Annual budget impasse over PFD drags into June

Gov. Mike Dunleavy wants legislators to be settling the future of the Permanent Fund dividend for decades to come but first they have to decide what it will be this year. Visible progress on the 2022 fiscal year budget has stalled as lawmakers again appear stuck in negotiations on the PFD. A June 1 budget conference committee meeting initially indicated as likely by committee chair Rep. Neal Foster, D-Nome, never materialized and Rep. Steve Thompson accused Senate leadership of dragging the process out during a May 26 floor speech. Fellow Fairbanks Republican Rep. Bart LeBon replaced Thompson as the House Republican caucus’ representation on the budget committee after it became clear finishing work on the budget would conflict with prior commitments Thompson made for early June. Thompson said he had gotten assurances from legislative leaders that the budget would be settled well before June but that did not happen. “I hope that it has a fast resolution but I don’t see how it’s going to,” he said of the conference committee’s work. Senate Republican leaders have mostly stayed quiet during the latest round of negotiations since passing the budget May 19. Senate President Peter Micciche, R-Soldotna, previously stressed a desire to be done with the budget before June. In prior years an unresolved budget on June 1 for the next fiscal year starting July 1 meant the administration would send out “pink slip” layoff notifications to state employees, but the Dunleavy administration has said the notices aren’t required until later in the month, per union agreements. At about $4.2 billion in unrestricted general fund spending from the House and just more than $4.4 billion from the Senate without PFD appropriations, the Legislature’s budgets are very close to the administration’s nearly $4.4 billion proposal for agency operations and other general expenses such as debt service, which historically would’ve led to a quick resolution. However, the House kept the PFD out of the budget and the Senate approved an additional $1.5 billion draw from the Permanent Fund Earnings Reserve Account to pay for PFDs of approximately $2,300 per Alaskan, in line with Dunleavy’s long-term plan for a “50-50 split” of the annual 5 percent of market value, or POMV, draw between the PFD and government spending. The Senate’s PFD vote came late in the process after many hours of floor debate on the budget and split Republican leadership in the nonbinding caucus. Micciche co-sponsored the PFD budget amendment, while Finance co-chairs Reps. Click Bishop and Bert Stedman — the caucus’ conference negotiators — voted against the larger dividend appropriation. Stedman has been particularly steadfast in his opposition to ad hoc draws from the Permanent Fund in his years as the operating budget chair. The Senate Finance version of the budget funded PFDs in the $1,000 range, or a $674.9 million appropriation. Conference member and House Finance co-chair Rep. Kelly Merrick, R-Eagle River, also submitted legislation late in the session to fund the PFD directly with 30 percent of the state’s annual mineral royalty income. Merrick’s plan in House Bill 202 would eliminate the state’s annual deficit based on current revenue projections but would do so via appropriations of $333 million and rising for PFDs in the $500 range, a fiscally expedient but politically challenged approach to the situation. Dunleavy called lawmakers into a special session May 20 immediately after the Senate passed its version of the budget to finish off the 2022 work and approve his 50-50 split constitutional amendment. Legislators, on the other hand, have given no indication they will take up the big issues this month. Instead, that is more likely to happen — if at all — during the second special session Dunleavy called for August when the governor wants lawmakers to settle on a revenue measures and future levels of spending cuts. Revenue Commissioner Lucinda Mahoney told Senators during a May 27 hearing on Dunleavy’s fiscal plan that administration officials do not believe a broad-based personal tax is necessary to close what they believe will be a long-term deficit of about $300 million per year based on projections for increasing oil revenue and continued strong Permanent Fund investment returns. “There is a recognition that we could have potential market disruptions; however, with the 5-year smoothing (in the POMV), we feel we should have plenty of time to react if there’s a sustained correction,” Mahoney said of a potential market downturn. The Fund returned just more than 25 percent on its investments in the first 10 months of the 2021 fiscal year and has performed far better than historical averages for the last five years. Revenue officials said they are working on ways to increase the state’s income ahead of the August special session call, which likely means oil production tax and corporate tax changes in the absence of broad personal taxes. Numerous legislators have said they believe the annual deficit would actually be closer to $1 billion under a 50-50 plan and current spending. While the PFD keeps wagging the budget dog, the conference committee members on May 27 did agree to cover ferry operations and a bunch of DOT projects with federal COVID-19 aid. The Senate’s budget was passed after much of the federal guidance for pandemic aid was published and included a broad spending plan for the money. Elwood Brehmer can be reached at [email protected]

Bank income starts 2021 where it left off in 2020

2021 is starting to look a lot like 2020 for Alaska’s banks, which is a good thing for them, at least. Alaska’s local and statewide banks reported consistently strong results again in the first quarter. First National Bank Alaska led the way with net income of more than $13.9 million during the period, a slight improvement over the $13.2 million netted to end 2020 and in line with the $14.1 million Alaska’s largest in-state bank made in the first quarter of last year, according to filings with the Federal Deposit Insurance Corp. FNBA total assets also grew by 4.9 percent in the first quarter, reaching nearly $5 billion, or a 29 percent increase in the past year. Fellow Anchorage-based statewide institution Northrim Bank reported $12.2 million in first quarter net income to FDIC officials, up from $10.1 million to end 2020 and just more than $1 million a year ago. Northrim’s quarterly profit was on the back of more than $2.3 billion in assets, which grew 10.8 percent in the quarter and have also increased by nearly 40 percent since the first quarter of 2020. Alaska’s smaller, local banks fared much the same to start the year. Denali State Bank netted $1.3 million in the first quarter on $397 million in total assets. A year ago, the Fairbanks-based community bank netted $552,000 in quarterly income on $306 million in assets, for 29 percent growth over the last 12 months. Southeast’s First Bank reported total assets of more than $715 million at the end of the first quarter for growth of nearly 23 percent since March 2020, with a first quarter net income tally of more than $2.5 million compared to $843,000 a year ago, according to FDIC filings. FNBA Chief Financial Officer Michele Schuh wrote via email that Paycheck Protection Program loans and low interest rates have continued to drive profitability across the banking sector. The Alaska Housing Finance Corp. advertised interest rates June 1 as low as 2.25 percent for a 15-year mortgage and rates for a 30-year loan as low as 2.65 percent. The low borrowing costs have fueled a boom in home sales since being implemented early last year in an attempt to mitigate the potential economic side effects of the pandemic. Northrim executives said in a conference call that the deposit growth should provide additional strength to future operations and PPP activity should provide another boost to the bank when more recent applications start to be forgiven in the second half of the year. Northrim led Alaska-based banks in PPP loans, residential mortgage activity and market share growth last year, according to bank leaders. PPP loans accounted for 26 percent of the bank’s approximately $1.5 billion total loan portfolio, according to a quarterly release. Additionally, home mortgages accounted for approximately 40 percent of Northrim’s first quarter total revenue and earnings, according to bank figures. “It’ll be a bit of a stretch to think 2021 will have the same activity from residential mortgages as 2020 even though the first quarter was strong,” Northrim Chief Financial Officer Jed Ballard said. Northrim CEO Joe Schierhorn noted the bank continues to grow its core loan and deposit portfolios alongside the growth more tied to outside forces, such as interest rates driving home-buying and mortgage refinance activity. Northrim increased its net loans by 45 percent, from just more than $1 billion to more than $1.5 billion, in the past year, and 7 percent during the first quarter. A return to more normal life post-pandemic should also encourage more traditional bank activity as federal COVID-19 aid work eventually fades, according to Schuh. “The increasing reopening of broad business activity will help fuel the Alaska economy, leading once again to increasing loan demand, which supports strong bank performance long-term,” Schuh wrote. Elwood Brehmer can be reached at [email protected]

Copper River closed again amid low counts

This year’s Copper River sockeye run is starting out a lot like last year’s, which is bad news for most everyone, except for maybe the fish that are showing up. Alaska Department of Fish and Game managers closed the famed early season drift gillnet fishery for a second consecutive opener May 31 due to poor sockeye counts at the department’s Miles Lake sonar upriver from the fishery. Just 54,154 sockeye had been counted at Miles Lake through May 31, compared to the approximately 132,000 fish needed by that date to meet the department’s in-river goal based on historical run data, according to a June 1 ADFG advisory. However, unusually late ice flows in the river prevented managers from installing all of the sonar equipment ahead of the run, meaning the counts for roughly the first week of the run are incomplete. Similarly, the May 24 fishing period — the last of three 12-hour openers so far this year — yielded 32,227 sockeye when fishermen should’ve netted approximately 56,100 fish based on historical data. Copper River drifters harvested 5,188 kings and 52,729 sockeye in the first three openings of the fishery, according to Alaska Department of Fish and Game figures. Cordova Area Management Biologist Jeremy Botz said in a brief interview that he is hopeful the late, cool spring has held many fish back from entering the river on a more traditional schedule. “The Copper’s just running really cold. Some warmer water should hopefully coincide with some increased fish passage,” Botz said. Last year’s Copper River sockeye harvest totaled just 98,300 fish for one of the worst seasons ever after fishing was shut down quickly in response to poor catches and sonar counts. This year managers expected just more than 1.3 million sockeye to return to the Copper, allowing for a commercial harvest of 672,000 fish. The 10-year average Copper River run is approximately 2.1 million sockeye. The closures also come at a time when processors were paying some of the highest prices ever for Copper River salmon. Peter Pan Seafoods announced after the second opener that it would be paying $19.60 per pound for kings and $12.60 per pound for sockeye; prices that are several fold greater than historical averages. Daily sonar counts from May 26 to 31 were consistently in the 7,000 to 8,500-sockeye range and Botz said if the run is going to improve significantly it should start showing in the counts soon. “We haven’t fished for close to 10 days so we think we’ve probably got some decent numbers of fish in the river relative to what this actual run size is,” he said June 1, adding that fishing could be allowed on “pretty short notice” if the situation improves. “We could even have an out-of-cycle fishing period,” if counts justify it, Botz said. The Copper River district is normally open Mondays and Thursdays for 12 hours each period. Elwood Brehmer can be reached at [email protected]

Interior Dept. files brief defending Willow project review

Attorneys for the Interior Department argue in a court brief filed late Wednesday that conservation and Alaska Native groups filed suits to stop ConocoPhillips’ $6 billion Willow oil project too late and the agency sufficiently accounted for the greenhouse gas emissions from the development in its environmental review. The complaints filed in federal Alaska District Court late last year violate the 1976 Naval Petroleum Reserves Production Act, which limits the time to challenge the environmental impact statement, or EIS, for a project in federal petroleum reserves to 60 days after the final EIS is published, the government contends in its court motion. The Sovereign Inupiat for a Living Arctic filed suit against the Bureau of Land Management and other Interior officials under the outgoing Trump administration in mid-November and a coalition of conservation organizations filed a similar complaint in late December. The Willow Project EIS was published in the federal Register Aug. 14, Interior’s attorneys note, adding that Judge Sharon Gleason has already exhibited a great degree of skepticism towards the plaintiffs claims on the issue. The groups argue that specific language in an amendment to the NPRPA stating the time limit applies to reviews “concerning oil and gas leasing,” meaning just least sale and land planning reviews for the National Petroleum Reserve-Alaska where Willow is located. Gleason, who is handling both cases, wrote in a Feb. 1 order denying a preliminary injunction motion to stop ConocoPhillips from opening a gravel quarry for early project construction that “Plaintiffs’ (National Environmental Policy Act) claims are likely time barred” and to that point had “not demonstrated ‘serious questions going to the merits’ with respect to their NEPA challenges.” The 9th Circuit Court of Appeals issued a preliminary injunction on appeal several weeks later, stopping ConocoPhillips’ work for the season at Willow until the merits of the case could be more closely examined. Federal attorneys also insist in the 70-page response brief that the allegation BLM officials “used the same modeling approach” when evaluating greenhouse gas emissions from Willow as was recently shot down by the 9th Circuit in a different case is not a fair comparison of the situations. Not only does the Willow EIS state that downstream, lifecycle emissions projections from foreign countries as a result of the project could not be reliably made because of a lack of important data, according to the brief, BLM officials reached a more logical conclusion regarding project emissions than Bureau of Ocean Energy Management officials did in regards to Hilcorp’s offshore Liberty oil project. “BLM’s analysis of lifecycle GHG emissions associated with the Willow project does not suffer from the flaws identified by the court in Liberty,” the brief states. “As that court explained ‘BOEM’s conclusion that not drilling will result in more carbon emissions than drilling is counterintuitive.’” As currently proposed, the Willow master development plan calls for the eventual construction of five drill sites stretching north-south over approximately 20 miles in the northeast corner of the federal petroleum reserve. ConocoPhillips also has two other nearby developments in the NPR-A but the Willow project would be several times larger than the single-drill site Greater Mooses Tooth-1 and 2 projects extending from the Alpine field. Full build-out of Willow is estimated at a cost of up to $6 billion, according to the company, with first oil during the 2025-26 winter. The project’s oil production is expected to approach 160,000 barrels per day at its peak. Overall, the project is expected to produce about 590 million barrels over 30 years. ConocoPhillips Alaska representatives have said it’s too early to tell what, if any impact the work stoppage early this year will have on the overall development schedule for Willow. The members of Alaska’s congressional delegation lauded the court filing as confirmation the Biden administration after a formal policy review would back the environmental conclusions made in favor of Willow under President Trump in a joint Thursday press call. Rep. Don Young thanked Biden and Interior Secretary Deb Haaland — a former New Mexico congresswoman and friend of Young’s — and said she called the delegation members in advance of the court filing. “This week has been a good week,” Young said, also referencing the legislation to re-open Alaska’s cruise industry Biden signed Monday. Sen. Lisa Murkowski said it was a good sign for Alaska’s economy, as Willow is expected to generate 2,000 jobs during construction and roughly $10 billion in government revenue over its production period. “It is a recognition of the value of the resource that we have within the NPR-A and the potential for jobs and revenues that we’re talking about,” Murkowski said. Both, along with Sen. Dan Sullivan, said they had been pressing administration officials — including the president on Monday — to support Willow. They emphasized in the press call that Willow was discovered and evaluated under the NPR-A land-use plan approved by the Obama-Biden administration in 2013. “Restricting the production of American energy fundamentally undermines our national security interests. We’ve been making that argument to everyone who will listen,” Sullivan said. “Some members of the Biden administration agree with that and I think that’s why we were able to gain traction on this.” ConocoPhillips Alaska leaders thanked the delegation for their advocacy in an emailed statement and said they believe the Willow EIS satisfies all legal requirements. Bridget Psarianos, an attorney with Trustees for Alaska representing the plaintiffs wrote via email that it is surprising the Biden administration would defend a process that the 9th Circuit already found to have “serious legal issues” and a project on the scale of Willow and in proximity to the Village of Nuiqsut was not contemplated when the 2013 land-use plan was approved. “The point here is the Trump administration broke multiple laws in its approval process,” Psarianos wrote. “We’d hoped this administration’s commitment to science-based decision making, environmental justice, and addressing the climate crisis would have caused them to take a closer look, rather than carry a bad decision forward to appease ConocoPhillips.” Elwood Brehmer can be reached at [email protected]

BROWN'S CLOSE: Road Rage, Or Why All Other Drivers Should Be Annihilated

My name is Sarah, and I suffer from road rage. You’d think living in a state with relatively little traffic, like Alaska, would have cured me of this illness. Alaska has nothing but wide-open spaces, but even this, unfortunately, has not calmed me. If anything, it may be making my road rage worse. My fellow Alaskans are, by and large, a laidback bunch. In conjunction with this laissez-faire attitude towards life, drivers do not give much thought to when they will arrive at their destination, and instead toddle along, nary a care in the world. On the other hand, I care very much about my destination and would like to arrive there sometime this calendar year, people, please! I wasn’t always this frustrated. As a newly minted driver with a learner’s permit in Fairbanks, I was very intimidated by the rules of the road. All the other cars dwarfed my first car, a 1997 Nissan Maxima. It had once belonged to my grandmother, and much like my grandmother, the car offered shelter and comfort. Also much like my grandmother, the car was smaller than others of its kind in the wild. My grandmother topped off at a whopping five feet tall and would often complain that the world was not made for people her size. An early adopter of microaggressions, she maintained her whole life that the world discriminated against short people. I would hear her small voice muttering to herself when reaching for things in the cabinets, when climbing into cars, and when sitting in chairs. “Everyone is against us! The world hates short people!” As I scooted around Fairbanks in my grandmother’s car as a teenager, I too adopted my grandmother’s ethos. Trucks would loom over me, vans would steam by me, and I would clutch the steering wheel in a death grip. My dad, in his designated role as driving instructor, would sit stone-faced in the passenger seat beside me. Even though I could not bring myself to drive faster than 45 miles per hour, his foot would stamp the floor where the brake pedal would be so hard the car would rock side to side. As a baby driver, I would get lost in my miniature hometown, drive many miles under the speed limit, and freak out if I encountered a one-way street. I once took the wrong exit off the Johansen Expressway, could not figure out how to get back on the expressway, turned around, and drove the wrong way up the exit ramp. There was absolutely no traffic on the road (it was Fairbanks after all), but I was sure I would be arrested at any moment for the high crime of being a dingbat. As we all know, however, with practice comes confidence. As I matured in my driving, I had the temerity to approach the speed limit, make left turns, and choose a lane other than the right. Having mastered the art of the turn, my confidence blossomed into aggression. My fear of my fellow drivers had been replaced with a blind resentment. Who were these other vehicles taking over the road? This place was not big enough for me, my Nissan Maxima, and them too! This only got worse after I started driving in major metropolitan areas outside of Fairbanks. Drivers on the East Coast are not afraid to drive 80 miles per hour, merge aggressively, or block traffic so they can cut into a long line. Boston was the first place I saw taxi drivers run red lights more often than stop. Man, did those guys have game. I learned much from these driving giants, and my fellow Alaskans could stand some similar tutelage. For example, upon moving back to Anchorage, I was devastated by my fellow residents’ complete and utter inability to use the passing lane. Rather than passing the car on the right, and then dutifully moving back into the right-hand lane, drivers simply treated the passing lane as another lane. Two lines of cars, equal in length, meander along together, and I am back at the end of the line calling everyone around me a deadhead. But the crème-de-la-crème of triggering behavior: nothing sends me into a fury faster than a car which pulls into the left lane, speeds up to pass the car on the right, reaches the car, and then slows down to drive the exact same speed as the car next to it. People! I beg of you! There is no point in getting into the left lane, speeding up to the car in front of you, and then driving the exact same speed. For crying out loud, just drive the same speed behind them in the right lane. Don’t be a monster! I’ve spent many hours profiling my fellow drivers, trying to ascertain who amongst me is an obstacle, and who is a fellow traveler; an ally, if you will, merely trying to get to his appointed destination. For example, I always try to follow a truck; they go faster and drive with purpose. I avoid Subarus, as those drivers are nearly always overly cautious. Stay away from boats, buses, and gaggles of RVs. The worst of the worst drivers, however, is a very specific breed of truck driver who views being passed as an afront to his manhood. This driver will go out of his way to drive slowly on one-lane streets, block the sections of road where there is a passing lane, and then saunter back to the one lane once the passing lane is dispensed with, satisfied he has ruined everyone’s day. I will be driving south this weekend for Memorial Day. May those who cross my path be speedy. Sarah Brown takes many deep breaths. Write to her on pain of death at [email protected], and on Twitter @BrownsClose1. “Close” is a British term for alley or cul-de-sac. For more of Sarah’s musings, visit Browns-Close.com.

World chip supply is in danger unless Taiwan gets vaccines

Back in February, as the world was beating a path to Taiwan’s door for help to tackle a shortage of semiconductors, the health minister got into a scrap with China over COVID-19 vaccines. Beijing, he suggested, had used political pressure to derail Taiwan’s plan to purchase five million doses directly from Germany’s BioNTech SE, rather than via a Chinese company which held the rights to develop and market the BioNTech-Pfizer Inc. vaccine across China, Hong Kong, Macau and Taiwan. Foreign Ministry spokeswoman Hua Chunying retorted that Taipei “should stop hyping up political issues under the pretext of vaccine issues.” Three months later, Taiwan is paying the price for a lack of vaccines, with a surge in virus cases that threatens to trigger a lockdown. Having successfully sidestepped the first COVID-19 wave, the government now faces a health emergency — only about 1 percent of its population is vaccinated so far — with the potential to disrupt the chip industry that dominates the local economy, and which is critical to an already-squeezed global supply. That’s a link made by the head of Taiwan’s office in New York, who warned of “logistical problems” without access to more shots. Yet by shunning vaccines from China and warning of more chip shortages if it can’t source enough doses elsewhere, the government is giving even greater incentive to the world’s biggest economies to make investments that may erode Taiwan’s competitive edge in semiconductors over the long term. Taiwan’s predicament illustrates its strategic yet vulnerable position at the confluence of U.S.-China tensions. Separated by a 110 mile-wide strait, Taiwan is regarded as a province by Beijing and its conquest is President Xi Jinping’s key goal for historical and ideological reasons. The U.S. is an ally of Taipei’s democratic government and a big buyer of its exports, dominated by chips produced by Taiwan Semiconductor Manufacturing Co. The onset late last year of chip shortages that have hobbled industries from autos to computer gaming had looked to give Taipei global leverage. TSMC is the world’s leading provider of cutting-edge semiconductors and holds 56 percent of the so-called foundry business of manufacturing chips designed by customers including Apple Inc. and Qualcomm Inc. But Taiwan has suffered a sudden reversal of fortunes. The pandemic comes just as a drought triggers power outages, stoking economic uncertainty and a slump in what was the world’s best performing stock index in the four years to January. Read More: The World Is Dangerously Dependent on Taiwan for Semiconductors What’s more, the very source of Taiwan’s recent geopolitical clout — its dominance of the market for cutting-edge chips — is under attack as governments from the U.S. to Europe and Japan, alerted to the strategic nature of the semiconductor supply chain, seek to spur production at home. China is pumping billions into catching up after Washington imposed export controls on U.S. chip technology. “I think we’ve become too dependent on Taiwan and Korea, that’s the point, we need a more balanced global supply chain,” Pat Gelsinger, chief executive officer of Silicon Valley’s Intel Corp., the world’s biggest chipmaker, said in an interview. The U.S. and Europe should act “more aggressively” to counter the “imbalance” of Asia’s lead in manufacturing semiconductors that are mostly consumed in the west, he said. Intel is a rival and plans to challenge TSMC at the cutting edge, but Gelsinger isn’t the only voice making for uncomfortable listening in Taiwan. Commerce Secretary Gina Raimondo said this month that while the Biden administration is working with Taipei and TSMC to address the chip shortage, it’s also looking to reduce U.S. dependence on Taiwan. TSMC is in the process of building a new fabrication facility in the U.S. Some in Washington have suggested that Taiwan is a backdoor to China by enabling tech transfers. Republicans Michael McCaul and Tom Cotton have called on the administration to engage with Taipei to do more to “mitigate the risk of Taiwanese companies providing services and technologies to entities of concern,” a reference to Chinese state-backed companies with links to the military. With the prospect of some $50 billion in government funding to build out chip making in the U.S. and the promise of still more in Europe and South Korea, there are signs that Taiwan is starting to feel the heat. The government is working to draft a new export control list targeting technologies with military use, to tighten curbs on exports to China and raise the penalty for violations, according to a person familiar with the issue who asked not to be named discussing policy deliberations. That’s after Alchip Technologies Ltd’s stock took a beating in April when the Washington Post reported that it supplied chips to Phytium, a People’s Liberation Army-affiliated entity. Alchip said it has always been in compliance with government regulations and that Phytium projects were on hold. Taipei has become more alert to the possibility of Chinese companies ramping up efforts to recruit Taiwanese engineers. Last month the Cabinet met to discuss how to prevent the outflow of local talent, with the Ministry of Labor instructing local job-search websites to remove ads recruiting Taiwanese citizens to work for China, particularly in the semiconductor industry. Companies and headhunters can be fined as much as NT$500,000 ($17,900) for advertising such jobs and NT$5 million for facilitating local engineers’ employment with Chinese companies on the mainland, ministry official Huang Chiao-ting said. Job search site 1111 said it has removed close to 3,000 job listings. Investigators have visited the local offices of four Chinese companies, including Bitmain Technologies Ltd, within the last two months to look into allegations they recruited engineers illegally. “By more aggressively investigating Chinese companies’ efforts to poach Taiwanese engineers, we hope we can help prevent potential trade secrets leaking to China should local talent get hired away,” said Judy Chen, a spokeswoman for the Hsinchu District Prosecutors Office. She declined to name the other companies probed. Members of the ruling Democratic Progressive Party are considering amending the law to boost penalties for intellectual property theft. Lawmaker Chao Tien-lin is proposing life sentences for those found guilty of economic espionage, a crime not currently on the statute books in Taiwan. “Taiwan needs to win trust from its partners and help prevent China from building a supply chain from stolen technology,” Chao said in comments provided by his assistant. Whether it’s enough to allay concerns in Washington may become clearer with the publication of President Joe Biden’s review of the semiconductor supply chain. The 100-day review is due to conclude on June 4. What’s already known is that there is bipartisan support to build U.S. chip making, and Taiwan is in the cross hairs. “Taiwan dominates semiconductor manufacturing, and one company, Taiwan Semiconductor Manufacturing Company, virtually controls the market,” Sen. John Cornyn, a Texas Republican who introduced the CHIPS for America Act to boost U.S. production, said on the Senate floor this month. The sustainability of Taiwan’s industry has also come into question after it suffered power outages this month, focusing attention on environmental factors including water shortages and uncertainty over future electricity supply for power-hungry chip plants. Taiwan can potentially overcome the virus outbreak as well as the power and water shortages, showing its companies “can still satisfy global demand by manufacturing mostly in Taiwan without any issue,” said Arisa Liu, a researcher at the Taiwan Institute of Economic Research. In the short term that will require vaccines, most likely from Europe or the U.S. According to Chunhuei Chi, a former health-policy adviser in Taiwan who is now director of the Center for Global Health at Oregon State University, “many politicians in Taiwan urged the Taiwanese government to use microchips as leverage” for vaccines. While the government is reluctant to use that leverage explicitly, “if the U.S. is concerned about the supply of chips from TSMC, the U.S. would have incentives to provide Taiwan with vaccines to make sure production will not be disrupted by this outbreak,” he said. More stories like this are available on bloomberg.com

Inflation brews for US producers while services wages pick up

Inflation continues to brew in America’s industrial heartland as growing materials shortages cascade into record-long delivery times and leave manufacturers struggling to keep pace with an energized economy. As producers attempt to navigate supply-chain pitfalls for the commodities necessary to produce their wares, wage growth is beginning to percolate. A recent Labor Department report showed the largest quarterly increase in worker pay at companies since 2003. This combination of higher labor and materials costs will probably lead to a bigger pickup in consumer inflation at a time when monetary and fiscal policies are conducive to faster economic growth. Colgate-Palmolive Co., food and beverage maker Mondelez International Inc. and Kimberly-Clark Corp. are among a growing number of companies raising prices. While Federal Reserve Chair Jerome Powell says the central bank views the shortages in materials and supply-chain challenges as temporary, companies are saying the constraints will linger, possibly into 2022. The Labor Department releases April inflation data on May 25. The following charts highlight the latest developments in materials shortages, delivery times and wages: Longer lead times are one of the clearest indications of the supply-chain challenges that producers face. Wait times of factories for production materials grew to 79 days in April, the longest in records dating back to 1987, according to the latest Institute for Supply Management data. The average delivery time of supplies for maintenance, repair and operations was also the longest in ISM data. Such delays have inflated order backlogs to record levels and kept a lid on a breakout in production growth. The ISM’s monthly reports also provide a clear indication of a growing number of commodities in short supply. In November, purchasing managers listed just 8 materials companies were struggling to get their hands on. Five months later and it’s expanded to 24. While some things like personal protective equipment and gloves have been in short supply for months, others like aluminum, wood pallets and rubber-based products are new additions to the list. Meantime, companies largest cost — labor — is accelerating as the lifting of coronavirus restrictions leads to a broader pickup in economic activity. The government’s latest employment cost index, a quarterly measure of compensation, showed wages in the private sector climbed in the first quarter by the most in 18 years. Most economists prefer the ECI because, unlike average hourly earnings in the monthly jobs reports, the worker-pay data aren’t distorted by the compositional changes in employment that have been particularly severe amid the pandemic. The overall ECI, including government workers, registered the biggest increase since 2007. Despite an elevated unemployment rate, many firms have cited troubles finding qualified workers. As a result, some are offering incentives like signing bonuses and boosting wages to attract applicants. Some 28 percent of small businesses reported raising compensation in a March survey by the National Federation of Independent Business. Increasing vaccinations have also allowed more Americans to head back to their favorite restaurants or begin traveling again. For service providers, that means hiring more workers. That will only increase amid projections for a wave of pent-up demand. But it’s been challenging to attract workers, which may reflect lingering child care obligations and enhanced unemployment benefits. The more generous jobless insurance and two latest rounds of pandemic-relief checks have given some workers the opportunity to be more selective about which job they take. These factors may help explain a big increase in first-quarter wages for service providers. The 1.3 percent gain was the largest quarterly gain in two decades of record keeping.

GUEST COMMENTARY: Thanks for nothing, Chris Cuomo

Thanks for nothing, Chris Cuomo. The public’s trust in traditional media is at an all-time low, with 56 percent of Americans agreeing with the statement that, “Journalists and reporters are purposely trying to mislead people by saying things they know are false or gross exaggerations,” according to data reported by Axios. It doesn’t help that former President Donald Trump spent his campaign and time in office popularizing the term “fake news” and branding journalists “the enemy of the people.” It doesn’t help that social media has blurred the lines, almost to the point of erasure, between vetted, fact-checked information and the rantings of ill-informed ideologues. And it doesn’t help that 68 percent of Americans usually get their news from television, where many cable news hosts have abandoned all pretense of objectivity in favor of the sweet lure of ratings — ratings that are easier to achieve when you sow outrage and fear, rather than deliver insights and context. It’s within that landscape that Cuomo, the host of CNN’s nightly show “Cuomo Prime Time,” joined strategy session phone calls with the staff of his older brother, New York Gov. Andrew Cuomo, to discuss the handling of sexual harassment allegations against the governor. “The cable news anchor encouraged his brother to take a defiant position and not to resign from the governor’s office,” the Washington Post reported Thursday. “At one point, he used the phrase ‘cancel culture’ as a reason to hold firm in the face of the allegations, two people present on one call said.” Chris Cuomo set an uncomfortable precedent last year when he invited his brother onto his show for frequent coronavirus updates and conversations early in the pandemic — a boundary that many journalists (including me) believed he shouldn’t have crossed. And revelations that Chris Cuomo got special access to state-administered COVID-19 tests when his brother’s administration dispatched state health officials to his relatives’ homes and expedited their test results, reported first in the Washington Post, are exactly why. Newsrooms often go to great lengths to prevent their employees from partaking in any activity that could even imply a conflict of interest. At the Chicago Tribune, we sign a pages-long ethics policy every year that mandates we don’t accept gifts from sources, don’t offer or accept favors to or from people, don’t participate in political rallies or protests, don’t donate money to politicians or candidates for elected office. The rules apply to everyone — reporters, editors, photographers, page designers. And — this is important — opinion writers. Because whether you’re encouraged to keep your opinions out of your work — as reporters are — or encouraged to let your opinions inform and populate your work — as columnists and critics are — you still need to avoid, at all costs, appearing beholden to anyone. Especially a politician — even if he or she is family. Your words — written or spoken, opinion-free or opinionated — are supposed to come from a pure, uncompromised place. It’s why I could write a column saying I liked Elizabeth Warren’s ideas, but I couldn’t contribute to her presidential campaign. I can’t have a vested, financial interest in her success. My words can’t be an attempt at securing myself a good return on investment. CNN is walking an uncomfortable line here. By choosing not to discipline Chris Cuomo, they’re making it hard for viewers to trust that the network’s reports and analysis are uncompromised by employees’ personal connections. The network is also asking viewers to trust its past and future stories about sexual harassment, even as it employs a guy who participated in the active brushing off of numerous women’s allegations, simply because they were made against his brother. That’s a tough sell, and it should be. It’s not so different from Fox News continuing to employ Sean Hannity, even as he acted as an adviser to Trump. It’s frustrating, both as a journalist and as an consumer of news and analysis, to see such blatant conflicts of interest shrugged off by both the folks participating in the conflicts and their employers, particularly when their employers play such an outsize role in shaping public opinion of the media. It erodes public trust at a time when it’s imperative for people to receive and believe the news — for public safety, for the wellbeing of our communities, for the health of our democracy. And trust, once it’s gone, is incredibly difficult to win back.

GUEST COMMENTARY: Federal permitting stands in way of infrastructure bill

The Biden administration’s American Jobs Plan talks about a climate crisis and an affordable housing crisis in its attempt to address the country’s infrastructure crisis. But before it can make serious progress on any of those issues it will need to address another crisis: federal permitting. President Joe Biden recently met with Republican senators to discuss building bipartisan support around infrastructure. His American Jobs Plan proposes spending an estimated $2.3 trillion, plus $400 billion in tax credits, to be offset by $2.1 trillion in additional tax revenue. Objectives include modernizing 20,000 miles of roads, 10,000 bridges, replacing lead drinking water lines, 100 percent national broadband coverage and, most ambitious of them all, overhauling the entire U.S. economy to achieve net-zero greenhouse gas emissions by 2050. But the federal government stands in its own way in accomplishing any of those goals. Many large infrastructure projects, especially linear projects such as utility lines that can cover hundreds of miles of right-of-way, are subject to a slew of federal, state and local permits and other authorizations. Most prominent among those is the National Environmental Policy Act, known as NEPA. The average time to complete an environmental impact statement — the type of analysis required for most major infrastructure projects — is 4.5 years, with some reviews taking over 10 years, according to a 2020 report from the White House Council on Environmental Quality that examined submissions from 2010 to 2018. Once approved, the most controversial projects, which are often also the largest, are subject to litigation from opponents searching for any vagaries in the law or process that they can exploit, delaying projects by an average of another two years. In 2020, the White House Council on Environmental Quality revised the NEPA regulations for the first time in more than 40 years. Many of those reforms relied on objectives outlined in the original statute and regulations, which called for striking a balance between economic, technical and public good considerations. The 2020 reforms established a “One Federal Decision” framework to streamline the approval process, providing senior level oversight of the timeline and limiting the length of submissions. For substantially similar activity, the reforms allowed for the re-use or substitution of environmental documents and public input processes conducted under other environmental laws. To help reduce litigation over interpretations of the rules, vaguely written regulatory language was clarified with more specific guidance.Upon rollout of the revised NEPA regulations in 2020, businesses both large and small from nearly every part of the U.S. economy issued statements supporting the changes. Unfortunately, the reforms have been challenged in multiple U.S. courts by both environmental groups and several states, prompting the Department of Justice to ask for time to review the reforms so the Biden administration can submit its own version. In the meantime, there are ominous indications that the rapid expansion of clean energy infrastructure in the U.S. is already running into permitting problems. Leaders from the Atlantic fisheries recently boycotted a public meeting to discuss future wind energy leases offshore New York and New Jersey, stating that there have been “no accommodations to mitigate impacts from individual developers” and calling the permitting process “broken.” There are currently 16 construction and operations plans for offshore wind farms winding their way through the lengthy NEPA process in the federal government. Elsewhere, environmental litigants are challenging the New England Clean Energy Connect, a $1 billion project that will provide 1,200 megawatts of renewable energy to the New England grid, with the Sierra Club calling the project an “environmental crime.” Perhaps one can take comfort in the single line in the American Jobs Plan that refers to “smart, coordinated infrastructure permitting,” but color me a skeptic. Brenda Mallory, the current chair of the White House Council on Environmental Quality, refused to endorse the need for more efficient timelines during her confirmation hearing. In fact, the sole change in the 2020 revisions that she endorsed was expanded engagement by Tribal Nations, suggesting this administration might follow the example of the Obama years, when officials lay down on the tracks to prevent meaningful reforms to NEPA. One thing you can count on: the tracks won’t be high speed rail, because those won’t be built for many years if all the recent improvements to NEPA are discarded. A bipartisan approach to NEPA permitting reform is still possible by focusing on these three key elements: • Implement the “One Federal Decision” framework to structure interagency coordination. • Establish presumptive time limits for approvals, reinforced by senior level oversight by the department leading the review. • Authorize greater use of the existing trove of federal, state and tribal environmental documents and administrative processes. These reforms won’t address all the reasons for delays, but they will help. The country has a solid foundation to create sensible permitting reform — let’s not waste valuable taxpayer funds in a slow and inefficient pursuit of the next generation of American infrastructure. Stuart Levenbach has held positions in three presidential administrations, including in the Office of Management of Budget, the Council on Environmental Quality, and the National Oceanic and Atmospheric Administration, and most recently as senior adviser to the former director of the National Economic Council.

Movers and Shakers for May 30

First National Bank Alaska announced Janet Weiss as the newest addition to its board of directors. Weiss previously served as regional president of BP Alaska for more than seven years before all assets were transferred in a sale to Hilcorp Alaska. Weiss received her bachelor’s degree in chemical engineering from Oklahoma State University. She began her career in Alaska in 1986 as a process engineer before moving into reservoir engineering. Weiss joins chair Betsy Lawer, Vice Chair Lucy Mahan, FNBA President Doug Longacre, Adm. Tom Barrett, USCG (ret.), Perry Eaton, Margy Johnson, Jane Klopfer and Tom Tougas on the board. All the directors were either elected or reelected to their board positions during the bank’s annual shareholder meeting on April 27. Action was also taken to reelect Lawer as chair, Mahan as vice chair and Eaton as lead director. Chugach Electric Association Inc. members elected University of Alaska Anchorage associate research professor Erin Whitney to a four-year term on the seven-member board. Whitney will replace engineer Stuart Parks, who has served on the board since January 2017. Stoel Rives LLP associate Whitney A. Brown has been selected to serve as a clerk for the Hon. Sonia Sotomayor, Associate Justice of the U.S. Supreme Court. The clerkship begins in July 2021 and will last for one year, after which Brown hopes and expects to return to Alaska. Brown, who focuses on complex litigation at Stoel Rives, was a law clerk to the Hon. Morgan Christen of the U.S. Court of Appeals for the Ninth Circuit, the Hon. Guido Calabresi of the U.S. Court of Appeals for the Second Circuit, and the Hon. Goodwin H. Liu of the Supreme Court of California. She earlier worked for several years in Washington, D.C., on health policy issues. Brown received her juris doctor from the UCLA School of Law, where she was editor-in-chief of the UCLA Law Review. She received her master of public health and graduate certificate in human rights from Emory University Rollins School of Public Health, and her associate’s degree from the University of Chicago.

FISH FACTOR: Grundens launches outerwear collection made from old gear

Grundens is using recycled plastics from old fishing gear for a new line of rugged casual wear, and the first batch contains contributions from Cordova. Grundens, whose motto is “We are fishing,” is the go-to brand for outerwear and foul-weather gear for mariners around the world. The company, which originated in Sweden in 1911, debuted its NetSource Collection this spring. The men’s shorts and women’s leggings use ECONYL, a regenerated nylon fabric that uses recycled fishing nets as the raw material. The company connected with the Copper River Watershed Project which collects the fishing nets and gets prepares them for shipping to Europe, where they are recycled into plastic pellets or, in this case, fibers. “We believe it’s really important to use our brand voice to help protect and maintain healthy marine environments and to lend a hand where we can,” said Mat Jackson, Grundens chief marketing officer. “At some point, you’ve got to just start doing it. And Cordova seemed like a tangible opportunity.” “Cordova is moving full steam ahead,” said Nicole Baker of Net Your Problem who helped make the Grundens connection. Baker, a former Bering Sea fisheries observer, has helped jumpstart fishing gear recycling programs in Alaska since 2017. “The gill net fleet is pretty dialed in and seines are made out of the same type of plastic, so those two gear types can be recycled together,” she added. “Right now, it’s just a small part of our overall collection, but we seek to expand it to other items, including foul-weather gear. It’s something we really believe in,” said Grundens spokesman Corey Lowe. “We’re aware of the amount of ghost nets and plastics in the ocean so whether we’re doing it or our competitors, we want more of it to end up in the recycling supply chain. We see it as a rising tide lifts all boats kind of thing and positive for the industry overall.” He added, “Hopefully, when fishermen buy something from us later on, it’s kind of cool to think ‘hey, my net is now hanging off my shoulders as a jacket or something.’” Grundens also is now using 100 percent biodegradable packaging called PLA whose raw material is glucose from corn starch. It fully decomposes in under one year. By June 2021 all products will be shipped in compostable Eco-packaging. “Grundens encourages other brands to follow suit and increase the rate at which plastic poly bags are eliminated from the apparel supply chain,” a press report said. Recycling road trip Grundens also has its eye on old fishing gear from Bristol Bay, where the borough will discuss a funding request from Net Your Problem at its June 7 meeting. Founder Nicole Baker said she had “tentative commitments” from the Regional Seafood Development Association, the Bristol Bay Economic Development Corp. and Grundens to help pay for the first year of recycling there. “If that gets approved, cross our fingers, we will be able to start in 2022,” Baker said. She and team members also will be in Cordova on June 8 to and in Homer in mid-June to talk with people about getting a program going there. They will head to Dutch Harbor on June 18. “We’re going to be working with the City to sort through the landfill and recycle what we can, and also to push for the boats to do recycling,” Baker said. In Southeast Alaska, Friends of Recycling in Haines is collecting fishing nets and RecycleWorks in Juneau is doing the same at Aurora Harbor. Kodiak is still accepting trawl nets and “things are in the works” for other gears, Baker said. The Dillingham program is defunct, Baker said, and the landfill there doesn’t accept fishing nets. “I’m hoping that those two forces will encourage fishermen and other businesses to work with us to get something going again,” she said. Baker is doing a survey to estimate the amount of fishing gear available for recycling in Alaska and said “every single fisherman with the exception of one has said they think recycling is a better option for their gear than the landfill.” The problem, she added, is “how do we pay for it? Do our values and morals align with what budgets we have and other alternatives costs?” Much of it falls to human behavior. Net Your Problem is one of 10 finalists in a global “Solution Search” competition for solutions related to plastic pollution that rely on behavior changes. It is sponsored by the Center for Behaviour and the Environment and the winning entrant receives a $25,000 grant. Project supporters can vote once per day through June 11. Dutch does it again Dutch Harbor easily held on to the title of the nation’s top fishing port, Naknek laid claim to No. 2 in terms of dollars crossing the docks and salmon toppled lobster as America’s most valuable fish. Those are a few takeaways from the Fisheries of the U.S. report by NOAA Fisheries for 2019. It also covers trade, mariculture and more for nearly every fish in the sea and is loaded with colorful graphics. A snapshot: Dutch Harbor was the leading port for fish landings for the 23rd year running with 763 million pounds worth $190 million. The Aleutian Islands, home to North America’s largest processing plant at Akutan, ranked second (589 million pounds/$142 million) and Kodiak placed third for landings (397 million pounds/$120 million). For value, New Bedford, Mass., held on to the top spot for 20 years at $451 million, due to landings of pricey scallops. Naknek ranked second for catch value at $289 million for 206 million pounds, followed by the Aleutians ($149 million), Bristol Bay ($129 million) and Kodiak ($120 million). Eight Alaska ports (40 percent) were in the top 20 for both seafood landings and values and accounted for 24 percent of the top 50. Of all the seafood species caught by U.S. fishermen, Pacific salmon had the highest value at $707 million for 840 million pounds. Alaska accounted for 99 percent of the total U.S. salmon catch. The average salmon price to Alaska fishermen was 81-cents a pound, down from 99-cents in 2018. Alaska pollock was tops for fish that is processed into fillets and other forms (1.6 billion pounds/$2.2 billion). Second was sockeye salmon (211 million pounds/$1 billion). In all, U.S. fisheries produced 9.3 billion pounds in 2019 worth $5.5 billion, on par with the previous year. Sixty percent of the U.S. catch and 33 percent of the value were generated by Alaska fisheries. The U.S. imported 6 billion pounds of seafood ($22.2 billion) and exported 2.8 billion pounds ($5.2 billion) for a trade deficit of $17 billion. For recreational fisheries, spotted trout was the #1 catch by U.S. anglers, followed by black sea bass and bluefish. And Americans ate a bit more seafood - 19.2 pounds per person, up two-tenths from 2018. Salmon watch At Copper River’s second opener on May 20, New Peter Pan Seafood paid $12.60 per pound for sockeyes and $19.60 for kings, an all-time high. Peter Pan Vice President of Operations Jon Hickman said, “leaders at Peter Pan are looking forward to being a foundation for all fishermen, communities and the market.” Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

2021 Copper River fishery underway with record prices

Update: State managers have decided to close the Copper River drift fishery for the 12-hour Thursday fishing period to allow more sockeye into the river, according to an advisory issued late Tuesday. Through Tuesday, just 6,298 sockeye had been enumerated at the Miles Lake sonar site upriver from the fishery while approximately 40,000 fish should've passed the sonar so far to meet the Department of Fish and Game's inriver run goal, the advisory states. ADFG Commercial Management Biologist Jeremy Botz noted that remaining ice flows in the river have deployment of the sonar equipment on the south bank of Miles Lake, which based on historical counts means only about half of the sockeye that have moved passed the sonar site have been counted. Botz added that he believes the sockeye are moving slowly through the lower river, which has abnormally low and cold flows, but said the low counts still necessitate closing the period. He's hopeful fishing can resume on a normal schedule with the 12-hour opener scheduled for Memorial Day. "We're still somewhere in that middle ground," between a potentially late and poor run, he said. Fishermen harvested 32,727 sockeye during the Monday opener, a drastic improvement over the first two periods; however, approximatley 56,000 fish should've been harvested based on historial data for the period, according to the closure advisory. Original story: The famed Copper River salmon fishery appears to be improving after a slow start and harvesters are mostly enjoying sky-high prices for their catch. Peter Pan Seafoods announced following the second 12-hour Copper River drift gillnet opener of the year that the company would be paying $19.60 per pound for kings and $12.60 per pound for sockeye; those prices that are several fold greater than historical averages. That compares to early season ground prices in the $3 to $4 per pound range for sockeye and just more than $6 per pound for Copper River kings last year when the onset of the pandemic closed many restaurants that drive much of the demand for salmon from the early season fishery. Peter Pan Vice President Jon Hickman said in a statement that to his recollection those are the highest prices any processor has paid for Copper River salmon. Those prices were reflected in retail offerings as well. Anchorage’s 10th and M Seafoods was selling Copper River sockeye for $54.95 per pound and kings for $69.95 per pound May 25. Seattle’s renowned Pike Place Market at the same time was advertising sockeye fillets for $59.99 per pound and fresh Copper River king for $79.98 per pound. While prices in the Copper River fishery are strong, the fishing is trying to catch up. Copper River drifters harvested 5,188 kings and 52,729 sockeye in the first three openings of the fishery, according to Alaska Department of Fish and Game figures. The king catch was fairly steady with between 1,160 and 2,068 fish caught in each of the three 12-hour openers but most of the sockeye — 32,727 of them — were caught May 24. The king harvest through three periods has already nearly matched last year when 5,850 big salmon were caught and the sockeye harvest is more than halfway there as well. A very poor Copper River sockeye return last year resulted in a harvest of just 98,294 fish when recent harvests had averaged more than 1.2 million sockeye, according to ADFG records. Fishing was closed for much of June due to poor catches in the May openers and low in-river sonar sockeye counts. Last year’s Copper River sockeye run totaled just 630,000 fish based on combined escapement and harvest data. This year, the department’s forecast calls for a total run of just more than 1.3 million sockeye with an allowable harvest of approximately 672,000 fish. The 2021 Copper River king forecast of 37,000 fish, if accurate, would allow for an all-user harvest of 13,000 kings to still meet the system-wide escapement objective. Through May 24 managers had counted just 4,813 at the Miles Lake sonar just upriver from the fishery; however, ice in the lake prevented complete readings for the first few days of counts. The Copper River sockeye escapement goal range is 360,000-750,000 fish for the prolonged run. Elwood Brehmer can be reached at [email protected]

Budget conference underway; Fund gains 25% in 10 months

Official work to finish the state’s 2022 fiscal year budget has slowed and it doesn’t appear lawmakers will give Gov. Mike Dunleavy’s plan to overhaul the Permanent Fund and constitutionalize the dividend much time in the coming weeks. The House and Senate operating budgets are quite close to each other in terms of overall spending at roughly $4.2 billion and $4.4 billion in unrestricted general fund appropriations, respectively, for agency spending and other items such as debt service; the hang-up continues to be the size of this year’s PFD. In most respects the budgets for next year are close to this year and in line with what the governor proposed as well. Senate President Peter Micciche said shortly before the first budget conference committee meeting that he “absolutely” expects the Legislature to pass a compromise budget before June 1 — when state agencies are required to send out layoff notices if the budget for the next fiscal year starting July 1 has not been approved — even though lawmakers technically have the full 30-day special session to complete it. The Senate passed its version of the budget 17-3 in literally the last minute of May 19 before the regular session officially ended with money for PFDs of between $2,300 and $2,400 per eligible Alaskan this fall. Paying for dividends of that amount means “overdrawing” the Permanent Fund’s Earnings Reserve Account by approximately $1.5 billion in excess of the annual 5 percent of market value draw, or POMV, which would be just more than $3 billion for next fiscal year, according to Legislative Finance Division figures. Micciche, who co-sponsored the amendment to increase the PFD, said he sees overdrawing the Earnings Reserve this year to “plant a flag” that a 50-50 government-PFD split of the POMV is the grand compromise that can end years of deadlock over the state’s ever-tightening fiscal situation. “I’m willing to overdraw for a year to get a package across the finish line,” he told reporters. Dunleavy, who campaigned on paying dividends in accordance with the decades-old statutory formula still on the books, proposed a constitutional amendment May 12 to split the POMV evenly and fold the currently spendable Earnings Reserve Account into the corpus of the Fund to prevent future overdraws. The governor was backed by a large group of Republican legislators and Bethel Democrat Sen. Lyman Hoffman in a showing of broad support for a conceptual fiscal compromise but whether it will last after the alternatives to resolve the roughly $1 billion annual deficit the 50-50 plan are vetted remains to be seen. Micciche stressed that the Legislature probably won’t reach the fiscal finish line until August when the second special session called by Dunleavy commences. He said individual lawmakers need to talk with their constituents about the 50-50 POMV split and the mix of taxes and a spending cap that appear to be leading ways to fill the rest of the budget gap. “I hope that when we arrive in August we’ll arrive ready to vote, not to start a discussion,” he said. “I think we have a lot of work to do to get our constituents there as well.” Senators also approved a $4 billion transfer from the Earnings Reserve into the constitutionally protected corpus of the Fund, a move to prevent it from being spent reminiscent of 2019 when the whole Legislature approved a $9 billion ERA-to-corpus transfer and Dunleavy vetoed $5 billion of it. The ERA held $11.3 billion in realized, uncommitted earnings as of April 30 with another $3.9 billion in unrealized gains on invested assets. The House, on the other hand, left the PFD out of the budget in favor of addressing it in a standalone bill. Leaders in that body have been adamant against exceeding the POMV draw limit. The six-member budget conference committee has limited powers, meaning it can set individual appropriations at any amount between what the bodies have already passed — in the case of the PFD anything between $0 and $1.5 billion. Similar situations in recent years have led to PFDs in the range of $1,000 per person and all three Senate conference committee members, Republican Finance co-chairs Sens. Bert Stedman and Click Bishop and Democrat Donny Olson, voted against the PFD amendment on the Senate floor. Senate Finance approved a $674 million overall PFD appropriation in line with last year in its version of the budget, but Micciche emphasized that the budget conference members will have to consult with their respective caucuses before setting the final amount. House Finance co-chairs Reps. Neal Foster, D-Nome, and Kelly Merrick, R-Eagle River, and Fairbanks Republican Rep. Steve Thompson are the House conference members. The conference committee held a brief organizational meeting May 20 but as of this writing May 25 no additional meetings were scheduled. The Senate also rolled the capital budget into its operating budget and included general language to appropriate roughly $500 million in federal American Rescue Plan COVID-19 aid. The Senate’s capital budget would spend $264.2 million in unrestricted general funds — more than double recent years — with $38.5 million going to school repair and maintenance projects and another $113 million for transportation projects statewide. It also approves spending for more than $1.9 billion in federal money, an increase from $1.2 billion last year. Fund keeps earning While lawmakers continue to banter over whether and how to spend it, Alaska Permanent Fund Corp. managers have the Fund growing at an astounding rate. As of May 24, the Permanent Fund had an unaudited value of more than $79.9 billion, up from $65.3 billion at the start of the 2021 fiscal year last July. Permanent Fund investments have achieved a rate of return just more than 25 percent in the 2021 fiscal year, according to the April 30 APFC performance report. For comparison, the fund’s five-year return average is 11.46 percent annually and its historic return averages are in the 7 percent range. APFC Board of Trustees chair Bill Moran said the recent growth of the fund is “unprecedented” in a formal statement but cautioned against getting overly excited about it. “We must put this unparalleled growth into context and recognize that it is not sustainable,” Moran said. “Recessions are likely in our future and will have a negative impact on the fund, which will impact the state. Knowing that the state now gets more than 70 percent of its revenue from annual withdrawals from this fund, we must remain diligent in managing and understanding our portfolio risk.” The fund’s nearly $31 billion public equity, or stock, portfolio had an astounding 43.6 percent return rate through the first 10 months of the 2021 fiscal year, according to the April performance report. It was bested only by the $13.4 billion private equity and special opportunities portfolio, which had a 47.5 percent rate of return over the period. Other investment sectors had returns more in line with historical averages. Elwood Brehmer can be reached at [email protected]

U.K. explorer makes billion-barrel find along Dalton Hwy.

The leaders of a small British explorer insist they have struck an oil accumulation measured in the billions of barrels that is also conveniently located alongside the Dalton Highway. Pantheon Resources intersected two reservoirs near the bottom of its Talitha-A exploration well that, combined, likely hold roughly 1.4 billion barrels of recoverable light oil and more than 12 billion barrels of oil in place, according to Technical Director Bob Rosenthal. The promising results from the Talitha well drilled and tested last winter transforms the prospect called “Theta West” within the company into an oil project, Rosenthal said. Pantheon did the drilling approximately 10 miles from what would normally be the best location for a well targeting the Brookian Upper and Lower Basin Floor Fan formations that contain the discovery because the primary target for Talitha-A was a shallower zone known as the Shelf Margin Deltaic that the company was unable to test before spring put an end to the North Slope exploration season. “We actually drilled this well 1,500 feet down-dip from the crest and we are actually 10 miles down-dip from its location, so this trap is huge,” Rosenthal described in an interview. “We’ve drilled a huge step-out appraisal well before we drilled the crest location.” Pantheon merged with Anchorage independent explorer Great Bear Petroleum in early 2019 and the blended operating company Great Bear Pantheon is conducting the fieldwork. Rosenthal was a founding member of Great Bear, which previously explored the area about 20 miles south of Prudhoe Bay along the Dalton for years, first focusing on shale oil prospects and then shifting its focus to conventional plays after the oil market reset of 2015-16. Pantheon leaders are particularly confident in their assertions about the first test results from Talitha-A because the company is also working off of data from the nearby Pipeline State-1 well drilled in 1988 by Arco that — combined with modern 3-D seismic data — has helped give them a better sense of what the rocks in the area hold. In that sense, Talitha-A is not a true wildcat exploration well. The Basin Floor Fan complex was also identified in data from the Pipeline State well, according to Rosenthal. He said previously that even though the 10,000-foot vertical Pipeline State-1 well has a roughly 2,200-foot oil-bearing column over four reservoirs, with the technology and oil prices of the late 1980s it did not add up to a viable prospect at the time. Rosenthal said before the initial well tests that Talitha A was similarly expected to have an oil-bearing zone of roughly 2,000 feet in the wellbore of about 10,200 feet but that has since grown to approximately 3,700 feet of oil-bearing rocks, according to a company statement. CEO Jay Cheatham also said prior to drilling that he thought Theta West could hold up to 500 million barrels of recoverable oil. “We know where we have oil 10 miles down-dip from the crest (of the trap). We know that there is oil up-dip from there because, of course, oil migrates up,” Cheatham said. Industry sources who have followed the Great Bear-Pantheon work generally said it is very probable the company hit a significant oil column but the porosity and permeability of the rock formations — and the ability to easily get the oil out of them — will most likely determine the ultimate size and success of the project. Rosenthal said the company hopes to drill another well into the crest of the Basin Floor Fan trap located northwest of Talitha-A, where the rocks should have better characteristics. “We expect to have thicker reservoir and because it’s shallower, better reservoir,” he said of the crest location. Pantheon also still needs to test the Shelf Margin Deltaic that was the primary Talitha target. Cheatham said there are additional plans in the works to drill a second well at the company’s Alkaid prospect just to the north to prove up what Great Bear found when it drilled Alkaid-1 in 2015. Cheatham acknowledged that the work the company hopes to do next winter is not yet funded; however, Rosenthal noted in a conference call that the early-stage economics of the project, which benefits greatly from its location adjacent to the Haul Road, helped convince investors to fund the Talitha work last year when work was otherwise being curtailed across the Slope due to the pandemic-induced oil market collapse. At the time, the company was running economic development models with oil in the $40 to $45 per barrel range, according to Rosenthal. “Oil prices are back up in the $60s,” he said. “COVID is hopefully going to be in our rearview mirror and we’ve gone out and actually drilled the well and found a world-class resource.” Elwood Brehmer can be reached at [email protected]

Biden signs bill authorizing Alaska cruise season

It took several months of educating and vote wrangling, but President Joe Biden signed the Alaska’s congressional delegation’s legislation on May 24 to salvage the latter half of this year’s cruise ship season, in Southeast, at least. The House of Representatives broadly approved Rep. Don Young’s version of the bill allowing Alaska-bound cruise ships to bypass a required stop in Canada for the rest of this year on May 20, a week after the Senate passed nearly identical legislation from Sens. Murkowski and Sullivan. The large cruise companies that have had their Alaska operations stalled since the start of the pandemic promptly responded to the activity in Congress by resuming ticket sales for Alaska cruises and announcing their schedules for later this summer. “This is the kind of news that makes everybody happy because as much as we love our state, we love the opportunity to showcase it to those who have dreamed about coming to Alaska,” Murkowski said late May 20. “This legislative fix was a long shot, in fairness, but it has paid off.” Holland America will sail to Alaska July 25 to Oct. 2; Princess Cruises will sail July 25 to Sept. 26; and Carnival Cruise Line ships will sail July 27 to Sept. 14. Industry officials have long said they would need at least two months after getting the clearance to sail to prepare the ships and hire crews before making the first passenger runs. Cruise Lines International Association Alaska spokeswoman Lanie Downs said she expects a “steady stream” of cruise ships through the Inside Passage though it is unclear at this point exactly how frequent the cruise ship traffic will be later this summer. “I don’t think there will be any four- or five-ship days in Juneau,” Downs said, referencing peak activity in recent years. Officials at the Anchorage and Fairbanks international airports have reported that summer passenger capacity levels are likely to be near or better than 2019 levels. Industry representatives say that’s in part because of pent-up demand among travelers along with the fact that it appears airplanes will remain the only way to get to much of Alaska as long as Canada keeps its borders closed. That’s because this summer’s large ship sailings will be limited to Southeast. A provision in the order issued last fall by the Centers for Disease Control laying out the broad requirements for the eventual return to cruise voyages limits all sailings to seven days this year; not enough time to reach Southcentral Alaska cruise ports from Seattle. While many Alaska cruises are normally limited to Southeast itineraries, several hundred thousand passengers made the cross-gulf trip to Seward, Whittier, Homer and Anchorage prior to 2020. Visit Anchorage spokesman Jack Bonney wrote via email that the 102-passenger National Geographic Orion is the only cruise vessel currently expected to reach Southcentral this summer with a July stop in Seward. Smaller, often domestic-made vessels such as the Orion are exempt from many of the public health rules and maritime laws that apply to the large cruise ships. Visit Anchorage leaders continue to believe the region’s tourism industry will rebound this year, but not recover completely, according to Bonney. “Before the Alaska Tourism Restoration Act passed, the prospect of having any Alaska cruises this summer seemed unlikely,” he wrote. “It’s encouraging that one part of our state may see some ships this summer. The congressional delegation has worked hard to get this far.” Alaska Railroad spokesman Tim Sullivan wrote that officials at the state-owned railroad were hopeful cruise ships would bring additional passengers for their cars but planned their summer passenger schedule based on the status quo earlier this year. Cruise lines that own rail cars for an extended land-based tour of the state contract with the Alaska Railroad to pull them in an arrangement that contributes significantly to the railroad’s passenger business most years. Introduced in late February following the Feb. 4 announcement from Canada’s Transportation Ministry that cruise ships again would not be allowed to dock in the country’s ports, the legislation temporarily exempts Alaska cruises from the 19th Century Passenger Vessel Services Act, or PVSA. The law mandates a stop in a foreign port for foreign-built passenger ships. The bill sat for months in committees in both chambers without action. It was first heard in the Senate Commerce, Transportation and Science Committee April 28. Murkowski said much of the intervening period was spent drilling it into colleagues that the PVSA exemption is focused and temporary but critical to Alaska because of the hundreds of businesses in the state that rely on the eager-to-spend visitors the ships normally bring. Talk of the longstanding PVSA, initially meant to protect domestic shipyards and mariners, often evokes philosophical debates that can slow or kill legislation in Congress, which the delegation worked hard to avoid. “Some of our Senate colleagues had legitimate issues that merit discussion or debate, but it was not the time to reform the PVSA or to bring up extraneous issues — although they may be very important — related to the cruise industry,” Murkowski said. “We had to walk them through the details of what’s been happening in Alaska.” She said in a previous interview with the Journal that Washington Democrat Maria Cantwell, who chairs the Commerce Committee and shared a close working relationship with Murkowski when they led the Energy and Natural Resources Committee for their respective parties, was also helpful in getting Democrat leaders on board. Cantwell highlighted the cruise industry’s impact on the Seattle economy in a statement following the Senate vote on the Tourism Restoration Act. The million-plus cruise passengers that previously arrived to Alaska via the Inside Passage accounted for more than half of the total visitors to the state in most pre-pandemic years and provided the foundation for one of the state’s handful of growing industries in recent years. Pre-2020, the leisure and hospitality industry had become one of the state’s largest employment sectors, but lost nearly 15,000 jobs last year, according to state Labor Department figures. “I applaud the commitment from Alaska’s congressional delegation in moving forward the Alaska Tourism Restoration Act,” said Alaska Travel Industry Association CEO Sarah Leonard. There was widely a presumption that large cruises would resume on some level this summer prior to Canada’s ban. After the extension of the Canadian ban, Gov. Mike Dunleavy proposed a $150 million aid program for tourism industry businesses out of Alaska’s roughly $1 billion American Rescue Plan allocation in mid-April and the state also launched a new nationwide visitor marketing campaign when the PVSA exemption appeared stalled. Young highlighted in a joint delegation statement that the Alaska Tourism Recovery Act is half of the equation to resume cruise sailings; CDC approval is the other. He and many other Alaska lawmakers have been critical of the CDC — to the point the Dunleavy administration joined a Florida lawsuit against the agency — for being slow to implement a conditional sail order allowing cruise activity to resume domestically with detailed COVID-19 mitigation plans in place. However, Young and Murkowski noted CDC officials have signaled an unofficial goal of midsummer for the first sailings. “We now have a path forward for a 2021 cruise season, and I am confident that Alaskans will all do their part to ensure a safe and prosperous tour season,” Young said. “To those who will be visiting our state this summer, I say, ‘welcome to Alaska; we are open for business!” Downs said the operators are currently working on agreements with local port governments to set formal plans and protocols for virus mitigation. While the agreements do not also have to be approved by the CDC, they must be in place, per agency guidance. Elwood Brehmer can be reached at [email protected]

OPINION: Assembly’s retreat gives Bronson room to govern

Two things have become clear over the past four weeks in Anchorage, one that was always more certain than the other. First, we found out that the Anchorage Assembly has, and indeed always had, the power to revise or revoke the emergency orders handed down from the mayor’s office. Second, as Dave Bronson’s lead grew to 1,212 votes in the runoff election for mayor as of May 18, we have learned that contra the supposed conventional wisdom, an unapologetic and unashamed conservative can still win a citywide race in Anchorage. The fact Joe Biden won Anchorage last fall and the Assembly’s ideological tilt is more lopsided than the last moments of the Titanic led a few prognosticators along with former candidate Bill Evans to assert that Bronson stood no chance in a one-on-one race against Forrest Dunbar. Appeals to Bronson supporters to make the “safe” vote for Evans fell on deaf ears — he didn’t crack 10 percent in the general election — and their significant advantage of enthusiasm and motivation appear to have carried him to victory. Evans’ refusal to endorse Bronson proved equally unimportant. During the April 6 general election, the three candidates to the right of Dunbar and his fellow progressives earned 50.3 percent of the vote. As of the most recent results, Bronson stands at 50.7 percent. A general rule about politics is that it is better to be voting for something, and Bronson supporters had that in spades even as much of what they were for was being against what Dunbar and his progressive cohort on the Assembly have put the city through over the past year. In contrast, Dunbar didn’t run on any accomplishments other than having been twice elected to the Assembly following an unsuccessful challenge to Dean of the U.S. House Don Young in 2014. The greatest accomplishment Dunbar could actually point to — other than funding more cops in a position also supported by Bronson — was his vote on April 27 to lift every pandemic prohibition other than the mask mandate. In a vote that telegraphed his desperation, Dunbar joined with Chris Constant to override the mayor, the city Health Department and the CDC guidelines in place at the time. Now it is quite obvious that adopting Bronson’s campaign platform did not help Dunbar as much as he may have hoped it would. Then as he departed for National Guard duty, he all but conceded the race and was not present when eight Assembly members voted to make effective immediately Acting Mayor Austin Quinn-Davidson’s release from the mask mandate she had scheduled for May 21 just hours earlier. With only one dissent from Meg Zalatel, the Assembly belatedly exerted the power they always had to moderate or eliminate emergency orders yet had refused to do for more than a year despite the pleadings from the people who flocked to Bronson for change. Whether they intended to or not, the Assembly opponents of Bronson have done him a favor. He should now be able to take office July 1 and inherit a city coming back to life from the damaging and often heartless orders issued by successive mayors and unfailingly — until now — upheld by the Assembly. The progressive elected officials paid a price for their refusal to moderate, their misplaced priorities, and the highly questionable line items where they sent CARES Act money. Bronson has breathing room to govern at a time when what the municipality needs more than anything is a steady hand on the till as businesses begin to recover. He has a chance to help shape the next tranche of $51 million in federal relief money, which may be a good place to fund his promise to rebate property tax payments for businesses that were shuttered by government order. Although he was smeared as simply wanting to jail the homeless, he expressed his support for the success of the mass shelter at the Sullivan Arena that not only provided a roof but the connections to services sought by many who are willing to seek the help. Based on the 9th Circuit court case so often cited over the past several years as an excuse for doing nothing, Bronson can recognize that a core piece of that ruling is that people cannot be cited for public trespassing when there is no shelter space available. The tragedy of people drinking themselves to death at our busiest intersections and the illegal and environmentally degrading camping through the greenbelts cannot be resolved without sufficient shelter space and resources. That is not to say that criminalizing crime can’t be a part of the policy. The right to sit on a corner doesn’t include the right to drink, use drugs, or do the things Bronson said belong “behind bathroom or bedroom doors.” Even though he will take office at the warmest time of the year, Bronson will be sworn in at a time when the political temperature should also be as low as its been in nearly a year. Expecting a honeymoon may be unrealistic, though, with critics stacked against him across the press and the Assembly chambers. Some enterprising person has probably already purchased “recallbronson.com”. Bronson fought hard for this, and his supporters deserve to enjoy their touchdown dance rather than immediately being lectured about compromising. What’s also certain is this: winning was hard, but governing is going to be even harder. Andrew Jensen can be reached at [email protected]

Lenders are competing on rates, and that’s good news for borrowers

Market watchers expected mortgage rates to be climbing toward 4 percent by now. In a break for borrowers, the anticipated run-up in rates hasn’t really begun. Instead, mortgage rates have declined for each of the past five weeks, according to Bankrate’s national survey of lenders. One reason? Lenders are flush with profits from a banner year in 2020, and they’ve decided to offer better deals to borrowers to compete for business. “There’s no question it’s good news for consumers,” says Guy Cecala, publisher of trade publication Inside Mortgage Finance. “It means we’re likely to have 3 percent or lower mortgage rates lingering around a little longer than we thought.” For homeowners looking to refinance, price competition means the window of opportunity remains open. Rates are staying low enough that a refinance makes sense for a larger number of borrowers. And for buyers competing in a fast-appreciating housing market, even slight reductions in rates boosts their buying power. “Any time there is heated competition, it is a win for consumers,” says Greg McBride, CFA, Bankrate chief financial analyst. How lenders set mortgage rates The calculus behind mortgage rates is complicated, but here’s one easy rule of thumb: The 30-year fixed-rate mortgage closely tracks the 10-year Treasury yield. When that rate goes up, the 30-year mortgage tends to do the same. While the 10-year yield and the 30-year mortgage rate generally move in tandem, the relationship isn’t perfect. Last year, the gap opened as wide as 3 percentage points, or 300 basis points, well above the normal range of about 200 basis points. Now, the spread has narrowed all the way to 155 basis points. It’s the smallest gap in a decade, according to Bankrate data. Mortgage rates are influenced by other factors, such as demand for home loans and lenders’ ability to meet that demand. When mortgage lenders have too much business, they raise rates to slow applications. When business is light, they tend to cut rates to attract more customers. That’s what’s happening now. Last year, plunging rates and an unexpected housing boom caused demand to soar far more quickly than lenders could ramp up their staffing levels. After a hiring spree, lenders now have enough people to handle a heavy workload. But the mortgage refinance boom has eased. “Although purchase mortgage activity is strong, there’s a lack of heavy refi activity,” Cecala says. After last year’s record $3.83 trillion in mortgage originations, volume is likely to fall 14 percent this year to $3.28 trillion, according to the Mortgage Bankers Association. That leaves lenders with a conundrum. They’d rather not lay off the people they just hired. “Before they start jettisoning staff, they want to see what else they can do,” Cecala says. “The most obvious thing is to offer a better deal than the guy down the street.” Strong profits give lenders some wiggle room Lenders did very well last year. The Mortgage Bankers Association said the industry generated an average profit of $5,535 per loan in the third quarter of 2020, up sharply from the $1,924 lenders earned during the same period in 2019. However, by the fourth quarter of 2020, average profit had retreated to $3,738. The profitability cycle follows a predictable pattern, says Gene Thompson, CEO of InterLinc Mortgage Services in Houston. Lenders bank their profits in boom times like the one they experienced last summer, then give some back as necessary. “When that volume starts to dwindle, we will see companies starting to use some of their war chest to chase volume,” Thompson says. “That’s when things will start to change on the profitability side for lenders.” That scenario is playing out now. Shares of publicly traded mortgage companies soared as industry profits rose. However, the stocks of Rocket Cos. and UWM Mortgage took a hit recently as this new reality became clear. Rocket — the parent of Quicken Loans, the nation’s largest lender — reported a margin of 3.74 percent in the first quarter of 2021, a decline from 4.41 percent in the fourth quarter of 2020. The company said it expects further erosion of profitability in 2021, as margins fall to less than 3 percent. That trend spooked investors, but Rocket CEO Jay Farner says plenty of wiggle room remains. “Margins, although moving back to more historical averages, are incredibly strong,” he said during an earnings call in early May. What you can do to get the best mortgage rate Before committing to a lender, do your research. To secure the most favorable mortgage rate, take these steps: • Compare offers: This advice is especially relevant now that lenders are competing on price. “This is why it is so important to shop around,” McBride says. “Not everyone offers the same price, and some lenders may have motivation to be very competitive on price.” Get offers from at least three lenders. If you live in an area with limited competition among local banks, that might require you to shop online. The upside: Comparison shopping can save you thousands of dollars over the life of the loan. • Look beyond brick-and-mortar lenders: The bank or credit union where you keep your cash might offer the best deal on a home loan, but make sure you do some comparison shopping. Rates and closing costs can vary widely by lender. • Spruce up your credit score: Improving your credit is the best way to lower your rate, and it’s more effective than boosting your down payment or improving your debt-to-income ratio. The best deals go to borrowers with credit scores of 740 or higher.

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