Permanent Fund gains 6.48 percent in Q3

The Permanent Fund rebounded from a tough finish to 2018 with a 6.48 percent quarter that put the $65 billion fund back in positive territory for the year. The gains in the quarter that ended March 31 — the third quarter of the Alaska Permanent Fund Corp.’s fiscal year — gave the fund a 3.07 percent investment return for the 2019 fiscal year so far, according to a May 23 APFC release. Permanent Fund investments lost 3.19 percent of their value in the first half of the state fiscal year. The fund held $65.8 billion of assets under management with approximately $1.6 billion of liabilities as of March 31. It ended the 2018 fiscal year last June 30 with a balance of $64.8 billion, from which the state appropriated roughly $2.7 billion to pay out Permanent Fund dividends and support government services. Most recently, the fund had a net balance of $65.3 billion with slightly more than $19 billion in the Earnings Reserve Account, which is the portion of the fund state lawmakers can appropriate from. Calculated as 5.25 percent of the fund’s five-year average value, the fiscal 2020 percent of market value, or POMV, appropriation is expected to be roughly $2.9 billion. Legislators are currently debating whether or not to make an additional draw from the Earnings Reserve that would be outside of the POMV appropriation — despite warnings from financial advisors about the long-term impacts of such ad-hoc draws — in order to pay the larger Permanent Fund dividends that Gov. Michael J. Dunleavy demands. The latest 6.48 percent quarterly return was driven by “an outstanding” 12.36 percent return on the fund’s public equities or stocks, portfolio, which comprises about 40 percent of fund investments, the APFC release states. For comparison, the Dow Jones Industrial Average gained 10.1 percent over the period. The fund’s $15.5 billion fixed income portfolio generated a 5.77 percent return during the quarter. The public market investments slightly outperformed the corporation’s return benchmarks for the given categories, according to fund managers. However, the fund’s private investments did not fare so well “due to the nature of quarterly appraisals and valuations,” the release states, but still outperformed comparable benchmarks. The $8.5 billion private equity portfolio returned 1.25 percent, compared to a Cambridge Private Equity Index return of -0.53 percent during the quarter. APFC leaders note the fund’s five-year private equity return is 24.3 percent. The fund’s infrastructure and private real estate investments similarly netted quarterly returns in of about 0.2 percent but have proved much more fruitful over the long haul. “These negative short-term distortions are not reflective of the generally strong underlying fundamentals, occupancy and cash flows of the properties,” the APFC release states regarding real estate investments. Real estate has generated a 7.97 percent annual return over the previous five years, according to fund managers. Elwood Brehmer can be reached at [email protected]

Solar energy lighting up more of land of Midnight Sun

A new industry is lighting up Alaska. Anchorage residents in particular have seen solar panels going up on buildings in their communities in the past five years. But across the state, more Alaskans are turning to the sun to power their homes and businesses. Over the last four years, Arctic Solar Ventures in Anchorage has seen 200 percent year-over-year growth, according to owner Stephen Trimble. This year, the business will mark its first megawatt, or 1,000 kilowatts, of installed solar power. “That’s a big achievement,” he said. “We have systems operating from Homer to Talkeetna.” Despite common conceptions about Alaska being too dark and snowy to be practical for solar, the technology has a long history in the state, particularly in rural Alaska. The first Solar Design Manual for Alaska was published in 1981, with a revised fifth edition published in May 2018 by the Alaska Center for Energy and Power and the Cooperative Extension Service. Off-grid cabins, fish camps and rural communities have long looked to alternative sources of energy as the cost of power in Alaska remains high. However, even Railbelt homeowners and businesses have been moving toward solar power. There are a number of motivations for that, but a major one is likely the plummeting cost of solar installations. Between 1980 and 2012, module costs fell about 97 percent, according to a November 2018 study published in the journal Energy Policy. “I would say in rural Alaska it’s become quite popular because it’s quite cheap,” said Erin Whitney, the manager for the solar technology program at the Alaska Center for Energy and Power, or ACEP. “It’s easy to install. Kits are pretty much turnkey. A wind turbine requires a massive foundation, which requires heavy equipment. If you’re in a rural village, it’s expensive, whereas a solar panel setup — that can be installed in a day.” Trimble said installers in Alaska have become somewhat innovative with methods to maximize the solar energy available, even during the winter. For instance, some buildings have solar panels installed vertically on their walls to prevent snow buildup, even though Anchorage gets far less snow than it used to as the climate warms, he said. “Between March and October, you actually have more than 12 hours of daylight per day, even down in Anchorage,” he said. “We’ve done probably 20 or more homes that are 100 percent net solar for the year. At the end of the year, they net out having received 100 percent of their power from solar. For a lot of folks, that’s really surprising; it’s that peak season of March to October that we have so much that it makes up for the dark months of winter.” The primary increase in solar power installations in the past decade or so has been on the Railbelt, Whitney said. The Anchorage metropolitan area, with approximately half the state’s residents, is pivoting toward solar in a number of areas. The Solarize Anchorage campaign is blazing forward this summer in the Turnagain, South Addition, Spenard and Rogers Park neighborhoods, helping residents band together to hire a solar energy contractor for their homes. ACEP and the Alaska Center have helped the residents with the logistics of the campaign, Whitney said. The installations aren’t cheap — a ballpark figure comes out to about $5,000 to $10,000 for a single homeowner, with larger installations costing more — but the discount comes from bulk purchasing and installations. “Solarize is a concept that’s been done all over the Lower 48,” she said. Multiple utility companies in the state have either installed solar or are seriously considering it. Golden Valley Electric Association installed a 563-kilowatt solar farm last year for about $850,000 after a $225,000 U.S. Department of Agriculture’s grant program incentivizing rural energy development. Chugach Electric Association is currently planning to install an approximately 500-kilowatt solar farm in Anchorage for an estimated $2 million, while Homer Electric Association’s board of directors proposed a community solar project to its members but didn’t get sufficient commitment to move forward with one, according to HEA’s 2018 annual report. There’s appetite for solar outside the Anchorage area. In Soldotna, local business River City Books is moving to a new building with a system of approximately 15 kilowatts on its roof installed by Anchorage Solar. Part of the project takes advantage of federal programs — one being the USDA rural energy development program and the other through federal tax credits for qualifying solar energy programs. Five projects through the USDA were authorized for funds on the Railbelt outside of Anchorage and Fairbanks in 2018 alone, according to the USDA’s Energy Investment Map. A number of Arctic Solar Venture’s systems have gone into communities along the Railbelt outside Anchorage. This year is the last year for programs to qualify for the full 30 percent tax credit, Trimble said. Next year, the credit will begin decreasing and will ultimately fall to a 10 percent tax credit for installed solar systems. “Whether you’re politically conservative or politically liberal, it doesn’t matter, because if you’re assessing solar as a potential customer, there’s the environmental benefits, there’s the immediate electric bill savings on a daily, weekly, monthly basis that are very substantial,” he said. “Most of our solar installations produce power at about a third of the cost of what they pay.” In addition to the decreasing cost of installation, utilities began allowing net metering in Alaska in 2010. Through net metering, homeowners or business owners can produce power from small energy systems and offset their energy bill through a utility company. Net metering in Alaska is currently capped at 1.5 percent of total retail demand. Beyond that, it’s up to the individual utility to decide whether to allow more, Whitney said. The future growth of individual solar installations could be inhibited there. “There’s certainly some discussions being had right now on whether it makes sense to change that limit,” she said. “Once you’re above that limit, it’s up to the goodwill of the utilities to continue allowing it.” Raising that limit would reduce uncertainty for residents and certainly for installers. Trimble and a number of other solar installers recently banded together and formed their own trade association: the Alaska Solar Energy Industry Association, or AKSEIA. The continuation of the net metering program is on the group’s list of issue interests, as well as regulatory certainty from the state, he said. But the members are also able to share information and communicate about projects, as well as keep to an ethical code that will protect consumers from bad actors as the solar industry grows, he said. “As any new industry tries to take shape, there can be people who come along when they see economic opportunity … and you get unqualified people doing work that can cause damage to homes, potentially produce injuries; at minimum, giving solar a bad name,” he said. “So we came up with this industry code of ethics to start introducing consumer protections from our side. We very much want to self-police and self-govern the industry, and everyone’s been very receptive.” Elizabeth Earl can be reached at [email protected]

Fishery observer survey seeks answers for high turnover

Many of Alaska’s commercial fisheries depend on observers having a place on board, but fewer than a fifth of them feel appreciated by the industry, according to a new survey. Fishery observers sail on vessels with fishermen in federal waters and keep track of catch and bycatch and take biological samples throughout trips. Managers use this information to evaluate stocks and manage fisheries. The job can be tough, requiring up to a month at a time on the water in rough conditions, and turnover can be high. The survey, conducted by the National Marine Fishery Service in 2016, asked 553 observers why they did the job and what their experiences have been like. Although three-quarters of them thought the job helped them in their careers and about 69 percent said the days at sea matched their expectations, nearly half them reported being harassed. Only 20 percent said they felt valued by the fishing community, and many said they were disappointed by a lack of opportunity to learn more about science and management, according to the survey findings, published in May. The original intent of the survey was to help improve retention. Most observers quit after a few years — the West Coast, with about 5½ years, has the longest average tenure. Alaska’s average tenure is about 4.8 years, according to the survey data. Although observers have to have some training or education before taking the job, there’s a lot they learn through experience. “Because the technical skills observers possess take time to hone and are essential to good data collection, retaining knowledgeable and hardworking observers is important to NOAA Fisheries,” the report states. “It is widely recognized that an observer’s job requires field skills and scientific knowledge that may require many deployments before gaining proficiency.” Many of the observers start their careers young, between the ages of 20 to 29, and leave the job as they get older. Most cite a chance for fieldwork as a major motivation for taking the job, but relatively low pay, lack of a predictable schedule and distance from home leads them to leave later. About 46 percent reported being harassed on the job, though, with only about a third reporting it every time. About 40 percent reported it some of the time and 27 percent never reported, according to the survey. “This survey also did not specify what type of harassment observers may have experienced or reported during their careers,” the survey states. “Incidents reported in this survey could include anything from a glare, to interfering with a workstation, to physical or sexual assault.” Observers cited different reasons for not reporting: disappointment with how the report was handled, a chance to resolve the issue at sea, worry about work reputation or choosing to let the issue go. Connected to the reports of harassment, the NOAA Office of Law Enforcement is conducting a followup anonymous survey specific to the North Pacific region. Preliminary data was presented to the North Pacific Fishery Management Council in 2018, with final data included in a report to the council in December 2018. Only 25 percent of observers responded, according to the Office of Law Enforcement report. Responses indicated that incidents of harassment fell between 2016 and 2017, though 45 percent of female observers still said they experienced verbal sexual harassment in 2017 though few reported it. The national observing program is massive. Alaska alone had about 413 observers, and about 4,423 trips were either observed by a person or an electronic system in 2018, according to the 2018 annual report on the observer program in the North Pacific from NMFS. Some of Alaska’s vessels require full coverage, such as catcher-processors, meaning all of the catch is recorded on every trip, while others only require partial observation, such as catcher vessels fishing for halibut or sablefish, meaning only some of the fishing trips are observed. About 53 percent of the respondents worked in Alaska, with the majority in halibut or groundfish fisheries. One of the common problems is a shortage of certified observers for fisheries in the region; not enough observers have been certified in fixed-gear lead level 2, or LL2, fisheries. Survey respondents cited too much work with low salaries as the reason for not seeking further certification, or a lack of flexibility in choosing deployments. Alaska-based observers responded that they were happy with the variety of deployment types, according to the survey. Changes are on the horizon for fishery observer coverage, though; vessel owners are beginning to install electronic monitoring devices or use electronic reporting systems. Most survey respondents said they supported electronic monitoring and reporting, though electronic systems can’t collect the biological samples that observers do. Last year was the first year that Alaska commercial fishing vessels were allowed to use electronic monitoring systems, and according to NMFS reports, it went off without a single violation on the 145 vessels that used those systems. The agency planned to open up an additional 20 spots to vessels for electronic monitoring in 2019. EM is particularly attractive for smaller vessels, where it’s hard to fit an additional person on board without leaving a crewmember behind. It may also pencil out to be cheaper; the 2018 annual report from NMFS cites an average daily cost for EM of between $956 and $1,527, while the average observer cost per sea day on a partial-coverage vessel was $1,380. The survey findings noted that the program will communicate better that electronic report and monitoring may have practical applications but that EM “is unable to replace observer coverage in all circumstances.” Elizabeth Earl can be reached at [email protected]

Movers and Shakers for June 2

Eric Gettis has been promoted to vice president of clinics for the Southeast Alaska Regional Health Consortium. Gettis will have system-wide responsibility for creating standard operating procedures and uniform processes to improve access to care at specialty and primary care clinics and ensure alignment of patient and provider satisfaction. Gettis previously held the position of SEARHC’s director of practice management. He has a master’s degree in counseling and guidance and a bachelor’s degree in education from Pacific Lutheran University in Tacoma, Wash. Before joining SEARHC, he held multiple management positions at Lourdes Health Network, including director of physician practices. Thrively Digital, Alaska’s oldest and largest digital agency, has hired Eric Fullerton as its new director of account strategy. Fullerton, formerly vice president and director of marketing for the Alyeska Resort, brings a wealth of experience to the position. He’s spent more than 25 years in the ski, travel, tourism and hospitality industries, and has a proven track record in marketing, sales and technology. Fullerton has an MBA from Phoenix University in the areas of internet, traditional and electronic marketing. Ahtna Netiye’ LLC announced that Eric McLaurin has joined the company as the new vice president of business development. McLaurin will be responsible for identifying strategic business opportunities and fostering strong industry relationships. McLaurin has a military background and brings more than 28 years of federal business development experience across engineering, construction, base operations and support, facility management, environmental, disaster recovery and information technology programs. He has directed business units of varying sizes with staff located throughout the U.S. and at international sites. McLaurin holds a bachelor’s degree in mechanical engineering from Southern University of Baton Rouge and is a professional engineer and registered environmental manager. United Fishermen of Alaska announced the hiring of Scott Kelley as executive administrator effective in June. Kelley, a Juneau resident, brings vast experience in commercial fisheries as the former director of Commercial Fisheries for the Alaska Department of Fish and Game. Kelley is replacing retiring UFA employee Mark Vinsel who has worked for UFA for 18 years in several capacities, including executive director. UFA is the statewide commercial fishing umbrella association, representing 35 member organizations from fisheries throughout Alaska. The U.S. Small Business Administration Alaska District Office announced ChemTrack Alaska Inc. as the Alaska Woman-Owned Business of The Year. Carrie Jokiel is the president of ChemTrack, an 8(a) and Economically Disadvantaged Women-Owned Small Business specializing in environmental engineering, remediation services, spill management, emergency response, and construction. Jokiel is a well-known business advocate at both the federal and state levels. She champions for small businesses and women-owned businesses through her community involvement, participation in hearings to the Senate Committee on Small Business and Entrepreneurship, and through her mentorship to many Alaskan businesses. Jokiel is a graduate from the SBA Emerging Leaders program. She was also a member of the 2014 Alaska Journal of Commerce Top Forty Under 40. Chugach Electric Association Inc. members re-elected Bettina Chastain and Harold Hollis to the utility’s board of directors. Election results were announced May 21 at the annual meeting. Of Chugach’s 69,320 members of record, 6,719, or 9.7 percent, cast ballots. Chastain was first elected to the board in 2015. Hollis was appointed in July 2018, after former director Sisi Cooper resigned. The board elected new officers May 22. Chastain was re-elected chair; Susan Reeves was reelected vice chair; Stuart Parks was reelected secretary; and Rachel Morse was reelected treasurer. Alaska USA Federal Credit Union announced that Bryce Deeney has been selected for the position of vice president, payments. Deeney brings extensive experience to the new position, having previously worked as vice president of integrated payments for a software payments company. At Alaska USA, Deeney will focus on the continued development of the credit union’s money movement platforms, such as credit and debit cards, bill pay, and peer-to-peer payments.

FISH FACTOR: Salmon census stable; algal bloom bites Norway

Salmon abundance in the North Pacific has declined slightly over the past decade, but salmon catches remain near all-time highs. For nearly 30 years the North Pacific Anadromous Fish Commission has summarized abundances and catches of salmon as reported by its five member countries: Canada, Japan, Korea, Russia, and the U.S. The Commission tracks all salmon species caught in the North Pacific, Bering Sea and the Sea of Okhotsk, and also provides the venue for coordinating research and enforcement activities. For 2018, the total salmon catch topped 1 million metric tons, or more than 651 million fish, the highest catch ever for an even-numbered year. That’s nearly 200 million more salmon than were caught in 2017. Russia led all other nations for salmon catches in 2018, taking 63 percent, or 676,200 mt. The U.S. ranked second for salmon catches at 27 percent at nearly 287,000 mt, with Alaska taking all but 8,700 mt of the total U.S. catch. The other three nations all were in single digits for salmon catches. Pink salmon made up 55 percent of the North Pacific catches by weight, followed by chums at 26 percent and sockeyes at 16 percent. Cohos comprised just 2 percent of the total salmon catch and Chinook was less than 1 percent. Hatchery releases from the five countries have been fairly stable since 1993 at about 5 billion fish released annually. The U.S. accounted for 44 percent of total hatchery salmon releases last year, mostly coming from Alaska. That was followed by Japan at 34 percent, Russia at 17 percent and 5 percent from Canada. Chum salmon made up 59 percent of all hatchery releases with pink salmon at 29 percent. Chinook salmon made up 5 percent, sockeyes at 4 percent and coho salmon at 2 percent of hatchery releases. The commission said variability in annual North Pacific salmon catches has been more pronounced during the past decade, primarily due to unpredictable pinks. A particularly low pink salmon catch in 2018 (71,300 mt) resulted in the lowest total North American catches of salmon in 40 years. Nature bites Norway Global salmon markets are getting shuffled by a massive algae bloom that has suffocated more than 8 million farmed salmon in Norway with no end in sight. Norway is the world’s largest farmed salmon producer and its supply numbers can set the mark for fish prices around the world. The Norwegian Directorate of Fisheries estimated the salmon loss so far at more than 25.5 million pounds of Atlantic salmon valued at more than $82 million. That would still amount to less than 1 percent of the industry’s output last year, when Norway produced nearly 1.3 million metric tons (nearly 3 billion pounds) of salmon, according to the New York Times. (That compares to Alaska’s catch of more than 605 million pounds of salmon.) “The algae has a chemical composition that affects the membranes of the cells in the gills and they are destroyed, so the fish actually dies due to lack of oxygen,” said Lars-Johan Naustvoll, a biologist at Norway’s Institute of Marine Research. Though the algae bloom is a natural event, fish growers said it is rare for it to be so concentrated and so lethal. Salmon farms are especially at risk since the salmon held captive in large net pens can’t swim away from it. Most blame an off kilter climate and warming oceans for the killer algae event. More salmon challenges The makers of genetically modified salmon are embracing the “Frankenfish” name, saying it’s much like the Frankenstein monster in the book written by Mary Shelley in 1817. Undercurrent News reports that Sylvia Wulf, CEO of AquaBounty Technologies, said: “It was the uneducated mob that didn’t understand the benefits of the science that killed Frankenstein. Let’s applaud the Frankenfish, because it’s designed to solve real-world global challenges.” Wulf was speaking at a Recirculating Aquaculture System Technology conference last week in Washington, D.C. In March, the Food and Drug Administration removed a three-year-old import alert that prevented AquaBounty from importing eggs from a Panama facility for grow out and sale in the U.S. With that regulatory barrier gone, the company is now gearing up to go to market. A first batch of eggs is on its way to a growing facility in Indiana with a goal of sending thousands of 8- to 11-pound genetically tweaked Atlantic salmon to supermarkets next fall. The fish is altered to grow three times faster than normal salmon. AquaBounty tested its fish in Canada in 2017 and 2018 and each time it sold out within a few days, the company said. The fish were not labeled as genetically modified, as Canada does not have a labeling requirement. By law, U.S. companies have until 2020 to begin labeling foods that contain 80 percent or more genetically engineered materials with a mandatory compliance date of Jan. 1, 2022. But it will fall to customers to find out on their own, as labels may be a symbol, a digital link, text message, phone number or web site. AquaBounty called the labeling requirement “good news” saying that the market will be awash in so many bioengineered products, customers won’t focus on their fish. Nearly 2 million Americans opposed the FDA’s approval of Frankenfish and 60 major grocery chains pledged not to sell it, including Safeway, Kroger, Target and Whole Foods. In a touch of irony, Wulf said AquaBounty plans to expand sales to China and South America, but has no plans to pitch Frankenfish to Europe because of “their anti-genetically modified leanings.” Seafood minus the sea Wild fish, farmed fish, Frankenfish — get ready for seafood grown directly from cells — with no head, tail, bones or blood. National Public Radio calls it “fish without the swimming and breathing part. It’s seafood without the sea.” In fact, it is whole fillets grown from a needle biopsy’s worth of muscle cells from a single fish. The cells are cultivated and fed a blend of liquid vitamins, amino acids and sugars. The resulting fillets can be sold fresh or frozen or made into various seafood dishes. A San Diego based company called BlueNalu is pioneering the cellular aquaculture as one of six companies focused on growing cell-based seafood. Finless Foods, for example, is focused on blue fin tuna; a company called Wild Type is working on salmon. All are likely five to 10 years away from having actual product on the market. The companies point out cell-growing uses no genetic tweaking, nor does it introduce anything new that doesn’t already exist in nature. They claim they’re not looking to replace wild or farm-raised seafood, and instead offer a third alternative. But the fledgling industry is poking at some tender industry spots: illegal and overfishing, climate impacts, bycatch and food waste. They note that cell-grown seafood is free from antibiotics and pesticides used in fish farms, potential ocean contaminants and micro particles of plastics. Referring to the more than 3.2 billion people globally who depend on seafood for at least part of their protein, a BlueNalu spokesman said “Catch, grow or make it, I’m not even sure we’ll be able to meet demand.” Alaska fish keeps Seattle afloat If not for Alaska’s fisheries, the Port of Seattle would be a shadow of what it is today. An economic report released in May reveals that Seattle is home port to about 300 fishing vessels and all but 74 make their living in Alaska. The Seattle-based boats harvest Alaska pollock, Bering Sea crab, flounders, salmon and many other high value species, and they vary in size from huge catcher-processors with 150 crew to small seiners and trawlers. In 2017, vessels that moored at one of Seattle’s three terminals and operated in the Alaska fisheries generated gross earnings of more than $455 million, nearly half of the total gross earnings from those fisheries. Boats fishing in Puget Sound and other Washington areas earned $26.6 million at the Seattle docks. An estimated 7,200 jobs were directly associated with commercial fishing at the Port of Seattle in 2017. Of those jobs, 5,100 were on fishing vessels, and all but 200 operated in Alaska fisheries. Additional revenues to the port came from various support services, staff and on-shore port tenants, including seafood processing and cold storage facilities. Factoring in all segments of commercial fishing at the Port of Seattle, fishing activities generated more than $671 million in business output in 2017. It also produced more than $13 million in state of Washington taxes. Between 2011 and 2017, Port of Seattle customers harvested between 800,000 and 1.3 million metric tons of seafood from the North Pacific fisheries. Harvested tonnage increased by more than 500 percent over this period, or approximately 23 percent per year, based on a compound annual growth rate. Factoring in indirect and induced impacts, the total statewide economic impact of commercial fishing operations to the Port of Seattle accounted for 11,300 jobs, $543 million in labor income and over $1.4 billion in business output in 2017. Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

Oil Search gets federal approval for Nanushuk project

The company working on one of Alaska’s largest oil prospects in decades now has the key federal authorization to develop the project. Oil Search Ltd. announced Thursday that it has received a favorable record of decision from the U.S. Army Corps of Engineers on the environmental impact statement, or EIS, for its Nanushuk oil project in the Pikka Unit on the central North Slope. The record of decision, signed May 14, marks the end of nearly four years of study on the roughly $5 billion project, which has the potential to produce upwards of 120,000 barrels of oil per day at its peak. Peter Botten, managing director of the Papua New Guinea-based producer said in a formal statement that two appraisal wells the company drilled last winter into the southern portion of Pikka reinforce earlier expectations that the oil available for the project should allow for peak production of at least the long-held estimate of 120,000 barrels per day. The trans-Alaska Pipeline System, commonly known as TAPS, is handling about 500,000 barrels of oil per day this year. North Slope production peaked in the late 1980s at approximately 2 million barrels per day. The project is also expected to support more than 1,000 drilling and operations jobs and “several thousand direct construction jobs,” said Oil Search Alaska President Keiran Wulff, who added in a formal statement that the company “will make every effort to work with companies located within the state of Alaska to maximize local hire.” Oil Search is planning a busy 2019-20 winter season with additional drilling work and the start of laying gravel for the project’s future roads and pads, according to Botten. “We remain very excited about the opportunities for Oil Search in Alaska and are looking forward to making material contributions to the state and the local communities, while also delivering value for Oil Search shareholders,” he said. The company reached a deal with Armstrong Energy in October 2017 to buy into Pikka and take over as the project operator for $400 million. Wulff said last fall it planned to exercise a $450 million option to fully buy out Armstrong from the project this year. An Oil Search Alaska spokeswoman said the buy out is on schedule to be completed by the June 30 deadline set as part of the initial deal. Spanish oil major Repsol is also a 49 percent owner in Pikka. While official estimates are more conservative, Armstrong Energy CEO Bill Armstrong has consistently said he believes more than 1 billion barrels can be produced from the Pikka Unit. First oil production is expected in late 2023, Wulff has said. Most of the oil would come from the shallow, conventional Nanushuk formation. It has been the source for smaller nearby discoveries by ConocoPhillips as well as Conoco’s Willow project in the National Petroleum Reserve-Alaska, which is similar in scale to Pikka but a couple years behind in the development process. The Corps of Engineers ultimately chose Oil Search’s preferred development option, which differed from the plan Armstrong initially submitted for its Clean Water Act wetlands fill permit. Wulff noted in a company release that Oil Search changed the plan at the behest of residents of the nearby Native Village of Nuiqsut, who use the Colville River Delta where the project is located for subsistence harvests. The approved plan moves a drill site near the Colville further from the river; realigns some north-south roads to interfere less with east-west migrating caribou; and narrows roads from up to 38 feet wide to 32 feet among other revisions. The changes will also result in a 22-acre reduction to impacted wetlands compared to the original plan, according to the corps. Overall, the project will fill 266 acres of wetlands, the EIS states. “We are committed to close collaboration with the people and organizations of Nuiqsut and neighboring communities to ensure our activities in the field are conducted in a sensitive and respectful manner,” Wulff said. Elwood Brehmer can be reached at [email protected]alaskajournal.com.

State still working with BP, ExxonMobil to refine AK LNG economics

New conclusions regarding the viability of the $43 billion Alaska LNG Project are still several weeks away from being made public, according to officials from the state agency leading the work. Interim Alaska Gasline Development Corp. President Joe Dubler said the state, BP and ExxonMobil have “preliminary answers” to the competitive assessment they are doing of the Alaska LNG Project and those initial results are being further vetted and analyzed before final conclusions are released. AGDC announced March 8 it had signed a memorandum of understanding with BP and ExxonMobil to assist the state corporation in finding ways to bring project costs down and get it through the federal regulatory process as smoothly as possible. Brett Huber, a senior advisor to Gov. Michael J. Dunleavy, said March 14 that AGDC, in consultation with the producer companies and the state Revenue Department would be conducting a 60-day review of the project to determine the state’s path forward. “We’ve agreed on inputs; we’ve agreed on the mechanics. So we’re using that model to finalize the future of Alaska LNG and what we think the competitive prospects are for the project,” Dubler said during AGDC’s May 22 board of directors meeting. Dunleavy has long been critical of former Gov. Bill Walker’s plan for a state-led Alaska LNG Project. He made it clear soon after being elected last fall that his administration would slow the pace of the project and try to bring the major oil companies back into the fold. In 2016, the international energy consulting firm Wood Mackenzie concluded the Alaska LNG Project likely wasn’t economic if developed by Alaska’s major producers, as first envisioned, in part because of the high internal return requirements oil companies typically have. However, a state-led project with federal tax exemptions could be viable, Wood Mackenzie said at the time. BP and ExxonMobil have major interests in seeing a successful Alaska LNG Project come to fruition. They combined to invest upwards of $4 billion between 2012 and 2016 to develop the North Slope Point Thomson natural gas field, which would be one of the main sources of gas for the project; Prudhoe Bay is the other. They also hold collective rights to approximately 70 percent — not counting the state’s royalty stake — of the 35 trillion cubic feet of gas expected to be available for sale through the project. The companies also signed separate and confidential gas sales precedent agreements with AGDC last year that outline the terms — including price — under which they would sell gas into the project. AGDC and the companies are also revisiting the $43 billion cost estimate, which is about three years old, to see if technological advancements and market conditions could bring it down. Spokesman Jesse Carlstrom said via email that potential cost savings have been identified primarily in the construction of the facilities for the project. Approximately $9 billion of the total project estimate is a contingency for cost overruns. Dubler added that corporation leaders who attended the LNG2019 in Shanghai in early April met with LNG shippers, investors, builders and customers that could be involved in Alaska LNG. He said the prospective participants were comfortable with the state’s new plan to slow the project and not start construction as soon as the Alaska LNG environmental impact statement is finished, likely in mid-2020. “We’re trying to find potential partners to get the state out of the driver’s seat and get other people in,” Dubler said. Officials from the governor’s office along with Natural Resources Commissioner Corri Feige and Revenue Commissioner Bruce Tangeman are planning a trip to China next month to discuss the future of the state’s role in the project with officials from Sinopec, the Bank of China and China Investment Corp., according to Dubler. The state-owned oil giant and financial companies signed a nonbinding joint development agreement with AGDC in November 2017 to advance the prospect of financing up to 75 percent of the project in exchange up to 75 percent of the LNG it produces. LNG exports to China have declined dramatically this year after retaliatory tariffs were imposed and are now scheduled to increase from 10 percent to 25 percent on June 1. Dubler reiterated that the administration feels a 75 percent stake in the project is too much for one investor and wants to spread potential investment more broadly. “We think that once we get the (Federal Energy Regulatory Commission) permitting completed it will open up the door for a lot more different types of firms and industries looking to invest in this project,” he said. FERC is scheduled to release the draft Alaska LNG environmental impact statement, or EIS, next month. AGDC Program Management Vice President said during the meeting that the corporation is anticipating a 90-day public comment period for the draft document, that will distill the roughly 150,000 pages of environmental, socioeconomic, and engineering data AGDC has submitted to FERC into a roughly 4,000-page EIS. Elwood Brehmer can be reached at [email protected]

Local governments weigh onsite cannabis consumption options

As the Marijuana Control Board is working on hemming up the regulations for on-site consumption, local governments are wrestling with how to handle their own rules. Cannabis entrepreneurs have long awaited state regulations allowing their customers to partake at retail locations. The board approved an initial set of regulations in December, with requirements such as only allowing smoking in a freestanding building with ventilation and limitations on individual consumption. Business owners said this would provide a more reasonable place, especially for tourists, to partake responsibly without violating laws against consuming in public. Lt. Gov. Kevin Meyer signed the regulations in early March, but the MCB has a few more changes to make, including defining what a “freestanding” building is and allowing more voice for residents of areas outside the jurisdiction of a local government. However, city and borough governments are deciding whether to let the state regulations stand or enact their own. There has already been a wide variety of opinions, ranging from applying no additional regulations to completely banning it within city borders. Fairbanks has already tackled it, while Anchorage and Kenai have ordinances pending and the City and Borough of Juneau is still considering information. The Anchorage Assembly was originally set to consider an ordinance to just allow the consumption of edible cannabis products on site, but a second ordinance would have allowed smoking in facilities as long as they met other requirements, including those for freestanding buildings and ventilation. Consideration of the ordinance was postponed at its May 21 meeting. One of the snags in approving onsite consumption is the state law banning smoking in enclosed public spaces and workplaces. Under the state law, the definition could include smoke from marijuana products and outdoor areas may be permitted under the law. However, the onsite consumption rules passed by the Marijuana Control Board would allow for the smoking of marijuana products as long as the facility has proper ventilation and is freestanding, with a smoke-free area for employees to monitor the activities in the consumption area. In late April, the Fairbanks City Council adopted an ordinance to permit onsite consumption as long as licensees met the other requirements for an endorsement through the Marijuana Control Board. Fairbanks City Attorney Paul Ewers said the city would probably defer to the state’s enforcement of the non-smoking law, as it’s not a city ordinance. “If it was a city ordinance, we definitely would (enforce it),” he said. “Our approach as a city would probably look to the state attorney general.” The City and Borough of Juneau is debating the same point about the smoking law. City Attorney Robert Palmer wrote in a memo to the council that if the members want to approve the consumption of cannabis by smoking in onsite consumption endorsements, they’ll have to have a “rational argument to distinguish marijuana from tobacco” or allow both. Currently, Juneau bans all onsite consumption by ordinance, and Palmer wrote that he wasn’t aware of a tobacco consequence if the edibles portion is repealed. “However, the definition of edibles would need to be narrow to avoid vaping and other inhalation forms of consumption that can affect nearby people,” he wrote. On the opposite end of the spectrum, the Kenai City Council rejected a regulations package for onsite marijuana consumption within its city limits and introduced an ordinance at its May 15 meeting to ban it entirely. The council referred the ordinance to the city’s Planning and Zoning Commission, as it required a zoning code change, and is scheduled to hear it again June 5. “We feel this ordinance is necessary to protect public safety and welfare,” wrote council members Glenese Pettey and Jim Glendening in their co-sponsors’ memo. The Alaska Department of Health and Social Services is not currently conducting any specific research into the effects of secondhand exposure to marijuana smoke, but DHSS Commissioner Adam Crum and Division of Public Health Director Jay Butler wrote a joint opinion article in December 2018 opposing the onsite consumption of cannabis, noting that some studies indicate little difference between the effects of inhalation of tobacco and marijuana smoke. The department leans on three main bodies of existing research about the effects of secondhand marijuana smoke, DHSS spokesman Clinton Bennett said in an email. Two of the studies — one from the World Health Organization in 2016 and two from the state of Colorado in 2014 and 2016 — indicate that secondhand cannabis smoke impairs lung function and contain many of the same cancer-causing chemicals in tobacco smoke, he wrote. The Alcohol and Marijuana Control Office is seeing public comment on its draft regulation revisions for onsite consumption — including further definitions for “freestanding” and setting up a process to give residents outside a local government’s jurisdiction a way to weigh in on an onsite consumption endorsement — until June 19. ^ Elizabeth Earl can be reached at [email protected]

Hilcorp lone Cook Inlet bidder for third straight year

Hilcorp Energy was the lone bidder in the State of Alaska’s annual Cook Inlet basin oil and gas lease sale for the third consecutive year. The Houston-based independent spent $190,350 on three lease tracts totaling 10,286 acres in the sale held Wednesday morning in Anchorage, according to the Division of Oil and Gas. Hilcorp has been the predominant oil and natural gas producer in Cook Inlet since purchasing significant assets from Marathon Oil in 2012. “We are pleased to see bid activity in the Cook Inlet lease sale,” Deputy Natural Resources Commissioner Sara Longan said in a prepared statement. “We recognize the focus of investment has been on the North Slope in recent years. Nevertheless, significant investment is made to sustain current Cook Inlet production, while exploration activities continue to inform and support future development.” The Cook Inlet sales have been quiet for several years. In 2016 the state received no lease bids for its original oil basin for the first time and industry representatives at the time largely blamed the state’s plans to curtail its tax credit program for exploration and development work. State officials note most of the leases covering the prospective areas in and around the Inlet are already leased. As Longan highlighted the recent North Slope sales, held each fall, have been some of the most lucrative in terms of dollars bid in the history of the state’s regular oil and gas lease sale program, with companies cumulatively spending upwards of $35 million in a single sale to acquire exploration acreage. Two of the leases Hilcorp acquired Wednesday are onshore tracts on the southern Kenai Peninsula near Anchor Point and BlueCrest Energy’s Cosmopolitan oil field; the third is near Trading Bay in the central portion of the Inlet where most of the offshore development has occurred.   Elwood Brehmer can be reached at [email protected]

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