Alaska House comes up one vote short on capital budget funding

The Alaska House failed by one vote Monday to win sufficient support to use reserve funds to help pay for a state infrastructure budget. The vote came on reconsideration, after a similar vote failed Sunday. Lawmakers still could try to revive the measure for another vote later. The measure previously passed the Senate. "We are not giving up hope," House Speaker Bryce Edgmon said in a statement. "We thank everyone who voted for the capital budget and for the growing commitment to find compromise on this issue and the many other challenges ahead." The capital budget would use constitutional budget reserve funds. In the House, that requires at least 30 votes and means the 23-member bipartisan majority needs buy-in from Republicans who are in the minority or not affiliated with a caucus. Supporters picked up four votes compared with Sunday's tally, with three of the seven minority Republicans who were absent Sunday back and voting in favor of the reserve fund provisions. House Minority Leader Lance Pruitt, a "no" Sunday, changed to "yes." Anchorage Rep. Sara Rasmussen, one of the returning Republicans, said she would not have chosen using reserve funds to help pay for the budget. She saw supporting the measure as the best path forward, however. "May this be the olive branch to begin truly working together as Alaskans, for Alaskans," she said in a floor speech. The capital budget is one of the agenda items for the current special session, which began July 8 and was marred early on by a dispute over the proper meeting location. Lawmakers also have yet to settle on an amount to pay residents this year from the state's oil-wealth fund, the Alaska Permanent Fund. Some legislators hope to reverse cuts Gov. Mike Dunleavy made to the state operating budget. Language in the capital budget also seeks to prevent money in various accounts, for things such as student scholarships and rural electric costs, from going into the budget reserve to help repay money that has been taken from it. Some minority Republicans argued Monday that provisions in the capital budget allowing for additional draws from the reserve fund were too broad and complicated. House Finance Committee co-chair Rep. Jennifer Johnston said the provisions allow up to $250 million to be drawn from the reserve for unforeseen costs and what she called standard language to ensure the budget is balanced if revenues do not meet projections.

Marathon aquires Interior fuel assets

Marathon Petroleum Corp. has purchased the site of the now-demolished North Pole oil refinery formerly owned by Flint Hills Resources. Marathon Alaska spokesman Casey Sullivan confirmed the refining and fuel transportation company purchased the 233-acre industrial site, which it now uses for fuel storage, in a deal that closed July 1. Sullivan wrote via email that owning the Interior Alaska fuel storage terminal will help the company optimize its operations across the state. “We are excited about the opportunities that this will bring for the company and for the community alike,” he said. “We believe this facility is a natural extension of our long-standing operations in Alaska and will enhance our ability to efficiently and reliably serve customers in the Interior and strengthen the integration from our Nikiski refinery to our customers.” Marathon had been leasing the 285,000-barrel North Pole terminal to store fuels it imports or produces at its Nikiski refinery on the Kenai Peninsula and then ships north on the Alaska Railroad for eventual distribution to Interior customers. The company took over the state’s largest oil refinery in Nikiski — long operated by Tesoro Corp. — late last year after finalizing a $23 billion deal to buy Andeavor, which ran the refinery briefly after purchasing Tesoro in 2017. In late 2015, Tesoro purchased a 580,000-barrel capacity fuel terminal in Anchorage and a 22,500-barrel jet fuel storage facility at the Fairbanks International Airport as well as wholesale fuel contracts in the state from Flint Hills; all that is now owned by Marathon. Flint Hills Resources closed its North Pole oil refinery — the site of historic soil and groundwater contamination — in May 2014 citing in part the high operating costs in the state. It began demolishing the oil refining facilities in December 2016 but kept the fuel storage terminal. The Flint Hills refinery was a primary supplier of jet fuel to Eielson Air Force Base. Fairbanks North Star Borough property records indicate that the former refinery-turned fuel terminal parcel has an assessed value of $24 million, down from $35.8 million in 2017 due to a decline in the value of on-site facilities. The land value has held steady at $2.5 million, according to borough records. Marathon also took ownership of the former ConocoPhillips LNG plant in Nikiski when it purchased Andeavor. The company is seeking approval from the Federal Energy Regulatory Commission to use the idled plant to import LNG that could be used to fuel part of the operations at its nearby refinery. Sullivan said Marathon has not ruled out selling imported LNG that has been regasified into the Southcentral market, but the company is focused on getting the requisite federal permits for importing LNG at this point. Elwood Brehmer can be reached at [email protected]

Movers and Shakers for July 21

Shannon Butler, Specialty Accounts officer at Denali-A Division of Nuvision Credit Union, was recently awarded the Certified IRA Services Professional certification from the American Bankers Association. The CISP certification was designed by ABA and its strategic partner Ascensus to establish meaningful standards of knowledge and competency for IRA professionals, give formal recognition to those who meet prescribed standards, and meet professional education and development requirements. ABA Professional Certifications promote the highest standards of performance in the financial services industry by validating individuals’ knowledge and expertise. Chief Master Sgt. Teresa Renson was selected as the next command chief for the 168th Wing, Alaska Air National Guard. Renson has been a member of the wing for 26 years, joining the unit in 1993 as a member of the 168th Maintenance Squadron. Renson will replace Chief Master Sgt. James Wolverton, who is retiring this summer. As the 168th Mission Support Group superintendent, Renson was responsible for providing administrative and technical supervision and guidance to sustainment services, manpower and personnel, force development, human resource systems manager, customer support, career development and force management functions. As the command chief, Renson will be the senior enlisted leader for the 168th Wing. She will be responsible for advising the wing commander on all matters concerning the discipline, health, morale, welfare and mentorship of more than 800 Guardsmen, civilian personnel and their families. Isaac Stark, EIT, has joined PND Engineers Inc.’s Juneau office as a staff engineer. He recently graduated from the University of Utah with a master of science in civil and environmental engineering, with a focus in structural design and analysis. He earned his bachelor’s degree there as well. Stark has engineering experience in both Alaska and Utah. He has completed internships with the Alaska Department of Transportation and Public Facilities Bridge Section, and has also worked with Juneau and Salt Lake City engineering and construction companies. Taylor Mortensen, EIT, is a lifelong Alaskan and graduate of West Anchorage High School. He graduated this spring from Montana State University with a bachelor of science in civil engineering. He previously interned at SECON Construction in Juneau and Houser Engineering in Bozeman, Mont., where he performed civil engineering design and inspection for mountainous environments. His main interests are in hydraulic, hydrologic, and coastal engineering. Before engineering school, Mortensen served six years in the U.S. Navy as a flight engineer on the P3 Orion aircraft, a land-based, long-range, anti-submarine warfare patrol aircraft. Schindler Elevator Corporation announced the appointment of Sierra Stonich to oversee sales and operations for its Alaska office, servicing Anchorage, the Mat-Su Valley, the Kenai Peninsula and surrounding areas. Stonich has extensive operations background and duties include anticipating the needs and priorities of customers while managing customized maintenance programs and facilitating emergency repairs. As the world’s second-largest elevator company and the largest escalator company, Schindler manufacturers, designs, and installs its own equipment and maintains, repairs, and modernizes equipment from all manufacturers. Cornerstone General Contractors hired Justin McVaney for its cost estimating team. McVaney has more than 18 years of experience in construction and will be responsible for supporting Cornerstone’s estimating operations and leveraging data analytics in estimating and contract performance. In addition, he is supporting the team in regular evaluation and optimization of competitive bidding on future projects. Before joining Cornerstone, McVaney worked as a superintendent and layout foreman in charge of vertical survey. McVaney also owned and managed his own algorithmic commodity trading firm, specializing in quantitative historical trend analysis, risk management, and allocation modeling. Alex Rasskazov has joined KPMG LLP, the audit, tax and advisory services firm, as a new Tax Managing director in the firm’s Anchorage office. Rasskazov is returning to KPMG as a Business Tax Services managing director. He will focus on providing federal and state tax consulting and compliance services to Alaskan entities, including Alaska Native corporations, other commercial businesses, and family office operations. Rasskazov has nearly 20 years of industry experience, primarily in tax. He joins KPMG from another “Big Four” accounting firm, where he served as a lead tax director for their on-shore compliance center. Rasskazov previously served in KPMG’s Anchorage office from 2001 to 2008 and is a graduate of the University of Alaska Anchorage.

Pipeline obstacles constrain capacity amid energy boom

Oil and gas pipeline developers around the country are frustrated at the delays and legal challenges they have to plow through when they would prefer to be burrowing underground to install new pipe. Tulsa, Okla.-based Williams Cos. has been trying for more than four years to obtain permission to replace about six miles of an older 8-inch-diameter gas line it owns in Seattle’s northern suburbs with a 20-inch line to serve new development in the area. Alan Armstrong, Williams’ CEO, told The Wall Street Journal this month that permitting delays have driven the project cost to $50 million from an estimated $6 million. The company hopes to start work this summer. “That is such a simple piece of work,” Armstrong told the Journal. “It’s hard for me to even talk about it because it’s repulsive how much money has been spent there.” The North Seattle Lateral, as it’s called, just north of Bothell and Woodinville, was built in 1956 and delivers gas from Canadian and Rocky Mountain producers. “(It) is operating beyond its intended peak capacity on cold winter mornings and days,” the company says on its website. Challengers during the permitting process include the Sierra Club and Mothers Out Front. Environmental groups have pushed regulators for greater scrutiny of the project, which would cross 15 streams. Challengers also have raised concerns of a leak or explosion in the suburban and rural area of Snohomish County. In Michigan, Enbridge has taken the state to court over a $500 million pipeline project. The company wants to dig a tunnel for new liquids pipelines to replace a 66-year-old line on the lakebed under the Straits of Mackinac, which connects Lake Michigan and Lake Huron. The legal fight escalated between the Calgary-based company and the State of Michigan after Gov. Gretchen Whitmer won election last fall. She wants the line shut down. The company wants to the state to honor an agreement with the previous governor that would allow Enbridge to install new pipe in the protective tunnel. The company’s Line 5, as it’s called, can move 540,000 barrels per day of crude oil and natural gas liquids from Canada to Michigan and Ontario refineries and other customers. Enbridge is asking the Michigan Court of Claims “to establish the constitutional validity and enforceability of previous agreements.” The governor wants the pipe out of the water to protect the Great Lakes from the risk of spills. In Canada, the most recent legal fight is not a company versus government but two governments battling each other. British Columbia wants to restrict the flow of oil sands production from Alberta through the coastal province. The intent is to block expansion of the Trans Mountain pipeline to move 890,000 barrels per day of oil sands bitumen to an export terminal near Vancouver. The B.C. Court of Appeals ruled May 24 that the federal government has sole jurisdiction over interprovincial projects such as an oil line, shutting down British Columbia’s maneuver. The B.C. government appealed and Alberta responded by joining the case as an intervenor to protect its interests. “The B.C. Court of Appeals’ unanimous decision was clear. B.C. does not have constitutional authority to block cross-provincial projects,” Alberta Premier Jason Kenney said July 12. “The actions of the British Columbia government not only target Alberta’s economy by landlocking our energy resources,” but also undermine free trade within Canada, Kenney said. The project that started the debate over oil sands pipelines 10 years ago — the Keystone XL line — continues to have its multiple days in court. Opponents asked a federal judge on July 1 to cancel permits and other approvals issued by the U.S. Army Corps of Engineers for the line from Canada, opening another legal fight over the long-delayed project. Attorneys for the Northern Plains Resource Council, Sierra Club and other groups filed the lawsuit in Montana. They claim the Army Corps did not examine the potential for oil spills and other environmental damages when it approved plans from pipeline developer TC Energy (formerly known as TransCanada). The 1,184-mile pipeline from Canada would connect to existing pipe in Nebraska to deliver oil to U.S. Gulf Coast refineries and export terminals. First proposed in 2008, Keystone XL was rejected by President Barack Obama but revived under President Donald Trump. Besides the filing in Montana, legal challenges continue in Nebraska. Though oil lines may attract the most media attention, insufficient U.S. gas pipeline capacity creates a lot more price volatility for consumers. Earlier this year, two utilities that serve the New York City area stopped accepting new customers in two boroughs and several suburbs, citing a lack of gas pipeline capacity. They said they couldn’t guarantee delivery to additional furnaces, The Wall Street Journal reported July 7, never mind that the country’s most prolific gas field, the Marcellus Shale, is only a three-hour drive away. Environmental and political opposition is making it difficult to build new pipelines in New England and the Mid-Atlantic states. At the other end of pipelines, producers in the Permian Basin in West Texas and Bakken in North Dakota have so much gas with no way to get it to market that they are burning it — a combined 1.2 billion cubic feet per day at its worst earlier this year. There just aren’t pipelines to move all the gas. U.S. production rose to a record of more than 37 trillion cubic feet last year, up 44 percent from a decade earlier. Prices have been negative at times this year at a trading hub near Midland, Texas, where producers had to pay companies to take gas off their hands. At the other end of the distribution system, prices hit records when heavy demand coincided with supply disruptions. A cold snap along the East Coast led to gas prices as high as $140.85 per million Btu in New York and $128.39 in the Mid-Atlantic on Jan. 4. “I don’t recall a situation when we’ve had the highs and lows happen in such extremes,” the Journal on July 7 quoted Rusty Braziel, a former gas trader who now advises energy producers, industrial gas buyers and pipeline investors. Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide. He is the incoming Atwood Chair of Journalism at the University of Alaska Anchorage School of Journalism and Public Communication.

Providers await impacts of Medicaid cuts; dental services axed

Gov. Michael J. Dunleavy’s cuts to the state Medicaid budget have providers holding their breaths as they wait to see the impacts. Dunleavy vetoed about $58 million of general fund support for Medicaid programs from the Legislature’s enacted budget on June 28. The Legislature, divided between special sessions in Wasilla and Juneau, failed to override the vetoes, and so the cut stands for now. Because Medicaid is a federally matched program, the dollars the state cuts lead to forfeited federal dollars as well. The $58 million general fund cut is compounded by those federal dollars, meaning at least $77 million less in total. Though there’s no immediate impact for hospitals, but one of their concerns is for the end of the next fiscal year, when money starts running out to reimburse providers. The state suspended payments for about two weeks in June due to a Medicaid funding shortfall, forcing hospitals to wait until the turnover of the fiscal year to be paid. While hospitals are again being paid, there’s the possibility that if funding is cut, the suspension could go on for longer next year, said Jeannie Monk, senior vice president of the Alaska State Hospital and Nursing Home Association. “Right now, in terms of hospitals and Medicaid, everybody’s okay,” she said. One Medicaid service would be eliminated entirely if the vetoes stand: adult preventive dental medical coverage. Up until this year, Medicaid recipients were able to access preventive dental services such as cleanings and X-rays. Dunleavy vetoed $27 million supporting the program, which would stop the preventive program, though emergency situations would still be covered, according to the Alaska Department of Health and Social Services. Providers say it’s more than a luxury. During the regular session, legislators and providers argued for the retention of the program, saying it was an essential part of preventative health and provided opportunities for people to encounter the medical system who might not have otherwise gone in for a doctor’s appointment. Without the benefit, there’s a concern that those patients will just wind up in the emergency rooms with abscesses and acute dental conditions, Monk said. The same is true of the homeless population, with the vetoes applying to social services that help run homeless shelters. For patients at federally qualified health centers, that means paying a sliding scale fee. Though that fee reduces the patient’s cost, it’s still about 25 percent of the total charge, said Jon Zasada, the policy integration director for the Alaska Primary Care Association. “I think a lot of folks know that once you start doing the cleaning, fillings, and other procedures, it becomes a lot more expensive,” he said. “Let’s say a cleaning or a tooth pulling … a patient could easily have a bill that at full cost is multiple thousands of dollars, and then they would be responsible for $1,000, which they generally are not able to pay.” Other states who have cut their preventive dental services for Medicaid have studied and tracked increases in emergency room visits for dental reasons, Zasada said. Though that isn’t something Alaska has done in the past, it’s something the APCA will be looking into, in part because of the inefficiency of treating those problems in an expensive place like an emergency room, he said. “Certainly an abscess or an infection, when treated in an emergency room, is far more expensive than when it might be under control because someone has access to preventative care,” he said. At hospitals, those patients would be eligible for financial assistance, or charity care. Hospitals generally have to eat that cost later. That’s not the case for federally qualified health centers; they often have grants to help cover that shortfall from the sliding scale fee. But with more patients not able to pay for services, they may have to rely more on those backup funding sources. For the Anchorage Neighborhood Health Center, that means probably looking for more grants to support their services and relying on patients who come with private insurance, said Tammy Green, the CEO of Anchorage Neighborhood Health Center. “We have figured out that we have a fair amount of our dental patients that are on Medicaid with our dental benefit,” she said. “We’re going to have to figure out where else to shoulder that in our business.” The Anchorage Neighborhood Health Center has integrated medical, dental and behavioral care, and patients who come in for dental services are frequently referred for medical services and vice versa. Without the dental benefit, patients may not be as likely to receive care in the first place, which may lead to more serious conditions down the road and may hamper their ability to get jobs. Green said a number of the patients who have had dental services have written to the clinics and said oral care played a role in their ability to be employable by correcting their speech or smiles. The other problem is that the caseload may go up as other providers in the area stop taking Medicaid patients, she said. “I think the other piece about these cuts is that in our community, the dentists will no longer be able to see the Medicaid patients and we are going to be deluged, but more importantly, I think the hospital emergency rooms are going to end up (seeing these patients),” she said. The House Finance Committee, meeting in Anchorage July 15, introduced House Bill 2001 to reinstate many of the cuts from the line-item vetoes, including Medicaid, and using remaining state funds to pay the Permanent Fund dividend. Zasada said the APCA hadn’t formally endorsed the bill, but “anything that would reinstate funding for broad health care services amongst all of the other things, we are supportive of.” During a press conference July 15, Dunleavy said his administration hadn’t had time to review the House’s new bill yet but planned to continue discussions with legislators later in the day. Elizabeth Earl can be reached at [email protected]

Concept scrapped for unified Railbelt utility

Alaska’s Railbelt electric utility leaders are headed back to the drawing board after five years of work now that efforts to jointly manage the region’s transmission infrastructure have failed, at least for the time being. The utilities behind Alaska Railbelt Transmission LLC withdrew the startup transmission company’s application for a certificate of public convenience and necessity, or CPCN, from the Regulatory Commission of Alaska on June 20. An RCA-approved CPCN is required for any regulated electric utility to operate in the state. A transmission company, or transco, has long been seen as a way for the five large Railbelt utilities, plus the City of Seward, to coordinate construction of new power generation facilities and pool resources for expensive transmission infrastructure projects that a single utility might not be able to afford but would benefit the customers on the broader system. Such a joint transmission-only utility would be a first for Alaska but they are more common in the Lower 48. When the transco CPCN application was sent to the RCA in February, Homer Electric Association, Anchorage-owned Municipal Light and Power, Golden Valley Electric Association, the City of Seward and Wisconsin-based American Transmission Co. were signatories to the 750-page document. American Transmission Co. operates as a transco in the Upper Midwest and company representatives coordinated transco development in Alaska since 2015, though the concept was being discussed prior to that. Work to formally integrate Railbelt utility operations became more urgent following a sternly worded June 2015 letter from the RCA to the Legislature in which the commission characterized the Railbelt electric system at the time as “fragmented” and “balkanized.” The RCA also insisted that if the utilities would not voluntarily work together for the betterment of their customers, the commission would do what it could to mandate better cooperation, either through its own regulations or by seeking statutory help from the Legislature. In May, the early drafts of in-depth legislation clarifying the RCA’s authority to oversee a transco or other joint utility organizations was introduced in both the state House and Senate. Some critical observers of the Railbelt electric system contend the six utilities — spread over a large area but with collective demand less than many individual Lower 48 utilities — have overbuilt generation capacity in recent years while ignoring transmission investments that could make it more cost effective to move lower cost power from one end of the system to the other. The 2015 letter notes the utilities had spent roughly $1.5 billion on new generation facilities over the previous five years. Currently, the Railbelt utilities continuously buy and sell power to each other; however, they also each apply their own transmission, or wheeling, tariffs, when power is sent across the portion of the main transmission lines they own. This can lead to situations where tariff “pancaking” disincentives power transactions that could otherwise maximize the efficiency of the system as a whole. Renewable energy advocates, in particular, stress that an open-access transmission system with a flat wheeling tariff would allow independent power producers to compete on a level playing field with current power plants for power sales and would incentivize more investment renewable projects in the region. Alaska Railbelt Transmission was challenged from the outset by not having participation from two of the larger utilities in the region, Chugach Electric and Matanuska Electric associations. Golden Valley CEO Cory Borgeson said when the group learned that ML&P was withdrawing its support for the transco it was scrapped. Chugach officials have said in filings to the RCA that the Anchorage-area utility wants to resolve its pending $1 billion purchase of ML&P from the Municipality of Anchorage, which is also under review by the commission, before entering into any binding agreements. ML&P officials did not respond to questions in time for this story. Seward Utility Manager John Foutz said Seward supports a transco because it would give the city “a buyer’s market.” “Right now we’re attached directly to Chugach’s transmission lines so any power we that we purchase has to go through Chugach’s system. If there was a transco that covered all of the transmission system then we would have the opportunity to basically shop around for the lowest price for our ratepayers and pay one unified transmission price to get it to us,” Foutz said. Seward currently buys the vast majority of its power from Chugach; it also has rights to a small portion of power from the state-owned Bradley Lake hydro plant near Homer, according to Foutz. MEA General Manager Tony Izzo said his utility hired outside consultants to evaluate the transco application and business plan and who concluded MEA should not get involved in the company. “We are convinced from the analysis that the transco as filed did not do what even the cover letter of the filing said it would do,” he said in an interview. Last November, prior to the transco application being filed, Izzo wrote in a letter to the RCA that MEA was “in full support of the formation of a transco,” but the utility wanted to see a sister cooperative organization formed to address transmission system reliability standards and perform economic power dispatch — consistently running the most efficient generators for the demand — across the Railbelt. Izzo insists the transco, as envisioned in the application, would not lessen the cost of wheeling tariff pancaking on the system, but would largely combine the existing tariffs into “one big pancake,” he said. Izzo has also questioned the ultimate motivation of a for-profit transco, which Alaska Railbelt Transmission would have been with ATC’s involvement, saying he would worry about costly and unnecessary transmission projects. The Alaska Railbelt Transmission application requested a 10 percent return on equity investments in its projects. Izzo said he believes the conceptual Railbelt Reliability Council cooperative can perform the functions of a transco while also implementing a single set of operating reliability standards in the Railbelt and coordinating the most efficient dispatch in the region. Chugach Electric CEO Lee Thibert similarly said the transco application gave Alaska Railbelt Transmission the authority to dictate long-term system planning and power dispatch; functions he said would be best performed by the reliability council. “Before you had two parallel paths and it was very difficult when you had two things going to the commission and competing against each other. At least with the transco pulled back maybe we can all agree on how we can move forward with the RRC and try to resolve our transmission issues at the same time,” Thibert said in an interview. “I’m hoping it opens the door to try to solve some of those things.” Borgeson noted that significant progress has been made with the utilities agreeing to a single set of reliability standards across the system, which Thibert said was a big deal for protecting their IT networks. “Probably the biggest focus (with reliability) is making sure we all have the same cyber security standards because we’re all interconnected,” Thibert said. There is no definitive timeline for the utilities to settle on the final structure of an RRC, but utility leaders said it would likely have a 13-member governing board with seats for each utility, the Alaska Energy Authority as a transmission asset owner, independent power producers, public experts and an RCA delegate. While they acknowledge the RRC does not inherently solve the issues with wheeling tariffs, its believed the organization would be able to work through those challenges. “Part of the RRC is to make sure we have a common way of dealing with interconnection guidelines (for independent power producers) and then it’s not a burden to move power from one side of the system to the other,” Thibert said. Despite the challenges, the utility leaders insist their relationships — which have been blamed for slowing reform in the past — are still very good. “A couple steps forward and one step back,” Borgeson said, adding that the utilities are already working continuously to provide the lowest cost power. GVEA purchases roughly 30 percent of its power from Southcentral utilities that have access to natural gas-fired generation versus the typically higher cost fuel oil plants the Fairbanks utility operates, according to Borgeson. “We’ll pick up the ball on the transco and we’ll keep moving the ball on the RRC,” he said. ^ Elwood Brehmer can be reached at [email protected]

Cultivators still seeking changes to cannabis excise tax

Questions continue to bubble up about potential changes to state cannabis taxes to keep the current structure from hampering business in the future. Alaska voters legalized recreational marijuana use in 2014, but it took about 18 months for the first cultivators to be licensed and open their doors. When they did, they began paying into the cultivation tax that Alaska assesses on commercially grown marijuana. Generally, any part of bud or flower is taxed at $50 per ounce and the remainder of the plant is taxed at $15 per ounce. That tax is assessed entirely on weight, rather than scaling with price. According to growers, that’s going to be a problem. From the beginning of the program through April 30, the state has assessed more than $28.5 million in taxes. That’s just the cultivation taxes, as sales taxes are assessed by local governments. As cultivators have ramped up production to meet sales demands — retail sales reached $130.4 million in 2018, up from about $57.5 million in 2017 — that tax amount has gone up as well. Cultivators have had to account for it in their businesses and so far have been able to do so, in part because with limited supply, the price has stayed relatively high. That’s not always going to be the case, though, said Jana Weltzin, an attorney representing cannabis businesses through the firm JDW Counsel. “That price will go down because supply will go up, and the demand will stay the same,” she said. In a presentation to the Marijuana Control Board, she presented a case for the Legislature to consider changing the way taxes are assessed in the future to prevent the strangulation of businesses. Based on Notice of Violations, some businesses aren’t even keeping up with their taxes now, she said. The Marijuana Control Board does not have any control over tax policy; the Legislature has to set it by statute. Weltzin said she recognized that but wanted the board to be informed of the problem so they could help educate legislators and advocate for a policy change. Since the inception of the program, cannabis-related businesses have hired many of their own employees but have also led to work generated in ancillary businesses. Between the taxes and indirect economic impacts, the businesses have stimulated enough activity to create a return of about $3 per dollar spent, much at the local level, she estimated. But looking forward, the inflexible tax structure may put excessive pressure on cultivators. Because Alaska assesses the tax based on weight, the amount that will be taxed will not change. The sale price will, and Alaska should respond by revising its tax structure to not jeopardize businesses, Weltzin said. She pointed to states like Nevada, which balances its tax revenue from cannabis between a 15 percent excise tax and a 10 percent sales tax. Colorado splits its revenue evenly, at 15 percent on both an excise and a sales tax, according to the Washington, D.C.-based think tank the Tax Foundation. Alaska, on the other hand, set a dollar amount per ounce rather than on a percentage. “We are the only solely based weight excise tax,” Weltzin said. “We maybe need to bob and weave and adjust our approach.” In a hypothetical example, she noted that a rough average of costs per month for a 5,000-square-foot cultivation facility at about $97,300 per month, not including rent and advertising. Based on the average sales price of $2,800 per pound, that leaves about $31,500 in profit to cover items like rent, advertising and local taxes. That doesn’t go a long way, and once the price begins to go down, that would cut into the profit. She suggested an approach like a 10 percent tax on sales from cultivators to manufacturers and a 10 percent tax on sales from manufacturers to retailers, but emphasized that this is not an industry-generated idea — it was just to get the conversation started, she said. “If we get tagged as the industry that doesn’t fulfill its tax obligations, most of the people aren’t going to understand that economically, with an inflexible price floor like we’ve set here with $800 per pound, it’s not possible,” she said. “While we strive to make the state money, the state needs to be our partner. The state needs to move and ebb and flow with the market like we do.” Board member Loren Jones said that while he understands the situation, consumers ought to be paying the taxes in the retail price because it should be built into cultivators’ business plans. The Legislature is unlikely to want to see the tax revenue go down, he said. In the case of local governments, businesses have to plan around local retail taxes when planning prices and expenses, he said. “If (businesses) say they can’t make money if they pay (local governments) the 5 percent, they’re doing it wrong,” he said. The Alaska Marijuana Industry Association hosted a call-in on the same topic on July 15 night and sent out a call for industry stakeholders to send in comments to the industry organization on the topic before July 22 to work on a proposal to send to the state. ^ Elizabeth Earl can be reached at [email protected]

More quake damage adds to troubles at Port of Alaska

The primary users of Anchorage’s beleaguered port want city officials to delay the first major rehabilitation work at the port in years while port leaders continue to discover earthquake damage to critical infrastructure. The eight companies that make up the informal “Port of Alaska Users Group” sent similar letters to Anchorage Mayor Ethan Berkowitz June 28 and members of the Anchorage Assembly July 12 urging them to stop advancing work to build a new petroleum and cement terminal. They contend the municipality’s plan to start building the roughly $220 million petroleum and cement import terminal, or PCT, without having a way to pay for all of it would leave the city with a “trestle to nowhere,” according to the July 12 letter to the Assembly, and could invite tariff increases that would impact business at Anchorage’s other logistics hub. “Fuel is a highly sensitive commodity and as the 5th busiest air cargo hub in the world, it seems imprudent not to conduct this type of analysis before proceeding down any path that might produce negative fiscal impacts to our fragile Alaskan economy. Ultimately, without knowing what the final cost of the project will be, it is impossible to determine what the appropriate tariff should be to underwrite the project, and by extension, whether the increased tariff is even feasible for the airport customers,” the July 12 letter to the Assembly states. The port user group is comprised of the general cargo shippers Tote Maritime and Matson Inc.; five fuel supplier and distribution companies; and Alaska Basic Industries, which is primarily a cement distributor. The Anchorage Assembly officially changed the name of the city-owned port in 2017 from the Port of Anchorage to the Port of Alaska in an attempt to highlight its importance statewide and possibly drum up support for funding the rebuild. Some sections of the pile-supported docks have been in place since 1961 and have far exceeded their initial 35-year design life. Studies indicate the pile maintenance program can keep the docks open for about another nine years before pervasive corrosion from seawater will start forcing closures. Major construction at the port has been on hold since 2010 after major damage to the sheet pile then being installed to support new docks was discovered. The original port expansion project cost upwards of $300 million but resulted in little usable infrastructure. The Municipality of Anchorage is currently engaged in a lawsuit against the federal Maritime Administration, or MARAD, which oversaw the failed work. The Federal Claims Court judge presiding over the lawsuit is scheduled to visit the port Aug. 1-2. Additional quake damage discovered Port officials stress rebuilding the docks is becoming more and more a time sensitive issue. While the port survived the 7.1 magnitude Nov. 30 earthquake, it didn’t come out of the shaking unscathed, according to port spokesman Jim Jager. He said in an interview that post-earthquake inspections of the already corroded pilings supporting the docks conducted since breakup have shown the port’s two current fuel docks are the facilities most at-risk of failure in another earthquake. This month, port engineers de-rated the load capacity of the Terminal 1 dock adjacent to petroleum, oil and lubricant dock No. 1 because of earthquake damage, according to Jager. Additionally, roughly 20 percent of the pilings under petroleum dock No. 2 have failed, he said, and most of the damage is likely due to the earthquake. “Engineers say that dock is vulnerable to progressive collapse…consequently, the dock is likely to function normally, until it doesn’t. Individual pile failures may not cause the overall dock to fail…until they create a failure that moves from one pile to adjacent piling (think of dominos falling),” Jager added via email. In February, city officials released a concept analysis that indicated the port’s import charges on fuels and cement would have to be increased five-fold or more if the municipality needed to sell $200 million worth of revenue bonds to pay for the new PCT. At the time, Anchorage Municipal Manager Bill Falsey said the city was trying to spread the $60 million it has for the port modernization effort to support preconstruction work on other portions of the project; however, officials have since decided to put that $60 million towards a new PCT. Airport cargo concerns Port users immediately responded to the concept tariffs by stressing the cost increases would certainly have major negative consequences on their business and could also drive air cargo traffic away from Ted Stevens Anchorage International Airport. The Anchorage airport is the fifth-busiest cargo hub in the world mainly because of its position between manufacturers in East Asia and consumers in North America, and that cargo business is a large reason the airport supports 10 percent of the jobs in the city, according to the Anchorage Economic Development Corp. Refueling in Anchorage allows carriers to fill aircraft with more cargo instead of carrying the added fuel that would be needed to reach refueling hubs or destinations to the south and east. However, the economics of the cargo business model rely on a difference of pennies per gallon between hauling more fuel or hauling more cargo, industry experts note. As a result, any tariff change at the port could impact international business at the airport, according to fuel company representatives. The PCT tariff analysis was largely an exercise to elevate the discussion about how the work most everyone agrees needs to happen should be paid for and less a step towards actually implementing large tariff hikes, city officials have said. “We talked to people and we agree, a tariff of that rate would have negative impacts on cargo operations at the airport,” Falsey said during a July 12 Assembly work session on the matter, adding the city will won’t do anything to drive business away from the airport or port, which could end up reducing the tariff revenue to fund port improvements. Still, he noted that some tariff increases on most cargo crossing the Anchorage docks are likely unavoidable as the overall port rehabilitation project continues. Port managers received a $42 million bid last month from Seattle-based Pacific Pile and Marine to build the PCT access trestle and platform next year with cathodic corrosion protection. The bid would leave the city about $100 million short of finishing the PCT, which would still need piping, utilities and mooring dolphins to secure offloading vessels, Falsey said. City officials initially expected the “phase one” PCT work to cost closer to $60 million, and delaying the work would likely push the cost back up, Falsey added. While not ideal, building part of the PCT would give the port a new, seismically resilient “dock” that could be used to offload fuel and cargo if an emergency — such as another major earthquake — rendered the three existing cargo terminals unusable before they are rebuilt, according to Falsey. The Assembly is scheduled to vote on funding the contract July 23. Marathon Petroleum spokesman Casey Sullivan urged the Assembly to reject the PCT construction contract and other major port work until the city has an overall financing plan. Moving ahead without full funding and a more detailed economic impact analysis of tariff increases is a signal of uncertainty to the port’s customers who would still have to plan for the most severe tariff increases possible, he and other representatives of port user companies said. “That (PCT) trestle is good but that trestle doesn’t ultimately fix the port,” said Lev Yampolsky of Petro Star, an Alaska fuel refining company. However, Falsey said in a brief interview that city and port officials have not been able to get specific information from fuel companies engaged in a highly competitive industry as to what level of tariff increases they would be able to absorb. Other Anchorage economic experts have similarly said getting detailed information on what would deter air cargo companies from stopping here is virtually impossible. The municipality is also concerned delaying the work could also hurt future logistics business prospects in Anchorage as companies could see slowing the work at the port as a signal the city has no plan to rebuild the docks before they deteriorate to the point of needing to be closed, he said. According to Falsey, the Assembly needs to approve the contract by about Aug. 1 if the city is going to have the work done next summer to allow Pacific Pile and Marine to order long lead time items such as the steel piles that would support the PCT trestle and platform. Building the PCT to the south of the current docks will also free up port frontage needed when the larger cargo docks are replaced, port officials emphasize. Sullivan and Yampolsky said the user companies have ideas on how to substantially lessen the $1.9 billion cost estimate for the overall port modernization project, and taking the time to develop a new, comprehensive plan would help gain the support of all the stakeholders in the project. That support will be needed to obtain large sums of federal grants or other funding for the work, they said. Falsey and port officials have stressed they will not build a $1.9 billion port; it’s simply unaffordable, and the Assembly has hired a consultant to review the high cost estimate and suggest lower-cost alternatives. That report is due in September and the port users encouraged the Assembly to hold off on any major decisions on the port at least until then. Elwood Brehmer can be reached at [email protected]

FISH FACTOR: ADFG receives barest of cuts among Dunleavy’s vetoes

Fisheries fared better than most in terms of Gov. Michael J. Dunleavy’s budget cuts. Just less than $1 million was cut from the commercial fisheries division of the Alaska Department of Fish and Game, leaving it with an $85 million budget, half from state general funds. “To give the governor credit, he recognized the return on investment,” said ADFG Commissioner Doug Vincent-Lang. “It’s a theme I had all the way through the Legislature that we take a $200 million budget of which about $50 million is unrestricted general funds and we turn that into an $11 billion return to our state. And I think he got that.” Vincent-Lang added that Dunleavy also did not veto the travel budget for the Board of Fisheries and its advisory committees. It’s indefinite still how the budget cuts will play out, and Vincent-Lang said he is trying to avoid staff cuts to the 700 comfish positions. “I suspect we may have some but we will try to do that through vacancies and a variety of other things as we have retirements,” he said. Also set to get axed is funding for research projects, such as salmon in-season sampling and Tanner crab surveys at Prince William Sound, and five salmon weirs at Kodiak and Chignik. Salmon counting is likely to be reduced at the Yukon River’s Eagle and Pilot Station sonars, along with various stock assessment surveys for groundfish. “I’ve asked my staff to look at their overall program, and not necessarily cut the projects, but take the ones that have the least impact on the management of our fisheries across our state in terms of economic value back and cut those,” he explained, acknowledging that the cutbacks could lead to more cautious management. “Clearly, any time you reduce your forecast ability you become more precautionary in your in-season management approach until you can become more certain,” he said. Vincent-Lang said the state hopes to form local partnerships to help fund shortfalls, “like the Bristol Bay Science Initiative and Yukon River tribal groups to try to find ways that we can replace that money to ensure that we minimize the impact to our ongoing management programs.” Those partnerships “are the path forward” for Alaska’s fishing industry to jointly fund research, he stressed. “If we are going to be continually dependent on state general funds, that presents a challenge,” he said. “We need to look for ways to partner with different groups to get a diversified funding stream.” Partnership also will be important to fund ADFG’s special areas management, which is facing a $280,000 budget cut for its oversight of 12 game refuges, 17 critical habitat areas and three wildlife sanctuaries. Vincent-Lang said using hunting dollars with matching grants in some areas will help make up for that budget shortfall. “The rest of the department, like the Sportfish and Wildlife divisions, are largely funded by federal funds that are dedicated to those activities and we match them with hunting and sport fishing license dollars. There’s very little state general funds in those divisions,” he explained. The Habitat and Subsistence Divisions will remain under the auspices of ADFG, despite reports that two director-level positions and associated funding would move to the Office of Management and Budget. Vincent-Lang said those two positions were open when he took the job and he opted not to fill them. “I didn’t want to lose actual staff members in those divisions that were equal to a director position,” he explained. “If a director position cost $200,000 I would have lost three or four staff members in both divisions to make up for that. I willingly gave up those two positions to OMB because they needed them, but the activity they were doing remains under the supervision of ADFG.” The total budget for ADFG is $200 million. Fish schools state workers Several hundred of Alaska’s fishery managers are graduates of the College of Fisheries and Ocean Sciences, or CFOS, an arm of the University of Alaska Fairbanks. The college offers degree programs in fisheries, marine biology and oceanography, and of its nearly 1,000 graduates more than half have come out of the fisheries program and work in the state. “That is a remarkable number. I don’t know any other fishery department in the country that can say half of their graduates still work in their home state,” said Brad Moran, dean of CFOS, adding that the college has seen steady year over year increases in enrollment of undergraduates. Moran is awaiting the fallout from Dunleavy’s evisceration of the university budget. CFOS, which has a staff and faculty of about 140, also operates campuses in Juneau and Kodiak and its collaboration with Alaska Sea Grant extends its reach to a dozen more locations. Moran said nothing is safe. “There’s not any faculty, staff, student or location that will not be impacted should the veto for the university budget not be overridden, “he said. “That has to be crystal clear. There is nothing that will be left untouched,” With the number of incoming state dollars driven by the university, Moran said he just doesn’t get it. “It’s been shown that for every dollar the state spends, we’re bringing in about $6 university-wide to the state. I don’t see how you cannot say that’s a great turn on investment,” Moran said, (unknowingly echoing the words of ADFG’s Vincent-Lang). Moran pointed to the CFOS-operated research ice breaker Sikuliaq home-ported at Seward as an example. “We are entrusted to operate a $200 million federal asset in that vessel which is owned and paid for by the National Science Foundation. All of the funding for that ship is externally coming into the state. That’s only one example of state dollars driven by the university,” Moran said. He added that Alaska’s university teachers and researchers are at the forefront in the world in terms of rapidly changing ocean and Arctic conditions. “All require basic research and those investments from the federal government are leveraged by the state one dollar on six,” he emphasized. “You can always look for economies of scale and improvements in cost efficiency,” Moran added. “What you cannot do is drop the hammer overnight to this extent and expect an organization to deliver the same kind of value to the state. But we will do our very best.” Alaskans Own delivers Alaskans Own, a Sitka-based seafood delivery service, is celebrating 10 years of providing local fish not to Outsiders, but to other Alaskans, the majority of whom can’t get their hands on the best fish out there. “It’s a crazy statistic that just 1 percent of the seafood that is caught in Alaska stays in Alaska, so 99 percent is exported,” said Natalie Armstrong, outreach assistant for Alaskans Own, a Community Supported Fishery project of the Alaska Longline Fishermen’s Association. The CSF follows a more well-known agriculture model that bridges the gap “from farm to table.” “We’re bridging the gap from ocean to table and connecting more communities to their seafood,” Armstrong said. Alaskans Own has more than 300 subscribers who from May to October can choose different sized packages of portioned halibut, salmon, lingcod, shrimp, sablefish and more. The fish is shipped to hubs in Sitka, Anchorage, Seattle, Juneau, and Fairbanks and also to Outside customers. “Anyone can choose what they want. They can get a mixed bag or 40 pounds of coho and we ship it right to their door,” Armstrong said. A fleet of 100 boats fish for the CSF, and all profits go to the Fishery Conservation Network, an ALFA offshoot that partners fishermen with scientists in local research projects. Armstrong is hopeful other Alaska fishing towns will create CSFs to promote their small boat fleets and protective fishing practices. Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

Gasline agency laying off 60 percent of staff

The Alaska Gasline Development Corp. is drastically cutting its staffing while it is in the midst of permitting the $43 billion Alaska LNG Project. The state-owned corporation issued a statement to the Journal Wednesday afternoon from Interim President Joe Dubler that reads: “AGDC is restructuring to reflect our primary focus on completing the FERC permitting process to advance the Alaska LNG Project. AGDC will continue to pursue (Federal Energy Regulatory Commission) authorization, expected in June 2020, with an eight-person technical staff plus contract support as needed, and reduce employee headcount by twelve. Completing the permitting process will substantially de-risk Alaska LNG and open the door to a wider range of potential project parties with the broad expertise required to unlock the value and manage the risks associated with a project of this magnitude.” Spokesman Tim Fitzpatrick said Dubler is responsible for staffing at the corporation and the decision was made under his authority. Most of the changes are expected to be complete by the end of July, according to Fitzpatrick. FERC released a draft version of the Alaska LNG Project environmental impact statement June 28. A final EIS is expected next March. Sources within AGDC said Dubler — who took the job in January on an interim basis and has no long-term plans to stay — and Vice President of Program Management Frank Richards will be the only executive-level employees that will be retained full-time. Vice President Fritz Krusen, who briefly served as acting AGDC president in early 2016, will be retained on a contract basis. Cutting back to a staff of eight means the group leading what has the potential to be one of the largest infrastructure projects in the world will be nearly as small as its board of directors, which is comprised of seven individuals. Staffing levels at the corporation have always been low considering the massive scope of the project it is working on and AGDC has relied on contractors and consultants to help complete major tasks. Still, the layoffs mark a complete shift in the state’s pursuit of a gasline project from former Gov. Bill Walker to current Gov. Michael J. Dunleavy. Under Walker, who for decades has touted the economic benefits exporting North Slope natural gas could bring to the state, AGDC accepted control of the Alaska LNG Project from the North Slope producers and worked to find investors and customers while also attempting to expedite the complex pre-construction work for the project. Walker and former AGDC President Keith Meyer regularly stressed a need to have the project start producing LNG in the mid-2020s to meet a global LNG market window of unmet demand in that timeframe. Dunleavy insists the project is too large and complex for the state to manage and has said repeatedly he wants private sector companies — whether the North Slope producers of BP, ConocoPhillips and ExxonMobil or other companies — to partner with the state. AGDC under Walker also signed approximately 15 early-stage agreements with potential Alaska LNG investors and customers, most notably the November 2017 joint development agreement with three large nationalized Chinese corporations. That signing was conducted at a trade ceremony in Beijing in front of President Donald Trump and China President Xi Jinping and at the time seemed to indicate Alaska’s long-awaited gasline was gaining significant momentum. Fitzpatrick said AGDC has a number of confidential agreements with potential customers that remain in effect and some other agreements have been allowed to expire. He would not disclose what entities AGDC still has agreements with or how many preliminary agreements are still active. The cutbacks are not being driven by near-term state financial considerations, according to sources. The timing of the decision was not linked to the governor’s $444 million of budget vetoes to dozens of state programs. AGDC’s roughly $10 million annual operating budget was not subject to a veto from the governor. Fitzpatrick could not provide what the budget savings would be at this point. Sources said the decision to shrink AGDC was made by officials in the governor’s office after significant time was spent reviewing the project. A spokesman for the governor did not immediately respond to questions regarding the layoffs. On May 29, Lt. Gov. Kevin Meyer announced BP and ExxonMobil are contributing $10 million apiece to help the state finish the FERC process. The major producers signed a memorandum of understanding with AGDC in March to provide technical assistance on the project. They also signed separate confidential gas sales precedent agreements with AGDC last year that outline the terms — including price — under which they would sell gas from the Prudhoe Bay and Point Thomson North Slope fields into the project. The companies are also currently assisting AGDC in reevaluating the overall economics of the project and its $43 billion cost estimate amid new global LNG market conditions. Spokespersons for BP Alaska and ExxonMobil could not immediately be reached. AGDC is scheduled to hold its next board of directors meeting Aug. 8 in Anchorage. Elwood Brehmer can be reached at [email protected]

Trudeau signs off on Alberta pipeline expansion

Alberta’s oil sands producers have done a good job of overcoming technical challenges to boost output of the gooey stuff. It’s moving all that oil to market that’s become the problem. It took almost 40 years to get from the first barrel in 1967 to 1.3 million barrels per day in 2008. It then took less than 10 years to more than double that to 2.8 million barrels per day in 2017. Even better, global energy analysts at IHS Markit forecast production could climb to as high as 4 million barrels per day in another decade. All that oil means Western Canada needs more pipeline capacity. The industry received some good news when the government of Prime Minister Justin Trudeau on June 18 ruled that expansion of the Trans Mountain pipeline could proceed. The expansion will almost triple the line’s carrying capacity to 890,000 barrels per day from the oil sands pipeline hub of Edmonton to an export terminal in Burnaby, British Columbia. Construction could begin as early as this year. The Cabinet move came almost 10 months after a federal court tossed out an earlier approval of the $7.4 billion (Canadian) project, finding that the government’s decision was based on flawed consultation with Indigenous communities and inadequate consideration of the effects of increased oil tanker traffic in coastal waters. The divisive project pits Alberta and its supporters, which talk of the economic gains, against British Columbia and other opponents, which worry about spills, other environmental risks and climate change. Federal approval is about balancing those interests, Trudeau said. “To those who want sustainable energy and a cleaner environment, know that I want that, too,” he said. “But in order to bridge the gap between where we are and where we’re going, we need money to pay for it.” The Cabinet decision is expected to be a key issue in Canada’s federal election in October. This isn’t about a private company building an oil line. The federal government is now the pipeline’s owner, having bought the existing line and expansion project for C$4.5 billion from Kinder Morgan last summer when the company threatened to walk away from the venture over constant regulatory and legal delays. Kinder Morgan first proposed the expansion more than seven years ago. Without enough pipeline capacity to get their product to market, oil sands producers have endured painfully lower prices. Benchmark Western Canadian Select was selling for $13 less per barrel than U.S. benchmark West Texas Intermediate and almost $20 less than the global Brent price on June 28 — though that is far better than the $40 discount to West Texas crude late last fall. Moving more oil to the B.C. coast would give producers access to higher-priced export markets. But even with the cabinet decision to proceed with the Trans Mountain expansion, opponents are not ready to quit. Several coastal First Nations said June 18 they plan to appeal the government’s action, and Vancouver Mayor Kennedy Stewart said the city would do “everything in our power” to support local First Nations in their court battles. Analysts are betting on first oil through the expanded line in 2021 or 2022, depending on legal challenges. “I am not ready to do a victory celebration, especially on the back of a reapproval of a project that should have been built by now,” said Rob Broen, CEO of Athabasca Oil, which has contracted to move oil on the pipeline, as quoted by a Calgary Herald columnist. Many First Nations, however, support the project, and some are interested in taking an equity stake in the venture. The government plans to sell the line back into the private sector, though it’s not clear if the sale would come before or after the expansion is complete. The government plans to start a series of meetings with interested First Nations starting July 22 in Vancouver, with stops in Victoria and Kamloops, British Columbia, and Edmonton, Alberta. The Trudeau government is prepared to discuss equity ownership, revenue sharing and royalty agreements with 129 First Nations, according to Canada’s Department of Finance. There is strong interest from First Nations. The Calgary Herald reports that the Indian Resource Council, representing more than 130 First Nations that own oil and gas resources on their territories, already has consulted with the federal government and held preliminary meetings with First Nations about making a bid for the Trans Mountain pipeline. There even is competition for the right to buy an equity stake in the Trans Mountain system, according to a Canadian Press report in June. An Alberta coalition, calling themselves the Iron Group, said it has invited 47 First Nations and about 60 Métis organizations in the province to sign up for an investment try. And there is a group called Project Reconciliation, a consortium inviting Indigenous participation from British Columbia, Alberta and Saskatchewan in a bid for a controlling stake in the pipeline. Meanwhile, supporters of the project saw some visible progress in June when a train carrying stacks of steel pipe rolled through Calgary. Pipe segments have been arriving at work sites for weeks, where nearly a third of all the pipe needed for the project is now staged, according to the Calgary Herald. But stacking up pipeline sections doesn’t mean construction is imminent; just ask the backers of the Keystone XL project, which would move Western Canadian oil more than 1,600 miles to a connection point in Nebraska for delivery to U.S. Gulf Coast refineries and export terminals. The project developer, TransCanada, proposed the line in 2008. Under pressure from opponents, the U.S. government denied an essential permit in 2012. The government’s attitude changed with the election of President Donald Trump in 2016, but legal challenges in federal and state courts have continued. The U.S. Court of Appeals for the 9th Circuit on June 6 overturned a lower court injunction that prevented Calgary-based TC Energy — formerly TransCanada — from beginning construction, but the decision came too late for this year. “There will be no mainline construction in 2019 in the U.S.,” TC Energy spokesperson Matthew John said. Besides, the company is still waiting on a Nebraska Supreme Court ruling on whether its permits to build the pipeline through the state are valid. ^ Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide. He is the incoming Atwood Chair of Journalism at the University of Alaska Anchorage School of Journalism and Public Communication.

Legislature breaks up over special session location

As legislators continue to posture in Wasilla and Juneau, a small group of them continues analyzing the history, and future, of the Permanent Fund dividend program. Members of the Bicameral Permanent Fund Working Group discussed the pros and cons of varying levels of PFD payments July 8, the result of a “homework assignment” given them shortly after the committee was formed near the end of the first special session. An impasse over the size of this year’s dividend payment has stalled progress on all other outstanding issues this year. Gov. Michael J. Dunleavy and the group of 22 legislators meeting in Wasilla, mostly House Republicans, are demanding the PFD be paid according to the statutory formula — equating to roughly $3,000 per Alaskan — while the majority of the Senate and House in Juneau favors smaller budget cuts that would result in a smaller PFD. While the governor’s $410 million of vetoes to General Fund spending increase the amount of surplus revenue available for dividends when combined with the Legislature’s approximately $280 million of budget reductions, the $1 billion available for PFDs from the Earnings Reserve Account of the $65 billion Permanent Fund is still only sufficient to pay dividends in the $1,600 per person range. Getting to “full,” $3,000 PFDs would still require drawing about $900 million in excess of the 5.25 percent of market value, or POMV, draw cap the Legislature put on appropriations from the fund just last year. As of this writing, the Legislature was scheduled to hold a joint session in Juneau July 10 to vote on overriding some or all of Dunleavy’s 182 line-item budget vetoes. However, with a high supermajority override threshold of 45 of 60 legislators needed to override budget vetoes and roughly a third of legislators committed to staying in Wasilla — where Dunleavy called the special session — it appears the vetoes will stand, at least for now. Republican House Minority Leader Lance Pruitt, R-Anchorage, has said members of his caucus could be open to backfilling some of the vetoed appropriations in the still unfinished capital budget, but that would only happen after the PFD is settled. Rep. Jonathan Kreiss-Tomkins, D-Sitka, who was paired with Sen. Shelley Hughes, R-Palmer, in the Permanent Fund Working Group to examine the consequences of a $3,000 PFD, said other issues aside, being able to put $3,000 in Alaskans’ pockets is “generally a good thing,” but noted in reality there is a “basic tension” between the size of the budget and the PFD that the state continues to struggle with. Kreiss-Tomkins supports more modest budget cuts and a corresponding smaller PFD, while Hughes has consistently supported cutting the budget to free up enough funds to pay full dividends. Still, he said they concur on one important principle. “Of all the available options in looking for fund sources for a $3,000 statutory PFD, we agree that overdrawing or overspending the Permanent Fund itself in excess of the POMV is least desirable or the worst option,” Kreiss-Tomkins said. With that as a backdrop, Hughes said even after the governor’s reductions the state still has an “unsustainable budget at this point” and that’s why she feels the Earnings Reserve has sufficient funds to pay full PFDs. The House Finance Committee also introduced a bill July 8 to pay $1,600 PFDs, but it would likely overdraw from the Earnings Reserve by a relatively small amount — less than $100 million depending on exactly how many recipients are eligible this year. The special Permanent Fund committee is expected to draft a new PFD formula sometime this summer near the end of its work; however, whether that could gain enough support in the Legislature as well as the governor’s blessing remains to be seen. Hughes said if the formula is changed the eligibility requirements should be examined along with the calculation because paying fewer dividends would mean larger per person amounts for those who are eligible. Finance co-chair Sen. Bert Stedman, R-Sitka, who for years has stressed the need to limit spending from the fund to preserve its value for future generations, was tasked with examining the value of a “surplus” PFD with Rep. Kelly Merrick, R-Eagle River. Stedman said paying dividends based on whether or not the state has surplus funds available in a given year is a good place to start working, but he acknowledged that could lead to years without a dividend, something he doesn’t think the Legislature as a whole is interested in. “A little bit of tension, I guess, has some value between the dividend and the operating budget, but I’m personally more inclined to have and more comfortable with a predictable and robotic structure where the dividend is paid out regardless of our current fiscal situation that given year and I guess that would be created when we restructure the formula,” he said. Stedman has supported recalculating the PFD while also saying the current formula — appropriating half of a five-year average of fund income — worked well for more than 30 years but it also was established under very different circumstances; the Permanent Fund was new and had only about $1 billion and there were far fewer Alaskans to receive dividends. Merrick insisted that while the state has a spending cap, it is ineffective and any move towards a surplus PFD would also require drastically lowering that limit. “Unless (the spending cap) is changed somehow government will slowly eat away at those funds and there will be nothing left over,” she said. The Legislature’s budget sent to Dunleavy this year would have allowed for a “surplus PFD” of roughly $900 per person. Finally, Rep. Adam Wool, D-Fairbanks, said in examining a $1,600 PFD, which is what was paid last year, said injecting additional money into the state economy through the dividend is undoubtedly a positive, but the actual economic benefits are mostly anecdotal, as it’s understood that many Alaskans save much of their dividends or spend it in ways that send the money out of Alaska. Instead, he suggested the Legislature might consider linking the PFD in part to the state’s oil revenue in a given year to better tie it to the fiscal reality of the day. Wool said drawing from 20 percent of the state’s oil revenue and 20 percent of the $2.9 billion POMV appropriation would provide for roughly $1,600 PFDs this year. “The Permanent Fund is independent from oil revenue but the State of Alaska isn’t,” he said. Elwood Brehmer can be reached at [email protected]

Locals keep share of fish taxes; new tech for cutting crab, salmon farms

One fisheries item that appears to have escaped Gov. Michael J. Dunleavy’s veto pen so far is his desire to divert local fish taxes from coastal communities into state coffers. Dunleavy’s initial budget in February aimed to repeal the sharing of fisheries business and landing taxes that towns and boroughs split 50/50 with the state. Instead, all of the tax revenues would have gone to the state’s general fund, or a loss of $28 million in fiscal year 2020 to fishing communities. “There is a recognition that these are viewed as shared resources, and they should be shared by Alaskans,” press secretary Matt Shuckerow said at the time. “So that’s kind of what this proposal does. It takes shared resources and shares them with all Alaskans, not just some select communities.” The tax split remains in place and the dollars are still destined for fishing towns, said rep. Louise Stutes, R-Kodiak, who also represents Cordova, Yakutat and several smaller towns. “It’s general fund revenue and that has been appropriated to the appropriate communities,” Stutes said in a phone interview. “What we can tell right now is it slipped by unscathed because it appears he did not veto that revenue to the communities that generate the dollars. So, it looks like we’re good to go there.” What’s not so good is the nearly $1 million cut to the Alaska Department of Fish and Game’s commercial fisheries budget. Stutes and Sen. Gary Stevens, R-Kodiak, worry that the shortfall could result in lost harvests. “It’s always short-sighted when you cut Fish and Game. It’s just really crucial that we have the personnel we need to manage our resources and to make sure they continue to be there when we need them,” Stevens told KMXT in Kodiak. Stutes, who chairs the House Fisheries Committee, said it does not make sense to cut state money makers. “In the long run, that creates revenue for the state because it allows all these different fisheries to stay open longer,” she said, adding that lost oversight due to budget cuts will result in more conservative management. “If they do not have the personnel to do the appropriate salmon counts, they’re going to manage very conservatively. And that means less openings or they’ll close the season earlier,” Stutes said. “Those are dollars that the state’s not going to get by the governor vetoing those funds to Fish and Game. It just doesn’t make sense to me under any conditions.” All the amendments that the Alaska Legislature added back into the original ADFG budget were vetoed, including a $280,000 cut to special areas management, which include 12 game refuges, 17 critical habitat areas and three wildlife sanctuaries. Two director-level positions and associated funding from the Habitat and Subsistence Research Divisions will be moved to the Office of Management and Budget and no longer be associated with ADFG related duties. Impacts of the budget cuts were not readily available and all questions are referred to a new [email protected] address. The questions may be directed back to appropriate staff, but “they want everything to be through that address,” said one ADFG employee. “Welcome to our world,” said Stutes. “As a Legislature, we can’t get answers. We can’t speak to department heads. We get no response. We are required to go through the legislative liaison. I have never seen such a lack of communication between any department or between the legislature and the executive branch.” Robots cut crab Radio Canada reports that robotic machines that cut and shuck crab have nabbed a U.S. patent that is being hailed as a breakthrough in fish processing technology worldwide. The system, developed by the Canadian Centre for Fisheries Innovation in Newfoundland, operates at lightning speed on crab at fish plants in eastern Canada. In a shipping container-sized chamber, crabs go down a conveyor belt where each is analyzed by cameras; then, “pick and place” robots saw off the legs, sort and package them and off they go. Along another belt, robots shuck the meat from the crabs, a job that would have been done in China. “Instead of sending all our crab out as sections with the meat in the shell we thought we could attract a higher price if we sold the meat instead,” said Bob Verge, the brains behind the crab robots and managing director at CCFI. While the crab cutting robots are designed for snow crab (Eastern Canada is the world’s largest producer), Verge said the system is adaptable to other crab species and potentially other shellfish. He added that interest is high, including from international markets who are interested in developing robotic solutions to other fish production problems. CCFI has applied for patents in 10 other countries and those are expected to be issued soon. The robot makers are hoping the system will help solve workforce problems in fish plants that often are located in remote regions where it’s tough to recruit enough workers. In this case, Verge said humans will work on more highly skilled machines and computers, and not on the slime line cutting up crab. “If we are going to attract the young people we need, we need better jobs, not more jobs. We have to offer them a better deal,” he said. “In demonstrating this technology to young people, they are very impressed with it.” Land ahoy! Since the 1990s, Alaska’s salmon industry has faced tough competition from farmed fish. Now salmon growers are coming ashore in the U.S. in a big way. The latest trend is raising Atlantic salmon in massive tanks on land, called recirculating aquaculture systems, or RAS. “It really could be considered salmon aquaculture 2.0,” said Garrett Evridge, an economist with the McDowell Group. “The current model is the nearshore farms, and land based technology has really improved upon that. Obviously, there is no worry about interaction with wild stocks.” The closed loop systems, some holding two million gallons of water, also use no antibiotics, additives or pesticides, removing big negatives from fish that are farmed in crowded ocean net pens. The tank water, gotten mostly from deep wells, is filtered similar to an aquarium, and can be constantly reused. A non-stop current also provides exercise to enhance fish health and meat quality. Maine already has attracted two growers. Last month Nordic Aquafarms of Norway announced plans to build an RAS farm in Belfast that will eventually produce 70 million pounds of salmon each year. UK company Aquabanq also announced they will begin building a massive RAS facility in Millinocket next spring. Another Norwegian company — Atlantic Sapphire — is doubling its land purchase in Homestead, Fla., to 160 acres for a RAS facility that aims to grow 500 million pounds of salmon annually by 2030. Since 2017 a Wisconsin company called Superior Fresh has advanced the land-based fish tank model on its 720 acres by attaching it to a greenhouse. Its motto is “great food from the best fish.” Alaska needs to pay attention, Evridge advises. “In sum, these proposed facilities would have production that in some years is equal to current Alaska salmon production. It’s certainly something to pay attention to and it looks like there’s momentum around the industry.” Video deadline Aug. 2 is the deadline to submit short videos that highlight contributions of women in all segments of the seafood industry: fishing, fish farming, processing, selling, managing, teaching, etc. It’s the second round for the contest that was launched last year by the Paris-based group Women in the Seafood Industry. Last year’s winner showcased women who mend nets for a living in Spain. Second place went to a film about California women who formed a clam farming cooperative. Tied for third place were films about female fishing mentors in Newfoundland and women in India who started food trucks to sell their husbands’ catches. The top winner receives 1,000 euros along with two 500-euro prizes. Enter at www.womeninseafood.com. Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

Powell signals that Fed rate cut could be coming soon

WASHINGTON (AP) — Chairman Jerome Powell signaled July 10 that the Federal Reserve is likely to cut interest rates late this month for the first time in a decade in light of a weakening global economy and rising trade tensions. Delivering the central bank’s semiannual report to Congress, Powell said that since Fed officials met last month, “uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook.” In addition, annual inflation has dipped further below the Fed’s annual target level. Powell’s remarks triggered a stock market rally, with the Dow Jones industrial average up nearly 100 points in late-morning trading. Economists suggested that Powell’s message made a quarter-point rate cut a virtual certainty at the Fed’s meeting this month, with many forecasting further rate cuts to come. Paul Ashworth, chief U.S. economist at Capital Economics, said he thinks economic growth will slow below a 1 percent annual rate in the second half of this year, which he thinks will lead to additional quarter-point cuts in December and then March. Ashworth said a July rate cut would be “insurance against the downside risk that Fed officials believe have mounted in recent months.” Many investors have put the odds of a rate cut this month at 100 percent. The Fed’s benchmark rate stands in a range of 2.25 percent to 2.5 percent after the central bank raised rates four times last year — action that incited public attacks on the Powell Fed from President Donald Trump. Trump, who is counting on a strong economy for his re-election campaign, has called the Fed his biggest threat. He contends that the central bank made a huge mistake by tightening credit last year and should be cutting rates now. Trump has argued that last year’s rate hikes have held back economic growth and the stock market. In his prepared remarks, Powell made no mention of the president’s criticism. He did thank Congress for the “independence” it has given the Fed to operate free of political intrusion. But later, in the question-and-answer period, Democratic members of the House Financial Services Committee, made clear their discontent with Trump’s attacks. Rep. Maxine Waters, who leads the committee, declared that “this president has made it clear that he has no understanding or respect for the independence of the Federal Reserve.” She also referred to published reports that Trump had discussed firing Powell. Asked by Waters what he would do if Trump said he wanted to fire him, Powell replied, as he has in the past, that he intends to serve his full four-year term. Powell’s remarks July 10 began two days of his testimony on Capitol Hill. On July 11, he addressed the Senate Banking Committee. At the moment, the U.S. economic landscape is a mixed one: The job market appears resilient, but economic growth is slowing. Many forecasters predict that growth has slowed to an annual rate of around 2 percent in the just completed April-June quarter. In his testimony, Powell said the economy has fared reasonably well over the first half of the year. But he noted that “crosscurrents, such as trade tensions and concerns about global growth, have been weighing on economic activity and the outlook.” He said that growth in business investment “seems to have slowed notably,” possibly because of concerns over slowing global growth and the trade battle between the Trump administration and China. The Fed chairman told the House committee that he thinks average worker pay isn’t rising fast enough to accelerate low inflation, even with the unemployment rate near a five-decade low. An absence of inflation pressure makes it easier for the Fed to cut short-term rates. Referring to rates, Powell repeated a pledge the Fed made in its June policy statement that officials would “act as appropriate to sustain the expansion.” But notably, he added that “many” Fed official saw that the case for a looser monetary policy “had strengthened.” The Fed hasn’t cut rates since 2008 at the height of the financial crisis. Trump and Chinese President Xi Jinping declared a truce last month in what had threatened to become an escalating U.S.-China trade war and agreed to resume talks toward a deal that would meet the administration’s demands to better protect U.S. technology. That step eased fears that Trump would extend punitive tariffs to an additional $300 billion in Chinese goods, in the process inviting retaliation from Beijing on American exports and likely weakening both nations’ economies. And last week the government reported that after a tepid job gain in May, U.S. employers sharply stepped up their hiring in June, an indication of the economy’s durability. A wild card in the Fed’s decision-making has been Trump’s highly unusual public pressure on the central bank to cut rates sharply. Trump’s attacks have raised alarms that he is undermining the Fed’s long-recognized independence from political pressure.

Cook Inlet salmon fisheries into full swing after rough 2018

Editor's note: This article has been updated to correct that the 2018 Kenai River personal-use dipnet fishery closed two days early. Upper Cook Inlet salmon fisheries are now in full swing, with promising sockeye returns finally showing up. East Side setnetters in the sections north of Kasilof opened for their first period July 8, and the personal-use dipnet fishery on the Kenai River opened July 10. They join the drift gillnet fleet and other Upper Cook Inlet setnetters as well as the inriver sportfishery and the Kasilof River personal-use fishery. As of July 8, nearly 80,000 sockeye salmon had passed the sonar in the Kenai River. That’s more than double the number that had passed through on the previous date in 2018, when only 37,513 had passed, according to the Alaska Department of Fish and Game. The Kasilof River sonar has registered about 98,635 sockeye, ahead of the 81,076 counted in 2018. Both rivers saw an uptick in daily passage on July 8 compared to July 7. Commercial fishermen throughout Upper Cook Inlet have harvested about 186,305 sockeye so far, according to ADFG. They’ve also harvested about 18,736 pink salmon, the second-largest component of their harvest so far. The pink salmon runs fluctuate wildly on a two-year basis in most areas, peaking in even years in Upper Cook Inlet. The run would normally be small this year, but ADFG has already had to apportion the pink salmon run within the sockeye run in the Kenai River. The managers run a fishwheel near the sonar site to help apportion the run when the pinks comprise more than 5 percent of the samples during the day. “The pinks in an odd year are usually earlier,” said Brian Marston, the commercial area management biologist for Upper Cook Inlet. “Now is exceptionally early for pinks.” The catch hasn’t been exceptionally high so far, he said. The managers apportioned both the Kenai and Kasilof rivers for about three days, but the passage on both rivers has dropped since then. Pink salmon usually peak in the area in early August. One of the major hallmarks of this summer so far has been the heat. Southcentral Alaska has smashed heat records in Anchorage and Kenai, with temperatures soaring into the upper 80s and up to 90 degrees on the Fourth of July. Along with the atmospheric heat, and possibly contributing to it, is increased sea surface temperatures across the Gulf of Alaska and Bering Sea. Data from the Alaska Center for Climate Assessment and Policy at the University of Alaska Fairbanks show that the waters around Cook Inlet are several degrees Celsius above average. While the effects of warmer ocean temperatures are unclear this summer so far, past studies have connected warmer water temperatures with changing marine organism behavior, including fish. So far, Marston said he hasn’t heard reports of particularly abnormal sockeye behavior. The lack of wind this summer may have made it harder for fishermen to hit aggregations of salmon, so members of the fleet have reported some tough fishing. The only direct data ADFG collects on sea surface temperature in Cook Inlet are with the Anchor Point test fishery, which takes place off the coast of Anchor Point as a way of gauging run timing coming into Cook Inlet. In the winter, ADFG collects data on the temperature of the Gulf of Alaska as a way of informing the run timing of the run the following year. Marston said the data they gathered this winter showed that the run this year is likely to be three or four days early. Stream temperatures are also significantly warmer than usual. The Kenai River at Soldotna, which is usually about 54 degrees Fahrenheit in July, measured at 64 degrees on July 9, according to the National Weather Service. Little Willow Creek in the Mat-Su Valley clocked in at 74 degrees. Those warm temperatures may discourage salmon from entering the lakes. Marston said the ADFG weirs in Mat-Su Valley lakes— Chelatna, Judd and Larson lakes — just went in and no fish have passed them yet, but with nearly 80 degrees measuring in some of the lakes, sockeye may not be eager to leave the cooler streams to head into the lakes. For all systems, ADFG is expecting about 6 million sockeye salmon to return to Upper Cook Inlet. With escapement goals totaling about 2 million, that leaves about 4 million for harvest, 3 million of which would go to the commercial fleet. The bulk of those sockeye are bound for the Kenai and Kasilof rivers, the two largest producers in the inlet, followed by the Susitna River. The forecast, which is slightly greater than the 20-year average, was welcome news for fishermen, who endured one of their worst sockeye seasons in recent memory in 2018. The harvest, about 1.3 million salmon total, was about 61 percent fewer than the recent 10-year average. Fishermen were out of the water for a big chunk of the season due to the poor sockeye return, and ADFG closed the Kenai River dipnet fishery two days early. The sockeye did eventually show up, but for the first time in recent memory, more than half the run showed up in the river after Aug. 1. So far, the run timing has been right about on average. About midway through July, ADFG reevaluates the run projection and adjusts management accordingly. Elizabeth Earl can be reached at [email protected]

Agriculture Division grapples with managing vetoes

Decision makers in the Department of Natural Resources are in the same boat as Alaska farmers when it comes to making sense of what Gov. Michael J. Dunleavy’s budget vetoes mean for the state’s agriculture development programs. Nobody seems to know. Division of Agriculture Director David Schade referred questions about how the agency will revamp its operations to Deputy DNR Commissioner Brent Goodrum, who oversees Agriculture and other arms of the department. “We’re in a state of flux,” Schade said, presuming the vetoes are not overridden by the Legislature. DNR spokesman Dan Saddler said department officials are working to implement the reductions and would be able to talk about the changes at a later time. Department commissioners and other agency leaders have mostly been excluded from the budgeting process in the Dunleavy administration. Dunleavy cut the Division of Agriculture budget by more than 60 percent, from approximately $5.1 million to $2 million, on June 28 as part of his $444 million of vetoes to enable the state to pay larger Permanent Fund dividends. The governor’s vetoes followed roughly $280 million in operating budget reductions passed by the Legislature. He chose to eliminate “lower priority programs” in the Division of Agriculture including the Marketing, Agricultural Veterinarian, Farm to Institution, Agriculture Inspections, seed production and pest research programs. Budget documents indicate lower priority programs in the North Latitude Plant Material Center in Palmer will also be cut by more than $1.1 million and $319,000 to administer the state’s active Agriculture Revolving Loan Fund was removed as well. DNR officials told the House Resources Committee in February that the state had 55 loans totaling $7 million in the Agriculture Loan Fund. How the state will oversee what many feel could become a highly successful new crop in Alaska, hemp, is also unclear. The governor vetoed $375,000 of receipt authority, or the ability to accept fee revenue, from the division’s budget; he also struck through the state’s ability to accept $559,000 in federal agriculture development grants and matching funds. Office of Management and Budget documents detailing the reductions explain that “The State’s fiscal reality dictates a reduction in expenditures across all agencies.” Former Gov. Bill Walker signed Senate Bill 6 last year, authorizing the state to develop a pilot project for industrial hemp growers. Since, the state has been working to develop regulations and plans to allow farmers to start growing industrial hemp. The receipt authority in the budget was intended to be for fees the department collected from prospective hemp farmers to get approved for the crop. SB 6 was championed by Palmer Republican Sen. Shelley Hughes, who has largely supported the governor’s plan to drastically cut the budget and state services. Alaska Farm Bureau Executive Director Amy Seitz said she is also trying figure out how the state and its growing agriculture industry will adjust while noting that much of the blocked federal money was for pass-thru federal specialty crop block grants the Division of Agriculture accepts on behalf of Alaska farmers and then distributes. The specialty crop grants are available in some form for “almost everything that’s not livestock,” Seitz said, and they are often used to support value-added crop endeavors. There have already been awardees assigned for this year,” she said of the grants. “My understanding is right now they’re saying those grants are going to have to be sent back to the feds so those projects won’t have funding.” Seitz added that the prospect of an industrial hemp industry was of interest to many farmers. She also wondered how the popular Alaska Grown program will be handled as the $1.5 million marketing section of the division’s budget was reduced by approximately 80 percent. Alaska is one of few states to have a growing agriculture industry. As of 2017, Alaska had 990 farms and had added more than 300 in the previous decade, according to the U.S. Department of Agriculture’s Census of Agriculture. Alaska’s farm product sales brought in $70 million in 2017 as well, according to USDA figures. In June, the Division of Agriculture hosted its first round of business-to-business international trade meetings between Alaska farmers and local food manufacturers and Canadian brokers in conjunction with the Western U.S. Agriculture Trade Association. The state’s membership in the organization helped connect the Canadian buyers with the Alaska producers, participants said. According to Seitz, it’s also unknown whether the state will continue to provide Good Agriculture Practices and Good Handling Practices audits that are a prerequisite for farmers to get their products into many grocery chains. “Are the grocery stores going to be able to buy local products — or who’s going to take that on?” she wondered. She added that the Northern Latitude Plant Material Center has long been the primary location for a wide range of research, such as what species perform best in Alaska in addition to seed cleaning and other services. “I think it’s going to be harder than people realize,” Seitz said. “I’m really concerned that it’s going to hurt.” ^ Elwood Brehmer can be reached at [email protected]

Valdez protests AK LNG analysis; Mat-Su Borough satisfied

Federal regulators all but confirmed Nikiski should be the terminus of the proposed $43 billion Alaska LNG Project when they released the draft version of its environmental review June 28, but officials hopeful to see the project in two other areas have very divergent views on that conclusion. The City of Valdez filed initial comments July 8 with the Federal Energy Regulatory Commission on the Alaska LNG environmental impact statement, or EIS, that note just one page of the roughly 3,800-page document is devoted to analyzing a route to Valdez and it “ignores the substantial advantages” that route would provide the project. Previous gasline investigations have determined routing a project to Valdez is the least environmentally damaging option, largely because the pipeline would follow the existing Trans-Alaska Pipeline System route, according to city officials. “Moreover, FERC appears to have taken (Alaska Gasline Development Corp.’s) unsupported assertions regarding the impacts of the Valdez Alternative at face value without conducting the additional research or analysis mandated by (the National Environmental Policy Act),” the comments state. Alaska Gasline Development Corp. leadership has, through multiple management changes, stuck with Nikiski as the chosen locale for the project’s massive LNG plant. Nikiski was selected in 2013 when ExxonMobil was leading early work on the project in a consortium with BP, ConocoPhillips and the state. Former ExxonMobil Alaska LNG Project manager Steve Butt said at the time that the project team studied more than 20 sites across Cook Inlet, Resurrection Bay and Prince William Sound. Nikiski was chosen largely for its flat terrain and the ability to provide natural gas to the state’s four largest population centers along the pipeline route. The draft EIS largely affirms the conclusions of AGDC and the producers. The producer companies solidified their project endpoint by subsequently purchasing nearly 700 acres along tidewater in Nikiski to begin preparing for the eventual LNG plant. Interim AGDC President Joe Dubler said in a statement following the release of the draft EIS that publication of the voluminous document indicates significant progress toward obtaining the key authorization to build the project. The final EIS is expected in March 2020 with a commission decision on the project coming in the following months. The public comment period on the draft EIS closes Oct. 3. Whether or not the State of Alaska, through AGDC, will follow through and build Alaska LNG if it gets authorization from FERC remains to be seen. Gov. Michael J. Dunleavy has directed the state-owned corporation to drastically slow its marketing and contract efforts related to the project and focus on the regulatory issues, which is a marked reduction in the work AGDC was doing under former Gov. Bill Walker’s administration. “The ongoing permitting process incorporates more than 150,000 pages of data and should give Alaskans confidence that the project’s merits and impacts are being rigorously scrutinized,” Dubler said. Valdez officials note that going to Nikiski requires approximately 196 miles of new pipeline right-of-way through currently undeveloped areas as well as a 27-mile subsea crossing of upper Cook Inlet, which is considered critical habitat for the endangered population of Cook Inlet Beluga whales. The comments note their route would also avoid construction in several state game refuges and possibly the edge of Denali National Park; however, whether or not the 42-inch Alaska LNG pipeline would cut through a small portion of the park or skirt around it is unclear at this point. AGDC’s current route plan — primarily developed by the producers — is to generally have the gasline follow the TAPS corridor from the North Slope south to about Livengood north of Fairbanks before splitting off and cutting through the Alaska Range along the Parks Highway. The southern portion of the pipeline route would parallel the Susitna River along its west side until reaching the Cook Inlet crossing to Nikiski. A gasline to Valdez has been studied extensively in the past but AGDC officials contend crossing over Thompson Pass just north of Valdez presents engineering challenges. They also note the different engineering requirements for the oil-carrying TAPS, more than half of which is above ground, and a gasline that would be completely buried. The comments also contend that the draft EIS “unlawfully includes impacts” from a potential spur pipeline from Glennallen to Palmer, which Valdez officials insist is not a reasonable foreseeable impact of routing to Valdez. “By aggregating Palmer Spur and Valdez Alternative data, FERC makes it impossible to discern the environmental impact specifically with (the) Valdez Alternative and the Nikiski Alternative,” the document states. The City of Valdez was granted intervener status on the project, meaning it can request the commission to reconsider its decisions on the Alaska LNG Project and can also appeal FERC actions in federal court. Site analysis FERC officials wrote in the draft EIS that AGDC first looked for plant sites with between 800 and 1,200 available acres with waterfront access for development, but reduced the size requirement to at least 400 acres after additional design work was done for the Nikiski site. They evaluated seven LNG plant site alternatives identified by AGDC, according to the EIS. Anderson Bay is a 464-acre state-owned site adjacent to Valdez and within its city limits that FERC evaluated. The EIS notes that it would not drastically increase the length of the mainline pipe from the 807 miles needed to reach Nikiski and would avoid the construction issues associated with Cook Inlet’s turbid and turbulent waters, but it would require an additional 113 miles of lateral pipelines to reach Anchorage and Fairbanks. The current plan calls for a roughly 30-mile spur pipeline running east from the main gasline to Fairbanks. It would connect to the Anchorage and Matanuska-Susitna Borough population centers through the existing gas pipeline network in the region. The Anderson Bay option would impact an additional nearly 1,400 acres of land, much with wetland and forest resources, according to FERC. “Unlike the proposed mainline pipeline, the Anderson Bay mainline pipeline would also cross two federally designated Wild and Scenic Rivers; however, minor deviations from the TAPS corridor would avoid the areas within the WSR designations,” the EIS states. FERC officials also largely agreed with AGDC’s assessment of burying the gasline for about five miles through Thompson Pass. It would “likely add significantly to the construction complexity, lengthen the construction schedule and increase environmental impacts,” they wrote. Laden LNG tankers traversing narrows near Valdez and the Hinchinbrook Entrance to Prince William Sound would also cause vessel traffic problems, according to FERC, as those tankers would need a very large safety zone established around them to travel safely. A 968-acre Robe Lake site near Valdez would require moving the Richardson Highway and several residential developments, according to the EIS, along with adding between 4 million and 13 million cubic yards of fill to get the plant above potential tsunami wave heights. The current plan calls for re-routing the Kenai Spur Highway through Nikiski to avoid the LNG plant site, which would require 3.4 miles of new highway, according to AGDC. A Robe Lake LNG plant would also require the loading dock to extend about a mile and need additional dredging to reach the 60-foot water depths large LNG tankers demand. It would also have the same vessel traffic constraints as Anderson Bay and would mean displacing 142 homes instead of the 16 estimated under the Nikiski option, according to FERC. Valdez officials said through their comments to FERC that they will file additional comments further detailing the failures in the draft EIS. “Alaskans deserve a robust comparative analysis of the Nikiski Alternative and the Valdez Alternative to allow a reasoned decision between them and ensure that both environmental impacts and project costs are minimized,” the comments state. Mat-Su satisfied After expressing their displeasure for years over allegedly having their favored LNG plant site unfairly dismissed by AGDC and the producers, Mat-Su Borough officials seem to be satisfied with FERC’s analysis. Mat-Su Borough Manager John Moosey said in a brief interview that borough staff are still reading through the EIS, but he believes it shows the Port MacKenzie site “in a fair and more accurate light, and that’s really what we wanted.” He noted that borough officials simply wanted the federal record to accurately reflect Port MacKenzie — across Knik Arm from Anchorage — whether for the Alaska LNG Project or other potential developments. “If the State of Alaska believes Nikiski is the best place and the project can happen we’re all in favor of that,” Moosey added. “I just think a lot of extra energy got wasted over five years of being ignored and not providing factual information.” They contended over the past several years that ExxonMobil’s initial review of potential LNG plant sites didn’t even consider the correct site. The site evaluated and dismissed by the Alaska LNG consortium is private land about three miles north of Port MacKenzie. It has extensive tide flats that would require a 1.6-mile trestle or a massive dredging operation to access water that is continuously 50 feet deep, which is necessary for the large LNG tankers that would berth at the dock. The EIS states that borough officials asked FERC to analyze a liquefaction site about 2 miles from tidewater that turned out to consist mostly of wetlands. AGDC also said the distance from tidewater would add design and operational challenges. Therefore, FERC did not evaluate it in detail. AGDC officials have said that while ending the pipeline at Port MacKenzie would cut 60 miles off the pipeline it would require demolishing the existing dock and construction of a larger one, which the EIS notes would mean additional dredging during construction. According to the EIS, the shipping channel across Knik Shoal would also have to be dredged to the tune of 700,000 cubic yards per year for the life of the project based on AGDC’s projections. Additional considerations for Port MacKenzie being in some of the most critical Beluga habitat and more challenging winter ice conditions in the upper reaches of Cook Inlet, among others, led FERC to conclude Port MacKenzie would not be a significant improvement over Nikiski. “FERC did what they’re supposed to do and I thought they did a fine job,” Moosey said. Elwood Brehmer can be reached at [email protected]

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