GUEST COMMENTARY: Charter agreement is unnecessary burden for Hilcorp purchase

After reading Philip Wight’s opinion piece in the Anchorage Daily News regarding Hilcorp’s purchase of BP’s assets on the North Slope demanding Alaska shackle this important business deal with a big government “solution” by requiring a complex Charter Agreement, I felt compelled to respond. Mr. Wight falsely claims that such a solution would benefit Alaskans, when, in fact, the opposite is true. I was the Department of Natural Resources commissioner who was serving at the time of the BP-ARCO merger when such a charter was justified. Over the years I have seen first-hand how Alaska’s public agencies have capably overseen a continually evolving oil and gas industry. Our agencies have the experience, the expertise and information needed to carefully and thoughtfully evaluate the intricacies of this transaction with the benefit of all Alaskans foremost in mind. It’s their job, and they do it very well. There are multiple agencies scrutinizing this transaction. We have regulations that require financial assurances and contingency plans to protect the state’s interests. We have regulations that govern exploration, production, labor and all other aspects of oil and gas operations. It is the duty of our agencies to ensure companies are capable and are complying with all of these requirements. If you think any of this is a rubber stamp exercise, I suggest you talk to someone who has had to go through it. I also witnessed first-hand the months-long agony the Legislature forced on the BP-ARCO merger. Such a cumbersome approach is unnecessary and counterproductive in this instance. BP and ARCO’s merger would have combined the ownership of about 70 percent of North Slope production, a situation that required serious intervention by the state led by then Gov. Tony Knowles. Here, we simply have Hilcorp stepping into the same position as BP. To force a Charter Agreement in this situation would clearly say to any other businesses watching from the sidelines, “Don’t invest in Alaska unless you want to be subjected to a difficult process which will be used by some to make your investment uneconomic.” And let’s remember, the corporate signatories to the charter referenced by Mr. Wight are already, or soon will be, gone. On the other hand, Hilcorp has been expanding its investment in our state since they arrived here in 2012. The greatest “benefit to Alaskans” is the one that Hilcorp is uniquely capable of providing: more responsible energy production. For those of us who have been paying attention to the numbers, Hilcorp has a proven track record of increasing production in Alaska’s mature basins. Look at what they recently achieved at Milne Point on the North Slope or over the last several years in Cook Inlet. Hilcorp’s investments have reversed declines, and Alaskans are benefiting. Remember, when Hilcorp showed up in Alaska and took a position in Cook Inlet, our gas reserves were so low that there was talk of having to ship in LNG from outside the state or forcing citizens in Southcentral to go back to the 60s when stove oil and wood were the main means of heating one’s home. While production is key, jobs are equally important. Hilcorp has achieved what it has by relying on the Alaskans who know our state’s oil and gas fields best. Hilcorp’s local hire rate is near 90 percent. Just like BP, ConocoPhillips, ExxonMobil and others, they, too, rely on thousands of local contract workers to keep things running. This is not a merger, it’s a stock sale — a point Mr. Wight conveniently ignores. The balance of ownership in Prudhoe will remain exactly the same. Hilcorp is merely stepping into BP’s shoes. The governance structure of TAPS will remain the same. The only new thing here is we have a company with a proven track record (in many different states, not just here) that is committed to increasing production and looking to invest billions of dollars in the coming decades. Considering the economic challenges we face in Alaska, this opportunity could not be coming at a better time. As an Alaskan, I’d prefer we remain focused on balancing the budget and creating policies that encourage investment here, rather than inventing needless and expensive requirements that will only hurt future investment in our state.

Premera grants $5.7M over three years for rural care

Programs financed by a grant from Alaska’s largest private individual health insurer are turning their eyes toward rural communities, where health outcomes tend to be the worst. Premera Blue Cross Blue Shield, the Washington-based health insurer, announced a $5.7 million investment in the state Oct. 29, spread over three years and split among a handful of recipients. The overall intention of the grant is to improve rural health care access in a state that comprises about one-fifth of the land mass of the United States but where nearly half the state’s population lives in one urban area and the much of the rest is scattered across a largely roadless, largely undeveloped landscape. The majority of the investment — $3 million — will serve as seed money for a new Rural Health Care Fund, from which grants will be issued to address “equity, availability and access to quality health care in rural areas,” according to a press release from Premera. The fund will be managed by the Rasmuson Foundation and housed by the Alaska Community Foundation. In addition to three $100,000 grants to Norton Sound Health Corp., Yukon-Kuskokwim Health Corp. and the Tanana Chiefs Conference to support community health aide/practitioner programs, the University of Alaska Anchorage will receive $1.77 million to expand its College of Nursing programs at four campuses, three of which are rural. The funds will also be used to increase recruitment efforts among Alaska Natives in rural areas. Another $700,000 will go to the Alaska Native Tribal Health Consortium, supporting the construction of its Anchorage-based Education and Development Center. The center provides Alaska Native-centered education for aspiring health care workers, particularly in rural areas, said Andy Teuber, chairman and president of ANTHC, in the press release. ANTHC has an Anchorage-based education center. However, the dental health aide, behavioral health aide and community health aide programs are in separate facilities at the moment; the grant funds will help build out the interior of the education center to bring all three programs under one roof, according to Shirley Young, ANTHC’s public relations and marketing manager. “Instead of housing the training programs in a variety of costly locations, which is how we have been operating, the students will benefit from offering co-location with inter-professional education on the Alaska Native Health Campus,” she wrote in an email. “Accessibility to quality education at a sustainable cost point is critical, especially considering Alaska’s current financial situation.” Young said having all the programs on the Anchorage campus will help provide students with culturally relevant training before going out to pursue jobs, many of which are in rural communities across Alaska. Increasing the number of qualified providers in rural areas remains a priority for ANTHC’s board of directors, she wrote. Health care disparities between rural and urban areas are well established, both in health outcomes and service availability. People living in the rural areas of the state tend to be poorer, are more likely to be uninsured and have less access to primary care. In 2016, more than two-thirds of the primary care providers in the state were located in the Anchorage or Mat-Su areas, according to a study from the Alaska Department of Health and Social Services. There were only 17 licensed primary care physicians in the Northern region and 37 in the Southwest region in 2016. Training more physicians is only part of the solution, according to the DHSS study; competition for clinicians is significant and training does not reduce unequal distribution of providers. The community health aide/practitioner program provides health professionals in many rural locations, but they are not licensed physicians of the same clinical level as a primary care physician. Improving access to nurses and physicians in rural areas of the state is the primary purpose of the grant, said Premera president and CEO Jeff Roe in a statement. “Many of Alaska’s communities are hundreds of miles from a regional medical center, and in most rural communities there is not an adequate number of physicians, primary and mental health care providers and sufficient facilities,” he said. “It is critical to invest in effective, long-term solutions to close the growing gap between urban and rural health care access.” UAA is placing the funding into recruitment and program expansion at its Bethel, Dillingham and Ketchikan campuses. Those three campuses have capacity for growth and community support, said Jeff Jessee, the dean of the College of Nursing and vice provost for University of Alaska health programs. UAA is partnering with the University of Alaska Fairbanks and the University of Alaska Southeast for the programs, as the Ketchikan program is located on the UAS campus and the Bethel and Dillingham programs are on UAF campuses, he said. “All of our state universities understand there’s an enormous need for nurses across Alaska, and our long-term vision is to expand our nursing programs on other campuses as well,” he said. The University of Alaska system is under financial pressure due to state budget cuts, but UAA intends to design the program to be financially sustainable, Jessee said. The Premera funds will be used for startup and expansion costs, with between 40 to 50 new nursing students by the fifth year of the grant, he said. Tuition is the major source of revenue, and is intended to cover ongoing costs for the program. “The School of Nursing also has important community partners who have pledged consistent funding for our nursing programs in the state, and growing our nursing workforce remains a priority for the University of Alaska as a whole,” he said. We expect support to continue, because there’s widespread recognition of how essential nurses is to the future of our state.” Elizabeth Earl can be reached at [email protected]

Anchorage secures $25M grant for Port of Alaska

Anchorage is getting a $25 million shot in the arm to help rebuild its long beleaguered port. Municipal officials announced Nov. 6 that they will receive a $25 million grant from the federal Department of Transportation to help complete the $214 million petroleum and cement terminal the Anchorage Assembly approved construction of earlier this year. The money is coming from the federal agency’s Better Utilizing Investment to Leverage Development, or BUILD, Grant program. Anchorage Municipal Manager Bill Falsey said in a formal statement that the lump sum helps fill a significant funding gap and gives officials overseeing the Port of Alaska modernization project plenty of confidence that they will be able to complete the petroleum and cement terminal in 2021. Port of Alaska Director Steve Ribuffo thanked the congressional delegation in a formal statement as well. The delegation sent a letter in July to DOT Secretary Elaine Chao supporting Anchorage’s grant application. According to the municipality, Anchorage was competing against approximately $10 billion in other project applications for a portion of $1 billion in grant funding. “I also thank the port staff and program team who put in some long hours writing a highly competitive application. This award is a giant step towards successful completion of the petroleum and cement terminal,” Ribuffo said. “With this success, we can start directing more attention to planning and financing new general cargo facilities.” The congressional delegation noted the statewide reliance on Anchorage’s port in a joint Nov. 6 statement about the grant. “Alaskans have been sounding the alarm about the critical state of Alaska’s primary import terminal for years and, thankfully, the Trump administration and Secretary Chao have listened and are taking action to help us. This new BUILD Grant will help offset the cost of the first phase of the port’s desperately-needed modernization program,” the delegation said. “We thank Secretary Chao for the administration’s prudent investment today to help ensure that safe, cost-effective and resilient operations at the port continue for years to come.” The grant comes as the municipality is in drawn-out litigation against another arm of federal DOT, the U.S. Maritime Administration, or MARAD, for its role in the failed port expansion project from about 10 years ago. The municipality sued MARAD in 2014, alleging the agency allowed contractors to perform shoddy work on new docks that ultimately cost more than $300 million for work that largely needed to be redone. A trial in the case is finally set for February 2020. In July the Assembly approved a $42 million contract to start construction on the new import terminal next spring. While there is consensus that the ports aging and badly corroded docks — some of which are more than 50 years old — are in need of replacement, an informal group of port user companies strongly objected to moving ahead with the project because municipal officials still needed $81 million to finish the project. They worried the tariffs levied on the goods and commodities offloaded at the port would be raised to fill the funding gap. Fuel company representatives stressed that significant additional import tariffs on petroleum products could impact Ted Stevens Anchorage International Airport’s robust cargo traffic business, which they said can be very sensitive to even small changes in fuel prices. The companies instead urged municipal leaders to hold off on building the new terminal, or PCT, until they had a complete funding plan. However, Assembly members approved the project mainly on the belief that it was important to start moving ahead with the new facilities at the port, which is the import hub for most of the consumer goods used across mainland Alaska, rather than risk another earthquake or other event rendering the port useless as more firm financing plans were arranged. Falsey has also stressed that the new PCT — located away from existing docks — needs to be finished first to free up space for work on the port’s cargo terminals that will require complex logistics to keep the port open during dock construction. The municipal Port Commission, and advisory body to the Assembly, voted 5-4 on Oct. 23 to recommend petroleum and cement tariff increases that would cover debt service on bonds that would be sold to pay for the remaining PCT work to be done in 2021. The stepped rate changes would increase petroleum tariffs at the port from 16.4 cents per barrel of fuel now to 55 cents per barrel in 2029. On cement, the recommended tariff increase would add a fee of $3.93 per ton, according to municipal figures. Port of Alaska spokesman Jim Jager said the BUILD Grant award is extremely helpful for port officials, but it will not reduce the needed tariff adjustments. They have applied for numerous federal grant and loan opportunities over the summer and expected at least one or two would be successful, he said. “The notion that we were going to get some grant was cooked into the tariff proposal,” Jager said. He noted that if the city gets additional outside funding the tariff schedule could always be revised back down later. The Assembly, which must approve any tariff changes, is expected to take the issue up later this month. ^ Elwood Brehmer can be reached at [email protected]

Movers and Shakers for Nov. 17

Dr. Math Trafton will serve as interim director at the Sitka campus of the University of Alaska Southeast once the post is vacated by Leslie Gordon. Trafton will begin his interim position Dec. 8 and the search for a permanent director of the Sitka campus will begin in January 2020. Trafton joined UAS Sitka in 2013 and is currently an associate professor of English with tenure in the School of Arts &Sciences at the Sitka Campus. He holds a Ph.D. and a master’s degree in comparative literature, a master’s degree and a bachelor’s degree in English-creative writing, and a bachelor’s degree in computer science, all from the University of Colorado at Boulder. Gordon will be leaving her position in early December. She has accepted a position with the Southeast Regional Health Consortium in Sitka as the director of performance improvement. Gordon joined UAS in 2006, and has worked as a full tenured professor and program director for health information management, and as assistant director of academic affairs. Gordon has been the Sitka Campus director since May of 2018. The Healing Hand Foundation announced that Desiree Jackson has been selected as the new president of their board of directors. Jackson is succeeding Joseph Kahklen who has been board president since its inception in 2001. Jackson has worked in the Alaska health care system for more than 20 years. She has held positions at the Southeast Regional Health Consortium, Alaska Native Tribal Health Consortium, and Southcentral Foundation. Currently, she is the director of Tribal Services for Tlingit-Haida Regional Housing Authority. Jackson spent years developing curriculum and teaching as an adjunct professor at the University of Alaska, while co-authoring several books and peer-reviewed journal articles. She founded and owns Healthy Traditions Nutrition Consulting. Jackson is a graduate of Kansas State University with a bachelor’s degree in dietetics and Alaska Pacific University, where she earned a Certificate in Alaska Native Executive Leadership and an executive MBA with an emphasis on strategic leadership. Since 2008, Ms. Jackson has been a registered dietitian specializing in Alaska Native traditional foods.

FISH FACTOR: Overall salmon value jumps in 2019; Kodiak gets Tanner fishery

Alaska’s 2019 salmon season was worth $657.6 million to fishermen, a 10 percent increase from the 2018 fishery. Sockeye salmon accounted for nearly 64 percent of the total value, topping $421 million, and 27 percent of the harvest at 55.2 million fish. Those are the lead takeaways in a summary from the Alaska Department of Fish and Game that reveals preliminary estimates of salmon harvests and values by region. The final values will be determined in 2020 after processors, buyers, and direct marketers submit their totals paid to fishermen. Pink salmon were the second most valuable species representing 20 percent of the total dockside value at $128.6 million, and 62 percent of the harvest at just more than 129 million fish. Chum salmon accounted for 10 percent of the value at $63.8 million and 9 percent of the harvest at 18.5 million. Coho salmon contributed about 5 percent of the fishery value at $29.6 million and 2 percent of the harvest at 3.8 million fish. The chinook salmon harvest of just more than 272,000 was worth $14.4 million to fishermen, the third lowest value since limited entry began in 1975. Salmon prices for 2019 took a dip for all but sockeyes, which averaged $1.45 per pound, an increase from $1.33. The average price for chinook was $4.48 per pound, down from $5.98 in 2018. Cohos at $1.15 dropped from $1.34; pink salmon at 30 cents declined from 45 cents, and chums at 49 cents took a big dip from the 78 cents paid on average last year. The price drops, especially for pinks and chums, likely stemmed from the huge Russian harvest that was expected to approach 1.8 billion pounds this year. That compares to a 2019 Alaska salmon catch of just more than 872 million pounds. Average salmon weights this year were 11.84 pounds for chinook, up from 11.59 pounds in 2018. Sockeye weight of 5.24 pounds was down slightly from 5.26 pounds. Coho salmon averaged 6.77 pounds, down from 7.42; pinks averaged 3.27 pounds, down from 3.76 and chum weight at 7.07 pounds declined from 8 pounds on average. At Southeast Alaska, fishermen caught 32.2 million salmon valued at more than $101.8 million. That compares to 21.2 million fish valued at $133.6 million in 2018. Prince William Sound fishermen harvested 57.75 million salmon this valued at just under $115 million. Last year’s take was just more than 29 million fish valued at nearly $95 million. At Cook Inlet, fishermen caught more than 4.3 million salmon valued at nearly $23 million. That’s a slight improvement over the nearly 3.3 million fish valued at $18 million in 2018. Bristol Bay fishermen had a total salmon catch of nearly 44.5 million salmon of which almost 43 million were sockeyes. The value of more than $306.5 million was a record and compares to 43.5 million fish worth $281 million at the docks in 2018. Kodiak’s salmon fishery produced 35.7 million fish valued at $47 million. That compares to fewer than 9 million salmon worth $27.8 million last year. At Chignik, fishermen fared far better with a catch of 3.5 million salmon valued at $8 million. Last year harvesters took just more than 1,000 salmon (only 128 sockeyes!) worth less than $4,000. At the Alaska Peninsula and Aleutian Islands region, a bumper catch of nearly 21 million pinks in the southern district pushed the total salmon catch to nearly 27 million salmon valued at more than $49 million. Last year fishermen there took just more than 6 million salmon worth more than $29 million. On the Yukon, fishermen took 561,644 fish, mostly chums, for a total fishery value topping $2.5 million. That compares to more than 1 million salmon valued at nearly $4.7 million in 2018. Norton Sound harvesters landed 381,124 salmon worth just more than $2 million at the docks. That compares to 540,796 salmon valued at $4 million last year. At Kotzebue, fishermen caught 493,340 salmon, nearly all chums, valued at more than $1.5 million. That’s down from 695,000 fish last year, worth nearly $2.3 million at the docks. Once again, there was no salmon fishing opportunity for fishermen at the Kuskokwim. The region’s Community Development Quota group, Coastal Villages Region Fund, abruptly closed its plant at Platinum a few years ago. No buyer means no commercial salmon fishing. Kodiak gets some crab It’s a go for Kodiak’s Tanner crab fishery, albeit a small one, but better catches aren’t far off. The mid-January fishery will have a combined 400,000 pounds catch limit in two areas, the minimum to open a fishery. At average weights of 2.2 pounds, the fishery should produce 182,000 crabs. That’s down from a harvest of 615,000 pounds last season. Crabbers are tapping on the tail end of a big Tanner year class from 2013, said Natura Richardson, assistant area manager for the westward region at the Alaska Department of Fish and Game office at Kodiak. “The east side’s going to have a 300,000-pound harvest and the southeast is going to have 100,000 pounds. And particularly on the east side, this definitely is fishing on the same crab that they’ve been targeting for the last two seasons,” she explained. “We first saw this big cohort from 2013 in the survey, and that’s what we fished on in 2018 and 2019. And 2020 is probably going to be the last hit on this specific cohort. Despite the low catch, she said managers don’t expect the fishery to go fast. “We don’t have any conservation concerns because there are so many mature crabs in the water that we still feel that we are leaving a good standing stock to reproduce,” she said. (Only mature male crabs can be retained for sale.) “But because of that people are going to be seeing a lot of non- target crab and not as many legal crabs, so it is probably not going to be really hot and heavy with high catches per pot. I think that it’s going to be a little bit more work to get to the legal males.” Looking ahead, the future bodes well for westward region Tanners. Surveys have been tracking the biggest pulse of crab they’ve ever seen for several years, and the crabs seem to be growing faster than usual. It can take more than five years for the crab to grow to harvestable size. “The next pulse in the water has definitely retained,” Richardson said. “We saw them in the survey last year and again this year. So we have a lot of hope that they will continue to track through the population. They have survived at a higher rate relative to the previous 2013 pulse, so that definitely looks promising for future fisheries.” The big pulse of crab should enter the fishery within a couple of years. Richardson agreed that the 80 percent cod crash in the Gulf last year might be a reason that the recruits are showing better survival, as cod eat lots of small crab. Fisheries at Chignik and the South Peninsula will remain closed although the outlook for those regions appears hopeful. Last season 82 crabbers dropped pots for Tanners at Kodiak. The statewide average price was $3.94 per pound. By the way, Tanner crab is spelled with a capitol “T” because it is named after discoverer Zera Luther Tanner, commander of the research vessel Albatross that explored Alaska waters in the late 1800s. Laine Welch lives in Kodiak. Visit or contact [email protected] for information.

Aging fleet plagues ferry system fixes

Alaska’s ferries are facing a forecast of some rough seas ahead. How that will manifest largely depends on the conclusions of a study examining the options to reshape the Alaska Marine Highway System that Department of Transportation officials are currently reviewing. DOT Commissioner John MacKinnon said in an interview that the study, conducted over spring and summer by the Anchorage-based research firm Northern Economics, evaluated 11 different options for overhauling the network of large vessels that move people, vehicles and goods between 35 communities spread across more than 3,000 miles from Bellingham, Wash., to Dutch Harbor. The desire to reshape the ferry system follows years of budget cuts that correspond to significantly diminished service across much of the network. Since peaking at $111.2 million in the 2012 fiscal year, the state-funded portion of the annual AMHS operations budget has roughly been cut in half. Service levels, measured by the cumulative number of weeks ferries in the 12-vessel fleet operate over a year, have been cut about 25 percent over that time, according to AMHS figures. This year’s budget calls for a $56 million state subsidy — a compromise between the Legislature and Gov. Michael J. Dunleavy’s original proposal of $21.8 million, which would’ve resulted in shutting the system down in October. The prospect of no ferries running for nine months or more generated strong backlash from many legislators and Alaskans in coastal communities and led to the softer, but still significant budget reduction for this year. While the budget cuts on the state side of the ledger are mainly due to lower oil revenues that have driven major cuts across state government, AMHS leaders have also had to deal with fewer ferry riders, even when the service reductions are accounted for. Ridership has declined over the past 20-plus years from about 350,000 ferry passengers in 1998 to 251,000 passengers in 2018. At the same time, vehicle transport has remained steady at about 100,000 car, truck and van shipments per year, according to AMHS figures. The prevailing belief is that coastal travelers have turned to the skies, favoring speedy and ever-more reliable jet traffic over more leisurely, scenic and cheaper ferry trips. Alaska Airlines offers daily flights to nine communities the ferries also call on and small regional airlines fly to most of the others. MacKinnon said that the drop in ridership coincides with GPS and other advancements that have made flying through coastal Alaska’s notoriously bad weather safer and more consistent. “The chance of them doing a flyover now and not being able to land is a lot smaller than it used to be, so our competition is just technology that the airlines have been able to use to improve their performance,” MacKinnon said. The final and possibly biggest challenge facing ferry managers, according to MacKinnon, is the age of the fleet. Most large vessels are retired and scrapped once they reach 30 or 35 years old, he said, while six of the 12 ferries are already more than 40 years old. Additionally, twin fast shuttle ferries Chenega and Fairweather, built in 2004 and 2005, are currently docked and up for sale; they have proved to be expensive to run — favoring speed over fuel efficiency — and have been plagued by engine problems and hull cracking. DOT sold the 55-year old ferry Taku in January 2018 to a Dubai-based company for $171,000. “I’m sitting here looking at the Malaspina, 56 years old, and then we’ve got the LeConte, the Columbia and the Aurora in the 45-year-old range and then from the late ‘70s to ’98 we didn’t build a ship,” MacKinnon said. “So we’ve got some newer ones and then we’ve got some older ones that should’ve been scrapped.” The ten operating ferries average 37 years old and that includes the Tazlina and Hubbard “day boats” that entered service earlier this year. The collective age of the fleet makes for costly routine maintenance that often leads to longer dry dock layups as more areas in need of repair are discovered. The Matanuska, one of the original mainline ferries launched along with the state system in 1963, recently received about $40 million of work to repair damaged steel and upgrade some systems to current safety standards. It’s sister ship, the Malaspina, is scheduled for a long-term layup in January. Repairing the Malaspina is estimated to cost upwards of $16 million, but that bill could approach the Matanuska’s total as the vessel is examined in dry dock, according to MacKinnon. The smaller LeConte was docked in October for a regularly scheduled $1.2 million overall, but it was determined that further hull steel repairs were needed for a total bill of about $5.2 million. MacKinnon said the similarly sized and aged Aurora, which went in for its evaluation Nov. 4, could need similar attention. The cost led DOT to halt repairs to the LeConte until it’s known whether it or the Aurora will be cheaper to repair. That question should be answered later this month, according to a department statement. MacKinnon is working to tally all of the recent repair bills for the older vessels to see just how much of the mostly federal money has been spent keeping them on the water. “We probably could’ve built a couple new for that kind of money,” he surmised. He stressed in a follow-up email that while the age of some of the ferries means they require significant upkeep, it doesn't mean they aren't safe. Each vessel is inspected by the Coast Guard before receiving an annual approval to operate from the Coast Guard. "Ships are required to dry dock three times every five years, but out of an abunance of caution, the ships are dry docked every year. "Crews also perform a variety of inspections on a regular basis," he wrote. When the ferries are laid up for repairs longer than expected — a common occurrence of late — it simply means some communities don’t get the service they planned on. That deters riders as well. The system has lost a lot of its formerly consistent commercial customers because of its inability to be reliable, MacKinnon added. It all paints a picture of a ferry system beloved by countless Alaskans that is in need of change to pull it out of what is now a slow, downward spiral. But a group of Southeast legislators insist there is already money available to fix the vessels that the administration is choosing not to use. Democrat Sen. Jesse Kiehl, Reps. Jonathan Kreiss-Tomkins, Sara Hannan, Andi Story and Independent Rep. Dan Ortiz sent a letter to Dunleavy and MacKinnon Nov. 12 in which they call the decisions to lay up the LeConte and Malaspina "a funding priority crisis that can be solved." The lawmakers wrote that the Legislature put $20 million aside in a previous budget to deal with unexpected costs to the ferry system. They argue the administration has a responsibility to Alaskans to use that money to repair the vessels. Not doing so puts the small Southeast communities served by the vessels — towns and villages with limited transporation options — "in an existential crisis," they wrote. "With the multitude of recent, severe budget cuts to AMHS, and delayed maintenance to system vessels, this is leading to future economic and social disasters, if management action is not taken quickly," the letter states. According to Kreiss-Tomkins staffer Kevin McGowan, the extra $20 million is in the Alaska Marine Highway System Fund, the system's operating fund. To access the money, the administration would have to send a request to the bicameral Legislative Budget and Audit Committee, which typically handles out-of-session funding issues. DOT would then be able to spend the money on ferry repairs if the request were approved by the committee. The AMHS Fund held $35.6 million at the end of October, according to state Treasury Division records. The Journal is awaiting a response from DOT officials on the matter. The reshaping plan now being vetted by the Dunleavy administration is the second attempt in recent years to address the ferries’ systemic challenges. In May 2016, former Gov. Bill Walker signed a memorandum of understanding with the Southeast Conference — a community development group originally formed in 1958 to advance a transportation network that became the ferry system — directing DOT to partner with the nonprofit in addressing the system’s mission statement, governance structure, operations, revenue opportunities and other potential partnerships that could support major changes to the system. That report concluded that a public corporation — similar to the Alaska Railroad Corp. — with an expert-filled board of directors would be the best option for Alaska’s ferries. The public corporation model would provide stability in management and board oversight that could translate into the long range planning that is needed to maximize efficiencies available in vessel operations and overall fleet management, according to the report. However, MacKinnon contends the prior administration’s attempt to fix the AMHS didn’t do enough to fundamentally change how it operates. “Our study is a broad study looking at a variety of things, there’s was focused on one thing,” MacKinnon said, “basically change the management structure from government managing it to a board of stakeholders.” A public records request for a copy of the draft report was denied by department officials, who cited deliberative privilege authority while it is being internally reviewed and finalized. The latest study is scheduled to be finalized in December. The state's contract with Northern Economics to produce the document was for up to $250,000. The first big, system-wide change the Dunleavy administration made was to implement a “dynamic” pricing schedule that increases fares as more passenger, vehicle and cabin tickets are sold for a given sailing. Dynamic pricing, along with new change fees and increased fares around special events in port communities, are all intended to take the amount of fare box revenue from current levels of about 35 percent up to 50 percent of the system’s overall operating revenue, MacKinnon said. The 50 percent mark is a goal set by the Legislature during the budget debates earlier this year. Hitting the 50 percent fare box recovery mark “requires concentrating on the high revenue runs, raising rates where the market will bear it and dynamic pricing. Dynamic pricing works well for airlines,” MacKinnon said. He suggested the broader reform effort could include local ferry authorities that manage vessels and runs in more isolated route segments, such as Prince William Sound. That would allow for dedicated vessels that are purposed specifically for certain runs to maximize efficiency. It’s a model that has worked well for the Inter-Island Ferry Authority between Ketchikan and Prince of Wales Island, he said. “I think it’s great when a community steps up and says, ‘We’d like to take control of our own destiny,’ and it will take investment by the state,” MacKinnon said. The public corporation model floated by the Walker administration required significant changes by the Legislature to AMHS statutes, and though it’s unclear exactly what plan the Dunleavy administration will settle on, it will undoubtedly require legislative buy-in as well. MacKinnon added that it’s a time to examine the overall concept of state-run ferries. While many residents of isolated coastal communities consider the ferries to be their version of Alaska’s road system, he contends the analogy misses a couple key points. “We don’t operate the busses on public roads. We run the airports; we don’t run the airlines, but on the marine side we not only own the ships and the ports, we operate them,” MacKinnon said, adding that he’s heard from private vessel operators who’ve told him they don’t even try to compete with the state ferries. “Our goal is not the demise of the system; it’s fixing the system,” he said. “You can always fix it by throwing more money at it but I think the reality is there’s no more money to throw at it.” (Editor's note: A previous version of this story incorrectly stated that repairs to the ferry LeConte are estimated to cost $4 million in total. DOT estimates the unexpected work will cost $4 million, for a total repair cost of about $5.2 million.) Elwood Brehmer can be reached at [email protected]

GUEST COMMENTARY: Maintaining Alaska’s fiscal system is mathematically impossible

Editor’s Note: This is the sixth installment of a continuing series on the Permanent Fund dvidend and Alaska’s fiscal system. Alaska’s fiscal system is unworkable under all likely scenarios. Detailed projections from the Alaska Legislative Finance Division — the non-partisan expert scorekeepers — show that the numbers make our situation untenable. That agency’s scenarios feature these base assumptions: • This year’s adopted budget growing in future years at the assumed rate of inflation • Revenues as projected by the Alaska Department of Revenue from existing taxes and royalties • Additional revenues from the draw on the Permanent Fund Earnings Reserve Account according to the 2018 statutes establishing the percent of market value, or POMV, system • No revenues from broad-based taxes such as an income or sales tax (because Alaska has not received any since repealing the personal income tax in 1980) • Growth of the Permanent Fund at 7 percent annually If you go by current law, the State of Alaska’s future outlays include Permanent Fund dividends paid under the formula contained in statutes adopted in the 1980s (although those statutes have not been followed since 2015). That statutory dividend formula provides that 50 percent of the Permanent Fund’s income (or earnings) in a category defined as “income available for distribution” or “statutory net income” is paid out each year as dividends, which would provide a dividend of nearly $3,000 this year (instead of the $1,606 that was actually distributed). Putting together those elements and assumptions makes for a grim picture. The State of Alaska is more than $1 billion short each year over the next eight years, according to Legislative Finance Division. This is bad given that the total annual outlays — the budget with the dividends under the statutory formula — are in the range of $6.5 billion to $7.7 billion in that period, and the projected deficits continue to grow for decades afterwards. (These numbers are unrestricted general funds or UGF, which is what most people mean when they refer to the “budget” and the “revenues.”) Starting in fiscal year 2022 (which is less than two years away), the scenario shows that all the rest of the state’s spendable savings disappear except for the Permanent Fund Earnings Reserve Account, which would then be spent down to fill the gap. Spending down the Permanent Fund Earnings Reserve Account has multiple negative effects, including reducing future dividends. And it’s easy to see more downside than upside. Dial up some plausible negative events — a substantial drop in oil prices or in the financial markets, a major earthquake or act of terrorism that shuts down the Trans-Alaska Pipeline System, a decline in the worldwide demand for oil. Those events could cause the Permanent Fund Earnings Reserve Account to go to zero, leaving the state broke and unable to fulfill its obligations. That would be the fiscal reckoning for Alaska. These terrible outcomes lead some Alaskans to reach for what economists call heroic assumptions. One favorite prospective savior is more Alaska oil production, but it is highly improbable that higher production can be enough by itself to fill the large and persistent fiscal shortfall. Another hoped-for rescuer is relatively small and painless budget cuts, but an approach relying heavily on additional budget cuts collides with inconvenient facts. First, the budget has been cut a lot in the past half-dozen years, and most low-hanging fruit is gone. Second, the reactions this year to Gov. Michael J. Dunleavy’s proposed budget cuts and vetoes show that most Alaskans don’t want an approach that seems to cut too much too fast. It remains important to search for budget efficiencies, but that effort cannot save us by itself. Mathematical reality will not allow our fiscal system to stay intact, and it does not appear that we will be easily bailed out of these big and continuing deficits. This means that we need to look at additional revenues from broad-based taxes and/or oil tax increases — as well as examine the system for paying dividends. That’s the topic of the next installment in this series. Cliff Groh is an Anchorage lawyer and writer as well as the legislative assistant who worked the most on the bill in 1982 that created the Permanent Fund dividend we have today.

GUEST COMMENTARY: Gut spill response regulations? Not on my watch

My work with the Alaska Department of Environmental Conservation began as manager of its oil spill planning and response programs several months before the 1989 T/V Exxon Valdez oil spill. I am currently the deputy commissioner. During my almost 30-year career I have served as the deputy commissioner and director of two divisions and worked under multiple administrations (Republican, Democrat, and independent). When the Exxon Valdez spill occurred, we (me, you, state and federal agencies, industry, fishermen, businesses, and every individual directly or indirectly affected by the spill) were woefully unprepared. In the wake of the spill, new statutes passed, regulations were written, staffing was increased, citizen involvement improved, escort tugs and double-hulled tankers were put in place, and spill prevention, planning, and preparedness for response began in earnest. My fingerprints are on almost all of that. There is no doubt another spill of that magnitude would still be a disaster, but it’s one we work hard to prevent and we are much better prepared to respond should another disaster occur. Recently, DEC announced a 90-day public scoping process to collect public input on statutes and regulations regarding oil discharge prevention and contingency planning, many of which are nearly 30 years old. No changes are currently being proposed, but everything deserves to be looked at. We have simply asked you, the public, to review those existing rules and provide feedback. Are there requirements that are working well? Are there provisions that could be updated to reflect current risks and technologies? Has another jurisdiction “built a better mousetrap” that we should consider? Are there outdated requirements that don’t actually help prevention or response to spills? Are there provisions that should be more stringent? Are we missing anything? Let’s not wait for another disaster to force us into an “after-the-fact” review. The two oil spill Regional Citizens Advisory Councils (established under federal law after the Exxon spill), however, appear to have mistakenly concluded that this is an effort to gut the regulatory protections and have asked DEC to rescind the public scoping process. As federally sanctioned “watchdog” groups, I would instead ask them to welcome an open invitation to participate in a thorough and transparent review of our spill prevention and response requirements. DEC is using a new method for this scoping effort where all comments are posted instantly on our website for all to see. DEC seeks input from the public, Regional Citizens Advisory Councils, and the regulated community to see if there are ways to update the regulations while maintaining or even improving environmental protection. Alaska can be open for business AND protect the environment. They are not mutually exclusive. I encourage everyone, particularly those with first-hand experience with contingency planning, major spills, laws, and regulations, to provide your input to DEC by Jan. 15, 2020. Comments can be viewed and submitted at In the end, DEC may decide the rules remain appropriate and relevant and not propose any changes. If we do propose improvements to spill prevention and response, those specific changes will go through their own public notice and comment period. What they won’t do is gut oil spill planning, preparedness, and response. Not on my watch. Lynn Kent is the deputy commissioner of the Alaska Department of Environmental Conservation.

Pact reached to avert government shutdown through Dec. 20

WASHINGTON (AP) — A top House lawmaker announced Nov. 12 that Congress will pass a government-wide temporary spending bill to keep the government running through Dec. 20, forestalling a government shutdown as the House turns its focus to impeachment hearings. Appropriations Committee Chairwoman Nita Lowey, D-N.Y., made the announcement after meeting with Senate counterpart Richard Shelby, R-Ala., in hopes of kick-starting long-delayed efforts to find agreement on $1.4 trillion worth of agency spending bills. A fight over President Donald Trump’s demands for up to $8 billion in new funding for his U.S.-Mexico border fence project is largely responsible for an impasse on the huge spending package, which would implement the details of this summer’s hard-won budget accord. The politically explosive impeachment hearing and the possibility of impeachment and a trial aren’t making the jobs of dealmakers like Lowey any easier. It’s yet another layer of complications for senior lawmakers pressing not just for an agreement on agency budgets; it’s also complicating action on a long-sought rewrite of the North American trade rules. The coming weeks could still be the last, best opportunity for lawmakers to wrap up their work on the budget and the trade deal, even as stakeholders admit the timetable could easily slip amid foot-dragging and partisan flare-ups. As the House returns from a quick break, the sole piece of must-do business before Thanksgiving is to pass a governmentwide stopgap spending bill to avert the second government shutdown within a year. The top leaders of the House and Senate Appropriations committees met Nov. 12 afternoon to try to make progress toward a year-end deal on a massive appropriations package. Greeting reporters after a meeting with Shelby, Lowey sought to dispel worries of a shutdown when current funding expires Nov. 21. Shelby and Lowey promised a renewed push toward completing their unfinished work in coming weeks but offered no specifics. “We had a very productive conversation,” Lowey said. “It’s our responsibility as the chairs of the committees to get our work done and we intend to get our work done.” Most notably, a recurring fight over Trump’s U.S.-Mexico border fence and immigrant detention practices is making it difficult for House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Mitch McConnell, R-Ky., to make progress on a broader, full-year $1.4 trillion spending bill. That measure is needed to implement the terms of last summer’s hard-won budget agreement, which distributed budget increases to both the Pentagon and domestic agencies. McConnell is personally invested in a successful budget outcome and both he and Pelosi have long histories on appropriations. The other top issue is a legislative update to the landmark North American Free Trade Agreement, which is especially sought by Trump’s GOP allies and the party’s Main Street supporters. Pelosi is the key figure on trade, which is always a tricky issue for Democrats, even if the politics of the new United States-Mexico-Canada Agreement are nowhere nearly as divisive as NAFTA was 26 years ago. Passage of NAFTA in 1993 badly split House Democrats, but Pelosi, who represents the Port of San Francisco, voted “aye,” as did Majority Leader Steny Hoyer, D-Md., and powerful Ways and Means Committee Chairman Richard Neal, D-Mass. Neal is leading a working group on the measure and says the group is “on the 5-yard line” and the optimistic take is that he and Pelosi will bring USMCA in for an easy landing. The trade updates are generally seen as an improvement over NAFTA, whose provisions enforcing Mexican labor and environmental rules are considered inadequate by many Democrats. The selling points for the new pact are that it updates NAFTA for the 21st century with hard-won provisions on digital trade, intellectual property, financial services and agriculture trade. Still, any impeachment-related delays could tax patience and thrust politically freighted issues like the border wall and the updated U.S. trade pact directly into the heat of the presidential primary campaign. On spending, Trump is a wild card as usual. He singlehandedly drove the 35-day partial shutdown that spanned the changeover between GOP and Democratic control of the House last winter. He has struggled to win much wall funding from Congress, where lawmakers in both parties have other designs for the money. Trump has had more success in exploiting his transfer powers to siphon money from Pentagon anti-drug and military base construction accounts toward the wall, and construction is finally beginning on the new segments he has long promised. Trump could easily spin a successful wall narrative without much more in new appropriations. Simply funding the government on autopilot — though hardly anyone is advocating that — would give him perhaps $6 billion more this year. A battle over Trump’s powers to transfer military funding to wall building also has stalled an annual military policy bill that has become law for 58 years in a row. Trump’s anger at impeachment, his poisonous relationship with Pelosi, and his unpredictability and volatility are red flags for optimists. But the forces favoring an agreement are powerful, and McConnell — a top force behind the July budget pact — appears ready to get engaged more actively. Capitol Hill veterans say hardliners on both sides — including House progressives and White House budget chief Russell Vought — are an impediment to the kind of split-the-differences agreement that the current balance of power can produce. And there is still time for action if the momentum stalls, even if the odds get more dicey in a presidential election year. One of the benefits of limiting the duration of the upcoming stopgap spending bill, known as a continuing resolution or CR, is that is means another is needed before Congress adjourns for the year. Any December stopgap measure could also provide a way to ship some unfinished business on taxes, health care and pensions to Trump’s desk as part of a must-pass package. Top lawmakers hope that a full-year spending bill would serve the same purpose but acknowledge there are considerable obstacles. “I think it would be a terrible mistake if we were still in a continuing resolution after the first of the year for a whole host of reasons,” said top Senate Appropriations Committee Democrat Patrick Leahy of Vermont, citing shifting signals from the White House as contributing to the delays. “It has been difficult with the White House because … they have not always been consistent in what they want.”

Beyond Netflix: A look at what you get with new streamers

Attention binge watchers: There’s life beyond Netflix, Hulu and Amazon. Streaming choices are about to proliferate with the debut of Apple TV Plus on Friday and Disney Plus in two weeks. HBO Max and Peacock arrive next year. With discounts and other incentives, consumers can sample them all to figure out which ones to keep. Here’s a look at the new streaming challengers and what you get with each: APPLE TV PLUS Apple’s entry into the streaming business. Launch date: Nov. 1 Price: $5 per month Promotions: Seven-day free trial. A year free to buyers of a new iPhone, iPad, Apple TV, iPod Touch or Mac. Original shows: A Jason Momoa series called “See” and “The Morning Show,” a comedy starring Jennifer Aniston, Reese Witherspoon and Steve Carrell. The service will launch with nine original shows and movies, with more expected each month. Other shows and movies: None. DISNEY PLUS Disney’s entertainment service, featuring shows and movies from Disney, Pixar, Marvel, Star Wars and National Geographic. Launch date: Nov. 12 Price: $7 a month or $70 a year. Getting Disney Plus with ESPN Plus and Hulu, both owned by Disney, will cost $13 a month. Promotions: Seven-day free trial. Free year with all Verizon Wireless unlimited plans and when customers switch to Verizon’s Fios Home Internet or 5G Home Internet. Original shows: “The Mandalorian,” a live-action “Star Wars” series created by Jon Favreau. A prequel to the “Star Wars” movie “Rogue One.” A series about the Marvel character Loki. A rebooted “High School Musical” series. A documentary series focused on Disney. Other shows and movies: Animated classics, including “Aladdin” and “The Jungle Book,” will be available at launch; others will be added as streaming deals with other services expire. Movies released in 2019 or later will go to Disney Plus rather than a rival streaming service first. Disney Plus will also house past seasons of “The Simpsons,” which Disney got through its purchase of Fox’s entertainment business. PEACOCK The service from Comcast’s NBCUniversal will carry 15,000 hours of video at launch. Launch date: April 2020 Price: Undisclosed Promotions: Free for many Comcast cable and internet customers. Original shows: Reboots of “Battlestar Galactica” and “Saved by the Bell.” Comedy series “Rutherford Falls,” from Michael Schur, creator of “The Good Place” and “Parks and Recreation.” Other shows and movies: “30 Rock,” “Will &Grace,” and “Cheers,” though these won’t stream exclusively on Peacock. Peacock will get “Parks and Recreation” and “The Office” once existing deals with Netflix expire. “Bridesmaids,” ”E.T.” and other movies from Universal Pictures, Focus Features and DreamWorks Animation. HBO MAX A souped-up version of HBO from AT&T’s WarnerMedia, with some 10,000 hours of video at launch. Launch date: May 2020 Price: $15 a month Promotions: Free for about 10 million existing HBO subscribers — those who get HBO through AT&T distribution platforms such as U-Verse and DirecTV, and those who get the HBO Now streaming service directly from HBO, rather than a cable or online partner such as Amazon. Free for customers of AT&T’s higher-tier wireless and broadband offerings. Original shows: A “Game of Thrones” prequel called “House of the Dragon.” ”Raised by Wolves,” a sci-fi series directed by Ridley Scott. “Strange Adventures,” a DC Super Hero anthology series. Other shows and movies: HBO shows and movies, including theatrical releases that HBO licenses. Programs from the Warner Bros. studio, including “Friends,” ”The Big Bang Theory,” ”The Fresh Prince of Bel Air” and “Pretty Little Liars.” The animated comedy “South Park.” New CW shows “Batwoman” and “Riverdale” spinoff “Katy Keene” will also be available to stream after the season ends.

RCA will rule on release of Hilcorp finances

An increasing number of Alaskans are calling for greater financial transparency from Hilcorp, the privately owned company seeking to buy BP’s North Slope assets, in part to ensure it has the financial muscle to respond to a potentially costly accident if the deal goes through. Under the regulatory process to approve a key element of the transaction, Hilcorp has asked a state agency to keep its recent years of financial records from public view, citing concerns that disclosure will hurt its competitive advantage. Some think those records should be made public. “We need to see their finances because they will become the most important oil and gas company in Alaska, full stop,” said Phil Wight, who is studying the proposed deal for the Alaska Public Interest Research Group, a consumer rights group. BP, operator of the Prudhoe Bay oil field, announced in August that it will sell its Alaska assets to Hilcorp for $5.6 billion, setting the stage for what many say will be the largest North Slope deal in a generation. The sale includes BP’s share in wells, pipelines, oil tanks and other hardware, much of it built in the 1970s, including the 800-mile Trans-Alaska Pipeline System. The companies expect to finalize the deal next year. The Regulatory Commission of Alaska is overseeing the part of the transaction involving the trans-Alaska pipeline. It is holding a public comment period that’s set to end Nov. 8. Under state requirements, the RCA must decide whether to grant Hilcorp’s request to keep its financial records confidential, in a decision that will balance the public interest versus the company’s concerns over its bottom line. At least one powerful state lawmaker appears to support Hilcorp’s confidentiality request. Some Alaskans have applauded the deal in hopes that Hilcorp will boost Alaska’s economy by increasing exploration and squeezing more life out of the oil fields. The transaction, among other major changes, would give Houston, Tex.-based Hilcorp a 48 percent stake in the pipeline and operator Alyeska Pipeline Service Company. That’s a bigger share than pipeline co-owners ConocoPhillips and ExxonMobil. Skeptics of the proposal complain less is known about Hilcorp because it lacks the financial disclosure requirements of publicly traded companies such as BP, Conoco or Exxon. Those much larger companies regularly update shareholders on cash flow, debt and other data under federal reporting rules. Hilcorp’s finances are a black box, said Wight, speaking Nov. 6 to a small group in Anchorage at an event organized by the public interest group. He questioned whether Hilcorp can afford to clean up a costly major oil spill if one occurs. “We are not saying the deal should not go forward, but we want to make sure the public’s interest is protected,” he said. Hilcorp is known for revitalizing old fields, including in the small Cook Inlet province near Anchorage, where it’s become the dominant oil and gas producer after arriving in Alaska eight years ago. It’s been criticized for a string of accidents and violations, but praised for taking steps to improve that record. BP has told the RCA it will retain responsibility for the huge cost of dismantling the pipeline. Dozens of public comments have been submitted to the RCA so far. Many have asked for more information about Hilcorp’s finances, as well as more time for people to comment. The agency has extended the comment period once, adding an additional 21 days. Republican Senate President Cathy Giessel told the RCA that the sale, once complete, will bring “substantial positive benefits” in the form of Alaskan jobs, investment, oil production, and state and local revenue. With the “appropriate insurance and financial sureties” that will be required by the RCA and other agencies, Giessel said she believes Hilcorp is “highly fit and able to hold BP’s share of the (trans-Alaska pipeline) assets.” Giessel said she trusts the RCA and other state agencies will have full access to Hilcorp’s confidential financial records in order to “facilitate a responsible decision by the government.” “I would not like to think Alaska is willing to require, as a condition for any type of company undertaking business on our land or with our resources, disclosure of confidential financial information that could adversely impact a company’s competitive position as we seek their investment dollars,” she wrote. RCA spokeswoman Grace Salazar said the five-member commission will have 30 days after the end of the comment period to weigh Hilcorp’s confidentiality request and determine if the companies’ joint application for the ownership transfer is complete. The commission could take up to six months to determine if it will permit the transfer. Rep. Geran Tarr, D-Anchorage and co-chair of the House Resources Committee, told the RCA that not enough is known about the proposed transaction and the impact it will have on Alaska. She wants the agency to extend the comment period through the holidays. Tarr said the committee plans to hold an informational hearing on the proposed sale next year. Andrew Brooks, an analyst with Moody’s Investors Service, a major credit rating agency, said Hilcorp has a good rating for a company of its size. It typically does not heavily rely on debt and generates “positive free cash flow.” But Moody’s was concerned enough about the transaction to launch a “review for downgrade” of Hilcorp’s rating after the deal was announced. Hilcorp has not yet said how it will finance the deal. The ratings review can’t be completed until those details are known, Brooks said. Moody’s presumes Hilcorp will take on a “fair” amount of debt to buy the Alaska assets, Brooks said. Too much could help lead to a ratings downgrade. “It’s a very sizable acquisition for Hilcorp, certainly a much larger acquisition than they typically have undertaken,” Brooks said. Brooks directed questions about Hilcorp’s net worth to the company itself. Company officials on Nov. 8 did not respond to a request for comment. Former Alaska Senate President Rick Halford said there hasn’t been enough scrutiny and public input on the proposed deal. “It’s been amazingly quiet in my opinion,” Halford said on Thursday. In 2000, Halford, a Republican, chaired the legislative committee that helped oversee a previous blockbuster deal on the North Slope, resulting in ConocoPhillips predecessor Phillips Petroleum buying ARCO Alaska’s assets for $6.5 billion. “There needs to be a real economic analysis, from the state, of this transaction,” Halford said. It should include a review of the costs and responsibilities of dismantlement and cleanup of everything from the pipelines to wells to buildings, he said. “There are a lot of old wells up there,” he said. Halford said he’s worried Hilcorp may be too small to handle the potential liability associated with the North Slope’s aging infrastructure. The RCA should disclose as much as it possibly can about Hilcorp’s finances, he said. “This is a huge asset very much tied to the value of state revenue,” Halford said. “The company’s finances should not be protected from public view…any more than is absolutely necessary.”

Group forms to oppose oil tax hike initiative

A new group calling itself OneAlaska has formed to fight a ballot initiative that seeks to boost production taxes paid by Alaska’s largest oil companies. The group — consisting of small-business owners, a union leader, a Native corporation chair and others — filed with the Alaska Division of Elections this week, a statement from OneAlaska said Nov. 7. The Alaska Oil and Gas Association, a trade group representing the industry, is a leading contributor to the group. The chair is Chantal Walsh, former director of the state’s oil and gas division under previous Gov. Bill Walker. “With several significant, new development projects in the works, adding a punitive new tax on companies that are trying to invest in Alaska is the wrong idea at the wrong time,” Walsh said. OneAlaska will oppose Vote Yes for Alaska’s Fair Share, which registered as a campaign group with state regulators in August. That group must collect 28,501 signatures from across Alaska in support of its two-page proposed “Fair Share Act.” It hopes to get the measure on the ballot during next year’s election. The proposal would alter the state’s 2014 oil production tax. It would apply to the North Slope’s large, legacy fields — currently Prudhoe Bay, Kuparuk and Alpine — held by major oil companies, according to Robin Brena, a member of the initiative committee leading the effort and an oil and gas attorney who worked on Gov. Walker’s transition team. Brena has said the measure would bring in about $1 billion extra in production taxes, if approved by voters. BP, the current operator of the Prudhoe Bay oil field, has estimated it could cost companies up to an extra $2 billion. The industry paid $750 million in oil and gas production taxes in the 2018 fiscal year, according to state figures. In an interview Nov. 7, Brena said Alaska is not getting enough in production taxes from the state’s major oil companies. If voters approve the Fair Share initiative, Brena asserted the companies will still be very profitable in Alaska and more money will stay in the state, helping the economy, not hurting it. The measure would require that tax returns and other documents from oil and gas producers would be public information, instead of confidential documents. “Whether you agree with us, or disagree with us, that’s one thing,” he said. But Alaskans should have the chance to decide if they’re getting their fair share for oil production, he said. Vote Yes for Alaska’s Fair Share reported in early October that it had raised just more than $45,000. Brena is listed as the top donor with a $25,000 cash injection. Co-chairs of the new group that will fight the measure include Crawford Patkotak, chair of Arctic Slope Regional Corp., which represents Alaska Natives from the oil-rich North Slope; Nicholas Begich III, a nephew of former U.S. Sen. Mark Begich; former Anchorage Rep. Jason Grenn, who served in the Legislature as an independent; Bill Popp, president of the Anchorage Economic Development Corp.; and Gary Dixon with Alaska Teamsters Local 959, which represents more than 5,000 people, including airline pilots, construction workers and truck drivers. “The ballot box is the wrong place to enact complicated tax policy, especially policy that would damage our economy, both in Anchorage and statewide,” Popp said.

Trilogy announces successful drilling at third Ambler prospect

The company with two copper prospects in a remote, mineral-rich region of Alaska is adding another. Trilogy Metals Inc. announced on Nov. 7 that it hit copper, zinc, silver and small amounts of gold and lead during summer drilling at its Sunshine prospect in the Ambler mining district northwest of Fairbanks. The Vancouver-based junior mining firm hit zones of at least 0.87 percent copper in each of the six boreholes tested; all but one of the holes contained copper zones with mineralization excess of 2.08 percent, according to the exploration report. For comparison, a 2016 research article published in the scientific journal Resources concluded that the average ore grade at currently producing copper mines worldwide is approximately 0.62 percent. However, the high costs associated with developing isolated prospects in Alaska often require much better-than-average resources to justify turning a prospect in the state into a producing mine. Zinc occurrences in the same zones were largely in excess of 2 percent, with silver densities reaching 74 grams per metric ton of ore. The results are from 1,356 meters of drilling over the six boreholes. Trilogy targeted the specific drilling sites following a $2 million electromagnetic geophysical survey the company conducted last spring over much of the Ambler prospect belt. Interim Trilogy CEO James Gowans said in a formal statement that Sunshine is just one in a host of prospects across the large Ambler mining region, “which has the potential to be one of the most prolific mining districts in the world.” “The grades and widths of mineralization found at the Sunshine prospect are very similar to what we see at the Arctic project and I expect that with more drilling we can delineate more mineralization at Sunshine,” Gowans said. Other companies are exploring other prospects in the Ambler region, which stretches for roughly 75 miles along the southern flank of the western Brooks Range in the upper reaches of the Kobuk River drainage. Trilogy is also working in other parts of the area, including its aforementioned and advanced Arctic prospect, about eight miles east of Sunshine. Former CEO Rick Van Nieuwenhuyse said last spring that Trilogy leaders hope to complete a feasibility study of Arctic early next year. Environmental permitting for Arctic should start once the environmental impact statement for the controversial, state-sponsored 211-mile Ambler Mining District Industrial Access Project is closer to complete as well, he said. The high-grade Arctic prospect covers approximately 36 million metric tons of ore with 3.07 percent copper, 4.23 percent zinc, 0.73 percent lead and 47 grams per ton of silver. Generally referred to as the Ambler road, the up to $350 million access project is a state-led plan for an unimproved industrial road off of the Dalton Highway to reach the large Ambler mining district. Under the plan, the Alaska Industrial Development and Export Authority would build the road via revenue bonds once it secures commitments from mining companies that would ultimately fund the project through tolls and use agreements. The road project has drawn opposition from local Alaska Native organizations, residents of the area and environmental groups who are worried the project will disrupt caribou migrations important for subsistence harvests. The proposed mines have also drawn scrutiny for potential impacts to salmon and whitefish runs in the Kobuk River drainage. In addition to the young Sunshine and mature Arctic prospects, Trilogy is also working on the mid-stage, copper-based multi-metal Bornite prospect to the south of the other two. The company completed more than 7,600 meters of drilling this year from 10 boreholes in and around the known resource. The $9.2 million drilling program at Bornite was funded by Australia-based South 32 through an agreement the companies signed in 2017. According to a company report issued prior to this year’s drilling, Bornite contains indicated resources of more than 40 million metric tons of ore holding an average of 1.02 percent copper for 913 million pounds of the metal. ^ Elwood Brehmer can be reached at [email protected]

Fed cuts rates for a 3rd time but signals it will now pause

WASHINGTON (AP) — The Federal Reserve cut short-term interest rates Oct. 30 for a third time this year to try to support the economy. But it signaled that it plans no further cuts unless it sees clear evidence that the economic outlook has worsened. For now, Chairman Jerome Powell sounded a bullish note about the economy in a news conference after the Fed’s latest policy meeting. Despite some signs of weakness, the Fed expects growth to continue and the job market to remain strong. Since spring, manufacturing output has stumbled amid trade tensions and slower global growth, while businesses have cut spending on large equipment. But Powell stressed that the Fed doesn’t see those trends weakening the broader economy. Instead, steady hiring is keeping unemployment very low, boosting consumer confidence, and encouraging more spending. “Monetary policy is in a good place,” Powell said. “If developments emerge that cause a material reassessment of our outlook we would respond accordingly. Policy is not on a pre-set course.” Some of the global and trade threats that have been bedeviling the economy have receded, Powell said, thereby reducing the need for future rate cuts. The U.S. and China have reached a tentative truce that has cooled their trade war. And the European Union has agreed to extend the deadline for the United Kingdom’s exit from Oct. 31 to Jan. 31, lowering the likelihood of an economically disorderly “no deal” Brexit. “On both, the risks appear to have subsided,” he said. “That could bode well for business confidence and activity over time.” Investors appeared pleased with Powell’s positive take on the economy. The Dow Jones Industrial Average closed up 115 points, or 0.4 percent. Analysts also noted that the year’s third rate cut had been widely expected and that expectations for another cut at the Fed’s next meeting, in December, were already dim. “He clearly set the bar high for rate cuts in December and January,” said Kathy Bostjancic, chief U.S. financial economist at Oxford Economics. But Bostjancic and some other economists say they expect growth to keep slowing and to eventually force the Fed’s hand. Bostjancic expects growth to decline to just 1.6 percent in 2020, below the Fed’s forecast of 2 percent, and that the policymakers will cut rates sometime next spring. Powell may be too optimistic about a defusing of the China trade and Brexit threats, Bostjancic said. While President Donald Trump and China’s President Xi Jinping are seeking to agree to an initial pact next month, it would likely leave many significant areas of dispute between the two countries unresolved. “He was wearing a little bit of rosy glasses with the trade talks and Brexit,” she said. “Trade tensions are still going to remain.” The Fed’s move reduces the short-term rate it controls — which influences many consumer and business loans — to a range between 1.5 percent and 1.75 percent. The policymakers dropped from their statement a key phrase they had used since June to indicate that a future rate cut was likely. That phrase said they would “act as appropriate to sustain the expansion.” The Fed’s new statement says instead that it will review the latest economic data as “it assesses the appropriate path” for its benchmark interest rate. Two of the Fed’s policymakers dissented from the decision: Boston Fed President Eric Rosengren and Kansas City Fed President Esther George said they preferred to leave rates alone. Both have dissented from all three rate cuts this year. The economy is in its 11th year of expansion, fueled by consumer spending and a solid if slightly weakened job market. By cutting rates, the Fed has tried to counter uncertainties heightened by Trump’s trade conflicts, a weaker global economy and a decline in U.S. manufacturing. The third rate cut of the year has partly reversed the four hikes that the Fed made last year in response to a strengthening economy. That was before rising global risks led the Fed to change course and begin easing credit. Lower rates are intended to encourage more borrowing and spending. Powell has said that the central bank’s rate reductions were intended as a kind of insurance against threats to the economy. Powell has pointed to similar rate cuts in 1995 and 1998 as precedents; in both those cases, the Fed cut rates three times. He and most other Fed officials credit their rate cuts with lowering mortgage rates, boosting home sales and generally keeping the economy on track. The Fed is also weighing the consequences of a decline in expectations for inflation. Lower inflation expectations can be self-fulfilling. This can pose a problem for the Fed because its preferred inflation gauge has been stuck below its 2 percent target for most of the past seven years. In the meantime, Trump, via Twitter, has renewed his attacks on the Fed for not lowering its benchmark rate closer to zero. The president has contrasted the Fed’s actions unfavorably with central banks in Europe and Japan, which have slashed their rates into negative territory. Though Trump has argued that this puts the United States at a competitive disadvantage, most economists regard negative rates as a sign of weakness. The U.S. economy is still growing, and hiring remains steady, though there have been signs of a slowdown in recent data. Americans cut back on spending at retailers and restaurants last month, a worrisome sign because consumer spending is the leading engine of economic growth. Still, consumer confidence remains high, and shoppers could easily rebound in the coming months. Earlier Wednesday, the government estimated that the economy grew at a tepid but steady 1.9 percent annual rate during the July-September quarter. That report showed that businesses cut back on their investment in new equipment and buildings by the most in nearly four years. But it also showed that the housing market helped drive growth for the first time in seven quarters, as home purchases and renovations have increased. Powell credited the Fed’s interest rate cuts for spurring those gains, along with greater spending on cars and appliances.

US trade deficit falls to $52.5B in September

WASHINGTON (AP) — The U.S. trade deficit fell in September to the lowest level in five months as imports dropped more sharply than exports and America ran a rare surplus in petroleum. The Commerce Department said Nov. 5 that the September gap between what America buys from abroad and what it sells shrank by 4.7 percent to $52.5 billion. That was down from the August deficit of $55 billion and was the smallest imbalance since April. The politically sensitive deficit with China edged down 0.6 percent to $31.6 billion. President Donald Trump has imposed tariffs on more than $360 billion in Chinese imports. China has retaliated with its own tariffs on American products as the world’s two largest economies have engaged in a trade war that has rattled global financial markets and slowed economic growth. The September deficit reflected the fact that exports fell 0.9 percent to $206 billion but imports fell an even faster 1.7 percent to $258.4 billion. For the first nine months of this year, the U.S. deficit is running 5.4 percent below the same period a year ago. The deficit for all of 2018 totaled $627.7 billion. Economists said they expect the trade deficit will be a drag on growth in the current October-December quarter as the continued weakness of the global economy further depresses demand for American exports. “It’s hard to see anything other than further weakness in exports over the coming months,” said Andrew Hunter, senior U.S. economist at Capital Economics. So far this year, the deficit with China is 12.8 percent lower than the same period a year ago although it remains the largest imbalance America runs with any country. The two countries are currently trying to complete a phase one trade deal that would deal with some of the administration’s complaints that China is stealing U.S. technology and pursuing other unfair trade practices. Investors are hoping that a phase one agreement will halt the imposition of any further tariffs. Those tariffs have disrupted global supply chains and caused businesses to pull back on their investment spending, resulting in slower economic growth in the U.S. and other countries. The September trade report showed that the U.S. ran the first surplus in petroleum in more than four decades, according to government records that go back to 1978. The small $252 million surplus reflected the fact that the United States exported $15 billion in petroleum products in September while importing $14.7 billion. U.S. petroleum exports have been growing in recent years, reflecting a boom in new production methods such as fracking. In addition to sparring with China, Trump has imposed import taxes on foreign steel and aluminum and is threatening to tax imported autos, too. Trump views America’s persistent trade deficits as a sign of economic weakness and the result of unfair trade agreements which he says have resulted in the loss of millions of American manufacturing jobs. But mainstream economists say the trade gap is the product of economic forces that don’t respond much to changes in trade policy such as a strong dollar, which makes U.S. goods more expensive on overseas markets, and the fact that Americans consume more than they produce with imports filling the gap. In September, the United States recorded a $71.7 billion deficit in the trade of goods such as cars and appliances. But it ran a $19.3 billion surplus in the trade of services such as banking and education.

China preps for first gas from Russian pipeline

China is a month away from getting its first Russian pipeline gas deliveries, which will help fuel the largest urbanized area in its North while also fueling speculation of what it will mean for liquefied natural gas imports into the country. Start-up of the Power of Siberia project — with its five-year gas field development and pipeline construction costs reportedly in the $50 billion range — comes just as China’s rapidly expanding gas demand is slowing down, blamed on weakened growth in the country’s economy. The pipeline in its first full year of operation is expected to move an average of just less than 500 million cubic feet of gas per day, or about 1.6 percent of China’s total estimated gas supply in 2019, according to Platts Analytics and China’s National Development and Reform Commission. But once the line reaches full capacity, expected in 2022-23, it could be transporting more than 3.6 billion cubic feet of gas per day, or about 9.5 percent of China’s supply needs for 2022, according to Platts’ estimates. A source with one of China’s major city gas suppliers told Platts the company would consider reducing LNG imports into northern China once Russian gas is available. Two Chinese end-users said they were considering reselling some of this winter’s LNG cargoes into the spot market. PetroChina expects the new pipeline supply to start Dec. 1, the state-owned major said Oct. 17. The initial northern section of the line will deliver gas to northeastern China and its Beijing-Tianjin-Hebei region, the country’s biggest winter-demand center. With the small volume of gas moving through the line at start-up, the impact on the Chinese market will be limited this winter. The full pipeline route, at more than 2,000 miles when completed, will end in Shanghai. PetroChina’s parent company, China National Petroleum Corp., or CNPC, signed a 30-year deal in 2014 with Russia’s Gazprom. Financial terms and prices have not been disclosed. Longer term, “price will become one of the decisive factors for the amount of LNG imports,” Ling Xiao, a senior executive at CNPC, said at an LNG conference in Shanghai in April. “Opening of the Russia pipeline will pose further threat to LNG imports,” he said. “We are hoping for cheaper and shorter-term LNG contracts and only in that way can LNG be truly competitive.” The pipeline start-up comes as China’s double-digit growth rate in gas consumption is slowing down. Gas demand is expected to grow 10 percent this year, down from an average 17 percent in each of the past two years. “Due to the macroeconomic situation and the government easing its push for the coal-to-gas (switching) program, China’s gas consumption growth is slowing,” said an official of state-run Sinopec Gas on Oct. 15, reading prepared remarks on behalf of Wu Gangqiang, the firm’s deputy chief economist, as reported by Reuters. Last year, China consumed about 10 trillion cubic feet, or tcf, of gas, with 56 percent coming from domestic production and about 26 percent from LNG imports. The rest was pipeline gas from Central Asia and Myanmar. Due to government price controls, importers lose money on much of the gas they bring in, which often costs more than they can charge for it on the domestic market. PetroChina reported it lost $3.09 billion (U.S.) on its gas import business in the first nine months of 2019. It lost $3.7 billion in all of 2018. The company has a mandate to ensure ample domestic supplies — even if that means selling at a loss into the price-regulated market. The government and gas importers would like to cut those losses by boosting domestic production from shale fields. “China’s reliance oil and gas imports is growing too rapidly, with oil topping 70 percent and gas moving toward 50 percent,” Lin Boqiang, director of the Energy Economics Institute at Xiamen University, was quoted by Reuters in September. The government has introduced a subsidy program to promote gas production from tight formations and has extended existing subsidies for production from shale and coal-bed methane, the U.S. Energy Information Administration reported in October. PetroChina and Sinopec have committed to produce a combined 2.1 billion cubic a day of shale gas by 2020, which would be double the country’s 2018 shale gas production. China, however, appears to be counting on inflated forecasts of domestic gas production, according to a Sept. 30 report on Radio Free Asia, which is funded by the U.S. government. China’s leadership has predicted a 20-fold increase in shale gas output by 2035, which could require over 500 new wells per year between 2019 and 2035. The numbers suggest the government is sticking with unrealistic targets, according to the radio commentary. “These numbers do look very, very high relative to what has been done so far in developing shale and tight gas,” said Mikkal Herberg, of the Seattle-based National Bureau of Asian Research. China’s technically recoverable shale gas resources are estimated at 1,115 tcf, just behind the United States at 1,161 tcf, according to a 2013 study by the U.S. Energy Information Administration. But shale drilling in China faces hurdles, the EIA said: Shale formations are in mountainous terrain where infrastructure is non-existent; drilling costs are higher; regulatory support is limited; and water supplies needed for fracking are scarce. To help boost gas production, Chinese President Xi Jinping has a plan to merge the tens of thousands of miles of pipelines held by three state-owned oil and gas giants into one new company. The firm — informally known as National Oil &Gas Pipeline Co. — would aim to attract private investors to help expand the pipeline network and diversify supply. An independent company would be more likely, in theory, to decide on new routes based on national need rather than what serves an individual producer, according to a Bloomberg report in October. ^ Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide. He is the Atwood Chair of Journalism at the University of Alaska Anchorage School of Journalism and Public Communication.

Movers and Shakers for Nov. 10

Amy Gallaway has been named the 2020 Alaska Teacher of the Year. The Alaska Teacher of the Year is the state’s nominee for National Teacher of the Year, and serves as a member of Commissioner Johnson’s Teacher Advisory Council. Gallaway started her Alaskan career in 1993 as an archeologist in Wrangell St. Elias National Park, but it was her seasonal job as a teacher’s aide in Glennallen School that changed her life. She left archeology and earned her teacher certification from the University of Alaska in 1999, and took her first teaching job in Nuiqsut, an Inupiaq village on the Colville River. In 2002, Gallaway started working for the Fairbanks North Star Borough School District. She currently works at West Valley High School where she teaches history, government, and career education to 9-12 grade students. She is a teacher mentor for the national “We the People” civics program, which emphasizes critical thinking and culminates with a simulated congressional hearing with community judges. Gallaway holds a bachelor’s degree from Northern Arizona University and a master’s degree in teaching from the University of Alaska Fairbanks. Ben Griese has been named the 2020 Alternate Alaska Teacher of the Year. He will serve as Alaska Teacher of the Year if Gallaway is named National Teacher of the Year. Griese has devoted 10 years to serving the communities within Southwest Region School District, most notably as a prek-12 special education teacher at “Chief” Ivan Blunka School in New Stuyahok. Griese teaches self-advocacy and inclusion for all students. He ensures that students with disabilities are included and successful in academic, social, athletic, and subsistence activities. Griese holds a bachelor’s degree in special education teaching from Purdue University. James Doughty and Jake Kolipano were recently promoted to partner at BDO’s Anchorage office. Doughty has extensive experience performing assurance work throughout Alaska. He serves a variety of clients across many industries, including Alaska Native corporations, government contractors, governmental entities and nonprofit organizations. He is a member of the Anchorage Audit Quality team. Kolipano provides assurance services to Alaska Native corporations, government contractors, construction contractors, and healthcare and nonprofit entities. His responsibilities include managing to completion comprehensive assurance and consulting engagements. Russell Gingras, EIT, recently joined R&M Consultants Inc. as a staff engineer in the firm’s Utilities Group. Gingras will assist with planning and design of civil engineering projects, with an emphasis in utility design, such as water and sewer improvements. Gingras brings two years of civil engineering experience to R&M, with experience in both public and private utility sectors. He is experienced in construction site inspections, utility conflict review, utility waivers and permitting, feasibility reviews, and agency coordination for review and inspection of wastewater projects. A former AWWU intern, Russell is knowledgeable in Municipality of Anchorage and American Water Works Association standards and specifications. Gingras has a bachelor’s degree in civil engineering from the University of Alaska Anchorage. He was also recently certified by the Alaska Department of Environmental Conservation as an operator for Water and Wastewater Treatment. Don Brown has joined PND’s CAD group in Anchorage. Brown earned a bachelor’s degree in science and technology from the University of Alaska Anchorage, an associate’s in electronics technology from the Community College of the Air Force and an associate’s in computer science from Charter College. He retired from the Air Force, where he served as a satellite communications technician and was deployed to Riyadh, Saudi Arabia, during Operation Desert Storm. He has since worked as a telecommunications worker, computer assistant, electronics mechanic, network technician, AutoCad specialist, engineering technician and adjunct professor teaching Autodesk, Microsoft Office, math and safety classes. Lifelong Alaskan and University of Alaska Fairbanks graduate Levi Overbeck, PE, has joined PND’s Anchorage civil staff. Overbeck holds bachelor’s and master’s degrees in civil engineering from the University of Alaska Fairbanks. He spent three years at Jacobs Engineering in environmental and drainage design and modeling. One of his first assignments at PND is to bring his Bentley MicroStation experience to bear on Alaska Department of Transportation and Public Facilities and Federal Highway Administration projects. Overbeck’s educational emphasis was in arctic water resources and hydrology; he spent two summers conducting hydrology studies at remote North Slope sites. Sarah Boeckman has joined PND’s Anchorage accounting staff. As a project accountant, she will assist with project setup and reporting, billing, and project closeouts, and other accounting functions as needed. Boeckman is a lifelong Alaskan and graduate of the University of Alaska Anchorage with a bachelor of business administration degree in accounting. She previously worked for Bristol Bay Industrial where she supervised project accounting and billing for Peak Oilfield Services. Stoel Rives LLP added three associate attorneys to its Anchorage office. Shannon Behm-Bleicher joins the office in the firm’s Environment, Land Use and Natural Resources group; Connor Smith in the Litigation group; and Heather Twitchell in the Corporate group. Behm-Bleicher provides counsel to clients in matters of environmental compliance, land use and permitting. She received her law degree, cum laude, from Creighton University School of Law and undergraduate degree from Creighton University. From 2017-19, Behm-Bleicher served as a judicial law clerk to the Honorable Judge Frank Pfiffner and to Judge Andrew Peterson of the Anchorage Superior Court. She is admitted to practice in Alaska and Nebraska. Smith represents clients in commercial litigation matters in state and federal courts, and in arbitration and mediation. He received his law degree, summa cum laude, from Seattle University School of Law and bachelor’s degree from California Polytechnic State University. Smith served as a law clerk to Justice Craig Stowers of the Alaska Supreme Court, as a judicial extern to the Judge Morgan Christen of the U.S. Court of Appeals for the Ninth Circuit, and as a legal intern at Fair Work Center. He is admitted to practice in Alaska. Twitchell provides counsel on a wide range of corporate transactional matters, largely in the realm of mergers and acquisitions. She received her law degree, cum laude, from the University of Wisconsin Law School and undergraduate degree from the United States Military Academy at West Point. Before joining the legal profession, she co-owned and managed a small business, Alaska Backcountry Fishing Lodge LLC, and served as a captain and UH-60 helicopter pilot in the U.S. Army. She is admitted to practice in Alaska and Wisconsin.

Mineral exploration spending strong for second year; Icy Cape grows

Mineral exploration is on the rebound in Alaska and a unique state-owned prospect is showing promise. Nearly $150 million was spent prospecting mostly for large mine opportunities in the state last year and likely in 2019, according to Curt Freeman, president of Fairbanks-based Avalon Development Corp. That is up from just more than $50 million three and four years ago, but off from a peak of roughly $350 million per year in the late 2000s, when substantial work was being done at the Pebble deposit. The figures were compiled with data from the Alaska Department of Natural Resources. Freeman tallied 18 large exploration projects across the state for “every metal under the sun,” he said. “It was a pretty good year for exploration all the way around.” However, he noted Alaska’s six metal mines are all large operations and the state does not have a single mid-sized producing mine. As is the challenge for many industries in the state, the high cost of operating in very remote places often requires very large and inherently complex projects to be economic. The Alaska Mental Health Trust Land Office is exploring a growing heavy mineral prospect it owns at Icy Cape on the exposed Gulf of Alaska coast between Cordova and Yakutat. Trust Land Office minerals and energy manager Karsten Eden said simply the prospect of industrial-use minerals is commercially viable and contains significant quantities of in-demand minerals such as garnet and epidote — as well as gold. “Every sample has gold in it,” Eden said of the drilling work that’s been done there. He spoke Nov. 5 at the Alaska Miners Association convention in Anchorage. When it started in 2017, the focus of the exploration was on the beach sands that underlie the spruce forests along the coast at Icy Cape. Now the resource delineation work has shifted to the deeper sediments, Eden said. Since 2017 the Trust Land Office has had 13,000 feet of core samples drilled from boreholes down to 300 feet, he said. The Trust Land Office manages roughly 1 million acres of land across Alaska for real estate and resource development purposes, the proceeds of which go to fund the Alaska Mental Health Trust Authority’s work to benefit Alaskans with mental health and addiction challenges. Specifically, the multi-heavy mineral prospect consists of abrasives garne and epidote, and zircon, magnetite and gold. They are present across most of the 48,000-acre property, which is closed to public access, but the exploration team is interested in 23,000 acres of it, according to Eden. The magnetite allowed the Trust Land Office to fly a magnetic survey of the area to better hone in on prospective areas to drill, he said. Different layers of the area’s marine sediments are largely comprised of similar minerals, just in consistently different sizes, he said. That can be beneficial when marketing the processed minerals as certain grain sizes are used for certain applications. “Where you have the highest concentration of heavy minerals you definitely have the highest concentrations of gold,” Eden said. Tests of the minerals’ characteristics by industrial users and labs indicate Icy Cape has “elements of prime quality,” he added, also noting that industrial manufacturers want large prospects that they can count on to produce for 15 years or more. Garnet, a fairly hard, multi-use mineral is in high demand, according to Eden. “The main producer India doesn’t export anymore so people are looking for garnets,” he said. Further resource evaluation will be coordinated with the ongoing logging of various portions of the property to take advantage of increased access to portions of it, according to the Trust Land Office. Eden said the next steps are to compile a formal resource evaluation while looking for a private partner to lead development of the prospect. That work would likely include building a port facility to handle supply shipments and mineral exports. “Gold you can always fly out,” he said. Elwood Brehmer can be reached at [email protected]

Leadership aims for common ground next session

Alaska’s leading lawmakers hope they can start to solve some of the longstanding, fundamental issues that challenge the state by improving a simple but crucial aspect of their work next session: communication. At a forum hosted by the Alaska Chamber on Oct. 29 in Girdwood, House Speaker Bryce Edgmon and Senate President Cathy Giessel said regardless of specific policies, they want to improve their working relationships with top decision makers in the Governor’s Office when they convene in Juneau next January. Both said that despite all parties spending months together in Alaska’s small Capitol building, they rarely if ever spoke with some of Gov. Michael J. Dunleavy’s closest advisors. “Last year in the House we virtually had little to no relationship with the governor,” Edgmon said. “I never talked once with his chief of staff. I never met his (Office of Management and Budget) director other than on the street — things like that. I’m encouraged that the governor’s got a new chief of staff that’s got legislative experience.” Dunleavy’s former chief of staff Tuckerman Babcock, who previously chaired the Alaska Republican Party, is known for his very conservative and uncompromising positions on many policy matters. Former OMB Director Donna Arduin, who has held equivalent positions for several Republican governors across the country, routinely told legislators questioning the governor’s budget proposals in committee hearings that it was not the responsibility of her office to vet the impact of those ideas. Policy goals aside, Giessel said that ideally next session would provide the public a chance to see the Legislature and the governor “actually working together, actually communicating. That would provide them, I believe, with something that’s been lost and that’s trust in government.” Looking back at last session, she acknowledged she likely could’ve been more aggressive in pursuing a dialogue with Dunleavy and some of his cabinet officials. Edgmon and Giessel spoke alongside Dunleavy’s current chief of staff and former Alaska Senate President Ben Stevens during the Alaska Chamber’s annual fall forum Oct. 29. Stevens was a policy advisor to Dunleavy prior to taking the role of chief of staff. Dunleavy spokesman Jeff Turner said the governor was on a personal trip during the Chamber event. Stevens noted it is common for governors during their first year in office to have an up-and-down relationship with legislative leaders, but said Dunleavy also acknowledges that if he would’ve had “more of an open-door policy,” better relationships could’ve been formed. “The governor’s in a cooperative mood to try to work with the Legislature and see if we can come to a resolution” on some of the pressing issues facing Alaska, namely the state budget and Permanent Fund dividends, Stevens said. Babcock said in a brief interview that he and Dunleavy decided early on that he would not be a primary conduit between the administration and the Legislature, though some governors do delegate that duty to their chief of staff. Instead, legislative leaders had frequent discussions with Dunleavy’s Legislative Director Suzanne Cunningham and regular meetings with the governor himself during the session. Also, Giessel and Edgmon never requested to meet with him, according to Babcock. “They’re just making excuses for how antagonistic they were towards the governor,” he said. In spite of budget debates that stretched into August — more than a month after the fiscal year 2020 budget took effect — Dunleavy’s goal for next spring is that he and lawmakers can reach agreement on a balanced budget in the traditional 90-day legislative session, according to Stevens. He said Dunleavy is going to continue to “face the budget head-on,” but at the same time the governor understands achieving his goals will require compromise. “I think this concept — I don’t know when it occurred — but the concept in politics that compromise equates to surrender is not really conducive to an agreement,” Stevens added. While there was a breakdown of communication between branches of government last session that largely left the state’s fiscal issues unresolved, legislative leaders seemed to form bipartisan bonds. Giessel, a staunch Republican, said she considers the biggest success of last session being the two-way trust formed between her and Edgmon, a longtime Democrat turned independent. “We formed a good basis of communication. I would also identify the positive communication I had with my minority leader, (Democrat) Sen. Tom Begich, which again, is probably shocking to some people. It’s shocking to me,” Giessel said. “I’m known as a fairly partisan Republican but yet on the positive, that communication really helped us move forward.” Throughout the year Giessel and Edgmon have issued numerous joint statements and aligned the mostly Democrat House and Republican-dominated Senate majorities on a host of issues. Deciding the dividend The biggest issue facing lawmakers continues to be the PFD, which Edgmon forecasted would continue to be the “elephant in the room next session.” Giessel said she’s looking forward to the report the bicameral Permanent Fund Working Group is expected to publish near the start of the session in January. The eight-member committee formed last year has examined the history of the Permanent Fund and various ways lawmakers could approach changes to the PFD formula and their fiscal impacts. “I have great expectations that the Permanent Fund Working Group report that they’re going to put together will provide a good basis for us moving forward on settling on the formula,” Giessel said. The group is chaired by Republicans Rep. Jennifer Johnston of Anchorage and Sen. Click Bishop of Fairbanks, who have advocated for revising the PFD formula. For Dunleavy, all other budgetary decisions precipitate from paying a full, statutorily calculated PFD. He primarily campaigned on paying full PFDs with minimal cuts to other state services at a time when budget forecasts indicated higher oil prices and production would provide most of the revenue to do just that. However, when oil prices fell nearly 30 percent between the November 2018 election and his early December inauguration, Dunleavy chose to stick to his PFD promise at the expense of other appropriations in a decision that has elicited strong support and backlash. The PFD is one of the issues that has united Giessel and Edgmon; both contend the state cannot afford to pay dividends at the amounts the current law calls for. Edgmon recalled public hearings the House Finance Committee held across the state following the release of Dunleavy’s budget plan, which would’ve cut approximately $1.2 billion in state spending and pulled another roughly $400 million in municipal tax revenues into state coffers. “We thought we heard resoundingly from the general public that they wanted a balanced approach,” he said. “They value the dividend but they also value public education, transportation, public safety, health care services and having stability in government.” With legislative leaders at odds with an entrenched governor over the PFD, it’s unclear at this point how the upcoming session will be different than the last. Dunleavy’s willingness to reverse about half of the more than $400 million he originally vetoed from the state operating budget was a big step towards improving his relationship with the majority of legislators but there’s still a lot of repair work to do, according to Edgmon. Education funding, spending cap, oil taxes On other issues, Stevens said reaching a resolution on education funding procedures could hopefully lead to important discussions about what reforms are needed to the state’s K-12 system. Dunleavy and the Legislature are currently involved in a lawsuit over whether the Legislature’s decision to forward-fund education across gubernatorial administrations is allowed by the Alaska Constitution. “We’ve gotten over and over reports that our outputs from the education system are diminishing in terms of comparison to national standards and national test results, so I think that’s probably one thing that we find out and agree upon early depending on the outcome of that case,” Stevens said. A school administrator prior to running for office, Dunleavy repeatedly said last spring that his administration would be putting forth a K-12 education reform package that didn’t materialize. Edgmon, who in 2017-2018 led a caucus that pushed for oil tax changes and rejected a state spending cap, acknowledged those positions likely aren’t workable in the current situation. As for a spending cap in state law, he noted legislators have taken to invoking the constitutional authority that generally allows them to bypass statutes relating to appropriations. That means a constitutional amendment, or amending the current constitutional spending cap is in order, he said, though those have very high hurdles for success. Constitutional amendments require a two-thirds vote from both the House and Senate before they can be put up to a public vote. Giessel concurred with Edgmon, adding that a revised constitutional spending cap proposed by Dunleavy is in the Senate Finance Committee and will likely be heard, and tweaked, during the session. Stevens called a new constitutional spending limit “a foundational part of a true fiscal plan,” contending Anchorage’s municipal tax cap — a limit on the revenue side of the ledger — has effectively limited spending increases in the city. Alaska passed a constitutional spending limit in 1982; it capped overall state General Fund spending on things other than debt service and PFDs at $2.5 billion at the time. However, allowances for inflation and population growth mean the state would have to spend somewhere near $12 billion to hit it today, Edgmon estimated, roughly twice the current budget. The trio also laid to rest rumors that the legislators or the governor would attempt to preempt a voter initiative to raise oil taxes by doing it themselves, likely at a lesser rate than the initiative calls for. The Fair Share Act sponsors estimate their voter initiative, which was certified by the Division of Elections Oct. 15, would raise approximately $1 billion per year in new revenue. The panelists all noted changing Alaska’s oil tax system is an issue that historically has required two years of debate to get new lawmakers educated on the exceedingly complex and contentious matter and vet all the ramifications of such a significant policy change in addition to pre-session analyses with consultants that haven’t happened this year. “Be wary of the initiative process to generate revenue, because, what’s next?” Stevens said. Many in the public believe higher oil taxes are a means to pay for higher PFDs, Edgmon surmised. He went on to say that adding another major issue to what is almost assured to be another tense time in Juneau wouldn’t be fruitful. “Quite frankly there are some differing world views with the Dunleavy administration and the Legislature that still exist. We have to get past that. To through oil taxes on top of that — I don’t know where it takes us,” he said. Budget gap widens Though lawmakers aren’t going to voluntarily add to their workload, it appears a variety of factors are combining to add to the budget deficit they will have to deal with when the session starts Jan. 21. First, Alaska North Slope oil prices and production are both tracking below expectations for the first four-plus months of the 2020 fiscal year. While North Slope production typically peaks in the winter and early spring, that is the same time of year when oil markets are at their softest. Legislative Finance Director David Teal told a gathering of the Alaska policy group Commonwealth North Nov. 1 that lower-than-expected oil revenues are likely to result in an $85 million deficit this fiscal year, which will be covered out of the $2.2 billion Constitutional Budget Reserve — the state’s lone remaining savings account. Teal noted further that this year’s capital budget was also funded via $142 million from the CBR, which is not a long-term solution. Additionally, the Legislature took $30 million from the Power Cost Equalization Fund to pay for higher public safety and corrections costs related to criminal justice reforms last session; mandatory public employee pension payments could increase by up to $100 million; and the state’s Medicaid bill could be $75 million more than was budgeted for after Dunleavy vetoed a portion of Medicaid funding without making major changes to the underlying program. “You’ve got to cut $150 million from the budget to stay even,” Teal said. If accounting for full PFDs, it all adds up to another projected annual deficit of $1 billion or more. Elwood Brehmer can be reached at [email protected]

Bering Sea halibut bycatch increases as council considers cod options

Editor's note: This article has been edited to correct the coastwide bycatch numbers. The bycatch numbers across Alaska exceeded the fishery limits, but in individual areas the bycatch was lower in 2019 than in 2018. Bycatch increase in areas 4 CDE+CA, in the Bering Sea. In the Bering Sea, commercial fishermen caught more halibut as bycatch this year, though overall bycatch in Alaska fell. Data released preceding the International Pacific Halibut Commission’s upcoming interim meeting shows that almost all the regulatory areas of Alaska from Southeast to the Bering Sea — areas 2C through 4E, respectively — caught less halibut as bycatch in 2019 than they did in 2018, though the areas all still exceeded their fishery limits, with the exception of Area 4B. Coastwide, from California and British Columbia through the Bering Sea, bycatch decreased from a little more than 6 million pounds to about 5.89 million pounds, though bycatch in areas 4 CDE+CA increased from about 2.98 million pounds to about 3.22 million pounds. Overall, commercial fishermen have landed about 16.5 million pounds of halibut in Alaska in the 2019 season, 13 percent less than the fishery limit. Alaska made up most of the non-directed commercial discard mortality, with about 5.56 million pounds. The IPHC will hold its interim meeting Nov. 25 in Seattle to review the stock assessment and season information, among other information, prior to its full annual meeting scheduled for Feb. 3-7, 2020, in Anchorage, where the commission adopts its season limits and regulations. Most of the non-directed commercial discard mortality — the technical IPHC term for bycatch — went to the trawl fleet, as it has in the past. There was also a small increase in Southeast Alaska’s bycatch numbers, though the area doesn’t have a trawl fleet and overall catch was down from the 2018 season. Halibut bycatch is a sticky problem throughout Alaska’s commercial fisheries. The high-volume trawl fleet targets a variety of species, including flatfish, that share habitat with halibut. While longliners can use larger hooks to avoid catching immature halibut, trawlers use large nets that don’t necessarily predict what will come up. To control the bycatch, the North Pacific Fishery Management Council sets prohibited species catch, or PSC, limits; when the limit on bycatch is reached, the fishery is restricted or closed. In the case of the Pacific cod fishery in the Bering Sea, this has been happening more and more often. Declining total allowable catch, or TAC, limits for Pacific cod increasingly shorten the season and pressure boats to work quickly, hoping to catch enough cod before the cap is reached. Because they work quickly, they increasingly may not take precautions to avoid bycatch, adding the pressure of the fishery closing more quickly as the PSC limit is reached. Combined with pressure on the stock from directed fishing and changing ocean conditions, researchers and stakeholders have raised concerns about the long-term sustainability of the stock. The North Pacific Fishery Management Council is working on a major program aimed partially to control halibut bycatch in the Bering Sea: rationalizing the Pacific cod fishery in the Bering Sea, aiming to alleviate the pressure on the halibut there by eliminating what stakeholders call “the race for fish.” During the council’s meeting in October, the members approved a list of options and elements for preliminary analysis for the Pacific cod fishery, including a number of particulars for a cooperative-based limited access privilege program in the fishery. Within the purpose and need statement, reducing bycatch is identified as one of the goals. The North Pacific Fisheries Association’s members want to see permanent measures to reduce bycatch included in the program, including mechanisms to change the plan if bycatch isn’t reduced, and encouragement to transition to more selective gear types. “We are encouraged that bycatch reduction is a top priority for the Council, and an integral part of the Purpose and Needs Statement for this topic,” wrote NPFA President Malcolm Milne in a letter to the council. “However, we have increasing concerns about the council’s ability to achieve that intent through a program that, despite strategic design, still codifies use of and permanent access rights to gear with high bycatch rates.” Pacific cod is a high-volume fishery, while halibut, on the other hand, is a high-value fishery. To sustain the communities that depend on cod, the high volume needs to come in, wrote Pacific Seafood Processors Association President Chris Barrows in a letter to the council. The processors recognize that something needs to be done to address the race for fish but encouraged the council to consider the investment and dependence on cod of all sectors before moving forward with a cooperative based model for rationalizing the Pacific cod fishery. “All sectors are reliant on a healthy resource, improving bycatch, robust monitoring, and a safely prosecuted fishery,” he wrote. “As we make changes to better accomplish those objectives, we want to encourage inclusion and consideration of all dependent sectors, including shoreside processors and the communities in which we operate.” Both Pacific cod rationalization program and an abundance-based management program — which would allow PSC limits to flex with the biomass assessments in the Bering Sea rather than being fixed — have potential to address the issue, but the particulars are still unclear, said Peggy Parker, the executive director of the Halibut Association of North America. The abundance-based management program is meant to help alleviate the problem of a non-directed fishery still taking Pacific halibut when a directed fishery is shut down or curtailed because of a lack of sufficient fish. “We could have a situation where the directed fishery is shut down, but bycatch is still allowed,” she said. “I really recognize the strong feelings they have not to shut down the flatfish fishery, the pollock fishery, any of that … We don’t want to shut down these really important-to-the-national-economy fisheries, but we also don’t want to lend a hand to what could be severely damaging to the halibut stock.” The bycatch issue in the Bering Sea goes outside its geographic confines, too, she said — halibut migrate extensively from west to east. With heavy fishing pressure on all age groups in the Bering Sea, the question extends to the other regulatory areas whether the Pacific halibut stock can withstand that level of bycatch. In either case, both measures are far to implementation yet. “I don’t know if it’s going to be enough, because we don’t really have a good clear picture yet of what either of those are going to look like,” she said. Elizabeth Earl can be reached at [email protected]


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