Elwood Brehmer

Former Gov. Walker, AGDC head lead new gasline venture

Former Gov. Bill Walker is revitalizing his quest to see Alaskans capture the full potential benefit of the state’s North Slope gas resources with a new project company, Alaska Gasline and LNG, LLC. Joining Walker in co-founding the venture is Keith Meyer, the former Alaska Gasline Development Corp. CEO that Walker selected to lead the project during his administration along with Fairbanks-area entrepreneur Bernie Karl and Joey Merrick representing the Laborers’ Local 341 construction workers union. Walker said during a Monday afternoon press briefing in Anchorage announcing the formation of Alaska Gasline and LNG that the state, through AGDC, has significantly de-risked the now $38 billion Alaska LNG Project by securing more than 70 permits and authorizations “including the ones that take years and decades to obtain,” but it's time for the work to transition back to the private sector. “Without their leadership and their pushing forward and their completing the permitting process we wouldn’t be here today,” he said of Gov. Mike Dunleavy’s administration. “I think Alaskans are ready for this project to happen.” The Federal Energy Regulatory Commission published a record of decision in May approving construction of the megaproject — North Slope gas treatment and Kenai Peninsula LNG plants connected by an 807-mile gas pipeline — and the state-owned gasline corporation has also secured federal rights of way and other environmental permits for the effort. Meyer, who stressed the importance of attracting customers while leading AGDC from 2016-2019, said the megaproject has no significant technical barriers and can be financed. He acknowledged that the global oil and gas industry has taken a beating from pandemic-depressed prices this year but noted a significant long-term growth trajectory remains for worldwide LNG demand. “The (LNG) industry has matured and Alaska is in a beautiful position to participate in this industry,” Meyer said. The prospect of commercializing the roughly 30 trillion cubic feet of natural gas resources in the Prudhoe Bay and Point Thomson fields has caused the state, private ventures and oil companies to repeatedly investigate various project structures to make a gasline economic. The cost of the roughly 800-mile gas pipeline has generally served as the impediment to developing what is otherwise a world-class resource. Under Meyer’s leadership AGDC attracted interest in the project from several of Asia’s largest LNG buyers, including Tokyo Gas and Korea Gas. Walker and Meyer most notably in November 2017 signed a nonbinding project venture agreement the three national Chinese mega corporations — including Sinopec, the state oil and gas company — to finance and purchase LNG from the project during a trade ceremony in Beijing attended by President Donald Trump and Chinese President Xi Jinping. In early 2016 Walker elected to have the state take Alaska LNG over from the North Slope producers after the industry majors said they would otherwise slow-roll development amid depressed LNG market prices at the time. Prior to becoming governor Walker, an attorney, served as general manager for the Alaska Gasline Port Authority, a joint effort by the City of Valdez and the Fairbanks North Star Borough to develop a gasline from the North Slope to Valdez. The appropriate role for the state in the massive development was a contested topic during the 2018 gubernatorial race; Dunleavy has long said that private industry should lead the work. AGDC leaders under Dunleavy have said they want to transfer the project to private hands by the end of the year or shortly thereafter. Walker said shifting Alaska LNG back to the private sector is the right move now given the state’s ongoing structural deficits and inability to finance major work, stressing that he simply wants the project to move forward. “We didn’t have enough time to put all the pieces in place,” Walker said, adding he hopes to meet with AGDC leaders in the coming week to start negotiations on a transition. Those talks would follow concept-level discussions Walker had with Dunleavy and AGDC board chair Doug Smith earlier this year. The public corporation could still represent the state’s interests in project development if a transition is achieved, he said as well. “This isn’t a matter of AGDC going away necessarily, but it’s us taking the baton,” Walker said. AGDC officials noted in an emailed statement responding to the AGLNG unveiling and request that this year they announced a new, $38.7 billion cost estimate for Alaska LNG that makes the project more competitive — down more than $5 billion from the $44.3 billion price tag given it in 2015, which was below the initial $45 billion to $65 billion range given by BP, ConocoPhillips and ExxonMobil before that.  “State of Alaska policymakers have made it clear that adequately funded third parties will need to fund Alaska LNG construction and lead the project forward. Any party with the appropriate resources and qualifications to advance the Alaska LNG Project is welcome to participate in the strategic path for Alaska LNG that the AGDC board defined this past spring,” the statement reads. AGDC has not had any formal negotiations with Alaska Gasline and LNG, according to representatives. In January Meyer pitched the AGDC board to negotiate a transfer of Alaska LNG — its technical data, permits and other assets — to a private consortium he had put together to relieve the state of the financial burden of the project. Meyer said Monday that after engaging with AGDC he believes Alaska Gasline and LNG will find a receptive investor base to fund acquisition of the project and move towards securing additional investments for construction. “As I said in the past the state should have the option to invest in the future but not the obligation. To me this is not taking (the project) away from the state either,” he said. When asked about silent partners in the venture, Walker said, “What you see is what you get; there’s nobody behind the curtain,” adding, “we’re not out here to get rich off this project; we want to make it happen.” AGDC has spent roughly $460 million advancing the Alaska LNG Project and the smaller, “backup” Alaska Stand Alone Pipeline Project over the past decade. Karl, a well-known Alaska entrepreneur and the owner of Chena Hot Springs Resort said he was long against the project but had his mind changed during a trade trip to China put on by Walker’s administration. “Our gas is wanted all over the world and it’s up to us to get it to market,” Karl said. Elwood Brehmer can be reached at [email protected]  

GOP dominates early count with thousands to tally

As many predicted, the only thing clear after election night was the sky over Southcentral. Democrats and independents trailed Republicans significantly in every statewide race and democrat candidates led just two state legislative races in which they had a Republican challenger as of this writing early Nov. 4. Republican incumbents President Donald Trump, Sen. Dan Sullivan and Rep. Don Young led their main challengers, former Democrat Vice President Joe Biden and independents Al Gross and Alyse Galvin, respectively, by at least 27 points with 81 percent of state precincts having reported results. On the state level, well-established, incumbent Democrat legislators from several traditionally liberal districts in Anchorage and Fairbanks also trailed their Republican challengers as well. Anchorage Democrat Sen. Bill Wielechowski, a lead supporter of the oil tax increase proposed in Ballot Measure 1, trailed Republican challenger Madeleine Gaiser by 207 votes with all of the precincts having reported results Nov. 4. Incumbent Republican and current House Minority Leader Rep. Lance Pruitt led returning Democrat challenger Liz Snyder by 1,092 votes, or nearly 23 points, the morning after election day despite beating her by less than 200 votes in 2018. Fairbanks Democrat Reps. Adam Wool and Grier Hopkins also trailed Republicans Kevin McKinley and Keith Kurber by seven and nine points. The early results could signal a sudden return to Republican dominance in the already red state; however, more than 122,000 absentee ballots and early votes will not be counted until a week or more after election day, according to Division of Elections. Division procedure calls for early votes cast within five days of Election Day to be counted seven days after the election and absentee ballots can be counted up to 15 days after Nov. 3. With approximately 173,000 votes counted out of more than 595,000 registered voters, the large absentee and early vote tally likely means more than one-third of all votes — a pool presumed to be cast by a larger share of Democrats — still remain to be counted. If the immediate results generally hold, a strong Republican majority in the state House and Senate would go a long way towards helping Gov. Mike Dunleavy achieve his fiscal agenda. While Republicans currently hold majorities in both chambers, several Republican incumbents who helped form a bipartisan majority coalition in the house or otherwise pushed back against Dunleavy’s attempts to make unprecedented cuts to the state budget either lost in primary races or won narrowly against candidates more aligned with the governor’s budget philosophies. That means even if there is a similar number of Republicans in the Legislature the makeup in 2021 is likely to be more conservative. If Dunleavy and his supporters in the Legislature have the votes to advance their agenda — larger Permanent Fund dividends, no new personal taxes and a balanced budget — they will have to find numerous other ways to cut into and cover over a fiscal year 2022 budget deficit currently expected to be more than $2 billion without the historical backstop of significant state savings. Ballot measures Ballot Measure 1, known as the Fair Share Act by its supporters, had received just 59,164 votes out of 168,261 votes counted through early Nov. 4, or about 35 percent of the vote. The citizen-driven initiative to significantly raise oil taxes on the largest North Slope fields was touted as a way for the state to start recouping revenue forgone since the Legislature passed the current oil production tax system known as Senate Bill 21 in 2013. SB 21 then survived a repeal referendum in the 2014 primary election by a margin of 52.7 percent to 47.3 percent, or about 10,000 votes. OneAlaska, the industry-led campaign coalition formed to defeat Ballot Measure 1, spent approximately $25 million on the campaign, compared to $1.3 million by Vote Yes for Alaska’s Fair Share. Ballot Measure 1 opponents stressed the higher gross and net taxes would further damage a primary industry in the state that was already reeling from collapsed oil prices — that briefly went negative in April — during a global pandemic that shows no signs of slowing. ConocoPhillips Alaska leaders have said they are withholding decisions on future drilling plans until Ballot Measure 1 is decided. Supporters insisted the measure would help the state recoup tax revenue more in line with its historical share and over time would likely contribute an average of approximately $1 billion of additional revenue to state coffers. Ballot Measure 2, the elections reform initiative intended to tighten state campaign finance laws, combine state primary elections and move Alaska to ranked-choice voting, had received 43 percent of the vote as of early Nov. 4. Known as the Better Elections initiative, the campaign and voting reforms were staunchly opposed by the Alaska Republican Party leaders and while the state Democrat Party did not formally endorse or oppose the measure, many longtime Alaska Democrats opposed it. Elwood Brehmer can be reached at [email protected]

What comes after the Roadless Rule repeal?

The Roadless Rule survived nearly 20 years of legal challenges in Alaska but not the Trump administration. U.S. Department of Agriculture officials published a new regulatory framework for Southeast Alaska’s Tongass National Forest in the Federal Register Oct. 29 that exempts the massive forest from the national rule established during the final days of the Clinton administration in early 2001. The Roadless Area Conservation Rule, which originally prohibited new roads across roughly 58 million acres of forestland nationwide, largely put a stop to new infrastructure across approximately 9.4 million acres of the Tongass. At about 17 million acres, the Tongass is by far the largest national forest in the country. The basic conservation versus development debate surrounding the oft-contentious Roadless Rule is as old as public lands, but what really happens next? According to many proponents of the repeal, actually very little. That’s because lifting the development impediments imposed by the Roadless Rule is about far more than restoring Southeast’s now niche timber industry to its glory years, they say. Sen. Lisa Murkowski, who chairs the Senate Energy and Natural Resources Committee until the new Congress convenes in January said in a joint statement from the Alaska delegation that the repeal of the Roadless Rule improves the ability to develop lower cost energy sources and public infrastructure for the region’s 35 mostly isolated communities. “A full exemption from the Roadless Rule means access to more affordable and renewable energy to power homes and schools, access to technology at a time when more Americans are logging online for health care and education, and access for transportation and recreation jobs and economic activity in the region — all while ensuring continued good stewardship of our lands and waters,” Murkowski said. Robert Venables, executive director of the Southeast Conference, a regional development group that has supported revising the Roadless Rule also wrote via email that energy projects — which often means hydropower in the Tongass — stand a better chance of being developed in the future and mineral exploration could continue to increase with easier access under the new Forest Service rules, but he stressed there is no money in the agency’s budget to suddenly start building roads. “There is no master plan or pent-up project list ready to explode its way through the old-growth forest,” Venables wrote. However, he also stressed a belief that the primary reason for the lack of ready community development projects is the inability of regional leaders to set long-term plans while the legal battles over the Roadless Rule have played out. “The uncertainty with the Roadless Rule has been a debilitating factor for the last 20 years and I do not see that ending unless the courts put a stop to it — the political revolving door will keep it in play as long as there are elections,” Venables wrote. The Alaska exemption from the Roadless Rule is specific to the Tongass, meaning the rule remains in place over the 5.5 million-acre Chugach National Forest in Southcentral where historical timber harvests have been minor. The State of Alaska first secured an exemption from the Roadless Rule for the Tongass as part of a 2003 court settlement to a lawsuit over the rule’s applicability in the state with the Bush administration but that exemption was overturned by a Federal District Court of Alaska judge in 2011. Subsequent appeals and other attempts by the state and resource development groups to have the Roadless Rule invalidated proved fruitless. Timber industry advocates also contend that even the complete exemption will not enable the widespread clear-cutting of old-growth stands that many Roadless backers fear in part because the forest-level land-use plan doesn’t call for it. The Tongass Land and Resource Management Plan finalized in 2016 by the Forest Service allows for roughly 188,000 acres of timber to be harvested across the Tongass without the Roadless Rule, according to the record of decision. A 2019 Alaska Forest Association analysis of the impact of repealing the rule on the available timber supply commissioned by the State of Alaska determined about 165,000 of those newly harvestable acres would consist of old-growth stands. “No matter the (exemption) alternative selected in the record of decision for the ‘Rulemaking for Alaska Roadless Areas’ at least 82 out of every 100 acres of suitable old-growth forest within the Tongass National Forest will not be available to maintain the existing timber industry through transition (to completely young-growth harvests),” the AFA analysis states. As a result, AFA leaders have pressed the Forest Service to also start the lengthy public process to again revise the Tongass Management Plan. Southeast Alaska Conservation Coalition Tongass Program Manager Dan Cannon said in an interview that the group expects the Forest Service to start planning timber sales in previously roadless areas soon, particularly if President Donald Trump wins reelection, and the commercial fishing, eco-tourism and other industries that benefit from intact forestlands will have to adapt. “The true economy (of Southeast) is really going to have to pay attention and navigate the potential impacts” of additional logging and development, Cannon said. Roadless Rule supporters regularly note that tourism and fishing have provided about one-quarter of the region’s jobs in recent years, while the timber industry — more than 4,000 workers strong at its peak — now accounts for less than 1 percent of current Southeast jobs, according to Southeast Conference data. Cannon also dismissed the notion that doing away with the Roadless Rule is necessary to facilitate public infrastructure projects that would otherwise be noncontroversial, pointing to Forest Service exemption decision documents that state the agency approved nearly 60 projects in Roadless-designated areas over the years. “There’s a lot of talk about it being a problem and that’s not the reality,” he said. “The Roadless Rule was well-designed and you can see that by the exceptions that have been made.” Timber harvesters and project developers emphasize that while the rule did not explicitly prohibit activity in roadless areas, it ostensibly did by requiring more complex logistics, transportation and added time to project construction. According to Cannon, compromises were made in the 2016 Tongass Management Plan approved under the Obama administration after stakeholder input. The plan calls for a faster transition to young-growth timber harvests than industry leaders say is practical. The Southeast Alaska Conservation Coalition is among the groups contemplating litigation to reverse the Tongass-specific repeal of the Roadless Rule, Cannon said. “We will do whatever we need to reinstate the protections of the Roadless Rule,” he said. According to Venables, the sudden swings of full repeal or fully Roadless make it difficult to reach a consensus that everyone could plan around. He was also part of a working group formed by former Gov. Bill Walker’s administration to draft recommendations for crafting an Alaska-specific Roadless Rule, though the USDA indicated early in the process it intended to move forward with a full repeal. Forest Service headquarters spokeswoman Babete Anderson wrote in response to questions that the decision-making process for local forest managers reviewing project applications will “change very little” without the Roadless Rule. “The Tongass Forest Plan, along with other conservation measures, will continue to guide management decisions, allowing roadless area values to play a role on the Tongass while offering additional flexibility to achieve other multiple-use benefits,” Anderson wrote in an email. She added that the agency currently has no plans to revise the Tongass Land Management Plan. ^ Elwood Brehmer can be reached at [email protected]

ConocoPhillips reports Q3 losses of $450M, $16M in Alaska

ConocoPhillips lost $450 million in the third quarter, with $16 million of that coming from the company’s Alaska operations, according to a quarterly earnings report published Oct. 29. The losses come as Alaska’s largest oil producer, and the state’s industry in general, awaits the fate of a citizens’ initiative in the Nov. 3 election, known as Ballot Measure 1, that would significantly raise production taxes on the three largest North Slope fields. Results from Nov. 3 showed the measure trailing with 65 percent against and 35 percent for with just more than 168,000 votes counted. ConocoPhillips Alaska President Joe Marushack said in a statement provided by the company that there are no active drilling rigs as a result of the pandemic-induced price collapse at the large Alpine, Kuparuk and Prudhoe Bay North Slope fields for the first time since each was developed. ConocoPhillips Alaska leaders have said they will make decisions regarding future drilling activity after Ballot Measure 1 is settled; the company instructed its drilling contractor, Doyon Drilling, in early April to lay down its North Slope drilling rig fleet indefinitely. According to the company, ConocoPhillips paid taxes and royalties of approximately $136 million to the state in the quarter. For the year, the company has incurred a net loss of $76 million from its North Slope operations, paid taxes and royalties estimated at $442 million, and spent $882 million on capital projects. In mid-March the company announced the first of multiple spending cuts to its 2020 Alaska spending plan that ultimately totaled approximately $400 million. ConocoPhillips lost $141 million in the state during the second quarter when Alaska North Slope crude prices briefly went negative early in the pandemic but netted $81 million in the first quarter. The $450 million companywide loss left ConocoPhillips with a $1.9 billion year-to-date net loss and translated to a loss of 42 cents per share, according to the earnings report. ConocoPhillips netted $3.1 billion a year ago. ConocoPhillips stock traded for $28.82 per share near the end of trading Oct. 29, in line with it’s pre-earnings closing price. The Houston-based oil major with an upstream exploration and production focus has generated total quarterly revenues in the $4 billion to $5 billion range in 2020 after producing between $8 billion and $10 billion in revenue in each quarter of 2019. CEO Ryan Lance said in a call with analysts that the third quarter results were largely what the company expected and ConocoPhillips “remains cautious on the timing and pace of recovery” for global energy prices as oil has hovered around $40 per barrel for months. Lance also noted the company ended its production curtailments over the summer and completed all of its seasonal turnaround work. “We remain very well-positioned financially and operationally thanks to our strong balance sheet and exceptional performance,” he said in a prepared statement. “Now that we’re back to more normal business, we’re focused on continued strong execution of our programs and progressing our announced transaction with Concho Resources.” ConocoPhillips announced Oct. 19 that it has acquired Texas-based independent producer Concho Resources Inc. in a $9.7 billion all-stock sale that grows the company’s Lower 48 shale oil portfolio. In May, ConocoPhillips began implementing oil production cuts on the North Slope that were originally planned to peak at about 100,000 barrels per day as part of a broader strategy to curtail up to 460,000 barrels per day companywide. The North Slope cuts were reversed to start July as oil prices pushed back above $40 per barrel. Early indications are the company’s 2021 capital program will be in line with this year, Lance said, but firmer plans are forthcoming. ConocoPhillips has spent $3.6 billion on capital projects worldwide so far this year — with the aforementioned $882 million in Alaska — compared with more than $6.6 billion in the first nine months of 2019. The company is entering the second of two major winter construction seasons for its Greater Mooses Tooth-2 oil project in the National Petroleum Reserve-Alaska, which is scheduled to start production in late 2021. The Bureau of Land Management on Tuesday issued a record of decision authorizing construction of ConocoPhillips roughly $5 billion Willow oil project in the NPA-A as well. While first oil from the large remote prospect is likely at least five years away, Willow is expected to produce nearly 160,000 barrels of oil per day at its peak, according to the company. Elwood Brehmer can be reached at [email protected]

Supreme Court hears case in dispute over fisheries landings tax

Millions of dollars of fish landing taxes are at stake in a lawsuit now being deliberated by the Alaska Supreme Court and the decision could hang on when the court decides processed fish are “in-transit.” The court heard oral arguments Oct. 21 in a lawsuit brought against the State of Alaska by Seattle-based Fishermen’s Finest Inc. in which the company argues Alaska’s fishery resource landing tax violates a prohibition on taxes or fees levied against goods on the way to export in the U.S. Constitution. Jim Torgerson, an attorney for Fishermen’s Finest, argued that the fish harvested and processed in federal waters by the company’s catcher-processor vessels have started their journey to foreign markets when it arrives at Alaska ports but before being shipped worldwide. Torgerson stressed that the fish are caught and preserved in the federal Exclusive Economic Zone, or EEZ, that starts three miles offshore and therefore the fish products are in-transit when they cross the three-mile boundary and enter state waters from the EEZ or, at the latest, when they are transferred elsewhere at the port. He said in response to questions from the justices about what constitutes a “significant movement” that crossing the three-mile boundary into state waters after all of the work on the actual fish has been completed is a key legal trigger. “The last thing for (the company) to do was to transfer the fish to the foreign markets and that transport process started when the vessels left the EEZ and spent a day or two traveling to Alaska into the ports, trans-loaded into the foreign vessels or into the refrigerated containers, so it was that actual movement, that actual transportation, that was commencement of that in-transit process,” Torgerson told the court. Fishermen’s Finest filed the lawsuit — technically an appeal of an administrative ruling in favor of the state — in May 2018. Superior Court Judge Dani Crosby sided with Fishermen’s Finest in a November 2019 ruling in which she concluded it violates the import-export clause because the fish are “in continuous export transit” when the tax is applied. The fishery resource landing tax generated nearly $12.5 million for the state and local governments in 2019, according to Tax Division records. It is levied based on 3 percent of the catch’s unprocessed value in established fisheries and 1 percent of the value in developing fisheries, as determined by the Alaska Department of Fish and Game. Unprocessed fish is not subject to the resource landing tax but could fall under the broader fisheries business tax. Leaders of coastal communities across the state said the fish tax revenues, which the state shares with local governments, are crucial for developing and maintaining the shore-side infrastructure used by the industry in those communities when Gov. Mike Dunleavy in 2019 proposed the state keep the local share of fish tax revenue to help close the state’s longstanding budget deficits. The Legislature ultimately rejected the governor’s plan for the state to retain all of the fish tax revenue. While the fish taxes are generally split 50-50 between the state and the local governments in which they are collected, qualifying statutory language can lessen a local government’s share below 50 percent. As a result, the local share of the fishery landing tax has been in the $5 million range shared by between eight and 14 mostly Western Alaska communities in recent years, according to Tax Division records. Fishermen’s Finest operates three catcher-processor vessels primarily out of Dutch Harbor and Kodiak. Assistant Attorney General Laura Fox countered that the fishery resource landing tax, which targets catcher-processors, is not the kind of levy the constitutional framers envisioned because it doesn’t burden other states or harm any federal interests. “Catcher-processor operators take advantage of Alaska to further their business and Alaska’s landing tax merely requires them to pay their fair share for doing business in Alaska like other businesses do,” Fox told the justices in her opening remarks. She said the tax is applied when the processed fish lands at an Alaska dock and could still be sold domestically, while the export process starts when the fish “actually leaves Alaska.” According to Fox, applying legal tests to parse out exactly when the processed fish is “in-transit” in attempting to determine the constitutionality of the tax would simply lead to fishing companies altering their business models or the state restructuring how it is applied to “get around the technical line-drawing that’s trying to be done.” Torgerson acknowledged in response to questioning that the tax would not violate the import-export clause if the fish products stayed stateside, but emphasized the products in question in the case were sold in foreign markets. Elwood Brehmer can be reached at [email protected]

Assessment shows 300M-barrel Slope play, drilling to follow

A small U.K. explorer is sitting on more than 300 million barrels of recoverable oil alongside the Trans-Alaska Pipeline, according to an independent assessment of the prospect. London-based Pantheon Resources’ Talitha project is being built off of new analyses of a well drilled in 1988 and modern data from a modern 3D seismic shoot of the broader area roughly 20 miles south of Prudhoe Bay. The Pipeline State-1 well was drilled by ARCO just east of the Dalton Highway-TAPS corridor and though the 10,000-foot vertical Pipeline State-1 well has a roughly 2,200-foot oil-bearing column over four reservoirs, the technology and oil prices of the late 1980s it did not add up to a viable prospect at the time, according to Pantheon leaders. Pantheon bought Anchorage-based Great Bear Petroleum and the roughly 200,000 acres of North Slope leases the company held in January 2019. Pantheon is focusing its work first on the shallowest of the four reservoirs intersected by the Pipeline State well, the Shelf Margin Deltaic, which holds 302 million barrels of recoverable oil and 1.1 billion barrels in place based on a resource assessment by the Oklahoma-based consultancy Lee Keeling &Associates. Pantheon expects to drill the Talitha-A well into the prospect itself starting early next year, and company leaders have stressed the work is appraising what is already known about the Pipeline State well and the surrounding area; it’s not greenfield exploration. In addition to the potential Shelf Margin Deltaic resource, Pantheon estimates internally that the prolific Kuparuk formation also holds upwards of 340 million recoverable barrels. Pantheon stands out because it is one of few companies working aggressively to delineate and develop an oil prospect on the North Slope or elsewhere in Alaska while the coronavirus pandemic continues to constrain oil demand and prices worldwide. Company leaders have stressed the project’s location — adjacent to the Dalton Highway and pipeline — as a driver of its economics. Pantheon estimates its projects have a break-even price of roughly $30 per barrel primarily because of their locations. The company also holds the 76 million-barrel Greater Alkaid prospect just to the north and bisected by the transportation corridor. “Our modeling shows Talitha is economic at very low oil prices because of the size, reservoir qualities and proximity to the Dalton Highway and Trans-Alaska Pipeline,” CEO Jay Cheatham said. “This is important for a company like Pantheon as we can reduce upfront capital by utilizing modular production units instead of large central processing facilities to expedite development and reduce risk.” Pantheon wholly owns the Greater Alkaid prospect and holds an 89 percent stake in Talitha. While the company is likely to start with a phased development and a gradual ramp-up of production, the assessment envisions full build-out of Talitha as an 85,000 to 90,000 barrels per day project at peak production from 91 producing wells. Pantheon filed an application with the state Division of Oil and Gas to establish the 44,000-acre Talitha Unit Sept. 4. The prospective Talitha Unit operator is listed as Great Bear Pantheon LLC.

Deficits continue to limit ferry system reform options

A work group tasked with making recommendations to Gov. Mike Dunleavy for improving the financial viability of the Alaska Marine Highway System identified the issues raised by other analyses but concluded a potential long-term fix popular among ferry advocates isn’t worth trying now. The Alaska Marine Highway Reshaping Work Group advised against restructuring the governance of the ferry system to a public corporation model and instead suggested the governor appoint a nine-member “operations” board of individuals with maritime business expertise and labor and stakeholder representatives. The group’s Oct. 22 report to Dunleavy, subtitled “Red Sky at Morning,” states that while lessening the political influence over the AMHS and particularly its budget through a new governance model is desirable, the change is not likely to accomplish that goal as long as the state is running large budget deficits. That’s because — as has been concluded before — the system will almost certainly always require an annual state subsidy on some level. Work group chair Adm. Tom Barrett, a former U.S. Coast Guard officer, deputy Transportation secretary and Alyeska Pipeline Service Co. CEO, said in an interview that the connection between ferry service and budget levels pulls the system into the political process. Leaving the system as an agency of the Department of Transportation and Public Facilities also should help state officials more efficiently plan and manage the state’s intermodal transportation network, he said. Barrett also said the system’s issues go beyond just funding problems. “Throwing more money at it is not going to solve the problem,” he said. A ferry system reform study conducted by the Alaska research firm McDowell Group in collaboration with the Southeast Conference and DOT under former Gov. Bill Walker acknowledged the continued budget challenges the system is likely to face but concluded transitioning to a public corporation was the best long-term structure because it would allow system leaders to plan with more certainty rather than being subject to frequent changes of political leadership and vision. However, Barrett said the work group, which included Southeast Republican Sen. Bert Stedman and Republican Rep. Louise Stutes of Kodiak, did not want to recommend changes that would require years of work on significant legislation and that is why the group settled on the governor-appointed operations board. Work group member, Marine Transportation Advisory Board chair and Southeast Conference Executive Director Robert Venables also said the group looked to prioritize actions that could be taken quickly to improve the reliability and cost effectiveness of the ferry system with longstanding revenue problems. He noted that the report does not discount the possibility of moving to a public corporation if the state’s broader financial situation can be improved. Barrett said the operations board could fold in the Marine Transportation Advisory Board, which largely provides regional and community-level input to the system but is not an expert group, to maintain public involvement in system management. While a lack of long-term planning and subsequent struggles to adapt to evolving markets are partly to blame for fare box recovery — the amount of revenue generated to cover operations — falling from historical averages of about 50 percent to less than 40 percent in recent years, an aging fleet and budget cuts compounded reliability issues last winter. Dunleavy initially proposed cutting the previously $85 to $90 million annual AMHS operating subsidy down to about $22 million, a level that would have officially shut the system down over the 2019-20 winter as the administration worked on a plan to restart with a more cost-efficient system. Dunleavy and the Legislature eventually settled on a roughly 50 percent cut that drastically reduced service but maintained a level of fall and winter service. A series of ill-timed mechanical issues and shipyard delays combined with a thin sailing schedule from significant budget cuts meant many isolated communities throughout the system went months without ferry service before sailing frequencies increased in late spring. Dunleavy’s spokesman Jeff Turner wrote via email that the administration is still reviewing the report it released Oct. 22. The report includes a prospective implementation timeline that would have the administration move quickly — starting yet this year — to revamp the system by assessing union contracts for cost savings and improved operational flexibility as well as refining the duties of the operations board and drafting its charter. The board would begin meeting by February and start reviewing and recommending changes to the fare structure for the summer schedule nearly immediately, under the work group’ timeline. The board could work to develop a longer-term operating strategy and vessel replacement plan by early to mid-2022, according to the report. Venables said he is looking forward to seeing an implementation plan from the administration over the coming months. Elwood Brehmer can be reached at [email protected]

Alaska Air Group improves financials as COVID-19 impacts continue

Alaska Air Group executives remain confident the airline company is one of the best positioned in the industry to rebound from the catastrophic toll of the pandemic despite losing $431 million in the third quarter and the acknowledgment the company will not break even this year. The loss compares to a $322 million profit the Seattle-based parent company to Alaska Airlines and regional carrier Horizon Air turned a year ago when the industry was riding the wave of a strong U.S economy. Excluding payroll support program wage offsets, special items and fuel hedging adjustments the loss was $399 million, Air Group reported Oct. 22. Company executives — as they often do — stressed Air Group’s strong underlying balance sheet that they feel will help them be nimble in restructuring their operations and recover quickly. CEO Brad Tilden said the combined cash burn rate at Alaska and Horizon has been cut from $13 million per day during the worst of the pandemic down to $4 million per day currently. That has enabled Air Group to maintain the same debt level net of cash of about $1.7 billion that it had at the end of 2019, according to Tilden. “This is an incredible achievement and one we believe few of our peers will replicate,” he said, adding Air Group’s treasury team added $4 billion worth of new liquidity to the company’s reserves when they had a goal of adding $2.5 billion. Air Group’s debt-to-capitalization ratio stood at 59 percent at the end of the quarter, compared to 41 percent at the start of the year. Chief Financial Officer Shane Tackett said the company took a $1.9 billion CARES Act loan from the Treasury Department because it came with an attractive interest rate and provided additional financial flexibility. The loan, which Air Group has made relatively small draws from according to Tackett, gives the company roughly $5.5 billion in available liquidity — about four years’ worth — and he doesn’t expect to need any more. “The next decision in front of us is whether to pay down or refinance our credit facility and 365-day term loans due in March and April of next year,” Tackett said. The third quarter loss takes Air Group’s year-to-date loss up to $877 million, versus a $588 million profit it turned a year ago. The $431 million quarterly loss translated to a loss of $3.49 per share. Alaska Air Group stock closed Oct. 22 trading at $40.60 per share, up slightly from a pre-earnings opening price of $39.15 per share. Air Group generated $701 million in total revenue in the third quarter, which was down 71 percent from a year ago, but an improvement over the second quarter, Tilden noted. Alaska and Horizon similarly carried about 70 percent fewer passengers in the third quarter compared to 2019 on capacity that was down 55 percent. Air Group executives also stressed that the company’s current — and many now former — employees have helped immensely in stabilizing its finances and operations through the industry collapse. Nearly 7,000 Alaska and Horizon employees have taken short-term leave and another roughly 4,000 volunteered for long-term leave or early retirement packages, according to Tilden. “Many of these people have been with Alaska for decades and are the folks that truly built Alaska,” he said. “They did nothing to cause this crisis and yet they’ve made a substantial personal sacrifice to contribute to our future and to save a job for someone else.” Tackett added that the employees that took voluntary leave and furloughs helped limit the number of involuntary furloughs Air Group had to issue earlier this month to about 400. The company also cut 350 management positions, he said. He estimated the temporary payroll savings to be about $350 million and said the annual savings from a smaller payroll should be more than $130 million per year. “Our goal is to bring back our flying and our people as soon as demand allows us to,” Tackett said. Air Group reported a workforce that averaged 16,027 full-time equivalent employees in the third quarter, which was down 28 percent from more than 22,200 employees a year ago. Tackett said the airline industry as a whole likely needs additional help through Treasury’s payroll support program, or PSP, in-part because the recovery from the near-total spring shutdown has been slower than expected. Air Group received $992 million in PSP funds in April and the company reported having utilized $760 million in payroll support wage offsets through the first three quarters of the year. “Only continued PSP support can reliably help avoid balance destruction for the industry — balance sheets that will be needed to fuel future industry recovery and growth, which would, we believe, support the broader economic recovery and growth needed in our country,” Tackett said. Negotiations on another large pandemic relief package between the House, Senate and White House have slowed prior to the Nov. 3 election. The recovery to the all-important “breakeven” point for Air Group will continue to be slower than first hoped primarily because Alaska Airlines also announced it will continue blocking middle seats in its Boeing 737 and Airbus aircraft through Jan. 6. Air Group leaders set a broad goal to reach zero cash burn by year’s end at the start of the pandemic but Tackett said blocking middle seats limits the load factor — how full each flight is — to just below what is needed for the company to reach cash breakeven. Alaska and Horizon had a combined load factor of 48.5 percent for the quarter, while the airlines’ planes were typically about 85 percent full pre-pandemic. Alaska Airlines President Ben Minicucci said surveys indicate passengers are much more likely to feel safe enough to fly again after making an initial trip and observing all of the precautions airlines are taking to protect customers. Minicucci also cited several scientific studies that generally conclude that a traveler is less likely to contract COVID-19 on a commercial flight than they are in other aspects of daily life. “It’s safe to fly right now but we’ve got some work to do getting that information out there,” Minicucci said. He added that bookings to Hawaii, which recently removed a mandatory 14-day quarantine period for travelers arriving with a negative COVID-19 test result, and other warm weather locations are steadily improving as people resume vacationing and look to work remotely from warmer climes. Minicucci said while the near-term recovery has been slower than first expected, Air Group still expects to be flying at about 80 percent of 2019 capacity next summer, with a full recovery coming “well into 2022.” Elwood Brehmer can be reached at [email protected]

Young pitches Jones Act waiver to aid cruise ships

Opening up the economy to help the country overcome the pandemic should be the priority, according to Rep. Don Young, who said he fears another multitrillion-dollar coronavirus relief package could start to push the country towards a period of rapid inflation. Young said during an Oct. 15 interview at his Anchorage campaign office that the Senate proposal for a smaller relief bill to aid the hardest hit industries of roughly $500 billion makes the most sense in the long-term. “We have a lot of people that say, ‘Just print more money,’” Young said. “We have to be very careful about a country that spends money it doesn’t have.” He expects the debate over the size and contents of the latest relief bill won’t be settled until after the election. “I don’t think they would dare call anybody back right now,” he said of congressional leadership calling a vote during the final days of campaign season. The Trump administration has floated a $1.8 trillion package in negotiations with House Democrats, who are backing their roughly $3 trillion HEROES Act. The CARES Act passed in March totaled about $2.2 trillion. By Oct. 21 national outlets were reporting negotiations on the relief package were stalling and a deal seemed more likely to come after the election. A spokeswoman for the campaign of Young’s independent challenger, Alyse Galvin, did not respond to questions about pandemic aid in time for this story. The best way to help the hardest hit industries in Alaska — the intertwined aviation and tourism sectors — is to get the Lower 48 economy producing again, according to Young. He noted the absence of the more than 1.3 million cruise ship passengers expected visit the state this year not only hit Southeast where the ships spend most of their time but Fairbanks and other parts of the state where blended tour itineraries take visitors. “Tourism money is surplus money and if you don’t have a strong economy in the Lower 48 you’re not going to get tourists to Alaska,” Young said. To that end, he is working on finding ways to make sure cruise ships can get to Alaska if the passenger demand materializes next year but Canadian ports and border crossings remain closed. Young said while he supports the broader objectives of the Jones Act, a century-old law meant to bolster the domestic maritime industry by requiring commercial ships traveling between U.S. ports to be U.S. made, he would like to see a temporary exemption for cruise ships traveling between Alaska and Pacific Northwest ports. As it stands, large cruise ships — nearly all of which are foreign-flagged — departing from the West Coast must stop in Vancouver before sailing to Alaska. However, federal officials in Canada continue to extend border closures and there’s no indication as to when the situation will change. Young said he is in conceptual discussions with airline and cruise industry representatives regarding ways to reroute the traditional flow of cruise tourists into and out of the state if Canadian ports are still off-limits when the cruise season starts next spring. “We believe the demand will be there; again, it all comes back to the Lower 48 economy,” he said. Cruise Lines International Association Alaska spokeswoman Lanie Downs wrote via email that a Jones Act waiver could not have salvaged the 2020 season for the group’s member companies, which generally operate larger vessels, because of a Centers for Disease Control “No Sail” order prohibiting vessels carrying more than 250 passengers from operating through Oct. 31. She emphasized that the cruise association is greatly appreciative of the delegation’s work to support the industry through the pandemic, but it’s far too early to tell what might be possible, or needed, for 2021. “The industry has been completely shut down in the U.S. since March and right now we are primarily focused on a safe resumption of service with strong measures in place to protect passengers, crew and communities we visit,” Downs wrote. Alaska Travel Industry Association CEO Sarah Leonard noted the group started advocating in March to the delegation for a Jones Act waiver for vessels with a capacity of 500 passengers or more until Canadian ports are open. “This action remains a high priority federal assistance for tourism businesses in Alaska as a way to mitigate continued job and revenue loss due to COVID-19,” Leonard wrote in an email. Alaska’s leisure and hospitality industry was down more than 15,000 jobs at the peak of the summer season compared to last year, according to Labor Department data. ^ Elwood Brehmer can be reached at [email protected]

Alaska receives $46.5M grants for remote broadband

A pair of Alaska telecoms are getting $46.5 million from the U.S. Department of Agriculture and pitching in some of their own to install new fiber optic broadband networks in parts of the state’s remote island regions. Unicom Inc., a GCI subsidiary, will match a $25 million grant with its own $33 million investment to build a roughly 800-mile subsea fiber network stretching from Kodiak along the Gulf side of the Alaska Peninsula to Unalaska. Residents and businesses in Unalaska will also receive “fiber-to-the-premises” network capable of providing internet speeds of up to 1 gigabit per second. The Kodiak Island, Alaska Peninsula and Aleutian communities of King Cove, Sand Point, Chignik Bay and Larsen Bay will also receive terrestrial broadband for the first time, according to GCI. Southeast utility Alaska Power and Telephone Wireless Co. will receive $21.5 million for its SEALink broadband project, which aims to provide a fiber optic network to all premises in the Prince of Wales Island communities of Kasaan and Coffman Cove. Contributing $7 million of its own capital to the project, Alaska Power and Telephone also plans to install a 214-mile fiber optic cable running from Prince of Wales north to Petersburg and Juneau. The rural Alaska broadband grants are part of $550 million in grants awarded through the second round of the USDA’s ReConnect Program. CEO Ron Duncan said the GCI Alaska United-Aleutians Fiber Project will give Unalaska internet capacity on par with urban Alaska. “Fiber service, the gold standard of broadband connectivity, will enable Unalaska, the nation’s largest fishing port and a gateway to the American Arctic, and the other project communities to realize their full economic potential while advancing the national security interests of the United States,” Duncan said in a formal statement. Alaska Power and Telephone CEO Mike Garrett called the grant-funded project a “once-in-a-lifetime opportunity for residents of Kasaan and Coffman Cove to leap ahead of the digital divide.” Work on the SEALink project in Southeast is scheduled to continue until 2025; at which point Alaska Power and Telephone says it will likely be able to extend high-speed broadband to other Prince of Wales communities. GCI expects its Alaska United-Aleutians Fiber project will be substantially complete by the end of 2022. Sen. Lisa Murkowski noted the need to conduct work and school remotely stemming from the coronavirus pandemic has highlighted gaps in Alaska’s broadband infrastructure and said the congressional delegation needs to continue to help rural communities gain the internet capabilities that are commonplace elsewhere in the country. Sen. Dan Sullivan said high-speed internet access can be “life-changing,” particularly for rural Alaska residents without access to other communications infrastructure. “Thousands more Alaskans across the state will finally experience a utility so many of us take for granted, one that has shown itself to be absolutely indispensable in the age of COVID-19,” Sullivan said in a formal statement. Combined, the projects will connect approximately 7,700 residents and more than 360 businesses among other public facilities, according to information provided by the congressional delegation. The grants follow the Alaska Legislature’s passing of Senate Bill 74 last spring, legislation sponsored by Sen. Lyman Hoffman, in part requiring that the minimum acceptable internet speed in Alaska schools be increased from 10 to 25 megabits per second. Hoffman thanked the USDA, the congressional delegation and GCI in a statement from his office. “This infrastructure expansion is critically important, especially with many students receiving an education online at home due to COVID,” he said. Hoffman’s district covers much of Western Alaska, including the Aleutians and Alaska Peninsula. Elwood Brehmer can be reached at [email protected]

Alaska Airlines adds newer, smaller jet to state fleet

Alaska Airlines has launched new passenger service to the Bristol Bay region despite the pandemic that has devastated the airline industry with the help of its sister airline’s smaller, more efficient jets. Horizon Air began daily service to Dillingham and King Salmon Oct. 18 with its Embraer 175 commuter jets. The regional carrier is also flying the E175 between Anchorage and Fairbanks on behalf of Alaska Airlines on flights advertised as AlaskaHorizon, marking the second time in the last six years the airlines have attempted to utilize smaller planes for in-state flights. Alaska and Horizon are owned by Seattle-based Alaska Air Group Inc. For years Alaska Airlines flew passenger service to the Bristol Bay hubs only during the summer months, when demand for flights to the region spikes from the large commercial salmon and sport fisheries and supports flying the major carrier’s larger Boeing 737 jets. Historically, in-state carriers PenAir and more recently Ravn Alaska operated daily scheduled Part 121 service to the Bristol Bay communities. However, the jointly owned PenAir and Ravn fleets were grounded in April following a 90 percent drop in demand due to the pandemic, company leaders said at the time. The Ravn and PenAir fleets were subsequently sold in a July bankruptcy auction and the new ownership group is currently working to resume scaled back service statewide. Even before Ravn and PenAir stopped flying many residents Dillingham and Naknek-King Salmon were already urging Alaska Airlines to serve the region year-round because of increasingly unreliable service from the other Part 121 carriers. Nathan Hill, manager of the Lake and Peninsula Borough, which has its offices in King Salmon, wrote via email that he believes the region’s demand for air service has largely been met with adequate capacity by several carriers over the years but added that he thinks the main concern among residents “revolves around consistency and predictable airline delivery services.” Marilyn Romano, Alaska Airlines regional vice president for the state said Alaskans who have traveled via the E175 in the Lower 48 have also routinely asked specifically about when the twin-engine jet might be deployed in Alaska. Utilizing the 76-seat E175s — versus the 124-plus seat 737s the airline otherwise uses — for Anchorage-Fairbanks service provides Alaska the flexibility to increase the frequency of flights between the state’s largest cities to up to seven per day, according to Romano. The airlines are currently flying four or five round-trip Anchorage-Fairbanks flights per day, mostly with E175s. Romano also said the E175 could help unlock other markets in the state down the road. One of the Alaskans who has occasionally hassled Romano about getting the E715 to Alaska is her longtime friend and former Fairbanks state senator Gary Wilken, she said. Wilken, who stands 6-feet-8-inches tall, first flew in an E175 several years ago out of Seattle and wrote in an email that he has “been a fan ever since.” Wilken who estimated he has made the flight between Anchorage and Fairbanks upwards of 800 times over 35 years, wrote that the small jet has a deceptively “roomy” feel to it, not only between seats but the ceiling above the seats feels higher as well. He also noted that the windows are larger than those in a 737. “I don’t have to bend way over to look horizontally out the window,” Wilken wrote. “One can actually look up and see the sky above.” Horizon’s 30 Embraer 175s are on average less than three years old, according to the company. Alaska previously employed Horizon planes in the state in the spring of 2014 when Horizon began flying its 76-seat Bombardier Q400 turboprop aircraft between Kodiak, Anchorage and Fairbanks. However, the airlines pulled the Q400 out of the state in 2017 citing challenges with operating the regional aircraft in the remote Alaska market. Romano and Horizon President Joe Sprague said in interviews that the airlines considered the Q400 operation in Alaska a success, but emphasized that the E175 should improve the logistics of using regional aircraft in the state because it is a faster jet that can start each day in Seattle, where Horizon conducts the vast majority of its maintenance. Sprague said starting the Alaska-bound E175 in Seattle allows the airlines to use it for a passenger revenue flight to Anchorage each day before it flies elsewhere in the state, thus improving the finances of the operation. With its range of more than 2,100 miles and a top cruise speed of about 620 miles per hour the E175 “is not what you would historically consider a regional aircraft,” Sprague said, adding it feels more like a 737 inside the cabin. “It’s a perfect airplane for these thinner markets.” Horizon will continue to honor Alaska’s policy of three free checked bags on in-state flights with the E175 for passengers that are members of the airline’s popular Club 49 program for Alaska residents, Sprague said as well. However, many passengers might prefer the E175 to the larger jets because — while they are temporarily blocked on all Alaska Airlines flights — it does not have the dreaded middle seats. The E175 has two seats on each side of the main cabin aisle and three seats across each first class cabin row. Sprague said Horizon is also currently blocking one of the aisle seats in each row of its aircraft, which reduces the planes’ overall capacity by about 25 percent. ^ Elwood Brehmer can be reached at [email protected]

Senators toughen stances against Pebble project

After years of stressing process over policy, Alaska’s U.S. senators have both announced their opposition to development of the Pebble mine. Sen. Lisa Murkowski made her most definitive statement to-date against the massive Southwest Alaska mine plan Oct. 15 during an address to the Alaska Federation of Natives virtual annual convention, saying there is a need for new economic development in Southwest Alaska and that she plans on working to ensure “longer term protections for the region that can also provide enduring value for Alaskans” in the next Congress that will convene in January. “I simply think that this is the wrong mine in the wrong place. The administration has said that Pebble cannot be permitted as proposed, and I agree with that,” Murkowski said. “I plan to build on my appropriations language from last year to ensure that the Bristol Bay region remains protected. But while we may have stopped Pebble today, I think now is the time to start thinking about the future.” Jason Metrokin, CEO of Bristol Bay Native Corp., which has helped lead the opposition to the mine, thanked Murkowski and Sullivan for agreeing Pebble should be stopped. “BBNC has long-opposed Pebble because the science is clear on the mine’s potential impacts — it would pose a significant risk to our region’s world-class fisheries and our shareholders’ economic livelihoods and subsistence way of life,” Metrokin said in a formal statement. “By stopping this ill-conceived mine, we defend 14,000 sustainable commercial fishing jobs, protect subsistence, and preserve the world’s most prolific wild sockeye salmon runs. Pebble is and always has been the wrong mine in the wrong place. We look forward to continuing to work with our senators to protect Bristol Bay and secure its future.” Late last year Murkowski added language to the 2020 Interior Department budget bill noting concerns from other state and federal agencies that commented on the draft Pebble environmental impact statement and questioned the veracity of the review. Murkowski’s spokeswoman Karina Borger highlighted the Interior appropriations language in an email and wrote that “throughout the process, (Murkowski) has continually said the Pebble project must meet a high bar as adverse impacts to the Bristol Bay ecosystem and its world-class salmon fishery are unacceptable.” Borger could not provide further detail about the senator’s plan for the appropriations process, she wrote. The hard line against what would be one of the largest resource development projects in the state’s history follows mixed messages from the U.S. Army Corps of Engineers — the agency conducting the environmental review — about Pebble’s ability to coexist with the largely untouched ecosystem and currently salmon-dependent economy in the region and the Sept. 21 release of a seemingly damning undercover video that led to the resignation of then-Pebble Partnership CEO Tom Collier. In the lengthy video, Collier and Ron Thiessen, CEO of Pebble’s parent company Northern Dynasty Minerals Ltd., touted relationships with Gov. Mike Dunleavy and Corps of Engineers Alaska officials that they claimed would benefit mine development to Environmental Investigation Agency personnel posing as potential Pebble investors. The project leaders also claimed to already have plans to expand the mine beyond the proposal submitted to the corps, despite previous claims to the contrary. According to Pebble, its official 20-year mine plan would employ up to 2,000 workers during construction and 750-1,000 workers during operations. Corps Alaska District Regulatory Chief David Hobbie wrote to Pebble leaders Aug. 20 that the project would have to come up with a new wetlands mitigation plan to compensate for varying impacts to more than 3,200 acres of wetlands and 184 miles of streams across the mine site and the project’s extensive support infrastructure within 90 days. The strict mitigation requirements juxtaposed the Corps’ overarching conclusions in the final Pebble environmental impact statement issued in July, which largely states that developing the massive copper and gold deposit would result in “no measurable change” in the numbers of salmon returning to the Nushagak and Kvichak rivers or in the long-term health of the commercial fisheries in the region and was touted by Pebble Partnership upon its release. The senators both said in statements following the mitigation letter that the project should not be permitted as proposed. Sullivan has since been more emphatic about Pebble; he said during a live radio interview on Alaska Public Media that the Environmental Protection Agency should use its authority to stop the project if the corps issues a favorable record of decision, or ROD, for the project. The Pebble ROD could be issued at any time after the company submits its mitigation plan. Sullivan and Murkowski were extremely critical of the EPA under the Obama administration for proposing in 2014 to prohibit Pebble or other large mines in the area via its authority under Clean Water Act Section 404(c) to override wetlands permit decisions by the corps if the agency deems a project too environmentally damaging. That was before Pebble had submitted its permit application to the corps, which meant it was not even giving the company a chance to develop a viable plan, the senators and many resource development advocates said, dubbing the move a “preemptive veto” of Pebble. However, Pebble’s plan is not final yet. Interim Pebble CEO John Shively wrote in an emailed statement about the senators’ opposition to the mine that the company believes federal permitting should be a scientific and not a political process and the company remains focused on finalizing what it needs to provide the corps for the ROD. “The (Corps) asked for our final mitigation plan by Nov. 18 and we will meet that deadline. This is our near term focus,” Shively said. Resource Development Council for Alaska Executive Director Marleanna Hall wrote in an email that without a final mitigation plan or ROD there is nothing for the industry advocacy group to comment on. Rebecca Logan, CEO of the Alaska Support Industry Alliance, the trade association for mining and oil and gas industry contractors in the state noted in an email that the Alliance has maintained that the permitting process should be followed “no matter what.” “Because the mitigation plan is not yet final and there is no ROD yet — it is premature to say that the project shouldn’t be built. If we allow the process to be hijacked for one project — it will set a precedent that harms the future of responsible resource development for Alaska,” Logan wrote. She added that she understands and respects the senators’ decisions to publicly oppose Pebble but that doesn’t mean she agrees with them. “Sens. Sullivan and Murkowski have been the backbone for resource development in Alaska — and their leadership has allowed us to make great gains in the last four years towards developing our oil, gas and mineral resources,” Logan continued. “Both of them have been strong defenders of the support industry, Alliance members, noting that the Alaskan jobs that accompany resource development are the highest paying jobs in the state and make a significant impact on Alaska’s economy. They both have fought hard in D.C. to protect these Alaskans.” Elwood Brehmer can be reached at [email protected]

Greens Creek owner files request to reroute road for tailings expansion

The operator of the largest silver mine in the country is asking the U.S. Forest Service to approve a tailings storage expansion plan that would allow the mine to produce into the 2030s. Hecla Mining Co., which owns the underground Greens Creek mine on Admiralty Island near Juneau, filed an amended plan of operations with the Forest Service Oct. 1 that calls for expanding the Greens Creek tailings disposal facility footprint by 14 acres, or about 20 percent, to store an additional 4 to 5 million cubic yards of tailings and waste rock produced at the mine. Hecla expects the current 66-acre facility will likely be filled by about 2031, at which point the mine would have to be closed, according to a company statement. The tailings facility expansion would not push the mine’s growing tailings stack further into Admiralty Island National Monument, but the plan does call for disturbing an additional two acres within the monument to relocate a portion of the road between the Greens Creek mill and tailings facilities. Greens Creek General Manager Brian Erickson said Hecla leaders believe the plan maximizes the area available for tailings storage while minimizing newly disturbed areas in a formal statement. “This amendment culminates years of careful planning to develop a plan that minimizes impacts on Admiralty Island National Monument and the fish-bearing sections of (nearby) Tributary Creek,” Erickson said. Mining within the monument was authorized by Congress in the 1980 Alaska National Interest Lands Conservation Act, which established or grew many of the federally protected areas in the state but also carved out exceptions for resource projects in several parts of Alaska that otherwise would be off-limits to development. Greens Creek facilities bisect the monument boundary between the Admiralty Island Monument and more open-access lands of the Tongass National Forest. The mine’s infrastructure, which includes a port and access road, is largely along the western coast in the northwest portion of the island. Hecla employs the dry-stack tailings process at Greens Creek, which eliminates the need for a tailings dam as well as this risk of a release of tailings water or slurry. The company’s plan for incremental expansion is the third such request by the Greens Creek operator in the past 20 years. Most recently Hecla proposed a 116-acre expansion to the mine’s tailings storage facilities in 2010; the Forest Service ultimately approved an 18-acre project in 2013. Hecla Greens Creek spokesman Mike Satre wrote via email that the Forest Service’s 2013 decision for a smaller expansion has helped support existing operations but prohibited the company from expanding the mine’s footprint within the monument. “After analyzing the record of decision and re-evaluating our design basis, we realized that there was an option to extend the facility to the north in non-monument Forest Service land that would give us sufficient space,” Satre wrote. Hecla has not disclosed a cost estimate for the proposal, according to Satre. The Forest Service opened a scoping comment period on Oct. 9 for the environmental impact statement — a supplement to the 2013 review — will likely be needed based on the size of the proposal. The 45-day comment period closes Nov. 23. The plan calls for decommissioning one of the existing water management ponds and subsequent modifications to other ponds or construction of a new pond in the first stage of the project, which would include storage for roughly 1.9 million cubic yards of tailings and waste rock. The second stage of the project entails re-routing a portion of the access road through the monument, a new transmission line and substation and a water collection system at Cannery Creek. The combined phases of development would add approximately 4.6 million cubic yards of storage capacity to the tailings facility, according to the plan documents. Idaho-based Hecla on Oct. 8 reported producing 2.6 million ounces of silver at Greens Creek in the third quarter; the mine has produced roughly 8.2 million ounces of silver so far this year and is expected to break the 10 million-ounce mark for annual production this year. Greens Creek also produced 38,000 ounces of gold in the first nine months of the year. Hecla acquired 100 percent of Greens Creek in 2008 and has since increased silver production from the 6 million ounces per year range to the upwards of 10 million ounces expected from the mine this year. The remote mine employs approximately 440 people and produces about 2,350 tons of ore per day, according to the amended plan. Elwood Brehmer can be reached at [email protected]

Cook Inlet oil activity slows in response to price drop

Glacier Oil and Gas leaders are asking state regulators to let them shut in two West Cook Inlet oil projects indefinitely as oil prices continue to hover about 30 percent below pre-pandemic levels. The Anchorage-based independent wants to put facilities in both the West MacArthur and Redoubt into “cold-shutdown and unmanned” status, according to applications filed Sept. 29 with the Division of Oil and Gas for the long-term suspension of operations at the facilities. Glacier’s plans, if approved, would formalize actions the company took earlier this year in response to once-collapsed oil markets. In early June, Division of Oil and Gas Director Tom Stokes approved Glacier’s plan to suspend production at both units and put the corresponding facilities into “warm-standby” status until oil markets improved. At the time the price for Alaska North Slope crude had just returned to the $40 per barrel range that it has since stabilized around, but prices in April and May averaged less than $30 per barrel as coronavirus-induced travel restrictions and a price war between Saudi Arabia and Russia combined to briefly put prices in domestic oil markets into the negative. The warm-standby status is currently approved through April 30, 2021, in line with the annual development plan periods for the units. The unit is operated by Glacier subsidiary Cook Inlet Energy LLC. The long-term shutdowns would involve shutting in wells and disconnecting them process piping, in addition to draining all fluids from all of the pipelines and tanks in the facilities to eliminate the risk of spills. According to the application, Glacier would inspect the facilities monthly to make sure they remain in condition to meet state and federal requirements. Glacier leaders could not be reached in time for comment in this story. Stokes wrote in approving the initial warm-standby suspensions that while the state has an interest in seeing its oil and gas resources developed, production from the Osprey platform would be marginally economic at best and have a “significantly reduced royalty value for both the State and private mineral owners.” According to Division of Oil and Gas figures, roughly 5.3 million barrels of oil and 2.6 billion cubic feet of gas have been produced over the nearly 20-year life of the Osprey platform, which has been shut-in before. The Osprey platform was installed by Forest Oil in 2001 but reservoir production problems pushed the Pacific Energy, a subsequent owner, to suspend operations in 2009, according to Journal records. The platform was restarted in 2011 by now-bankrupt Miller Energy. In April, prior to the warm shutdown oil production averaged 1,675 barrels per day from four wells on the Osprey Platform, according to Alaska Oil and Gas Conservation Commission Records. More than 15.6 million barrels of oil have been produced from West MacArthur facilities over approximately 30 years, according to the division. Approximately 370 barrels of oil per day were produced from two West MacArthur wells in April, according to AOGCC production data. Glacier subsidiary Savant Alaska LLC also suspended production at its small Badami North Slope oil field in June but restarted activity there in August, according to state records. ConocoPhillips also curtailed production at its major North Slope fields by an average of 45,000 barrels per day in the second quarter. Cosmo slowed Across Cook Inlet, activity at BlueCrest Energy’s Cosmopolitan project on the Southern Kenai Peninsula is also in a holding pattern until oil markets strengthen. The small Texas-based independent planned to drill what the company calls a Trident well — a long, angled main well with laterals extending out both sides of the wellbore — this year but paused the work early in the year as well, according to the Cosmopolitan Unit plan of development submitted to the Division of Oil and Gas Sept. 25. Instead of drilling the extensive well, BlueCrest focused its resources on further evaluating the large Cosmo natural gas cap above the oil reserves held by the company. BlueCrest also commissioned what it has dubbed a “Mechanical Refrigeration Unit” to increase its processing capacity up 35 million cubic feet of gas per day to pipeline quality specifications, the POD states. BlueCrest leaders are confident the shallow, near shore Hansen pool holds upwards of 500 million barrels of oil, which the company aims to extract with long reach wells from an onshore drilling pad near Anchor Point. The oil is also accompanied by a large gas accumulation, but it’s previously been presumed developing the gas resource would require an offshore platform that would challenge the economics of the project. Drilling of the first Trident well will continue to be contingent upon improvement in oil market conditions, according to the POD. BlueCrest produced just more than 1,000 barrels of oil per day from five wells, according to AOGCC production data. Elwood Brehmer can be reached at [email protected]

State CARES plan splits $50M among fishery sectors

Alaska Department of Fish and Game officials plan to evenly distribute $50 million in fisheries pandemic relief aid among the sport, commercial and processing sectors with smaller amounts set aside for mitigating impacts to aquaculture businesses and subsistence harvesters. The department’s draft plan allocates 32 percent of the $50 million, or about $16 million, for the three major sectors of Alaska’s fishing industry; $500,000, or 1 percent of the funds would go to aquaculture businesses and $1.5 million, or 3 percent of the total would be dedicated to offset challenges to subsistence harvests. The money is Alaska’s share of $300 million Congress directed for fishery relief nationwide in the $2 trillion CARES Act passed in the early days of business shutdowns and travel restrictions nationwide. While the state reliably accounts for more than half of the country’s commercial seafood landings and has a robust sport fishing industry, the CARES fisheries money was calculated state-by-state based on the residency of commercial harvesters and the homeport for at-sea processing vessels, per guidance from the National Oceanic and Atmospheric Administration, the seven-page spending plan states. According to the plan, NOAA Fisheries calculated the total revenue from the sport, commercial and processing sectors in eligible jurisdictions. “For Alaska, average annual landings revenue data in the commercial harvesting sector was adjusted to attribute landing to each vessel owner’s state of residence to better reflect where fishing income accrues,” the plan states. “The adjustments were made by determining the proportion of landings in Alaska fisheries attributed to vessel owners residing in another state and attributing that portion of the revenue to the respective states of residence.” Eligible applicants in a fishing business must certify that they incurred a revenue loss of more than 35 percent during the period from March 1 to Nov. 1 directly resulting from the pandemic. Revenue figures from that period will be compared against gross revenue totals from the previous five years for the period. Applicants must have operated their business in 2018 and 2019 but those without revenue records for all of the previous five years will be able to average gross revenues from the available years. Projections of income or losses will not be accepted, according to the plan documents. The revenue information NOAA Fisheries used to reach the $50 million allocation for Alaska attributed 5.5 percent of qualifying revenue to the sport charter sector, 35.2 percent to the commercial harvesting sector and 59.3 percent to seafood processors, wholesalers and distributors. However, those revenue splits were based on historical information and do not reflect the likely loss in each sector due to the pandemic, according to ADFG. The sport charter allocation was increased significantly “to help mitigate loss to that sector resulting from travel restrictions and health mandates that reduced demand for sport charter services,” the plan states. While state officials deemed fishing an essential industry in spring when other business sectors were forced to temporarily close, nonresident sport charter customers were not given special clearance to travel to Alaska as nonresident commercial fishing and processing workers were. United Fishermen of Alaska Executive Director Frances Leach said she could not comment on the plan because the large organization’s board of directors had not formally reviewed it. Leaders of several other commercial fishing groups across the state said they were similarly in the process of reviewing the plan. ADFG is taking public comments on the draft plan through Oct. 19. Kenai River Sportfishing Association Executive Director Ben Mohr said the even split among the three large sectors is a recognition of that issue. Mohr noted that many commercial fishery participants dealt with lower market prices stemming from a lack of restaurant demand, particularly in spring, but emphasized that they were still able to fish. “Many of our sport and charter folks didn’t get to fish at all. The tourist business that these guys rely on didn’t materialize,” he said. Mohr said anecdotal reports indicate many Southcentral sport fishing guide and charter operators took between a 60 to 70 percent loss in revenue this year and the losses were often worse for those in more remote locations where travel was even more difficult. In Southeast, where cruise ships bring more than 1 million potential charter customers to Alaska each year, the losses for some businesses have reached 90 percent of their usual revenue, according to Mohr. He added that some operators likely offered deep discounts or resident specials in order to generate more business and questioned how many of them would not hit the 35 percent loss threshold because of it. The Pacific States Marine Fisheries Commission will publish the final application materials and review and approve the federal aid applications for the state, according to the plan. The $1.5 million subsistence allocation is set to be split evenly among qualify applicants, provided a member of an applying household participated in a marine or anadromous subsistence fishery in at least two of the previous four years. ADFG Legislative Liaison Rachel Hanke wrote via email that discussions with members of communities with high rates of subsistence harvests revealed that the biggest impact to them was from travel restrictions. Many younger Alaskans that have moved to urban centers were unable to travel to their home villages and communities to participate in harvests, according to Hanke. She wrote that the eligible subsistence impacts could be broad and “any impact at all that meets the intent of the act” will be allowable. Elwood Brehmer can be reached at [email protected]

Judge denies State request for injunction against Subsistence Board

Rural subsistence hunters won the initial round in the latest battle between state and federal wildlife managers that also underscores the long-simmering tensions between Alaska’s rural and urban fish and wildlife harvesters. U.S. District Court of Alaska Judge Sharon Gleason denied the State of Alaska’s petition for a preliminary injunction to reopen federal lands in the area of the popular Nelchina caribou hunt to hunters from across the state in a Sept. 18 order. Gov. Mike Dunleavy’s administration filed a lawsuit against the Federal Subsistence Board Aug. 10 in an attempt to overturn the board’s July decision to close federal public lands in state game management units 13A and 13B to non-local moose and caribou hunters for the 2020-21 and 2021-22 fall and winter hunting seasons. State officials contend the federal restrictions on moose and caribou hunting in the Upper Copper River basin violate the Alaska National Interest Lands Conservation Act, or ANILCA, and impair the Alaska Department of Fish and Game’s ability to fairly and effectively manage the game resources. They additionally allege in the same complaint that the Federal Subsistence Board overstepped its authority by opening special, unrelated moose and deer hunts in Southeast Alaska last summer. The board approved the closure at its July 16 meeting as a means to reduce competition for game between federally qualified subsistence hunters who live in the area and hunters from elsewhere in the state — often from the Anchorage, Fairbanks or Mat-Su areas. State law mandates that all Alaska residents are eligible to participate in state-sanctioned subsistence harvests across the state, while federal law can offer preferential harvest status on federally managed lands to residents of qualifying rural areas. The diverging structures have long spurred often convoluted but reliably contentious debates between state and federal land and resource managers. State Game Management Unit 13 encompasses most of the upper Susitna and Copper River valleys and is a particularly popular region among urban hunters because of its road access. The 13A and B subunits can be reached by Denali, Glenn and Richardson highways. Many residents of the area have long insisted the annual influx of non-local hunters hinders their ability to successfully harvest moose and caribou for subsistence purposes. The closure, which applies to nearly 3 percent of the land within Unit 13, was first proposed to the board by a resident of Glennallen. Those federal lands are largely along the Delta and Gulkana rivers. State attorneys wrote in their original complaint that the board first violated ANILCA and related regulations by issuing the closure to reduce hunter competition, which they claim is an unlawful justification for the move. “Congress (in ANILCA) did not authorize restrictions on hunting based on competition or number of hunters in the area,” the complaint states. The board also extended the proposed closure to two years so the board wouldn’t have to address future special requests rather than limiting it to the “minimum period necessary” required by regulation, according to state attorneys. According to state and federal data compiled by board staff, between 600 and 700 hunters participated in the federal moose hunts for all of Unit 13 in recent years with an average success rate of about 11 percent, compared to state moose hunts in the unit that attract an average of about 4,700 hunters per year with a success rate of about 17 percent. The number of state Unit 13 caribou hunters — and their success rate — can vary widely year-to-year, primarily due to animal abundance, according to board reports. In 2016, state hunters harvested 5,785 caribou in Unit 13, but the harvest dropped to 1,411 animals by 2018. Qualified hunters participating in the Unit 13 federal subsistence hunts harvested 320 caribou and 61 moose in 2018 and 102 caribou and 71 moose in 2019, according to Office of Subsistence Management Wildlife Biologist Lisa Maas. ADFG officials typically do not limit the number of Unit 13 subsistence caribou hunting permits — known as Tier I permits — issued to Alaska residents; rather, managers limit harvest by closing the season early if hunters approach the yearly harvest quota based on in-season reporting. The Unit 13 Tier I caribou hunt started Aug. 10 and closed Sept. 20. It is scheduled to reopen Oct. 21 following a closure to protect the animals during their breeding season, or rut. The season could remain open until March 31 if the harvest quota is not met before then. Dunleavy administration officials also argued that the board overstepped its authority in June by approving special moose and deer hunts requested by the Organized Village of Kake. Tribe leaders claimed in court filings that the COVID-19 pandemic caused shortages of food and cleaning supplies in Kake, a Kupreanof Island community with about 550 residents. In June, the Federal Subsistence Board authorized area U.S. Forest Service officials to permit a special 30-day hunt in which two bull moose and five male Sitka blacktail deer could be harvested by Tribal members. Hunters harvested those animals in the hunt that took place from June 24 to July 24 and distributed the meat to more than 100 households in Kake, according to court filings. The Organized Village of Kake intervened as a defendant in the state’s lawsuit against the board. As for the Unit 13 issues, Gleason in part agreed with the board’s justifications that the closures would “ensure continued subsistence use opportunities” and “address public safety concerns resulting from overcrowding and user conflict along the Richardson Highway,” she wrote in an order denying the state’s request for a preliminary injunction. Gleason also concluded that at first blush that the two-year closure appears to be in line with the regulatory cycle of the Office of Subsistence Management, or OSM, which the board operates under. “Because the closure term is consistent with the outer limits of (OSM regulations) — the end of the current regulatory cycle — and the record provides support for the conclusion that two years might be the ‘minimum time period… necessary under the circumstances’ due to the ongoing nature of the issues in Unit 13, the Court finds that the State has not demonstrated either a likelihood of success or serious questions going to the merits of its claim,” she wrote. Gleason did not rule on the state’s claims regarding the Kake moose and deer hunt or the state’s claims overall. Elwood Brehmer can be reached at [email protected]

Chum, chinook returns fall short across Yukon, Western Alaska

Poor chum and coho returns led to some of the lowest commercial harvests in decades across much of Western Alaska and biologists are unsure why far fewer Yukon chinook are making it to Canada in recent years. The Yukon River summer chum return of approximately 733,000 fish was sufficient to meet the minimum escapement goal for the entirety of the massive drainage but it did not allow for a significant commercial fishery and was far less than expectations. Fishing was closed through the first half of the run while it was unclear if a harvestable surplus of chum would be available according to the Alaska Department of Fish and Game’s preliminary Yukon River summer fishery summary. Commercial fishermen, primarily in the lower Yukon, harvested just 13,968 chums in the summer fishery, which was 97 percent less than the five-year average of nearly 449,000 fish. The minimal catch translated to a total-fishery ex-vessel value of just $51,440 in 2020 for a fishery that typically generates roughly $1.5 million, though prices of 60 cents per pound for lower Yukon chum and 29 cents per pound were in line with previous years. Prices in some other salmon fisheries were low — particularly early in the season — as the pandemic slowed restaurant demand for fish. Managers had predicted a rather average return of about 1.9 million summer chum, which would have left a harvestable surplus of about 1.1 million fish, according to ADFG. The summer fishery comprises chinook and chum that enter the river generally before July 15, at which point management in the lower Yukon transitions to the fall chum and coho runs. The chinook return of an estimated 161,859 fish to the Pilot Station sonar was less than last year when 219,624 chinook reached the lower Yukon, but was in line with the expected return. However, an unusually small portion of the fish passed the sonar at Eagle near the Canadian border. Managers estimated 77,000 of the chinook were of Canadian origin based on in-season run assessments, yet just 33,005 fish were counted at Eagle, according to the summary. The minimum escapement goal for passage beyond Eagle is 42,500 chinook, which also does not provide for harvest in Canada per the Pacific Salmon Treaty. Managers speculated that near record-high water levels in the Yukon from a deep snowpack possibly fatigued fish that otherwise would have reached Eagle. They also documented reports of high rates of Ichthyophonus, a parasite, in salmon caught in the upper river, which could have increased mortality. On the bright side, the chinook sampled by ADFG biologists at Eagle were older and more of them were female than in recent years. Age-6 chinook comprised 53 percent of the sampled fish — above the 10-year average — and 3 percent were age-7 salmon. Females comprised 54 percent of the sampled fish, compared to 44 percent over the past decade, according to department data. Biologists have documented a general decrease in the size of chinooks across their range in recent years, largely because more of the fish are returning at age-4 or age-5. The smaller salmon are less likely to spawn successfully and smaller females carry fewer eggs, which also reduces the odds of offspring. Kotzebue Sound To the north, low commercial catches in July and concerns from subsistence harvesters about poor chum catches along the Kobuk River caused Kotzebue-area managers to cut commercial fishing time from 60 hours per week in July to as little as 24 hours per week in early August. The harvest of 149,808 chums was the lowest in the Kotzebue District set net fishery since 2007 and netted $542,308 in ex-vessel value, according to ADFG figures. The fishery has a long-term average harvest of approximately 230,000 chum but it produced a catches of greater than 400,000 fish from 2016-2019. Kotzebue chum sold for an average of 45 cents per pound this year, which was up from 39 cents a year ago. Norton Sound In addition to also having their smallest chum harvest since 2008, Norton Sound fishermen dealt with a very small coho return. The poor showings from the primary species targeted in the district led to a catch of 50,679 salmon in all, which was just 15 percent of the 10-year average harvest, according to the Norton Sound season summary. The cumulative ex-vessel value of $290,302 for the five-species harvest was just 12 percent of the five-year average. The Norton Sound catch generated approximately $2.1 million last year and more than $4 million in 2018. The Norton Sound pink salmon run was — as it has been of late — a near-record return. However, processors shied away from purchasing them, according to ADFG managers, resulting in a catch of 6,950 pinks. That was down from a harvest of more than 75,000 a year ago. The 2020 Norton Sound coho harvest of 14,650 fish was less than 10 percent of the five-year average and the 26,365-fish chum harvest was 17 percent of the five-year average of 151,442 salmon. Additionally, 906 Chinook and 1,808 sockeye were harvested from Norton Sound. Elwood Brehmer can be reached at [email protected]

Appeals court rules ANCs ineligible for CARES Act Tribal aid

Additional pandemic relief aid could be out of reach indefinitely for nearly 200 Alaska businesses following a ruling by Washington, D.C., Appeals Court judges. A three-judge panel of the D.C. Court of Appeals ruled Sept. 25 that Alaska Native corporations are ineligible for a portion of $8 billion allocated to Tribal organizations across the country in the $2 trillion CARES Act passed by Congress in late March. The decision reversed a June 26 District Court ruling in favor of the Native village and regional corporations, in which D.C. District Court Judge Amit Mehta determined Native corporations are eligible for CARES Act funds, “as Congress intended — no more, no less,” Mehta wrote in his order. Title V of the massive spending package lays out how $150 billion in coronavirus relief funds were to be distributed by the Treasury Department, stating that $8 billion of the broader pool going to states, municipalities and Tribes shall be reserved for “making payments to Tribal governments.” However, the appeals panel concluded that specific wording in the 1975 Indian Self-Determination and Education Assistance Act, or ISDA, excludes Alaska Native regional and village corporations from receiving the aid intended for Tribes, regardless of what Congress meant in the CARES Act. The CARES Act defines a Tribal government as “the recognized governing body of an Indian Tribe,” according to the court, and uses the definition of an “Indian Tribe” found in the ISDA. The ISDA generally references Alaska Native village and regional corporations among other organizations in its definition of a Tribe, but also requires the entities be “eligible for the special programs and services provided by the United States to Indians because of their status as Indians,” according to the ruling. The appeals court concluded that Alaska Native corporations, commonly known as ANCs, cannot be eligible for a portion of the $8 billion “because no ANC has been federally ‘recognized’ as an Indian tribe, as the recognition clause requires, no ANC satisfies the ISDA definition.” The ruling stems from lawsuits filed by 18 Tribes from across the country, including six Alaska Tribes, against the Treasury Department in late April, in which the Tribes argued the for-profit corporations should not get money set aside specifically for Tribal governments. The members of Alaska’s all-Republican congressional delegation said in a joint statement that the Tribal funds were intended to provide pandemic relief for all American Indians and Alaska Natives; it matters not how they would receive the money, according to the delegation. “It is unconscionable that COVID-19 aid would be withheld from a subset of Alaska Native people simply because of the unique tribal system that exists in Alaska,” the delegation said. “Furthermore, this decision goes beyond the CARES Act, erasing more than 45 years of precedent and practice, with the potential to undo tribal systems of health care, housing, education, workforce development, and more in our great state.” The delegation’s statement eludes to the 1971 Alaska Native Claims Settlement Act, which established the 12 current Alaska Native regional corporations and the 174 village corporations in operation today and collectively allocated them 44 million acres in the state in-lieu of the Tribal reservation system used across the country to resolve land disputes between Tribes and the federal government. The Alaska Regional and Alaska Native Village Corporation associations, which intervened in the case on behalf of their members, said in a joint Sept. 25 statement that the “deeply flawed” ruling will only worsen the effects of the pandemic in Alaska by limiting access to critical health services and economic relief in remote communities across the state. “For forty years, courts and administrative agencies have consistently recognized that Alaska Native communities are uniquely organized, as designed by Congress. Within this framework, that includes both regional and village corporations, we strive every day to bring our ‘shareholders’ — our Alaska Native brothers and sisters — economic opportunity as well as vital social, health, cultural and educational services. Until today, our status as Indians under the Indian Self-Determination and Education Assistance Act, which expressly includes Alaska Native corporations among other types of Indian Tribes, has never been called into doubt,” the ANC associations said. Treasury officials have not disclosed exactly how much of the $8 billion was set-aside for ANCs, but the Appeals Court ruling indicates $162 million was meant for the Alaska companies. The ruling does not prohibit the 229 federally recognized Tribes in Alaska — some of which backed the original lawsuits — from receiving a portion of the $8 billion. Additionally, many of the smaller village corporations and regional corporation subsidiaries were among the roughly Alaska-based small businesses that collectively received more than $1.2 billion in forgivable federal loans through the Small Business Administration’s popular Paycheck Protection Program. Leaders for the Alaska Regional Association did not respond to questions in time for this story about whether or not the group will appeal the decision, among other issues. Elwood Brehmer can be reached at [email protected]

Kinross adds Tok-area gold deposit to portfolio for $93.7M

The operator of the Fort Knox gold mine north of Fairbanks paid $93.7 million for a majority stake in a gold deposit south of Tok, roughly 250 miles away. Kinross Gold Corp. announced Sept. 30 that it has acquired a 70 percent interest in the Peak Gold project from Royal Gold and Contago ORE Inc. Kinross intends to develop the Peak Gold deposit into a short-lived open pit mine and truck the ore north to the Fort Knox mill for processing. The trip would involve hauling the crushed ore up the Alaska and Richardson highways, through Fairbanks and up the Steese Highway to the mine site near Chatanika. Scheduled to open in 2024, the Peak Gold mine is expected to produce roughly 1 million ounces of gold equivalent from grades of about 6 grams per ton over 4.5 years. Kinross estimates the $110 million project will have an all-in sustaining cost of approximately $750 per ounce. Paul Rollinson, CEO of Toronto-based Kinross, said in a company statement that it is a high-margin project at current gold prices. “The relatively high-grade, low-cost Peak Gold project is an excellent addition to our portfolio, as it allows us to leverage our existing mill and infrastructure at Fort Knox and strengthens our medium-term production and cash flow profile,” Rollinson said. The project would add roughly 220,000 ounces of gold equivalent production to Fort Knox, more than double the mine’s production from 2019 of just more than 200,000 gold equivalent ounces, according to Kinross, which expects blending the ores will cut the mine’s all-in sustaining costs by about $70 per equivalent ounce. In the deal, Kinross sent $49.2 million to Royal Gold for its 40 percent stake in the project and $44.5 million in cash and Contago ORE shares purchased from Royal Gold to a Contago subsidiary. Contago, which previously held a 60 percent stake in the project, will retain a 30 percent interest in Peak Gold. Royal Gold CEO Bill Heissenbuttel said the deal allows the company to focus on its core royalty and streaming business. Kinross said it expects to conduct initial permitting and drilling for the open-pit mine concurrently and hopes to complete permitting and feasibility reviews by the end of 2022 before a year of construction. The company will charge Contago a management fee and mill toll to process its 30 percent of the ore mined from the project. Kinross plans to rename the project after consulting with leaders of the nearby Native Village of Tetlin, according to the statement. Tetlin Chief Michael Sam said in a statement issued by Kinross that he is pleased to see the company investing in the project. “We look forward to the safe and responsible development of the project and the positive benefits it is expected to generate for our community,” Sam said. The 675,000-acre Peak Gold property also holds other exploration targets that could extend the life of the project, according to Kinross. A 2018 preliminary economic assessment of the project estimated measured and indicated resources of about 1.2 million ounces of gold equivalent at a grade of 4.1 grams per ton and inferred resources of about 116,000 ounces of gold at an average grade of 2.7 grams per ton. Elwood Brehmer can be reached at [email protected]

Dunleavy: Gov’t lead needed for pandemic recovery

Gov. Mike Dunleavy said he expects the state’s response to the coronavirus pandemic to ultimately benefit the beleaguered tourism industry and the economic recovery from 2020 should be led by government. The governor spoke about ways to boost Alaska’s struggling economy Sept. 24 during the Alaska Chamber’s virtual annual Fall Forum gathering. He emphasized that prior to the March economic shutdowns and travel restrictions that Alaska had a solid economic foundation with several billion dollar-plus oil projects in various stages of planning and development; large investments planned to grow the cargo business at Ted Stevens Anchorage International Airport; and record low unemployment in the state. Alaska added approximately 1,300 jobs and had an unemployment rate of 5.8 percent in February. The state’s unemployment rate was reported at 7.4 percent in August, but according to the state Labor Department the number is likely artificially low because the virus has disrupted the household surveys typically conducted to compile the data. Overall, Alaska was down roughly 37,000 jobs year-over-year in August. Tourism was one of the strongest sectors of Alaska’s economy for years prior to the pandemic, but has also been one of the hardest hit by the pandemic for a host of reasons. More than 1.3 million visitors were expected to arrive to the state via cruise ship at the start of the year; however, none of them showed up — by cruise anyway. Dunleavy said state health and administration officials crafted the state’s plans and requirements for essential industry operations, notably commercial fishing, after observing COVID-19 outbreaks in the Lower 48; he also noted that Alaska’s overall COVID-19 case and death counts have been among the lowest in the country since the start of the pandemic. Alaska’s total COVID-19 case count of 8,602 through Sept. 29 is the fifth-lowest in the country; the 1,176 cases per 100,000 residents is the eighth-lowest in the country, according to data tabulated by The New York Times. “We had watched what happened at some of the meatpacking plants down south and we didn’t want to repeat that,” Dunleavy said. State officials are now working on health protocols to restart the annual parade of cruise ships through the Inside Passage next spring, he added, acknowledging the success of the work will in part be contingent upon the efficacy and availability of a coronavirus vaccine and other treatments. “The virus is going to be with us but it’s not going to control us,” Dunleavy said. “We want to show them that we can manage this virus.” How quickly Alaska’s broader tourism sector can rebound will largely depend on when the border with Canada is reopened for leisure travel as well. The U.S.-Canada border is closed to nonessential travel through Oct. 21 — a restriction that has been extended six times since March — and Canadian ports are closed to large cruise ships until Oct. 31. Federal law requires all foreign flagged vessels traveling between U.S. ports to stop at a foreign port in between. For cruises bound for Alaska, that typically means stopping in or starting from Vancouver. While the 2021 cruise season is still many months away, Brandon Lee, consul general of Canada to Alaska said during a Sept. 29 forum discussion that the Canadian government sees the pandemic primarily as a health crisis and is taking a very conservative approach to managing it. “We’re really trying to prioritize the health of Canadians,” Lee said, adding that the border situation is evaluated “day-by-day, week-by-week.” That evaluation is driven not only by case counts in the U.S., but also by the capacity in Canada’s health system, according to Lee. Dunleavy stressed that the onus for Alaska’s broader economic recovery is on government because it was government restrictions that led to the ongoing struggles. “Government has an obligation to fix and rectify what happened during the pandemic,” he said. The best way to do that, Dunleavy said is with a “comprehensive, large, multi-year approach” to infrastructure development. He added a common refrain for his administration that Alaska has the natural resources the world wants — all that’s needed is access. When asked about the infrastructure development comments, the governor’s spokesman Jeff Turner said he was likely referring to the federal infrastructure package President Donald Trump has pushed to varying degrees throughout his term. However, Dunleavy mentioned some state-specific projects and indicated his administration is working investment angles regardless of what the feds do. The administration is currently conducting pre-development analyses road projects to access resources in the Western Susitna Valley and Interior mineral prospects through the Alaska Industrial Development and Export Authority, which is also seeking private investment for those projects. “We need to refurbish our ports. We need to finish our rail spur (in the Mat-Su Borough),” Dunleavy said. “We’re exploring these opportunities with private investors and hopefully we’ll have more to announce in the next few weeks.” Dunleavy thanked Trump for signing a presidential permit authorizing a border crossing for the proposed $13 billion Alberta to Alaska, or A2A, rail link that would add roughly 1,500 miles of track to connect Alaska Railroad tracks to those in Canada. Proponents of the general concept have long seen it as a way to export resources from Northern Canada and import products to Alaska more affordably. The A2A project is specifically aimed at exporting Alberta tar sands oil through Alaska to world markets, but the project’s backers note it could be utilized for other shipments as well. Elwood Brehmer can be reached at [email protected]

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