Elwood Brehmer

Homer Electric secures lower price on gas deal with Furie

The price of Cook Inlet natural gas continues to trend downward as utilities and producers agree to contracts beyond 2018. Homer Electric Association has signed a gas purchase agreement with Furie Operating Alaska LLC to purchase natural gas beginning April 1, 2016, for $6.50 per thousand cubic feet, or mcf. The deal was submitted to the Regulatory Commission of Alaska Sept. 14. That initial base load gas price is 12 percent cheaper than the $7.42 per mcf price that Hilcorp Alaska and the Department of Law agreed to in the 2012 Consent Decree, a condition of Hilcorp’s purchase of Chevron Corp. and Marathon Oil Co. assets in the basin. The Consent Decree expires in early 2018 at price of $8.03 per mcf. At that time, Homer Electric could be purchasing natural gas from Furie for $7 per mcf, according to the utility’s filing with the RCA. The gas supply agreement is tentative pending the approval of the RCA. The initial $6.50 per mcf price extends through 2016. In 2017, the price increases 25 cents per mcf to $6.75. It continues to escalate 25 cents per mcf each year through 2020, the end of the agreement, when the price would be $7.50 per mcf. Homer Electric’s current supply contract with Hilcorp ends March 31, 2016, and the two were not able to reach an extension, according to the RCA filing. The utility estimates the contract will save it approximately $3 million in the first year versus the Consent Decree price. Those savings dwindling to about $350,000 per year in the out years, when compared to the agreement Hilcorp reached with Chugach Electric Association earlier this year. “This contract will provide one of the Cook Inlet independent producers with a market for its gas, allowing them to move forward with significant investment in Cook Inlet offshore gas infrastructure,” Homer Electric General Manager Brad Janorschke said in a release. “The contract brings to fruition the State of Alaska’s goal to incentivize offshore exploration and development in the Cook Inlet.” Janorschke also said that excess capacity from current gas development could further price competition in the market. Chugach’s agreement with Hilcorp extends through March 2023 at a base load price of $7.96 per mcf. The last two years of the Homer-Furie supply contract, 2019 and 2020, are separate optional terms that can be picked up at the discretion of Alaska Electric and Energy Cooperative Inc., the wholesale gas supplier of which Homer Electric is the sole member. Base gas load under the deal is for between 4 billion cubic feet, or bcf, per year to 6.2 bcf per year. Homer Electric projects its demand to grow by about 4 percent over the length of the contract to just more than 4.4 bcf in 2020. If daily demand exceeds the base load and reaches 12.4 million cubic feet per day, the “swing load” gas price increases to $7.48 per mcf in 2016. Overall, the swing load prices are 10-20 percent less than comparative prices under the Consent Decree and Hilcorp’s agreement with Chugach. Peak load prices at demand greater than 15.4 million cubic feet per day start at $10.73 per mcf in 2016 and escalate to $12.37 in 2020. Furie Vice President Bruce Webb said in the Homer Electric release that the agreement is a step towards Furie’s long-term success in Cook Inlet. “When we began drilling in 2011, the Cook Inlet was in the midst of a potential energy crisis. We are proud to be one of the companies to provide energy security to the residents of Southcentral Alaska,” Webb said. In a previous interview with the Journal, Webb said Furie expects to begin production from the Kitchen Lights Unit in the central Inlet sometime in November. Initial production of up to 20 million cubic feet per day will likely increase as more customers are secured, he said. By the end of the year, Furie will have invested about $500 million in the Kitchen Lights development, according to Webb. Elwood Brehmer can be reached at [email protected]

AIDEA releases five IEP finalists

The five leading Interior Energy Project proposals are out and most of them make aggressive claims about the proposers’ abilities to get low cost liquefied natural gas to the Fairbanks market. Of the final five, three are familiar names to the Interior Energy Project: Hilcorp Alaska and its LNG subsidiary Harvesy Alaska; WesPac Midstream LLC, which proposed a Cook Inlet LNG delivery system to the Alaska Industrial Development and Export Authority board roughly a year ago; and Spectrum LNG, which competed to be an AIDEA partner on the first iteration of the project. The two new players are Salix, Inc., a subsidiary of the Spokane Wash., energy company Avista Corp., and Phoenix Clean Fuels, a consortium of seven companies including General Electric Oil and Gas, fuel supplier Crowley LNG, TDX Power and Alaska Industrial, a North Pole-based trucking company. Spectrum’s boasts the ability to get North Slope LNG to Fairbanks for less than $8 per thousand cubic feet, or mcf, of natural gas — by far the cheapest proposal. It would leave room in the cost model to add several dollars per mcf of gas for regasification and distribution to customers to the overall cost and still come in at or below the final “burner tip” cost goal of $15 per mcf. However, Spectrum’s five-page plan overview does not detail transportation costs or logistics, and uses a speculative wholesale gas cost of $1 per mcf for North Slope natural gas, which is unsubstantiated. The plan would also be completely financed by AIDEA through the grant and loan package approved by the Legislature for the Interior Energy Project. On the other end of the spectrum, Hilcorp offered three conservatively priced, privately financed proposals originating from Cook Inlet: one each for liquefaction at $4.95 per mcf; another gas supply and liquefaction costing $12.25 per mcf, and a delivered LNG to Fairbanks cost of $15 per mcf on a 10-year contract. The latter plan with a complete supply chain mirrors the agreement Hilcorp’s subsidiary Harvest had with Fairbanks Natural Gas for a smaller amount of LNG — a deal ultimately denied last month by Attorney General Craig Richards. WesPac proposed the only final plan with LNG imported from British Columbia. It would use low-cost natural gas liquefied near Vancouver and efficient barge and rail transport methods to get LNG to Fairbanks for $11.08 per mcf equivalent. Each of the proposals is for at least enough LNG to meet the projected demand in the Fairbanks area of 6 billion cubic feet of natural gas per year after full build out of the initial distribution system. AIDEA announced Aug. 3 that it had received 16 proposals from 13 respondents for the Interior Energy Project. Elwood Brehmer can be reached at [email protected]

Judge approves subpoena of former EPA staffer

Pebble Limited Partnership has the go-ahead to depose a key witness in its lawsuit against the Environmental Protection Agency, but that’s only part of the battle. U.S. District Court of Alaska Judge H. Russel Holland ordered a subpoena for former EPA biologist Philip North. Aug. 27. North appears to be a key for either side in determining whether or not the EPA violated federal law while compiling the Bristol Bay Watershed Assessment. The 1,000-plus page document finalized in January 2014 is the basis for the agency’s attempt to preemptively block development of Pebble’s copper and gold deposits through its Clean Water Act Section 404(c) wetlands protection authority. The exhaustive assessment found large-scale mining in the Bristol Bay watershed would irreparably harm the region’s robust salmon fisheries. In November, Holland issued an injunction to halt all work on the 404(c) process until the court case is resolved. He denied an EPA motion to dismiss the case June 4. North worked extensively on the assessment beginning in 2011 and Pebble claims he conspired to kill the proposed mine in the years prior. “North was instrumental in forming and utilizing the work of de facto federal advisory committees at issue in this case and in utilizing them to provide recommendations and advice for EPA to launch its unprecedented attack on Pebble mine,” Pebble attorneys wrote in a motion to subpoena North. Pebble’s current case against the EPA is based on the premise that the agency predetermined its stance against the mine before the assessment was finalized. Additionally, the mine investors claim the EPA meetings with anti-mine groups before and during the assessment process violated the Federal Advisory Committee Act, or FACA, because they did not include Pebble and follow open meetings procedures. The EPA argues Pebble had ample opportunity to provide input as the assessment was formed. Agency attorneys said during oral arguments in May that Pebble and EPA officials have met more than 30 times since 2003 — long before the assessment process officially began in 2011. Holland set North’s deposition to occur Nov. 12, in Anchorage, but he is currently believed to be in Australia. The federal judge also found $2,400 would be sufficient to cover travel expenses for North; Pebble offered to pay $1,500 in its motion. Members of Congress have accused North of evading prior interviews when he was allegedly in New Zealand. EPA Administrator Gina McCarthy has been drilled while testifying before congressional committees about emails from North regarding Pebble that her agency claims were lost when a computer crashed in 2010. Whether or not the EPA followed the Federal Records Act and properly backed up the emails is unresolved. The EPA Inspector General is also in the midst of a review of the Bristol Bay Watershed Assessment that began in May 2014. Pebble also accused North of “secretly collaborating, including through personal email” with attorneys for Alaska Native groups and Trout Unlimited — staunch mine opponents — to draft a petition that is purportedly the catalyst for the assessment in its subpoena motion. Further, Pebble believes North recruited “an entourage” of scientists, environmental groups and lobbyists for the EPA to use in support of the assessment. Finally, North is alleged to have drafted an “options paper,” which Pebble called the “agency’s roadmap” to preemptively stop the mine before the petition to conduct the assessment was submitted. The EPA did not oppose the attempt to subpoena North, but contended Pebble’s characterizations of him are based on allegations and not evidence. Holland wrote in a footnote to his order that “some of (Pebble’s) observations with respect to Mr. North are just a bit inflammatory and counsel for (EPA’s) responsive comments were not at all helpful.” Elwood Brehmer can be reached at [email protected]

Mat-Su Borough unloads idle ferry to Philippine Red Cross

The Matanuska-Susitna Borough’s big boat nightmare might finally be over. Borough Manager John Moosey got approval from the Mat-Su Assembly late Sept. 1 to sell the M/V Susitna ferry for $1.75 million to the Philippine Red Cross. “I’m elated that this ship will be put to the noble work of saving lives after disasters in the Philippines,” Moosey said in a borough release. “We exhausted our options on disposing of this vessel. It’s time to give it new life and release our taxpayers from the burden of its upkeep.” The Susitna has cost the borough about $30,000 per month in maintenance, moorage and insurance, Moosey has said. Once envisioned for ferry service between Point MacKenzie and Anchorage, the borough has been trying to sell the 195-foot Susitna for about three years since plans to build a landing terminal outside of Anchorage fell through. A $12.3 million bill issued to the Mat-Su Borough more than a year ago by the Federal Transit Administration for federal grant money spent on the borough landing terminal and other parts of the failed ferry plan is still unresolved, according to the borough statement. Borough officials said shortly after the repayment was demanded that a smaller settlement could hopefully be reached. Moosey said in an interview that Transportation Secretary Anthony Foxx told borough officials that while the local government would not get out of paying back the grants completely, an amicable deal could be reached. Moosey noted a belief that the FTA understands the ferry project was supposed to be shared with the Municipality of Anchorage and now the Mat-Su Borough is bearing the entire fiscal responsibility. “They know that if we have to pony up for $12 million it’s going to have some serious finance implications (for the borough) and I think they’re sensitive to that,” he said. He added that finally selling the Susitna should help resolve the outstanding FTA debt. The $78 million prototype vessel was built for the U.S. Navy at the Ketchikan Shipyard and was donated to the borough after the Navy was finished with it. Philippine Red Cross CEO Richard Gordon said in the borough statement that there are an average of 170 maritime accidents each year in the country’s waters and the Susitna will be used to respond to those emergencies and others. “The Susitna will serve as a mobile clinic-hospital ship serving some of the most isolated of the 7,107 Philippine Islands,” Gordon said. It will also be made available to Red Cross societies and non-government organizations for disaster relief when needed, he said. The sale, however, is not final until “a slew” of federal agencies sign off on it because the Susitna is a military prototype, Moosey said. The borough has been waiting for that approval for nearly six months, since a deal with another potential buyer was close, according to Moosey. He said it has been frustrating to wait for the feds to sign off on what he views as a formality. “The Office of Naval Research pulled everything they wanted on (the Susitna) and they have absolutely no interest in what we do with the ferry,” Moosey said. “With that — we’re optimistic and wonder why this would be a problem other than it seems to be taking forever.” Despite being unwanted, the 195-foot Susitna is a vessel with remarkable capabilities. The catamaran ferry has the space to hold up to 129 passengers, 20 vehicles and has a 35-ton overall freight capacity. It has a main deck that can be lowered to offload equipment and can land on beaches in as little as four feet of water. In addition to the $1.75 million sale price, the borough will get another $60,000 for “upkeep costs” while repairs are made to the Susitna. It sustained engine damage earlier this year from heavy rainfall while it was moored at Ward Cove near Ketchikan — where it has been for several years. The Mat-Su Borough rejected a $2 million offer for the Susitna in 2013. Elwood Brehmer can be reached at [email protected]

Judge rules for Jewell in King Cove road lawsuit

King Cove will not get its road to Cold Bay, through the courts, anyway. U.S. District Court of Alaska Judge H. Russel Holland on Sept. 8 denied the Agdaagux Tribe of King Cove’s attempt to overturn Interior Secretary Sally Jewell’s record of decision that has prevented the construction of an emergency access road between the Alaska Peninsula communities of King Cove and Cold Bay. Jewell issued her decision Dec. 23, 2013, stating that the proposed 11-mile, gravel road between King Cove and Cold Bay would irreparably harm critical waterfowl habitat in the Izembek National Wildlife Refuge. The Tribe of King Cove filed suit against Jewell in June 2014 and the State of Alaska then joined the suit on behalf of the Alaska Native group. Holland wrote in a 38-page opinion that Congress gave the Interior secretary the option to select the no-action alternative resulting from the environmental impact statement needed to evaluate the road proposal, and thus Jewell did not violate the National Environmental Policy Act. “Given the sensitive nature of the portion of the Izembek Wildlife Refuge which the road would cross, the NEPA requirement for approval of the proposed road probably doomed the project,” Holland wrote. “Under NEPA, the secretary evaluated environmental impacts, not public health and safety impacts. “Perhaps Congress will now think better of its decision to encumber the King Cove road project with a NEPA requirement.” In 2009 Congress approved a land swap of 206 acres in Izembek, needed to build the road, for about 56,000 acres of state and Native village of King Cove Corp. land on the Alaska Peninsula. The deal was part of the Omnibus Public Land Management Act signed by President Barack Obama. Congress also paid for an emergency response hovercraft for King Cove to use across the water body of Cold Bay, but the Aleutians East Borough suspended the operation in 2011, stating the roughly $1 million in annual operating costs was too much for the small government. The road would provide an essential link for emergency services when bad weather prevents flights out of King Cove or boat travel across Cold Bay. With a paved runway longer than 10,000 feet, Cold Bay’s airport has one of the longest civilian runways in the state and is the area’s main link to Anchorage. U.S. Coast Guard helicopter medevacs, which originate in Kodiak, are the only current means out of King Cove during inclement weather. The Wilderness Society issued a statement praising Holland’s ruling and noting that no federal wilderness area has been stripped of its protection under the Wilderness Act of 1964 for the purpose of building a road. “The U.S. Fish and Wildlife Service (the lead agency on the EIS) has conducted extensive scientific studies that repeatedly demonstrate the destructive nature of this unnecessary and extremely costly proposed road,” The Wilderness Society Alaska Director Nicole Whittington-Evans said in the release.” We are very pleased by the court’s ruling, and hope that this issue can finally be resolved by all parties working together to find a non-road alternative that will address local residents’ concerns while leaving Izembek’s globally significant resources intact.” The State of Alaska has allocated money to pay for the road, estimated at about $21 million. In December, Holland dismissed four of the five claims brought against Jewell by the state and the tribe. He upheld the allegation that health and safety concerns had a connection to the physical environment in this case. Therefore, the tribe’s interests fell “within NEPA’s zone of interests,” Holland wrote. However, he found that Jewell’s selection of the no-action alternative does not need to meet the purpose and need of the proposal, which it rarely does, regardless of the project, according to Holland. Sen. Lisa Murkowski has hammered Jewell on her decision at every opportunity since it was issued. As chair of the Senate Appropriations Subcommittee on Interior and Environment, Murkowski included include a provision in the Interior budget moved in June that calls for the state and the Interior Department to negotiate a “fair trade” land exchange that would allow the state to build the road. Elwood Brehmer can be reached at [email protected]

Obama paints dire view on climate change

President Barack Obama seems to be setting the agenda for the final 16 months of his presidency, and climate change is his top priority. The president exclusively discussed the urgency with which the United States and other nations must act to stem the warming air and rising tides during a half-hour speech to close the State Department’s Conference on Global Leadership in the Arctic: Cooperation, Innovation, Engagement and Resilience, or GLACIER, Aug. 31 at the Dena’ina Civic and Convention Center in Anchorage. The planet is warming faster than previously thought, Obama said repeatedly, and denying that fact is pointless. “The science is stark and it’s sharpening. It proves that this once distant threat is very much in the present,” the president said. “In fact, the Arctic is the leading edge of climate change — our leading indicator of what the entire planet faces.” He noted that the Arctic, particularly Alaska, has warmed twice as fast as the rest of the world over the last century. Last year was the warmest year on record in the state, as it was worldwide. To further localize the issue, he said that thawing permafrost and shrinking sea ice has led to some of the swiftest shoreline erosion on Earth in Western Alaska. Obama also said the state’s fire season is a month longer than it was in 1950, among the litany of climate change examples he offered. “The point is that climate change is no longer some far off problem. It is happening here; it is happening now,” he said. The results threaten the livelihoods of rural Alaska communities dependent on fishing and tourism-based economies, he added. Obama began to shift the immediate focus of his administration to addressing climate change Aug. 3 when he announced the Environmental Protection Agency would adopt the Clean Power Plan, a Clean Air Act proposal to reduce carbon emissions from power plants by nearly a third below 2005 levels by 2030. Alaska is exempt from the rule because of a lack of data regarding emissions from qualifying plants in the state, according to the EPA. The members of Alaska’s congressional delegation said before the president’s first extended visit to the state that they hoped his trip would include more than just a climate agenda. Their wishes went unfulfilled. Sen. Dan Sullivan was one of the first to greet Obama as he stepped off Air Force One at Joint Base Elmendorf-Richardson. Sen. Lisa Murkowski said in an Aug. 30 welcoming speech to GLACIER attendees that residents of the Arctic and their need for healthy economies should be at the forefront of Arctic policy discussions. North Slope oil and gas development has radically improved the standard of living for the people of the area over a very short time, she noted. “As a result of responsible resource development, more people on the North Slope now have medical clinics that provide care for themselves and their loved ones. They have improved telecommunication and search and rescue equipment for hunting parties that previously might have disappeared on the ice, never to be heard from again. And they have access to other modern amenities — like flush toilets — that the rest of the U.S. takes for granted,” Murkowski said. She wrote a letter to Obama prior to his Alaska visit emphasizing that conventional resource development is one of the best ways to lift the state’s economy and in turn support new energy technologies being implemented across the state. Alaska Native and Northwest Arctic Borough Mayor Reggie Joule said during a speech at the outset of GLACIER that Alaska Natives need food, economic and cultural security, which are all impacted by climate change. At the same time, Joule said it’s understood that the state’s resources are both a gift and a responsibility, and a medium can be struck. “We have learned that with diligence and oversight that you can balance resource development and still have the animals and the fish and the plants flourish,” he said. “Alaska has a 60-year history of oil development on the North Slope; we have Red Dog Mine (in Northwest Alaska) where we have worked to make sure that the subsistence renewable resources are not sacrificed as we develop these nonrenewable resources.” Lt. Gov. Byron Mallott noted to Secretary of State John Kerry, who attended GLACIER, that Interior Secretary Sally Jewell is likely more important to Alaska than he is because of her ability to authorize resource development on public lands in the state. Environmental groups typically in the president’s corner had harsh words for him stemming from his administration’s approval of Shell’s drilling offshore drilling plan in the Chukchi Sea. “President Obama emphasized two things during his speech in Alaska: the urgency of climate change and the possibility of solving it,” Greenpeace Senior Arctic Campaigner Mary Nichol said in a formal statement. “But it’s time for the president to stop talking about urgency and stop approving extreme fossil fuel projects like Shell’s Arctic drilling plans. In fact, the approval of that very project undermines ever other bold move the president has made on climate change, including the recent Clean Power Plan.” A statement from Friends of the Earth called the president’s trip to Alaska a showcase in “hypocrisy,” because of the green light given to Shell’s activity. The Wilderness Society President Jamie Williams was more subdued. “Obama’s visit (to Alaska) comes at a historic time for management of our public lands, especially the Arctic,” Williams said. “We have a generational opportunity to reshape the trajectory for whether, where and what kinds of energy we develop and use with common-sense reforms that modernize antiquated policies to ensure to don’t have to make a false choice between the energy we need and the places that we love.” Obama visited Seward, where he hiked the receding Exit Glacier and toured Resurrection Bay, as well as Dillingham and Kotzebue during his three days in Alaska. Jewell, also in Anchorage with the president, visited Kotzebue and nearby Kivalina in February. Kivalina is one of numerous Western Alaska coastal villages fighting against a quickly eroding shoreline, which may ultimately force the community to relocate. Obama spoke before foreign ministers, primarily from northern countries, in Anchorage to discuss Arctic climate, environmental and economic issues. Kerry said in remarks to open the daylong conference that he was grateful for the diverse gathering of nations to address the pressing issue. “What we discuss here today is important not just for the Arctic, it is important for the rest of this planet,” Kerry said. “Everywhere I travel, leaders and average folks talk to me about the impacts of climate change and what they feel and see is happening in their lives in one particular part of the world or another.” Because it is a worldwide problem, climate change requires a worldwide effort towards a solution, Obama said, and the U.S. will lead that effort as long as he is president. Political leaders who deny the impact of climate change are playing politics and “are not fit to lead,” the president asserted. He received applause when he said, “The time to plead ignorance has passed.” “We can have a legitimate debate about how we are going to address this problem but we cannot deny the science,” Obama said. The president’s message is leading up to the United Nations Climate Change Conference in Paris this December. He said this year “has to be the year the world reaches a (climate change) agreement to protect the one planet we have while we still can.” Elwood Brehmer can be reached at [email protected]

Mat-Su Assembly approves $1.75M sale of Susitna ferry

The Matanuska-Susitna Borough’s big boat nightmare might finally be over. Borough Manager John Moosey got approval from the Mat-Su Assembly late Tuesday night to sell the M/V Susitna ferry for $1.75 million to the Philippine Red Cross. “I’m elated that this ship will be put to the noble work of saving lives after disasters in the Philippines,” Moosey said in a borough release. “We exhausted our options on disposing of this vessel. It’s time to give it new life and release our taxpayers from the burden of its upkeep.” The Susitna has cost the borough about $30,000 per month in maintenance, moorage and insurance, Moosey has said. Once envisioned for ferry service between Point MacKenzie and Anchorage, the borough has been trying to sell the 195-foot Susitna for about three years since plans to build a landing terminal outside of Anchorage fell through. A $12.3 million bill issued to the Mat-Su Borough more than a year ago by the Federal Transit Administration for federal grant money spent on the borough landing terminal and other parts of the failed ferry plan is still unresolved, according to the borough statement. Borough officials said shortly after the repayment was demanded that a smaller settlement could hopefully be reached. The $78 million prototype vessel was built for the U.S. Navy at the Ketchikan Shipyard and was donated to the borough after the Navy was finished with it. Philippine Red Cross CEO Richard Gordon said in the borough statement that there are an average of 170 maritime accidents each year in the country’s waters and the Susitna will be used to respond to those emergencies and others. “The Susitna will serve as a mobile clinic-hospital ship serving some of the most isolated of the 7,107 Philippine Islands,” Gordon said. It will also be made available to Red Cross societies and non-government organizations for disaster relief when needed, he said. Despite being unwanted, the 195-foot Susitna is a vessel with remarkable capabilities. The catamaran ferry has the space to hold up to 129 passengers, 20 vehicles and has a 35-ton overall freight capacity. It has a main deck that can be lowered to offload equipment and can land on beaches in as little as four feet of water. In addition to the $1.75 million sale price, the borough will get another $60,000 for “upkeep costs” while repairs are made to the Susitna. It sustained engine damage earlier this year from heavy rainfall while it was moored at Ward Cove near Ketchikan — where it has been for several years. The Mat-Su Borough rejected a $2 million offer for the Susitna in 2013. The sale is not final until federal agencies approve it because the Susitna is a military prototype vessel, according to the borough.   Elwood Brehmer can be reached at [email protected]

Obama announces support for building new icebreaker

While in Seward Sept. 1, President Barack Obama said he will push for expedited construction of a heavy icebreaker, a cause Alaska’s congressional delegation has been advocating for years. The administration hopes to accelerate delivery of a $1 billion heavy icebreaker by two years, from 2022 to 2020, and will push Congress to fund the project, according to a White House statement. The Coast Guard’s average annual capital budget is about the same $1 billion. The need for U.S. icebreaking capacity is evident when compared to our Arctic counterparts, the president noted. Russia has 40 ice vessels in operation or under construction, while the U.S. has two. “It’s important that we are prepared so, whether it’s for search and rescue missions or national security reasons, whether it’s for commerce reasons, that we have much greater capability than we have now,” Obama said. He made the announcement in front of the Seward City Dock before touring Resurrection Bay and the Kenai Fjords — a boat trip focused on viewing the effects of climate change. The U.S. Coast Guard Cutter Polar Star is the country’s only heavy icebreaker in operation and along with the medium icebreaker Healy, comprise the operational icebreaking fleet of two. The Polar Sea, a sister ship to the Polar Star, is inactive and located in Seattle being used as a source of spare parts. Rep. Don Young said in a formal statement after the president’s announcement that the administration’s acknowledgement of the icebreaking need is an important step for Alaska. “For too long this conversation has fallen on deaf ears, which is why my colleagues and I called upon the president to address on our nation’s dwindling icebreaker fleet during this visit,” Young said. “I’m encouraged to see the administration recognize some of the region’s broader needs – icebreakers, deep water ports and navigational aids – and hope they do their part when it comes to tackling these significant infrastructure hurdles.” Sen. Lisa Murkowski included $6 million for evaluating the condition and capability of the Polar Sea in the Department of Homeland Security budget passed out of committee. She also voted against a $940 million Democratic proposal to fund a heavy icebreaker earlier this year, saying that despite the need for the ship, the spending would surpass the sequestration spending cap. For further Arctic support infrastructure, the U.S. Army Corps of Engineers is working through the public process on a $210 million plan to expand and deepen the Port of Nome. The more capable port would provide a home base for smaller support and response vessels tasked with aiding the oil and gas industry and large ships traversing U.S. Arctic waters. Announced in February, the port plan would require local or state matching funds to about $100 million of federal money, all of which still needs to be secured. The project likely won’t be finished for at least 10 years, corps officials have said. Maritime Arctic emergency management The obvious detriments of climate change to Alaska were the focus of the GLACIER conference Aug. 31 in Anchorage, but the potential opportunities resulting from a warming Arctic were not lost either. Rear Adm. Dan Abel, commander of the 17th District of the U.S. Coast Guard in Alaska, said managing growing business opportunities in the region means being prepared for an increasing range of challenges as summer Arctic sea ice recedes. “Nothing in maritime is risk free, so that’s why we have both sides, prevention and response,” Abel said during a panel discussion on international preparedness and cooperation for emergency response in the Arctic. Traffic numbers through the Bering Strait are a likely indicator of what’s to come as more water opens up each summer. The number of vessels traversing the narrow passage more than doubled from 220 in 2008, to 480 in 2012, Shell’s first year of drilling in the Chukchi Sea. The vessel count through the Bering Strait was 340 last year, according to Abel. Activity from shipping, energy, tourism and possibly fishing vessels is just expected to keep growing. Adding to the challenge are the 12,000-plus bowhead whales and millions of birds that migrate through the Bering Strait twice each year, he said. Separating commercial activity from wildlife and subsistence users is a major task. “Keeping all of this new ocean traffic moving smoothly is a growing concern for safety’s sake. It’s also important to our U.S. economy, to Alaska’s economy, the environment and national security,” said Gerd Glang, director of the National Oceanic and Atmospheric Administration Office of Coast Survey. Arctic vessel traffic and summer sea ice coverage are inversely related, and if current models are correct, the Arctic will be nearly ice free by 2040, he added. As a result, the Coast Guard pushes as many resources north from early July through October as possible. Abel said this year two helicopters typically stationed in Kodiak were moved to Deadhorse for the open water season, cutting response time to Barrow from more than eight hours to about 90 minutes. Still, Abel said first responders offshore from the North Slope or Western Alaska are likely to be recreational, commercial or subsistence vessels, which is why the Coast Guard has 51 oil and fuel spill response kits stashed in 19 communities in the region. “The first responders deserve to have a Band-Aid kit,” he said, should an emergency arise. North Slope Borough Search and Rescue Director April Brower said the majority of the borough’s responders are subsistence hunters because they have adequate gear, understand the dangers of the Arctic waters and how long someone could potentially survive in the elements. Abel emphasized the importance of the Coast Guard’s relationship with local residents throughout the hour-long discussion. “Do we have a village, borough, tribal, state federal or international teammate that can help us in our mission?” he said. As far as search and response efforts go, he also said the Coast Guard’s relationship with Russia is good, despite a strained relationship on other diplomatic fronts. “I’m happy with the connection I have with my tactical peer 44 miles to the west (across the Bering Strait) in Russia,” Abel remarked. Glang said much could be done to prevent hazardous situations, or at least respond quicker and safer, simply through improved mapping of the U.S. Arctic. However, obtaining the charts is not that simple. The federally defined maritime Arctic includes waters above the Arctic Circle, but also the Bering Strait south, encompassing the Bering Sea and the Aleutian Islands. In total, the Arctic accounts for about 63 percent of navigationally significant U.S. waters, according to Glang. Less than 1 percent of that has been charted with modern technology. “NOAA charts in the Arctic are patchwork of hydrographic surveys, which were motivated by economic development and national defense since before Alaska was a state,” Glang said. Some thorough charts from decades ago are outdated, particularly those around river mouths where channels, shoals and currents constantly change, he said. Some good news is that 20 percent of the U.S. Arctic water is not deemed high priority for charting because of location and water depth, and about 70 percent of vessel traffic occurs in that area, according to Glang. This summer, the NOAA hydrographic charting vessels Fairweather and Rainier spent nearly two months surveying Kotzebue Sound, but that work is not cheap. In 2010, NOAA led the formation of the Arctic Regional Hydrographic Commission, a charting partnership focused on data sharing and preventing duplicative charting with Canada, Norway, Denmark and Russia. “We promote cooperation in hydrographic surveying and nautical charting,” Glang said. “The commission provides a forum for better collaboration to ensure safety of life at sea, protecting the increasingly fragile Arctic ecosystem and support for the maritime economy.” Glang said needed information goes beyond accurate charts to simple tide and current data in Arctic waters. Much of the tide and current data relied upon today was gathered in the 1950s over only a few days at each location, when at least 30 days of measurement is required to model accurate predictions. NOAA has 10 water level observation points in the Arctic and another 16 across Alaska leaving 27 gaps in water level observation, he said, 19 of which are in the Arctic. The near shore water level and current information is essential not only for preventing disasters, but also responding to them quickly and safely, he said. Elwood Brehmer can be reached at [email protected]

Climate change only Alaska agenda item for Obama

President Barack Obama seems to be setting the agenda for the final 16 months of his presidency, and climate change is his top priority. The president discussed the urgency with which the United States and other nations must act to stem the warming air and rising tides exclusively during a half-hour speech to close the State Department’s Conference on Global Leadership in the Arctic: Cooperation, Innovation, Engagement and Resilience, or GLACIER, Aug. 31 at the Dena’ina Civic and Convention Center in Anchorage. The planet is warming faster than previously thought, Obama said repeatedly, and denying that fact is pointless. “The science is stark and it’s sharpening. It proves that this once distant threat is very much in the present,” the president said. “In fact, the Arctic is the leading edge of climate change — our leading indicator of what the entire planet faces.” He noted that the Arctic, particularly Alaska, has warmed twice as fast as the rest of the world over the last century. Last year was the warmest year on record in the state, as it was worldwide. To further localize the issue, he said that thawing permafrost and shrinking sea ice has led to some of the swiftest shoreline erosion on Earth in Western Alaska. Obama also said the state’s fire season is a month longer than it was in 1950, among the litany of climate change examples he offered. “The point is that climate change is no longer some far off problem. It is happening here; it is happening now,” he said. The results threaten the livelihoods of rural Alaska communities dependent on fishing and tourism-based economies, he added. Obama began to shift the immediate focus of his administration to addressing climate change Aug. 3 when he announced the Environmental Protection Agency would adopt the Clean Power Plan, a Clean Air Act proposal to reduce carbon emissions from power plants by nearly a third below 2005 levels by 2030. Alaska is exempt from the rule because of a lack of data regarding emissions from qualifying plants in the state, according to the EPA. The members of Alaska’s congressional delegation said before the president’s first extended visit to the state that they hoped his trip would include more than just a climate agenda. It appears their wishes will go unfulfilled. Obama is scheduled to visit Seward, where he will see receding Exit Glacier, as well as Dillingham and Kotzebue during his three days in Alaska. Interior Secretary Sally Jewell, also in Anchorage with the president, visited Kotzebue and nearby Kivalina in February. Obama spoke before foreign ministers primarily from northern countries in Anchorage to discuss Arctic climate, environmental and economic issues. Secretary of State John Kerry said in remarks to open the daylong conference that he was grateful for the diverse gathering of nations to address the pressing issue. “What we discuss here today is important not just for the Arctic, it is important for the rest of this planet,” Kerry said. “Everywhere I travel, leaders and average folks talk to me about the impacts of climate change and what they feel and see is happening in their lives in one particular part of the world or another.” Because it is a worldwide problem, climate change requires a worldwide effort towards a solution, Obama said, and the U.S. will lead that effort as long as he is president. Political leaders who deny the impact of climate change are playing politics and “are not fit to lead,” the president asserted. He received applause when he said, “The time to plead ignorance has passed.” “We can have a legitimate debate about how we are going to address this problem but we cannot deny the science,” Obama said. The president’s message is leading up to the United Nations Climate Change Conference in Paris this December. He said this year “has to be the year the world reaches a (climate change) agreement to protect the one planet we have while we still can.” Elwood Brehmer can be reached at [email protected]

UA prioritizes its way through budget cuts

University of Alaska leaders are trying to minimize the impact of budget cuts on the new school year while at the same time remodeling operations to make institutions statewide more efficient. In raw numbers, the UA System absorbed a $26.3 million cut from the Legislature to its unallocated General Fund appropriation, according to the operating budget approved by the Board of Regents. However, the actual cut is closer to $31.4 million, UA officials say, when unfunded fixed cost increases, such as pay raises for union employees are included. Most union faculty and staff throughout the system received 2 percent pay increases July 1, the beginning of the 2016 state fiscal year. Direct state appropriations account for about 40 percent of the overall system budget each year. The overall budget is $920.6 million for the current fiscal year, $355.7 million of which came from unrestricted General Fund dollars. Statewide Programs and Services took the largest hit percentage-wise with a $4.9 million cut from a 2015 fiscal year appropriation of $28.3 million, UA Vice President of University Relations Carla Beam said. Beam also serves as president for the UA Foundation. The statewide offices are making ends meet through program cuts, furloughs and direct staff reductions, according to Beam. Staff reductions totaled 17 positions statewide from a count of about 240 employees. UA senior leaders and administrators will be furloughed for seven to 10 days, while non-union faculty, such as deans and heads of university institutes will take five days of unpaid leave this fiscal year. Savings were identified from a 90-day hiring delay. “As we curtailed spending in fiscal year 2015, we were able to keep over some funds that are also helping fill the gap,” Beam said. She noted that the university system is not allowed to carry over general funds, but other revenues can be banked when available. Other service and support reductions include terminating a contract with a Washington, D.C., firm that aided in federal relations. Beam said that will now be done in-house. The fact that the cuts this year are not a surprise — growth in state UA appropriations slowed in 2013, funds peaked in 2014 and have fallen the past two budget years — has helped somewhat in preparing the mindsets for tough times, according to Beam. It’s understood that tighter budgets will be the norm for the foreseeable future, she said, which is a mantra carried at the three major campuses as well. “Just like the three universities are doing, we’re really trying to balance our near-term need to cut with preserving opportunities in the long term,” Beam said. “Looking at what can we cut so we can reallocated funds to things that might provide long-term benefits, either in cost reduction or revenue generation.” UA Fairbanks Research costs money, and Alaska’s primary research institution, the University of Alaska Fairbanks, receives the largest share of state funding, despite having a significantly smaller student body than the Anchorage campus. UAF’s portion of the overall state budget cut is $13.1 million from its $179.2 million base 2015 appropriation. This fiscal year is the third-straight year of state funding reductions at UAF. The actual gap is closer to $20 million when university-specific fixed costs, debt service and pay increases are factored in, according to a UAF budget report. “UAF-wide, spending reductions in (fiscal year 2016) will amount to approximately 11 percent of state revenue and more than 7 percent of all unrestricted funds, which includes tuition, indirect cost recovery for sponsored activities and other external funding sources,” according to the report. University executives will take furloughs and support and administrative service departments will take deeper cuts than academic wings of UAF to minimize direct impacts to students. Over two years, spring 2013 to spring 2015, UAF’s total employee headcount has fallen by 205 positions, nearly 5 percent of faculty and staff. Regular employees may be asked to work reduced contracts, for example, working 11 months per year, to save cash in the future. The measure is being implemented to some degree at the Anchorage and Southeast campuses as well. Academic units under the provost were targeted for the smallest percentage cut of General Fund revenues at 11.4 percent. Rural, Community and Native Education was pegged for an 11.7 percent General Fund reduction and UAF’s 40-plus research centers and institutes absorbed a 13.3 percent General Fund hit. The chancellor’s office took the largest percentage cut at 17.3 percent. UA Anchorage The University of Alaska Anchorage is facing a $13 million shortfall from a base 2015 fiscal appropriation of $133.3 million. “We’re doing everything we can to minimize the impact on our students,” UAA spokeswoman Sarah Henning said. Students should expect longer waits for administrative procedures such as processing paperwork, she said, but UAA is also trying to give students a heads-up where services are reduced or slowed. While more than 200 positions have been affected by the university’s fiscal plan, only 17 employees were laid off, according to a university release. UAA’s satellite campuses in Kodiak, Kenai, Palmer-Wasilla and Valdez collectively took a $1 million hit. Academic departments in Anchorage will manage a $3.4 million shortfall, while support services at the main campus are facing an $8.6 million cut. Significant indeed, but Henning said the university is grateful the cuts are not as great as some of the numbers that were discussed through the legislative session. Each department was given a budget number to try to reach and staff was tasked with finding their own ways to reach the goal. Those recommendations were then rolled into the fiscal plan, according to Henning. Additionally, UAA is canceling nearly 40 degree programs from certificates to master’s degrees and reworking dozens more as part of a prioritization effort started in 2013, long before the budget cuts of today were envisioned. Henning said many of the programs were simply outdated and no longer fit UAA’s mission. “Through prioritization, some of the changes we’re making are good ones regardless of the fiscal environment,” she said. Henning noted that uncertain economic times in Alaska could push more people to further their education, and UAA is still ready to meet new demand, she said. A new Doctorate of Nursing Practice program opened this year, the first doctorate offered specifically through the university, according to a UAA release. “I want to reassure you that UAA remains a vibrant and resilient university,” Chancellor Tom Case said in a formal statement. “Our commitment to our students and employees — as well as to our incredible state — remains optimistic and forward-looking.” UA Southeast The smallest of the main three institutions, the University of Alaska Southeast, is absorbing a $2.3 million budget gap — 7.9 percent — on a $28.8 million state revenue base in 2015. As a result, UAS was forced to eliminate 21 funded positions in fiscal year 2016, according to a university budget report. Like the larger schools to the north, Southeast is also saving through reduced full-time contracts — keeping less IT support during the summer, for example, Vice Chancellor of Administration and IT Services Michael Ciri said. “Given the fact that between 60-80 percent of your budget, depending on how you count it, is staff costs, you really can’t get there without tackling the staffing side of the budget,” Ciri said. Staff vacancies were shifted to non-essential positions as much as possible through promotions, he added. In recent years UAS has sold buildings, reduced IT funding and continues to strive to be more energy efficient, efforts to defray fixed overhead costs. “There’s been a huge emphasis to reduce our energy consumption, which hasn’t necessarily reduced costs, but if we were still consuming energy now at the rate we were in 2008 it would be costing us about $350,000 more a year,” Ciri said. Still, like its much larger siblings to the north, UAS is eliminating programs. Among those is the school’s MBA. UAS Live!, course delivery via broadcast television, is being cut due to staffing reductions. Some required fixed costs make it more difficult for a smaller institution to absorb budget cuts, but Ciri said being able to adapt quickly because of its size has helped UAS through challenging budget times, now and before. “We’ve been able to do some innovative things at UAS in large part because we’ve been able to be very fast moving,” he said. “Thus far, I would say that our smaller size has helped more than it’s hindered.” Elwood Brehmer can be reached at [email protected]

Port biz bustles around stalled expansion

Business is bustling at the Port of Anchorage around the remnants of a $300 million mistake. Fuel distributor Delta Western Inc. is building a 360,000-barrel storage facility, which will push petroleum storage capacity to more than 3 million barrels at the port. Across the yard, Alaska Basic Industries Inc., which owns Anchorage Sand and Gravel, is working on a $14 million facility that will triple its cement storage at the port. Alaska Basic Industries President Dale Mormon said the new capacity should ensure most of the state has a reliable cement supply year-round. The basic building block cannot be shipped in winter and Alaska Basic Industries supplies all of mainland Alaska, he said. The Flint Hills Resources mothballing of its North Pole oil refinery last year was a headache for the Interior and meant lost freight revenue for the Alaska Railroad, but ultimately benefitted the Anchorage port. The jet fuel produced at the refinery was hauled south by rail and supplied much of the demand at Ted Stevens Anchorage International Airport. With that supply gone, jet fuel for one of the busiest cargo hubs on Earth must be imported by tanker. In 2013, 4.2 million barrels of petroleum products moved across the Port of Anchorage; last year the fuel business grew to 6.7 million barrels, according to a port release. Overall, roughly 90 percent of the goods entering mainland Alaska come across the docks in Anchorage. Port Director Steve Ribuffo said the uninterrupted day-to-day business at the port has been overshadowed by the major construction project that went wrong years ago. He wants to the Port of Anchorage Intermodal Expansion Project in the rear view. “The port that everyone loves to criticize is the Intermodal Expansion port,” Ribuffo said. “There’s been very little acknowledgement that’s been made that we came to a conclusion a little over two years ago that we’ve got plenty of port to support the population of the state for many, many years to come.” Projections for cargo growth in the 1999 port master plan, which was the basis for growing business capacity with the expansion project that began in 2003, simply haven’t materialized. The master plan forecasted gross tonnage at the port nearing 4.5 million tons by 2015. In actuality, business has fluctuated between 3.4 million tons and 3.7 million tons since 2012. Ribuffo said overall state population projections have flattened, which means demand for bulk commodities should follow. He noted that today the docks are regularly occupied only two days per week, Sunday and Tuesday, when regular freight service calls from Totem Ocean Trailer Express Inc. and Matson, formerly Horizon Lines. The Municipality of Anchorage, which owns the port, unveiled the Anchorage Port Modernization Project plan last November. Pegged at $485 million, it will replace the existing terminals and add another fuel berth. The U.S. Maritime Administration, or MARAD, led the previous iteration of the Port of Anchorage Intermodal Expansion Project for nine years. The municipality cut ties with MARAD in 2012 after major construction damage was discovered. No significant work has been done to Alaska’s largest marine hub since 2010. MARAD expended more than $300 million of the $439 million spent on the expansion project by the feds, State of Alaska and the port itself. There is $127 million left, which should pay for Phase 1 of the four-phase project — relocating the port administration building and adding a new point of loading dock at the southern end of the port — according to port engineer Todd Cowles. That leaves nearly $360 million for the municipality to round up in the coming years. Anchorage Mayor Ethan Berkowitz told the Journal that finishing Phase 1 is his main priority at the port, and getting that done by 2018 is the current goal. Cowles said the cargo terminal docks need to be replaced at some point, preferably sooner than later. The port has been repairing the most corroded support piles at the 54 year-old port under the main dock face since 2005, starting at about 20 per year, he said. Once the expansion project ground to a halt the number of patch sleeves installed was upped to about 100 per year, at the cost of $2 million to $3 million per year. To date, about 470 of the 1,400 steel piles have been sleeved, which is a temporary fix that does not significantly improve the fading seismic capability of the port infrastructure. “Our projection is these sleeves won’t last more than 20 years,” Cowles said. The piles under the new dock will be a combination of steel and concrete designed for a 75-year working life. The forces of nature will have to eat through a layer of concrete up to 3 inches thick before reaching the load-bearing steel pile, he said. “Over the total life cycle you have a very robust and resilient design,” Cowles said. They will be driven approximately 150 feet through tide mud to the firm glacial till. “It becomes really a reinforced concrete structure sitting on the steel going down to the bed layer,” he said. In the meantime, critical environmental permits must be reacquired as most have expired since the expansion project was terminated. The most significant permit is an incidental harassment permit for driving piles near endangered Cook Inlet Beluga whales, Cowles said. A construction team led by Kiewit Corp. is tentatively scheduled to drive test piles next spring to gather data on how the whales react to the noise, according to Cowles. The expansion project included whale-spotting towers and installation of the sheet piles was immediately stopped when the belugas approached the project. Cowles said the Alaska Department of Transportation and Public Facilities has expressed interest in the data collected by the trial pile driving for other coastal projects across the state. Elwood Brehmer can be reached at [email protected]

Senators push against wetlands requirements at field hearing

WASILLA — With Congress on its annual August recess, Alaska’s senators took the opportunity Aug. 17 to commiserate with Alaskans troubled by federal wetlands regulations and grill the federal officials tasked with implementing the requirements at a Senate field hearing in Wasilla. Invited testimony during the first hearing panel was heard from mining and construction industry representatives, North Slope region Alaska Native corporations and the State of Alaska through Department of Natural Resources Deputy Commissioner Ed Fogels. A second panel comprised of Alaska-based federal land and environment management officials heard the senators’ frustrations. Sen. Lisa Murkowski, chair of the Senate Energy and Natural Resources Committee, said the purpose of the hearing was to examine the regulatory practices that “impact and often delay and prevent development in our state.” Murkowski also noted the oft-cited statistic that roughly half of Alaska is deemed wetlands by the federal government and that the U.S. Bureau of Land Management oversees 72 million acres of Alaska. “The federal government is in many ways both a gatekeeper and a landlord here in Alaska,” Murkowski said. Sen. Dan Sullivan, who chairs the Senate Subcommittee on Fisheries, Water and Wildlife, drove home the theme that all federal regulations must be based in statute or the U.S. Constitution throughout the hearing. “Many agencies forget or even ignore this bedrock principle of the rule of law,” he said. Sullivan is a former Alaska attorney general and Department of Natural Resources commissioner under former Gov. Sean Parnell. He said compensatory wetlands mitigation requirements dictated by the U.S. Army Corps of Engineers and the Environmental Protection Agency can seem arbitrary and punitive, particularly when applied on private and state land. Dredging and filling of wetlands under federal jurisdiction is strictly regulated by the EPA through Section 404 of the Clean Water Act. If wetlands adjacent to navigable waterways are to be disrupted by a development project, some sort of compensatory mitigation must occur as a reaction to offset the original loss of wetlands. Compensatory mitigation can be achieved through direct restoration, enhancement or preservation of other onsite wetlands by the 404 permittee. A mitigation bank, or offsite wetlands improvement or preservation area can also be established to compensate for future development in wetlands. Finally, an in-lieu fee program, in which the permittee pays a third party to handle its compensatory mitigation responsibilities, can be used. The type of mitigation is typically left up to the permittee or developer. However, the amount of wetlands that must be mitigated, or the cost to an in-lieu fee program, is dictated by the federal agencies and can vary depending on the determined ecological value of the disrupted area. Kuukpik Corp. Vice President Joseph Nukapigak testified that the EPA required 292 acres of Kuukpik property be set aside in permanent conservation status as compensation for construction of a 5.8-mile road from the North Slope village of Nuiqsut proposed in 2013. Negotiations with the agency ultimately led to 127 acres being set aside for a project with a 51-acre footprint, he said. Kuukpik’s other option was to pay $1.8 million for offsite mitigation, according to Nukapigak. Kuukpik Corp. is the Native village corporation for Nuiqsut. Nukapigak testified that there is an “inherent conflict” between the Alaska Native Claims Settlement Act, which awarded Kuukpik its land, and the Clean Water Act, which demands the same land be set aside through a conservation easement. He proposed Alaska Native corporations be exempted from Clean Water Act requirements when a project is on Native corporation land. “The power to require payment and other concession on what occurs on private and state lands effectively grants federal agencies the ability to zone the whole state and that should concern all of us,” Sullivan said. “A dollar spent on mitigation is a dollar not spent building Alaska.” Sullivan requested the BLM, Corps, and EPA officials to each provide the statute that gives their respective agencies the authority to calculate and mandate mitigation fees and requirements. Murkowski likened unchecked fee requirements for in-lieu fee mitigation to extortion. At the same time, the Native Village of Nuiqsut Tribal government complained in an Aug. 14 release that it was left out of the hearing, despite holding the responsibility of protecting subsistence resources for the community. “(Native Village of Nuiqsut) supports mitigation requirements that protect natural and cultural resources, and routinely provides comments and position statements with respect to industrial activities as well as land management proposals and decisions,” the release stated. “Native corporations, in contrast are structured to maximize profits to Native shareholders.” Nuiqsut Village President Sam Kunaknana was part of a group of plaintiffs in an unsuccessful lawsuit filed in 2013 against ConocoPhillips’ for its nearby CD-5 oil development. Kuukpik and Arctic Slope Regional Corp. sided with ConocoPhillips in the matter. Army Corps of Engineers Regulatory Division Chief for Alaska David Hobbie testified that the goal of the Corps, which oversees 404 permits for the EPA, is to “ensure no net loss of wetlands function and values, while remaining as flexible as possible to allow reasonable and sustainable development.” In the 2015 federal fiscal year, the Corps has granted 431 wetlands permits in Alaska, according to Hobbie. Of those, approximately 6 percent required compensatory mitigation. Murkowski said that nearly half of the wetlands in the Lower 48 have been filled over the past 200 years, while less than 0.1 percent of Alaska’s wetlands have been lost over that time. “Our consideration (in Alaska) should simply be different from those in the Lower 48 and yet Alaska is again categorically analyzed through the lense of national and regional portfolios,” she said. Fogels, of DNR, said duplicative requirements often slow and complicate development project permitting. “Federal regulators, especially the BLM, need to increase coordination and transparency in permitting,” Fogels testified. “This is especially important in the area of mitigation for the impacts of permitted projects, where overlapping federal authorities are burdening applicants and delaying progress on critical state and private projects.” He said federal cooperation through project permitting is inconsistent. Sullivan encouraged the BLM and the Corps to institute a program similar to the Alaska DNR Office of Project Management and Permitting, which helps environmental permit applicants navigate the process. The permit applicant pays for DNR staff time dedicated to their project. Hobbie said the Alaska Department of Environmental Conservation sits on an inter-agency review team and regularly comments on wetlands permit applications in the state being reviewed by the Corps. The state and the Corps should be “co-regulators,” Sullivan said, for projects on private and state lands. Elwood Brehmer can be reached at [email protected]

GOP cites constitutional question in lawsuit vs. Gov. Walker

The fight over expanding Medicaid between Gov. Bill Walker and Republican legislators has gone from the Capitol to the Anchorage Legislative Information Office and is now headed for a courtroom. The Republican-heavy joint Legislative Council voted 10-1 Aug. 18 to sue Walker over his use of executive authority to accept federal funds to expand the state Medicaid program. Minority Democrat Rep. Sam Kito of Juneau was the only dissenting vote. Senate Majority Leader John Coghill, R-Fairbanks, said the attorney fees would be split between the House, Senate and Legislative Council budgets. Walker announced July 16 that he would accept $148.6 million from the federal government for Medicaid expansion beginning Sept. 1, the end of a mandatory 45-day waiting period. It is possible the majority’s push for an injunction to halt the expansion process could be heard as early as Aug. 24, Coghill said. “We’ve kind of been put in a position where you either defend the integrity of the Legislature or not defend it,” he said. Accepting and spending money by the State of Alaska typically requires the Legislature’s approval. However, because this Medicaid funding is federal dollars and does not involve the general fund, it could be done administratively. The legislators contend that expanding Medicaid coverage to a group of previously uncovered individuals qualifies as adding a new, optional group, which would require the Legislature’s approval. Also approved was spending $450,000 to secure legal counsel from the Washington, D.C.-based law firm of Bancroft LLC and the Anchorage firm of Holmes, Weedle and Barcott.  “I’m just really disappointed,” a visibly frustrated Walker said during a press briefing after the Legislative Council vote. “I cannot understand, I cannot fathom to understand why suing to take away health care coverage of working Alaskans is a partisan issue. I don’t have a clue as to why they’ve done that.” Growing the low-income health care program will make about 42,000 uninsured residents eligible for coverage; about 20,000 are expected to sign up in the first year. Newly eligible for Medicaid under the program will be adults without dependents who make less than 138 percent of the federal poverty level; for single individuals that is $20,314 per year and for married couples it’s $27,490 annually. House Speaker Mike Chenault, R-Nikiski, said he understands the governor’s frustration, but that Walker exceeded his authority when he moved to start a new state Medicaid program. “We as the Legislature have the authority to pass laws and set state policy and we feel that this time the Legislature has been left out of that policymaking decision, and out of that process, and this is the constitutional way that we are allowed to uphold the powers that the Legislature has,” Chenault said. “The legislative process is working. Government was never intended to be fast. Normally when legislation moves through quickly, that’s when we find we have the most problems.” Walker said he is confident in his position and that Alaska governors have accepted outside money this way seven other times. He did not directly address the potential legal issue of establishing a new program without legislative approval. Ultimately, the state will likely spend about $1 million in the fight after his administration hires outside counsel because of cuts to the Department of Law, Walker said. Kito said in a formal statement that the decision to sue the governor will cost the state money and up to 4,000 jobs that could be associated with adding money to the state’s health care system. “I am very disappointed with the Legislative Council vote to hire outside counsel to pursue a lawsuit against our governor, challenging his action in accepting Medicaid expansion,” Kito said. “The governor’s attorney general and the legislative legal department have both prepared legal opinions indicating that the governor, under existing state law and our Constitution, has the ability to accept Medicaid expansion under the Affordable Care Act.” Rep. Andy Josephson, D-Anchorage, said U.S. Supreme Court rulings made accepting the federal money optional, not providing care to the expansion population once the money is taken, and therefore the governor is not accepting optional funds for a new program. Alaska state Medicaid law encompasses those groups required to be covered by the federal statute and an additional 15 groups that are eligible. State law requires any new groups to be approved by the Legislature, but Attorney General Craig Richards has asserted that the expanded eligibility for Medicaid under the Affordable Care Act falls under the federal “required” group. Under that interpretation, the only thing struck down by the U.S. Supreme Court was the enforcement mechanism allowing the federal government to withhold Medicaid funds from states that refused to expand their coverage. Republicans skeptical about expanding Medicaid, one of the largest line items in the state budget at about $1.5 billion per year, have long said the current system must be reformed to save money before federal expansion money is accepted. The governor said that he had been encouraged by recent conversations he has had with Legislative Budget and Audit Committee chair Rep. Mike Hawker, R-Anchorage, on reforming the Medicaid program. “We began working on (Medicaid) reform on Dec. 1, 2014, when we were sworn in,” Walker said. Both sides insist there is still a good working relationship between Walker and Republican leaders despite the current situation and battles on other matters. Walker, who included Medicaid legislation in a special legislative session he called in late April, said all he has ever asked for is a vote by the Legislature. Chenault said repeatedly that the Legislature and the administration each hired expert consultants to make recommendations on how to restructure the Medicaid program. Legislators need that information before making a decision, he said. Coghill said the Medicaid legislation was tough to handle during the special session on top of trying to close budget negotiations “in a very austere year.” Health and Social Services Commissioner Valerie Davidson has said more Medicaid money would also save the state $6.6 million this year and more than $100 million over the next six years by using federal funds to foot the bill for things the state is currently paying for. The state would not have to contribute this fiscal year, which ends next June 30, but contributions would begin in fiscal year 2017 and by 2021, the state would be required to put up a 10 percent match on any federal Medicaid expansion dollars, which would be about $20 million, according to Health Department projections. Senate President Kevin Meyer, R-Anchorage, noted that cost projections have exceeded projections in a number of the 29 states that have accepted Medicaid expansion. A $145 million line item for federal receipts to expand Medicaid included in Walker’s operating budget proposal was cut out by the Legislature during the budget process, and a bill to expand Medicaid introduced by Walker did not make it out of the House Finance Committee during the special session. Elwood Brehmer can be reached at [email protected]

Susitna-Watana studies resume after spending freeze lifted

Work is resuming on the Susitna-Watana hydroelectric project under spending guidelines put in place by Gov. Bill Walker’s administration. The overall cost for the proposed 705-foot dam in the upper reaches of the Susitna River has been pegged at $5.6 billion in 2014 dollars by the Alaska Energy Authority, or AEA. AEA will need $105 million, maybe more, to get through the Federal Energy Regulatory Commission licensing process and to construction, authority Executive Director Sara Fisher-Goad said during an Aug. 6 board meeting. However, AEA only has the ability to spend the $6.6 million it has in the bank for the project through 2017. That money should get the project to the study plan determination, at which point FERC would rule whether or not the authority has gathered sufficient relevant data to apply for a project license. The FERC license is the last and largest pre-construction hurdle. Fisher-Goad said AEA will continue to update data with field studies as necessary to prevent work from becoming stale or outdated. National Marine Fisheries Service officials have questioned the validity of some Susitna-Watana fisheries studies. “The longer we stretch this out, we’re losing our economy of scale to be able to have logistics support on several studies at one time,” she said. “We’re doing this in more of an incremental fashion.” AEA has completed 14 of 58 FERC-approved studies so far, according to Dyok. To date, the project has received $192 million in state appropriations. The Walker administration lifted an administrative order July 6 that halted spending on the dam, one of six large infrastructure projects that were put on hold in late December. After 2017, once AEA has exhausted its funds for working towards a study plan determination, “the project will be revisited in the context of the fiscal environment and other competing major capital projects,” Office of Management and Budget Director Pat Pitney wrote in a memo to Fisher-Goad. Mike Wood, president of the lead Susitna-Watana opposition group the Susitna River Coalition, in a July 16 release, called resuming the project a “slap in the face” to Alaskans as state leaders discuss ways to increase state revenue during a time of multi-billion dollar budget deficits. “The proposed dam has already wasted hundreds of millions of state dollars and needs to be immediately shut down,” Wood said. “It diverts necessary funds for other, more responsible and reasonable alternative energy developments, as well as goes against Walker’s campaign promises of fiscal responsibility and fish-first policies.” AEA has touted the dam, which would generate about 2,800 gigawatts, as a way to provide half of the Railbelt’s energy demand with clean energy at long-term stable prices. Continuing at a slower pace to prevent unnecessary spending could end up costing the state if the dam is ultimately built, AEA Project Manager Wayne Dyok said at the AEA board meeting. At $5.6 billion to build today, inflation on project financing could add up to $150 million to the cost each year construction is delayed, he said. If everything goes according to the current plan, AEA will be able to submit its license application with FERC in 2019, and hopefully begin construction soon after a typical two-year review, according to Dyok. However, if AEA gets the $100 million-plus it needs to submit its application before 2017, that timeline could be accelerated by two years and potentially save the state $300 million. The cost of financing the project could also have a direct impact on long-term electric rates. “What you get out of a constructed hydro project is this inflation-proof aspect, but you don’t get that until it’s constructed and generating,” Fisher-Goad said. Dyok said the dam would save Railbelt consumers an average of $224 million per year on energy costs over the first 50 years in production, a total savings of $11.2 billion over that time. Initial electric rates from Susitna-Watana — with first power in 2029 — would be in the 13 cents per kilowatt-hour range, AEA estimates. That price would continue to drop to an average of 6.6 cents per kilowatt-hour as about $8 billion in principal plus interest is paid off over 50 years. By contrast, natural gas-generated electricity from the large Alaska LNG Project would be about 11 cents per kilowatt-hour in 2029 and increase to a more stable rate of about 15 cents per kilowatt-hour over several decades, according to Alaska Center for Energy and Power projections. On the energy savings alone, Dyok said the cost-benefit ratio for the project is 2.39-to-1. When the avoided cost of building new gas-fired generating capacity, generation facility retirement, and greenhouse gas reductions are included, the ratio improves to more than 3-to-1, he said. Roughly half of the project qualifies for a U.S. Department of Agriculture Rural Utilities Service loan, which is conservatively projected with 4 percent interest, Dyok said. The rest of the project financing is planned as nearly $4 billion paid in state bonds at 5 percent interest over 30 years a portion of which would be refinanced at a lower rate, according to AEA officials. Economic, study impacts As an added bonus, Susitna-Watana would generate billions for Alaska’s economy during construction along with clean, affordable power once its turbines are turning, AEA claims. The dam would have an economic impact of $3.4 billion and generate about 1,300 jobs each year during construction, according to a Northern Economics study commissioned by the authority. Preconstruction study work has generated jobs, but also information that is being used by other state agencies. “This project has advanced the state of science for a number of agencies, particularly the Alaska Department of Fish and Game through some of the salmon work,” Dyok said. ADFG Mat-Su area sport fish biologist Richard Yanusz said in an interview that AEA’s funding for fisheries studies has provided significant benefit to the department. He said there is relatively little data on chinook salmon in the Susitna drainage, despite the popularity of the species. AEA’s studies in 2013-14 provided drainage-wide abundance estimates through radio telemetry tracking and mark-recapture efforts. According to Yanusz, some of that information had not been gathered since the first time Susitna-Watana was proposed in the 1980s. “It’s been a long time between those abundance estimates, so having such a basic piece of information is very helpful to management,” he said. “It is almost new information, very rare information, so just having those reference points will be helpful.” Similar studies were done for coho salmon, the other primary sport fish in the drainage, on the main stem of the Susitna, without including the major tributaries such as the Yentna. Dyok said the Department of Natural Resources has also found flow data helpful for other potential projects in the region. Managing flow below the dam has been an issue of contention for those opposed to Susitna-Watana, because of the potential impacts to juvenile salmon, particularly in winter. AEA is developing models to better project flow regimes throughout the year, but how much water is let through the dam is ultimately regulated by FERC, according to Dyok. Average winter flow at the dam site would increase about four times and roughly be cut in half during the summer to retain water during times of lower electric demand based on early projections, he said. Flow at the dam site currently comprises about 16 percent of the average annual water in the Susitna. “Fisheries, recreation, and power; you need to balance all of those factors,” Dyok said. Elwood Brehmer can be reached at [email protected]

Chugach, Hilcorp agree on gas supply contract

Chugach Electric Association has extended its natural gas supply deal with Hilcorp Alaska for five years at prices less than those prescribed at the end of the current contract. The third amendment to the Gas Sale and Purchase Agreement between the Southcentral utility and the Cook Inlet producer kicks in April 1, 2018, at a base load price of $7.35 per thousand cubic feet, or mcf, of natural gas. That is 8.5 percent lower than the March 31, 2018, price. In the first quarter of 2018, Hilcorp will sell base load gas to Chugach for $8.03 per mcf. That marks the end of the Consent Decree Hilcorp signed with the State of Alaska when it became the dominant producer in the basin after purchasing Cook Inlet assets from Chevron Corp. and Marathon Oil Co. in 2012 and 2013, respectively. In the out years, the gas price increases 2 percent per year until reaching $7.96 per base load mcf of gas in March 2023. Chugach’s base load price from Hilcorp is $7.13 per mcf for all of 2015 and $7.42 for all of next year. The contract amendment was submitted to the Regulatory Commission of Alaska July 23 for approval. Mark Fouts, Chugach director of planning analysis, said the pricing is likely a combination of new competition from small producers entering Cook Inlet and Hilcorp having a better confidence in its reserves and the ability to produce them efficiently. “When (Hilcorp) signed that first five-year deal with everybody under the Consent Decree they had just bought the Chevron and Marathon assets, but they had not really had time to go through and check everything out,” Fouts said. Hilcorp spokeswoman Lori Nelson wrote in a formal statement that the company has indicated to each of its customers that it is ready to enter contracts beyond the Consent Decree in order to provide lead time to execute the requisite projects to meet the needs of its customers. “In order to ensure Hilcorp has long-term success in the Inlet and on the Slope we remain focused on increasing production, lowering costs and growing reserves,” Nelson wrote. “Each of these factors play a key role in extending the life of the fields and supporting competitive supply contracts with local utilities.” The eight-year commitment, with a price drop roughly halfway through, is a stark contrast to the market conditions when Hilcorp came to Alaska via its purchases in 2012. At that time, there were open discussions about the prospect of importing LNG to Southcentral and a cold 2012-13 winter strained the immediately available gas supply. The current proven plus probable natural gas reserves in Cook Inlet are estimated at 800 billion cubic feet to 1.3 trillion cubic feet by the state Division of Oil and Gas. Demand from the basin totaled about 120 billion cubic feet, or bcf, last year. Hilcorp’s commitment to supplying Chugach’s base load drops from nearly 8 bcf of gas per year in 2017 to 5.5 bcf from 2019 through the end of the contract. That leaves roughly 2.5 bcf per year in swing load as an optional purchase, at prices between $9.19 and $9.95 per mcf in the last five years of the agreement. Emergency load is covered in the $11 per mcf range in the out years. It is listed at $12.04 per mcf in early 2018. Chugach projects its gas demand to remain virtually flat in the 8 bcf per year range through early 2023. Fouts said the flat demand projection accounts for uncertainty in the market, but also includes the expectation that the Railbelt utilities will eventually work more efficiently together as economic dispatch is emphasized. The RCA issued a recommendation to the Railbelt electric utilities earlier this summer that urges them to increase cooperation as a way to maximize the use of low-cost power. The RCA stated it would use its authority and seek legislative action to mandate cooperation if the utilities don’t work more closely together voluntarily. “A lot of (demand) is hard to predict, but through the Hilcorp contract we have the optionality to move up and down and cover the uncertainties, which adds a lot of value to us in the Hilcorp contract,” Fouts said. Chugach spokesman Phil Steyer added that the optional load is the utility’s way of balancing assurance of a fuel supply with the prospect of more competitive prices from other producers to fill that gap in the future. Other factors that play into the flat demand projection are increased efficiency from the new gas-fired Southcentral Power Plant, which Chugach operates in partnership with Anchorage’s Municipal Light and Power, and less individual electric consumption from residential customers, Steyer said. Average residential consumption has decreased more than 10 percent per customer over the past 20 years, Steyer said, due to energy efficiency improvements among other things. Elwood Brehmer can be reached at elwood.b[email protected]

AIDEA gets 16 options for Interior gas

There are plenty of options for the Alaska Industrial Development and Export Authority to choose from in this go-round of the Interior Energy Project. A request for proposals, or RFP, that ended Aug. 3 yielded 16 plans from 13 respondents for getting a lower cost, cleaner energy supply to the Interior, according to AIDEA representatives. Nick Szymoniak, an AIDEA energy infrastructure development officer, outlined the types of proposals during an authority board meeting Aug. 6. The 16 proposals, ranging from strictly natural gas liquefaction, to gas supply, liquefaction and transport, break down as follows: Cook Inlet LNG: 9    • LNG plant only: 5    • LNG plant and gas supply: 1    • Gas supply, LNG plant and gas transport: 3 North Slope LNG: 3    • LNG plant only: 1    • LNG plant and transport: 2 One each for a small diameter pipeline from Cook Inlet; imported propane; imported LNG; and Cook Inlet “other.” Now the task of separating the detailed, well-rounded and cost-effective plans from the rest begins. A project partner will have access to the low-interest state financing package meant to improve the feasibility of the financially challenging and logistically complex project. The RFP states the proposals will be evaluated based on five weighted criteria: project understanding, methodology, experience and qualifications, project description and costs, and lastly, the ability to meet the project goals. It is noted in the RFP that $4 to $5 per thousand cubic feet, or mcf, of gas will almost certainly be added to any delivered LNG price to cover the costs of storage and distribution to consumers. As a result, the price for LNG delivered to Fairbanks would likely have to be in the $10 to $11 per mcf equivalent range to meet the project goal of a $15 per mcf “burner tip” price for consumers by 2017. The added cost would be slightly lower for a natural gas pipeline project because gas storage and regasification of LNG would be unnecessary. Attorney General Craig Richards recently nixed a contract between Pentex, the parent company of Fairbanks Natural Gas, and a Hilcorp Energy subsidiary to provide a small amount of LNG to the utility for $15 per mcf. AIDEA has said it would provide a long-term gas supply contract that Golden Valley Electric Association has with BP if another attempt at a North Slope LNG trucking operation is deemed the most viable. Golden Valley offered up that contract when AIDEA attempted to get LNG from the Slope last year. Ultimately, capital expenses for the North Slope liquefaction plant turned out to be too costly, and initial gas was pegged in the $18.50 to $20 per mcf range. Interior Energy Project manager Bob Shefchik said the evaluation team will spend August evaluating the projects and unveil a group of likely three to five finalists in early September. From there, AIDEA will enter into negotiations with the final group and final offers from each proposer will be evaluated by a committee, in hopes of reaching a consensus on a preferred plan, according to the RFP. That entire process should take 60 days, Shefchik said. The proposals and the rankings associated with them will be made available to the public when the final group is announced, he said. According to Shefchik, the review committee will take a “more qualitative than quantitative” approach in evaluating non-cost items of the proposals. “At the end of the day, all the proposals can be looked at by anyone in the public who says, ‘why did they do that and how?’ including the score sheets, and that’s where the openness of the ranked evaluations comes out,” he said. It was discussed at the board meeting that this approach would be more transparent than the last time an Interior Energy Project partner was chosen. At that time, in January 2014, little was known about the plans put forth by AIDEA’s three suitors — Pentex, Spectrum LNG and MWH Global Inc. — until after MWH was chosen. Once the Interior Energy Project team reaches a preliminary agreement with its latest partner, Shefchik said the plan is to make a recommendation to the AIDEA board at one meeting and ask for formal approval at the next to keep the process open and allow for ample review. He has said he hopes to have the process wrapped up by December. AIDEA board meetings are typically held every four to six weeks. The last meeting of the year is currently scheduled for Dec. 3. The Interior Energy Project team also closed a request for information, or RFI, for Cook Inlet natural gas supply and prices July 16. That information is being held much tighter. AIDEA’s Szymoniak said the responses, number of respondents, results and even who is doing the evaluating will be kept confidential. “I will go as far as to say we do have responses to evaluate, so that is a good thing,” Szymoniak told the AIDEA board. The RFI was intended to test the market and determine if Cook Inlet could reasonably supply the Interior as well as Southcentral with natural gas, he said. At the end of the evaluation process, a single memo with the RFI results will be sent to the RFP team, according to Szymoniak. Hilcorp recently reached an agreement with Chugach Electric Association to extend its gas sale and purchase agreement through March 2023. The initial gas price when the amended agreement kicks in is $7.35 per mcf in April 2018. That is 8.5 percent lower than the price of $8.03 per mcf Hilcorp will sell base load gas for under a Consent Decree the producer agreed to with the state when it became the dominant supplier of natural gas in the Cook Inlet basin. Hilcorp acquired the former assets of Chevron and Marathon in 2012 and 2013, respectively. Shefchik said in an interview that he is happy to see the price drop, but declined to comment further on the Cook Inlet natural gas market. Pentex subsidiary Titan Alaska LNG, which liquefies and transports LNG for Fairbanks Natural Gas, charges $3.55 per mcf for liquefaction and up to $3 per mcf for transport costs, according to FNG President and CEO Dan Britton. Titan’s small, 1-billion cubic feet, or bcf, per annum LNG plant is located on Point MacKenzie and is a possible location for expanded LNG capacity for the Interior Energy Project. Adding the $7.35 per mcf gas cost to Titan’s costs comes out to nearly $14 per mcf before storage and distribution costs are added. However, a 6-bcf plant needed for the Interior Energy Project could add economies of scale, which when combined with a low-interest state financing package could improve the feasibility of a basic Cook Inlet project. AIDEA and Fairbanks Natural Gas also plan to begin testing a 13,500-gallon LNG trailer within the next month. A large LNG trailer is not currently legal in Alaska. Titan uses 10,000-gallon trailers, which are filled to about 85 percent capacity to allow for expansion, and using a larger trailer could directly lower transportation costs. Home conversions The Interior Energy Project is a futile exercise if enough Fairbanks-area consumers can’t afford to convert their home heating systems from fuel oil or wood to natural gas. Alaska Energy Authority Energy Policy Director Gene Therriault, who has led the conversion aspect of the project, said he had an encouraging meeting with U.S. Department of Agriculture officials in Washington, D.C., regarding the Energy Efficiency and Conservation Loan Program. A USDA official characterized the loan program, which has been in place less than two years, as “underutilized,” Therriault said. The loans can be passed through an electric cooperative, such as Golden Valley, to consumers. “It provides low-cost capital for electric co-op customers to perform energy efficiency and conservation efforts to their home,” he said. Converting to more efficient appliances and a lower emitting home heating fuel both qualify, Therriault said. Converting from an old fuel oil boiler heating system to a high-efficiency natural gas system can cost as much as $10,000, which could challenge some Interior residents who want to make the switch but are already struggling with high fuel costs. Interest rates on the Energy Efficiency and Conservation loans vary little from 1 percent on a short, two-year loan to up to 2 percent on a 10-year term. The maximum term is 15 years, according to the USDA. Therriault also said the cooperative can’t add more than 1.5 percent interest to any pass through loan. Homeowners with houses that qualify for the Alaska Housing Finance Corp.’s Home Energy Rebate Program could also utilize state money to finance their conversions, Therriault noted. Rebates of up to $10,000 are available for significant energy efficiency improvements, which could include changing out an old heating system. While the Rebate Program did not receive additional funding in the 2016 fiscal year budget, AHFC still has about $26 million available for new applicants, according to July 29 program report. AHFC Energy Program Information Manager Jimmy Ord said that heating conversions could qualify for the rebate if the original boiler or furnace is old and inefficient, but simply switching to a cleaner fuel doesn’t. “It solely has to do with the efficiency of the appliance,” Ord said. He encouraged Interior residents to check whether or not they would qualify for a rebate as part of a heating conversion before the funds run out and also before demand for heating technicians rises. Elwood Brehmer can be reached at [email protected]

Medicaid cost projections vary by millions

Only time will tell which Medicaid expansion cost and enrollment projection is correct, and the difference could be hundreds of millions of dollars. The State of Alaska is using lower estimates generated by the Portland, Ore.-based research firm Evergreen Economics, which projects the number of individuals newly-eligible for Medicaid services under the state’s expansion plan at 41,900 in the 2016 state fiscal year that began July 1. Evergreen expects little growth in that number, with 42,260 expansion-eligible Alaskans in 2021. The newly-eligible group is generally healthy adults, without dependents, who make less than 138 percent of the federal poverty level; for single individuals that is $20,314 per year and for married couples it’s $27,490 annually.  Evergreen made its projections to the state last winter. A Feb. 6 memo from Evergreen Economics Vice President Dr. Ted Helvoigt to Department of Health and Social Services Commissioner Valerie Davidson presents the numbers as preliminary results of Evergreen’s Medicaid expansion analysis. States are eligible to expand Medicaid under the Affordable Care Act. The cost for new enrollees in Alaska will be covered completely by federal money in fiscal year 2016, and for the first half of fiscal year 2017. Alaska’s share of that cost will gradually increase to a 10 percent match by 2021, which is similar to much of the federal money the state accepts, namely Transportation Department funding for roads and airports. Gov. Bill Walker announced last month that he plans to accept federal Medicaid expansion funding beginning Sept. 1 without legislative approval. The newly-eligible population is the foundation for what a larger Medicaid program will cost Alaska, and an April 2013 study by the health care research firm The Lewin Group projected the new Medicaid market to be 54 percent larger than Evergreen. The Lewin projection was for a newly-eligible population of 64,700 persons in the 2015 calendar year, with 1.4 percent annual growth to 69,700 by 2020. The Alaska Department of Labor and Workforce Development’s population projection for all adults ages 19-64 over the same period is 0.03 percent growth. Helvoigt said in an interview that Evergreen used Labor Department population data combined with Behavioral Risk Factor Surveillance System, or BRFSS, data from the state Division of Public Health to form its projection. Helvoigt presented the Evergreen report to the Legislature in March. The BRFSS data provided demographic information that was weighted and added to the population figures, he said. “When we reweighted the data using the Department of Labor data, there was essentially no difference from what Public Health came up with in the BRFSS with their weighting scheme,” Helvoigt said. He noted that the similar results added confidence to the final numbers. Representatives from The Lewin Group could not be reached for comment on their study completed in early 2013, but the methodology behind the results is detailed in the report. The Lewin projection of 64,700 newly eligible Alaskans was generated from a simulation based on the federal Census Bureau’s Current Population Survey data from 2008-10, which included demographic characteristics, according to the study. “The (Current Population Survey) reports up to 40 percent fewer Medicaid enrollees than program data show actually participate in the program,” the Lewin study states. “To correct for this problem, we identified people who appear eligible for Medicaid in these data and assigned a portion of them to Medicaid covered status.” It is important to note that Alaska’s population was growing at a faster rate from 2008 to 2010 — 1.2 percent annual growth — than between 2012 and 2014, when the state’s population grew just 0.2 percent per year. If the Lewin projection for the expansion-eligible population is ultimately correct, that would mean nearly 1-in-11 Alaskans fall into that demographic. Helvoigt surmised that many rural Alaska Natives could fall into the income demographic and technically be eligible for expanded Medicaid coverage. However, that group would already be covered 100 percent by the federal government through Indian Health Services programs, which could skew some data sets. While Helvoigt said he is “extremely confident” in Evergreen’s eligible population projection, forecasting the number of actual enrollees is much more difficult.Evergreen used Lewin’s 63 percent enrollment rate in its projections. “What’s that take-up rate going to be?” he said in an interview. “Is it going to be that 63 percent? I just don’t have a great feel for that and I don’t think anyone really does. There’s just a lot of different things that drive that.” The Lewin study suggests an increase in enrollment among those currently eligible for Medicaid but not enrolled. That could come from increased media coverage of the Medicaid program. Helvoigt said that is exactly why it is so difficult to predict how many people will sign up. Looking at what has happened in other states that have accepted new Medicaid money — some have spent tens of millions more in match dollars when initial projections turned out to be low — isn’t reliable because public outreach and sentiment is different in each state, he said. Of the 31 states that have accepted Medicaid expansion, half are likely to be greater than projected enrollment and half are likely to be fewer, Helvoigt predicted. “No one’s going to hit it right on,” he said. The demographics of the newly-eligible population could also lend to less enrollment, according to Helvoigt. “There’s reason to believe that the expansion population —working age, not disabled, no children — that their take-up rate is going to be lower than other current Medicaid eligible (populations) simply because this population is going to be more mobile, in general younger and more male,” he said. Male or female, young people just out of college could fall into the income demographic but be looking for work that will soon make them ineligible or plan on moving out of Alaska and thus not sign up, he suggested. In the end, The Lewin Group projects a final tally of about 43,000 new Medicaid enrollees, while Evergreen Economics pegged 26,600, which is the number the State of Alaska is using, at the end of the forecast periods. The disparity between the enrollment projections and a difference in per-individual cost sums to a significant overall cost gap. In fiscal year 2021 (state fiscal years runs from July 1 to June 30), Evergreen and the state project Medicaid expansion to cost $224.5 million, of which the state will pick up almost 10 percent. The Lewin Group projects a cost of $517.2 million in calendar year 2020. That would mean the State of Alaska is on the hook for about $50 million that year, more than the total amount it would pay from fiscal year 2019-21 under the Evergreen projection. Evergreen estimated a cost of $7,200 per individual in fiscal year 2016. In the 2015 calendar year, Lewin had a cost estimate of $9,700 per person. The origin of this disparity is less clear, as both firms report using historical Medicaid cost data from groups as demographically similar as the newly-eligible population as possible. Helvoigt said he ran cost estimates for former Gov. Sean Parnell’s administration, which ultimately turned down expansion, and investigated if there would be an initial spike in Medicaid costs because of health services use by people previously without insurance. The assumption that new enrollees will seek health care at an abnormally high rate doesn’t hold water based on historical data, according to Helvoigt. “Regardless of who they were, and even after accounting for inflation, you find that people enroll and then they start using a little more (health care) each year,” he said. “It’s possible that there’s something about this population that’s going to make them very costly, but I don’t know what that would be.”                   Elwood Brehmer can be reached at [email protected]

Economy faring well amid uncertainty says AEDC

Anchorage’s economy is doing better than expected based on job growth reported by Anchorage Economic Development Corp. CEO Bill Popp. The city added about 1,000 jobs in June based on a new U.S. Department of Labor calculation. Private sector employers added 2,200 jobs for the month, according to Popp. The job market was strong through the first half of 2015, despite depressed oil prices. “Oil and gas, in direct employment, is up 500 jobs (statewide) according to the new Department of Labor numbers, so we are seeing some very positive indicators in the overall numbers mainly driven by private sector growth,” Popp said. He made his remarks at AEDC’s annual three-year economic forecast luncheon July 29. While Anchorage’s job market ended 2014 below forecast — losing about 690 jobs — so far 2015 is outpacing AEDC’s prediction of a flat market. Most of the job losses last year were attributed to contracting government workforces at the federal and local education levels, Popp said. Losses in the business and professional services portion of the private sector in 2014 should flatten out this year. Those jobs were lost in large part due to less need for engineering and design services, a result of slightly less capital construction spending, he said. The health care industry is expected to continue to grow because the State of Alaska is poised to accept Medicaid expansion funding from the federal government starting Sept. 1. June unemployment in the city was 5.5 percent, the lowest it has been during the month in eight years, according to the AEDC forecast report. Popp said unemployment could drop near 5 percent, which is considered full employment, or less by the end of the year. “That is a great unemployment rate,” he said. As wages go, Popp said Anchorage is still better than the national average, but the delta is shrinking. Much of that could be related to an improving Lower 48 economy, which is driving wages up in most of the country. Average wages in Alaska are typically some of the highest in the nation, the direct result of high cost-of-living expenses. AEDC’s employment forecast for the entirety of 2015 has Anchorage adding 730 jobs, or about 0.5 percent growth. That would give the city a record of 155,800 jobs. The size of Anchorage’s workforce will mirror its population over the next several years, according to AEDC. This year, the city is expected to peak at 302,000 people, similarly up 0.5 percent from 2014, and a record number of Anchorage residents. Recently announced force reductions of 2,600 Army personnel from Joint Base Elmendorf-Richardson could begin to drop Anchorage’s population back below 300,000 in 2016, with a leveling out at 297,500 people in 2017 and 2018. The overall population decline includes the roughly 3,500 spouses and children that could leave with the active-duty personnel. “We’re trying to engage our friends and neighbors in the military to stay in Anchorage and fill many of the jobs that are currently going unfilled for lack of qualified or available candidates,” Popp said. AEDC expects the Anchorage workforce to hold steady at 155,800 in 2016 and shrink slightly to 155,000 workers in 2017 and 2018, following the track of population projections. Considering low oil prices and contracting government spending, the outlook is fairly positive, and projections are good for Anchorage’s primary industries despite the tepid job market. Passenger volumes at Ted Stevens Anchorage International Airport are expected to match the 2008 record of more than 5.3 million people and climb steadily each year to nearly 5.7 million in 2018. Those are promising numbers for both the airport and the city’s tourism industry, which combine to account for roughly 20 percent of direct and indirect employment in Anchorage, Popp noted. The air cargo business at the Anchorage Airport should also return to banner years of record volumes over the next several, according to AEDC. Roughly 3 million tons of cargo is expected to move across the tarmac at TSAIA this year for the first time since 2007. By 2018, 3.5 million tons is expected due to lower fuel prices and larger Boeing 747-800 and 777 aircraft capable of carrying heavier loads from Asia markets. Popp said, however, that the larger aircraft could mean fewer landings and in-turn some lost revenue for the airport. Freight volume at the Port of Anchorage is projected to follow a similar, growing trend. Collective personal income should continue to rise as well, Popp said. This year, AEDC expects Anchorageites to take home $18 billion, up about 3.5 percent from a year ago. That growth over the next several years could see personal income in the city hit $20 billion in 2018. A chunk of that income this year will come from the Permanent Fund Dividend checks deposited in October. Another large check — AEDC is projecting it near $2,000 per Alaska resident — should add $540 million to bank accounts in Anchorage. A discretionary spending bump reliably follows deposits in a large PFD year. Elwood Brehmer can be reached at [email protected]  

Utilities welcome exemption from emissions rule

Alaska utilities will not have to comply with new federal standards requiring cleaner power production. The state is currently exempted from the Environmental Protection Agency’s Clean Power Plan, announced in its final form by President Barack Obama Aug. 3. Proposed in June of last year, the ultimate goal of the 1,500-page Clean Power Plan is to reduce carbon emissions from power plants by 32 percent from 2005 levels by 2030. Fossil fuel-fired plants emit roughly a third of the country’s total carbon pollution output, according to the EPA. Alaska’s exemption from the requirements came as welcome news to electric utility leaders in the state. “The federal government has acknowledged that the circumstances here are unique and the fact that there’s very little interconnection amongst the utilities,” Alaska Railbelt Cooperative Transmission and Electric Co. CEO David Gillespie said. “It’s a very different animal here (than the Lower 48) and I think the EPA has acknowledged that in this ruling and that’s a good thing.” Sen. Lisa Murkowski also praised the EPA’s decision to omit Alaska, saying in a release that the final rule is a “victory” for the state, which has unique needs because of its limited ability to generate cost-effective and compliant energy, she said. “Although I appreciate the EPA’s recognition of Alaska’s unique needs and challenges, I continue to have strong concerns about the national impacts of this rule. In the days ahead, I will be reviewing it closely to determine its impacts on electricity prices, the reliability of our electric grid, and many other related factors,” Murkowski said. “While it is a positive for Alaska to be exempt, I am mindful of the fact that nearly every other state will be forced to comply, and of the burdens that will impose across the country.” Murkowski chairs the Senate Energy and Natural Resources Committee and has moved an energy bill package of her own through the committee that is waiting to be heard on the Senate floor. Gov. Bill Walker lauded the EPA’s decision on Alaska as well. “Alaska has over 200 small utilities across the state, and a very limited power grid on the Railbelt,” Walker said in a release. “Alaska can and should be a leader in affordable, clean energy development. However, this has to be on Alaska’s terms given how unique our state is.” Department of Environmental Conservation Air Quality Division Director Denise Koch said the exemption was unexpected. A State of Alaska consortium of the Department of Law, Alaska Energy Authority, RCA and DEC combined to draft 70 pages of comments when the Clean Power Plan was proposed. “We were preparing to have to comply with the rule,” Koch said. “We were hopeful of course that the EPA would have considered our comments, but it was not certain for sure that we would not be included in the rule.” Along with Alaska, Hawaii, Vermont and the District of Columbia are exempt from Clean Power Plan requirements. Hawaii has the highest residential electric costs in the country at 30 cents per kilowatt-hour, while neither Washington, D.C., nor Vermont have fossil fuel-fired power plants, according to the U.S. Energy Information Administration. Supplied largely by Canadian hydropower, Vermont also has the lowest total carbon dioxide emissions of any state. The Clean Power Plan is the first set of national standards to address carbon emissions from power plants. “We limit the amount of toxic chemicals like mercury an sulfur and arsenic in our air and our water and we’re better off for it,” Obama said in a speech announcing the regulations. “But existing power plants can still dump unlimited amounts of harmful carbon pollution into the air. For the sake of our kids and the health and safety of all Americans that has to change.” While the U.S. has cut carbon pollution more than any other nation over the past decade, this is the single largest step the country has taken in that regard, the president said. “We’re the first generation to feel the impact of climate change and the last generation that can do anything about it. That’s why I committed the U.S. to leading the world on this challenge,” Obama said. According to the EPA, 14 of the warmest 15 years on record have come in this century. To reach their goals, other states will have to come up with plans as to how they will comply and submit those plans to the EPA. Those plans will include steps to lower energy use from high carbon output plants through dispatch of power from cleaner and renewable sources and end-user energy efficiency measures. Until 2030, the EPA will establish interim carbon performance rates for coal- and oil-fired plants separate from performance rates for existing natural gas-fired combined cycle generating plants. States will able to measure carbon output as a rate — pounds of carbon per megawatt of power produced — or through total carbon output in short tons per year, according to the EPA Alaska will not be asked to submit an efficiency plan, at least for now. “The basis of that proposed rule was really based on the assumption that every location had this robust interconnected grid and we felt like some of the assumptions that the rule was based on were not appropriate and they were not accurate in Alaska,” Koch said. The Clean Power Plan would likely have impacted five coal and natural gas power plants in the Railbelt, she said. Developing a more reliable and efficient Railbelt transmission grid at a cost of more than $900 million has been a hot topic among region utilities and the Regulatory Commission of Alaska and even spilled over into the Legislature during the last session. Koch encouraged tempered optimism about the announcement because of the reason for the exemption. “It’s clear that Alaska isn’t included in this; we have no goals or deadlines for submitting plans,” Koch said. “However, EPA talked about the reason for that is that they lacked appropriate information and they do go on to say that the EPA is going to seek additional pieces of information.” The state group that drafted the comments plans to meet soon to discuss the meaning for Alaska, particularly if the EPA wants more information from them on what Alaska can do to lower its carbon emissions. Elwood Brehmer can be reached at [email protected]  

Judge finds Greenpeace USA in contempt

Greenpeace USA must immediately get its activists out of the way of a vessel contracted to work in the Arctic for Shell or face fines ramping up each day until it does. An annoyed-looking Alaska U.S. District Court Judge Sharon Gleason imposed a fine of $2,500 per hour beginning at 10 a.m. Alaska Time Thursday on Greenpeace until the 13 environmental protesters dangling from ropes below the St. Johns Bridge across the Willamette River in Portland, Ore., pull themselves onto the bridge. The fines will escalate daily until reaching $10,000 per hour if they aren’t off the bridge by 10 a.m. on Aug. 2. Gleason also found Greenpeace in civil contempt of court for violating an injunction she issued in May that prohibits Greenpeace from impeding any vessels working on Shell’s offshore Arctic drilling. She made her ruling at approximately 9:45 a.m. Thursday, setting the fines to begin accruing 15 minutes later and disregarding a Greenpeace request for a three-hour grace period to get the activists up from below the bridge. Gleason said she was “unpersuaded that a grace period is warranted” before the fines take effect because there is no assurance Greenpeace would follow the latest order. The activists can be on top of the bridge, she said, but need to be off the ropes beneath the structure. Greenpeace immediately appealed Gleason’s decision to the 9th Circuit Court of Appeals and a hearing has been set for August. Early Thursday before the hearing, the activists lowered themselves into the path of the icebreaker Fennica on its way from a Portland shipyard back to Alaska. Greenpeace attorneys contended kayakers not associated with the environmental group got in the way of the vessel and the Fennica did not enter a 100-meter safety zone from the activists that would have violated the injunction. Gleason said the evidence was “clear and convincing” that Greenpeace intended to violate the order, despite how close the Fennica actually got. An email from the master of the ship Tommy Berg was filed with the court that stated the activists forced the Fennica to retreat. “Please be advised that Fennica has made an attempt to sail for sea as instructed by Shell. However, the eNGO (environmental non-governmental organization) activists dangling from ropes off St. Johns Bridge clearly prevent the vessel from passing and cause a navigational hazard. We have thus decided to await further instructions,” Berg wrote. The Fennica is a 380-foot ice-management vessel. It was in Portland for repairs after it sustained a three-foot gash in its hull when it hit a shoal leaving Dutch Harbor for the Chukchi Sea July 3. The hourly fines will increase $2,500 each day at 10 a.m. Alaska time until reaching $10,000 per hour the morning of Aug. 2, or when Greenpeace gets its employees out from under the bridge. Shell first asked for fines of $2,500 per hour in a Wednesday hearing, which it says is equal to the contract rate it pays for the Fennica. In Thursday’s hearing the oil company’s representatives upped their request to $250,000 per day, arguing that Greenpeace uses its acts of protest as fundraising tools, which offsets smaller fines that might be levied against it. Gleason said the progressive fines are intended to “coerce behavior that would have them leave.” The environmental group offered its reaction to the decision in a formal statement from Greenpeace USA Executive Director Annie Leonard. "Right now we're asking the activists what they think we should do next. As of this moment, the 26 activists will stay in place," Leonard said. "Shell is still trying to circumvent the growing global call to preserve the Arctic, and has turned to the courts for help. While we respect the courts, we also respect the increasingly urgent science that tells us Arctic oil needs to stay underground." Shell was pleased with the outcome. "We have consistently stated that we respect the right of individuals to protest our Arctic operations so long as they do so safely and within the boundaries of the law," wrote spokesperson Meg Baldino. "The staging of protesters in Portland was not safe nor was it lawful. Furthermore, Greenpeace demonstrated a complete lack of regard for the authority of a U.S. Federal Court. We are pleased with today’s court ruling that holds Greenpeace in contempt and prescribes fines for further non-compliance." Gov. Bill Walker spoke with Portland Mayor Charlie Hales and Oregon Gov. Kate Brown’s chief of staff Thursday morning, according to a release from Walker’s office. The governor urged Oregon’s leaders to stop the illegal protesting and allow Shell to conduct the activities it is permitted for. “Alaska and the United States have the chance to be leaders in responsible offshore drilling in the Arctic,” Walker said in the release. “As our state faces a multi-billion dollar budget deficit, and an oil pipeline that is three-quarters empty, we would be foolish to turn away such significant economic opportunity. I hope that leaders from outside Alaska can understand and respect that.” Shell’s two drilling vessels are in the Chukchi Sea and ready to drill, Shell and federal agency sources said July 29. Shell has permission to drill “top holes,” or the upper parts of wells that do not penetrate potential oil-bearing formations, until the Fennica gets to the Arctic with the capping stack after its repairs. Elwood Brehmer can be reached at [email protected]

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