Elwood Brehmer

Suit against tax credit bonds bogs down over jury trial motion

A lawsuit challenging the constitutionality of a state law to pay off nearly $1 billion in oil and gas tax credits has slowed to a crawl as attorneys squabble over whether or not a jury should decide the matter. Former University of Alaska Regent Eric Forrer requested a jury trial July 19 in the public interest lawsuit he filed May 14 against Gov. Bill Walker’s administration with the Juneau District of state Superior Court. The request has resulted in each side filing multiple briefs in the debate over a trial, exemplified by the latest in the series filed by state attorneys Aug. 20 entitled, “Defendants’ Reply to Plaintiff’s Response to Defendants’ Motion to Strike Demand for Jury Trial”. That filing, signed by Assistant Attorney General Bill Milks, contends the issue at hand is a matter of the reading of law and therefore is not eligible for determination by a jury of 12. “This case is a facial challenge to a statute. A jury cannot determine what the words of a statute mean. A jury cannot determine what the words of the Alaska Constitution mean. Those are questions of legal interpretation solely within the authority of the judiciary,” Milks wrote. He continued to note that House Bill 331, the administration-sponsored legislation authorizing the bond sale that passed June 20, has not yet been implemented. The Department of Revenue has not sold any bonds yet. A bond sale was originally planned for sometime in August, but Deputy Revenue Commissioner Mike Barnhill said in June that the administration would hold off on marketing the bonds while the lawsuit progressed. Barnhill referred questions for this story to the Department of Law; officials there did not respond to requests for comment. Pushing ahead with the sale during the litigation would undoubtedly increase the state’s cost of borrowing greatly and damage the underlying economics of the plan to pay off the credits with borrowed money while not incurring additional costs. Under the plan, the companies and banks holding credit certificates would take a up to a 10 percent discount on the amount they are owed to get the money right away and thus insulate the state from borrowing costs. Forrer filed the lawsuit on the belief that such sale would violate the Alaska Constitution, which has tight sideboards on what the state can incur debt for and how it must be done. The state Constitution generally limits the Legislature from bonding for debt to general obligation, or GO, bonds for capital projects, veterans’ housing and state emergencies. In most cases the voters must approve the GO bond proposals before the bonds are sold. State corporations can also sell revenue bonds, but those are usually linked to a corresponding income stream and only obligate the corporation to make payments, not the State of Alaska as a whole. Legislative Legal Division attorneys in an April 13 opinion questioned whether the Alaska Tax Credit Bond Corp. — that HB 331 authorizes Revenue Commissioner Sheldon Fisher to set up — would truly have a revenue stream that could pass legal muster given it would rely on annual legislative appropriations to fund the debt payments. Administration officials contend the plan is legal because the 10-year bonds would be “subject to appropriation” by the Legislature, which the bond buyers would be aware of, and therefore would not legally bind the state to make the annual debt payments. Forrer’s attorney, Joseph Geldhof said in an interview that they are not trying to “slow roll” the legal process by asking for a jury trial to further delay a bond sale, but rather insisted the state’s attorneys have been “enormously uncooperative” and have not engaged in the typical case process. Geldhof emphasized that the Department of Law has not yet filed an answer to the original May 14 complaint or a July 19 amended complaint. “They won’t even admit, for example, that the tax credits are not a form of debt,” Geldhof said. What exactly the tax credits are and how they should be treated is one of several similar material facts that should be decided by a jury, according to Geldhof. He wrote in response to the state’s motion to strike the trial request that without an answer to the complaint or resolution of the facts in the cast that it’s too early for Judge Jude Pate to rule on the trial motion. The state has “steadfastly ignored” the insistence that there are factual issues to resolve in the case, according to the Aug 8 response to the state. Geldhof argued that if the facts of the case can be settled, both sides could move for summary judgment, but that hasn’t happened yet. Forrer wrote in an Aug. 9 affidavit that Revenue Commissioner Sheldon Fisher and other state officials have referred to the bonds as an “obligation” of the state as well as “subject to appropriation” and “revenue” bonds, thereby clouding how they should be viewed relative to constitutionality issues. Forrer also stressed that it’s unclear what entity would be responsible for repaying the bonds, the State of Alaska or the Tax Credit Bond Corp., which could go a long way towards determining what would happen to the state’s credit rating if the Legislature eventually opted not to make the bond payments. “Representatives of the state have not explained how, if the credit of the state is at risk, the faith and credit of the state is not implicated under HB 331,” Forrer wrote. “In fact, the bill does not include express language stating that the faith and credit of the state will not be pledged.” Judge Pate has not yet ruled on the state’s June 25 motion to dismiss — based on the failure to make a claim for relief. Geldhof made a request for oral arguments on the state’s motions to dismiss and the opposition to a jury trial Aug. 23. Regardless of the outcome in Superior Court, the case appears primed for an appeal to the Alaska Supreme Court. Elwood Brehmer can be reached at [email protected]

ExxonMobil signs gasline agreements with state

Two out of three ain’t bad, but there is still a lot of work ahead for the Alaska Gasline Development Corp. The state agency in charge of putting together the $43 billion Alaska LNG Project signed a gas sales precedent agreement with ExxonMobil on Sept. 10, meaning two of the three major North Slope natural gas holders have now agreed to key gas pricing and volume terms with AGDC. Those exact terms are confidential, but Gov. Bill Walker said in a formal statement the agreement “means Alaska is one step closer to monetizing the North Slope’s vast and proven natural gas resources.” ExxonMobil operates the Point Thomson gas field and holds a 62 percent stake in the unit (with BP owning nearly all of the remaining share), which sits east of Prudhoe Bay on state land near the edge of the Arctic National Wildlife Refuge. The company also holds a 36 percent interest in the Prudhoe Bay field. With roughly 28 trillion cubic feet of gas available from Prudhoe and another 8 tcf in Point Thomson, ExxonMobil has rights to nearly 15 tcf of North Slope gas. “This precedent agreement is good for Alaska and ExxonMobil and represents a significant milestone to help advance the state-led gasline project,” ExxonMobil Alaska President Darlene Gates said in an AGDC release. “As the largest holder of discovered gas resources on the North Slope, ExxonMobil has been working for decades to tackle the challenges of bringing Alaska’s gas to market.” The announcement with ExxonMobil means ConocoPhillips is the only major North Slope producer to not yet sign a preliminary gas deal with AGDC. BP and AGDC reached a similar agreement in early May on binding price and volume terms; however, there are numerous finer financial and technical points to be addressed before final gas sales agreements are signed. ExxonMobil’s gas sales precedent agreement — like BP’s — calls for gas to be sold into to the large North Slope gas treatment plant that would be the start of the 807-mile gas pipeline and LNG export project. AGDC spokesman Jesse Carlstrom said the state-owned corporation is actively engaged in similar discussions with ConocoPhillips. Department of Natural Resources Commissioner Andy Mack said in an interview that final gas sales agreements would likely be signed nearly in concurrence with a final investment decision on the overall Alaska LNG Project. “It brings the firepower and brand name of ExxonMobil to the project,” Mack said as AGDC officials begin their major push to attract third-party investors to the project. In a separate but related development, Mack and Attorney General Jahna Lindemuth also signed what is being called a “letter of understanding” with ExxonMobil and BP Alaska leaders on Sept. 10 to suspend key provisions of the 2012 Point Thomson Settlement Agreement as they work on Alaska LNG. The letter removes the requirement for ExxonMobil, as the Point Thomson operator, to move forward with a plan to expand production at the field in a way that doesn’t jive with feeding the LNG project. Before ExxonMobil signed the letter with the state, the 2012 Settlement Agreement signed by then-DNR Commissioner and current Sen. Dan Sullivan required the company to make a final decision on how to increase production at Point Thomson by Dec. 31, 2019. Specifically, it prescribes that the company choose to either increase production at Point Thomson to more than 50,000 barrels per day of natural gas liquids, or condensates, and pipe up to 920 million cubic feet of natural gas per day into Prudhoe Bay, or simply grow condensate production to 20,000 barrels per day and reinject the gas into the Point Thomson reservoir. The current Point Thomson facilities have a production capacity of about 10,000 barrels of condensates and 200 million cubic feet of gas per day. However, the technical challenges of producing gas from and reinjecting into the ultra-high pressure field have hampered ExxonMobil’s production ability. A third, untenable option would be for ExxonMobil and BP to relinquish the leases back to the state, but that would seem unlikely given they spent upwards of $4 billion between 2012 and 2016 to develop the gas field in accordance with the settlement. In July 2017, ExxonMobil submitted a long-range development plan to the Division of Oil and Gas outlining plans to pipe gas more than 60 miles to Prudhoe for injection into the oil field to aide in oil recovery. That plan was initially rejected, but eventually approved by state regulators. Despite that, the Point Thomson development was always meant to feed a large gas project. Some former state officials and Alaska LNG experts have questioned the economics of piping Point Thomson gas to Prudhoe. Mack characterized all the settlement alternatives other than a major gas project as “suboptimal” for the state and the companies, noting the prospect of moving and injecting gas into Prudhoe is not as attractive as it seemed in 2012. With the Sept. 10 letter, the state retains the ability to reinstate the 2012 Settlement provisions at any time, Mack said, stressing that the preferred option is for the companies to help the state be successful with the Alaska LNG Project. “The whole idea is to redirect the (Point Thomson) project back to major gas sales,” he said. If at some point state officials decide Alaska LNG is not going to be successful or ExxonMobil backs away from it, the settlement provisions can be brought back with a 30-month window for the company to comply. Mack said the extra time — versus the 16 months between now and the end of December 2019 — is to allow ExxonMobil to restart its Point Thomson expansion engineering team and work out other related issues with the state. The engineers that have been working on that project will hopefully be put towards advancing the Alaska LNG Project, he said. Mack added that the gas sales precedent agreement and the letter “are definitely related,” noting the signing of the former is a significant show of commitment by ExxonMobil to the state-led LNG project. “This is another critically important step, but there’s many more steps in this process,” Mack said. Elwood Brehmer can be reached at [email protected]

Pebble permit scoping report first step toward EIS

The summary released Aug. 31 by the U.S. Army Corps of Engineers of the topics the public wants studied in the lead up to a permitting decision for the proposed Pebble mine was met with criticism from groups who feel the mine review is being fast-tracked. The comments that make up the scoping report are, as the name implies, intended to guide the scope of analysis in the environmental impact statement, or EIS, the Corps is in the midst of drafting for the large mine project. Not meant to be a referendum on the controversial mine plan, the Corps received 174,889 comments during the 90-day scoping period that ran until June 29, according to the report. The Corps extended the original 30-day comment period shortly after it opened April 1 following requests to do so from Sen. Lisa Murkowski and Gov. Bill Walker’s administration, who suggested the month-long comment period could be insufficient given the scale and complexity of the project. Public meetings were also held in nine communities during scoping, but mine opponents contended more should have been held in the numerous remote villages and small towns across the Bristol Bay region that have the potential to be impacted by the project. Much more than a large surface mine, the Pebble project would stretch over 187 miles from the start of a natural gas pipeline near Anchor Point on the Kenai Peninsula, across Cook Inlet to a new port that would be built near Amakdedori on the west side of the Inlet. From there, the transportation corridor would include 53 miles of new road plus a ferry across massive Iliamna Lake that would lead to the mine itself. “The input we received is insightful and helpful, informing our analysis and potential alternatives to be included in the draft EIS,” Corps Project Manager Shane McCoy said in a prepared statement. Though the Corps received nearly 175,000 submissions during scoping, just 3,653 were considered individual comments, with the remaining roughly 171,000 being various form letters, according to the report. More than one-third of the non-form comments focused on the potential socioeconomic impacts of the project; the rest were split roughly evenly between suggestions and concerns regarding the National Environmental Policy Act process, the proposed tailings dam facility and prospective project impacts to fish and wildlife. More than half of the form letters focused on the NEPA process. Groups opposing the project were critical of the 37-page scoping report, alleging it glosses over many important issues that need review in the EIS. United Tribes of Bristol Bay, Commercial Fishermen For Bristol Bay and Trout Unlimited Alaska all called for state and federal leaders, particularly Murkowski, to pressure the Corps to slow or stop the EIS until a more thorough review of the project’s potential impacts is done. Trout Unlimited Alaska stated in a press release responding to the publication of the report that more than 400,000 comments were submitted that raise concerns about Pebble’s permit application. Pebble Limited Partnership spokesman Mike Heatwole said simply via email that the company will continue to work closely with the Corps to help the complete the draft EIS in a timely manner. The totality of the Corps’ review is unclear at this point given the draft EIS has not yet been published, but the aggressive schedule set for the Pebble EIS has also been a point of contention. Pebble Limited Partnership submitted its project plan to the Corps for review in late December 2017 and Corps officials plan to have a draft EIS finished in January 2019, or between six and seven months after the scoping period closed. Comparatively, it took the agency nearly three years to draft the first version of the EIS for the Donlin Gold mine permit application, a large surface mine proposal with extensive support infrastructure similar to Pebble. Corps regulatory officials insist they are applying best practices learned during the Donlin review to the Pebble EIS, allowing them to speed up the process while performing the same level of analysis. Aside from expected comments highlighting the economic opportunities the project could provide to a region with few year-round jobs and the potential harm a tailings dam failure could have on salmon habitat downstream of the mine, many commenters stressed the need to study possible impacts to subsistence activities not only in the Bristol Bay area but also near the gas pipeline origin on the Kenai Peninsula. Some noted the mine could reduce out-migration from the region, helping to maintain enrollment in small schools in the area, while others contended the mine — with a 20-year initial life — would simply create a greater boom-and-bust economic cycle that would end with lost jobs when the mine closed. Suggestions were made to require an economic assessment of the project be conducted to determine if Pebble Limited Partnership’s plan is financially viable. Pebble CEO Tom Collier said in an April interview with the Journal that the company plans to release a preliminary economic assessment of its latest project plan by the end of the year. Heatwole said in a Sept. 4 email that he had no further information to provide about the status of the economic report. Elwood Brehmer can be reached at [email protected]

Second CP project advances as subsistence concerns unsettled

Alaska officials within the Bureau of Land Management are generally on board with ConocoPhillips’ plan for the Greater Mooses Tooth-2 project, but the best ways to minimize the $1 billion-plus oil development’s impacts to subsistence activities are still unsettled. BLM selected ConocoPhillips’ proposal as its preferred option for developing the oil prospect just inside the eastern boundary of the federal National Petroleum Reserve-Alaska in the project’s final supplemental environmental impact statement released Aug. 30. The $1.5 billion GMT-2 project is expected to produce upwards of 30,000 barrels oil per day at its peak, with construction commencing this coming winter and startup scheduled for late 2021 barring unforeseen delays, according to ConocoPhillips representatives. Its near mirror-image predecessor project, GMT-1, is expected to come online late this year with a similar peak production rate. Sen. Lisa Murkowski and Rep. Don Young lauded the preliminary decision to move towards additional development in the NPR-A through statements in a BLM news release. Assistant Interior Secretary and former Alaska Natural Resources Commissioner Joe Balash said GMT-2 is proof the Trump administration is following through on its commitment to make Alaska a central player in increased domestic energy production. “Oil and gas development in the NPR-A is important to meeting our nation’s energy needs and this analysis provides a responsible path forward in balance with resource protections,” Balash said in a formal statement. “And, throughout the process we are proud of our efforts of involving the people most affected by development activities on the North Slope of Alaska.” ConocoPhillips Alaska spokeswoman Natalie Lowman said via email that the company is reviewing the final EIS and as a result is unable to comment on it at this time. Presuming an acceptable record of decision — issued at least 30 days after the final EIS is published in the Federal Register — ConocoPhillips executives could make a funding decision on GMT-2 later this year, according to Lowman. The final supplemental EIS for GMT-2 is a follow-up from one done in 2004 when the project was first proposed as a satellite to the company’s large Alpine field on state acreage just to the east of the NPR-A. The footprint of ConocoPhillips’ updated plan for GMT-2 is larger than what it got approval for in 2004, with an oil pipeline paralleling an 8.2-mile access road and a 14-acre drill pad capable of holding up to 48 wells, according to the proposal submitted to BLM. The road and pipeline would connect the project to GMT-1, which is about eight miles to the northeast. Alternative development options considered in the EIS include a longer road and pipeline to avoid the Fish Creek and Tinmiaqsiugvik River drainages with the intent to keep traffic and oil farther away from the water bodies and hopefully reduce the impacts of a major spill if one were to occur. Another option contemplated a 5,000-foot airstrip with a 47-acre footprint to eliminate the need for a gravel road. With no year-round surface connection, the third alternative would also require a larger 19-acre gravel drill pad to and an 18-acre camp pad to accommodate workers unable to leave each day. The oil pipeline in that scenario would follow the company’s desired route. Subsistence impacts While some of Alaska’s political leaders praised BLM’s conclusions in the review document, the agency also acknowledged in the EIS that “development of the GMT-2 project may significantly restrict subsistence activities for the village of Nuiqsut, and the cumulative effects of GMT-2 and other development on the North Slope may significantly restrict subsistence activities for the villages of Nuiqsut, Anaktuvuk Pass, Atqasuk and Utqiagvik.” To that end, Native village of Nuiqsut President Margaret Pardue wrote in comments to BLM on May 17 asking the agency to stop permitting on GMT-2 for at least five years after GMT-1 is complete. Nuiqsut — a village of about 400 people roughly 15 miles from the proposed GMT-2 site and closer to GMT-1 and other ConocoPhillips developments in the area — has been “inundated with development proposals and planning exercises,” according to Pardue. She contends the full effects of the Alpine field satellite projects have not been fully felt or understood by Nuiqsut residents and development should be slowed until those impacts can be quantified. Pardue noted that other federal agencies are evaluating permit applications for the very large Nanushuk oil development just north of the village and the offshore Liberty project being done by Hilcorp Energy, which is in an area Nuiqsut residents use for whale hunts. Also, on Aug. 7 BLM issued a notice that ConocoPhillips had submitted development plans for its Willow oil prospect northwest of the village in the NPR-A, which would be a major, $4 billion-plus project with multiple drilling pads and its own oil processing facility. “(The Native village of Nuiqsut) strives to be an active and engaged entity in these review processes, but the amount of planning currently underway in the region presents serious capacity challenges in our ability to have constructive and meaningful involvement,” Pardue wrote. “By delaying GMT-2, the true impacts of development will be more understood and NVN will have greater time to consider the risks of development and rigorously engage in this proposed project.” Last winter ConocoPhillips adhered to a lengthy list of mitigation measures aimed at reducing noise, light and air pollutants from an exploratory drill site about three miles from Nuiqsut at the behest of Kuukpik Corp., the community’s Native village corporation. That drilling went well and the mitigation efforts were successful by all accounts, but how those could translate into a permanent development is unclear. Kuukpik also has in-holdings within the NPR-A that would be crossed by the GMT-2 road-pipeline corridor. Pardue insisted in her letter that GMT-2 will push wildlife resources such as caribou and wolverines away from the community, forcing hunters to travel farther to reach them and putting the villages food security at risk. “With active exploratory drilling to the east, west, and south, our community is on the verge of being surrounded by oil and gas development. BLM has taken no actions to meaningfully protect subsistence resources and our remaining subsistence use areas from the impacts of oil development within the region,” Pardue wrote. She continued to assert that human health impacts, particularly air quality, were not adequately addressed in the draft EIS, which was published in March. GMT-2 is the continuation of a lack of government response to the air quality impacts of ongoing oil development, according to Pardue. She added that the potential impacts of development on residents’ mental health and nutrition need comprehensive evaluation as well. Arctic Slope Regional Corp., the regional Native corporation for North Slope communities, supported ConocoPhillips’ development plan in its own May EIS comment letter. However, ASRC Development Vice President Teresa Imm wrote that company leaders believe the potential impacts of GMT-2 to locals’ subsistence activities need to be fully evaluated before the project is approved. BLM will evaluate and potentially apply new mitigation measures as stipulations in its record of decision, which is likely to be published this fall, according to the EIS document. Elwood Brehmer can be reached at [email protected]

No favorite so far for competing Interior natural gas plans

Interior Gas Utility leaders were largely measured in responding to a late pitch from Siemens Government Technologies on a new option for getting an additional natural gas supply to the Fairbanks area. Pamela Throop, chair of the startup utility’s board of directors and a longtime Fairbanks commercial real estate developer said the Siemens proposal is “neck and neck in some ways” with the Alaska Industrial Development and Export Authority’s $330 million comprehensive gas distribution and supply build out financing package. AIDEA’s plan also included IGU purchasing Fairbanks Natural Gas and its sister LNG supply chain companies for nearly $60 million — a purchase made predominantly with $42 million in state Interior Energy Project grant funds. Siemens representatives laid out their LNG supply chain plan to IGU officials Aug. 21. Throop and other utility board members said the Siemens turnkey proposal, which includes a partnership with the Southcentral Knik Tribe, is attractive for its simplicity to the utility — it could provide LNG by rail to Fairbanks for a contract price without IGU investing in added liquefaction capacity. However, they noted that the company still needs to secure the first, critical link in its LNG supply chain: a contract for natural gas. “We have questions above and beyond dealing with the dollars — security of supply, transportation, all those kinds of things that we have to deal with. We have to make sure that they’re capable of doing what they say they can do,” Throop said in an interview. “They don’t have a gas supply yet, either. They’re working on one; so they can’t really give us a firm price until they have a gas supply and that’s really going to make all the difference in the world, depending on what they can bring that gas supply in for, in my opinion.” Siemens is in talks with Cook Inlet gas producers and believes it can get feedstock natural gas for approximately $5 per thousand cubic feet, or mcf. That would be a marked improvement over the $7.72 per mcf price IGU and AIDEA negotiated with Hilcorp Alaska on a short, three-year contract that runs into 2021, but would also be a significantly cheaper gas price than Southcentral utilities have inked of late on longer deals for much larger volumes of gas. Recent contracts for a firm gas supply from Cook Inlet have been in the $7 per mcf range. Former AIDEA board member Gary Wilken, now a member of the IGU board, said it took AIDEA and IGU 18 months of negotiations to finalize the $7.72 per mcf price with Hilcorp. Getting a gas contract with favorable terms for the Interior could also be challenging because it is for a relatively small demand, likely starting at a little more than 1 billion cubic feet per year range and growing as Interior residents and businesses sign up for gas. What’s problematic for the greenfield project is the fact that no one really knows how quickly that new gas demand will materialize. It is dependent upon a variety of factors including the cost of alternative heating supplies, namely fuel oil and wood, as well as the number of customers willing to invest in new natural gas appliances and how quickly gas distribution infrastructure can be built out. Converting to a new natural gas home heating system can cost residents upwards of $10,000 without any sort of assistance program, AIDEA officials have long noted, which is a major potential hurdle for the Interior Energy Project. “The question is: Is that (gas supply) real?” IGU board member and former Golden Valley Electric Association CEO Steve Haagenson said in an interview. The company insists it could be shipping LNG to Fairbanks by early 2020 if it can reach an agreement with IGU by the end of the year. Siemens is also investigating the prospect of sourcing its own gas directly from the Houston area where its modular LNG plant would be sited. Controlling the gas supply could bring the cost down to the $4 per mcf range, according to company representatives, but that would appear to be a longer term venture as well. AIDEA and FNG have estimated their plan, with its state financing support, would result in an initial $17.30 per mcf burner tip price to consumers in 2020. That price could drop to the $15 per mcf IEP goal by 2022 as more customers are brought online. Using IGU’s contract price, Siemens would get LNG to the Fairbanks storage tank for $17.98 per mcf, according to the company — plus $5 to get it all the way to customers. The Siemens cost would drop into the $16 per mcf range with $5 per mcf wholesale gas, according to the company, but that again would be delivered to the large LNG storage tank FNG is currently building and require costs for storage, regasification and distribution totaling about $5 to be added on to the customers’ final price, Wilken highlighted. Company representatives said the LNG cost could drop further if other industrial users — either in the Interior or Southcentral — could be secured. Throop said the prospect of having another entity assume LNG plant construction and operational and transportation risks is particularly appealing. “We don’t care what their capital construction costs are; all we care about is the gas price in the contract,” Throop said. The Siemens plan starts with the company’s modular “LNGo” liquefaction units that can produce up to 30,000 gallons of LNG per day. The plan is to initially install two LNGo units at a proposed industrial park near Alaska Railroad Corp. tracks in Houston. The fuel would travel by rail to Fairbanks Natural Gas’ 5.25 million-gallon LNG storage tank currently under construction in south Fairbanks for regasification and distribution to residents and businesses. Once gas demand grew to where more than four of the LNGo units were needed the company would look at installing a single, larger LNG facility, according to Siemens officials. Under the plan, IGU would sign a 20-year liquefaction services agreement, or LSA, with the Knik Tribe but the responsibility for executing the contract would flow to Siemens through a separate contract with the tribe. IGU would also sign a transportation contract with the Alaska Railroad, but that cost would be rolled into the LSA terms. The company is partnering with the Knik Tribe because the federally recognized Tribe has access to federal loan and grant programs that could provide lower-cost financing to the project, according to Siemens officials. It would be located on land owned by Knikatnu Inc., a Native village corporation. Wilken said that while Siemens is generally a well-regarded company with significant resources it currently has just one LNGo plant in operation in Dawson Creek, British Columbia, so the reliability of the system is still somewhat an open question. “We need to be sure we’re getting a plant that’s going to work in an Arctic environment,” he said. Haagenson said managing a utility is a constant balance between cost and reliability, but added that “a utility in Fairbanks is kind of held to a higher standard,” because a home can go from warm to frozen in less than eight hours when the heat is cut off at 40 below zero. Wilken emphasized that he wants Siemens representatives to pull back the curtain on the details of their supply chain costs. A Siemens spokesman said via email that the company has “confirmed pricing from feedstock providers at a quoted rate less than the current IGU contract price,” but declined to provide details on the specific supply chain costs. “While the comprehensive pricing will be fully visible and transparent to the IGU prior to entering into any long-term contract, we first need IGU to advise us if they are willing to enter into preliminary negotiations culminating in a memorandum of understanding, at which time we’ll carefully review all pricing along the entire supply chain,” the Siemens statement reads. Throop said IGU leaders will be talking with Siemens and Knik representatives and try to stay on the company’s timeline of reaching a deal — or not — around the end of this year. “We need to make a decision one way or the other and that’s what I’d like people to know,” she said. Picking the Siemens plan would also require approval by the AIDEA board of directors, as it would be a major change to the Interior Energy Project development plan IGU and the authority have already agreed to. AIDEA spokesman Karsten Rodvik said authority officials committed to reviewing alternative gas supply plans in the IEP financing agreement and are in the process of reviewing Siemens’ plan with IGU leaders. ^ Elwood Brehmer can be reached at [email protected]

MARAD ordered to hand over port study

Federal Claims Court Judge Edward Damich didn’t take long to rule that the U.S. Maritime Administration must produce a previously proprietary report on the failings of the former Port of Anchorage Intermodal Expansion Project. Damich ruled Aug. 23, just two days after arguments on the matter, that a root cause analysis engineering report done in 2012 by the international consulting and management firm AECOM will become part of the court record in the Municipality of Anchorage’s lawsuit against the federal agency commonly known as MARAD. Justice Department attorney Jeffrey Regner argued on behalf of MARAD in an Aug. 21 telephonic hearing that the report was commissioned by MARAD’s legal office in September 2011 to, as its name implies, uncover the underlying issues as to why the construction project went awry. The facility is the entry point for the vast majority of goods that are dispersed throughout Alaska. It was renamed the Port of Alaska after an October 2017 vote by the Anchorage Assembly and is owned by the municipality. Anchorage officials in 2003 signed an agreement for MARAD to oversee the project as a way to direct federal funding to the project; the port is also designated as a national strategic defense facility. MARAD, in turn, hired Integrated Concepts and Research Corp. to manage the project. ICRC settled a separate lawsuit with the municipality in January 2017 for $3.75 million, one of seven settlements totaling $19 million with design and construction contractors in the project. MARAD paid ICRC $11.3 million in project funds as part of a September 2012 settlement to a Civilian Board of Contract Appeals complaint the company filed against the federal agency. Anchorage attorneys claim MARAD purposefully settled the dispute with ICRC secretly and without the municipality’s knowledge, while federal attorneys say city officials were made aware of the deal within days after it was reached. Judge Damich agreed with municipal attorneys who argued that the AECOM report is likely the only place to find specific information on the project’s problems. Damich said during arguments that there is no indication in the court record that MARAD told the municipality it was preparing to settle the contract case. “(T)hat the case was settled without the knowledge of Anchorage leads the Court to conclude that Anchorage’s argument regarding ‘evasion’ are compelling enough to hold that Anchorage has a substantial need to review AECOM’s work-product to understand what prompted MARAD to settle ‘surreptitiously’ with ICRC without first consulting Anchorage as Anchorage asserts MARAD was required to do pursuant to the 2011 Agreement (between Anchorage and MARAD),” he wrote in the eight-page order. “Furthermore, Anchorage has a substantial need to obtain testimony and documents from AECOM because of AECOM’s unique position in the project.” Damich continued to state that MARAD and AECOM are the “gatekeepers” of information that could help the city understand what motivated the agency to settle with ICRC. Damich additionally granted the municipality’s motion to subpoena AECOM principal Brad Erickson, noting in his order that MARAD “has not provided any argument regarding its opposition to the deposition, only that it titles its motion ‘Motion to Quash the Subpoena of Brad Erickson,’ without more, the Court permits the deposition.” MARAD has 14 days from the issuance of the order to produce the report. Work stopped on the port reconstruction in 2010 after extensive damage to the sheet pile dock structure that was being installed was discovered. Roughly $300 million in public money was spent on the project that yielded little; most of the sheet pile has been removed. A construction worker was killed at the port in 2011 when the ground beneath the bulldozer he was operating collapsed, causing the bulldozer to fall into the water and trap him as he tried to escape, according to news reports of the accident. The worker was employed by a subcontractor hired to stabilize the damaged sheet pile dock structure while project officials determined a path forward. Port leaders are now moving forward with a scaled-back modernization of the corroding dock infrastructure, some of which is approaching 60 years old. The municipality sued MARAD in February 2014 in federal contract court, a lawsuit with four years of discovery that has progressed slowly as the private-party suit was ongoing. It is seeking up to $370 million from the federal government in the suit, according court documents. MARAD was also blasted for its alleged inattention to managing the Anchorage project as well as other Pacific port projects in an August 2014 Inspector General report. Regner contended the root cause analysis was done strictly for MARAD’s internal legal use, was left in draft form and was paid for with agency funds and not port project funds, making it a privileged document. He said further that it was compiled at the same time and largely with the same information that can be found in a public CH2M (formerly CH2M Hill) suitability study to determine whether or not the patented Open Cell Sheet Pile dock design was appropriate for the unique seismic conditions at the Anchorage port. CH2M’s study concluded that the design and construction in the project were both problematic and led in large part to the municipality suing the contractors in 2013. During the roughly four years of discovery in the case MARAD has produced approximately 360,000 documents consisting of over 2.3 million pages, according to Damich. The sides have also taken 28 depositions, with another 30 expected in addition to an unknown tally of expert depositions. Discovery is set to conclude in March 2019, although a trial schedule has not been set. ^ Elwood Brehmer can be reached at [email protected]

In defense of King Cove deal, federal attorneys argue swap legal under ANILCA

Federal attorneys insist an environmental coalition wildly misconstrues several federal laws in its suit against Interior Secretary Ryan Zinke over a land swap that would facilitate a road out of the Alaska Peninsula community of King Cove. Filed in U.S. District Court of Alaska Aug. 22 with Judge Timothy M. Burgess, Justice Department attorneys argued that the land exchange announced in January complies with the Alaska National Interest Lands Conservation Act but falls outside the purview of other environmental laws in a 42-page opposition response to the coalition’s July 11 summary judgment motion. Friends of Alaska Wildlife Refuges, the Alaska Wilderness League, The Wilderness society and six other national conservation groups sued Zinke in late January shortly after the he signed a land exchange with King Cove Corp., an Alaska Native village corporation. The agreement has the company trading up to 500 acres of its land for an equal-value chunk of a Wilderness-designated section of the Izembek Wildlife Refuge, or enough refuge land to build an 11-mile, single-lane gravel road that would complete the connection to community of Cold Bay and its 10,000-foot, all-weather runway. Building a road between King Cove and Cold Bay has long been a contentious issue between the state and federal governments. Alaska legislators threw bipartisan support behind it in 2017 via a unanimous resolution; it has also been a priority of multiple governors Alaska’s congressional delegation. Proponents stress, as Zinke did when announcing the agreement, that the road would greatly improve access to medical care for King Cove’s roughly 800 year-round residents as the isolated town’s small airport is regularly rendered unusable by harsh North Pacific storms and medevacs requiring risky operations by the Coast Guard. At the same time, the road has garnered opposition from conservation organizations and prior Interior leaders in presidential administrations of both parties, who fear it would not only damage critical waterfowl and wildlife habitat in the Izembek Refuge but also set the dangerous precedent of developing an area previously designated by Congress as Wilderness, the strongest protection given to public lands. To the court filings, the conservation coalition alleges the land exchange, which has yet to be finalized, violates the 1980 public lands bill commonly known as ANILCA. Signed by President Jimmy Carter, ANILCA established or expanded many of the national parks, wildlife refuges and other federal conservation areas in the state. Section 1302 of the milestone law grants the Interior Secretary the authority to make such land exchanges but also mandates they must be done to “carry out the purposes of this act.” The attorneys for Interior acknowledge Congress passed ANILCA to protect natural public lands in the state, but add that it also allows for the “adequate opportunity for satisfaction of the economic and social needs of the State of Alaska and its people,” according to the Interior brief. “In agreeing to the land exchange, the (Interior) Department is establishing a ‘proper balance’ between the interests of the people of Alaska and the conservation of Alaska’s natural resources, as intended by ANILCA,” the brief states. It further notes that Zinke signed the agreement so King Cove Corp. could pursue construction of a gravel road primarily for health and safety reasons. However, the federal attorneys also contend Title XI of ANILCA, which lays out the process for approving a transportation system through federal conservation lands and includes requirements for inter-agency consultation of such a plan, doesn’t apply in this case because the agreement does not guarantee a road will be built. In June 2017 Interior granted the state Department of Transportation approval to conduct several weeks of surveys over the yet-to-be swapped Izembek lands to identify the least impactful road route through the refuge. Title XI of ANILCA also mandates an environmental impact statement under the National Environmental Policy Act also be drafted to evaluate a proposed transportation system through federal conservation areas. They additionally contend that because the agreement does not authorize road construction and “any future road would not be built through a conservation system unit, but through private land, and Title XI would not apply,” the brief states. Arguments that Zinke violated NEPA by not first having an Interior agency conduct an EIS for the land exchange are also irrelevant, according to the department, because the swap will result in a conveyance to a Native corporation. King Cove Corp. also agreed to relinquish 5,430 acres of lands it had selected for conveyance as part of the agreement. In late 2013, then-Interior Secretary Sally Jewell rejected land swap deal passed by Congress in 2009 after a U.S. Fish and Wildlife Service environmental impact statement urged against it; the EIS deemed the road would irreparably damage critical waterfowl habitat in the refuge. King Cove Native organizations and the State of Alaska subsequently sued Jewell over her decision to block the road, but the suit was dismissed in federal District Court and an appeal to the 9th Circuit Court of Appeals was later dropped. That swap would have traded 206 acres of Izembek land and 1,600 federal acres outside the refuge for about 56,000 acres of state and King Cove Corp. land. Finally, Interior’s attorneys insist Zinke did not need to consult with U.S. Fish and Wildlife Service officials regarding potential impacts to endangered species and their habitats — specifically Steller’s eider ducks and northern sea otters — before signing the agreement, again because the agreement does not authorize road construction. They note that in 2013 the Fish and Wildlife Service concluded a land exchange would have “no effect” on Endangered Species Act-listed species or critical habitat and as a result no consultation was required. “Road construction, if any, can proceed only after King Cove passes numerous significant hurdles like funding, planning, any state approvals and permitting, and any federal approvals and permitting, including any required ESA review and compliance,” the brief states. Elwood Brehmer can be reached at [email protected]

Feds select Hilcorp’s plan for offshore oil prospect

Hilcorp Energy mostly got what it asked for in the Bureau of Ocean Energy Management’s environmental review of the company’s proposed Liberty offshore oil development released Thursday. The federal agency picked Hilcorp’s plan to construct a 24-acre gravel island in the federally-controlled shallow waters about six miles offshore and just east of Deadhorse in the Beaufort Sea as its preferred option for developing the estimated 330 million barrels of light crude oil at the heart of the project in its final environmental impact statement. Hilcorp Alaska leaders have said the project could produce between 60,000 and 70,000 barrels of oil at its peak. It is planned for a 15 to 20-year production life. The island, in 19 feet of water, would have a working surface area 9.3 acres, enough for 16 wells, with up to half of those being production wells and the rest reserved for injection and disposal purposes, according to the EIS. A 12-inch, roughly seven-mile, mostly subsea oil pipeline would connect the Liberty Island to onshore oil infrastructure near Deadhorse. Specifically, the pipeline would tie into the Badami oil line, which feeds the Trans-Alaska Pipeline System. The project would add oil to TAPS, but the majority of revenue from the production would go to federal coffers because the project would be in federal waters. Liberty is expected to cost about $1.5 billion overall, according to federal regulators. BOEM Acting Director Walter Cruickshank said the agency held meetings in the North Slope communities of Nuiqsut and Utqiagvik, as well as Fairbanks and Anchorage after the draft EIS was released about a year ago. “The final EIS incorporates input from those communities and the comments we received from other stakeholders, partner agencies and the general public. With that input, our scientists have produced a robust analysis that thoroughly analyzes the potential impacts of Hilcorp’s proposal,” Cruickshank said in a formal statement. Hilcorp Alaska spokeswoman Lori Nelson wrote in an emailed statement that the company is reviewing the EIS and is encouraged the project has taken another step forward. “The Liberty project will incorporate proven technologies already utilized in the shallow waters of Alaska’s Beaufort Sea, and would help generate new jobs, revenue and domestic energy,” Nelson wrote. She could not specify when the company hopes to begin constructing the project. Hilcorp Alaska officials have pointed to the four large existing North Slope oil development islands — Endicott, Spy, Oooguruk and Northstar — as strong evidence that Liberty can be done safely. The company is the majority owner and operator of the Northstar and Endicott fields, after purchasing BP’s interests in them in a 2014 deal that also gave it a 50 percent interest in Liberty. BP subsequently sold 10 percent of its stake in Liberty to ASRC Exploration. BP purchased Liberty from Shell in 1996 after Shell discovered the prospect with four exploration wells in the mid-1980s. BP first planned to build an island to develop Liberty but put those plans on hold in 2001 to further study the project, according to the EIS. In 2005 the London-based oil major proposed drilling ultra-extended-reach wells from onshore to eliminate the need for an island and minimize the project’s impacts on Alaska Native subsistence whaling hunts in the area. That plan was scrapped in 2012 and Hilcorp subsequently took over the project in 2014. Drilling from onshore would require drilling wells nearly a mile longer than the world record wellbore of 40,602 feet, according to BOEM. Alternative development options considered in the EIS considered included moving the man-made island up to 1.5 miles to keep the project away from the densest area of what is known as the “boulder patch,” an area of the seabed with small boulder substrate that “supports the richest and most diverse biological communities in the Beaufort Sea,” the EIS states. However, moving it about a mile east would require pipeline design changes to limit the risk of pipeline buckling or wear and moving it closer to shore — into state waters — would increase the average wellbore from about 13,900 feet to 17,200 feet, according to BOEM. Moving processing facilities off the manmade island was also considered as a means of reducing equipment noise and vibrations with the potential to impact marine mammals relied on for subsistence harvests. Leaders of Kuukpik Corp., the Alaska Native village corporation for Nuiqsut, wrote in earlier comments during the EIS process that the company doesn’t have a stance on the project, but urged BOEM officials to closely examine the impacts of abandoning the Liberty Island once production has ceased. Leaving the gravel island to wash away once all production and erosion protection equipment has been removed could at a minimum cause navigation hazards in a travel corridor frequently used by Native subsistence hunters, according to Kuukpik President Isaac Nukapigak. Doing so could also expose the Boulder Patch to artificial debris, Nukapigak also noted. Decommissioning the project through removing facilities and equipment, stripping the island of its erosion protection and letting the ocean reclaim the area was the procedure used for Tern Island and other gravel exploration islands built in the area during the 1980s and 1990s, according to the EIS. Elwood Brehmer can be reached at [email protected]

Effort to transform ferry system a lift for next Legislature

Election Day is still months away but some coastal Alaska legislators are already ramping up to overhaul the state ferry system in the 2019 legislative session. House Transportation Committee co-chair Rep. Louise Stutes, R-Kodiak, said during an Aug. 16 hearing that a top priority of the committee for the upcoming session will be revising legislation to turn the Alaska Marine Highway System from a subset of the state Department of Transportation into a semi-independent public corporation. Stutes, who won her GOP primary Aug. 21, is a member of the bipartisan House Majority coalition, which currently holds a small majority over the House Republican Minority caucus. She said House Bill 412, introduced by the Transportation Committee late in the last session that ended in mid-May, received unanimous support from its members. Exactly what changes will be made to HB 412 are unclear at this point, but it also has backing from other Interior Alaska legislators, according to Stutes, who historically have questioned the cost of the ferries that require significant ongoing state funding support to operate. “Aside from maintaining healthy fisheries, revitalizing our ailing ferry system is probably the most important issue to coastal Alaska,” she said. State Marine Transportation Advisory Board chair Robert Venables stressed during the hearing that taking AMHS funding battles out of the Legislature’s annual debates as much as possible is crucial to forming a more effective and efficient ferry system. “Finding that mechanism for at least getting stabilized funding would at least allow the ferry system to capture the most revenue from the highest revenue months,” he said. Venables is also the executive director of the Southeast Conference, an economic and community development nonprofit for the region. Former Commerce Department Commissioner Susan Bell largely echoed Venables assessment. They emphasized that reliable state funding would allow AMHS leaders to publish sailing schedules, particularly for the busiest summer months, further in advance, which in turn would give potential passengers more time to plan travel and hopefully increase bookings. Nonresident passengers comprise up to 40 percent of ferry riders any given year, according to AMHS officials, who market the ferries as an alternative to the giant cruise ships that traverse the Inside Passage each summer. The fights in the Legislature over ferry funding while the state grappled with multibillion-dollar budget deficits led to a 28 percent cut in state support for the AMHS over the last five years, from $124 million to $89 million. The budget cuts directly led to cuts in service, according to DOT leaders, which have led to lower expenses but also lower revenues. Between fiscal years 2015 and 2017 AMHS operating revenues went from an all-time high of $53.9 million to $45.8 million, a 15 percent reduction, while overall service was cut about 13 percent over the period, according to AMHS financial reports. The system’s fleet has also gone from 11 to nine working vessels in recent years. Bell is also a principal for the Alaska economics research firm McDowell Group, which helped study options for revamping the model under which the system operates. McDowell Group primarily conducted a revenue analysis of the operations and looked for new revenue sources. Seattle-based naval architectural and marine engineering firm Elliott Bay Design Group led the two-phase reform evaluation, which started in the spring of 2016. The first round of studies looked at other ferry systems worldwide to determine what could be pulled from their operations to benefit Alaska. Phase two formed the long-term operating strategy and included McDowell’s revenue analysis. HB 412 is largely the end result of those studies. Transitioning to a public corporation model should provide the system with more continuity in senior leadership, Bell said, allowing for more institutional knowledge and long-term planning. The reform studies recommend a seven-member board of directors with a majority of members bringing business and maritime transportation expertise and at least one member to represent the system’s union employees. House Speaker Bryce Edgmon, D-Dillingham, suggested the board have an ex-officio member from the system’s Outside ports of call, either Prince Rupert, British Columbia, or Bellingham, Wash. Bellingham service generates an average of 44 percent of the system’s operating revenue as the long-haul service is a popular way for military service members and other Alaskans to move in and out of the state from the Lower 48. As a sub-agency of DOT, the highest levels of ferry system leadership usually change with each governor’s administration. In May, DOT Commissioner Marc Luiken appointed longtime former Unalaska Mayor and Marine Transportation Advisory Board member Shirley Marquardt as the first executive director of the Alaska Marine Highway, a move made to start the transformation of the ferry system. “Having the public corporation model set up so it is run by people that are passionate about its mission brings a whole different element to operations than the status quo,” Venables commented. Bell also urged during a presentation to the Transportation Committee that labor negotiations with the system’s employee unions currently handled by Department of Administration officials be negotiated directly by AMHS officials, which would improve labor-management communication and could help reduce labor costs by inserting more industry expertise into the labor talks. Venables said many of the changes should be made to make the system run more as a private-sector operation. “We really should be operating more like business. It’s always going to have a public mission; it’s always going to need some level of funding support from the state to achieve that public mission, but it’s a $150 million enterprise that needs to be run more like a business,” he said. Studies have shown that increasing fares to fully recover costs would likely reduce ridership and undermine the revenue generation effort, DOT officials have said. Full privatization has been dismissed because Alaskans would lose much of the essential services the system provides, according to reform strategy documents. However, Venables said the overhaul should not stop at the system’s management structure. He insisted the AMHS needs to continue to move toward a more standardized fleet with smaller ferries feeding mainline vessels that make the long distance sailings to Bellingham, across the Gulf of Alaska and out the Alaska Peninsula and Aleutian Islands. That will mean keeping politics out of fleet selection and vessel design and letting contracted marine architects handle that work, Venables said. “We’ve got kind of a troubled history in trying to design the right boat so we’re going to take a fresh look — even at the Alaska class vessels,” he said. The M/V Tazlina, the first of the two Alaska class “day boat” ferries was christened in Ketchikan Aug. 11. The twin, 280-foot ferries are planned for use in Lynn Canal between Juneau and the road-accessible towns of Haines and Skagway. Built at Vigor Industrial’s shipyard in Ketchikan, the Tazlina and the Hubbard are the first AMHS ferries built in Alaska. Elwood Brehmer can be reached at [email protected]

Gaps in Arctic strategy leave room for trouble

The shortcomings in U.S. Arctic policy only start with the country’s feeble icebreaking “fleet,” according to Mark Rosen, an Arctic expert with the Washington, D.C.-based policy think tank CNA. Rosen spoke Aug. 15 in Anchorage during a lunch presentation put on by the Alaska policy nonprofit Commonwealth North. He was also in Alaska to attend a U.S. military Northern Command, or Northcom, conference at Joint Base Elmendorf-Richardson. “Almost to a person, there seems to be unanimity among all the people at the conference — very senior officers and so forth — that we are really behind in terms of as a nation in recognizing the enormous resource potential of the Arctic as well as some of the challenges that are occurring today in other parts of the Arctic because the legal structure in many respects is not sufficiently robust,” Rosen said. A retired U.S. Navy captain, Rosen is a vice president and general counsel for CNA. He stressed that Arctic waters, though referred to as an ocean, are ostensibly a “closed sea,” making it much more likely for the happenings in one portion of the Arctic to impact the entire region. Rosen said he finds some of the environmental standards of other Arctic nations particularly worrisome as well as a lack of enforceable shipping standards for the icy region. The U.S., he noted, generally has stringent environmental standards for remote developments. He referenced a remote drilling platform, part of the Russian Prirazlinloye oil field in the country’s waters of the Barents Sea, and others like it, as being a potential source for an Arctic-wide ecological disaster. Oil produced from the field, which is about 35 miles offshore and roughly 1,000 miles from the nearest major port according to Rosen, is stored on the platform until it can be transferred to a tanker. “When you have those types of activities 1,000 miles to nowhere — I think there’s a song like that — you’ve got to wonder, well, what happens if something goes wrong? What happens if that caisson springs a leak?” Rosen wondered. (Dwight Yoakam’s country hit 1,000 Miles from Nowhere reached No. 2 on Billboard’s country chart in 1993. Yoakam also sports an amazing pair of painted-on orange leather pants while standing atop a moving train in the accompanying music video.) “Russia has the right to develop those resources but again, the Arctic is a closed sea and so there needs to be, in my judgment, some accounting for the fact that what happens in the Russian Arctic can affect the U.S. Arctic, can affect Alaskan waters,” he said further. As a result, Rosen advocates for Arctic-wide development standards based off of U.S. requirements to use current technologies and practices for oil drilling at least, that could be developed and implemented fairly simply by each of the five nations with Arctic coasts. The European countries surrounding the North Sea and its significant offshore oil and gas fields have such modern and reciprocal development standards, liability provisions and infrastructure inspection protocols through the 1998 OSPAR Commission, and could be used as a model in the Arctic, he suggested. While the Law of the Sea says individual nations are to regulate development activities and responsible parties are expected to compensate those impacted by an offshore incident, the procedures can be much more difficult to execute when something occurs, according to Rosen. “The duty to monitor and cooperate in the event of an incident does not equal the duty to pay damages,” he said. “At the end of the day, as a lawyer, if something goes wrong, I want to figure out who’s going to pay and are there enough resources to be able to satisfy the immediate claims for cleanup and the claims of those that might be adversely affected, such as fishermen.” On Arctic shipping, Rosen does not foresee Canada’s Northwest Passage or Russia’s Northern Sea Route becoming “maritime superhighways” for transit shipping. For one, he said containership operators that fill major U.S. ports such as Long Beach and SeaTac work on tight, space-available schedules and generally cannot afford to be delayed by any of the many variables added by shipping through the Arctic. Rather, he believes most of the long-term Arctic shipping growth will be destination-based and focused on serving a growing number of resource development and infrastructure projects. Rules of the road The requirements for large vessels operating in the Arctic are difficult to enforce in situations where they are prescribed and virtually nonexistent in other cases, Rosen said. That’s because the Law of the Sea with few exceptions delegates shipping requirements and subsequent enforcement to the “flag state” of a vessel, or its country of origin. The Polar Code has detailed vessel capability and equipment requirements for ships operating in the Arctic. However, it only applies to vessels built after the code was implemented and still relies on flag-state enforcement. Rosen said there have been talks about adding inspections in a vessels last port of call before embarking on an Arctic voyage, but such heightened scrutiny is not yet mandated. The Polar Code was ratified in 2014 and took effect in January 2017. “If you have a Liberian-flagged vessel that’s going through Arctic waters you have to rely on the government of Liberia in order to ensure this particular ship meets all the requirements of the Polar Code,” Rosen described. “The Polar Code is good but we need to layer cake it. We need to have insurance requirements and there needs to be a system to ensure that somebody’s inspecting the ships’ papers before they go into the Arctic to make sure they’re complying with the Polar Code.” Established in 1996 as a working body for the eight Arctic nations to collaborate on policy and social issues, the Arctic Council deliberately wasn’t formed to be a regulatory enforcer, according to Rosen, out of a collective fear for layering further international oversight on a given country’s activities. Sea ice and extremely harsh water and weather conditions necessitate additional requirements for Arctic-bound vessels, but so does the simple lack of information regarding the ever more popular area, he said. The luxury cruise liner Crystal Serenity’s Northwest Passage voyages in 2016 and 2017 underscore the need for oversight in a portion of the world that can take days for emergency responders to reach, depending on conditions, Rosen added. “If you look at a chart of the Northwest Passage it’s downright scary, because there’s an awful lot of white space (where nothing has been mapped) and there’s also places in the Northwest Passage that have a tendency to get blocked up because of ice,” he said. “What happens if one of those ships runs aground or loses propulsion because the screw hits a block of ice?” Foreign investment Finally, Rosen said there are also potential issues surrounding foreign direct investment in the Arctic, particularly in regards to areas currently lacking a strong economic foundation. Norway’s laws on foreign direct investment, or FDI, are similarly stringent to the U.S. and Canada has good requirements in that realm, he said, noting that Canadian researchers and press reports indicate China is interested in developing ports through the Northwest Passage. Rosen characterized the Chinese interest in Canada as “a little bit concerning.” He added that China is growing its investment presence in Iceland and has a 500 or-so person research team dubbed “Northern Lights” located there. Iceland and Greenland are particularly vulnerable to the side-effects of foreign investors who do not have a stake in assuring local people or environments are protected, he said, because they are focused on growing their small economies. Greenland is seeking FDI to indirectly help offset the growing costs of social programs, according to Rosen. “Are you going to allow foreign mining and foreign investment for a mine, for an offshore oil project — there are a couple on the books in Greenland that are being developed — and how heavily are you going to regulate that activity, and then on the other hand deprive yourself of the revenue? So, it’s sort of a classic case,” he said. Adhering to strict environmental standards can also push money to where the regulatory burden is the lowest, he added. “Everybody’s going to try to game the system so that they have an advantage over the other state in terms of attracting inbound investment,” Rosen said. He noted that current U.S. sanctions on Russia haven’t helped the Arctic investment scene either, as they have simply pushed Russia and China into “a marriage of convenience.” China National Petroleum Corp. and China’s Silk Road Fund provided 30 percent of the investment needed for Russia’s $27 billion Arctic Yamal LNG project, which started exports in 2017, according to French oil and gas giant Total, which also has a stake in Yamal LNG. According to a November 2017 CNA report co-authored by Rosen and titled, “Unconstrained Foreign Direct Investment: An Emerging Challenge to Arctic Security,” often nationalized Chinese companies and development banks have invested roughly $90 billion in Arctic infrastructure and resource projects since 2012. The report additionally estimates that China has invested upwards of $1.4 trillion in the economies of Arctic countries since 2005. He highlighted concerns about state-owned Chinese companies taking projects or properties over when finances fail, but also said some Chinese investors take the remove the potential to default when lending in order to be more attractive to borrowers. The move of eliminating default risk, along with investments in Arctic resource projects that seemingly don’t pencil out raise questions as to whether China is making its investments for strictly commercial reasons, Rosen said. He suggested the Arctic nations should look at forming an international Arctic development bank to give those in the region and looking for major chunks of capital another option that could also ensure the projects are built responsibly and with fair lending practices. “You can debate about who would be members but I see the charter members as being the five countries that have Arctic coastline,” Rosen elaborated. “They would form a bank and they would provide investment capital to enterprises that may want to develop a mine in Greenland, Iceland, and then the financing terms need to be sufficiently robust that they can compete with the Chinese.” He said such a bank could be started with private lending supported by loan guarantees to lessen the immediate need for direct appropriations by the founding countries. Elwood Brehmer can be reached at [email protected]

Siemens pitches alternative plan for gas to Interior

Interior residents got their first detailed look at an ambitious alternative plan to get more natural gas to a region with poor winter air quality and high home heating costs. Representatives from Siemens Government Technologies Inc. made their pitch to the Interior Gas Utility board of directors Aug. 21 by contending they could supply the Fairbanks area with more natural gas without requiring IGU to invest in additional LNG facilities in Southcentral. IGU recently purchased Fairbanks Natural Gas and the Titan LNG plant that supplies it from the Alaska Industrial Development and Export Authority for about $60 million. That purchase, largely enabled by $42 million of Interior Energy Project grant money AIDEA awarded IGU, is part of a larger, $330 million financing package approved by the Legislature in 2013 that also includes plans for a $46 million LNG plant expansion and another $233 million in ultra low-interest loans and bonds to finance gas storage distribution infrastructure in North Pole and Fairbanks. Siemens Energy and Infrastructure Director Kelly Laurel told the IGU board that the company’s plan, which she noted was not solicited by the utility, is to partner with the Knik Tribe to get added natural gas to the region by January 2020 on a 20-year turnkey contract. “We’re not asking you to make an investment or do any bonding, but just to sign a liquefaction agreement,” Laurel said. The Siemens plan hinges on the company’s modular “LNGo” liquefaction units that can produce up to 30,000 gallons of LNG per day. The plan is to initially install two LNGo units at a proposed industrial park near Alaska Railroad Corp. tracks in Houston. The fuel would travel by rail to Fairbanks Natural Gas’ 5.25 million-gallon LNG storage tank currently under construction in south Fairbanks for regasification and distribution to residents and businesses. Once gas demand grew to where more than four of the LNGo units were needed the company would look at installing a single, larger LNG facility, according to Siemens officials. Laurel and other Siemens officials acknowledged— as they did last October when they pitched the idea to the AIDEA board of directors — that the company hopes to parlay involvement in the Interior Energy Project into more gas supply projects in the state. She said the company mostly does work for Department of Defense installations and would like to grow into supplying the Interior military bases and possibly other developments with natural gas. “This particular project to the Interior, we see this as just one step in the infrastructure build out of Alaska,” she said. Under the plan, IGU would sign a 20-year liquefaction services agreement, or LSA, with the Knik Tribe but the responsibility for executing the contract would flow to Siemens through a separate contract with the tribe. IGU would also sign a transportation contract with the Alaska Railroad, but that cost would be rolled into the LSA terms. The company is partnering with the Knik Tribe because the federally recognized Tribe has access to federal loan and grant programs that could provide lower-cost financing to the project, according to Siemens officials. It would be located on land owned by Knikatnu Inc., a Native village corporation. Laurel said Siemens believes it can secure a gas supply for far less than the price of $7.72 per thousand cubic feet, or mcf, that IGU agreed to in its three-year contract with Hilcorp Alaska. Siemens is in talks with multiple Cook Inlet gas producers, she said, and believes it can secure feedstock gas for $5 per mcf, which would be significantly cheaper than the gas price Southcentral gas and electric utilities have been able to secure on much larger volume contracts. The Siemens-led group is also investigating the prospect of developing potential gas reserves in the Houston area, which would bring the feedstock price down to $4 per mcf, according to the company’s project documents. “We believe we have a firm (gas) supply to be able to contract to rail your LNG to you,” Laurel told the IGU board. She said partnering with Siemens and the Tribe on a performance-based contract would shift LNG supply and operational risks from the utility to the company. “You won’t get these sort of ‘whoops’ bills or overrun bills. That’s our problem to deal with,” she said. On cost, Siemens believes it can deliver LNG to FNG’s storage tank for $15.02 per mcf, based on a $5 per mcf gas feedstock price. Members of the IGU board had questions for the Siemens representatives but largely withheld judgment on the proposal. New IGU board member and Fairbanks-area resident Gary Wilken, who recently resigned from the AIDEA board to take the local position, noted that even with $5 feedstock gas, another $5 per mcf would need to be added to the final customer price to cover regasification and distribution costs, bringing the “burner tip” cost into the $20 per mcf range. AIDEA and FNG have estimated their plan, with its state financing support, would result in an initial $17.30 per mcf burner tip price to consumers in 2020. That price could drop to the $15 per mcf IEP goal by 2022 more customers are brought online. Using IGU’s contract price, Siemens would get LNG to the Fairbanks storage tank for $17.98 per mcf, according to the company — plus $5 to get it all the way to customers. Siemens representatives said they can have the operation up and running 12 months after contracts are signed, which would mean IGU would have to agree to the plan by the end of the year to get gas flowing by January 2020. Laurel acknowledged there is a lot to negotiate. “We recognize that this is a great opportunity to advance Alaska and its infrastructure,” she said. ^ Elwood Brehmer can be reached at [email protected]

MARAD fights turning over study on failed port project

The Municipality of Anchorage settled its lawsuits against contractors in the failed port expansion project last year for $19.3 million, but city attorneys are still aiming to recover much more money in a lawsuit against the federal government. Attorneys for Anchorage and the U.S. Maritime Administration, or MARAD, argued Aug. 21 over whether the federal agency should be forced to hand over an allegedly incomplete engineering report on the problems of the port construction and what documents among roughly 20,000 should be withheld from the court record. Senior Federal Claims Court Judge Edward Damich adjudicated the proceeding telephonically from Washington, D.C. The facility, renamed the Port of Alaska by a vote of the Assembly on Oct. 24, 2017, is owned by the municipality. Anchorage attorney Jason Smith contended MARAD is improperly claiming attorney-client privilege in order to withhold a root cause analysis study done in 2012 by the international engineering and project management firm AECOM . The municipality commissioned MARAD to oversee the expansion project, which began in 2003, as a way to direct federal funding to the Anchorage port, which is designated as a national strategic defense port. MARAD, in turn, hired Integrated Concepts and Research Corp. to manage the project. ICRC settled with Anchorage in January 2017 for $3.75 million, one of seven settlements with design and construction contractors in the project. Municipal attorneys have said they are looking to recoup upwards of $340 million between the two lawsuits against MARAD and the project contractors. About $300 million was spent between state and federal funds on the project that yielded little. Most of the sheet pile dock structure, which was not finished when work stopped in 2010, has been removed. The municipality sued MARAD in February 2014 in federal contract court, a lawsuit that has progressed slowly as the private-party suit was ongoing. MARAD was also blasted for its alleged inattention to managing the Anchorage project as well as other Pacific port projects in an August 2014 Inspector General report. MARAD attorney Jeffrey Regner said the AECOM study was done roughly at the same time that CH2M (formerly CH2M Hill) was conducting a suitability study to determine whether or not the patented Open Cell Sheet Pile dock design was appropriate for the port with great seismic risk. The AECOM study was expected to be “short, sweet and to the point,” Regner told Judge Damich, adding it was left in draft form and was never intended to be shared outside the MARAD counsel office. He said AECOM was paid by the federal government, not with project funds, and the firm was hired to be a litigation consultant, adding the CH2M Hill and AECOM studies “overlap quite a bit.” “I think the good news is we have CH2M Hill doing parallel work at the same time,” Regner said. The conclusions in CH2M’s study that the design and construction in the project were both problematic led in large part to the municipality suing the contractors in 2013. Smith argued a root cause analysis is a specific type of engineering study to determine, as the name implies, the fundamental reason a project failed and had a different purpose than CH2M’s suitability study. The relationship between the city and MARAD really began to fall apart in September 2012 when MARAD settled with ICRC, allegedly without notifying the city of the deal. Regner said “it was at most days,” after MARAD officials decided to settle with ICRC before municipal officials were notified. Damich noted there is nothing in the record to indicate MARAD told the muncipality that it was going to settle with ICRC. Smith also said the log of roughly 20,000 documents MARAD attorney’s contend are privileged is unreasonable, noting that 8,000 or so don’t have sufficient descriptions and more are labeled with attorney-client privilege. “We shouldn’t be burdened to go through a privilege log with 20,000 entries to determine which ones are privileged and which ones aren’t,” Smith said, adding the agency’s factual position has changed several times during the suit that has yet to go to trial. “When you’re dealing with 20,000 documents you’re going to make some mistakes it seems to me,” Damich commented. Regner said MARAD’s attorney’s started with upwards of 15 terrabytes worth of documents and whittled those down to the 20,000. Discovery in the case is scheduled to be finished by March 2019. ^ Elwood Brehmer can be reached at [email protected]

CP: Efficiencies, discoveries leading ‘renaissance’ on North Slope

ConocoPhillips Alaska employees have a big round target to hit that company leaders believe is the key to staying competitive. And it’s not a buried treasure map that points right to where the next exploration well should be drilled — although with the company’s recent success indicates they might have one of those, too. “It’s just math,” ConocoPhillips Alaska President Joe Marushack said during an Aug. 9 meeting with Journal and Anchorage Daily News staff. The target is $40 per barrel, and making the math work so all of the company’s operations in the state are profitable at or below that key price point. Particularly on the North Slope, where costs are unavoidably higher than in most other oil basins worldwide, the company has focused on making sure it can withstand the inevitable ups and downs of oil markets, Marushack emphasized. That $40 breakeven has been hit at ConocoPhillips’ large existing Alpine and Kuparuk River oil fields, but also applies to all of the greenfield projects it’s working on as well. Alaska Vice President Scott Jepsen said the $40 focus revolves around remaining competitive with Lower 48 unconventional oil plays for investment dollars within the company. Jepsen described the massive and ever-growing shale oil basins in Texas and North Dakota as “the center of gravity” for the oil business, noting those plays are “attracting tens of billions of dollars of investment this year.” Making $40 oil profitable keeps Alaska operations competitive, but he added that some of the oil being pulled from Texas is now done so for less than $30 per barrel. The continued emphasis on cost is also a way to prepare the company for what its leaders believe will be ever more wild market swings. While oil has momentarily steadied in the $70 per barrel range, few seem to believe it will stay there for long. “Our chairman (Ryan Lance) said the higher the price of oil the greater the crash is going to be so we’ve got to be able to survive that volatility,” Jepsen said. The new mindset is also a far cry from just a few years ago, when companies Slope-wide were discussing the need for $70 oil just to break even on new discoveries. “2015 was a very, very scary time for us so we did an awful lot to reduce our cost — as did everyplace else we that we produce — and we were very successful at reducing our costs and we’ve got to be able to maintain that,” Marushack said. Part of those savings are coming from doing more tests on pipelines and equipment that previously would have been routinely replaced regardless of its condition. Jepsen said the company is also able to recoat the inside of existing oil lines to extend their working life without wholesale replacement, a technological improvement that has been adopted on a large scale in the last five years. Further advancements in compressed seismic exploration allow the company to gather far more, and better, data than ever before for the same cost to inform geologists on where to drill. Marushack added that some equipment redundancies have been engineered out of the company’s equipment as well without sacrificing reliability. However, getting to $40 still meant cutting its Alaska workforce from about 1,200 employees in 2015 down to 970 today. Its contracted labor force has also shrunk by about 35 percent over that time, he said. “At $110 oil you’re focused on getting every barrel you possibly can,” Marushack observed about the lack of cost emphasis when prices were high. The refocus on efficiency, combined with the emergence of Nanushuk formation plays on the western Slope, leads ConocoPhillips Alaska leaders to believe up to 400,000 barrels per day of new oil could be produced from the Slope by 2025. Much of that would come from their fields, particularly the Willow prospect with potential for up to 100,000 barrels per day with a $4 billion to $6 billion development cost. The Bureau of Land Management announced the start of a scoping period Aug. 7 as the first step toward developing an environmental impact statement, or EIS, for the Willow development. Two projects now in permitting — Hilcorp’s offshore Liberty and Oil Search’s Pikka — should be big drivers, too, along with other, smaller projects. They see it as a “renaissance” on the North Slope, Marushack said. “We think it’s really incredible what’s happening,” Jepsen added. “It’s not just us. If you look at what’s happening, there’s a lot of stuff that — it’s not just a concept or it’s not just an exploration prospect — people are actually doing stuff; they’re in the permitting stages and this stuff is going to happen.” For ConocoPhillips, bringing much of that newly-found oil online will mean developing projects near the Native Village of Nuiqsut, which is located just east of the company’s work in the National Petroleum Reserve-Alaska and very close to its Putu and Stony Hill Nanushuk discoveries made this past winter. Early estimates on each of those have been pegged at about 20,000 barrels per day. The company employed a series of significant steps to mitigate the impacts of drilling its Putu exploration well, just about three miles from the village last winter. The biggest measures were centered on eliminating diesel exhaust from the drilling rig and pad operations, which was upwind from the village of about 400 residents. ConocoPhillips powered the rig and pad with low-emission generators placed farther from Nuiqsut and monitored air and water quality near the village before, during and after the work was done. By all accounts the work went well, and such mitigation is also likely to be needed as the prospects are developed. Marushack said the company listened to the concerns of Nuiqsut residents and did its best to address them. Residents’ concerns led ConocoPhillips to postpone exploration drilling the previous winter. “We believe we’re going to have to continue to engage with the village, not only with Kuukpik, but with the village and listen to what they say and then try to figure out where there’s some things that they could participate in,” he said. Kuukpik Corp. is the village corporation for Nuiqsut. The Putu well was drilled with one of its rigs. Marushack noted that a portion of the royalties from oil produced in the NPR-A by law must go to mitigating the impacts of development in area communities. ConocoPhillips is also one of the largest donors to Stand for Alaska, the campaign organized to oppose Ballot Measure 1, which aims to strengthen requirements for development projects in salmon habitat. Jepsen said the company isn’t exactly sure what direct impacts the proposed fish habitat permitting law changes would have on its operations, but the primary concern is with a new, public permitting process that could open avenues for lawsuits that don’t exist now. “If the initiative goes forward I could see a very lucrative path for those organizations that are opposed to oil and gas exploration on the North Slope to pursue something that can slow us down,” Jepsen said. The initiative’s advocates, led by the nonprofit Stand for Salmon, stress that their primary goal is not to stop projects, but rather to codify in law best practices — and prevent them from being eroded by political forces — that are employed by Fish and Game in its habitat permit adjudications today. The ballot initiative would also add public notices and comment periods to one of the few state public resource-use permits that currently does not have such requirements. Jepsen added that while much of the company’s work has little if any impact on anadromous fish habitat, its most common work that could be slowed is the annual building of ice roads that use water from area lakes. Jepsen emphasized that those water draws are done in close concert with the Department of Fish and Game and are based on decades worth of data. ^ Elwood Brehmer can be reached at [email protected]

Education College launched with aim to produce more Alaskan teachers

Alaska’s higher education leaders are overhauling their operations in an effort to ultimately improve the outcomes of the state’s youngest students. The University of Alaska System debuted its College of Education this month, which system President Jim Johnsen hopes will provide better structure to teacher education programs statewide and eventually help the UA produce more homegrown teachers to fill vacancies in school districts statewide. “I can’t say it enough, teachers are the single most important job in our state and in our society,” Johnsen stressed in an interview. “The touch or touched every single person in our state and their purpose, more than any other occupation in our society, is to support our people and to advance our people.” Individuals with a solid educational background add to a skilled workforce, are more culturally aware, earn higher incomes, are less likely to be incarcerated and live healthier lives, Johnsen added. School districts across Alaska have collectively had to look Outside for up to 70 percent of their new teacher hires each year, according to Johnsen. UA College of Education Executive Dean Steve Atwater said more specifically, the system’s three main campuses in Anchorage, Fairbanks and Juneau — where the new Education College is located — graduate roughly 225 new teachers each year while school districts have to fill between 700 and 1,000 vacancies. Atwater joined the UA System in 2014 after five years as the superintendent of the Kenai Peninsula School District and time as a high school teacher and administrator in the Lake and Peninsula School District in Southwest Alaska. Johnsen and other state education officials have long noted that it not only costs districts more to bring in teachers from Outside, but many of those transplants don’t stick around long either, particularly in rural districts. Often, they simply don’t acclimate to living in remote parts of the state. While virtually unquantifiable, the whole challenge of keeping teachers is largely believed to be a fundamental issue underlying why Alaska’s students are routinely near or at the bottom of national performance indices for core subjects. “Especially in rural Alaska, they have a very high turnover rate so there isn’t this level of knowledge, awareness, commitment, particularly to communities — unique communities — across the state that would make these teachers more effective in those communities,” Johnsen elaborated. UA officials also regularly cite statistics that indicate up to 50 percent of otherwise high-performing Alaska high school graduates need remedial coursework once they enroll at a UA campus. Johnsen and Atwater believe a centralized College of Education will help the state university produce more homegrown teachers who better understand the state and are more able to adapt their instruction to what their students need, which should translate into better student outcomes. UA leaders have set a goal of producing 90 percent of the teachers Alaska school districts need to hire each year by 2025. The men emphasized that the schools of education at UA Fairbanks and Anchorage will not go away just because the college is in Juneau at UA Southeast. The teacher education programs will remain at all three campuses and hopefully be strengthened through increased coordination, more consistent standards and the elimination of redundancies, according to Johnsen. “There’s no effort to undue existing programs at the university; we’re not trying to narrow the focus or number of opportunities,” Atwater reiterated. There is capacity for more students in the existing teacher education programs; and if those classes can be filled the universities will happily hire more faculty to provide more classes, he said. The specific changes to the overall teacher education strategy will be led by the UA Teacher Education Council, a 12-member advisory body that Atwater chairs with representatives from each of the main campuses. The council doesn’t have the authority to eliminate programs — that power is held by the Board of Regents — but its recommendations will go through the channels of the system to become policy, he said. Atwater said the system’s traditional teacher education programs are strong and generally need to be grown. However, an initial change that could be made is consolidating the two master’s level education technology programs in Fairbanks and Juneau. He said each has about a dozen students. “Neither program is very well attended or enrolled and why do we have two? That’s low-hanging fruit conversation we can have,” he described. “Does it make sense to keep going independently from one another or should we combine them and just have one?” Johnsen has spent the last several years implementing the system’s Strategic Pathways initiative, an effort to similarly overhaul and streamline mostly administrative operations to save money while improving results during lean budget years. He said four years of cuts by the state Legislature to the system’s General Fund budget have amounted to a cumulative cut of about $165 million on a system-wide budget that peaked at about $922 million in 2014. In addition to the direct budget cuts, enrollment has fallen nearly 15 percent over the past four years, according to UA data, which has reduced tuition revenue. Legislators added about $10 million to the UA budget for fiscal year 2019, a little more than $1 million of which will go to the College of Education, according to Johnsen. He noted that school districts in Alaska generally spend $20 million per year recruiting teachers from outside. “If we can spend $1 or $2 (million) more each year and at some point bring that $20 million number down that makes a ton of sense,” Johnsen said. Some of the budget increase will also go to the system’s marketing and recruitment programs to attract more students, which have been scaled back significantly as well. Part of that will be pushing the post-baccalaureate program that is an avenue for those already with a college degree to quickly become a teacher. “In a year a person can have a degree in teaching if they come in with a baccalaureate degree; they can have a master’s degree and be a full-time teacher in one year,” Johnsen described. “It’s a super-cool program that we really want to expand.” When it comes to producing more homegrown teachers, Johnsen said the college is employing the national Educators Rising program. Very similar to the wildly successful Alaska Native Science and Engineering Program, known as ANSEP, in Anchorage, Educators Rising targets middle and high schoolers interested in teaching and enables them to earn college credits while in high school. It gives them a direct and cost-effective means to achieve their career goals. Atwater added that teaching is currently a career path in about 25 school districts and UA officials want that number to continue to grow. “We’ll have a much higher number of high school kids who are thinking in terms of becoming a teacher more seriously and actually taking some introductory-type classes to get them the real sense of what that’s about rather than just waiting for them to come and hoping they’ll enroll in a teacher prep program,” Atwater said. He continued by emphasizing that elevating teaching at a societal level could intrinsically help recruitment in Alaska. In other places around the world teachers as doctors are revered in the United States, he said. “The profession of teaching has to be viewed as really important or actually the most important thing and we as a state need to give the teaching profession the esteem that will draw kids to it,” Atwater said. ^ Elwood Brehmer can be reached at [email protected]

Feds approve Donlin mine plan in unique joint decision

One of the world’s largest gold prospects is one big step closer to becoming one of the world’s largest gold mines after federal agencies issued a first-of-its-kind decision Aug. 13 in Anchorage.  U.S. Army Corps of Engineers Alaska District Commander Col. Michael Brooks and Assistant Interior Secretary Joe Balash signed a joint record of decision to finish the environmental impact statement for Donlin Gold’s proposed open-pit mine and approve a right-of-way across federal land for a natural gas pipeline that will fuel the mine’s large power plant.  The record of decision generally approved Donlin Gold’s preferred construction plan for the gold mine near Crooked Creek in the upper Kuskokwim River drainage. More specifically, it approved the project’s Clean Water Act Section 404 wetlands fill permit application — applications the Corps adjudicates for the Environmental Protection Agency. Donlin’s permit allows for the disturbance of roughly 3,500 acres of wetlands, according to the EIS documents.  Donlin General Manager Andy Cole said the record of decision is the result of more than 20 years of thorough planning.  “I think it clearly demonstrates that the project has a track record of engineering excellence and a strong culture of safety, environmental stewardship and community engagement, all values that will remain constant,” Cole said. “We believe that Donlin Gold can be a model of responsible mine development with the potential to generate meaningful benefits for our Native corporation partners and communities throughout Alaska for many decades to come.”  The EIS was initiated in December 2012.  Donlin spokesman Kurt Parkan noted that nearly 400 meetings were held on the company’s proposal, with about 350 of those led by the company and another 50 or so by the Corps of Engineers.  However, the world-scale mine that would extract upwards of 33 million ounces of gold over an initial 27-year life is only part of the overall project. Substantial support infrastructure for the mine would also be built, including a 312-mile, 14-inch natural gas pipeline from near Beluga on the west side of Cook Inlet to the mine site to provide a fuel supply for the 227-megawatt power plant at the mine site. Donlin’s plan also calls for a 30-mile access road from the Kuskokwim to the mine as well as expanding the Bethel barge dock and constructing additional fuel terminals in Dutch Harbor.  Donlin Gold leaders acknowledge the project is more sensitive to gold prices than even other Alaska prospects simply because of its associated infrastructure costs.  Gold was trading for nearly $1,200 per ounce on Aug. 14.  “It’s safe to say that the price of gold currently is too low,” Parkan wrote in an email.  Donlin Gold estimates the mine and associated infrastructure that includes a natural gas pipeline from west Cook Inlet and fuel storage all the way in Dutch Harbor, will cost $6.7 billion based on its plan from a 2011 feasibility study.  Donlin Gold is owned by Canadian-based Novagold Resources Inc. and Barrick Gold Corp.  Brooks said at a signing ceremony held at the Corps’ Alaska headquarters on Joint Base Elmendorf-Richardson that the joint Donlin decision — the first of its kind in the nation — is the last major permit he will approve. Brooks handed over command of the Corps Alaska District Aug. 14; he said he is retiring after 25 years of service.  Corps officials emphasized that the record of decision was made into an event less for the decision rendered than for the fact that it was the product of multiple agencies reaching a single conclusion.  “I think it is something to be celebrated that different parts of the federal government are working together to streamline these processes,” Brooks said.  Corps Alaska Regulatory Chief David Hobbie said in an interview that the public will be split on whatever decision an agency makes regarding a major project such as Donlin, adding that lessons learned from this EIS can be applied to similar projects in an effort to speed up the decision-making process.  “This really wasn’t about Donlin’s good, bad or indifferent; it’s about the joint record of decisions because the federal government came together and spoke with one voice. That’s good for the taxpayer, right? Even if they don’t like the decision, at least we made a decision,” Hobbie said.  A major aspect of “streamlining” such permitting is developing a good schedule initially and making sure all stakeholders, including the applicant, stick to it, he added.  The mine would be on land owned by The Kuskowkim Corp., the area Alaska Native village corporation and Calista Corp., the regional Native corporation, owns the subsurface mineral rights.  Calista CEO Andrew Guy said in an interview that the company supports Donlin largely because its leadership has come to trust the environmental review process despite the fact that some of its shareholders — and local tribal governments — oppose the project because of concerns it could harm subsistence resources, particularly salmon in the Kuskokwim.  “We selected certain lands for development purposes but we did not get into that for a long time, primarily because of concerns to the environment and our people’s reliance on subsistence to make a living. But we saw how (the National Environmental Policy Act) affected and impacted mining operations; we saw how NEPA really worked and that’s when our board and management decided that we’ve seen enough of the positive impacts that NEPA has on the process that, yes, now it’s time for us to fulfill (the Alaska Native Claims Settlement Act’s) mandate to provide the work and jobs to our shareholders,” Guy said.  He said that Calista shareholders would benefit not only through mineral royalty revenues to the company but also through work its subsidiary companies would do at the mine.  The Yukon-Kuskokwim River Alliance and the tribal government in the city of Bethel, Orutsararmiut Native Council, said in a statement they are “outraged” by the decision. The groups said the agencies ignored voices from the region and could hurt wildlife and subsistence hunters and fishermen.  Guy additionally stressed that Donlin would lay the groundwork for lower-cost energy and technology infrastructure by bringing natural gas and fiber-optic cable to the region. Calista, in concert with the state and federal governments, could eventually expand that infrastructure to nearby villages he said.  While the EIS decision is a milestone for Donlin, the project is far from being green-lighted.  In addition to the record of decision, the company still has to secure numerous other state and federal permits, among them approvals for water discharge, waste management and a tailings dam safety permit that will eventually require additional geotechnical drilling, according to Parkan.  After the permits are secured company leaders will reevaluate the project’s economics and begin the search for financing if the project pencils out.  Editor's note: This story has been updated from the original version to include Rick Parkan's comments about the current price of gold and its impact on the project. Elwood Brehmer can be reached at [email protected]  

Supreme Court parses, approves salmon habitat measure for ballot

The Alaska Supreme Court approved most, but not all, of the contentious ballot initiative aimed at strengthening the state’s salmon habitat protections in a decision issued Wednesday morning, meaning the initiative will be on the November ballot sans one key provision. The five-member court unanimously ruled that language in the proposed law change requiring the Department of Fish and Game Commissioner to deny permit applications for development in salmon habitat if the activity were deemed to have a “significant adverse effect” is an unconstitutional limitation on the Legislature’s authority to appropriate the state’s resources. That’s because the language would mandate the state to value anadromous fish habitat over other resources, according to the justices — a balancing act that the Alaska Constitution specifically reserves for the Legislature. “(W)here a project like a mine or a hydroelectric dam would permanently, and perhaps irreversibly, displace fish habitat, there is no reasonable interpretation under which that habitat would not suffer ‘substantial damage’ as the initiative defines it,” the 48-page opinion states. “If the habitat has been permanently displaced, it cannot be ‘likely’ for that habitat to be restored within a ‘reasonable period,’ because it will never be restored.” On Oct. 9, 2017, Superior Court Judge Mark Rindner overturned Mallott's Sept. 12 rejection of the initiative petition, which was based on the Department of Law’s determination that it is unconstitutional. The Supreme Court decision remands the case back to Rindner, who is to direct Mallott and the Division of Elections to put the initiative on the Nov. 6 ballots. Ryan Schryver, director of the nonprofit leading the initiative effort Stand for Salmon, said in a brief interview that the group is naturally disappointed that the court struck a small but significant provision of the law change. However, Schryver stressed the group is happy that, “The heart and soul of what we’re trying to do remains intact.” He said the initiative is still fundamentally about making sure the state’s economically and culturally important salmon resources are protected while assuring industry has clear and predictable development standards. Stand for Alaska, a counter-campaign supported by the state’s oil and mining industries as well as Alaska’s Native regional corporations with the exception of Bristol Bay Native Corp., which has taken a neutral stance on the initiative, said in a prepared statement that the courts decision to strike a portion of Ballot Measure 1 “validates just how flawed and poorly crafted the measure is.” “Even with today’s changes, this measure still replaces our science-based habitat management system with untested regulations that will result in job loss and kill current and future, vital projects,” the statement reads. “Stand for Alaska remains strongly opposed to the misguided measure that threatens our jobs, communities and way of life.” Justice Daniel Winfree agreed the “significant adverse effect” language needed to be struck for the initiative to comply with the Constitution, but he partially dissented with the overall ruling because he doesn’t believe it went far enough. According to Winfree’s dissenting opinion, there is not reasonable way to interpret the habitat protections and mitigation requirements that would not effect a resource appropriation. “Where the court and I diverge is with other (initiative) provisions that, while not explicitly prohibiting the Legislature from allocating anadromous fish habitat, would have the same practical effect,” he wrote. Stand for Salmon representatives insist the initiative would mainly codify best practices Fish and Game currently uses in evaluating development permits in salmon habitat and would protect those actions from being degraded by political influence. Stand for Alaska alleges the group is attempting to severely restrict, if not altogether stop, substantive development statewide. Attorney Valerie Brown, who argued on behalf of Stand for Salmon in front of the court, emphasized that provisions detailing what constitutes healthy salmon habitat remain intact after the ruling. Those provisions deal with water quality, maintaining stream flows and require any mitigation to offset unavoidable habitat damage be done within the impacted water body. “The habitat standards are a huge improvement over current law because they are actual standards Fish and Game must apply when they’re considering permits, so it’s definitely a step in the right direction,” Brown said. Currently, Title 16, the state’s anadromous fish habitat permitting statute, directs the ADFG commissioner to issue a development permit as long as a project provides “proper protection of fish and game.” The initiative sponsors contend that is far too vague and an update is needed to just define what “proper protection” means. In early 2017, Alaska Board of Fisheries chair John Jensen sent a letter to legislative leaders urging them to update Title 16 with opportunities for public involvement in permit application reviews and enforceable development standards. Brown also noted that other parts of the proposal dealing with public process were not impacted by the court’s decision. “One of the other provisions that will definitely go forward that is a huge leap forward over current law is the provisions for public notice and public comment on large projects that could cause a lot of harm to salmon habitat. This will be first time we have a chance to participate in those.” The fact that salmon habitat permits are one of the only environmental permits the state issues without notifying the public has been a rallying point for initiative supporters. While state Department of Law attorneys originally argued the provisions of the initiative were too intertwined to sever without wholly discarding it, Attorney General Jahna Lindemuth said in a formal statement that the court confirmed Law’s understanding of the powers and limitations of a citizens’ initiative in the state Constitution. “That limitation extends to the Legislature’s power to allocate the state’s resources — including fisheries and waters — among competing uses,” Lindemuth said. She also thanked the court for its unexpectedly quick ruling on the case, which will provide the Division of Elections additional time to prepare ballot materials in advance of the November election. The state had asked the court for a ruling by early September, just ahead of a deadline for the Division of Elections to have general election information ready to distribute to voters. The Wednesday morning release of the ruling also caught folks involved in the case by surprise. The court has historically handed down its opinions on Fridays, almost without exception.   Elwood Brehmer can be reached at [email protected]

Sullivan pushes back against partisan DC narrative

Sen. Dan Sullivan is adamant that news reports and sound bytes creating a perception of unprecedented partisanship on Capitol Hill ignore the underlying cooperation that continues in Congress. “Of course there’s some principled differences that you read about daily between Democrats and Republicans on key issues: resource development, ANWR, tax reform, health care, to some degree, but on some really big, important issues there’s a lot going on — that we’re getting done — and it’s bipartisan,” Sullivan said during an Aug. 3 editorial board meeting with the Journal and the Anchorage Daily News. For starters, he pointed to the National Defense Authorization Act, which lays out the spending plan for the Department of Defense each year. Sent to President Donald Trump Aug. 1, the $717 billion NDAA for the 2019 fiscal year that begins Oct. 1 passed the Senate on an 87-10 vote. The House approved it in late July on a vote of 359-54. It further reversed the sequestration cuts to Defense spending from 2010-16 and is an $18 billion increase over the 2018 bill. The bill includes a 2.6 percent pay increase for service members. Sullivan described it as “a generational shift that focuses more on China and Russia versus Al Qaeda and terrorism, although that’s still up there,” he added. The 2019 NDAA contains another roughly $300 million worth of military construction projects in Alaska, which brings the three-year running tally here to $1.3 billion, Sullivan noted. Most of money is headed to the Interior where work to add 28 new intercontinental ballistic missile, or ICBM, interceptors to Fort Greely’s existing missile defense system is ongoing. The interceptors are the country’s primary defense against ICBM threats from North Korea and Iran. Work is also continuing at Eielson Air Force Base near Fairbanks in preparation for the two squadrons of F-35 fighters scheduled to arrive at the base starting in 2020. More than 2,700 personnel will accompany the fighters, according to Defense reports, and preparing Eielson for the squadrons is estimated to cost a total of $453 million and generate more than 2,300 construction jobs in the state. Sullivan and Defense Secretary James Mattis toured Eielson and Fort Greely in late June. “It is smoking right now, which is great for the (Alaska) economy and for national defense,” Sullivan said of the construction activity at the Interior installations. In addition to the work at Eielson and Fort Greely, the Missile Defense Agency is in the midst of spending another $325 million over six years at Clear Air Force Station just south of Fairbanks. The money there is going towards installing a new power plant and missile detection radar system. Sullivan will be hosting the secretaries of the Army, Navy and Air Force as well as the new commandant of the U.S. Coast Guard following a four-day trip to 14 Western Alaska communities. He and Navy Secretary Richard Spencer will visit Nome and Adak as part of the Alaska congressional delegation’s continued push for the feds to assist in building a strategic “Arctic” port somewhere on Alaska’s west coast, he said. Sullivan also pointed to the NDAA as proof that Congress as a whole is finally warming on Arctic issues, as it provides the Defense Department the authority to contract for up to six polar-class icebreakers. A contract for the first DOD-funded vessel is to be awarded sometime in 2019 with construction of the second starting in 2022 and the rest coming on a one-per-year schedule. He acknowledged, however, that actually paying for the vessels will still be subject to the annual appropriations process, which has been bungled for years. “(Russian President Vladimir) Putin has called the Arctic the new Suez Canal and he’s going to own it with his 40 icebreakers. And they’re building 13 more and they’re weaponizing them; they’re making them nuclear-powered,” Sullivan said, noting China is also expanding its icebreaking fleet. “We’re clearly, clearly behind the curve, but the good news is Democrats and Republicans are starting to take notice and put things into law, which matters.” He also provided a little insight into the closed-door NDAA markup in the Senate Armed Services Committee, which he serves on. According to Sullivan, committee leadership from both parties were against his icebreaker provisions, fearing they would “gut” the Navy’s shipbuilding budget, but they survived with unlikely help. Sullivan admitted even he didn’t know how the vote would shake out after a spirited debate. “I asked for a roll call (vote) and it really was actually kind of funny because you just go to each member and there was completely no rhyme or reason — the chairmen of the committee voted against me, the ranking Democrat voted against me, some of my more hawkish Republican foreign policy allies voted against me and (Massachusetts Democrat) Elizabeth Warren voted with me and we won,” he recalled. If this year is any indication, there is reason to hope the icebreakers will be paid for, as the traditional process for funding the government is working again, for now, at least. Slow return to regular order Congress has passed seven of the 12 annual appropriations bills before August for the first time since 2000, another achievement which Sullivan noted requires bipartisanship as the bills need 60 votes to pass the Senate. He said newer senators, such as himself elected in 2014, have pushed particularly hard against further omnibus funding packages, which have become the norm in recent years and generate bipartisan disdain amongst rank-and-file legislators. “The only people in my view that like (omnibus appropriations) are the leadership, on both sides. Republicans and Democratic leadership — (Senate Minority Leader Chuck) Schumer, (Senate President Mitch) McConnell, (House Speaker Paul) Ryan, (House Minority Leader Nancy) Pelosi — because they negotiate the whole bill,” Sullivan commented. “I had no idea what was in the last one until I was given it and they said, ‘Here, you have 24 hours to read this;’ 2,400 pages, $1.3 trillion in spending and they’re like, ‘You have to vote for it,’ and I’m like, ‘No I don’t,’ so I didn’t.” Sullivan agrees with McConnell’s decision to cut the Senate’s August recess from the traditional five weeks down to one, a move fellow Alaska Sen. Lisa Murkowski has expressed unequivocal disdain for. Many in the Senate have complained about a simple lack of time to hear the spending bills or vote on presidential appointments, according to Sullivan, who dismisses that excuse. Murkowski said in June that she opposes cutting the recess because it’s difficult for senators from such far-flung states to meet with constituents — or family — on weekends during session when their colleagues can make a quick trip home. “My view is, well then let’s make more time. Sen. Murkowski says let’s work on weekends. I’m all for that but we also shouldn’t be taking a five-week recess,” Sullivan said. Coastal concerns As chair of the Senate Subcommittee on Oceans, Atmosphere, Fisheries and the Coast Guard, Sullivan is planning to hold a hearing on the causes behind Alaska’s numerous struggling salmon stocks shortly after the Senate reconvenes. He noted that salmon management is mostly a state issue, but the general belief that ocean conditions are playing a large role in poor returns — with little knowledge beyond that — makes it a federal concern as well. “There’s all kinds of theories but we need to get our arms around (poor salmon runs), which is really impacting a lot of people,” Sullivan said. National Marine Fisheries Service Administrator Chris Oliver, an Alaskan who served for nearly 20 years as the executive director of the North Pacific Fishery Management Council, will participate in the hearing, according to Sullivan, who added that he advocates for fully funding NOAA’s scientific research budget. Sullivan has been particularly focused on ocean acidification, which has the potential to disrupt shellfish fisheries as well as some species of plankton that are the diet foundation for numerous North Pacific fish stocks. Federal disaster declarations stemming from some of this summer’s weak sockeye and chinook runs are likely, he said. In June, Commerce Secretary Wilbur Ross allocated $56 million for Alaskans impacted by low pink salmon returns in 2016. That money was part of $200 million approved by Congress for nine fisheries disasters nationwide. Talking Trump Sullivan treaded lightly when asked if Trump’s routinely impulsive behavior and sharp denigration of his critics has contributed to damaging the country’s social discourse. He called the president “a true disruptor in a lot of ways,” while adding: “He’s kept a lot of campaign promises, even if a lot of people didn’t like those.” He emphasized a general need to be “respectful and civil” when addressing contentious issues. “I think that’s critical; and I’ve called the president out when I think that doesn’t happen,” Sullivan said. A supporter of many of the Trump’s policy objectives, Sullivan said he agrees with the president that the country’s trade deficit with China needs to be balanced, but he thinks the administration is taking the wrong approach. He said he calls the president directly when he has issues with policy or strategy, and the two have had multiple conversations about trade in recent months in addition to similar discussions with top Commerce officials in the administration. “I think on one hand these guys are raising the challenges, which I think is a long-term challenge in regards to China. But what I’ve been saying to them and him, very, very regularly, which is ‘look, you can’t have a tariff battle with every country in the world,’” Sullivan said. “You guys need to finish the NAFTA negotiations, which they’ve committed to me they’re going to soon; fix those issues with the Europeans and then, working together with our allies — these are our allies — turn to the general issue that China poses, all of us, together; that’s like two-thirds of the world’s GDP.” He said he specifically pointed to the 25 percent retaliatory tariffs China has imposed on U.S. seafood imports, which has hit Alaskan fish exports. In 2017 China imported $796 million worth of Alaska seafood, which accounted for nearly one-third of the state’s total seafood exports last year. “I’m like, ‘Mr. President, we’re having retaliation on a huge export market for me and my constituents and he and (Commerce Secretary) Wilbur Ross are saying, ‘Tell them we’re actually trying to open those markets for them in China,’ which I think they believe but it’s been a challenge,” Sullivan said. Still, he emphasized that major domestic policy victories on things such as oil exploration in the Arctic National Wildlife Refuge, regulatory and tax reform and judicial appointments and a strong national economy are all major positives. “Overall, as I think you can tell, I think things are going on a good path,” Sullivan summated. Elwood Brehmer can be reached at [email protected]

Division of Oil and Gas promotes North Slope SALSA sale

Attention oil explorers: State of Alaska officials have three flavors of SALSA they would like you to try. Painful puns aside, Department of Natural Resources officials for the first time have put together large chunks of available North Slope acreage that will each be auctioned off with a single bid during the state’s annual fall lease sales held by the Division of Oil and Gas. The three Special Alaska Lease Sale Areas, or SALSAs, are some of the only remaining swaths of unspoken-for acreage in the middle of one of the country’s preeminent hydrocarbon basins; and they come with a starter kit of data to inform drilling that any wildcatter should love. The idea to auction of tracts of leases via a single bid was borne out of discussions about how the state could use the massive amounts of 3D seismic data, well logs and other typically proprietary information that has become publicly available over the past few years. “You’ve got a whole bunch of treasure chests of gold in a dark forest and somebody’s wandering around aimlessly in the dark — here’s a flashlight. This might help you just a little bit. It’s a search tool that also focuses people around the particular areas that we want to promote interest in,” said Deputy DNR Commissioner Mark Wiggin. While the refundable oil and gas tax credit program the state started in 2003 ultimately grew into something that was just too expensive to continue — the Legislature killed it last year — part of the deal of the program was that the data gathered in part with the state’s assistance would become public after a 10-year period. And the state’s team of petroleum geologists and software experts has organized that information so it’s much easier to locate and use for anyone interested in exploring the Slope. “The 3D seismic data is kind of what got us rolling to find its highest use,” said Oil and Gas Geologist Kevin Frank. The three SALSAs, starting from the west, include the state waters of Harrison Bay on the Beaufort Sea at 66,430 acres; part of Gwydyr Bay and adjacent onshore areas near the manmade Northstar Island field totaling 23,040 acres; and an area of 30,720 acres dubbed Storms immediately south of Prudhoe Bay. Each is accompanied by a 3D seismic data set that has become public within the last four years. But wait, there’s more. The Division of Oil and Gas group also compiled all of the lease and land records for the SALSAs in addition to all the data available from exploration wells drilled in an around those areas into a “one-stop shop” of sorts for anyone who is sick of counting sheep to easily peruse. “There’s always a team of folks that are looking at things, so we’re trying to provide what would be important for a team that’s doing exploration. At some point you want to know what’s the underlying info for the lands and that’s what this and these tools get you,” Frank said. Much of the well data is from Alaska Oil and Gas Conservation Commission records, but a lot also comes from the state Geologic Materials Center. However, Frank added that there are also web links to any references made to exploration well tests in news articles — largely from the Journal’s friendly competitors at Petroleum News — or any other public reports. Cumulatively, the well data is presented in ways that indicate what geologic formation was targeted when the well was drilled, as well as whether or not mud and resistivity logs or core chips and analyses are available for a particular well. “You can imagine if you don’t know much about the Slope and you say, ‘Shucks, I don’t know where oil is;’ this says, that’s where oil is. We don’t know the reservoir quality but we know based on the reports something flowed to the surface,” Wiggin said. The vast majority of the well information is free, but DNR is charging what Wiggin describes as a “handling fee” for the seismic data. That’s because the state officials have spent significant amounts of time verifying the quality of the seismic data and money on new hard drives and servers to hold it. The data set to one seismic shoot ate up 278 terrabytes of hard drive space, according to Wiggin. Frank described the seismic information as “like the free puppy” that comes with the occasional vet bill. He noted that the tens of thousands of dollars in fees to access the 3D seismic should be compared against the tens of millions of dollars it would cost to shoot the areas and obtain the data. A 162 square-mile seismic set shot over Harrison Bay in 2006 can be accessed for about $32,256, for example. “Put your Visa number in and boom, you’ve got a seismic shoot,” Wiggin remarked. The final requirements for bidding on the SALSAs are still being hashed out; they’ll be released in a public notice later in August, according to Frank, but the bids will be taken and opened as part of the regular North Slope and Beaufort Sea sales. Neither Frank nor Wiggin were willing to say whether or not they have any expectations for the SALSA bids — Harrison Bay is in the part of the Slope that has become a hotbed for large Nanushuk formation oil finds. “We’re ready to be surprised anywhere different folks see different things and that’s kind of the beauty of how this whole thing works,” Frank said. All of the SALSA information is available through the Document Library tab on the Division of Oil and Gas homepage. Elwood Brehmer can be reached at [email protected]

Scoping starts for ConocoPhillips’ Willow development

ConocoPhillips’ westward push on the North Slope took reached another milestone Aug. 7 when the Bureau of Land Management began asking for public input as it drafts permitting documents for the company’s proposed multibillion-dollar Willow oil development. The remote Willow prospect is west of the existing North Slope oil fields in the National Petroleum Reserve-Alaska. Largely a Nanushuk formation-focused play, ConocoPhillips announced its discovery in January 2017 after the company drilled two exploration wells the previous winter. Company leaders said during a July 16 investor presentation that appraisal wells drilled last winter indicate Willow likely holds between 750 million to 1.1 billion barrels of oil and pegged development of the isolated resource at $4 billion to $6 billion. The company has estimated it could produce up to 100,000 barrels of oil per day. With a shallow conventional target zone in the 4,000-foot range, ConocoPhillips also believes it can produce from Willow for less than $40 per barrel, according to a release accompanying the presentation. ConocoPhillips’ initial development plan calls for a central processing facility and pad, up to five drilling pads with up to 50 wells each, access roads, an airstrip and a gravel mine within the NPR-A, according to BLM. The proposal also contemplates a temporary island in state waters to facilitate module deliveries via sealift barges. The company sent BLM a letter in May requesting authorization for the development, a BLM release states. The federal agency will be drafting an environmental impact statement to evaluate the master development plan for the massive project and as such is asking the public what should be studied in the EIS. “Analyzing the proposed Willow prospect in a single (master development plan) EIS will result in a quicker and more efficient process for the approval of applications for permits to drill. Public input on this project is important and we look forward to hosting public meetings and listening to the comments people may have,” Acting BLM Alaska Directory Karen Mouritsen said in a prepared statement. Audubon Alaska issued a statement emphasizing that Willow is near the “globally-important Teshekpuk Lake wetlands complex, one of the most ecologically important habitats in the entire Arctic.” The 2013 NPR-A Integrated Activity Plan — the land-use plan for the entire 23 million-acre reserve — precludes oil and gas leasing and development in much of the northeast portion of the reserve to protect the area surrounding Teshekpuk Lake and the caribou herd and waterfowl that use it and are important subsistence resources for many North Slope residents. Audubon Alaska also notes the master development plan EIS is subject to an Interior Department directive issued by Trump administration officials to limit the review to one year and the EIS to 150 pages. “We urge the agency to go slow, think carefully, and adhere to the Integrated Activity Plan,” Audubon Alaska Policy Directory Susan Culliney said. “Using a hastened (National Environmental Policy Act) timeline for this massive development project will only gloss over the science and lead to a faulty decision. The complex and sensitive Arctic ecosystem deserves more consideration than can possibly be achieved through a quick and dirty fast-tracked analysis.” Public scoping meetings will be held in the North Slope communities of Anaktuvuk Pass, Atqasuk, Nuiqsut and Utqiagvik as well as Fairbanks and Anchorage, but meeting times have not been announced. ConocoPhillips is expected to bring its roughly $1 billion Greater Mooses Tooth-1 project in the reserve online this fall. When it does, it will be the first oil production from the NPR-A with an expected peak rate of 30,000 barrels per day. Its Greater Mooses Tooth-2 project is now in permitting and is also projected at 30,000 barrels per day at peak rate. Elwood Brehmer can be reached at [email protected]

State, feds agree to revise roadless in Tongass

State and federal officials inked an agreement Aug. 2 that could lead to scaling back the U.S. Forest Service’s long-debated Roadless Rule in Alaska. The memorandum of understanding signed by Department of Natural Resources Commissioner Andy Mack and Interim Forest Service Chief Victoria Christensen lays the foundation for the agencies to reopen the Roadless Rule on the prospect of working towards an Alaska-specific rule that could allow for more access to large swaths of federal lands that have ostensibly been off-limits to logging or other developments and activities since the early 2000s. Approved in early 2001 by former President Bill Clinton, the Roadless Rule prohibited new road construction on roughly 58 million acres of undisturbed national forest lands across the country. The “no new roads” edict has since been continuously challenged in court, particularly by western states that contend it has arbitrarily curbed logging and other activities on Forest Service territory and conflicts with the agency’s multiple-use land planning mission. In 2015, the U.S. 9th Circuit Court of Appeals upheld an Alaska U.S. District Court decision to overturn a 2003 exemption to the Roadless Rule for the Tongass National Forest put in place by George W. Bush’s administration. Alaska Division of Forestry Director Chris Maisch said the MOU to examine revising the rule was borne out of Gov. Bill Walker’s petition to Agriculture Secretary Sonny Purdue for a full, statewide exemption to the Roadless Rule. The MOU is focused in the 17 million-acre Tongass National Forest, according to Forest Service spokeswoman Dru Fenster, which encompasses the vast majority of Southeast Alaska and is by far the largest national forest in the country. At 5.4 million acres, the Chugach National Forest in Southcentral is the second-largest national forest, but its timber is much less suitable for large-scale commercial logging. The members of Alaska’s congressional delegation lauded the MOU in formal statements, insisting it is a big step towards getting “forest management and the economy of Southeast Alaska back on track,” as Sen. Dan Sullivan put it. “As I have said many times before, the Roadless Rule has never made sense in Alaska,” Sen. Lisa Murkowski said Aug 2. “I welcome today’s announcement, which will help put us on a path to ensure the Tongass is once again a working forest and a multiple-use forest for all who live in Southeast. “I thank Secretary Purdue for recognizing the need for economic relief in these communities and look forward to continuing to work with the administration, state officials, Sen. Sullivan and Congressman Young to see this process through to the finish line.” Murkowski chairs the Senate Appropriations subcommittee that covers the Forest Service budget and has inserted language to exempt Alaska from the Roadless Rule into recent budget bills for the agency. Those provisions have ultimately been stripped from the spending bills the president has signed. Specifically, the MOU directs DNR and the Forest Service to establish a State-Forest Service Executive Steering Committee to carry out the agreement. The Forest Service will lead development of an environmental impact statement to analyze the effects of prospective management changes to the Tongass, while the state will form a public advisory group of representatives from Southeast tribes and Alaska Native corporations as well as conservation groups and the timber, mining, tourism and commercial fishing industries. Colorado and Idaho are the only other states to have their own Roadless rules, but those came only after years of study and court challenges. Forest Service officials said they plan to have the Alaska EIS complete within 18 months, in part to keep stakeholders engaged in the process. Forest and fishing advocates criticized the agreement, claiming it will put some of Southeast’s largest industries at risk. Trout Unlimited, which has pushed for permanent protections for dozens of critical salmon-bearing watersheds in the Tongass — its Tongass 77 campaign — contends the fishing and tourism industries rely on unspoiled wilderness in the region provided by the Roadless Rule and currently support 26 percent of all the jobs in Southeast Alaska in addition to contributing about $2 billion per year to the region’s economy. TU Alaska Policy Director Austin Williams stressed in a formal statement that revising the Roadless Rule in the state would mean throwing out the 2016 Tongass Management Plan, which took more than four years to finalize. The Tongass Plan calls for a transition to strictly young-growth timber harvest in the forest over 16 years, a period Murkowski and timber industry leaders argue is much too short to provide an adequate timber supply for Southeast’s few remaining sawmills. “The current Tongass Forest Plan, which includes protections for roadless areas, was monumental and was perhaps the first time a diverse set of stakeholders successfully came together around a common vision for how to move forward on the Tongass and leave the timber wars behind,” TU Alaska’s Williams said. “The overwhelming majority of Alaskans that participated in that process voiced a desire for increased protections for important fish and wildlife habitat. Rather than flushing that hard work down the drain, we should look for lasting solutions that protect the remaining roadless areas.” Forest Service Associate Deputy Chief of Forest Systems Chris French acknowledged in an interview that any substantive changes in how the Roadless Rule is applied to the Tongass at the end of the EIS process will likely require another EIS to at least amend the Tongass Management Plan accordingly. French said the MOU provides “a wide open space” for forest managers to consider changes in how the rule is used. “It basically allows us a lot more flexibility in how we approach apply the protections of roadless that you see in the 2001 Roadless Rule,” he said. Any rule changes could apply to the 57 percent of the Tongass that was designated as roadless in 2001. About 35 percent of the Tongass has been granted “wilderness” protection by Congress and as such will not be impacted by any changes to the rule. The remaining roughly eight percent is set aside for other opportunities, according to Forest Service officials. “We don’t know what we’re going to propose yet. We don’t know what we’re going to hear at this point. We really want to start from the space of allowing folks to speak their mind; allowing folds to contribute their ideas — come to maybe some solutions — give us some proposals and all that will be considered as we go forward,” French said. Alaska Forest Association Executive Director Owen Graham said in an interview that the organization had been pleading with the Forest Service to revise the rule, but also lamented the fact that easing the land-use restrictions likely won’t change on-the-ground work for several years. “Just removing the Roadless Rule won’t let us cut one more tree because the Roadless Rule is in the forest plan,” Graham said. He has been critical of the 16-year transition to young-growth-only harvests in the current Tongass Management Plan, insisting most young-growth areas in the forest are at least 30 years from maturity. Graham said prematurely harvesting young-growth stands can necessitate cutting over twice the acreage to achieve similar harvest volumes, as stands of smaller trees simply do not offer the same amount of usable timber as mature or old-growth stands. “You have to have this economy of scale,” he said. Graham also noted that old-growth trees provide opportunities for Alaska mills to produce specialty and value-added products while lower-grade, young-growth logs from the Tongass are almost always exported to Asian markets for processing. State Forester Maisch said he doesn’t foresee old-growth harvests from the Tongass going away anytime soon, but also noted new technologies such as cross-laminated timber could open up new value-added opportunities around young-growth for Southeast mills. Maisch also stressed flexibility in management as a driving interest for the state to revise the Roadless Rule, saying the rule’s impacts go beyond traditional forest uses. “It’s about community access; it’s about energy; it’s about have the ability to be adaptable and flexible so we can make changes as technology changes,” Maisch said. “For example, cell towers and the need for cell towers in locations that are not so easy to do that in around communities right now. Hydro (power) is another good example. It’s difficult to build some of those types of utility infrastructures without having roads to support it for both construction and maintenance.” Additionally, French said Purdue’s vision of the Tongass as “a working forest” — as the USDA secretary said during a July trip to Prince of Wales Island with Murkowski — is not strictly limited to logging. “We also understand that industry is changing and the values that Alaskans hold for these lands is something that is changing as well and we recognize the importance that folks see with roadless. We also recognize the needs that other user groups and industry have for these lands. We want to be able to consider all of that,” French said. Elwood Brehmer can be reached at [email protected]


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