Elwood Brehmer

Division continues over pandemic powers

House and Senate leaders have continued on divergent paths to address gaps left in the state’s pandemic response when the official public health emergency declaration expired last month. The House Finance Committee passed House Bill 76 to extend the emergency declaration March 22, readying it for a floor vote before that would likely send it to the Senate. However, the governor no longer supports the legislation that his office submitted just before the session. Dunleavy has said he believes his administration can adequately manage public health concerns without a formal declaration. Doing so is one step towards returning to a state of normalcy, according to the governor. House majority coalition leaders sent a letter to Dunleavy March 17 outlining their rationale for sticking with HB 76 despite his change in approach. They emphasized that numerous health care and social service organizations across the state have stressed the importance of having an active declaration while unemployment remains high and health care and business practices are altered because of the pandemic. House Speaker Rep. Louise Stutes, R-Kodiak, said after the House Finance passed HB 76 that it provides the resources needed to help end the pandemic in Alaska. “While there has been an active disinformation campaign about what this bill does, the measures it contains are not at all controversial. We will not allow opportunist politics to get in the way of good policy,” Stutes said in a coalition statement. Numerous Republicans in both chambers argue a declaration is unnecessary as daily statewide COVID-19 case counts have stabilized at lower levels and vaccines are now available to all adults. Declaring a disaster again will just facilitate the continuation of government restrictions that have been overly burdensome for months, they contend. Illustrating that, HB 76 moved out of the Finance Committee on a 6-5 vote. House leaders noted to Dunleavy in their letter that a disaster declaration does not require any of the business restrictions such as “hunker down orders” that many have long opposed. Dunleavy responded March 18 writing to Stutes that after a thorough analysis of what authorities his administration needs to manage the public health response, administration officials concluded they require the continued ability to distribute vaccines and COVID-19 treatments; limited immunity for officials conducting the state’s public health response; a continuation of waivers allowing for enhanced telehealth services; and authority to access available federal funding. In the meantime the Department of Health and Social Services has continued to operate as if the statutes and regulations waived and suspended during the formal emergency still are, a position that has caused some confusion among providers, according to Alaska State Hospital and Nursing Home Association officials. Representatives from the Food Bank of Alaska and other charitable organizations have said the state needs to pass some sort of authority by March 31 to continue accepting $8 million per month in boosted federal Supplemental Nutrition Assistance Program, or SNAP, funds, which equates to an additional 2.2 million meals per month that can be distributed across the state, according to Food Bank of Alaska officials. Senate President Peter Micciche, R-Soldotna, said in a March 19 press briefing that he believes it’s pointless for the House to pass a bill the governor has no intention of signing. “There’s no doubt the communities of Alaska are worn out feeling like we’re in an emergency declaration stage,” Micciche said. “If the fit-for-purpose tools are available without a declaration that’s the way we want to go in the Senate and that’s the way the governor wants to go.” Senate Republicans have said for weeks they have drafted legislation with the tools to address the administration’s requests without the political hang-up of actually renewing the public health emergency declaration; Micciche called it a “disaster declaration light,” but they have yet to formally submit the bill. He also said Senate leaders are “not allowing populous politics to get in the way of managing this pandemic.” Senate Rules chair Sen. Gary Stevens, R-Kodiak, said he believes House leaders “will come along once they realize what the governor’s concerns are.” Little interest in bonds Micciche also said March 19 that he sees little need for a primary piece of Dunleavy’s economic recovery plan for the state. The Senate President said the $356 million general obligation construction bond package largely seeks to fast-fund the state’s minor share for road and airport projects funded at upwards of 90 percent with federal dollars that are already in the state’s long-term transportation plans. Bond funding for construction projects typically takes years to “hit the streets” with a tangible economic impact and Micciche noted the state is about to get another roughly $1.5 billion from the $1.9 trillion American Rescue Plan. Taking on debt when the state is about to have a cash infusion is an inefficient way to manage funds, he said. “There’s no doubt that we have infrastructure needs in this state but if there is another billion-and-a-half dollars coming to our state from Congress we can put that money to work,” Micciche said. Elwood Brehmer can be reached at [email protected]

Stakeholders urge Legislature to update emergency declaration

Update: Alaska State Hospital and Nursing Home Association CEO Jared Kosin wrote to the Journal via email that the organization recieved a letter from federal Centers for Medicare and Medicaid Services officials that addresses many of the concerns ASHNHA member organizations had about pandemic response operations without a formal state emergency declaration. However, the health care group still "wholeheartedly" supports the Legislature's passage of House Bill 76, the public health emergency legislation lawmakers are debating to mitigate the regualtory amibuity and unintended consequences caused by the current situation, according to Kosin. Original story: Alaska business, health care and local government leaders are urging lawmakers to renew the state’s COVID-19 disaster declaration to support social and economic recovery from the pandemic as much as public health needs. Anchorage Economic Development Corp. CEO Bill Popp told members of the House Finance Committee March 15 that safely and effectively welcoming back the tourists the Alaska’s economy desperately needs will require further support from the state. The state’s largest city — and likely its top visitor hub this year — needs to be able to offer tourists an environment in which they can feel safe and have minimal odds of contracting COVID-19 or being caught in another lockdown because of an outbreak of the virus, Popp said. He stressed that state-sponsored programs enabled by a declaration, such as COVID-19 testing for arriving travelers at the state’s major airports, are crucial to a prolonged economic rebound statewide. Mandatory COVID-19 testing for incoming travelers who did not have proof of a test within the past 72 hours ended with the Feb. 14 expiration of Gov. Mike Dunleavy’s most recent 30-day COVID-19 public health emergency declaration. The airport testing program detected 2,514 positive cases of COVID-19 since being stood up early last June, according to Department of Health and Social Services records. “We need these tools in the toolbox to facilitate proper health care, proper food services and to give assurances to our businesses and our out-of-state visitors that Anchorage and Alaska are a safe place to visit and enjoy a great vacation,” Popp said. Alaska Municipal League Executive Director Nils Andreassen said since the declaration expired that local governments have been struggling to fill gaps in management of the pandemic and many have had to rework local declarations that also expired because they were tied to the state’s. The situation has also led to questions about how resources such as vaccine allotments and COVID-19 testing supplies will continue to be distributed, according to Andreassen. “Ultimately, it’s this uncertainty that ends up being the most challenging,” he said. Dunleavy asked the Legislature to pass a bill extending the declaration through September when the legislative session began in mid-January but it did not pass because of roughly a month of disorganization in the House and members of the Senate Republican majority who questioned the need for continuing the state of emergency. Dunleavy declined to unilaterally extend the declaration despite a nonbinding resolution from the Senate and letters signed by the vast majority of House members asking him to do so. Attorneys for the Legislature said the governor likely cannot extend the emergency declaration on his own, even though he did so in the past while the Legislature wasn’t in session to maintain emergency health orders and regulatory changes. DHSS Commissioner Adam Crum acknowledged during the House Finance hearing that the lack of a formal emergency declaration has left the department in a “precarious position” as DHSS officials try to navigate the complex realm of federal funding and regulatory flexibilities tied to the state declaration. Crum noted that he believes Anchorage, for example, could require testing at the state-owned airport without an emergency declaration but other issues are more challenging. State health department officials have attempted to continue operating with suspended statutes and regulations as if there has been a valid declaration in place since mid-February, a position that Senate President Peter Micciche said in a prior interview would normally raise significant concerns about DHSS overstepping its authority; however, the need to continue an effective, coordinated response to the pandemic trumps those issues for now, according to Micciche. Senate leaders have said for several weeks they are working on a bill to give DHSS and other state agencies the authorities needed to be flexible with policy mandates and accept federal COVID-19 aid, such as $8 million per month in boosted food stamp assistance, without the politically sensitive formal disaster declaration. It’s unclear exactly when the Senate legislation will be submitted. Instead, the House is gradually moving House Bill 76, the governor’s bill to renew the declaration, ahead of an April 1 deadline for the state to have an emergency declaration or other statutory mechanism that meets the U.S. Department of Agriculture’s requirements to get the extra $8 million per month from the Supplemental Nutrition Assistance Program known as SNAP. Cara Durr, engagement director for the Food Bank of Alaska, testified that the charity saw a 43 percent increase in demand during the last half of 2020 compared to 2019 and the record need has continued into this year. The $8 million per month provides about 2.2 million meals, while the Food Bank currently has the capacity to distribute about 750,000 meals per month she said. “With the current high level of need that we’re seeing, we’re deeply concerned about the loss of the SNAP emergency allotments could mean for food insecurity in Alaska and for the additional burden their loss will place on the charitable food network,” Durr said. Rep. Dan Ortiz, I-Ketchikan, relayed concerns from a constituent who he said could not continue to receive telehealth care from an Outside provider because regulatory exemptions tied to the emergency declaration had also expired. “Removing ambiguity” from declaration-related telehealth mandates is one of the main immediate priorities for DHSS, Crum said. Alaska normally requires a provider to conduct an in-person visit before future telehealth appointments. Out-of-state providers also usually need a valid Alaska medical license to conduct telehealth appointments with Alaskans — another requirement the declaration lifted. Alaska State Nursing Home and Hospital Association CEO Jared Kosin testified that the group “strongly supports” HB 76. “There is no harm or unintended consequences to passing (HB 76). In fact, there are only unintended consequences and harm if this legislation is not passed,” said Kosin, who also emphasized that broad COVID-19 testing at airports is still very important. Testimony from the general public was mixed on HB 76, with several individuals stressing a need for Alaska to move past emergency declarations to help the economy recover. Kosin wrote via email that ASHNHA requested a formal letter roughly a month ago from Centers for Medicare and Medicaid Services officials clarifying hospitals and providers can still operate under a host of waivers once effective in the state because of the declaration, including one allowing health care organizations to have off-site facilities, such as COVID-19 testing sites. The group is still waiting for a response from CMS, according to Kosin. “A disaster declaration is a legal mechanism,” Kosin said. “Alaskans may not see it or experience it in everyday life but Alaska’s health care providers do.” The House Finance Committee tabled HB 76 at the end of its March 15 meeting and another hearing on the bill had not been scheduled as of this writing. Elwood Brehmer can be reached at [email protected]

Heavy oil study finding success on Slope

The early results are promising in a years-long study of an advanced oil recovery method that could unlock billions more barrels on the North Slope. “We have not failed; let me put it that way. We have succeeded so far,” said Abhijit Dandekar, chair of the University of Alaska Fairbanks Petroleum Engineering Department. Dandekar is leading a small team of UAF researchers in collaboration with Hilcorp Alaska engineers to flesh out the viability of a seldom-used technique to drive heavy oil to the surface. The four-year, $9.7 million Department of Energy-sponsored study is intended to determine whether a thick, syrup-like water-polymer can be used to improve recovery of the viscous heavy oil that geologists say is abundant across the North Slope. “It really is an experiment done on a field scale,” Dandekar said in an interview. The field is Hilcorp’s Milne Point, which the company bought from BP in 2014 and has since focused on rejuvenating the mature Prudhoe Bay satellite. It’s unclear exactly how much heavy oil is spread across the Slope but Department of Natural Resources officials broadly believe the potential resource to be in the tens of billions of barrels. Seawater is often injected into light and even more viscous oil reservoirs to “flood” the rocks and push as much oil out of the tiny pores of the rocks that hold it. But the “heavy oil” of the North Slope, which Dandekar said is a very “Alaska-specific definition,” is unique. “There needs to be something different done for heavy oil,” he said. Launched in 2018, the specifics of the project involve injecting the polymer into Milne Point’s Schrader Bluff heavy oil reservoir via a pair of horizontal injector wells and production tests at a nearby pair of horizontal producers. Dandekar compared the synthetic polymer to tapioca pearls before it is mixed with water; afterwards the thickening agent increases the viscosity of the water up to 40-fold, he said. “You want to slow down the mob of water, which is basically helping sweep more oil,” Dandekar said. Heavy oils tend to be shallower, as oil pools go, and the Schrader Bluff target of the polymer flood project is up to about 5,000 feet deep. Dandekar said it’s the relative shallow location of the oil that makes it so heavy. It’s colder than deeper oils, particularly in Alaska. That cold, thick oil simply doesn’t move as easily when pushed by water, which can cause a water “breakthrough” and in a way dilute the oil pool. The recovered liquid is often more than half water when a traditional flood is used on heavy oil and enhanced viscous oil recovery techniques used elsewhere often involve injecting steam into the wells to heat the oil and help it flow more easily. “Anything thermal, which is easily deployable elsewhere in non-Arctic conditions, is unimaginable here in Alaska because we’ve got 1,800 to 2,000 feet of continuous permafrost,” he noted. According to a summary of the project by the federal National Energy Technology Laboratory, the work being done at what researchers have dubbed the Alaska North Slope Field Laboratory is the first polymer flood production in the country, though it has been used internationally. Dandekar said the team first had to prove the “injectivity” of the polymer in Arctic conditions. “The ambient temperature plays an important role,” he said. “The operation aspects of a polymer injection unit — those are something nobody had tried before.” Since proving they could inject it, the researchers have refined their polymer management techniques to achieve roughly 1,000 barrels per day of additional oil production from the pair of producers in the test. Use of the polymer has also decreased the water “cut” of what is produced from 65 percent to between 15 percent to 20 percent, according to a briefing on the work published by the research team in February. “We are a team working on this and without a team I obviously don’t think this would go anywhere,” Dandekar said. “This is a classic example of collaboration between the federal government, industry and academia.” Hilcorp Alaska spokesman Luke Miller wrote in an emailed response to questions about the project that the company is proud of the partnership it has with the university and federal research agency. “UAF and DOE provide outstanding Arctic and industry expertise, as well as technical and project support,” Miller wrote. “As we build on our initial success at Milne Point, we’re expanding polymer flooding to additional reservoirs at Milne Point and continue to evaluate new opportunities across the North Slope.” The team detected a polymer breakthrough last October of 600 to 700 parts per million in the producer wells, according to Dandekar, meaning the polymer had traveled the roughly 1,100 feet between the injectors and producers. He described the recovered polymer particles as “beaten down, sheared and spent.” He said it was simply a matter of when the polymer would appear and the fact that it took more than two years is another positive. “That is a good thing in the sense that the polymer — it still is — really sweeping the oil,” Dandekar said. The February paper additionally suggests updated reservoir models indicate heavy oil recovery could reach 36 percent, or about twice what was forecasted for continued water flooding. Now that the preliminary viability of the polymer flood has seemingly been proven, the next challenge is repeating it. The UAF engineers are trying to match the data they have collected from the wells to what simulation models have produced. “The idea is to honor that (production) history, match it and then do a forecast,” he said. The project spawned from a nagging urge UAF researchers felt to work on the well-known heavy oil challenge. “There’s so much heavy oil, we’ve got to do something,” Dandekar said. That led the university researchers to seek out funding for the work. Milne Point was selected as the test case because it provided of a long history of data from a mature field that previously had been flooded with water, according to Dandekar. He reached out to Hilcorp officials about the polymer flood after working with them on previous company-funded projects, he said. “For projects of this scale, unless you have an industry partner, nothing’s going to happen,” he said. “It’s been a great, functional team.” The research is set to conclude in September 2022. Elwood Brehmer can be reached at [email protected]

DEC: Current staffing sufficient for spill response division

A decision to cut positions from the state agency charged with preventing oil spills despite potential new revenue is a step towards longer-term sustainability, according to the Dunleavy administration, while the group dedicated to preventing another Exxon Valdez insists it is a needless step towards unpreparedness. Gov. Mike Dunleavy’s 2022 fiscal year budget proposal calls for eliminating five positions from the Spill Prevention and Response, or SPAR, Division, which is a move Department of Environmental Conservation leaders settled on several years ago to keep SPAR on a gradual path to maintaining solvency, Commissioner Jason Brune said. “We believe that we can continue to responsibly prevent oil spills and clean up contaminated sites, which is the role of SPAR, with FY22 funding levels,” Brune said in an interview. He emphasized that the position reduction is part of a multi-year plan developed to reduce the number of funded positions in SPAR by up to seven each year rather than cut up to 30 positions at once as he was told would eventually be necessary when the Dunleavy administration took over in late 2018. He also highlighted that the positions slated to be cut are currently unfilled, as are 12 other positions in the division; he said that is a longstanding issue department leaders are working to address as well. Nearly all of the prior cuts were to vacant positions, Brune added, noting that impacted staff were able to find other positions in the department. “We can’t go and ask for additional positions if we’re not filling the current ones we have,” he said. The division would have 123 positions next year with the cuts under the governor’s budget. SPAR is funded by surcharges levied on each taxable barrel of oil produced in the state and each gallon of fuel produced at Alaska’s refineries instead of general fund appropriations, so lawmakers and the administration are able to forecast with a reasonable degree of accuracy how much money will be available to the division. Members of the Prince William Sound Regional Citizens’ Advisory Council, the public oversight body created by Congress after the 1989 Exxon Valdez oil spill, argue the department is voluntarily hamstringing itself while a once-popular bill to add funding is making its way through the Legislature. House Bill 104, sponsored by Rep. Andy Josephson, D-Anchorage, would generate approximately $3.5 million in added revenue to the division’s prevention account, which covers general SPAR operating costs, by adding 0.55 cents per gallon to the current 0.095 cents per gallon surcharge on refined fuels. The revenue decline mostly stems from the fact that the prevention account was historically funded by a 4 cents per barrel surcharge on produced oil, meaning SPAR funding is also tied to the long and gradual decline in North Slope production. The Legislature added the fuel surcharge in 2015 to address the issue but inflated estimates of how much fuel Alaskans consume have since led to less new revenue than was initially expected. As a result, draws on the prevention account are exceeding surcharge revenue by more than $1 million per year and is on pace to be depleted by 2025 without increasing the fuel surcharge to 1.5 cents per gallon, the council stresses. The prevention account held $8.5 million at the end of 2019, according to the division’s annual report. HB 104 primarily deals with increases to the state’s motor fuel taxes and largely mirrors legislation that was passed by the Senate last year and was nearing approval in the House before the onset of COVID-19 pushed the Legislature to adjourn early. It was moved out of the Transportation Committee March 16 and will next be taken up by House Finance. PWSRCAC Executive Director Donna Schantz testified to House Transportation before the bill was passed out of the committee that the “chronic” revenue issues in the prevention and response funds have led DEC to cut 17 positions from SPAR since 2015. “The division is beyond doing more with less and is now having to make difficult choices about how to do less with less and still meet its statutory responsibilities,” Schantz said, also contending that SPAR staff will have to prioritize and delay some work cleaning up the more than 2,400 contaminated sites across the state. Brune told lawmakers during a March 9 DEC budget subcommittee meeting that SPAR Director Denise Koch had resigned earlier that day. Koch had emphasized the need to increase funding for the division and keep the five positions before leaving, council spokeswoman Brooke Taylor wrote in an email. Brune said in an interview that Koch had concerns about staffing levels at SPAR but he couldn’t comment further on personnel issues. “Whenever you take cuts there is concern and I appreciate that concern,” he said. “I’m really sad that Denise left.” Koch did not respond to questions in time for this story. Last fall, Brune told the council that he would advocate to the governor’s office for increasing revenue to the prevention account but the best way to that over the long-term was through increased North Slope production, he said. Now, Brune said he still supports the surcharge increase in HB 104, but noted the bill has yet to get through the Legislature and Dunleavy may veto it so he expects to move forward with the position cuts regardless of whether the bill passes. Doing so would allow SPAR to maintain 2022 budget levels for the next 10 years based on modeling by the department, while keeping the five spots would cut the sustainability period to six years, according to Brune. HB 104 sponsor Josephson said in an interview that he finds Brune’s assertion that more production is the best solution to SPAR’s funding issues “bizarre” and the administration’s decision to cut the positions whether additional funding is available or not is consistent with their review of spill prevention and response rules, which he sees as an industry-backed deregulatory effort. The administration also de-funded the Ocean Ranger cruise ship-monitoring program paid by passenger fees when lawmakers rejected legislative attempts to end the program in statute. “They just don’t have much passion for monitoring and regulating the threat of oil spills. That’s just not a thing they’re particularly concerned about” Josephson said. Brune said he first came to Alaska as a biologist to work on sea otters oiled in the Exxon Valdez spill. “I promise you (preventing spills) is something I give the utmost passion to,” he said. “If I believe that we need to make increases and propose increases in the future I will do that. At present I do not believe that is the case.” Elwood Brehmer can be reached at [email protected]

State revenue outlook improves with oil price rebound

Alaska’s ride on the oil price rollercoaster should again get a little smoother as markets have recovered quicker than expected from the pandemic but special provisions in the CARES Act will cause the state to forgo some corporate tax revenue as well, according to Department of Revenue officials. “Revenues are moving in a much better direction, which is up,” Revenue Commissioner Lucinda Mahoney remarked during a March 16 Senate Finance Committee hearing. The Revenue Department published the spring update to its official Fall 2020 Revenue Forecast March 15 with projections that the state will collect approximately $791 million more over the next year-plus than was thought last fall. Higher oil prices and increased production — a rare combination of late — are the primary drivers behind the slightly improved fiscal outlook though the expected additional revenue would not nearly come close to fixing the state’s structural budget deficit. The state is specifically projected to collect $332 million more in the current 2021 state fiscal year than was thought last fall and $460 million more in fiscal year 2022, which starts July 1. The added revenue would cut current year deficit down to approximately $550 million and the deficit in Gov. Mike Dunleavy’s 2022 budget proposal would fall to roughly $1.7 billion, according to figures from the Office of Management and Budget. Petroleum taxes and royalties currently account for about 20 percent of all state revenue, according to the forecast. Chief Revenue Economist Dan Stickel told Senate Finance members that global oil markets seem to have rebalanced quicker than most analysts expected in recent months, which led to an updated average price forecast of $53.05 per barrel of Alaska North Slope crude for fiscal 2021 and $61 for 2022. The new price projections are nearly $8 higher for 2021 and $13 higher for 2022 than what was expected last fall and were based on Brent benchmark oil futures prices in late February, according to Stickel. The price for Alaska oil has largely plateaued in the high $60s per barrel in recent weeks. State economists expect oil prices to stabilize after 2022 and rise with inflation. “We believe that looking at financial markets is probably the best indicator as to where oil prices are headed,” he said. However, he also cautioned that there is “particularly large uncertainty” with the forecast given what happens to COVID-19 cases domestically and worldwide in the coming months. On the production side, North Slope operators will ultimately produce about 5,000 more barrels per day on average this fiscal year than was thought last fall as well, according to the forecast, which now pegs 2021 North Slope oil production at 482,000 barrels per day. According to Stickel, Revenue and Department of Natural Resources officials still believe the lack of drilling on the Slope last year will still lead to a sharp drop in production in 2022, but it isn’t expected to be nearly as severe as once thought. Last fall they were predicting a year-over-year North Slope production decline of 38,000 barrels per day; that has been revised down to a decline of about 23,000 barrels per day for 2022 production of nearly 460,000 barrels of oil per day from the North Slope. Production is also supposed to rebound and begin a longer-term upward trajectory after the 2022 dip. State officials now expect North Slope operators to collectively produce more than 502,000 barrels per day by 2024 with production exceeding 555,000 barrels per day by the end of the decade. “We’re expecting a lower decline rate in the existing fields and then an improved outlook regarding new fields coming online with the higher price forecast,” Stickel said. CARES Act refunds The COVID-19 relief bills passed by Congress last year directed approximately $5.8 billion to Alaska but special corporate tax provisions in the first aid package are likely to cost the state $162 million in forgone revenue through 2022, according to revenue officials. Stickel said the CARES Act passed nearly a year ago allows corporations to “carry back” net operating losses from 2018-20 for up to five years and receive refunds for previous taxes paid. Another provision allows companies to “accelerate alternative minimum tax refunds into tax year 2019,” he said, and because Alaska uses the federal corporate income tax code by reference in state statute the federal tax changes will hit the state if the Legislature does not change them. “The biggest refunds are expected in tourism-related companies, which are expected to show very large losses for 2020,” Stickel said. Overall, the state is expected to collect $80 million in corporate income taxes this year and $35 million in 2021, compared to $102 million and $175 million for the respective years without the tax changes, according to Stickel. Total annual corporate income tax revenue should return to roughly $240 million by 2023 when the impacts of CARES Act provisions and broader pandemic economic conditions will lift, according to the forecast. Elwood Brehmer can be reached at [email protected]

Supreme Court to expedite case over appointments

The Alaska Supreme Court has agreed to hear arguments in the Legislature’s lawsuit against Gov. Mike Dunleavy over his political appointments seemingly in time to rule on the case before lawmakers are required to adjourn this year. The court granted in-part the Dunleavy administration’s request for an expedited appeal schedule in an order dated March 2, which lays out a briefing schedule through March leading up to oral arguments on April 6. State Department of Law attorneys asked in a Feb. 23 motion for the Supreme Court to hold oral arguments “on or about” April 2 and to issue a decision by April 12 to avoid a repeat of last year, noting the Legislature is directed by statute to adjourn April 18 after 90 days. However, the body routinely takes its constitutionally allotted time of 121 days, which is May 19 this year. Lawmakers quickly passed a budget and recessed late last March as the pandemic reached Alaska without holding a joint House-Senate floor session to vote on Dunleavy’s appointees. Attorneys for the Legislature argued in response that the expedited appeal is unnecessary given the governor took the step of reappointing all of his unconfirmed appointees in question earlier this session, meaning lawmakers can vote on them along with the rest of his subsequent appointments made so far this year. If for some reason the Legislature were to again adjourn without a joint session, approximately 181 appointees, including members of Dunleavy’s cabinet, “will be unceremoniously removed from office,” the administration’s motion states. Senate President Peter Micciche, R-Soldotna, said in a March 5 press briefing that he couldn’t comment on the lawsuit but he generally expects the appointment process to be more normal this year with committee hearings to vet appointees prior to a lengthy joint floor session shortly before lawmakers gavel out. “We’re hoping to work together (with the House) to get those people confirmed or not, depending on who they are, and not have a disruption in service,” Micciche said. The one likely caveat to a normal process is COVID-19-related; legislative leaders and staff are working to find a larger venue in Juneau to hold the joint session with 60 lawmakers plus support staff, according to Micciche. “We’re not sure what that looks like yet,” he said, adding, “The Senate’s going to get its work done one way or another.” Among the many appointees left in limbo were acting Revenue Commissioner Lucinda Mahoney and Dunleavy’s nominees to the Board of Fisheries, which are nearly always among the most controversial of a governor’s appointments. Dunleavy spokesman Corey Young wrote via email that while the governor took the step of reappointing the individuals in-question earlier this year he maintains his actions last year were legal. The Legislature’s lawsuit against Dunleavy ultimately stems from a disagreement over whether his appointees the Legislature did not vote on last year could still serve on the dozens of boards and commissions across the state and hold positions within the administration. While lawmakers did not hold a joint confirmation session in 2020, they did pass a laws extending the validity of the appointments either to the start of the current session or 30 days after the first public health emergency declaration expired, which occurred on Nov. 15. In mid-December Dunleavy wrote to House and Senate leaders that he was exercising his authority under the Alaska Constitution to continue the appointments while the Legislature was adjourned. That spurred the joint Legislative Council to approve a lawsuit on the grounds that Dunleavy was overstepping his authority shortly before Christmas. Juneau Superior Court Judge Philip Pallenberg granted the Legislature’s motion for summary judgment in the suit Feb. 18, concluding that the statutes passed early in 2020 meant, “the appointments in question were rejected as of Dec. 15, 2020” and the governor’s attempt to reappoint them the next day was prohibited by statute as well. The lawsuit is the Legislature’s second against Dunleavy. Lawmakers sued the governor in 2019 in a battle over education funding that the administration ultimately lost. Elwood Brehmer can be reached at [email protected]

Copper River forecast still off from historical returns

State research biologists expect the famed Copper River salmon fishery to rebound from what was nearly a lost season in 2020, but runs for the river’s high-value species are still expected to fall well short of historical averages. Just more than 1.3 million sockeye are projected to return to the Copper River this year for a corresponding allowable commercial harvest of 672,000 fish, according to the Alaska Department of Fish and Game’s 2021 Prince William Sound and Copper River Salmon Forecast. The 2021 return of Copper River king salmon — some of the most sought-after salmon on the planet — is pegged at 37,000 fish, which is the midpoint in a run forecast range of 22,000 to 53,000 kings. If accurate, the 37,000-fish estimate would provide for an available harvest of 13,000 kings by all user groups. The 10-year average king return to the Copper is approximately 48,000 fish and the forecasted total allowable harvest of 13,000 kings for 2021 matches the average commercial catch over the past decade, according to ADFG records. The forecast for wild sockeye, which make up the bulk of the Copper River run, is 37 percent less than the recent average of nearly 2.1 million wild fish and just 51,000 sockeye are projected to return to the Gulkana Hatchery; that’s 81 percent less than the 10-year average. Additionally, the allowable commercial harvest of 672,000 sockeye based on those returns is 46 percent less than the recent average harvest of more than 1.2 million Copper River sockeye. Copper River king and sockeye salmon are particularly valued for their high fat content and because the fishery that starts in May is among the first to offer large volumes of fresh salmon each year. The subpar preseason projections follow what was a dismal 2020 Copper River commercial salmon fishery. Poor catches during the initial May openers forced managers to close fishing for much of June when the largest pulses of sockeye typically enter the river. The 2020 Copper River commercial season ended with a harvest of 98,294 sockeye and 5,850 kings. Coho made up the majority of the 269,966-all salmon harvest in the district last year. The extremely poor overall return of roughly 630,000 sockeye — ADFG commercial harvest plus in-river figures — to the Copper River last year is weighing on the expectations for this year. According to the forecast report, the wild sockeye run estimate is largely based on the number of sockeye that returned in prior years but are from the same brood years as the majority of the fish returning this year. Predictions for the youngest sockeye that spend either one year rearing in freshwater and one at sea or those that spend minimal time in freshwater and three years in the salt water are based on the mean returns for those age classes during the last five years. However, a very poor 2018 sockeye run that finished with a commercial harvest of just 44,400 fish and an in-river count of 701,577 did not correlate to a weak return the following year. Nearly 1.3 million sockeye were harvested in the Copper River district in 2019, part of a total run of roughly 2.3 million fish. The 2021 Copper River king forecast is primarily based on spawner-recruitment trends for the Copper River system since 1999, according to the report. While the forecast for the 2021 Copper River salmon season is somewhat dim, it is not expected to translate to the adjacent Prince William Sound fisheries. Coghill Lake in western Prince William Sound is expected to see 282,000 sockeye, which would be 45 percent greater than the 10-year average of 194,000 fish. A return of that size would also allow for an all-user harvest of 252,000 sockeye using an escapement target of 30,000 fish. ADFG biologists also expect it will be a particularly strong year for wild pink salmon runs in the sound. Odd-numbered year pink runs are typically much larger in Prince William Sound for the species with a very strict two-year life cycle and this year nearly 19.2 million wild pink salmon are forecasted to return to river systems across the sound, which would be 27 percent greater than the recent odd-year average of about 15 million wild pinks. Nearly 12 million wild pink salmon have been harvested sound wide on average during the last 10 odd years, according to ADFG data. Despite the strong official forecast figures, the report notes that there is “considerable uncertainty” as to the spawning success of wild Prince William Sound pinks in 2019 due to the extreme drought conditions across much of southern Alaska that year, which would directly impact this year’s return. “Pre-spawn mortality, lack of water in spawning streams, and high water temperatures were observed in 2019. This forecast does not integrate environmental indices or other indicators of spawning success and the 2021 prediction takes no account of the anomalous conditions observed during the parent year,” the report states. Many millions of hatchery-reared pinks also return to Prince William Sound during odd years as well. Lower Cook Inlet On the other side of the Kenai Peninsula, ADFG researchers are predicting a commercial harvest of just more than 2.1 million salmon across all species in lower Cook Inlet waters this year. The 2021 commercial harvest would be below the 2.5 million salmon harvested last year and the roughly 2.4 taken in 2019, but does not account for nearly 1 million combined hatchery sockeye and pink salmon expected to be harvested for cost-recovery purposes. The vast majority of salmon harvested in lower Cook Inlet are pink salmon — pinks comprise 1.8 million of the 2.1 million-fish common commercial harvest projection — in contrast to upper Cook Inlet fisheries that predominantly target sockeye. Elwood Brehmer can be reached at elwood.br[email protected]

Setnet permit buyback bill moves from Senate committee

Legislation aimed at easing tensions and fishing pressure in one of the state’s most popular fisheries is already on the move this session after dying in the COVID-shortened session last year. Without objection, the Senate Resources Committee advanced Sen. Peter Micciche’s Senate Bill 29 to the Finance Committee March 8; the bill authorizes the state to buy back nearly half of the upper Cook Inlet setnet permits on the Kenai Peninsula from any members. Micciche, a Soldotna Republican who was also selected Senate President earlier this year, said during a March 3 Resources hearing that the plan for the state to voluntarily repurchase permits from East Side Cook Inlet setnetters was initially drafted by a group of sport anglers and commercial harvesters “who have struggled to work together for many years and now feel like they have a solution moving forward.” Resources chair Sen. Josh Revak, R-Anchorage, noted that public testimony on SB 29 generated nearly 30 mentions of support, primarily from East Side setnetters, and no opposition, which was a contrast from prior attempts to move similar legislation. “We’re finally at the end of our rope. Fishing families that have been fishing the East Side of Cook Inlet for generations are at the end of their rope,” Micciche said to the committee. “We want some of those fishing families to remain viable and give those that choose to be bought out an opportunity to move to other fisheries or to retrain for another line of work.” He also stressed that while SB 29 authorizes the Alaska Commercial Fisheries Entry Commission, or CFEC, to buy out up to 200 of the existing 440 East Side setnet permits via a lottery permit holders could enter if they so chose, it does not spend any state money to do it. As it’s currently written, SB 29 would allow East Side permit holders to collect $260,000 per permit, meaning $52 million would need to come from somewhere to fund the buyback program only after it is approved through votes from the Legislature and subsequently the setnetters themselves. Micciche and Ken Coleman, president of the Eastside Consolidation Association, said support for the buyback program among setnetters has grown in recent years as people gain a better understanding of its mechanisms and the need for it. According to Micciche, 95 percent of respondents to a survey sent to all East Side permit holders supported the buyback. It’s a means to relieve fishing pressure not only on the Kenai and Kasilof river sockeye stocks that are the main target of the shore-based commercial fishery, but also on the rivers’ king and coho salmon that are mostly of interest to sport anglers but are occasionally intercepted by commercial nets while hopefully leaving viable fishery for the setnetters that remain, he said. Coleman emphasized that a provision to permanently close sites that are bought out “is a prime feature of the bill” because fewer nets in the water would provide more harvest opportunity for those that remain and prevent a repeat of the 1980s when a string of large sockeye runs to the Kenai and Kasilof and high salmon prices drew many permit holders from across upper Cook Inlet to the East Side beaches. That shift decades ago has resulted in the majority of inlet setnet permits being on the east side where the vast majority of personal use and sport fishing pressure occurs as well. The $260,000 per permit buyback amount was generated from average gross revenue for permits over the past 10 years — just more than $20,000 per year — and $60,000 to cover likely tax liabilities, according to Coleman, who said each buyback amounts to permanently closing a small business. It’s generally believed funding for the program could be secured through National Oceanic and Atmospheric Administration Fisheries capacity reduction programs intended to prevent or stop overfishing but the hunt for funding can’t start in earnest until SB 29 is passed. Management changes at the Board of Fisheries in recent years have also curtailed fishing opportunity for East Side setnetters in favor of in-river users and to limit the harvest of Kenai-bound king salmon during times of low abundance, such as now. “I think that people are frustrated and very worried about losing their entire investments,” Coleman said in an interview. Because of that, he’s confident the 200 potential buyback lottery slots will be filled if SB 29 is approved, adding that many East Side permit holders would use the money to gear up for fishing elsewhere in the state “where there are more lucrative fisheries and a more stable Board of Fisheries management.” “The regulatory instability and the biomass reductions over time, the competition for fish between all the user groups has made it very difficult for them to hang in and stay for the long-term so I think there’s a good appetite (for the program),” said Coleman, who is approaching 50 years of participating in the East Side fishery. He estimated the annual gross revenue from his site near the mouth of the Kenai has fallen roughly 75 percent over the last 20 years, but said he’s unsure if he would participate in the buyback. “If I could get 50 percent of the 75 percent back I’d be thrilled; I’d be viable again in terms of the financial picture,” Coleman said. Alaska Department of Fish and Game spokesman Rick Green wrote via email that the department doesn’t have a position on SB 29 specifically, but department officials “see value in buyback programs such as this as another tool in our regulatory toolbox to manage fully allocated fisheries.” The North Pacific Fishery Management Council added another complication to the longstanding Cook Inlet “fish wars” this past December when the council voted to close the federal waters — areas at least three miles offshore — of the upper Inlet to commercial salmon fishing starting in 2022 after state officials said co-management of the salmon fisheries in Cook Inlet is unworkable following a federal court order that concluded the state’s management plan does not meet federal requirements. While the pending closure is unlikely to ultimately be enacted and would most directly impact the drift fleet, it would push the drift gillnet boats into state waters and further increase near shore fishing pressure and related conflicts. Coleman characterized the council’s action as one that probably had some impact on fishermen deciding to either support or participate in the buyback should it materialize. Scott Summers, a Kenai-area permit holder testified March 3 that his son has made more money fishing as a crewmember in Bristol Bay in recent years than he has owning an East Side permit and he would participate in the lottery. “It’s just not viable for us anymore the way it is. Something needs to change,” Summers said. “We’re sick of the politics; I think that’s why some of us support this bill.” Elwood Brehmer can be reached at [email protected]

Fixes in flux after emergency status lapses

State lawmakers and Dunleavy administration officials are working to untangle the red tape left after a messy end to Alaska’s COVID-19 state of emergency and see how much of it they still need. Senate President Peter Micciche, R-Soldotna, said legislative leaders have asked the administration to do a series of analyses to see if there are any gaps in current state policy that could cause departments to forgo any federal COVID-19 funding that could help Alaskans now that the state no longer has an active emergency declaration. Alaska’s COVID-19 state of emergency expired Feb. 14 after the Legislature failed to pass Gov. Mike Dunleavy’s bill to formally extend it; the House was still unorganized and without leadership at the time and the Republican-led Senate majority has members who questioned the need for continuing the emergency declaration. Dunleavy declined to unilaterally extend the declaration despite a nonbinding resolution from the Senate and letters signed by the vast majority of House members asking him to do so. Attorneys for the Legislature said the governor likely cannot extend the emergency declaration on his own, even though he did so in the past while the Legislature wasn’t in session to maintain emergency health orders and regulatory changes. Senate leaders are also working with the administration on legislation that would “essentially provide the same authorization that a declaration would allow” without giving the governor some of the broader powers that come with an official state of emergency, Micciche said. “Once we have this scrubbed here in the next couple days we are going to share it with the House for hopefully a companion bill they can move through the process fairly quickly,” he said in an interview. The House is again challenged to conduct business with a minor outbreak of COVID-19 among representatives and staff. More specifically, the bill addresses primary concerns the administration has regarding its ability to respond to the pandemic: distribute vaccines and financial aid without a declaration, as well as legislators’ desire to increase the state’s current 10 percent education fund balance cap on school district reserves. Micciche said many districts are approaching the statutory limit that prevents them from holding more than 10 percent of their annual budgets in reserves due to federal CARES Act funding and other money going to districts as a result of the pandemic increasing the cap would allow them to hold that money when future revenues are particularly uncertain. He also stressed that the bill would allow the state to capture the $8 million per month in federal Supplemental Nutrition Assistance Program, or SNAP, aid commonly known as food stamps. The federal boost to the program is set to expire at the end of March if the state goes without an emergency declaration or a similar measure. “We’re not going to let Alaska’s needy families go without,” Micciche said. “$8 million a month is not something we can replace.” However, the lapse of the emergency declaration also meant the roughly 200 state fees and regulations Dunleavy suspended early in the pandemic immediately went back into effect or became stuck in limbo. Dunleavy spokesman Corey Young wrote in response to questions about the regulatory situation that the departmental review of the suspended regulations is ongoing to determine which may be eligible for permanent repeal. “In the face of a global pandemic, Alaskans have been hit hard and Gov. Dunleavy clearly sees the need to prevent Alaskan businesses from failing, which includes making sure there are no roadblocks with regulations to help Alaska’s economy thrive,” Young wrote. The state Division of Corporations, Business and Professional Licensing gave up approximately $6.8 million in business license and corporate filing revenue over the roughly 11 months the fee suspensions were in effect. Commerce Department spokeswoman Glenn Hoskinson wrote in an email that other revenue covered the division’s expenses, allowing the forgone amount to stay in the hands of the businesses that needed it. Alaska State Hospital and Nursing Home Association CEO Jared Kosin said in an interview that the sudden lack of an emergency declaration has left many health care providers questioning what they can now legally do given the pandemic is ongoing. A statement on the Department of Health and Social Services website lays out the department’s plan to “operate its COVID-19 response under the same guidance and direction that had previously been provided, which includes all prior waived or suspended statutes and regulations” despite not having clear authority to do so. Kosin said he appreciates the attempt to maintain consistency for patients and providers but questioned: “How can you say ‘just operate as-is’?” He described situations the association is aware of where cancer patients have not been able to see an out-of-state provider via a telehealth visit because of providers’ fears of running afoul of Alaska laws and regulations. Among the regulations suspended during the declaration was one requiring Outside doctors performing telehealth visits by videoconference or phone call to have a medical license in Alaska. “Even though everyone’s acting as if everything’s the same, the providers said that’s not something they can put their license on the line for,” Kosin said. “There’s so much confusion over what is set aside, what is not — what authority there is to do things.” He added that ASHNHA is waiting for a clarifying response from Centers for Medicare and Medicaid Services officials regarding the ability for health care organizations to have off-site facilities, such as COVID-19 testing sites, without a state emergency. A prior federal waiver allowed such activity with an emergency declaration. A DHSS spokesman did not respond to questions about the department’s management of its regulations and governing statutes in time for this story. Micciche said under more normal circumstances he would be particularly concerned about a state agency arbitrarily setting its own operating rules but directly challenging the administration on that front isn’t likely to be productive either given the public health situation. “I think a transition plan is appropriate until we pass this bill,” he said. “I think yanking the rug out from under the administration’s ability to manage COVID right now — it concerns me a great deal. We are doing the best we can under the current conditions to support the governor’s ability to manage a response.” Elwood Brehmer can be reached at [email protected] (Editor's note: A prior version of this story indicated Senate President Peter Micciche said in an interview that legislators had requested generally accepted accounting principles, or GAAP, analyses from state agencies for federal COVID-19 aid. Micciche later clarified that he simply meant analyses had been requested to determine if there were any "gaps" in state laws and regulations that prevented agencies from accepting the federal funds without a formal emergency declaration.)

Enstar inks supply deal with new Inlet entrant

Prices for long-term supplies of natural gas from Cook Inlet remain high relative to much of the country but are inching downward based on the latest in a series of recently signed public contracts. Enstar Natural Gas Co. filed a contract with the Regulatory Commission of Alaska containing a starting price of $7.30 per thousand cubic feet, or mcf, of natural gas with Vision Resources LLC, the new owners of the North Fork Unit on the Kenai Peninsula. The RCA reviews and rules on supply contracts for regulated utilities. While the five-year gas sale and purchase agreement covers nearly 3 percent — about 1 billion cubic feet, or bcf, of gas per year — of the Southcentral gas utility’s annual demand, the starting price is also 3 percent less than the initial rate of $7.55 per mcf Enstar agreed to in a contract for the vast majority of its gas needs last May. The starting price in the Enstar-Hilcorp deal, which amended and extended an existing contract, is also 7 percent less than the utility and producer had originally agreed to in their prior contract. Hilcorp Alaska, the dominant gas producer in Cook Inlet, also inked a contract approved by the Fairbanks area Interior Gas Utility in mid-January with a starting gas price of $7.60 per mcf. Though the price is higher than in the comparable Enstar-Vision Resources deal, also for roughly 1 bcf per year, it is less than the $7.72 IGU had previously been paying Hilcorp and IGU leaders also note the price includes Hilcorp’s willingness to match gas supply to the small utility’s highly seasonal demand swings. After the first year the gas price increases yearly by 7 cents per mcf through the end of the contract for a final price of $7.60 per mcf through March 2026. Gas deliveries are expected to start May 11 and either Enstar or Vision Resources can terminate the deal if the RCA has not approved it by May 1, according to a letter from Enstar officials accompanying the contract filing. “The (Vision contract) also ensures an element of ongoing diversity in Enstar’s gas supply portfolio, allowing Enstar to continue to purchase from a smaller Cook Inlet producers. This is important to ensure the safe and reliable delivery of gas to our customers and could encourage further exploration and development in the Cook Inlet basin,” Enstar Regulatory Supervisor Chelsea Guintu wrote. Enstar also has a small firm supply contract with Furie Operating Alaska through early 2023. The gas utility projects its demand will remain flat at 33.6 bcf per year through early 2026. Vision Resources, a privately held, Louisiana-based firm, recently purchased the onshore North Fork Unit on the Southern Kenai Peninsula near Anchor Point from Anchorage-based Glacier Oil and Gas. Company representatives could not be reached for this story, but late February filings to the state Division of Oil and Gas by Glacier leaders indicate the company is in the process of transferring the North Fork assets to Vision Resources. Glacier Oil and Gas suspended operations at several of its other Inlet and North Slope facilities last summer due to the collapse of oil and gas markets early in the pandemic. The RCA is accepting comments on the proposed contract through March 26.

Small cruisers still set for sailing in 2021

The fate of the 2021 Alaska tourism season is still very much an unknown for the large international cruise lines that operate vessels with thousands of passengers, but small vessel operators are preparing to get back to touring the Inside Passage. Alaska Dream Cruises is one of those companies in the unique position of falling outside of strict guidelines imposed on the large cruise companies. Marketing Director Zak Kirkpatrick said in an interview that the Sitka-based tour provider has seen an “uptick” in bookings of late for cruises this spring and summer and broader reservation inquiries are getting back to pre-pandemic levels for the company. Canada’s Transport Ministry on Feb. 4 moved to again block cruise ships from calling on its ports in 2021, effectively eliminating the only practical way for ships sailing to Alaska from West Coast ports to comply with the Passenger Vessel Services Act. The 19th Century law requires foreign-built vessels, which all of the world’s large cruise ships are, traveling between U.S. ports to stop in a foreign port along the way. However, Alaska Dream Cruises’ vessels are American built, Kirkpatrick noted, and they stay in Southeast Alaska. The company’s six vessels carry between 10 and 76 passengers, which additionally provides leeway outside of the Centers for Disease Control guidelines and mandates for cruise ships, which apply to vessels capable of carrying 250 passengers or more. Kirkpatrick said those booking with Alaska Dream Cruises this year are largely in the 60-year-plus demographic that traditionally makes up most of the company’s cruise customers. “That’s correlating with a lot of folks who are in line for the first wave of vaccines or they feel they will be in the summer,” he said. “There appears to be pent up demand. People are feeling excited to travel and we’re going through all the necessary safety and health protocols to welcome them back this year.” The company could add additional sailings in late September outside of its normal schedule if the demand is there, Kirkpatrick said as well. Alaska Marine Highway System spokesman Sam Dapcevich said it’s too early to tell if the state ferry system — long used by some travelers as an alternative to the large ships with its Bellingham, Wash., service — will see a boost in ridership from cruise ship situation because the summer ferry schedule was just opened for booking Feb. 24 but system officials are expecting more traffic. He also noted that one additional cross-Gulf of Alaska sailing per month has been added to the summer ferry schedule to help accommodate drivers impacted by Canada’s border closure. Alaska Dream Cruises is one of three smaller cruise lines scheduled to ply Southeast waters this summer; UnCruise Adventures out of Seattle and Connecticut-based American Cruise Lines are the others, according to Steve Danishek, president of TMA Travel in Seattle. Many of the companies’ vessels are small, custom-made cruise ships, but much of the collective fleet are reconfigured fishing and work vessels as well. These smaller ships — some American Cruise ships carry up to 175 passengers — are also used to visit the Southeast communities the massive ships can’t reach. In Wrangell, one such community, tour operators still feel the effects of no large cruise ships via excursion contracts they have with the cruise lines even if they aren’t located directly at a port of call for the large ships, Chamber of Commerce Executive Director Stephanie Cook said in an interview. “It’s big income for the charter operators as well as the businesses in the community,” Cook said of the large cruise lines. “(Canada’s announcement) was definitely a bit of a hit for us but we are looking forward to the ships that we are going to be able to get: the smaller ones. We’re just trying to push through and be thankful for what we’ve got coming, hopefully.” The Wrangell Chamber’s visitors board is working on new branding aimed at independent airline travelers that they are hoping to have ready in time for summer, according to Cook, who said the business group is among those across Southeast that are “just trying to be creative and come up with alternative solutions” to the large cruise ships. Kirkpatrick said Alaska Dream Cruises parent company Allen Marine is in much the same situation. Allen Marine primarily operates day excursions such as whale watching and guided beach tours for the large cruise companies. Company leaders are now working on plans for independent visitor trips with its fleet of day catamarans, he said, while also stressing that a quick return of the big ships and their million-plus passengers is still critical. According to Kirkpatrick, Allen Marine and Alaska Dream Cruises previously employed about 180 full-time, year-round workers, a number that fell to less than 50 shortly after the onset of the pandemic when it became clear there would be no sailings last year. “It’s just impossible to overstate how important it is to our economy,” he said. To that end, Rep. Don Young introduced the Alaska Tourism Recovery Act in the House Feb. 24. The bill would provide a temporary “workaround” to the Passenger Vessel Service Act requirements by considering voyages between Washington and Alaska “foreign voyages,” according to a statement from Young’s office. “We’ve made significant progress in the fight against COVID-19,” Young said in a prepared statement. “Vaccinations continue to ramp up, and daily cases are on the decline. By the time the 2021 cruise season typically starts (in early May), I am confident that we will be in a strong position to allow cruises to resume with proper safeguards in place.” Staffers in Sen. Dan Sullivan’s office said he and Sen. Lisa Murkowski are working on similar legislation to file in the Senate, which lately has been consumed by confirmation hearings. Cruise line representatives have additionally floated the possibility that Canadian officials could be more receptive to limited and strategic port calls if COVID-19 national case counts generally remain on a downward trajectory and many cruise passengers have been vaccinated. Elwood Brehmer can be reached at [email protected]

Corps shuts state out of Pebble appeal process

Pebble Limited Partnership can appeal the denial of a primary environmental permit for the company’s large mine proposal but the State of Alaska cannot, U.S. Army Corps of Engineers officials ruled in separate Feb. 24 decisions. In a Feb. 26 statement from his office announcing the Corps’ determination that the state does not have standing to appeal the permit decision, Gov. Mike Dunleavy said that it is another instance of federal officials inhibiting the state from fulfilling its obligation to develop its natural resources. “This is a precedent-setting decision that puts all possible resource development projects on state land at risk and cannot be accepted,” Dunleavy said. “We will not stop fighting for Alaska’s economic prosperity.” Then-Attorney General Ed Sniffen argued in the state’s Jan. 22 appeal to the denial of Pebble’s wetlands fill permit that commitments made in the Alaska Statehood Act and other Alaska-centric federal legislation require state officials to push back against federal authorities that challenge the state’s use of its resources. Army Corps of Engineers Pacific Division Commander Kirk Gibbs wrote to state Department of Law officials that the state does not meet the Corps’ definition of an “affected party” to appeal. The regulations governing the permit appeals process require the appellant be “a permit applicant, landowner, a lease, easement or option holder (i.e., an individual who has an identifiable and substantial legal interest in the property) who has received an approved jurisdictional determination, permit denial, or has declined a proffered individual permit,” according to Gibbs’ letter. Gibbs is also the decision-maker on the merits of Pebble’s appeal. While the Pebble deposit and the vast majority of the project’s extensive network of support infrastructure is on state land, the permit denial was directed specifically at Pebble, which applied for the Clean Water Act permit in late 2017. Pebble’s parent company Northern Dynasty Minerals separately announced Feb. 26 that Corps of Engineers Pacific Division officials deemed that Pebble’s appeal is “complete and meets the criteria for appeal.” The Dunleavy administration was also seeking to participate in Pebble’s appeal conference intended to clarify and explain the administrative record between the Corps and the company, which Gibbs also all-but rejected. Administration officials contended that because it has “substantial and identifiable legal interests in the property in question,” the state should be able to participate in the conference. Gibbs wrote that the meeting is limited to the appellant, their agents and Corps staff, and state officials would be asked to participate only if they can contribute to clarifying the administrative record that will be adjudicated in the appeal. It’s unclear exactly how long it will take before Gibbs rules on Pebble’s appeal. A Pacific Division spokesman previously said Corps officials have an informal goal of ruling within 90 days of an appeal being filed but the complexity of the Pebble project could make for a longer wait. Dunleavy has long insisted he maintains a “neutral” stance on the highly controversial project, a claim mine opponents is hollow given the appeal and prior instances in which he and officials in his administration attempted to assist Pebble through federal permitting. A spokeswoman for Dunleavy said in response to questions following the initial appeal that the governor believes the Army Corps Alaska District’s record of decision denying Pebble was politicized after it previously seemed to be on track for a wetlands fill permit. The final Pebble environmental impact statement published last July largely maintained the conclusions reached in the draft version published in early 2019: that the project would not have measurable impacts on Bristol Bay’s salmon populations or the major fishery there. However, officials from several state and federal resource agencies issued comments on the draft that were largely critical of the review for what they viewed as significant gaps in background data and overly broad or simplified conclusions made by Corps officials. The Nov. 25, 2020, decision to deny Pebble’s permit application followed a rigorous compensatory wetlands mitigation requirements by the Corps in late August and the September release of secretly recorded videoconferences in which then-Pebble CEO Tom Collier and Northern Dynasty CEO Ron Thiessen outlined plans for expanding Pebble far beyond what they have proposed and discussed potentially beneficial relationships with Alaska politicians, including Dunleavy, with activists posting as potential investors. Elwood Brehmer can be reached at [email protected]

Fund continues bull rush, nears $75B in value

Alaska’s Permanent Fund has continued its rapid growth into 2021 with a value quickly approaching $75 billion. The fund had a value of nearly $74.8 billion as of Feb. 22, according to unaudited figures from the Alaska Permanent Fund Corp., which equates to growth of 4.3 percent in just the first roughly seven weeks of the year. It ended a tumultuous first half of 2020 — that also marked the end of the 2020 state fiscal year — with a total balance of $65.3 billion for a net value increase of about $9.5 billion, or 14.5 percent, in less than eight months. The APFC board of trustees has an annual target return of 5 percent more than inflation; over the last 10 years the fund has averaged annual returns of 8.4 percent, according to corporation figures. Much of the growth is attributable to the fund’s $30 billion public equity, or stock, portfolio. The Dow Jones Industrial Average is similarly up more than 20 percent since June. The particularly strong stock returns have also led to a larger Earnings Reserve Account, the subaccount of the Permanent Fund that is spendable by the Legislature and provides the roughly $3 billion annual percent of market value draw to help fund state services each year, according to CEO Angela Rodell. The Earnings Reserve held $14.9 billion on Jan. 31, of which approximately $9 billion was uncommitted realized earnings immediately available for spending. Another nearly $3.1 billion is committed to the current 2021 fiscal year POMV draw while the remainder is accounted for as unrealized gains on invested assets, according to APFC financial statements. As recently as early September the Earnings Reserve held just less than $6 billion in uncommitted, realized gains and $10.5 billion overall. Rodell said in an interview that the recent ballooning of the earnings reserve is largely due APFC managers attempting to maintain discipline regarding the fund’s total asset allocations. The corporation has a target allocation for stocks to make up 37 percent of the fund’s total investments and when its stocks perform as well as they have in recent months they gradually become a larger portion of the overall fund, which pushes managers to sell a portion of those stocks — and generate income — to maintain a stock portfolio more in-line with the target allocation, according to Rodell. “All of the benefits of the growth fall to the Earnings Reserve,” she said. “The exact reverse is also highly possible and that’s what happened in March of 2020.” Public markets contracted sharply in the early days of the pandemic from the general uncertainty as to what the world was dealing with at the time. Then, managers pulled resources from other investment types such as bonds that were over-weighted at the time and put them into stocks. “While this is a really great thing that’s happening right now, it’s not something that happens continually or is forecasted to continue over the next 10 years,” Rodell added. Gov. Mike Dunleavy’s latest state budget proposal calls for drawing roughly $3.2 billion from the Earnings Reserve this year in addition to the annual POMV draw to pay for spring and fall Permanent Fund Dividend installments meant to inject cash into the state’s struggling economy. Rodell once again told lawmakers during a Feb. 23 House Finance Committee hearing that she fully understands the desire to provide Alaskans additional cash to help the state recover from the last unprecedented year but noted that it would have long-term consequences as well. “It reduces your market value draw every year hereafter,” she said of spending from the Earnings Reserve beyond the POMV. “You have to be thinking about how you’re going to replace this revenue or how you’re going to adjust spending as a result. She additionally noted that APFC’s advisory firm, Callan, expects the fund’s real return — total minus inflation — to be in the 4.2 percent range over roughly the next decade. If that forecast is close to accurate it would likely mean the current 5 percent annual draw on the fund would be too large to maintain its real value. “It does imply that if this forecast is correct you would be taking out more than you are saving and the fund would contract; it would not grow,” Rodell said in response to questions from legislators. Some legislators who generally support the annual draw have said they are concerned a 5 percent draw is too large, though the APFC trustees for years have consistently endorsed a draw up to that level. As it stands, the POMV accounts for roughly 70 percent of unrestricted annual state revenue. Elwood Brehmer can be reached at [email protected] (Editor's note: A previous version of this story incorrectly referred to the Alaska Permanent Fund Corp. advisory firm as Callan Associates. The company has changed its name to Callan.)

ConocoPhillips requests July decision on Willow suit

ConocoPhillips is asking the federal judge overseeing both of the lawsuits seeking to stop one of the largest North Slope oil developments in decades to determine the near-term fate of the project by the summer. Attorneys for the Houston-based major that has grown its presence on the Slope in recent years proposed to U.S. District Court of Alaska Judge Sharon Gleason that she rule by July 1 on the merits of the nearly identical lawsuits challenging the federal permits for its Willow oil project. A midsummer decision would hopefully allow ConocoPhillips and Interior agencies time to remedy any issues ahead of the 2021-22 winter construction season, they wrote in motions filed Feb. 22. Separately, the Bureau of Land Management and the coalition of national conservation groups suing the agency over its approval of ConocoPhillips’ development plan for Willow jointly submitted a motion Feb. 22 in one of the suits laying out an agreed-upon schedule that would have the last briefs filed by June 1, ahead of a ruling by Gleason. The Sovereign Inupiat for a Living Arctic and conservation groups that filed the other suit against BLM had not filed a proposed schedule as of Feb. 23. ConocoPhillips was prohibited from starting work Feb. 6 on access roads to the $6 billion oil project the company expects to eventually produce upwards of 100,000 barrels per day after Gleason issued temporary injunctions in the suits until the 9th Circuit Court of Appeals could rule on an appeal of her Feb. 1 decision that initially rejected injunction requests. The company had planned to open a gravel mine and construct up to 2.8 miles of gravel road extending west from its smaller Greater Mooses Tooth-2 oil project, which is also under construction and is expected to start producing oil late this year. Significant work was set to start in mid-February before the order halted it. In explaining the temporary backpedal, Gleason wrote that there is likely to be irreparable environmental consequences once ConocoPhillips begins blasting for a gravel pit to supply its road construction and the 9th Circuit Court could have a different interpretation of statutes she believes time-bar the permit challenges. She had previously concluded that the early gravel work in the National Petroleum Reserve-Alaska was not likely to “irreparably injure” the population of south Beaufort Sea polar bears that are protected under the Endangered Species Act before she could rule on the broader merits of the lawsuits as the conservation and Alaska Native groups argued. A panel of 9th Circuit judges subsequently granted the injunction in an order filed Feb. 13 on the grounds that they could have a different view of the applicability of a 1980 statute that limits challenges of at least some NPR-A environmental impact statement reviews to within 60 days after a notice of the EIS is published. At the heart of the matter is whether the law applies to all EIS reviews relating to the NPR-A or just broader reviews for things such as oil and gas leasing programs. Then-Interior Secretary David Bernhardt signed the record of decision approving the Willow plan with some modifications to the company’s original plan Oct. 26, 2020. Bernhardt and BLM Alaska Director Chad Padgett also signed the record of decisions for a new land management plant meant to open more of the NPR-A to oil and gas leasing this past December. The lawsuits arguing BLM officials under the Trump administration failed to conduct a sufficiently rigorous review of the oil project’s environmental impacts were filed Nov. 16 and Dec. 21; the final EIS reviews for Willow and NPR-A land-use plans were published in Aug. 13 and June 25, respectively. ConocoPhillips attorneys wrote in their schedule motions that preparing for next winter’s construction season “requires ramping up to as many as 300 employees in the second half of 2021 to work on engineering and logistics, as well as entering into numerous contracts for the construction, fabrication and transportation of pipes, culverts, bridges and other equipment to the North Slope for use next winter.” ConocoPhillips Alaska spokeswoman Rebecca Boys wrote via email that the company is reviewing its options to determine if the delay this winter will impact the overall development timeline for Willow. The company previously hoped to start producing oil from the large project in 2026. Boys wrote that she could not put a dollar figure on the expenses the company is incurring due to the injunction but did note that it has impacted approximately 120 jobs this winter. The members of Alaska’s congressional delegation said in a joint statement that they are “deeply troubled” by the 9th Circuit ruling that stalled work on one of the few current bright spots in the state’s economy. In December, the 9th Circuit invalidated the EIS for Hilcorp Energy’s Liberty oil project offshore from the North Slope because Bureau of Ocean Energy Management officials failed to estimate the greenhouse gas emissions from the project’s oil that would likely be sold overseas. Sen. Dan Sullivan has long championed splitting the San Francisco-based Ninth Circuit into two courts on the hopes a new court for Alaska and other resource-dependant states could be more favorable to resource extraction projects. CP drilling Elsewhere on the Slope, ConocoPhillips currently has one drill rig actively working at its highly productive CD5 drill pad. The company suspended all drilling on the Slope for most of 2020 while oil prices remained low as a result of the pandemic. However, oil prices have rebounded quicker than many analysts expected and are back to pre-pandemic levels of more than $60 per barrel. Doyon Drilling Rig 25, which is currently at CD5, will move to GMT-2 in the second quarter in preparation for first oil from the mid-sized NPR-A project later this year, according to Boys. Doyon 26, dubbed “The Beast” for its extended reach drilling capabilities, will also start drilling in the Alpine field in the second quarter, Boys wrote. ConocoPhillips Alaska leaders previously said they plan to have four rigs working on the Slope by the end of the year. Elwood Brehmer can be reached at [email protected]

AIDEA to split $70M of Ambler access work with explorer

The leaders of Alaska’s development bank have a deal to finance remaining preconstruction work for the Ambler mining district access road with the company leading exploration in the region. The 50-50 cost-share agreement approved Feb. 10 by the Alaska Industrial Development and Export Authority board of directors and signed with Ambler Metals, a joint venture of Trilogy Metals, authorizes up to $70 million of spending on the Ambler road until state officials decide whether or not to build the remote 211-mile industrial road. It runs through 2024 if AIDEA officials don’t reach a final investment decision before then. The AIDEA board transferred the $35 million that it plans to use for the 50-50 cost-share agreement from the authority’s Revolving Fund in June to the formerly unfunded Arctic Infrastructure Fund established by the Legislature. The Bureau of Land Management approved the environmental impact statement for the road in July. The federal agency led the review because the road would require a special right-of-way across federal lands in the area, including through Gates of the Arctic National Park. BLM granted AIDEA the right-of-way in early January. Vancouver-based Trilogy Metals has been exploring two large multi-metal prospects — Arctic and Bornite — on the southern flank of the Brooks Range near the terminus of the proposed road. Leaders of the junior explorer have long said the road is needed to make the prospects economically viable despite their generally high grades of mineralization. “I would again like to commend the leadership of AIDEA and Ambler Metals for the incredibly hard work that they have invested in moving the Ambler Access Project forward. I am also extremely pleased at the commitment by the State of Alaska and AIDEA in their determined effort in making this road a reality. The completion of this agreement marks another step to the eventual construction of this road which will have a significant benefit to the people of Alaska,” Trilogy CEO Tony Giardini said in a statement from the company. The agreement also includes a clause that allows Ambler Metals to credit its future predevelopment contributions against the tolls and other fees the company would pay to use the road once it is developed. An AIDEA spokeswoman did not respond to questions about the specifics of the deal in time for this story. Officials in AIDEA and Gov. Mike Dunleavy’s administration have emphasized the road’s potential to access numerous other less-delineated mineral prospects in the region as well despite significant opposition from Tribal and village governments in the area, particularly those near where the road would connect with the Dalton Highway north of Fairbanks. “Projects like the Ambler Access Project help to create the tangible economic opportunities Alaskans need and deserve, especially for neighboring communities. No one does resource development better than Alaska,” AIDEA chairman Dana Pruhs said. Local opposition to the road stems from fears it will disrupt caribou migrations and attract additional sport hunters in a large area of the Interior used predominantly for subsistence purposes. AIDEA leaders insist use of the road will be actively monitored and restricted to mining traffic only with exceptions for local uses. However, the legal path to keeping the road private remains unclear given $26 million in state general funds has been spent on the road that is expected to cost upwards of $520 million, according to the authority. AIDEA’s early price estimates for initial construction of the road were in the $300 million range. Elwood Brehmer can be reached at [email protected]

City vs. MARAD port trial set to begin

A trial is set to commence nearly seven years after Anchorage sued the U.S. Maritime Administration for its role in the botched expansion of the city’s port but there is still a long way between now and a final ruling. The Federal Claims Court trial, being held via videoconference, began Feb. 16, at 6 a.m. Alaska time. Assistant Municipal Attorney Bob Owens said that the participants in the two- to three-week trial will be scattered across the country. Attorneys for the municipality will attempt to complete their arguments that the federal agency owes the city upwards of $320 million for its role in the port construction project that started way back in 2003 and was deemed a failure in 2012. Former Mayor Dan Sullivan’s administration sued MARAD in late February 2014 alleging agency officials did not provide the oversight of construction work they were responsible for under a memorandum of understanding, or MOU, signed with the city. According to Anchorage officials, that lack of oversight, which included rarely having someone on-site, led directly to the fundamental construction issues the project experienced. A Justice Department spokeswoman declined to comment on the case via email, but Justice attorneys representing MARAD argue the agency was employed by Congress to simply be a vehicle for getting federal funding to the work. They insist the MOU only clarified Anchorage officials’ decision-making authority for the project and it was the city’s responsibility to provide requirements and direction to MARAD for the project. Owens said that while he had no prior experience with the typical process of Federal Claims Court cases, Anchorage’s lawsuit was delayed about 18 months to two years as a 2013 lawsuit the city filed in Federal District Court against a handful of project contractors played out. That lawsuit netted $19.3 million for Anchorage through seven individual settlements made in early 2017. “This court is set up to handle contract disputes involving the federal government; that’s all it does,” Owens said in an interview. “It’s purely contract disputes so it’s sort of unique in that respect and it has national jurisdiction.” But the unique traits of the court don’t end there. For one, there is no jury for the trial; the presiding judge likely won’t issue a ruling until long after the trial is over. Following the trial, each side typically submits a series of post-trial briefs and replies. “Suddenly you’re at 100 days out before the judge even starts reading,” Owens said. “We might not have a decision this year.” State lawmakers and the members of Alaska’s congressional delegation have largely said the lawsuit against MARAD needs to be resolved before significant funding for future work to rebuild the critical facility’s aging and corroded docks can be considered. While the final parameters are still being evaluated, the current port modernization plan contains just more than $1 billion of unfunded rehabilitation and construction. MARAD did award the municipality two development grants in late 2019 and early 2020 totaling $45 million for current work to replace the port’s petroleum and cement terminal for the first phase of the second construction effort. Owens said city attorneys offered a settlement early in the case proceedings that was rejected and the sides subsequently engaged in mediation but “there’s been no overtures” for several years, adding the city would still be open to settling the case outside of court. If that doesn’t happen, Anchorage attorneys believe the history of the case weighs in their favor. “We don’t assume anything but we have successfully navigated their motions to dismiss the case and their motions for summary judgment. We’ve got a pretty good record in motion practice so we’re cautiously optimistic,” Owens said. Anchorage Assemblyman Christopher Constant leads the Assembly’s watch of the port as chair of the Utility and Enterprise Oversight Committee; it’s also in his district. He said that he is operating under the belief that the city will not get anything from MARAD. “They’re the federal government, you can’t make them pay,” Constant said in an interview. “I’m planning for the fact that we have to be responsible for the redevelopment of that port.” Regardless of the ultimate construction financing package, he said the port’s primary users — most notably TOTE Maritime and Matson Inc. — are deeply involved in ongoing discussions with city officials about the scope of the project after many months of debate over tariff increases to help pay for the new petroleum and cement terminal. “We are in a place where people are working together and there are great, detailed communications back and forth about what the priorities are. We’re working through who is going to have what and who’s paying for it,” Constant said. “It’s good that they’re involved.” He added that in spite of his skepticism about the prospect of MARAD paying out because of the litigation, he still supports it. “We’ve been wronged and we need to have a judgment that shows that,” Constant said. Elwood Brehmer can be reached at [email protected]

Blame Canada: Alaska contends with cruise ban

Travel industry and local government leaders across much of Alaska are attempting to devise a Plan B after a decision by Canadian government officials upended the state’s coming tourism season. That’s because Canada’s Feb. 4 move to again block cruise ships from calling on its ports in 2021 eliminates the only practical way for ships sailing to Alaska from West Coast ports to comply with the Passenger Vessel Services Act. The 19th Century law requires foreign-built vessels traveling between U.S. ports to stop in a foreign port along the way. Alaska’s congressional delegation and many state lawmakers have been critical of Canadian officials for the suddenness of the decision and the length of the extension; cruise vessels carrying more than 100 people are banned from Canadian waters through February 2022. The ban has been in place since last spring but had previously been extended in 60 or 90-day blocks. “Temporary prohibitions to cruise vessels and pleasure craft are essential to continue to protect the most vulnerable among our communities and avoid overwhelming our health care systems (with COVID-19 patients). This is the right and responsible thing to do,” Canada’s Transport Minister Omar Alghabra said in a prepared statement. Prior to the pandemic roughly 1.3 million travelers — nearly 60 percent of all visitors to the state — were expected to visit Alaska via cruise ship during the 2020 season, continuing roughly a decade-long run of strong tourism growth. Howard Sherman, an executive vice president with Norwegian Cruise Lines said he was surprised by the terms of the extension Canada announced as well during a Feb. 9 presentation hosted by the Southeast Conference. Sherman stressed the ultimate need is for a long-term fix to the Passenger Vessel Services Act requirement, but in the meantime the company will continue to advocate for a temporary waiver for Alaska cruises, both of which require congressional action. “Anytime you’re talking about a legislative solution, it’s complicated,” he said. Rep. Don Young said in a previous discussion with the Journal that his office was looking into logistical options around the required stop in Canada, such as rerouting cruise ships from the traditional Inside Passage — and sometimes on to Southcentral — voyages. However, there simply are no practical options for avoiding the foreign-port stop, according to Sherman. A spokesman for Young did not respond to questions about the prospect of a waiver in time for this story. Young and Sens. Dan Sullivan and Lisa Murkowski said they “expect more from our Canadian allies” after indicating they were not made aware of the situation prior to the announcement but said they are working on possible solutions in a joint statement. “Upon hearing the announcement, we immediately reached out to Canadian and American agencies to try to understand the rationale behind this decision — particularly the duration of the ban. We are exploring all avenues, including changing existing laws, to ensure the cruise industry resumes operations as soon as it is safe. We will fight for a path forward,” the delegation said. Sherman said Norwegian is not sailing anywhere yet because it still isn’t safe — Holland America and Princess also canceled early season Alaska sailings in January — but continued improving macro trends in COVID-19 case and vaccination counts could make late spring and summer cruises viable. Industry leaders will likely press Canadian officials to consider lifting the ban in favor of strict port entry requirements, such as negative COVID-19 test and possibly vaccine verifications, that would still allow the industry to adapt and operate, according to Sherman. “The ships are all over the world right now and many of them are prepositioned for an Alaska season right now,” he said, adding that crewing the mostly idle vessels takes 60 to 90 days before they can resume sailing. “If we’re sitting in the exact same position on May 1 I would expect there wouldn’t be a season; that would be my guess.” Sherman said. Alaska Travel Industry Association CEO Sarah Leonard said the group has been “brainstorming” with the delegation on alternatives solutions to get more visitors back to the state. ATIA is also shifting its marketing strategy to focus on air travel and options for independent travelers such as the Alaska Marine Highway System as long as large cruise sailings are tenuous, according to Leonard. Gov. Mike Dunleavy included $5 million for ATIA marketing efforts in his proposed 2022 fiscal year capital budget. “We know we can welcome visitors back safely and provide those wonderful and safe experiences in Alaska,” Leonard said. Local governments in many Southeast and Southcentral coastal communities also rely on cruise ship passengers for revenue, mostly through per passenger taxes paid each time a vessel calls on a given port town. The State of Alaska collects a $5 per-head commercial passenger vessel excise tax for local governments and distributes that money to them the following year. It must be used to either mitigate the community-level impacts of the large cruise ships and their passengers or to otherwise support the industry, per federal commerce laws. The near-term outlook is mixed among some of Southeast’s biggest cruise port towns with the increasingly uncertain prospect of visitor revenue this year after ostensibly nothing in 2020. Ketchikan Gateway Borough Manager Ruben Duran said in an interview that the local government is in fairly decent shape regarding its cruise ship “head tax” revenue largely because the borough has used the money to provide services it doesn’t need with out the cruise ships — shuttle busses and cleanup crews, for instance. “The costs went away and so did the revenue so it somewhat balanced out,” Duran said, noting that since the state distributes the money a year after it is collected the budget impacts of no cruise revenue last year hasn’t really been felt yet. The borough also started saving a portion of the $2.4 to $2.7 million in head tax revenue it has received in recent years, according to Duran, who said the roughly $2 million it has in reserve in combination with fewer costs should help the borough to the other side. “We started putting money away back in 2017 and it’s going to carry us pretty much through this,” he said. Juneau’s situation appears more challenging. In addition to the forgone state tax revenue, City and Borough of Juneau officials are trying to figure out how to deal with the loss of revenue from local passenger taxes as well. In total, the city collects $13 per cruise passenger, which has translated to upwards of $15 million of tax revenue in recent busy cruise seasons, according to CBJ Finance Director Jeff Rogers. About $2.1 million per year in tax revenue is committed to debt payments on two new city docks and approximately $6 million per year in total is needed to cover all of the “operational activities servicing the waterfront,” Roger said. Those activities include police, fire and other essential service expenses that aren’t always flexible, he added. “You don’t have a smaller fire department because you don’t happen to have ships one year,” Rogers said. Juneau’s remaining head tax revenue has typically been spent on capital improvements to infrastructure and services. City officials initially thought they could withstand a single year of lost revenue in part because Juneau operates on fiscal year that ends June 30, potentially allowing it to absorb the halves of one lost season over two fiscal years, Rogers said. However, the news out of Ottawa could mean Juneau and the rest of Alaska’s cruise ports have to cover two lost seasons. “If we really do have back-to-back seasons with no passengers we are going to have significant shortfalls with those expenditures,” Rogers said, noting that it would not only mean missing out on $30 million of excise taxes but also another $20 million in sales tax revenue visitors provide. The decision on how to cover the lost head tax revenue is ultimately for the Juneau Assembly. Rogers said officials could choose to employ a mechanism in the city code that allows them to borrow money from a solvent fund to cover a shortfall elsewhere. That money must eventually be paid back to the original fund. “We might have to effectively borrow from future revenues to pay those costs this year,” he said. “We just don’t really know what happens to tourism going forward — we don’t know if it stays soft or if it goes back to its previous strength.” Elwood Brehmer can be reached at [email protected]

Dunleavy releases package of bond spending projects

Gov. Mike Dunleavy submitted the final piece of his 2022 budget plan to the functional half of the Legislature Feb. 5 but where the $356 million construction bond package will end up is anyone’s guess. The general obligation, or GO, bond proposal in Senate Bill 74 would spend $356.4 million of state general funds to capture just more than $1 billion in matching federal transportation funding. Dunleavy has said he wants to hold a special election this year should the stimulus effort pass the Legislature in order to expedite the process that would traditionally have the vote in November 2022. The Alaska Constitution requires a statewide vote to approve most forms of new debt. “This statewide bond package is essential to stabilizing our economy and putting Alaskans back to work following the economic upheaval caused by the pandemic,” Dunleavy said in a statement from his office. “Not only will this proposal create jobs, it will improve critical infrastructure for all Alaskans. I look forward to working with the Legislature to take this to a vote of the people following the 2021 legislative session.” The governor announced his plans for a roughly $350 million state GO bond package this past December with his broader fiscal year 2022 budget plan as part of $5 billion in stimulus programs and spending — mostly for Permanent Fund dividends — to counter the economic toll the pandemic has taken on Alaska’s nascent recovery from a multi-year recession. In order to capture the most federal money, the projects are largely road and airport upgrades ranging from $29.9 million of state money for a new Sterling Highway roadbed around Cooper Landing to $540,000 for a mile of work on the Denali Highway. It would also add $25 million to the School Major Maintenance Grant Fund as well as $9 million to aid in replacing the Houston Middle School that was demolished following the November 2018 earthquake. Nearly $30 million would be allocated to the University of Alaska for general building maintenance and energy efficiency projects across its campuses along with $19.5 million for similar work at AVTEC, the state’s vocational training college in Seward. The governor is also proposing $8.5 million for the Alaska Industrial Development and Export Authority to continue early work on the West Susitna Access project that would provide roads to coal and mineral prospects on the remote side of the Susitna Valley as well as $2.1 million for the Arctic Strategic Transportation and Resources, or ASTAR, concept by the Department of Natural Resources to similarly develop a primitive North Slope road network to access oil, gas and minerals and connect otherwise isolated communities. According to the governor’s spokesman Corey Young, the administration felt the $356 million of state spending being proposed strikes an appropriate balance between the state’s ability to take on additional debt and the economic impacts the funded work would have across the state. Young wrote in an email that the West Susitna Access allocation would provide AIDEA the funds to prepare an environmental impact statement and get through the initial feasibility evaluations. While the West Susitna road is the revival of former Gov. Sean Parnell’s Roads to Resources initiative, the money for ASTAR would continue work started by Gov. Bill Walker’s administration in 2017 and subsequently carried by the Legislature and Dunleavy through additional rounds of funding. A panel of state senators discussed the GO bonds among several issues during a Feb. 9 videoconference hosted by the Southeast Conference, a regional community development group. Juneau Democrat Sen. Jesse Kiehl said he believes much of the work proposed for the area is “good, central infrastructure,” but questioned the regional allocation of it as well. Senate President Peter Micciche, R-Soldotna, said the bond package needs to fit into an overall fiscal plan for the state. “My interest this year is working towards a sustainable budget future. I know that feels like a tall order for many but I have faith in our Legislature,” Micciche said. Sitka Republican and Senate Finance co-chair Sen. Bert Stedman noted that much of the work is basic infrastructure that the state could use but also emphasized the bond process is slow, meaning the money is not likely to “hit the street” and produce an economic benefit for several years. “I recognize that interest rates are low and money is really cheap right now but that’s only part of the equation,” Stedman said. “If you want immediate relief you have to use cash, which is a pretty rare thing right now.” Elwood Brehmer can be reached at [email protected]

Latest gasline effort pitched by AGDC leadership

Leaders of the state’s gasline corporation on Feb. 4 provided details on a new, phased development plan for the $38 billion Alaska LNG Project that could get large volumes of lower cost natural gas to Fairbanks by 2025. Alaska Gasline Development Corp. President Frank Richards said during a board of directors meeting that AGDC management has been in discussions with several potential private participants in the megaproject. “This group of strategic parties has the financial and technical capability to bring a project the scale of Alaska LNG to fruition,” Richards told the board. One in particular has agreed in concept to make a significant investment towards constructing a $5.9 billion portion of large-diameter pipeline to Fairbanks. The catch to the first pipeline phase, however, is that it relies primarily on billions of dollars of yet-to-be-identified federal funding. Under the working concept, the pipeline firm would contribute 25 percent of the $5.9 billion, or about $1.5 billion, while the rest would come from federal infrastructure funds. AGDC officials have informed the members of Alaska’s congressional delegation of their desire to participate in a federal infrastructure and stimulus program and briefed President Joe Biden’s transition team on the potential benefits of the project, according to Richards. “Alaska LNG has the authorizations that truly make it a shovel-ready project,” he said, adding that it should be considered a “clean energy initiative” given gas from the project would displace coal and heating oil relied up today in Interior Alaska and Asian markets. While Biden has said repeatedly that he wants to rebuild the nation’s infrastructure and invest in clean energy projects, there is no legislation being considered yet. Infrastructure spending was also a priority of President Donald Trump’s but he could not get a bill through Congress. Richards described the undisclosed firm as a “world-class pipeline operator” in an interview and said AGDC is in commercial negotiations with them to identify what it would take for the company to lead the pipeline portion of the integrated North Slope gas-to-pipeline-to-LNG effort. Building the section of 42-inch diameter pipeline between the North Slope and Fairbanks first — as opposed to the full 807-mile line to Southcentral Alaska — would provide Interior residents and businesses with natural gas first while the rest of the complex project is sorted out. Richards noted gas would also be available to the region’s military installations, which could be large volume customers, as the Defense Department tries to transition away from the coal and oil-fired heat and power plants used currently. Phasing construction and accordingly having separate owners for the project’s North Slope gas treatment plant, pipeline and LNG plant at Nikiski would not only facilitate quicker delivery of gas to the Interior but it would also give AGDC the time to secure the rest of the commercial arrangements needed for complex endeavor. Richards said that while AGDC has identified “likely” lead parties for the gas plant and pipeline, corporation officials are still trying to get the attention of a firm to lead development of and own the LNG plant that accounts for roughly half of the overall $38 billion Alaska LNG price tag. It would also defer the expense of the large gas treatment plant by pulling gas only from ExxonMobil’s Point Thomson field. At full build-out, about three-quarters of the natural gas used in the project would come from Prudhoe Bay but its gas contains significant quantities of carbon dioxide that must be stripped out in the treatment plant and reinjected into the reservoir. Point Thomson gas is cleaner and therefore can bypass treatment. Richards said the pipelines would lead to and from the site of the gas plant to prepare for its eventual construction and because the project would use the same design approved last spring by the Federal Energy Regulatory Commission it would not need new permits; it’s the same work just in a different order. The progress of the phased development strategy was to be the topic of discussion at a Jan. 14 AGDC board meeting but that meeting was rescheduled to Thursday to allow Gov. Mike Dunleavy to unveil the new plan, which he did in an op-ed published Tuesday in the Anchorage Daily News. Richards and AGDC board chair Doug Smith emphasized that while there is a lot more work to do they do not want to be late to the game either. “As Alaskans, we all know this may sound like a long shot and there’s still a lot of hurdles left,” Smith said. “We felt we needed to have a large opportunity on the table should funds become available to support it. We’re not being unrealistic about this and what the hurdles are in front of us.” After the vote, former board member and construction union leader Joey Merrick questioned the action given no one to AGDC’s liking has shown interest in the LNG plant. Merrick is also a partner with former Gov. Bill Walker, former AGDC President Keith Meyer and others in Alaska Gasline and LNG LLC, a venture they formed last fall to take the project from the state. Merrick said AGDC officials originally told him that Alaska Gasline and LNG would be able to participate in an open request for proposal, or RFP, process but subsequent meeting requests have been declined. “We’re standing by ready to take the project from the gas treatment plant on the North Slope to the liquefaction plant at Nikiski,” Merrick said. “Our plan doesn’t require the $4 to $5 billion subsidy you’re talking about, “ he added. The Fairbanks-only project just doesn’t pencil out as I think you all know. The numbers just don’t work.” Those additional hurdles include again addressing “fiscal certainty” for the private investors and the project’s property tax obligations. Under the distant original Alaska LNG structure in which the North Slope producers were planning to be the primary investors in the project, fiscal certainty referred to amending the state constitution to allow for fixed, project-specific taxes and contracts with the state. A new payment in-lieu of tax, or PILT, structure would also likely be needed for the project’s property taxes, according to Richards, who said the project’s PILT of roughly $400 million per year sharply juxtaposes the tax breaks and incentives other LNG projects around the world are getting. The board ultimately approved a resolution allowing management to continue negotiations with the current interested parties to transition the project into private leadership and forgo a new formal solicitation period. AGDC officials hope to make that transition by the middle of the year. Elwood Brehmer can be reached at [email protected]

Biden climate orders make immediate impact in Alaska

Alaska didn’t have to wait long to feel the effects of the administration change in Washington, D.C., following President Joe Biden’s Jan. 27 directives pausing oil and gas leasing across millions of acres of federal lands and waters in the state. Conservation groups hailed the executive order, which is effective nationwide, as a significant first step towards addressing climate change while Alaska’s leaders largely criticized the president for ignoring the economic realities facing the state and nation. Interior Department officials stressed that the order does not impact previously issued leases, permits or approved activities. The nationwide order also followed a more expected executive order suspending all activity related to the Arctic National Wildlife Refuge issued on Biden’s first day in office. An additional Jan. 20 decree from Acting Interior Secretary Scott de la Vega suspended staff-level authority to issue drilling permits, among other things, for up to 60 days. The secretarial order slowed the issuance of a North Slope exploration drilling permit for Australian-based 88 Energy, which is prospecting the southeast corner of the National Petroleum Reserve-Alaska, for several days but the company announced Feb. 1 it had received the permit to drill the Merlin-1 well from Bureau of Land Management officials and mobilization is underway. 88 Energy Managing Director Dave Wall thanked the congressional delegation and BLM appointees for working to resolve the permit application submitted Jan. 12. “After a brief hiatus in activity, it is now back to full operations with ramp-up towards the spud of Merlin-1, which is expected in around four weeks,” he said. The single, remote well is expected to cost $12.6 million, according to the small explorer. Biden further ordered reviews of all major regulatory actions taken during the Trump administration, which in Alaska was many. In addition to conducting the first lease sale for the ANWR coastal plain — after a 40-year fight — Interior also overhauled the NPR-A land use plan to open more of the sought-after northeast corner of the reserve to leasing; it also happens to be an area of prime summer migratory bird and caribou habitat. The agency took other steps to designate much of the general purpose BLM holdings across the state as eligible for mineral exploration under President Donald Trump as well. While a sharp departure from Trump administration energy policies was expected, it’s not yet completely clear how far Biden is willing to go. Interior officials have said there is no timeframe for the leasing program pause and review, but a permanent moratorium — or at least four years — on federal leasing would sharply curtail development in the NPR-A, which has again become highly prospective with industry technological advancements and new formation discoveries. Alaska’s all-Republican congressional delegation collectively chastised Biden for putting Alaska’s oil-dependent economy at greater risk than it already is, among other things. “This sweeping, misguided policy will kill good paying middle-class jobs, make America more reliant on foreign sources of energy, empower global bad actors like Russia and Iran, and ultimately hurt the president’s climate change goals as more oil and gas is produced by nations with much lower environmental standards,” Sen. Dan Sullivan said in a prepared statement. At the state level, rural Alaska Native lawmakers have also been critical of the administration’s energy policies, arguing they impinge on the rights of North Slope residents to develop economic opportunities in the region and basic infrastructure that is often taken for granted elsewhere. “Over the years, we Inupiat of the north have exercised our right to self-governance over natural resources — both seal oil and crude oil,” Rep. Josiah Patkotak, I-Utqiagvik, said in a joint statement from the Legislature’s Bush Caucus. “We have struck the proper balance between our cultural and traditional lifestyle and the reality of a cash economy. This type of overreach hinders our ability to provide basic services like running water and reliable home heat in Kaktovik and the rest of the North Slope.” Longtime conservative Alaska political strategist and former Republican communications director for the Senate Energy and Natural Resources Committee Robert Dillon said in an interview that the new president is attempting to satisfy a broad group of constituents with his early actions and they do not mean that drilling for oil is over. “You can’t just turn off the taps — no pun intended — on U.S. oil production. It’s not going to be all or nothing; it’s just going to be less, harder. They’ll do things that will make production more expensive and harder,” Dillon said, adding that exploring ANWR is off the table for the foreseeable future but “maybe the NPR-A makes sense; Alaska’s got a good argument to make.” The Biden administration needs to focus on market-based climate solutions rather than top-down mandates if it wants to be successful legislatively with Republicans, which is the only way to make long-term changes, according to Dillon. “An EO is more of a club than an olive branch,” he said. Putting price an upstream tax on carbon is one national policy that producers can reliably account for — some already are — he highlighted, which is partly why it has garnered support from some of the largest oil producers in the country. ConocoPhillips CEO Ryan Lance reiterated that the company continues to advocate for a “well-designed price on carbon in the U.S. because we believe that’s the most economic, efficient and effective step that can be taken by the U.S. to set the world on a long-term sustainable path to (greenhouse gas) emissions reductions,” he said. Sullivan’s spokesman Nate Adams wrote in response to questions about the senator’s thoughts on climate policy that he believes the orders are the result of “lofty campaign promises, not a thought-out strategy designed to combat climate change.” According to Adams, Sullivan wants a national policy to come from debate and compromise in Congress, “not from the unilateral stroke of President Biden’s pen.” He also noted that U.S. greenhouse gas emissions have declined significantly since 2005 while the country also grew to become the largest oil producer in the world. He did not directly address Sullivan’s stance on a carbon tax, but instead wrote that, “solutions to climate change — from adaptation to mitigation — are broad and complex. They will require coming together at the federal level to incentivize renewable energy, maintain reliable and affordable energy, spur innovation for new technology and energy storage, and help communities adapt and address climate change on the front lines, like in Alaska. These are the issues that Sen. Sullivan has worked on throughout his time in Congress.” A spokeswoman for Sen. Lisa Murkowski did not respond to similar questions in time for this story, but Murkowski has touted her omnibus energy reform bill passed late last year as a major step towards energy efficiency and clean energy research and development. Elwood Brehmer can be reached at [email protected]


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