Alaska hospitals take advantage of tech to coordinate care

Editor's note: This article has been updated to correct the spelling of Rachel Lieber's last name and the estimated number of hospitals in Collective Medical's network.  It’s pretty easy for patients to disappear in the labyrinth of the medical system. Alaska’s hospitals are trying to make sure that it’s much harder. By late August, more than a dozen Alaska hospitals were live on a technology platform run by Collective Medical that allows them to see a patient’s medical history upon arriving at their emergency departments. That’s somewhat novel; without it, hospitals would have to gather all the information they could from the patient and request any prior information from other emergency rooms and other hospitals to put together a medical history. “For years, I have worked in emergency departments where there is a book somewhere where there are care plans for our patients,” said Dr. Keri Gardner, the chief medical officer at Alaska Regional Hospital. “That care plan, instead of just being at Alaska Regional, will now be visible to (any hospital in the network).” Alaska Regional Hospital’s Emergency Department went live on Collective Medical’s platform in early August. It’s easy to use and embedded in the hospital’s electronic medical record system, Gardner said. The providers there recognize the value in being able to see a patient’s recent emergency room visits, prescription history and other records. Collective Medical, a 10-year-old company with about 1,000 hospitals in its network around the country, collects information from hospitals’ emergency departments and runs it through its platform, sending notifications to emergency departments where a patient is also seen to provide more information. It runs through an HL-7 interface and is Health Insurance Portability and Accountability Act-compliant, said Rachel Lieber, the northwest region manager for Collective Medical. Beyond the medical side, the system also provides another notification of interest: safety threats. Assaults and threats against emergency department staff happen all over the country, including in Alaska. Lieber said the safety notifications came up fairly early in Collective Medical’s development. “Knowing how often your staff are facing assault, aggression or violence helps you know what your staff are dealing with in the workplace,” Lieber said. How a hospital deals with safety issues for staff varies from patient to patient, Gardner said. The safety flags can also help protect other patients. For example, if an incoming patient may be a threat to other people in the emergency room, he or she could be placed in a separate room, she said. “This is a big issue in Anchorage,” she said. “The health care workers who staff emergency departments are at risk. I have personally experienced and personally witnessed injuries to emergency department workers ranging from cuts and bruises to broken bones.” Gardner pointed to the leadership of the Alaska State Hospital and Nursing Home Association in getting all the hospitals in Alaska to invest in the same platform. Lieber said Collective Medical began working with providers in the state about four years ago, around the same time that ASHNHA began its care coordination initiative. Care coordination is a key reason for choosing the program, along with improving emergency department utilization, said Becky Hultberg, CEO of ASHNHA. Other hospitals in the network have documented 15 percent decreases in emergency department utilization and 10 percent utilization decreases among frequent emergency department users. “Along with improving patient care, reducing avoidable hospital admission and readmissions and (streamlining) transition to post-acute care providers are often cited by hospitals as the biggest benefits of using the Collective platform,” Hultberg wrote in an email. Gardner said another important driver of the program is cost reduction and improved value. Being able to see which procedures and prescriptions a patient has undergone recently may inform care and reduce overutilization, especially on controlled prescription drugs. Over-utilization of emergency departments at hospitals is a major issue nationally. Emergency services are one of the most expensive ways to receive health care, but studies have shown that some individuals are visiting emergency departments more than a dozen times per year. Alaska has a handful of these individuals as well, known as “superutilizers,” who are responsible for a major chunk of the emergency room costs annually. In 2016, the top 6 percent of emergency department users accounted for 23.8 percent of the charges, or about $148 million, according to the Alaska Department of Health and Social Services. Some have suggested one of the reasons individuals may be over-using the emergency departments is that they do not have adequate access to behavioral or primary care services. The Collective Medical platform works with providers of various specialties and populations, including jail clinics and behavioral health providers, which helps connect different points in the care continuum, Lieber said. “The emergency room may be the best place to interact with some individuals that are facing housing insecurity or homelessness, or are challenged by mental health disorders or substance abuse,” she said. “Sometimes the emergency room, while we want to make sure we’re using it appropriately, might also help us start conversations with individuals who may not otherwise have access to a primary care.” Whether because of health care record privacy laws or because of insular operations, hospitals and health care organizations do not always communicate. An effort like this is helpful, Gardner said. “It’s unusual to see hospitals working together at this level, and it’s refreshing to see,” she said. ^ Elizabeth Earl can be reached at [email protected]

State continues process for behavioral health Medicaid waiver

About three years after starting the process, the state is finally moving forward with a plan to try something different with behavioral health patients on Medicaid in an effort to reduce costs. The Alaska Department of Health and Social Services has been in the process of applying for a Section 1115 waiver through the federal Center for Medicare and Medicaid Services since 2017 under former Gov. Bill Walker, which would allow the state to use Medicaid funding on non-traditional services for patients with behavioral health and substance use disorders. The waivers, which target innovative practices not usually authorized by Medicaid, are intended to help states demonstrate a way to reduce health care costs while still providing care. The origin of the program goes back to 2016, when the Legislature passed a Medicaid reform bill and directed the DHSS to apply for the waiver, said Gennifer Moreau-Johnson, the director of the DHSS Division of Behavioral Health. Behavioral health is the lynchpin to Medicaid reform, she said; without an effective behavioral health system, underlying problems driving costs will remain. But it may not necessarily fit into the same screening tools as other medical procedures like measuring height and weight. Without an effective continuum of care that emphasizes intervention, behavioral health issues escalate into crises. “If you think of Medicaid as a health care model, behavioral health doesn’t fit really neatly into the model,” she said. The federal government fast-tracked the portion of the application related to substance use disorders, approving it in November 2018 with an effective date of Jan. 1, which allowed the state to get the ball rolling on providing those services. The state is expecting approval for the behavioral health section any day, Moreau-Johnson said. Behavioral health services in the state suffer from both a lack of availability in all communities and overuse at the acute end of the care spectrum. By the time patients access services, they are typically at a critical stage, and families may be broken up as children are put into the care of the Office of Children’s Services. Inpatient services are limited in Alaska, with only a set number of beds available at Alaska Psychiatric Institute in Anchorage. The waiver targets three specific populations: children, adolescents and their parents or caretakers with or at risk of mental health and substance use disorders; transitional age youth and adults with acute mental health needs; and adolescents and adults with substance use disorders. In addition to the difficulty for patients, delivering acute care for behavioral health disorders is often the most expensive. That is a key opportunity to reduce costs, said Farina Brown, the deputy director of the Division of Behavioral Health. The waiver program helps expand the number of services that are eligible to bill Medicaid, such as the standardized screening for mental health and substance use disorders, and community-based outpatient services and mental health day treatment. That draws down federal funds to help support services that are needed or are already being provided rather than relying on state funds. In some cases, what the division has done has been to align service codes to make services clearer to bill, Brown said. The waiver is authorized for five years. However, the state has to complete a number of evaluations along the way, Moreau-Johnson said. The program has to show budget neutrality to the federal government and, in the case of the cash-strapped state government, show savings, she said. “Section 1115 waivers get evaluated to a degree that no other waiver does,” she said. “We are, for example, required to hire an outside evaluator. We also have a contract with an outside actuarial firm.” Originally, the state applied for both the behavioral health and substance use disorder components. Because the federal government fast-tracked the substance abuse portion, the state was able to get some of the components in place earlier, Moreau-Johnson said. Currently, 96 sites are operating around the state, with the majority clustered in urban areas but nine “early adopters” operating in more rural areas, she said. Capacity is a major concern. The workforce and facility availability in Alaska is already limited, and Moreau-Johnson said providers and organizations in behavioral health identified workforce as a top concern for behavioral health service expansion. The state has contracted with Optum, an outside organization that provides various services for health plans and population health management, as an administrative services organization to help offset the capacity issue. One of the key goals of the program is to help keep individuals from having to leave their communities to obtain quality mental health services, she said. “We want to reduce the number of people being treated out of state but also the people going to Anchorage for treatment,” she said. Brown noted that a recent bill passed by the Legislature also expands provider eligibility to licensed medical family therapists and licensed clinical social workers, who can provide family therapy as an early intervention. Though the cost savings are a major driver for implementing the program, Brown added that providing behavioral health care for individuals who need it should still be the purpose. “This is really about providing services to those in need, to meet folks where they’re at, helping providers serve people,” she said. “At the end of the day, this is about changing people’s lives.” Elizabeth Earl can be reached at [email protected]

OPINION: BP hands off Prudhoe Bay to a hungry wolf in Hilcorp

A hungry wolf runs faster, and that means Prudhoe Bay should be in good hands with Hilcorp. The long-rumored blockbuster deal finally announced on Aug. 27 marks a historic transition for the largest North American oil field ever discovered as pioneering Alaska producer BP is exiting the state in a $5.6 billion asset sale. BP leaves huge shoes to fill, not only from its 60-year presence on the North Slope where it has helped produce more than 13 billion barrels of oil to far exceed the original estimates of less than 10 billion, but also from its community presence of active employees and millions upon millions in charitable donations. Hilcorp was named No. 20 on Fortune’s Best Places to Work in 2015, one of many such lists it regularly appears upon (although one can wonder how a company that paid all of its 1,400 employees $100,000 bonuses that year could possibly not be No. 1). There will no doubt be transition and turmoil for BP’s employees and the thousands of jobs tied to contractors, suppliers and the indirect impacts of its payroll across Alaska. But ultimately it must be kept in mind that this was inevitable and despite the unraveled recent mantra from BP about “40 more years” in Alaska, the company is handing off an asset it has spent the past several years revitalizing from years of annual decline averaging around 5 percent or more. BP Alaska President Janet Weiss shaved her long locks in early 2018 after losing a friendly bet with her employees that they could hold production from Prudhoe Bay steady, which they did over three straight years from 2015-17 at about 280,000 barrels per day thanks to record amounts of drilling and well workovers even as prices sank to as little as $26 per barrel in early 2016. Whether in anticipation of this sale or not, BP conducted a 400-square mile seismic shoot over the entirety of the Prudhoe Bay field this past winter and the results must have been encouraging enough to cement Hilcorp’s and its financiers’ willingness to execute the biggest transaction in Alaska’s history. BP personnel have stated they believe there is another billion barrels of recoverable oil at Prudhoe Bay and they praised Hilcorp’s ability to squeeze more oil out of aging fields as demonstrated at assets the Houston-based company acquired from BP in 2014. That capability not only impressed BP, but it had to have earned the trust of fellow Prudhoe Bay working interest owners ConocoPhillips and ExxonMobil, who would have had to sign off on a transaction that makes Hilcorp the operator and guardian of their still large financial interests on the North Slope. Southcentral Alaska can also thank Hilcorp for turning around the aging and neglected assets of Marathon and Chevron after it entered the state with its first purchases back in 2012. That was not long after the Cook Inlet Recovery Act passed the Legislature unanimously in 2010 amid widespread fears of looming natural gas shortages, and should remind us that the tax credit incentive programs the state enacted with diminishing production both on the Slope and the Inlet worked despite the fact they came under fire and were ended during the recent budget deficits. Hilcorp drew unwanted attention for a natural gas leak in 2017 from an old Cook Inlet pipeline cracked by a rolling boulder, but it should have earned more praise for spending $90 million to build a new subsea oil transportation system long sought by environmental groups and the Regional Citizens’ Advisory Council to drastically reduce tanker traffic and mothball the oil storage farm in the shadow of the Mt. Redoubt volcano on the west side of the Inlet. The purchase of Prudhoe and the rest of BP’s assets brings Hilcorp’s total investment in the state to about $10 billion over the past seven years, and it stands to spend billions more to recoup those investments including building the offshore Liberty project that could add 70,000 barrels per day to the pipeline it now owns half of. With ConocoPhillips and Oil Search also in the midst of permitting massive projects with six-figure per day production estimates and multi-billion dollar price tags, this should also serve as a red flag to those who would like nothing more than to raise taxes by a billion or more per year. Now is not the time to shoot the wolves just as they are hunting the state’s dinner. Andrew Jensen can be reached at [email protected]

Draft report on Willow released; 130k b/d possible

Alaskans got a sense of what developing one of the state’s largest oil prospects in decades would look like Aug. 23 when the federal Bureau of Land Management released the draft environmental impact statement for ConocoPhillips’ Willow project. The $4 billion to $6 billion proposed oil field is expected to produce up to 130,000 barrels per day at its peak if it is developed as currently envisioned. Willow is expected to cumulatively produce upwards of 590 million barrels of oil over approximately 30 years. It would also be another major step into the mostly undeveloped National Petroleum Reserve-Alaska where ConocoPhillips has been exploring for years. Last October, oil started flowing from the company’s smaller Greater Mooses Tooth-1 project, which marked the first oil production from federal leases within the NPR-A. ConocoPhillips is also in the midst of constructing the $1 billion-plus Greater Mooses Tooth-2 oil project to the east of the Willow development area. All of the aforementioned projects are in the northeastern portion of the NPR-A. ConocoPhillips announced the discovery of the primarily Nanushuk oil formation-sourced Willow prospect in January 2017 and has subsequently drilled multiple appraisal wells in the area. If developed, Willow would be the westernmost oilfield on the North Slope and would be linked to existing infrastructure via a road to GMT-2 based on ConocoPhillips’ current plan. In totality, ConocoPhillips hopes to build 38 miles of new gravel roads to connect five drill sites and a processing facility within the project to GMT-2. Each drill site is designed to accommodate at least 50 production and injection wells. Willow would also have a large operations center with an airstrip for a total gravel footprint of 442 acres, according to the draft EIS. Additionally, the company is proposing to build a temporary gravel island at Atigaru Point in near shore state waters of the Beaufort Sea north of the project for offloading and storing modules. The facility segments would be barged up in summer months and transported via ice roads to the project area in winter, according to the EIS. The 12.8-acre gravel island would be stripped of all manmade materials after several years of use. “It is anticipated the top of the island would drop below the water surface in 10 to 20 years following abandonment as it is reshaped by ice and waves,” the document states. The Atigaru Point island would be the shortest delivery route without needing to dredge marine waters or have additional impacts to the marine environment, according to BLM officials. The island would require 117 miles of ice roads to build and use. The agency selected the company’s plan as its preferred alternative, but BLM Alaska spokeswoman Lesli Ellis-Wouters noted that identifying a preferred plan in the draft stage of the environmental review does not preclude BLM from changing course based on comments it receives on the draft document. If BLM ultimately selects the ConocoPhillips development plan, first oil is expected in late 2024. Development without a field access road would push first oil to early 2026, according to the EIS. The company expects full development to take between seven and nine years. Two other development options considered in the EIS would cut out several infield roads to reduce potential impacts to caribou movements and lessen the number of stream crossings, but those changes would require another airstrip and ultimately lead to slightly more gravel fill. A transfer island farther north and west at Point Lonely is also considered to utilize existing Department of Defense infrastructure there and move the island away from areas frequently used by residents of the nearby village of Nuiqsut for subsistence harvests. Utilizing the Point Lonely site for offloading barges would mean building nearly 230 miles of ice roads for developing the facility and transporting equipment. Developing either island would require crossing part of the Teshekpuk Lake Caribou Habitat Area identified in the 2013 NPR-A Integrated Activity Plan with ice roads. BLM Alaska officials are in the midst of developing a new land-use plan for the NPR-A. Department of Interior leaders have said it will likely have more areas available to oil and gas leasing and possibly smaller areas with special wildlife habitat protections, particularly in the northeastern part of the reserve, which is believed to have more potential for oil and gas finds. Public comment meetings are planned for the northern Alaska communities of Anaktuvuk Pass, Atqasuk, Nuiqsut and Utqiagvik, as well as Anchorage and Fairbanks in mid and late September. Public comments on the Willow draft EIS can be submitted to BLM through Oct. 15. Elwood Brehmer can be reached at [email protected]

End of an era as Hilcorp buys out BP for $5.6B

Alaska is going to have a new “big three.” BP is selling all of its Alaska assets to Hilcorp Energy in a $5.6 billion deal announced Tuesday morning. For years, BP, ConocoPhillips and ExxonMobil have dominated North Slope oil production. Houston-based Hilcorp will now be taking BP’s place in that group. The sale means the iconic Prudhoe Bay oil field will have a new operator. Hilcorp will also assume BP’s 49 percent stake in the Trans-Alaska-Pipeline System through its pipeline subsidiary Harvest Alaska, according to statements from the companies. Hilcorp will additionally take BP’s 50 percent interests in the North Slope Milne Point and Liberty projects, which Hilcorp currently operates in partnerships with BP, as well as its 32 percent stake in the Point Thomson gas field operated by ExxonMobil. BP CEO Bob Dudley said the sale out of Alaska is a big part of the company’s broader objective to divest approximately $10 billion of assets worldwide this year and next. “Alaska has been instrumental in BP’s growth and success for well over half a century and our work there has helped shape the careers of many throughout the company,” Dudley said in a formal statement. “We are extraordinarily proud of the world-class business we have built, working alongside our partners and the State of Alaska, and the significant contributions it has made to Alaska’s economy and America’s energy security.” Hilcorp executives highlighted the company’s work to revitalize mature oil and gas fields in the state — it’s the primary operator in the Cook Inlet basin — and its workforce in the state, in prepared statements.  “With several years of operational experience in Alaska and an Alaska workforce made up of nearly 90 percent Alaskan residents we understand the importance of this asset to the state,” Hilcorp CEO Greg Lalicker said. “We’re excited about the opportunity ahead and are fully committed to the safe and responsible development of natural resources in such a special place. This commitment is a top priority as we work to ensure a seamless transition process.” The deal includes about $4 billion in near-term payments and $1.6 billion in longer-term payments. It is pending both state and federal approvals and is expected to close next year, according to BP. As a privately held company, Hilcorp has largely tried to avoid the spotlight while in Alaska and kept the details of its financial situation private.  Hilcorp was founded in 1989 by Jeffrey Hildebrand and operates in nine states, including Alaska. The company produced approximately 325,000 barrels per day of oil and gas equivalent in 2018, according to a presentation on its website. In Alaska, Hilcorp currently has more than 500 employees and produced more than 75,000 barrels per day of oil and gas equivalent last year. Company-wide, Hilcorp has more than 2,300 full-time employees, according to a company statement. It has invested roughly $4 billion in Alaska over the past seven years, according to the Alaska Oil and Gas Association. Hilcorp spokesman Justin Furnace wrote via email that BP’s current Alaska workforce of approximately 1,600 employees is vital to operating Prudhoe and conducting other work. “Our plans for that workforce will develop as we determine how we will integrate the acquisition into Hilcorp’s existing operations and we receive a list of eligible employees from BP so we can begin the interview process,” Furnace said in response to questions about how current BP employees will be handled. Hilcorp will assume the lease for BP’s midtown Anchorage office building, according to BP Alaska spokeswoman Meg Baldino. Hilcorp came to Alaska in early 2012 when it bought the Cook Inlet assets of Chevron and Marathon Oil. In 2014 it moved north to the Slope with a $1.25 billion purchase of BP’s offshore Northstar and Endicott oil fields. That deal also gave Hilcorp its 50 percent operator roles in Liberty and Milne Point, which had been solely owned by BP. Hilcorp has been lauded for stabilizing Cook Inlet natural gas production — which supplies Southcentral Alaska with heat and electricity — but also had a prolonged gas leak in late winter 2017 from an old pipeline on the Inlet seafloor. That incident drew widespread criticism for how the company handles the often aging assets it buys, but did not result in significant regulatory action. The existing relationship between BP and Hilcorp helped fuel rumors about a potential sale of Prudhoe Bay, so the announcement does not come as a shock to those within the industry, despite BP Alaska leaders’ recent emphasis on “40 more years at Prudhoe,” a reference to the 40th anniversary of startup at Prudhoe in 2017. Baldino said the deal is in line with that message because Hilcorp specializes in revitalizing declining assets. Oil production at Prudhoe peaked way back in 1988 at just more than 1.6 million barrels per day. Production from Prudhoe and associated satellite fields steadily declined for nearly three decades until stabilizing at about 280,000 barrels per day for the past few years. BP’s ability to stem the production decline is something the company has touted of late.  Cumulatively, more than 13 billion barrels of oil have been pulled out of Prudhoe, making it the most prolific oilfield in the country’s history, according to BP. Last winter BP conducted the first 3-D seismic shoot of the entire Prudhoe Bay field, which was seen by some industry observers as a sort of sales pitch to potential buyers. “This really is about 40 more at Prudhoe. This is what Hilcorp does in investing in mature fields,” Baldino said. She said it’s a tough day for BP employees, but added that they are proud of the work they’ve done in Alaska. “You have an energetic buyer and a valuable asset,” Baldino said. Elwood Brehmer can be reached at [email protected]

GUEST COMMENTARY: Regardless of our structure, UA is committed to students

There has been much concern regarding the future of the University of Alaska, given the events of the last six months. I’d like to assure all Alaskans that, despite all the upset over our budget and the ongoing need to right-size, no matter what UA’s structure ends up being, UA must and will continue to provide broad access to high quality education and workforce training to students throughout the state. At statehood UA was established as a single legal and financial entity. Over the years, with support from the state, the university established new campuses and facilities across Alaska. The system grew from one university serving Alaskans at numerous locations to three separately accredited universities—each with a distinctive identity and its own administration. In 2012, due to decline in the number of students graduating from high school and changes in student preferences, UA student enrollment and associated tuition revenue began to decline. In 2014, state funding for the university followed as oil revenues fell. This year’s funding agreement with the governor provides for a $70 million reduction over three years. While this is far better than the $136 million reduction in one year originally proposed by the governor, by 2022 annual state funding to the university will have declined by $121 million (32 percent). These continued reductions require that we right-size the university without downsizing our geographic footprint. I believe many would agree that we should reduce unnecessary administration and focus resources on academic programs and student services. Of course the details matter, and each detail will impact numerous stakeholders. The immediate issue the Board of Regents must face is the $25 million budget reduction in the fiscal year that started in July, and the right-sizing that must happen as a result. Regents will do so with an eye on another $45 million in cuts over the next two years. In response to direction from the Board of Regents, we are implementing administrative consolidations across the system. We are collecting input on how best to combine duplicative academic colleges and schools, consolidate research institutes, and better integrate our community campuses. However, the savings we generate from these consolidations are limited by our current structure of three separately accredited universities. So the broader question the legislature, the governor, the Board of Regents and all Alaskans are asking is whether we can afford, and effectively staff, three universities, or whether one university, with programs based in locations across the state, can more cost effectively deliver programs and services to all students. Maintaining three separate universities has the advantage of initially requiring the least structural change and disruption, while preserving local control and identity. However, it also requires three administrations and multiple administrators. This comes with a cost in real dollars which are then not available for students. The three-university structure also has built-in geographic and political constituencies with inevitable silos. That structure impacts UA’s adaptability to respond to a fast changing technological, economic, and demographic reality. It promotes unnecessary competition rather than collaboration, as well as costly differences in student processes and requirements that are barriers to students’ access and progress. In this funding environment, even if the Board of Regents ultimately decides to maintain three separate universities, those universities will need to change. If savings do not come from elimination of senior administration and redundant bureaucracies, savings must come from the faculty and staff who deliver our academic programs and student services. The board will need to assess whether preserving the current structure is worth the cost to students and academic programs. With just 27,000 students across the state, our entire system is the size of one regional university in the Lower 48. There is no question that changing back to a single university would pose issues in institutional and program accreditations, as well as challenges to maintaining local responsiveness and a sense of local identity. Change also creates uncertainty and fear, some real, because jobs and programs will be lost, but some groundless because opportunities for innovation will be created. A transition to one university would not occur without successful accreditation. Nor would it mean that all programs and services would be located in one area. One university would make use of faculty, staff, and facilities across the state to offer programs in-person and on-line to meet student demand. Change must happen, regardless of UA’s structure. As we right-size and consolidate administration and academic programs, the Board of Regents and administration will methodically evaluate the options and proceed with a structure that makes the most sense for our students and the state. Because in the end, the University of Alaska must continue to provide access to a high quality education to students all across Alaska. Jim Johnsen is the 14th president of the University of Alaska.

Excess supply, economic fears drive down oil prices

Fears of an oversupplied oil market amid rising global trade tensions are holding down prices. In addition, markets are reacting to weak economic indicators and unsettling political news, along with rising non-OPEC production, resulting in frequent daily price swings of $2 or more per barrel. Worries of too much oil chasing after uncertain demand is making investors, traders and corporate executives nervous, even prompting one bank to suggest prices could drop more than $20 a barrel if everything goes wrong. “Oil is at the edge of a cliff,” analysts at Bank of America Merrill Lynch wrote in a research note. Brent, the global price, started the week of Aug. 26 at around $59 per barrel, off more than 20 percent from its April peak of $74. U.S. crude tumbled roughly 8 percent on Aug 1, the steepest one-day drop since 2015, after President Donald Trump announced a new round of tariffs on China. “President Trump’s unexpected tariff announcement … suddenly revived the specter of an economic slowdown, akin to bubonic plague for oil demand,” Robert McNally, president of Rapidan Energy Group, told The Wall Street Journal in early August. “The U.S.-China trade spat has been at the center of the oil market demise, which has sent the global economy to the brink of recession and negatively impacted oil demand forecasts,” Stephen Innes, managing partner at VM Markets, Singapore-based trade specialists, was quoted by Reuters on Aug. 20. “Recession risk is now the single biggest factor driving oil prices because it will determine whether recent price falls will be enough to rebalance the market, or whether a deeper and longer slump is needed,” a Reuters’ columnist said Aug. 20. Putting numbers to the risk, a Bank of America Merrill Lynch global research report warned Aug. 2 that prices could sink more than $20 per barrel if China decides to buy Iranian crude in retaliation for U.S. trade tariffs. “A Chinese decision to reinitiate Iran crude purchases could send oil prices into a tailspin,” the report said, noting that the increased volume would add to an already well-supplied market. Global oil consumption is falling at the fastest rate since late 2014 as manufacturing and trade flows slip and as production of new cars and trucks declines, the Reuters’ columnist reported. Demand in the top 18 consuming countries fell by almost 0.2 percent in the three months between March and May compared with the same period a year earlier. Back in 2014-16, the combination of falling consumption with booming U.S. shale output and Saudi Arabia’s refusal to cut back on its production led to a price slump that dropped Brent from the $100-plus level in 2014 to a low of $27.88 in January 2016. This time around, Saudi production cutbacks have limited the price drop. OPEC is trying to prop up prices. Total output by its members hit an eight-year low in July with a further voluntary cut by top exporter Saudi Arabia. The 14-member Organization of the Petroleum Exporting Countries pumped 29.42 million barrels per day in July, according to a Reuters survey, the lowest OPEC total since 2011. But despite the cutbacks by OPEC and its allies, “bulging global oil stocks have failed to decline and the market remains well supplied,” said Stephen Brennock, with PVM Oil Futures, which bills itself as the world’s leading broker of oil trade and investment instruments. OPEC, Russia and other non-members agreed in July to continue their voluntary cutback in production, extending the deal adopted in December. The producing nations agreed to trim their output by more than 1 million barrels a day, about 1 percent of worldwide production. Even with that, OPEC has indicated the market will be in slight surplus in 2020. “The risk to global economic growth remains skewed to the downside,” said an OPEC report of early August. OPEC may be able to govern its own production to guard against global oversupply and low prices, but U.S. producers continue driving much of the surge in output, along with new projects in Brazil and Norway. Citigroup and JPMorgan Chase analysts project global supply will grow roughly 1 million barrels per day more than demand in 2020. The analysts said those new barrels could exacerbate the expected global surplus, particularly as concern about a slowing world economy triggers fears about crumbling demand. U.S. production totaled 12.3 million barrels per day in June, setting a new record. The nation’s output was just 5 million barrels per day in 2008. The U.S. Energy Information Administration forecasts 13.3 million barrels per day in 2020. Much of the booming production is coming from Texas, in particular the Permian Basin. Oil production in Texas has shot up from about 1 million barrels per day a decade ago to 5 million this summer. All that oil needs buyers, and much of it is leaving the country — but not as much as earlier in the summer. U.S. exports averaged 2.4 million barrels per day during the three-week period ended Aug. 9, down from an average 3 million barrels between the start of May and mid-July, Energy Information Administration figures show. It was easier to sell U.S. crude overseas when it was priced about $8 to $10 per barrel less than Brent, as it was over the winter and much of the spring. But U.S. oil is now trading at the smallest discount to global prices in more than a year. New pipelines are transporting oil from the Permian to the Gulf of Mexico, easing the bottleneck that constrained markets and held down prices. With improved access to overseas buyers, West Texas Intermediate crude was trading at just $3.50 less than Brent the third week of August. Higher prices reduce the attractiveness of U.S. crude exports. “Nobody really wants the barrels when they’re $3 cheaper than Brent,” Bob Yawger, director of the futures division at Mizuho Securities USA, was quoted by The Wall Street Journal on Aug. 20. “It could get ugly long term.” 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 incoming Atwood Chair of Journalism at the University of Alaska Anchorage School of Journalism and Public Communication.

Vetoes final with PFD session to come

Gov. Michael J. Dunleavy said he plans to continue to push for a Permanent Fund dividend calculated using the formula in state law. He also wants to keep cutting state spending, he said. “My plan is to continue to work at reducing this deficit as much as we possibly can, as soon as we possibly can,” Dunleavy said during a conference call with reporters Aug. 20, the day after he announced his final decisions on the state operating budget for the fiscal year that started July 1. Despite Dunleavy’s decision Aug. 19 to reverse a list of his prior vetoes, the governor said his budget plan moving forward remains the same: Cut state spending. “I’d like to get this issue of the deficit settled sooner rather than later,” Dunleavy said. The budget signed by Dunleavy this week formally has a surplus of $145.7 million, according to the state Office of Management and Budget. That takes into account a dividend reduced from the traditional formula and the draining of about $300 million from the state’s savings accounts: the Constitutional Budget Reserve and Statutory Budget Reserve. The traditional formula calls for a dividend of about $3,000 — costing around $1.94 billion total. The budget crafted by legislators and signed into law by Dunleavy calls for spending about $1 billion on the dividend, or about $1,600 per person. If the traditional formula is used to pay the dividend, there’s a deficit. If it isn’t, the deficit goes away. ‘There may need to be two checks’ In interviews on conservative talk radio shows earlier Aug. 20, the governor confirmed his intention to call the Alaska Legislature into a special session this fall to pursue a supplemental dividend payment above the amount already approved. He said he believes the upcoming 2020 election will put pressure on legislators, a majority of whom have refused to approve a $3,000 dividend. “There are a number of folks who don’t want to have an incomplete dividend hung around their necks,” Dunleavy told radio host Dan Fagan. Speaking to talk show host Michael Dukes, the governor said, “I believe in talking to some of the legislators that having the sole focus on the PFD will — not using a pun here, Michael — will return dividends.” On the radio and during the call with reporters, the governor said he intends to change his communications strategy and reach out directly to voters, in part because he is unhappy with news reports. Dunleavy announced his budget decisions Aug. 19 in a pre-recorded video, and he told reporters that the announcement was a “direct appeal to the people,” and his office will continue to do that. When it comes to the dividend, he told Dukes, he hopes the strategy switch will help convince legislators to change their minds on the dividend. “I am hoping the people of Alaska get agitated. I am hoping the people of Alaska really get on the phones and really start sending letters to their legislators,” Dunleavy said. Anne Weske, director of the Permanent Fund Dividend Division, previously said that any PFD payment in October must be finalized by the end of August. Given that, any additional payment would come later. “There may need to be two checks, one after another,” Dunleavy told Fagan. The Legislature and governor disagree about the dividend in large part because paying a traditional dividend — at current levels of state spending — requires violating a spending cap approved last year. Going above that cap increases the risk that the Permanent Fund will lose value, according to analyses by the Alaska Permanent Fund Corp. Some legislators have proposed a possible compromise: a change in the traditional payout formula in exchange for a one-time boost this year. Dunleavy said during the call with reporters that if people want to discuss “a potential statute change and constitutional amendment, we can have that discussion, but first and foremost we need to complete this incomplete dividend.” ‘The right thing to do at this time’ For months, state lawmakers have wrestled with the PFD and spending on services. The Legislature first cut $76 million from the state operating budget, according to figures from the Legislative Finance Division. Dunleavy then vetoed more than $400 million from that budget. The Legislature responded by passing a bill that added back most of that money. On Aug. 19, Dunleavy cut more than $200 million of those add-backs before signing the bill. Again, away went funding for Medicaid, the state court system and school bond debt, among cuts to other programs and agencies. Dunleavy agreed to restore other funding, but the majority of the cuts remained. Asked during the call about his reasons for cutting some programs and not others, Dunleavy said based on input from Alaskans and how late in the fiscal year final budget decisions were made “led us to conclude that adding money back into some of these areas would be the right thing to do at this time,” he said. “Our plan is, as we move forward in building a budget for the following year, is to engage a number of these organizations and groups early on this fall and have the discussion as to how they can assist by working together with us to lower the state’s footprint with regard to these programs and these services,” Dunleavy said. Dunleavy said that would also give groups more time to seek additional funding from other sources. Next year, the goal is to end the legislative session in 90 days, he said. That way, he said, “everyone has plenty of time to adjust to whatever budget realities will come out of this session.” What will this year’s PFD be? Though the governor and legislators have repeatedly mentioned a “$1,600 dividend,” this year’s payout has actually been estimated at $1,580, according to figures provided by Department of Revenue Commissioner Bruce Tangeman. That’s because the Legislature appropriated (and the governor approved) a set total amount for dividend payments, and that amount will be divided by the number of applicants. Legislators had estimated a slightly smaller number of applicants, leading the Legislative Finance Division to estimate a $1,597 payout on July 27. This is the first year since 2015 that the state budget does not set a specific amount for the dividend.

Movers and Shakers for Aug. 25

First National Bank Alaska announced the appointments of a new business support manager and a vice president/loan officer. Kara Blake returns to FNBA as business support manager in the Wealth Management Operations Unit. Blake first arrived at FNBA as a teller in 2004, then worked her way to overseeing Northern Lights and Main branches as branch manager. Paul Beer joins the bank as loan officer and vice president. Beer brings 30 years of banking experience to the Wasilla Branch where he will help small business owners in the Mat-Su Valley with their deposit and lending needs. Cornerstone General Contractors announced that Senior Project Manager Jonathan Hornak was named partner effective this past Jan. 1. Hornak started his career with Cornerstone in 2008 as an intern on the Veterans Affairs Outpatient Clinic project. After graduating with a bachelor’s degree in construction management from the University of Alaska Anchorage in 2009, he joined Cornerstone as a full-time employee. Over the last decade, Hornak has served in nearly every role that Cornerstone offers and has become an expert in healthcare facilities after managing numerous projects within the Alaska Native Medical Center, Alaska Spine Institute, and Providence Alaska Medical Center, Providence Valdez Medical Center, and Alaska Regional Hospital. More recently, he was inducted into the 2019 Alaska Journal of Commerce Top Forty Under 40. The Alaska Superintendents Association announced Yukon-Koyukuk School District Superintendent Kerry Boyd as Alaska’s 2020 Superintendent of the Year. The Superintendent of the Year program, now in its 33rd year, pays tribute to a school system’s top leader who exemplifies leadership for learning, personal and organizational communication, professionalism, and community involvement. Boyd is starting her 12th year as superintendent of the Yukon-Koyukuk School District but has been a part of the district since 2005. Her district, which covers the area of Washington state, has 16 sites, and she personally visits each community several times throughout the year. Boyd has been an officer in the Alaska Superintendents Association for seven years, and serves on the Alaska Council of School Administrators board. She has been the Coalition for Education Equity president and has been a statewide leader in the implementation of the Every Student Succeeds Act as well as serving on several statewide policy committees. ASA will advance Boyd’s candidacy to the 2020 National Superintendent of the Year program. All state Superintendents of the Year will be honored in February at the 2020 AASA National Conference on Education in San Diego, Calif. The law firm of Birch Horton Bittner &Cherot announced that attorneys Michael Schwarz and Matt Widmer have joined the firm. Schwarz joined the firm in January after practicing with a prominent law firm based in Westchester County, N.Y., for 13 years. Schwarz has represented and counseled clients in a wide variety of matters including: real estate, land use and zoning, municipal law, environmental law, foreclosure (commercial and residential), contracts, commercial disputes, and business torts. In addition, Schwarz has represented national and regional title insurance underwriters in connection with coverage matters, and has also served as defense counsel for underwriters’ insureds. Widmer joined the firm in November 2018, bringing more than 13 years of civil and criminal litigation experience throughout Alaska. Widmer began his legal career in private practice in Bethel. After five years, he moved to Anchorage where he worked for the Office of Public Advocacy and the Public Defender Agency, handling felony-level offenses, parole, and post-conviction relief. Widmer graduated from William &Mary Law School.

OPINION: Of ants and grasshoppers

Winter is coming, and the grasshoppers are knocking on the ants’ door once more. A two-page rewrite of the production tax code was filed as a voter initiative on Aug. 16 by the usual suspects made up of former Gov. Bill Walker’s anti-oil buddies Robin Brena and Merrick Peirce, Walker’s Tax Division director Ken Alper and one-note Democrat fiddle players Sen. Bill Wielechowski and former Sen. Joe Paskvan. Singing the tired old song of “Alaska’s Fair Share” that could be covered as Disney’s “The World Owes Me a Living,” the group is promising its measure would tax the producers by at least an extra $1 billion per year, or nearly a 40 percent increase over the approximately $2.6 billion they paid in the just completed 2019 fiscal year. To put that in context of North Slope operations, $1 billion is roughly what ConocoPhillips spent to build Greater Mooses Tooth-1, which started producing last fall, and another $1 billion is what it is spending right now to build the sister project GMT-2 scheduled to start producing this winter. According to ConocoPhillips’ most recent second quarter financial report, the company’s Alaska profits so far this year have been matched nearly dollar-for-dollar on what it is spending to bring GMT-2 online in addition to ongoing exploration work at the nearby Willow discovery that has the potential to produce 100,000 barrels per day or more and will cost several billion dollars to construct. Rather than work to get Alaska’s own financial house in order, this short-sighted grasshopper coalition is aiming to tax the stores of the North Slope ants and gorge itself on the future. Like Aesop’s fabled layabout, the state strummed away its savings over the past five years instead of reforming the budget. Inspired by Walker and his vetoes of tax credit payments and the Permanent Fund dividend, the Legislature followed suit time and again to solve its cash flow problems not through structural changes but by simply not paying the bills. Enabled by the Supreme Court decision that it could ignore the PFD formula, the Legislature’s failure to address the issue has poisoned the budget process as its members pick and choose which laws to follow. The failure to pay the tax credits forced Caelus Energy to sell out to the majors and helped send Furie Operating Alaska into bankruptcy. While the major producers were losing billions of dollars from their upstream operations, they did not come to the state asking for a cut in the gross minimum tax or relief from their royalty payments. Instead they worked to find efficiencies. ConocoPhillips slashed its dividend by two-thirds to save cash. They not only kept producing oil but increased throughput while at the bottom of the price trough. And, finally, they kept exploring, invested billions of dollars with scant available capital to bring new projects online and made major discoveries that promise to add hundreds of thousands of barrels to the pipeline in the near future. For all that foresight and prudence, their reward after absorbing years of losses is only to have the grasshoppers come calling with demands for another billion dollars per year. In the original version of Aesop’s fable, the ants tell the grasshopper to go dance the winter away. In Disney’s Silly Symphony adaptation, the ants take pity on the irresponsible grasshopper and after he is nursed back to health he changes his tune. After bailing out the state for years with no corresponding sign that any lessons have been learned, the ants have every right to tell Brena, Wielechowski and the rest of the grasshopper gang to grab their fiddles and get to steppin’. Andrew Jensen can be reached at [email protected]

FISH FACTOR: Bristol Bay business boot camp set for September

Investment that comes from within, not from without, is the motivation behind a boot camp that will jump start and nurture businesses in communities throughout Bristol Bay. Through Sept. 15 locals with good ideas, start-ups or existing businesses across the region will compete to attend a three-day boot camp that provides in-depth business education, networking and advice. First, they must make the grade in a simple application process. The 10 or 12 who make that cut will go to the boot camp and be judged on business feasibility and contributions to their community. Three winners will receive up to $20,000 in grants for consulting and technical assistance. The business boosters include the Bristol Bay Native Corp., The Nature Conservancy of Alaska and the Bristol Bay Development Fund, a subsidiary of BBNC that is infusing $5 million of “nurture capital” into local businesses that benefit its nearly 10,000 shareholders. “Guided by our traditions, we also know that investing in the culture, education, and sustainable future of our communities pays off for all of us,” BBNC states on its website. The group has partnered with the Path to Prosperity, or P2P, program by Spruce Roots Inc., an arm of the Juneau-based Sealaska Corp. that focuses on business coaching, technical assistance and tailored loans. Over six years P2P has provided management training and mentoring to nearly 80 Southeast businesses. The Coppa ice cream shop in Juneau, for example, went on to win top honors at the Symphony of Seafood and jars of Barnacle Foods kelp salsa varieties are in stores throughout Alaska and nationwide. Path to Prosperity received the Silver Award for Excellence in Economic Development by the International Economic Development Council in 2015. “They provide assistance all along the way, even if you just want some feedback on your application. It only asks about six questions to see if your business concept has any legs,” said Doug Griffin, executive director of the Southwest Alaska Municipal Conference, or SWAMC, which represents the Bristol Bay region. “It’s all about the sustainability of small communities,” Griffin added. “It’s also a way to show entrepreneurial spirit in a community. If you see a small business startup and it’s successful, it gives something for the next generation. They see that if they want to stay in their community where jobs are so limited, they can make their own job by starting a business. It’s something they can take pride in. And it’s kind of the American way to be a small businessperson doing well.” Find more information at or contact Cindy Mittlestadt at (907) 265-7865 or [email protected] Fall fish board call The state Board of Fisheries is organizing its lineup for the upcoming meeting cycle through March that will include Lower and Upper Cook Inlet, Kodiak and statewide crab and supplemental issues. Anyone wanting consideration of a fish issue from any other regions can submit an Agenda Change Request, or ACR, through Aug. 26. “The board recognizes that some of the other subjects that are important but aren’t in cycle so this is an opportunity for the public to submit proposals for the board to review at its October work session,” said board Executive Director Glenn Haight. The agenda change requests must fall under one of three criteria to be considered. “If the request is for a fishery conservation purpose or reason, if it is to correct an error in regulation, or if it is to correct an effect on a fishery that was unforeseen when the regulation was adopted,” Haight explained, adding that the board avoids requests that deal with out of cycle allocation disputes The board will consider the agenda change requests at its work session, Oct. 23 and 24 at the Egan Center in Anchorage. The Alaska Board of Fisheries includes seven members who set policy for Alaska’s subsistence, commercial, sport, guided sport, and personal use fisheries, and management is based on their decisions. Bycatch watch Alaska fishery managers closely track everything that comes and goes over the rails on boats in the Gulf and Bering Sea, including halibut taken as bycatch. The National Marine Fisheries Service posts all the catch data by gear type, region and fishery in federal waters (three to 200 miles out), down to the name of the boats. A few months ago, that caught the attention of longtime fisherman turned broadcaster Jeff Lockwood, who has turned the bycatch numbers into weekly reports on KBBI in Homer, the nation’s top halibut port. “I thought this is kind of interesting. Everybody talks about and knows about halibut bycatch, but as fishermen none of us really knew what was going on,” Lockwood said. “When I saw this information was there and just a week or 10 days behind what’s actually happening, I decided to compile and organize it. With any kind of numbers like that they’re kind of buried and you have to put in some work to sift through it. A 2018 halibut catch summary by the International Pacific Halibut Commission showed that coastwide landings of Pacific halibut from California to the Bering Sea totaled 23.5 million pounds, a low for the last decade. Commercial fisheries took 61 percent of the halibut catch, recreational users took 19 percent and 3 percent went for subsistence. Halibut bycatch in other fisheries accounted for 16 percent of the total catch limit. Lockwood said he is concerned about the bycatch impacts on a fragile Pacific stock and he hopes his reports create more understanding, especially between dueling halibut users. “In Homer the halibut longliners and charter operators tend to get at each other’s throats over who’s taking all of the fish,” he said. “It’s sort of hey guys, stop fighting amongst yourselves and look at this other stuff going on.” The reports also list bycatch of chinook and other salmon and crabs. Laine Welch lives in Kodiak. Visit or contact [email protected] for information.

GUEST COMMENTARY: State budget is a reflection of Alaskans’ values

As the Legislature and the governor wrestle with assuring an affordable and sustainable budget, Alaskans are being forced to decide what we, as a society, value. It’s not surprising that good people disagree. In these past weeks, Alaskans have spoken loudly and clearly about the programs and services they value, causing the governor to re-examine his vetoes. In our own lives, we pay for what we value: electricity, school supplies, winter boots, cell service. Deciding what we value — and how to pay for it — in our very diverse, unique and vast state is the heart of what legislators and the governor must do every year. We’re sometimes told that government is “bloated.” Or, we hear anger and resentment toward “government” in general. So, it’s important to step back and look at what government is and what it does. In reality, “government” is mostly an array of public services delivered for Alaskans by Alaskans. These services are an expression of what we, the people, have collectively deemed worthy to provide for ourselves, our families, and our neighbors. Whether it’s the school custodian, driver’s license examiner, child protection worker, prosecutor, fisheries biologist, water quality specialist, or corrections officer, it’s a public service. And, government is citizens like me and hundreds and hundreds of other everyday Alaskans in the Legislature or on assemblies or school boards across the state elected to conduct the public’s business and to assure critical services. Citizens wrote the Alaska Constitution, which requires state government to provide education, health, and welfare, all of which are more expensive in a high cost-of-living state with few concentrated population centers. Those citizen delegates decided that Alaska must manage its vast public resources, such as oil, gas and fisheries. And, those same citizens determined that our new state would be responsible for services typically provided by counties, such as courts, jails, child support, juvenile justice, roads, ferries, public safety, medical examiners, and airports. (In fact, Alaska is the largest operator of airports in the world.) I think it’s worth noting here that a 2017 state analysis demonstrated that once “Alaska-unique” obligations and programs are accounted for, per capita state spending is within a few percentage points of the national average. Despite the state’s extensive responsibilities, state jobs and departments have shrunk in the past four years since oil prices dropped. While the total state budget is higher than last year due to increased federal contributions (mostly for Alaskans’ health care coverage), overall state general fund spending for agencies, the university, Legislature, and judiciary actually dropped by more than $1.5 billion or 25 percent since 2015. Since the per-barrel price of Alaska’s crude plummeted by more than half (landing at $49 per barrel in January 2015, after being at or more than $100 per barrel for nearly four years), 2,900 state jobs have been eliminated (about 11 percent of the workforce); university positions have dropped by 17 percent. Can state government be downsized further? Yes, and it will. Can state government be made more efficient and effective? Yes, and it should. Agencies and the legislature must be diligent in seeking efficiencies and implementing savings. But we must also be vigilant to not be penny-wise and pound-foolish, harming our future generations for short-term savings. In this process, we also must be vigilant to not upend Alaska’s fragile economic recovery. Surely, a stable economy is at the top of our collective values list. Local chambers of commerce, banks, and economic development corporations have warned about the damage of sudden, big cuts. Business values stability. As legislators, we must, as well. And, like a business, we must take care of our assets and protect our investments in order to support our core mission, as well as what we value — including the Permanent Fund, the Permanent Fund dividend, and public services — for the long haul. We are in a great debate about the future of our state. Tough decisions require digging deeply to evaluate spending and to ensure that funding is directed at that which, collectively, Alaskans value. And, we must remember: state spending, for the greater part, is an investment in Alaska’s economy, it’s people, and our future. Rep. Andi Story represents House District 34 in Juneau.

GUEST COMMENTARY: A path forward to unify Railbelt electric utilities

The article entitled “Concept scrapped for unified Railbelt utility,” written by Elwood Brehmer in the Alaska Journal of Commerce on July 17, does not mean the future of our utilities is doomed; it just means there is opportunity to work out better solutions. The electric utility companies that cover the Railbelt have been working to form the Railbelt Reliablity Council and have been working on the formation of a transmission company, or transco, intended to simplify electrical transmission transactions among entities along the Railbelt. The real driver for all this is the desire by some to allow open access of renewables to any point along the system, and this vision was driven by House Bill 306. In 2010, HB 306 “An act declaring a state energy policy” was passed. Item 2 of the legislative intent reads: “…the state receive 50 percent of its electric generation from renewable and alternative energy sources by 2025.” There are efforts to establish a binding Renewable Portfolio Standard that would require 50 percent renewable electric generation by 2030 as some think Alaska’s (or Alaskans’) feet need to be put to the fire. Before we get to a binding standard, Alaska needs a plan to work out all the issues that hinder even starting the process of achieving 50 percent and greater renewable energy sources, as there are many issues that need to be solved. First, the Regulatory Commission of Alaska and the state have not provided any real incentives to achieve a unified utility. Instead, they have threatened to do it for them if they fail to get it done. The Railbelt utilities comprise the largest supplier of electric power to the residents and businesses in Alaska, and yes, there have been efforts to encourage the addition of renewable energy sources to the Railbelt. There are those who would have the Legislature create an independent entity in the Railbelt with the desired intent to mandate the increase of the amount of renewable sources that are connected to the Railbelt utilities. The concern that drives this is that the Railbelt does not deliver the maximum benefit possible to ratepayers. Forcing the Railbelt utilities to change their practices by mandate and regulation will not result in the desired effect, as there are many technical and business problems to address before all the separate utilities can operate effectively as a combined entity. There are also political hurdles that need attention, since there have been numerous complaints from the public against the Railbelt utility companies over the $1.5 billion spent for generator upgrades, which many think should have been invested, instead, directly in renewable resource connection. Understandably, utility companies are reluctant to invest any more money in infrastructure when their previous investments only drew the ire of their ratepayers, resulting in rate case intervention against them in some circumstances. Second, combining five separate entities into one is not as easy as many think, as each utility must consider the adverse impact to their own ratepayers; thus, some positive motivation should be provided to the utilities to ensure obvious and measurable benefit is achieved in their combining to become one utility. As noted before, for the entire Railbelt to be combined into one entity and be open to connection of Independent Power Producers, or IPPs, there are technological problems to be worked out. Third, the list of issues that work against adding generation to the system are many. Decreasing population, decreasing loads (with increased efficiency through conservation efforts), insufficient communication over the extent of the Railbelt, lack of energy storage, and insufficient transmission line capacity all provide negative incentives to develop a unified utility. As rates continue to rise, more customers will be incentivized to install peak-shaving, load-leveling, and distributed generation assets to decrease their costs, and this will require adjustments to rate structures to meet utility revenue requirements. Likewise, introduction of distributed battery energy storage and distributed generation will also require new rate structures for charging, discharging and production. To complicate matters, every change in rate structure requires the approval of the RCA, a lengthy and political process subject to public intervention and scrutiny. Under the current circumstances, why would the utilities be motivated to increase the amount of generation they have available when everything is working against them? Fourth, the technical deficiencies of the current Railbelt paradigm should not be underestimated. Communications and control capabilities along the Railbelt need to be upgraded to allow proper monitoring and control of all the new inverter-based equipment that will be connected. Even if we do not implement a true “smart grid,” it will need to be a lot smarter than it currently is to accommodate a lot of renewables interconnected throughout the system. Transmission lines need to be upgraded not only for the current loads and generators but also for the future loads as well as a reconfigured Railbelt utility. Sufficient energy storage must also be added to the system in strategic locations to smooth out the variability of renewable sources as well as variable loads to ensure system stability and minimize renewable resource curtailment. Right now, Railbelt utilities are compensating for the existing variability from Fire Island and other sources with conventional generation. This wastes fuel as well as renewable generation potential. To illustrate the scale of the problem posed by the desire to incorporate 50 percent renewable energy resources, a recent annual value for energy consumed along the Railbelt is just more than 5 million megawatt hours, or MWh, which is an average generation of 580 megawatts. The 50 percent share of renewable and alternative generation called for by HB 306 would be 2.5 million MWh. This could be provided by 725 MW of interconnected renewable and alternative generation sources operating at a capacity factor of 40 percent (typical for wind power), provided there is sufficient energy storage to account for the variability. At some point in the future, nearly 100 percent of the Railbelt’s energy demand could be supplied by alternative sources, but large-scale, long-term energy storage is needed to make this possible. The best current technology for storing and absorbing energy on the needed scale of weeks to months is pumped hydro. In any case, the solution needs to be big enough to continuously store surplus energy during seasons of high energy production and to discharge continuously during seasons of low production. Additionally, implementing anything on this scale will require extensive transmission line upgrades to handle the flow of power. By the way, spending $1.5 billion for upgraded generation seems to have been a good idea, as the new generation will help ensure a more efficient and reliable system while the distributed renewable resources are added than the old generation ever could have. Finally, The Railbelt utilities need to be in the business of providing the lowest cost electricity possible. One way to do that is grow their load base to increase the economy of scale and decrease the cost of service to meet revenue requirements. Therefore, utilities should look for ways and cooperate with other entities to encourage the diversification of Alaska’s economy through value-added endeavors on all extracted resources in Alaska (i.e., processing rare-earth minerals and heavy metals), developing new industries (such as the ocean industries or “Blue Economy”), and improving the economy in more communities. If Alaska is “open for business” then let’s produce the power to support the new businesses while serving the long-time customers with low-cost power. For example, the utilities should be marketing power to the mining projects currently in process. How can six individual utilities market to encourage an expanding marketplace? The consumer marketplace has its own considerations. Electric vehicles are supposed to “take over the world” in the next few years. How can six separate entities incentivize fast-charging stations in their respective service territories? What about incentivizing customers to use electricity for heating and cooling instead of using natural gas? Business development efforts such as these should have the overall goal of increasing the demand for their product, electric power. Once utilities become serious about providing low cost power and growing their customer base, we can look at the necessary capital improvements that are necessary to accommodate the vision we wish to achieve. In summary, moving the integration of the Railbelt utilities forward requires a PLAN, not a mandate. They (the utilities) will have to find a way to become one utility while keeping all the customers happy with rates lower than they are paying now. Let’s be innovative! For Alaska to develop a long-term energy plan takes leadership to expand our energy base beyond oil and gas, while we still have a good oil and gas economy. Robert Seitz, PE, electrical engineer, is Alaska resident for more than 75 years, and an advocate for renewable energy sources.

GUEST COMMENTARY: State is committed to helping coastal fishing communities

I read with interest a recent guest editorial penned by long time Adak fisheries advocate Clem Tillion regarding the need to take immediate actions to protect Alaska’s residents and coastal communities to ensure for their economic viability. The insinuation is that not enough is being done. Let me begin by saying that the State of Alaska is committed to developing fisheries management policies that benefit Alaska residents and coastal communities. We recognize the unique challenges faced by fish harvesters and processors operating in remote Alaskan waters and are committed to finding solutions. The state has worked closely with our management partners over the years to develop programs that provide economic benefits and stability to fishery-dependent communities in Alaska. Specific to Adak, the state has actively participated in the development and implementation of several fisheries management actions to promote economic opportunity. For example, the Alaska Board of Fisheries established the Aleutian Islands Subdistrict Pacific cod fishery in 2006 to provide economic benefits to Adak. In 2018, the board took action to increase the state-waters Pacific cod guideline harvest level to provide more harvesting opportunities for Alaskans and more fish delivered to Adak. The board action increased the amount of Pacific cod allocated to the state waters fishery from 27 percent to 31 percent of the total allowable Aleutian Islands removals for 2019 and 35 percent for 2020. The overall state waters allocation could increase to a maximum of 39 percent in subsequent seasons if 90 percent of the guideline harvest level is taken in 2020. In March 2019, the Board of Fisheries again acted to benefit Adak by authorizing a Western Aleutian District Tanner crab fishery under the authority of a commissioner’s permit. The state also supported several management actions in federal waters off Alaska to support Adak. A 2004 congressional action allocated Aleutian Islands pollock to Adak in order to promote a local, small boat pollock fleet to deliver fish to Adak and further develop the local fisheries-based economy. While several challenges have prevented Adak from realizing the benefits from its pollock allocation, the state supports continued efforts to fulfill Congress’ intent to benefit fisheries development in Adak. In 2005, the state supported action by the North Pacific Fishery Management Council and Congress to allocate 10 percent of the Western Aleutian golden king crab to Adak and require 50 percent of the Western Aleutian golden king crab allocations to be processed in Adak. These measures were implemented as part of the Bering Sea and Aleutian Islands Crab Rationalization program and intended to aid in the development of seafood harvesting and processing activities within the community. In 2010, the state actively supported council action to authorize Adak to purchase and hold commercial halibut and sablefish quota to provide fisheries access for a local fishing fleet and benefit the community. Finally, the state strongly supports the council’s most recent action, known as Amendment 113, to provide opportunity for trawl catcher vessels, onshore processing plants, and communities, including Adak, to sustain participation in and receive benefits from the Aleutian Islands Pacific cod fishery. The 2018 and 2019 fishing seasons demonstrated that Amendment 113 worked as intended for Adak by providing deliveries of Pacific cod to keep the plant operating and the associated benefits flowing to harvesters and the community. The state was disappointed by the March opinion in the Washington, D.C., District Court that vacated the regulations for Amendment 113. We are actively working with our management partners, the Alaska congressional delegation, and our legal advisors to pursue all available options to reinstate Amendment 113 regulations and/or develop new regulations that benefit Adak and other Aleutian Islands shore plants. Unfortunately, immediate solutions are constrained given the court decision. The record is clear. The state has well documented history of taking actions to help ensure the continued viability of this remote community. We will continue our efforts as we move forward on issues that affect this and other remote Alaskan communities and Alaskan fishermen. ^ Doug Vincent-Lang is the commissioner of the Alaska Department of Fish and Game.

Banks see positives in economy amid budget debate

Alaska banks are seeing positives in the state economy despite uncertainties caused by the state’s budget situation. The largest in-state banks, First National Bank Alaska and Northrim Bank each had solid results in the second quarter, although Northrim couldn’t match a particularly strong 2018. Northrim netted a $4.2 million profit during the quarter, a 26 percent year-over-year drop largely due to the fact that the second quarter 2018 was a very good period for the bank and higher interest rates helped generate a $5.8 million net income, Chief Financial Officer Jed Ballard said. This year Northrim has felt the impact of an inverted yield curve — when interest rates on short-term debt are higher than long-term debt — according to Ballard, who noted that about two-thirds of the bank’s loan portfolio is in variable-rate loans. “We had some pretty decent loan growth in Q2 that helped offset lower interest rates,” he said. Northrim increased its total lending 5.5 percent year-over-year to a $1.05 billion portfolio, according to records filed with the Federal Deposit Insurance Corp. First National Bank Alaska grew its second quarter net income 3.7 percent year-over-year to more than $13.1 million, according to results posted on the bank’s website. FNBA also eclipsed the $2 billion threshold in total loans in the second quarter with 4.7 percent year-over-year portfolio growth. Both banks increased their total assets as well; Northrim grew 5.6 percent year-over-year to more than $1.55 billion and FNBA ended the second quarter with more than $3.76 billion in holdings, a 3.1 percent increase from 2018. Northrim Chief Credit Officer and Bank Economist Mark Edwards said the positives he is seeing in North Slope oil investments as well as the ever-growing tourism sector have largely been “drowned out” in the noise caused by the state budget debates. Northrim had a 1.12 percent return on its assets in the quarter, while FNBA returned 1.43 percent. Some economists in the state have estimated Gov. Michael J. Dunleavy’s one-time group of budget vetoes totaling more than $400 million would have cost Alaska more than 4,000 jobs across numerous sectors; however, much of that fear has been tamped down as Dunleavy has agreed in recent days to restore significant amounts of funding, most notably to the University of Alaska’s budget. Edwards said he did not think the vetoes would be as damaging to the economy as some did, but added that the compromise the governor has agreed to is preferable to steep immediate cuts. Wells Fargo Alaska Commercial Banking Market Executive Joe Everhart had similar sentiments about the Alaska economy, also noting that commercial fisherman across the state’s many fisheries have generally received good prices for their catch this year. “The budget and legislative issues clearly dampened some of the economic optimism after 40-plus months of being in a recession, but there are a lot of positive steps that are happening on the Slope with Oil Search and (ConocoPhillips) as examples; the state budget conversations did throw a little bit of cold water on better economic indicators,” Everhart said. Wells Fargo held just more than 50 percent of total bank deposits in the state last year, according to FDIC data. Updated figures have not yet been published. Everhart said, “Generally things were positive” for Wells Fargo in Alaska as well, but he did not want to discuss specifics until the numbers were officially public. Some sectors, such as health care and nonprofits, saw a particular lack of investment through the spring, as the state budget remained undecided into July. Dunleavy vetoed $50 million from the state’s Medicaid budget; a cut that came on top of the Legislature’s $70 million reduction to Medicaid. “People didn’t necessarily want to ramp up, buy additional inventory, hire staff if they didn’t have confidence in what was happening in the State of Alaska,” Everhart said Aug. 14. “Fast-forward a couple of days, it does appear there’s been a meeting of the minds to put this conversation to rest so everybody can plan for the future.” Edwards and Everhart also both pointed to low foreclosure and loan delinquency rates in the state as evidence that the underlying support of the Alaska economy is generally strong. Northrim held its loan loss allowance in the second quarter nearly steady at $20.5 million, an increase of 2 percent year-over-year, while FNBA’s increased 8.8 percent to $19.5 million. Northrim had $18 million of loans in nonaccrual in the second quarter and FNBA had $7.3 million of loans in similar status. Elwood Brehmer can be reached at [email protected]

Alaska sets another first in unmanned aircraft testing

Alaska continues to be at the forefront of an aviation revolution. This time, pilots and scientists from the University of Alaska Fairbanks Alaska Center for Unmanned Aircraft Systems Integration conducted the first official beyond-visual-line-of-sight unmanned aircraft flight in the country approved by the Federal Aviation Administration. The roughly 30-minute flight on July 31 was conducted over a nearly four-mile section of the Trans-Alaska Pipeline System in a sparsely populated area north of Fairbanks. About half of the flight was flown under true beyond-visual-line-of-sight conditions, according to ACUASI Director Cathy Cahill. “Needless to say we were all very excited and we were leading the country. That was the first (flight) where we didn’t have to have a human observer with their eyes on the aircraft,” Cahill said in an interview. “We couldn’t see the aircraft but we knew everything about the aircraft and the airspace around it.” The unmanned aircraft center, often referred to as ACAUSI, is an arm of UAF’s Geophysical Institute, where scientists conduct high-end research on everything from the aurora to Arctic climate conditions, earthquakes, volcanoes and the remote sensing technologies used in unmanned flights, among other fields. Short-range commercial flights with small unmanned aircraft have been authorized for roughly three years now, but it was tests in Alaska that helped FAA officials draft the detailed regulations needed for general commercial unmanned aircraft system, or UAS, flights in the national airspace. Prior to 2016, any UAS flights with a business purpose needed special, case-by-case approval from the FAA. In 2013, ConocoPhillips conducted the first FAA-approved commercial UAS flights in the country when the company flew unmanned survey operations over its offshore oil and gas lease holdings in the Chukchi Sea. Less than a year later, in June 2014, a UAS team working for BP flew the country’s first UAS commercial flight over land to survey Prudhoe Bay oilfield infrastructure. The FAA approved ACUASI’s Pan-Pacific Test Range in late 2013 to be one of the country’s first six UAS testing hubs. The Pan-Pacific Range includes test sites in Oregon and Hawaii. President Donald Trump pushed the FAA to take the further steps to advance commercial remote flights in October 2017 when he issued a Presidential Memorandum directing the Transportation Secretary to establish a UAS Integration Pilot Program. Acting FAA Administrator Daniel Elwell said in a statement that the program is helping the agency continue to develop safe practices for integrating drones into the commercial aviation industry, which is the ultimate goal. “This important milestone in Alaska gets us closer to that goal,” Elwell said. The beyond-visual-line-of-sight flight was observed by a group of FAA officials, Cahill added. She said it was meant to simulate a flight conducted to inspect pipeline integrity and monitor activity in the TAPS right-of-way. However, the Skyfront Perimeter, a 6.5-foot diameter quad-copter, employed to fly the mission was not equipped with a camera or other surveillance instruments; the flight was strictly to demonstrate it could be done safely, according to Cahill. “It was the airspace integration and the detect-and-avoid (demonstrations) that were the complex parts of this mission,” she said. Utilizing UAS to conduct infrastructure inspections, mapping, wildlife monitoring and even fish counting has long been the goal of unmanned vehicle proponents. Unmanned craft are seen as being particularly applicable to Alaska, where vast distances and often challenging terrain and weather regularly combine to make manned flights to conduct the same work costly and dangerous. A lot of this work has been done under current FAA regulations, which require small UAS to be flown within eyesight — without binoculars or other visual aides — and lower than 400 feet, but those limitations still don’t allow operators to capture the full suite of benefits an unimpeded UAS can provide, Cahill stressed. “If I want to go monitor a seven-mile long salmon stream in a canyon I would have to put people at a distance where they could keep their eyes on the (unmanned) aircraft the entire length of that seven miles,” she said of current FAA requirements. “That requires flying people in or them hiking in under dangerous conditions; that’s not safer than flying the manned aircraft we’re trying to replace. So we need to go beyond visual line of sight.” To go further, the ACUASI team used a detect-and-avoid system from San Francisco-based Iris Automation Inc. aboard the Skyfront to alleviate conflicts with birds or other aircraft in combination with a system of eight ground-based Echodyne radars to keep tabs on the aircraft. The area used in the demonstration was also chosen for its usually quiet airspace and general lack of development after consultation with FAA officials, according to Cahill. “We could see (the aircraft) in the telemetry. We could see it in the radar data; we knew where it was. We knew the Iris system was watching the airspace and it all worked really well,” she said, adding that, “the key word in everything we do is ‘safe.’ If it’s not safe, we’re not doing it.” Alyeska Pipeline Service Co. President Tom Barrett said in a statement that even though the Skyfront flight wasn’t technically doing pipeline-related work, it is significant progress towards operating TAPS more reliably, safely and with better environmental protections. “This innovative step forward will advance safe performance not just in our industry, but in multiple disciplines and workspaces across the country,” Barrett said. To Cahill, it was significant, but incremental progress, as she told the FAA’s integration program team that ACUASI wants to gain approval for “365 days a year, 24/7 beyond-visual-line-of-sight operations in Alaska,” for the litany of applications such permission could be used on. The focus now is getting approval for longer flights, she said. “It really is a crawl, walk, run, scenario and we crawled, but we crawled before anyone else did and we’re very, very excited about that.” Elwood Brehmer can be reached at [email protected]

Partnership mines old gold while reclaiming Fortymile

Tailings from placer mining operations a century ago have left some streams in Interior Alaska less than ideal for fish. Miners caused the damage, and now miners are trying to fix it. And in the process, they get some gold out of it. Up on Jack Wade Creek, a tributary of the Fortymile River east of Fairbanks, the Salmon Gold project is entering its second year of operation. Existing placer miners in the area are working with RESOLVE, a Washington, D.C.-based nonprofit, to re-mine old sites on the river and then reclaim the bank with vegetation, restabilization and restored river structure. The goal is to make the rivers more habitable for fish — not just salmon — and to pull out some of the remaining gold in the process. The project just delivered its first batch of gold to refiners, on its way to companies like Apple and Tiffany &Co. So far, it’s only produced about 1,000 ounces among three sites, but RESOLVE and the miners hope to scale it up into a self-sustaining operation in the future, said President Stephen D’Esposito. The project dates back to when he spent time in Canada and saw some of the damage in creeks that had hosted placer mining in the past. “It was the first time I had seen placer and the historical impacts of placer mining — sediment in streams, that kind of thing,” he said. “And about four years ago, when I was doing some work in Alaska, talking to mining industry people, conservation groups, I hadn’t really known that there was a historical impact of placer mining (in Alaska). My thought was if you could pull the gold back out of the tailings and work hard at reclamation, that could be a really interesting combination.” RESOLVE is a nonprofit, and operating mining equipment is expensive. D’Esposito said he quickly realized buying equipment and running its own mining operation wouldn’t be economically feasible, so instead began to look around for partners. The U.S. Bureau of Land Management was already working with placer miners on federal lands on how to allow mining operations while mitigating damage and restoring fish habitat. Dean Race on Jack Wade Creek, Peter Wright on Sulphur Creek in the Yukon Territory and Tod Bauer on Gold Creek near Talkeetna are partnering with the project so far. Through the BLM, D’Esposito said the organization was able to find three miners to work with on Jack Wade Creek, Sulphur Creek and Gold Creek. Operations began in 2018, and though they weren’t expecting to recover any gold that year, they were able to extract about 50 ounces from the Fortymile River drainage. By comparison, the Fort Knox Gold Mine near Fairbanks produced 255,569 gold-equivalent ounces in 2018, according to the Alaska Department of Natural Resources. The production volume was never going to be extremely high, D’Esposito said — the main goal is to find ways to reclaim stream habitat for fish, and the gold can help provide marketable support for that. “In stage one right now, it’s commercial in certain aspects, but it’s mostly philanthropic,” he said. “In the second stage we get to, as we scale up, RESOLVE will keep raising money to figure out how it can work, and we need to find long-term funding sources.” Tiffany &Co. and Apple also help supply some of the funding at this stage, D’Esposito said. As they go forward, the companies hope to scale up to other streams and other miners, allowing the project to become self-sustaining. But at the same time, the companies and miners recognize that the process and model is still experimental, he said. It may also be a step forward on another front: compensatory mitigation. Under the Clean Water Act, all mining companies have to perform offsetting mitigation measures to compensate for the loss of or adverse effects on aquatic resources or habitat. In the past, mining companies have taken such actions as buying land and setting a conservation easement on it, which will prevent it from being developed. But in a case like Salmon Gold, the re-mining of old placer mining sites and the stream reclamation along the way may be able to be counted as a sort of bank for compensatory mitigation purposes, said Steve Cohn, the former state deputy director for resources for the BLM in Alaska. Under the Clean Water Act, some operators act as “mitigation banks.” Essentially, a party can purchase a damaged site and restore it, and work with the U.S. Environmental Protection Agency to then sell compensatory mitigation credits in connection with that restoration. How many credits the work is worth is up to an interagency review team, but developers who need to account for compensatory mitigation for a project may buy those credits to offset adverse impacts. “(Miners) are required to reclaim, but there’s a difference between reclaiming a site … and restoring it,” he said. “There’s a delta in there, and that delta could be turned into a profit. It hasn’t really materialized yet, but it’s one of the ideas that’s hopefully still being explored.” Cohn said there has been a history of tension between miners and the BLM over standards for reclamation, particularly in areas of the Fortymile River, which has more than a century of mining history but was also designed a Wild and Scenic River by Congress in 1980 in a number of places. Wild and Scenic River designations limit some development activities. In an effort to work with the miners and to restore some of the fish habitat, the BLM began convening meetings with stakeholders through the Resource Advisory Council. “I feel like the miners are very well-intentioned people and they’re willing to try different things if it makes sense to them and it fits within their business model,” Cohn said. “(The Wild and Scenic designation was) almost set up for conflict. It really set up the BLM and the miners to be in conflict in some ways. Both entities have tried hard to find some middle ground, and that resource advisory council really helped serve as a mediator.” D’Esposito said as the project moves forward, RESOLVE will be working on bringing additional placer miners interested in reclamation work in, and how to coordinate the differences in sites as it expands to different creeks. The suppliers are interested, placer miners showed support as well. “There’s an appetite, there’s a hunger out there for this kind of project, which is interesting,” he said. “I’ve really been quite impressed with the placer miners, how interested they are in this working. Even though I think people were skeptical that this would actually produce gold, they’re rooting for us.” Elizabeth Earl can be reached at [email protected]

Furie declares bankruptcy; cites $105M in unpaid state credits

An Alaska natural gas producer filed for bankruptcy protection last week, pointing to challenges producing enough gas in Cook Inlet and the state’s decisions to withhold many millions of dollars in cash tax credits the company had counted on. Furie Operating Alaska, owner of an offshore production platform in Cook Inlet and a subsea pipeline, wants to quickly find a buyer, the company’s interim chief operating officer told federal bankruptcy court in Delaware Aug. 9. “I believe a prompt sale of the debtors’ assets and/or equity interests represents the best option available to maximize value for all stakeholders in these Chapter 11 cases,” said Scott Pinsonnault, Furie’s interim chief operating officer, in a filing in federal bankruptcy court in Delaware last week. The company, with offices in Anchorage, faces debts of about $450 million, primarily for large loans used to cover costs, according to its petition for bankruptcy. The value of its assets falls somewhere between $10 million and $50 million, the company said in its petition for bankruptcy. Among the Alaska contractors owed is Cruz Construction, providing oilfield support services. They’re due $21,000, court records show. “For us it’s unfortunate, but hopefully they get things together in Chapter 11 and get their debts paid,” said owner Dave Cruz. “The real big factor to me is the state promised payback on tax credits and that got vetoed,” Cruz said. “That hit ‘em pretty doggone hard.” After oil prices and state revenues crashed starting in 2014, the state began reducing the annual tax-credit payments it had long made to small independent companies to encourage oil and gas exploration. The state began paying the legal minimum required by law, rather than the amount companies applied for and had come to expect. Former Gov. Bill Walker began capping the payments in 2015, and the Legislature later followed. The Legislature has since ended the program, but the state still owes many companies. Furie says it’s owed $105 million. Other companies have also faulted the reduced credits for hurting operations, including Texas-based Caelus Energy that has sold off North Slope prospects and struggled to advance what it calls a large oil discovery at Smith Bay on the North Slope. Furie also had trouble delivering enough natural gas to meet contractual agreements to utilities, including early this year when an “operational” problem blocked its sub-sea pipeline, halting gas deliveries for a period of time, Pinsonnault told the bankruptcy court. The company lost about $200 million combined the last two years, selling about $65 million in gas over that period. It employs seven workers and contractors. “Historical construction delays and cost overruns” added to the problems, and the company struggled to pay its debts, he said. Lindsay Hobson, a spokeswoman with Enstar Natural Gas, said Furie has been unable to deliver “expected volumes of gas” for a number of months. The company provides a small part of Enstar’s gas portfolio, she said. “We’re in pretty regular communications and are in negotiations about the future of that contract,” she said. Furie owes $7.2 million to the Department of Justice, its petition shows. That’s tied to the $10 million penalty the company agreed to pay in 2017 after it violated the Jones Act. The act requires that American ships and crews be used to haul goods from one U.S. port to another. In 2011, the company used a foreign ship to haul a jack-up drill rig from Texas to Alaska. The company, named Esopeta Oil Company at the time, was racing to start drilling in Alaska, to take advantage of the tax credits, the federal government said. Officials with Furie could not be reached Aug. 16.

Drought and dry conditions impacting salmon across state

This summer has been hot and dry in Alaska — so hot, in fact, that even the fish are feeling it. All over coastal Alaska, temperatures have hovered significantly greater than normal. The state began sweltering in mid-June and crested on July 4, with Anchorage hitting 90 degrees Fahrenheit and Bethel reaching 91. The bright, sunny days brought Alaskans out to swim and recreate, but they also left the waters where salmon were returning exposed to the direct, unforgiving heat. Shallower lakes and rivers across Southcentral and Southeast Alaska were the first to heat up. In the Matanuska-Susitna Valley, lakes like Larsen and Judd, where the Alaska Department of Fish and Game operates weirs for sockeye salmon, reached 80 degrees. The Kuskokwim River in western Alaska registered water temperatures about 10 degrees greater than normal, likely contributing to a reported salmon die-off as the fish headed upstream. On the lower Kenai Peninsula, the Anchor River hit its warmest temperature on record on July 7: 73 degrees. It’s dropped since then to about 66.2 degrees, but the spike was troubling, said Sue Mauger, a scientist with Homer-based conservation nonprofit Cook Inletkeeper. The lack of rain has contributed to the temperature increases too. “I think (the snow) melted out fast,” she said. “It takes a really long time for that volume of water (after a rain event) to warm up again … a rain event can be really significant in these streams.” Mauger runs a network of stream temperature monitors on 48 creeks around the Cook Inlet watershed through Cook Inletkeeper. Of the four streams she monitors in real time — the Anchor, the Russian River, the Deshka River and Crooked Creek, near the Kasilof River — all have been above normal temperatures except for the Russian River. Though the Russian is a clear water river, it’s likely buffered by its connection to two large, deep lakes at higher elevations near Cooper Landing. The Deshka’s elevated temperature — more than 81 degrees Fahrenheit on July 7 — was troubling to more than just people. July is normally the height of the king salmon return to the Deshka, but from July 1 to 9, a total of 13 individual king salmon passed the weir, according to Fish and Game. Numbers increased afterward, with nearly 2,000 passing from July 11 to 17, but soon plummeted again. ADFG has also closed fishing for silvers on the Deshka and Little Susitna rivers until the end of September. “As soon as the temperature dropped a little bit, hundreds were coming in,” she said. “Clearly, we are seeing the behavior of holding in cooler water.” In Prince William Sound, managers reported having slow escapements of pink salmon but reports of large aggregations of fish milling in the salt water, which made it difficult to plan fishing periods, as the management systems are based on inriver escapement. Prince William Sound does not currently have any offshore test fisheries to gauge salmon return indices in the marine waters for fishing periods, so managers and fishermen were stuck waiting for salmon to be ready to head up the creeks. The one exception has been glacially fed creeks. Not only are water levels relatively normal or high on glacial river systems, their temperatures are also closer to normal. The Copper River experienced record water levels on both ends of the spectrum this year — it was the lowest recorded level ever when Fish and Game put in the sonar in the spring and it hit its highest level ever later in the year — but the temperature has been relatively closer to normal, said Stormy Haught, a research biologist with the Fish and Game commercial division in Cordova. “Any glacial streams are doing much better than groundwater, rainfall streams,” he said. “Part of it is snowpack; we’ve had a lot of hot weather so there’s just not a lot of source for these streams. Copper River has been high and doesn’t seem like any major temperature anomalies this year.” The groundwater and snow-fed systems are low, and some are simply drying up. In Prince William Sound, dewatering is relatively normal for some systems; on Montague and Hinchinbrook islands, some short streams can dry up even in wet years, Haught said. However, even normally stable creeks are experiencing extremely low water levels. In Southeast, the Stikine River’s most recent discharge level was below the 25th percentile, according to the U.S. Geological Survey; the Situk River near Yakutat is below its lowest recorded discharge level, as of Monday. Most of Southcentral and Southeast Alaska are officially in drought stages, according to the National Integrated Drought Information System. About 21 percent of the state is abnormally dry, but not officially in a drought, while some areas in southern Southeast are in extreme drought as rain continues not to fall. In Cordova, a city that usually receives about a dozen inches of rain even in the summer months, public works officials have been urging people not to water their lawns, wash their cars or water down the dust on the dry roads. Public Works Director Samantha Greenwood said it’s a game of trying to keep up with the salmon processing plants, which are now receiving some of their largest deliveries of pink salmon all year. The processors can use millions of gallons of water per day to keep up with operations, and the city can only process so much a day. “I send an email to the processors, who’ve been great at trying to turn water off whenever they can,” she said. As of Aug. 19, fishermen in Prince William Sound had harvested about 30.2 million pink salmon in one of their strongest weekly harvests so far this season. But as the sun continues to shine, Cordova’s reservoirs are dropping now, unable to be recharged by lakewater. The city’s website asks residents to conserve water as much as possible. Upstream, with the low water levels and high temperatures, salmon may be entering a difficult environment. In Bristol Bay, salmon die-offs were reported in the Igushik River in June, likely due to hypoxic conditions as salmon packed into the river and would not pass upstream through pocket of warm water. As more salmon pack into less water, they deplete the oxygen supply and can suffocate. Because pink salmon tend to spawn low in the river systems or in the intertidal zone, they may do fine in Prince William Sound, Haught said. “The beauty of salmon is that they have these (variable) life histories, and that’s what helps them survive these environmental events,” he said. “That said, yeah, it’s fairly ugly out there. A fish can’t swim into a stream if there’s no water.” Mauger said it’s hard to know if salmon will have spawning success, even if they were counted on weirs — there may have been enough water downstream, but maybe the spawning grounds were cut off or too shallow. The low water levels are also leaving gravel bars — prime salmon spawning habitat — high and dry, she said. And if the water levels continue to drop after salmon have laid their eggs, exposed eggs will dry out and die as well. Cook Inletkeeper produced projections for water temperatures in different case scenarios for climate change in 2004, projecting out to 2069. This summer saw the Deshka’s water temperature crest above what the models predicted would happen by 2069, Mauger said, putting the temperature increases 50 years ahead. “I think it’s important that people realize that this is the new reality of where we are and where we’re headed,” she said. ^ Elizabeth Earl can be reached at [email protected]

Initiative filed seeking $1 billion tax hike on oil industry

A group of Alaskans has launched an effort to put a measure before voters asking them to increase taxes on the oil industry, as the governor moves to close the deficit with large cuts but no new taxes. Oil companies and an industry trade group swiftly condemned the effort, saying it would lead to less investment and oil production in the North Slope oil patch. “Vote Yes for Alaska’s Fair Share” registered as a campaign group with state regulators on Aug. 19. On Aug. 16, an initiative group applied with the Division of Elections so it can collect signatures in support of a two-page ballot proposal. The so-called “Fair Share Act” would alter the state’s 2013 oil-production tax passed as Senate Bill 21. It would apply to the North Slope’s large, legacy fields — currently Prudhoe Bay, Kuparuk and Alpine — held by major oil companies, said Robin Brena, an initiative committee member and an oil and gas attorney who chaired former Gov. Bill Walker’s Transition Subcommittee on Oil and Gas. The measure would bring in about $1 billion extra in production taxes, he said. “Alaskans should receive their fair share from the sale of our oil,” Brena said in a statement. BP estimates taxes on the industry would increase between $1 billion and $2 billion, if voters approve the measure, based on an initial analysis. That would stunt investment in Alaska as companies put their money in other oil provinces around the world, according to Megan Baldino, a BP spokeswoman. “We are still reviewing the language but the initiative appears to propose a very substantial increase in oil taxes that would make investing here less attractive,” wrote Natalie Lowman, a spokeswoman for ConocoPhillips, in an email. The initiative effort’s other two committee members are Jane Angvik, former Anchorage Assembly chairwoman, and Merrick Peirce, a former chief executive with the Alaska Gasline Port Authority. The campaign group’s treasurer would be Ken Alper, former Tax division director under Walker. Co-chairs of the campaign group include Sen. Bill Wielechowski, D-Anchorage and former Sen. Joe Paskvan, a Democrat from Fairbanks. The proposal would leave the 2013 tax system in place for small and new fields. Large prospects being pursued by ConocoPhillips and Oil Search could eventually fall under the new proposal, but it would take close to a decade of sustained production before that would happen, based on company production estimates. “We’re trying to help the (smaller) independent companies, and we’re certainly trying to not cause harm,” Brena said Aug. 19. “The larger, more profitable fields being harvested are in a better position to pay their fair share.” BP, ConocoPhillips and ExxonMobil are the major lease-holders at Prudhoe Bay. ConocoPhillips owns and operates Kuparuk and Alpine. The proposed initiative comes with Alaskans gripped by a tense debate over how to close the state deficit. Residents speaking at budget hearings this year have often called for increased oil taxes as one way to generate more state revenue. State lawmakers and the Dunleavy administration are expecting to weigh the impacts of any potential changes to the 2013 oil-production tax law in the legislative session that begins in January. The initiative group announced the effort Aug. 19, the same day Gov. Michael J. Dunleavy vetoed more than $200 million from the Legislature’s operating budget bill. Kara Moriarty, chief executive of the Alaska Oil and Gas Association, an industry trade group, said the measure would lead to less future oil production as Alaskan companies slow investments. “I get it, the state’s fiscal situation is concerning and as an Alaskan, that goes for me too,” said Kara Moriarty, chief executive of the Alaska Oil and Gas Association, a trade group. “But while this can seem like an easy fix, in reality it’s bad policy and I’d argue irresponsible to put forth a policy proposal of this magnitude when you don’t know the impacts.” Peirce, an initiative committee member, said the 2014 law isn’t working. “The Fair Share Act will help keep more money from the sale of our oil in Alaska,” he said. “Keeping more money in Alaska will help improve our economy — which is among the worst in the United States — avoid further layoffs from Gov. Dunleavy’s budget cuts, and create new jobs for Alaskans.” In 2014, a group of Alaskans attempted to repeal the tax system with a referendum and restore an earlier tax law that significantly increased state revenue at higher prices. That grassroots effort was vastly outspent by the oil industry, and failed at the polls. The measure proposed Aug. 16 would make major changes to the law for the legacy North Slope fields, including: • The gross minimum production tax, which has kicked in in recent years when oil prices are low, would increase from 4 percent to between 10 percent and 15 percent, depending on the price of oil. • The net production tax, which has kicked in when oil prices are higher, would eliminate the per-barrel credit provided to oil producers. That would save the state about $1 billion annually, Brena estimated. • Producers’ production tax returns and supporting documents would be public, rather than confidential as they are today. The Division of Elections as of Aug. 19 lists three other active petitions that are at least undergoing review by the state, including to reform public education, move the Legislature to Anchorage, and to overhaul elections. A citizen’s effort to recall the governor Dunleavy is also underway, following his proposals for large cuts and other actions. The initiative group turned in well over 100 signatures from registered voters with its application form, Brena said. The signers will serve as sponsors. The office of Lt Gov. Kevin Meyer, who oversees the Elections division, has 60 days to review the group’s application, said Lauren Giliam, a deputy press secretary for Dunleavy, on Aug. 19. The certification deadline is Oct. 15, she said. Meyer’s office will work with the Department of Law and the Elections division to confirm the proposed bill, application and sponsors meet requirements, she said. If the application is certified, the initiative committee will have a year to turn in 28,501 qualifying signatures, an amount equal to 10 percent of those who voted in the preceding general election. A minimum number of signers must live in at least 30 of the 40 House districts in the state. The group hopes to get the measure on the November 2020 ballot, Brena said.


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