Stakeholders seek ways to grow outdoor rec economy

A group of business owners and advocates are pushing for Alaska to place more of an economic stake in its outdoor recreation economy. Alaska boasts a massive number of tracts of undeveloped public land. Most Alaskans take advantage of all that land for various activities all year, and the summer brings tourists from all over the world, especially to fish. The founders of Confluence, an outdoor recreation advocacy group begun under the umbrella of the Valdez Adventure Alliance, think the state could advertise the outdoor economy better and enable more businesses to cater to it. A new study from the University of Alaska Anchorage’s Center for Economic Development establishes a numerical sketch for the industry’s impact as well. The study estimates that participants in outdoor recreation spend about $3.2 billion annually, excluding equipment purchases, and that the industry provides about 29,000 direct jobs and about 10,000 indirect and induced jobs. The report estimates that equipment purchases could be a similar sum. “A majority of Alaskans say that opportunities to get outside are a reason they choose to live or remain in the state, and a similar share of visitors come to Alaska to experience the great outdoors,” the report states. “Both locals and visitors spend money in the course of their activities that circulates throughout the state economy, making outdoor recreation a substantial industry.” During a House Resources Committee meeting on March 6, committee members heard testimony in support of legislation enhancing the outdoor recreation industry in the state. Lee Hart, one of the co-founders of Confluence, told the committee that Alaskans have long shown support for spending state resources on outdoor recreation, including taxing themselves for trail maintenance. “Since at least the year 2000, residents of this state have been clamoring for more access to the public lands and waterways that surround their communities,” she said. Nolan Klouda, the director of UAA Center for Economic Development, presented the study to the committee and noted that outdoor recreation is also an attraction for workers. An economic strategy for a geographically isolated state like Alaska may not necessarily be to attract firms, but to attract talented workers to live here because of the quality of life and thus lure the businesses to where the workers are, according to the study. Klouda said businesses often identify hiring talent as a major obstacle to operating. “Economic development increasingly is about attracting talent and keeping talent in your area,” he said. “Just the ability to hire any workers at any skill level that can fill the positions that you have, and Alaska businesses will tell you that that is a major challenge.” Exploring ways to attract and retain residents is one of four recommendations included in the report. The others include gathering better data about outdoor recreation consumers, adding an economic impact component to state recreation development and supporting entrepreneurship. The report points to efforts such as the Anchorage-based Launch Alaska and the Seward-based Alaska Ocean Cluster as examples of incubators for businesses in particular sectors. The study also references programs like the state of Vermont’s grant program for remote workers, which grants prospective residents up to $10,000 for living in the state while performing remote work, and to an effort in Valdez to start a telework center meant to attract tech workers from crowded, expensive areas like Seattle and Silicon Valley based on the local outdoor recreation opportunities available. In a handout presented to the committee, Confluence identified four priorities: raising awareness of emerging sectors, creating a blue ribbon commission to identify ways to reduce regulatory burden for outdoor industries, leveraging federal matches to fund outdoor recreation access, and management and preserving the Snowmobile Trails Grant Program. A number of stakeholders also wrote letters to the committee in support of the SnowTRAC program, in which snowmachiners pay an increased license and registration fee in exchange for maintained trails. Gov. Michael J. Dunleavy’s fiscal year 2020 budget proposes reorganization for the state recreational trails program, under which the snowmobile trail grant program is administered, by eliminating a position, according to the Office of Management and Budget. Michele Stevens, who represented the Petersville Community Nonprofit Corporation, said the snowmobile trails provide more than just recreational opportunity — they are important for search and rescue operations, as people are less likely to get lost. Matanuska-Susitna Borough Assembly member Dan Mayfield wrote a letter to Dunleavy that he was surprised that funding for the snowmobile trail program, known as SnowTRAC, was not included in the budget. “The money funds trail care, safety and grooming activities that, in turn, bring increased business through recreational visitation to each of the communities throughout the state who have qualified for these funds,” he wrote. “Failure to fund this program means the end of SnowTRAC, increased hazards on the trails, the failure of several non-profit organizations who work to support snowmobile activity and decreased business/revenue for communities up and down the trail system.” ^ Elizabeth Earl can be reached at [email protected]

GUEST COMMENTARY: Alaska’s resource future can and should be a win-win

Recently, several public opinion messages and campaigns have voiced concerns about the mining industry here in Alaska. It seems that much of the angst is based on either a perceived favorable bias of the regulatory system towards industry, a bias against natural resource extraction in general, or a zero-sum game view that says you must “trade one resource for another,” which precludes the possibility of success for more than one resource. I am grateful this attitude has not defined Alaska’s journey, and I pray it will not define our path forward. I believe Alaska is on the verge of the greatest resource production renaissance in the history of our state and it will only be realized if we come together as one. All resource extraction industries have struggled to overcome enormous obstacles in this last frontier and have evolved into more accountable and effective stewards of our environment, providing excellent jobs for our people. Alaska is a paragon for the world because of our long history of the mining and oil and gas industries co-existing with fisheries, wildlife and other habitat users. In Cook Inlet, oil and gas exploration, development and production has existed alongside a significant commercial and sport fishing industry for nearly 70 years. Mining and commercial salmon fishing have co-existed in the waters of Southeast Alaska for generations. And the North Slope oil and gas industry has demonstrated to the world that polar bears, caribou and other wildlife can thrive alongside one of the world’s largest oil producing basins. We understand that the land and the sea make up one Alaska. There is no question that the mining practices of the late 1800s and early 1900s were hard on the laborers and the environment. The commercial fishing industry certainly had its dark moments in the history of our state and was one of the prime motivators for statehood. And certainly, the oil and gas industry has made mistakes. Yet we all know that much has changed with these modern industries. Today, you can’t find better regulated, higher performing resource extraction industries anywhere in the world. Alaskans decided to move forward. I have been commercial salmon fishing in the waters of Bristol Bay and Cook Inlet for nearly 50 years. I remember listening to my father and others from his generation talk with pride about the honor of being able to participate in the rhythm and cycle of this harvest. It was a family business. We were focused and “all-in” physically and emotionally. We enjoyed success and failure, exhaustion and exhilaration — together. I was never a miner, but I have dear friends who have devoted their whole lives to this industry. One recently told me a story of his late father emerging from a mine at the end of a hard day, his face dark with dirt and sweat, a hard hat with an attached light on his head. He said, “the grimace on my dad’s face would break into a smile when he would see us. We were always waiting for him at day’s end. Mining was our family, our life.” The roustabout crews from the oil derricks in Cook Inlet to the drill pads of the Slope are no different. They live, work, and die as a family. These vocations all have inherent risks, and we Alaskans accept and learn from them. We keep moving forward, no matter what. Today our state university has powerfully connected education to jobs through robust fisheries, mining, and petroleum engineering programs because these industries have a great future in Alaska and need a highly skilled workforce. The incorporation of strong public input into our industry permitting processes and considerable regulatory oversight is a good thing. It is true we have well-founded concerns about local impacts and the need for safe, responsible development of our resources. But I think it is fair to say that most Alaskans want to see mining, fishing and other resource extraction industries be well-regulated and flourish in our state. Alaska has consistently had a higher unemployment rate than the national average since 2013. Within Alaska, unemployment is highest in rural areas, which have limited economic opportunities and year-round employment is almost non-existent. Mines produce high paying jobs without question and a sense of self-sufficiency in areas long deprived of careers that can offer multi-generational prosperity. No one industry could have brought us to the point where we have the capacity to energize, feed and enrich far more than just our own people. If we each are willing to support opportunity, self-sufficiency and purpose’s expansion outside of our own interest, there is no limit to how bright our future will be. Our families and future generations will be the beneficiaries. Chuck Kopp is serving his second term as state House representative for District 24 in Anchorage and is chair of the House Rules Committee.

PWS Tanner crab fishery gives winter season a boost

A rejuvenated Tanner crab fishery in Prince William Sound is showing positive signs of finishing out its second season in 30 years. The fishery opened for the first time since 1988 in 2017, operating on commissioners permits. A test fishery operated as an information-gathering pot fishery in the area in 2016 to a limited number of vessels. Based on Alaska Department of Fish and Game survey data, the stocks were good to go for another season this year, opening March 1 and closing either by EO or on March 31. So far, 11 vessels have landed about 16,850 Tanner crabs, totaling about 28,699 pounds. Harvest has been better than expected in two areas, said Jan Rumble, the area management biologist for commercial shellfish fisheries in Prince William Sound. One, in federal waters off of Cape Puget, had a harvest of 14,754 pounds and the Icy Bay/Whale Bay area harvested 7,042 pounds. “Fishing for the first week of the fishery has been more spread out than last year, and not as focused in one statistical area, with 10 statistical areas fished to date,” she wrote in an email. Fishermen in the area are feeling fairly optimistic about the catches and catch per unit of effort so far, said Chelsea Haisman, the executive director of Cordova District Fishermen United. “The weather has been the biggest buzzkill,” she said. “(One fisherman has) sat out 11 days so far. It’s been hardly any fishing at all. It’s part of the game, I guess.” There was enthusiasm on the docks when the fishermen first came in with the crab in Whittier, Seward and Cordova, she said. The catch provides a new seafood opportunity for residents before the summer fishing season kicks into gear. It also fills in some of the space for the Prince William Sound fleet before the summer salmon season starts — there are several quiet months right now around December and January, and the salmon season doesn’t start in earnest until early May, she said. “It sounds like right now, the fishery can keep going as long as the biomass is there,” she said. “The fleet is seeing some smaller crabs that they are releasing back.” Deliveries have been made in Whittier, Seward and Cordova, she said. Tanner crab, often marketed as its cousin the snow crab, is a fairly valuable product for fishermen. In 2017, the average ex-vessel price was $3.53 per pound, the highest price since 1994, according to ADFG records. The scientific species name of Tanner crab is C. bairdi, though another species of crab — C. opilio — is also often marketed as snow crab and sold for more than $4 per pound at the dock in 2017, according to ADFG. The commercial Tanner crab fishery in Prince William Sound boomed from 1968 until the late 1970s, when the catch began to decline before the fishery was closed in 1988. At its peak, fishermen brought in 13.9 million pounds, according to a March 2017 memo from Fish and Game. That was before the minimum carapace width of 5.3 inches was set, though. By 1988, fishermen only brought in about a half-million pounds, with little to no harvest in the Eastern District because there were fewer legal males available. The collapse of the stock could be due to overharvesting and changes in environmental conditions, according to the memo. The early fisheries on legal-size males were limited by season rather than by Guideline Harvest Level, which is the current limit set by the Board of Fisheries for Tanner crab fisheries. “Handling mortality of undersized and female crab may have contributed to the decline, particularly during fishing seasons of seven months duration, which encompassed some of the molting and mating seasons,” the memo states. “Changes in environmental conditions, documented on a Gulf of Alaska-wide basis, may have caused high mortality of Tanner crab larvae, impaired growth and reproduction, and coincided with increased production of crab predators such as gadoid fishes.” The fishery depends on daily call-ins from fishermen on the grounds for tracking and port sampling of the catch. At the beginning of this season, ADFG asked fishermen to call in faithfully to provide accurate information so the fishery can stay open. In the face of less information, ADFG tends more conservative in its management in the best interest of stocks. So far, fishermen have been providing regular reports, Rumble said. “The mandatory call-in compliance has been good and has allowed harvest and effort tracking by the statistical area; harvest has been relatively stable,” she said. “The fishery will continue to be closely monitored via the call-in reports and deliveries for the next weeks to determine if any management action is necessary.” At this point, Fish and Game feels confident enough in its information that there are no immediate plans to close the fishery early, she said. Without early intervention from Fish and Game, the fishery will close March 31. Elizabeth Earl can be reached at [email protected]

AGDC stays on schedule with latest batch of answers to FERC

While cutting back on overall spending to preserve its money to last into 2020, the Alaska Gasline Development Corp. continues answering questions and providing additional information to federal regulators, submitting on March 1 the first of six batches of information it is scheduled to submit through September. The information will be included in the Federal Energy Regulatory Commission’s safety review and final environmental impact statement, or EIS, but not necessarily in the draft EIS that is scheduled for release in June. The March 1 packet answered about 60 of FERC’s information requests from January, dealing mostly with fire safety, equipment and procedures, including trucking fuel to the facilities; mapping fault lines, unstable slopes and other geologic hazards; and plans for a temporary access road during construction that would cross over existing buried pipelines at Prudhoe Bay. The state-led Alaska LNG project team had told FERC it would answer the remaining questions about fire safety, spill-containment safeguards, hazard mitigation and other design issues in monthly batches March through July. The requested information covers various details of the North Slope gas treatment plant at Prudhoe Bay, and the liquefaction plant and liquefied natural gas storage tanks in Nikiski. It will be September, however, before AGDC provides federal regulators with more information about the project’s 27-mile underwater pipeline crossing of Cook Inlet to Nikiski. FERC wants more geotechnical data about the seafloor. It also wants to know if AGDC expects tidal flow and other currents will move debris and boulders across the pipeline, and how the project proposes to stabilize and protect the line against tidal currents and boulders. If all goes according to schedule between the state project team, FERC and other federal agencies involved in preparing the EIS, the final impact statement is scheduled for release in March 2020. That allows nine months for public and agency comment, public hearings, review and revisions between the June 2019 draft and the final EIS. The single EIS will be used by all federal agencies involved in regulatory oversight of the proposed Alaska LNG project, which includes a gas treatment plant at Prudhoe Bay to remove carbon dioxide and other impurities, 807 miles of large-diameter high-pressure steel pipe to move gas to the liquefaction plant and LNG export terminal in Nikiski. Though the state corporation expects to end the current fiscal on June 30 with about $20 million still available to spend, it could run out of funds about the same time that FERC finishes work on the EIS according to a staff financial presentation at the March 6 AGDC board meeting. The corporation is cutting back on its leased office space in Anchorage, closing its Houston office and taking other steps to stretch out its available funding. Interim AGDC President Joe Dubler told the board March 6 that the corporation also has been able to reduce its legal and contractual spending this year. The Alaska Legislature is now working to put together the state budget for fiscal year 2020, which starts July 1, but there was no request before lawmakers as of March 11 to appropriate additional funds to AGDC. Many legislators have said they are looking for evidence that the estimated $43 billion project is commercially viable before proceeding past the EIS. Gov. Michael J. Dunleavy has said he opposes state control of the project — with the state taking all the risk — and he wants to see the North Slope producers back on board. “AGDC will only pursue Alaska LNG if the project viability is assured,” Dubler told the board March 6. “AGDC will seek third-party support from qualified, experienced LNG project owners and operators to build, own, and operate the project.” The state took over the project more than two years ago after North Slope oil and gas producers ExxonMobil, BP and ConocoPhillips — citing market conditions — declined to spend the billion-plus dollars that would be required to complete permitting, final design and engineering. The state, anxious to see the project continue at a faster pace, took over 100 percent funding of the application to FERC and the environmental impact statement. AGDC has not contracted for construction-ready final engineering and design work, which could cost as much as $2 billion, Dubler told the board March 6. While working to finish the EIS, the state corporation continues talking with potential investors and customers, looking to determine if the project can pass the economic-viability test. While continuing its quest for the large-volume Alaska LNG project, the state corporation has completed its original 2010 assignment when the Legislature created AGDC: Obtain regulatory approval for a smaller-volume backup project to deliver North Slope gas to Alaskans. The U.S. Army Corps of Engineers and federal Bureau of Land Management on March 4 signed a joint record of decision for the Alaska Stand Alone Pipeline, or ASAP, also known as the in-state project and the bullet line. The 733-mile pipeline would move North Slope gas south through the state, ending at a connection point near Big Lake, north of Anchorage, to ENSTAR’s gas distribution system for Southcentral Alaska. The project, estimated by AGDC several years ago at $10 billion, does not include a liquefaction plant or any other export component. The line’s maximum capacity would be 500 million cubic feet of gas per day, far less than the LNG project that is designed to handle 3.5 billion cubic feet per day at the entrance to the gas treatment plant at Prudhoe Bay. ASAP was intended to meet in-state needs for natural gas, in particular providing gas to Fairbanks and potential mining projects. The line’s capacity would be more than double the average daily demand of all Southcentral gas users. The state paid 100 percent of the cost of permitting to reach the federal record of decision, but there is no money available for final engineering and design. And, like the LNG venture, the economics of the backup project are questionable. The Legislature has appropriated about $480 million in state funds to AGDC for the two projects since 2010. The final EIS and record of decision on the backup line are helpful to AGDC and the larger gas pipeline project, particularly the decision by the Army Corps to allow construction in wetlands, with mitigation as required. “Because ASAP and Alaska LNG share a common path for 80 percent of Alaska’s LNG pipeline route, this permit and the underlying data will help the Alaska LNG project efficiently advance through the federal permitting process,” AGDC said in a prepared statement. Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide.

Alaska LNG Project economic review underway

Alaska’s new gasline team expects to have the analyses that will determine the path of the estimated $43 billion Alaska LNG Project complete in the next two months. Gov. Michael J. Dunleavy’s senior policy advisor Brett Huber said March 14 that the Alaska Gasline Development Corp. should know in about 60 days whether or not the state should continue actively pursuing the large LNG export plan based on the project’s economics. Dunleavy and several members of his administration held a conference call with reporters while attending the CERAWeek oil and gas industry conference in Houston. The governor subsequently downplayed the prospects of Alaska LNG, saying there generally appeared to be little interest in the project from potential investors also attending the conference. He said talks about Alaska were instead primarily focused on the state’s conventional oil plays, which he highlighted in a speech at the conference. AGDC officials offered more detail on the Alaska LNG review in background discussions. The project review is being done from two angles. First, AGDC engineers are attempting to determine what advancements in LNG technology, such as modular construction, might have occurred over the last three years that could bring the $43 billion Alaska LNG cost estimate down. In 2016, the international energy consulting firm Wood Mackenzie concluded the Alaska LNG Project likely wasn’t economic if developed by Alaska’s major producers, as first envisioned, in part because of the high internal return requirements oil companies typically have. However, a state-led project with federal tax exemptions could be viable, Wood Mackenzie said at the time. Secondly, the state corporation is conducting an all-in, long-term economic modeling exercise for the project that includes construction expenses, financing rates, operations and management costs under multiple ownership and investment structures. That economic modeling, which is being done in conjunction with the Department of Revenue, will ultimately forecast rates of return for potential investors based on the project’s structure; those returns will largely determine the path forward, officials said. If the expected investment returns from the project are favorable — in the 10 percent to 15 percent range — AGDC is likely to begin seeking investors with experience in the LNG realm. If the range of returns comes in lower, the Dunleavy administration, the corporation’s board of directors and legislators will have to decide how much further they want to take the project at this point. AGDC leaders are also planning to meet with BP and ExxonMobil representatives in Houston to review the modeling with them when it is complete. The companies signed agreements announced in early March to assist the state corporation in finding ways to improve the project’s economics. Regardless of the outcome of the economic modeling, AGDC will almost certainly continue seeking a favorable record of decision for the project from the Federal Energy Regulatory Commission. In February, FERC pushed back the Alaska LNG environmental impact statement schedule several months; the first draft of the EIS is now expected in June, with a final EIS set for March 2020 and a decision on the broad federal authorization coming in the months after the final draft. AGDC officials and other industry observers have emphasized the value of securing the authorization whether or not the project is advanced immediately afterwards. It is seen as a major step in de-risking the project, which could attract investors at lower return thresholds or allow the state to quickly resume the project if LNG market conditions improve. Those big decisions aren’t likely to be made until the EIS is complete. On the commercial side, a dialogue between AGDC and potential LNG buyers continues but the sides are no longer actively negotiating. Corporation leaders said they are continuing the relationship they have with the three Chinese companies — Sinopec, Bank of China and the China Investment Corp. — that signed a nonbinding joint development agreement with AGDC in November 2017 with monthly phone calls and will meet with them in Shanghai at the LNG2019 conference in early April. Elwood Brehmer can be reached at [email protected]

Cook Inlet oil infrastructure review moves into second phase

Two years after a major gas line in Cook Inlet leaked millions of cubic feet of methane into the water, the citizen agency charged with monitoring oil and gas activity is assembling a panel of experts to review information related to the region’s aging industry infrastructure. The Cook Inlet Regional Citizens’ Advisory Council took on a project to conduct a risk assessment for the area’s oil and gas facilities about a year after Hilcorp, the operator of the leaking pipeline, announced in April 2017 that the leak had been stopped. The leak, which drew international attention, began in December 2016; the company said ice conditions made it too difficult to dive down and repair the line at the time. Later investigation indicated a rolling boulder — about 3 feet by 10 feet long, according to the Alaska Department of Environmental Conservation — at the bottom of the Inlet had damaged the line, which delivered dry natural gas to a production platform. The assessment included taking an inventory of existing infrastructure and its structural integrity. With funding from the Kenai Peninsula Borough and the Alaska Department of Environmental Conservation as well as its own dollars, CIRCAC began the first phase of a review in May 2018 and, on March 15, announced that it would move into its second phase. The CIRCAC and its sister organization in Prince William Sound were created by Congress after the March 24, 1989, Exxon Valdez disaster that spilled nearly 11 million gallons of crude oil. The second phase involves an expert panel of independent experts: Dr. Christopher Dash, James Howell, Andrew Kendrick, Christopher Myer and Dr. Shirish Patel. All five are pipeline safety experts, and four have direct Alaska experience, according to a March 15 announcement from CIRCAC. “Myers has an intimate knowledge of Cook Inlet oil and gas operations, while Howell and Dash have worked on pipeline safety in other parts of Alaska,” the announcement states. “Kendrick has consulted on risk management and safety for pipeline projects throughout the country, and Patil spent 30+ years teaching and studying petroleum engineering at the University of Alaska Fairbanks prior to moving to a similar role in Saudi Arabia.” Tim Robertson, the co-owner of Nuka Research and Planning Group, the contractor managing the project for CIRCAC, said the operators are still reviewing the information gathered in the inventory but that part of it should be publicly available by the end of the month. “It’s going to put out by a website, and that website should be live by the end of the month,” he said. “There is a second level of the inventory, which is a little more proprietary for the operators.” Most of Cook Inlet’s oil infrastructure dates back to the 1960s, when the oil boom began there in earnest. Companies in the succeeding years patched and repaired platforms and pipelines there, handing them off to newcomers as each successive company sold its interest in the Inlet. Hilcorp, which bought into the inlet in 2012, controls and operates the majority of Cook Inlet’s infrastructure, with Marathon Petroleum operating the former Tesoro refinery in Nikiski and Cook Inlet Energy, Furie Operating Alaska and BlueCrest Energy operating units of their own. Robertson said one of the challenges of assembling the inventory so far has been the sales between companies. Nuka Research previously worked on a pipeline risk assessment for the North Slope, where the infrastructure has mostly been built by the current operators. In Cook Inlet, assets have been bought and sold multiple times over the years and records of maintenance have not been easily available. The operators have been helpful where they can, but they’re often busy and sometimes may not have the records themselves, he said. “Recent information is really, really good, but if you go back beyond about 1995, it’s really fuzzy,” he said. “Likewise, we’ve had some variability in repairs. Again, that’s been really hard information to find out in some cases.” The panel members have already met via teleconference and will meet face-to-face in Anchorage on May 8, Robertson said. This will also be a chance for the public to participate and gather more information about the infrastructure in Cook Inlet. CIRCAC plans to announce the details of the meeting in the future. So far, the timeline has been going about as Nuka expected, Robertson said. There have been some delays because of hiccups in obtaining funding from the state and because of the schedules with operators — including the Nov. 30 earthquake that rattled Southcentral Alaska. Moving into the second phase, Nuka is planning for the experts to spend the next month reviewing the information before meeting in May to discuss it. They will then provide feedback, which Nuka will review before the panel meets again around August or September, he said. Right now, they don’t have a prescribed set of deliverables they expect from the panel. They may take a different form than the North Slope pipeline review’s recommendations did, Robertson said. “We certainly want the expert panel to take ownership of their recommendations,” he said. “They’re all members of the industry … some from a worldwide perspective, others from a Cook Inlet perspective. They all understand the industry. We aren’t putting any bounds on recommendations at this point. I think at this point, they’ll be looking at best practices and information gathering.” Elizabeth Earl can be reached at [email protected]

Denver company taking a fresh look at old seismic data

Although the first new oil is yet to flow, the apparent recent successes of several companies exploring on the North Slope has at least a few people looking for new clues in old geologic information that covers a large swath of the oil and gas basin. Geologist Bill Enyart and his Denver-based company Seismic Strategies have applied modern processing techniques to approximately 1,000 miles of the roughly 15,000 miles of two-dimensional seismic data shot across the National Petroleum Reserve-Alaska. The 23 million-acre federal NPR-A covers nearly the entire western half of the North Slope. The eastern portion of the reserve nearest to existing oil infrastructure is a focal point for Slope oil exploration after Torok and Nanushuk formation discoveries by ConocoPhillips in the NPR-A and Armstrong Energy and Caelus Energy on adjacent state acreage. ConocoPhillips’ Willow prospect, announced in early 2017, has the potential to produce upwards of 100,000 barrels per day, according to the company, as does Armstrong’s original Nanushuk discovery in the Pikka Unit on state lands just to the east of the reserve. Both of those finds centered on the shallow, conventional Nanushuk formation, are being permitted for development. Oil Search, an Australian producer, took over operations of the Pikka Unit last year after a $400 million deal with Armstrong announced in fall 2017. Caelus’ similarly large Smith Bay prospect in state waters on the northern edge of the NPR-A is focused on the Torok formation, which is geologically related to the Nanushuk. Those discoveries also led the U.S. Geological Survey to drastically increase its oil resource estimate for the reserve and nearby state lands in late 2017 to more than 8.8 billion recoverable barrels. Enyart said the NPR-A 2D seismic data was shot by federal agencies, including the Navy, in the 1970s and 80s. The NPR-A was first established as a Naval Petroleum Reserve in 1923 and was later transferred from the Navy to BLM. He described the original seismic as “a very good data set” that would be difficult to duplicate today, primarily because of cost and environmental considerations. Given that, the mere fact that it exists makes the old information valuable today, he said. “The signal’s there but since that data was acquired we have seismic data processing routines that can extract additional information and those routines just weren’t available 40 years ago,” Enyart said. Very simply, when geologic seismic data is shot, sound waves are sent into the depths of the Earth and when those waves return — in a basic sonar process — they provide information about the type and formation of rocks beneath the surface as well as the possibility of hydrocarbon deposits. New seismic reprocessing technology provides higher resolution images and can better organize old sound signals that were disrupted by permafrost, which can scramble seismic signals. “The original process was just broad-brush processing looking deep into the section. Historically, a lot of the production was coming from older, deeper formations, so we put a lot of effort looking into the (often shallower) Cretaceous rocks, that would be the Nanushuk and Torok formations,” Enyart said, adding that he’s not aware of anyone else doing this work on the NPR-A data. While the Slope is generally considered a vastly underexplored oil and gas basin, such reprocessing can help identify previously overlooked prospects even in heavily covered areas such as the Gulf Coast, according to Enyart. He acknowledged that most oil companies today won’t commit to drilling an exploration well — which on the Slope can cost $20 million or more depending on the remoteness of the location — without first seeing modern 3D seismic data of the target, but said an updated version of the publicly available 2D data is a good starting point for companies interested in Alaska. “The downside to 3D is it’s an expensive means of acquiring seismic data and 2D is a good reconnaissance project,” Enyart described. “You go into an area the size of the NPR-A and shoot 15,000 miles of 2D seismic — that gives you clues as to the broad geology. It gives you an idea of what it looks like below the surface in kind of a gross or coarser sense and then that allows you to zero in on choice areas and go out and acquire 3D for finer prospecting.” Similar reprocessing could be done on “tax credit” seismic data shot on state lands that is becoming publicly available because it was shot with the financial help of the state’s former refundable oil and gas tax credit program, according to Enyart. Companies that use the seismic tax credit program were able to get state support for the work in exchange for agreeing to make the data public after 10 years. Alaska Division of Oil and Gas geophysicist Holly Fair said reprocessing old seismic is a basic way to add value to what is already publicly available. Geologist Kevin Frank, head of the Oil and Gas Resource Evaluation Section, added that seismic shoots on the North Slope must be done when the tundra is frozen, which limits the ability to acquire the data. A planned 3D seismic shoot over the newly-opened for exploration portion of the Arctic National Wildlife Refuge had to be scratched this winter after the government shutdown delayed permitting for the work, Frank noted. “If you just cannot get — even if you’re indifferent to cost — you cannot get new data, you work the old data to your benefit,” he said. Some seismic was shot on the ANWR coastal plain by a consortium of companies in the mid-1980s, but it generally remains proprietary information. Elwood Brehmer can be reached at [email protected]

Movers and Shakers for March 24

Rasmuson Foundation announced two new members of its board of directors. Eklutna Inc. CEO Curtis McQueen and Alaska Airlines Regional Vice President Marilyn F. Romano have been elected to three-year terms. McQueen joined Eklutna in February 2005 as communications and shareholder relations manager and became CEO two years later. He brings more than 32 years of experience in business, communications, project and construction management, administrative management and governmental affairs. He also previously worked in business development for his tribe, Central Council of Tlingit &Haida Indian Tribes of Alaska. He serves on the boards for Great Land Trust, Chugiak-Eagle River Chamber of Commerce, Anchorage Chamber of Commerce and the Alaska Native Village Corporation Association. He also is on the advisory board for the University of Alaska Anchorage Rasmuson Chair of Economics, and he serves on a subcommittee for Associated General Contractors of Alaska. Romano started with Alaska Airlines in 2011 as the regional vice president for Alaska and added the state of Hawaii to her area of responsibility in 2016. Before working for the airline, she spent nearly two decades with the Fairbanks Daily News-Miner, the second largest paper in Alaska, including 11 years as publisher. She was the newspaper’s first woman top executive. Romano serves on the boards of the Anchorage Economic Development Corp. and Alaska Chamber. She also serves on the Governor’s Aviation Advisory Board, is a trustee for the University of Alaska Foundation, and is vice president of the Alaska Airlines Foundation. Her contributions have brought recognition including a Top Forty Under 40 award from the Alaska Journal of Commerce, Woman of Distinction from the Farthest North Girl Scouts, and the Cashen Award for meritorious service to University of Alaska Fairbanks. In 2014, she was inducted into the ATHENA Society, which honors female leaders who work to set an example for the next generation. Meghan Carson is the newest associate financial advisor on the Alaska Permanent Capital Management private wealth team. Carson graduated from the University of Alaska Anchorage in 2015 with a bachelor’s degree in economics and in 2017 with a bachelor’s degree in accounting. Prior to that, she studied psychology and Spanish at the University of Denver and abroad in London. Senior Financial Advisors Robert Bell, Alex Joannides and Cassie Kosinski of Wells Fargo Advisors in Alaska have been named among the top 10 Forbes Best-In-State Wealth Advisors for 2019. Bell is based in Fairbanks and works with high-net-worth clients in Interior Alaska. He has 21 years of experience as a financial advisor, including 13 years with Wells Fargo. Joannides joined Wells Fargo Advisors in 2008. He is based in Anchorage and serves high-net-worth individuals and families in Southcentral Alaska. Kosinski has 26 years of financial services experience with Wells Fargo, including 18 years as a financial advisor in Anchorage. The Forbes Best-In-State ranking algorithm is based on industry experience, interviews, compliance records, assets under management, revenue and other criteria by SHOOK Research, LLC, which does not receive compensation from the advisors or their firms in exchange for placement on a ranking. Investment performance is not a criterion. Southeast Alaska Regional Health Consortium has hired Elliot J. Bruhl, M.D. to assume the newly created systemwide position of vice president/chief medical officer. SEARHC created the VP/CMO position to enhance the coordination and communication of the medical staff and the rest of the Consortium. Bruhl will begin on May 6. Bruhl has accumulated leadership and management experience in both Tribal and non-Tribal healthcare and has a proven track record in developing and implementing quality improvement measures. He served as the medical director for Mountainside Clinic in Sitka from 2006-08 where, among other things, he coordinated the merger with the Moore Clinic and redesigned the physician-practice model. From 2013-15, Bruhl served as Mt. Edgecumbe Hospital’s medical director, where he supervised the full-time medical staff, served on the leadership team, recruited physicians and established a new compliance system. He is currently the medical director of the Northeast and Northwest Family Clinics of the Mayo Clinic in Rochester, Minn., and serves as a consulting physician in the Mayo Clinic Department of Family Medicine and as an assistant professor in the Mayo Clinic School of Medicine. After receiving his bachelor’s degree in geology from Carleton College in Northfield, Minn., and a master’s degree in hydrology from the University of Idaho, Bruhl earned his doctor of medicine from the University of Colorado.

FISH FACTOR: Groups collaborate to launch fishermen’s loan fund

A new lender is offering loans to young Alaska fishermen who want to buy into the halibut and sablefish fisheries, and repayment is based on their catches. The Local Fish Fund opened its doors this month to provide alternative loan structures to young fishermen as a way to help turn the tide on the trend called the “graying of the fleet.” The average age of an Alaska fisherman today is 50 and fewer recruits are choosing the fishing life. A big part of what’s turning them away is the cost to buy into fisheries that are limited through permits, or in the case of halibut, catch shares that can cost up to $75 per pound. The high values have made conventional loans unobtainable, especially for crewmen who may know how to catch fish but have little collateral. “The cost and risk involved in accessing Alaska’s quota share fisheries are comparable to purchasing a hotel as a first step in home ownership,” said Linda Behnken, founder of the Alaska Sustainable Fisheries Trust and director of the Alaska Longline Fishermen’s Association in Sitka. “We’re looking for ways to help the next generation of fishing families get that start and build sufficient equity to eventually access conventional loans.” The Trust is among a group of entities that collaborated on the unique lending concept for more than a decade. They include The Nature Conservancy, Craft3, Rasmuson Foundation, Catch Together, Oak Foundation and the National Fish and Wildlife Foundation. The Local Fish Fund was jump started with $1.5 million from Catch Together and the Rasmuson Foundation and will be centered for now on fisheries in Southeast Alaska. “We’re hoping to build the fund to be available more broadly and capitalize at a higher level,” Behnken said. The Fund’s flexible “revenue participation” approach will let fishermen repay their loans according to the ups and downs of fishing. “Part of what has made it really challenging to buy into the fisheries is the uncertainty and how that will affect their ability to make fixed payments that don’t fluctuate as catches or fish prices drop,” Behnken said. “We share and reduce that risk so the payments are based on what fishermen are paid at the dock. If the price falls, so does the payment; conversely, if they go up, it’s a bigger share.” The Local Fish Fund comes with another good catch. Fishermen are encouraged to participate in local resource conservation projects, such as electronic monitoring or networking to keep whales away from fishing gear. They are given a 1 percent break in their loan interest if they do. “Part of our goal is to involve more fishermen in conservation research and fisheries management. Our perspective has always been that fishermen are the best problem solvers and when we engage them, we find solutions,” Behnken said. “Some of the partners we’re working with are coming specifically from that impact investment sector that is trying to obtain conservation goals through innovative lending,” said Dustin Solberg of The Nature Conservancy in Cordova. “There are great opportunities for fishermen and scientists to team up to get a better understanding of our fisheries and the ocean environment.” Get more information at LocalFishFund.org or [email protected] Halibut starts The Pacific halibut fishery started on March 15 with more fish to catch and favorable market conditions. The coastwide catch limit from California to the Bering Sea is just less than 30 million pounds, an 8.2 percent increase over 2018. Alaska’s share of the halibut catch is 22 million pounds, up 1.5 million pounds, with increases in all fishing areas except the Western Gulf of Alaska. Market conditions are more favorable this year, due mostly to fewer fish in the freezers. SeafoodNews.com reports that less carry over going into the new season has renewed interest in halibut, especially during Lent which runs until April 20. Buyers pulled back on halibut purchases last year after years of high prices and a sudden flood of cheaper fish from eastern Canada sucked the wind out of the Pacific market in 2017. The Canadian fishery, which operates year round, has recently been putting up to 11 million pounds of halibut into U.S. markets. Starting prices to Alaska fishermen last year were in the $4 to $5 range, down $2 on average from previous years. Prices ticked upwards during the season but never reached the levels of a few years ago. Roughly 2,000 Alaska longliners hold quota shares of halibut, which they can fish through Nov. 14. ComFish at 40 Hundreds of visitors will flock to “the Rock” to celebrate the 40th ComFish Alaska trade show March 28-30 at Kodiak. Joining all the vendors and exhibits at the downtown convention center will be U.S. Sen. Dan Sullivan, who reportedly plans to stay a few days. From the governor’s office, special advisor John Moller and Rachel Baker, deputy commissioner of the Alaska Department of Fish and Game, will hold open meetings, as will Rep. Louise Stutes, R-Kodiak. Trending topics on the ComFish agenda also include a Q &A with Mark Lester, president of Alaska Aerospace Corp., which has over 30 rockets planned for the Kodiak launch pad that could curtail fishing. Also, updates on the Pebble mine, seafood marketing, “throw me a rope” safety tips, fish stories and sea songs, legal advice, net recycling and much more. Recognizing Kodiak’s processing workers has become a ComFish Saturday tradition and teams from different companies compete in skill competitions. This year includes a shark dissection, a new Fish in a Box contest where a line up must be identified by touch and/or tail, and a fish toss. A contest to showcase the most able fisherman will bring ComFish to a close. Alaska Airlines is offering a 7 percent off ComFish special for Kodiak flights. See the full line up of ComFish events at www.kodiakchamber.org and on Facebook. Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

GUEST COMMENTARY: Resource development is good for Alaskans’ health

It seems as though we are constantly beating back the regressive ideas that development of our abundant resources is bad, businesses are bad, people who work for businesses are bad, and on and on. Generally, our response to these views has something to do with revenue to the State of Alaska, jobs and the state’s gross domestic product. While true, these cold, dry facts draw little interest. To my surprise, an article published last May in the Journal of the American Medical Association caught my eye and put new and brighter light on what resource development means for Alaskans. It drew me in. I thumbed through the pages and came to Figure 2, “Change in Life Expectancy at Birth by County, 1980 to 2014.” It was a map of the U.S., Alaska and Hawaii showing that the average life expectancy of Alaskans had increased in every area of the state during those years. But the most dramatic increase could be seen in the North Slope Borough, Northwest Arctic Borough, Aleutians-East Borough, Kodiak and the Southeast coast of Alaska; these areas saw an 8- to 13-year increase in life expectancy, at birth, between 1980 and 2014. Nearly 80 percent of the state saw an increase of more than six years over that 35-year time period. That stopped me. I had to ask, what caused this dramatic increase, larger than most of the rest of the U.S.? The researchers’ discussion was interesting. Socioeconomic and race/ethnicity, behavioral and metabolic risk factors, and healthcare factors combined to explain 82 percent of the contributing factors to change in life expectancy. This begged the question: What was happening in Alaska during the years 1980 to 2014? Well, that’s not hard to answer for those of us who were here in those years. The Trans-Alaska Pipeline System began flowing oil in 1977. Red Dog Mine began production in 1990. The Magnusson-Stevens Act pushed out the foreign fishing fleets, leading to important development of Alaska fisheries. These resource developments, along with others around the state, changed Alaska from a struggling new state, to an economically thriving place. These resources became jobs and opportunity for work close to traditional homes, something previously unavailable. And boroughs were formed in these areas, enabling the ability to levy taxes that funded community infrastructure. Healthcare, education, clean water, wastewater treatment and good-paying local jobs transformed rural and urban Alaska. The Alaskan people benefited. After the 1957 discovery of oil on the Kenai, Congress finally decided, in 1958, that Alaska had a chance of supporting herself on her rich resources. Alaskan voters, all 46,000 of them, voted six-to-one to become a state. As a territorial kid growing up in Fairbanks, I remember those days. I had the delightful chance to frequently go to work with my dad, a Wien Airlines captain. That meant riding along on an F-27 as he made rounds to rural communities around our state. They were referred to as “villages” then and they were isolated, poor and small. Then came resource development. As a nurse practitioner, I had the wonderful privilege of providing healthcare services in those same rural areas, now thriving communities with schools, clinics, roads and jobs. In one very remote community, I was on the same flight with a young man, going to his job at Prudhoe Bay. His wife and little son bid him goodbye at the airport. The airline agent told me that the young man was the pride of the community, bringing his paycheck back home, helping his parents and grandparents out with fuel costs in the winter and supporting his family. That is what resource development means for Alaska’s families. It’s all about our people. Yes, we love the state government revenue and services that it pays for. We have all prospered during these years since oil and mining production. But the most important benefit of resource development is to our people, our families and our local businesses. As a healthcare professional, it still brings tears of pride to my eyes to contemplate the change in our state. We still have challenges. But we met challenges before and have demonstrated an ability to solve them. The caribou, polar bears and fish all coexist with our industries. The important thing is our lands are precious for the resources they contain, and our people can and will thrive by utilizing and stewarding them. Alaska’s resource development continues to bring health and happiness to our people. ^ Senate President Cathy Giessel, a Republican, represents District N, which covers parts of Anchorage and communities along Turnagain Arm.

OPINION: Democrats misleading public yet again on oil tax policy

Based on their latest effort to mislead the public about oil tax policy, Democrats should be cheering the fact that North Slope production will miss its forecast by about 20,000 barrels per day in the 2019 fiscal year. After all, according to former one-term Fairbanks state Sen. Joe Paskvan, the state is “paying” a credit of $8 per barrel for each one produced on the North Slope under Senate Bill 21, the production tax reform passed in 2013 that took effect and was upheld by voter referendum in 2014. According to their current talking point, the state should now “save” $42.6 million in credits thanks to 14,600 fewer taxable barrels flowing through the Trans-Alaska Pipeline System each day. The only problem with that is the most recent Spring Revenue Forecast released March 15 now projects that the miss on production for the fiscal year will actually reduce total unrestricted petroleum revenue by $75.6 million and require a larger draw on state savings to balance the budget. Math, how does it work? The reason for this disparity is because the state doesn’t actually “pay” the credit Paskvan is claiming. It is a reduction in tax liability, which is a vital distinction the Democrats are counting on the public not making. No legislative session would be complete without Democrats trying to jack up oil taxes, and this one is no different with Sen. Bill Wielechowski, D-Anchorage, banging his Twitter drum in an effort to raise rates on the oil industry by $1.2 billion per year by repealing the per-barrel credit and raising the production severance tax to one of the highest in the world at 35 percent of net income. Wielechowski’s bill will go nowhere in the Republican-controlled Senate and wouldn’t survive a veto by Gov. Michael J. Dunleavy even if it were to make it to his desk, but this latest campaign is yet another example of how Democrats appear to be fundamentally incapable of speaking honestly about how SB 21 works and the unquestionable success it has been in stemming the decline of Alaska oil production. Wielechowski loves pointing to the production forecast as proof that SB 21 hasn’t worked based on five and 10 years from now. Because he is so fond of forecasts to the point he quotes them as if they came down from a mountain on stone tablets, let’s rewind to the 2013 production forecast that was completed in the final year of his preferred policy known as ACES that was repealed under SB 21. The 2013 forecast for production in the current 2019 fiscal year was for just 429,100 barrels per day. Even with this year’s miss relative to forecast, production should still be about 511,000 barrels per day, or nearly 82,000 better than the 2013 forecast. In fact, when you add up the North Slope’s actual production since SB 21 took effect, the cumulative production greater than the 2013 forecast is almost 90 million more barrels of oil. Even more remarkable than that is to consider the price environment during the 2014-19 period when prices crashed from more than $100 per barrel in the summer of 2014 to a low of $26 per barrel in January 2016. (The price forecast in 2013 was for $121 oil in the current fiscal year.) The net effect of the majors maintaining production, and even growing it in two straight years from 2015 to 2016, is that while production tax revenue (a function of price) declined by 93 percent from 2014 to 2016, royalty income declined by only 50 percent in comparison. And we cannot forget that under Wielechowski’s beloved ACES, the state would have collected exactly $0 in production taxes at all prices less than $63 per barrel. Under SB 21, the state always collects a production tax thanks to the gross tax minimum. Wielechowski and Paskvan also continue to lie about former Gov. Sean Parnell by claiming he “promised” that 1 million barrels of oil could flow through TAPS in 10 years if SB 21 passed. The truth is that the 1 million barrels per day statement was a goal. Just look at the transcript from his 2012 State of the State address: “Let’s meet my goal of one million barrels a day.” Even still, by 2024 the state should be seeing production from Pikka, Willow and Mooses Tooth that could collectively add more than 300,000 barrels per day. In fact, ConocoPhillips has continued to invest more than $1 billion per year in capital projects in Alaska and its fellow owners at Prudhoe Bay are spending $750 million this year on seismic work to identify more pools of oil. While Wielechowski loves harping on distant forecasts and statements from seven years ago, he hates being brought face-to-face with his own touting of ACES in 2013 in which he exalted over its credit system that under his own talking points had the state covering more than 65 percent of dry holes and citing the benefits of major producers reducing their tax liability by buying those cashable credits from small explorers. When he was a member of the Senate majority in 2012 he voted for a budget that appropriated nearly a $1 billion in cashable credits — that were actually “paid” in the truest sense of the word — compared to just more than half of that amount in Permanent Fund dividends. ACES also contained provisions for 20 percent credits for capital expenditures that did nothing to increase production, which dropped by an average of 5 percent per year despite sky high prices while it was in place. SB 21 replaced that 20 percent credit with a credit that is only earned when a barrel of oil is produced. Based on production since 2014 — the thing that matters most when evaluating the policy — it worked. That leaves lying about it the only option the Democrats have, which just goes to show how little respect they have for the media who cover them and the people of Alaska in general. Andrew Jensen can be reached at [email protected]

30 years after Exxon Valdez, vigilance still No. 1 priority

This March 24 marks 30 years since one of the darkest days in Alaska’s history. It was the day when the industry largely credited with affording Alaska the ability to become a state wounded the marine ecosystem to the point where it still hasn’t fully recovered. For that reason and others, leaders of the Prince William Sound Regional Citizens’ Advisory Council make it a point to acknowledge the anniversary of the Exxon Valdez oil spill while trying to avoid reliving the events. “You recognize, you commemorate it, but certainly there are a lot of communities in Prince William Sound that are still very much suffering or feeling the effects of the oil spill. It’s not a happy anniversary at all,” PWSRCAC Executive Director Donna Schantz said in an interview. The council’s approach instead has been to evaluate the changes in Prince William Sound oil tanker operations since 1989 and highlight the improvements made to safety and environmental protection as well as areas where work could still be done. That evaluation makes up the council’s Then and Now report, which is updated every five years. The 30-year edition of Then and Now was released March 19. Schantz called Alaska’s largest oil tanker operation and the spill prevention and response efforts that surround it “a world class system,” but one that could still be better, according to the council. “Our message really is:’ Hey, we’re doing really well, we haven’t had another major oil spill in 30 years; we must be doing something right,’” she said. “Let’s not let complacency creep back in. We need to remain vigilant.” Congress concluded complacency contributed to the spill and subsequently established the citizens’ advisory councils in the 1990 Oil Pollution Act, Schantz noted. A sister council was also created for Cook Inlet. The law was a major overhaul of spill prevention and response capabilities. It established the requirement to develop spill contingency plans for oil shippers and storage facilities and the federal Oil Spill Liability Trust Fund, which can provide up to $1 billion to respond to an oil discharge. Cleanup during 1989 of the Exxon Valdez cost more than $1.8 billion, according to the National Transportation Safety Board. The requirement for two tugs to escort each laden tanker out of Prince William Sound not only provides immediate response capabilities in the event of an incident, it also adds redundancy in fighting the “human factor,” according to Schantz, who cited statistics indicating the vast majority of oil spills, including the Valdez disaster caused by the tanker grounding on Bligh Reef, are the result of human error, not equipment failure. There are simply more people observing the entire operation with two more vessel crews involved. “It’s a lot harder to have something like the Exxon Valdez happen with all those extra sets of eyes watching and maintaining protection. The two escort tugs really are one of the biggest oil spill prevention efforts in place,” Schantz said. Last summer, Edison Chouest Offshore took over the escort responsibilities and many other prevention and response duties at the Alyeska Marine Terminal from Crowley Maritime. Crowley held the Ship Escort/Response Vessel System, or SERVS, contract since 1990. There were questions from advisory council members and other observers after the contract was announced in mid-2016 about whether Edison Chouest would be able to take over the role in the relatively short time, given the company was to build many of the 10 new tugs and 8 purpose-built response barges at its Gulf Coast shipyards. The company also brought in employees who were not familiar with Alaska operating conditions. After two minor incidents in early summer 2018 around the time Edison Chouest took over the SERVS work, the company has performed well, Schantz acknowledged. “Edison Chouest has really good people and they’ve worked really hard. This winter we were very concerned because it was a steep learning curve coming into a new environment, a new operating system,” she said. The council has also recently focused its attention on more closely matching condition requirements for some escort and response training exercises with what are deemed acceptable operating conditions for laden tankers. Currently, tankers are permitted to travel through the sound in weather and water conditions of up to 45-knot winds or 15-foot seas at Hinchinbrook Entrance near the open Gulf of Alaska. Council officials note the tanker and tug crews do not train in such adverse conditions, which they contend could leave the mariners less than fully prepared for the situations they might encounter on some working days. The council’s position is that it could be safer for the crews to work in controlled conditions and to better understand the limits of safe operations, Schantz said, adding that if conditions are deemed unsafe to train in the operating maximums might need to lowered. She further noted that oil recovery becomes exceedingly difficult in rough seas. Alyeska Pipeline Service Co. leaders see it differently. They contend current training regimens with more than 200 drills annually, which are not usually predicated on sea conditions, and the stronger, more advanced Edison Chouest tugs offer robust spill protection while not putting crews at unnecessary risk. Alyeska spokeswoman Michelle Egan said the company is proud of the escort system and is committed to continually ensuring it’s the best it can be. “It’s a professional disagreement about what is the right balance between demonstrating what we can do and protecting human life and the environment because there’s certain environmental risks associated with going out in those (rough) conditions,” Egan said. “We’ve worked with our regulators on that and we’re comfortable that we’ll be able to respond. But it’s really about prevention; that’s our focus.” The Alaska Department of Environmental Conservation directed Edison Chouest to train in certain unfavorable conditions in preparation for taking over the SERVS contract, but Schantz noted that will not be a regular requirement going forward. One of the things they agree on is that the contracted fleet of roughly 400 fishing vessels and 1,600 crew members trained in spill response across Southcentral Alaska provide a massive response force should prevention efforts ever fail. Schantz, who’s been with the council for 20 years, said she’s confident its oversight has helped retain high standards around oil transport in Prince William Sound. The council regularly reviews operating permits, contingency plans and recommends improvements or flags potential changes deemed to potentially degrade spill defenses. “We want to make sure that all the protections put in place after the Exxon Valdez oil spill, that we maintain those, because it’s easy to say, ‘well, we haven’t had another major oil spill, maybe we don’t need all of this,’” Schantz described. Our position is, ‘hey, we haven’t had another major oil spill. Let’s not dismantle a system that’s working well.’ We can’t weaken it; we can’t go backwards.” ^ Elwood Brehmer can be reached at [email protected]

Users say fuel tariff hikes would impact cargo operations at airport

Anchorage port customers on March 15 affirmed the possibility that self-funding a rebuild of the critical but badly corroded infrastructure they use might drive ultimately business away from the port and Anchorage in general. Municipal and port officials are once again in the midst of an analysis to determine exactly is needed how to pay for it at what is arguably Alaska’s most critical piece of infrastructure. The ongoing Anchorage Port Modernization Program would mostly replace the existing docks with a few additions. While scaled back from the failed port expansion project of the late 2000s, the current work is expected to cost upwards of $1.9 billion to complete, according to the project management firm CH2M, which was recently purchased by Jacobs Engineering Group. That price has been met with varying levels of sticker shock; it also includes more than $500 million for risk contingencies and cost escalations as the current schedule calls for work through 2028. Increased foreign steel tariffs; building to high seismic criteria with a 75-year working life; the logistical complexities of keeping the port open during construction; and removing much of the 30 acres of fill that created a large area of backlands at the north end of the port during the expansion project further add to the cost. First in line for replacement is the petroleum and cement terminal, or PCT, which is scheduled to be replaced over the next two years at a cost of $223 million. The PCT is on the oldest section of the docks and must be done first to free up space for when the adjacent cargo docks are rebuilt, according to port officials. Some sections of the pile-supported docks have been in place since 1961 and have far exceeded their initial 35-year design life. Studies indicate the pile maintenance program can keep the docks open for about another nine years before pervasive corrosion from seawater will start forcing closures. The PCT work is being partially funded with unspent money from the first project and court settlements, but absent state or federal funding, city officials in February proposed drastic increases to the port’s fuel and cement import tariffs to cover the cost of borrowing up to $200 million through revenue bonds for the remainder of the work. Representatives from port user companies said at a March 15 Anchorage Assembly Enterprise and Utility Oversight Committee meeting — the second in a series of meetings examining port reconstruction — that increasing the port’s fuel tariff by more than 500 percent would likely increase the cost of fuel and goods across the state. It’s estimated that up to 90 percent of the goods destined for delivery across mainland Alaska arrive across the port’s docks. In 2017, the Anchorage Assembly renamed it the Port of Alaska in an attempt to highlight its importance statewide and hopefully drum up support for its rebuild. Few state leaders deny the necessity of the port work, but the prospect of meaningful levels of state assistance is bleak as lawmakers continue to wrestle with how to close large state budget deficits. Specifically, the proposed fuel tariff change would incrementally increase the current 0.38 cents per gallon to 2.4 cents per gallon in 2023, which would be sufficient to cover the debt service on bonds to pay for a new PCT when combined with cement tariff hikes. While just about 2 cents per gallon in nominal terms, the impacts of the higher petroleum tariffs could be much larger in practice, according to shippers and others. Fuel economy Bert Mattingly, a manager with Anchorage Fuel and Service Co., said any tariff increase would force the international cargo carriers that support a large portion of the business at Ted Stevens Anchorage International Airport to reexamine their operations. Anchorage Fuel and Service doesn’t buy fuel. Rather, it is a consortium of 18 primarily cargo airlines that own fuel facilities at the airport and handles the fuel purchased by the individual carriers. Roughly half of the 616 million gallons of jet fuel the company received in 2018 came through the port, according to Mattingly. Anchorage Fuel and Service also owns the pipeline that carries jet fuel from the port to the airport, he said. The Anchorage airport is the fifth busiest cargo hub in the world mainly because of its position between manufacturers in east Asia and consumers in North America, and that cargo business is a large reason the airport supports 10 percent of the jobs in the city, according to the Anchorage Economic Development Corp. Refueling in Anchorage allows carriers to fill aircraft with more cargo instead of carrying the added fuel that would be needed to reach refueling hubs or destinations to the south and east. However, the economics of the cargo business model rely on a difference of pennies per gallon between hauling more fuel or hauling more cargo, industry experts note. As a result, any tariff change at the port could impact international business at the airport, Mattingly said, adding that newer, more fuel efficient jumbo jets have already begun to challenge the model of an Anchorage stopover. “We’re in a good place physically for heavy cargo to come through but on the return flight (cargo carriers) have a lot more options” for refueling locations, he said. Petro Star Vice President Mark John characterized the Alaska fuel business as an “incredibly competitive” market where changes as seemingly minor as “fractions of a penny” can influence decisions. Petro Star operates small refineries in North Pole and Valdez as well as fuel terminals across much of the state. The company also purchased a 200,000-barrel storage facility at the Anchorage port in 2017. “While we agree that the port is vital to the state’s commercial and public interests, an increase of over 500 percent in port user tariffs would ripple through the fuel market in Alaska and cause irreparable harm,” John told the Assembly members. “Once those customers leave they won’t return.” John said in response to questions about other funding alternatives that Petro Star’s parent company, Arctic Slope Regional Corp., is aware of the situation at the port and is also active in state lobbying efforts for its businesses. Committee co-chair Assemblyman Christopher Constant commented that the tariff proposal is the first thing the city has done regarding the port project that has garnered attention from outside Anchorage. “As scary as it might sound that this could happen it might be the first time we can actually educate people outside of Anchorage that this is their port,” Constant said. The situation for cement could be similar to fuel if the tariffs are enacted, according to Ryan Zins of Alaska Basic Industries, which imports cement at the PCT. Cement tariffs would go from $1.61 per ton eventually to $8.30 per ton under the city’s proposal. Anchorage Municipal Manager Bill Falsey has said city officials believe the current market price for cement is about $155 per ton. “If we look at it from a tariff standpoint, what I hear is lost jobs,” Zins said. He acknowledged the market can absorb some cost increases on cement but the proposed tariffs would equate to $750,000 to $1 million either coming out of Alaska Basic Industries’ bottom line or its customers pockets. The company is in the fourth year of a recession in its business, Zins said, adding that the tariffs could curtail some work in an already fragile construction sector. However, the worries about the basic commodity tariffs don’t even consider what it would cost for Anchorage to self-fund the port’s general cargo docks used by TOTE Maritime and Matson Inc., which provide consumer goods to Alaska. City leaders estimate another roughly $200 million per year would need to be generated to cover the debt service for building new, permanent cargo terminals and the backlands removal and stabilization. All in, that work is pegged at nearly $1.5 billion. Up to $200 million in new charges equates to about $2,000 per container delivered from Tacoma, according to Marion Davis, a Matson consultant, who called the company, “the grocery guys.” “I don’t know what (costs) we could pass on but it wouldn’t be $200 million a year,” Davis said. And while some shipments could possibly be routed to Seward or Whittier, he said that isn’t likely on a large scale. Whittier, tucked against the Chugach Mountains, doesn’t have much extra space; using the railroad isn’t feasible for time-sensitive produce, according to Davis; and adding large volumes of truck traffic to the Seward Highway from either alternative port is untenable. The most likely alternative is that more groceries would likely come north via the Alaska Highway, he said. Davis also clarified that TOTE and Matson need to use the port on the same days — Sundays and Tuesdays, necessitating two cargo docks — because supermarkets want fresh produce early in the week. Also, staggering the shipping schedules would put some ships back in Tacoma during weekends, when there is no freight to load, amongst other logistical challenges. After hearing the concerns of those most directly impacted by changes at the port, Falsey emphasized that city officials along with the Assembly are conducting a detailed review of every aspect of the modernization plan approved in late 2014. “We’re not interested in building a port that will cause business to flight from the airport. We’re not interested in building a port that will cause volumes to spiral down so that the port can no longer pay for the infrastructure that it just created,” Falsey said, while noting that something needs to be done soon. “Our goal remains to build the cheapest port that serves our needs and we’re all in this together.” Funding alternative While Anchorage leaders have struggled for years to drum up support for state and federal funding or the port project, a new possibility emerged from one of the country’s largest labor unions at the March 15 Assembly meeting. Alaska AFL-CIO President Vince Beltrami said the building trades union has a large Building Investment Trust that it could utilize to leverage other funds and help with the Port of Alaska rebuild. The roughly $7 billion AFL-CIO Building Investment Trust supports the union’s pension plans and invests in projects its laborers can work on, according to spokesman Bob Struckman. As a concept, the trust would likely sell bonds to fund a large part of the project but would not become a part owner of the port, explained Struckman, who added the investment could be “in the range of hundreds of millions” of dollars or more. “We would enter into an agreement with Anchorage to service whatever investment that we put in. The terms are very good because we’re not Wall Street. I think we’re a lot better partner than a lot of sources of funding and it can be easier than self-financing,” he said. Beltrami said any such agreement would come with the expectation that AFL-CIO affiliated laborers would do the work and Constant noted the city would hire union contractors for a project the size of the port regardless of funding arrangements. Struckman said he’s very optimistic the union’s fund managers would be interested in the Anchorage port and he’s looking to get investors to Alaska soon to review the project. Elwood Brehmer can be reached at [email protected]

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