DJ Summers

Alaska past due loans buck national trends

Alaska’s economy is facing strong headwinds from the collapse in oil prices, but its banks are outperforming the nation’s in at least one measure. U.S. banks have an overall higher percentage of delinquent loans than credit unions, but in Alaska the opposite is true. Alaska banks have a much lower delinquency rate than both the national average and credit union rates, while Alaska credit union delinquency rates are nearly twice the national average. Nationally, banks have a delinquency rate twice that of credit unions, according to an analysis of more than 12,000 banks and credit unions from Washington, D.C.-based credit union consulting firm Callahan & Associates. Delinquency rate measures the amount of past due loans in the total loan portfolio. The analysis measures how credit unions and banks classify “delinquent” differently. For banks, anything overdue by 90 days is considered delinquent, while credit unions count delinquent loans as anything unpaid after 60 days. According to the analysis, the credit union industry’s overall delinquency ratio for the first quarter of 2016 was 0.71 percent, a little less than half the 1.58 percent reported to the Federal Deposit Insurance Corp. by banks over the same period. Callahan & Associates analysts say credit unions’ lending practices are more individually tailored to consumers, and so foster fewer delinquencies. “The difference is in the way credit unions and banks operate,” said industry analyst Stephanie Clark. “When CUs are originating their loans they’re wanting to make sure it’s a good fit for the members. Banks don’t really have that. They’re more accustomed to their shareholders. The main difference is just in the overall lending philosophy.” Alaska’s banks and credit unions, however, buck the national trend. Callahan’s analysis looked at the five Alaska-based banks and 12 Alaska credit unions. This excludes Wells Fargo, which is not based in Alaska but has a 53 percent market share of all Alaska deposits as of June 30, 2015. For the Alaska-based banks, delinquency rates are lower than their credit union counterparts. Alaska banks have a 0.39 percent delinquency rate, about five times less than the national average specified by Callahan analysts. Alaska credit unions have a delinquency rate of 0.98 percent. First National Bank Alaska Chief Financial Officer Michelle Schuh said she isn’t surprised that Alaska’s banks differ from the national trends, though the difference between credit unions’ largely consumer accounts and bank’s more business-focused portfolios makes a direct comparison difficult. She said Alaska’s banks in large part set the tone for the kind of lending practices Clark attributes to credit unions. Alaska’s banks, some established long before the credit unions, fostered the kind of consumer and business relationships typical of small towns, intimate business settings, and volatile economic swings of the state, she said. First National Bank Alaska first opened its doors in 1922. National Bank of Alaska opened as the Bank of Alaska on March 20, 1916, in Skagway, and was purchased by Wells Fargo in 2000. “We’re relationships based in Alaska,” Schuh said. “We have fewer banks. The banks tend to know their customers better. They have more established relationships, and therefore structure and design loans for their customers in Alaska that have a higher chance for repayment.” Dan McCue, senior vice president of corporate administration for Alaska USA Federal Credit Union, said there are too many factors contributing to delinquency rates for him to comment. Chrissy Bell, senior vice president of communications and culture at Credit Union 1, said the state’s economic situation contributes to the higher delinquency rate of Alaska credit unions. Credit unions as a whole tend to lend to higher risk members, and during uncertain economic times (like the one Alaska is currently facing) “look for ways to keep assisting their members to help them through financial difficulties,” wrote Bell in an email. “In general, that can result in higher delinquency rates while the economy gets back on track.” Bell said Credit Union 1’s delinquency increase of 41 percent versus last year’s first quarter is in part blowback from North Slope troubles. “Credit Union 1 is seeing a slight increase in delinquency in a small part to the effect of low oil prices and the impact on service workers that support employees on the slope,” Bell wrote. “In addition, we make a greater effort to provide loans and services to low or moderate income families.” Alaska’s banks did have an increase in loans 30-89 days past due in the first quarter of 2016, however. First National Bank Alaska’s 30-89 day delinquent loans, which did not factor into the Callahan analysis, rose in the first quarter of 2016, which Schuh said is a bounce back to normal levels. “We just happened to hit a really low spot in December 2015,” said Schuh. “If you look at the last five years, our 2015 percentage was the lowest of the prior five years.” For nonaccrual loans past 90 days due, Schuh said First National Bank Alaska’s rate is “dead steady.” Likewise, Northrim Bank’s 30-89 day past due loans almost doubled, rising by 94 percent. Chief Financial Officer Latosha Frye said this rise came mostly from one large business loan. In the first quarter of a 2016, the total amount of nonaccrual loans for Alaska’s banks rose 5.6 percent over the same quarter in 2015. Most of the rise, however, came from spikes in unpaid loans for Ketchikan-based First Bank and Fairbanks-based Denali State Bank. Both First National Bank Alaska and Northrim Bank lowered their total loans in nonaccrual by 12.5 percent and 33.6 percent, respectively. The delinquency rate could be low in Alaska not because the total unpaid loans are declining, but because loan portfolios are rising. The total unpaid loan increase coincided with first quarter growth in assets, net income, and total loans. In total in the first quarter, Alaska banks increased their assets by 6.3 percent, led by a 13.2 percent increase for Mt. McKinley Bank. Net income grew a collective 18.5 percent in the first quarter. First National Bank Alaska had 28.7 percent year over year net income growth, along with a 36.5 percent growth for First Bank and a 26.1 percent bump for Denali State Bank. Only Northrim didn’t post a first quarter net income increase, with 5 percent decline year-over-year. Net loans and leases grew for each bank but Northrim, for a total 5.8 percent increase. First National Bank Alaska increased its loan portfolio by 10.6 percent, and Denali State Bank increased its loan portfolio by 10.8 percent. Credit unions also posted increases in unpaid loans, though record from the National Credit Union Administration show loans past due 30 days instead of the 60 days specified in Callahan’s study. Delinquent loans grew a combined 5.7 percent for the six largest Alaska credit unions, mostly due to Credit Union 1 and Denali Alaska, who posted 41 percent and 99 percent increases to delinquent loans, respectively.   Credit unions boosted total loans by a total 9.8 percent in the first quarter of 2016. Alaska USA increased total loans by 10.4 percent over last year.  DJ Summers can be reached at [email protected]  

Healthcare jobs see unexpected spike

Healthcare employment continues rising in the state, though economists are still unsure what precisely drives that growth to the levels observed.  A state Bureau of Labor Statistics report released in May detailed that the Anchorage’s healthcare employee ranks rose by 1,000 year-over-year. This high number could be a data flub, but it is consistent with the projections that Alaska’s healthcare industry will continue its status as the largest job growth sector in the state. Despite links to population patterns and increased usage, state economists say healthcare industry job growth has an unknown, unquantifiable variable that contributes to Alaska’s perpetual industry growth.  “It is interesting to note that Health Care employment in May grew by 1,000 jobs compared to May, 2015,” reads the report. “It is unclear what has driven this sudden significant jump in healthcare employment and may be a data anomaly. This is a preliminary figure and subject to revision in next month’s report.” An Anchorage Economic Development Corp. forecast expected only 300 jobs in 2016. “The health care sector is expected to add 300 jobs in 2016, up 1.6 percent, to a total of 19,100 jobs,” according to the forecast. “This matches the estimated 300 jobs added in 2015.While health care employment has been on a growth trend for more than a decade, the rate of growth has been slowing since 2012.” Healthcare has long been one of the steadiest growth industries in the state. Healthcare employment has more than doubled in Anchorage since 2000, rising to 19,500 by the end of 2015. Statewide, just less than 35,000 healthcare workers call Alaska home, nearly double the amount than in 2000, according to the studies. Apart from being the largest industry growth sector, Alaska healthcare employees also earn the biggest paychecks in the state. According to data compiled from the Bureau of Labor Statistics, eight of the 10 top paying positions in the state are healthcare positions. Family and general practitioners get paid the most in Alaska, with an average annual salary of $235,600.  Psychiatrists and obstetricians rank second and third with average annual salaries of $234,130 and $221,480, respectively. Nurse practitioners are the 26th highest paid group in the state with an average salary of $117,080. Registered nurses are the 77th highest, with an average salary of $88,510. Employment numbers rise in Alaska for a host of reasons, but none entirely explain why they continue to grow as fast as they do, according to economists. A few factors in particular could drive growth, including aging populations and changes in state healthcare policy. Typically, healthcare employment growth follows aging population growth, according to State of Alaska economist Caroline Schultz, who crunched the study’s numbers. “Historically it hasn’t been linked to population growth. Historically it’s been linked to 65 and older population,” Schultz said. “We know Alaska’s older population is growing very quickly. Our aging population is growing very quickly because we had a younger population than the nation as a whole. In a lot of ways we’re kind of playing catch up.” In 2000, Alaska had 626,932 residents. In 2015, the number had grown to 737,625 and the 2015 AEDC economic forecast is for Alaska’s population to grow by 10 percent between 2012 and 2022. During the same period, however, Alaskans aged 65 and older will increase by 79 percent. While other job sectors are taking a hit due to Alaska’s state fiscal situation and declining oil prices, healthcare demands don’t have the same dynamic. The state looks to healthcare along with retail as bright spots in an otherwise gloomy job growth outlook. “In most situations, demand for healthcare is pretty inelastic,” said Schultz. “We expect that healthcare will be one of the last industries hit.” Becky Hultberg, executive director of the Alaska State Hospital and Nursing Home Association, said unpredicted increases in health care employment could be related to a bump in hospital usage over the last year, driven by an increase in coverage demographics. Gov. Bill Walker expanded Medicaid coverage to an additional 20,000-odd Alaskans by accepting federal funds via an executive order in July 2015. Hultberg said pent up demand could be responsible for more medical treatment and the medical workers needed to give it. “We’re seeing very high hospital census numbers,” Hultberg said. “Hospital beds are full. Census numbers are trending high, at least in the Anchorage bowl. It’s not clear why those numbers are so high. It could be again population. It could be Medicaid expansion. It’s most likely related to demographics.” Hultberg said hospital utilization rose last summer due to drug-related emergencies, and the number haven’t dipped to their pre-spike levels. “There was a increase utilization in the spice epidemic,” said Hultberg. “Those numbers haven’t slid back down. I don’t know I can highlight what’s going on.” Hultberg said the rise in hospital usage will naturally affect the workforce, but it doesn’t coincide with a targeted recruitment campaign. William Smith, vice president of human resources at Alaska Regional Hospital, said he doesn’t have the data for why hospitals have higher usage numbers, but that the higher patient census is opening up more positions at his hospital. “That’s definitely affecting openings,” Smith said. “It’s creating great opportunity for recruitment.” Healthcare employment numbers are expected to be the largest job growth sector well into the 2020s as the population ages. Schultz believes increasing health care employment could simply be part and parcel of Alaska’s development process. With a substantial portion of the population out of reach of common healthcare options and a difficultly attracting and retaining workers, Alaska may be slowly coming to match per capita healthcare employment elsewhere. “We’ve essentially been underserved. We are just catching up to the level of healthcare people expect elsewhere,” Schultz said. As recently as 2014, however, the per capita representation of Alaska healthcare workers was more than the national average. In 2014, there was approximately one U.S. healthcare worker per every 26 U.S. citizens, according to census records. In Alaska, the records show one healthcare worker per every 21 Alaskans. “We don’t know exactly the answer,” said Schultz. “What’s the right level of healthcare in Alaska? That’s something we don’t really know.” DJ Summers can be reached at [email protected]

Launch : Alaska aims to attract, keep startups in Anchorage

“Diversify the economy” is Alaska’s rallying cry as oil production and prices sink. First of its kind Alaska tech accelerator Launch : Alaska wants to put the idea into action with the hot-ticket item of booming Lower 48 metro areas. The program combines Anchorage municipal goals to draw more diverse businesses into the city with private investment. Five startups from Alaska, the Lower 48 and South America each received $25,000, office space at The Boardroom, housing, networking opportunities, and professional advice from a pool of mentors including former Lt. Gov. Mead Treadwell, Alaska Industry Development and Export Authority Executive Director John Springsteen, and a slew of capital investment and tech development experts. On Aug. 25 at the end of the 90-day program, the teams will each pitch their developed products to investors in Anchorage. In return, the incubator gets a 6 percent share of the companies’ eventual profits, in the meantime hooking the founders on Alaska’s quality of life points to keep them here. Lower 48 cities and companies commonly use tech accelerators to get a share in potentially lucrative mobile apps and technology platforms. More than 300 exist in the U.S. Launch: Alaska planned to incubate technologies with applications relevant to Alaska’s unique needs in the Arctic and energy development areas. Some of the five have clear ties to this focus. Aquilo, based in Fairbanks, is creating new technologies for drone flight, which has broad applications for both research and operations purposes for Alaska’s key industries. Roborzoid is a voice recognition platform that can connect voice commands to objects ranging from microwaves to oil derricks for remote and hands-free control. The creators, from Carnegie Mellon University in Pittsburgh, say they can adapt this kind of software for more than the current user demographic. “Its primary users are people with disabilities, parents with children, and geeks,” the founder said. “But the market is huge.” The voice recognition software could have potential North Slope engineering and telehealth applications, and the creators said they have already had discussions with Alaska companies interested in the platform. Other accelerator startups have less apparent focus on Arctic work and energy development but do have applications for Alaska’s outdoorsy and rural residents. Heather’s Choice is an Anchorage-based food box delivery service in the vein of Nature Box that focuses on outdoors meals. Kwema, a Santiago, Chile-based startup, is developing wearable technology for women’s safety. Lance Ahern spearheads the program. Ahern has background in both tech development and in municipal public affairs. He founded Internet Alaska in 1994, then left for Silicon Valley in 1998 to found Fort Nocs, an online merchant infrastructure system. Most recently, he worked as the Chief Information Officer for the Municipality of Anchorage and as a business advisor for the Alaska Small Business Development Center. Ahern wants to address the common Alaska brain drain problem that plagues tech even harder than other areas. “We just keep seeing great people leaving and doing what they were going to do here anyway, just doing it somewhere else,” Ahern said during a June 30 networking event thrown for the accelerator teams. Anchorage is hardly synonymous with tech startups more likely to be found in the San Francisco Bay Area, Seattle, Austin, or New York City. In hopes to draw innovators to the city, the program hosts team events to attract startups to Alaska’s natural beauty. A hike along the Powerline Pass trail at Chugach National Park, Ahern said, was a hit among the teams. “Our teams so far have been blown away by Alaska,” he said. “It sells itself.” Perhaps more importantly, Alaska offers lower business expenses than tech-heavy Lower 48 centers. California’s flat 8.84 percent corporate income tax rate is eighth-highest in the nation, according to Tax Foundation, while Alaska ranks as the third best state for business tax rates. Alaska’s corporate income is progressive, from zero percent for companies with less than $25,000 in income to 9.4 percent for those with more than $222,000, a boon for upstart companies with limited capital. A bevy of other taxes typical to California have no Alaska equivalent, or do not apply to small businesses. Further, while Anchorage’s office rent is higher than the national average it pales in comparison to New York City or Silicon Valley. Startups can theoretically house their development teams here for a fraction of the cost of more traditional tech centers. Ahern himself left Alaska for Silicon Valley in the late 1990s just before the dot-com bubble burst in 2000. Like others, he said he would rather have remained in Alaska but simply didn’t have the option. “I never wanted to leave in the first place,” he said. “I had to leave to take the money.” Ahern’s problem was business infrastructure. Tech startup must-haves like venture capital funding drove him and other tech founders into more established markets. Ahern’s mind is dotted with examples of ideas drawn away from Anchorage in search of investment dollars. “This is a guy who just raised $30 million, this guy’s partnering with Amazon now in Austin, this guy’s building his second security software company in Washington, D.C. There’s no reason they couldn’t have done this here, but the local ecosystem hasn’t been ready,” he said. After 15 years, however, Anchorage’s business landscape looks far friendlier to tech startups. “We have a co-working space, we have venture funds, we have a relationship with the university,” Ahern said. “All the pieces are here.” Apart from partnerships with The Boardroom to provide working space and housing at the University of Alaska Anchorage, the program has congealed disparate Alaska investors into a single focused program. The prospect of a tech accelerator, initially begun with a Small Business Administration loan, picked up steam and now involves a host of Alaska investors. Alaska Growth Capital, Native corporation Cook Inlet Region Inc., and individual angel investors now pitch in for the total cost along with the Alaska Accelerator Fund. The Alaska Accelerator Fund is a seed capital fund created by individual community investors and the Municipality of Anchorage’s 49th State Angel Fund. The city of Anchorage established this fund with $13.2 million grant from the U.S. government to invest in small local business and startups. DJ Summers can be reached at [email protected]

Kenai late run king management opens conservatively

The Alaska Department of Fish and Game will restrict sport and commercial fishing on the Kenai River to begin July based on total late run of king salmon forecast to be 30,000 fish. Sport fishermen will be restricted to an unbaited single hook on an artificial lure to ensure a cautious harvest approach and commercial setnet fishermen will likely be restricted to regular Monday and Thursday periods until a better estimate of the run size is available. The sport fishery opened Friday, July 1, but commercial setnet fishing has not yet opened on Kenai stocks. The Kasilof River section of the setnet salmon fishery opened June 29. Preseason forecasts for king salmon are below average but above the amount necessary to open the Upper Cook Inlet commercial sockeye fishery. To protect the still-sensitive run, managers want to remain conservative. King salmon have shown better numbers in Southcentral this season than the abysmal returns of the last three years, including the Kenai River. The early-run kings totaled 9,850 by the end of June — more than 3,000 above ADFG estimates. Pat Shields, the area commercial fishing manager for ADFG, said the early run hopefully means a healthy late run. “There is a relationship that most often comes true, that when the early run is better than expected, the late run is better than expected,” said Shields. However, the forecasts and estimates don’t stack up to real numbers. “Until we get enough data, we kind of want to back off these fisheries and be careful,” Shields said. “We want to start off both the sport and the commercial fisheries conservatively.” Forecasts for late-run kings are only just above the minimum for a full commercial and sport fishery.  “Based on the preseason outlook, the 2016 Kenai River late-run king salmon total run is expected to be approximately 30,000 fish,” reads an emergency order released by ADFG on July 1. “Expected harvest scenarios in a run this size without fishery restrictions risks not achieving the lower end of the sustainable escapement goal. Therefore, beginning on July 1, the Kenai River sport fishery will be managed conservatively under a provision of no bait, per 5 AAC 75.003.” Kenai River commercial and sport fisheries are managed in tandem. Based on the preseason forecast, paired restrictions require a no bait for the sport fishery and 36-hour weeks for the commercial setnet sockeye fishery if late run kings are projected to return to the Kenai River in numbers less than 22,500. ADFG estimates commercial setnetters will take 5,900 to 6,500 Kenai kings while targeting sockeye. “The 2016 preseason forecast for late-run Kenai River king salmon is for below average total run of approximately 30,000 fish,” according to the order. “This is approximately half of the 1986–2015 average total run of approximately 56,000 fish and is insufficient to provide harvest in an unrestricted sport, commercial, and personal use fishery without jeopardizing attainment of the sustainable escapement goal. Therefore, prohibiting bait in the sport fishery is warranted.” ADFG forecasts a total run of 7.1 million sockeye salmon, with a total run of approximately 4.7 million sockeye salmon to the Kenai River. Like the no bait sport fishery, the commercial fishery will be managed carefully to ensure both king and sockeye escapement. ADFG said it will almost certainly have emergency closures that restrict the normal commercial fishing open periods. Last year, the Kenai River commercial setnet sockeye fishery was restricted to 36-hour weeks until July 25. “Utilization of additional hours beyond Monday and Thursday regular 12 hour periods will be predicated upon achieving escapement objectives of both sockeye and king salmon stocks,” the report reads. “It is highly unlikely that all of the hours available in the sockeye salmon management plans will be used until inseason escapement estimates project goals will be achieved.” DJ Summers can be reached at [email protected]

After leaving IPHC, Kauffman calls violation ‘honest mistake’

An executive from a Community Development Quota group blamed a regulatory mix-up for the fishing violation that forced him to resign from the international commission regulating halibut harvests. The National Oceanic and Atmospheric Administration Office of Law Enforcement charged Jeff Kauffman and two other men in March with possessing more than 10,000 pounds of halibut over their combined quota limits for a violation that occurred in June 2012. Kauffman is the vice president of the Central Bering Sea Fisherman’s Association, the Community Development Quota group for the island of St. Paul. CDQ groups are six organizations representing 65 Alaska villages within 50 miles of the Bering Sea coast that receive 10.7 percent of the total Bering Sea groundfish quota annually. The charges resulted in a $49,000 settlement — about $13,000 less than original fine — and cost Kauffman’s Alaska resident seat on the International Pacific Halibut Commission. He resigned on June 22. The joint U.S.-Canadian body has governed halibut quotas and regulations by international treaty since 1923, and has three commissioners each from the U.S. and Canada. Kauffman chalked the violation up to a regulatory mix-up. The violation occurred around June 5, 2012, while Kauffman fished for halibut around St. Paul with Mike Baldwin and Wade Henley, the captain of the F/V Saint Peter. CBSFA owns 100 percent of the vessel. The attorney for the three men objected to Kauffman being charged along with Baldwin, the CBSFA board of directors chair, on grounds that the captain is solely responsible. In his resignation letter, Kauffman described the violation as an “honest one, and one of a low tier,” that resulted only in a civil charge, not a criminal charge, without damaging the halibut resource.  “The Notice of Violation and Assessment makes clear there was no intent to deceive or steal,” said Kauffman in a statement. “The quota holders held quota for every pound caught in each regulatory area. The Vessel Monitory System and the logbook were in perfect alignment.” Still, he acknowledged in his letter that he accepts the U.S. Department of State’s zero tolerance policy for violations among its appointed officials. IPHC commissioners are presidential appointments. Kauffman was only named to the IPHC in December to replace Don Lane of Homer. “I understand that my ignorance of the technicalities of the regulations is no excuse, and I am prepared to pay the consequences — in more than one way,” he said in his statement. The violation concerned holding halibut onboard from multiple regulatory areas. The IPHC sets limits for halibut removals in various regulatory areas and quota for the areas are issued through Individual Fishing Quota, or IFQ. The Bering Sea is Area 4, subdivided into sections labeled A-E. In 2012, the three men aboard the F/V Saint Peter fished 14,000 pounds of halibut in 4A. Kauffman and the other two men claimed they moved away from Area 4A when whales began eating the hooked fish from their gear, a common problem in longline fisheries. The F/V Saint Peter moved into Area 4D and fished another 10,000 pounds, then returned to Area 4A. According to regulations, one vessel fishing multiple areas cannot hold more halibut than the unharvested total all quota holders possess for a single regulatory area. “The difference between a violation and no violation in this instance is simply the order in which the areas were fished,” wrote Kauffman in a letter to the National Marine Fisheries Service. “Had we caught all the 4A IFQ before fishing in 4D, there would’ve been no violation because there was enough unfished 4D IFQ (40,000+ pounds) to cover the 14,000 pounds harvested in 4A. Instead, we fished 4A until the whales showed up, went to 4D and caught roughly 10,000 pounds and then returned to 4A to finish the trip. Because there was not enough unfished IFQ in 4A to cover the 4D quota previously harvested, a violation occurred.” Two different bodies oversee halibut removals in the North Pacific: the federal North Pacific Fishery Management Council and the International Pacific Halibut Commission. Kauffman also serves on the Advisory Panel to the North Pacific council, a 20-member stakeholder group that makes management recommendations to the council. Though the State Department cannot tolerate violations from its commissioners, Kauffman’s role on the Advisory Panel is less certain; council members have not yet discussed the matter. He remains certain about continuing on the panel though, and said he doesn’t plan to step down. According to the NOAA regulations, a vessel cannot retain more halibut than the “total amount of unharvested IFQ or CDQ, applicable to the vessel category and IFQ or CDQ regulatory area(s) in which the vessel is deploying fixed gear, and that is currently held by all IFQ or CDQ permit holders aboard the vessel, unless the vessel has an observer aboard under subpart E of this part and maintains the applicable daily fishing log prescribed in the annual management measures published in the Federal Register pursuant to § 300.62 of this title and § 679.5.” According to the 2012 Pacific Halibut Fishery Regulations, “halibut caught in more than one of the Regulatory Areas 4A, 4B, 4C, or 4D may be possessed on board a vessel at the same time provided the operator of the vessel has a NMFS-certified observer on board the vessel as required by NMFS regulations published at 50 CFR Section 679.7(f)(4); or has an operational VMS on board actively transmitting in all regulatory areas fished and does not possess at any time more halibut on board the vessel than the IFQ permit holders on board the vessel have cumulatively available for any single Area 4 regulatory area fished; and can identify the regulatory area in which each halibut on board was caught by separating halibut from different areas in the hold, tagging halibut, or by other means.” Kauffman said the F/V Saint Peter crew followed IPHC regulations to the best of their knowledge.  “Had we understood the technical difference between CFR Section 679.7(f)(4) and the language in the Halibut Fishery Regulation handbook, we would have simply finished fishing in 4A before moving into 4D,” explained Kauffman. Kauffman’s resignation happened four years after the violation occurred. It took over three years for NOAA to make an initial enforcement report. NOAA enforcement office Jerod Cook wrote the enforcement action report on Oct. 27, 2015, and transmitted the report to Henley on Dec. 29, 2015. The official Notice of Violation and Assessment, or NOVA, was filed March 1, 2016 by NOAA General Counsel enforcement attorney Brian McTague. The original enforcement action only named Henley. Only later were Kauffman and Baldwin added to the March 1 NOVA. In a letter to McTague, attorney Tom Wyrwich argued against including Kauffman and Baldwin in the NOVA, saying the captain’s decision shouldn’t affect the crew. “The only ‘person’ who chose to ‘retain’ or ‘possess’ the halibut in question is Mr. Henley,” reads a letter dated April 15. “It is unclear how Mr. Kauffman’s status as an officer in a corporate entity has any relevance, and we are unaware of any law that allows NOAA to pursue corporate officers for a vessel’s unintentional alleged violations of regulations.” Wyrwich also argued against the amount NOAA charged, initially $61,781 and settled for $49,000. “While St. Peter understands NOAA’s interest in deterrence,” wrote the Wyrwich, “the assessed penalty is grossly disproportionate to the alleged offense, which was indisputably not intentional, and the gross ex-vessel value bears little relationship to the ‘economic benefit’ of the actual violation.” Violations of this sort are not atypical, though they vary in volume of the fish in question and the ensuing fines. Several vessels in the first half of 2013 were given written warnings for the same violation, and similar violations in 2015 yielded fines from $1,000 to $3,000. NOAA bases these fines on the value of the halibut overage. The F/V Saint Peter fished and received payment for 24,600 pounds of halibut in 2012, worth $132,900 to processor that bought the fish. Of the total, 10,500 pounds were in excess of the unharvested Area 4A quota. At an average $5.40 per pound for halibut in ex-vessel price, the total harvest value of the fineable halibut came to $56,806. DJ Summers can be reached at [email protected]  

USDA advances $16M in rural energy development grants

In an era of state cutbacks, every federal penny counts. U.S. Department of Agriculture-Rural Development Alaska State Director Jim Nordlund announced on June 23 that nine grant applications from Alaska totaling $16 million are moving to a final review process. The USDA’s High Energy Cost Grant program is intended to help families and individuals in areas with extremely high per household energy costs, which is federally classified as any community that pays 275 percent of the national average. Alaska has some of the highest utilities costs in the nation at just less than 18 cents per kilowatt-hour, according to a March 2016 report from the U.S. Department of Energy. The national average is 10 cents per kilowatt-hour. In rural Alaska communities, this number grows even higher. The grants fall under the USDA Rural Development program, which has granted more than $2 billion in housing, community facilities, businesses, energy, water and sewer and telecommunications projects in 226 rural Alaskan communities since 2009. USDA specifies the funds may be used to acquire, construct, extend, upgrade or otherwise improve energy generation, transmission or distribution facilities. The USDA received grant applications between $400,000 and $3 million from Alaska Power & Telephone Company, Alaska Village Electric Co-Op, City of Grayling, City of Pilot Point, Alaska Native Tribal Health Consortium, NANA Regional Corp., New Koliganek Village Council, Asa’carsarmiut Tribe and Naterkaq Light Plant. Each project still has to pass an environmental review before approval. Nordlund said he was uncertain on how long the process takes, but staff estimated 60 days as typical for some previous projects. “It really depends on the project,” said Nordlund. USDA’s program picks up some of the slack from a drop in state funding geared toward the same purpose. “Because of the state fiscal crisis, the money for things like that fund and other efficiency programs has dropped precipitously over the last two years,” said Chris Rose, executive director of the Renewable Energy Alaska Project, a coalition of over 70 business and power producers, conservation groups, and electric utility companies focused on energy efficiency development. The Alaska Renewable Energy Fund passed in 2008 at the behest of REAP and others similarly focused groups. Since then, the state has appropriated over $250 million into the fund, which in turn produced another $200 million in federal and state matches for feasibility studies, designs, and construction. The 50 projects currently completed with these funds will displace 30 million gallons of diesel per year, according to the Alaska Export Authority estimates. Nordlund said proposals are increasing for the federal program, both in quantity and in quality. “I think we’re seeing a lot more interest,” said Nordlund. “I’m seeing a lot more creativity in the projects that come in. I think what you’re seeing is more sophistication in the proposals, because we’re starting to build a core of engineers and developers in this state who understands what works and what doesn’t work in the state of Alaska. They’re getting to be better prepared.” Most of the nine awards foster development a few key technologies. The three largest grants of $3 million apiece to Alaska Village Electric Co-Op, Alaska Power and Telephone Company and Naterkaq Light Plant will go toward wind energy development projects.  “If you were to collapse them into categories,” said Nordlund, “every one of them either has something to do with wind generation, waste heat recovery, solar, battery technologies, electric thermal stoves, or biomass, which in English is like heating with wood.” Health organizations like the Alaska Native Tribal Health Consortium, granted $690,388, will use the money for water treatment, lowering one of the larger power costs in remote places. “A good cornerstone of health is good water,” said Steve Weaver, director of the Division of Environmental Health and Engineering at ANTHC. “We’re looking at putting solar panels on eight water treatment plants in eight remote communities that use diesel fire generators to provide electricity. We expect solar to offset their power costs by 15 percent over time.” Jason Custer, a business development representative from Alaska Power and Telephone, estimates the project will reduce cost to 15 cent per kilowatt-hour in the heavily diesel-dependent communities it services. In Alaska Power and Telephone’s case, the $3 million makes the total $10 million project financially viable. Cost reductions are key to the program, but Rose said the ebbs and flows of oil and gas pricing are enough concern on their own for utilities companies and their customers.  “We don’t have any control over fossil fuels, even though we produce them here in the state,” said Rose. “We don’t have control over the price of diesel. We don’t have control of the price even of the natural gas we use here in the Anchorage area.” With renewable sources, he said, even if the price doesn’t go down it will at least be more predictable. “For a lot of these communities, the most important thing is that it’s stably priced. Once you put in a renewable energy project, you can much more predictably see what the cost of power is going to be in the future.” As with oil and gas, Alaska’s renewable energy development can give direction for national and international projects of the same scope and purpose. Navigant Consulting, an energy consulting firm, produces studies related to renewable energy. Alaska ranks top of the line in at least one category.  “Their definition of microgrids includes islands that have renewables in them,” said Rose. “By that definition, Alaska has more small islands with renewables integrated into them than any other place in the world.” Rose said his group is already working with Outside communities to help adapt Alaska-bred methods. “We believe we can export these technologies,” said Rose. “There are people we’re working with in island communities in the Caribbean and the Pacific who we believe want the same technology.”   DJ Summers can be reached at [email protected]  

Council appointments approved, AP changes upcoming

U.S. Secretary of Commerce Penny Pritzker announced the appointments of Buck Laukitis and Theresa Peterson to the North Pacific Fishery Management Council June 27, further strengthening Gov. Bill Walker’s fisheries management position on preserving local fisheries participation in coastal Alaska. The nominations will go into effect Aug. 11. Governors submit nominations to the Commerce Department, which must then be approved by the secretary. The North Pacific Fishery Management Council is the most economically powerful of eight regional councils that oversee federal fisheries between three and 200 miles off the U.S. coast. As of 2014, the North Pacific region accounts for 65 percent of the nation’s total seafood harvest value, according to National Oceanic and Atmospheric Administration reports. Peterson and Laukitis replace Duncan Fields and David Long, respectively. Fields, a Kodiak attorney and fisherman, finished his third three-year term in June 2016, the maximum terms allowed consecutively under the U.S. fisheries governing regulation, the Magnuson-Stevens Act. Long, a Wasilla resident and Bering Sea groundfish fisherman, served one three-year term and was not reappointed though he did submit his name for consideration. Peterson and Laukitis will fill two of six designated Alaska seats on the 11-member body. Fields had a reputation on the council for boosting a specific vision of fisheries. He emphasized local ownership and active participation rather than the more corporatized systems of fishing quota and leasing arrangements common in many rationalized Alaska fisheries. Walker’s positions, and his Alaska Department of Fish and Game Commissioner Sam Cotten’s, largely align with this view. Both Peterson and Laukitis, small vessel owners with conservation experience, fit into this mold, though both insist they hold no rancor for larger industrialized fisheries whose interests sometimes collide with the smaller operators. A Kodiak setnetter like Fields and small vessel operator, Peterson said small-scale fishermen are “the most underrepresented” voice in the council process. “I want the next generation of fishermen to have similar opportunities to commercial fish and work their way up to ownership,” Peterson said in a statement. “Small boat fishermen are the fabric of maritime communities around the state and their voices must be heard in the council arena along with large scale fisheries.” Like Peterson, Laukitis hails from coastal Alaska and fishes traditionally small boat species with his family. Laukitis holds salmon licenses and halibut quota as well as an inactive trawl permit for Gulf of Alaska groundfish. Both Peterson and Laukitis have ties to conservation group Alaska Marine Conservation Council, or AMCC, a non-profit that advocates for active coastal fisheries participation and conservation. Laukitis served as vice president of AMCC’s board of directors for eight years. Peterson currently serves as the group’s outreach coordinator. The leadership shift will open a spot for newcomers into the council process, and a fishing violation may open yet another. Peterson currently serves on the council’s Advisory Panel, or AP, a 20-member stakeholder group that makes management recommendations to the council. The North Pacific Council is accepting nominations from stakeholders for an AP member to replace Peterson. Because Peterson’s council nomination is effective in August, the new AP appointee will fill out the remainder of her term through December 31, 2017. The council asks for letters of interest and/or nominations to be sent to [email protected] along with a resume. Nominations close July 29. The AP could potentially have another new member depending on the council’s will during its October meeting. AP member Jeff Kauffman recently resigned as U.S. commissioner of the International Pacific Halibut Commission following a fishing violation that occurred in 2012 and settled in 2016. Though Kauffman has resigned from the IPHC after being appointed this past December, it’s still unclear as to whether or not he will maintain his position on the other. Kauffman himself said he has no plans to discontinue serving on the AP. The council maintains its own discretion in these matters, and hasn’t yet taken any action one way or another. Chris Oliver, executive director of the North Pacific council, said he can’t remember a council member or an Advisory Panel member having been ejected due to fishing violations, though he said Kauffman is by no means the first to have encountered one. As of June 28, Oliver hasn’t discussed the matter with council chairman Dan Hull, a halibut fishermen currently out on the water. “It’ll be up to the council as to whether or not to do anything about it,” said Oliver. “This’ll be something they have to do in executive session, and we don’t have another scheduled meeting till October. If they wanted they could all a special session, but I’m not expecting that. I don’t know where this falls on the spectrum of egregiousness.” DJ Summers can be reached at [email protected]  

Kauffman resigns from IPHC after fishing violation leads to $49K fine

Jeff Kauffman resigned as the Alaska resident member of the International Pacific Halibut Commission on June 22, shortly after he and two fellow fishermen agreed to a $49,000 fine for harvesting more than 10,000 pounds of halibut over their combined quota limit in June 2012. The settlement the National Oceanic and Atmospheric Administration Office of Law Enforcement was nearly $13,000 less than the original Notice of Violation and Assessment of $61,781 issued on March 1 of this year. Kauffman, who is the vice president of the Central Bering Sea Fisherman’s Association, or CBSFA, and a member of the Advisory Panel to the North Pacific Fishery Management Council, did not respond to a request for comment. Linda Behnken, executive director of the Alaska Longline Fishermen’s Association, will replace him as interim commissioner, NOAA Fisheries announced June 22. "During his short tenure as commissioner, Mr. Kauffman has well served the U.S. interests on the IPHC, and we thank him for his service," said Jim Balsiger in the announcement from NOAA Fisheries. Balsiger is the NOAA Fisheries Alaska Region Administrator and is married to Heather McCarty, who works as a lobbyist for Central Bering Sea Fisherman’s Association. Balsiger is also the federal member of the IPHC that manages North Pacific halibut harvests between the U.S. and Canada. Each nation has three seats on the commission. Neither Kauffman or McCarty were present at the June meeting of the North Pacific council in Kodiak. McCarty also represents the City and Borough of Kodiak on fisheries matters. CBSFA is the Community Development Quota group, or CDQ group, for the island of St. Paul. CDQ groups — six organizations representing 65 Alaska villages within 50 miles of the Bering Sea coast — receive 10.7 percent of the total Bering Sea groundfish quota annually. CBSFA owns 100 percent of the F/V Saint Peter, which Kauffman was aboard on or around June 5, 2012, with Mike Baldwin, CBSFA’s board director, and Wade Henley. The violation occurred in 2012, but the NOAA Office of General Counsel did not file charges until March 1, 2016, following an investigative report from the NOAA Office of Law Enforcement. It was not immediately clear why the violation nearly four years ago was just now coming to light. “On or about June 5, 2012,” the charging document reads, “Wade Henley, the operator of the F/V Saint Peter, and Jeff Kauffman and Mike Baldwin, members of the crew and Individual Fishing Quota (IFQ) permit holders, acting for themselves and on behalf of Saint Peter, LLC, owner of said vessel, did retain halibut in Regulatory Area 4A in an amount that exceeded the total amount of unharvested IFQ currently held by all IFQ permit holders aboard the vessel for the regulatory area in which the vessel was deploying fixed gear, to wit: they retained about 24,600 lbs. of Halibut in Area 4A and held only about 14,085 lbs. of Area 4A IFQ.” The original charge specified a penalty of $61,781 for the violation, but the group settled out of court for $49,000. IPHC appointment Kauffman’s was named an interim commissioner to the IPHC in December 2015, replacing Don Lane of Homer. Under a bilateral treaty, the IPHC sets the quota for both U.S. and Canadian halibut fishermen. Bob Alverson of Seattle is the non-Alaska resident member of the U.S. delegation. In a letter to the nominees in December 2015, Balsiger clarified that official presidential appointments are hard to predict. "The presidential appointments will be pursued for both of you,” Balsiger said, “but that timeline is difficult to anticipate in the present politics of Washington D.C.” The present politics were evidently unfavorable to a speedy appointment. The president had not confirmed Kauffman’s interim appointment as of his resignation from the position. Kauffman’s commissionership coincided with an increase in all but one regulatory area’s quota limits at the commission’s 2016 meeting in January. In total, the commission set the overall halibut harvest for the 2016 season at 29.89 million pounds, a 2.3 percent increase from 2015. This is also an increase from the catch limits recommended at the commission’s 2015 meeting, called the “blue line” limits. The 2016 limits exceeded the blue line by more than 3 million pounds. Each area either received an increase in quota or an equal amount to the 2015 season, except Area 3A, the Central Gulf of Alaska. Each area’s 2016 harvest exceeded the blue line harvest limit. Officials including the Secretary of Commerce had asked the commission to set quota at a bare minimum of 1.285 million pounds for the Central Bering Sea regulatory area adjacent to the island of St. Paul, which it did in 2015. The quota rose again in 2016.  CBSFA and the 2015 Halibut Wars Halibut monopolized the North Pacific council’s entire year in 2015, with CBSFA driving much of the discussion. Harvestable halibut stocks dropped sharply in the last decade, thought numbers have improved recently. In 2004, the coastwide Pacific halibut catch limit was 76.5 million pounds. By 2014, that had been cut 64 percent to 27.5 million pounds. Simply put, the halibut pie is smaller than before, and the directed fishery only gets a small piece. In 2014, over two-thirds of halibut removals were bycatch, not directed removals. Central Bering Sea fishermen made the case that their situation was the most dire, as employment options on the island are extremely limited to fishing. The trawl industry fishing Bering Sea groundfish has had a relatively stable bycatch limit for 20 years. The North Pacific Fishery Management Council governs bycatch while the International Pacific Halibut Commission governs the directed fishery quota. The two bodies haven’t coordinated the halibut biomass decline to work on the same system. The six Alaska member of the North Pacific council asked the Department of Commerce to make an emergency 33 percent cut to the Bering Sea bycatch quota. The Department of Commerce then asked the IPHC to parcel more than recommended to the Central Bering Sea fishermen. The commission agreed and set the Central Bering Sea harvest limit at 1.285 million pounds of halibut. CBSFA specified this amount as the minimum needed to survive. At its June 2015 meeting, the North Pacific council took a further step and slashed the Bering Sea and Aleutians Islands trawl fleet’s bycatch limits by 25 percent, which was too much for trawlers and too little for CBSFA. Following the vote, CBSFA scoffed at the council’s motion and board chairman Myron Melovidov said, “We got screwed.” DJ Summers can be reached at [email protected]

Cannabis industry readies for next steps after first licenses approved

The first commercial licenses are issued, growers are gearing up to grow, the Marijuana Control Board is shuffling, and the Alaska marijuana industry is entering a new chapter. Nearly year after the Marijuana Control Board began its commercial cannabis rollout, on June 9 the board gave the go-ahead to over two dozen marijuana growers looking to stock retail shelves later this fall. The board approved just nearly 30 cultivation licenses, and did not outright reject any. It tabled three: two in the Mat-Su Borough, which will hold a borough wide ballot to ban commercial cannabis in October, and Stoney Creek Growers in Seward. The remaining standard and limited cultivation licenses are scattered from Fairbanks to Ketchikan. Fairbanks has the greatest representation of new cultivation licenses, consistent with the relatively cannabis-friendly attitude of the borough and city authorities. Unlike most other Alaska cities, Fairbanks requires no local license for marijuana businesses beyond a zoning requirement. The borough has approved over 30 cultivation facilities for zoning.  Newly licensed companies include Alaskan Greenery in Valdez; Dream Green Farms in Anchorage; Rainforest Cannabis Cultivation in Ketchikan; Northern Lights Indoor Gardens LLC in Sitka; Elevated Innovations LLC in Fairbanks; Parallel 64 LLC in Anchorage; Tanana Herb Co. LLC in Fairbanks; Alaskan Bud Brothers Aerogardens LLC in Kasilof; Pakalolo Supply Co. Inc. in Fairbanks; Green Rush Gardens LLC in Sterling; Peace Frog Botanicals LLC in Kenai; Coyote and Toad’s Garden LLC in Skagway; Permafrost Distributors in Nikiski; and Talisman Farms in Homer. Crucially, the board also approved testing facility licenses for CannTest LLC and AK Greenlabs, ensuring cultivators will be able to legally test their product when the board issues retail licenses in September. Though licenses have been approved, cultivators and laboratories still require state and city inspections to make sure the extensive security requirements and other required regulations are filled along with the normal city and state inspection building codes. Leif Abel, a board member of the Coalition for Responsible Cannabis Legislation and owner of Greatland Ganja cultivation facility in Kenai, said his cultivation facility should be ready for inspection in the next week. “We’re feeling good about everything,” Abel said. “We’re basically in the last two weeks or so of wrapping everything up.” Abel said the hard part is on the way, not behind them. “I’ll be accepting congratulations when we get everything planted and get that first crop up for sale in the fall,” he laughed. New chair elected The board elected a new chairman, switching from an entrepreneurially minded industry representative to a police officer with a record of caution on legalization. The board wrestled with personality conflicts from inception, as Bruce Schulte and Brandon Emmett, the two industry representatives on the five-person board, often disagreed the more conservative tendencies and suggestions of executive director Cynthia Franklin and fellow board members Loren Jones and Soldotna Chief of Police Peter Mlynarik. Now that regulations are operable, though far from perfected, the dynamic could shift. During the June 9 board meeting, the board voted 3-2 to replace Schulte as chairman with Mlynarik. The election immediately followed an executive session called by board member Mark Springer at the beginning of the meeting. Mlynarik’s election was sandwiched between the executive session and the tense resignation of administrative officer John Calder. Reading from a statement, Calder said he was resigning because of Schulte’s behavior. The then-chair silenced him before Calder could continue what began as a list of grievances.  Franklin and Calder did not respond to requests for interviews.  Mlynarik acknowledges he and Schulte don’t always agree, but said he doesn’t expect the board’s tendencies to change substantially. “I’m sure we have different outlooks on it,” said Mlynarik. “We come from different sides of it. I’m from law enforcement, he’s from industry, so obviously he’d like to see thing get cranked up. I think the board’s fairly diverse, so I don’t know if just changing the chair is going to change the direction of it. We move along on the majority of the vote.” Schulte said that the decision of the board didn’t surprise him. He, Mlynarik, and Springer had each expressed interest in being board chair when the board convened for the first time nearly a year ago. Because the June 9 meeting was a rare meeting in which all members were physically present, it was only natural to have a vote. Schulte agrees with Mlynarik that chairmanship doesn’t change the fact that one member still only has one vote. “I don’t think it’s quite as significant as how people would have it be,” said Schulte. “The challenge of the chair is to manage the flow of the meeting and to make sure each member is getting their voice heard and there’s no hijacking of the discussion. That’s going to be Peter’s challenge. I certainly found it challenging.” Schulte acknowledges that the new chair’s stances are more conservative than his own, but said he personally likes and respects Mlynarik. “We’re going to continue to disagree, but it’s going to continue to be a healthy, professional disagreement,” he said. Mlynarik, from a city with a moratorium on commercial marijuana, fills the statutorily designated role of public safety representative on the board. While industry members residually fearful of law enforcement might have some reservations about a cop on their regulatory board, Mlynarik said he won’t have any more influence now than before he was voted chair. “I don’t think there’s any changes from where I was,” he said. “I have one vote just like anybody else does.” The police chief has a wary regulatory style, opposed to Schulte’s more laissez faire tendencies, and found himself on the losing side of several 3-2 votes on the five-member board. His actions on the board contrast markedly with Schulte, who came from the activism front of the 2014 Ballot 2 Initiative, which legalized recreational marijuana sales in Alaska. A commercial pilot who admittedly uses cannabis in his off-season, Schulte serves as president of the Alaska Marijuana Industry Association, and fills the industry representative/at-large designated seat on the Marijuana Control Board. Mlynarik voted with Jones against allowing on-site consumption in retail cannabis shops. When the board took up retail stores, Mlynarik and Jones voted for stricter operational hours and voted against non-marijuana product sales when retail store merchandising came up. Other tiebreaker votes swung in his favor. He supported smaller servings sizes for edible products, and successfully introduced a regulation that bars anyone with a misdemeanor drug possession charge from applying for a commercial cannabis license for five years. DJ Summers can be reached at [email protected]  

Cannabis labs seek to serve growers off the road system

New products and strategies are being brought to Alaska to make cannabis testing simpler, but it will take more development before it can match other legal cannabis markets. Before cultivators can sell any of their products to the retail market, they must first send small product samples to licensed testing facilities to screen for potency and contaminants. Alaska’s size and population spread, however, combine with federal laws to make sending samples difficult at best and cost prohibitive at worst. Cultivators off the road system — which includes all of Southeast Alaska’s population — cannot fly samples, ship them through federal waters, or send them through the U.S. Postal Service or any private packaging services. Regulators and industry members are seeking creative solutions to lessen testing transport expenses, potentially by bringing the testing to the product instead of vice versa, through a rare Outside partnership in the Last Frontier. The Marijuana Control Board hasn’t provided any concrete guidance addressed for rural marijuana supply channels. The firmest has come from Executive Director Cynthia Franklin, who suggested at an April meeting that perhaps sending such small amounts of marijuana through the U.S. mail might not anger the feds, if they even notice. Then-board chairman Bruce Schulte said shipping is not the board’s focus; the board only wants to know the product was tested, not the particulars of its route to the testers. Currently, the board has no further solutions for rural communities or plans to implement some kind of lab standards. “There’s nothing special for anybody off the road,” said Soldotna Police Chief Peter Mlynarik, who was elected chair to replace Schulte at a June 9 meeting. “If these labs that are approved can take their testing equipment out and use it remotely then that could be an option, but as far as right now, it’s all the same for everybody.” The board has some time to sort testing matters in the roughly three-month period a marijuana crop takes to grow to maturity. “I assume we’ll be talking about that at our July meeting,” said Mlynarik. In the meantime, testing facilities are finding potential solutions where they can. Brian Coyle owns AK Greenlabs in Anchorage, one of two testing facilities in the city to be granted a license by the Marijuana Control Board on June 9. AK Greenlabs and CannTest LLC are the state’s lone testing facilities; a third in the Mat-Su Borough dropped out in the face of an upcoming borough ballot initiative that could ban commercial cannabis operations in all unincorporated parts of the borough. On June 22, Coyle signed a licensing agreement with California-based Steep Hill Labs Inc. to use the company’s testing process. Steep Hill Labs has been in the testing industry since 2008, operating several labs out of Colorado, California, and Washington. The Oakland-based company has contracted with the Amsterdam Cannabis Cup, one of the world’s premier industry events, and has a contract with Leafly, the cannabis strain database mobile app that tracks potency among other variables. The company is in the midst of developing Steep Hill Express, a portable testing platform that tests for potency and contaminants but not for pesticides or solvents. Jmîchaele Keller, Steep Hill’s CEO, like Alaska’s marijuana regulators, recognizes Alaska’s specific challenges for commercial cannabis supply and testing chains. “Alaska’s really unique because of its topography,” said Keller. “That presents unique challenges in the testing world. The reality is the size of the state is prohibitive both in distance and the amount of investment. Let’s say you want to have a lab in northern Alaska. Labs are very expensive to run. You can’t afford it based on the amount of customers you would have in that area.” Steep Hill’s equipment relies on near infrared spectroscopy, a less intensive and shorter process than the more common high performance liquid chromatography, or HPLC, used by other labs. Keller insists NIR spectroscopy gives accurate results, pointing to several successful runs in various cannabis competitions. Coyle even delivered a whitepaper presentation to the Marijuana Control Board in past meetings describing the statistical deviations Theoretically, a technician with a day’s training could operate the NIR spectroscope and give a potency reports the same day for a nominal fee. If the Marijuana Control Board approved offsite testing affiliated with licensed labs, Coyle could service the entire off road market without the legal problems of transport. However, Steep Hill would only partially address the problem. Cultivators will still have to send away for microbial and pesticides testing, though Keller said Steep Hill is developing those technologies as well. Even then, if cultivators off the road system wanted to sell in Southcentral population centers, they would still have to find way to deliver saleable quantities. Other testing plans fold sample delivery into existing security transport contracts. Cannabis security firm Valkyrie Security and Asset Protection has drafted a separate deal with Coyle’s AK Greenlabs to offer testing sample transport free of charge to those cultivators already contracted with Valkyrie for product transport. If already delivering product from Fairbanks cultivation facilities to the Anchorage retail market, Valkyrie will provide testing transport to AK Greenlabs as a bonus while collecting fees from the lab itself. Coyle’s licensing of Steep Hill testing equipment is related to a larger issue of laboratory standards. Typically, federal bodies oversee testing for consumable products. Because cannabis is still illegal at the federal level, cannabis testing labs have little guidance for proper procedure. Testing labs in Colorado, Oregon, and Washington developed largely without oversight when each of those states developed their medical marijuana systems. After recreational sales came online, some labs pressed regulators to have stricter standards for labs to ensure accuracy. Coyle has advocated a system of testing standards oversight to the Marijuana Control Board, called “proficiency testing” in the industry. This would require independent third party labs to provide their own testing against which licensed marijuana labs can compare their own results. Steep Hill spearheaded a push for proficiency testing in other cannabis markets. “All you need to do is look at Washington,” Keller said. “It’s a perfect example of how not to do it. There was no proficiency testing. There’s no random testing. No verification. All the evidence points to they are not doing that in certain labs.” Steep Hill successfully lobbied the Washington Liquor and Cannabis Board to revise regulations. Steep Hill had considered withdrawing from Washington entirely, saying they couldn’t compete in the market with the less scrupulous labs that passed suspicious amounts of product. A study by Dr. Jim McRae, a research associate at the Center for Study of Cannabis and Social Policy, challenged the Washington labs’ oversight with wide disparities in testing outcomes. Four of the fourteen labs certified by the state failed to reject a single specimen during a three-month period, while two had rejected 44 percent for microbial contamination. Similarly, five labs didn’t fail a single specimen for residual solvents. DJ Summers can be reached at [email protected]  

Rural Alaska, Arctic telecom projects continue growth

Broadband networks and provider contracts for Alaska’s largest telecommunications companies are slowly expanding in rural markets, focusing on large contracts with federally-funded Alaska Native organizations and municipal customers. General Communications Inc. announced on June 21 the addition of 10 new Northwest Alaska villages into its now-completed TERRA network. Buckland, Kiana, Noorvik, Selawik, Koyuk, Elm, Golovin, White Mountain, Stebbins and St. Michael will now have access to internet connection speeds far faster than 6 megabits per second standard in many rural Alaska communities, which is well beneath the FCC benchmark of a minimum 25 megabits per second. TERRA is a hybrid of broadband cable and microwave transmitters in stretching from Southwest to Northwest Alaska. The expansion is the second this year to build on the existing system. The TERRA-Northwest project extends from Nome to Kotzebue. The Southwestern portion of TERRA began upgrades June 8 with new microwave radio networks from Levelock to Bethel — which allows 3G wireless data service in 28 communities in Southwestern rural Alaska villages, including Aniak, St. Mary’s, and Marshall. GCI’s expansion will provide the standard wish list of high-speed internet applications to customers like video chat and gaming capability, but these customers are scarce in the sparsely populated Alaska bush while providing the service is expensive. Rural customers’ access, rather, follows the demands of regional centers for healthcare, education and government services. GCI already has operating contracts with the Northwest Arctic Borough School District, Norton Sound Health Corp., and Maniilaq Association, an Alaska Native health and social services organization. Telecommunications capability has broad applications for remote Alaska regions. Health organizations can implement telehealth options that enable health care professionals to diagnose and treat patients remotely, sparing both the expense of medical transport to more robust medical centers in urban Alaska and the difficulty of finding qualified personnel willing to move to villages. Rural Alaska’s dismal education performance, among the nation’s lowest, also benefits from internet expansion. “With high-speed internet access, our schools are able to leverage digital tools at a level that was not possible before. Giving students in remote communities access to cutting-edge technology to prepare them for the future workforce is critical,” said Annmarie O’Brien, superintendent of Northwest Arctic Borough School District, in a release. “Part of our district has been on TERRA for more than a year, and the impact is phenomenal. We’re thrilled for the other districts to follow suit.” Greg Chappados, GCI’s executive vice president and chief operating officer, said the region’s contracts with key customers drive the company to continue expanding despite the expense.  “The key is serving the anchor tenants,” said Chappados. “The healthcare providers, the education providers, those guys support the investment and make it possible to build the platform, then other people can get on the platform. If you were relying on those regular customers there’s not a chance that it would work.” Larger customers — particularly medical customers — demand more and more development. “What you’ve got to do for those customers is provide them continuing upgrades. They’re demanding customers.” Chappados said GCI’s anchor tenants in rural Alaska pressure the company to complete the loop of broadband coverage running throughout the region by installing two Western Alaska mountaintop microwave sites at $2 million to $5 million apiece. “A ring is a big deal in the telecommunications industry,” he said. “Those anchor tenants want higher availability, and that’s how you get it.” Quintillion’s ships are coming in Wireline wholesaler Quintillion’s plans for an intercontinental subsea fiber system connecting Asia and Europe continue to evolve. The company sets the project into three phases, each of which representatives said are independently viable financially. The first phase connects an undersea fiber system from Nome to Prudhoe Bay with an existing terrestrial fiber line running north from Fairbanks. The second will entrench a subsea line from Nome spur to Tokyo, while the third lays line from Prudhoe Bay to London. Ships from France are currently en route to begin laying the subsea cable for phase one, scheduled for mid-July through October. Rather than sell directly to customers, Quintillion hopes to draw Alaska’s telecommunications providers to the fiber system. Companies like GCI or Alaska Communication Systems, representatives said, should see the value of fiber over less robust platforms built and used internally. “We know that fiber, long term, is much less expensive to operate and maintain than microwave or satellite,” said Kristina Woolston, Quintillion’s vice president of external communications. “We think the money that is currently being spent would be better spent on wireline systems. When you’re delivering long microwave hops, that’s when the system breaks down.” Along with Cooper Investment Partners, Alaska Native organizations Arctic Slope Regional Corp., and Calista Corp. bought into the Alaska portion of the project, previously led by Canada’s Arctic Fibre. Now the project is entirely Alaskan. Costs have shifted since the project started. Previously estimated at $250 million, Quintillion vice president of external relations Kristina Woolston can only say now the project is a “considerable investment.” Woolston said Quintillion has already drawn up initial revenue contracts. Separate from the undersea cable project, Quintillion has at least one contract in the area with a major telecommunications company. Quintillion already has an operating agreement with Alaska Communication Systems for the wireline segment running from Fairbanks to Prudhoe Bay. ConocoPhillips formerly owned the fiber and is now an operating customer of Alaska Communications.  ACS renews Kodiak telehealth contract Outside the North Slope and away from the areas of coverage provided by the TERRA project, Alaska Communications is supplying Alaska Native health providers with coverage in Southcentral. Alaska Communications representatives confirmed on June 21 that the company has drawn up a new five-year contract with Kodiak Area Native Association following the expiration of a previous three-year contract. KANA provides health care services, including primary, specialty, behavioral and emergency services to Alaska Natives in Kodiak, Larson Bay, Ahiokiak, Port Lions, Old Harbor and Ouzinkie. The new contract will connect these hubs with upgraded speeds. DJ Summers can be reached at [email protected]

Council adds guidance to Gulf alternatives

KODIAK — Many words created few changes to the Gulf of Alaska bycatch reduction package the North Pacific Fishery Management Council is pondering. At its June meeting in Kodiak, the council held another session dedicated to the plan, which would enact one of several options aimed at reducing the amount of halibut and chinook salmon bycatch in the Gulf of Alaska groundfish fishery. Groundfish includes pollock and non-pelagic species such as Pacific cod, Arrowtooth flounder and rockfish. Council member and Alaska Department of Fish and Game Commissioner Sam Cotten also added an “overarching goals and objectives” section to the plan, intended as guidance along with the existing purpose and needs statement. The council moved three alternatives into a public scoping process but before making adjustments to alternatives, the overarching goals and objectives debate spurred a two-hour word battle among members that the chair found unproductive. “Yes, words do matter,” said Dan Hull, a Cordova halibut fisherman and council chairman. “We have wrestled with some specific language. While words matter, we’re spending an awful lot of time on goals and objective, but…the trawl fleet is looking for some meaningful progress on the structure of the program. I’m concerned we get wrapped around the axle so much that we forget about the other elements of this package.” Cotten and the Alaska council members want more in the management plans than just raw economics. The new language adds a cultural ingredient to the mix. Not only should the plan reduce bycatch, as the purpose and needs statement says, but should also “promote increased utilization of both target and secondary species while minimizing economic barriers for new participants and limiting harvest privileges.” The council lingo is meant to protect new entrant fishermen from consolidation and overwhelming entry costs to purchase fishing quota. Opposing council members from Washington and Oregon felt the new language added too much new focus and detracted from a clear goal to reduce bycatch by the best means available. Only council members Bill Tweit of the Washington Department of Fish and Wildlife and Roy Hyder of the Oregon Department of Fish and Wildlife voted against the language addition. Supporters argued that the plan needs to avoid some of the negative results of catch share plans with crab and halibut that caused job losses, fleet consolidation and a high entry cost driven by exorbitant quota prices. Eighty-five percent of North Pacific federal fisheries have some kind of catch share system. “Management efficiency can’t be our main driver,” Cotten said. The newly revised options will now head back to council staff for a preliminary analysis of the alternatives’ impacts. The National Marine Fisheries Service will publish a public scoping document in the Federal Register on the new alternatives and objectives and goals statement. The council will take action as needed on the issue at its Anchorage meeting Dec. 6-14. Kodiak’s future For Kodiak, a town a built on fish, catch shares are seen as either savior or slayer. The Gulf of Alaska, with Kodiak as its hub, has some of the most diversified fisheries in the state. Groundfish trawlers, halibut longliners, and skiff-sized salmon seiners share Kodiak’s St. Paul and St. Herman harbors. Alaska and the U.S. government issued 1,179 commercial fishing permits to Kodiak in 2014, with 845 Kodiak resident crew licenses. Most of Kodiak’s seafood landings value — $41 million in 2014 — comes from groundfish, according to Juneau economics firm McDowell Group, which contracted with the city and borough of Kodiak in 2015 for a study on the community’s fisheries dependence. The island has 10 active processors, five of which are among the city’s 10 largest employers with more than 1,300 Kodiak resident employees. Together the 10 make more than two-thirds of their revenue from federal fisheries. Of this, 58 percent of the total dockside value comes from federal groundfish. Kodiak has already seen its fisheries participation shrink. In Kodiak, cost of entry into fisheries has risen, and local participation has fallen. Between 2000 and 2010, Kodiak’s locally held Commercial Fisheries Entry Commission permits dropped from 1,646 to 1,279; halibut quota holders from 304 to 224; active crew licenses from 1,263 to 884; and locally owned vessels from 719 to 452. Much ado about trawling The trawl industry has hammered Cotten, the leader of the six-member Alaska delegation on the council, over his proposed Alternative 3, which they believe wasn’t thoroughly vetted before he introduced it in October 2015. In their eyes, the council is playing with untested social experiments while bycatch limit cuts reduce their groundfish harvest. “We are operating on the edge of disaster in this fishery,” Bob Krueger told the council. Krueger is executive director of the Alaska Whitefish Trawlers Association, a Kodiak-based industry group of groundfish trawlers. Krueger and Julie Bonney, Kodiak resident and executive director of the processor and trawler group Alaska Groundfish Data Bank, have opposed Cotten’s Alternative 3 because it does not have individual fishing quota; it only assigns bycatch quota. They and others organized fishing stand-downs, letter-writing campaigns to Gov. Bill Walker’s administration, and during the Kodiak meeting a parade and festival celebrating the trawl industry. The trawlers are supporting Alternative 2, which would allocate quota for both the directed species and for bycatch. Processing workers and trawl crew marched through downtown Kodiak sporting signs reading, “Gov. Walker, don’t take our jobs” and “Don’t destroy what you don’t understand.” Red baseball caps with the words “Make Trawling Great Again” were de rigueur for attendees — even for Duncan Fields, one the most outspoken of the council’s Alternative 3 supporters and critics of catch share programs. Amid a dockside crowd of hundreds munching free pollock burgers, Fields took his cap off for a charity pie-throwing contest. Heather Mann, executive director of Midwater Trawlers Cooperative, and Joe Bundrant, CEO of Trident, paid a combined $2,500 for the privilege. NMFS Alaska Region Assistant Administrator and alternate council member Glenn Merrill and Trident legal counsel Joe Plescha donated as well, collectively raising $7,000 for Kodiak’s Brother Francis Shelter.   The festival’s levity somewhat broke a longstanding hostile aura present since the council’s Portland meeting in February, when fuming trawler crew had a shouting contest directed at Cotten following one session.  Cotten appeared to extend an olive branch to Krueger during session, acknowledging the trawl industry’s backlash and asking to work together for an option all stakeholders can live with. “We do need your help,” said Cotten. “We’re trying to find some way to accommodate our concerns and yours. I’d like to make that offer to you again.” The raised voices were absent, but the issue remains contentious and raised a crowd. The council blocked days for the one agenda item and still needed overtime to keep schedule. Breaking roughly in half for and against catch shares, more than 70 people signed up for public testimony, from 20-year-old deckhands in Kodiak Brewing Company hoodies to well-scrubbed CEOs. Some testified as groups, including a Filipino family of processor workers brought in by Bonney who asked the council in broken English not to harm the trawl industry that keeps them working. “There are fewer and fewer economic opportunities for young people entering the workforce and more and more fish barons who now 100 percent control resources that were once public,” said Robert Carter, a 32-year Kodiak resident who jigs and longlines for cod from his F/V Faith, in speaking against issuing catch shares. “They own them now and forever. They own rights to fish that aren’t even born yet. They get rich while the rest of us work twice as hard for half as much.” Others supported catch shares as a proven method for bycatch management and regional economic stability. “The GOA (Gulf of Alaska) is surrounded by catch share plans, based on history in the fishery, that have been overwhelming successful in accomplishing their original goals,” said Tom Evich, owner and operator trawler/seiner based in Sand Point. “The cornerstone of all those plans was to stabilize the economic health of the fishing boats and the processing sector.” Alternative 3 seeks community protections, but the trawl and processing industries said they already protect the community. In each of the alternatives, vessel cooperatives would be connected to processor, ensuring that the shoreside plants keep money flowing into coastal towns. Alternative 2 has options to prohibit any processor from receiving or processing more than 10 percent, 20 percent or 30 percent of the total target quota. Alternative 3, in contrast, would only establish regional vessel cooperatives that could deliver to multiple processors. Representatives from the processing sector said Alternative 3 should incorporate some kind of processor linkage. Regardless of proposed caps, Trident now controls 50 percent of the total groundfish volume in Kodiak after buying Western Alaska Fisheries’ assets from Japan’s Maruha Nichiro in 2014. In the Alternative 2 language, any company that currently processors more than the 10 percent to 30 percent range would be grandfathered into the new program. Fields asked Trident CEO Bundrant why the council shouldn’t be concerned a single company might cement a 50 percent market share. Bundrant, who paid $1,250 to squash a chocolate cream pie into Fields’ face night before, said the council shouldn’t be concerned that processor consolidation could hurt Kodiak’s community or the fishing industry. “I believe we’ve been a leader in looking out for this industry,” said Bundrant. “Think of the contributions and investments we’ve made. We wouldn’t be at 50 percent if we weren’t doing this right, if we weren’t taking care of our employees.” The alternatives The alternatives aim to fix a bycatch issue in the Gulf of Alaska. Bycatch happens when groundfish fishermen pulling up Pacific cod, pollock, and flatfish haul in non-target species. In the Gulf groundfish fisheries, chinook salmon and halibut are the main species taken as bycatch, also known as prohibited species catch, or PSC. Conservation concerns led the council to lower the halibut bycatch limits by 15 percent in 2012; the council created chinook salmon bycatch caps for the pollock and non-pollock trawl fleets in 2011 and 2013, respectively. Hitting limits ends fishing, which happened to the non-pollock fleet in the Western Gulf last year, leading to an emergency council action to allocate some salmon bycatch from the pollock fishery to the non-pollock fishery to allow fishing to continue. Groundfish fishermen from the trawl sector argue in favor of quota systems, which they say will slow the “race for fish” that makes it difficult to reduce bycatch. Alternative 2 resembles a traditional catch share program. Alternative 3 would only create quota for bycatch, not for the target species. The alternatives would handle the quota differently, however. In traditional catch share programs and Alternative 2, quota would attach to the fishing license itself. The newly amended Alternative 3 will give the bycatch quota to cooperatives instead, theoretically stopping a few persons or vessels from holding several licenses with masses of quota. The alternatives have some similarities. Both alternatives would require all trawl vessels in the fishery to carry an observer contracted by the NMFS or to have electronic monitoring capability 100 percent of the time. Current observer coverage rates for Gulf vessels are less than 20 percent. Both would change the four season dates for pollock and cod, and shift more of the quota to the earlier seasons to avoid the halibut caught later in the year. Both alternatives could reduce the chinook salmon bycatch limit for the GOA pollock fishery by 25 percent, relative to its current cap of 25,000 and proportionate to the Western and Central Gulf areas where it is subdivided. Both alternatives would also lower halibut bycatch caps for the GOA non-rockfish trawl fishery, relative to the current 1,515-metric ton limit. The council could lower the cap by as much as 25 percent or as little as 10 percent. Both would encourage vessels to be members of a cooperative with each cooperative linked to an onshore processor. Both would divide the Gulf PSC limits between catcher processors, which process and catcher vessels. Catcher vessels in the Central Gulf take the most halibut bycatch, 68 percent of the total bycatch between 2003-15. Because the onshore sector takes this much, a bycatch cap reduction would mean catcher processors would have to improve performance if it wants to keep catching as much groundfish. “It is expected that the CP sector would need to improve its PSC usage rates in order to harvest GOA groundfish at historical levels under all the proposed options,” reads the paper. Council staff recommended tight rules from the onset to prevent over-consolidation of the fleet. The Gulf rockfish program — the only catch share program including trawlers in the region — has a vessel use cap of 4 percent that ensures at least 25 vessels will participate in the fishery. “It is likely better to begin the program with rules that more aggressively prevent consolidation, and loosen the rules as appropriate,” staff wrote in the discussion paper of the alternatives. “Tightening consolidation rules after the fact would be less effective, in part because consolidation will already have occurred.” Some of the new changes to Alternative 2 strengthen protections against consolidation. Vessels could be forbidden from transferring more than 5 percent to 40 percent of their overall quota, and be prohibited from making any transfers for two years after the program begins. A third alternative would create either one Gulfwide or two regional Community Fisheries Associations, or CFAs, to hold five percent to 15 percent of the available quota to dole out to qualify license and vessel holders in the community.  The governor would appoint the associations’ board members. Kodiak, Homer, Seward, Whittier, Valdez, Cordova, and Community Quota Entities in the Western and Central Gulf would qualify for membership in the CFA. The council recognized during the meeting that the CFA structure is only compatible with the catch share program in Alternative 2. DJ Summers can be reached at [email protected]  

Fields’ voice never louder as he ends nine-year council run

KODIAK — Duncan Fields ended his nine years on the North Pacific Fishery Management Council in signature style at his final meeting in his hometown. In talks over Gulf of Alaska bycatch measures and catch shares, he tried to set aside some proposed groundfish quota for owner-operators only. The council didn’t take up the motion. Nobody would second it for a reading. From the onset, he’s had a particular vision for how North Pacific federal fisheries should look, and he’s lost a lot of votes along the way. As time has passed, though, the State of Alaska has come closer and closer to it.  Although he’s leaving the council, he isn’t leaving the public arena and is running as an independent for the Alaska House of Representatives challenging Kodiak Rep. Louise Stutes. Fields counts his greatest successes — and failures — as somehow related to active participation in fisheries. “Duncan has a reputation not being afraid to take an unpopular position and lose a vote 10-1,” said fellow council member and Alaska Department of Fish and Game Commissioner SamCotten. An attorney and salmon fisherman in Kodiak, Fields had already served on the council’s Advisory Panel for seven years when Gov. Sarah Palin appointed him to the council along with current Cotten in 2007, replacing Doug Hogel and Stephanie Madsen. Gov. Sean Parnell renominated him in 2010 and again in 2013, maxing out the statutory three consecutive three-years terms council members are allowed under the Magnuson-Stevens Act. Wasilla fisherman David Long also served his last day on the council after a single term. “I stepped in to the council room nine years ago ready to fight,” Fields said. “Gerry Merrigan was there ahead of me, he was equally conversant, and we were the two young kids on the block. We were ready to change the world.” Changing the world meant something specific. Fields brought two priorities to the council. “One, protecting rural Alaska fishing within the communities and providing access to marine resources,” Fields said. “The number two priority is to have people with an ownership interest that are actively engaged in fishing being able to obtain the rewards from their fishing.” Community Quota Entity programs, which give fishing quota to coastal groups rather than to persons, became a pet project of his. He and the council carved out six amendments to the program and eventually implemented the new entities. Fields similarly counts the abolition of hired skippers in the halibut fishery in his win column. In 1993, the North Pacific Fishery Management Council created an Individual Fishing Quota, or IFQ, program for halibut and sablefish in the North Pacific. The program assigned quota shares to fishermen based on their historical participation in the fishery, and allowed share transfers among fishermen. The North Pacific council passed a rule in 2013 that prohibited the use of hired masters to harvest any quota acquired after Feb. 12, 2010. A U.S. District Court has since ruled that the rule broke administrative laws, however, and a ruling on a motion to overturn it is pending. Not all attempts to ensure active participation were successful for Fields. “The second thing I was very interested in because of its impact in Kodiak was making adjustments to the Bering Sea crab program to create active participation requirements for anybody with quota shares,” he said. “While we looked at that over a long period of time, I and the council were largely unsuccessful in changing that program for any substantive good.” Along with three governors, Fields has worked on the council alongside their three different commissioners of the Alaska Department of Fish and Game – Denby Lloyd, Cora Campbell, and Cotten, appointed by Gov. Bill Walker in 2014. Commissioners are expected to lead the six Alaska voting council members and steer votes towards goals that align with the administration. Fields said his relationships with commissioners were always cordial, but some possibly more productive than others. “The ability to affect change ebbs and flows with your co-council members,” Fields said. “I’ve enjoyed good relationships throughout the three commissioners over a nine-year period of time. A couple of the commissioners I had deeper and more personal relationships with, and perhaps a greater ability to build a coalition for change.” Participation in fisheries forms the core of Gulf of Alaska bycatch management measures, Fields’ last large-scale regulation package. Different commissioners have taken different routes to address the halibut and chinook salmon bycatch issues in the Gulf of Alaska groundfish fisheries. Lloyd didn’t want to take up the issue at all. Fields said he likely didn’t relish the time and expense. Campbell introduced the idea of catch shares. Cotten took the last step to Fields’ position, recognizing that catch shares can have unwanted blowback. “I think the state’s goals about the Alaska coastal communities have largely remained the same,” said Fields. “I think there are different ideas about the tools or the means to the common end, but the end in and of itself really doesn’t change from one commissioner to another.” Cotten agreed. “Duncan’s been pretty consistent,” said Cotten. “The administration’s positions have changed. None of the administrations have ever been interested in limiting access to fisheries, but Duncan and I both felt that if you did this rationalization wrong, it would really damage some of these communities.” Mike Szymanski, a government affairs coordinator with Fisherman’s Finest and council attendee for the last 25 years, said Fields finds himself now more closely aligned with the administration’s goals, but that his voice hasn’t shifted with the times. “From the day he took office I’ve watched his ability to represent Kodiak and his sector. He’s been effective,” said Szymanski. “He’s been a voice people listen to. His description of his philosophy is that his job on the council is not only to represent those who testify, the lobbyists…but the voices of the people who did not testify. I sincerely believe Duncan will go down as the best single representative of that voice I’ve seen.” The council, he said, rarely has a member with Fields’ ability to digest information and willingness to press it on the council. Even fellow Alaskans on the council disagreed with some of his motions. Like Szymanski, Cotten said Fields’ effectiveness only improved with time. The council valued his attorney’s skill to mine documents for information, his memory, and his loquacity “I think his effectiveness has become better,” said Cotten. “He became an expert mechanic. We may disagree on some things, but he’s pushed me to be more substantive in my own arguments.” Cotten has high praise for Fields’ and Long’s replacements: Theresa Peterson, who also hails from Kodiak, and Buck Laukitis. Still, he said the council will lose a valuable asset with Fields. “I voted against what he had to say a lot of times, but I did end up admiring and respective his unabashed advocacy and his tenacity,” said Cotten. “That experience and ability to make motions and have the historical perspective to remember something that happened on Amendment 91 from six years ago. Certainly experience that he brought won’t be there anymore.” Fields now makes the fourth former council member on his street in Kodiak, neighboring Kevin O’Leary, Doug Hodel, and Stosh Anderson.   DJ Summers can be reached at [email protected]

Report: Temper expectations for sockeye price increase

The message on prices for Alaska’s sockeye fishermen from Juneau economics firm McDowell Group this season is good, but not great. “Despite some positive developments, fishermen should have tempered expectations about sockeye market conditions heading into the 2016 season,” reads the report, commissioned by the Bristol Bay Regional Seafood Development Association. Though prices will be better than in 2015, “analyses conducted for this report and expert interviews suggest it is unlikely that prices will jump back to pre-2015 levels this year.” The report builds on an April McDowell report commissioned by the Alaska Seafood Marketing Institute that touched on some of the new report’s points. Bristol Bay sockeye salmon production is forecast to dip this year, which will solve some of the oversupply issues the market faced in 2015. Meanwhile, farmed Atlantic production is down due to a massive algae outbreak in Chile. The U.S. dollar has weakened against key export currencies. Processors are recovering from low revenue. Prices are already looking better than last year. According to a June 12 KDLG article, the base price at a Copper River Seafoods plant in Bristol Bay is 75 cents per pound, with bonuses available up $1.25 per pound. Processors are geared for a big season. According to an ADFG processor survey, processors intend to purchase 35.5 million fish in 2016, which is 20 percent higher than the forecast harvest of 29.5 million fish. Processors could work 2.6 million fish per day for about 17 days. The Bristol Bay sockeye fishery opened June 8, but the fish have yet to come back in viable amounts to justify heavy fishing. Last year, a total supply of Bristol Bay sockeye produced a 10-year low of 50 cents per pound in dockside pay for fishermen, later revised to 63 cents per pound. Of the five major sockeye-producing Alaska regions including Prince William Sound, Cook Inlet, Kodiak and the Alaska Peninsula, only Bristol Bay had this low a price. Two-thirds of the world’s wild sockeye came from Alaska on average between 2011-14. Bristol Bay produced 38 percent of the world’s wild sockeye supply last year, more than any other region. Another 25 percent came from other Alaska areas. Much of price decline came from a spike in supply in 2014 and 2015. From a 10-year low of 301 million pounds in 2013, harvests went up 78 million pounds in 2014, the largest production figure since the mid-1990s. In 2015, the numbers shot up even more with about 36 million sockeye harvested in Bristol Bay. “Preliminary estimates suggest sockeye harvests increased by approximately 18 million pounds in 2015, with Bristol Bay accounting for nearly half of worldwide sockeye production,” according to the report. Bristol Bay wild sockeye salmon competes with farmed Atlantic salmon in both domestic and foreign markets. Last year, farmed production from Norway, Chile, and Canada was high, further deadening sockeye prices. This year, McDowell Group expects farmed Atlantic production to drop 6 percent and Chilean coho production to be down 20 to 30 percent, both due to a toxic algae bloom in Chile. Norwegian salmon producers have also experienced a dreaded sea lice outbreak that will hurt their production numbers along with Chile. During the low price slump in 2015, retail prices remained steady. Fishermen had concerns that retailers and processors were sticking them with the overstock price slump, but the study said retail sales shared the burden. Retail prices did fall later along with ex-vessel price. The average U.S. retail prices on sockeye fillets fell 9 percent to $9.98 per pound during the 2015 sales cycle.  “U.S. retailers have passed on most of the savings from lower raw material (i.e. ex-vessel) prices, though not all,” reads the report. “Retail sockeye fillet prices fell approximately $1.03/lb. during the 2015 sales cycle (compared to the previous cycle). Meanwhile, the cost of raw material (i.e. ex-vessel cost) included in a one-pound sockeye fillet fell from approximately $2.89 to $1.52 — a difference of $1.36/lb. However, this type of retail pricing behavior is not uncommon.” Exchange rates also influenced price. Typically, when the U.S. dollar is strong against the yen and euro — currencies to key export markets — sockeye prices will lag as exports become more expensive. In 2015, sockeye prices were at their strongest relative to these currencies since 2003 at a time when prices were at their lowest anyway. Exchange rates have improved slightly since then. The dollar’s value dropped 1.7 percent against the euro from May 2015 to May 2016. For the same time period the dollar declined against the Japanese yen by 10.3 percent. The study suggests several marketing strategies to prevent the same kind of pricing issues in later seasons, including emphasis on quality, increased marketing efforts for canned salmon, and even creating a subset of Bristol Bay wild sockeye to exist on its own to help strengthen prices. “Bristol Bay sockeye are typically marketed to consumers as ‘Alaska sockeye’ or simply ‘sockeye salmon,’” the report states. “It is possible that by differentiating Bristol Bay sockeye from other sockeye/salmon varieties, value could be added to the product. “BBRSDA has already committed to testing this hypothesis by funding a branding pilot project in Boulder, Colorado.” DJ Summers can be reached at [email protected]

After 10-year crab review, council seeks social impact information

KODIAK — Statistics help explain economics, but fisheries managers want to find a way to put number to cultural impacts as well. The North Pacific Fishery Management Council approved a 10-year review of rationalization on June 10, the program that ended derby-style crab fisheries in 2005 and gave quota shares to vessel owners, captains and processors. The aim was to reduce overcapitalization and create a safer fishery by allowing crew to fish slower with a guaranteed quota allocation compared to the previous free-for-all. The program mandates reviews every five years. The next is scheduled for 2020. The council voted to approve the review for publication, but allowed the Scientific and Statistical Committee to pepper additional points beforehand, including an extended summary and conclusion section and more context for the social impacts that accompanied fleet profile changes. At the committee’s suggestion, the council also voted to explore creating a working group dedicated to social impact studies. The study The 10-year review charted a continuation of trends found in the five-year review. Crab stocks rebounded from their mid-1980s dive, and have been rebuilt in some cases. Half as many crew and vessels now make twice the money as before the program began. Non-captain crew members remain roughly as Alaskan now as in 2005. Vessel consolidation continued along with quota consolidation, but both somewhat stabilized in the last five years. Fewer people hold quota than before. Each individual quota holder, naturally, holds more quota now than in 2004; 53 fewer people hold Bristol Bay red king crab crew shares now than in 2005. In the two years following rationalization, the crab fleet shrank from 256 vessels in 2004 to 91 in 2006. “In subsequent years, the aggregate number of participating vessels has varied between 75 and 88 vessels, with marginal increases in some years, but continuing a general declining trend,” reads the report. “The smallest active fleet of 75 vessels occurred in 2013/14, concurrent with the lowest aggregate catch of 63.75 million pounds across all fisheries since 2009/10 season. “ Vessel revenues increased as well. Per vessel, crabbers raked in $1.22 million to $3.38 million in the last 10 years — seven times the average from 1998, 2001 and 2004, the references years the council used. Council staff said it’s nearly impossible to compare pre-rationalization employment to post-rationalization, and to link a shrinking participation directly to quota shares.  “While crew employment and remuneration were clearly substantially changed following the transition to rationalized management, to what degree those changes were caused by the implementation of IFQ, per se, as opposed to the mitigation of overcapitalization generally, and of derby conditions specifically, is likely not possible to ascertain.” There were roughly 1,300 non-captain crew positions in the three pre-rationalization reference years. By 2006, this number was halved to 640. Vessels also fish far longer seasons and catch more crab. Over the 2006-14 period, average catch per vessel was 1.047 million pounds, 123 percent higher than during the reference years. Per person, a crew member made an average $57,000 between 2006 and 2014, about twice the $28,500 from pre-rationalization. Processors followed roughly the same route, halving in the 10 years after rationalization but each taking on double the pre-rationalization workload with the accompanying revenue. Crew has stayed as Alaskan as it was when rationalization began. Of the 584 commercial crew license holders in 2014, 34 percent were Alaska residents. This number of Alaska crew has remained steady since 2006 when it was first tracked. Between 2006 and 2014, the percentage of Alaska crew has stayed within the 36-34 percent range. Crew numbers have gone as high as 631 and as low as 515. The Alaska residency of gear operators has dropped five percent from 1998. The total number of gear operators has dropped from 349 to 92. During the first five years of the program, vessels in the two highest landings quartiles — meaning volume of landings — consistently paid both captain and crew members at lower rates per pound than vessels in the two lower volume quartiles. This disparity has smoothed since 2010. “In the most recent seasons, however, this has shifted in part, with vessels in the highest and lowest quartiles paying between 10.0 and 11.9 percent of gross revenue to captains, while crew member gross percentage shares continue to be highest (3.0-3.3 percent) on the vessels with smallest volume of landings, but nearly equal levels prevail across the other three quartiles (from 1.8 to 2.2 percent).” Stocks have recovered from their early 1980s collapse, but in some cases declined since rationalization began. Total biomass of Bristol Bay red king crab fell from 698 million pounds to 76.1 million pounds in 1985, but increased to 207.01 million pounds in 2007, and subsequently declined to 156.1 million pounds in 2015. Other stocks followed a similar route. Stocks that had been previously classified in danger rebounded. Several have been a classified as “rebuilt” since rationalization. Fishing above the total allowable catch stopped entirely. “Between 2000 and 2004, the (guideline harvest limit) for Bristol Bay red king crab was exceeded in 2 out of 5 years; the GHL for Bering Sea snow crab was exceeded in 5 out of 6 years; and the GHL for Aleutian Islands golden king crab was exceeded in 2 out of 5 years. “Since the implementation of the Crab Rationalization Program, the (total allowable catch) for these target fisheries has never been exceeded.” Mixed signals The Scientific and Statistical Committee and certain council members want catch share reviews to have more cultural studies in the future, leading to concerns about time management and labor costs for the council staff. The committee gave somewhat mixed messages about whether the 10-year review is ripe for publication in the Federal Register, confusing council members who wanted a clear-cut yes or no. “The SSC finds the document to be a satisfactory broad and comprehensive review of the crab rationalization program,” wrote the SSC in its recommendation to council. “The document presents the best data available on a broad range of measures affected by crab rationalization, and is summarized in a fashion that is useful for identifying ‘red flags’ in program performance.” Later in the minutes, the SSC said the opposite. “The SSC determined that the framework and format for this document falls short of the scientific standard for analysis that is mandated for a 10-year review,” reads the briefing. “This review did not identify program impacts separate from other causes and trends, or evaluate them against the goals and objectives laid out in the Council’s problem statement.“ The SSC referred to a letter written to U.S. Congress by then-chairman Dave Benton, outlining the expected impacts of crab rationalization, in particular community protections and the economic health of crew. To get the best information about these social impacts, the SSC wants the review, and further reviews, to give a quantitative weight to social studies. These would a need to reinstate fieldwork funds for the social impact assessment in the next program review, a description of active participation by quota holders, and methods to characterize how access and upward mobility has changed. The SSC already has a meetings scheduled for June to discuss social impact studies. Council members and the executive director fear the workload could distract from the myriad management duties it has elsewhere. “If we were to attempt what they were suggesting, it would take all of our staff,” said Chris Oliver, the council’s executive director. “With the various catch share programs we have…we would be doing nothing but program reviews for the rest of this council’s eternity.” Others believed fisheries management will depend more and more on such studies, and the council should at least examine what such a workgroup’s duties and contributions might look like.  “I believe social science plan teams are something that will be incorporated on a national level,” said member Duncan Fields, who introduced the motion. DJ Summers can be reached at [email protected]  

State fix on groundfish tax collection still a work in progress

Editor's note: this story has been updated with exact numbers provided by Kurt Iverson. KODIAK — A fishing tax rate glitch has new data that will increase state revenue in 2016, but the fix still needs work. “I don’t think this issue’s going to go away,” said Kurt Iverson, a research analyst for the Alaska Department of Fish and Game. Iverson said 2015 data has raised the price for formerly undervalued fish. The state won’t make the millions it believed the fishery is worth, but the aggregate tax increase is worth more than a half-million dollars. “The state was thinking the loss was in the neighborhood of $1-$2 million, but it’s closer to something like $600,000,” said Chris Woodley, executive director of Groundfish Forum, an industry group comprised of the flatfish catcher-processors that target the species in question such as yellowfin flounder and Atka mackerel. Following the June 15 publication of this article, Iverson had more specific numbers.  "The bottom line is a $787,295 increase," wrote Iverson in an email. "Most of that ($626,960) was yellowfin sole.  Then mackerel was $166,825.  Rock sole went down by about $54,000 because the price dropped; flathead sole stayed the same; and turbot went up by about $40,000." Though the payments have risen for 2015 based on the new prices, Woodley agrees with Iverson’s outlook for a final plan to fix the rate for good. “It’s a work in progress,” he said. Woodley was one of several industry leaders with whom the state consulted to fix a tax glitch discovered in late 2015. According to state research estimates at the time, the state had lost out on $1.8 million to $2.5 million per year, or more than $10 million over the last five years. The fishery resource landing tax levies a tax on fish that are landed in Alaska communities. Half the tax goes to the state and half to the community where it was landed.  The value, however, is based on ex-vessel price, or what fishermen receive at the dock from processors. Processors turn much of the flatfish caught as bycatch into low-value fishmeal, so the only known ex-vessel price for certain flatfish species is artificially low. “The federal government faces the same issue when tries to come up with economic analysis for the (North Pacific Fishery Management) Council,” Iverson said. “So they developed a formula to back calculate from the wholesale price.” The state, Iverson said, submitted this formula to the Department of Revenue and was in the process of notifying industry when the Commercial Operator’s Annual Reports came out in April with the increase in ex-vessel flatfish value. “Those former values were based on incidental instances of these species coming in and being ground up for fishmeal,” Iverson said. “The actual transactions for 2015 were not arm’s length transactions and the final products when into headed and gutted and frozen form that reflects the majority of the market. So prices went up.” According to Commercial Operator’s Annual Reports, or COAR reports, processors paid an average of two cents per pound for yellowfin sole in 2014, and only a penny per pound in 2013. Atka mackerel must have had more shoreside action to raise its price from fishmeal, but still came in very low at 10 cents per pound in 2014 versus 2 cents per pound in 2013. In 2015, these prices rose. Yellowfin sole sold for 9 cents per pound, and Atka mackerel sold at 19 cents per pound. Last year’s ex-vessel prices reflected more dockside information, but that kind of activity is rare in the flatfish fishery to the extent seen last year.   “What if these transactions that increased the ex-vessel value don’t occur again?” said Iverson. “How do you prepare for that?” The fallback, he said, will be to use the imputation formula derived from wholesale data the federal government uses. The calculation uses the total first wholesale product value, total round weight harvest, and a value reduction system of 0.4 percent to calculate true value. The landings tax issue formed a backdrop to fisheries tax discussions in the House Finance committee. Fishermen leery of proposed industry tax hikes said the state should maximize revenue where it can. Rep. Louise Stutes, R-Kodiak, who chairs the Fisheries Committee, said her committee would watch closely to see the matter is resolved. DJ Summers can be reached at [email protected]  

Early-run Kenai king fishing opened for first time since 2012

After years of depressed stocks and depressed fishermen, the Alaska Department of Fish and Game has opened the early king salmon sport fishery for the first time since 2012. This accompanies several other early king runs throughout Southcentral and in the Arctic, correlating with warmer marine temperatures. “We’re seeing stronger numbers of early-run kings returning to the Kenai,” said Robert Begich, the area management biologist in Soldotna, in a release. “This has allowed us to ease pre-season restrictions, and provide opportunity for anglers to fish for early-run king salmon.” Sport fishing for king salmon in the Kenai River will be from its mouth up to an Alaska Department of Fish and Game regulatory marker at the outlet of Skilak Lake. Fishing will be restricted to catch-and-release from June 4 through June 30 using only one, unbaited, barbless, single-hook, artificial fly or lure. Numbers for the early run have been promising. On the Kenai River, sonar has counted 3,658 fish as of June 6 — nearly double the 2,068 fish seen at the same time last year. ADFG closed the Kenai River early king salmon run to sport fisheries on Feb. 18 due to a low forecast. Only 5,206 fish were expected, which would rank 29th of the last 31 years ADFG has been counting. The optimal escapement goal for early-run Kenai River king salmon is 5,300 to 9,000. “Things are looking very promising right now,” said Jason Pawluk, Kenai area assistant management biologist, in a May 29 interview. “The question is it a really early, below average run, or is it a big run? That’s the ultimate question right now.” Other oddities are popping up with the early run. Pawluk said the returning fish are younger than usual. ADFG uses size measurements as a proxy for age. By these measurements, Pawluk notes more two-ocean and four-ocean fish than typically return this early. On other rivers, king salmon have seen promising numbers. The Deshka River’s weir counted 7,822 king salmon by June 6, an improvement over the 4,149 and 1,903 counted by the same date in 2014 and 2013, respectively. On the Anchor River, video weirs counted 2,326 by June 6, slightly less than last year’s measure of 2,728. Kings and chums are also coming back early farther north on the Yukon River, according to Kwik’Pak Fisheries sales manager Jack Schultheis. “We’ve been catching fish here for the last two weeks,” Schultheis said. Environmental changes accompany, and may explain, the early runs. In the Gulf of Alaska, surface temperatures average one degree Celsius above the average temperature. This is a leftover effect of the Gulf’s infamous Blob in 2015, which warmed Gulf of Alaska surface temperatures two degrees Celsius and ushered in a red tide of toxic algae. On the Yukon River, ice floes have vanished already with the same early run effects as in Southcentral, as predicted by ADFG in an earlier forecast. “This is a very unusual year, for the ice to go out as soon as it did,” said Schultheis. In 2013, for example, he said ice was still present on the river on July 10. “Then we got into this pattern lately when it would go out the 27th or 28th of May,” he said. “Now it’s going back to earlier breakups. Fish come in right after the ice goes out.” At the Pilot Station sonar counter on the Yukon River, 8,408 chinook have passed, nearly four times more than the amount passed the year before by June 6. The fish could be returning earlier to beat the heat. Anecdotal evidence of warming trends adds up. “We monitor Hidden Lake when the ice goes out,” said Pawluk. “This year, we went on April 7, but it was completely open. Jean Lake was open. It went out between April 1 and April 7. Typically it goes out the first week of May.”  Pawluk said ADFG has been monitoring stream temperatures as well. On the Russian River, he said temperature readings in April read between eight and nine degrees Celsius instead of the typical five degrees. For other Southcentral rivers not so sensitive to environmental changes, runs are decidedly slower. On the Copper River, sockeye returns are only a third of what they were at the same point in the last two years, and the early king salmon run is lackluster as well. “Our king salmon harvest was low,” said Jeremy Botz, the Copper River area management biologist. “Through Tuesday (May 31), we’ve got close to 9,000 harvested. The last five years we’ve had really small runs. Typical for this time period we had twice that. We would’ve wanted 13,400 by this time.” The Copper River, however, lacks the same environmental vulnerability its sister Southcentral rivers display. Glacial runoff forms the Copper River. When waters warm, the glacier simply pours more cold water into to the river to correct the imbalance. “That’s why the Copper River runs are so consistent,” said Botz. “A lot of it has to do with that regulation.” The boost in king salmon performance is not consigned only to Upper Cook Inlet, though Southeast kings have yet to come back in force. Further south, Kodiak’s chinook runs are performing better than the last two years. The Karluk River counted 315 by June 6, up from the 100-odd kings counted by the same time in 2015 and 2014. On the Ayakulik River, 597 kings have returned as of June 6, three times more than each of the preceding three years. Southeast Rivers have different timing than Southcentral’s. According to ADFG Division of Sportfish director Tom Brookover, chinook in Southeast rivers like the Taku and Stikine rivers are returning more slowly than their northern brethren. Unlike the Kenai River, Southeast Alaska managers have restricted king fishing on the Taku River, citing below average catches. “These regulations are in place because Taku River king salmon production is low at this time,” reads an ADFG report. “More liberal regional bag limits, set under the Southeast Alaska King Salmon Management Plan are not appropriate in areas where local king salmon stocks are in a period of low productivity.” DJ Summers can be reached at [email protected]    

Judge allows part of Kenai subsistence suit to proceed

The Ninilchik Traditional Council’s battle for a Kenai River subsistence gillnet will run into the 2016 salmon season, with a lawsuit over last year’s operational plan potentially brushing up against this year’s plan.  The road to a Kenai River gillnet has been rocky for the Ninilchik Traditional Council. The federal fishing manager wouldn’t approve it in 2015 because of conservation concerns. State and federal biologists advised against it. Alaskans broke volume records begging the board to reconsider it. Other subsistence groups chimed in April to ask the Federal Subsistence Board to repeal it entirely. The Ninilchik Traditional Council filed a complaint against Federal Subsistence Board Chair Tim Towarak, U.S. Secretary of Agriculture Tom Vilsack and U.S. Secretary of the Interior Sally Jewell in October 2015, saying both the Federal Subsistence Board and federal wildlife manager erred in not approving the 2015 gillnet operational plan for the Kenai River. In March, the federal defendents asked the judge to dismiss the case. He did so partially after an April 14 hearing, leaving certain elements of the complaint to be further considered. NTC intends to file an amended complaint against federal management now that the suit’s scope has been narrowed. The remaining complaints will examine whether or not Kenai National Wildlife Refuge manager Jeff Anderson acted legally when he did not approve the Kenai River gillnet operational plan in 2015. The defendants asked Judge John Sedwick to dismiss the case, saying the NTC has no legal standing to sue and that its claims are “unripe.” Among other arguments, the defendants said the decisions regarding the Kenai River gillnet are not final. More than 700 Alaskans submitted requests for reconsideration to the board; until these are resolved, the feds say the matter is not final and therefore unripe for a legal challenge. Sedwick disagreed, saying the law “does not state that a board action is not final until all third-party requests for reconsideration are resolved. It states that if a party requests reconsideration and the board denies that request, the board’s denial ‘represents the final administrative action’ on that specific request.” Because the matter is ripe, Sedwick said portions of NTC’s complaint fall under the court’s jurisdiction and give NTC standing to sue. Some portions of what NTC requests do not fall under the court’s authority. Sedwick said the court has authority to examine whether Anderson’s decision to not approve the gillnet was appropriate under the Administrative Procedures Act, but not to force Anderson or the board to approve the gillnet. “The court lacks jurisdiction over NTC’s request for an order compelling defendants to issue the Kenai gillnet permit because nothing in the (regulation) requires the in-season manager to issue that permit,” reads the ruling. “Instead, the regulation gives the in-season manager discretion to determine whether an operational plan is meritorious.” Many of NTC’s claims concern the subsistence section of the Alaska National Interest Lands Conservation Act, Section 804. The act, or ANILCA, established conservation mandates for 100 million acres of Alaska land, including outlines for federal subsistence management. Sedwick notes nothing in ANILCA Section 804 can force the board to rescind Anderson’s order, as NTC originally requested last October. “NTC’s complaint alleges that Anderson has made several decisions that violate Section 804, in particular his decision to ‘close the fishing season for chinook salmon on the Kenai River before it began, and keep it closed throughout the season’ and his decision not to issue a Kenai gillnet permit.” NTC has requested an administrative record from the defendants in order to file an amended complaint about Anderson’s decision. The Federal Subsistence Board approved the Kenai gillnet in January 2015 to a statewide wave of vocal criticism. State and federal biologists opposed both the Kenai net and the Kasilof River net. Gillnets are a non-selective gear type, and could possibly snag precious king salmon when sockeye are the target species, they said. The board voted 5-3 in favor. The U.S. Fish and Wildlife Service representative on the board — which controls the Kenai National Wildlife Refuge in question — voted against it. Both nets must have an operational plan, however, approved by area manager Anderson. Anderson approved the Kasilof plan, but did not approve the Kenai plan. Instead, Anderson closed the river to king fishing entirely last summer, even as escapements were enough that the Alaska Department of Fish and Game liberalized king salmon fishing rules to allow retention, as well as additional commercial fishing time, in the final week of July. NTC asked the board to overturn Anderson’s closure and rewrite regulations to take them out of federal fishing management scope, or to force the federal manager to approve their operational plan. The board shot down NTC’s requests; each failed by a tie vote. In response, NTC filed the lawsuit in October. In April, the Cooper Landing and Hope Federal Subsistence Community filed for a change in the 2017-2019 Federal Subsistence Board proposal book that would eliminate the Kenai gillnet. The gillnet, the Cooper Landing and Hope filers said, has a negative direct impact on them. DJ Summers can be reached at [email protected]

House energy bill attracts veto threats

The U.S. House of Representatives approved an amended Energy Policy Modernization Act on May 25 with a cluster of additions opposed by President Barack Obama’s administration and Senate Democrats. The administration issued seven veto threats against the House version compared to none against the Senate version. The White House threatened to veto the House’s California drought relief package, their version of America COMPETES, provisions to develop energy on tribal lands, and expressed concerns over the sportsmen’s package and forest fire provisions. The energy bill’s House version did not enjoy the same bipartisan support the Senate version did. While the Senate version passed by a 85-12 vote, the House version passed along party lines with a 241-178 vote. The Senate will have to vote on whether to move to a conference committee to reconcile the bills. Senate Democrats think House Republicans compromised the bill’s potential passage. In an interview with Politico, the committee’s ranking Democrat, Sen. Maria Cantwell, D-Wash., said the House won’t get what it wants. “There’s just so much there that’s already been SAP’d by the president,” she said, using an acronym for statement of administration policy. “Why would you send that over if you were serious about getting a bill?” While Democratic senators expressed disdain for the House version, Sen. Lisa Murkowski’s staff said it only presents a step towards compromise. “While there are some differences in the House and Senate energy bills, that is to be expected, and there is also significant overlap between them,” wrote Nicole Daigle, communications director for the U.S. Senate Committee on Energy and Natural Resources chaired by Murkowski, in an email. “Some are keen to focus on areas where there appear to be disagreements, but there are many more provisions where both chambers are generally in agreement.” Daigle said Murkowski remains hopeful the House and Senate can work together, echoing earlier statements the senator made to the Journal. After the Senate passed its bill, Murkowski acknowledged that the administration “hadn’t exactly endorsed the bill.” However, she said the fact that the Secretary of Energy is helping her office write language for the bill’s LNG permitting aspect illustrates the administration’s willingness to accept certain provisions. The bill — the first energy policy overhaul since 2007 — includes provisions for renewable energy production for wind, solar, hydro, and geothermal energy, as well as provisions to ease Alaska’s oil and mineral development processes. Permitting reforms are one of the bill’s key components for Alaska’s liquefied natural gas industry. The bill requires the Secretary of Energy to make a decision on any liquefied natural gas export application within 45 days after completion of environmental review. Similar permitting revisions for mineral development are included. The bill allows for expansion of Terror Lake hydro project on Kodiak Island. The House added several of its own previously passed bills to the mix. The most contentious concern water use and environmental issues. One bill would give more water rights to California farmers. The House’s version of the America COMPETES Reauthorization Act, passed by the House in 2015, would cut National Institute of Standards and Technology spending beneath the president’s request. Other elements of the bill, both in the Senate and House versions, expand public access to federal lands for recreational hunting and fishing purposes, a point of pride for both Murkowski and Alaska Rep. Don Young. The House version also streamlines permitting processes for resource development on tribal lands. The House and Senate have not yet set a date for the conference committee charged with consolidating the House and Senate versions of the final energy and natural resources legislation, but new appointments give Alaska a double whammy. The Senate hasn’t yet appointed conferees, but Murkowski chairs the Energy and Natural Resources Committee and sponsored the bill. On May 26, House Speaker Paul Ryan, R-Wis., appointed Young to serve on the conference committee. Young said in a release that the bill isn’t only about energy, but public natural resources. Challenging the administration, he said, is the idea. “We’ve seen little progress in the face of this administration’s many attempts to lock away our lands and limit responsible resource development,” Young said. “Yesterday’s House-passed energy legislation includes a number of long sought provisions and reforms aimed at ensuring access to critical resources and public lands, streamlining energy development, and eliminating red tape facing our nation’s sportsmen.” DJ Summers can be reached at [email protected]  

‘Reluctant’ Legislature passes bill to salvage insurance market

The Legislature forwarded a bill to Gov. Bill Walker that will stave off steep insurance premium increases in the individual market — at a $55 million cost to the state — at least for two years. Reinsurance is a form of subsidy for insurance providers. It will subsidize existing individual plans to slow rate increases, which spiked in Alaska by nearly 40 percent this year and a similar hike was likely coming in 2017. The Affordable Care Act, or ACA, drew high-risk patients away from the Alaska Comprehensive Health Insurance Association with its lower-cost, federally-subsidized plans. When federal reimbursements for insurer losses came up short, insurance companies hemorrhaged money and have been forced to raise insurance rates to recoup losses or leave the state altogether. Insurers will submit claims to the Alaska Division of Insurance, then receive a direct payment from the state to dampen the costs. The bill, drafted by Gov. Bill Walker’s administration and sponsored by Sen. Mia Costello, R-Anchorage, will draw proceeds from a statewide insurance premium tax to pay the reinsurance. This tax of 2.7 percent per plan typically draws between $50 million and $60 million per year according to Lori Wing-Heier, director of the Division of Insurance. Reinsurance will cost $55 million. The premium tax currently goes into the General Fund. The bill establishes an Alaska comprehensive health fund within the General Fund designated to pay for the reinsurance. The proposed operating budget will have to be amended or supplemented to account for the $55 million. The Senate added two key elements to the bill during a June 3 hearing. First, it sunset the reinsurance program in two years. Second, it established a legislative work group assigned specifically to discuss matters related to medical insurance, with hopes of isolating some of the underlying causes of Alaska’s high health care costs. Premera Blue Cross, Alaska’s lone individual insurance provider, said the bill is a good first step, but hints at some unease with the two-year sunset and hopes for something more substantial in the working legislative group. “We’re pleased that the Alaska Legislature has taken this positive step toward providing relief for Alaskans by helping to stabilize the state’s individual insurance market,” read a Premera statement. “We recognize that longer term solutions are needed to strengthen the insurance market and help consumers manage rapidly rising healthcare costs. We are committed to continue working with legislators, the Division of Insurance and other stakeholders on these efforts.” Legislators cringed at a $55 million operating budget cost in the current fiscal climate, but acknowledged Alaska has no choice if it wants to keep insurance rates from ballooning beyond a mortgage payment.  “Through this legislation we’re addressing a crisis,” said Costello during the June 3 Senate hearing. Two senators characterized their support for the bill as “reluctant” given the cost, but supported it all the same. “$55 million is a huge amount of money,” said Sen. Anna MacKinnon, R-Eagle River. “We’re living through those moments each day trying to make those tough decisions.” Only Sens. Charlie Huggins, R-Wasilla, and Mike Dunleavy, R-Wasilla, voted against the bill during the hearing. In a House concurrence session, representatives had mixed feelings about the Senate’s two-year sunset. Some thought the plan would only delay the problem of all but one of Alaska’s insurance providers leaving the state in the last two years. “The purpose of this bill was to entice insurers up here so we would have some competition,” said Rep. Les Gara, R-Anchorage. “To say, ‘Come on up here, and by the way, the program is going to disappear in two years,’ I don’t understand exactly how that makes sense. I don’t think any insurance company is going to change their practice to come up here for a year.” Those in support said the House has little choice. “The choice before the body is to have two years of stabilization, or no stabilization,” said Rep. Dan Saddler, R-Eagle River. “If we don’t offer some direction and some assurance that the industry can get the support and cooperation of the state, they will make the business decision to abandon this market, exposing the state to the need to spend a couple hundred million dollars to set up our own state regulated state run insurance company and the $200 million a year to operate that.” Premera will file its new rates with the Centers for Medicare and Medicaid Services on July 15. Premera spokeswoman Melanie Coons said the company was discussing a rate increase of up to 42 percent prior to the bill’s passage. She said Premera expects the rate increase to be less now; previous estimates said the bill would produce an increase of 15 percent to 18 percent. Premera received an extension to incorporate Moda Health’s rate information for its 14,000 Alaska customers last month. On May 1, Moda Health announced that it is leaving the Alaska individual market in 2017. Moda officials said the company could no longer operate in Alaska without a substantial increase in insurance premiums, which had already increased by 29 and 37 percent in 2015 and 2016, respectively. Even with the rate increases, insurers have been losing money. Premera’s rates rose approximately 37 percent and 39 percent in 2015 and 2016, but Premera still lost roughly $13 million since 2014 because of Alaska’s small customer base of individual policyholders cannot offset the number with high medical costs. Premera’s average premium is $713 per person per month, but costs per plan exceed $900 per person per month. Statewide, the average $700 per person per month is the highest in the nation, which averages $468 per person per month. In Alaska, people with pre-existing conditions were previously insured in a special high-risk pool, operated by the Alaska Comprehensive Health Insurance Association, or ACHIA. These plans were expensive, based on the nature of the risk pool, and many of these customers left for the subsidized federal insurance exchange. Congress passed an appropriations bill that restricted reimbursements to insurers to the amount received from premiums collected that exceeded costs. This has meant that many insurance companies, Moda Health for example, received reimbursements for 20 percent or less of their losses. The nation’s largest health insurance provider, UnitedHealth, announced earlier this year it will mostly exit the federal ACA exchanges next year after losing hundreds of millions since 2014. DJ Summers can be reached at [email protected]  


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