ISER study: Warmer temps will cost hundreds of millions per year

University of Alaska economists believe the impacts of climate change could cost the state hundreds of millions of dollars per year in the coming decades. The consequences of a warmer climate — from failing infrastructure to community relocation, increased wildfire frequency and shorter ice road seasons — are likely to be a net loss of $340 million to $700 million per year, according to a University of Alaska Anchorage Institute of Social and Economic Research report published this past November. That report, Economic Effects of Climate Change in Alaska, focuses on the net costs of five widely reported effects over the next 30 to 50 years, a timeframe used for long range economic and infrastructure plans. Those costs would equal 0.6 to 1.3 percent of the state’s $51 billion GDP, but they would not be distributed evenly, “as rural communities face large projected costs while more southerly urban residents experience net gain,” the report states. The projections are based Alaska’s annual average temperatures rising 1 to 2 degrees Celsius by 2050, as the U.S. National Climate Assessment published last year by the U.S. Global Research Program forecasts, with warming by up to 3 degrees Celsius statewide by the end of the century. The authors, ISER professors Matthew Berman and Jennifer Schmidt, note annual average temperatures across the state have risen by 1.5 degrees Celsius since the 1950s. Infrastructure damage from thawing permafrost and coastal erosion are a major portion of the overall impact cost, at $250 million to $420 million per year between 2015 and 2060. The Fourth National Climate Assessment estimates an additional $110 million to $270 million will be needed annually to maintain select portions of Alaska’s infrastructure. Those costs were limited to impacts to public transportation and pipeline infrastructure without accounting for private industry buildings, the report notes, and are expected to arise from projects with shorter useful lives and the subsequent for early reconstruction. Current erosion issues, particularly along the state’s western coast, are also likely to get worse, the assessment adds. “Longer sea ice-free seasons, higher ground temperatures, and relative sea level rise are expected to exacerbate flooding and accelerate erosion in many regions, leading to the loss of terrestrial habitat in the future and in some cases requiring entire communities or portions of communities to relocate to safer terrain,” it states. The ISER study estimates the annual total for bracing against coastal erosion and flooding and eventually relocating communities from it at $50 to $100 million. It notes the State of Alaska has requested $162 million from the federal government for three communities — such as Newtok on the Yukon-Kuskowkim Delta — that the U.S. Army Corps of Engineers expects will need to be relocated within 15 years. Other, more northerly Western Alaska villages such as Kivalina and Shishmaref have also been the subjects of relocation studies. A higher number of wildfires would likely have a host of effects on Alaska, from fewer tourists to public health issues as well as the more easily quantifiable impacts of firefighting and property damage costs. The report estimates the combined increased annual cost of fire protection and property damage claims is likely to be $25 million to $40 million based on the growing frequency of years with over 1 million acres burned in the state. Shorter ice-road seasons — requiring more expensive permanent gravel or limiting travel options — are another challenge. Building all-season roads across the North Slope would cost another $10 million to $20 million per year, according to the study, to maintain travel to remote communities as the climate warms. Former Gov. Bill Walker’s administration began conceptual work on a network of primitive all-season roads across the western Slope with the Arctic Strategic Transportation and Resources, or ASTAR, project in 2017. A major positive of a warmer climate — particularly in rural Alaska where energy prices can be extremely high — is reduced heating costs. By correlating current average statewide energy cost and consumption data with long-term climate forecasts, Berman and Schmidt conclude Alaskans could save $100 million to $150 million per year on space heating costs over the next 30 to 50 years. The number of annual heating degree days, a calculation of the amount of energy needed to heat a space in a given climate over a year, has already decreased by 8.4 percent in Anchorage, 5.6 percent in Fairbanks and 7.5 percent in Utqiagvik over the past 50 years, according to the report. Additional changes could need to be made in areas such as hydropower production with higher winter water levels. The final effects on Alaska’s fisheries of ocean acidification stemming from higher levels of carbon dioxide in the water remain to be seen but are a significant worry for many, Berman and Schmidt note as well. Elwood Brehmer can be reached at [email protected]

More Nanushuk exploration set with $15M test well

A consortium of small oil explorers is ready to test the extent of a suddenly attractive North Slope oil formation. The state Division of Oil and Gas approved Great Bear Petroleum’s plan to drill the Winx-1 exploration well Dec. 14. Anchorage-based independent Great Bear is partnered with Australian explorers 88 Energy, Red Emperor Resources and Otto Energy to drill the well estimated to cost roughly $15 million, according to company filings with the state. The Winx-1 well will be 13 miles due south of the Village of Nuiqsut and about 5 miles east of the Horseshoe well and sidetrack Armstrong Energy drilled into the shallow Nanushuk formation in early 2017. The Horseshoe well extended the prospective Nanushuk formation play more than 20 miles south of the Pikka Unit — in which Spanish major Repsol also holds a significant position — and Armstrong estimates holds roughly 1.2 billion barrels of primarily Nanushuk-sourced oil. CEO Bill Armstrong said when the Horseshoe results were announced that the well is a strong indicator that the Nanushuk resource in the area could be double what is known in the Pikka Unit. Oil Search Ltd. is now developing the Pikka Unit. Slope geologists generally believe the Nanushuk prospect to be a western Slope phenomenon and exploratory drilling has mostly been west of the initial discovery at Pikka. However, 3-D seismic data indicates the area where the Winx well will be drilled could hold 400 million barrels of Nanushuk oil, according to a prior 88 Energy release. The work schedule approved by the Division of Oil and Gas calls for the companies to build ice roads and pads to the drill site through January, with drilling to start in mid-February. Great Bear Chief Commercial Officer Pat Galvin said in a brief interview that the work is on schedule and is being managed by wholly-owned 88 Energy subsidiary Captivate Alaska LLC. Work will wrap up in late April or along with the end of the Slope ice season. Plans are to drill Winx-1 to 12,000 feet using Nordic-Calista Services Nordic No. 3 rig. Armstrong said the Nanushuk oil his company encountered to the north was primarily less than 5,000 feet deep. “The Nanushuk is the primary target and there isn’t a plan to test other zones but sometimes you hit things you don’t expect,” Galvin said. Great Bear and 88 Energy are also continuing work on separate projects along the Dalton Highway south of the developed area of the North Slope. Galvin said Great Bear is preparing to test its Alkaid-1 well drilled in 2015 later this winter. The well is looking for conventional oil targets, he added. Great Bear had previously been focused on unconventional oil prospects on the southern flank of the Slope. 88 Energy is finished with testing its unconventional Icewine-2 well on the southern Slope, which targeted the HRZ shale formation. A late December project update from 88 Energy Director David Wall said the company is working with consultant Baker Hughes and the U.S. Geological Survey on new hydraulic fracturing testing methods to evaluate its wells. While they are small oil companies, 88 Energy and Great Bear hold significant positions on the Slope. Combined, they have an interest in more than 650,000 acres, most of which is along the Dalton Highway south of Deadhorse, where they have focused on unconventional oil exploration. ^ Elwood Brehmer can be reached at [email protected]

OMB director: Budget must match revenues

Alaskans should expect a balanced state budget next year, at least as long as Donna Arduin has a say in it. The new Office of Management and Budget director said she wouldn’t be doing her job if she didn’t draft a budget to present to the Legislature that matched revenue expectations. The alternative would mean relying on speculative income growth or require future government cuts; that’s work she doesn’t plan to leave on the table. “I don’t believe in budgeting towards hoping revenues go up,” Arduin said in a Dec. 28 interview. “The budget should be steady and predictable, so we shouldn’t budget hoping that we’re going to get more revenues next year.” The $5.7 billion fiscal year 2020 general fund budget proposal Gov. Michael J. Dunleavy’s administration released Dec. 14 — mostly crafted by former Gov. Bill Walker’s team as often happens when state leadership changes hands — is projected to result in a deficit of more than $1.6 billion after a roughly $300 million deficit this year. By the numbers, the current fiscal 2019 budget is very similar to the 2020 placeholder plan. The single biggest difference is a much larger Permanent Fund dividend appropriation in the 2020 proposal, which, coupled with an lower oil price forecast from the Department of Revenue, adds up to $1.6 billion more in spending than the state is likely to collect over the year. The 2020 fiscal year begins July 1. Shortly before leaving office Walker released his budget as balanced, but that was based on a $75 per barrel average oil price forecast; a number derived in October when Alaska North Slope crude prices averaged $80.02 per barrel, according to the state Tax Division. New Revenue Commissioner Bruce Tangeman curbed the $75 per barrel projection to a $64 per barrel average for 2020 as prices for Alaska crude, which is priced to the international Brent benchmark, have retreated to the mid-$50s. Dunleavy is ardently averse to new or higher taxes and dedicated to paying statutory formula-based Permanent Fund dividend that would collectively be about $920 million more than the latest PFD payout of $1.02 billion, according to OMB documents. That means reducing government spending by $1.6 billion — or 28 percent of a $5.7 billion budget — in other areas is pretty much the only remaining option. On the prospect of making those spending cuts, Arduin said, “If you don’t do them this year you’re going to have to do them next year. It doesn’t get any easier.” Legislators have found spending cuts of that size unworkable in recent years following several years of cuts totaling more than $3 billion, as state budgets have stabilized roughly at the current level over the past three fiscal years. Several recent annual deficits were so large there was little expectation the gap would be closed in a single year, and the Legislature drew down some $14 billion from state savings accounts in order to cover the gaps. The vast majority of the structural budget gap was filled last spring when legislators approved Walker’s landmark legislation to establish a 5.25 percent of market value endowment-style draw from the Permanent Fund, while additionally setting dividends below the statutorily calculated amount. Making those tough spending decisions is nothing new to Arduin. The conservative budget fixer has led the crafting of budgets for Republican governors in Michigan, New York, Florida and California over the past 25 years in addition to consulting roles for other Republican politicians across the country. Arduin agreed to join the Dunleavy administration because transforming state spending plans “is what I enjoy doing,” she said. “I enjoy the challenge and working with fiscally conservative governors to make sure that — in most state it’s taxpayers; here it’s dividend recipients and hopefully not future taxpayers — are first and foremost at every policy table and every policy discussion,” Arduin explained. Alaska’s budget structurally isn’t all that different from other states, she said, aside from the fact that most of the revenue comes from oil and other obvious differences such as the PFD. Arduin, who arrived from her home state of Michigan in late November, said she has received great help from OMB staff and other administration officials. The Office of Management and Budget now includes the administrative services directors who were who apart of 13 executive branch departments. Dunleavy made the staffing change, which Walker’s administration considered but didn’t implement, through a quiet early December administrative order. Those individuals were largely in charge of the department budgets and detailed operations and were moved to OMB “precisely for the reason that we can work through every detail of what the agencies do and know who to talk to within the agencies and how to analyze their functions,” she said. “I have an amazing team at OMB,” Arduin continued. “I was able to recruit — even prior to the inauguration — some of the most talented people around state government and then we moved the (administrative services directors) here so the Budget Office doesn’t look like it did a month ago.” Laura Cramer, a former chief of staff to Finance Committee co-chair Sen. Anna MacKinnon is Arduin’s deputy OMB director. The office is currently conducting a policy driven analyses of everything the state does. She declined to discuss the possibility of major changes to state operations in order to close the gap. Arduin also couldn’t say when the Dunleavy administration would release its first original budget, but it has a Feb. 15 deadline to do so. She reiterated a point the governor has emphasized when asked how she views the Permanent Fund is best utilized. “We need to follow the law,” she said, in reference to the fact that the statutory PFD formula has not yet been changed despite that it hasn’t been followed recently. Arduin later added, “The Permanent Fund is designed to invest and grow. The Constitution and statute tells us which revenues go into the fund and once earnings are realized how much of those earnings can be used and that the first use of those (earnings) is for the statutorily calculated dividend.” The 2020 POMV draw is projected to be roughly $2.9 billion, which would leave about $1 billion available to support government services and pay down the deficit. About $1.7 billion in fund earnings is being used for that this year. The Revenue Department expects nearly $2.2 billion in other unrestricted revenue to be available in fiscal 2020, versus about $2.7 billion in the current year, adding to the expected deficit. On less pressing matters, Arduin said she tries to apply all of her prior experiences across the country to her current work. “We can learn so much from each other. It’s just been very valuable to me having worked in other states where everything is slightly different,” she said. “On the other hand, I can anticipate what may happen in the future based on my experience.” She has had less success anticipating Juneau’s weather, but she’s still warmed to the city. “I love Juneau. I love all the boots that I’ve now acquired,” Arduin joked. “If only someone out there could invent one that converts from rain to snow to ice during the same walk — I enjoy it. The people are nice; the city is charming and it’s beautiful.” ^ Elwood Brehmer can be reached at [email protected]

Movers and Shakers for Jan. 6

John Novak was appointed as the Anchorage District Attorney. Novak has worked in the Criminal Division of the Department of Law since 1990 and has worked on everything from homicide cases, to handling federal prosecutions as a Special Assistant to the United States Attorney, to advising the Department of Public Safety. Novak’s career has taken him all across the State to prosecute crimes, including Anchorage, Kenai, Palmer, Seward, Bethel, Dillingham, Naknak, and Unalaska. He has also supervised both the drug and violent crimes units during his tenure and pitched in as Acting District Attorney for the Palmer District Attorney’s office. Novak replaces Richard Allen, who has taken a job with the Palmer District Attorney’s office. Col. Torrence Saxe was appointed to serve as the new commissioner of the Alaska Department of Military and Veterans Affairs and to serve as the adjutant general for the Alaska National Guard. As commissioner and adjutant general, Saxe will be responsible for nearly 4,400 personnel in four state divisions, and the National Guard, which is organized within the DMVA. DMVA’s divisions include Homeland Security and Emergency Management, Veterans Affairs, Alaska Military Youth Academy, Air and Army National Guard, Naval Militia, State Defense Force and Administrative Services. Saxe most recently served as commander of the Alaska Air National Guard, presiding over 2,300 Air Guardsmen in the Joint Forces Headquarters Air staff and two wings, located at Joint Base Elmendorf-Richardson in Anchorage and Eielson Air Force Base near Fairbanks. LifeMed Alaska, an Alaska-based ground and air ambulance service with base locations in Anchorage, Bethel, Dutch Harbor, Fairbanks, Juneau, Palmer and Soldotna, announced that Russell L. Edwards has joined the company as CEO. As a former Army MEDEVAC pilot and Alaska Air National Guard rescue helicopter pilot with the 210th Rescue Squadron, Edwards has led teams in the safe and effective conduct of flight operations that resulted in safe evacuation of hundreds in Alaska, the Lower 48, and during multiple overseas deployments. His comprehensive understanding and application of pertinent military and civilian regulations, crew resource management, and team leadership has resulted in multiple awards for rescue operations, including an Air Medal for Heroism for leading a flight of two HH-60s in the rescue of a wounded Special Forces officer in the mountains of Afghanistan. Edwards will retire from the Alaska Air National Guard in the fall of 2019 as a lieutenant colonel.

Annual Picks and Pans closes 27th year of Fish Factor

This column that each week focuses on Alaska’s seafood industry will enter its 28th year in 2019. It began in the Anchorage Daily News in 1991 at the request of longtime former business editor Bill White and has appeared in the ADN ever since. Fish Factor also is featured in more than a dozen weekly papers across Alaska and nationally. The goal is to make all readers more aware of the economic, social and cultural importance of one of Alaska’s oldest and largest industries. Here are Fish Factor’s annual Fishing Picks and Pans for 2018 – a no holds barred look back at some of the year’s best and worst fishing highlights, in no particular order, and my choice for the biggest fish story of the year. • Biggest new industry potential: Mariculture. Growing shellfish and seaweeds could be a $100 million Alaska industry in 20 years, says a comprehensive state report. Kelp farms are cropping up around Kodiak and, along with food makers, the Department of Energy already has its sights on Alaska for biofuels from macroalgae. • Best fish sigh of relief: Many Gulf fishermen began using pots instead of hooks to keep whales from robbing their pricey sablefish catches, called “getting whaled.” • Best fish visionaries: Tidal Vision of Juneau, for their eco-friendly method of extracting chitin from crab shells, a first in the US. Uses for chitin range from fabrics to filters to pharmaceuticals. • Best Fish Legislators: Rep. Louise Stutes, R-Kodiak, Rep. Bryce Edgmon, D-Dillingham, Rep. Dan Ortiz, I-Ketchikan • Best fish knowledge sharers: Alaska Sea Grant • Best fish giver: Sea Share, over 225 million fish servings to food banks since 1994. The program began as a way to use bycatch caught in Bering Sea fisheries. • Trickiest fishing conundrum: Sea otters vs. crab and dive fisheries in Southeast Alaska • Most earth friendly fishing town: Kodiak, for generating nearly 100 percent of its electricity from wind and hydropower, and for turning its fish wastes into high quality oils and meals • Biggest fish WTF? Rick (Rydell) Green being chosen as a special assistant to the Alaska Department of Fish and Game to “restore trust” in the department. Green has no education or experience in fisheries or wildlife and was a talk show host on KENI/Anchorage since 2001. • Scariest fish stories: Ocean acidification and warming oceans • Best daily fish news site: • Best fish watchers: Cook Inletkeeper, Salmon Beyond Borders • Best new fish economist: Garrett Evridge, McDowell Group • Best go to bat for their fish: Genuine Alaska Pollock Producers; the fishermen funded/operated Bristol Bay Regional Seafood Development Association • Best fish motivators: The Bering Sea Fishermen’s Association’s Alaska Ocean Cluster Initiative that promotes Blue Economy business ideas and entrepreneurs. • Best fish mainstream push: The Get Ugly crab campaign by the Alaska Seafood Marketing Institute. Older crabs with shells that are discolored, scarred or covered with barnacles can comprise 30 percent of the catch in Bering Sea fisheries. The “ugly” crab can be a turn off to buyers. “It’s what’s on the inside that counts,” the campaign says, adding that the older crab often have better meat fills. • Biggest fish bust: 25 percent tariffs on nearly all U.S. seafood products going to and from China. China is Alaska’s biggest seafood buyer, purchasing 54 percent of our seafood exports last year valued at $1.3 billion. • Best Industry Entrepreneurs: Salmon Sisters of Homer • Best eco-friendly fish feat: The removal of hundreds of thousands of pounds of old fishing nets, lines and gear from Dutch Harbor and Kodiak by Nicole Baker’s “net your problem” program. The nets are shipped to Europe where they are recycled into plastic products. • Biggest fish fake: Genetically modified salmon, aka Frankenfish • Biggest fish raised eyebrows: Offshore fish farms being proposed by the Trump Administration. Backers that include Cargill, Pacific Seafood, Red Lobster, High Liner Foods, Sysco and Seattle Fish Company are pushing a bill in the U.S. Senate called Advancing the Quality and Understanding of American Aquaculture (AQUAA) Act that will streamline the permitting process for offshore aquaculture projects. • Best new fish writers: Elizabeth Earl, Alaska Journal of Commerce; Alistair Gardiner, Kodiak Daily Mirror • Worst fish travesty: Commercial and sport fishermen get cuts every year while nearly six million of pounds of halibut are allowed to be taken as bycatch in other fisheries. It’s getting better, but still a long way to go. • Best fish assists: Every person at ADFG and NOAA Fisheries/Alaska. • Best go to bat for its future fishermen: Alaska Longline Fishermen’s Association, Sitka • Best fish showoffs: Alaska Symphony of Seafood, hosted for 26 years by the Alaska Fisheries Development Foundation. • Biggest fish uncertainty: Dunleavy administration • Best fish switch: Herring taken for its roe pays $100 to $350 per ton in a fading Japanese market; herring used for food and bait can fetch up to $2,000 per ton. (While many fishermen pay over $1 per pound for bait herring from the east coast.) Time for a management shift? • Biggest fish opportunity: Turning Alaska’s three billion pounds of fish heads, skins, internal organs and other “wastes” into pet foods, nutraceuticals, pharmaceuticals, etc. An Analyses of Alaska Seafood Specialty Products report by the Alaska Seafood Marketing Institute says using byproducts could be worth an additional $700 million or more to the industry. • Biggest fish disappointments: Salmon catches throughout the Gulf of Alaska were the lowest in 50 years in some regions. Likewise, catches of cod, halibut and Bering Sea crab also tumbled. • Best fish boosters: Alaska’s salmon hatcheries • Biggest fish story: Alaska Fish are changing their behavior in search of colder waters. No sea ice in the winter of 2018 in the Bering Sea led to the disappearance of the “cold pool,” a big tongue of bottom water that corresponds to the usual southward extent of the ice cover. That’s led to more than half of the cod biomass being found in regions north of the normal surveys, as well as a big plug of pollock. There also was a 20 percent shift in the density of Pacific halibut from a year ago in the northern Bering Sea. Laine Welch lives in Kodiak. Visit or contact [email protected] for information.


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