DJ Summers

Borough files to dismiss suit by Red Dog over severance tax

The Northwest Arctic Borough has filed for summary judgment to dismiss a lawsuit brought against it by Teck Resources, the Canadian owner of Red Dog Mine 90 miles north of Kotzebue. Teck filed a lawsuit against the borough on Jan. 15, alleging the borough’s new severance tax is unconstitutional. The borough insists it has the taxing authority granted to any home rule government. The new severance tax would increase the amount Teck pays the borough from $12 million in 2015 to an estimated $30 million to $40 million in 2016.  The mine, the world’s largest zinc source and a large lead producer, forms the backbone of the region’s economy. The state formed the borough in 1986, coinciding with the mine’s development and opening in 1987. Because the new borough would take time to decide its tax structure, it enacted a payment in lieu of taxes, or PILT, agreement with Teck in 1987. Under the PILT, Teck has paid approximately $140 million to the borough and the borough school district over the years. The borough relies on Red Dog for about 70 percent to 80 percent of its annual revenue, alongside its annual $12.5 million state general fund allotment. The borough levies no property or sales taxes on private citizens or any other taxes on businesses. According to Teck, Red Dog supports 715 mine-related jobs with $75 million in annual payroll, and the company spends $160 million on supplies within Alaska each year. More than 600 of the jobs are held by shareholders of NANA Regional Corp., the Alaska Native regional corporation for the area. PILT vs. severance Teck makes several key arguments against the severance tax. Most pointedly, Teck argues that the tax unfairly singles out the mine, which uses virtually no borough services. “Rather than distributing the tax burden among different classes of taxpayers or different economic activities, this Borough imposed its entire tax burden on one taxpayer,” reads the most recent filing from Teck, dated April 29. “There is evidence that the Borough has taken this approach for illegitimate reasons, deliberately targeting only one captive taxpayer and doing so with the stated purpose of confiscating what the Borough considers its ‘equitable share’ of Teck’s profits, while declining to take any share of the profits earned by any other person or entity in the Borough.” Teck also argues the borough failed to live up to its terms of agreement. The borough created the severance tax by ordinance, rather than through negotiations with Teck.  In 2009, the borough created a severance tax effective Jan. 1, 2012. In 2011, the borough renegotiated a PILT agreement with Teck that exempted it from the 2009 severance tax. Under this agreement, Teck paid the borough and its school district more than $57 million between 2011 and 2015. The 2011 PILT expired at the end of 2015, but gave Teck the option to renegotiate another PILT. Instead, Teck argues the borough passed two ordinances that terminated the ability of mining operations to negotiate another PILT, and another that raised the severance tax rate by 50 percent. “The combined effect of these ordinances was to dramatically increase the tax, prohibit the Borough from entering into a PILT that would provide for reduced payments, and prevent the Borough from renegotiating the 2011 PILT Agreement in good faith, as provided in paragraph 5 of the 2011 PILT Agreement,” the complaint argues. The borough says the it has every right to implement constitutionally sound excise taxes how it sees fit, and that it never intended the current PILT system to stick around forever. When the mine first broke ground, the borough said, its prospects were uncertain. Now the time has come to properly tax a profitable organization. “The Northwest Arctic Borough has an obligation to raise revenue to fund greatly-needed public services,” reads the motion to dismiss filed March 1. “The PILT structure was intended to support an uncertain prospect and an unprofitable mine; it was never intended to continue indefinitely to the benefit of Teck shareholders and to the detriment of Borough residents.” The borough cites several correspondences between the two entities as proof it negotiated with Teck; the fact the two parties were unable to reach an agreement Teck liked, attorneys said, does not mean there were no negotiations. As a home rule government, the borough says, it can implement excise taxes as it pleases, which includes severance taxes. “In Liberati v. Bristol Bay Borough, the Alaska Supreme Court stated, ‘[a] severance tax is a tax upon the taking or extracting of a resource,’” reads the motion to dismiss. The borough cites similar taxes in Montana enacted on coal industry as proof they meet constitutional muster. In the April 29 response, Teck wrote the Montana tax is dissimilar; it wasn’t literally the only tax in the area, as it is for Teck. “The Borough has arbitrarily singled out Teck as the sole ‘person’ that must pay virtually 100 percent of the Borough’s tax burden, and it has arbitrarily singled out Teck’s mining activity and NANA’s mineral resources to bear virtually 100 percent of the Borough’s tax burden,” the filing reads. NANA’s stake NANA Regional Corp., the Alaska Native regional corporation for the area, owns the land on which Red Dog Mine operates. As both a direct beneficiary of Teck’s operations and the representative organization for the Alaska Natives in the borough, NANA has a vested interest for both parties to remain happy. Shelly Wozniak, senior communications director for NANA, said the corporation wants to find a balanced way to provide the borough with revenue without cutting too far into Teck’s bottom line. “Finding a solution that’s a win-win is in the best interest of the region,” said Wozniak. The borough mentions the “detriment of borough residents” as a possible outcome of failure to implement a severance tax, but Teck’s royalties to NANA, at least, have been substantial. NANA underlines the mine’s importance to the region’s residents as both an employment source and a mainstay for the corporation’s revenue. “We are concerned about jobs,” according to an official NANA statement on its website. “A reduced operating budget for the mine will mean fewer jobs for NANA shareholders. Since 1989, NANA shareholders have received more than $469 million in wages by working at Red Dog. In 2015, approximately 603 NANA shareholders worked at the mine earning $39.3 million in wages.” Aside from the employment, Teck’s presence fills Alaska Native corporation coffers. Since 1989, Teck ‘s operations at Red Dog Mine have paid $1.3 billion to NANA. Not only NANA has befitted directly from the mine. The other 11 Alaska Native regional corporations have collected between $12 million and $172 million apiece from Teck since the mine began operations. As part of the Alaska Native Claims Settlement Act, which established regional Native corporations in 1971, Native corporations distribute royalty income from their lands in what’s called 7(i) sharing. Named for the section of ANCSA, it requires all regional Native corporations to give 70 percent of all timber and subsurface mineral resource revenues to the other regional Native corporations, relative to how many shareholders each has. ANCSA then requires half of the 7(i) funds from the regional Native corporations to be distributed to the Native village corporations within that respective region. Under 7(i) sharing, NANA has paid $820 million since 1989 as a direct result of Red Dog Mine’s revenue. NANA has retained $480 million from Red Dog Mine. In the mine’s lifetime, NANA paid a total $221 million to its shareholders from the mine’s proceeds. The borough’s argument to raise severance taxes in some ways mirrors the debate over raising state oil taxes. NANA has concerns that the severance tax will stymie mining exploration projects. NovaCopper, Inc. is currently exploring mineral projects in the Upper Kobuk region. If the borough’s severance tax cuts too deeply into Teck’s pockets, other mining operations could be scared off. “We believe the tax endangers NANA and non‐NANA funded exploration projects by changing the economics,” according to the statement on NANA’s website. “Future responsible development in the region is a key business strategy so NANA can continue to deliver cash benefits to shareholders.” DJ Summers can be reached at [email protected]  

Yukon, Kuskokwim king rules will remain cautious in ‘16

Along the states most heavily used subsistence waterways, Alaska’s lack of chinook salmon complicates food access in 2016. Despite an upward looking forecast for chinook on the Kuskokwim River, managers are still gun shy from the 2010 drop in king salmon recruitment. One average forecast, they say, does not merit a move to looser management. The 2016 Kuskokwim River king salmon forecast is for a range of 125,000 to 219,000 fish. The drainage-wide Chinook salmon escapement goal is 65,000 to 120,000. Average subsistence Chinook salmon harvest is 84,000. If the run comes back within the forecast range, then there may be enough chinook salmon to provide for escapement and subsistence needs. Managers are still uncertain how many kings actually came upriver in 2015. Unlike many other widely used Alaska waterways, the Kuskokwim River does not yet have a functional Alaska Department of Fish and Game sonar system to count returns. Other less accurate methods prevail, and even these disagree with each other over the amount of kings returning to the system in 2015. Weir counts and aerial surveys from a dozen Kuskokwim tributaries set a range of between 129,000 to 229,000 chinook returning to the river, or 172,000 as the median. Mark recapture studies say differently. They estimate 124,000 kings came up the river. Between the two, managers say, it pays to keep vigilant. “Given the uncertainty in the estimate of the 2015 run size, the large forecast range of the 2016 run, and consecutive years of low chinook salmon runs to the Kuskokwim River, a precautionary management strategy remains warranted,” according to the forecast. Managers say they will continue considering several of the tools used in the past several years to conserve chinook salmon, including early season chinook salmon subsistence fishery closure, tributary closures, restrictions on gillnet mesh size and length, live release of chinook salmon from fishing gear, time and area restrictions, and subsistence hook and line bag and possession limits. These restrictions could produce much the same season in 2016 as in 2015: a poor one. Management during low abundance of kings hobbled the 2015 Kuskokwim season. The Kuskokwim River produced some surplus chinook for subsistence, but nowhere near the official amount needed for subsistence, or ANS. The ANS, a number set by the Board of Fisheries, is 67,200 to 109,800, and hasn’t been met in five years. The average subsistence harvest is 84,000. ADFG estimates the Kuskokwim River chinook salmon subsistence harvest in 2015 was between 17,000 and 25,000. Native communities along the river continue to appeal to the federal government to manage the run. The Akiak Native Community has asked Federal Subsistence Board to close off all salmon harvest in the Kuskokwim River’s federal waters in the Yukon Delta National Wildlife Refuge to anyone but federally qualified subsistence users. In 2015, U.S. Fish and Wildlife Service closed all chinook fishing opportunities, including federally-qualified subsistence, in waters within and adjacent to the Yukon Delta National Wildlife Refuge, and put gear and time restrictions for all other salmon to protect the chinook run. Yukon River ADFG hasn’t released Yukon River forecasts yet, but management plans from the area’s Board of Fisheries meeting aided commercial fisheries while still protecting kings.  During the Alaska Board of Fisheries Arctic-Yukon-Kuskokwim meeting in January, the board adopted several restrictions for the Yukon, but also opened new opportunities for commercial users. To provide more opportunity at the behest of Kwik’pak Fisheries, the board opened up a commercial pink salmon fishery for the lower Yukon River — provided there are enough chum and pink salmon forecasted to satisfy subsistence demands. The board also allowed for beach seines for the commercial chum harvest, subject to chinook-sensitive mesh size and depth restrictions. Each fishery and gear type has strict orders to closely watch for caught kings and live release them back into the river. This now applies to subsistence fish wheels for the first time. The Yukon River has a substantially greater commercial fishing industry than the Kuskokwim, and subsistence management has to strike a balance between the two user groups. Long before king salmon declines materialized starting around 2010, the Yukon River saw a precipitous decline in king salmon abundance beginning at the turn of the century that has led to restrictive management measures ever since and resulted in three federal disaster declarations for poor returns. These measures appear to be working, or at least not making things worse. In 2015, the Yukon River restrictions coincided with one of the best escapements in years. At the Eagle sonar station near the Canadian border, ADFG counted 83,372 chinook salmon, 20,000 more than 2014 and 50,000 more than the Canadian escapements in 2013 and 2012. The trick for ADFG will be to continue the evidently successful king restrictions while supporting commercial fishing, one of the region’s only employers. The 2015 Yukon River commercial harvest — only considering chum, the river’s main commercial crop — netted $1.3 million, up from the 2005-2014 summer chum value average of $832,055. Subsistence needs for chum were met, but at the expense of chinook subsistence harvest. Chum salmon are the Yukon River’s only commercial species, as ADFG discontinued the commercial chinook fishery in 2011 in response to poor returns. Prices were down in 2015, and the upper river’s only processor shut down. The lower Yukon will continue to hold processing capability for its new pink fishery. A fire took much of Kwik-Pak’s office and housing in 2015, but general manager Jack Schultheis said the company won’t lose a step before the 2016 season. None of the processing capability was affected. “We did not lose any production facilities,” said Schultheis. “We’re not going to miss anything.” In the meantime, Schultheis said Lynden Transport is shipping a barge with new housing and office materials to the lower Yukon to be ready for the season.

Price crash halves ASRC’s 7(i) sharing with regional corps.

Alaska Native corporations will bear some of the same revenue losses the state endures as a result of dwindling oil production and prices. The State of Alaska is running a $4.1 billion budget deficit due to the 2014 crash in oil price, and the 12 Native regional corporations are seeing a dip in their own share of the revenues. Major North Slope producers BP and ConocoPhillips have struggled with slashed revenues and income due to the price drop; both have announced layoffs and the idling of some rigs this year at Prudhoe Bay will result in a drop of 20,000 to 60,000 barrels per day. Royalty payouts associated with oil revenues have declined sharply as well after prices bottomed out in the mid-$20s in January. In April 2015, Arctic Slope Regional Corp., the largest of the 12 and the owner of some subsurface rights at oilfields in the Colville River Delta and the Alpine field, paid out $125 million of its oil-sourced revenue to the other groups. This year, it paid in the neighborhood of $60 million according to ASRC communication director Ty Hardt. The 12 regional corporations were set up by the Alaska Native Claims Settlement Act, or ANCSA, in 1971 that included 44 million acres of land and nearly $1 billion. Part of the act provided for revenue sharing among the 12 regional corporations for those revenues associated with timber and subsurface minerals, which includes oil and gas.  This 7(i) sharing — named for the section of ANCSA where its found — requires that 70 percent of regional corporations’ be distributed to the others based on their respective numbers of shareholders. Each corporation in turn gives out half these revenues to the village corporations in its region for their daily operations. Alpine field production peaked in the late 2000s, but several satellite operations have picked up slack, accounting for 20 percent of Alpine’s production in 2014. The oil-related ASRC revenues have been a large income source for the rest of the regional corporations. Last April, ASRC announced that its $125 million payment crossed the threshold of $1 billion dollars in 7(i) sharing. ASRC President and CEO Rex. Rock Sr. predicted in the announcement last year that the Alpine filed cash cow would take a hit. “Every region in the state benefits from ASRC’s 7(i) distribution, and the more than a billion dollars in total is a testament to the hard work and dedication of ASRC employees, as well as the importance of responsible natural resource development,” said Rock. “However, in light of this milestone, it’s an important reminder that oil production continues to decline on the North Slope. That decline in production as well as low oil prices will likely affect future 7(i) payouts.” DJ Summers can be reached at [email protected]  

Marijuana Control Board changes policy to speed licensing process

The Marijuana Control Board enacted a policy decision April 27 that will hurry along the licensing process that has been slowed since the state started taking applications Feb. 24. The board voted 4-1 to allow its Executive Director Cynthia Franklin to declare license applications complete before state and federal fingerprint background checks are completed. Only Loren Jones opposed the policy decision of the five-member board. Currently, Alcohol and Marijuana Control Office staff will not declare a license application “complete” unless it sends applicant fingerprints to both the Alaska Department of Public Safety and the Federal Bureau of Investigations for criminal background checks. Gov. Bill Walker is expected to sign a bill allowing this authority, though a legislative legal opinion said it wasn’t necessary in the first place. Without a complete state status, some local governments cannot begin their own local licensing process. “Complete” status has been an ethereal concept, and has changed in board conversations for months. Board Chair Bruce Schulte said the shifting concept of a complete license needed to be nailed down so both localities and applicants can move forward with their own plans. “The definition is highly subjective,” Schulte said. “I don’t think we’ve been doing the public a service by changing it every week and every month. We have a choice to make.” The state has a 90-day window to issue licenses once it has declared them complete. The completed license status is also necessary for local governments to start their own licensing process, which takes additional time beyond the 90-day period required for the state. By deeming licenses a complete status, the board allows applicants to move into the municipal licensing process. So far, Franklin said eight licenses of more than 270 statewide applications are currently in a stage where lack of criminal background checks keep them from being declared complete. These licenses will now move into complete status. Board members voiced concerns that the licensing timeline has strayed far from the original intent expressed in Ballot Measure 2, which voters approved to legalize recreational marijuana in 2014. To salvage the statutory intent of the 90-day completion-to-issuance deadline — operable licenses by the summer of 2016 — Schulte said the board should make every attempt to hurry the process along. “Our schedule is blown,” he said. “We’re not going to make the deadline. I think it’s incumbent on this board to do everything we possibly can to remedy that situation.” The longer the industry takes to be viable, the longer marijuana license applicants have to sit on their respective building leases without an income stream. Brandon Emmett, an industry and public representative, said the board exposes itself to more and more lawsuits for violating statutory intent the longer it takes to issue licenses. “I think it’s important we continue to process these applications,” said Emmett. “I think we’re going to see the public become increasingly more frustrated the longer and longer this gets drawn out.” Federal checks Marijuana license applications were in holding at the state level. Local licenses will require even more time after state licenses are complete, yet again pushing Anchorage’s first legal marijuana sale back. Ballot Measure 2 set May 24 for the industry’s state license approval deadline, or 90 days after applications opened on Feb. 24. Regulators said June 9 is the new target, but in Anchorage, the process will take additional time. Like most municipalities, Anchorage requires a special land use permit and a local license in addition to the state license. Franklin was holding state applications until the board can request criminal background checks through the Federal Bureau of Investigation. The state doesn’t have the authority to request such background checks, however, until the Legislature changes statutory language to allow it. Senate Bill 165, which revises alcohol laws and also adds the authority to request background checks, passed in the Senate on April 22 and is awaiting transmittal to Walker. Most in the marijuana industry agree that federal checks are a good idea, but their necessity has been questioned. Regardless of whether statutory language is changed, the Division of Legal and Research Services for the state’s Legislative Affairs Agency said licenses can move forward without it. A legislative legal opinion requested by Rep. Gabrielle LeDoux, R-Anchorage, says the Marijuana Control Board doesn’t require federal background checks. “Under current law,” reads the opinion, “there is no fingerprint requirement for registration or licensure as a marijuana establishment nor is there a requirement that the board do an FBI or similar criminal background check.” Until the board’s April 27 meeting, Franklin had planned to continue holding licenses until Walker’s signs SB 165. Under Alaska law, bills don’t take effect until the 90th day after a governor’s signature. Because Franklin would not be able to declare a license complete until then, municipal licenses in Anchorage would not begin until July or August. Anchorage For Anchorage and other municipalities, the policy decision will grease the licensing process. Erika McConnell works in the Anchorage Office of Economic and Community Development as special assistant to director Chris Schutte. Informally, McConnell works as a kind of marijuana whip, making sure the city’s offices work in concert with marijuana. McConnell said the municipal licensing process will take additional time beyond the state timeline. “Assuming they (the state) have all their ducks in a row, we’re looking at a process that will take approximately two months,” said McConnell. McConnell clarified that the municipality doesn’t need the actual state license to start its own process. Rather, it needs proof that the state license application is complete. The municipality will begin processing “as soon as the governor signs SB 165 and the AMCO can start doing background checks, and we can tell that the application is complete,” she said. Once it has proof of completion, the application is routed to agency reviewers and community councils, and eventually scheduled for an Assembly hearing. McConnell said the municipality is trying to work concurrently with the state process regarding cultivation and testing facility licenses. The state has decided to process testing and cultivation applications first, and Anchorage will naturally have these as first entrants to city reviews. All marijuana products sold in retail stores require testing prior to sale, and all marijuana plants require state tracking from seed to sale. In order for retail establishments to have legal product, these licenses must come out first. For the rest of the state’s marijuana applicants, this presents a bottleneck. Every cannabis product must be tested by a licensed facility, and only three such licenses have been submitted. Two are in Anchorage. The other is in the unincorporated Mat-Su Borough, which will vote on a commercial cannabis moratorium on May 3 leading up to an October ballot initiative that would ban commercial marijuana in the borough. As with the state, city officials have limited capacity to deal with what will be an application flood. The Alaska Marijuana Control Office has just under a dozen full time license review staff. McConnell said she expects 10-20 testing and cultivation licenses to come into municipal review in a burst once the state renews processing. As of April 12, hopeful cannabis entrepreneurs have submitted 65 licenses with proposed physical addresses in Anchorage and two in Girdwood. Anchorage’s license applications don’t veer as heavily in favor of cultivation as the rest of the state. 24 are for standard cultivation facilities, and four for limited cultivation facilities, which have an upward limit of 500 square feet. 29 license applications are for retail stores. DJ Summers can be reached at [email protected]

Senate approves federal check bill for marijuana licenses

The Senate approved a bill on April 22 that would allow the state to request federal background checks for marijuana license applicants. The bill’s main focus revises alcohol regulations to streamline enforcement, a measure in review since 2012. The bill, sponsored by Sen. Peter Micciche, R-Soldotna, also changes statutory language to allow the Department of Public Safety to request federal background checks for commercial marijuana license applicants. Marijuana Control Board director Cynthia Franklin has held current marijuana license applications, saying the federal background checks are necessary to comply with statute, which forbids a marijuana license to anyone with a felony conviction in the last five years.  The bill will now move to a vote in the House. The bill has not yet been scheduled for a House hearing. The House will next reconvene at 2 pm, April 23. The original request for federal checks was in House Bill 75, sponsored by Rep. Cathy Tilton, R-Wasilla. HB 75, however, has foundered in conference committee after the Senate and House could not agree on other bill provisions concerning unorganized borough commercial marijuana. During the last week, in which the Legislature is in overtime past its 90 day mark, a conference committee on HB 75 has cancelled hearings for the bill four times. The sticking point concerns rural Alaska villages. The Senate bill would automatically opt unorganized borough villages out of commercial marijuana, as opposed to the rest of the state where statute makes commercial marijuana legal unless localities opt out. Village elders would have their own discussions about whether or not to allow marijuana businesses and decide whether or not to allow them. DJ Summers can be reached at [email protected]

Package of tax hikes on fishing, mining and fuel stalls

A bill to raise taxes on fisheries, fuel and mining remains unscheduled for a House Finance Committee hearing after public objections. Gov. Bill Walker introduced a suite of proposals at the beginning of the session designed to hitch up taxes on state industries and individuals to help close the $4.1 billion budget gap. Fisheries, fuel, and mining tax increases had varied levels of support. Each remained on the committee backburners after being recommended to it weeks or even months ago. Senate Bill 132 and its mirror House Bill 249 were passed to their chambers’ finance committees on Feb. 29 and Feb. 24, respectively. The fisheries tax moved out of a lengthy House Fisheries Committee holding pattern on April 5. Mining taxes moved to the committee on April 1. To keep legislators from having to muster individual votes, the House Finance Committee folded the three industry tax increases into a three-part minibus on April 14. The adjusted tax minibus did not provide new estimates for the state’s likely revenue. Previous estimates for the three taxes indicated $80 million for the state. The bills’ complexities brought mixed receptions. Industry leaders acknowledged the need to pay for state services, but contested portions of the package they found inequitable.   At an April 16 hearing, the House Finance Committee responded to concerns by postponing a discussion scheduled for the next day. “After hearing public testimony last night,” said committee co-chair Rep. Steve Thompson, R-Fairbanks, “We’ve realized there are a lot of problems with the tax bill HB 249, and we’re going to set it aside for the time being.” In an April 15 committee hearing, the Alaska Chamber testified against the newly bundled tax increases. Chamber President and Chief Executive Officer Curtis Thayer said the state needs to look to its own finances before raiding the private sector.  “The public won’t support a host of new taxes,” Thayer said. “Not while the state is handing out double-digit raises. How can they when their friends and family members are losing their jobs?” Thayer said public employee contracts promise too much. He said that pay raises between 3.25 percent and 10.5 percent over three years are still being considered.  “They’re trying to fill a $4 billion dollar budget gap by hammering fishing and mining with $49 million in new taxes,” Thayer said. “Meanwhile, another $70 million in pay raises just widens the gap.” Fisheries tax increases in the omnibus received much of the same treatment as the standalone bill. Industry representatives repeated many of the same concerns they had voiced in the House Fisheries Committee. Objections were widespread concerning the various fishing sectors that would each be impacted by tax increases differently: canned salmon simply cannot handle a tax increase, floating processors and inshore processors need different treatment, developing fisheries cannot handle a tax increase, the state’s reputed fiscal loss on fisheries management is a red herring, and tax increases will make it harder for young fishermen to enter the industry. Fishermen previously wanted to make sure they would not be alone in tax increases. Committee chair Rep. Louise Stutes, R-Kodiak, held the bill earlier in session, saying she needed assurances that other industries would be taxed as well and that the existing fisheries taxes would be reexamined to maximize revenue to the state. With a modified bill and promises from the Department of Revenue to maximize existing fisheries taxes, the bill moved on to the House Finance Committee without opposition. Though the inclusion of the fisheries bill into an omnibus is a “step in the right direction,” said United Fishermen of Alaska, the states largest fishing industry group, they still do not support the package. Walker’s original bill would impose a 1 percent increase on both landings taxes and fisheries taxes on each fishery sector. The amended bill keeps the 1 percent increase for every fishery sector except the shore-based salmon cannery sector and the developing fisheries sector. A negative market outlook for Alaska fisheries caused many fishermen to reject the bill outright, saying they have little room to have more revenue scraped from their decks. Certain bill changes address two of the larger concerns for salmon canneries and developing fisheries. In previous testimony, representatives from the Pacific Seafood Processors Association spoke of the tax’s tone-deafness regarding the 2016 salmon market and how a tax increase could cripple canneries. Back-to-back years of large sockeye runs in the state’s largest salmon fishery, Bristol Bay, left salmon processors with a price-lowering glut of product. The U.S. dollar’s strength against key export market currencies added to the overstock to create a tough market outlook for salmon in 2016. Walker’s bill to increase state fuel taxes had support from some industry groups it would directly impact. The Senate Transportation Committee passed the bill onto the Finance Committee with lukewarm support on a 3-2 vote. Senate Bill 132, and its mirror House Bill 249, would raise the per gallon state fuel taxes as follows: highway fuel tax from 8 cents to 16 cents; marine fuel tax from 5 cents to 10 cents; aviation gasoline from 4.7 cents to 10 cents; and jet fuel from 3.2 cents to 10 cents. The legislation would correspondingly increase the per gallon highway fuel tax rebate for off-road use from 6 cents to 12 cents. In all, the tax hikes are projected to raise $49 million per year, according to the Revenue Department. The mining tax increase, originally HB 253, was badly received when introduced. It would raise the tax rate for mines with a net income of $100,000 or greater from 7 percent to 9 percent. This includes 14 mines statewide. The bill would eliminate a 3½-year tax exemption for new mines and implement a fee for mining licenses. Mining taxes collected $38.6 million in 2015 according to state records. The increase would collect another $6 million per year. DJ Summers can be reached at [email protected]

Mat-Su Assemblyman proposes marijuana moratorium

The Mat-Su Borough could halt marijuana commercial activity in its unincorporated areas sooner than thought if a proposed moratorium passes the Assembly. Mat-Su Borough Assembly member Randall Kowalke introduced a temporary moratorium on commercial marijuana on April 19. The Assembly will accept public comment and vote on the moratorium on May 3. Depending on the results of an October borough ballot initiative that would ban commercial marijuana, the moratorium could extend indefinitely. Kowalke said he doesn’t intend the moratorium to be a roadblock. He said state regulatory authorities and the borough’s own zoning regulations make him want to take a pause. “My ordinance is rather straightforward,” he said. “It’s to call a time out.” The moratorium responds to zoning concerns, Kowalke said, as his district’s libertarian land ownership practices seem to have found their limit. The unincorporated borough’s lack of zoning laws has presented a tricky situation, he said. Commercial marijuana cultivation facility proposals are sprouting up in rural areas that could be classified as residential but have no legal distinction as such. Lakefront property owners and others have called him concerned about grandchildren running around in the vicinity of a marijuana grow. “My district has long prided itself on you buying a piece of land and doing whatever you want on it,” he said. “Those are some of the folks that have contacted me about the marijuana things.” Further, Kowalke said he’s concerned with the federal background check provision in statute. Marijuana Control Board director Cynthia Franklin has said she will not process marijuana license applications until legislation allows the board to request federal background checks. Two bills in the Legislature allow this, but the Senate and House cannot agree on either. The motivation, Kowalke said, is to avoid the ambiguity and “to give a time out to try to zone residential issues, give the state time to figure out background checks, and work with planning and zoning.” The borough already has a ballot initiative scheduled for October that would ban all commercial marijuana in the unincorporated borough. This temporary moratorium would halt commercial licenses until voters decide the measure — potentially making it a permanent ban rather than temporary moratorium. The moratorium would apply only to unincorporated areas. Palmer, Wasilla, and Houston, as established cities, would be left out. However, both Palmer and Wasilla have each passed commercial marijuana bans. If the temporary moratorium passes, only Houston will remain as a cannabis-friendly zone in the state’s second-largest population center. Operationally, this gave hopeful businesses time to begin their state licensing process. Over 30 applications to the state Marijuana Control Board have addresses in the unincorporated Mat-Su Borough. About three-quarters of those are for cultivation businesses. One such business hopeful, Bailey Stewart, said she’s already sunk her life savings into a retail marijuana operation in the borough. Stewart, vice president of the Matanuska Valley Cannabis Business Association, said the time in between now and the October vote is crucial. The state will begin issuing licenses in early June, provided the Legislature authorizes the federal background checks for applicants. If cultivators and retailers have the opportunity to begin a few months of sales — and pay municipal taxes — the October vote might swing in industry’s favor. “We had an opportunity to show the community that we weren’t going to be in their face,” said Stewart. “If the moratorium passes we’ll lose that opportunity before the October vote.” Stewart said she doesn’t think borough lawmakers are antagonistic to the industry. They simply don’t understand either the money involved in setting up a marijuana business or the potential tax dollars to be gained. The state collects a $50 per ounce excise tax on cannabis cultivators, and municipalities have implemented varied sales taxes, including a 5 percent sales tax in Anchorage with the ability to rise to 12 percent. Meanwhile, state licenses cost $5,000 on top of the payments for the leased cultivation, retail, or manufacturing premises. Marijuana entrepreneurs in Alaska have a precarious financial situation in a state with limited capital options. Federally insured banks will neither loan to them nor accept their deposits. State regulations forbid Outside investment. Many like Stewart bootstrap their businesses with savings.  “We’re talking about an industry that is financial sensitive,” she said. “When you’ve worked this hard for so many years, you don’t want to see your life savings go up in smoke.” Not only is the downtime between license issuance and the October ballot necessary for public perception, Stewart said, but recovering some of the initial investments as well. “I would have had the chance to recoup some of my costs,” Stewart said. “Now, they’ve already spent that money. A lot of them, it’s no going back.” DJ Summers can be reached at [email protected]  

LeDoux shelves House, Senate bills that would ban smoking statewide

Operators of marijuana clubs had reason to celebrate the unofficial national pot smoking holiday of April 20. A bill that would have banned smoking statewide in workplaces and other enclosed spaces won’t pass this year, and a version of the bill to be introduced in the next legislative session will leave marijuana consumption out. Both Senate Bill 1 and its House companion, House Bill 328 would have replaced Alaska’s current local control system with a statewide prohibition. Both bill’s definitions included any “plant intended for inhalation,” and would have applied to vaporization in addition to actual smoking. The bill also defined what constitutes a “public place” in a manner that would have included marijuana social clubs, which currently operate as neither a prohibited nor an authorized type of business. It would have also prohibited onsite consumption at retail marijuana cafes that was allowed by the Marijuana Control Board in its final version of license regulations approved last fall. HB 328 will not make it out of the House Judiciary Committee. The committee chaired by Rep. Gabrielle LeDoux, R-Anchorage, will not hold any more meetings for the rest of the legislative session, which is already running past its 90-day mark and into the 121 days allowed by Alaska statute. The Senate version also failed to pass after being added to a bill being advanced by LeDoux. LeDoux’s originally simple bill added one member to the Board of Barbers and Hairdressers in House Bill 289. The Senate Finance Committee stacked a controversial optometry bill and the Senate’s smoking bill onto it in the end of session chaos, however, and LeDoux withdrew the bill.  “That wasn’t intended to go through,” said SB 1 sponsor Peter Micciche, R-Soldotna, in a phone interview. “It was just a good example of the kind of silliness that goes on in this building.” The final version of the bill, which will be introduced again in next year’s session, has amended language that would not apply to marijuana cafes or social clubs as well as vape shops, he said. “It certainly wasn’t our intention to get in the way of the Marijuana Control Board and their work,” said Micciche. Micciche introduced the bill, which would prohibit tobacco or e-cigarettes in enclosed public spaces including places of employment, apartment buildings, hotels, and at schools and universities. It grants certain exceptions to tobacco stores where 90 percent of revenue comes from tobacco sales, but includes no language to exempt marijuana retail stores with the same sales configuration. The original bill was at odds with state marijuana regulations, which explicitly grant onsite marijuana consumption to retail stores if the Marijuana Control Board approves the request. The bill would also have outlawed the existing marijuana social clubs, which offer cannabis users a place to consume but in which no marijuana is sold. Onsite consumption provisions for retail stores are explicitly legal, but marijuana social clubs are in limbo. The Marijuana Control Board does not endorse social clubs, but has acknowledged it lacks the authority to allow them or prohibit them until the Legislature creates a license type for that business. DJ Summers can be reached at [email protected]

Subsistence group files opposition to Ninilchik gillnet

Federal subsistence groups upriver from a controversial subsistence gillnet have asked that the Federal Subsistence Board rescind its 2015 to allow it. The Cooper Landing and Hope Federal Subsistence Community has filed a proposal change in the 2017-2019 Federal Subsistence Board proposal book that would eliminate Ninilchik Traditional Council’s gillnet on the Kenai River. The gillnet, the Cooper Landing and Hope filers said, has a direct impact on them. The gillnet has not yet been in the water on the Kenai after the operational plan was not approved last summer and fishing for king salmon was prohibited by the U.S. Fish and Wildlife Service manager. “We maintain firmly that the Federal Subsistence Board’s approval, which allows Ninilchik to place a community gillnet in the Kenai River, aggrieves the federal subsistence priority and right of Cooper Landing and Hope subsistence users,” the proposal states. The subsistence users echo biologists’ concerns that the gillnet is not “consistence with sound management principles and the conservation of healthy populations of fish and wildlife.” “The nonselective nature of a gillnet does no allow for close management or control of fish harvests by either the subsistence user of river management personnel,” reads the proposal,” and will likely result in chinook harvest numbers that are above sustainable population levels.” They also said the gillnet creates a priority for one set of subsistence users, which is specifically forbidden by the Alaska National Interest Lands Conservation Act, which established subsistence laws in the state in 1980. According to ANILCA protocol, authorities must give equal priority to subsistence users in the same area. Because they both fish the waters of the Kenai National Wildlife Refuge, Cooper Landing and Hope subsistence fishermen are entitled to the same gillnet allowance. However, conservation concerns take the forefront. “While we firmly maintain that (the gillnet) adversely affects our subsistence priority by allowing Ninilchik an exclusive priority to place a community net in the Kenai River, we do not believe allowing all three communities to place a gillnet in the Kenai would rectify this adverse effect,” reads the proposal. Cooper Landing and Hope subsistence users claim in their proposal that the Ninilchik Traditional Council already has a host of methods and means of harvesting fish including rod and reel and dipnets, but the council underutilizes them. Only 2 percent of 807 year-round Ninilchik residents aged 20-69 applied for federal fishing permits. This excludes those who applied for a gillnet permit on the Kasilof River, which was passed by the Federal Subsistence Board and put in the water during the summer of 2015. In Cooper Landing in 2015, 40 percent of 214 resident 20-69 year olds participated in federal subsistence fishing. In Hope, 21 percent participated of 149 residents.  “An increased participation rate by the community of Ninilchik alone in the other available subsistence fishery methods and means on the Kenai River using selective gear will most likely result in a more than sufficient harvest result,” the proposal reads, “without the burden of incidentally targeting other fisheries with conservation concerns.” The Ninilchik Traditional Council gillnet has caused a heated and tangled legal battle. In January 2015, the Federal Subsistence Board, a multi-agency board that governs Alaska subsistence use, allowed NTC two community subsistence gillnets, one each on the federally managed portions of the Kasilof and Kenai rivers in the Kenai National Wildlife Refuge. The proposal allocated 4,000 sockeye — a small portion of the total Kenai River sockeye run — but king salmon form the center of the debate. State and federal biologists advised the board against passing the proposal over conservation concerns. In an era when king salmon are at a statewide low point, they said, a gillnet could indiscriminately snap up valuable king salmon along with the sockeye. As a condition, NTC would have to submit operational plans for each gillnet. The federal in-season manager Anderson, who works for the U.S. Fish and Wildlife Service, must approve the plan before either net can go in the water. The proposal passed 5-3, with the U.S. Fish and Wildlife Service voting against. Few besides NTC itself appreciated the gillnets. State and federal biologists opposed the gillnet idea on conservation grounds. More than 700 requests for reconsideration have flooded the Office of Subsistence Management urging a repeal; the previous record for such requests of a single proposal was six. Anderson reviewed and approved an operational plan for the Kasilof River sockeye gillnet on July 13, but did not approve the operational plan submitted for the gillnet on the Kenai River. In an emergency order, Anderson also closed all chinook fishing in the area, including subsistence fishing. Anderson argued that while the early chinook run did meet the lower end of the escapement goal, the low statewide numbers for chinook returns merited a conservation-minded approach. NTC Executive Director Ivan Encelewski said there were no conservation concerns, and that Anderson unfairly halted the fishery for political reasons. With a week to go in July, the Alaska Department of Fish and Game liberalized commercial fishing time for sockeye salmon and allowed the recreational take of Kenai River chinook salmon based on estimates that the minimum escapement goal would be met. The Ninilchik Traditional Council submitted two requests on July 17 and July 21 asking the subsistence board not only to rescind Anderson’s orders, but to remove Cook Inlet area subsistence fishing from the federal in-season manager’s authority. Further, NTC wanted to rewrite the proposal, requesting that the federal manager be forced to accept their operational plan. At a July 28 meeting in Anchorage, the board upheld Anderson’s decision to deny the operational plan and kept him as the manager of the fishery despite the council’s request to remove him. The special action request failed on a tie vote. Last fall, NTC filed a lawsuit against the Department of Interior seeking to order the Kenai River operational plan approved and to remove Anderson as the FWS manager for the refuge. The suit is ongoing. DJ Summers can be reached at [email protected]  

Murkowski's energy bill passes Senate 85-12

The U.S. Senate brought a long-delayed energy bill spearheaded by Alaska U.S. Sen. Lisa Murkowski off the shelf on April 20 after legislative gridlock driven by the water crisis in Flint, Mich. Co-managed on the Senate floor with Sen. Maria Cantwell, D-Wash., the ranking minority member of the Energy and Natural Resources Committee, the Energy Policy Modernization Act of 2016 passed the Senate with an 85-12 vote. The bill includes provisions for renewable energy production for wind, solar, hydro, and geothermal energy, but also a host of provisions to ease Alaska’s oil and mineral development processes and access to federal lands in Alaska. The bill marks the first energy policy overhaul since 2007. “Moving forward with this act will help America produce more energy and bring us one step closer to being an energy superpower,” said Murkowski. “At the same time, it will help Americans save more money and save energy with all of the energy policy provisions.” Permitting reforms are a key component. 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. Other Alaska-specific measures include changing the definition of Indian Tribes to include Alaska Native corporations that would allow them to apply for hydro licenses, biomass demonstration projects and funds for weatherization projects. Permit streamlining for hydro projects is a broader provision that could aid several Alaska communities, according to Murkowski, and the bill also reauthorizes federal research into development of methane hydrates at Prudhoe Bay. Further, the bill allows a rerouting of an Alaska gasline project through federal land on Denali National Park. Federal land access will also ease for sportsmen with Murkowski’s Sportsmen’s Act folded into the energy bill. The act directs federal agencies to expand and enhance sportsmen’s opportunities on federal lands, make “open unless closed” the standard for federal lands administered by the Forest Service and Bureau of Land Management in Alaska, and clarify procedures for commercial filming on federal lands. The energy bill’s House version has not enjoyed the same bipartisan support evidenced by the 85-12 vote, Murkowski said, characterizing it as “pretty much a Republican bill.” It incorporates key differences concerning the federal Land and Water Conservation Fund. However, Murkowski said she believes the Senate’s strong passage is a good indication that whatever hurdles come up in conference committee can be overcome. “What we’re going to do is try to keep that bipartisan approach,” Murkowski said in a teleconference interview. Murkowski acknowledged that President Barack Obama’s administration has “not exactly endorsed” the energy bill. However, she said the administration has helped more than hindered. “The Secretary of Energy has been working with us,” she said, specifically to craft the language to expedite LNG permits. “There has been a working relationship with this administration.” Though the bill had broad bipartisan support as it advanced from the Energy and Natural Resources Committee that Murkowski chairs, it became entangled in the Flint water crisis. In early February, U.S. Senate Democrats withheld support for the bill unless it contained hundreds of millions in funds to address the lead poisoning problem in Flint. Sen. Debbie Stabenow, D-Mich., tried to add a fiscal note to the energy bill that would’ve given $600 million in funds to Flint. The addition exceeded the estimated amount Flint needs to update its water supply, or about $50 million. Would it have been approved in the Senate, it would likely have been halted in the House anyway. The state of Michigan approved $37 million in relief funds and is expected to give more, but its congressional representatives wanted more. An $80 million pledge from President Barack Obama set the tone for Senate Democrats to fight for relief money they said Republicans would’ve gladly given if the city had been whiter and wealthier. Some Senate Republicans characterized Stabenow’s play as a Democrat power play designed to make Republicans look bad rather than a genuine request for help. DJ Summers can be reached at [email protected]  

Senate panel OKs medical marijuana access for veterans; Alaska to see $561M in construction spend

A Senate subcommittee moved veterans one step closer to accessing medical marijuana in states where it is legal, which up to this point has been strictly prohibited under a 2011 Veterans Health Administration directive. The U.S. Senate Appropriations Subcommittee on Military Construction, Veterans Affairs, and Related Agencies voted to approve the Veterans Equal Access Amendment into the FY2017 Military Construction and Appropriations Bill. Sens. Steve Daines, R-Mont., and Jeff Merkley, D-Ore., introduced the amendment, which would prohibit any federal funds to be used to punish Veterans Affairs doctors from recommending or discussing medical marijuana with their patients. Alaska U.S. Sen. Lisa Murkowski voted in favor of the amendment. When Pennsylvania Gov. Tam Wolf signs a bill that will legalize medical marijuana in the state, the U.S. will have 24 states with legalized medical marijuana systems, and 17 states with allowances for medical use of cannabidiol oils. Even in states where medical marijuana is legal, however, veterans do not have access through their VA physicians because of the 2011 order. A 2011 Veterans Health Administration directive forbade VA doctors from recommending or even discussing medical marijuana with patients. The directive was set to expire on Jan. 31, 2016, but is still in effect as the VHA anticipated a congressional action to reverse the policy. The amendment in the FY17 appropriations bill will have to be renewed annually. The same amendment passed the same committee last year by an 18-12 vote with four Republicans joining 14 Democrats. This year the vote to approve the amendment was 20-10 with Sens. Lindsey Graham, R-S.C., and Roy Blount, R-Mo., joining the majority. Daines spoke out against the current policy during the brief debate, characterizing it as, “a violation of the 10th Amendment against states and the 1st Amendment against veterans speaking freely with their VA doctors.” Daines and 21 other legislators wrote a letter to Veterans Affairs Secretary Robert McDonald in 2015 urging him to let VA doctors discuss and recommend marijuana in states where it is legal. Speaker of the House Rep. Paul Ryan, R-Wis., has been amenable to certain marijuana legislation in the past. In 2012, he expressed a personal opposition to Colorado’s recreational marijuana legalization effort, but ultimately believes that the matter should be left to states rather than the federal government. Similar amendments to allow for veteran medical marijuana usage failed in the past, including the Daines-Merkley amendment last year. It failed in the House by a vote of 210-213. Rep. Sam Farr, D-Calif., introduced legislation in 2015 to allow Veterans Health Administration doctors to recommend medical cannabis, but the House Appropriations Committee rejected the measure. The House of Representatives has slightly warmed to medical marijuana, passing an appropriations bill in 2014 with an amendment by Farr that would have banned federal prosecutors from challenging state marijuana laws. It is also subject to annual renewal. Alaska construction spending totals $561M; $103B for VA forward funded for FY18 The committee approved the full $561 million in the president’s request for Alaska-related military construction spending, with more than half of that for the recently announced deployment of two squadrons of F-35s to be based at Eielson Air Force Base in Fairbanks. The totals break down as follows, according to Murkowski’s office: $295.6 million for seven construction projects supporting the 2020-2021 beddown of 54 F-35 A Joint Strike Fighters at Eielson Air Force Base. $155 million to construct the Long Range Discrimination Radar (LRDR) at Clear Air Force Station. $47 million to construct a hangar to house the Gray Eagle Unmanned Aerial Vehicles at Fort Wainwright. $29 million to expand and improve the Airborne Warning and Control Systems Alert Hanger at Joint Base Elmendorf- Richardson. $20 million to construct a new fire station at Clear Air Force Station. $9.6 million for electrical improvements to the missile defense fields at Fort Greely.  $4.9 million to construct a jet fuel truck offload facility at Joint Base Elmendorf-Richardson. A total of 54 new aircraft and an estimated 2,765 personnel will be part of the F-35 deployment, with construction to begin in fiscal year 2017, which begins Oct. 1. Veterans Affairs spending increased $14.7 billion over last year to a record $177.4 billion total. Veterans mandatory benefits received $103.9 billion in advance FY2018 funding. This includes veteran disability compensation programs for 4.4 million veterans and 405,000 survivors; education benefits for nearly 1.1 million veterans; guaranteed home loans for 429,000 veterans; and vocational rehabilitation and employment training for more than 141,000 veterans. Veterans medical programs received $66.4 billion in advance FY2018 funding. DJ Summers can be reached at [email protected]

Marijuana bill stalls in conference over rural opt-out

A bill standing in the way of marijuana license applications is still deadlocked in Conference Committee, as legislators argue over a bill provision that would opt rural Alaska villages out of commercial marijuana. House Bill 75, introduced by Rep. Cathy Tilton, R-Wasilla, and its Senate companion, a committee substitute Senate Bill 14, remain under consideration after an April 13 hearing that underlined disagreements but brought no conclusion. The committee broke to compile more information regarding unorganized villages that have opted out of alcohol sales. The bill would change statutory language to allow the Department of Public Safety to request federal background checks for commercial marijuana license applicants. A similar provision is included in SB 165, scheduled for a April 14 hearing in the House Judiciary Comittee at 1 pm, which could bypass HB 75 gridlock. Marijuana Control Board director Cynthia Franklin says the bill is necessary to process applications, as she isn’t comfortable completing licenses without a federal felony check. As per Alaska statute, felony convictions bar applicants from obtaining a commercial marijuana license. Both legislators and Marijuana Control Board chairman Bruce Schulte say they’ve received mixed input about whether they actually need the federal background check provision to be changed in statute and whether the specific background checks are needed at all. Marijuana industry attorney Jana Weltzin has threatened to bring a lawsuit against the state if it continues holding licenses if the bill doesn’t pass, calling federal background checks a “red herring.” “There are dueling legal opinions right now,” said Sen. Lesil McGuire, R-Anchorage, one of the three senators on the conference committee. “One theory is that we actually have to put into statute a requirement to authorize the Department of Public Safety to authorize federal background checks. “There’s another theory that says you don’t need that specific authority, it’s implied,” she said. Regardless, legislators said the bill’s background check provision is a must-pass. McGuire said, the Marijuana Control Board “itself has decided they don’t feel comfortable relying on the legal opinion,” and marijuana license applications are being held until HB 75 background check provision is implemented. Rep. Charisse Millett, R-Anchorage, said she hopes the Senate would consider dropping the most contentious bill provision if the chambers can’t agree, in order to remove the marijuana industry’s licensing roadblock. The sticking point concerns rural Alaska villages. The Senate bill would automatically opt unorganized borough villages out of commercial marijuana, as opposed to the rest of the state where statute makes commercial marijuana legal unless localities opt out. Village elders would have their own discussions about whether or not to allow marijuana businesses and decide whether or not to allow them. “There are good parts of this bill,” said Millett. “I don’t feel like we should let good work go to waste because we can’t agree on that.” Sen. Lyman Hoffman, D-Bethel, swayed the Senate in favor of the automatic opt out. Lyman said rural Alaska’s experiences with alcohol regulations that opted villages in leave a bitter taste in village mouths, producing violence and social problems. He said they want to make sure they don’t repeat the problems with cannabis. “Title 4 (alcohol regulations) was flawed,” Hoffman told the conference committee. “It started out with those communities wet, and they had to go through all that pain and suffering.” Hoffman prefers that villages start on the automatic opt out side so they can more carefully control the industry, if that is the elders’ and communities’ wish. Hoffman points to the number of unorganized borough villages that have opted out of alcohol as evidence that an automatic opt out would be safer. “They would have never had to go through that suffering and pain if Title 4 was flipped,” he said. House representatives felt that Hoffman’s concerns are legitimate, but that the realities of the marijuana industry make rural Alaska fears a moot point. Rep. Harriet Drummond, D-Anchorage, said that the expense of starting a marijuana business in general makes her question whether any cannabis operation will appear in rural Alaska anyway, and that village elders should instead focus on the black market. Retail businesses and grow operations demand capital and consumers. Moving the product either to an urban retail outlet or the required testing facilities, for which there are few license applications concentrated in Southcentral Alaska, would preclude the likelihood that marijuana businesses will crop up in rural areas. “Consider what it would take for a marijuana business to establish itself,” said Drummond. “I doubt that anyone is going to start a growing operation in a village of 200. I don’t think that opting out will be an issue because of the difficulty of establishing a marijuana business anywhere. It’s difficult to do in Spenard.” Hoffman agreed, but insisted the elders and village councils have the opportunity to discuss those issues amongst themselves before marijuana businesses are approved. “Those are the exact issues and dialogues that need to take place at the local level,” Hoffman said. “Why can’t we have those discussions in our communities? Just give us the opportunities to have that debate.” Drummond said the village elders would be in the mix anyway. Marijuana businesses in her home district of Spenard, which has both the highest concentration of alcohol licenses and marijuana license applications in the state, regularly confer with local community councils at the beginning of the licensing process. The conference committee adjourned to compile a list of villages that have opted out of alcohol and will reconvene at a later date.   DJ Summers can be reached at [email protected]  

Northrim management on economy: Prepare, don’t panic

Northrim Bank leaders say Alaska’s state fiscal outlook may be grim, but the economy has some positives to focus on as well. The bank has launched a new speaking series geared specifically towards helping businesses navigate the state’s new fiscal environment. The key point is psychology, the bank’s leaders say. They don’t deny the importance of the state’s $4.1 billion budget deficit and they don’t deny that an economic downturn is in the works, but they say handwringing is the wrong response. “What’s better than panicking is preparing,” said Mark Edwards, the bank’s senior vice president and chief economist, to a room packed with hundreds of Alaska businesspeople. “No matter how long you live here you’re going to eventually feel an earthquake, so we can’t really stop that. The best thing we can do is prepare for it. Same sort of thing in a recession. No matter where you live in the world, you’re going to feel one every 10, 20, 30 years. It’s going to happen.” Edwards and the rest of Northrim’s management use the term recession with a dash of salt. Northrim’s Chairman and President Joe Beedle said during an editorial board meeting April 12 that recession is a specific term to apply to specific industries, rather than the state as a whole. “There will be geographies in a recession, and there will be industries in a recession,” said Beedle. “It’s not the overall economy. It’s how that economy affects the individual businesses.” Clearly, they acknowledge, the oil and gas industry, along with the construction industry and state finances attached to them, is in the midst of a slowdown that could be considered a recession. North Slope layoffs and declined production tied to the slide in oil prices contribute to a Department of Labor prediction that Alaska will lose 2,500 jobs in 2016, reversing the gain of 1,700 jobs in 2015 that staved off fears of an economic downturn. Oil and gas drive the largest segment of the state’s construction industry, and state workers will suffer under budget cutbacks. Despite oil-driven economic woes, Edwards said the state still sees growth in other industries. Unlike Alaska’s 1986 recession, driven by a similar oil price plummet, Alaska’s economy is now broader and more diversified.  Tourism, healthcare, and retail business, Edwards said, provide a bright spot for the Alaska economy. Last year was a big one for Alaska tourism, with more than 2 million visitors, a 7 percent increase from 2014. National retailers have been moving into Anchorage, and consumer spending driven by gas pump savings should keep the trend flowing, Edwards said. Healthcare is predicted to see a major employment boost to offset the oil-related job losses.  “As we age and need more healthcare and the cost of healthcare increases, we’re seeing more construction activity,” said Edwards. “It’s predicted to be another 400 jobs in 2016.” Edwards drew attention to, but did not quantify, the economic impacts of Native regional corporations. Native corporations, established by the Alaska Native Claims Settlement Act in 1971, are an unappreciated economic mover in the state, Edwards said, which spread wealth throughout low employment areas outside of urban Alaska. Other positives for business owners include Anchorage’s housing market and wage rates, Edwards said. Alaska’s per capita income grew 3.8 percent in 2015 to $55,940, the sixth-highest in the nation. Edwards did not mention that that Alaska’s cost of living is also commensurately higher. According to the Council on Community and Economic Research, Alaska’s cost of living index for the first quarter of 2015 was 132.9, meaning Alaska is about 33 percent more expensive than the national average. In Anchorage, the housing index is 63 percent greater than the national average. According to the U.S. Bureau of Labor Statistics’ Consumer Price Index, “Anchorage residents spend the most by far on housing, at more than 40 percent of their income.” For businesses, Edwards highlights the housing expense as a positive, urging them to make the most of Alaska’s low interest rates for personal refinancing and housing stock movement. Along with a record high average home price in Anchorage, mortgage rates are at their lowest, around 3.7 percent, unlike the 16.6 percent interest rates paid by Alaskans in 1981. Alaska also ranks second nationally for the least amount of delinquent loans, roughly half the national rate. “Prices increased 2.4 percent on average for homes here in Anchorage,” said Edwards. “That’s the fourth year in a row that we’ve had prices increase in Anchorage. Our housing market has not been affected yet.” Northrim said it supports Gov. Bill Walker’s plan to restructure the state’s finances to cut government spending, restructure the Permanent Fund, and implement broad based taxes. The traditional explanation for state fiscal troubles, Edwards said, are valid — overreliance on declining oil revenue combined with state overspending. However, he believes the root of the problem is an Alaskan cultural expectation of government services without the will to pay for them or the infrastructure to collect sales or income taxes that are common in Lower 48 states. “The deeper reason is that many of the traditional sources the government uses to balance their budgets are off limits in Alaska,” Edwards said. “I think we’ve become complacent that oil can pay all the bills and we haven’t had to make some of the tough decisions. In the inverse, we actually received $1.3 billion in dividends last year. So we’ve gotten to this point of expecting money from the government instead of paying into it as all the other states do.” Edwards highlighted Alaska’s lack of private property ownership as one of the primary reasons municipal governments lack a tax base. Without it, the state picks up much of the tab for local services. “The state owns about 104 million acres of land, but only half of 1 percent of the state is owned privately,” he said. “So it’s hard for local governments to provide a tax base, typically from property taxes, to pay for local government sources. So the state has been left with things like power cost equalization, municipal revenue sharing, and the structure really hasn’t been determined yet.” To prepare, rather than panic, Northrim urged businesses to follow a few key points of recession survival. Fraud increases during a recession, so businesses should be mindful and consider cash king; slowing dividends is an effective coping strategy. Companies and investors should also consider losing their poorest performing assets and tracking the economic viability of both their competitors and their clients. Above all, businesses should take pains to have plans and strategies to tell their employees as layoff stories begin to circulate, Edwards said. “You’ve got to make sure that you have a positive message, that you have a strategy, and that you’re focused. You want to shift the focus from past problems to future opportunities.”

Marijuana social clubs dwindle as legal confusion reigns

Anchorage’s Pot Luck Events is the only marijuana social club still operating without a legal challenge, as statewide puzzlement to their legality produces a patchwork of local controls. Fairbanks’ The Higher Calling and Homer’s Kachemak Cannabis Club have both closed, and the City of Kenai is seeking an injunction against Green Rush Events. The clubs, which allow dues-paying members to share and consume cannabis but do not sell it themselves, inhabit either a murky legal area or a clearly defined one, depending on whom you ask. The Marijuana Control Board and several localities have asked the state to clarify the law, but the Legislature’s only action on marijuana clubs has been a statewide smoking ban that incidentally applies to marijuana clubs and has stalled in the House Judiciary Committee chaired by Rep. Gabrielle LeDoux, R-Anchorage.  Marijuana social clubs are distinct from marijuana cafes. State regulations allow for onsite consumption at locations attached to retail cannabis stores. The state hasn’t yet issued any retail licenses, however, and these onsite marijuana cafes will have to wait until late 2016 to open along with the rest of the commercial marijuana industry once a legal crop is available to sell. In the meantime, localities deal with marijuana clubs on their own in the absence of clarity from the Alaska Legislature.   Down to one Of the state’s marijuana social clubs, Pot Luck Events alone is both open and without any pending legal challenge. In early April, The Higher Calling club in downtown Fairbanks closed its doors. Owner Marcus Mooers said the club closed due to low membership, not political pressure, having had too few members to sustain itself. Homer’s Kachemak Cannabis Club closed in March, on the heels of the Homer police chief’s conversation with Marijuana Control Board director Cynthia Franklin, during which she told him clubs are illegal. Chief Mark Robl said the club closed for internal reasons, the city had not initiated any kind of action to close it, and had planned to use enforcement as a last resort. Other clubs are still open, but only until the locality fulfills its intent to close them. In early April, the Kenai city council directed city attorney Scott Bloom to seek an injunction against Green Rush Events. The council decided the club violates an ordinance passed by the Kenai council in January that placed a moratorium on clubs. The ordinance specifies that in the absence of state clarity, it is taking matters into its own hands. “It is in the best interest of the City of Kenai to establish a moratorium prohibiting the consumption of marijuana and marijuana products in Retail Marijuana Stores and Marijuana Clubs, until further guidance is provided by the Marijuana Control Board or State Legislature ensuring minimum health and safety standards are met to protect consumers,” reads the ordinance. Bloom said Green Rush Events has since switched its business model; it now charges nothing for entry, and sells no beverages. Bloom will determine whether or not this violates ordinance and issue an injunction accordingly. In the meantime, the club is still open. Confusion reigns Authorities have no public consensus on marijuana social club legality. State marijuana officials disagree while local officials flip-flop between marijuana club prohibition and allowance. Franklin says clubs are clearly illegal, but city officials, newspapers, and the chairman of the Marijuana Control Board are under the impression they aren’t. Throughout the marijuana regulation process, Franklin has stayed resolute that marijuana clubs violate regulation, which forbids cannabis consumption in public places, defined as “any place to which the public or a substantial portion of the public are invited.” Club owners say Franklin’s interpretation is incorrect, as their clubs charge membership fees and are only open to patrons over the age of 21, making them private businesses, not public places. Franklin argues this makes them no more private than a movie theater.  Bruce Schulte, chairman of the Marijuana Control Board, has repeatedly emphasized that the board has not made social clubs illegal and awaits legislative action to establish the license type or to ban them. The board struck down a proposed club ban in 2015 and issued a ruling that it had no authority to regulate one way or another. Ballot 2, which legalized recreational marijuana in Alaska through a voter initiative in 2014, does not specify social clubs as a license type. The board’s authority to regulate clubs depends on the Legislature changing statute to add the license.  If clubs are indeed illegal, the state has remained silent at the enforcement level. No state law enforcement agencies have brought any charges against clubs or their patrons. This differs from other marijuana businesses that fell against state legal action. The owners of Discreet Deliveries, Alaska Cannabis Club, and Absolutely Chronic Delivery Company, three companies the state alleges sold cannabis without state licenses, were each charged with felonies in 2015. The uncertainty leaks down to the municipal level. When Kachemak Cannabis Club was burglarized in mid-February, Homer Chief of Police Mark Robl said his force wouldn’t take action against the club’s existence, the Homer News reported. “That’s the board’s position. Right now they’ve reached an impasse where these clubs are not expressly permitted or prohibited,” Robl said. “They’re allowing them to operate provided here’s no proof of other violations of law.” However, only weeks later on Feb. 25, Alaska Public Media reported Robl said he’d had a misperception that clubs were not illegal, and learned otherwise from an unnamed “Alcohol and Marijuana Control Board member.” In a later interview with the Journal, Robl revealed the member he spoke with was Franklin. Robl’s new legal interpretation had no chance to be implemented, however, as the club closed down of its own accord in March. The Fairbanks club went through a tangle of local control attempts. Fairbanks Councilman David Pruhs sponsored a measure that would have banned the club, then withdrew it in mid-January. Pruhs said the state needs to decide. “I am giving the people of this industry time to work with the state and rectify this one way or another. I don’t believe in shutting down a business so soon when there might be a chance that this could become a legal activity,” he said at the time. After the ban’s withdrawal, The Higher Calling continued operations until it folded in late March. Even with Pruhs’s ban withdrawn, however, the borough still had concerns. In an April 7 editorial, the Fairbanks Daily News-Miner responded to a proposed ordinance from Fairbanks North Star Borough Assemblyman Christopher Quist that would ban all marijuana businesses without state licensure. “It’s hard to blame Mr. Quist for wanting to provide that clarity at a borough level, given the number of businesses capitalizing on the loophole and the inaction on it thus far,” reads the editorial. “But the state is the authority that should make the determination, and the borough should take its lead from that decision. It’s past time for the matter of marijuana clubs to be sorted out.” The Anchorage Assembly had planned to discuss marijuana social clubs, but member Ernie Hall advised them during March 22 to halt marijuana considerations after a conversation with Franklin, during which he was advised that the state is still considering several marijuana-related items. State silence With most legislative bandwidth taken by a $4.1 billion budget deficit, the Legislature has stayed away from marijuana clubs. No bill to create a license type has surfaced, nor any plans to craft one. The only bill directly pertinent to clubs has stalled and shows no sign of movement before lawmakers adjourn. Rather than directly addressing the licensing issue, the bill incorporates a de facto public marijuana smoking ban into a larger anti-smoking measure. The pair of anti-tobacco bills had moved successfully through both chambers, but stalled in the House Judiciary Committee. House Bill 328 and companion Senate Bill 1, would enact a statewide ban on smoking in any public place except tobacco stores deriving 90 percent of their income from tobacco sales. The bill includes vape pens, e-cigarettes, and any other “plant intended for inhalation.” An amendment from Rep. Adam Wool, R-Fairbanks, that would exempt marijuana businesses hasn’t yet been adopted. LeDoux, the Judiciary chair, has not scheduled a bill hearing during the Legislature’s final week. DJ Summers can be reached at [email protected]

Washington rep, trawlers scuttle rumors of Gulf legislation

A Washington congresswoman’s office and members of the North Pacific trawl industry deny rumors that they are collaborating on federal fishing legislation that would circumvent the North Pacific Fishery Management Council process. The North Pacific Fishery Management Council regulates federal fisheries from three to 200 miles off the Alaska coast. Currently, the council is considering a regulatory package of several options to implement a quota share system for Gulf of Alaska groundfish fisheries, one of the last remaining North Pacific fisheries without such a system. Word surfaced that a Washington legislator had crafted language at the behest of the trawl industry to implement a preferred industry alternative at the congressional level. The congressperson named in fisheries circles, Rep. Jaime Hererra Beutler, R-Wash., sits on the House Appropriations Committee. Fisheries legislation dictating North Pacific council actions regarding Bering Sea crab and Gulf of Alaska rockfish catch share programs have previously been passed through appropriations bills amended by the late Alaska Sen. Ted Stevens. Hererra Beutler’s office said it has no such legislation, and that anything resembling a federal order would have to come from Alaska. “Rep. Herrera Beutler’s office hasn’t drafted any legislation relating to this issue and Jaime believes that any potential legislative solution would need to come from and be led by the Alaskan delegation,” read a statement from Amy Pennington, Hererra Beutler’s communications director. Though the office has no legislation, Pennington did acknowledge that Hererra Beutler’s office — along with other congressional offices — does receive concerned pleas from trawl industry members based in the Pacific Northwest. The North Pacific trawl industry is largely ported in Seattle, though many independent trawlers operate in the Gulf of Alaska out of Kodiak. “We continue to hear from a variety of stakeholders in the fishery, from harvesters to processors in Northwestern states, who are frustrated with the long council process and we have encouraged them to continue work towards a solution with the North Pacific Fishery Management Council,” Pennington wrote. “Members of Congress from Washington and several other impacted states have been hearing complaints about this issue for some time, and Jaime continues to monitor the situation closely.” Trawl industry members echo Pennington. They said they have ongoing relationships with several members and their staff, and while they have expressed concern over the Gulf of Alaska issue they have made no request to draft federal legislation. “I’ve talked to anybody who would listen,” said Julie Bonney, executive director of the Alaska Groundfish Data Bank. “I talked to (Sen. Maria) Cantwell’s staffer, Jordan Evich (of Hererra Beutler’s office), and the Alaska congressional delegation as well. But it was basically expressing concern, not having any particular ask.” Brent Paine, executive director of United Catch Boats, also said he isn’t aware of any drafted legislation. Paine said he has an ongoing relationship with Hererra Beutler’s office regarding West Coast fisheries, but hasn’t discussed this particular North Pacific issue. Both Paine and Bonney said such efforts wouldn’t be unusual given the council’s pace; the groundfish fleet in the Gulf of Alaska began discussions of a catch share program as early as 2001. Many North Pacific fisheries regulatory changes have depended on congressional action, including crab rationalization, the American Fisheries Act that ended Japanese ownership of vessels harvesting pollock in U.S. waters, and the Gulf of Alaska rockfish pilot program. Trawl vessels mainly prosecute the Gulf of Alaska groundfish fishery, which includes the midwater species pollock, and non-pelagic, or bottom trawl, species such as Pacific cod and arrowtooth flounder. The trawl industry vehemently opposes one particular regulatory option — allocating quota shares for bycatch species but not for the target species — while assorted Gulf of Alaska fishermen and residents support its consideration, if not its passage. The rumors of congressional language culminated in a petition circulated at the annual ComFish gathering in Kodiak. A letter circulated by the Alaska Marine Conservation Council and signed by 250 Gulf of Alaska fishermen and residents was sent to each of Alaska’s three congressional delegation members in early April. The letter suggested that congressional actions could potentially be underway, and urged representatives to not support any such actions.  “Specifically, we request our Alaska delegation to support development of a Gulf of Alaska Trawl Bycatch Management Program (aka catch share) in the Council process so all stakeholders may contribute to a transparent process,” the letter asks. “Please do not support any attempt to circumvent the council process through legislation in Washington, D.C., as that would effectively preclude Alaskan coastal communities and stakeholders from having a direct voice in the process.” DJ Summers can be reached at [email protected]

Gulf fishermen wary of Congressional intrusion into council process

Editor's note: Stephen Taufen of Groudswell Fisheries Movement did not write the petition distributed by AMCC. This article refers to a seperate memo of his own distributed to interested parties in which he alludes to Rep. Beutler.  Gulf of Alaska fishermen suspect that Washington, D.C., politics might come into play for fisheries regulations they want left to the North Pacific Fishery Management Council. A letter circulated by the Alaska Marine Conservation Council and signed by 250 Gulf of Alaska fishermen and residents was sent to each of Alaska’s three congressional delegation members. The letter asks that the Alaska’s representatives in the nation’s capital oppose any legislation intended to press Gulf of Alaska fisheries regulations. “Specifically, we request our Alaska delegation to support development of a Gulf of Alaska Trawl Bycatch Management Program (aka catch share) in the Council process so all stakeholders may contribute to a transparent process,” the letter asks. “Please do not support any attempt to circumvent the council process through legislation in Washington, D.C., as that would effectively preclude Alaskan coastal communities and stakeholders from having a direct voice in the process.” During ComFish, an annual Kodiak commercial fisheries booster event, Stephen Taufen of Groundswell Fisheries Movement said that the Congresswoman in question is Rep. Jaime Hererra Beutler, R-Wash. Beutler, a representative of southwest Washington, sits on the House Appropriations Committee. Much of the Gulf trawl industry is based in Seattle. In the address and his own letter, Taufen alleged that Beutler’s office was contacted by trawl industry representatives and has drafted legislation. “It is most likely they helped draft the closeted legislation,” Taufen said. Beutler’s office did not respond to calls for comment. Alaska Department of Fish and Game Commissioner Sam Cotten, one of six Alaskans who make up the majority of the 11 voting council members, said he hasn’t seen any evidence, only rumor, and that members of Congress from Washington or Oregon would be unlikely to force such legislation at the federal level. Legislative action directing North Pacific council actions would not be unprecedented in Alaska’s history. Two North Pacific federal fisheries programs came from federal legislative action either in addition to or instead of council action. Crab rationalization — which assigned individual quota shares to vessel owners, captains and processors to replace the derby-style fishing that made it the most dangerous fishery in the nation — depended in part on the late Alaska U.S. Sen. Ted Stevens to implement. In 2001, Stevens urged the North Pacific council to examine whether the Bering Sea and Aleutian Islands crab fishery should be rationalized. In 2002, the North Pacific council was in unanimous support of crab rationalization and approved it with an 11-0 vote. Stevens’ rider in the Consolidated Appropriations Bill of 2003 ordered the Secretary of Commerce to approve the council’s action on crab rationalization. The Commerce secretary must approve all council actions as meeting national standards and other applicable laws before they can be implemented, but Stevens’ rider removed any discretion from the cabinet position in the case of crab rationalization. Stevens put a similar mandate into the 2004 consolidated appropriations bill, this time directing the North Pacific council to establish a Gulf rockfish pilot program. The five-year pilot program ran from 2007-12 and was reauthorized by the council with significant changes in 2012. The letter to Alaska’s delegation aiming to stave off an intervention in council action is the latest in a protracted regulations dispute. The Gulf of Alaska forms the core of a contentious fishery management argument that has gotten more heated since an October 2015 North Pacific meeting. The trawl industry insists the council’s Alaska membership has an embedded antagonism towards it, evidenced by Gov. Bill Walker’s council nominations and an unpopular regulation option. At the October 2015 meeting, Cotten introduced a new management alternative into a broader regulations package that has been under consideration for years in its most recent iteration and traces its council roots to the early 2000s. The overall package contains a series of options to lower bycatch rates and increase safety in the Gulf of Alaska groundfish fisheries, potentially by creating a quota system. These fisheries are some of the last remaining in the North Pacific without a quota system assigning fishing privileges to harvesters. The trawl industry has adamantly opposed Cotten’s Alternative 3, and feels that the council erred in moving it forward in the regulations process. Alternative 3 would implement a bycatch quota system rather than a traditional catch share program, which allocates individual target species quota to fishermen based on historical catch and other factors. Instead of target species, Alternative 3 would only create a bycatch quota system. Trawlers say the bycatch quota system in Alternative 3 would cripple their industry, instead favoring Alternative 2, a more traditional catch share program that would assign both directed species quota and bycatch quota. Trawlers flocked to the council’s Portland meeting in February to urge the council to not move Alternative 3 forward into the environmental impact analysis process. Opponents of the catch share program fear job losses and widespread consolidation of capital and ownership, observed byproducts of past quota system implementations. Cotten’s alternative intends to avoid some of these consequences. The council did move Alternative 3 into analysis, saying it deserved thorough review despite its unpopularity with the trawl industry. Against this backdrop, Walker appointed two new members of the North Pacific council in March to fill seats that will expire in June. The nominations of Buck Laukitis of Homer and Theresa Peterson of Kodiak infuriated the trawl industry, which believes both are fundamentally opposed to large vessels, Outside fishermen, and trawlers. DJ Summers can be reached at [email protected]  

Anglers want personal use to pay share

As always, fishermen want to know revenue generating bills won’t single them out, and that they will actually benefit the area from which fees are taken. House Bill 137 from Rep. Dave Talerico, R-Healy, would raise fishing and hunting license fees in addition to creating a sockeye salmon stamp for Kenai and Kasilof rivers users. However, only sportfishermen on the state’s most heavily used rivers would have to pay the $15 resident or $150 non-resident stamp fee, while personal use fishermen who dipnet would continue paying nothing. The bill is part of the landslide of bills intended to snag as much spare cash as possible to help reduce the state’s $4.1 billion budget deficit and its ensuing budget reductions. Sportfishing advocates say the measure could potentially deter tourists from dropping money into the Alaska fishery. In addition to raising the non-resident annual fishing license fee from $100 to $150, the non-resident sockeye stamp would cost another $150. Only Alaska residents may participate in the personal use fisheries. Anglers also say they want assurances that the stamp, which only applies to the Kasilof and Kenai rivers, will only be used for management on the same rivers. “We don’t mind helping,” said Dwight Kramer, secretary and treasurer of the Kenai Area Fishermen’s Coalition. “We just don’t want to be singled out.” HB 137 would raise prices for resident and non-resident hunting, trapping, and fishing licenses, running the gamut from a $5 increase for resident fishing licenses up to a $500 increase for non-resident grizzly bear tags. The bill would also increase the age at which Alaska residents would require a license from 16 year old to 18 years old. In 2015, the bill was approved by the House and sent to the Senate, where it stopped in the Resources Committee at the end of the session. Last year, the stamp applied to both sportfishing and personal use fisheries. The personal use addition had been dropped when the bill was taken up in 2016. Kramer said his organization has begun a letter writing campaign to bend state representatives against the bill’s provision to only apply the sockeye stamp to sport users. Kramer is also a board member of the Kenai River Special Management Area board, which he said will reconsider its support of the bill in future discussions. Fishing and hunting licenses, permits, and stamp fees feed directly back into the Alaska Department of Fish and Game for management purposes. Kramer said that sportfishing is a self-contained expense directly proportionate to the amount of anglers engaging in the fishery. Personal use fisheries, however, generate no revenue despite raising department costs. Kramer said burdening sportfishermen alone is inequitable. “We just don’t think that’s right,” said Kramer. “When you look at the whole thing in perspective, the sportfishing isn’t generating new expenses. All its expenses are generated for years…on the other end of the spectrum, the (personal use) fishery is generating a lot of management expense. It just doesn’t make any sense.” Personal use comes from Alaska’s constitution, which declares residents owners of state resources. On the Cook Inlet rivers in question, the personal use sockeye fishery has become increasingly popular. In 2015, Cook Inlet personal use fisheries harvested 533,000 salmon. The Alaska Department of Fish and Game issued just less than 35,000 personal use permits. To deal with increased personal use of the Kasilof River — a record 89,000 salmon were harvested in 2015 — the Department of Natural Resources has appropriated $2.8 million to invest toward site improvements. As the personal use fishery on the Kasilof River grows, Kramer said it’s only fair that the personal use fisheries contribute. During a bill hearing in the Senate Resources Committee, Sen. Bill Stoltze, R-Chugiak, a vocal personal use fishery proponent, said he appreciated the personal use stamp requirement being dropped from the bill. Personal use fishermen, he said, contribute to local economies around the rivers through local retail spending. Kramer said Stoltze misses the point; while personal use fishermen do indeed contribute to municipal coffers, much of the area management and upkeep come from the state. The Department of Natural Resources is planning several projects to accommodate the personal use fisheries, including the Kasilof River Improvement Project set to begin construction this summer. For the growing Kasilof River fishery, the state has yet to install sanitation and garbage disposal, however. Infrastructure developments like boat launch installation cost money the department will no likely have in the future due to budget cuts. Kenai River bank erosion associated with the personal use fishery will require walkway installation, another expense whose funding may not be secure.   DJ Summers can be reached at [email protected]

Fishing groups voice opposition to CFEC reorganization

Following an April 4 hearing that drew unanimous opposition from fishing groups, the House Resources Committee held a bill that would make statutory changes to the Commercial Fisheries Entry Commission. The bill is a relatively simple administrative fix, but sits in a tangle created by an administrative order by Gov. Bill Walker that has attracted criticism over its legality, a legislative audit of the agency, and opposition from fishermen. Rep. Louise Stutes, R-Kodiak, introduced the bill, but drastically scaled down the original version introduced last year to simply meet the needs of a 2015 legislative audit recommending some of the changes directed by Walker’s order. Now, the bill’s main elements address administrative fixes: moving the CFEC commissioners to part-time pay and changing CFEC employees’ statutory designations. “It changes (commissioners) from being on a monthly rate to a daily rate,” summarized Stutes’ staffer Reid Harris. It also changes CFEC employees’ designation from “exempt” to “classified,” another statutory change. “This bill is drafted to the recommendations of the audit,” Harris said. Both recommendations enable Walker’s order, which folded CFEC duties into the Alaska Department of Fish and Game. Walker’s order mandated the CFEC to fold some of its duties into the Alaska Department of Fish and Game. The CFEC creates and licenses the limited entry commercial fisheries in Alaska state waters. The Alaska Department of Fish and Game, or ADFG, manages the fisheries in season and performs the scientific studies necessary to do so. The order folded several of CFEC’s administrative duties into ADFG’s domain, including: licensing and permitting services (ministerial services only); information technology services; accounting services; payroll services; procurement services; and budget services. Walker’s order was intended to be a cost-saving measure, and follows two bills introduced in the last two years that would have dismantled CFEC altogether, including Stutes’ bill. A legislative audit completed by former Administrative Services director Tom Lawson recommended several changes to CFEC structure that Walker’s order incorporated along with several changes independent of the audit. CFEC commissioners circulated two letters following the order, saying it exceeded the audit’s recommendations. They also said it borders on unconstitutional. Legislators took up the query. Rep. Cathy Muñoz, R-Juneau, asked the legislative law office for its opinion of Walker’s order. The opinion, drafted by Legislative Affairs Director of Legal Services Doug Gardner, found a potential constitutional snag. According to the Alaska Constitution, the governor is indeed authorized to “reorganize” administrative duties in the executive branch, which includes both ADFG and CFEC. If the reorganization requires “force of law” — a change in statute — then it requires an executive order subject to the Legislature’s approval. Most CFEC duties are statutory, put in place by the Limited Entry Act. In particular, Walker’s administrative order could give ADFG the statutory duty to issue licenses under certain circumstances. This would require a statutory change — a force of law — which means Walker’s order should have been executive, according to Gardner. “Based on the language in (Walker’s order),” wrote Gardner, “it is hard to evaluate how ADFG can perform either of these licensing functions which are 1) specific statutory duties of CFEC that in some cases affect the rights and liabilities of permit holders; and 2) where these statutory functions could be more that purely ‘ministerial.’” The Resources Committee will hold another hearing for the bill on April 6. Fishermen spoke unanimously against the bill during the hearing, mostly because it relates to an administrative order they oppose but have no direct recourse to change. During the hearing, the scant public commentary mostly addressed the related administrative order rather than the bill’s elements. “We’re opposed to anything in this bill, as it’s helping the administrative order,” said Martin Lunde of the Southeast Alaska Seiners Association, or SEAS, who added that they believe it should have been done as an executive order. Bob Thorstensen, the executive director of SEAS, called Walker’s administrative order “far, far, far deeper and more destructive than even the audit.” Jerry McCune, president of the United Fishermen of Alaska, the largest fishing industry group in the state, said the agency crossover would present new problems as the State of Alaska develops new fisheries in the Bering Sea’s federal waters, that are controlled by the North Pacific Fishery Management Council. ADFG Commissioner Sam Cotten sits on that council, as per federal law. McCune and others voiced a concern that conflict would occur if Cotten makes licensing calls in both the federal and the state fisheries. Ben Brown, one of two currently sitting CFEC commissioners, said he could support the bill, and did not speak directly of the administrative order itself. “The debate that’s started to happen doesn’t address the four corners of this bill,” said Brown.” Brown said the bill’s intent to lower commissioners to part-time pay and part-time workloads was acceptable, given that it falls in line with the legislative audit’s recommendation to streamline CFEC but maintain its existence. “I don’t know what the practical end result of the administrative order will be,” said Brown. “We commissioners can support (this version) of this bill.”   DJ Summers can be reached at [email protected]  

House Judiciary Committee guts asset forfeiture bill

The House Judiciary Committee moved a stripped-down version of a civil asset forfeiture reform bill to the Finance Committee on April 4, with members saying they’d rather pass something palatable this session than nothing at all. The bill, introduced by Rep. Tammie Wilson, R-North Pole, would have overhauled Alaska’s criminal asset forfeiture laws, ranked as some of the worst in the nation. Judiciary Committee chair Rep. Gabrielle LeDoux, R-Anchorage, was a bill co-sponsor and expressed a deep appreciation for the bill during hearings along with fellow committee members, but introduced a committee substitute in the last 10 minutes of an April 4 meeting that removed many of the bill’s reforms. LeDoux’s staff said her office had a meeting the morning of April 4, during which they decided to strip down the bill, keeping only one clause that abolishes “in rem” forfeitures, or non-criminal forfeitures. It leaves criminal forfeitures untouched. Staff said Wilson and her co-sponsors plan to redraft the bill in the interim. “I think that this bill is in good form for the end of this session,” said LeDoux at the end of the hearing. “I still have some very real problems with the idea that someone’s property can be seized prior to a conviction of guilt. But we have next session to consider that.” Alaska’s civil asset forfeiture laws leave room for improvement; according to the Institute for Justice, a government watchdog group, Alaska gets a D+ for its current laws. According to Alaska statutes, law enforcement can seize the property related to a crime on reasonable suspicion that it aided in, or is otherwise evidence of, that particular crime. The property being seized by law enforcement does not have to be evidence, nor does the state have to wait until a criminal conviction or even a criminal charge for seizure. Courts provide recourse for asset seizures. The property owner has to file to have property returned within a specific time frame; the court sets the burden of proof on the defendant to prove the property’s disconnection from the crime. If the property’s owner doesn’t file to have it returned, or if the court rejects the appeal, law enforcement can raise revenue by selling the property. Under Wilson’s bill, the state would have to wait until sentencing to seize property. Law enforcement would also have to submit an annual report detailing its seizures. LeDoux and other attorneys on the Judiciary Committee appeared appalled by the current statutes regarding asset seizures, and sharply cross examined several law enforcement representatives who testified before the committee on March 31. Judiciary Committee members implied or outright gushed about supporting the bill’s purpose. “I love the concept of this bill,” said LeDoux. “I just want to get the bill right. I’m going to continue it.” Cash seizures and airplane seizures came to represent the issue during the hearing. Under current criminal prosecution procedures, law enforcement may seize cash and keep it as partial evidence of potential drug activity. LeDoux asked acting Major Jeff Laughlin of the Alaska State Troopers why that actual cash needed to be seized. “Why couldn’t you do the same thing with photocopying the money?” she said. “Why do you need it actually for evidence, as opposed to a photocopy of the money?” “It’s evidence of a crime,” Laughlin said, and answered with a rhetorical question. “Couldn’t we ask the same question of many of the items we seize?” LeDoux didn’t think the question was rhetorical. “You probably could,” she said, “and that’s kind of what we’re doing.” Committee members said they understand the statute allowing law enforcement to take such actions. Rather, they had philosophical problems with current laws, not procedural ones. The state, LeDoux said, has no right to do what any private citizen filing suit against another wouldn’t be able to do. “I really don’t see why you should be in such a different position than any other plaintiff who thinks they’ve got this really good case and don’t want the defendant to be able to hide their assets,” she said. “I just have a real problem with the idea that you can seize something you don’t actually need for evidence before a finding from a judge and a jury that somebody has committed a crime beyond a reasonable doubt.” Among problems with the bill, Alaska Department of Law Criminal Division Director John Skidmore said it could bog the system down with hearings and filings that will add more time and expense to routine criminal prosecutions. Skidmore said there “may be horror stories” about delays in property returns, but that the for the most part the courts release property in a timely manner when the appeal is approved. Anchorage attorney Kevin Fitzgerald, a civil asset forfeiture reform advocate, said law enforcement fears of endless report filing and litigation amounted to playing “Chicken Little.” Civil asset forfeiture was born from federal 1980s drug war policies, intended as a deterrent factor to seize drug kingpin assets. As law enforcement seized more and more property and money, media and civil liberties groups came to view civil asset forfeiture laws as a revenue-generating source that law enforcement abuses. Federal law enforcement seized $5 billion through civil asset forfeiture in 2014, according to the Washington Post. Civil liberties groups and watchdog organizations including the American Civil Liberties Union, the Center for American Justice, and the Institute for Justice lobby for changes. Reforms have picked up steam in several states. The same day LeDoux passed the stripped bill from committee, Florida Gov. Rick Scott signed a bill that would have required many of the same overhaul’s as Wilson’s original bill. In 2015, a similar bill passed rapidly through the New Mexico Legislature. On March 31, the Tennessee House passed a bill requiring law enforcement to provide detailed reports of asset seizures. DJ Summers can be reached at [email protected]  

Fisheries tax increase moves to Finance Committee

After a hiatus, an amended version Gov. Bill Walker’s fisheries tax increase bill moved out of the house Fisheries Committee on April 5. Committee chair Rep. Louise Stutes, R-Kodiak, held the bill earlier in session, saying she needed assurances that other industries would be taxed as well and that the existing taxes would be reexamined. With a modified bill and promises from the Department of Revenue to maximize existing fisheries taxes, the bill moved on to the House Finance Committee without opposition. Kevin Brooks, deputy director of the Alaska Department of Fish and Game, said he understands fishermen reticence about tax increases, but that the department has a duty to perform. “No one likes to be talking about taxes,” said Brooks. “We understand the position of the industry. But it’s part of a broader package the governor has and we support it.” Walker’s original bill would impose a 1 percent increase on both landings taxes and fisheries taxes on each fishery sector. The amended bill keeps the 1 percent increase for every fishery sector except the shore-based salmon cannery sector and the developing fisheries sector. A negative market outlook for Alaska fisheries caused many fishermen to reject the bill outright, saying they have little room to have more revenue scraped from their decks. Certain bill changes address two of the larger concerns for salmon canneries and developing fisheries. In previous testimony, representatives from the Pacific Seafood Processors Association spoke of the tax’s tone-deafness regarding the 2016 salmon market and how a tax increase could cripple canneries. Back-to-back years of large sockeye runs in the state’s largest salmon fishery, Bristol Bay, left salmon processors with a price-lowering glut of product. The U.S. dollar’s strength against key export market currencies added to the overstock to create a tough market outlook for salmon in 2016. An amendment offered by Rep. Jonathon Kreiss-Tomkins, D-Sitka, also exempted the developing fisheries sector from the 1 percent tax increase. Stutes’ fisheries advisor, Reid Harris, told the committee that ADFG recommended removing developing fisheries from the tax increase, as the taxes gained from the small sector would be negligible and potentially discourage new entries to the fishery through sheer paperwork volume. Though fishermen could see a tax bump, the new bill also tries to restore money to the industry’ marketing arm. Another of the bill’s additions would designate 0.5 percent of the increased landings taxes, which apply to offshore processors, to fund the Alaska Seafood Marketing Institute. The Alaska Seafood Marketing Institute, or ASMI, is a joint operation between private industry and the State of Alaska. It aims to increase the market value and presence of Alaska seafood domestically and abroad. Currently, a voluntary 0.5 fisheries tax, which comes from fishermen delivering to onshore processors, funds ASMI. For the institute, designated funds are a matter of survival. Walker’s budget plan slashed over $1 million of the state’s share from ASMI’s operating budget, leaving only $2.4 million of state funding for fiscal year 2017. ASMI is expected to wean itself off state funding entirely by fiscal year 2019. The bill addresses no existing fisheries or landings tax reforms, but committee members drew attention to certain tax glitches as being interconnected to the bill’s intent. Stutes made a point to put on the record that the Department of Revenue has been working on revising fisheries tax code, another issue fishermen asked the committee to examine before implementing a tax hike. A fisheries tax accounting glitch has deprived the state of up to $2 million a year in landings taxes from offshore groundfish fisheries. Since the department discovered the problem in 2015, it says it has worked to invent a new accounting model. The fishery resource landing tax assesses groundfish based on ex-vessel price. Processors turn flatfish caught as bycatch into low-value fishmeal, so the only known ex-vessel price for certain flatfish species is artificially low. Nine species have this price uncertainty, but most flatfish volume comes from yellowfin sole and Atka mackerel. According to state research estimates, the state has lost out on $1.8 million to $2.5 million per year, or more than $10 million over the last five years. Brooks said during the April 5 hearing that the department has come up with a revised model it hopes to being implementing soon. “We’ve developed a methodology for imputing a value,” said Brooks. “We’ve vetted it with the National Marine Fisheries Service that does a similar calculation.” Brooks said in a telephone interview that the new 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. Brooks said the departments plan to notify fishermen of the changes to their tax calculation within the next 30 days. Stutes noted that the committee will be “watching with both eyes open” how the Department of Revenue implements the new tax calculation. DJ Summers can be reached at [email protected]  


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