State awards contract for Medicaid block grant study

Gov. Michael J. Dunleavy’s administration is looking into making Alaska the first state to transform its Medicaid program into a block grant system, but opponents in the Legislature contend it’s an attempt to justify a predetermined outcome. The Department of Health and Social Services on May 29 issued an intent to award a $100,000 contract to Boston-based Public Consulting Group Inc. to analyze the prospect of implementing block grants for federal Medicaid payments, work requirements for Medicaid enrollees, and shifting some Alaska Medicaid recipients to private insurance. The tentative contract calls for Public Consulting to draft a paper by June 30 studying whether or not the initiatives will save the state money, according to the request for proposals for the work. On March 1 Dunleavy sent a letter to President Donald Trump about a number of Alaska-specific policy issues, including Medicaid block grants. “Your Medicaid Administrator, Seema Verma, has urged us to be the first state to receive Medicaid dollars as a block grant. We are eager to do this, but your support of her on this ‘first’ will keep the proper focus and speed on the application,” Dunleavy wrote. The letter followed a meeting the governor and president had while Trump was briefly at Joint Base Elmendorf-Richardson during a refueling stop. State House Democrats wholly denounced the ideas in a letter sent to DHSS Commissioner Adam Crum last month. In it, they argue that a lengthy report done for the state in early 2016 “found that costs of private coverage would be prohibitively high compared to Medicaid coverage,” among other objections. Medicaid would pay insurance costs such as premiums and other out-of-pocket expenses that are typically paid by the insurance recipient. That study, known as the Milliman report and done when state lawmakers were debating a suite of Medicaid reforms, concluded that shifting low-income adults enrolled under expanded Medicaid coverage to the individual private insurance market would cost the state an additional $57 million per year growing to $97 million per year over the first five years of the plan. “Although DHSS’s administrative role and, thus, costs are reduced under this option, DHSS would be responsible for ensuring that the enrollee does not experience costs beyond the allowed Medicaid limits, paying for services not covered by the private coverage benefit plan, and paying co-payments for services paid by the insurer,” the Milliman report states. Milliman Inc., a Seattle-based actuarial and consulting firm, submitted a proposal for the latest study but was not chosen by DHSS officials. DHSS spokesman Clinton Bennett wrote in response to questions about the department’s plans that Public Consulting Group will analyze whether enrolling Medicaid recipients in private insurance is feasible and could lead to overall savings for the state. He noted that “only those with modest health care needs (healthier population) will be eligible for placement in the private market” and the study will identify the parameters of that population. House State Affairs Committee co-chair Rep. Zack Fields, D-Anchorage, said in an interview that Alaska is probably the least likely state for the concepts to work because of the state’s struggling private health insurance market. Premiums in the individual private market are among the highest in the country at hundreds of dollars per month and Alaska is generally regarded as having the highest health care costs in the country; both issues can in part be attributed to the state’s isolation and small population. Also, Premera Blue Cross Blue Shield of Alaska has been the only company offering health insurance on the individual private market in the state since 2017. “The idea that we’d make half-baked decisions with our largest federal stream of investment, which, by the way, is life or death for 215,000 Alaskans that rely on Medicaid health insurance — it’s just crazy,” Fields said. Premera officials declined to comment for this story. The Dunleavy administration initially proposed cutting $225 million to $270 million from the state’s Medicaid program; it’s estimated those state cuts would result in a roughly $480 million corresponding cut to federal Medicaid funds. DHSS officials later said they could achieve approximately $100 million in cuts in the 2020 fiscal year through administrative and regulatory changes, such as cutting provider payments by 5 percent, without legislative action. They also acknowledged the larger cuts first proposed were targets driven by the Office of Management and Budget and not the result of specific policy reforms. Economic analyses done for provider groups found that such cuts would likely result in at least 8,000 job losses in the state. Health care — buoyed by federal Medicaid spending — is the one major industry that has continued to grow through Alaska’s three-plus year recession, according to state economists. According to the Legislative Finance Division, overall spending on Medicaid in Alaska has increased from $1.7 billion to more than $2.3 billion since fiscal year 2015, but the state’s portion of that has actually gone down from $724 million in 2015 to $677 million. The state savings is largely attributable to Senate Bill 74 passed in 2016, which started long-term efforts to reduce overall Medicaid costs and utilization, but also shifted as many eligible costs as legislators could find to the federal government. Fields said the Medicaid reform found in SB 74 is an example of “prudent” policymaking. “When there were studies in the past the administrations and the Legislature did it right and they took the time to make sure they understood the implications of different policy decisions and if the new administration wants to go in a different direction in terms of Medicaid they need to base it on actual information and legitimate studies and not just kind of create an excuse for them to do something they’ve predetermined to do,” Fields said. Block grants for Medicaid have long been a policy favored by many Republicans in Congress as a way to rein in spending, but there has never been enough broad support to make the change. Under the concept, the federal Centers for Medicare and Medicaid Services, or CMS, would issue a lump sum for Medicaid to Alaska each year, and it would be up to the state to keep spending within that amount or cover additional expenses. DHSS spokesman Bennett said via email that the department would need a Section 1115 demonstration waiver from CMS to shift enrollees to private insurance and it’s unclear whether Congress would need to change federal Medicaid laws to allow for block grants. “CMS will need to provide official guidance on (block grants) before state are fully able to consider this approach to funding for state Medicaid programs,” Bennett wrote. Fields said limiting health care for Medicaid recipients — which he sees as a likely outcome of instituting a block grants — would simply push more people back to receiving more care through costly and inefficient emergency room visits that are generally seen as an overall cost driver in the health care system. He also pointed to a May 1 Legislative Legal Services opinion that concludes block grants for the purpose of cost savings would likely be illegal if done through a 1115 demonstration waiver. Legislative attorney Marie Marx wrote while citing prior cases in Arkansas and Kentucky that a cost-focused waiver would likely be invalidated by federal courts because it wouldn’t further the primary mission of Medicaid laws, which is to provide medical coverage to needy populations. “I think it’s critical to look at every opportunity to make the health care system more efficient and the Legislature and previous administration’s have been doing that,” Fields said. “My objection is actually to abandoning reform, which is what this effort represents.” Elwood Brehmer can be reached at [email protected]

OPINION: Legislature should drop pointless education fight

In a rare display of bipartisan and bicameral unity, the leadership of the Alaska House and Senate took a break from not accomplishing anything to hold a press conference on May 28 announcing their intent to sue Gov. Michael J. Dunleavy if he follows through on his belief that the Legislature has not properly funded K-12 education for the 2020 fiscal year that begins July 1. Dunleavy, backed by a legal opinion from Attorney General Kevin Clarkson, has asserted that the Legislature’s attempt to “forward fund” education in a bill passed in 2018 is unconstitutional as an improper dedication of funds and an end-run around his line-item veto authority. Having repeatedly failed to accomplish its One Job of passing a budget within the time constraints of a regular session and triggering layoff notices from school districts who require funding certainty, the Legislature passed House Bill 287 that paid for K-12 education in fiscal year 2019 and called for an equal appropriation to be made in the 2020 fiscal year. The problem with that, Dunleavy’s administration argues, is that the Legislature appropriated money it doesn’t yet have in the General Fund, and therefore it is a dedication of funds prohibited by the state Constitution, and by doing so it robs him of his authority to veto spending in the upcoming fiscal year. There is certainly no question that the Alaska constitution created a powerful executive branch, particularly in regards to spending. A two-thirds vote is required to override a veto on regular legislation, but a three-fourths majority is necessary to override a veto on spending. While Clarkson has released a nine-page memo defending the administration’s position, the Legislature has not offered any similar legal analysis backing up its assertion of power other than an argument that boils down to “we say we can.” Perhaps emboldened by the Supreme Court decision in the lawsuit over former Gov. Bill Walker’s 2016 veto of half of the Permanent Fund dividend appropriation that gave legislators carte blanche to ignore the laws they have passed, they may now similarly believe they can usurp the governor’s constitutional role in the budget process. Taking the Legislature’s assertion of forward funding power to a logical conclusion, they could have passed a 10- or 20- or 100-year education funding bill and as long as lawmakers never touch the bill they could put a billion-plus dollar budget item on autopilot and outside the reach of Dunleavy or any future governor. That’s going to be a tough argument to make at the Supreme Court, and despite their protestations to the contrary, this is not a settled legal issue. The administration’s position is not unreasonable, though if it comes to it and he follows the AG’s opinion and does not transfer funds after July 1 it will surely be portrayed that way. The Department of Law attorneys who testified told the Legislature had the money been called for to be appropriated in the current year on June 30 they would regard it as legal. Similarly, had the Legislature appropriated money from a fund that actually has money such as the Permanent Fund Earnings Reserve Account, the administration has stated that, too, would be legal. House Bill 287 did neither of those things. It appropriates money not yet in the Treasury and calls for it in a future fiscal year, which certainly raises the dedicated funds issue. Dunleavy has promised not to veto education funding if the Legislature puts language in the current budget; he would fail even if he tried as the House Minority Republicans already called for status quo K-12 funding that would be enough to override his red pen. The legislators who support HB 287 said they did it to ensure stability for school districts, but their decision to dig in over an untested power is only causing more disruption. With far bigger problems to address regarding unsustainable spending and the dividend, their refusal to abide Dunleavy on this issue and thus guarantee K-12 funding for the upcoming year shows they are actually more concerned with defending their turf than they are in preventing pink slips from going out. Andrew Jensen can be reached at [email protected]

Sullivan wants new icebreaker focused on Arctic, not McMurdo

The U.S. Coast Guard is on track to have another icebreaker in five years, but how much time the vessel will spend in the Arctic is open question. Currently, the country’s only heavy icebreaker — the 43 year-old Polar Star — does its work on the other end of the world, returning to its homeport of Seattle each summer for maintenance and repairs. It breaks ice and escorts supply vessels to access the National Science Foundation’s McMurdo Station research center in Antarctica. NSF spokesman Peter West said via email that the 399-foot Polar Star typically starts the trip south shortly after Thanksgiving each year and returns around mid-March from the roughly 11,000-mile roundtrip voyage. NSF officials anticipate the new 460-foot Polar-class icebreaker will take over the Polar Star’s Antarctic research duties once it is ready, according to West. “By Presidential Memorandum, the NSF is empowered to reach out to other agencies for cost reimbursable services in support of the (U.S. Antarctic Program, or USAP),” he wrote. “The USGS has the responsibility for the nation’s icebreaking and is committed to the McMurdo Station breakout mission on an annual basis for the foreseeable future.” Sen. Dan Sullivan said in a meeting with the Journal and Anchorage Daily News on May 28 that the Antarctic policy will likely shift the future icebreaker away from the Arctic-focused missions it should be utilized for. “I think we’re too focused on Antarctica and not focused on our own sovereign interests here,” Sullivan said. The policies directing Antarctic support from the Coast Guard are ones he hopes to change, Sullivan said. “I write the Coast Guard bill. I chair that subcommittee; we’ll see,” he said. Sullivan chairs the Security Subcommittee of the Senate Commerce, Science and Transportation panel. Coast Guard spokesman NyxoLyno Cangemi wrote in response to questions that the Polar Star escorted one cargo ship to the McMurdo Station last year and in 2020 there will be two cargo vessels and one tanker for the icebreaker to escort. The Polar Star does not currently conduct Arctic missions. Presidential Memorandum 6646 issued in 1982 by former President Ronald Reagan directs agencies to support the U.S. Antarctic Program, either directly or through logistics and transportation support. The budget bill passed in February appropriated $655 million to fully-fund one Polar security cutter, or heavy icebreaker, and $20 million for long-lead item items to prepare for building a second. On April 23 the Department of the Navy awarded a contract to Mississippi shipyard VT Halter Marine for building the vessels. The first is expected to be ready in 2024, and, if funded, the second coming a year later and a third to be delivered in 2027. The 2018 National Defense Authorization Act approved construction of up to six heavy icebreakers, but Congress still has to appropriate the funding for building most of them. Alaska’s congressional delegation and numerous Arctic policy experts have stressed the need for the U.S. to upgrade its icebreaking capability to keep up with many other countries — notably Russia and China — that are preparing to have a large presence in Arctic waters as sea ice continues to shrink each year. Cangemi noted other laws compel the Coast Guard to generally support scientific research and the agency “is fully committed to supporting the USAP mission until directed otherwise. Diverting USCG resources, specifically, Polar Star, away from the Antarctic mission would require an order from the White House,” he wrote. This year, the NSF reimbursed the Coast Guard $49,311 per day for use of the Polar Star. The Coast Guard was reimbursed nearly $33,000 per day for use of the medium-duty icebreaker Healy, which supports Arctic research, according to Cangemi. The Polar Star had a fire in its garbage incinerator while on the McMurdo support mission in February; the incident was contained and it is now back in Seattle for repairs. The icebreakers are part of a larger nationwide effort to recapitalize the Coast Guard with new vessels and aircraft. Sullivan noted that the Coast Guard is in the process of adding four medium-sized fast response cutters to Alaska bases — two in Kodiak, one in Seward and one in Sitka — in addition to the two already based in Ketchikan. Additional patrol vessels will be stationed in Petersburg and Juneau as well, according to an April 2018 letter to Sullivan from former Coast Guard Commandant Adm. Paul Zukunft. Elwood Brehmer can be reached at [email protected]

FISH FACTOR: Mariculture expanding in area, species so far in 2019

More Alaskans are turning to seaweed farming as the state’s fledgling mariculture industry expands to more regions. Shellfish growers also are finding that an oyster/aquatic plant combo boosts their bottom line. Sixteen applications were filed for new or expanding aquatic farms during the January through April time frame, of which 56 percent were for growing various kelp, 31 percent for a combination of Pacific oysters and kelp, and 13 percent for oysters only. While it was the same number of applications as 2018, the underwater acreage increased considerably, said Cynthia Pring-Ham, aquatic farming coordinator at the Alaska Department of Fish and Game, which issues the farm permits. “There were about 616 acres that were applied for in 2019 compared to 462 acres in 2018. That’s about a 33 percent increase,” she said, adding that ADFG partners with the Department of Natural Resources, which leases the tidal and submerged lands where aquatic farming takes place. For the first time, interest came from a westward region beyond Kodiak. “In 2019 we had our first applications from the Alaska Peninsula, two from Sand Point, and for kelp species,” said Pring-Ham. “It’s difficult for bivalves in that area to grow successfully, so maybe that will be a new avenue for people. We are very excited.” Two Kodiak growers pioneered kelp farming in Alaska by getting the first state permits in 2016. A mixed sugar and ribbon kelp harvest of 16,000 pounds followed in 2017; that jumped to nearly 90,000 pounds in 2018, valued at $33,000. Currently in Alaska there are 58 aquatic farms, 5 hatcheries and 7 nurseries operating, with most involved in oyster production at Kachemak Bay, Southeast and Prince William Sound. In 2017, 41 operators produced a crop of nearly 2 million Pacific oysters, valued at $1.53 million. Pring-Ham said Alaska oyster farmers are finding that fast growing kelp can boost their bottom lines. “The major species people are growing can be grown in a very short amount of time. They put them out in the fall and can harvest in the spring. So in four to six months they can have a product ready for market, which is a lot shorter than for shellfish like our Pacific oysters which can take two to four years,” she said, adding that aquatic plants also provide opportunities for more people in fishing communities. The global commercial seaweed market is projected to top $22 billion by 2024, with human consumption as the largest segment. Besides kelp, 21 of Alaska’s aqua-farmers also have added dulce, nori and sea lettuce to their macroalgae or shellfish menus. Other undersea crops being grown in Alaska include urchins, sea cucumbers, mussels and giant geoduck clams. Shrimp shines in the Panhandle Southeast Alaska is the state’s biggest producer of America’s No. 1 seafood favorite: shrimp. And much of it is enjoyed right where it’s landed. Four varieties of shrimp are taken at various times throughout the year by permit holders, with recent catches topping 1.5 million pounds and worth $3 million at the docks. “We have 19 different areas around Southeast and each has its own appropriate harvest level for sustainability,” said Dave Harris, area manager for the Alaska Department of Fish and Game in Juneau. Catching shrimp with beam trawls, in fact, is Southeast’s longest ongoing fishery since 1915. The trawlers target tiny northern, or pink, shrimp and larger sidestripes, mostly near Petersburg and Wrangell, with recent harvests topping 1 million pounds. Most of the pinks pay out at around 20 cents per pound and are frozen into blocks and currently processed elsewhere; the sidestripes fetch more than a dollar per pound from local processors and lots of customers pay much more buying direct from the boats. Fewer than 10 boats are participating in the trawl fishery of late; it’s the better known and more lucrative pot fishery for big spot shrimp that is drawing the most interest. “That’s been getting more popular,” Harris said. “In 2016, 116 fished, the next year it was 157,” adding that 175 of 256 active permits fished the current season for a half million pound harvest. Fishermen have several sales options for spots. They can fetch $5 to $7 per pound from processors; $10 at the docks and boats rigged to freeze the shrimp onboard get even more. “Guys are catching, hand packing and freezing whole shrimp onboard their boat primarily for the Japanese sushi market,” Harris said. “They can get $10 to $12 for the whole product, which is about twice the weight of the tailed product.” Fishermen also catch coon stripe shrimp in pots along with the spots, which usually pay out at around $2 per pound. Shrimp are unique in that they are protandric hermaphrodites, meaning they start out as males and switch to females after reproducing for a year or two. The sex switch can make it a tricky species to manage. “As part of the overall population dynamics, it doesn’t really matter when you harvest that shrimp; you’re taking away their reproductive potential,” Harris explained. “For a young male, you’re taking them a couple of years before they convert over to female for the rest of their life. That’s a key part of the management which makes it makes it so difficult because it is very easy to over-fish shrimp if you’re not careful.” It also has been difficult to gauge impacts on the shrimp stocks from personal users. In 2018, new state rules required that personal use fishery permits be issued for the first time. “We have some information from specific areas that it can be quite significant, equal to or more than the commercial harvest in some cases,” Harris said. Other shrimp bits: Total U.S. shrimp production in 2016 was 4 million pounds valued at $10 million. Texas is the largest U.S. shrimp producer at nearly 3 million pounds annually, followed by Alabama and Florida. The U.S. imported nearly 700,000 metric tons of shrimp in 2018 (1.54 billion pounds), setting a new tonnage record for the third year in a row. India achieved the milestone of becoming the first country to top 500 million pounds of shrimp to the U.S., followed by Indonesia and Ecuador. Wood who? Seemingly out of nowhere, Gov. Michael J. Dunleavy last week named fly fishing enthusiast John Wood of Willow to the state Board of Fisheries, to which industry stakeholders responded with a collective “who?” Wood, who is an attorney and local chairman of the Alaska Republican party, was a legislative staffer for then Dunleavy from 2012-14 and focused on Northern Cook Inlet salmon allocation issues. Wood also has participated in the Mat-Su Fish and Game Advisory board, according to a press release. The surprise timing of the appointment also raised eyebrows, because the Legislature won’t be able to confirm him until next year when the regular session resumes. Meanwhile, Wood will be making decisions starting this fall on Cook Inlet regulatory issues when the Board of Fisheries begins its meeting cycle in October. Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

Copper River sockeye show up early, give optimism for fleet

Copper River fishermen are getting a nice change of pace from the last two years this season as the sockeye run is shaping up better than expected so far. As of June 2, approximately 240,234 sockeye salmon had passed the sonar at Miles Lake on the Copper River, according to the Alaska Department of Fish and Game. That’s about 65,000 more fish than the cumulative management objective so far on the river, which is based on average past escapements. It’s definitely better than in 2017 and 2018, when slow and weak sockeye runs kept commercial fishermen at the docks as managers struggled to make escapements. On the same date in 2018, only 55,840 sockeye had passed the sonar. There’s a significant lag between fish entering the mouth of the Copper and Miles Lake, which is far upstream — about 33 miles — and the passage time can depend on the water levels, according to ADFG. There’s also a lag between the passage at the sonar site and the popular Chitina personal use dipnet fishery area, which is about 70 miles upstream from the sonar. So far, commercial catches have been good, too; 326,257 sockeye have been landed in 2,801 deliveries. More than half of that total was landed in the periods on May 27 and May 30, with about 189,000 sockeye harvested between the two days. It’s not a banner year, but it’s also not too shabby in the context of the last two years, said Jeremy Botz, the commercial gillnet area management biologist for Prince William Sound. The run in-river is a little ahead of schedule, but so far, the run may shake out close to the forecast estimate. “This’d be pretty typical for timing for a peak in the fishery,” he said. “The run has been ahead of the curve, especially in-river. (It’s) right about anticipated in the commercial fishery, throughout the first two periods. We’re far enough into it now to have what appears to be a pretty reasonable fishing schedule.” The Copper River fishing season kicks off with kings. In 2017, concern for enough king salmon escapement in the river prompted commercial fishing restrictions on the fleet that curtailed early sockeye harvest; in 2018, the run lagged through May into June, leaving fishermen in the typically first-on-the-market Copper River mostly emptyhanded. The overall run shaped up into a decent season, but only toward the latter half. The forecast for this year in the Copper is somewhat lackluster — between hatchery and wild production, ADFG projected about 1.5 million sockeye, with wild production at just more than 1.4 million fish and Gulkana hatchery production at about 98,000 fish. If it proves true, the wild run would be about 31 percent less than the recent 10-year average and the hatchery run would be about 69 percent below the average, according to the forecast. In the forecast, managers warned caution. While the Copper River’s sockeye salmon forecast is widely regarded as the most reliable in Prince William Sound, managers have been unpleasantly surprised in the last two years as sockeye failed to materialize in the numbers or schedule they predicted. Managers have indicated that warm water conditions in the Gulf of Alaska may have contributed to poor survival for salmon. The Copper River has separate goals: one for the upper drainage and the other for the lower drainage, Botz said. The fish in the earlier part of the run tend to be headed farther upstream, while those in the latter part of the season tend to be more delta-bound fish. “Last year (the run) kind of came online in the second half of the season,” he said. “That’s still a big question mark.” It’s good news for Cordova, where a large number of the residents depend on the commercial fishing industry for their income. In general, the fleet is optimistic about the run, said Chelsea Haisman, the executive director of the Copper District Fishermen United trade group. “Our whole community — the schools, the restaurants, the small businesses — not just the commercial fishermen, depends on healthy salmon runs, so it is a breath of fresh air for everyone here,” she wrote in an email. “The weather has been tough in the early season, but as we move into June, we’re definitely ready for some calmer days and a little more sun.” The Copper River’s salmon run is typically the first Alaska wild salmon to hit the market and thus commands a high price. Chefs on the West Coast were reportedly asking $55 for a Copper River sockeye dish upon first delivery this May, and fishermen reportedly getting $9 to $10 per pound at the dock for sockeye and $14 for kings. Typically, supply goes up at the season goes on and the price drops, with fishermen in other areas seeing much lower prices for their salmon by the time they come online in June. Bristol Bay typically floods the market with sockeye in June and July, pushing the prices significantly down. It’s also a canary in the coal mine for other salmon runs across the Gulf of Alaska, including Cook Inlet and Kodiak. Last year, all three tracked together with disappointing sockeye salmon runs and widespread closures. Cook Inlet’s commercial fishermen are due to hit the water in mid-June, though some fisheries in Lower Cook Inlet open at the beginning of June. In the Kodiak Management Area, managers may announce sockeye salmon openers after June 1. Elizabeth Earl can be reached at [email protected]

Rural telecoms, including Alaska, worry over Huawei order

A new rule about how telecommunications companies can use some of their funding from the federal government may poke a hole in their wallets, especially as they are looking to migrate their networks to 5G. From selling its cell phones and laptops to providing high-level networking equipment, the U.S. government has effectively banned the Chinese telecom company Huawei from doing business in the United States. President Donald Trump cited national security concerns in his May 15 executive order in response to worries from Congress and the Central Intelligence Agency regarding Huawei’s close relationship with the Chinese government and the potential for security breaches in network buildouts using Huawei equipment. The Federal Communications Commission had its own rulemaking process already going on a similar topic, beginning almost a year earlier in March 2018, which would ban the use of Universal Service Fund monies in buying equipment from Huawei or a number of other Chinese telecommunications companies. The commission is citing national security threats to the communications supply chain in the proposed rule. Huawei, the No. 2 smartphone maker in the world, is one of the largest telecom equipment providers in the world, and its equipment already helps deliver service to many areas of the United States. Because its equipment tends to be less expensive than its competitors, many smaller and rural telecom providers have bought the company’s equipment, and the rule means a huge economic cost to them. Companies probably aren’t going to be able to cobble together networks with some Huawei equipment, though. According to a number of filings with the FCC about its proposed rule, companies are concerned about interoperability between Huawei equipment and other equipment they have to purchase in the future. But they’re also concerned about the increased expense — according to an FCC filing in November 2018 from the Rural Broadband Association, some companies have been quoted two to four times as much for the same equipment from Lucent or Ericcson, two other primary suppliers. Alaska’s rural geography presents a challenge for telecom providers. Much of rural Alaska is served by GCI along with a number of smaller local companies that also provide services in rural areas. AT&T is the largest provider of mobile phone service in the state. Larger companies can spread their costs across multiple geographies and many customers; small rural companies don’t have that option, and swallowing millions in expenses to rip out and replace equipment that the U.S. government has now banned is a fairly large expense. Sen. Dan Sullivan, R-Alaska, is co-sponsoring a bill to help address some of that cost. The United States 5G Leadership Act would set aside $700 million for U.S. telecom providers to replace Huawei equipment in their current infrastructure. The bill is dependent on the FCC finalizing its proposed rule banning companies from using Universal Service Fund monies to buy Huawei equipment. Sullivan has heard directly from Alaska telecoms that are currently using Huawei and ZTE equipment, said Mike Anderson, communications director for Sullivan’s office. ZTE is the No. 2 Chinese telecom company behind Huawei. “Senator Sullivan will very much be monitoring how any prospective legislation such as this bill or regulation will impact our carriers, and engaging policymakers like the FCC accordingly,” Anderson wrote in an email. “Part of why he was pleased to partner with (Mississippi Sen.) Chairman (Roger) Wicker on this bill is because unlike any other proposed solution, it included a funding mechanism for ripping and replacement.” The $700 million figure isn’t set in stone, as the bill sponsors don’t have a precise inventory of equipment that needs to be replaced, in part because wireless equipment is more difficult to inventory, Anderson said. There is language in the bill allowing for additional funding if the original amount is not enough. “We estimated that we needed $800 million to $1 billion for our carriers, but that only covers about a dozen companies,” Carrie Bennet, general counsel for the Rural Wireless Association, told NBC News in a May 27 story. “I don’t want to insult the bill they’ve introduced. It’s great that someone has focused on what this is going to cost, but this is not enough money.” Alaska was significantly behind in implementing 4G infrastructure, particularly outside the urban areas of Anchorage, Juneau and Fairbanks. Network connection is expensive and the geography and distance makes it logistically difficult. However, companies are now catching up with faster speeds, particularly in urban areas, and newly installed cell towers in western Alaska as part of GCI’s infrastructure investment there. But as they do, the country is looking toward 5G, the next generation of wireless communication standards with higher speeds and lower latency times. AT&T included Anchorage in a 2018 announcement of its initial 5G network rollout, initially announced to be deployed in 2019 and 2020. A May 31 press release from the company stated it has spent $250 million in Alaska from 2016-18 to improve its network. So far, the company has updated its network to 5G Evolution in Anchorage, Bethel and Kusilvak, which enables customers in those areas with 5G-enabled devices to access faster speeds, wrote AT&T spokesman Brent Camara in an email. “While we have not yet announced specific plans for 5G cities in Alaska, we continue investing in building the network our customers need today and preparing for the future,” he said. Like in the past, rural residents may not see the service their urban neighbors do from major carriers for a long time, even as speeds increase significantly in urban areas. That’s one of the reasons organizations like the Rural Wireless Association advocate for policies that support rural providers — because the small companies based in rural areas will build out those areas rather than focusing on the bigger, more valuable markets. Daryl Zakov, senior counsel for the Rural Wireless Association, said the organization has a number of issues it advocates for to support rural networks as the world moves to 5G, including advocating for the FCC to auction off smaller license service areas so rural companies can more effectively bid on them and implement new rules on roaming service partnerships. The telecom market has consolidated in the past decade, with regional companies going under or merging; four companies dominate the U.S. market while smaller rural companies serve more constricted areas, with two currently trying to merge. The four big companies — Verizon, AT&T, Sprint and T-Mobile — will likely be focusing their initial buildouts in urban areas rather than expanding coverage to rural areas, if they get there at all. Smaller rural companies, on the other hand, don’t have to choose between urban or rural settings for their infrastructure focuses, Zakov said. “(Urban areas are) where (the big companies) are going to start their coverage,” he said. “When rural carriers start building out, that’s going to be in the rural areas. In every generation, urban areas have been built out before rural areas.” Sprint and T-Mobile told the FCC in filings they will build out rural 5G coverage if their merger is approved. Elizabeth Earl can be reached at [email protected]

State answers FERC questions about Cook Inlet pipeline crossing

The state-led gas line development team has told federal regulators it is confident the Alaska LNG project’s steel pipeline could withstand Cook Inlet’s strong currents, shifting seabed and traveling boulders along the 29-mile underwater route to the gas liquefaction plant in Nikiski, on the Kenai Peninsula. The water-crossing information is among the remaining batches of answers the Alaska Gasline Development Corp. owes to the Federal Energy Regulatory Commission, which is scheduled to publish sometime this month its draft environmental impact statement for the proposed $43 billion project to pipe North Slope gas to the LNG terminal for export. Federal regulators last October asked the state team for more information on the Cook Inlet pipeline crossing, including how the currents could affect the line’s stability on the seafloor and how the high-pressure steel pipe would be protected against boulders. “The strong tidal currents of Cook Inlet could potentially move debris and boulders across the pipeline,” AGDC reported in a May 24 filing with FERC. The project team analyzed what would happen if boulders as large as 10 tonnes (22,000 pounds) fell on the 42-inch-diameter pipeline, which would be laid — not buried — on the seabed floor. The analysis also looked at the risk of 15-tonne boulders “traveling at the maximum identified Cook Inlet bottom current velocity of 4.8 knots.” The analysis showed that any hits by boulders of the size modeled “can be easily absorbed by the pipeline steel alone,” AGDC told FERC. For additional protection, the 1.25-inch-thick steel pipe would be coated with 3.5 inches of concrete before the lengths are welded together and lowered to the seafloor. The pipe in Cook Inlet would be substantially heavier than the pipe along the rest of the 807-mile route from Prudhoe Bay to Nikiski, most of which would range between 0.677 and 0.862 inches thick. Because the gas moving through the line is pressurized — to about 2,000 pounds per square inch — to keep it moving and keep it cool, the gas line steel is much thicker than the 0.462-inch and 0.562-inch pipe used for the Trans-Alaska Pipeline construction more than 40 years ago. AGDC’s answers filed with FERC also addressed questions raised last fall by the U.S. Pipeline and Hazardous Materials Safety Administration, which regulates oil and gas pipeline safety standards. Responding to the regulators’ questions, AGDC said it is not planning to install any piling, riprap (large rock) or “concrete mattresses” to help hold the pipeline in place against Cook Inlet currents. Its analysis determined no such anchoring is needed, the state team said in its May 24 filing. “The analysis indicates that the installed pipeline would be stable and not subject to lateral movement,” AGDC said. The state team added that stability designs would be “further evaluated … when updated geotechnical information is available.” The pipe segments would be welded together aboard a pipe-laying barge and the string continuously lowered into the water, putting stress on the steel pipe, concrete coating and welds. Federal regulators asked AGDC if it had a plan to ensure that the weight of the pipe and strong currents would not damage the line during the pipe-laying operation. “Initial analysis indicates that pipelay … will not result in stress loads sufficient to result in pipe buckling or concrete crushing,” AGDC said. The state corporation further explained that the exact tensions on the pipe would be specific to the vessel used for the operation. “Therefore, such issues will be re-examined when contractor equipment is known.” The project team expects the pipe-laying barge would move at 0.5 to 1 knot a day, with the entire operation from shore to shore scheduled for just short of three months when the inlet is ice-free. The underwater pipe would link up on the west and east sides of Cook Inlet with shorter segments trenched and buried through shallower water. In its analysis of seafloor conditions along the crossing route, AGDC relied on 22 soil corings, conducted in 2016 before North Slope oil and gas producers ExxonMobil, BP and ConocoPhillips left the project and turned over management to the state. The companies at that time did not believe market conditions warranted proceeding with the FERC application and spending more money on permitting and design. Those 2016 soil corings were taken every 1,000 feet along the route where the pipeline would be buried or trenched near shore, and every 3 miles where the pipe would be laid uncovered on the bottom of the inlet. Federal regulators asked AGDC if it had collected sufficient site-specific data to confirm that the seafloor soil would be firm enough to support the heavily weighted pipeline, without the line sinking and putting high-strain loads on the pipe and welds. The state team referred to its 22 soil corings as a “preliminary assessment of bottom soil strata properties and strengths,” adding that “further evaluation will be conducted” if the project goes to the detailed design stage. Near to shore, the pipe would be buried in a trench. In the very nearshore, about 600 to 800 feet from landfall, the trench would be immediately backfilled to protect and hold the line in place, AGDC said. Farther out, “natural fill is expected to occur” to cover the pipe trench. The state team is scheduled to file its last responses to FERC’s environmental and engineering data requests later in June and in July. Those last answers are not expected to delay release of the draft environmental impact statement, or EIS, in June. Allowing for public hearings around the state, a public comment period and review by federal agencies participating in the EIS, federal regulators are scheduled to release the project’s final EIS in March 2020. FERC commissioners would be required to take up Alaska LNG’s project application no more than 90 days after the final EIS, putting a decision into June 2020. The state has been paying all of the permitting and design costs since the North Slope producers left the project 2½ years ago. AGDC expects to have about $22 million left in its account as of the end of the fiscal year on June 30, which could be tight to finish the effort at FERC while continuing to market the project to potential investors and customers and work on design issues in hopes of putting together an economically viable development. Though potential customers have expressed interest in Alaska LNG, none have signed a binding commitment or invested in the development, which would require billions of dollars in equity and tens of billions in long-term financing. BP and ExxonMobil have agreed to help the state finish its work at FERC. Each company will contribute $10 million to the effort, according to an announcement by Alaska Lt. Gov. Kevin Meyer at an oil and gas industry conference in Anchorage on May 30. The Alaska Legislature this session provided no additional state funding for AGDC but did grant the corporation the authority to deposit and spend the producers’ contributions. With the producers’ funding, the state corporation does not have to worry about shutting down later in 2020 for lack of money. Alaska Gov. Michael J. Dunleavy has been critical of the state leading the costly project. AGDC interim President Joe Dubler was quoted in March: “We’re trying to find potential partners to get the state out of the driver’s seat and get other people in.” ^ In other answers submitted to federal regulators in multiple filings in late May, AGDC reported: • Additional details of its fire-suppression and spill-prevention systems at the gas liquefaction plant, storage tanks and marine terminal in Nikiski and at the gas treatment plant at Prudhoe Bay that would remove carbon dioxide, water and other impurities from the gas stream before it starts its 807-mile journey to the LNG terminal. • Updated details for direct microtunneling to run the pipe under five waterway crossings, including the Tanana River. The filing includes plans for any inadvertent release of drilling fluids or other contaminants during the tunneling. In microtunneling, a laser-guided machine is lowered into a pit to dig its way under the waterbody. • Preliminary site-specific plans for each of the 24 gas pipeline crossings beneath the Dalton Highway, which runs from north of Fairbanks to Prudhoe Bay. • Further details for the 12 locations where the gas line would cross the trans-Alaska oil pipeline. For crossings where the oil line is buried, AGDC proposes to construct the gas line in a berm crossing over the oil line. The berm would provide a minimum of 3 feet of cover around the gas pipeline. Where the oil line is elevated, the gas line would be buried at least 4 feet underground. • The project’s air transport plan, detailing how AGDC proposes to move construction workers by aircraft along the project route. The busiest airport, according to the plan, would be Fairbanks, with up to a dozen flights a day, each carrying between 77 and 144 people. Other hub airports would be Anchorage, Deadhorse and Kenai. FERC also had asked how construction and operation of the pipeline and LNG terminal would affect salmon setnetters on the west and east sides of Cook Inlet. The state team said it “will work with setnetters and the Alaska Department of Fish and Game to estimate measurable loss of harvest, if any, related to construction activities. … Mitigation compensation would be based on the estimated lost harvest, as agreed to by both parties.” AGDC acknowledged that commercial salmon setnetters with leases at the LNG plant site and marine terminal “will lose fishing opportunity at those specific sites due to plant construction and operation. … AGDC will work with impacted setnetters and the State of Alaska to provide reasonable alternate beach access locations and alternate fishing sites. If no reasonable alternative can be identified, AGDC will work with individual setnetters to determine the appropriate amount of monetary compensation for salmon harvest loss or loss of access to a shore fishery lease.” Several factors will be considered to determine “the appropriate compensation including individual permit harvest history, terms of the shore fishery lease, and whether the damage is temporary or permanent,” AGDC said. In its May filings, AGDC provided FERC with a list of permits and authorizations required for the project, with anticipated receipt dates for the approvals. Most of the major approvals are expected later in 2020, such as the U.S. Army Corps of Engineers Clean Water Act permit, Environmental Protection Agency, Bureau of Land Management and U.S. Fish and Wildlife Service approvals. The state project team said it expects to file permit requests in the third quarter of 2020 with the North Slope, Fairbanks, Denali, Matanuska-Susitna and Kenai Peninsula boroughs. Those would include land-use, waste-disposal, utility, floodplain management, gravel sites and right-of-way permits. Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide. He is the incoming Atwood Chair of Journalism at the University of Alaska Anchorage School of Journalism and Public Communication.

US sanctions on Huawei bite, but who gets hurt?

The Trump administration sanctions against Huawei have begun to bite even though their dimensions remain unclear. U.S. companies that supply the Chinese tech powerhouse with computer chips face a drop in sales, and Huawei’s smartphone sales could get decimated with the anticipated loss of Google’spopular software and services. The U.S. move escalates trade-war tensions with Beijing, but also risks making China more self-sufficient over time. Here’s a look at what’s behind the dispute and what it means. What’s this about? Last week, the U.S. Commerce Department placed Huawei on its so-called Entity List, effectively barring U.S. firms from selling it technology without government approval. Google said it would continue to support existing Huawei smartphones but future devices won’t have its flagship apps and services, including maps, Gmail and search. Only basic services would be available, making Huawei phones less desirable. Separately, Huawei is the world’s leading provider of networking equipment, but it relies on U.S. components including computer chips. About a third of Huawei’s suppliers are American. Why punish Huawei? The U.S. defense and intelligence communities have long accused Huawei of being an untrustworthy agent of Beijing’s repressive rulers — though without providing evidence. The U.S. government’s sanctions are widely seen as a means of pressuring reluctant allies in Europe to exclude Huawei equipment from their next-generation wireless networks. Washington says it’s a question of national security and punishment of Huawei for skirting sanctions against Iran, but the backdrop is a struggle for economic and technological dominance. The politics of President Donald Trump’s escalating tit-for-tat trade war have co-opted a longstanding policy goal of stemming state-backed Chinese cyber theft of trade and military secrets. Commerce Secretary Wilbur Ross said last week that the sanctions on Huawei have nothing to do with the trade war and could be revoked if Huawei’s behavior were to change. The sanctions’ bite Analysts predict consumers will abandon Huawei for other smartphone makers if Huawei can only use a stripped-down version of Android. Huawei, now the No. 2 smartphone supplier, could fall behind Apple to third place. Google could seek exemptions, but would not comment on whether it planned to do so. Who uses Huawei anyway? While most consumers in the U.S. don’t even know how to pronounce Huawei (it’s “HWA-way”), its brand is well known in most of the rest of the world, where people have been buying its smartphones in droves. Huawei stealthily became an industry star by plowing into new markets, developing a lineup of phones that offer affordable options for low-income households and luxury models that are siphoning upper-crust sales from Apple and Samsung in China and Europe. About 13% of its phones are now sold in Europe, Gartner analyst Annette Zimmermann estimates. That formula helped Huawei establish itself as the world’s second-largest seller of smartphones during the first three months of this year, according to the research firm IDC. Huawei shipped 59 million smartphones in the January-March period, nearly 23 million more than Apple. Ripple effects The U.S. sanctions could have unwelcome ripple effects in the U.S., given how much technology Huawei buys from U.S. companies, especially from makers of the microprocessors that go into smartphones, computers, internet networking gear and other gadgetry. The list of chip companies expected to be hit hardest includes Micron Technologies, Qualcomm, Qorvo and Skyworks Solutions, which all have listed Huawei as a major customer. Others likely to suffer are Xilinx, Broadcom and Texas Instruments, according to industry analysts. Being cut off from Huawei will also compound the pain the chip sector is already experiencing from the Trump administration’s rising China tariffs. As expected, the Commerce Department on Monday announced a grace period of 90 days that applies to existing Huawei smartphones and networking equipment. The grace period allows U.S. providers to alert Huawei to security vulnerabilities and engage the Chinese company in research on standards for next-generation 5G wireless networks. It also gives operators of U.S. rural broadband networks that use Huawei routers time to switch them out. The Commerce Department could extend the temporary license to continue to ease the blow on smartphone owners and network operators with installed Huawei gear. Whether that happens could depend on whether countries including France, Germany, the U.K. and the Netherlands continue to refuse to completely exclude Huawei equipment from their wireless networks. Still in place are requirements that government licenses be obtained for any U.S. sales to Huawei unrelated to existing equipment. Could this backfire? Huawei is already the biggest global supplier of networking equipment and is now likely to move toward making all components domestically. China already has a policy seeking technological independence by 2025. U.S. tech companies, facing a drop in sales, could respond with layoffs. More than 52,000 technology jobs in the U.S. are directly tied to China exports, according to the Computing Technology Industry Association, a trade group also known as CompTIA. What about harm to Google? Google may lose some licensing fees and opportunities to show ads on Huawei phones, but it still will probably be a financial hiccup for Google and its corporate parent, Alphabet Inc., which is expected to generate $160 billion in revenue this year. The Apple Effect In theory, Huawei’s losses could translate into gains for both Samsung and Apple at a time both of those companies are trying to reverse a sharp decline in smartphone sales. But Apple also stands to be hurt if China decides to target it in retaliation. Apple is particularly vulnerable because most iPhones are assembled in China. The Chinese government, for example could block crucial shipments to the factories assembling iPhones or take other measures that disrupt the supply chain. Any retaliatory move from China could come on top of a looming increase on tariffs by the U.S. that would hit the iPhone, forcing Apple to raise prices or reduce profits. What’s more, the escalating trade war may trigger a backlash among Chinese consumers against U.S. products, including the iPhone. “Beijing could stoke nationalist sentiment over the treatment of Huawei, which could result in protests against major U.S. technology brands,” CompTIA warned.

LNG export capacity keeps expanding

There were lots of big numbers last week for the U.S. liquefied natural gas industry. The country’s fourth LNG export terminal loaded its first cargo while work is underway on four more export projects, with two scheduled to come online this year and the other two planning start-up in three to five years. The eight plants will have a total nameplate capacity of more than 86 million tonnes of LNG per year, making the United States the world’s largest LNG producer until Qatar completes its expansion and retakes the title around 2024. U.S. gas going through the liquefaction plants this month is cheap, at least compared to the past 20 years. The June 1 benchmark price was less than $2.45 per thousand cubic feet. It hasn’t averaged that low for an entire year since 1999. But not everyone wants to be in the U.S. LNG business. Toshiba, which in 2013 signed a 20-year contract to take 2.2 million tonnes of LNG per year from the Freeport project in Texas, is bailing out even before its contract kicks in next year. The company signed the deal 2½ years after the 2011 tsunami and Fukushima nuclear plant meltdown forced Japan to shut down all its nuclear power plants, driving a steep spike in LNG demand and prices. But global supply has more than caught up with demand and prices have fallen. Toshiba decided it could not afford the risk of paying for liquefaction capacity at Freeport and maybe not finding enough buyers every year willing to pay the price to take all that LNG. So, the company, which has other financial problems and has decided to focus on its core businesses, last week struck a deal to turn over its Freeport LNG obligation to French oil and gas major Total. Freeport is expected to start up this year, and Toshiba’s contract is scheduled to start next year. In a reversal of the normal practice when a company sells an asset, Toshiba essentially is selling a potential liability and is paying Total $800 million to take over the contract. Toshiba has been quoted as predicting it could have lost billions of dollars over the life of the contract, depending on LNG market conditions. Total, the world’s second-largest LNG trader among the oil majors, is bulking up its gas portfolio, particularly in North America, adding the Freeport supply to its offtake contracts with two LNG export terminals in Louisiana. Of the two U.S. Gulf Coast export terminals just starting construction, one developer, Virginia-based Venture Global LNG, has lined up a $1.3 billion equity investment from New York investment firm Stonepeak Infrastructure Partners to cover about 30 percent of the predicted cost of its Calcasieu Pass project in Cameron Parish, La. Venture Global, which reported May 28 it already has spent more than $250 million on site preparation, engineering, equipment purchases and fabrication, said it plans to start production in 2022. To hold down construction costs, the company plans to use mid-scale, modular, factory-fabricated liquefaction trains for the plant’s annual LNG capacity of 10 million tonnes. Among those projects getting close to a final investment decision, Houston-based NextDecade on May 28 awarded a pair of construction contracts worth nearly $9.6 billion to San Francisco-based Bechtel for engineering, procurement and construction services for Rio Grande LNG in Brownsville, Texas. The start of work is contingent on NextDecade winning Federal Energy Regulatory Commission approval, anticipated in July, and then a final investment decision by the company. The contracts with Bechtel reportedly call for the LNG terminal to start up in 2023, eventually reaching 17.6 million tonnes annual capacity. Also in Texas, Freeport LNG, which is expected to start operations later this year from the first of three liquefaction trains under construction, already is looking toward an expansion and in May lined up FERC approval and Department of Energy export authorization for an additional 5 million tonnes of LNG per year. The fourth train, which the company said could come online by 2023, would boost the plant’s capacity to 20 million tonnes a year, the second-largest in the United States. Another Texas project made the news in May when Saudi Aramco agreed to a 20-year LNG deal to take 5 million tonnes per year from San Diego-based Sempra Energy’s proposed development in Port Arthur. Saudi Aramco also will take a 25 percent equity stake in the development. Sempra plans to make a final investment decision on Port Arthur in the first quarter of 2020. It would be the company’s second Gulf Coast export terminal. Its Cameron LNG project in Louisiana shipped its first cargo May 31. While Aramco wants to develop its own gas resources for power generation, it also is looking to buy into LNG developments in the United States, Russia, Australia and Africa as it starts to get into the business, the Wall Street Journal reported. “It’s unclear what the final destination of Saudi Aramco’s (Port Arthur) LNG will be. There continues to be a long-term expectation that, in time, Saudi Arabia will import LNG to be used for power generation,” said Giles Farrer, Wood Mackenzie’s research director. Though it wants to reduce its reliance on oil revenues, Saudi Arabia also wants to make more oil available for export by burning natural gas — either its own or imported gas — instead of oil for power generation. In 2015, Saudi Arabia held the world’s sixth-largest gas reserves, but producing that gas is tricky, and the country has large gaps in its power needs, according to a report in The Wall Street Journal. Multiple analysts said the Saudi deal to buy into low-cost U.S. LNG makes sense. “The investment in gas … is a way to secure a commodity it will itself demand as well as a hedge against a murky future for its main source of income (oil),” the Journal “Heard on the Street” columnist wrote. Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide. He is the incoming Atwood Chair of Journalism at the University of Alaska Anchorage School of Journalism and Public Communication.

Movers and Shakers for June 9

Former intern Felipe Ruiz, EIT, recently joined R&M Consultants Inc. as a full-time staff engineer in the firm’s Waterfront and Structural Engineering Groups. Ruiz will be involved with civil and structural design of port and harbor development, airport and utility projects. His responsibilities include civil and structural analysis, load calculations, modeling and other upland site development associated with these projects. Prior to joining R&M, Ruiz worked as an intern at a steel erection and pre-engineered metal buildings company. He also spent five years working as a fiscal tech for the University of Alaska Anchorage’s College of Engineering. Since joining the firm, Ruiz has worked on projects including school structure renovations and repairs, airports around the state and structural analysis for mooring dolphins at the Hoonah Cruise Dock. Ruiz received his bachelor’s degree in civil engineering last month from the UAA. He also has a bachelor’s degree in accounting from the University of Central Florida. Originally born in Colombia, Ruiz moved from Florida to Anchorage to complete his civil engineering degree. Great Alaskan Holidays, Alaska’s largest RV rental, sales, and service business headquartered in Anchorage, hired Brenda Sims as a full-time member of the vehicle maintenance technician team. Already with several years of relative technical experience, Sims recently graduated cum laude from the University of Alaska Anchorage with an associate’s degree in automotive technology. Sims is also ASE-certified as a Parts Specialist, has passed her exams for ASE certification on Electrical and Brakes, and is currently underway with her Recreation Vehicle Dealers Association certification as a registered technician. Bering Straits Native Corp. hired shareholder Lucille Sands for the newly-created position of Shareholder Development director. In this new position, Sands will actively design and implement strategies to align shareholder development with organizational goals and business needs, work to recruit shareholders and descendants for open positions, source qualified shareholders and provide ongoing review and metrics related to open positions and hiring of qualified shareholders. Sands has been employed by BSNC for many years, and has worked across many departments, which enhances her ability to assist management in meeting our commitment to shareholders and descendants. She earned an MBA from Western Governor’s University, a bachelor’s of business administration degree with a minor in Alaska Native business management from the University of Alaska Anchorage, and an associate’s degree from the UAA. Sands recently served as the proposal compliance manager at BSNC. PND Engineers Inc. announced the following new hires in its Anchorage office. Carlos Perreira was hired as IT systems administrator. Previously, Perreira was the Operations director for the Anchorage Chamber of Commerce, where he was responsible for IT and financial duties. Perreira has a bachelor’s degree in architecture and experience as both an IT support specialist and a designer/drafter. He has more than 13 years of AutoCAD 2D and 3D experience, GIS experience, and has worked in design of oil and gas facilities including housing facilities, pipeline stations, modules and more. Claire Ellis, EIT, has worked in the engineering field since she was in high school and completed her bachelor’s degree in civil engineering from University of Alaska Anchorage last month. She joined PND part-time in March and is now a full-time status staff engineer focused on general civil engineering. She has previous intern experience with the Alaska Department of Environmental Conservation, reviewing submittals for public and community drinking water systems, and with Holler Engineering, working on a range of water, wastewater, and soils testing and design elements. Colton Jessup, LSIT, earned a bachelor’s degree in geomatics from the UAA in 2017. Jessup is a lifelong Alaskan from Kotzebue who previously worked for Red Dog Mine operations as a technical intern, and later as a full-time mine/survey technician. In that role, he provided survey services for mining activities, support for GPS systems, and construction monitoring. Most recently, Jessup worked for Bell &Associates on the North Slope. Justin Lobdell, EIT, brings several years of experience in residential construction and earned his bachelor’s degree in civil engineering from the UAA this spring. Lobdell started working part-time for PND in April and has since joined the Palmer office full-time, supporting the structural team. Kannon Lee, EIT, has joined PND’s geotechnical group. He is originally from New Mexico, earned a bachelor’s degree in civil engineering from the University of Alaska Fairbanks, and is currently completing a master’s in geotechnical engineering from the UAA. He came to Alaska in 2012 to work as grants administrator for the Igiugig Village Council. More recently, he worked for Jacobs Engineering in Anchorage.

Senate stalls over PFD amount

The clock is ticking towards important deadlines but legislators remain stalled over the size of this year’s Permanent Fund dividend checks. Senators rejected the latest attempt to break the logjam with a compromise amount June 4 with just 10 days remaining in the special session; they also failed to pass a full, roughly $3,000 per person PFD. Finance Committee co-chair Sen. Bert Stedman, R-Sitka, presented the Rules Committee with a proposal on June 3 to pay $1,600 dividends — equal to last year — with a mix of money totaling just more than $1 billion from the General Fund, Statutory Budget Reserve and the Higher Education Investment Fund. The bill was quickly advanced to the Senate floor despite facing clear bipartisan opposition. Sen. Shelley Hughes, R-Palmer, immediately introduced an amendment to increase the PFD amount to equal the statutorily calculated amount of more than $1.9 billion, or about $3,000 per Alaskan, coming from the Permanent Fund’s Earnings Reserve Account, which holds about $19 billion of the roughly $64 billion fund value and is accessible by a simply majority vote. Hughes and others said Stedman’s proposal fundamentally changed the PFD by drawing it from sources other than the fund. Stedman and fellow Finance co-chair Sen. Natasha von Imhof, R-Anchorage, have been among the most ardent opponents to appropriating from the fund in excess of the 5.25 percent of market value, or POMV, draw passed just last year. Doing so would set the dangerous precedent of spending above a sustainable annual amount and could very well lead to the long-term degradation of the fund’s value, they stress. “We need to get away from the ‘me-me’ generation attitude and look to the future,” Stedman said on the Senate floor. “I think protecting the corpus of the Permanent Fund exceeds the benefit in any year of a dividend.” Hughes said her amendment, which passed 10-8, would not have to overdraw the Permanent Fund if the Finance co-chairs would agree to adjust the funding sources in the budget to make it jive with paying a collective $1.9 billion PFD from the Earnings Reserve as residents expect. “I get the math but right now trust is more important,” said Hughes, referring to the belief that the public does not trust lawmakers to make the appropriate decisions after three years of deviating from the PFD formula set in law amid large and ongoing state budget deficits. Former Gov. Bill Walker vetoed half of the PFD appropriation in 2016 in an action that was eventually upheld by the Supreme Court, and the Legislature followed that precedent in 2017 and 2018 to ignore the statutory formula by setting the dividend amount at $1,100 and $1,600, respectively. Stedman noted that a formula-funded PFD would mean violating the POMV statute, a fact many legislators gloss over. “Frankly, we’re running out of liquidity and room to maneuver so something’s got to give,” he said. The fiscal year 2020 POMV draw will be roughly $2.9 billion. Anchorage Republican Sen. Chris Birch, who unsuccessfully proposed an amendment to pay the roughly $900 per person PFDs that would be available with a balanced budget under the POMV draw, called Hughes’ proposal “the height of big spending.” He emphasized that Alaskans receive the benefits of their collectively owned resources through government services provided without personal taxes, not just the PFD. “This ($3,000) dividend erodes public confidence in our ability to protect the Permanent Fund,” Birch said. Von Imhof insisted that making continued draws on the Fund equal to what Hughes proposed would drain the Earnings Reserve — the spendable portion of the Permanent Fund that proponents of a full PFD note currently has nearly $19 billion — by 2025. Gov. Dunleavy issued a statement June 3 in response to Stedman’s proposal in which he promised to veto the bill and said, “it would kill the Permanent Fund Dividend as we know it.” The governor has said any change to the PFD should only be made after a public vote on the plan. While there were enough votes to amend Stedman’s bill on the Floor, which requires a majority of the senators present, there were not enough votes to pass it to the House, which requires 11 votes, or a majority of the full body. That’s because Sens. Tom Begich, D-Anchorage, and Mike Shower, R-Wasilla, were excused from voting. Shower, who Walker appointed in early 2018 to replace then-senator, now Gov. Michael J. Dunleavy in the Senate and was elected to a full term last fall, said via social June 1 media that he has used up all of his personal leave at his primary job and would have to be excused from much of the remainder of the special session, which ends June 14. Shower is a pilot for FedEx. The June 4 floor debate exemplified the split in Senate leadership over the PFD, as Senate President Cathy Giessel and the co-chairs of the Finance Committee voted against Hughes’ amendment while current Senate Majority Leader Mia Costello, R-Anchorage, supported it. “The dividend was created to protect greedy politicians from spending the people’s fund,” Costello said, adding she is open to discussing a new PFD formula, but the historical formula should be followed until it is changed. Bills to change the formula in both the House and Senate were soundly rejected by the public during testimony earlier in the year. Where lawmakers go from here is unclear. The House Majority coalition has agreed to a less-than-full PFD to avoid overdrawing the Permanent Fund or again dipping into savings accounts, but the Senate is split on the issue while Dunleavy continues to demand a full PFD with the threat of budget vetoes looming if the Legislature doesn’t send him one. House Speaker Bryce Edgmon, I-Dillingham, said in a statement after the Senate happenings that the Legislature needs to pass the operating budget that is largely agreed upon to avoid a government shutdown July 1. Layoff notices are also expected to go out to state employees June 14 if the Legislature doesn’t pass the budget by then. “Today’s vote in the Senate perfectly illustrates why an operating budget has not yet been enacted: debate over the amount of this year’s Permanent Fund Dividend is consuming the Legislature,” Edgmon said June 4. “This is why we believe the Legislature should first pass a responsible budget to provide students, elders, and business leaders certainty in the critical services they rely on. Then we can focus on the many important questions surrounding the future of the Permanent Fund.” The House also has yet to pass the capital budget, but that could be done after July 1, as has been done in recent years. Elwood Brehmer can be reached at [email protected]

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