Tariffs set to take toll on Alaska seafood exports and imports

More seafood tariffs in Trump’s trade war with China are hitting Alaska coming and going. On July 6, the first 25 percent tax went into effect on more than 170 U.S. seafood products going to China. On Aug. 23 more items were added to the list, including fishmeal from Alaska. “As of right now, nearly every species and product from Alaska is on that list of tariffs,” said Garrett Evridge, a fisheries economist with the McDowell Group. Alaska produces more than 70,000 metric tons of fishmeal per year (about 155 million pounds), mostly from pollock trimmings, with salmon a distant second. The pollock meal is used primarily in Chinese aquaculture production, while salmon meal goes mostly to pet food makers in the U.S. In 2017 about $70 million worth of fishmeal from Alaska pollock was exported to China from processing plants all over the state. Anchovy-based fishmeal from Peru is the predominate source for world aquaculture, but whitefish meal made from Alaska pollock is regarded as the premium. According to Undercurrent News, pollock meal commands $600 to $700 more per ton than Peruvian meal and is currently trading at up to $2,300 per ton. The tariffs on U.S. seafood products exported to China is a done deal. In the long run, Evridge said Alaska might be able to shift exports to other countries, but the size of the Chinese market makes it tough to replace. “On the Chinese side, it looks like there is little recourse,” Evridge said. “At least in the short term there is little ability for the Alaska seafood industry to avert these tariffs.” And there’s also a flip side. Trump has proposed a 25 percent tariff on products coming into the U.S. from China. It would include seafood that is caught in Alaska, shipped to China for reprocessing into fillets, portions or fish sticks and then resent to the U.S. for distribution to buyers. “That will possibly be the case next month when those tariffs go into effect on the U.S. side,” Evridge said. On Aug. 20, the U.S. International Trade Commission began hearing from over 350 speakers representing a wide variety of industries harmed by Trump’s tariffs from flooring to fruit juices to fish. The commission also must review more than 2,300 letters received so far; the pile is expected to grow by the Sept. 6 public comment deadline. “We’re kind of a pawn in a broader game,” Evridge said, adding that the Alaska Seafood Marketing Institute, Alaska’s congressional delegation and the governor’s office are “closely engaged.” The National Fisheries Institute voiced strong opposition to the proposed new tariffs in testimony last week saying that “it will punish American fishermen and the communities that rely on them by making their products more expensive for American families to eat.” “Of the $2.7 billion in annual seafood shipments subject to this proposal, an estimated $950 million comes from an American fisherman – primarily an Alaska fisherman – harvesting in U.S. waters in a U.S.-flag vessel using a U.S. crew,” said NFI’s Robert DeHaan. One of the Trump Administration’s stated goals — making China respect its obligations regarding intellectual property rights — don’t line up with tariffs on seafood, DeHaan added. “How punishing these harvesters — and these businesses for ‘Buying American’ — will convince China to respect its obligations regarding intellectual property rights and technology transfers is difficult to fathom,” he said. “Cutting fish is not an intellectual property secret.” Last year China purchased 54 percent of Alaska’s seafood, valued at nearly $800 million. Salmon wrap Alaska’s statewide salmon catch is 31 percent below expectations and is unlikely to reach the preseason forecast of 147 million fish. In what the Alaska Department of Fish and Game is calling an “unusual season” in a wrap up announcement, they said that the shortfall stems from poor pink salmon returns to Gulf of Alaska regions. ADFG also cited unexpected run timing for sockeyes at several major regions, causing uncertainty for managers and lost harvest opportunities for fishermen. Bristol Bay’s Kvichak River saw the latest peak since 1956; more than half of the Kenai River’s late-run sockeye returned during the month of August, which has only occurred once before; and Copper River sockeye salmon returned in three distinct pulses, the third happening in mid-July. But “it is important to maintain perspective on historical salmon harvests,” ADFG said, pointing out that the three largest Alaska salmon harvests on record occurred between 2013 and 2017. The 2018 season has not been without bright spots, notably at Bristol Bay, which experienced the second largest sockeye salmon harvest on record of nearly 42 million fish, and the fourth consecutive season with the harvest topping 35 million sockeyes. Norton Sound also is likely to exceed last year’s record coho salmon harvest and at Kotzebue, the chum salmon harvest will be among the top four on record. Preliminary statewide total harvests and exvessel (dockside)values by salmon species and area will be available by mid-October. Salmon cells Plans are underway to grow and sell salmon and other seafoods made directly from fish cells. San Diego-based BlueNalu says it will “disrupt current industry practices” and be a pioneer in “cellular aquaculture,” in which living cells are isolated from fish tissue, cultured in various lab media and then assembled into “great-tasting fresh and frozen seafood products.” BlueNalu is being seeded with $4.5 million in startup money from a private venture fund called New Crop Capital whose mission is ‘funding the future of food.’ Seafood perceptions Seafood lovers around the world believe that the biggest threat to the oceans is pollution, followed by overfishing. Those are some of the top takeaways from a survey earlier this year of more than 25,000 people in 22 countries. The survey was done by the public opinion research firm GlobeScan for the Marine Stewardship Council. The non-profit MSC led the movement starting 20 years ago towards certifying fisheries that are managed sustainably, which has become a requirement of doing business by most seafood buyers around the globe. The study found that 72 percent of seafood consumers want sustainability verifications at their supermarkets, but price is still the biggest motivator for buying decisions. A surprising gender divide showed that men are more motivated by price while women regarded seafood sustainability as more important. Seventy-two percent also agreed that buying seafood from sustainable sources will help save our oceans; 70 percent said people should switch their purchases to earth friendly fisheries. Eighty-three percent of global consumers agreed that seafood needs to be protected for future generations, and 70 percent said they would like to hear more from companies about their sustainability purchasing practices. In what the survey called “a climate of persistently low consumer trust in business globally,” trust in the blue MSC label remained high at 69 percent and understanding of the label has increased to 37 percent, up from 32 percent in 2016. Younger consumers are even more tuned in to choosing sustainable seafood, with 41 percent of 18-34 year olds understanding what the MSC label means. That group also showed a slightly different profile, eating less seafood on average and worrying more about the effects of climate change on the oceans than their older counterparts. Global consumers also rated certification organizations third for their contribution to protecting the oceans, after NGOs and scientists. Governments and large companies rated as contributing the least. Fish event Big names in fisheries are inviting the public to participate at a special town hall event on August 31 at the Centennial Hall Convention Center in Juneau. Keynote is retired Navy Rear Admiral Timothy Gallaudet, an American oceanographer who currently serves as the Assistant Secretary of Commerce for Oceans and Atmosphere within the U.S. Department of Commerce. Gallaudet will discuss the DOC’s Strategic Plan and NOAA’s Blue Economy priorities. Joining him in a roundtable discussion is David Wetherell, director of the North Pacific Fishery Management Council; Nicole Kimball, vice president of operations for the Pacific Seafood Processors Association; Alexa Tonkovich, director of the Alaska Seafood Marketing Institute; Frances Leach, director of United Fishermen of Alaska; Rich Yamada, president of the Alaska Charter Association; Stephanie Madsen, director of the At-sea Processors Association; Chad See, director of the Freezer Longline Coalition; Ben Stevens, tribal advocate for the Tanana Chiefs Conference; Mark Fina, policy analyst for U.S. Seafoods; Jamie Goen, director of Alaska Bering Sea Crabbers; Paddy O’Donnell, president of Alaska Whitefish Trawlers; Brett Veerhusen, alternate director of the North Pacific Fisheries Association, Chris Woodley, director of the Groundfish Forum and Linda Behnken, director of the Alaska Longline Fishermen’s Association. The group will take questions from the public. Doors open at 3:30. Contact is Kevin Wheeler at [email protected] or 202-482-5096. Video deadline Aug. 31 also is the deadline to submit videos to the worldwide Women in Seafood competition. Videos must be no longer than four minutes and will be judged in two categories: Under 25 which highlights futures for young women in the seafood industry, and Women’s Contributions from a social and/or economic perspective. Winners will receive 1,000 Euros (US $1,162) and their films will be shown to global audiences. Send videos to [email protected] or [email protected] Winners will be announced in late September. Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

COMMENTARY: Fixing the Clean Power Plan is a sensible first step

Washington loves controversy. And critics are undoubtedly clucking right now about the Trump administration’s plan to replace the Clean Power Plan, or CPP, with a modified effort. But the administration deserves credit for updating the plan, rather than scrapping it entirely. For starters, the CPP envisioned by President Obama represented a massive overreach of the EPA’s authority under the Clean Air Act. Instead of addressing individual power plants, the Obama administration simply mandated wholesale changes to large swaths of America’s power grid. The Supreme Court found this problematic, though, and issued an unprecedented stay of the rule while a lower court was reviewing it. It wasn’t just the EPA’s intrusion into the way individual states generate electricity, however. There was also the incredibly high price tag. According to a study by Energy Ventures Analysis, the CPP would have forced the closure of enough generating capacity to power 24 million homes. This would have cost consumers an estimated $214 billion in additional electricity costs between 2022 and 2030, plus $64 billion for replacement infrastructure. Such a massive expense prompted 27 states to challenge the rule, and a bipartisan majority of Congress to formally state their disapproval. What the Trump administration is now attempting with its Affordable Clean Energy, or ACE, rule is to focus on improvements for existing plants. This is a far more lawful approach, and it means the EPA will respect both the boundaries established under the Clean Air Act and the ability of individual states to securely generate electricity. Essentially, the new rule means the administration wants to innovate and upgrade existing facilities, rather than scrap them. There’s precedent for this, since extensive investments in environmental controls for America’s coal fleet have already reduced emissions of sulfur dioxide, nitrogen oxide, and particulate matter by 92 percent per kilowatt-hour since 1970. Utilities have invested more than $127 billion in emissions technologies through 2018, and are also expected to spend an additional $5 billion through 2020. The CPP was a blunt hammer, and it aimed to rapidly eliminate coal-fired power in the U.S. But shutting down key parts of the nation’s power grid could have reduced the reliability and affordability of America’s electricity mix. A recent EVA study found that replacing just three of the coal plants facing premature retirement could cost consumers 15 times more than providing support to keep them operating. Coal currently generates 32 percent of the nation’s power supply. It’s part of a long-term effort to maintain a balanced energy mix. The CPP overreached, in that it would have imposed massive costs on U.S. consumers. But it offered little gain in return. A fully implemented CPP would have yielded only a theoretical 0.018 degrees Celsius reduction in global temperatures by 2100, and reduced power plants CO2 emissions by less than 1 percent. Yes, the Trump administration has waded into a complex and controversial issue. But they’ve taken a prudent approach to help states generate electricity safely, reliably, and affordably. More can be done to scale up up wind and solar power, for example. But that should be encouraged alongside advances in coal technologies that can further improve safety while also providing reliable electricity every day. ^ Terry M. Jarrett is an energy attorney and consultant who has served on both the National Association of Regulatory Utility Commissioners and the Missouri Public Service Commission.

China struggles to curb its reliance on US buyers, suppliers

BEIJING (AP) — Faced with plunging U.S. orders, surgical glove maker Ren Jiding is hunting for new markets amid Chinese government calls to reduce reliance on the United States. But none can absorb the 60 percent of his sales that went to American customers last year. “Other countries import much less than the United States,” said Ren, a co-owner of Hongyeshangqin Medical Science and Technology Co., Ltd. in the eastern city of Zibo. From medical products to smartphone chips to soybeans, Beijing is responding to President Donald Trump’s tariff hikes by pushing companies to trade more with other countries. But there are few substitutes for the United States as an export market and source of technology for industries including telecom equipment makers Chinese leaders are eager to develop. Beijing has announced tariff cuts and other changes while rejecting U.S. demands to scale back plans such as “Made in China 2025,” which calls for state-led creation of Chinese champions in robotics, biotech and other fields. American leaders say those violate Beijing’s market-opening promises and might erode U.S. industrial leadership. The response highlights the cost the ruling Communist Party is willing to pay in lost sales and jobs to stick to plans that are fueling conflict with Washington, Europe and other trading partners. “China sees its technology and industrial policies as fundamental to its growth,” Tianjie He of Oxford Economics said in an email. “It is thus hard to see China’s leadership committing to significant changes.” Trump has raised duties on a total of $50 billion of Chinese imports including ultrasound scanners and industrial components that Washington says benefit from improper policies. China retaliated with similar penalties. The U.S. is poised to raise duties on $200 billion of imports including the gloves made by Ren’s company. Beijing has issued a list of American goods for retaliation. The impact on China is “small and is containable, at least for the time being,” said Vincent Chan of Credit Suisse. He said the “worst case” outlook if all threatened U.S. tariff hikes go ahead would cut China’s growth by 0.2 percentage points this year and 1.3 percent in 2019. Chinese leaders have tried to cushion the blow to their own economy by targeting American goods its importers can get from other countries — soybeans from Brazil, gas from Russia, cars from Germany and fish from Vietnam. Beijing has promised to use revenue from the higher tariffs to help struggling exporters and has ordered banks to lend more freely to them. The biggest jolt so far came from Beijing’s cancellation of orders for soybeans, the biggest American export to China at $21 billion last year. That hammered farm states that voted for Trump in the 2016 election. It also pushed up prices for Chinese farmers that use soybeans for animal feed and food processors that crush them for cooking oil. That could be a windfall for Brazil. But China already is its top market and consumes two-thirds of the global supply. Chinese total imports last year of 95 million metric tons were 50 percent more than the South American giant’s entire exports. “The Chinese can talk all they want about finding other sources of soybeans,” but 80 percent come from the United States, Brazil and Argentina, said Michael Cordonnier, president of Soybean &Corn Advisor, Inc., a U.S. research firm. “If you want to import soybeans, it generally must be from one of those three countries,” said Cordonnier in an email. Regulators also cut import duties on automobiles on July 1 but raised them on vehicles from the United States. That helps luxury brands that import from Germany and Japan. Replacing markets for Chinese exporters that support tens of millions of jobs will be harder. The United States bought $430 billion of China’s exports last year, or 20 percent of the $2.2 trillion total. The No. 2 market was the 28-nation European Union at $370 billion. “We can’t afford to lose the U.S. market,” said David Hu, general manager of Sinohood Bags Factory Ltd. in the southeastern city of Yiwu. Americans bought 40 percent of his canvas tote bags last year, including the most profitable customized versions with Christmas and other designs. “What we export to Europe is lower-end products with lower prices,” said Hu. “We could explore the Indian, Vietnamese or Philippine markets. But the prices they offer would be too low.” Chinese officials point to potential markets in the “Belt and Road,” a multibillion-dollar initiative led by President Xi Jinping to boost trade by building ports, railways and other infrastructure across Asia to Europe. That has brought a flood of contracts to Chinese state-owned builders but complaints about costs have hurt its appeal. Prime Minister Mahathir Mohamad of Malaysia announced this month the cancellation of plans for Chinese-built projects including a $20 billion rail line. “There is potential for development in areas such as central Asia, Eastern Europe, Africa and South America. But their problems are development imbalance and economic instability,” said Li Yong, a senior fellow at the China Association of International Trade, an industry group. Local officials have met with exporters to exhort them to “diversify markets,” according to the state press. Authorities in the central city of Jingzhou visited exporters to help with customs forms, financing and other details, the website China Industry and Commerce News said. Ren, the surgical glove maker, said his 300-employee company was looking at Europe and developing countries but demand was sluggish. Some companies are confident of keeping their U.S. market share. That reflects the possible success of official efforts to develop higher-tech goods instead of competing on price alone. The general manager of Yihua Electronic Equipment Co. in southern China’s Guangdong said the tariffs should not affect sales of its digital soldering guns, one-fifth of which are sold to the United States. “With the 25 percent tariffs, ours still are cheaper than similar German- or Japanese-made products,” said the manager, who would give only his surname, Gou. “We are not producing something like shoes and clothing that could be easily replaced.” Trump’s pressure is likely to backfire by encouraging Beijing to throw even more resources at nurturing its own technology creators. China’s search for non-U.S. suppliers could help companies such as Taiwanese chipmaker MediaTek Inc. But redesigning a phone or network gear and then gaining regulatory and customer approval can take a minimum of three to five years. “For now,” said He of Oxford Economics, “China remains technologically dependent on the U.S.”

US-Mexico trade deal a Trump win to pressure Canada

President Donald Trump on Aug. 27 announced an agreement that he said would replace NAFTA, an almost 25-year-old deal that allows most goods produced in North America to move duty-free across the continent. Pointedly, the deal excludes Canada, one of the three original North American Free Trade Agreement signatories. All three had been working on a new deal since last August, but recently Mexico and the U.S. began negotiating on their own. Although Trump said he hoped Canada would join the new U.S.-Mexico agreement, he threatened Canada with new auto tariffs if it didn’t “negotiate fairly.” As an expert on international economic law, I believe there are two key takeaways from this deal. A tentative deal designed to pressure Canada First of all, it does not appear that the U.S. and Mexico have actually concluded negotiations. The United States Trade Representative said only that they’ve reached a “preliminary agreement in principle, subject to finalization and implementation.” Therefore, details and legal language remain subject to further negotiation — which means the final agreement could change significantly. Moreover, a new trade agreement with Mexico would require Congress to pass implementing legislation by a majority of both houses before it could come into force. Absent a signed agreement, the Trump administration cannot ask Congress for that legislation. In addition, Trump threatened to terminate NAFTA to clear the way for the new agreement. But it is unclear whether the president has the legal authority to do so without congressional approval, and his lead trade negotiator later said the United States would not withdraw. Even if Trump were to withdraw from the accord, the legislation implementing NAFTA would remain in effect until Congress repeals it. It’s more likely that the new deal and Trump’s threat to terminate NAFTA are designed to increase pressure on Canada to reach an agreement on his terms. Trump’s triumph? The agreement does appear to resolve — at least between Mexico and the U.S. — two contentious issues that would represent big wins for the Trump administration. For instance, under NAFTA, cars exported from one signatory to the next are free of tariffs as long as 62.5 percent of their content comes from a country in the agreement. The new deal would increase that to 75 percent. It would also require that 40 percent to 45 percent be made by workers earning at least US$16. Officials have said that the agreement would remain in force for 16 years, with a review every six. NAFTA, in contrast, doesn’t have an expiry date. Mexico and Canada both initially opposed including a sunset provision. Although much could change in negotiating the final language and Canada’s participation, these compromises would represent significant victories for Trump. The Conversation is an independent and nonprofit source of news, analysis and commentary from academic experts provided through the Associated Press.

Talks with Canadian officials expected after US-Mexico deal

WASHINGTON (AP) — Canada’s minister of foreign affairs was scheduled to hold talks in Washington on Aug. 28 in hopes of reaching a trade agreement with the United States, an urgent response after President Donald Trump announced a deal with Mexico on Aug. 27 that left out Canada. The official, Chrystia Freeland, is facing a tight deadline to keep the three nations that formed the North American Free Trade Agreement 24 years ago together in a trade pact. The deal unveiled by Trump — whose administration set an Aug. 31 deadline — raised several key questions: Can Canada, the United States’ second-largest trading partner, be coaxed or coerced into a new pact? If not, is it even legal — or politically feasible — for Trump to reach a replacement trade deal with Mexico alone? And will the changes being negotiated to the 24-year-old NAFTA threaten the operations of American and foreign companies that have built sophisticated supply chains that span the three countries? “There are still a lot of questions left to be answered,” said Peter MacKay, a former Canadian minister of justice, defense and foreign affairs who is now a partner at the law firm Baker McKenzie. Trump was quick to proclaim the agreement a triumph, pointing to the Aug. 27 surge in the stock market, which was fueled in part by the apparent breakthrough with Mexico. “We just signed a trade agreement with Mexico, and it’s a terrific agreement for everybody,” the president declared. “It’s an agreement that a lot of people said couldn’t be done.” Trump suggested that he might leave Canada out of a new agreement. He said he wanted to call the revamped trade pact “the United States-Mexico Trade Agreement” because, in his view, NAFTA has earned a reputation for being harmful to American workers. But first, he said, he would give Canada a chance to get back in — “if they’d like to negotiate fairly.” To intensify the pressure on Ottawa to agree to his terms, the president threatened to impose new taxes on Canadian auto imports. Talking to reporters, the top White House economic adviser, Larry Kudlow, urged Canada to “come to the table.” “Let’s make a great deal like we just made with Mexico,” Kudlow said. “If not, the USA may have to take action.” Canada’s NAFTA negotiator, Foreign Minister Chrystia Freeland, cut short a trip to Europe to fly to Washington on Aug. 28 to try to restart talks. “We will only sign a new NAFTA that is good for Canada and good for the middle class,” said Adam Austen, a spokesman for Freeland, saying that “Canada’s signature is required.” MacKay added, “There is still a great deal of uncertainty — trepidation, nervousness, a feeling that we are on the outside looking in.” Critics denounced the prospect of cutting Canada out a North American trade pact, in part because of the risks it could pose for companies involved in international trade. Many manufacturers have built vital supply systems that depend on freely crossing all three NAFTA borders. Noting the “massive amount of movement of goods between the three countries and the integration of operations,” Jay Timmons, president of that National Association of Manufacturers, said “it is imperative that a trilateral agreement be inked.” Trump has frequently condemned the 24-year-old NAFTA trade pact as a job-killing “disaster” for American workers. NAFTA reduced most trade barriers between the three countries. The president and other critics say the pact encouraged U.S. manufacturers to move south of the border to exploit low-wage Mexican labor. The preliminary deal with Mexico might bring more manufacturing to the United States. Yet it is far from final. Even after being formally signed, it would have be ratified by lawmakers in each country. The U.S. Congress wouldn’t vote on it until next year — after November midterm elections that could end Republican control of the House of Representatives. But initially, it looks like at least a tentative public-relations victory for Trump, the week after his former campaign manager was convicted on financial crimes and his former personal attorney implicated him in hush money payments to two women who say they had affairs with Trump. Before the administration began negotiating a new NAFTA a year ago, it had notified Congress that it was beginning talks with Canada and Mexico. So the Aug. 27 announcement raises the question: Is the administration authorized to reach a deal with only one of those countries? A senior administration official, who briefed reporters on condition of anonymity, said yes: The administration can tell Congress it had reached a deal with Mexico — and that Canada is welcome to join. But other analysts said the answer wasn’t clear: “It’s a question that has never been tested,” said Lori Wallach, director of the left-leaning Public Citizen’s Global Trade Watch. Even a key Trump ally, Rep. Kevin Brady, the Texas Republican who is chairman of the House Ways and Means Committee, expressed caution about Monday’s apparent breakthrough. Brady said he looked forward “to carefully analyzing the details and consulting in the weeks ahead to determine whether the new proposal meets the trade priorities set out by Congress.” And the No. 2 Senate Republican, John Cornyn of Texas, while hailing Monday’s news as a “positive step,” said Canada needs to be party to a final deal. “A trilateral agreement is the best path forward,” Cornyn said, adding that millions of jobs were at stake. There are political reasons to keep Canada inside the regional bloc: “Mexico will have a difficult time selling ‘Trump’s deal’ back home if Canada does not think it is a good deal,” said Daniel Ujczo, a trade attorney with Dickinson Wright PLLC. “It will appear that Mexico caved.” Indeed, Mexico has said it wants Canada included in any new deal to replace NAFTA. “We are very interested in this being an agreement of three countries,” said President-elect Andres Manuel Lopez Obrador. At the same time, Foreign Minister Luis Videgaray told reporters that “Mexico will have a free trade agreement regardless of the outcome” of U.S.-Canada negotiations. The Office of the U.S. Trade Representative said Mexico had agreed to ensure that 75 percent of automotive content be produced within the trade bloc (up from a current 62.5 percent) to receive duty-free benefits and that 40 percent to 45 percent be made by workers earning at least $16 an hour. Those changes are meant to encourage more auto production in the United States. For months, the talks were held up by the Trump administration’s insistence on a “sunset clause”: A renegotiated NAFTA would end after five years unless all three countries agreed to continue it. Mexico and Canada considered that proposal a deal-killer. On Aug. 27, the Trump administration and Mexico announced a compromise on that divisive issue: An overhauled NAFTA would remain in force for 16 years. After six years, the countries would review the agreement and decide whether it needed to be updated or changed. They then would either agree to a new 16-year deal or the pact would expire.

IRS proposes rules to govern new small business deduction

NEW YORK (AP) — Small business owners have gotten more information about a new tax break many will get, with the IRS issuing proposed regulations that explain the deduction for qualified business income and which company owners can claim it. Some of the new details include how to handle a spouse’s income, whether side businesses qualify, and the rules for losses in one or more businesses. Under the new tax law, many owners can deduct 20 percent of their qualified business income, up to a ceiling that’s equal to 20 percent of their taxable income minus capital gains. Qualified business income is earned from a company operated as a sole proprietorship, partnership or S-corporation. These businesses are known as pass-throughs because the company income “passes through” to owners’ 1040 forms, where it is reported to the IRS. Business owners of any kind can get the full 20 percent deduction as long as their taxable income — which includes earnings outside their companies — is no more than $157,500 for an individual and $315,000 for a married couple filing jointly. Even if the owner’s spouse has income from outside the business — for example, being employed in a different field or industry — that income is part of the calculations to determine whether an owner can take a qualified business income deduction. If owners’ taxable income is above the $157,500 or $315,000 threshold, they may get a partial deduction. The computations needed to determine a partial deduction are complex and affected by how much the business pays its employees and the value of some of its property. However, owners whose companies are what’s called a specified service trade or business — for example, health providers, attorneys, accountants or consultants — have no deduction if their taxable income is more than $207,500 for an individual or $415,000 for a married couple. The proposal also provides details about how owners and tax preparers should treat a number of situations. For example, if an owner’s business loses money, there is no deduction in the current tax year, but the owner can carry the loss forward to the next year. If an owner has multiple businesses and one or more lose money, that loss is used to offset income in the other business or businesses. It’s possible for owners with several businesses to have qualified income from one or more but not from others. For example, if a doctor has a side business designing and manufacturing medical devices or dietary supplements, his income levels may prevent him from getting a deduction for his practice, but he might still be able to get one for his manufacturing company. The proposed regulations will not become official until after the IRS has received comments about them and they have been published in the Federal Register, www.federalregister.gov . Meanwhile, the IRS says taxpayers can rely on the proposed regulations for guidance about the deduction. Many owners will need to consult a tax professional to determine how large a deduction they can take. The IRS website has information about the regulations as well as frequently asked questions including some examples of how the deduction is computed at https://bit.ly/2vwgkPx . Small business in brief • Optimism at small businesses is growing along with the economy. The Wells Fargo/Gallup Small Business Index, compiled from a survey of 604 owners, has reached 118 in the third quarter, up from 106 in the second quarter. An index measuring owners’ expectations for the future rose to 66 from 61. Thirty-five percent of the owners said they plan to add jobs in the next 12 months, up from 31 percent. • Retirement is the biggest reason owners are putting their companies on the block. That’s the finding of a survey of brokers who handle sales of businesses; the survey was conducted by researchers at Pepperdine University’s Graziadio School of Business and two industry groups, the International Business Brokers Association and the M&A Source. Retirement was cited by nearly a third of owners who sold their companies for prices under $500,000. But it was the reason cited by roughly half the owners of companies with higher price tags.

No favorite so far for competing Interior natural gas plans

Interior Gas Utility leaders were largely measured in responding to a late pitch from Siemens Government Technologies on a new option for getting an additional natural gas supply to the Fairbanks area. Pamela Throop, chair of the startup utility’s board of directors and a longtime Fairbanks commercial real estate developer said the Siemens proposal is “neck and neck in some ways” with the Alaska Industrial Development and Export Authority’s $330 million comprehensive gas distribution and supply build out financing package. AIDEA’s plan also included IGU purchasing Fairbanks Natural Gas and its sister LNG supply chain companies for nearly $60 million — a purchase made predominantly with $42 million in state Interior Energy Project grant funds. Siemens representatives laid out their LNG supply chain plan to IGU officials Aug. 21. Throop and other utility board members said the Siemens turnkey proposal, which includes a partnership with the Southcentral Knik Tribe, is attractive for its simplicity to the utility — it could provide LNG by rail to Fairbanks for a contract price without IGU investing in added liquefaction capacity. However, they noted that the company still needs to secure the first, critical link in its LNG supply chain: a contract for natural gas. “We have questions above and beyond dealing with the dollars — security of supply, transportation, all those kinds of things that we have to deal with. We have to make sure that they’re capable of doing what they say they can do,” Throop said in an interview. “They don’t have a gas supply yet, either. They’re working on one; so they can’t really give us a firm price until they have a gas supply and that’s really going to make all the difference in the world, depending on what they can bring that gas supply in for, in my opinion.” Siemens is in talks with Cook Inlet gas producers and believes it can get feedstock natural gas for approximately $5 per thousand cubic feet, or mcf. That would be a marked improvement over the $7.72 per mcf price IGU and AIDEA negotiated with Hilcorp Alaska on a short, three-year contract that runs into 2021, but would also be a significantly cheaper gas price than Southcentral utilities have inked of late on longer deals for much larger volumes of gas. Recent contracts for a firm gas supply from Cook Inlet have been in the $7 per mcf range. Former AIDEA board member Gary Wilken, now a member of the IGU board, said it took AIDEA and IGU 18 months of negotiations to finalize the $7.72 per mcf price with Hilcorp. Getting a gas contract with favorable terms for the Interior could also be challenging because it is for a relatively small demand, likely starting at a little more than 1 billion cubic feet per year range and growing as Interior residents and businesses sign up for gas. What’s problematic for the greenfield project is the fact that no one really knows how quickly that new gas demand will materialize. It is dependent upon a variety of factors including the cost of alternative heating supplies, namely fuel oil and wood, as well as the number of customers willing to invest in new natural gas appliances and how quickly gas distribution infrastructure can be built out. Converting to a new natural gas home heating system can cost residents upwards of $10,000 without any sort of assistance program, AIDEA officials have long noted, which is a major potential hurdle for the Interior Energy Project. “The question is: Is that (gas supply) real?” IGU board member and former Golden Valley Electric Association CEO Steve Haagenson said in an interview. The company insists it could be shipping LNG to Fairbanks by early 2020 if it can reach an agreement with IGU by the end of the year. Siemens is also investigating the prospect of sourcing its own gas directly from the Houston area where its modular LNG plant would be sited. Controlling the gas supply could bring the cost down to the $4 per mcf range, according to company representatives, but that would appear to be a longer term venture as well. AIDEA and FNG have estimated their plan, with its state financing support, would result in an initial $17.30 per mcf burner tip price to consumers in 2020. That price could drop to the $15 per mcf IEP goal by 2022 as more customers are brought online. Using IGU’s contract price, Siemens would get LNG to the Fairbanks storage tank for $17.98 per mcf, according to the company — plus $5 to get it all the way to customers. The Siemens cost would drop into the $16 per mcf range with $5 per mcf wholesale gas, according to the company, but that again would be delivered to the large LNG storage tank FNG is currently building and require costs for storage, regasification and distribution totaling about $5 to be added on to the customers’ final price, Wilken highlighted. Company representatives said the LNG cost could drop further if other industrial users — either in the Interior or Southcentral — could be secured. Throop said the prospect of having another entity assume LNG plant construction and operational and transportation risks is particularly appealing. “We don’t care what their capital construction costs are; all we care about is the gas price in the contract,” Throop said. The Siemens plan starts with the company’s modular “LNGo” liquefaction units that can produce up to 30,000 gallons of LNG per day. The plan is to initially install two LNGo units at a proposed industrial park near Alaska Railroad Corp. tracks in Houston. The fuel would travel by rail to Fairbanks Natural Gas’ 5.25 million-gallon LNG storage tank currently under construction in south Fairbanks for regasification and distribution to residents and businesses. Once gas demand grew to where more than four of the LNGo units were needed the company would look at installing a single, larger LNG facility, according to Siemens officials. Under the plan, IGU would sign a 20-year liquefaction services agreement, or LSA, with the Knik Tribe but the responsibility for executing the contract would flow to Siemens through a separate contract with the tribe. IGU would also sign a transportation contract with the Alaska Railroad, but that cost would be rolled into the LSA terms. The company is partnering with the Knik Tribe because the federally recognized Tribe has access to federal loan and grant programs that could provide lower-cost financing to the project, according to Siemens officials. It would be located on land owned by Knikatnu Inc., a Native village corporation. Wilken said that while Siemens is generally a well-regarded company with significant resources it currently has just one LNGo plant in operation in Dawson Creek, British Columbia, so the reliability of the system is still somewhat an open question. “We need to be sure we’re getting a plant that’s going to work in an Arctic environment,” he said. Haagenson said managing a utility is a constant balance between cost and reliability, but added that “a utility in Fairbanks is kind of held to a higher standard,” because a home can go from warm to frozen in less than eight hours when the heat is cut off at 40 below zero. Wilken emphasized that he wants Siemens representatives to pull back the curtain on the details of their supply chain costs. A Siemens spokesman said via email that the company has “confirmed pricing from feedstock providers at a quoted rate less than the current IGU contract price,” but declined to provide details on the specific supply chain costs. “While the comprehensive pricing will be fully visible and transparent to the IGU prior to entering into any long-term contract, we first need IGU to advise us if they are willing to enter into preliminary negotiations culminating in a memorandum of understanding, at which time we’ll carefully review all pricing along the entire supply chain,” the Siemens statement reads. Throop said IGU leaders will be talking with Siemens and Knik representatives and try to stay on the company’s timeline of reaching a deal — or not — around the end of this year. “We need to make a decision one way or the other and that’s what I’d like people to know,” she said. Picking the Siemens plan would also require approval by the AIDEA board of directors, as it would be a major change to the Interior Energy Project development plan IGU and the authority have already agreed to. AIDEA spokesman Karsten Rodvik said authority officials committed to reviewing alternative gas supply plans in the IEP financing agreement and are in the process of reviewing Siemens’ plan with IGU leaders. ^ Elwood Brehmer can be reached at [email protected]

Now with power to long rule China, Xi beset by challenges

BEIJING (AP) — As China’s leaders gather for their annual Yellow Sea retreat, the country’s political waters are looking choppy. Chinese President and ruling Communist Party leader Xi Jinping is beset by economic, foreign policy and domestic political challenges just months after clearing his way to rule for as long as he wants as China’s most dominant leader since Mao Zedong. Mounting criticism of the Xi administration’s policies has exposed the risks he faces from amassing so much power: He’s made himself a natural target for blame. “Having concentrated power, Xi is responsible for all policy setbacks and policy failures,” said Joseph Cheng, a retired City University of Hong Kong professor and long-time observer of Chinese politics. Notably, Xi used to dominate state-run newspapers’ front pages and the state broadcaster CCTV’s news bulletins on a daily basis but has in recent weeks made fewer public appearances. “He can’t shift the blame, so he’s responding by taking a lower profile,” Cheng said. The challenges so far aren’t seen as a threat to Xi’s grip on power, but for many Chinese, the government’s credibility is on the line. Of greatest concern to many is the trade war with the U.S. that threatens higher tariffs on hundreds of billions of dollars of Chinese exports. Critics say they’ve yet to see a coherent strategy from Beijing that could guide negotiations with Washington and avoid a major blow to the economy. Beijing instead seems to be opting for defiance and retaliatory measures of its own. Both the stock market and the currency have weakened in response and the Communist Party itself conceded at a meeting last month that external factors were weighing heavily on economic growth. At the same time, a scandal over vaccines has reignited long-held fears over the integrity of the health care industry and the government’s ability to police the sprawling firms that dominate the economy. “Trust is the most important thing and a loss of public confidence in the government could be devastating,” said Zhang Ming, a retired professor of political science in Beijing. And last week, the authorities mobilized a massive security effort to squelch a planned protest in Beijing over the sudden collapse of hundreds of peer-to-peer borrowing schemes that underscore the government’s inability to reform the finance system to cater to small investors. Meanwhile, Xi’s signature project, the trillion-dollar “Belt and Road” initiative to build investment and infrastructure links with 65 nations, is running into headwinds over sticker shock among the countries involved. Some Chinese have also questioned the wisdom of sending vast sums abroad at a time when millions of Chinese remain mired in poverty. That in part plays into concerns over Xi’s abandonment of the highly pragmatic, low-key cautious approach to foreign relations advocated by Deng Xiaoping, the architect of China’s economic reforms that laid the groundwork for today’s relative prosperity. Leaders are likely to discuss at least some of these challenges during informal discussions at the Beidaihe resort in Hebei province as part of a tradition begun under Mao. Xi and others generally drop out of sight for two weeks or more during the summer session. Xi’s mildly bombastic brand of Chinese triumphalism “has not been popular with many in the party,” leading critics to speak out, said Steve Tsang, director of the China Institute at London’s School of Oriental and African Studies. Some have even called for the sacking of one prominent proponent of the rising China theme, Tsinghua University economist Hu Angang, with 27 graduates of the elite institution signing a letter to that effect. Resentment lingers also over Xi’s moves to consolidate power, including pushing through the removal of presidential term limits in March and establishing a burgeoning cult of personality. That resentment was given voice in a lengthy jeremiad titled “Imminent Fears, Imminent Hopes” penned by Tsinghua University law professor Xu Zhangrun, who warned that, “Yet again people throughout China … are feeling a sense of uncertainty, a mounting anxiety in relation both to the direction the country is taking as well as in regard to their personal security.” “These anxieties have generated something of a nationwide panic,” Xu continued before listing eight areas of concern including stricter controls over ideology, repression of the intelligentsia, excessive foreign aid and “The End of Reform and the Return of Totalitarianism.” Even more boldly, Xu called for a restoration of presidential term limits and a re-evaluation of the 1989 pro-democracy movement centered on Beijing’s Tiananmen Square. The peaceful protests were crushed by the military and remain a taboo topic to this day. Although Xu is reportedly out of the country and has not been officially sanctioned, another longtime critic, retired professor Sun Wenguang, found himself carted off by police in the middle of a radio interview with the Voice of America in which he railed against China’s lavish spending abroad. A sign of the Xi administration’s anxieties is a new campaign to promote patriotism among intellectuals — a recurring tactic when public debate is seen as needing a course correction. The notice of the new campaign, issued July 31, cites “the broad masses of intellectuals” and the “patriotic spirit of struggle,” while giving little in the way of specifics. Much of the discontent with Xi can be traced to his administration’s perceived ineffectiveness, said Zhang, the retired academic. “If you want to be emperor, you must have great achievements,” Zhang said. “He hasn’t had any, so it’s hard to convince the people.”

For many young investors, the stock market’s only gone up

NEW YORK (AP) — Meet the generation of investors who haven’t known a bear market. The U.S. stock market has been on the upswing for nine and a half years, during which a cohort of younger investors has never dealt with a 20 percent drop in the S&P 500 — the classic definition of a bear market. Such a decline has historically happened on average every four or five years. That’s nice for these 20- and 30-somethings, and their retirement accounts, but it raises the question: What will they do when the next downturn inevitably arrives? How they respond will be crucial because this generation bears a heavier responsibility for paying for their own retirement, as pensions go extinct and Social Security’s finances weaken. Few analysts are predicting an imminent downturn for the S&P 500, which hit a record high on Aug. 20, but they’re much less confident about 2019 or beyond due to rising interest rates and other market challenges. The fear is that inexperienced investors will panic at their first taste of a bear market and sell their stocks, which would lock in their losses. For young investors with decades to go before retirement, conventional wisdom says the best bet is to ride through and wait for a recovery. The average bear market brings a loss of nearly 40 percent for the S&P 500, but it typically lasts less than two years, according to S&P Dow Jones Indices. Many experts say today’s young investors are generally taking the right approach. For instance, many are invested in the stock market through specialized kinds of mutual funds in their 401(k) accounts called target-date retirement funds, which may keep them from making rash moves. Some younger investors also say the experience of their parents in the wrenching financial crisis of 2008-2009, when the S&P 500 lost more than half its value, has prepared them for the next downturn. They know the stock market more than made up all those losses, eventually. They’re investors like Marcus Harris, a 34-year-old physician in the Houston area who started investing about five years ago. “It’s going to sound terrible, but I’m actually looking forward to the next downturn,” he said of the opportunity to buy stocks at a lower price. “I know it’s an overbought position right now, and I’m just sitting on my hands saying, ‘I can’t wait.’ Hopefully it will go to half the price, and I can gobble up a lot of it.” He’s somewhat of an anomaly among his peers in that he owns stocks at all. Only four in 10 households led by someone under 35 owned stocks in 2016, according to the most recent data from the Federal Reserve. Stubbornly low wages and high debt are keeping many younger workers out of the stock market. Still, the ownership rate among younger households, at 41 percent, has been on the upswing and is much higher than the 23 percent rate in 1989. Since then, the only time young investors were much more likely to own stocks was around the dot-com bubble. “All the ones I know, they do want to get involved,” said Kimelah Taylor, a 36-year-old accounting adviser in Houston who began investing with a financial adviser about four and a half years ago. “There is that delay in when they get involved because they’re paying off student loans and other things.” Some younger investors may also be in the market without even realizing it. More employers are automatically enrolling their workers into 401(k) accounts, and many of those have a target-date retirement fund as the default investment. These funds automatically change over time and create a portfolio that’s appropriate for an investor’s age. When the target retirement year is decades away, they’re virtually entirely in stocks. As retirement approaches, they shed some stocks for bonds and other safer investments. Young people are much more likely to have their entire 401(k) in target-date funds than older savers, and the hope is that when the next downturn hits, young investors will continue to leave the investment decisions in their hands. “Inertia in this case is working for them,” said Jeanne Thompson, senior vice president at Fidelity Investments. “In many cases, that inertia will help when there is a market downturn, and they’ll probably leave their assets and stay the course.” In some ways, they’re more fortunate than older generations, who didn’t have target-date funds to take care of the decisions and often gave into the urge to sell stocks during a downturn. “The main reason young people are not running away from stocks is they aren’t figuring it out for themselves,” said Jean Young, senior research associate for the Vanguard Center for Investor Research. And even though younger investors haven’t faced a full-blown bear market yet, they have had a few mini-tests, with two drops of 10 percent since early 2016. Through them, younger investors made more calls than usual to T. Rowe Price, but they usually stopped short of selling their stocks, said Roger Young, senior financial planner at T. Rowe Price. If anything, market dips have only emboldened some, said Charles Adi, financial adviser at Blueprint 360 in Houston. During a tumble earlier this year, for example, he was balancing calls from older clients looking for reassurance with younger clients hungry to buy more shares of stock. “In 2008, it was unexpected,” Adi said. “Now, a downturn is expected. They’re ready for it. They’re waiting for it.” Still, there is the threat of overconfidence. Maybe young investors’ nerves won’t remain as steady as they expect. “They think they’re good fighters,” said Danny Alexander, a financial coach at Stangier Wealth Management in Portland, Oregon, which recently hosted an event for clients called “Gearing up for the next crash.” “But until they’ve been in a fight and punched in the mouth, they don’t know how they’ll respond.” Editor’s note: This story has been updated to reflect that the S&P 500 hit a record level on Aug. 20.

Russia paying cost to be an LNG boss

Russia started as a bit player on the liquefied natural gas stage less than a decade ago but is not content in that role and wants to share top billing. In 2009, when Russia’s first LNG export terminal went online, the Sakhalin-2 project in the Far East provided about 4 percent of the world’s liquefaction capacity. When the country’s second liquefaction plant, Yamal LNG, reaches full capacity early next year, Russia will have moved up to 26 million tonnes annual capacity, 7 percent of the world’s total. If gas producer Novatek, which operates Yamal LNG, goes ahead with its plan for a second project in the Siberian Arctic, Russia could climb to 46 million tonnes in the 2020s, in the No. 4 spot behind Qatar, Australia and the United States. Plans to expand Sakhalin production would further bolster Russia’s position in Asian markets, where it holds a decided geographic advantage. The Sakhalin terminal is just 750 miles north of Tokyo Novatek’s own long-term goal is to produce 55 million to 60 million tonnes of LNG per year by 2030, company CEO Leonid Mikhelson said earlier this month. Government financing, tax breaks, building infrastructure and providing icebreakers are part of the plan. “Don’t think of these as commercial projects,” a global energy analyst foretold at a Washington, D.C., conference six years ago. Rather, he said, accept that Russian politics are part of the equation. The government might be willing to subsidize a project to promote economic development or to gain momentum in the growing Asian market. That same summer as the Washington conference, Russian President Vladimir Putin signaled the gradual end of state-controlled Gazprom’s monopoly on gas exports, opening the way for rivals, including Novatek, to do business in Asia. Gazprom has long profited from its exclusive position in pipeline gas sales to Europe, which Putin did not touch. The easing of export restrictions applied only to LNG. As part of the decision to promote LNG exports, the government’s 2013 actions included reducing its mineral extraction tax and canceling export duties on new Arctic offshore oil and gas projects. The government further assisted in Yamal by financing construction of a port, airport, pipelines, icebreakers and dredging to create a navigable channel to the port, at a cost of at least $9 billion. The regional government contributed a property tax exemption and lower corporate profits tax rate. Just five years later, two of three liquefaction trains are now in production at Yamal, with the third train scheduled to start up early 2019, bringing the $27 billion project’s capacity to 16.5 million tonnes per year. The partners are Novatek (50.1 percent), France’s Total (20 percent), China National Petroleum Corp. (20 percent) and China’s Silk Road Fund (9.9 percent). China also provided $12 billion in financing for Yamal, after U.S. sanctions blocked other lenders. Novatek and the country’s top oil producer, Rosneft, both lobbied for LNG export rights. Rosneft and its partner ExxonMobil for years have considered adding a gas liquefaction plant to their Sakhalin-1 project, which started producing oil in 2005. Though the companies continue to plan their own LNG plant, Gazprom would prefer that they pay to run their gas through its Sakhalin-2 project. Reuters this spring reported that ExxonMobil and Rosneft had invited companies, including China National Petroleum Corp.’s engineering arm, to submit construction bids by October for their $15 billion LNG project with an initial capacity of 6 million tonnes per year. The news service reported a final investment decision is due next year. Gazprom, meanwhile, is looking at adding a third train at its Sakhalin plant but lacks enough gas reserves for the expansion. Reaching a deal with ExxonMobil/Rosneft for supply would be the fastest option using existing infrastructure because some of the gas is being pumped back into reservoirs, Sakhalin-2 commercial director Andrey Okhotkin told a Russian LNG conference this summer. While oil and gas giants Gazprom and Rosneft are active in the Far East, Novatek wants to expand in the Arctic. The company is targeting mid-2019 for a final investment decision on its Arctic LNG-2 plant, which would be built east of Yamal. Estimated at $25.5 billion, the plant is proposed at 19.8 million tonnes per year, with start-up in 2022-23. In June, Total agreed to buy a 10 percent stake in the venture, and Novatek has signed a memorandum of understanding with Korea Gas expressing “mutual interest for KOGAS to enter into the Arctic LNG-2 project.” Talks also are underway with Saudi Arabia’s Aramco, China National Petroleum Co. and Japan’s Marubeni Corp. In anticipation of going ahead with Arctic LNG-2, Novatek is building a shipyard in the port city of Murmansk for construction of the production modules that would be towed to the plant site on the Gydan Peninsula. Ice-class LNG carriers move Yamal gas through the Northern Sea Route to East Asia and also westward to Europe, but the ships are significantly more expensive to build and operate than the usual LNG tankers. Novatek is pursuing an answer to that costly dilemma — trans-shipment terminals to transfer the fuel to less-expensive, traditional carriers after the ice-class ships have reached open water. The company wants to build an LNG trans-shipment terminal by 2023 on Russia’s Kamchatka Peninsula, about 1,500 miles north of Tokyo. Trading house Marubeni and shipbuilder Mitsui O.S.K. Lines are among the Japanese companies considering participation in the project. Tokyo also might help through public institutions such as the Japan Bank for International Cooperation and Nippon Export and Investment Insurance, according to a report in the Nikkei Asian Review. And if one trans-shipment terminal is good, two might be better. Novatek is considering building an LNG trans-shipment terminal near Murmansk, CEO Mikhelson said Aug. 20. The location will be determined “in the nearest future,” Mikhelson said. The use of Ura Bay, 25 miles from Murmansk, is under discussion with Russia’s Defense Ministry, which operates a submarine base nearby. The transfer terminal, on the route from Yamal to Europe, would strengthen the company’s positions in the global LNG market, Mikhelson said. “We are losing,” he said, “and will continue losing in transportation with ice-breaking tankers.” ^ Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide.

Movers and Shakers for Sept. 2

Melinda Freemon was appointed executive director of Anchorage Project Access, a non-profit dedicated to increasing access to health care for low income uninsured members of our community by working with a network of over 600 medical and dental providers to serve those in need. Freemon brings more than 30 years of experience in Alaska in organizational management with an emphasis on systems integration and improvement. She has worked in rural and urban Alaska and led a variety of health care, behavioral health, housing and other programs for vulnerable populations. Before becoming the executive director, Freemon served as the director of the Municipality of Anchorage Department of Health and Human Services, the director of Supportive Housing for the Rural Alaska Community Action Program and the executive director of the Salvation Army Clitheroe Center. Freemon holds a master’s degree in counseling psychology from Alaska Pacific University. She is a licensed professional counselor and a certified clinical supervisor. The Alaska Department of Law announced the appointment of Tim McGillicuddy as the Ketchikan District Attorney, effective Aug. 6, after Ben Hofmeister accepted a position with the Department of Law, Civil Division in Juneau. McGillicuddy graduated from the University of Illinois School of Law in 2007 and served as a prosecutor around the country for nine out of the following 11 years. He has practiced in diverse areas of the country from Chicago to the Navajo Reservation in Arizona. He came to the Ketchikan District Attorney’s office in 2016 and since then has worked a varied caseload including complex homicides, assaults, burglaries, and drug trafficking cases. MSI Communications, one of Alaska’s largest advertising and public-relations agencies, has promoted Director of Client Services Kris Miller to vice president. Miller oversees the agency’s two largest accounts, Alaska Airlines and BP Alaska. As director of client services, she is responsible for training and developing the account managers and account executives who, as a group, oversee the agency’s entire roster of clients. Originally from Minnesota, Miller has been with MSI for five years. She joins Creative Director Jim Coe; Vice President, Director of Digital Strategies Steve Howell; Vice President, Campaign Strategist Lana Johnson; and Senior Vice President and Director of Finance Amy Clifford on MSI’s senior advisory and agency operations-management team. Alaska Aerospace Corp. announced the hiring of Mark D. Lester to serve as the company’s new president. Lester will report directly to Craig Campbell, who continues as CEO. Prior to joining Alaska Aerospace, Lester was the founder and CEO of Pantigo Lester LLC in Colorado Springs where he provided management consulting services to mid-market aerospace and defense businesses. His background includes previously serving as the CEO with Doss Aviation, as well as providing business development, marketing, program management, and engineering expertise for a number of aerospace companies. Lester also served in the United States Air Force as a space systems engineer, satellite operator, and intelligence analyst. He holds a bachelor’s degree in electrical engineering from Norwich University and a master’s degree in space operations from the University of Colorado. Credit Union 1 promoted Mish Mafnas to branch manager of its First Avenue Branch in Fairbanks. Mafnas, who has 13 years of financial institution experience, was initially hired by Credit Union 1 in 2009 and has served as member service representative, senior teller and assistant branch manager. In 2017, Mafnas briefly left the credit union before returning in 2018 to her branch manager promotion. Luke Hasenbank, who most recently served as vice president, has been promoted to president of Alaska Maritime Agencies, where he will continue to oversee all Alaska operations that include offices in Anchorage, Dutch Harbor, Kenai, Seward, Whittier and the Lynnwood, Wash., accounting department in addition to all the outlying Alaskan ports. He has been with the company since 2003. Andrew Mew, who previously served as operations manager, has been promoted to vice president. He has been with the company since 2013.

OPINION: Getting to the bottom of shady votes in District 15

Among the many subjects that regularly earn Republicans a mocking from Democrats and their media sympathizers, perhaps none rank as highly as claims about election fraud. Attempts to secure the voting franchise through requirements for ID are universally decried as racist and based on bogeyman conspiracy theories about the dead or otherwise ineligible casting ballots. In House District 15, where Rep. Gabrielle LeDoux now holds an insurmountable lead of 113 votes over her inert challenger Aaron Weaver, a case is now emerging that voter fraud indeed took place. Seven dead people requested absentee ballots from beyond the grave. At least two others confirmed ballots returned in their names were not cast by them. A total of 26 absentee ballots — all cast for LeDoux — are now under investigation by the Division of Elections and the Criminal Division of the Department of Law. Fewer than 600 ballots were cast on Aug. 21 during the GOP primary election, with Weaver waking up to a three-vote edge, 294-291, after he went to bed without even bothering to follow the results as they began posting around 9:15 p.m. LeDoux crushed Weaver in the absentee count conducted Aug. 28 and now leads 452-339, but a strong whiff of corruption hovers over her apparent victory thanks to what appears to be a systematic effort to game the system. At the center of it is LeDoux’s Hmong outreach contractor Charlie Chang of Fresno, Calif., who she’s enlisted in each of her House District 15 competitions and was paid nearly $12,000 in July for get-out-the-vote efforts in the Muldoon neighborhood of Anchorage. Three components are central to any type of legal investigation: motive, means and opportunity. Every one of those elements fits LeDoux and Chang in House District 15. In her own statement denying any wrongdoing issued Aug. 28, LeDoux hit on motive: “District 15 is a very low turnout district.” A low turnout district means every vote is crucial, as was evident on election night with a margin of just three votes between LeDoux and Weaver. The means and opportunity fit as well as a substantial number of the ballots in question are linked to a narrow range of addresses in Muldoon where Chang’s outreach is focused. Finally, in the mother of all coincidences, every ballot under review was cast for LeDoux. Whether LeDoux faces any legal jeopardy seems unlikely absent a claim by Chang he was instructed to do anything improper, and the investigation is in too early of a stage to speculate on whether he did anything wrong, either. But there is another element of investigations — “Cui bono,” Latin for “who benefits?” — that clearly does not favor LeDoux. Something fishy went down in Muldoon, and the investigation must proceed expeditiously with the general election coming up Nov. 6 and the state Republican Party now deciding to attempt an actual effort to defeat LeDoux after basically sitting out the primary against one of its biggest and easily best-funded targets. The broader issue at play, though, is the routinely overlooked aspect of Democrat fights against election integrity. Claims that Republicans are trying to disenfranchise minority voters ignore the very real competing impact of voter fraud: the disenfranchisement of those whose legal votes are canceled out by illegal ones. It is no less an act of disenfranchisement to deny the vote to some by allowing the ineligible or deceased to vote — through negligence or corruption — as it is to deny access to the voting booth in the first place. The Division of Elections deserves credit for flagging these irregularities, which officials obviously believe bear enough signs of intentional fraud to warrant a criminal investigation. LeDoux may rightly believe there is no evidence that will implicate her in whatever events took place to result in every questioned ballot being a vote for her. She shouldn’t be as confident that this dark cloud won’t follow her into November. Andrew Jensen can be reached at [email protected]

MARAD ordered to hand over port study

Federal Claims Court Judge Edward Damich didn’t take long to rule that the U.S. Maritime Administration must produce a previously proprietary report on the failings of the former Port of Anchorage Intermodal Expansion Project. Damich ruled Aug. 23, just two days after arguments on the matter, that a root cause analysis engineering report done in 2012 by the international consulting and management firm AECOM will become part of the court record in the Municipality of Anchorage’s lawsuit against the federal agency commonly known as MARAD. Justice Department attorney Jeffrey Regner argued on behalf of MARAD in an Aug. 21 telephonic hearing that the report was commissioned by MARAD’s legal office in September 2011 to, as its name implies, uncover the underlying issues as to why the construction project went awry. The facility is the entry point for the vast majority of goods that are dispersed throughout Alaska. It was renamed the Port of Alaska after an October 2017 vote by the Anchorage Assembly and is owned by the municipality. Anchorage officials in 2003 signed an agreement for MARAD to oversee the project as a way to direct federal funding to the project; the port is also designated as a national strategic defense facility. MARAD, in turn, hired Integrated Concepts and Research Corp. to manage the project. ICRC settled a separate lawsuit with the municipality in January 2017 for $3.75 million, one of seven settlements totaling $19 million with design and construction contractors in the project. MARAD paid ICRC $11.3 million in project funds as part of a September 2012 settlement to a Civilian Board of Contract Appeals complaint the company filed against the federal agency. Anchorage attorneys claim MARAD purposefully settled the dispute with ICRC secretly and without the municipality’s knowledge, while federal attorneys say city officials were made aware of the deal within days after it was reached. Judge Damich agreed with municipal attorneys who argued that the AECOM report is likely the only place to find specific information on the project’s problems. Damich said during arguments that there is no indication in the court record that MARAD told the municipality it was preparing to settle the contract case. “(T)hat the case was settled without the knowledge of Anchorage leads the Court to conclude that Anchorage’s argument regarding ‘evasion’ are compelling enough to hold that Anchorage has a substantial need to review AECOM’s work-product to understand what prompted MARAD to settle ‘surreptitiously’ with ICRC without first consulting Anchorage as Anchorage asserts MARAD was required to do pursuant to the 2011 Agreement (between Anchorage and MARAD),” he wrote in the eight-page order. “Furthermore, Anchorage has a substantial need to obtain testimony and documents from AECOM because of AECOM’s unique position in the project.” Damich continued to state that MARAD and AECOM are the “gatekeepers” of information that could help the city understand what motivated the agency to settle with ICRC. Damich additionally granted the municipality’s motion to subpoena AECOM principal Brad Erickson, noting in his order that MARAD “has not provided any argument regarding its opposition to the deposition, only that it titles its motion ‘Motion to Quash the Subpoena of Brad Erickson,’ without more, the Court permits the deposition.” MARAD has 14 days from the issuance of the order to produce the report. Work stopped on the port reconstruction in 2010 after extensive damage to the sheet pile dock structure that was being installed was discovered. Roughly $300 million in public money was spent on the project that yielded little; most of the sheet pile has been removed. A construction worker was killed at the port in 2011 when the ground beneath the bulldozer he was operating collapsed, causing the bulldozer to fall into the water and trap him as he tried to escape, according to news reports of the accident. The worker was employed by a subcontractor hired to stabilize the damaged sheet pile dock structure while project officials determined a path forward. Port leaders are now moving forward with a scaled-back modernization of the corroding dock infrastructure, some of which is approaching 60 years old. The municipality sued MARAD in February 2014 in federal contract court, a lawsuit with four years of discovery that has progressed slowly as the private-party suit was ongoing. It is seeking up to $370 million from the federal government in the suit, according court documents. MARAD was also blasted for its alleged inattention to managing the Anchorage project as well as other Pacific port projects in an August 2014 Inspector General report. Regner contended the root cause analysis was done strictly for MARAD’s internal legal use, was left in draft form and was paid for with agency funds and not port project funds, making it a privileged document. He said further that it was compiled at the same time and largely with the same information that can be found in a public CH2M (formerly CH2M Hill) suitability study to determine whether or not the patented Open Cell Sheet Pile dock design was appropriate for the unique seismic conditions at the Anchorage port. CH2M’s study concluded that the design and construction in the project were both problematic and led in large part to the municipality suing the contractors in 2013. During the roughly four years of discovery in the case MARAD has produced approximately 360,000 documents consisting of over 2.3 million pages, according to Damich. The sides have also taken 28 depositions, with another 30 expected in addition to an unknown tally of expert depositions. Discovery is set to conclude in March 2019, although a trial schedule has not been set. ^ Elwood Brehmer can be reached at [email protected]

In defense of King Cove deal, federal attorneys argue swap legal under ANILCA

Federal attorneys insist an environmental coalition wildly misconstrues several federal laws in its suit against Interior Secretary Ryan Zinke over a land swap that would facilitate a road out of the Alaska Peninsula community of King Cove. Filed in U.S. District Court of Alaska Aug. 22 with Judge Timothy M. Burgess, Justice Department attorneys argued that the land exchange announced in January complies with the Alaska National Interest Lands Conservation Act but falls outside the purview of other environmental laws in a 42-page opposition response to the coalition’s July 11 summary judgment motion. Friends of Alaska Wildlife Refuges, the Alaska Wilderness League, The Wilderness society and six other national conservation groups sued Zinke in late January shortly after the he signed a land exchange with King Cove Corp., an Alaska Native village corporation. The agreement has the company trading up to 500 acres of its land for an equal-value chunk of a Wilderness-designated section of the Izembek Wildlife Refuge, or enough refuge land to build an 11-mile, single-lane gravel road that would complete the connection to community of Cold Bay and its 10,000-foot, all-weather runway. Building a road between King Cove and Cold Bay has long been a contentious issue between the state and federal governments. Alaska legislators threw bipartisan support behind it in 2017 via a unanimous resolution; it has also been a priority of multiple governors Alaska’s congressional delegation. Proponents stress, as Zinke did when announcing the agreement, that the road would greatly improve access to medical care for King Cove’s roughly 800 year-round residents as the isolated town’s small airport is regularly rendered unusable by harsh North Pacific storms and medevacs requiring risky operations by the Coast Guard. At the same time, the road has garnered opposition from conservation organizations and prior Interior leaders in presidential administrations of both parties, who fear it would not only damage critical waterfowl and wildlife habitat in the Izembek Refuge but also set the dangerous precedent of developing an area previously designated by Congress as Wilderness, the strongest protection given to public lands. To the court filings, the conservation coalition alleges the land exchange, which has yet to be finalized, violates the 1980 public lands bill commonly known as ANILCA. Signed by President Jimmy Carter, ANILCA established or expanded many of the national parks, wildlife refuges and other federal conservation areas in the state. Section 1302 of the milestone law grants the Interior Secretary the authority to make such land exchanges but also mandates they must be done to “carry out the purposes of this act.” The attorneys for Interior acknowledge Congress passed ANILCA to protect natural public lands in the state, but add that it also allows for the “adequate opportunity for satisfaction of the economic and social needs of the State of Alaska and its people,” according to the Interior brief. “In agreeing to the land exchange, the (Interior) Department is establishing a ‘proper balance’ between the interests of the people of Alaska and the conservation of Alaska’s natural resources, as intended by ANILCA,” the brief states. It further notes that Zinke signed the agreement so King Cove Corp. could pursue construction of a gravel road primarily for health and safety reasons. However, the federal attorneys also contend Title XI of ANILCA, which lays out the process for approving a transportation system through federal conservation lands and includes requirements for inter-agency consultation of such a plan, doesn’t apply in this case because the agreement does not guarantee a road will be built. In June 2017 Interior granted the state Department of Transportation approval to conduct several weeks of surveys over the yet-to-be swapped Izembek lands to identify the least impactful road route through the refuge. Title XI of ANILCA also mandates an environmental impact statement under the National Environmental Policy Act also be drafted to evaluate a proposed transportation system through federal conservation areas. They additionally contend that because the agreement does not authorize road construction and “any future road would not be built through a conservation system unit, but through private land, and Title XI would not apply,” the brief states. Arguments that Zinke violated NEPA by not first having an Interior agency conduct an EIS for the land exchange are also irrelevant, according to the department, because the swap will result in a conveyance to a Native corporation. King Cove Corp. also agreed to relinquish 5,430 acres of lands it had selected for conveyance as part of the agreement. In late 2013, then-Interior Secretary Sally Jewell rejected land swap deal passed by Congress in 2009 after a U.S. Fish and Wildlife Service environmental impact statement urged against it; the EIS deemed the road would irreparably damage critical waterfowl habitat in the refuge. King Cove Native organizations and the State of Alaska subsequently sued Jewell over her decision to block the road, but the suit was dismissed in federal District Court and an appeal to the 9th Circuit Court of Appeals was later dropped. That swap would have traded 206 acres of Izembek land and 1,600 federal acres outside the refuge for about 56,000 acres of state and King Cove Corp. land. Finally, Interior’s attorneys insist Zinke did not need to consult with U.S. Fish and Wildlife Service officials regarding potential impacts to endangered species and their habitats — specifically Steller’s eider ducks and northern sea otters — before signing the agreement, again because the agreement does not authorize road construction. They note that in 2013 the Fish and Wildlife Service concluded a land exchange would have “no effect” on Endangered Species Act-listed species or critical habitat and as a result no consultation was required. “Road construction, if any, can proceed only after King Cove passes numerous significant hurdles like funding, planning, any state approvals and permitting, and any federal approvals and permitting, including any required ESA review and compliance,” the brief states. Elwood Brehmer can be reached at [email protected]


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