ConocoPhillips turns first annual profit since 2014

ConocoPhillips continued its turnaround from the oil price collapse by netting the company’s first annual profit in four years with net income of more than $6.2 billion in 2018. In its year-end earnings report issued Jan. 31, the Houston-based oil major additionally posted a fourth quarter profit of $1.8 billion, compared to a fourth quarter 2017 profit of nearly $1.6 billion. ConocoPhillips lost $855 million overall in 2017. The fourth quarter result is also the company’s best quarterly return since the third quarter of 2014 when oil prices averaged $97 per barrel and it earned $2.7 billion, according to report archives. In Alaska, ConocoPhillips turned profits of $445 million for the fourth quarter and $1.8 billion overall for 2018. The companywide earnings came on the back of $10.3 billion in revenue for the quarter and $38.7 billion for the year. ConocoPhillips generated $5.5 billion in free cash flow during the year, according to the earnings report. CEO Ryan Lance said he is proud of the results in a formal statement. “Our accomplishments reflect our clear commitment to a value proposition that is focused on returns and free cash flow generation, and that balances investments with returning cash flow to shareholders through price cycles. This is our formula for offering investors a compelling way to invest in our sector, ” Lance said. “We look forward to delivering another strong year of performance in 2019.” ConocoPhillips announced a first quarter dividend of 30.5 cents per share ahead of the earnings report. The dividend will be paid March 1. ConocoPhillips stock closed trading at $67.69 per share Jan. 31, up from a pre-earnings opening price of $65.76 per share. The company sold its oil for an average price of $68.03 per barrel last year, compared to $51.89 per barrel in 2017. ConocoPhillips Alaska leaders have said the company has set a $40 per barrel oil price breakeven benchmark for all of its future projects. During the year ConocoPhillips paid down $4.7 billion in debt and reached its debt target of $15 billion 18 months ahead of schedule, according to an earnings release. Last July, the company announced a deal with BP to swap a portion of its interests in the offshore Clair Field in Britain’s North Sea for BP’s 38 percent stake in the Kuparuk River oil field on the North Slope, which ConocoPhillips operates. The cash-neutral deal gives ConocoPhillips a 92 percent stake in Kuparuk, according to state Division of Oil and Gas records. The company also commenced production from its $725 million Greater Mooses Tooth-1 oil project in early October. GMT-1 is expected to produce up to 30,000 barrels of oil per day at its peak and marks the first oil production from federal leases within the National Petroleum Reserve-Alaska. Later that month ConocoPhillips approved funding for the nearby and slightly larger $1 billion-plus GMT-2 project, which is forecasted to come online in late 2021. The company also initiated permitting on its large Willow oil prospect, also in the NPR-A, which could cost $4 billion to $6 billion to fully develop over the next six-plus years. ConocoPhillips spent nearly $1.3 billion on capital projects in the state last year out of an overall capital budget of $6.7 billion. BP, ExxonMobil report results BP, which operates the massive North Slope Prudhoe Bay oil field, reported a full-year 2018 profit of $9.4 billion Feb. 5, compared to $3.4 billion in 2017. The London-based major also reported an underlying replacement cost profit of $3.5 billion for the fourth quarter from strong performance in all of its business sectors. The company generated an 11.2 percent return on invested capital during the year, compared to 5.8 percent in 2017, according to the financial report. BP’s 2010 Gulf of Mexico oil spill settlement payments totaled $3.2 billion last year. Its oil and gas production was up more than 8 percent year-over-year, averaging 3.7 million barrels of oil equivalent in 2018. ExxonMobil, operator of the Point Thomson gas field on the North Slope, on Feb. 1 reported full-year earning of $20.8 billion, up from $19.7 billion in 2017 and fourth quarter earnings of $6 billion, down 28 percent year-over-year. However, excluding U.S. corporate tax reforms and impairments, the fourth quarter results were $6.4 billion, compared to $3.7 billion in the last months of 2017, according to a company statement. ^ Elwood Brehmer can be reached at [email protected]

Dunleavy proposes constitutional changes amid budget debate

Gov. Mike Dunleavy on Wednesday proposed constitutional changes that would limit legislative authority and give voters a say on taxes and any changes to the Permanent Fund dividend. One of the proposed amendments is aimed at ensuring the PFD is not changed without a vote of the people. Another seeks to set what Dunleavy called a "spending and savings rule," replacing an existing spending limit that critics say is too lax and targeting leftover revenue to the permanent fund and a reserve account. The third constitutional change would let voters decide whether to approve any new or higher state taxes passed by lawmakers. If, on the other hand, voters by initiative pass a new or higher tax, legislators would be asked for their approval. Dunleavy, a Republican, said his proposals, if approved, would help create a durable fiscal plan. "This is going to right the ship," he told reporters. "It's not going to be easy but I think intuitively we all know it needs to be done. We need to fix this now." Dunleavy's administration projects a $1.6 billion deficit for the coming fiscal year, and lawmakers are bracing for major cuts in the budget expected to be released by mid-February. Dunleavy said the relationship between legislators and voters should be tight. He said his proposals "certainly hem us in" but would be good for the state in the long run. He said the state has a referendum process where, if a tax is imposed, the people could repeal it. "That's problematic if you want stability and durability," he said, adding that his proposals aim to get agreement on such issues on the front end. According to the Division of Elections, four referenda have successfully been proposed and appeared on the ballot, the most recent in 2014, when voters upheld an oil tax overhaul. Alaska has no state sales or personal income tax — ideas that have been batted around in recent years amid the fiscal debate. But the state has an array of other taxes addressing such things as corporate income, oil and gas production, motor fuels and marijuana. Each of the proposed constitutional changes would need two-thirds support of both the House and Senate to qualify for the ballot, which Senate Rules Chair John Coghill said could be difficult to reach this session. The North Pole Republican said he thought there was generally good support for the ideas. "Now, whether those ideas belong in the Constitution, I think, is a proper debate," Coghill said. "It will be interesting to see how the governor defends them." Anchorage Democratic Rep. Matt Claman said the state has a strong governor form of government and is hesitant to support anything that further limits the Legislature's power to act as a check and balance. Dunleavy's proposal dealing with spending and savings would replace what is now known as the Constitutional Budget Reserve fund with a savings reserve fund. Attorney General Kevin Clarkson said the fund would be easier to access than the CBR — requiring a simple majority rather than a three-quarter vote of both the House and Senate — but its use would be limited. Claman expressed concern with the potential shift and said a three-quarter vote requirement gave power to legislators in the minority, which he said is important for them to have some influence.

Construction spending forecasted to rise 10%

The coming year should be better than last for Alaska’s construction industry and the state economy as a whole. Construction spending across the state is expected to increase about 10 percent this year over last to a grand total of more than $7.2 billion, according to the Associated General Contractors of Alaska’s annual industry forecast. AGC of Alaska Executive Director Alicia Siira said the trade group is “cautiously optimistic” about 2019 after some very tough times. “Our industry has really taken a beating over the past few years with this recession and we could really use some good news,” Siira said. “We’re hopeful this trend continues and we start to see some dollars moving through the state to help support the economy.” Alaska’s construction workforce averaged a little more than 15,000 workers the past two years and employment levels that low hadn’t been seen since 2001-02, according to state Labor Department data. The industry was doubly hit by Alaska’s three-year oil price-induced recession. Not only did oil companies sharply curtail capital spending, but the state also cut its capital budget allocations from more than $2 billion to less than $200 million in recent years. Restoring some of that state capital spending is a top priority for AGC. State economists expect Alaska to officially climb out of the recession towards the end of the year. The construction industry is correspondingly expected to add roughly 900 jobs in 2019. Most of the spending growth is expected to come via the oil and gas industry and Department of Defense projects at Interior military installations. Both sectors are pegged for 13 percent growth; however, in oil and gas that means an increase to $2.7 billion and roughly $700 million overall for Alaska Defense spending in 2019. On the oil side, many companies have managed to reduce their operating costs to where they can afford to resume investing in larger projects at current prices in the $60-70 range — a price band that is being predicted for several years. The discovery of the now-prolific Nanushuk oil formation on the North Slope has also spurred some oil prospects with development costs pegged at upwards of $5 billion. As a result, oil industry spending is projected to increase for several years, according to the forecast. Military construction in the state continues to center on Eielson Air Force Base near Fairbanks, which is readying for two new squadrons of F-35 fighters that are planned to start arriving in 2020. “Some of the larger elements of the (F-35) ‘bed-down’ are a flight simulator, new maintenance buildings, aircraft weather shelters, new utilidor, as well as renovation of many existing structures,” the forecast states. Additional missile defense projects are ongoing at Fort Greeley near Delta Junction and Clear Air Force Station near Nenana. While not as significant in terms of overall dollars, the mining industry is projected to increase its capital spending by 18 percent this year to $265 million as three of Alaska’s six big large mines — Red Dog in the Northwest and Pogo and Fort Knox in the Interior — have major expansions planned. Siira said she is hopeful political forces will continue to support the resource industries. “For increased spending to continue we feel that we need some stability in our stat and timely review of resource development projects which support the economy and, of course, construction spending,” she said. Overall private industry spending is expected to be about $4.4 billion, a 9 percent year-over-year increase; Alaska public construction expenditures should grow about 7 percent, with about $200 million or more coming as a result of the Nov. 30 earthquake. “Our industry, both vertical and road construction, did see an increase in activity due to the earthquake and although it was unfortunate, it maybe highlighted some of the projects that have been overlooked over the years,” Siira noted. She added that private building damage from the earthquake is more difficult to quantify. State and local government officials have emphasized since the earthquake that additional damage will likely be revealed with the arrival of spring. Longer term, the state still has a $2 billion-plus deferred maintenance list that it must address and new cost estimates to rehabilitate the Anchorage port have shot up dramatically to nearly $2 billion as well.   Elwood Brehmer can be reached at [email protected]

Mat-Su Borough keeps up fight over LNG site

The Matanuska-Susitna Borough on Jan. 25 added 145 pages to its ongoing argument that Port MacKenzie would be a better location than Nikiski for the Alaska LNG project’s natural gas liquefaction plant and marine terminal. The borough, which owns the property across Knik Arm from Anchorage, added additional comments, maps, charts and photos to the docket at the Federal Energy Regulatory Commission, which is scheduled to release its draft environmental review of the Alaska LNG proposal sometime in February. The borough has long been critical of the site selection, Port MacKenzie alternative analysis and answers provided by the Alaska Gasline Development Corp., the state-funded corporation that is leading the proposed $43 billion project. “Unfortunately, the approach to analyzing the alternatives employed by AGDC in its responses confuses, rather than clarifies, the differences between the alternatives of Nikiski and Port MacKenzie, and its responses could result in an inadequate analysis of alternatives to AGDC’s proposed action,” the borough said in its latest filing with FERC. The borough’s Jan. 25 filing was in response to the state’s answers turned in at FERC on Nov. 20 after federal regulators had asked AGDC for further analysis of Port MacKenzie. The project’s environmental impact statement is required to review any economically feasible alternatives to determine the “least environmentally damaging practicable alternative.” The borough a year ago complained to federal regulators that AGDC may have violated the National Environmental Policy Act and federal Clean Water Act by “improperly and intentionally excluding” Port MacKenzie as a “reasonable alternative” for the proposed LNG plant. Asserting a list of geographical advantages, the borough has noted that Port MacKenzie offers more developable land and is about 50 pipeline miles closer to Prudhoe Bay than Nikiski, which is farther south on the Kenai Peninsula. Building at the port also would eliminate the need for 27 miles of underwater pipe across Cook Inlet to Nikiski. The borough has long promoted its money-losing port for the LNG project and other industrial developments, with little success. Nikiski emerged as the preferred alternative among more than two dozen options in October 2013, when North Slope oil and gas producers ExxonMobil, BP and ConocoPhillips were leading the venture. The state took 100 percent control of the project in late 2016 after the companies declined to proceed with spending hundreds of millions of dollars on additional engineering, design and permit applications. The state applied to FERC in April 2017. The Matanuska-Susitna Borough, the Kenai Peninsula Borough (defending its community, Nikiski), and the City of Valdez (also promoting its community as the best location for the LNG plant), have all signed on as intervenors in the project’s application at FERC. Intervenor status does not bestow any special privileges or additional consideration in preparation of the EIS. The only significant difference between an intervenor and anyone else submitting comments to the docket is that only an intervenor can challenge a FERC decision in court. The Mat-Su and Kenai boroughs and AGDC are each paying different Washington, D.C., law firms with experience in FERC issues. If FERC stays with its self-imposed timeline of the draft EIS in February — no specific date set — it is scheduled to release its final EIS in November 2019, assuming it encounters no roadblocks or delays during the public comment period for the draft and assuming AGDC submits all the information requested by federal regulators. The state team has said it will be September before it can answer all of FERC’s questions about the Cook Inlet pipeline crossing. Regardless whether the project can stay on schedule with its FERC review, AGDC lacks funding to go past the past EIS. The new administration of Alaska Gov. Michael J. Dunleavy has said it is time “to re-engage the Legislature” and talk with the North Slope producers. This is a “great opportunity to pause and see where we’re at,” Revenue Commissioner Bruce Tangeman said at the Alaska Support Industry Alliance annual Meet Alaska conference in Anchorage on Jan. 18. Absent any partners, the state has been paying 100 percent of the costs since the producers left two years ago. Among its objections to AGDC’s analysis, the Matanuska-Susitna Borough contends that the state development team did not accurately map out and consider the “optimum site” proposed by the borough. “As a result,” the borough said AGDC’s efforts “misidentify and overlook key features of Port MacKenzie.” The borough further contends in its Jan. 25 filing, that “Rather than assessing Port MacKenzie as a unique site, AGDC begins from the assumption that the same facilities specifically designed for Nikiski will be built at Port MacKenzie. This assumption is irrational and leads AGDC to overestimate the amount of construction necessary to site a liquefaction facility at Port MacKenzie. … Simply transposing plans developed for Nikiski onto a map of Port MacKenzie, as AGDC has done, will not fulfill FERC’s duty to analyze potential alternative sites.” “It appears that AGDC is justifying its preference for Nikiski over Port MacKenzie not based on technical feasibility and environmental impacts, but rather simply because AGDC has already completed design work for Nikiski but not Port MacKenzie,” the borough filing states. “While this need for additional design work might explain why AGDC prefers to site the facility at Nikiski, it is not relevant to FERC’s National Environmental Policy Act analysis and is not responsive to FERC’s data request regarding the specific differences in environmental impacts for each site.” The North Slope producers, before they left the project and AGDC since then, have consistently pointed to problems with the Port MacKenzie location, including stronger tidal currents and tidal ranges, more winter ice hampering operations, a narrower channel for vessel traffic, conflicts with other potential users at the port, and the significant regulatory problems of operating in critical habitat waters of the endangered Beluga whales. In a separate issue for the EIS, the state project team on Jan. 23 submitted hundreds of pages of data, maps, charts and tables to FERC, responding to questions from the U.S. Army Corps of Engineers about the project’s effects on wetlands. Among the data submitted to the Army Corps and FERC: • AGDC reported the project would permanently impact 10,412 acres of wetlands during construction, with an additional 8,731 acres temporarily affected during the work. About 3,500 acres would be impacted during project operations. The acreage includes the 62-mile pipeline from the Port Thomson gas field to the gas treatment plant at Prudhoe Bay, the gas plant, the 807-mile pipeline from Prudhoe to Nikiski, and the LNG facility and marine terminal. The Jan. 23 filing includes a detailed list of the wetlands locations. • Additional information on AGDC’s plans for digging the trench and laying the pipe in wetlands, including protection and restoration plans. • AGDC expects to provide a draft wetlands mitigation plan in the second quarter of 2019. • Reiterating its plans not to remove gravel fill placed in wetlands, the AGDC filing said the project “would not actively restore sites where gravel fill is placed, but rather would leave it in place to encourage thermal and physical stabilization. As stated previously, it is not practicable for AGDC to restore wetlands where gravel fill is placed.” • For areas not covered in gravel fill, “while some impacted areas would be converted to upland and revegetated, others would ultimately return to wetlands,” AGDC said. “The goal of restoration for the Alaska LNG project is to establish a right of way that is stable, both physically and thermally, and that maintains some of the ecosystem functions that were present prior to construction, where feasible.” • Additional details on dredging 800,000 cubic yards from Cook Inlet to accommodate vessel traffic at the barge landing and freight dock that would be used for construction in Nikiski. The dredged material would be dumped at approved sites in deeper water. • Clarification that while AGDC proposes pipe-coating and double-jointing pipeline yards in Fairbanks and Wasilla, it has dropped plans for a similar yard in Seward. • AGDC reported it does not have plans at this time for any additional gas offtake points along the pipeline for local distribution other than the previously disclosed offtake points in Fairbanks, the Matanuska-Susitna Borough and Nikiski. Though AGDC has long touted the availability of gas for local use from at least five offtake points, it has not publicly identified any additional economically feasible connection points. ^ Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide.

Busiest exploration season in decades planned for this winter

The number of exploration and production rigs working on the oil-rich North Slope should reach its highest level in 20 years this winter, state officials say. Oil field employment is higher than last year, modestly, but a first in more than four years. And the state just had one of its strongest North Slope lease sales in recent history. Those factors and others show the recent plunge in oil prices has not dampened industry’s expectations for the region, amid newfound interest in a little-tapped geological formation, the Nanushuk, state officials indicated in a meeting with the Senate Finance committee last week. But with long development windows for Alaska projects, much of the new oil production is still years away. “It’s very good news” but the state will stay stuck in a fiscal “ditch” at least for at least the next couple of years, said Sen. Bert Stedman, R-Sitka and Senate Finance Committee co-chairman, during the meeting. Still, state authorities said they’re encouraged by positive signs showing that investment in the oil and gas sector, a key driver of Alaska’s economy, is on the rise. In a first since 2014, the sector employs more people than it did one year earlier, said Neal Fried, economist with the Alaska Department of Labor and Workforce Development, on Jan. 22. About 9,250 people worked in the industry in November and December, a year-to-year increase of 100 jobs. The rise followed a long period that saw thousands of oil and gas workers laid off, helping make Alaska unemployment the nation’s worst, at 6.3 percent in December. “The numbers are not dramatic,” said Fried, who was not part of the Finance Committee meeting. “But the fact it appears that the trend is over is what’s real important. It’s important to people working there, and it’s an important signal to our economy.” North Slope oil prices that are critical for supporting industry operations — and revenue for companies and Alaska — sank after breaching $85 a barrel in early October, to current levels just above $60. Still, the recent prices are an improvement from previous years, creating a better environment for the industry, he said. “There’s been volatility, yes, but the price environment has improved a lot, even with the somewhat lower prices in recent months,” Fried said. The North Slope rig count is expected to reach its highest level in two decades, with an estimated 18 exploration and production rigs expected to operate this winter, said Graham Smith, permitting manager in the state’s Oil and Gas Division, in an email on Tuesday. That’s higher than the 17 rigs in 2014, a year of high oil prices, he said. “Some of our legacy fields are picking up rigs, we haven’t seen that for the past four years,” said Chantal Walsh, Oil and Gas division director, speaking to the committee Jan. 24. “Additional to that, we have a high level of exploration activity.” ConocoPhillips, looking to develop the large Willow field, is leading the way with plans to complete its largest Alaska exploration season in 16 years, drilling six to eight exploration and appraisal wells this winter. Oil Search has said it is drilling two appraisal wells this winter to better understand how to develop its Pikka discovery. The large find has sparked industry interest in the relatively shallow and sprawling Nanushuk formation. Oil Search on Jan. 24 reported “encouraging” results from the first well it drilled this winter, with oil confirmed in “hydrocarbon-saturated, high porosity sand,” said Peter Botten, Oil Search’s managing director. The company, based in Papua New Guinea, has rapidly grown its Alaska operations over the past year. It boosted the workforce to more than 100 employees from just a few, after buying a stake in Pikka in late 2017. Also this winter, BP is conducting a large seismic shoot to better understand future production potential in the state’s main legacy field, Prudhoe Bay. “There is a lot more activity, which translates to jobs for people,” Walsh said. Smith said other positive signs of rebounding North Slope activity include a strong lease sale in November. The state received high bids of $27.3 million from oil companies, the third highest in the last 20 years. The extra activity doesn’t necessarily mean additional oil production, Walsh cautioned. “It doesn’t lead immediately to adding money to the state general fund, but it is an exciting indication” that the state’s fortunes are improving, she said. Oil production at Pikka and Willow, perhaps the state’s most promising discoveries awaiting development, aren’t expected to begin producing oil until about 2024. Production could reach about 100,000 barrels daily at each field, possibly more at Pikka. Tax write-offs associated with the cost of developing Pikka and Willow will lower revenue for the state, officials said. Also, at Willow, located on federal land, half the royalties would go to the federal government, and the rest would be set aside by law for distribution to North Slope communities, reducing state revenue. Over roughly 16 years, Willow could bring about $7 billion in revenue to Alaska, the state estimated. Pikka, on state land, could be worth about $10.5 billion during that length of time.

Sablefish season to open with slight increase, along with uncertainty

Alaska’s sablefish fishermen will go into the 2019 season in March with no change to their overall catch limit but some debate about the state of the stock. Sablefish, also known as black cod, regularly opens to fishing in Alaska in March, at the same time as the halibut fishery. Commercial fishermen in the Bering Sea, the Gulf of Alaska and Southeast Alaska catch them using trawls, longlines or, in some areas, pots. Fishermen landed about 13,956 metric tons of them last year between the Gulf of Alaska and the Bering Sea/Aleutian Islands fisheries. (A metric ton is 2,204 pounds, making the catch last year about 30.7 million pounds.) The North Pacific Fishery Management Council, which manages the species, voted to slightly increase the sablefish total allowable catch in the Gulf of Alaska and the Bering Sea/Aleutian Islands — from 11,505 to 11,571 metric tons in the Gulf, from 1,464 to 1,489 metric tons in the Bering Sea and from 1,988 to 2,008 metric tons in the Aleutian Islands. The increases were recommended by the council’s advisory panels, based on an observed increase in the fishery surveys conducted in 2016 and 2017. Researchers noted a 14 percent increase in the longline survey index from 2016-17, which built on a 28 percent increase from 2015–2016. The spawning biomass is expected to “increase rapidly from 2018 to 2022, then stabilize,” according to the National Oceanic and Atmospheric Administration’s 2018 assessment of the sablefish stock. Alaska’s sablefish are a high-value species, but with a caveat — they’re far more valuable when they’re large. Fishermen can make $7 to 8 per pound when the fish is greater than a certain weight, but for small fish, they make less per pound. That’s driven by consumer preferences, said Garrett Evridge, an economist with the McDowell Group who tracks seafood markets. Consumers in Europe, China and, increasingly, Middle Eastern countries like Dubai and the United Arab Emirates, are beginning to demand sablefish. However, Japan is far and away the biggest market for sablefish, 70 percent of which comes from Alaska, Evridge said. Japanese fishermen pioneered the fishery in Alaskan waters after World War II, and new generations have grown up developing a taste for sablefish. “When we talk about sablefish, it’s all about Japan,” he said. “Japan continues to value that larger fish.” Demand definitely weakened in 2018, pushing prices down after a peak year in 2017, Evridge said. Remaining inventory and high retail prices repressed demand last year, pushing down prices for fishermen in 2018. With roughly the same catch limit and relatively stable demand, the price trend should remain relative stable for the fish, he said. International currency strengths also play a role — when the dollar is stronger against the yen, it makes things more expensive for Japanese consumers. The slight TAC increase in 2019 follows an increase of about 14 percent from 2017-18. The surveys have continued to show an increasing abundance, with focus on the 2014 age class entering the spawning biomass. However, it doesn’t mean the news is completely rosy. In the survey summary for 2017, the researchers recommended an acceptable biological catch, or ABC, less than the maximum permissible, albeit 14 percent higher than in 2016. That was because of uncertainty regarding the strong 2014 age class and the existing spawning biomass. “While there are clearly positive signs of strong incoming recruitment, there are concerns regarding the lack of older fish and spawning biomass, the uncertainty surrounding the estimate of the strength of the 2014 year class, and the uncertainty about the environmental conditions that may affect the success of the 2014 year class,” the survey states. “These concerns warrant additional caution when recommending the 2018 and 2019 ABCs.” Despite high numbers turning up in the surveys, some fishermen have reported seeing the opposite out on the fishing grounds. During the North Pacific council’s deliberations in December, two groups submitted public comments asking the council to keep the TAC at the current level because of concerns about the sustainability of the stock into the future. Sablefish can be long-lived — the maximum recorded age is 94 years old, according to the National Marine Fisheries Service — with 40-year-old fish caught frequently in the commercial sector. They mature at approximately 5 to 7 years old, spawning annually after that, according to the Alaska Department of Fish and Game. The Alaska Longline Fishermen’s Association, a group of stakeholders in the small-boat longline fleet, requested the council set the 2019 TAC equal to 2018. Because of the concern about the uncertainty of the incoming age class and the decline of mature spawning biomass, the group asked the council to limit increases to fishing for the coming year. The North Pacific Fisheries Association, a commercial stakeholder group based in Homer, raised similar concerns in a letter to the council. Erik Velsko, a board member, said the catch per unit of effort where he fishes out of Homer has recently increased significantly, even in areas that were historically excellent fishing grounds. Other fishermen have said they’re seeing large numbers of juvenile sablefish, he said. “I think it’s true, that age class is there, it’s just a question of whether those fish are going to grow up enough (to be part of the spawning biomass),” he said. One of the major issues the council and fishermen are still dealing with in the sablefish fishery, though, is whale depredation. Longliners have long been frustrated by orcas and sperm whales arriving as they begin hauling in lines and stripping the fish from their hooks, causing them to lose hours of effort and thousands of dollars. The federal surveys and recommendations account for whale depredation as part of the fishery now — based on existing data, researchers estimated the total whale depredation on the fishery in Alaska at 371 metric tons, according to the 2017 survey. To combat the problem, some fishermen have begun switching to using pots to catch sablefish instead, which the whales reportedly have not been able to break into yet. Elizabeth Earl can be reached at [email protected]

DEC nominee: Experience a plus, not a problem

Jason Brune insists his time working for a former investor in the Pebble mine project and advocating for other resource developments in Alaska is experience that benefits his newest role leading the Department of Environmental Conservation, despite claims by many detractors that it should disqualify him from consideration. Among the first appointments to Gov. Michael J. Dunleavy’s cabinet in November, Brune told Senate Resources Committee members during a Jan. 25 hearing on his confirmation that the questions regarding his professional background are “appropriate and fair,” while also noting that he has no financial interests in the Pebble Limited Partnership and has sold all of his stocks in oil and mining companies that work in the state. He highlighted a belief that Alaska has the most stringent environmental protection standards in the world and as DEC commissioner he demands everyone in the state be held to them. “My personal environmental ethic is ‘think globally, develop locally.’ I believe that provided that the companies that are trying to invest here do uphold the highest environmental standards, we should work with them to try to allow that investment and the development of those resources to occur here,” he said. Brune worked as the U.S. public affairs manager in Anchorage for London-based mining major Anglo American from 2011-14. Anglo American was a 50 percent partner in the Pebble project and invested more than $540 million in exploration and pre-development work at Pebble before announcing it would walk away from the project in September 2013. Before agreeing to lead DEC, Brune most recently worked as the lands and resources director for Cook Inlet Region Inc. He also spent more than a decade with the Resource Development Council for Alaska with about half of that time as executive director. The RDC is an organization that promotes Alaska’s oil and gas, mining, timber, tourism and fishing industries. Public testimony during the Senate hearing was overwhelmingly against Brune’s confirmation as DEC commissioner. Nearly all the individuals that testified in opposition to his confirmation cited his prior work history, contending he could not be objective in reviewing permit applications Pebble would need to submit to DEC before it can develop the large copper and gold mine. DEC is often most visible through its Spill Prevention and Response, or SPAR, Division, but the department also has primacy over several federal Clean Air and Clean Water Act programs as well as overseeing drinking water and food safety in the state. Opposition in written testimony offered to the Resources Committee before the hearing also centered on permitting Pebble. Brune received written support from industry groups such as the Alaska Miners Association, the Council of Alaska Producers and the Alaska Independent Power Producers Association. State commissioner-designees must be confirmed by a majority of legislators in a joint House and Senate vote that is usually held in spring near the end of the legislative session. Brune said in a Jan. 11 interview prior to the hearing that he doesn’t have a position on the highly contentious mine plan. “As a regulator I have the requirement to objectively look at what Pebble has to do to go through the process, so no, I don’t support the Pebble project. I don’t oppose the Pebble project. I think they deserve to have a fair hearing,” he said. The results of an annual poll of Alaskans by the Republican-led Senate majority caucus on current policy issues show that 61 percent of poll respondents oppose development of Pebble even if the company can secure all the requisite environmental permits. An outlier in the debate over Brune’s work history, Icicle Seafoods spokeswoman Julianne Curry, who is also a former executive director of United Fishermen of Alaska, wrote in support of his confirmation. “We have worked with Mr. Brune in the past and have found him to be knowledgeable and interested in finding solutions to problems facing Alaska. His hard-working nature and ability to cut directly into issues will help make him an asset in DEC,” Curry wrote. Brune said his experience in the resource industries can be beneficial to leading DEC and he believes it’s one of the reasons the Dunleavy administration asked him to apply for the job. “I’m not going to rubber stamp any permit for any project — for Pebble, for an oil and gas permit, for a fishing permit. I’m going to look at it and I’m going to make sure that they’re doing what they need to do to protect the environment but that we’re working alongside them to ensure that they’re given a fair process and that we’re partners in bringing responsible resource development jobs to the state,” he said in an interview. Brune’s undergraduate education is in biology and is what originally brought him to Alaska. He spent a summer in the early 1990s as an intern with the U.S. Fish and Wildlife Service cleaning and monitoring sea otters impacted by the Exxon Valdez oil spill in Prince William Sound. He later came close to a master’s degree in environmental science from Alaska Pacific University, but never completed his thesis. “(The otter work) was very impactful on me because I saw, of course, how resource development can be done in the worst way possible. The impacts of the oil spill, we never, as Alaskans, want to see that again. That never should have happened and it’ll never happen again hopefully and we need to put protections in place to make sure it never happens again,” Brune said. On other issues, he said DEC needs to be adequately funded so it can adjudicate permit applications but at the same time he and DEC division directors are working with Dunleavy’s Budget Director Donna Arduin to determine what the department can and can’t afford to do when the state is faced with major deficits and dwindling savings. One of the programs Brune suggested could be on the chopping block is the Ocean Ranger program, which he has heard there isn’t much support for continuing. The program was established in 2006 via a voter initiative and requires certified marine engineers or individuals with expertise in marine safety and environmental protection to monitor marine discharges from large cruise ships operating in the state. DEC also has other regulations and sampling programs to monitor cruise ship discharges, according to the Ocean Ranger web page. “There are things that in these fiscally austere times that we have to ensure are still appropriate,” Brune said. “We have things on the books that are unfunded mandates or that are not necessarily doing anything to protect the environment; they’re just adding regulatory hurdles for companies and we have to evaluate those.” Brune also stressed a belief that “local problems are best met by local solutions,” particularly noting that he hopes DEC can successfully implement recommendations on how to best improve at times dangerously poor winter air quality in the Fairbanks area from a local stakeholder group. He continued to say that he expects the issue of PFAS contamination in drinking water supplies, particularly in rural Alaska, to be a growing issue DEC will have to address during his tenure if he is confirmed. Per- and polyflouroalkyl substances, known as PFAS chemicals, are artificial chemicals used, among other things, as highly effective fire suppressants at airports. Brune said DEC is working with DOT to test wells near airports in several rural Southeast and Western Alaska communities and has found the contaminants in each well that has been tested, in addition to Fairbanks. “I think we need to be a resource for the citizens of Alaska to give them the confidence that the water they’re drinking, that the things they’re doing, are safe,” he said. ^ Elwood Brehmer can be reached at [email protected]

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