ADFG left out of ‘reverse sweep’; Catch 49 ups offerings

As Alaska lawmakers continue their struggle to keep the state afloat, the Commercial Fisheries Division dodged a bullet that would have removed millions of dollars from its budget. An obscure procedural action within the capital budget called a “reverse sweep” prevents dozens of program-specific pots of money from being automatically drained into the Constitutional Budget Reserve, which happened this year after House Republicans would not provide the 30 votes needed to execute the move. “The sweep is money that is not spent in a single year. In this case, it comes from certain sources, such as test fish receipts, commercial crew licenses and sale of Commercial Fisheries Entry Commission permits and licenses,” explained Alaska Department of Fish and Game Commissioner Doug Vincent-Lang. “There is usually unexpended funds within the budget that typically carry over by the reverse sweep into next year’s budget, and they are integrated into the department’s operational budget as there is an expectation those moneys will be available.” There was a lot of confusion about what the sweeps swept up, he added. “From the ADFG perspective, there was an initial document that showed all of those different pots of money are sweepable. However, we have since learned that the actual budget that was signed by the governor and passed by the legislature included language that makes the test fish receipts, crew member licenses and the CFEC licenses non-sweepable.” Money from test fish receipts comes from sampling salmon or other species that are caught by the state to gauge run strength and collect other biological data and then are sold. Crew license sales and CFEC dollars from permits, vessel licenses and other fees go into separate savings accounts; more comes from General Fund program receipts, primarily from crew license sales. “The test fishing receipts are on the order of $2.5 million, crew licenses bring in $2.5 to $3 million and those are built into our management program for the next year,” Vincent-Lang said. “We use them for doing things like crab and shellfish management to herring management, conducting aerial surveys and running weirs and sonar operations.” Vincent-Lang said the Commercial Fisheries Division is working out the details of a nearly $1 million dollar budget cut, which he calls “not life threatening.” “There’s going to be impacts on some weir operations and sonar operations, but we we’ll be able to manage around them,” he said, adding that things would have been far worse if the test fishing and license receipts were swept away. “Not all of that would’ve been spent in a single year, but it would have meant somewhere on the order of $2.5 to $4 million worth of unexpected budget impacts to the division of commercial fisheries,” Vincent-Lang said. The approved fiscal year 2020 budget for the commercial fisheries division is about $71 million, of which $52 million is from general funds. Catch 49 grows fish sales The Catch 49 program that delivers locally caught seafood to Alaskans across the state has expanded its 900 customers to include a growing wholesale base and a retail store. Princess Holland America lodges in Denali are now one of its biggest buyers for jig caught rockfish and Tanner crab from Kodiak. The Bridge Restaurant in Anchorage and the Muse Restaurant at the Anchorage Museum are clients, as is North Star Quality Meats, the protein supplier for all of the AC stores in rural Alaska. “We are really proud to be one of the first people to supply Alaska caught seafood to those rural communities. It’s kind of shocking they weren’t getting that before, but we’re happy to be filling that gap,” said, Katy Rexford, director of Catch 49, which is an arm of the non-profit Alaska Marine Conservation Council. It’s the eighth year for the “boat to table” program described as a community supported fishery. Customers pre-order their seafood favorites in advance and pick it up at distribution hubs across the state a few weeks later. Up to 15 boats fish for Catch 49 products now, Rexford said, and they are always on the lookout for more fishermen across the state. The group offers sockeye salmon from Bristol Bay and Copper River, halibut, Tanner crab, king crab from Norton Sound, Kodiak rockfish, shrimp from Prince William Sound, octopus, sablefish, smoked products and “just about anything you can pull out of the water.” Rexford said when the seafood arrives at the various distribution centers, it’s like “fishmas!” “I get to hand customers these big beautiful bags of gorgeous fillets or shrimp and people are so happy to be able to buy the best seafood in the world and to know they are supporting fishing families and the fishing way of life in our small Alaska coastal communities,” she said. “One hundred percent of our proceeds is supporting policy work and conservation programs that buoy our fisheries and keep them sustainable and productive for generations to come.” Catch 49 summer orders are being taken through Aug. 5 at www.catch49.org; drop offs will take place a few days later in Fairbanks, Seward, Homer and the Mat-Su Valley. Anchorage customers can now pick up seafood every Thursday from 12 p.m. to 6 p.m. at a new retail location at 636 E. 15th Avenue. “Instead of four or five times a year, people in the Anchorage area can now order seafood year round. We’re trying to position ourselves as a more regular source of sustainable seafood,” Rexford said, adding that Catch 49 hopes to expand the opportunity to other regions. Fraser salmon stuck There could be fewer wild salmon from British Columbia competing with Alaska this year due to a rockslide 250 miles up the Fraser River that is keeping the fish from their spawning grounds. “All that rock on top of that face has fallen into the river which is confining passage for fish. I’ve never seen anything to this degree on this side of the river,” Dale Mickey, a manager with Fisheries and Oceans Canada, told CTV News Vancouver. Nearly 80 percent of the sockeye runs from eight tributaries head up the Fraser River, which this year is expected to be 3.5 million fish. A run of 180,000 reds a day is starting to arrive and a sense of urgency has rescuers resorting to a temporary solution: flying the fish upriver by helicopter. Crews have begun air-lifting the fish from a holding pond below the rockslide where the sockeyes are netted, tagged and put in oxygenated aluminum tanks for transport and release upriver. They also are working nearly round the clock to secure the canyon and create a “natural fishway” using artificial salmon ladders inserted into the river. Another assist could come from pressurized tubes called fish cannons created by Seattle-based Whooshh Innovations. The cannons literally shoot the fish up and over dams or other obstructions blocking their migrations. Company CEO Vince Bryan said results have shown that the cannons provide far less stress on the fish than other transports, like trucks and helicopters. “People have asked us how we know it’s okay for the fish, and we tell them because when they come out of the tube, they turn their heads and look back at us waving their tail and saying thanks,” he said in a phone interview. “In all seriousness, studies we did on the fish cortisol (stress) levels as they were going into the tube were not raised.” Cohos will arrive later and the Fraser produces more chinook salmon than all the rivers of Puget Sound combined. Canada’s provincial and federal governments say they will do everything possible to make sure the salmon are able to reach their spawning grounds. Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

GUEST COMMENTARY: Governor’s vetoes don’t reflect Alaska’s values

Over the past month, Rasmuson Foundation’s board of directors has urged our elected leaders to compromise and seek solutions that are best for Alaska when addressing the state’s $1 billion plus budget gap. We have stated our belief that a solution relying primarily on cuts will negatively impact critical services throughout the state, causing harm to many Alaskans. The Alaska Legislature responded with a budget that included $190 million of cuts, which was the largest decrease in year-on-year spending in state history, while preserving a high quality of life for our citizens. The governor’s vetoes announced June 28 will harm Alaska’s most vulnerable citizens and have a significant and detrimental impact on our state’s economy. The impact of these decisions will carry negative consequences well beyond this year, impacting generations to come. The budget he signed into law has set off a battle that addresses the soul of Alaska, who we are and what we represent, and the kind of state we hope to leave to future generations. Since 2016, Rasmuson Foundation has been conversing with Alaskans about the budget through townhalls, community meetings and online discussions. Research shows that a majority of Alaskans prefer a multifaceted approach to balancing our state budget. Yes, this includes reducing spending, but it also means exploring new ways to generate revenue and the use of Permanent Fund earnings will need to be part of the solution. The vetoes must be closely examined by our elected officials: • The defunding of housing and services for families and individuals experiencing homelessness is inhumane. It’s estimated that the cuts to Brother Francis Shelter, Clare House, Covenant House and AWAIC in Anchorage will put hundreds of people out on the street adding to an already intolerable homeless population of 1,100. • Very low-income seniors will be pushed into homelessness with the loss of their senior benefits. • The closing of Head Start programs for low-income families will decimate the childcare now available to working parents and force many into public assistance. • Seven hundred professionals will be laid off from the University of Alaska Anchorage and 40 student programs will be shuttered. It’s estimated that 3,000 students will be directly affected. Whether a local government, business, nonprofit or individual, we all benefit when we are able to plan. Businesses want certainty in regulation and taxation, which in turn allows them to build strategy. Individuals base decisions like buying a house on what they expect their annual household income to be. Dramatic changes — the sudden repeal of a law or elimination of a job — can cause chaos, not just on an individual level, but across entire communities. Nonprofits are no different. They build their budgets each year using the best available data. When you cut expenditures for homeless services, housing, legal assistance, telecommunications and healthcare as dramatically as was proposed by Gov. Mike Dunleavy, our nonprofits will have to drastically change the way they do business, and they’ll have to do it overnight. It will be the financial equivalent of the 7.1 earthquake that hit Southcentral last November. But this time, there is no state or federal agency to step in and help handle the emergency. That’s because Alaska’s nonprofits handle emergencies on a daily basis as they are the stopgap between homelessness and having a place to rest your head. Between hunger and having a warm meal. The place that houses women and children who need a safe haven. Total state general fund spending has been cut from almost $7.8 billion in fiscal year 2013 to about $4.5 billion in fiscal year 2018. It is change that has been painful but measured in annual steps. As a result, systems in healthcare, education, resource management and the arts continue to serve Alaskans while adapting to our new reality. Massive cuts will dismantle, in just one year, services, organizations, and programs that took decades to build. These cuts are a priority of the governor, but what about Alaskans? Do these cuts represent the philosophies and beliefs of Alaskans? Given the high level of community support across the state for nonprofits and education, from the arts to services for the poor and vulnerable, it seems unlikely that the depth of these cuts represents Alaska residents’ beliefs. Rasmuson Foundation promotes a better life for Alaskans. Our mission guides us every day to be part of a solution that improves the quality of life for all Alaskans. We believe notice is critical for Alaskans to plan, make the hard decisions and adjust. Reducing spending — dramatically and on such short notice — will significantly diminish certainty and confidence in Alaska. We can and must do better. The budget, as reduced by the governor’s vetoes, does not embody the values of the Alaska we all support and love. Diane Kaplan is the president and CEO of the Rasmuson Foundation.

GUEST COMMENTARY: The self-destructive fight over the PFD

Like many Alaskans, I’m dismayed at how the debate over the size of the Permanent Fund dividend has degenerated into cutthroat politics, pitting Alaskans against each other. I’ve always felt the small-town character of our state, where many people know each other, would allow us to work out our disagreements in a more reasoned manner. No more, it seems. Former Gov. Jay Hammond, who passed away in 2005, would be dismayed at how the PFD has divided Alaskans and corrupted our politics. Civil debate is no longer how to improve schools or solve homelessness, but about the size of the annual dividend check. It’s obvious, too, that many Alaskans, a lot of legislators and possibly our governor, have little knowledge of the history of the Permanent Fund and the dividend, and how they work. I forgive ordinary people who are busy earning a living for this, but I’m not so forgiving to elected officials who should know better. I was around the Legislature when the Fund was created by the Legislature and the voters in 1976, as well as in 1980, when the dividend was approved by the Legislature. You wouldn’t know it now listening to those who see the PFD as an entitlement, but the dividend was actually quite controversial when it was created, and almost didn’t pass the Legislature. Many Alaskans were true conservatives in those days and were dubious about the state handing out checks. Gov. Jay Hammond and a group in the state House pushed the dividends, but there was a lot of opposition from other legislators, particularly in the Senate, where there were worries about the dividend diverting money from sorely-needed public infrastructure. Hammond had to strong-arm senators with threats to veto the state capital budget to get the votes, and even then the margin was narrow. When the Permanent Fund was created in 1976, there was no discussion about a dividend. The idea was mentioned once during a legislative hearing by a consultant, but there was no public discussion. I served on an advisory board to Hammond and in a long series of public forums we held in the late 1970s on how Alaska should handle policy issues, including our new oil wealth, I don’t recall any mention of a PFD. All that was years ago, however. Memories fade and myths develop. One myth I heard a lot of during public meetings on the PFD this spring and early summer was that the dividend is the “people’s share” of state oil wealth. In a symbolic sense, that can be true — people are free to believe it because the PFD does represent a public sharing of some of the Permanent Fund’s income, but there is no legal basis of a private right to this public resource or that the PFD is guaranteed. In fact, when Congress passed the Alaska Statehood Act in 1959, our new state was given a generous land endowment, including mineral rights (the basis of future oil wealth), but the state was forbidden to sell or privatize its mineral rights. Leasing of extraction rights was allowed, however. which we do. This prohibition in the statehood act cuts against any notion of a private right, through the PFD, to an individual’s direct share of oil ownership. Congress’s reasoning for this is buried in the committee records, but the common belief was that congressmen were worried about the young state’s ability to support itself and wanted to encourage natural resource development to provide revenue for public services. The prohibition was inserted to forestall any temptation by Alaskans to sell off resources, other than through orderly leasing programs, to get quick bucks. In its wisdom, Congress was protecting us from ourselves. But while the state can’t legally grant a private right to oil income the Legislature, which has the sole authority to appropriate funds, can certainly develop a mechanism to share the wealth, which it did in creating the PFD in statute. However, our constitution gives the Legislature the flexibility to change any statute any time, including that for the dividend. The PFD also requires an appropriation every year in the budget, and despite the existence of a 1980s-era statute that guides the calculation of the dividend the amount is purely up to the Legislature. The existing formula was designed at a time when the Permanent Fund consisted mainly of investments in bonds and it worked well at the time. When the Fund diversified into stocks and other equities distortions began to appear but legislators essentially followed the formula over the years because the Permanent Fund was small at the time and the PFDs relatively modest, but most important because state oil revenues were ample. State leaders were preoccupied with other issues that were more important at the time and left the PFD formula alone. Then came 2016, when state oil revenues dived, and the Permanent Fund, its earnings and the PFDs had grown. The need to use some Fund earnings became apparent. Reducing the PFD was part of that, even though the dividend remained high by historical standards. We certainly face a political collision over this now. As he campaigned, Gov. Mike Dunleavy promised a “fully-funded” PFD under the old formula, which works out to about $3,000 this year. There is strong pushback from most legislators and many in the public, however. To pay for the large dividend, the governor has effectively cut the state budget through vetoes. Critics feel huge cuts to the University of Alaska and social services for needy Alaskans, through vetoes, aren’t worth the $3,000 PFD. Others, however, argue their families need the large dividends to help ends meet. It’s hard not to be sympathetic. It was interesting to me, however, that in hearings by the House Finance Committee on the PFDs last week, many who argued for the larger checks also said they would be willing to pay modest state taxes to help support public services. One person said she arrived in Alaska in 1977 and paid a hefty state income tax. If the taxes Alaskans paid then were adjusted for inflation, she said, they would bring $1.4 billion yearly into the state treasury. That’s easily enough to cover the budget deficit and even pay for the PFD. Alaskans now essentially pay no state taxes as individuals. The state is still supported by oil revenues and, now, a portion of Permanent Fund earnings. Other Americans look at our political fight over the PFDs and think Alaskans are nuts. They’re right. ^ Tim Bradner is co-publisher of the Alaska Economic Report and Alaska Legislative Digest.

Anchorage Assembly approves $42M contract for first new port dock

The Anchorage Assembly has approved funding to start a total rebuild to the docks at the city’s beleaguered port a decade after construction problems halted prior efforts to upgrade the essential infrastructure. An 8-3 Assembly vote at a July 30 special meeting allows city officials to award a $42.1 million contract to Seattle-based Pacific Pile and Marine to build the first phase of a new, roughly $220 million petroleum and cement terminal at the city-owned Port of Alaska. The Assembly had delayed the vote twice before at its regular bi-weekly meetings on the hope officials in Mayor Ethan Berkowitz’s administration could reach an agreement over the work with a consortium of eight Port of Alaska customers, who object to the plan, primarily because of its cost. The port user group is comprised of the general cargo shippers Tote Maritime and Matson Inc.; five fuel supplier and distribution companies; and Alaska Basic Industries, which is a primary cement distributor in the state. Representatives of the user companies have stressed at numerous Assembly committee meetings and work sessions over the past few months that city and port officials do not have a plan to finance the rest of the petroleum and cement terminal, or PCT, and cannot explain how the cost of the project went from $38 million in 2014 to more than $200 million today. Millions of dollars have already been spent on preconstruction dredging in front of the docks and other soil stabilization work. They have urged the city to stop work to advance the port modernization project and reexamine the whole scope of the project to replace all of the five cargo and fuel terminals at the port, which is now estimated to cost $1.9 billion, a price tag no one sees as viable. A significant portion of the $1.9 billion cost is for removing what’s left over from the original port expansion project, which stopped in 2010 after large sections of sheet piling meant to support the new docks were found to have been damaged during installation. Anchorage Municipal Manager Bill Falsey acknowledged during the July 30 meeting that the city is still about $100 million short of finishing the PCT, but said the city’s plan “is to responsibly make incremental progress” on port work while ways to bring down the cost of the rest of the dock replacement are examined. Falsey also noted the PCT needs to be built first, as it’s location south of the existing facilities will open up space for work on the rest of the docks while vessels continue to call on the port. He has long insisted that city officials recognize the $1.9 billion plan is wholly unaffordable, even though the PCT is the first part of that plan. However, ongoing examinations of the badly corroded steel piles that support the current docks — many of which are more than 50 years old — continue to reveal damage from the November 2018 earthquake, adding to the urgency of the matter, according to port officials. Their experts contend the port has less than 10 years before some of the docks will have to be de-rated for weight capacity or closed altogether if they are not rebuilt. The $42.1 million contract to build a PCT trestle and dock platform next year “begins to put petroleum and cement deliveries back on reliable footing,” Falsey said. Dave Karp, a senior vice president with Tote Maritime’s parent company Saltchuk, said before the vote that the user group and city officials met multiple times over the past week but were unable to reach a compromise path forward. He emphasized the users do not want to obstruct progress on rebuilding the port as they agree the work needs to be done; they just don’t believe it is so pressing that it needs to happen before a comprehensive look at the project costs is complete. “Do we really want to risk history repeating itself?” Karp asked Assembly members, in reference to the failed port expansion project that cost roughly $300 million and produced little viable infrastructure. Consultants hired by the Assembly to review the project for cost saving measures have said alignment between the city and the users will be critical to move the project forward successfully. Falsey said the city will “wring out the big costs from the rest of the project while making incremental progress” on the PCT. The users have suggested repairing one of the existing petroleum terminals but the viability of that is unclear at this point. Adding to the pressure, Pacific Pile and Marine representatives have said the contract needs to be approved by Aug. 1 in order to ensure the massive steel pilings can be ordered and fabricated in time for the 2020 construction season and to get the best price. Assemblyman John Weddleton, who voted against the contract, said it’s difficult to stop a major project once it is started and questioned when the current Assembly members — none of whom were a part of the body at the time — would’ve stopped the failed expansion project. “I don’t want to get stuck with something else we don’t need,” Weddleton said. “I’m ready to pause. I’m going to say, ‘let’s look.’” Assemblywoman Meg Zaletel said the city needs to move forward with the PCT, contending the debate over it has served as a catalyst to bring the city and users to the table for important discussions about the rest of the project despite the disagreement over how and when to move forward. “I understand there’s debate but I’m convinced there’s critical need for this infrastructure,” she said. The Assembly also approved the formation of a formal five-member port working group to facilitate better communication between the city, users, and the Assembly on major port reconstruction decisions. The group will have two members nominated by the users and approved by the Assembly, two city officials and one Assembly-selected member, likely the Assembly’s consultant hired earlier this year to examine the overall scope of the port work for cost savings. Assemblyman Fred Dyson, who voted against awarding the contract, said he doesn’t expect major savings will result from the meetings, but he commended the users and the city for making good-faith efforts to reach a compromise. Assemblywoman Crystal Kennedy was the third “no” vote. Karp reiterated after the vote that the users will continue to work with the city on ways to improve the final port project. Falsey also emphasized again that the administration is open to hearing from anyone who can help produce a better, less costly, port modernization plan.

Alaska Air Group rebounds to solid second quarter profit

Alaska Air Group Inc. executives said the company is returning to its core business principles following a strong second quarter that netted the company a $262 million profit. Seattle-based Alaska Air Group Inc. operates Alaska Airlines and regional carrier Horizon Air. Air Group leaders have long stressed fundamental business principles to achieve an investment-grade balance sheet with modest debt levels; ideals that led the company to seven consecutive years of record profits earlier this decade. The streak of profitability provided Alaska Airlines the financial wherewithal to purchase Virgin America, one of its primary West Coast competitors, in an April 2016 deal that cost the company roughly $4 billion. The complexities of merging two large airlines have since eaten into company profits, but the airline is poised to return to its strong moneymaking ways, CEO Brad Tilden said in a July 25 conference call with investors. “We are well set up to move towards our targeted annual growth and our targeted pretax margin of 13 to 15 percent over the business cycle,” Tilden said. “Our results for the first half of the year make us optimistic for the rest of 2019 and beyond.” Company officials generally said their focus in 2019 is on managing costs — which was done better than expected in the first half of the year — and the coming years will be about beginning to realize the benefits of the larger network the Virgin America acquisition can provide. Alaska Air Group produced a profit of just $4 million in the first quarter, but executives blamed the relatively small profit on unusually bad winter weather in the Pacific Northwest. The $262 million in second quarter earnings was a 26 percent improvement over its $193 million profit for the same period in 2018. The $262 million profit also translated into a net of $2.11 per share. Alaska Air Group stock closed trading July 25 at $63.83 per share. The company paid a dividend of 35 cents per share in the second quarter and repurchased approximately $25 million worth of shares in the first half of 2019, according to the quarterly report. “We set a plan to return $220 million to shareholders this year and we’ll hit it,” Chief Financial Officer Brandon Pedersen said during the earnings call. The $262 million profit was on the back of nearly $2.3 billion in operating revenue, which correlates to 6 percent year-over-year growth. Chief Commercial Officer Andrew Harrison said that the second quarter revenue growth of was the best year-over-year per unit improvement the company has seen in seven years. Pedersen noted the company also enjoyed its second consecutive year-over-year improvement in quarterly margins. “It’s evidence that our plan to improve revenues is working,” Pedersen said. Air Group ended the quarter holding more than $1.6 billion in cash and short-term investments. The company, which holds nearly $13 billion in assets, generated cash flow from operations totaling roughly $1.1 billion during the first half of the year. After $330 million in capital expenditures, Air Group was left with $735 million in free cash flow, which Pedersen said was nearly $400 million more than 2018 year-to-date. The extra available cash is the result of a calculated decision last year to reduce capital investments in order to have more money on-hand, he said. In Alaska, the company completed a new $50 million hangar at Ted Stevens Anchorage International Airport last November. The Anchorage maintenance facility was the largest of numerous new construction and renovation projects Alaska Airlines began across the state in 2016. It also spent $30 million to remodel and expand several of the terminals it owns at rural Alaska airports it serves. The airline also participated in several terminal upgrade projects at some of its West Coast hubs, such as Los Angeles International Airport, in recent years. The airline also finished launching three new cargo aircraft dedicated to serving the state of Alaska last year. Additionally, Pedersen said Air Group has repaid about $280 million in debt this year and is trying to refinance some of its outstanding obligations to fixed-rate debt to take advantage of currently low borrowing costs. He noted the company has repaid $1.2 billion of the roughly $2 billion it borrowed to purchase Virgin America and is on pace to reduce its debt balance by about $350 million this year. Including aircraft leases, Alaska Air Group’s debt-to-capitalization ratio currently sits at about 45 percent and is on track to be 42 percent by the end of the year. The company should return to its 40 percent debt-to-cap target next year, according to Pedersen. “A fortress balance sheet has been the hallmark of this company for many years and we’re moving quickly back to that position,” he said. On the operations side, Pedersen said Horizon Air’s productivity — measured as passengers per full-time equivalent employees — improved 3.3 percent in the second quarter and the regional carrier’s passenger traffic increases 17.4 percent on a 15.3 percent increase in capacity, according to the quarterly report. Chief Operating Officer Ben Minicucci added that Horizon, which for years had dealt with on-time performance issues related to an industry-wide pilot shortage, according to company leaders, is now among the top-performing regional carrier in the country. “I want to give a shout out to the people of Horizon for a complete turnaround in their performance over the past couple of years,” he said. During the quarter Alaska Airlines also reached a two-year contract extension with its mechanics represented by the Aircraft Mechanics Fraternal Association, which allows Alaska mechanics to work on all of the airline’s mainline aircraft, according to Tilden. Alaska Airlines historically flew Boeing 737 aircraft exclusively, while Virgin America operated Airbus planes. Alaska also reached a tentative five-year agreement with its roughly 5,200 office, passenger service and ramp employees represented by the International Association of Machinists, which Tilden said he hopes will be ratified by the union in the coming weeks. Alaska does not have any of the currently grounded Boeing 737 MAX series aircraft. The airline was scheduled to take three 737 MAX planes later this year, but those deliveries will likely be cut to one MAX this year, according to Pedersen, with two more coming early in 2020. The new labor deals will add about $50 million in wage and benefit costs annually, and about $40 million in the second half of this year due to $24 million in signing bonuses that will be paid in the third quarter, according to executives. Pedersen said even with the new labor costs the company expects to keep its cost growth at about 2 percent per unit for the year, excluding fuel, which is in line with earlier projections. “We’re delivering industry-leading performance and our customer service is award winning,” Pedersen said. “On the financial side we have revenue and cost momentum and our balance sheet is strong. If we continue to execute our plan we’ll be in the top quartile of the industry for profit margins, balance sheet and free cash flow generation.” Elwood Brehmer can be reached at [email protected]

Legislature sends capital budget, $1,600 PFD and spending bills to gov

JUNEAU — The Alaska Legislature has approved legislation fixing the state’s four immediate fiscal problems, and now the final decision is up to Gov. Michael J. Dunleavy. On July 29, lawmakers passed two pieces of legislation that address this year’s Permanent Fund dividend, the governor’s operating budget vetoes, the capital budget and reverse sweep. • House Bill 2001 sets this year’s dividend at $1,600 per person and reverses all but $23.29 million of the $444 million in vetoes Dunleavy made to the state’s operating budget in June. The remaining vetoes include $20 million from the University of Alaska and travel reductions to many state agencies and departments. • Senate Bill 2002 funds the state’s capital budget with money from the Constitutional Budget Reserve and includes the “reverse sweep,” a procedural matter that prevents 54 state savings accounts from being automatically drained into the budget reserve. It also contains permission for the Legislature to spend $250 million from the Constitutional Budget Reserve on as-yet-undefined projects, such as wildfire fighting. The Legislature would be required to specify the spending at a future date. Legislation is not sent to the governor’s desk immediately when it passes the Legislature. Legislative drafters, lawyers and clerks first examine the bill before transmitting it to the governor. In addition, the leaders of the House and Senate have the final word on when a bill is transmitted, and they can hold on to legislation (though not indefinitely) before sending it to the governor. It remains unclear when the bills will be transmitted. “The Senate has every intent of getting the capital budget to the governor’s office as soon as possible,” Senate President Cathy Giessel, R-Anchorage, said by text message. “The money for roads, and funding for our UA scholars less than a month from classes starting, is too important, and will not be held up.” A spokesman for Speaker of the House Bryce Edgmon, I-Dillingham, was unable to answer questions before the end of the day on July 30. The current special session adjourns Aug. 6. According to the Alaska Constitution, if the Legislature is not in session, the governor has 20 days (Sundays excluded) to sign a bill, veto it, or allow it to become law without his signature, once it is transmitted to him. In a July 29 phone call with reporters, the governor said of the capital budget bill and reverse sweep that “we’re glad for that, and we’re glad because … it helps Alaskans.” The governor was less positive about the legislation setting the PFD amount and reversing many of his budget vetoes. In the same call, he referred to the bill as a “disappointment because the PFD was now taxed by almost 50 percent for every man, woman and child.” The governor has consistently maintained his view that the state’s budget should be balanced by cutting services and not raising taxes or reducing the dividend. In February, he introduced a proposal to do so in one year. He now believes that proposal should be implemented over two years. Even if the governor were to re-veto all of the budget items he vetoed in June, the state would not have a balanced budget if a full dividend were paid this year. The governor has said he will propose additional cuts next year.

ConocoPhillips posts seventh straight quarterly profit

Lower global LNG and natural gas prices took a small bite out of ConocoPhillips’ profits, but the major producer still generated a healthy profit of nearly $1.6 billion in the second quarter. Company executives released the quarterly earnings report July 30. Chairman and CEO Ryan Lance said in a statement accompanying the report that the period was the seventh consecutive quarter the company was able to generate free cash flow and pay for capital investments, share buybacks and dividends out of cash from operations while meeting its operational and financial targets. “ConocoPhillips has embraced an approach to our cyclical industry that we believe will deliver superior returns and create value across a range of commodity prices,” Lance said. “This quarter represents a continuation of strong performance on our business model that prioritizes financial returns, discipline, resilience with upside and shareholder distributions.” The companywide profit was generated from more than $8.3 billion in revenue and translated into earnings of $1.40 per share. ConocoPhillips stock closed trading July 30 at $59.56 per share, up 4.2 percent from the pre-earnings report start to the day. Lance added that company leaders will present a plan detailing their ability to continue the strong returns over the long term at a November investor meeting. ConocoPhillips had achieved profits greater than $1.8 billion for three quarters in a row before the $1.6 billion second quarter net. ConocoPhillips’ total realized price for all of the oil and natural gas it sold during the first half of the year was $50.55 per barrel of oil equivalent, compared to $52.37 in the first six months of 2018, according to the report. The company also continued to realize strong returns from its North Slope Alaska operations, which netted a $462 million profit during the period. However, several special item costs “predominately related to non-cash adjustments for certain state and federal tax adjustments” totaling $81 million resulted in $381 million in adjusted quarterly earnings for ConocoPhillips’ Alaska business segment, spokeswoman Natalie Lowman wrote in an email. ConocoPhillips paid $278 million in State of Alaska taxes and royalties during the quarter as well, according to Lowman. She added that the company has reinvested all of its adjusted Alaska earnings totaling $765 million so far in 2019 back into projects in the state. ConocoPhillips Alaska spent $370 million on capital investments during the quarter. The second quarter also marked the end to one of the company’s largest Alaska exploration seasons, in which eight exploration wells were drilled and tested, Lowman wrote via email. A slide presentation accompanying the earnings report states ConocoPhillips had “encouraging” results from the wells drilled at its North Slope Willow and Narwhal prospects, but the company has not released additional information on the exploration results. ConocoPhillips also announced a deal to purchase the mid-sized Nuna prospect on the North Slope from small independent Caelus Energy, but a purchase price has not yet been disclosed. The $462 million Alaska profit accounted for 29 percent of ConocoPhillips global earnings for the quarter, while the company’s production from the state — dominated by high-value oil — accounted for 16 percent of its total combined oil and gas production. Alaska has also accounted for 23 percent of the company’s overall year-to-date capital spend of $3.4 billion. Elwood Brehmer can be reached at [email protected]

EPA rescinds proposed action to stop Pebble mine

A July 30 announcement from the Environmental Protection Agency means it won’t stand in the way of Pebble Partnership receiving the key federal permit it needs to construct what has become one of the most controversial development projects in the country. EPA Region 10 Administrator Chris Hladick on July 30 signed a 28-page notice at the direction of agency leaders that formally removes the agency’s proposed “preemptive veto” that loomed over the Pebble mine project since it was initiated under former President Barack Obama’s administration in 2014. In an interview Pebble CEO Tom Collier said, “This is a good day for Pebble. It’s a day I wish had happened much sooner, but it’s a good day for Pebble.” The EPA retains its power to eventually prohibit the Pebble mine project under the Clean Water Act. Hladick also wrote that the EPA has other avenues to scrutinize the project such as the 404(q) process, which “elevates” the environmental analysis of projects the EPA believes could have significant environmental impacts through a longstanding agreement the EPA has with the Corps of Engineers. Traditionally, the 404(q) has been used before any final actions regarding a wetlands permit are made, according to Hladick. “EPA believes these processes should be exhausted prior to EPA deciding, based upon all information that has and will be further developed, to use its Section 404(c) authority,” he wrote. Collier added he doesn’t see why the EPA would use the 404(q) and potentially go back to a 404(c) veto in roughly a year — when the Pebble EIS is scheduled to be done — after rescinding it now. Formal statements from Pebble and its parent company, Vancouver-based Northern Dynasty Minerals Ltd., thanked Gov. Michael J. Dunleavy for pushing President Donald Trump’s administration to rescind the proposed restriction. Dunleavy has avoided taking a formal stance on the hotly contested project, but said the EPA’s unusual actions to preclude its development send a bad signal to prospective investors in other projects across Alaska. The Pebble deposit is on State of Alaska land. Hladick is a former commissioner of the Alaska Department of Commerce, Community and Economic Development under former Gov. Bill Walker, who opposed the Pebble mine, and has served as manager to several local governments across Alaska, including the City of Dillingham, a commercial fishing hub in the Bristol Bay region. Pebble’s opponents, which include conservation groups, area fishing lodges, Bristol Bay tribes and Bristol Bay Native Corp., said in statements that the EPA’s latest action disregards the agency’s namesake responsibility, insisting the mine would endanger the salmon area residents rely on for jobs and subsistence harvests. BBNC President Jason Metrokin stressed that the move is inconsistent with the comments EPA Region 10 officials sent to the U.S. Army Corps of Engineers July 1 on the Pebble draft environmental impact statement. Those lengthy written comments —signed by Hladick — stated the project as proposed could have significant adverse environmental impacts and the draft review document lacked important analysis of the project’s downstream impacts, among other things. “A large majority of BBNC shareholders, more than 80%, are concerned about the risks Pebble poses to the region and its fisheries and are opposed to the project. BBNC will always advocate for its shareholders’ best interests and will continue to oppose this inherently dangerous proposal,” Metrokin said. “One thing is certain: the people of Bristol Bay will not stand down. Bristol Bay’s commercial fishery is once again on pace for a record sockeye salmon harvest, but the people, the economy and a way of life that is dependent on these incredible fish are put at risk by today’s decision.” He also asserted that the EPA’s move comes just weeks after agency officials said they had no timeline for revisiting the proposed restriction. Pebble’s Collier said the concerns listed in EPA’s comments on the project review and those from other federal and state agencies were largely the result of overlooked information that is in fact in the roughly 1,400-page EIS. “For the most part the issues that have been raised aren’t of great surprise and aren’t of great significance. I think they’ll be dealt with by the Corps and the third party contractor (working on behalf of Pebble) and we’ll march ahead towards getting our permit,” Collier said. “There’s a reason they call it a ‘draft,’” he added. EPA General Counsel Matthew Leopold directed Hladick in a June 26 memo to reconsider the agency’s proposed 404(c) restriction. Hladick wrote in his 404(c) lifting notice that the Pebble EIS provides an analysis of Pebble’s actual plan, instead of relying on the 2014 Bristol Bay Watershed Assessment, which contemplated several hypothetical mine projects and Pebble claims was written to justify stopping the project. The allegation that the watershed assessment was biased formed the basis for Pebble’s lawsuit against the EPA but it was not invalidated in the 2017 settlement. A January 2016 EPA Inspector General report supported the validity of the assessment, but scolded the agency for months’ worth of missing emails and other procedural missteps related to evaluating the prospective Pebble project. Collier said he doesn’t see a need to invoke the more stringent but somewhat nebulous 404(q). “Sometimes a project just becomes one where decisions are being made at the highest levels of the agency in Washington, D.C.; I think that’s where we are,” Collier said. “So I’m not sure elevation would change a damn thing. You saw that the highest level person at EPA who has not rescued himself and that’s the general counsel (Leopold), was involved in this decision essentially in-lieu of the administrator.” EPA administrator Andrew Wheeler has rescued himself from anything relating to Pebble to prevent a potential conflict of interest stemming from business at a law firm where he previously worked. Leopold sent a letter to Army Corps of Engineers leadership July 25 asking for an extension to the deadline in the 1992 working agreement by which the EPA was supposed to request the 404(q) process be started. That deadline was July 26. Specifically, Leopold asked for EPA officials to have 30 days after the Corps drafts preliminary decision documents for Pebble’s permits before the EPA has to make its decisions regarding the project. That would likely be sometime next year. The EPA began the process to withdraw the proposed Section 404(c) veto — named for where it is found in the Clean Water Act — in July 2017 following the settlement of a lawsuit earlier that year by Pebble against the agency that directed EPA officials to take steps to lift the proposed development prohibition. The settlement, however, did not mandate the proposed veto be lifted, as the EPA has now done, but the action needed to happen before the U.S. Army Corps of Engineers could issue a final wetlands fill permit for the project. The Army Corps of Engineers adjudicates wetlands fill permits on behalf of the EPA for development projects across the country, but the Clean Water Act gives the EPA the authority to override wetlands fill permits the Army Corps issues if it determines the project would have unacceptable impacts to the environment. The EPA has used that authority very sparingly over the decades since the Clean Water Act was passed, but Pebble was the first instance in which it had been invoked prior to a wetlands fill permit being applied for. Pebble applied for its 404 wetlands fill permit in December 2017. In January 2018 in an unexpected move, former EPA Administrator Scott Pruitt suspended the 404(c) withdrawal process after the agency took public comments on the move citing “serious concerns” he had regarding the impacts the large Pebble mine and infrastructure project could have on the area’s salmon fisheries, which support an estimated 14,000 commercial fishing jobs in an otherwise economically depressed region. Pebble has long touted that it would provide roughly 2,000 jobs to Alaska, many of which would be high-paying opportunities in inland parts of the Bristol Bay region that see less benefit from the commercial fishing industry. Elwood Brehmer can be reached at [email protected]

Kenai River sockeye push liberalizes bag limits; commercial catches rise

SOLDOTNA — After a slow start to their season, things are looking up for Upper Cook Inlet’s commercial fishermen. Total salmon landings reached 1.4 million after the July 29 fishing period, with more than 1.1 million sockeye so far. The majority of those landings have come from the Central District drift gillnet fleet and east side setnets, with setnetters on the west side, Kalgin Island and in the Northern district bringing in about 150,000 salmon between them, according to the Alaska Department of Fish and Game. It’s hard to say whether the forecast of 6 million sockeye across all the systems of Upper Cook Inlet will materialize yet, but it’s definitely looking better than it was a few weeks ago, when Upper Cook Inlet fishermen were lagging significantly behind even their 2018 catch by this date. Last year was one of the worst years in recent memory for sockeye harvest for fishermen across the Gulf of Alaska, Cook Inlet included. On July 26, fisheries managers in Soldotna estimated that the Kenai River run is 2 to 4 days later than usual, but that it will likely be greater than 2.3 million. That’s on track with the preseason forecast of about 3 million. That’s much more on time than last year, when the run turned out to be at least a week later than usual. Even a run four to five days late can significantly interrupt fishing management plans in Upper Cook Inlet, where the interlocking user groups and their management plans keep operations fairly tight. The Kasilof River, about 12 miles to the south of the Kenai, is getting close to the upper end of its own escapement goal of 340,000 sockeye. As of July 29, 306,812 sockeye had passed on the sonar on that river. Commercial area management biologist Brian Marston said the managers will likely start opening up more hours in the Kasilof area to help control that escapement, with an eye toward not having to open the Kasilof Special Harvest Area. “We have several steps that we’re supposed to take before that, which is to use more hours than the management plans normally allow and also to not adhere to the (mandatory closure) windows,” he said. “The SHA is a last resort. The management plans actually state that you shall do extra hours and step on the windows before you do the SHA. Although it’s a good idea, it doesn’t function to really stop the river that well.” The SHA is a constrained terminal harvest area around the mouth of the Kasilof River, functioning as a last effort to control escapement to that river. Because of the tidal flats and constrained area, it’s relatively hard to fish. During the 2017 Upper Cook Inlet Board of Fisheries meeting, the board members took several steps to help managers avoid having to use the SHA to control escapement, including expanding opportunities for the use of the 600-foot setnet fishery along the nearby beaches. The Kenai River is already within its sustainable escapement goal range, and as of Monday was within the inriver goal range of 1 million to1.3 million sockeye. The sustainable escapement goal is set for spawning; the in-river goal is designed to account for sportfishing harvest. Now it’s a game of controlling escapement to not exceed the upper end of the escapement goal using the commercial and sport fisheries. But one confounding factor is the king salmon run there. The kings are still returning to the Kenai, but only 8,615 large kings had passed the sonar as of July 29. The lower end of the escapement goal for late-run kings is 13,500. In trying to protect kings, the commercial area managers are somewhat hamstrung when trying to open setnets to harvest sockeye salmon in the Kenai River area. After Aug. 1, the managers get more hours as the restrictions on commercial fishing hours through the Kenai River Late-Run King Salmon Management Plan are lifted, Marston said. “As soon as we get out of the king plan at the end of the month, we have to still pay attention to the escapement of king salmon,” he said. The Kenai River personal-use dipnet fishery closes on July 31 at 11:59 p.m. as well. Sport anglers will keep fishing, and ADFG sport fishing managers doubled the bag and possession limits to six per day with 12 in possession for the Kenai River downstream of Skilak Lake effective Sunday. They also increased the bag limits for sockeye in the Kasilof River Effective July 24 to six per day with 12 in possession. The personal-use dipnet fishery there will continue as well until Aug. 7. Pink and coho salmon are starting to show up as well, though this year is set to be a relatively weak pink year, as odd-numbered years are in Upper Cook Inlet. As of July 29, commercial fishermen had landed 83,307 coho salmon across Upper Cook Inlet, and though there are no escapement goals for coho salmon south of the Deshka River, Marston said there were signs the run could be strong this year. The Deshka River weir has counted 826 coho salmon as of July 29, ahead of last year on the same date. The northern streams are on target for their coho runs so far, and strong numbers have been showing up at Fish and Game’s weirs since the rain began last week. The run could still turn out to be unexceptional, as coho didn’t show up strongly in the test fishery numbers, but it could also be another excellent year, he said. ^ Elizabeth Earl can be reached at [email protected]

Hundreds of Alaska ferry workers go on strike

Hundreds of ferry workers went on strike Wednesday after failing to reach agreement on a contract, a move that state officials called unlawful and disruptive during the busy summer travel season. Robb Arnold, a spokesman for Alaska's Inlandboatmen's Union of the Pacific, said the strike began Wednesday afternoon after a meeting with state personnel officials did not yield an agreement. He said the union remains open to a deal. "Unfortunately, we had to take this action," he said, noting earlier that 86 percent of the union's membership had authorized a strike. Areas of disagreement cited by the state include pay increases and health care benefits. The union said service cuts are a key issue. The state budget includes cuts to the system and Gov. Mike Dunleavy's administration has said it wants a consultant to identify possible ways to reduce the state's financial responsibility to the system, which is seen as an important transportation link for many coastal communities. Department of Administration Commissioner Kelly Tshibaka told reporters the strike is unlawful and said the state was doing all it can to end it, "short of capitulating" to demands she called unreasonable and expensive. She said the union is striking to force Alaska to agree to terms that would violate the state Public Employment Relations Act. If the strike is in support of unlawful contract proposals, which she said the state believes is the case, then the strike is not lawful or proper and can leave striking workers open to discipline, she said. Tshibaka said she has to be intentionally vague with what she discloses publicly but said the state is sharing specific issues with the union. John MacKinnon, commissioner of the state transportation department, said ships will be maintained at port. He said that could be complicated if the other two unions representing ferry workers refuse to cross picket lines. MacKinnon said the department, which oversees the ferry system, was refunding passenger tickets, helping passengers with other travel arrangements and looking at ways to get passenger vehicles to their final destinations. He said the timing of the strike is unfortunate, noting the Southeast Alaska State Fair is happening this weekend in Haines. "We're disappointed that they chose this time to do it," he said. "I think there was probably some calculation behind that." The Department of Administration said late Tuesday the sides were at an impasse following the rejection of "numerous fair and fiscally responsible contract offers." The union represents about 430 workers, the department said. Talks between the state and union have gone on for over 2½ years, Tshibaka said. The union said the state proposed mandatory overtime instead of hiring more workers and a one-year contract instead of "more efficient" three-year agreements. It also cited what it says has been poor treatment by management. According to the department, the state, under the prior administration, offered a 5 percent pay increase over three years. The union proposed a 9 percent pay increase over three years and allowing workers to choose which ships they work on. That would have limited the state's ability to manage the ferries as effectively as possible, the department said. Tshibaka said the state had asked the union to meet with a federal mediator Thursday. "But they declined and instead you see what they're doing," she said, adding that the state thinks it has "new and creative solutions" to the dispute.

UK: Europe-led mission will protect Gulf shipping

LONDON (AP) — Britain announced plans July 22 to develop and deploy a Europe-led “maritime protection mission” to safeguard shipping in the vital Strait of Hormuz in light of Iran’s seizure of a British-flagged tanker in the waterway last week. Briefing Parliament on the budding crisis, Foreign Secretary Jeremy Hunt accused Iran of “an act of state piracy” that must be met with a coordinated international reaction. Iranian officials have suggested the Stena Impero was seized and taken to an Iranian port in response to Britain’s role in seizing an Iranian oil tanker two weeks earlier off the coast of Gibraltar, a British overseas territory located on the southern tip of Spain. Hunt announced precious few details of the proposed protection mission, but said Britain’s European allies will play a major role in keeping shipping lanes open. One-fifth of all global crude exports passes through the narrow strait between Iran and Oman. The foreign secretary said Iran must understand that its actions will only lead to a bigger Western military footprint in the region. “It is with a heavy heart that we are announcing this increased international presence in the Gulf, because the focus of our diplomacy has been on de-escalating tensions in the hope that such changes would not be necessary,” Hunt said. He also sought to put distance between Britain and its closest international ally, the United States. Washington has broken with London on Iran policy as a result of President Donald Trump’s rejection of the international accord designed to prevent Iran from developing nuclear weapons. Trump pulled the U.S. out of the accord last year and re-imposed harsh sanctions, which have had a severe effect on Iran’s economy. The foreign secretary said the planned European mission was not part of the U.S. policy of exerting “maximum pressure” on Iran. It was unclear which countries will join the protection force or how quickly it can be put in place. Hunt said he had consulted with foreign ministers of Oman, the United States, France, Germany, Italy, Finland, Spain and Denmark. There are no British nationals among the Stena Impero’s 23 crew members — most are Indian, as well as Filipino, Russian and Latvian nationals. Iran released new video showing the ship’s crew for the first time Monday, an apparent attempt to show they were unharmed. Iran’s government spokesman Ali Rabiei said that there are diplomatic solutions to the current crisis, but he also defended Iran’s actions. “When you illegally seize a ship in Gibraltar… we don’t deem it as necessary to show tolerance,” he said. “Some countries have asked for the immediate release of the British tanker. Well, we ask those countries to make the same request to Britain first.” Britain says it acted lawfully off the Gibraltar coast to prevent illegal oil shipments to Syria that would have violated European Union sanctions. It says Iran broke international maritime law by forcing the Stena Impero to change course and go to Iran. However, Iran’s Foreign Minister Mohammad Javad Zarif said the Stena Impero was in violation of “international law on safe passage” in the Strait of Hormuz on the day it was seized. Speaking Monday during a visit to Nicaragua, he said the British ship had “turned off its signaling” for longer than is allowed and “was passing through the wrong channels.” Britain also says the tanker was in Omani waters at the time, which Iran disputes. The tanker crisis is unfolding in the final days of British Prime Minister Theresa May’s leadership. The Conservative Party named Boris Johnson her successor July 23 and the new prime minister took office July 24. The July 19 seizure of the Stena Impero came amid heightened tensions between the U.S. and Iran. In June, Iran shot down an American drone in the Strait of Hormuz, and Trump came close to retaliating with airstrikes. As the nuclear deal between Tehran and world powers unravels, the U.S. has expanded its military presence in the region. Iran has in turn begun openly exceeding the uranium enrichment levels set in the accord to try to pressure Europe into alleviating the pain caused by the sanctions. European nations are working to save the nuclear deal and have tried to come up with ways to keep trading with Iran, but have run smack into Trump’s sanctions, which also target Iranian oil exports. In the newly released video on July 22, the Stena Impero crew is seen dressed in red uniforms and seated around a table onboard as an unidentified Iranian man is heard thanking them for their cooperation. A cameraman is heard telling them not to look at the camera. It wasn’t clear if the crew was under duress to take part in the filming. Other choreographed shots show a man checking on the ship, the crew sharing a laugh and talking next to a coffee machine inside the ship. The crew’s chefs are seen preparing food. Another video released by Iran’s state broadcaster shows Iran’s flag hoisted on the ship’s bridge. Meanwhile, officials in Gibraltar say the ship’s crew has been kept on board the vessel since its seizure July 4. Four Indian crewmembers, including the ship’s captain, were arrested, but not charged, and were then bailed. The crew is comprised of Indian, Pakistani and Ukrainian nationals. ^ Associated Press writer Aya Batrawy from Dubai, United Arab Emirates and Jill Lawless and Danica Kirka in London contributed to this report.

Sustainable fund? Index fund? More investors choose both

NEW YORK (AP) — Two of the hottest trends in investing are working in tandem to steer billions of dollars toward companies seen as the best corporate citizens. The first trend, sustainable investing, is nothing new. Funds focused on companies seen as doing well on environmental, social and governance issues have been attracting ever increasing dollars for years. Their pitch is that companies with better records on the environment are less likely to face big fines or possible bankruptcies, for example, making them less risky long-term investments. The second trend, index investing, has become the default way for many conventional investors to get into the stock market. Now these funds are playing a much larger role in “ESG,” or sustainable, investing and turbocharging its growth. Last year, investors shoveled a record $5.5 billion into sustainable funds. This year they’d reached $8.9 billion by the end of June, according to Morningstar. “There are a lot of investors who would like to invest in ESG and a sustainable portfolio but haven’t done so yet partly because there weren’t low-cost, passive options available,” said Jon Hale, Morningstar’s director of sustainability research. “Now there are.” The recently launched iShares ESG MSCI USA Leaders exchange-traded fund is one example. It’s already amassed $1.43 billion, which makes it bigger than the 81-year-old George Putnam Balanced fund that’s rated five stars by Morningstar. The bulk of that came from a single investor, a European pension fund that made a similarly large investment in the launch of another sustainable index ETF, Xtrackers MSCI USA ESG Leaders Equity, in March. Size matters in investing, and big funds can spread their costs out over a wider base to keep fees low. Both the iShares and the Xtrackers funds have expense ratios of 0.10%, for example. That means they keep $1 of every $1,000 invested annually to cover their fees. The average stock mutual fund, meanwhile, kept $12.60 of every $1,000 invested last year, according to the Investment Company Institute. Of the 15 sustainable funds that attracted more than $100 million in investment last quarter, eight were index funds, according to Morningstar. It’s just the latest evolution in the sustainable investing field, which in its early days attracted investors by avoiding so-called “sin stocks”— gun makers, cigarette manufacturers, etc. More recently fund managers have begun diving deep into companies’ records on the environment, social issues and corporate governance, on the belief that it would lead to better long-term performance. Now, sustainability minded scorekeepers keep tallies for individual companies when it comes to their corporate citizenship. ETFs that track these indexes will often give more weight to companies that have high performance on environmental, social and governance issues than those in the same industry that don’t. Just don’t expect sustainable index funds to look radically different from traditional index funds, Hale said. “There are things that are excluded, but you should definitely not expect to see a focused portfolio of 50 or 100 companies that are complete exemplars of sustainability,” he said. “The typical investor going through the list of hundreds of companies in a portfolio may indeed find some that make them think, ‘I don’t get it, I thought I was avoiding this company.’” The iShares ESG MSCI USA Leaders ETF doesn’t own Exxon Mobil, for example, but it does own ConocoPhillips and other oil and gas companies. For all the recent popularity of sustainable index funds, their actively managed rivals are still drawing dollars themselves. That’s counter to the trend in the broader industry, where investors have been pulling their cash out of conventional funds run by stock pickers in favor of index funds. “I think active management in the ESG space can bring some elements to the portfolio that investors are really interested in, and they’re willing to pay a little premium for that work and the potential for better impact and superior performance,” said John Streur, chief executive of Calvert Research and Management, one of the largest families of responsibly invested mutual funds.

Movers and Shakers for July 28

Gov. Michael J. Dunleavy announced his selections to fill Alaska Superior Court judgeships in Anchorage and Fairbanks. Brent Bennett has been appointed to the Fairbanks Superior Court. Bennett has been an Alaska resident and practiced law for 13 years. He graduated from the University of Cincinnati College of Law in 2006, and is currently the supervising attorney of the Office of Public Advocacy, Fairbanks Defense Section. Earl Peterson has been appointed to the Fairbanks Superior Court. Magistrate Judge Peterson has been an Alaska resident for more than eight years, and has practiced law for 23 years. He graduated from Chicago Kent College of Law in 1995, and is currently a magistrate judge in Fairbanks. Peter Ramgren has been appointed to the Anchorage Superior Court. Magistrate Judge Ramgren has been an Alaska resident for 17 years, and has practiced law for over 21 years. He graduated from Northeastern University School of Law in 1997 and is currently a magistrate judge in Anchorage. Maj. Gen. Peter B. Andrysiak assumed command of U.S. Army Alaska in a ceremony at Pershing Field on July 16. Andrysiak will replace retiring USARAK commanding general, Maj. Gen. Mark J. O’Neil. Andrysiak returns to Alaska from Fort Shafter, Hawaii, where he served as the Chief of Staff for U.S. Army Pacific. He previously commanded USARAK’s 2nd Engineer Brigade at Joint Base Elmendorf-Richardson, including a combat rotation to Afghanistan in 2015. He graduated with a bachelor’s degree in civil engineering from the U.S. Military Academy at West Point, a master’s degree in environmental and water resources engineering from the University of Texas, and a master’s degree in national security strategy from the National War College. Andrysiak was commissioned as a Second Lieutenant in the U.S. Army Corps of Engineers upon graduation from the U.S. Military Academy and has led a career spanning more than 29 years. His decorations include the Distinguished Service Medal, Legion of Merit, Bronze Star Medal, Defense Meritorious Service Medal, Meritorious Service Medal, Joint Service Commendation Medal, Army Commendation Medal, Navy and Marine Corps Commendation Medal, and the Army Achievement Medal. He has earned the Combat Action Badge, Senior Parachutist Badge, and Ranger Tab. Alaska Family Services Inc. announced that longtime Mat-Su Valley health professional Desiré Shepler has accepted the position of president and CEO. Shepler was chosen from a national field of applicants to lead one of Alaska’s largest nonprofits, serving more than 12,000 Alaskans annually with programs and services focused on the family. Shepler comes to AFS from the Mat-Su Health Foundation, where she has served since 2013, most recently as Director of “Raising Our Children with Kindness” (R.O.C.K) Mat-Su. As a student working on her associate’s degree in human services from Matanuska-Susitna College, Shepler completed her practicum hours at Alaska Family Services’ domestic violence shelter. She earned a master’s of public health degree and a bachelor’s degree in psychology, both at University of Alaska Anchorage. Shepler also earned a Certificate in Nonprofit Management from The Foraker Group. Shepler, who was named to the Alaska Journal of Commerce Top Forty Under 40 in 2018, replaces Donn Bennice, who retired as president/CEO in April after leading AFS for 17 years. Vitus Energy LLC (Vitus Marine) has hired Jessica Pestrikoff as human resources manager, Charlotte Long as inventory manager and Jonathan Bloomquist as controller. Pestrikoff has more than 12 years of administrative experience, with eight in the HR field. She came to Vitus from Chugach Alaska Services where she was the staffing program manager working directly with Alyeska Pipeline Service Co. to provide contingent staff to support their field operations. She holds two bachelor’s degrees from the University of Alaska Anchorage in marketing and management. She is a Society of Human Resources Management Certified Professional as well as a Professional of Human Resources. Long joined Vitus Energy with more than 20 years of inventory/sales/accounting experience. Most recently she served as the sales representative for 40 Western Alaska Villages at JB Gottstein. She has two bachelor’s degrees in business and logistics management from the UAA. Bloomquist has a master’s of accounting degree, as well as two bachelor’s degrees from Central Washington University. He comes to Vitus from Vigor Marine where he served as the corporate finance manager with more than 10 years of experience. Wasilla resident Sammye Pokryfki has joined the Mat-Su Health Foundation board of directors. Pokryfki is a lifelong Alaskan who has lived in the Mat-Su Borough for more than 36 years. She was senior vice president at the Rasmuson Foundation until 2017, where she worked for 12 years. Currently she works as a consultant and adjunct faculty member in the University of Alaska Anchorage Honors College. Previously, Pokryfki was executive director of United Way Mat-Su and Denali KidCare rural outreach coordinator for Chugiak Children’s Service. She has also served as a volunteer leader on nonprofit boards, government boards and commissions, blue ribbon committees, and in soup kitchens, domestic violence shelters, faith communities, mentoring programs, recreational events, and as a Court Appointed Special Advocate. Pokryfki holds a master’s degree in social work and two bachelor’s degrees, one in social work and one in English literature, all from UAA. Lebron McPhail, who joined the MSHF board in 2016, was chosen as vice chair. The Alaska Trucking Association has announced top management changes effective Aug. 1. Lifelong Alaska resident and business leader Robert Shake has been named the new executive director of the 300-member association, and Joe Michel was named deputy director. After serving ATA for 13 years, Aves Thompson will officially retire as executive director on July 31. Thompson had spent 24 years regulating commercial vehicles for the state of Alaska and retired as division director of commercial vehicle enforcement in the Department of Transportation and Public Facilities. He also served as chief and director of Weights and Measures and was presented a lifetime achievement award from the National Conference on Weights and Measures. He chaired the AMATS Freight Advisory Committee and served on the Port of Alaska Commission, the UAA Advisory Boards for the Engineering, Logistics and Diesel Schools as well as the Governor’s Road and Highway Advisory Board. Shake brings nearly 40 years of commercial finance and management experience to ATA having held executive management positions in commercial banks, credit unions and the commercial insurance industry. A graduate of Colorado College with a degree in business administration, he has served on and held leadership positions on various boards and commissions including Providence Alaska Foundation, Municipal Light &Power, World Trade Center Alaska and Boys and Girls Club Alaska. Michel, the newly appointed deputy director, has more than a decade of experience in Alaska State Government. He has worked in the governor’s office and both the House and Senate of the Alaska Legislature. He has coordinated the capital budget for the House of Representatives and the operating budget for DOTPF.

OPINION: The messianic arrogance of isolation

“Any Given Sunday” doesn’t seem like Gov. Michael J. Dunleavy’s kind of movie, but Oliver Stone’s outlandish take on pro football does have its moments of profundity. Late in the film after a game when his offensive line allowed him to take a beating over his bigshot attitude, quarterback “Steamin” Willie Beamen walks into the sauna occupied only by linebacker Luther “Shark” Lavay. “Yeah, you led,” Lavay says. “But did anybody follow?” The question, like most are when the answer is obvious, was purely rhetorical. Dunleavy’s support has shriveled in the Legislature to a handful of members mostly from the Valley while traditional Republican Party allies across the business community have either refused to defend him or have directly come out against his vetoes and the House minority holding the capital budget hostage in exchange for a statutory PFD. Dunleavy has led. But how many are still following as he stakes his office on a minority of legislators barely large enough to sustain his vetoes and the oftentimes hateful rhetoric of his PFD-or-bust base in the Valley? Rather than recognize the lack of support for his proposals as evidence of a need to change course, Dunleavy has chosen the path of Valley Rep. David Eastman, who also arrogantly takes his isolation as a badge of honor and proof of his messianic righteousness. Instead of attempting to be a governor for all of Alaska, Dunleavy has chosen to be the governor of District E. This outcome is what many who supported Dunleavy feared when he hired former Republican Party Chairman Tuckerman Babock as chief of staff cum wartime consigliere. And, not to belabor the references to movies starring Al Pacino, he has not governed like the cool-headed and savvy Michael Corleone but as a combination of Sonny and Fredo mixing vindictiveness with incompetence. Dunleavy’s single-minded focus on a $3,000 PFD has leveled the once high ground of sustainable budgeting and respect for the rule of law with his vetoes ranging from punitive to petty to preposterous. Not that the legislative leadership is blameless. Far from it. The aimless stewards of the House allowed the PFD issue to fester for months rather than addressing it or showing even a modicum of respect for the minority members whose votes they now need to fund the capital budget and overturn some or all of Dunleavy’s vetoes. The Senate is led by Cathy Giessel, who was perfectly willing to run on a full PFD with back payments when she faced a tough reelection battle in 2016. “There’s a difference between looking at options and grabbing someone else’s money,” Giessel told the camera in a video that is still live on her 2016 reelection Facebook page. “That’s what Gov. Walker did. He grabbed your money. That money grab didn’t solve anything. A money grab is not a solution. “Sen. Mike Dunleavy is proposing a solution that would give that money back to you. I support that solution and we’ll be working with him in January to see that done. You see, you deserve to have that money back. Alaska deserves a real solution to the budget crisis.” Alaska’s budget situation wasn’t any better in 2016 than it is now — in fact it was worse — but Giessel has done a complete 180 on what she successfully ran on just three years ago. In that regard, Dunleavy deserves credit for trying to deliver what he promised. But in reality the state is not with him as measured by the best possible indicator, which are the votes cast in the Legislature that he has been on the wrong side of all year. Dunleavy could have introduced a sensible four-year plan to gradually reduce government spending to sustainable levels but he blew his chance for real budget reform when he attempted it all in one bite and in such draconian fashion that he spawned the bipartisan majority in the House that has frustrated him at every turn. It’s been written in this space that the PFD is not a suicide pact, but right now Dunleavy and Babcock are mixing the punch with their Valley cohort and intending to force it down everyone’s throats if they don’t get what they want in spite of their lack of popular support. Time is running out for a compromise with the least fortunate among us being turned out to the streets and the University of Alaska declaring the equivalent of bankruptcy a month away from the fall semester. Dunleavy and his dwindling number of allies would do well to remember one more line from “Any Given Sunday” delivered by Pacino’s Coach Tony D’Amato to his players facing one last shot to keep their season alive: “Either we heal now, as a team, or we will die as individuals.” Andrew Jensen can be reached at [email protected]

GUEST COMMENTARY: Dunleavy governing by coercion instead of persuasion

The Alaska Legislature’s failure to override Gov. Mike Dunleavy’s budget vetoes would be an interesting topic for a political science class if the consequences were not so devastating. Dunleavy has followed the path of minority rule, and minority rule in a democracy is always of interest to students of politics. How do you justify minority power over the majority and what mechanisms are available to implement it? In classrooms, students routinely are taught the importance of protecting minority rights. American history, students learn, is replete with controversies over the limits of majority rule. The U.S. Constitution itself was born of one of these controversies. In 1789, how could tiny Rhode Island protect itself from the behemoth next door, Massachusetts? Equal representation in the Senate was one way. The history of the struggle to end slavery can be seen as a protracted battle over of the property rights of the slave-holding minority. Slaveholders built an intricate intellectual and legal structure to maintain their minority power, backed by force. The American majority stripped them of their slaves not after debate but through violence — the Civil War. In Alaska, Gov. Dunleavy has the mechanism for minority rule over the budget — the veto — but does not have a majority of the Legislature behind him, nor a majority of the public. Legislators say they have received thousands of messages damning Dunleavy. Civic and business leaders have spoken out against the cuts to the university, Medicaid, public schools, the arts and old folks’ benefits. I would wager the majority of paid lobbyists, so often trashed for everything that smells in Juneau, are against the vetoes. They have too many clients who directly benefit from government spending and the stable political system Gov. Dunleavy upended. The governor’s oft-repeated justification for the cuts is: There is no choice. Government doesn’t have the money to do what it did in the past. Governments always have a choice, no matter how unpalatable. Subsidizing oil companies is a choice. Rejecting all forms of state taxation is a choice. Demanding a $3,000 Alaska Permanent Fund dividend while laying off thousands of workers is a choice. Gov. Dunleavy has said that it is fine by him if the cuts shackle government — and that is what he intends to do, while championing the genius of the free enterprise system as the solution to our difficulties. Whatever free enterprise can do, it will never respond rapidly enough to rescue teens whose college plans have been ruined. Don’t misunderstand; The governor has Alaskans who agree with him - maybe a third of the Legislature and a chunk of public opinion perpetually riled up about big government. In the 2018 election, the governor received 51.44 percent of the vote. It is a good guess there are people who picked Dunleavy who now think “I voted for the guy because he was the best choice at the time. I didn’t expect him to eliminate my job.” By governing via veto, Gov. Dunleavy has abandoned persuasion for coercion, and he has magnified his weaknesses in the rest of the legislative process. He can’t pass Constitutional amendments by himself. He can’t appropriate money by himself. Non-budgetary legislation he introduces will face a new level of scrutiny and hostility from burned lawmakers. Governors understand that they will make enemies. Bill Walker knew this when he reduced the amount of the Alaska Permanent Fund dividend. But governors rarely set out to make enemies as Dunleavy has. I have heard people say Gov. Dunleavy is a tool of the Koch brothers, the right-wing billionaires. There is some evidence for this, given Dunleavy’s relationship with the Koch-created group Americans for Prosperity. But however close Dunleavy is with the brothers, it is clear that he understands two of the core Koch beliefs, rarely expressed publicly by the Koch family members themselves but commonly heard from the university and think-tank intellectuals who have joined the Kochs. First, to succeed, you must use the legislative rules to maximum advantage and then change the rules to your advantage through Constitutional amendments. Second, killing major state-funded programs is never popular with a majority of voters. Too many people (“takers, not makers,” in Koch-speak) benefit from student loans, Medicaid, power cost subsidies. A referendum on dismantling the university would never pass. Gov. Dunleavy knew this when he began his veto review. The cries of pain were expected, even those of establishment Republicans like Senate President Cathy Giessel. Gov. Dunleavy has had his way, but he has paid a price - to his reputation, to public respect for his office. He has been especially hurt by his inability to either show (or fake) empathy for the people he is damaging. In candidate Dunleavy’s 2018 election-pamphlet statement, he concluded “Too many politicians have squandered the trust of the people with broken promises on the PFD, taxes, the budget, and other issues. I am committed to earning that trust back, the only way I know how; by keeping promises and commitments.” At the moment, Gov. Dunleavy’s trust department is earning a rate of return of about zero. Michael Carey is an Anchorage Daily News columnist. He can be reached at [email protected]

AGDC president outlines path forward; China deal is dead

Interim Alaska Gasline Development Corp. Joe Dubler insists that Alaska is still making unprecedented progress towards a long-sought natural gas pipeline project despite the fact that the lead agency on the effort is downsizing significantly. “I think we’re closer now than we’ve ever been” to making a gasline project happen, Dubler told House Resource Committee members on July 19. AGDC officials informed the Journal July 10 that the quasi-state agency would be ending its work to secure customers and investors for the roughly $40 billion Alaska LNG Project, as well as closing its public and government relations department. The reductions are expected to take AGDC’s personnel count from about 20 to less than 10 over the coming weeks. The remaining eight or nine employees will focus on completing the ongoing Alaska LNG environmental impact statement process the Federal Energy Regulatory Commission. FERC published the project’s nearly 3,700-page draft EIS June 28. Dubler told the legislators the reductions are intended to make AGDC “more fit for purpose,” as it focuses on completing the crucial EIS process, which is scheduled to be completed next June. Staffing levels at the corporation have always been low considering the massive scope of the project it is working on and AGDC has relied on contractors and consultants to help complete major tasks. “We’re going to have just enough people to get this thing done and at the end of next (fiscal) year in June, then we take a look and say, ‘where do we go from here?’” he said. It’s at that point that AGDC will reexamine and determine the state’s participation, if there will be any, in the project going forward, according to Dubler. He said it’s tough to forecast where the project will go in a year, but stressed the state will no longer be leading it through AGDC. Dubler confirmed that he had the authority to make personnel decisions, which was delegated to him by the corporation’s seven-member board of directors. Sources within AGDC said the staffing changes followed a detailed review of the project and corporation by Gov. Michael J. Dunleavy’s administration. Dunleavy has consistently said he wants the state to back away from leading the complex project and instead focus on bringing in partners, such as large oil companies, to again take it over. By getting a favorable decision on the EIS, AGDC can reduce the regulatory risk to Alaska LNG and make the project more enticing to potential partners, according to Dubler. He said the state still wants to monetize the roughly 35 trillion cubic feet of known natural gas on the North Slope. “This isn’t a change in what we’re doing; it’s a change in how we’re going about it,” Dubler said. He highlighted that FERC largely agreed in the draft EIS that AGDC’s plan for the 807-mile pipeline and a 20 million tons per year LNG plant at Nikiski is the least environmentally damaging option available. China deal is dead He also confirmed that AGDC did not renew the nonbinding joint development agreement, or JDA, it had with three large, nationalized Chinese firms to buy up to 75 percent of the project’s LNG in exchange for an equal share of the needed financing. Signed in front of President Donald Trump and China President Xi Jinping in November 2017, the JDA was touted as a signature achievement in former Gov. Bill Walker’s effort to secure partners for a state-led Alaska LNG Project. The agreement was extended multiple times under Walker and former AGDC President Keith Meyer. Dubler said the project envisioned in the JDA “frankly doesn’t exist anymore” given that the Dunleavy administration is not comfortable with the risk the state would have to assume to lead the project to fruition. “What we told them is moving forward we will work with the producers and them to see what their role would be, if any, moving forward,” he said of a recent teleconference with representatives from Sinopec, China Investment Corp. and the Bank of China, the three other JDA parties. Dubler acknowledged that the commercial work AGDC had done since taking over the project in late 2016 was beneficial in that it proved there is international interest in the Alaska LNG Project, but he said much more work needs to be done before major LNG purchase and investment agreements can be finalized. AGDC officials have said they signed about 15 nonbinding agreements with potential partners — mostly in East Asia — but the content of those agreements has been kept confidential. “(Those agreements) really didn’t do anything as far as progressing the project and they didn’t do anything for the other side as well because they had no commitments there either so what we said is we don’t need to do those anymore until we have something we can commit to,” Dubler said. “In another two or three years, whoever’s going to be building this project would again go to the market and look for off takers.” The overall cost of Alaska LNG — last estimated at $43 billion by AGDC in 2017 — is currently a major impediment to developing it, according to Dubler. That cost translates to LNG delivered to Asian customers at $11 to $12 per million British thermal units, which is nearly three times the going rate for spot market LNG purchases today. “That’s so far out of the market now nobody would return your phone call. I mean, they wouldn’t even talk to you,” he said. Dubler’s predecessor Meyer regularly stressed that spot LNG prices are deceptive in that contracted LNG prices are often significantly higher because they come with long-term commitments to deliver scheduled cargoes and that reliability is something large utility buyers covet. Role of producers Rep. Chris Tuck, D-Anchorage, said the refocusing of AGDC’s work appears to be taking the project back to early 2016 when BP, ConocoPhillips and ExxonMobil were partners with the state in Alaska LNG but determined that depressed global energy markets challenged the economic viability of the project at the time. The producers’ Alaska leaders then said they would either shelve or slow down the project until market conditions improved or allow the state to examine ways to make it more economic, and the state enthusiastically chose the latter under Walker. BP and ExxonMobil, which collectively hold rights to a lion’s share of the gas in the Prudhoe Bay and Point Thomson fields, agreed to general terms including prices for gas sales into the project in 2018. They also agreed to fund up to $10 million each towards completing the Alaska LNG EIS, which state officials have said could cost close to $30 million. An economic analysis of the Alaska LNG Project conducted during the producer-state transition by the international energy consulting firm Wood Mackenzie concluded that a project led by the producers would likely not be viable because of the comparably high investment returns large oil companies require, among other considerations. However, a state-led project could be profitable because of the state’s exemptions to federal taxes and lower return requirements, according to Wood Mackenzie. “It seems like the light is dimming on a potential gas pipeline,” Tuck said. “It just seems less and less hopeful as we either lose interest from other entities or we are no longer interested in those entities.” Dubler responded that AGDC has done a detailed review of the project’s costs and potential economics using Department of Revenue economic models and has received assistance from BP and ExxonMobil on how to reduce the overall cost. Those cost reduction workshops have led state officials to believe the project is “in the ballpark” of being economically competitive, Dubler said. However, he declined to provide a new cost estimate, saying that disclosing those figures could harm a project proponent’s position in future LNG sales negotiations. “Instead of pulling everybody behind us we’re going to be behind them helping them set up whatever the state can do to help them be successful,” Dubler said of AGDC’s new role while also acknowledging that it’s unclear who “them” is at this point. He added, though, that major participation from a major oil company, as the administration envisions, would likely require “fiscal certainty” for the project, a term commonly used when the producers were leading Alaska LNG. Fiscal certainty is the concept that the producers would need the state to agree to set firm tax rates for natural gas — and possibly oil — before they would agree to multibillion-dollar investments in Alaska LNG. Clauses in the Alaska Constitution prohibit the Legislature from contracting away its taxing authority, so achieving fiscal certainty for Alaska LNG would likely necessitate a potentially highly controversial constitutional amendment. ^ Elwood Brehmer can be reached at [email protected]

Murkowski still pushing energy policy overhaul featuring nuclear power

Expect to hear more from Sen. Lisa Murkowski on her plan to overhaul the nation’s complex energy policy. Alaska’s senior senator said during a July 19 speech to the nonprofit policy study group Commonwealth North in Anchorage that its been 12 years since Congress last did a full-scale update to federal laws covering energy development, security, reliability and innovation. Murkowski has said technology has made many of those policies outdated. She chairs the Senate Energy and Natural Resources Committee. “There are things that you’d imagine coming from an Alaskan senator but there’s also a few things that you look at and you say, ‘well, where’d that come from?’” she said in reference to her proposed energy reform legislation. Both the House and Senate passed versions of an energy reform package Murkowski championed in 2016. However, the bill died when conference committee negotiations stalled. At the time, Murkowski blamed House Republican leaders for opting to leave Washington, D.C. for December holiday parties elsewhere instead of working out minor differences in the detailed legislation. This go-round Murkowski is particularly highlighting the prospects of advanced nuclear power, which is something she said Alaskans should be very interested in for what it could to in rural communities to lower the cost of energy with zero emissions. “Just imagine a system that’s the size of a connex and provides continuous power and needs to be refueled once every 25 to 30 years,” she said of potential small-scale nuclear power generation. On July 16 the Energy and Natural Resources Committee passed the Nuclear Energy Leadership Act with broad bipartisan support. The bill directs the Energy Department to establish advanced nuclear development goals, support nuclear research and work to make low-enriched uranium — nuclear power “fuel” — available for research and demonstration projects. Murkowski has long touted Alaska’s capability to be on the forefront of energy technology development with its high energy costs and ranging climate and geography. “We are leading as a state when it comes to microgrids and how we’re piecing these smaller energy solutions together,” she said. “We’re getting not only the attention of the nation, but of the world for what we’re doing.” On health care, Murkowski, who was one of three Republican senators to vote against the party’s “skinny” repeal of the Affordable Care Act in 2017, said lawmakers and the public often get caught up in the cost and availability of health insurance, without addressing the underlying cost of care. She also serves on the Health, Education, Labor and Pensions Committee, which sent the Lower Health Care Cost Act to the full Senate for consideration in early July. According to the Congressional Budget Office, the bill would have a net cost of about $9.4 billion over five years primarily through cuts to federal health insurance subsidies countered with increased spending for community health centers and other programs. Murkowski said the Lower Health Care Cost Act attempts to curb some of the fundamental cost drivers for patients. “It’s the first time that we’ve really drilled down on efforts to lower the actual cost of care through greater (billing) transparency, addressing prescription drug pricing and ending this surprise medical bill issue,” she said. It would also change the minimum age to buy tobacco from 18 to 21. And while members of Alaska’s congressional delegation rarely weigh in on issues before the state government, the severity of the budget-related impasse between legislators and the governor have tested that precedent. Sen. Dan Sullivan has urged state lawmakers to capture as much federal revenue as possible by appropriating the necessary state funds to match federal program contributions. Murkowski echoed that sentiment. She said part of the delegation’s job is to stabilize and enhance the state’s economy, noting the $286 million in Defense spending Congress approved on projects at Interior Alaska military installations for this year. The ongoing work to update infrastructure and expand operations at Eielson Air Force Base, Clear Air Force Station and Fort Greely has largely been credited with supporting the state’s construction industry while the state’s capital spending has been cut drastically amid years of budget deficits exceeding $1 billion. Murkowski said the delegation is collectively working to determine exactly what the many deadlines are for the state to match funds for various federal programs. “The thing with the federal side is they really don’t care what are problems are up here; they really don’t care whether we’re in Wasilla or Juneau, there’s a date and if they don’t hear from us by that date they assume that they’ve got access to something that was going to be in the Alaska pot, so they’re moving on to something else,” she described. The largest single pool of money the state is at risk of losing because of the inability to pass funded capital budget is more than $910 million of federal highway and aviation infrastructure funds, which requires a state match of less than $100 million. On July 23, the Anchorage Daily News reported that the Federal Highway Administration’s chief congressional liaison confirmed that Alaska has until 2020 to come up with matching funds for hundreds of millions of dollars in federal aid following an inquiry from the office of U.S. Sen. Dan Sullivan. The federal government’s fiscal year starts Oct. 1, explained liaison Tim Arnade, and the state becomes eligible for its federal highway aid at that point. As long as the state comes up with its matching funds before August 2020, it receives the full amount of federal highway aid. If it doesn’t come up with the money in time, the federal aid is redistributed to other states. The inability of the Legislature and Gov. Michael J. Dunleavy to resolve their differences over the budget just adds to the air of economic uncertainty in the state, Murkowski said. “Not everything’s perfect up here, but it never, ever, ever has been so let’s not get so focused on some of the challenges that are just gripping us and bringing us down. We’ve got to remember that we’ve got some challenges in front of us but we’ve got more opportunity than anybody out there. We still have still have $65 billion, with a ‘B,’ in the bank,” she said referring to the Permanent Fund. “We are not so broke we can’t figure our way out of this. We know how to do this we just have to come together as Alaskans and do it.” Elwood Brehmer can be reached at [email protected]

Anchorage Assembly delays vote on port repair contract

Caught between potential disasters, the Anchorage Assembly again delayed a vote on July 23 to decide whether the city should start rebuilding its aging port that is badly in need of repair or wait to determine if more cost-effective solutions exist. Anchorage Mayor Ethan Berkowitz’s administration insists the Assembly should approve a $42.1 million contract with the marine construction firm Pacific Pile and Marine to build the first phase of a new petroleum and cement terminal, or PCT, at the municipal-owned Port of Alaska. While port officials and members of the administration acknowledge the contract, which is for the 2020 construction season, would leave the city about $100 million short of finishing the PCT, they stress that it would give the port one very basic but seismically resilient dock structure that could be used in an emergency while the rest of the years-long construction on the rest of the port is underway. Municipal Manager Bill Falsey also noted at the Assembly meeting that part of the reason the administration is pushing the PCT plan is the need to move fuel and cement offloading away from the rest of the docks to free up space for the logistical juggling that is rebuilding the port at the same time ships continue to regularly call on it. The new PCT would be well to the south of the current petroleum and cargo terminals. “The PCT is the key to unlocking the whole project,” Falsey said during the July 23 meeting. Port officials also continue to discover new earthquake damage to the already badly corroded steel piles that support the docks and are largely past their intended useful life. At the same time, the port’s primary user companies are urging the Assembly to suspend the port construction plan because the users fear the PCT is the first step towards another port project that will turn into a financial nightmare, particularly because the city does not have a firm plan to finance the rest of the work. “We don’t doubt there are problems, but what other options are there and what do they cost?” asked Ryan Zins, a vice president for Alaska Basic Industries, the primary cement importer at the port. The overall price for the current port reconstruction plan has escalated from roughly $500 million in 2014 to $1.9 billion today because of a myriad of factors that include federal steel tariffs and stringent seismic design criteria, among other reasons. Falsey and port officials have repeatedly said they do not plan to build the $1.9 billion project — even though the PCT is the first part of it — and will look for major savings in constructing the larger cargo terminals and other aspects of the project. Their experts contend the port has less than 10 years before some of the docks will have to be de-rated for weight capacity or closed altogether if they are not rebuilt. The users have suggested repairing one of the existing petroleum terminals but the viability of that is unclear at this point. Consultants hired by the Assembly to review the project for cost saving measures have said alignment between the city and the users will be critical to move the project forward successfully. The Assembly ultimately voted 8-3 to push the contract vote back about a week, likely to a July 30 special meeting, to give the city and the users time to discuss their options and see if a compromise can be reached. The users pledged to work diligently and in good faith with the administration in the coming days, and Falsey highlighted that the administration is doing its best to provide as much information as possible on the complex project to anyone who wants it. Pacific Pile and Marine representatives have said the contract needs to be approved by Aug. 1 in order to ensure the massive steel pilings can be ordered and fabricated in time for the 2020 construction season and to get the best price. Assemblyman John Weddleton, who owns Bosco’s Comics in Anchorage, said the city needs to listen to its customers at the port and do a more diligent review of the project’s costs. “Ignore your customers at your peril,” Weddleton said. His comments were echoed by several other Assembly members. Assemblywoman Meg Zaletel said she’s worried Gov. Michael J. Dunleavy’s administration might claw back the $49 million in uncommitted state grants the city has received for the project in recent years if the money is not spent soon. “I’m unwilling to wait for an emergency and worse yet a catastrophe,” Zaletel said, partly responding to assertions from the users and other opponents to the PCT plan that the docks are not truly in dire need of immediate repair. Assemblyman Fred Dyson of Eagle River wants to slow the project for a more detailed cost review. “I believe the administration is acting in good faith. I believe they got off-track because they didn’t have the best information,” he said. Falsey asked Assembly members to send the administration every question they have about the PCT plan and the overall project in the coming days so they have absolutely all the information they need to make a decision on the PCT at the special meeting. It’s unclear at this point how the Assembly will vote then. Major construction at the port has been on hold since 2010 after major damage to the sheet pile then being installed to support new docks was discovered. The original port expansion project cost upwards of $300 million but resulted in little usable infrastructure. The Municipality of Anchorage is currently engaged in a lawsuit against the federal Maritime Administration, or MARAD, which oversaw the failed work. The Federal Claims Court judge presiding over the lawsuit is scheduled to visit the port Aug. 1-2. In February, city officials released a concept analysis that indicated the port’s import charges on fuels and cement would have to be increased five-fold or more if the municipality needed to sell $200 million worth of revenue bonds to pay for the new PCT. That caught the attention of the users, who also fear the lack of a firm financing plan for the overall project could lead to steep tariff increases, even though city officials have repeatedly pledged to not levy tariffs to fund construction that would drive away business or otherwise harm the Anchorage or state economy. The ongoing lawsuit with MARAD has made it difficult for the city to secure large chunks of financing for the port since it’s unclear what the suit could potentially yield. ^ Elwood Brehmer can be reached at [email protected]

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