Dunleavy launches ‘massive’ plan to cut state spending

JUNEAU — Alaska Gov. Mike Dunleavy on Wednesday unveiled his proposal to balance the state’s budget without new taxes and without a reduction to the Permanent Fund dividend. “This budget is going to impact all Alaskans. It’s too massive not to,” the governor said in a televised news conference from Juneau. The state released a trove of documents detailing his proposal on the state Office of Management and Budget’s website Wednesday morning. Initial figures released by OMB show the governor is proposing to spend $9.1 billion in the fiscal year that starts July 1. That figure does not include the Permanent Fund dividend. If the governor’s $1.9 billion in dividend spending is included, overall spending is near $11 billion. Last year’s budget, not including the dividend, was $10.9 billion, according to OMB figures. The dividend last year cost $1 billion. The governor had said he would cut the budget by $1.6 billion, but based on dividend-included figures, spending in his plan will be down less than that because of the boost to the dividend. Health care and K-12 education, the largest components of the state’s budget, are cut under the proposal. The Department of Education is cut from $1.66 billion to $1.34 billion under the governor’s plan. The Department of Health and Social Services is cut from $3.25 billion this year to $2.47 billion, according to figures from the Office of Management and Budget. One of the biggest duties of Health and Social Services is overseeing the federal-state Medicaid program, which provides health care to more than 210,000 Alaskans, according to the latest figures from the state. Of those, almost 48,000 are covered by Medicaid expansion by an executive order signed by former Gov. Bill Walker. Dunleavy will not reverse that order at this time, he said Wednesday, but the state will work with the federal Centers for Medicaid Services to adjust benefits, he and Arduin said. Medicaid spending, which stands at $2.27 billion, will be cut by $714 million, according to OMB figures. About one-third of that cut is state money; the remainder consists of federal dollars the state will forego, according to OMB’s analysis. State support for the University of Alaska is cut 45 percent, from $327 million to $193 million, but the university is granted the authority to raise additional money through tuition, grants or other sources to make up the difference if it can. Arduin said about 625 full-time state jobs would be cut under the budget, and if part-time positions are included, that figure is above 700. Those figures do not include cuts at the University of Alaska. The governor’s proposal must be vetted and approved by the Alaska House and the Alaska Senate before it becomes official. That process is expected to take several months, and the timeline may be lengthened by the House’s ongoing inability to elect a leader, a prerequisite to officially consider legislation. “We know this is just the beginning. This is the beginning of the journey for this budget,” Dunleavy said. Groups and agencies affected by the budget cuts are expected to spend Wednesday and the next few days examining the governor’s proposal to see how it would affect them.  

FISH FACTOR: FCC issues warning on fishing gear beacons

Small electronic beacons that are being widely used by increasing numbers of fishermen could net them big fines. Automatic Identification Systems, or AIS, are easily attached to nets, longlines and pots and signal the locations of the gear via a vessel’s navigation system, laptops, or even cell phones. The inexpensive buoys, which range from $47 to $199 from most online retailers, are regarded as a Godsend by fishermen in the way they help locate gear as well as being a potential money saver. “If you’re not sitting on your gear with your vessel either on radar or on AIS, somebody can come along that doesn’t think there’s any gear in the water in the absence of an AIS marker and set over the top of you. Or a trawler could potentially come and nail your gear and it could result in substantial financial loses,” explained Buck Laukitis, a Homer-based fisherman and a member of the North Pacific Fishery Management Council. AIS is required for boats longer than 65 feet and in certain shipping lanes, said Jerry Dzugan, director of the Alaska Marine Safety Education Association. But warning bulletins are advising that other users and sellers are subject to fines of more than $19,000 to $147,000 per day for those who continue to use them. A Federal Communications Commission bulletin says “anyone advertising or selling these noncompliant fishing net buoys or other noncompliant AIS devices should stop immediately, and anyone owning such devices should not use them. Sellers, advertisers, and operators of noncompliant AIS equipment may be subject to substantial monetary penalties.” The reason for the severe warning? The systems being used on fishing gear are not authorized by the Federal Communications Commission nor the U.S. Coast Guard. The small AIS buoys transmit a strong signal without essential navigational safety information and can interrupt or obscure the situational transmissions of other boat operators. “In crowded areas, the signals create a lot of clutter for vessels to navigate around — is it a vessel they are seeing on their plotter or just a buoy?” said Dzugan. “It’s especially problematic for large vessels or tugs with a tow that can’t maneuver quickly.” He added that the cheaper, small units coming from China also do not have proper standards for signals, which cause more identification problems. The FCC seems very committed to getting AIS fishing gear buoys out of the water and off the market, said Michael Crowley of National Fishermen. “Even if you have a certified AIS device, it shouldn’t be used for a fishing buoy because its purpose is vessel safety or personal rescue,” he wrote. “Equipment for tracking nets is authorized only when it operates in the 1,900 to 2,000 KHz band, not AIS frequencies, and they cannot be advertised as AIS approved.” Alaska’s congressional delegation sent a letter last month to the FCC requesting reconsideration for AIS use by fishermen, Laukitis told radio station KMXT in Kodiak. Meanwhile, he advises fishermen to forego the beacons. “I don’t think the word’s really gotten out, but we’re kind of in a pickle for this summer,” he said. “Fishermen are definitely not going to want to use these AIS beacons given the FCC’s warning. That means we’re probably going to have a lot more conflicts on the fishing grounds.” Tanners round two Crabbers are gearing up for another Prince William Sound Tanner fishery next month. It will be the second go for Tanner crab after last year which was the first opener since 1988. “The fishery will open March 1 in the western and eastern districts of Prince William Sound, which covers the southwest area of the sound and wraps around to the outside,” said Jan Rumble, area manager for Prince William Sound and Cook Inlet shellfish and groundfish at the Alaska Dept. of Fish and Game office in Homer. Last March 14 boats dropped pots for Tanners and hauled up 82,000 pounds of crab with average weights of just under two pounds, or about 44,000 animals. Rumble said summer trawl surveys and a first ever pot survey last November came up pretty scratchy. “In our trawl survey it was pretty much half of the legal males we saw the previous year, so we are not opening the Northern and Hinchenbrook part of the Sound based on those results,” she explained. “In the pot survey we saw some crab, but it was not as good as we hoped so we will be monitoring each area throughout the fishery to make sure we are comfortable keeping it open.” Crabbers are required to get a Commercial Fisheries Entry Commission card, a commissioner’s permit and pot tags, which have been reduced to 25 due to the expected number of participants. Also mandatory: daily call-ins by 3 p.m. from the fishing grounds. “There was a mandatory call in last year but the compliance was pretty low,” Rumble said. “We’re really encouraging fishermen to call in because low compliance will result in our being more conservative. We want to work with information that’s coming from the grounds and not try to speculate on what’s going on out there.” Depending on catch rates, the fishery could remain open through March 31. The deadline to register for the Tanner crab fishery is Feb. 15. Bivalves help beat diseases Shellfish such as oysters, clams and mussels may hold clues to fighting flu and cancer in humans, as well as aiding in bone regeneration. In studies at the Bigelow Laboratory for Ocean Science in Maine, oysters were exposed to human bacteria and viruses and fought off the pathogens without antibodies, the proteins that immune systems in mammal use to attack disease. Likewise, clams could contract a contagious cancer, but also cured themselves without antibodies. “Clams don’t have chemotherapy or radiation, and somehow they are able to get rid of cancer,” said Jose Robledo, lead author on the study that was published in the journal Developmental and Comparative Immunology. “How on earth do they do it? Their strategy can give us clues about how to fight cancer in humans,” he told the Bangor Daily News. Studying immunity in bivalves could help researchers find an alternative to antibiotics, which are becoming more resistant to pathogens. And mimicking the antimicrobial compounds that mussels produce may yield new drugs for both humans and livestock, Robledo added. Along with helping humans, the research could also benefit the shellfish industry. Robledo plans to develop recommendations to guide farmers and hatcheries in breeding bivalve stocks for resistance to disease, and for development of strong shells and rapid growth. The bivalve study was funded by grants from the Saltonstall-Kennedy Foundation, the National Science Foundation, and the National Institute of Health. ^ Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

OPINION: Knopp sides with his ego over voters

Rep. Gary Knopp’s fellow Republicans appealed to party loyalty and pragmatism as they attempted to convince him to break his month-long holdout that has prevented the state House from organizing. Democrats flattered his ego. Knopp sided with his ego. After telling Anchorage Daily News reporter James Brooks that he decided over this past weekend to end his pointless stunt of refusing to vote for Rep. Dave Talerico of Healy as Speaker of the House in a Quixotic quest to force the formation of a bipartisan coalition, Knopp reneged on his pledge a day later after Democrats put forth his name as their choice instead of former Speaker Rep. Bryce Edgmon of Dillingham. Knopp then voted for himself and against Talerico on Feb. 12, resulting in another set of 20-20 stalemates that leave the House unorganized and unable to even receive the 25 bills Gov. Michael J. Dunleavy said he intended to introduce the following day in tandem with his “ground up” budget to address a projected $1.6 billion shortfall for the fiscal year that starts July 1. In a ridiculous piece of semantics explaining his reversal, Knopp said he only pledged to vote for a Republican as Speaker and not which Republican that would be. Calling his statement disingenuous would be polite. Or, as Rep. Mark Neuman of Big Lake put it more accurately, it’s “bullshit.” Rather than dance with the people who brought him — his District 30 is so Republican that Democrats didn’t even field a candidate against him and its voters chose Dunleavy by a 68 percent to 27 percent margin of 3,214 — Knopp is determined to prove his original assertion that one person can blow up a caucus of 21. At the time, Knopp specifically was referring to notorious gadfly Rep. David Eastman of Wasilla, who is looking more and more sensible every day in comparison. Now, rather than organize with the Republicans as his voters intended for him to do, Knopp is single-handedly doing more damage to House business than Eastman could ever approach. With per diem of more than $200 multiplied by 40 House members, it’s is a safe estimate to say Knopp’s grandstanding has cost the state about a quarter-million dollars for nothing so far. Knopp can claim all he wants that he believes a bipartisan coalition is preferable, but in reality what he is doing is nothing more than the bidding of the Democrats who lost their majority in the last election. Oh sure, Democratic caucus members Reps. Louise Stutes of Kodiak and Gabrielle LeDoux of Anchorage have an “R” next to their name, but that doesn’t make them Republicans any more than donning a paper crown makes someone the Burger King. There is no understating how badly Knopp screwed up by siding with himself over the simple good of being able to organize and conduct business and then letting chips fall where they may as the session unfolds. Knopp broke a very public pledge and as such can’t be trusted by any of his fellow Republicans going forward even if he eventually comes around to voting for Talerico. He may well have further entrenched both sides, or it is possible his intransigence driven by his completely unjustified belief that he’s acting on principle will end up sending a couple wavering Republicans into the Democrat caucus to give them control that the people of Alaska — and especially those of his own district — clearly did not vote for. Knopp can say whatever he wants about Eastman, but Eastman says what he means and acts accordingly. Knopp has demonstrated that he values loyalty to himself first and that his word means nothing. There isn’t a soapbox big enough to look down on anybody from that perspective. Andrew Jensen can be reached at [email protected]

Movers and Shakers for Feb. 17

Tony Drabek was appointed to the Koniag Inc. board of directors. Drabek was the president and CEO of Natives of Kodiak for more than a quarter century and helped start Northrim Bank, serving on its board for more than two decades. He also served in the United States Army for four years, including one tour in Vietnam and one in Korea. Drabek fills the seat of long time board member Brent Parsons, who passed away unexpectedly in November of last year. Enterprising Women magazine has named Anchorage business owner Kristen Fowler Lindsey a winner of its 2019 Enterprising Women of the Year Awards. Now in its 17th year, the award is considered one of the most prestigious recognition programs for women business owners. Fowler Lindsey, an industry veteran with nearly 25 years of technology marketing experience, is president and owner of Thrively Digital, Alaska’s oldest and largest interactive digital agency. Other award recipients include women from the United States, Canada, India, Pakistan, United Arab Emirates, South Africa, Turkey, Germany and Switzerland. Fowler Lindsey is the only honoree from Alaska. Thrively provides comprehensive, integrated digital marketing services to businesses in the tourism industry, as well as in the non-profit, healthcare, transportation, education, government, telecom, publishing and retail sectors. In 2015 Fowler Lindsey completed the Goldman Sachs 10,000 Small Businesses program, which is designed to train entrepreneurs to grow their businesses and fuel their local economies. She began Thrively Digital in 2003 and has grown it into a 10-person agency that’s served more than 100 clients in Alaska and the Lower 48. She’s a community member of the Alaska Public Media Board Development Committee and a member of the Anchorage Downtown Rotary Club. She’s a former board chair of the Anchorage Concert Association; she also has been involved with the American Marketing Association and the Alaska Travel Industry Association. Tomas Boutin was appointed executive director of the Alaska Industrial Development and Export Authority. Boutin comes to this position after a distinguished career in forestry, including four years of service as Alaska State Forester. He is also a former deputy commissioner of the Alaska Department of Revenue. The AIDEA board of directors also appointed former Executive Director John Springsteen to the position of chief operating officer. Springsteen has been tapped to bring AIDEA’s financing expertise to Gov. Michael J. Dunleavy’s newly created Industry Development Task Force. Springsteen has served as AIDEA’s executive director since March 2015, and will represent AIDEA on the Task Force while working out of Department of Commerce, Community and Economic Development offices in Anchorage. Boutin received his undergraduate degree in Forest Resources from the University of New Hampshire, and holds an MBA from the University of Oregon School of Business. Springsteen received his undergraduate degree from the Massachusetts Institute of Technology and holds an MBA from the Kellogg Graduate School of Management at Northwestern University. Boutin and Springsteen began their new duties on Feb. 11. Credit Union 1 promoted Chris Harris to accounting manager. Harris was initially hired by the credit union in 2010 and brought previous experience as a personal banker with Bank of America to his position at Credit Union 1. With Bank of America, Harris was recognized amid the top 5 percent of personal bankers in the Midwest region. Harris graduated with honors from the University of Hawaii. In his new position, Harris will be responsible for the daily operations of Credit Union 1’s Finance Department. CU1 also promoted Brian Ellis to the position of controller. Ellis was initially hired by the credit union in 2013 as a financial analyst. He was promoted to senior financial analyst in 2016, which is the position he held prior to his promotion to controller. Previously, Ellis worked as an audit associate for KPMG LLP in Anchorage, and he holds an active CPA license from the State of Alaska. He graduated from Idaho State University with a BBA in accounting and has also completed his general MBA. In his new position, Ellis will be responsible for supervising the maintenance of the general ledger, preparation of financial statements with variance narratives, managing the financial and 401(k) audits, assisting the CFO with budget and three-year forecast preparation, and keeping informed of changes and developments in GAAP and regulations that affect the credit union’s accounting, reporting and operations.

UA braces for budget cuts

University of Alaska President Jim Johnsen is preparing for the worst when Gov. Michael J. Dunleavy releases his budget plan Feb. 13. While budget specifics were not discussed, Johnsen said after several discussions with Dunleavy and his Budget Director Donna Arduin that he expects the university’s proposed budget cut to be “big.” “I would say it’s going to be a capital ‘B’ big,” Johnsen said during a Feb. 8 meeting with the Journal and the Anchorage Daily News. Dunleavy, Arduin and other administration officials have spent much of their first two-plus months in office preparing Alaskans for what their budget will look like without roughly $1.6 billion. They are committed to balancing the state’s budget — currently with an anticipated 2020 fiscal year deficit of about $1.6 billion — without tax hikes or changing the Permanent Fund dividend calculation, which were two pillars of Dunleavy’s campaign. Johnsen expects the state universities to be one of the areas that will take the brunt of the budget cuts because the university system is the state’s third- or fourth-largest budget item, depending on whether one lumps PFD payments with other state spending. “It’s going to be K-12, health and us to get to $1.6 (billion in cuts),” he said. The University of Alaska System is also one of the easiest places lawmakers to cut spending. Despite having three separate universities and 13 community campuses under its umbrella, the university system’s general fund budget support comes in one lump sum and it is up to Johnsen and the UA Board of Regents to allocate funding and implement the cuts. The state’s university funding also is not tied to any other statutory mandates — outside of the constitutional mandate to have a university — or funding formulas that would need to be changed to make cuts legal or workable within the Capitol. Whatever cuts Dunleavy proposes to the UA budget will come on top of significant cuts already. The state’s general fund support for its university system has fallen from $378 million in fiscal 2014 to $327 million currently. University funding bottomed out at $317 million in 2018 but last spring legislators agreed to add $10 million back in; at the time former Gov. Bill Walker was proposing flat funding but agreed to the one-time increase. Johnsen considers the budget cuts to total $195 million in overall forgone state support since 2014, which doesn’t account for inflation since then. Unrestricted state money accounts for roughly 40 percent of the total UA budget. The rest of the system’s funding comes from federal sources, tuition and student fees and other sources such as research grants. “For us, even the word, even the news of a significant budget cut has negative implications for us. It has negative enrollment implications, which takes away our ability to serve our mission for the state,” Johnsen said. “With enrollment comes tuition.” To that end, enrollment has fallen along with the budget in recent years. The total student headcount across the system was down 15 percent from fall 2013 to fall 2017, according to university figures. The university system has cut its workforce by 1,283 over the past four years and statewide administration has been cut by 38 percent over that time, according to Johnsen. Much of that was done under Johnsen’s multi-year “Strategic Pathways” initiative to reform the system’s operations and focus on strengthening the programs and other things it does best. He characterizes the state funding as the “seed corn” that allows the university system to carry out its multiple missions. “We’ve already taken $195 million in cumulative cuts but if this year-over-year cut is big then it’s, to quote Donna Arduin, ‘it’s doing less with less,’” Johnsen said. “Then it’s saying, really seriously folks, this campus, this college, this school, this service, this team — sorry, it’s going to need to go away.” He and the regents will do everything the can to avoid closing branch campuses that are often in remote parts of the state, but the concept of using them as “nodes” where students use content developed at the main campuses through distance learning has been discussed, Johnsen added. He has avoided talk about eliminating specific programs to avoid unnecessary worry among students as well as potentially deterring future students from enrolling. However, he now says, “if indeed the sky is falling I am going to yell and I’m going to say, this is what athletics costs; this is what KUAC (UAF public radio) costs; this is what Mat-Su College costs; this is on down the list and talk about it.” What cuts come will not be pro-rated among the three main campuses; they will be evaluated at a statewide level, Johnsen emphasized. One thing administrators will prioritize is the system’s research budget, which is weighted to Arctic research at UAF. Fairbanks is generally recognized as the world’s leading Arctic research institution. UAF’s Geophysical Institute has also served as primary testing ground for the Federal Aviation Administration’s work to integrate small, unmanned aircraft into the national airspace and allow the private sector to realize the advantages of the new and evolving technology. The drone work at UAF has also helped attract business startups in that realm to Alaska. UA leaders often stress that state research support returns $6 to Alaska for every $1 invested. “If you have a revenue generator like that, that actually adds to your international reputation and the quality of what happens in your classrooms and your labs you’re going to try to reduce the impact there,” Johnsen said of research funding. While the expected magnitude of Dunleavy’s proposed cuts have many across the state waiting anxiously for the release of the budget — and many others waiting eagerly — legislators will also have their say as to what future state spending will look like. In conversations with legislators Johnsen said there are naturally those who are opposed to the governor’s plan. Others, even some who he characterized as “fiscal hawks,” are skeptical that the administration can find another $1.6 billion to cut from a budget that has already been reduced about 40 percent from its peak. Others exude “resignation,” Johnsen said, given Alaska’s governor has the authority to line item veto appropriations. That authority could mean that Dunleavy vetoes appropriations back to his proposed level regardless of what the Legislature does. Dunleavy has said he wants to work with the Legislature to rebuild the state’s budget. A final group of lawmakers is resigned for a different reason, according to Johnsen. “Maybe the average citizen in Alaska needs to experience what likely would come from a $1.6 billion cut to get it, to understand — maybe it’s too big a role — but to understand the very important role that government plays in Alaska’s economy,” he described. “so that was interesting to hear.” Dunleavy and Arduin discussed possibilities for supporting the university with Johnsen through fulfilling its land grant entitlement or tying funding to performance outcomes, the latter of which California did when Arduin worked there. He is supportive of those concepts, but they are very long-term, Johnsen said. He did note that legislators and administration officials don’t seem to be holding the UAA School of Education accreditation issues against the system overall. “There were serious issues there; the leadership issues have been addressed; the curricular issues are being addressed,” Johnsen said of UAA losing its initial education licensing accreditation. “The primary concern right now is taking care of those students and making sure each and every one of them has a path to licensure from an approved program.” UAA’s advanced and specialized education licensing programs, such as those for a principal license or special education certification have not been impacted, he added. Whether or not UAA will go through the multi-year process of reapplying for its lost accreditation is unclear at this point. Administrators are still gathering information to answer that question. If the decision is ultimately not to reapply, undergraduate education students at UAA could get degrees through UAF or UAS from Anchorage in much the same way the system runs its nursing school. “If you’re sitting in a nursing class in Fairbanks, the faculty member and the students are UAA students, the same in Juneau; so nursing education is done across the state by UAA, so we know how to do this,” Johnsen described. Regardless of what the answer is to that question, it would undoubtedly be made more difficult by another significant budget cut. Johnsen acknowledged his frustration regarding what he sees as a “culture of complacency” in Alaska and a corresponding feeling of entitlement, which other prominent leaders in the state have expressed recently as well. “It is frustrating there’s no doubt about it when the dominant thinking in the state is ‘me, now’ as opposed to ‘us, later,’ which is sort of our business, right?” he said in reference to Dunleavy’s pledge to pay $1.9 billion in PFDs while cutting $1.6 billion elsewhere. “We’re in the business of preparing people to create the future of our state.” Still, he said the university will ramp up marketing for its college savings fund around PFD time next fall. And when the politics and bureaucracy and other challenges of his job start to strain his nerves, Johnsen goes back to the root of the issue. “When I get sort of to the end of my rope I’ll ask my assistant to get me into a class somewhere here at UAA, or UAS or a rural campus or up in Fairbanks and then you get why we’re here,” he described. “Or you meet with some researchers and they start talking about what they’re doing with drones or with sea ice or with you name it; and you just go ‘Wow, this is cool stuff. This is exciting; we need to keep fighting for this.’” Elwood Brehmer can be reached at [email protected]

Murkowski leads major lands bill through Senate

Sen. Lisa Murkowski was happy to talk with reporters after shepherding the first omnibus lands bill package through the Senate in years with overwhelming support. The U.S. Senate passed the Natural Resources Management Act Feb. 12 on a 92-8 vote. The legislation addresses a plethora of “small matters that in local communities can really make a significant difference,” Murkowski said in a conference call with Alaska reporters. “When we can come together on a bipartisan basis — move something out of the Senate 92-8 — it is a pretty significant win,” she said. “I think it’s a pretty historic day really when it comes to our public lands.” The Natural Resources Management Act is a compilation of about 120 individual lands bills dealing with issues nationwide. It’s the first public lands package to pass the Senate in five years, according to Murkowski. While much of what it deals with are “small, parochial” matters, as Murkowski characterized them, it also permanently reauthorizes the popular Land and Water Conservation Fund and declares an “open unless closed” policy for recreation activities on most federal lands. Murkowski, who chairs the Senate Energy and Natural Resources Committee, introduced the legislation Jan. 9. Using military training exercises on Bureau of Land Management tracts in the Interior as an example, she said areas that need to be closed to hunting and other activities for such a reason will only have access restricted for specific periods and not without explanation. The process for notifying the public about a given federal lands closure will be spelled out in regulations. “Our public lands are going to be designated as open for public use unless specifically closed, so this is significant in that regard,” Murkowski said. The bill also reforms and makes permanent the longstanding and popular Land and Water Conservation Fund. Congress established the LWCF in 1964 as a way to offset impacts from oil and gas development. Revenue from federal offshore oil and gas leases in the Gulf of Mexico is allocated to the fund and used for land and water restoration, parks, trails and other conservation projects across the country. The LWCF has funneled approximately $3.9 billion to support more than 40,000 projects covering nearly 2.4 million acres in every county in the country since its inception, according to the Interior Department. The National Geologic Mapping program, run by the U.S. Geological Survey, is also reauthorized for five years under the bill. Specifically to Alaska, the Natural Resources Management Act is an attempt to resolve several long unresolved issues. Notably, it would allow for Alaska Native veterans of the Vietnam War to finally receive the allotment entitlements they missed out on selecting when Native lands claims were settled in the early 1970s and they were serving overseas. Murkowski said the issue applies to roughly 300 individuals and the bill lays out a specific course by which they can select their 160-acre allotments. “Now our Alaska veterans will be able to submit their selections in a very considered process, but one that will allow them to move forward,” she said. It provides a way for eligible family members of deceased veterans to select allotments as well. The provisions in that portion of the Natural Resources Management Act were largely introduced by Sen. Dan Sullivan in the Alaska Native Veterans Land Allotment Equity Act he introduced in the last Congress. Sullivan thanked Murkowski and former Interior Secretary Ryan Zinke for working on the issue and Rep. Don Young for gaining support to resolve it in the House in a Feb 12 statement from his office. “For decades, a group of special Alaska veterans have suffered an injustice due to their service during the Vietnam War. My colleagues and I today took a significant step towards righting this wrong and ensuring Alaska Native vets have an opportunity to finally receive the land allotment they’ve previously been denied,” Sullivan said. The bill additionally includes provisions to provide flexibility for securing a natural gasline right-of-way through the eastern edge of Denali National Park and Preserve and requires the Interior Department and the U.S. Forest Service to study the impacts federal land acquisitions have had on Chugach Alaska Corp.’s ability to develop its land and come up with options for potential land exchanges with the Alaska Native regional corporation. It also repeals a federal prohibition on exporting unprocessed timber from lands conveyed to the Kake Tribal Corp, among other things. Today, much of the timber harvested in Southeast is exported directly to China. Murkowski said she and former ranking Energy and Natural Resources Democrat Sen. Maria Cantwell of Washington started working with Natural Resource Committee leaders in the House last year to gain support for the omnibus bill and make sure it gets to President Donald Trump’s desk. “Because of the way we handled this process — working again across the aisle and across the chambers — I’m feeling very good about its prospects on the House side,” Murkowski said.

Council takes first step toward rationalizing P-cod fishery

Pacific cod fishermen in the Bering Sea and Aleutian Islands, one of the last remaining unrationalized federal fisheries in Alaska, may finally have to cross that bridge. The North Pacific Fishery Management Council passed a motion at its meeting Feb. 9 to take action on the Pacific cod fishery, which is facing a number of issues in abundance, processing and participation. Depending on public review and the council’s action at the next several meetings, the Pacific cod fishery could see significant changes to seasons, limits and vessel participation. The motion hinges around an analysis developed on the trawl catcher vessel fishery and releases Alternatives 1, 2, 3 and 6 for public review separate from the rest. Rationalization, also known as catch shares, refers to a system in which set amounts of the harvest are issued as quotas to various gear and vessel types, typically based on participation history in the fishery. Halibut and sablefish were the first fisheries to be rationalized in Alaska in the early 1990s, followed by Bering Sea pollock later that decade and Bering Sea crab fisheries in the mid-2000s. Proponents tout the benefits of such programs for ending the dangerous, “derby style” races for fish and curbing bycatch; opponents point to the high cost of entry for newcomers to purchase quota shares, consolidation of effort and the accompanying loss of jobs. The council’s Advisory Panel, made up of fishing industry stakeholders, unanimously supported the move to release some alternatives sooner, in part because of the urgency of the problems in the fishery. The shortened season was a particularly painful point for many: the 2018 Bering Sea trawl cod season was the shortest in the fishery’s history at just 13 days. “The (Bering Sea/Aleutian Islands) trawl catcher vessel Pacific cod fishery is facing multiple issues simultaneously that are negatively impacting the sustained viability and rational prosecution of the fishery for all its participants,” the council motion states. “These factors include: decreasing Pacific cod TACs (total allowable catch), an increase in the number of participating LLP licenses, the potential for additional new participants, a race among existing participants (often in unsafe conditions), and an increasingly shortened season.” Pacific cod are managed by both the state and the federal government, with some fisheries allowed in state waters. In recent years, participation has been growing, both in the state and federal fisheries. The state Board of Fisheries recently created a new cod fishery for pot gear for small vessels near Dutch Harbor, gaining record-high participation in the fishery this January. Pacific cod is a valuable fishery in Alaska. Most of that value goes to out-of-state residents. In 2016, $76 million in ex-vessel value went to Alaska residents; $117.7 million went to out-of-state residents, according to a December 2017 report to the council. The harvest of Pacific cod was cut by 80 percent in the Gulf of Alaska last year, and by nearly half in the Bering Sea. That’s attracting more boats to the open access state waters fishery, where the harvest comes out of the overall TAC. In its report, the Advisory Panel also pointed to an increase in mother-shipping by catcher-processors in the Bering Sea and Aleutian Islands, pushing down shoreside processing and thus tax revenue for the Bering Sea communities. Those communities have long depended on the economic base provided by shore-based processors to sustain economies in incredibly remote, meteorologically hostile areas. During the council’s hearing, more than a dozen stakeholders offered testimony in person and by letter, and one by voicemail. Most testified in favor of the Advisory Panel’s motion and spoke about the danger of the fishery without changing the race for fish and the impact of the painfully short season this year. “Unfortunately, the season was so short this year that it allows me to be here to testify,” said Chris Cooper, who fishes on the F/V Perseverance. “…One thing that has not changed is our participation and commitment in this fishery. In the past, we’ve relied on the fishery for as much as half of our income … We’ve watched a two-and-a-half month to three-month season go down to under two weeks this year. To say that we’ve been directly affected by this change is an understatement.” The halibut bycatch is a perpetual problem for the trawl fisheries. The Pacific cod fishery, like other groundfish fisheries, have bycatch caps after which the fishery will close to protect non-target stocks. Brent Paine, the executive director of stakeholder group United Catcher Boats, said the halibut are victims of the race for fish; when fishermen are racing against the clock, they may not move to a new fishing area when they encounter large numbers of halibut in the bycatch. “In a 15-day fishery where these boats are racing for fish, you can’t exclude halibut bycatch. It doesn’t work,” he said. “We don’t like to compete. We can rationalize this fishery … if you just look at a catch share program.” The areas included in the fishery are often subject to poor weather, and with a breakneck race for fish before the managers close it, safety can go out the window. “The cod fishery has turned into a dangerous, irrational fishery recently here,” said Robert Smith, who said he owns and operates a trawler for cod and pollock. “We need to move forward with some kind of a rationalization program. The safety sometimes gets overlooked here. In these nice, warm rooms and stuff, I wish we could somehow convey how bad this weather can be up there at times.” Opposition came from the floating catcher-processors, who said implementing the rules suggested by the advisory panel would push them out of the area. Changing the rules on mothership deliveries would upset a large part of the fishery, said Matt Upton, representing U.S. Seafoods. “If you change it on us now, it’s basically jeopardizing our entire business operation,” he said. “We support the AP motion — it’s a wide range of alternatives for you to consider.” Shoreside processors said it’s important for the their sector to have a fair shot, as they support the communities that often depend on the economic support of the processors. Nicole Kimball, representing the Pacific Seafood Processors Association, said the council motion should not affect the Amendment 80 fleet, either, which is a group of Seattle-based groundfish catcher-processors. The council batted amendments back and forth but ultimately unanimously supported releasing the separated alternatives of the analysis. Council member Andy Mezirow said he hoped the federal process would not bog down the council’s ability to make progress on the changes before the next Pacific cod season, based on the concerns the members heard. “Hopefully, even though our schedule Is fairly jammed up here … hopefully in the three-meeting outlook we can get this moving,” he said. Council member Craig Cross encouraged members of the public to begin meeting and looking at the alternatives. Unlike other council actions, which start with an abstract discussion paper, this is further along in the process, he said. “I think this is further along and I think the public should understand that this is further along than a discussion paper, and it has intent,” he said. ^ Elizabeth Earl can be reached at [email protected]

Zero to 68: US set to join top 3 LNG exporters

It’s going to be a big growth year for U.S. exports of liquefied natural gas, with three more terminals set to start operations in 2019 and developers already this month committing to a $10 billion investment for another project. Plus, final investment decisions are anticipated on two or three more gas export terminals. “North America is set to lead an expected record year for LNG project sanctions,” Alex Munton, principal analyst for Americas LNG at energy consultancy Wood Mackenzie, said in a prepared statement. “The first half of 2019 will be an especially busy one for the United States.” By early 2020, U.S. LNG export capacity could total more than 68 million tonnes per year, or about 15 percent of global capacity, and boosting the United States to third place behind Qatar and Australia. That’s up from zero exports just three years ago, before Cheniere Energy in February 2016 shipped the first cargo from its terminal in Sabine Pass, La. At full production in early 2020, the six U.S. liquefaction plants could consume almost 10 percent of the country’s 2018 marketed gas production. Though U.S. LNG exports started 50 years ago in Alaska, the tremendous increase in shale gas production in the Lower 48 states over the past decade burst into the global LNG market by making seemingly unlimited supplies available at affordable prices. The small LNG plant in Nikiski — built by Phillips Petroleum and Marathon Oil in the 1960s — was the only North American export terminal in operation when it loaded its last cargo in 2015 and shut down amid strong global competition. ConocoPhillips sold the mothballed plant in 2018. Marathon now owns it and has not announced specific plans for the property. Most of the new U.S. LNG plants have been built on the Gulf Coast, with two East Coast exceptions: Cove Point, on Maryland’s Chesapeake Bay; and Elba Island, on the Savannah River in front of the Georgia city of the same name. Of the six export terminals that will be in operation by the end of this year, five were cost-efficient additions of liquefaction units, called trains, to existing but unused or significantly underused LNG import terminals. Originally an import terminal from the 1970s, Cove Point LNG, owned and operated by Virginia-based Dominion Energy, shipped its first export cargo in April 2018. Its liquefaction capacity is 5.25 million tonnes per year. Kinder Morgan’s Elba Island terminal is unique in that it will operate 10 small-scale, modular trains with a total capacity of 2.5 million tonnes per year. Federal regulators on Feb. 1 gave permission to start commissioning the first train. Kinder Morgan expects all 10 units to be in production by the end of the year. Elba Island started as a receiving terminal in 1978. Opened in 2008 as an import terminal, Cheniere’s Sabine Pass project in Louisiana was the first to add liquefaction and LNG exports. It now has four trains in operation, with a fifth scheduled to start production in the second quarter of 2019, bringing its total capacity to 22.5 million tonnes. In addition, Cheniere has signed up Bechtel as the engineering, procurement and construction contractor for a sixth train, with the final investment decision predicted in the first half of 2019. Cheniere’s second Gulf Coast export terminal — Corpus Christi, Texas — is the only one of the six that did not build on an unused import operation. Its first train started service in November 2018; commissioning is underway on a second train; and a third train is scheduled to enter service in 2021 — each at 4.5 million tonnes per year. Meanwhile, Cheniere is looking at adding up to seven mid-scale trains at Corpus Christi, boosting total output capacity to 23 million tonnes. Freeport LNG, owned by private investors, has three trains under construction at its Texas terminal, each at 5 million tonnes per year and scheduled to come online late 2019 through early 2020. A fourth liquefaction train is waiting on regulatory approval. San Diego-based Sempra Energy and its partners plan to start production by April from the first train at Cameron LNG in Hackberry, La. The next two trains are set to come online before the end of the year, bringing total capacity to 13.9 million tonnes per year. Sempra also is looking at building a new LNG export facility in Port Arthur, Texas, targeting late 2019 or early 2020 for an investment decision on the 11-million-tonne-per-year project. The Federal Energy Regulatory Commission issued its final environmental impact statement in late January. The newest entrant to the export trade, Golden Pass LNG, was given the go-ahead for construction Feb. 5 by its partners Qatar Petroleum (70 percent) and ExxonMobil (30 percent). The $10 billion project in Texas, across the river from Cheniere’s Sabine Pass operation, is planned for 15 million tonnes per year with start-up by 2024 at the site of an unused import terminal. “On a dollars-per-tonne basis, it’s still one of the lowest-cost opportunities for new large-scale liquefaction capacity anywhere in the world,” Wood MacKenzie’s Munton said of Golden Pass. It’s the only one of the bunch being developed by oil-and-gas producers. Virginia-based Venture Global is awaiting FERC approval — perhaps at the commission’s Feb. 21 meeting — for its Calcasieu Pass LNG in southwestern Louisiana. The company has hired Kiewit to build the 10-million-tonne-per-year, $8.5 billion project. Venture Global expects to make a final investment decision in the first half of 2019 and has signed 20-year offtake agreements with Shell, BP, Italy’s Edison, Portugal’s Galp, Spain’s Repsol and Poland’s PGNiG. Another new entrant, Houston-based Tellurian, also is targeting the first half of 2019 for an investment decision on its $16-billion Driftwood LNG project. FERC issued its final environmental impact statement in January, though the developer has yet to announce any binding offtake deals for Driftwood. Tellurian is planning as much as 27.6 million tonnes per year capacity at the plant on the west bank of the Calcasieu River, south of Lake Charles, La. Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide.

Alaska Native split over ANWR on display at Anchorage hearing

During the federal government’s last public hearing in Alaska before oil leasing is allowed in the Arctic National Wildlife Refuge on Feb. 11, some 50 protesters silently holding “Listen to the People” banners turned their back on a federal official trying to explain the regulatory process before drilling can occur. Outside that hearing room at the Dena’ina Center in Anchorage, an equally large audience of Alaska Natives from the North Slope region where drilling is set to occur held signs saying “It’s our backyard,” and called for oil development in the 19-million-acre refuge. “Government is listening to the people,” said Crawford Patkotak, chairman of the Arctic Slope Regional Corp. and a speaker at the pro-drilling rally. “Thank God for that.” “Bought and paid for Natives!” Natasha Gamache, an Alaska Native from Nome, shouted at him. “We’re supposed to be protecting the land.” “1002!” drilling supporters shouted, a legal reference to the 1.6-million-acre coastal plain where drilling would take place. “Shame on you!” Gamache shot back. The dueling protests capped a day of public testimony at the Anchorage hearing, a tamer version of a Fairbanks meeting held the previous week, when opponents of drilling took over and began speaking publicly at what was organized as an “open-house” event without public testimony, according to the Fairbanks Daily News-Miner. Public testimony was originally not scheduled for the Anchorage meeting, but BLM changed the format following the Fairbanks complaints, said Lesli Ellis-Wouters, a spokeswoman with BLM. “It’s in response to what we heard in Fairbanks,” she said. One last public hearing on the federal government’s 700-page draft environmental report — released in December and spelling out four different options for oil development in the refuge — was set to take place on Feb. 13 in Washington, D.C. Public comment is allowed until March 13, a month-long extension from previous plans. Speakers filtered in and out of the Anchorage meeting hall through the day — the hearing lasted more than six hours — offering their view on the bitter, decades-old argument. More than 100 people signed up to speak, officials said. More than 400 people signed up to attend. Some 700,000 people commented last year, before the draft report was released, most of them via form letter, according to the BLM. The Republican Congress and President Donald Trump in late 2017 passed legislation ordering the federal government’s first-ever lease sale in the refuge, decades after Congress in 1980 set it aside for possible future exploration. Joe Balash, an assistant Interior Secretary, told reporters on Monday the Bureau of Land Management is still on track to hold the lease sale late this year, auctioning tracts to oil companies. The issue seems anything but decided. On Monday, Reps. Jared Huffman, D-Calif., and Brian Fitzpatrick, R-Penn., introduced legislation in Congress to stop the lease sale, though it’s unlikely to pass a Republican-led Senate. Balash, addressing criticism that the lease sale has been fast-tracked, told reporters the BLM has dedicated employees to developing the environmental report, allowing it to advance more quickly than past reviews when employees were engaged in multiple projects. The federal government’s final report and it’s decision, selecting an alternative for development, is expected in the fall. The development scenarios each provide protections for the Porcupine caribou herd and other prized wildlife, after the agency heard from an array of interests before the draft report was created, Balash said. Asked if he was trying to rush the process before leadership in Washington can change, Balash said that’s an issue for “political prognosticators” to comment on. “I’ve been given a job and we’re doing it as well as we can,” he said. Patkotak, while signing up to speak Monday, said drilling is an Alaska Native “right’s issue” that will benefit Alaskans with jobs and a better economy, not an argument about the climate that has been warming and cooling for ages. ASRC, the Native regional corporation, has joined two other companies to take the first exploration steps in the refuge in decades, by conducting a modern seismic survey that could support oil drilling. “The Inupiaq are the rightful owners of the resource,” and have the right to develop it, said Patkotak, a bowhead whaling captain from Utqiagvik, population 4,500. Patkotak and other drilling proponents wore “We stand with Kaktovik — Open ANWR!” buttons, a reference to calls by the village, the only one in ANWR, favoring drilling in the refuge. Opponents of drilling said they stood with the Gwich’in in Arctic Village south of the refuge, where drilling is opposed in part out of concerns for the caribou they hunt and other wildlife they say are threatened by development. Earlier in the day, Anchorage resident Kengo Nagaoka turned his back on Balash as he spoke, indicating his opposition to drilling and an outcome he said was predetermined by the Trump Administration. “You are here to check a box,” said Nagaoka, with drilling opposition group Defend the Sacred - Alaska, before turning to the audience to speak. “Drilling in ANWR continues the cycle of violence to our lands and our people (and) that must stop.” Sarah Siqiniq Maupin, an Utqiagvik resident with indigenous chin and forehead tattoos, said warming temperatures linked to increased oil development and greenhouse gas emissions has made the ice softer, endangering hunters traveling on frozen rivers and ocean. “Climate change is devastating our world,” she said. “What happens in the Arctic affects everyone.” Ken Federico, who recently worked for a drilling company on the North Slope, and is chairman of the Southcentral Alaska Dipnetters Association, said the oil industry can drill in the refuge and protect the environment. “It can be done responsibly,” he said.

Alaska LNG still on schedule for February EIS draft

The Alaska Gasline Development Corp. has added to the list of information it will not submit to federal regulators until this summer, but there has been no indication that the absence of the mostly technical engineering data will delay the scheduled February release of the draft federal environmental impact statement for the proposed Alaska LNG project. The Federal Energy Regulatory Commission has not publicly amended its schedule for the project’s draft EIS, though it has not designated a specific date in February. However, as of Feb. 11, a federal website that tracks pending regulatory work shows Feb. 28 as the “current target date” for the Alaska LNG draft. The tracking website, named FAST-41 for Section 41 of the 2015 law that created the multi-agency effort, is not legally binding on agencies. Federal regulators have been working to prepare the draft EIS since the state in April 2017 submitted its application for the project to move North Slope gas down an 807-mile pipeline to a liquefaction plant and export terminal in Nikiski, on the eastern shore of Cook Inlet. The state-led project team on Feb. 4 responded to FERC’s most recent request, answering a Jan. 15 letter for further detailed information on fire safety, spill containment safeguards and hazard mitigation designs at the North Slope gas treatment plant, the liquefaction plant and liquefied natural gas storage tanks in Nikiski. Addressing the remaining 81 requests for information, AGDC said it would provide the answers in four batches, starting in April and running to July 26. That information is in addition to 76 technical engineering data requests FERC raised in December, which the state team said it will answer in March, May and June. Those requests cover specific engineering, safety and emergency system designs at the gas treatment plant and LNG plant. AGDC will need to complete all the work with a diminishing pot of money. The corporation had expected to end the state fiscal year on June 30 with $15 million to carry it through the entire EIS process — FERC is scheduled to issue its final EIS in November — but Alaska’s budget director said in January the governor wants to take back $5 million from AGDC to help balance state spending. The corporation was expecting to spend an average $3.6 million per month during the first six months of 2019, drawing down its account balance to $15 million by June 30 to carry it through to the end of the calendar year. Spending likely will slow down, however, as the corporation fulfills FERC’s information requests. Among the answers and data AGDC has said it will provide to FERC by March 1: • More information about where the pipeline crosses active earthquake faults, including the hazards and estimated vertical and horizontal offsets of active faults. • A more detailed route map of the 62-mile pipeline from the Point Thomson field to Prudhoe Bay and the pipeline from Prudhoe Bay to Nikiski, showing all seismic hazards within 5 miles of the pipeline and “areas requiring special treatment of permafrost” within a quarter-mile. An example of the technical nature of FERC’s questions is the request for additional information on the design of the piping on top of the LNG storage tanks in Nikiski and surrounding impoundment area for any tank spills, and more details on piping diagrams at the gas treatment plant at Prudhoe Bay. AGDC said it would submit those drawings in late June. AGDC also owes federal regulators more information about the project’s 27-mile underwater pipeline crossing of Cook Inlet. AGDC on Dec. 7 told FERC it would need until September to fully respond to more than a dozen of the questions about the Cook Inlet crossing, including: • Will tidal flow and other currents move debris and boulders across the pipeline? And how much movement is expected, particularly during tidal currents? • Does AGDC plan to use any additional weights or supports along the pipeline after construction to stabilize the line against tidal currents? • Will concrete mats be used to protect the pipeline after it is set on the seafloor? • Is there any site-specific geotechnical data to confirm that the bottom soil is firm enough so that the weighted 42-inch-diameter pipe “will not continue to sink,” placing high-strain loads on the pipe welds during construction and operations? The state project team proposes to bury the pipe near shore as it enters the water on the west side of Cook Inlet near Beluga, lay the concrete-coated pipe on the seafloor across the inlet, then bury it as it reaches shore on the east side for the last 14 pipeline miles to the LNG plant. It’s not unusual for FERC to continue asking for information as it works through its review — particularly engineering design questions about an LNG plant. Regulators can add information between the draft and final EIS. After North Slope oil and gas producers ExxonMobil, BP and ConocoPhillips pulled out of the project in late 2016, citing market conditions, the state has covered 100 percent of the development costs, including regulatory approval at FERC. A legislative audit presented to lawmakers in January showed that since AGDC was established in 2010, the Legislature has appropriated $480 million for the corporation’s work on the Alaska LNG export project and the in-state-distribution-only Alaska Stand Alone Pipeline, a $10 billion project its supporters have promoted as a backup if the larger development fails to go ahead. The in-state line is closer to completing the regulatory process than the LNG project but it, too, lacks any state funding to proceed past permitting. Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide.

IPHC to investigate ‘chalky’ halibut among research plans

After years of hearing concerns from fishermen about the prevalence of “chalky” Pacific halibut, the International Pacific Halibut Commission is planning to gather information for an investigation into it. Chalky halibut are fish that, when cut open, have a stiff, chalk-textured flesh as opposed to the normal pale and tender flesh. Chalky meat is not dangerous to humans but is not desirable and thus costs the fishermen at the dock. Dr. Josep Planas, who heads up biological research for the IPHC, noted plans to gather information about chalky halibut from stakeholders this year before moving forward with designing a study on it. “What we plan is to initiate this project by collecting information from stakeholders on the incidence of chalky flesh and trying to understand the conditions that lead to its development,” he said. “We would love to get any information from any stakeholders on this topic.” Chalky halibut is not a new phenomenon; fishermen and researchers have been seeing it for decades. IPHC research from the 1960s and 1990s connect the prevalence of chalky flesh with the buildup of lactic acid in the fish and lowered pH in the fish after death. Researchers have associated it with warmer ocean temperatures near the bottom, according to the IPHC. When the bottom temperatures reach 12 to 14 degrees Celsius, they tap at the upper thermal limits of Pacific halibut distribution, according to the IPHC. “The condition is reversible in live fish,” according to the IPHC’s website. “Flesh which might otherwise turn chalky does not develop the condition post-mortem if the fish are allowed a 1-2 day resting period after capture, and before killing.” The project is one of a host of research projects the IPHC is planning for the next two years. Those projects focus on topics including migration, growth patterns, reproduction, genetics and discard mortality, Planas said. He said the migration study, which incorporates a number of different methods for tracking fish through their migration patterns, will likely produce some results on larva distribution in 2019. The study on reproduction, which aims to craft a more detailed picture of the full Pacific halibut lifecycle, will likely produce results in early 2020. Researchers are also taking advantage of a new tool on many commercial fishing vessels: electronic monitoring. Some fishing vessels, to save the aggravation and expense of having a human observer on their boats, are opting to install cameras and other electronic systems to monitor their harvests and bycatch. After the first year, the National Marine Fisheries Service reported implementation and compliance went smoothly, with plans to enroll 165 vessels for 2019. The researchers are taking advantage of the presence of electronic monitoring devices onboard to test out different methods of tagging and tracking fish, Planas said. The IPHC is working on a study on discard-related mortality, and specifically how handling and release methods affect halibut injury and outcomes. On vessels with electronic monitoring, the researchers were able to closely track release methods and verified that the data was good. “What we can say so far is when you compare the electronic monitoring-determined release method to the actual, the correlation is incredibly high,” he said. “Sometimes 100 percent, but close to 97 to 95 percent. EM captures very well the release method.” The researchers are working on results to determine how release methods impact the fish’s condition upon release and thus survival. Planas said the study includes both the commercial and recreational sector and results may be incorporated into stock assessments as soon as late 2019 and 2020. The purpose of the research program is to fill in gaps about knowledge of Pacific halibut stocks and life history, he said. In the future, the IPHC is planning to work with other researchers for studies on whale detection techniques and possibly using LEDs on trawls to trigger flight responses in Pacific halibut, thus helping to reduce trawl bycatch, Planas said. ^ Elizabeth Earl can be reached at [email protected]

Credit union to offer financial services to cannabis industry in March

Starting next month, cannabis business owners in Alaska will have access to financial services for the first time. Credit Union 1, an Anchorage-based credit union, expects to launch its pilot program serving licensed cannabis businesses in March. CU1 has been working on the details of the program closely with business owners for more than a year and announced the pilot program in November, said Joseph Martin, who manages the marijuana-related business program for Credit Union 1. “The whole plan all along has been to launch it sometime in March,” he said. “We announced it so early because we wanted to give the industry hope, because they’ve been struggling for awhile now.” Because cannabis is still listed as a Schedule I narcotic under the federal Controlled Substances Act, financial institutions have been skittish about serving the businesses. Banks are federally insured and inspected, and taking on the risk of serving a business technically still considered illegal by the federal government could present risk. Thus, cannabis business owners and customers to date have largely had to work in cash, with huge deposits of cash going in and out of businesses by hand. That’s something that’s both inconvenient to businesses and dangerous to the public. Martin said that was one of its concerns as a community credit union — business owners are taking on a risk by having to transport large sums of cash down the street to pay bills and holding their payroll in cash. Credit Union 1 is a relatively small player in the larger world of financial institutions, with about $1 billion in holdings — for comparison, JPMorgan Chase has about $3 trillion — but its nonprofit status and community orientation allows it to take on more risk, Martin said. “Credit unions typically take on bigger risks than banks to serve the underserved,” he said. “I think marijuana kind of fits into that. It’s a big community safety issue to have all this cash running around on the streets.” Essentially, the pilot program will hinge on improved software to serve the cannabis industry. Because of the nature of the business, the credit union has to keep close tabs on what is coming in and out of the accounts and file reports on every deposit over $10,000 — which is basically all of them, Martin said — to report them to the federal government. That helps CU1 prove to the federal government that everything is above board and the accounts are not laundering money, he said. The financial industry occupies a strange tidepool in the world of back-and-forth cannabis legalization legislation. After Obama-administration U.S. Deputy Attorney General James M. Cole issued a memorandum in August 2013 essentially telling all federal prosecutors to defer to states’ legalization laws on cannabis, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network developed its own guidelines for banks wishing to serve the cannabis industry. Even after President Donald Trump’s former Attorney General Jeff Sessions retracted the Cole memorandum, the Financial Crimes Enforcement Network let its banking regulations stand, as long as banks complied. For those looking to open accounts, there will likely be a significant charge, at least at first. The cannabis banking programs are expensive. For one, the additional burdens of tracking the industry to comply with the FinCEN’s guidelines require significant manpower. Credit Union 1, which usually files about 2,000 reports of transactions more than $10,000 per year, expects its annual reports to increase to about 15,000, Martin said. “When you’re thinking of (the service) from inside the financial institution, it’s not information that we have readily available,” he said. “It’s very invasive … we have to know their product lines, their normal customer base, we have to know all their owners, anyone tied to the business.” But the software improvement should help Credit Union 1 bypass some of the staffing increases other banks have had to take on. For example, other banks have developed cannabis departments in which individual employees handle specific cannabis accounts and know the ins and outs of each business. The software Credit Union 1 has been working on will help avoid some of that, Martin said. Over time, he said he thinks the program will get cheaper as CU1 onboards more businesses and the employees get better at serving the cannabis industry. The federal burdens of reporting may decrease, too, as bills move through Congress to change the regulations on serving the cannabis industry. The U.S. House Committee on Financial Services held a hearing on just such a draft bill on Feb. 13. The bill, which would encode safe harbor banking practices, is championed by the National Cannabis Industry Association and supported by the Marijuana Policy Project. Though it’s only a draft, a final version could be introduced shortly thereafter, said Morgan Fox, the communications manager for the National Cannabis Industry Association. “There’s a number of comprehensive bills being introduced that all approach the issue from different directions,” he said. “Almost all of them would basically solve the banking issue.” Since the midterm election, many of the “obstructionist” legislators have left Congress and the NCIA feels the banking bills have a better chance of passing, Fox said. The particular bill being discussed on Feb. 13 would carve out a safe harbor for banks, but he said he had never heard of a bank being prosecuted for serving the cannabis industry. There aren’t very many of them, though. Though FinCEN’s official tracking documents roughly 486 banks maintaining service for cannabis businesses, Fox said the true number is significantly smaller than that — something like 40 financial institutions nationally have cannabis departments, he said. Having access to banking services is important for cannabis businesses from an economic angle and for states from transparency and regulatory perspectives, he said. “Without access to banking, they have to institute much more expensive measures … even paying taxes, security,” he said. “I think it’s really important from a regulatory standpoint.” Martin said Credit Union 1 has plans in place to unwind the program if the federal government is uncomfortable with it, but they’re fairly confident in the plan they’ve written out. One of the core things the bank hopes for is to normalize the legal cannabis industry as members of the business community in the state. “We don’t have a political or moral sense about this. You’re not going to see us sponsoring (bills) … but because it is legal in the state of Alaska, we’re going to service it like a business like any other,” he said. Elizabeth Earl can be reached at [email protected]

GUEST COMMENTARY: An honest budget: sustainable, predictable, affordable

One promise I made to Alaskans was to present you with a permanent fiscal plan, one where we tackle our economic challenges and start bringing fiscal responsibility to Juneau. Combined with a series of legislative proposals and constitutional amendments, a major element of that commitment is addressing the state’s out-of-control spending. This year we’re presenting the Legislature with an annual budget that takes an open and straightforward approach. Rather than starting with the bloated budgets of the past and asking ourselves “where do we cut,” we did exactly what Alaskan families and small businesses are forced to do when faced with financial hardship. We started from the ground floor and built an annual budget where the amount we spend aligns with the amount we bring in; an approach that built a budget up, rather than reducing a budget down. As we’ve all seen, for too long politicians haven’t been honest when it comes to the numbers and the seriousness of our fiscal woes. We’ve seen misleading figures, confusing budget tactics; we’ve relied on massive amounts of savings and Alaskans’ PFDs to grow the size and reach of government — all while never seriously tackling the issue of spending. Today I’m here to say: those days are over. We can no longer spend what we don’t have and we can’t pretend otherwise. The economic outlook Alaska faces today is dire. After burning through nearly every dollar in the state’s savings account — more than $14 billion over the last four years — we are faced with another $1.5 billion deficit, and less than a year in reserves. The gradual glide path approach, which lawmakers called for repeatedly since the rapid decline in oil prices, never came to fruition. Oversized budgets and outmatched spending continued with little recourse. In building this budget, my team and I worked across government to identify efficiencies, duplications, and cost savings to restore the core principles of government responsibility. We built a balanced budget where expenditures do not exceed revenues; a budget that shows Alaskans the realities of where we are and the tough choices that have to be made. We looked for logical constraints on government and built a budget based on these core tenets: Expenditures cannot exceed existing revenue; The budget is built on core functions that impact a majority of Alaskans; Maintaining and protecting our reserves; The budget does not take additional funds from Alaskans through taxes or the PFD; Sustainable, predictable and affordable. The foundation to my budget is based on the principle that expenditures cannot exceed revenues. For the first time in decades, our budget will match the money we spend as a state with the revenues we bring in as a state. This year, based on the revenues we have identified and the dollars made available through previously enacted law, we built a budget based on $4.6 billion in revenues. The differences in funding, the consolidation of core services, and the changes to programs take a serious approach to our financial situation, while reflecting a sincere commitment to put the full amount of the Permanent Fund Dividend back into the hands of Alaskans. Our focus also prioritized the core functions of government, functions that impact a majority of Alaskans. This truth-in-budgeting-approach examined required state obligations, the size and scope of government, services and needs, and resulted in a budget that for the first time gets our fiscal house in order. It includes a number of government-wide initiatives to improve effectiveness and refocus spending, including constraints on government travel, limits on top-tiered government wages, reforms to government procurement, and reorganization of staff and departments. While some will describe these and other reforms as drastic, I say to them: show me a proposal that stops our unsustainable spending trajectory and accounts for our current financial dilemma. In order to protect what little savings remain, we have prioritized maintaining and protecting what little we have left in reserves. The days of spending everything we have and avoiding the tough decisions for our future must end. If this spend-at-all-cost mentality is allowed to persist, Alaska’s economic outlook will only grow darker and the future of the Permanent Fund Dividend will diminish by the day. Based on the will of the people, and a sincere belief that we can’t tax our way out of these fiscal challenges, my budget proposes no new revenues from Alaskans. While some wish to ignore Alaskans and propose billion dollar taxes and PFD grabs to close our financial gap, I’ve made clear that this is out of line with the core beliefs of most Alaskans and the promises I made on the campaign trail. And finally, our budget takes a sustainable, predictable and affordable approach. We must reset the spending clock and realign expenditures with the realities we face today. We must transform government at its core, right size spending, eliminate duplication and prioritize programs to match our realty. Though we’ve been blessed financially in the past, we must establish a government that can weather the storm of low oil prices and save for the next generation of Alaskans. As your governor, I will always be honest with you. I will treat the people’s money with the care and respect it deserves. As the details of my budget proposal are unveiled over the coming days, I ask all Alaskans to consider the alternative. Continuing down the path of oversized budgets, outsized spending, and out-of-line priorities will only jeopardize the future of our state. For those demanding more spending, including those in the Legislature, we must respectfully insist: where will the money come from? We must be honest with ourselves and align our spending with our revenues in order to bring about a brighter future for the Alaskan people.

Report touts benefits of Medicaid expansion; legislative lawyers conclude no rollback without statutory change

Repealing Medicaid expansion would pull more than a half-billion dollars out of Alaska’s economy and likely extend what is already the longest recession in the history of the state, according to an analysis commissioned by one of the state’s leading health care groups. The report for the Alaska State Hospital and Nursing Home Association concludes that repealing Medicaid services for the expanded class of eligible recipients from Alaska’s Medicaid program would have a negative economic impact of $556 million. In turn, Alaska would lose 3,690 jobs, according to the report done by Halcyon Consulting released Feb 11. More than 1,800 of those jobs would come out of hospitals, private practice offices, outpatient centers and other health care providers. Dental offices would lose an estimated 174 jobs, according to the report, while smaller, secondary impacts would be felt through job losses in the real estate, air transportation and other sectors. The next day, on Feb. 12, House Democrats released an analysis from Legislative Legal Services that concludes it would take a statutory change for Gov. Michael J. Dunleavy to roll back Medicaid expansion. According to the Legislative Finance Division, overall spending on Medicaid in Alaska has increased from $1.7 billion to more than $2.3 billion since fiscal year 2015, but the state’s portion of that has actually gone down from $724 million in 2015 to $677 million, which includes a $15 million supplemental budget request, in the current fiscal year. Economists generally expect Alaska will come out of the current recession, which started in late 2015, towards the end of this year. The state Labor Department is officially forecasting Alaska will add approximately 1,400 jobs this year after losing roughly 12,000 over the last three-plus years. However, if and when Alaska’s economy rebounds will largely depend on how legislators and Dunleavy resolve the state’s roughly $1.6 billion budget deficit projected for the 2020 fiscal year that begins July 1. The health care sector — partly driven by new Medicaid expansion funding started in fall 2015 — has defied overall state economic trends and added roughly 3,700 jobs, for about 11 percent growth, since 2015, according to Labor statistics. The longstanding policy debate over whether the State of Alaska should offer Medicaid to individuals who now qualify for it under the expanded eligibility guidelines of the Affordable Care Act has been at the forefront of state politics since former Govs. Sean Parnell first rejected Medicaid expansion in November 2013 and Bill Walker accepted it in 2015. The federal Affordable Care Act allows states to expand Medicaid coverage to cover uninsured low-income adults up to 138 percent of the federal poverty level. A 2012 U.S. Supreme Court decision struck down the ACA language requiring states to expand Medicaid and left it to each to decide whether to expand eligibility. Proponents highlight the fact that procedures and other costs for expanded-class Medicaid recipients are covered by at least 90 percent federal funding with a corresponding 10 percent state general fund match; a matching rate similar to federal transportation funding programs Alaska routinely attempts to maximize. Costs for more traditional Medicaid recipients are covered 50-50 by the feds and the state, while Medicaid coverage for Alaska Natives is paid 100 percent by the federal Indian Health Service. Expansion detractors argue the program simply adds to overall government health care costs for individuals — low-income, working-age adults — who were never intended to be covered by Medicaid when it began. There also are no assurances the federal expansion-class support won’t be arbitrarily reduced at some point, then leaving the state to pay more, they contend as well. Halcyon Consulting founder and longtime Alaska economist Jonathan King said in a formal statement that the projected negative impact of repealing Medicaid expansion would mostly be a result of lost federal funds. In the 2018 fiscal year the State of Alaska spent $15.6 million to match $404.5 million in federal funds to cover more than 50,500 Medicaid recipients under the expanded program. The federal funding rate has gone from 100 percent in 2016 to 93 percent in calendar 2019 and in 2020 will level out at 90 percent per year. Expanded-class enrollment estimates from before Walker unilaterally accepted federal Medicaid expansion funds in September 2015 ranged from roughly 43,000 more than 64,000. Economy and health care analysts also believe the ongoing recession has added individuals once covered by employee-sponsored health care to the state’s Medicaid rolls. “Elected officials can debate the politics of the issue, but not the numbers; economic analysis shows how rejecting these federal dollars would hurt Alaska’s economy,” King said. “Our economy is too fragile (to) absorb this size hit without extending the recession.” According to the report, strictly cutting Medicaid expansion would pull, based on fiscal 2018 figures, $420 million from the state budget, result in $283 million in lost wages from 4,041 fewer jobs across the state and have a cumulative negative economic impact of $627 million. However, the report presumes that a small portion of the expansion population would then find health insurance through another means, thereby lessening the net negative impact. Alaska State Hospital and Nursing Home Association CEO Becky Hultberg said she has not heard of any specific plans from the Dunleavy administration to repeal Medicaid expansion or make other wholesale changes to the state’s program, which includes many optionally covered services and procedures, but noted administration officials have stressed that everything is “on the table.” A spokesman for Dunleavy did not return a request for comment in time for this story. In addition to Walker accepting federal funding for Medicaid expansion in 2015 — then 100 percent federally funded — despite attempts by the Republican-controlled Legislature to stop him in court, in 2016 the Legislature passed a Medicaid reform package aimed at reducing the state’s annual bill. The state’s savings in that bill were estimated at the time to total more than $365 million over six years, with most of that coming from targeted efforts to and maximize the value of the state’s Medicaid matching funds shift state costs to the federal government. The state has also reduced its Medicaid reimbursement rates paid to providers. “I think the question for not just our state but for our country is: How do we take care of people and do it in a fiscally sustainable way?” Hultberg said. “We have lots of conversations about how we do one or the other but the reality is that we have an obligation to do both.” She added that the U.S. already provides health care to people who can’t afford it but that care usually comes via emergency departments; often the least effective and most expensive way it can be provided. Legislative Legal: Gov must accept expansion funds While the federal money for expanding Medicaid services was accepted with executive authority, the governor cannot selectively reject Medicaid funding without a change to state law, at least according to an opinion offered by the nonpartisan Division of Legislative Legal Services. The House Democrat-led coalition released a memo on Feb. 12 from Legislative Legal Director Megan Wallace that states, “given the precedent in Alaska, without a substantive law change, if the governor refused to accept all or part of the federal funding for Medicaid expansion, that act alone would not be enough to reverse Medicaid expansion.” The memo is dated Dec. 6 and addressed to then Rep.-elect Zack Fields, D-Anchorage. House Democrats emphasized the economic boost the federal money — nearly $1 billion so far — offers the state in formal statements. “Medicaid expansion has reduced the cost of uncompensated care at hospitals, which saves money for Alaskans who are covered by private health insurance,” Fields said. “Alaska’s leading business organizations advocated for Medicaid expansion based on a need to reduce uncompensated care and bring new investment to the state.” Gov. Walker in 2015 accepted the expansion money by invoking state statutes that call for all Alaskans who are eligible for federal Medicaid coverage to be offered that coverage and allow the governor to accept federal program recipients in excess of what the Legislature appropriated for as long as the appropriation was made in the budget. In other words, the governor can authorize the state to spend more federal money than the Legislature planned for as long as the new money is going to an existing appropriation. An Alaska Superior Court ruling upheld that authority in a subsequent lawsuit led by Republican legislators against Walker over the issue. However, according to Wallace, the governor cannot parse out and reject the Medicaid expansion funds — or any other subset of federal Medicaid funding for that matter — because all Medicaid funds are lumped together in a single $2 billion-plus “Medicaid Services” appropriation in the budget. “Medicaid expansion cannot be stopped through the failure to accept or appropriate full funding, it would instead impact all Medicaid services,” Wallace wrote. As a result, any restrictions on how Medicaid funding can be spent must come through a law change, according to Wallace. Officials in the Dunleavy administration have said a suite of separate but related bills will accompany their much-anticipated budget release Feb. 13 to address formula funded programs and other issues. ^ Elwood Brehmer can be reached at [email protected]


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