Elwood Brehmer

Wash out halts rail service to Seward

Alaska Railroad passengers hoping to take the train to Seward will have to wait at least one more day to get there by rail. High water at Skookum Creek near Portage washed out an 80-foot section of the track bed adjacent to the bridge over the creek Tuesday morning. The railroad’s Glacier Discovery train route has also been shortened as a result of the washout, according to an Alaska Railroad Corp. release. The sightseeing train will stop at Whittier instead of following its normal route to whistle stops at Spencer and Grandview south of Portage. Seward-bound passengers have the option of taking a motor coach provided by the railroad if they choose. Railroad crews began maintenance on the right-of-way almost immediately after the erosion was discovered. As of late Wednesday the railroad’s goal was to have service restored by Friday the release states. “This area experienced significant isolated rainfall that measured as much as a half-inch every 10 to 15 minutes for a sustained period. We are essentially dealing with a new river channel that did not exist,” railroad vice president of engineering Clark Hopp said. In all, the railroad estimated about 300 to 400 passengers per day are impacted by the schedule changes. One coal train from Healy to Seward has been delayed as well, the railroad said. Anyone wishing to cancel or reschedule train tickets or take the motor coach to Seward can call the Alaska Railroad at (907) 265-2494 for more information. Elwood Brehmer can be reached at [email protected]

Deadlines looming for Interior gas project

The Alaska Industrial Development and Export Authority is in overdrive to finalize agreements for all of the facets of the complex plan to deliver lower cost natural gas to the state Interior. Staff from AIDEA’s project partner, Colorado-based engineering and consulting firm MWH Americas Inc., helped lay out the near-term Interior Energy Project timeline to the state authority’s board of directors at a June 4 meeting. “The next three months are going to be very critical as we drive towards financial close, and that’s the goal, getting to financial close,” MWH Vice President and Managing Director Rick Adcock said. The first step to getting to financial close with all the parties involved in late October is finally completing the working agreement for the future of the project. AIDEA Executive Director Ted Leonard said the agreement would lay out the ground rules with MWH over the up to 30-year life of the project. It should be ready for board review at the June 26 AIDEA board meeting, he said. “We are right now in the process of completing the concession agreement, which is the main agreement that AIDEA will have with the project company,” Leonard said. AIDEA is also actively looking for gas from one, or possibly more, North Slope suppliers, he added. Those talks will continue over the next couple weeks. Chris Brown, a vice president and Alaska manager for MWH said the team hopes to have a gas supply contract in place by June 30. The $332.5 million in bonds, loans and direct appropriations that the state gave AIDEA to put towards the project last year in Senate Bill 23 for the IEP is reserved specifically for North Slope natural gas production, liquefaction and shipment down the Dalton Highway to Fairbanks and North Pole. Converting to natural gas heat from fuel oil could cut heating costs up to 50 percent for some residents, multiple studies have indicated. First gas is scheduled to reach the Interior in late 2015, when Fairbanks Natural Gas, a small private utility that serves the center of Fairbanks, should have its distribution system fully built out. Golden Valley Electric Association, the region’s power utility, could also have a substantial demand for gas that would be burned to generate electricity. Leonard said AIDEA is still investigating the possibility of hauling Cook Inlet gas north to Fairbanks, much the way Fairbanks Natural Gas currently operates, but on a larger scale. Using Inlet gas could be an easier and cheaper solution, particularly with the option of hauling it the majority of the way by rail. However, the availability of gas from the region has limited that option. Hilcorp, the main producer in Cook Inlet, is making supply commitments into 2019 and is “examining the market’s appetite for even longer supply commitments,” Hilcorp spokeswoman Lori Nelson wrote in an email to the Journal. Further, Nelson wrote that Hilcorp is interested in supplying all of Interior’s gas needs, as it does Fairbanks Natural Gas and Southcentral utilities, and that the company thinks it can be an equally reliable supplier to other parties around Fairbanks. AIDEA projects residential gas demand from the IEP to be about 7.5 billion cubic feet, or bcf, of gas annually by 2021 — less than 10 percent of Southcentral’s gas demand of about 90 bcf per year. Currently, Fairbanks Natural Gas gets just less than 1 bcf per year from Hilcorp. If North Slope gas is used, the utilities — Fairbanks Natural Gas, the Interior Gas Utility and Golden Valley — will have to agree to a price range until a final price can be worked out, members of the IEP team said. Brown said the goal is to have a final gas price pinned down Oct. 3. The utilities would then enter into final off-take agreements and the rest of the Slope LNG plant contracts and others would fall in line by the end of October. All of the items on the IEP list are very interdependent, he said. “In order to get to that off-take agreement there has to be a gas price; there has to be (operating expenditures and capital expenditures) for the LNG plant; there has to be trucking and storage costs known,” Brown said. The size of the LNG plant, which could cost more than $180 million for a 9 bcf plant, likely won’t be finalized until the gas demand is clear, as well. “It’s the interplay of increasing certainty that allows the process to move forward,” Brown said. During the feasibility stage, AIDEA estimated the “burner tip,” or gas cost for consumers, would about $15 per thousand cubic feet, or mcf. Now the team has to work towards an indicative cost range that will be the basis for the preliminary off-take agreements, Brown said. Those agreements are needed by July 30 to keep the process moving, he said. MWH’s Adcock said other potential industrial and federal government customers are being pursued as well. “We’re trying to get all of the utilities to the table to help us understand demand profiles (and) timing,” Adcock said to the board. While everyone involved repeatedly acknowledged the aggressive timeline of the project, AIDEA board member and former state senator for Fairbanks Gary Wilken noted that the board was told in February the commercial agreements would be in place by the end of May and that timeline has been pushed back five months to the end of October. In April the AIDEA board approved a $15 million loan to Fairbanks Natural Gas to jumpstart the expansion of the utility’s distribution system so its customers could be able to receive gas when it becomes available. A key term of the loan was Fairbanks Natural Gas consenting to a “take or pay” agreement of 0.5 bcf of gas. Wilken said he has concern with the fact that Fairbanks Natural Gas could decline the $15 million loan at 3 percent and look for a private lender at likely a higher interest rate if it can find a better gas price than the IEP can provide. Golden Valley President and CEO Cory Borgeson said a hitch in the plan is that it doesn’t incentivize the utilities to sign up early; they are offered the same gas price no matter when they sign up. Part of the answer has to be a non-guaranteed price, he said. Without the utilities’ gas demand, the whole project could fall apart. “Every one of the utilities is going to act like a business and make their decision based on the narrowing of that (gas) price range,” AIDEA’s Leonard said. Adcock said he’s confident off-take agreements will be reached with the utilities given that everyone understands the importance of the agreements to the project. Elwood Brehmer can be reached at [email protected]

July hearing set for Kenai Loop gas payments

Buccaneer Energy, Cook Inlet Region Inc., and the State of Alaska will be back before the Alaska Oil and Gas Conservation Commission July 7 to duke it out once more over gas royalty rights from Buccaneer’s Kenai Loop well pad. The hearing will be held — as has been the case with most milestones in the dispute — if the parties cannot come to an agreement on royalty payments prior to July 7. CIRI claims Buccaneer owes it royalties for gas Buccaneer drained from the Native corporation’s land that is adjacent to the Kenai Loop pad. Buccaneer once held a now-terminated gas lease with for the CIRI property. It does not dispute that the drainage is occurring. The Alaska Mental Health Trust Authority, which owns the property under the Buccaneer pad also owes it money, CIRI claims, because the authority has been receiving royalties on gas that CIRI had right to. Whether or not CIRI is liable for production expenses if it is eligible to receive gas revenue will be another point of debate at the hearing. The commission ordered Buccaneer to set up an escrow account by June 1 to hold its Kenai Loop production revenue until the dispute is resolved and make monthly deposits to the account starting June 10. Formation of the account has been delayed as Buccaneer asked the commission for clarification regarding details in the order and a brief comment period for the other parties was also established. How Buccaneer’s May 31 filing for Chapter 11 bankruptcy filing in South Texas will impact negotiations and where its money goes immediately remains unclear. All of the parties have said an agreement has been close at times during months of negotiations. Buccaneer’s bankruptcy filings list the company’s combined assets at between $50,000 and $500,000 and liabilities of $50 million to $100 million. In May 2013, Division of Oil and Gas Director Bill Barron denied Buccaneer’s application to form a Kenai Loop unit from its leases in the area. When the application was submitted in July 2012 Buccaneer was the working interest owner to 7,499 acres of lease space in the proposed unit. The company had right to 4,827 acres Mental Health Trust Authority land, its 1,275-acre lease with CIRI and 1,391 acres of state land over four leases. Units are typically formed when an oil or gas pool extends beyond a sole landowner’s property; they are a way to parcel royalties and prevent drainage or other resource rights disputes among multiple lessees. Before the decision to deny the unit was made, CIRI informed the division that it had terminated Buccaneer’s lease, but Buccaneer did not acknowledge that fact, according to Barron’s ruling. CIRI’s termination of the lease has subsequently been upheld in Alaska Superior Court. Barron wrote in the 20-page document that his decision was based on the fact that Buccaneer was at the time the sole working interest owner in the area, thus making unit formation unnecessary. Additionally, the state land leases were set to expire on at the end of September 2012 when the application was filed a couple months prior to their expiration. The only interest that would have been protected by granting the unit would have been Buccaneer’s by way of gaining state lease extensions, according to Barron’s findings. He also claimed that Buccaneer made no commitments to fully develop the gas resources in the unit, and “exploration may be a component of unit activity but the primary purpose of unitization is development of reserves proven during the primary term of a lease,” Barron wrote. Subsequently Buccaneer appealed Barron’s decision in April 2013 to the Department of Natural Resources commissioner. That appeal is currently unresolved before commissioner Joe Balash. The commissioner is withholding a decision on the appeal while the “fundamental issues involving the leases that would underpin the proposed unit are addressed” through either a settlement reached by the parties or the conservation commission process, according to DNR spokeswoman Elizabeth Bluemink. Elwood Brehmer can be reached at [email protected]

Prudhoe flight first commercial use over land for UAS

The nation’s the first commercial unmanned aircraft flight over land took place June 8 when a drone working for BP flew over the Prudhoe Bay oil fields. The Federal Aviation Administration issued a certificate of authorization, or COA, to allow BP to survey pipelines, roads and other North Slope equipment, the agency announced June 10. “These surveys on Alaska’s North Slope are another important step toward broader commercial use of unmanned aircraft. The technology is quickly changing, and the opportunities are growing,” Transportation Secretary Anthony Foxx said in a formal statement. ConocoPhillips was awarded restricted COAs last summer to fly over its offshore leases in the Chukchi Sea. They were the first COAs issued for commercial UAS operations in the country. Unmanned aircraft systems manufacturer AeroVironment conducted the flight for BP with its Puma, a hand-launched fixed-wing UAS with a wingspan of about nine feet. “The flight operation will use light detection and ranging 3D technology to survey the gravel roads and pads at Prudhoe Bay. This technology will help BP optimize the planning and implementation of maintenance programs for the North Slope infrastructure throughout Prudhoe Bay. Targeting maintenance activities on specific road areas will save time, and address safety and reliability,” BP Alaska spokeswoman Dawn Patience wrote in a company statement. Curt Smith, U.S. technology director for BP, said the company is seeking precision mapping of Prudhoe Bay oil field roads, which the light and range technology, or LIDAR, mounted on unmanned aerial vehicles, can provide. The goal, however, is to aid in the company’s implementation of GPS-aided guidance for vehicles and equipment in the field. BP has been testing various approaches to driver and operator assistance with GPS in the field but found that the oilfield roads were not adequately mapped. LIDAR data, which can map surface contours to five centimeters horizontal and one-centimeter vertical accuracy, solves that problem and it is most effectively delivered from the air, with the UAV as an effective way to do that, Smith said. It’s also the only way to map off-road facilities like pipelines, where truck-mounted LIDAR can’t go, he said. The procedure will also enable BP to plan rig moves from pad to pad in the field because the condition of oil field gravel roads can be surveyed, and needed repair done, before heavy, bulky rig components are moved to a new location. Now that the system is up and running people at the field are coming up with new ideas, like using the unmanned aircraft to survey power transmission lines. “You know you have a winner (in a new technology) when people start asking, ‘can it do this?” Smith said. “Our initial goal was safety, to give vehicle operators assistance in driving during whiteouts and poor visibility but we’re finding more and more uses for this,” Smith said. GPS-aided vehicle operation is commonly used in agriculture and in large surface mines but its application by BP on the North Slope will be a first. But BP isn’t ready for autonomously-controlled vehicles, at least yet, Smith said. The company will start with “driver-assisted” GPS where the operator has access to a display screen with guidance instructions. In early May, FAA Administrator Michael Huerta made a trip to Alaska to formally open the Pan-Pacific UAS Test Range Complex operated by the Alaska Center for Unmanned Aircraft Systems Integration, an extension of the University of Alaska Fairbanks. When Congress passed the FAA Modernization and Reform Act in 2012 it mandated the FAA to draft and implement regulations to integrate unmanned aircraft into the national airspace. The Pan-Pacific Test Range and five other sites like it across the country were formed by the agency to allow government and industry a place to safely experiment with regulations and new technology. “The 2012 reauthorization law tasks us with integrating small UAS in the Arctic on a permanent basis. This operation will help us accomplish the goal set for us by Congress,” Huerta said. Alaska is widely considered a top test site for UAS because of its extensive uninhabited areas with relatively little air traffic. Oil and gas companies in the state have also expressed interest in the craft for surveying on and offshore leases and existing infrastructure — a cheaper and safer means of monitoring than manned flights. Elwood Brehmer can be reached at [email protected]

Prudhoe flight a first for unmanned craft

BP partook in the nation’s the first commercial unmanned aircraft flight over land June 8 when it flew over Prudhoe Bay. The Federal Aviation Administration issued a certificate of authorization, or COA, to allow BP to survey pipelines, roads and other North Slope equipment the agency announced June 10. “These surveys on Alaska’s North Slope are another important step toward broader commercial use of unmanned aircraft. The technology is quickly changing, and the opportunities are growing,” Transportation Secretary Anthony Foxx said in a formal statement. Unmanned aircraft systems manufacturer AeroVironment conducted the flight for BP with its Puma, a hand-launched fixed-wing UAS with a wingspan of about nine feet. "The flight operation will use light detection and ranging 3D technology to survey the gravel roads and pads at Prudhoe Bay. This technology will help BP optimize the planning and implementation of maintenance programs for the North Slope infrastructure throughout Prudhoe Bay. Targeting maintenance activities on specific road areas will save time, and address safety and reliability," BP Alaska spokeswoman Dawn Patience wrote in a company statement. In early May FAA Administrator Michael Huerta made a trip to Alaska to formally open the Pan-Pacific UAS Test Range Complex operated by the Alaska Center for Unmanned Aircraft Systems Integration, an extension of the University of Alaska Fairbanks. When Congress passed the FAA Modernization and Reform Act in 2012 it mandated the FAA to draft and implement regulations to integrate unmanned aircraft into the national airspace. The Pan-Pacific Test Range and five other sites like it across the country were formed by the agency to allow government and industry a place to safely experiment with regulations and new technology. “The 2012 reauthorization law tasks us with integrating small UAS in the Arctic on a permanent basis. This operation will help us accomplish the goal set for us by Congress,” Huerta said. Alaska is widely considered a top test site for UAS because of its extensive uninhabited areas with relatively little air traffic. Oil and gas companies in the state have also expressed interest in the craft for surveying on and offshore leases and existing infrastructure — a cheaper and safer means of monitoring than manned flights. ConocoPhillips was awarded restricted COAs last summer to fly over its offshore leases in the Chukchi Sea last summer. They were the first COAs issued for commercial UAS operations in the country. Elwood Brehmer can be reached at [email protected]

Buccaneer files for bankruptcy

Buccaneer Energy, an independent Cook Inlet explorer with high hopes but skimpy resources, saw those hopes come crashing down May 31. The company filed for Chapter 11 bankruptcy protection that day in a U.S. Bankruptcy Court in south Texas. The company has been fighting a rear-guard action on finances almost since the time it arrived in Cook Inlet, bidding on lease sales and then bringing a jack-up rig to the Inlet from Asia with a Singapore company and the State of Alaska as partners. Buccaneer had also become embroiled in a dispute with Cook Inlet Region Inc., which owns land adjacent to the state land on which Buccaneer’s producing Kenai Loop gas wells are located. Buccaneer previously had a lease on the CIRI land but the Anchorage-based Alaska Native corporation for Southcentral terminated the lease. Buccaneer sued, claiming the termination was improper, but lost in court. Meanwhile, CIRI filed a complaint with the Alaska Oil and Gas Conservation Commission, the state agency that regulates industry production practices, alleging that Buccaneer’s Kenai Loop wells were draining gas from its lands. After two hearings and months of deliberations, the conservation commission decided May 22 to escrow all revenues from gas sales minus operating expenses at Kenai Loop until it could sort out how the gas should be shared among Buccaneer, CIRI, the State of Alaska and the Mental Health Land Trust. Under the commission order, the escrow account was to be created at an Alaska bank by June 1, and revenues to be deposited on the 10th day of each month beginning in June until an allocation was determined. Cut off from its only source of cash income amid its restructuring, Buccaneer had no choice but to file for protection, sources familiar with the company said. In bankruptcy filings for its parent and subsidiary companies, Buccaneer claimed combined assets of $50,000 to $500,000 and liabilities of between $50 million and $100 million. In a state Superior Court civil dispute between Buccaneer and CIRI paralleling the AOGCC case, the Native corporation sued for compensation over the gas drained from its land. On April 22, Judge Frank Pfiffner stayed a ruling on CIRI’s drainage claims until a decision is handed down by the commission or an agreement is reached between CIRI, Buccaneer, the Department of Natural Resources and the Mental Health Trust Land Office, which owns the Kenai Loop property adjacent to CIRI’s parcel. As of June 3, Buccaneer had not set up the escrow account, AOGCC Commissioner Cathy Foerster said. The company asked for clarifications regarding its responsibilities, she said, and a 10-day comment period was issued for the other parties involved to respond. June 10 is also the deadline set by the commission for the parties to reach an agreement on gas and royalty payments. If an agreement is not reached, the commission will determine gas rights at a future hearing. “We don’t have an agreement yet; we’ve been close a few times over the last year — certainly the last six months,” DNR Commissioner Joe Balash said June 2. “I would say there’s no good reason we don’t have an agreement, that’s my perspective.” The “hodgepodge” of subsurface ownership, combined with disputing past and future payments has complicated negotiations, he said. Trust Land Office Deputy Director John Morrison said there has been “good communication among all four parties” and that he felt they were close to an agreement June 3. CIRI spokesman Jason Moore said it is unclear whether Buccaneer’s bankruptcy would influence negotiations, but also that the Native corporation could see the bankruptcy coming. Moore said CIRI pressed for the escrow account to be set up to hold funds in dispute. Further, he said the Trust Land Office owes CIRI “a lot of money” for royalties it has taken from CIRI gas produced on the Kenai Loop pad. CIRI has a right to 20 percent of production minus expenses, according to Moore. CIRI Land and Energy Development Vice President Ethan Schutt said at an April 21 AOGCC hearing that the Kenai Loop wells were producing in the neighborhood of 8 million cubic feet of gas per day. Morrison said the Trust Land Office is “pretty comfortable” that the payments it receives from Buccaneer will be safe from creditors involved in the Chapter 11 bankruptcy action after discussing the issue with counsel.  Foerster said she did not know whether the bankruptcy would affect Buccaneer’s regulatory commitments. As for the Land Trust Office’s royalties, Balash said there is a memorandum of understanding, or MOU, between the Alaska Mental Health Trust Authority and DNR that gives the department the responsibility to help the authority maximize revenue from its lands. The MOU shifts gas royalty payments that typically go to the Division of Oil and Gas to the Trust Land Office when produced on Trust land, he said. “At least from where I sit (the MOU) causes all ‘ties’ to go to the trust, and that’s OK because the situation we find ourselves in is that it’s either going to the general fund or the Mental Health Trust account and either way they’re state sources of revenue,” Balash said. Income from leasing and resource development on the 1 million acres of Mental Health Trust land across the state is part of the roughly $26 million the trust budgets each year for programs and services for Alaskans with disabilities and mental illness, according to the trust. Overall, Balash said the state has had “a couple rubs” with Buccaneer during the company’s oil and gas work in the state, but he said the issues were nothing out of the ordinary. Buccaneer still holds other Cook Inlet leases that are currently without issue, he said. “They were an aggressive company and had a lot of enthusiasm; they just didn’t have enough capital,” Balash said. Plague of problems Before the May 22 Kenai Loop decision and the May 31 bankruptcy filing, a lot of other things went wrong for Buccaneer, including a dispute and a lawsuit with its first rig operator, delays in getting the jack-up operating, problems siting the rig at an offshore location in the Inlet and an expensive dry-hole on the Peninsula. The unraveling of the company’s Alaska strategy began in March when the board of directors suspended CEO Curtis Burton with pay pending a review of operations. Burton meanwhile filed a lawsuit in a Texas state court arguing a breach of his employment contract. On May 14 the board completed its review, terminated Burton and also removed him from the board. Burton’s lawsuit continues, meanwhile. What really aggravated the financial situation was when an investor that had promised to help fund expensive offshore drilling at Buccaneer’s Southern Cross prospect failed to come through with the money. One of Buccaneer’s shareholders, Meridian Capital International Fund, stepped in with interim financing, but the company was still left seeking other longer-term capital. There was a second win, however, with a potentially major gas discovery at Cosmopolitan, near Anchor Point. It was a bittersweet development, though. To raise cash, Buccaneer had to sell its minority interest in the discovery to its partner in Cosmopolitan, BlueCrest Energy of Fort Worth, and also its share of the jack-up rig. Through all of this, Buccaneer worked on a long-term refinancing strategy. On April 30 the company’s major creditor, Meridian Capital CIS Fund, an affiliate of Meridian Capital International, sold its debt to Houston-based AIX Energy LLC, a privately-held energy finance group that has been affiliated with Meridian. Meridian itself remained as a major shareholder in Buccaneer. Sources familiar with Buccaneer said a major payment to AIX on the debt is due June 30, but that may be delayed due to the bankruptcy. What made people really take note of Buccaneer initially in Cook Inlet was its discovery of the small Kenai Loop gas field near the city of Kenai and successful production of gas in 18 months from the time the exploration well was drilled, which is light-speed compared with the lengthy permitting and occasional lawsuits that get other companies bogged down. Ironically, it was Kenai Loop that finally forced the company into bankruptcy after the commission’s decision. The company will now sell most of its assets. Kenai Loop’s discovery came at a time when the regional utilities were deeply worried about depleted gas fields in Cook Inlet and the possibility that they would have to import gas as liquefied natural gas. Buccaneer showed, with a drill bit, that there was still gas to be found. Also, the company found new gas just a mile from the long-producing Cannery Loop gas field, formerly owned and operated by a large company, Marathon Oil. This seemed to show that the large companies like Marathon that have long dominated the industry were not aggressively exploring despite the utilities’ worries.  “As part of the Chapter 11 proceedings Buccaneer Energy has also reached an agreement in principle with its secured lender on certain critical elements of a plan of reorganization that would result in the sale of substantially all of the company’s assets,” Buccaneer said in a June 2 press release. Meanwhile, there are no changes, for now, in production operations. The company has three employees overseeing the Kenai Loop gas wells. “Buccaneer will continue to operate and oversee its assets during and throughout the restructuring process,” the press release said. The restructuring should allow Buccaneer to pay off its creditors, but at the expense of its assets. “The company expects to have sufficient cash on hand throughout the Chapter 11 proceedings to pay all of its post (bankruptcy) petition obligations as they come due,” the press release said. What next for Endeavor rig? With the bankruptcy filing of Buccaneer Energy, what happens to the Endeavour jack-up rig that is still parked at Port Graham in lower Cook Inlet and partly owned by the Alaska Industrial Development and Export Authority? The answer: AIDEA and Ezion Holdings, the remaining partner in the rig, are looking for work for the rig and wells to drill. Buccaneer had chartered the rig for its exclusive use to drill several wells in the Inlet this summer, including a deep test for oil at the “Tyonek Deep” North Cook Inlet gas field held by ConocoPhillips’. That well will not be drilled, this summer at least. AIDEA officials expect Buccaneer will be relieved of its charter obligation as a part of the bankruptcy filing. Assuming the South Texas bankruptcy court approves this, the rig would be placed back under the control of Kenai Offshore Ventures, the AIDEA/Ezion partnership that owns the Endeavour, according to Mike Catsi, business development manager for the authority. “KOV, through its member-manager Ezion, is already investigating and negotiating with a replacement rig manager,” an entity to take the place of Buccaneer. The day-to-day management of the rig is through a drilling contractor, Spartan, which is also managing the other jack-up rig in the Inlet, the Spartan 151 that is working for Furie Operating Alaska, another independent working in the Inlet. Catsi said Buccaneer, through a subsidiary Kenai Drilling, was obligated to make payments and it did so through Dec. 1, 2013. However there were five monthly payments from the end of 2013 and through the first months of 2013 that were deferred and not yet due, Catsi wrote in an email. There may yet be business for the rig. “AIDEA has been approached by another party who has expressed strong interest in using the rig in Cook Inlet. AIDEA has passed this information through to Ezion Holdings,” Catsi wrote. Buccaneer had promoted the rig being brought to Cook Inlet and persuaded AIDEA and Ezion Holdings to help finance the purchase of the drilling unit and its move to the Inlet. Buccaneer was originally an investor and a major partner in Kenai Offshore Ventures but had to sell its shares last year when the company encountered financial difficulties. Although it was no longer an owner, Buccaneer still had its charter of the rig for drilling, however. In his email, Catsi described AIDEA’s current relationship with the rig: “AIDEA is a Preferred Member in Kenai Offshore Ventures, LLC with a stake of about $23.6 million invested.  Ezion Holdings Limited and its affiliate Teras Investments Pte., Ltd. (who bought out Buccaneer’s stake in KOV in January of this year) are the Common Members of KOV; Buccaneer is no longer a member of KOV,” Catsi wrote. “AIDEA is entitled to receive repurchase payments of its entire investment plus dividends at fixed dates, if KOV’s revenues and cash permit.  AIDEA has received one payment against dividends owed to AIDEA of about $4,062,000 in February of this year.  All of AIDEA’s investment plus dividends must be repaid by KOV by January 1, 2018 (regardless of KOV’s revenues and cash) or AIDEA may pursue recourse to all its security including the rig.” The Endeavour is capable of drilling to 20,000 feet and in water depths up to 300 feet. It was originally designed for the North Sea but was in storage in Asia when it was purchased by the Kenai Joint Ventures partners. After modifications it was brought to Cook Inlet. The other jack-up rig in the Inlet, the Spartan 151, was brought earlier from the U.S. Gulf coast by Escopeta Oil and Gas (now Furie Operating Alaska). AIDEA made the decision to help Buccaneer get its jack-up to Alaska because at the time it was not clear that Escopeta could get the Spartan rig moved. The authority felt there was an urgent need to have a jack-up rig in Alaska because of the belief then that there could be shortages of natural gas in Southcentral Alaska. Elwood Brehmer can be reached at [email protected] Tim Bradner contributed to this story.  

Point Thomson-TAPS connection complete

At Point Thomson, it is $2 billion dollars down and $2 billion to go for ExxonMobil. Sofia Wong, the Point Thomson infrastructure and pipeline manager for ExxonMobil, said a pipeline connecting the eastern North Slope gas field to the Trans-Alaska Pipeline System, or TAPS, was completed in March. The 12-inch, 22-mile pipeline will carry natural gas condensates to the Badami field line that is a common carrier to TAPS, she said. “Our expectation is by 2016 we will be starting to produce at 10,000 barrels per day (of condensates) into TAPS,” Wong said. A hydro test will likely be run on the pipe in July. The pipeline has a capacity of 70,000 barrels per day. Early production will be slow with three wells — two injector wells and one production — until it’s known how the gas reserve responds to production, she said. Point Thomson is about 60 miles east of Prudhoe Bay on the edge of the Arctic National Wildlife Refuge. The natural gas field is estimated to hold roughly 8 trillion cubic feet of gas, roughly 25 percent of total North Slope gas reserves. The gas also contains about 200 million barrels of usable liquids. It was originally discovered in 1977. Unlike Prudhoe Bay gas, the Point Thomson field is under high pressure, Wong said, making it easy to capture the liquids for TAPS. “When you get gas at 10,000 pounds and you let it expand into separators, the condensate, the liquids just simply fall out and you collect those and put them into the pipeline,” she said. “(It’s) very simple from a process standpoint.” The gas processing facility will arrive at Point Thomson via barge along with summer in 2015. The four-piece modular plant is currently being constructed in Korea, according to Wong. To date, ExxonMobil has spent about $2 billion on Point Thomson. The major producer expects to spend a total of about $4 billion on the project to get it to full production, the company has said. During the winter of 2012-13, the first construction season for ExxonMobil at Point Thomson, about 2,200 vertical supports were installed for the pipeline. Nearly all of the pipeline construction work was done by a subsidiary of Interior Alaska Native corporation Doyon Ltd., Wong said. The peak of just-completed winter construction at Point Thomson saw about 1,200 people working on the project, she said, similar to the first-year job numbers. Of those, 729 were rotational Slope positions, meaning some were backed by an additional laborer. Wong said ExxonMobil has a camp of about 100 workers in Deadhorse managing logistics. Overall, Alaska-hire rates on Point Thomson are in the 85 percent range, she said. Other major work last winter included laying another 1 million cubic yards of gravel to expand the site pad to the north on top of the 1 million cubic yards laid during the first construction season. Over the summer, 2.2 million gallons of diesel storage was added to the site, Wong said. Completion of a warehouse and Alaska Clean Seas maintenance facility is scheduled for this year’s warmer months. The infrastructure at Point Thomson will go a long ways towards spurring future North Slope gas development, particularly since the State of Alaska, the three major Slope producers, and TransCanada, a pipeline company, have agreed on a framework of ownership for a large export liquefied natural gas project, she said. “Point Thomson has been key to the progress we’ve made on the large (LNG) project,” Wong said. If the $40 billion to $65 billion project ever comes to fruition, she said another $6 billion to $8 billion of investment will be needed at Point Thomson to capture the gas there and would be part of the overall expenditure. She said that investment would include a 30-inch gas line connected to a treatment plant in Prudhoe Bay. “It’s the 8 trillion cubic feet of gas that we’re focusing on; that’s really what I call the prize,” Wong said. “The condensate that comes along with that is just gravy that comes on top of the natural gas.” Elwood Brehmer can be reached at [email protected]  

Wind power storage generating heat, displacing diesel

President Barack Obama has long touted an “all of the above” energy strategy for America. In Western Alaska, a small group of villages is putting the rhetoric to work. By implementing a complex power management system in four Kuskokwim Bay-area communities, the team at Intelligent Energy Systems has started to employ wind power for heat, expanding the use of a renewable energy source typically limited to electric generation. “With respect to villages in Western Alaska, renewables is not a luxury. It’s a necessity that has to be harnessed to make those villages sustainable,” said Dennis Meiners, a project manager for Anchorage-based Intelligent Energy Systems. “We’ve invested in infrastructure and this is a way to support it.” Meiners’ team has been working to integrate wind energy into diesel-supported grids in Kwigillingok, Kongiganak, Kipnuk and Tuntutuliak — a collective population of about 1,700 residents. The village governments formed the Chaninik Wind Group in 2005 as a way to pool resources and develop affordable energy solutions, Meiners said. In Kwigillingok, five remanufactured 95-kilowatt Windmatic turbines not only offset the burning of diesel for Kwig Power Co., they also heat homes when the wind blows hard, as it often does in the flat, treeless region. Common peak load from Kwig Power’s 100 customers is about 250 kilowatts, according to Kwig Power Manager William Igkurak, meaning the five turbines can supply the community’s power demand when they’re generating at peak capacity. Currently, about 25 homes in “Kwig” have been outfitted with electric thermal storage units, Igkurak said. The thermal storage units are metal, wall-mounted boxes filled with ceramic bricks that are heated by an electric coil. Rather than dump excess power generated by the turbines when the wind is really whipping, the electricity is diverted from the traditional grid to heat the storage units, ultimately reducing the diesel, or fuel oil, burned for heating in Kwig as well. “This project is still in its infancy,” Igkurak said. The hope is to grow the number of thermal storage units in the village to further maximize peak production of power, he said. Even still, the project displaced about 25 percent of Kwig Power’s historic diesel consumption in its first year, he said. Surplus electric heat costs about 10 cents per kilowatt-hour, or kwh, for residents with the storage units, according to Igkurak. He said the current price of diesel-generated electricity from Kwig Power is more than 60 cents per kwh. For further efficiency, the “micro grid” is getting wind power storage in between the wind turbines and the thermal electric storage units thanks to Detroit, Meiners said. The storage should allow the utility to shut down its fossil fuel power system when wind production meets demand. By installing eight Chevrolet Volt lithium-ion battery packs, Kwig power will have enough storage to meet peak demand for 15 minutes, he said, enough time to fire up the diesel generators. Thus, when the wind provides excess power it will go to the batteries first, and on to the thermal storage units only when the batteries are charged. Lithium-ion batteries can be charged and discharged quickly and have a life many times longer than traditional lead-acid batteries when cycled properly, Meiners said. Together, the eight battery packs take up about as much space as two refrigerators, he said, while the same amount of lead-acid storage would fill a small room. A Chevy Volt battery pack typically sells for $4,000 to $6,000 without the add-ons to adapt it to a vehicle. The exact impact the batteries will have on ratepayers won’t be known for another six months, Meiners said, after the system has been tuned and in place some time. However, he expects it to eventually displace upwards of 50 percent of the utility’s diesel need, he said. The wind system is down as the storage is integrated, Igkurak said, but it should be back up and running by the end of June. Igkurak and Meiners emphasized that the wind-diesel system is a demonstration project. “We would like to prove that the system works in our small community,” Igkurak said. Purchasing, transporting and installing the batteries cost about $600,000, Meiners said. The Chaninik Wind Group received a $750,000 grant from the Department of Energy in 2010 to help fund $2 million worth of energy improvements in the four villages. Contributions from numerous other sources rounded out project payment.  A classic example of the challenges of infrastructure work in rural Alaska, the batteries were shipped last August and arrived in Kwig in October, but were not able to be moved into place until late January when the region’s marshy ground finally froze, Meiners said. Only about half of the project’s costs are in materials, Meiners said. The rest have gone to construction and transport costs to the remote area. The turbines being used in the communities were originally used in small wind farms in California, Meiners said. Using the remanufactured mid-sized turbines was a way to save money, he said. “Nobody’s making stuff for villages. It’s about adapting available technology to the situation. It’s not a market; it’s not something (General Electric) is going to invest in,” he said. Despite being an experiment of sorts, Meiners said similar projects with larger turbines will likely be “pretty common” in rural areas like Western Alaska with good wind resources. He estimates a 1-megawatt system could be installed for about $5 million. Such a system would displace about 100,000 gallons of diesel and be able to pay for itself within 10 years — a target timeline — he said. The initial operating life of a multi-use wind power system is about 25 years, he said. Bigger turbines that push wind power capacity well past peak demand will be vital to fully realizing the benefits of wind in rural Alaska, according to Meiners. “It’s a matter of gaining confidence that the technology is going to solve the problem and when the willingness to invest in it because we should be moving towards ways to install larger turbines in smaller villages, just like you install a hydro project,” He said. “You look at the whole community energy need. That’s the economic way to do it.” Elwood Brehmer can be reached at [email protected]  

Pebble sues EPA over attempt to veto mine

The Pebble Limited Partnership took the Environmental Protection Agency to court May 21 and claimed the agency is illegally overstepping its bounds by attempting to block a mine before the permitting process begins. In a statement released in conjunction with Pebble’s complaint filed in U.S. Alaska District Court, company CEO Tom Collier said the plea to the court to stop EPA’s actions is not an attempt to strip the agency of its regulatory authority under the Clean Water Act. Rather, he said, it is an attempt to ensure guidelines set by Congress are followed. “Simply put, EPA has repeatedly ignored detailed comments that we, the State of Alaska, and others have made about this massive federal overreach and continues to advance an unprecedented pre-emptive regulatory action against the Pebble project that vastly exceeds its Clean Water Act authority,” Collier said. “If EPA ultimately vetoes Pebble before a development plan is proposed or evaluated through the comprehensive federal and state permitting processes, the precedent established will have significant, long-term effects on business investment in this state and throughout the country. Litigation is necessary in order to get the agency’s attention and bring some rational perspective back to the U.S. permitting process.” In February, the EPA said it would initiate a seldom-used Clean Water Act process to block large-scale surface mining in the Bristol Bay region to protect the region’s robust salmon fishery. EPA Administrator Gina McCarthy referenced the 1,000-plus page Bristol Bay watershed assessment released a month before as reason to block Pebble, stating a large, open-pit mine in the region would cause “irreversible negative impacts on the Bristol Bay watershed and its abundant salmon fisheries.” If developed, an Iliamna-area Pebble copper and gold mine would likely be one of the largest of its kind in the world. All of the company’s mineral claims are on state land. While the EPA has vetoed wetlands permit applications 13 times since the inception of the Clean Water Act in 1972, it has never used the power to deny a permit before an application was submitted, as is the case currently with Pebble. The regional Army Corps of Engineers handles wetlands permit applications under Section 404 of the Clean Water Act for all projects, public or private, that could impact wetlands. Subsection 404(c) states that the EPA can prohibit the use “of any defined area as a (material) disposal site” when the agency administrator deems the placement of fill material “into such an area will have an unacceptable adverse effect” on fish, wildlife or water supplies. Pebble’s complaint states that Congress limited the EPA’s authority in the permitting process to reviewing applications after they have been evaluated by the Corps of Engineers. Additionally, Pebble claims the mine’s impact on such areas cannot be judged because it has not released a formal mine plan or applied for wetlands permits. “If the EPA veto proceeding is allowed to upend the permitting process, the entire administrative process will be eviscerated,” the complaint states. “There will be no concrete proposal, no specification of ‘such materials’ or ‘such area,’ no consideration of alternatives, no conditions imposed by a permitting agency, and no mitigation requirement. Neither the Corps nor the state will be able to bring their expertise to bear.” By working to prevent development on state land in the region, Pebble also argues the EPA is also violating the intent of the Cook Inlet Land Exchange, a 1976 agreement between Cook Inlet Region Inc., and the state and federal governments. Under the acreage swap, the State of Alaska was awarded ownership of federal lands with high mineral potential — the same lands where Pebble’s copper and gold claims exist today. According to Pebble, the mineral value of the land was “one of the driving factors in the state’s selection.” In return, the state turned over property that was ultimately be conveyed to CIRI through the federal government. CIRI subsequently gave up its Lake Clark-area holdings north of Iliamna to complete the federal Lake Clark National Park and Preserve. “Both the Statehood Act and the Cook Inlet (Land) Exchange legislation explicitly provide Alaska with the right to manage its lands for economic development purposes,” the complaint states. Mine opponents have countered Pebble’s claims that a mine would ignite Bristol Bay’s economy by contending it would put thousands of fishing jobs in the region in jeopardy. The annual ex-vessel value of Bristol Bay salmon has been between $140 million and $185 million since 2009. The EPA Inspector General’s office notified the agency May 2 that it would review the information gathering and science behind the watershed assessment at the request of Pebble, the State of Alaska, and members of Congress. Pebble has claimed intra-EPA communications prove the three-year assessment process was biased against mine development from the get-go. Region 10 EPA spokeswoman Hanady Kader has said the agency followed all prescribed public involvement guidelines in forming the assessment and that the 404(c) process, which usually takes about a year, will continue during the Inspector General’s review. Trout Unlimited responded to Pebble’s litigation May 22 by demanding the group release a complete mine plan. The national coldwater fisheries nonprofit has been at the forefront of the fight against Bristol Bay mine development for years. “Clearly, this is a last ditch effort from a company which now has no major mining experience on its team and has lost at every step of the way. It’s ridiculous that PLP is using resources to file a lawsuit but continues to refuse to apply for official permits after promising to do so for nearly a decade,” TU Alaska Executive Director Tim Bristol said in a formal statement. “The fact is, (Pebble Limited Partnership) can apply for a permit today, but they refuse to do so because they will have to reveal to the public once again that they will build a colossal open pit mine, impact wetlands and waterways, destroy salmon habitat and threaten thousands of jobs and unique way of life.” Elwood Brehmer can be reached at [email protected]

Hecla CEO: Bright future for Greens Creek

Prospects are strong at the Greens Creek silver mine near Juneau, according to senior leadership at the mine’s operating company. Hecla Mining Co. President and CEO Phil Baker said in a May 22 interview with the Journal that the 2013 drill results at the mine are some of the best he’s seen in his 13 years with the company. “We have a mine plan that’s 10 years but we fully expect that it will go well past that,” Baker said. A 24-year-old underground silver, zinc, lead and gold operation, Greens Creek is the largest silver mine in the United States and among a handful of the largest in the world, Baker said. The mine has been run on a seven to 12-year plan for most of its life. Baker said if a new tailings facility — currently in the final stages of state and federal permitting — can be constructed, it could push Greens Creek’s future out 15 years or more. Baker made his comments after Coeur d’Alene, Idaho-based Hecla’s shareholder meeting held May 22 in Anchorage. Further longevity at Greens Creek would mean steady, but not significantly increased production because of footprint limitations, he said. The total Greens Creek property is 27 square miles. It’s location near the center of Admiralty Island, southwest of Juneau, surrounded by Tongass National Forest and Admiralty Island National Monument-Kootznoowoo Wilderness land makes expanding difficult, community relations manager for Hecla Mike Satre said. Hecla purchased Greens Creek in 2008 from Kennecott, a subsidiary of industry giant Rio Tinto. The company is also the longtime operator of the Lucky Friday silver mine in Idaho and the Casa Berardi gold mine in Quebec, which it purchased last year. Baker said Greens Creek has driven the company’s revenue since the purchase, contributing nearly 75 percent of Hecla’s $800 million of overall cash flow in the past four years. “Greens Creek is one of the few mines that have the sort of cash flow generation that it does in the world,” he said. “There are dozens of them, but it’s one of those dozens.” As Baker noted, first quarter silver production at Greens Creek was nearly identical to 2013 at 1.78 million ounces — up less than half a percent year-over-year. The Southeast mine accounted for 72 percent of Hecla’s total first quarter silver production. For the year, the company expects to produce between 6.5 million and 7 million ounces of silver and about 55,000 ounces of gold at Greens Creek, according to its quarterly report. The mine mill processed an average of 2,252 tons of ore per day during the quarter. Recent drilling in Greens Creek’s Deep 200 South mineralization area intersected a 28-foot area with 27.3 ounces per ton of silver; 0.46 ounces per ton of gold; 13.7 percent zinc; and 6.7 percent lead. Additionally, a five-foot intersection in the same area was found to contain 52.1 ounces per ton of silver. Baker said the collection of metals at Greens Creek are “extraordinarily important” to its strong economics. As of the beginning of the year, Greens Creek had proven and probable reserves of 92.5 million ounces of silver at 11.9 ounces per ton; 713,000 ounces of gold at 0.09 ounces per ton; 678,000 tons of zinc and 256,000 tons of lead. Current silver prices at about $20 per ounce are off more than 30 percent from 2011 when the precious metal went for nearly $30 per ounce, but are still much improved over a decade ago when silver went for less than $4 per ounce. “Long-term the (silver) outlook is extraordinary,” Baker said. New technological applications have doubled global demand for silver over the past 30 years to about 1 billion ounces per year and he said that market could double again in the next 30 years as Asian economies grow. “As people get wealthier, they consume more of those things that have silver in them,” he said. While silver markets track closely with gold currently, Baker said he thinks a divergence between the two is likely as silver demand grows. Low silver prices in prior decades limited exploration and has led to few new mines, he added, a factor that could tighten the market and mean strong silver prices long-term. To do its part in meeting projected silver demand with Greens Creek, Hecla has started a list of programs to get Southeast’s youth thinking about careers in mining, part of an emphasis the company has to hire locally, according to Baker. He said mines offer career opportunities for a wider range of skill sets than some might recognize. “There’s 400 employees (at Greens Creek) and you’ve got engineers and chemists and accountants and miners and mechanics and nurses and janitors — you’ve got everything,” he said. Two diesel mechanics that were hired in May became the first Greens Creek employees who visited the mine as eighth graders on class tours that began in 2008, went through the company’s Pathways to Mining Careers high school partnership program with the University of Alaska, and began work at the mine. “I’m convinced that over the course of the next 10 years we will have class after class of new employees that are from Juneau — that’s where they want to live,” Baker said. Most Juneau residents that work at Greens Creek commute by boat, but to retain and attract workers from other regions of Alaska and Outside, new camp and housing facilities were built at the mine in the last two years. Elwood Brehmer can be reached at [email protected]

Corps of Engineers gains flexibility for Alaska projects

The U.S. Army Corps of Engineers has more leeway to develop and maintain marine infrastructure in Alaska under the latest version of legislation that governs the Corps’ authority. Under the proposed Water Resources Reform and Development Act unveiled by a congressional conference committee May 15, ports and harbors in many of Alaska’s outlying communities would be included in the remote and subsistence harbors program that prioritized projects for funding in Hawaii and the U.S. territories but left Alaska out in the 2007 version of the bill. Currently, Alaska Corps of Engineers Program Manager David Martinson said small, remote port and harbor projects must be at least 70 miles from another mode of transportation and a majority of goods brought into the nearest community must be consumed there, among other requirements to climb the funding ladder. Instead of having to meet a list of  “ands,” in-state development would qualify through the addition of “or Alaska” in the new bill, he said. “That really helps with harbors that may be close to a system but are still a small or remote harbor,” Martinson said. Port Lions on Kodiak Island, for example, could qualify for funding prioritization because it is an isolated community even though it is less than 30 miles from the City of Kodiak. According to Sen. Mark Begich’s office, such projects would be eligible for up to $10 million in dedicated funding. The latest bill also requires such small and remote harbor projects be prioritized based on their environmental, social, and regional benefits with large projects, not just how they fit the Corps of Engineers’ national economic development program, Martinson said. Projects will be compared based on which is the “best buy,” he said, and a project’s local benefits will be viewed as equal to the national benefit if the legislation passes.  “What remains to be seen is how we’re going to work through the implementation to show how all the projects are prioritized nationwide to compete for funding,” Martinson said. The Water Resources Reform and Development Act passed the House last October by a vote of 417-3, and the Senate’s version passed 83-14. The bipartisan legislation passed the House May 20 and passage is expected in the Senate before heading to the president’s desk. Alaska’s congressional delegation has supported the bill. “I worked hard to secure millions of dollars that will now be coming home to Alaska for our ports and harbors. (This) bipartisan progress will translate into more jobs for Alaskan’s, the elimination of bureaucratic red tape, and investment that will be an economic boost for local communities,” Begich said in a May 13 release from his office. An amendment in the bill sponsored by Sen. Lisa Murkowski would allow the Corps of Engineers to partner with non-federal public entities on a deep-draft Arctic port. Currently, the Corps of Engineers can only use its engineering and construction know-how for other federal agencies or departments. Results from a Corps of Engineers study recommending an Arctic port plan utilizing one or more locations on the Seward Peninsula near Nome is expected in the coming months. The language in the new bill would permit work with the State of Alaska or a local government to possibly expand on what, if any, port plan the Corps approves, Martinson said. The Corps would not be able to partner with a private group for Arctic port development. In the recently wrapped-up session, the Alaska Legislature increased the Alaska Industrial Development and Export Authority’s reach to cover Arctic infrastructure development. The state financing corporation in the past has often partnered with private business either as a financer or owner in projects, with the private sector as a builder and operator. “As this administration seems to ‘lead from behind’ when it comes to Arctic investment and vision, my amendment to allow for partnerships with non-federal public entities could be a game-changer in terms of getting an Arctic deep-draft port closer to becoming a reality in the state,” Murkowski said in a formal statement. She and Begich both lauded language in the bill lifting federal “navigational servitude” over uplands adjacent to the City of Seward small boat harbor, potentially opening them up for development. Additionally, what had been a directive from Corps of Engineers leadership to trim the cost and length of study-time would become law under WRRDA. With few exceptions for large projects, the bill mandates that infrastructure development studies be completed in three years and for less than $3 million, something Arctic port study program manager Lorraine Cordova has said her team worked to accomplish. While the bill approves roughly $10 billion in port, flood control, lock and dam and environmental across the country, it also defunds $18 billion worth of old or inactive work approved prior to the 2007 Water Resources and Development Act. Defunded projects either haven’t begun construction or have not been funded, federally or otherwise within the last six years. Elwood Brehmer can be reached at [email protected]

Pebble sues EPA over attempt to veto mine

The Pebble Limited Partnership took the Environmental Protection Agency to court May 21 and claimed the agency is illegally overstepping its bounds by attempting to block a mine before the permitting process begins. In a statement released in conjunction with Pebble’s complaint filed in U.S. Alaska District Court, company CEO Tom Collier said the suit is not an intent to strip EPA of its regulatory authority under the Clean Water Act, but rather an attempt to ensure guidelines set by Congress are followed. “Simply put, EPA has repeatedly ignored detailed comments that we, the State of Alaska, and others have made about this massive federal overreach and continues to advance an unprecedented pre-emptive regulatory action against the Pebble project that vastly exceeds its Clean Water Act authority,” Collier said. “If EPA ultimately vetoes Pebble before a development plan is proposed or evaluated through the comprehensive federal and state permitting processes, the precedent established will have significant, long-term effects on business investment in this state and throughout the country. Litigation is necessary in order to get the agency’s attention and bring some rational perspective back to the U.S. permitting process.” In February, the EPA said it would initiate a seldom-used Clean Water Act process to block large-scale surface mining in the Bristol Bay region to protect the region’s robust salmon fishery. EPA Administrator Gina McCarthy referenced the 1,000-plus page Bristol Bay watershed assessment released a month before as reason to block Pebble, stating a large, open-pit mine in the region would cause “irreversible negative impacts on the Bristol Bay watershed and its abundant salmon fisheries.” If developed, an Iliamna-area Pebble copper and gold mine would likely be one of the largest of its kind in the world. All of the company’s mineral claims are on state land. While the EPA has vetoed wetlands permit applications 13 times since the inception of the Clean Water Act in 1972, it has never used the power to deny a permit before an application was submitted, as is the case currently with Pebble. The regional Army Corps of Engineers handles wetlands permit applications under Section 404 of the Clean Water Act for all projects, public or private, that could impact wetlands. Subsection 404(c) of the act gives the EPA the power to deny permits to projects that will use a defined area as a material disposal site and “have an unacceptable adverse effect” on fish, wildlife, or water supplies. Pebble’s complaint states that Congress limited the EPA’s authority in the permitting process to reviewing applications after they have been evaluated by the Corps of Engineers. Additionally, Pebble claims the mine’s impact on such areas cannot be judged because it has not released a formal mine plan or applied for wetlands permits. The EPA Inspector General’s office notified the agency May 2 that it would review the information gathering and science behind the watershed assessment at the request of Pebble, the State of Alaska, and members of Congress. Pebble has claimed intra-EPA communications prove the three-year assessment process was biased against mine development from the get-go. Region 10 EPA spokeswoman Hanady Kader has said the agency followed all prescribed public involvement guidelines in forming the assessment and that the 404(c) process, which usually takes about a year, will continue during the Inspector General’s review. Early May 22, Trout Unlimited responded to Pebble’s litigation by demanding the group release a complete mine plan. The national coldwater fisheries nonprofit has been at the forefront of the fight against Bristol Bay mine development for years. “Clearly, this is a last ditch effort from a company which now has no major mining experience on its team and has lost at every step of the way. It’s ridiculous that PLP is using resources to file a lawsuit but continues to refuse to apply for official permits after promising to do so for nearly a decade,” TU Alaska Executive Director Tim Bristol said in a formal statement. “The fact is, (Pebble Limited Partnership) can apply for a permit today, but they refuse to do so because they will have to reveal to the public once again that they will build a colossal open pit mine, impact wetlands and waterways, destroy salmon habitat and threaten thousands of jobs and unique way of life.” Elwood Brehmer can be reached at [email protected]

Commerce Dept. focusing on addressing energy problems

Alaska Commerce Department Commissioner Susan Bell highlighted the wide-ranging work her department is involved in across the state in a May 19 speech to the Anchorage Chamber of Commerce. Bell said dealing with the ever-present energy issues the state faces are “central” to the mission of many of the 13 agencies in the broad Department of Commerce, Community and Economic Development. “When we’re thinking about our economic foundations something we all need to do is think about how we use the energy resources we’re blessed with and how we bring down the cost of energy across the state,” she said. Through the Alaska Industrial Development and Export Authority and its sister agency the Alaska Energy Authority, both under the Commerce umbrella, the department is involved in major projects to lower the cost of living in the state. Bell serves on the board of directors for both state groups, as well as the Alaska Gasline Development Corp. board. AIDEA’s Interior Energy Project includes more than $260 million of work to develop an area-wide natural gas storage and distribution network in Fairbanks and North Pole. While gas will initially be supplied via trucks hauling it from the North Slope, Bell said the distribution system is a long-term investment. “Whether we have a large (gas) pipeline or a medium-sized pipeline it will be critical that we have a market in place and ready to use that gas when it comes.” Bell said. Getting natural gas to the Interior could cut heating bills in half for the region’s residents that currently rely on fuel oil, economic impact studies have indicated. Lowering energy costs is one of the single most important things the state can do to spur job creation, Bell said. As AIDEA works to lower heating costs, AEA is focused on meeting the Legislature’s goal of generating at least 50 percent of the state’s electricity through renewable sources by 2025. Bell said a little more than 20 percent of Alaska’s power comes from such sources — primarily hydro — now. She stressed that the impetus behind the work is to reduce cost. “We’re not just developing renewables for renewables’ sake,” she said. Alaska’s biggest renewable energy project, which will be one of the tallest dams in the country if it’s built and would get the state to the 50 percent goal, is the Susitna-Watana dam. In the state’s 2014 fiscal year about to end June 30, AEA had a $95 million budget for “very detailed” environmental, engineering and technical work to get the project to FERC licensing, Bell said. There is $20 million to continue Susitna-Watana study in the 2015 capital budget on Gov. Sean Parnell’s desk now. With AEA as a catalyst, the Legislature has appropriated $227.5 million since in 251 renewable energy projects large and small across Alaska through the Renewable Energy Fund since its inception in 2008, she said. The Legislature put $22.8 million towards the fund in the pending capital budget. Bell called the 50-plus mile long Red Dog mine road and port system in Northwest Alaska a “template” for future resource development. Owned by AIDEA, the transportation infrastructure to the zinc mine is considered by some one the authority’s greatest success story. “Our department has been working to increase the visibility of our resources as well as the tools that we have from permitting to financing entities like AIDEA that can partner with the private sector, with our banking community,” Bell said. AIDEA is in the midst of a several years-long environmental impact statement process to ultimately build another industrial road in the region, a 220-mile road from the Dalton Highway to the Ambler mining district. The authority is finalizing a route and working with local communities to answer key questions about the project, she said. Elwood Brehmer can be reached at [email protected]

Kenai company leading the way on unmanned aircraft radar

With a little hard work, Kenai’s John Parker might just be able to answer the biggest question facing the Federal Aviation Administration: Can manned and unmanned aircraft coexist? Parker, founder of Integrated Robotics Imaging Systems Ltd., acquired exclusive patent rights to a prototype “sense and avoid” radar for unmanned aerial vehicles in early April from a University of Denver research team. “My phone’s kind of been ringing off the hook since it went public that I’ve got this thing,” Parker said. While in Alaska for the opening of the Pan-Pacific UAS Test Range Complex, headquartered in Fairbanks, FAA Administrator Michael Huerta said safely integrating unmanned aircraft into the national airspace is the biggest challenge the emerging technology presents. An unmanned aerial vehicle becomes an unmanned aerial system, or UAS, when outfitted with a camera, radar, or other equipment to perform a specific task, Parker explained. “(UAS) flights in VFR (visual flight rules) airspace, where there is no air traffic control, that raises one set of issues and the kind of questions we need to understand is who else is using that VFR airspace and can they see this aircraft because VFR airspace relies on ‘see and avoid,’” Huerta said. For UAS, the FAA mantra is transformed to “sense and avoid,” according to Parker. The “sense” part of the equation has seemingly been worked out. The radar can detect small aircraft and their altitude, speed and direction up to a mile away, he said. During tests at Atlanta’s Hartsfield-Jackson International Airport, Parker said it correctly identified planes and their routes with 99.99 percent accuracy while the takeoff and landing frequency was as high as one every 39 seconds. As far as he is aware, Parker’s radar is the most advanced unmanned aircraft sense and avoid system in the country, he said. Parker’s curiosity in unmanned aerial vehicles grew in 2011 when using the craft to monitor debris washing up on Alaska’s shore from the Japanese earthquake was considered. Parker incorporated Integrated Robotics Imaging Systems in November 2012 and began assembling engineering talent and industry expertise, he said. “In my research I actually stumbled across this white paper on radar-based detection and it piqued my interest because I knew being an aircraft (accident) investigator for a lot of years — the key to UAVs in the national airspace is collision avoidance,” he said. “That’s the key to the whole thing.” The Integrated Robotics team currently consists of five people across the U.S. and Canada and is headquartered in Kenai. His team will soon be centralized on the Peninsula, he said. When placed under a protective dome, the 12-ounce radar with a roughly four-inch square antenna will be tested on the Infotron IT180, a French-made, dual-rotor unmanned platform at Pan-Pacific Range sites, Parker said. The Alaska Center for Unmanned Aircraft Systems Integration, run by the University of Alaska Fairbanks, had its Pan-Pacific Range, which includes test sites in Oregon and Hawaii, chosen by the FAA in December as one of six UAS testing operations nationwide. The ranges are a major step in the FAA’s attempt to develop guidelines for melding commercial UAS operations into the national airspace, something Congress has dictated be done by the end of 2015. At 31 pounds and with a 71-inch rotor diameter, the IT180 can carry the radar and classifies as a small craft. It is significantly larger than other unmanned aircraft in production — which are often less than 10 pounds — meaning the radar will have to be downsized to make it truly universal. Parker said phased array antennas of about an inch-square are available and doesn’t foresee downsizing the radar to be an issue. The next big hurdle, he said is developing a software program to handle the “avoid” part of the equation. If the radar detects an aircraft flying a potentially dangerous route nearby, the software needs to take over if the pilot on the ground doesn’t respond appropriately, or in time, Parker stressed. “The real-time capability of this equipment is key and that autonomous timing situation to make sure that if we have to we take the pilot out of the scenario and the aircraft avoids a target and we’re talking about very little time,” he said. “That envelope is going to be very small.” Exactly how short the timeframe needs to be will be determined during testing, but Parker said he believes it will be in the “tenths of seconds.” Parker’s plan is for his team to have software ready to test and fly in six to 10 months, he said. Once the bugs are worked out, it’s a matter of designing a universal plug adapting the radar to other UAVs, he said. Ultimately, Parker sees Integrated Robotics as about 18 months away from manufacturing its first commercial sense and avoid radar system, a timeline that fits with FAA’s. He already has a 3,000 square-foot building in South Kenai waiting to be the Integrated Robotics manufacturing facility when the time comes. Putting each unit together will take an additional five-person crew “a couple days” once a system is in place, Parker estimates. Then, it’s on to the sale. With much work left to do a price point for the early radar systems has not been set, but when considering the technology and the fact that radars for small general aviation are often $15,000, a $7,000 to $10,000 tag would not be unreasonable, he said. “If we produce a quality product, we won’t have any problem selling it,” he said. For Parker, getting the equipment in the hands of those that need it is the most important thing. “Because it’s a one-off and there’s no comparative you’ve got to look at the value to the client, and it fulfills two issues,” he said. “One, it allows companies to meet the requirements FAA is going to put on all of us, and two, by meeting those requirements it will drive revenue to their company. We see there’s an additional spin-off on that for us because as it drives revenue to their company they’re going to be needing more so it will create follow-on revenue for us.” Elwood Brehmer can be reached at [email protected]

Sealaska posts $35M loss

Sealaska Corp. reported a $35 million net loss for 2013 in its annual report released May 14. The Southeast Alaska Native corporation attributed much of the bad year to a $26 million operating loss from one of its construction subsidiaries that offset profits in other businesses in a corporate release. “Despite posting losses, Sealaska is a stable institution that continues to protect its Native land, support education and shareholder opportunities, while growing our investments and operations,” Sealaska President and CEO Chris McNeil Jr. said in a formal statement. “Sealaska has strong cash flow and access to financing and we are well positioned to make new acquisitions.” Overall, the financial report indicates operational losses of $52.2 million in 2013. Sealaska made up $21.9 million of that in net natural resources revenue sharing from other Native corporations as part of the Alaska Native Claims Settlement Act. A spokesman for a collection of Sealaska board candidates known as the Sealaska 4 said in a group statement that the prospect of “huge losses” motivated the four candidates to run for board seats, and that the losses turned out to be greater than first feared. “The shareholders of Sealaska deserve a full explanation of these losses, and the reported accounting adjustments as well,” Randy Wanamaker said. The corporate release states the company realized $24.6 million in accounting adjustments for the year. In April, Sealaska announced spring shareholder distributions totaling $11.8 million that were reportedly paid out April 11. The company’s annual shareholder meeting will be held June 28 in Seattle. Elwood Brehmer can be reached at [email protected]

Pebble cites EPA emails were biased

Pebble mine developers claim they have proof Environmental Protection Agency officials acted with bias and a pre-determined mindset when examining the potential risks a mine could pose to Bristol Bay fisheries. Documents and email chain records from as far back as 2010, obtained by Pebble Limited Partnership through the Freedom of Information Act, show EPA Region 10 staff in lengthy communications about the prospect of preemptively banning large mines in the Bristol Bay watershed. These communications occurred between staff within the EPA and with agency staff and conservation group members. In an email dated Sept. 14, 2010, EPA Aquatic Ecologist for Bristol Bay Phil North wrote to current EPA Region 10 Office of Ecology, Tribal and Public Affairs Manager Michael Szerlog and program manager Richard Parkin that the land in the Nushagak and Kvichak drainages — where Pebble’s copper and gold claims are located — is owned almost entirely by the State of Alaska and private parties, making it susceptible for development, and because of that, action should be taken to prioritize its protection. The email predates by months the EPA’s Feb. 7, 2011, announcement it would undertake a yearlong risk assessment of the impacts of mining in the Bristol Bay watershed. Most other Bristol Bay land is federally protected as wildlife refuge or national park land. “A big project like Pebble would be a big blow by itself (not to mention seven more Pebbles), but it is the accumulation of mines and highways and all the associated residential and commercial development enabled by the larger scale developments, that will ultimately cause the demise of the (salmon) resources we are targeting,” North wrote. EPA Administrator Gina McCarthy said Feb. 28 that the agency would move forward with the early stages of a process to use authority granted it under subsection 404(c) of the Clean Water Act to block the large mineral project from getting a required U.S. Army Corps of Engineers wetlands dredge and fill permit. The regional U.S. Army Corps of Engineers handles Section 404 permit applications for all projects, public or private, that could impact wetlands. McCarthy said at the time the decision was based on the agency’s final assessment, released in January, of potential impacts a mine could have on salmon stocks in the Bristol Bay region. More than half of the Bristol Bay region is considered wetlands under the Clean Water Act. If developed, the Iliamna-area mine would likely be one of the largest surface copper and gold mines in the world in the middle of the region that returns roughly half of the world’s sockeye salmon every year. While the EPA has vetoed wetlands permit applications 13 times since 1972, it has never used the power to deny a permit before an application was submitted, as is the case currently with Pebble. North continued in the September 2010 email: “So a 404(c) that targets the primary habitat of the resource we are trying to protect, salmon, is a logical approach. First at the specific habitat level by prohibiting discharge in stream channels and the riparian (or adjacent) wetlands that most directly support them. Second by initially addressing Bristol Bay as a whole then narrowing to those watersheds that are at risk.” Subsection 404(c) of the Clean Water Act states that the EPA can prohibit the use “of any defined area as a (material) disposal site” when the agency administrator deems the placement of fill material “into such an area will have an unacceptable adverse effect” on fish, wildlife or water supplies. The question remains whether that language gives the agency the authority to veto an activity such as mining across a broad area, rather than just in a specific location. On May 2, the Office of Inspector General for the EPA announced it would review the agency’s actions in developing the Bristol Bay watershed assessment at the request of Pebble, the State of Alaska and several members of Congress. EPA Region 10 spokeswoman Hanady Kader wrote in an email to the Journal that the agency received requests from nine Tribal governments in 2010 to use the Clean Water Act authority to protect the watershed and fisheries from a proposed Pebble Mine. “EPA made transparency and public engagement a priority from day one of the Bristol Bay Watershed assessment. It is a strong scientific document based on hundreds of peer-reviewed studies. The agency considered thousands of comments and scientific data submitted during two separate public comment periods and eight public meetings. EPA met with many stakeholders over the course of its assessment, including multiple meetings Pebble Limited Partnership,” she wrote May 13. A memo from consulting Anchorage attorney Geoffrey Parker to EPA’s Parkin dated Feb. 14, 2012, suggested the agency change its course of action at the time to speed up the Pebble veto. “This recommends that EPA shift from a ‘linear’ to an ‘overlapping’ schedule for its watershed assessment and 404(c) process. Doing so can maintain and improve quality, and should result in a more legally defensible final decision,” Parker wrote. Pebble claims additionally that the peer reviews of drafts of the watershed assessment call its scientific validity into question. “Not only does EPA not have the statutory authority to undertake pre-emptive action at Pebble, they are threatening to do so based on a flawed study that is now the subject of an investigation by their own agency,” said Ron Thiessen, president and CEO of Northern Dynasty Minerals Ltd., which owns the Pebble project, in a formal statement May 6. Pebble has said the EPA could still veto its project after a wetlands permit application is submitted to the Corps of Engineers if it does not meet regulatory standards. While Pebble says the mine would generate up to 1,000 full-time jobs over 25 years, Kader said the economic value of the commercial salmon fishery in Bristol Bay has been overlooked in recent media reports covering the controversy. An April 2013 study from the University of Alaska Anchorage’s Institute of Social and Economic Research commissioned by the Bristol Bay Regional Seafood Development Association found that the 2010 Bristol Bay commercial sockeye harvest generated $1.5 billion of final sales value across the U.S. The ex-vessel value of the 29 million sockeyes harvest from the region that year was $165 million, 31 percent of the total Alaska salmon harvest value, and helped support 12,000 seasonal fishing and processing jobs nationwide, according to the report. Elwood Brehmer can be reached at [email protected]

Coast Guard to move slowly into the Arctic

The U.S. Coast Guard unveiled its draft plan for increased Arctic operations over the next decade at open houses held across Alaska May 12-16. The preferred alternative action in the draft environmental assessment of USCG Arctic Operations and Training Exercises matches the growth in maritime Arctic activity expected in the coming years with an appropriate USCG presence, 17th District Arctic Planner James Robinson said at an Anchorage open house May 13. Doing so would mean responding to the “seasonal surge” in Arctic activity, primarily mid-March through mid-November, with a shore, air and sea presence, the report states. Further, the Coast Guard’s plan is a response to Arctic strategies laid out by the White House and Defense Department among other federal agencies over the last two years, Robinson said. Outside of responding to specific missions, the Coast Guard has not historically emphasized being in the usually quiet Arctic. The USCG cutter Healy, typically used in support of scientific missions, has been its only consistent presence in the region, according to the assessment. Robinson said when Shell was exploring its Beaufort Sea oil and gas leases in 2012, the Coast Guard positioned a forward operating base in Barrow. Last summer, with no Arctic Outer Continental Shelf drilling occurring, a forward operating base was stationed in Kotzebue to generally learn more about operating in the Bering Strait, he said.  “We look at our operations and analyze our risk picture,” when determining where to deploy resources, Robinson said. With no drilling this year, he said the Coast Guard would likely split resources between the North Slope and Western Alaska, working to advance logistical knowledge for future operations. According to the assessment, the risk picture in the Bering Strait is growing. Maritime traffic transiting the strait increased from 220 vessels in 2008 to 480 in 2012, as summer sea ice continues its general retreat. The U.S. Army Corps of Engineers is expected in the coming months to release a deep-draft port proposal for the Seward Peninsula, another federal response to a busier Arctic. A deep-draft port in the Nome area could serve as an operations center for Arctic emergency responders, including the Coast Guard, Corps of Engineers Alaska officials have said. Robinson said the Coast Guard is reevaluating plans to rid itself of its small former base and airstrip at Port Clarence as a result. With deep water, Port Clarence, northeast of Nome, is cited by the Corps of Engineers as a possible place for civilian or military infrastructure development. It could help Coast Guard missions mitigate “the tyranny of distance and time” that makes seasonal Arctic operations so expensive, Robinson said. The Coast Guard is looking for partners of all types, from the military to Alaska Native corporations, to mitigate those costs and maximize efficiency, he said. USCG C-130 aircraft positioned at Eielson Air Force Base near Fairbanks can fulfill a myriad of Arctic missions, according to Robinson. While the Coast Guard is often welcomed in rural Alaska, he noted that an emphasis must be placed on reaching out to residents in the villages of Northwest Alaska to assure them the Coast Guard will take steps to minimize its impact on wildlife, marine or otherwise, and will do its best to make sure others do as well. Keeping a distance from wildlife will be of high priority in the Arctic going forward. All vessels and aircraft will avoid areas of active or anticipated subsistence hunts by contacting those in area villages to determine a proper course of action, according to the assessment. Additionally, when weather allows, Coast Guard planes will not fly below 1,500 feet and less than a half-mile from polar bears and they won’t be below 2,000 feet when within a half-mile of walruses. The draft assessment is available for review online at www.uscg.mil/D17. A public comment period on the report is open until May 28. Elwood Brehmer can be reached at [email protected]

Inspector General to investigate EPA Bristol Bay process

The Office of Inspector General for the Environmental Protection Agency asked EPA Region 10 officials for a list of names, documents, dates and spending associated with developing the Bristol Bay watershed assessment when it notified the office May 2 that a review of the assessment process would be conducted at the request of Pebble Limited Partnership and members of Congress. In February, the EPA said it intended to initiate a seldom-used process to block large-scale surface mining in the Bristol Bay region to protect the region’s robust salmon fishery, using the 1,000-plus page watershed assessment as a basis for its decision. Questions have been raised by Pebble and media reports about the EPA’s objectives while conducting the assessment. Ron Thiessen, president and CEO of Vancouver-based Pebble owner Northern Dynasty Minerals Ltd., said in a May 6 formal statement the mining company is “thankful” the IG’s office plans to investigate the agency’s Bristol Bay actions. “While the documents we’ve received to date through Freedom of Information Act requests have been sparse and heavily redacted, they paint the picture of an agency launching a watershed assessment to justify a predetermined outcome,” Thiessen said. If developed, it is believed the Iliamna-area Pebble mine would be one of the largest surface copper and gold mines in the world. Sen. Lisa Murkowski and Rep. Don Young sent a letter to the EPA Inspector General Arthur Elkins Jr. in February requesting an inquiry into the science behind the watershed assessment. Spokesmen for Murkowski and Young both said they are in “wait and see” mode until the IG issues a final report. Sen. Mark Begich took a stance opposing the mine after release of the Bristol Bay assessment in January. Begich spokeswoman Heather Handyside wrote in an email to the Journal that the senator welcomes the review if it can resolve lingering uncertainty about the assessment that “was subject to two peer reviews and an extensive public process involving tens of thousands of comments, the vast majority of which support the science in the Bristol Bay assessment.” Young and Murkowski have officially said they remain neutral on the mine project.  According to an April 30 Washington Times report, EPA officials were discussing how the Clean Water Act could be used to stop a mine in 2010, before the official three-year assessment process began. United Tribes of Bristol Bay spokeswoman Alannah Hurley said area Tribes asked about how EPA could use its Clean Water Act power to stop the mine prior to the assessment and the group that has long opposed Pebble is confident the EPA has met all its public responsibilities. Trout Unlimited’s Tim Bristol, who is Alaska executive director of the nonprofit leading the fight against the proposed mine, said Pebble’s request for a review of the assessment is nothing more than a sign of desperation and that he doesn’t know how a government agency having discussions with the public could be considered scandalous. “It’s clearly just another unsettling act by Pebble Partnership to try and delay the Clean Water Act process,” Bristol said. In a detailed and blunt 60-page document dated April 29, the Pebble Limited Partnership laid out five claims describing how it believes the EPA overstepped its authority and damaged the federal environmental permitting process when it announced its intent to begin work to preemptively veto a wetlands permit for a mine plan that has yet to be filed. The letter is addressed to EPA Region 10 Administrator Dennis McLerran and is signed by Pebble CEO Tom Collier. EPA Administrator Gina McCarthy said Feb. 28 that the agency would move forward with the early stages of a process to use authority granted it under subsection 404(c) of the Clean Water Act to block the large mineral project from getting a required U.S. Army Corps of Engineers wetlands dredge and fill permit. It’s unclear if the EPA will be able to move forward with its work while the Inspector General investigation is underway. The agency has said the full Clean Water Act process would likely take about a year. The Region 10 EPA office did not respond to a request for comment in time for this story. The regional U.S. Army Corps of Engineers handles Section 404 permit applications for all projects, public or private, that could impact wetlands. McCarthy said at the time the decision was based on the agency’s final assessment, released in January, of potential impacts a mine could have on salmon stocks in the Bristol Bay region. More than half of the Bristol Bay region is considered wetlands under the Clean Water Act. The first and most repeated claim in Pebble’s response to the EPA is that the agency overstepped its Clean Water Act authority by issuing an intent to begin the 404(c) permit veto process before the group has submitted a wetlands application to the Corps of Engineers or released a formal mine plan. In a formal statement issued by Pebble to coincide with the letter submittal, Collier said, “The actions EPA is contemplating today go well beyond Pebble. It is a precedent that will be leveraged by environmental activist groups and will have a chilling effect on future investment and job creation throughout the country. Congress never intended to grant EPA the authority to undertake proactive watershed zoning over broad areas of state and private lands when it passed the Clean Water Act, yet that is exactly what is happening here.” While the EPA has vetoed wetlands permit applications 13 times since 1972, it has never used the power to deny a permit before an application was submitted. In documents obtained by the Washington Times, a decision “matrix” rating the pros and cons of the tradition National Environmental Policy Act, or NEPA, process versus a preemptive veto were weighed. Among the “cons” listed for the traditional NEPA process was that the EPA would only be able to veto one project at a time as opposed to vetoing all activities in a large area. Listed as “cons” under the preemptive veto decision were “litigation risk” and the fact that the action has never been taken in the agency’s history. In 2011, when the EPA formally announced it was initiating the assessment process, the Journal reported on a 2008 document from the Region 10 EPA Environmental Justice unit that listed protecting subsistence fishing on the Colville River and addressing impacts of hard rock mining in Bristol Bay as examples of successful long-term outcomes. The EPA succeeded temporarily in halting the ConocoPhillips CD-5 project that included a bridge crossing the Colville River in 2010 and is now moving to block Pebble as well. The Environmental Justice unit at Region 10 is led by Rick Parkin, who Region 10 Administrator Dennis McLerran tapped to lead the Bristol Bay assessment. Subsection 404(c) states that the EPA can prohibit the use “of any defined area as a (material) disposal site” when the agency administrator deems the placement of fill material “into such an area will have an unacceptable adverse effect” on fish, wildlife or water supplies. Additionally, Pebble claims the agency cannot meet its burden of “finding that the Pebble project will have an ‘unacceptable adverse effect’ because a permit application has not yet been submitted.” Collier also noted in his statement that the EPA could still veto the wetlands application if the group fails to submit an environmentally safe plan, as the agency has done with other projects. Alaska Attorney General Michael Gerhaghty, in an April 29 letter to regional EPA chief McLerran, called the agency’s actions “premature, speculative, without precedent, illegal in terms of both process and substance, and unnecessary.” April 29 was the final day of a 45-day period for stakeholder response to the EPA on the final assessment, a period extended from the minimum 15-day period at the request of the state and Pebble. EPA has said the veto process usually takes about a year to complete. Further, Geraghty wrote that a “cloud of uncertainty” hangs over lands owned by all parties in the region as a result and that the EPA would deny the state its right to develop lands conveyed to it under the Alaska Statehood Act and other federal agreements that were chosen specifically for their mineral potential, a stance echoed by Pebble. The Pebble copper and gold claims are entirely on state land. Finally, Geraghty stated that there is no risk to the environment by working through the current federal and state statutes including the National Environmental Policy Act, which offers the public significant comment on proposed development, and the Clean Water Act. The February announcement by McCarthy was praised by commercial fishing and conservation groups steadfastly opposed the proposed mine and lambasted by Young and Murkowski, who have said repeatedly Pebble should be allowed to go through the same review process as any other project. Murkowski has remained neutral on the project, but has pushed the Pebble Partnership to unveil a mine plan so it can be judged and speculation about the project can be put to rest. When former 50 percent-share Pebble investor London-based Anglo American Plc pulled out of the project in September, remaining investor Northern Dynasty Minerals said it would hold off on issuing a formal plan until a new investor could be secured. Pebble says the mine would generate about 1,000 full-time jobs for up to 25 years in a region with high unemployment. Mine opponents say it is too risky of a project in the middle of the largest sockeye salmon fishery in the world. Bristol, of Trout Unlimited, said in a formal statement that Pebble’s response to the EPA doesn’t change that a large mine could damage a fishery that supports thousands of jobs every year. “The EPA has legal, policy and scientific backing to protect Bristol Bay and its economy from Pebble mine.” Bristol said. “It also has the backing of 80 percent of Bristol Bay residents, a majority of Alaskans and vast numbers of Americans across the political spectrum who have spoken out on this issue. The agency should work to complete the 404(c) process as quickly as possible and apply the much-needed Clean Water Act protections to the headwaters of Bristol Bay.” The 2013 ex-vessel value for all commercial salmon harvested in Bristol Bay was $140.5 million, according to the Alaska Department of Fish and Game. United Tribes of Bristol Bay President Robert Heyano said in a release the mine threatens “salmon-based” livelihoods and cultures in the region. “The Pebble Limited Partnership’s response to the 404(c) process does nothing to ease our concerns about its plans in Bristol Bay,” Heyano said. “The fact remains that the Pebble deposit is massive in scope, sits in a sensitive location, and poses severe impacts to the sustainable salmon resource in Bristol Bay.” Elwood Brehmer can be reached at [email protected]

Fairbanks flight opens unmanned aircraft test site

A small and unassuming unmanned aircraft made a short flight Monday in Fairbanks that signified a big step in aviation, Federal Aviation Administration chief Michael Huerta said. The quad-rotor Aeryon Scout’s flight of less than five minutes at the University of Alaska Fairbanks Large Animal Research Station officially made the Alaska Center for Unmanned Aircraft Systems Integration the second operational unmanned aircraft systems, or UAS, test site in the country. “Alaska is positioned to make great contributions to our research of unmanned aircraft,” Huerta said from Anchorage. The FAA recently approved a two-year certificate of authorization, or COA, for the Unmanned Aircraft Center for Scout flights at the research station. In late December, the center’s Pan-Pacific UAS Test Range Complex, which also includes sites in Oregon and Hawaii, was sanctioned by the FAA as one of six UAS testing grounds across the country. “This is absolutely a special day for our program and for our people who have worked so hard to make this happen — make it a reality,” center director Marty Rogers said in Fairbanks. “We have and have had for a long time a very active and science and research unmanned aircraft program with over a decade of successful flight operations across Alaska, the Lower 48, and internationally, but this, the very first flight at any of the UAS test sites is groundbreaking for us because it is a visible and tangible event that moves us collectively one step closer to safe integration of unmanned aircraft into our national airspace.” The test sites are the result of a 2012 congressional mandate to the FAA to develop operating procedures to meld UAS and traditional aviation by 2015. Rogers said the center would work with UAF scientists to determine the feasibility of using the Scout and other UAS to do what Huerta called often “tedious” large animal studies in the wild. While also symbolic, Monday’s flight at the Large Animal Research Station was also used to see how musk ox at the station responded to the Scout, Pan-Pacific Range Director Ro Bailey said. Huerta said the Pan-Pacific Range and other sites would be used in coming years to determine safe flight conditions, proper operator qualifications, support systems and, most importantly, effective “sense and avoid” technology for flying among traditional aircraft. “I think we need to think about this as an evolutionary process,” he said. While initial UAS guidelines will likely be implemented in 2015, they will continue to morph as new technologies arise, Huerta said. UAF Geophysical Institute researchers counted Steller sea lions with an infrared camera affixed to a UAS in the Aleutian Islands for the National Oceanic and Atmospheric Administration in 2012 — a low-altitude mission that would be dangerous and largely ineffective for a manned aircraft.  Additionally, the UAF crew has used the little fliers to monitor oil spill response drills run by Chevron in at the mouth of the Columbia River in Oregon. The experience of the UAF staff was a “major factor” in selecting the Alaska Center as a test site operator, according to Huerta. “They came to us with a very tight and well-developed research program that addressed a very broad scope of the research objectives we identified for the program in its entirety,” Huerta said. That work was done as government research, before the test site program was in place. The FAA is not currently issuing COA’s for commercial UAS operations and the only legal commercial unmanned flight in the country’s history took place last September when ConocoPhillips used a UAS to survey its offshore oil leases in the Chukchi Sea. Elwood Brehmer can be reached at [email protected]

Pebble to EPA: mine veto would overstep authority

The group working to develop the Pebble copper-gold deposits in Southwest Alaska responded April 29 to the Environmental Protection Agency’s possible move to preemptively block the mine. In a detailed and blunt 60-page document, the Pebble Limited Partnership laid out five claims describing how it believes the EPA overstepped its authority and damaged the federal environmental permitting process when it announced its intent to begin work to preemptively veto a wetlands permit for a mine plan that has yet to be filed. The letter is addressed to EPA Region 10 Administrator Dennis McLerran and is signed by Pebble CEO Tom Collier. EPA Administrator Gina McCarthy said Feb. 28 that the agency would move forward with the early stages of a process to use authority granted it under subsection 404(c) of the Clean Water Act to block the large mineral project from getting a required U.S. Army Corps of Engineers wetlands dredge and fill permit. The regional U.S. Army Corps of Engineers handles Section 404 permit applications for all projects, public or private, that could impact wetlands. McCarthy said at the time the decision was based on the agency’s final assessment, released in January, of potential impacts a mine could have on salmon stocks in the Bristol Bay region. More than half of the Bristol Bay region is considered wetlands under the Clean Water Act. The first and most repeated claim in Pebble’s response to the EPA is that the agency overstepped its Clean Water Act authority by issuing an intent to begin the 404(c) permit veto process before the group has submitted a wetlands application to the Corps of Engineers or released a formal mine plan. In a formal statement issued by Pebble to coincide with the letter submittal, Collier said, “The actions EPA is contemplating today go well beyond Pebble. It is a precedent that will be leveraged by environmental activist groups and will have a chilling effect on future investment and job creation throughout the country. Congress never intended to grant EPA the authority to undertake proactive watershed zoning over broad areas of state and private lands when it passed the Clean Water Act, yet that is exactly what is happening here.” If developed, it is believed the Iliamna-area mine would be one of the largest surface copper and gold mines in the world. While the EPA has vetoed wetlands permit applications 13 times since 1972, it has never used the power to deny a permit before an application was submitted. Subsection 404(c) states that the EPA can prohibit the use “of any defined area as a (material) disposal site” when the agency administrator deems the placement of fill material “into such an area will have an unacceptable adverse effect” on fish, wildlife or water supplies. Additionally, Pebble claims the agency cannot meet its burden of “finding that the Pebble project will have an ‘unacceptable adverse effect’ because a permit application has not yet been submitted.” Collier also noted in his statement that the EPA could still veto the wetlands application if the group fails to submit an environmentally safe plan, as the agency has done with other projects. Alaska Attorney General Michael Gerhaghty, in an April 29 letter to regional EPA chief McLerran, called the agency’s actions “premature, speculative, without precedent, illegal in terms of both process and substance, and unnecessary.” April 29 was the final day of a 45-day period for stakeholder response to the EPA on the final assessment, a period extended from the minimum 15-day period at the request of the state and Pebble. EPA has said the veto process usually takes about a year to complete. Further, Geraghty wrote that a “cloud of uncertainty” hangs over lands owned by all parties in the region as a result and that the EPA would deny the state its right to develop lands conveyed to it under the Alaska Statehood Act and other federal agreements that were chosen specifically for their mineral potential, a stance echoed by Pebble. The Pebble copper and gold claims are entirely on state land. Finally, Geraghty stated that there is no risk to the environment by working through the current federal and state statutes including the National Environmental Policy Act, which offers the public significant comment on proposed development, and the Clean Water Act. The February announcement by McCarthy was praised by commercial fishing and conservation groups steadfastly opposed the proposed mine and lambasted by Rep. Don Young and Sen. Lisa Murkowski, who have said repeatedly Pebble should be allowed to go through the same review process as any other project. Murkowski has remained neutral on the project, but has pushed the Pebble Partnership to unveil a mine plan so it can be judged and speculation about the project can be put to rest. When former 50 percent-share Pebble investor London-based Anglo American Plc pulled out of the project in September, remaining investor Northern Dynasty Minerals Ltd. said it would hold off on issuing a formal plan until a new investor could be secured. Sen. Mark Begich took a stance opposing the mine after release of the Bristol Bay assessment in January. Pebble says the mine would generate about 1,000 full-time jobs for up to 25 years in a region with high unemployment. Mine opponents say it is too risky of a project in the middle of the largest sockeye salmon fishery in the world. Trout Unlimited’s Tim Bristol, who is Alaska executive director of the nonprofit leading the fight against the proposed mine, said in a formal statement that Pebble’s response to the EPA doesn’t change that a large mine could damage a fishery that supports thousands of jobs every year. “The EPA has legal, policy and scientific backing to protect Bristol Bay and its economy from Pebble mine.” Bristol said. “It also has the backing of 80 percent of Bristol Bay residents, a majority of Alaskans and vast numbers of Americans across the political spectrum who have spoken out on this issue. The agency should work to complete the 404(c) process as quickly as possible and apply the much-needed Clean Water Act protections to the headwaters of Bristol Bay.” The 2013 ex-vessel value for all commercial salmon harvested in Bristol Bay was $140.5 million, according to the Alaska Department of Fish and Game. United Tribes of Bristol Bay President Robert Heyano said in a release the mine threatens “salmon-based” livelihoods and cultures in the region. “The Pebble Limited Partnership’s response to the 404(c) process does nothing to ease our concerns about its plans in Bristol Bay,” Heyano said. “The fact remains that the Pebble deposit is massive in scope, sits in a sensitive location, and poses severe impacts to the sustainable salmon resource in Bristol Bay.” Elwood Brehmer can be reached at [email protected]

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