Elwood Brehmer

Salary for signatures argued in oil tax initiative lawsuit

Attorneys for resource industry groups argued in Superior Court July 7 that salaries paid to signature gatherers for a ballot measure to raise oil taxes violate state law in a lawsuit that could have big implications for future voter-driven initiatives in Alaska. The monthly payments made to employees of Las Vegas-based Advanced Micro Targeting Inc., which was hired in January by Vote Yes for Alaska’s Fair Share, were in excess of what should be a strict $1 per signature cap spelled out in state law, insisted Matt Singer, an attorney representing a half-dozen industry groups led by the Resource Development Council for Alaska. The business advocacy and trade associations are all members of One Alaska, a campaign coalition organized to fight the Alaska’s Fair Share initiative, which aims to significantly raise production taxes on North Slope oil producers as a means to help close the state’s billion-dollar-plus annual budget deficits. Signature gathering firms are commonly used by initiative sponsors to collect the large number of signatures needed to validate a statewide petition. Vote Yes for Alaska’s Fair Share was required to submit 28,501 signatures, which equals 10 percent of voters in the last general election. At the heart of the suit is a seemingly simple clause in Alaska law that states a petition circulator, or signature gatherer, “may not receive payment or agree to receive payment that is greater than $1 a signature, and a person or an organization may not pay or agree to pay an amount that is greater than $1 a signature, for the collection of signatures on a petition.” “We ask that the court enforce the law as it is written,” Singer said to Superior Court Judge Thomas Matthews during teleconferenced oral arguments. RDC, the Alaska Chamber and others sued Lt. Gov. Kevin Meyer, the Division of Elections, which Meyer oversees, and Vote Yes for Alaska’s Fair Share in April on the grounds that Advanced Micro Targeting paid its employees too much to gather signatures in Alaska and therefore the signatures gathered by the company should have been thrown out by Elections officials. Such a ruling would invalidate 25,865 of the nearly 39,174 signatures submitted by the initiative sponsors and certified by the Division of Elections. In an odd happenstance of legal friends and foes, Alaska’s Fair Share sued Meyer and the Division of Elections last November for what it claimed was an inaccurate and politically slanted ballot summary of the initiative. A Superior Court Judge ruled in favor of Alaska’s Fair Share June 10, ordering the division to correct a sentence in the summary. Gov. Mike Dunleavy’s administration has staunchly opposed changes to oil taxes. RDC, the Alaska Chamber, the Alaska Trucking Association, the Alaska Miners Association, the Alaska Support Industry Alliance and the Associated General Contractors of Alaska who filed the suit contend the initiative would drastically increase taxes on North Slope producers, deterring investment by the industry that drives an outsized portion of Alaska’s economy at a time when oil companies are struggling to adjust to the second sustained oil price collapse in the last five years. In advertisements, Advanced Micro Targeting offered to pay signature gatherers $3,500 to $4,000 per month with an expectation they would collect at least 80 per day, six days per week, according to the group’s complaint, which attorneys for the state and Alaska’s Fair Share did not dispute. Invalidating the signatures would not officially kill the initiative, but it would force Alaska’s Fair Share to gather the signatures again and keep it off the ballot until the next statewide general election in 2022. Longtime oil industry attorney Robin Brena argued for Alaska’s Fair Share that the Legislature wrote the law as it did to limit what he called “bounty hunting” for signatures. “It does not address any other form of payment to circulator,” Brena said of the law. “To state the obvious there is no bounty when petition circulators are paid by salary.” Brena chairs Vote Yes for Alaska’s Fair Share and has been a leader in the push to raise the production tax since the More Alaska Production Act, best known as Senate Bill 21, passed in 2013. The initiative sponsors allege, among other things, that lawmakers are shirking their constitutional duty to receive the maximum possible benefit for the state’s publicly owned resources under SB 21. They estimate the Alaska’s Fair Share Act, which will be on the November ballot as Ballot Measure 1, will raise approximately $1.5 billion in revenue at a time when the state desperately needs it. Advanced Micro Targeting employees were also paid for other work on the campaign, so parsing out how much of their compensation was for what work is impractical, Brena said, while also stressing that the Division of Elections has certified each of the signatures that would be thrown out. He said the lawsuit is a concerted effort by companies that do not want to pay more taxes to disenfranchise initiative signers through potential administrative errors by the Division of Elections. The large North Slope producers are major donors to the trade and business advocacy groups in the state. A motion to dismiss filed by Alaska’s Fair Share highlights that the groups did not raise the issue when Advanced Micro Targeting signature gatherers worked on prior, unrelated initiatives. Assistant Attorney General Margaret Paton-Walsh emphasized that the lieutenant governor does not have subpoena or investigative powers in elections statutes to verify that the affidavits submitted by signature gatherers are accurate. Rather, state law says Elections officials must verify that the affidavits are complete, which is why falsifying an affidavit is a criminal offense of the individual signature gatherer, according to Paton-Walsh. She also noted that state law only gives Elections officials 60 days to certify the validity of the initiative petition. “60 days is not enough time for any kind of investigation into the truth of the circulator affidavits,” Paton-Walsh said. Singer insisted the Legislature intended to rid initiatives of “big money,” noting that leaders of the Recall Dunleavy campaign did not need paid gatherers to collect the first round of signatures needed to remove the governor from office. “If there’s grassroots support for an initiative, signatures can be gathered without any payment,” he said. Brena countered that invalidating the signatures in this case would set a precedent that would make it impractically difficult for citizens to organize an initiative campaign. “The proper remedy (for a false affidavit) is to pursue the criminal matter and not to disenfranchise 40,000 Alaskan voters,” Brena said. “That would be an absurd result.” Judge Matthews said he would make a ruling quickly as the case is likely headed to the Alaska Supreme Court prior to the November election. ^ Elwood Brehmer can be reached at [email protected]

Hilcorp picks up on BP’s plan for Prudhoe

The iconic Prudhoe Bay oilfield is now officially in the hands of Hilcorp Energy, the first phase of a $5.6 billion deal to buy BP out of Alaska. As expected, the companies announced the operator transition at Prudhoe Bay July 1. The upstream portion of the deal also includes BP’s roughly one-third stake in the Point Thomson gas field operated by ExxonMobil as well as the London-based major’s half share of Milne Point, which is already run by Houston-based Hilcorp. However, Hilcorp Alaska leaders have said Prudhoe Bay was the real prize of the deal. “We look forward to continuing to drive economic growth, create Alaskan jobs and contribute to local economies for decades to come. Hilcorp is committed to safely and responsibly developing Alaska’s natural resources,” Hilcorp CEO Greg Lalicker said in a prepared statement. The companies expect to close on the midstream portion of the deal, which includes BP’s 48 percent share in the Trans-Alaska Pipeline System, later this summer. It is under review by the Regulatory Commission of Alaska. According to Hilcorp, the company has almost tripled its Alaska workforce from about 550 employees pre-deal to about 1,450 workers, with more hires likely. State regulators in the Division of Oil and Gas expect Hilcorp will work off of BP’s plan of development — the annual state-approved work plan — for Prudhoe Bay, according to spokesman Sean Clifton. Oil and Gas Director Tom Stokes approved BP’s 2020 Prudhoe Bay POD, which covers July 1 to June 30, 2021, on May 13, so the work planned by BP will be conducted by Hilcorp. A Hilcorp spokesman declined to comment on the Prudhoe Bay plan of development, or POD, but Clifton wrote via email that Hilcorp had representatives that participated in the POD process both for Prudhoe Bay and its satellite fields, so Oil and Gas officials do not anticipate Hilcorp filing an amended POD for Prudhoe, at least in the near term. The 2020 POD outlines plans to conduct more than 300 production-adding well work jobs and another 500 non-rate adding well jobs across the 254,000-acre field. BP conducted similar levels of well work in 2019, according to the POD. Work by Hilcorp in the next 12 months is also expected to include drilling between four and seven new rotary wells across the field and another 15 to 20 coil tubing well sidetracks. Those targets are mostly spread across the eastern and central portions of the field, according to a map submitted by BP. BP produced an average of 165,000 barrels of oil per day from Prudhoe in 2019, down from 174,200 per day in 2018. BP estimated 2020 production to fall somewhere between flat and an 11 percent decline to 147,000 barrels of oil per day. Another 43,000 barrels per day of natural gas liquids were produced from Prudhoe last year; liquids production is forecasted to generally remain flat in 2020. BP also conducted five well workovers in the 2019 period, which Hilcorp is likely to increase to six to nine over the next year. The workover activity will focus on returning injector and producer wells that were shut-in due to wellbore integrity issues to service, according to the POD. The document also calls for merging data from a 2015 seismic survey of North Prudhoe Bay with the field-wide 3D seismic shoot BP conducted last year. Stokes acknowledged in the May 13 approval letter to BP that some of the work in the plan may have to be deferred because of the coronavirus pandemic. “The Division therefore assures BP of its support regarding any plan changes necessary to protect the health, safety and welfare of operations personnel, the physical and economic integrity of the facilities and preservation of the surrounding environment,” Stokes wrote. ConocoPhillips, the other primary North Slope producer, cut its 2020 drilling program short earlier this year. Late-winter exploration drilling was ended early to protect the health of workers at remote drill sites while development drilling was also stopped in response to the oil price collapse that saw the price for Alaska North Slope crude briefly go negative in April. Elwood Brehmer can be reached at [email protected]

Parties skeptical of ranked-choice voting intiative

This fall Alaskans will have the chance to overhaul the voting process for statewide elections with an initiative longtime Alaska officials in traditional two-party politics are dead-set against. Leaders of the Vote Yes on 2 for Better Elections campaign insist their initiative would put an end to “dark money” in statewide elections by stiffening disclosure requirements for third-party political groups, encourage voter turnout in primary elections and ensure winning candidates are supported by a majority of voters, among other benefits. Better Elections Campaign Manager Shea Siegert said during a June 30 House State Affairs hearing that current state campaign finance laws do not require third-party groups supporting a candidate or cause, commonly referred to as independent expenditure groups, to disclose the ultimate source of their funding. That leaves voters without enough information about who is attempting to influence Alaska’s elections, according to Siegert. The initiative would require all independent expenditure groups to report the primary source of contributions of more than $2,000, but it would not prohibit them, as they are protected under the First Amendment, he noted. “What we’re trying to do is shine a light on that true source,” Siegert said. The Alaskans for Better Elections initiative will be proposed as Ballot Measure 2 on the November general election ballot. It would also shift Alaska to an open primary system allowing voters of any political affiliation to vote in any primary election. Currently, Alaska law allows parties to choose how they conduct their primaries; Republican primaries are open to party members and non-partisans while the other parties have open elections. Alaska had a blanket primary system — which allows voters to support candidates from different parties in different races — until 2000, when it was ruled unconstitutional by the U.S. Supreme Court. Open primaries generally permit all voters to pick which party they want to vote for but can limit voting to a single party. The top four vote-getters in the primary, regardless of party, would move on to the general election under the initiative. According to Better Elections attorney Scott Kendall, other states that have gone to open primaries have seen turnout increase by 50 percent or more. “The great thing about increased primary turnout is those primary voters almost universally become general election voters,” Kendall said. Open primaries demand more compromise from candidates on big issues because the voter base is broader, he contends. In a closed or semi-closed primary, “5 percent of the electorate can punish (candidates) for something the rest of the district wants,” Kendall said. Finally, Alaska’s general election would shift to a ranked-choice system in which voters would rank the candidates 1-4. The candidate receiving the fewest first choice votes would be eliminated and the process would continue until one candidate gets more than 50 percent of the votes in what amounts to an automatic runoff election. Voters who favored the first candidate eliminated would have their vote moved to their second choice candidate, according to Kendall. Additionally, voters who wanted to vote for only one candidate could simply vote for just their first choice, he said. Maine voters passed ranked-choice voting in 2016 — the first state to do so — and 99 percent of voters filled out their ballot correctly in the first ranked-choice election, according to Siegert. He said the open primary and ranked choice systems mostly benefit the 62 percent of Alaskans who are not registered with one of the two major parties by adding more competition into state politics. He said nationally the major parties generally favor ranked-choice voting. “In essence, it’s the return of free market voting to Alaska,” he said in an interview. Kendall argued that ranked-choice voting discourages partisan legislative redistricting, or gerrymandering, that can arise when voters’ choices are limited by a two-party system. “In our system where they will have four choices and can rank those choices it becomes a zero sum game to begin to push votes around the map,” he said. Former Anchorage Democrat legislator and one-time Alaska Democratic Party executive director Kay Brown said she believes the election reforms run afoul of the Alaska Constitution in several fronts, including a requirement that a party’s governor and lieutenant governor candidates must run as a team in primary elections. Brown said she respects the goal of bringing more openness and transparency to campaigns but called the 25-page initiative “complicated, confusing, poorly explained and legally flawed.” “Alaska’s election system is not perfect but I do not believe it is broken,” Brown said. “If anything is broken it’s the initiative process.” Kendall noted that state attorneys and the Division of Elections challenged the initiative because they believed it violated the Alaska Constitution’s single-subject rule for initiative bills but they did not raise other perceived constitutional conflicts. The Alaska Supreme Court upheld the initiative in a unanimous June 12 ruling. Alaska Democratic Party spokeswoman Jeanne Devon declined to comment when asked about the party’s official position on the Better Elections initiative. Alaska Republican Party Chairman Glenn Clary concurred with Brown’s sentiments, but further argued in an interview that the initiative is part of an attempt by Better Elections’ Outside funders to control Alaska politics. “What they’re wanting to do is socialize Alaska. They’re trying to eliminate identity to any party,” Clary said. “That’s socialism.” Better Elections’ principal backer is Unite America, which bills itself as an independent group attempting to lessen partisanship in the country’s politics through advocating for ranked-choice voting and open primaries. Through the first quarter of the year Better Elections had raised more than $1.1 million for the initiative campaign, with $965,000 of that coming from Unite America, according to Alaska Public Office Commission filings. Alaska is being used as a test lab because of its small population for the policies an elite few want to enact nationwide, according to Clary. “If you believe in certain tenants and label yourself as such, then you’re not welcome in this state under Better Elections,” he said. While parties would lose control of who can vote in their primaries, candidates would still be able to have their political affiliation shown on the ballot with the traditional “D” or “R” or “I” or something else, according to campaign leaders. Clary said he would expect the Alaska Republican Party to seek a convention-style primary system if the initiative passes. Elwood Brehmer can be reached at [email protected]

Revised BLM plan opens 80% of NPR-A to development

Interior Department officials released an aggressive plan to open millions more acres on the North Slope to oil and gas leasing June 25, the latest effort in the Trump administration’s ongoing push to encourage more energy development in Alaska. The Bureau of Land Management intends to make 18.7 million acres of the 23 million-acre National Petroleum Reserve-Alaska on the western North Slope available for leasing under the agency’s preferred alternative in the final environmental impact statement for the NPR-A Integrated Activity Plan. The new plan would add 6.9 million acres to the area open for leasing, or about 100,000 acres more than was evaluated under the most liberal leasing option discussed in the draft NPR-A land-use EIS released last November. Currently, about 11.8 million acres, or a little more than half of the reserve, is available for leasing by industry under the NPR-A plan finalized by the Obama administration in 2013. The existing NPR-A Integrated Activity Plan has been roundly criticized by development proponents for restricting industry access to large swaths of highly prospective oil acreage, some of which are currently deemed to be critical habitat for caribou and waterfowl populations that are important subsistence food sources for nearby village residents. Interior Secretary David Bernhardt said in a formal statement the revised NPR-A plan is another significant step towards making good on President Donald Trump’s promise to increase access “to our nation’s great energy potential.” BLM is also leading the environmental impact statement review for the highly contentious Arctic National Wildlife Refuge coastal plain oil and gas leasing plan. BLM Alaska Director Chad Padgett said agency officials worked to open more land to industry while using various management tools to protect wildlife habitat and subsistence activities. “The BLM worked with state, local, Tribal and private sector stakeholders to propose management prescriptions that achieve a balance between conservation stewardship, being a good neighbor, and responsibly developing our natural resources to boost local and national economies,” Padgett said. The plan would open the entire Teshekpuk Lake Special Area in the northeast portion of the reserve — an area of particular importance to both industry for its oil potential and conservation and subsistence interests for its waterfowl and caribou rearing habitat — to leasing. Impacts to caribou calving areas and bird habitat would be “partially mitigated through no surface occupancy stipulations and timing limitations,” the final EIS states. Other, more conservative leasing options considered by BLM would prohibit leasing around Teshekpuk Lake but would allow for a pipeline corridor through the area to support nearby development. The plan would eliminate the Colville River Special Area, which provides habitat protections over 2.4 million acres adjacent to the river as well. The Colville River makes up much of the eastern boundary of the NPR-A. BLM’s preferred alternative also would not add any of the 12 rivers in the reserve suitable for a National Wild and Scenic Rivers System designation to the conservation network, according to the EIS. Instead, “BLM would manage the existing 12 suitable rivers to protect their free flow, water quality, and outstanding remarkable values,” the document states. Gov. Mike Dunleavy and the members of Alaska’s congressional delegation all commended BLM officials on the new plan to drastically increase the area open to industry in formal statements. State officials under both former Gov. Bill Walker and the Dunleavy administration have pushed Interior to revise the 2013 NPR-A plan and the state is also looking at ways to link several communities in the reserve with year-round road connections. In December 2017, the U.S. Geological Survey issued a resource assessment for the NPR-A in which the agency concluded the reserve and nearby state lands could hold some 8.7 billion barrels of technically recoverable, undiscovered oil, primarily based on the recent Nanushuk discoveries in the area. A 2010 NPR-A assessment projected a mean resource estimate for the reserve of just 896 million barrels. The vast majority of the acreage currently under lease is held by ConocoPhillips, which is in the environmental permitting process for its large Willow oil prospect in the northeast portion of the reserve and is also working on smaller projects in the area. Expected to cost between $4 billion to $6 billion to fully build out, the Willow project could produce upwards of 100,000 barrels of oil per day at its peak, according to the company. Former Interior Secretary Ryan Zinke first directed department agencies to reevaluate the reserve’s oil and gas potential as well as changes to the management plan in May 2017. BLM officials expect the new plan could help spur oil production of up to 500,000 barrels per day over the next 20 years with up to 250 miles of new roads and approximately 20 new drilling pads in the reserve under a “high development scenario,” according to the agency’s analysis. Medium development is envisioned as peak production of 210,000 barrels per day, 160 miles of new roads and 10 satellite drilling pads. Low long-term development would generally be limited ConocoPhillips’ existing work at Willow and its other, smaller Greater Mooses Tooth projects farther south in the reserve along its eastern boundary with state land, BLM estimates. The agency will finalize the NPR-A plan with a record of decision at least 30 days following the release of the final EIS, in accordance with the National Environmental Policy Act. ^ Elwood Brehmer can be reached at [email protected]

Judge approves bankruptcy sale for Ravn

An auction after the July 4 holiday may decide the future of Ravn Air Group, Alaska’s largest rural airline. Ravn filed for bankruptcy protection in April, and on Thursday, a Delaware bankruptcy judge approved a plan for selling the company in whole or in part to satisfy creditors. A specific date for the auction has not been set. It is expected to take place after July 4 but before a July 9 court hearing scheduled to finalize the sale. A Ravn attorney said he was not allowed to talk to the media about the case. It isn’t yet known who will bid on the airline, but in a written statement Thursday, Ravn Air said that “approximately 30 bidders expressed interest in buying all or some of the air group’s assets. Of these, five strategic buyers submitted bids to buy the entire air group.” “The outcome of today’s hearing turned out as we had hoped, and we are excited that our employees, our customers, and the many communities we serve will now have a very real opportunity to see Ravn back in the skies later this summer,” Ravn CEO Dave Pflieger said in a written statement. Among the attorneys participating in this week’s proceedings were two representing Float Shuttle, a Southern California commuter service. Rob McKinney, the company’s president, said the firm is interested in buying Ravn and getting it operating again in Alaska. “It’s definitely our intent to keep Ravn as a going concern. We’re all about service to communities, and we really believe we have the right team we’re putting together,” he said. Restarting Ravn is only one possible outcome: If the airline isn’t sold in whole or in pieces big enough that it can continue to operate, the bankruptcy plan calls for its assets to be put into a trust and sold to satisfy creditors. Attorneys for creditors have been debating since April whether to end Ravn and sell its aircraft and other aircraft piecemeal, in what’s known as Chapter 7 bankruptcy, or in a manner that would allow the company to continue operating in Alaska or elsewhere. An analysis conducted as part of its bankruptcy proceedings estimated that Ravn’s assets in liquidation would be worth between $21.2 million and $33 million, far less than its debts of $151.5 million to $185.8 million. Before filing for bankruptcy on April 5, Ravn operated more than 400 flights per day using a fleet of 72 aircraft. During the coronavirus pandemic, passenger traffic dropped more than 90 percent. “Because of the current economic circumstances, the debtors’ financial condition, and the substantial working capital needed to restart the debtors’ operations, the debtors have no prospect of generating positive cash flow before 2021 at the earliest,” according to court filings. What will emerge Several longtime players in Alaska’s air service industry said while there may be bids in the bankruptcy auction to take all of Ravn’s assets it is unlikely that an airline will reemerge with a reach close to what Ravn had before it shuttered. Ravn Air Group regularly serviced 118 communities across the state and had approximately 1,300 employees when it stopped flying in early April. The carrier conducted both FAA Part 121 scheduled passenger and freight service to regional hubs with larger aircraft as well as Part 135 air taxi and charter service to smaller communities predominantly with single-engine aircraft through its subsidiary Ravn Connect. Ravn also comprised approximately 20 percent of the charter flight market across much of the state, according to the company. Danny Seybert, former CEO of PenAir, said in an interview that he believes smaller carriers have largely backfilled the space left in Part 135 air taxi and charter service in the nearly three months since Ravn grounded its fleet. “That void has been filled very nicely by very competent carriers,” Seybert said. “Now those communities have better, reliable service.” Residents in many of the communities Ravn served — where it was often the only carrier — had become increasingly critical of the airline in recent years for deteriorating reliability in its business. Ravn purchased PenAir out of bankruptcy in 2018 for $12.3 million. PenAir operated for decades out of Anchorage serving Southcentral and Southwest Alaska. However, an unsuccessful foray into Lower 48 markets strained the company’s finances. Matt Atkinson, an owner of Fairbanks-based Wright Air Service said there it’s possible a smaller air taxi with more efficient routing could arise out of Ravn but he otherwise generally echoed Seybert’s assessment of the situation. “Carriers around the state have stepped up in a major way and absorbed capacity,” said Atkinson, who is also president of the Alaska Air Carriers Association board of directors. Wright operates primarily in Interior Alaska, but began serving some North Slope communities when Ravn shut down. “With the tight markets Ravn did a lot of good things,” Atkinson said. He added that COVID-19 — which Ravn leaders said pushed the company into bankruptcy — has suppressed air travel demand in Alaska’s villages as it has nationwide so the new air taxi market picture won’t be clear until the pandemic is over. Atkinson said Wright Air is one of the bidders for some of Ravn’s assets, but is not interested in the entire airline. Seybert said the scheduled Part 121 side of Ravn’s operations are “a whole different picture” and he sees room for a smaller carrier to operate in that space. Alaska Airlines announced June 22 that it would be flying Embraer 175 aircraft, which can carry up to 76 passengers, to several hub communities across the starting in October through its regional sister airline Horizon Air. Alaska has traditionally flown larger Boeing 737-series jetliners. The major carrier also said in May that it will be serving the Bristol Bay region — formerly a major market for Ravn — year-round once the busy salmon season there wraps up. Alaska previously flew to the Bristol Bay hubs of Dillingham and King Salmon during the summer peak for the commercial fishing and tourism industries. Seybert noted that Alaska Airlines has filled some of the service gaps left by Ravn but added that even the smaller Embraer 175s are too large to service Unalaska and other Alaska Peninsula communities. Unalaska is the busiest commercial fishing town in the country with roughly 55,000 passengers passing through the small community each year, according to Seybert, who said the current situation of mostly charter service is untenable over the long-term. He emphasized that while Ravn’s bankruptcy was a major shake-up to the state’s air service industry, similarly impactful events have happened before. “There will always be a carrier that will step up and meet the needs of the communities,” he said. Seybert declined to comment on whether he is pursuing assets in the bankruptcy auction.

Economists project another slow recovery after pandemic

A long, slow recovery from a near shutdown of Alaska’s economy lies ahead, and that’s only if things go well, according to some of the state’s leading economists. State Department of Labor and Workforce Development Economist Neal Fried said 2020 was supposed to be the second consecutive year of slow growth following the oil price-induced recession of 2016-18 during which the state lost more than 10,000 jobs. However, Alaska lost 42,200 jobs in April alone, or 13 percent of its workforce, during the peak of the pandemic-induced economic shutdown, according to Labor Department figures. When the job losses were tallied it took Alaska back to roughly 2001 employment levels, Fried said. “The timing of this (pandemic) was lousy for Alaska,” he said, as the state has the most seasonal economy in the nation, and it’s not even close. While the state’s gradual reopening helped add back 14,200 jobs in May, Fried noted that Alaska tourism businesses added more than 18,000 jobs during the 2018 summer season. He also emphasized that those jobs support economic activity throughout the year as well. “As we move into June and July the big story is going to be how many jobs are we not going to gain that we normally do,” Fried said. Fried was part of an online panel discussion on the state’s economy hosted by the Alaska policy think tank Commonwealth North. It remains to be seen how many of those tourism jobs will materialize this year with no cruise ships and minimal air travel into the state but the early numbers have not yielded much hope. According to the Labor Department, employment in the leisure and hospitality industry declined by nearly 40 percent in May across the state, from approximately 38,500 jobs in May 2019 to 23,200 last month. “A saving grace is that a lot of those jobs go to nonresidents,” University of Alaska Anchorage Institute of Social and Economic Research Economist Mouhcine Guettabi said of the leisure and hospitality industry. Guettabi said he’s “very confident” Alaska’s economy is “at bottom or very near bottom,” in terms of employment, but he doesn’t think the state will recover to pre-pandemic employment levels until early 2023 or late 2022 at the earliest. That recovery timeline is predicated on limited further spending cuts in government or the private sector, according to Guettabi. “If austerity were to take place that puts even more pressure on the recovery because a cut is a cut is a cut at this point,” he said. He stressed a fear of an “income cliff” if temporary government aid programs aren’t extended, given the economic plight currently being felt in Alaska and the nation would be exponentially worse if not for the more than $2.5 trillion Congress has put into various forms of COVID-19 assistance. He noted that more than $3 billion in individual and business aid has been injected into Alaska, which is about 7 percent of the state’s gross annual product. “It seems very clear to me at least that there needs to be more support and a transition that gets us to the other side of this recession,” Guettabi said, adding that consumer demand could “completely evaporate” later this summer if Congress does not extend boosted unemployment benefits. Lawmakers approved $600 per week in federal unemployment assistance on top of state unemployment insurance in the CARES Act passed in late March. The federal unemployment payments are set to expire July 31. If they are extended, the size of the federal supplement will face scrutiny as unemployment benefits are in many cases paying workers more to stay home than to return to work. Guettabi also characterized Alaska’s unemployment rate — 12.2 percent in May after hitting 13.1 percent in April — as being “scary” but also “artificially low” because of the immensely popular Paycheck Protection Program for small businesses. “There needs to be a rolling way to think about this instead of setting arbitrary deadlines. I would rather (Congress) do too much than too little because the cost of too little is too high,” Guettabi said. The economists also highlighted the importance of comparing monthly pandemic employment data year-over-year as the job losses came so quickly and were so severe that month-to-month comparisons will likely show improvements that appear very positive but do not represent the totality of the situation. Guettabi expects Alaska’s health care sector, which was down 2,900 jobs or about 7.5 percent year-over-year in May, to recover quicker than most other sectors mainly due to historical demand. It was one of the few industries that added jobs throughout the 2016-18 recession. Job losses in health care from the pandemic surprised many economists nationally as restrictions on elective procedures sidelined doctors and nurses working in specialty practices. As for the state’s anchor oil industry, the outlook is cloudy. Fried said state economists expected the oil and gas sector to add about 400 jobs this year on the back of renewed exploration and several large projects under development, but that was when oil was trading in the $60 per barrel range. Since the start of the pandemic and the subsequent price war between Russia and Saudi Arabia that briefly put Alaska North Slope Crude in the negative in March, Alaska has lost 2,200 oil and gas jobs, or about 20 percent of total industry employment. Continued North Slope production decline, ever-changing industry technologies, the pending transition from BP to Hilcorp’s leaner business model at Prudhoe Bay and no expectation for oil prices to fully recover in the near-term mean it might be years before the state recovers the lucrative oil jobs, if ever. “I never thought I would celebrate $38 oil prices,” Fried said of the current price range. ^ Elwood Brehmer can be reached at [email protected]

Pandemic price slump pushes production to lowest level since TAPS startup

Suffice it to say the first half of 2020 has been exceptionally challenging on a host of fronts and Alaska’s oil production figures illustrate well the hardships facing one of the state’s premier industries and primary revenue sources. Through June 22, North Slope producers had extracted an average of 474,919 barrels of oil per day through the 2020 state fiscal year, which ends June 30, at an average price of $52.28 per barrel, according to Department of Revenue data. While the production and price figures are generally in line with Revenue’s most recent predictions for fiscal year-end averages — the realized production to-date is 2.4 percent below expectations and the price is 1.2 percent more than was predicted — those estimates were made in early April when it was clear what the COVID-19 pandemic and a Saudi-Russian price war were going to do to Alaska’s oil industry. Revenue’s fall 2019 oil production forecast called for an average of 492,063 barrels per day at an average sale price of $63.54 per barrel of Alaska North Slope crude in fiscal 2020. North Slope production averaged about 496,900 barrels in fiscal 2019, meaning the current rate of 474,919 barrels per day would result in a year-over-year decline of 4.4 percent, versus the original forecast of less than 1 percent production decline. Additionally, the actual price and production averages are likely to drop a little more before the final tally for the fiscal year at the end of June as North Slope production has been in the 430,000 barrels per day range of late and the price of Alaska oil remains in the low $40s per barrel. At current averages, the $52.28 per barrel price would be the lowest since Alaska North Slope crude sold for $49.43 in 2017 and oil production would be at its lowest level since the startup of the Trans-Alaska Pipeline System in 1977 when the first few days of North Slope production averaged 10,500 barrels per day, according to Revenue Department figures. It jumped to 789,600 barrels per day in 1978 and peaked at 2.1 million per day in 1988. The 387,782 barrels per day average through June 22 would also be the lowest monthly North Slope production since TAPS started as well, largely due to ConocoPhillips cutting its North Slope production by roughly 100,000 barrels per day, or half of its normal production, in response to collapsed oil markets. Revenue officials expect the price for Alaska North Slope crude to average $37 per barrel in fiscal 2021 and North Slope production to average 486,500 barrels per day, according to the spring revenue forecast. It all adds up to less oil tax and royalty revenue in the state’s coffers and ever-more difficult choices for lawmakers who will attempt to close the widening budget gap when they convene in Juneau next January. Legislative Finance Division officials said in late April following an announcement by Alyeska Pipeline Service Co. that the oil flow through TAPS would temporarily be reduced by 50,000 barrels per day in response to a supply glut during the peak of the global economic shutdown that the price and production drops would likely balloon the state’s deficit to $1.3 billion in 2020. The state started 2020 with a small budget surplus before paying Permanent Fund dividends and appropriating additional funds to combat the impacts of COVID-19. On the bright side, ConocoPhillips Alaska officials have said they plan to resume normal Slope production operations in July with improving market conditions and Alyeska has stopped constraining TAPS throughput. ConocoPhillips spokeswoman Natalie Lowman wrote via email that further decisions on curtailing production with be made month-to-month. However, the major producer will not be resuming drilling on the Slope for the rest of the year, which was cut as part of approximately $400 million in capital spending reductions announced in March and April, according to Lowman, so it’s unclear what the ultimate impact to future production will be. Lowman said ConocoPhillips still plans to start production in late 2021 at its Greater Mooses Tooth-2 oil project in the National Petroleum Reserve-Alaska. The $1.4 billion project is expected to produce up to 40,000 barrels per day at its peak. State Division of Oil and Gas officials on June 4 authorized Savant Alaska LLC, a subsidiary of Anchorage-based independent Glacier Oil and Gas, to suspend its production at the North Slope Badami Unit through July 15, 2021, or at least until market conditions improve. Savant applied for state approval to suspend production at Badami May 28. Savant produced about 1,300 barrels of oil per day from the field in April, according to Alaska Oil and Gas Conservation Commission records. Elwood Brehmer can be reached at [email protected]

Upstream portion of BP-Hilcorp sale on track for state approval

BP and Hilcorp are hoping to close the upstream portion of their $5.6 billion Alaska deal by the end of the month while state regulators continue to evaluate Hilcorp’s financial wherewithal to take a large stake in the Trans-Alaska Pipeline System. State Natural Resources and Environmental Conservation department officials said they are also on track with their reviews of the sale to hit the companies’ preferred closing date during a June 19 meeting of the Governor’s Oversight Committee on the transaction. DNR Commissioner Corri Feige said staff in her department should finish their fit, willing and able test of Hilcorp’s ability to operate the large Prudhoe Bay oil field that is the heart of the deal by June 26. “We still do in DNR’s shop have the secondary liability of upstream guarantee for both DEC and their contaminated sites and DNR’s (removal and restoration) obligations pending so that one is still very much active,” Feige said. Companies that develop infrastructure on state oil and gas leases are required to maintain a financial assurance with the state that they will be able to restore the parcel back to a condition deemed acceptable by DNR officials, commonly known as dismantlement, removal and restoration, or DR&R. Under its deal with Hilcorp, BP will retain its secondary liability for the upstream North Slope facilities it is selling to the Houston-based independent as well as for BP’s portion of TAPS, which the company holds a 48 percent stake in. The total cost to restore the Prudhoe Bay leases or the TAPS corridor is unclear given the exact requirements could vary depending on the individuals in leadership at the time, but a 2002 U.S. General Accounting Office report put the cost to restore areas of the North Slope developed for industry “in the billions of dollars” at the time. Reports evaluating the cost to close down and clean up TAPS have come to similar conclusions. A third-party estimate of the DR&R obligation is submitted to DNR every three years but kept confidential, according to DNR officials. BP spokeswoman Meg Baldino wrote via email that the companies do not expect to hold any sort of event at Prudhoe when the deal is final and are instead focused on a smooth transition. A Hilcorp spokesman declined to comment. DEC Commissioner Jason Brune said during the meeting that his department is also evaluating BP’s guarantee to back up Hilcorp in addressing existing contaminated sites. Hilcorp has asked to incorporate the Prudhoe Bay facilities it will take over into its current oil spill response contingency, or C-plan, and submitted a list of the facilities that would be added to the plan to DEC on June 15, according to Brune. The department is also targeting a June 30 decision on Hilcorp’s proposed C-plan amendments. DEC received no comments on the changes to the spill response plan during a 10-day comment period that closed June 19, according to spokeswoman Laura Achee. The companies had originally hoped to close the entire transaction at about this time, but the Regulatory Commission of Alaska has spent considerable time evaluating Hilcorp’s finances in relation to it taking BP’s 48 percent share of TAPS. John Ptacin, a state attorney for the RCA, said the pipeline and utility oversight agency received a substantial amount of data from the companies specific to the TAPS transaction May 4 and a request for confidentiality of that information is currently being reviewed. The City of Valdez in April appealed the RCA’s March decision to keep Hilcorp’s financial records private in state Superior Court. Feige said the next transaction oversight meeting is likely to be held in late August to update work on the upstream close if it does not happen June 30 or evaluate where the TAPS portion of the deal stands; it is currently on pace to close in fall, according to state officials at the meeting. ^ Elwood Brehmer can be reached at [email protected]

Donlin co-owner NOVAGold issues rebuttal to short-sale report

Investors will now decide who’s right and who’s wrong. NOVAGold Resources Inc. responded sharply on June 8 to a short-sale report calling the company’s massive Donlin gold project “fool’s gold” and a “pipe dream,” in reference to the lengthy natural gas pipeline that is planned to help power what would be one of the largest open-pit gold mines on Earth. Executives for NOVAGold said the May 28 short-sale report compiled by J Capital Research USA LLC is “error-ridden” and a “sucker punch” aimed at artificially degrading NOVAGold’s stock value. “When I first read JCAP’s report, my first reaction was to chuckle because the piece was clearly so fallacious that I initially assumed it had been written by a child — cooped up kids have far too much time on their hands these days — or, more likely, a disgruntled short-seller,” Thomas Kaplan, chairman of Vancouver-based NOVAGold wrote in a 17-page personal rebuttal. NOVAGold CEO Greg Lang said in a formal statement that the company has thoroughly reviewed the report and is evaluating its legal options against JCAP. Leaders of JCAP acknowledge on the firm’s website that they hold a “short” position in NOVAGold stock, meaning they stand to profit if the mining company’s stock loses value, but insist their report is fact-based and lays out a compelling argument as to why Donlin is “the deposit that will never be mined.” NOVAGold stock sold for $10.65 per share on the New York Stock Exchange at the close of trading May 27 before the short-sale report was released. It has since traded between $8 and $9 per share and closed trading June 23 at $8.77 per share. The JCAP report largely hinges on a common and often accurate refrain for Alaska resource projects: that despite its size, the 33 million-ounce Donlin gold deposit is simply too remote and technically challenging to be economically viable. “(NOVAGold) management’s game is clear: keep investors interested in the stock while they rake in huge salaries,” the JCAP report alleges. “Construction of the Donlin mine was originally expected to start in 2008. Now, 12 years later, management’s best guess is that construction may start in 2022 and production in 2028.” Donlin Gold, the joint-venture project company owned 50-50 by NOVAGold and mining giant Barrick Gold Corp., received a record of decision approving the project’s environmental impact statement from the Army Corps of Engineers in August 2018. Barrick Gold Corp. has not commented on the JCAP report. Donlin officials for years have acknowledged the project will require strong gold prices to be profitable but have declined to specify what the market conditions must be to sanction the mine even as gold prices have risen steadily from about $1,400 per ounce to more than $1,700 per ounce over the past year. Gold peaked at nearly $1,900 per ounce in mid-2011. According to the report, NOVAGold leaders “might have the cushiest job in mining” because CEO Lang has been paid approximately $8.3 million in cash and taken over 1.8 million shares in the company over the past five years despite leading a junior mining firm with no operating income. NOVAGold executives and directors have cumulatively netted about $35 million from share sales over that time as well. About 70 percent of NOVAGold insider share sales have occurred in the past year while the company’s stock has increased in value by roughly 300 percent, according to JCAP figures. Over that time, Chief Financial Officer David Ottewell sold more than half his shares in NOVAGold and Lang reduced his position by 26 percent. “Clearly, the insiders have voted with their feet,” the report concludes of the stock sales. NOVAGold responded that management’s compensation is established by a committee of the company’s board of directors and is regularly measured against a group of peer companies. NOVAGold held $59.7 million in cash and $108 million in total liabilities at the end of February, according to the company’s filings with the Securities and Exchange Commission. JCAP fundamentally contends the 2011 capital cost estimate of $6.7 billion for Donlin was far too low at the time and only grown with inflation since. NOVAGold leaders said in April that the company is working to update its feasibility study this year. The report focuses on the 315-mile, 14-inch natural gas pipeline Donlin plans to build from the west side of Cook Inlet to the mine site near Crooked Creek in the upper Kuskowkim River drainage, which JCAP calls a “project killer.” It references a prior $1 billion cost estimate for the pipeline and asserts a more accurate cost considering inflation would be more than $3.8 billion. According to the report, JCAP consulted with a pipeline expert who confirmed the traders’ rough calculations that the Donlin pipeline would cost 200 to 400 percent more than NOVAGold has stated. “The proposed natural gas pipeline central to powering the project is dead on arrival. The terrain around the Donlin deposit is among the most inhospitable on the planet,” the report states of the pipeline that would cross the Alaska Range. JCAP also discounts the option of barging diesel nearly 200 miles up the Kuskokwim as an alternative fuel source to the pipeline given the sheer volume of fuel that would be needed to power the mine facilities as also being a “bust.” At its planned size to produce 1.1 million ounces of gold per year, Donlin would need more than 1 million liters, or about 264,000 gallons of diesel per day, but the project only has permits to barge a little more than half of that for mine vehicle fuel, according to the report. “Under the most optimistic scenario, cutting production to half of what is now planned, the diesel barged in would be sufficient for at most seven months of operations per year, essentially reducing output to a quarter of what is now planned,” the report sates. However, NOVAGold’s 40-page line-by-line rebuttal to JCAP calls the report’s conclusions on the pipeline simply “inaccurate,” noting references to anonymous engineers and pipeline experts also lack the individuals’ credentials. NOVAGold stresses that the capital costs specified in the 2011 Donlin feasibility study were compiled in accordance with U.S. Generally Accepted Accounting Principles, or GAAP, and the pipeline design and development costs were put together in 2013 by the international engineering firm CH2M Hill (now Jacobs Engineering). NOVAGold management also discounted a comparison of the Donlin pipeline to the 750-mile, 30-inch Mackenzie River pipeline project in Canada that was stopped in 2017 with an estimated cost of $16 billion Canadian. Similar to several Alaska North Slope gasline proposals, the Mackenzie River pipeline was planned to move large quantities of gas from the river delta and near shore Beaufort Sea south to infrastructure and markets in Alberta. “The Mackenzie pipeline project uses different materials in a different location with a different climate and environmental concerns. It is not an appropriate comparison,” states the NOVAGold rebuttal. NOVAGold also insists the amount of diesel needed to run the entire operation could be supplied via the Kuskowkim if needed just by increasing the number of fuel barge tows beyond what is planned for the mine vehicles; but the company does not address the logistical and storage issues that would come with using solely diesel fuel during the months when the river is frozen. Finally, NOVAGold leaders picked apart several inaccuracies in statements about Donlin’s 227-megawatt power plant. The JCAP report asserts that the planned Donlin power plant would be the largest in Alaska, would increase power generation in the state by 40 percent and would produce enough electricity to power a city of 500,000 residents. However, the NOVAGold response notes that the Beluga power plant owned by Chugach Electric Association is 332 megawatts and average generation in Alaska is about 800 megawatts, meaning the 227-megawatt plant run full bore would instead increase statewide power generation by about 28 percent. NOVAGold called the city comparison “exaggerated and irrelevant.” Donlin officials have said the plant would average 153 megawatts of output, which would be about 20 percent of the power currently produced in the state. Elwood Brehmer can be reached at [email protected]

Hilcorp lone bidder once again at Cook Inlet lease sale

For the fourth year running Hilcorp was the only player in the state’s annual Cook Inlet oil and gas lease sale. The Division of Oil and Gas received three bids from the Houston-based producer, netting the state nearly $179,000 for 7,146 acres. Hilcorp’s bids averaged $26.76 per acre. Hilcorp is the primary operator in the basin and has been the only company to bid in the state’s spring Cook Inlet leases sale since no bids were submitted in 2016. The company acquired 17 tracts from 2017-19. The Alaska Peninsula lease sale garnered no bids as usual. Division of Oil and gas officials released the bid results June 17. Hilcorp won the rights to one tract adjacent to the oil-bearing Cosmopolitan Unit, which also contains gas, on the southern Kenai Peninsula. The two other tracts are on the west side of Cook Inlet on the Iniskin Peninsula. Oil production from the Inlet has averaged roughly 15,000 barrels per day in recent years, but the basin is most known for being the lone supply of natural gas for Anchorage and the rest of Southcentral Alaska. Division of Oil and Gas Director Tom Stokes noted the auction was also the state’s first online-only lease sale. “We have been working hard to update the way the division does business, including providing scientific data, making lease offerings available globally, and conducting auctions online. (This) experience, including sale results, validates our investment in this new way of doing business,” Stokes said. “It bodes well for our ability to conduct larger, more complex sales in the future that operate efficiently at lower state cost.” Division officials contracted with EnergyNet Services LLC, a Texas-based firm that specializes in commodities and oil and gas property auctions for the sale. The business relationship should enhance the state’s ability to offer prospective oil and gas acreage to broader markets worldwide, according to a division statement.

Copper River counts keep commercial fishing closed

There seems to be a decent chance commercial fishing in the Copper River District could resume soon despite a dismal start to the famed early season salmon fishery. “I’m optimistic about having some opportunity at this point,” Cordova Area Management Biologist Jeremy Botz said June 16. Botz attributed the more positive sentiment to the facts that recent counts of sockeye at the Miles Lake sonar in the Copper River have been greater than expected and the sockeye that move through the river in May and early June are not headed to the same spawning tributaries that the fish entering the Copper in late June and July are. “We are definitely managing for a different set of stocks than we were before,” Botz said, noting there are more than 100 distinct sockeye stocks throughout the Copper drainage and nearby systems that contribute to the overall fishery. The diversity of the stocks means managers are not trying to “make up” for fish that did not show up early in the run by restricting opportunity the rest of the season, Botz explained. However, exactly when the commercial fishery might reopen is unclear as ADFG managers are still compiling run data from across the system. As of June 15, the Alaska Department of Fish and Game had counted 245,645 sockeye at the Miles Lake sonar and approximately 53,000 of those fish, or more than 20 percent of the total escapement, had been counted in the past four days. While the counts are improving, the total escapement was still just less than half of 2019 when 502,000 sockeye had been counted as of June 15 — with much more commercial fishing time. ADFG’s sustainable escapement goal range for the Copper River is 360,000 to 750,000 sockeye. Fishing time in the Copper River District was halved from two 12-hour openers per week to one for multiple weeks following mid-May openers the first week of the season that cumulatively netted just 6,071 sockeye compared to managers’ expectations of harvests in the 25,000-fish range each day. More than 30,000 sockeye were harvested in each of the two following openers, but the typical early season peak in daily sockeye escapement counts never materialized, which has forced managers to close commercial fishing since June 1. Overall, 71,370 sockeye have been harvested so far this year from the Copper River District, about 10 percent of the overall preseason forecast of a 771,000-fish harvest and a total run of about 1.5 million fish. The Copper River District fleet harvested approximately 1.2 million sockeye last year. The Copper River king salmon harvest has also been lower than expected with 5,751 fish caught over the four openers. The lack of a significant restaurant market this year has also depressed ground prices for Copper River salmon, which traditionally fetch high prices in-part because it is the first large-scale Alaska salmon fishery of the year, based on reports from Botz and other observers. Prices for during the early openers were in the $3.50 per pound range for sockeye and approximately $6.50 per pound for king salmon. The price for kings was about $10 per pound last year. As for some of the other Prince William Sound gillnet fisheries, Botz called it a “mixed bag” of early results. Through June 15 nearly 5,000 sockeye and 42,000 chum had been harvested at the Coghill River and another 41,000 had been caught in the Eshamy-Main Bay District, according to ADFG figures. According to all-gear harvest data compiled by the research firm McDowell Group for the Alaska Seafood Marketing institute the overall Prince William Sound sockeye harvest — including the Copper River District — was off 82 percent from last year with approximately 114,000 fish caught through June 14, compared to a harvest of 646,000 sockeye by the same date a year ago. The Prince William Sound chum harvest of 221,000 fish was off 14 percent from 2019 as of June 14 as well, according to the ASMI data. Elwood Brehmer can be reached at [email protected]

Pebble Partnership pitches payments to area population

Pebble Partnership leaders announced a plan June 16 to pay Bristol Bay residents if the controversial mine project that has sharply divided many communities in the area reaches construction and eventually production. Pebble CEO Tom Collier said in a prepared statement that the revenue sharing program dubbed the “Pebble Performance Dividend” makes good commitment he offered in late 2017 when its new plan for a smaller, 20-year copper and gold mining operation was unveiled. The U.S. Army Corps of Engineers is currently evaluating Pebble’s Clean Water Act Section 404 wetlands fill permit application for the 20-year mine and drafting the corresponding environmental impact statement, or EIS. A final EIS should be released sometime this summer, according Corps Alaska officials. “While not everyone will want to work at the mine, this (dividend) ensures a direct way for everyone to participate. Whether a resident supports the project, opposes it, or is neutral, anyone who is a year-round resident can participate,” Collier said. Collier and other Pebble leaders have long touted the mine as a way to improve the economics of the region that currently relies on commercial fishing and tourism as its primary industries. The mine is expected to support up to 2,000 jobs during construction and between 750 and 1,000 jobs once it is developed, according to Pebble. The company says it will allocate $3 million per year for the dividend during the multi-year construction phase of the project. Once the mine is operating and profitable Pebble will distribute 3 percent of the net profits from the mine to Bristol Bay-area residents that have signed up for the dividend. As of last year the 31 communities in the area Pebble has made eligible for the dividends — in the Dillingham Census Area and the Bristol Bay and Lake and Peninsula boroughs — had a combined population of 7,378 residents, according to the state Labor Department. The mine site would be in the Lake and Peninsula Borough. Bristol Bay residents must have lived in the region for 12 months prior to enrolling in the dividend program. An online portal through which residents can enroll in the dividend program will be open through Aug. 31, according to Pebble. Opponents of the mine have characterized the dividend proposal as an attempt to buy support for a project that has widespread opposition in the region, primarily due to the concern that the mine would pose major, multifaceted risks to the salmon fisheries in the large Nushagak and Kvichak river systems. Jason Metrokin, CEO of Bristol Bay Native Corp., which has led the opposition to Pebble, said in a formal statement that the dividend proposal is another tactic “to try to sway public opinion on this vastly unpopular project.” He also questioned why Pebble would open a two-and-a-half-month enrollment period now when construction of the mine is at least three or four years away. While Pebble is nearing the end of the EIS process, it still must receive numerous other state and federal permits before construction can start and several of those permit applications typically take multiple years for officials to review and approve. “BBNC’s opposition to the proposed Pebble mine is rooted in our shareholders’ culture and subsistence way of life and is strengthened by the good science that concludes that the proposed mine would cause unacceptable and irreparable adverse impacts to the Bristol Bay region. We will not trade salmon for gold, and we will not be swayed by promises of cash payments from a proposed mine that cannot and should not be built,” Metrokin said. A 2019 poll commissioned by BBNC found that 76 percent of its shareholders were against the mine and 83 percent living in the Bristol Bay region opposed it at the time. In early May Pebble offered to have BBNC administer its Performance Dividend program through the Native regional corporation’s own shareholder dividend distribution program; the offer was unanimously rejected by the BBNC Board of Directors. Metrokin wrote to Collier May 22 in response to the offer that it lacked the detail that would be needed to support it. He continued to write that Pebble has not provided sufficient information about the economics of the company’s plan, regardless of the dividend proposal. “Consequently, your offer to share a portion of revenue from Pebble is too speculative to consider and highly unlikely,” Metrokin wrote to Collier. BBNC and other Bristol Bay stakeholders have asked (Pebble) to produce an economic feasibility study for its mine proposal for years and (Pebble) has repeatedly failed to do so. We do not believe that your 20-year mine plan is economically viable at all.” Collier has said Canadian finance laws prevent Pebble’s parent company, Vancouver-based Northern Dynasty Minerals Ltd. from releasing an economic analysis of the 20-year plan at this point. When asked about the allegation that Pebble is trying to buy support, spokesman Mike Heatwole wrote in an email that the company simply wanted to provide an additional way for residents who won’t end up working at the mine to share in its benefits. Elwood Brehmer can be reached at [email protected]

Poor Kenai king returns will restrict start of Cook Inlet fishery

Segments of the Upper Cook Inlet commercial sockeye fishery will again start with restrictions to limit the harvest of late-run Kenai kings. Alaska Department of Fish and Game managers issued an Emergency Order June 15 restricting the late-run Kenai king sport fishery, which starts July 1, to fishing without bait and all kings longer than 34 inches must be released. That means the fishing time for East Side Cook Inlet setnetters will be no more than 36 hours per week, as long as the sport gear and harvest restrictions remain in place, per the Board of Fisheries paired restrictions plan for the sport and commercial fisheries that are often in conflict. This year the time restrictions on the setnetters kick in earlier as well because the Board of Fish broadened the paired restrictions to also include the Kasilof Section, where fishing will start June 25 or before if the number of sockeye into the Kasilof is sufficient to warrant an early opening. ADFG’s late-run Kenai king forecast estimates a total return of 22,707 large kings greater than 34 inches, which is within the sustainable escapement goal, or SEG, range of 13,500 to 27,000 large fish but would be the sixth-smallest return in the past 35 years, according to the department. However, it would still be nearly double last year’s total return of just 12,780 of the famed large, late-run Kenai kings. The average return over the past 35 years is approximately 43,000 large fish but over the past five years it’s fallen to an average of about 21,600 large kings, according to the department. The Board of Fish also established an optimal escapement goal of 15,000 to 30,000 late-run Kenai kings — a win for sport interests — in a further attempt to get more fish into the river. Kenai-area Sport Fish Management Biologist Colton Lipka said the preseason Kenai late-run restriction was implemented in part because of the low forecast and also because the early-run of Kenai kings has been extremely poor. Through June 15 just 1,165 large kings had been counted on the Kenai, much less than the minimum optimal escapement goal of 3,900 fish. Early-run fishing was closed June 8 by Emergency Order. Lipka said there is some correlation in the performance of the two stocks; the early-run Kenai kings generally spawn in tributary streams while the late-run fish spawn in the main stem of the Kenai. The king fishing restrictions on the Kenai also trigger regulation changes in the nearby Kasilof king fishery to limit the effect of likely increased fishing pressure. The Kasilof will continue with single-hook and no bait limitations through the July 31 close of the season or until the restrictions on the Kenai are lifted. For all interests, the slow start to another Kenai salmon season is beginning to feel less like an exception and more like the norm. For the setnetters, the time restrictions come on top of a less-than-stellar forecast for sockeye on the Kenai Peninsula. The Kenai sockeye return is forecast at roughly 2.2 million fish, which is 38 percent less than the 20-year average of 3.6 million. About 723,000 sockeye are expected to return to the Kasilof, which would be 26 percent less than the average of 971,000 fish. While better than average returns are forecasted for the Fish Creek and across the Susitna River drainage, the low expectations on the two most productive sockeye systems in Upper Cook Inlet mean the total commercial sockeye harvest is forecast at 1.7 million fish this year, which would be approximately 40 percent less than the 20-year average of 2.8 million sockeye caught. The small harvest forecast comes on the heels of two consecutive low-harvest years for the Upper Cook Inlet sockeye fishery as well. As a result, this year Pacific Star Seafoods in Kenai will be the only processor in the area, according to multiple sources. Representatives at Pacific Star did not respond to requests for comment. Upper Cook Inlet commercial fishermen contend the processor situation exemplifies the broader economic activity lost in the region as restrictions are placed on commercial salmon harvests, largely in attempts by the Board of Fish to provide more fish to other user groups. The small expected returns also come in the first year of an increased SEG for the Kenai and a lower optimum goal for the Kasilof. The board increased the Kenai goal range from 700,000 to 1.2 million sockeye to 750,000 to 1.3 million based on the department’s recommendation and moved the lower bound of the Kasilof goal down by 20,000 fish to 140,000 sockeye and the upper bound up by 30,000 to 370,000 sockeye. Upper Cook Inlet Commercial Fisheries Area Manager Brian Marston said it’s unlikely the Kasilof will meet the threshold of 30,000 escaped sockeye to open the Kasilof Section before at least June 22, but noted that assessment was based on just the first day of counts, June 15, in which 3,942 sockeye passed the Kasilof sonar. The Kasilof Section is otherwise scheduled to open June 25. Elwood Brehmer can be reached at [email protected]

Salmon set to return, but market questions loom

The start of the massive Bristol Bay commercial sockeye fishery is fast approaching but this year is bringing with it a level of uncertainly rivaled by few others even in the volatile fishing industry. Fishery participants and observers generally expect a softer market and lower prices for Bristol Bay sockeye due to several factors, though it’s difficult to predict how the market influences will interact, according to Bristol Bay Regional Seafood Development Association Executive Director Andy Wink. The COVID-19 pandemic has all but evaporated traditional restaurant markets for Alaska salmon and other seafood, which has resulted in lower-than-normal prices for the Copper River sockeye and king fishery that started in mid-May, Wink noted. However, he added that poor returns and a corresponding small harvest at the Copper could help buoy demand for salmon from Bristol Bay. Adding to the complexity of the situation, Wink also cited news reports indicating an increase in retail seafood sales and that could be a boost for the fishery that sends a large portion of its harvest to supermarkets. Bloomberg reported June 12 that generally homebound consumers had increased retail seafood sales by 27 percent nationwide since early March compared to last year. “Although Bristol Bay salmon is more commonly sold in grocery stores, which have seen a bump in seafood sales, massive spikes in unemployment and a standstill in restaurant traffic could also affect pricing,” Wink wrote via email. “However, we do expect continued strong demand for one of the healthiest proteins available, all things considered.” On top of that, Wink said the strength of the U.S. dollar could hurt Alaska fishermen in export markets and lower prices for farmed salmon worldwide aren’t likely to help either. “On the plus side, lower predicted harvests for sockeye and other salmon species globally could provide some support for pricing in 2020 as well as potentially more demand for canned product,” he said. The final price for Bristol Bay sockeye has averaged between approximately $1 per pound and $1.60 per pound in recent years following a sudden drop to 64 cents per pound in 2015, according to data compiled by BBRSDA. A large sockeye return last year led to a preliminary ex-vessel harvest value of $306.5 million, which is the highest initial value ever for the fishery, according to the Alaska Department of Fish and Game. The initial base price for Bristol Bay sockeye averaged $1.35 per pound last year. ADFG managers are expecting another strong return of sockeye to Bristol Bay. The department’s preseason forecast estimates a total return of nearly 49 million fish and a harvest of 34.5 million sockeye. Last year’s run of 56.5 million fish was the fourth-largest ever and also marked the fifth consecutive year the Bristol Bay sockeye return exceeded 50 million fish. The 20-year average return is approximately 39 million sockeye to the region, according to ADFG. And even if it goes off without a significant outbreak of COVID-19, the impact of the virus are still likely to ripple through the Bristol Bay fishery in the form of more expenses for processing companies paying for extra health precautions for their workers, such as COVID-19 tests and chartered flights in some instances, according to Wink. He said it’s unknown at this point to what extent the industry will be able to recoup those costs and without government aid, they could result in lower prices for fishermen. Through the federal CARES Act, the fishing industry in Alaska was allocated $50 million and the state appropriated $100 million from the block grant in the same bill. “The processing companies which buy Bristol Bay salmon are also very involved in other Alaska regions and species. Some of those species have struggled with a combination of low prices and/or lower biological production,” he wrote. “So even if the Bay is doing well, from a consumer demand standpoint, the fishery’s ex-vessel value could be affected by worse performance in processors’ other business segments.” Operationally, Wink and Dillingham-based ADFG Nushagak Area Manager Tim Sands said they expect fishery to go off as close to usual as could be expected this year, barring an outbreak of COVID-19 among participants or sudden changes to government mandates. “By and large we expect processing and harvesting capacity to be pretty normal,” Wink said, a conclusion Sands echoed. In most years processors are able to handle daily harvests of slightly more than 2 million fish during the peak of the season before the system starts to back up, according to Sands. As for the fish, Sands said ADFG’s Nushagak River sonar has been operating since June 6 as normal and had counted roughly 10,000 fish as of June 15, but department personnel had not been able to apportion the numbers of fish passing the sonar to get species-specific data. However, anecdotal reports from subsistence harvests near the mouth of the Nushagak around Dillingham indicate early king returns have been poor, which is something managers are “very concerned about,” Sands said. Poor king returns often lead to reduced opportunity for fishermen targeting sockeye as managers try to allow more kings into the river. “I feel like we were catching more fish just in general at this point in the season with subsistence nets over the last several years so things might be a little bit later in general,” Sands said. He also noted that sockeye harvested by subsistence users have generally been smaller than normal, but it’s too soon to tell yet if that means an overall larger run is coming or something else. The commercial fishery is opened when certain river escapement thresholds are met. Fishing activity traditionally peaks around July 4. Elwood Brehmer can be reached at [email protected]

Niblack parent company settles debt, gets new CEO

The owners of a multi-metal prospect in Southeast Alaska have new leadership and potentially new life through an agreement to settle $3.4 million of debt. Vancouver-based Heatherdale Resources Ltd. announced June 3 that it had reached the settlement with fellow Canadian mining firm Hunter Dickinson Services Inc. that clears the vast majority of the debt Heatherdale had compiled with Hunter Dickinson through normal business. Heatherdale Resources is the sole owner of the Niblack underground copper, gold, silver and zinc prospect on a remote portion of southern Prince of Wales Island. According to a statement from Heatherdale, the company had accrued more than $4 million (Canadian) in debt to Hunter Dickinson as of late last year. The settlement grants Hunter Dickinson more than 35 million shares in Heatherdale at a price of 9.75 cents per share. Robert McLeod, one of the purchasers of the stock, will take over as a director and CEO of Heatherdale as part of the deal as well. Heatherdale Chairman and CEO David J. Copeland agreed to step down from the leadership position and make way for McLeod, according to the company. McLeod is a professional geoscientist with more than 25 years of experience in mineral exploration, having worked primarily in Alaska, Northwest Canada and Nevada, according to Heatherdale. Hunter Dickinson is an owner in Northern Dynasty Minerals, which is the sole owner of the large and contentious Pebble deposit in Southwest Alaska. Ron Thiessen is a director and CEO of both mining firms. Heatherdale leaders said issuing the settlement shares will help the company preserve cash for future work. “The company’s board of directors believes that the debt restructuring is necessary to provide the company with a clean balance sheet in order to attract new capital and position the company to unlock value from its current project and acquire new interests,” the June 3 statement reads. Heatherdale has held the Niblack prospect since 2009 but work had slowed of late as the company dealt with its financial issues. The Niblack deposits hold 5.6 million metric tons of indicated resources with an average copper grade of 0.95 percent; 1.73 percent zinc; 1.75 grams per ton of gold, and 29.5 grams per ton of silver. Niblack also holds another 3.4 million tons of inferred resources at slightly lower metal grades, according to Heatherdale. The underground Niblack mine would mill between 1,000 and 1,500 metric tons of ore per day for 10-plus years if it is developed. Heatherdale has proposed a plant for processing metal concentrates on Gravina Island near Ketchikan — an operating model similar to that being advanced by Ucore Rare Metals Inc., which is working on the Bokan rare earth element prospect near Niblack on Prince of Wales. Ucore is planning a processing facility in Ketchikan, the company has said. Both projects received a boost from the state back in 2014 when the Legislature approved a bill signed by former Gov. Sean Parnell allowing the Alaska Industrial Development and Export Authority to assist in financing their development. At the time, Heatherdale was seeking a partner in the project, which was then estimated to cost between $175 million and $250 million to develop. The legislation authorized AIDEA to put up to $125 million into Niblack. Elwood Brehmer can be reached at [email protected]

Pipeline right-of-way permit under review for Donlin mine

Rising gold prices are fueling excitement among the owners of the Donlin gold mine but groups opposed to the project are raising questions about the thoroughness of its permitting process. Alaska Department of Natural Resources Commissioner Corri Feige on April 30 granted a request to reconsider her Jan. 17 approval of a right-of-way lease for Donlin’s natural gas pipeline following a Superior Court appeal of her decision to approve the lease and initially deny a request for consideration filed Feb. 6. Homer-based conservation advocacy group Cook Inletkeeper filed the permit appeal on behalf of several Kuskokwim-area Tribes. Feige initially denied the reconsideration request but reversed that decision in an April 30 letter to Cook Inletkeeper Advocacy Director Bob Shavelson. However, the two-page letter does not explain what motivated her to reverse course. Cook Inletkeeper and the Orutsararmiut, Chevak and Chuloonawick Native council and villages appealed Feige’s decisions to Superior Court March 19. The appeal was dropped following the April 30 ruling. The 14-inch pipeline would run 315 miles from near Beluga on the west shore of Cook Inlet to the mine site in the Crooked Creek drainage in the Upper Kuskokwim Valley. It would supply feedstock gas to the mine’s large power plant. Cook Inletkeeper’s request to reconsider the permit contends it is premature to issue the right-of-way for a pipeline that has yet to receive state fish habitat and other permits. The groups also argue it is DNR’s responsibility to consider the cumulative impacts of the $7 billion-plus project in granting the right-of-way lease. “The pipeline is proposed as part of a massive gold mine with substantial environmental impacts, including habitat loss and degradation, water and air quality impacts, and risk of tailings dam failure, to name a few,” the request states. “If the benefits of the entire Donlin project can be used to bolster DNR’s analysis of the public interest, the detriments of the entire project should also be used in its analysis to ensure the agency is truly acting consistent with the public interest.” Feige wrote in her decision that state law does not require a cumulative effects analysis and emphasized DNR’s role as a cooperating agency in the project’s environmental impact statement that was approved in 2018, “which stringently considered cumulative and reasonably foreseeable impacts.” “Nonetheless,” she wrote, “the Department of Natural Resources will conduct a further analysis of the cumulative and reasonably foreseeable impacts of the right-of-way lease for the Donlin pipeline. Once this analysis is complete, a new decision will be issued, and notice will be provided of a new comment period consistent with Alaska law.” She also wrote that granting the reconsideration “does not imply that the issues raised in the request have merit.” DNR spokesman Dan Saddler wrote in response to questions that the he could not provide more detail behind the reasoning for reversing the decision than is in the letter because it is an ongoing matter. According to Saddler, the department does not believe the additional look will set a precendent for when the state must review the cumulative impacts of a project for various permitting decisions. "By virtue of the state's participation in the (National Environmental Policy Act) process as a cooperating agency, DNR performed a cumulative impacts analysis leading up to its issuance of the right-of-way at issue here, but it is nonetheless undertaking addtional analysis thorugh the Commissioner's reconsideration," Saddler wrote. Feige and Gov. Mike Dunleavy have both expressed strong support for the Donlin project, stressing the roughly 1,400 jobs its estimated the mine would support are badly needed in the remote region of the state. The Tribes oppose the project that would be located on land owned by The Kuskowkim Corp., a Native village corporation largely because they fear the impacts it will have on subsistence resources, primarily salmon and whitefish in the Kuskowkim River. Donlin Gold LLC spokeswoman Kristina Woolston wrote via email that the reconsideration will not impact the project’s timeline and the company is awaiting the state’s updated decision. Donlin suspended its 2020 work program in early April in response to the COVID-19 pandemic but work resumed last month. The company is employing four drilling rigs and has 120 workers at the deposit that include Calista Corp. shareholders and Yukon-Kuskokwim residents, according to Woolston. Gold prices have increased nearly 30 percent in the past year to a recent plateau of approximately $1,700 per ounce. Tom Kaplan, chairman of Vancouver-based NOVAGold, which owns a 50 percent stake in the Donlin project, said during the company’s annual shareholder call in May that he is confident gold will soon exceed $3,000 per ounce. Donlin’s size as one of the largest gold mines in the world — with planned production of 1.1 million ounces per year — and its remote location mean the project will require a very strong gold market to develop. Company leaders have not said what price or market condition would trigger development if the project reaches that stage. The Tribes on June 5 also appealed a May 7 Department of Environmental Conservation decision to maintain a Certificate of Reasonable Assurance to Donlin that the project will meet Clean Water Act Section 401 discharge standards. The Tribes argue the EIS conducted by the Army Corps of Engineers concluded the project would result in elevated mercury levels, loss of salmon habitat and could increase stream temperatures. The appeal states that the area already has naturally-elevated mercury levels and the mine could add to that and exceed allowable levels. DEC Commissioner Jason Brune has 10 days to approve or rule on the request, per state regulations. DEC officials wrote in response to comments about the certification decision that they believe mitigation measures taken at the mine will be sufficient to limit stream mercury levels. Elwood Brehmer can be reached at [email protected]

PPP rules loosened, but some businesses still struggle to find aid

Congress continues to expand the COVID-19 economic safety net as it becomes clear it still isn’t catching some small businesses that have not been able to secure any of the several forms of government aid. President Donald Trump signed the Paycheck Protection Program Flexibility Act June 5, just 10 days after it was introduced in the House. As the name implies, the legislation significantly eases spending parameters for the federal government’s primary aid program to help small businesses survive the pandemic. It loosens the restrictions on how businesses can spend their PPP funds without being required to repay them; extends the time businesses have to spend the money from eight to 24 weeks; extends the loan maturity period for businesses that do have to repay at least a portion of their PPP aid from two to five years; and reduces the amount of a loan that must be spent on payroll from 75 percent to 60 percent; among other changes. Seeded with $660 billion over two installments, the Small Business Administration had dispersed more than $511 billion in loans — that turn into grants if the spending parameters are followed — through Paycheck Protection Program to more than 4.5 million businesses nationwide as of June 6. In Alaska, 10,265 small businesses had received more than $1.2 billion, according to the SBA. However, those figures have hit a plateau in recent weeks. Just 215 PPP loans totaling approximately $5 million had been approved in the past two weeks, according to SBA figures, despite the fact that more than $130 billion remains available. The state had nearly 71,000 small businesses in 2018, according to the SBA. “The PPP has served as a critical lifeline to keep our small businesses afloat through the peak of the coronavirus pandemic. I am glad to see these common sense changes to the program pass the Senate, changes that will undoubtedly give small businesses greater flexibility and the ability to keep their workers on their payroll,” Sen. Dan Sullivan said in a formal statement. Sen. Lisa Murkowski said the PPP changes should especially help seasonal business that make up a large share of the Alaska economy. “It’s got to help,” Anchorage Economic Development Corp. CEO Bill Popp said of the PPP Flexibility Act. Popp expects the changes will encourage new PPP applications and he hopes they do because he said AEDC staff has been consistently hearing from “dozens” of small business owners who previously couldn’t qualify for government aid to weather the pandemic. “Those (initial requirements) were all just too tight given the fact that business was just shut down for a period of time,” he said. “I’ve dealt with some pretty angry calls from people looking for someone to vent to.” Alaska Small Business Development Center Executive Director Jon Bittner similarly said he’s heard from individuals frustrated by some of the challenges and inconsistencies in the aid programs. Bittner said many small business owners will likely apply for a grant through the state’s $290 million AK CARES program being administered by Credit Union 1 before trying — sometimes again — to get a PPP loan because the state program is currently limited to those businesses that have not received federal aid. SBDC staff are hearing from some business owners who have received just a small Economic Injury Disaster Loan, or EIDL, from the SBA he said. “If you got $3,000, that’s not why (the state) was excluding people,” Bittner said. Kenneth Wake, who owns of Prepper’s Pack, a small emergency equipment and tactical outdoor gear shop with his wife in South Anchorage is one of the emerging group of business owners who didn’t initially qualify for PPP aid; and the changes don’t appear to have helped, either. Wake said the couple does not take regular paychecks from the business; they draw on their investment and then pay taxes off of that, meaning they don’t have the documentation the application process requires. The couple does not have any employees. The PPP Flexibility Act does not amend the loan application requirements. “We can’t show proof of income,” he said. Prepper’s pack closed March 23 and did not reopen for nine weeks. In the interim, Wake, a former hotel security director, accepted a security job so he didn’t apply for unemployment. The state Labor Department is also requesting his wife repay unemployment benefits because the couple’s income records are not standard issue, he said. “It shouldn’t matter how we pay ourselves to be self-employed,” he said, noting unemployment benefits have been extended to self-employed individuals during the pandemic. Wake first applied for an EIDL of up to $10,000 and was unsure of the status of the application when a $2,000 advance showed up in his account. However, that $2,000 in federal aid has prevented him from applying for an AK CARES grant of between $5,000 and $100,000 as well as Anchorage’s Small Business and Nonprofit Relief Grant Pilot Program. Wake said he filled orders for protective equipment from the Anchorage Airport Police and medevac services while Prepper’s Pack was closed to the public but estimates he gave up approximately $17,000 in revenue while the store was closed. He said their landlord forgave part of the April rent payment for the store and the couple paid part of May but they still owe for June. Business has gradually improved in the days since Prepper’s Pack reopened, but Wake said he is still unsure about the future of the business. “I’m hoping and praying we get through this but I tell you what I won’t be holding my breath,” Wake said. Bittner suggested that business owners having trouble finding assistance at the state and federal levels should begin to look locally for at least some sort of aid. He noted that nearly $600 million of the $1.5 billion the state received from the CARES Act is going to local governments that are setting up their own business assistance measures. “Those are going to be small pots of money,” Bittner said, but “There is some more funding on that level that should be easier to get.” Officials in Gov. Mike Dunleavy’s administration have said the rule limiting AK CARES grants to those who had not received federal help was written in late April when the PPP loan pool was first exhausted. It was intended to ensure as many Alaska businesses as possible got some help. Administration officials, House and Senate leaders have all said they want to remove the federal aid restriction for the program but it is unclear exactly how that will be done. Wake sent an email June 2 to Sullivan, Dunleavy’s Chief of Staff Ben Stevens and the legislators on the bicameral Legislative Budget and Audit Committee, which handles out-of-session fiscal matters, explaining his situation and expressing his frustration with the requirements for the various aid programs. He said he had not received any responses as of June 9. Credit Union 1 had accepted 1,224 AK CARES applications through June 8, according to spokeswoman Jessica Gallagher. Elwood Brehmer can be reached at [email protected]

Corps OKs $618M plan for Port of Nome

A long-sought plan for a deepwater port in Western Alaska appears to finally be gaining momentum. U.S. Army Corps of Engineers commander Lt. Gen. Todd T. Semonite approved a $618 million plan June 1 to expand the Port of Nome, leaving approval from Congress as the last major hurdle for a project that many officials hope is just the first in a series of infrastructure developments in the region. The Port of Nome Modification Feasibility Study is the latest iteration in a series of proposals made over the past decade to upgrade maritime facilities along Alaska’s largely undeveloped western coast. Army Corps Alaska District Acting Commander Col. David Hibner said in a formal statement that the existing port facilities in Nome are overcrowded and restrict vessel traffic because of water depth limitations. “We’ve developed a feasible engineering solution that provides safe, reliable and efficient navigation improvement to support a critical region of the state. Delivery of this important infrastructure will help to strengthen commerce and national security in the Arctic,” Hibner said. Earlier concepts to further develop Nome port or build a wholly new deepwater facility elsewhere on the Seward Peninsula were based on the expectation that the oil and gas industry was poised to start large-scale operations in the Beaufort and Chukchi seas. In 2015 the Army Corps of Engineers released a $210 million plan to expand the area of protected water in front of Nome and dredge the area for larger vessels. The Corps’ work on that plan started as early as 2011. However, when Shell announced later that year that its $7 billion Chukchi oil exploration effort had come up empty and it would cancel its offshore Arctic drilling program later, the corresponding plan to renovate Nome’s port to better handle oil and gas industry support vessels was scrapped as well. Congress then turned around in 2016 and subsequently broadened the scope of potential benefits the Corps is allowed to evaluate when considering marine infrastructure projects in Alaska to include “the viability of regions,” rather than strictly looking at a direct and immediate cost-benefit review for a given project. The latest plan — released in draft form in January — calls for roughly doubling the length of the port’s existing west causeway to reach approximately 2,100 feet farther into Norton Sound with a nearly 1,400-foot breakwater to protect harbor entrance from incoming waves. The L-shaped barrier would also hold two new 450-foot and one new 600-foot dock to handle the larger vessels that have started calling on Nome, according to Corps officials. The existing east causeway-breakwater would be demolished and replaced with a larger, 3,900-foot causeway-breakwater that would greatly expand the port’s outer basin. Approximately three-quarters of the material from the existing east causeway would be used to build its replacement, according to the study. The bigger outer port basin would also be dredged deeper — from 22 feet currently to 28 feet — and the three new docks would be near the end of the longer west causeway-breakwater in an area dredged to at least 40 feet deep. The 2015 plan called for adding 2,150 feet to the existing west causeway and dredging the harbor entrance channel to a maximum depth of 28 feet. The primary benefit to residents of Nome and outlying communities would be potentially lower-cost goods brought in by larger vessels and to realize that local officials will likely need to contribute significantly to funding the project. The $618 million price tag breaks down to $386 million funded by the federal government, largely for the in-water dredging and construction. The City of Nome would have to contribute nearly $123 million for the navigation features and another $128 million for infrastructure deemed “local facilities” such as access roads, docks, utilities and other things, according to Alaska Corps officials. Nome Port Director Joy Baker wrote via email that local government leaders are working with consultants on a plan to fund the project from several possible sources, but they are not yet ready to disclose the details. The 2020 American Water Infrastructure Act passed out of the Senate Environment and Public Works Committee May 11 containing language directing Corps leaders to expedite approval of the Nome project. Sen. Dan Sullivan, who serves on the EPW Committee, said during a May 27 videoconference discussion hosted by Commonwealth North that members of Congress from other states are starting to recognize the need to focus attention on the Arctic as countries like China and Russia grow their icebreaker fleets and continue to grow their presence in the region that is believed to hold vast stores of energy, minerals and other resources. “There has been an Arctic awakening, there’s no doubt about it. It is across the board; Democrats, Republicans, Senate, House and it’s coming up all the time,” Sullivan said. Currently, Dutch Harbor is the only deepwater port in Western Alaska capable of being the homeport for large vessels — whether they are for research, spill response, search and rescue or industry. “It’s going to be expensive but the key is it’s going to be the first port” in the Arctic, Sullivan said of the Nome project. The Alaska delegation, state lawmakers and Defense and Coast Guard leaders in the state for years have emphasized what they believe is a need for an Arctic deep-draft port in Western Alaska as shipping traffic through the Bering Strait increases as a result of the ever-receding sea ice. City officials hope the project can relieve congestion at the port and generally make it easier for vessels of all sizes to utilize the facilities, according to Baker. Baker also expects more activity at the port from fishing fleets as populations of cod, Pollock and other species historically confined by water temperatures to the southern Bering Sea move north with warming water over the long term. Congress would still need to appropriate funding for the federal portion of the project in a spending bill even if it is ultimately authorized through the traditionally noncontroversial water infrastructure bill, as expected. Elwood Brehmer can be reached at [email protected]

Small improvement seen for Copper River run

The Copper River sockeye run has improved after an abysmal start, but not enough for managers to allow for normal fishing periods in the famed early season fishery. Alaska Department of Fish and Game biologists appear to have correctly predicted a smaller than normal 2020 Copper River sockeye run, but it is shaping up to be even less than expected. Fish and Game Area Management Biologist Jeremy Botz said June 2 it was unlikely the drift gillnet fishery would be opened for a regular 12-hour period June 4, as sockeye passage past the Copper River sonar at Miles Lake was only about half of what managers expected it would be. Through June 1 just 79,482 sockeye had been enumerated at the sonar in the lower river. Comparatively, more than 220,000 sockeye had moved past the sonar by the same time last year despite additional fishing time in the commercial fishery. The low sockeye escapement figures continue despite managers closing the regular, 12-hour Thursday fishing periods during the second and third weeks of the fishery. The Copper River District normally opens in mid-May with 12-hour fishing periods on Mondays and Thursdays. “We’re just going to be watching that sonar real close and hoping to get a few days of 20,000-plus (sockeye),” Botz said. Botz said the sockeye run appears to be late and small, while the Copper River chinook run — expected to be strong this year at roughly 60,000 fish — also appears to be smaller than forecasted, although getting an accurate early read on the chinook return is more difficult, Botz noted. Overall, department biologists forecasted a smaller Copper River sockeye run of 1.5 million fish this year compared to a 10-year average of 2.1 million wild fish. The Gulkana Hatchery supports a small portion of the annual Copper River sockeye run. The department’s official forecast estimated a commercial sockeye harvest of 771,000 fish versus a harvest of 1.2 million sockeye last year. The Copper River chinook return and harvest was initially expected to be strong with a total run of 60,000 fish and an all-fishery harvest of up to 36,000 fish possible. Fishing improved for the gillnet fleet during the May 25 and June 1 openers, with 33,777 and 31,522 sockeye taken during the respective periods. The larger catches followed drastically low catches in the first two openers of the season in which the combined harvest was just 6,071 sockeye, which led to the restrictions on fishing time. According to Botz, ground prices for the prized Copper River salmon have improved somewhat from initial low prices of $3.25 per pound for sockeye and $6.25 per pound for chinook, but only to the $4 per pound range for sockeye and nearly $7 per pound for chinook. Widespread restaurant closures in the Lower 48 have greatly reduced the traditional primary market for Copper River salmon. The run is still better than 2018 when low sockeye returns forced managers to greatly restrict fishing time to achieve sufficient escapement. Just more than 44,000 sockeye were harvested during the entire 2018 Copper River season and only 45,000 fish had passed the sonar by June 1 of that year, compared to the 79,000 fish this year. Chinook catches have also been low this year, with 5,751 fish caught during the first five openers, but with no other way to track the Copper River chinook return until the fish reach counting stations at upriver tributaries, Botz said the time restrictions put on the fishery because of the low sockeye counts could have allowed a significant number of fish into the river. It’s just too soon to know for sure. Cordova District Fishermen United Executive Director Chelsea Haisman said the fishery has been disappointing so far, but fishermen understand the need to restrict time and allow for adequate fish passage into the river. “We certainly wouldn’t want to see the run put in jeopardy in the long-term,” Haisman said. ^ Elwood Brehmer can be reached at [email protected]

Banks issuing deferrals as economic impacts arrive

Alaska’s banks generally had a solid start to 2020 but what’s in store for the rest of a tumultuous year is anyone’s guess. First National Bank Alaska, the state’s largest local bank, ended the first quarter of the year with assets totaling nearly $3.86 billion, up from approximately $3.81 billion to start the year. FNBA netted $14.1 million in the first quarter, which is in line with the bank’s performance in recent quarters, according to figures in reports published by the Federal Deposit Insurance Corp. Anchorage-based Northrim Bank held more than $1.67 billion in total assets on March 31 — a 2.4 percent increase during the quarter — and generated $2.3 million in net income during the first quarter. In Fairbanks, Denali State Bank surpassed the $300 million mark in assets, finishing the first quarter with $306 million in total assets for an increase of 3.4 percent in the first quarter. Denali also netted $552,000 during the quarter. Denali State Bank CEO Steve Lundgren said in an interview that the community bank finished the first quarter “on budget” and has since seen its loan portfolio grow by nearly 20 percent, largely due to participating in the Small Business Administration’s Paycheck Protection Program, which provides low-interest loans to small businesses seeking help for payroll and other fixed costs to weather the coronavirus-induced economic upheaval the country is facing. According to Lundgren, Denali has processed about 430 PPP loans totaling roughly $41 million. He said most of that cash went into the bank in the form of deposits. The vast majority of PPP loans are expected to convert to grants as long as borrowers use the financial aid on qualifying expenses and don’t reduce their workforce after receiving the funds. Despite the ostensible economic shutdown that caused Alaska’s unemployment rate to jump from 5.2 percent in March to 12.9 percent in April, according to the state Labor Department, Denali has not seen a corresponding spike in loan delinquencies or charge offs, according to Lundgren. “I tell my staff, I tell my board that’s because we process a significant amount of loan deferrals,” he said, adding that most of the deferrals are for three months. Lundgren said Denali customers have mostly been proactive and requested help if they saw personal financial trouble on the horizon. The true test to the effectiveness of the bank’s help — and that from government on all levels — will be in late summer when those payment deferrals expire. Denali leaders in May used an increase in revenue to fund their loan loss reserve for the entire year, according to Lundgren. The bank had a loan loss allowance of $3.3 million in the first quarter, according to the FDIC reports. “I’m cautiously optimistic that as the state continues to open up we won’t see many delinquencies,” he said. Northrim Chief Lending Officer Michael Huston said he couldn’t speak to what bank leaders are seeing internally in the second quarter until the final numbers are published, but added there is a general concern among financial analysts nationwide about banks’ ability to handle the stress that could be coming. “I think there’s a fair amount of concern about credit quality among banks,” Huston said. Wells Fargo Alaska Commercial Banking Market Executive Joe Everhart said in an interview that he was among the many close observers who had a very positive view of the Alaska economy as recently as late February. However, he now expects the state’s economic recovery from the pandemic to lag behind the rest of the country because Alaska’s economy is largely built on industries that have been hit hardest by the global shutdown — oil and tourism. Wells Fargo loan officials began reaching out to borrowers early and processed many 90-day loan deferrals, according to Everhart. He said they’re starting to work on the steps for the next 90 days if business conditions don’t quickly improve. Officials for the very large national bank are adapting their policies to where they’re working, Everhart said, noting the bank is even processing some 14-month payment deferrals for businesses, such as those in the tourism sector, that might not have meaningful revenue until a year from now. “To expect a customer to have income to make payments when they don’t have revenue is challenging,” he said. There are still reasons to be optimistic amid the challenges and uncertainty, according to Huston. “I think most of our customers are working with their customers. We’re all in this together,” he said. Everhart also noted that through various aid programs Alaska residents, businesses and local governments are cumulatively expected to receive roughly $3 billion in federal assistance — a lot of money for a small state. “I have to think that’s going to provide a great backstop in this (economic) storm,” he said. Elwood Brehmer can be reached at [email protected]


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