Bill would compel Big Tech to divulge user data value

WASHINGTON (AP) — As Congress bears down on big tech companies, two senators want to force giants like Google, Facebook and Amazon to tell users what data they’re collecting from them and how much it’s worth. The legislation floated June 24 by Sens. Mark Warner, D-Va., and Josh Hawley, R-Mo., goes to the heart of the tech giants’ lucrative business model: harvesting data from platform users and making it available to advertisers so they can pinpoint specific consumers to target. “When a big tech company says its product is free, consumers are the ones being sold,” Hawley said in a statement. “These ‘free’ products track everything we do so tech companies can sell our information to the highest bidder and use it to target us with creepy ads. Even worse, tech companies do their best to hide how much consumer data is worth and to whom it is sold.” The measure would require commercial services with more than 100 million active monthly users to disclose to their customers and financial regulators the types of data they collect. They also would have to provide their users with an assessment at frequent intervals of the data’s value to them. It comes as bipartisan support grows in Congress for a privacy law that could sharply rein in the ability of the biggest tech companies to collect and make money from users’ personal data. At the same time, a House panel has opened a bipartisan investigation of Silicon Valley’s market dominance. The Internet Association, the tech industry’s major trade group representing Facebook, Google and dozens of other tech companies including Netflix and Airbnb, said Monday that it supports a comprehensive data privacy law. “Data helps businesses, across all industries and of all sizes and business models, provide consumers with better products and services,” the group’s president and CEO Michael Beckerman said in a statement. “The internet industry supports a comprehensive, economy-wide federal privacy law that covers all companies … to give consumers the protections and rights they need to take full control of the data they provide to companies.” The group’s statement didn’t directly address the issue of mandating companies to put a value on users’ data. Unlike many industrialized nations, the U.S. has no overarching national law governing data collection and privacy. Instead, it has a patchwork of federal laws that protect specific types of data, such as consumer health and financial information, and the personal data generated by younger children. A national law would be the first of its kind in the U.S. and could allow people to see or prohibit the use of their data. Companies could be required to seek permission to provide the data to third parties. A law could shrink Big Tech’s crucial revenues from advertising. There’s no parallel legislation in the House for the new Senate bill, called the Dashboard Act, and its prospects are unclear. Warner, who amassed a fortune as a tech industry investor and executive before entering politics, and Hawley, a freshman and conservative who pursued investigations of Google and Facebook’s business practices as Missouri attorney general, have been especially active in the debate over big tech.

Legislative leadership rejects Dunleavy’s call to Wasilla

JUNEAU — Two weeks before an anticipated special session in Wasilla, the leaders of the Alaska Legislature say they are rejecting Gov. Michael J. Dunleavy’s plans in favor of meetings in Juneau and Anchorage. In an emailed announcement June 24, Speaker of the House Bryce Edgmon, I-Dillingham, and Senate President Cathy Giessel, R-Anchorage, said, “The Alaska Legislature announced today it will convene in Juneau on July 8th for the 2nd special session, with the majority of meetings to be held in Anchorage.” While lawmakers lack the votes to change the special session agenda or timing laid out by the governor in a June 13 proclamation, the leaders of the House and Senate believe they can change the location away from Wasilla Middle School. The legality of such a decision is a significant question. “Really, a lot of this is gray area. It hasn’t been tested,” Edgmon said by phone. Article II, Section 9 of the state constitution says, “Special sessions may be called by the governor or by vote of two-thirds of the legislators.” State law implementing that section says in part, “The legislature may call itself into special session if two-thirds of the membership responds in the affirmative to a poll conducted by the presiding officer of each house.” Currently, fewer than 40 of the Legislature’s 60 members support a change to the governor’s agenda. All 15 members of the Alaska House Republican minority support it, as do at least six of the 10 members of the Senate who voted in favor of a traditional Permanent Fund dividend this year. State law also says the governor can designate a location for the special session. The constitution does not grant the governor that power, and Edgmon said the doctrine of separation of powers trumps state law in this case. “The Legislature is exercising its right to the location,” Edgmon said by phone. “Although we are one vote short of the 40-vote threshold to call ourselves into our own special session agenda, the majority of legislators in both bodies considers it our right to determine the location and venue best equipped to conduct business on the Governor’s special session call, while providing the most access to as many Alaskans possible,” Edgmon and Giessel said in their joint statement. The decision to keep the agenda and timing but not the location is making the governor and some lawmakers unhappy. “I feel like the Legislative leadership is pulling an end run to try to move the venue when they don’t have the votes,” said Rep. Colleen Sullivan-Leonard, R-Wasilla and co-chairwoman of the Legislature’s nine-member Matanuska-Susitna delegation. Hours before the statement from Edgmon and Giessel, the delegation had issued a press release welcoming the Legislature to the region. “I think we probably need an independent legal opinion on this. To arbitrarily challenge the governor … I don’t know legally they can do that,” Sullivan-Leonard said. In the Senate, Senate Majority Leader Mia Costello, R-Anchorage, is among the lawmakers in favor of a Wasilla session. She echoed Sullivan-Leonard’s concerns about legality and added, “Frankly, we have a trust problem with the public already, and I think we should follow the law.” The governor came within a step of calling the House and Senate leadership criminal. “The Senate President and Speaker of the House admit they lack the votes to change the venue or call a special session of their own, yet they are committed to thwarting the law and the voice of the Alaskan people. This is all part of why Alaskans have lost trust in their lawmakers. How can we with a straight face expect people to follow the law when the legislative leadership ignores, breaks, and skirts the law at every turn?” he wrote in a prepared statement. The issue of the Permanent Fund dividend is the sole item on the special session agenda envisioned by the governor and the session envisioned by the House and Senate leaders. The governor supports a dividend paid using the traditional formula in state law. The Legislature’s leaders — despite dissent from many of their members — do not. According to revenue projections for the fiscal year that begins July 1, the state does not have enough revenue to pay both a traditional dividend and spending at levels proposed by the Legislature. (The governor may cut the budget via the veto process, and a final decision is pending.) With tax increases off the table and sufficient budget vetoes unlikely, that means lawmakers and the governor must spend from savings in order to pay the traditional dividend. A majority of the House is opposed to spending from savings for the traditional dividend, as is half the Senate. The governor supports it, however, and he chose Wasilla, a hotbed of support for the traditional dividend.

Furie back to supplying gas to Homer, but still short with Enstar

Furie Operating Alaska has returned to meeting some, but not all, of the natural gas supply commitments it has with Southcentral Alaska utilities. The small Texas-based gas producer resumed supplying Homer Electric Association with all of the Kenai Peninsula electric utility’s demand of approximately 12.4 million cubic feet of feedstock gas per day for its power plants on April 11, according to HEA Manager of Fuel Supply and Renewable Energy Mikel Salzetti. For about six weeks before that, HEA leaders were forced to purchase spot market gas from other producers in the Cook Inlet basin as well as draw on reserves stored in the Cook Inlet Natural Gas Storage Alaska facility commonly known as CINGSA. Furie had stopped supplying gas to HEA on about Feb. 25, Salzetti said in an early April interview. Enstar Natural Gas Co., on the other hand, stopped receiving gas from Furie on Jan. 25, according to utility spokeswoman Lindsay Hobson, and hasn’t gotten the amount of gas it contracted for in early 2016 since. Enstar’s parent company SEMCO Energy Inc. is the majority owner of CINGSA. Hobson wrote in a June 24 email that the Southcentral gas utility “has been able to negotiate the delivery of short-term volumes from Furie. These volumes vary week to week.” Hobson said previously that the less-than-contracted deliveries started in late March. Furie operates the offshore Kitchen Lights natural gas field in central Cook Inlet. Furie is one of the newer entrants to Cook Inlet that were supposed to ease Southcentral gas supply concerns by developing new fields and adding competition to the market. In 2015 the company installed the Julius R platform at Kitchen Lights, which was the first new production platform built in Cook Inlet in since the 1980s. The company is one of several small oil and gas operators in Alaska that were impacted by less-than-full payments of refundable tax credit payments by the state, which started in 2015 and are an ongoing issue. Furie officials said in 2017 they planned to work on developing oil prospects in the Kitchen Lights gas field, but those plans have largely been scuttled because of the state’s delay in paying millions of dollars in oil and gas tax credits the company earned for its previous work, according to the 2019 Kitchen Lights Plan of Development filed last October with the state Division of Oil and Gas. While Furie’s financial situation is unclear, the company’s website was offline as of June 25. Furie leaders did not respond to requests for comment in time for this story. In May, Furie produced an average of 14.3 million cubic feet of gas per day from the four wells it has in the Kitchen Lights field, according to Alaska Oil and Gas Conservation Commission records. A Feb. 11 letter from Enstar and Alaska Pipeline Co. President John Sims states that Furie has had problems proving up its gas reserves to meet its contract with Enstar and has had operational problems with its wells. The producer asked for a delayed delivery of more than half of its firm supply commitment to Enstar on Jan. 17 as it worked on issues at its facility, according to the letter. Elwood Brehmer can be reached at [email protected]

FISH FACTOR: Vessel owners scramble to comply with new registration law

A well-intended new Alaska law has gone awry from a botched rollout that has turned thousands of Alaskan fishing vessel, tender, barge and sport fish operators into lawbreakers. Since the start of 2019, all vessels longer than 24 feet are required to be registered with the state at a Department of Motor Vehicles office. Previously, vessels that were documented with the U.S. Coast Guard were not also required to register with the state. The registration costs $24 and is good for three years. “You need to get down to the DMV whether you’re documented or not,” explained Frances Leach, executive director of United Fishermen of Alaska. “If you’re documented you have to register, and if you’re not documented, you have to register and get a title.” The new rule stems from Senate Bill 92, the Derelict Vessels Act introduced last year by Sen. Peter Micciche, R-Soldotna, and passed by the Legislature. It is intended to help harbormasters and others track down owners of abandoned vessels. But virtually no mariners know about the new registration requirement. “We found out about it from DMV personnel in Haines who told one of our gillnetters and he told me, and we both called the troopers and they didn’t know anything about it,” said fisherman Max Worhatch of Petersburg. “Later they got back to us and said it was indeed the law.” Worhatch, who is executive director of United Southeast Alaska Gillnetters, said he’s directed queries to the departments of Administration and Public Safety. “Why weren’t we notified?” he asked. “Nobody found out about this and nobody would’ve found out about this if we hadn’t alerted people. There was no public notice, nothing.” The new law states that a derelict vessel prevention program shall, to the extent that general funds are available, establish education and community outreach programs. But the only outreach is coming from fishermen’s groups, said UFA’s Leach in a June 18 letter to Department of Administration Commissioner Kelly Tshibaka. “Since becoming aware of this new law in late May, UFA has been working with the Department of Motor Vehicles and State Wildlife Troopers to understand how they intend to implement the requirements of the law,” the letter says. “We have notified thousands of fishermen of the law’s requirements through emails and social media posts. As far as we can tell, the commercial fishing industry, spearheaded by UFA, is the only sector actively working to inform commercial fishermen of the new requirements, even though this affects thousands of non-commercial fishing boat owners around the state. Who is informing them?” It adds,“As fishermen attempt to comply with the law’s requirements they are discovering that many DMV offices are not ready to deal with the onslaught of this new bill.” Leach and Worhatch also point out that requiring vessel registration at a DMV adds an unnecessary layer of bureaucracy and is “reinventing the wheel.” “All the information on the DMV registration is available on a public database website at the Commercial Fisheries Entry Commission website. Everything,” said Worhatch. UFA, which represents 36 fishing groups, requested a one-year delay of the law “until all state agencies are better prepared and trained and adequate public notice and education are given prior to it going into effect.” That has the support of Representative Jonathan Kreiss-Tomkins, D-Sitka. “Running the DMV gauntlet is the last thing fishermen need to be thinking about as salmon season heats up,” he wrote by email. Kreiss-Tomkins voted against the new law, saying he was concerned that the bill, albeit well intentioned and addressing all too real a problem, would create more paperwork than it would solutions. “The fear about paperwork headaches is proving all too real,” he said, adding that it “makes heaps of sense” for the existing CFEC database to do “double duty” and relieve the DMV of those headaches. “If sound legislation will be forthcoming to this end, I’ll certainly support it,” he said. As to the botched rollout, Kreiss-Tomkins said: “There seems to be critical mass concern. Everyone — the fishermen, the agencies — is climbing a learning curve, so to some extent it’s understandable. I just hope that this recent attention can help everyone get on the same sheet of music.” Naknek does nets Fishing net recycling is expanding to Naknek. Nicole Baker, founder and operator of Net Your Problem, plans to meet with net menders, processors, gear sellers and landfill managers in early July to begin formulating a program. “These are people who have reached out to me or I have been communicating with over the last year or so,” she said, adding that the recycling start up is set for next summer. Baker, who is in Dillingham for three weeks taking a class at the University of Washington salmon research camp, also has met with the local Curyung Tribe which has managed a net recycle program at the Dillingham Harbor since 2008. Since 2017, Net Your Problem has shipped more than a half-million pounds of plastic fishing nets from Dutch Harbor and Kodiak for renewed life in Europe. “They grind them up, melt them down and turn them into plastic pellets that they then resell to buyers of recycled plastics who turn them into water bottles, phone cases or whatever they choose,” she said. Other updates: nets are still being taken in at Dutch Harbor and Kodiak has a net drop off deadline this summer of Sept. 1 due to shipping logistics. Petersburg will soon be sending out a container of nets collected by the Petersburg Indian Association. The Haines Friends of Recycling has collected seven nets so far and more are being dropped off at the Net Loft. Juneau will be sending out a container of nets at the end of summer collected by the Recycle Works Group. Fishing changes Fishermen are closest to the changes brought by a warming climate and talking about it is a first step in finding solutions. That’s the thought behind The Nature Conservancy’s second collection of audio stories in its Tidal Change series. “If we are not talking about the problems or the challenges ahead, we’re not going to start tackling them. This is a chance to generate conversation,” said spokesman Dustin Solberg of Cordova. The stories reveal a swirl of emotions. Here’s a sampler: “The environment is changing, undoubtedly. When I first fished there was a lot of ice and now most of the glaciers are receding,” said Leonard Leach of Ketchikan, who has been fishing since 1961. “If this whole warming trend keeps happening my understanding is that jellyfish will really come back and that would be a detriment to our gillnetting and seining.” “The water’s warmer and the fish get confused and they don’t know when they’re supposed to run,” said Lia Cook, who fishes with her family at Bristol Bay. “It really affects the peak and the amount of fish that comes through because there is confusion in the school of when are we supposed to go and spawn and do all these things.” Lauri Rootvik of Dillingham also spoke to the odd run timing at Bristol Bay. “When I was a child it was the 4th of July run and it was pretty predictable. It’s not predictable anymore and it hasn’t been for quite a few years,” she said. “Warm water produces more harmful algae blooms. It’s not something that’s coming, it’s something that we are experiencing,” said Bob Eder, a 45 year veteran of Dungeness crab fishing in Oregon. “In our industry there are people of all different political leanings but I don’t know any fishermen who don’t recognize climate change and the challenges coming.” Katrina Leary grew up at a fishing camp along the Kuskokwim River and called it “magical.” “It’s really emotional when you realize your livelihood is being threatened and your kids might not be able to do this. Fishing really is our life. I couldn’t imagine a summer without fishing and I hope I never have to.” Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

GUEST COMMENTARY: America’s energy, tech and defense future needs mining

As the recent trade war with China has escalated, Beijing has implied that it may retaliate by withholding rare earth minerals. Such a strategic vulnerability — and America’s alarmingly high reliance on imported minerals and metals — is now in the spotlight for all the world to see. China’s rare earth threat underscores just how perilous U.S. mineral import reliance has become. While rare earths are currently the focus, America’s overall reliance on imports of these minerals is indicative of a far larger problem. According to the U.S. Geological Survey, the U.S. is now 100 percent import-reliant for 18 minerals and metals, and 50 percent or more reliant for another 30. Despite ever-growing demand for these minerals and metals in defense technologies — such as stealth and night vision technologies — or consumer goods and green energy technology, U.S. import reliance has doubled over the past 25 years. Notwithstanding the nation’s vast mineral reserves, mining investment in the U.S., and production of essential minerals, has steadily declined. The atrophying of the nation’s materials supply chain shouldn’t just be chalked up to the march of globalization and large-scale economic integration. It’s also the product of a decades-long adversarial approach to domestic mining that can be seen in federal land-withdrawals and a mine permitting process that now regularly stretches to 10 years or more. Modern, responsible, and well-regulated mining should be encouraged in the U.S., not pushed aside. To meet the material needs of our advanced tech, manufacturing, energy, and defense sectors, America will need almost exponential growth in the mining and refining of a vast array of minerals and metals, many of which can be produced here at home. While materials recycling should be a key part of meeting this demand, it’s hardly a cure-all. It’s past time for the U.S. to place strategic importance on mining and the greater materials supply chain. China is already years ahead in this industrial arms race, prioritizing mining as a cog of its industrial policy. For example, China is the top resource holder for 10 of the minerals and materials vital to wind, solar and battery technologies. A new report from the Commerce Department stresses the urgency of action. It warns that the U.S. has become “heavily dependent” on foreign sources for 31 of the 35 minerals recently designated as “critical” by the Department of the Interior. While the U.S. has fallen far behind, there are signs of hope. Bipartisan legislation introduced by Sen. Lisa Murkowski and Sen. Joe Manchin, D-W.V., The Minerals Security Act, is an important step forward in responding to China’s dominance and beginning to right our supply chain. The legislation would streamline a variety of mine permitting and regulatory processes currently sapping U.S. mining competitiveness. Their leadership in beginning to address this issue deserves strong, bipartisan backing. The technologies of tomorrow — whether they’re energy technologies or the defense applications that keep us safe — are more materials-intensive than what they’re replacing. It’s essential we build a supply chain to support them. Failing to do so won’t just be an economic missed opportunity. It would be a geopolitical blunder that undermines our global leadership. The time for decisive action to encourage domestic mining, and rebuild our industrial base, has arrived. Retired U.S. Army Brig. Gen. John Adams served more than 30 years in command and staff assignments as an Army aviator, military intelligence officer, and foreign area officer in Europe, Asia, the Middle East, and Africa. He is president of Guardian Six Consulting.

GUEST COMMENTARY: Governor holds UA future in hands with veto pen

In this austere budget environment, and after intense scrutiny, the Legislature passed a budget that includes a reasonable $5 million general fund reduction for the University of Alaska. In the next few days, the governor will decide whether the state will continue its investment in the university — allowing Alaskans of all ages to carry on, uninterrupted, with their vocational, continuing, or higher education — or veto a large portion of the UA budget. Make no mistake, the university cannot absorb an additional, substantial reduction in state general funds without abruptly halting numerous student career pathways mid-stream, eliminating services, or shutting down community campuses or universities. An additional reduction of even $10 million — on top of the $51 million in cuts we’ve already taken — will mean the discontinuation of programs and services with little or no notice, and that in turn will have ripple effects, damaging UA’s ability to generate revenue and causing even greater harm across the state. Severe reductions in state Undesignated General Funds, or UGF, as originally proposed by the governor would require closure of hundreds of programs and affect thousands of students. To provide context for such a reduction, $134 million is nearly the equivalent of the total UGF budget for University of Alaska Anchorage and UA Southeast combined. At that level we may need to cut whole programs or close one or more of our universities, UAA, UA Fairbanks or UAS. But a university system is not like a typical corporation or factory; it needs a critical mass of faculty with different specialties to provide a quality education. Eliminating whole programs to reduce costs does not eliminate our responsibility to affected students. We are obligated to complete their programs, which carries costs that delay any immediate savings. The university’s total budget this year is comprised of $327 million from the state (about 40 percent). The remainder comes from tuition and fees paid by our students, research grants and contracts, proceeds from land development, and private donations. However, those private revenue sources will inevitably be harmed if general fund support is reduced. Prior cuts have had the effect of reducing opportunities for our students and services to our communities, while increasing tuition. The cumulative reduction in the university’s budget of $195 million over the last five years has resulted in significant reductions in administrative staff and services, to the point that further reductions will compromise UA’s ability to meet its many obligations. Indeed, the university’s statewide administration, which provides consolidated support services, has taken a 37 percent cut over the last several years, almost triple the average cut across the university system. Still, the university remains a highly accessible and affordable path to an excellent education and the opportunities that only education can provide in the workplace. However, that will not continue with further substantial reductions. We have had numerous meetings with the governor and his team, demonstrating how the university has focused its mission, reduced costs, increased private fundraising, developed strategic plans with measurable goals, created a task force to look at the university’s structure, and developed an exciting vision for how the university enables Alaskans to create a strong and sustainable future for our state. The governor was receptive, and I think impressed with the work that’s been accomplished by the university. However, he may feel compelled to follow through with his original proposal to reduce the university’s appropriation. As a result, if the governor vetoes a substantial amount, I ask that you contact your legislator to request that he or she consider overriding that veto. The educational investments and opportunities for thousands of Alaskans will depend on it. Jim Johnsen is the president of the University of Alaska.

Movers and Shakers for June 30

Perkins Coie announced that Danielle M. Ryman has been named managing partner of the firm’s Anchorage office. Ryman succeeds Eric Fjelstad, who served in the role since 2007. As a partner in the firm’s Labor and Employment practice, Ryman works with clients on the myriad issues affecting today’s workplace, including executive employment agreements, pay equity, restrictive covenants and enforcements, privacy and internal investigations. She has extensive experience with the Family and Medical Leave Act, the Fair Labor Standards Act, the Americans with Disabilities Act, Title VII of the Civil Rights Act of 1964, the Fair Pay Act and equivalent state laws. Ryman is an experienced trial lawyer having defended cases to verdict in state and federal courts. She also serves as management-side labor counsel in collective bargaining, representation before the National Labor Relations Board, and counseling on strategic union relationships. Perkins Coie’s Anchorage office provides a wide range of legal services, and its clients include energy and natural resources projects, Alaska Native corporations and national companies doing business in Alaska. GCI’s Stephanie Nichols has recently been selected from a field of approximately 1,000 U.S. applicants for the prestigious Marshall Memorial Fellowship for 2019-20. The Marshall Memorial Fellowship is the German Marshall Fund’s flagship leadership development program and was created in 1982 to introduce a new generation of European leaders to the United States. It now prepares leaders from both sides of the Atlantic for transatlantic relations. GMF selects fellows from all 50 U.S. States and across 39 European countries. Following a rigorous and intensive seven-month application process, Nichols was one of only 75 applicants chosen for the 2019-20 fellowship. Selected fellows engage in six months of preparation and a month of first-hand experience in several cities throughout Europe to facilitate knowledge and network opportunities for effective engagement and leadership development. As a MMF fellow, Nichols will join a network that includes notable alumni such as: President of France Emmanuel Macron; House Minority Leader for the Georgia General Assembly and State Representative for the 89th House District Stacey Abrams; and EU High Representative for Foreign Affairs and Security Policy Federica Mogherini. The fellows’ on-site engagement in Europe includes meetings with prominent national and local European political leaders and distinguished policy makers. Blaine Jenkins has recently been hired as a full-time member of the Great Alaskan Holidays vehicle maintenance technician team. Jenkins has several years of industry experience coming to Great Alaskan Holidays from Karen’s RV and will be responsible for inspecting, maintaining, and ensuring the safe operation of Great Alaskan Holidays’ entire fleet of rental motor homes. Jenkins is currently in pursuit of his Recreation Vehicle Dealers Association certification, as well as his ASE Certification. Lani Auelua was promoted to branch manager of the Credit Union 1 University Branch in Fairbanks. Auelua began as a teller with the credit union in 2013, with previous experience in retail service and management. In her time with Credit Union 1, she has served in various roles such as senior teller, member service officer and member service supervisor. She held the position of branch manager at the credit union’s Downtown Branch in Anchorage prior to her promotion to manager of their University Branch in Fairbanks. Alaska Pediatric Oncology, the state’s first private pediatric oncology practice, opened in Anchorage last week. The new practice provides comprehensive care to children and young adults diagnosed with cancer or blood disorders. It works in close collaboration with Alaska Pediatric Surgery, offering a comprehensive team of specialists solely dedicated to pediatrics. Alaska Pediatric Oncology’s medical team — Dr. Shannon Norman, Dr. Brenda Wittman, Dr. Laura Schulz and nurse practitioner Ronda Nakoa — previously worked at Providence Medical Group Pediatric Hematology and Oncology before shifting to private practice. With the same providers and the same high-level of care, the new clinic ensures a smooth transition for patients and families. Beginning in August, the new practice will share offices with Alaska Pediatric Surgery, the only locally-owned, full-time pediatric surgical practice in the state. The collaboration will bring additional resources to patients and families and allow specialists to work more closely on their patients’ care. Alaska Pediatric Oncology is currently located at 4100 Lake Otis Parkway, Suite 314. In August, it will relocate to Suite 312. Paula Bradison, CEO and founder of Bradison Management Group LLC, recently received her Gallup Certification. Kelly Stewart of BMG is also officially a Gallup Certified Strengths Based Coach.

Tax credit issue plods along toward Supreme Court

Alaska lawmakers are relying on the prospect of a favorable court ruling this year to pay down the state’s remaining and roughly $700 million obligation of refundable oil and gas tax credits. The 2020 state fiscal year operating budget the Legislature passed June 10 includes language authorizing Department of Revenue officials to sell bonds through the Alaska Tax Credit Certificate Bond Corp. that would allow the state to pay off the entirety of the obligation. The budget also reauthorizes a $27 million unused appropriation approved last year to make the first interest payment on the debt if the 10-year bonds are sold under House Bill 331. However, the budget approved last year — for the fiscal year that ends June 30 — also contained a $100 million contingency appropriation in case the bond sale didn’t occur or some companies holding the credits did not agree to the terms that come with participating in the bond plan. As it turned out, the bond sale originally set for last August was scuttled by a public interest lawsuit by former University of Alaska Regent and Juneau resident Eric Forrer challenging the constitutionality of HB 331. That led the state to pay just $2.8 million in tax credits during 2018, according to Department of Revenue documents, the smallest annual credit payment total in years. Previous tax credit payments totaled in the tens or hundreds of millions of dollars per year. In response, Revenue officials released the $100 million early this year as a means to provide the small explorers and producers eligible for the credits — several of which have had significant financial issues in recent years — some financial relief, according to Commissioner Bruce Tangeman. “These companies have gone through this process for too long,” Tangeman said in a brief interview. The bond plan was hatched by former Gov. Bill Walker’s administration early last year as a way to quickly pay off the credit holders, put what had become an extremely messy political issue to rest, and eventually restore the state’s reputation among private financial institutions that lent money to companies backed by the presumption of past credit payments. At the time, administration officials estimated the final tax credit obligation would total nearly $1 billion but Tangeman said the latest total after the $100 million installment is closer to $700 million. The reason for the discrepancy is unclear; however, some small companies could have sold their credit certificates to larger North Slope oil producers that are not eligible for payment but can use the credits against their annual oil production tax liability. Such transactions would not have to be publicly reported and would reduce the final amount of money the state is obligated to pay. Numerous oil and gas companies used the state credit certificates as collateral to secure loans from large banks to fund exploration and other work. A commonly used credit for explorers with no production and no tax liability had the state paying 35 percent of the cost of qualifying work in cash. When Walker diverted from the state’s prior practice — but not law — of paying off the annual credit bill in full each year by vetoing $200 million of a coincidentally $700 million appropriation in the face of a $3 billion-plus budget deficit in 2015, it ostensibly froze the market that had grown around the state tax credits. Walker vetoed another $430 million of the payments in 2016 when he also reduced the Permanent Fund dividend appropriation by half. Subsequent years of minimum tax credit payments based on a statutory formula that incorporates the state’s oil production tax revenue also pushed some companies to default on those loans. Many Republican legislators who were roundly critical of Walker’s approach to the refundable industry tax credit program now acknowledge the now-defunct policy became unaffordable when oil prices began to fall in late 2014, but still contend the state should make paying the remaining balance a priority. That’s where the tax credit bonds come in. To get paid sooner, the credit holders would have to accept a discount of up to 10 percent less than the face value of the certificates. The state Department of Revenue would then use the difference between the credit values and the discounted amount to cover the borrowing costs. Supporters of the bond plan insist it is a way to restart stalled investment by small companies in Alaska’s oil and gas fields; Forrer and some in the Legislature contend it flies in the face of strict limitations on the state’s ability to incur debt laid out in the Alaska Constitution. The state constitution generally prohibits lawmakers from taking on debt unless it is for capital projects that are also approved by voters, in response to a natural disaster or invasion, or it is in the form of bonds sold to support a specific project repaid through the eventual revenue of that project. State corporations such as the Alaska Industrial Development and Export Authority and the Alaska Housing Finance Corp. regularly utilize such revenue bonds. Superior Court Judge Jude Pate dismissed Forrer’s lawsuit in January, concluding that while the fiscal policy implications of the bonds are worthy of debate, the plan fits within the constitutional sideboards relating to state debt. Forrer appealed Pate’s ruling to the Alaska Supreme Court and has said he believes allowing the tax credit bond plan to move ahead would give lawmakers and local governments the freedom to employ the scheme in countless other situations, potentially strapping the state with substantial additional debt. State officials contend similar plans have already been employed to pay for capital projects, including the Goose Creek Correctional Facility in the Matanuska-Susitna Borough. State attorneys argue, and Pate agreed, that a provision in HB 331 establishing the plan that calls for the bond repayments to be “subject to appropriation” by the Legislature each year means the State of Alaska would not ultimately be liable for defaulting on the payments. Proponents acknowledge that not making bond payments would likely have a significant negative impact on the state’s credit rating but the state would technically not be liable for the bonds if the Legislature in any year decided not to repay the bonds. Instead, bondholders would have to sue the Alaska Tax Credit Certificate Bond Corp. — which Forrer notes would be comprised of a couple Revenue Department leaders and would have no money of its own — and not the State of Alaska for recourse because the state corporation would actually hold the debt. Forrer’s attorney, longtime Juneau lawyer Joe Geldhof, wrote in a 60-page May 16 brief filed with the Supreme Court that Judge Pate incorrectly overlooked the plain language and meaning of the state constitution. “The position advanced by the state and adopted by the trial court to the effect that the debt is not debt because the statute says it is not debt amounts to an unsupported argument resting on circular ‘logic’ that should be viewed with doubt when evaluating a constitutional claim,” Geldhof wrote. “The Alaska Constitution is our state’s guiding framework of law and policy and its intent should be respected; the state’s search for a clever loophole — some sort of technicality — to provide an end-run around the constitution’s clear intent should not be sanctioned,” he continued. “the state should be deterred from offensive attempts to disregard the known meaning of the constitution, now and into the future.” In a 49-page June 19 brief, state attorneys cited prior Supreme Court cases that permit the state to take on some forms of debt and contend that even if the court finds that HB 331 is prohibited by the constitutional limitations on debt, “it constitutes a refinancing of a pre-existing state financial obligation rather than the creation of a new one and the bonds are backed only by the resources of an independent public corporation rather than by the state treasury.” Oral arguments before the Supreme Court are scheduled for Sept. 12. ^ Elwood Brehmer can be reached at [email protected]

Woodrow officially takes director’s helm at ASMI

JUNEAU — Alaska’s seafood industry has a new captain at the helm of its main marketing agency. Jeremy Woodrow, previously the organization’s communications director, officially took over as executive director of he Alaska Seafood Marketing Institute this June. He replaces former executive director Alexa Tonkovich, who left the position in December 2018 to pursue a master’s degree in international business. In some ways, it’s the top of a long ladder for Woodrow. Born and raised in Juneau, he started as an intern with ASMI in 2001 and worked with the organization’s former public relations firm Scheidermeyer &Associates Alaska. After a stint in the communications department at the Alaska Department of Transportation and Public Facilities, he returned to ASMI as the communications director in 2017. Though he’s not in commercial fishing at present, he said his family has a long history in it. That connection has helped inform his involvement in the ever-changing fisheries of Alaska, and though ASMI stays out of fisheries policy, there are plenty of other tangles to sort out. High on that list is the increasing volatility in fisheries. Salmon fisheries in particular are always fluctuating from year to year, but fishermen have had unpredictable disasters followed by banner years followed by disasters, which is a relatively new phenomenon, Woodrow said. In response, some fishermen are looking to diversify their income or their fishing portfolios to help offset that uncertainty, he said. The fleet is consolidating as well, especially in the larger offshore fisheries. However, Alaska’s wild seafood products have never been more valuable. “While our fisheries have been fully exploited for several decades, we have seen the value continue to go up, and that’s a good thing,” he said. “That shows that there is value in the fish. There are other ways to gauge value than just the price of fish at the dock. More people wanting to get into it, the price of boats …. all that generates money to fisheries economies.” Part of that is due to increasing seafood consumption in the U.S., but part is also due to the increasing price wild Alaska salmon has been able to command in markets. Salmon is the most valuable commercial U.S. species, with a total value of $688 million in 2017, according to the National Marine Fisheries Service. Alaska salmon accounted for 98 percent of landings in 2017. The average landing price for all species — the majority of which were pink salmon — was 65 cents, according to NMFS, but once those salmon are sent to the supermarket, consumers are paying significantly more for them than for Atlantic salmon or salmon from elsewhere. That’s in part due to ASMI’s work over the years to promote the Alaska brand, Woodrow said. The state’s fisheries have a good story to tell: comprehensively managed fisheries, small communities and a fleet dominated by small boats and local fishermen. “We have such a great generational story to tell, a management story to tell, all that, wrapped into an incredible place,” Woodrow said. Things are changing there as well, though. The ongoing trade conflict between the U.S. and China has presented ASMI with a complex new marketing landscape. China is Alaska’s single large market for seafood, and the organization has spent about two decades building relationships with buyers and processors there. A significant portion of Alaska’s fish are exported to China and reprocessed there, with most bound for either export to other world markets and the U.S. or for domestic consumption in China. On top of that, other countries are increasing their salmon farming efforts and marketing in the U.S., attracting consumers with lower prices for salmon. Norway, for example, is ramping up efforts to market its salmon in the U.S., and Iceland is in the process of expanding its aquaculture industry for salmon. ASMI has been clear about its intentions to remain in China, Woodrow said. With 1.3 billion residents and a rapidly expanding middle class, the country is too big a market to abandon because of tariffs. While the disagreements over trade have merit, the tariff battles have impacted seafood demand there, Woodrow said. “We do agree that something has to change (in U.S.-China trade), but this conflict going on has definitely created extra headwinds for the Alaska seafood industry,” he said. ASMI received a $5 million grant from the U.S. Department of Agriculture to develop markets for seafood in other countries, focusing on Southeast Asia, Woodrow said. The organization has also established a presence in South America, with an office in Brazil and significant interest in seafood among people there. There’s also an opportunity to take some of the reprocessing market there, reducing some of the dependence on China for that service. There are also opportunities for marketing other products. Mariculture is a growing industry in the state, with expanding interest in kelp and geoduck clam farming. Most of those products are currently bound for foreign markets, but there’s growing interest in the U.S., especially among younger consumers, who are more open to tastes for different palettes. But it’s not only alternative products. Pollock — the single largest commercial fishery in the U.S. by volume — also has an opportunity. “A great example is pollock roe,” he said. “I guarantee you very few Alaskans or Americans have ever eaten pollock roe, but pollock roe is incredibly popular in Japan … the size of the pollock roe is very similar to the size of fish eggs that you see on sushi. That’s a perfect segment for it to come into the U.S. market.” The ASMI board announced Woodrow’s hire as executive director June 10, saying the board was excited to have a lifelong Alaskan to lead the agency. “The Alaska seafood brand is as strong as ever and we are confident that Jeremy’s leadership will advance the direction and mission of the agency,” said Jack Schultheis, chairman of the ASMI board of directors, in the announcement. Going into the role, Woodrow said one of the things he considers with each decision is how Alaska fishermen will accept decisions that ASMI makes, in part because the agency is ultimately paid for by the fishermen with state funding zeroed out over the past few years through budget cuts. “Anytime that we have a marketing plan, I always keep in the back of my mind how will an Alaska fisherman react to this, because they’re always our first audience,” he said. “We have to make sure they understand they’re getting good value.” Elizabeth Earl can be reached at [email protected]

Sub-500: TAPS throughput drops in 2019

Measured on the state calendar, Alaska North Slope oil production is about to be at its lowest level since the first days after startup of the Trans-Alaska Pipeline System. North Slope crude production averaged 499,103 barrels per day through June 24 for the 2019 state fiscal year, which ends June 30. The last time North Slope wells pumped that little oil was 1977 when oil first started flowing through TAPS in late June; production averaged 10,500 barrels per day in 1977, according to Revenue Department figures. It jumped to 789,600 barrels per day in 1978 and peaked at 2.1 million per day in 1988. Daily North Slope production dipped to about 501,000 barrels per day in 2015 but that was followed by two years of increases, which were celebrated by industry and state officials, as it was the first instance of production growth on the North Slope since 2002. The 499,103-barrel average for 2019 is unlikely to improve much in the last days of the month as the combination of warm weather and scheduled maintenance makes summer the least productive season for companies on the Slope. State production analysts in the Department of Natural Resources expected the average daily throughput to decline in their latest projection, but not this much. The Spring 2019 Revenue Forecast released in March pegged fiscal 2019 North Slope production at 511,460 barrels per day. Actual production has been off by about 2.4 percent. However, 2019 was originally supposed to be a bounce-back year after unexpected decline in 2018. The 2019 forecast released in December estimated 526,800 barrels of oil per day from the North Slope following the 521,400 barrels produced per day last year. In the end it means North Slope oil production this year will decline a little more than 4 percent instead of increasing about 1 percent as state officials once thought would happen. Alaska Oil and Gas Association CEO Kara Moriarty said the unexpected decline is probably the result of several smaller factors given the complexity and diversity of North Slope operations. She noted that the long-term production trend has improved, from the industry and state’s perspectives, in recent years and the state’s forecasts are often optimistic. “I do know that we are significantly higher than the forecasts of 2012 and 2013,” Moriarty said. In the fall of 2012, state officials expected North Slope production would be about 421,600 barrels per day this year. At that time, the annual decline rate was in the 6 percent range. Last year, state officials surmised the unexpected drop in oil flow could have been from higher than normal winter North Slope temperatures. Warmer weather decreases the efficiency and capacity of compressors used to process the natural gas that comes with the oil on the Slope, and thus has an impact on how much oil can be produced. BP Prudhoe Bay Production Manager Jennifer Starck said last January actually produced some record cold temperatures at the iconic oil field, but noted that March was warmer than usual. Last March is believed to be the warmest March on record across Alaska. “We live with the natural ambients,” Starck said. Currently, Prudhoe Bay is producing a calendar year 2019 average of about 275,000 barrels per day compared to about 279,000 barrels per day a year ago, Starck said. She added that BP currently has two drilling rigs working at Prudhoe and the company is also “working over” old wells. It also conducted a 3-D seismic shoot over the entire field this winter and believes it can recover another billion barrels from the basin. While the company does what it can to buck production trends for mature fields, she stressed that production from nearly all oil fields starts naturally declines — and Prudhoe is more than 40 years old. Hilcorp Alaska officials did not respond to questions in time for this story, but Moriarty and acting state Division of Oil and Gas Director Beckham also pointed out that Hilcorp’s Moose Pad development in the Milne Point Unit was originally slated to start producing in last fall, but didn’t come online several months later. The $400 million project is now producing about 7,000 barrels per day, according to AOGA and Hilcorp leaders have said it should peak at 16,000 to 18,000 barrels per day. ConocoPhillips’ Greater Mooses Tooth-1 project in the National Petroleum Reserve-Alaska, which started flowing oil last October, is off to a bit of a slow start as well. The company estimated GMT-1 could produce up to about 30,000 barrels per day at its peak; three wells are currently producing about 11,500 barrels per day. ConocoPhillips Alaska spokeswoman Natalie Lowman wrote via email that the company’s estimates are usually a mid-range figure of what a project could produce and the smaller projects generally see more variability because production is dependent upon fewer wells. As a counter to GMT-1, she noted that the company’s nearby CD-5 development, which started in late 2015, was first estimated to produce about 16,000 barrels per day but actual production has been more than double that. Monthly production from ConocoPhillips’ large and aging Kuparuk River field has also been roughly 6,000 to 8,000 barrels per day less than last year, according to Department of Revenue figures. Beckham said he had noticed the daily production totals for 2019 were approaching 500,000 barrels, but said he thinks focusing on the exact number is a bit unnecessary. “For years, for whatever reason, that 500,000-barrel level has been somewhat of a benchmark and it’s an arbitrary number but we do have concerns about low-flow in the pipeline, although I think Alyeska (Pipeline Service Co.) has most of those covered,” Beckham said. “I think the optic is more impactful than the actual volume but I do expect that we’ll have more production online this year and as other years come up.” Alyeska officials have said TAPS should run smoothly as currently designed down to production levels of about 300,000 barrels per day. Brooks Range Petroleum Corp. is expected to start its small Mustang field near Kuparuk this summer, among other work. Longer term, ConocoPhillips’ Willow, Oil Search’s Nanushuk and Hilcorp’s Liberty projects could collectively add nearly 300,000 barrels per day of production to the Slope over the next five-plus years. The Liberty and Nanushuk projects have federal approval and ConocoPhillips is currently in the process of permitting Willow with a final environmental impact statement scheduled to be issued in 2020. ^ Elwood Brehmer can be reached at [email protected]

Oil shippers boost security after attacks on tankers in Gulf

DUBAI, United Arab Emirates (AP) — A series of attacks on oil tankers near the Persian Gulf has ratcheted up tensions between the U.S. and Iran — and raised fears over the safety of one of Asia’s most vital energy trade routes, where about a fifth of the world’s oil passes through its narrowest at the Strait of Hormuz. The attacks have jolted the shipping industry, with some of the 2,000 companies operating ships in the region on high alert and ordering their vessels to transit the Strait of Hormuz only during the daylight hours and at high speed. Washington’s accusation that Iran is behind the attacks targeting oil tankers comes as tensions flare between the two countries. The U.S. has deployed an airstrike carrier and bombers to the region, and announced this week it will send 1,000 more troops. European powers are facing a deadline from Tehran to ease the effects of punishing U.S. sanctions — described by its leaders as “economic warfare” — or Iran will break out of the limits set on its uranium enrichment by the landmark 2015 nuclear deal. The apparent targeting of tankers is alarming to ship owners operating in the Persian Gulf, said chief shipping analyst at BIMCO, Peter Sand. The company dubs itself the world’s largest shipping association. But it’s more or less business as usual for shippers, he said, despite the need for added precautions. “They are all of course increasingly worried, but many of them are going with business as they would have done without the attacks, but of course with an extra layer of safety and security measures on top of that,” Sand said. That means going at high speed through the Strait of Hormuz, which at its narrowest point is about two miles wide. Normally, vessels carrying cargo would slow down to save on fuel costs. It also means avoiding the strait at night to keep better watch on security around the vessel. Washington alleges Iranian forces surreptitiously planted limpet mines on two vessels in the Gulf of Oman last week. The attack forced the evacuation of all 44 crewmembers onboard and left one of the ships ablaze at sea. Washington also blamed Iran for similar attacks on May 12 that targeted four oil tankers anchored off the coast of the United Arab Emirates. Iran denies being involved. The attacks last week targeted the Norwegian-owned MT Front Altair, which had a cargo of highly flammable naphtha loaded from the UAE, and the Kokuka Courageous, a Japanese tanker carrying Saudi methanol. Both had been traveling through the Gulf of Oman, having passed the Strait of Hormuz. Of the roughly 2,000 companies that operate ships in the Persian Gulf, only two companies have halted bookings outright. Otherwise, “business has continued more or less undisrupted,” Sand said. In fact, higher risks could boost the bottom line for some oil shippers, after a lackluster period for the industry. A risk analysis by shipping services company Braemar ACM said owners can ask for higher premiums now. The firm said the Gulf region was declared as a “Listed Area”, meaning it faces enhanced risk, after the May 12 incidents targeting tankers off the UAE coast. Immediately after last week’s attacks, freight rates for operators in the Gulf rose 10 percent to 20 percent. With increased risks, however, come higher insurance premiums, which are expected to rise 10 percent to 15 percent. It’s typically the buyers and charterers who bear the brunt of the overall higher costs, another reason why security of the Strait of Hormuz is paramount for oil-importers around the world. An estimated 18 million to 20 million barrels of oil — much of it crude — pass through the strait every day. BIMCO says anywhere between 10 to 40 vessels carrying just crude oil move through daily. During the so-called Tanker War of the 1980s, when Iran and Iraq targeted vessels carrying one another’s exports, the U.S. Navy escorted oil tankers through the Persian Gulf to ensure American energy supplies. But the U.S. is no longer as reliant on Arabian producers. Today, any conflict that threatens tankers would badly disrupt crude supplies for energy-hungry East Asia. Higher prices could hit hardest China, Japan, South Korea, Singapore and Indonesia — among the five biggest buyers of Arabian oil. Indeed, the MT Front Altair was headed to Japan; the Kokuka Courgaeous reportedly to Singapore. The Washington Post quoted this week Air Force Gen. Paul J. Selva, vice chairman of the Joint Chiefs of Staff, as saying that because most of the oil passing through the Strait of Hormuz is headed to Asian markets, it would be ill-advised for the U.S. military to take the same role it did in the 1980s. He said there were plans to reach out to the big Asian oil-importers about a possible international effort to safeguard tanker traffic. Robert Macleod, CEO of Frontline Management, whose vessel Front Altair was targeted last week, said the general area of the Strait of Hormuz “represents a real and very serious risk to shipping.” In a statement, he said crews must be on high alert while traversing through the passage. The company, however, said it had re-commenced trading in the region after briefly halting it following the attack. He said the company also tightened security measures, but did not elaborate. One extraordinary measure ship owners might consider, if the situation deteriorates further, is having armed guards onboard. This is already the case for many vessels transiting the Gulf of Aden, where piracy is a major concern. “From a shipping industry perspective, we are certainly not in favor of bringing more armed guards onboard international commercial ships because they are not warships,” said Sand. “They should not be carrying arms. They should be able to transit without being interrupted.”

Q&A: Stocks soar while bonds are signaling gloom. What’s up?

NEW YORK (AP) — Why is the stock market so happy and the bond market so gloomy? Just as the S&P 500 was setting a record high Thursday, bond yields were tumbling to their lowest levels since Donald Trump was elected. The yield on the 10-year Treasury, which influences rates for mortgages and other loans, dropped below 2 percent at one point. It was above 3.20 percent in November. Usually, stock prices rise when investors are feeling confident. Bond yields, meanwhile, often fall when investors are worried about a softening economy. How can both be happening at the same time? In large part, it’s because investors are locking in bets based on expectations for what the Federal Reserve will do with interest rates. The U.S.-China trade war is also playing a role. Here’s a look at how ebullience and trepidation can occur simultaneously: How is the Fed pushing the stock market higher? Most investors expect the Fed to cut interest rates at its next meeting in July for the first time since the economy was swamped under the Great Recession in 2008. Not only that, many investors expect the central bank to cut rates another one or maybe even two times later this year. It’s a sharp turnaround from December 2018, when the Fed raised rates for the seventh time in two years. For stocks, lower rates can goose prices higher because stocks suddenly look more attractive than bonds. Lower rates also can encourage borrowing and more economic activity. “Markets have accepted the new world order where low interest rates are viewed as a huge positive and people buy into the fact that you can afford to pay higher valuations” for stocks, said Nate Thooft, senior portfolio manager at Manulife Asset Management. It’s also not just the Fed. Central banks around the world have shown their willingness to keep interest rates low to invigorate their economies. Why are Treasury yields falling? Short-term yields tend to fall when expectations build for coming rate cuts. Longer-term yields, meanwhile, fall when expectations for inflation are low and worries about the economy are growing. Inflation has remained remarkably tame. Some concerning economic figures, meanwhile, have been popping up around the world. Particularly in manufacturing, countries have seen slowing momentum as the global trade war weighs on trade and business confidence. “The bond market has reacted more powerfully than the equity markets over the last several months, both in anticipation of Fed news and when it comes to global growth worries,” said Thooft. The bond market is usually seen as the more sober one when it comes to assessing economic trends, rather than the stock market, but Thooft said the movement in bond yields may have been overdone. Is the trade war also moving markets? Yes. Optimism is rising that the world’s largest economies can make progress on their trade dispute when the U.S. and Chinese leaders meet at the Group of 20 summit next week. Trump’s tweet announcing the meeting earlier this week helped send the S&P 500 to one of its better days of the year, up 1 percent. Aren’t the two things moving markets mutually exclusive? If the trade war gets resolved, will the Fed still cut rates? If Trump and Chinese President Xi Jinping make so much progress that a deal seems near, Fed policymakers may not cut rates, or at least not in July. But few economists expect much progress will be made. Most analysts say that the most likely outcome is that the two sides agree to schedule talks. It’s not clear whether Trump will suspend his threat to slap more tariffs on the remaining $300 billion in Chinese imports that haven’t yet been taxed. Even if the Trump-Xi meeting goes well, the effects of Trump’s trade fights with Europe and Mexico, as well as China, will likely linger. U.S. farmers have been hurt by retaliatory tariffs imposed on agricultural exports and U.S. business investment has slowed, as companies delay planned expansions amid greater uncertainty. Trade fights “don’t unwind rapidly,” Diane Swonk, chief economist at Grant Thornton, said. There are signs that the U.S. economy is stumbling, and that low inflation is more stubborn than the Fed previously thought, both of which argue for lower rates. “They’re getting the cuts,” said Joe Brusuelas, chief economist at tax advisory firm RSM, referring to stock market investors who bid up shares on anticipation of the Fed slicing rates. “The U.S. domestic economy is decelerating at an accelerating pace.” But the economy is doing well, isn’t it? Yes, for now. Few economists are forecasting a recession. But Brusuelas and others expect growth could come in as low as 1.8 percent this year, sharply below last year’s 2.9 percent. The boost to consumer spending from the tax cuts is fading, Brusuelas said. And while the unemployment rate remains low, hiring is on track to fall to its slowest pace since 2010. Inflation has remained below the Fed’s 2 percent target, which Chairman Jerome Powell said as recently as April was likely a temporary issue stemming from cheaper gas and other factors. But Wednesday, Fed policymakers forecast that inflation would be just 1.5 percent at the end of this year. While lower inflation might sound good, it suggests that wages won’t rise by enough to push prices higher. What if the Fed surprises everyone and doesn’t cut rates at all? The expectation for rate cuts is so deeply entrenched in markets that most investors don’t consider this a likely scenario. Brian Jacobsen, senior investment strategist at the multi-asset solutions team at Wells Fargo Asset Management, is outside the mainstream in saying that the Fed might stand pat. He says China’s slowing economy adds urgency for its leaders to reach a deal, while Trump has seen how much the stock market wants a trade agreement. If next week’s meeting does offer some resolution, expectations for a rate cut will be dashed. But any disappointment could be offset by expectations for more durable economic growth around the world. “Once again, we could be in a position where bond yields rise and stocks rise as well,” Jacobsen said. “We’ll no longer have this divergence.”

OPINION: Ignoring session call latest offense for a scofflaw Legislature

The zombie legislative session that will not sine die staggers on aimlessly, consuming the brains of anyone trying to make sense of what’s going on and swallowing the souls of those still naïve enough to believe in following the laws as written. In the latest escalation of a race to the bottom, Senate President Cathy Giessel and House Speaker Bryce Edgmon have thumbed their noses at Gov. Michael J. Dunleavy’s call to a special session in Wasilla to decide the fate of the Permanent Fund dividend despite admittedly not having the votes to call themselves to Juneau. A great irony of the 31st Legislature will be going down in history as one that managed to pass a new tough-on-crime bill while simultaneously breaking as many laws as possible. The 90-day time limit on legislative sessions approved by voters? Pffft. The 35-year-old statutory formula for calculating the PFD? Yeah, right. No per diem without an operating budget? We didn’t really mean that. The law says the governor can choose the site of a special session? We. Don’t. Care. Most galling of all is that when the leaders of the Legislature decide to ignore a law they hide under the claim of constitutionality. Sometimes they don’t even bother going that far. “It’s a gray area,” Edgmon told James Brooks of the Anchorage Daily News about the leadership’s authority to ignore the governor’s call, but they plan to conduct some mutant combination of floor sessions in Juneau and committee hearings in Anchorage anyway. These leaders would be a lot more credible when it comes to defending their turf if they’d shown any competence at doing their jobs or a bare minimum respect for the laws they’ve passed. Instead, the scofflaws have only been emboldened over the past four years after escaping any repercussions for skipping out on their lease at the Downtown Anchorage Legislative Information Office under the guise of the “subject to appropriation” clause. The result of that decision is that the Legislature has spent $24 million on the Wells Fargo bank-turned-LIO but still has no place to actually conduct a special session in a single building on the road system. Many people cheered that decision to abscond from the Downtown office and leave the owners to face foreclosure on a $28 million loan taken out on the faith and credit of the Legislature, and likewise approved of the subsequent refusal of former Gov. Bill Walker to fully pay off the year’s balance of refundable oil tax credits without any warning to banks or the industry. The owners knew what they were doing, some argued. The companies knew the terms, some excused. Now some of these same folks are squealing about not following laws governing the PFD or per diem. Only now do they realize that just because something is legal doesn’t make it right. Only now may they realize that the decision to take the easy way out on the Anchorage LIO without really saving any money was the gateway drug to funding government by cutting the PFD. Once the Supreme Court enabled the Legislature to ignore its formula on the PFD, it has been a free-for-all on gimmicks and budget shortcuts and disregard for the law, even those that are barely a year old. Their “solution” to the tax credit liabilities ran afoul of constitutional questions and is headed for the Supreme Court. So is their claim about the legality of forward “funding” of education without actually funding it and their assertion that they don’t have to convene a session according to the governor’s call. Perhaps it’s only fitting that the Legislature keeps getting dragged into court. That’s where most scofflaws eventually end up. Andrew Jensen can be reached at [email protected]

Back from China, AGDC officials await draft environmental report

Alaska gasline officials are preparing for the long-awaited first draft of the $43 billion Alaska LNG Project’s environmental review after returning from an overseas trip to update potential LNG customers and investors on the latest plans for the project. Alaska Gasline Development Corp. officials expect the Federal Energy Regulatory Commission, which oversees the domestic LNG industry, to publish a roughly 4,000-page draft Alaska LNG environmental impact statement June 28, the last working day of the month. Interim AGDC President Joe Dubler said during a June 20 board meeting that leaders of the state-owned corporation and members of Gov. Michael J. Dunleavy’s administration had productive discussions with senior development representatives from national Chinese companies that are potential participants in several aspects of Alaska LNG on a trip to Asia earlier this month. Dubler and AGDC commercial staff traveled to Beijing and Bangkok, Thailand, from June 10-18. They were joined on part of the trip by Brett Huber, a senior policy advisor to Dunleavy as well as Department of Natural Resources Commissioner Corri Feige and Revenue Commissioner Bruce Tangeman. Dunleavy has long been critical of former Gov. Bill Walker’s plan for a state-led Alaska LNG Project. He made it clear soon after being elected last fall that his administration would slow the pace of the project and try to bring the major oil companies back into the fold. Officials from Chinese oil and gas giant Sinopec Corp., the Bank of China and China Investment Corp. recognize the benefit of focusing on the regulatory and permitting progress for Alaska LNG as a means to de-risk the project for possible future investments, Dubler said. The state-owned oil and financial companies signed a nonbinding joint development agreement with AGDC in November 2017 to advance the prospect of financing up to 75 percent of the project in exchange up to 75 percent of the LNG it produces. At the time, Walker and AGDC leaders were pushing hard to make a final investment decision on Alaska LNG in 2020, shortly after the state would receive a presumably favorable permitting decision from FERC, to capture demand opportunities in the rapidly expanding global LNG trade. “The message was very well received from (the Chinese representatives) that the governor is keeping the project moving with the producers involved,” Dubler said. LNG exports to China have declined dramatically this year after retaliatory tariffs were imposed and increased from 10 percent to 25 percent on June 1. He also stressed that AGDC is no longer pursuing LNG customers or gas supply agreements as the corporation had been under Walker’s plan. Instead, AGDC is refocusing on the “stage-gate” project development process often used by major oil companies to evaluate large projects. The state, BP, ConocoPhillips and ExxonMobil were in between the preliminary front-end engineering and design, or pre-FEED, and the full FEED stage — estimated to cost $1 billion-plus — of development in 2016 when the producers chose to back away from Alaska LNG project because of depressed global oil and LNG prices. The international energy consulting firm Wood Mackenzie concluded at the time that the Alaska LNG Project likely wasn’t economic if developed by Alaska’s major producers, as first envisioned, in part because of the high internal return requirements oil companies typically have. However, a state-led project with federal tax exemptions could be viable, Wood Mackenzie said. The AGDC team also met with officials from Public Company Ltd., known as PTT, Thailand’s national oil and gas company to maintain the relationship, according to Dubler. AGDC signed nonbinding, early-stage agreements with approximately 15 potential Asia-Pacific Alaska LNG customers and investors from 2016-2018 under Dubler’s predecessor Keith Meyer, according to corporation officials. Revenue Commissioner Tangeman, a former AGDC finance official, said meetings with the Chinese companies went very well. The primary message from the Alaskans was that the Dunleavy administration is still interested in monetizing North Slope natural gas through an LNG export project, he said, adding that the recent support from BP and ExxonMobil provided the Chinese representatives “a lot of comfort.” “We’re not interested in doing this (LNG project) at any cost,” Tangeman said in a brief interview. “I think the previous administration’s hurdle was much lower.” The North Slope producer companies own the lion’s share of the roughly 35 trillion cubic-foot gas resource that would feed the project and both have been providing technical assistance to AGDC since March; BP’s assistance goes back to 2017. On May 30, Lt. Gov. Kevin Meyer announced BP and ExxonMobil had agreed to contribute up $10 million apiece to help the state pay for completing the FERC licensing process. AGDC leaders expect that will cost roughly $30 million over the next year or more. The AGDC board approved $20 million in expenditures over the next year to advance the project EIS, which should be finished next June, according to FERC documents. Dubler noted during the meeting that through April 30 AGDC was operating at 9 percent below its $10.3 million budget for the 2019 fiscal year, which ends June 30. Among other things, the corporation gave up its 6th floor boardroom and some office space in the Midtown Anchorage Calais office building it occupies. The June 20 board meeting was the first held in public meeting rooms at the state Atwood Building in Downtown Anchorage and was hampered by technical difficulties. Overall 2019 spending — including corporate operations and Alaska LNG-specific project expenses — is down about $5 million, according to Dubler, who said those cost reductions will continue into 2020. Elwood Brehmer can be reached at [email protected]

ConocoPhillips buys North Slope Nuna prospect from Caelus

A North Slope oil prospect is changing hands in a deal that appears to be another step out of Alaska for a small independent oil company. ConocoPhillips Alaska announced June 17 that it has agreed to purchase 100 percent of the mid-sized Nuna project from Dallas-based Caelus Energy. “This transaction represents an attractive addition to our expanding North Slope position and will allow ConocoPhillips to cost-effectively develop Nuna utilizing Kuparuk River Unit infrastructure. “We believe this acquisition could lead to more oil production, more revenue for the state and more jobs for Alaskans,” ConocoPhillips Alaska President Joe Marushack said in a formal statement. ConocoPhillips officials declined to disclose the terms of the sale. Caelus representatives referred questions about the deal to ConocoPhillips. The Nuna sale marks the second asset Caelus has sold this year. Italian oil major Eni announced in early January that it would acquire Caelus’ 70 percent operator stake in the small Oooguruk field. The company still holds the potentially multibillion-barrel Smith Bay oil prospect discovered in 2016 in remote state waters adjacent to the National Petroleum Reserve-Alaska, but work to appraise and advance Smith Bay has largely been shelved. For ConocoPhillips, the Nuna acquisition is the latest in a series of moves to grow the company’s already large presence on the North Slope. ConocoPhillips purchased all of Anadarko Petroleum Corp.’s North Slope assets for $400 million. The companies had been partners in western Slope exploration and development work, with Anadarko holding a silent minority share in those projects. In December ConocoPhillips also closed a deal to ostensibly swap BP’s 39 percent interest in the large Kuparuk River field for a portion of its interest in the British Clair oil field. ConocoPhillips has also been an aggressive player in recent federal NPR-A lease sales. Development of the Nuna prospect has been subject to fits and starts since Pioneer Natural Resources discovered it in 2012. Pioneer sold Nuna to Caelus in 2014 as part of a larger $550 million deal for all of Pioneer’s Alaska assets. Caelus CEO Jim Mussleman said at the time that the company planned to drill roughly 30 wells at Nuna to produce between 20,000 and 25,000 barrels of oil per day from more than 100 million barrels of reserves. First production was expected in late 2016 for the development pegged at roughly $1.5 billion. Nuna currently consists of a 22-acre gravel pad and road and several exploration and appraisal wells. Caelus subsequently asked for and in January 2015 received a reduction in the oil royalty rate for Nuna from 12.5 percent to 5 percent from the state Department of Natural Resources to improve the economics of the prospect. The state oil royalty modification required the company had to quickly sanction the project and start oil production by October 2017. However, the combination of sustained low oil prices and former Gov. Bill Walker’s decision in June 2015 to veto a portion of refundable state tax credits for oil project development in response to a nearly $4 billion state budget deficit — also the result of fallen oil prices — pushed Caelus to delay work on Nuna. Caelus’ March 2016 request to extend the special royalty terms was denied by then-Division of Oil and Gas director and current DNR Commissioner Corri Feige. Company leaders have said Caelus was once owed more than $100 million in tax credits by the state. The aim of the now defunct tax credit program was to encourage more small independent operators, such as Caelus, to work in Alaska’s oil and gas basins. Elwood Brehmer can be reached at [email protected]

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