Bids sought for 2020 work at Port of Alaska

Anchorage officials are moving ahead with a plan to build part of a new berth at the city’s beleaguered port while they look for ways to pay for the rest of it. Municipal Manager Bill Falsey said during a May 16 meeting of the Anchorage Assembly’s Enterprise and Utility Oversight Committee that administration leaders want to use the $60 million they have on hand for port work to fund the first year of construction of a new petroleum and cement terminal. Port officials in February released a financial analysis that indicated tariffs levied on fuel and cement imported to the state across the Port of Alaska docks would have to be increased at least five-fold in order for the port to fund revenue bonds to pay for the construction of a new terminal, which has been estimated at $223 million. That caught the attention of both the shippers who call on the port and their customers who expressed fears that sharp tariff hikes could dramatically impact their business, which, because it is in basic commodities, could in turn have significant broader impacts on the overall state economy. For one, Ted Stevens Anchorage International Airport’s flagship cargo business — Anchorage is among the busiest cargo hubs in the world — relies on geography that makes it economically advantageous for cargo planes flying between Asia and North America to stop and refuel in Anchorage. Representatives from companies that handle fuel for the airlines have said any change in the tariffs would force the cargo companies to reexamine the business model. Higher fuel and cement tariffs would also be felt by consumers across Alaska, as the Anchorage port is the primary point of entry for the vast majority of goods sold in the state. The Assembly in 2017 changed the official name of the facility to the Port of Alaska as a means of emphasizing that point, which has also been used to make the case for state funding of the port rebuild. However, officials say some level of tariff increases will be likely to pay for the needed work. Large portions of the docks are nearing 60 years old and are close to doubling their 35-year design life. Port maintenance crews for years have been patching the most badly corroded steel pilings that support the docks. Using the $60 million — a mix of internal port funds, a $20 million state grant and remnants from the first failed expansion plan — to fund a year of construction on the petroleum and cement terminal, or PCT, gives city officials and the Assembly time to reevaluate the scope of the entire port modernization project. The cost estimate has gone from less than $500 million in 2014 to about $1.9 billion today and there is a general belief that the current price tag is prohibitively expensive. Falsey said municipal officials have determined that there is no issue with building a portion of the PCT even if it isn’t immediately completed other than a little initial corrosion before it is put into service. “If we build half the PCT we are one year closer to replacing that facility,” he said. City officials on April 16 released an invitation to bid on the work for the 2020 construction season; the bids are due by June 7. Deputy Port Director and engineer Sharen Walsh said the $60 million should enough to drive the pilings and put decking on the terminal trestles. “It will be a standing unit,” Walsh said. Soliciting bids now should give port officials time to select a contractor before the Assembly approves or rejects the spending, likely in July. Port spokesman Jim Jager said in a brief interview that the PCT plan provides time to order the major steel components that come with long-lead times in preparation for construction next year. The partial-build approach is also recognizes that building the entire PCT in one summer was going to be a time crunch, according to Jager, who noted the $223 million estimate contains significant contingency considerations if construction were delayed. Most in-water work at the port must stop if endangered Cook Inlet beluga whales or other marine mammals are spotted near the port; it’s a work limitation that’s hard to account for. “Risk is expensive,” he said. The PCT development would be the first major actual construction to rehabilitate the port since the prior Port of Anchorage Expansion Project was halted in 2010 when flawed construction techniques and possible design issues resulted in major damage to segments of sheet pile that were being installed at the time to support new dock facilities. Jager added that port officials are “cautiously optimistic” about their chances to get a multimillion-dollar grant from the Federal Emergency Management Agency to fund design components that would make the PCT a super-seismic structure. Those features account for about 5 percent of the cost, he said, but the possible total of the prospective grant isn’t settled. Meanwhile, city and port project leaders will be holding formal meetings with port users to get a better sense of what they truly need in a new, rebuilt port. A two-day “charette,” or design meeting involving stakeholders, is scheduled for June 13-14 and another will likely follow later in the summer, according to Falsey. Many of the design choices now seen as possibly too expensive were selected during charettes in 2013 and 2014 led by former Mayor Dan Sullivan’s administration, Falsey said. “We know that there are a lot of costs that got rolled into the program in the design choice that somebody else was going to pay for and I suspect that we can pull a lot of those things off,” he said. The charettes will also help flesh out what features, such as crane and dock size, that the users are willing to pay for. “We all have to be rowing in the same direction if this is going to work,” Falsey said. ^ Elwood Brehmer can be reached at [email protected]

Legislature passes bill repealing most telecom regulations

One of the handful of bills that passed through the Legislature this year updates many of the state’s regulations on telecommunications companies. Senate Bill 83, sponsored by Sen. Chris Birch, R-Anchorage, successfully passed the House and the Senate May 14, the day before the regular session ended and the Legislature moved into a special session; it now awaits the governor’s signature. The bill repeals a number of statutes regulating telecom providers, including ratemaking authority, standards for equipment and services and Carrier of Last Resort, or COLR, regulations, which are designed to protect rural communities in the event that all telecom providers want to stop serving an area. Telecommunications companies in Alaska broadly backed the bill, saying it would free up resources for them in an increasingly competitive environment. The Regulatory Commission of Alaska supported it as well, with the sole opposing vote coming from chairman Stephen McAlpine. RCA staff, however, raised a number of concerns about the future for telecom service across Alaska if the bill becomes law. The members of the Alaska Telecom Association, who range from statewide providers like Alaska Communications to small local telephone companies, argued that economic regulation of telecommunications providers is outdated, clumsy and consumes resources that could be better put toward operations. Christine O’Connor, the executive director of the ATA, noted that the statutes have not been fully updated in about three decades. “We tried to tackle that starting in 2014 with a petition to the Regulatory Commission,” she said. “They made some minor changes, but it didn’t end up relieving the burden. Some companies ended up with more complexity, not less. They had those petitions in 2014, and five years later we said let’s just do a full cleanup of these statutes.” The telecom market has become more competitive in Alaska in recent years, with consumers increasingly preferring mobile and web-based communication services as opposed to traditional landlines. Landlines are still important, though; O’Connor said approximately 4 percent of Alaskans depend solely on landlines, while 48 percent still maintain one in addition to another service. As the market shifts, the traditional monopoly-style regulation of telecoms becomes outdated for everyone, she said. Under the new regulations, telecommunications providers would no longer have to file informational tariff reports with the RCA. The filings are to inform the RCA of intended changes rather than to request rate increases, and the companies argued that the filings are time-consuming and unnecessary. GCI, one of the largest carriers in the state, spends significant time on filing the tariffs with the RCA, said Heather Handyside, vice president of corporate communications and community engagement for GCI. The company, which began as a landline provider about 40 years ago, has a dedicated team that sinks significant time into producing the reports, she said. “We all can understand here in Alaska how dramatically telecommunications have changed in the last 40 years,” she said. “The regulatory environment hasn’t changed in 30 years, and we’re still operating today with regulatory guidance from 30 years ago. That’s really a part of what SB 83 does: eliminate the onerous and unnecessary paperwork that our company does.” The bill does not mean the telecom providers will disengage entirely from the RCA, Handyside said, but it will “streamline” the process for everyone. It would also eliminate statutes requiring utilities to charge “just and reasonable” prices, removing RCA oversight over rates, and repeal the ability of the RCA to designate a Carrier of Last Resort. Companies argued in their letters and presentations that the Federal Communications Commission will still hold requirements for companies seeking to leave an area to justify it, but the RCA staff raised concerns about the potential for loss of service in rural areas. In documents submitted to the Legislature, ATA argued that COLR creates uncertainty for carriers because the RCA can change it at any time. In a memo to the RCA, Common Carrier staff member David Parrish outlined concerns about many of the items in the ATA’s proposed bill, highlighting particularly the elimination of economic regulation, the elimination of COLR regulations and how the changes would impact RCA’s ongoing review of its subsidy program, known as the Alaska Universal Service Fund. In letters and presentations to the Legislature, telecom providers mentioned how a number of states in the Lower 48 have taken similar actions to deregulate their telecommunications providers. The RCA staff memo contested that the situations in the Lower 48 and Alaska are the same. “What has not been clear is whether those states have taken the approach of completely deregulating even the least competitive markets within their respective jurisdictions,” the memo states. “ATA has not indicated that other states have so limited the enforcement tools available to their utility commissions for whatever jurisdiction those commissions retain to render that jurisdiction de facto unenforceable.” In the event the Legislature passed the bill, the staff memo recommends the RCA immediately open rulemaking processes to reinstate some of the provisions eliminated from statute. In a House Labor and Commerce hearing on May 1, McAlpine told legislators that his primary motivation for opposing the bill was concern about service in rural Alaska. In a May 13 hearing, Rep. Jonathan Kreiss-Tomkins, D-Sitka, shared similar concern with the House Judiciary Committee, saying the bill was moving quickly and could have impacts on residents like those in the rural areas of Southeast. “These communities for the main part don’t have cell phone service,” he said. “Landlines are the only means of communication these communities have. So therefore, it becomes a life and safety issue, as well as a commerce issue.” The House Labor and Commerce Committee added an amendment to allow the RCA more flexibility to hire on a telecommunications industry expert, which it does not currently have. Rep. Adam Wool, R-Fairbanks, co-chair of the committee, said a number of people had approached him about a “brain drain” at the RCA because of more attractive jobs in the private sector. O’Connor said the bill will result in immediate time and cost savings, especially for small providers that may have to bring in consultants to complete the filings required by the RCA. The RCA staff memo referred to the bill as deregulation, and O’Connor said the industry and ultimately the commissioners disagreed with that analysis. “I would say it’s just a difference of philosophy,” she said. “I’m on the record at the RCA saying that we felt it was time to update these statutes. This one staffer said he felt like it’s a go in another direction. Naturally since our goal was to become more efficient and we were responding to a lot of comments over time … saying we’re doing a lot of work here on telecommunications here that’s outdated and needs to be stripped away.” The amended bill passed the Legislature on May 14 and awaits transmittal to Gov. Michael J. Dunleavy for his signature. Elizabeth Earl can be reached at [email protected]

UAA alums make a difference — nominate an Achiever today

Last weekend, more than 1,200 students graduated from the University of Alaska Anchorage. As they walked across the stage and toward their futures at Sunday’s Commencement ceremony, I watched them join the ranks of more than 53,000 UAA alumni, most of whom live and work in the state. I am confident the class of 2019 will, like those who came before them, make a difference not only in Alaska’s economy, but also in its communities. UAA alumni are leaders and business owners; they are our dental hygienists, nurses, journalists, police officers, K-12 superintendents, university professors, petroleum engineers, welders, diesel mechanics, pilots and earthquake engineers. They are also our neighbors, nonprofit board members, community council leaders, legislators, and friends. They are being recognized nationally and internationally. Recently, Samantha Mack was named UAA’s first-ever Rhodes Scholar, Eagle River teacher Valerie Baalerud won the Milken Educator Award, and alumna Megan Green received a Fulbright Scholarship. Local employers recognize the value of UAA-educated graduates. Companies like R&M Consultants, an Alaska-based consulting firm with a workforce comprised of 30 percent UAA graduates, understand how important it is to provide by-Alaska, for-Alaska services. R&M employs nearly 100 people in Anchorage and Fairbanks to provide civil, structural, waterfront, and geotechnical engineering; UAA graduates’ depth of knowledge in engineering for cold weather is invaluable. Nearly every industry in the state benefits from the students that walk across the UAA stage. The Anchorage School District, the State of Alaska, GCI, BP, ConocoPhillips, Southcentral Foundation, Providence Health and Services, Alaska Airlines, and, of course, UAA, are among the employers hiring the highest numbers of UAA graduates. Here at UAA we work to recognize the successes and contributions of our alumni. Since 2010, UAA has honored nearly 30 Alumni of Distinction in our community. The Alumni of Distinction Awards recognize and celebrate those who have made important contributions in their communities and whose actions honor the legacy of excellence at UAA. Leaders like Sophie Minich, CIRI president and CEO, Tim Gravel, Kaladi Brothers Coffee CEO, Jennifer Thompson, Thompson &Co. PR president and CEO, Carol Comeau, former superintendent of the Anchorage School District, Roald Helgesen, CEO of the Alaska Native Tribal Consortium, and Ted Trueblood, a longtime Alaskan and civil engineer, are just a few of the many great individuals who have earned this prestigious award. As it happens, nominations are now open for the 2019 UAA Alumni of Distinction Awards. Anyone in the community can nominate UAA alumni for these distinguished awards. Do you know someone who deserves to be recognized for the work they do in their community? UAA also continues to grow and deepen our community connections through our honorary degree and meritorious service award program. At commencement last weekend we recognized four community members for their significant and lasting contributions to the university and the state of Alaska: Bede Trantina, Sheila Toomay, Barbara Hood and Dr. Thomas Nighswander. These outstanding individuals join the growing and strong network of UAA alumni and friends who make a difference in our community and state everyday. UAA’s commitment to and partnership with Anchorage and extended Southcentral communities is deep and permanent. As this new class enters the workforce, we are excited to see where they will end up, and how they will change their communities, and our state, for the better. A new generation of leaders is emerging and together our community and our university will grow. In a few years we might see some of the 2019 class back on campus for their own Alumni of Achievement awards. I am proud to be part of an institution that produces so many of Alaska’s leaders and change-makers. If you know someone deserving of the Alumni of Achievement Award, contact the Office of Alumni Relations or visit www.uaa.alaska.edu to learn more about the nomination process. Nominations are due by 5 p.m. on Monday, June 17. Megan Olson is vice chancellor at the University of Alaska Anchorage.

PIP Printing marks 40 years with SBA award

Some people don’t find a lifelong career because of an intense calling to a specific field. They pursue happiness instead by avoiding what they don’t want to do: work for somebody else. That was the case for John Tatham, who, along with his wife Jan and her sister Shelley Bramstedt started Anchorage’s PIP Printing of Alaska nearly 40 years ago. The trio was recognized earlier this month as the Alaska Small Business Persons of the Year by the U.S. Small Business Administration. “I didn’t have printer’s ink in my veins or anything,” John Tatham said. “I just wanted to be in business for myself. I didn’t have any money, so I just starting casting around for something to do.” A college friend of John’s knew the owner of the PIP corporate franchise at the time and connected him with John, who inquired in the 1970s about opening a store in Anchorage. However, they were told Anchorage was too remote to justify a store, Jan recalled. That lasted for about nine months until John got a call from company officials asking if they were still interested. They said yes and proceeded to grow their printing shop from the three of them to a total of 38 employees today. “We started with just copy machines and one press,” Jan said. Today, PIP offers traditional printing services, vehicle wrapping, design and virtually every type of sign imaginable. John acknowledged during a tour of the Third Avenue complex they’ve been in for 30 years that the printing portion of the business is contracting. He expects the future of the business is in its sign shop. “Nothing ever really goes away but it does shrink and force you to change your business model,” he said. Early on, the trio managed three stores at the behest of corporate leaders who felt more storefronts was the best way to grow the business. They felt that was inefficient and instead consolidated to their current location and developed an outside sales staff to expand. Jan said the freedom to make their own business decisions was a primary reason for wanting to start a PIP franchise. John noted that PIP corporate liked the idea of outside sales personnel so much they adopted it into the company’s business plan. “We’ve done a couple innovative things like that that put us on the map with the franchise,” he added. PIP President Richard Lowe said in a release recognizing the three that he’s not surprised they earned the award from the SBA. “They invest heavily in technology to support their customers. They have an excellent team and over 40 years of experience in the marketing, signs and print industry. We are very proud of their accomplishment,” Lowe said. Jan said their success started with a $100,000 loan underwritten by the SBA that allowed them to open the business. She said they couldn’t get financed through a private bank because they simply didn’t have a track record in business. “When you don’t have it and you need it, it is huge and the SBA was there for us when we needed them,” John added. SBA Alaska economic development advisor Kimberlee Hayward wrote via email that the PIP group was selected because they are downright great business owners. PIP offers retirement benefits, health insurance and bonuses not provided by many small businesses, Hayward said. Additionally, a large portion of their workforce has been with them for up to 30 years and the company has a great reputation amongst its customers. They are also celebrating their 40th year in a challenging line of work, Hayward noted. “This is a huge feat as the industry they are in has seen huge changes due to technology. They have successfully reinvented themselves and rolled with the times,” Hayward said. SBA Regional Administrator Jeremy Field said after a tour of PIP that what’s particularly impressive about the operation is how responsive they have been to their clients’ needs, which he emphasized is common among successful entrepreneurs. Honoring people who have made the most of the help the SBA was able to offer them — whether loans or counseling or something else — and be a positive force in their community is a highlight of his job, Field said. “It’s not like we’re in the Constitution; we’re not here to defend the country from invaders, but the value that the SBA brings…you can’t quantify it because it gives opportunities to business people that might not otherwise have it,” he said. Elwood Brehmer can be reached at [email protected]

State nearing the end of project information owed to FERC

The Alaska Gasline Development Corp. continues to whittle down the information it owes federal regulators for the Alaska LNG Project’s environmental impact statement, which is due out as a draft sometime in June. The state-funded public corporation submitted three batches of responses to the Federal Energy Regulatory Commission on May 3 — totaling more than 300 pages — answering dozens of requests from this winter for additional technical information about the project. AGDC expects to send another package of information to FERC by the end of May, answering two-thirds of the remaining questions in that filing. The last responses are planned by the end of June and end of July. Among the last filings will be answers to regulators’ questions about the project’s 27-mile underwater pipeline crossing of Cook Inlet to Nikiski. FERC wants more geotechnical data about the seafloor and how AGDC proposes to stabilize and protect the pipeline against tidal currents and boulders. FERC had planned to release its draft environmental impact statement, or EIS, for the proposed Alaska LNG project in February, but postponed publishing the document until June. The commission did not provide a specific reason in February for the delay, though the five-week federal government shutdown that ended Jan. 25 interfered with the work of other agencies involved in helping to prepare and edit the draft EIS. FERC is under no legal requirement to issue the draft in June, though it would need to notify the applicant and public of any change in the schedule. The commission plans a nine-month work period which includes public and agency comments, public hearings, review and revisions to the draft, with the final EIS scheduled for March 2020. Under FERC regulations, the commission would be required to issue its decision on the Alaska LNG project application by June 2020. Already this year, the commission has issued final impact statements and project approvals for several U.S. Gulf Coast LNG ventures as developers are racing to meet growing market demand for the fuel amid an anticipated tightness in global supply sometime in the mid-2020s. The State of Alaska has been the sole developer of the Alaska LNG project for two and a half years since North Slope oil and gas producers ExxonMobil, BP and ConocoPhillips declined to spend the substantial sums of money required for permitting, final engineering and design. The Alaska LNG project, estimated by the state to cost $43 billion, would remove carbon dioxide and other impurities from the gas stream at a North Slope treatment plant, then pipe the methane 807 miles to a liquefaction plant at Nikiski on the east side of Cook Inlet. AGDC has enough money left over from previous legislative appropriations to cover its work on the EIS this year. In case one or more of the North Slope oil and gas companies or other investors want to help start paying the bills toward further development efforts, the Alaska Legislature is considering giving the corporation “receipt authority” to deposit any checks AGDC might receive so that it could spend the money on the project. The state capital budget, which unanimously passed the Senate May 8, includes authorization for AGDC to receive and expend up to $25 million of non-state funds in the fiscal year that starts July 1. The bill still requires approval by the the House and then the governor. Without that receipt authority or additional state funds, AGDC would essentially run out of money sometime next year. Legislators generally have been supportive of AGDC using its available funding to at least complete the EIS. “There’s value in having a permit,” Sen. Bert Stedman, R-Sitka, co-chair of the Finance Committee, was quoted in the Anchorage Daily News on May 5. The AGDC board of directors is scheduled to meet May 22. The corporation continues to talk about commercial opportunities for selling Alaska LNG in the growing Asia market, while acknowledging that it first needs to determine the project’s economic competitiveness and then find partners, investors and customers for the gas. The corporation’s May 3 filings with FERC covered mostly safety systems and procedures at the Nikiski LNG facility and Prudhoe Bay gas treatment plant, such as the coverage area of firefighting water-spray apparatus, the use of firefighting foam equipment, emergency shutdown systems and protection of air intakes from volcanic ash. The filings also included a draft ballast water management plan for vessel traffic in Cook Inlet and Prudhoe Bay, and a marine mammal monitoring and mitigation management plan. For example, the marine mammal management plan explains that humpback whales, beluga whales, killer whales, sea otters, harbor porpoises and harbor seals “may be encountered near the construction activities” in Cook Inlet. If a marine mammal is spotted in the area during construction, pile driving would stop until the area is clear of the marine mammals, according to the management plan. Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide. He is the incoming Atwood Chair of Journalism at the University of Alaska Anchorage School of Journalism and Public Communication.

Cook Inlet independent develops new drilling to reach oil

BlueCrest Energy is drilling from the bottom up to reach oil offshore in Cook Inlet. Benjamin Johnson, CEO of the small Texas-based independent, told members of the state House Resources Committee May 1 that the company has developed new long-range drilling techniques with lower costs to access the oil. BlueCrest is developing the Cosmopolitan oil and gas field near Anchor Point on the southern Kenai Peninsula. The Cosmo field has long been known to hold significant resources but development of Cosmo has been a slow process. A prior owner drilled the first exploration well in 2001. “We know for a fact that we have about half a billion barrels of oil in the ground in the field, but what we don’t know is how much of that oil we’re going to get out of the ground,” Johnson said to legislators. The Cosmo oil reservoir is relatively shallow — down to about 7,000 feet — and about three miles offshore so drilling is being done from an onshore pad. The long, angled wells have been drilled to upwards of 30,000 feet, according to Johnson, using what he often notes is currently the most powerful drill rig in Alaska. BlueCrest began producing small amounts of oil from the original well in 2016 and since has drilled another 11 wells into the field, he said. Company leaders initially planned to tap Cosmo with a series of wells drilled about 800 feet apart. Each of those wells were to be fractured once at the end to encourage oil to flow through the multiple layers of the reservoir and into the wellbore, which is a common practice to produce oil from thick, layered fields, Johnson said in an interview. However, fracking is expensive and inexact, as it’s difficult to control the fractures at the end of the well. That led the company’s drilling experts and consultants to theorize about new ways to drill into Cosmo by fully utilizing the capabilities of BlueCrest’s rig. Johnson said the drillers were very successful at steering the rig to drill pretty much wherever they wanted and it occurred to BlueCrest leaders that they could probably drill through the layers of the reservoir from underneath the oil. The technique utilizes the now common practice of drilling multiple sidetrack wells off of a main wellbore; but those sidetrack wells are usually horizontal wells targeting a specific layer in a reservoir. “We weren’t sure how it would work, how successful it would be but it turned out that it has been successful. We’ve got good wells and we were able to replicate it over and over,” he said. The Cosmo field also has a significant natural gas cap above the oil. It’s believed developing the gas would require an offshore drilling platform. The “fishbone” wells allow BlueCrest to punch numerous holes into Cosmo with fewer main wellbores and without fracking. By drilling up through the layers the company is “drilling the fractures,” Johnson described. The technique provides the same penetration as if the wells were being drilled from the surface every 800 feet. “To our knowledge we’ve never seen anybody drill vertically but we’ve been able to do it ourselves,” he said. While company leaders and state regulators stressed the fracking company officials originally planned to conduct was environmentally safe, many residents of the area expressed concerns when BlueCrest was seeking drilling permits that it could impact marine life and possibly groundwater. “The rock is very good; that’s the other thing that makes this work is our rock doesn’t cave in,” Johnson added. “Other places, if the rock is not consolidated enough the formation would cave in and that would be a problem.” The fishbone wells have increased oil production at Cosmo from a few hundred barrels per day in 2016 to between 1,800 to 2,000 barrels per day now. Now BlueCrest leaders are looking to expand on the bottom up fishbone technique in up to 20 more wells by splitting the main well into three spines, each with its own fishbone ribs for what they are calling a “trident fishbone,” according to Johnson. “It makes it faster, more efficient, less cost and it improves the economics to try to pay for these wells,” he said. Over the next year Johnson said oil production could reach the 3,000 to 4,000 barrels per day range. BlueCrest is also likely to eventually add injection wells to maintain pressure in the oil reservoir. Elwood Brehmer can be reached at [email protected]

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