Fourth special session begins without budget, PFD fixes in sight

JUNEAU — The Alaska Legislature began its fourth special session on Oct. 4 with low expectations and little hope that legislators will be able to end their annual struggle over the Permanent Fund dividend. For the past six years, lawmakers have debated the size of payments from Alaska’s trust fund, turning the issue into an annual battle that has consumed legislative attention and repeatedly brought Alaska to the brink of a government shutdown. Gov. Mike Dunleavy convened this session, asking legislators to pass a constitutional amendment that would guarantee future dividends and pay them according to a new formula. “In the end, if there was ever a time to settle this issue, it’s now,” Dunleavy said. But that seems unlikely. “I don’t think the session is going to be very productive,” said Senate Minority Leader Tom Begich, D-Anchorage. It takes 27 votes in the House and 14 in the Senate to send a constitutional amendment to voters in the November 2022 election. Right now, legislators say there aren’t enough votes to pass the governor’s proposal or any of the alternative amendments proposed by legislators themselves. That’s because most of those amendments call for larger dividends and require additional money. Lawmakers could overspend from the Alaska Permanent Fund, breaking a limit installed in 2018. They could cut state services, freeing more revenue for the dividend. They could pass tax increases or install new taxes that generate additional revenue for the dividend. Senate President Peter Micciche, R-Soldotna, is among a group of legislators who has promoted an “all-in” idea that uses multiple options simultaneously. He frequently analogizes the situation to a machine with a variety of control levers, each representing a different option. When it comes to a constitutional amendment, he said, there isn’t a way to move the levers in such a way that gets 14 votes in the Senate. In the state House, Rep. Andy Josephson, D-Anchorage, said the “politics are nearly insurmountable.” A bipartisan, bicameral working group made some progress this summer. It agreed on what the state should expect for revenue and expenses in the next several years, what a proposed dividend would cost, and on the available options to pay for it. But because the House and Senate are divided about which options are best, no one idea has the needed votes. “I really don’t think anything is going to come out of this session because we’ve had a lot of this stuff with us here for the past seven months,” said Rep. Mike Cronk, R-Tok. Any constitutional amendment wouldn’t be put into place until after next year’s election, so the governor has proposed to increase this year’s dividend to what it would be under his proposal. If Dunleavy’s proposed formula were in place this year, it would result in a $2,350 dividend instead of the $1,114 Alaskans will receive starting this month. That increase would cost roughly $791 million. New taxes would take at least a year to implement, Department of Revenue officials have previously testified, and budget cuts would also take time to implement. That leaves overspending from the Permanent Fund. The earnings of the Alaska Permanent Fund are now the largest source of revenue for state services, accounting for roughly two-thirds of the state’s budget. Spending more from the fund today means less money invested and lower returns in the future, which has caused lawmakers to reject overspending. Dunleavy argues the fund gained a record $16 billion in value during the last fiscal year. He says larger dividends will aid the state’s economy, which is continuing to suffer from the COVID-19 pandemic. ”You never hear that when it comes to taking the PFD and cutting it severely out of the hands of children and elders, that has a detrimental effect, especially in the environment that we’re experiencing today, with supply chain disruptions, inflation, uncertainty, people whose hours were cut,” Dunleavy said. When it comes to the budget, he said legislators should see that holding a “no-overspend” position has political consequences. ”If they can’t see that, maybe to some extent, that’s at the root cause of the inability to come up with a decision,” Dunleavy said. Democratic legislators say Dunleavy’s reluctance to consider new revenue without a statewide vote is contributing to the problem. ”You know, then the Legislature would really love to have him engaged in robust conversation during this fourth special session,” said Rep. Ivy Spohnholz, D-Anchorage. Dunleavy said that if a revenue bill were included in a package of legislation to deal with the dividend issue, he will reserve judgment until he sees it. “I would take a look at the components within the framework of a full solution. And if there is a viable, coherent, sustainable long-term solution, I would take a look at that package very seriously. But again, it’s not sitting in front of me right now. So I need to see what that looks like,” he said. As an alternative to a constitutional amendment, lawmakers could pass a new law. Doing so would require 21 votes in the House and 11 in the Senate, but there’s no guarantee that future legislators would follow that new formula. In 2017, the Alaska Supreme Court ruled that the formula in place at the time — one used since the 1980s — was “subject to normal appropriation and veto budgetary processes.” In other words, the governor and Legislature could choose to follow it or not. A new formula in state law would face the same problems. “I can tell you, that a statute is not going to engender the confidence of Alaskans. They won’t buy it,” Dunleavy said. In the state Senate, lawmakers proposed a formula change at the end of the third special session. That bill proposed to gradually raise the dividend over several years, reaching Dunleavy’s preferred level if the state raises $700 million in additional revenue. That bill was debated but failed to pass the Senate before the end of the third special session. Micciche said that with adjustments, it could be a first step toward an eventual solution. “I think once people are comfortable with (the bill), then I think you have a higher probability of the level of support it would take for a constitutional amendment,” he said. “Right now, I don’t know if you have 11 votes to get the PFD under the constitution. Once people are comfortable with the new calculation, that becomes a lot more likely,” Micciche said.

Alaska-based startup plans for Asian, Lower 48 destinations

A new Alaska-based carrier that plans to provide daily passenger flights between Asia and the Lower 48 bought its first Boeing 757-200 jet on Sept. 30. The acquisition is a key step for Northern Pacific Airways as it begins to build its fleet, said chief executive Rob McKinney. The company plans to begin service next year from Anchorage, with year-round travel to destinations such as Tokyo, Seoul, Orlando and Los Angeles. “From Anchorage you could go to Tokyo for the weekend,” McKinney said. Northern Pacific plans to buy a dozen of the Boeing 757-200s, which can carry more than 200 passengers apiece, separated by a single aisle, McKinney said. The business plan is modeled after the success of air cargo service at the Ted Stevens Anchorage International Airport, he said. The airport has become the world’s fourth busiest for cargo, with Anchorage typically a stop for refueling and crew changes as jumbo jets hop between Asian cities and the Lower 48. “We plan to replicate that model with passengers,” McKinney said. It’s an ambitious plan for the startup company. Northern Pacific is a sister brand to Ravn Alaska that now provides service to rural Alaska on turboprop planes typically seating up to 37 passengers. The brands are owned by FLOAT Alaska. Leadership with FLOAT purchased the assets of RavnAir Group out of bankruptcy last year, launching Ravn Alaska. McKinney, a pilot with experience flying in Alaska, is also chief executive for both Ravn Alaska and FLOAT Alaska. Ravn Alaska has other future plans, including purchasing small hybrid-electric aircraft in the future. Northern Pacific recently announced that it had agreed to buy the first of six Boeing 757-200s. The jets were retired from service last year, after they flew for American Airlines, McKinney said. The first jet, after the sale closes on Sept. 30, will leave a storage yard in New Mexico next month, McKinney said. It will receive several weeks of “intensive” maintenance through Certified Aviation Services, a company in San Bernardino, California. The jet will then be painted and receive its Northern Pacific design, and arrive in Alaska in December. “We’ll keep the process going one after the other,” he said. Northern Pacific is working with a broker to buy the jets and engines, McKinney said. The price of the first two jets will run about $10 million apiece, on average, he said, and Northern Pacific is raising money from private sources to cover the costs of its business plan. “We have a reasonable target for capital expenditures and there’s a lot of talent out there,” he said. “We are bringing talent from all over the world that knows how to do this type of operation.” About 15 full-time workers have been hired so far to help get Northern Pacific started, he said. That brings the Ravn and Northern Pacific workforce to about 400. The number is expected to double once Northern Pacific is fully operating, he said. The company hopes to receive approval from the Federal Aviation Administration after conducting proving runs in the spring. It hopes to be by operating by September, McKinney said.

American Seafoods subsidiaries lose round over Jones Act fines

A federal judge on Sept. 28 sided against Alaska seafood shippers who say they and other companies have wrongly been hit with more $350 million in penalty notices from the U.S. Customs and Border Protection for alleged violations of the Jones Act. U.S. District Court Judge Sharon Gleason in Anchorage denied a request by Kloosterboer International Forwarding and Alaska Reefer Management to stop the federal government from imposing further penalties as the case proceeds, according to her 25-page order. The two companies, part of the American Seafoods Group family, are part of a supply chain that moves seafood from Dutch Harbor in Western Alaska to the Eastern U.S., passing through the port of Bayside in Canada near the border with Maine. They say the notices, issued this summer, threaten the movement of the seafood and jobs in Alaska and the Lower 48. The companies sued the federal government in early September, asserting that they faced excessive fines and were meeting the requirements of the Jones Act, which requires that vessels carrying goods between two U.S. points be American-made and American-flagged. The companies use foreign-flagged vessels but say they meet an exemption under the act because the seafood travels briefly by rail in Canada. The companies want a trial by jury and a ruling that says they comply with the Jones Act and that the fines are excessive, among other items. Kloosterboer has received $25 million in penalty notices. In the case, the U.S. Department of Justice argues that the two companies in 2012 began secretly using a specially built rail track in Canada that’s only 100 feet long, in an effort to evade the requirements of the Jones Act. Gleason said that the companies are improperly relying on a rate tariff filed with the Surface Transportation Board in 2006, when they used a different and much longer railway in Canada to transport their product before it was shipped into the U.S. Gleason said in the decision that the companies also failed to seek a “ruling letter” from Customs and Border Protection when they switched to the short rail line in 2012. She said the companies can renew their request to halt additional fines if they show they’ve properly filed a rate tariff for the newer route, and show that they’re “diligently pursuing available administrative remedies” to resolve their concerns. Officials with the companies and Customs and Border Protection could not immediately be reached late Sept. 28 for comment.

Alaska DNR reaches royalty oil sale deal with Petro Star

Officials in the Alaska Department of Natural Resources have agreed with Petro Star Inc. on a royalty oil sale that avoids the need for legislative approval. A best interest finding signed by DNR Commissioner Corri Feige and published Sept. 23 along with the proposed contract states that department officials, for their part, opted for a shorter contract out of concerns a longer approval process could lead to interruptions in the delivery of royalty oil to Petro Star. The longer-term contracts DNR officials have often negotiated with the state’s refiners are required to be reviewed by the state Royalty Oil and Gas Development Board and approved by the Legislature. The longer contracts are rarely politically controversial but they can move slowly, the best interest finding notes. “This approval process takes time, and here, could mean months without royalty oil being delivered to Petro Star’s two refineries, but contracts entered into to relieve market conditions are not required to go through these steps so long as they are for one year or less, pursuant to (state law),” the document states. Petro Star Inc. is a wholly owned subsidiary of Arctic Slope Regional Corp. Its refineries largely produce jet fuel, diesel and heating oil. The state’s existing contract with Petro Star expires in December. It took effect in 2018. DNR sells much of the state’s royalty oil to local refiners because the state can typically make a small per-barrel premium when it is sold in-kind versus receiving an in-value payment from the producers for the state’s oil that they sell. Department officials and local refiners agree on a negotiated price differential that allows the state to capture some of the revenue lost from transportation costs when oil is otherwise shipped to West Coast refineries. In recent royalty in-kind, or RIK, oil contracts, the state has generally netted $1 to $2 more per barrel than if it sold its royalty oil in-value, according to DNR; however, the state briefly lost money when oil prices and demand collapsed last year with the onset of the pandemic. DNR officials estimate the Petro Star sales could net the state roughly $4 million over what it would receive from royalty in-value, or RIV, sales in which the producers sell Alaska’s oil — typically to West Coast refineries — on the state’s behalf. The marine transportation costs for Alaska North Slope crude are expected to total approximately $3.25 per barrel in fiscal years 2022-23, according to state projections. The agreement with Petro Star calls for the state to cumulatively sell 10,000 barrels of oil per day in 2022 to the company’s refineries in North Pole and Valdez for a RIK price differential of $2.17 per barrel, meaning the state would generally collect the delta between the marine costs and the RIK differential as additional income. The volume represents about 12 percent to 17 percent of the state’s available royalty oil based on production forecasts, according to the finding, and the RIK differential matches the contract DNR officials signed with Marathon Petroleum Corp. in late April. The contract with Marathon, which owns the Kenai refinery, is for 10,000-15,000 barrels per day and is also for one year. DNR officials do not commit all of the state’s oil to RIK contracts, in order to maintain some RIV sales through which they can gain insight to oil market information that otherwise is difficult to come by. Elwood Brehmer can be reached at [email protected]

As LNG prices soar, a lesson that timing is everything

An LNG trader with some extra of the heating and power-generation fuel to sell in Asia this month could make $100 million more than what it was worth less than 18 months ago. The $100 million is not a month’s worth of deliveries; that’s one standard-size 975-foot-long LNG carrier with a full load in its insulated tanks. In this fall’s lucrative and rapidly escalating Asian spot market, the gas is worth more than half as much as the entire ship cost, brand new. There appears no question that natural gas producers and liquefaction plant developers failed to fully anticipate the heavy demand for the fuel this fall and winter, or the resulting gas supply shortages that are causing record-high prices and economic pain across much of Asia and Europe. While producers and traders have some spare gas to sell, not bound under fixed-price contracts, those same companies needed to have invested tens of billions of dollars years ago if they were going to cash in even bigger during the price spike, which has seen liquefied natural gas on the Asian spot market sell for an unprecedented, unworldly and unaffordable $34.47 per million BTU last week. That’s almost 20 times the low of $1.85 set in May 2020, when the world was shutting down for the COVID-19 pandemic, and just a month after crude oil prices had averaged less than 50 cents a gallon. Unlike OPEC and its allies, which have significant spare oil production capacity that can ramp up in weeks or months as the global economy recovers, additional natural gas doesn’t move that easily. The industry needs years and at least $10 billion, often double that, to build the complex liquefaction plants to produce new supply for buyers. Therein lies the challenge — and the risk — of judging the market for a long-term investment that will not start delivering until the market may have changed. Examples of bad bets are plentiful. In the first decade of the 21st century, several gas producers, developers and traders saw high natural gas prices in the U.S., declining production from mature basins and rising demand, and decided the country would become a major LNG importer. They spent billions reactivating unused receiving terminals from the 1970s and building new LNG import facilities. They thought they were going to get rich. Then some smart gas producers figured out how to drill and market prodigious amounts of shale gas, overwhelming U.S. demand. The imperative to import the fuel disappeared within a few years. The owners of those unused import terminals later spent billions more to turn the facilities into export projects, so they could reverse course and profit from selling much of that surplus U.S. gas overseas. A happy ending, but only after heavy losses for years. More recently, Norway’s Equinor and Russia’s Gazprom, which together supply about 60 percent of Europe’s natural gas, found themselves cashing record-size checks for pipeline gas deliveries to the continent. The European Union had liberalized its gas market years ago, shifting away from long-term contracts at fixed prices, often linked to oil, moving to short-term or flexible contracts that worked to their advantage during a long period of low natural gas prices. Europe’s luck ran out this year as the tight market and multiple other factors drove up prices by 300 percent, without contracts to protect buyers. “The rapid increase in gas prices happened at the best historical time possible for Equinor,” company economist Eirik Waerness told Reuters last month. In Asia, buyers that were traditionally bound under oil-price-linked LNG purchase contracts clamored for more flexibility and better terms when oil was above $100 a barrel 10 years ago. Many switched to shorter-term contracts or spot purchases as new LNG supply flooded the market, driving down prices. As in Europe, buyers in Asia enjoyed low prices, but only until the market reversed course. Now, as the spot-market is at record highs amid tight supplies, those oil-linked contract LNG cargoes are less than one-third the cost of spot buys. Timing is everything, and prices seem to always look better on the other side of the forecast. Meanwhile, it’s getting more complicated. In addition to knowing whether ample supply will hold down prices for years, or whether short supplies will drive up prices and profits, gas producers and investors now have to calculate how much renewable energy will cut into their market share in the years ahead. It’s made many of them cautious. No sense building a fossil-fuel project that needs 20 years for payback if green energy will take over the electric meters of the future. Unless renewables don’t, in which case LNG suppliers will be happy to oblige at a profit, as long as they are willing to risk the investment years ahead of time. As is Qatar, the world leader in LNG production and exports, which is proceeding with a multibillion-dollar, 40 percent expansion of its output capacity this decade. This year’s record-high gas prices are “due to the market not investing enough in the industry,” Qatari Energy Minister Saad al-Kaabi said on the sidelines of the Gastech industry conference last month in Dubai. The lack of investment in new supply, either due to risk aversion or fear that renewables will dominate the future, is not good for anyone, he said. “We don’t want these high prices, we don’t think it is good for the consumers. We don’t want $2 and we don’t want $20, we want to have a reasonable price that is sustainable,” Reuters quoted al-Kaabi. All those years of low gas prices, while comforting for buyers, are part of the reason for today’s tight market, said a U.S. LNG developer. “The world was kind of lulled to complacency because (gas) prices were low for five years so no one felt an urge to plan and everyone got very religious on environmental protection and it is wonderful,” said Charif Souki, co-founder of Tellurian, which wants to build an LNG export terminal in Louisiana. “But we should look at what things actually work rather than simply what we hope for,” he told Reuters last week. Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide. He can be reached at [email protected]

Movers and Shakers for Oct. 10

The Southcentral Foundation board of directors selected April Kyle as its president and CEO. She has been serving as interim president and CEO since August 2020. Her career with Southcentral Foundation spans two decades. Prior to her year as interim president and CEO, Kyle was a member of Southcentral Foundation’s vice president of behavioral services division. Kyle has been part of building Southcentral Foundation’s Nuka System of Care. She was one of the first graduates of Southcentral Foundation’s Executive Leadership Experience, as well as a member of the Alaska Native Executive Leadership Program’s inaugural class at Alaska Pacific University and the Alaska Journal of Commerce’s Top Forty Under 40 class of 2013. She received her MBA from the University of Washington. Alaska Native Science &Engineering Program Assistant Director Dr. Michele Yatchmeneff recently accepted a position as the executive director of Alaska Native Education and Outreach for University of Alaska Anchorage. In her role as ANSEP’s assistant director, Yatchmeneff has been a faculty advisor to more than 2,500 students in ANSEP’s longitudinal model of education. Yatchmeneff was the first Alaska Native female engineering professor in UAA’s Department of Civil Engineering. She is currently an associate professor in the department where she has spent the past six years as a researcher. Yatchmeneff’s work has earned awards from the National Science Foundation and other distinguished research organizations. Before earning her bachelor’s degreein civil engineering, master’s degree in engineering management and doctorate in engineering education, Yatchmeneff began her STEM education as an ANSEP student. Paula Vrana was appointed commissioner of the Alaska Department of Administration. Vrana has served as deputy commissioner of the department since January 2019. Acting Commissioner Amanda Holland is retiring after 30 years of state service. Vrana practiced law at the law firm of Brena, Bell &Clarkson and has served as the CEO of Copper River Native Association as well as executive director of Hospice of Anchorage. Alexandra Hoyt has been promoted to project manager II with Ahtna Engineering Services LLC. Hoyt joined Ahtna in 2013 as an environmental scientist/biologist. Hoyt holds a master’s degree in geography: environment, society, and development from the National University of Ireland Galway and a bachelor’s degree in community and environmental studies (minor business administration), from Colby-Sawyer College in New London, N.H. Justin Dunn has been promoted to program manager with Ahtna Environmental Inc’s construction services division. Dunn has more than 14 years in the industry and joined AEI in February 2019 as a senior project manager. Ahtna Solutions LLC. announced the addition of Senior Proposal Manager Michelle McGarry. With more than 15 years of proposal management experience, McGarry has led proposal teams across the U.S. Ranging from a few contributors to more than 20 writers, graphic artists, word processors, cost estimators, subject matter experts, senior leadership, and team members, winning over $500 million in new contract awards. Ahtna Global Inc. has added Proposal Coordinator Chase Quinn. Prior to this role, she was with HDR Engineering for four years as a project coordinator assisting on environmental, water and transportation projects. Ahtna Engineering Services LLC. hired Proposal Coordinator Connor Weiss. Weiss is a Washington State University graduate with degrees in management information systems and marketing. Before starting his position as proposal coordinator in the fall 2020, he worked for Ahtna in the field as a laborer on projects in Metlakatla and Shemya Island. Ahtna Environmental Inc. hired Marketing and Communications Manager Katy Kless. She has worked in marketing for 16 years and 11 years in the A/E/C industry. Ahtna Engineering Services LLC. hired Marketing &Communications Manager Laura Reishus. She has more than eight years of experience handling simultaneous graphic design projects and managing marketing campaigns from conception to completion. Prior to joining AES, Reishus served as the Development Director for Habitat for Humanity. Ahtna Global announced Jacob Henkel has joined its construction division as a senior project engineer. Based in the Anchorage office, Henkel has worked as a project engineer for both Alaska Frontier Constructors and Granite Construction Co. and as a heavy equipment operator the 10 years prior.

Chugach Electric faces revenue shortfall from pandemic

With many once-bustling Anchorage office buildings dimmed as a result of the pandemic, Chugach Electric Association is having a hard time meeting its financial obligations, and utility leaders are asking for help from state regulators. Attorneys for the state’s largest electric cooperative in early July filed a petition with the Regulatory Commission of Alaska asking to modify its detailed and highly technical approval of Chugach’s $1 billion purchase of formerly city-owned Municipal Light and Power, so Chugach can remain in good standing with its lenders and avoid raising electric rates. The long-discussed deal closed in October 2020. Chugach spokeswoman Julie Hasquet wrote via email that the pandemic “has taken a toll” on the utility’s revenue, noting that power demand from commercial customers is down about 8 percent for the Anchorage-area utility. “Like many businesses, we are feeling the effects of the economic downturn. In response, we are managing costs, and we are asking the RCA to allow us to modify the stipulation (agreement) that was accepted when we bought ML&P,” Hasquet said. “The modification, if accepted by the RCA, would provide a reprieve on the treatment of certain expenses over the next several years. This reprieve would allow revenues to recover and additional savings to be realized through integration efforts. We certainly don’t want to raise rates in a pandemic.” Chugach leaders emphasized before the deal was final that rates for customers of both utilities would not increase as a result of the purchase. More specifically, Chugach leaders are asking the RCA to allow the utility to forgo amortization of $19 million in fees and other costs related to the ML&P deal if it cannot maintain a “margin for interest” ratio of at least 1.20 on portions of the debt it took on to buy ML&P, according to the petition. Chugach would continue to operate and maintain its books as if it will hit its original targets, but would “be entitled to reverse entries in its books associated with the amortization” if the margin for interest ratio is less than 1.20 at year’s end, the petition states. Chugach borrowed approximately $800 million in private markets to purchase ML&P, according to Hasquet. On Sept. 30, the state-owned Alaska Energy Authority became the latest stakeholder organization to back Chugach’s plan in filings with the RCA. AEA Director of Planning T.W. Patch, a former RCA commissioner, during the agency’s board meeting called the issue “inordinately complex” even in the oft-arcane realm of utility regulation. “Chugach has failed or is on the cusp of failing to meet certain covenants in its debt structure,” Patch described to the AEA board. “If you borrow money and you promise that you will pay that money back, there is a cost to that money if you don’t meet certain earnings targets. That is the nexus of the present case before the RCA,” he added. Patch also highlighted that no other stakeholders, such as the other Railbelt utilities, have offered what he believes would be a better solution; they have largely supported Chugach’s petition. “Frankly, I’m not sure that there’s a better way to protect the ratepayers, which is what Chugach is attempting to do,” he said, adding he believes it’s likely the RCA will approve the request. RCA officials do not comment on issues before the commission. Chugach leaders once expected to close the year with margins of $12.6 million and a margin for interest of 1.30 when they approved the utility’s 2021 budget late last year. However, that changed when Chugach received ML&P’s financial statements from the municipality the following month, according to the petition. “Upon review, it became apparent ML&P (and now Chugach) was experiencing a significant decline in North District sales and revenues,” the filing states. Chugach’s amended budget, including the updated ML&P figures, calculated out to year-end margins in the $600,000 range. The not-for-profit cooperative utility model is largely based on thin operating margins to keep members’ rates as low as possible. The structure typically works well in the highly regulated and mostly predictable power industry, but it often leaves little financial cushion for utilities when the balance is upset. ML&P’s former service area in the north and east portions of Anchorage included the Downtown, Midtown and U-Med areas, which have some of the highest concentrations of offices and other businesses in the city. According to the petition, power sales from Chugach’s North District — the former ML&P service area — were down 14 percent and billing demand was off nearly 16 percent for the 12 months ending May 31. That resulted in a $16.2 million decrease in base revenue for the North District, while Chugach saw revenue from its more residential Southern District decline by just about $400,000 over the same period. More broadly, Chugach and other large energy utilities in Alaska are facing flat or declining demand now and for the foreseeable future from a declining state population, as well as more efficient appliances causing households to use less energy. Chugach’s purchase of ML&P had been contemplated for decades and was supported by some prominent Anchorage business leaders. Chugach officials insist it has still been beneficial to the community and ratepayers overall. They note ML&P would be facing the same situation if it were still a standalone utility and Chugach has so far captured savings of approximately $21 million in fuel, labor and not needing to account for inter-governmental charges, according to Hasquet. “We are saving roughly $1 million each month in fuel alone. We expect savings to continue to materialize over the next several years as integration efforts are completed,” Hasquet wrote. Elwood Brehmer can be reached at [email protected]

ADFG: Bristol Bay sockeye runs set all-time record

It’s official: Bristol Bay’s 2021 commercial salmon season was the largest on record. In-season escapement and harvest estimates already set the stage for the record, but the end-season summary released by the Alaska Department of Fish and Game confirmed it. About 66.1 million sockeye salmon returned to the streams across the Bristol Bay watershed, breaking the previous record of 62.9 million, which was set in 2018. It’s only the third time in the bay’s history that the total inshore run has exceeded 60 million sockeye, according to Fish and Game. While the run was 60 percent above the recent 20-year average and about 32 percent above the pre-season forecast, harvest didn’t quite exceed forecast to those levels. In total, fishermen harvested 40.4 million sockeye, 11 percent above the preseason forecast of 36.4 million. It’s only the fifth-largest harvest on record, but it’s the third time in the last four years that the harvest has come in higher than 40 million fish. The $247.7 million overall ex-vessel value — which includes all salmon species, not just sockeye — was the fourth largest in the bay’s history. That amount doesn’t include post-season adjustments, either. During the season, managers noted that the average size of sockeye was somewhat smaller than historical averages. That’s in part because the fish that came back this year were younger. Fish and Game noted in the season summary that the dominant age class this year was three-year-old fish, or the 1.2 age class. They made up about 60 percent of the total run. The larger, older fish made up a much smaller component. “Average weight for sockeye salmon was roughly a pound less than their most recent 20-year average of 5.7 pounds,” the summary notes. Though some areas saw extremely high single days of returns — the Nushagak saw more than 1.8 million sockeye return in a single day in July — the overall run timing was earlier than in recent years as well. That helped with fishery operations. “Inshore run timing to Bristol Bay this season was not as late as in recent years and aligned more with historical average timing in most districts,” managers wrote in the summary. “This helped the fishery to operate at full capacity for the entire season.” Meanwhile, as Bristol Bay’s fishermen took home fat paychecks, other fisheries saw some of their worst seasons. Some of that was due to poor runs, and some was due to lack of harvester participation, lack of processor participation or both. Chignik, for example, saw a stronger than expected late-season sockeye run, which was refreshing for an area that has seen multiple complete sockeye run failures in the last five years. However, this year, there was no one available to harvest it, as the failure of the early-season sockeye run led fishermen to go elsewhere. The Chignik managers noted in a September report that there wasn’t much harvest opportunity in June and July because of the low run. “It is not appropriate to compare sockeye salmon harvest this year to recent averages due to the low participation and lack of harvest opportunity in June and much of July,” the managers wrote. The same is true for Cook Inlet; the commercial harvest is exceptionally low this year, with the drift fishery harvest coming in at about 849,150 sockeye, much less than the average in the last decade. Setnet harvest was low, too, in part because the setnet fishery experienced one of the earliest closures in its history in mid-July due to the failure of the Kenai River late-run king salmon harvest. There were plenty of sockeye — the end-season estimate of 2.4 million escapement into the Kenai is the highest since 1987 — but the lack of kings led to fishing restrictions. Managers noted that participation in the drift fishery was lower than average, too. In the Yukon River, the chum salmon run completely failed. Both the fall chum and the coho runs in the Yukon are the lowest on record, according to an Oct. 1 announcement from Fish and Game. For comparison, the normal historical run size is about 870,000 fish; as of Oct. 1, Fish and Game estimated the run at 102,000. Fish and Game estimates the coho run at 37,000 fish compared to its historical normal of 240,000. The chum run didn’t meet the threshold to allow any kind of fishing, and may not meet the Canadian treaty requirement. Subsistence fishing in the area relies on chum salmon, and managers plan to relax some of the requirements after Oct. 1 for the Lower Yukon, even though the escapement didn’t meet the requirement for any kind of fishing. “Preliminary data from assessment projects indicated that fall chum and coho salmon had the smallest fish lengths observed in their respective datasets,” the announcement said. “Subsistence fishing restrictions are being relaxed starting in the Lower Yukon Area on October 1 and moving upriver once the tail end of the salmon run has passed a subdistrict.” Kotzebue Sound’s season fell short as well, plagued by poor salmon returns and increasing restrictions in July and August. The final harvest estimate of 96,492 chum salmon was only about 64 percent of the 2020 harvest, and was the lowest since 2007. Like Bristol Bay, chums were also smaller, with an average weight of 7.4 pounds per salmon. There are only five years in the history of the Kotzebue Sound commercial fishery when the average weight was below 8 pounds, according to Fish and Game. The lack of fishing opportunity and thin harvests led the three buyers — Copper River Seafoods, Pacific Star Seafoods and Arctic Circle Wild Salmon — to say they would withdraw by mid-August, though the season didn’t end until Aug. 31. The season summary, released Sept. 23, said the department then opened some additional fishing time in the last week. Participation was low, though catch per unit of effort was similar to 2020. “Throughout most of the season, the catch per unit of effort (CPUE) was similar to 2020 but, for most of the time this year, about 25% fewer permit holders were fishing,” the summary states. “During the last week of fishing, the CPUE was double the previous year with nearly the same amount of permit holders fishing.” In total, managers estimate the ex-vessel value for Kotzebue Sound at $332,064, which is less than half of the historical average value of the fishery, according to Fish and Game. Elizabeth Earl can be reached at [email protected]

Ship with infamous COVID-19 outbreak set to cruise again

The cruise ship that stranded thousands of passengers for days off the California coast in one of the nation’s first cruise ship coronavirus outbreaks returned to sea Sept. 25 for the first time in 18 months. The Grand Princess will depart from the Port of Los Angeles for a five-day cruise to Cabo San Lucas, Mexico, part of a phased effort by the nation’s cruise companies to relaunch the badly battered $150-billion industry after a historic shutdown. Among the changes enabling its launch: only vaccinated passengers and staff are allowed onboard, masks are mandatory in common areas, and many cabins will have new air-filtering technology. “Given what happened last year, it’s very important for (the cruise company) that the passengers and crew are safe,” said Lara Handler, who is taking the cruise with her husband, Blake, to celebrate their 30th wedding anniversary. Before the pandemic, the couple booked cruises almost once a year. “They are doing what they have to do to make it so,” she said. “I feel pretty confident.” The 949-foot ship idled off the coast of San Francisco for several days in early March 2020 as public health officials and the cruise company deliberated over how to address an onboard coronavirus outbreak. At least 21 people on the ship tested positive for COVID-19. A week earlier, a 75-year-old passenger from a previous Grand Princess cruise had become California’s first COVID-19 fatality, marking a major turning point in the state’s battle with the coronavirus. Some cruises have been sailing off Europe and Asia for months, and ships began launching in the U.S. this summer from Texas, Seattle and Florida. The Carnival Panorama, departing on weekly voyages from the Port of Long Beach to Mexico, relaunched Aug. 21 as the first cruise to embark from Southern California. The Port of San Diego is scheduled to reopen for cruises Oct. 1. As part of the new health protocols on the Grand Princess, all passengers will be required to show proof of a full COVID-19 vaccination before boarding and proof of a negative viral test, taken within two days of their departure date. The crew will be vaccinated, and the first few cruises will be limited to no more than 75 percent of the ship’s 2,600-person capacity. Passengers will be required to wear masks in places such as elevators, retail stores, the casino and before being seated in the main dining room and the buffet area. The ship’s heating, ventilation and air conditioning system has been upgraded with filters designed to remove fine particles and bacteria, and some units will include ultraviolet light treatment systems to kill viruses in recirculated air, according to Princess Cruises. Most major cruise lines — including Carnival, Norwegian and Royal Caribbean — require passengers and crew on nearly every cruise from U.S. ports to be vaccinated or to show proof of a negative COVID-19 test. The Centers for Disease Control and Prevention recommends that unvaccinated people avoid cruise travel. “The virus that causes COVID-19 spreads easily between people in close quarters aboard ships, and the chance of getting COVID-19 on cruise ships is high,” the agency says on its website. The extended shutdown of operations nearly capsized the industry. Carnival Corp., the world’s largest cruise company and parent company to Princess Cruises, reported losing more than $14 billion since the pandemic started. Royal Caribbean, one of Carnival’s largest competitors, lost more than $8 billion during the pandemic shutdown, the company said. A survey by New York University’s School of Professional Studies found that only 10 percent of the more than 2,300 Americans surveyed planned to take a cruise this year, down from 36 percent in 2019. Still, cruise companies say reservations are on the rise because of pent-up demand by cruise enthusiasts who have been away for more than a year. Carnival reported during its latest earnings report Sept. 24 that booking volume slowed last month because of an increase in coronavirus Delta variant cases, but cruise bookings for the second half of 2022 have already surpassed the rates of 2019. “The broader environment for travel, while choppy, has improved dramatically since last summer, and we believe it should improve even further by next summer, if the current trend of vaccine rollouts and advancements in therapies continues,” said Carnival’s CEO Arnold Donald. “We have also opened bookings for further-out cruises in 2023, with unprecedented early demand.” Royal Caribbean said in its April-to-June earnings report that the company received about 50 percent more new bookings compared with the previous three-month period “with trends improving from one month to the next.” By June, the company said bookings were up 90 percent compared with the first quarter of the year. Bookings on Norwegian Cruise Line for 2022 are expected to surpass booking levels for 2019, the company said last month. But the industry’s problems aren’t over. The Carnival Vista, sailing from Galveston, Texas, reported a COVID-19 outbreak last month of 26 crew members and one passenger. A 77-year-old passenger who complained of COVID-19 symptoms on the ship later died after being evacuated to a hospital. Carnival, Princess and other cruise companies also face a wave of lawsuits filed by the families of passengers who have died on cruises and passengers who were stricken by COVID-19 while on a ship. But such lawsuits are not likely to win huge awards for passengers or their families partly because the cruise companies operate under maritime law, which limits damages from deaths, illness and injuries that take place at sea, said James Walker, a Miami attorney whose firm has filed several lawsuits against cruise ships during the pandemic. “The lawsuit payouts by cruise lines are, in my view, an insignificant cost in their business model,” he said.

Valuable Bering Sea crab populations are in a ‘very scary’ decline

Federal biologist Erin Fedewa boarded a research vessel in June in Dutch Harbor, and journeyed to a swath of the Bering Sea that typically yields an abundance of young snow crab in annual surveys. Not this summer. At this spot, and elsewhere, the sampling nets came up with stunningly few: a more than 99 percent drop in immature females compared to those found just three years earlier. Biologists also found significant downturns in the numbers of mature snow crab as they painstakingly sorted through the sea life they hauled up. “The juveniles obviously were a red flag, but just about every size of snow crab were in dramatic decline,” Fedewa said. “It’s very scary.” This collapse in the Bering Sea snow crab population comes amid a decade of rapid climatic changes, which have scrambled one of the most productive marine ecosystems on the planet in ways that scientists are just beginning to understand. The changes are forcing them to reconsider how they develop models to forecast harvest seasons. As waters warm, some older crab have moved northwest, young crab are being gobbled up by an increased number of predators and disease is on the rise. All of this could be making crab more vulnerable to excessive harvesting, and that has increased concern over the impacts of trawlers that accidentally scoop up crab as they drag nets along the sea floor targeting bottom-dwelling fish. The forecast for the 2022 winter snow crab season is bleak. At best, it is expected to be considerably less than 12 million pounds. That would be down from a 2021 harvest of 45 million pounds and a fraction of the more than 300 million pounds taken during two peak years in the early 1990s. The iconic Bering Sea red king crab, which can grow up to 24 pounds with a leg-span up to 5 feet, also are in trouble. In a big blow to the commercial crabbers, many of whom are based in Washington, the October harvest for these crab has been canceled, something that has only happened three times before. Overall conservation measures are expected to wipe out most of the value of the annual Bering Sea crab harvest, worth more than $160 million during the past year, according to Jamie Goen, executive director of the Seattle-based Alaska Bering Sea Crabbers. “We have gotten a double blow, and the economic impact is unlike anything we have experienced in this industry,” Goen said. The harvest cutback also will hit some Alaska communities that rely on the crab fleets to help sustain their economies. St. Paul, in the Pribilof Islands northwest of Dutch Harbor, is the site of a major crab-processing plant operated by Seattle-based Trident Seafoods, and depends on crabbing not only to generate activity for its port but also to pay taxes that prop up the local government. Crabbers want more done to protect crab from some types of fishing, including trawling. Goen said that crabbers will be pressing fishery managers to step up protective measures, such as expanding zones where trawling is not permitted and finding a way to estimate the unseen death toll of crab passing under nets. “We need other (fishing) sectors to come forward and protect the crab,” Goen said. Both king and snow crab are caught off Alaska by steel-framed pots set along the bottom by a fleet of some 60 vessels. Each boat typically employs six to seven crew, some of which have been featured in the Discovery Channel’s long-running reality television series “Deadliest Catch.” Most of the king crab harvest and snow crab sold in the United States in recent years has been imported from other countries. But the downturn in U.S. stocks could push consumer prices higher. Less ice, warmer water Ocean conditions are key for scientists studying the decline of Bering Sea crab, which for all species are now estimated to be at their lowest overall levels in more than four decades. “This is huge,” said Bob Foy, director of the National Oceanic and Atmospheric Administration’s Alaska Fisheries Science Center. “It is a massive shift for our ecosystem in the Bering Sea, and the implications for other fisheries are just starting to be thought through.” He notes snow crab juveniles looked to be on an upward trend just two years ago. Then, in the space of 48 months, they appeared to have imploded. One focus of research is the Bering Sea ice that forms each winter, and acts like a giant platform for growing algae at the base of the food chain. As it freezes, the ice sheds a dense layer of cold, briny seawater that eventually forms a cold pool on the bottom, prime conditions for young snow crab. In some recent winters, there has been a big reduction in the extent and thickness of the ice. During these weak ice years, the size of the cold pool has shrunk, a retreat closely mapped by federal researchers. One of the crab’s voracious predators — cod — do not like the chill temperatures in the cool pool. The warmer temperatures appear to have made it possible for cod to hunt far more young snow crab, according to Fedewa, who said analysis of cod bellies show they are eating more crab. “The assumption is that the thermal barriers in cold-water habitat that have protected juvenile snow crab from predators like Pacific cod are basically breaking down,” Fedewa said. King crab also may be suffering from increased predation. Earlier federal research in the 1980s showed that young Bristol Bay sockeye salmon like to feed on larval king crab. In recent years, there have been a series of strong sockeye runs that may be due, at least in part, to warmer and more favorable conditions in the lakes where they rear before heading to saltwater. “That is a hypothesis that needs to be looked at more,” Fedewa said. Shifting populations The warming trends in the Bering Sea appear to be increasing the numbers of crab found farther north. The trends, tracked through surveys, are not fully understood. The fall Bering Sea king crab harvest was canceled because of low numbers of mature females. But this summer’s survey found an increase in mature king crab females in more northern areas. These crab were tallied outside the main survey zone, and thus not used to calculate potential harvests. Snow crab populations also appear to be shifting. This last winter, crab skippers reported an unusual harvest season when the main concentrations of snow crab were found some 500 miles northwest of Dutch Harbor, which is about twice the typical distance for February and March fishing. “The crab that we found were good crab. They were just way farther away than we traditionally fish,” said Tom Suryan, who has fished crab for than 40 years and plans to retire. Suryan, skipper of the Bristol Mariner, said that he was about 60 miles from the maritime boundary with Russia. Others boats were even closer. “I could literally spit across the Russian border. I mean, we were on it, down to the quarter mile,” said Owen Kvinge, captain of the Seattle-based Arctic Sea, who suggests some of the U.S. crab may have moved into Russian waters. Tumultuous past Though crab populations fluctuate, there also are cautionary tales of collapses in Alaska that continue to haunt the industry. In the 20th century, the Gulf of Alaska was the site of a major king crab fishery that boomed and then went bust. Shut down in the early 1980s, it has yet to resume. The Bering Sea king crab fishery also has a tumultuous history. The annual catch soared to about 130 million pounds in the early 1980s, then crab stocks crashed and the harvest was shut down. Since 1996, in the aftermath of two consecutive years of closures, the harvests have never topped 22 million pounds, and fell to 2.6 million pounds last year. In a whistleblower complaint filed earlier this year with NOAA Fisheries, a former federal fishery biologist based in Kodiak alleged that federal surveys in the 1970s and 1980s were carried out improperly, with extra tows made in random locations and other steps taken to deliberately inflate the estimates of crab populations. The whistleblower, Braxton Dew, said the faulty surveys set the stage for overfishing, which he called the primary cause of the king crab collapse. “It was a precipitous collapse, and that’s because of all the bogus numbers that were used,” Dew alleged in a recent interview. Foy, the director of NOAA’s Alaska Fisheries Science Center, said that survey methods have changed and improved since the time period cited in Dew’s complaint, and that even back then the results were subject to reviews that offered checks and balances. Later this fall, the Alaska Department of Fish and Game is expected to decide whether the 2020 snow crab (also known as opilio) harvests can proceed, and also is responsible for setting levels for small Bering Sea harvests for bairdi crab and golden king crab. In the years ahead, crabbers are hoping populations can rebound if strong conservation measures are quickly put in place. Yet their livelihoods could face a perilous future if the warming climate works against recovery. “The environmental pressures are enormous,” Suryan said. “Perhaps Bering Sea crab are an indicator species — the proverbial canary in the coal mine. I don’t know. But things are changing, of that we can be certain.”

Murkowski seeks permanent waiver from law compelling Alaska-bound cruises to stop in Canada

Sen. Lisa Murkowski is trying to make a temporary, pandemic-driven exemption from longstanding federal maritime laws permanent for Alaska cruises. Alaska’s senior senator submitted the Cruising for Alaska’s Workforce Act in the U.S. Senate Sept. 23 to end the historical requirement that Alaska-bound cruises embarking from U.S. West Coast ports also stop at a foreign port on their way north. The legislation builds on and would solidify the 2021-only exemption to the Passenger Vessel Services Act that passed in late May, which allowed for a scaled-back cruise season in Southeast Alaska this year. Last spring, the Alaska congressional delegation successfully propelled the current, temporary exemption through Congress to President Joe Biden’s desk, via Rep. Don Young’s Alaska Tourism Restoration Act, reaffirming the trio’s collective influence in the Capitol. For large cruise vessels to call on Alaska this year, the exemption was needed because Canadian transportation officials in February announced they again would not allow the ships to dock in the country’s ports in 2021 after similarly banning cruise ships in 2020, in an attempt to limit the spread of COVID-19. The 19th Century-era PVSA requires foreign-built, crewed or flagged passenger vessels sailing between U.S. ports to make at least one stop in a foreign port; an attempt to buoy the nation’s shipbuilding and maritime industries. The modern-day effect has been for cruise lines to use a Canadian port, most often Vancouver, as either the starting point or a stop en route for Alaska-bound voyages to comply. The pandemic hang-up for international cruise companies and the plethora of Alaska tourism businesses — from fishing charters in Ketchikan to the Alaska Railroad to gift shops in Fairbanks — that depend on cruise passengers is that no American yards build large cruise ships. All of the large cruise ships currently operating were built elsewhere. Murkowski said in a statement from her office that the new legislation guarantees that the PVSA will not interfere with Alaska’s tourism industry again without allowing foreign-built ships to compete with the domestic industry. That’s because the Cruising for Alaska’s Workforce Act includes a provision that would reinstate the foreign stop requirement for foreign-built vessels if a large U.S.-built cruise ship were to enter service. “While the PVSA still serves its purpose in the Lower 48, it unintentionally put many Alaskan businesses at the mercy of the Canadian government when Canada closed its borders, including ports,” Murkowski said. “The inability for cruises to travel to Alaska nearly wiped out our economies in Southeast; communities like Skagway for example saw an 80 percent drop in business revenues.” The temporary exemption passed in late May gave cruise companies time to start limited sailings in July. Overall, this year’s cruise season in Southeast was about 10 percent of normal, according to a report commissioned by the Southeast Conference, a regional community development nonprofit. Alaska’s cruise industry peaked in 2019 when roughly 1.3 million tourists — more than half of all visitors to the state that year — arrived via cruise ship. Last year, the region lost approximately 45 percent of the nearly 8,400 tourism-dependent jobs it had in 2019, primarily due to the lack of cruise ships. Delegation staffers have said they would expect a permanent Alaska cruise exemption to the PVSA to garner support similar to what the temporary waiver received. Murkowski’s bill is first set to be heard in the Senate Commerce, Science and Transportation Committee chaired by Washington Democrat Maria Cantwell, who worked closely with Murkowski for years when they led the Energy and Natural Resources Committee for their respective parties. Cantwell backed the temporary exemption, noting at the time that the lost 2020 Alaska cruise season cost Seattle an estimated 5,500 jobs and $900 million in potential economic activity. Elwood Brehmer can be reached at [email protected]

Native corporations slowly approach shared revenue ‘cliff’

Alaska Native corporations across the state face a “fiscal cliff” of their own that is still years off, but there are currently few options to avoid it. For decades, the 12 Alaska Native regional corporations and nearly 200 village corporations statewide have shared revenue generated from resource projects amongst themselves to the tune of roughly $3 billion since 1982, according to figures from a 2018 report on the revenue sharing program by the McDowell Group combined with more recent data. Generally known as the “Section 7(i)” program for its place in the Alaska Native Claims Settlement Act, the provision in the landmark legislation directs Alaska Native corporations to distribute 70 percent of the revenue originating from resource projects on their land to the other Native corporations statewide. The land or resource owner company keeps the remaining 30 percent. ANCSA Regional Association Executive Director Kim Reitmeier said the 7(i) program is a critical component of ANCSA “that truly reflects the Alaska Native values of unity and collaboration.” Revenue from the 7(i) program has been a significant source of funds for benefits each of the regional corporations have offered their shareholders, according to Reitmeier. The money is often used for cultural education, language revitalization, and scholarships, or is paid directly in shareholder dividends, but the individual corporations ultimately determine how it is spent. “There’s been trials and tribulations for the regional corporations and 7(i) revenue, and assistance from the other regional corporations has been paramount in the success of all of them,” she said. Revenue shared in the program — greatly influenced by commodity prices and production — totaled $246 million in fiscal year 2019 and $158.4 million last year, according to Reitmeier. She also noted it’s a model that flies in the face of the country’s traditional business principles. “It’s really something that baffles the mind. Ask Lowe’s and Home Depot and all those entities to share profits with each other. You take those concepts to Western business cultures and it blows people’s minds,” Reitmeier said. From 2015-2017 Bristol Bay Native Corp. collected between $5.6 million and $9.6 million per year in 7(i) revenue, net of what the company also turned around and distributed to village corporations in its region through the closely linked 7(j) program, according to BBNC’s 2017 annual report. Section 7(j) of ANCSA subsequently directs the 12 regional corporations to distribute half of the shared revenue they receive to the area’s village corporations. The 12 regional corporations are all involved in numerous industries and business sectors, from government contracting to oil field services to remote fishing lodges, typically through subsidiaries and partnerships. And while many village corporations are often more focused on a single industry, whether drilling oil wells or managing parking garages, Alaska Native Village Corporation Association Executive Director Hallie Bissett said that the 7(j) income accounts for all or nearly all of the revenue collected by approximately two-thirds of the 177 village corporations that are ANVCA members. Similar to Reitmeier, Bissett said the emphasis on spreading the benefits of natural resources across the state is one of the first socially responsible business models. “People often forget the Alaska Native piece of ANCs and just focus on the corporation,” Bissett said. “It’s very similar to the way we would share subsistence food,” she added. The problem lies in the fact that resource revenue from Alaska Native corporation-owned lands is generally declining and the fall is likely to accelerate in the coming years. As is the case with oil production across the North Slope, production from lands owned by Arctic Slope Regional Corp. or state leases to which ASRC holds an overriding royalty interest has been on a downward trend, with no outlook for an abrupt recovery. Shared revenue from the Red Dog mine in northwest Alaska — one of the world’s largest zinc producers — also has an expiration date, and it’s the one Bissett is most concerned with. “There’s a huge cliff coming for 7(j),” she said in an interview. Opened in 1989, the Red Dog mine is on NANA lands north of Kotzebue. However, the metal deposit Red Dog operator Teck Resources Ltd. has been mining from is projected to be exhausted by 2032, according to Teck, with a likely ramp-down of production in the years preceding closure. Teck leaders in 2018 announced a second major discovery in 2018 that company representatives characterized as another world-scale zinc prospect, but it is on nearby state land. A spokeswoman for NANA did not respond to questions about royalty and 7(i) revenue from Red Dog in time for this story. According to the Alaska Industrial Development and Export Authority, which owns the industrial toll road used to access the mine, royalty payments to NANA average greater than $130 million annually. Through 2016, Red Dog had generated more than $1.3 billion in royalties for NANA, of which $860 million was subsequently distributed to Alaska Native corporations through the 7(i) and 7(j) programs, according to figures in a 2017 AIDEA asset review report. “Awareness is the first big piece,” Bissett said in regards to addressing the looming dilemma. “Some (village corporation leaders) don’t even know where the money comes from.” She said Native corporation leaders attempted to get a 3 percent royalty from possible oil production from the Arctic National Wildlife Refuge but that was unsuccessful. Leaders of the Donlin gold project in the upper Kuskokwim region of Western Alaska tout their world-scale prospect — with the potential to produce upwards of 33 million ounces over a nearly 30-year planned mine life — as a possible solution to the 7(i) and 7(j) revenue outlook. The Donlin prospect is on land owned by The Kuskokwim Corp., a consolidated village corporation and, as is the case across the state, the subsurface rights and royalties are controlled by the regional corporation — in Donlin’s case, Calista Corp. A Donlin spokeswoman referred questions about royalties to Calista officials. Calista spokesman Thom Leonard noted via email that Donlin isn’t the only resource development opportunity on Alaska Native-owned lands, but it is the next major opportunity after Red Dog to contribute to the 7(i) program. “Like we can’t predict how many fish we will catch, we can’t speculate on the amount of 7(i)/7(j) revenue (from Donlin). It will depend on the price of gold and other factors. That said, if the Red Dog mine is any guide, we expect to be a significant contributor to 7(i)/7(j) distributions to all Alaska Native corporations,” Leonard wrote, also noting that Red Dog accounted for 70 percent of all 7(i) revenue between 2015 and 2018. Bissett concurred that Donlin could be a major source of shared revenue, but also added that it is several years from the start of a lengthy construction process, if the mine is ultimately built at all. She suggested it could be 20 years before significant 7(i) revenue is collected from Donlin. “As my chairman said, (shared revenue) is the difference between being in business and not in business” for many village corporations, Bissett said. Elwood Brehmer can be reached at [email protected]

Pebble touts economics as EPA moves to reinstate mine ‘veto’

The Pebble Limited Partnership continues to press ahead on pre-development work for its highly contentious mine, despite major roadblocks set by federal agencies under both the Trump and Biden administrations. The mining venture’s parent company, Vancouver-based Northern Dynasty Minerals, earlier this month released a summary of the preliminary economic assessment for its latest mine plan, which until recently was long demanded by the project’s opponents. According to Northern Dynasty, the 20-year mine plan Pebble submitted to the U.S. Army Corps of Engineers in late 2017 would generate an internal rate of return of nearly 16 percent and represents a 7 percent discounted net present value of approximately $2.3 billion, based on long-term metal price assumptions. At current prices for the prospect’s copper, gold and silver, the 20-year Pebble plan would generate returns of nearly 24 percent and holds a discounted net present value of $4.8 billion, the PEA states. The full report will be made public by late October, according to Northern Dynasty. Pebble last issued a formal evaluation of its project’s economics in 2011, which led opponents in recent years to demand updated economic estimates for its newer, scaled-back mine plan. They claimed the company avoided making its internal figures public because the smaller mine is not economically feasible on its own and would simply be a precursor to significant expansion. Northern Dynasty CEO Ron Thiessen said the report outlines the “robust economics” of Pebble in a statement accompanying the PEA. “It is a project that can be designed, built and operated with industry-leading environmental safeguards while generating significant financial returns over multiple decades,” Thiessen said. The 20-year economic forecast for the project is based on processing approximately 180,000 tons of ore per day from the open-pit mine and cumulative production of roughly 6.4 billion pounds of copper, 7.3 million ounces of gold and 37 million ounces of silver, along with ancillary production of other metals. An expanded mine capable of processing up to 270,000 tons of ore per day over 90-plus years would increase the project’s internal return to roughly 20 percent at forecasted metal prices and 25-30 percent at current prices, according to the PEA figures. The expansion economics are based on producing up to 60 billion pounds of copper and 50 million ounces of gold. For comparison, the proposed Donlin gold mine in the Kuskokwim region is forecasted to produce upwards of 33 million ounces of gold, which would make it one of the largest gold operations on Earth. At the same time Pebble and Northern Dynasty leaders were touting the moneymaking ability of their project, attorneys for the Environmental Protection Agency were indicating the Biden administration’s plan to resurrect a regulatory “veto” of Pebble in federal court filings. EPA attorneys filed a scheduling motion in U.S. District Court of Alaska on Sept. 9 outlining their intent to reverse the Trump administration’s 2019 withdrawal of a proposed determination to prohibit a large mine in the Pebble area through the agency’s Clean Water Act Section 404(c) authority. The withdrawal was partly rejected by the 9th Circuit Court of Appeals in June as part of a separate lawsuit filed against the EPA in 2019 by numerous Tribes and environmental groups opposed to the mine. The Appeals Court panel partly overturned a District Court ruling, finding that EPA regulations allow for a 404(c) withdrawal “only when an ‘unacceptable adverse effect’ on specified resources was not ‘likely,’” the June 17 order states. According to the order, the EPA under the Trump administration did not sufficiently justify its rationale for reversing the proposed determination, as required by the agency’s regulations. The EPA began the years-long veto process in 2014 under former President Barack Obama. But the settlement to a subsequent lawsuit by Pebble against the EPA was resolved by EPA leaders in the Trump administration, which allowed Pebble to move ahead with permitting its project. In a surprising move last November, the U.S. Army Corps of Engineers rejected the mine plan at the end of a nearly three-year environmental impact statement process, which resulted in a final EIS that broadly concluded the mine could co-exist with the area’s other resources and would cause “no measurable change” in the numbers of salmon returning to the Nushagak and Kvichak rivers, or in the long-term health of the commercial fisheries in the region. Pebble’s appeal of the Army Corps of Engineers Alaska District’s record of decision for the project EIS is primarily based on the perceived inconsistencies between the EIS and the agency’s final decision. Pebble spokesman Mike Heatwole wrote in an emailed response to questions that the company maintains its position that the withdrawal of the 404(c) veto by the EPA under the Trump administration “was sound and appropriate.” Heatwole emphasized that the EIS published last year concluded the project could be built without harm to the region’s fisheries or water resources and further represents a “tremendous economic opportunity” for nearby communities. “Our focus remains on working through the formal appeals process via the (Army Corps). As the Biden administration seeks lower carbon emissions for energy production, they should recognize that such change will require significantly more mineral production — notably copper,” he wrote. “The Pebble project remains an important domestic source for the minerals necessary for the administration to reach its green energy goals.” Pebble’s appeal of the record of decision to Army Corps Pacific Division leaders is ongoing. Elwood Brehmer can be reached at [email protected]

Movers and Shakers for Oct. 3

Joe Gerace was named director of the Municipality of Anchorage Health Department effective Sept. 17. Gerace has more than 38 years of experience in emergency service delivery and more than 20 years of experience working in disaster response. He has worked as a firefighter, paramedic, Red Cross disaster responder, and as a medical detachment commander for the Alaska National Guard and the State Division of Homeland Security and Emergency Management during the pandemic. Gerace was recently was the Director of Operations for Visit Healthcare which was the sole testing and vaccination provider for the Municipality of Anchorage. Gerace is also currently the chairman of the board for American Red Cross in Alaska. He has a bachelor’s degree in chemistry and chemical engineering and an MBA with a focus on supply chain logistics and operations. Amanda Browning was appointed to a vacancy on the Palmer District Court. Browning served as an Assistant District Attorney for the Alaska Department of Law in Kenai and Sitka before serving as a Magistrate Judge IV in both Ketchikan and Kenai. She graduated from the Ralph R. Pappito School of Law at Roger Williams University in 2005. Melinda Meade Meyers has been promoted to Of Counsel for Van Ness Feldman’s Land, Water, and Natural Resources and Native Affairs practices. Meyers’ practice includes the Alaska Native Claims Settlement Act, the Alaska National Interest Lands Conservation Act, the National Environmental Policy Act, the Endangered Species Act, and other natural resources statutes. She also counsels Alaska Native corporations and Tribes on federal small business contracting and participation in the U.S. Small Business Administration’s business development programs, such as the 8(a) and HUBZone Programs. Before attending law school, she served as director of Communications for the National Park Hospitality Association and also worked with the American Recreation Coalition, where she collaborated in the development and implementation of nationwide programs and initiatives promoting outdoor recreation industries. She holds a juris doctorate from the George Mason University School of Law and a bachelor’s degree from Cornell University. Birch Horton Bittner &Cherot announced Bill Falsey and Zoe Danner as two additions to its Anchorage-based team of attorneys. Falsey is the former Municipal Attorney and City Manager for the Municipality of Anchorage. Falsey is a graduate of Stanford University and Yale University Law School. Danner joins Birch Horton Bittner &Cherot after completing two clerkships with the Anchorage Superior Court. Danner graduated from Columbia University with a degree in Russian language and culture and received her juris doctorate from the University of California-Irvine School of Law. During law school, Danner clerked at the Anchorage District Attorney’s Office and the Los Angeles County District Attorney’s Office, where she prosecuted misdemeanor and felony matters.

FISH FACTOR: Tech providing solution to ‘ghost fishing’ gear

Lost fishing gear — be it nets, lines or pots — continues “ghost fishing” forever, causing a slow death to countless marine creatures and financial losses to fishermen. Now new “smart buoys” can track and monitor all types of deployed gear and report its location directly to a cell phone or website. Blue Ocean Gear of California created and builds the buoys that also can track ocean temperatures, depth, movement, even how much has been caught. The small, three-pound buoys are just seven inches in diameter, don’t require any special training to use, and are tough enough to handle the harshest ocean conditions. “All the information is collected in a database,” said company founder and CEO Kortney Opshaug. “We have both a mobile app that you can access from your phone or a web interface that allows you to see more of the data, charts and things like that. Most of the buoys have satellite transmission, but some also have radio transmission and we’re working more and more with that. They’re slightly more cost effective, and we can create networks out on the water that are talking to one another.” Opshaug and her Silicon Valley team of engineers and product developers were motivated primarily by the impacts of lost gear on the marine environment and the costs to fishermen. “As we explored the space, it became very clear that lost fishing gear was one of the most devastating issues that has both environmental impacts as well as financial impacts on the industry,” she said. “There’s about 640,000 metric tons of gear lost every year and it continues to fish. It becomes devastating for the marine ecosystems, but it’s also unlimited competition for the fishermen from their own gear that they’ve lost. Plus, they have to pay to replace that gear. So we developed our smart buoys to be able to track gear out on the water. We thought if you could track it, you’re not as likely to lose it.” Chief Business Officer Peter Macy added, “There may be a crab pot at the bottom of the ocean and a buoy at the surface, but when the tides and currents are strong, the buoy can get pulled underwater. Fishermen can’t find it and they waste a lot of time and fuel. But our device tracks the gear from the surface.” The smart buoys, which first hit the water in 2015, were tested by two vessels during the 2020-21 golden king crab season in the Aleutian Islands to help refine the software and communications settings. The automated system identified several pieces of errant gear, including a line that had severed. It allowed the recovery in real time of nearly 100 pounds of floats and lines that would otherwise have been lost. “Real time alerts are the difference between an 8-day trip and a 14-day trip,” said one of the skippers in a case study testimonial on the Blue Ocean Gear website, adding that “the time saved per string of gear was about seven hours.” “The main goal is to help fishermen fish more, and fish more sustainably,” said Macy. The smart buoys also are being used in Alaska’s halibut fishery and a first order has come from a Southeast kelp farm, Macy said, crediting assists from the Alaska Ocean Cluster. The buoys also are in use on the east coast, Canada, the Caribbean and the South Pacific. Learn more at www.blueoceangear.com Bristol Bay sockeyes on ice Sockeye salmon from Bristol Bay is taking to the ice at Seattle’s Climate Pledge Arena in a partnership with the National Hockey League’s newest team, the Seattle Kraken. Bristol Bay Native Corp., which represents 31 tribes comprising 10,000 members, also will operate a Bristol Bay Wild Market in collaboration with the fishermen funded and operated Bristol Bay Regional Seafood Development Association and Bristol Wild Seafood Co. BBNC purchased Blue North Fisheries and Clipper Seafoods in 2019, making that new company the largest longline Pacific cod operation in the U.S. The three organizations have come together to bring “exceptional wild Alaskan seafood and the people and rich cultural heritage of Bristol Bay to millions of Arena visitors every year,” the groups said in a press release. During every game and event held at the arena, an Alaska seafood menu will feature wild Alaska panko cod and sockeye tacos, fish n’ chips, sockeye fillet and baguette and chowders. Bristol Bay also will be splashed across hundreds of TV screens inside the arena, the LED side rings, on the main scoreboards and more. The marketing move follows the lead of Oregon-based Pacific Seafood, the first seafood supplier to land a sports partnership last fall with a multi-year deal with the Pac-12 Men’s basketball and football teams which includes a dozen West Coast universities. It added Pac-12 Women’s basketball earlier this year. Back on the ice rink, the Kraken team and coaching staff also will hold annual hockey camps in Alaska for kids who wouldn’t normally have exposure to the game. Getting canned Sales of canned salmon continue to surge as COVID-19-conscious consumers continue to opt for healthier, easy to use, non-perishable foods. Seafood Source highlights a new report by market tracker Fact.MR that predicts the global canned salmon market will reach $4.5 billion this year and sales will continue to grow through 2031. More global consumers also care more about where their seafood comes from, the report said, and wild Pacific salmon is the top choice, accounting for the most market share of nearly 82 percent this year. The market experts predict that overall, wild canned salmon will generate 67 percent of the total global market share and nearly 62 percent of total North American sales over the next decade. It’s good news for Alaska, which provides more than 95 percent of the nation’s wild salmon. Not surprisingly, boneless/skinless fish is the preferred canned item and those sales are expected to rise at an annual rate of nearly 7 percent through 2031. Canned pinks are expected to have the most demand with a market share this year of 34.5 percent. The market watchers also predict an upsurge in pink sales to global markets at over 7 percent per year. Canned sockeye salmon is the second-highest seller, especially in exports to Europe. Canned chums also are becoming more popular “because of their lighter oil content,” and annual sales growth is projected at 6.2 percent over the forecast period, the report said. Coho salmon also is expected to “witness lucrative growth with a rising demand across the globe” estimated at 5.5 percent per year. Alaska processer reports show that more than 81 million pounds of Alaska salmon went into cans in 2020, valued at nearly $687 million on their sales sheets. Of that, nearly 60 million pounds were pinks valued at $205 million; canned sockeye salmon topped 21 million pounds, worth over $480 million at first-wholesale. Salmon canning started in Alaska in the 1870s and by the early 20th century, it was the state’s largest industry, generating 80 percent of the territorial tax revenues. Its position then in Alaska’s economy is one that oil enjoys today. OBI Seafoods has been Alaska’s largest canned salmon producer for more than 100 years. John Daly, manager of U.S. canned sales, believes the canned pack has the staying power to remain as one of the state’s most well-known products. “Ever since I’ve been in the industry, I’ve heard from everybody that canned salmon is dying,” Daly said. “And here we are with record numbers.” Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

GUEST COMMENTARY: Alaska’s clean energy leadership

In November 1969, Alaska made energy history by exporting the first cargo of American liquefied natural gas, shipping this new, cleaner form of energy to Asia and establishing ourselves as a low-carbon energy innovator. That first transit was the beginning of the longest-term export contract between the U.S. and Japan. Today a worldwide transition to climate-friendly energy is underway, and Alaska is well positioned to accelerate this global transformation. Because of hydrogen’s net-zero carbon benefits, it is a major component of a decarbonized energy future. Hydrogen is a clean-burning gas that contains more energy per unit of weight than fossil fuels, only emits water when burned, and can be made without releasing CO2. I am one of 10 senators that authored the bipartisan Infrastructure Investment and Jobs Act, which passed the Senate last month and is expected to be before the House soon. The bill includes $8 billion to establish a handful of U.S. hydrogen hubs, and here in Alaska, we have an enviously complete checklist of all the components needed to become a global hydrogen leader. Alaska is rich with natural gas, whose primary component is methane, a key ingredient for producing hydrogen. Our natural gas is found in Cook Inlet, and in even larger quantities on the North Slope. The Alaska LNG Project is fully permitted and in an advanced planning stage, and adding hydrogen production to this project enhances and extends Alaska LNG’s financial rationale and climate benefits. Six of the top 10 cities with the largest carbon footprints are found in Asia, with Alaska positioned as the closest U.S. shipping point to these markets. This advantage was understood 50 years ago when we began exporting LNG, and it holds true today. Shorter shipping routes directly equate to lower shipping emissions, giving Alaska a major advantage over more distant markets. Hydrogen is a fundamental component of energy transition plans across Asia. Hydrogen is one of the building blocks of Japan’s energy roadmap. The Tokyo Games this summer featured the first hydrogen-powered Olympic Flame in Olympics history, a small but profound visible demonstration of Japan’s commitment to clean energy. South Korea is also rapidly moving toward a hydrogen future, with growing hydrogen targets in their overall energy supply. Alaska already has well-established trade relationships with Asian nations. Supplying them with Alaska hydrogen will give our economy and our collective climate a major boost. The bipartisan infrastructure bill also includes $3.5 billion to establish hubs for carbon capture, utilization, and storage — known as CCUS — in “regions of the United States with high levels of coal, oil, or natural gas resources.” Alaska is the perfect proving ground for such a project. To achieve the climate benefits of converting natural gas to hydrogen, carbon must be captured during the production process and safely stored. Carbon is typically stored in naturally occurring underground reservoirs, and geologists have determined that Cook Inlet is among the best sites in the U.S for potential carbon sequestration. In addition to Cook Inlet’s natural gas, Nikiski will be home to the Alaska LNG terminal and already has infrastructure available that can be the basis of launching hydrogen production, storage, and export. Alaska is ahead of the game. We have the ability to integrate new, cutting edge energy technologies into existing infrastructure, which will decrease startup costs, and make the long-term economics of hydrogen energy more affordable. No one knows how to produce energy in a cleaner, safer, and more profitable manner than we do here in Alaska. As the world adds new clean fuels like hydrogen to supplement or replace existing energy supply, Alaska has the resources to continue to be an energy leader for the foreseeable future. As our clean energy infrastructure priorities take shape and get funded in Washington, I will continue to ensure Alaska’s assets are a leading component of the national solution. Lisa Murkowski is the senior U.S. senator from Alaska.

Alaska’s budget fights resemble Lower 48 fiscal struggles

States such as Illinois and New Jersey are often used as a punchline for their historic money management troubles, but a decade of deficits has Alaska headed down a similar path, according to fiscal policy analysts at The Pew Charitable Trusts. Josh Goodman, a senior officer with Pew’s State Fiscal Health project, provided examples of the choices states struggling with a structural fiscal imbalance often make during a Sept. 24 gathering of the local policy think tank Commonwealth North. It turns out Alaska has made pretty much all of them. Lawmakers in states with ongoing budget issues often struggle to agree on the severity of the problem, according to Goodman, a symptom Alaska’s elected leaders continue to exhibit. The special legislative session that wrapped up in mid-September was intended to put a bow on Alaska’s new fiscal plan by settling the remaining budget gap with spending cuts or revenues, after the future of the Permanent Fund was settled in June. Instead, the June session was consumed by the immediate need to pass a budget and avoid a government shutdown. It ultimately resulted in a last-minute deal to pass a fiscal year 2022 budget with Permanent Fund dividends of about $525 per person, an amount Gov. Mike Dunleavy called insufficient after vetoing it. That led to the most recent 30-day fight over this year’s PFD, which resulted in $1,100 dividends the governor is also unhappy with, rather than the long-sought resolution to the state’s fiscal imbalance. There is little reason to believe the special session starting Oct. 4 — the fourth of the year — will end any differently based on the political dynamics of the Legislature. Alaska’s 2021 political stalemate built on the inaction of prior years and resembled what has gone on in Illinois, according to Goodman. “In Illinois’ case, they had these deeply flawed budgets to the point that they struggled to pass a budget at all,” he said. To discourage talk of new taxes, budget and revenue officials in the Dunleavy administration spent much of the last special legislative session emphasizing optimistic views of the state’s revenue outlook based on projections for increased oil production and relatively strong oil prices over the coming decade. Conversely, legislators from both sides of the aisle, skeptical of Dunleavy’s proposal to pay out half of the state’s annual Permanent Fund revenue appropriation in dividends, presented their own, much less rosy figures for the state’s long-term revenue. Independent budget analysts and political observers have said the most accurate assumptions are likely somewhere in the middle. “The more different stakeholders can agree on what the problem is, at least it gives a common starting point for figuring out what the solution should be,” Goodman said. The inability to reach a common understanding of the state’s fiscal situation — largely driven by the itseliance on unpredictable commodity prices and financial market conditions — has pushed Alaska lawmakers to paper over the deficit each year with a variety of unsavory but well-established tactics. Meanwhile, the state’s savings have dwindled in the absence of a comprehensive solution. Goodman said Kentucky, for example, has struggled to invest in its priorities, namely improving the capacity of its workforce, and has relied heavily on one-time funding sources to fill its budget. “You have the chamber saying, ‘our biggest investment is our workforce; we need to invest in our workforce,’ and Kentucky isn’t doing it,” he said. Alaska business leaders have long said employers in many industries struggle to find and keep skilled workers, even before the pandemic extended those problems to service industry businesses. Dunleavy’s 2019 proposal for deep cuts to the University of Alaska System, among other reductions, was a key driver behind the now-defunct effort to recall him from office. The governor has also proposed using money generated by the Alaska Industrial Development and Export Authority, the state’s development bank, to pay for recurring expenses such as oil and gas tax credit payments. Dunleavy also previously insisted the endowment-style Power Cost Equalization fund, used to subsidize high rural power costs, should be rolled into the state’s general fund. Legislators also have occasionally moved money in various state funds to pay for unintended items, including funding PFDs with money from the state’s savings accounts. In California, state lawmakers began deferring school funding after the Great Recession took a substantial bite out of the state’s tax revenue, according to Goodman. “It’s just, ‘push it into the next fiscal year and then we won’t have to worry about it this fiscal year,’” he said of California’s situation. In Alaska, Dunleavy has partially vetoed the Legislature’s formula-driven appropriations to fund the school bond debt reimbursement program, which under state law calls for the state to help local governments cover the cost of school capital improvement projects. With the shrinking of the American auto industry in the early 2000s, Michigan had well-publicized budget problems, Goodman noted. There, state government leaders struggled to make good on industry tax incentives after revenue driven by the industry dissipated. New Jersey has faced similar situations with a host of development programs, he said. “New Jersey promised economic development incentives for businesses and the Legislature simply didn’t appropriate the money to pay for those incentives,” Goodman said. Former Gov. Bill Walker in 2016 broke the state’s longstanding tradition of annually paying off several hundred million dollars worth of oil and gas tax credits by vetoing much of the appropriation down to a minimum formula-driven amount called for in state law. Lawmakers have since struggled to make meaningful progress paying down the obligation, which peaked at nearly $1 billion. A bill that passed in 2018 to sell bonds to pay off the tax credit liability was unanimously ruled unconstitutional by the Alaska Supreme Court. The tax credits have been relegated to little more than an afterthought in recent budget debates. Dunleavy spokeswoman Shannon Mason said via email that the administration “will continue to propose paying tax credits as required by statute.” Goodman said in an interview that Alaska’s situation, with its uniquely large $80 billion Permanent Fund, is viewed in a few different ways. The state’s traditional savings accounts, the Constitutional and Statutory Budget reserves, have jointly been drawn down to just more than $1 billion after starting the deficit run with funds of roughly $16 billion. “Alaska is a state, depending on how you look at it, is among the strongest (fiscal) position of any state or the weakest position of any state,” he said. Those starkly opposing views of the state’s finances likely play into perpetuating the challenges, Goodman suggested. “Is the political disagreement a cause of the fiscal problem or the result of the fiscal problem?” he said. Elwood Brehmer can be reached at [email protected]

BROWN’S CLOSE: Backpacking, and Other Burdens Part 2

Previously, on “Brown’s Close…” The pain in my ankle was sharp. The only sounds I could make were a shriek, and a pitiful, “Oh no.” This was it. My worst fear. I’d have to be taken off the trail by helicopter like the poor woman we were previously warned about. My name would go down in trail history as an inexperienced nuisance. My friend, who had been consistently moving at a quick pace and was far ahead, heard me fall and doubled back with the lightning speed of a jaguar.  Reaching my side –  “Drop the pack,” she ordered. I struggled out of the large backpack, clutching my ankle. I rolled around on the ground, taking the kind of deep breaths women are always practicing when they give birth on television. “I heard a crack,” I mumbled. My friend didn’t say anything, and instead turned grey. I rolled around some more, and then tentatively rolled my ankle. Then, with the horrific image of having to lie on the ground for hours waiting for a helicopter to find me and take me home, I rolled onto my knees, and stood up. Confirming I could walk, I told myself that my ankle wasn’t broken.  My friend helped me on with my pack, and she bounded on, with me trudging behind her. With her periodically running ahead and then doubling back, she glowingly confirmed we were not as far from Eagle River as she’d initially expected. My heart leapt for joy; Eagle River was the overnight camping site. We would cross the river first thing in the morning. Eagle River, like many of Alaska’s natural elements, is mighty. The current is quick, the water high, and hikers get caught and drown. Until my ankle injury, which was now my chief concern, fjording the river had been the part of the trip about which I had been quietly fretting.  Reaching the riverbank, I plopped down, took off my left boot, and examined my ankle. It was significantly swollen; all prior definition was gone, and the vascularity had disappeared from my foot. The ankle was unstable. My friend was marching up and down the river, examining the conditions. There was a couple across the way on the other side, happily changing clothes in full view. They had clearly just crossed through the glacial melt, and were putting on dry clothes as advised to prevent hypothermia. “Uh, Sarah?” she spoke softly, as if approaching someone on her deathbed. “I think we should cross.” “Wait, what now?” I squawked, alarmed.  I was supposed to have eight hours to prepare myself for this feat. “Well, yeah. There are people around. I’d rather do it then.” My safety track record on this trip so far was not great; tripping and drowning were definitely possible. If I did that when people were watching, at least they could report where to look for my body. “Well, let me change my shoes and see how my ankle feels.” We’d each brought separate water shoes solely for the purpose of crossing Eagle River. I pulled the sandals gingerly over my ankle. It was so swollen the straps almost didn’t make it around the blobby grapefruit that, an hour ago, had been a working joint. I didn’t have any way of treating the injury other than making it worse by walking on it for another fourteen miles. Oddly enough, submerging it in icy water might be the best thing at the moment. “Let’s do it.” Prior to the trip, I watched a safety video on crossing Eagle River. According to the video, we were supposed to line up with everyone in our group, holding the hips of the hiker in front of us, and move sideways in a line facing the current. The theory was each person would help stabilize the hiker in front of him. I hobbled over to the water’s edge, and my friend graciously agreed to be the leader, taking the brunt of the current. My friend leaned into her poles, and I leaned into her. The water, which came up to mid-thigh, was icy and, as advertised, fast. The rocks under foot were smooth and slippery, and would have been difficult to negotiate with two good ankles. My friend took a shuffling side step to the left, and I followed. We took another, and I felt myself lurch forward. “Wait, stop you’re going too fast, you're going too fast!” I shrieked hysterically, all in one breath. “You okay you okay you okay?”  “I’m okay I’m okay I’m okay,” I answered in our new call and response. We took another step to the left. And another. And another. I was torn between skipping as quickly as we could to the shore, and with keeping my ankle from getting stuck between one of the rolling, slippery rocks. We lurched to the left again, and I compulsively squeezed her hips in a death grip.  “You’re going too fast, you're going too fast!” Then, realizing we really were quite close to the shore by then --   “I’m okay I’m okay I’m okay,” I shrieked before she could ascertain if I was ready to move forward. In a weird sideways charge, we galloped the last 10 feet, and onto the rocky beach. I collapsed, tears streaming down my face from pain, and total relief. “I’m so glad that’s over,” I kept muttering. “You know Sarah? Every time you told me I was going too fast? I was just, like, moving.” I laid down on my back, lifting my ankle into the air, moaning, muttering, and periodically asking my friend if she needed help erecting the tent. She assured me she did not, and then came to sit next to me on the rocky beach. “I’m so glad that’s over and we don’t have to do that tomorrow,” I muttered one last time with finality. In advance of this trip, I had excitedly, and optimistically, purchased a “backpacking sleeping bag” on Amazon, rated down to 47 degrees Fahrenheit. All day trudging through the snow covered mountains, I’d worried about whether the bag would be warm enough.  While I did not freeze to death, I did roll around all night shivering, and wondering what shape my ankle would be in by morning. At 6, I crawled out of my friend’s tent shivering, and examined my ankle. It still resembled a grapefruit, but did not hurt as much as I had feared. Chalking it up to adrenaline, I hoped this protective panic would last until I could collapse at home later that night. My friend scuttled out of the tent soon after me, and we made breakfast. Of my remaining freeze dried meals, I determined chili mac was the most breakfast-like, and I stirred the contents around in the boiling water, marveling at the sheer volumes of sodium inherent therein. We then packed up, and hit the trail. Everything hurt. My ankle, my shoulders, my back, my feet, my new blisters. The residual pain of Day 1 exacerbated the pain of Day 2.  I spent the better part of the first two hours hobbling along, holding my breath. We were wading through creepy tall grass again, and a bear could stick his face out in front of me without warning. Eventually we made our way into woods which, while still eerie, offered more visibility. Bursting over a bridge and crossing Eagle River from a different vantage point, two young men came bounding towards us, hailing us down.  My friend grabbed her bear spray. I, on the other hand, was glad to see them. Maybe they’d give my old bones a lift home after they murdered me. They announced they were taking surveys for the Alaska Department of Natural Resources. I leaned heavily on my poles, relieved that we had stopped walking. “How did you hear about this trail?” I gestured mutely to my friend. “How is the difficulty level?” “Easy!” she rattled off. I, on the edge of collapse –  “Really hard,” I muttered, in a voice barely louder than a whisper. “A lot of beginners like it for the variety. You’re exposed to so many different types of terrain. Snow patches, river crossings, eh?” “I fell down the hill in the snow yesterday,” I answered flatly. “Do one of you have an ace bandage?” One of the surveyors obligingly looked through his pack, and then confirmed not only did he not have an ace bandage, they had stopped carrying first aid kits. “Last question,” the other resolutely continued. “What did you do with human waste?” My friend and I glanced at each other for a moment. “Uh, I haven’t had that problem.” “Me neither,” she answered coyly. “Are you familiar with the concept of, ‘Leave No Trace?’” he stubbornly continued with his intrusive line of questioning. My friend, experienced backpacker that she was, assured him she knew how to bury her poop in the woods, sans tutorial, thank you. While this little vignette broke up the monotony of the hike, we were just postponing the inevitable pain to come. We shuffled forward. “The fun part about the last day is you can plan where you are going to eat a celebratory dinner!” my friend sang out. “I always like to think about where I am going to go for dinner in Eagle River when we finish…” She glanced at her watch as she trailed off. Then – “Though we would really need to pick up the pace if we are going to have time to go to a restaurant before driving back to Girdwood.” I grunted in response and continued to shuffle. “Let’s play a trail game!” my friend called in desperation. “Oh gosh, yes please.”  Anything to distract me from my total abject misery. The game was simple. She decided on a category (“Items I will serve in the new restaurant I am opening”). We then traded naming items in that category, in alphabetical order, while reciting all previously named items. If one player failed to name a new item, or failed to remember an old item, that player lost. The restaurant to be opened by my friend quickly turned into a boozy bakery, serving solely sugary cocktails and decadent desserts. Menu items included Dutch Apple Pie, Eclairs, Fudge, Mango Margaritas, Sorbet, and Wine.  Exhausting the alphabet, we switched to Items We Can’t Forget for Our Vacation (“Jungle Safari Hats,” “X-ray Goggles,” and “Yellow Rubber Ducky Raincoats”). We were happily listing all of the qualities of Our Dream Guys (“Bulging Biceps,” “Cute Calves,” “Helps Me When Needed,” and, above all, “Quiet”) when I threw out my arm and grabbed her shoulder. “Hang on, there’s something moving up there.” Our current trail was meandering along the side of a steep cliff that descended into the river. Forrest covered our right side. We squinted through the forest. The trail bent to the right, and I couldn’t tell if the movement was coming from a fellow hiker, or something more sinister. Then its profile emerged from behind a tree one hundred feet in front of us. The most horrible profile imaginable. “Bear! Bear! Bear!” I whispered hysterically.  We each seized our bear spray, and retreated down the hill as far as we could before we hit the cliff. The bear sensed he had company, and crashed up the hill ahead of us. We watched the trees up the hill, frozen. The bear sashayed up over our heads, and then emerged from the trees, looking at us curiously. He started walking towards us. Hoisting our weapons high, we sidestepped to the left, as the bear continued his approach. Then, distracted for a moment, he looked off to his left, and we scrambled on through the trees, breaking into a run at the first opportunity. “Is he following us, is he following us, is he following us?” “No,” she said, putting the safety clip back on the cannister, and holstering her spray. “I think we are safe.” Knees and ankle wobbling, I put my weapon away, and the two of us abandoned the remaining qualities of our dream guys, and began shouting frantically. “Hey bear! Hey bear! Heeeeeeyyyyyy beeeeeaaaaaarrrrrr!” We were now within the Eagle River Nature Center, and all of my attention was single mindedly focused on getting out of here. Ankle sore and rickety, I began using my walking poles as crutches. More and more people were on the trail, and my friend cheerily reminded me that the more children we saw, the closer to the end we were; small people can’t hike too far.   By the time I saw toddlers, I escalated my walking pole crutch speed to as close to a run I could manage. A group of young mothers and babies were up ahead, and spotted our backpacks. “Where did you camp?” one mother asked curiously.  My friend stopped to chat.  I blew past them.  No time for moms. I was rocketing forwards by now, drawing heart from the sight of power lines in the distance. My friend, breathless, hurried to catch me. “Lesson learned, Sarah does not brake for moms! Admittedly, they were very chatty.” We burst out of the forest and into the parking lot. I began to cry quietly with relief, as my pace slowed to a shuffle, and I hobbled pitifully back to her car. The author, at left, managed a smile at the end of the hike from Girdwood to Eagle River. It was four in the afternoon, and too late for dinner in a restaurant before driving back to Girdwood to get my car. Instead, we went to Arby’s and wolfed down large sandwiches, curly fries, and chocolate milkshakes. We then trekked back to Girdwood, back to Anchorage and back to home. Upon arrival, I got into bed, and did not get out for two days. Sarah Brown periodically whimpers. Whisper soothingly to her on Twitter @BrownsClose1, or email her at [email protected] “Close” is a British term for alley or cul-de-sac. For more of Sarah’s musings, visit Browns-Close.com.

What clients get wrong about their financial adviser

With your financial life resembling a three-dimensional chess game — bills, retirement saving, sending kids to college — working with a financial adviser can be a very smart move. What you pay for that help, unfortunately, can also be a bit of a challenge to figure out. A recent survey by State Street Global Advisors found that 60 percent of people working with an adviser believe the management cost of their investments (funds, exchange traded funds) is included in the fee charged by the adviser. It isn’t. The hidden expense that adds up Every mutual fund and exchange traded fund, or ETF, you own, whether it’s in your 401(k) or an account your adviser manages directly, charges an annual fee known as the expense ratio. Expense ratios are hidden and never show up as a line-item expense on any investment statement. They are deducted from the raw performance of a fund or ETF; the return you see in your statement has been reduced by whatever expense ratio was charged. The cheapest expense ratios can be less than 0.1 percent for index funds and ETFs, though for actively managed funds the norm is more than 0.6 percent. When you’re working with an adviser who manages a portfolio for you that includes mutual funds or ETFs, you need to add the cost of those portfolios to what the adviser charges to land at the all-in fee. All-in fees, all important Many advisers who manage investment portfolios work on an “assets-under-management” arrangement with clients. According to the 2020 Inside Information Fee Survey, for clients with assets of $500,000, about three of four advisers charge at least 1 percent. That’s just for their services. If they use funds and ETFs, the underlying expense ratios are an additional fee clients pay to the company managing the fund or ETF. A few years ago the Inside Information Fee Survey reported that the average expense ratio for portfolios managed by advisers was an additional 0.50 percent. Given the encouraging trend toward lower-cost funds and ETFs, it’s likely that the expense ratio average for adviser-managed portfolios may be lower today. The key is to know what your all-in fee is. Less is definitely more for core funds If your adviser is using mostly low-cost index mutual funds or ETFs, your average weighted expense ratio should likely be less than 0.25 percent. Plenty of U.S. stock index funds and ETFs charge less than 0.1 percent. International stock and bond funds might run a bit more. If your adviser has you invested in funds and ETFs that charge more, that’s worth a conversation, if you are also paying the adviser an assets-under-management fee. If the portfolio is mostly actively managed funds, you need to make sure you’re on board with that approach. Over long periods, very few actively managed funds consistently out-perform index funds, especially in the biggest (most popular) corners of the market. For instance, the investment category known as large-cap blend includes portfolios that invest in the S&P 500 index. According to Morningstar, a mere 15 percent of actively managed large-cap funds managed to outperform large-cap index funds over the 15 years through 2020. The under-performance gap was 1.4 percentage points on average: 12.4 percent vs. 13.8 percent. Expense ratios are likely to be an even more important factor in your investment success in the coming years, as many market pros expect the long-term returns for U.S. stocks to be much lower than what we have experienced for the past 10 years. One example: Based on current economic conditions, Vanguard estimates U.S. stocks might deliver in the range of 2.6 percent to 4.6 percent annualized over the next 10 years. For core U.S. bonds the expectation is a return no higher than 2.4 percent. The value of professional portfolio advice Once you know your all-in investment cost to work with an adviser who charges an assets-under-management fee, you can make an informed decision about whether you are getting value for that fee. To be clear, paying even 1.5 percent per year in an all-in fee can be well worth it, if you feel strongly in your adviser’s approach, and it gives you the confidence to stick with a long-term plan. Studies also suggest that an adviser can help you avoid the costly psychological investing mistakes that can undermine success. But if you learn you have a bunch of expensive, actively managed funds in market pockets where indexing is typically the more successful route, that should be a yellow flag. Nor is the assets-under-management model the only way to pay managers. Especially when you have yet to build up a sizable investment portfolio (at least $1 million), working with an adviser who charges a flat monthly or quarterly fee or an hourly fee can be advantageous. The bottom line is that professional financial advice can be a smart investment. But knowing your all-in fee is the only way to be sure you are in fact getting value for the expertise. Rate.com/research/news covers the worlds of personal finance and residential real estate.

Airfares are lower than usual right now, but prices won’t stay down for long

The nation’s airlines are sweating over an unexpected drop in business travel in the last few weeks — and that’s welcome news if you’re a traveler looking to save money. This month, domestic airfares are down 5 percent from September 2019 and international fares down about 8 percent, drops that industry experts attribute partly to the traditional price slump that happens at the end of the peak summer travel season plus the rise in coronavirus cases due to the Delta variant, according to the travel website Hopper. Prices for flights to Europe are at a five-year low, down more than 30 percent compared with the same month in 2019, according to the travel website. But the discounted prices are not expected to last long, with increases likely when travelers start booking holiday trips. “Everything we are seeing says people are definitely going to be traveling,” said Adit Damodaran, an economist for Hopper. The airfare roller coaster shows how the pandemic continues to affect the nation’s $1.5-trillion travel and hospitality industry. For the first time since COVID-19 took hold in spring 2020, travel demand this summer began to match and briefly surpass pre-pandemic levels, giving airline executives hope that the industry would soon rebound from more than a year of financial losses. But in the last few weeks, airlines have reported a steep drop in demand and an increase in reservation cancellations. September typically marks the end of the peak summer travel season and the start of business travel for conferences, conventions and meetings. Industry experts say the uptick in business travel never materialized because of the surge in COVID-19 cases. As a result, airlines are forced to drop prices to fill the seats left empty by business travelers. “In a normal year, the fares would stay high because people would travel for business, but that is just not happening,” said Madhu Unnikrishnan, editor of the publication Airline Weekly. The average domestic round-trip flight costs $260, down from $290 at the end of August, according to Hopper. International round-trip fares have dropped to an average of $700, down from $760 at the end of August. The average round-trip price of a flight to Europe from the U.S. is $565, down from $665 at the end of August and the lowest price in five years, according to the website’s data. That price was an average of $940 at this time in 2019. But flying to Europe could become more difficult soon. The European Union recommended this week that its 27 nations reinstate restrictions on tourists from the U.S. because of rising coronavirus infections. The guidance isn’t mandatory, and member countries have the option of allowing fully vaccinated U.S. travelers in. The slump in business travel and rise in overall cancellations have airlines worried. Southwest, United, Delta and American airlines all revised their earnings outlook for the July-to-September quarter. “The company continues to experience softness in bookings and elevated trip cancellations, especially close-in, as a result of the rise in the COVID-19 cases associated with the Delta variant,” Southwest Airlines said in a Sept. 9 filing with the Securities and Exchange Commission. “Close-in” cancellations are usually defined as being within 21 days of departure. In its own Sept. 9 investor update, Delta Air Lines said “initial revenue expectations were predicated on an acceleration of business travel through the September quarter. The pace of business travel recovery has paused as companies delay or scale down initial office reopening.” United Airlines said it expects the drop in demand to push total revenue down 33 percent in the July-to-September quarter. Airlines are not the only businesses feeling the pain. The hotel industry is projected to lose more than $59 billion in business travel revenue in 2021 compared with 2019, according to a report by the American Hotel &Lodging Assn. and Kalibri Labs. If the number of coronavirus cases drops or remains unchanged, travel experts say, Americans are likely to book air travel in high numbers for the Thanksgiving and Christmas holiday season. And higher demand usually means higher prices. “Most airlines have said Thanksgiving and Christmas and year-end holidays remain solid,” Unnikrishnan said. “So far, people are not canceling their holiday plans.” Bookings and internet searches for holiday flights have started to rise. “Right now, flight prices for the holiday travel season are up across the board compared to both 2019 and 2020,” said Giorgos Zacharia, president of the travel website Kayak. Domestic round-trip airfares around Thanksgiving are priced at an average of $300, up 23 percent from 2020 ($245) but down 11 percent from the pre-pandemic 2019 fares ($335), according to Hopper. The average domestic round-trip airfares for travel around Christmas are $430, up 71 percent from 2020 ($250) and up 10 percent from 2019 ($390). Rick Seaney, chief innovations officer at 3 Victors, a travel data company, said making flight reservations for the holidays can be tricky. Booking early — up to six weeks before departure — usually ensures that travelers get the lowest prices. But Seaney said another coronavirus surge could keep prices down, allowing travelers to book flights much closer to the holiday season. “The question is will the prices get better or worse if you wait,” he said. “It depends on what will happen with the pandemic.”

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