Without Downtown office, Legislature lacks space for Anchorage special session

With the Legislature at a continued impasse over one of his top priorities, Gov. Michael J. Dunleavy has suggested calling a second special session outside of Juneau to deal with the PFD. The Legislature last held a special session outside of Juneau in 2015 at the former Downtown Anchorage Legislative Information Office building. The $44 million, six-story LIO custom-built for the Legislature in 2014 had adequate space and other amenities to hold floor sessions and committee meetings, said Legislative Affairs Agency Executive Director Jessica Geary, but there were significant sound issues at the time. “(Legislators’) main concerns there were sound quality. The walls were not soundproof and they had some problems with recordings,” Geary said. “If you go back and listen to the floor sessions the record is really lacking — so that was one of the biggest concerns and complaints that came up.” The Legislature eventually abandoned that space in 2016 in response to public pressure over spending to cover the $3.3 million annual lease payments the space required, eventually leading EverBank to foreclose on the owners. Legislators also had an opportunity to purchase the building outright for about $30 million, but former Gov. Bill Walker said he would veto the appropriation if they tried. The building is now occupied by the Anchorage Police Department. As an alternative Anchorage LIO space, lawmakers subsequently purchased a Midtown Anchorage office building from Wells Fargo bank for nearly $11.9 million in 2016. Remodeling the building to better suit lawmakers’ needs has brought the cumulative price for the building to approximately $24 million, according to LAA records. Geary said work on the building is ongoing this summer and should be done in August. While the new Anchorage LIO has three committee meeting rooms, it lacks space for the full House and Senate to meet and therefore still won’t be suitable for a special session, according to Geary. “It’s just office space; that’s all it is,” she said. The governor, who hosted a “Restore the PFD” rally June 6 at a Wasilla resort, specifically proposed holding a session at the Wasilla Middle School, where it’s presumed legislators would hear from more Alaskans who support full PFD payments and the governor’s plan for steep spending cuts. However, officials in the Legislative Affairs Agency, which handles business and behind-the-scenes operations for the Legislature, drafted a list at the behest of legislative leaders outlining the complicating issues with holding the session in the school. The agency cited concerns with security, IT networks, a lack of audio and video recording capabilities for committee meetings and floor sessions, and the fact that the governor’s office would control the camera system in the school, which LAA officials concluded “is not appropriate.” “The governor should not have access to security cameras over Legislative space,” the LAA paper states. The most workable places for a special session in Southcentral would be Anchorage’s Egan or Dena’ina convention centers, Geary said. “We could hold floor sessions there. It would take work to get that set up but it is doable because legislators will have their offices and then committee rooms at the LIO,” she added.

Council turns down petition sought to protect Adak processor

Editor's note: This article has been updated to correct the spelling of Steve Minor's last name. The Aleutian Islands won’t be getting an emergency boost in quota for Pacific cod, despite stakeholders’ assertions that the processing plant in Adak needs it to survive the next season. The North Pacific Fishery Management Council decided not to approve an emergency petition from a group of Aleutian Islands stakeholders at its meeting June 9, instead taking a longer route through a discussion to look at the set-aside options for the area. The petition had sought an emergency quota set-aside of Pacific cod, separate from the general Bering Sea-Aleutian Islands quota, to help sustain the shore-based plant and thus the community. Adak, a small community on an island west of Unalaska that once housed a naval base, relies heavily on Pacific cod processing. The community there taxes fishery landings to pay for public services as well. In recent years, the shore-based processors have had to increasingly compete with larger companies’ catcher-processor vessels participating in the Bering Sea Pacific cod fishery. The fishery has grown as well, and as the fishery is not under rationalization, fishermen have complained of an increasingly dangerous “race for fish” that makes the season shorter and shorter. In spring 2019, the Bering Sea Pacific cod “A” season lasted less than two weeks. Since 2016, the Aleutian Islands area has had a leg-up in the fishery through a provision in the council’s management plan for the area called Amendment 113. Essentially, it created a priority quota for cod to be delivered to shore-based processing plants west of the 170-degree west latitude line in the Aleutian Islands, protecting Adak’s plant from being outrun by the at-sea processing vessels. However, in May, a federal judge ruled in favor of a group of fishermen that complained about that amendment being against the provisions of the Magnuson-Stevens Fishery Conservation and Management Act, saying the council needed to either revise or remove the amendment. The City of Adak is appealing the decision, but in the meantime, the fishermen and plant operator hoped to get an emergency policy from the council to protect the plant in the upcoming season. Steve Minor, who testified to the council June 8 on behalf of the petitioners, said the proposed petition wouldn’t have ensured that fish were delivered to the Adak plant, but it provided a chance to do so. “The emergency rule will not restore Amendment 113,” he said. “It also does not guarantee that a single pound of Pacific cod will be landed by any shore-based processor, but it will create opportunity for us.” The petitioners argue there is an emergency because with the increasing participation in the Bering Sea fishery, the season is shortening as vessels run up to the halibut protected species catch limit quickly, forcing all the other fisheries closed to protect halibut. Fishermen have told the council in the past that with the pressure to fish quickly, vessels may not move off a particular ground even if the catch of halibut is high because they are concerned about not keeping up. With the challenge of more vessels fishing on the same limit of halibut, the petitioners argue they’re concerned that without a set-aside of 5,000 metric tons above the guideline harvest limit of Pacific cod, they may not get a season at all. George Pollock of Aleut Enterprise urged the council to establish a Limited Access Privilege Program fishery, which would add additional protections for that area. The community is working on developing other fisheries, such as for geoduck clams, he said. “These activities are directly or indirectly supported by shore-based Pacific cod processing,” he said. However, Bering Sea trawlers opposed the emergency petition. In the complaint filed over Amendment 113, the Groundfish Forum, the United Catcher Boats, B&N Fisheries Co. and the Katie Ann LLC complained that the set-aside for the Aleutian Islands did not meet the MSA criterion for conservation purposes, and the court agreed. Heather Mann, representing the Midwater Trawlers Association, told the council the petition did not meet the criteria for an emergency and was instead another attempt to reinstate Amendment 113. “(Emergency rules) are not a management tool to be used as an end-run around court decisions,” she told the council. “In this case, the criteria have not been met.” The council members did not agree that it was an emergency and voted instead to ask staff to produce a discussion of trawl catcher vessel harvests and the set-aside in the Aleutian Island Pacific cod fishery. Council alternate member Rachel Baker, representing the State of Alaska for Department of Fish and Game Commissioner Douglas Vincent-Lang, proposed the amendment, saying that she didn’t think that the National Oceanic and Atmospheric Administration would view it as an emergency even if the council sent it on. “I as one council member can’t do that,” she said. Council members Craig Cross and Bill Tweit agreed with her, saying they would support the motion of looking at the problem holistically. Council member Andy Mezirow said he was disappointed the members had not done more to support Adak, and council member Theresa Peterson said she would have preferred some kind of more immediate action to help the community out of its predicament. “This is most likely going to take a long time,” she said. “I think about the vulnerability of the plant and those dependent on the success of the plant to move forward.” Elizabeth Earl can be reached at [email protected]

Southeast metal prospect has major potential

A Southeast Alaska multi-metal prospect has the potential to produce a big payback if developed into a mine largely due to its proximity to established infrastructure, according to an early evaluation of the project. Constantine Metal Resources’ underground Palmer copper-zinc-precious metals prospect north of Haines could generate $266 million in after-tax cash flow despite a projected mine life of just 11 years based on the results of a preliminary economic assessment, or PEA, released by the company June 3. The Palmer project is a joint venture between Vancouver-based Constantine as the majority and Dowa Holdings, a Japanese metal manufacturer. The deposit is adjacent to the Alaska-Canada border and near the Haines Highway about 40 miles northwest of Haines along the Klehani River, which flows into the Chilkat River. It is on a mix of federal mining claims surrounded by land owned by the Alaska Mental Health Trust Authority, which is open for development. If developed as currently envisioned, the Palmer project would be an underground mine that would process up to 3,500 metric tonnes of ore per day, or approximately 12.5 million metric tonnes over the life of the mine. From that, the mine would produce more than 1 billion pounds of zinc, 196 million pounds of copper, 18 million ounces of silver, 91,000 ounces of gold and nearly 2.9 million tonnes of barite, a common industrial mineral, according to Constantine. The mine would cost $278 million to develop and require another $140 million for sustaining capital and reclamation costs for an estimated all-in cost of $418 million. Those costs translate to an operating-capital cost of approximately $65 per tonne with operating income of $92 per tonne of ore, according to the PEA figures. Constantine CEO Garfield MacVeigh said in a corporate release that the PEA is a major milestone for the Palmer project and demonstrates “a high-quality project with strong economics and a progressive, environmentally conscious mine design.” Advanced zinc-copper projects such as Palmer with favorable economics are scarce in North America, MacVeigh said. “What sets the Palmer project apart from its peers is excellent access by paved all-season highway and secondary roads, close proximity to an existing Pacific port ore terminal, reasonable and manageable capital costs, significant district-scale upside for additional mineral resources, and a joint venture that includes a global leader in the zinc smelting business,” he said further. Constantine expects the project would support about 260 full-time jobs during operation. Constantine plans to truck copper and zinc concentrates to the Haines port, where the material would be barged about 15 miles to the deepwater ore terminal in nearby Skagway, which is owned by the Alaska Industrial Development and Export Authority. The barite concentrate would be barged separately from Haines to a rail terminal in Prince Rupert, British Columbia, just south of Ketchikan. Barite is an important industrial mineral in drilling mud for oil and gas wells and has other applications in the medical field. Barite from Palmer would be ready for use and not require additional refinement, according to Constantine. The Palmer deposit currently consists of indicated resources of 539 million pounds of zinc at an average grade of 5.3 percent; 154 million pounds of copper at a 1.5 percent average grade; and 1.1 million tonnes of barite along with gold and silver resources. Inferred resources include more than 1 billion pounds of zinc; 124 million pounds of copper; more than 2.6 million tonnes of barite. According to the PEA, zinc would account for 48 percent of the total value of all the concentrates produced from the Palmer project. Constantine touts Palmer as an environmentally sound project largely due to a design that would eventually store potentially acid-generating rock underground — backfilling mined ore — preventing exposure to rainwater and potential acid leaching. Constantine estimates that 78 percent of the mine tailings would be used as backfill. A portion of the potentially acid-generating waste rock would need to be stored above ground early in the mine’s life until space was available to begin the backfilling underground. “Desulfurized tailings,” accounting for about 15 percent of the total processed material, would permanently be stored above ground, according to the company. However, the Palmer project has detractors. The Chilkat Indian Village of Klukwan and several local conservation groups sued the Bureau of Land Management in December 2017 for not adequately considering the potential impacts of future mine development when approving exploration permits for the project. Alaska U.S. District Court Judge Timothy Burgess rejected the claims in a March 15 ruling that has since been appealed to the U.S. 9th Circuit Court of Appeals. Southeast Alaska Conservation Council staff scientist Guy Archibald said in an interview that the group and others oppose the project because of its location — in the upper reaches of a salmon-bearing watershed — and the omnipresent potential for acid leaching from massive sulfide deposits such as Palmer. Archibald said Constantine’s overall plan to permanently store potentially acid-generating tailings underground is a better plan “on paper” than other traditional mine operations, but he also noted “that even the best laid plans quite often go awry.” Elwood Brehmer can be reached at [email protected]

Cook Inlet fishermen celebrate ‘Return of the Reds’ with hope for 2019

Cook Inlet fishermen are looking forward to their salmon season with high hopes that the sockeye will arrive in better numbers than last year. On June 11, fishermen and processors grilled up some of the first Cook Inlet salmon of the year at the Pacific Star processing plant in Kenai, gathering to build excitement for the coming season. The plant is now receiving salmon from the west side of Cook Inlet, while the fishermen in the drift gillnet and east side set gillnet fleets gear up for their first expected openings in the coming weeks. The event, dubbed the Return of the Reds, was reminiscent of the recent gatherings in Anchorage and Seattle to receive the first Copper River salmon of the year, a heralded fish in the culinary and fisheries world. The Kenai version is the first in what the Alaska Salmon Alliance hopes will be a new annual tradition for the area, said ASA President Nate Berga. Retailers, fishermen and local government officials gathered at Pacific Star and donated proceeds from sale of grilled fish to the Kenai Peninsula Food Bank. The event was less about promoting the processor or the industry than connecting Alaskans with their locally available fish as well as building excitement for the season, he said. “The biggest thing that we wanted to focus on is getting fresh Alaska salmon onto Alaskans’ plates,” he said. Alaska salmon is an internationally valuable commodity, with a huge percentage being shipped overseas to Asia and some being consumed in the Lower 48. Many Alaskans fill their freezers with salmon they harvest themselves at personal-use dipnet fisheries or in sport fisheries, but others may not have the chance — and the ASA wants to see Alaskans more connected with their commercial fisheries, Berga said. Commercial fisheries are also one of the largest private industry employers in Alaska, and most of the Cook Inlet fishermen live in the state according to permit data. “This is a time when our state is struggling,” he said. “This money is staying here.” Upper Cook Inlet faced a terrible sockeye harvest in 2018 — about two-thirds below the recent 20-year average — with the total estimated run coming in at 1.7 million sockeye to the Kenai River and 697,000 to the Kasilof River. Fishermen sat on the docks for much of the season, and the Alaska Department of Fish and Game closed the Kenai River dipnet fishery a day early with an eye toward making escapement goals. The sonar has yet to click on for the Kenai River, the major driver in the region, this year, but early reports from sport fishermen on the river indicate good abundance. The Russian River sport fishery opened June 11 at midnight, with more than 8,400 sockeye past the weir on Lower Russian Lake as of June 10, though it takes about a week for sockeye to typically make it to the Russian River from the lower Kenai, according to ADFG. The large early numbers and fish holding in the Kenai River prompted ADFG to open the area known as the Russian River Sanctuary — a section of the Kenai River close to the confluence of the two rivers — earlier than usual, according to a news release. “Looks like the Russian River is off to a strong start. We haven’t seen numbers like this for several years,” stated Area Management Biologist Colton Lipka. “Sport fishing for sockeye salmon in the Russian River area will likely be good to excellent.” If ADFG’s forecast proves out, about 6 million sockeye will return to the stream systems throughout Upper Cook Inlet this year, about 200,000 more than the 20-year average. That increase is mostly in the Kenai River, where the forecast estimates about 3.8 million salmon to return this year. The Kasilof, which is the second-largest sockeye system in the region, is forecasted at 873,000 sockeye, which is about 94,000 fish less than its 20-year average. Sockeye are the primary driver in Cook Inlet, but fishermen are also out for chum, silver and pink salmon as well. In Lower Cook Inlet, fishermen are oriented toward pink salmon harvests, both wild and hatchery, and some smaller sockeye runs than further north. ADFG’s preseason forecast about 2.4 million in commercial common property harvest for the area. That’s only the commercial common property harvest, as researchers have recently found a high percentage of hatchery-marked fish in Lower Cook Inlet streams, possibly confusing the traditional spawner-recruit forecasts the department has done in the past, according to the forecast. Other species were also produced as commercial common property harvest forecasts, including 125,000 sockeye, 84,800 chum, 13,700 silvers and 452 kings, according to the forecast. The first Cook Inlet drift gillnet period is expected after June 19 this year, which would fall on June 20, while the East Side setnet fisheries won’t open until the first regular period on or after June 25 in the Kasilof section and July 8 in the Kenai and East Forelands sections. Elizabeth Earl can be reached at [email protected]

Southwest village prepares to harness river in harmony with salmon

A small Southwest Alaska village is trying to integrate the power of an iconic Alaska river into its electric grid without interfering with the millions of salmon that rely on the same water. The Village of Igiugig and Maine-based Ocean Renewable Power Co. are in the midst of a years-long partnership to refine and eventually utilize the company’s RivGen Power System generator in the Kvichak River. The village of about 70 residents sits at the outlet of Iliamna Lake — Alaska’s largest — which feeds the Kvichak that flows another 50 or so miles before emptying into Bristol Bay. The clear waters of the system support some of the largest salmon runs on Earth. Somewhere between 3 million and 7 million sockeye and countless numbers of other salmon pass by Igiugig each year on their way upriver to spawning grounds in Iliamna’s myriad of tributaries. However, the remote location that affords residents the opportunity to live in such a unique ecosystem also comes at a cost that many rural Alaskans are familiar with. Diesel fuel, which is the primary fuel source for power generation, averaged $5.85 cents per gallon last year in Igiugig, according figures compiled by the Alaska Energy Authority. Acting Igiugig Administrator Karl Hill said that fuel is flown into the village in batches of about 3,000 gallons. Those costs translate into residential electrical rates regularly in excess of 90 cents per kilowatt-hour, according to AEA, which the state then subsidizes through the Power Cost Equalization Program to a more manageable effective household rate of around 30 cents per kilowatt-hour. For comparison, recent electric rates in Anchorage were 18 to 20 cents per kilowatt-hour. Power for businesses and most public buildings is not eligible for the PCE funding, which makes the cost of power a major impediment to economic growth across much of Alaska. “We’re looking for any way we can to be more self-sufficient. To have the means to produce our own energy gives us that much more autonomy,” Hill said of the RivGen System. A 35-kilowatt RivGen system, which is 12 feet tall and about 40 feet wide, landed in Igiugig June 6 after being barged across Cook Inlet from Homer to Williamsport, trucked 15 miles up the Williamsport Road to Pile Bay at the east end of Iliamna and finally loaded on a second barge for the final leg of the journey across the length of the massive lake. That followed a May 23 order from the Federal Energy Regulatory Commission that approved a license for a pilot project to run two RivGen units in the Kvichak for 10 years. Sen. Lisa Murkowski, who chairs the Senate Energy and Natural Resources Committee, has supported federal research and grant programs to advance small-scale renewable energy production and integration into small, isolated power grids. According to her office, the Igiugig Village Council is the first Tribal entity in the country to gain federal approval for an in-river power project. “I am so pleased this project will be able to move forward, reducing local diesel consumption and energy prices. Igiugig’s efforts are blazing a trail for marine renewable energy and microgrid solutions around the world — when we prove these technologies can work in rural Alaska, we are proving they can work just about anywhere else on the planet,” Murkowski said in a June 5 statement. According to the FERC license, the single RivGen can produce power at an average annual cost of 78 cents per kilowatt-hour. Company and village officials plan to install the RivGen soon and operate it for up to a year, ORPC project manager Monty Worthington said in an interview from Anchorage just a couple days before he was to leave the city for a summer of working on the system. The lengthy test should prove whether the system can handle its two biggest remaining challenges: big chunks of ice and tiny salmon. Prior late-summer tests of a prototype bottom-dwelling generator indicated through five monitoring cameras that it can coexist with adult salmon and other fish, according to Worthington. “A million-and-a-half sockeye went past the turbines and we saw no adverse impact,” he said. Juvenile salmon, known as smolt, however, also pour out of Iliamna by the tens of millions each spring on their way to the ocean. The sheer numbers of them and the fact that they aren’t as adept as adults at avoiding hazards when in the strong main river current means how the smolt interact with the RivGen unit must be studied closely. As it’s currently designed there is nothing to block fish or other objects from interacting with the RivGen. A large grate to deflect drifting wood or ice could be added, Worthington said, but a screen small enough to deflect smolt would almost certainly disrupt water flow and in-turn the efficiency of the unit. The National Marine Fisheries Service recommended in comments to FERC that the twin-turbine generator be shut down for two weeks during the late May-early June peak of the smolt outmigration. FERC officials are not requiring such a stipulation, but stressed in their order that the interaction be watched closely. Worthington noted that like adult sockeye, the smolt usually stick closer to shore and the surface of the river when on the move. He also compared the leading edge of the five-foot diameter open turbine to a baseball bat, meaning any little fish that swim through it wont get cut by the unit. “They’re better at avoiding than we assume they are and also they just get pushed out of the way by the pressure wave on the front of these (turbines),” Worthington said. Still, a biologist will be on-site continuously during the smolt season to monitor any impacts the RivGen might have on them. “Certainly, if we find out that smolt are getting injured by our device we won’t be operating at that time of year; it’s a no-brainer,” he added. ORPC officials also feel that they will be able to work around ice flows emitting from Iliamna Lake each spring, though the upcoming winter will be the first that the RivGen is in the water. The Kvichak itself is a fairly quick, deep river near the outlet of the lake so it rarely freezes over and the large lake provides unusually stable flows when compared against other large Alaska rivers. Additionally, the chosen installation site is about 15 feet deep, Worthington said, so ice sheets should drift harmlessly over the 12-foot tall RivGen. The site is also immediately downriver from a large shoal that should deflect large chunks of ice. Still, ever more common mid-winter thaws can send ice downriver at unpredictable times and ice jams in a shallow, braided section below the RivGen site could complicate matters, he acknowledged. Keeping the unit in the water and operating year-round is paramount to maximizing the project’s efficiency and driving down its per-kilowatt cost. “It’s a big experiment and we recognize (ice) is probably one of the riskier aspects of the project, but it’s also such an important one,” Worthington said. If it is damaged ORPC will need to devise ways to protect it or pull it from the water easier, he said. If the yearlong test proves successful, the plan is to install a second unit; combined, the two could produce up to 70 kilowatts of electricity and mostly get Igiugig off of diesel-fired power. The village’s powerhouse has 40 kilowatts of generation capacity, according to the FERC license. Village Administrator Hill said the village has plans to purchase large batteries for power storage and is also working with micro-grid developers to better integrate existing small wind turbines into their power system as well. Completely shutting off diesel generation is rarely feasible, as it is needed to mitigate fluctuations in power from variable renewable sources and make up for sudden spikes in demand that — particularly in small isolated communities — can come from a single residence. ORPC believes two fully operable RivGens with the requisite grid upgrades should allow Igiugig to limit its cumulative diesel generation to about four weeks per year, Worthington said. The first unit and several years of shipping, testing and monitoring has been paid in part by federal Department of Energy grants totaling $2.3 million. Those grants required equal private matches for a total project cost of $4.6 million, according to Worthington, who acknowledged it’s a high price for a small village endeavor. “I think they key is this is all a first-build,” he said. “A lot of our construction costs are easily double what even a second unit would be because to build the turbines we had to build molds for them and everything’s sort of like that.” He estimated a second RivGen would cost about $1 million, with costs gradually shrinking for subsequent units. The technology could also eventually be scaled and applied to other river villages and is very applicable to shallow tidal sites near costal communities, he added. Even with another year or two of refinement, Igiugig’s hydrokinetic power project has already been years in the making. ORPC officials first visited the village in 2011 after initially investigating the prospect of testing their technology at the community of Nenana on the banks of the Tanana River south of Fairbanks. Worthington said the appeal of Nenana was that it’s right on the Parks Highway, which would’ve allowed the company to avoid all of the logistical challenges inherent to working in remote Alaska. However, the glacially muddied Tanana didn’t prove cooperative, he said. The dark water made it difficult to monitor fish, debris and even confirm the composition of the river bottom. Meanwhile, Igiugig leaders were starting to seek renewable energy prospects of their own through Alaska Energy Authority programs. “It was clear they really wanted to partner with technology providers to try to do this,” Worthington recalled. “It was an accepting community.” Prototype tests in subsequent years led to development of the latest commercial RivGen model. Hill said the work with ORPC has indeed been a long process, but one that’s necessary to pioneer new technology. “We have a very active village and council — very progressive,” Hill said. “Living next to this wonderful source of power that flows past us 24 hours a day…it’s pretty obvious that if we can harness some of that energy and not harm the salmon and some of the other fish in our area it’s definitely something worthwhile.” Elwood Brehmer can be reached at [email protected]

Legislature passes budget, punts PFD to second special session

Legislators have done their part to at least end the threat of a government shutdown by passing a state operating budget, but what Gov. Michael J. Dunleavy will do in response remains to be seen. The House-Senate budget conference committee resumed meetings June 8 after a three-week hiatus when it became clear the issue holding up everything else — the size of this year’s Permanent Fund dividend checks — could not be resolved in the Senate. The House proceeded to quickly pass the nearly $4.4 billion unrestricted general fund operating budget along caucus lines. In the Senate the budget passed unanimously, with minority Democrats approving the budget with $189 million in cuts in lieu of the governor’s plan for more than $1 billion in reductions. While Senate Republicans touted it as the smallest adjusted operating budget the state has had in 15 years, resulting in a $600 million surplus, House minority Republicans called it “bloated” in a caucus statement. House Minority Leader Lance Pruitt, R-Anchorage, was sharply critical of the fact that the budget does not contain a PFD appropriation. “At this point, it is clear that the House Majority is completely unwilling to have the tough, voter-mandated conversations, and plans to dictate to the people what will happen with the PFD, regardless of what the law says,” Pruitt said. The budget also does not settle the stalemate between legislative leadership and the Dunleavy administration over forward funding of K-12 education, which appears headed for the courts. How exactly that issue will impact school districts preparing for the upcoming year is an open question as well. The House Finance Committee also picked the roughly $200 million unrestricted general fund and mostly non-controversial capital budget back up June 11 and readied it for a subsequent floor vote. Legislation to pay full, roughly $3,000 PFDs according to the statutory calculation died 10-10 in the Senate, exemplifying the split over the issue that crosses party lines. That pushed lawmakers to change course and pass a budget without resolving the PFD to avoid a government shutdown July 1, which is the start of the 2020 state fiscal year. Combined with the operating and capital budgets, paying full PFDs would require a draw on the Permanent Fund Earnings Reserve Account of about $1.5 billion beyond what is allowed by the 5.25 percent of market value, or POMV, structure lawmakers passed just last year. The fiscal 2020 POMV draw is approximately $2.9 billion and House and Senate leaders have been resistant to make additional cash calls on the fund; they contend doing so would set a dangerous precedent and put the long-term value of the $65 billion Permanent Fund at risk. Instead, the Legislature’s budget moves $10.5 billion from the $19 billion Earnings Reserve Account — which is spendable through simple majority votes — into the constitutionally protected corpus of the fund to cover inflation-proofing payments for the next nine years. The Dunleavy administration had proposed a nearly $1 billion inflation-proofing payment for 2020, but the additional transfer could make it more challenging to pay the full dividends, and three years of forgone PFD amounts from 2016-18, that the governor has demanded from legislators. Dunleavy did not issue a customary statement from his office after the Legislature passed the operating budget, but instead tweeted that he would “review and scrutinize” the budget and noted he could veto portions or all of it. “I am absolutely determined to address the budget issues that have haunted #Alaska for years,” Dunleavy tweeted. In an attempt to solve the PFD debacle, legislators approved a House resolution establishing an eight-member Bicameral Permanent Fund Working Group to examine the best path forward for the state in regards not only to PFDs but also the broader fund structure. The working group, which was scheduled to meet for the first time June 12, consists on the House side of majority caucus Reps. Jennifer Johnston, R-Anchorage; Adam Wool, D-Fairbanks; Jonathan Kreiss-Tomkins, D-Sitka; and minority Republican Rep. Kelly Merrick of Eagle River. In the Senate, it is Republican majority Sens. Bert Stedman, R-Sitka; Click Bishop, R-Fairbanks; Shelley Hughes, R-Palmer; and minority Democrat Donny Olson of Golovin. As of this writing, the Permanent Fund Working Group was scheduled to have two meetings to conclude the special session, which ends June 14. Elwood Brehmer can be reached at [email protected]

A bull’s eye on Alaska

With more than $4.5 billion in assets under management from offices on the 11th floor of the JL Tower that feature panoramic views of spectacular Alaska scenery, staying focused on the big picture comes naturally to McKinley Capital Management CEO Rob Gillam. Taking the long view is also a family tradition. Gillam, 47, took over as CEO on Oct. 1, 2018, just a couple weeks after his father and firm founder Bob Gillam passed away on Sept. 12 after suffering a stroke at age 72. Gillam took a lot of advice from his father over the years, and the final piece he received over a lunch stands out. “He looked at me and said, ‘Remember, in life and in business when you sit in this chair: don’t fly too low. Get out of the weeds and look up,’” Gillam recalled during an April 26 interview. “That was his message and I think every Alaskan should remember that.” Gillam is a relatively rare breed in Alaska these days as the state is still climbing out of a three-year recession brought on by the 2015 crash in oil prices while the Legislature and Gov. Michael J. Dunleavy are locked in high-stakes battles over the Permanent Fund dividend, education funding and the size of government spending. Gillam is, unabashedly, a bull on Alaska. “People are depressed because they’re looking this far out,” he said, holding his hand near his face. “And don’t get me wrong, I get it. If it’s your job that’s at risk based on a budget, I’m not saying that’s not scary. What I’m saying is we live in a resilient place, and if you look this far out (extending his arm), it’s a very different picture. “We have the ingredients that most of the world wants. We have natural resources, beautiful scenery, infrastructure opportunities, business opportunities. Any time you’re from a place where more people come to visit, by a multiple, than the number of people who live there, you need to remember we have something here. I think as Alaskans we can get a little too provincial and we forget to look up.” That message is one Gillam wants to share as he leads what he has dubbed “McKinley 2.0,” building on his father’s work but also taking his own path. Just sitting down for an extended interview is a major departure from his father, who Gillam described as “notoriously press shy.” “I am really proud of what we’ve accomplished,” he said. “I’m proud to be Alaskan. When I travel around the world they don’t even remember my name. I’m just ‘Mr. Alaska.’ The guy who owns the hotel I stay at in Manhattan just calls me ‘Alaska,’ ‘hey, Alaska.’ “I want my people to feel that way. I want Alaska to feel that way. I want our customers to feel that way. They should be really proud. I am. The more places I can tell that story, I’ll tell that story.” The story of McKinley Capital Management — a homegrown entrepreneur who didn’t believe in “no” and overcame every disadvantage of time and space to build a powerhouse asset management firm — is pure pioneer Alaska. “When he founded McKinley there was no such thing as an asset management firm in Alaska,” Gillam said. “It didn’t exist, and it was hard to do from a technology standpoint. It was hard to do because it was remote. But he never let ‘no’ deter him.” For Gillam, who started working for his father in 1995 and led the creation of its international strategies arm after following in his footsteps at the prestigious Wharton School at the University of Pennsylvania, the story is also far from over. Driven by digital Nothing has changed the world more than technology in the nearly 30 years since Bob Gillam founded McKinley Capital Management in 1990, and the firm is no exception. In fact, Gillam’s team has become world leaders in harnessing the power of artificial intelligence in asset management. With offices in Anchorage, Chicago, New York and most recently Abu Dhabi, Gillam is captain of a team of about 45 that also includes a scientific advisory board headed by 1990 Nobel Prize winner in economics Dr. Harry Markowitz. Differences in time zones and limited computing power were once hurdles for McKinley. In a firm now firmly focused on a worldwide investing strategy, time and technology are its biggest strengths. “My dad founded an asset fund. Today I run a technology fund,” Gillam said. “My dad founded a firm in Alaska, from Alaska. I founded a firm that chooses to be in Alaska. Because I can do what I do anywhere.” Once solely invested in U.S. equities with individual clients, Gillam recounted how it used to take an entire weekend to perform the analytics on the 1,300 or so stocks McKinley covered. Now with the vast majority of its portfolio invested around the world and huge institutional clients that have included the Alaska Permanent Fund Corp. for 22 years, the firm is covering more than 50,000 stocks in 105 countries. “We never knew anything other than technology to do what we do,” Gillam said. “Traditionally money mangers would travel the world, meet with management teams, do that sort of old school analysis. That wasn’t our way. It couldn’t be our way. So we’re not in the disadvantaged position a lot of money managers are today in having to retool what they do. “We were plumbed that way from the start.” Utilizing incredible computing power and machine learning algorithms, McKinley vacuums up information from around the world from analyst calls, financial reports and other text sources using data scraping methods and a custom built platform that also have to account for different currencies, languages and accounting standards. “We make billions of calculations every day and we do it in tenths of a second,” Gillam said. “The scale is astronomical.” His team is made up of both the traditional financial analysts and computer scientists drawn from the U.S., the world and the University of Alaska Fairbanks and UA Anchorage. “We have code writers from Indonesia, from China, from all over the place, and from UAF,” Gillam said. “We are an equal opportunity skill set. You bring the skills, we don’t care if you’re from Mars. “The good news is that math doesn’t need translation.” Gillam is solidifying McKinley as an Alaska firm that is bullish on the state’s future with the May 23 announcement the company has formed an academic partnership with the University of Alaska Lab for Data Science and Artificial Intelligence. According to the announcement, the partnership will include students and interns, and McKinley is building out an area of its Anchorage headquarters where students will be able to study and work on AI and data science projects. “Our goal with students is to help develop their skills, oversee their senior projects where appropriate, and collaborate with staff on research across the spectrum of AI-related projects,” Gillam said. “We value the university and its dedication to student learning. As a company, we want to invest in our community’s most critical assets: the students and the youth of Alaska who are our future. This partnership allows us to provide UA students a place where they can apply their talent and create a future for themselves. It’s a really exciting partnership for us.” UA President Jim Johnsen called the McKinley partnership an “amazing opportunity.” “This agreement with McKinley Capital represents our commitment to solving the challenges of our private sector partners, and meeting the needs of our state,” Johnsen said. So while McKinley continues to scour the globe for growth opportunities, it hopes to find the future of the firm in its own backyard. “We have a lot of big dreams in Alaska and people who have the ability to turn them into reality should,” Gillam said. “We have a role to play in there and there’s other great players in the state we can do that alongside, and we’re happy to do it.” As for the growth in artificial intelligence as a tool, Gillam doesn’t believe it can ever replace the humans who create it. “One of the things I told the students over there (at UAA) was that ‘artificial intelligence is long on artificial and short on intelligence. Don’t think the bots are coming to take everybody’s job any time soon.’ “Having said that, we all know that when we get on a plane a computer does most of the flying. We also know none of us would get on if there wasn’t a pilot. That’s a good way to think about the interchange.” Gunning for growth The use of AI as a financial tool is critical for McKinley’s effort to find the best growth opportunities around the world. Its joint venture office in Abu Dhabi opened in December 2017 as the firm launched its “Middle East, Africa and South Asia” strategy in the second quarter of 2018. McKinley sees huge potential in the region that has 44 percent of the world’s population and 8 of the top 10 fastest-growing economies while accounting for just 5 percent of total global market capitalization. But just as investors seek a return, many McKinley clients also want their money to work for companies that are responsible citizens. The creation of its “Environmental, Social, Governance” strategy came in response to customer requests — its first ESG client was a large Dutch company that invested a half-billion dollars with McKinley — and now other factors than simply financial performance can be calculated. “It’s hard to find fast growing companies in Ghana from Alaska. It’s hard to find fast-growing companies in Kuwait from Alaska unless you have the computational power,” Gillam said. “Once we find those companies, we have to decide what companies we want to have in that fast growing set that don’t pollute the environment, ones that don’t lie, cheat and steal. We want ones that are good to the communities in which they live and work. It’s an over and above good characteristics. “We have a fiduciary responsibility to build a portfolio with the best return for the amount of risk that we can. That governs everything we do. If, on top of that, we can encourage good behavior, of course we’re going to do that.” Creating custom products such as the ESG strategy based not only on generating a return but aligning with the values of the client is the fastest-growing category at McKinley, Gillam said. “At the end of the day, we have to give people peace of mind,” he said. “That’s our job.” Generating consistent returns has given clients a lot of peace of mind. According to Gillam, the various portfolios dating back to 1990 have made both positive absolute returns and positive returns relative to benchmarks. “We remain focused on systematically searching the world for the best growth opportunities and are proud to work with clients from around the world that range from large global companies, cities and/or states, sovereign wealth funds, foundations and private clients,” he said. “While we have three other offices outside of Alaska, we are proud to play a role in helping our customers from our office right here in Alaska.” ‘Brand Alaska’ Gillam and his wife Stacia made an investment in the state just as the recession was taking hold back in 2015 with their purchase of Alaska Glacier Products, a bottled water sourced from the Eklutna Glacier just north of Anchorage that provides the city’s water supply. The company has since won several international taste awards and Stacia Gillam is still the chair of the company. “We call those ‘brand Alaska’ transactions,” Gillam said. “It turns out that a lot of people think we’re cool and have a really cool lifestyle. Turns out they are right. On top of that, we have really amazing quality. The reality is we have some of the best water in the world, right out here. “What we realized was here was an opportunity to invest in a company that is brand Alaska, which we believe in, that can create jobs, and when we bought the company when jobs were shrinking there weren’t a lot of manufacturing jobs in the state. Every ship that goes out of the Port of Alaska is empty; we could put something on it. The world wants what we want and lets give it to them. It was a neat deal and a good investment.” “Brand Alaska” encapsulates McKinley’s DNA, and Gillam’s thoughts on the Pebble mine, which his father was as well-known for vigorously opposing as he was for being named the richest man in the state by Forbes. Rob Gillam said it’s time for the leaders of the opposition aided by his father to take the lead in the fight, but his opinion is no different when it comes to Pebble. “I absolutely oppose the Pebble mine,” he said. “It’s not a good thing. But I have a little different perspective on it. It’s just a math question. You have one resource that is perpetual, that is already generating income for generations that goes on forever, and one that is finite. So do the math. It’s a net present value calculation. “To me it is pretty easy. Every person in Alaska should pay attention to this; 58 percent of our wild salmon comes from one place. How’s our branding going to be if we have an ‘oops’?” “The other thing that is important, is that there is nothing wrong with mining. Alaska has been built on that. There’s just some places you don’t want to do it, and that’s one of those places.” A passion for Alaska was the driving force behind Bob Gillam’s efforts to conserve Bristol Bay and to keep McKinley a quintessential Alaska-grown company; the same passion for the state is driving his son to leverage its success for the benefit of Alaska as a whole. “I hope McKinley, the new McKinley, can pave a little bit of the path to the opportunities in Alaska,” he said. “I think they’re pretty huge. “My family has been in Alaska for almost 100 years. The one thing that has never changed about Alaska is the DNA of the people here. You can call it the pioneer spirit, the frontier spirit. You have a lot of people who are creative, who are sturdy, who are ambitious, who are self-sufficient, who figured out how to make a whole lot of something out of where there was nothing. That personality still exists.” Spoken like a true Alaska bull. Andrew Jensen can be reached at [email protected]

Movers and Shakers for June 16

Zach Frain was appointed Mortgage Loan Originator III and loan officer at First National Bank Alaska. Frain, who worked for First National originally in 2005, returns to the bank with nearly 15 years of local mortgage lending experience. Sen. Lisa Murkowski announced that Spencer Nelson has joined her Senate Energy and Natural Resources Committee staff and that Abigail Hemenway has joined the committee’s non-designated staff. She also welcomed four summer interns who are assisting the committee with various projects this summer — Lauren Eckl, Kaiwi Eisenhour, Alexander Jackstadt and Nathan Solorio — and noted her appreciation for the time Samuel Burgess spent interning during the month of May. Nelson joins the committee as a professional staff member focusing on energy innovation, including nuclear energy. He comes to the committee after four years at ClearPath, where he was a policy program director. Prior to that he conducted research at the University of North Carolina at Chapel Hill and the National Institute of Environmental Health Sciences. Nelson has bachelor’s degrees in environmental science and quantitative biology from the University of North Carolina at Chapel Hill. Hemenway joins the non-designated committee staff after working as an Arctic program assistant and administrative aide at the North Star Group. She earned a bachelor’s degree in political science at the University of Miami and is originally from Juneau. Solorio, a legal intern, is pursuing a law degree at Willamette University. Prior to law school, he served as legislative correspondent and grants coordinator for Murkowski’s personal office in Washington, D.C. Solorio is from Anchorage and graduated from the University of Alaska Anchorage in 2015. Burgess served the committee as a legal intern in May 2019, before joining the Coast Guard’s JAG internship program for the remainder of the summer, and is pursuing a law degree at Cornell Law School. Burgess is from Anchorage and graduated from the Virginia Military Institute in 2016. Eckl, a college intern, is pursuing a bachelor’s degree in political science with a minor in business from the University of Colorado at Boulder. She also served the Senate as a high school page in the summer of 2015. Eisenhour, a college intern, is pursuing a bachelor’s degree in chemistry at Weber State University. This marks his second summer with the committee. Jackstadt, a college intern, attended Anchorage East High School and recently graduated with honors from the University of Alaska Anchorage with a bachelor’s degree in economics and was a member of the university’s hockey team. Jeff Schramm is the new forest supervisor for the Chugach National Forest. As forest supervisor, Schramm will oversee the management of more than 5.4 million acres of National Forest System lands in Southcentral Alaska. Schramm graduated from Utah State University with a bachelor’s degree in forest management. He worked as the district ranger on the Ashley and the Uinta-Wasatch-Cache National Forests in Utah and most recently served as the Forest Supervisor of the Ashley National Forest, where he has been instrumental in advancing the revision of the forest plan. Schramm will report to the Alaska Region in August. He replaces Terri Marceron, who retired at the end of December 2018 after serving as Forest Supervisor for eight years. Credit Union 1 announced the selection of Spencer Herrington as its new physical security officer. Herrington brings past experience in managing and operating all phases of corporate and physical security to his new role. He has previously worked in financial institutions, casinos and labor environments. Herrington has been licensed with the State of Alaska for more than 12 years in armed security; he is a certified NRA Range Instructor and a current ALICE instructor as well. He has also attended Homeland Security IED counter terrorism workshops and received training related to social engineering and counter terrorism measures. Herrington is a 1996 graduate of the Alaska Computer Institute. Credit Union 1 also announced the promotion of Mai Moua to manager of its Downtown Branch in Anchorage. Moua was initially hired by the credit union in 2005, and she has since served in several roles ranging from records clerk to teller, member service officer and more. Most recently, she held the position of assistant branch manager at the credit union’s Midtown Branch prior to her promotion. Moua also holds a bachelor’s degree in business administration in finance. The Alaska Seafood Marketing Institute board of directors has selected Jeremy Woodrow as the new executive director. Woodrow has served as ASMI’s interim executive director since December 2018, and as communications director since 2017. As executive director, Woodrow will administer all ASMI programs and operations out of its global headquarters, located in Juneau. Before joining ASMI, Woodrow served as the communications officer for the Alaska Department of Transportation and Public Facilities. He has previously worked with ASMI both as an intern in the communications program and with ASMI’s former public relations agency, Schiedermayer &Associates Alaska. Born and raised in Juneau from a commercial fishing family, he also brings a wealth of industry knowledge to the role. Woodrow holds bachelor’s degrees in public relations and advertising from Northern Arizona University. Woodrow replaces former ASMI Executive Director Alexa Tonkovich, who left ASMI in December 2018 to pursue a master’s in international business.

FISH FACTOR: Feds still working on plan for $56M in disaster relief funds

Alaska fishermen are still awaiting disaster relief funds for the 2016 pink salmon run failure that was the worst in 40 years. Congress approved $56 million that year for Alaska fishermen, processors and communities hurt by the fishery flop in three Alaska regions: Kodiak, Prince William Sound and Lower Cook Inlet. The Alaska Department of Fish and Game and National Marine Fisheries Service finalized plans and procedures for payouts last August. Since then, the paper push has stalled on various federal agency desks. NMFS missed a promised June 1 sign off deadline and now says the funds will be released on the first of July, according to Rep. Louise Stutes of Kodiak, who has been tracking the progress. “It affects all the cannery workers all the processors, all the businesses in the community,” she said. “This has a big trickle-down effect.” The draft spending plan awaiting approval provides for funds in four categories. Coastal communities that would have gotten 1.5 percent of the landed value of the foregone pink catch would receive $2.43 million. Just more than $4 million was set aside for pink salmon research, and processors would get $17.7 million for lost wages as a result of the humpy bust. Alaska fishermen would get the biggest chunk at $32 million. The funds would be distributed using a calculation to restore lost dockside value equal to 82.5 percent of their five even year averages. As for the July 1 promise, Stutes said she “is not holding her breath because of the fed’s current track record in adhering to its own timelines.” “They know I’m a squeaky wheel and my job is to keep this moving in a forward direction,” she said. Season of uncertainty Fisheries are always fraught with uncertainties, but there is an added element this year: trade tariffs on Alaska’s largest export: seafood. “The industry is accustomed to dealing with uncertainty about harvest levels, prices and currency rates. The trade disputes just add another layer to that,” said Garrett Evridge, an economist with the McDowell Group. Tariffs of up to 25 percent on U.S. seafood products going to China went into effect last July and more are being threatened now by the Trump administration. China is Alaska’s biggest seafood buyer purchasing 54 percent of Alaska seafood exports in 2017 valued at $1.3 billion. “It’s important to remember that a tariff is simply a tax and it increases the prices of our products,” Evridge explained. “As Alaskans we are sensitive to any increase in the price of our seafood because we are competing on a global stage. And right now we have tariffs imposed on seafood from the Chinese side and the U.S. side.” In terms of Alaska salmon, the new taxes could hit buyers of pinks and chums especially hard. Managers expect huge runs of both this summer and much of the pack will be processed into various products in China and then returned to the U.S. “There is uncertainty as to whether or not those products will be tariffed and the Trump administration has indicated they want to tariff all products from China,” Evridge said. For salmon, in a typical year Alaska contributes 30 percent to 50 percent of the world’s wild-caught harvest. But when you include farmed salmon, Evridge said, Alaska’s contribution is closer to 15 percent of the global salmon supply. The Alaska Department of Fish and Game is predicting a total catch of 213.2 million salmon this year, more than 80 percent higher than in 2018. The harvest breakdown this year is pegged at about 42 million for sockeye salmon, 9 million fewer than last year. For pinks, a haul of nearly 138 million would be an increase of 97 million fish over last summer. A coho salmon harvest of 4.6 million would be up 900,000 silvers over 2018. Chum catches are projected to be at an all-time high with a catch of 29 million, topping the 25 million record set in 2017. The harvest for Chinook salmon is 112,000 fish at areas outside of Southeast Alaska, where catches are determined by a treaty with Canada. The all gear limit in Southeast this year is 137,500 kings. You can track Alaska’s salmon catches via weekly emails that Evridge compiles for the Alaska Seafood Marketing Institute. “It gives folks a sense of what the various Alaska areas are producing versus prior years. The goal is to provide a quick snapshot of 2019 versus 2018 as well as the five year average,” he said. Sign on at [email protected] Big boat buy? The Bristol Bay Native Corp. is in talks to buy the two largest U.S. Pacific cod longline fishing companies, according to Undercurrent News. The companies — Clipper and Blue North — have 20 percent and 17.5 percent, respectively, of the longline portion of the Pacific cod catch. Clipper has a fleet of six vessels while Blue North has five larger longliners. Buying the fishing companies would be the first move into seafood for BBNC, which reported revenue of more than $1.6 billion in 2018. Undercurrent said the corporation “generates around half its revenue from providing services to the oil and gas industry. The company’s next biggest business units are firstly construction and then providing engineering and technical services primarily for the U.S. government.” New fish hire Scott Kelley has joined United Fishermen of Alaska as its new executive administrator. Kelley was former director of the Alaska Department of Fish and Game commercial fisheries division from 2015 until his retirement last year. He worked with ADFG since 1990, starting as a port sampler at Excursion Inlet near Juneau. Kelley replaces Mark Vinsel, who has worked at UFA for 18 years, including as executive director. “Scott’s immense knowledge of commercial fisheries in Alaska is well-respected and his relationship with commercial fishermen is extremely valuable. We are very lucky to have him join our organization,” said UFA Executive Director Frances Leach. UFA is the nation’s largest commercial fishing trade group, representing 35 member organizations. ^ Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.


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