal importance to her own case. “What exactly has changed between now with these other clubs and mine, is what I’m having a hard time understanding,” said Greene. “Why am I the only one operating one of these groups that’s being prosecuted if they have all this documentation proving these other ones exist? My prosecution is political. I am undergoing a selective prosecution if that’s the case.” Selective prosecution or an inconsistent application of the law could become a factor for Greene along with other cases. The state charged Rocky Burns, Larry Stamper and Michael Crites with running their respective alleged marijuana delivery services, Discreet Deliveries and ACDC. John Skidmore, the Anchorage Division director for the Department of Law, said the state’s prosecution of the previous criminal cases could factor in the new regulatory developments, if the Marijuana Control Board and the Legislature choose to move in that direction. “When policy makers in society decide to change the laws, is that a consideration for prosecutors in cases that are already pending? The answer is yes,” he said. “Does that automatically mean that those prosecutions go away? That answer is no.” Similar situations exist in other areas of law, Skidmore said, particularly after criminal reform bill Senate Bill 91 passed during the 2016 Legislative session. After that bill passed, criminal prosecutors for offenses like failure to appear in court or violation of jail release terms needed to reevaluate their cases, as the bill lessened penalties for those offenses. Skidmore said he has no knowledge of any enforcement officials bringing the alleged unlicensed marijuana sellers before the Anchorage division. “I would probably wait for the policy makers to finish their work,” he said. “Then we would want to analyze what were the rationales and reasons behind why they adopted that particular policy to help us evaluate what are the societal interests of pursuing or not pursuing the prosecutions of cases that are not resolved.” Skidmore was careful to clarify both that the state hasn’t yet convicted Charlo Greene, Rocky Burns and Michael Crites, and that speculation on legal developments should be tempered. Changing the pace of prosecution, he said, could all be part of the industry’s development process. “Some of this is growing pains and transitions as the marijuana industry gets going,” Skidmore said. “That’s certainly going to factor into what we factor into prosecution as well, and the decision whether or not to prosecute, would be, ‘is this part of the transition?’” Bans and licenses In Southcentral areas outside the Anchorage municipality, marijuana business license applicants are vying to get more time to prove to their respective local governments that they can bring in enough money to make the industry valuable as a tax base. Industry representatives in the Mat-Su Borough are suing over a proposed ballot initiative scheduled for an Oct. 4 vote that would outlaw commercial cannabis business in unincorporated areas. Only Houston would be marijuana-friendly, as Wasilla and Palmer both passed commercial cannabis bans. In the meantime, a temporary moratorium on commercial marijuana passed in April, squashing production in what is largely regarded as the state’s largest cannabis-producing area. The two people representing themselves in the lawsuit, Ronda Marcy and Thomas Hannam, claim the ballot violates both the public process and the Alaska constitution. “The Matanuska-Susitna Borough Clerk, Lonnie R. McKechnie, was ‘objectively unreasonable’ to permit the proposed zoning initiative to be placed on the Ballot, when the Supreme Court of Alaska provided written notice, in a case under her name, that ‘zoning by initiative is invalid,’” according to the lawsuit. Borough cannabis licensees have a tight timeline. Darcy and Hannam, both of whom had hoped to enter the industry, are asking for an expedited consideration of the lawsuit. Another agricultural hub for the cannabis industry, the Kenai Peninsula, is also waiting for word on a proposed ban. Petitioners on the Kenai Peninsula Borough, whose ranks included board chairman Mlynarik, failed to gather enough signatures to get a commercial cannabis ban onto the October ballot. On Aug. 15, the petitioners got enough signatures to put the initiative onto the ballot either at the borough assembly’s discretion or on the October 2017 ballot.  In order to get the initiative onto the 2016 ballot, the borough assembly would have to hold a special election, estimated by borough staff to cost as much as $60,000. DJ Summers can be reached at [email protected]  

Employees file complaint against Blood Bank

A group of Blood Bank of Alaska employees have filed a complaint with the U.S. Food and Drug Administration charging the BBA leadership with mismanagement and financial impropriety leading to dangerous donor conditions and blood shortages. According to the complaint, filed Aug. 28, the BBA allegedly could not fill the order of Providence Medical Center when it had its grand opening because too much blood had been shipped to California the day before. Blood Bank representatives did not respond to numerous requests for comment. In correspondence with Linda Soriano, the blood bank’s former grant writer, the FDA confirmed receipt of the complaint, but is not able to comment on ongoing investigations. Soriano spearheaded a group of employees whose names are being held confidential by the FDA, alleging that the blood bank has been shedding donors as the result of a vigorous campaign to supply the blood needs of both Alaska and a California blood bank it has an export contract with. Soriano served as the Blood Bank of Alaska’s grant writer since 2012 and as development manager since 2015. She tendered her letter of resignation on Sept. 11. Prior, she worked as the grants officer for Christian Health Associates and Providence Health & Services Alaska, the company that owns Providence Medical Center Alaska. Soriano blames the alleged blood bank shortages on costs of the new building. “The irony is that BBA could have built a $33M facility that was right-sized for Alaska’s needs and moved into it debt free,” Soriano wrote in an email. “All of the corner cutting, exporting and lack of financial transparency could have been avoided if we hadn’t gone forward with the Taj Mahal of blood banks.” Despite repeated appeals to state and federal elected officials, Soriano said she has had no luck finding actionable ways to address the blood bank’s issues. After conversations with state Sen. Berta Gardener and U.S. Sen. Lisa Murkowski, Soriano lamented that no government agency apart from the Food and Drug Administration oversees the blood bank. “The real anguish of the summer came from seeing the inability of well-meaning people in powerful positions to intervene in a serious and potentially life-threatening situation that could affect every Alaskan,” she wrote to the Journal. “These people all urged me on, but no State or local agency has jurisdiction over the Blood Bank. Getting through those three holiday weekends — Memorial Day, July 4th and Labor Day — was excruciating.” Allegations in Detail According to the complaint, the blood bank has a “severe and ongoing lack of inventory” due to blood export contracts made to meet the expense of the blood bank’s new building loan. After moving into its $45.7 million, 57,000 square foot building earlier this year, the Blood Bank of Alaska entered an agreement with LifeStream, a California blood center, to export 100 units of blood per week, all the while ramping up recruitment for more donors in Alaska. The building was funded with $32.8 million from the state capital budget, an $8.5 million loan from the Alaska Industrial Development and Export Authority, and a $3 million donation from ConocoPhillips. In prior interviews, blood bank board members and CEO Bob Scanlon have insisted that such export agreements are commonplace in the industry. No Alaska hospitals, they said, have been shorted on blood supply. They said the blood export agreement with LifeStream has no connection to the building’s finances, but is simply a way for the BBA to more effectively manage blood to maximize efficiency. On Sept. 1, Gov. Bill Walker dropped by the Blood Bank of Alaska to donate a pint and proclaimed the month of September the Alaska Blood Drive and Donation Challenge Month. “To help increase participation in blood donations and ensure an adequate supply of blood, all Alaskans who are eligible to donate are encouraged to donate their gift of life at least once a year,” reads the proclamation, “and State agencies are challenged to sponsor four blood drives in the next year of 2017.” The proclamation also stated that, “Blood Bank of Alaska needs to collect 100 units each day to meet the needs of hospitals and communities across Alaska.” The complaint claims BBA has struggled with shortages since late spring when it moved into the new building. On the day of the new building’s grand opening ceremony May 20, Soriano and a colleague found six or seven units of O negative and trays of AB negative, the latter of which the Director of Hospital Services said none of the hospitals wanted. May 20 fell on a Friday. BBA ships blood units to California every Thursday. After the grand opening, Soriano and several BBA employees warned Alaska’s largest hospitals — Alaska Regional Hospital, Providence Medical Center, and Alaska Native Medical Center Hospital — of the shortage. “I worried about the lack of blood all weekend and decided to call an acquaintance who is in leadership at one of the major hospitals,” she wrote to the Journal. “He was deeply concerned, and within a few days, his hospital was insisting that BBA keep it fully stocked with blood at all times. Although I was unaware of it at the time, a colleague at BBA had the same concerns and was notifying other hospitals that we could not adequately support them in an emergency.” Providence did not confirm or deny the shortage in an emailed statement. “The Blood Bank of Alaska has consistently provided uninterrupted service to Providence Alaska Medical Center, including during its recent move into a new building,” wrote senior manager of external communications Mikal Canfield to the Journal. “The blood bank worked with Providence prior to the move to ensure we had enough blood supply to meet our requests during the move.” The complaint said BBA has run low on blood several times since then, and has tried to import blood from the Lower 48 without any luck due to national blood shortages. To secure more blood, BBA has increased donor recruitment and donor collections. According to Soriano, “donors are besieged by texts, emails and robo-calls that are causing many longtime donors to remove their names from our lists permanently.” According to the complaint, the need for more export blood led to overdrawing some donors and to drawing less than usual per unit in order to meet the demands of the LifeStream contract. “Recently the BBA medical director asked if I could get grant funding for soft furniture and carpeting in the donor recovery area because ‘donors keep face planting,’” Soriano wrote in the complaint to the FDA. “She said that reactions were increasing, and one woman had broken a bone or bones in her face when she fell.” The BBA employees say leadership has a record of financial impropriety, alleging Scanlon gave Soriano inaccurate financial reports to submit to potential BBA grant givers, including a projection of $25,000 to $41,000 per month in unrestricted gifts, which BBA has no history of receiving, Soriano said. “The financials are definitely being manipulated to make BBA’s financial situation appear more stable than it is,” Soriano wrote in the complaint.  When she asked for budgets to present to grant givers, she received numbers that were “clearly incorrect and showed the monthly (line of credit) payment as $26K when it was actually $47K a month per an email I later received from the CEO,” Soriano wrote in the complaint. In previous interviews, Scanlon confirmed that the monthly payment on the building loan was roughly $40,000. Soriano said she recently received updated financials with year-to-date actuals through June 30 that appear more realistic. In search for more funding, during an August meeting Scanlon asked Murkowski’s Chief of Staff Michael Pawlowski and Legislative Director Garrett Boyle for a $2 million federal grant and an FDA waiver to import blood directly from Canada. Karina Peterson, Murkowski’s director of communications, confirmed that the meeting took place and involved the requests Soriano described in the complaint, though she didn’t confirm Soriano’s characterization of Scanlon as “belligerent.” DJ Summers can be reached at [email protected]

Marijuana board issues first retail, manufacturing licenses

Retail stores, cupcakes, caramels, cookies and candies replaced enforcement talks at the Sept. 8 meeting of the Marijuana Control Board. The meeting marked the first issuance of both manufacturing and retail licenses, moving the industry to the final phases before growers have an outlet for their cannabis. Held up for most of the day by manufacturing license discussions, retail stores breezed through by the end of the meeting. The following retail licenses have been approved: Frozen Budz in Fairbanks, Enlighten Alaska in Anchorage, Arctic Herbery in Anchorage, Rainforest Farms LLC in Juneau, Raspberry Roots in Anchorage, Herbal Cache in Girdwood, Pakalolo Supply Co. in Fairbanks, Remedy Shoppe in Skagway, The Frost Farms in Anchorage, Herbal Outfitters LLC in Valdez, and Weed Dudes in Sitka. Apart from the normal objections from the Anchorage municipality, Nick Miller, the board’s newest member, had to recuse himself and switch seats to face his fellow board members for his retail outlet, Alaska Buds LLC in Anchorage. The board approved. The Frost Farms in Anchorage initially had trouble when it was discovered they had posted a public notice on a single light pole near their Dimond Blvd. location in Anchorage, rather than on a post office bulletin board or similar public area. Regulations specify such notices must be “conspicuous.” Complaints were received that the notice was not actually noticeable. The owners explained that there were no public notice spots available in the area, and the license was approved with the others following a clarification of intent from the board. Generic vs Branded Edibles Most of the day’s conversation revolved around products. The board took a painstaking look at what each manufacturing facilitiy planned to offer. For every product, the board asked for its type, how much THC it contains, what kind of packing it requires, how many serving sizes, how the consumer will be alerted to serving sizes and how closely the product resembles commercial product appearance. Edible cannabis products in particular is a major sticking point for states with legalized recreational marijuana. Colorado, Washington and Oregon each have myriad regulations, for example. The goal is to keep edibles and other cannabis derivatives away from children and away from consumers who might confuse a marijuana cookie for a Milano. “It’s good to discuss these things just so we have a baseline,” said board chairman Peter Mlynarik. Frozen Budz, a manufacturing facility as well as a retail outlet, went through a half hour’s worth of questioning to determine if its entire product line met regulatory muster. Owner Destiny Neade was asked to explain how products like gummies, brownies, and caramels will be packaged and sold to make them distinct from commercial products. During one exchange, the board argued with furrowed brows and clasped hands whether or not to allow Neade to make cannabis Rice Krispies.  “These two are more like home products,” said board member Loren Jones. “It’s generally a product that’s produced at home, not generally commercially available. Are we only talking about branded products?” Harriet Milks, assistant attorney general and the board’s legal counsel, clarified. “The point of this is that there’s not confusion in the market place,” she said. “It’s a call you need to make.” Brandon Emmet agreed with Jones that “these crispy treats aren’t widely commercially available.” Peter Mlynarik, Chief of Police in Soldotna and the board’s chair, did have concerns about how Neade would make the serving sizes for the brightly colored crispy treats clear for the consumer. “My concern on this is it’s brightly colored, it’s attractive,” he said. “When you put these demarcations on these colorful patterns…will it be easy to see?” Neade affirmed that indeed the crispy treats would be clearly marked with indentations for the legal 5-milligram serving size, and the board voted unanimously to approve the product type. The board repeated the conversation over peanut brittle. Some manufacturing applications were even cut short so the board could pass a handful of retail licenses. Justin Roland from manufacturing company Einstein Labs only had 16 of his planned 26 products reviewed. He said the board’s thoroughness impressed him, and he would rather get to retail licenses anyway — without them, he has no place to sell. “I would rather cut my product list down and get retail stores up and actually ready to get my products,” said Roland. License ownership and management  A hiccup occurred when Top Hat Concentrates came before the board with an application for a manufacturing license. Top Hat Concentrates applied for the license, but notified the board in an email before the meeting that the company itself would be managed by a separate entity, Top Hat LLC. The owners of both the concentrates company and the LLC happen to be the same, but Franklin said this type of management structure is subject to heavy abuse in the alcohol industry. Though the board grants ownership to the concentration license and must be notified of its ownership changes, the LLC would be beyond its authority. By managing under a separate LLC, Franklin fears the legal accountability of the operation could shift over time and potentially even allow for Outside actors to manage Alaska marijuana businesses — which regulations expressly forbid. “This is a huge problem, to have someone other than the licensee managing the license,” said Franklin. “The board is setting a precedent in allowing a license to have a different entity managing it. This is a huge turning point. To this point, we have required…that the people behind these entities actually operate these licenses themselves.” Milks elaborated after a short break. “When the board approves an entity, it’s that entity that’s being licensed,” she said. “Whatever goes on behind the scenes…is quite another matter. It’s something the board will need to address sooner rather than later. What happens…you have groups managing licensed properties and the board doesn’t know what they’re doing. It has very serious public safety implications.” The board eventually approved the concentration license with a condition. Any entity managing the license must also have a license and be under control of the management of the Marijuana Control Board. The LLC must be under identical ownership of the license being managed. DJ Summers can be reached at [email protected]

Marijuana board wants to deschedule marijuana in face of illegal pot shops

Legislative inaction and Alaska Attorney General Jahna Lindemuth’s recent opinion on marijuana social clubs are making waves for an industry an optimistic two months away from the first legal sale. At a Sept. 7 meeting of the Marijuana Control Board, Lindemuth’s opinion squashed a scheduled discussion about onsite consumption for marijuana retail stores. It also rolled into the discovery of a network of unlicensed cannabis shops around the state and an industry-led push to eradicate them with limited resources. Meanwhile, the Legislature still has not addressed several marijuana-related issues and left them to fester, creating a situation where marijuana enforcement officers have a hard time confronting unlicensed businesses. Unlicensed pot shops Lindemuth’s opinion has produced a rare moment of solidarity between regulators and industry. According to Alcohol and Marijuana Control Office enforcement officers, stores around the state in Fairbanks, Anchorage and the Kenai Peninsula have been cropping up that sell marijuana without a license. One of the industry’s most high profile attorneys, Jana Weltzin, drafted a letter imploring the Marijuana Control Board and its enforcement arm to more vigorously prosecute unlicensed marijuana sales. From the licensed industry’s angle, unlicensed pot shops might as well be black marketeers. Because Ballot Measure 2 explicitly aimed to destroy the black market, Weltzin said unlicensed shops will give the Legislature all motivation it needs to declare marijuana legalization a failure in 2017 and repeal Ballot Measure 2. “The time is now to make the transition,” wrote Weltzin. “Those who refuse to transition unilaterally risk the massive investment of time, money, and stress the rest of us as a collective movement have made. It is not fair to allow the selfish wants of a few to tank the entire industry and ruin this opportunity for the state.” In the board’s eyes, this usurps the two years of regulatory effort on the part of the industry players currently waiting for their first sale. “This is going to be a gold mine,” said board member Mark Springer. “To use that metaphor, who wants their claim jumped?” Enforcement officers and AMCO staff saw the situation coming, and that it damages the upcoming legal market by offering the public a false start. “This is not a surprise to anybody. It’s become so blatant that people are operating in small businesses with green crosses on the front clipping buds out in the open,” said James Hoelscher, the enforcement supervisor for the Alcohol and Marijuana Control Board. “The difference we see with this store front, they’re giving the public the perception that they’re legal, that they’re licensed. It’s our opinion that something needs to be done about this until it becomes too late.” Hoelscher said the businesses continue to exist because local law enforcement has no appetite to make any enforcement actions of their own. Because AMCO’s offices are stretched thin on resources, they can’t either. “It’s kind of a hot potato,” he said. “Not to put anybody on the spot, but it seems like it’s not something they want to deal with at the time. The response we’re getting is pretty much, it’s being allowed to happen.” Cynthia Franklin, the director of the board and of AMCO, said prosecutors themselves don’t have an appetite to prosecute the cases either. “The prosecutors just aren’t interested in these kind of cases,” she said. “What we want the board to be aware of is unless we get some laws protecting the industry, our industry is going to be very vulnerable to these unlicensed actors.” The root of the problem is marijuana’s classification as a controlled substance in the State of Alaska. This means there is not a specific crime for selling marijuana without a license, as there is for the alcohol-related crimes such as bootlegging. Franklin had tried to change the substance designation during the legislative session, but like the marijuana social club issue, it did nothing. As it stands now, the only marijuana-related crimes concern possession over the statutory limits and other dealing-related crimes. “We don’t have a crime called 'selling marijuana without a license,'” Franklin said. To do so, the Legislature would have to make a statutory decision during its next session to remove marijuana a controlled substance under state law, thus making it mirror alcohol regulations. In the meeting, the board took the position that it would like the Legislature to deschedule marijuana. Onsite consumption delayed again Lindemuth wrote an opinion on Aug. 31 that marijuana social clubs, which charge a membership fee to consume home-brought marijuana on their premises, are illegal. She said they qualify as businesses, and therefore are unlicensed. The people who visit them, she said, clearly violate the ban on public consumption of marijuana. In the AG’s opinion, this means two popular marijuana social clubs, Anchorage’s Pot Luck Events and Kenai’s Green Rush Events, violate state laws. Both have continued operating, and law enforcement from the state, local government or Alcohol and Marijuana Control Office have not yet taken any enforcement action. The opinion responded to widespread uncertainty about whether social clubs are illegal. The Marijuana Control Board asked the Legislature to either create a social club license type or to ban them in late 2015, but no such actions was taken. The board did, however, make a carve-out for onsite consumption in licensed retail stores in 2015. It had planned to review the draft for onsite consumption over the summer, but has bumped back approval each time in the face of widespread opposition from anti-smoking advocates including the American Lung Association and Alaska Tobacco Control Alliance. This time, the board voted to postpone onsite consumption discussions again, this time until October, saying the AG’s opinion leads to too many questions. “The AG’s opinion talked about what is a public place,” said Loren Jones, the board’s public health designee. “They conclude that if we as a board give them a license to consume, that’s now exempt from the definition of public. I’m not sure I agree with that. I’m not sure it would tested very well in court.” The board voted 3-2 in favor of postponing the onsite consumption draft. Jones, Springer, and chair Peter Mlynarik voted in favor, while Brandon Emmett and new member Nick Miller voted against.  DJ Summers can be reached at [email protected]

Court rules no guns for medical marijuana cardholders

Alaska’s hunters and concealed carry holders can’t continue to pack iron if they hold a medical marijuana card, according to a recent court decision. The 9th U.S. Circuit Court of Appeals issued a decision on a Nevada case on Aug. 31 that upholds previous Bureau of Alcohol, Tobacco, Firearms, and Explosives order to gun sellers not to sell firearms to state medical marijuana cardholders. Cardholders meet the definition for “unlawful drug users,” according to the ATF guidance and the court decision affirming it. The case concerned a Nevada woman, S. Rowan Wilson, who attempted to buy a gun but was prevented from doing so by the storeowner, who knew she had a medical marijuana card. Nevada is one of 24 states that have legalized medical or recreational marijuana. Wilson’s challenge was complex, but the decision distilled to a Second Amendment rights denial. “The district court concluded, however, that Wilson’s Second Amendment challenge failed under our decision in United States v. Dugan, 657 F.3d 998 (9th Cir. 2011),” reads the court opinion. “In Dugan, we held that the Second Amendment does not protect the rights of unlawful drug users to bear arms, id. at 999–1000, in the same way that it does not protect the rights of ‘felons and the mentally ill,’ Heller, 554 U.S. at 626–27. The Government argues that if the Second Amendment does not protect the rights of unlawful drug users to bear arms, it must not protect any possible rights of unlawful drug users to purchase firearms or of firearm dealers to sell to unlawful drug users.” The court affirmed the ATF orders and Wilson’s status as an unlawful drug user. On Sept. 21, 2011, the ATF issued an “Open Letter to All Federal Firearms Licensees” stating that “any person who uses or is addicted to marijuana, regardless of whether his or her State has passed legislation authorizing marijuana use for medicinal purposes, is an unlawful user of or addicted to a controlled substance, and is prohibited by Federal law from possessing firearms or ammunition.” This answers a question Sen. Lisa Murkowski had on March 2 when she sent a letter to U.S. Attorney General Loretta Lynch asking Lynch to reexamine federal gun regulations conflicting with state laws where marijuana is legal. As of Sept. 1, Murkowski’s office has still not received a reply from Lynch.   In December 2015, Alaska had 730 federal firearms license holders, about one for every 1,000 residents. According to a Columbia University study released in June 2015, Alaska also has the highest per capita gun ownership in the nation; 61.7 percent of Alaskans own one or more firearms. Alaska also has more than 1,000 medical marijuana cardholders. This number, however, is an inaccurate metric for marijuana usage, as state laws have not allowed for marijuana cultivation or distribution until recreational use was approved by a voter initiative in 2014. DJ Summers can be reached at [email protected]  

Alaska banks, credit unions won’t follow Lower 48 counterparts into bud business

Marijuana businesses and the State of Alaska have something in common: banks won’t help them reap the rewards of the Green Rush. In the same week that Alaska banks and credit unions closed the business accounts of several licensed marijuana business owners, U.S. Bank told the Alcohol and Marijuana Control Office it can no longer accept credit card payments for licensing fees. The bank would not give details on its Alaska-based decision. “Although legalized in many states, marijuana remains illegal under federal law,” according to a statement from U.S. Bank. “As a federally regulated bank, U.S. Bank complies with federal law. We are committed to serving our valued clients while complying with the highest standards of legal and regulatory compliance. As a matter of policy, we do not comment on customer conversations or relationships.” U.S. Bank’s cancellation of credit card activity came as a surprise to the Department of Revenue. No other industry has the same kind of cash dependence as cannabis, and the department is having to construct a cash room in Anchorage just to allow for tax drops. Both credit card companies and banks themselves fear federal scrutiny and as a result the marijuana industry remains largely cash only. Marijuana is still a Schedule I controlled substance under federal law after the Drug Enforcement Agency’s August decision to not take it off the listing alongside heroin. Federal judges and financial regulators have told banks to move ahead in states where it is legal, leaving banks with two options: drown in the compliance paperwork or risk a federal crackdown.  ‘We can’t tell them what to do’ Nationwide, more than 300 banks now accept money from marijuana businesses. Alaska’s banks, however, remain cool to the idea.  Kevin Anselm, director of the Division of Banking and Securities in the Department of Commerce, Community & Economic Development, wants to have a more cheery outlook for the industry but has nothing to offer. “I wish I had better news,” she said. “It’s really tough for an absolutely legitimate business in the state of Alaska. It really is a struggle on all fronts.” Alaska’s financial institutions simply don’t have the wherewithal to do what others in the Lower 48 can. “In Washington and Colorado there are a number of banks and institutions that have decided to go into these markets,” she said. “That has not been the decision up here. A lot of it is we don’t have the structure to make it easy for the banks, to move money, cash or otherwise.” Alaska has three federally chartered banks that fall outside state authority. Anselm said she’s approached each of the remaining state chartered banks and credit unions with no luck convincing them to do business with cannabis. The Commerce Department puts together informational seminars to support banks looking to get into the industry under federal guidance specified in the Cole Memorandum and Financial Crimes Enforcement Network, or FinCEN, basically an informal promise to not prosecute banks for taking pot money as long as they keep the business clean: no gangs, no organized crime, no money laundering, and no kids. Still, the advice meets reluctant ears. “We’re trying to give them all the support they need, but we can’t tell them what to do,” Anselm said. Assembling and reporting the background information is daunting. There are three separate suspicious activity reports banks must file for every single marijuana account transaction. The cost and manpower to process them simply isn’t worth the trouble, according to banking leaders. Steve Lundgren, president of Denali State Bank and of the Alaska Bankers Association, said marijuana in Alaska brings extra costs and extra risk without any real potential for extra profit. “We have discussed, as a group, and no member bank I’m aware of is planning or proposing to directly bank with marijuana businesses,” he said. Federal law aside, filing or not filing the right paperwork can result in a stiff fine or even a spike in insurance rates from the Federal Deposit Insurance Corp. Filing the right paperwork means extra staff and fees; Colorado and Washington banks add thousands in service fees to the accounts of marijuana businesses, Lundgren said. While Washington, Oregon and Colorado banks are slowly coming into the fold, banks in Alaska think the state’s unique characteristics make it a poor investment. “It’s not going to be a big money maker,” Lundgren said. Lundgren said Colorado and Washington get millions from marijuana because they are populous and within driving distance of neighboring states. Those are two features Alaska doesn’t have. Lundgren also takes a long view. He said the Alaska market will fall prey to full national legalization at some point. Once marijuana can be transported across state lines, Alaska marijuana businesses could suffer as product gets shipped in at lower costs from large-scale growers in the Lower 48, much like most of the produce. “I think there will be so few businesses up here, even if we charged thousands of dollars in services fees it’s probably not going to be enough to mitigate the risk,” he said. Washington solutions Other states have had better luck with banking, but the solutions don’t necessarily apply to Alaska. Rick Riccobono is Washington’s Director of Banks. The notorious “cash only” cannabis stigma, he said, is largely mythical. The reality is more nuanced. “People say it’s a total cash business in Colorado and Washington,” he said. “Quite the opposite. We’ve actually gotten this thing pretty far along.” Riccobono said roughly 90 percent of all marijuana-related taxes and fees pour into the state treasury electronically, not with cash. Washington, he said, has at least three credit unions and two banks that accept money from cannabis operations. Recently, one even made a loan to a business, which Riccobono said is a first. Banks and credit unions at first refused to handle Washington’s marijuana-related monies, including taxes and licensing fees. A cannabis business law firm and the State of Washington had the same response: take all of our money or none of it.  “The state was pretty clear. If you’re going to do any of our business, you’re going to do all of our business. But we did kind of go a round or two with them on that,” Riccobono noted with a laugh. Still, marijuana businesses can’t pay taxes directly to Washington state with credit cards. Part of the problem is with the credit card companies themselves rather than the actual banks. Visa, MasterCard and other credit card companies have a strict no marijuana purchases policy. Like other businesses with reputations as less than family friendly — strip clubs, for example — marijuana vendors in Colorado ended up miscoding the transaction as “herbal tea” or “food” to cloak the purchase. Naturally, credit card companies threaten to drop the bank when they find out. Washington uses workarounds. In both, credit cards are allowed, but the transactions are non-marijuana transaction codes that credit cards companies can accept. The first, called PayQwick, serves as a closed loop system similar to PayPal. Retailers stock a prepaid card with money and all transactions take place within that system. The product might be marijuana, but the prepaid card system meets industry standards for credit card companies who depend on a wide range of similar setups. “There’s a code for that,” Riccobono said. “It’s totally permissible to load a prepaid card in a loop. They couldn’t cut that out, or then they’d have to cut PayPal. They’d have to cut Target.” The second electronic system, used by marijuana retailers, has a customer credit card buy the digital currency Bitcoin and accept Bitcoin payments. Retailers cash their accounts out at the end of the day and deposit the money into their bank. Banks then make electronic transfers directly into the state treasury for taxes and fees. Alaska solutions Alaska, however, isn’t like the Lower 48. The two private systems that Washington state uses to facilitate electronic marijuana tax payments can’t work here, according to Brandon Spanos, deputy director of the Tax Division of the state Department of Revenue. Either they don’t exist or the tax structure doesn’t allow for them. PayQwick isn’t registered to work in Alaska. The Bitcoin system relies on retail taxes, which don’t exist at the state level in Alaska. The state will only collect excise taxes of $50 per ounce from cultivators. In the absence of those two closed loop systems, Spanos said the state may switch its credit card processing vendor altogether. “There are other processors that don’t scrutinize the payments like U.S. Bank does and are willing to process credit card transactions that are legal in that state,” said Spanos. “We are looking into those options.” Spanos said Alaska hoped for a 50-50 split between cash payments and electronic payments for taxes, but recalibrated that hope after the Alaska banks and U.S. Bank’s actions in recent weeks. “The further we get down this path the more it looks like we’ll get less than that, just because the banks taking early action in shutting down some of the accounts,” said Spanos. “We are just a less populated state. In Colorado, they simply change their name and go to another bank. I anticipate that happening less frequently. There are fewer banks, and they’ll figure out quickly who the marijuana players are.” DJ Summers can be reached at [email protected]  

GCI expands presence in Pacific Northwest

  GCI Business, a unit of General Communications Inc., announced Aug. 17 that it will expand services to business customers in the Pacific Northwest and Texas. GCI Business has opened a Seattle office to serve as headquarters along with a Houston location. Martin Cary, senior vice president and general manager of GCI Business, said the expansion formalizes, rather than expands, GCI’s current presence in both regions. “We’ve been doing business in the Pacific Northwest,” said Cary. “We’ve had offices down in Seattle for 30 years. It’s kind of been where we meet the other carriers.” Because GCI does not own facilities in the Lower 48 the way it does in Alaska, most of its offerings to the Houston and Seattle markets will be services including professional services, managed services such as Wi-Fi, video conferencing, Drewall and 24/7 monitoring. In part, the newly consolidated Seattle office helps with staffing needs. Like most Alaska industries, recruiting and hiring capable people can be expensive. “You can’t find enough IT people at the level we’re looking for in Alaska, so we’ve actually been using Seattle as a place to hire talent and use them out of Seattle and not force them to move to Alaska,” Cary said. “We can have a network engineer doing his job from Seattle just as well as they were sitting here in Anchorage, and if that’s where they prefer to live, it’s kind of a win-win.” The announcement comes only shortly after an announced capital expense reduction for 2017. GCI executives said the company will cut as much as one-fourth of its planned capital project spending next year in light of the Legislature’s failure to pass a fiscal plan during its 2016 marathon legislative session. However, the expansion into Lower 48 markets isn’t costing the company anything substantially extra, Cary said. GCI had two existing Seattle offices dedicated to business services and staffing and a continued presence in Houston as well. GCI began moving into the Pacific Northwest 15 years ago, when it expanded SchoolAccess and Connect MD programs, which are managed services for K-12 and a secure medical network, respectively. For the Pacific Northwest office, it was only a matter of folding the two existing Seattle locations together. “We combined the offices in July and did a big open house,” Cary said. “Sort of kicked off the new space. The people there are GCI business people: engineering people, IT people, we’ve got some accounting people, so it’s starting to feel like a really more formalized GCI presence instead of an outpost.” GCI’s board of directors developed a diversification committee years ago to delve into where the company could expand its footprint. The booming tech industry in the Pacific Northwest, along with Houston’s oil and gas industry, fit the bill. Cary said the expansion doesn’t drain resources from Alaska, but rather adds to them. GCI’s Lower 48 expansion adds redundancies for Alaska operations. New equipment and personnel in Seattle and Oregon can be put to use remotely. “The Pacific Northwest is somewhere we’ve had a footprint,” Cary said. “For me, having so much growth in Alaska, it’s like ‘OK, I can put some energy into the Pacific Northwest now, let’s see what we can build there.’ It’s certainly not taking anything away from Alaska but it’s something we can diversify into a market that right now is pretty hot.” Cary said commitment to Alaska remains firm. “There’s no de-focusing on Alaska,” said Cary. “We’re continuing to build our TERRA network, we’re continuing to expand a second fiber cable up to Prudhoe Bay, continuing to expand our wireless footprint and expand our LTE footprint. There’s plenty going on in Alaska.” DJ Summers can be reached at [email protected]  

AG provides opinion on marijuana social clubs

Alaska’s gray market marijuana social clubs may have just gone up in smoke. Alaska Attorney General Jahna Lindemuth issued an opinion Wednesday that marijuana social clubs — which include Anchorage’s Pot Luck Events and Kenai’s Green Rush Events — are illegal. Lindemuth said these clubs, which allow fee-paying members to consume marijuana on premises but do not sell marijuana, fall under the definition of public consumption, which is prohibited by statute.  Though the Marijuana Control Board may allow retail stores to have onsite consumption, neither Pot Luck nor Green Rush is licensed as a retail store or any other cannabis business license type.  “When Alaskans voted in 2014 to liberalize personal use of marijuana and to allow a commercial marijuana industry, they also voted to prohibit public consumption of marijuana,” said Lindemuth in a statement. “Unlicensed marijuana social clubs are public places like any other place of business—such as cafes, movie theaters, or retail stores—where marijuana consumption is not allowed by law.” Chris Hladick, Commissioner of the Department of Commerce, Community, and Economic Development, requested that Lindemuth offer an opinion on marijuana social clubs. In a statment released hours later, the DCCED said it appreciates Lindemuth's opinion, as it clarifies a longstanding disagreement between interpretations of Ballot Measure 2. With the opinion, Hladick wrote local governments can now work with law enforcement to address these clubs. "The ballot measure anticipated a licensed, regulated commercial marijuana industry in Alaska," reads the statement from DCCED. "In order for the Department and the Marijuana Control Board to be able to fulfill the meaning and intent of the law, this clarification was needed. The Alcohol and Marijuana Control Office enforcement staff, in cooperation with local law enforcement, will work to address illegal consumption. Local governments may use their civil and injunctive powers to disallow the operation of illegal businesses in their cities and boroughs." Her legal opinion caps a lengthy standoff between the clubs’ owners, law enforcement and regulators. Marijuana social clubs like Anchorage’s Pot Luck Events previously existed in a legal gray area. They allow consumption and sharing on premises in exchange for a membership fee, but sell no marijuana directly. The Marijuana Control Board issued an opinion saying the Legislature would have to create the license type for them to either issue a license or close the club. Opponents of the clubs including Marijuana Control Board director Cynthia Franklin defined clubs as “public places,” in which marijuana consumption was banned during the summer of 2015. Pot Luck owner Theresa Collins said throughout 2015 and 2016 she was perfectly within the confines of the law because the fee-based membership did not fill the definition of a public place. “You don’t pay a membership fee and sign a membership contract at a movie theater,” Collins said. Law enforcement took no action against Pot Luck Events or a Fairbanks club that opened its doors in November 2015. Soldotna club Green Rush Events closed that month, based on fears of law enforcement, then reopened. Lindemuth is unequivocal in her opinion. “If that place is not a licensed retail marijuana store, consuming marijuana there is unlawful,” she wrote. “Charging people a fee to consume marijuana at a physical venue, if done regularly and for financial benefit, is to operate a business. The venue itself would therefore be a ‘place of business’ where it is unlawful to consume marijuana ,even if the venue’s proprietor expressly invites people to do so.” Even if it were not acting “as a business,” she wrote, it is still public consumption, as a substantial amount of people have access to it. Furthermore, Pot Luck’s distribution of marijuana samples qualifies the venue as a business, Lindemuth said, as they are taking money in exchange for providing them if the total amount exceeds one ounce, the statutory limit. “If this person has ‘dominion or control’ of the marijuana provided as samples — even if he does not own or have physical possession of the marijuana — he is acting unlawfully if the total amount of marijuana is more than one ounce or if he receives payment for transferring that marijuana to patrons.” This is a developing story. Check the Journal’s website for updates. DJ Summers can be reached at [email protected]

Claims for expanded Medicaid group $30M over estimates in first year

Alaska has trouble affording the Affordable Care Act. Alaska’s new Medicaid enrollees are already costing more than what economists predicted they would in 2021. This matches a national trend. Centers for Medicare and Medicaid Services recently reported to Congress that Medicaid expansion enrollees cost $6,366 per person for fiscal year 2015 (ended last Sept. 30), about 49 percent higher than estimated. President Barack Obama’s Affordable Care Act, or ACA, expanded Medicaid eligibility in 2014. More than 4.3 million additional Americans now qualify, for a total of 64 million. By 2024, state and federal governments will spend $920.5 billion on the program, at which time 77.5 million people will get coverage. The Medicaid expansion covers 41,910 low-income Alaskans from 19 to 64 years of age who are currently not eligible for Medicaid — those not caring for dependent children, not disabled or pregnant, and who earn at or below 138 percent of the Federal Poverty Level, or FPL, for Alaska. For Alaska, which already has the highest per capita Medicaid costs in the nation, this could turn into increased state spending when the treasury is hurting and already bitten by other ACA-related backfires. As of July 31, 2016, Medicaid expansion covered 20,371 people in Alaska and according to Department of Health and Social Services records, claims for the new group have amounted to $175 million so far, entirely paid for by the federal government. That’s $30 million more than was estimated, or nearly 21 percent, for 11 months with a month to go until marking a year of coverage for the expanded Medicaid class. The per capita cost equals $8,591 in the first 11 months, more than the national average for 12 months of $6,366 in 2015. Gov. Bill Walker unilaterally chose to expand the Medicaid program by accepting the federal payments last year. In the fiscal year 2016 budget recently passed by the Legislature, an amount was included to cover the state’s 5 percent match for the expanded group beginning Jan. 1, 2017. DHSS Deputy Commissioner Jon Sherwood said his department takes the cost overage seriously and is addressing it with a study. “It is running somewhat over what we’ve estimated, though the actual number of enrollees are where we thought they’d be,” Sherwood said. “We actually started in September of 2015. We’re just getting through August, so we’re sort of coming up to having one year of data. We’re in the process of analyzing it to see where our numbers differ from the projections and try and get a feel for what’s causing that. We haven’t finished our analysis yet.” Because the program only began less than a year ago and Medicaid providers are still trickling bills in to DHSS, Sherwood said there isn’t a clear view of why the costs are higher than expected. Other states, however, give some guidance in what to look for. “Just knowing from how some other states started like Ohio, it’s not unusual to see a bump when the program is first starting,” Sherwood said. “As people are coming onto the program, they haven’t had insurance and there’s kind of a whatever you want to call it, pent up demand. “Someone needs an operation or procedure they’re not going to need every month, they come into the program and have that worked on. In some states they see an initial peak and then the average spending goes down.” Sherwood said a supplemental budget request to the Legislature would be premature before the study’s results pin down a clear trend. “I don’t know whether or not we’re seeing the trend over time,” he said. “You expect it to be a little higher initially as you have that pent up demand, but whether or not this is a long term trend or coming down…we’re just now getting the billings for recent months. We’ll continue to do that analysis and figure out whether or not we have sufficient authority in our budget.” Before Walker expanded Medicaid under the ACA in 2015 without the Legislature’s approval, Evergreen Economics estimated 20,066 new enrollees in fiscal year 2016 at an average cost of $7,250 for a total cost of $145 million. For the 2016 calendar year, the federal government will pay 100 percent of the expansion claims, but that number will gradually shift more and more to the state’s burden. The state will bear 5 percent of the cost in calendar year 2017; 6 percent the next year; 7 percent in 2019; and 10 percent in 2020 and beyond. Evergreen estimated that the fiscal year 2017 expansion class would grow to 23,273 with an estimated cost of $7,495 per person, or $171 million to the federal government and $3.8 million to the state. By fiscal year 2021, this number will have grown to 26,623 people at $8,433 per person and $20 million total cost to the state. Alaska has a history of spending more per Medicaid enrollee than most states, though the most recent numbers for post-expansion enrollment are not yet available. In 2011, Alaska spent $9,474 per Medicaid enrollee, higher than any state in the union and approaching twice the national average of $5,790. During fiscal year 2012, Medicaid spending nationwide amounted to $415.2 billion, or $6,833 per enrollee. During the same year, Alaska spent nearly twice as much as the national average per enrollee at $12,047, according to the Kaiser Family Foundation. Alaska spent $1.4 billion on Medicaid in fiscal year 2014. The Legislature appropriated $1.6 billion for that fiscal year. With a 50 percent federal match, this means the state spent $700 million on 122,521 Alaska Medicaid enrollees as of June 2015, meaning the state and federal government both spent $5,713, or a total of $11,426 per person. Most recently, the Legislature approved a total appropriation for Medicaid services in fiscal year 2017 of $1.7 billion, or $10,911 per Medicaid user. The ACA has had other unintended consequences for Alaska, and at a higher cost. In May, the Legislature bailed out insurance provider Premera Blue Cross Blue Shield of Alaska with a $55 million reinsurance bill. The ACA forced insurers to accept high-risk patients for coverage. This drew high-risk patients away from the Alaska Comprehensive Health Insurance Association with lower cost, federally subsidized plans. When federal reimbursements for insurer losses came up short, insurance companies hemorrhaged money and have been forced to raise insurance rates to recoup losses or leave the state altogether. In this case the reinsurance plan draws proceeds from a statewide insurance premium tax. This tax of 2.7 percent per plan typically draws between $50 million and $60 million per year, according to Lori Wing-Heier, director of the Division of Insurance. In two years, Alaska’s individual insurance market provider pool shrank from five providers to one as Moda Health, Aetna, State Farm and Assurant Health left Alaska’s individual insurance market. On July 18, Premera Blue Cross Blue Shield of Alaska filed a request for a 9.8 percent increase of individual insurance rates, ending a two-year run of 37 percent and 39 percent increases. DJ Summers can be reached at [email protected]  

As sales near, cannabis industry still lacks unified voice

More than 300 licenses spread among a landmass the size of Mexico is causing some organizational problems for an industry without income or central leadership. Common theory in the Alaska cannabis industry says the industry needs more time to get onto the map than its sister states in the Lower 48. Colorado, Washington and Oregon each had an established medical marijuana industry for years prior to full recreational legalization. Medical suppliers only needed to switch gears. This explains in part why Alaska hasn’t had a recreational sale just yet, but also presents an issue the industry is only now starting to recognize: it has little organization. Left without leaders “It’s a huge problem,” said Taylor Bickford. Since leaving his involvement with the industry behind after Ballot Measure 2 passed, Bickford said he has concerns about the lack of unity the industry has now as a result of lobbying efforts. Bickford worked as the spokesperson for the Campaign to Regulate Marijuana Like Alcohol, which was mainly responsible for rustling up the 53 percent of Alaskans who voted in favor of Ballot Measure 2 in 2014.  Nearly $800,000 for the campaign came from the Marijuana Policy Project. Bickford, a senior vice president at public relations firm Strategies 360 now representing the Bristol Bay Native Corp., managed the communications campaign while father Frank Bickford handled Juneau. The elder Bickford oversees the accounts of Altria Client Services, a tobacco group affiliated with Philip Morris USA Inc., John Middleton Co., U.S. Smokeless Tobacco Co., and Nu Mark LLC; the Alaska Society of Eye Physicians and Surgeons; the American Academy of Ophthalmology; Oracle America, Inc.; and Alaska Hospitality Retailers. “If you look at any major industry in the state, they all have representation in the state capital, particularly in an industry like marijuana that’s going to be heavily regulated,” Bickford said. “The danger for the industry is it’s hard for them to present a unified voice to the Legislature.” Bickford said the marijuana industry suffers from a lack of centralized direction in a place where localities end up having more control than the state. Ballot Measure 2 gave local authorities the ability to craft their own marijuana laws, up to and including banning commercial sale and production. Areas range from Southeast Alaska municipalities asking for more lenient buffer zones between cannabis businesses and schools to proposed borough-wide bans in the Kenai Peninsula and Matanuska-Susitna. “What you have is a number of disparate voices that probably are mostly close to being on the same page, but in a lot of cases are not,” he said. “All these businesses are going to be just as, if not more, accountable to local governments than they are to the state. And in Alaska, that’s a pretty big patchwork.” Karen O’Keefe, the Marijuana Policy Project’s director of state policy, said her organization did continue lobbying efforts into the 2015 session following the Ballot Measure 2 approval in 2014, but implementation efforts dropped after the law passed. “There have been some lobbying efforts after the passage of Ballot Measure 2,” she said. “Last year in particular, there was a lot of legislation moving. There was a team of advocates working to make sure the will of the voters wasn’t being undermined. “That included Frank Bickford, Taylor Bickford, his son, the campaign spokesperson at the local level, Tim Hinterberger, a lot of other people showed up at the local level and in the Legislature.” In 2016, the tune changed. Rep. Gabrielle LeDoux, R-Anchorage, has been one of the cannabis industry’s major legislative supporters. She said she noticed a cannabis industry absence in the Juneau lobbies during the 2016 session, in part because the fiscal crisis-driven Legislature had no time for it. This industry was fortunate, according to LeDoux, because it needs statehouse representation as much as any other industry. “Even if it doesn’t seem like there’s going to be a lot going on in Juneau, you’ve got to be aware if you’re an industry player,” LeDoux said. “You’ve got to know when somebody proposes a bill that’s going to bite you. Unless you’ve got somebody down in Juneau, and that’s generally a lobbyist looking over the bills every day when they’re read across…you might find yourself someday with (a bill) that’s going to pass both houses and you didn’t know anything about it because you weren’t at the table to give your comment.” A patchwork LeDoux and other public officials say industry is understandably concerned given its history, but that fears have little basis in reality. “It’s just like in fisheries,” she said. “People are always trying to second guess. ‘Why is this happening, why is that happening, is somebody trying to sandbag this, is somebody trying to sandbag that?’ It’s just like fisheries, or just about anything else in politics I should say.” Regardless, the perception of large-scale antagonism against the industry spurs the conversation for better connections in the political world. Recent events have shaken the cannabis industry, including the ousting of long-time advocate Bruce Schulte from the Marijuana Control Board and who Gov. Bill Walker will choose to replace him. Board shakeups are standard for Walker, but industry views setbacks through a blood-colored lens. Though voted in by a 53 percent majority, Ballot Measure 2 was unpopular with most of Alaska’s movers and shakers. A laundry list of power brokers across the state publicly opposed Ballot Measure 2, including the Alaska Republican Party, the Alaska Association of Police Chiefs, the Alaska Chamber, the Alaska Conference of Mayors, the Alaska Industry Support Alliance, the Anchorage Assembly, the Mat-Su Business Alliance, the Alaska Mental Health Trust Authority, several boroughs and cities, Alaska Native corporation Doyon Ltd. and the Alaska Native Village CEO Association, among others. From stakeholders’ perspective, regulators on the Marijuana Control Board and in high-density localities are drawing the first sale out too far. Recent board events — including the firing of former chair Schulte and current chair and Soldotna Chief of Police Peter Mlynarik gathering signatures for a proposed Kenai Peninsula Borough commercial cannabis ban — make them even more suspicious. And now one of the Anchorage Assembly’s most sympathetic voices, Mountain View’s Patrick Flynn, is not allowed to vote or discuss any issues of relevance to the cannabis industry. Nick Miller is the president of the Anchorage Cannabis Business Association, a group of 30-odd dues-paying industry participants with plans to operate within the municipality. Miller agrees with Bickford in that the industry doesn’t put up a united front in Juneau, to the public, or with each other. “Between Anchorage and Fairbanks and Fairbanks and Kenai and Kenai and Mat-Su, there is a pretty large disconnect,” Miller said. “As an industry, I don’t feel we’re very unified. We don’t always send the same message. We all have our wants and needs, but we don’t really coordinate or align those very well.” Miller isn’t unsympathetic to the challenges of having hundreds of localities with disparate rules. As of yet, bringing each unaffiliated group together under a united flag or even a widespread newsletter hasn’t happened. “I feel like you need a group to lobby in your local area for your local regulations, but you think there’d be a time and place where members meet monthly and say, ‘ok, what are your top six issues statewide?’” he said. “For better or for worse there have been organizations that have tried that but it’s just not very well organized.” Lobbying smells suspicious to some cannabis business people, Miller said, and ACBA members seem wary. “I’m not sure what’s more important at this point,” one asked during an Aug. 10 meeting, “a lawyer or a lobbyist?” Miller has had conversations with one lobbyist, Paul Fuchs, who mapped out strategies, detailing which legislators and power brokers he has relationships with and how he would approach each differently on issues relevant to the industry. Miller learned more than he thought he did about the “very strange “ business of lobbying and wants to duplicate the experience for his members. Fuchs will speak and answer questions at the ACBA’s bi-weekly meeting on Aug. 24. Lobbyist or executive director? While ACBA vets possibilities for direct industry lobbyists, others think industry associations should fill the role in the absence of the money a lobbyist would demand. The Alaska Marijuana Industry Association hired Cary Carrigan as executive director last month. Carrigan is a former weatherman for KIMO and KTUU, as well as the former host of a radio show on KUDO. He approached the AMIA board looking to put his 30 years in Alaska media to good use after watching his Alzheimer’s-stricken father in-law-pass away and wanting to get more involved with cannabis. “There’s going to have to be someone from the mainstream who understands how the PR angle worked,” said Carrigan. “That’s what I’m trying to do.” Carrigan agrees that the Alaska cannabis industry lacks organization, but the solution is not a lobbyist in his mind. It’s the AMIA. “That’s a great thought, but I don’t know if the people need to buy the legislators more dinner,” he said. “I think what they need to do is let the legislators know that there’s an industry out here that wants to help support the state in a time of financial crisis.” The AMIA has marketed itself as the premier industry association since 2015. Two of its board members, Schulte and Brandon Emmett, ended up on the Marijuana Control Board as well. Other unaffiliated industry voices have criticized AMIA for being less an industry association than a board member organization. AMIA still has no dues-paying members, while other grassroots industry groups like Miller’s ACBA have dozens. AMIA board members, Carrigan said, launched too quickly and with too much ambition. Each had his or her own license applications to file and businesses to build and couldn’t focus energies on the association activities it had planned. With a volunteer executive director, the group will launch an aggressive campaign to build social media presence and organization activities for Alaska’s scattered industry, he said. This could involve providing campaign assistance for boroughs with potential commercial marijuana bans like Mat-Su and Kenai Peninsula, as well as resources and speakers for education, community outreach and regulatory assistance. “Our hope is to make the AMIA an umbrella organization just to give people a central focal point,” he said. “There’s going to be groups of people all over the place. There’s going to have to be some focal point because this where things tend to fall apart, because they get skewed and there’s too many people in too many different areas duplicating the same things.” National look Alaska’s industry focus on organization, and the differing ideas to get there matches the national pattern, according to Kris Krane, president of cannabis business advising company 4Front Ventures. Krane is the former associate director of the National Organization for Responsible Marijuana Legislation and now serves on the national board of directors for the National Cannabis Industry Association, Common Sense for Drug Policy and Marijuana Majority. Krane wasn’t surprised to hear about the push for a lobbyist and the questions about a central industry group. MPP gets laws passed, but doesn’t directly lobby for industry needs. The establishment of trade groups and the hiring of lobbyists comes next. “We’ve seen this happen in Arizona, we’ve seen this happen in Massachusetts, we saw it happen early in Colorado,” Krane said. “You have these industry associations that spring up that want to be the trade group and more often than not what ends up happening is a trade industry association eventually does arise, sometimes more than one, that is legitimate. “But it never actually happens until the businesses are up and running and enough of them are generating revenue that they can financially support the activities of one of these organizations.” In the meantime, trade groups vie for early traction, and he said tension between groups is the rule. Colorado’s early medical and adult use days had several trade groups that eventually whittled down to two competing associations with influence at the state level. “Eventually, once these businesses are operational and generating revenue, the dust will settle,” Krane said. “Most people will get behind whatever trade organization it is.” Krane said industry’s paranoia of state interference might sound fearful, but are a “totally valid concern.” Without money from sales, the kind of political firepower to address that concern is limited. “Without business that have cash flow, you would need to have a small handful of extremely wealthy people who have these licenses be willing to front this money without support from other license holders or other industry players. That’s what’s generally proven difficult.” In the meantime, he said nothing in Alaska looks anything less than normal. “None of this is a red flag for the development of the industry,” Krane said. “These are just the normal growing pains of developing something from nothing: an entirely new industry.” DJ Summers can be reached at [email protected]

Federal Reserve Western District president says rates will rise, but not when

The Federal Reserve will raise national interest rates, though leadership isn’t sure when. John C. Williams, president and CEO of the San Francisco-based Federal Reserve district that represents nine western U.S. states, addressed rate hikes during an Aug. 18 meeting presented by the Anchorage Economic Development Corp. The Federal Reserve hasn’t raised interest rates since December 2015, and the financial industry has spent the last year guessing as to when an increase will take place. Since the Brexit vote that will pull the United Kingdom out of the European Union, speculation has gotten even more rampant, with some even suggesting the Fed may lower interest rates in anticipation of Brexit’s global financial market impacts. Williams said the pestering for rate information never slows at this point in the year. “It’s become a bit of an annual ritual in August for everyone to ask me, ‘what’s the fed going to do in September?’ At this point in the year I wish September were over.” September may be too soon — Williams only said rates “should be on the table” — but the national economic trends justify a rate increase sometime in the near future. “In the context of a strong domestic economy with good momentum,” he said, “it makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later.” Williams spent most of the AEDC luncheon explaining how the complexities of monetary policy make it difficult to be any more specific.  “It’s hard to explain all the factors that go into the reasons for putting of f the next rate increase,” he said. “It’s hard to communicate a strategy of gradual rate increases.” The Federal Reserve’s two main functions are to ensure maximum employment and monitor inflation. This year, both measurements of economic health seem backed by reports. The national unemployment rate is 4.9 percent, smack dab on the mark for the 5 percent unemployment rate the Federal Reserve considers optimal for a healthy economy. The Federal Reserve has a benchmark inflation rate of 2 percent. Right now, Williams said Fed economists put the inflation rate at 1.5 or 1.75 percent. Williams’ core argument said the U.S. economy is doing so well that the Fed needs to slow it down. “Quite honestly, we need to see the pace of job growth start to slow down to a more sustainable pace,” he said. “We need to see the U.S. economy grow, but not at the same pace it’s been going the last couple years.” Critics of a Federal Reserve rate hike, and critics of the supposed strength of the U.S. economy in general, point to different numbers, however. National rates of labor participation — total labor force divided by Americans over 16 years of age — has performed less impressively than the national unemployment rate, which some say point to the U.S. economy being less rosy a picture than the Federal Reserve would like to believe. Williams explains the low rates of labor participation away with “demographic factors.” More college-age workers are staying in school longer, and more Baby Boomers are entering retirement. A successful month adds 80,000 jobs in his mind, and the last few months have seen up to 180,000 jobs a month “We should expect the pace of job gains to slow, and no one should be alarmed when it does,” he said. “We should only be alarmed, frankly, if we don’t see that necessary slowdown.” Inflation rates have been staved off, he said, by the 2015 drop in oil prices and the relative strength of the U.S. dollar compared to key import and export countries. Ironically, these factors which help Lower 48 pocketbooks also harm Alaska’s oil-based and seafood-based exports, both critical to the state economy. Alaska’s 6.7 percent unemployment is also the highest in the nation. All the more reason for Alaska not to fear a rate increase, Williams said. “All the issues we’re talking about here just swamp whether interest rates are 1 or 2 or 3 percent,” said Williams. “Those are things that have very modest implications in the long run for any of the issues we’re talking about in terms of economic development, all these things. There’s no question that Alaska can do well in a world with 3 percent interest rates. That’s not even on the radar.” DJ Summers can be reached at [email protected]    

Sotomayor talks Supreme Court scrutiny, offers advice at Anchorage event

Life on a changing Supreme Court comes with fame and criticism, but it’s a little quieter without recently deceased Antonin Scalia, according to Associate Justice Sonia Sotomayor. Sotomayor stopped for a visit in Anchorage during a statewide tour she’s folded into the court’s summer vacation as part of her mission to visit each of the 50 U.S. states. The Alaska Bar Association booked the event at the Dena’ina Center for a crowd half full of the Last Frontier’s lawyers and half full of Sotomayor’s admirers. U.S. Ninth Circuit Court of Appeals Judge Morgan Christen, a former Alaska Supreme Court justice, moderated the discussion with Sotomayor from a list of questions submitted by Alaska Bar Association members and the general public, more of them veering into personal territory than political. Justice Scalia’s death on Feb. 14 put the Supreme Court at the center of a national political battle with issues including race and the death penalty upcoming before the court during a presidential election. The Republican leadership, worried of another liberal judge shifting the court’s balance, have refused to consider President Barack Obama’s nominee Merrick Garland. The court will likely still have eight members when it begins its next session on Oct. 3. Those attorneys and politicos looking for hints at current Supreme Court direction found no thought fodder, however. Sotomayor, appointed by Obama in 2009 as the third woman and first Hispanic justice in U.S. history, spent less of her time talking about the court than her reaction to sitting on it. For the duration of the meeting, Sotomayor strolled through the audience shaking hands as a half a dozen Secret Service agents watched from the room’s edges for sudden movements. “Don’t stand up,” she’d told the crowd before she waded in. Sotomayor did not directly answer a question about how the court has changed since Scalia’s death. Mostly, she said, the court is “less fun” and quieter without him around. Scalia was known for his forays into oral arguments and in his absence Sotomayor said she found herself speaking more to fill the void. “He was a big brother who sometimes said the most annoying things and we disagreed a lot in writing,” she said, “But he was fun. And he was witty. And he was also an extrovert. We acknowledged that in each other. He was curious about the world. Sometimes he would bring up facts nobody else in the room knew… He was entertaining, gregarious, generous when he felt you were in need. He cared.” As the first Latina and third woman justice, Sotomayor has received both praise and public rebuke since 2009, the former for adding diversity to the court and the second for being appointed for diversity’s sake rather than aptitude. In Anchorage, she expressed some resentment at her detractors and the sheer breadth of attention she garnered, saying the constant criticism “got to my stomach” and made her waver on accepting the nomination. “I was reading about how harsh I was, how tough I was, and that I really wasn’t smart,” she said. “Is this really worth destroying a lifetime of what I had thought was a great reputation?” Accept she did, however, and she said she credits her diversity on the court as a paramount issue, though she clarifies it’s diversity of experience the court needs, not diversity of appearance. “I don’t define diversity by ethnicity or gender alone,” she said. “I worry a lot about our Supreme Court today. We have all Ivy Leaguers, myself included. We have four New Yorkers. We have people from Washington, D.C., New Jersey. We have nobody from the Midwest. We have no Protestants.” The court, she said, needs people from different experiences to capture the broadest knowledge and perspective base possible. The Supreme Court judges have to become expert in each case they decide, and need all the outside information they can use. “You’re asking a judge to become a master of basically every human endeavor there is,” she said. “We have to become a specialist enough to answer the questions the experts can’t. I think you want people involved in the enterprise who really know as much of the world as they can.” To that end, Sotomayor said the growing number of women on the court has played a role in not only better decisions but better relationships between judges overall. Not only did fellow judges Ruth Bader Ginsberg and Sandra Day O’Connor bring about the first Supreme Court decisions in favor of a woman’s claim, but they changed the reputation for divisiveness. O’Connor insisted judges eat together for every meal, Sotomayor said, and scolded those who blew it off. Apart from matters of court membership and values, Sotomayor answered a litany of questions about her experiences being appointed. “Getting nominated to the Supreme Court is like getting onto a rocket ship that takes you to the moon,” she said. “And it doesn’t take you back.” Aside from media and political scrutiny, she talked about the level of attention the general public pays her. She told tales of people flocking to her at rooftop parties, in restaurants and in grocery stores asking for advice or selfies.    “I miss my privacy a lot,” she said. “I went from being a person that could choose when I could be in the front of the classroom or the back of the classroom...to a person who’s up to the front of the room. I’m no longer given a choice. That kind of attention can be very seductive.” For the attorneys who invited her, Sotomayor had two pieces of advice among the stories, imploring lawyers to make written briefs as clear as possible and to find an emotional angle to cases. She told a story about advice from a supervising attorney after a more experienced attorney had beaten her in court twice in a row against the same defendant. Finding a way to make the story interesting and to convince the jury of a moral obligation, she said, was her favorite part of the job. “I loved being a trial lawyer,” she said. “I loved being a trial judge. When and if I retire, I’m not going to sit on a court of appeals. I’m going to try cases.” DJ Summers can be reached at [email protected]

Managers statewide mystified by poor production of pink salmon

Weather patterns contributed to a screwy sockeye run in 2015, and this year the same is happening to pinks, the second-largest salmon harvest in Alaska. In 2016, commercial fishermen have only harvested 8 million pinks as of Aug. 15 in Prince William Sound, the state’s largest pink run. Only one-third are hatchery fish, a marked turn from last years’ massive pink haul of 96 million in the Sound, a 20-year record-breaker over 93 million pinks in 2003. Of these, 80 percent were hatchery fish. Southeast Alaska’s run is doing as badly with only 13.4 million harvested, less than half the already-substandard forecast of 34 million fish. Dan Gray, the area management biologist for Southeast Alaska’s commercial fisheries, said he and fishermen both are stumped as to the poor run’s nature, but seem to think the warm Gulf of Alaska “blob” of 2015, which raised surface temperatures 2 degrees Celsius, has some impact. “Maybe it wasn’t the best thing for high sea survival,” he said. Hope for a midseason pickup in returns is dim. The Southeast pink salmon run midpoint is typically the first week of August. Gray has noted low male-to-female sex ratios throughout the run. “They generally indicate an early and possibly compressed run timing,” he said. “We’re kind of seeing that’s coming to pass. This run looks like it could just fall off the table here quite soon.” Causes might be unclear, but Gray is certain of one thing: weirdness. “The fact this seems to be early and compressed is just a head scratcher for everybody,” he said. “Maybe it shouldn’t be, because we’ve seen such anomalies in the last couple years, with Bristol Bay being two weeks late (in 2015). If that thing was ever two days off the average peak it was big news. We’re seeing some historical really weird stuff. I ask around, ‘Have you ever seen anything like this?’ Across the board, the answer is ‘no.’ This is just historically odd.” Charles Russell, the area management biologist for ADFG’s Cordova office, echoed Gray. “You used to be able to set your clock to a lot of things,” said Russel. “Now every year there seems to be a new variable introduced.” Like last year, Prince William Sound fishermen have made deliveries of species found in waters further south like sunfish and chub mackerel. Nobody has reported a delivery of the latter since 1932. Russel noted other oddities as well. Like in Southeast, the Prince William Sound run seems to be 7 to 10 days early and slightly compressed. “Usually, you’ll start seeing jumpers early in the season, indicators that the fish are coming in,” he said. “This year we had very few jumpers in the Sound. The fish were holding deep because the water was warmer, swimming off shore. We had gorgeous weather here. There wasn’t any rain, so they weren’t going up the streams. The water was warm, and there was a lack of water.” Like Gray, Russell said the blob could be a potential culprit, but doesn’t rule out other unknown factors. “From what I can gather, something knocked them down early,” said Russell. “As to what that variable is, it could’ve been ocean temperature or food variables, something that affected the stock across the board.” Hatcheries are feeling the squeeze of bad returns. The Valdez Fisheries Development Association predicted a catch of 17 million fish, but Russell said 8 million is more likely. The Prince William Sound Aquaculture Corp. expected 20 million in total, and up to 6 million by Aug. 11. By that date, however, fishermen only caught 1.2 million. Russell said the drop in hatchery production shouldn’t raise eyebrows. Wild runs and hatchery runs will vary in production from year to year. “It’s not that there’s anything up with hatchery returns in the Sound,” said Russell. “All these places are seeing a decline in abundance of pink salmon.” In Kodiak, the state’s third largest pink run, “things are even crazier,” said ADFG management biologist James Jackson. Last year, the commercial fleet harvested 33 million fish, an enormous run by Kodiak’s standards. This year, Jackson said a 4 million harvest is rather optimistic, the worst return Jackson has seen since the 1970s. Like Southeast and Prince William Sound, the run was early, to boot. “It’s a phenomenal shift,” said Jackson. “Probably the most frightening thing is not only is this run weak but it looks like it peaked already. Usually right now we’re about 60 percent of our run timing. I wouldn’t be surprised if we’re around 80 percent of our run timing right now.” Hatcheries will likely not meet their cost recovery harvest, he said, and fishermen on Kodiak will deal with a rare island-wide weeklong closure. A bright but no less odd spot arises in above average pink salmon sizes statewide. “We are seeing the largest pinks we’ve ever seen here,” said Jackson. “Our average weight for pink salmon now is five, five and half pounds. Normal is three and half pounds. These guys are almost twice the size they usually are. Fishermen are bringing in 10-pound pink salmon. There’s a guy who brought in a 14-pound pink salmon. They’re enormous.” Jackson had a detailed explanation for the poor production. Weather patterns and ocean temperatures combine for hostile waters for pink salmon fry. “We’ve got ocean temperatures we’ve never seen,” said Jackson. “We’ve got near shore conditions too. Kodiak hasn’t really had a winter in three years. Kodiak has these really deep inner bays, almost like fjords. “We usually get a lot of snowmelt, so you have a lot of abundant fresh water. We haven’t been getting a lot of the snow lately, so a lot of those inner bays have been a lot warmer than we usually see. You have less productive water. Pink fry…if they come out early because there was no winter…those fish have to get to a certain size before they go offshore and start feeding. Those in shore conditions are really important.” The environmental factors carry over from last year, when Kodiak experienced a glut of sea bird and whale mortalities. The irregularities in whether and marine survival, he said, lead to more questions and few answers. “We’ve had the same pink salmon fishing schedule for four years. It’s a beautiful bell curve,” he said. “Our effort has been consistent for the last 20, 25 years. Now, everything is different. Last year’s run was huge around Kodiak. That was a late run. It was just so huge that we thought it was early. When you look at the peak, it was well past what we usually have. In 2014, the run was weak and early, which you don’t usually see. These runs are usually very consistent.” Gone are the days when managers could tell the day of the week by the fish. “It’s a strange year,” he said. “It’s one for the books.” DJ Summers can be reached at [email protected]

Alaskan restrictions help Yukon kings meet Canadian goals

For the second year running, Yukon River chinook salmon seem to be climbing out of an abundance pit. The river is home to a bulk of Alaska’s subsistence communities that suffered from a statewide decline in king salmon, the staple subsistence harvest, since the early 2000s. Historically, the river sees an average return of 300,000 fish, but that hasn’t been seen since 1997. The most recent five-year average is less than half at 126,000 king salmon. Though subsistence users are still restricted to protect kings, 2016 saw good news on the Yukon in terms of commercial chum salmon fishing harvest and king salmon escapement over the Canadian border. At the Eagle sonar station on the border, ADFG counted 71,000 fish by Aug. 10, comfortably more than the 42,500 to 50,000 escapement goal Holly Caroll shoots for. Caroll is the summer management biologist for the Yukon River. She said managing over the escapement goal can look like unnecessary restrictions for subsistence users. However, she said, people forget that the Canadians want to harvest king salmon as well. The escapement goal only aims for how many salmon will spawn on their birthing grounds, not for the entire amount of chinook to be used by the end of the run. By treaty, Canada must have 23 percent to 26 percent of the total escapement goal to harvest on their own. “It’s hard to manage that harvest,” said Caroll. “It’s kind of confusing. We’ll say the ‘harvest-sharing objective’ and people don’t know what that is. Even the total in-river run is confusing.” Last year, Yukon villagers harvested only 7,000 kings for subsistence, according to ADFG survey estimates that take place after the season ends — far below the historical average ranging closer to 60,000 per year. In 2016, Caroll said she hoped to double that number by loosening subsistence restrictions. ADFG will not have those final survey estimates until December. Caroll doesn’t measure success by the fish themselves, but instead by how many of the state’s most remote population gets to eat them. “This is still not an awesome number,” she said. “Subsistence fishermen are still severely restricted. I’m not going to be happy till the run is large enough to stop restricting subsistence harvest. That’s how it’s supposed to be.” This year the commercial fishing season broke harvest records not seen since the 1980s, providing a welcome cushion for the cash-strapped region. Jack Schultheis, the manager of the Yukon River’s only commercial fishing processor, Kwik’pak, said the commercial fleet harvested over 500,000 fish, a marked uptick from the typical 300,000 seen by the summer season’s close.  “All things considered, the best summer fishery this company ever had,” said Schultheis. He did note that conservation measures for kings cut into the potential to harvest the 2.4 million chums, though he commended ADFG managers for opening every commercial opportunity possible once king salmon had cleared through the area. “The foregone harvest was something over a million fish that was available,” Schultheis said. “Once the kings were through here, they did let us fish a lot. The run wasn’t compressed. People did well fishing.” Schultheis believes what’s good for commercial fishermen is good for subsistence fishermen. Yukon commercial fishermen, he said, are invariably subsistence users as well and even adopt commercial methods for home use. Subsistence users often ask Schultheis for ice; commercial fishermen ice and bleed their catch for better storage and marketability. “Subsistence and commercial, it’s like the same thing to them,” he said. “It’s a big factor in their lives here. Everything gets better here when they’re allowed to commercial fish. It’s how they can afford to live here.” The National Oceanic and Atmospheric Administration co-produces a series of surveys with ADFG that predict two more years of improving chinook runs on the Yukon River. The studies began in 2007, when NOAA could no longer secure its own funding and had to get grant money to continue. By 2010, NOAA decided ADFG might like juvenile salmon studies for management purposes, and the federal and state biologists have worked together ever since. Katie Howard, an ADFG biologist, co-manages the juvenile Western Alaska salmon stock portion of the study alongside NOAA’s Jim Murphy. The survey takes place in the Bering Sea north of Nunivak Island. Research teams use pelagic, or midwater, trawls to gather juvenile salmon in the top part of the water column where they usually swim. Among other research points, Howard and Murphy look for abundance estimates, indication of the size range, dietary habits, physical condition, genetics, and presence of diseases or parasites. From the study, Howard knows the amount of marine juvenile salmon correlates closely with final escapement back to upriver spawning grounds. “It’s a pretty stable relationship, at least for the years we have data,” Howard said. Salmon spawn in the fall and hatch in the spring. They usually journey into saltwater between May and August. By the time Howard and Murphy see them in the Bering Sea in September, the numbers of juveniles is consistent with the final number of adults.  “What would have to explain these big changes in productivity on the Yukon is probably occurring before we see them in September,” said Howard. “After that point, it’s been pretty stable marine survival.” The timeline could mean that the first few weeks of a juvenile salmon’s ocean life are critical. Changing weather conditions could be a culprit, she said.  “The first few weeks in the ocean is being really important to whether not you’re going to have a strong cohort or weak cohort,” she said. “That’s the next step (in research). Some of the ideas that have been floating around are differences in timing, as fresh water systems are warming, fish are migrating earlier, and there could be a mismatch with wind conditions.” ADFG’s funding for the Chinook Research Initiative begun under former Gov. Sean Parnell fell prey to declining state revenues, and many of the more robust research and management programs have been cut as well. Howard said ADFG is considering similar juvenile studies for pink salmon in Prince William Sound, but juvenile studies for chinook are still lacking. She hopes the team can continue to develop more grant money to try the chinook surveys further south. “There aren’t a lot of projects like this out there for Alaska,” said Howard. “We are working on funding to do something very similar that would get information on Kuskokwim and Nushagak, mostly Bristol Bay stocks. We’ve kind of fine-tuned things in the Northern Bering and figured out how we can make it work. We think we can just take it south and apply the same thing.” DJ Summers can be reached at [email protected]  

More than 100 names on list to fill marijuana board seat

Gov. Bill Walker has no shortage of names to replace Bruce Schulte on the state’s body of cannabis regulators. Walker fired Schulte from the Marijuana Control Board on July 29, leading to a conclusion on Schulte’s part of anti-cannabis agenda within the governor’s administration. The board’s applicant listings are now stacked with more than 100 industry members, public officials, average citizens and attorneys with varied ties to commercial cannabis. It remains to be seen whether Walker will appoint another member of industry or someone from the general public to the seat. State law requires one seat be reserved for industry and another for either industry or the general public. Through its first year, the board had two industry representatives. Both Schulte and board member Brandon Emmett insist Emmett filled the industry/public seat and Schulte the designated industry seat, but Emmett’s original appointment letter from July 1, 2015, does not specify one way or another. Grace Jang, Walker’s director of communications, said the seat is open to more than just an industry representative. “That seat is open to industry or public,” said Jang. “It just depends on who’s the most qualified.” The list of candidates from 2015, when the board held its first meeting, is still active. Several industry representatives have either reapplied or submitted new applications. Among the new names are Joshua Tyson Bird, Mark Browne, Krystal Dietrich, Billy LaVoyce Fikes, Jr., Johnny Furlong, Matthew Gore, Diane Lee Hutchison, Kim Kole, Cameron Leonard, Robert Mikol, Dollynda Phelps, Rebecca Rein, Amy Tuma and Sara Williams. Those without licenses Bird, Browne, Fikes, Furlong, Gore, Hutchison, Leonard, Nathan and Rein have no cannabis licenses pending. Some are known in the industry, while others have no apparent involvement. Three applicants have legal or public service background. Diane Hutchison serves on the Fairbanks-North Star Borough Assembly with a prohibitionist stance on commercial cannabis. On June 9, Hutchison voted against local approval for several commercial cannabis licenses. She argued both that the licenses were incomplete because they had not completed background checks — the core of a much-debated argument during the 2016 Legislative session — and said she doesn’t support anything that contradicts federal law.  “You can’t just pick and choose what part of the Constitution you are affirming and you are going to uphold,” she said. In August 2015, Hutchison proposed a borough tax of 8 percent on wholesale marijuana, instead of the current 5 percent rate applied to alcohol. “Hutchison has mixed feelings about taxing marijuana,” according to an Aug. 10, 2015, article in the Fairbanks Daily News-Miner. “The government might come to depend on a marijuana tax, which would make it harder to reverse the new law approving marijuana for recreational use, the assemblywoman said. On the other hand, a higher tax might discourage people from purchasing and using marijuana, Hutchison said.” “A higher tax discourages use—to me, that’s a biggie,” Hutchison said, according to the article. “I still think the No. 1 issue here is health and the general well-being of the young people.” Like Hutchison, others come from public or legal backgrounds. Cameron Leonard is an attorney with Anchorage-based law firm Perkins Coie and a former senior assistant Attorney General for the State of Alaska, retiring from that position in 2013. This overlaps the years Cynthia Franklin, the board’s director, served as the Anchorage Municipal Prosecutor. He now specializes in environmental law, particularly relating to helping industrial operations navigate federal environmental process. Rebecca Rein is the deputy city clerk for the city of Houston. Houston is the only locality in the Mat-Su Valley that has actively courted cannabis development, while Wasilla and Palmer have opted out and the borough will have a commercial ban ballot on the October ticket. Other names are well known in industry groups. Bird owns and operates Green Rush Events, the Kenai-based marijuana social club. Furlong operates Cheeky Monkey, “a new start up company which will offer retail franchise storefronts which takes the head shop, vape shop, and accessories and brings them into one clean, sophisticated, and fun adult atmosphere,” according to its website. Williams, who serves on the Mat-Su Borough Marijuana Advisory Committee, recently left her long-time project, Midnight Greenery, and plans to start another, though neither businesses have licenses pending with the Marijuana Control Board. Others have little industry participation or public service or legal experience. Browne has no license and has a public record evidently limited to a letter to the Alaska Dispatch News briefly mentioning the marijuana’s potential ability to help Alaska’s economy. Gore’s public involvement with cannabis consists of several Amazon product reviews for grow tents, lights and plant nutritional supplements. Those with licenses The remaining industry applicants have a range of experience in the commercial marijuana industry. Dietrich, owner and operator of a Talkeetna trucking business, plans to operate a standard cultivation facility in Talkeetna barring a Mat-Su Borough ban in unincorporated areas. Robert Mikol has a license for his Fairbanks standard cultivation facility. Mikol is a geospatial analyst with Wolf Creek Federal Services and a graduate of the University of Fairbanks School of Natural Resource Management. Amy Tuma has a license to manufacture concentrates in Willow. Dollynda Phelps, a Kenai drywall business owner, has a limited cultivation license for a facility in Kenai. Kim Kole has applied for four separate marijuana licenses in Anchorage. Like Kole a fellow Alaska Marijuana Industry Association member Leif Abel, owner of Greatland Ganja cultivation facility in Kasilof, remains on the list from last year’s application period and said during an interview during his facility’s July 28 inspection that he is hoping his application is reviewed. Another AMIA member? Upon leaving the board he once chaired, Schulte, along with several other of the industry’s more visible members endorsed Kole, saying she knows the regulations and as a woman would address criticism from 2015 about the board members being all male. Kole points to her regulatory knowledge as her best asset, highlighting her work producing one of the state’s marijuana handler courses, required by regulation for each commercial employee. “We have to have somebody go in there who knows the regulations cold,” said Kole. “You can’t have somebody new learning that stuff. The fact I put together one of the handler card courses means I’ve gone over them 20 times.” Kole also said her Anchorage home makes her an important voice, though statute for the board’s makeup does not mention geographical representation other than one member must be from a rural area. With Schulte off the board, no members currently live in Anchorage or plan businesses there. Others said Kole or Abel would prolong a year of dominance from the Alaska Marijuana Industry Association. AMIA is among the most visible of cannabis industry groups though also the smallest, having obtained no dues-paying members since its July 2015 birth. Its members are the remnants of the Coalition for Responsible Cannabis Legislation, an advocacy group formed to advocate for the ballot measure legalizing recreational use that passed in 2014. Schulte served as the president of AMIA but resigned shortly after the news broke of his removal from the Marijuana Control Board. Kole is on the board of directors at AMIA alongside Brandon Emmett, Shaun Tacke, a co-owner of a Fairbanks cannabis business license with Emmett, Leif Abel, and attorney Jana Weltzin, who serves as member and legal counsel in addition to handling the personal businesses of several AMIA board members. The group’s mission statement said it will provide fund raising efforts, sponsored recreational activities, informational seminars, group health insurance options and lobbying effort, but has engaged in few events in the last year. The state has no record of any of its members being registered as lobbyists. Phelps is a member of the Alaska Small Cultivators Association, which encourages favorable legislation for limited cultivators with grows under 500 square feet and smaller standard cultivation operations — the Mom and Pop guys, she calls them. She said her own involvement with the regulations is as just as substantial, having hosted one of the marijuana handler’s courses and served on the Kenai Peninsula Borough Marijuana Task Force alongside Leif Abel and Marijuana Control Board chairman and Soldotna Chief of Police Peter Mlynarik. Other industry members like Williams also have local regulatory experience.  Phelps said AMIA’s efforts consist of attention mongering more than advocacy, and that AMIA represents those wanting to dominate the industry rather than ensure equal access for the Mom and Pop operators she represents. “I do not think it’s a wise idea,” said Phelps. “I think this industry needs a much broader industry representation than just those five or seven people. This industry consists of thousands of people, and I question why Gov. Walker would appoint two people from the same industry group and certainly don’t think it’s a good idea to do it again.” Kole said AMIA’s involvement with the Marijuana Control Board process has not benefitted its own members exclusively. “We are not doing it for ourselves,” said Kole. “We are doing it for the industry as a whole.” Kole acknowledged AMIA has not been as active as planned, but that the lag came from time management issues, not intentional clannishness. She said AMIA has scheduled a relaunch in the coming weeks to announce changes that will encourage more membership, including Schulte’s replacement, current board membership and a January 2017 voting process for board members. “We are putting ourselves up for election along with everybody else,” she said. “We want to be as transparent and non-cliquey as possible.” DJ Summers can be reached at [email protected]  

Proposals in, 2017 board meeting to revisit Inlet battles

Deadlines have passed for proposals to the 2017 Upper Cook Inlet finfish meeting of the Alaska Board of Fisheries. The proposal book, now under review, is stuffed with 499 pages that largely carry over the battles fought in the 2014 meeting, when the two-week Board of Fisheries marathon gave way to new rules for the Kenai River management plans that added fuel to the so-called Cook Inlet “fish wars.” The book is currently under review for the 166 proposals submitted. More than a dozen proposals look to modify or entirely repeal the Kenai River Late Run King Salmon Management Plan and the Kenai River Late Run Sockeye Salmon Management Plan. The current late run king salmon plan include restrictions on commercial sockeye fishing and sport fishery bait usage when the department projects an in-river run of less than 22,500 fish. The late run sockeye plan, which begins after the sport fishery closes on July 31, restricts the commercial setnet fleet to 36 hours through Aug. 15 if the Alaska Department of Fish and Game projects a king salmon escapement of less than 22,500 fish. Commercial fishermen largely resent the August sockeye rules and have been restricted by them to some degree in each of the last three years since they were adopted in 2014. However, ADFG used its emergency management authority to allow a 12-hour setnet opener on Aug. 9 after using the allowed 36 hours for the month in the previous week in order to keep late run sockeye from exceeding the in-river goal for the Kenai River. Some fishermen say the August restrictions are a de facto optimum escapement goal. While ADFG sets the sustainable escapement goal, or SEG, the board may set optimum escapement goals, or OEG. An OEG may not be lower than the sustainable escapement goal, but the board may choose a higher range for reasons such as passing more fish to in-river users. “The current provisions in 5 AAC 21.359(e) and (f), which were adopted in 2014, have essentially created an optimal escapement goal (OEG) for Kenai River late-run king salmon bore disproportionately by the Upper Subdistrict set gillnet fishery,” wrote Joel Doner. “The current management plan places the entire burden of conservation for this stock in August solely on the set gillnet fishery.” Because the Kenai River is managed with a sustainable escapement goal of 15,000 to 30,000 king salmon, commercial fishermen wonder why the number comes up at all. “There is no biological reason or data, that can justify for this number,” wrote Gary Hollier in his proposal. “22,500 puts unnecessary restrictions on the ESSN (East Side setnet) fishery. In the Kenai-East Forelands sections, where in some years up to 25 percent of their harvest can occur in August, the current regulation is very devastating. If 15,000 is the minimum goal, and the minimum escapement goal is projected, why are there any time restrictions put on the set net fleet?” The Anchorage Advisory Committee, one of dozens around the state that make recommendations to the Board of Fisheries, wants to decouple the restrictions on commercial sockeye harvest for the Kenai and Kasilof rivers if the use of bait is prohibited in the Kenai River for king salmon. “Allowing ADFG to independently use the 36 hours in each beach will make meeting the objective of maximizing sockeye salmon harvest more effective, and thus, more efficient,” wrote the committee. Elements of the August plan, said others, have tied ADFG management’s hands with the 36-hour limit. “The restrictions in place are too static and will not allow any flexibility to managers,” wrote Paul Shadura, spokesperson for South K-Beach Independent Fishermen’s Association, or SOKI. “The question of pairing is not fundamentally possible in a fisheries with so many different moving parts.” Not only is the August plan unmanageable, others said, but a clear violation of ADFG’s constitutional charge to manage fisheries to ensure maximum yield. “The current version of 5 AAC21.360 and 5AAC21.365 set gillnet fishery management plans are in violation of the constitutional mandate and does not allow adaptive in-season management,” wrote the board’s Central Peninsula Advisory Committee, which also asks repeal the optimum escapement goal of 700,000 to 1.4 million for sockeye. “The result has been gross annual over-escapements and annual loss of harvest in the tune of millions of salmon and tens of millions of dollars.” The Upper Cook Inlet Drift Association, an industry group of Cook Inlet drift net fishermen, notes that sockeye have indeed surpassed the upper end of the goal the majority of the most recent years. “The Kenai River late-run sockeye have exceeded the inriver goal for seven of the last 10 years and the Kasilof River sockeye have exceeded the (biological escapement goal) for nine of the last 10 years,” wrote UCIDA, which also wants to revise the Central District drift plan. Personal use fisheries have a wealth of proposals in the queue as well, asking for expanded hours and zones and restricted hours and zones. Rich Koch, city manager of Kenai, wants to repeal the ability of ADFG to open dipnetting to 24 hours by emergency order, saying the city has enough trouble cleaning up the normal dip net season. “There are inherent safety conflicts between personal use fishery participants and the operation of heavy equipment in a confined area during a dark period of the night/morning, during 24 hour openings of the fishery,” wrote Koch. While commercial fishing representatives are trying to repeal some 2014 restrictions, guided angler representatives will try to enact even more at the 2017 meeting. The Kenai River Sportfishing Association, a guided angler industry group, wants to limit East Side set netters to 29-inch mesh, in addition to increasing the daily bag limit of coho salmon to three after the set net fishery closes in August and expanding boat usage further upstream. “Research conducted at the request of the Alaska Department of Fish and Game and widespread experience of set net fishermen both demonstrate that fishing with shallower set net gear will more selectively harvest large numbers of sockeye with reduced harvest of king salmon,” reads the proposal. “Most fishermen currently use 45 inch mesh depth gear. A maximum net depth of 29 meshes is currently thought to provide the best efficiency for harvesting sockeye while avoiding kings.” KRSA also wants to establish an optimum escapement goal of 15,000 to 40,000 for king salmon and expand Kenai sockeye restrictions to the Kasilof Special Harvest Area. “Higher in-river runs produce tremendous sport fishery benefits with no significant impact on future production or yield for escapements up to 40,000,” the proposal reads. “The proposed upper goal of 40,000 includes the historical average escapement and maintains high production and yield according the Department’s recent escapement goal analysis. “Returns from all historical escapements below 40,000 exceeded replacement and produced substantial yields. There was no significant correlation with returns for escapements between 22,500 and 40,000.”  

Alaska Communications grows business segment in 2Q

Alaska Communications Systems Group Inc. released its second quarter financial report for 2016, underscoring growth in its targeted areas since leaving the wireless industry despite a drop-off in both residential and business connections. Like the first quarter of 2016, Alaska Communications charted an increase in net income over last year. In 2015, second quarter net income was a $4.8 million loss. This year, the quarter’s net income was $0.3 million on total revenue of $56.2 million, up from $55.7 million year-over-year. Alaska Communications’ wireline segment now makes the most important revenue source for the company. While the loss of wireless customers has reduced revenue, broadband-based cash flow has risen. In the second quarter of 2016, total broadband revenue grew 8.4 percent year-over-year. Total business revenue, which includes both broadband and managed IT services, has risen from $31.2 million to $33.9 million. This growth comes mostly from business broadband rather than managed IT services, which have stayed flat since last year. Business broadband revenues grew some $12.6 million to $14.4 million.  “I’m pleased to report our performance is aligned with our operating plan for the year,” said president and CEO Anand Vadapalli during an Aug. 4 earnings call. “We continue to deliver results consistent with the long-term directional view we provided on earlier calls.” As of Aug. 9, the company’s stock was $1.69 per share, a 19 percent drop from the $2.08 per share on Aug. 11, 2015. Investor calls since 2014 have focused on the company’s move to broadband and managed IT after selling it shares of the Alaska Wireless Network and its wireless customer base to General Communications Inc. in 2014 for $300 million. The sale reduced Alaska Communications’ debt — which stands at $169 million now instead of more than $400 million — but also reduced revenue from the wireless market. This year, Vadapalli said the company’s new focus is starting to yield results. Consumer revenues, meanwhile, have fallen, as expected by the company when it switched to unlimited data connections for consumer broadband plans with only one price of $79.99. In 2015, second quarter consumer revenue came in at $10.1 million. This year, that number has dropped to $9.5 million, mostly due to a decline in consumer broadband. Like GCI, Alaska Communications is losing residential connections, dropping 982 connections since last year. Consumer broadband revenue decreased to $6.2 million in 2016 from $6.6 million in 2015. Overall, business connections have actually declined by nearly 3,000 since last year. Rather than expanding the number of connections, Alaska Communications is making more money off the connections it has. The average revenue per user, or ARPU, has risen substantially since last year. For broadband, Alaska Communications’ ARPU for the business section of broadband rose from $268 in 2015 to $314 in 2016. The ARPU drove much of broadband’s growth; the company said business customers are paying more to satisfy high and high demands for data. “This improvement was primarily driven by a $1.8 million increase from new and existing customers buying or increasing their consumption of bandwidth using our advanced network services such as multi-protocol label switching (“MPLS”), dedicated Internet and Enhanced Metro Ethernet,” according to Alaska Communications’ quarterly report. Vadapalli did not directly address a shareholder question about market contraction due to Alaska population declines. These were expected by GCI President and CEO Ron Duncan in an earnings call the day before. GCI announced that it will cut capital expenditures by as much as a quarter next year in light of failure to produce a fiscal plan in Juneau. Duncan said he expects an oilfield recession to combine with GCI’s own cutbacks to contribute to a loss of Alaskans. “We’re expecting the size of the market to compress rather than continue growing,” Duncan said,” depending on how bad the state economy gets in reaction to the fiscal situation, we’re going to see some loss of population over the next several years up here. We’re already seeing it with the compression in the oil industry. We’re going to compound it with the compression of investment spending by not just us but others in the economy.” In response, Vadapalli said he “cannot comment on someone else’s perspective,” but did say the company will not be directly impacted by oilfield contraction. “Our exposure to the two sectors that are most directly impacted by the price of oil, which is the energy sector and the state government remains somewhat limited,” said Vadapalli. “More importantly, our wallet share of the spend from those sectors is also pretty low.” DJ Summers can be reached at [email protected]  

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