Hatchery production back on Board of Fisheries agenda

KENAI — The Board of Fisheries will once again have to tangle with the issue of hatchery pink salmon production at its upcoming work session Oct. 15-19 in Anchorage. Two of the agenda change requests, or ACRs, filed for the work session address concerns about hatchery production. One references an issue from the early 2000s, with concerns about the impact of salmon releases in Southeast Alaska, while the other is a revival of an emergency petition about a Valdez-area hatchery the board considered and voted down in July. Both are linked to overall concerns about the number of hatchery pink salmon being released into the Gulf of Alaska each year. The first, from Fairbanks Advisory Committee chair Virgil Umphenour of North Pole, asks the board to reduce overall hatchery production to 75 percent of what it was in 2000. He states in the proposal that the state and hatcheries agreed to cap production in 2000. He referenced the second request, filed by the Kenai River Sportfishing Association. KRSA’s ACR asks the board to block the release of salmon resulting from an egg take increase at Valdez Fishery Development Association’s Solomon Gulch Hatchery this summer and permanently cap the hatchery’s egg take capacity. It’s virtually identical to an emergency petition the board previously turned down, saying it didn’t meet the criteria for an emergency. At the time, the emergency petition was backed by a broad coalition of sportfishing groups from around Southcentral Alaska, objecting to the increase because of the risk of Prince William Sound hatchery pink salmon straying into other streams. They cited data from a Lower Cook Inlet salmon otolith analysis in 2016 and 2017, showing that Prince William Sound hatcher-origin pinks outnumbered local stocks in a number of streams. Ricky Gease, the executive director of the Kenai River Sportfishing Association, said the organization chose to refile the request as an ACR because the board said they would take it up later, just not as an emergency petition. “They said we’d discuss it in a meeting in October,” he said. “Well, this is October, and there wasn’t a place for it on the agenda.” The board has a similarly stringent set of criteria for accepting ACRs, one of which is a requirement that an effect of a regulation threatens the conservation of a fishery. In its request, KRSA noted that a number of scientific papers have connected increased pink salmon numbers in the Gulf of Alaska is decreased king and sockeye salmon survival. Increased returns and the risk of straying create a conservation risk, the request notes. Gease noted the concern for impacts to sockeye and king salmon stocks, which are important to commercial, recreational and subsistence fisheries around the state, particularly king salmon on rivers like the Kuskokwim and the Yukon, where the Alaska Native people have long depended on them for winter stores. The board turned down the petition in July in part because there had been a public process for the egg take increase, through the Regional Planning Teams and the Alaska Department of Fish Game, over several years. Scientists from the state’s various hatcheries presented a packet of information to the board at the time reviewing a number of the studies connecting pink salmon to decreased survival of sockeye and kings, stating that several of the studies cited have flaws. The hatchery managers say they are interested in research about the impact of pink salmon releases into the North Pacific — that’s why they’re paying into the 11-year study coordinated by Fish and Game and the Prince William Sound Science Center to examine hatchery-wild salmon interaction. The question of the impact of pink salmon on the entire North Pacific ecosystem is a complicated one, said Mike Wells, the executive director of the Valdez Fisheries Development Association. He noted ongoing research work through the North Pacific Anadromous Fish Commission on the same subject. “The carrying capacity question is a big, big question,” he said. “I think what’s important to recognize is it’s an international question.” Casey Campbell, the executive director of the Prince William Sound Aquaculture Corporation, cited data that only about 15 percent of the pink salmon in the North Pacific Ocean are hatchery-origin. He also pointed to the hatchery-wild study as a major piece of the puzzle to understand the dynamics of pink salmon in the Gulf of Alaska, with some preliminary data expected in December. Wells said the hatchery managers are watching the board’s decision at the upcoming meeting to determine a future direction for its involvement hatchery management. Until now, the board’s function has been primarily allocative, leaving hatchery management decisions primarily to ADFG. “I think what’s important with this upcoming meeting in October is that there will be a forum and a discussion,” Wells said. “The public will have an opportunity to come and discuss their concerns with the board. That’s a good venue to come and get concerns out but at the end of the day what has been practiced for 40 years in hatchery production is that it has been centered around science.” Wells, Campbell and Cordova Mayor Clay Koplin all wrote op-eds for newspapers in various regions of the state in recent months, presenting an argument for hatcheries as supporting local communities and jobs in the seafood industry. Wells said that connects with the research about the effects of hatcheries on wild stocks. “The hatchery operators around the state recognize that there is a need to educate the public about what we do,” he said. “That would include the types of salmon species that we raise, for the user groups that we benefit, and about the science work that’s being done.” Elizabeth Earl can be reached at [email protected]

Guides honored for catch-and-release program

SOLDOTNA — Like many efforts involving Cook Inlet salmon, Fish for the Future started with frustration. Unlike many of those, it didn’t end there. The brainchild of two Soldotna-area residents, Fish for the Future is both amorphous and very clear. The goal hasn’t changed in its three years of operation: make sure more Kenai River king salmon make it onto the spawning beds, primarily through encouraging sport fishermen to release the king salmon they catch. What it exactly is isn’t as defined. Co-founders Greg Brush and Mark Wackler essentially run a contest that awards prizes for the best photos and videos of people releasing the Kenai and Kasilof river king salmon they caught. Virtually everything happens on Facebook, and both carefully keep their names off the page. Brush said that was a conscious choice because of the negativity long associated with the salmon fisheries on the Kenai River. He and Wackler both work as guides, but they wanted Fish for the Future to stand on its own and not carry the connotation of being a “guide” project. “We’re just two concerned residents,” he said. After three seasons of increasing growth, though, with photos submitted almost every day during the three-month fishery, their work is getting some attention. The Kachemak Heritage Land Trust, a regional land conservation trust based in Homer, awarded Fish for the Future its annual “Kingmaker” award, intended to recognize individual or group contributions to conserving salmon, Executive Director Marie McCarty and Communications and Development Director Denise Jantz noted in a letter accompanying the award. “By creating the simple, non-allocative, education-based Fish for the Future program, you have ensured that more king salmon will make it to their spawning grounds upstream and will be in our rivers far into the future,” the letter states. “As the Fish for the Future website states, this important catch and release program allows anglers opportunity while minimizing impact.” When Brush and Wackler conceived the idea three years ago, it was based on frustration that while Kenai king runs kept coming back weaker, smaller and later, people continued to proudly post pictures of huge fish they caught. Both had converted their guide businesses to catch-and-release only for kings years before, explaining to each prospective client that Kenai kings are special but in trouble and they’d release each one. Both expected that the conversion would cost them business, but they say it hasn’t set them back; some clients would choose not to come if they couldn’t keep fish, while others understand. They modeled Fish for the Future after other catch-and-release programs, offering prizes for photographs of released fish — not necessarily the biggest fish, just the best photo. The first year, they got a few donated prizes from various companies, including plane tickets and fishing gear. By the second year, they had people coming to them, including fishing gear giant Rappala, to donate giveaway items. “We had thousands of dollars worth of donations, and we were like, ‘How do we get these in the hands of people?’” he said. Kenai king salmon runs have been declining in recent years, most markedly beginning in 2008. The shortages, reaching a trough in 2012 when an extremely weak run forced commercial and sport fishing closures, have intensified longstanding tensions between user groups in the region. There are two words Brush says no one will find in any of the Fish for the Future posts: “commercial” and “allocation.” They make a point to stay positive and encouraging of catch-and-release rather than combative about those who don’t release their fish. Catch-and-release has helped other sport fisheries around the world come back from population declines. Michigan fisheries managers began using catch-and-release as a conservation mechanism for rainbow trout in the 1950s, and the United Kingdom has required catch-and-release for threatened Atlantic salmon stocks for years. In the Bristol Bay area, anglers are required to release all the rainbow trout they catch. Brush cited the example of the increasing use of catch-and-release in marlin sportfishing — with millions of dollars hinged upon catching the specific fish, catch-and-release has helped preserve the populations and thus the economies that depend on them. “It takes a culture change to go from (holding up a fish) as your advertisement to where you’re down in the water, release is your advertisement,” Wackler said. “It might be a different group of clientele or whatever, but it works. I think it’s been proven that works all over the world.” Catch-and-release remains controversial among some fishermen because of the potential mortality to the fish, but Brush said the way he sees it, there’s a better chance of survival for a released fish than a retained one. The evidence they’ve seen, both in data and anecdotally, indicates that a major percentage of the released fish survive, he said. “Part of Fish for the Future is educational in nature — if you’re worried about seven out of a hundred dying, I understand that,” he said. “It’s not perfect. Seven out of a hundred is a shame. But it’s seven out of a hundred. It’s not fifty out of a hundred or a hundred out of a hundred.” Right now, Fish for the Future exists as a Facebook page and nothing more — Wackler and Brush don’t even accept the donated prizes, they just connect the prizewinner with the donor. In the future, they’re considering new avenues to keep it going, they said. ^ Elizabeth Earl can be reached at [email protected]

Cook Inlet fishermen blame rigid management for season losses

KENAI — Cook Inlet’s commercial fishermen feel that mandated closures played a part in them missing the boat on many of the salmon they could have harvested this season. At a meeting in Kenai on Sept. 28, Upper Cook Inlet commercial fishermen grilled Alaska Department of Fish and Game Commissioner Sam Cotten and Gov. Bill Walker with questions about regulation of the fishery and policy changes to support it in the future. Some of the concern is about inflexible management. A number of the questions Cotten fielded were about why Kasilof area setnetters were closed, allowing sockeye to go past for the sake of the Kenai River escapement, while the Kenai River personal-use dipnet fishery remained open. By the end of the season, the Kasilof River sockeye escapement goal had been exceeded, with the Kenai in the middle of its goal range. Toward the end of the season, drift gillnet fishermen also target the silver and chum salmon on the west side of the Inlet. Georgie Heverly, who moderated the discussion, asked about the delay in openings on the west side of Cook Inlet in August, when chum and silver salmon were returning. “Specifically for the drift fleet, we sat around for weeks waiting for Chinitna to open, waiting for an aerial survey,” she said. “It was really unfortunate — a lot of us, the younger generation who don’t own a boat, we have boat payments. We hang on to scrape up what we can from that silver run in August, and that was a huge financial burden for us, to sit around for three weeks, waiting for (ADFG) to get data on Chinitna.” Cotten said he hadn’t heard of that issue particularly, but said weather and flight scheduling can delay aerial surveys. The department relies on aerial surveys when there are no weirs or sonars on stream systems but they need to estimate run sizes for a fishery. In this case, the fishermen said that had the fishery opened earlier, they could have salvaged their season on the silvers and chums after a dismal sockeye run, but they missed them as they passed up the Inlet. That resulted in a great catch for the setnetters in the northern district, said Dave Martin, a longtime drift fisherman in Upper Cook Inlet. The indices at the test fishery in Anchor Point showed high numbers of silver salmon, which are not enumerated by sonar or weir in any Kenai Peninsula stream system, were high this year, but the drift fishermen were closed and missed them, he said. “We could’ve salvaged a halfway decent season on the other species, the chums, the pinks and the silvers, and then it came out in the middle of August that the silvers in the test fishery were the largest we’ve ever had,” he said. “That’s the first we heard about it.” Those closures required under the management plan have long been a sticking point for Upper Cook Inlet’s commercial fishermen, who say the lack of flexibility makes the fishery ineffective and allows too many fish to escape into the stream systems. Martin said the fishery managers need to have the flexibility to go outside the management plans to prosecute an effective fishery. Dates play a major role in the management, and this year, when more than half the Kenai River sockeye run arrived in August — the first time in Fish and Game’s records — much of the fleet was shifted away from the Kenai or out of the water by Aug. 15 by regulation, with more sockeye still coming in. Cotten said the department has some flexibility to go outside the plans but cannot completely bypass them. He said in answer to concerns about the scientific accuracy of established escapement goals, the department would make a “very, very” serious effort to have public meetings on escapement goals in the Cook Inlet. “The problem is it’s very difficult to just completely ignore the Board of Fisheries,” he said. “I find it very, very difficult to ignore the management plans they’ve laid out.” Walker said he’s made a point not to be involved in fisheries management decisions during his administration, deferring to Cotten and ADFG. “I have absolutely stayed to my word, I don’t tell them how to run the department,” he said. “I just don’t have those credentials.” Walker, who is up for reelection in November, recently hired Ephraim Frohlich as a fisheries advisor in his office. He added that he hopes the Cook Inlet Salmon Task Force he appointed, intended to bring together user groups from around Cook Inlet to discuss the allocation and issues facing Cook Inlet fisheries. Early in the process, saying the task force was aimless, the Kenai River Sportfishing Association withdrew from the process, though other stakeholder groups have stayed involved. The task force’s first meeting, pending appointment of members, is scheduled for Oct. 12 in Anchorage. “We have been meeting about this a lot, and we have been talking about it a lot,” he said. “I’m really hopeful that what we’re trying to do on this task force, something is going to come of that.” Walker has found controversy in his board nominations as well. In 2015 he told former chair Karl Johnstone, who represented recreational fishermen on the board, that he would not be replaced and when Johnstone resigned in response Walker named UCIDA Executive Director Roland Maw to replace him. That nomination was scuttled when Maw faced charges for applying for resident hunting and fishing privileges in both Montana and Alaska as well as illegally receiving Permanent Fund dividends. KRSA opposed Kenai area biologist Robert Ruffner, Walker’s next choice, and he was narrowly defeated in the Legislature before Walker nominated him again the following year and he was approved. Encouraging young fishermen Part of the meeting’s tone was also about how to encourage young fishermen to enter and stay in the Cook Inlet fishery. But with increasing cost, relatively low earnings and unpredictable openings, Cook Inlet’s commercial fishermen are concerned about the future of the fishery with fewer young people attracted to making a career of it. In 2017, the average Cook Inlet drift gillnet permit holder brought home just about $28,000, according to the Commercial Fisheries Entry Commission. That’s about two-thirds of the average permit price that year of $42,400. Over the past three decades, average gross earnings for the drift fleet have fluctuated wildly from year to year — from a high of more than $133,000 in 1988 to a low of $7,947 in 2001 — and 2017 is far from the lowest amount they’ve earned in a season. The east side set gillnet fishery is a little better off, where the average permit holder earned $23,991 in 2017, about $8,000 more than the 2017 permit value of $15,600. Like the drifters, their average earnings per season fluctuate, varying from a high of $91,099 in 1989 to a low of $5,551 in 2012, according to the CFEC. Elizabeth Earl can be reached at [email protected]

COMMENTARY: Money from outside Alaska distorts policy debates

Since its inception, the Alaska Policy Forum has been guided by a vision of continuously growing prosperity in Alaska. Our work is to support policy and leadership that maximizes individual opportunity and empowers Alaskans to pursue that opportunity freely and with confidence. We believe in our state and its people. We are optimistic and believe a bright future lies ahead. To ensure that bright future, Alaska’s voters and policymakers need to be able to make informed decisions based on a solid foundation of knowledge, transparency, and clarity regarding issues that will shape our path forward. Too often, in today’s political landscape, that’s simply not possible. This is, in part, because the high-profile debates currently underway in Alaska are being increasingly influenced by an influx of serious money from outside of our state. This growing pool of funding is being used to distort debates and advance agendas that are driven not by the best interests of our state, but by activists, advocates, foundations, and billionaires from all over the country. This money is changing the face of policy in Alaska, and it’s doing so behind closed doors. That’s bad for our state and runs contrary to the principles of sound policymaking. That’s why the Alaska Policy Forum is launching a new site focused on detailing and chronicling the Outside money that is impacting policy in Alaska and putting the agendas of environmental activists ahead of our own. This isn’t a new or unfamiliar dynamic for our state. For decades, Outside environmental interests opposed to resource development in Alaska have sought to influence local, state, and federal decisions impacting Alaska policy — like opening up the Arctic National Wildlife Refuge. They continue to do so today and one prominent advocacy campaign stands out as the flagship of their effort: Ballot Measure 1. Ballot Measure 1 would overhaul the way Alaska regulates permitting for development projects ranging from energy infrastructure to roads and bridges. Supporters of Ballot Measure 1 state they are acting to protect salmon. The reality of Ballot Measure 1 is much different and it has the potential to have a serious detrimental impact on both existing and future economic development in Alaska. What’s more, implementation would require additional state spending to meet the regulatory requirements. The burden of the policies enacted by Ballot Measure 1 would fall upon state regulators, creating an ever-larger strain on our already strapped state budget. Who, then, is behind Ballot Measure 1? Those supporting Ballot Measure 1 include a handful of local groups, including the official Yes for Salmon campaign as well as Stand for Salmon, the Alaska Center, Salmon State, and Wild Salmon Center organizations. But the money behind those groups isn’t local. In fact, there’s a web of outside money behind Yes for Salmon. Take the New Venture Fund, a Washington, DC-based entity with a long history of dropping into local debates with big money and big ideas about how to shape local issues in a way that advances broader environmentalist priorities. The New Venture Fund contributed at least $400,000 to help establish Salmon State and they are also listed as the employer of the Alaska Center activist managing the Yes for Salmon effort. But the Outside money in Alaska goes much deeper than this. Nearly all of the money New Venture Fund pumped into Salmon State came from the California-based Hewlett Foundation _ another group known for extreme climate activism. Other big names — like billionaire activist Tom Steyer and Keystone XL agitators Bold Alliance — are plying their trade in Alaska in an effort to impose an agenda contrary to our own. Alaskans deserve to know who’s pulling the strings in our state. In the coming weeks, the Alaska Policy Forum will be looking into the Outside money that is impacting policy in Alaska. Our mission is to empower and educate Alaskans and policymakers, and ultimately to help cultivate a pro-growth policy environment built on principles of transparency and honesty. The debate we have today will inform the decisions we make at the ballot box and will in turn shape our state’s future. We’ll be there every step of the way, working to shed light on the web of Outside money behind Yes for Salmon — and broader efforts to derail Alaska’s economic success. ^ Larry Barsukoff, JD/MBA, is the Director of Operations for the Alaska Policy Forum.

COMMENTARY: China tries to hide illegal trade practices as tariffs hit

As President Trump imposes new tariffs on Chinese exports, Beijing is countering with a public relations offensive. In a recent “white paper,” China’s State Council argued that any trade dispute is entirely the fault of the US. Beijing claims that it absolutely plays by the rules of the World Trade Organization, and doesn’t hack other nations’ intellectual property. One shouldn’t expect less of China’s autocratic regime. After racking up trillions of dollars in trade surpluses with the United States over the past few decades, it would indeed be surprising if Beijing admitted to any faults, or chose to abandon its winning strategy. But facts are stubborn things. When China joined the WTO in 2001, it promised to move to a market economy and to compete on a free-market basis with advanced nations. President Bill Clinton promoted China’s WTO accession, saying it would make them “more like us.” That never happened. The Coalition for a Prosperous America has identified many instances where China is supporting and protecting its own industries with government subsidies and preferential treatment. And as researchers Usha and George Haley have documented, China took entry into the WTO as the beginning of an opportunity for “aggressively subsidizing targeted industries in order to dominate global markets.” The Haleys found $27 billion in energy subsidies that China’s steel industry received between 2000 and 2007, making it the world’s No. 1 steel producer. Similarly, China’s paper industry received $33 billion in government subsidies. Such massive subsidies vastly expanded China’s economy. And while US consumers often assume that China’s manufacturing advantage comes from cheap labor, the Haleys found that labor amounted to “between 2 percent and 7 percent of production costs” for such key industries as solar, steel, glass, paper, and auto parts. Yet China routinely sold such goods for “25 percent to 30 percent less than those from the U.S. or the European Union,” thanks to industrial subsidies, a currency manipulated to below-market levels, and import controls. All of this flies in the face of China’s WTO obligations, with Beijing having promised to halt the deliberation undervaluation of its currency. Similarly, the multi-billion dollar subsidies that Beijing doles out to its state-owned enterprises remain actionable under WTO rules. Essentially, the Chinese government chose to specialize in what they believed would make China a superpower, and they’ve shown remarkable success in transforming a desperately poor, backward dictatorship into the world’s No. 2 economic power. None of this is acknowledged in China’s recent white paper, however. Nor does China admit to hacking, intellectual property theft, or forced technology transfer. American multinational companies often voluntarily enter into agreements to set up joint ventures in China. But the price of doing business is the transfer of technology to Chinese “partners.” Such deals provide only short-term benefit before China has sucked out all the relevant technology — and begins favoring its own suppliers. The European Chamber of Commerce in China has become increasingly concerned about this coerced technology transfer, stating: “foreign companies are often pushed to transfer technology as the price of market entry, which is in contravention of (China’s) commitments as a member of the World Trade Organization.” Finally, there are China’s illegal forms of technology transfer, including industrial espionage, reverse engineering, and evasion of US export control laws. A June report by the White House identified 27 different techniques by which China’s economic aggression threatens US intellectual property. It’s estimated that cyber-espionage costs U.S. industry an astonishing $400 billion per year, with 90 percent originating in China. China doesn’t appear to have modified its behavior since President Donald Trump took a more aggressive tone on trade. And Beijing’s claims of fair play cannot whitewash such self-serving behavior. The U.S. and China are heading towards economic disengagement unless Beijing modifies its behavior. If that happens, China will be the loser. Jeff Ferry is the research director of the Coalition for a Prosperous America.

COMMENTARY: A reasonable approach to protecting Alaska’s wild salmon and habitat

I’ve always considered living in Alaska special. While I grew up in a big city, I fell in love with the outdoors as a biology major, and was thrilled to land a job with the U.S. Fish and Wildlife Service. Better yet, I treasured the opportunity, along with my husband, to have raised our two kids — now in their 20s — surrounded by world-class outdoor recreational opportunities and an appreciation for being able to catch and eat wild salmon amidst incredibly beautiful surroundings. I spent 19 years as Field Supervisor for the U.S. Fish and Wildlife Service’s Anchorage Field Office, where we evaluated how proposed water projects could impact our state’s fish and wildlife, and how to best mitigate those impacts. I also oversaw the Service’s fish habitat restoration projects throughout Southcentral and Western Alaska. From that vantage point, I see Ballot Measure 1 as a balanced, reasonable, and responsible approach to protect wild salmon and their habitats, while supporting sustainable job opportunities for all Alaskans. The Alaska departments of Fish and Game and Environmental Conservation, along with other federal agencies, were typically a partner in those project reviews I mentioned. But over the years, the state’s involvement shrunk, as state budgets shrunk. Meanwhile, the need for close scrutiny for large projects in fish habitat has grown with the increased scale of recent projects. Ballot Measure 1 will right-size state involvement in developments around Alaska. Its tiered system ensures projects meeting specific scientific criteria would not need a permit and would proceed as they now do. Others would require either minor or major habitat permits depending on established standards. It would also allow general permits for similar activities that would not cause significant adverse effects and where such effects can be avoided by certain conditions and stipulations. This is similar to the general permit process for wetlands developments in Anchorage that has been effectively implemented by the municipality over the past few decades. Ballot Measure 1 will rightfully shift the greatest onus to the developers whose proposals would cause the greatest impacts to our anadromous habitats. It provides an opportunity for public input on those very large, high-impact projects. Also important, Ballot Measure 1 will require a realistic performance bond to restore habitats where permittees are not in compliance with required permit conditions and stipulations. Let’s look at habitat impacts and restoration. The cost and feasibility of restoration is steep. From 2011-16, one program, the National Fish Habitat Partnership and its partners, invested nearly $14 million in habitat restoration projects just in Bristol Bay, the Mat-Su, and the Kenai. Fish habitat restoration in the Copper River Delta, Buskin River Watershed, and Kenai Peninsula is being been funded with over $22 million of Exxon Valdez Oil Spill funding for fiscal years 2015-22. While significant, available funds only address some current restoration needs, for example, about 20 percent of blocked crossings on the Kenai. In the Mat-Su, over $6 million was required from fiscal years 2005-13 to address about 20 percent of blocked salmon streams. These projects primarily restore relatively small sections of stream banks, replace poorly designed culverts blocking fish, and remove other barriers to upstream fish passage. None involve major mining projects or other extensive habitat alterations from one single project. We do not even know if it is ecologically feasible to restore salmon habitats that are strip-mined or undergo major changes over a larger area. Look at the billions of dollars that have been spent — with little success — on salmon restoration in the Pacific Northwest. Once the habitat is gone, populations are gone. Given the high stakes, the state’s estimated $2.75 million cost for implementing Ballot Measure 1 would be a shrewd, proactive investment. That money will be spent on biologists, managers, and engineers to conduct the careful analyses, determine needed conditions, and develop the permits for major projects. Those analyses will protect the thousands of rural residents for whom salmon is a primary, reliable, affordable, and nutritious food source. Implementing Ballot Measure 1 will safeguard more than 30,000 jobs that directly depend on Alaska’s fisheries— our largest private sector employer. And it’s insurance for the $1.4 billion in fishing recreation economy that’s driven by outside visitors to Alaska. It ensures the continued place for our salmon resources in the culture and lifestyles of nearly ALL Alaskans — including our children. Salmon are a renewable resource — as long as we take care of their habitats. That is what Ballot Measure 1 will do, and that is why I encourage you to help pass it by voting Yes on November 6. ^ Ann Rappoport is a 39-year Alaska resident, now retired after a 33-year career with the U.S. Fish and Wildlife Service in Alaska, including 19 years as Field Supervisor in the Anchorage Fish and Wildlife Field Office.

Eklutna hydro power a piece of puzzle as Chugach, ML&P refine sale

Officials are on the clock to hash out the all-important details of the $1 billion sale of Anchorage Municipal Light and Power to Chugach Electric Association in time for the necessary approvals. Nearly two-thirds of Anchorage voters consented in April to a proposal from Mayor Ethan Berkowitz’s administration to sell the municipality-owned electric utility to the neighboring Chugach cooperative, but that vote was just the start of the real work in a deal Municipal Attorney Becky Windt Pearson called “immensely complicated.” The resolution voters approved requires the Anchorage Assembly and Chugach board of directors to subsequently approve the final terms of the sale by Dec. 31. That ostensibly sets a much sooner deadline for final negotiations, as both bodies will need time to review and debate the purchase and sale. Windt Pearson said the negotiating teams have committed to getting an asset purchase agreement done by Oct. 24 in advance of Assembly public meetings and work sessions expected in November, adding that about half of the transaction documents have been negotiated. “We started with a very rudimentary set of terms and we’ve been working towards something that is more nuanced and we’re really pleased with how far we’ve come,” she said. The Assembly is tentatively scheduled to vote on the sale Dec. 4. The utility consolidation is also subject to approval by the Regulatory Commission of Alaska, which could require changes to the structure of the deal. As it stands now, the all-in price for ML&P has gone down slightly from $1.024 billion to $1.009 billion, mostly because of lower-than-expected costs to execute the deal. Chugach has also committed to municipal requests to not lay off any ML&P employees or raise customer rates because of the sale, Anchorage officials said. CEO Lee Thibert said Chugach would find similar senior-level positions for those currently in leadership positions at ML&P. Ekluta hydro shift The biggest change to the original proposal is a shift away from Chugach making 30 years of unsecured payments totaling $170 million. Instead, the utility has agreed to a 35-year power purchase contract from the 39-megawatt Eklutna hydroelectric plant, which Anchorage will remain a partial owner of. How much power Chugach buys from the Eklutna facility will depend on whether or not Matanuska Electric Association agrees to increase its stake in the hydro plant through a separate but related deal with Anchorage, according to Windt Pearson. Currently, the municipality holds a 53.3 percent stake in Eklutna hydro, Chugach is a 30 percent owner and MEA owns the remaining 16.7 percent. Anchorage officials have put forth an offer for MEA to own up to 35.7 percent of the plant or remain a 16.7 percent owner and buy more power from it, according to the power purchase term sheet. If that happens, Chugach would have rights to the remaining 64.3 percent of Eklutna power. If MEA declines, Chugach would simply buy more power from Anchorage, which would remain the majority Eklutna owner. In the event MEA accepts, Chugach’s power purchase payments would start at about $2.5 million per year and gradually increase to more than $3.5 million in year 35, the term sheet states. Without greater participation from MEA, Chugach would start by paying $3.9 million for more power in year one and end with a $5.4 million payment by the end of the power purchase agreement. Windt Pearson said the municipality will keep title to Eklutna either way and the power purchase arrangement puts Anchorage in a better position than the originally contemplated payments that amounted to a 30-year unsecured loan. “(Eklutna) is our asset. If there’s a default under the agreement we keep it and can do something else with it,” she said. MEA spokeswoman Julie Estey said the utility officials are in preliminary conversations with their municipal counterparts to discuss a possible Eklutna deal. Municipal Manager Bill Falsey described the Eklutna proposal as the “correctly shaped puzzle piece to fit the hole” of the less desirable direct payment option. “It’s clean, so rather than retaining a single generation unit at (ML&P’s plant) 2A, with this we could retain the entirety of the MOA share of the Eklutna plant,” Falsey said. Chugach will also be responsible for operating and maintaining the Eklutna hydro infrastructure, which could be a significant point given major changes are likely coming to the Eklutna River watershed over the next decade. A 1991 agreement in which the U.S. Department of Energy sold the Eklutna hydro plant to the utilities included a mandate for the plant’s owners to start studying options to restore fish and wildlife habitat in the Eklutna River in the coming years. Eklutna Lake, with its large earthen dam, also provides the vast majority of Anchorage’s water supply in addition to fueling the hydro plant with water diverted away from the Eklutna River. Environmental studies on how to mitigate the impacts of the dam and power plant must start by 2022; the work must be done by 2032, but the Assembly has urged the utilities to start the process sooner. “Some form of restoration is going to happen,” Anchorage Assembly member Forrest Dunbar said at the work session. If the only option is to shut down the hydro plant, Chugach will continue to make the power purchase payments, according to the agreement term sheet. Clearing debt, PILT Windt Pearson said defeasance costs on the $542 million of ML&P debt Chugach agreed to pay off at closing will be $13.3 million less than originally calculated and the annual payment-in-lieu-of-taxes, or PILT, that Chugach will pay the city for the assets it acquires also won’t be quite as much as once thought based on ML&P’s latest electric rate case determination by the RCA. The debt retirement will account for the vast majority of $767.8 million in cash Chugach will pay the municipality at closing. The PILT, which will replace ML&P’s municipal utility service area, or MUSA, payments, will also be paid over 50 years versus the 30-year term originally contemplated. MUSA payments are a substitute for property taxes on publicly owned utilities and are accounted for in ML&P’s customer rates. Recent MUSA payments have been in the $6 million per year range for ML&P. “There will still be the question at the end of that (50 years) as to how that revenue source is replaced but we have a longer time to consider how to do that, what kind of structure to put in place,” Windt Pearson said. The PILT has also been structured to prevent legacy ML&P customers from bearing the brunt of paying for the transaction, she added. Because it is a calculation based on the assets located in the ML&P service territory, primarily Midtown and Downtown Anchorage, there were concerns that if it continued to be calculated based on actual asset investment it could create a disincentive for Chugach to make future investments in the area. As a result, the same payments will be due regardless of what Chugach does there, Windt Pearson said. That structure will remain until 2033 — while former ML&P customers are getting the benefit of the utility’s ownership stake in the Beluga River natural gas field — at which point the PILT will shift to all Chugach customers, she said further. The Beluga River field is expected to produce feedstock natural gas through 2033. Financing With the major points worked out, Chugach’s Thibert said the utility has retained three financial advisors to help it secure the necessary cash to close the deal. Thibert said that while near-term interest rates are gradually rising, rates on 10-year terms have been flat. “I think the market looks very good right now for co-op financing. The yield curve has been very flat, so that’s encouraging,” he said. “We’ve been talking to financiers out there; there is interest in the market. We feel that this will get plenty of subscriptions once we put this thing out for bid.” Chugach is ready to finish the deal, he added. “We put a lot of time and energy into it and we still have some more work to do but we feel very good about where we’re at. We think it’s been a good process and we look forward to a successful transaction,” Thibert said.   (Editor's note: This story has been updated to correctly note the owners of the Eklutna hyroelectric facility are required to study ways to mitigate its evironmental impacts, but are not immediately required implement mitigation based on the 1991 agreement.) Elwood Brehmer can be reached at [email protected]

Movers and Shakers for Oct. 7

KeyBank has promoted Jesse Wolf to commercial analyst, a role in which he will assist with client and sales support to Alaska’s Commercial Bank relationship team. He has served as a branch manager since 2008. In that position, he was accountable for soliciting consumer and business accounts to grow branch profitability and was consistently honored as a top producer in Key’s Alaska district. He began his career with Alaska USA Federal Credit Union before moving to KeyBank, and held FINRA–Series 6 and Series 63 licenses. Rural Alaska Community Action Program, Inc. named L. Tiel Smith the new chief operating officer in August. Smith brings more than 15 years of management and strategic leadership experience to the agency which works to improve the quality of life for low-income Alaskans. The COO is responsible for strategic planning, process improvement, and compliance, along with the agency’s accreditation maintenance through the Council on Accreditation. Prior to accepting the COO position, Smith was a consultant specializing in corporate strategic planning, land and resource management, and information technology solutions; the general manager of Bristol Alliance Fuels; and vice-president of Lands and Natural Resources at Bristol Bay Native Corp. Additionally, he served as the BBNC corporate information technology director. Originally from Dillingham, Smith is an Aleut shareholder of BBNC and Choggiung Ltd. He holds a bachelor’s degree from Utah State University and an MBA from Alaska Pacific University. Nathan Dennis joinedR&M Consultants Inc. as an environmental specialist in the Environmental Services Group. His experience includes gathering environmental baseline data, Phase I and II ESAs, storm water management and field environmental services. He previously worked for the Alaska Department of Fish and Game where he was involved with numerous fish habitat preservation and erosion mitigation projects. His work there included gathering environmental baseline data to assist with erosion mitigation on the Talchulitna River; reviewing and editing EIS documents for the Kasilof River; and conducting fish sampling, counting and other relevant environmental baseline data about the salmon run in the Judd Lake fish weir. He also compiled ESA Phase I information and dealt with regulatory permitting restrictions for land use in that area. Since joining R&M, Dennis has supported environmental efforts for the Interior Alaska Veterans Cemetery, UAA campus well permitting, Port of Alaska and Alaska Aerospace Corp. environmental assessment reevaluation. Nathan has a bachelor’s degree in environmental science from the University of Idaho. First National Bank Alaska announced several personnel moves. Pamela Keeler was named compliance senior legal counsel and appointed senior vice president. Her legal expertise is rooted in a diverse education, with a number of degrees in political science-public service, education and law from the University of California Davis, Western Washington University and University of the Pacific’s McGeorge School of Law. With more than 16 years of financial experience, Stephanie Daniels is Cash Management’s newest services specialist and was appointed business development officer. A decorated Army veteran, Rob Parrish was appointed branch manager of the Sitka Branch. A graduate of the bank’s Management Associate Program, Parrish spent time honing his financial skills in Anchorage, Bethel, Eagle River, Kenai, Palmer and Wasilla. Trust Account Administrator Amy Robinson, appointed to trust officer, has extensive knowledge in complex commercial transactions and consumer finance regulation. Aldrich CPAs + Advisors hired Lia Patton, CPA, in its Anchorage office. Patton brings with her nearly two decades of experience in audit and accounting and a unique knowledge of the Alaska business community. Patton oversees federal and State of Alaska single audits, as well as audits for Alaska Native corporations, nonprofit entities, and employee benefit plans. An Anchorage resident for more than 20 years, Patton was a partner at BDO LLP’s Anchorage office, formerly Mikunda Cottrell and Co.

Judge orders briefings in suit challenging tax credit bonds

Parties to a lawsuit challenging the constitutionality of the state’s plan to use bonds to pay off oil tax credits are going backward to move forward after the first oral arguments in the case were heard Oct. 1. Alaska Superior Court Judge Jude Pate ordered former University of Alaska regent Eric Forrer and his attorney Joe Geldhof to submit a brief by Oct. 8 opposing the state’s motion to dismiss the suit on grounds it failed to state a claim upon which relief can be granted. State attorneys will then have until Oct. 12 to respond. During the informal, conversational arguments that lasted about 90 minutes, Geldhof said that he and Forrer had not responded to the June 25 dismissal request because he read it as a motion for summary judgment. “It went extensively into the merits of the state’s arguments and beyond what I, at least, thought was a dismissal for failing to state a claim,” Geldhof told Pate, while noting the state has not answered the original or amended complaints. Both sides have made numerous other filings in the case, including a back-and-forth over Forrer’s request for jury trial to which the state objects. Geldhof has insisted state attorneys have not followed normal briefing procedure in the case, which has greatly slowed its progress. He also contends Walker administration officials, in debates over House Bill 331 in the Legislature, made differing statements over what kind of debt the tax credit bonds would be and how stringent an obligation the tax credits are to pay off in the first place. Assistant Attorney General Margaret Paton-Walsh, in turn, questioned whether Geldhof understands what the state’s motion for dismissal means from a procedural perspective. She said the case raises “purely legal questions. What does the (Alaska) Constitution mean, what does the statute do; does the statute violate the Constitution?” She continued to say that standard procedure would be for Forrer and Geldhof to file an opposition to dismiss and a cross motion for summary judgment. The plaintiffs would generally move for an injunction to block the state from implementing the law, Paton-Walsh said, adding that in this case the suit itself is a de-facto injunction because its mere existence prevents the state from offering bonds to investors. The state filed the motion to dismiss in order to move the case quickly, she said. Geldhof said he believes it’s premature for rulings on his request for a jury trial because there are still outstanding issues of fact surrounding the specifics of the bonds that could be answered through the state answering the complaint, discovery or other ways. For his part, Pate dismissed motions from both sides regarding a jury trial and fact discovery without prejudice, meaning they could be filed again at a later time. He also agreed with the state’s position that the lawsuit is a pretty straightforward one. “I’m not interested in the factual arguments. I’m interested in the law, the language of the statute, the Constitution, that’s it,” Pate said. However, he did not indicate how he might rule on the constitutionality of HB 331. The lawsuit alleges the bond sale would commit the state to debt beyond the restrictions the Alaska Constitution puts on the Legislature’s ability to incur financial liabilities. Administration officials contend the plan is legal because the 10-year bonds would be “subject to appropriation” by the Legislature, which the bond buyers would be aware of, and therefore would not legally bind the state to make the annual debt payments. They would be sold by the Alaska Tax Credit Certificate Bond Corp., which would be established solely for the purpose of managing the bond money. The state Constitution generally limits the Legislature to bonding for debt through general obligation, or GO, bonds for capital projects, veterans’ housing and state emergencies. In most cases the voters must approve the GO bond proposals before the bonds are sold. State corporations can also sell revenue bonds, but those are usually linked to a corresponding income stream and only obligate the corporation to make payments, not the State of Alaska as a whole. Geldhof called the entity — run by a small group of Revenue Department employees including Commissioner Sheldon Fisher and with no income other than the Legislature’s annual appropriations to pay the bond debt — a “shell corporation” that is part of an elaborate constitutional workaround. State attorneys contend the plan is legal because it does not bind the state to pay the bonds, just the corporation, because paying the debt would be “subject to appropriation” by the Legislature and that risk is “baked into the price of the bonds” via a higher interest rate,” Paton-Walsh said. The constitutional sideboards on borrowing are there to prevent the state from exposure to bankruptcy, which she said HB 331 does through the subject to appropriation stipulation. “If you sued the State of Alaska on one of these bonds we would come in and move to dismiss and say we didn’t issue these bonds; they are not a debt of the state,” she elaborated. Geldhof responded that the state’s position ignores the real-world implications to the state’s overall credit rating of not paying the debt. “If the state defaults on these (bonds), if they don’t make the appropriation, there’s significant and obvious fiscal impacts on the State of Alaska, not just the shell corporation,” he said. “The Legislature, in year two, three, four, essentially has what amounts to a gun to their head if they don’t appropriate this money because the credit rating of the State of Alaska is immediately harmed.” Pate noted that state attorneys cited similar actions in other states that have been deemed constitutional, but asked Paton-Walsh if there was precedent in Alaska. She acknowledged there is not. Pate pushed to refocus the attorneys near the end of the hearing, noting that Forrer needs to rebut the state’s dismissal motion. “Heck yeah he’s stated some great claims,” he told Geldhof, “but can relief be granted under the law? That’s the issue.” Geldhof insisted a finding that HB 331 is unconstitutional would be proper relief in the public interest case and stressed his belief that a ruling to dismiss the case for failure to state a claim would undoubtedly be overturned upon appeal. Pate said he expects to issue a ruling on the matter in early November. Elwood Brehmer can be reached at [email protected]

INSIDE REAL ESTATE: Anchorage, Kodiak only areas to see vacancies up, rents down

Anchorage and Kodiak were the only two areas where vacancies rose in 2018 and rents dropped, according to the latest survey by Alaska Economic Trends in conjunction with the Alaska Housing Finance Corp. Anchorage’s vacancy factor rose to 6.2 percent, up slightly more than 1 percent due to negative migration. Meanwhile, the Matanuska-Susitna Borough had a net migration of 1,233. Its vacancy factor was down to 7.3 percent from 7.6 percent in 2017. However, it was still higher than Anchorage’s. Single-family homes in Anchorage have an average monthly rental rate of $2,149. Higher rental income can be obtained for four-bedroom homes that have a double- or triple-car garage. Renters with pets can expect to pay an additional $100 to $150 per month plus a pet deposit according to leasing agents. Smokers also pay a premium. The most popular rental areas and the most expensive in Anchorage are in the Bootlegger’s Cove area and southeast Anchorage. Rental rates tend to be lower in East Anchorage, which has an abundance of zero lot lines and older two-bedroom, multi-family units. Newer properties have a premium and so do units with an interior washer/dryer. In the Fairbanks North Star Borough, a three-bedroom single family home rents for $100 more than in Anchorage while the lowest rental rate is in the Wrangell-Petersburg borough where single-family homes rent only for $1,034. The rental rates above include all utility costs, according to the survey. However, more desirable rentals in age and location often charge the renter for at least gas and electric, assuming separate meters are available. In particular, single-family homes and luxury duplexes often have tenants paying basic utilities while providing water and sewer. In Anchorage and the Mat-Su, more than 90 percent of all rentals use natural gas for heat and hot water. However, in almost all areas of the state, cooking is powered by electricity, as are washer/dryer hook-ups. The small increase in vacancy factors and modest decline in rental income is reflective of the stability in the housing market which continues to adjust to historic lows for new construction permits, whether for sale or rent. As of August 2018, Anchorage had only 10 applications for multi-family permits, totaling 129 units, compared to 21 applications in 2017 for 153 units, which demonstrates that multi-family projects are increasing in size and scope of the number of units per projects. Duplexes, considered by some the new affordable single-family home when each side is sold, has had a decrease in number of units built so far in Anchorage. The latest Municipality of Anchorage published statistics for August show a decline in year-to-date permits from 58 compared to 76 in in 2017. The MOA does not differentiate between rentals and for sale units for multi-family and duplex permits. ^ Connie Yoshimura is the Broker/Owner of Dwell Realty. Read more columns by Connie at www.cyalaska.com. Contact her at 907-229-2703 or [email protected]

Trustees keep up push for inflation-proofing Permanent Fund

Those closest to the Permanent Fund are beginning to talk more openly about their wishes for the $65 billion endowment as its management becomes increasingly politicized. Alaska Permanent Fund Corp. staff recommended to the Board of Trustees Sept. 26 that the board approve a resolution urging legislators to fortify protections against gradual degradation of the Fund’s value. The resolution reemphasized two that the seven trustees approved during their 2017 annual meeting. Last year’s resolutions requested legislation to prioritize the amount needed to inflation-proof the corpus of the Fund before the tally of its statutory net income — gains or losses — every year. Permanent Fund Corp. CEO Angela Rodell said the current state law definition of the Fund’s “net income” is not accounting based. “This would subtract inflation-proofing from the statutory net income and allow it to stay back” in the corpus, Rodell explained. Rodell has expressed concern — as several of the trustees did during the meeting — that not making an annual transfer from the Earnings Reserve Account to the corpus puts the Fund’s long-term health in jeopardy. The Earnings Reserve Account is where the Fund’s annual earnings are deposited in most years, and where investment losses are pulled from in rare bad years. It can be spent via a majority vote of the Legislature; the corpus is constitutionally protected from being spent. APFC Trustee and former Natural Resources Commissioner Marty Rutherford said the board needs to remind legislators that they have a responsibility to manage the fund for future Alaskans, not just present-day challenges. For years, the Legislature made the inflation-proofing appropriation without issue. However, legislators declined to approve the transfer in fiscal years 2016-2018 as they debated whether or not to utilize a portion of the Fund’s earnings for government spending. And while they made $942 million inflation-proofing payment to the corpus last year, they rejected Gov. Bill Walker’s proposal to make the retroactive payments and now the precedent to not make they appropriation has been set. “I think what we’re saying is because you haven’t inflation-proofed for three years we want the law to change so that inflation-proofing occurs automatically,” trustee and former Attorney General Craig Richards said. Richards was also elected chairman of the APFC board on Sept. 27. The board ultimately tabled the issue until a later date, which was done at Richards’ request despite his support for the resolution. He asked for a one-day late October work session for the board to draft additional recommendations for the Legislature on how it deals with the Fund. In a brief interview, Richards said he wants the trustees to form a concise message about the need for sticking to sustainable draws from the Permanent Fund, avoiding ad-hoc appropriations from the Earnings Reserve and predictability in how the Fund will be used. “Follow whatever formulas are on the books,” he said. In May, legislators passed legislation establishing an annual 5.25 percent of market value, or POMV, draw from the Fund to pay both Permanent Fund dividends and support government services. The POMV draw will automatically be reduced to 5 percent per year after three years, but several of the trustees noted that changes are likely coming to Senate Bill 26 — the law that established it — in the next legislative session that starts in January. While the Alaska Supreme Court ruled unanimously in August 2017 that the Legislature’s power of appropriation supersedes it’s need to follow other laws it has passed, Permanent Fund managers have consistently stressed a worry that shifting politics will play into how the state spends money from the Earnings Reserve. Not knowing what will be asked of them and how much money will be needed at a given time hampers their ability to protect the Fund’s investments and maximize its earning potential, they contend. ^ Elwood Brehmer can be reached at [email protected]

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