GUEST COMMENTARY: Attempt to repeal ANWR development an insult to Alaskans

Last week the House of Representatives approved measures that would restrict America’s future energy supply, including one that would block responsible development in northeast Alaska. As the state’s congressional delegation, we are unified in strong opposition and believe passage would be a reckless strategic mistake. The bill in question comes from a California representative and targets the non-wilderness 1002 Area of the Arctic National Wildlife Refuge, which Congress set aside in 1980 for future exploration. After years of debate, Congress agreed in 2017 to allow careful development of just 2,000 acres of the 1.5-million-acre area, itself located within the ANWR’s 19.3 million acres. This developable fraction of a fraction amounts to one ten-thousandth of the refuge. We believe, in fairness to Alaskans, that the leasing program should proceed responsibly, with Congress and the Trump administration ensuring that lands and wildlife are cared for. All of us are working to put the proper guidelines in place. Yet some in Congress still remain eager to repeal the provision, based on misperceptions about what is at stake and what most Alaskans want. Most offensively, the repeal effort ignores the Inupiat people of Kaktovik, the only village located in the ANWR. Most who live there, like a sizable majority of Alaskans, support responsible development of the 1002 Area. Members of Congress seeking a repeal ignore the significant environmental protections that apply to development, as well as the decades-long record of safe operations on Alaska’s northern coast under some of the world’s strictest environmental regulations and oversight. They ignore incredible advances in technology, which have dramatically reduced the surface footprint of development while increasing drillers’ subsurface reach by as much as 40 times. They also overlook the importance of economic vitality in sustaining Alaskan life. Our state wasn’t allowed into the union until 1959 when Washington was finally satisfied we could support ourselves through resource production, and maintaining a strong economy remains essential to all of our goals, including environmental preservation. Alaska is still young and will need to develop its resources long into the future. As recent years have shown, our economy, our state budget and our people suffer when federal restrictions prevent development. But it isn’t only Alaska that stands to lose. According to the Seattle Metropolitan Chamber of Commerce, Alaskan oil supports 12,000 jobs and $780 million in wages in Washington’s Puget Sound region each year. All of that could vanish if the Trans-Alaska Pipeline shuts down. The pipeline is currently only a quarter full and needs new throughput from the 1002 Area to reach capacity. Further south, data from the California Energy Commission shows the state’s imports of foreign oil have risen significantly as Alaska production has declined. California’s answer is that it plans simply to stop using oil—yet it still ranks near the top of the list of oil-refining states. Despite ceaseless rhetoric about a Green New Deal, the reality is that our nation and the world are demanding the resources that will come from the 1002 Area. If Alaska doesn’t supply them, another country will. Global oil demand is rising, not falling. President Trump’s commitment to America’s energy renaissance has helped create thousands of well-paying jobs across America, strengthening families and communities along the way. And while prices have been relatively stable, artificial restrictions can lead to price spikes that cause hardship and unrest. See Paris as a recent example. Careful development of the 1002 Area will help strengthen America’s economy and improve our energy security in the long-term. It will also benefit global energy markets, allowing the U.S. to provide allies with alternatives to resources from unfriendly nations and cartels. Competition for resources in the Arctic is another geopolitical dimension of the ANWR issue. Russia and China are expanding their presence in the region, with billions of dollars of investments in infrastructure. The U.S. is falling behind in icebreakers, deep-draft ports and other Arctic infrastructure needs. Pulling up the stakes on an American energy program that helps build a presence in the region would put us further behind. We understand that Alaska has earned an almost mythological place in the minds of many Americans. But we cannot be treated like a snow globe, to be placed on the shelf for viewing pleasure only. Alaska has tens of millions of acres of national parks, wildlife refuges and federal wilderness. We also have room for the responsible development of a small part of the 1002 Area, and all Americans should recognize this is in our nation’s best interest.

Final EIS released for ANWR lease sale

A federal agency on Thursday recommended a plan to offer the entire coastal plain of the Arctic National Wildlife Refuge in Alaska for lease to oil and gas companies, rejecting more restrictive alternatives and setting the stage for the federal government’s first lease sale there by year’s end. The Bureau of Land Management plan, contained in its final environmental report of leasing in the refuge, could allow the oil industry to nominate tracts from the entire 1.6 million-acre coastal plain, about 8 percent of the refuge. The recommendation offers the most acreage available for petroleum extraction, compared to a list of options the agency proposed in a December draft report. But it would restrict surface use in many areas, such as near rivers and coastal areas, and land used by denning polar bears and caribou. Alaska leaders applauded the plan in a statement from BLM announcing the release. “This is a major step forward in our decades-long efforts to allow for responsible resource development in Alaska’s (coastal plain), and I thank Secretary (David) Bernhardt and his team for their thousands of hours of hard work,” said Sen. Lisa Murkowski, R-Alaska. “I’m hopeful we can now move to a lease sale in the very near future, just as Congress intended, so that we can continue to strengthen our economy, our energy security, and our long-term prosperity.” “Forty years after Congress selected the Arctic Coastal Plain for potential energy development, the Trump Administration is making good on that decades old potential,” Gov. Mike Dunleavy said. “I join with all Alaska governors since 1980 in assuring the nation and the world that we develop our natural resources responsibly. I look forward to the lease sale scheduled for later this year.” The Republican-led Congress in 2017 approved lease sales in the refuge in the tax-reform bill, and directed BLM to oversee them. Congress in 1980 set aside the coastal plain for possible development. The federal agency’s recommendation came as efforts continue in Congress to halt drilling in the ecologically important region in northeast Alaska, home to climate-threatened polar bears, migrating caribou and other important species. Bills to stop the drilling, including one passed in the House on Thursday, aren’t expected to clear the Republican-led Senate. The bigger question may be how much interest industry will show in the politically divisive and costly region near the Canadian border about which little is known by the oil industry. Major oil company BP recently announced it would sell its long-held stake in the only well ever drilled in the refuge, an effort that ended in 1986 under an exception allowed by Congress. The sale was part of BP’s decision to sell its Alaska assets to Hilcorp Alaska. Members of the Gwich’in Steering Committee, a voice for several Gwich’in communities in Alaska and Canada that oppose drilling in the refuge, criticized the BLM report on Thursday. The Gwich’in people live outside the refuge but have hunted caribou in the refuge for eons. “There is nothing final about this (environmental report) except that it demonstrates that this administration and the Alaska delegation will disregard our way of life, our food, and our relationship with the land, the caribou, and future generations to pander to industry greed,” said Bernadette Demientieff, the committee’s executive director. Conservation groups have argued that relatively little money will be generated by the lease sale, based on past sales in Alaska, countering a key rationale by the Trump administration that drilling in ANWR could be a boon for the U.S. and Alaska treasuries. The Defenders of Wildlife said about three-quarters of the coastal plain is designated critical habitat for Beaufort Sea polar bears that increasingly spend time ashore as sea ice melts, and whose numbers are declining. Development will lead to a spiderweb of airstrips, roads and pipelines, plus oil spills and increased pollution, the group said in a statement. “This Arctic National Wildlife Refuge leasing plan is another disgraceful example of the Trump administration’s continued rejection of environmental law, sound science and the wishes of the American people in protecting wildlife and wild lands," said Jamie Rappaport Clark, president of Defenders. “Selling off the entire coastal plain for oil development presents an existential threat to threatened polar bears and is opposed by 70% of Americans.” Members of the Alaska congressional delegation say that most Alaskans support development in the coastal plain. The report’s release marks the “culmination of decades of work,” said Rep. Don Young, R-Alaska. “I have fought for responsible oil and gas development on the coastal plain since ANWR was created, and I am immensely pleased that we have reached this stage.” “For decades, Alaskans have been urging their federal government to open the (coastal area) of ANWR for exploration,” said Sen. Dan Sullivan, R-Alaska. “At long last, Congress voted to allow it. Now, the administration is working diligently to fulfill Congress’ directions in a transparent and responsible process.” Chad Padgett, Alaska director of the Bureau of Land Management, said precautions under the recommended plan include areas along rivers where the surface would be off limits for use. The plan could allow rare exceptions, such as for a pipeline that must cross a stream. “For all the waterways, we have setbacks to provide for no surface occupancy to allow caribou to get away from insects,” he said. He said a strong leasing program could create as many as 2,500 direct jobs during peak years and generate hundreds of millions of dollars annually in federal and state royalties. The federal Energy Information Administration has estimated that about 3.4 billion barrels of oil would be produced in the refuge by 2050. The first drops of oil, if enough is discovered, aren’t expected to flow until at least 2027. The Interior Department could approve a final leasing plan next month. The BLM hopes to hold a lease sale before the end of this year, Padgett said.

Supreme Court hears arguments over bill to pay off credits through bonds

Justices on the Alaska Supreme Court heard oral arguments Thursday morning in the lawsuit over oil and gas tax credit bonds that could have major ramifications for the state’s financial future. Longtime Juneau attorney Joe Geldhof argued on behalf of former University of Alaska Regent Eric Forrer that House Bill 33 — a law passed in May 2018 allowing the state Department of Revenue to sell up to $1 billion in bonds to pay off outstanding oil and gas tax credits — violates the Alaska Constitution’s strict limitations as to what kinds of debt the state can take on and how. If the Supreme Court strikes down HB 331, the Legislature and Gov. Michael J. Dunleavy’s administration would have to find a new way to pay off the remaining refundable oil and gas tax credit obligation, likely through partial appropriations over several years. Revenue officials say the outstanding tax credit certificates the state has not repurchased total roughly $700 million compared to the $1 billion authorized by the bill. That scenario would require the small, oftentimes financially vulnerable companies as well as the investment banks holding the credits to wait substantially longer to be repaid. Several companies have already delayed drilling work, left Alaska or filed for bankruptcy, citing the lack of expected tax credit payments as a reason for their actions. However, Geldhof contended that upholding HB 331 would allow the state to take on debt that is not contemplated in the Alaska Constitution and could have “enormous” fiscal consequences to the state at-large. “If you allow the kind of debt the state seeks to incur here for the state, keep in mind that there’s 162 municipal units that within a week or two of your decision are going to say, ‘Wow, this is a splendid opportunity for us to borrow and spend and we’ll worry about the debt in the future,’” Geldhof said to the panel. The justices subsequently questioned whether he was making a policy debate, which is outside of their purview to consider. Geldhof responded that he wasn’t asking them to second-guess the Legislature’s policy, but stressed that HB 331 is “a clever workaround” to the Constitution that “will allow a proliferation of debt” in Alaska if it stands. Alaska Superior Court Judge Jude Pate dismissed the suit in January on the grounds that Forrer failed to state a claim upon which the court could grant relief on the grounds that HB 331 “passes constitutional muster,” Pate wrote in his decision. Forrer originally filed the suit in May 2018. Hatched by former Gov. Bill Walker’s administration as a way to pay off the large tax credit obligation, HB 331 would allow the companies and banks holding credits to get their money relatively quickly instead of possibly waiting for the state to pay them off over years of appropriations according to current statute. To get paid sooner the credit holders would have to accept a discount of up to 10 percent less than the face value of the certificates. The state Department of Revenue would then use the difference between the credit values and the discounted amount actually paid to cover the borrowing costs. Supporters of the tax credit bonds insist it is a way to restart investment by small producers and explorers in Alaska’s oil and gas fields that has been slowed by three years of credit payment amounts at levels less than what was applied for as the Legislature and the administration debated how to resolve the state’s large budget deficits. At issue is whether or not the law, which passed with bipartisan support and was signed by Walker, runs afoul of Article IX of the Alaska Constitution as Forrer and Geldhof insist. The state Constitution generally limits the Legislature from bonding for debt to general obligation, or GO, bonds for capital projects, veterans’ housing and state emergencies. In most cases the voters must approve the GO bond proposals before the bonds are sold. State corporations can also sell revenue bonds, but those are typically linked to a corresponding income stream and only obligate the corporation to make payments, not the State of Alaska as a whole. HB 331 allows the Revenue Department to set up the Alaska Tax Credit Certificate Bond Corp. specifically for the purpose of issuing the 10-year bonds. But the only revenue the tax credit corporation would have would be direct appropriations from the Legislature, as the bonds would not be sold to support a project that would eventually generate funds to repay the bonds that originally funded it, as is the case in a traditional revenue bond scenario. That’s why Geldhof and other critics of the plan often refer to the state tax credit corporation as a “shell corporation” with the sole purpose of passing money from the Legislature to the bondholders. State officials rebut that language in the bond certificates would notify potential buyers that their repayment would be “subject to appropriation” by the Legislature, which shields the larger State of Alaska from recourse and makes the plan legal. Department of Law attorney Laura Fox argued on the state’s behalf that prospective bond buyers would be aware of the appropriation risk, which is common in state contracts, and that risk would be accounted for through slightly higher interest rates. “Those words tell creditors they can’t legally compel the state to pay,” Fox said of the subject to appropriation clause. She noted the bondholders only recourse would be against the assets of the corporation — which the Legislature appropriated to it. Geldhof questioned whether the state would truly be free from liability if the lawmakers failed to make the bond payments. State attorneys have also pointed to previous court rulings that have allowed the state to take on debt outside the explicit constitutional provisions, but Geldhof asserts those deal with lease-purchase agreements and are not applicable to the bond sale contemplated in HB 331. The intent of the framers of the Alaska Constitution was also contemplated during the arguments. The justices asked Fox if she could discern through Constitutional Convention meeting records whether or not the delegates crafting the Constitution considered the HB 331 plan to be revenue bonds, or if such a plan was even contemplated. Fox responded that revenue bonds in the traditional sense were likely the understanding at the time the Alaska Constitution was granted, but noted that other state corporations occasionally have revenue bond payments supported by legislative appropriations. “Nothing in (Article IX) says where the corporation has to get its revenue from,” she said. She acknowledged the state does not consider the tax credit obligation to be debt, but rather “it is indebtedness,” Fox said, as the Constitution does allow the state to refinance existing debt. “I don’t know whether the semantic debate whether you call it debt or not really matters,” she said. Geldhof said in his closing rebuttal that the state is trying to incur debt to cover operating expenses, which is not what the constitutional framers intended. “We have enough financial problems in Alaska, don’t add to them by green-lighting debt that we can’t sustain,” he said. No timeframe was given as to when the Supreme Court justices will issue their ruling. (Editor's note: This story has been corrected to accurately reflect that Judge Jude Pate serves on the Alaska Superior Court, not District Court.) Elwood Brehmer can be reached at [email protected]

FISH FACTOR: Dietary guidelines zero in on seafood

Federal agencies are meeting now through next March to define U.S. dietary guidelines for 2020-25, and a high-powered group of doctors and nutritionists are making sure the health benefits of seafood are front and center. For the first time in the 40-year history of the program, the dietary guidelines committee has posted the questions they are going to consider. They include the role of seafood in the neurocognitive development in pregnant moms for their babies, and in the diet of kids from birth to 24 months directly, said Dr. Tom Brenna, professor of pediatrics and nutrition at Dell Medical School at the University of Texas. “We really got jazzed when we saw that because we wanted to figure out what the committee would find when it does its literature search on what medical evidence is out there and boy, did we find a lot,” Brenna said. Brenna also chairs the advisory council of the Seafood Nutrition Partnership, which on Sept. 17 is holding its 3rd annual in Washington, DC. The non-profit hosts the event as part of a public health campaign started in 2015 aimed at getting Americans to eat more seafood. More than 40 studies address the two committee questions, Brenna said, and provide evidence of how nutrients in seafood, such as omega-3 fatty acids, are so especially important to brain and eye development. “The brain and the retina in the eye are omega-3 organs. As calcium is to the bones, omega-3 is to the brain,” he said. “These kinds of data are exactly the kind of human study the dietary guidelines focus on. They are not cell studies, not rat studies, they are based on real studies on humans. It’s direct evidence. That’s why we are so excited.” For centuries, fish has been regarded as “brain food” and a plethora of studies has shown that seafood can prevent or relieve dementia and Alzheimer’s disease and reduce depression, among other things. “I don’t understand why anyone wouldn’t be thinking of seafood if they wanted to keep their brain in good working order,” Brenna said, adding that he is baffled why such positive health messages have not “stuck” in the U.S. Answers could be forthcoming in a discussion of Building Lifelong Seafood Consumers at the D.C. symposium. Unlike the meat or dairy industries who use sustained, national campaigns such as “Where’s the Beef?” or “Got Milk?”, the seafood industry has never banded together on its own behalf. “Getting the seafood industry together to promote one message has been difficult,” Brenna said, adding that the industry appears fragmented instead of coming together as a national “whole.” He is hopeful that putting the spotlight on seafood’s health advantages will help move the message and that national media will show more interest. “We’re generating the ammunition for the policy guys,” Brenna said. “There’s only so much that the science guys can do and boy, we’ve spent a lot of time doing it. We can lay the evidence in front of the policy makers. They have to implement it.” The 2015-20 dietary guidelines recommended at least two servings of seafood per week, but only one in 10 follow the recommendation. Consumption of seafood by Americans reached 16 pounds per person in 2017, in increase of 1.1 pounds versus 2016, according to federal data. The Dietary Guidelines Advisory Committee will meet five times with the last meeting tentatively scheduled for March 12-13, 2020. All meetings will be open to the public and two will include opportunity for public comment. Written comments are being accepted until the committee completes its work. A final report will be submitted to the Departments of Agriculture and Health and Human Services. Crab’s coming Bering Sea crabbers got some good news in advance of the season opener in mid-October. “We’ve been told that we will have a Bering Sea red king crab season. We don’t know what the catch will be yet but we understand that it will be reduced from last year. We really appreciate the Alaska Department of Fish and Game for giving us a heads up on that,” said Jake Jacobsen, director of the Inter-cooperative Exchange, or ICE, which represents more than 75 percent of the crab fleet of about 85 boats. The 2018 catch limit for Bristol Bay red king crab was just 4.3 million pounds. Jacobsen said the catch will go into an eager market and make for a good pay day. “Our average price for king crab last year was $10.53 (per pound),” he said. “We’re expecting higher prices this year based on what we’re seeing in world markets.” The record price for Alaska red king crab was $10.84 per pound paid in 2011. No word yet on the catch quota for snow crab, or opilio, although it should increase from this year’s take of 27.5 million pounds. Surveys in 2018 showed a 60 percent boost in market sized male crabs and nearly the same for females. Bob Foy, director of the North Pacific Fishery Management Council’s crab plan team, said it “documented one of the largest snow crab recruitment events biologists have ever seen.” Snow crab prices for the 2019 winter fishery are still being finalized, Jacobsen said, adding “it should be somewhere around $3.95 to $4 (per pound) average price.” A shortage of snow crab could prompt earlier fishing than the traditional mid-January start, he added. Crabbers also are keeping their fingers crossed for an opener for bairdi Tanners, snow crab’s bigger cousin. Jacobsen said the 2019 Tanner price “should average around $4.50 a pound.” Just 2.4 million pounds were allowed for harvest in the 2018-19 Tanner fishery, although crabbers say they see a lot more crab than what’s been showing up in annual trawl surveys. “It’s really hard to guess from one year to the next on the surveys. It might show something one year and you can’t find them the next,” he said. Jacobsen added that buyers like Red Lobster are featuring the larger bairdi Tanners on their menus and a closure would crimp those markets. “We’re really hopeful we can get a bairdi season this year so we can maintain that differentiation in the marketplace. It seems like we have to rebuild it every time we miss a year or two,” he said. Managers will reveal findings of the summer survey during the week of Sept. 16 in Seattle and finalize the catch quotas in early October. The Bering Sea crab fisheries open Oct. 15. Five species, five pieces Snack sized stories can teach a lot about Alaska salmon and connect people across the state. “I don’t think it’s an overstatement to say that here is no other species that is as important to Alaska as salmon,” said Peter Westley, an assistant professor at the College of Fisheries and Ocean Sciences at the University of Alaska Fairbanks. His students compile a Five Bites of Salmon newsletter that showcases stories and research about Alaska salmon as a way to “help increase salmon literacy and build a network of salmon connected people,” he said. A recent Five Bites highlighted lethal impacts of Alaska’s heat wave on salmon, what raging wildfires might mean for salmon habitat and interactive dives into 13 salmon regions that show, for example, that the Yukon is home to a larger watershed than Texas. The newsletter is a small offshoot of the college’s Salmonid Evolutionary Ecology and Conservation lab, or SEEC, which focuses on projects that help inform policy makers and sustain connections between salmon, people and place, Westley said. “Sustainability is not just about having a high abundance of salmon in some river,” he said. “It’s really about sustaining the connections to that resource on the landscape.” Research by SEEC lab students has revealed, for example, that larger numbers of adult coho salmon at Kodiak have a much higher dependence on Buskin Lake before they head downstream to spawn. Another showed for the first time that the demise of most Yukon River chinook seems to occur in the ocean and not in fresh water habitats. Research also is ongoing on hatchery strays and invasive Northern pike. The SEEC Lab also is a part of the Alaska Salmon and People project, a statewide initiative to quantify the varied states of salmon through histories, case studies and in depth data. Sign on to the Five Bites newsletter and learn how to make Blueberry Cured Salmon Gravlax. Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

Movers and Shakers for Sept. 15

Olympic gold medalist Kikkan Randall is the newest member of The Alaska Club board of directors. Randall, a longtime member of The Alaska Club, will bring her unique and extensive perspective on training, physical fitness and personal health to the management team. Randall is an internationally recognized athlete who grew up in Alaska. She has raced for the U.S. Cross Country Ski Team, is a three-time Overall World Cup Sprint Champion and an Olympic gold medalist. Randall is a voice for athletes as an International Olympic Committee member and a United States Olympic and Paralympic Committee board member. She is involved with Healthy Futures and Fast and Female, two organizations that promote healthy lifestyles to youth. Darren Franz was named Anchorage commercial lending officer and executive vice president at First National Bank Alaska. Franz joins First National with 27 years of local banking experience. During his banking career, Franz has successfully overseen the management of retail and business banking in 16 different Alaska communities with broad geographic, economic and cultural diversity.

Schulte’s return to marijuana board restores industry influence

When the Marijuana Control Board meets this week in Nome, there will be a familiar face behind the dais again: Bruce Schulte, the board’s first chairman. Gov. Michael J. Dunleavy appointed Schulte to the Marijuana Control Board in August. The Legislature will consider his appointment for confirmation during its next session, but until then, he’ll serve in one of the board’s seats designated for a member of the public or active in the industry. That’s a change from the last time he served on the board, when he served in the seat designated for a member of the industry after helping lead the campaign to legalize recreational use. Schulte doesn’t actually have a financial stake in a cannabis business. When it was first legalized, he intended to pursue a license, but reconsidered based on the economics, he said. “I applaud the folks that have put so much time and energy and capital into this,” he said. “I want the industry to succeed, but the free market being what it is, some will succeed and some won’t. My sense is that the market is a little saturated. Already we see some people pulling out, merging forces… which is kind of what we expected to happen.” He was dismissed from the board in 2016 under former Gov. Bill Walker’s administration amid accusations of poor behavior to staff. At the time, the Alcohol and Marijuana Control Office was run by former director Cynthia Franklin, who had a somewhat combative relationship with the board and the nascent industry. Schulte said he expects to be asked about the accusations during the confirmation process but described Franklin’s behavior to the board as bullying in those days. “That led to some frustration on my part,” he said. “And rightfully so.”  In a statement provided to the Journal after publication, Franklin wrote that she was “saddened” that Schulte was engaged in “sniping about perceived slights that happened years ago.” “Although Mr. Schulte had personal power and control issues that interfered with his ability to serve in a professional manner on the board back in 2015-2016, I hold out hope that he has grown in the interim,” Franklin wrote. “Given this second chance, surely Mr. Schulte will focus on having mature interactions with the AMCO staff, industry members and his fellow board members. “In my role as director of AMCO when Alaska legalized marijuana, I did my best to balance the need to protect the nascent industry from federal overreach while giving newly licensed businesses room to grow. There were some folks determined to drive a wedge between AMCO and those new businesses, but for the most part, we managed to come together and create regulations that work for Alaska.” Franklin added that she voted for legalization and was “proud” of her work establishing the legal cannabis industry in Alaska. The Marijuana Control Board was established in 2015 after Alaskans voted in favor of Proposition 2, which legalized the recreational use of cannabis, in 2014. At first, two seats were dedicated for industry representation along with one law enforcement, one public health and one public seat. However, statutes establishing the board allowed for one of the industry seats to be a member of the public with no stake in the industry. Dunleavy initially nominated Fairbanks resident Vivian Stiver to fill a vacant seat after he decided not to reappoint industry member Brandom Emmett of Fairbanks. Industry stakeholders heavily objected to Stiver because of her earlier involvement in a citizen initiative to ban commercial cannabis operations from the City of Fairbanks. Stiver said in testimony during confirmation hearings that she intended to regulate the industry fairly at the state level, but the Legislature ultimately voted against confirming her to the seat. Dunleavy later appointed her to the board of the Alaska Housing Finance Corp. and Schulte to the seat on the MCB. The governor’s decision to appoint Schulte came after conversations with people both inside and outside the industry, said Matt Shuckerow, Dunleavy’s press secretary. Schulte’s name was included on a list of five people suggested by the Alaska Marijuana Industry Association shortly after the Legislature voted not to confirm Stiver, and while the governor ultimately chose one of the individuals on that list, he was not obligated to, Shuckerow said. “I think that the governor, in his review of all boards and commissions, has expressed a desire to have people who think innovatively, who take into consideration the different views of their communities and the whole,” Shuckerow said. “He wants someone who can think outside the box, who can bring a different perspective … My understanding on this appointment was that under Mr. Schulte’s credentials, he does qualify as a public member.” In his initial fiscal year 2020 budget, Dunleavy proposed dissolving the Marijuana Control Board and Alcoholic Beverage Control Board and consolidating the powers into the office of the Alcohol and Marijuana Control Office director. The Legislature did not accept that change, and it was ultimately removed from the budget. Shuckerow said he did not have any news about the governor’s intentions related to the boards, but that there is clearly public interest in the actions of the board, as shown by the recent public interest in proposed regulations before the Alcoholic Beverage Control Board about breweries. “More broadly, there is an examination and will continue to be an examination of boards, looking at alignment and intent and whether or not they can be changed or reformed in some manner,” Shuckerow said. “That is something that is important.” Schulte said though he’s not serving in an industry seat, he does have a clearer history of advocating for the industry than the average person. The industry has matured since the first legal sale in 2016, reaching about $130.5 million in retail sales and $15.7 million in total taxes in 2018. In some ways, that’s what early advocates envisioned, Schulte said: that cannabis would be just another industry in Alaska’s economy. There are outstanding issues facing regulators and the industry, though. At the forefront of those issues is the tax structure implemented on cultivators, which is assessed entirely on weight at a rate of $50 per pound. While advocates originally proposed that tax structure for simplicity’s sake in the initiative approved by voters, stakeholders have since raised the alarm that it will strangle cultivators as supply increases and the retail price for cannabis drops. As the price drops, the assessed tax will remain the same, as it is based on weight, cutting more and more into cultivators’ profits. Schulte said he originally supported the tax structure but now agrees that it’s a problem. However, it’s not up to the Marijuana Control Board to change it; that’s the purview of the Legislature. “As prices come down, the taxes have not changed,” he said. “In some cases, people have found that it’s impossible to be profitable. I think that that’s something that needs to be looked at. But again, the best the Marijuana Control Board can do is inform the Legislature what some of the options are and then it is up to the legislators.” On-site consumption endorsements are still an issue for the Marijuana Control Board as well, with the backdrop of a statewide indoor smoking ban complicating the landscape. The board approved endorsements in general for edible on-site consumption indoors for businesses that hold endorsements, but smoking is relegated to outdoor areas with adequate ventilation, but even that is complicated by the smoke-free workplace law. Going forward, he said he wants to see the board partner with the industry stakeholders to help them be successful in addition to being regulators. “The question I would raise in any situation is: are these folks conducting themselves appropriately in regards to regulation and statute, and what are we doing to help them be successful?” he said. “Some of these regulatory boards get too wrapped up in telling folks what they can’t do, not what we can do to make it better. I think if I were to bring any preconceived notion to the board, it would be that: what can we do to help you succeed?” Elizabeth Earl can be reached at [email protected] Editor's note: This story was updated to include a statement from former Alcohol and Marijuana Control Office Executive Director Cynthia Franklin.

Letters fly in latest scrap over potential Pebble investor

One third of the Alaska Legislature sent a letter to a Canadian mining company on Sept. 9 in an attempt to dissuade a potential investment in the Pebble mine project. The correspondence from the bipartisan and bicameral group of 20 lawmakers is the latest in a series of letters to Vancouver-based Wheaton Precious Metals Corp. CEO Randy Smallwood over the past seven weeks from conservation and Bristol Bay-area Alaska Native organizations opposed to the project and Gov. Michael J. Dunleavy, who sought to counter the negative messaging regarding Pebble with a July 30 letter. The legislators — mostly Democrats, two Republicans and House Speaker Bryce Edgmon of Dillingham, who changed his affiliation from Democrat to independent this past session — specifically responded to Dunleavy’s letter in which the governor stressed his slogan that “Alaska is open for business” and he did not want a potential investor in a major resource development project to be discouraged by those opposed to it. “A fair, efficient and thorough permitting process, without interference and threats from project opponents, is essential to the future economic growth of Alaska,” Dunleavy wrote to Smallwood July 30. “I am committed to making that happen, and once appropriate permits are granted, I am equally committed to removing obstacles that would hinder immediate construction.” The Pebble Partnership is in the midst of the multi-year federal environmental impact statement process to get a key construction authorization from the U.S. Army Corps of Engineers, but the company would still need to obtain numerous other state and federal agency approvals before construction could commence. According to Dunleavy’s letter, the investment Wheaton is purported to be considering would help Pebble get through the expensive permitting process. Pebble leaders have openly acknowledged they need to secure a financially strong partner to move the project from concept to reality, as Pebble’s parent company and junior mining firm Northern Dynasty Ltd. simply doesn’t have the financial wherewithal to raise the several billion dollars that would be needed to construct the large mine and major support infrastructure. The 20 lawmakers responded by retorting that “Alaska is — and always has been — open for business” in their letter to Smallwood, noting that the Alaska Constitution reserves resource ownership in the state to its citizens with a mandate that they be developed for the maximum benefit of all Alaskans. However, they emphasized that “fish are by far the single most important resource” in the Bristol Bay region.” “In his letter, Gov. Dunleavy assures you that the State will actively defend your company’s investment from ‘interference’ and ‘frivolous and scurrilous attacks.’ Opposition to this project is both local and statewide, and is not frivolous, slanderous or interference,” they wrote. “As individual Alaskans our opposition to this project arises from the potentially severe social, economic, and cultural risks that Pebble Mine represents. As elected officials, our opposition to this project aligns with the interests of our constituents.” The lawmakers continued to cite the late Sen. Ted Stevens’ oft-quoted remark that Pebble “is the wrong mine for the wrong place” and highlighted the fact that several large mining firms have already walked away from the project over the years after spending hundreds of millions of dollars to advance it. They also cited figures from a survey commissioned by Bristol Bay Native Corp., which also opposes Pebble, that found approximately 35 percent of Alaskans support Pebble’s development. Pebble Partnership released its unscientific own survey early this year with figures showing the majority of Alaskans support its efforts. The back-and-forth started July 24 when Bristol Bay-area commercial fishing and Native organizations along with several national conservation groups, including the Natural Resources Defense Council, sent a letter to Smallwood to discourage a potential investment in Pebble. Next came Dunleavy’s letter, followed by an Aug. 29 letter from BBNC CEO Jason Metrokin, which had much the same tone as the legislators’ letter, and finally the Sept. 9 letter. A spokeswoman for Wheaton did not return calls or emails regarding the correspondence to the company. BBNC Lands and Resources Vice President Dan Cheyette in a brief interview called it “entirely inappropriate” for the governor, who oversees the agencies that would be regulating Pebble, to send a letter “that is essentially cheerleading a potential investment in a project that has not yet been permitted.” Resource development advocates similarly criticized former Gov. Bill Walker for taking a formal stance against Pebble, alleging state agencies under his watch would not give the project a fair shake. Dunleavy has consistently taken a neutral stance on Pebble, while he has backed most all other resource development efforts in the state. “While some in the Legislature may disagree, Governor Dunleavy and a large number of Alaskans believe projects should be allowed to follow a fair and transparent permitting process; one that is rigorous, merit-based and prescribed by law,” Dunleavy’s spokesman Matt Shuckerow wrote in response to the legislators’ letter. Pebble spokesman Mike Heatwole wrote via email that the company has had conversations with several potential investors but he could not comment on specific prospective partners. “We continue to have productive discussions with a range of companies about the project and when we have something formal to announce we will do so,” he wrote. The lawmakers did not reference a 2014 ballot initiative that requires any large mining project in the Bristol Bay region to be formally approved by a vote of the Legislature. Voters approved the measure with 65 percent support. Pebble leaders have repeatedly said they believe it is unconstitutional and the company will challenge it when it is necessary to do so. Heatwole said the measure illegally gives “one branch of government (the Legislature) two bites at the apple” in regards to approving Pebble, as it is the Legislature that sets the permitting standards carried out by state agencies. He added that even if it stands a legal test, he doesn’t believe legislators would want to “go on the record (with a vote) killing a job-creating, economically stimulating project” that had already met state permitting requirements. ^ Elwood Brehmer can be reached at [email protected]

Sockeye harvest breaks all-time top 5; pinks picking up

The 2019 salmon season has seen plenty of fish return to the state, but far from evenly across regions. As of Sept. 10, commercial fishermen across Alaska have landed 198.4 million salmon of all five species, about 8 percent less than the preseason forecast of 213.2 million. Most of that shortfall is in pink and chum salmon, which haven’t delivered on their forecasts so far, but a surplus of sockeye salmon helped make up for some of that gap. Statewide, commercial fishermen have landed more than 55.1 million sockeye, about 9 percent more than last year and 5 million more than the preseason forecast. The boom in sockeye salmon mostly landed in Bristol Bay, the state’s largest sockeye fishery. Commercial fishermen there landed about 43.2 million sockeye by the end of their season, eclipsing last year’s harvest of 41.2 million. The total sockeye run across the state is the largest since 1995 and the fourth-strongest season since 1975, according to a weekly harvest update from the McDowell Group and the Alaska Seafood Marketing Institute. Sockeye are still coming in, though; commercial fishermen in Kodiak landed 130,000 last week, according to the update. The sockeye harvest there clocked in at just more than 2 million fish as of Sept. 10, which is slightly less than the preseason forecast for the area. Kodiak has some of the latest sockeye runs in the state, and weaker runs tend to come in later than stronger runs, said area management biologist James Jackson. But like other areas of the state, Kodiak has seen sockeye salmon arrive near their terminal streams and hold in the salt water, waiting to enter the streams. “We’ve had sockeye holding in the Karluk Lagoon for what seems like a month now,” he said. The sockeye run hasn’t been exceptional, but the pink salmon run has done well in Kodiak this year. Pinks are the bread and butter for salmon fishermen there, and this year has brought more than 32.5 million of them so far. That’s significantly better than the total forecast harvest of 27 million pinks for 2019, and it showed up early, Jackson said. “The pink run mostly shows up in July and August, and we usually have a very small September component,” he said. “We had the fourth-largest July harvest of pinks, and the fourth-largest overall harvest of pinks, and we’re on track to have the largest September harvest ever.” The run this year never seemed to have a discernable peak, though, he said; the fish showed up early and just kept showing up. A warm summer with record-low precipitation all across the Gulf of Alaska coast, though, made escapement a little tricky for salmon, as creeks were warm and water was low. Kodiak is on track to have high escapements for pinks, Jackson said, though there will likely be some pre-spawning mortality, in part related to low water and limited oxygen. Pink salmon in other areas were slow to return early on. At the end of July, the statewide cumulative harvest was about 20 percent behind the previous odd-year harvest; as of Sept. 10, it’s only about 8 percent behind. Most of that upswing in harvest has come from Kodiak and Prince William Sound, where fishermen have harvested 31.5 million pink salmon since Aug. 8, according to ADFG’s weekly summary. “Prince William Sound Aquaculture Corporation wild stock pink salmon run entry was delayed this year, likely due to the abnormally warm weather and drought conditions in Prince William Sound,” the summary states. The low water in many creeks and warm temperatures for the majority of the summer reportedly led to many pink salmon holding offshore in Prince William Sound, delaying fisheries. The lack of precipitation in normally rainsoaked Cordova also led to a water shortage, which was compounded by the increased need at processing plants as the pink salmon season ramped up. Rain and cooler temperatures arrived across much of the Gulf coast on Labor Day weekend, bringing relief to many of the state’s parched communities. Chignik, which initially looked to be having a second summer of disastrously low sockeye returns, swung back into sockeye fishing in recent weeks as well. As of Sept. 10, 614,000 sockeye had been harvested in the Chignik Management Area, and though overall season harvest is less than than average, daily harvest is better than average for this time of year, according to ADFG’s weekly update. Participation is lower, though, in part due to fishermen heading elsewhere early in the season as the run failed to materialize. September is usually when commercial fishermen transition away from sockeye and pink salmon to coho. However, this year has presented slower returns of coho in general so far. Harvest in Prince William Sound and parts of Southeast are reportedly less than average. Statewide, fishermen have landed just more than 3 million coho, about 11 percent behind last year’s harvest. Jackson said Kodiak may see a better-than-average coho run as well, but harvest may be limited by participation. The fleet isn’t as motivated to fish for silvers if the price isn’t high enough, he said. Low water in some areas has challenged coho the same way it challenged other species of salmon. In the Mat-Su Valley, sportfishing managers closed the Little Susitna and the Deshka rivers to coho fishing effective Aug. 19 until Sept. 30 out of concern for the low numbers of coho entering the river, citing low water levels in the upper parts of the rivers. “The story of coho for 2019 is one of slower production,” said Garrett Evridge, an economist focusing on fisheries with the McDowell Group. Preliminary production numbers for coho show that harvest slowed down to about 250,000 fish last week, with the five-year average being double that. But compared to other species of salmon in Alaska, coho are not a particularly high-profile species like sockeye and king salmon, Evridge said. Elizabeth Earl can be reached at [email protected]

Applications filed for major cargo projects at Anchorage airport

As of now there are proposed cargo warehouse and transfer facility developments worth nearly $600 million at the Ted Stevens Anchorage International Airport. The wave of potential developments, which were made public through applications to lease land at the state-owned airport, comes after years of trumpeting Anchorage’s unique cargo transfer opportunities by airport officials and city leaders. Anchorage Economic Development Corp. CEO Bill Popp said he’s not exactly sure what caused the recent burst of interest in the airport but he’s very happy to see it. “There’s been a lot of drumbeating for Anchorage International Airport and it finally appears to be paying off,” Popp said. Specifically, 6A-XL Aviation Alaska LLC is proposing a 500,000 square-foot cargo transfer facility on the west side of the airport across the north-south runway from the passenger terminals. 6A Aviation Inc. is also proposing a 300,000 square-foot air cargo warehouse at the north end of the airport near Point Woranzof. Both of the 6A proposals are estimated as $170 million projects. Szczesniak said 6A Aviation is a contractor doing pre-development work for other companies. The company’s website does not list contact information and state business license records list an Annapolis, Md., address for the company, but little additional information. The largest proposal both in terms of size and value is from Alaska Cargo and Cold Storage LLC, which has plans for a $200 million, 700,000 square-foot climate-controlled cargo warehouse facility on a boggy, undeveloped parcel just north of the terminals. Popp noted the site will be a challenging one to develop because of the ground conditions but said he’s hopeful the company has considered those obstacles and figured out ways to overcome them. Finally, FedEx is planning a $57 million, 98,000 square-foot domestic operations center that would include the company’s administrative offices, according to the lease application. A FedEx spokeswoman wrote via email that the company doesn’t comment on business plans until they are final, but Szczesniak said the package delivery giant is likely to move it’s existing Alaska distribution operations into the new building, which would allow the company to support future growth in its international freight business at other facilities. AEDC is among several groups that for years has pitched Anchorage as a prime place for international air cargo companies to focus their business. That’s because Anchorage — already the fifth busiest air cargo hub in the world — is not bound by the same international trade restrictions as nearly every other airport in the country, or the world for that matter. Cargo options Thanks to the venerable late-Sen. Ted Stevens, since 2004 foreign cargo can be transferred from one aircraft to another without being subject to customs and other trade requirements or tariffs at the airport that now bears his name. The same options are available at the Fairbanks airport but Anchorage has more capacity to handle large aircraft. Air cargo operators have long stopped their Boeing 747s at Anchorage because of its geography. Alaska’s midpoint location between Asian manufacturing centers and North American consumer markets makes it a prime refueling stop; cargo planes can carry more freight if they refuel here as opposed to making a nonstop transcontinental journey. However, few cargo companies have regularly utilized the unusual but potentially significant transfer opportunity — particularly given Anchorage’s geographic location — that in theory could make their operations more efficient. Amazon Air began using the airport for daily stops in June. Airport officials and general Alaska trade advocates have said the open shipping options have not attracted business in part because shippers are often skeptical they’re actually allowed; in most places such cargo transfer would be cabatoge, a federal crime. Airport officials surveyed cargo carriers last fall to gauge the interest in a potential cargo transfer facility and the response was positive enough to investigate the idea further. This spring they sought expressions of interest from cargo industry players. Anchorage Airport Manager Jim Szczesniak said in an interview that the solicitations at least played a part in attracting the potential business opportunities that are now here. “You’ve got a pro-business administration coupled with the airport really driving the potential that this place has,” Szczesniak said, referring to Gov. Michael J. Dunleavy’s mantra that Alaska is “open for business” under his leadership. “That’s going to get a lot of traction in the business community.” The lease applications submitted in July and August do not signal sure-fire projects, but they do prove the demand certainly exists for plenty more warehouse space at the airport, he noted. “We think that these are good, solid projects, to start the transformation of the airport and really take advantage of the cargo transfer rights,” he said. “We, as the airport, are trying to do more.” What substance there is behind the proposals will likely be better known next spring when Szczesniak said he hopes the first construction will start on at least a couple of the projects. He added that cargo industry officials typically correlate 1,000 square feet of warehouse space to one-half to one full-time job. Based on that, the four projects could cumulatively generate between 700 and 1,500 new jobs in Anchorage beyond the initial construction activity. AEDC estimates the Anchorage airport already supports 10 percent of the city’s jobs. “We think that this is the first wave of projects because as of right now the tenants haven’t been announced but once that’s public, then their competitors are going to be like, ‘Hey, what are these guys doing in Anchorage; we need to be there, too,’” Szczesniak surmised. He said airport officials also recently wrapped up a request for qualifications, or RFQ, for developers interested in building a hotel on the airport. They identified an 80,000 square-foot location tucked between the south terminal and airport parking lots. Officials are evaluating the responses and intend to invite the best five respondents to participate in the final request for proposal, or RFP, step, according to an airport public notice. Elwood Brehmer can be reached at [email protected]

Sullivan seeks answers on missile defense plans

Sen. Dan Sullivan wants Alaskan contractors to know that the more than $200 million expansion project at Fort Greely is moving ahead “full bore,” despite mixed messages coming out of the Pentagon. The Associated Press reported in late August that Department of Defense officials decided to cancel a contract with Boeing to develop a new “kill vehicle” for intercontinental ballistic missile, or ICBM, interceptors housed at Fort Greely because of problems with the aerospace giant’s current design and related cost issues. The contract was officially canceled Aug. 22. Fort Greely is at the center of the country’s ground-based missile defense system with 40 of the 44 active ICBM interceptors housed in underground silos at the Interior Alaska Army installation. Sullivan said in an Aug. 29 meeting with the Journal that he wanted to quell concerns he heard after the news of the kill vehicle contract broke from those working on a project to expand the number of interceptors at Fort Greely from 40 to 60, as Congress directed in the 2018 National Defense Authorization Act. After making calls to Secretary of Defense Mark T. Esper, Missile Defense Agency Director Vice Adm. Jon Hill and other senior Pentagon officials, Sullivan said he was assured the expansion work at Fort Greely wouldn’t be stopped along with the kill vehicle contract. “We continue and will continue into the future to be the cornerstone of America’s missile defense — no ifs, ands or buts,” Sullivan said of Alaska and Fort Greely. “They got silos, the need to put in what they call sleeves; the need to wire them… That’s continuing. That’s a $200 million project, just that expansion. It’s not done yet but it’s getting close.” In addition to the work at Fort Greely, the Missile Defense Agency is in the midst of spending another $325 million over six years at Clear Air Force Station just south of Fairbanks. Clear is a radar base near Nenana along the Parks Highway. The money there is going towards installing a new power plant and missile detection radar system. Clear Air Force Station is on the electrical grid; however, the upgraded power plant is a backup facility that will be protected against electromagnetic pulse weapons that could be used to render electrical systems useless, according to former MDA Director Vice Admiral James Syring. When the long range discrimination radar being installed at Clear —expected to be done in the early 2020s — is done it will be “the most sophisticated ground-based radar system on planet Earth,” according to Sullivan, and is focused on detecting ballistic missile threats. As for the kill vehicles on the interceptors, he said Pentagon officials want updated kill vehicles to match the ever-evolving threats from adversarial nations and a request for proposals should be let soon to the aerospace companies capable of performing the work. Sullivan added that he was assured the new kill vehicles and associated rocket booster are compatible with the infrastructure at Fort Greely. He planned to get detailed, classified briefings on the status of the ICBM interceptor program when he returned to Washington, D.C., in September after spending most of the August recess in Alaska followed by a week of training at Camp LeJeune in North Carolina as part of his duties as a colonel in the Marine Corps Reserve. Sullivan serves on the Senate Armed Services Committee and chairs the Readiness Subcommittee. To him, the worries over whether or not the work at Fort Greely was going to continue came down to a poorly executed communications strategy on the part of Pentagon officials. The incomplete information that came out initially resulted in the ballistic missile interceptors at Fort Greely and California’s Vandenberg Air Force Base being conflated with work to oppose the newer, hypersonic missiles China and Russia are believed to be developing. The hypersonic weapons fly at a faster speed and on a much lower trajectory than ICBMs and therefore are beyond what the current interceptors can respond to, according to Sullivan. He said the interceptors at Fort Greely are meant to counter threats from “rogue nations” such as North Korea. “I was very mad about the rollout. I was not given a heads up about it but I knew they were looking at it,” he said about the interceptor redesign. He highlighted the significance of a successful test in March when two ICBM interceptors were launched from Vandenberg and destroyed the faux warhead exactly as prescribed. The first defense missile struck the dummy threat, while the second honed in on the largest piece of leftover debris and destroyed it. Sullivan described it as “a bullet hitting a bullet in space, essentially.” There are also plans to increase the frequency of missile tests at the Pacific Spaceport Complex in Kodiak. In July, the Israel Missile Defense Organization and the MDA conducted a successful test of the Israeli Arrow-3 Weapon System at Kodiak, according to a statement from the MDA. “Maybe at the end of the day this was the smart thing to do,” he said of the interceptor changes, “but what I’ve been able to tell people here is that on the construction that’s ongoing, which is kind of all over, and the continued use of Kodiak as a really important place, we’re full bore.” Milcon funding to border wall Secretary of Defense Esper issued a memo to Defense agency leaders Sept. 3 that included a long list of military construction projects that will be deferred as money is pulled from them to fulfill President Donald Trump’s emergency declaration to build a $3.6 billion wall along the southern border with Mexico. Trump issued the declaration in February and projects at Fort Greely Eielson Air Force Base near Fairbanks will have $102 million pulled from them to support wall construction. At Eielson, $74 million to repair two of the base’s central heat and power plan boilers and $19 million to upgrade the combat arms training and maintenance, or CATM, range will be redirected. At Fort Greely, $8 million to support expansion of the installation’s Missile Field No. 1 will also be sent south. However, the contracts for that work was not scheduled to be awarded until early 2020 and early 2021, according to Esper’s memo. Sullivan has been critical of congressional Democrats for blocking attempts to fund additional border security through the normal appropriations process. His spokesman, Mike Anderson, wrote via email that the 2020 National Defense Authorization Act, which passed the Senate in June 27 on an 86-8 vote, authorizes $3.6 billion to restore the repurposed funds. “Going forward, Sen. Sullivan will work with his colleagues on the Appropriations committees to fund this initiative,” Anderson wrote. Elwood Brehmer can be reached at [email protected]

Arctic LNG-2 extends Russia’s reach in Asia

Russian-led ventures earlier this month announced plans for two more liquefied natural gas terminals that would double the country’s production capacity by the mid-2020s. One is in the Arctic and the other in Russia’s Far East, and both are counting on Asian buyers to take much of the LNG. Arctic LNG-2 will aim to send 80 percent of its output to Asia, Leonid Mikhelson, CEO of project leader Novatek and Russia’s richest businessman according to Forbes magazine, said after the development partners signed a final investment decision Sept. 5. And it’s not just China, which is on its way toward becoming the world’s biggest LNG consumer and is a 20 percent partner in Arctic LNG-2. Japan is a partner in the venture, too, one of the largest in the history of Japanese-Russian relations, said Japan’s Industry Minister Hiroshige Seko. “It will unite Japan and Russia even more, as well as Europe and Asia. The Japanese government will provide all necessary assistance for the realization of this project,” the minister said as company officials announced the final investment decision at the Eastern Economic Forum in Russia’s Pacific port of Vladivostok on Sept. 5. On the same day at the forum, Novatek, which holds a 60 percent stake in the $21 billion Arctic LNG-2 project, announced a joint venture with marine shipping company Sovcomflot to purchase, finance and operate a fleet of 17 new ice-class LNG carriers for year-round transit through the Northern Sea Route to buyers in Europe and Asia. The vessels will be built at the new Zvezda shipyard, developed with Russian oil and gas producer Rosneft and with assistance from South Korea’s world-leading LNG carrier shipbuilders. The $4 billion shipyard is near Vladivostok, in the Russian Far East. Novatek, which developed Russia’s first LNG project in Siberia, Yamal LNG, will benefit from extremely low-cost gas at Arctic LNG-2, helping it compete against gas from the U.S. and Canada, Wood Mackenzie analyst Nicholas Browne told Reuters. Arctic LNG-2, at 19.8 million tonnes annual capacity, is scheduled to start production in 2023, reaching full capacity by 2026. Yamal is at 16.5 million tonnes annual capacity. Global LNG production capacity this spring totaled almost 400 million tonnes per year. “Novatek is clearly driving home their ambitions to be a global LNG powerhouse,” Chong Zhi Xin, associate director of gas, power and energy at analysts IHS Markit, said to Reuters on Sept. 5. Novatek’s partners in Arctic LNG-2 are France’s Total, China’s National Petroleum Corp. and China National Offshore Oil Corp., and the Japan Arctic LNG consortium comprised of Mitsui and state-owned JOGMEC, formally known as Japan Oil, Gas and Metals National Corp. “This is an important project for Russia and follows our strategy to create capacities for LNG production,” Russian Energy Minister Alexander Novak said at the forum in Vladivostok. It’s the largest LNG development to reach an investment decision this year, said global energy consultancy Wood Mackenzie, bringing to 63 million tonnes total project commitments in the first eight months of this year as suppliers look to meet growing demand. Meanwhile, Gazprom, which operated Russia’s only LNG export terminal until Yamal started up two years ago, is looking to expand its operation in the Far East and also build a new liquefaction plant and marine terminal on the Baltic Sea. If all of the projects move ahead, Russia would push its way on the top-four leaderboard of global LNG production capacity with Qatar, Australia and the United States, a fast climb from its No. 10 spot just a decade ago. The Baltic project, which would include an LNG plant and petrochemical operation, has been estimated at almost $14 billion, with 10 million tonnes annual LNG production capacity. Prime Minister Dmitry Medvedev said last month it would be impossible to build without government support, and soon after Russia’s state development bank VEB said it would invest up to 111 billion roubles ($1.68 billion) in the project. Reuters reported this summer that Russia’s National Wealth Fund also will help finance the Baltic investment. The government is helping with Arctic LNG-2, too. Novatek will get a reported $600 million in additional tax deductions for building the port, along with the Russian government covering more than half the construction budget at the port and channel, according to reports in Norway’s Barents Observer newspaper. Novatek also will receive about $160 million in property and income tax breaks from the regional government for its investment in a $1.6 billion construction yard near Murmansk, about 1,000 miles west from the project site, where it will build 1,000-foot-long concrete and steel platforms that will be towed and installed at Arctic LNG-2, the newspaper reported. In the Russian Far East, shareholders in the Sakhalin-1 oil and gas project have decided to build their own liquefied natural gas plant and export terminal at the mainland port of De Kastri, about 150 miles from the offshore oil and gas fields. Sakhalin-1 has been producing oil for almost a decade, with production of about 200,000 barrels a day in 2017, while the partners have considered options for selling the gas. The four partners in Sakhalin-1 are Rosneft, ExxonMobil, Japan’s SODECO and India’s ONGC Videsh. The partners had been talking with Gazprom about selling or sending their gas through the Sakhalin-2 liquefaction plant, but Rosneft CEO Igor Sechin announced on Sept. 5 that the Sakhalin-1 partners would build their own LNG plant, according to press reports Gazprom, Russia’s top gas producer, leads Sakhalin-2, where the partners plan to expand production capacity from the current 9.6 million tonnes of LNG per year. Gazprom has not issued any statements about the Rosneft-led effort to build a competing LNG terminal that also would draw on gas fields offshore Sakhalin Island. Sakhalin-2 went online in 2009. The company and its partners Shell and Japan’s Mitsui and Mitsubishi have been working toward an expansion for several years but are not yet at the final investment decision stage. Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide. He is the Atwood Chair of Journalism at the University of Alaska Anchorage School of Journalism and Public Communication.

Fitch downgrades Alaska again for state budget problems

Alaska’s financial situation got a little bit tougher Thursday afternoon when Fitch Ratings downgraded a suite of credit ratings tied to state debt. Most notably, Fitch downgraded Alaska’s general obligation, or GO bond rating from AA to AA- on $724 million worth of bonds. Another roughly $1.1 billion in state appropriation bonds was downgraded from AA- to A+ and more than $1.1 billion in Alaska Municipal Bond Bank Authority resolution bonds also went from AA- to A+. Fitch gave the ratings a stable outlook. As with other ratings downgrades from Fitch and other agencies in recent years, the downgrade is tied to the State of Alaska’s continued inability to balance its budget, according to a statement accompanying the announcement. “To date, (state budget) operating revenue remains anemic, and the administration’s commitment to funding a full Permanent Fund dividend despite projected revenue loss has contributed to the enactment of a fiscal 2020 budget that includes deep cuts to core state services,” Fitch analysts wrote. “Fitch expects this will be followed by comparable actions in fiscal 2021. Despite the expenditure reductions, appropriations from the state’s Statutory Budget Reserve Fund and Constitutional Budget Reserve Fund are required to fund the dividend payment and the capital program, reflecting the state’s ongoing structural deficit.” Department of Revenue officials have said a one-notch downgrade such as this one roughly equates to a 0.25 percent increase in the interest rate on money the state borrows often through bonds for capital projects. Local governments and school districts also piggy-back on the state’s rating and use the moral obligation of the state to secure lower interest financing for their projects. The Revenue Department is looking to sell up to $700 million in revenue bonds to pay off the state’s remaining oil and gas tax credit obligation after the refundable tax credit program was ended in 2017 due to budget constraints. However, it’s unclear exactly when, or if, that bond sale will take place as the legality of the plan has been challenged and is currently under review by the Alaska Supreme Court. State debt manager and Alaska Municipal Bond Bank Authority Executive Director Deven Mitchell said via email that he was surprised and disappointed by the downgrade because even though getting to a final 2020 budget was “a painful process” the state ended up with a budget that is pretty much balanced. “The report was based on negative ‘beliefs’ and ‘potentially expected futures’ rather than the reality of today,” Mitchell said. The state’s credit rating has been on a downward trajectory since early 2016 when oil prices dropped to less than $30 per barrel and the state’s budget deficit was more than $3 billion. Alaska had sterling AAA ratings prior to 2016. Moody’s and Investors Service currently has an Aa3 (comparable to AA-) rating for the state’s GO bonds, while Standard and Poor’s has an AA rating for the state. In February, Dunleavy proposed closing the state’s roughly $1.6 billion deficit without tax increases or reducing PFD payments by drastically cutting state services and pulling local tax revenue into state coffers. According to Fitch, Gov. Michael J. Dunleavy’s desire to pay a full, statutorily calculated PFD “elevates the state’s fixed cost burden and reduces its ability to respond to future economic weakness as revenue growth is expected to be modest.” The agency’s analysts also believe that “substantial reductions” to the state’s health care and university budgets could have consequences for future economic growth in the state. A prolonged budget debate resulted in Dunleavy vetoing $50 million from the state’s Medicaid budget in addition to a $70 million cut instituted by the Legislature. Dunleavy agreed to a $25 million cut — part of $70 million over three years — to the state’s support of the University of Alaska. Dunleavy was upbeat in a statement issued late Thursday responding to Fitch’s criticisms of the state’s fiscal situation. “In reading this report, it’s clear this is the result of what has – or has not – occurred over the last several years,” the statement said. “My administration is determined to get our fiscal house in order. Alaska has struggled with fiscal imbalance for years and we must continue moving forward on necessary steps to put in place a stable and reliable fiscal plan. I continue to be optimistic for Alaska’s future: unemployment is at its lowest rate in nine years; GDP is on the rise; billions in new oil and gas investment are being made on our North Slope; the Ted Stevens Anchorage International Airport – the 2nd busiest for air cargo in the US, 5th busiest in the world – continues to expand and bring new business to Alaska. Once our fiscal house is in order, I have no doubt Alaska will once again top the rating agency charts.” Moody’s downgraded the University of Alaska’s bond ratings several notches in July following the governor’s initial $130 million, or roughly 40 percent, cut to its state budget. The agency also lowered the state-owned Alaska Industrial Development and Export Authority’s bond rating two notches — from Aa3 to A2 — in late July despite it’s generally solid financial performance because the authority is ultimately tied to the state’s budget situation, analysts wrote. AIDEA routinely finances infrastructure and real estate development projects through its roughly $1.3 billion Revolving Fund. Dunleavy proposed using a portion of the Revolving Fund to pay for other state government expenses in his original budget plan but the idea was not part of the final state budget. Elwood Brehmer can be reached at [email protected]

GUEST COMMENTARY: ‘Open for business’ means Alaska must protect Bristol Bay

Bristol Bay’s salmon fishery raised me. I spent my summers commercial fishing with my brothers and later helped my family run a seafood processing company. Today I have a young family and business of my own, Northline Seafoods, a salmon processing company that uses ultra-low-temp freeze technology and an innovative business model that allows us to pay our fishermen more for their catch. We just finished our first season in Bristol Bay, which had its second-largest commercial harvest on record. The biggest threat to the success of my business and my family’s future is the proposed Pebble mine project. Worse than the threat of the mine itself is its current permit process, which is being increasingly compromised by politics and lacks the scientific rigor and transparency that Alaskans have been promised for years. I invested in Alaska because there is tremendous economic opportunity in our fisheries, especially in Bristol Bay, where we have record-high salmon runs, intact habitat and a regional brand that commands a high market price. The value of the Bristol Bay salmon industry has increased significantly over the last decade — progress that is a direct result of financial investment and the innovative energy of Bristol Bay’s fishermen, processors, and thousands of individuals who participate in the fishery every summer. Every year, we continue to improve fish quality, reduce fish waste, increase efficiencies in processing, and grow consumer loyalty. We have only begun to scratch the surface of Bristol Bay salmon’s full economic value. Bristol Bay’s salmon fishery has been going strong for more than 130 years, and my personal stake in its economy are a solid bet on a consistent natural resource — that is, if you could take the threat of Pebble out of the picture. The Pebble mine is just a proposal at this point, yet it’s already having a negative impact on Bristol Bay’s fishery and businesses like mine. This past spring, our largest customer expressed concern about the Pebble mine and market risk to Bristol Bay salmon. The controversy and environmental threats posed by the Pebble project are a dominant theme in national news coverage of Bristol Bay salmon. As we expand distribution of our sockeye into new markets we now must also educate and inform consumers on Pebble. Consumer perception of Bristol Bay salmon cannot be defined by open-pit mines and tailing pond waste. It’s shocking to see our federal agencies turn a blind eye to all of this and instead let politics drive their analysis and decision-making. In Pebble’s permit review, the U.S. Army Corps of Engineers completely downplays Pebble’s potential impacts on Bristol Bay’s fishery, basing their conclusions on incomplete information and false assumptions. In Chapter 4 of the key document called the draft environmental impact statement, or DEIS, the Army Corps goes so far as to say that a change in the market reception of Bristol Bay fish is “not expected to occur.” I know that I’m not alone in my disappointment with the Army Corps’s DEIS; both the Bristol Bay Regional Seafood Development Association and Bristol Bay’s biggest seafood processors submitted strong comment letters to the Army Corps documenting the glaring gaps and flaws. Bristol Bay’s seafood processors went so far as to request that the Corps “withdraw the DEIS and reinitiate an analysis of the Pebble Project of the appropriate scope and depth, as required by NEPA.” I echo their request and look to Alaska’s elected leaders to restore integrity and public confidence in this flawed permitting process. Both Sens. Lisa Murkowski and Dan Sullivan have been strong champions for Alaska’s fishing industry in the past, and I appreciate Murkowski’s recent acknowledgement that the Environmental Protection Agency’s concerns with the DEIS are “substantial.” Because the Army Corps is unwilling to take an honest look at this project, we need our senators to step in and make sure our questions and concerns are addressed before any permits are issued. Alaskans deserve to know the truth, especially Alaska businesses whose assets, investments, and employees are on the line. If Alaska wants to have a healthy economy and attract new businesses like my own, we need to uphold rigorous, science-based permitting and make sure we protect places like Bristol Bay, which make Alaska — and Alaska’s economy — work. Ben Blakey lives in Sitka and is the president and co-founder of Northline Seafoods.

FISH FACTOR: Commercial Fisheries Division sorts out budget cuts

Now the shuffling begins at Alaska fisheries offices around the state as the impacts from back and forth veto volleys become clearer. For the commercial fisheries division of the Alaska Department of Fish and Game, an $85 million budget, about half of which is from state general funds, reflects a $997,000 dollar cut for fiscal year 2020. Where and how the cuts will play out across Alaska’s far-flung coastal regions is now being decided by fishery managers. “Now that the salmon season is about over we’re taking a good close look at this and what we’re going to put in the water next season. We’ve been assured we can look at our (commercial fisheries) budget in total and reduce the lowest priority projects,” said ADFG Commissioner Doug Vincent-Lang. Some layoffs are likely and vacancies and retiree positions may not be filled to save money, he added. “We’ll be consolidating different groups across the state in an effort to keep as much as we can going that is mission critical in terms of work out in the field. Because the less information we have the more precautionary we’ll become in our management,” he said. Gov. Michael J. Dunleavy’s vetoes for commercial fisheries included $258,000 for surveys and stock assessment in Southeast, $240,000 in Southcentral, $300,000 from the Arctic-Yukon-Kuskokwim Region, and $200,000 from the Westward Region. A possible list includes doing fewer or shorter surveys on Bering Sea juvenile chinook salmon, and relying on fewer weir or sonar tracking for sockeyes at the Susitna River drainage. Test line fisheries at Cook Inlet might be shortened and Tanner crab surveys at Prince William Sound could get the axe. Salmon weirs at Kodiak and Chignik may be reduced along with various groundfish stock assessment projects. Also cut by 50 percent were state travel funds for the Alaska Seafood Marketing Institute and all ADFG divisions, except for members of advisory committees, or ACs, to the boards of Fisheries and Game. “The AC travel appropriation was not vetoed with credit to the governor for seeing the value of the local citizens involvement,” said Rick Green, special assistant to the commissioner. “I’m told it will be tight but we think we can still manage the meetings.” The funding for directors of the state habitat and subsistence divisions (about $400,000) was rolled into the Office of Management and Budget, but their functions remain under ADFG. Vincent-Lang said he opted to not fill those positions and instead make the two divisions into “sections” to be able to retain more staff. “I probably would have lost two permitters out of habitat and two staff members that go out and conduct community surveys in the subsistence division just to have a director in those roles,” he explained. “There are deputy operations managers for each of those new sections. The one for habitat reports to Deputy Commissioner Ben Mulligan and the subsistence section reports directly to me. The functions of subsistence and habitat remain at ADF&G.” Seafood contest call The call is out for new seafood products for the 27th annual Alaska Symphony of Seafoods competition that will be celebrated at two gala events. The Symphony, hosted by the Alaska Fisheries Development Foundation, showcases new seafood products to boost their value and appeal to a wider range of customers. It features four categories: retail, food service, Beyond the Plate and Beyond the Egg. “Beyond the Plate features byproducts or ‘specialty’ products. We’ve had salmon leather wallets things made of chitosan from crab shells, fish oil capsules, and pet treats is another big one,” said AFDF Executive Director Julie Decker. “Beyond the Egg includes products made with roe,” she added. “It could be a paste or jarred salmon roe or pollock roe. It is some of the high value and high nutrition part of the seafood that comes out of Alaska waters and we really want to encourage more roe product development.” Decker said the Symphony event is on a mission to acquire more major sponsors for three-year commitments to provide more money and stability for the dual seafood soirees. “We need more money in order to do more with the Symphony and have more impact for the industry and the coastal communities that rely on the industry,” Decker said. Another push is to grow the competition beyond the dozen or so entries the Symphony usually receives. “They can be from a company in the state, in the U.S. or in another country. Anyone that makes anything out of Alaska seafood can enter,” Decker said. The seafood entries will be judged at Pacific Marine Expo on Nov. 20 and first place winners will be announced there on Nov. 22. Second and third place winners, plus the grand prize, will be kept secret until a Feb. 24 Juneau legislative reception. Symphony winners get a free trip to the Seafood Expo North America in Boston in March. Decker said the Symphony has even more benefits in store for its winners. “We plan to start working with retailers to get commitments that they will give retail space to Symphony winners.” Product entries are due to AFDF by Oct. 15. D.C. does salmon In what’s got to rank near the top for savvy promotions, Bristol Bay sockeye salmon will be featured for a week this month at nearly 30 restaurants in Washington, D.C., and Wegman’s locations in Maryland and Virginia. “Really they signed up very quickly. All we had to do was tell people we have this massive wild salmon fishery in Bristol Bay Alaska, the largest in the world, and we want to create a special event around that to connect people to the place that it comes from and the people,” said Andy Wink, executive director of the Bristol Bay Regional Seafood Development Association. The group, funded and operated by fishermen, was able to build “Salmon Week” based on chef and retail relationships it has cemented in recent years, and through its use of slick promotions in stores and on social media. The brand building outreach is bankrolled by a 1 percent tax on the catches of Bristol Bay’s nearly 1,600 drift gillnetters, which they’ve paid since 2007. For 2018, Wink said that added up to $3 million; the RSDA can use the money in any way it chooses. From the get-go the RSDA invested in chilling systems and infrastructure to boost overall fish quality. Processors rewarded chilling with bonuses that this year could pay fishermen $1.65 per pound or far more. Wink said chilling has been the group’s best return on investment. “From an ROI (return on investment) perspective you know that chilled fish are getting bonuses of usually 20 cents or better and it often unlocks bonuses which are far in excess of that,” he said. “These are really high returning projects for us. Last year when we added it all up, the amount of chilled fish we produced by RSDA investments almost paid for all of the funding that we would normally get through the assessment.” Why should Alaskans elsewhere care about salmon catches and quality at Bristol Bay? “In the context of the Alaska salmon industry, Bristol Bay is really a market moving fishery. In 2018 it was about half of Alaska’s total salmon value,” Wink said, adding that all but three Alaska regions are home to residents who “fish the Bay.” “I think the only borough and census areas that don’t have a Bristol Bay permit holder are Nome, Skagway and Yakutat. Every other place has some residents who own a commercial fishing permit at Bristol Bay,” Wink said. “You’d be hard pressed to find any other fishery that has that type of scale and scope to it. What happens in Bristol Bay affects the entire state in a lot of different ways.” Bristol Bay Salmon Week is set for Sept. 16-20. www.bristolbaysalmonweek.com. Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

Movers and Shakers for Sept. 8

Credit Union 1 promoted Victoria Worley to Risk and Compliance manager. Originally hired in 2004, Worley began at the credit union as a teller and has since held various positions such as consumer loan processor, branch manager, account recovery manager, and most recently, member assistance manager. Worley will be responsible for the daily oversight of the credit union’s compliance in regulatory and policy matters, vendor management, file maintenance, enterprise risk management, and policy management programs. Tom Hoffer has been appointed Bethel District Attorney effective Aug. 21 following former Bethel District Attorney Steve Wallace’s appointment to the Kodiak Superior Court. He previously worked in the Bethel District Attorney’s Office from 2008-12. Hoffer has been practicing law for 15 years. He recently returned to Alaska to work in the Fairbanks District Attorney’s Office after taking some time off to focus on other areas of law. John Golick has joined UIC as general manager of the Rockford Corp. Golick has nearly 30 years of experience in general and mechanical construction. His leadership roles inside of the industry have included overall management, estimating, business development and marketing. Golick has previously worked at SKW Eskimos, Inc.; Alaska Mechanical, Inc. and various other mechanical and general construction companies. Golick graduated from Dimond High School and received his bachelor’s degree from the University of Alaska Anchorage. Coffman Engineers Inc. hired Richard “Rick” Harvey, FPE at its Anchorage office. Harvey brings to Coffman more than 30 years of experience in fire protection engineering, mechanical engineering, and project management of government and industrial projects including both new facility design and renovation of existing systems. He holds a bachelor’s degree in mechanical engineering from the University of Alaska Fairbanks. He is a registered fire protection engineer in Alaska and Alberta, Canada, and is also a registered mechanical engineer in Alaska. Harvey’s background includes serving as fire protection engineer in responsible charge for clients in Alaska and Canada. He has provided program management of the fire protection program for the Federal Aviation Administration in Alaska. Northrim Bank announced several new hires: Timothy Breeden as commercial loan officer-Wasilla; Rana Hill as corporate secretary; Megan Liska as technical development manager; Wolf Toller as training manager; and Scotty Watkins as commercial lending team lead-Fairbanks. Breeden joins Northrim with 15 years of experience in the financial industry, 10 of those years as a lender. He holds a bachelor’s degree in management from Wayland Baptist University. Hill comes to Northrim Bank with more than 25 years of experience working with public and private companies with an emphasis on SEC filings and board of directors and shareholders’ meetings. Liska joins Northrim Bank with more than 16 years of experience in the financial industry. During her time at Alaska USA she developed policy, procedure, training and other materials for systems and front line related processes. Toller comes to Northrim Bank with 15 years of experience in the financial industry, 12 of that in training. He holds a bachelor’s degree from Wayland Baptist University. Toller is ISSP certified (Integrity Selling for Service Professionals) and is an active volunteer with The Reality Foundation. Watkins joins Northrim Bank with more than 13 years of experience in the financial industry. He has worked in banking in both Nome and Fairbanks. Watkins holds a bachelor’s degree from the University of Arkansas at Monticello and an MBA from the University of Alaska Southeast. Anita Halterman joined the Alaska Mental Health Trust Authority Board of Trustees after being appointed in August. Halterman, currently working as an account executive for a risk management firm, is an Eagle River resident who brings more than 30 years of experience working in federal, state and local government to the board. Halterman has a master’s degree in business administration and spent most of her career working for the State of Alaska Department of Health and Social Services. She also served as chief of staff in the Legislature. There are seven trustees that oversee the Alaska Mental Health Trust Authority. Trustees are appointed by the governor and confirmed by the legislature to five-year terms.

Dunleavy asks federal council to fast-track Southeast rare earths prospect

Gov. Michael J. Dunleavy wants federal decision makers to approve a fast-tracked permitting plan for one of Alaska’s prime metal prospects. The governor sent a letter to federal Council on Environmental Quality Chair Mary Neumayr Aug. 9 urging the council to classify the Bokan Mountain rare earth metals prospect as a High Priority Infrastructure Project. The “High Priority” designation would provide the Bokan project proponents, Nova Scotia-based Ucore Rare Metals Inc., an expedited federal environmental impact statement process aimed at ultimately accelerating development of a mine. The Bokan Mountain rare earth underground mine prospect near tidewater on southern Prince of Wales Island holds more than 4.7 million metric tons of indicated rare earth ore, according to a 2015 resource assessment by. That translates to approximately 63.5 million pounds of collective rare earth metals, 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 plethora of applications including LED displays. Heavy rare earths account for roughly 40 percent of the mineralization at Bokan, according to Ucore. Dunleavy wrote in his letter to Neumayr that the state understands the country’s need for a secure supply chain of rare earths and deeming Bokan a high priority project would help to “ensure the resource is available for development in a reasonable time-frame.” “America’s dependency on a non-allied, foreign-sourced, critical metals supply chain to support national defense, green energy initiatives, and high-tech product manufacturing is an ongoing concern at both the State and Federal levels,” he wrote. 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. For several years, the U.S. imported all of its rare earth elements until the Mountain Pass rare earths mine in southern California reopened last year. That’s a significant concern for many federal officials and policymakers because China is still the primary source for rare earths globally and the Chinese government — already engaged in a tense trade dispute with the U.S. — could restrict the flow of these critical metals. A drop in rare earth prices in 2015 has shifted Ucore’s attention away from the mine in recent years and towards advancing the processing technologies that would be used its refining complex. Ucore leaders thanked Dunleavy for the letter in formal statements. The company is also working to develop a facility to refine the metals it mines in Ketchikan. Sen. Dan Sullivan said in a recent interview with the Journal that Defense officials told him about 90 pounds of rare earths go into each new F-35 fighter jet. He suggested China manipulates global rare earth markets to keep metal prices low enough to deter development of rare earth mines elsewhere, thus allowing the country to maintain its position as the world’s primary supplier. “A (high priority project) designation would shave significant lead time off of the development of a fully permitted project, prospectively delivering us to construction commencement in just over two years,” Ucore Chief Operations Officer Mike Schrider said. “Our fundamental objective is to establish the Bokan-Dotson Ridge resource as a shovel-ready critical mineral reserve for the rapidly expanding domestic technology and defense industry sectors that are dependent on rare earth metals.” Just four days after taking office in January 2017, President Donald Trump signed an executive order directing the council “to streamline and expedite” the National Environmental Policy Act, or NEPA, process for projects deemed to be a high priority for the nation. The order allows for governors or federal department executives to request the high priority status and specifically lists electric power grid projects as well as telecommunications systems, pipelines and transportation infrastructure as the primary types of projects that could receive the designation, but it does not explicitly list mines. According to the order, Council on Environmental Quality Chair Neumayr has 30 days to decide whether a request for a high priority listing should be granted. Schrider said in a brief interview that Ucore got a letter from Council on Environmental Quality officials Sept. 3 that Dunleavy’s request is being evaluated. A spokesman for the council did not respond to questions in time for this story. Schrider said the company is very appreciative of the governor’s efforts and Ucore is examining ways to move ahead with developing the mine at current metal prices. The next step towards developing Bokan is a detailed feasibility study of the project, according to Schrider. ^ Elwood Brehmer can be reached at [email protected]

Proposed regs on tasting rooms tighten tensions in alcohol industry

A new set of proposed regulations has split the state’s alcohol industry: breweries, wineries and distilleries that make it versus bars, hotels and restaurants that serve it. The regulations themselves don’t have anything to do with alcohol production, service or distribution. Instead, the regulations proposed by the Alcoholic Beverage Control Board published on Aug. 26 are a revision to what’s allowed on site at taprooms and tasting rooms; the new regulations clarify the definition of “other recreational and gaming opportunities.” Breweries, wineries and distilleries are allowed to sell alcohol to consumers directly in their taprooms and tasting rooms, but with a number of restrictions: no more than 36 ounces of beer or 3 ounces of liquor per person per day, no serving after 8 p.m., no seats at the bar and no games, entertainment or televisions, among other restrictions. The regulations proposed would more closely define some of the activities prohibited, including festivals, games and competitions, classes, parties (except for private parties limited to specific invited guests), presentations or performances and “other types of organized social gatherings that are advertised to the general public.” The Brewers Guild of Alaska, which represents craft beer breweries all over the state, opposes the language of the regulations as proposed for numerous reasons, said Lee Ellis, the president of the organization and the director of operations at Midnight Sun Brewing Co. For one, the guild doesn’t agree that this regulation would be the intent of the Legislature in authorizing taprooms in the first place and would disrupt a number of operations for breweries, he said. “This would make giving brewery tours not available,” he said. “(Midnight Sun Brewing) has a first Friday art event … If we promote any sort of beer release at our brewery, that would not be allowed. That would ban other sorts of marketing.” Taprooms and tasting rooms are a relatively new phenomenon in Alaska. They were not allowed in the state until 2006, when the Legislature passed a bill to authorize them with a number of regulations like the limitations on gaming. Since then, the craft brewing industry in the state has exploded. Before 2001, only a handful of breweries existed. Today, there are dozens all over the state, many with taprooms and tasting rooms of their own. Some distribute to package stores and bars, like Juneau’s Alaskan Brewing Co., while others simply sell growlers at their manufacturing location or glasses in a restaurant, like Soldotna’s St. Elias Brewing Co. Even as overall beer consumption has decreased in the U.S., craft beer consumption has increased. In 2018, craft brewer sales by volume increased 4 percent, reaching 13.2 percent of the national beer market according to the National Brewers Association. Craft “micro” beer is also more valuable than large, “macro” beer; though it’s only 13.2 percent of the total beer sales by volume, it made up more than 24 percent of the total dollar value nationally. Some of the conflict is over whether bars and taprooms draw the same customers. The Brewers Guild of Alaska says that’s not a full picture of why bars may have seen business decline since taprooms and tasting rooms began operating, as there are a number of complicated factors in the state such as an ongoing recession, Ellis said. “I would say that our customers are driven to come to our facilities for a specific reason,” he said. “I don’t know if we didn’t exist that a bar would fill that niche for them. The way that we see it is that we are drawing out a customer that might not be going out to get a beer otherwise.” Another aspect of the conflict dates back to Alaska’s regulation structure post-Prohibition. Traditionally, there are three tiers of alcohol distribution: manufacturer, distributor and retailer. With the advent of taprooms, manufacturers have been able to bypass the other two tiers and sell directly to consumers. Glenn Brady, who owns Fairbanks-area brewery Silver Gulch Brewing Co. and serves on the Alcoholic Beverage Control Board, said the three-tier system was originally intended to keep one tier from gaining too much power over another. While the regulations seem onerous, he says they may have helped set the stage for the boom in craft breweries happening all over the country. “It’s fabulous to see the resurgence since Prohibition of local manufacturers,” he said. “A lot of people are doing interesting and unique things …. That’s the good part. The difficult part of it is that some see it as the erosion (of the three-tier system, and) some see it as a zero-sum game.” The craft beer, wine and spirits stakeholder group has grown significantly since 2006, both on the manufacturer side and the consumer side, Brady said. There were compromises made then to get the bill through, including the restrictions on activities in taprooms and tasting rooms, he said. There has been a lot of discussion since the proposal was announced, but Brady emphasized that these are just proposed regulations that are out for public comment and still have to be approved by the Alcoholic Beverage Control Board before going into effect. The public comment period runs until Oct. 4, at which point staff from the Alcohol and Marijuana Control Office will compile comments for the board members to review. The proposed regulations are a revision to an existing regulation, so the Legislature does not have to be involved to deal with it; the Alcoholic Beverage Control Board could pass a revision on its own after debate. However, the last time a controversial revision to alcoholic beverage regulation came before the board in 2017, when the board debated banning distilleries from serving cocktails in their tasting rooms, the Legislature stepped in. However, the Legislature plays a key role in another large issue facing the alcohol industry in the future: a rewrite of the Title 4 statutes regulating alcohol businesses. Legislators have been debating different versions of bills to rewrite the statute for the last three years, but disagreements among legislators and in the industry have held the bills up. The rewrite was on track to pass in 2018, but a last-minute amendment by former bar owners Reps. Adam Wool, D-Fairbanks, and Louise Stutes, R-Kodiak, that would have cut the allowable amount of drinks at tasting rooms by a third (from three to two) killed the bill before the session expired. Ellis said the BGA and the Cabaret, Hotel, Restaurant and Retailers Association, or CHARR, have been meeting this summer to discuss language for the Title 4 rewrite, working toward an agreement on revisions. “We’ve had certain legislators that very much side with bars, they’re very much concerned about them,” he said. “We’ve tried for three years in a row to get this thing through. We decided we’re going to sit down this summer and decided on language we need to change.” The proposed regulations have thrown some additional difficulty into the task of resolving the conflicts in the industry, wrote Sarah Oates, the executive director of CHARR, in an email. “While I sincerely believe that setting clear and consistent expectations and requirements certainly helps prevent confusion and frustration on all sides, Alaska CHARR has not yet taken a position on whether the proposed changes are appropriate or reasonable,” she said. Elizabeth Earl can be reaced at [email protected]

Ombudsman finds Board of Fisheries violated law on Upper Cook Inlet vote

First it was scheduled to be in Kenai. Then it was yanked back to Anchorage. Now, the location of the 2020 Upper Cook Inlet Board of Fisheries meeting is up in the air again. The Alaska State Ombudsman, which investigates complaints against state agencies, found in a report released Sept. 3 that the Board of Fisheries violated the Open Meetings Act when the members voted this past January to reconsider the location for the 2020 meeting and that the manner in which the vote was taken called into question whether chair Reed Morisky and other members “acted in good faith.” The fix? They’ll vote on the location again at the upcoming work session from Oct. 23-24 in Anchorage. A confidential complaint was filed with the ombudsman’s office in May 2019, according to the report. A draft investigation was finished in July, and the Board of Fisheries responded on Aug. 15. “The Ombudsman recognizes that the decision to set a meeting location may be, in some circumstances, a purely ministerial action,” the report states. “However, in this instance, the Board itself has noted that ‘one of the most divisive issues it faces almost every year is not a regulatory subject, but rather where to hold the Upper Cook Inlet Finfish meeting.’ As such, the Board should exercise increased diligence to ensure that its decisions on this issue are beyond reproach, to include strict adherence to the Open Meetings Act.” In a response to the findings, Morisky wrote that the board will reconsider the location at the upcoming work session, when the board normally discusses locations for upcoming in-cycle meetings, and will issue notice in accordance with the Open Meetings Act. At the same time, the board will reconsider a policy previously passed that would formally set the Upper Cook Inlet meeting locations on a rotating schedule between Palmer/Wasilla, Anchorage and Kenai/Soldotna to “determine if it has any future viability,” Morisky wrote. “It is within the board’s purview to revoke a policy,” he wrote. The Upper Cook Inlet meeting location is a perpetual source of controversy. With nearly half the state’s population and large stakeholder groups in sport, commercial, subsistence and personal-use fisheries, the Cook Inlet basin is one of the most heavily fished areas in the state. The Board of Fisheries makes allocation and fisheries management decisions that are often controversial, and the Upper Cook Inlet meeting is the longest, lasting about two weeks. Stakeholders often have to travel to the location to participate in board proceedings. Kenai Peninsula residents have been asking for the Board of Fisheries to hold a meeting on the central Kenai Peninsula for at least a decade. The last time the board held a meeting there was in 1997; the meetings have been in Anchorage since. Stakeholders contend that it is more expensive and onerous for them to travel to Anchorage, where they have to pay for hotels and travel long distances through the mountains in the winter, than for Mat-Su and Anchorage residents, who can stay at home and attend the meetings. Board members have consistently voted to keep the meetings in Anchorage, citing the expense of holding it on the Kenai Peninsula or the neutrality of Anchorage as a meeting location. At the March 2018 meeting, board members voted 4-2 in favor of holding the 2020 in-cycle meeting in Soldotna and to adopt a proposed policy to rotate the meetings on a regular basis between the three major communities of the Cook Inlet basin. However, the following January at the Arctic-Yukon-Kuskokwim in-cycle meeting, Morisky raised the issue again in the middle of the meeting and called a vote, which proceeded 4-3 in favor of moving the meeting back to Anchorage. The ombudsman’s report cites the lack of public notice on the debate at the January meeting as a major reason for the finding. “Despite the paucity of the notice given of the addition of the UCI Finfish meeting location to the January 2019 meeting, interested members of the public managed to learn of the change and travel more than 100 miles to attend,” the report states. “Then, the Board Chairperson by his own admission told representatives from the Kenai/Soldotna area that the matter wouldn’t be taken up — only to introduce the matter for a vote later the same day, after they had gone. “This not only violates the spirit and the letter of the Open Meetings Act, it brings into question whether the Board Chairperson and members acted in good faith.” The composition of the Board of Fisheries has changed since the January 2019 meeting. Former board member Robert Ruffner, who lives in Soldotna and advocated for the meeting to be held on the Kenai Peninsula, has been replaced, as has board member Al Cain, who proposed the policy that would rotate the meeting locations between the three communities. Former board member Orville Huntington has moved to the Board of Game as well. The governor has appointed three new members: Marit Carlson-Van Dort of Anchorage, John Wood of Willow and Gerard Godfrey of Eagle River. ^ Elizabeth Earl can be reached at [email protected]

Deputy secretary praises state energy research, pledges more partnerships

Alaska companies and communities aiming to implement new energy technologies or just improve their energy efficiency could see more resources coming their way, according to one U.S. Department of Energy leader. Deputy Energy Secretary Dan Brouillette said during an Aug. 28 press briefing in Anchorage that he wants the department to expand its current footprint in the state and provide more help to Alaskans working with energy technologies. That help could come in the form of additional technical assistance for remote communities that need help complying with the state’s Power Cost Equalization program, for example; additional funding for local energy infrastructure projects; or more cooperative research between the University of Alaska and DOE’s 17 national laboratories; Brouillette said he hopes it all can happen. He spoke alongside Sen. Lisa Murkowski at Cook Inlet Tribal Council’s “Fab Lab” at the end of a five-day trip. Brouillette toured North Slope oil operations and visited Western Alaska villages working to integrate renewable energy technologies into their communities among other meetings. He said he wants to expand the department’s footprint in the state because the applied research done here has implications worldwide. “The lessons that I learn here are very practical and sometimes we lose sight of that. We spend a lot of money at the Department of Energy on some fantastic science, and it’s very important that we do so, but it’s also important that we take the time to come to places like this one to see the actual application of these scientific lessons and that’s what’s so exciting for us,” Brouillette said, adding that Alaska regularly leads the country in energy technology innovation. According to DOE budget documents, the department spent $9.7 million on Alaska programs in federal fiscal year 2018 and has a $16.2 million budget for grants, projects and other work in the state for the current, 2019 fiscal year, which ends Sept. 30. Much of the bump in DOE funding to Alaska was for fossil energy research and development. Last winter, the Department of Energy partnered with the U.S. Geological Survey, BP and Japan Oil, Gas and Metals National Corp. to drill a test well in the Prudhoe Bay oil field for natural gas hydrate research. It was the start of a multi-year endeavor with the ultimate goal of better understanding the viability of commercial gas hydrate production. The department’s funding for energy efficiency and renewable energy projects has increased slightly in recent years, but generally been in the $2.3 million per year range. While it’s a tiny fraction of DOE’s overall budget of more than $37 billion, Brouillette said the department’s work — combined with what other organizations do — on energy efficiency improvements in Alaska is crucial. The Federal Energy Regulatory Commission, an independent arm of the Department of Energy, on May 23 approved a first-of-its-kind, 10-year operational license for a RiverGen in-river power generation system in the Southwestern Alaska village of Igiugig. “We count on that technology; we count on that research; we count on those efforts not only for Alaska, but for the rest of the country,” Brouillette said. “Our energy efficiency program at DOE is very much looking to Alaska to solve some of the problems that we face in other parts of the country.” To that end, Murkowski said she is committed to finding ways to replace $750,000 of state funding for the Cold Climate Housing Research Center that Gov. Michael J. Dunleavy vetoed from the state capital budget as a means of reducing the state’s ongoing budget deficits. Murkowski chairs the Senate Energy and Natural Resources Committee. She stressed that the benefits of the research and building designs developed at the Fairbanks-based center stretch well beyond Alaska. “The work that Cold Climate Housing has been doing is not only important to us in Alaska; this is the facility in the Arctic,” Murkowski said. “Other Arctic nations are looking to what Cold Climate Housing is doing and saying, ‘We want to share your good ideas. We want to use some of your designs because we struggle with the same issues.’” The Cold Climate Housing Research Center is widely known for developing what are believed to be the most energy efficient northern latitude homes in the world. CCHRC founder and CEO Jack Hébert said based on prior conversations with Murkowski that she is investigating whether the center could partner with the Energy Department's national laboratories partly as a means to secure funding. "She's just doing what she can do. She believes in us and we certainly appreciate her for that," he said. However, Hébert said getting federal funding is made more difficult by the fact that the state has cut off its support. He added that the center is also looking a private sources of funding, such as nonprofit foundations. "It's tough, but we'll make our way," he said. Both Murkowski and Brouillette noted that while the center’s work is focused on northern home design, the same construction methods can be used to keep the heat out in warmer climes. Murkowski also said she is working on legislation to allow Department of Energy grants to be more easily passed through quasi-state agencies, such as the Alaska Energy Authority, to local governments and Tribes for renewable energy and efficiency projects. Additionally, Murkowski has long been working to pass an omnibus national energy policy reform package. Such legislation passed both the House and Senate in 2016, but ultimately died on conference committee negotiations. Republican Senate Energy and Natural Resources spokeswoman Tonya Parish wrote in an email that the committee has held several hearings on energy reform legislation, advancing 22 bills to the Senate floor in July. The committee is expected to hold another bill markup soon, “with continued focus on energy-related matters that can be combined into a bipartisan package,” Parish wrote. The pair visited the Kuskokwim Bay communities of Kwigillingok and Kongiganak. “Kwig” and “Kong” leaders, along with officials from other nearby villages for years have been working to not only to integrate wind power into their primarily diesel-supported power grids, but also have been trying new ways to maximize the amount of wind energy they can use through hi-tech battery storage and in-home electric thermal storage units, among others. Murkowski said the work has allowed the communities to get off of diesel-generated power upwards of 30 percent of the time. “When you’re paying $6 a gallon for your home heating fuel every percent that you can get off diesel is money ahead,” she said. Brouillette commented that he was further surprised by the interest residents of Kwig have in hydrogen energy technology. “To see that interest in such a small community (with a population of about 300), again speaks to the entrepreneurial spirit of the Alaskan people,” he said. “If we were able to assist smaller communities like Kwig all throughout Alaska, given the amount of water resources here — that would be a tremendous opportunity. He added that while wind and solar energy projects are helping to immediately reduce energy costs in rural Alaska, the opportunities that could be afforded by economic hydrogen energy “represents a future that none of us today can even imagine.” Elwood Brehmer can be reached at [email protected]

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