Medicare, Social Security face shaky fiscal futures

WASHINGTON (AP) — The financial condition of the government’s bedrock retirement programs for middle- and working-class Americans remains shaky, with Medicare pointed toward insolvency by 2026, according to a report April 22 by the government’s overseers of Medicare and Social Security. It paints a sobering picture of the programs, though it’s relatively unchanged from last year’s update. Social Security would become insolvent in 2035, one year later than previously estimated. Both programs will need to eventually be addressed to avert automatic cuts should their trust funds run dry. Neither President Donald Trump nor Capitol Hill’s warring factions has put political perilous cost curbs on their to-do list. The report is the latest update of the government’s troubled fiscal picture. It lands in a capital that has proven chronically unable to address it. Trump has declared benefit cuts to the nation’s signature retirement programs off limits and many Democratic presidential candidates are calling for expanding Medicare benefits rather than addressing the program’s worsening finances. Many on both sides actually agree that it would be better for Washington to act sooner rather than later to shore up the programs rather than wait until they are on the brink of insolvency and have to weigh more drastic steps. Limiting her comments to Medicare, White House press secretary Sarah Sanders said the report highlights the need for “serious-minded” lawmakers to work with the administration on bipartisan changes to lower costs, eliminate fraud and abuse, and preserve the program for future generations. Sanders also took the opportunity to criticize Democrats’ calls to expand Medicare. She claimed such a step would amount to a “total government takeover of health care” that would cut out private-sector options, endanger access to health care for seniors and further strain the federal budget. But potential cuts such as curbing inflationary increases for Social Security, hiking payroll taxes or raising the Medicare retirement age are so politically freighted and toxic that Washington’s power players are mostly ignoring the problem. Arkansas Rep. Steve Womack, the senior Republican on the House Budget Committee, urged action, saying the financial condition of both programs is driving up federal spending, increasing budget deficits and crowing out other priorities. “We cannot afford to ignore this reality any longer,” Womack said. Later this year, Social Security is expected to declare a 1.8 percent cost-of-living increase for 2020 based on current trends, program officials say. The April 22 report by three Cabinet heads and Social Security’s acting commissioner urges lawmakers to “take action sooner rather than later to address these shortfalls, so that a broader range of solutions can be considered and more time will be available to phase in changes while giving the public adequate time to prepare.” If Congress doesn’t act, both programs would eventually be unable to cover the full cost of promised benefits. With Social Security that could mean automatic benefit cuts for most retirees, many of whom depend on the program to cover basic living costs. For Medicare, it could mean that hospitals, nursing homes, and other medical providers would be paid only part of their agreed-upon fees. In a glimmer of good news, Social Security’s disability program is now estimated to remain solvent for an additional 20 years, through 2052. Overall, however, Social Security would run out of reserves by 2035, one year later than projected in last year’s report. “We remain committed to further bolstering the programs’ finances, which will benefit from the long-term growth we will see as a result of the Administration’s economic policies,” said Treasury Secretary Steven Mnuchin. As an indication of Medicare’s woes, it would take a payroll tax increase of 0.91 percentage points to fully address its shortfall or a 19 percent cut in spending. Medicare’s problems are considered more difficult to solve, as health care costs regularly outpace inflation and economic growth. Social Security is the government’s largest program, costing $853 billion last year, with another $147 billion for disability benefits. Medicare’s hospital, outpatient care, and prescription drug benefits totaled about $740 billion. Taken together, the two programs combined for 45 percent of the federal budget, excluding interest payments on the national debt.

Tokyo Gas signs gas deal linked to coal prices

Natural gas is increasingly promoted as a cleaner-burning option to coal for power generation, and liquefied natural gas is the answer for buyers without access to gas pipelines. Which makes it ironic — but sensible in a competitive energy market — that a long-term LNG contract would be linked to coal prices. Tokyo Gas this month signed a heads of agreement with Shell for a 10-year supply of LNG starting in 2020, at 500,000 tonnes per year. That’s about seven or eight full cargoes per year in conventional LNG carriers. Some of that supply — the companies are not saying how much — will be indexed to coal prices. It appears it’s the first time a Japanese buyer is using a coal-based pricing index in an LNG contract, Reuters reported. The explanation is that Japan’s second-biggest LNG buyer is stepping up its efforts to diversify supply sources and pricing while it works to reduce costs. The volume not based on coal will be priced to conventional gas- and oil-linked indexes, a Tokyo Gas spokesman said April 5. Traditional oil-linked LNG pricing, which goes back decades, is roughly based on the energy-equivalency of gas to oil. Burn one or the other, the price is similar. It’s the same logic for coal-indexed LNG pricing. “Coal indexation in LNG contracts will be particularly relevant for Japanese buyers, not least because coal is an integral part of Japan’s power-generation mix,” Abhishek Kumar, head of analytics at Interfax Energy in London, told Reuters. Integral and equal to gas in market share, the target for the country’s 2030 energy mix is 26 percent coal and 27 percent LNG, according to Japan’s Ministry of Energy, Trade and Industry. “Coal remains the largest competitor to gas in the power sector in Asia. If the index is competitive, this could be an important step for enabling LNG and utilities to better compete with coal,” Nicholas Browne, a Wood Mackenzie analyst, told Reuters. Coal-indexed LNG pricing is a smart “risk management strategy” for a company that competes with coal-fired generation, said Christopher Goncalves, chair of the energy practice at Berkeley Research Group. The Tokyo Gas deal with Shell underscores how Asian buyers are pushing hard for price diversification, which will increasingly influence LNG contract negotiations and renegotiations, S&P Global Platts reported. “We are in a stage of experimentation with non-oil indexation,” Craig Pirrong, professor of finance at the University of Houston, was quoted by Platts. The traditional oil indexation is one of three fronts in LNG contracts on which Asian LNG buyers have pushed back in recent years. The other two being destination restrictions to prevent buyers from redirecting or reselling cargoes, and contract durations. Japan’s energy ministry has advocated for abolishment of destination clauses for years. Asian buyers have also gained traction in cutting contract durations, with the market structure moving in favor of shorter-term contracts. Oil indexation, however, has been tougher to dislodge. The deal with Shell “is an example of diversification of pricing, in line with Tokyo Gas’ previously stated strategy,” Hiroshi Hashimoto, senior gas group analyst at the Institute of Energy Economics of Japan, told S&P Platts. But some analysts see the coal-linked deal as not that big of a deal. It’s a long-overdue step but unlikely to represent a major shift in the market, a Reuters’ columnist reported April 10. Buyers and sellers could easily see oil market pricing, and it made sense over the years to stick with that proven formula to provide a reasonable level of revenue certainty for developers of multibillion-dollar LNG export projects, columnist Clyde Russell said: “Crude also made more sense than coal, given that 40 years ago the crude futures market was significantly more advanced — and still is — than the market for trading thermal coal.” The Tokyo Gas deal makes sense in Japan, where LNG and coal are effectively competing fuels, Russell said. By linking the prices, Tokyo Gas can hedge against competitors that use coal for power generation. “While this recent innovation makes sense in Japan, it may not have too much relevance in other countries in the region,” the April 11 column said. Spot-market pricing or short-term deals linked to LNG or natural gas indexes are likely to hold more appeal outside Japan than coal-indexed pricing, Russell said. Those other pricing mechanisms offer enough flexibility and don’t require strong knowledge of the workings of coal markets. Regardless whether the Tokyo Gas deal with Shell is a trendsetter or just an outlier, coal still is a big player in Asia’s energy mix. China has decided to allow 11 provinces and regions to resume building coal-fired power plants. It’s a clear sign that the world’s largest energy user is far from finished with the most-polluting fossil fuel. Bloomberg News reported April 19 that China’s National Energy Administration forecasts that the 11 provinces — which previously had been labeled as overcapacity for power generation — no longer have too much capacity and can now start adding new coal plants. The decision underscores how dependent the world’s second-largest economy still is on coal, Bloomberg reported, even as China invests hundreds of billions of dollars in cleaner energy sources such as natural gas, wind turbines and solar panels. And while coal’s share of China’s energy consumption fell slightly last year, the volume of coal burned increased as the country’s total energy demand grew. China is not alone in keeping coal around. Pakistan has fired up its first major power plant fueled by one of the world’s 20 largest coal reserves, the country’s Thar desert, S&P Global Platts reported. The new power plant will allow coal to compete head on with imported LNG in the country’s power mix. Pakistan has battled severe power shortages for years and expects to ramp up the share of coal in its electricity mix to 30 percent by 2030 from as little as 1 percent in 2014, driven mainly by its Thar coal fields, S&P Platts reported. Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide.

Reps apologize after last-minute charges sink Johnstone nomination

Editor's note: This story has been updated with a list of names provided to the governor by the Alaska Marijuana Industry Association for the Marijuana Control Board. Last Wednesday night was a strange one for the Legislature. In a joint session of the House and Senate on April 17, the members confirmed most of Gov. Michael J. Dunleavy’s nominees for state boards and commissions and all of his cabinet appointments. Seven appointees were not confirmed, though, with one not being voted on and six being rejected. Although some were rejected based on their resumes, last-minute accusations of sexual harassment against one blew up the confirmation process. Karl Johnstone, one of Dunleavy’s four nominees to the Board of Fisheries, was voted down 24-33 late that night. Earlier in the day, Rep. Ivy Spohnholz, D-Anchorage, surprised the members of the Legislature when she said during her comments that she had received texts from two women alleging sexually harassing behavior from Johnstone during his previous service on the board. The allegations were not mentioned during multiple previous confirmation hearings, when hundreds of people testified for and against Johnstone based on his past service with the board. After Spohnholz’s comments, the Legislature voted narrowly to table Johnstone’s nomination but brought it up again later that night, at which point he was voted down. The allegations were a surprise to many in the room, and Spohnholz did not identify the two people who put them forward, nor were they identified later. No formal investigation was conducted into the allegations, and Johnstone did not have the opportunity to make comments on the record about any allegations. Andy Hall, the president of setnetting group the Kenai Peninsula Fishermen’s Association and a setnet fisherman, wrote public testimony to the Legislature opposing Johnstone’s nomination but said he was surprised by the process of the vote. “It would’ve been cleaner if it was a vote based on the testimony provided to the Legislature about him,” he said. “That last incident may or may not have changed things. I don’t know.” Hall and many others who testified to the Legislature against Johnstone offered anecdotes about intimidating behavior, both toward members of the public and toward Alaska Department of Fish and Game staff. Commercial fishermen opposed Johnstone primarily because of a record of voting for sportfishing interests and his public commentary about the need to prioritize sportfishing and personal use fisheries over commercial fisheries, particularly in Cook Inlet. The United Fishermen of Alaska, which does not usually oppose or endorse Board of Fisheries candidates, made a point to oppose Johnstone’s nomination because of his record. The UFA did not have any connection to the allegations of sexual harassment that arose, wrote Executive Director Frances Leach in an email. “We feel it was unfortunate timing that these allegations came out on the floor right before the vote as Mr. Johnstone was not provided time to respond,” she wrote. However, according to UFA’s tracking, it didn’t change the ultimate outcome. Political organizations regularly keep track of how legislators have said they would vote in a record called a chit sheet, and UFA’s chit sheets made before the joint session showed that Johnstone would have been defeated anyway, Leach added. In a statement to KTVA, Johnstone wrote that, “I believe that legitimate claims should be taken seriously and investigated. But let me be clear, I never made inappropriate sexual comments as stated by Rep. (Spohnholz) … I have thick skin and can take the hits, but it stings to know my four daughters have been hurt by this. My appointment to the Board of Fisheries is no longer at stake. My hope is that the truth comes out because the only thing at stake now is my reputation. All Alaskans should be concerned that the truth comes out. What happened to me can happen to anyone.” The vote left a bad taste in some mouths, even among those who did not vote for Johnstone. Reps. Sarah Vance, R-Homer, and Ben Carpenter, R-Nikiski, issued a joint apology to Johnstone and another appointee, Bob Griffin, for what they said was inappropriate behavior from the Legislature impugning nominees’ characters without giving them a chance to respond. Both Vance and Carpenter hail from the Kenai Peninsula, which is rife with fisheries conflict but home to most of Cook Inlet’s commercial fishermen, who heavily opposed Johnstone’s nomination. Both are members of the House minority. House Speaker Bryce Edgmon, I-Dillingham, and Spohnholz did not return calls for comment. “Neither Rep. Carpenter nor I voted to confirm Mr. Johnstone to the Board of Fish, but our decisions had nothing to do with the unfair accusations levied against him on the floor,” Vance said in a statement. “To wildly throw out such offensive accusations with a clear intent to derail someone’s nomination is a sick political stunt, and I hope Mr. Johnstone and Mr. Griffin will accept our apologies on behalf of the body.” Stiver shot down for Marijuana Board In a cleaner, but narrower, vote, the Legislature also turned down the nomination of Vivian Stiver of Fairbanks to fill a seat on the Marijuana Control Board. Members of the cannabis industry heavily campaigned against her based on her past participation in a campaign to ban commercial marijuana activity in Fairbanks and her lack of background in the industry. She was to replace Brandon Emmett, also of Fairbanks, who had represented industry on the board since its inception in 2015. The Legislature did confirm Dunleavy’s second appointment to the board, Alaska Wildlife Trooper Lt. Christopher Jaime of Soldotna. Stiver was turned down in a 29-30 vote, one shy of what she needed for a majority. Carey Carrigan, the executive director of the Alaska Marijuana Industry Association, said the members of the industry were relieved at the vote and that “common sense prevailed.” “We’re not trying to oppose people to oppose them,” he said. “(For) that second seat that everyone’s considering a public seat, I’d like to see two seats for industry on the board. To have two seats on the board representing industry on the board is not unreasonable.” The industry group has assembled a group of suggested individuals for appointment to submit to Dunleavy’s administration, Carrigan said, aiming for a person with industry background and knowledge, he said. That list, submitted Wednesday, includes Bruce Schulte of Anchorage, Joseph Martin of Anchorage, Rebecca Rein of Houston, Michael White of Anchorage and Gary Evans of Fairbanks. Schulte served on the board from 2015–2016, including as chairman, until former governor Bill Walker dismissed him. “I don’t know if there’s going to be any desire to accept our assistance,” he said. “I hope there is.” Elizabeth Earl can be reached at [email protected]

Movers and Shakers for April 28

Alaska USA Federal Credit Union has selected three individuals to fill executive level positions. Elizabeth Rense Pavlas has been promoted to the position of executive director, retail financial services. She was previously senior vice president, operations. Pavlas started with Alaska USA in 2008 as a marketing manager for Retail Financial Services and has earned positions of increased responsibility throughout her 10-year career with the credit union. She has a bachelor’s of business management degree and an MBA from the University of Alaska Anchorage. She is also in her final year of Western CUNA Management School. Robert McNaughton has been selected for the position of executive director, business and commercial services. McNaughton has worked at Alaska USA for 15 years, most recently as vice president, business and commercial lending. He has more than 30 years of commercial lending experience, including portfolio management, credit underwriting, and small business banking. Jeff Gregg has been selected for the position of vice president, business and commercial lending. Gregg has worked for Alaska USA for the last three years, most recently as regional vice president, commercial lending, Pacific Northwest. He has more than 28 years of commercial lending experience and has a bachelor’s of business administration degree from Central Washington University. PND Engineers Inc. announced the following new hires in its Anchorage office. Cameron Brailey, EIT, has joined PND as a staff civil engineer. Brailey has a strong background in construction, hydrology and hydraulics. He is a lifelong Alaskan and a 2016 graduate of Northern Arizona University with skills including bathymetric survey and computer modeling. Diana Linder, EIT, has joined the team as a staff structural engineer. Linder is a December 2018 graduate of Mississippi State University with a bachelor’s degree in civil engineering. Originally from Minnesota, Diana also has a background in water resources and environmental research. As an undergraduate student, she was president of her ASCE student chapter and volunteered with an organization to promote STEM careers with middle school girls. She participated on the Mississippi State Concrete Canoe Team for two years; both teams went on to win first place in the regional competitions and advance to the 30th and 31st Annual ASCE National Concrete Canoe Competitions. Lifelong Alaskan Elizabeth Swan, EIT, a staff structural engineer, received her bachelor of science degree in civil engineering from the University of Alaska Anchorage in spring 2018. She is currently splitting her time between PND’s Anchorage and Palmer offices while working toward her master’s degree. Prior to joining PND, she interned for two summers with the Alaska Department of Transportation &Public Facilities Bridge Section, gaining experience with structures by assisting on bridge inceptions statewide. Jane Hemstreet has joined PND Engineers Inc. in Anchorage as our front desk administrative assistant. Hemstreet comes to PND from Wells Fargo, where she worked most recently with the home mortgage team, and also brings previous experience as an auto claims adjuster. Jason Hoke of Glennallen has been appointed by the Secretary of Commerce as the Denali Commission federal co-chair. Hoke will replace John Torgerson who has been serving in the role of interim federal co-chair. Hoke’s previous work experience in Alaska includes serving as Programs Director for the Ahtna Inter-Tribal Resource Commission, overseeing energy, resource and biomass projects for Ahtna and its Tribes. In addition, he worked as executive director for the Copper Valley Development Association Inc. and served as Tribal administrator for the Cheesh’Na Tribal Council. Bruce Schactler was reelected and Tyson Fick, Melanie Brown and Cynthia Wallesz were elected to the United Fishermen of Alaska board of directors as at-large members. UFA’s individual and lifetime members elect four at-large directors every two years to represent the more than 450 individual, lifetime, and crewmembers on the organization’s board. The at-large directors will serve two-year terms beginning April 15. Also taking effect on April 15 is the return of Duncan Fields to the UFA Executive Committee as administrative chair. Fick and Wallesz return to the board as elected at-large members. Fick represented the Alaska Bering Sea Crabbers group from 2017-18 and Wallesz represented United Southeast Alaska Gillnetters on the UFA board from 2015-18. Fick previously worked as communications director at the Alaska Seafood Marketing Institute as well as executive director at ABSC. Based in Juneau, he now fishes Southeast salmon gillnet, salmon handtroll, and Dungeness crab, and is a co-owner of Taku River Reds. Wallesz, of Petersburg, and Boise, Idaho, has been a Southeast salmon drift gillnetter for 25 years and direct marketing her family’s salmon since 1999. She has also longlined for halibut, and fished Dungeness crab in Washington, and has been active in the Petersburg Community Foundation, Chamber of Commerce, and Southeast Alaska Rainforest Wild. Since earning a master’s degree in sustainable business in 2012, she has consulted with small businesses and nonprofits to help them strategize their futures, work efficiently and meet their goals. Brown of Juneau has been fishing since 1979 in her family’s Bristol Bay setnet operation and as a crew member in Togiak herring, Kotzebue Sound and Norton Sound setnet fisheries. She is an alternate member of the Juneau Douglas Advisory Committee and in her second term on the Alaska Seafood Marketing Institute Salmon Species Committee, and a board member of Alaska Marine Conservation Council. Schactler, of Kodiak, has fished salmon seining in Southeast and Kodiak, Tanner crab in Kodiak and Togiak, longlining for cod and halibut, and herring throughout the state. He also is the director of the Alaska Global Food Aid Program with the Alaska Seafood Marketing Institute and national director for the National Seafood Marketing Coalition. He co-authored the UFA Marketing Plan in 2001 which led to USDA Country of Origin Labeling for seafood, USDA Trade Adjustment Assistance eligibility for fishermen, and inclusion of Alaska salmon and herring in food aid programs. Schactler has served as an at-large board member since 1993 and received the 2013 UFA Fisherman of the Year award, and will continue in his role on the Executive Committee as UFA marketing chair.

Major issues unresolved as session limit nears

JUNEAU — The biggest issues heading into this year’s legislative session remain unresolved in the session’s final weeks, with Gov. Michael J. Dunleavy facing resistance to pieces of his agenda. Lawmakers have yet to finalize a budget. The size of the check residents will get this year from the state’s oil-wealth fund, the Alaska Permanent Fund, is unsettled, as is the debate over the program’s future. The Republican governor wants lawmakers to pass his package of bills related to crime and act on proposed constitutional amendments pitched as part of his fiscal plan. But he faces pushback, with a key House member wanting to focus initially on issues related to public safety with the broadest level of support and other lawmakers arguing that the push for constitutional changes may not be realistic. While voters years ago approved a 90-day legislative session, that mark came and went with little acknowledgment earlier this month. Legislative leaders early on cast doubt on whether their work could be completed in 90 days, with Dunleavy releasing his budget a month into session and the House failing to organize until around that time. The constitution permits 121-day regular sessions, with an option to extend for another 10. The 121-day mark would be hit May 15. Budget and dividend The version of the state operating budget passed by the House and the one the Senate is working onreject the level of cuts proposed by Dunleavy. The House-passed budget did not include a Permanent Fund dividend amount, with House leadership saying that issue would be debated separately, later. Debate over the dividend snarled the House’s deliberations on the budget last year. The $1,600 check that was politically agreeable on that side is what ultimately was settled upon. Debate this year, too, is politically fraught. When lawmakers last year decided to use Permanent Fund earnings, the pot used to pay dividends, to help cover government costs amid an ongoing budget deficit, the dividend began competing with other programs for funding. Sen. Lyman Hoffman, D-Bethel, said Tuesday that having government “take the first bite of the apple puts the dividend potentially at risk.” He said the split between what goes to government and what goes to dividends should be settled. Dunleavy campaigned on following the formula in state law for a full dividend payout after three years of reduced payouts. He has not said specifically what he would do if lawmakers deliver a smaller dividend. But he has said he won’t be afraid to flex any of his constitutional powers, which include veto authorities. The Legislature can override vetoes if it musters sufficient support. Crime bills Dunleavy said April 22 he was “imploring” lawmakers to move his crime bills, which deal with sex offenses, sentencing, pretrial and probation and parole. He said he wants to deal with “the criminal element” versus trying to address issues such as recidivism, preparing inmates for release and substance abuse. Those will be worked on, he said. “But the people of Alaska, I believe right now, demand that we get these bills that we filed moving and out before the session is over,” he said. Rep. Matt Claman, chair of the House Judiciary Committee, said each of Dunleavy’s bills is “massive.” Claman, D-Anchorage, favors prioritizing, finding areas that broadly can be agreed upon and working longer-term on other areas. Senate President Cathy Giessel, R-Anchorage, said the Senate — which has been vetting the bills — and the House “have to reach agreement, and that’s what the next few weeks is about,” she said. Giessel expects lawmakers to act on crime bills of some kind. Dunleavy said he would not rule out a special session if lawmakers don’t act on his bills. Constitutional amendments Dunleavy wants action on proposed constitutional amendments addressing taxes, the dividend and spending. Two-thirds support in each chamber is needed to send such proposals to voters. Response so far has been tepid, though some, notably in the Senate, have shown intrest in replacing in law an existing spending limit. Senate Finance Committee Co-chair Bert Stedman said constitutional amendments are difficult to deliver, “otherwise we’d have the constitution changed every four years.”

OPINION: RIP, ‘Paid for by ConocoPhillips’

In a little-noticed post mortem to the Stand for Salmon initiative battle last fall, the Alaska Public Offices Commission issued a ruling that will serve to limit transparency in campaign financing for future ballot measures. APOC ruled Feb. 4 on a complaint filed last September by the initiative opponents, Stand for Alaska-Vote No on 1, against three entities supporting the measure: Yes for Salmon-Vote Yes on 1, The Alaska Center and Stand for Salmon. In addition to violations of naming regulations and rules for financial disclosures known as the “paid for by” statements, the opponents’ complaint alleged that the latter two initiative proponents should have registered as a group based on their close coordination and should have also been required to disclose the source of hundreds of thousands of dollars in campaign expenditures above and beyond what they reported in donations. If you’re interested in the more arcane legal arguments over what constitutes a “group” or an “individual” or the more common decisions on “paid for” statements and naming rules, the APOC complaint documents and final order are on its website (complaint 18-08). We’ll focus on how APOC’s ruling on financial disclosures figures to upend the state’s goal of transparency in campaign spending. For quick background, Stand for Salmon and The Alaska Center were formed in 2013 and 1990, respectively, while the Yes for Salmon group was formed and registered with APOC in 2017 for the specific purpose of backing Ballot Measure 1 in the 2018 general election. The Stand for Alaska complaint focused on its calculations that The Alaska Center reported making contributions to the campaign in excess of $500,000 while reporting donations of about $234,000. Similarly, Stand for Salmon reported spending more than $400,000 while receiving about $181,000 in contributions, according to the opponents’ calculations that were mostly undisputed other than the supporters claiming that they over-reported the amount of donations they received to back the initiative. All in all, about $730,000 of the $1.1 million in reported contributions to Yes for Salmon, the official group registered with APOC to support the initiative, were classified as “non-monetary” with the top donors being The Alaska Center at $357,000 and the Washington, D.C.-based New Venture Fund that paid the salary of campaign manager Ryan Schryver with a total “non-monetary” contribution of $227,000. Stand for Alaska objected to this arrangement, arguing that Yes for Salmon was nothing more than a shell organization and that the campaign was actually being run by Stand for Salmon and The Alaska Center who were clearly expending more than they were collecting without having to report the source of the money. As was previously written in this space, groups like The Alaska Center, Cook Inletkeeper, Trustees for Alaska, Salmon State, and others are heavily supported by nonprofit advocacy groups based outside of Alaska. There isn’t anything wrong with that, but these same groups regularly run their campaigns — and this one was no different — attacking “foreign” oil and mining companies as heartless ravagers of the resource whose arguments should be discounted as Outsiders despite having thousands of employees and billions of dollars invested over decades in Alaska. Whether it was the 2014 campaign to uphold the 2013 oil tax reform legislation or the most recent salmon habitat initiative, the resource companies have erred on the side of transparency no matter how self-serving it looked politically. In 2014, the end of every pro-SB 21 commercial was followed by the statement “Top three contributors are BP, ExxonMobil and ConocoPhillips” or some variation of that order. It was the same in 2018, with a combination of BP, ConocoPhillips, ExxonMobil, Donlin Gold or Teck usually holding down the top three positions in the disclosures opposing Ballot Measure 1. Taking the information provided through transparent financial reports as a weapon to slam their opponents while at the same time not being transparent about the source of their own Outside funding takes a particular brand of chutzpah, but politics ain’t beanbag, as they say. Ultimately, APOC sided with the initiative backers on the basis that Stand for Salmon and The Alaska Center, as entities, predated the campaign and are not specifically organized to support any particular ballot measure. For that reason, any money in their general funds that was not expressly solicited for the purpose of the campaign does not have to be reported even if it is used to support the campaign. You don’t have to be Kreskin to see where this goes. There is no shortage of pro-resource development organizations in Alaska, and all of them could be quite capable of running a campaign to defeat the next anti-development initiative that comes along. Under APOC’s ruling, all they have to do is form an organization such as “No to NIMBY” and then allow some other established entity, say, the Resource Support Association, to run the campaign out of their offices with their staffs and call it all a “non-monetary” contribution to the official “group.” Under APOC’s ruling, as long as they spend money from general funds not earmarked for or solicited for that election, they wouldn’t have to disclose a dollar of where it came from. Take resource issues out of it and there is still the potential for this game of hide the ball on every ballot measure going forward. APOC’s ruling may not go against the letter of the law, but it obviously goes against the spirit of transparency that our campaign disclosure rules are intended to demand. If we have seen the death of disclosure in ballot measure spending, it will be thanks to what may turn out to be a pyrrhic victory for the supposed opponents of “dark money” who turned to its side in 2018. Andrew Jensen can be reached at [email protected]

State hopes to launch industrial hemp program by fall

Though the state legalized a pilot project for industrial hemp agriculture more than a year ago, some hurdles still stand between farmers and authorized grows. Hemp and marijuana both come from the same plant, but the variety that produces hemp is significantly lower in the psychoactive component, THC. Hemp can be used in a variety of products, from textiles to cosmetics to animal feed. One of its most widely known uses is in the dietary and medicinal supplement cannabidiol, or CBD. Former Gov. Bill Walker signed Senate Bill 6 into law in April 2018, authorizing the state to move forward with developing a pilot project for industrial hemp growers. The program is authorized under the 2014 federal farm bill, which essentially allowed states to take the helm on developing these projects if they chose to without fear of federal raids. For the past year, the Alaska Division of Agriculture and the Alaska Department of Law have been working together to hatch both a plan and regulations for that plan to allow farmers to start their own hemp grows. Officials say they hope to get the program rolled out this fall. David Schade, the acting director of the Division of Agriculture, told the House Community and Regional Affairs Committee in a hearing April 18 that the division aims to have a regulation package out for public review by May 15. “Everybody is working really hard to get this along because we’re very well aware of the high level of interest in this project,” he said. “That is a really optimistic timeline but it’s one we’re going to do our best to push forward to meet.” Like marijuana, industrial hemp is complicated to regulate because it has been illegal at the federal level for decades. Unlike marijuana, though, the federal government delisted hemp as a Schedule 1 substance in the 2018 farm bill, defining hemp as “the plant Cannabis sativa L. and any part of such plant, whether growing or not, with a delta-9 tetrahydrocannabinol concentration (THC) of not more than 0.3 percent on a dry weight basis.” The farm bill provided no effective date for the delisting, but based on research, the Drug Enforcement Agency is no longer enforcing Schedule 1 regulations against hemp products, said Joan Wilson, the assistant attorney general with the Department of Law who is working with the Division of Agriculture on the hemp program. A spokesperson for the U.S. Department of Justice confirmed that any parts of the marijuana plant that have that concentration level will be defined as hemp and will not fall under the DEA’s purview. For now, people can’t grow hemp in their backyards the way they can under the state’s recreational cannabis rules. It will still have to be authorized through the pilot program, said Rob Carter, the manager of the state’s Plant Materials Center. As the Division of Agriculture works on the regulations for permits. the Plant Materials Center is working on growing its own cycle of hemp for research and testing purposes at the facility in Palmer. “Without the regulations in place and absent the opportunity to register, producing or marketing industrial hemp … is still illegal,” he said during the House Community and Regional Affairs hearing. “It is to be noted that industrial hemp seeds are much harder to come by than one would expect and at a great cost.” There’s a lot of interest among potential growers, Carter said; he estimated that more than 1,000 people had told him they were interested in growing industrial hemp. Optimistically, they would be able to apply and start growing in indoor facilities in the fall, he said. However, that depends on the state’s ability to get the regulation package approved, which will take about six months if everything goes smoothly, Schade said. There are a number of roadblocks to that. For one, Gov. Michael J. Dunleavy’s proposed fiscal year 2020 budget cuts most of the Division of Agriculture’s existing budget, though neither the Senate nor House proposed budgets include his initial cuts. But one missing item so far is the receipt authority the division estimates it will need to adequately regulate an industrial hemp program. Schade explained that the intent of SB 6 was for the hemp industry to pay its own way, but the division needs the receipt authority from the Legislature for the fees from the industry. Right now, the division estimates the needed authority at $500,000. Rep. Harriet Drummond, who co-chairs the House Community and Regional Affairs Committee, said she would be willing to introduce a bill to grant the division that receipt authority. “Otherwise it sounds like you’d have to come to a screeching halt waiting for receipt authority,” she said. The regulations package also needs to clarify exact laws on hemp, Wilson said. That’s part of what the Department of Law is working on. “Technically we could be requiring registration from any individual who goes to Natural Pantry and buys CBD oil,” she said. “I don’t believe that was (the Legislature’s) intent.” CBD oil has boomed in popularity nationally, including in Alaska. Because industrial hemp is not being grown in Alaska, the oil is being moved across state lines, which is technically a violation of the federal interstate commerce laws. In February 2017, the state Alcohol and Marijuana Control Office raided a number of retailers and seized CBD oil under a 2017 law defining CBD as a marijuana product. The 2018 Farm Bill changed that definition as long as CBD retains a low enough THC concentration, but the U.S. Food and Drug Administration retains authority to regulate it under the Food, Drug and Cosmetic Act. Under that law, introducing into interstate commerce food products to which CBD or THC have been added is illegal. Schade noted that despite its questionably legal status, it’s easy to find CBD products marketed around Alaska. “That creates a lot of angst for those of us who have to regulate this potential industry,” he said. “The issue is under the FDA guidelines this is still illegal for interstate commerce, and yet we see these products out there for both animal and human consumption. We are taking this very seriously.” Several aspiring industrial hemp growers also testified to the committee during the April 18 hearing. Shawn McDonough, who said he purchased several properties on the lower Kenai Peninsula with the express intent to grow hemp. Beyond just the CBD use, he said he’d seen uses for hemp in bioplastics and clothing, though he said he intends to use his grow for CBD extraction. “It seemed like things were moving forward and then we kind of had the rug pulled out from under us and things kind of came to a standstill in recent months in the industry,” he told the committee. “We’d love to see things get back on track.” Elizabeth Earl can be reached at [email protected]

FISH FACTOR: Salmon permit values rise on optimism; halibut shares sinking

Nearly all Alaska salmon permits have gone up in value since last fall and buying/selling/trading action is brisk. “We’re as busy as we’ve ever been in the last 20 years,” said Doug Bowen of Alaska Boats and Permits in Homer. “Boat sales are doing well and between IFQs (individual fishing quota) and permit sales, we’ve got a busy year going.” The salmon permit interest is fueled by a forecast this year of more than 213 million fish, an 85 percent increase over 2018. Also, salmon prices are expected to be higher. For the bellwether drift permit at Bristol Bay, the value has increased from around $165,000 and sales are now being made in the low- to mid-$170,000 range. Several good salmon seasons in a row pushed drift permits at Area M on the Alaska Peninsula to about $175,000 last fall, Bowen said “and if you can find one now, it’s going to cost you over $200,000.” At Cook Inlet, where salmon catches have been dismal for the drift fishery, permit values bottomed out at $28,000 and have climbed a bit to $38,000. At the salmon fishery’s peak in the late 1980s and early 1990s, Cook Inlet drift permits were traded at more than $240,000, Bowen said. “When Alaska’s salmon industry crashed in the early 1990s due to the flood of farmed fish, those permits dropped to under $10,000 and since then have been all over the map,” he added. The drift fleet at Prince William Sound also had one of its worst years last summer and that permit is one of the few that has gone down in value. “They were over $150,000 and the last one we sold was at $145,000,” Bowen said. For Prince William Sound seiners, who are expecting a good pink salmon year, the permit value is listed at $170,000, a $5,000 increase from last fall. At Kodiak, seine permits have held steady for several years in the $28,000 range. At Chignik, where seiners experienced the worst fishery ever last year catching just 128 sockeyes, there is little to no interest in permits. Salmon permit action in Southeast Alaska “is kind of a mix,” said Olivia Olsen at Alaskan Quota and Permits in Petersburg. For both buying and leasing, there’s less interest in power troll permits for a second year but prices “are holding at a respectable $27,000 to $28,000,” Olsen said. “The permit holders have a really positive outlook for all species except kings, so they don’t understand why the price isn’t going up,” she said, adding that there is little interest in hand troll permits. Southeast drift permit prices are up with expectations of good prices and lots of fish. “Last year they were selling for $79,000 to the low $80s and currently prices are at $95,000. So that’s been a hot permit,” Olsen said. “They are opening new fishing areas which they feel should thin out the herd and have plenty of fish for everybody.” Demand also is up for Southeast seine permits and the price has increased to $250,000, a boost of $25,000 since last fall. Both Olsen and Bowen agreed that Alaska salmon permit holders are looking toward a good year. “We’re seeing a lot of optimism pretty much across the board,” Bowen said. Halibut quota slump A slight increase in this year’s halibut catch and respectable dock prices haven’t done much to boost the value of IFQs. Halibut quota shares that topped $70 per pound in some regions took a 30 percent nose dive in 2018 and have remained there ever since. Now $63 per pound is the high for halibut IFQs in the Southeast fishing region, with most moving at the $52 to $58 range, said Olivia Olsen. In the Central Gulf of Alaska, quota is listed in the $35 to $45 per pound range, down from a high of $50 last November. The value per pound in the Western Gulf, is down by 50 percent from 2017. “It’s advertised at $27 and selling for less,” Olsen said. Last fall, halibut prices dropped by $2 per pound to the $5 range at the Alaska docks and boats sometimes couldn’t find buyers for their fish. The biggest hit was a flood of seven million pounds of cheaper Atlantic halibut from eastern Canada displacing Alaska’s fish in east coast markets. But things seem to be looking up. “This year there is an increased confidence level for halibut. There is some optimism that we’ll see better recruitment into the fishery,” said Doug Bowen, referring to strong year classes from 2011-12 that are showing up in the fishery. Olsen agreed. “The confidence level is up a bit in halibut after last year being our slowest selling year ever for IFQs,” she said. “Buyers are interested but at last year’s prices and it seems to be working. Considering that the IFQ prices were out of whack on the high end, perhaps it’s a good adjustment.” Baited fisheries Herring and smelt at Upper Cook Inlet are fisheries that pay out nicely for the few who participate, and both are open to all. Ten to 20 fishermen usually take part in the bait herring fishery that runs from April 20 to the end of May. A combined take of 150 tons can be taken from four areas by set or drift gillnets, although nearly all comes from the upper east side, said Pat Shields, commercial fisheries management coordinator for Lower and Upper Cook Inlet at the Alaska Dept. of Fish and Game office in Soldotna. “It’s a pretty small quota but we’re not even reaching the quota of up to 40 tons on the east side,” he said, adding that all of herring goes into the bait market for halibut fishermen, either commercial or sport. The catch might be small, but it fetches big bucks as bait. “Currently the fishermen are selling that product for $2,000 to $3,000 a ton, or $1 to $1.50 a pound,” Shields said. In contrast, the average price for herring caught only for their eggs at places like Sitka, Kodiak or Togiak averages 12 cents per pound. Shields speculated the price is so high because there are so few bait herring fisheries in the state. Most Alaska fishermen purchase herring for bait from the east coast, often at about $1 per pound. The Cook Inlet herring is frozen and sold throughout the year and Shields said demand far exceeds the supply. Also at Upper Cook Inlet: A smelt fishery with a 200-ton limit will open from May 1 and run through June. Fewer than 20 fishermen participate in what Shields calls “one of the most interesting and challenging fisheries in the state.” “It’s done with dip nets at the mouth of the Susitna River. People usually take a drift boat across the mudflats. That’s eight or nine miles of a muddy mess that you have to navigate with winds coming in from three different areas: Knik Arm, Turnagain Arm and Cook Inlet. Some people refer to it as a cesspool because the waters are just swirling and it’s shallow,” Shields said. The boats come back to the Kenai River to offload their catches and the smelt is frozen, boxed up and shipped out. “Then it gets distributed primarily along the West Coast for human consumption, where Columbia River smelt fisheries are very restricted or closed,” Shields said. “It also goes into the bait market for the sturgeon fishery and the marine aquarium market.” Fishermen can get a nice price, twice: 25 cents to 75 cents per pound for their catch, and up to $2 per pound after it goes to market. Estimates from 2016 peg the annual smelt run to the Susitna River at 53,000 tons but Shields said the catch remains very conservative. “The reason for the small limit is that this is a beluga critical habitat area and this is a forage fish that is considered very important to that species,” he explained. Both the smelt and herring fisheries are open to anyone but require special permits. “Anytime you have an interest in what we call these smaller fun, interesting fisheries, please give us a call and we’ll do all we can to help you get involved in them,” Shields said. ^ Laine Welch lives in Kodiak. Visit or contact [email protected] for information.

Recession, federal payment cuts contribute to revenue decline at GCI

Alaska’s economic outlook and a major shortfall in federal reimbursements took a toll on GCI Liberty during 2018. The final stretch of 2018 yielded better results than the year before, but the company’s annual finances took a dip overall. GCI’s total revenue grew less than 1 percent in the fourth quarter of 2018 from $225 million to $226 million. However, total annual revenue declined 2.2 percent from 2017 to 2018, from $895 million to $875 million. In part, Alaska’s wobbly economy drove the decline, according to Vice President of Corporate Communications Heather Handyside. “Certainly we’re still seeing the effects of the sluggish economy in Alaska,” Handyside said. “You see that in the business side of the finances.” Handysides’ diagnosis is supported by the company’s annual report. Business revenues were entirely responsible for the overall decline. Business revenue dropped 4 percent year-over-year, from $458 million to $439 million. Of the business revenue streams, wireless, data and voice each shrank with the only increase in video. Alongside Alaska’s economy, GCI’s financials reflect a shortcoming from the federal government. “We took a dramatic cut last year with the Rural Health Care funding that was reduced from the amount we requested,” said Handyside. Federal law requires that internet providers serve rural healthcare facilities at the same cost as more populated areas. The Federal Communications Commission’s Rural Health Care program gives financial assistance to internet providers to expand and administer rural telemedicine options. A few bad apples spoiled the applications for GCI and Alaska Communications Systems Group Inc., Alaska’s largest internet providers. The Federal Communications Commission exhausted its $400-million annual pool of money to fund the Rural Health Care program and a federal investigation showed some non-Alaska companies inflating their rural internet rates to justify greater reimbursement. Those companies were fined, and the funding shortfall led to GCI receiving nearly $28 million less than it had requested for services rendered. GCI is currently in the process of appealing the FCC decision. The commission has opened up its rule-making process to comment. Handyside said the FCC may not have thoroughly understood the challenges inherent for Alaska’s internet providers such as the logistics of providing internet service across such distances and population sparsity, in particular. “Our goal would be for the decision to be reconsidered,” said Handyside, though she emphasized GCI has no idea when the FCC will consider and decide on the appeal. The loss of $28 million in expected receipts contibuted in part to the layoff of 87 employees announced April 4, or about 4 percent of its workforce. Despite the bruises from economy and federal government, GCI’s annual financials did display some bright points. GCI’s consumer revenue stayed level at $437 million year-over-year. This revenue’s stability relied entirely on data growth. Data revenue increased by 10 percent, from $146 million to $160 million, or exactly enough to offset declines in every other consumer revenue stream. Consumer wireless, video, and voice revenues dropped 2 percent, 10 percent, and 6 percent, respectively, from 2017 to 2018. Streaming services and the cord-cutting habits of American consumers in general contribute to the decline, but Handyside said myriad factors play into the shifts in consumer revenue streams. “There’s not one thing that explains it,” said Handyside. “On the consumer side of the house it fluctuates generally. This reflects having a lowering population.” Other numbers continue the trend. GCI’s cable modem subscribers increased 1 percent, but video subscribers declined 8 percent, and total consumer voice lines declines 9 percent. “I think people are finding more and more ways to watch the content they want to watch,” Handyside said. “We find there also a strong segment who want to watch things with predictability. We’re trying to continue to serve those markets.” Despite financial setbacks, Handyside said her company can point to some concrete successes in 2018, particularly with GCI’s rural 1 gigabyte internet service. “We’ve gotten our 1 gig service out to rural communities,” Handyside said. “Eighty percent of Alaska has access to 1 gig. The fact we have remote communities like Kodiak and Sitka have 1 gig service, that’s pretty incredible.”

Alaska Communications posts 2018 revenue increase of 2.5%

Despite somesetbacks, Alaska Communications System Group Inc. reported financial gains for both the final quarter of 2018 and throughout 2018. Alaska Communications clocked a 2.5 percent growth in annual revenue, from $227 million in 2017 to $232 million in 2018. The tail end of 2018 saw growth as well. The company’s fourth quarter revenue grew from $54.9 million to $58.7 year-over-year. Alaska Communications’ business revenue accounted for the growth, increasing 3.9 percent from $139 million in 2017 to $145 million in 2018, offsetting flat annual revenue for the company’s consumer offerings. Alaska Communications spokeswoman Heather Cavanaugh pinpointed the company’s success as the result of large enterprise and carrier customers. “We have built a track record of performance in this area and we see very exciting opportunities for future growth,” wrote Cavanaugh in an email. “Serving customers in the carrier, federal, education and oil and gas verticals are all opportunity areas for us. Further, with the turn up of our partner’s fiber network serving select northwest Alaska communities, we are seeing new opportunities come our way in these communities.” While Alaska’s economy continues to impact businesses across the state, Alaska Communications said growth in government and on the North Slope drove revenue. “Our growth is driven by our larger enterprise and carrier customers,” wrote Cavanaugh in an email. The business revenue grew solely due to voice, while business broadband revenue declined. Cavanaugh said this growth came from a long overdue price renovation. “Our voice revenue increase is a function of us raising some of our prices in the last year where we had not seen any price adjustment for years, in some cases more than 10 years,” Cavanaugh wrote. “We had to get our revenues more aligned with market and costs.” Two of Alaska’s internet providers, Alaska Communications and GCI Liberty, experienced a revenue shortfall from federal funding sources in 2018. The Federal Communications Commission’s Rural Health Care program gives financial assistance to internet providers to expand and administer rural telemedicine options. After the FCC ran out of its $400 million annual funding pool, Alaska Communications was due nearly $12 million in unpaid as of March 31, 2018, and the company cited the unpaid bills as a reason it had to lay off 30 workers in December 2017. Cavanaugh explained that while the Rural Health Care program did negatively impact Alaska Communications, the company is making headway communicating with the FCC to recoup the costs. “We are making progress with the FCC which has approved substantially all our customer contracts for the last two years and we remain in dialogue about expedient processing for upcoming years,” Cavanaugh wrote. “In this regard, we want to acknowledge the assistance of our congressional delegation in helping us and others who have been impacted with their advocacy on behalf of Alaskans.” Furthermore, Cavanaugh said other federal programs have served as a pressure valve for Alaska Communications’ finances. “In addition to Rural Health Care, we also receive support under the E-Rate program that funds schools and libraries, and the Connect America Fund program that supports expansion of internet service to underserved areas,” she wrote. “These programs currently provide a stable level of support.” For the coming year, Cavanaugh wrote the company will flesh out plans to expand wireless service. “One opportunity for our company over the next several years is the provision of 5G wireless backhaul for a national carrier,” she wrote. “In 2018, we deployed about $2 million of capital toward this opportunity and expect to deploy between $7-8 million in 2019, all of which will substantially improve our fiber network in our major markets.”

Consultant team including Begich tapped for Port of Alaska review

The Anchorage Assembly has brought in some familiar names in Alaska political and maritime circles to determine the best path forward on its troubled port modernization project. The Assembly Enterprise and Utility Oversight Committee on April 18 approved a $45,000 contract to a partnership of the national project management firm Ascent PGM and the Anchorage consulting firm led by Mark Begich Northern Compass Group. Ascent Alaska Vice President Roe Sturgulewski said he has worked on large port projects in Unalaska and Kodiak as well as other smaller marine infrastructure efforts across the state over the past 30 years. Begich, a former U.S. senator and Anchorage mayor, noted during the April 18 committee meeting that he opposed the original port project management structure that put the U.S. Maritime Administration, or MARAD, in charge of the construction project because of the agency’s lack of experience in project management. MARAD’s management was approved by the Assembly and former Mayor George Wuerch shortly before Begich was sworn in as mayor in 2003, he said. Most recently Begich ran as a Democratic candidate for governor in 2018 when he lost to Republican Michael J. Dunleavy. Construction problems arose in the 2008-09 timeframe on the initial $350 million port expansion project, which has mostly been stalled since. Those issues led the city to sue MARAD in 2014 to recoup lost construction funds; that lawsuit is ongoing in Federal Claims Court. The cost estimate on a new, scaled back design advanced by the engineering firm CH2M has gone from $485 million in 2014 to nearly $2 billion today, prompting the Assembly to reexamine all aspects of the work. The nearly $2 billion price tag is largely seen as unfeasible given the State of Alaska’s ongoing budget deficits and the fact that the Municipality of Anchorage does not have a tax base to support such an expensive endeavor. The port, renamed the Port of Alaska in 2017 by the Assembly, is the primary entrance point for consumer goods and commodities going to communities across Alaska and portions of its badly corroded docks have less than 10 years of operational life left before the must be shut in, according to port engineers. The full Assembly approved up to $100,000 in late March for consulting work to determine, among other things, why the costs on the current plan have escalated so severely; what design criteria the project should have; what basic infrastructure and amenities port customers need and the best way to pay for it all. Assemblyman Christopher Constant said the Ascent-Northern Compass team was the only bidder on the municipality’s request and other potential bidders told him they would not bid on the port consulting work because the contract terms would preclude them from competing for potentially more lucrative port construction contracts. Begich said they expect to have a report back to the Assembly by Sept. 15, which would be a faster turnaround than requested, but it better matches budget cycles for possibly securing funding for the project. ^ Elwood Brehmer can be reached at [email protected]

Copper River opener to kick off salmon season in week of May 12

Every spring, Alaska commercial fishermen hold their breaths before taking the plunge of salmon season and the unpredictability of what the runs will bring. The Alaska Department of Fish and Game does its best to forecast what fishermen might expect, but as it’s a prediction, fishermen have to take it with a grain of salt. This year, ADFG is forecasting fairly average sockeye salmon runs, even in Bristol Bay. However, pink salmon and chum runs may help make up for some of the lackluster sockeye runs and still-struggling king salmon runs across the state. Prince William Sound, traditionally the first salmon fishery to hit the markets, is expected to open the week of May 12 in the Copper River and Bering River districts, with the subsequent areas opening in June. The sockeye salmon are the most famous fish from the Copper River fishery, but the kings kick off the season with the annual airplane ceremonies in Anchorage and Seattle for the first king deliveries. The forecast for a return 55,000 Copper River kings is about 20 percent above the recent 10-year average run of 46,000 fish, according to the Prince William Sound 2019 forecast. The forecast for sockeye salmon in the Copper, which is regarded as the most accurate forecast in the region, is about 1.4 million wild fish and 98,000 hatchery fish, about 31 percent and 69 percent below the recent 10-year averages respectively. But ADFG warns caution there as well; last year, the summer brought about 1 million fewer fish than the forecast predicted and there were just a handful of openings for kings. “This forecast is uncertain and should be interpreted with caution as poor runs of many Gulf of Alaska sockeye salmon stocks in 2018 suggest there is considerable likelihood of over-forecasting in 2019,” the forecast states. Pink salmon may be a bright spot as the summer moves along for Prince William Sound, though. ADFG’s forecast projects about 23.5 million wild-run pink salmon to come back, largely based on good escapements in 2015 and 2017. That’s on top of an estimated 22.3 million pinks estimated to return to Prince William Sound Aquaculture Association facilities and an estimated 20.1 million to return to the Valdez Fisheries Development Association’s Solomon Gulch Hatchery. Pink salmon runs have been unreliable in recent seasons, though. The 2018 season was disappointing for salmon fishermen all over the Gulf of Alaska. Pink salmon catches were dismal and sockeye runs were late, if they appeared at all. The 2016 pink salmon season was disastrously poor for Gulf of Alaska fishermen as well, with the federal government appropriating disaster funds to help make up for some of the loss. Fisheries scientists have drawn possible connections between the poor pink salmon returns and persistent warm water conditions in the Gulf of Alaska through 2015 and 2016. Bristol Bay benefited from some of that downturn in sockeye salmon, though. While the rest of the Gulf of Alaska struggled to meet escapement goals and still allow for commercial fishing, Bristol Bay fishermen and processors could barely keep up with record-breaking sockeye salmon runs last year. Things might return to a little more normal this year, though. The 2019 projected total run of 40.18 million would allow for a commercial harvest of about 26.1 million to 27.6 million in Bristol Bay fisheries, according to Fish and Game’s forecast. For comparison, the total run in 2019 would be smaller than just the harvest in 2018; commercial fishermen hauled in 41.3 million sockeye in 2018, with a total estimated run of 62.3 million sockeye to all river systems. The dearth in sockeye elsewhere helped keep prices higher for Bristol Bay fishermen, who caught all those sockeye and were able to sell them for an average ex-vessel price of about $1.26 per pound, according to Fish and Game. “2018 prices were strong, Bristol Bay processors and fishermen were able to move a lot of product at a pretty high price,” said McDowell Group seafood economist Garrett Evridge. “Part of that high price came from weakness in other areas of the state, so that’s a factor. In terms of the 2019 price, the market appears to be pretty stable when you consider the level of inventory. We haven’t heard too many reports of significant existing inventory out there.” Salmon prices fluctuate wildly in-season, with prices typically starting higher early in the season and moving down as more fish hit the market. Before the season begins, processors work on contracts both domestically and internationally, and though ADFG clearly states that salmon forecasts are subject to change, they do affect markets and prices, Evridge said. “The bottom line is these forecasts can be off significantly and sometimes they’re right,” he said. “We should recognize that these are forecasts … Those Fish and Game forecasts are talked about at the highest level of negotiations and they do impact expectations.” Forecasts aren’t the only thing that impact prices. Internationally, farmed salmon production can also affect how consumers demand and purchase fish. Producers like Norway and Chile have not increased production dramatically in the last few years and struggle with pests like sea lice, but other countries are working on expanding their industries. Iceland, for example, has been taking steps to expand its aquaculture industry dramatically over the next decade. Evridge said outlook over the long term is for farmed salmon production to increase as high prices attract investment into aquatic farming. Trade conflicts between the U.S. and China and talk of new tariffs in the European Union on American seafood due to a trade dispute may also affect prices, though nothing is solidified. The issue with forecasting prices is that many factors affect them, and the bottom line is that it’s never a clear projection, Evridge said. “It’s just unknowable,” he said. “But I can say that in recent years we have seen strong prices basically because demand has been strong and demand has been stable. You have the industry that’s marketing and you have ASMI that’s investing significant time and resources into telling the story of Alaska salmon. We generally think that the Alaska name has value to the consumer. Thinking long-term, there are certainly challenges right now with salmon management, but we do have a robust, scientifically managed, sustainably harvested fishery. We are endeavoring to preserve these fisheries in perpetuity.” One bright spot this year may be an exceptionally large run of chum salmon, with a potential harvest of 29 million chums, potentially the largest in the state’s history. Last year brought huge numbers of chum salmon to Norton Sound, and this year may bring a burst of them to Southeast Alaska. Between the region’s hatcheries, an estimated 18 million chum may return. The Northern Southeast Regional Aquaculture Association alone is forecasting almost 9 million chums to return, with just shy of 8 million available for commercial harvest. That may help make up for some of the other disappointing forecasts in Southeast. Pink salmon forecasts are weak, with only 18 million forecasted, and king salmon stocks in the Chilkat, King Salmon and Unuk rivers not even projected to meet their escapement goals. Elizabeth Earl can be reached at [email protected]

Trilogy keeps refining Arctic project as it awaits road permit

Trilogy Metals is in the midst of advancing two mineral prospects in Northwest Alaska but it’s still on the lookout for additional opportunities in the region. The Vancouver-based mining company is preparing its most advanced Arctic copper, zinc and precious metal deposit for permitting. CEO Rick Van Nieuwenhuyse wrote via email that Trilogy is specifically developing an environmental evaluation document to ostensibly organize and vet all of the information about the prospect and planned open-pit mining operations before it is submitted in formal state and federal permit applications. The environmental evaluation goes hand-in-hand with a feasibility-level study of the mine and its forecasted economics, according to Van Nieuwenhuyse. Trilogy has $7 million budgeted for the feasibility and environmental work this year with a goal of having the feasibility study done in early 2020. He expects to formally start the permitting process once the Ambler Mining District Industrial Access Project is “substantially permitted” through its own environmental impact statement process, he wrote. Generally referred to as the Ambler road, the access project is a state-led plan for a 211-mile unimproved industrial road off of the Dalton Highway to reach the large Ambler mining district, which holds Trilogy’s Arctic and Bornite prospects, among others, on the southern flank of the Brooks Range. The road project has drawn opposition from residents of the area and environmental groups who are worried the project will disrupt caribou migrations, which Van Nieuwenhuyse acknowledges is the most significant subsistence food source in the region. The proposed mines have also drawn scrutiny for potential impacts to salmon and whitefish runs in the Kobuk River drainage. The Alaska Industrial Development and Export Authority is leading development of the road, which has an estimated cost of between $305 million and $346 million for a basic, single-lane gravel road. It would be financed by the authority with bonds that would be paid back through tolls paid by Trilogy Metals and any other companies that would develop one of the other prospects in the Ambler mining district. The Bureau of Land Management is writing the road EIS and the first draft of the environmental review is expected in late summer or early fall with a final EIS published towards the end of 2019, according to BLM’s project website. At its core, the Arctic prospect is about as good as undeveloped metal deposits come these days, according to Van Nieuwenhuyse. With just more than 43 million metric tons of probable reserves averaging 2.3 percent copper, 3.2 percent zinc and smaller amounts of lead, gold and silver, it’s roughly 10 times the average grade being mined in many other open pit copper mines today, he has said previously. Trilogy’s prefeasibility study of Arctic estimates the relatively small but high-grade prospect would cost $911 million to develop and operate over a short 12-year life but with roughly $450 million in annual free cash flow it would have just a 2-year payback. The mill and other facilities at Arctic could also be used for the company’s other, larger, but less explored Bornite copper and cobalt prospect about 20 miles to the southwest. While most of the exploration drilling at Arctic is done, Trilogy has a $9.2 million drilling program planned for the upcoming summer at Bornite. That work will be a combination of infill and expansion drilling for the existing known deposit, according to a company presentation. The Bornite prospect is on NANA Regional Corp. lands and under a partnership with Trilogy, the Alaska Native corporation can receive up to a 2.5 percent royalty on the ore concentrates produced from the prospect if it is developed into a working mine. Trilogy drilled 12 boreholes at Bornite in 2018. The prospect holds about 900 million pounds of indicated copper and 77 million pounds of indicated cobalt with another nearly 5.5 billion pounds of copper inferred, according to Trilogy’s resource analysis. Finally, Trilogy is also spending $2 million this year in a joint venture with South 32 Ltd. to conduct an electromagnetic geophysical survey of the entire roughly 75-mile long Ambler district belt. The airborne survey is being done as a new way to hunt for metal deposits in the area where dozens of prospects have been identified over the years. Targets identified by the survey will be examined more closely with follow-up drilling, Van Nieuwenhuyse said in a February company release. “It is exciting to be drilling new exploration targets again,” he said. “We are confident that we can find additional high-grade polymetallic resources along this prolific mineral belt.” ^ Elwood Brehmer can be reached at [email protected]

US ends sanction waivers for Iranian oil

The Trump administration said April 22 that it will no longer exempt any countries from U.S. sanctions if they continue to buy Iranian oil, stepping up pressure on Iran in a move that primarily affects the five remaining major importers: China and India and U.S. treaty allies Japan, South Korea and Turkey. President Donald Trump made the decision as part of the administration’s “maximum pressure” campaign on Iran that aims to eliminate all of its revenue from oil exports that the U.S. says funds destabilizing activity throughout the Middle East and beyond. “This decision is intended to bring Iran’s oil exports to zero, denying the regime its principal source of revenue,” the White House said in a statement. Industry experts said April 22 that the sanctions could potentially remove up to 1.2 million barrels of oil per day from international markets. But that number will likely be lower, depending on how countries respond and just how much oil Iran continues to export. Announcing the step, Secretary of State Mike Pompeo said no more sanctions waivers would be granted when the current batch expire on May 2, choking off Iranian income that had been more than $50 billion per year. “The goal remains simple: To deprive the outlaw regime of the funds that it has used to destabilize the Middle East for decades and incentivize Iran to behave like a normal country,” Pompeo told reporters at the State Department. The administration had granted eight waivers when it re-imposed sanctions on Iran in November after Trump pulled the U.S. out of the landmark 2015 nuclear deal. The waivers were issued in part to give those countries more time to find alternate energy sources but also to prevent a shock to global oil markets from the sudden removal of Iranian crude. Three of those waivers — for Greece, Italy and Taiwan — are no longer needed because they have all halted their imports of Iranian oil. But the other five continue to import Iranian oil and had lobbied for their waivers to be extended. NATO ally Turkey has made perhaps the most public case for an extension, with senior officials telling their U.S. counterparts that Iranian oil is critical to meeting their country’s energy needs. They have also made the case that as a neighbor of Iran, Turkey cannot be expected to completely close its economy to Iranian goods. Turkish Foreign Minister Mevlut Cavusoglu criticized the decision, saying it “will not serve regional peace and stability.” In a message posted on Twitter April 22, Cavusoglu said: “Turkey rejects unilateral sanctions and impositions on how to conduct relations with neighbors.” Cavusoglu added the decision would harm the people of Iran. He tagged the U.S. State Department and U.S. Secretary of State Mike Pompeo on his tweet. China, one of Iran’s largest customers, slammed the step, calling it more evidence of U.S. “unilateral sanctions and long-arm jurisdiction.” China, which relies on imports for about half of its oil, could present the toughest diplomatic challenge for the U.S. in trying to enforce its sanctions. Those arguments fell on deaf ears within the administration. “We will no longer grant any exemptions,” Pompeo said. “We are going to zero, we’re going to zero across the board.” Iran brushed off the decision, calling the sanctions “illegal.” “Regarding the illegal status of the sanctions, the Islamic Republic of Iran basically has not seen and does not see any worth and validity for the waivers,” the foreign ministry said in a statement carried by the official IRNA news agency. It said Iran has intensified consultations with its “European and international partners” and that a “necessary decision” would be announced later, without elaborating. Earlier, Iran reiterated its long-running threat to close the Strait of Hormuz if it’s prevented from using the crucial waterway in the Persian Gulf through which about a third of all oil traded at sea passes. Left unclear by the U.S. decision is whether the five countries will face immediate American sanctions if they continue to take delivery of Iranian oil after the waivers expire. Two senior U.S. officials — Special Representative for Iran Brian Hook and Assistant Secretary of State for Energy Resources Francis R. Fannon — refused to comment on whether any of them would be given additional time to complete purchases made prior to May 2 or allowed to use money already set aside for purchases after that date without penalty. Both said questions about such provisions were “hypothetical,” suggesting that some accommodation may be possible. Fannon said the U.S. did not expect any sharp spike in oil prices or any significant reduction in the global supply of oil, given production increases by other countries, including the U.S. itself, Saudi Arabia and the United Arab Emirates. Kevin Hassett, chairman of the Council of Economic Advisers, echoed those comments, although benchmark U.S. crude oil rose 2.4 percent early April 22 after the decision was announced. Hassett told reporters at the White House he’s not concerned that the decision will negatively affect oil prices. He said U.S. production has risen in recent years by “more than all of Iranian production” so there is adequate capacity should there be a need for oil supplies. He said the link between oil prices and the U.S. economy has diminished as American oil production has increased. Saudi Energy Minister Khalid Al-Falih said in a statement that his country would work with other oil producers “to ensure adequate supplies are available to consumers while ensuring the global oil market does not go out of balance.” Iran hawks on Capitol Hill like Sen. Ted Cruz, R-Texas, who had long lobbied for the step, applauded the end of oil waivers. “This decision will deprive the ayatollahs of billions of dollars that they would have spent undermining the security of the United States and our allies, building up Iran’s nuclear and ballistic missile programs and financing global terrorism,” he said. Israel’s Prime Minister Benjamin Netanyahu, meanwhile, praised the administration for further tightening sanctions enforcement on Iran, which the Jewish state regards as an existential threat. He said the move “is of great importance for increasing pressure on the Iranian terrorist regime.” Deb Riechmann in Washington and Nasser Karimi in Tehran, Iran, contributed to this report.


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