FISH FACTOR: Bristol Bay business boot camp set for September

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

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

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

GUEST COMMENTARY: A path forward to unify Railbelt electric utilities

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

GUEST COMMENTARY: State is committed to helping coastal fishing communities

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

Banks see positives in economy amid budget debate

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

Alaska sets another first in unmanned aircraft testing

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

Partnership mines old gold while reclaiming Fortymile

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

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

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

Drought and dry conditions impacting salmon across state

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

Initiative filed seeking $1 billion tax hike on oil industry

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

OPINION: Sound and fury with no assembly required

About the only good thing to say about the ongoing effort to recall Gov. Michael J. Dunleavy is that at least it won’t cost as much as the Mueller Report. In the end, though, it will end up being just as effective at reversing the outcome of an election. The opponents of the governor launched their effort on Aug. 1 to much fanfare and media coverage highlighted by a rally at Cuddy Park in Anchorage where a couple hundred people gathered just steps away from homeless camps as Democrat Rep. Ivy Spohnholz egged on the crowd with her fist raised like John Carlos and Tommie Smith. Lost in the excitement was much, if any, of a critical look at not only the high legal hurdles to overcome but the more relevant length of time this pointless fight is going to take. First, the recall pushers have to gather some 28,000 legitimate signatures to even deliver the petition to Lt. Gov. Kevin Meyer, who oversees the Division of Elections and is required to make the call on whether it passes legal muster. Meyer will rely on the advice of Attorney General Kevin Clarkson in deciding whether to certify the petition, with the odds of a positive recommendation somewhere in the neighborhood of President Donald Trump appointing Rosie O’Donnell as chief of staff. Once Meyer denies the petition for lack of meeting the legal standard for recall, the battle will move on to Superior Court with the losing party in that venue sure to appeal to the state Supreme Court. Should the Superior Court ruling go in the recall petitioners’ favor, they will be allowed to begin gathering the more than 71,000 signatures needed for a special election while the appeal is pending. Should it not, they won’t be able to start unless they ultimately prevail at the Supreme Court. Recent history on two high-profile cases that reached the Supreme Court show that even in an expedited timeframe the entire process would take nearly a year if not more to be resolved. When Sen. Bill Wielechowski, D-Anchorage, sued former Gov. Bill Walker in September 2016 for vetoing half of the Permanent Fund dividend, it was not until August 2017 that the Supreme Court issued its decision in favor of Walker. After former Lt. Gov. Byron Mallott denied the Stand for Salmon initiative from the ballot in September 2017 and was subsequently challenged in court, it was not until August 2018 that the final ruling was made. To think a case as monumental as the recall of a governor would take any less time is wishful thinking. As the petitioners note in their legal analysis, no recall petition against a statewide official has ever been certified in Alaska. Presuming the petitioners gather enough signatures in the next month or so, and they said they got to 18,000 within the first week, it likely won’t be until the fall until Meyer makes his decision and kicks off the court fight. Further presuming at least a year to receive a ruling from the Supreme Court, the soonest a recall election could take place would be sometime in early or mid-2021 depending on whether they are allowed to gather signatures while the appeal is pending based on how the Superior Court decides. That would be just more than a year away from the regularly scheduled gubernatorial election in 2022. Now we have entered the be-careful-what-you-wish-for stage of the recall effort for the petitioners. Should everything somehow go their way, a recall election is held and they are successful in giving Dunleavy the boot, they will have only succeeded in elevating Meyer to the governor’s office. Giving him more than a year to govern, including a legislative session, would provide Meyer an opportunity to present himself as a reasonable and drama-free Republican alternative much in the way the low-key former Gov. Sean Parnell benefited from simply not being Gov. Sarah Palin after her abrupt resignation in summer 2009 and he easily won election in his own right in 2010. That isn’t going to help Democrats win a statewide office for the first time since Mark Begich squeaked out a win over the unjustly convicted late Sen. Ted Stevens in 2008. Legal process aside, the recall petition itself is as thin as the paper it’s printed on even as the authors throw as much spaghetti at the wall as possible hoping just one piece sticks. When the top arguments by their own admission are Dunleavy’s failure to appoint a judge to the Palmer Superior Court within 45 days (he eventually did) and their unproven allegations of campaign finance disclosure violations, even they know they are throwing a Hail Mary hoping for a judicial miracle. If failure to follow a statute (cough, PFD formula, cough) and APOC violations are grounds for recall, then there are a lot of legislators who should be sweating. Further, the allegation of “incompetence” for an admitted error in a Medicaid funding veto is laughable. While the habitual rake-stepping of this administration has been described in this space as incompetent, that is not the legal standard for a recall. The petitioners even acknowledge this in their legal memo with the admission that the legal standard is “lack of ability to perform the official’s required duties,” which refers to situations such as medical incapacity. The leaders of this effort likely know all of this and understand the real purpose is to gin up enthusiasm for the 2020 legislative races. Those who actually believe this is going to work may also be interested in buying a bridge to Gravina Island. Andrew Jensen can be reached at [email protected]

Dunleavy, UA agree to three-year plan for spending cuts

Gov. Michael J. Dunleavy announced Aug. 13 that he intends to replace a one-year, $135 million budget cut for the University of Alaska system with a $25 million state funding cut this year and another $45 million cut over the following two years. Dunleavy unveiled the new, three-year plan at his office in downtown Anchorage alongside UA President Jim Johnsen and UA Board of Regents chairman John Davies. Dunleavy described it as a three-year agreement with UA regents that stemmed from numerous conversations. “We’re at a place today where I think we’re locking arms and moving forward,” Dunleavy said. The agreement, detailed in a two-page document signed by Dunleavy and Davies, marks a sharp reversal from the governor’s decision on June 28 to veto $130 million in funding for UA atop a $5 million cut approved by the Legislature. It includes a list of terms, including that UA will report its progress on certain priorities to the governor’s office and the Legislature over the next three years. The agreement comes more than a month into the fiscal year and about two weeks before the start of UA’s fall semester. University officials said Aug. 13 that they welcomed the smaller funding cut and the step-down approach, but the governor’s initial budget veto had also already led to damage at the public university system, including hampering its ability to recruit students and retain faculty. “But that’s done and so our task at this point is to look forward,” Johnsen said. A majority of state legislators have already agreed to a $25 million cut for UA, proposing to add back $110 million in state funding for the university system following Dunleavy’s veto. The Legislature included the proposal in a bill last month. But some legislators who support reducing UA’s budget cut, launched criticism Aug. 13 at the new, three-year agreement, saying Dunleavy had overstepped his authority. The governor’s office disagrees. “I think the regents, in the position they’re at, had a gun to their head and basically agreed to the words that were on the page. But the Legislature ultimately has the ability to fund the university, and I hope the governor will respect that,” Sen. Scott Kawasaki, D-Fairbanks, said. A multiyear path After announcing the three-year agreement, Dunleavy and Davies sat down next to each other on Aug. 13 and signed a two-page document that they called a compact. It outlines the terms of the agreement and the state funding amounts for UA’s operating budget: $302 million this year, $277 million next year and $257 million in fiscal year 2022. The agreement says Dunleavy agrees to $5 million in state funding for UA’s capital budget this year, and a not-yet-determined amount the following two years. It also says Dunleavy and UA will work together to “remedy the University’s land grant deficit.” It says UA must report its progress each year on a list of “strategic goals” and priorities such as reducing operating costs and administrative overhead as well as increasing research income and “structural consolidation and consideration of single accreditation.” Davies said he endorsed the compact. It provided UA with much-needed stability, he said. “One of the biggest problems has been the uncertainty,” he said. “I think that this agreement will provide a great deal of certainty so we can begin the process of moving forward together.” Davies said he expected regents to request the state funding amount detailed in the agreement over the next two years. Dunleavy’s press secretary Matt Shuckerow said the governor would then propose an annual budget based on those amounts. The doesn’t change the Legislature’s authority to appropriate funding from there, he said. Under the state’s constitution and state law, the Board of Regents suggests a budget to the Legislature each year, but legislators are the ones who set that amount. The governor may reduce that amount through line-item vetoes, but cannot increase that amount. Under the three-year agreement, Dunleavy “could choose to veto funding should amounts be appropriated beyond agreed upon amounts,” Shuckerow wrote in an email. ‘Working on this for some time’ Dunleavy had originally vetoed more than $400 million from the state operating budget on June 28 for the fiscal year that started three days later. That included erasing $130 million in state funding for UA, where he got his master’s degree, atop the $5 million cut approved by the Legislature. The total cut amounted to an unprecedented 41 percent state funding cut for UA, and nearly 16 percent of the university system’s total operating budget from the last fiscal year: $855.4 million. Dunleavy repeatedly said the vetoes were part of a two-year plan to balance the budget by cutting spending, and not by raising new taxes or reducing the Permanent Fund dividend. The vetoes prompted widespread protests, the launch of a recall effort and warnings of a recession. The Legislature then passed a bill reversing most of Dunleavy’s vetoes, including adding back $110 million in funding for UA. The bill set this year’s PFD at $1,600, instead of $3,000. That bill was sent to Dunleavy, who still must decide whether to approve the bill or veto some or all of it. Dunleavy’s announcement that he intends to accept the $25 million cut for UA follows two similar announcements: He has also walked back decisions to veto funding for early childhood education programs and an income-based senior benefits program. “It’s not my desire to cause angst or worry or turmoil,” Dunleavy said. “But the budget vetoes, in many respects, got us to where we are today, to be able to reduce this budget and then talk about what the budget can look like next year.” Dunleavy said the funding agreement with UA is not connected to the recall effort. “We’ve been working on this for some time,” he said. ‘A feeling of relief’ By the time Dunleavy announced the new three-year plan, planning was already well underway at UA for a $135 million cut. Johnsen had described the cut as “devastating” and “draconian,” and said it could result in the closing of campuses, slashing of degree programs and the elimination of at least 1,000 university jobs Already, the regents have taken the unusual step of declaring “financial exigency” in the face of a financial crisis, allowing them to more quickly cut costs, including laying off tenured faculty. Moody’s Investors Service has already downgraded UA’s credit rating, making bonding and borrowing money more difficult and expensive. Also, Johnsen is already drafting plans to consolidate to a single accredited university with multiple locations — a controversial proposal. The university system currently includes three separately accredited universities: the University of Alaska Anchorage, the University of Alaska Fairbanks and the University of Alaska Southeast in Juneau. There are also about a dozen community campuses and a Fairbanks-based statewide administration. Johnsen said Aug. 13 he continues to support consolidating the university system under a single accreditation. Regents would have to approve that plan. Regents will discuss consolidation at their meeting in September, and will also revisit financial exigency, Davies said. They could decide to reverse the declaration, he said. As for the previously announced furloughs, Johnsen said, the new funding agreement means about 2,500 UA employees will no longer have to take 10 days unpaid leave this year. Still, Johnsen and Davies underscored that $70 million is a significant budget cut. It follows about $50 million in state funding cuts over the last several years, Johnsen said. “It’s still a significant amount of money and it will require a significant amount of work,” Davies said. There will likely still be some layoffs, but far fewer than under a one-year $135 million cut, Davies said. Regents will try to minimize reductions felt by students, he said. “We’ve already started the process at looking at more administrative efficiencies, but that can only go so far,” Davies said. Maria Williams, a professor of Alaska Native studies at UAA who chairs UA’s Faculty Alliance, said this year’s smaller state funding cut has led to “a feeling of relief” after weeks of fear and uncertainty. But questions still remain. “It feels like I’ve been on a horrible, turbulent plane ride that I thought I was going to die on,” she said. “Now we’ve landed and we’re on the Tarmac and they won’t let us leave the plane.” Williams said she still has serious concerns about the future of the university system. She said she hoped regents reverse their declaration of financial exigency and decide against moving toward a single accredited university. Alex Jorgensen, a senior at UAA and student government executive, said he’s also relieved by the reduced state funding cut, but worries about the negative impacts of three years of budget cuts. “We may not have to completely gut academic programs in the spring semester, but in the long-run I think we’ll still see detrimental effects to public education,” he said.

Sockeye harvests wind down; pinks and chums slow going

As Alaska’s salmon fisheries transition away from sockeye and kings to pinks and chums, the harvest results so far look mixed. May, June and July are the main harvest months for sockeye salmon across Alaska, beginning in Prince William Sound and reaching a crescendo in Bristol Bay throughout July. The Alaska Department of Fish and Game forecasted a total sockeye harvest of 41.7 million sockeye salmon for the 2019 season. Some sockeye are still being harvested, but as of Aug. 11, the count stood at 53.7 million sockeye, more than 43.1 million of which came from Bristol Bay. Bristol Bay’s harvest blows away even the large harvest from 2018 of 41.7 million, though it didn’t quite reach the all-time record. The Prince William Sound harvest is about 2.5 million sockeye, and the Cook Inlet harvest is about 1.9 million as of Aug. 13. The Kodiak harvest was about 1.64 million as of Aug. 13. While Prince William Sound’s sockeye harvest is close to its preseason forecast, Upper Cook Inlet fishermen are about 1.5 million fish shy of their preseason forecast of about 3 million sockeye. Constrained by low late-run king salmon returns to the Kenai River, managers closed setnet fishing in the Upper Subdistrict on the eastern shore of Cook Inlet on Aug. 5 and Aug. 8, with a possibility of reopening if king salmon escapements improve on the Kenai. The closure continued Aug. 12 for Upper Subdistrict setnetters. The drift fleet was scheduled to fish its normal period. “Kenai River late-run king salmon escapement will continue to be monitored on a daily basis and if escapement projections estimate the SEG (sustainable escapement goal) will be achieved, the Upper Subdistrict set gillnet fishery may be reopened,” the closure announcement stated. The commercial closures to shield kings come at the cost of exceeding escapement goals in the Kenai River; as of Aug. 12, more than 1.7 million sockeye had passed the sonar in the Kenai, about 400,000 fish more than the upper end of the in-river goal and 500,000 fish more than the upper end of the sustainable escapement goal. The Kasilof River sonar has counted about 376,184 sockeye as of Aug. 11, greater than the upper end of the biological escapement goal for that river but still within the optimum escapement goal. And so far, pink and chum results across the state are tepid at best. The statewide preseason forecast predicted a rosy harvest of 137.8 million pinks and 29 million chum, which would have been a record chum harvest. Though pink harvest has been good in Kodiak so far — as of Aug. 13, fishermen there are on their way to the preseason forecast of 27 million with 14.4 million harvested so far — it hasn’t lived up to expectations in Prince William Sound yet. As of Aug. 12, only 17.6 million pinks had been harvested in Prince William Sound. At this point, nearly 25 million pinks would need to be harvested per statistical week through the end of the season to reach the forecast, and the odds of those numbers appearing are relatively low. Warm weather and drought conditions in Prince William Sound may be holding back escapements, though. Purse seine commercial fishery manager Charles Russell said the escapements of pink salmon into streams across the region have been delayed as fish shy away from the extremely warm water in creeks, waiting for temperatures to cool and rain to fall. “We were already in a drought scenario moving into the season, and that heatwave just exacerbated the situation,” he said. “In the low water and extremely warm water temps we were seeing around the sound, salmon were holding offshore. They didn’t have any urge to move into stream mouths like they typically do. It’s delayed the fisheries here. Obviously, we manage on escapement in streams, and if we don’t get escapement in streams, it’s hard to justify a fishery.” Catches are improving, though, after a slow start. The aquaculture associations have met their cost recovery goals and escapements are catching up, Russell said. However, with underperformance from the Solomon Gulch Hatchery — the run is estimated to finish at about 10 million to 12 million pinks as opposed to the 20 million forecasted — it seems unlikely that the area will reach its preseason forecast of 64 million fish, he said. Chum runs look likely to disappoint, too. Southeast Alaska’s salmon hatcheries had collectively projected about 10 million chum salmon to be harvested in that area, courtesy of a large parent year return. However, that run has yet to materialize, and at this point seems unlikely. As of Aug. 9, commercial fishermen had harvested about 2.5 million chum. “Based on our harvest so far, it looks like we’re going to have one of the lower harvests since the program for chum salmon began,” said Andrew Piston, a research biologist with Fish and Game’s Division of Commercial Fisheries in Ketchikan. “Over the last decade, (the chum harvest) averaged about 10 million, and the way things are shaping up, we’ll be lucky to get about half that.” It’s hard to say what happened to the chum salmon that were predicted to come back this year. The forecasts for chum are produced by the hatcheries, which collectively produce about 90 percent of the chum harvested in Southeast Alaska. The wild stocks are returning in decent numbers, but the hatcheries are having trouble harvesting enough chum, Piston said. Southeast is about on track to meet its forecasted pink salmon harvest, Piston said, but that wasn’t high to begin with — about 18 million pinks total. There has been very little opportunity in northern Southeast, which is divided roughly at Sumner Strait near Wrangell, but southern Southeast has harvested about 9 million pinks as of Aug. 12. The low abundance of hatchery chums wouldn’t change ADFG managers’ fishing strategies for the commercial fleet, Piston said; as long as the wild stocks are meeting their goals, they’ll continue to fish as normal. “We wouldn’t not let our fishermen fish on wild stocks because there aren’t enough hatchery fish,” he said. Though it’s struggling for pinks so far, Prince William Sound is doing just fine for chum salmon — about 82 percent greater than last year’s catch, and above the preseason forecast of about 2.8 million. As of Aug. 13, just shy of 5 million chums had been harvested in Prince William Sound, according to ADFG. Russell said the hatcheries were expecting a good harvest this year based on past returns, and the same pattern played out with chums as with pinks — many fish were caught milling around in the sound. As of Aug. 12, fishermen across the state had harvested just more than 120.7 million salmon. ^ Elizabeth Earl can be reached at [email protected]

FISH FACTOR: Some Chamber members oppose policies, but admit lack of engagement

The Alaska Chamber touts itself as “the voice of Alaska business” but seafood industry and coastal community members are largely left out of the conversation. The chamber isn’t entirely at fault; it appears that most of those members are not speaking up. Three cases in point. In February the chamber was one of the first to “applaud Governor Dunleavy for proposing a spending plan that matches current revenues.” In April the chamber testified in support of the Pebble mine draft environmental impact statement, or DEIS, “in the name of due process.” (The Pebble Partnership is a chamber member.) The chamber’s top federal priority is to “support oil and gas exploration and development in Alaska’s federal areas including the Outer Continental Shelf, National Petroleum Reserve-Alaska, Cook Inlet, and the Arctic National Wildlife Refuge.” But just about every Alaska coastal community strongly opposed Gov. Michael J. Dunleavy’s budget; likewise, they spoke out strongly against President Donald Trump’s administration plans for oil and gas development in Alaska’s offshore waters, and nearly all fishing interests have protested what they perceive as sloppy and biased science in the Pebble DEIS. In a canvassing of nearly 25 coastal chamber members and trade groups, not one said they were aware of those policy positions nor were they queried (including at Bristol Bay). “No, we were not contacted, period,” said Clay Koplin, Cordova mayor and chamber member. “We disagree with the state chamber’s executive committee or whoever formulated that. Granted, we seldom attend meetings,” he added. Ditto Kodiak Chamber Executive Director Sarah Phillips. “Our current membership with the Alaska Chamber of Commerce does not reflect agreement or alignment on political issues,” Phillips said. “I find it very unsettling,” said a spokesman for the Aleutian Pribilof Island Community Development Association which represents six remote communities. “We were not contacted by the chamber regarding the formation of its legislative priorities and policy positions,” said Doug Griffin, executive director of the Southwest Alaska Municipal League, which serves the Aleutian/Pribilofs, Bristol Bay and Kodiak. “SWAMC is not a very active member and I have not attended any annual meetings. I do not think we would have much impact, but perhaps we could at least provide a dissent on some of its positions. I think many of the chamber’s positions are misguided,” he added. “No contact” also was the response of chamber members Alaska Seafood Marketing Institute, United Fishermen of Alaska, Pacific Seafood Processors Association and At-Sea Processors Association, which commented that, “we do get minutes and position papers regularly with opportunity to provide input.” Alaska Chamber CEO Kati Capozzi was surprised at the responses and said the way in which positions and priorities are determined is “quite possibly the most democratic, egalitarian process of any statewide association that I’m aware of.” Every year an email goes out to all members in good standing advising them that the process is open and “it is the opportunity to have your voice heard,” she explained. Each fall, members gather at a policy forum to propose positions for the upcoming year. Based on submitted proposals, chamber members adopt positions on issues that impact Alaska’s economy and the board of directors select the top state and federal priorities. “Every position makes it to our membership at our policy forum,” Capozzi added. “You must be present to vote, but that’s when any member can vote to adopt a position or not. No matter how big or small a business is, it’s one member, one vote. Then we notify all members afterward and tell them what we will be championing for the next year. It’s really a unique process that helps us have a lot of credibility as we move to advocate for the positions that our membership has voted on.” For actions that fall outside of the fall voting time frame (such as the governor’s February budget debut and the window for commenting on the Pebble DEIS), Capozzi said the adopted positions provide a “blueprint that serves as my guiding light for the next year.” “Our February press release applauding the budget directly related to our top state priority to support reduction of spending to sustainable levels. We did not and will not come out in support or opposition to the Pebble project but we are constant advocates for due process,” she explained, adding that “I think that the positions that we come up with are very representative of the overall business community concerns. I don’t know how we can be more inclusive with our process, but a good point is being more communicative with the statements and positions we do come out with.” The Alaska Chamber claims it has “700+ members representing 100,000 employees and 30+ local chambers.” Associations, non-profits and businesses with annual gross revenues less than $1 million pay a $500 annual membership fee; others pay from $800 to $7,200 based on gross revenues. The seafood industry represents only about 1 percent of the membership and Capozzi said she would “love, love to see that number grow.” “I have strong relationships within that community and I hope to get as many of those friends in the industry more involved because the more involvement we have from the business community, the more diverse and better off our positions will be. I believe that firmly,” she added. Chamber members can submit their positions and priorities preferences through Sept. 6. The fall meeting, where attendees will vote, is set for Oct. 28-30 in Girdwood. Best fish messages Alaska’s seafood marketing messages are resonating with consumers and it’s helping to home in on how to persuade them to buy and eat more. “What we know now is that the consumer not only wants a product that is good for them, but good for the planet,” said Michael Kohan, technical program director for the Alaska Seafood Marketing Institute. ASMI pinned down that message from a Technomics Foodservice research survey that revealed that 35 percent of consumers are eating more seafood. “When we asked those consumers why, they actually identified aspects of Alaska’s seafood aspects or attributes found in our tag lines — wild, natural and sustainable,” she said at an Accelerate Alaska conference. “Wild” resonates in terms of quality, and “natural” was seen in Alaska’s pristine environment. Consumers said they want to be able to choose a pure source of protein as part of a healthier diet. “Sustainable” definitions vary by person and region, Kohan said, but origins and jobs are highly valued. “The U.S. consumers thought knowing where seafood comes from was important as well as by purchasing seafood they were supporting American jobs,” she said. Kohan added that ASMI believes the already winning “wild, natural and good for the planet messages” give Alaska seafood an advantage in world markets. They will build on the quality, nutrition and sustainability themes and “personalize” outreach by telling people why Alaska seafood is good for them and what body parts get the most benefit. She said that ASMI is becoming more involved in research that applies Alaska seafood to nutrition and healing. “For instance, ASMI is working with the industry to understand if omega 3 content found from DHA and EPA fatty acids in Alaska wild salmon is important or can affect the pain that is triggered by inflammation for breast cancer survivors,” Kohan said. ASMI also is striving to make full utilization of seafood a part of Alaska’s sustainability message by expanding markets for fish “specialty” products to pet food, nutraceutical and medical industries. ^ Laine Welch lives in Kodiak. Visit or contact [email protected] for information.

Movers and Shakers for Aug. 18

The Mat-Su Health Foundation has announced leadership changes for R.O.C.K. Mat-Su (Raising Our Children with Kindness). Kathryn Swartz will serve R.O.C.K. Mat-Su’s interim director for the next six months, and Lindsay Prunella has been promoted to the position of operations manager. Swartz comes to R.O.C.K. Mat-Su from her permanent position with the Mat-Su Health Foundation where she serves as special assistant to the CEO and board liaison. Swartz was previously a consultant for the World Bank. She received a Ford Foundation Social Justice fellowship and worked for the Cultural Heritage and Education Institute in Fairbanks. She earned a master’s degree in international development studies and anthropology from George Washington University and a bachelor’s degree in sociology/anthropology and Spanish from Kalamazoo College. Prunella has been with the R.O.C.K. Mat-Su staff since 2017 and was recently promoted to operations manager. Prunella was previously R.O.C.K. Mat-Su’s program coordinator. Prior to that she was employed as director of a community coalition and prevention specialist in Michigan. She was also a behavioral health clinician and coalition coordinator at Alaska Community Island Services in Wrangell. Prunella earned a master’s degree of social work from Loyola University and a bachelor’s degree from Michigan State University in interdisciplinary studies. The Alaska Seafood Marketing Institute has named two new directors. Megan Rider is the new domestic marketing director and Ashley Heimbigner is the new communications director. Rider joined ASMI in 2013, working with the international program, and most recently served as the domestic marketing manager. Prior to joining ASMI, the lifelong Alaskan worked in the Office of the Governor, as well as for a lobbying firm. The domestic marketing program is responsible for executing strategic Alaska Seafood promotions with foodservice and retail partners across the United States. Rider was named interim domestic marketing program director in November 2018. Heimbigner joined ASMI in January of 2018 as international marketing specialist. Prior to joining ASMI, Heimbigner worked as tourism and sales manager at Visit Anchorage, and also held the communications manager position at Alaskan Brewing Co. in Juneau. As communications director, Heimbigner will oversee the brand and messaging priorities of the whole organization, act as a spokesperson to press and trade media, and manage ASMI’s domestic consumer public relations, in-state and fleet communications. Heimbigner replaces Jeremy Woodrow, who was named executive director in June of this year. Mat-Su Health Foundation Vice President of Programs Dr. Melissa Kemberling has been selected for the prestigious Change Leaders in Philanthropy Fellowship. This national program is conducted by Grantmakers for Effective Organization. It is a 10-month peer cohort program for senior executives who are responsible for developing and guiding key change efforts in their organizations. In her role as vice president of programs, Kemberling oversees grants, scholarships, and community systems change, and manages research and evaluation for the Mat-Su Health Foundation. She began her career as a pediatric physical therapist in the Neonatal Intensive Care Unit at Boston City Hospital in Massachusetts, as well as working in local schools. Kemberling holds a Ph.D. in sociology from Tulane University and a master’s degree in public health from Columbia University. During graduate school she worked as an education director at a Head Start Program in northern Manhattan and was a Center for Women in Policy Fellow at SUNY Albany. Her career in public health began with international work evaluating HIV/AIDS prevention efforts in Central America, as well as health clinics in Trinidad and Tobago. When she first arrived in Alaska she taught in the Sociology Department at UAA. She also spent six years at the Alaska Native Epidemiology Center at ANTHC where she served as the senior epidemiologist.

Spot-market LNG prices have buyers seeking more options

It’s just shy of six years ago when spot-market prices for liquefied natural gas in Asia hit a record $20 per million British thermal units and a cargo aboard a standard-size LNG carrier cost almost $65 million. That same volume of LNG would cost less than $13 million today, or around $4 per million Btu. Spot-market buyers paid more than long-term customers during the post-Fukushima, tight-supply price spikes of 2012-14, but the roles are reversed during today’s weak market conditions. It’s a matter of supply and demand driving spot prices, while long-term LNG contracts are linked to oil prices that are detached from LNG market conditions. In July, Japanese utilities paid an average $4.70 per million Btu for spot LNG cargoes amid an oversupplied market, according to trade ministry data, about half the price those same utilities paid for gas under long-term contracts linked to oil prices. Tokyo Gas and electric utilities in Hokkaido, Tohoku, Kyushu and Hokuriku regions have all said they are looking at ways to take advantage of cheaper spot LNG, Reuters reported Aug. 9. But they are limited in the number of cargoes they can take because most of their supply comes under long-term take-or-pay contracts. Oil-linked LNG contracts around the world vary, ranging from about 11 to 15 percent of the price of a barrel of crude averaged over the past six months to five years. When oil was $120 several years ago, contract buyers paid dearly for their LNG. But nothing linked to oil can compete with $4 spot-market gas. The low prices are pushing utilities in Japan to get more aggressive in the price reviews allowed under their long-term contracts, according to multiple news reports. The five- or 10-year reviews are built into many of the contracts. “Price-review negotiations are becoming more intense,” Thanasis Kofinakos, head of Wood Mackenzie’s Asia-Pacific gas and LNG consulting, told Reuters in early August. According to Reuters, Japan’s second-biggest city-gas company, Osaka Gas, is in arbitration with ExxonMobil’s LNG project in Papua New Guinea after failing to win a reduction in prices during a price review. However, there is a risk in negotiating for a new pricing structure in long-term contracts — what happens the next time the market flips and oil-linked LNG is cheaper than spot sales? Utilities would need to accept the risk that spot prices could surge in tight markets, Hirofumi Sato, Tokyo Gas general manager of financial management, said during an earnings news conference. Besides, it’s not easy for the utilities to gamble on market pricing swings, as they have long favored stability of supply over price. Still, Tokyo Gas is looking for ways to take advantage of cheaper spot prices, including buying up more gas and storing it for the peak winter season, Sato said. Another tactic is to scale back purchases within the limit of what’s allowed under their contracts. Some buyers in Japan and China are seeking to delay shipments or reduce volumes under their contracts from the Ichthys LNG project in Australia, an Inpex executive told Reuters Aug. 8. Inpex is the Japanese oil and gas producer that operates Ichthys. If the money-saving spot prices persist, India’s top gas importer Petronet LNG will look to renegotiate more of its oil-linked supply deals, its managing director said Aug. 8. “You don’t have much of a choice,” Prabhat Singh told Reuters. Petronet is paying $8.25 to $9.50 per million Btu under its long-term contracts with Qatar’s RasGas and for cargoes from ExxonMobil’s share of the Gorgon project in Australia, Singh said. The company renegotiated new price deals in other contracts in 2015 and 2017. No doubt Petronet is aware that Indian Oil Corp. bought a spot cargo for delivery in the second half of August from commodity trader Trafigura at $3.69 per million Btu. China National Offshore Oil Corp. bought a cargo for delivery in early September from trader Vitol at $3.90. As new LNG supply comes into the global market amid weaker demand growth, the volume of spot cargoes is growing, adding to the soft prices. Spot- and short-term trades comprised one-third of the market in 2018, the International Group of LNG Importers said in its 2019 annual report. It was 1.5 percent in 1997 and 8.9 percent in 2003. There is so much low-cost LNG available that traders are starting to look at booking vessels to store LNG at sea as they bet on winter demand to boost prices, according to multiple news reports. If October and November spot prices are 90 cents higher than August prices, “floating storage is starting to make sense … and at $1.50 people will be jumping on it,” a Singapore-based LNG trader told Reuters. Another factor is the steady return of Japan’s nuclear-power fleet over the next three years. Nine nuclear plants are back online, with 14 more expected in the next few years, leading a shift in demand away from imported LNG. S&P Global Platts estimates the issue of over-contracting for LNG will emerge this year among Japanese utilities. The situation could peak in 2020, with the over-contracted volumes reaching 19.5 million tonnes. Europe is buying more LNG, but has its limits. There is increasing concern Europe’s gas storage could hit “tank tops” by the end of summer, putting more downside pressure on prices, Reuters reports. Storage sites at some key hubs in the Netherlands and Austria are already more than 95 percent full, Refinitiv data shows. U.K. and Dutch gas prices, benchmarks for European gas sales, have lost half their value since last September. They hit 10-year lows in June, knocked down by an influx of LNG imports and pipeline gas from Russia. Continued oversupply, coupled with new liquefaction capacity coming online in the U.S., Australia, Russia and Mozambique, could cause developers to rethink their schedules. “We may see some delays in final investment decisions in new LNG projects given the current market environment,” Inpex Senior Managing Executive Officer Masahiro Murayama said in an earnings call. 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.

Report concludes private-Medicaid doable, but costs uncertain

A Medicaid overhaul analysis commissioned by Gov. Michael J. Dunleavy’s administration concluded Alaska could see benefits from shifting a subset of its Medicaid population to private insurance, but the details of potential cost savings and whether or not the change can be implemented remains unclear. Boston-based Public Consulting Group Inc.’s 48-page Alaska Proof of Concept Analysis Medicaid report says the public policy firm believes there is “a plausible path to approval of a ‘Private Option’ waiver for Alaska” from the federal Centers for Medicare and Medicaid Services, or CMS, based on similar approvals for other states. While federal Medicaid officials could be amenable to such a plan, Alaska Department of Health and Social Services leaders would likely have to establish a new pricing system for services provided to Medicaid recipients on private insurance, according to the report. Additionally, the state would probably need to bring at least one other private insurer — and competition — into the individual health insurance market to gain CMS approval, it states. Currently, Premera Blue Cross Blue Shield of Alaska is the only private insurer in Alaska’s individual health insurance market. Under the private-Medicaid concept, a group of relatively low-utilization Medicaid recipients would be moved to private insurance plans and the state would subsidize the premiums and other out-of-pocket expenses paid by those individuals. A new “reference-based pricing” mechanism would be necessary to curb reimbursement costs for procedures paid for by the state through a private insurer that were previously paid at Medicaid rates. According to Public Consulting Group, which cited estimated figures from other recent reports on Alaska’s Medicaid program, Medicaid reimbursement rates in the state are approximately 126 percent of what Medicare pays for particular services. However, commercial insurers in the state pay providers on average 353 percent of Medicare, rates that would significantly increase Medicaid costs to the state. To counter that, state officials could implement reimbursement rates specific to the Medicaid population moved to private insurance, according to the report, but also not without potential consequences. “In selecting targeted (reference-based pricing) reimbursement rates, Alaska will need to consider trade-offs between cost savings and the impact those savings may have on provider network access,” the report states. A 2016 study, known as the Milliman report, and done when state lawmakers were debating a suite of Medicaid reforms, concluded that shifting low-income adults enrolled under expanded Medicaid coverage to the individual private insurance market would cost the state an additional $57 million per year growing to $97 million per year over the first five years of the plan. Milliman Inc., a Seattle-based actuarial and consulting firm, submitted a proposal for the latest study but was not chosen by DHSS officials. The contract for the Medicaid analysis was for up to $100,000. DHSS officials requested the report this past spring, which was obtained by the Journal Aug. 13 through a public records request, after the Dunleavy administration initially proposed cutting $225 million from the state’s Medicaid budget in February. Office of Management and Budget officials at the time acknowledged the $225 million proposed cut was an arbitrary figure needed to reach an overall balanced state budget and DHSS leaders said in March they could cut about $100 million from Medicaid this year largely through regulatory actions, such as cutting provider reimbursement rates. The Legislature ultimately cut the state’s Medicaid services appropriation by about $70 million to $493 million, and Dunleavy vetoed another $50 million before signing the budget. Many legislators were critical of the veto because short-funding the program on the front end without major changes to Medicaid will likely necessitate supplemental appropriations later in the fiscal year — a scenario that has played out in recent years. While overall Medicaid spending in Alaska continues to rise, the state’s part of that bill is shrinking. According to the Legislative Finance Division, overall spending on Medicaid in Alaska has increased from $1.7 billion to more than $2.3 billion since fiscal year 2015, but the state’s portion of that has actually gone down from $724 million in 2015 to $677 million in the just-ended fiscal year 2019, which includes other services such as behavioral health as well as a $15 million supplemental budget request. The Dunleavy administration has also suggested shifting the state’s federal Medicaid funding to block grants as a way to limit overall costs. Public Consulting Group recommended a “global cap” to self-impose spending limits while giving the state flexibility in how it would stay under the cost cap. Doing so could also help the state offset any extra costs from the private insurance option by using a portion of the expected federal savings to cover higher reimbursement rates, according to the report. Any such changes to Alaska’s Medicaid program would require CMS approval. Elwood Brehmer can be reached at [email protected]

International issues boost premium for Alaska oil

Sanctions against Iran and contaminated oil from Russia appear to be giving Alaska a small but much-needed financial boost. Alaska North Slope crude oil is bucking a longstanding trend and is now trading at a premium to Brent crude, a leading benchmark price followed closely by global oil traders. The Brent benchmark originates from London with oil largely sourced from North Sea fields. Alaska North Slope oil has sold for a premium to Brent in every month since last November except for May, when Brent averaged 1 cent more per barrel. Since May, the daily average Alaska price premium has gone from $1.28 per barrel in June to $1.96 per barrel so far in August, according to the Alaska Department of Revenue. The spread peaked on July 9 when Alaska oil sold for $3.25 per barrel more than Brent-priced crude. For years, Brent crude consistently sold for a higher price than Alaska oil. The Brent premium to Alaska oil has typically been in the $1 to $2 per barrel range, but hit a near-term peak in February 2015 when Brent oil sold on average for $4.80 per barrel more than Alaska North Slope crude. More recently, in August 2016 Brent sold for $2.99 per barrel more than Alaska, according to Alaska Department of Revenue data. At that time Alaska oil was also selling for slightly less than West Texas Intermediate — the benchmark for Lower 48 oil — which was also bucking tradition. Over the previous five years, Alaska North Slope crude has sold for a significant premium to West Texas Intermediate. The Alaska premium over WTI peaked at $10.04 per barrel last February and has been more than $5 per barrel for more than a year. Alaska oil is traded on its own price for a variety of reasons, but a major driver is that the vast majority of shipments from Valdez are sent to West Coast refineries. Transportation constraints limit the amount of oil produced east of the Rocky Mountains that can be sent west. That soft barrier has led to the development of ostensibly two oil markets in the U.S. Economist Ed King, who recently served as the lead economist in Gov. Michael J. Dunleavy’s administration, wrote on his firm’s website July 23 that a $3 premium to Brent — going from $2 less to $1 more — correlates to “an extra $100 million or so of financial gain” to the state through extra royalty value and tax collections. According to Alaska Tax Division Director Colleen Glover, every dollar change in the price of Alaska North Slope crude equates to roughly $42 million more, or less, to the state treasury over the fiscal year at the current price band of $60-$65 per barrel. Alaska oil sold for $62.82 per barrel on Aug. 13, according to the state Department of Revenue. Economists say it’s often difficult to pinpoint a specific reason as to why one oil price changes in relation to another, but according to American Petroleum Institute Chief Economist Dean Foreman, the new Alaska premium over Brent oil correlates to increased exports to South Korea from the Valdez oil terminal at the end of the Trans-Alaska Pipeline System. Foreman said in an interview that trade data compiled by the U.S. Census Bureau indicates South Korean oil buyers purchased 42 percent more oil in June than they did a year prior and Bloomberg reported July 23 that two 1 million-barrel capacity tankers —ConocoPhillips’ Polar Adventure and BP’s Alaskan Explorer — were delivering oil to Yeosu, South Korea, last month after being filled in Valdez. BP Alaska officials declined to comment on the exports; ConocoPhillips Alaska spokeswoman Natalie Lowman wrote via email that the company recently sold a cargo of Alaska oil to customers in Asia, its first export of Alaska oil this year. Longtime Alaska petroleum economist Roger Marks surmised that traditionally low North Slope production during the summer months could be straining the ability of West Coast refineries to find adequate supplies, which could contribute to the price premium as well. Foreman noted there is rarely a single explicit answer as to why oil is traded or priced as it is, but he said South Korea is likely buying more Alaska oil because the country’s typical supplies of light crude from Iran and Russia have been choked. President Donald Trump re-imposed economic sanctions on Iran last November that restricted its ability to export oil after his administration chose to withdraw from the Iranian nuclear deal the Obama administration agreed to in 2015. South Korea was one of a handful of countries that the Trump administration granted waivers to, allowing buyers to keep purchasing Iran oil without repercussions until those waivers expired at the end of April. Additionally, about 36 million barrels of Russian oil were contaminated in spring by organic chloride, which curbed Russia’s oil exports and further limited South Korea’s options, Foreman said. “If you increase by 40 percent the amount of crude that South Korea wants, if you have existing supply channels (of Alaska North Slope crude) going into California, it’s going to have to compete against that and that would be the process of bidding the price up,” Foreman explained of the Alaska oil premium over Brent. “We’re talking about 2,000 to 3,000 barrels a day; this is not huge volumes but it is enough on the margins that it would be one source of a possible premium leading to higher prices on the margins.” Glover, of the Tax Division, said via email that China is also purchasing Alaska oil and added that slumping production from Venezuala and output cuts by OPEC members — aimed at increasing oil prices globally — have likely boosted demand for Alaska oil domestically as well. According to Glover, approximatley 40 percent of oil processed in California refineries was sourced from OPEC members in 2018. "The story just boils down to ANS crude being worth more to the U.S. west Coast and Asian refineries," she wrote. Foreman noted that Alaska oil has a similar “weight,” or gravity, to Iranian and Russian crudes, making it a viable substitute for South Korea refineries designed to handle oil from those areas. “ANS was obviously an attractive and available source for (South Korea) to want to take more year-over-year,” Foreman said. Elwood Brehmer can be reached at [email protected]

GUEST COMMENTARY: Boom or bust in Adak? Politics will decide

Adak is 1,200 miles west of Anchorage in the Aleutian Islands in the center of some of Alaska’s last “derby style” fisheries. Now, a great political struggle between some large Seattle-based corporate fishing companies and this Aleut community will determine whether Adak and it’s value-added approach to seafood development survives or if these valuable Alaska fisheries resources are simply added to the portfolios of the consolidated fishing companies. These large fishing companies already have exclusive Bering Sea and Aleutian Islands fishing privileges with an aggregate value in excess of $2 billion. In contrast, if Adak and Alaska lose this struggle, the community is not likely to survive. Almost everyone agrees there is an emergency. Without a regulatory or legislative fix by January the local shore-based fleet will start departing the region; markets, jobs and investments will be lost and the collapse of Adak will begin. But a few well-financed companies are working to defeat the fix at every turn. A brief history For at least 8,000 years Aleuts relied on Adak for trapping, hunting and fishing, establishing both permanent and later seasonal settlements. This all changed when the U.S. entered World War II when it built both Army and Navy facilities on Adak and terminating any further use by the Aleuts. At its Cold War peak, Adak was home to more than 6,000 military personnel and their families. In 1997 the military ended its presence on Adak and in 2004 some portions of the island were transferred back to the Aleut Corp. Throughout the late 1990s and early 2000s, the North Pacific Fishery Management Council rationalized most of the great Bering Sea fisheries (halibut, sablefish, pollock, crab and several species of groundfish), which created world-class sustainable fisheries and gave rise to a consolidated, globally competitive fishing industry. Because this all happened before portions of Adak were handed back to the Aleut Corp., the community missed out on these programs. Starting on 2008, the North Pacific Fishery Management Council and the State of Alaska began developing programs to protect Adak, Atka and the western Aleutian Islands region from the excess capital and fishing power of the newly-created fishing companies. In 2016 the council approved, and the National Marine Fisheries Service implemented, a new regulation known as Amendment 113. This regulation ensures that communities in the western Aleutian Islands region have some access to Pacific cod as an economic foundation, by designating that a small portion of the Aleutian Islands cod resource be delivered to any shore-based processor operating in the western Aleutian Islands region during a specified period of time. This is similar to other programs designed to protect other Alaska coastal communities throughout the ‘90s and early 2000s. Amendment 113 had an immediate, positive impact: attracting a new processor and millions of dollars of investment to Adak, stabilizing the local economy and the school. In response, the Seattle-based companies and their associations (United Catcher Boats, Groundfish Forum, Katie Ann and B&N Fisheries) filed a lawsuit against Amendment 113 in Washington, D.C., District Court; far from Alaska, where their chance of getting a judge with little or no understanding of Alaska fish policy was nearly a sure thing. Today By late 2017, the new Adak processor, Golden Harvest Alaska Seafoods, had stabilized the local economy and the school, had invested millions of dollars in processing infrastructure and housing, and developed new Alaska seafood products (fresh and live crab, fresh Pacific cod and halibut fillets; custom package portions for Costco, Whole Foods and other major West Coast retailers). The development of these markets and products is due in part to the former military airport runway, which allows the local processor to ship fresh and live product using high volume cargo planes and create hundreds of new jobs in Alaska and Washington state. Then, this March, the D.C. District Court ruled against Amendment 113. In its opinion, “… the Service (NMFS) did not exceed its statutory authority … (but) the Service failed to demonstrate that the amendment satisfied the requisite standards for such regulatory measures…” The immediate effect was to vacate Amendment 113 and put Adak and the entire western Aleutian Islands region at risk. The long-term effect is to endanger the North Pacific council’s ability to provide protection to Alaska communities, including programs already in place to ensure other Alaska communities have reasonable access to fish in their region. Seeing the far reaching damage to council authority and the State of Alaska’s efforts to ensure its coastal communities had reasonable access to fish, one of the four original plaintiffs (B&N Fisheries) immediately dropped from the lawsuit and expressed its support for a regulatory or legislative fix to Amendment 113. The State of Alaska quickly issued a letter expressing the need for “…enactment of federal legislation…” and the North Pacific Fishery Management Council issued a letter to the Department of Justice requesting a court appeal, finding that “…deliveries of Pacific cod to the AI (Aleutian Islands) shoreside processors is vital to the economic health of AI communities.” As recently as Aug. 1, the Alaska congressional delegation, led by Sen. Dan Sullivan, was working to reimplement Amendment 113 through the federal legislation. This legislation — which is precisely what the state requested — was blocked by at least one of the remaining plaintiffs thorough a Washington state senator. Given the political discord in Washington, D.C., it will be increasingly difficult to accomplish the fix through legislation. The Aleut Corp., the City of Adak and a number of other entities (including B&N Fisheries) have also filed an Emergency Rule petition with the Secretary of Commerce to ensure the 2020 season for Adak, which starts in January. However, the remaining plaintiffs have worked to defeat this approach as well. In response to the court opinion, the council itself is expected to start working on a new regulatory package in October, but that process will take at least three years — perhaps too long for Golden Harvest Alaska Seafoods and its local fleet to survive. Almost everyone agrees there is an emergency. The North Pacific council — with members from Alaska, Washington state and Oregon — spent more than 10 years developing Amendment 113. But a few well-capitalized companies are now working hard to defeat the Alaska community protections that it provides. Without strong political pushback, Adak in particular and the western Aleutian Islands face an economic collapse in the middle of some of Alaska’s most abundant fishing grounds. ^ Clem Tillion is a retired commercial fisherman, a former Alaska state legislator and past chair of the North Pacific Fishery Management Council.


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