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 www.alaskafishradio.com 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.

Court fight over King Cove road enters third round

The battle over a proposed emergency access road through the Izembek National Wildlife refuge is headed back to the federal court system for a third time. A consortium of Alaska and national conservation groups again sued Interior Department leadership Aug. 7 over a land exchange agreement signed with King Cove Corp. that would allow the completion of a road through currently wilderness-designated Izembek lands. The lawsuit comes less than five months after the same group won a nearly identical suit when U.S. District Court of Alaska Judge Sharon Gleason threw out a January 2018 land exchange signed by former Interior Secretary Ryan Zinke. Gleason concluded Zinke didn’t sufficiently justify his rationale for approving the land swap, which went against numerous prior agency decisions on the longstanding issue. Most notably, in 2013 then-Interior Secretary Sally Jewell nixed a land swap between the federal government, the State of Alaska and King Cove Corp. approved by Congress in 2009 that would have cleared the way for a road through Izembek to link King Cove with the nearby village of Cold Bay and it’s all-weather airport. Jewell concluded — following a recommendation from U.S. Fish and Wildlife Service officials — that the road would have unacceptable impacts on the refuge and the world-renowned gatherings of migratory birds that use Izembek’s habitat each year. The conservation groups also argued Zinke did not follow a process for disposing of Alaska conservation unit lands prescribed in the 1980 Alaska National Interest Lands Conservation Act when he made the deal. Opponents of the road largely insist building it would set a terrible precedent of development on land previously designated by Congress as wilderness, one of the highest land preservation classes available. “This deal violates the same laws as the first one and we’re prepared to continue to fight to protect this irreplaceable wilderness. This is another Trump administration public land giveaway that breaks multiple laws and dishonors the public processes that go into protecting the health of the lands, waters and wildlife of the National Refuge and Wilderness System,” said Trustees for Alaska attorney Bridget Psarianos, who signed the 42-page Aug. 7 complaint. Led by Sen. Lisa Murkowski, advocates for the 11-mile segment that would complete an approximately 30-mile road, argue it would provide a safe and reliable way for residents of King Cove — a village shrouded by mountains with notoriously bad weather — to reach Cold Bay’s airport and its 10,100-foot runway. The Cold Bay airport was originally built as a military airfield in World War II and has occasionally been used by commercial jetliners needing to make emergency landings. This time, Interior Secretary David Bernhardt quietly signed a land swap deal with King Cove Corp. July 3 after company President Dean Gould sent a letter and draft agreement to him May 21. The land deal Bernhardt signed is strikingly similar to what Zinke approved less than a year-and-a-half prior but it does not cap the federal government’s land conveyance to 500 acres or explicitly prohibit the proposed gravel road from being used for commercial purposes. According to Bernhardt’s agreement, the land swap would be an equal-value trade not subject to acreage limitations. However, King Cove Corp. would agree to relinquish its rights to 5,430 acres of land it had selected within Izembek under the Alaska Native Claims Settlement Act but has yet to be conveyed. The Native village corporation would still have rights to other yet-to-be-conveyed selections outside of the refuge. Bernhardt also attached a 20-page memo to the latest agreement that details his rationale for the decision. In it, he asserts that there have been more than 70 medevacs out of King Cove to hospitals often in Anchorage or Seattle since Jewell made her decision in 2013 and 21 of those were conducted by the Coast Guard at a cost of roughly $50,000 per mission. Bernhardt also wrote that Jewell in 2014 committed that Interior would work to find alternative emergency transportation options, which spurred a 2015 U.S. Army Corps of Engineers study of a possible King Cove-Cold Bay ferry, King Cove airport upgrades and a helicopter shuttle, but to-date has not amounted to much more. That study concluded that a ferry and two terminals would be more than 99 percent reliable but would cost between $30 and $42 million to build, according to Bernhardt. The State of Alaska estimates the road would cost about $30 million to build. He added that since the report, Aleutians East Borough officials, strong advocates for the road, have said they don’t intend to develop a landing craft. The borough previously operated a federally funded hovercraft as a means of emergency transportation during bad weather to Cold Bay but cited high operating costs and reliability concerns when that operation was scrapped. Bernhardt also noted in the memo that the State of Alaska is instituting drastic cuts to funding for the Alaska Marine Highway System, although it’s unlikely the state would operate a King Cove-dedicated ferry. The Corps of Engineers determined expanding King Cove’s small airport or using a helicopter to be more expensive and less reliable options. Additionally, he wrote that the land exchange agreement is just that; any decision to build a road would be up to King Cove Corp., while state officials have expressed a willingness to fund the construction. “Secretary Jewell placed greater weight on protecting ‘the unique resources the Department administers for the entire Nation,’” Bernhardt’s memo concludes. “I choose to place greater weight on the welfare and well-being of the Alaska Native people who call King Cove home. I value the well-being of an entire community over the impacts derived from the change in ownership of these various parcels of property which are an incredibly small percentage of Alaska’s Wilderness. Although it is not a decision I take lightly, it is one that I believe best serves the public interest, my responsibilities and humanity.” The Agdaagux Tribe of King Cove sued Jewell in 2014 to get her decision to deny a land swap overturned. However, U.S. Alaska District Court Judge H. Russel Holland dismissed the lawsuit the following year, ostensibly ruling that although the tribe disagreed with Jewell, she made the decision within the bounds of applicable federal laws and regulations. Elwood Brehmer can be reached at [email protected]

Dunleavy signs second, funded capital budget with vetoes

Gov. Mike Dunleavy signed the capital budget Thursday afternoon during a brief and somber ceremony at the Associated General Contractors of Alaska headquarters in Anchorage. The bill signing came on the heels of the news that state Sen. Chris Birch, R-Anchorage, had died unexpectedly late Wednesday. “Today is cause for celebration but it’s a tempered celebration with the loss of Sen. Chris Birch yesterday. It was a shock to all Alaskans. It was certainly a shock to us,” Dunleavy said. In signing the capital budget, Senate Bill 2002, the governor restored roughly $115 million of funding from various state accounts for programs such as Power Cost Equalization, which subsidizes high power costs for rural residents, the Alaska Performance Scholarship and the University of Washington medical school partnership Alaska participates in with other western states known as WWAMI. “Today’s action represents only one part of the equation — a properly funded capital budget that we see as significant progress for fulfilling our commitments to Alaskans, encouraging growth within our economy, and working together on moving forward,” Dunleavy said in prepared remarks. The funding for those programs and others had been moved into the state’s $1.9 billion Constitutional Budget Reserve fund on July 1, as required by law, but lawmakers initially failed to muster the votes needed to perform what has been dubbed the “reverse sweep” to pull the money back out of the budget reserve so it can fund the various programs. While the reverse sweep vote historically has been a noncontroversial technicality, accessing the Constitutional Budget Reserve, or CBR, requires a three-fourths supermajority affirmative vote from both the House and the Senate. House minority Republicans at the time refused to approve the reverse sweep until lawmakers passed a $3,000 per person Permanent Fund dividend. Dunleavy first signed the $1.2 billion capital budget July 8, but that version of the key spending bill was only partially funded because it largely relied on funding from the CBR and lawmakers in the 40-member House couldn’t muster the 30 votes needed to access it. The capital budget primarily funds infrastructure projects for the 2020 state fiscal year that began July 1. There was also much concern amongst legislators that further delay in passing a fully funded capital budget could cause the state to miss out on roughly $1 billion in federal funds for numerous programs that require a state match if it was not passed by the end of July. For example, $73 million in state matching funds in the 2020 budget unlocks approximately $750 million in federal transportation money for road construction and airport improvement projects across the state. However, Sen. Dan Sullivan’s office indicated to the Anchorage Daily News after discussions with federal officials that the capital budget was not as time-sensitive a matter as once thought. Still, the Senate approved the second iteration of the capital budget July 20 on a 19-0 vote and by the House July 29 on a 31-7 vote. Dunleavy did not sign the first capital budget without vetoes to the tune of $10.6 million and the second go-round was no different. The governor vetoed more than $34.7 million from part or all of 26 line items in the budget bill, including $5 million for the Alaska Housing Finance Corp.’s popular home weatherization program. Dunleavy also vetoed $10 million in statewide addiction treatment facility matching grant funding, cut $3.6 million from AHFC’s Homeless Assistance program and $70,000 for cameras in Soldotna Police patrol cars, among other spending reductions. Dunleavy vetoed $444 million from the state operating budget June 28, a move intended to provide more money for PFDs that also drew sharp criticism from across the state. On the vetoes, he said during the capital budget signing that a sudden decline in oil prices — from about $85 per barrel before last year’s election to less than $60 today — necessitated significant reductions. “Had (oil) held at $85 we’d probably be having a very different conversation in Alaska, at least for a while,” Dunleavy said. The majority of legislators have pushed for modifying the PFD formula instead of significantly cutting state services, while Dunleavy has long championed the current PFD and it’s that disagreement that has led to the current, prolonged fiscal debate. Anchorage Democrat and Senate Minority Leader Tom Begich called the capital budget vetoes "truly antithetical" to the governor's priority to improve public safety in Alaska in a statement following the budget signing. "This was a bare-bones capital budget to bring in federal dollars and help alleviate some of Alaska's infrastructure needs and to keep Alaskans working. It was carefully crafted with the entire Legislature's input, which is why it passed with significant support — twice," Begich said. "I'm disappointed in Governor Dunleavy's acitons today, and they will only hurt our economy and make Alaskans less safe." Dunleavy stressed that his vetoes are not intended to harm Alaskans, as he said has been suggested. Rather, “What’s going to harm Alaskans is to pretend we have no budget deficit,” he said. Dunleavy did not take questions from reporters after making his comments. The $4.4 billion operating budget passed by the Legislature left the state with roughly a $600 million expected surplus at the time but did not appropriate funding for PFDs. Lawmakers officially sent House Bill to Dunleavy Wednesday to pay PFDs of approximately $1,600 per person and restore most of the funds he vetoed from the operating budget.  A statement issued Tuesday by Dunleavy’s spokesman Matt Shuckerow says the governor will “make a determination on a certain number of additions to the budget, but he largely considers a vast majority of the (fiscal year 2020) budget settled." It’s not known when or if he will sign HB 2001.   Elwood Brehmer can be reached at [email protected]

Sen. Birch passes away at age 68

Chris Birch, a longtime Anchorage Assembly member who shifted to the Legislature in 2016, died suddenly Wednesday at the age of 68. He was driven to the Anchorage Fire Department station on O’Malley Road around 7 p.m. and taken to the Providence Alaska Medical Center from there. “It was immediately determined he did not have a heart attack and as they were administering tests to determine the cause of the pain, he went into cardiac arrest and passed away from an an aortic dissection, a torn or ruptured aorta,” said the statement, which was written by Birch’s son Logan, his wife, Pam, and daughter Tali. The family is devastated, they wrote. “The same optimistic, level-headed, steadfast, honest, gregarious, and positive public persona that so many of you knew, was the exact same husband, father, grandfather, brother, uncle, and friend that he was to all of us. He was the ultimate cheerleader and it is difficult to imagine this world without him.” Birch, a Republican, was in his first term as a state senator and served as chair of the Senate Resources Committee. He was an avid hiker described as very fit by friends, who said that made his death all the more shocking. His death was confirmed Thursday morning by the Alaska Senate majority. Senate President Cathy Giessel, R-Anchorage, offered condolences to the Birch family. “This is a devastating loss to our state,” Giessel said in a statement issued Thursday morning. "Chris was a good, principled man of character, one who treated everyone with dignity and respect. You could always count on him to stand up for what’s right, regardless of the political consequences. His absence in the Capitol will be keenly felt by all who had the privilege to know him.” Anchorage Republican Sen. Natasha von Imhof in a statement described Birch as her colleague, hiking partner and “dear friend,” saying “I will miss him deeply.” His passing “came as a shock to us all,” von Imhof said. “He was extremely fit, in both mind and body. Chris never met a hiking trail he didn’t like and could often be found on top of a mountain range, rain or shine. He carried that same mindset to the Senate floor and didn’t shy away from the tough topics. Instead, he worked hard for Alaska’s best future, while always maintaining a positive outlook.” Other legislators expressed their condolences and surprise. Sen. Shelley Hughes, a Palmer Republican, said she got a text from Giessel at about 10:15 p.m. Wednesday that Birch died of a heart attack. “He was actually more health conscious than most,” Hughes said in a message. “He and his wife Pam loved to hike. Makes the news all the more shocking.” Birch spent nine years on the Anchorage Assembly representing South Anchorage. A retired engineer, he worked for mining companies as well as serving as senior engineer for Ted Stevens Anchorage International Airport. He won a seat in the House in 2016 and the Senate in 2018, representing residents of the Huffman, O’Malley, Abbott Loop, Independence Park and East Dowling neighborhoods. Rep. Laddie Shaw, who replaced Birch in the House, said by phone that he was “an honorable man. Decent. Caring. A man who truly loved his community, his state, his friends.” “Every time we’ve crossed paths, he would reach out to me, and say ‘My Representative,’ and shake my hand. And I was always glad I was fit, because he had such a strong grip,” Shaw said. He added that while Birch might have supported his opponent in last year’s Republican primary, the moment Shaw won, Birch “was just shining on and giving me his full support.” “He could talk to you with differences on one day and absolutely respect you as a friend on the same day,” Shaw said. Rep. Josh Revak, who represents the other House district in Birch’s Senate district, said by text message, “Chris filled every room with energy and enthusiasm. He was unwavering in his dedication and love for Alaska.” By phone, Revak said he is “heartbroken for Pam and the family.” “When everybody talks about Senator Birch … it’s easy to overlook the family, who’s really grieving and suffering during this difficult time,” he said. Birch’s family came to Alaska in 1944, when his father was stationed in Adak with the U.S. Marine Corps, according to a bio on the Alaska Senate Majority website. His father returned to work as a mining engineer and his mother as a geologist. Birch was born in Illinois but grew up in mining camps near Fairbanks and the Brooks Range and earned a bachelor’s degree in mining engineering and a Master of Science in engineering management from the University of Alaska Fairbanks. He is survived by his wife, Pam, two adult children and four grandchildren. Birch is the first Alaska lawmaker to die in office since Anchorage Democrat Max Gruenberg in 2016 and the 11th overall. He is the first senator to die in office since Bettye Fahrenkamp in 1991, according to a list compiled by the Legislative Research Service. By law and custom, Anchorage Republicans will submit the names of three possible replacements to the governor, who will make the final choice. The remaining 12 Senate Republicans can accept or reject Dunleavy’s selection. Because Birch was elected to the Senate in 2018, his replacement will serve only until next year’s general election, according to state law. At that time, voters will select a permanent replacement.  

Preliminary finding would allow oil exploration near Bering River

A small Nikiski-based company is close to getting exclusive oil and gas exploration rights to a large swath of state land at the edge of the Gulf of Alaska. Acting Division of Oil and Gas Director Jim Beckham signed a preliminary finding Aug. 2 that, if finalized, would give Cassandra Energy Corp. sole rights to exploring 65,773 acres at the mouth of the Bering River. The area of mostly tidelands and near shore state waters is adjacent to the Copper River Delta State Critical Habitat Area to the west. Much of the surrounding area is Chugach National Forest land. The Division of Oil and Gas issues broad exploration licenses to encourage companies to hunt for commercially viable hydrocarbons in areas outside of the state’s traditional North Slope and Cook Inlet basins. The 256-page draft decision would give Cassandra Energy exploration rights to the acreage for 10 years and includes a $1 million work commitment, a contingency established by Beckham based on work proposed by the company, it states. The division is soliciting public comments on the preliminary exploration license through Oct. 4. Division of Oil and Gas officials said Cassandra Energy leaders have outlined a general work plan to them but declined to relay that information out of commercial concerns. The company has not submitted formal exploration or operational plans to the state. The exploration license could eventually be transformed into more formal state oil and gas leases. Cassandra Energy initially planned to explore the nearby onshore historic Katalla oil field near the Bering River in the early 2000s by drilling from Chugach Alaska Corp. holdings inside the Chugach National Forest. The plan sparked a lawsuit over the U.S. Forest Service’s evaluation of Cassandra’s proposal, according to news reports at the time. Oil has been produced from areas near the exploration acreage in the past. According to the license finding, 44 wells were drilled in the Katalla field and surrounding areas in the early 1900s and approximately 154,000 barrels of oil were ultimately produced. A small refinery built in 1911 supplied fuel to the Kennecott mine located about 150 miles to the north. The refinery burned in 1933 and was never rebuilt, according to the license. The area is also known to have occurrences of coal. Division officials expect the area’s bedrock — fractured and disrupted by many large earthquakes — could make oil and gas recovery difficult. “Although there is no evidence of a viable conventional petroleum system, it is likely that the unconventional shale play still holds technically recoverable oil and gas resources,” the license states. Representatives for Cassandra Energy could not be reached in time for this story. The company first submitted an exploration license application for the area in April 2015. While adjudication of exploration license applications requires multiple rounds of public comment and subsequent evaluation, the process usually doesn’t take more than four years, which is how long it has taken to reach the preliminary decision for Cassandra Energy’s application. In this case, the Division of Oil and Gas was more deliberate in its evaluation of the proposal because of the ecological and economic importance of the nearby Copper River Delta, division officials said. The commercial fishery that occurs there each spring and summer is the first major salmon harvest in the state each year and in turn generates a very high per-pound value for the prized Copper River chinook and sockeye salmon taken. This year, Copper River District fishermen harvested more than 1.2 million sockeye salmon and nearly 18,000 chinook. The Copper River also supports a large upriver personal use salmon fishery. According to comments from the fishing group Cordova District Fishermen United summarized in the preliminary finding, Cordova ranks 14th among U.S. fishing ports in terms of landed value and volume, with much of that harvest coming from the Copper and Bering River areas. Then-Cordova District Fishermen Executive Director Alexis Cooper wrote during a 2015 comment period on the application that the group opposes oil and gas exploration in the area until technological advances in the industry eliminate a substantial risk to renewable resources in the region. Department of Natural Resources officials responded in written comments included in the preliminary finding that they understand the importance of the region’s commercial fisheries and therefore the license prohibits surface activity in the Copper River Delta State Critical Habitat Area, among other measures. Other Cordova residents and area conservation and fishing groups opposed an oil and gas exploration license for the western Gulf of Alaska, repeatedly citing the need to protect the region’s fisheries and other marine life. Several noted that Prince William Sound is still recovering from the 1989 Exxon Valdez oil spill. DNR officials responded, in part, that, “Spill response techniques and technology have improved since the time of the Exxon Valdez spill and other agencies including (the Alaska Department of Environmental Conservation) are responsible for review of spill prevention and response plans for any proposed activity associated with this exploration license.” Requirements in the draft license for mitigating environmental impacts from oil and gas activity prohibit facilities within 500 feet of fish-bearing waters and limit development within a half-mile of several rivers in the area. The license would also restrict offshore drilling to onshore directional drilling unless an environmentally preferable location is found. It also states that the Division of Oil and Gas would approve many development proposals would only after consulting with other resource agencies, such as Environmental Conservation and Fish and Game. Elwood Brehmer can be reached at [email protected]

FISH FACTOR: Mexico becomes top US trade partner one year into China conflict

It’s been one year, so how’s that trade war with China working out for the nation’s seafood industry? As with farmers, there’s not much winning and ongoing tweeted skirmishes have global fish markets skittish. The quick take is the 25 percent retaliatory tariff imposed by China on U.S. imports last July caused a 36 percent drop in U.S. seafood sales, valued at $340 million, according to an in-depth analysis of Chinese customs data by Undercurrent News. “Chinese imports of US seafood fell from $1.3 billion in the 12 months prior to tariffs (July 1, 2017-June 30, 2018), to $969 million in the 12 months after (July 1, 2018-June 30, 2019), underlining the heavy impact of weaker demand for U.S. seafood subject to tariffs, while poor catch of U.S. wild-caught seafood was also to blame,” the News wrote. Until then, China had been Alaska’s biggest seafood buyer purchasing 54 percent of seafood exports in 2017 valued at close to $1 billion. The tit for tat taxes hit nearly all Alaska seafood; exempted were millions of pounds of frozen Alaska pink and chum salmon and cod that are sent to China for processing into fillets or portions and exported back to the US and other countries. Those numbers took a big slide. Over the past year, China imported $136 million of Pacific salmon, down 56 percent, and reflecting a 62 percent drop in volume. Imports of frozen cod decreased to 53 million pounds valued at $91 million, both down 37 percent. The 25 percent tax also pushed the U.S. from China’s second largest seafood supplier to fourth place, behind Russia, Ecuador and Canada. The trade uncertainties have had a downward press on many fish prices and forced Alaska salmon buyers into a more “conservative mode,” especially with pink and chum salmon, said a major Alaska processor. “The tariffs are not on but they are not off. Could they be on tomorrow or never hit? The threat is always out there,” he said. Meanwhile, China is turning away from the U.S. market, and selling products to Europe in direct competition with American producers, said John Sackton, market expert and publisher of SeafoodNews.com. “Products that China is not shipping to the U.S. due to the trade war are going elsewhere, and where they compete directly with U.S. products, it means U.S. exporters face a more competitive situation,” he said, adding that American brands will suffer. “To the extent buying American in China becomes unpatriotic, the Chinese will begin to shun U.S. seafood products and actively seek out other sources, such as Norway, Ecuador, and Russia,” Sackton said. “In my view, the greatest long term danger from the trade war is that it could lead to a generation of Chinese who look down on American products.” Doug Vincent-Lang, commissioner of the Alaska Department of Fish and Game, said he believes the escalating trade wars are the seafood industry’s biggest challenge. “In talking with processors, they are uncertain as to the economic viability of delivering their products and getting them onto the shelves of their consumers,” Vincent-Lang said. “When I took this job I understood how we managed our fisheries but I didn’t really have a good appreciation of that dance between how we manage our fisheries in the context of the global economy and world markets.” Meanwhile, President Donald Trump tweeted that beginning Sept. 1 the U.S. will impose a 10 percent tariff on the remaining $300 billion in goods the U.S. imports from China which will include more seafood. The Wall Street Journal reports that: “The total value of bilateral goods traded with China, $271 billion in the first half of the year, fell short of that with both Canada and Mexico for the first time since 2005. Mexico is now the U.S.’s top trading partner.” Fish trade assist As the federal government prepares to roll out $16 billion to help farmers caught in the cross fire of Trump’s trade wars, Democratic congressmen want fishermen included in the deal. Currently, fishermen and seafood producers are not eligible to apply for US Department of Agriculture trade assistance programs. Oregon Sen. Ron Wyden and Massachusetts Rep. Seth Moulton filed legislation in late June to amend the Magnuson-Stevens Act to enable the federal government to expand the scope of fishery disasters to include trade disputes. Alaska and Maine’s congressional delegations also wrote separate letters to the Trump administration asking it to provide the same relief for fishermen that has been created to help farmers hurt by tariffs. Salmon prices Icicle Seafoods was the first buyer at Bristol Bay to post base prices for sockeye at $1.35 per pound, up from the average $1.26 last year, and 40 cents per pound for chums, an increase of four cents. KDLG in Dillingham reported that Icicle also is paying 15-cent bonuses for iced or refrigerated seawater fish for both drift and setnetters, plus 8 cents more for chilled/bled, and a five-cent premium for floated fish. All told, that’s $1.63 per pound for sockeyes at Bristol Bay. Alaska General Seafoods, North Pacific Seafoods and Peter Pan at Bristol Bay also have posted a sockeye base of $1.35. Kodiak base prices have taken a dip with reports of $1.45 for sockeyes, 27 cents for pinks and 25 cents for chums. That compares to last year averages of $1.56, 39 cents and 51 cents, respectively. At Cook Inlet, sockeye prices were reported at $1.70, down from $2.27. Southeast Alaska trollers were averaging $5.13 a pound for chinook, $1.56 for coho and 61 cents for chums, according to fish tickets. Prices for seine and driftnet-caught salmon were reported at 55 cents for chums, down from 90 cents, sockeyes at $1.90, a drop of six cents, and 30 centsfor pinks, down from 38 cents per pound on average last year. At Norton Sound, chum prices at 50 cents were down from 80 cents and coho at $1.40 was the same as last year. Average Alaska salmon prices per pound across all regions for 2018 were: chinook, $5.98; sockeye, $1.33; coho, $1.34; chum, 78 cents; pink, 45 cents. Prices do not include bonuses. Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

Data-driven minds descend on Anchorage

It's been hard to miss for anyone who spent time in Downtown Anchorage the past week, but others may not have noticed one of the premier computer science and artificial intelligence conferences in the world is in town. For the better part of five days a markedly young crowd of computer scientists and data analysts is streaming between presentations at the city’s Dena’ina and Egan event centers. The Association for Computing Machinery’s 25th Conference on Knowledge, Discovery and Data Mining has consumed virtually every square inch of both from Aug. 4-8. Conference co-chair Vipin Kumar acknowledged in an Aug. 6 interview that Anchorage is not a typical city to host discussions about high-technology innovation but also noted that the conference, known as KDD, was recently in Halifax, Nova Scotia, among meetings in Sydney, San Francisco and Beijing. His fellow co-chair Ankur Teredesai said it was a family trip to Alaska eight years ago — the first trip with his young daughter — that largely drove him to pitch for holding KDD here. As is often the case with first-time visitors, he was taken aback by the state’s natural features. Teredesai also noted that conference organizers wanted to move away from a solely business-driven agenda. “It was fascinating to me to see what would happen if 1,500 to 2,000 data scientists converged on this city and shared in that spirit of the importance of the environment and climate change,” he said. Kumar added that the computer and data science industry as a whole, not just the conference planners, has historically had a single commercial problem-solving focus that is just starting to change. “We thought Anchorage would be a really good place because — what’s a better way to get people to think about certain issues than to bring them to where they matter the most and you can see them the most?” said Kumar, who chairs the University of Minnesota Computer Science and Engineer Department. Anchorage’s Chief Innovation Officer Brendan Babb, the local KDD co-chair, said having individuals as influential in the data science industry as Kumar and Teredesai actively championing for Anchorage as a place to host the conference was an immense help. Still, Babb admitted to being “a little bit surprised and bewildered” when the choice was made nearly three years ago. “There’s some unique data to Alaska and its great to have some of the best minds in the world taking a look at it and sharing what they know. Everyone’s been incredibly generous and excited to be here. It’s been fantastic,” he said. Teredesai, a computer science professor at the University of Washington Tacoma and co-founder of the advanced health care analytics firm KenSci, also said the group received “tremendous support” from the folks at Visit Anchorage, who spend much of their time recruiting national and international trade shows and conferences to the city. Visit Anchorage spokesman Jack Bonney said the city is a practical place to hold an event with global participation, as Anchorage is within a nine-hour flight from the vast majority of the world’s population centers. “In the eye of a meeting planner we’re a very cost-conscious option,” Bonney said. According to Visit Anchorage, hosting the KDD conference will generate roughly $4 million in additional economic activity in the city. Babb said that city officials hope the exposure will encourage some KDD attendees to return north permanently. “We’d like to snag some as they visit here and have them relocate to Anchorage,” he remarked. Based on the response, he might be on to something. Kumar said KDD organizers generally expected to attract 1,500 to 2,000 attendees to Anchorage, but the actual response astounded them. “We had 3,200 people register and a couple hundred more knocking on the door asking, ‘can we get in?’” he said. Those 3,200 or so attendees came from 51 different countries, according to Babb. It’s believed to be the largest professional gathering the city has ever hosted. And while the North Slope oil fields or the fishing grounds of the Bering Sea seemingly share little with Silicon Valley, the men stressed that the research done in their industry is not only applicable, but essential, to the future of Alaska’s industries as well. Teredesai recalled that one of the first lessons in a primary textbook used by computer science graduate students, entitled, “Pattern Classification” could’ve been drafted on a fishing boat. “It’s quite fundamental and everybody uses it,” Teredesai said of the book. “If you open the first chapter the first example in that book to teach someone pattern recognition is actually to teach them to learn to classify the differences between a salmon and a sea bass.” More directly, there have been numerous presentations on the applicability of current data science in resource management; for example, how to use satellite imagery to combat illegal high seas fishing, Kumar said. The leaders of Alaska’s oil and gas industry have also long-discussed the need to advanced technology and data analysis to remain globally competitive in a traditionally high-cost operating regime. Teredesai noted further that the ability to process large amounts of data in highly compressed timeframes is paramount to the supply chain and logistics industry, which are important parts of the Alaska economy, whether it’s mobilizing for a remote construction project or part of the global cargo trade. Ted Stevens Anchorage International Airport is the fifth-busiest air cargo hub on the planet. “The entire Amazon supply chain is driven by the algorithms that are published and reported in this conference,” Teredesai said. Kumar added, “If you’re in industry and you’re not paying attention to this area you are losing out to your competitors. You can’t afford to ignore this technology.” Babb continued that the work done at firms like Teredesai’s KenSci is helping reduce the cost of health care and improve the effectiveness of telemedicine delivery, which has major benefits for rural Alaska communities lacking access to large health care facilities. Teredesai also said he thinks the exposure KDD will give Anchorage and Alaska will encourage more activity, and possibly investment, in the data science realm here. That is, if the city and state make the proper investments as well. He called investing in higher education “a no brainer.” “I understand balancing priorities but it is in these type of hard times that we have to make sure that our longer term goals and visions have to be protected. So, making sure that places of innovation, places to access education like universities are funded at the appropriate level,” Teredesai said. “Even high schools and elementary schools — taking money away from education and putting it to something else may solve the short-term problem but it creates more problems in the long run.” ^ Elwood Brehmer can be reached at [email protected]

FERC sets eight public meetings in September on AK LNG draft EIS

The Federal Energy Regulatory Commission has scheduled eight meetings around the state in September to hear public comments on the draft environmental impact statement for the proposed Alaska LNG project. “The primary goal of the public comment meetings is to have you identify specific environmental issues and concerns with the draft environmental impact statement,” FERC said in its July 26 announcement. “All verbal comments will be recorded by a court reporter and become part of the public record.” FERC released the draft environmental review on June 28. Public comments are due by Oct. 3. Allowing time for state and federal agency review, along with revisions to the draft, the commission’s schedule calls for release of the final EIS in March 2020 and a commission vote on the project application in June 2020. The state, which has been by itself directing the estimated $43 billion project for almost three years, plans to finish the work with FERC and then put the effort on hold until it sees a way forward with private companies in the lead. The public comment meetings will run Sept. 9-12, with sessions in two different communities each day. All meetings are scheduled for 5 to 8 p.m. Monday, Sept. 9 Inupiat Heritage Center, Utqiagvik Trapper Creek Elementary School, Trapper Creek Tuesday, Sept. 10 Kisik Community Center, Nuiqsut Houston Fire Station, Houston Wednesday, Sept. 11 Tri-Valley Community Center, Healy Nikiski Recreation Center, Nikiski Thursday, Sept. 12 Morris Thompson Cultural and Visitors Center, Fairbanks Dena’ina Center, Anchorage FERC will lead the meetings, not the project applicant Alaska Gasline Development Corp. “Other federal agency representatives may also be in attendance and available to answer questions,” FERC said. In addition to the eight FERC meetings, the federal Bureau of Land Management will hold two public sessions on subsistence issues. Those meetings are scheduled for “potentially affected communities.” BLM will be looking at the effects of construction and operation and how they fit under the Alaska National Interest Lands Conservation Act. Those meetings are scheduled for 6 to 9 p.m. at: Anaktuvuk Pass Community Center, Tuesday, Sept. 17. Kaktovik Community Center, Thursday, Sept. 19. Comments on the draft EIS can be filed electronically through the eComment feature on the ferc.gov website. “This is an easy method for submitting brief, text-only comments,” FERC stated. Longer comments, or submissions with attachments, can be submitted through the eFiling feature on the website. Or people can mail comments to: Kimberly D. Bose, Secretary; Federal Energy Regulatory Commission; 888 First Ave. NE, Room 1A; Washington, DC 20426. All comments should include the project’s docket number: CP17-178-000. FERC staff is available to help with filing comments online: Call 1-866-208-3676 or email [email protected] The 3,800-page draft EIS determined that the project would damage areas of permafrost and wetlands and could affect migrating caribou and six endangered or threatened wildlife species — referred to as “adverse impacts” — but many of the effects could be reduced or eliminated if the right steps are taken during construction and operation to avoid, minimize or repair the damage. FERC is the lead on the environmental review of the state-sponsored project to pipe North Slope gas 807 miles to a natural gas liquefaction plant and marine terminal in Nikiski, on the Kenai Peninsula. The draft EIS was prepared with the assistance of nine other federal regulatory agencies, including the U.S. Fish and Wildlife Service, National Park Service, Environmental Protection Agency, National Marine Fisheries Service, Army Corps of Engineers and Bureau of Land Management. The state has been leading the project since North Slope oil and gas producers ExxonMobil, BP and ConocoPhillips decided in late 2016 to stop writing big checks for regulatory and engineering work. Now the state, through AGDC, has decided it, too, needs to slow down spending. The state corporation plans to finish the FERC process and try putting together a project without the state in the lead. AGDC earlier this month announced it would lay off more than half its staff, shutting down its effort to find customers and investors. “We’re going to have just enough people to get this thing done (FERC) and at the end of next (fiscal) year in June, then we take a look and say, ‘Where do we go from here?’” AGDC interim president Joe Dubler told the state House Resources Committee on July 19. At that point, AGDC will re-examine the state’s future participation in the project, Dubler said, according to a July 24 report in the Alaska Journal of Commerce. Dubler also told legislators that AGDC did not renew the nonbinding joint-development agreement it had with three large, nationalized Chinese firms to buy up to 75 percent of the project’s LNG output in exchange for an equal share of financing. The project envisioned in the agreement “frankly doesn’t exist anymore,” Dubler said, explaining the Gov. Mike Dunleavy administration is not comfortable with the risk the state would assume as project leader, the Journal of Commerce reported. The agreement was signed in front of President Donald Trump and China President Xi Jinping in November 2017, promoted as a signature achievement in former Gov. Bill Walker’s effort to secure partners for a state-led Alaska LNG project.

LNG trucking expands as option in absence of pipelines

Though the liquefied natural gas industry is mostly focused on projects that produce millions of tonnes per year and LNG ships that transport almost 70,000 tonnes per load, a growing volume of the gas is moving in 20-tonne deliveries. Trucks are hauling 40-foot-long insulated LNG tanks around the U.S., Canada, Mexico and especially China. The “pipeline on wheels,” as they are called, have been delivering LNG to Hawaii to displace costly synthetic gas made from naphtha. The pilot project started in 2014 and has been expanded. FortisBC, which recently completed a $400 million expansion of its small 1971 gas liquefaction plant across the Fraser River from Vancouver, said July 16 it had signed a two-year contract to ship 53,000 tonnes per year to China — delivering almost 60 of the specialized shipping units per week. Pricing was not disclosed. The 40-foot tanks can each carry about 12,000 gallons of LNG, which, when regasified, is about 1 million cubic feet of gas. The LNG will go to smaller commercial and industrial customers in China that are not connected to a gas pipeline, potentially displacing coal or fuel oil, Doug Stout, vice president of market development at FortisBC, told Bloomberg. The company has been selling smaller shipments of LNG to China on a spot basis since 2017. The expansion at the Tilbury liquefaction plant and marine terminal took the facility’s capacity from 35,000 to 250,000 tonnes per year. The July contract is with Chinese LNG distributor Top Speed Energy. Such shipments are a growing component in the global LNG sector, especially when the customers are small or unconnected to a pipeline grid, Alex Munton, an analyst for Wood Mackenzie, was quoted by Bloomberg on July 17. China’s ENN Group last year opened a new LNG import terminal in Zhoushan, at the mouth of the Yangtze River. It’s the first in the world built to load the majority of its LNG into trucks instead of reheating it to a gas for pipeline distribution, according to a late-2018 Bloomberg report. The facility is designed to take in up to 3 million tonnes of LNG per year, with 2 million destined for loading into tanker trucks. The operation includes 14 loading bays, and the privately owned distributor started with a fleet of 400 trucks to serve the market during the 2018-19 winter. The trucked LNG market is unregulated in China, allowing nimble sellers to benefit from rising prices during peak demand, while pipeline gas prices remain set by the government. “We haven’t seen this kind of volume in trucked LNG anywhere else in the world,” Xizhou Zhou, head of China energy research for IHS Markit, said last year. Trucks delivered about 19 million tonnes in China in 2017, about 12 percent of the country’s total LNG consumption, according to Wood Mackenzie estimates. In North America, two companies have carved out a niche by using tanker trucks to deliver the fuel to industrial and agricultural customers in Mexico. Houston’s Stabilis Energy is tapping into a growing market in Mexico, supplying LNG to industrial customers and greenhouses, the Houston Chronicle reported this spring. Its $55 million plant in the South Texas town of George West can produce 120,000 gallons of LNG a day. The plant also supplies fuel to portable LNG-powered generators at remote drilling and fracking sites in Texas, and at fracking sand mining sites out of reach of pipelines and power grids. Mexican gas company Enestas serves customers outside of local power grids and miles away from pipelines. Gold, silver and lithium mines in Mexico use the company’s gas-fired generators to power equipment and provide heat in deep mine shafts, the Chronicle reported. Industrial-sized greenhouses designed for growing peppers, cucumbers and other vegetables in the mountains of Central Mexico burn gas to keep crops warm at night. Enestas expects to sell 10 million gallons of U.S. LNG to its customers in Mexico in 2019 — equal to more than 800 million cubic feet of gas. Up the U.S. East Coast, New Fortress Energy has proposed building an LNG export terminal in New Jersey, filling the storage tanks with gas liquefied at a plant in Pennsylvania and trucked to the dockside facility. The U.S. Army Corps of Engineers, the lead permitting agency for the project, released company plans in mid-July that said the terminal, just across the Delaware River from the Philadelphia International Airport, would receive as many as 15 trucks an hour — around the clock — to fill an oceangoing tanker every two weeks. The gas, produced from Pennsylvania’s Marcellus Shale, would be liquefied at a plant about 200 miles away in Bradford County, also proposed by New Fortress Energy. Rail might be another option to move the LNG to the waterfront terminal. Communities along Canada’s north shore of Lake Superior could start burning gas by late 2020, as the Ontario government this spring decided to provide $27 million (Canadian) toward building an LNG plant in Nipigon for distributing gas to communities struggling with high energy costs. The provincial funds will cover about half the cost of the plant. Residents in Marathon, Terrace Bay, Schreiber, Manitouwadge and Wawa — total population, about 11,000 — suffer under price spikes on fuel oil, propane and electrical power. An earlier feasibility study estimated trucking LNG into the towns would save municipalities, homeowners and business more than $6 million annually. Northeast Midstream, an Ontario energy developer, will take gas from a nearby pipeline and liquefy it. Trucks will deliver the LNG to depots in each community, where it will be warmed back to a gas and distributed by short pipelines into individual homes, public and commercial buildings. Press reports said longer pipelines were not a good option in the area’s rugged topography. The promise of lower home heating costs are the main selling points for Terrace Bay Mayor Jody Davis. “In the wintertime, over the past several years, heating bills in some of our homes have been up to $1,000 per month” for diesel, fuel oil or propane. 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.

Pages

Subscribe to Alaska Journal RSS