Hilcorp agrees to operate Point Thomson

ExxonMobil is in the process of transferring operations at its Point Thomson gas field on the North Slope to Hilcorp Energy, according to representatives of both companies. An agreement signed Oct. 19 calls for Hilcorp to take over as operator at Point Thomson early next year presuming the requisite state regulatory approvals are secured. ExxonMobil Alaska spokesman Hans Neidig said there is no change in ownership associated with the arrangement. ExxonMobil owns 62% of the eastern North Slope field, which started producing natural gas liquids in 2016. Hilcorp purchased BP's 37% stake in Point Thomson as part of its $5.6 billion takeover of the London-based major's Alaska assets. Other parties collectively own less than 1% of Point Thomson. “This change takes advantage of Hilcorp's scale and experience operating North Slope assets and allows the Point Thomson working interest owners to contribute our respective strengths to the value of the asset,” Neidig said. No cash changed hands in the deal. Hilcorp took over operations at Prudhoe Bay from BP in June 2020. Prudhoe Bay and Point Thomson are seen as primary sources of natural gas for the state's long-sought pipeline and LNG export project. Hilcorp Alaska Senior Vice President Luke Saugier said the company is excited to continue its commitment to Alaska in a prepared statement.  “We welcome the opportunity to apply our proven record of enhancing conventional assets to Point Thomson,” Saugier said. Hilcorp has leaned on its business model of extending the life of mature assets to steadily increase its position in the state since entering the Cook Inlet basin approximately a decade ago. The Point Thomson deal will impact 38 ExxonMobil employees, according to Neidig, who said they would be able to interview with Hilcorp or be repositioned within ExxonMobil, possibly outside of Alaska. ExxonMobil agreed to construct Point Thomson in 2012 at a cost of roughly $4 billion. Development of the high-pressure gas field was a key precursor to a large LNG project.   Elwood Brehmer can be reached at [email protected]

Board of Fish adds Chignik, Inlet sockeye issues to March agenda

Upper Cook Inlet setnetters may get some changes from the Alaska Board of Fisheries sooner rather than later. At its Oct. 20-21 worksession, the Board of Fisheries turned down seven agenda change requests from Upper Cook Inlet fishermen, five of them related to the restrictions on the set gillnet fishery and two more on general fishing provisions.  However, the board members accepted their own proposal that could allow for limited fishing in the setnet fishery as long as the late run of Kenai River kings meets the lower end of its goal and both the Kenai and Kasilof rivers have also met their sockeye goals. This year presented exceptionally hard circumstances for the Kenai Peninsula setnetters of the upper sub-district, which stretches about 60 miles from Nikiski to Kasilof. Though sockeye salmon, the fishery’s primary target, were running thick, Upper were forced to pull gear out of the water by mid-July—usually the peak of the sockeye run—because of low king salmon returns. Because the two salmon runs are paired together in regulation, setnetters lost weeks of harvest, and some said that translated to tens of thousands of dollars for their operations. “The lost opportunity to harvest sockeye each year is an economic disaster, and cannot be overstated, for our families, coastal communities, support infrastructure, and processors,” longtime Upper Cook Inlet setnetters Brian and Lisa Gabriel wrote in testimony to the board. “At a time when the governor has stated that we need to squeeze every dollar that we can out of the economy, it seems contrary when $60 to $80 million of economic stimulus was left on the table because of forgone harvest.” The Gabriels were among dozens of setnetters who submitted similarly supportive comments of an agenda change request, or ACR,  which would have allowed for openings of the 600-foot fishery to harvest sockeye under certain circumstances even when Kenai River king runs are limited. Recent data from the fishery indicates that few kings are caught in the short nets, which are set out to 600 feet of mean high tide. Travis Every, who submitted the request, submitted a nearly identical request in July, which prompted an emergency meeting from the board in August. The board declined to accept the request then, which would have potentially reopened some setnetting at the tail end of the Kenai River sockeye salmon run.  “At (the emergency) meeting several board members stated that the emergency petition platform was not the correct venue to solve this matter,” Every wrote. “They encouraged setnetters to present our limited 600ft fishery through the ACR process.” Board member McKenzie Mitchell submitted the board’s 600-foot fishery proposal, which would allow limited fishing when escapement in the late run of Kenai kings reaches 13,500 fish and escapements have been met in the Kenai and Kasilof sockeye fisheries. Mitchell said she agreed that the public ACRs didn’t meet the standards for an emergency, but wanted to see something to be done to help the commercial fishermen. The board has three criteria for accepting ACRs: a conservation purpose, to correct an error in regulation, or to correct an effect on a fishery that was unforeseen. Every wrote that the board’s decision to implement increased king salmon escapement goals at the 2020 Upper Cook Inlet meeting and to require a complete setnet fishery closure could not have foreseen two pieces of information. One is the data showing that the 600-foot fishery, when implemented across the entire east side setnet fishery, would catch so few king salmon proportionally.  The other is that the North Pacific Fishery Management Council moved to close the federal waters to salmon fishing in Cook Inlet, effective at the end of this year. Estimates range for how that will impact the drift fishery, but past records from the Alaska Department of Fish and Game have estimated that about half of the drift fleet’s salmon harvest in Cook Inlet comes from the federal waters. Drifters have protested the move, and the United Cook Inlet Drift Association is currently working in the courts against the council’s decision. Board of Fisheries member Gerad Godfrey, who supported the fishermen’s argument that the present situation was unforeseen at the August meeting, said now that he agreed with the petitioners’ logic and that without action, the fishery will likely become cost-prohibitive to participate in. Board member Indy Walton, who is new to the board and lives on the Kenai Peninsula, said he agreed that the actions taken at the 2020 meeting led to these consequences. “If you’re changing the escapement goals and not seeing the potential domino effect… Now here we are today, looking at those dominoes that have fallen, knowing what has caused those,” he said. “From a conservation standpoint … I want to see these king stocks grow, but at the same time too, we run the risk of over-escapement.” Board member John Wood also said he would support accepting the ACR, especially in light of the federal waters closure. Without additional action, he said the risk of letting too many sockeye into the river is a real one. However, board members Israel Payton, John Jensen, and Marit Carlson-Van Dort all said the request didn’t meet the criteria for an unforeseen emergency. Payton said the board knew that the actions it took in 2020 would result in less sockeye opportunity in order to preserve kings, so that didn’t make it unforeseen. The board also accepted an ACR aimed at conserving Chignik sockeye salmon stocks. Chignik has seen four years of failed early-run fisheries and the proposal seeks to limit Alaska Peninsula harvest of Chignik-bound stocks through season adjustments. By approving the change requests the board members have not made any regulatory changes yet; rather, they agreed to investigate the issues at a March meeting. The board members went back and forth on whether the Chignik request qualified under the ACR guidelines as well, but ultimately came down to concern over the conservation of the stock. Board member John Jensen said he is concerned about the stock, but that Chignik’s regular meeting is coming up next year and could be discussed then with the extra data. Other board members disagreed, saying that Chignik had already had to wait an extra year because of delays related to the COVID-19 pandemic. “There was one entity that said, ‘Do not postpone this because our situation is so dire,’” Wood said. “That entity was Chignik.” Fish and Game representatives said the department did not see the ACR as meeting the criteria, because early-run sockeye are returning to Chignik at a sustainable rate, but that the yield available for harvest is lessened. Public comments in favor of the Chignik ACR were divided—there were nearly double as many comments opposed as in support, with nearly all the comments in support from the community and those opposed from the commercial fisheries outside it.    Elizabeth Earl can be reached at [email protected] 

With last grants, Exxon Valdez oil spill council provides funding for cultural preservation

Little, if any, money from the $900 million Exxon Valdez oil spill settlement remains unspoken for. But much of the last round of funding was distributed with an eye toward investments in facilities and resources that numerous Alaska Native organizations and some current stewards of the settlement funds say were long overdue. Exxon Valdez Oil Spill Trustee Council members unanimously approved approximately $150 million in grants for research and restoration of habitat and resources impacted by the 1989 oil spill during their Oct. 13 meeting. Among the largest funding proposals approved was $8 million for expanding the Alutiiq Museum and Archeological Repository in Kodiak. Following the council’s vote on the proposal, Alutiiq Museum Executive Director April Laktonen Counceller said that the renovation and expansion will address all of the major issues identified in a 2019 survey of the museum’s audience. “The museum will transform its entire first floor into a public space. The exhibit gallery and store will be significantly enlarged, and a classroom created. Here, the museum will be able to meet with elders, hold classes, and host receptions,” Counceller said. “We are going to create a living culture classroom — a place where people can gather to share knowledge and celebrate traditions.” Work on the museum, which currently houses a collection of roughly 250,000 artifacts, is scheduled to start in February. Grant funding will also be used to build a new vault in the museum’s basement. The original vault was filled about 10 years ago, according to museum leaders. The initial funds to build the Alutiiq Museum largely came from a 1993 EVOS Trustee Council grant. Current council chair and Department of Environmental Conservation Commissioner Jason Brune said in an interview after the meeting that it was important for the state trustees, who include Fish and Game Commissioner Doug Vincent-Lang and Attorney General Treg Taylor, to make sure there is long-term funding in place for continuing operations at the Alutiiq Museum, as well as other facilities and organizations that arose from the spill. Helping the museum expand and improve its operations is one way to do that. “The anthropological resources, cultural resource efforts have really been overlooked and it’s important to ensure they will be appropriately preserved for generations,” Brune said. He added that several trustees were able to tour the museum and better understand what leaders there wanted to do. Shauna Hegna, president of Koniag Inc., the Kodiak-area Alaska Native regional corporation, said she is thrilled the council made the decision to invest in the museum, which coincides with Koniag donating a portion of the building. The first floor of the building was built with EVOS council funds and Koniag has worked over the past year to purchase the basement of the building, which will be turned over to the nonprofit for the renovation. “The Alutiiq Museum will now own its facility and be able to renovate it,” Hegna said. She thanked the trustees for reviewing the museum proposal and others focused on cultural priorities impacted by the oil spill that previously had little opportunity to secure EVOS funding — $6.8 million for a new Chugach Heritage Foundation Museum and $2.4 million for subsistence resource camps in the Chugach region. The lion’s share of projects the council historically funded were scientific research and habitat restoration efforts. Numerous projects in those realms were also funded Oct. 13. Chugach Corp. Executive Vice President Josie Hickel echoed Hegna’s sentiment in regards to the broader proposal review, adding it is one of several improvements Chugach leaders feel the council has made in recent years. She highlighted the support for culture camps aimed at rejuvenating subsistence activities in the Chugach region as recognition of a major facet of life that was almost completely lost in many spill-affected areas. “Subsistence was one of those things that was drastically and immediately impacted by the spill,” Hickel said. “That disruption caused a generation of young people to not learn subsistence practices.” She added that she believes an ultimately unsuccessful stakeholder-led effort to encourage the council to move its last roughly $200 million into an endowment to maintain funding for decades caused council leaders to rethink their approach, at some level. According to the trustees, a legal opinion from the Justice Department precludes putting the remaining EVOS funds into a traditional endowment fund; that would require an act of Congress. Brune said that in the alternative, the council funded several 10-year science programs to stretch out the money. A former member of the EVOS Public Advisory Committee, Brune said he and other trustees worked to improve the transparency in the funding process by voting on each of the 65 proposals submitted. Previously, it was much more difficult for unsolicited proposals to garner the attention needed to get funded, according to Hickel and others. The remaining $10 million-$12 million in unencumbered funds — as of Friday, council staff were still crunching the final numbers for several proposals amended or partially funded at the meeting — will mostly go to staff and expenses for administering the outstanding grants as the EVOS Trustee Council gradually “winds down,” Brune said. He expects to hold another council meeting over the winter to determine the council’s budgeting but then only hold meetings every several years or on an as-needed basis. The trustees have traditionally held at least one full council meeting each year. “We’re trying to put as much money into restoration and science-based efforts, as well as those legacy facilities,” he said, noting the trustees were presented with more than $250 million in proposals when they had approximately $160 million to distribute. “We put our money where our mouths were and funded what should be funded,” he said. Elwood Brehmer can be reached at [email protected]

Inflation spikes lead to rising voter concerns. Will Biden be blamed?

WASHINGTON — Democrats and Republicans alike have long expected next year’s midterm elections to hinge on the state of the coronavirus pandemic, the job market and former President Donald Trump’s influence on the GOP. Now, they see a new potential top issue emerging: inflation. Political strategists from both parties are closely watching the price of everyday goods, which continue to rise at higher-than-expected rates, preparing to grapple with a pocketbook issue that could resonate with voters in a way it hasn’t in decades. Republicans in particular see the issue as a potent one for the upcoming midterm campaign, increasingly putting rising inflation rates at the heart of their attacks on the economic policies of President Joe Biden and Democrats in Congress. “I believe the economic challenges the country faces, with inflation leading them, will be the single biggest concern to voters this cycle,” said Don Conston, president of the Congressional Leadership Fund, a super PAC with ties to House Republican leadership. “It’s already there, and likely that it will only intensify further going forward.” Not everyone is so certain. Economists say they don’t know if prices will continue to increase, and even if they do, political operatives say it’s unclear whether voters will blame the president. But veteran Democrats concede that it’s an issue they are now watching closely for the first time since the rampant inflation of the late 1970s and early 1980s, the latest in a string of challenges facing the Biden White House and the party. “It’s like an old nightmare girlfriend from 40 years ago who shows up on your front steps,” said James Carville, chief strategist for Bill Clinton’s 1992 presidential campaign. Carville labeled the political threat of inflation “not an emergency” but a “matter of some concern.” The Bureau of Labor Statistics recently released data showing that prices have risen 5.4% over the last year, according to the consumer price index, which tracks the cost of housing, food, energy and other items. It was the largest year-over-year rise in 13 years, well above the Federal Reserve’s target of a 2% rate of increase. That has led to growing fears in economic and political circles that inflation could continue into 2022. The data was also released the same week that concerns about supply-chain disruptions at the nation’s ports crested, with the Biden administration announcing that the Port of Los Angeles would operate 24 hours a day to help relieve the logjam there. White House officials have for months fended off questions about their concern over inflation, saying the price increases are only temporary and mostly a consequence of the economy returning to normal after the worst of the pandemic. But polling has shown that voters are worried about rising prices. A Pew Research Center survey from late last month found that 63% of Americans said they were “very concerned” about rising prices for food and consumer goods, topping the other economic issues they were asked about. And according to a Fox News poll from mid-September, 82% of voters said they were concerned about inflation and higher prices, more than any other issue, including the pandemic and situation in Afghanistan. Republican operatives argue that the longer inflation remains a concern, the more likely voters are to naturally blame the party in power in Washington. They say that will especially be the case if Biden’s job performance rating on the economy as a whole remains low. Less than 40% of voters approved of Biden’s handling of the economy in a new Quinnipiac University poll, while two-thirds of voters said the economy was going in the wrong direction in the latest Politico/Morning Consult survey. “If inflation continues to rise, I think it’s very problematic for Democrats. It’s something we haven’t seen in 40 years,” said Glen Bolger, a veteran Republican pollster. “The longer this goes on, the more it impacts the economy and the mood of voters. Voters are nervous.” Republicans have heavily criticized Biden and the Democrats on a variety of fronts over the past nine months, ranging from immigration to crime to Afghanistan. But inflation has been among the most prominently featured issues in their early paid media campaigns. The NRCC, CLF, and its associated nonprofit group, American Action Network, have all aired TV or digital ads over the last three months blaming vulnerable House Democrats and their policies for rising prices. Officials with those groups say they expect that messaging to continue heading into the election year. “This is going to be an issue all the way through to the midterms,” NRCC Chairman Tom Emmer said in an interview. “This will come back to bite them at the ballot box in 2022.” While Republicans say inflation could have particular resonance with independents, suburbanites and seniors, they argue the issue is uniquely consequential because it directly affects Americans across the board. “You’ll hear candidates talking about it over and over and over again, because it’s a way to make the consequences of failed leadership real to average voters,” said John Ashbrook, a Republican strategist and former aide to Senate Minority Leader Mitch McConnell. Some Democratic pollsters say they are now asking voters about inflation for the first time in recent memory, while other operatives say the issue comes up organically in focus groups. And they acknowledge that average voters are noticing the rising prices and are concerned about them. But Democrats also say that if the rate of inflation starts to decrease over the next several months, the issue could become a moot one for the public by November 2022. And even if it does continue to increase, they argue that Biden and congressional Democrats aren’t necessarily going to receive the brunt of the blame. According to the recent Fox poll, of the 49% of voters who disapproved of Biden’s overall job performance, just 3% cited inflation as the specific reason. “Taxes going up is a very simple thing to understand, and something people can see in their property tax bill,” said Anna Greenberg, a longtime Democratic pollster. “It’s harder for them to see how government policies lead to inflation.” Ultimately, Democrats still say that their party’s fate in the midterm elections is likely to be more tied to the trajectory of the pandemic. “It’s out there, but I’m not sure the general public is so focused on it right now,” Democratic pollster Jeff Horwitt said of inflation. “I still think the overriding issue here for Biden and the Democrats is COVID.”

ConocoPhillips and Biden administration won’t appeal court ruling blocking Willow permit

With the deadline to appeal an August court decision come and gone, it appears federal approval for ConocoPhillips’ massive Willow oil project on the North Slope will be subject to at least a partial do-over, all but ensuring the development will be delayed multiple years. Environmental and Alaska Native groups successfully sued the Bureau of Land Management over the agency’s approval of the environmental review for the major oil development, which took place under the Trump administration. On Wednesday, those groups thanked BLM officials under President Joe Biden for not appealing the August court ruling invalidating the permit. But they also acknowledged that the Houston-based oil major has given every indication it will not drop the 100,000-barrels-per-day-plus oil prospect. “The Biden administration’s decision not to appeal comes as good news. It also comes as the same old news, because we know that ConocoPhillips will continue to pursue this harmful extraction project on Iñupiat lands,” Sovereign Iñupiat for a Living Arctic Executive Director Siqiñiq Maupin said in a statement. “We know the real impacts on our bodies and communities. We know that fossil fuel industrialization is an attack on our health and food security. What oil corporations seeking to exploit our homelands need to know is that Indigenous groups around the country are united. We will, alongside our climate and human rights allies everywhere, continue to protect the lands and waters our ancestors protected for us.” Tuesday was the deadline for attorneys for the Justice Department and ConocoPhillips to appeal an August order from Alaska District Court Judge Sharon Gleason, throwing out BLM Alaska’s October 2020 approval of the Willow Master Plan environmental impact statement. Gleason ruled that BLM officials erred in, among other things, not sufficiently justifying their rationale for not estimating the project’s likely contribution to foreign greenhouse emissions. That was in part due to a 2020 9th Circuit decision that vacated the environmental review for another North Slope oil project approved by the Trump administration. In that instance, the court ruled that the Bureau of Ocean Energy Management’s approval for Hilcorp Energy’s offshore Liberty project was “counterintuitive,” in that the agency concluded that not developing the oil would result in greater foreign greenhouse gas emissions. ConocoPhillips Alaska spokeswoman Rebecca Boys said in an email that company leaders opted not to appeal because they felt the best path forward is to resolve the issues highlighted in Gleason’s decision directly with the agencies. “We, and many important stakeholders, remain committed to Willow as the next significant North Slope project,” Boys wrote. “The merits of the project represent a strong example of environmentally responsible, low cost of supply development that offers extensive benefit to the public and the residents of the North Slope, including significant employment of Alaskan skilled labor from union and non-union trade associations and revenue for federal, state, borough and local governments.” At $6 billion to reach first oil and up to $8 billion to fully develop, oil industry advocates see Willow as an infrastructure hub on the western North Slope that could spur other oil projects in the otherwise mostly undeveloped National Petroleum Reserve-Alaska. ConocoPhillips had targeted the winter of 2025-2026 for first oil production from Willow, and estimated the project would generate up to 2,000 construction jobs over several years of development. Bridget Psarianos, a lead attorney for SILA and the coalition of environmental groups, said she was not caught off guard that Interior Department officials and ConocoPhillips, which intervened in the suit, did not appeal. “I think given the similarities with our case and the Liberty decision, which the 9th Circuit pointed to when we won our injunction back in February, we would’ve been a little surprised if they would’ve taken an appeal to the 9th Circuit,” Psarianos said. In February, the 9th Circuit ordered fieldwork stopped at Willow largely before it started. ConocoPhillips had planned to open a gravel pit and begin laying gravel for roads and pads last winter before the ruling. The appeals court then sent the case back to Gleason, who then issued her broader August ruling invalidating the environmental review. Interior spokeswoman Melissa Schwartz declined to comment on the decision not to appeal Gleason’s ruling, but said BLM officials are determining their path forward in regards to Willow’s federal permits. BLM’s initial environmental review and approval for Willow took slightly more than two years. It’s unclear how long a supplemental review or entirely new review would take, but it would likely be a multi-year process based on similar situations in the past. Longtime Alaska oil industry attorney and analyst Brad Keithley said he believes the agency and company may have taken the more expeditious route to keep moving Willow forward by not appealing. That’s particularly true if the Biden administration still backs the project, he added. “If (the Biden administration) wants to make this work, I think they can pull together the supplemental EIS in the short-term. If they view this as an opportunity to shut down development in the Arctic or set a precedent that’s going to apply to other projects — ANWR and elsewhere — then I think that’s what is going to lengthen it out,” Keithley said. In May, attorneys for BLM filed court briefs backing the approval of Willow, which drew the ire of the same groups now commending the administration for withholding an appeal. Psarianos said her clients want BLM to improve the public involvement process, which was disrupted by the onset of the pandemic, for any future Willow review and take a much more holistic look at the project’s potential consequences. “I think they really need to take a step back, gather baseline information and engage with the communities most impacted by the project,” Psarianos said.   Elwood Brehmer can be reached at [email protected]  

Alaska Air Group returns to profitability without pandemic aid

Alaska Airlines stood up on its own in the third quarter for the first time since the pandemic began, company executives said in a Thursday earnings call with investors. Alaska Air Group Inc., which also owns regional carrier Horizon Air, reported  $194 million in third quarter net income without COVID-19 financial assistance from the federal government. The profit stands in stark contrast to the $431 million loss the airline company endured a year ago. CEO Ben Minicucci said the turnaround exemplifies the success of Alaska Air Group's approach to maintaining discipline in its balance sheet and operations. He noted the final pre-tax earnings margin beat internal projections of 10%for the quarter. “Our 12% pretax margin solidly led the industry and was just six points shy of our third quarter 2019 margin,” Minicucci said. “I'm proud of how our company is recovering strong from the pandemic.” Alaska Air Group netted $397 million in the second quarter — it's first after five consecutive losses totaling more than $1.5 billion — but that was the direct result of more than $660 million in federal pandemic relief loans and grants the company accepted during the period. Without the federal aid and other special items, Air Group would've reported a $38 million second quarter loss, according to company executives. Minicucci attributed the rebound to pent-up leisure travel demand and thanked the company's employees for their strong performance in a fluid environment. Activity around theFourth of July and Labor Day approached 2019 levels. Customer service metrics have exceeded internal targets each month of the quarter, according to Minicucci. “Sustaining operating performance with high guest satisfaction is a remarkable achievement given how complex re-ramping our operations has proven to be,” he said. Minicucci is planning for Alaska Air Group to return to its pre-pandemic size “no later than next summer and then grow from there,” he said. Air Group added back nearly 4,300 employees last quarter, which correlates to 27% growth in the company's workforce. The $194 million third quarter profit was generated on the back of more than $1.9 billion in total revenue, nearly triple what the company generated a year ago. The income translates to net earnings of $1.53 cents per share. Alaska Air Group stock traded $54.49 per share near the end of trading Friday, which was down from a pre-earnings open price of $57.23 per share despite the reported profit. Chief Financial Officer Shane Tackett said Alaska Air Group's healthy liquidity and balance sheet should give company leaders the flexibility to reinstate shareholder distributions later in 2022, while also funding a large order of new Boeing 737-900 aircraft. Alaska Air Group ended the quarter with $3.6 billion in total available cash, including unused credit, which was down from $4.4 billion after paying down nearly $550 million in debt and making a $100 million voluntary contribution to employee pensions, which are now 94% funded, according to Tackett. The pension payment allowed Alaska Air Group to capture a one-time, $14 million tax benefit, he said. Cash from operations was “essentially breakeven” in the quarter, Tackett said, adding operational cash flow will likely be slightly in the negative, up to $100 million. But company leaders ultimately expect to net up to $100 million if Alaska Air Group's 2020 tax refund comes as expected. Chief Commercial Officer Andrew Harrison said load factors, or the percentage of seats filled by revenue customers, dropped from 88% in July to 72%, largely due to the emergence of the delta variant across the country. Fourth quarter bookings are being impacted, as well, he said. “The consequences from the delta variant have not yet dissipated and we're still working to build back Q4 bookings that were lost from the fourth COVID wave, given it occurred during an important period for building fourth quarter traffic,” he said. Despite the broader, immediate challenges, demand for first-class and premium seating has exceeded 2019 levels and should be sustained as business travel returns, according to Harrison. Alaska Air Group additionally netted its largest cash payment ever from its credit card loyalty program, up 7% from the same period in 2019, he noted. “Our loyalty program is one of the most durable, competitive advantages and we are squarely focused on maintaining and improving this momentum over the coming quarters,” Harrison said. Relatively high oil prices are likely to add marginal costs over the coming quarters if they hold, according to Tackett, despite the fact that 50% of the company's expected fuel consumption is hedged over the next six months. Fuel hedging has saved the company about 11 cents per gallon this year as oil prices have climbed, he said. Despite a contracted workforce, overall per-unit costs have been higher than pre-pandemic levels and were 9.3% over 2019 levels, but still beat internal projections in the third quarter, according to Tackett. He expects unit costs to drop as Alaska Air Group's airlines continue to bring back capacity, even with higher fuel prices and upward pressure on entry-level wages. “Notwithstanding the headwinds, we will emerge as an airline with a cost structure equal or better than 2019 in short order,” Tackett said. Operating costs will also be aided by the addition of many new, more efficient Boeing 737-900 aircraft in the coming years, he said. Alaska Airlines currently has seven Boeing  737 “dash nines,” as they are known in the industry, and should have 93 by 2024 with options for 52 more, according to Minicucci.  The new Boeing fleet will replace the Airbus aircraft acquired in Alaska's 2016 purchase of West Coast rival Virgin America, and also positions the airline for significant growth when demand fully recovers, Minicucci said.   Elwood Brehmer can be reached at [email protected]

One year done: A look back at the Chugach acquisition of Municipal Light & Power

It’s hard to believe that it has been one year since the acquisition of Municipal Light & Power, or ML&P, by Chugach became final. On Oct. 30, 2020, the papers were officially signed, closing on an idea that had been discussed in Anchorage for decades.  Combining the infrastructure and workforces of two established and well-run electric utilities in Alaska’s largest city is no small feat. It took nearly two years of planning and preparation to get to what we internally called “Day 1” the first day we became a combined utility. We are proud to say the integration occurred with minimal impact on the community and the members we serve. Overnight, we went from serving roughly 69,000 members to serving nearly 93,000 members. All of this occurred, in the middle of the COVID-19 pandemic, without an interruption in electric service.  When we joined the Municipality of Anchorage in the spring of 2018 asking voters to approve the sale of ML&P to Chugach, we made commitments. Among those were that rates would not go up as a result of the transaction; significant savings would be achieved by combining many functions; and it would be good for the community as sale proceeds would pay down municipal debt and help pay for city services.  While the integration continues, rates and costs are lower than they otherwise would have been without the acquisition. We are already seeing savings and know they will continue to materialize over the next several years as integration efforts are completed. We will have the final numbers on our first year in the first quarter of 2022, but we do know this: In January 2021, Chugach’s electric rates decreased for all customer classes. Payments of $712 million have gone to the MOA in the first year; of the sale proceeds, $229 million went into the Municipal Trust Fund, eligible to pay for city services. Savings of about $21 million have been realized from fuel, labor, and the elimination of inter-governmental charges. We are saving roughly $1 million a month in fuel alone. What we didn’t know when the ML&P acquisition was being finalized for regulatory approval, was that 2020 would bring a worldwide pandemic. Anchorage joined cities across the globe in closing businesses which caused an unprecedented economic downturn. For several months we did not collect delinquent accounts while the local and state emergency orders were in place, and we are working with members allowing them to catch up with their billing. To date, we have applied roughly $3.2 million from the federal CARES Act, Alaska Housing Finance Corp. assistance, and the state’s heating assistance program to eligible member accounts. Besides our members, the utility itself is also feeling the impacts of the pandemic.  Demand for power from commercial members is down about 8% compared to pre-pandemic times. That decline, coupled with inflation, labor costs, and energy efficiency measures by members has hit the bottom line. In response, we are managing costs and have asked the Regulatory Commission of Alaska to allow us to modify one of the agreements accepted when we bought ML&P by getting a reprieve on the treatment of expenses while we allow revenues to recover. As a member-owned, not-for-profit cooperative, we recognize the economic hardship many of our members are facing during the pandemic, and we don’t want to add to that hardship by asking for a rate increase.  In the meantime, as we continue to navigate the pandemic and other challenges together, we remain steadfast in our belief that Anchorage’s decision to combine two utilities remains the right one.  There’s still a lot of work to do as we continue to integrate systems and programs. What we know for certain is ratepayers are better off as a result of the acquisition with significant savings being realized and still more to be achieved in the years ahead.  The future is full of opportunities.  By powering Anchorage together, we can better meet future challenges and opportunities. Reducing carbon emissions, adapting to new technologies such as electric vehicles and battery storage, and continuing to improve efficiency will make our cooperative and the communities we serve a better place to live, work and play.  Most of all, we must meet our primary mission of providing safe, reliable, and affordable power to our member-owners.   Rachel Morse is the board chair and Lee Thibert is the CEO of Chugach Electric Association.  

As oil and gas prices spike, global investment lags behind demand

Fears of a global oil and gas shortage are pushing up prices, leading to a painful spike that is hitting many companies and consumers in their pocketbooks. The high prices have prompted multiple pleas for the industry to invest in new production. But outside of the Middle East and a few spots elsewhere around the world, including Russia, the hundreds of billions of dollars that would be needed to grow supply this decade isn’t showing up in new leases, drilling rigs, production facilities and pipelines. “The industry will need to spend significantly more, especially if oil and gas demand keeps climbing beyond pre-pandemic levels through 2025,” Moody’s Investors Service analysts wrote in a report released Oct. 7. Though oil and gas companies are expected to spend $352 billion on drilling and other activities worldwide this year, Moody’s said, the report recommended $542 billion in spending — the highest since 2015. “Our analysis demonstrates that upstream companies will need to increase their spending considerably for the medium term to fully replace reserves and avoid declines in future production,” Sajjad Alam, a vice president and senior analyst at Moody’s, said in the report. While U.S. natural gas prices have more than doubled this year, liquefied natural gas prices in Asia and Europe have hit record highs, and crude oil has climbed by more than 50% in price, drilling outlays are forecast to increase only 8% globally, Moody’s said. “The upstream energy sector continues to invest well below pre-pandemic levels despite the sharp turnaround in oil and natural gas prices in 2021. Exploration and production companies are signaling continued spending restraint in 2022,” the report cautioned. Boosting profits and dividends to please investors and worries about the long-term future for oil and gas are holding back companies from pouring more money into exploration and production. But the lack of drilling sets up the market for even tighter supply scenarios, Alam wrote in the report. The top official of the Organization of the Petroleum Exporting Countries said: “Don’t blame us.” Speaking at the online Energy Intelligence Forum on Oct. 6, OPEC Secretary General Mohammad Barkindo said: “The energy transition is not being handled properly. … And hence we are beginning to see the fallout.” The problem lies with the “hysteria” that has overtaken global thinking about how and how quickly to move away from fossil fuels to cleaner energy, he said. That rush and unrealistic planning is shrinking much-needed investment in new production, he said. In an interview with The Wall Street Journal a few days before his remarks at the energy forum, Barkindo said consumers should brace for more energy shortages unless the world boosts investment in oil and gas development. “The energy crisis in Europe and many parts of the world is a wake-up call,” he said. “It all comes back to the issue of investment across the oil and gas industry.” Saudi Aramco plans to invest in an additional 1 million barrels a day of new production by 2027, adding more than 8% to its current maximum output, CEO Amin Nasser said at the same online energy forum. “We still expect growth in oil demand,” he said, contrary to predictions of peak global oil demand as soon as 2030 or early next decade. The Saudis see cleaner oil and gas in the future rather than a lot less of the fuels, differing from the view that renewables and greener fuels soon will take over the market. Abu Dhabi National Oil, the main oil producer in the United Arab Emirates, plans to spend tens of billions of dollars this decade to boost its oil production capacity to five million barrels a day, up from about four million today. Neighboring Qatar, which leads the world in LNG production just as Saudi Arabia is a leader in oil, has a similar view of what the energy transition means to demand for fossil fuels. “For me to just come out and say net-zero 2050 would be very sexy,” Saad Al-Kaabi, Qatar’s energy minister, said at an event in Doha on Oct. 11. “But it’s not the right thing.” Many politicians “are just throwing it out there without a plan,” he said. Banking on strong demand for LNG in the decades ahead, Qatar is going ahead with a $30 billion project to boost its LNG production capacity by 50% in the next six years. Don’t blame high prices on the transition to clean energy, said the chief of the Paris-based International Energy Agency. “Well managed clean energy transitions are a solution to the issues that we are seeing in gas and electricity markets today, not the cause of them,” Fatih Birol said at a meeting of the European Parliament’s energy and environment committees last month. Multiple factors, including inadequate natural gas stockpiles in Europe, supply disruptions and a faster-than-expected economic recovery from the pandemic created the supply-and-demand imbalance, driving up prices, Birol told the committees. “A lot less product is available to meet this now-rapid growth we’re seeing,” ExxonMobil CEO Darren Woods said in virtual remarks at a conference in Russia on Oct. 13. “If we don’t balance the demand equation and only address the supply, it will lead to additional volatility.” Regardless of the reasons, the high prices for oil and gas are driving utilities in Europe, China, India, Pakistan and elsewhere around the world to turn to the old reliable power-generating fuel — coal — and driving up greenhouse gas emissions. “This is the revenge of the fossil fuels,” Thierry Bros, an energy expert and professor at the Paris Institute of Political Studies, told Bloomberg last week. “Energy importers have two options,” Clyde Russell, a longtime energy reporter and columnist with Reuters, wrote Oct. 5. “Namely to increase investments in fossil fuels in order to ensure that they always have sufficient supplies, or go down a path of boosting investment in renewables and energy storage in order to reduce reliance on foreign fuels.” Larry Persily is a former Alaska journalist and state and federal official who has long tracked oil and gas markets and projects worldwide. He can be reached at [email protected]

Despite low expectations for special session, Alaska House plugs away on fiscal policy

Official business in Alaska’s Capitol has been limited, but there is, in fact, still an ongoing special legislative session. House lawmakers have led most of the work, aimed at addressing the state’s long-standing structural fiscal imbalance. Senate business has largely been kept to the requisite technical floor sessions — brief formal proceedings to keep the session active — and hearings of the joint Redistricting Board. House Ways and Means Chair Rep. Ivy Spohnholz, D-Anchorage, has held meetings in recent days out of the Anchorage Legislative Information Office, focused on legislation promoting the multi-pronged approach to raise revenue and curb spending growth that most House majority members have generally endorsed. Most legislators have attended hearings by phone or videoconference from across the state. Spohnholz on Oct. 13 reemphasized her support for a 25-75 split of the $3 billion-plus in annual Permanent Fund earnings available for spending under the Legislature’s 2018 formula. It calls for spending no more than 5% of the fund’s overall value in a given year, which she says is a key element of a comprehensive fiscal plan, along with legislation for an education head tax, fuel tax increases and revisions to the state’s oil tax system. Based on currently proposed legislation, those elements would combine for a $72 million deficit next fiscal year and a small surplus in fiscal year 2024, Spohnholz said, “so we could start to address our capital deferred maintenance deficit and also start to make strategic investments as needed.” Next year’s Permanent Fund dividends would be approximately $1,248 per eligible Alaskan under a split in which 25% of available fund revenue would go to dividends, and PFDs would gradually grow to $1,575 per person by 2028, according to Spohnholz. While PFDs would start out larger than this year’s amount of $1,114 per person, the 25-75 split is still just half of what Gov. Mike Dunleavy has demanded from legislators. Dunleavy said his intent in calling the latest special session, which started Oct. 4., was in part to push legislators to add to the PFDs being paid out this month. However, it became clear near the end of the prior session that ended in mid-September that substantive policy changes would be unlikely this year with many lawmakers fatigued from one of the busiest legislative years in the state’s history. A major sticking point all year has been the disparate projections on the state’s fiscal future coming from administration officials and the Legislature’s finance experts. Officials in the Department of Revenue focused on unexpectedly strong current oil prices; impressive near-term Permanent Fund and state pension fund returns; and forecasts for gradually increasing North Slope oil production as the basis for estimates of future deficits peaking in the $500 million-per-year range with Dunleavy’s proposed 50-50 PFD-government split of fund earnings. Legislative Finance Division analysts, on the other hand, continued to project near-term deficits of $1-billion-plus per year with no new revenues under the governor’s plan. The disagreement over the parameters of the long-term fiscal problem has made settling on a range of options to solve it similarly challenging. Additionally, in the previous session, administration officials presented conceptual options for new revenues — such as a sales tax and oil tax changes — that they said Dunleavy would be open to with stipulations, but Dunleavy has repeatedly downplayed the need for taxes in recent press briefings. Administration officials have mostly been absent from fiscal policy hearings so far this session. Spohnholz also introduced a new version of House Bill 141, her legislation to tighten the state’s existing spending limit during an Oct. 14 Ways and Means hearing. The bill would base future appropriations limits on prior years spending and adjustments for inflation and population changes. The starting baseline for 2023 would be nearly $5.8 billion, which is an increase over the earlier versions of the bill in recognition of the “historically low spending,” when accounting for inflation and population, the state has enacted in recent years, Spohnholz said. Lawmakers approved nearly $4.6 billion in unrestricted general fund spending so far this year. HB 141 would not count PFDs or the state’s portion of school construction bond debt reimbursement as part of the annual spending limit and would allow lawmakers to exceed the cap for certain capital and deferred maintenance projects. Members of the House Judiciary Committee heard an alternative plan for capping state spending that attempts to capture the performance of Alaska’s private sector in calculating how much money is needed for state government from Anchorage Republican Rep. James Kaufman Oct. 15. Kaufman’s uniquely linked House Joint Resolution 401 and House Bill 4006 would set a lower statutory spending limit of 11.5% of total state product and a higher constitutional spending cap at 14% of state GDP. The ostensive spending limit range would prevent significant spending growth in high revenue years but also provide a buffer for unforeseen expenses, according to Kaufman. While it is very unlikely the Legislature will pass significant fiscal legislation in the remaining two weeks of the special session, the current work can build momentum for the next regular session in January. “This appropriation limit is not attempting to drive draconian cuts; it’s more about trying to smooth out our economic planning, our forecasting, our spending,” Kaufman said. “It would shave off (spending) peaks and move them forward over time. It would create money going forward over time.” The current year budget would have fit within Kaufman’s lower proposed statutory limit with $16 million to spare if it were effective, and the 2022 constitutional cap would be nearly $6 billion, according to materials accompanying the legislation. Kaufman’s legislation also excludes school bond debt, PFDs and other state debt payments from the appropriations limits. Elwood Brehmer can be reached at [email protected]

Faced with crashing crab stocks, council looks to swiftly analyze closures and trawl impacts

As crab fishermen face a dire season in Western Alaska this year, the North Pacific Fishery Management Council is looking for quick analysis and the fleet is looking for more extensive closures to protect some crab stocks. Survey data has shown an approximately 90% drop in snow crab stocks since the last survey, pushing acceptable catch limits down, while the long-term decline of Bristol Bay red king crab has led to a complete closure in the fishery for the first time since 1994. The Alaska Bering Sea Crabbers Association, the trade group that represents the majority of crab harvesters in the Bering Sea and Aleutian Islands rationalization program, has estimated a $200 million loss for the fishery. “It is simply catastrophic,” wrote ABSC executive director Jamie Goen in a Sept. 29 letter to the council. “We have boats that are not going to be able to make their payments, vessel repairs that will be delayed, and long-time skippers and crew that are losing their jobs, not to mention all the downstream effects to processors, communities, supply chains, and support businesses.” The problems with the crab fisheries in the region are complicated, and the reason for the apparent stock declines is not entirely clear. With an eye toward conservation, the ABSC requested that the council extend a closure area for red king crab in Bristol Bay and, among other long-term actions, to develop a council discussion paper based on how to minimize bottom contact by pelagic trawl gear in crab protection areas. The council voted to start the process for both. Alaska Department of Fish and Game deputy commissioner Rachel Baker, who serves on the council, introduced the first motion to extend the Bristol Bay closure area. The first action would ask the council staff for an analysis of the effects of extending the red king crab conservation area in Bristol Bay northward by half a degree. The ABSC says this would help protect crab stocks, which are increasingly concentrated in that northern area. Baker said she drafted the motion in response to requests from stakeholders, but wanted the council to have more information before taking definitive action. “While I realize there are some time constraints related to this analysis, and it’s not practicable for every single impact, I am requesting this analysis as outlined in the motion in the hopes to be able to understand if the proposed action is a likely solution to the emergency request from reduced mature female red king crab abundance as outlined in the ABSC request,” she said. Fish and Game, which cooperatively manages the crab fishery with the National Marine Fisheries Service, is very concerned about the decline in the Bristol Bay red king crab stock, but the request for the analysis is meant to help strike a balance between the need for conservation and the impact on the groundfish fisheries in the area, Baker said. The other motion, introduced by council member Cora Campbell, would start the development process for a longer analysis document, which the council refers to as a discussion paper, about the impact of bottom contact by pelagic trawl gear on Bristol Bay red king crab stocks. It would also evaluate boundaries used for the crab surveys, assessments, bycatch determination and directed fishery area. That is almost directly in line with what the ABSC requested. Campbell referenced ecosystem changes in the region in her rationale for the request. She said she hopes the discussion paper will help establish a discussion basis for collaboration among multiple user groups while balancing groups’ interests. “I chose to focus solely on BBRKC because that stock and our opilio stock are clearly the most stressed, and opilio will be the focus of a rebuilding plan that will address most of these elements for that stock,” she said. Many seem to agree that changes in the ecosystem may be playing a role with crab stocks in the Bering Sea region. Goen noted in a separate, Sept. 29 letter to the council that the crabbers acknowledge that changing ocean conditions and predator/prey dynamics may be playing a role, in addition to direct and indirect fishing pressure. Survey data has been showing that the largest concentration of female red king crab in Bristol Bay has been moving north in recent years, so expanding that conservation area would help protect them from fishing pressure, she wrote. The drop in snow crab stocks gave the industry a shock this year — in other recent data, the snow crab stock seemed to be on the upswing. Katie Palof, the co-chair of the council’s Crab Plan Team, presented data to the council that indicated two possibilities for the fate of the missing snow crab: They’re either alive and the survey missed them, or they’re dead with an as-yet unknown cause. She said it’s not likely that the survey system was flawed, because it worked for Tanner crab. There are a number of other factors — including possibly increased predation by species like Pacific cod, a change in bottom temperatures, an increase in bitter crab infection among the crab stocks and possibly fishing pressure — that may indicate that the crab are dead. “Snow crab is our biggest species to be aware of this year, just because of the decline we saw on the survey,” she said. An undercurrent of urgency ran among commenters at the meetings. Particularly, the council received hundreds of comments urging them to take stronger action to limit bycatch limits in the trawl fisheries in the Bering Sea. That’s not entirely because of crab, though — this year also saw a precipitous decline in salmon runs in Western Alaska, which has led to subsistence food instability for many rural Alaska villages. Council member Bill Tweit said he noticed the division among commenters, particularly among the crab fishermen, in the comments, and hoped they could change their “divisive language” as the fisheries try to work together on what to do about the Bering Sea’s changing landscape. “I see some parallels between the crab situation and the salmon situation in the Bering Sea,” he said. “With red king crab and with Chinook, we’re seeing long downward trends; with snow crab and chum there’s really some sudden crashes. Obviously equally, crab harvesters are as dependent on the Bering Sea as anybody else, too. We’re all in the same boat together.” Baker’s motion for the analysis on the Bristol Bay red king crab conservation area closure provides for a fast timeline. She estimated it could be done by the council’s December meeting to help them make decisions on managing the fishery. Elizabeth Earl can be reached at [email protected]

Alaska tourism industry sees reasons for optimism in 2022 after a roller-coaster year

A topsy-turvy visitor season for Alaska ended with plenty of optimism for 2022, according to industry leaders across the state. “Things continued to change. Even though I don’t think our industry was in as much of a crisis mode as it was in 2020, I would say 2021, through the summer season, was really a mixed bag,” Alaska Travel Industry Association CEO Sarah Leonard said. “Overall, we’re super grateful that we had the economic activity that we did for 2021.” This year’s peak visitor season started with a major hurdle: the prospect of no large cruise ships and the thousands of visitors each can bring for a second consecutive year. Canadian transportation officials in February announced a continuation of their 2020 ban on large cruise ships in the country’s ports, meaning no foreign-flagged or built cruise vessels could sail to Alaska from West Coast cities without violating federal maritime law. The 19th century-era Passenger Vessel Services Act requires foreign passenger vessels sailing between U.S. ports to make at least one stop in a foreign port — then an attempt to buoy the nation’s shipbuilding and maritime industries. Alaska’s congressional delegation largely reaffirmed their effectiveness by shepherding a temporary exemption to the PVSA through Congress in time for an abbreviated cruising schedule in Southeast this year.Sen. Lisa Murkowski has since introduced legislation for a permanent Alaska PVSA exemption. The first large, Alaska-bound ships since 2019 sailed in late July and, according to estimates by local economic researchers, brought just more than 100,000 passengers, or about 10% of recent years. Additionally, no large ships made the cross-Gulf voyage to Southcentral ports during the shortened season. Cruise ships cumulatively brought several hundred thousand visitors to Seward, Whittier and Anchorage each summer prior to the pandemic. Robert Venables, executive director of the Southeast Conference, a regional development organization, said the disappointment to start the year in the industry was ultimately turned around by the end of the summer, in part due to the cruise activity, but also because of a boom in independent travel. Based on anecdotal reports, it was enough for many visitor-dependent businesses struggling through a second pandemic summer to keep their doors open, according to Venables. “Businesses that might have had to fold or take more drastic measures this winter maybe are able to hold on until next spring,” he said, when expectations are “much more robust.” To the north, Explore Fairbanks CEO Scott McCrea said Interior visitor businesses did “surprisingly well this summer given all of the factors to include.” The lack of cruise ships to Southcentral ports meant far fewer Fairbanks-bound tourists via coach bus or Alaska Railroad tours, which typically provide about 40% of the region’s summer visitation, according to McCrea. Cross-border highway traffic and other international travel was similarly depressed by COVID-19 restrictions, he noted. “We definitely saw, like the rest of Alaska, an extraordinary surge in domestic, independent travelers,” McCrea said. He attributed a surge in last-minute Alaska trips to very buyer-friendly airfares most of the year. “Normally we’re a destination people plan months in advance,” he said. “Our visitor information staff spent a lot more time than they usually do working one-on-one with visitors because they were showing up with no plans at all.” The unexpected activity left some visitor-centric businesses short-staffed, just a year after Alaska’s overall leisure and hospitality lost nearly 30% of its jobs, according to state Labor Department data. Airlines added capacity back to Fairbanks and Alaska in general faster than expected. McCrea noted that Fairbanks International Airport saw record capacity at the start of the summer. In Anchorage, passenger capacity rebounded to 83% of 2019 levels by mid-year, according to Ted Stevens Anchorage International Airport officials. McCrea said he expects continued improvement next year as more cruise ships return and border travel likely becomes easier. More immediately, Fairbanks’ aurora-viewing season is off to a good start as well, he said. “It’s sounding like February and March are going to be pretty strong for us,” McCrea said. Venables added that Southeast’s many fishing lodges and outfitters also reported strong business over the summer — much of it rolled over from 2020. He has robust expectations for next year. Venables said he would consider a “three-quarter season” next summer a success; meaning about 75% of the cruise traffic compared to pre-pandemic averages of slightly more than 1 million cruise passengers. ATIA’s Leonard emphasized that encouraging more travel to Alaska is a fundamental way to help the state’s broader economic recovery. Prior to the pandemic, tourism defied Alaska’s general economic struggles in recent years and was one of the state’s fastest-growing industries. “I’m hopeful people will continue to feel comfortable traveling and we’re seeing that sentiment really hasn’t changed throughout the U.S. and Alaska” Leonard said. Elwood Brehmer can be reached at [email protected]

Shell asks Alaska regulators for more time to find partners for North Slope prospect

Shell Offshore is asking Alaska regulators for more time to find partners to explore a remote North Slope prospect. In Oct. 6 filings recently posted to the division’s website, attorneys representing the subsidiary of Royal Dutch Shell asked Division of Oil and Gas officials for an extra year to secure a new operator for exploring the oil giant’s West Harrison Bay Unit. Oil and Gas officials last December approved formation of the West Harrison Bay Unit in state waters of the Beaufort Sea, north of ConocoPhillips’ $6 billion Willow oil project, as well as a multi-year exploration plan for the area. The exploration plan at the time called for Shell to bring in partners to spread out the costs and risks of drilling the area. That included finding a company willing to take on the operator role for the West Harrison Bay Unit by the end of 2021. Shell is proposing that deadline be pushed back to Dec. 31, 2022. According to the proposed amended exploration plan, Shell’s attempts to finalize commercial arrangements with other industry players continue to be hampered by the pandemic. That is despite Alaska North Slope oil prices in the $80-per-barrel range, which have recovered from an early 2020 collapse to now exceed pre-pandemic prices. Shell currently holds 100% of West Harrison Bay. “COVID-19 makes marketing the (West Harrison Bay) project more challenging as all meetings and negotiations have to be held virtually, and because the timing of execution of the project is uncertain due to logistical restrictions to operations, including surveying; and, until very recently, the low oil price suppresses the cashflow available to prospective investors for new projects and management appetite for new, higher risk exploration projects,” the second West Harrison Bay exploration plan states. Shell’s focus in the area is on the Nanushuk sands formation — the relatively shallow, conventionally produced oil-bearing geologic formation that is the primary source for the large Pikka and Willow developments, as well as a host of smaller North Slope prospects identified in recent years. Leaders of Oil Search Alaska, the company that has led exploration and development work at Pikka since 2018, have also acknowledged challenges they have had securing funding to construct the $3 billion first phase of the oil project. If Shell can put together a team for West Harrison Bay, the game plan is for the operator to drill an initial exploration well — and possibly a sidetrack — into the Nanushuk formation during the 2023-24 winter drilling season. A second well and potential sidetrack would be drilled in the 2024-25 season, according to Shell’s filings, after which time an additional exploration or development plan would be submitted to the division depending on the outcome of the drilling. The company is also asking state oil and gas officials to remove an expectation in the first exploration plan filed last year for the wells to penetrate the deeper Torok sands, which Shell claims would add unnecessary time and expense to the work and could jeopardize the timing of the overall program. The Torok zone was the primary target for Caelus Energy’s similarly situated Smith Bay prospect, discovered in 2016 to the west of Shell’s acreage. Caelus leaders said at the time the Smith Bay prospect could hold upwards of 6 billion barrels of oil, but appraisal drilling at Smith Bay was not conducted largely due to funding and logistical challenges associated with the isolated prospect.   Hilcorp plans more Prudhoe drilling Hilcorp North Slope expects to drill up to 10 wells next year into the western portion of Prudhoe Bay as oil prices continue to strengthen. According to the proposed 2022 Prudhoe Bay Unit Western Satellites Plan of Development recently filed with the Division of Oil and Gas, the Alaska subsidiary of Houston-based Hilcorp Energy plans to drill the wells into the Aurora, Borealis, Orion and Polaris participating area after restarting development drilling at Prudhoe earlier this year, following a pandemic-induced pause on development drilling work. In July, Hilcorp filed an amended 2021 Prudhoe plan with the division to drill up to six wells into the Orion participating area in the far western portion of Prudhoe. According to the 2022 development plan, one well was spud into the Orion area on Sept. 22 and the rest will be drilled the remainder of 2021 or possibly early next year depending on operational timing. Hilcorp increased oil production from the western Prudhoe satellite areas by 43% in the first year after taking over for BP, mainly through returning idle wells to service, targeting under-developed reservoirs and optimizing production through existing infrastructure, according to the filings with the state. Elwood Brehmer can be reached at [email protected]

Gas-starved Europe can’t look west as US faces its own crunch

If there’s any country that might’ve been in a position to rescue Europe from its energy crisis, it’s the U.S., which is home to vast shale fields holding a seemingly endless supply of natural gas and giant terminals capable of liquefying it and shuttling it abroad. Instead, for a multitude of reasons, U.S. shale is in no position to bail out Europe. Indeed, supplies are so tight that Americans are staring down their own supply squeeze, and the accompanying sky-high utility bills. U.S. stockpiles haven’t been replenished as much as usual in recent months after summer heatwaves sent energy demand soaring and the post-pandemic industrial recovery diverted fuel to power plants and factories. Meanwhile, many major shale drillers have been funneling cash to shareholders and focusing on climate goals rather than boosting production. The result: There’s very little supply cushion in the U.S., and whatever is available for export as liquefied natural gas is going to be fought over, not just by desperate European importers, but also by buyers in Asia, who face an energy crunch of their own and are willing to pay a premium. This reality is a stark change from recent years that saw a steady domestic surplus and government efforts to promote exports as “molecules of U.S. freedom.” Americans are likely to face some of their highest energy bills in years. New York-traded gas futures have more than doubled so far in 2021, and the peak-demand season hasn’t even begun. The U.S. benchmark price jumped to a seven-year high this week, and it could more than double in the next few months, according to research firm BTU Analytics. “In theory, the U.S. is the Saudi Arabia of natural gas, but the reality is we have no new gas coming online,” said Campbell Faulkner, the chief data officer at OTC Global Holdings LP who formerly worked in risk-management and analysis at Royal Dutch Shell Plc and JPMorgan Chase &Co. “These prices tell you how worried people are about not having enough gas.” The consequences could go well beyond household heating bills. Europe stands as example of what could unfold, with its disastrous supply shortage leading to record prices, widespread corporate failures in the U.K. power market and the continent’s biggest chemicals producer BASF SE cutting output as its feedstock costs soar. And of course, prolonged gains for energy prices are compounding concerns about inflation and adding to the rising costs businesses are already shouldering for raw materials. New York natural gas futures are on track for their steepest annual jump since 2000, when an early winter sparked massive consumption at a time when domestic energy production was stagnating. Prices more than quardrupled that year. Shale-extraction techniques advanced in the two decades that followed, opening up vast new resources and transforming the U.S. into a global exporter.Makers of plastics, fertilizers and other gas-derived products seized on the flood of cheap, reliable shale gas, spending billions of dollars to build or expand manufacturing plants. Concurrently, climate-conscious regulators, activists and investors pushed for the closure of much of the nation’s coal-fired electricity fleet, inadvertently increasing the grid’s reliance on gas-fueled generators. But then the steady expansion for production in U.S. shale fields suddenly slowed. Among U.S. shale executives, “there’s been a dramatic shift in sentiment away from production growth and toward shareholder returns and ESG initiatives,” Connor McLean, an analyst at BTU, said in an interview, referring to environmental, social and governance goals. Gas stored in underground U.S. salt caverns and depleted water aquifers — a crucial source of fuel to augment pipelined supplies during the peak demand of winter months — is 21 percent less than the 10-year average for this time of year, according to research firm Vortexa Ltd. That helps explain why U.S. prices are surging. On the New York Mercantile Exchange, gas for October delivery on Oct. 4 jumped 11 percent and topped $5.50 per million British thermal units for the first time since early 2014, when the Polar Vortex enveloped much of the U.S. in record-breaking cold. Prices for December through February deliveries were even higher, signaling traders’ concern about the sufficiency of supplies. In California, which is dealing with a unique set of challenges that include a scarcity of hydro power and summer-driven demand for electricity to run air conditioners, prices already are surging. Gas traded at the Southern California border reached $7.40 last week, while in the Los Angeles area it was almost $11, according to OTC Global Holdings LP. U.S. gas output is only expected to rise by 1.1 percent during the second half of this year compared with the first six months, the Energy Information Administration said on Sept. 8. The residential, commercial and industrial sectors all will burn more gas this year than last, although overall demand may slip by 0.9 percen as soaring prices for the fuel prompt some electricity generators to switch to coal, according to the EIA. Even if an unexpected spell of mild weather frees up some U.S. supplies in coming months, gas exporters will almost certainly shun Europe and instead ship those cargoes to Asia where prices are higher, said Anna Mikulska, an energy-studies fellow at Rice University’s Baker Institute of Public Policy in Houston. “Europe can’t lean on the U.S. for gas this winter,” said McLean of BTU. `Winning the arbitrage’ As alarming as $7.40 gas is to U.S. buyers, prices in Europe and Asia are magnitudes higher: A key gas-import benchmark for Japan and Korea is approaching $30, while Europe is seeing the fuel command the equivalent of $25. Citigroup Inc. warned prices may hit $100 during the final three months of the year as power producers, utility companies and manufacturers around the northern hemisphere vie for supplies. That’s more than double the bank’s previous forecast. Those regional price dislocations also explain why any spare gas that American drillers manage to eke out this winter will probably head for Asia aboard liquefied gas tankers rather than remain home or traverse the Atlantic Ocean to Europe. “Asia is winning the arbitrage,” said Rice University’s Mikulska. On the supply front, drillers haven’t responded to this year’s price gains by increasing investment in new North American discoveries because earlier this year they hedged most of their expected 2021 output, which locked them into selling supplies at lower prices, said Raoul LeBlanc, North American shale analyst at IHS Markit Ltd. Management teams also have little incentive to expand output after investor pressure to focus on financial returns and debt reduction prompted boards of directors to remove production-based metrics from compensation packages, said BTU’s McLean. “Shareholders have been very clear that that money is theirs and they don’t want them to spend it on growing supply,” LeBlanc said. Then there are the temporal and physical barriers.Anyone erecting a rig and beginning to drill a gas well today can’t realistically hope to see any fuel begin to flow for five or six months — or longer, depending on the jurisdiction. And with domestic liquefaction plants that prepare gas for shipment overseas already running close to full capacity, there’s no room to export more fuel even if supplies were on hand, according to Rystad Energy Vice President of Markets Sindre Knutsson. “Gas producers looing at the strong forward curve really don’t have time to bring any new supplies online before the end of the winter,” said Jen Snyder, a managing director at research house Enverus.

Gas prices reach at highest point in 7 years

President Joe Biden’s administration has said it is considering releasing oil from emergency reserves, among other things, to help bring down costs as gas prices surge in the United States. Gas prices reached a national average of $3.24 on Oct. 7, according to AAA. That’s up from $3.20 on Monday, which is a level AAA said hasn’t been seen since October 2014. An increase in demand and the high cost of crude oil, which AAA said has stayed above $73 a barrel, are likely driving the price increases at the pump. Presidents don’t control gas prices. But the Biden administration has recently said it is looking at every tool it has to address the costs of oil, including the Strategic Petroleum Reserve and working with international partners. Surging gas prices The Oct. 4 national average of $3.20 for a gallon of gas is 2 cents higher than last month and $1.02 high than this time last year, according to AAA. Patrick De Haan, an analyst at GasBuddy, tweeted that GasBuddy is showing an average of $3.26 per gallon and that the increases “won’t stop yet.” He predicted prices could hit $3.30 a gallon or more. High demand, supply constraints and the COVID-19 pandemic are likely factoring into the increased costs. During most of 2021, as the country recovered economically from the pandemic, higher gas prices were mostly a result of increasing demand as Americans started to go out or travel more, McClatchy News reported in June. Last week, gasoline demand rose more than 5 percent, AAA said. But the Energy Information Administration said oil and natural gas production was lower than pre-pandemic levels. That “tightened supply” is part of the reason crude oil prices have stayed above $73 and is preventing gas prices from “taking their usual seasonal swoon.” “Global economic uncertainty and supply chain concerns caused by the lingering COVID-19 pandemic could be playing a role in keeping crude oil prices elevated,” Andrew Gross, AAA spokesperson, said Oct. 4 What Biden’s administration is doing White House Press Secretary Jen Psaki said last week that the administration did not have any “near-term” solutions to announce but that it is “looking at every means we have to address the cost of oil.” She said that includes discussions with international partners — including the Organization of the Petroleum Exporting Countries, or OPEC — on “the importance of competitive markets and setting prices” and on doing more to support recovery of oil supply. This week, OPEC, Russia and other oil suppliers announced they would stick with their deal reached in July to only increase oil production by 400,000 barrels a day in November, which is less than 0.5 percent of worldwide demand, despite pressure to ramp up production, The New York Times reported. Psaki also said that last month, National Economic Council Director Brian Deese sent a letter Federal Trade Commission Chairperson Lina Khan asking that the FTC “use all of its available tools to monitor (the) U.S. gasoline market and address any illegal conduct that might be contributing to price increases.” She said the FTC responded and committed to “take specific actions to identify, deter and investigate.” On Oct. 6, U.S. Secretary of Energy Jennifer Granholm said during a Financial Times summit that “presidents don’t control the cost of gasoline” and that the “market is what the market is.” But she said releasing oil from the Strategic Petroleum Reserve, or SPR, is a “tool that’s under consideration.” The federally owned SPR is the “world’s largest supply of emergency crude oil” and was established to lessen the impact supply disruptions, according to the Energy Department. It is stored in underground salt caverns at four sites along the Gulf of Mexico. “SPR oil is sold competitively when the president finds, pursuant to the conditions set forth in the Energy Policy and Conservation Act, that a sale is required,” the department said. “Such conditions have only existed three times, most recently in June 2011 when the president directed a sale of 30 million barrels of crude oil to offset disruptions in supply due to unrest in Libya.” The energy secretary can also “authorize limited releases in the form of exchanges with entities that are not part of the Federal Government,” it said. De Haan tweeted Oct. 6, however, that “we would need a significant release” to bring gas prices down much.

Alaska snow crab harvest slashed by nearly 90%, tanners by 53%

The snow crab is a mainstay of the Alaska crab boat fleet — much of it based in Washington — and the 2021-22 catch limit of 5.6 million pounds, announced Oct. 8, is down 88 percent from the previous season. The 2021 fall harvest of Bristol Bay red king crab, another important source of revenue for that fleet, was canceled for this year because of too few females. The combined impacts of the closure and snow crab cutbacks are a big financial hit to crabbers who in past years have grossed more than $200 million from the two harvests. At a meeting of the North Pacific Fishery Management Council this week, crabbers called for additional restrictions in other harvests. “I implore you to do whatever is necessary to keep the crab fisheries sustainable,” said Jenny Gore Dwyer, whose family owns three North Pacific crab boats, in Oct. 6 testimony before the council. “First and foremost we are a business based on fishing crabs in the Bering Sea … But for us, it’s not just a business, it’s a way of life.” Scientists who study the snow crab are scrambling to understand what happened to them in the aftermath of dire summer survey results that included a more than 99 percent drop in immature females compared to those found three years earlier, as well as substantial drops in mature males and females. The changes in the Bering Sea include dramatic declines in winter ice cover in 2018 and 2019, which resulted in reduced size of a cold pool on the bottom favored by young crab. Some of the causes for the population decline likely include increased predation of the young snow crab by cod which typically stay out of the cold pool as well as overall stress caused by the higher temperatures, according to federal and Alaska state scientists who spoke during the virtual council meeting. Researchers also have tracked increased disease. As the sea bottom warmed, snow crab also appear to have moved much farther to the northwest and in deeper waters than in years past. But scientists, in testimony to the council, said the evidence indicates a big downturn in the population — not just a migration out of the survey zone. “We really do think that … some sort of mortality event did occur,” said Katie Palof, an Alaska Department of Fish and Game biologist who advises the North Pacific council about crab. Formed by a landmark 1976 federal law that extended U.S. control over the 200-mile fishery zone off the nation’s coasts, the council — composed of state, industry and federal officials — develops harvest plans in the Bering Sea and the Gulf of Alaska. In an Oct. 6 vote, the council approved a maximum allowable snow crab harvest of 12.4 million pounds for 2021-22. The State of Alaska, which sets the final quota, opted for a considerably lower 5.6 million pounds. Also on Oct. 8, the state set a quota of 1.1 million pounds for Bering Sea bairdi crab, down 53 percent from the previous season. The crab and fish harvests in the Bering Sea collectively rank as the most valuable fisheries in North America, and the federal council, when it resumes meeting next week, is expected to consider additional restrictions in some other harvests because of the low number of snow and king crab. Bycatch and trawlers The accidental, or bycatch, of crab by other fleets has come under increased scrutiny, although biologists at the council meeting did not find that was a big contributor to the crabs’ decline. The biggest bycatch of red king crab has come from crews who harvest fish with steel, baited traps set along the sea bottom. A significant portion of these fishermen also are crabbers. Since 2008, estimates based on observers aboard some of those vessels indicate the pot-fisheries bycatch has varied from as few as 804 king crab in 2008 to 243,469 in 2018 and 235,607 so far in 2021. Pot fishers must throw back all these red king crab, but biologists estimate only half survive. Jamie Goen, executive director of the Alaska Bering Sea Crabbers association, said the bycatch is concerning but noted pot fishers have been testing promising new gear that could reduce bycatch. Crabbers also are seeking more restrictions on the bottom-trawling fleets that while targeting fish also scoop up king crab. Biologists who help assess the stocks estimate that 80 percent of those crab die when they’re returned to the sea as required. During the past 13 years, the bottom-trawl bycatch of king crab has ranged from a high of 85,541 in 2008 to a low of 12,725 in 2018. This fleet has observers on board all vessels, and has a hard cap of the number of king crab they can net. This year, the cap was set at 97,000, and the bycatch so far has been less than 15,500 crab. Next year, that cap will lowered to 32,000, according to Mary Furnuness, a National Oceanic and Atmospheric Association Fisheries official who’s involved in managing the harvests. Under the current regulations, a king crab conservation area of the Bering Sea that is off-limits to bottom trawling will be expanded south for 2022. Crabbers are pressing for the council to make an additional expansion to the north to an area that may now be used by more king crab. “What we are proposing with an emergency closed area and requested voluntary actions from all fishing sectors should help crab stocks rebound and hopefully allow us to have a (king crab) fishery next year,” Goen said. That move is opposed by Chris Woodley, executive director of the Groundfish Forum, a Seattle organization that represents most of the largely Washington-based bottom-trawl fleet. “Crab are moving in unprecedented ways and new closure areas would be an uneducated guess with high potential for unintended impacts,” Woodley said. Woodley said the closure might move bottom trawlers into other areas used by king crab. The North Pacific council also is being asked to do more to protect the accidental harvest of salmon by Bering Sea trawlers. This plea comes in the aftermath of disastrous returns of chinook and chum to the Yukon and Kuskokwim rivers that severely impacted Alaska Natives in the region who depend on these fish for subsistence. The cause for the decline in these salmon runs is not well understood. Warming trends in the Bering Sea and freshwater are one factor researchers are exploring. Farther south, sockeye salmon runs returning to Bristol Bay hit record levels in 2021. “For the first time in our history, we were not able to harvest salmon. We were not able to throw our nets in the river,” said Serena Fitka, executive director of the Yukon Drainage Fisheries Association, which represents 42 rural communities, in Oct. 6 remarks to the council. “Our fishing traditions are fading. Is this the beginning of the end to the Yukon River salmon … “We are in crisis.”

Banks would have to give IRS data on accounts with more than $600 under proposal to catch tax cheats

As Congress negotiates the details of the reconciliation bill, a big question is how to pay for all the new spending. One proposal would give the IRS a better chance to track down tax cheats. It would require banks to report to the IRS all accounts with a balance of $600 or more or that have $600 or more in transactions. The IRS would then be able to compare the bank account information to the information on tax returns to see if there may be unreported income. The banks would not report the details on individual transactions — like whether you went to Wawa or the liquor store, booked a massage or a vacation to Aruba — but instead report the total amounts going into and out of the accounts. The Biden Administration said the information would help the IRS find unreported income from rich individuals and businesses and help it close a tax gap of more than $160 billion — taxes owed on earnings that have never been paid. Indeed, over the past decade, the IRS has been auditing fewer and fewer tax returns. In 2010, the agency audited 1.11 percent of returns. In 2019, that number was down to 0.45 percent. Treasury Secretary Janet Yellen told a Senate committee that the proposal would add two additional pieces of information onto the 1099-INT, a form that banks already file with the IRS. “I think it’s important to recognize that we have a tax gap that’s estimated at $7 trillion over the next decade,” she said. “That is taxes that are due and are not being paid to the government that deprive us of the resources we need to do critical investments to make America more productive and competitive.” But critics say the move would be an invasion of privacy and overly burdensome. The American Bankers Association, in a letter to Congressional leaders, said the move would require financial institutions “to develop the necessary technology and processes to identify the accounts, report to the IRS and customers, and educate customers and bank staff on what the information does (and does not) mean.” It also said that while the proposal is meant to go after high-dollar tax cheats, it would also have an impact on the little guy. For example, it cited self-employed contractors who typically buy materials for construction jobs, saying they will commonly have gross inflows and outflows that exceed their actual income. The additional reporting could make innocent people come under scrutiny, it said. “In the end, whether it is average workers or self-employed citizens, virtually all Americans will be subject to this new reporting,” ABA said. “The taxable portions of this activity are already generally captured by existing reporting, and it is unclear how these additional details will help the IRS target tax cheats in the top 1 percent of reporters.” Rep. Jeff Van Drew, R-N.J., last week introduced a bill that would block the proposal if it became law, calling it “government overreach.” “This useless proposal by the Administration is an invasion of Americans’ privacy rights and allows the government to have expanded access to individuals sensitive bank information,” Van Drew said in a statement. ”The vast majority of Americans are law-abiding taxpayers and we, as members of Congress, should be treating them as such.” Yellen disputed the privacy concerns, noting that the proposal would not report individual transactions, and she said it would not be burdensome on banks. “Banks already report directly to the IRS the interest that they pay on accounts when it exceeds $10, and this is not a proposal to provide detailed transaction-level data by banks to the IRS,” she told CNBC.

COVID-related event cancellations cost Anchorage $39M

As Alaska contends with a COVID-19 surge that swelled in recent weeks, several local groups have canceled or postponed conferences and meetings during Anchorage’s typically busy fall convention season. As the coronavirus has continued to hamper international travel, one international group has also canceled. The shifting plans have heaped more pain atop the Anchorage event industry, experiencing its second straight year of tough times after the pandemic canceled travel and social gatherings. And it could continue. Alaska organizations that have recently rescheduled conferences say they’re eyeing COVID-19 numbers in the state and could delay events once again if things don’t improve. In-person meetings and events this year were on the rise partway through summer as the economy was bouncing back, said Greg Spears, general manager for the Egan and Dena’ina convention centers. The Foo Fighters show at the Dena’ina Center in mid-August sold out rapidly and saw heavy sales for merchandise, he said. It showed people are ready to get out and be together. Cancellations and postponements for 2021 have occurred all year because of COVID-19, Spears said But the number increased starting in August as COVID-19 cases in Alaska were rising due to the more contagious delta variant, he said. Events set for as far out as December, or even early next year, have been canceled or postponed, he said.Anchorage-wide, at least 114 meetings or events have been canceled or put off this year due to the pandemic, said Jack Bonney with Visit Anchorage. The cancellations have affected hotels, convention centers and other venues. The events would have generated about $39 million in spending in Anchorage, he said. Twenty-four of those have been canceled or delayed since Aug. 1, he said. “Traveler enthusiasm and optimism is starting to flag as COVID has reared its ugly head again,” Bonney said. ‘Ready to meet in-person, but not until it’s safe’ On the plus side, at least 60 meetings, conferences and events have been held in Anchorage this year, pumping about $12 million into the economy, Bonney said. The figure doesn’t include smaller meetings organized by local groups on short notice, he said. Things have improved since March 2020, but the number of events is still well below 2019 levels, Bonney said. Visit Anchorage has been able to rebook most large events and groups for future years, Bonney said. The canceled and postponed events have hurt restaurants, food suppliers, event support companies and others, said Bill Popp, head of the Anchorage Economic Development Corp. “It’s disappointing for many businesses,” Popp said. The Alaska Oil and Gas Association had planned to hold its annual one-day conference at the Dena’ina Center in early September after a year and half of postponing it, said Kara Moriarty, the group’s president. But with the state’s COVID-19 cases rising, she reached out to Alaska health officials and Providence Alaska Medical Center for advice. There was no way to keep 500 people socially distanced, she said. “I realized, ‘Yeah, this is not safe,’ ” she said. The meeting is now reset for Jan. 12. That plan will be reassessed shortly before the event to make sure it’s safe, she said. The date can be pushed off again if needed. “We are ready to meet in-person, but not until it’s safe,” she said. The Alaska Federation of Natives delayed its annual convention by two months, moving it to Dec. 13-15 at the Dena’ina Center. The group took the step after consulting with medical experts, including Dr. Anne Zink, Alaska’s chief medical officer, said Sheri Buretta, chair of AFN’s Convention Committee. The Alaska Federation of Natives convention is typically the largest in the state. Thousands of delegates and relatives pour in from across Alaska, spending millions of dollars at hotels, shops and grocery stores. In particular, AFN doesn’t want its delegates to contract COVID-19 in Anchorage and bring it back to villages without hospitals or much medical support, she said. “We have a vulnerable population and medical facilities,” she said. “Getting together (in October) would really increase the risk, so we didn’t want to do that to our population.” The convention was held virtually last year for the first time ever. The Alaska Federation of Natives convention brings together friends and family from across Alaska, so it was difficult not to meet in-person, she said. This year’s plans for a fully in-person meeting could change, she said. The group’s board will meet again to decide if a virtual or partially virtual event will be safer. “There is hope that maybe the numbers will go down in December,” Buretta said. “There’s something about being together that everyone wants so badly. But we have to do the right thing and protect our people.” Impact on small business The thought of the AFN convention canceling again this year is “terrifying,” said Karin Johnson, an owner at Dark Horse Coffee, across the street from the Dena’ina Center. Business from that convention, along with holiday bazaars and other fall events, usually provides a financial boost for winter, she said. “AFN is like my Black Friday,” she said. “And it’s like a family reunion, so we were sad to miss it last year.” After a strong surge from tourists in Anchorage this summer, business has dropped again at the coffee shop, she said. Small civic and community meetings seem to be the only thing happening in the Dena’ina Center, she said. Sales at Dark Horse are about half what they were in 2019, she said. But Johnson said she understands the reason for the cancellations, because they keep people safe. “I may suffer from it, but it is the right thing,” she said. The Alaska Chamber planned to hold its annual forum over three days late last month at the Hotel Alyeska in Girdwood. But it canceled those plans. It’s now holding the policy forum online on Oct. 12 to set its annual advocacy agenda. The group is still planning a business conference for Dec. 8-9 at the Hotel Alyeska with about 200 participants. The plans for the December event could change if the stress on the state’s hospitals from COVID-19 doesn’t ease, said Kati Capozzi, president of the Alaska Chamber. The group will communicate with state health officials before making a final decision. “If we are like what we have now, we’re not having it,” Capozzi said of the currently high number of COVID-19 hospitalizations in Alaska. If the December event has to be canceled, it will be postponed until it can be held safely in person, she said. People want to network and personally interact, she said. “We’ve been doing virtual conferences and meetings for 18 months,” she said. “It gets to be tough to be sitting at computers.” The Alaska Miners Association canceled its five-day conference, set to start Nov. 1 at the Dena’ina Center. It attracts more than 1,000 people, said Deantha Skibinski, the group’s executive director. A new date has not been set, she said. The cancellation of the event last fall was no surprise, given that there was no COVID-19 vaccine available at the time, she said. But this year’s cancellation is frustrating since many Alaskans have not taken advantage of the vaccines, she said. “The fact that we’re here again is super disheartening,” she said. International events have also been canceled or postponed. The IEEE Signal Processing Society canceled its large international technology conference on image processing, planned for four days in mid-September at the Dena’ina Center, said Kenrick Mock, a group member and organizer of the event. The conference was instead held virtually. It’s now planned for Anchorage in 2025, said Mock, dean of the College of Engineering at the University of Alaska Anchorage. The group decided in August to cancel, he said. COVID-19 rates were rising nationally at the time. More than 1,000 people were expected to visit Anchorage from all over the world, but pandemic travel requirements made flying difficult for many participants. “It was disappointing,” he said. The Resource Development Council still plans to hold its annual conference Nov. 17-18 at the Dena’ina Center. But plans could change depending on the path of the pandemic, the group’s website says. “While we will do all we can to bring our members and supporters together in November, we may be forced to shift to virtual or hybrid event,” the website says.

Judge allows millions of pounds of Alaska seafood to move

Companies that haul fish from Alaska to the eastern U.S. can resume shipping what they say is an estimated 26 million pounds of frozen fish that has been stranded in Canada in a battle over a federal maritime shipping law known as the Jones Act, a federal judge ruled on Oct. 10. The decision is a temporary victory for Kloosterboer International Forwarding and Alaska Reefer Management. The companies last month sued U.S. Customs and Border Protection, asserting that the agency has wrongfully issued more than than $350 million in penalty notices to Kloosterboer and other companies in the transport chain. The federal government claims the companies since 2012 have secretly used a specially built, 100-foot rail track at the port of Bayside in New Brunswick, near the border with Maine, in an illegal attempt to take advantage of an exemption in the act. Customs and Border Protection cannot issue new penalties for seafood moved through the Bayside rail line until the case is resolved, U.S. District Court Judge Sharon Gleason in Anchorage said in the 24-page decision. Not allowing the seafood distribution would close factories, hurt jobs and disrupt the supply chain for the U.S. Department of Agriculture food bank and school lunch programs, Gleason said in the order. The seafood, mostly pollock, is caught by fishermen working from Dutch Harbor in Alaska’s Aleutian Islands. It reaches stores and restaurants on the East Coast. “We were forced to halt shipping over 50 days ago,” said Jennifer Adamski, Kloosterboer’s director of logistics and operations, in a prepared statement. “As a result, 26 million pounds of Alaska produced seafood products remain in the Bayside cold storage, unable to reach U.S. seafood manufacturers at a time when the supply chain is severely strained.” The companies say they have recently taken steps that Gleason required in an earlier round in the case, including filing a petition seeking administrative remedies with Customs and Border Protection, Gleason’s decision said. The two seafood shipping companies provide transportation and logistics services as part of the American Seafoods Group family. The Jones Act requires that vessels carrying goods between two U.S. points be American-made and American-flagged. The companies use foreign-flagged ships. But they say they meet a Jones Act exemption because the seafood travels briefly by rail in Canada. The U.S. Department of Justice asserts that before 2012, the companies legally used the New Brunswick Southern Railway to transport their seafood in Canada, a journey of more than 30 miles along an established railway that moved the seafood from one point to another. But in 2012, the companies began using the 100-foot mini-track that goes nowhere, which the Justice Department argues is unlawful. The companies briefly roll the seafood-filled trucks on the track in an effort to save money and find a loophole in the Jones Act, the agency asserts. Kloosterboer and Alaska Reefer argue that the short track is a registered Canadian rail line and a legal part of the shipping route between Alaska and the East Coast.

Trawler bycatch debate heats up after dismal 2021 returns

Fishermen are calling for state and federal fisheries managers to make changes to salmon bycatch limits for trawlers as chinook salmon numbers plummet across Alaska. Chinook salmon returns were dismal virtually everywhere in Alaska this year, from Southeast to the Bering Sea, with few exceptions. That follows a trend, as abundance has declined over roughly the last decade. Commercial fishermen have lost most of their opportunity to harvest kings, and sport fisheries have been restricted. Now subsistence fisheries are being reined in to help preserve the runs. The North Pacific Fishery Management Council is debating changes in its meeting this month. Trawlers, which use weighted nets to drag either along the bottom or in midwater, are permitted a certain amount of bycatch as they fish for their target species, the largest of which is pollock. Bycatch is always a heated issue, but it is especially so now. The Alaska Department of Fish and Game informed the council in a letter dated Sept. 23 that three index species that it uses to track king salmon runs in the Bering Sea—the Unalakleet, Yukon, and Kuskokwim rivers—didn’t reach a threshold necessary to maintain the current bycatch allowances. That threshold is set at 250,000 fish between the three rivers; this year, there were 165,148. The Kuskokwim’s run came within its forecasted range, but the other two fell short. The shortfall in salmon this year hit fishing communities hard, particularly among subsistence fishermen. Amos T. Philemenoff, Sr., president of the Aleut Community of St. Paul Island, wrote to the board that the salmon shortages in the Arctic-Yukon-Kuskokwim region this year have impacted the island’s subsistence traditions. Donations of salmon from commercial harvesters to replace the lost food do not replace the traditions, he said. “Our communities have experienced physical, mental, emotional, and spiritual hardship due to the impacts of over-harvest and mismanagement that characterize these Alaska fisheries,” he wrote. “The burden of conservation has fallen on Indigenous (e.g., subsistence) users who are not part of the salmon population collapse.” Philemenoff said the island community has been bringing up concerns about the Bering Sea ecosystem for years and pointed to a combination of factors, including trawl over-exploitation of the fishery resources and climate change. Sea ice has become increasingly rare, not surrounding St. Paul Island since 2011 and 2012, and seabird die-offs have become increasingly common in the region. “The population declines of northern fur seals, Steller sea lions, Pribilof Islands blue king crab, and Pacific halibut, to name a few, have been devastating to the livelihoods, wellbeing, and future of our tribal and community members,” he said. “We have carried these concerns to this Council for years, decades.” He requested that the council drop salmon bycatch allowances to zero for the 2022 Bering Sea pollock fishery, that it seek federal disaster aid and research funding and that the council seek tribal consultation on salmon bycatch and management. The Kuskokwim River Inter-Tribal Fish Commission asked for the same measures in its letter, noting that because of the lack of information on the reason for the salmon collapse, “sustainable fishery management requires that the Council limit salmon bycatch in the Bering Sea pollock fishery to ensure that NO salmon are taken as bycatch in the Bering Sea pollock fishery in 2022.” Kawerak, Inc., the Ocean Conservancy, the Yukon River Inter-tribal Fish Commission, the Yukon Drainage Fisheries Association and the Bering Sea Fishermen’s Association submitted the same requests. Several commenters are asking for similarly tough actions on the Bering Sea pollock fishery, but others are noting that significant cuts could also heavily impact Native coastal communities because they hold interest in that fishery through their CDQ groups. Fishermen with the Coastal Villages Region Fund, which represents the villages around the Kuskokwim River Delta and surrounding areas, caught about 102 million pounds of pollock in 2019, according to CVRF’s annual report from that year. Others are asking for changes to the bycatch management in the trawl fisheries. A letter from the Salmon Habitat Information Partnership program signed by 300 commercial fishermen asks the council to reconsider a decision it made regarding apportionment of Chinook salmon bycatch in the Gulf of Alaska pollock fisheries. In August, the National Marine Fisheries Service published a rule moving 1,350 Chinook from the Gulf of Alaska pollock fishery to the non-rockfish program catcher vessel sector in the Gulf. Those 1,350 Chinook are a projected unused part of the prohibited species catch limit — essentially, some that the pollock fleet didn’t catch that they were allowed. The fishermen in the letter, from everywhere from Ketchikan to Dutch Harbor, protested this move, saying the fish should be left in the Gulf rather than be allowed to be caught by another sector as bycatch. “Alaskans are making huge sacrifices to protect Chinook; the federal government via the NPFMC needs to do the same,” the letter states. “Chinook bycatch being rolled over to another trawl sector to kill and discard is unconscionable when many Alaskans are foregoing subsistence, sport and commercial harvest.” Salmon fishermen across the Gulf of Alaska, from Southeast to Bristol bay, saw restrictions this year due to low king salmon runs. In Bristol Bay, early-season commercial fishing in the Nushagak District was restricted because of the slow king salmon return there. In Cook Inlet, setnetters were shut down completely in mid-July because of a poor king salmon run, along with a complete sportfishery closure for the Kenai River king salmon. In Southeast, sport anglers were restricted starting in June to protect the kings returning to the rivers there. In the letter, the fishermen argue that the rollover policy needs to be reversed while the council takes more long-term action to address king salmon bycatch in the trawl fisheries in the Gulf. The North Pacific Fishery Management Council is meeting this week via Zoom. The link to the meetings can be found on its website at npfmc.org. Elizabeth Earl can be reached at [email protected]

Former Brooks Range executives seek second shot at Mustang

Some of the players in a failed North Slope oil project want to revive the state-backed field under a new name. Alaska Division of Oil and Gas officials in mid-September approved the transfer of state leases from Brooks Range Petroleum Corp. to Finnex LLC, according to documents recently published on the division’s website. Finnex is led by CEO Majid Jourabchi and Chief Operating Officer Harry Bockmeulen, who previously held the same positions at Brooks Range. Finnex was formed in June 2020 and is located in the same South Anchorage offices as Brooks Range, according to records filed with the state Division of Corporations, Business and Professional Licensing. Brooks Range was the Anchorage-based oil junior that, under a prior management team, first attempted to produce oil from the small Mustang project with $70 million of help from the Alaska Industrial Development and Export Authority, the state-owned development bank. AIDEA took control of the Mustang project in December 2020 following years of fits and starts by Brooks Range that ultimately led the authority to foreclose on the project assets in an attempt to recoup the $70 million authority officials invested in the Mustang development between 2012 and 2014. Division of Oil and Gas officials also issued a notice to Brooks Range on Sept. 9 that they had terminated two of the company’s North Slope leases for failing to pay rent on the acreage that was due Sept. 1. AIDEA officials have said they are working to eventually sell its share of Mustang assets. The authority has a 90 percent working interest ownership in the Southern Miluveach Unit that contains the oil prospect. The tipping point was when Brooks Range’s majority owner, Singapore-based Alpha Energy Holdings, failed to make good on loan payments to AIDEA stemming from a prior refinancing of the investment firm’s obligations to the authority. Jourabchi is also president of Houston-based Thyssen Petroleum, once a minority owner in Anchorage-based Brooks Range. Jourabchi told the Journal in May 2019 that he was part of a team of investors attempting to buy a majority stake in Mustang from Caracol Petroleum, a subsidiary of Alpha Energy. The Mustang field is adjacent to the southern portion of ConocoPhillips’ large Kuparuk River field and also near the Pikka oil project being developed by Oil Search. The field is estimated to hold about 22 million barrels of oil and could peak at production rates of about 12,000 barrels per day when fully developed. Brooks Range drilled test wells at Mustang in 2011 and 2012 that led AIDEA in December 2012 to take a stake in Mustang. The state oil lease interests approved for transfer to Finnex by TP North Slope Development, Brooks Range and Caracol are outside of the Southern Miluveach Unit, which holds the Mustang facilities, but Jourabchi said in an Oct. 12 interview with the Journal that Thyssen Petroleum submitted a proposal to AIDEA to purchase the Mustang assets with the intent of producing from the field quickly. Thyssen owns 85 percent of Finnex. “We feel it’s very credible,” Jourabchi said of the proposal. He also said Finnex has secured $35 million in financing to restart development of Mustang. “We feel we can get (Mustang) to production very quickly, but if it doesn’t happen, we have other ideas that clearly will take much longer,” Jourabchi said. Brooks Range briefly produced oil from Mustang in 2019 but a lack of funding prevented sustained production operations. A spokeswoman for AIDEA did not respond to questions about Mustang in time for this story. Full development of the field was initially estimated to cost about $580 million and included drilling 11 production and 20 more gas and water injection wells, according to AIDEA’s project documents. Brooks Range later changed its plans to utilize smaller, modular production facilities to spur development. Brooks Range leaders said when AIDEA made its first investment that they hoped to have Mustang in production by late 2014, and said when AIDEA made its second payment to the project oil would start flowing in late 2015. Thyssen has producing assets in Louisiana. Elwood Brehmer can be reached at [email protected]


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