Elwood Brehmer

Interior Department sued over revised NPR-A plan

A coalition of environmental groups sued the Interior Department Aug. 24 urging a federal judge to halt implementation of the Trump administration’s plan to expand oil and gas opportunities in Northwest Alaska. The six state and national conservation organizations, including The Wilderness Society, the Northern Alaska Environmental Center and the Alaska Wilderness League allege Bureau of Land Management and Interior Department officials violated at least three longstanding federal laws in selecting a land-use plan for the National Petroleum Reserve-Alaska that would open more than 80 percent of the massive federal parcel to hydrocarbon development. The groups, led by the Anchorage-based nonprofit environmental law firm Trustees for Alaska, argue in-part that BLM Alaska leaders violated the foundational National Environmental Policy Act, or NEPA, by only conducting a cursory review of the impacts of additional development in the petroleum reserve. The agency also did not consider any management alternatives in the final NPR-A land-use environmental impact statement, known as the reserve’s integrated activity plan, meant to substantially increase protections for the reserve’s wildlife and aquatic resources — another NEPA violation, according to the complaint. To the contrary, the final EIS published in late June identifies a preferred alternative that would open more of the nearly 23 million-acre reserve to industry than was contemplated in any of the three action alternatives detailed in the draft review. The most industry-friendly management alternative discussed in the draft EIS would have opened 81 percent of the NPR-A to potential leasing and development, while the BLM’s preferred alternative in the final review would open 82 percent, or 18.7 million acres, of the reserve to leasing by industry. All of the alternatives in the final EIS would also reduce the size of the Teshekpuk Lake Special Area and eliminate the Colville River Special Area — parts of the reserve previously established to support local subsistence harvests and maintain habitat for caribou, waterfowl and other species — the complaint notes. The Obama administration finalized the current NPR-A plan in 2013, which made about 11.8 million acres available for leasing and roughly doubled the size of the Teshekpuk Lake Special Area to 3.6 million acres, with more than 3.1 million acres of the special area off-limits to leasing. Suzanne Bostrom, the Trustees for Alaska attorney who signed the complaint, said in a statement that the Trump Administration is doing everything it can to meet industry’s wishes with little regard for the impacts to locals and wildlife in the region. “BLM’s decision to launch an all-out assault on the western Arctic is completely at odds with its obligation to provide maximum protection for areas like Teshekpuk Lake and lands and waters essential to the health of western Arctic animals and people,” Bostrom said. She wrote via email that the lawsuit was filed before BLM has issued a record of decision finalizing its plan because of a clause in federal law requiring any complaint specific to an NPR-A leasing review be made within 60 days of publication of the final EIS. In unrelated cases, Trustees attorneys have successfully sued the Interior leadership twice in the past two years to have separate land exchange agreements meant to facilitate an emergency access road through what is now the Izembek National Wildlife Refuge on the Alaska Peninsula. The firm is also leading another suit filed Aug. 24 against Interior officials over the administration’s plan to open the coastal plain of the Arctic National Wildlife Refuge in far northeast Alaska to oil and gas exploration. BLM’s preferred alternative for the NPR-A would open the entire 3.6 million-acre Teshekpuk Lake Special Area to leasing with limitations on activities and permanent facilities intended to limit impacts to wildlife. The area around the large lake, which sits in the northeast corner of the reserve, has become of particular interest to oil and gas industry advocates because of large Nanushuk formation oil discoveries made on nearby state land and within the NPR-A. Those discoveries led the U.S. Geological Survey in late 2017 to increase its resource assessment for the reserve to nearly 8.7 billion barrels of technically recoverable, undiscovered oil. A 2010 NPR-A assessment projected a mean resource estimate for the reserve of just 896 million barrels. The vast majority of the acreage currently under lease is held by ConocoPhillips, which is in the environmental permitting process for its large Willow oil prospect in the northeast portion of the reserve and is also working on smaller projects in the area. Expected to cost up to $6 billion to fully build out, the Willow project could produce upwards of 160,000 barrels of oil per day at its peak, according to the company. Former Interior Secretary Ryan Zinke first directed department agencies to reevaluate the reserve’s oil and gas potential as well as changes to the management plan in May 2017. BLM’s preferred management plan for the reserve includes elements from the range of alternatives analyzed in the draft EIS and was developed with input from cooperating agencies and stakeholders, according to the agency’s Alaska spokeswoman Lesli Ellis-Wouters. BLM officials expect the new management plan could help spur oil production of up to 500,000 barrels per day over the next 20 years with up to 250 miles of new roads and approximately 20 new drilling pads in the reserve under a “high development scenario,” according to the agency’s analysis. The complaint additionally alleges that BLM violated the 1976 Naval Petroleum Reserves Production Act and related regulations by voiding many protections put in place for the Teshekpuk Lake area and doing away with the Colville River Special Area entirely. “The (NPRPA) instructed the Secretary of the Interior to designate any areas containing significant subsistence, recreational, fish and wildlife, or historical or scenic values as special areas and to provide ‘maximum protection’ for those values,” the complaint states. The alleged failure to fully analyze all of the impacts resulting from industry activity under the new management plan also violates the Administrative Procedures Act, according to Trustees attorneys. Elwood Brehmer can be reached at [email protected]

Hydro expansion another step in grid improvement

A small valve opened in a remote mountain valley at the head of Kachamek Bay sending a stream of water downhill that will eventually become low-cost power for places as far away as Fairbanks. The Alaska Energy Authority started flowing water through its West Fork Upper Battle Creek Diversion Project Aug. 25. The $47 million project will increase the amount of water in nearby Bradley Lake, in-turn increasing the practical power production capacity of the AEA-owned Bradley Lake Hydro Project by about 10 percent, according to AEA project manager Bryan Carey. Already the largest hydro plant in the state, Bradley annually produces about 380,000 megawatt-hours of power for the six electric utilities in Alaska’s Railbelt. The reliable supply of glacial-fed “fuel” stored behind the Bradley dam can be used by the utilities to manage the variable portion of their electric load and optimize operation of their gas-fired generators. “We want our gas turbines to be at the sweet-spot” for maximum efficiency, Homer Electric Association Board of Directors Vice President David Thomas said during a tour of the new facilities. “You could argue Bradley Lake is the largest battery in the state.” The Bradley Lake turbines are rated to produce up to 120 megawatts of power at any given time but constraints at both ends of the project have limited its average production to about 44 megawatts. And because Bradley power costs just 4 cents per kilowatt-hour to produce, according to AEA — making it some of the cheapest power in the state — more is better, said Tony Izzo CEO of Matanuska Electric Association. Izzo also chairs the Bradley Lake Project Management Committee. The hydro project is operated by HEA under a contract with AEA. Feedstock natural gas for the utility’s other power plants calculates out to a cost of about 8 cents per kWh. “It’s pretty easy to see the benefit (of Bradley Lake) when you look at the numbers,” Izzo said. MEA is in the middle of studies to see how much variable renewable power its grid can accept and identify some of the prime areas for renewable energy generation in its service area. The Battle Creek project will add about 37,300 megawatt-hours of production capacity to Bradley by diverting glacial water from the West Fork of Upper Battle Creek and piping it nearly 2 miles to the manmade lake; enough power to light about 5,000 Railbelt homes, according to AEA. The 60-inch high-density polyethylene pipe buried largely alongside the project access road installed to carry the water from the lake can handle up to 600 cubic feet of water per second, equivalent to a small river, according to Carey. The diversion stream was flowing at about 60 cubic feet per second, or cfs, on Aug. 27, he said. Being short and steep glacial drainages Bradley and Battle creeks do not have many salmon — which makes them good candidates for harnessing their water — but they do have some. AEA is required to keep an average minimum flow of 15 cfs in Battle Creek to maintain fish habitat. Carey acknowledged the project will likely change the fish habitat some; the stabilized flow is likely to benefit salmon such as kings that spawn mid-stream, but could challenge others. He said Battle Creek was finished on time, but slightly over budget — AEA previously pegged it at about $44 million — but Izzo noted it was completed within the parameters of the original financing plan and small overruns are often a fact of life for that type of work. “On a remote project in the mountains, that’s not exceptional,” Carey said. At about $16 million, the three miles of new road needed to reach the project accounted for approximately 40 percent of the overall cost of the work, which was led by Anchorage-based Orion Marine Contractors. AEA and utility officials noted the recent agreement to purchase of the 39-mile Soldotna-to-Quartz Creek segment of transmission line by the authority from HEA is another small step along with the commissioning of the Battle Creek project to spur more efficient power production and distribution Railbelt-wide. The “S-Q” transmission line was out of service for about four months last year following damage from the Swan Lake fire, which cost ratepayers to the north about $11 million by cutting off access to Bradley Lake and necessitating more gas-fired power. Even when the 115-kilovolt line is operational, it has “line loss,” or the amount of power lost during transmission, of about 40 percent at maximum capacity, according to AEA Engineering Director Kirk Warren. The goal is to eventually upgrade the S-Q line under AEA’s ownership with financial support from the utilities that will benefit. Warren estimated upgrading the S-Q line to 230 kilovolts would cost $800,000 or more per mile based on previous work, but it would also allow the utilities to access more Bradley power without losing nearly as much of it to the ether. “It’s part of the overall continued effort to reduce rates or keep rates down and increase the use of renewables,” Izzo said. Elwood Brehmer can be reached at [email protected]

New Corps requirements may signal end for Pebble

The U.S. Army Corps of Engineers gave the Pebble Partnership a very steep final hill to climb to reach federal approval for its mine plan with a short letter establishing strict requirements to offset the project’s impacts to area watersheds. Corps Alaska District Regulatory Chief David Hobbie wrote in a two-page letter on Monday to Pebble Permitting Vice President James Fueg that district officials have determined the copper and gold project, as proposed, would “cause unavoidable adverse impacts to aquatic resources” resulting in significant degradation of those resources. “Therefore, the District has determined that in-kind compensatory mitigation within the Koktuli River Watershed will be required to compensate for all direct and indirect impacts caused by discharges into aquatic resources at the mine site,” Hobbie’s letter states. He wrote additionally that compensatory mitigation will also be required for direct and indirect impacts from the project’s transportation corridor that includes a port on West Cook Inlet. The stringent requirements laid out by Hobbie are in such sharp contrast to Pebble’s proposed mitigation plan and guidelines issued by the Trump administration in 2018 that both mine opponents and traditional resource development advocates reacted to as if the project is ostensibly dead. Under the requirements, Pebble must compensate for impacts to 2,825 acres of wetlands, 132 acres of open water and 129 miles of streams at the mine site, as well as 460 acres of wetlands, 231 acres of open water and 55 miles of streams impacted by the port and 82-mile access road. The company also must submit the new mitigation plan within 90 days. The Koktuli River drains approximately 290,000 acres and contains more than 36,000 acres of wetlands in its headwaters, according to the final environmental impact statement for the project. Sen. Dan Sullivan, an emphatic critic of the Obama administration’s attempt to preemptively “veto” the mine in 2014 via the Environmental Protection Agency’s Clean Water Act Section 404(c) authority, said in a prepared statement that he has always advocated for a “science-based review” of Pebble “that does not trade one resource for another,” and that is what has happened. The Army Corps of Engineers administers Clean Water Act Section 404 wetlands permits nationwide but the EPA has final say over whether a wetlands fill permit is issued. “I have been clear that given the important aquatic system and world-class fishery resource at stake, Pebble, like all resource development projects in Alaska, has to pass a high bar — a bar that the Trump administration has determined Pebble has not met,” Sullivan said. “I support this conclusion — based on the best available science and a rigorous, fair process — that a federal permit cannot be issued.” Sen. Lisa Murkowski said she supports the decision and agrees that “a permit should not be issued.” “After years of extensive process and scientific study, federal officials have determined the Pebble project, as proposed, does not meet the high bar for large-scale development in Bristol Bay,” she said. Sullivan’s challenger in the November election, independent Senate candidate Al Gross opposes the Pebble project. Corps officials released the final Pebble EIS July 24. A record of decision on the EIS and Pebble’s Clean Water Act wetlands fill permit could be issued 30 days after the EIS was published in the Federal Register. The voluminous final EIS generally maintained the conclusions in the draft EIS and states there would be “no measurable change” in the numbers of salmon returning to the Nushagak and Kvichak rivers or in the long-term health of the commercial fisheries in the region. The Koktuli River is in the upper reaches of the Nushugak watershed. Murkowski and Sullivan previously expressed concern that the Corps’ EIS did not sufficiently analyze the full range of potential impacts of the mine, particularly following highly critical comments from federal and state resource agencies about the scope of the review. Bristol Bay Native Corp. CEO Jason Metrokin said in an interview that while the mitigation requirements aren’t an official death knell for the project, he was happy to learn that, from his perspective, the Army Corps has finally concluded what the BBNC, and a majority of Alaskans have; that Pebble’s plan is insufficient. “They can’t produce a quality mitigation plan in three months if they haven’t been able to do so for years,” Metrokin said, noting Pebble has not backed up the claim that its smaller 20-year mine plan is economic. BBNC has long opposed the project and has refused to allow Pebble access to its land for development. Pebble CEO Tom Collier downplayed the significance of the requirements, saying the letter is a normal part of the permitting process and the company is well on its way to developing a mitigation plan to meet them in a prepared statement. The company has had teams totaling about 25 people in the field this summer and a large part of their work has been mapping wetlands in the region over about the past month, according to Collier. Pebble’s new mitigation plan will likely focus on preserving an area multiple times larger than the aquatic areas impacted by the project, which should meet the requirements based on discussions with Corps officials, Collier said. “Anyone suggesting a different opinion — i.e. that Pebble will not be able to comply with the letter or that such compliance will significantly delay issuing a (record of decision) — must be ignorant of the extensive preparation we have undertaken in order to meet the requirements of the letter,” he said. Pebble spokesman Mike Heatwole wrote in an email to follow-up questions that Collier’s statement provides the best information the company has on the work right now and more details will be made public when they are available. Shares in Pebble’s parent company, Vancouver-based Northern Dynasty Minerals Ltd., closed Monday trading on the New York Stock Exchange at 90 cents per share, down 38 percent on the day after the letter was made public. Pebble’s initial compensatory mitigation plan released in January relied on a collection of smaller — and likely less costly — mitigation efforts outside of the Koktuli watershed. The company first planned to replace culverts in the Dillingham area to restore salmon access to about nine miles of spawning and rearing habitat; improve water treatment facilities at villages near the mine site; and periodically clean debris from seven miles of beach around the Cook Inlet port site. All of that potential work is outside of the remote and undeveloped Koktuli watershed. Pebble’s permitting executive Fueg acknowledged when the draft mitigation plan was published that the lack of development in the region beyond the immediate communities made it difficult for the company to identify opportunities to restore damaged wetlands or preserve areas threatened by other development — the more traditional means of wetlands mitigation now being demanded by the Corps. A Corps Alaska District spokesman did not immediately respond to additional questions for this story. Former EPA Administrator Scott Pruitt and Assistant Army Civil Works Secretary R.D. James signed a joint memo in June 2018 that updated guidance from the early 1990s as to how the agencies would handle wetlands mitigation specifically in Alaska. The revised guidance states that Alaska’s situation — more than half of the state is classified as wetlands with relatively little development — means specific, focused compensatory mitigation requirements traditionally used in the Lower 48 often aren’t realistic in Alaska. When avoiding or compensating for development impacts to wetlands is not practicable, minimizing wetlands impacts will be the main means of complying with Clean Water Act requirements, according to the 2018 memo. It also explains that compensatory mitigation over larger watershed scales could be appropriate for Alaska given that options to offset wetlands losses on a more localized scale are often limited. The guidance does not lay out quantitative thresholds for determining major versus minor impacts — that is decided on a case-by-case basis — but it outlines what should be considered in making that determination, an EPA spokeswoman said at the time. Elwood Brehmer can be reached at [email protected]

Greens Creek silver output up; Constantine investigates gold

The owners of a Southeast silver mine again reported production growth last spring despite the pandemic and an explorer in the region believes it is honing in on the source of historic placer gold deposits. Hecla Mining Co. produced 381,000 more ounces of silver at the Greens Creek underground mine near Juneau in the second quarter from a year ago — a 17 percent increase to 2.7 million ounces. For the year, silver production at Greens Creek is up more than 920,000 ounces, or nearly 20 percent, from the first half of 2019 to 5.5 million ounces total, according to the company’s quarterly earnings and operational report. Gold production at Greens Creek was down 8 percent, however, to 25,300 ounces in the first half of the year. The improved production at Greens Creek helped Idaho-based Hecla increase its overall sales revenue by 24 percent to $166.4 million in the second quarter. Hecla’s Alaska mine accounted for 51 percent of the company’s revenue in the quarter. The company also has precious metal mines in the Lower 48, Canada and Mexico. While Hecla still absorbed a net loss of $14 million despite the production growth, CEO Phillips Baker emphasized that the company produces roughly a third of all the silver mined in the U.S. and the second quarter production totals were the best since 2016. “I am extremely proud of our workforce’s adaptability and commitment in this challenging time, which positions Hecla well to improve cash flow generation in this higher silver and gold price environment,” Baker said. Hecla generated $27 million in free cash flow during the quarter. The company has leased a hotel in Juneau where incoming workers are quarantined for seven days before traveling to the Admiralty Island mine for three weeks of work, according to a monthly investor presentation. With the long-term upward trajectory of production at Greens Creek — Hecla has increased annual ore throughput at the mine 15 percent since purchasing it in 2008 — the company also increased silver reserves by 22 percent at the property last year and expects to operate Greens Creek with strong production into the 2030s, according to the presentation. Constantine gold To the north of Greens Creek on the mainland, Constantine Metals reported Aug. 13 that the company had identified prospects with “high-grade gold sampling results” at its Porcupine Creek property north of Haines. The prospects, dubbed Golden Eagle and McKinley Creek Falls, are located up a valley from historical placer operations. Historical mineral sampling by the U.S. Bureau of Mines produced samples with mineralization of up to 531 grams per ton of gold, according to Constantine. Company President Garfield MacVeigh said the high-grade occurrences have received little investigation for their potential, particularly given geological similarities with other known gold deposits in the region. “We look forward to evaluating these previously untested areas of prospective high-grade mineralization,” MacVeigh said. Earlier this year Constantine scaled back the summer exploration program at its nearby Palmer copper prospect from initial plans to limit the risk of spreading COVID-19. The McKinley Creek area, which is 100 percent owned by Constantine, is about five miles east of the much more advanced Palmer deposit. The company spun off the rest of its gold-focused program into HighGold Mining Inc. last year. HighGold is conducting 15,000-meter drilling program at the Johnson Tract prospect within Lake Clark National Park and Preserve. Elwood Brehmer can be reached at [email protected]

New CEO: Safety, customer service top priorities for restarting Ravn

The new leadership team at Ravn Alaska is hopeful scheduled service to many of the hub communities the grounded airline used to serve can resume in mid-September with a renewed focus on customer service. Ravn Alaska CEO Rob McKinney said in an Aug. 18 interview that there is no set return-to-service date because the approximately $9.5 million bankruptcy asset sale closed Aug. 8, meaning the group could not dive into what it had earlier agreed to purchase until then. Restarting the Part 121 business — scheduled service with large aircraft — will require mechanical inspections that became due for several aircraft over the five-month period after it stopped flying; it was by far the largest passenger airline based in Alaska and Ravn’s people will be taking refresher courses before getting back in the air as well, according to McKinney. “Virtually every flight crew is being sent back to training, so everyone’s going to be going to flight safety. All of the flight attendants are going to train from scratch just because of the length of time (since Ravn suspended operations),” McKinney said. “We just want to make sure we err on the side of being conservative.” Ravn Air Group Inc. filed for Chapter 11 protection in Delaware Federal Bankruptcy Court April 5, three days after grounding its fleet of 72 regional and commuter aircraft. Airline leaders said at the time they were forced to shutter following a roughly 90 percent drop in passenger demand at the outset of the coronavirus pandemic. Before closing, Ravn employed approximately 1,300 people and served 115 communities across the state. McKinney said Ravn will need about 400 employees when it starts flying. The Anchorage-based carrier is actively recruiting both former and new employees on its website. Having purchased the Federal Aviation Administration Part 121 flight certificates for both Ravn and Penair, which was purchased out of bankruptcy by Ravn in 2018, McKinney’s group also acquired the associated Ravn-branded aircraft: nine DeHavilland Dash-8s. He said service will be added over several weeks after it initially starts and the plan is to eventually operate in all of the hub communities Ravn previously served with the exception of Kodiak and Kotzebue — also served by Alaska Airlines — at least for the first year. “We’re not going to be able to roll out 14 cities on Day 1, but by the end of week three or so we hope to be over 10 cities that we’re service and be back to probably all 16 cities within six weeks or so,” McKinney said. Ravn won’t be refunding previously booked tickets for unfulfilled flights but passengers can re-book the reservations for future flights as they become available. Unalaska and St. Paul are the “top two” communities on Ravn’s list to serve first primarily because their remote locations mean limited transportation options, he added. Last October, a Penair Saab 2000 aircraft operated by Ravn Air Group skidded off the end of the runway at Unalaska, killing one passenger. Ravn immediately suspended service to Unalaska, which left the major fishing hub without scheduled flight service. The company resumed service after nearly a month on Nov. 14 with the smaller Dash-8 aircraft after experts’ preliminary conclusions that the Saab 2000 overshot the 4,500-foot runway while attempting to land in a swirling tailwind. The pilot also had relatively little experience in the Saab 2000, according to an initial National Transportation Safety Board report on the crash. McKinney noted that Ravn will be flying its Dash-8s to Unalaska when it resumes service. McKinney was part of the group that started Float (Fly Over All Traffic) Shuttle, a Southern California air taxi largely focused on serving Los Angeles and San Diego-area commuters. When state and local coronavirus travel restrictions forced Float to suspend operations, the group began searching for opportunities amidst the most severe downturn in the history of the passenger airline industry and quickly focused its attention on Ravn because of prior time in Alaska, he said. Both McKinney and new Ravn Chief Commercial Officer Dan Kitchens had worked in Alaska aviation before; McKinney for a Southeast carrier and Kitchens for multiple operators in the state, including Ravn. “As soon as we saw in April that they filed for bankruptcy we went to pursue this because we just knew from our experience what an opportunity it was. We knew how much the communities depended on the service to connect them to the city and medical and shopping as well as the rest of the world. We felt that of every airline in the country, Ravn had the best opportunity because so much of the business is freight and people really have to travel regardless of whatever happens to be going on in the world,” he said. While in the process of permanently relocating to Anchorage, McKinney, who has flown extensively as a commuter pilot and managed flight operations for several carriers, offered a common refrain as to why he has come to favor his work in the city over his prior time in Alaska: “Southeast…it rains a lot,” he said. Getting enough people to fly with Ravn again will also require repairing an image that is damaged in many communities. Increasingly unreliable service from Ravn often accompanied with multi-day waits following non-weather-related cancellations in the year-and-a-half after purchasing Penair pushed residents in Bristol Bay-area communities to petition for year-round service from Alaska Airlines, which the major carrier started this summer. Ravn said in statements issued last year that airline leaders reduced scheduled flights in an attempt to right-size the Bristol Bay market specifically following the acquisition of Penair, a former competitor, which at times resulted in more demand than available seats. McKinney acknowledged that a question from the Journal regarding the perception of Ravn statewide was one of many he has received in the same vein. However, he doesn’t believe it would be a worthy investment to rebrand the airline. “I think that’s just needlessly spending money painting airplanes and changing out signs when really people know it’s the same company. They’re going to see a lot of maybe the same employees, but I tell you what — when you come in here with a new message to the employees that customer service is the most important thing and — and I think that if we’re transparent and we publish our completion stats and our on-time performance, I think over time people will see that it’s a new Ravn and we really do care about the customers that we serve,” McKinney said. “It’s not just about doing what hits the bottom the best, but actually making sure that we’re taking care of our customers as best we possibly can and that will pay us dividends in the long-run.” Ravn’s new leaders conducted detailed modeling to determine what business outcomes will be necessary to be successful, but the airline will also be aided greatly by its ownership structure of one, according to McKinney. California entrepreneur Josh Jones is the airlines’ sole investor and he will be patient as Ravn rebuilds its operations, McKinney said. “(Jones) is not a private equity guy. He’s done well for himself. He’s been an incubator of other businesses and started and sold several businesses of his own but just a really, really sharp guy and he saw an opportunity here and saw the vision that we have, so yeah, we have to keep one guy happy, which makes life a lot easier,” McKinney said, adding that Jones wants Ravn to offer free wi-fi at all of its facilities. “He’s very, very customer service driven and believes strongly that if we take care of our customers they will take care of us.” Ravn’s prior majority owners were the New York-based investment firms W Capital Partners and J. F. Lehman and Co., according to bankruptcy filings. Attempts to reach Jones in time for this story were unsuccessful. “We really are a different Ravn; same planes and the same paint but we have such a different attitude towards the people that we serve,” McKinney said. “We truly care about the communities and we want to be a part of their lives that they can depend on.” Elwood Brehmer can be reached at [email protected]

Final Willow review out; production estimate grows again

Oil companies worldwide are struggling to adjust to the immediate pandemic-induced market reset but ConocoPhillips took a step towards the long-term with the Aug. 13 release of the final environmental review of its $4 billion-plus Willow project on the North Slope. Bureau of Land Management Alaska officials backed the company’s amended design for the largest oil development to date in the National Petroleum Reserve-Alaska in the final environmental impact statement for the Willow Master Development Plan. That plan calls for the eventual construction of five drill sites stretching north-south over approximately 20 miles in the northeast corner of the federal petroleum reserve. ConocoPhillips also has two other nearby developments in the NPR-A but the Willow project would be several times larger than the single-drill site Greater Mooses Tooth-1 and 2 projects extending from the Alpine field. ConocoPhillips Alaska leaders have continually increased the expectation for peak oil production from Willow since announcing its discovery in January 2017, from approximately 100,000 barrels per day initially to upwards of 160,000 barrels per day now, according to the EIS. It is being designed with a processing capacity of up to 200,000 barrels per day. Overall, the project is expected to produce about 590 million barrels over 30 years. ConocoPhillips Alaska spokeswoman Natalie Lowman wrote via email that first oil from Willow is planned for the winter of 2025-26. She noted the company had previously disclosed that peak production rates would likely be in excess of 100,000 barrels per day, but the final rates and overall recovery volumes may differ from what is described in the EIS. Company leaders in Alaska have said it will cost roughly $4 billion to achieve first oil at Willow and full field development will be upwards of $6 billion. BLM Alaska Director Chad Padgett said Willow will provide access to valuable resources as well as jobs and revenue for the state; the members of Alaska’s congressional delegation lauded the regulatory progress for the major project in formal statements. “With this important review process completed, we are one step closer to bringing this massive North Slope development to fruition — including hundreds of good-paying jobs for hard-working Alaskans, thousands of barrels a day in TAPS throughput, and billions of dollars of economic activity — without negatively impacting the environment Alaskans cherish,” said Sen. Dan Sullivan. Conservation groups such as the Alaska Wilderness League, however, insist the review downplays the impact the development would have on waterfowl and caribou in the Teshekpuk Lake Special Area, which is currently off-limits to industry and primarily designated to protect breeding and calving habitat for wildlife also harvested by subsistence hunters. “Since the Trump administration took office in 2017, it has been laser-focused on handing some of the largest expanses of wild lands left in North America over to the extraction industries. The rubber-stamping of ConocoPhillips’ Willow proposal is just the latest example,” Alaska Wilderness League Conservation Director Kristen Miller said, also alleging BLM “fast-tracked” the review in the midst of the coronavirus pandemic despite calls to suspend the process until stakeholders could again focus on analyzing a supplemental portion of the EIS. Arctic Slope Regional Corp. and North Slope Native village corporation Kuukpik requested an extension to the spring comment period for the supplemental EIS. Both are significant landowners in the region. BLM officials maintained the original 45-day comment period and held virtual public meetings on the project in early May. Willow is primarily targeting the shallow, conventional Nanushuk formation that has been the source of several North Slope oil discoveries over the past five years, including the $5 billion Pikka project being advanced by Oil Search. It will be the farthest west oilfield on the North Slope if it is developed. ConocoPhillips proposed connecting Willow to GMT-2 with approximately seven miles of gravel road as well as linking the drill sites with year-round roads; BLM officials preferred that plan over options leaving either the drill sites without year-round road access or limiting surface access to Willow to winter ice roads. The company’s plan calls for 37 miles of new roads, seven bridges and one airstrip. The alternative plan to leave the drill sites disconnected from the processing and operations facilities includes two airstrips. Former Assistant Interior Secretary and state Natural Resources Commissioner Joe Balash, who led the Trump administration’s work on numerous Alaska resource development priorities, said recently that subsistence hunters often complain that aircraft activity necessitated by roadless oil projects affects their hunts more than permanent infrastructure. North Slope oilfield roads are also generally open to local use and ConocoPhillips will construct boat ramps at Fish and Judy creeks for subsistence access as part of its work at Willow. The company initially proposed building a temporary island north of the project near Atigaru Point for offloading facility modules barged to the Slope in summer; however, the plan was scrapped after BLM officials heard from residents that construction of the island could disrupt coastal and marine hunts, which spurred the supplemental draft EIS published earlier this year. Instead, ConocoPhillips will build 80 miles of ice roads and an ice bridge across the Colville River to reach the Willow development area. Construction will require 495 miles of ice roads in total over nine seasons, according to the EIS. Elwood Brehmer can be reached at [email protected]

Votech schools to open with no online option for hands-on learning

Classes will go on at Alaska’s colleges and training centers where the coursework regularly requires working with one’s hands but like nearly everything lately the first day of school will be far from normal. Kenai Peninsula College Director Gary Turner said many lessons taught at the University of Alaska Anchorage-affiliated school that specializes in industry training, process technology and other field-oriented areas of study were already being done online but a large amount of work in those types of course cannot be done remotely. “It’s more challenging with the technical, vocational type of classes but the vast majority of our process technology is delivered online and these classes have been for years,” Turner said, adding that most of KPC’s other courses are a hybrid of online and face-to-face instruction. “Industry and learning objectives of mostly the industrial process instrumentation courses — industry demands that these students, graduates, get hands on training with the stuff, turning the dials and gauges and working with our big simulator in our career tech center, so those are things that we still have to do.” Still, he said the number of students receiving any face-to-face instruction this fall will be down significantly from more than 1,300 last year to just more 330 when classes start Aug. 24. KPC, which offers classes in Homer and Seward in addition to its main Soldotna campus, is increasing the number of lab sessions and in-person classes this year to reduce the number of students in a room at any time for those who will be going to class. Rooms will be limited to 25 percent of normal capacity and students will be spaced at least six feet apart, Turner said. Students’ digital key cards used for access to campus facilities will be programmed to turn on 20 minutes before class starts and shut off 20 minutes after a class is over; common areas will be closes as well. “Students will come to class, be taught and then need to go,” Turner said, also noting that is a departure from how things normally operate. “Students, regardless of age, they like to talk a lot and sit down and study together and do study groups. That’s over unless they want to go do that on their own at home, but I hope they don’t.” KPC is following the guidance from the UAA chancellor’s office on more general coronavirus procedures and precautions, he added. Masks will be mandatory in all KPC buildings as well, Turner said and there will be none of the traditional public events at KPC this fall, either. “That’s sad because our colleges are such important parts of our communities; so that’s tough to swallow,” he said. The uncertainties and challenges surrounding the impending school year have largely increased ongoing enrollment declines across the university system and Turner said KPC’s student head count is down 24 percent from a year ago and the number of course hours students are taking is down 27 percent despite the fact that recessions often result in more people seeking vocational training. He believes many potential students are waiting to enroll — some may be holding out to see if they will have to home school their own kids or not while others might be waiting to see what the ever-changing coronavirus-related requirements and procedures are closer to the start of the semester. “Within a week of the (Aug. 24) start date I expect we’ll see enrollment increase. It seems to make sense but with covid nothing seems to make sense,” Turner said. The enrollment situation is leading KPC officials to budget for a $2 million deficit on what was a roughly $16 million budget in 2019. Turner said he is trying to fill most of the gap by not refilling positions when they become vacant. On the other side of the Kenai Peninsula, in Seward, AVTEC Director Cathy LeCompte said the state’s vocational and technical education school will be operating at half of normal enrollment for its long-term programs but not for lack of demand. There would still be waiting lists for several AVTEC programs if the school was running at full capacity, she said. What demand there will be for AVTEC’s popular maritime training center and bridge simulator is less clear, according to LeCompte, as it is largely used by industry for short training sessions. In a normal year, up to 1,100 people will go through the maritime center, she said. AVTEC officials are “cautiously optimistic” they will be able to bring students back on campus in the coming weeks, and whether or not that happens will be impacted by the virus case count in Seward, LeCompte added. “We have some programs that we’re able to do online, but for the most part our courses are pretty hands-on intensive,” she said. If students are allowed back, they will be divided into “cohorts” based on their respective areas of study and will live in an area of dorm housing away from other students to limit interactions as much as possible, according to LeCompte. AVTEC’s dorms will be limited to half capacity and, as at most campuses, common areas will be closed as well. “Our gymnasium is currently a hospital — a makeshift hospital for the City of Seward and Providence Hospital — so there’s no gymnasium available and no activities taking place,” she said. LeCompte is featured in a short video on AVTEC’s homepage detailing other virus precautions being taken in which she makes it clear masks will be required across the school. “As a state agency, it’s nice to have the governor’s health team on our side when it comes to face coverings,” she said. ^ Elwood Brehmer can be reached at [email protected]

AIDEA-Oil Search MOU eyes Pikka project

Officials at Alaska’s state development bank are in early talks to fund basic infrastructure development at the largest North Slope oil project in decades. The Alaska Industrial Development and Export Authority board of directors approved a preliminary memorandum of understanding with Oil Search Alaska LLC on Aug. 5 to investigate the viability of the authority financing road and bridge construction for the Pikka Unit project the company is advancing on the central North Slope. Oil Search Vice President of External Affairs Joe Balash said the Papua New Guinea-based producer envisions the arrangement being similar to that for the 52-mile DeLong Mountain Transportation System for the Red Dog zinc mine in Northwest Alaska, in which AIDEA took ownership of the infrastructure, sold bonds to fund construction and recouped the investment through tolls paid by the mining company. The current design for the $6.5 billion Pikka project entails 26 miles of gravel roads, approximately 70 acres of gravel pads, and more than 120 miles of pipelines. Balash said Oil Search has completed 11 miles of roads extending from the Kuparuk River field and several pads so far, with much of that work being done last winter. In the case of Pikka, AIDEA would issue the debt to purchase the roads and lease them back to Oil Search, according to Balash. He said the arrangement could help the company capture the advantage of lower-cost bond financing available through the state-owned authority. “It’s a concept that at least in the 50,000-foot view looks workable but we need to go down a considerable bit in elevation,” Balash said of the plan. The MOU calls for Oil Search to reimburse AIDEA for up to $225,000 spent from the authority’s Revolving Fund to analyze the details of the proposal. Balash worked to advance the federal permitting process for the Ambler mining district access project — another industrial-use toll road concept AIDEA is proposing to reach remote Interior Alaska mineral deposits — while an assistant Interior Department secretary in the Trump administration. He left Interior last August. At the start of 2020, Oil Search and Spanish major Repsol, its minority partner in Pikka, planned to make an final investment decision on the project by the end of the year, but the collapse of oil markets brought on by the coronavirus pandemic and a Saudi-Russian price war early in the year have forced the companies to defer sanctioning Pikka, which is expected to produce up to 135,000 barrels of oil per day at its peak, according to Balash. Last October, Oil Search filed a Pikka development plan with the Division of Oil and Gas that called for pushing the first oil date from the field up a year, to late 2022 by processing oil from the first completed pad through Kuparuk facilities while the rest of the Pikka facilities were built. Balash said Oil Search still expects to start production in 2025, even though the rest of the timeline is unclear at this point. Oil Search started the year with a “mid-$40s” per barrel long-term breakeven price for oil from Pikka based on the design at the time, he said, and the companies are working to bring that cost down to reflect the new market. Alaska North Slope oil prices have stabilized in the low-$40s per barrel of late but when the price will increase further will largely depend on the lasting economic effects of the pandemic. “Exactly what our schedule is going to look like and what our profile’s going to look like — we’re working closely with Repsol and hope to have an update later this year,” Balash told the AIDEA board. He emphasized that the Pikka project, which many industry advocates have pointed to as the genesis of a North Slope “renaissance,” could provide benefits beyond the companies. “This is not just about the Pikka development,” Balash said. “We believe we have a lot to offer the state of Alaska for a very long time —that will be a substantial and material impact on the throughput of (the Trans-Alaska Pipeline System) for a very long time.” The MOU expires in August 2021. Power line purchase Just prior to the Aug. 5 AIDEA meeting, the Alaska Energy Authority board — the same seven individuals that oversee AIDEA — approved a $15.3 million plan for the authority to purchase a 39-mile stretch of electric transmission lines damaged by the 2019 Swan Lake fire with the help of the Railbelt utilities. The complex arrangement calls for AIDEA to sell bonds to allow AEA to purchase the Sterling-to-Quartz Creek segment of transmission lines from Homer Electric Associationthat connects several utilities to the Bradley Lake hydro project. The Sterling-to-Quartz Creek segment was taken out of service in late August last year as the Swan Lake fire spread through the area and didn’t transmit power again until mid-December, for a total outage of 123 days. According to AEA, the fire damaged about one-third of the 127 support structures along the S-Q line. Homer Electric repaired five structures late last fall to put the line back into service, but another 38 still need to be replaced. AEA Executive Director Curtis Thayer said that while the authority will own the line segment, the agreement calls for the six Railbelt utilities — including HEA — to pay the debt service on the bonds relative to the proportion of low-cost Bradley Lake power they receive. Railbelt consumers will benefit from the cost sharing, according to Thayer. He first said AEA was in talks with HEA to purchase the line in late January. AEA also owns the Bradley Lake project, which it is in the process of expanding . The Sterling-to-Quartz line is owned by HEA but it largely runs through the Kenai Wildlife Refuge and does not serve HEA customers; rather, it connects to the transmission lines owned by Anchorage’s Chugach Electric Association, which start at the Quartz Creek Substation. “By having this purchase you bring the resources of the six utilities to manage and help oversee” the transmission line, he said, adding that upgrading the line could eliminate up to 40 percent line loss as power is transmitted north from Bradley Lake. “There’s both a short-term and long-term advantage to ownership of that line.” The $15.3 million includes $13.3 million to buy the transmission line and another $2 million for repairs, according to AEA documents. The transaction has been approved by the Bradley Power Management Committee — which includes the six utility managers — but must also be approved by the utility boards, Thayer said. Officials with several of the other Railbelt utilities expressed frustration with HEA over what they felt was a slow response to fix the line in the weeks after the fire subsided. HEA leaders said at the time that they were being cautious prevent exposing line crews to lingering ash pits or falling trees and also noted that strong fall windstorms storms on the Kenai Peninsula took manpower away from the Sterling-to-Quartz work. According to AEA, losing access to Bradley hydropower collectively cost Railbelt consumers an additional $13.6 million and resulted in another $2.2 million worth of water being spilled over the Bradley dam. Bradley Lake supplies up to 10 percent of the electricity needed by the Railbelt utilities. At 4 cents per kilowatt-hour, the hydroelectric dam can produce power for about half the current cost of natural gas-fired generation. “I don’t think we would be here if that fire had not occurred,” Thayer told the AEA board. Elwood Brehmer can be reached at [email protected]

AEDC: Pandemic could wipe out 20 years of growth

Anchorage could be facing a lost generation of economic growth when the ongoing impact of the pandemic is added to the lingering effects of the recession from which Alaska had just emerged. Anchorage Economic Development Corp. CEO Bill Popp said the city is likely to lose more than 11,100 jobs this year during a virtual presentation of the organization’s annual three-year economic outlook for Anchorage on Aug. 5. Those losses would take the city back to employment levels last seen prior to 2000, when employers offered about 140,00 jobs in Anchorage, according to AEDC and state Labor Department figures. Anchorage was already at the tail end of a four-year recession — in which more than 6,000 jobs were lost — that Alaska overall had began to pull out of. Popp said in January that AEDC leaders expected Anchorage to add about 100 jobs this year and officially put an end to the recession. However, the severity of the pandemic-induced recession that suddenly took hold in March could result in the “destruction of aspects of our economy” Popp said in an interview. He urged lawmakers at every level to work on finding ways to help keep businesses afloat and prevent large-scale foreclosures or evictions. “Time is the enemy,” Popp said. Unsurprisingly, AEDC officials expect the leisure and hospitality industry to be hit the hardest with the loss of more than 5,000 jobs, or 30 percent of the sector in the city. No other industry is expected to lose nearly as many jobs; retail is expected to contract by about 1,000 jobs, or 7 percent, the next largest loss overall, according to AEDC’s forecast. Passenger traffic through Ted Stevens Anchorage International Airport — a key component of the leisure and tourism sector — is expected to drop by 60 percent this year to about 2.3 million passengers with steady growth in the following years to 5 million passengers by 2023. Air cargo volumes at the airport, which is one of the busiest cargo hubs on Earth, is expected to grow slightly this year and remain in the 3 million tons per year range going forward, according to the AEDC forecast. The oil and gas industry, hit hard by very low market prices that briefly went negative in April, is not expected to show major employment losses again in Anchorage offices that were previously scaled back during the 2015-17 price downturn. AEDC is predicting the industry will lose about 300 jobs this year from approximately 2,500 before adding those positions back in 2021. In June, Anchorage had an average unemployment rate of 12 percent, down slightly from May but still far beyond the 5 to 6 percent range where it had been for many months prior. Statewide, unemployment averaged 12.4 percent in June, despite the fact that the start of commercial salmon fishing statewide helped add approximately 18,000 jobs during the month. Still, Alaska was down 37,700 jobs from a year ago, with more than 18,000 of those losses coming from Anchorage and the Matanuska-Susitna Borough, according to Labor Department data. Popp said AEDC expects the Anchorage economy to begin recovering by next year — but the re-growth is not likely to be sudden — with approximately 3,300 new jobs in 2021. By 2023, Anchorage will likely have regained nearly 7,000 jobs, according to AEDC. ^ Elwood Brehmer can be reached at [email protected]

Fund ends fiscal year with positive return, but draws reduce value

Alaska Permanent Fund managers navigated the worst market downturn in more than a decade to a small positive return by the June 30 end of the 2020 state fiscal year. The $66 billion Permanent Fund finished the 2020 fiscal year up 2 percent, a return that beat a passive investment benchmark but fell short of the Alaska Permanent Fund Corp. Boart of Trustees’ strategic return goal for the year of matching inflation plus 5 percent, or 5.65 percent, according to the year-end financial and performance reports published by the corporation. The fund had a return of 5.38 percent halfway through the fiscal year on Dec. 31. The tempered return, combined with the state’s 5.25 percent annual draw of $2.9 billion from the fund’s Earnings Reserve Account resulted in net decline in value for the seventh time in the 43-year history of the fund. Including 2020, it has a five-year return average of 6.44 percent. The Permanent Fund ended the 2020 fiscal year with a value of $64.7 billion, down from $66.3 billion a year ago. The fund has since grown to hold an unaudited value of $66.9 after markets closed Aug. 7, according to APFC figures. Alaska Permanent Fund Corp. CEO Angela Rodell said officials for the state-owned corporation are happy the fund ended the year with a positive return following the coronavirus-induced sell-off of late winter that at least temporarily cratered financial markets worldwide. “I think it highlights just how important it is to maintain discipline in volatile times. We held on to our core convictions and never lost sight of our long-term mandate,” Rodell said of the 2020 results in a formal statement. “In 2018, Senate Bill 26 was made law, enacting the POMV (percent of market value) structure. The certainty provided by knowing how much we need for short-term liabilities, while still executing our long-term investment strategy, has never been more valuable.” The Dow Jones Industrial Average peaked at 29,551 points Feb. 12 but lost nearly 40 percent of its value by late March before the rebounding on traders’ belief that the $3 trillion CARES Act aid package would protect against a total economic collapse as businesses were closed nationwide to limit the spread of COVID-19. The Dow has nearly recovered from the month of losses in the months since. It closed Aug. 7 trading at 27,433 points. Fund managers moved more than $2 billion into equities as markets bottomed out to take advantage of the anticipated recovery, according to Chief Investment Officer Marcus Frampton. “This orientation of being a long-term focused investor in the midst of the sea of short-term traders has once again accrued to the benefit of the fund’s stakeholders now that markets have subsequently regained their footing,” Frampton said. Stocks traded on public markets account for nearly 40 percent of the fund’s investments. Those public equity investments netted a 21 percent return in the final three months of the year, according to the monthly performance report. The $14.3 billion fixed income portfolio performed the best among the fund’s investment types with a 4.19 percent return for the year. APFC officials also noted that while the Earnings Reserve Account held $12.8 billion on July 1, nearly $3.1 billion of that is committed to the 2021 POMV draw for dividends and government services and another $3 billion is committed for 2022. That means about $5.3 billion in the Earnings Reserve is expected to be available for future appropriations; about $1.3 billion in the account was unrealized gains, according to the APFC. Elwood Brehmer can be reached at [email protected]

New owner: Furie going ‘back to basics’ of natural gas

It’s “back to basics” for a Cook Inlet gas producer pulled out of bankruptcy earlier this summer. Longtime Alaska oil and gas industry player John Hendrix officially took over Furie Operating Alaska LLC July 1, which all but wrapped up a complex Chapter 11 bankruptcy process that lasted nearly 11 months. Just more than a month in, Hendrix, a petroleum engineer, said he and other company leaders are focused on mining and analyzing data from Furie’s four wells and the rest of the company’s operation to better understand how production can be improved and where savings can be found. “We need to know our people; we need to know our wells and we need to know our costs,” he said in an interview. Originally from Homer, Hendrix was general manager of Apache Corp.’s operations in Cook Inlet prior to becoming former Gov. Bill Walker’s oil and gas policy adviser in 2016. The formerly Texas-based Furie filed for bankruptcy in August 2019. At the time, the company owed lenders approximately $440 million and was owed about $105 million in refundable tax credits from the State of Alaska, according to the bankruptcy petition. In 2015, Furie installed the Julius R platform over the Kitchen Lights gas field in the central portion of Cook Inlet, which at the time was the first new development platform the Inlet built since the 1980s. However, the company’s financial challenges were significant; Furie absorbed a loss of $58.5 million in 2017 despite netting $25.4 million from gas sales, according to bankruptcy court filings. The situation worsened in 2018 when the company sold $42.8 million of natural gas but took a loss of nearly $152 million. Furie lost $21.4 million in the first quarter of 2019, when a freeze-up in a gas production pipeline kept the company from supplying Homer Electric Association and Enstar Natural Gas Co. with gas for more than a month. Furie officials estimated the value of the company’s assets at between $10 million and $50 million in their initial bankruptcy filings. Furie’s contract with Enstar is currently its only firm supply contract but it has interruptible contracts with HEA and Matanuska Electric Association as well, according to Hendrix. Enstar spokeswoman Lindsay Hobson wrote via email that officials for the Southcentral gas utility look forward to working with Hendrix and continuing their relationship with Furie. “We are particularly optimistic that Mr. Hendrix’s experience in Alaska’s oil and gas industry will enhance Furie’s financial footing and overall gas supply in the Cook Inlet,” Hobson wrote. He initially won a December bankruptcy auction for Furie and with a $15 million bid through his newly formed company Hex Cook Inlet LLC, but attorneys for Furie and its largest lenders — primarily investment firms — claimed Hendrix did not subsequently negotiate the details of the deal in good faith. An attorney for Hex denied the allegations regarding the bankruptcy sale negotiations in February but said they made it difficult for Hex to obtain the financing needed to close the sale. Then in April, the Alaska Industrial Development and Export Authority approved a loan of up to $7.5 million to help fund Hex’s acquisition of Furie; negotiations with another interested buyer for Furie fell apart in April when the coronavirus pandemic sent financial markets and economies worldwide into a tailspin, sources said at the time. That reopened the opportunity for Hendrix, through Hex, to purchase Furie. According to court filings, the final foreclosure sale price was just more than $5 million, but the overall bankruptcy settlement calls for Hex to repay at least $15 million back to Furie creditors for a final cost that will likely be between $20 million and $25 million, according to Hendrix, when the details are resolved. Since taking over Furie, he said the company has overcome a couple small production challenges and consolidated its small contract workforce of about 15 employees from three contractors, two of which were Lower 48 companies, to Anchorage-based Udelhoven Oilfield System Services. Internally, Hendrix said he is working to empower employees in the belief that will help them take pride in Furies operations and strengthen their commitment to running a safe and successful company. “We want to bring ownership all the way down to the guy turning the valve,” he said. Furie previously struggled with its identity at times and shifted its business philosophy multiple times in the few years the company operated in Cook Inlet, he said. Ambitions to drill for oil — ultimately stalled by the lack of state tax credit payments, Furie officials told state regulators in prior years’ development plans — stretched Furie too thin, Hendrix said, but he stressed that won’t be happening again. He noted that the insurance needed to operate as an oil company versus solely a natural gas supplier is a $500,000 per year expense Furie is not benefitting from. Furie, which remains the Kitchen Lights Unit operating entity, is strictly a gas producer and “not an oil company,” Hendrix emphasized. He added that exploring for oil is not in the plans at this point, but could be a long-term prospect if market conditions improve and funding is available. “We’re just very realistic about what our capacity is,” Hendrix said. “You don’t promise the world if you don’t know what you have.” As for near-term changes, Furie is seeking approval from the state Department of Environmental Conservation to discharge its produced water into Cook Inlet instead of piping about 2,000 gallons per day to shore. He described the produced water as being drinkable quality and said the process of sending it to shore resulted in a frozen flow line that halted gas production in 2019 and forced Furie to purchase $17 million of gas to try to meet its supply commitments at the time. “We’re a clean gas company that makes water with our gas and the water is clean,” Hendrix said. Elwood Brehmer can be reached at [email protected]

State keeps tweaking AK CARES as rollout remains slow

Additional small businesses will be eligible for more than $155 million in pandemic aid from the State of Alaska Aug. 6 following wholesale changes to the AK CARES grant program, but whether or not the revisions will result in distribution of funds remains to be seen. Department of Commerce, Community and Economic Development officials announced July 31 that less restrictive eligibility requirements for small businesses to receive the grants would go into effect approximately seven weeks after they were first released. On Aug. 6, AK CARES grants will also be available to Alaska-based businesses with up to 50 full-time employees that have received $5,000 or less from federal government aid programs such as the Economic Injury Disaster Loan, or EIDL, and Paycheck Protection programs run through the Small Business Administration. Approximately 11,600 Alaska small businesses had received nearly $1.3 billion in aid through the Paycheck Protection Program as of July 31, according to the SBA. Commercial fishermen who held a state Commercial Fisheries Entry Commission permit either this year or last and fished in 2019 are also now eligible for the grants of between $5,000 and $100,000, as are 501(c)6 nonprofits, such as local chambers of commerce. The move to broaden eligibility came after legislators and business leaders said they heard from many small business owners who had taken small federal loans or grants this spring that proved insufficient as the economic conditions brought on by the pandemic continue. Dunleavy administration officials said some of the prior restrictions, particularly disqualifying businesses that had taken federal assistance, were put in place to assure that more businesses in need of aid would get it at some level. The AK CARES program was seeded with $290 million of the more than $1.25 billion the state received in federal CARES Act funding this spring and went live June 1. As of Aug. 3 Credit Union 1 — the lender selected to administer the grants — had received 2,542 AK CARES grant applications with requests totaling approximately $114 million; of those, 511 applications totaling about $20 million have been approved, according to the Commerce Department. Another 136 applications have been approved but the applicants have not opened a free account with CU1 needed to receive the funds, according to Commerce spokeswoman Glenn Hoskinson. State and CU1 officials have also acknowledged it has taken too long to process the applications and distribute the funds in legislative hearings on the matter, but Commerce Commissioner Julie Anderson said in a statement that the department’s new online application portal, which will be used instead of CU1’s website going forward, should speed it up from the start. The state’s new AK CARES loan application portal is at www.akcaresonline.org. Anderson said evolving federal guidance the state must adhere to for the money has challenged the process, as have incomplete applications and a lack of responsiveness by applicants to address issues with their documents. “We continue to adapt the program to assist as many businesses as we can, as quickly as we can. I expect to see significant improvements in processing times and the number of businesses we can reach as a result of the program changes,” she said. Senate President Cathy Giessel, R-Anchorage, said the Legislature is not in a position to micro-manage the aid program and needs to support the Dunleavy administration’s efforts to improve the program; but the slow distribution of funds is largely a reflection of how government agencies typically operate. “This is simply a mechanical, bureaucratic process that is just slow,” Geissel said in an interview. “I wish it were more smooth.” Anchorage Economic Development Corp. CEO Bill Popp said the changes are not all he and others were hoping for but they are very important for some business owners that have now faced roughly five months of pandemic impacts — from slower sales to forced closure. “The timing will be good for many businesses with the uptick in cases. Every little bit helps,” Popp said. The Municipality of Anchorage has also appropriated $5 million for a second round of pandemic aid grants targeting tourism and hopsitality businesses, nonprofits and arts and culture organizations in addition to the $1 million dispersed earlier this year, according to the mayor's office spokeswoman Carolyn Hall. A CU1 spokeswoman did not respond to questions in time for this story; however, the Anchorage-based lender sent a long list of the “most commonly missed items” on AK CARES applications or expense schedules to Alaska regional development organization leaders and Commerce officials on July 29. The 20-issue list highlights missing business incorporation documents; requesting amounts outside the $5,000 to $100,000 limits; a lack of tax forms; and illegible handwriting among some of the problems credit union staff are facing when working with applicants. Some applicants and other professional observers have said the first application required significant documentation, similar to what would be needed for a large loan application, rather than prioritizing the speed of the process. Elwood Brehmer can be reached at [email protected]

North Slope production beating prior years after pandemic cuts

North Slope oil production in July was stronger than it has been in years and while it’s a long ways from the “glory days” of Alaska’s oil era, every little bit helps with state budget experts forecasting a nearly $1 billion deficit this year. The final North Slope production average of 477,896 barrels per day last month was the largest for July since producers pumped about 497,300 barrels per day in 2013. About 466,000 barrels per day were produced from North Slope fields in July 2019, according to Revenue Department records. In April, Revenue Department officials forecasted an average production rate of 486,570 barrels of oil per day from the North Slope in the 2021 state fiscal year at a time when the price for Alaska oil was running less than $20 per barrel. The summer months are traditionally when producers conduct maintenance on facilities that can require them to curtail or outright stop production from time to time. Warmer temperatures can also degrade the efficiency of processing facilities engineered to operate in cold Arctic conditions to some degree. The July production boost followed a roughly six-week production curtailment period by ConocoPhillips in response to very low oil prices. The company said it would slow production by about 100,000 barrels per day in late May and resumed normal production operations in July. ConocoPhillips’ Alaska production was ultimately cut by about 40,000 barrels per day in the second quarter, the company reported last month. It also comes at a time when the small Badami oil field east of Prudhoe Bay, which has generally produced 1,000 to 2,000 barrels per day, is offline. Savant Alaska LLC asked the Division of Oil and Gas in late May to approve a production suspension from the field in light of the poor market conditions. Detailed production data for July is not yet available but the company did not produce from the field in June, according to Alaska Oil and Gas Conservation Commission records. The improved production rate could also partially be the result of ConocoPhillips’ move to curtail some of its wells. While it’s difficult to exactly quantify the impact, spokeswoman Natalie Lowman wrote via email that the company’s data and models indicate field production rates will be higher for some time after wells are shut-in. “This is called flush production and it has been seen historically in North Slope wells after production shut-ins,” Lowman wrote. However, production at the iconic Prudhoe field, which was just taken over by Hilcorp on July 1, is also running far better than recent history. Hilcorp produced an average of 287,341 barrels per day last month, more than 30,000 barrels per day greater than July 2019, according to Revenue records. This July was also the best rate for the month at Prudhoe since at least 2012 when the state began combining oil from the large field and its satellites in its production reports. State Oil and Gas analysts generally surmised it could be the result of fewer large maintenance projects scheduled during the operational transition between BP and Hilcorp, but a Hilcorp spokesman did not respond to questions in time for this story. There has been a positive rebound on the price side for Alaska producers and the state budget as well. While it’s just more than one month into the 2021 fiscal year, the average oil price of $43.38 per barrel for Alaska North Slope Crude is 17 percent greater than the state’s official forecast of $37 per barrel for the year. Whether the stronger-than-expected price holds will continue to depend on the severity of the pandemic in the world’s major oil consuming nations, analysts predict. Elwood Brehmer can be reached at [email protected]

ConocoPhillips manages profit amid pandemic

Despite facing negative oil prices and cutting production ConocoPhillips still managed to turn a profit in the first full reporting period of the global coronavirus pandemic. ConocoPhillips executives reported net earnings of $260 million in the second quarter during a Thursday morning investor call. The $260 million overall quarterly profit is a dramatic turnaround from the more than $1.7 billion ConocoPhillips lost in the first quarter when oil prices began to fall worldwide. However, ConocoPhillips lost $141 million on its North Slope operations in the second quarter. It also lost $451 million cumulatively from its Lower 48 and Canadian segments. The North American losses were more than offset by profits turned elsewhere around the globe, according to the earnings report. The company's net adjusted earnings, excluding income from asset sales and other special items, totaled a $994 million loss in the second quarter. The Houston-based global oil and gas producer generated just more than $4 billion in total second quarter revenue, which was down from $4.8 billion in the first three months of the year, but also cuts its expenses by more than 35 percent to less than $4 billion. It ended the quarter with $2.9 billion in cash reserves, down $1 billion from the first quarter and more than $2 billion over the first half of the year, according to the earnings report. CEO Ryan Lance said the result reflects the company’s strong underlying business operations and its commitment to continue work safely through the pandemic that at times has brought whole sectors of the economy to a complete halt, which has been reflected in energy markets worldwide. “We are monitoring the market closely to develop a view around the timing and path of price recovery and to guide our corresponding actions,” Lance said, the company began reversing actions to curtail production as oil prices rose late in the quarter. “Our financial strength, flexibility and portfolio diversity represent a distinct advantage that enables us to navigate and preserve value in this volatile environment.” Prices for oil on domestic markets, including Alaska, fell further in April and stayed there longer than the internationally-recognized benchmark of Brent crude. Prices on the Alaska North Slope and West Texas Intermediate oil markets went negative April 20 but stayed below $20 per barrel for weeks, while Brent prices dipped to $19 per barrel on separate occasions but rebounded afterwards. ConocoPhillips reported a second quarter average realized price of $26.81 per barrel for its Alaska oil compared to $32.32 per barrel for production from Europe and Africa. Alaska North Slope crude traded for $42.46 per barrel on Wednesday, according to the state Revenue Department. The company paid $85 million in state taxes and royalties during quarter, according to spokeswoman Natalie Lowman, who also noted that ConocoPhillips invested $223 million in North Slope capital projects, or about 25 percent of the company’s global capital spend during the period. Since mid-March, ConocoPhillips leaders announced $400 million of cuts to the company’s overall 2020 spending plan in Alaska. In early April the company told its drilling contractor Doyon Drilling that it would be laying down its North Slope drilling rig fleet indefinitely. In May, ConocoPhillips began implementing oil production cuts on the North Slope that were originally planned to peak at about 100,000 barrels per day as part of a broader strategy to curtail up to 460,000 barrels per day companywide. The North Slope cuts were reversed to start July as oil prices pushed back above $40 per barrel. Spread over the entire quarter, the North Slope production reduction averaged to 45,000 barrels per day less being produced in the second quarter — which averaged 153,000 barrels per day — compared to the first. The curtailment averaged a reduction of about 225,000 barrels of oil equivalent per day during the quarter, according to the company.   Elwood Brehmer can be reached at [email protected]

Alaska broadband deal alive as global telecom OneWeb resurrected

A partnership to bring multiple layers of broadband coverage to Alaska next year is back on following the reemergence of a London-based telecom. Representatives for OneWeb and Anchorage-based Pacific Dataport Inc. said the companies’ agreement to deploy and distribute broadband capacity across Alaska and Hawaii remains valid. OneWeb was pulled from bankruptcy earlier this month when the U.K. Department for Business, Energy and Industrial Strategy teamed with investment firm Bharti Global Ltd. to commit more than $1 billion to purchase OneWeb and restart its global satellite project. Pacific Dataport, or PDI, is a subsidiary of Anchorage-based telecom provider Microcom. In January, PDI and OneWeb announced a business partnership that would have the Alaska broadband company distribute capacity across Alaska and Hawaii on OneWeb’s worldwide network of low-earth orbit satellites, which was in-the-works when the economic effects of the coronavirus pandemic began to be felt worldwide. OneWeb filed for Chapter 11 bankruptcy March 27 after several of its large investors backed away, citing financial uncertainty created by the pandemic, which immediately halted work on its worldwide broadband project. OneWeb previously touted large international partners and investors such as fellow telecoms Hughes and Qualcomm as well as Coca Cola and Dutch aerospace giant Airbus. Hughes announced July 27 it has agreed in principle to invest $50 million in OneWeb alongside Bharti and the British government presuming creditors and regulators ultimately approve the purchase. PDI’s partnership targets large customers with the company selling wholesale broadband capacity on OneWeb’s network, which is based on a massive fleet of low-earth orbit, or LEO, satellites. Their plan originally was to begin offering capacity by the end of the year. PDI Government Affairs Director Shawn Williams said the work has been delayed by about four months, but stressed the company’s partnership with OneWeb “stands exactly where it was before the filing. If anything, it’s stronger.” He emphasized that PDI continued work on its own Alaska-focused Aurora System broadband project while OneWeb’s future was uncertain. PDI’s project is specifically targeting Alaska with geosynchronous equatorial orbit, or GEO, satellites that are launched into an orbit thousands of miles above Earth and mirror the planet’s rotation. The Aurora System will be run by Pacific Dataport. Microcom will offer small business and residential retail broadband from the system and Pacific Dataport will handle business-to-business and wholesale broadband contracts. Work on OneWeb’s LEO network was delayed by several months, according to an Alaska representative for the company, but PDI and OneWeb expect to start offering service in the state next year through both the LEO and Aurora projects. The Aurora project will offer 7.5 gigabits per second of broadband capacity through its first satellite early next year and the launch of a second satellite planned for 2022 should provide an additional 70 gigabits of bandwidth. “Everything is back on track,” Williams said. Elwood Brehmer can be reached at [email protected]

AIDEA gets green light for Ambler mining road

In approving a mining access road across the subarctic Interior, the Trump administration has signed off on another decades-long goal of Alaska development proponents. Bureau of Land Management Alaska officials signed a record of decision providing the State of Alaska right-of-way access across federal lands for the 211-mile Ambler mining district access road July 23. The road would open the roughly 75-mile-long mineral belt along the southwest portion of the Brooks Range for development of its copper, zinc, cobalt and precious metals. The area has been explored for decades but its remote location far from the road system has precluded additional work. Congress specifically contemplated the road in the 1980 Alaska National Interest Lands Conservation Act, or ANILCA, which directs the Interior Secretary to permit a right-of-way through Gates of the Arctic National Preserve to access the mining district, per other environmental regulations, when one is applied for. The state Department of Transportation began early reconnaissance work on the road under former Gov. Sean Parnell before the project was transferred to the Alaska Industrial Development and Export Authority, which applied for the right-of-way under Gov. Bill Walker’s administration. “This long-sought development of the road and mining district represents tremendous potential for economic growth, diversification, and job opportunities for Alaskans, along with revenue expected to the state and local governments for decades,” AIDEA board chair Dana Pruhs said in formal statement. Gov. Mike Dunleavy thanked President Donald Trump and Interior Secretary David Bernhardt for working to advance domestic mineral production in a prepared statement. “Nearly 40 years after Congress guaranteed access to the Ambler mining district, today’s decision allows AIDEA to move forward with the planning of a project that could create thousands of Alaskan jobs and a new source of revenue for the benefit of all Alaskans,” Dunleavy said. The members of Alaska’s congressional delegation largely echoed the governor’s sentiment in a joint statement. Trump also opened the Arctic National Wildlife Refuge to oil leasing and potential exploration — another ANILCA-designated opening for development — via a provision in the tax cut bill he signed in December 2017. Local opposition to the Ambler project from villages such as Evansville and Bettles, near where the road would connect to the Dalton Highway, has focused on the belief the road and eventual mine traffic would disrupt the migration of caribou needed for subsistence harvests. AIDEA officials are modeling their plan for an industrial toll road after the 52-mile haul road to the Red Dog zinc mine in Northwest Alaska that the authority financed in the late 1980s. And while AIDEA insists access to the road will be limited to mining activity, some also question whether the state will be able to effectively restrict access or if it will instead lead to increased sport hunting pressure. Numerous conservation groups and others have also questioned the economics of the road. Estimated in 2017 to cost between $280 million and $380 million for basic gravel construction, the final environmental impact statement, or EIS, for the road now pegs the total construction cost at approximately $520 million. They often note AIDEA has not publicly detailed its plan to coordinate road financing and construction with development of the mineral prospects needed to support the road beyond a conceptual plan. While there are more than a dozen early-stage prospects in the Ambler district, only two deposits held by Vancouver-based Trilogy Metals have been explored significantly and only Trilogy’s Arctic copper-zinc-precious metal prospect is close to be ready for permitting. Trilogy said “development of the road will unlock the world-class economic potential of the region by allowing greater access to the district and the potential development of the Arctic project,” in a company statement. Trilogy leaders previously said the company would likely start federal permitting for an open-pit mine at Arctic shortly after the road was approved. However, the junior mining company was forced to defer its 2020 summer field season because of the pandemic and it’s unclear at this point where the project stands. Elwood Brehmer can be reached at [email protected]

Alaska Air Group loses $214M in 2Q; major layoffs likely

Alaska Air Group Inc. absorbed a loss of $214 million in the first full quarter of the coronavirus pandemic and the airline company could be forced to shed up to 7,000 jobs in the coming months if the country’s overall condition does not improve soon, executives said Thursday. Brad Tilden, CEO of the Seattle-based parent to Alaska Airlines and regional carrier Horizon Air said during an earnings call with investors that the $214 million second quarter loss balloons to a $439 million loss when federal CARES Act payroll support funding is removed from the equation and called the numbers “sobering.” “It’s the largest quarterly loss in our history and it’s obviously not a sustainable result,” Tilden said, noting the company’s airlines operated at capacity levels about 75 percent less than last year during the quarter.  Alaska Air Group netted a $262 million profit in the second quarter of 2019. The company lost $232 million in the first quarter before it and other major airlines were able to substantively respond to broad travel restrictions and economic shutdowns imposed by states and local governments in March as the coronavirus gained a hold across the country. Since then, Air Group has managed to reduce its cash burn from approximately $400 million per month at the end of March to about $120 million in June, according to the quarterly report. The company has also more than $3 billion in cash reserves — including about $1 billion in CARES Act funding — since March by pulling on multiple financing levers, according to Chief Financial Officer Shane Tackett. Air Group currently has about $3.7 billion in cash on-hand with the ability to add to that total by leveraging its unencumbered aircraft and other assets to add liquidity, Tackett said. Most recently Alaska Airlines announced July 2 it had secured $1.2 billion in private loans by using 61 of its owned aircraft as collateral. Air Group is also in discussions with the Treasury Department about utilizing its popular mileage plan program as collateral for more than $1 billion in additional loans, Tackett said.  The company has signed a nonbinding letter of interest with Treasury and anticipates government officials will make a final decision on the financing in the next eight weeks, he said. Air Group stock mostly held steady in the hours immediately following the earnings call; it closed trading Thursday at $36.67 per share. The company’s stock traded in the $60 to $70 per share range for months prior to a pandemic-induced slide that started in late February. On the operating side, Alaska and Horizon’s combined revenues totaled just $421 million in the second quarter, an 82 percent drop from a year ago. The airlines collected just more than $2 billion in operating revenue in the first half of the year, compared to approximately $4.1 billion in the first six months of 2019. Alaska flew just 905,000 revenue passengers during the quarter, a drop of more than 90 percent year-over-year. Passenger traffic is down 55 percent so far in 2020. Overall operating expenses were down 63 percent year-over-year to $709 million and company executives continue to stress a strong desire to reach cash breakeven by year’s end but also believe it will take at least two years for the industry to return to 2019 activity levels.  Tilden said Alaska’s low-cost operating structure and strong market control should help the airline rebound as quickly as anyone in the industry but the long-term outlook means major domestic carrier will almost certainly have to shrink significantly before it can begin growing again. Tackett said Alaska might have to shed up to 7,000 of the airline’s roughly 23,000 workers by the fourth quarter but no specific timeline for the layoffs has been announced. Tackett emphasized that executives are searching for ways to limit the scale of involuntary furloughs. The airline has about 1,800 employees across the state of Alaska. More than 30 percent of employees have already taken a voluntary leave of absence that will continue to be offered through the end of the year, he said, and incentives are being offered for frontline workers and pilots to retire or otherwise leave the company. About 300 management positions will be cut on Oct. 1 as well, according to Tackett.  “It goes without saying that these (job cut) decisions have regrettable and meaningful impacts on employees that have invested their careers here,” he said. “While extraordinarily difficult, these actions are necessary given the realities of our business going forward.” Air Group leaders said they want to return the company to its pre-pandemic cost structure even if it means a smaller company for the foreseeable future. “There’s no doubt in our minds that we will have to be very aggressive in restructuring the company to ultimately get back into a growth trajectory and pay down this debt we’ve taken on,” Tackett said further. Air Group held a debt-to capitalization ratio of 51 percent at the end of the quarter, up from 41 percent to start the year.  The executive team has long preached that a conservative balance sheet has helped Alaska Airlines grow steadily over the past decade-plus in the highly volatile industry. Company executives took steep pay cuts in late March, ranging from a 100 percent cut for Tilden, a 50 percent pay reduction for Horizon President Gary Beck and 30 percent cuts for executive and senior vice president level management. Tilden added that the outlook for the airline industry has only again turned dismal in recent weeks as the number of coronavirus cases has again spiked across much of the country since states began reopening in May and June. “We were on a really nice clip through the July 4 weekend in terms of it seemed like every day was a thousand more customers than the previous day, but as the narrative changed and the headlines changed I do think every airline has seen a softness in bookings for future travel and that’s what’s making us nervous for August and September,” Tilden said. “The environment is a lot different than it was 30 days ago.” Elwood Brehmer can be reached at [email protected]

Final Pebble mine EIS maintains early Corps conclusions

U.S. Army Corps of Engineers officials describe the Pebble mine as one that would remove 99 miles of fish habitat at the mine site but poses little risk to the broader area in the project’s final environmental impact statement released July 23. The conclusion mirrors what was written in excerpts of the preliminary final EIS leaked to the public in February. Pebble Partnership CEO Tom Collier said both the preliminary and final documents support the company’s assertion that the mine could operate in harmony with the region’s famed salmon fisheries. “Alaskans have demanded that Pebble, and any Alaska resource development project, meet its high standards before the project could advance. Today, we have passed a critical milestone on that journey,” Collier said in a July 24 statement. He said the EIS process has been thorough and called criticism of the Corps’ work on the project “unfortunate,” insisting that the mine can be a source of year-round jobs in an area without many. The final EIS is the last step in the federal review of the project before Corps officials reach a conclusion on the key record of decision for the project: whether it is an acceptable development plan based on the issues studied in the EIS process. Pebble says it will work through state permitting over the next three years before commencing a four-year construction period for what is now planned as a 20-year mine. Project opponents contend the Corps limited its focus to environmental impacts at the mine site and ignored potential downstream effects, particularly to fisheries, in the draft EIS. They allege the process has been rushed to fit within the timeframe of President Donald Trump’s term in office following an attempt by the Obama administration to preemptively veto the project via Environmental Protection Agency authority. The EPA ultimately has the authority to reject the Corps’ decision on Pebble’s Clean Water Act Section 404 wetlands fill permit application, which triggered the EIS in 2018. Corps officials responded to concerns from the commercial fishing sector that the mine would damage the perceived quality of Bristol Bay salmon and ultimately lower its market value by noting that some of the state’s other fisheries are conducted alongside resource development. “Prices paid in Bristol Bay are nearly always lower than those paid in other Alaska salmon fisheries producing similar products, which reflects the higher transportation expense associated with Bristol Bay’s geographic location and the lack of a strong brand identity, which could boost prices,” the EIS states. “(T)he Cook Inlet salmon fisheries exist in an active oil and gas basin and have developed headwaters of Anchorage and the Matanuska-Susitna areas. The Copper River salmon fishery occurs in a watershed with the remains of the historic Kennecott copper mine and the Trans-Alaska Pipeline System in the headwaters of portions of the fishery. Both fisheries average higher prices per point than the Bristol Bay salmon fishery.” It concludes that there would be “no measurable change” in the numbers of salmon returning to the Nushagak and Kvichak rivers or in the long-term health of the commercial fisheries in the region. At the mine site, approximately 99 miles of fish habitat, part of roughly 2,200 acres of permanently impacted wetlands, would be destroyed in the combined North and South Fork Koktuli drainages, which feed the Nushagak River and support all five species of Pacific salmon. However, the expected losses of wetlands at the mine site represent just six percent of the mapped wetlands in the Koktuli, according to the document. Bristol Bay Native Corp. CEO Jason Metrokin noted the impacts of the current plan represent mining just a small portion of the copper-gold ore body and leaders of Pebble’s parent company, Vancouver-based Northern Dynasty Minerals Ltd., have long pitched additional development to investors. “Put simply, the EIS does nothing to alleviate our concerns about the myriad risks Pebble would pose to Bristol Bay’s watershed, salmon, way of life, and economy,” Metrokin said in a statement. Staff scientists for the Environmental Protection Agency, Interior Department and several state agencies were highly critical of apparent gaps related to wetlands, hydrology and fish habitat data in official comments on the draft EIS. Interior scientists went as far as to suggest the Corps should rewrite the voluminous document in light of the omissions. Corps officials said in response that the agencies’ comments would be considered alongside all others. The final EIS states that gaps in wetlands data identified by other agencies and stakeholders in the draft EIS published in February 2019 have been filled. Corps officials wrote in the EIS they do not believe it is necessary to analyze the likelihood that the mine’s proposed tailings dams could fail — a primary concern of mine opponents — because the Pebble Partnership is designing the dams differently than those that have failed at other mines in recent years and attracted global attention. “Modeling of a catastrophic, very low-probability tailings release was requested by commenters, but deemed inappropriate based on the applicant’s permeable flow-through design for the tailings storage facility (TSF) main embankment, compared with historical water-inundated TSFs that have been subject to large-scale failures,” the EIS states. Corps officials have also said in media briefings that a detailed review of the tailings dams would be done by the state under the Department of Natural Resources Dam Safety Program. DNR officials wrote in March comments on the preliminary final EIS that a full breach of a large and well-designed and operated tailings dam is very unlikely, but asserted that Pebble’s mine waste storage plan high-level and key aspects of it could be impractical. According to the comments, Dam Safety officials believe the Corps’ use of a subject risk analysis process in the preliminary final EIS to study tailings and water management pond dam failure scenarios was “based on a marginally developed, conceptual design, and the exclusion of other risks including the other relatively large, water management dams, does no represent a thorough assessment of risk from potential failure modes and potential impacts.” The pre-final EIS comments from DNR’s Dam Safety Unit also state that Pebble’s plan to move pyritic, or potentially acid-generating, mine tailings from a temporary storage facility into the pit at mine closure “does not appear to be reasonable, practicable or safe” because filling the pit would preclude accessing other parts of the deposit. Additionally, the tailings are likely to consolidate over years in a storage pond, making them more difficult and costly to extract, according to the Dam Safety Unit comments. The EIS highlights Pebble’s plan to drain and thicken the bulk tailings — which has caused critics and regulators to question whether the company can constantly treat the large volume of water — as a design element likely to limit the downstream flow of tailings in the event of a spill. However, Corps officials also acknowledge in the document that the ground waste rock may not settle as expected and it could only be confirmed if the tailings system was working as intended after about two years of operation. Additionally, the corridor identified as the least environmentally damaging route for a road to a port on west Cook Inlet needed to supply the mine remains viable despite the fact that some of the Alaska Native corporations that own land in the corridor are some of Pebble’s staunchest opponents, according to the EIS. In late May, Corps officials announced they had identified a road route along the north shore of Iliamna Lake to a port on the west side Cook Inlet as the least environmentally damaging practicable alternative, or LEDPA, for the expansive mining plan in its environmental impact statement review. Until that point, Pebble had long promoted its plan for a year-round, ice-breaking ferry across the lake to shuttle supplies and metal concentrates to and from the mine site to the north of the lake. Alaska Native village corporation Pedro Bay Corp. owns much of the land along Iliamna’s northeastern corner and along with regional Bristol Bay Native Corp. — which holds the subsurface rights to Pedro Bay Corp. property — has opposed to the project for years and insists Corps officials are discounting the fact that Pebble does not have access to the area. Army Corps Alaska District Regulatory Chief David Hobbie said in a July 20 call with reporters before the release that Pebble officials maintain they believe they can gain access to the area so the agency considers the route viable. The EIS states the Corps has determined that “even though some alternatives may not be available to the applicant at this time, the alternatives remain reasonable under (National Environmental Policy Act) guidelines and are retained in the EIS.” Economic review unlikely Opposition groups and some technical observers of Pebble’s complex plan question the economics of it, particularly given the scaled-back, 20-year mine, and have pointed to the lack of an independent economic assessment as justification for the skepticism, but Collier said in an interview that that one is unlikely to come at this point. That’s because Northern Dynasty Minerals is past the stage of seeking the retail or institutional investors that would find a public economic assessment of the project valuable, Collier said. At this point, the junior mining firm is focused on attracting a large partner to help fund development. “A major mining company isn’t going to give two wits about a PEA (preliminary economic assessment),” he said, adding any interested company would conduct its own evaluation and it would be costly for Pebble to hire the required independent analysts. Northern Dynasty ended the first quarter with $7.2 million Canadian in cash, according to its latest quarterly report. Canadian finance law prohibits the company from disclosing its internal projections, he said. Collier told the Journal in the spring of 2018 — shortly after Pebble filed its permit application — that Pebble would likely publish a PEA by the following winter. Opponents have urged the Corps to demand economic information from Pebble so it can be better known which of the development options are truly viable. Project managers for the Corps have said they would like to have the estimates but they are not required for the EIS. Editor's note: This story was updated for the Aug. 2 edition of the Journal that went to press July 29. Elwood Brehmer can be reached at [email protected]

Hardrock exploration resumes after pandemic pause

Hardrock exploration activity continues to build at some mining camps across the state as companies get back to work delayed for months by the pandemic. Tectonic Metals started drilling its Tibbs gold prospect not far to the east of the producing underground Pogo mine in the Interior July 20, company CEO Tony Reda wrote via email. The rotary air blast drilling program is first looking to expand on a discovery last year of a 29-meter seam containing more than 6 grams of gold per metric ton of ore. Reda said Tectonic has a thorough COVID-19 mitigation plan in place at its camps and company leaders are excited to learn more about their prospects. “Given our strong treasury in conjunction with the compelling targets and the untapped potential at our Tibbs and Seventymile projects, the Tectonic team has unanimously concluded that we must move forward with two drill programs this summer,” Reda said. “The truth machine is currently hard at work at our Tibbs project following up on last year’s intercept of roughly six grams per tonne over 29 meters.” Reda said in April that it was unclear at that point whether or not the drilling could be done this year. He added that two other targets will be drilled at Tibbs before work moves east to the Vancouver-based company’s Seventymile prospect near the Canadian border. Drilling at each of the near-surface prospects will cumulatively cover roughly 2,500 meters, with an average bore length of about 100 meters, according to Tectonic. The drilling will be company’s first at Seventymile, a 149,000-acre property owned by Doyon Ltd., the Interior regional Alaska Native corporation. Doyon announced in late April that it had invested $1.5 million in Tectonic, which has rights to four early-stage exploration properties in the Interior. The investment made Doyon the largest single shareholder in Tectonic with a 22 percent stake in the company. As of July 10 there were 69 active applications for hardrock exploration across the state, according to Department of Natural Resources officials, who noted that not all of the applications indicate active field work this summer. Placer miners also held 837 active operations permits and another 90 suction dredge operations have active mining permits as well. Hardrock exploration had been on the upswing prior to 2020 with estimates of about $150 million annually spent by companies searching for metals across Alaska in recent years. Department officials reported anecdotally through field inspections that higher gold prices have encouraged more placer and suction dredge activity though some operations have been idled because of travel restrictions and funding challenges, according to an email from DNR spokesman Dan Saddler. Gold prices have risen steadily over the past year to more than $1,800 per ounce. Donlin Gold temporarily suspended work and sent approximately 120 workers home from its remote upper Kuskowkim valley camp in early April as the company formulated a plan to address health and safety risks stemming from COVID-19. Workers began returning to the camp May 22 following implementation of COVID-19 mitigation strategies. Constantine Metal Resources is conducting a scaled-back $2.1 million field program at its multi-metal Palmer prospect north of Haines this summer as travel restrictions and health concerns limited exploration activity early in the year, according to a company statement. Constantine is focusing on gathering environmental data and other information to aid in permitting future underground exploration. Dowa Metals and Mining, Constantine’s partner in Palmer through Constantine Mining LLC Joint Venture, will be funding this summer’s work and take a slightly larger stake in the project as a result, according to Constantine. President Garfield MacVeigh said in a statement about the work program that despite the shorter-than-anticipated work schedule and other challenges from the pandemic the joint venture continues to make progress towards underground exploration and feasibility studies. “We also continue to be excited about the exploration potential on both the (Palmer) property as well as the immediately surrounding district controlled 100 percent by Constantine,” MacVeigh said. The state Department of Environmental Conservation last fall remanded a water discharge permit key to Constantine’s plan to excavate a roughly 1.2-mile tunnel from which the company could conduct exploration activities for review by the Division of Water following appeals from local environmental groups and others. They claim the waste management permit for groundwater discharges is insufficient because the wastewater will quickly resurface in nearby Glacier Creek, which feeds the salmon-producing Klehini and Chilkat rivers. The development includes a large water treatment facility with two settling ponds in addition to the exploration tunnel. DEC officials have yet to make a decision on Constantine’s waste management permit and while staff are working on it there is no timetable for a resolution, according to DEC spokeswoman Laura Achee. The permit decision is also in flux partly due to a U.S. Supreme Court case over wastewater treatment in Hawai’i between the County of Maui and the Hawai’i Wildlife Fund. In April the court issued a middle-ground opinion remanding that case back to the Ninth Circuit Court of Appeals for further consideration. There will be less activity in the western Brooks Range this summer as Trilogy Metals announced earlier this month that it would be deferring its summer exploration program at its Upper Kobuk mineral projects in the Ambler mining district. The company said in a July 8 statement that the combination of ongoing safety concerns regarding the possible spread of the coronavirus at its remote camps and the fact that the field work had already been significantly delayed its entire 2020 field season had been called off. Trilogy and its partner, Australian-based South32 Ltd. fund the exploration projects through their joint venture Ambler Metals LLC. Trilogy holds the Arctic copper-zinc and precious metals deposit, which is the most advanced prospect in the region as well as the nearby Bornite copper-cobalt prospect and other early-stage properties in the area. The company expects to complete a feasibility study on the Arctic prospect later this summer. A record of decision on the Ambler Mining Industrial Access Project, most commonly known as the Ambler road, is expected from the Bureau of Land Management this summer as well. The road is being pursued by the Alaska Industrial Development and Export Authority and has been met with strong opposition from many locals and others who are skeptical of the private industrial toll road concept. However, state officials insist the plan will provide access to one of the state’s premier mineral belts while also allowing the state to recover development costs through tolls. Elwood Brehmer can be reached at [email protected]

New front forms in Pebble battle over land route

A new front is forming in the ongoing battle over the Pebble mine concerning lands up to 50 miles from the proposed project site. Many opposed to the world-scale copper and gold mine insist the U.S. Army Corps of Engineers is affording the Pebble Partnership special treatment under the Trump administration, which they claim is now manifesting itself in a new transportation plan that Pebble currently doesn’t have access to develop. On May 22, Army Corps Alaska District Regulatory Chief David Hobbie announced the agency had identified a road route along the north shore of Iliamna Lake to a port on the west side Cook Inlet as the least environmentally damaging practicable alternative, or LEDPA, for the expansive mining plan in its environmental impact statement review. Until that point, Pebble had long promoted its plan for a year-round, ice-breaking ferry across the lake to shuttle supplies and metal concentrates to and from the mine site to the north of the lake. The re-route was made to alleviate some of the concerns of area residents who feared the ferry could impact Iliamna’s unique population of freshwater seals and complicate winter travel across the lake ice among other concerns, Hobbie said at the time. Pebble amended its plans to align with the Corps’ LEDPA decision and Tom Collier, CEO of the Vancouver-based junior mining firm noted the northern road route for years was the company’s preferred option — when it was officially advancing a much larger, 78-year mining plan — and the company only selected the ferry route because it was thought regulators would prefer the smaller wetlands footprint it offers. The south ferry route allowed Pebble to utilize lands owned by Alaska Peninsula Corp., which the company has an access agreement with, for the roads and ferry terminals on the north and south sides of the lake to access a port at Amakdedori on Cook Inlet. Pebble and Alaska Peninsula Corp. announced July 6 they have signed a memorandum of understanding to make APC the lead organizer of a consortium of other area village corporations to provide transportation and logistics support for the project. The companies estimate the MOU could be worth more than $20 million per year to APC during mine operations. APC leaders said the agreement would help provide locals with more opportunities to participate in the project. However, some of Pebble’s staunchest opponents hold title to the land Pebble would need access to in order to develop the northern road and port corridor. Alaska Native village corporation Pedro Bay Corp. owns much of the land along Iliamna’s northeastern corner and Iliaska Environmental LLC is a majority owner of a rock quarry at Diamond Point, the new location for the Cook Inlet port. Iliaska Environmental is owned by the Igiugig Village Council and regional corporation Bristol Bay Native Corp. owns the subsurface rights to those lands. All three have been opposed to the project for years and stress Corps officials are ignoring the fact that Pebble does not have access to the area as well as their own precedent in similar, prior instances. Pedro Bay Corp. CEO Matt McDaniel could not be reached for comment in time for this story but he wrote to Corps of Engineers Pebble project manager Shane McCoy last July to reiterate that the company “has not, and will not, consent to the Pebble Limited Partnership’s use of its lands for the Pebble project.” As such, the north route should not be considered practicable in the final EIS, McDaniel wrote. Eliminating the northern corridor option at this point would be a major problem for Pebble, as the Corps is scheduled to release the final EIS July 24. McDaniel’s 2019 letter quickly spurred a memo from the Corps to Pebble requesting an analysis of feasible northern corridor options around Pedro Bay Corp. lands, but a consultant to Pebble determined there isn’t one through the mountainous terrain. In October 2017, Hobbie signed a record of decision for an oil spill response facility proposed near Cordova and being pursued by the Native Village of Eyak that eliminated three alternative development sites because the landowners either would not sell the parcels or otherwise provide access to them for development. As such, the Corps did not consider the alternatives “practicable,” according to the decision document. As for Pebble, however, the Corps continues to advance the LEDPA despite the objections from the landowners. Hobbie said during a July 20 media teleconference that Corps officials are relying on Pebble’s assertion that the company can gain access to the northern corridor. “Since Pebble has stated it’s a practicable alternative, we’ve still considered it,” Hobbie said. Corps Alaska District spokesman John Budnik additionally wrote via email that the Native Village of Eyak did not contend it could gain access to the lands needed for the alternatives discarded in its project. Pebble spokesman Mike Heatwole wrote in an email that observers of the situation are likely confusing “preferred” with “practicable,” a legal term. “Our preferred alternative has always been the ferry route; it remains the ferry route. One of the reasons that is so is that the land owners (Alaska Peninsula Corp.) had already agreed to our access,” Heatwole wrote. “We continue to believe that the land owners will ultimately agree to the land access needed to construct the (northern) route.” Elwood Brehmer can be reached at [email protected]

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