Movers & Shakers 12/06/15

Dani Crosby was appointed to the Anchorage Superior Court. Crosby will replace Judge Michael Spaan, who retired at the end of November after serving on the Anchorage Superior Court since 2007. Raised in Sitka, Crosby has practiced law for nearly 20 years, focusing on employment issues, complex business disputes, and family law matters. For the past two years, she has worked as a private practice attorney for Dani Crosby Law Office Inc. Prior to that, Crosby was an attorney at Ashburn & Mason P.C. for 14 years, where she was a leader in the firm’s litigation practice, and worked on complex matters for the State of Alaska, the University of Alaska, and other private clients. In addition to her work as an attorney, Crosby is the President of the Alaska Bar Foundation, a member of the Civil Rules Committee, and a regular volunteer with Alaska Legal Services Corp. She received a bachelor degree in English and comparative literary studies from Occidental College, and a juris doctor from Gonzaga University School of Law. Dana Pruhs of Pruhs Corporation, Anchorage, was elected president of the Associated General Contractors of Alaska for 2016 at the association’s annual meeting last month. Pruhs will serve for the next calendar year along with the executive board composed of Dan Hall, Knik Construction, Anchorage, vice president; Jim St. George, STG Inc., Anchorage, treasurer; Mike Shaw, Roger Hickel Contracting, Anchorage, secretary; Tony Johansen, Great Northwest, Fairbanks, contractor at large; Traci Johnson, Spenard Builders Supply, Anchorage, associate member; and Meg Nordale, GHEMM Company, Fairbanks, immediate past president. The Matanuska Electric Association board of directors voted unanimously to hire Tony Izzo as the new general manager. Joe Griffith, current general manager of MEA, is set to retire in January 2016 after many years in the electrical utility industry. Izzo has worked for MEA as the manager of Fuel Supply since April 2012 and brings 34 years of experience in utility operations, leadership, and regulatory relationships, including time as the CEO of ENSTAR Natural Gas. Mike Bridges is the new First National Bank Alaska property manager. Bridges has spent the last 35 years in the United States National Guard, retiring as a brigadier general. He earned numerous service awards during his military career, including the Army Bronze Star Medal and the Alaska Legion of Merit. Bridges’ primary tasks will focus on leadership of the Property Department team, which oversees statewide bank facilities maintenance, renovations, equipment and services. His leadership extends to relationship management of the broad array of vendor partners who keep the bank’s office buildings and branch locations in good order. With more than 30 properties in both urban and rural areas, the challenges of property ownership will engage Bridges’ statewide facility background gained through his prior experience. The Alaska Railroad has named Christy Terry as port manager, Seward. Terry fills the position most recently held by Louis Bencardino who will retire in January after 13 years with ARRC. Terry has worked as Seward Dock Operations Manager for ARRC since 2010 and will bring her extensive knowledge of ARRC operations in Seward to her new position. Terry’s duties will include responsibility for the overall on-site administration, management, operations, maintenance and repair, use and marketing of the Alaska Railroad Seward Docks, real estate land and other assets at the Seward Terminal Reserve as well as compliance with all federal, state and local regulations, and ARRC terminal and land use agreements. Terry moved to Alaska from California in 1991 to attend the University of Alaska Fairbanks where she received her bachelor’s degree in 1995. Terry is a Certified Port Executive through the International Association of Maritime and Port Executives and worked for the City of Seward from 2006 to 2010 serving as the Community Development Director from 2008 to 2010. She is also a recipient of the 2012 Alaska Journal of Commerce “Top Forty under 40” award. CRW Engineering Group, LLC, has expanded its IT, Electrical Engineering, and Land Surveying departments. Calli Rabe brings with her over five years of technical experience in computer systems and services to both government agencies and private industry to CRW’s IT Department. A lifelong Alaskan, she graduated from the University of Alaska Anchorage with a degree in literature, then worked as a technical specialist for Department of Natural Resources and in the television industry before joining CRW. Corey Rogers, EIT, brings 16 years of statewide electrical engineering experience to CRW. He has lived in Alaska for over 30 years and has a bachelor’s degree in electrical engineering and applied mathematics from the University of Alaska Fairbanks. Ben Hron, PLS, graduated from Milwaukee Area Technical College and has 13 years of land surveying experience, including 10 years in Alaska. Bryant Burgin, LSIT, holds a bachelor’s degree in geomatics surveying from UAA, and brings with him five years of surveying experience around the state of Alaska.

Fauske resigns as AGDC president

The melodrama that has become the Alaska Gasline Development Corp. continued Nov. 21 with the sudden resignation of president Dan Fauske. Fauske stepped down one day after Gov. Bill Walker removed John Burns and Commerce Commissioner Chris Hladick from the Alaska Gasline Development Corp., or AGDC, board. Burns, who served as board chair, is a former Alaska attorney general. AGDC is the state entity tasked with representing the State of Alaska in the $45 billion-plus Alaska LNG Project — the large North Slope natural gas export effort with BP, ConocoPhillips and ExxonMobil. Walker appointed former Fairbanks North Star Borough Mayor Luke Hopkins and Transportation Commissioner Marc Luiken to replace Burns and Hladick. Fauske tendered his resignation in a letter dated Nov. 20 that was made public just prior to a special AGDC board meeting the morning of Nov. 21. He wrote that he is proud of his time as president of the corporation, but did not expand on specific reasons for his departure. “As an (Alaskan) for many years, I strongly desire that a natural gas pipeline project will come to pass,” Fauske wrote. “In that pursuit, I wish the governor and this board of directors success. I believe that a successful project will benefit Alaskans for many years into the future and will be a source of economic prosperity for the state.” His resignation will officially take effect Jan. 1, however, Fauske indicated he will take accrued personal leave until then. During a press briefing following the board meeting Walker commended Fauske for his work with AGDC in bringing the Alaska LNG Project to its current point and said Fauske offered to help move the project along in any way he could during a conversation the two had Friday. The governor said changes to the state’s gasline team are meant to bring “alignment” to the group. He also said that while he didn’t directly ask for Fauske’s resignation, he expressed his wish to the corporation that a change in leadership be made. “We need a person in that (AGDC president) position that has done many, many pipeline projects,” Walker said. Prior to leading AGDC, Fauske headed the Alaska Housing Finance Corp., or AHFC, for many years. AHFC first worked on the state-led Alaska Stand Alone Pipeline project known as ASAP, a contingency project to get North Slope natural gas to Alaskans if a commercial project with the producers doesn’t materialize. Fauske transitioned to AGDC when it was formed in 2013 to focus on natural gas projects. Fauske said in a recent interview with the Journal that he was displeased with proposed AGDC confidentiality regulations — drafted by the Attorney General’s office and strongly opposed by the producers — because they would make contracts the corporation entered into public and could compromise the state’s bargaining position and ability to work with third party vendors, according to Fauske. The governor also said he met with the leaders of the House and Senate Resources committees earlier in the week to discuss how the administration and the Legislature can work more collaboratively to bring the project along. The coming year will be a big test for the project, as all four parties will need to decide if they want to make significant investments in front-end engineering and design, or FEED, for the project, a multi-year commitment to bring it to a final investment decision. Alaskans will also likely have to decide if they are willing to amend the state Constitution to allow long-term contracts to be signed with the producers. Senate Resources Committee chair Sen. Cathy Giessel, R-Anchorage, said in an interview following Fauske’s announcement his departure is a “significant loss” for the state because of his experience in finance and that she is concerned with the recent loss of experience in positions of leadership for a project crucial to the economic future of Alaska. What, if anything, the shakeup at AGDC means for the direction of the Alaska LNG Project remains to be seen. “Continuity, consistency, stability, predictability, those are the key words these companies (BP, ConocoPhillips and ExxonMobil) look for, not only in tax policy but also in personnel,” from the State of Alaska, Giessel said. She added that Burns provided consistency on the board through its changes and offered “exemplary” service to the state. The AGDC board unanimously approved acting board chair Dave Cruz to also act as corporation president until an interim AGDC president is named. That topic will be addressed at the next board meeting scheduled for Dec. 3. Cruz said in a formal statement that Fauske did an “incredible job” building the state organization from its infancy. “Under (Fauske’s) leadership, Alaska has made more progress on a natural gas pipeline than every before,” Cruz said. “I want to personally thank him for his dedication to this incredibly important project and for his years of service to the State of Alaska. He will be missed.” Since taking office nearly a year ago, Walker has now replaced six of the seven AGDC board positions. In January, he began reshaping the board by removing three members appointed by former Gov. Sean Parnell, citing transparency issues. At the time he ordered the new board members not to sign confidentiality agreements that, prior to the Walker administration, all AGDC board members and employees were required to sign. Cruz, owner of Cruz Construction Inc., an oilfield contracter, is the only board remaining board member to have signed AGDC’s confidentiality agreement. Walker called the resolving the issue of what’s confidential a “fine line” and said he is assessing the concerns of all parties on the issue, but added that Alaskans need to be kept abreast of the agreements the state is entering into if they are going to be asked to change the state’s Constitution. “We don’t want to hinder the project in any way,” the governor said. “We’ll find that line.” As for former AGDC chair Burns, Walker said he holds Burns in the highest regard and removing him from the board does not in any way reflect the relationship the two have. “I don’t think we’ve seen the last of John Burns in this project,” he said. He also noted that Commerce Commissioner Hladick already serves on more than 20 different boards and DOT, the state’s infrastructure agency, will have a large role in the project moving forward. Not to be lost in the buzz surrounding the latest AGDC leadership changes is the fact that the state now officially owns TransCanda Corp.’s share of the Alaska LNG Project. The AGDC board passed a resolution to authorize a $64.6 million payment to TransCanada and accept the company’s share of the midstream portion of the project. That follows the Legislature’s approval of the state’s purchase TransCanada’s 25 percent share of the North Slope gas treatment plant and the 800-mile pipeline in the special session completed earlier this month. Approval of AGDC’s fiscal year 2017 work plan and budget was delayed until the Dec. 3 meeting, apparently at the request of Walker. He said at the briefing it was premature for the state to commit funding work before getting formal commitment from the producers that gas will be made available to the project if one or more of them pulls out. The governor and the producers settled on a Dec. 4 date for withdrawal agreements in late October. Elwood Brehmer can be reached at [email protected]

Tesoro acquires Flint Hills marketing operation

Tesoro will acquire Flint Hills Resources’ fuels marketing and logistics facilities in Alaska, the company announced Nov. 23. The Interior Alaska refinery closed by Flint Hills in April 2014 is not included in the transaction. Tesoro operates a refinery at Nikiski, on the Kenai Peninsula in southern Alaska. “This investment represents our commitment to efficiently and reliably serve customers in the state of Alaska, said Tesoro CEO Greg Goff in a statement. “We have been part of the Alaska community since 1969 and over the last five years we have invested $300 million in our Alaska facilities. We look forward to continuing our operations in the state.” Under the deal Tesoro will acquire Flint Hllls’ wholesale fuel marketing contracts in Alaska, a terminal in Anchorage with 580,000 barrels of storage capacity, truck racks and rail-loading facilities. A 22,500-barrel capacity jet fuel storage facility at the Fairbanks International Airport in the state’s Interior is also included as well as access to rail offloading facilities in Fairbanks that will provide Tesoro better access to the Interior market, according to the company’s statement. The transaction is expected to close in 60 days, Tesoro said. No purchase price was given. Tesoro has been supplying diesel and jet fuel to Flint Hills for that company’s Interior Alaska customers since Flint Hills shut down operations at its refinery at North Pole, east of Fairbanks. “What’s important to us is to be as close to our customers are possible, and this transaction allows us to connect our refinery more efficiently to people we serve in Fairbanks,” through Flint Hills, said Nate Weeks, Tesoro’s vice president for strategy and business development. Tesoro has been investing corporate-wide in infrastructure and logistics in recent years and the new acquisition in Alaska fits that strategy, said Weeks. An important aspect of the purchase is that the former Flint Hills bulk fuel facilities and logistics chain will be open to third parties to use under contract, which is not currently possible with Flint Hills, Weeks said. As an example, a large volume customer could contract to store its fuel in the Anchorage or Fairbanks fuel terminals. Now only Flint Hills-owned products are stored. Tesoro does this at many of its other Lower 48 terminals and even at storage facilities near its Nikiski refinery. “Obviously this is on a space-available basis, but we want to make it available because there is limited fuel storage capacity in the market and we don’t want to appear to be choking off competition by buying more storage capacity,” he said. Flint Hills’ refinery was closed mainly for economic reasons and Flint Hills would like to sell the refinery, the company has said, but buyers are reluctant because of potential liability for soil and groundwater contamination at the site. Flint Hills is currently engaged in a protracted negotiation with Williams Co., a previous owner of the refinery, over cleanup costs. Tesoro’s Nikiski refinery has a capacity to process up to 72,000 barrels per day of crude oil and makes a full range of products including gasoline, jet fuel and ultra-low sulfur diesel. The Nikiski refinery is connected to Anchorage with a 69-mile, 48,000 barrels-per-day pipeline, which gives the company the ability to ship jet fuel to air carrier customers at Ted Stevens Anchorage International Airport by pipeline. The Flint Hills refinery in Fairbanks, in contrast, could make jet fuel and gasoline but not ultra-low sulfur diesel, which put the plant at a competitive disadvantage. Flint Hills also had to ship its jet fuel to Anchorage, to customers at the airport, by rail, which is less efficient than Tesoro can do with its pipeline. At one time Tesoro considered closing its Nikiski refinery because of high costs and supplying Alaska customers from Washington State but the plan was shelved. The Nikiski refinery is now benefitting from a surge of new oil production in Cook Inlet, which allows Tesoro to reduce imports of crude from other regions. The refinery was originally designed to process Cook Inlet crude. Tim Bradner can be reached at [email protected]

Anchorage port contractor claims no liability in failed project

A key subcontractor in Anchorage’s failed port expansion project wants out of a lawsuit first filed by the Municipality of Anchorage because it claims the city has no jurisdiction to recover lost money. Attorneys for Quality Asphalt and Paving, the contractor that led construction work at the Port of Anchorage in the late 2000s, argued in U.S. District Court of Alaska Nov. 20 that QAP already settled claims related to the project with Integrated Concepts and Research Corp., or ICRC. ICRC managed the project to update and expand dock and shore side facilities at Anchorage’s aging port on behalf of the U.S. Maritime Administration, or MARAD, a federal Department of Transportation agency commissioned by the municipality to oversee the project. The Port of Anchorage Intermodal Expansion Project began in 2003 as a $210 million endeavor, but problems installing the patented open cell sheet pile system chosen to build the docks exploded project costs over time.  Construction work at the port ceased in 2010. Ultimately MARAD spent $302 million of the money Anchorage, the State of Alaska and the federal government contributed to the project.  The city has about $130 million remaining from $439 million appropriated for the work and has begun a scaled back plan known as the Anchorage Port Modernization Project. QAP attorney Michael Geraghty said during the Nov. 20 hearing that a 2012 settlement in which MARAD paid ICRC $11.3 million for QAP’s and MKB’s work released the contractors’ claims and effectively ended their ties to the project. The municipality has said it was not party to the settlement and was even unaware of it at the time it was reached. Attorneys for the municipality have said Anchorage is looking to recoup more than $300 million in two outstanding lawsuits, one initially filed in 2013 against ICRC, project designer PND Engineers Inc. and CH2M, which purchased project consultant VECO Alaska, and another suit filed last year against MARAD in Federal Claims Court. By partnering with MARAD to execute the project on behalf of Anchorage, the municipality subjected itself to federal contracting guidelines that place responsibility for delivery with MARAD, Geraghty argued.  “You’re letting someone else decide if that work is acceptable for your benefit,” in the federal contracting process, he said. Geraghty also noted it should not be lost that the municipality has not submitted claims against QAP; rather, PND filed a third-party suit against the subcontractors. PND has long claimed the problems with the disastrous project come down to shoddy installation of its proprietary sheet pile design, not its suitability for the site. QAP and MKB are still waiting for PND to clarify its case against the contractors. The subcontractors contend the problems were issues of engineering and constructability and those responsibilities fall on the owner of the project, the municipality. QAP filed a motion for summary judgment in the case in August — the motion argued Nov. 20. Geraghty furthered his point by noting what he considers a simple conflict in the municipality’s stance; Anchorage is attempting to recover the same damages through its separate lawsuits against MARAD and the private project participants. Municipal counsel Donald Featherstun said that there are many material facts in dispute yet in this case; summary judgment can only be rendered when the facts are not in dispute and the only questions are interpretations of the laws at issue.  “The arena of government contracts is enormously complicated,” Featherstun said. He also contended that if QAP is allowed to walk away as a subcontractor without potential liability, the viability municipality’s case against the rest of the defendants goes too. Featherstun emphasized the point that the municipality was kept in the dark regarding 2012 settlement between MARAD and ICRC. “In effect, they were all hiding from (the municipality),” he said. Geraghty rebutted by asking why the municipality would sue MARAD and at the same time claim that MARAD released itself from claims through the settlement. Claiming a need to sort out federal contracting complexities as a reason for QAP to continue in the case is “a deliberate attempt to sandbag the court,” Geraghty said. A trial in the suit first against ICRC, PND and CH2M was once set for October of this year, but is now scheduled for September 2016. Elwood Brehmer can be reached at [email protected]

Independent power producers cheer RCA rules revisions

Alaska’s independent power producers are claiming victory over regulatory changes that they say will encourage investment in renewable energy projects. The Regulatory Commission of Alaska on Nov. 20 finalized revisions to state regulations pertaining to how electric utilities calculate their cost of power and mandating them to purchase power from economically viable third-party sources. Alaska Independent Power Producers Association Director Duff Mitchell said the changes simply bring Alaska’s scheme in line with Federal Energy Regulatory Commission, or FERC, regulations followed in the Lower 48. “What this does is it allows independent power producers and qualifying facilities to sit at the table. The elements of a fair playing field is what this creates,” Mitchell said. The state framework governing power purchases had not been updated since 1982. Sponsors of several renewable energy projects across Alaska felt those regulations allowed utilities to discriminately purchase power from their own generation sources regardless of potential cost savings — a power grab to retain control of the state’s electric market, the independent producers claim. The revisions require utilities to use an incremental avoided cost methodology to determine their cost of power, which mirrors FERC requirements, versus the historical option to choose an average avoided cost model. The Nov. 20 final order was the culmination of a public rulemaking process that took more than two years to complete. FERC regulates Lower 48 utilities because the electric grid crosses borders and connects states. Alaska Railbelt electric network and many smaller grids are cut off from the rest of the country, which removes FERC’s jurisdiction on the matters in the state. Given an option, electric utilities will almost always draw power from several generation sources at once as a result of need or preference, usually both. Multiple sources of power are often a necessity for larger utilities that can’t get ample supply from a sole generation plant. Multiple sources also provide redundancy in the system, which helps a utility keep the lights on if one source should drop offline for any reason. In an incremental avoided cost model, a utility calculates the cost of each power source individually and tries to limit the amount of power purchased from its most expensive source. If a less expensive source becomes available, the most expensive power is turned off, or at least throttled back. An average avoided cost model allows utilities to average the cost of all its power generation and purchase power from another source only if it is less expensive than the averaged cost. Mike Craft, owner of Alaska Environmental Power, a small wind farm near Delta Junction, has long said he would build more turbines to his two-windmill operation if Alaska utilities would relax their hold on the market. “Alaska’s outdated regulations were a big factor holding up the expansion of our wind generation facility in Delta Junction,” Craft said in a release. “This ruling will help us move forward and benefit the community by displacing even more expensive diesel fuel, reducing air pollution, and improving energy security in Interior Alaska.” Cook Inlet Region Inc. wind power manager Suzanne Gibson said the decision should help larger projects, such as CIRI’s Fire Island Wind farm, which has had difficulty obtaining a power purchase agreement with utilities needed to continue with planned expansions. The state’s few larger electric utilities — some of the only ones with power generation options — have said they are always looking for less expensive power, but the average avoided cost model allows them to better calculate the true costs of variable renewable sources, particularly wind power in Alaska. Managing other power generation to match the clean and cheap but fickle nature of wind power adds hidden costs that also vary, so averaging those costs assures a utility it is buying a balance of cheap and stable power, utility leaders have said. Alaska Power Association Executive Director Crystal Enkvist said some of her members disagree with aspects of the regulations and didn’t think the power-cost revisions were necessary, but added that regulatory clarity is always beneficial. “We can understand the commission’s desire to directly align the RCA regulations with the language of the FERC regulations,” Enkvist said. The Alaska Power Association represents 21 electric utilities across the state that are active members in the organization. Its members include four of the large Railbelt utilities. The new regime further mirrors FERC standards by eliminating a distinction between firm and non-firm power — the difference in controlled generation such as natural gas- and oil-fired power plants or large hydropower and variable, often renewable power sources. Mitchell said bluntly that implementing variable power sources into generation is the responsibility of the utilities that must simply follow the law. “Utilities don’t get special treatment down south so why are ours?” he said. The biggest positive for Alaska could come from not what the regulations require, but what they encourage, according to Mitchell. Aligning Alaska’s electric purchase requirements with the rest of the country removes regulatory uncertainty for investors interested in the potential for expanded renewable power in the state, he said. By mandating utilities to purchase power on an incremental cost basis, investors will be assured that power from financially feasible projects will be purchased, he added. CIRI’s Gibson agreed in a formal statement. “The RCA’s decision helps remove impediments for renewable energy development projects, and it will make it more feasible for Native corporations and other independent power producers to invest millions of dollars of private capital to help stabilize rates and develop a clean and reliable energy system for Alaska,” she said. Mitchell said further revisions are needed to relax regulations on small windmills and other power generation for private use, but the Nov. 20 order was a major step forward. “We don’t like federal overreach. This eliminates some of our state overreach,” he said. Elwood Brehmer can be reached at [email protected]

Alaska USA leads a strong third quarter for CUs

Alaska’s six biggest credit unions had another beefy quarter, on average, though delinquent loans and foreclosures cut into the bottom line for an unlucky few. Overall, the six largest credit unions increased their collective net income 39 percent compared to last year to $52.7 million, up from $38 million. Total assets grew 10 percent year-over-year, topping $8.5 billion. Each financial institution grew its loan portfolio, for a total $6.4 billion. Alaska USA, the state’s largest credit union, gained the bulk of the overall third quarter net income, up to $39.5 million in 2015, a $13.6 million gain. The company grew its total loans $650 million. This follows a strong second quarter, where net income shot up 54 percent year over year. Denali Alaskan led the pack in growth rate, despite holding $900,000 more in delinquent loans than in the same quarter 2014. The credit union vaulted its net income over 200 percent year-over-year to $4.9 million. Matanuska Valley credit union made an 82 percent gain as well, breaking the $3 million mark for the quarter, driven by a $40 million total loan increase and 21 percent reduction in delinquent loans. Not all were as fortunate. Credit Union 1 saw a 39 percent net income decline for the quarter, driven by a $1.5 million spike in delinquent loans over last year. Spirit of Alaska’s income dropped 23 percent, saddled with $900,000 in foreclosed property it didn’t have in 2014. This is the second quarter in a row foreclosed properties have bitten chunks from the credit union. Second quarter net income decreased 33 percent to $349,000, having lost $2.1 million in loans and gained $1.2 million in foreclosed property. Juneau’s True North Credit Union has had a rough year as well. Third quarterly net income plummeted over 350 percent year over year to $155,160, down from more than $700,000, with $140,000 more in foreclosures than last year. This marks the second quarter of declining income; net income shrank from $351,000 in second quarter 2014 to just more than $12,000 in 2015. DJ Summers can be reached at [email protected]

ConocoPhillips only successful bidder at federal lease sale

In contrast to a state areawide lease sale held the same day, bidding was very light at a federal U.S. Bureau of Land Management sale in the National Petroleum Reserve-Alaska Nov. 18. NPR-A is the large federal reserve west of state lands on the North Slope,. Only six bids were submitted for six tracts, all by ConocoPhillips. The acreage bid on was adjacent to leases already held by ConocoPhillips and Anadarko Petroleum, a minority partner. In total, BLM netted $788,680 in total high bids in the sale, half of which will be shared with the state of Alaska under terms of a 1975 federal law. ConocoPhillips’ high bid per acre was $31.91, and the highest bid for a lease was $199,760, BLM officials said. The federal sale was area-wide, like the state sale, meaning that all unleased tracts in the area open for bidding were offered. Most of the area open to bids in the sale was of moderate potential for oil and gas discoveries. Lands with higher potential to the north of the lands offered, and nearer the coast, were off-limits to bidding because of the environmental sensitivities of the area, which is a waterfowl breeding area during summer. ConocoPhillips also announced Nov. 18 it would proceed with development of its Greater Moose’s Tooth, or GMT-1 project, in the area near the new leases acquired. The company is also working on a prospective GMT-2 a few miles further into NPR-A from GMT-1. The 23-million-acre NPR-A was created in 1923 by President Warren Harding as a petroleum reserve for the U.S. Navy, although it had no known oil deposits at the time. Designated as Naval Petroleum Reserve No. 4, the region has had several phases of exploration beginning with a Navy-led effort in years following World War II that was followed by a program managed by the U.S. Geological Service. In 1975 the reserve was transferred from the Navy to the U.S. Interior Department and re-designated the National Petroleum Reserve-Alaska. In the 1980s, parts of NPR-A were opened to leasing by private companies and several exploration wells were drilled over the following years. Modest oil and gas discoveries were made in the government-led exploration including a small oil field at Umiat, in the reserve’s southeast, and a gas field at Barrow, which now supplies gas to the community. Federal government geologists now believe the NPR-A has only modest potential for oil discoveries but more substantial prospects for natural gas. Tim Bradner can be reached at [email protected]  

BlueCrest set for April production at Cosmo

BlueCrest Energy will begin oil production next April at its Cosmopolitan project in Cook Inlet and will initially be trucking crude oil to the Tesoro Alaska refinery at Nikiski, company CEO Benjamin Johnson told the Journal. Cosmopolitan is an offshore oil and gas deposit three miles off Anchor Point, on the east side of Cook Inlet, that is owned 100 percent by BlueCrest. Oil will be produced through production wells drilled from shore. BlueCrest, an independent oil and gas company, is based in Fort Worth, Texas. Johnson would give no production or reserve estimates but said previously that the company has expanded previous estimates of oil and gas reserves after new drilling in 2013. “We are not able to disclose reserves but I can tell you that our initial expectations of oil rate start out at several hundred barrels per day from the existing one well and grow to several thousand barrels per day as we drill more wells,” Johnson said. An independent estimate of Cosmopolitan’s reserves done in 2012 and based on previous drilling, estimated the field to hold proved and probable reserves of approximately 55.2 million barrels of oil equivalent. The estimate was based on exploration by Cosmopolitan’s previous owners, Pioneer Natural Resources and ARCO Alaska. The 2013 well drilled by BlueCrest and Buccaneer Energy, then a 25 percent minority partner, confirmed the presence of the gas reservoir overlying the oil and further tested the deeper oil deposit. BlueCrest acquired Buccaneer’s 25 percent share before Buccaneer filed for bankruptcy. Meanwhile, BlueCrest is bringing new equipment to Alaska. “We’ll be bringing a new drill rig to Cook Inlet in January to drill the oil production wells. It will be the largest rig in Alaska,” at 3,000 horsepower and a 1.5-million-pound last load rating, Johnson said. A large rig is needed to drill the high-angle, deviated production wells. Houston-based Oderco Inc., a major manufacturer of drilling rigs, is constructing the rig for BlueCrest, Johnson said. All American Oilfield LLC, an Alaska-based drilling contractor, will operate the rig. “All American has a lot of experience in the Cook Inlet and are well prepared to operate our rig. Many of their workers actually live close to the Anchor Point drill site,” Johnson said. All American is owned by Chugach Alaska Corp., an Alaska Native regional corporation. Onshore facilities to support the drilling and process the crude oil are already installed on a 38-acre pad, Johnson said. “We will be trucking the oil to Tesoro (the company’s refinery near Kenai). Once we have drilled more wells we may look into building a pipeline,” Johnson said. Until then, however, BlueCrest expects the number of oil trucks on the road to be minimal, he said. BlueCrest also plans development of a shallower gas deposit but that will require installation of two gas production platforms with pipelines built to shore, Johnson said. The gas reservoirs are too shallow to tap with high angle production wells from shore, in contrast with the oil reservoir, which is deeper. Gas development is on hold for now, however, until the state clarifies its position on an oil and gas development tax credit program that is now being reviewed, Johnson said. If all goes as planned, however, the drilling of gas production wells will begin in 2016 using Spartan Drilling Co.’s Spartan 151 jack-up rig now in winter storage at Seward, a south Alaska port, Johnson said. Gas production could begin in 2018. BlueCrest is in a partnership with California-based WestPac Midstream on the gas development. WestPac will handle marketing of the gas to Alaska utilities and industrial customers, he said. The gas development schedule is contingent on the state of Alaska not making major changes in its oil and gas development tax program, which is under review by the state. Gov. Bill Walker ordered a review and changes to the program earlier this year because of its growing expense, but also said that some form of state oil and gas development incentives will remain. He deferred payment of some $200 million in credits in the current fiscal year. “If we are able to proceed with the offshore gas development, we expect each platform will produce approximately 35 million cubic feet per day for the first few years before declining in rate. We will start with one platform and then add the second as gas supplies are needed,” Johnson said. Tim Bradner can be reached at [email protected]  

Murkowski puts hold on nominee over GM labeling

Alaska’s senior senator isn’t backing off her fight to label genetically modified salmon, and she said Monday she’ll go as far as blocking confirmation of the Food and Drug Administration’s next commissioner. In a statement released Monday, Sen. Lisa Murkowski, R-Alaska, said she “will not stand back and just watch these genetically engineered creatures be placed in our kitchens and on our tables without a fight. The “creatures” Murkowski refers to are the genetically engineered Atlantic salmon approved for human consumption by the FDA on Nov. 19. The fish, engineered by the Massachusetts-based company AquaBounty, grow at twice the rate of farm-raised Atlantic salmon due to a growth hormone gene from Pacific Chinook salmon and a genetic switch from the ocean pout, which keeps the growth hormone gene active year-round. Murkowski said she intends to block the confirmation of Dr. Robert Califf as the new FDA chief as a way to continue her pursuit of mandatory labeling of “frankenfish.” Mike Anderson, the spokesman for Sen. Dan Sullivan, R-Alaska, said by email the state’s junior senator “supports Senator Murkowski’s efforts on this issue – which includes placing a hold on the FDA nominee.” Added Anderson, “At a minimum — these newly approved Frankenfish must (be) properly labeled so that Americans know exactly where their salmon came from.” The Alaska delegation and other lawmakers in the Pacific Northwest, whose fisheries stand the most to lose when the modified salmon hit market shelves in a couple of years, pushed for labeling regulations during the FDA’s approval process of AquaBounty’s AquAdvantage Salmon. Concerns are that when the modified fish are displayed next to the real thing, consumers won’t know which is which. “I am furious about this decision, but now I must do everything I can to make sure it is labeled — consumers have a right to know what it is they are eating,” Murkowski said. The FDA has said the modified fish don’t require additional labeling because there’s no nutritional difference between them and natural fish. “There are no biologically relevant differences in the nutritional profile of AquAdvantage Salmon compared to that of other farm-raised Atlantic salmon,” the Associated Press reported the agency as saying. Murkowski doesn’t see it that way. “Genetically modifying salmon is messing with nature’s perfect brain food,” she said. “The real thing is not only the safe choice, but it’s the best thing.” In 2013, a New York Times poll found three-quarters of Americans had concerns about genetically engineered food, and 93 percent said they supported laws requiring the labeling of such foods. Murkowski also said she would continue supporting stores that will refuse to carry AquAdvantage Salmon. To date those stores include Costco, Target, Safeway, Trader Joe’s, Whole Foods and Kroger.

The Bookworm Sez: Attracting, and keeping, customers

A lasso just won’t do it. Neither will a harness, a come-along, or a whole pack of sheepdogs. No, there are better ways to get customers to your door, but what are they? What’s the secret to snaring new clients?  Author Joe Calloway knows, and in his new book “Magnetic: The Art of Attracting Business,” he draws it out. A long line down the sidewalk. For a business owner, there’s nothing better than to see customers waiting to give you their money. It’s irresistible and, says Joe Calloway, it’s “what magnetic looks like.” Magnetic is a way of business that attracts customers old and new. It’s a method for pulling in new clients by tapping into “the greatest marketing program of all time,” also known as word of mouth. “The single most important factor in the future success of your business,” he says,” is this: what your customers tell people about their experience with you.” Making sure that it’s positive is “the single most important thing… to grow your business.” That’s done by determining the three things you want your customers to say about you, and the three things that you “must get right every time.” Those, says Calloway, are the “guiding elements of” a successful business. They can’t be general; they must be specific and “intentional” because you can’t, of course, control people but you can control your corporation and its culture. Don’t rest on being “different,” however; Calloway says that being better is the key to magnetism. It’s also important to know that the greatest threat is irrelevancy: remember that your customers are connected, most will research you online, they know about the next new thing (even if you don’t), they have other choices in purchasing, and they won’t settle for anything less than immediacy. Don’t, therefore, sit on an email or tweet from a customer; to do so is to lose out. Finally, remember that while you should work to “re-earn” customer loyalty every day, there will be times when “no” is the proper response to a client request. Cultivate a “filter” and don’t feel guilty when you listen to it. Common-sense stuff?  Yes, it is, and somewhat repetitive but be patient. Once you get to the nitty-gritty of what’s inside “Magnetic,” there’s plenty to learn. Using his own business as an example, boosted by a plethora of stories from colleagues, author Joe Calloway gives readers sure-fire ways of changing the inside of a business in order to affect its outside success. There are no accidents or incidentals in the teaching in this book; Calloway is deliberate and, as it seems, politely short with problem clients. He doesn’t apparently suffer fools gladly; readers might actually find a few surprises on that note, which may lead to real empowerment. The repetition here can be a distraction, but I have to say that I learned quite a bit from this book. If, in fact, you’re looking to gain clients with the right amount of efficiency, I think you’ll find “Magnetic” to be quite attractive. Terri Schlichenmeyer is the author of The Bookworm Sez, which is published in more than 200 newspapers and 50 magazines throughout the U.S. and Canada. Schlichenmeyer may be reached at [email protected]

Bristol Bay permit stacking, plan revisions on board agenda

The Alaska Board of Fisheries will hold its last meeting of 2015 from Dec. 2-8 in Anchorage to discuss changes to the management of Bristol Bay finfish, largely sockeye salmon, the region’s largest moneymaker. The board has 70 proposals to consider, the bulk of which concern permit stacking for commercial fishermen and amending district management plans, boundaries, and permit requirements. Bristol Bay is the largest natural sockeye run in the world. The resulting fishery, the most valuable in the state, is the region’s largest source of employment. The board meets once every three years for each region under its control. Permit stacking Nine of the proposals, submitted by members of the public or by the board’s regional advisory councils, request that Bristol Bay fishermen be allowed to hold several commercial permits at once. Currently, setnetters are allowed to hold two permits but only allowed to fish one. Driftnetters are held to similar restrictions. The unpredictable value of the fishery, they said, has made it uneconomical to only fish one setnet or driftnet permit. In some cases transfer restrictions prevent families from making full use of their existing permits. Such permit stacking was allowed only between 2009-2012, then discontinued by the board. Permit stacking, the board said, raised the price of permits and made them less available to Bristol Bay locals. Setnetters said the board should reinstate the program, and that fears were overblown. “The program worked like it was supposed to,” wrote Kim Rice, setnet permit holder. “There were no problems. We had over 82 percent positive comments at the last board cycle for Bristol Bay. It was a sound program that allowed setnet fishers to not have to transfer between family members all the time.” Bristol Bay locals have felt the region’s unpredictability sharply in 2015. After a massive season in 2014 left vendors stockpiled with extra sockeye salmon, the equally impressive but oddly timed 2015 sockeye run only paid out 50 cents per pound to fishermen. This is half the average price. Bristol Bay fishermen have circulated a petition asking for more transparent interactions with processors to ensure fair treatment. Management plans and boundaries Residents of Port Heiden are asking the board to redefine boundary lines so their members can participate in Bristol Bay fisheries. Other members of the public are asking the board to redraw boundary lines or create new areas to allow more fishing opportunity and decrease competition among permit holders in cramped areas. Also geared towards cutting competitiveness, the Togiak Advisory Committee is suggesting the board prohibit tenders, fish buyers, and fish transport vessels from anchoring within 1,500 feet of set gillnet sites. Tenders, the committee says, often encroach “upon set net sites to impede drifters from drifting legal distances from set net sites.” Other proposals would establish minimum distance requirements for specific districts. An argument is also taking place over registration times. In the Egegik district, locals say the registration dates to fish in their district needs to be pushed back, as incoming fishermen will dart between several districts during the season and make fishing more competitive and more dangerous. Incoming fishermen, however, are proposing several looser registration requirements, arguing they need as much leeway as possible to go from one fish-heavy district to another and maximize their income. Several village councils are requesting that the board create individual salmon management plans for new areas, including the Alagnak River, Kvichak River, and a special harvest area in the Graveyard Creek area. The Alaska Department of Fish and Game is proposing several upkeep items, including updating salmon management plans to reflect in-river run goals and escapement goals for Nushagak coho salmon and Togiak sockeye salmon.

Movers & Shakers 11/29/15

Jillanne Inglis was appointed as Americans with Disabilities Act Coordinator for the Municipality of Anchorage. Inglis will facilitate the full implementation of the ADA within the municipality as well as monitor compliance with the laws in the areas of physical accessibility and municipal services. Chad Hufford, a PlanMember advisor with Veritas Wealth Management in Anchorage, has been nominated as a semifinalist for the third Elite Advisor Award, an annual recognition of excellence in the 403(b) and 457(b) retirement industry. The 2016 award is sponsored by the National Tax-Deferred Savings Association. With more than $70 million of assets under management, Veritas Wealth Management, a PlanMember Financial Center, helps more than a thousand individual and corporate clients throughout Alaska, including hospitals and school systems statewide. Deadline for Movers & Shakers is each Monday at noon. Announcements are published in the order received on a space-available basis. For information, contact Andrew Jensen at (907) 275-2165 or by e-mail at [email protected]

Schedule slipping on pre-FEED work, critical agreements

State officials say they are worried that the schedule for the big Alaska LNG Project could slip because of delays by North Slope producers in reaching key agreements. However, the state itself is contributing to some of the delay, as well as part of the cost increase of the pre-front end engineering and design, or pre-FEED, sources familiar with the project say.  Gov. Bill Walker had hoped to have the agreements earlier this fall in time for legislative approval in a special session of the Legislature held in late October, but that did not happen. The governor did present a proposal that the state buy out the interests of TransCanada Corp. in the project, which lawmakers approved. Several big issues remain, however. “We’re not making progress on the commercial agreements needed and this could be costly to the project timeline,” Alaska Natural Resources Deputy Commissioner Marty Rutherford said in a recent briefing to legislators. The Alaska LNG Project involves an 800-mile, 42-inch pipeline from the North Slope to a large gas liquefaction plant in southern Alaska, along with a large gas treatment plant on the North Slope that would mainly remove carbon dioxide from the produced gas. AGDC is the state corporation that represents Alaska’s 25 percent interest in Alaska LNG Project. The project has been given federal approvals to export up to 20 million tons of LNG yearly. Construction costs are estimated between $45 billion and $65 billion. Frequent changes in the state’s gas negotiating team by Walker have created uncertainty for the industry negotiating partners, the sources said, who asked not to be identified. The governor has made three changes of his lead negotiator since earlier this year. Rutherford, at DNR, was the lead of the gas team until late spring, when Walker requested that Audie Setters, an experienced, retired Chevron LNG official, take over the role. Setters had been working as a consultant for the state. He was replaced in the summer by Rigdon Boykin, a retired California attorney who now lives in South Carolina, and who had worked with the governor in prior years on the Alaska Gasline Port Authority, a group Walker headed. Boykin was sent home to South Carolina by Walker the week of Nov. 9. Boykin’s departure was not announced and no replacement was named but sources told the Journal that key decisions on the negotiations are now being made by three officials: Attorney General Craig Richards, Revenue Commissioner Randy Hoffbeck and Rutherford. Timeline slipping The schedule is slipping in other ways. It looks now that preliminary engineering now underway will not be complete until mid-2016, instead of late 2015 or early 2016 as was hoped earlier. Part of that delay is due to Walker, too. Late in the summer the governor requested the Alaska LNG Project team to reevaluate the use of 48-inch diameter pipe rather than 42-inch pipe. Industry partners had earlier concluded that 42-inch pipe was optimal for shipping the known gas reserves, and that the pipe could be manufactured by several suppliers including steel mills in North America. Walker argued, however, that there will eventually be much more gas found on the North Slope and that building in extra capacity, with bigger pipe, will be more efficient in the long run than handling expansions by building more compressor stations. Industry partners in Alaska LNG agreed, some reluctantly, to the reassessment of the bigger pipe, which is adding $30 million to the pre-FEED cost and delaying its results. The analysis of 48-inch pipe against 42-inch pipe is to be finished by March with the final evaluation to be done by May, according to sources. The decision on the pipe size must be made before the decision to move to front-end engineering and design, or FEED, which is currently estimated to cost the project partners a combined $2 billion, of which the state would be responsible for a quarter, equivalent to its ownership stake. All that means the FEED decision could be delayed to late 2016, Rutherford told legislators in the briefing. However, industry partners in the gas project may also wait to see the outcome of the November 2016 state general election. That’s when voters will decide whether to approve a necessary constitutional amendment to allow the state to enter long-term fiscal agreements with the producers for the gas project. Dan Fauske, CEO of the Alaska Gasline Development Corp., or AGDC, told its board in a briefing Nov. 12 that while the hoped-for schedule is slipping it is still within an overall timeline laid out by the partners, which calls for beginning of FEED no later than July 2017. This could still allow a final investment decision in 2019 and project completion in 2025, which is the current plan. Rutherford said the most critical agreements the governor wants by early December are a gas balancing agreement among North Slope producers BP, ConocoPhillips and ExxonMobil, who are partners with the state in the project, and a separate agreement to cover contingencies over a partner withdrawing from the project, she said. Withdrawal, gas-balancing agreements The partner withdrawal agreement has been requested by Walker, who is concerned that if a partner pulls out of the project it could stymie others in proceeding. Rutherford said the governor is pushing the producers to have the gas balancing and withdrawal agreements by Dec. 4, the date on which the project members are to vote to approve the 2016 budgets for completing the preliminary engineering. “Meeting this goal will be a significant challenge,” Rutherford said. AGDC Operations Vice President Joe Dubler said the balancing agreement is proving to be complex because gas for the project will come from two North Slope fields, Prudhoe Bay and Point Thomson, and there are differing percentages of ownership by the producers. “They’ll get there, but it is taking time,” Dubler said in the Nov. 12 briefing to AGDC’s board. Agreements for withdrawn partners are normal in big projects but Walker wants an added provision that guarantees that the withdrawing party will commit gas to the project, meaning that it would agree to sell to a buyer. That is proving to be very difficult in the negotiations because it essentially involves an agreement to sell gas to an unknown buyer for an unknown price. One option is that the state itself could buy the gas now owned by a withdrawing partner, but that could entail huge financial risks for the state, advisors to the Legislature have warned lawmakers. Dubler told AGDC’s board Nov. 12 that the partners are working hard on an agreement and hope to have it by the governor’s Dec. 4 deadline. Fauske said the Alaska LNG Project partners could vote on the 2016 pre-FEED budget without the withdrawn parties and gas balancing agreements but that the governor prefers to have them done. The state itself will vote on the budget, as a partner. Deadline for amendment looms Meanwhile, Rutherford said a hard deadline the project faces is June 24, 2016. That is the day a proposed constitutional amendment on fiscal terms must be sent to the Division of Elections to appear on the November general election ballot. By that that time Legislature must also have ratified the agreement between the state and North Slope gas producers that will fix state tax and royalty terms for a period of years, presumably the length of long-term contracts to sell Alaska LNG. To be legal, the fiscal agreement will require an amendment to the state constitution. The constitution currently forbids the Legislature approving a guarantee that state taxes won’t change. North Slope gas producers say the fiscal term deal is a “must-have” because of Alaska’s past record of frequently changing state taxes on oil production. However, fiscal terms deal is proving to be another big sticking point in current negotiations, the governor has said in recent briefings. At least one Slope producer is pushing to have it cover taxes on crude oil as well as gas, Walker said. The state is pushing back on that. Assuming the fiscal terms deal agreement is eventually concluded it will have to be ratified by the Legislature next spring, most likely in an April or May special session following the end of state lawmakers’ regular 2016 session. A constitutional amendment requires a two-thirds vote of both the state House and Senate and that must be done by June 20.  “If we don’t meet that the entire project schedule begins to slip,” Rutherford said, because the next general election for ratification of the amendment is November 2018, which would effectively delay the project two years. ASAP update In other developments, managers of AGDC told its board that work is continuing to complete a supplemental environmental impact statement, or SEIS, on the state’s backup pipeline plan, the 36-inch Alaska Stand Alone Project, or ASAP. This is important because while ASAP itself is on hold (it is a backup in case the larger Alaska LNG Project doesn’t go) the work being done for the SEIS and the U.S. Army Corps of Engineers Section 404 wetlands permit is transferable to the larger project. Dave Cruz, an AGDC board member who heads the board’s technical committee, said there are no indications of any delay in the Corps of Engineers issuing the final supplemental EIS, its Record of Decision, as well as the Section 404 permit and other permits by fall 2016, most likely October. A right-of-way across 100 miles of federal lands would also be issued by the U.S. Bureau of Land Management as a part of the other federal documents. “Those permits are transferable to Alaska LNG even though there is a six-inch difference between the 36-inch pipe (of ASAP) and the 42-inch pipe (of Alaska LNG),” Cruz told the board. What’s important is that the physical footprint of the two pipeline projects, including the space needed for construction equipment, are similar, which should be the case for 36-inch or 42-inch pipe, he said. “There’s still some debate on this but it shouldn’t be a problem,” for the regulatory agencies, Cruz said. However, 48-inch pipe may be a different matter, he acknowledged. If 48-inch pipe is decided on and the Federal Energy Regulatory Commission, which is lead agency on the federal EIS for Alaska LNG, decided that the larger pipe represents a “substantial” change, at least some of the work on the 36-inch SEIS won’t be usable. A critical factor, however, is that the routes of the two projects, ASAP and Alaska LNG, have been exactly aligned from Prudhoe Bay to a location in the Matanuska-Susitna Borough where the bigger pipeline would veer off toward a Cook Inlet crossing to the Kenai Peninsula.  ASAP would end in the Mat-Su Borough where it would connect with existing regional pipelines. Meanwhile, AGDC is finishing up other parts of the ASAP project that will be useful to Alaska LNG. This includes a fine-tuning of information gathered to support final engineering on the ASAP project including a c“works package” of equipment needed for construction, AGDC Engineering Vice President Frank Richards told the board that information is available from a Request for Information the state corporation had sent out to vendors for estimates equipment packages. Material sites for construction were also identified. “They have been looking at equipment, parts, camps, pads–those early activities that will need to be done well in advance of construction. There will also be development of material sites and the opening of access roads,” AGDC spokesman Miles Baker said. This information will be useful to the Alaska LNG project, he said. “There may be some differences in equipment due to the differences in pipe size, 36-inch instead of 42-inch, but the civil works side of the project will be roughly the same,” for both ASAP and the larger Alaska LNG Baker said. Moving to 48-inch pipe would require heavier equipment and more updated information, however. “We would have four mainline contractors (on different parts of the 800-mile route) using similar equipment and working simultaneously to build the pipeline, and we need to make sure they are serviced and supplied,” Baker said. Tim Bradner can be reached at [email protected]

Lengthy to-do list remains for Alaska LNG negotiators

There is a long list of commercial issues yet to be resolved in the Alaska LNG Project negotiations but many of these may be combined, so the number of agreements, in the form of contracts, is yet to be determined, sources familiar with the negotiations have told the Journal. At the top of the list are four items important to the state of Alaska, two of which Gov. Bill Walker hopes to see resolved by early December. They are: • Gas balancing agreement: Sometime called a gas supply agreement, which spells out how and when gas will be withdrawn from the two fields supplying Alaska LNG: the Prudhoe Bay and Point Thomson fields. This agreement is between the three Slope producers — ExxonMobil, BP and ConocoPhillips — and is complex because of differing ownership levels at the two fields. ExxonMobil and ConocoPhillips each own about 36 percent of the gas at Prudhoe, and BP another 26 percent. At Point Thomson, ExxonMobil and BP own about 93 percent of the gas and ConocoPhillips less than 5 percent. About 75 percent of the gas for the project is to come from Prudhoe and the remainder from Point Thomson. The gas at Prudhoe, unlike at Point Thomson, is used to enhance oil recovery. • Withdrawn partners agreement: This would spell out terms for a partner withdrawing from the project and clarify how the partner’s gas, as a producer, will still be available for purchase through the project. Other issues pending include: • Fiscal agreement: This would stipulate that state taxes on gas produced for the project would not change over the terms of LNG sales contracts, which could span 20 years to 25 years. Purchasers of the LNG will require this provision, or at least will ask producers to absorb any state tax increase, which the producers will not do. The state constitution currently forbids long-term tax deals, so a constitutional amendment will be needed. Sources have told the Journal that attorneys for the state and the companies are currently debating whether a narrowly-drawn constitutional amendment is possible, such as one that relates to specific contract terms, or whether the amendment will have to be more broadly written. Alaska voters are considered more likely to approve a narrowly-drawn amendment than a broadly-written approval. • Governance agreement: This would provide the long-term framework on how the project would be managed and how costs would be allocated. Decisions have to be made on whether a stand-alone operating entity, such as Alyeska Pipeline Service Co., would be created. This is needed by late 2016, the time that the project would move into final engineering, if that happens. As it has been described the governance agreement would guide the work on final engineering, construction and operations. • Expansion agreement: This is a request by the state, and it involves how a physical expansion of the project, such as if there were more gas to be shipped, would be funded and managed. Sources said this may wind up being rolled into the governance agreement. • PILT, impact payments: It was revealed Sept. 23 that the producers have agreed to pay the state $16.5 billion for property tax obligations and community construction impacts related to the Alaska LNG Project. Revenue Commissioner Randy Hoffbeck made the announcement during a Municipal Advisory Gas Project Review Board meeting in Fairbanks. Of the $16.5 billion sum, $800 million would be for community impact payments during construction. Afterwards, $15.7 billion would be payments in-lieu of tax, or PILT, substituted for property tax payments in project infrastructure and property holdings, according to Hoffbeck. The negotiated $800 million amount is a “fairly firm” number, Hoffbeck said, and would pay for increased public services — police, fire and other first responders — needed in communities along the project corridor that grow from an influx of construction workers. How the massive dollar figures will be allocated amongst the state and the communities affected by the project still needs to be worked out. Whether or not the state’s purchase of TransCanada Corp.’s share of the gas treatment plant and the pipeline — done after the PILT and impact amounts were announced — plays into how much money is distributed is another question Kenai Peninsula Borough Mayor Mike Navarre has raised. The board consists primarily of mayors of local governments along the project route from the North Slope to Nikiski on the Kenai Peninsula. The state commissioners of the Natural Resources, Revenue and Commerce departments also serve on the board. The next Municipal Advisory Gas Project Review Board meeting is scheduled for Dec. 7 in Anchorage. • Contract operator service agreement: This would govern how a company acting as project operator, currently ExxonMobil Corp. in the preliminary engineering now underway, would perform its duties. • Member services agreement: This could be a separate agreement, providing administrative services like independent accounting, to support the contract operator. This could be rolled into the contract operator service agreement. Sources told the Journal that ConocoPhillips has been asked to provide the administrative support function until decisions are made on a possible independent operating company. • Capacity release agreement: This would cover how an owner of capacity in the project, most likely a producer, would release it to other parties if there is spare capacity. The state wants this in place as an assurance to third party access, such as independent explorers. • In-state sales agreement: This is needed to spell out whether and how producers, or the state, will offer gas for in-state sales, such as to utilities. Sources told the Journal that the producers are not keen to supply in-state needs because they would prefer all of their gas go to long-term export customers, and that they would prefer that the state supplies in-state needs with its gas. The state is concerned that if it is the only supplier of in-state gas there will be huge political pressure to sell state gas at a discount. Having producers among the sellers of gas to in-state customers would provide a buffer against these kinds of pressures. • Financing of spur lines and gas conditioning facilities at gas take-off points: The Alaska LNG Project has agreed to at least five of these, but there could be more, as many as 20. The governor is pressing the producer members of Alaska LNG to allow the project to pay for these, including spur pipelines of several miles, such as will be needed to connect the Alaska LNG pipeline to Fairbanks. This is still an issue on the table. The producers thought that Alaska Gas Development Corp., the state gas corporation, was supposed to be responsible for this, which is spelled out in Senate Bill 138, the legislation providing the framework for state participation. So far, AGDC has funded the engineering and design of the “kits,” or facilities, needed at the takeoff points, but there have been no decisions made on where  the points will be except for one near Fairbanks, in the Matanuska-Susitna Borough and on the Kenai Peninsula. Who would fund the takeoff kits and spur lines is also undecided. Tim Bradner can be reached at [email protected] Journal reporter Elwood Brehmer contributed to this article.

Confidentiality regs get pushback from producers, AGDC

Who can see, and say, what has become a contentious issue as the Alaska LNG Project moves toward some key milestones. The state’s partners in the $45 billion-plus North Slope liquefied natural gas pipeline project, the Alaska Support Industry Alliance and Alaska Gasline Development Corp. leaders have all taken positions against draft regulations that would make public the contracts the state enters related to the project. The Alliance is a trade association that represents about 500 businesses that work in the state’s oil and gas and mining industries. The proposed confidentiality regulations, first presented at AGDC’s Aug. 13 board meeting, would keep financial reports, business plans and other proprietary information of partner companies private. However, contracts AGDC could enter into would be made public at least 10 days prior to the board meeting at which they would be considered. AGDC President Dan Fauske said in an interview that he takes issue with making contract terms public because the producer partners — BP, ConocoPhillips and ExxonMobil — do. The regulations are a “speed bump” that the project won’t be able to get over as they are currently written, Fauske said. “I just want agreements that enhance the development of this project — that the state’s happy and the producers are happy (with),” he said. The regulations were drafted primarily by the Attorney General’s office, in coordination with AGDC legal counsel, according to corporation spokesman Miles Baker. They are very similar to the confidentiality rules followed by the Alaska Industrial Development and Export Authority, which makes its contracts public. AIDEA typically acts as a state lender to private business, but has delved directly into smaller oil and gas business deals in recent years in Cook Inlet and on the North Slope. However, AIDEA often holds much of the leverage in its partnerships with smaller companies as the primary financer of a project, as opposed to AGDC through the State of Alaska, which just acquired 25 percent of the immense project. There is no timeline for the AGDC regulations to be adopted. AGDC board chair John Burns said at a Nov. 12 meeting that a committee consisting of board members Rick Halford, Dave Cruz, Joey Merrick and corporation attorney Ken Vassar would take up the regulations. “We are very cognizant of the (regulations) issue,” Burns said. All three producers submitted questions and comments expressing concern over how the draft confidentiality regulations would affect the progress of the Alaska LNG Project during a public comment period that closed Oct. 21. ExxonMobil Commercial Advisor Bill McMahon submitted a letter that states the producer is troubled by the proposed confidentiality guidelines and it believes they would prohibit AGDC from continuing in the project if they are adopted. “Disclosure of the commercial terms relating to the AK LNG Project would not only be to the competitive detriment of the AK LNG Project, but also would put the AK LNG participants at a significant disadvantage in commercial negotiations with potential LNG buyers, potential contractors, suppliers and vendors to the project and potential lenders,” McMahon stated. He added that the Legislature has already given AGDC authority to enter confidentiality agreements necessary for the project under House Bill 4 and Senate Bill 138, the legislation that formed AGDC and outlined the project process, respectively. ConocoPhillips Senior Lead Negotiator Patrick Flood noted in eight pages of formal comments that state participation in a competitive gas project is unique in the United States and echoed that the Legislature provided AGDC with broad powers to participate in the project. BP contends the proposed regulations would allow for information previously considered confidential to be released to the public without consent. The company signed a confidentiality agreement with AGDC May 9, 2014, according to its comments. “Public disclosure of this information could jeopardize the competitiveness of the Alaska LNG Project,” BP stated. “It would also deter third parties form disclosing their confidential information to all the Alaska LNG Project participants and impair the ability of the project participants to share technical and commercially sensitive information with each other.” Fauske, the former head of the Alaska Housing Finance Corp., and AGDC Vice President of Commercial Operations Joe Dubler, who served as AHFC’s chief financial officer before moving to the gasline project, both likened making AGDC’s contracts public with making public the mortgage term sheets AHFC has agreed to with thousands of Alaskans. Under AHFC regulations that information is kept private. “I think what’s being missed here in this whole thing is in a lot of cases it’s in the state’s best interest not to disclose that (confidential) information,” Dubler said. “When you’re talking about information your customers can use to determine what it cost you to produce the gas — when you sit down and negotiate with them — if they know what it cost to produce the gas, guess what they’re going to offer your for that gas: it’s not going to be a whole lot more than what it’s costing you.” According to a description of the draft regulations provided by AGDC, the corporation would continue to honor all third-party confidential agreements made prior to April 1, 2015. The regulations state that no contract the corporation enters after Dec. 1 to protect the confidentiality of information shall itself be treated as confidential. The confidentiality issue is festering as the state looks to secure financial agreements with the producers that will need to be in place before a constitutional amendment needed for the project can be approved by the Legislature. The Legislature needs to have the amendment wrapped up and ready for the fall election ballot by June 24 to meet statutory requirements or the whole timeline could be delayed two years. At the same time, the project is moving towards the end of the pre-front end engineering and design, or pre-FEED, stage later next year — the end of which will require significant decisions by all parties as to whether or not the project should continue. Fauske said the challenge with not signing strong confidentiality agreements is that what is deemed confidential by one party could be debated by another, slowing the whole process down. Currently, two AGDC board members, board chair Burns and Cruz, have signed confidentiality agreements. They signed the agreement that all corporation employees and board members signed prior to Gov. Bill Walker’s administration, according to AGDC’s Baker. That agreement binds those who have signed it to any confidentiality agreement the corporation enters into with third parties. In January, Walker fired three AGDC board members and ordered new board members not to sign the confidentiality agreement. Around the same time, Attorney General Craig Richards said in an interview with the Journal that the current requirement, which is still in place, keeps too much information from the public and that a new policy could be expected that would allow more open discussion of Alaska LNG Project issues while protecting certain private information. Walker has not signed a confidentiality agreement relating to the Alaska LNG Project, however he can review the same information that is available to the CEOs of the three producers, according to his spokeswoman Katie Marquette. Fauske said the Legislature appropriates all the money AGDC spends and what it will be spent on is vetted in committee hearings. “You trust the system that you have in place to work,” he said. “We’ve got to start acting more like business partners instead of regulators.” Elwood Brehmer can be reached at [email protected]

Kenai mayors offer $60K to lure Cook Inlet board meeting

If Alaska fishermen want coffee at the 2017 Upper Cook Inlet finfish meeting, the Alaska Board of Fisheries might have to change the location to the Kenai Peninsula. In a Nov. 16 letter to the Board of Fisheries, Kenai Peninsula Borough and City of Kenai mayors Mike Navarre and Pat Porter, and Soldotna Mayor Pete Sprague offered the board over $60,000 in service savings if the board were to hold its 2017 Upper Cook Inlet finfish meeting on the Peninsula instead of Anchorage. The board spent a large chunk of time discussing a potential relocation at its annual October work session. Opponents of a location shift say the travel to the Peninsula will be prohibitive. Proponents say it’s been prohibitive for them for nearly two decades. “Not having reasonable, periodic access to the (Board of Fisheries) process is simply unfair to the large populations of Alaskans living on the Kenai Peninsula,” the mayors’ letter reads. The Board of Fisheries oversees all commercial, sport, and personal use fishing in the state waters of Alaska, which are within three miles of shore. The board operates in three-year cycles, reviewing each area and species type once every cycle. The last Upper Cook Inlet finfish meeting, which overwhelmingly focuses on salmon, was held in Anchorage in February 2014. At that meeting, as in 2011, the board made major amendments to its Kenai and Kasilof river management plans. The board hasn’t held an Upper Cook Inlet meeting on the Peninsula since 1999, or five regulatory cycles. Apart from issues of fairness, the Peninsula mayors make a fiscal offer in their letter. Board meetings are expensive, and due to the state’s fiscal situation the board is going to have to discuss cost-cutting measures. By volunteering local venues, they estimate to save the board $61,288, according to similar expenses from the 2014 meeting. According to board Executive Director Glenn Haight, the bulk of board meeting expenses are, in fact, the exact services the Kenai officials are volunteering at no cost to the state: a place to hold the meeting, and the coffee service to fuel it. Haight said the Egan Center venue for the 14-day 2014 meeting cost $41,000. Coffee service alone, which provides coffee, tea, and water for all board meeting attendees, cost $20,000 for the Downtown Anchorage meeting. The Peninsula mayors say they would provide one of two available venues to the board for free: the Soldotna Regional Sports Center of the Kenai Central High School Auditorium and Challenger Center. Either city would also throw free joe into the deal, along with transportation service courtesy of local school buses. Ancillary costs like board member travel, board support travel, and freight add another $3,000 to $4,000 to the tab, while division staff transportation and hotel costs are borne by the Alaska Department of Fish and Game. Board costs for hotel stays in Kenai or Soldotna would equal an Anchorage meeting; only one board member lives in Anchorage. Both Kenai and Soldotna also promise one uniformed police officer to be present at the meeting. Board support is funded from unrestricted general funds, which have been slashed in light of state budget shortfalls. Haight said even without further reductions to unrestricted general funds, the board is projecting a $170,000 shortfall for the 2017 fiscal year, when the Upper Cook Inlet meeting will occur. Board support has already ceased any further hiring and kept an eye on advisory committee travel to keep costs down. “This is just a really basic kind of question that we have to ask ourselves,” said Haight. “Right out of the chute we’re in jeopardy for next fiscal year.” The board will discuss solutions and cuts at its upcoming Bristol Bay finfish meeting in Anchorage in December. Coping strategies drafted by Haight include consolidating finfish and shellfish Southeast meetings, cancelling training meetings, furloughing board executive directors, and combining meetings. Coffee service, Haight said, is “one of those things that would need to come off.” At the October work session, the board voted unanimously to change the 2017 Upper Cook Inlet meeting to Feb. 22-March 9, but only voted 4-3 in favor of discussing a UCI meeting location change at its December meeting. Alaska Gov. Bill Walker wrote a letter to the board Oct. 21, asking it to consider changing the location and promising to attend if it were held on the Peninsula. “There has been much attention given to the controversies surrounding the Cook Inlet fisheries, and I feel we should attempt to improve the communication and exchanges among the many interested parties,” wrote Walker. “Holding a meeting on the Peninsula, possibly Soldotna, may show a willingness to consider points of view from local residents who may not have been able to participate over the past five board cycles.” Several Alaska representatives have also expressed support for a location change in letters to the board, including Alaska Speaker of the House Mike Chenault, R-Nikiski, in a Nov. 9 letter, Sen. Cathy Giessel, R-Anchorage, Sen. Peter Micciche, R-Soldotna, Rep. Kurt Olson, R-Soldotna, and Rep. Paul Seaton, R-Homer in a letter from Sept. 24, 2014. City managers and mayors from Kenai Borough, Homer, Seldovia, Soldotna, and Seward have also expressed support of a location change. DJ Summers can be reached at [email protected]

AGC-Alaska 2015 award winners recognized

The Associated General Contractors of Alaska, the state’s largest construction organization has named the top construction projects and safety award winners and recognized individuals at the association’s annual conference in Anchorage. Hard Hat Award: Jim Jansen, Chairman Lynden Inc., given to an AGC member who has demonstrated exemplary service to the Association, the community and the industry. Sustainability in Construction: A new award given this year to Davis Constructors & Engineers for the Davis Office Building. The Excellence in Construction awards sponsored by Parker, Smith and Feek are as follows. Vertical Construction: Under $5 million — Unit Company for CH2MHill Seismic Reinforcement; Between $5 million and $15 million — Neeser Construction for KTUU Channel 2 Northern Lights Media Center; Over $15 million — Cornerstone General Contractors for Boney Courthouse renewal. Transportation, Marine, Heavy Earthmoving: Under $5 million — Bristol Construction Services, LLC for Chester Creek at Muldoon Creek realignment; Between $5 million and $15 million — Hamilton Construction Alaska Co. for Parks Highway MP 237 Riley Creek Bridge Replacement; Over $15 million — Brice Incorporated for Kotzebue Airport and Safety Area Improvements Stage 3. Specialty Contractor: Vertical Construction — KLEBS Mechanical, Inc. for Coronado Park Senior Village, Solar Heated Domestic Hot Water System; Transportation, Marine, Heavy, Earthmoving: Davis Block and Concrete, Inc. for KLU#3 Furie Platform Grout Seal Remedial Work. Excellence in Safety awards sponsored by Wells Fargo are as follows. Large: Davis Constructors & Engineers, Inc.; Medium: Kiewit Infrastructure West Company; Small: American Marine Corporation; Individual: Steve Rowe, Cornerstone General Contractors, Inc. Associate of the Year: Alaska Digital Printing, Anchorage Stan Smith Volunteer of the Year: Jenith Flynn, Davis Constructors & Engineers. AGC is a 650 member statewide association for companies in the construction/contracting business including buildings, highways/utilities, heavy industrial and specialty areas. Construction is the third largest industry in Alaska, contributing more than $9.1 billion to the Alaska economy, and paying the second highest wages with more than 20,000 in the workforce. AGC is headquartered in Anchorage with an office in Fairbanks.

Borough officials brief Peninsula residents on AK LNG impacts

NIKISKI — Nikiski residents gathered at the Nikiski Recreation Center on Nov. 12 for another discussion on the local effects of the Alaska LNG Project — hosted this time not by AK LNG staff, but by the Kenai Peninsula Borough. Borough Mayor Mike Navarre and Larry Persily, the mayor’s special assistant on oil and gas projects, gave their perspective on the project in an expansive question-and-answer session that ranged from the Kenai Spur Highway relocation project to Navarre’s role on the state Municipal Advisory Gas Project Review Board to the scope of future property purchases in Nikiski. Navarre and Persily, whom the Borough hired in March 2015 to monitor the LNG project, plan to host talks in Nikiski every second Thursday of the month. The next is tentatively scheduled for Dec. 10. Persily began by outlining the LNG project’s summer activity in Nikiski, where the project plans to end its natural gas pipeline from the North Slope in a liquefaction plant and export terminal to be built on 800 or 900 acres of Cook Inlet-fronting land, near ConocoPhillips’ current LNG export terminal, between miles 19.5 and 21 of the current Kenai Spur Highway. Persily said the only work the LNG project has planned for the winter in Nikiski is to demolish some buildings — he estimated about 10 — on recently bought property. “They’ve shut down their field work, and they’ll be back next summer to do more hole-drilling or water-well testing,” Persily said. He said the project’s summer 2016 fieldwork will be planned in a meeting on Dec. 4. Possible work may include digging a test trench in the Inlet floor in front of the export terminal site, in order to observe how quickly the dredged Inlet bottom fills back in. As for the Kenai Spur Highway relocation project — in which the AK LNG Project will plan, permit, and construct a new segment of the highway that would swerve around the future export terminal and give the road to the Alaska Department of Transportation afterward — Persily said “their plan is to spend pretty much all of 2016 planning.” In summer 2017, Persily said that the project will decide on a preferred route for the new road. Persily distributed copies of a borough-created map showing the projected terminal site and 12 possible routes the relocated Spur Highway may take around it, a tangle of possibilities he jokingly called the “spaghetti bowl.” Persily estimated that to move the road and build the terminal, the LNG project will need to buy about 600 properties in the area. He emphasized that AK LNG does not have a power of eminent domain — the power to force landowners to sell their property — and said the variety of potential routes allows the project to operate flexibly without it. “They need to pick a preferred route,” Persily said. “If they can’t buy the land, then it isn’t going to be their preferred route anymore.” In order to get eminent domain, AK LNG would have to be granted the power by the state Legislature. Both Persily and Navarre said the LNG pipeline and the Spur Highway relocation were separate projects, although both are being carried out by the same organization for the same ultimate goal. Persily said there was a possible, though unlikely, scenario in which the highway would be relocated even if the export terminal and pipeline are never built. The export terminal is scheduled to begin construction in 2019, with the relocated highway already planned to be in place by the end of 2018. If AK LNG decides to cancel the pipeline project between the two construction periods, the Nikiski area could be left with a new highway and no plant or terminal. “Maybe in 2019, if they don’t get their final permit, or there’s a lawsuit, or the market’s crappier than it is now, they could decide ‘we’re not going to build the plant this year,’” he said. “But we’ve already got the highway. So we may end up with a relocated highway regardless of whether the LNG plant goes in. But given how much it’s going to cost them to build the highway, before they start the construction I bet you they’ll be pretty sure they’re going to go ahead with the LNG plant.” Navarre, a member of the Municipal Advisory Gas Project Review Board created to advise the Legislature on local effects of gasline projects, spoke to the attendees about one of that group’s activities. Navarre said that the Municipal Advisory Board was currently negotiating for $800 million in local impact aid money during the project’s five-year construction — equaling $160 million each year — to be given to local governments to pay for new costs brought on by construction activity and the large number of people it will bring to the area. Navarre gave examples of needs that could be funded with the impact aid money: hiring new teachers for an increased number of students in local schools, or hiring new emergency response personnel. Navarre said the local impact aid money would not fund impacts of the highway relocation. Ultimately, he said, the money would be distributed by the Legislature with advice from the Municipal Advisory Board. Nikiski resident Heidi Hatch asked what would happen to the local impact aid money on the borough level. “What safeguards will be in place that the borough doesn’t just disperse this money to other communities that aren’t impacted like Nikiski?” Hatch asked. “How will we be sure Nikiski is getting that?” “Not everybody who works on this project or is part of this project is going to live in Nikiski,” Navarre said. “But Nikiski is going to have a big part of this aid. But for example the airport in Kenai may need something done for the different flights and activities that are going on. ... So I can’t say with any certainty how the money will be dispersed.” Persily gave another caveat. “The impact aid is not like punitive damages in court, where you get $1,000 to pay your medical bills and you get $100,000 for pain and suffering. The impact aid, as it’s intended, is to cover direct costs of the project. Expanding the parking lot or terminal at the Kenai airport, or roads in Nikiski, or adding another firetruck and six more full-time staffers and an ambulance. That’s what the impact aid is going to be.” Many questions received only speculative answers, such as the logistics of the 5,000-person man-camp to be built for workers during the terminal’s construction and the long-term future of the global LNG market. The most consistent message Persily and Navarre gave was that the project is still full of unknowns. “There are a lot of unknowns at this point,” Navarre said. “There is not even certainty that the project is going to go forward.” Persily said the next opportunity for public input on the AK LNG project will come after public comment period on the Federal Energy Regulatory Commission’s environmental permitting process ends on Dec. 4. Reach Ben Boettger at [email protected]

AK LNG Project may bring more Kenai River traffic

KENAI — Managers are concerned that pressure on the Kenai River could increase if the Alaska LNG P roject goes through. The project is still tentative and will not receive a final ruling until 2018 at the earliest, but if it does go through, the borough could see an influx of as many as 5,000 workers for the five years it takes to construct the 900-acre plant in Nikiski. Unless the camp is closed, many of them will likely recreate on the Kenai River. The Kenai River Special Management Area board raised concerns about access to the river at its meeting Nov. 12. The Kenai River is already seeing impacts from too many people wanting to fish and boat, and the addition of a potential 5,000 more LNG employees — and potentially their families — to the peninsula. Larry Persily, borough mayor Mike Navarre’s special assistant for oil and gas, addressed the board with an update about the particulars of the project. Much is still up for debate, including whether the project will even happen, he said. “It’s going to be three years at best before we know whether this project is going to go through,” Persily said. “But during those three years, there will be a lot of work to do and a lot of community input.” The board has been debating ways to limit access to the river for some time. During the board’s October meeting, the members asked Alaska Department of Parks and Outdoor Recreation representative Jack Blackwell to request a white paper from the Department of Law about ways to limit use of the river. Blackwell said he requested the paper, but it was not ready for the November meeting. However, he said it would be ready for the December meeting. The overuse of the river could be affecting habitat and water quality as well. Jeanne Swartz, a board member and an environmental program manager with the Alaska Department of Environmental Conservation, said a water quality survey from the Kenai Watershed Forum showed a relative improvement in water quality but elevated levels of certain metals, including copper and zinc. “We’re not sure what could be causing that,” Swartz said. “We looked at the things that we were sure weren’t a problem and took them out of the program, and everything else is going to be looked at closely. Then we’ll be able to make a more sophisticated or more in-depth analysis.” Elevated levels of copper can disturb young salmon, according to the National Oceanic and Atmospheric Administration. When the agency conducted a survey of 811 sites around the country in 2007, they found that elevated levels of copper may have come from road runoff in the surrounding areas and interfered with the salmon’s senses. Swartz said the Department of Environmental Conservation is not sure what is causing the elevated levels of metals in the river but may request data from the Alaska Department of Transportation about road traffic as well as other information about potential sources of toxins in the environment. If the LNG does come to Nikiski, there will likely be significant increases in traffic on roads close to the Kenai River, which could cause impacts in the water quality if road runoff damages salmon. Persily suggested that the board list all its items of concern and submit them to the Federal Energy Regulatory Commission, which will be conducting the Environmental Impact Statement for the LNG project. That statement will take approximately three years and will play a significant role in the project’s fate, he said. “FERC and the regulators know that this is going to have to look at salmon habitats, road traffic and air quality standards,” Persily said. “If there’s a concern that what are the company’s plans to deal with 5,000 workers roughly who on their days off will want to go to limited recreational opportunities on Kenai, that should be proposed in the EIS.” Reach Elizabeth Earl at [email protected]

EDITORIAL: Alaska’s prison system is killing Alaskans

Joseph Murphy was having a bad morning. On Aug. 14, he woke up in jail. The night before, with a blood-alcohol level of 0.165 percent, he had been taken to Lemon Creek Correctional Center for his own protection and left alone in a cell under the supervision of a camera. When he woke up, he was sober and angry. He wanted out. He wanted to go home. He had been accused of no crime, and under state law, he should have been allowed to leave. He was not. He grew angrier. He banged his cell door and shouted to be let out. His chest started to hurt — he had heart problems and was taking medication. A corrections officer stopped by his cell and told him to knock off the banging and suck it up. He would be getting out soon. Murphy asked for his heart pills. Tempers flared. Murphy and the corrections officer started shouting at each other, swearing at each other. Murphy’s chest hurt worse. “I don’t care,” the corrections officer told Murphy. “You could die right now, and I don’t care.” They swore some more at each other, and the corrections officer left. Murphy, locked in his cell, paced back and forth. He was sweating. Six minutes after the corrections officer left, Murphy collapsed to his hands and knees. He got up again, and fell again. He did not get up. Twenty-nine minutes after the corrections officer left Murphy, another arrived to deliver breakfast. On the floor of the cell was Murphy, dead. He is not alone. Since Gov. Bill Walker took office in December, 15 people have died in Alaska’s prisons. Joseph Murphy’s last minutes are recounted in the report released Monday by a pair of special investigators appointed by Gov. Bill Walker. The investigators’ report is damning. It finds comprehensive problems and mistakes by the Alaska Department of Corrections. It finds that corrections officers, at times understaffed, undertrained and mismanaged, have violated the rights of guilty and innocent Alaskans alike. Simply listing the problems shows their extent: • Correctional officers repeatedly violated inmates’ legal due process rights; • Drunken and intoxicated people were held in protective custody for illegal lengths of time; • Investigations of inmate deaths were not conducted properly; • Several juveniles have been kept in solitary confinement for more than a year; • Newly hired corrections officers sometimes go months without attending the training academy; • Medical and mental health employees do not report to prison superintendents; • Many prison policies have not been updated since the 1980s; • Correctional officers were not adequately searched for contraband; • Misconduct by corrections officers and management was not always punished. We cannot help but think that all of these problems — every single one, including the death of Joseph Murphy — were avoidable. In the past few years, the Juneau Empire and the Alaska Dispatch News have repeatedly investigated the surge in prison deaths that has afflicted Alaska. Again and again, we have requested information about these deaths and about the practices of Department of Corrections. We have investigated the problems reported by inmates and we have covered the actions of the state ombudsman in responding to complaints about the prison system. Almost inevitably, our reporting has been met by a stone wall of silence from the Department of Corrections. The department has repeatedly denied our requests for information, for comments, for simple reports about what exactly happened. The Department of Corrections is a public agency. It is supposed to be answerable to all Alaskans. Instead, it concealed its actions with silence and denials, and now 15 people are dead because no one knew what was killing them. It was neglect — sheer neglect on the part of administrators past and present, those who cared more about protecting their jobs and concealing shame than fixing problems. Inadequate training and staffing, coupled with outdated policies and a culture of secrecy have allowed an infection of mistakes to turn septic. We fully expect criminal charges to be brought against some members of the Department of Corrections as a result of their negligence, and based on the reports we have read, those charges will be amply deserved. That’s not to say all corrections employees are to blame. Just as there were a few who didn’t follow the rules, there are many more who have served dutifully in their roles. It would be easy — and wrong — to simply say that these are inmates and that they should not have committed the crimes that landed them in jail. Joseph Murphy was no criminal. He had not committed a crime, and yet our prison system and its policies killed him just as surely as if he had been hanged on the steps of our capitol building. On Monday, Walker accepted the resignation of corrections commissioner Ron Taylor, a good-natured man whom Walker himself appointed to the job in January. Now comes Walt Monegan, a man whose integrity was shown during the Troopergate scandal of Gov. Sarah Palin. Monegan faces a mammoth task, but it is a necessary and urgent one. Alaskans are quite literally dying as a result of problems in the Department of Corrections.


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