GUEST COMMENTARY: What were the original arguments for Permanent Fund dividends?

Editor’s note: This is the first in a series of pieces from Cliff Groh covering the history of the Permanent Fund dividend. I was the legislative assistant who worked the most on the bill that created the Permanent Fund Dividend in 1982. Advocates of the dividend offered essentially five rationales during consideration of the legislation that put in place the “equal payments for all” program we have today. The per capita dividend adopted in 1982 was the result of a bill that served as a backup — or backstop — for the original “the longer you’re here, the more you get” dividend created by a law passed in 1980 that quickly became stalled in litigation. The Alaska Legislature passed the bill providing for the per capita dividend as a backstop 11 days before the U.S. Supreme Court struck down the original dividend bill as unconstitutional, and so the first dividends were paid in the summer of 1982 under the backstop bill. The five arguments for per capita dividends made at the creation were: 1. Paying dividends out of the Permanent Fund’s income or earnings would build a political constituency to protect the Permanent Fund’s principal against raids by special interests. The logic: The bigger the Permanent Fund, the bigger the Permanent Fund dividend. A variant of this argument was that the dividend would strengthen political opposition to pork barrel spending and budgetary hypergrowth. 2. Paying dividends would provide greater economic “bang for the buck” than spending the same amount of money on the operating budget, capital projects, or loans to residents. A related argument was that compared to the alternatives, dividends would more efficiently allocate the surplus oil money coming into the State of Alaska’s coffers in the early 1980s. 3. Individuals have a right to use a portion of their oil wealth. This argument’s supporters pointed to the Alaska Constitution’s statement that “The legislature shall provide for the utilization, development, and conservation of all natural resources belonging to the State, including land and waters, for the maximum benefit of its people.” Legislators recognized this individual entitlement to state-owned natural resources by adopting findings to the 1980 dividend bill stating that the legislation “fairly compensates each state resident for his equitable ownership of the state’s natural resources….” (The legislation in 1982 that created the per capita dividend we have today had no findings, however, as some legislators considered such philosophical statements too controversial to include in the bill.) 4. Permanent Fund dividends would deliver benefits more equitably than alternative uses of the surplus oil money. Gov. Jay Hammond — the most important supporter of dividends — contended that the powerful and well-connected were already benefiting from the state’s oil wealth through special-interest appropriations, often arranged behind closed doors. The repeal of Alaska’s personal income tax in 1980 further tilted benefits towards higher-income people, some of whom were non-residents. The state’s highly subsidized loan programs were also cited as examples of inequitable distribution. As I noted in a document circulated in the Legislature during the 1982 session, per capita Dividends by contrast “treat all Alaskans alike — whether they are rich or poor, or whether their home is Adak or Anchorage.” 5. Universal direct distribution of a portion of the Permanent Fund’s income would fortify the safety net for low-income Alaskans. Hammond never thought much of this argument, but legislators concerned over what seemed to them a possible perverse effect inserted “hold harmless” provisions in the 1982 legislation authorizing use of the state’s General Fund to offset loss of federal needs-tested benefits caused by receipt of a Dividend. Which arguments make sense now? Cliff Groh considers his work on the 1982 Permanent Fund dividend legislation perhaps his most interesting, challenging, and fun job ever. Some of this material overlaps with a chapter he co-authored with Gregg Erickson for a book published in 2012, one of four chapters Groh has authored or co-authored in academic books about the Permanent Fund dividend and Alaska fiscal policy.

Alaska Airlines to end miles partnership with American

Finding ways to use your Alaska Airlines miles is about to get a little more difficult. Alaska and American Airlines announced Oct. 2 that they are scaling back their mileage plan partnership early next year. As of March 1, 2020, Alaska Airlines mileage plan members will no longer be able to earn miles on American Airlines international flights and they will no longer be able to use miles for award travel on any American flights. Alaska plan holders will still be able to earn mile-for-mile value on American flights with Alaska flight numbers to places in the Midwest, the East Coast and parts of Canada, according to the airlines. American Airlines was already Alaska’s lone remaining domestic mileage plan partner company, so the degraded mileage plan partnership means Alaska plan members will not have another major carrier on which they can use their Alaska miles. Steve Danishek, president of Seattle-based TMA Travel, said in an interview that he’s not aware of any other major domestic carriers that do not have another airline their loyalty plan members can fly on with earned miles. Alaska Airlines still has partnerships with 15 international carriers as well as in-state airlines Ravn and PenAir, which are under one owner. An Alaska Airlines spokesperson wrote via email that the partnership with American just doesn’t benefit either airline the way it did before Alaska purchased its West Coast rival Virgin America in 2016. “With our acquisition of Virgin America, we’re now the fifth-largest airline in the United States and can now fly more people where they want to go when they want to go,” the statement from Alaska said. Alaska Airlines insists the vast majority of its mileage plan members will not notice the change because it serves about 90 percent of the destinations that Alaska members earned or used miles through American Airlines flights on. When the 20-year partnership began Alaska was serving roughly 18 million passengers; last year it flew 46 million passengers, according to the airline. Alaska Airlines lost its other major domestic partner, Delta Air Lines in 2017, shortly after it purchased Virgin American as Delta began to make Seattle one of its hubs and became a more direct competitor with Alaska on West Coast routes. Alaska travel expert and author of the Alaska Travelgram blog Scott McMurren said American has been trying to divorce itself from Alaska since the Virgin America deal was made. He noted that the Department of Justice forced Alaska to amend some of its partnerships to allow the $4 billion deal to go through. “Ever since that time the partnership agreement (with American) has been degraded until it finally reached a tipping point most recently,” McMurren said. He also noted that American currently serves Anchorage with wide body Boeing 787 aircraft and recently announced nonstop flights between Fairbanks, Dallas and Chicago will start next May for the summer travel season. However, McMurren said given that Alaska Airlines now has upwards of 115 destinations of its own, travelers from its namesake state likely won’t feel the impact of the slow break up with American very often. Danishek said Alaska’s domestic partnership situation is somewhat part of the natural evolution as airlines grow. He pointed to Delta, which has ended many of its marketing arrangements and instead has chosen to purchase minority shares of smaller airlines that its mileage plan members can fly on with Delta miles. “The airlines will do better revenue-wise if they take all the mileage members and put them into their own planes because they don’t pay anything” to the partner airline, Danishek said. “So the fewer choices they give the mileage members — however they do it — the more money they keep. So there’s a revenue side to cutting loose partners.” Danishek said because Delta recently purchased a portion of Chile-based Latam Airlines he expects Alaska’s partnership with Latam will not be renewed when it expires. “Delta kind of declared war and they’re trying to clean Alaska’s clock any time they can,” he said. Danishek added that he suspects the West Coast battle between Alaska and Delta has started to eat into Alaska’s mileage plan membership somewhat, but overall the customers benefit from the competition as fares are kept in check. Elwood Brehmer can be reached at [email protected]

AFN to focus on ‘good government,’ public safety, services

Thousands of Alaskans are about to converge on Fairbanks for annual Alaska Federation of Natives convention, the largest Native-focused event in the country. While the event features artisans, performances, exhibitions and awards, a major focus is also on social and governance issues affecting Native communities. The theme this year, “Good Government, Alaska Driven,” will explore what an effective state government that serves of the needs of the people would look like. Delegates also vote on resolutions at the convention that guide AFN’s policy advocacy for the upcoming year. “The theme sets our convention’s tone and guides the agenda,” said AFN President Julie Kitka in a press release. “AFN is reaching out to all Alaskans to help build an Alaska we all want to live in. That’s going to be a big part of what we discuss this year.” The two halves of the theme tie to the state government’s fiscal challenges. This year, Gov. Michael J. Dunleavy and the Legislature wrestled over the state budget for nearly seven months, disagreeing primarily over school funding, the Permanent Fund dividend, funding for the Alaska Marine Highway System and criminal justice system reform. Many of the items cut in his preliminary budget heavily affected rural Native communities, such as the Power Cost Equalization program and Medicaid. The theme seeks to discuss “the basic necessity of sound, fact-based government policy” and “AFN’s position that sensible, long-term and balanced solutions require meaningful Alaskan input through citizen engagement in the democratic process,” according to the press release. “In 2019, the Dunleavy Administration tested the bounds of this principle,” the conference agenda states. “By example, the governor’s budget and vetoes eliminated (or encumbered) the state’s obligation to provide several constitutionally mandated services. #GoodGovernment requires Alaskans—particularly Alaska Natives—to assess the quality of state government in 2020.” Following that theme is the ongoing crisis of public safety in rural Native communities. The issue drew national attention this summer when U.S. Attorney General William Barr made a visit to Alaska to investigate the lack of meaningful law enforcement. In July, he declared a public safety emergency and made $6 million immediately available to address the issue, with another $4.5 million to follow. Barr will return to Alaska for a panel at the convention, scheduled for the afternoon of Oct. 17 at 2:10. He will be joined by Republican Alaska Sens. Lisa Murkowski and Dan Sullivan. The panel will explore options to improve public safety in the villages, according to the agenda. “Despite the best efforts of a number of well-intentioned people, the state has been unable to stand up a sustainable public safety system in rural Alaska,” the agenda states. “This caused U.S. Attorney General William Barr to declare a historic federal law enforcement emergency earlier this summer. To ensure parity between Alaska’s urban and rural public safety systems, the congressional delegation and the state must work with the Native community.” Another discussion will follow the panel with Barr, Murkowski and Sullivan, the second one specifically focused on safety issues for Alaska Native women and children. U.S. Attorney General for the District of Alaska Bryan Schroder will speak, along with a handful of other law enforcement officials. The convention kicks off Thursday, Oct. 17, at 8 a.m. at the Carlson Center in Fairbanks with a performance by the Tagiugmiut Dancers. After welcoming remarks from Interior Alaska leaders and the mayors of the City of Fairbanks, the Fairbanks North Star Borough, North Pole and Anchorage, Dunleavy will address the convention at 9:05 a.m. Following Dunleavy, Speaker of the House Rep. Bryce Edgmon will speak. The keynote speaker this year, Pete Kaiser, doesn’t draw his fame from government. Instead, he drew attention across Alaska for being the first Yup’ik musher to win the Iditarod sled dog race. Kaiser was already known in his hometown of Bethel and in the mushing community as the four-time winner of the Kuskokwim 300 sled dog race, but his win in March in Nome brought out celebration among Natives both in Bethel and across the state. Other discussions on Friday and Saturday will focus on fixes for the Alaska economy, public school funding, the Tribal Child Welfare Compact, economic development, infrastructure, redistricting and unresolved land issues, among other discussions. Throughout the convention, there will be music performances, youth literary readings, dance performances and exhibitions, with delegate discussions and resolution voting on Saturday. Find a complete agenda online at the Alaska Federation of Natives’ website. Elizabeth Earl can be reached at [email protected]

Movers and Shakers for Oct. 13

Dave Weber was named Ducks Unlimited’s Regional Director of the Year for his outstanding efforts as a staff member in Region 1, an area that encompasses the West Coast and Alaska. Weber, a resident of Anchorage, covers the state and works with local volunteer committees hosting fundraisers for the 82-year-old conservation organization. Credit Union 1 has announced the promotion of longtime employees Shane Gustin and Brooke Johnson to the roles of assistant vice presidents of Operations. In these new roles, Gustin and Johnson will be responsible for the strategic direction of Credit Union 1’s branch network. They will also oversee service level goals and initiatives and the continued development and oversight of the credit union’s physical security. During his past 25 years with Credit Union 1, Gustin has held various management positions within the credit union, and he most recently served as regional branch manager. Gustin is currently enrolled in Western CUNA Management School. Johnson joined Credit Union 1 in 2010 with previous credit union experience. She has also served in various management roles at CU1, most recently as regional branch manager. Jeremy Price was appointed to the public commissioner seat on the Alaska Oil and Gas Conservation Commission. Price grew up in Salcha and worked at Salcha Electric for 10 years. He has worked in a wide range of public policy roles, including in areas of oil and gas policy, for Rep. Don Young, Sen. Lisa Murkowski, the American Petroleum Institute, the Alaska chapter of Americans for Prosperity, and currently as Gov. Michael J. Dunleavy’s deputy chief of staff. Price was also designated as AOGCC chair, effective Oct. 7. He is subject to legislative confirmation in accordance with AS 31.05.005-170. BDO USA LLP announced the promotion of James Doughty and Jake Kolipano to assurance partners. Previously, Doughty and Kolipano served as directors and have both been with the Anchorage office for more than 13 years. On July 1, Joy Merriner was named assurance office managing partner. Merriner previously served as assurance partner and has been with the Anchorage office for 17 years. They join Kevin Van Nortwick, tax office managing partner, Bikky Shrestha, assurance partner, and Chad Estes, tax partner in leading more than 80 professionals locally. Collectively, the group has more than 90 years of experience serving Alaskan businesses and the community. In recognition of decades of service to survivors of domestic violence, Attorney General Kevin Clarkson presented Theresa Hillhouse with the Attorney General’s Award for Pro Bono Service at the opening ceremonies of Domestic Violence Action Month. For 10 years, this award has honored an attorney who has dedicated a portion of their career to assisting survivors of domestic violence and sexual assault. Since 2003, Hillhouse has personally represented clients in 10 pro bono cases through the Alaska Network on Domestic Violence and Sexual Assault. Hillhouse began her legal career in Anchorage, focusing on employment, labor, and public law. While working in Anchorage as an assistant municipal attorney, she became involved with ANDVSA undertaking pro bono cases. In Sitka while municipal attorney, she often staffed the ANDVSA hotline in addition to her casework. The number of hours she has donated pales in comparison to the impact she has had on the lives of her clients. Though retired from state and local government practice, she is of counsel at Gilman &Pevehouse. The Alaska SeaLife Center added six new members to its board of directors for three-year terms. Kate Consenstein is the principal and owner of Rising Tide Communications in Anchorage. She specializes in public relations, campaign development, strategic communications, branding, integrated messaging, content creation, social media, and freelance writing. Consenstein is a graduate from the University of Alaska Anchorage. Joshua Kindred is the regional solicitor for the Alaska Region for the U.S. Department of the Interior. Prior to that, Kindred was the Assistant District Attorney for the State of Alaska and Environmental Counsel for the Alaska Oil and Gas Association. He is a graduate of the University of Alaska Anchorage and the Willamette University College of Law. Scott Meszaros is the City Manager for the City of Seward. He is a career public management sector employee with 26 years of service. He has extensive experience with land use and rapidly growing communities. Meszaros is a Certified Public Manager from the International City Managers Association and a Certified Municipal Clerk from the International Institute of Municipal Clerks. Roslyn Mitchell is a senior account manager for Matson Alaska. She brings more than 20 years of experience in the field of transportation and logistics. She holds a bachelor’s degree in organizational management from Alaska Pacific University. Brian Pinkston is the founder and president of Bright Road Wealth Management in Anchorage. He has worked in the financial industry for more than 22 years. He is a Certified Financial Planner, a Chartered Financial Analyst, and holds a bachelor of business administration degree from Texas A&M University and an MBA from the Goizueta Business School at Emory University. Darryl Schaefermeyer returns to the board after a 23-year hiatus during which he served as general manager and Operations director for the Alaska SeaLife Center. Schaefermeyer previously worked as a staff assistant to the late Sen. Ted Stevens and was also the City Manager for the City of Seward. He holds a bachelor’s degree in political science from Brigham Young University. Bering Straits Native Corp. shareholders elected five board of directors members at its 2019 annual meeting on Oct. 5 in Nome. Incumbents Gail R. Schubert, Charles “Chuck” Fagerstrom, Louis “Louie” Green Jr. and Eugene F. Asicksik were reelected and Cynthia “Cindy” Towarak Massie was newly elected to the board. Directors serve three-year terms.

FISH FACTOR: Halibut, sablefish bycatch levels front and center again for council

Halibut catches fluctuate based on the ups and downs of the stock from California to the farthest reaches of the Bering Sea. If the numbers decline, so do the catches of commercial and sport fishermen. But similar reductions don’t apply to the boats taking millions of pounds of halibut as bycatch in other fisheries. In the Bering Sea, for example, there is a fixed cap totaling 7.73 million pounds of halibut allowed to be taken as bycatch for trawlers, longliners and pot boats targeting groundfish, with most going to trawlers. The cap stays the same, regardless of changes in the halibut stock. Nearly all of the bycatch gets tossed over the side, dead or alive, as required by federal law. Stakeholders are saying it is time for that to change. This month, after four years of analyses and deliberation, managers are moving towards a new “abundance based” management plan that would tie bycatch levels to the health of the halibut stock as determined by annual surveys. Levels of bycatch (also called prohibited species catch, or PSC) are set by the North Pacific Fishery Management Council in waters from three to 200 miles offshore, where the bulk of Alaska’s harvests come from. In several regions, the bycatch allowed each year exceeds the catches that can be taken by fishermen who count on halibut to keep their small, seagoing businesses afloat. In a letter to the council, fisherman Josh Wisniewski of Homer cited a 2013 scenario. “The total amount of halibut that could be removed…was less than the prospective amount of halibut bycatch allowed. In other words, we didn’t have enough fish in the water to cover allowable bycatch and there would have been no directed fishery. Only emergency negotiations preserved opportunity for directed fishermen,” he wrote, adding “when halibut abundance declines, the proportion to the bycatch users increases and the amount to the directed halibut users decreases.” “I believe it is imperative, as a matter of conservation and equity, that the Council continue to move forward and develop an abundance-based management approach that provides the ability for the bycatch cap to go up and down based on stock abundance. The fixed cap, under today’s halibut stock status, is both outdated and inequitable,” Wisniewski added. Along with halibut, the council is getting an angry earful for the amount of sablefish, or black cod, that’s also going over the side by the big, mostly Seattle-based boats fishing for deep water flatfish in the Bering Sea. Scientists with the council revealed last week that sablefish bycatch of nearly 5 million pounds has been taken by Bering Sea trawlers this year, more than triple their allowance of 1.4 million pounds. They said that “given current information, there is a good chance that the Bering Sea overfishing limit for sablefish in 2019 will be exceeded.” That would close all directed sablefish fisheries in federal waters for the rest of the year. In a letter to the council, Linda Behnken of the Alaska Longline Fishermen’s Association, called “the amount of trawl inflicted mortality unacceptable.” The Seattle-based Fishing Vessel Owner’s Association and Deep Sea Fishermen’s Union agreed. “Our first concern is that, by allowing the bycatch to reach these levels, any assumption that we were saving fish to help rebuild this resource cannot be sustained,” both wrote in a letter to the NPFMC, adding, “Having nearly 5 million pounds of bycatch of juvenile sablefish is not acceptable, ever, and particularly if this is becoming an annual event.” The numbers of fish coming and going over the side as bycatch in the Bering Sea are straightforward because nearly all of the boats are required to have 100 percent observer coverage. That’s not the case in the Gulf of Alaska where in 2018 observer coverage included just one out of every six fishing trips. Based on those observations, groundfish trawlers in the Central Gulf caught nearly 4.7 million pounds of sablefish as bycatch, more than double their 2.3 million-pound allotment. Halibut bycatch in the Central and Western Gulf in 2018 totaled 2.1 million pounds, nearly all by trawlers with longliners a distant second. They also took 16,802 chinook salmon, according to state and federal data compiled by Oceana. “For comparison, the total chinook allocation for all sport fishing in all of Southeast Alaska is only 23,900 fish,” Jamie Karnik, Oceana’s Juneau-based Pacific Communications Manager said in a statement. IPHC researchers have cautioned that Gulf bycatch numbers could be much higher due to the data gaps. “This is important not only for overall observer coverage, but for the ‘observer effect,’ where it has been shown that on average over the last three years bottom trawl vessels caught 30 percent less fish overall when they had an observer on board, yet those trips are used as the baseline for data on unobserved trips,” Karvik said. There’s not a fisherman alive who likes throwing fish over the side. Many Gulf trawl fishermen and trade groups for years have urged the council to craft a new management plan to “slow the race for fish” and allow them to fish cooperatively or under a catch share program. In June 2012, the Council initiated the process but in 2016, citing too much division among stakeholders, all work on a Gulf trawl bycatch management plan was postponed “indefinitely.” Cod in the USA Many Americans are skeptical about buying fish and the mislabeling of seafood is rampant. One fishing company is removing all the guesswork from consumers. “America’s Cod Company” is the new red, white and blue brand that Alaskan Leader Seafoods is splashing all over its packaging. The company’s four longliners fish for cod in the Bering Sea. “We’re sitting here with this amazing Alaska fishery, which we’ve all been born into, and we just want to represent it. Across America there’s so many foreign products that I think the domestic consumer is interested in something that’s Made in the USA,” said Keith Singleton, head of Alaskan Leader’s value added division. The company was selected last week as a leading innovator by Seafood Source in its 20th annual list of the top 25 U.S. seafood suppliers, citing its consumer friendly, pop in the oven cod with flavored sauces and the latest, a Fish and Chips kit which will debut at next month’s Alaska Symphony of Seafood. Big wins at the Symphony’s new products competition two years ago has led to shelf space at Costco and a pet food deal with Purina. The pet food market, Singleton said, fits the company’s goal to use every part of the fish. “The cod liver oil is spoken for and we have a great stomach program and we’ve got a roe program,” he said. “On the pet food side, we have the head program. It’s a growing portion of our business and we’re all about one hundred percent utilization. We’re not there yet, but we’re darn close. And we’re very proud of that.” October is National Seafood Month Be sure to celebrate Alaska seafood, fishermen, processors and all the related industries that keep fishing communities afloat! ^ Laine Welch lives in Kodiak. Visit or contact [email protected] for information.

Most fund earnings splits still leave state with deficit

Nearly every option to change the Permanent Fund dividend being considered by lawmakers still leave the state with significant yearly deficits, according to the Legislature’s budget analysts. Legislative Finance Division analyst Alexei Painter told members of the Legislature’s Bicameral Permanent Fund Working Group on Oct. 7 that based on the current budget and revenues, the only way to break the state’s seven-year streak of deficit spending is to make the dividend 25 percent of the total annual draw from the $65.1 billion Permanent Fund. That solution to the State of Alaska’s ongoing deficits, Painter noted, is what the Senate passed in March 2017 in an early version of Senate Bill 26. That bill, championed by former Gov. Bill Walker, ultimately established an annual 5.25 percent of market value, or POMV, draw on the Permanent Fund from which the state could support government services and pay PFDs without violating basic financial management principles for endowment-style funds. However, the SB 26 that passed the Legislature and became law in 2018 did not address the contentious PFD calculation, which was a major political hurdle to establishing the POMV draw that most lawmakers felt needed to happen as the state’s savings accounts dwindled. Legislative leaders formed the eight-member Permanent Fund Working Group in June to analyze how the state should manage its giant nest egg over the long term when Alaska’s traditional oil revenue — and state savings from it — is generally on the decline. Working group co-chair Sen. Click Bishop, R-Fairbanks, said the group will hold another meeting soon to discuss a summary report and present that information to House and Senate leaders. Gov. Michael J. Dunleavy had said he would call a special session to address the PFD this fall — a move that could finally bring the longstanding issue to a head with his stated demand that the Legislature appropriate additional money from the fund to pay an additional $1,300 to satisfy the current statutory formula — but that has been complicated by a drawn out process to fill the seat of late Anchorage Republican Sen. Chris Birch, who died suddenly in early August. A “25-75” split of Permanent Fund POMV revenue between dividend payments and government support would make $773 million available for PFDs in the upcoming 2021 state fiscal year based on the current state budget and financial market forecasts, according to Painter. The remaining $2.3 billion from the nearly $3.1 billion POMV draw would go into the state’s General Fund. The $773 million would equate to dividends of about $1,100 per Alaskan. “It’s roughly a balanced budget if you have a dividend of this size and no other policy changes,” Painter said. The recently paid $1,606 PFDs required an appropriation of just more than $1 billion; that included a $172 million appropriation from the Statutory Budget Reserve Fund that zeroed out that savings account. A dividend calculated with 25 percent of the overall Permanent Fund POMV draw would leave the state with a small surplus of $56 million next fiscal year if the budget grows with inflation and the state’s oil revenue forecast is correct, according to Legislative Finance modeling. Still, a clause in SB 26 that automatically reduces the annual draw to a 5 percent draw — calculated from the Permanent Fund’s average value over the first five of the previous six years — would combine with changes in oil-based revenues to leave the state with deficits in the $100 million to $200 million range through 2026 based on the current budget and inflation projections. If lawmakers were to revert back to the historic dividend calculation, which is approximately half of the five-year average of the Permanent Fund’s annual earnings, the state would have a deficit of nearly $1.2 billion next year, growing to more than $1.7 billion by 2023, Painter said. It’s that large projected deficit that leads many legislators to say the current PFD and POMV statutes are “in conflict.” Backfilling the deficit with additional money beyond the 5.25 percent draw from the fund’s nearly $16 billion Earnings Reserve Account, which is available for the Legislature to spend with a simple majority, would violate endowment fund management principles and could lead to the degradation of the fund’s real value over the long-term. The Alaska Permanent Fund Corp.’s advisor firm Callan and Associates projects the fund will grow by about 7 percent in fiscal 2020. A draw beyond the approved 5.25 percent could then eat into the fund’s ability to grow with inflation. “They’re both equally weighted laws,” said Sitka Republican Sen. Bert Stedman, a co-chair of the Senate Finance Committee. “Both laws are subject to change by the Legislature, but what we can’t change is the Constitution. So we just need to be careful when we talk about following the law.” Dunleavy and legislators in favor of paying PFDs based on the statutory formula have stressed a need for the state to “follow the law” in regards to paying dividends. Dunleavy has proposed paying dividend amounts — and drawing beyond the 5.25 percent from the fund — forgone over the previous three years when the amount was first by Walker with a veto and then Legislature through the appropriations process. Stedman, an investment manager by trade, has been a leading voice in the Legislature against making additional ad-hoc draws on the fund for fears they would damage its long-term value. He and some other lawmakers, including Bishop, have suggested the current POMV draw rate might be too high as well. Palmer Republican Sen. Shelley Hughes for years had been one of the lawmakers advocating for full PFD payments and significant budget cuts to resolve the deficit, but she recently amended that position. A majority of legislators, urged on by significant public opposition to Dunleavy’s plan to cut more than $1 billion out of the state’s roughly $4.5 billion unrestricted General Fund budgets, have said the state cannot absorb cuts of that size and still provide the services most of the public expects. With those same legislators by and large opposed to additional draws on the Permanent Fund and taxes being an ever-politically sensitive topic, recalculating the dividend formula is a focal point of the budget debate. Hughes said during the meeting that a formula leading to somewhat smaller PFDs makes sense but to make it palatable government should not receive more from the fund than the public does. “Let’s make it fair and agreeable and go 50-50,” she said. “I am and expect to get beat up a bit by folks in my district and across the state that are supporting the historic (PFD) formula and have looked for me to carry that flag but I think we have to be realistic and we do have a mathematical problem and we have to realize that the historic draw is eroding the growth of the fund and we do have to make a change.” Stedman and Finance co-chair Sen. Natasha von Imhof, R-Anchorage, proposed legislation last spring to change the PFD formula to be a 50-50 split of the POMV draw, but it did not ever come before the committee for a vote. An even split of the POMV draw would provide more than $1.5 billion for both state services and dividend payments next year. Individual dividends would be in the $2,300 range — instead of about $3,000 under the current formula — and gradually grow to more than $2,500 over several years, according to Legislative Finance figures. However, lawmakers would still have to resolve a roughly $700 million deficit in 2021 and that deficit would likely grow to more than $1 billion by 2024 without additional measures, Painter said. While a 50-50 POMV split would still leave lawmakers with a lot of work to balance the budget, Hughes characterized it as a “grand compromise” that could be a big step towards resolving the issue that has dominated Alaska politics for four years and counting. “We have many important things in the state to work on and we’re getting wrapped around the axle on this one issue and it’s keeping us from addressing other problems,” she said. Bishop said Painter’s modeling indicating that nearly every change to the PFD being discussed still leaves the state with a deficit is a signal that it’s time for Alaska to look for new cash flows. For several years he has proposed the state reinstitute a small employment head tax to help fund school maintenance and construction. “Personally, it’s my opinion that we need to continue to look at new forms of revenue because I believe Alaska has a 20- to 30-year window to diversify our economy and the sooner we get ahead of the curve the better off Alaska’s going to be,” Bishop said. Elwood Brehmer can be reached at [email protected]

GUEST COMMENTARY: UA System chancellors must have role in maintaining accreditation

As former chancellors of universities within the University of Alaska System, we wish to express our alarm at the recent letter from the Northwest Commission on Colleges and Universities to University of Alaska Anchorage Chancellor Cathy Sandeen, University of Alaska Fairbanks Chancellor Dan White and University of Alaska Southeast Chancellor Rick Caulfield, the UA Board of Regents and UA System President Jim Johnsen. The NWCCU ensures that each university is being run in a way that guarantees the current and future delivery of a quality education. Accreditation is a stamp of approval that gives universities the ability to grant meaningful degrees and allows students access to federal financial aid. No concerns about the quality of academic or research programs at UAA, UAF or UAS are raised in the letter from the NWCCU. UAA and UAS recently had their accreditations reaffirmed with commendations for academic programs, and we fully expect that when UAF hosts its reaffirmation of accreditation visit in the fall of 2020, that the NWCCU visit team will be equally impressed with the quality of its academic and research programs. Instead, the letter raises concerns about governance in the University of Alaska system. The NWCCU standards require that in a multi-university system, “the division of authority and responsibility between the system and the institution [i.e., each university] is clearly delineated.” (NWCCU Standard for Accreditation 2.A.2.) Regional accreditation relies upon the authority and responsibility of chancellors to operate their universities as true CEOs. Standard practice is that boards and system offices guide strategy and policy. They are not authorized to operate the institutions. The UA Board of Regents and Statewide are not accredited; UAA, UAF, and UAS are accredited. Students, prospective students, faculty, staff, and alumni entrust its University of Alaska chancellors with the accreditation of its universities. Any actions that prevent the chancellors from fulfilling their responsibilities as CEOs of their respective institutions put the entire UA system at risk. Here are two examples: President Johnsen instructing the chancellors to comply with direction from him, and him stating that he is meeting with NWCCU staff to discuss the accreditation without the chancellors, the very people who actually manage those three universities. We acknowledge these are trying times for the University of Alaska system. The university system is challenged by reductions in state funding and drops in enrollment, largely due to due Gov. Michale J. Dunleavy’s approach to its statewide university system. However, these are not the first challenges the system has faced. Its rich history provides several examples where the president, chancellors, faculty, staff, students and alumni constituents have worked collaboratively to address and overcome issues. The three chancellors have already made the necessary budget cuts for this year and should now be permitted to move forward confidently with planning processes specific to each university that will effectively downsize and focus each separately-accredited body in a way that preserves the missions of each one and that allows the universities to flourish in their service to their regions and the State. The NWCCU has required a response to its letter by the end of October from the three accredited institutions, not the president or board chair. A Sept. 27 letter sent to university employees by the UA system office on behalf of Board Chair Davies, President Johnsen, and Chancellors Caulfield, Sandeen, and White, asserts that it will be this entire group that responds to the NWCCU. By interfering with the chancellors’ ability to respond directly to the NWCCU, the system president and board chair could further jeopardize accreditation. As the UA system faces a critical juncture due to budget cuts, compliance with NWCCU standards must be made the first priority. In the meantime, we recommend expedited reviews and restructuring be conditioned upon the three chancellors playing the critical role assigned to them by the standards of accreditation and upon full recognition of the role of shared governance in all aspects of academic decision-making. Fran Ulmer, Tom Case, Sam Gingerich, and Lee Gorsuch are former chancellors of the University of Alaska Anchorage. Mike Powers and Brian Rogers are former chancellors of the University of Alaska Fairbanks. John Pugh is a former chancellor of the University of Alaska Southeast.

Dunleavy takes another crack at District M, taps Revak

Gov. Michael J. Dunleavy has appointed Anchorage Republican Rep. Josh Revak to an Alaska Senate seat left vacant by the August death of Chris Birch. The seat is key to the state’s ongoing debate over the Permanent Fund dividend, and the struggle to fill it has generated a historic amount of friction among Republicans. The governor announced the appointment Sept. 27. Revak’s appointment is subject to confirmation by the Alaska Senate’s 12 Republicans, and in a written statement, Senate President Cathy Giessel, R-Anchorage, said Republicans are determining a time to meet and consider the appointment. “It would be an honor to serve with them if they choose to confirm me,” Revak said by phone from Washington, D.C., where he was attending a reunion of his military unit. On Sept. 20, Senate Republicans failed to confirm the governor’s first choice for the vacancy, Rep. Laddie Shaw. It was the first time in state history that sitting Republicans declined to confirm a candidate nominated by local Republicans and picked by a Republican governor. The 6-6 vote on Shaw’s nomination, one vote shy of confirmation, was due to Senate Republicans’ ongoing disagreement over the Alaska Permanent Fund dividend. The six who voted no on Shaw either offered no comment when asked about Revak’s appointment or did answer their cellphones Friday. Shaw had voted in favor of a payment using the traditional formula in state law. Half of the Senate’s Republicans (and an 11-9 majority of the Senate overall) voted in favor of a smaller amount. One of the votes in favor of the smaller amount came from Birch. If he is replaced by a senator in favor of the traditional dividend formula, it would deadlock the Senate 10-10 unless another lawmaker changes his or her vote. Revak voted for a traditional dividend in the House this year. “I have a voting record on the dividend, but I haven’t spoken about it with the Senate,” he said when asked about the vote. Dunleavy also supports a traditional dividend payment. Speaking to reporters about Revak’s prospects for confirmation, the governor said, “We’re hopeful, just like we were with Laddie Shaw.” Like Shaw, Revak represents one half of the South Anchorage district Birch was elected to represent. Like Shaw, Revak is a military veteran and was first elected to the House last year. “He’s well-qualified, and we think he will make a good senator,” Dunleavy said of Revak. Shaw and House Minority Leader Lance Pruitt, R-Anchorage, offered their support for Revak in a written statement. “There is absolutely no good reason on this Earth that he should not be confirmed for this seat, and I look forward to calling him ‘My Senator,’” Shaw wrote. Revak was not one of the three candidates suggested to the governor by local party officials. Governors are not required to follow the wishes of local officials but traditionally have done so. Dunleavy press secretary Matt Shuckerow said by phone that because Revak has already been elected to the House after an endorsement by local officials, he has their support. “The governor feels that Josh Revak has won in the district, is a sitting representative, has been elected in the district and has been supported in the district, so in his eyes, it makes him one of the more qualified candidates out there,” Shuckerow said. Revak has previously worked as a staffer for U.S. Rep. Don Young, R-Alaska, and U.S. Sen. Dan Sullivan, R-Alaska, and both lawmakers offered him their congratulations Sept. 27. Revak said he learned Sept. 26 that Dunleavy would be appointing him to the seat. “This was very much a shock to me,” he said. “I didn’t realize I was being vetted for this. I was just sort of going about my daily life here and yesterday got a call from the governor’s office. “The governor called me and said, ‘Josh, I would like to appoint you to go through the process to fill the vacant Senate seat, and would you accept?’” Revak said. He said the governor did not ask about the dividend. On Sept. 27, he took time out from a bus tour of Mount Vernon, President George Washington’s traditional home, to watch the governor announce the pick. He said he has since spoken briefly with Giessel to offer her respect as Senate president and “let her know that I’m very much looking forward to sitting down with the senators.” If senators reject Revak, Dunleavy must name a replacement within 10 days of the rejection.

Consultants: $1.9B Port of Alaska price could be halved

Consultants tapped to take a comprehensive look at Anchorage’s long-challenged port renovation believe a third or more can be shaved off the project’s current ballpark price of approximately $1.9 billion. A draft report issued to the Anchorage Assembly recommending how city officials should move forward with the Port of Alaska modernization project says between $600 million and $800 million could be saved by limiting new construction to what is truly needed and shifting to a new contracting and design philosophy. The 97-page report was authored by Roe Sturgulewski, a vice president with the project management firm Ascent PGM. Former Anchorage Mayor and Alaska Sen. Mark Begich and Schawna Thoma, both of the consulting company Northern Compass Group, assisted in the port evaluation. Sturgulewski said during a Sept. 19 presentation to the Assembly’s Enterprise and Utility Oversight Committee that the $1.9 billion price tag — a shock to many observers when it was made public early this year — includes upwards of $300 million simply for cost escalation since the design concept was first drafted in 2014. Ascent and Northern Compass were contracted by the Assembly in April to help the city find ways to lower the cost of the project and identify funding options. In July, the Assembly approved a $42 million contract to start construction of a new petroleum and cement dock next year. The work will be the first major development at the port since construction was halted in 2010 when problems installing steel sheet pile led to widespread damage in the structure that was to be the primary dock support. The Municipality of Anchorage has since sued and settled with several contractors that worked on the project and is currently suing the U.S. Maritime Administration, or MARAD, in Federal Claims Court for the agencies role in overseeing the project that saw roughly $300 million of state and municipal money spent with little to show for it. The companies that use the port urged against starting work on the petroleum and cement dock largely out of concern that municipal officials would raise tariffs and fees at the port to cover at least some of the shortfall for the remainder of the petroleum and cement dock. The city had approximately $60 million allocated to the port at the time; the new dock is expected to cost more than $200 million. While the Assembly ultimately approved the contract at the administration’s request, Sturgulewski said at the Sept. 19 meeting that, “There’s a common goal of wanting to solve the port issue, so there’s a good foundation for moving forward.” Design changes and add-ons requested by the port user companies totaled roughly $400 million of the $1.9 billion overall cost based on the administration’s estimates, he also said. Sturgulewski also confirmed that another element adding significantly to the $1.9 billion estimate — a figure no one involved believes is feasible — is that the administration used the basic design criteria from the petroleum and cement terminal and extrapolated them out to other facilities, such as the large cargo terminals, that need to be upgraded. The petroleum and cement dock was designed to have a 75-year life and be extremely seismically resilient; to the point some engineers have said it’s overbuilt. “It was a very conservative approach,” Sturgulewski said. “It was useful to bound the issue but I think it’s definitely overstated what the actual costs are and that could be in the order of hundreds of million of dollars difference.” He suggested some other alternatives to drastically cut costs, such as building just one new cargo terminal instead of replacing both that are currently used. Shippers Matson and TOTE insist their schedules are set out of necessity and a result of many logistical issues, from when grocery stores want their fresh products to longshoremen’s union contracts. Both Matson and TOTE call on the port each Sunday and Tuesday and the two current cargo terminals are largely unused the rest of the week. Some Assembly members have said building one cargo terminal and compelling the shippers to adjust their schedules — with significant lead-time — warrants serious consideration. “You can cut the cost of the program in half, I believe, and that includes where we are at in terms of the PCT,” Sturgulewski said. Begich stressed that city officials need to move towards a maximum price design-build contracting approach. They also need to determine as much as possible what funding is available from the state and federal governments or other sources and build to that funding level. “You need to have a realistic plan of finance; not based on what you think the project is going to cost, but what you can actually get,” Begich said. Municipal Manager Bill Falsey said, as did Assembly members, that he was still reading through the lengthy report, but most of the suggestions were well received. He said he wanted to learn more about how the maximum price contracting concept would work with the inherent uncertainties of a large construction project. Sturgulewski asked for feedback from stakeholders that would be incorporated into the final report by Oct. 4. ^ Elwood Brehmer can be reached at [email protected]

Palmer mine exploration permit on hold pending result of Hawaii water case

The tentacles of a legal battle over wastewater discharges in Maui have reached Alaska. Department of Environmental Conservation officials issued letters on Sept. 9 informing stakeholders that a wastewater discharge permit key to future exploration at the Constantine Metals Resources’ Palmer copper and zinc project near Haines mine would be remanded to Division of Water staff for review. Acting Division of Water Director Amber LeBlanc wrote to Southeast Alaska Conservation Council scientist Guy Archibald that the potential impact to Alaska wastewater discharge permits would be evaluated over approximately 90 days pending the outcome of a case now before the U.S. Supreme Court that originated in Hawaii. After that time, the division could uphold, revise or revoke Constantine’s Waste Management Permit for its Palmer exploration plan, according to LeBlanc. The Southeast Alaska Conservation Council, or SEACC, is one of several groups and individuals who requested an informal review of the project. Archibald said in an interview that DEC issued the wrong permit to Constantine altogether. He and Gershon Cohen, a project director for the group Alaska Clean Water Advocacy, argue the state agency should’ve examined the Palmer exploration plan under a more stringent Alaska Pollutant Discharge Elimination System Permit. They claim the Waste Management Permit for groundwater discharges is insufficient because the wastewater will quickly resurface in nearby Glacier Creek, which feeds the salmon-producing Klehini and Chilkat rivers. “The Waste Management Permit they issued basically allowed water degradation for Glacier Creek,” Archibald said, and does not analyze different options for managing wastewater at the site. Over the past year, Vancouver-based Constantine has been pursuing state approvals for its underground exploration plan. The company hopes to excavate a 2,000-meter tunnel that would serve as a space to conduct exploration drilling and collect geotechnical and hydrologic data, according to the plan submitted to the Alaska Mental Heath Trust Land Office. The Palmer project is located on Alaska Mental Health Trust property. Hawaiian connection The link between the State of Alaska wastewater permits and a Ninth Circuit Court of Appeals ruling in the case of Hawai’i Wildlife Fund v. County of Maui comes via the Clean Water Act. In many states, the Environmental Protection Agency administers the National Pollution Discharge Elimination System Program as required by the Clean Water Act. In Alaska, the state took primacy of the program starting in 2008, which allows the Department of Environmental Conservation to oversee the federal pollution discharge elimination system requirements, so long as the state standards are at least as stringent as the EPA’s. In the Maui case, the Hawai’i Wildlife Fund and attorneys for the national environmental law firm Earthjustice contend the County of Maui for decades has been polluting near shore ocean waters by injecting millions of gallons of treated sewage water into the groundwater. The contaminated water — pumped into four injection wells that are about 200 feet deep and roughly a half-mile from the ocean — then resurfaces through the shallow ocean floor near a local beach. The wastewater effluent has damaged coral and other marine life in the area, according to Earthjustice. The groups brought a lawsuit against the County of Maui and in 2014 a federal District Court of Hawaii judge found the wastewater injection well operation violates the Clean Water Act because the wastewater seeping up through the ocean floor can be traced back to the injection wells. The county’s appeal to the Ninth Circuit Court of Appeals was rejected as well. A three-judge panel of the federal appeals court ruled in February 2018 that the water injection wells are indeed “point sources” that discharged polluted water into a federally regulated navigable water. That makes the wells subject to National Pollution Discharge Elimination System Program regulation, the 2018 ruling states. “Agreeing with other circuits, the panel held that the Clean Water Act does not require that the point source itself convey the pollutants directly into the navigable water,” Ninth Circuit Court Judge D.W. Nelson wrote. “The panel held that the County was liable under the Act because it discharged pollutants from a point source, the pollutants were fairly traceable from the point source to a navigable water such that the discharge was the functional equivalent of a discharge into the navigable water, and the pollutant levels reaching navigable water were more than de minimis.” Had the courts ruled that wastewater is a non-point source pollutant, it would be outside the purview of the Clean Water and instead be subject to state regulations. Maui County further appealed the case to the U.S. Supreme Court and oral arguments are scheduled for Nov. 6. Palmer plan Constantine’s water management plan for Palmer states that groundwater expected to seep into the tunnel would be collected and run through a water management facilities and ponds at the floor of the Glacier Creek valley before being discharged back into the ground via diffusers about six feet below the surface. The two settling ponds are designed to handle 500 gallons per minute and hold up to 358,500 gallons each for 12 hours to allow solid materials to settle out of the water before it is sent back underground. The ponds would have surface spillways to release excess water if they are inundated due to melt water, rain runoff or unexpectedly high levels of seepage into the tunnel, according to the water management plan. Alaska Clean Water’s Cohen wrote in a July 25 request for an informal review by DEC that Constantine’s water management plan does not account for treating the water for residue from explosives used in the metal exploration work or hydrocarbons released from vehicles working in the tunnel or drilling compounds, “which will quickly make their way to fish-bearing segments of Glacier Creek and the Klehini River due to the connectivity of the groundwater to nearby surface waters.” Cohen said in an interview that the wastewater will quickly percolate through the loose glacial till soil that makes up the bottom of the valley and end up in the streams still carrying the contaminants. He wrote further in the review request that analysis of the area’s groundwater has been “wholly inadequate.” “We have no confidence that the operator [or the Department] has any credible knowledge of the eventual fate of the discharges, which will affect nearby salmon habitat and possibly the drinking water wells of nearby residents,” Cohen wrote. DEC staff wrote in a July 17 response to comments on the Waste Management Permit that the permit establishes surface water quality triggers at three sites and includes water quality monitoring at four sites “to assure and document the absence of a surface water discharge.” As it stands, Constantine’s Waste Management Permit is good through mid-July 2024. Constantine Vice President of External Affairs Liz Cornejo said in an interview that the permit delay has not impacted the company’s operations, as it was not planning to start work on the tunnel and other facilities until next year. Cornejo also wrote via email that the company agrees with DEC’s decision to not move forward with the permit, and subsequent construction, until the Maui case is resolved. “Construction of the underground ramp [tunnel] will not begin and no water discharge will occur until we have DEC support and approval,” she wrote. Alaska weighs in Alaska Attorney General Kevin Clarkson joined 19 other state attorneys general in supporting Maui County through an amicus brief filed with the Supreme Court. The states argue the Ninth Circuit’s decision drastically expands the Clean Water Act and would place a huge burden on states, such as Alaska, that have taken on pollution discharge elimination programs. “All told, the ‘fairly traceable’ standard threatens to drown state environmental protection agencies under a wave of newfound responsibility, requiring them to process and issue a swell of technologically challenging and complex NPDES permits to sources that have never before been subject to that process. Handling this flood of new permits will leech already scarce resources from other programs better equipped to address groundwater pollution,” the Supreme Court brief supporting Maui states. DEC spokeswoman Laura Achee said department officials aren’t sure about the implications of the Maui case because it’s still unresolved and therefore they aren’t commenting on issues relating to Constantine’s permit. Further complicating matters is a tentative settlement in the case approved by the Maui County Council on Sept. 20. Earthjustice spokeswoman Liz Trotter said the settlement would have county officials find another way to dispose of the wastewater, pay reclamation fees and most importantly, it would mean the Ninth Circuit’s ruling stands. However, Maui County Mayor Michael Victorino has yet to sign off on the agreement, which is required for it to be valid per the county’s procedures. Victorino’s spokesman Brian Perry said the mayor is weighing his options and has not yet decided whether or not to approve the settlement. “He’s doing his due diligence and giving the case the attention it warrants,” Perry said in a brief interview. He said the wastewater injected into the wells is “a step below drinking water” and the half of it not put into the ground is used by area farmers and property owners for irrigation. County officials view the issue as one over home-rule, not a debate over environmental laws with national implications. “Our concern is our own wastewater system, period,” Perry said. He added that the county would like to reuse all of the water as Earthjustice wants, but developing such a system could be prohibitively expensive. “The water has to go somewhere because people aren’t going to stop using the bathroom,” Perry said. Elwood Brehmer can be reached at [email protected]

Oil Search pushes up production date for Pikka

The company developing one of the largest oil prospects on the North Slope has applied with state regulators to change its plans and start producing oil a year early. Oil Search Alaska submitted a modification to its July 2019 Plan of Operations for its Nanushuk project in the Pikka Unit on Sept. 26 with the Division of Oil and Gas. The amended plan calls for some changes to the layout and size of the project’s three drill sites near the Colville River delta and moving the tie-in pad that will connect to ConocoPhillips’ Kuparuk River Unit that will link the project’s pipelines to the rest of Slope oil infrastructure at a site that won’t interfere with existing operations. But it also requests changes to the Nanushuk drill site B and associated pipelines that will allow the company to begin producing up to 30,000 barrels per day from the pad in 2022. Alaska leaders for Australia-based Oil Search had previously pegged late 2023 for startup of its Nanushuk oil project, which will require nearly $5 billion of investment and could produce upwards of 120,000 barrels of oil per day at its peak. According to the plan modification document, Oil Search hopes to initially transport liquids produced from drill site B to the Kuparuk Central Processing Facility-2 via pipelines that will pass through the Nanushuk Processing Facility site while it is being constructed. When its own Nanushuk Processing Facility is operational in 2023 or 2024, Oil Search will shift from sending unprocessed liquids to the Kuparuk facilities to sending sales-quality oil through them for shipment down the Trans-Alaska Pipeline System. The project changes will increase its overall gravel footprint by approximately 0.2 acres and add roughly 5,000 cubic yards of fill in total, according to the documents submitted to DOG. An Oil Search Alaska spokeswoman did not respond to questions about the changes in time for this story. This winter the company plans to conduct additional appraisal drilling and begin laying gravel for roads and work pads, Oil Search leaders have said. Oil Search received a favorable environmental impact statement record of decision for the project from the U.S. Army Corps of Engineers last May. The company reached a deal with Armstrong Energy in October 2017 to buy into Pikka and take over as the project operator for $400 million. This year the company exercised an additional $450 million option to completely buy out Armstrong and GMT Exploration Co., a silent working interest owner in Pikka, to take a 51 percent stake in the Unit. Spanish major Repsol holds a 49 percent interest in the Pikka Unit and the Nanushuk project. Most of the oil would come from its namesake shallow, conventional Nanushuk formation. It has been the source for smaller nearby discoveries by ConocoPhillips as well as Conoco’s Willow project in the National Petroleum Reserve-Alaska, which is similar in scale to Pikka but a couple years behind in the development process. The company announced Oct. 1 that current Oil Search Alaska President Keiran Wulff will take over for retiring Managing Director Peter Botten in February. The company’s current chief operating officer for its Alaska unit, Bruce Dingeman, will replace Wulff as its Alaska President. Elwood Brehmer can be reached at [email protected]

Movers and Shakers for Oct. 6

Jenna Krohn and Brett Watts have recently joined the firm of Hughes White Colbo Wilcox &Tervooren LLC as associate attorneys. Jenna Krohn graduated from the Mitchell Hamline School of Law in St. Paul, Minn., where she twice made Dean’s list and interned at the Municipality of Anchorage. She also worked full-time in human resources while attending law school. After graduating in 2008 from Case Western Reserve University School of Law in Cleveland, Ohio, Brett Watts practiced criminal law both the prosecution and defense side, immigration law, family law, and general litigation. Watts left immigration law to spend more time in the courtroom, and now his practice focuses primarily on family law and litigation. Hughes White Colbo Wilcox &Tervooren LLC was founded in 1939, as Davis &Renfrew in Anchorage. The firm focuses on litigation, product liability, insurance law, environmental law, condemnation and eminent domain, employment law and family law. Alaska Air National Guard Brig. Gen. Scott Howard was promoted at a ceremony Sept. 18 in the National Guard armory on Joint Base Elmendorf-Richardson, after holding the rank of colonel for three years. Howard is commander of the Alaska Air National Guard and assistant adjutant general-Air for the Department of Military and Veterans Affairs. After joining the Air Force, Howard spent seven years enlisted as an air surveillance technician. His first tour was at Tinker Air Force Base, Okla., followed by a tour at Geilenkirchen NATO Air Base, Germany. At this point, Howard had earned his bachelor’s degree in professional aeronautics from Embry Riddle Aeronautical University and was working on his master’s of aeronautical science. He was prompted by officers within his unit to commission, and went directly to Officer Training School after his tour in Germany. After commissioning as a second lieutenant, Howard was assigned to Tyndall Air Force Base, Fla., before he was sent to the 611th Air Control Squadron in Alaska. He was in the 611th for approximately two years when he decided to transfer to the Alaska Air National Guard’s 176th Wing. Chris Hamey joins Residential Mortgage as chief financial officer with 15 years of experience in accounting and audit through his career in Alaska. Hamey was born and raised in Juneau before moving to Anchorage to attend the University of Alaska Anchorage. Most recently he was the Accounting manager at Chugach Alaska Corp. He has also worked for Klondike Advertising, Inlet Petroleum Co. and KPMG. Hamey holds bachelor’s degrees in English and accounting, both from UAA. Ahtna Inc. announced Lori A. Kropidlowski, CF APMP, recently achieved Foundation Certification through the Association of Professional Management Professionals. Kropidlowski is the Business Development and Marketing manager with Ahtna Environmental and has more than 25 years of architecture/engineering/construction specific sales and marketing experience. She also holds her certification as a Certified Professional Services Marketer through the Society of Marketing Professional Services. Kropidlowski serves on the boards of directors for both the Society of Military Engineers and the National Association of Women in Construction. Jason Sellars joins Ahtna Environmental Inc. as a site supervisor. Sellars has been an Alaskan resident for 25 years, the last 23 years in construction throughout Alaska. His main accomplishments have been directly involved in approximately 75 percent of the building and installation of all the wind turbines in the state. Sellars was the site foreman in over 40 self-standing terrestrial communication towers, linking western Alaska to the rest of the world with telemedicine and high speed internet. Ahtna Engineering Services LLC hired Marlena “Marty” Brewer as senior chemist. She has more than 20 years of professional experience in biomolecular research, environmental laboratory analysis, environmental consulting, and working in an environmental regulatory capacity. Marty holds a master’s degree from the University of Arkansas for Medical Sciences and a bachelor’s degree from the University of Central Arkansas. First National Bank Alaska announced several recent hires, appointments and promotions. Senior Vice President Karl Heinz was promoted to senior regional manager and will now oversee bank operations in Fairbanks. Heinz joined the bank in 2003 and previously led First National branches in Eagle River, Glennallen, Haines, Kenai, Kodiak and Valdez. With 15 years of financial experience, Tim Redder joined First National as regional branch manager lending and was appointed vice president. Redder is based out of the Kenai Branch and will oversee operations on the Kenai Peninsula and in Kodiak. Vice President and Loan Officer Mike Frost was promoted to branch manager lending of the Soldotna Branch. Stephanie Daniels was promoted to Cash Management support manager and appointed assistant vice president. Daniels has 17 years of banking experience. Business Development Representative Debra Davies was appointed Business Development officer and will continue expanding and developing new customer relationships in the bank’s Escrow Unit.

OPINION: Stop the shenanigans and seat Revak

We are truly through the looking glass in Alaska politics when it is more important to pledge allegiance to Senate President Cathy Giessel than to the laws as written. Gov. Michael J. Dunleavy nominated Rep. Josh Revak on Sept. 27 to fill the Senate seat vacated by the untimely passing of Sen. Chris Birch of District M after six Republican senators led by Giessel voted to reject Rep. Laddie Shaw on Sept. 20. Revak is the other elected Republican from the district and he quickly earned the strong and public endorsements of two-thirds of Alaska’s congressional delegation from his former bosses Rep. Don Young and Sen. Dan Sullivan. The fact that Young and Sullivan chose to weigh in at all on an internal state party matter should not go unnoticed by the Republican senators who shot down Shaw and in particular Giessel, who offered a backhanded slap at the representative who succeeded Birch in a Facebook newsletter video that told viewers in a pathetic defense of their actions their betters in Juneau knew things they don’t about Shaw. “Many times we know these individuals in a way that perhaps you don’t, and that is part of a decision-making process,” Giessel said in perhaps the best unintentional argument against the insularity of Juneau ever uttered. “This Senate Majority caucus is focused on being reasonable, responsible and rational,” Giessel went on, with the obvious implication being that Rep. Shaw was none of those things. Young’s and Sullivan’s statements in support of Revak, a decorated Army veteran who worked for both on veterans’ issues, could not have been more clear: Don’t you dare smear him the way you did to Shaw. Shaw’s great mistakes from the Geissel Six’s perspective were his answers to questions about whether he would follow the law on setting the Permanent Fund dividend and the location of a special session called by the governor. Whether or not Giessel and her gang of 5 choose to acknowledge it, they don’t have a monopoly over the party and the PFD formula and the special session statutes remain on the books. Giessel tried to muddy the waters by claiming that the Legislature was following the law when it set the PFD at $1,300 less than the statutory calculation by pointing to the passage of Senate Bill 26 in 2018 that allows a draw of 5.25 percent of the Permanent Fund’s value to pay for both government services and the dividend. “The law was changed,” she asserted, but then gave up the ghost. “We have competing statutes.” That’s it in a nutshell. SB 26 didn’t amend the PFD formula and she knows it. The Supreme Court has given the Legislature carte blance to ignore the laws they pass and she and her cohort of both Republicans and Democrats are taking full advantage of it. They don’t want to try to pass a law that changes the formula because they either don’t have the votes or they fear a public backlash. They didn’t want to seat Shaw because he believes until the law is changed it should be followed. Giessel’s curt statement acknowledging Revak’s appointment was a sign she’s not planning to give him any more due consideration than she gave Shaw, and that’s a shame. That men of character like Shaw and Revak don’t pass muster with Geissel and her minority of senators says more about her standards than it does about theirs. Andrew Jensen can be reached at [email protected]

GUEST COMMENTARY: Hilcorp’s Prudhoe purchase will ultimately benefit Alaska

The recent announcement that BP is selling its Prudhoe Bay assets to Hilcorp Alaska may have surprised Anchorage and Alaska, but the Anchorage Economic Development Corp. believes in the industry’s strength, Hilcorp’s efficient business model and that positive outcomes will ultimately result from this change. This is far from the death knell for Alaska’s oil and gas industry. It’s a transition to a different business model than what we’re used to. Hilcorp didn’t buy this asset to take it down to zero. Hilcorp’s investment is indicative of confidence in its ability to produce additional revenue. When Hilcorp first came into the oil and gas scene in Cook Inlet, we saw a production and investment renaissance. Hilcorp has ramped up exploration and production plans in Cook Inlet over the last several years, relying heavily on new and existing professional services firms, resulting in a nice bump in the economy on the Kenai Peninsula. We may be able to expect some of the same in the North Slope. Before the country’s recession kicked in, the U.S. was at an all-time record high oil production of about 9.6 million barrels a day. The United States had more than 525,000 people employed nationwide in the oil and gas extraction industry for 2015. At the bottom of that recession, that number dropped dramatically, and the workforce dropped to just more than 350,000. The national oil industry recession has ended, and oil production is projected to rise to a new record of 12.2 million barrels per day in 2019; however, the oil and gas workforce has only risen to about 436,000. With new technology, production is a more efficient process. The Hilcorp business model has embraced this new way of doing things. With this changing business model, and with Hilcorp leading the way, other mid-size exploration and development companies may be attracted to Alaska. From Hilcorp to ConocoPhillips, Oil Search and more, we are seeing a lot of activity going on in the North Slope and I believe we will see a solid turnaround there in the next three to five years. Here in Anchorage, I see opportunity. Looking at AEDC research and reports and a talented, skilled labor pool at the BP headquarters, I see a match between needed skills and available workforce. The city has seen a net loss of about 20,000 people in the last five years, between people moving out of Anchorage to the Lower 48 and the number of new people coming in from the Lower 48. This net loss of families and workforce to the Lower 48 leads to a lack of qualified candidates to fill open jobs. I also hear from employers that many other industries are seeing a skillset shortage. Where does that leave us? A fresh opportunity for skilled workforce and employers, both in the oil industry and in other sectors of the economy including project management, logistics, accounting, and HR to name a few, who may be able to tap into a significant talent pool to fill their openings. While I am sorry to lose BP, they, too, are transitioning to the industry’s new realities. A legacy field with declining performance is not the right fit for a major like BP anymore. There is much to be applauded in what the company has done for Alaska, the revenues it has generated, the employment it has provided for Alaskan families, the investments it has made in our community, and the way that BP employees, volunteerism, and philanthropy have become part of the fabric of our state. We’re going to lose some of those people, and it saddens me that friends I’ve known for many years will be moving to other parts of the world. I want to close with my deep gratitude to BP for its contributions to Anchorage, Alaska, and to AEDC over its long history in the state. BP has been a tremendous partner with Alaska over the last 60 years. But I believe in Anchorage, I believe in the change that Hilcorp brings to the table, in this industry as a whole and I look forward to the transition ahead. We’re going to see an evolution in this industry over the coming years — and a resultant change in employment — that I’ll be watching closely. Bill Popp is president and CEO of Anchorage Economic Development Corp.

GUEST COMMENTARY: Opportunities, challenges for Alaska as Northern Sea Route opens

I took this picture on Aug. 26 at the port of Petropavlavsk-Kamchatski. This is the Russian icebreaking containership Sevmorput loading containers of Russian Far East fish products for export to Europe. The fact that the containers are from Maersk Shipping Lines, the largest shipper in the world, is testament that the Northern Sea Route is developing into a true world shipping route. This presents both opportunities and challenges for Alaska and we need to manage both of these unless we want to be left behind. On the opportunity side is the potential for direct shipments to Europe for Alaskan products, from fish to timber to minerals. This could be especially beneficial to Alaska’s fishing industry that sells many of its products into the European market. It also represents a major opportunity for a container trans-shipment hub and fueling port such as The Aleut Corp. has proposed at Adak. On the challenge side is the risk of potential vessel casualties and pollution of Arctic waters. This clearly calls for strong prevention and response measures in a bilateral approach with Russia, which shares our common heritage of Arctic oceans. Ocean circulation patterns in the Arctic indicate that an incident anywhere could be carried across the entire Arctic. Fortunately, a public/private partnership, the Marine Exchange of Alaska, in conjunction with the U.S. Coast Guard and the State of Alaska has developed the most comprehensive prevention program in the world. This consists of 135 receiving stations throughout the coast of Alaska that receive the location data of vessels transmitted by the vessel’s AIS (automated identification system) transmitter. Vessel AIS transponder systems are required by international law. This data is monitored 24/7 by specialists of the Exchange, ensuring fidelity to offshore routing measures, identifying vessels in distress and nearby vessels who could respond, transmitting real time weather data and other safety information to the vessels via AIS. However, not all vessels are required to follow these safety measures, which points to the need for cooperation with Russia in protecting our Arctic waters, either through bilateral regulations or through proposals to the International Maritime Organization. There is currently an effort by Russian Far East regional governments and Alaskans to form the Bering Pacific Arctic Council, similar to the Barents Council, which can promote and oversee Arctic shipping prevention measures. Safe shipping measures are also supported by the Arctic shipping members of the Arctic Economic Council, so this should be a realizable goal. These measures will be necessary to answer critic’s consistent opposition to any development in the Arctic, no matter how misguided. A recent example of this was French President Macron’s announcement during the recent G-7 meeting in Biarritz, France, calling for no shipping the Arctic. He claimed this was because the faster, ice free route was the “consequence of our past irresponsibility.” Ironically, the vessels using the Suez or Panama canal routes instead of the Northern Sea Route will burn much more fuel and produce subsequent increased CO2 emissions. The French shipper CMA CGM then dutifully said it wouldn’t use the route, at the same time announcing conversion of many of its vessels to LNG fuel. Because LNG wouldn’t cause any pollution in the case of a vessel casualty and is an ideal fuel for Arctic shipping, it proves once again that once you get on the politically correct posturing train, the next station you inevitably arrive at is Stupid. And let’s not forget that Arctic LNG shipping as the Russians have developed may be the method we use to commercialize our North Slope gas reserves if a pipeline cannot be financed. Alaska and our Arctic neighbors can’t afford to let others who don’t live here and don’t understand us, or our environment, set the agenda for our future. We have to do that for ourselves. We have the tools. We just need to use them. Paul Fuhs is President Emeritus of the Marine Exchange of Alaska, and a consultant on Arctic port development. He was recently named as the US Coordinator of the Bering Pacific Arctic Council Working Group. He can be reached at [email protected]

GUEST COMMENTARY: Board of Regents must lead on restructuring the UA system

On Sept. 20, the Senate State Affairs Committee heard from the University of Alaska Anchorage Faculty Senate. I was there and listened, however the Board of Regents is still best suited to decide about structuring the University of Alaska at this time. First a context, then a comment. In a break from normal procedure, the State Affairs Committee was used to hear additional faculty voices. Those voices were appreciated, and I will consider them in this priority: First, constitutionally, then statutorily, and then budgetary. The Board of Regents has the primary duty to own and manage our university. The legislators have a duty to fund and describe by law the outline of the university. The Governor has the power of veto and proposal. The state is small in population and large in geography as well as diverse in its culture and economy. Each campus has taken on different missions that complement our communities and should complement a unified but diverse UA system. The Sept. 20 hearing was informative, and there were many credible speakers (including Dr. Forrest Nabors, together with faculty). There is a general consensus on a few areas, namely that the Alaska Constitution, Article VII, Sections 2 (“The University of Alaska is hereby established as the state university…”) and 3 (“The University of Alaska shall be governed by a board of regents…”) represent the controlling authority. Presently, under that controlling authority, information is being collected and circulated by relevant decision makers. The Board of Regents met in Anchorage on Sept. 12-13. Public testimony was collected, both from Anchorage and around the state. Additional opportunities for public testimony are at From Nov. 7-8 there will be a scheduled Board of Regents meeting in Fairbanks too. As we go through this period of history, it’s important to remember: This is about all Alaska; not just one community, or one community versus another. The University of Alaska, to be fair, just like all of us, should be looking for ways as to “how we can do it better.” But, that’s a disciplined process. A process found in our state constitution. In my view, at this time, structural changes to our university system primarily rest with the decisions by the University of Alaska Board of Regents (which know the complexities of our university system). The legislature has had a role, prior to Sept. 20, and that occurred when the legislature inserted intent language in this year’s budget. The intent language tasked the Board of Regents with looking at all issues related to consolidation and the different campuses. The due date for that board report is Dec. 1. Before the Legislature does anything, if anything at all, about structuring, it may be wise to see what that report says. Allow the Board of Regents to do their work, pursuant to their authority, for the benefit of the entire University of Alaska system. John Coghill is from Fairbanks and represents Senate District B.

House passes landmark cannabis banking legislation

A bill moving through Congress could open up a legal path for financial institutions to offer banking services to cannabis businesses. The Safe and Fair Enforcement Banking Act, HR 1595, passed the House of Representatives on Sept. 25 by an overwhelming and bipartisan vote of 321-103. The bill would prevent federal regulators from punishing financial institutions that choose to do business with cannabis establishments in states that have legalized its use. Specifically, a federal financial regulator wouldn’t be able to terminate or limit the depository or share insurance of a depository institution; prohibit, penalize or discourage financial institutions from providing services to cannabis businesses and would provide protections for ancillary businesses in transactions with cannabis-related businesses, among other protections. Federal financial regulators also wouldn’t be able to take any adverse or corrective action on a supervisory loan simply because it involves a cannabis business, an employee of one or the owner of a business working with one, according to the bill. Rep. Don Young, one of the bill’s sponsors in the House, said in a press release that his constituents highlighted the banking issue in meetings. Young, co-chair of the Congressional Cannabis Caucus, has consistently held that cannabis legalization should be up to the states, not the federal government. “When cannabis businesses are not permitted to utilize traditional financial institutions, they are forced to operate cash-only businesses, leaving significant amounts of cash out in the open and making these businesses high-profile targets for robbery and other crime,” Young said in a release. “The SAFE Banking Act is as much a public safety bill as it is a cannabis bill, and I am proud to have been an original co-sponsor of this important initiative.” Lack of access to banking is one of the biggest hurdles for the cannabis industry. Since Alaska’s industry came online in 2016, retailers have been forced to operate on a cash basis, and cultivators have had to pay their taxes in cash. In 2018, retailers conducted more than $130.4 million in total transactions, and cultivators paid more than $15.6 million in taxes, according to the Alcohol and Marijuana Control Office. Having to operate on a cash basis makes businesses more vulnerable to theft, and employees are limited in their ability to deposit paychecks earned from working with cannabis. Other financial services, like loans, are also off-limits, which hamstrings businesses from being able to operate like other retailers or farmers. Earlier this year, a handful of Alaska cannabis businesses got the chance to try a pilot program for banking through Credit Union 1, but it was short-lived. In August, the credit union announced its intentions to cancel the pilot program because a critical insurance program wouldn’t be renewed if the pilot program continued. “The Alaska Marijuana Industry Association and its members are thrilled to see the SAFE Banking Act pass the House with strong bipartisan support, and hope it will move swiftly through the Senate without hurdle,” said Lacy Wilcox, President of the Alaska Marijuana Industry Association, in a press release. A similar bill was introduced in the Senate in April with 33 co-sponsors, including Alaska Sens. Lisa Murkowski and Dan Sullivan. The Alaska delegation has generally agreed to support legislation delegating more cannabis regulation authority to states. The Senate version of the bill has not moved through hearings. Though HR 1595’s language talks about cannabis, it would also affect the hemp industry. Because of its association with cannabis — hemp is a non-THC-bearing part of the cannabis plant — hemp farmers are also not allowed to access banking services under current federal law. Industrial hemp farming itself was legalized nationally in 2018. Because of its murky legal status, hemp industry stakeholders have also reported difficulties accessing banking services. Senate Majority Leader Mitch McConnell, R-Kentucky, introduced the Hemp Farming Act of 2018, in part because of the interest in farming hemp in his home state. McConnell’s office did not return requests for comment on the SAFE Banking Act, but in previous public statements and newsletters has indicated support for banking availability for hemp-related businesses. Because cannabis is legal either recreationally or medicinally to some extent in 33 states, the District of Columbia and Puerto Rico, the American Bankers Association is encouraging the federal government to do something. The gap between federal and state law has caused confusion for financial institutions and creates risk for those who choose to provide services to cannabis businesses. “Current proposals in both the Senate and the House that seek to provide greater clarity and bridge the gap between state and federal law provide a solid starting point for discussion,” the ABA wrote in a statement. “We look forward to working with policymakers of both parties to find solutions that provide the legal and regulatory certainty banks need to best serve their communities.” The Senate is currently in recess and will return Oct. 8. ^ Elizabeth Earl can be reached at [email protected]

US economy grew at modest 2 percent rate in second quarter

WASHINGTON (AP) — The U.S. economy grew at a modest 2 percent annual rate in the second quarter, a pace sharply lower than the 3 percent-plus growth rates seen over the past year. Many analysts believe growth will slow further in coming quarters as global weakness and rising trade tensions exert a toll. The April-June increase in the gross domestic product, the economy’s total output of goods and services, slipped from a brisk 3.1 percent gain in the first quarter, the Commerce Department reported Sept. 26. The government’s third and final look at second-quarter GDP growth was the same as the previous estimate, although the components were slightly altered. Consumer spending and business investment rose at slower rates than previously estimated, but this was offset by slightly stronger gains in government spending and exports. In the current quarter, analysts believe GDP is likely growing at the same modest 2 percent rate, and they are forecasting a similar outcome in the final quarter. For the year, GDP is expected to rise around 2.2 percent, down from the strong 2.9 percent gain seen last year, which had been the best performance since 2015. President Donald Trump, who is counting on a strong economy to boost his re-election bid, has called the economy’s performance the best ever. But after a spurt in growth last year due to the president’s $1.5 trillion tax cut program, growth has slowed noticeably to slightly below the 2.2 percent annual growth rates turned in during the current economic expansion. While the economic recovery from the Great Recession is now in its 11th year, the longest in U.S. history, it has been the slowest in terms of annual growth rates, a fact economists attribute to slower growth in the labor market, due to the retirement of baby boomers, and a slowdown in productivity. Trump, however, repeatedly attacked Obama administration economic policies for the lackluster GDP rates and pledged to achieve annual growth above 3 percent with his economic program of big tax cuts, deregulation and tougher enforcement of trade laws. The economy has achieved four quarters of 3 percent-plus GDP rates since Trump took office in early 2017, but economists doubt that this pace can be achieved on a sustained basis given the labor force and productivity issues facing the country. This year’s expected slowdown has been attributed to a fading of the impact of the Trump tax cuts as well as adverse effects of Trump’s trade war with China. Mark Zandi, chief economist at Moody’s Analytics, said that if Trump carries through with an escalation of the tariffs nest month and in December, it could be enough to push the country into a recession next year. “It all hinges on the president and what he decides to do with trade,” Zandi said. “If he follows through on this tariff threats later this year, then in all likelihood growth will slow and we would end up in a recession next year.” Zandi is forecasting that GDP growth this year will slow to 2.3 percent and then slow further to 1.6 percent next year, but that is based on no escalation in the trade war with China. The GDP report showed that consumer spending, which accounts for 70 percent of economic activity, came in at a sizzling rate of 4.6 percent, the best quarterly performance since late 2014, but down slightly from last month’s estimate of a 4.7 percent rate of gain for consumer spending. Spending by the federal government and state and local governments increased at a 4.8 percent rate in the spring, up from last month’s estimate of a 4.5 percent gain. In a separate report, the Labor Department said Sept. 26 that the number of Americans filing initial claims for unemployment benefits, a proxy for layoffs, rose by 3,000 last week to 213,000. That is still a low level indicating a strong labor market.

UPS gets government approval to become a drone airline

DALLAS (AP) — UPS has won government approval to operate a nationwide fleet of drones, which will let the company expand deliveries on hospital campuses and move it one step closer to making deliveries to consumers. Many regulatory obstacles remain, however, before UPS — or other operators who are testing drones — can fill the sky over cities and suburbs with drones carrying goods to people’s doorsteps. United Parcel Service Inc. said Oct. 1 that its drone subsidiary was awarded an airline certificate last week by the Federal Aviation Administration. Even before getting that designation, UPS Flight Forward, as the subsidiary is called, has operated more than 1,000 flights at WakeMed’s hospital campus in Raleigh, North Carolina. The designation removes limits on the size of the company’s potential drone operation. Flight Forward can fly an unlimited number of drones, a key step toward expanding the operation. It can also fly drones at night — the company plans to do that after installing the necessary colored warning lights on each machine. However, UPS still faces severe restrictions before it can run a large commercial operation with drones. For example, drones won’t be allowed to fly beyond the sight of the operator without an FAA exemption for each route. Also, each flight will need a separate operator. Scott Price, the company’s chief strategy officer, said UPS will eventually apply for FAA permission to have a single operator fly multiple drones at the same time. The airline certificate lets UPS fly drones carrying more than 55 pounds, “but we’re not comfortable we have the hardware for that yet,” Price said in an interview. Operations will be limited to campus-like settings because FAA has not yet written regulations to allow commercial drone flights over populated areas. Price said UPS is eyeing “hundreds” of campuses in the U.S., including hospitals, colleges and office complexes. Price said the Wake Forest experiment has been successful, with only “a few” drone flights canceled for mechanical problems or because of bad weather. He said none have crashed. With a special FAA exemption, the company operated a drone flight there on Friday beyond the sight of the operator, which Price said was a first for a revenue-generating delivery. UPS believes the earliest commercially viable uses of drones will be for same-day deliveries, for augmenting truck-borne deliveries in rural areas, and for larger drones that could carry cargo of up to a ton from one rural area to another. Price said the latter idea is still years away. Transportation Secretary Elaine Chao called the decision a step forward in integrating drones into the U.S. airspace and maintaining U.S. leadership in unmanned aviation. UPS is racing against technology companies and startups to develop commercial-scale deliveries by drone to consumers. CEO Jeff Bezos promised in 2014 that drones would be making deliveries to people’s homes by 2019, but regulatory and technological hurdles proved too much for that prediction. Earlier this year, the FAA gave permission for a unit of Google parent Alphabet Inc. to make drone deliveries, but only in a tiny piece of southwestern Virginia. Other delivery companies such as Germany’s DHL Express are testing drones. UPS rival FedEx plans to take part in tests by the Alphabet unit, called Wing Aviation. In the U.S., drone operators have been frustrated by the lack of FAA regulations to allow drones to fly over urban and suburban areas, and to set rules for remote identification of drones. The latter rule would help law enforcement agencies, which were given authority under a law passed last year to track, intercept and destroy drones that they deem a security threat.

Mat-Su Borough wants another review of Port MacKenzie site

Just six days before the close of public comment on the draft environmental impact statement for the Alaska LNG project, the Matanuska-Susitna Borough has accused federal regulators of failing to prepare an “adequate analysis” of the municipality’s Port MacKenzie as a potential site for the multibillion-dollar gas liquefaction plant and marine terminal. The borough filed a motion with the Federal Energy Regulatory Commission on Sept. 27, calling on FERC to prepare a supplemental draft EIS “in order to cure the foundational defects in the current draft.” The public comment period on the 3,800-page draft closed Oct. 3. The borough wrote in its Sept. 27 filing that it intended to submit additional comments before the deadline “to address technical deficiencies in the report,” but filed its separate motion for a supplemental draft EIS “in an effort to draw attention” to what it believes are “significant flaws” in the environmental review. The alleged shortcomings in judging Port MacKenzie as an alternative to the project’s preferred LNG terminal site in Nikiski, on the Kenai Peninsula about 65 air miles to the southwest, “should be immediately addressed and corrected so that the draft EIS is able to withstand scrutiny upon review by the commission or a federal court,” the borough wrote. As an intervenor in the Alaska LNG docket at FERC, the Matanuska-Susitna Borough has the legal right to challenge the final EIS and commission decision in federal court, as do other intervenors: The Kenai Peninsula Borough, which is defending Nikiski as the preferred site, and the city of Valdez, which is promoting its community for the project. Though Valdez has not submitted detailed objections to the draft EIS, it has asked FERC to extend the comment period. The city issued a statement back in July: “It is apparent that the draft EIS fails to rigorously explore and objectively evaluate” Valdez as an alternative site to Nikiski. The draft “ignores the substantial advantages associated with the Valdez alternative,” and “unlawfully” includes speculative impacts, the city wrote. All three Alaska municipalities have hired lawyers to represent their interests before FERC. They are arguing over a state-led venture that has no firm customers for the gas in a highly competitive global market, no partners, no investors or financing for the proposed $43 billion project to move North Slope gas through a pipeline the length of the state to a liquefaction plant and marine terminal for export. The state agency in charge of the venture, the Alaska Gasline Development Corp., cut more than half its staff this summer as it halted its commercial and finance efforts to instead focus on completing the EIS. Trustees for Alaska, an Anchorage-based environmental law group reviewing the EIS for several clients, also has asked FERC to extend the comment deadline by at least 30 days, the same as Valdez, depending on when the state project team submits additional information requested by federal regulators. The Matanuska-Susitna Borough has long promoted the essentially dormant Port MacKenzie property, about four miles across Knik Arm from downtown Anchorage, as a potential site for the proposed Alaska LNG terminal. Other unsuccessful efforts over the years have included a much smaller LNG project proposed by private interests that folded in 2017. The municipality filed its motion with FERC about 12 weeks after Mat-Su Borough Manager John Moosey told the Alaska Journal of Commerce that while his staff was still reading through the draft EIS, he thought it showed the Port MacKenzie site “in a fair and more accurate light, and that’s really what we wanted.” The borough has complained for the past several years that the port was not fairly judged as a potential project site. Nikiski was selected as the preferred site in 2013, when the project was led by North Slope oil and gas producers ExxonMobil, BP and ConocoPhillips. The state stuck with Nikiski when it took over full control of the project in late 2016, after the companies declined to spend a lot more money on the effort. “If the State of Alaska believes Nikiski is the best place and the project can happen, we’re all in favor of that,” Moosey was quoted in the Journal of Commerce on July 10. The producers, when they were leading the project, and the state-created Alaska Gasline Development Corp., after it took over management, asserted that multiple factors made Nikiski a better site than Port MacKenzie. The project teams said winter sea ice, dredging of shipping channels, strong currents and tidal ranges, and conflicts with critical habitat for the endangered Cook Inlet Beluga whales all counted against Port MacKenzie. In past filings, the borough has rebutted many of the objections. In its latest filing, the borough said FERC dismissed Port MacKenzie from “full consideration as a reasonable alternative site” based on factual inaccuracies. “Even though the draft EIS lacks adequate analysis,” the borough said, “the current draft appears to show that Port MacKenzie is in fact” the least environmentally damaging practicable alternative. For example, the borough said, laying the gas pipeline to Port MacKenzie instead of to Nikiski would reduce the affected wetlands by 27 acres, out of about 1,600 acres. Stopping the line at Port MacKenzie would avoid displacing about two dozen residences and businesses near Nikiski, the borough added. “The draft EIS should be supplemented with a full ‘hard look’ analysis of the Port MacKenzie alternative,” the Mat-Su Borough wrote in its motion to FERC. It also alleged the draft includes “muddled statements” about which project site would cause the least environmental damage. If the FERC-led environmental review fails to provide “sufficient factual information to make this determination,” the borough said, the U.S. Army Corps of Engineers, with regulatory authority over wetlands, dredging and fill, “will be required to supplement the draft EIS at a later date.” A failure by FERC to do its job “likely is delaying the inevitable,” the borough said. Unless FERC changes its schedule, it plans to issue the final EIS in March 2020, with a commission vote on the project application in June 2020. While the Alaska municipalities battle over the project site, AGDC continues working to answer detailed engineering, construction and operations questions from federal regulators. AGDC submitted 295 pages of information, tables and maps to FERC on Sept. 25. The packet included: • A comprehensive table of waterbodies that would be crossed by the main pipeline, the 62-mile line from the Point Thomson gas field to Prudhoe Bay, compressor stations, work camps, access roads and other project construction activities. In addition to other details, the table lists the width of each waterbody and how AGDC would lay the pipeline, such as trenching, and at what time of year. • Revised air dispersion modeling of emissions along the pipeline route, at the gas treatment plant at Prudhoe Bay and liquefaction plant at Nikiski. • Updated annual emissions calculations for maximum LNG carrier operations at the loading terminal in Nikiski. The calculations include emissions from as many as 360 LNG carriers a year, plus support vessels. 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.


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