Deputy secretary praises state energy research, pledges more partnerships

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

BP sale has impacts for ANWR, AK LNG

Hilcorp Energy’s pending $5.6 billion acquisition of BP’s Alaska assets has implications well beyond what happens to the oil remaining in the Prudhoe Bay field. That’s because the London-based oil major’s reach in the state isn’t limited to operations at the legendary oil field, which BP holds a 26 percent stake in. ConocoPhillips and ExxonMobil each hold a 36 percent share of Prudhoe Bay and Chevron has the remaining 1.1 percent interest. BP also holds a one-third share of the $4 billion Point Thomson gas field on the North Slope, which is operated by ExxonMobil and is a lynchpin to the proposed roughly $40 billion Alaska LNG Project. A spokeswoman for ConocoPhillips Alaska said company officials heard the same rumors leading up to the deal that everyone else in the industry did, but they have not seen the details of the transaction and could not comment on it. Additionally, BP is one of two companies — Chevron is the other — that knows the results of the only oil well drilled in the Arctic National Wildlife Refuge coastal plain. After 60 years in Alaska, BP had also become one of the largest charitable givers in the state. It contributed more than $4 million last year to education causes and nonprofits in Alaska. Houston-based Hilcorp donated $315,000 to charitable causes in the state last year, according to the companies. BP has long been a primary proponent of the Alaska LNG Project; the company was part of the consortium that started work on the plan to export North Slope natural gas in 2013 through a partnership with the state. Then, when the companies decided in February 2016 to step away from Alaska LNG amid collapsed oil and global LNG prices and let the state continue the work, BP was the first producer to formally reengage the project when it agreed to provide technical assistance to the state-owned Alaska Gasline Development Corp. starting in December of that year. That assistance preceded BP becoming the first company to sign a binding gas sales precedent agreement with AGDC in May 2018. The terms of the confidential agreement, which is still in effect, according to AGDC, include gas price and volume figures. ExxonMobil later signed a similar confidential deal with AGDC last September. Finally, in late May BP committed up to $10 million to help AGDC fund the remainder of the Alaska LNG Project environmental impact statement being analyzed by the Federal Energy Regulatory Commission. ExxonMobil also put up $10 million to finish the Alaska LNG EIS. Scheduled for completion in mid-2020, a favorable decision from FERC on the EIS is seen by most industry experts as a major step towards de-risking the project and one that could help attract investors. Under Gov. Michael J. Dunleavy AGDC leaders have said they plan to finish the FERC EIS process and pitch the project to private sector investors and operators they hope would take it over. It all appears to counter the decision to sell the company’s share of North Slope gas — estimated to be about one-fourth of the roughly 35 trillion cubic feet of available gas resources — which BP Alaska leaders regularly touted as the largest undeveloped gas resource in its broad global portfolio and one they hoped to monetize. It’s worth noting that the BP-Hilcorp transaction is subject to several state and federal approvals and isn’t expected to close until sometime next year. Economist Ed King, who worked on Alaska LNG in its early stages under former Gov. Sean Parnell’s administration, said in an interview that BP’s willingness to exit the state and sell the gas resources as part of that suggests the company didn’t have faith that Alaska LNG would be built anytime soon. “We’ve all known for a long time that it’s an economically challenging project,” King said. In the midst of the transition to state leadership of Alaska LNG in mid-2016, the international energy consulting firm Wood Mackenzie forecast that an oil company-led project would not meet the return thresholds typically required by oil companies to make it economically attractive. However, the tax exempt status a state-sponsored LNG project would enjoy along with other factors could make it viable, Wood Mackenzie representatives said to legislators at the time. BP Alaska spokeswoman Meg Baldino wrote via email that the company plans to honor the $10 million commitment. She also noted that BP would still have the opportunity to participate in Alaska LNG if it’s built, potentially as a purchaser of the project’s LNG. As for Hilcorp, AGDC spokesman Tim Fitzpatrick said the company had not engaged in recent discussions about the gasline project with the agency. AGDC officials speaking on background said Hilcorp had a positive view of the project in its early stages several years ago but also said Hilcorp had not discussed the project with them of late. Spokespersons for Hilcorp did not respond to multiple questions and requests for comment for this story. While Hilcorp’s official view of North Slope gas sales is unclear, the company should also be getting a leg up in the quest for the untapped oil many believe is below the Arctic National Wildlife Refuge coastal plain. According to BP’s Baldino, Hilcorp will get all of BP Alaska’s lease holdings within the boundaries of ANWR and the associated data, which includes the results of the KIC-1 well — the only oil well drilled in the refuge — in 1986. The longstanding leases jointly held by Chevron and BP are over much of the 92,000 acres of ANWR in-holdings that are owned by Kaktovik Iñupiat Corp., or KIC, that surround the Native village of Kaktovik on the northern edge of the 19 million-acre refuge. Arctic Slope Regional Corp. owns the subsurface rights to the acreage. The companies teamed up to drill the well about 15 miles from the village and have managed to keep the well data, and whether or not it hit oil, under wraps. Interior and Bureau of Land Management officials in Alaska have consistently said they intend to hold a lease sale for the roughly 1.5 million-acre coastal plain this year after the environmental impact statement evaluating oil and gas development in the area is complete. Congress also mandated a second lease sale in the 2017 tax overhaul legislation that carried the ANWR rider. When it comes to oil, King said he will be watching how many of the roughly 1,600 BP Alaska employees Hilcorp retains to operate Prudhoe Bay and the company’s nearby fields and prospects, which it also purchased from BP in 2014. Hilcorp is known for boosting production or at least holding it steady in mature oil and gas fields, which is partly why the company’s acquisition of BP’s Prudhoe assets was not a surprise to many industry observers. However, King noted doing so profitably usually means a smaller workforce. He surmised that the number of personnel in the field likely won’t change much and Hilcorp’s smaller corporate structure is also a way the company keeps downward pressure on overhead. “I’m really curious if they’re taking a look at some of the projects that have been on the shelf,” King said of Hilcorp’s plans for the Prudhoe field, adding that some marginally economic infield oil projects have been dismissed while BP has been the operator. Elwood Brehmer can be reached at [email protected]

Movers and Shakers for Sept. 1

Ash Grove Cement Co. hired Jay Barringer as Technical Sales representative. Barringer will work from the Bellevue sales office and his assigned territory will cover Alaska. Ash Grove Cement supplies cement to concrete producers and construction projects in many areas of Alaska. Barringer comes to Ash Grove following a successful career as an officer in the U.S. Navy. During his tenure, he completed several tours, most recently as the Operations Officer for Regional Support Organization, Pacific Northwest in Everett, Wash. Prior to that he was the First Lieutenant onboard the USS Cape St. George, followed by an assignment as the first Damage Control Assistant for the new commissioned USS Ralph Johnson. Great Alaskan Holidays, Alaska’s largest RV rental, sales, and service business headquartered in Anchorage, hired Maddy Herrin as a service writer. As a service writer, Herrin is responsible for the coordination of customer RV repair and service needs with the company’s entire sales, production and technical teams. Prior to joining Great Alaskan Holidays, Herrin held a similar position with Kendall Ford in Anchorage Bobby Alexander, chairman of the Alaska USA Federal Credit Union board of directors, has been inducted into the Defense Credit Union Council’s Hall of Honors. The Hall of Honors was established in 2000 as a way of acknowledging credit union leaders, volunteers, and staff for their significant contributions throughout the year. Most notably, it recognizes individuals who epitomize the DCUC’s philosophy of “Serving Those Who Serve Our Country.” Alexander has served on the Alaska USA Federal Credit Union board of directors since 1996, and has held the rank of chairman of the board since 2001. In addition to his considerable service to the credit union, he has an extensive service record with the U.S. Army. Alexander’s service includes two tours to Vietnam with the 5th Special Forces Group, where he was selected to be the noncommissioned officer in charge of the group’s financial section. During his time in the military, Alexander received numerous awards and commendations, and even after retiring from the U.S. Army, he returned to serve in a civilian capacity. He maintains his military connection through volunteer efforts, including as a board officer with the Association of the U.S. Army AUSA Last Frontier Chapter. Credit Union 1 announced the selection of Elizabeth Nerland as its new Marketing manager. Nerland brings more than 15 years of experience in marketing and communications to her new role, primarily in business-to-business service industry fields. Nerland is also currently an adjunct professor at University of Alaska Anchorage in its marketing degree program, where she teaches courses such as marketing media analytics, branding and content marketing, and marketing research. She has bachelor’s degrees in marketing and corporate communications from Duquesne University, and she also has an MBA from the University of Alaska.

Hilcorp’s swift growth in Alaska capped by Prudhoe purchase

Hilcorp Alaska’s $5.6 billion acquisition of BP’s assets in Alaska, announced Aug. 27, marks a “crowning achievement” for a Houston, Texas, company that has rapidly risen to become a major player in Alaska’s oil patch, after establishing a foothold in Cook Inlet seven years ago, observers say. The privately held company, founded by billionaire Jeffery Hildebrand in 1989, is known for squeezing more oil out of aging fields, a pattern seen in Cook Inlet after it began buying assets in 2012. There, the company soon became the dominant oil and natural gas producer in the Southcentral Alaska region, where it now runs a collection of offshore platforms and recently spent $90 million to upgrade oil delivery. The company’s Cook Inlet purchases attracted little attention compared to the company’s bold move in 2014, when it acquired two fields from BP, and parts of two other fields, in a $1.25 billion deal. “In Alaska, we’ve seen them double and double again, because they seized the opportunity,” said John Hendrix, former chief oil and gas adviser to former Gov. Bill Walker. “My hat’s off to them.” Hendrix said Hilcorp has strong buy-in from employees — stoked by incentives such as Hilcorp’s $100,000 bonus to all employees in 2015. “They won’t take risks,” but they also won’t burden their business with unnecessary bureaucratic delays, he said. Joe Balash, now an assistant U.S. Interior Secretary, was deputy commissioner for the state Department of Natural Resources when Hilcorp was originally hunting for deals in Cook Inlet. He said the company had bigger plans for Alaska even then. “In our very first conversations we had with Jeffery Hildebrand in Houston, when they were looking at the acquisitions in Cook Inlet, he had his eye on the North Slope,” Balash said. In 2014, Hilcorp proved itself an effective operator in the Arctic Alaska region, continuing to partner with BP on fields where both companies held stakes, he said. “They impressed BP management to the point they were obviously able to develop a relationship necessary to make a transaction like this possible,” Balash said. Hilcorp’s reputation in Alaska took a hit in 2017, after state regulators highlighted a long list of operating infractions, and a subsea pipeline in Cook Inlet leaked natural gas for months, with icy, cold water complicating repairs. But the company has taken steps to improve its operations in the state, regulators have said. The company employed more than 400 people in Alaska last year, and produced more than 75,000 barrels daily of gross oil and gas equivalent. The acquisition announced Aug. 27 cement’s Hilcorp’s position in Alaska, and will make it the second largest producer in the state when the deal is finalized, observers said. “For Hilcorp, buying BPs assets, including assuming operatorship of Prudhoe Bay, is a crowning achievement to the Alaska business they have built since 2012 to become the largest private operator in the state,” said an emailed statement from Enverus, an oilfield data services firm in Texas. How Hilcorp Alaska will integrate BP’s workforce of 1,600 employees is unknown. That workforce is vital to operating Prudhoe and conducting other work, according to an email from Hilcorp spokesman Justin Furnace. “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. Hilcorp’s next big move in Alaska could be at its offshore Liberty field, another North Slope acquisition from BP, in the Beaufort Sea. Hilcorp has moved rapidly in its efforts to develop the field. It hopes to launch oil production in the coming years. The field could produce up to 70,000 barrels of oil daily.

FISH FACTOR: Enthusiasm continues building for mariculture industry

Underwater and out of sight are the makings of a major Alaska industry with two anchor crops that clean the planet while pumping out lots of cash: shellfish and seaweed. Alaskans have now applied for more than 2,000 acres of new or expanding undersea farms, double the footprint from two years ago, ranging in size from 0.02 acres at Halibut Cove to nearly 300 acres at Craig. Nearly 60 percent of the newest applicants plan to grow kelp with the remainder growing a mix of kelp and/or Pacific oysters, said Cynthia Pring-Ham, aquatic farming coordinator at the Alaska Department of Fish and Game, which issues the permits. ADFG partners with the Department of Natural Resources which leases the tidal and submerged lands for farms. Currently in Alaska, 36 operators are producing primarily Pacific oysters in Southeast, Prince William Sound and Kachemak Bay. Their combined crops of about 2 million bivalves have sales topping $1.5 million from a mostly local customer base. It’s the faster growing seaweed that has spawned wider interest, especially from regions that aren’t as hospitable to growing shellfish. Alaska’s first kelp farm permits were issued in 2016 at Kodiak; 15,000 pounds of brown and sugar kelp was harvested in 2017 and sold to California food maker Blue Evolution for $10,000. Last year the Kodiak output jumped to 90,000 pounds worth more than $33,000. Now, besides kelp, 21 Alaska growers also have added dulce, nori and sea lettuce to their macroalgae or shellfish menus. It will go into a global commercial seaweed market that is projected to top $22 billion by 2024, with human consumption as the largest segment. The interest is quickly spreading to other Alaska regions. This year two kelp applications were submitted from Sand Point and queries have come from the Pribilof Islands, said Julie Decker, chair of a state mariculture task force created in 2016 by former Gov. Bill Walker to lay the foundation for “a $100 million industry in 20 years.” “People are calling from St. Paul and St. George in the Bering Sea. They are interested and want to know what they need to do to get started,” she said. “I can’t see a single downside to it,” said ADFG Commercial Fisheries Division Director Sam Rabung, who is also a task force member. Rabung, who began researching kelp in Japan in the 1980s and has worked in salmon enhancement and mariculture in Alaska for more than 35 years, called diversification into seaweed farming “the biggest change to the industry I’ve seen in the last five years.” It is getting legs for several reasons, he said. “It’s a really good fit with our existing fishery infrastructure. We have a blue workforce, an ocean workforce of fishing communities, vessels, fishermen, processors that in many cases get used in a kind of boom-and-bust manner. This gives an additional shoulder to a season,” he said. “The giant kelp that we’re focusing on in Alaska right now, the brown algae, can be used for everything from food to nutritional supplements to animal feed ingredients, biofuels, soil amendments and everything in between. We’re just at the tip of the iceberg in terms of the uses of algae,” he added. Plus, growing seaweed benefits the planet. As the “trees” of coastal ecosystems, seaweeds pull massive amounts of carbon from the atmosphere, absorbing five times more than land-based plants. But planting the earth friendly kelp fronds in the fall and plucking them in the spring is the easy part. “What do you do when you harvest them? You need to have something in place to take the product and make use of it before you ever plant your seeded lines,” Rabung said. As the fledgling algae industry develops, the task force is advocating that some growers form clusters to “really get things going.” “Getting a larger number of farms concentrated around a hub to get the synergy to create that critical mass and reduce the cost of logistics, transports, and support services that the farms need,” Rabung explained. “We need it to become a company, an industry. That’s where the state will see its biggest benefit.” At least two Alaska processors, Ocean Beauty and Silver Bay Seafoods, are involved in the new industry and buyers want product. “They need to know there is enough steady volume to make sure it’s worthwhile,” Rabung said. An early obstacle for aspiring Alaska growers, Rabung said, is financing, although the state’s revolving loan fund has made its first loan for a kelp farm. He said another is “acceptability.” “The way our statutes are written aquatic farming is the lowest priority use of coastal waters,” he said. “When we review a farm permit, we’re looking at its compatibility with existing uses as one of the criteria, such as fisheries. We can’t put farms in places that are traditional seine hook-offs or troll drags or dive fisheries or subsistence harvest areas.” Applicants also must be aware of navigational hazards and marine mammal haul outs when they are siting their farms. An online, interactive GIS map showing site areas and other data for Alaska’s entire coastline is being compiled and will help provide more information. It also can be shared with state agencies to help speed up the permitting process which has a two year backlog. “We’re kind of victims of own success because for years we’ve been building a foundation and network of people all working in the same direction. “Now the industry is stepping up and submitting applications for new farms and it coincides with staff and budget reductions at DNR,” Decker said. She added that Gov. Michael J. Dunleavy’s administration is “enthusiastic” about the mariculture industry’s potential. “We’re getting really good interest and support,” Decker said, “All the pieces are in place to move forward.” Farmer training sessions will be held next year in Ketchikan, Sitka and Kodiak and perhaps other communities, Decker said. Pink salmon payout Applications should now be in the hands of Alaska salmon fishermen and processors hurt by the 2016 pink salmon fishery failure. National Marine Fisheries Service last month approved $56.3 million in relief funds at Kodiak, Prince William Sound, Chignik, Lower Cook Inlet, South Alaska Peninsula, Southeast Alaska, and Yakutat. Funds are being distributed by the Pacific States Marine Fisheries Commission. Salmon permit holders who show losses from the pink bust will split $31.8 million based on average dockside values over even years from 2006 to 2014. Skippers are responsible for compiling data for their crews in applications that are due Oct. 31. The PSMFC will then distribute applications to crew members to apply for disaster payments through January 31, 2020. The relief funds should be in hand six to eight weeks after an application is accepted. Alaska processors also must apply by Oct. 31 to receive their share of $17.7 million in relief funds. Workers will be eligible for an equal share of 15 percent of an eligible processor’s total disaster payment. The funds also include $3.63 million for pink salmon research. Of that, $450,000 goes to Kodiak’s Kitoi Bay Hatchery for its Saltwater Marking Sampling project. The Southeast Alaska Coastal Monitoring Survey will get $680,000 to help with pink salmon forecasting research. And $2.5 million will go to the Alaska Hatchery Research Project that since 2011 has studied interactions of hatchery and wild salmon in Prince William Sound and Southeast. Details are still being worked out on distributing $2.4 million to municipalities that were affected by the pink crash. More trade taxes China will add an additional 10 percent tariff to imports of U.S. seafood products starting Sept. 1, bringing the total to 35 percent in the latest escalation in the trade war with President Donald Trump. Undercurrent News reports that frozen Alaska salmon, cod or pollock that go to China for processing into patties or portions and are then re-exported will remain exempt from the extra taxes. In total, the additional tariffs, not only on seafood, apply to $75 billion in imported goods. In response, Trump sent out a series of Twitter messages saying: “We don’t need China and, frankly, would be far better off without them. Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies home and making your products in the U.S.A.” Sales of U.S. seafood to China dropped 36 percent since the 25 percent tariff was imposed in July 2018 valued at $340 million. Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

BLM issues first review of Ambler Road project

Bureau of Land Management officials have released the draft review of a proposal by the State of Alaska to build a road that would open a large swath of Interior Alaska to mineral development. The state-owned Alaska Industrial Development and Export Authority is leading the permitting and possibly eventually the financing of the long-sought Ambler Mining District Industrial Access Project, which has drawn opposition from environmental groups and some local stakeholders. Commonly referred to as the Ambler road, the 211-mile gravel road would link the remote Ambler mining district in the Upper Kobuk River drainage to the Dalton Highway near the base of the Brooks Range and the rest of Alaska’s road system. BLM identified AIDEA’s plan for the Ambler road as it’s preferred alternative for the project in the draft environmental impact statement, or EIS, released Aug. 23, but the exact route through or around Gates of the Arctic National Park and Preserve is still undecided. AIDEA applied with BLM to start the Ambler road EIS in March 2017. The one other Ambler road route considered in the draft EIS would start just north of the Yukon River bridge, near milepost 60 of the Dalton. The road would generally angle northwest for 332 miles before terminating near the Ambler River. Fairbanks would be 456 miles from the end of the road using AIDEA’s route and 476 miles from the end of the Ambler road under the alternative route. BLM dismissed the longer route because it would be nearly 60 percent longer than AIDEA’s plan and would have correspondingly more impacts to the environment and be “considerably more costly to construct,” the EIS states. Using a toll road concept, AIDEA would finance the basic gravel road — with an estimated construction cost between $280 million and $380 million — via revenue bonds that would be repaid by the mining companies that would use it to develop the multiple metal prospects in the 75-mile long mining district near the end of the road. According to AIDEA, construction and maintenance costs for the road would total between $475 million and $616 million over 30 years. The authority would return between $988 million and $1.1 billion over that time in tolls, according to its analysis, if the mines are developed. Critics have pointed to the cost of the project, and the fact that there is no guaranteed repayment method, as reasons to scrap the plan. The Wilderness Society contends the current estimate for the road does not consider some of the costs inherent to building in remote northern Alaska, such as constructing a road over permafrost. The group suggests the road could end up costing $1 billion or more as a result. The proposed mines have also drawn scrutiny for potential impacts to salmon and whitefish runs in the Kobuk River drainage and many residents of the area villages are concerned about impacts to caribou in the region that are an important subsistence food source. Numerous village and Tribal governments in the area of the proposed road have issued formal statements of opposition to the project. AIDEA officials insist access to the road will be restricted to mining activity because it would ultimately be paid for through tolls under the plan; there would be no public access to currently isolated hunting areas, which has been another concern of area residents worried about increased activity. The state has spent approximately $26 million of public General Fund money on predevelopment studies for the Ambler road over the years. Rick Van Nieuwenhuyse, CEO of Vancouver-based Trilogy Metals, called the road “crucial to unlocking the incredible mineral wealth” in the Ambler mining district in an Aug. 23 statement. “The development of the Ambler district will lead to generation of thousands of high-paying jobs for the residents of Alaska,” Van Nieuwenhuyse said. “I want to commend the BLM and all cooperating agencies for getting the draft EIS done and look forward to completing the permit for the road.” Trilogy Metals is exploring two multi-metal deposits in the district and Van Nieuwenhuyse has repeatedly stressed that without road access the prospects cannot be economically developed. Trilogy is preparing to start the federal permitting process for the Arctic copper, zinc and precious metal deposit shortly after permitting the road is complete, he has said. Arctic would be an open-pit mine and its expected many of the other prospects in the area would be as well if they are developed. Public comment meetings on the draft Ambler road EIS are scheduled for more than 20 communities during a 45-day comment period. “I realize the importance of this project to the State of Alaska and for the state’s ability to develop its resources and as such, I am committed to ensuring a thorough and comprehensive analysis,” BLM Alaska Director Chad Padgett said in a statement. “This can’t be done without substantive input from stakeholders.” The public comment period is scheduled to start Aug. 30 and run through Oct. 15. Elwood Brehmer can be reached at [email protected]

On the Money: Fed’s rate cuts strike savers’ pocketbooks

NEW YORK (AP) — Just when bank customers were finally getting something reasonable for their hard-earned savings, the party is coming to an end. After several years of increasing the meager interest they paid on savings accounts and certificates of deposit, banks are starting to trim their offerings to savers. The declines are slight, usually less than 0.25 of a percentage point, but the trend is certain to continue for at least the next six months to a year, experts say. Blame the Federal Reserve, which cut interest rates in July and is widely expected to cut them again this year to help insulate the economy from the Trump administration’s trade disruptions and to support the stock market. U.S. President Donald Trump has repeatedly attacked the Fed for failing to cut rates aggressively, and has used his criticism to link the Fed’s moves with outcomes of the stock market. However, while nearly all households have savings accounts, a tiny minority own the vast majority of stocks. “There’s a lot more economic certainty and thoughts of a potential economic slowdown, and that’s been driving a lot of banks to cut back on what they’re offering to customers,” said Ken Tumin, founder of banking news site Depositaccounts.com. Some banks didn’t wait for the Fed to cut rates. Earlier this summer Goldman Sachs cut Marcus’ online savings rate to 2.15 percent from 2.25 percent, while competitor Ally cut its rate from 2.2 percent to 2.1 percent. The average online-only bank now offers an interest rate of around 1.68 percent. After the Great Recession, savers looking to safely store their cash and make a modest return had few, mostly terrible options. The Federal Reserve cut its benchmark interest rate to zero and kept it that way for years. It was not uncommon to see a big bank like Bank of America or Wells Fargo offer 0.02 percent or even 0.01 percent on a traditional savings account. Even online savings accounts, which typically offer rates far higher than brick-and-mortar establishments, offered only 1 percent. Banks didn’t have to offer enticing rates because they largely didn’t need deposits. Lending slowed considerably after the Great Recession, and new regulations kept banks from lending too dangerously, so the need for deposits to fuel that lending waned. But as the economy recovered, however, and the Fed steadily raised interest rates from near-zero to 2.50 percent at its highest level, banks started offering more to savers. Banks also started offering more loans, which in turn meant the competition for deposits heated up. But that competition for deposits is now dwindling and banks are not as willing to pay for long-term deposits as they used to. For example, six months ago an average bank was willing to pay 2.24 percent for a five-year CD. That’s declined now to 2.16 percent. The decline is small, but expected to continue downward. Savers looking for new places to lock-away money and get some sort of yield should check out no-penalty CDs offered by banks like Marcus, Tumin says. While the rate is not much higher than what a customer might get in an online-only savings account, no-penalty CDs allow a customer to lock in a rate for a year. If the Federal Reserve does cut interest rates again this year or next year, at least a saver would have locked in that higher yield and there would be no penalty for pulling the money out in most cases. Lower interest rates have been good news for some, however. Big banks cut their so-called prime rate almost immediately after the Fed’s July rate cut. That means lower interest costs for borrowers, as the prime rate is typically used to determine the interest rate on credit cards. Mortgage rates have also declined, with the average 30-year fixed-rate mortgage now averaging around 3.81 percent, compared to 4.44 percent in March.

What lies ahead following Oklahoma opioid judgment

Oklahoma’s $572 million judgment against Johnson &Johnson will likely be followed by more trials and legal settlements seeking to hold a drug company accountable for a U.S. opioid crisis that has ripped apart lives and communities. The Aug. 26 ruling could help shape negotiations over roughly 1,500 similar lawsuits filed by state, local and tribal governments consolidated before a federal judge in Ohio. And as the legal cases against the opioid industry accelerate, so do concerns about how the money from verdicts or settlements will be spent. Following are questions and answers about the opioid crisis and what lies ahead. Q: Why are so many governments suing over opioids? A: Forty-eight states plus around 2,000 local and Tribal governments have sued companies in the drug industry, arguing those that make, distribute and sell the drugs are partly responsible for a crisis that has killed more than 400,000 people across the country since 2000, according to the U.S. Centers for Disease Control and Prevention. That’s including more than 47,000 in both 2017 and last year. The plaintiffs argue that drugs were improperly marketed and that companies failed to stop suspicious orders from shipping. Q: What’s the financial toll of the crisis? A: The White House Council of Economic Advisers published a report in 2017 pegging the cost of the crisis at just over $500 billion in 2015. That includes lost productivity as well as costs borne by taxpayers, such as ambulance runs, jail treatment costs, and the costs of caring for children whose parents have died from opioid overdoses. Q: What are opioids and how are they used? A: They’re an addictive family of drugs that block pain signals between the body and brain. They include prescription painkillers such as Vicodin and OxyContin, as well as illegal drugs such as heroin and illicit versions of fentanyl. Until recent decades, they were prescribed largely for pain for patients with cancer, at the end of their lives, or with acute pain, such as after surgery. Since the 1990s, there’s been a push in the medical world, partly funded by drug companies, to do better at treating pain — and opioids came to be seen as part of the solution. Q: So what’s the problem? A: Recent studies have questioned their effectiveness with chronic pain and the U.S. Centers for Disease Control and Prevention has told prescribers to be cautious about using the powerful drugs to treat patients with long-term pain. Experts say the longer patients are on the drugs and the higher the doses they receive, the more likely they are to develop addictions. Also, more people with prescriptions means more access to the drugs for recreational users and addicts. Q: What happened leading up to the Oklahoma judgment? Oklahoma’s public nuisance lawsuit against several drugmakers and their subsidiaries was the first in the wave of opioid litigation to make it to trial. Before the start of the six-week trial in May, Oklahoma reached a $270 million deal with Purdue Pharma, the maker of OxyContin, and an $85 million settlement with Teva, both of which faced criticism from state lawmakers, who argued they have control over dispersing funds. The Purdue settlement calls for about $200 million to go into a trust to fund an addiction studies center at Oklahoma State University in Tulsa. The remaining defendants, Johnson &Johnson and some of its subsidiaries, proceeded to trial. Q: What makes the cases legally complicated? A: There are dozens of defendants and thousands of plaintiffs with different interests. State and local governments are battling over control of any settlement money before any national deals have been reached. In Oklahoma, the U.S. Centers for Medicare and Medicaid Services has told the state that the federal government is entitled to a portion of Oklahoma’s proceeds from its settlement with Purdue. Several local governments refused to participate in the lawsuit against Purdue so they could pursue their own, while others have criticized how most of the settlement money from that case is being spent. Q: When did the opioid crisis begin? A: By the early 2000s, the death toll from opioids was rising and there were growing numbers of thefts of drugs from pharmacies. In 2007, Purdue paid a $634 million fine and pleaded guilty to understanding the addiction risks of the drug. But the crisis only deepened after that. Prescriptions flowed freely at “pill mill” clinics, especially in Florida, where drug dealers would get drugs and spread them around the country. Q: How widespread is the problem? A: In recent years, opioid overdoses have been the nation’s largest cause of accidental deaths, ahead of even automobile accidents. The death tolls per capita have been the highest in places with the highest prescription rates. The Appalachian region has been hardest hit. Q: Have prescriptions stopped being given out so freely? A: Yes. States have used databases to track prescriptions and prescribers, pill mills have been shut down and prescribers have become more conservative in calling for the drugs since around 2011. Government guidelines and some insurance company standards have also been tightened. But as prescription rates started falling, death rates actually rose, with more addicts using deadlier illicit versions of opioids. Preliminary data shows that the death toll declined very slightly in 2018 for the first time since the crisis began. Q: What’s next? A: The first federal trial, involving claims from Ohio’s Cuyahoga and Summit counties, is scheduled for Oct. 21. The Cleveland-based judge in that case, Dan Polster, intends to use that as a bellwether, providing decisions that could apply to other cases. Polster is overseeing most of the opioid cases and is pushing the parties to settle. Other cases in state and federal courts could be tried as soon as next year.

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]

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