Pipeline ransomware attack shows US economy’s soft digital underbelly

Lest we think the Colonial Pipeline hack is something that happens to other people, consider the pipeline infrastructure that feeds the Pacific Northwest. A system of four pipelines carries gasoline, diesel, jet fuel and heating oil from the four refineries of north Puget Sound, plus U.S. Oil and Refining in Tacoma, south to Portland, serving customers all along the way. Eastern Washington is served by a separate pipeline network linked to the Gulf Coast. According to the American Petroleum Institute, 190,000 miles of liquid petroleum pipelines cover the United States. Any could be targeted for shutdown by a hacker group such as DarkSide, which the FBI says is behind the Colonial shutdown. The 5,500-mile Colonial is just one of them, albeit the largest. But considering its strategic importance to the East Coast and deep-pocket owners such as the Koch empire, ransomware attackers thought: low-hanging fruit. If you want to get Americans’ attention, hit their ability to drive. Panic buying and gas lines were quickly seen in the Southeast. Midweek, 71 percent of the gas stations in car-burdened Charlotte, N.C., were dry. Ransomware takes control of a company’s or organization’s software or data until the owners make a payment. Even paying a ransom doesn’t guarantee the owners will get control again. Initial reports said Colonial refused to pay ransom. But Colonial handed over nearly $5 million to the hackers. Bloomberg reports that the payment was in difficult-to-trace cryptocurrency. In exchange, Colonial received a decrypting tool to help restore its disabled network. DarkSide, believed to be based in Eastern Europe, released a statement saying, “We are apolitical, we do not participate in geopolitics … Our goal is to make money, and not creating problems for society.” But no one is safe from cybercrime, whether the attacker is a shadowy group or tied to a nation-state, whether they want money or data or to paralyze infrastructure. Whether the victim is an individual who opened an email containing malware or a leading technology company. Earlier this year, Microsoft’s popular Exchange email system was the target of hackers tied to the Chinese government. As the company worked feverishly to stay ahead of the hack, it reached crisis proportions affecting tens of thousands of victims and attracting the attention of the White House. In 2019, Accenture predicted that cybercrime would cost companies $5.2 trillion worldwide within five years. Some 43 percent of attacks were against small businesses, while only 14 percent were prepared to repel them. Hiscox, an insurer, said the average cost of a digital attack was $200,000. That’s easily enough to put many small companies out of business; many aren’t covered by insurance for cybercrime or can’t afford it. It’s a Wild West of sublethal international conflict out there. The weaponized malware called Stuxnet set back Iran’s nuclear program in 2009, followed by other cyberattacks; Israel and the United States were seen as carrying them out. Chinese, Russian and North Korean hackers have targeted us, including penetrating government sites and conducting industrial espionage. It’s not a leap to predict that the next major war will be fought heavily in cyberspace. Before the first shots are fired, an opponent might try to blind the enemy’s satellites by cybermethods, and use secreted malware that wrecks the capabilities of such advanced weapons as the F-35 Joint Strike fighter and shuts down the U.S. electrical grid. We, no doubt, would try the same. The result might be more bloodless than previous wars. Unless, that is, a blinded nation fears it’s being targeted for a nuclear strike; then all bets are off. Longtime readers remember one of my favorite stories about the dangers of techno-magic. In the television series “Battlestar Galactica,” Admiral Adama (played by Edward James Olmos) refused to allow his ship to be networked. As a result, the aging Galactica was the only warship to survive the deadly Cylon surprise attack that depended on an advanced, networked fleet. But in the real world, we’re living more than ever online and in the cloud. President Joe Biden and Congress are under pressure to do more to protect us. The administration is committed to “a global effort” to fight ransomware attacks. That includes criminal prosecutions, going after hacker money laundering, and greater disclosure of breaches. In 2019, Congress created the Cyberspace Solarium Commission to develop better defenses against major hacks, to prevent “a cyber 9/11.” But only about half of its recommendations have been implemented. That fits a pattern of paralysis going back to 2010. Since then the Government Accountability Office has offered 3,300 recommendations for agencies to protect themselves. Yet at least 750 had not been put in place as of 2020. “Although the federal government has made selected improvements, it needs to move with a greater sense of urgency commensurate with the rapidly evolving and grave threats to the country,” the GAO said. And this is only in the federal government, not state or local government, not in the private sector overseeing critical infrastructure. An enormous workload awaits those charged with keeping ahead of cybercriminals. It’s enough to keep you up at night. Or, in the daytime, be extra suspicious of potential malware showing up as a legitimate-looking email. Jon Talton writes about business and the Pacific Northwest economy in the Sunday Seattle Times. He may be reached at [email protected] and on Twitter: @jontalton.

Expert: Chip shortage to cost auto industry $110 billion

The semiconductor shortage is now expected to cost global automakers $110 billion in revenue this year, according to global consulting firm AlixPartners, up from the $61 billion the firm predicted in January. Interruptions to chip supply, including a fire at a Japan semiconductor facility, severe weather in Texas and a drought in Taiwan, pushed the firm to increase its original estimates, which also included the production loss of 2.2 million vehicles. The firm now expects a production loss of 3.9 million vehicles globally, representing a little more than 4.5 percent of the vehicles automakers planned to build this year. “These (chip) plants are running full out,” said Dan Hearsch, a managing director in AlixPartners’ automotive and industrial practice. “There’s nothing to absorb the shocks, there’s no additional capacity, there’s no additional inventory … all of the cushion has been taken out and you’re running on knees with no cartilage.” Automakers here and abroad have been battling the semiconductor shortage since the start of the year. They’ve halted production at various plants, even shutting down some of the ones that make high-demand trucks. Ford Motor Co. expects to lose some 1.1 million vehicles of planned production this year, the Dearborn automaker said on its earnings call. The Dearborn automaker is projecting a $2.5 billion hit to its adjusted earnings for the year due to the chip shortage. General Motors Co. hasn’t provided specifics on volume impact. The Detroit automaker has said the shortage could lead to a $1.5 billion to $2 billion earnings hit. Stellantis NV lost 11 percent of planned production, or about 190,000 vehicles, in the first quarter because of the microchip shortage, but didn’t specify further volume impact. The transatlantic automaker hasn’t released financial impact estimates of the shortage. Japanese automaker Nissan said it’s planning to produce a half-million fewer vehicles in 2021, CNBC reported May 13. AlixPartners sees the situation normalizing with fewer shutdowns by the third quarter. “You’re probably going to see little bumps, a plant slow own or shutdown here and there related to this, but it’s not going to be 15 plants like what we currently have,” Hearsch said. “It’s not going to be widespread and global.” By the fourth quarter, the firm anticipates overtime shifts being scheduled to make up for the losses. Hearsch said the supply constraints the industry has battled this year, from semiconductors to foam shortages, have “served as a wake up call that automakers need to have a lot less trust and a lot more verify.”

Projects on tap cementing Anchorage as cargo hub

Cargo traffic through Ted Stevens Anchorage International Airport surged during the COVID-19 pandemic, with scores of jets arriving daily from Asia. They brought with them computers, cell phones, pharmaceuticals and other products in high demand from homebound people in the Lower 48, airport officials said. Jets headed the other way hauled Canadian lobster, Washington state cherries and more, airport director Jim Szczesniak said during a recent airport tour. “There’s the lobster plane,” he said, nodding to a Sky Lease Cargo jet. Altogether, the airport landed 3.2 million metric tons of cargo last year, a 15 percent increase as e-commerce boomed along the world’s busiest trade route from Asia to the U.S. The Anchorage airport’s growth far outpaced the competition, making it the world’s fourth-busiest for cargo, up from sixth place. Despite that growth, the airport lacks the services of its competitors, Szczesniak said. It’s largely a fuel stop and crew-change site for the jumbo jets headed to other airports. But a series of projects proposed for the airport, valued at $1 billion, could help transform it into more of an all-purpose stop for cargo jets, he said. For the first time, giant new warehouses would allow any of the airport’s nearly 30 international carriers, such as China Airlines or Korean Air, to stockpile items for efficient shipment. As it is now, cargo jets occasionally meet on the tarmac to trade products, limiting options and requiring coordination, officials said. Another proposal for a cold-storage facility, part of a $200 million project, could increase shipments of frozen or perishable goods, including seafood from Alaska. FedEx and UPS, which operate freight-sorting hubs that move about one-fourth of the airport’s landed cargo, also plan large expansions, airport officials said. The projects were announced starting in 2019 as developers pursued leases for raw land around the airport. They are now in various phases of design and engineering, he said. They represent the airport’s most significant chance for growth in cargo services ever, he said. If built, they’d provide hundreds of jobs, serving as a potential counterweight to Alaska’s struggling economy. “We are full-throttle trying to maximize this asset to pull (Alaska) out of this decline,” Szczesniak said. A perfect spot Perched midway between Hong Kong and the Lower 48, the Anchorage airport is geographically blessed for cargo service, said Darren Prokop, an economist and logistics professor at the University of Alaska Anchorage. Cargo jets can fly right over Anchorage if they choose, he said. But they can instead gas up at the airport, allowing them to carry less fuel and more of the cargo they’re paid to haul. That aviation fuel is relatively cheap, because the airport is part of a foreign-trade zone administered by the nearby Port of Alaska where the fuel arrives. That means the fuel avoids duties that can boost prices elsewhere, said Prokop. The airport enjoys another advantage over competitors, Prokop said. Unlike airports elsewhere in the U.S., foreign carriers can legally transfer cargo between jets at the Anchorage airport. The exemption was secured by the late Ted Stevens in 1996 and enhanced in 2004, he said. Carriers have been reluctant to take advantage of that. They worry it might be illegal in Anchorage because it’s illegal elsewhere, he said. Also, it requires timing jets’ schedules. “Hence the cargo facilities,” Prokop said. If the new facilities are built, foreign jets can still transfer product without having to worry about making sure the other jet has arrived. And they can do it more efficiently, at more convenient times, at the cargo facilities. Prokop said that long term, the airport should see continued gains in cargo because of the strong demand in the U.S. for products from Asian countries. “We are the gateway city to the Lower 48,” he said. During the pandemic, cargo flights from a growing number of Asian cities began passing through Anchorage. To haul products to the Lower 48 faster, they bypassed big hubs such as Shanghai or Hong Kong, Szczesniak said. What will happen as the pandemic eases is uncertain. Szczesniak said he thinks changing route patterns and continued growth in e-commerce are factors that will help supplant the pandemic-related issues that boosted cargo to Anchorage. “The pandemic has cemented the importance of Anchorage in the global supply chain,” he said. A full-service stop John Tichotsky, a former chief economist for Alaska, is a partner in IC Alaska. The company plans to build a maintenance hangar to provide mechanical work for jumbo jets at the airport’s southern end. The hangar is part of a $500 million proposal that also includes new cargo storage and sorting space. Also, 14 “hard stands” would allow cargo jets to fuel up, plug into power and transfer freight. The project will change the airport from the equivalent of a standalone gas pump into a full-service station, Tichotsky said. Lease negotiations for the land at the airport are being finalized, he said. The hard stands could open as early as next year. “I can’t identify anything (in Alaska) that will come online faster and produce greater economic benefit than providing infrastructure at the airport,” Tichotsky said. Other projects are: • FedEx plans to expand its existing operation by 19 acres, building a new center to sort domestic freight, part of a $60 million project. International freight sorting will continue in the current transfer center. • 6A Aviation has proposed building a 195,000-square-foot warehouse and six parking spots for cargo jets, a $170 million project on the airport’s west side. • Alaska Cargo and Cold Storage plans its $200 million warehouse off the north-south runway, with cold storage. • UPS plans to expand its existing facility by 28 acres, and add space for three big cargo jets, a $110 million project. The UPS expansion will take up much of the northern portion of the airport, Szczesniak said. “This will all be one big, giant UPS campus,” he said during the tour, pointing to a stretch of raw land that extended to a hill. Construction for the cold-storage project could start later this year, officials said. Besides supporting international businesses, cold storage could help Alaska companies that want to ship seafood or peonies, said Joe Jacobson with McKinley Capital Management, a project partner. The plan is to capitalize on the traffic that currently exists at the airport. Any growth would be a bonus, he said. “Right now there is unrealized opportunity just with the existing traffic,” Jacobson said. A bright spot The cargo industry was a bright spot in Alaska last year, as the pandemic battered other sectors, said Bill Popp, head of the Anchorage Economic Development Corp. Among other benefits to Anchorage, it brings hundreds of cargo pilots daily who help fill hotels and support restaurants. (A cargo plane pilot was Alaska’s first confirmed positive case of COVID-19 on March 11, 2020.) Cargo activity is responsible for much of the employment at the airport. The airport supports about 10 percent of the jobs in Anchorage, he said. Recently, FedEx announced it is hiring more than 200 workers to create its first permanent night shift for package-sorting at the airport. Popp said there’s optimism that cargo in Anchorage will stay strong, increasing the odds the projects will be built, he said. Prokop, the logistics professor, said the new warehouses might one day support new manufacturing businesses in Anchorage. Parts stored at the airport could be assembled into final products that can be shipped elsewhere. “Ten or 20 years from now, we’ll see if this leads to value-added manufacturing,” he said.

New CP Alaska president excited about return

New ConocoPhillips Alaska President Erec Isaacson should have a pretty good idea of what it will take to remain competitive on the North Slope in the rapidly evolving oil industry. That’s because he just was the competition. Isaacson took to the helm of the Alaska business unit in January following the retirement of Joe Marushack, who had held the spot since 2015. He and his family came north from the Lower 48 where Isaacson led development and operations of the company’s Eagle Ford and offshore Gulf Coast assets, which produced an average of 241,000 barrels of liquids per day last year. The South Texas Eagle Ford basin is one of ConocoPhillips’ — and the country’s — top focus areas for unconventional oil production and Isaacson said in a May 14 interview with the Journal that he believes Lower 48 unconventional, or shale, oil will largely continue to set the base of oil markets that other regions around the globe must match. That’s in part due to the relative fast pace of the work that is regularly measured in weeks or months, compared often to years on the North Slope. And it’s more than just the ability to quickly match activity and production levels to market conditions; it’s the ability to innovate at the same pace. “You’re finishing off wells every couple weeks. You drill and then move on to the stimulation phase and that ability to learn rapidly and continue to optimize really quickly,” Isaacson said of work in the shale fields of the Lower 48. “You can try different things and learn really quickly whether or not it works and then you can optimize your program and continue to work in it from that standpoint; whereas up here, you’re not turning things over as quick. You have to take the opportunity to learn a little bit differently, through maybe just statistics. You just have to be more purposeful about the way that you learn, the way that you optimize (in Alaska).” ConocoPhillips doubled down on its unconventional oil bet last year when the company announced a deal to purchase fellow shale producer Concho Resources for $8 billion, a further indication that the Lower 48 will remain Alaska’s biggest competition for oil capital within ConocoPhillips as well as broader markets for years to come, according to Isaacson. He is well versed in the fundamentals of the North Slope industry despite being only a few months into the Alaska president position because it is not his first time here. He first reported to work in Alaska in 2006 as the company’s exploration manager when ConocoPhillips was starting to explore the National Petroleum Reserve-Alaska in earnest. Before heading overseas in 2010 for roles leading operations in Qatar and Indonesia, he also did a stint as Alaska vice president of commercial assets at a time when ConocoPhillips still operated Cook Inlet gas fields and the Kenai LNG plant when cargoes were regularly being sent to Japan. He was also a representative for the company on the Trans-Alaska Pipeline System Owners Committee. “It was a real opportunity to see the full value chain of the oil and gas industry,” Isaacson said. During his first tour north, ConocoPhillips was looking in the NPR-A to repeat the massively successful Alpine field, which began producing in 2001, and had picked up federal leases in the Chukchi Sea. At the time, many in the industry envisioned a big move offshore as sea ice gradually retreated and oil prices remained high. That early NPR-A exploration is now starting to turn into oil production with the development of the two Greater Mooses Tooth drill sites — first oil from GMT-2 is expected late this year — but the company never struck Alpine 2.0. The shale-induced oil market reset of 2014-15 has all but evaporated former visions of massive Arctic offshore oil fields even if the resources are there. Arctic offshore oil just can’t compete with the price standard set by Lower 48 unconventional production. However, Isaacson noted that Alaska’s innovations have come in the form of new onshore discoveries and major advancements in the sustainability of North Slope developments. While ConocoPhillips did not replicate Alpine in its initial NPR-A exploration seasons, the company has turned the shallow, conventional Nanushuk oil formation find first popularized by Armstrong Energy and Repsol in the Pikka Unit into the $6 billion Willow project in the NPR-A and other satellite prospects as well. “That Brookian topset play that is Willow and in the Pikka area — that was stuff that we weren’t really chasing back then,” Isaacson said of his first stint in Alaska. The opportunity to lead development of a large, modern oil project on the scale of Willow, which could produce up to 160,000 barrels per day at its peak, is something he said he finds truly exciting; so is being in a place where there is still plenty of largely unexplored territory. “In some ways it’s part of the hunt. Part of the excitement you had in the original oil and gas industry is going out there and conducting that exploration activity,” Isaacson, a trained geophysicist, described. The Colorado native also mentioned several times, unprovoked, that he enjoys winter among the other aspects of the Alaska lifestyle that made him want to eventually return after leaving roughly a decade ago. “I like the mountains, the skiing. I like the winter and the outdoor pursuits, so as a family, we really enjoyed it here,” Isaacson said. He hopes his family can spend this summer reacquainting themselves with the once-familiar parts of Alaska and finding new favorites. “For us it’s just kind of being active up here again,” he added. On the business side, the rest of the year will be much about restarting after the forced reset of 2020. Isaacson said he wants to get back to the Slope more frequently as COVID-19 travel and camp space limitations are relaxed to meet more of the people doing the field work and see some of the infrastructure that didn’t exist the last time he worked in Alaska, such as the highly successful CD-5 drill site and the Greater Mooses Tooth projects. He also wants to “reinforce the safety culture that has made ConocoPhillips so successful in working on the North Slope,” Isaacson said. “That’s one of my key responsibilities when going up to the Slope: engaging with our employees, reinforcing our safety culture, reinforcing the way we work and the way we develop things here in Alaska.” ConocoPhillips is drilling again at CD-5, development wells are planned at GMT-2, and it is conducting workover operations in the large Kuparuk River field this year. According to Isaacson, ConocoPhillips and the other working interest owners of Prudhoe Bay have also agreed to restart drilling there later this year. ConocoPhillips is also continuing engineering and design work on the facilities for Willow while on-the-ground development is paused in the midst of two lawsuits challenging the federal government’s environmental review of the company’s plan for the project. Isaacson reiterated that no major decisions would be made regarding the future of Willow until the lawsuits filed by conservation and Alaska Native organizations are resolved. The parties have asked federal Alaska District Court Judge Sharon Gleason to expedite the suits so a decision can be reached prior to next winter’s North Slope construction season. “Barring those legal risks, it’s competitive within our portfolio and we’re doing a lot of work right now, spending a lot of money heading towards getting that engineering done so we can be in a position to make (a final investment decision),” he said of Willow. Looking out further, he said the State of Alaska must maintain a stable oil and gas fiscal regime to garner investment dollars, particularly as pressure on Arctic developments continue to intensify and even though the state still faces significant annual budget deficits. “Alaska has a risk premium, so if you think about being attractive for investment you have to consider that sort of risk premium that you’re operating in the Arctic — from a regulatory standpoint — that really underpins the need for an attractive, stable fiscal regime in order to attract that capital investment in the long-term,” Isaacson said. Elwood Brehmer can be reached at [email protected]

Movers and Shakers for May 23

Kayla Green has joined United Way of Anchorage as director of People and Culture. This is a new position that demands sound business judgment with people skills and a practical passion for equity, diversity, inclusion, and access both at work and in the wider community. Most recently, Green has worked as a human resources and business development consultant and as a realtor with Keller Williams in Eagle River. She has worked as a daily operations manager and health benefit enrollment specialist at Southcentral Foundation. She also worked as a supervisor and trainer and mental health specialist at North Star Behavioral Health. Green serves as first vice president of the Anchorage chapter of the NAACP and is a member of the State of Alaska Board for Marriage and Family Therapy. Green earned a master’s degree in human resources at the Jon M. Huntsman School of Business at Utah State University in 2014 and a bachelor’s degree in psychology at Brigham Young University-Idaho in 2011. Toast of the Town LLC announced Martha Keele as chief operating officer and co-owner. Keele previously served as the managing director at Toast of the Town, producing more than 80 virtual events last year. She replaces co-founder Carrie Shephard, who is transitioning to a consulting role with the company in order to concentrate on her passion of community development. Shephard recently accepted a role as manager of The Nave, focused on community, culture and art. With this new ownership transition, the leadership team at Toast of the Town brings more than 40 years of collective event experience to the Alaska event industry, continuing its commitment to grow in the talent and capabilities it provides to companies, nonprofit organizations and the state of Alaska. Keele joined Toast of The Town in 2020 with more than 15 years of hospitality and event experience. She is responsible for organizational growth, overseeing the event logistics team and strategic fundraising consulting. She has extensive nonprofit and government advocacy experience at both the local and national level, and has organized events ranging from 20-person fly-in conferences to 1,500-person award-winning galas. The Prince William Sound Regional Citizens’ Advisory Council has elected officers who will serve from May 2021 to May 2022. The executive committee is comprised of: President Robert Archibald, representing the City of Homer; Vice President Amanda Bauer, representing the City of Valdez; Treasurer Wayne Donaldson, representing the City of Kodiak; and Secretary Bob Shavelson, representing the Oil Spill Region Environmental Coalition. Three Members-at-Large are: Ben Cutrell, representing Chugach Alaska Corp.; Robert Beedle, representing the City of Cordova; and Rebecca Skinner, representing the Kodiak Island Borough. The Alaska Industrial Development and Export Authority announced the addition of Dona Keppers as chief financial officer and Tiffany Janssen as Commercial Finance director. Serving in a shared services role, Keppers is the CFO for AIDEA and its sister agency, the Alaska Energy Authority. Keppers has worked in Alaska’s energy sector with specialized experience leading finance, accounting, and tax teams within Alaska’s state government. Prior to joining AIDEA and AEA, she served as the Alaska Deputy Commissioner of Revenue, AK LNG Project Executive Sponsor, Tax Division Chief Economist and Audit Master. Tiffany Janssen has more than 15 years of experience managing commercial lending teams across Southeast, Southcentral and Interior Alaska. Janssen specializes in asset‐based lending working with small‐ to large‐sized businesses with expertise in partnering with third parties to customize financial structuring for large capital projects. As Commercial Finance director, Tiffany oversees AIDEA’s commercial finance function, including the Loan Participation Program, Business and Export Assistance Program, loan administration, loan servicing, and other real estate owned portfolios. Prior to joining AIDEA, Tiffany was the Commercial Lending manager for Matanuska Valley Federal Credit Union. Brock Anundson has been named as the director of athletics for the Alaska Nanooks. Anundson was selected from a pool of four finalists after a national search led by Athletics Staffing and Consultants. He will start his new position on July 12. Anundson currently is the assistant director of athletics for internal operations and events at Black Hills State University in South Dakota, where he is responsible for overseeing administrative operations and multiple athletic facilities on the campus. He previously served as the program coordinator for the U.S. Olympic Committee’s Olympic Training Center in Colorado Springs and worked for four seasons in stadium operations for the Denver Broncos at Mile High Stadium. Anundson is a former hockey student-athlete, playing four seasons with the University of Minnesota Crookston, where he still holds the record for career scoring. He signed with the Colorado Eagles of the ECHL for the 2005-06 season before beginning his professional career in athletics administration. He has a bachelor’s degree in sport and recreation management from the University of Minnesota, an MBA from the University of Colorado, and a doctorate in education leadership and innovation from Arizona State University.

FISH FACTOR: State seafood marketers hoping for pandemic relief

Alaska’s lone seafood marketing arm gets zero budget from the state and to date, has received no pandemic funds. The Alaska Seafood Marketing Institute is hoping to get a breather from the more than $1 billion coming to Alaska in the latest round of federal relief dollars under the American Rescue Plan, or ARP. The influx also provides $518 million of non-discretionary funds to Alaska and $220 million for public health and safety, workforce development, education, transportation, and emergency management. ASMI put in a $20 million request two months ago, but Gov. Mike Dunleavy made no mention of it in mid-April when he released his proposals for the ARP money nor anything since. Dunleavy did include $150 million for Alaska Tourism Revitalization citing the need for “industry relief to promote tourism and adapt services for potential loss of cruise ship season.” “Recovering market losses from the pandemic will require additional investment,” said Jack Schultheis, ASMI board chair and manager of Kwik’Pac Fisheries in Emmonak. He cited widespread closures, shipping disruptions to markets and added costs for harvesters and processors in the communities where they operate. ASMI revenues dropped 25 percent in the last year, due to an estimated $500 million in lost income to the statewide fleet. The group is solely funded by a 0.5 percent voluntary industry tax based on dock prices and competitive grant funding. “ASMI’s revenue is expected to decline by $5 million over two years,” said executive director Jeremy Woodrow at a House Fisheries Committee presentation last week. Along with COVID-19 impacts, Alaska’s seafood industry faces a double-whammy from hurtful trade barriers. Seafood is Alaska’s largest export by far with nearly 75 percent exported each year to nearly 100 countries. The newest trade snafu is a 25 percent to 35 percent tariff imposed last November on U.S. salmon going to the 27 countries that comprise the European Union. The dispute stems from U.S. subsidies being paid to Boeing and competing European aircraft. China, Alaska’s largest trading partner, has levied 37 percent to 42 percent tariffs on Alaska seafood since 2018. Russia, Alaska’s largest competitor, slammed its doors on U.S. seafood purchases in 2014, but Russian exports to the U.S. are up 173 percent. ASMI’s profile and the off-kilter seafood trade deals could get a nudge from two resolutions filed last week by Alaska senators. Senate Joint Resolution 16 calls on President Biden to immediately seek and secure an end to the Russian embargo on U.S. seafood imports. Senate Joint Resolution 17 asks the U.S. Trade Representative to bring a renewed focus on the plight of producers of seafood in Alaska and the U.S., and to compel China to comply with its commitment to increase its imports of U.S. seafood products. Dollars for direct sellers The Local Catch Network, a nationwide group of small-scale harvesters, will act as guides through another round of relief funds. The Farmers Market Promotion and Local Food Promotion programs include $77 million in competitive grants for seafood businesses, Tribes and groups involved in local, regional and direct seafood marketing. National Fisherman reports it stems from $92.2 million in funding through the 2018 Farm Bill Local Agriculture Market Program as part of USDA’s Pandemic Assistance for Producers Initiative. Local and direct seafood sales have been a bright spot during the pandemic and direct to consumer, e-commerce sales increased by 122 percent over the past year, according to ASMI data. For the next six weeks, the Local Catch Network will host outreach events and provide technical help to fishermen and community organizations interested in applying for funding. Copper River fish frenzy Phones were “ringing off the hook” at Pike’s Place Fish Market in Seattle where pre-orders of fresh sockeye salmon fillets were retailing at $49.99 per pound, and $79.99 per pound for Copper River kings. The fish was expected on May 18, one day after the salmon season’s first opener. The Cordova Times reported that Sena Sea Seafoods in Washington, the sales arm of Cordova-based 60º North Seafoods, had pre-orders for fresh king fillets at $139 per pound and $122 for sockeyes. Four eight-ounce portions of frozen kings were going for $189 and frozen sockeye pre-orders were $95 for four, six-ounce portions. Copper Rivers Seafoods was taking orders for sockeye fillets at $49.95 per pound and king salmon at $69.95. Anchorage-based seafood marketer FishEx was promoting sockeye orders at $44.95 per pound and $78.95 for kings. State managers forecast low total Copper River catches this year at 652,000 sockeyes, 13,000 king salmon and 218,000 coho. Overall, Alaska’s 2021 statewide salmon harvest is projected to top 190 million fish, a 61 percent increase over the 2020 catch. Fish builders Turning plastics from old fishing gear and marine debris into durable lumber is building momentum from coast to coast and one Alaska entrepreneur plans to take it on the road. Patrick Simpson of Cordova received a $100,000 grant from the Environmental Protection Agency to develop a mobile plastic waste recycler. He told Alaska Public Media that the recycler would fit into one or two 40-foot container vans for easy transport to local communities. “The technology is not terribly difficult,” he said. “The innovation is in the use of the net combined with the melted plastic to create an extruded recycled plastic lumber, and the packaging into this mobile platform.” Along with old fishing gear, Simpson plans to pick up plastic materials that wash up on local coastlines. He hopes to gather the goods collected in community beach cleanups before it goes to landfills. Plastics come in many forms, he said, and the kinds used in milk jugs or bottles are different from those used in nets or ropes. “I’m able to take the polyethylene and polypropylene and I’m melting those, and then I’m shredding net nylon and using it as a reinforcement, the fibers, to create a recycled plastic lumber. Then I’m going to sell that locally,” he said. Simpson said the lumber could be best used for decks, fences or roofing tiles. He is hoping to get a more sizeable grant that would enable him to use drones to locate plastic debris on coastlines. Elsewhere, Radio Canada reports that Goodwood Plastic Products in Nova Scotia has commercialized synthetic lumber made out of derelict fishing gear and other plastics, using a nearly half-million dollar grant from the government. It’s part of a more than $8 million Innovative Solutions fund that includes fishermen and divers eager to help. The recyclables are shredded, melted, and pushed through molds to create planks and posts for decks, park benches and picnic tables. Goodwood now employs 10 people and hopes to recycle more than 22 million pounds of plastics annually. Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

Cruise legislation halfway to Biden’s desk after Senate passage

Those pushing to get large cruise ships back to Alaska waters this summer are halfway home on one major front at least after the Senate broadly approved legislation allowing the ships to temporarily bypass Canada on their way north. The Alaska Tourism Restoration Act sponsored by Sens. Lisa Murkowski and Dan Sullivan passed the senate by voice vote May 13 after the bill spent much of the spring stalled in the Senate Commerce, Science and Transportation Committee despite consistent pressure for action from the Alaska congressional delegation. It was moved out of the committee earlier May 13 without objection. Murkowski said that the key to gaining support for the Tourism Restoration Act was reinforcing to other senators that it is an Alaska-focused and temporary exemption to the Passenger Vessel Services Act, or PVSA, and little more. “It effectively is designed to just get us through the balance of the cruise season for ’21, that’s it,” Murkowski said in a May 17 interview. Keeping the scope of the bill limited helped Murkowski and Sullivan keep it out of more philosophical debates over the need for the PVSA at all from Utah Republican Sen. Mike Lee and the business practices of large, international cruise companies raised by Connecticut Democrat Sen. Richard Blumenthal. “We said, ‘legitimate arguments on both sides but this is not that fight. This is a very temporary, targeted fix for a state that has been hit very hard by COVID,’” Murkowski said. “It allowed both sides to come together and sit down.” Sullivan said on the Senate floor that passing the PVSA exemption is “an example of the U.S. Senate working at its best.” “This is an important step forward, but we still have more work to do. Congressman Don Young, the dean of the House and a great advocate for Alaska, will be working with his colleagues to quickly get the Alaska Tourism Restoration Act through the House,” Sullivan said May 13. “And we’re continuing to work around the clock with (Centers for Disease Control) leaders to finally issue workable guidance that allows the cruise lines and coastal communities to safely welcome visitors again. Given the CDC’s much-awaited loosening of mask guidelines today for vaccinated Americans, I am hopeful we will see progress on this front as well.” The PVSA requires foreign built, crewed or flagged passenger vessels sailing between U.S. ports to make at least one stop in a foreign port and cruise lines typically used a Canadian port — most often Vancouver — as a stop en route or the starting point for Alaska-bound voyages to comply. However, the Feb. 4 announcement by Canadian transportation officials that they would not be allowing large cruise ships to dock in the country’s ports again this summer disrupted plans for a return to more normal sailings. While the first ships of the year have usually arrive in Ketchikan by the start of May, Murkowski noted that getting the bill to President Joe Biden quickly could provide roughly a two-month window for sailings late this summer. “We all know there’s no cruise ships that will come north beyond September,” she said. The cruise legislation was also aided by Washington Democrat Sen. Maria Cantwell, who worked closely with Murkowski in recent years when Murkowski chaired the Energy and Natural Resources Committee and Cantwell was the ranking Democrat. Cantwell now chairs the Commerce, Transportation and Science Committee that was given the PVSA exemption bill. Murkowski said Cantwell helped get Democrat leaders on board with the bill, which would also help Washington’s tourism industry recover. For her part, Cantwell said in a statement from her office that the loss of the 2020 cruise season cost Seattle — where many Alaska-bound voyages originate — 5,500 jobs and $900 million in lost economic activity. Industry representatives have consistently said they need at least two months of lead-time to prepare and crew the vessels before sailings can resume. Young’s spokesman Zack Brown wrote via email May 17 that passage of the cruise bill puts Alaska in a much better position than it has been in for some time. “The Congressman is working very hard to expedite consideration of the legislation, and will be working with his colleagues to earn support for the effort before the House is adjourned (for Memorial Day),” Brown wrote. “We are extremely hopeful that any remaining hurdles can be addressed, so that the cruise season may safely resume in some form.” CDC officials took a step towards loosening its restrictions on domestic cruises in an April 28 letter to industry leaders in which agency officials wrote that they are hopeful guidelines can be put in place to resume large cruise sailings by midsummer. The million-plus cruise passengers that arrived to Alaska via the Inside Passage accounted for more than half of the total visitors to the state in most pre-pandemic years and provided the foundation for one of the state’s handful of growing industries in recent years. Pre-2020, the leisure and hospitality industry had become one of the state’s largest employment sectors, but lost nearly 15,000 jobs last year, according to state Labor Department figures. The lack of visitors has also hit many local governments hard. According to City and Borough of Juneau officials, the lack of cruise ship and passenger fees and taxes totaled roughly $26 million in forgone revenue last year. Murkowski also reiterated that it seems unlikely Canadian officials will lift their ban on large passenger vessels anytime soon following discussions with them given the country’s more conservative approach to COVID-19 and the fact that vaccine distribution has been slower there than in the U.S. “I wish I could tell you that we had received a more enthusiastic agreement to working with us but so much of this has been directed out of Ottawa it seems,” she said of talks with Canadian government officials. “Those in British Columbia certainly recognize that their communities are impacted by this Canadian order and they don’t like it, either.” Regardless, Murkowski said she would raise the issue during upcoming Canada-U.S. Inter-Parliamentary Group meetings with Canadian lawmakers. Elwood Brehmer can be reached at [email protected]

GUEST COMMENTARY: Don’t repeat Europe’s vaccine catastrophe

For many Americans, the calamitously slow vaccine roll-out in countries like Germany, France, and Italy comes as a surprise. After all, in the early days of the pandemic, Europe’s response to the crisis seemed highly competent, especially compared to the United States. But the sluggish vaccination campaign in these nations is actually quite predictable. For years, European policymakers have imposed strict price controls on new pharmaceuticals; and those price caps have delayed patients’ access to cutting-edge medicines. The same story is now playing out with COVID-19 vaccines. Amazingly, Congress is now seeking to emulate Europe’s failed price control policies. Europe’s botched vaccine rollout ought to make lawmakers reconsider. Four months after the first COVID-19 vaccine earned authorization, large portions of Europe are still struggling to inoculate their populations. In Germany, Italy, and France, only about 25 percent of patients have received at least one vaccine dose. Consider that the United States — which is far more populated than any of those three nations — has administered at least one dose of the vaccine to more than half the adult population, and has fully vaccinated three in 10 people. How to explain Europe’s sluggish vaccine rollout? While there is no single cause, one major factor is the European Union’s obsession with paying less for COVID-19 immunizations than many other countries. Whereas Israel — by far the world leader in COVID-19 vaccinations — agreed to pay $25 for each dose, and the United States paid $20, the EU held out for a discount, ultimately paying $15 to $19. And while EU countries got a lower price, they paid more in other ways. A recent analysis found that the delayed rollout could cost the European economy close to $107 billion this year. That’s more than four times what the EU paid for its vaccines. Sadly, this isn’t the first time Europe’s price-obsessed bureaucracy has delayed access to lifesaving new medicines. It’s routine for agencies like Germany’s Federal Joint Committee and France’s Economic Committee for Health Products to set prices for breakthrough drugs at below-market rates. And it’s because of these tactics that new medicines generally take far longer to reach European patients. There were 290 new active pharmaceutical substances released worldwide between 2011 and 2018. Of those, German patients had access to just less than two -thirds, and just less than half were offered to French patients. Meanwhile, in America — where policymakers have so far eschewed European-style price-controls — patients had access to nearly 90 percent of these new treatments. Despite the damage wrought by Europe’s drug price controls, many American lawmakers remain eager to copy these policies. House Democrats just revived H.R. 3, a bill that would tie prices for up to 250 common medicines covered by Medicare to the average price paid in other rich nations, Germany and France among them. Europe’s catastrophic vaccine rollout has shown the high cost, in money and lives, of price controls. Importing those policies here would have disastrous consequences for American patients and end up costing us all more in the long run. Joel White is president of the Council for Affordable Health Coverage, a coalition of organizations seeking to lower the cost of health care for all Americans. Previously, Joel spent 12 years on Capitol Hill as a House staffer, most recently as the Staff Director for the Ways and Means Health Subcommittee.

Show us the money, redux: Alaskans respond to budget challenge

Last fall, we asked Alaskans to “show us the money” using a new website that models the State of Alaska’s fiscal year 2022 budget challenge. Using the current year budget as a baseline and incorporating the then-most current revenue projections, the website started with a projected $1.3 billion dollar deficit. Alaskans were invited to try their hand at filling the gap. A lot has happened since then, but one thing remains the same – the State of Alaska has a structural budget problem that can’t be solved with short-term federal dollars or further delays. Since last fall, we’ve heard from more than 2,100 Alaskans. Using the Alaska Budget Choices web site, they showed us how they would increase or decrease spending; increase or decrease current taxes; add new taxes; modify the draw from Permanent Fund income; designate a level for the dividend; and create their own unique solution. We’ll share more about the results below but first a few reminders. It was never our intention to put forward a single budget solution. Our purpose was to engage Alaskans in a process to better understand the challenges and difficult choices ahead. We reached out to all Alaskans through the news media, social media, email marketing, speaking engagements, and referrals. It was a challenging time with the pandemic, economic worries, and a contentious presidential election all vying for Alaskans’ attention and airtime. We are pleased so many Alaskans took the time to grapple with the challenge of balancing the state budget. We promised to share the results with elected officials. Last week, we sent extracts from the results to all members of the Alaska State Legislature. Those extracts use zip codes to approximate each legislator’s district. The results surprised us. We learned a lot about our fellow Alaskans, mostly that the public conversation about the budget hasn’t really reflected the measured steps that most Alaskans would take if they were the decision makers. Respondents clearly affirmed the need to protect the Alaska Permanent Fund by following a sustainable percent of market value formula draw. When it comes to dividends, the vast majority of responses landed on holding the line or suspending the dividend until we can afford it. In terms of spending, for the most part, respondents favored holding the line on more cuts and maintaining current levels of service. On the revenue side, most respondents favor holding the line on corporate and resource taxes. However, opinions were more diverse and varied when it came to use taxes, an income tax, and a statewide sales tax. We want all Alaskans to see the results as well. The full report can be accessed at: https://bit.ly/2RuhQ2R We hope the Alaska Budget Choices project has provided participants with a greater understanding and appreciation for the challenges facing our legislators. We also hope it has prepared participants to more fully engage with their legislators on this most important topic. As the regular session marches toward a conclusion and the legislature moves into the first of two special sessions, it is imperative for citizens to remain engaged. Stay informed about the budget options under consideration. Reach out to your legislators. It is not hyperbole to say that the future of our state hinges on the decisions that will be made in Juneau in the coming days. Cheryl Frasca is a former director of the Alaska Office of Management and Budget, and former director of the Municipality of Anchorage Office of Management and Budget. Eric Wohlforth is an attorney, and former Trustee with the Alaska Permanent Fund Corp. He served as the commissioner of the Alaska Department of Revenue in the early 1970s.

Dunleavy calls for resolution of PFD, budget in special sessions

Gov. Mike Dunleavy unveiled his latest offer to settle the suite of omnipresent issues relating to the Permanent Fund that have mostly stalled work on all other fiscal matters backed by a large, bipartisan group of legislators on May 12, but it’s still unlikely the proposal will breeze through the Capitol. At the heart of Dunleavy’s plan, which is packaged as a sweeping constitutional amendment to change the structure of the Permanent Fund and how it can be spent, is a call to equally split the revenue from the annual 5 percent of market value, or POMV, draw between money for government services and Permanent Fund dividends. “Imagine a world where we’re not wrestling over the Permanent Fund anymore. Imagine a world where we’re not wrestling over the PFD anymore,” Dunleavy said. “We realize that for the people of Alaska we need to solve this now.” As to the now, Dunleavy included an amended version of Senate Joint Resolution 6, the legislative vehicle for the Permanent Fund constitutional amendment, in his call for an immediate special session along with the operating budget and separate legislation setting this year’s PFD. Dunleavy campaigned on the prospect of getting the Legislature to issue full, statutory PFDs after several years of the formula-driven amount being first cut by former Gov. Bill Walker and then by lawmakers concerned dividends approaching $3,000 per person they believed were unaffordable while the state was also running multibillion-dollar annual deficits. After two years of unsuccessful attempts to get enough legislators on board to pass fully funded PFDs or reach resolution on any other aspects of a long-term budget fix, the governor’s hard line on the statutory formula PFD has faded. Lawmakers with varying stated views on the structure of the fund and the long-term fate of the PFD commended Dunleavy for putting the first big pieces of a broad fiscal compromise into something they can work with. Senate President Peter Micciche, R-Soldotna, said until there is a fiscal plan with a PFD resolution at the center of it, the Legislature will remain “stuck in neutral,” a sentiment echoed by Dunleavy and others. “Until this matter is settled you cannot figure out how to fix the rest of the (budget) gap,” said Senate Majority Shelley Hughes, R-Palmer. Sen. Lyman Hoffman, an influential rural Democrat from Bethel, has previously been sharply critical of many of the administration’s fiscal policies but said he’s worried that if the various issues pertaining to the Permanent Fund are not addressed soon “we’re going to be in a bigger mess than we’ve ever been in before” given it holds Alaska’s remaining spendable reserves. SJR 6 would also enshrine the “50-50” PFD in the state constitution and roll the Earnings Reserve Account, which currently holds more than $14 billion in spendable cash, into the corpus of the fund to ultimately make for a more traditional endowment-style fund. It would additionally roll the Power Cost Equalization endowment fund into the Permanent Fund and require the PCE program be funded each year out of the adjusted POMV. While the concept of simplifying the fund’s structure through and subsequently limiting all appropriations from it to the annual POMV has gradually gained support in the Legislature, particularly among those most vocally opposed to ad-hoc draws from the fund, constitutionally guaranteeing a set annual PFD will be a much tougher sell amongst fiscally conservative legislators who fear the state could someday be forced to forgo essential services in order to pay PFDs. At current revenue and budget levels with a traditional formula-driven PFD, the state has roughly a $2 billion deficit per year that would shrink but not be eliminated with a 50-50 POMV split. However, some legislators once reluctant to constitutionally mandate dividends concede it is the only way — other than eliminating it — to actually settle the issue after the Supreme Court in 2017 unanimously confirmed lawmakers’ authority to bypass the statute when setting the budget each year. Dunleavy is additionally proposing a one-time, $3 billion transfer from the ERA to the Constitutional Budget Reserve to act as a monetary bridge for the state until the Permanent Fund amendments and other deficit-reducing measures can take full effect. Amending the Alaska Constitution requires supermajorities of 14 votes in the Senate and 27 in the House before going to a vote of the people, which Dunleavy noted takes the executive branch out of the debate once the resolution is submitted. “This is really between the representatives of the people and the people themselves,” he said. However, the statewide vote would not happen until 2022 at the earliest, putting the first fiscal impacts of any changes well after that. Dunleavy also gave legislators the heads-up May 13 regarding a second special session in August to take up federal COVID-19 aid appropriations, his constitutional amendments for a tighter state spending cap and to mandate a public vote to approve new taxes, which have gained little traction in the Legislature, as well as “An act or acts relating to measures to increase state revenues,” the special session proclamation states. Micciche said in a May 14 briefing with reporters that he strongly supports taking the divisive PFD issue off the table but he is “struggling” with the $3 billion transfer out of the Earnings Reserve on top of the annual POMV draw of approximately $3 billion primarily because it would likely have an opportunity-cost approaching $200 million in lost fund earnings each year. Micciche also backs the plan for an August special session as it would give lawmakers time to talk to their constituents about the specifics of big policy changes but urged Dunleavy to go beyond his general acceptance of tax discussions to submitting legislation to fill the deficit left by a 50-50 POMV split. “The governor’s plan is a good start but it leaves a $1 billion hole in perpetuity,” he said. “I’d like to know what their plans are for paying for a 50-50 PFD.” Micciche contends a sales tax and adjustments to industry taxes, including oil taxes, will be necessary to fill the deficit under a 50-50 split. “Are the people that support the PFD ready to pay for it? That means taxes,” he said. Elwood Brehmer can be reached at [email protected]

Raters credit Permanent Fund for improved outlooks

The firms that evaluate Alaska’s creditworthiness mostly agree that the state’s financial picture is getting better, at least in the short-term. Analysts for Moody’s Investors Service have upgraded the state’s fiscal outlook from negative to stable, according to a May 4 credit opinion that cites stabilizing oil prices and substantial growth in Permanent Fund as reasons for the improved opinion of Alaska. S&P Global Ratings similarly revised its outlook on the State of Alaska from negative to stable in a report issued May 4 as well. Both ratings agencies also reaffirmed their general obligation ratings for Alaska, with S&P maintaining its AA- rating and Moody’s keeping its equivalent Aa3 rating for the state. Fitch Ratings also revised its outlook for $319 million in revenue bonds sold by the state-owned Alaska International Airport System from negative to stable May 5 based on a surge in cargo traffic that largely offset lost passenger revenue from the pandemic. S&P’s May 4 opinion followed an April 15 report in which the agency’s analysts concluded states with oil-centric economies and budgets are likely out of immediate harm of the pandemic’s influence on oil prices — which have returned to the mid-$60s per barrel range — but surmised Alaska’s economic recovery would likely be slower than other oil producing states. S&P analysts noted in the most recent report that with Permanent Fund income now supporting the majority of the state budget, oil revenues are likely to account for just 20 percent unrestricted state revenue in the 2022 fiscal year that starts July 1. They also wrote that while the state’s fiscal system still needs structural changes to be sustainable over the long-term, the Alaska Permanent Fund Corp. has exceeded investment return expectations in recent months to give the state more cash to play with, for now. Some lawmakers who have long been opposed to Gov. Mike Dunleavy’s plan to spend from the Earnings Reserve outside of the annual structured draws for fear it would degrade the long-term earning power of the fund have also proposed moving most of the available money in the account into the corpus of the fund to ensure it is not spent. However, S&P analysts indicate doing so might also have an unintended impact on their view of the state’s finances because it would lessen Alaska’s reserves, which currently stand at nearly 250 percent of the state’s annual unrestricted general fund budget. “We expect reserves at fiscal year-end 2021 and 2022 to be significantly better than the state’s estimates absent any transfer from the (earnings reserve account) to the Permanent Fund corpus or unexpected market downturn,” the May 4 S&P report states. The analysts added that the roughly $1 billion in federal American Rescue Plan aid Alaska is set to receive reduces the near-term need for new state revenue sources. The Permanent Fund Earnings Reserve Account, which contains the spendable income the fund generates, held nearly $14.2 billion in reserves available for appropriation by the Legislature, up from $9.8 billion last June. As of May 10, the Fund’s overall unaudited value was $78.9 billion, up approximately 21 percent since the start of the 2021 fiscal year. In general terms, fund managers need to achieve annual returns in the 7 percent range to maintain the real value of the fund over time while accounting for inflation and the annual 5 percent of market value, or POMV, draw lawmakers started in fiscal 2019. Revenue Commissioner Lucinda Mahoney said in an interview that she finds the ratings adjustments “encouraging” but emphasized that lawmakers and state officials need to keep pushing towards fiscal reforms that will improve the state’s long-term sustainability. Mahoney said she stressed the view that Alaska’s revenue streams are more diversified than they may appear in recent meetings with ratings agency analysts. While the state was long dependent on oil prices and production for its revenue picture, the Permanent Fund — through its many billions of dollars in real estate, stocks and other varied income ventures — has indirectly but substantially diversified the state’s revenue picture. “I tried to get them to think about revenues in a different light,” Mahoney said, adding that the strong market performance behind the Permanent Fund’s growth has also improved the state’s pension funds, thereby decreasing the expected long-term pension debt obligation and annual payments. Elwood Brehmer can be reached at [email protected]

The power of shopping local

During a year when many local businesses struggled, some retailers reported stable or increased revenues. John Staser of Mountain View Sports in Anchorage says that his 2020 sales turned out to be even with the year prior, and are up so far in 2021. “Alaskans really stepped up to support local businesses,” says Staser. “I noticed a change in attitude and more customers saying they want to shop local. I attribute it to how people saw restaurants struggling and some closing; it struck home that if you don’t buy from people they go out of business.” Local small businesses are the backbone of Alaska’s economy. A dollar spent at a local business has three times the impact on the economy compared to a dollar at a non-local business. Across the state, small businesses employ approximately 137,000 individuals and provide critical goods and services to residents and other businesses. According to “Buy Local: The Impact of Spending at Local Businesses in Alaska”, for every dollar spent at a local business, 63 cents stays in Alaska compared to an estimated 22 cents at non-local businesses. “It’s not only powerful, it’s doable.” Julie Gardella, an analyst at the University of Alaska Center for Economic Development and a contributor to the report, knows full well how much it takes to be a business owner; she grew up watching her father run his small business. Gardella recently placed an order with Denali Dreams in Anchorage, and was gratified by the amount of the time the salesperson spent with her, which was followed up with a sample and a handwritten note. “It was kind and so personal,” she said. “The whole experience brought me a lot of joy, plus the product is high-quality and costs the same as something I could buy at the grocery store. I’m definitely going to keep shopping there and recommend it to my friends.” Despite already knowing that shopping locally is good for the economy, Gardella admitted she was surprised by how much money leaves the state when shopping at a chain store. “The way we did the analysis showed that if each (Alaska) household switched $20 a week or $1,000 a year from a big box store or online to a locally-owned business, that would be an additional $103 million into the economy each year,” she said. “Making the change to local is not only powerful, it’s doable.” Local businesses have more intricate financial ties to their communities than chain operations do. When they need professional services like accountants or lawyers, they tend to contract with in-state firms, keeping the spending local. Because they are relatively small and nimble, local businesses are more able to stock Alaska-made products, stimulating manufacturing. While chain businesses may give to charity, they tend to spend the most money near their corporate headquarters in some other state. Local businesses, on the other hand, prefer to give to local nonprofits. All of these ties help to keep more money circulating in Alaska. Gardella says she’s seen people becoming increasingly conscious about where they spend their money, and points to the Buy Alaska program as an example of how people can find more ways to support local businesses. Formed to connect consumers to Alaska businesses to grow the state’s economy, the program includes a product directory, marketing campaigns, and recently announced a new partnership with Royal Caribbean International and Celebrity Cruises to introduce passengers to Alaskan-owned businesses in port towns that are struggling because of the pandemic. Customer service, local expertise, and competitive pricing make the difference When it comes to consumers choosing to shop local, Mike Hajdukovich, owner of Trax Outdoor Center in Fairbanks and Trax 2.0 in Anchorage wants to be clear that he’s not interested in “handouts.” “Don’t just come in just because you want to buy something local, come in because I’m better than every box store and everyone online,” he said. “Nine times out of 10, the local guys are going to bust their butts to bring up the level of service because we know that when people come through our doors, that’s our chance.” Along with customer service, Staser focuses on matching prices online. “I challenge retailers to join me,” he said. “It’s scary at first but when you get down to it you gain a customer for life and it doesn’t cost that much to do it. We need to step up and be cost competitive.” Staser says that when chain stores offer the same products at the same prices, they simply “can’t compete with a good local store,” and notes that Mountain View Sports customers can avail themselves of his 33 years of experience in the industry combined with a lifetime spent hunting and fishing. He considers a member of his staff to be one of the best guides in Alaska and makes sure that his customers are the beneficiaries of their knowledge. “We can tell them where the fish are biting that day, what our personal experiences are with the gear, what fits them and what doesn’t,” he said. “And then they can walk out of the store that day with their products in hand; it’s immediate gratification.” When it comes to locally-made products, Staser says he’ll sell everything he can get his hands on. Currently that includes products from Alpine Fit, FisheWear, and an assortment of t-shirts and jewelry. By comparison, Alaska products generally struggle to find shelf space at large chain retailers. Recently ShuzyQ moved into his store, and their added inventory of both fashionable and functional footwear has been a successful complement to outerwear and fly fishing gear. Despite a clear belief that their stores offer the best option for their customers, both Staser and Hajdukovich keep an eye on their national competitors to stay sharp. “REI is a good store, they have good stuff and they’re tough to beat…but I’m going to die trying,” says Hajdukovich. Gretchen Fauske is a marketing-minded economic developer fueled by a passion for innovation and entrepreneurship. She is the associate director for the University of Alaska Center for Economic Development, Board President for the Anchorage Downtown Partnership, and a Gallup-certified CliftonStrengths coach.

Movers and Shakers for May 16

Dr. Laurie Stuart has accepted the position of executive director at the Tyonek Tribal Conservation District. Stuart is an experienced nonprofit executive with more than 10 years of leadership roles in science education, conservation, and nonprofit management. She comes to TTCD after serving as a director at Woodland Park Zoo in Seattle, and has previously held leadership positions at the Pratt Museum in Homer and at the Alaska SeaLife Center in Seward. Stuart earned her doctorate of education from the University of Missouri, with an emphasis on sustainability, social justice, and participatory methods in natural resource management. She also holds a master’s degree from the University of Alaska Anchorage. Stuart will be following TTCD’s founding executive director Christy Cincotta. The Tyonek Tribal Conservation District is a non-regulatory, nonprofit 501c3 organization that addresses local issues through community-led conservation. The district serves diverse stakeholders and their geographic focus includes the Native Village of Tyonek, Tyonek Native corporation lands, private lands, and lands within Alaska Game Management Unit 16. Colby Swenor has joined RISQ Consulting as a strategy consultant. He will be working with both current and prospective clients, providing them with customized and comprehensive insurance programs to ensure that their risks are successfully managed. Swenor comes to RISQ following a successful 15 year career in the financial services industry and has held management positions with Wells Fargo, Key Bank, and as well as a commercial loan officer position at Alaska USA Federal Credit Union. Prior to joining RISQ he was the CFO for a large Anchorage based contracting company. Northrim Bank announced two new officers and a promotion: Jeffrey Sanford, vice president-loan officer, Kodiak Loan Production Office; Asanya Lloyd, assistant branch manager, Jewel Lake Branch; and Michelle Lozano, special credits associate officer. Sanford joins Northrim Bank with more than 20 years of commercial banking experience specializing in Alaska’s commercial fishing and seafood industry, helping customers from the Bering Sea to the Gulf of Alaska. He holds a bachelor’s degree from the University of Wisconsin Eau Claire. Lloyd comes to Northrim with six years of experience in finance, investments and lending. She holds a bachelor’s degree from the University of Technology Jamaica. Lozano started at Northrim in January 2019 and has 25 years of experience in banking and financial services. She has worked at a variety of Alaskan financial and title institutions throughout her career. Rasmuson Foundation hired Michele Brown as its newest senior fellow and Rodney Hamilton as IT operations manager. Both joined the Foundation in April. In 2020, Brown retired as president of United Way of Anchorage after 17 years of service. At the Foundation, she will continue work to prevent and solve homelessness through innovative strategies and partnerships. Hamilton, our other new team member, is a lifelong Alaskan born and raised in Anchorage. He brings a wealth of experience from 20 years of working in IT at the Alaska Native Tribal Health Consortium. Among his duties in his most recent role as ANTHC senior computer systems administrator, Rodney supported more than 3,000 users on the health organization’s network, including outlying clinics. For five years, he helped plan and address technology needs for the annual Raven’s Ball. Prior to leading United Way, Brown served seven years as commissioner of the Alaska Department of Environmental Conservation under Gov. Tony Knowles. She also served as an assistant attorney general under multiple state administrations. Brown has received numerous awards including the University of Alaska Anchorage Meritorious Service Award in 2018 and Congregation Beth Sholom’s Shining Lights Award in 2013. Her work to create a community plan to increase Anchorage high school graduation rates resulted in United Way of America’s Best Practices recognition. Ken Taylor has joined Peter Pan Seafood Company LLC as vice president of purchasing, sales and logistics. Taylor brings more than 36 years of experience in the seafood industry, including 24 years in his last role at MOWI. His extensive background includes plant management, longlining, crabbing, harvesting, processing, market development and sales management.

State could net extra $3M with royalty oil sale to Marathon

Department of Natural Resources Commissioner Corri Feige has approved a sale of the state’s oil that could net up to $3 million in additional revenue over the coming year and more importantly sets the stage for lawmakers to consider a similar five-year sale as well. Feige signed off April 22 on the best interest finding for the one-year state royalty oil sale to Marathon Petroleum Corp. that will have the state make 10,000 to 15,000 barrels of oil per day available to the Kenai refinery between Aug. 1 and July 31, 2022. The sale should represent 19 percent to 25 percent of the state’s total available royalty volume, according to the finding. DNR typically makes a small per-barrel premium on the state’s royalty oil when it is sold in-kind versus receiving an in-value payment from the producers for the state’s oil that they sell. Department officials and local refiners agree on a negotiated price differential that allows the state to capture some of the revenue lost from transportation costs when oil is otherwise shipped to West Coast refineries. In recent royalty in-kind, or RIK, oil contracts the state has generally netted $1 to $2 more per barrel than if it sold its royalty oil in-value, according to DNR; however, the state briefly lost money when oil prices and demand collapsed last year along with the onset of the pandemic. The Marathon agreement calls for an RIK differential price of $2.17 cents per barrel, meaning the state will collect incremental revenue as long as average marine transportation costs between Alaska and West Coast refineries remains greater than $2.17 per barrel. A Department of Revenue forecast projects marine transport costs will gradually climb from $3.01 per barrel this year to $3.56 by 2030. In 2016, DNR officials negotiated an RIK differential of $1.95 per barrel for a previous contract with Tesoro, a prior owner of the Kenai refinery. That five-year contract was for up to 25,000 barrels per day and was unanimously approved by the Legislature, which must pass a bill authorizing each RIK sale longer than one year. A Marathon spokesman did not respond to questions in time for this story, but the best interest finding indicates the company has agreed to start negotiations on another five-year contract that would commence in 2022. DNR officials will make up to 95 percent of the state’s future royalty oil — in the range 70,000 barrels per day — available for nomination by refiners under RIK sales. They prefer to keep a small portion available for in-value sales due to higher royalty values for certain leases and to obtain pricing and other market information from in-value sales. The Kenai refinery has a processing capacity of approximately 68,000 barrels of oil per day and generally produces about 59,000 barrels of refined products daily, according to DNR’s finding. In addition to strictly the monetary benefit, DNR’s commercial negotiators also factor in more subtle reasons for selling the state’s oil locally, such as the incremental economic benefits of processing it here rather than having it sent elsewhere. While being on the edge of Cook Inlet allows Marathon to import oil to the Kenai facility, approximately 90 percent of the oil refined there has been either from the North Slope or Cook Inlet in recent years, according to DNR. Since 1979 the state has sold 964.5 million barrels of North Slope oil through in-kind sales, according to DNR data. Elwood Brehmer can be reached at [email protected]

Mishap highlights growing foreign-flagged oil tanker traffic

An unladen oil tanker that’s part of a growing number of foreign-flagged vessels transporting Alaska crude reportedly dragged its anchor for nearly four miles in rough Gulf of Alaska seas while waiting for a pilot escort to Valdez in mid-April. The mishap ultimately resulted in a damaged windlass, or anchor winch, aboard the Bermuda-flagged tanker Stena Suede but little else, according to collated reports. However, it was enough to raise concerns from the federally mandated public oversight group tasked with oil industry activity in Prince William Sound as well as the group of marine pilots that escort large vessels through Southcentral Alaska’s often shallow, tricky nearshore waters. According to the Prince William Sound Regional Citizens’ Advisory Council, or PWSRCAC, the crew on the 810-foot Stena Suede decided to drop anchor roughly 20 miles outside of the Hinchinbrook Entrance to Prince William Sound when winds began to increase on April 14. Continually increasing winds caused the crew to reverse its course of action and attempt to pull the anchor after several hours. During the attempt to retrieve the anchor, the Stena Suede dragged it for nearly four miles — to a position 16.5 miles from Hinchinbrook Entrance — over 30 hours. After the windlass motor failed, the crew reset the anchor and worked to repair the anchor windlass, based on information from the council and a vessel tracking service. The Stena Suede eventually reached the Valdez Marine Terminal a day late on April 16 and departed Valdez April 17. PWSRCAC spokeswoman Brooke Taylor said in an interview that the attempt to anchor in the open Gulf of Alaska amplified the council’s attention to the increased frequency of foreign tankers chartered by North Slope producers to take Alaska oil to refineries across the globe. Taylor stressed that the citizens’ council mostly wants to know more about the vetting process that oil companies use before selecting a vessel operator to carry out a chartered mission. “We were very lucky that it wasn’t a worse situation,” she said, noting that the Stena Suede was unladen with crude oil but still held thousands of gallons of fuel and such situations put the crew at risk as well. “There’s less risk (with an empty tanker) but there’s still plenty of fuel and things that could hit water had this situation gone differently,” Taylor said. U.S. Coast Guard officials said during a May 6 videoconference council meeting that crew leaders on the Stena Suede asked if the Coast Guard had any objection to them “drifting” in the Gulf but did not request assistance. A Coast Guard spokeswoman did not respond to questions about the Stena Suede in time for this story. Southwest Alaska Pilots Association President Capt. Joe Martin wrote in an April 22 letter to Coast Guard Sector Anchorage Commander Capt. Leanne M. Lusk that there are just three acceptable anchorages in Southcentral waters based on the association’s best practices for large vessels. Those are at Knowles Head in Prince William Sound, east of the Homer Spit in Kachemak Bay, and in St. Paul Harbor near Kodiak. While Martin did not specifically reference the Stena Suede in his letter, he wrote that in the association’s opinion, “there is no safe anchorage to be had in the Gulf of Alaska within our pilotage area for large seagoing commercial vessels other than those listed above. This includes adjacent offshore waters. Anchoring in open waters in the Gulf of Alaska is at best imprudent, and at worst negligent, given the unpredictable environmental conditions which may be encountered at any time of the year.” Alaska marine pilots board large ships at predetermined points off the state’s coast and assist the crews in navigating the near shore waters that often have unique tides or highly unpredictable weather, among other factors. Martin also wrote in testimony submitted to the council that the Stena Suede also received damage to its bow mooring equipment but it was made satisfactory for docking at the Valdez terminal and the rest of the tanker’s voyage was uneventful. Longtime Alaska oil industry attorney and analyst Brad Keithley, who tracks Alaska crude shipments weekly, said there are indeed more foreign-flagged tankers visiting Valdez in recent months and the root cause is COVID-19. “It’s a subset of the shift in (Alaska North Slope oil) since the pandemic started,” Keithley said. The price collapse that hit Alaska producers and the state budget so hard last spring was the result of a drastic drop in demand for transportation fuel in the U.S. That forced refineries along the West Coast where Alaska’s oil is typically sent to sharply curtail production, and in turn their oil needs, pushing producers to charter foreign tankers that usually end up in China, he said. According to Keithley, Alaska producers sent an average of approximately 2 percent of their oil to foreign refineries in the years prior to 2020. Last year it jumped to 11 percent, peaking at 17 percent in the second quarter when the global oil glut was at its most severe. He said logistics dissuade the large producers from using their own tankers to make the cross-Pacific journey and therefore they often contract with third-party vessel operators to move their oil. The foreign tankers are likely to keep coming as long as demand from West Coast refineries remains subdued and it has at least temporarily stabilized at about 20 percent less than 2019 levels, Keithley said. “The pandemic certainly started this; it’s a question of whether those West Coast refineries come back up to full demand and I don’t think anyone knows the answer,” he said, noting some California refinery owners have committed to convert their facilities to renewable diesel production. A chart provided by the council indicates that as of May 6, foreign-flagged tankers have loaded in Valdez 11 times since the start of 2020 out of 279 tanker visits. Foreign tankers made just eight calls on Valdez in the three years prior. Regardless of why there are more foreign-flagged tankers calling on Valdez, Taylor said the council primarily wants to learn more about how the unique operating best practices and regulatory requirements in Alaska are communicated to the crews of chartered tankers before they start their journey here. “I’m told anchoring in open water is a technique used in many areas; it’s common practice. It’s a common practice internationally that doesn’t apply here,” she said. “Are the risk factors and the knowledge that people need to navigate our waters — are they being communicated?” Rob Kinnear, shipping manager for Hilcorp Energy’s subsidiary Harvest Midstream, said during the council board meeting that the company, which owns 49 percent of the Trans-Alaska Pipeline System, has chartered vessels when the tankers that normally make the West Coast run were in dry dock or when oil demand has waned on the West Coast. Each charter operator gets port information and vessel traffic manuals — about 800 pages of stuff — before sailing to Alaska, according to Kinnear. “Those documents are present on day one — probably 30 days out from when the vessel is going to load,” he said. The unique aspects of bringing a tanker into Prince William Sound are discussed with the vessel master in a call about a week out, Kinnear added. He said the incident involving the Stena Suede, which was chartered by Harvest, reemphasized the inbound tanker protocol. Alyeska Pipeline Service Co. spokeswoman Kate Dugan wrote via email that foreign tankers are required to have the same design features, such as double hulls, as those purpose-built for the Valdez run under the 1990 Oil Pollution Act. Elwood Brehmer can be reached at [email protected]

GUEST COMMENTARY: S. 1 would muzzle free speech

If you want to turn private life into political warfare, there’s a bill in the U.S. Senate just for you. It’s the Democrats’ 800-page election takeover, S. 1. Promoted as a voting and campaign reform measure, 300 pages of the bill actually contain new restrictions on your First Amendment rights to association and free speech. These provisions have been criticized by everyone from the ACLU to Mitch McConnell, but Democratic leaders refuse to budge. The bill has already passed the House of Representatives. S. 1 also seeks to nationalize election law in ways that won’t fit our unique state. I oversaw elections as Gov. Sean Parnell’s lieutenant governor. Alaska’s election rules reflect our vast land areas, diverse languages and cultures, and even the challenges of getting an ID card if you live in rural Alaska. Sadly, S. 1 will not allow for our uniqueness and diversity. It turns more power over elections to the federal government, and overrides our state’s constitution in several ways. A second challenge in the law is its effort to stifle political debate and undermine individual privacy, both things Alaskans hold dear. Under S. 1, any group that mentions a candidate in communications about legislation or public affairs could be forced to publicly expose its supporters. This will discourage Americans from joining groups that speak about the issues. It would also violate the privacy of longstanding nonprofit organizations that care about public policy and good government. Americans have a First Amendment right to privately support charities and civic groups, including through membership. Doing so should not “brand” someone as fully supporting everything that group does or advocates. A garden or gun club, an aviators’ group, or a snowmachine group might have views on parklands or air traffic control or access to public lands. Why should they have to release their membership to make their feelings known on a legislative issues? First Amendment freedom has been vital to social movements, including many that are now celebrated among our democracy’s greatest achievements. Americans who challenge the establishment have good reason to value their privacy. One of the great victories of the civil rights movement was a unanimous 1958 ruling by the U.S. Supreme Court protecting citizen privacy. It said Alabama could not force the NAACP to turn over a list of its members. The Court saw that “compelled disclosure of affiliation with groups engaged in advocacy may constitute as effective a restraint on freedom of association as (other) forms of governmental action.” In other words, censorship isn’t the only way the government can make a troublesome group or viewpoint disappear. If it can weaponize the law to force organizations to expose their members, it can dry up support for any group that dares to criticize the government. Soon enough, the criticism goes away, or at least gets a heck of a lot quieter. Importantly, the court’s ruling did not just apply to the NAACP or in the South. It protected the right to private giving for all Americans and from all governments. The threats to citizens today, and the chill to speech, are significantly greater. Thanks to the internet, private giving that is publicly exposed will be available for all time, to anyone, in just a few clicks. Who knows what opinions will get you “canceled” a generation from now? Even today, three out of four voters say they cannot speak openly because of how others would react to their views. S. 1 would silence us more. Sen. Lisa Murkowski courageously stood for privacy and the First Amendment freedoms of Alaskans during the 2005 Patriot Act debates. I agree with the sentiments she expressed then about the importance of “providing safeguards to protect the constitutional rights of all Americans.” She fought giving the government power to do a “fishing expedition” into our library, health and gun records. Now I’m hopeful our delegation stands together to protect our privacy, by defeating S. 1. Congressman Don Young has already voted no. Private giving is the protection that new ideas need in a democracy. History teaches us that some of them, maybe even those we regard as silly or strange today, will become the founding principles of our future. No wonder those in power want to shut them down. Mead Treadwell was lieutenant governor of Alaska from 2010-2014. He is a board member of Alaska Policy Forum and many other nonprofit groups.

GUEST COMMENTARY: HB 176 offers solution to health care shortage

Alaskans suffer from a health care shortage in most of our boroughs. It is not that we have a shortage of providers, though. We rank among the top 10 states in the country for most doctors per capita. A large part of the problem is that onerous regulations on providers make it more difficult for them to treat patients in need. But now, lawmakers are proposing a potential solution to this problem, one that would allow doctors to spend more of their time with patients and less time filling out paperwork. The Alaska Legislature is considering a bill, HB 176, that would legally define “direct health care agreements,” also known as direct primary care, as distinct from an insurance product and therefore exempt from Alaska’s insurance laws and regulations. Make no mistake: This bit of legalese would be game-changing for health care and those who depend on it in our far-flung state. HB 176 would give health care providers, including primary and specialty care providers, the legal certainty they need to see Alaskans through direct primary care, an arrangement in which patients would pay a fixed, monthly fee — on average, $25 to $85 — in exchange for round-the-clock access to their doctors. Think of it as a gym membership for health care. Under the current system, many physicians hesitate to offer DPC because they worry it will be regulated under the state’s insurance laws creating extra layers of bureaucracy to deal with, along with the inevitable higher costs. HB 176 would fix that. In turn, the benefits DPC could offer to doctors and patients would be enormous. America’s doctors spend inordinate time — half their working hours — navigating the cumbersome third-party insurance reimbursement system, time that results in 40 percent higher overhead expenses, and which could have been spent treating patients. This process also contributes significantly to physician burnout, causing skilled medical professionals to leave the practice. DPC could relieve some of this hemorrhaging. Their practices spend significantly less time on often mind-numbing paperwork, allowing them to focus more of their attention on the patients in their care. Patients, too, could benefit from increased access to DPC. One study found that DPC patients visited the emergency room 41 percent less often, admitted to hospitals 20 percent less, and needed 13 percent fewer health care services overall, compared with patients who use traditional fee-for-service primary care. DPC also increases health care affordability by improving patient outcomes. After a North Carolina county offered their public employees an option to receive care through DPC, total medical costs fell 23 percent, out-of-pocket spending decreased a whopping 46 percent, and prescription drug spending fell 36 percent. The average patient was able to save $3,120. What’s more, under DPC arrangements, providers typically spend 30 to 60 minutes with each patient, compared to just 12 to 15 minutes for fee-for-service relationships. For these and other reasons, more than 30 states have passed bills ensuring that consumers have access to DPC. Removing barriers to DPC in Alaska could be exactly what we need to expand access to quality, affordable health care. Lawmakers should pass HB 176. Not only would it give patients better access to better care, but it would also free up more of our doctors to provide it. This is our chance to help them do it. Ryan McKee is state director of Americans for Prosperity-Alaska.

GUEST COMMENTARY: Biden’s clean energy plan requires a U.S. mining renaissance

President Biden is making a big push for his American Jobs Plan. As he explained in his recent address to Congress, a large-scale U.S. transition to renewable energy could create millions of good-paying jobs, particularly if “Made in America.” That would be a great help for America’s domestic manufacturers. But there’s a catch: a potential shortage of the raw materials needed to actually manufacture these advanced technologies. A new report by the International Energy Agency makes clear that the United States will need to drastically increase its supply of critical minerals in order to manufacture everything from wind turbines and solar panels to lithium-ion batteries and electric vehicles. As the IEA explains, an insufficient supply of raw minerals could jeopardize the chances of actually manufacturing these technologies in the U.S., or deploying them globally to effectively address climate concerns. According to the IEA, the production of lithium-ion batteries alone could drive up the global demand for lithium by more than 40 times through 2040. Supplies of other key minerals — including graphite, cobalt, and nickel — would need to increase by at least 20 times as well. President Biden plans to build out America’s energy infrastructure, including an estimated 20 gigawatts of new, high-voltage power lines and a proliferation of EV charging stations. The IEA estimates that, globally, these kinds of investments will require a doubling of copper supplies in the next 20 years. Similarly, increased production of wind turbines and solar panels could boost demand for rare earth metals by as much as seven times. These new technologies are far more minerals-intensive than the systems they’re replacing. An EV uses six times the mineral inputs of a conventional car. And an onshore wind plant requires nine times more mineral resources than a gas-fired power station. Unfortunately, the United States is now heavily reliant on China and other nations for these raw materials. In fact, America’s mineral-import reliance has doubled in just the past two decades. And thanks to aggressive, mercantilist policies, China now controls 70 percent of the world’s lithium supplies, 80 percent of rare earth metals, and roughly 70 percent of the world’s graphite. A key concern is that China utilizes extremely toxic practices to extract these resources. In Inner Mongolia, Chinese mining operators have poured refining waste into a poisonous artificial lake large enough to be visible on Google Earth. And China’s Bayan-Obo dumping site consists of dangerous sludge roughly three times the size of Central Park. In contrast, America’s mining operators adhere to the world’s most stringent environmental standards. However, the permitting process for new U.S. mines can often take up to a decade. Countries such as Australia and Canada typically approve new mines in only two to three years, though, even while imposing equally strict environmental controls. To meet soaring demand and reduce imports from China, the United States must start mining more of these resources at home. The good news is that the U.S. possesses more than $6 trillion in mineral reserves. It’s time for federal policies to change in favor of U.S. mining and materials processing. Otherwise, President Biden’s clean energy agenda could fall short of its goals—and leave the U.S. dependent on China’s reckless mining industry. Michael Stumo is CEO of the Coalition for a Prosperous America. Follow him at @michael_stumo

Ucore aims to start construction of rare earths facility by ‘23

A Canadian metals exploration and technology firm has solidified its plan to disrupt China’s control over increasingly critical metal supply chains and Southeast Alaska is at the center of it. Leaders of Nova Scotia-based Ucore Rare Metals Inc. highlighted their “Alaska 2023” plan to complete a $35 million rare earth metals processing plant in Ketchikan by the end of the namesake year during a May 11 videoconference presentation hosted by the Alaska Support Industry Alliance. Ucore chose the Southeast town for its proximity to the Bokan Mountain-Dotson Ridge rare earth mine prospect on nearby Prince of Wales Island, which the company has held since 2007. CEO Pat Ryan said the schedule is “aggressive,” but the company hopes to use revenue from the metals processing facility to support development of a small underground rare earth mine. If developed today, the Bokan project would be just the second rare earth mine in the country. As it stands, Bokan is an advanced-stage prospect that the company largely set aside after a 2015 drop in prices for rare earth metals. Ucore leaders at the time shifted their focus to developing the Ketchikan SMC — in which they hope to deploy an emerging, proprietary metals separation technology dubbed “RapidSX” — to be ready to jump into the burgeoning rare earth supply chain when prices improved. It appears that time is rapidly approaching. Company leaders announced May 4 that they began testing the RapidSX technology under an agreement with a rare earth producer. They expect the design for a commercial-scale system to be ready early next year if the current tests go well, according to the May 4 statement. Ucore Vice President Mike Schrider said rare earth prices started to increase significantly last year and the company is tracking them so it is ready to restart work on the mine when metal prices justify it. With much of the resource delineation complete, Ucore can have Bokan “near shovel-ready” within 30 months of reaching a financing agreement for the mine, he said. In 2014, the Legislature approved the Alaska Industrial Development and Export Authority to issue up to $145 million in bonds to help finance the Bokan project. Ucore estimated in 2013 that the mine would cost about $220 million to develop. Company leaders said they are currently in discussions with AIDEA officials for financing the Ketchikan SMC. An AIDEA spokeswoman did not respond to questions about talks with Ucore in time for this story, but authority leaders have regularly voiced general support for developing Bokan. Ucore’s value-added rare earth plan could put Alaska on a path to help underpin the country’s clean energy revolution in much the same way the North Slope did with oil decades ago, according to Ryan. “The new oil or the new gas for the future are these critical (rare) metals,” he said. Currently, China controls roughly 80 percent of global available rare earth resources, Ryan said, which is potentially problematic given the particular need for them in electric vehicle batteries and motors. It’s because of China’s control over those markets that Ryan said Ucore is working to integrate multiple aspects of the supply chain into its business. “If we don’t do something to regain and recapture the supply chain in North America, in the U.S., it will be lost to China,” he said, insisting that Chinese government officials strategically aimed to the middle of the rare earth supply chain — processing concentrates into metal oxides —to influence the broader downstream markets. “China’s forcing people to set up (rare earth metals processing) in China,” Ryan added. Shipping concentrates to China forgoes upwards of half the total value in the supply chain, he said. The Bokan Mountain prospect holds more than 4.7 million metric tons of indicated rare earth ore, according to a 2015 resource assessment. That translates to approximately 63.5 million pounds of collective rare earth metals, according to Ucore, which are used in a plethora of high-tech applications, from smartphones to advanced batteries and fighter jets. There are 17 minerals defined as rare earth elements, but “heavy” rare earths — such as europium, terbium, and ytterbium with a greater atomic weight — are the most sought after and are used in products that rely on high-temperature magnets. More common lighter rare earths are used in a range of applications including LED displays. Heavy rare earths account for roughly 40 percent of the mineralization at Bokan, according to Ucore. The company hopes to utilize “allied” rare earth feedstock from mines in Brazil, Australia, or the Mountain Pass mine in California, among others, to supply the SMC until the Bokan mine is producing, according to Schrider, who said the feedstock supplies would eventually be blended for oxide production. The company’s economic modeling shows it can be competitive in rare earth oxide markets with its RapidSX separation technology, which uses the same metallurgical processes as traditional plants but does it on a much smaller footprint and at a much lower cost, Ryan said. He described a typical rare earth processing facility as being roughly the size of a football field, while the Ketchikan SMC would fit “in the Red Zone,” or the last 20 yards, he said. Ryan emphasized that Ucore’s biggest hurdle isn’t financing — he’s confident in what they’re developing — rather, it’s China realizing they could lose control of a valuable geopolitical tool. “When they see what’s developing, we’ll have to have our supply chain all wrapped up,” he said, stressing the company will then need political support to keep Chinese government officials from working to unravel what they’ve put together. Elwood Brehmer can be reached at [email protected]


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