Sullivan, GOP colleagues pitch climate plan

Alaska Sen. Dan Sullivan is helping lead a group of Senate Republicans who insist the country can help significantly curb global carbon emissions by, among other things, continuing to produce more oil and gas at home. Sullivan and other prominent members of his party stressed at a Nov. 3 Capitol Hill press briefing that their outline for a climate solution, dubbed the American Energy, Jobs and Climate Plan, is the total inverse of what the Biden administration and most congressional Democrats have long said is the key to easing the effects of a changing global climate. “We thought after 10 months of Green New Deal lunacy we needed to present a competing vision,” Sullivan said. “It is based on facts and data and, importantly, what is already working for our country.” That competing vision largely relies on the efficiency of domestic energy production relative to other major energy supplying nations around the globe. Sullivan acknowledged that much of the American Energy, Jobs and Climate Plan is still in the works; much like the Green New Deal, it is a largely aspirational proposal at this point and is not a single report, strategy or piece of legislation. Sullivan, Texas Sen. Ted Cruz and other Republicans pointed to U.S. Energy Information Administration data indicating, among other things, that carbon dioxide emissions from domestic power generation have fallen by 27% since 2005, while the country’s economy has grown roughly 25% over that time. “On a widespread scale we’re substituting natural gas for coal in electricity production,” Cruz said. Maximizing U.S. production and exports of natural gas — often referred to as a “bridge” fuel to renewable or emissions-free energy — would go a long way toward reducing global carbon dioxide emissions up to 40% per year by 2050 Sullivan said, a goal the Republicans said they support. According to Sullivan, “dramatically increasing” exports of U.S. LNG could cut global greenhouse gas emissions by 9%. “That’s just from America,” he said in a follow-up interview. Officials in the Department of Energy in June announced plans to conduct a supplemental environmental impact statement for the $38 billion Alaska LNG Project to analyze overall likely emissions from the massive gas export project. Alaska Gasline Development Corp. officials responded by commissioning their own carbon emissions analysis of Alaska LNG. That report, issued in early October, concluded that the lifecycle emissions from LNG sold to Chinese utilities for power generation would total about half of the greenhouse gases that would be emitted if coal were burned instead. Burning coal accounted for nearly 60% of China’s primary energy consumption in 2019, according to the EIA. Pronouncement of the Republican energy and climate plan came as President Joe Biden and members of his administration pressed the need for drastic actions stateside and abroad to reduce global carbon output before some of the more dire predictions for the climate can unfold. Where the carbon-cutting strategies from the president and congressional Democrats emphasize the need for constrictive policies to swiftly convert from hydrocarbon-based fuels to cleaner and renewable energy sources stateside the Republicans said, their plan relies on free market principles and incentives to spur American ingenuity. Sullivan said he believes it’s an outline the vast majority of the country can support because it’s a plan “based on abundance, not scarcity” of energy and other resources. He accused White House climate advisors Gina McCarthy and John Kerry of intentionally driving up the cost of domestic energy to hasten the transition from carbon-based to renewable fuels, something he called “planned suffering.” “We don’t think what (the administration) is doing is going to help anything, including greenhouse gases,” Sullivan said. “It’s certainly hurting the energy sector, energy workers.” While the administration has fought the congressional directive to advance leasing in the Arctic National Wildlife Refuge and moved to slow or stop oil industry development in Alaska and elsewhere, in May, Justice Department attorneys defended the Trump administration’s since-vacated approval of ConocoPhillips’ $8 billion North Slope Willow oil project. It was a move that earned the praise of Alaska’s leading Republicans, including Sullivan, and frustrated many environmental and climate advocacy groups. Biden and congressional Democrats have also long said the country’s traditional energy workforce could be retrained to build and maintain clean energy infrastructure. The Republican counter climate strategy that has been months in the works also prioritizes more domestic mineral production on the premise that mining is best done here, under U.S. environmental laws and regulations, over nearly anywhere else. The same goes for manufacturing, according to Sullivan, who touted America’s factories as some of the cleanest in the world. Sullivan said many pieces of the Republican concept are already in separate bills, adding that work to collate the ideas into a single bill is ongoing. “We believe our vision and framework is mainstream, it’s common sense and has the potential to be bipartisan,” said Sullivan, who also noted some currently unnamed Democrats have been encouraged by aspects of it. To that end, some of the research programs, tax breaks and other incentives for private industry to develop new climate-friendly energy technologies that the group of Senate Republicans said they back were part of Sen. Lisa Murkowski’s detailed Energy Act of 2020. The omnibus energy reform package passed late last year with strong bipartisan support. Several congressional Democrats who supported Murkowski’s energy reform legislation referred to it at the time as a “down payment” on cleaner energy production and carbon capture efforts. Elwood Brehmer can be reached at [email protected]

Boom-bust commercial salmon season doubles 2020 value

This summer was significantly better for commercial salmon fishermen in Alaska than 2020, though that success was far from evenly spread. Commercial salmon fishermen hauled in salmon valued at $643.9 million this season, according to the Alaska Department of Fish and Game. That’s more than double the 2020 value of $295.2 million, but still a little behind the estimated 2019 value of $657.6 million. Overall, 2021 ranks fairly well in the historical averages for numbers of salmon harvested and poundage as well as in value, according to Fish and Game data. “When compared to the long-term time-series (1975-2020), the 2021 all-species commercial salmon harvest of 233.9 million fish and 858.5 million pounds is the third highest on record for both total fish harvested, and total pounds harvested,” the season summary states. “Adjusted for inflation (CPI, 2021 prices), the 2021 exvessel value estimate of $643.9 million is also the third highest exvessel value reported since 1975.” The vast majority of that value was in Bristol Bay, where fishermen took home an estimated $248.9 million in exvessel value—about 38% of the total value in the state. Unsurprisingly, nearly all of that value in Bristol Bay is from sockeye salmon. The Bay broke its run record again this year, though not its all-time harvest record. However, that value is still significantly below 2019, when it earned about $306.5 million. The fishermen only caught about a million fewer fish, but about 27 million fewer pounds than in 2019. The difference was in the size — the average fish was about 4.7 pounds this year, compared to 5.2 pounds in 2019. Biologists noted during the season that fish were smaller on average. Southeast Alaska came in second for value, with an estimated $132.2 million between its five species of salmon harvested. Southeast’s main commercial species are pink and chum — fishermen there landed about $48 million in pinks and about $39.6 million in chums, according to Fish and Game. Prince William Sound wasn’t far behind Southeast, with an estimated $121.4 million in exvessel value. Prince William Sound is much more heavily weighted toward pinks, though, with an estimated 66.3 million fish harvested and about $84 million in value for just that species. Prince William Sound also commands the highest price for sockeye in the state — about $2.57 per pound — but only brought in about 1.2 million sockeye this year, resulting in a value of about $16.7 million. The Alaska Peninsula and the Aleutian Islands also did well this year, with an estimated value of $67.4 million, also mostly concentrated in sockeye. That’s more than quadruple what the region earned in 2020 and about $18 million more than in 2019. However, a number of other fisheries suffered this year. Cook Inlet lost a major chunk of its fishing season opportunity for sockeye in the upper Inlet fisheries due to low king salmon runs, resulting in a lower catch than usual, though it is higher than 2020′s catch. Chignik landed only 118,785 sockeye, with a value of $868,635. Fishermen in Chignik lost much of their season this year due to a weak run and resulting closures. The Yukon area had no fishery at all due to near-complete run failures. The region was only able to harvest pink and chum in 2020, but in 2019, it earned about $2.5 million from chinook, coho, pink and chum catches. Big job losses in salmon in 2020 The COVID-19 pandemic led to job losses in almost every sector of the economy, but seafood harvesting saw its largest single-year drop since 2000, according to the Alaska Department of Labor and Workforce Development. Throughout all fisheries, the state lost 1,078 jobs from its monthly average of seafood harvesting jobs. That may not be entirely due to the pandemic, though, according to a Nov. 1 Labor Department report. “While COVID-19 made last year’s employment trends anything but typical, it’s difficult to isolate the pandemic’s effects because harvesting employment can change dramatically from year to year anyway,” wrote Joshua Warren, a state economist. “The swings are subject to a range of factors, including when openings happen — if they happen — and environmental and biological factors.” Salmon is the largest employment sector, with more than half the harvesting jobs, and the losses last year hit salmon fisheries the hardest. August saw the largest drop in raw numbers, with 3,000 fewer salmon jobs than in 2019. Across the year, salmon saw an average monthly drop of 700 jobs from the year before. Some of that is due to COVID-19′s impact on restaurants — less demand for seafood products made for less profitable fisheries. Health and safety restrictions on operations also made bringing in staff more difficult. “All of these complications, especially early in the pandemic when little was known about the virus and what mitigation measures were effective, prompted some permit holders to not fish last year,” Warren wrote. “Those who did often reported using fewer crew members.” The Department of Labor’s numbers are for 2020. Employment numbers for 2021 show some early signs of improvement, Warren wrote, and operations reportedly ran more smoothly. However, long-term risks like stock declines and climate change may impact employment in Alaska salmon fisheries long term. Elizabeth Earl can be reached at [email protected]

Quiet state North Slope oil and gas lease sale nets 6 bids, $467K

The state's second North Slope lease sale of the year was a quiet one, garnering just six bids totaling $467,609 for state coffers. Division of Oil and Gas officials announced bids Nov. 3 in the fall 2021 North Slope oil and gas lease sale, in which independent explorer Lagniappe Alaska collected five new state leases covering approximately 12,800 acres. Savant Alaska, a subsidiary of Denver-based Savant Resources and operator of the Badami Unit, submitted the other bid of $38,476 for 1,280 acres. All of the tracts are in the eastern portion of state land on the North Slope, between Prudhoe Bay and ExxonMobil's Point Thomson gas field, and come with an initial 10-year lease term. Explorers have shown more interest in eastern Slope areas in recent years. The area was partly explored in the 1980s and some oil was found, but for several reasons was not developed. No bids were submitted for the North Slope foothills and Beaufort Sea areas. Lagniappe is a relatively new venture of Denver-based wildcatter Bill Armstrong, whose namesake company Armstrong Oil and Gas led discovery of the large Pikka prospect, and more broadly the suddenly-popular Nanushuk sands formation. The Nanushuk is the basis of ConocoPhillips' large Willow project and numerous smaller oil discoveries on the North Slope in recent years. Lagniappe also collected 13 leases in the first 2021 North Slope sale of the year, held in January. That sale netted about $7 million over 115 bids. The latest bids bring Lagniappe's holdings to roughly 180,000 acres in the area, according to a Division of Oil and Gas statement. Both of this year's sales continued a recent trend of declining activity in the state's sealed-bid North Slope auctions. There was no sale in 2020 for administrative reasons, according to Oil and Gas officials, and the 2019 sale generated $7.8 million in winning bids. More than $28 million was collected in 2018 for 141 bids covering nearly 245,000 acres of North Slope land and the near-shore Beaufort Sea. The 2018 sale was the last in a series of busy state and federal North Slope sales as oil prices recovered and explorers sought new acreage in search of Nanushuk prospects. Oil industry insiders mostly said they believe the recent quieter lease sales are largely due to a lack of prime acreage available following several years of high activity. Companies that bought up rights to large swaths of state land in prior years are now evaluating its potential. Division of Oil and Gas Director Tom Stokes generally concurred with that assessment in a statement following the bid opening. According to Stokes, 45% of the state's near-shore Beaufort Sea leases are spoken for and roughly 40% of the North Slope is under lease as well. “When you combine that fact with the limited available acreage around known exploration targets throughout the North Slope, and some banks' current hesitance to lend money for Arctic exploration, it's understandable that the modest interest in today's lease sale focused on opportunities close to development infrastructure,” he said.   Elwood Brehmer can be reached at [email protected]

Alaska's numbers tell messy story amid slow pandemic recovery

COVID-19 made a mess of Alaska’s economy, and more than a year into the recovery, some of the fundamental metrics still don’t add up. “Where are the workers?” Dan Robinson asked during an Oct. 27 online presentation hosted by the Alaska Department of Labor and Workforce Development. Robinson is the chief economist in the department’s research and analysis section. He, among others, said the pandemic’s effect on Alaska has upended some of the principal notions of how an economy typically functions. “Normally when you’re in a recession you have way more people than jobs,” Robinson said. “We have the opposite.” Alaska had the highest rate of open jobs in the country at 9% of available positions unfilled in August, according to a federal Bureau of Labor Statistics survey, down from 10.6% in July, also a national high. At the same time, participation in Alaska’s labor force by working-age individuals — while up slightly over 2020 — has averaged 64.4% so far this year, down from 2019 and every other year over the last decade, according to Labor Department data. The state’s unemployment rate, currently at 6.3%, has been slowly falling over the past year since peaking at nearly 12% in the spring of 2020, but is still above the 5.1% rate just before the pandemic hit. Alaska’s unemployment rate has mostly returned to historical norms. But the state’s recovery has lagged behind the nation’s in the most basic category: jobs. Labor Research Economist Karinne Wiebold said Alaska this year has regained 30%-40% of the nearly 50,000 jobs lost at the peak of the pandemic’s impacts. That makes Alaska’s recovery among the worst in the country, according to Wiebold. “The interesting story to me is how far we have to go,” she said. Alaska has averaged approximately 310,000 jobs so far this year in its highly seasonal economy, which is growth of about 2.5% over last year, but is also still 6%, or about 20,000 jobs, short of 2019. Longtime Department of Labor Economist Neal Fried said Alaska was just starting a long-term recovery out of a years-long pre-pandemic recession when the economic shock of COVID-19 hit, while most of the country was in a sustained period of growth. “This is the first recession out of many, many recessions where Alaska joined the rest of the country,” Fried said of the pandemic’s hit to the state. Reduced employment in the oil and gas sector, Alaska’s trademark industry for decades, exemplifies the lagging recovery and is possibly an indicator of things to come. Oil and gas employment in Alaska has largely held steady at about 6,700 jobs this year, down more than 30% from pre-pandemic levels and nominally above pandemic lows reached last fall,just before the larger North Slope operators resumed drilling. That is despite oil prices that have strengthened throughout the year to the recent plateau of about $85 per barrel. “This is not just Alaska, the industry is obviously responding differently to this $80 oil than it did 10 years ago,” University of Alaska Anchorage Institute for Social and Economic Research Director Ralph Townsend said. Fried suggested the economic disruption might have spurred an ongoing “rightsizing” of Alaska’s economy to better match the corresponding demands of the state’s shrinking population. He emphasized that while there may be disconnect in some of the traditional economic indicators, having a job market tipped toward workers has been a positive for many people. “What it is also doing is for those who want to work or are working, their wages are going up faster than normal, and they have choices — more choices than they’ve had in a long time,” Fried said. “It’s just a weird economy. I’ve been doing this for a very long time and it’s not the first time we’ve had a labor shortage by any means, but this is definitely the most significant I’ve seen,” he said. Each of the economists also insisted that it is the pandemic itself and widespread fear of COVID-19 that has and continues to impact the economy, not corresponding business restrictions or public health mandates. “Until we get by the pandemic, there are workers who will stay on the sidelines, and until we get by the pandemic, customers will continue to change their habits,” Townsend said. “There’s good reason to leave some workplaces if you’re 55 to 60, particularly with health concerns.” However, he and Alaska Economic Development Corp. CEO Bill Popp noted separately that the ongoing trend of increasing outmigration from Alaska, which has added to the state’s labor issues, started years ago. “The pandemic may have served as a tipping point for broader forces,” Townsend added. The state has been losing 7,000 or more individuals per year than have moved to Alaska annually since 2016, according to Labor Department data. Popp believes the cost and availability of child care has been a sneaky factor keeping some parents out of the workforce but “there is no ‘the’ issue,” he said in an interview. The primary issue the pandemic laid bare for him is the need for Anchorage, as the state’s economic hub, to invest in making itself a place skilled, working-age people want to live. “What are we going to do to engage workers to move here and get locally produced workers to stay here?” Popp said. “The rate of outmigration is accelerating and that just makes a bad situation worse.” He dismissed suggestions that the surge in remote work will be a sustainable boon for Alaska. “We have a very strong outdoor proposition but it is more than one factor that plays into where people choose to live. We are going to have to start thinking about what it is we need to do in regards to economic opportunities, quality of life issues, providing a quality education,” he said. “Our goal is to attract workers who want to stay here and put down roots here.” Elwood Brehmer can be reached at [email protected]

ConocoPhillips nets $2.3B in 3rd quarter, $405M in Alaska

ConocoPhillips rode a strong oil market to its second-consecutive $2 billion quarter over the summer. The predominant North Slope operator netted $405 million in Alaska, part of a $2.3 billion profit in the third quarter, ConocoPhillips executives said Nov. 2. The bountiful earnings for the Houston-based major exemplify the suddenness of the rebound for an industry that was in full-fledged survival mode just a year ago. While leaders regularly emphasized the relatively healthy position ConocoPhillips was in to manage its way through the pandemic’s impacts last year, the company lost $450 million in the third quarter of 2020 — $16 million of which was attributable to Alaska — and generated less than 40% of the $11.6 billion in revenue it collected in the most recent period. Year-to-date, ConocoPhillips has netted more than $5.4 billion overall and $935 million from Alaska, compared to nearly $2 billion in losses over the first three quarters of 2020. The $2.3 billion third quarter profit translated to earnings of $1.78 per share. ConocoPhillips’ stock traded at $73.08 per share in the final hours of activity Nov. 2, down 2.2% following the morning earnings report. CEO Ryan Lance told investors that the oil major is on track to close out the year in its strongest position in more than a decade. “Every aspect of our triple mandate is moving in the right direction. Our underlying portfolio cost of supply is improving; our overall (greenhouse gas) intensity is lower; our emissions intensity reduction targets are more stringent; underlying margins are expanding and our trailing 12-month return on capital employed is headed towards an estimated 14% by year-end, reflecting the benefit of more than just strong commodity prices,” Lance said in an earnings call. Prices for Alaska North Slope and global benchmark Brent crude largely recovered to pre-pandemic levels early in the year and averaged more than $70 per barrel in the third quarter for the first time since 2018. Alaska oil traded for $85.83 per barrel Nov. 1, according to state Revenue Department officials. In Alaska, ConocoPhillips produced approximately 163,000 barrels of oil per day in the third quarter, down from 184,000 barrels per day a year ago. However, ConocoPhillips Alaska President Erec Isaacson noted in a statement that the company’s Greater Mooses Tooth and Fiord West drill site projects — with peak combined production estimated at 55,000 barrels per day — will begin producing oil soon. The company paid an estimated $301 million in taxes and royalties to the State of Alaska during the quarter and an additional $68 million to the federal government, according to a statement from ConocoPhillips Alaska representatives. The company also invested $235 million in North Slope projects in the third quarter, bringing its total 2021Alaska investment to $698 million, or 19% of its global capital expenditure, which is in line with recent history. In mid-October the company opted not to appeal a U.S. District Court ruling invalidating key federal environmental approvals for its $6 billion-$8 billion Willow project in the National Petroleum Reserve-Alaska. The decision sets the stage for Bureau of Land Management Alaska officials to conduct what is likely to be a multi-year supplemental environmental review to address the flaws identified in the District Court ruling. Elwood Brehmer can be reached at [email protected]

Forecast: Oil to add $1.2B to Alaska state coffers this year

The pandemic that once brought about subzero prices for Alaska oil is now a driver of what is likely to be a $1.2 billion windfall this year, according to Department of Revenue officials. A preliminary version of the Revenue Department’s annual fall state revenue forecast published Oct. 29 projects the State of Alaska will collect nearly $1.2 billion more this fiscal year and almost $1.4 billion more in 2023 than in 2021, mostly due to higher oil prices. Alaska North Slope crude ended Oct. 19 trading at $85.63 per barrel, well above the $61 per barrel average price for the 2022 fiscal year that Revenue officials pegged last spring. The average price for 2023 is forecasted at $76 per barrel. The price of Alaska oil briefly went negative in April 2020 following the global onset of the pandemic. Overall, Alaska is expected to collect nearly $6 billion in unrestricted revenue this fiscal year and more than $6.1 billion in 2023. Approximately $3 billion of the state’s yearly spendable income comes from the Permanent Fund Earnings Reserve account, based on the percent of market value, or POMV, formula lawmakers passed in 2018. “Recent oil price increases have significantly improved our current fiscal situation and I’m pleased to report that the outlook for Alaska’s budget is good,” Revenue Commissioner Lucinda Mahoney said in a formal statement. “We are optimistic about the current oil price and production trends.” A day prior to the publication of the preliminary revenue forecast — it is usually published in early December — Gov. Mike Dunleavy urged legislative leaders to consider his proposal to pay out supplemental Permanent Fund dividends, so this year’s total would match what would be paid under his “50-50″ fiscal plan. That plan would pay half of the spendable Permanent Fund income out in PFDs annually. “The state is now making hundreds of millions of dollars in additional oil production taxes, while Alaskans — recovering from job losses and the pandemic economic slowdown — are now facing rising energy costs,” Dunleavy said in a statement. Lawmakers skeptical of paying out dividends on the scale Dunleavy envisions have regularly noted that the state has mostly had balanced budgets in recent years before PFDs are paid. Paying out dividends under the governor’s plan would cost approximately $1.5 billion per year and increase from there. Revenue officials used the median price for Brent benchmarked oil futures traded in the five days ending Oct. 26 to form their estimates for 2022 and 2023, the preliminary forecast states. However, that is where the link to oil futures markets ends. The prices predicted for beyond next fiscal year are based on futures prices for 2023 increasing with 2% annual assumed inflation, which would put oil prices at about $88 per barrel in 2030, according to the forecast. Publicly available futures prices compiled by CME Group, a Chicago-based commodity marketplace, gradually fall from a current mid-$80s per barrel high to $71 per barrel a year from now and $65 per barrel by the end of 2023. Futures for December 2024 are currently trading at $61 per barrel, according to CME Group. Oil industry analysts have said the futures market indicates a belief the near-term oil supply squeeze — resulting from the sudden 2020 global industry slowdown brought about by the pandemic — will end and oil markets will return to their general pre-pandemic balance in the $60-$65 per barrel range. Department of Natural Resources officials tasked with predicting the state’s oil output also expect the recent oil price surge to translate into higher levels of production on the North Slope, even if it is relatively short-lived. Last spring, DNR’s production prognosticators estimated North Slope operators would collectively average about 471,000 barrels per day this year and nearly 489,000 barrels per day next year, with production gradually ramping up to nearly 580,000 barrels per day by the end of the decade. Now, production is expected to average 488,000 barrels per day this year and just more than 500,000 barrels per day next year, with slower production growth to 541,000 barrels per day by 2030. Since the spring forecast was published, a successful legal challenge to ConocoPhillips’ large Willow prospect became likely to delay that project by multiple years; first oil from Willow was once targeted for 2025-2026. Oil Search Alaska has also acknowledged significant issues in funding its Pikka development, which is the other large-scale prospect that many believe will eventually support a sustained increase in North Slope production. Elwood Brehmer can be reached at [email protected]

Proposed solar project on Kenai Peninsula would be Alaska’s largest

The Kenai Peninsula may soon get the state’s largest solar power farm to date, but it may depend on the local government’s willingness to provide a tax break. Renewable Independent Power Producers, an Anchorage-based company with several solar farms in Anchorage and the Mat-Su area, is working on a new project on the Kenai Peninsula. If it moves forward with the development, the farm — planned to be 160 acres, with about 60,000 panels and 20 megawatts of power production — would be the largest in Alaska. Jenn Miller, the CEO of Renewable IPP, told the Kenai Peninsula Borough Assembly in October that the company isn’t sharing details of the exact location for the project yet because the land lease details are still in the works. “It’s definitely significant,” she said. “This would be about 60,000 solar panels. Our record to date is a panel per minute to install, so we’ll see if we can beat that.” Across Alaska, cooperative utilities like Chugach Electric Association, Matanuska Electric Association and Homer Electric Association generate and provide electricity to members. Their boards are elected, and the members underwrite the infrastructure projects in their power bills. In the past, the cooperatives have built and owned all their generation sources. IPPs are essentially private companies that build and own the generation projects, but not the transmission lines. They then sell the electricity they generate to the cooperatives. Renewable IPP already owns three projects—one in Willow, one in Houston and one in Anchorage. Miller said the Willow project is the largest so far, but the Kenai Peninsula project will be significantly larger than that, providing enough energy to support about 4,500 homes, or about 6.5% of HEA’s energy demand. But one factor that may make or break the project is whether the Kenai Peninsula Borough Assembly is willing to give the project a property tax break. Without a significant subsidy, the project won’t be competitive as a power producer, she said. “Property taxes would be about 10-15% of our annual revenue,” she said. “Ultimately what that does is it inhibits our ability to offer the lowest possible electricity cost to HEA members.” There’s a tax difference between public utilities and for-profit private energy generation companies. Utility cooperatives like HEA are incorporated as nonprofits, and therefore are not taxed on their properties. Private for-profit corporations — even if they are providing utility services — are. Electric utilities also operate as regulated monopolies under the Regulatory Commission of Alaska, which prevents them from altering prices to consumers too much without oversight. They can only adjust power costs so much under RCA regulations. Renewable IPP is providing electricity like a utility, but because it doesn’t have any paying members, it can’t pass the cost along directly to amortize its infrastructure project. HEA can’t necessarily pass along its cost directly, either, because its prices are regulated by the RCA. Therefore, the solar project has to be competitive with natural gas prices in order to be economical. Miller said that’s why the property tax amounts on a project like the Kenai solar farm—with an estimated $30 million-$35 million in infrastructure costs—can make or break it. “If we get this exemption for this project, how does it benefit the borough residents?” she said. “If we come in four-tenths of a penny below the current cost of generation, we will equal what we would have paid in property taxes, and those dollars are going directly to the residents.” Renewable IPP does pay property taxes on the Willow project in the Mat-Su Borough. However, the difference there is the size of the project, Miller said — the Kenai project would be larger, and with intermittent energy like solar, the company has to cover the cost of guaranteeing power to HEA when the sun isn’t shining. Assembly members expressed some skepticism about having to provide a tax subsidy for a private industry. Borough Mayor Charlie Pierce said several times he didn’t support providing a tax cut to the solar project when another utility provider like Enstar Natural Gas pays taxes on its lines. Enstar, where Pierce was previously an employee before retiring, is a for-profit company and thus pays taxes. However, Enstar is also different in that it has a direct subscriber base of consumers. Miller said Renewable IPP usually does have a set escalator over the life of a lease that has to “meet or beat inflation.” The company has to look out a few decades at a price forecast for the utility’s cost of generation and show its price comes in under the estimate to receive approval from the utility and the RCA. She said the estimated cost per kilowatt-hour of electricity for the project would be competitive with HEA’s current costs of generation—between 7 and 9 cents per kilowatt hour—which is still more expensive than the Lower 48 average for solar power generation, but it is renewable and doesn’t depend on the cost of fossil fuels like natural gas or coal, which can fluctuate. She said the project may appeal to new businesses coming into the area as well. “We have heard for some new industries (what) they are looking at when they are considering siting a manufacturing plant here in Alaska … energy prices are one of the major deciding factors,” she said. “Some new businesses are very keen on renewable energy, and they want to be able to say, ‘We’re getting this much of our generation from renewable,’ but people have different feelings about that.’” The assembly took no action on a potential tax exemption for the project in October, but several members said they appreciated the information and were looking for more. Reach Elizabeth Earl at [email protected]

Feds increase oil and gas expectations for Cook Inlet leases

Interior Department officials have added to their expectations for oil and gas development in lower Cook Inlet based on new resource estimates for the area. In the lower Cook Inlet federal oil and gas lease sale draft environmental impact statement, Interior contemplates the eventual construction of six offshore platforms and up to 81 oil and gas producing wells in the largely untapped region over 40 years. A version of the draft review published earlier this year considered development of up to four platforms and 48 production wells over 36 years. The vast majority of existing industry development in the Cook Inlet basin is located in near-shore state waters and the state-controlled waters of the northern Inlet. The changes stem from the Bureau of Ocean Energy Management’s updated October analysis of Alaska’s offshore oil and gas resources, according to BOEM Alaska spokesman John Callahan. From that analysis, BOEM increased its estimates for total oil production in the lower Cook Inlet area by 18% to 192 million barrels, and total gas production by about 4% to 301 billion cubic feet, or bcf, of natural gas over estimates made in 2016. Callahan wrote via email that the projections represent the maximum potential development that could stem from the lease sale being considered. BOEM officials initiated a 45-day public comment period Oct. 29 for the draft EIS of its proposal to offer up nearly 1.1 million acres of federal Cook Inlet waters to oil and gas companies in a lease sale tentatively scheduled for some time next year. Environmental groups have long lobbied Interior leaders to stop proposing Cook Inlet lease sales, citing a lack of interest from industry and fears development activity could harm the Inlet’s endangered population of beluga whales and other marine life. The updated EIS is the Biden administration’s attempt to comply with a June U.S. District Court order that barred the administration from “pausing” new oil and gas leasing on federal acreage, as President Joe Biden ordered in late January shortly after taking office. BOEM officials in early February subsequently recalled a draft lower Cook Inlet EIS published in the final days of the Trump presidency. Interior’s appeal of the District Court ruling is pending. Specifically, BOEM is largely proposing to make the northernmost portion of the broader federal Cook Inlet planning area available for lease; a rough triangle starting at about Ninilchik to the north and Seldovia and Augustine Island to the south. According to the draft EIS, BOEM officials targeted areas closer to existing infrastructure and industry activity and avoided most of the area listed as critical habitat for Cook Inlet belugas and northern sea otters in selecting acreage to lease. Alternative plans call for removing 10 lease blocks of critically designated beluga habitat in the northern portion of the proposed lease area or restrictions on some exploration activities in winter, when the whales are most likely to be in the area. Agency officials are also open to similar restrictions to mitigate impacts to northern sea otters and activity restrictions to coincide with the summer commercial drift gillnet salmon fishery that occurs in the northern portion of the proposed lease area each year. Hilcorp Energy was the lone bidder in the last lower Cook Inlet lease sale held in 2017. The Houston-based independent, which is the dominant player in the broader Cook Inlet basin, selected 14 leases for just more than $3 million at the time. Those leases are just offshore from the Ninilchik and Cosmopolitan state units, and in the middle of the Inlet in front of Kachemak Bay. Prior to 2017, the last federal sale of Inlet waters was in 2008. The state holds a lease sale for its acreage in the basin each year. Once the state’s primary source of oil, the Cook Inlet basin is now mainly a source of natural gas for local utilities. Absent historic demand for LNG exports to Japan and gas for major industrial uses, new, large-scale Cook Inlet oil and gas projects have been rare in recent years. The public comment period for the lower Cook Inlet lease sale draft EIS is open through Dec. 13. Elwood Brehmer can be reached at [email protected]

Coal demand spikes amid global pandemic recovery

About a decade ago, at an energy conference in Washington, D.C., Aubrey McClendon, CEO of Chesapeake Energy and a leader in promoting U.S. natural gas produced with hydraulic fracturing, made fun of coal. Standing on the stage in front of several hundred analysts, politicians, bankers, journalists and industry participants, he held a lump of coal in his hand. Before launching into his corporate PowerPoint slides, he smirked and asked how anyone who had ever held a piece of coal could possibly call it clean. The future was plentiful, affordable, clean gas, McClendon said, wiping the coal dust from his hands. It’s not so plentiful or affordable today. Facing a shortage of natural gas, especially liquefied gas that can be moved around the world at sea, and wincing at record-high prices for the fuel, utilities and power generators worldwide are burning through their stockpiles of coal. Not because it’s cleaner than gas, but because it’s available and cheaper. The growing global economic recovery from the COVID-19 pandemic has unleashed power demand beyond expectations. Certainly, beyond investments in new energy supplies. Investors had turned away from coal, European nations shut down their coal-fired power plants, and coal consumption to generate electricity in the United States had been in a steady decline since reaching its peak in 2007. Even China was cutting back on coal, in its push to show the world it, too, could reduce emissions and clean up its skies. Then the energy crunch came this year. Liquefied natural gas shot past $35 per million BTU on the spot market in Asia and Europe. The same amount of energy from coal would cost half that price, or less, depending on the market. U.S. natural gas prices are about double from a year ago, and coal consumption at U.S. power plants was up 35% in the first seven months of this year from 2020, according to data from the U.S. Energy Information Administration. According to government data, coal stockpiles at U.S. power plants in August were at their lowest in at least 24 years. The volume stacked and stored to make electricity was down almost one-third from the start of the year. Miners hadn’t planned on the resurgence in demand, and investors hadn’t been putting money into new production of the world’s dirtiest fossil fuel. “Coal stocks for our customers are at critically low levels,” Joe Craft, CEO for Oklahoma-based Alliance Resource Partners, said during a conference call with investors and analysts on Oct. 25. China recently ordered its coal mines to boost production to satisfy demand, after coal-to-gas switching to meet climate goals and safety inspections restricted a lot of the country’s production. The nation’s coal imports in September were the highest of the year. Even at that, some factories have had to cut back on production for lack of power. China had planned to cut its coal use to 56% of its energy mix this year, according to the country’s National Energy Administration, down from around 68% a decade ago. But coal consumption is now going in the opposite direction. The U.K. banking giant Barclays said coal was back to 62% of China’s power generation in the first eight months of this year. Though cheaper than natural gas, coal is still expensive this winter. Chinese coal prices have about doubled this year, hitting a record high on Oct. 19 of almost $310 a tonne on the Zhengzhou Commodity Exchange, though the price dropped back to about $200 a week later. “China could see its worst winter power shortage since 2010,” Citigroup analyst Tracy Liao told Bloomberg News last month. The government has told top state-owned energy companies to make sure they have the fuel they need for winter, whatever the cost. Even natural gas producers, such as French oil and gas major Total Energies, know the high prices for LNG cannot last. “High pricing is not good news — of course immediately for my company results are better,” but for customers it’s not, TotalEnergies CEO Patrick Pouyanne said during a Russia Energy Week panel in Moscow last month. Replacing coal with gas “is good for climate change,” but that works best when natural gas is affordable, Pouyanne said. “Coal today is a king, because coal is cheaper than all the other sources of energy.” Bringing more gas to market is the answer to lowering the price and pushing coal aside, he said. “For us today, prices are too high. We have to find stability, going back to something more normal.” But until “normal” returns, coal producers are enjoying better times. McClendon, who died in 2016, probably never expected coal — regardless of how much new technology could reduce its emissions — would come back as a power plant fuel option. Vietnam announced last month it may double the amount of new coal-fired power generation it builds by 2030, as its growing economy needs affordable, reliable electricity. India, where the government has been pushing hard to boost natural gas as a power plant fuel, still relies on coal for about 70% of its electricity generation. But with supply shortages from domestic mines and imports, government data last month showed that 80% of India’s 135 coal-powered plants had just a few days of coal supplies left. The average the past four years has been 18 days. In the U.K., a half-century-old coal-fueled power plant, the West Burton A station, is scheduled to close next year. Until then, the polluter is fired up sparingly, but it ran several days in September to help satisfy the country’s demand for electricity. Bloomberg’s chief energy correspondent reported last month that strong demand growth for energy is likely to push the combined consumption of coal, natural gas and oil to an all-time high by mid-2022. “This is the revenge of the fossil fuels,” said Thierry Bros, an energy expert and professor at the Paris Institute of Political Studies.  

BROWN'S CLOSE: Squatting in Graveyards

In honor of Halloween, this column is dedicated to my dad, and his most favorite hobby of all time – standing in graveyards looking at headstones. Like many Americans, my dad is interested in genealogy. His storied family ancestry dates back to Oliver Cromwell, the Mayflower, and the Revolutionary War. Dad has dutifully led his family through many historic sites, tracing the gallant, brave acts by Browns long since lost. I’ve personally stood in graveyards across multiple state lines with my dad, looking for the graves of dearly departed family members. The older the grave, the more difficult this is, as years of graveyard wear and tear rub away the names. Most recently, my dad discovered he was a descendent of John Pemberton, the leader of the famed “Overmountain Men.” This ragtag group from 1700s-era East Tennessee heard that the British had threatened to burn all of their farms to the ground. The Overmountain Men understandably objected to this, and charged out of the hills of Tennessee and down into North Carolina. The British soldiers, confronted by a hundred crazed and imposing backwoodsmen, freaked out and met a shameful defeat at the Battle of King’s Mountain. In order to pay homage to the group’s bravery, my dad wanted to trace the journey of the Overmountain Men by car. While it would take us a matter of hours, we would follow the route that the men marched along for two painful weeks, from John Pemberton’s farm, through the Great Smokey Mountains, and down into North Carolina. John Pemberton, a wealthy farmer, mustered his brawny troops under the Pemberton Oak near his house. This was the first stop on our local tour. Down narrow dirt roads near Bristol, Tennessee, my dad and I drove hither and yon, looking for an oak. The challenging part was that the oak tree had fallen over in 2002, so we were reduced to looking for a sign, which was much less impressive. We missed the sign for the other trees, and in frustration moved on to our next site, John Pemberton’s grave. The grave was in a small cemetery on private property near a tool store. Dad thought it best we scout out the place in advance of trespassing, and make sure we could distinguish which dirt road, to which farm, behind which tool store. My dad has always believed if something is worth doing, then it is worth doing well. In every store, in every gas station, in every restaurant, he asked the employees, “Have you heard of John Pemberton? Have you heard of the Overmountain Men?” Most of these employees were somewhat sullen teenagers begrudgingly working summer jobs. To say they were wholly unconcerned with John Pemberton and the Overmountain Men would be an understatement. “Who? No, never heard of him.” “What? Who's that?” “Huh? Like Pemberton Road? That’s right there.” “Nope. Well, that’s something right there.” There was, however, one elderly man who owned a gift shop that sold only religious iconography and soapstone animals. “Ah yeah. That’s behind that tool store. Park, walk up the hill, through the fence, past the farmhouse, and it’s on your right. Nobody ever goes there.” We thanked him for the clear instructions, and my dad bristled at Bristol’s lack of reverence for our Revolutionary family members. We found the tool store in a manner of minutes and parked in the gravel lot. The building was inauspicious, and the store closed. We walked around the store through a grassy field, and up a hill. We found a fence, clearly marked “Private Property, Do Not Enter,” and entered. Up around a farmhouse, where we were aggressively greeted by a handful of chained dogs, through a second fence, and into a small graveyard. It was quiet and shaded, with a myriad of faded headstones. Dad and I then began the slow work of looking at each headstone, and attempting to locate the name of the deceased. Most graves were too old, and any inscription had long since worn away. Some, however, were fresh and legible from as recently as the 1960s. I was just pondering what Dad and I would have to do to qualify to be buried at such a historic site, when I heard the delighted cry of, “Found it!” I picked my way through some overgrowth to a small stone marking John Pemberton’s remains, next to those of Mrs. Pemberton. We stared reverently for a few moments, and then bolted the fence, said goodbye to the dogs, walked back to the rental car, and began the lengthy drive to North Carolina.   Sarah Brown can be found squatting near graves. If you're too chicken to join her, Tweet her on Twitter @BrownsClose1, or email her at [email protected] “Close” is a British term for alley or cul-de-sac. For more of Sarah’s musings, visit Browns-Close.com.

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 sockeye fisheries and the proposal seeks to limit Alaska Peninsula harvest of Chignik-bound stocks through season adjustments. The ACR specifically focuses on the early run. 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 in 2023 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]

Pages

Subscribe to Alaska Journal RSS