Elwood Brehmer

USDA plans to reinstate ‘Roadless Rule,’ $25M for Southeast aid

And back the pendulum swings. The U.S. Department of Agriculture officially announced its plans to end old-growth logging in the Tongass National Forest and restore the contentious Roadless Rule development restrictions that agency officials just spent years repealing. Dubbed the “Southeast Alaska Sustainability Strategy,” the Biden administration’s plan also calls for distributing $25 million in discretionary funding and technical resources to advance economic development and identify future priority investments, according to a July 15 statement from the USDA. Agency leaders say they will organize a local group to consult with Southeast Tribes and Alaska Native corporations among other stakeholders to develop a strategy for the funding and other assistance. “This approach will help us chart the path to long-term economic opportunities that are sustainable and reflect Southeast Alaska’s rich cultural heritage and magnificent natural resources,” USDA Secretary Tom Vilsack said in a formal statement. It was about nine months ago that USDA officials under the Trump administration finalized their full repeal of the Clinton-era Roadless Rule that, with exceptions, largely prohibited development across approximately 9.3 million currently undeveloped acres of the 17 million-acre Tongass. Leaders of Sealaska announced in January that the Native regional corporation, which owns more than 360,000 acres across Southeast, would be making a transition out of the logging industry this year after a multi-year shift in its business model to focus on ocean-based food and tourism opportunities. Sealaska acquired just more than 70,000 acres formerly of the Tongass in 2015 to fulfill the company’s land entitlement under the Alaska Native Claims Settlement Act. Company leaders then said that nearly all of the acreage was selected for timber harvest and management. While timber is naturally the most recognizable resource industry in the forest, Alaska mining industry leaders and hydropower advocates have also pressed the USDA and Forest service to lift the rule — or at least exempt the Tongass from it — for years, contending that though the rule doesn’t outright ban their projects, the access limitations of the Roadless Rule often add greatly to the cost of the developments. Both of the large operating mines in the region recently applied with the Forest Service to expand their tailings facilities and extend the life of their operations. The advanced Bokan Mountain prospect on Prince of Wales Island would also be just the second rare earth element mine in the country. Rare earths are a suite of metals with unique properties that are widely used in small amounts in advanced technological equipment, phones, and national defense technologies. Several Southeast Tribes and conservation groups backing the reinstatement insist the economy of the region has changed from timber-centric to being more reliant on fishing and tourism in the two decades since the rule was first enacted nationwide. They also note that Forest Service regulations allow for project proponents to apply for specific exemptions to the Roadless Rule, which the agency routinely grants. USDA officials initially indicated their intent to reinstate the Roadless Rule in the Tongass in mid-June when the agency published a required notice for proposed rulemaking to reverse the Trump administration’s repeal. At the time, Sen. Dan Sullivan called the move an “unacceptable whipsaw” in federal policy after the Trump administration spent two years analyzing the rule, though USDA leaders made their intent to fully repeal it, rather than develop a Tongass-specific rule, early in the process. Sullivan called the $25 million economic investment in the region “simply a pay-off” for killing the long-term economic opportunities lifting the rule provided. “Greater restrictions on the Tongass have been opposed for decades by all of Alaska’s governors and the state’s federal elected officials, both Republican and Democratic,” Sullivan said in a statement from his office. “Let me be clear: $25 million doesn’t even come close to covering the economic damage that this administration’s policies will inflict on Southeast Alaska. Alaskans have the right to make a living, support our families, and connect our communities and have a much greater interest in seeing the Tongass healthy and sustainably managed than outside extreme environmental groups pulling the strings in the Biden administration.” Backers in the timber industry of the Trump administration’s repeal finalized last October emphasized that in practicality just about 188,000 acres of additional old-growth would be made available for harvest — not 9.3 million acres — because the Tongass Land Management Plan finalized under the Obama administration in 2016 still applies. The comprehensive Tongass land-use plan calls for a transition away from old-growth harvests to second-growth stands over about 15 years. It’s unclear at this point how the latest directive to end large old-growth sales will mesh with the 2016 plan. Elwood Brehmer can be reached at [email protected]

Greens Creek helps generate $41M cash flow for Hecla

Production at the country’s largest silver mine was down to start the year despite strong metal prices due to processing lower-grade ore, according the mine’s owner. Idaho-based Hecla Mining Co., which owns the underground Greens Creek mine near Juneau, reported silver production of approximately 2.55 million ounces in the second quarter July 13. That was a decrease of 7 percent from a year ago. Silver production at Greens Creek is similarly down 7 percent for the first half of the year at 5.14 million ounces, compared to 5.53 million ounces in 2020. In its report, the company attributed the decline to “lower grades resulting from mine sequencing.” Hecla leaders earlier this year estimated total silver production of 9.5 million to 10.2 million ounces from Greens Creek in 2021. Even with the recent decline, silver output in the first half of the year from the Admiralty Island mine was still far better than comparable 2019 levels when the company produced approximately 4.6 million ounces of silver, which was an 18 percent increase over 2018, according to company records. Secondary gold production at Greens Creek was down 2 percent in the second quarter at 12,859 ounces, but is up 3 percent for the year overall at 26,125 ounces, Hecla reported. CEO Phil Baker said the “solid” and relatively steady silver production from what is by far the largest of the company’s five operating mines, helped Hecla generate $41 million in cash overall for the quarter, marking its fifth consecutive quarter of increasing cash reserves and said the company’s collective response to COVID-19 should help sustain the momentum. “With the company’s U.S. vaccination rate higher than the U.S. average, including Greens Creek at a nearly 90 percent vaccination rate, and Casa Berardi (Quebec) increasing, we expect to build on these results,” Baker said in a formal statement. After bottoming out at around $12 per ounce during the global onset of the pandemic, silver prices have rebounded to as high as $28 per ounce of late and are currently in the $26 per ounce range. Gold has recently sold in the $1,800 per ounce range after peaking at more than $2,000 per ounce roughly a year ago. The U.S. Forest Service is also in the midst of a supplemental environmental impact statement review of Hecla’s plan to expand the tailings disposal facility at Greens Creek by about 14 acres, or 20 percent. Hecla expects the current 66-acre facility will likely be filled by about 2031, at which point the mine would have to be closed. The company submitted the plan last October. Exploration update On the exploration side of the industry, remote camps are active this summer across the state after the disrupted 2020 work season. There are four drill rigs working at the Donlin gold site near the Kuskokwim River in Western Alaska and they are expected to drill 64 holes totaling approximately 20,100 meters this summer, according to Donlin’s co-owner Vancouver-based NovaGold. The drilling at the well-advanced prospect is aimed at further testing the continuity of the ore body and the structure of the mineralization, according to the company. HighGold Mining Inc. is also adding to the drilling work this summer at its early-stage Johnson Tract gold prospect on the west side of Cook Inlet. According to a statement from HighGold, the company was able to raise enough money in its most recent stock sale for leaders to consider adding 4,000 meters of drilling to the initially planned 16,000-meter, $10 million program. Back in Southeast Alaska, Constantine Resources is working towards drilling 6,000 meters of exploratory boreholes at its multi-metal Palmer project near Haines. The nearly $9 million work program is being funded by Tokyo-based Dowa Metals and Mining, which purchased up to 56 percent of the project through the funding arrangement, according to Constantine. A small summer program is also ongoing at the Pebble camp in Southwest Alaska, where a crew of nine is continuing baseline environmental studies and data collection for engineering as well as demobilization of unneeded facilities, according to Pebble Partnership spokesman Mike Heatwole. Pebble is currently appealing the Army Corps of Engineers Alaska District denial of its Clean Water Act wetlands fill permit last November. Elwood Brehmer can be reached at [email protected]

Adak stakeholders protest denial of proposed cod allocation

Stakeholders of an isolated Aleutians fish plant contend state appointees on the federal fisheries management board have ignored calls for help to keep more of the area’s large Pacific cod catch in Alaska despite a court order that shot down the first attempt to do so. Representatives from Aleut Corp., which owns the fish processing plant in Adak through a subsidiary, and Peter Pan Seafood Co., have said they need to be able to rely on a foundational allocation of cod from federal fisheries to reopen the currently shuttered plant. It’s believed a reliable allocation of roughly 5,000 metric tons of Pacific cod to the plants in Adak and Atka, where a plant is also currently closed, would provide a base volume of fish that would allow an operator to keep it open year-round with purchases in the state waters cod and other fisheries throughout the year. Doing so could provide the ultra-remote community of approximately 300 residents with nearly 200 jobs during peak activity and several dozen steady positions if the plant were operated year-round, they estimate. The North Pacific Fishery Management Council that oversees the largely Seattle-based trawl cod fishery is in the process of reforming those allocations amidst other regulatory changes. Of the 11 voting council members, six are appointed by Alaska’s governor, in theory giving the state bloc control over council decisions and the business interests as well; those with more personal ties to the former Naval base community are wondering why, as they put it, the administration is not supporting the interests of a rural Alaska community over the trawl industry. Peter Pan Executive Vice President Jon Hickman wrote in public comments submitted prior to the council’s mid-June meeting that the company supports a harvest split with up to 30 percent of the qualifying shares going to eligible processors, contending that it would create a competitive, but not exclusive, market for the cod. For Peter Pan, it would likely provide the market stability the company needs to make investments in value-added cod products at Adak, according to Hickman. Peter Pan’s message on the issue was backed by the Pacific Seafood Processors Association, which feels a dedicated shore-side allocation recognizes the investments made in the fishery and the changes that have occurred due to rationalization and other factors, according to testimony from PSPA President Chris Barrows. Excess floating processing capacity left over after the rationalization starting in the mid-2000s of crab and other Bering Sea fisheries was moved south to participate in the federal Aleutians cod fishery among others, which challenged the community of Adak after the first time the plant closed in 2009, according to Adak Community Development Corp. board member Dave Fraser. “All that excess capacity flowed out into the Aleutians and shortened the seasons,” Fraser said. That 5,000 metric-ton mark is what was set aside by the council in 2016 under what is known as Amendment 113 for shore-based plants from the area’s federal Pacific cod fishery for several years as a means to direct resources to the communities that would otherwise be sent to floating processors. It was the council’s response to mitigate the impacts of its prior actions in other Bering Sea fisheries on Adak and other Aleutian communities. Offloading at shore side facilities means the large catcher vessels must pay the 3 percent state fish landing tax and adds other expenses to their operation. So in turn, several Seattle-based trawl industry groups and vessel owner companies sued the council in late 2016 in an attempt to have Amendment 113 overturned. They argued in part that the Magnuson-Stevens Act does not give the council the authority to allocate harvest to shore-based processers and that the council did not provide a rational explanation for the regulatory change, thus violating the Administrative Procedures Act that is at the core of many federal regulatory disputes. D.C. Federal District Court Judge Timothy J. Kelly sided with the trawl coalition in a March 2019 order in which he concluded the harvest set-aside for a pair of plants — but practically just Adak — violated national standards under the MSA that prohibit the council from discriminating between residents of different states in allocation issues. Sen. Dan Sullivan subsequently attached a rider to the 2019 Coast Guard reauthorization bill that largely would have made Amendment 113 law and bypassed the council; however, Washington Democrat Sen. Maria Cantwell gathered opposition sufficient to prevent Sullivan’s amendment from getting the requisite 60 votes on the Senate floor. According to data submitted by Peter Pan to the council prior to its recent June meeting, cod deliveries from the federal trawl catch to Adak in 2018 and 2019 when Amendment 113 was in effect accounted for 12 to 13 percent of the total Bering Sea and Aleutians trawl cod allocation. Brent Paine, executive director of United Catcher Boats, one of the plaintiffs in the Amendment 113 suit, wrote to the council that the group believes the concept of allocating harvest shares to processors is meant to provide stability in the catcher-processor relationship and a new catch-share program should strengthen that relationship, not weaken it. United Catcher Boats supported a processor allocation range of 10 to 20 percent in June when the council was deliberating its preliminary preferred alternative on the matter, versus Peter Pan’s 30 percent request. “By narrowing the range the council will help the public focus its attention on a fair and reasonable allocation percentage at this time,” Paine wrote in reference to the national fisheries standard requirements. Peter Pan Business Development Manager Steve Minor said in testimony after the council selected a preliminary alternative that would allocate about 2,000 metric tons of cod per year to Adak that the company is suspending its work to restart the Adak plant as a result of the decision. “There are many problems associated with this (preliminary preferred alternative), but let me close by saying that by selecting this PPA, the council ignored the unanimous agreement between all of the major Adak stakeholders about the most reasonable option to restore Adak’s economy,” he said. According to a written statement from Peter Pan after the council’s preliminary Adak decision, which was approved 10-1 as part of a broader regulatory package, there is a significant amount of work that needs to be done to the plant before it can be operated consistently. “Adak’s economic future, its school and small businesses are all tied to the success of the seafood plant, and we hope that the council ultimately supports the Adak community and the harvesters that helped pioneer this remote fishery,” Peter Pan’s statement reads. Council members who responded to questions from the Journal said the council rejected the allocation proposal because it would have allowed the fish to be transferred to other communities, such as King Cove or Unalaska, where Peter Pan and others have active facilities, and required a cash payment to Adak instead of generating real economic activity in the community, which state officials wanted to preserve. Officials in the Governor’s Office and the Department of Fish and Game did not respond to questions and interview requests for this story. They also said the 5,000-ton “set aside” for one group is far too much considering the annual total allowable catch, or TAC, for Pacific cod is in steep decline. It would create a situation where one user is provided a fixed quantity of a resource, with the rest are subjected to the swings in abundance. Adak Community Development Corp.’s Fraser said he hopes the council can come up with a way to support Adak’s economy that will get broader buy-in from stakeholders before finalizing the allocations; the council’s next meeting is scheduled for Oct. 11-16. If the plant remains closed, regardless of the reason, it’s likely the school will close, which would be another major blow to the community, he said. Adak’s economy shrunk rapidly after the first time the plant closed for two years starting in 2009, according to Fraser. “Each time that happens, that somebody opens and then closes the plant again you lose more and more people out of the community and the ability to maintain a small business in Adak is reduced,” he said. “It is literally a matter of life and death for the community to have access on a sustainable basis to the resources that are right on its doorstep.” Elwood Brehmer can be reached at [email protected]

Legislators promise commitment to fiscal solution

This time, they say, is different. “Consensus,” “tough decisions,” “optimistic,” “move Alaska forward” and “workable solution” were among the catch-phrases and buzzwords during the inaugural meeting of the Legislature’s fiscal policy working group as lawmakers said all the right things about wanting to end Alaska’s melodrama and once-and-for-all solve the state’s structural budget deficit. This time, they are fully committed to shared facts, open to hearing opposing views and willing to compromise for the good of Alaska, members of the bicameral Comprehensive Fiscal Plan Working Group said in so many words. Senate President Peter Micciche, R-Soldotna, said this time is different in part because the makeup of the group is unique. His staff could not find a similarly formed special committee or legislative work group with two members from each caucus, giving each contingent equal representation. “This is not a partisan issue; this is not a caucus issue; this is not an issue between bodies,” Micciche said of the state’s finances, starting with the Permanent Fund dividend. “For us to go anywhere we need to hear from everybody.” He noted the committee’s co-chairs, who normally have the authority to tightly regulate committee proceedings and advanced legislation, will in this case be facilitators tasked with maintaining course but little more. “There will be no squashing of ideas,” Micciche emphasized via videoconference. The co-chairs are Sitka Democrat Rep. Jonathan Kreiss-Tomkins and longtime Bethel Sen. Lyman Hoffman, a Democrat who caucuses with the otherwise Republican Senate Majority. The four Finance Committee co-chairs of the House and Senate are notably absent from the working group roster, which also includes Reps. Ben Carpenter, R-Nikiski; Kevin McCabe, R-Wasilla, Calvin Schrage, D-Anchorage and Sens. Shelley Hughes, R-Palmer; Scott Kawasaki, D-Fairbanks; and Jesse Kiehl, D-Juneau. The group was formed after House Minority Republicans agreed late last month to vote for an effective date clause on the budget to avoid a government shutdown ostensibly in exchange for more say in the state’s fiscal decisions. Hoffman said the group will likely start its work by reviewing what has previously been done but this time is different because the group’s work product will be taken more seriously than in past efforts. “The work will not be half-heard, deterred or delayed or not even addressed by procedural maneuvering,” Hoffman said. Micciche and House Speaker Louise Stutes both said they are committed to putting bills reflecting the committee’s recommendations on the Permanent Fund, PFD, spending cuts, spending caps and taxes through the committee process in the special session currently scheduled for August called by Gov. Mike Dunleavy . The timeline for tackling such a list of complex and contentious issues would appear untenably tight with less than a month before lawmakers could need to return to Juneau to debate the work group’s plan, but legislators openly discussed talks with the officials from the governor’s office about pushing the special session back a month or more until the working group is complete. “This is a real thing. This isn’t an exercise or something to put on a bookshelf,” Micciche said. “My intent is to move it forward, some members may be uncomfortable with that, but we are floundering and we owe it to Alaskans to find a solution.” The group members will not have to look back far to find the most recent joint attempt to gain momentum towards solving the state’s ongoing deficits. It was January 2020 when legislators on the eight-member Bicameral Permanent Fund Working Group failed to agree on a complete set of recommendations regarding the use of the fund’s income for the rest of the Legislature. The group did, however, agree that one of the few laws or procedural norms the lawmakers have refused to violate in recent years — limiting the annual Permanent Fund draw to the 5 percent of market value formula — is imperative to ensuring the fund’s long-term strength. Hughes, who also participated in the Permanent Fund group, urged colleagues to pay attention to what the group does. “Legislators may be fishing or traveling or working, but I hope they’re listening because we’re going to need their buy-in,” during the special session, Hughes said. While the insistence that the group’s recommendations will be carried forward is new compared to recent efforts, it remains unclear what will change from the just-concluded marathon session that saw the Senate approve $2,300 PFDs, the House initially avoid the issue and Dunleavy ultimately vetoing the appropriation for PFDs of about $525 per person he called a “cruel joke.” With most legislators seeing little ability to cut the budget much further and Dunleavy’s continued opposition to broad-based taxes, one of the few other places for the state to derive significant amounts of revenue is industry taxes and corresponding exemptions. Tax Division Director Colleen Glover said during a July 13 meeting of the House Ways and Means Committee that the state’s indirect expenditures totaled more than $3.9 billion in what she characterized as “forgone revenue.” For comparison, Dunleavy’s plan to make the PFD 50 percent of the annual Permanent Fund draw and add it to the Constitution results in ongoing deficits of roughly $1 billion, according to legislative figures. The largest single indirect expenditure in the Department of Revenue, which accounts for 97 percent of the state’s indirect expenditures through tax credits and exemptions, was the sliding scale per-barrel oil production tax credit. Oil companies claimed just more than $1 billion in the per-barrel credits in fiscal year 2019; the credits are up to $8 per barrel deducted from the 35 percent net profit tax when oil is less than $80 per barrel. The per-barrel credit has long been a target of Democrat legislators and some Republicans have recently said an adjustment to oil taxes is very likely to be part of a full state fiscal plan. Glover said the per-barrel credit claim for fiscal 2019 was unusually high and the expectation for 2020 is approximately $585 million and 2021 is $420 million once the final taxes are calculated. The smaller recent totals are likely due to lower oil prices during the pandemic that made the per-barrel credit inapplicable; a 4 percent gross minimum production tax kicks in at low oil prices. Elwood Brehmer can be reached at [email protected]

AGDC: Review will find benefits of AK LNG

State officials leading the Alaska LNG Project insist a new Department of Energy review of the massive natural gas export venture will find it would help lessen global greenhouse gas emissions if finally brought to fruition. Acting Assistant Energy Secretary for Fossil Energy Jennifer Wilcox signed an order June 28 directing the National Energy Technology Laboratory to prepare a supplemental environmental impact statement, or EIS, for the $38 billion gas pipeline and liquefaction megaproject largely to study the full range of greenhouse gas emissions resulting from the project’s construction and operation. Alaska Gasline Development Corp. President Frank Richards said in an interview following the Department of Energy order that he believes the federal government’s analysis will conclude that use of Alaska’s estimated 35 trillion cubic feet of available North Slope gas worldwide “will result in significant reductions in greenhouse gasses, predominantly carbon dioxide.” AGDC previously commissioned an independent study of the project’s emissions that found roughly 80 million tons of carbon would be kept out of the atmosphere because of Alaska LNG, according to Richards. AGDC leaders and other supporters of the project have long pitched it as a way to help displace coal burned with lower-emitting natural gas for power generation in China and other East Asian countries. Under the Trump administration, the Department of Energy authorized LNG exports to non-free trade countries largely in August 2020 based on the EIS and subsequent order approving construction from the Federal Energy Regulatory Commission earlier that May. DOE officials in April granted a rehearing request filed by the Sierra Club that ultimately spurred the additional review. The rehearing order states that the department intends to issue an order after the supplemental EIS is complete that will reaffirm, modify, or vacate the project’s export authorization to non-free trade countries. Among the executive orders issued by President Joe Biden shortly after taking office was one reviewing all regulatory and administrative decisions made during the Trump administration that could result in additional carbon emissions. FERC evaluated carbon emissions from the project, but not the fully life-cycle emissions from the gas production, transport and consumption. “We understand the need for what DOE is doing but we think the overall outcome is going to show a net positive in greenhouse gas reductions from AK LNG,” Richards said. According to FERC’s EIS, construction of the North Slope gas treatment plant and 20 million tons per year Nikiski LNG plant would each result in approximately 622,000 metric tons of greenhouse gas emissions, while constructing the 807-mile gas pipeline would cause another 1.1 million metric tons of carbon emissions. The gas treatment plant needed to extract carbon dioxide from the Prudhoe Bay gas for injection back into the ground would also cause 4 million to 6 million metric tons of carbon dioxide emissions per year depending on the need to flare gas, which is generally prohibited in Alaska outside of emergency situations, according to the EIS. The project is expected to have an operating life of about 30 years. FERC officials wrote in their May 2020 order approving the project that the responsibility to approve LNG exports is DOE’s and the National Environmental Policy Act does not require FERC to consider upstream or downstream impacts of actual gas exports in determining if the LNG facility meets the requirements of the Natural Gas Act. Commissioner Richard Glick wrote in dissent of the order that it violates both NEPA and the NGA because the broader commission “steadfastly refuses to assess whether the impact of the project’s greenhouse gas emissions on climate change is significant, even though it quantifies the direct GHG emissions caused by the project’s construction and operation. “That refusal to assess the significance of the project’s contribution to the harm caused by climate change is what allows the commission to perfunctorily conclude that the environmental impacts associated with the project are ‘acceptable’ and, as a result, conclude that the project satisfies the NGA’s public interest standard.” In January, Gov. Mike Dunleavy unveiled a concept to fund pipeline construction between the Point Thomson gas field and Fairbanks — estimated at nearly $6 billion — largely with unidentified federal infrastructure grants as a means to jumpstart investment in the rest of the system and provide natural gas to Fairbanks. The administration is hopeful Congress and the Biden administration, which Dunleavy clashes with regularly, will recognize what they see as the environmental benefits the project could provide via cleaner burning natural gas. Richards said AGDC will provide Energy officials with any information they need and emphasized that FERC’s construction authorization will remain valid throughout the process. He added that while he feels it’s highly unlikely any issues will arise from the supplemental EIS, the project owners would have years to address those concerns before startup. Richards has said AGDC officials are in confidential negotiations with a lead party to manage the gas pipeline portion of the project at least partially contingent upon the availability of federal funds for the first phase of construction. AGDC leaders hope to secure commitments from developers, operators and investors in the LNG and gas treatment plants by this fall, with the project’s major financial agreements coming next year. Elwood Brehmer can be reached at [email protected]

Coeur receives preliminary OK for Kensington expansion

The U.S. Forest Service is likely to approve a plan that would allow the Kensington gold mine near Juneau to operate for at least 10 years longer based on a draft decision published July 9. If the draft record of decision remains substantively the same in its final version the underground mine’s life would be extended from 2023 out to 2033. Chicago-based Coeur Mining Inc. applied for the first amendment to its operations plan in September 2019. Extending the life of Kensington in this case involves increasing the mine’s tailings storage capacity by 4 million tons, or nearly 50 percent, to approximately 8.5 million tons, according to the draft decision. That would be done by raising the height of the tailings treatment facility from 88 feet to 124 feet and constructing another 40-foot “back dam” between the treatment facility and Upper Slate Lake, a natural lake. The draft approval also allows Coeur to expand the mine’s existing Pit No. 4 and Comet waste rock storage facilities as well as construct a new waste rock facility for a total storage capacity increase of 6 million tons. The work would also require 1.75 miles of new roads, according to the Forest Service. The development growth would also allow Coeur to increase throughput at Kensington’s mill from approximately 2,000 tons to 3,000 tons per day. Located about 45 miles north of Juneau on the edge of Lynn Canal, Kensington employs nearly 370 people. “The Forest Service recognizes the importance of mineral resources and encourages safe, responsible mineral exploration and development as part of our multiple-use mandate,” Tongass National Forest Supervisor Earl Stewart said in a prepared statement. “We have worked closely with Coeur Alaska to mitigate potential impacts of their proposed extension of operations for the mine. Public engagement has been and continues to be an important part of the process.” Forest Service officials opened a 45-day objection period along with publication of the draft decision that is open only to individuals who submitted “specific, timely comments” during any of the comment periods for the project, the July 9 announcement states. In January, the Juneau-based Southeast Alaska Conservation Council requested the agency require dry-stack tailings to limit spill risk to nearby Berners Bay, an ecologically significant area, following the release of the draft EIS. Southeast Alaska Fishermen’s Alliance Executive Director Kathy Hansen wrote in January comments on the project that the group supports Coeur’s plan because mining is an important part of the region’s economy, along with fishing, and the company’s operations have not harmed the surrounding marine environment. Coeur is proposing to improve Dolly Varden habitat by constructing new stream channels and small stream deltas along with replacing three culverts to facilitate fish passage. Forest Service officials state in the draft record of decision that there is a high likelihood that the tailings treatment facility — formerly Lower Slate Lake — will be restored to long-term fish habitat after closure of the mine. The expansion project would result in the loss of approximately 52 acres of wetlands through water inundation or fill; however, Coeur’s reclamation plan calls for a net increase in wetlands in the area once the mine is closed, according to the Forest Service. Coeur has operated the mine since startup in 2010, when Kensington represented about 5 percent of the company’s precious metal assets. Now, Kensington is nearly 30 percent of Coeur’s precious metal assets among its five operating mines, according to the company. This year Coeur expects to produce between 115,000 to 130,000 ounces of gold at Kensington, very much in line with the 125,000 ounces produced last year. Kensington held an estimated 331,000 ounces of reserves at the end of 2020 and another 830,000 ounces worth of mineralized material, according to Coeur’s annual report. The mine also produced 28 percent of the company’s revenue last year. Coeur expects to spend $23 million to $30 million on capital investments at Kensington this year that will be focused on pit development and equipment replacements, according to a corporate presentation. Elwood Brehmer can be reached at [email protected]

OneWeb launches final satellites to serve Arctic

A growing British telecom just cleared a major hurdle toward making Alaska one of the first jurisdictions to eventually have access to its global satellite broadband network. OneWeb launched 36 satellites from the Vostochny Cosmodrome in Southeast Russia on July 1, bringing its total constellation to 254 low-Earth orbit, or LEO, satellites. While the large, London-based broadband startup is still less than halfway to its goal of eventually having 650 LEO satellites circling the globe, it now has enough deployed to cover regions above 50 degrees north and Alaska is at the top of the service list, according to company leaders. The latest launch also keeps OneWeb on track to offer broadband capacity to Alaska, which will be sold through local retailers, before the year’s end. The next months will be spent testing the LEO system before it goes live; the company’s broadband offering is expected to go global in 2022. OneWeb representatives have said the company decided to roll out service in Alaska first because it is a part of the U.S. that in many respects resembles other countries that have large segments of population on the wrong side of the digital divide. “This is a historic moment not only for OneWeb, but also for the 49th state,” CEO Neil Masterson said in a July 1 statement from the company. “Our company has been committed to putting Alaska and the Arctic first and we are glad to be one step closer to delivering service.” Eric Gillenwater, OneWeb’s vice president and business head said in an interview following the launch that the company’s broadband, which he described as a “fiber-like experience,” will give Alaskans and others in remote regions of the world more options to be better connected to the global economy. He suggested seafood processors across Alaska could benefit from OneWeb’s low-latency broadband through real-time market and pricing information as one example of the many possibilities for helping industry in the state compete globally. “In my opinion it’s all about the use cases that are getting enabled. There are satellites that are there today but they’re limited,” Gillenwater said. The company is using a business-to-business model for its service, partnering with local “middle mile” providers that can use OneWeb’s service options to “make the whole economy more efficient,” he said. In January 2020, OneWeb and longstanding Alaska telecom Microcom announced a deal for Microcom to sell OneWeb’s broadband capacity in the state. Under that arrangement, Microcom will offer retail sales of OneWeb’s broadband and its subsidiary, Pacific Dataport Inc, will handle wholesale transactions. OneWeb’s LEO satellite network will augment what Pacific Dataport offers through its own Aurora broadband project, which aims to offer high-speed broadband via geosynchronous equatorial orbit, or GEO, satellites that are launched into an orbit thousands of miles above Earth and mirror the planet’s rotation. “This is an exciting moment for Pacific Dataport, Microcom and OneWeb,” Pacific Dataport CEO and Microcom founder Chuck Schumann said of the July 1 launch. “We have been working for the last five years to see Alaska fully connected, and we are making substantial progress today through our partnership with OneWeb.” In early June, OneWeb and Alaska Communications announced a similar distribution agreement. Alaska Communications CEO Bill Bishop said at the time that OneWeb’s service will augment what the Anchorage-based internet provider can offer to its business and government customers. OneWeb is utilizing partnerships like those it has with Pacific Dataport and Alaska Communications so everyone can focus on doing what they do best, according to Gillenwater. “The reason we work with a B-to-B model is our local partners will always know the local market better than we will. And to dismiss that type of knowledge we feel is not effective,” he said. “We’re part of the solution, not the solution.” When the deal with Microcom was first announced roughly 18 months ago, OneWeb’s service was supposed to be live in Alaska by the end of 2020. However, OneWeb went into survival mode and filed for Chapter 11 bankruptcy in the early days of the pandemic after major investors in the company’s ambitious plans pulled out to shore up their own finances during a period of extreme uncertainty. The British government and investment firm Bharti Global Ltd. teamed up to commit more than $1 billion to purchase and restart OneWeb last July; the events slowed, but didn’t stop, the company’s plans. Gillenwater said OneWeb and its suppliers have subsequently managed to overcome COVID-19 work restrictions, material shortages and other supply chain disruptions to keep the company on its revised work schedule. The monthly launches, which will continue for another year, are “becoming routine,” according to Gillenwater. “That’s only possible if you have the right operational rigor and experience to do that,” he said. Elwood Brehmer can be reached at [email protected]

Capital budget nearly $2B following vetoes

At just a hair less than $2 billion, the 2022 fiscal year capital budget is the largest Alaska has seen in years even after Gov. Mike Dunleavy vetoed more than $325 million from it. Much of what Dunleavy vetoed was federal highway funding but some of the nixed projects were also items he previously suggested. According to the administration, the $1.97 billion capital budget is the largest since the state’s fiscal outlook drastically deteriorated with the fall of oil prices seven years ago. Nearly $1.6 billion of that is federal money, most of which is directed to highway and airport projects, as is the norm, but the $239.7 million of unrestricted general funds is almost exactly double the $120.3 million spent last year. More than $2 billion in general funds alone were appropriated in annual capital budgets at the peak of state spending. “This capital budget will put people to work but also build Alaska and fix infrastructure,” Dunleavy said during a July 1 press briefing on the budget. Of his vetoes, which included some or all of 68 items totaling more than $1.1 billion in spending in the combined capital and operating budget bill, the largest and undoubtedly most contentious was $682.4 million for Permanent Fund dividends in an effort to ultimately force a larger amount. The second-largest line item cut was $150 million in federal highway project acceleration funds for the Department of Transportation and Public Facilities. The governor similarly vetoed a $100 million federal highway project contingency appropriation down to $30 million. In response to questions sent to DOT officials about what the money would be used for, Dunleavy spokesman Corey Young wrote that the governor recognized the Legislature’s skepticism in regards to large, block appropriations of federal money to agencies — an issue that cropped up last year with the CARES Act — and reduced the appropriations to DOT as a result. “The decision to significantly restrict DOT’s contingency and project acceleration funds is a show of good faith to the Legislature that his departments will not use federal funding tools to subvert the intent of the Alaskan appropriating authority,” Young wrote. However, the federal appropriations were added to the budget by the Legislature during the session based on a review of the original capital budget bill the governor submitted in January. According to the House majority caucus, some of the $220 million would have gone toward regional or smaller projects such as clearing ice roads between rural communities. When it comes to state money, Dunleavy vetoed a $10 million grant to the Alaska Travel Industry Association for statewide tourism marketing. ATIA is the state’s primary travel trade association. In April, the governor’s office announced a national tourism marketing campaign aimed at recruiting independent travelers to the state at a time when it appeared significant volumes of cruise passengers were unlikely to reach Alaska this year. ATIA CEO Sarah Leonard wrote in an emailed statement that the efforts by both the trade group and the governor’s office are beginning to pay off, but the funding cut is likely to kill that momentum and there will be no funding to market Alaska in 2022. “Alaska competes with other domestic destinations to attract visitors who have an ever-increasing, pent-up demand for travel. Next year, international destinations will most likely be back in the marketplace, offering even greater competition,” Leonard said. “Without state allocated marketing funds, ATIA is on hold in our efforts to help with the state’s economic recovery.” Dunleavy proposed a $5 million grant to ATIA in his original budget plan. The governor’s capital budget vetoes also included erasing a $21.6 million general fund appropriation to the Major School Maintenance Grant Fund as well as $13.2 million for a trail link between Seward and Fairbanks. A $12.5 million appropriation for upgrades to the Alaska Vocational Technical Center, or AVTEC, was also vetoed. Each of those vetoes were to items the governor also originally proposed in his $356 million general obligation bond proposal. While the Legislature did not pass the bond bill this year with some lawmakers uneasy about taking on debt with large sums of federal money available, it funded some of the projects at reduced levels, such as the school maintenance and AVTEC upgrades. The trail grant matched the administration’s original request. Elwood Brehmer can be reached at [email protected]

UAF imaging technology open for business

Scientists at the University of Alaska Fairbanks spent much of the last seven years learning how to interpret powerful imaging technology and now they’re looking for partners to use it. The renowned UAF Geophysical Institute has the only hyperspectral imaging sensors in the state. “We are very fortunate to have this capability here,” said Martin Stuefer, Alaska’s state climatologist and director of the Alaska Climate Research Center. Stuefer is particularly invested in the sensing equipment that underpins the Geophysical Institute’s hyperspectral imaging laboratory, best known as the HyLab, because he’s ostensibly given his airplane for it. The sensors take up much of the space behind the pilot’s seat in Stuefer’s Cessna 185, one of the most sought-after aircraft in the state for the versatility its size and power provide. The hyperspectral sensors must be finely calibrated each time they are moved so that means they live in his plane, according to Stuefer. “I’m a researcher and I’m very excited about the data. It’s a state-of-the-art technology, so I feel pretty privileged even not having the airplane for fun weekend rides,” he said. “It is pretty cool that we can provide this and demonstrate the capability. It helps my career too — no secret about it.” As the name implies, at least a little, the hyperspectral sensors take pictures that tell stories not visible to the naked eye by capturing the subtle, identifying color wavelengths that every material or substance or object holds. “We can sense the surface properties really in unprecedented detail,” Stuefer said. Geophysical Institute Directory Bob McCoy noted that normal color imagery starts with the three primary colors. “The idea with hyperspectral is instead of three you use like 1,000,” McCoy said. A geophysicist by training with deep expertise in remote sensing, current UAF Provost Anupma Prakash applied for the original $500,000 grant from the National Science Foundation to purchase the hyperspectral equipment in 2014 after serving as a science advisor to NASA officials working with remote sensing technology. “For me, the big passionate area was the mineral exploration potential of the equipment,” Prakash said in an interview. She described the detailed wavelengths as individual “signatures” that can be identified in most anything after careful study. “If you’re looking at a person’s signature, I can transfer a million dollars with someone’s signature because that signature identifies that person uniquely — that’s your identity. Every object on Earth has a spectral signature. An infected birch leaf has a different spectral signature than a healthy birch leaf. If there’s a deep-seated mineral, it leaches metals out to the soil and you can map it,” Prakash said, alluding to just a couple of the uses for the HyLab’s equipment. “We interpret the subsurface based on what we see on the surface.” Stuefer is naturally eager to talk about the applications for climate-related monitoring, such as cataloging areas with large amounts of wildfire fuel, different aspects of glacial melt or various ocean conditions, but he also emphasized that the “noninvasive” aspect of the imaging technology should allow for less costly — to the environment and on the balance sheet — mineral exploration. “There are some areas (in the Alaska Range) where people have gone in with large machines and didn’t find anything and destroyed a lot of the surface. If they would have had our technology I think there would have been a lot less damage,” Stuefer said. Officials at the University of Washington are using their own hyperspectral sensors to collect large-scale agricultural research. Data is collected by flying prescribed linear patterns at altitudes usually between 7,500 and 8,500 feet, he said, adding that the higher the flight the larger the ground segment the sensors can capture and hyperspectral imaging is best suited for landscape-level analysis. “I fly high because I do not need centimeter-scale; I need meter-scale on the ground resolution segment,” Stuefer said. It has taken UAF researchers years to become true experts in taking, and importantly examining, the hyperspectral images because it simply has taken that long to learn how to analyze the airborne data and classify many of the on-the-ground materials observed. McCoy said Geophysical Institute officials now want to partner with private industry to really put the HyLab technology to work and they’re open to ideas. “We’re not about making money. We’re about doing research and finding new technologies,” McCoy said. “What we’d like to do is show something really works well and see industry go out and do it themselves. That’s kind of what we’re all about.” UAF also offers a free course for how to interpret the hyperspectral images for anyone using data from them, according to Prakash. “I’m very happy that we have faculty and students and post-docs taking it forward,” Prakash said. Elwood Brehmer can be reached at [email protected]

Reinsurance program caught up in failed CBR vote

The Alaska House of Representatives reversed course June 28 to make sure the whole state government won’t shut down July 1, but politics will still leave many longstanding and broadly popular programs unfunded for the foreseeable future, including one that has been successful in reducing private health insurance premiums. Legislators on the budget conference committee attempted to pressure their colleagues to vote for Permanent Fund dividends of about $1,100 per person by tying the larger amount to funding the Power Cost Equalization subsidy for rural residents, the state’s school bond debt payments to local governments and $114 million in oil and gas tax credits; paying the oil and gas tax credits has been supported by many of the Republican advocates for larger PFDs. Much of the funding for the PFD and the other impacted programs in the fiscal year 2022 budget was made contingent upon a favorable vote for the now-annual draw from the state’s dwindling savings account, the Constitutional Budget Reserve, which requires a three-quarters vote in both the House and Senate to access its funds. An affirmative CBR vote also authorizes a technical action, known as the “reverse sweep,” that restores program funds at the start of each fiscal year due to a constitutional requirement. However, the CBR vote failed in both the House and the Senate, resulting in a slew of un-or underfunded programs and capital projects, and PFDs of approximately $525 per Alaskan, at least until the Legislature convenes again. Among the unfunded programs is one that only required lawmakers to approve the acceptance and transfer of federal funds to help offset the unusually high cost of individual market health insurance plans in Alaska. The state’s first-of-its-kind reinsurance program, approved by lawmakers in 2017, lowers the cost of health insurance premiums for individual market enrollees by directing the premiums of high care utilization or catastrophic health cases to the Alaska Comprehensive Insurance Association, a nonprofit. The insurance group then goes to the broader individual market to spread out the costs for those individuals, lessening the cost to individual insurance providers. After rising to the highest in the nation, Insurance premiums for individual plan holders have mostly decreased each year since the program took effect. Alaska was eligible to receive approximately $78.5 million from the U.S. Department of Health and Human Services to support the reinsurance program through a 1332 innovation waiver, according to a March statement from the state Division of Insurance, but budget language tying the reinsurance program to the reverse sweep means the program is currently unfunded for the 2022 and 2023 fiscal years, according to some House Democrats. Department of Commerce, Community and Economic Development spokeswoman Glenn Hoskinson wrote via email that the funding level for the reinsurance program the next two years is unkown, but noted that it is funded on a calendar year basis.  The average premium for a consumer on a Bronze marketplace plan was $435 per month in 2020, which was down about $100 per month versus 2018 rates, according to the Kaiser Family Foundation. The House adjourned sine die nearly immediately after approving an effective date for the existing budget to avoid a government shutdown but did not address the CBR vote, all but assuring the host of impacted programs will start the fiscal year without the necessary funding. Senate President Peter Micciche, R-Soldotna, said in a statement provided by a Senate Majority spokeswoman that the caucus will have internal meetings and discuss with other legislators the prospect of addressing the CBR and potentially other items before the next special session called by Gov. Mike Dunleavy — the third this year — begins in early August. “There’s still more work to be done: the three-quarter vote, reverse sweep, etcetera. If there’s a way of coming to an agreement for short-term sessions prior to the special session, I believe we would have the opportunity to be a lot more productive,” Micciche said. A spokesman for House Speaker Rep. Louise Stutes, R-Kodiak, did not respond to questions about the prospect for dealing with the CBR vote prior to August in time for this story. Elwood Brehmer can be reached at [email protected]

More of the same a good thing as Bristol Bay gets underway

Early indicators are pointing to yet another strong year in the massive Bristol Bay sockeye fishery, which is contrasted against the continued struggles in many of the state’s other large salmon fisheries. Just more than 3.2 million sockeye had been harvested through June 27, according to Alaska Department of Fish and Game figures, with the Nushagak District accounting for more than half of the catch so far at nearly 1.7 million fish. The 3.2 million-fish harvest to-date this year is between the comparable totals for recent years; 1.2 million sockeye were harvested through June 27 last year, while more than 4.4 million were caught by the same day in 2019. With sockeye harvests of more than 40 million fish and total runs greater than 56 million sockeye, both of the last two years have been among the most productive in the history of the Bristol Bay fishery. Dillingham Area Management Biologist Tim Sands said early June 29 that he’s confident there are a lot of fish still making their way to the head of Bristol Bay based on catches in the Port Moller test fishery. He noted that returns to the Egegik River down the Alaska Peninsula have been particularly strong, with a harvest of more than 1.2 million fish and a total return estimated at more than 1.7 million sockeye through June 27, several-fold more than last year in each category. “We’re seeing a little bit of a lull here, which we’ve seen the past four years, and it’s supposed to blow (June 30) so I expect things will kick into high gear from then on,” Sands said. Strong winds blowing up the bay can help push surface-oriented sockeye towards the rivers and nets at the head of the bay. Sands also said he expects the Nushagak River return to exceed the department’s preseason forecast of nearly 5.8 million sockeye; the run forecast for the adjacent Wood River is nearly 8 million sockeye. The overall 2021 Bristol Bay sockeye forecast of just more than 51 million fish — while less than actual returns the past four years — would still be 45 percent greater than the long-term average for the bay, according to ADFG. Sockeye escapement in the Nushagak has already more than doubled the upper end of the department’s optimal escapement goal of 760,000 fish, with more than 1.6 million past the sonar through June 28. Escapement in the Wood River was more than 1 million sockeye as of June 28 as well. Sands said those large early escapement figures are primarily due to limited early-season commercial fishing time. “We were trying to protect our (Nushagak) kings and the only way to protect them is to not fish,” he said, latter adding, “We also had a lot of nets out of the water even though it was open,” due to several days of winds strong enough to make fishing impractical and unsafe. Through June 28 the Nushagak River sonar had enumerated just 20,649 kings, less than comparable run totals for the prior two years when the runs ultimately fell well short of the 55,000-fish lower end of the biological escapement goal. The Nushagak District king harvest was reported at 1,639 fish as of June 28, according to ADFG. Harvest restrictions have also been implemented in the upriver Nushagak king sport fishery. Until very recently the Nushagak was one of the few major king-producing river systems in the state to maintain strong returns. Sands said June 29 that managers will likely increase the frequency of fishing openers soon. He also encouraged fishermen to use nets with a smaller diameter mesh to help control escapement, as the 2021 edition of Bristol Bay are again trending smaller than long-term averages. Andy Wink, executive director of the Bristol Bay Regional Seafood Development Association, wrote via email that factors are starting to shape up favorably for Bristol Bay fishery participants. Market conditions are good for Bristol Bay sockeye as the season ramps up with high demand, particularly in the domestic retail sector and the early numbers of fish are so far supporting the preseason harvest forecast of 36 million sockeye, according to Wink. “Retail prices for sockeye are trending up, farmed salmon prices are way up, the dollar is weaker; all things considered market conditions for sockeye look even better than 2019 and 2019,” when final ex-vessel prices averaged $1.60 and $1.54 per pound, respectively, he wrote. Peter Pan Seafood Co. leaders announced in mid-June that they would commit to pay a base price of $1.10 per pound for Bristol Bay sockeye this year. According to ADFG data, the final ex-vessel price for Bristol Bay sockeye averaged 70 cents per pound in last year’s pandemic-suppressed market. Under new state-based ownership this year, the Peter Pan is quickly making it common practice to publicize its prices early in a fishery — the same was done in May for Copper River salmon — a departure from tradition in the industry intended to gain support from fishermen. As for the Copper River, fishing has been more consistent after another slow start and harvest totals so far this year have already exceeded the final numbers in what was a dismal 2020 but are still well below historical averages. Through June 28, just more than 195,000 sockeye and 6,721 kings had been harvested in the Copper River district over eight openers. In the Kodiak area, the sockeye harvest totaled 408,761 fish through June 26, according to ADFG figures, while sockeye escapement totals through June 27 at many of the region’s primary rivers were less than recent years. The total annual Kodiak sockeye harvest has averaged approximately 1.8 million fish over the past 10 years. Elwood Brehmer can be reached at [email protected]

Supreme Court sides with ANCs on CARES funds

Alaska Native corporations are set to receive roughly $450 million in COVID-19 relief grants following a June 25 Supreme Court ruling but leaders of the companies have stressed none of it will end up in corporate coffers. The U.S. Supreme Court decided in a 6-3 split opinion that the nearly 200 Alaska Native regional and village corporations, or collectively ANCs, are eligible for a portion of the $8 billion set aside for Tribes nationwide to use to mitigate the direct impacts of COVID-19 in the $2.2 trillion CARES Act passed by Congress shortly after the domestic onset of the pandemic in March 2020. The Treasury Department under former President Donald Trump first said the ANCs would be allocated $500 million, which was later revised down to approximately $450 million. The justices that signed onto the majority opinion written by Justice Sonya Sotomayor ultimately agreed with what the members of the Alaska congressional delegation had emphasized from the start: ANCs were meant to be eligible for the Tribal funding in the CARES Act. Rep. Don Young and Sens. Lisa Murkowski and Dan Sullivan said in a joint statement following the release of the court opinion that it is a major victory for Alaska Natives who, under the unique structure largely established by the Alaska Native Claims Settlement Act, receive services through several types of Tribal governments and organizations along with the ANCs. “The U.S. Supreme Court affirmed what we knew all along — that when Congress used the definition of ‘Indian tribe’ from the Indian Self-Determination and Education Assistance Act in the CARES Act, it absolutely made Alaska Native corporations eligible for those coronavirus relief funds,” the delegation said collectively. “We knew this because we wrote this language in the CARES Act. In addition to equitable pandemic relief, this decision ensures Alaska Natives will continue to benefit from the unique but effective delivery of health care, housing, and many other public services authorized under numerous statutes using the ISDA’s definition of an Indian tribe, which the (prior) D.C. Circuit ruling threatened to destabilize.” A nationwide coalition of Tribes, which eventually included several of Alaska’s 229 federally recognized Tribes, sued the Treasury Department in April 2020 when it became clear the agency intended to make a portion of the CARES Act Tribal appropriation available to the ANCs. At the heart of the matter was a Congress-specific definition of an Indian Tribe, as referenced by the Alaska delegation. The brief clauses in Title VI of the CARES Act that allocate the $8 billion direct Treasury officials to disperse the money to “tribal governments” within 30 days after the bill was signed. The definition of a Tribal government used in the CARES Act is pulled directly from the 1975 Indian Self-Determination and Education Assistance Act, which states that Indian Tribes include any “tribe, band, nation, or other organized group or community, including any Alaska Native village or regional corporation as defined in or established pursuant to the Alaska Native Claims Settlement Act which is recognized as eligible for the special programs and services provided by the United States to Indians because of their status as Indians.” Tribal attorneys argued that despite the explicit inclusion of ANCs in the Indian Self-Determination and Education Assistance Act definition, the corporations should not be eligible for the CARES money because they do not qualify for all of the “special programs and services that official, federally recognized tribes do; for one, they are for-profit enterprises and not sovereign governments. D.C. District Court Judge Amit Mehta issued a preliminary injunction early in the case preventing Treasury from dispersing the $450 million to the ANCs, but eventually sided with the delegation and the ANCs in a June 2020 ruling on the case. The D.C. Circuit Court of Appeals reversed Mehta’s ruling, instead concluding in its ruling that the ISDA definition of an Indian Tribe only includes ANCs “only if ‘recognized’ as such.” An appeal by the corporations led to the Supreme Court decision in which Sotomayor wrote that the ISDA definition of an Indian Tribe does not specify the particular programs and services an organization must be eligible for to satisfy the “recognized-as-eligible clause.” “Given that ANCSA is the only statute the ‘Indian Tribe’ definition mentions by name, the best reading of the definition is that being eligible for ANCSA’s benefits by itself satisfies the recognized-as-eligible clause,” Sotomayor wrote in the majority opinion. Ethan Tyler, spokesman CIRI Inc. said the Southcentral regional corporation does not have detailed plans yet for its portion of the $450 million, but highlighted that the funds must be used to counter the direct public impacts of COVID-19. “Ultimately, our plan is to get (the money) to where it’s needed most and we’ll be working with our partners and Tribal affiliates to serve our shareholders and descendents,” Tyler said. Sealaska Legal and Policy Vice President Jaeleen Kookesh insisted the case simply reinforces the specific qualifications Alaska Natives have lived under for decades. “This isn’t creating anything new,” Kookesh said in an interview. She also serves on the legal working group for the ANCSA Regional Association. Attorneys representing the Alaska Tribes did not respond to questions in time for this story. ANCs have long been eligible for other programs aimed at addressing Tribal issues ranging from cultural preservation to energy development and the CARES Act just added COVID-19 to that list, according to Kookesh. “We’re not now sovereigns; we’re not now federally recognized Tribes but we continue to be eligible as Tribes by specific statutes,” she said. “Our Alaska Native people are served through tribes, Alaska Native nonprofit organizations or Alaska Native corporations and this case just allows distribution of the funding through these types of organizations.” Treasury representatives did not respond to questions about how the $450 million will be allocated amongst the 12 regional corporations and 174 active village corporations, but Kookesh said meetings and training sessions with Treasury officials are scheduled to help ANC accountants document their CARES expenditures for potential audits down the road. She stressed the money will not be used to provide boosted shareholder dividends, employee bonuses or anything of the like. Sealaska leaders are examining ways to reach Tribal members living outside of the areas where existing services are offered by Tribes or ANCs with the CARES money, among other uses for it, according to Kookesh. Otherwise, it is likely much of the money will be sent to Tribes or nonprofits that have already established eligible programs and could use additional funding. “Or, if they have a program that works, maybe we can borrow that structure and integrate it into our organization,” Kookesh said. Elwood Brehmer can be reached at [email protected]

88 Energy makes deal to sell $19.1M in tax credits

Alaska’s $700 million-plus oil and gas tax credit obligation has been cut some but not because lawmakers are paying it down. Leaders of the small North Slope explorer 88 Energy Ltd. announced June 21 that they have reached an agreement with a larger oil producer in the state to sell $19.1 million worth of refundable tax credits from the State of Alaska for $18.7 million. The transaction itself is not unusual, as state officials and industry insiders have said such deals have been a regular occurrence since the state started limiting its annual tax credit refund payments in 2015. Prior deals involving the potentially sensitive financial information, though, have not typically been acknowledged and rarely, if ever, has the value of the transaction been disclosed. Ashley Gilbert, managing director of Australia-based 88 Energy said the deal was made simply to accelerate the timeline on which the company could realize the value of the credits it held. Under current estimates, the 88 Energy’s credits were not likely to be fully reimbursed until 2026, according to a company statement. “As a result of the transaction, the company is now set to be debt-free with reduced annual overheads of over $1 million in associated finance costs,” Gilbert said in a prepared statement. According to the company’s figures, 88 Energy holds $16.1 million in debt that is due to mature at the end of 2022. The revenue from the tax credits will be used to pay that off and the remaining $2.6 million will be put towards the company’s working capital needs. The credits were largely issued to small exploration companies that did qualifying work, but they were then often used as collateral for loans issued by investment banks to support additional exploration work. A commonly used credit for explorers with no production and no tax liability had the state paying 35 percent of the cost of qualifying work in cash. The Legislature largely ended the tax credit program in 2017 as state revenues remained low and savings started to dwindle. However, the credits earned but unpaid in previous years remained. 88 Energy holds approximately 210,000 acres on the North Slope mostly around the edges of other industry activity. The company has participated in drilling several exploration wells on the southern portion of the Slope in recent years and in April announced its Merlin well drilled last winter in the National Petroleum Reserve-Alaska struck Nanushuk formation sands that are the basis for multiple large, ongoing oil developments. The sale also saves 88 Energy from future interest payments on that debt. On the other end of the deal, the unnamed large producer — the group including ConocoPhillips, ExxonMobil or Hilcorp, which do not acknowledge the individual transactions — can use the $19.1 million in credits to pay down the oil production taxes it owes to the state and save the roughly $400,000 difference between the value of the credits and the $18.7 million purchase price. The state, in turn, will see its tax credit bill, which stood at $732.5 million to start the year, according to the Department of Revenue, decrease by $19.1 million. At this point, it appears 88 Energy’s credit sale and similar deals will be the only way the state’s obligation will be cut this year. That’s because the Legislature did not approve a $114 million payment to the state’s oil and gas tax credit fund when they passed the operating budget June 16. The $114 million payment was set to come out of the Constitutional Budget Reserve Fund, which requires a three-quarters vote from both the House and the Senate to draw from, but the CBR draw vote failed after being wrapped in the complex and omnipresent fights over the size of Permanent Fund dividend checks. The tax credit payment is one of several programs or obligations that will go unfunded in the 2022 fiscal year if lawmakers do not pass additional funding bills. Gov. Mike Dunleavy called the Legislature into a second special session starting June 23 to remedy the effective date for the budget that he insists is needed to prevent a government shutdown July 1. Many legislators, however, argue that the budget is valid as-is based on prior legal opinions that conclude spending bills do not need an effective date clause to be immediately valid. As it stands, this year would mark the third consecutive budget in which the Legislature decided not to fund the tax credit payments, a situation that has helped push some small companies into bankruptcy and damaged the state’s reputation amongst lenders to the industry. The last payment to the tax credit fund of approximately $100 million came in fiscal year 2019 after the state’s plan to sell bonds that would support a full payoff of the credit obligation was challenged in court. Lawmakers decided against tax credit payments the next two years while the lawsuit over the bond plan made its way through the courts. The Alaska Supreme Court unanimously found the plan violated the strict sideboards on accruing debt in the state Constitution last September, putting lawmakers back at square one. Despite it being years since the state issued any significant amount of tax credits, the $700 million-plus tally of the yet-unpaid credit certificates continues to complicate matters for credit holders, which are not all banks and oil companies, either. The borough-owned Interior Gas Utility in the Fairbanks area is owed $15 million for LNG storage credits it earned when it recently completed a 5.25 million gallon LNG storage tank intended to underpin expanding gas distribution in the area. IGU General Manager Dan Britton wrote via email that if the credits are left unpaid the local utility will eventually be forced to borrow to complete projects the credits would have otherwise funded. The ultimate result is either slightly higher utility rates or a slower expansion of IGU’s gas network, according to Britton. In all, Revenue officials said there are approximately 40 entities holding oil and gas tax credit certificates. The tax credit situation is also a challenge for the new owners of the small Cook Inlet gas producer Furie Operating Alaska, which filed for bankruptcy in 2019 due to management and production issues and being owed more than $100 million by the state. Creditors to the pre-Chapter 11 iteration of Furie are still owed $103 million, according to CEO John Hendrix. However, the deal Hendrix reached last year to purchase Furie for $5 million in cash included a clause that requires the company to pay the creditors $15 million plus 7 percent interest, which kicks in next year, if approximately 90 percent of the $103 million is not paid off by July 2025, he wrote in an email. “If they pay off the tax credits owed to the creditors my purchase price goes from $20 million to $5 million,” he said. Hendrix was former Gov. Bill Walker’s oil and gas policy advisor in 2016 when Walker vetoed most, but not all, of the tax credit payment approved by the Legislature. He said in an interview that he stressed to Walker at the time that the state needed to fund the credits each year based on the formula laid out in statute, which generally calls for payments in the $50 million to $150 million range, as opposed to fully paying them off to the tune of several hundred million dollars each year. That’s much different than the Legislature now ignoring the statutory formula, Hendrix said. “Money comes in from (production) taxes, it pays down the credits. What they’re doing now, the Legislature isn’t appropriating the money they’re getting in taxes,” he said. Back on the Slope, the continued lack of credit reimbursement could indirectly slow the progress on a potentially large oil discovery, according to another small explorer. London-based Pantheon Resources Ltd. purchased Anchorage-based Great Bear Petroleum’s assets in 2019 after Great Bear had done years of exploration work and earned tax credits on the North Slope. Pantheon leaders in late May announced an oil discovery near the Dalton Highway that they believe is greater than 1 billion recoverable barrels. They said in a corporate statement responding to questions about the tax credits that Pantheon did not purchase Great Bear’s credits or the associated debt, noting that Pantheon’s work has been done after the program ended. However, Great Bear and its lender are large shareholders of Pantheon and the company’s ability to raise money for ongoing work is “significantly compromised by the debt that remains outstanding due to the failure of the state to repurchase the eligible tax credits,” according to the Pantheon statement. It’s unknown how much Great Bear is owed. Elwood Brehmer can be reached at [email protected]

North Slope outpaces state production forecast

Improving oil prices and a little better than expected North Slope production are bits of good news for Alaska’s budget situation, but everything is relative when compared against the worst of 2020. The price for Alaska North Slope crude has been on a consistent upward trend in recent weeks and closed June 22 at $74.64 per barrel, according to state Revenue Department figures, which is far greater than the department’s average price forecast of $53.05 for state fiscal year 2021 that ends June 30. However, the forecast, made in March, is very close to the actual yearlong average ANS price of $53.64 per barrel. When releasing the updated forecast in March, the state estimated the better price per barrel would result in an additional $322 million in unrestricted General Fund revenue for the current fiscal year. Oil market analysts largely believe prices will remain strong — they are currently as high as they’ve been since fall 2018 — as global demand continues to recover from the pandemic. On the production side of the equation, actual North Slope production of 487,368 barrels per day has outpaced the spring forecast compiled by the Department of Natural Resources by 5,391 barrels per day, which adds up to nearly 2 million barrels over the course of the year. Division of Oil and Gas spokesman Sean Clifton noted via email that the official forecast figures are the mean in a production forecast range and the modest increase in production above the mean forecast is still well within the broader forecast range. Clifton wrote that while it’s possible the operators could be responding to improved prices, it’s not likely given the more methodical approach to North Slope oil development as compared to the more agile shale operations across much of the Lower 48. The average daily production for most of fiscal year 2021 is also a 2.5 percent increase over 2020, when production averaged just less than 475,000 barrels per day after ConocoPhillips curtailed much of its North Slope production during the worst of the pandemic-induced oil price collapse. The to-date 2021 production of 487,368 barrels per day is still a decline of nearly 12,000 barrels per day from 2019, when North Slope production averaged approximately 499,100 barrels per day. All of the recent-year figures mark the lowest levels of North Slope production since startup of the Trans-Alaska Pipeline System in 1977, according to state production records. Department of Natural Resources officials believe North Slope production will bottom out next year at roughly 460,000 barrels per day before new projects start to bring new oil online and starts a steady increase back to more than 565,000 barrels per day by 2030, according to the spring forecast. Elwood Brehmer can be reached at [email protected]

Trustees, stakeholders differ on spending final Valdez funds

Nearly 30 years after ExxonMobil agreed to pay $900 million to help restore resources damaged by the company’s disastrous Prince William Sound oil spill, more money remains than was once expected, and naturally there are plenty of ideas as to what should be done with it. The Exxon Valdez Oil Spill Trustee Council, the entity responsible for allocating the civil settlement funds, approved structural changes to the traditional spending plan in January for the roughly $200 million left in the spill restoration accounts that many opposed to the changes have dubbed a “spend-down plan.” Specifically, the six EVOS trustees — three state-appointed and three federally-appointed — voted to shift the council’s previously annual public review and meetings to a five-year cycle. In October, the council is expected to review and vote on 10-year funding proposals. Shauna Hegna, president of the Kodiak-area Alaska Native regional corporation Koniag Inc., said in an interview the company has long been in the camp that there is significant value in creating an endowment for the remaining EVOS settlement money that could fund projects in perpetuity. “The trustees have vocalized that they want to spend down the money,” she said, adding such an objective might meet the immediate needs to restore much of the ecological damage caused by the spill but it is unlikely to adequately support the human services needed to help communities fully recover from the spill. Kodiak-area villages are, or at one point were, fishing communities that lost their primary economic driver after the spill and, according to Hegna, many now lack the resources to rejoin the industry as the ecosystem has recovered. “How do you position the next generation to enter that economy now that you’ve recovered the fish resource but the workforce has moved on?” Hegna questioned. “Just doing scientific research doesn’t heal an economy; you have to then invest in that economy.” She suggested investments in workforce training and programs to help would-be commercial fishermen enter the typically capital-intensive industry. Chugach Alaska Corp. Lands and Resources Vice President Josie Hickel said based on her research that less than 1 percent of the total EVOS settlement funds dispersed to-date have gone to Alaska Native communities in the Chugach and Koniag regions. Hickel emphasized that the scientific research funds regularly go to projects such as fish population monitoring managed by the Alaska Department of Fish and Game and the National Oceanic and Atmospheric Administration through the National Marine Fisheries Service it oversees. ADFG Commissioner Doug Vincent-Lang and NOAA Fisheries Regional Administrator Jim Balsiger both serve as appointed council trustees. “They’re just giving themselves money and I’m not saying those programs aren’t necessary or effective, but again, it goes back to this whole idea about process and it doesn’t seem to be open and transparent,” Hickel said. She and Hegna also said projects to help preserve cultural resources and activities not totally lost to the spill should also be a higher priority for the council. “Many of those (ecological) resources have recovered 30-plus years later but there are still impacts on our communities,” Hegna said. “The cultural resources that were damaged by the Exxon Valdez oil spill are irreplaceable. Our village economies were changed by the oil spill and that has led to outmigration from many villages in our region.” Vincent-Lang, through a department spokesman, referred questions to current council chair and Alaska Department of Environmental Conservation Commissioner Jason Brune. Tribes seek input Additionally, Chugach representatives have heard from Tribal leaders in their region that federal officials have not adequately consulted with them on potential council-supported projects in their communities, according to Hickel. “There certainly hasn’t been any meaningful consultation in the last five years that I’m aware of,” she said, though council members in recent conversations have indicated a desire to improve outreach to the region’s Tribes and villages. “We get the impression that they’re trying to shore things up, improve their processes and make things more open and transparent and understanding the need to work with Alaska Native communities and the people of the region but to this point it’s all been talk.” NOAA’s Balsiger, who has spent approximately 15 years on the council over two stints, said in an interview that he believes the council needs to improve its Tribal consultation and said the trustees have urged council staff to work with Tribal representatives on funding proposals that fit under the terms of the 1991 Consent Decree. “I understand to the Tribes, ‘we’re working on it’ is not a good answer but I hope they can be patient,” he said in regards to more Tribal involvement in the council. Balsiger added that he believes projects focused on restarting cultural activities lost after the spill, such as subsistence harvests, or preserving cultural artifacts, can fit under the settlement. “I think that if they’re properly put together there’s no problem finding them legitimate under the Consent Decree,” Balsiger said. Acting EVOS Trustee Council Executive Director Shiway Wang directed questions about the organization to the individual trustees. DEC’s Brune, who has chaired the last two EVOS council meetings, said the council’s latest invitation for proposals — those proposals are now being vetted by council staff — requires outreach to Alaska Native organizations in the communities where work is proposed and documentation of the consultation that occurs. At the first meeting he chaired in early 2020, Brune said he heard from representatives of several Tribes and village corporations that they were not made aware of the meeting and he has subsequently met with Chugach and Koniag officials countless times, adding he has encouraged staff to increase coordination with those groups as well. However, Brune also said “consultation does not mean funding,” explaining that he believes local groups should have the opportunity to fairly compete for funding but having it awarded should not be a forgone conclusion. “If their projects rank up favorably, absolutely,” he said of directing funding to proposals by Alaska Native organizations. As to the longer-term funding plans, Brune said they are essential to maximize the efficacy of the available funds while providing certainty to the practitioners of the years-long scientific research and habitat restoration projects the council has historically supported. “That predictability is incredibly important to scientists,” he said. Return on investment boosts balance Brune acknowledged that the council’s broad plan for scientific research calls for spending roughly $100 million over 10 years but also emphasized that the money will not all be allocated at once, meaning what remains will continue to generate investment returns, or it will at least as long as the Permanent Fund does. As of Jan. 31, the latest financial report available for the council, the EVOS research investment account held $108.8 million and the habitat account held another $88.3 million for total EVOS funds of $197.1 million, which Brune and Balsiger said is a lot more than initial estimates projected would be left. “Because of the investment success the monies have gone a lot further than anyone ever anticipated, both for science and habitat,” Brune said. While a very short period of time during which market returns have been exceptionally strong, the recent performance to the investment accounts has more than maintained the balances despite withdrawals. Through the first months of the 2021 fiscal year the research account, for example, grew by more than $5 million despite $7.6 million in withdrawals because $13.3 million in investment income was generated. It’s a similar story for the habitat account, which started the fiscal year at $82.9 million and has grown to $88.3 million even with $4.6 million in withdrawals for projects and administrative costs. Having the EVOS funds invested alongside Permanent Fund assets — as many other State of Alaska investments are — may not be an official EVOS endowment “but to me it runs pretty much like one,” Balsiger said. “The Permanent Fund is a good place to put your money.” To additional concerns about lifting the requirements for annual council meetings, Balsiger said fewer opportunities for the public to directly provide input to the trustees is not ideal, but added that he expects there will be enough issues to address that formal meetings will still be held pretty regularly. “Things come up so I would think we will continue to have more frequent meetings than every five years,” he said. Brune stressed that council staff will continue to monitor and require annual reporting for funded projects, also noting that the council held two meeting last year and is very likely to hold a second this year, which is beyond the prior requirements. “A meeting for a meeting’s sake is not often necessary but if there’s a funding decision that needs to be made, then absolutely, we should meet,” Brune said. Stakeholder alternatives In recent years, an informal group of EVOS stakeholders and generally involved individuals self-dubbed the EVOS Think Tank, which includes Hegna, Chugach board chair Sheri Buretta and former Alaska lieutenant governors Fran Ulmer and Mead Treadwell among others, has pressed the council to transfer the EVOS funds to the Alaska Community Foundation under a plan that would set aside $20 million endowments each for the Alaska Sea Life Center in Seward and the Prince William Sound Science Center in Cordova, among other allocations. A white paper published by the EVOS Think Tank in February 2020 asserts that the administrative burden of transferring funds between multiple government agencies can consume upwards of 40 percent of the funding for some projects research and habitat projects and investing with the Alaska Community Foundation would be one way to lessen that overhead. Balsiger said he’s not convinced the nonprofit groups could manage the money more efficiently. There are also questions as to whether or not the council could legally hand over the $197.1 million even if it wanted to. According to the council, a legal opinion from Department of Justice attorneys states the federal laws establishing and guiding the council make such a fund transfer illegal. While some Think Tank members contend the DOJ memo posted to the council’s website is largely legalese that falls short of providing a true legal opinion, Brune insisted DOJ attorneys have kept a more detailed opinion provided to the trustees confidential despite his urging to make it public. Brune said he is in favor of an EVOS endowment in concept — if it were legal — because he believes the administrative burden could be lessened but not some of the specifics of the Think Tank proposal, which got an endorsement from the congressional delegation in 2018. “The money could be going directly to Gulf of Alaska ecosystem monitoring and other science,” Brune said, adding, “I wanted to see the Sea Life Center and the Prince William Sound Science Center endowed in perpetuity; talk about a great legacy following the spill.” Balsiger said new ideas could always come forward but at this point the Think Tank’s proposal is “a settled issue” among the trustees. Hegna said overall she is “cautiously optimistic” that the steps the council has taken to clarify the policies for distributing funds and the new requirements in the proposal process will result in more opportunities for local involvement and help empower communities in the Koniag and Chugach regions to compete for EVOS funding. “We’ve had 31 years to right the ship and we’re not quite there yet,” Hegna said. Elwood Brehmer can be reached at [email protected]

Court rulings reopen door to Inlet oil and gas activity

Federal judges in recent weeks have reopened the door to more oil and gas exploration in Cook Inlet, but the immediate impact is uncertain. Federal Western Louisiana District Court Judge Terry Doughty granted a preliminary injunction request from Louisiana and other states including Alaska June 15 that temporarily prevents the Biden administration from “pausing” the oil and gas leasing programs for federal lands and offshore waters. President Joe Biden in his first week in office signed an executive order that paused federal leasing across the country and in Alaska impacted a lease sale for the federal waters of Cook Inlet scheduled for sometime this year. Doughty’s injunction is likely to hold until the case is settled. The states largely argue Biden’s executive order is arbitrary and is costing them potential revenue from oil and gas exploration and production. Gov. Mike Dunleavy lauded the ruling in a statement from his office, calling it “stunning that a federal judge has to tell the president of the United States to stop trying to illegally shut down environmentally sound oil and gas development and good paying jobs for Americans and Alaskans.” Sen. Lisa Murkowski in a statement to the Journal urged the state or other stakeholders to sue the Biden administration over the June 1 announcement that Interior Department officials would suspend the leasing program for the Arctic National Wildlife Refuge. In Alaska U.S. District Court, Judge Sharon Gleason issued an order May 27 outlining a path for Hilcorp Energy to explore the 76,000 acres it acquired in 14 leases during the 2017 federal Cook Inlet lease sale, the first of its kind since 2008, and conduct other activities in the Inlet over a five-year period. Hilcorp was the only bidder in the sale, which netted just more than $3 million. Gleason ordered portions of the marine mammal permits and environmental review findings by the National Marine Fisheries Service for Hilcorp’s seismic exploration program vacated and remanded the permits and environmental assessments back to the agency for revision. Cook Inletkeeper and the Center for Biological Diversity sued NMFS in 2019, arguing the marine mammal incidental take permits and finding of no significant impact for the seismic work severely discounted the impact the blasting and tug activity associated with exploration and decommissioning offshore wells could have on Cook Inlet’s endangered beluga whale population and other marine life. Gleason vacated some portions of the environmental permits related to tug activity but did not give NMFS officials a deadline to have the subsequent permit revisions complete as Hilcorp requested in court filings. A Hilcorp spokesman declined to comment but the company has not appealed Gleason’s ruling. Cook Inletkeeper Advocacy Director Bob Shavelson said the Homer-based environmental advocacy group also does not plan to appeal. “It’s nice the court found the deficiencies (in the permits) but they’re mostly technical and they can probably fix them,” Shavelson said. He insisted the primary issue is the legal requirements aren’t sufficient to protect, in this instance, marine life. “The policy is not in line with the science,” he said. Elwood Brehmer can be reached at [email protected]

Report: ‘Blue’ economy outpaced national growth in 2019

The nation’s maritime economy accounted for nearly $400 billion worth of gross domestic product in 2019 and its growth outpaced that of the strong, pre-pandemic U.S. economy overall, according to federal data published June 8. Dubbed the “blue economy” by marketing types, the varied water-centric industries from trans-oceanic shipping to mariculture, cruising, shipbuilding, oil and gas development, commercial fishing to beachcombing combined to provide approximately 1.9 percent of the U.S. GDP in 2019. The $397 billion of economic output from the blue economy two years ago — which includes the Great Lakes — represented 4.2 percent growth versus 2018, when the sector generated $372 billion, or 1.8 percent of total U.S. GDP. The growth was not limited to final output, either, according to the first Marine Economy Satellite Account compiled by Commerce Department agencies. Total compensation for blue economy workers increased 7.3 percent in 2019 alone compared to 4.4 percent for the U.S. economy as a whole and employment up 3.2 percent versus 1.3 percent nationwide. Employment in maritime industries totaled 2.4 million in 2019. Government was the largest employer with 647,000 jobs, accounting for nearly one-third of maritime-related employment, followed by leisure and hospitality businesses that employed 464,000 workers nationwide. Businesses in those industries generated more than $665 billion in sales as well, led by the tourism and recreation sector, with $235 billion and national defense and public administration with $180 billion in sales a couple years ago. In Alaska, 2019 largely represented the historic peak of the state’s tourism industry — led by cruising — with more than 2.2 million visitors during the summer highlighted by record warmth across much of the state. The more than 1.3 million Alaska cruise passengers in 2019 represented 13 percent growth from a year prior, according to Alaska Travel Industry Association data. Commerce Secretary Gina Raimondo said in a prepared statement that the numbers emphasize the importance of maritime industries in the nation’s overall economic recovery, which is quickly ramping up. “President Biden sees the immense value and potential of strengthening America’s blue economy, and this administration will continue to take actions to combat the climate crisis, conserve our oceans and protect coastal communities,” Raimondo said. Nationwide, commercial fishing contributed $7.9 billion towards the nation’s GDP and seafood processing accounted for another $4.4 billion; both were slight increases versus 2018 and were on steadily increasing trends at the time, according to Bureau of Economic Analysis charts. And while the federal report does not get state specific, Alaska accounted for a very large share of that based on a January 2020 report commissioned by the Alaska Seafood Marketing Institute. Alaska’s seafood harvesting and processing industries generate $5.9 billion in direct output spread across the nation, according to the report compiled by McKinley Research Group. Acting National Oceanic and Atmospheric Administration Administrator Ben Friedman said the newly-generated maritime economic data should help government officials with policy as well as assist private groups in making investments in target markets. One of the fastest growing subset of the blue economy was non-recreational vessel construction, which generated $31.2 billion in gross output for a 37 percent increase over 2018. Elwood Brehmer can be reached at [email protected]

With support lacking, Legislature puts off budget vote

The fight over how much money Alaskans’ government owes them is inching ever-closer to giving them no government at all. House and Senate leaders further delayed action on the state operating budget June 15. The Senate held a technical floor session but did not address the budget bill while the House floor session for the day had not been held as of this writing late June 15. By not acting promptly on the budget after the conference committee finalized the compromise version over the weekend — as has been done in recent similar situations and would allow the special session to adjourn — is an indication that some members are firmer in their position for the state to pay Permanent Fund dividends at least equivalent to Gov. Mike Dunleavy’s “50-50” plan. The conference committee’s budget funds PFDs of approximately $1,100 per person by pulling $371 million from the General Fund, scraping $320 million from the bottom of the Statutory Budget Reserve, and skimming $48 million off of the roughly $1 billion Constitutional Budget Reserve, according to Legislative Finance Division documents. The conference committee via language in the budget also tied lawmakers’ vote to spend from the CBR, which requires a three-quarters majority in each body, to school debt reimbursement and oil and gas tax credit payments, as well as the size of the PFD and a host of capital projects backed by the administration. If legislators do not approve the CBR draw the PFD would drop to approximately $525 per person, or about what the state could pay and maintain close to a balanced budget. It also moves $4 billion from the Permanent Fund’s Earnings Reserve Account, which holds spendable income, to the corpus of the fund that lawmakers are constitutionally barred from spending. The overall value of the Fund between the corpus and Earnings Reserve is currently about $81 billion. Senate Finance co-chair and conference member Sen. Bert Stedman, R-Sitka, consistently is one of the most influential lawmaker in regards to the budget and for years has been firm in his opposition to spending from the fund beyond the 5 percent annual draw approved in 2018, as the Senate’s budget would have to do to pay dividends of roughly $2,300. House and Senate negotiators finished their work on the budget June 13 after weeks of slow progress. Legislators have until June 18 to approve a budget before the special session called last month by Dunleavy ends. Another special session would quickly ensue if legislators can’t agree on the budget, which is close to the administration’s proposal for roughly flat spending this year outside of the PFD, but they are also inside of two weeks to the hard budget deadline of June 30 to avoid a government shutdown and all that would entail. With the fraying of the Legislature’s caucuses that has come from years of battles over the PFD it’s unclear how the fiscal year 2022 budget vote will fall. The governor called the Legislature back to first to finish the budget but also to hash out an agreement over his proposal to split the roughly $3 billion annual draw from the Permanent Fund evenly between the dividend appropriation and government services and etch it into the Alaska Constitution. While a handful of committee hearings have been held to vet the governor’s plan, legislative leaders have said they expect to take up the big Permanent Fund issues, and possible taxes to fill the rest of the several hundred million-dollar budget gap, in the August special session Dunleavy also called. The governor insisted one way or another the future of the PFD, at least as it pertains to lawmakers, would be settled this year. A public vote on any constitutional amendments would likely happen in the next general election in 2022. Elwood Brehmer can be reached at [email protected]

Joint venture advancing geothermal for Unalaska

Unalaska city leaders, a local Native corporation and a team of renewable energy experts from Fairbanks are working hard to unlock the energy potential inside a volcano near the Aleutian fishing community. The geothermal resource in the base of Makushin Volcano — a prominent feature about 15 miles west of the city — is well-documented, according to Dave Matthews, a program manager with the Ounalashka Corp. and Chena Power LLC joint venture. However, the cost and logistical challenges common to rural Alaska projects, along with prior land ownership issues, have precluded development to date. “Tens of millions of dollars have been spent in the last 40 years on the Makushin resource. There’s actually been 13 plans for development there,” Matthews said during a June 4 video conference presentation hosted by the policy think tank Commonwealth North. “People have written papers and gotten their Ph.D.s based on this resource. It’s well known in the geothermal world.” Geothermal energy is one of the most consistent forms of renewable energy, whether used for heat, power generation, or both. Wells are drilled into a geothermal reservoir that emits steam that can then be captured and used in multiple ways. Chena Power currently operates the only geothermal power system in Alaska. A traditional geothermal power project will utilize the steam to turn a turbine generator, after which the steam is sent through cooling towers before being injected back to the reservoir. At the Makushin project, the steam will be produced at about 390 degrees Fahrenheit and it will be injected as liquid water of 80 to 100 degrees, according to Matthews. “The whole concept is to try to extract as much geothermal energy as you can from the geothermal reservoir before you put it back into the ground where it gets reheated again,” he said. Based on a 1983 test well, the Makushin resource has been “ball parked” to be capable of supplying steam to generate 500 megawatts for 500 years, he added. Unalaska, with a population that peaks at nearly 10,000 during the height of fishing activity, needs only a fraction of that, according to City Manager Erin Reinders; and that’s part of the problem. The city currently relies on diesel power generation and has a peak demand of about 11 megawatts. The seafood processors that help make Dutch Harbor the largest volume fishing port in the country and, along with a handful of other isolated power consumers, generate nearly 20 megawatts at peak demand themselves. Getting the processing companies or others to connect to the city grid is imperative, according to Reinders. “In order to make this pencil out we’ll need to have more (power) sales,” Reinders said in an interview. She also noted that the project has the potential to displace more than 2.5 million gallons per year of diesel consumed by the city’s current power generation. Residential power rates in Unalaska were approximately 28 cents per kilowatt-hour in 2020 after the state Power Cost Equalization subsidy was applied, based on Alaska Energy Authority data. Commercial customers are not eligible for PCE subsidies. Simply put, the seafood processors — already in a highly volatile industry — don’t want to relinquish control over their all-important power supply, even if doing so would mean forgoing millions of gallons of diesel purchases each year. Matthews said the fixed development costs, such as that for the 10-mile road to the site, along with the inherent nature of the ostensibly free heat resource, mean developing a larger plant up-front will lead to lower electric rates over the long-term if other customers can be added to Unalaska’s grid. For that reason, Ounalashka and Chena Power plan to install a net 30-megawatt plant with three individual generation systems. Having three smaller systems is more expensive than one large system but it will allow the plant to better match demand fluctuations, which will be a necessity given the Makushin plant will be Unalaska’s primary power if it is seen through, according to Matthews. “The thing with geothermal is it’s a high capital cost but once you get it installed your price is pretty much fixed for 30 years,” Matthews said, noting the larger plant provides ample opportunity for grid growth. The City of Unalaska signed a 30-year power purchase agreement, or PPA, with Ounalashka and Chena Power last August, which calls for fixed payments starting at $16.3 million with a 1 percent annual escalator that puts the 30th year total at $22 million to power the city. Reinders said the Unalaska City Council approved the deal in part because the processors publicly supported the project even if they aren’t ready to commit to it yet. “In the past the other showstopper was that the processors weren’t on board,” she said. Matthews emphasized the benefit to the companies is the consistent cost of the power, adding that the reliability can be proven to them over time. “The power that we’re providing to the city is pretty close to the diesel cost in the next few years and will become cheaper over time, of course,” he said. The project is currently on schedule to produce its first power in late 2023 shortly after a 4-mile, redundant subsea power line is laid to connect Unalaska to the Makushin project, according to Matthews. Finalizing the PPA qualified the development group to seek financing for the full project, Reinders said, noting it is also a step that has never been reached before in other development attempts. Matthews said the joint-venture, which is aided by Ounalashka owning the land, is self-funding the road and pad construction that started in May. He declined to disclose the overall price estimate for the project, but said bids are due from two international geothermal plant developers later this month. “We’ve gone a long ways on getting the details of the cost and logistics plan put together,” Matthews said. Elwood Brehmer can be reached at [email protected]

Hex tops Inlet lease bids, but dispute emerges over North Fork purchase

Small independents did the bidding in Wednesday’s Cook Inlet oil and gas lease sale that netted the Department of Natural Resources $451,594 from eight bids, according to the department's tally. Furie Operating Alaska collected four leases adjacent to its large offshore Kitchen Lights Unit in the middle of the Inlet gas fields as well as one onshore tract containing at least part of the North Fork Unit just east of Anchor Point on the southern Kenai Peninsula. Overall, Furie spent $325,605 for the rights to its acreage. Hex LLC, the primary owner of Furie, also won two onshore tracts north of Nikiski along the edge of the Kenai National Wildlife Refuge for $101,489. John Hendrix, a former Apache Alaska general manager and oil and gas advisor to former Gov. Bill Walker owns Hex LLC and purchased Furie — and the Kitchen Lights natural gas facilities — out of bankruptcy last summer. Production problems and unpaid state tax credits among other issues pushed the previous owners to seek debt relief. Furie currently produces a small amount of natural gas from Kitchen Lights for local utility customers. As for the 5,760-acre North Fork Unit tract, which Furie bid $325,843, or $56.75 per acre, to acquire, the opportunity to purchase the lease already with a handful of wells and pipeline infrastructure was too good to pass up, according to Hendrix, who also noted an apparent discrepancy regarding the total acreage leased in figures provided by the state Division of Oil and Gas. “Until they can prove otherwise the leases that they put up for sale were up for lease. That’s why we bid on it,” Hendrix said. “I can’t afford not to bid on it.” A spreadsheet detailing the winning bids indicates Furie won 19,200 acres across five tracts, while a summary of the sale shows the company won an estimated 14,053 acres in five tracts. Somewhere between 21,267 acres and 26,414 acres were sold Wednesday, according to the division’s numbers. Division of Oil and Gas spokesman Sean Clifton wrote via email that Oil and Gas Director Tom Stokes delayed a mandatory contraction of the North Fork Unit in a March decision after Cook Inlet Energy resigned its rights to North Fork and transferred them to Gardes Holdings Inc., a Louisiana-based firm. The actual acreage available for lease was about 720 acres, according to Clifton, who wrote that the time and labor required to adjudicate tracts for lease means the work is usually done after a sale is held. Furie will be refunded for the amount the company bid on acreage that wasn’t available to lease, according to Clifton. Hendrix insisted state officials had not notified him of any issues with the lease and need to be open in their explanation of the situation. “We should get what we bid for. We bid on it because it was available,” he said, adding the company could have used the money it committed to the North Fork lease elsewhere. “They hurt us with our strategy,” Hendrix said. Hendrix said the goal with the acreage near Kitchen Lights is to “shore up” the company’s position around the unit and eventually work to diversify its resource base. “We bid on some acreage that I wanted to drill back in the Apache days,” he said in an interview. Hilcorp Energy, the large, dominant producer in the Cook Inlet basin, was the only bidder in last year’s sale. This year’s winning bids averaged $21.23 per acre, according to the Division of Oil and Gas. Houston-based Strong Energy Resources LLC also picked up a small offshore lease on the edge of state waters near Anchor Point. BlueCrest Energy produces oil from the nearby offshore Cosmopolitan Unit. Elwood Brehmer can be reached at [email protected]


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