Alaska Air Group reports $131M Q1 loss, boosted by federal help

Alaska Air Group Inc. is getting closer to breaking even more than a year into the pandemic but it’s not quite there yet. The parent company to Alaska Airlines and regional carrier Horizon Air reported a $131 million first quarter loss April 22. The early 2021 results are a significant improvement over a year ago when the Seattle-based airline company lost $232 million; however, the most recent $131 million loss includes federal CARES Act Payroll Support Program funding. Without that and other special items, the first quarter loss would have been $436 million. according to the company. Alaska Air Group netted $181 million in the first quarter of 2019. The company lost $430 million in the fourth quarter of 2020 and more than $1.3 billion in all of last year. New Alaska Air Group CEO Ben Minicucci thanked employees for helping return the airlines to positive cash flow in March at the end of the quarter in a statement accompanying the earnings report. “We’re such a big company, but still small enough that each person’s work makes a difference,” Minicucci said. “We’re now laser focused on a return to profitability and growth, with aggressive cost control, optimal productivity across all our work groups, and the operational and financial discipline that Alaska is known for.” Minicucci officially took over as Air Group’s top executive April 1 following the retirement of former CEO Brad Tilden, who took over in 2012 and led the company to a long run of record growth that included the 2016 acquisition of West Coast competitor Virgin America. The $131 million loss was on the back of $797 million of operating revenue, a 51 percent year-over-year decline, and translated to a loss of $1.05 per share, according to the financial filings. Alaska Air Group stock closed April 23 trading at $69.21 per share. Despite the losses, Air Group leaders reduced the company’s net debt by approximately $100 million to $1.6 billion during the quarter and reported a debt-to-capitalization ratio of 62 percent at the end of the first reporting period for the year. Air Group leadership has long held a goal of maintaining the company’s debt-to-cap at less than 50 percent, which they had largely achieved prior to the pandemic. The company also issued early recall notices to approximately 350 Alaska pilots who had been on extended leave during the quarter to prepare for summer growth. In the state of Alaska, at least, officials at the Fairbanks and Anchorage international airports have said they expect collective summer passenger capacity across airlines to be in line with or even exceed 2019 levels, partly due to the fact that it’s unclear at this point whether cruise ships will be allowed to sail to the state this summer. Alaska Airlines averaged 12,472 full-time equivalent employees during the quarter, down more than 25 percent from a year ago. Its operating fleet also shrunk by 24 to 201 aircraft over the year. Air Group held $3.5 billion in cash and other liquid assets at the end of the first quarter and more than $5.3 billion in total liquidity, according to the earnings report. Company executives have stressed their ability to rely on what was a very strong balance sheet to ride out the pandemic despite being in an extremely volatile industry. Air Group received $546 million in Treasury Department loans and grants during the quarter and is eligible for another $584 million in the third round of Payroll Support funding, according to a company statement. Elwood Brehmer can be reached at [email protected]

Pioneer Natural Resources goes on buying spree in Permian

Two years ago, Pioneer Natural Resources was reversing course and retrenching after Wall Street soured on the Irving-based oil and gas company. “The market clearly isn’t paying for your business model,” one analyst said while another complained that Pioneer’s stock price hadn’t moved much in three years. A week later, the CEO abruptly retired after two decades at Pioneer, and chairman Scott Sheffield returned to his former role as top executive. Pioneer, whose oil and gas production had been growing rapidly in the Permian Basin, dropped its audacious goal of trying to produce the equivalent of a million barrels of oil a day by 2026. Soon after, Pioneer was restructuring, laying off hundreds of workers and buying out others — spending $159 million on employee-related charges in 2019. That wasn’t enough cutting. Amid the pandemic and low oil prices, Pioneer laid off about 50 in its well services business last June. In the third quarter, it laid off 300 more. Pioneer ended last year with 1,853 employees, almost 2,000 fewer than in 2017, according to its annual public filings. Yet on April 1, Pioneer announced a $6.4 billion acquisition, including debt, to add DoublePoint Energy and its 97,000 acres in the Permian. That followed the purchase of another Permian player, Parsley Energy, in January; when the Parsley deal was announced in October, it was valued at $7.6 billion. How does such a spending spree fit with Pioneer’s professed strategy of austerity? “In a way, it’s consistent,” said Peter McNally, global sector lead at research firm Third Bridge. “The stock market has decided you can’t ramp up rig count in response to commodity prices, but you can engineer growth by doing acquisitions. “It’s more about financial engineering than petroleum engineering.” As the shale business has matured, it more resembles a manufacturing operation than a wildcatter enterprise. That’s led to more consolidation amid a push for ever-greater efficiencies. Pioneer has relatively low leverage and the lowest costs in the Permian, and now it’s become the biggest player there. “They’re probably in a situation where it’s acquire or be acquired,” said Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University. Shale wells decline so quickly that companies must keep replacing their drilled assets in “a kind of perpetual motion machine,” he said. The good news for Pioneer: “Wall Street’s beginning to open up again” for oil and gas companies, Bullock said. “But it’s still a very narrow window.” The shale and fracking revolution has been a great success in producing oil and gas, but investors have often been disappointed as cash kept flowing into drilling and production. At one point, Pioneer was putting all its excess cash into capital spending, the CEO told analysts in February. Now that contribution has been cut roughly in half — “a big change,” Sheffield said. He’s pledged to grow production just 5 percent a year, a far cry from the 16 percent average annual increases from 2016-18. “Seeing three downturns in 11 years, I just think it’s better to have the best balance sheet in the business,” Sheffield said in the call to discuss 2020 results. The latest purchases will add to cash flow, Pioneer said, and allow the company to return more money to shareholders — a top priority. Pioneer has adopted a variable dividend policy so it can pay out more if oil prices are high. It bought Parsley in an all-stock transaction, issuing 52 million shares, along with the assumption of debt. The DoublePoint deal includes $1 billion in cash and some debt, but the biggest chunk will come from issuing over 27 million shares of Pioneer stock. While this means some dilution for shareholders, Pioneer’s stock price has been climbing since the fall — and is up over 30 percent this year. Over the same time, oil prices have rebounded, too. The DoublePoint deal is consistent with what Pioneer has been telling shareholders about potential acquisitions, President Richard Dealy said in a recording that accompanied the April 1 announcement. It adds to cash flow, earnings and returns. It adds high-quality acreage next to Pioneer’s holdings, which provides significant synergies. And the deal structure maintains Pioneer’s strong balance sheet. “This acquisition checks all those boxes,” Dealy said in the recording. Pioneer plans to slow DoublePoint’s drilling activity — from a 30 percent annual growth rate to 5 percent by next year. It will reduce the number of rigs from seven to about five. Pioneer expects to save about $1 billion over 10 years through operating efficiencies and reductions in overhead and interest expense. With Parsley, Pioneer projected cost savings of over $2 billion in a 10-year period. “This is a case of assets being worth more in the hands of a different operator (with a substantial scale advantage),” David Meats, director of research, energy and utilities for Morningstar, wrote in an email. The purchase won’t damage Pioneer’s balance sheet because so much is being paid with stock. “The variable dividend makes sense to us as well,” Meats wrote. Exploration and production companies “have reached an inflection point where they are cash generators, rather than cash users.” That also shifts the investment case: “Income generation is the reason to own these stocks,” he said. Another energy analyst, Stewart Glickman of CFRA, said Pioneer was being opportunistic. It struck a deal for Parsley while the pandemic was getting worse, which resulted in paying a small premium. And Pioneer could absorb the target’s debt load. With DoublePoint, Pioneer took advantage of its rising stock price, which was tracking the price of oil. Now the test is whether the company can stick to its austerity goals. Since last fall, oil prices have increased about 50 percent, and Pioneer is still harping on keeping production growth low. “A lot of these companies, including Pioneer, have been surprisingly good at being disciplined,” Glickman said. “They’ve really held the line.”

COMMENTARY: Georgia’s voting law kicks off another round of partisan falsehoods

Georgia’s state legislature has passed a set of laws tightening the mechanics of the state’s voting process. Democrats are decrying the move as restrictive and racist, with some prominent national and state leaders, including President Joe Biden, comparing the law to the Jim Crow era. Republicans have challenged these assertions, arguing the bill’s provisions actually expand voting access while tightening security for the process with commonsense ID requirements. The truth lies somewhere in the middle. The super-heated rhetoric coming from the left is obscuring legitimate criticisms of the bill, and Republicans’ claims that the bill will not dampen voter turnout also ring hollow. The country’s political leaders must stop grandstanding and actually work to reach reasonable compromises. Tightening the amount of time voters can request a mail-in ballot or requiring a state-issued ID to request an absentee ballot is not the same as requiring a poll tax or a literacy test. The law does limit the option of mail-in voting. For example, it makes it illegal for a mail-in ballot to be mailed to all eligible voters, instead requiring voters to request a ballot. It also limits the number of state-provided drop boxes and reduces the hours that voters can drop off ballots. (It’s worth noting that ballot drop boxes would not have been legal in the future without this law.) This will certainly make those who don’t customarily vote less likely to do so as compared to “turnout” if voters were to receive a ballot in the mail each election. The bill also makes the state election board chairperson a position elected by the state’s General Assembly instead of the Georgia secretary of state, centralizing election authority with the state legislature. This is clear overreach. The state legislature should not have this sort of oversight of local election procedures without compelling evidence of malfeasance. This is a power-grab born of petulance in the aftermath of the 2020 presidential election and the subsequent Senate runoff elections. Perhaps the most controversial provision involves third parties being prevented from providing food or water to those in line at a polling place within 150 feet. The law’s opponents claim this could deter potential voters from waiting in line; proponents say that it doesn’t ban anyone from bringing their own refreshments and is intended only to block partisan groups from attempting to influence voters’ decisions. This is a tempest in a teapot. A friend or neighbor should be allowed to hand another friend a bottle of water. No one should be allowed to campaign in a voting center, using water as a prop or bribe. Democrats argue that any attempt to limit the availability of ballots or drop-off locations will have a chilling effect on voter turnout, with concentrated impact in poor and minority communities. They use the same argument for the new requirement that eliminates signature matching and requires a driver’s license or state ID number to request an absentee ballot. But a majority of Americans support voter ID, according to polling data from the Pew Research Center. This is not an overly burdensome restriction. There are legitimate arguments to be made against some of the bill’s provisions, and the appropriate avenue for review is the court system. Democrats are rushing to avail themselves of that system, as they have every right to do. Voting is a right. It is also a duty. Americans should exercise the franchise deliberately. The right should be guarded jealously. The duty should be taken seriously. Safeguarding the system ought not to be a partisan matter. The ultrapartisan rhetoric surrounding the Georgia law cheapens both the duty and the right.

Despite pandemic progress, fewer than 1 in 4 back in office

People had started showing up to the office again in greater numbers, but fled for home as the recent coronavirus surge shook the region, fresh data show. Still, employers and landlords are betting that workers will want to return as vaccinations increase and virus fears recede, even though demand to rent space in office buildings continues to shrink. “By the stats, it’s not that encouraging,” said broker Todd Doney of real estate services company CBRE. “We certainly have work ahead of us to get through this. … But when the governor announced no more COVID restrictions on June 15, that’s light at the end of the tunnel for me.” An average of 24 percent of employees in 10 major U.S. cities were back to the office as of April 7, down nearly a full percentage point from the week before, according to Kastle Systems, which provides keycard entry systems used by many companies and tracks patterns of workers’ card swipes. In Los Angeles, the average at Kastle’s 148 buildings was 22.1 percent and, like the national average, took a significant dip during the winter COVID-19 surge, but had been rising again before the latest virus resurgence. Although beneath the U.S. average, L.A.’s offices were more full than five other cities tracked by Kastle, including San Jose at 16.7 percent and San Francisco at 13.4 percent. As employees were trickling back to some offices, other workplaces were turning off the lights and turning over the keys. Overall non-rented office space in Los Angeles County reached 17.2 percent in the first quarter, the highest vacancy level since early 2012, CBRE reported. That reflected a net loss of 1.6 million square feet of leased space, nearly matching the worst quarterly loss during the Great Recession. Signings of office leases have been falling for about a year as companies sent employees home to work or laid them off in the face of a sharp economic downturn spurred by the virus. Many tenants reduced their office footprints as their leases rolled over, while others put their unused space on the market for sublease. Tenants looking to get some money for offices they were not using had 7.3 million feet available for sublease in the first quarter, about 15 percent of the total space available for rent, which is high by historic standards. The number of leases being signed remained low, as tenants avoided long-term decisions in favor of short-term renewals when their leases expired. Despite the economic headwinds, the average asking rate climbed slightly to $3.90 per square foot per month in the first quarter, reflecting higher quality space coming available and the reluctance of landlords to drop their rates. Instead, landlords offered tenants inducements to sign leases such as months of free rent or generous allowances to build out their offices. Uber, Google, Facebook and Microsoft are among the companies that have reopened offices or are on the verge of doing so, according to media reports. And recent surveys have shown that many companies and their workers are eager or at least willing to get back to the office. A February survey commissioned by software company Eden Workplace found 85 percent of office workers are looking forward to being back at work, with many of them saying that they miss socializing with their colleagues. A customer poll by marketing data provider ZoomInfo in February found that more than half plan to be back in the office by June, with IT firms leading the way. The worry for landlords is how much space tenants think they need going forward and whether they still want to work in city centers that many can reach only by long commutes. It is a given among industry observers that remote work has been normalized to the point that white-collar companies will commonly allow their employees to work from home a few days a week in the future. Some workers may no longer have to come to the office at all. That’s a substantial change in the office world from previous recessions, which also produced dramatic cutbacks in space leasing as companies went under or contracted their staffs. Recovery from this downturn will look different as companies reevaluate their needs. A big unknown is how businesses will configure their office space in a post-pandemic world. Will companies need less room if people are working at home sometimes, or must they have a devoted desk waiting for each worker when they do come in? Will workers still be seated close to each other as they have been in many offices in recent years, or must they have more elbow room to feel safe from viruses? “Most of our tenants are making some changes to their physical office layouts,” landlord Bert Dezzutti said, but the long-term impacts of those changes on building occupancy “haven’t sorted themselves out yet.” Flexible work schedules “are here to stay,” said Dezzutti, head of Southern California operations for Brookfield Properties, the dominant office landlord in downtown Los Angeles. Many bosses, nevertheless, remain keen on preserving the office footprints they have. A recent survey by consulting firm KPMG found that only 17 percent of chief executives are looking to downsize their office space as a result of the pandemic, a steep drop from August, when 69 percent said they planned to shrink their offices. Before they return to the office, though, the majority of chief executives would like to see more than 50 percent of the general population vaccinated. They especially want to see their own employees get COVID-preventing shots; 90 percent of bosses said they are considering asking employees to report to them when they have been vaccinated, which may guide decisions on when companies return to their offices. For the last six months or so, tenants in Brookfield’s high-rises have been inhabiting about 12 percent to 16 percent of their space, Dezzutti said. He expects that number to climb now that local officials have doubled office population allowed for nonessential businesses to 50 percent as part of easing COVID-19 restrictions. Doney predicted that many companies will reduce the size of their offices in the future as remote labor becomes routine, but that they will return to working together for the most part. “As more people get vaccinated and get more comfortable, they will do more things, including going to the office,” he said. “Zoom meetings are terrific, but sometimes that magic occurs in person before a meeting starts or after it ends.” People will come back to the office over the summer, he said, but the return will be substantial after Labor Day when the working-age population is largely inoculated and children are back in school. An autumn renaissance of office attendance is also expected by Kastle Systems Chairman Mark Ein. “You’re going to see an increase of some magnitude starting at the beginning of the summer,” Ein said. Then, “barring something unforeseen, there should be a huge surge coming back in the fall when virtually everyone is vaccinated.” Cities where workers commute more by car than by public transit tend to have the most people in the office these days, Ein said. Offices in Houston and Dallas are the fullest in the country at close to 40 percent inhabited. Having your COVID-19 shots will become mandatory for many, he said, potentially enforced by voiding the keycards of the unprotected. “There are going to be a lot of companies who are going to decide that they only want people to come back to the office who are vaccinated,” Ein said. Human beings have not been fundamentally changed by the coronavirus, Dezzutti said, and will again seek each other’s company in busy metropolises. “In history, there has been no pandemic or plague or natural disaster that’s killed off the city,” he said. “Our need to live and work in urban clusters, and the concentration of people and economic activity that occurs there, is just too strong.”

Summer travel surge has airlines scrambling to unwind cuts

Airlines are planning for a surge in summer travel that could make skies look like it’s 2019 again, but it will take a lot of work to get planes and employees ready. The four big U.S. airlines — American, Delta, United and Southwest — have more than 650,000 flights scheduled for June, which would make it even busier than the same month in 2019, according to Diio by Cirium, an aviation data analytics firm. Carriers are looking to capture pent-up travel demand and momentum from the distribution of COVID-19 vaccines. “It’s a good problem to have with so many people expected to fly,” said Allied Pilots Association spokesman Dennis Tajer. “But it takes a long time to crew up an airplane and try to undo the cuts from the last year.” The airline industry has shed more than 41,000 employees since the beginning of the COVID-19 pandemic in March 2020, according to the U.S. Department of Transportation. That includes more than 10,000 at American and 4,600 at Southwest. But that understates the depth of the cuts because many crewmembers are still working reduced hours with fewer flights taking off and landing. “Really, we’re just gearing up for the May schedule, which is looking to be about 80 percent of summer 2019,” said American Airlines spokeswoman Lindsey Martin. That could change soon. Almost exactly a year after U.S. airport traffic dropped to less than 100,000 passengers during the worst stretch of the COVID-19 pandemic, airlines are now facing the enormous task of getting employees and planes ready to fly again. Airline advanced bookings and customer surveys are showing that travel could bounce back this summer, even if international and business travel lag behind. That means getting mothballed aircraft and employees ready over the next six weeks. The last of American Airlines’ 8,000 flight attendants who were furloughed in October will be back on schedules as of May 1. It could take through the end of the year for all of American’s 1,605 pilots to return from furlough after going through training updates, getting vaccinated and finishing other regulatory work needed to fly again. American’s 17,500 furloughed employees have been getting paid since Dec. 1 thanks to $12 billion in government payroll support, but there hasn’t been enough flights until now to justify bringing employees back to work. Dallas-based Southwest Airlines said this week that it would recall 209 pilots from voluntary leave they signed up for last summer, when pandemic uncertainty reached its peak. American Airlines reported last month that bookings were approaching 90 percent of 2019 levels, prompting the Fort Worth-based carrier to announce that it would bring back most of its fleet by this May. Southwest also reported a surge in new bookings starting in the middle of February. Industry optimism got a further boost around spring break travel, with the streak of 1 million or more travelers passing through Transportation Security Administration checkpoints now standing at 27 straight days. “The flights have been full all winter to any beach destination or outdoor destination,” said Paul Hartshorn, a spokesman for the Association of Professional Flight Attendants representing workers at American. “There haven’t been as many hours available everywhere, but if you are somewhere like Charlotte or Dallas, it’s been quite busy.” Last week, airlines were about 75 percent full, by far the fullest since the pandemic began. Much of that is attributable to the fact that airlines are still flying about 40 percent fewer flights than they did before the pandemic. “It will take some work, but remember that we are still going to end this year a third below where we were in 2019,” said Michael Boyd, an aviation consultant with Boyd Group International. “There are still people waiting for the government to open up travel and for businesses to say their workers can get on planes again.”

Parties agree to expedited schedule in Willow lawsuit

ConocoPhillips has agreed with a coalition of Alaska Native and conservation groups on a timeline to resolve a court dispute over the adequacy of the environmental review for its multibillion-dollar Willow project that could allow the company to resume on-the-ground activity next winter. Per the agreed-upon timeline to argue the lawsuit, ConocoPhillips will not restart construction work at the large North Slope oil prospect before Dec. 1. The Houston-based oil major intervened in the suit originally filed last November against the Bureau of Land Management over the agency’s approval of the company’s development plan last year. ConocoPhillips was planning to open a gravel quarry to feed road and facility pad construction in the National Petroleum Reserve-Alaska in February before a 9th Circuit Court of Appeals panel stopped work on the project with a preliminary injunction Feb. 13 in which the judges concluded the groups were likely enough to succeed on at least one of the National Environmental Policy Act Claims that allowing the potential environmental harm from the mining work last winter was not worth it. Shortly after the injunction, attorneys for ConocoPhillips requested a July decision on the merits of the case of Federal District Court of Alaska Judge Sharon Gleason so the company could prepare for the 2021-22 winter work season on the North Slope. Timely completion of the project is in Alaskans’ interests because of the economic benefits it can provide, the company’s attorneys wrote. The summary judgment schedule in the case approved by Gleason starts with the conservation groups filing their opening brief by April 23 with defendant replies by May 26 and the plaintiffs’ reply on June 11, according to an April 5 order. As currently proposed, the Willow master development plan calls for the eventual construction of five drill sites stretching north-south over approximately 20 miles in the northeast corner of the federal petroleum reserve. ConocoPhillips also has two other nearby developments in the NPR-A but the Willow project would be several times larger than the single-drill site Greater Mooses Tooth-1 and 2 projects extending from the Alpine field. Full build-out of Willow is estimated at a cost of up to $6 billion, according to the company, with first oil during the 2025-26 winter. The project’s oil production is expected to approach 160,000 barrels per day at its peak. Overall, the project is expected to produce about 590 million barrels over 30 years. ConocoPhillips Alaska representatives have said it’s too early to tell what, if any impact the work stoppage early this year will have on the overall development schedule for Willow. Gov. Mike Dunleavy’s office announced April 15 that the state would also ask Gleason to intervene on BLM’s behalf. Dunleavy said in a statement that developments such as Willow provide the economic base for critical services on the North Slope. “Oil and gas development is critical to North Slope communities, and Alaska has long anticipated bringing the Willow project online. With the potential to produce 100,000 barrels of oil per day, it is imperative that Alaska is given the opportunity to responsibly develop our resources,” Dunleavy said. While the state’s oil production tax applies to projects in the federal petroleum reserve, the state will distribute its 50 percent share of any royalty revenue from Willow through grants to eight North Slope communities. Royalties have been the primary source of petroleum revenue for Alaska since prices fell from their $100 per barrel high in 2014. Department of Law attorneys argued the state has significant economic interests in protecting Willow’s development, not only in the upwards of $3.5 billion the project is expected to generate in state and local tax revenue, but also the direct and indirect jobs it would add to Alaska’s sputtering economy. According to the environmental impact statement for Willow, the project would support at least 1,000 construction jobs and approximately 400 operations positions when finished. Attorney for Sovereign Inupiat for a Living Arctic Bridget Psarianos wrote in an April 19 response to the state’s request that the group does not outright oppose the state’s participation in the suit but waiting to intervene until months after the case was filed could complicate the accelerated briefing schedule the sides had previously agreed to. Editor's note: This story has been modified to note that while construction work won't restart any earlier than Dec. 1, development work will continue. The original version also stated that the state will not receive royalty revenue from Willow. The state will receive 50 percent of the royalties, but under federal law it is required to distribute that money to the North Slope communities as grants. Elwood Brehmer can be reached at [email protected]

Could small-scale nuclear power be a part of Alaska’s future energy mix?

As parts of Alaska hit new record lows for April — blizzard conditions, negative 70 degree wind chill, and temperatures more than 40 degrees below zero in some parts of the state — we’re reminded, as we often are during winter months, to be grateful for the comfort of warm shelters that stand up to even the most wicked of weather events. That comfort comes easier in some places than others. Hundreds of villages, spanning the state across miles upon miles of wilderness, are powered by microgrids, which are self-sufficient energy systems that act as individual controllable entities. Alaska’s microgrids depend primarily on high cost imported diesel fuel to bring electricity to rural homes, businesses, and community buildings. As a result, rural residents pay much more than residents in Alaska’s more populated areas in the Railbelt or Southeast. These expenditures on imported heat and fuel for electric power generation represent a significant drain on local households. Finding a consistent, lower cost source of energy — including both electric power and heat — would mean that instead of spending income on utility services, rural Alaskans could invest additional funds in education, technology, new businesses, savings, and more. One way to reduce the cost of power and increase reliability is through innovative new energy solutions. An emerging technology, micro-nuclear reactors, is being considered as an option for powering remote microgrids. Micro-nuclear reactors, approximately the size of a shipping container or small house, offer consistent, nearly maintenance-free power for 10 to 20 years before requiring refueling. At the University of Alaska Fairbanks Center for Energy and Power, Gwen Holdmann and her team are dedicated to applied energy research and technology testing focused on lowering the cost of energy in Alaska. Known by many as one of the top global experts in microgrid energy systems, Holdmann thinks nuclear energy has the potential to replace diesel fuel in rural communities but recognizes that concerns exist. “The nuclear energy industry has really evolved over time. The last 10 years have seen a new, much more flexible approach to how nuclear energy can be deployed. Systems are smaller, modular, and with more inherent built-in safety features,” says Holdmann. “That said, many people have a sort of visceral reaction to the idea of radioactive materials potentially contaminating the environment and that is legitimate. When you’re thinking about energy sources, it’s important to evaluate potential risk as part of a broader decision-making process. “That includes understanding the technology, how the technology functions under a variety of operational and environmental conditions, and consideration of the full life cycle including fuel management. Then you have to balance all of those concerns against the potential to reduce costs or create new economic opportunities.” Richelle Johnson, lead analyst at the University of Alaska Center for Economic Development, or CED, just wrapped up a year-and-a-half long project funded by the U.S. Department of Energy and Idaho National Labs researching potential use cases for small scale nuclear power. “Alaska’s future energy landscape is going to look a lot different than it does today,” says Johnson. “It’ll be a mix of renewables and fossil fuels, but realistically it could also include nuclear.” Johnson and other UA CED researchers interviewed a number of potential energy users, ranging from small villages and hub communities to remote mining projects and military installments. “The people we interviewed for the report were experts in their field, and were very aware of the limitations of renewables in Alaska — you can only gather wind resources when the wind is blowing, you can only collect solar power when the sun is up — you still need a consistent baseload, and right now that comes from diesel,” Johnson said. Despite interest in the benefits of nuclear power, researchers found skepticism about operating a new nuclear technology in remote areas and a preference to see it proven out elsewhere first. “When it’s -20 degrees outside, you have to know how to fix something, and right now it is still unclear what that looks like for micro-reactors,” says Johnson. Silicon Valley-based Oklo, a venture-funded company founded in 2013, is poised to deploy its first project in Idaho Falls on the Idaho National Labs campus. As the sole company with a license application to build and operate a small-scale nuclear power plant, they are leading the industry in new technology. Large players like General Electric and Westinghouse are not far behind with designs of their own, however. Co-founder and CEO Jacob DeWitte, says that Oklo’s microreactors are a far cry from what most people picture when they think of nuclear energy. “We look different and operate different because we’ve been able to incorporate technology that’s been developing for decades,” he said. He’s looking for an Alaska site for his second deployment project, and has spent time in the state as a portfolio company for Launch Alaska, an Anchorage-based nonprofit dedicated to energy innovation. “Right now we’re in the process of finding partners and end users for our system. Alaska offers so much diversity in culture, climate, and geographic regions,” DeWitte said. “From a technical perspective, making something work in Alaska would help us evaluate our capacity to deliver in the most demanding environments in the world, to really prove out what we can do. If we can do it there, we can do it anywhere.” The deployment at INL is planned for sometime in the early 2020s if everything goes to plan, and an Alaska project would follow. The company is already pursuing multiple leads in Alaska, and is actively seeking additional customers in the states. DeWitte says that although he understands concerns, he’s hoping to help people shift their thinking about nuclear energy. “Our microreactors are inherently safe, self stabilize, are able to shut themselves down, and stay cool without a lot of operational involvement,” says DeWitte. “These are simple, safe systems.” That’s not to say nuclear energy shouldn’t continue to be treated with care. Holdmann referenced a floating Russion nuclear power plant (with more, such as a 35-megawatt barge, being planned to serve Russia’s Arctic communities) noting that if there were an accident on it, it would negatively impact Alaska’s fisheries. Other countries, like Canada and China are deeply engaged in research, testing, and deployment of small modular reactors. “There’s been a significant increase of nuclear installations across the world, especially in regions with more friendly permitting and licensing,” says Holdmann. “As a country, if we want to maintain our leadership in this industry, we need to pay attention to what’s going on. There’s a balance between caution and progress.” Gretchen Fauske is a marketing-minded economic developer fueled by a passion for innovation and entrepreneurship. She is the associate director for the University of Alaska Center for Economic Development, Board President for Anchorage Downtown Partnership, and a Gallup-certified CliftonStrengths coach.

Oil industry still reeling from pandemic price crash

The price for Alaska North Slope crude largely recovered months ago from the unprecedented fall it took a year ago, but if a recovery is also going to occur in Alaska’s oil workforce it has yet to materialize. Rather, preliminary employment data for March from the state Labor Department indicates the industry is continuing in the other direction. Approximately 6,300 people were employed in the state’s oil and gas sector last month, which was in line with February but did not reverse a declining trend that has persisted since the start of the pandemic. Following a near-term peak of 10,200 oil and gas jobs in February 2020, the industry has shed nearly 40 percent of its workforce; it is the largest drop among all of the industries the Labor Department tracks. But the recent decline in one of the state’s trademark industries is not an isolated incident. Alaska’s oil and gas workforce has contracted by 57 percent since peaking at an average of 14,800 jobs in 2014. Alaska Oil and Gas Association CEO Kara Moriarty emphasized that while the operating companies would relish the ability to hire more workers again, what has happened in Alaska is reflective of the national picture. Nationally, the industry peaked at nearly 199,000 direct jobs in 2015 and has had 133,000 through the first few months of 2021, a one-third drop in employment. “When you have a price fall like we have from 2014 to today the companies just don’t have as much money to spend and it does force efficiencies and you just can’t drill as many wells when prices are where they’re at today compared to 2014,” Moritarty said. The price for Alaska crude stood at $66.62 per barrel on April 19, according to the state Revenue Department and it has remained greater than $60 per barrel since early February — a return to where it started 2020 — but still far from the $100 per barrel-plus regime the industry enjoyed early last decade. State Labor Economist Neal Fried said the simple price of oil is consistently the best indicator of pending employment trends in the industry. While shale production in the Lower 48 requires more constant and labor-intensive drilling activity, there is clearly no correlation between oil production and jobs in Alaska. Pre-pandemic employment levels are in line with the size of the industry when more than 1 million barrels per day were being produced on the North Slope. Fried said the Labor Department’s definition of an oil and gas worker is quite narrow and is largely limited to employees of the producer companies and others active in exploration or field work, noting employment at Prudhoe Bay includes a host of support professionals, caterers, construction workers and security personnel, among others. While the producers have made significant cuts to their collective workforce, first after 2014 and again since the onset of the pandemic, most of the job losses have been with oilfield service contractors and support companies, according to Fried. “The producer part of the industry changes more slowly,” he said, adding that “right now it’s pretty ugly” in the oilfield support business. Alaska Support Industry Alliance CEO Rebecca Logan said the impact of the negative employment trend is exacerbated by the fact that the state is losing some of its highest paying jobs. “It impacts everyone in one way or another,” said Logan. She generally agreed that the support companies that work on the North Slope have felt the brunt of the cuts via less work from the producers. “You had work stop when oil just hit rock bottom and went below zero (last April). That was the death knell and we haven’t recovered from that,” she said. Doyon Drilling felt the pandemic directly last April when ConocoPhillips informed company leaders that it would lay down its contracted drilling rigs to limit the risk of spreading of COVID-19. The rig de-mobilization came amidst $400 million in cuts to ConocoPhillips’ 2020 capital plan, which previously was approximately $1.5 billion. In early February 2020, Doyon Drilling had 470 employees, according to spokeswoman Sarah Obed, a figure that fell to just 110 by mid-May. The company now employs 222 workers, Obed wrote in an email. ConocoPhillips gradually resumed its drilling program last fall. In contrast, Logan said some of the companies that work more peripherally in the industry, such as logistics and shipping firms, are thriving and she expects the industry to eventually recover at least to pre-pandemic levels because of a small flurry of yet-to-be-developed oil discoveries in recent years. “There’s a very viable industry here,” she said. ConocoPhillips has approximately 1,000 workers in Alaska after a reduction in February of nearly 100 positions across all functions of the company related to a restructuring stemming from the company’s recent acquisition of Texas-based shale operator Concho Resources, according to spokeswoman Rebecca Boys. She wrote via email that the company’s current workforce is “more than sufficient” to advance ConocoPhillips’ existing suite of capital projects, which includes the 100,000 barrels per day-plus Willow project, several smaller satellite prospects and development projects within the Alpine and Kuparuk fields. Boys added that the past year has emphasized the need within ConocoPhillips to “stay focused on cost and become more efficient in what we do. The company must be set up to succeed long-term and be able to provide jobs long-term — across industry cycles and during energy transitions. That said, we will look to grow our workforce accordingly with our projects.” Economist Ed King of King Economics Group and a former state economist said in an interview he believes when several of the current North Slope oil prospects become construction projects — such as Oil Search’s Pikka and Hilcorp’s Liberty prospects in addition to those held by ConocoPhillips — the industry will begin adding jobs again. An outlier, Oil Search bought into Alaska in 2018 when it took over as operator of the Pikka Unit Nanushuk prospect from Armstrong Energy, has added jobs to the industry and currently has about 150 employees in the state, according to spokeswoman Amy Burnett. However, the Australian producer had about 180 Alaska workers a year ago and has since scaled back its development plan for the large Pikka project. “I don’t think that where we are today is the new normal,” for Alaska’s oil industry, King said. “Now that we’re back up in the $60s (per barrel) we should see employment and investment return to where it was two or so years ago.” Longtime Alaska oil and gas attorney and fiscal analyst Brad Keithley sees less reason for optimism in Alaska’s oil fields. Keithley said that largely through 2015 Alaska was a “big project state” with Shell concluding $7 billion of offshore exploration in the Chukchi Sea; ExxonMobil developing the $4 billion Point Thomson gas field; and the major producers also investing significantly in the Alaska LNG Project at the time. He questions whether the market conditions will ever materialize again for multiple large-scale projects like those to occur simultaneously. While Alaska’s political leaders have blasted the growing contingent of large banks that are choosing to formally eschew Arctic oil and gas projects, Keithley said he believes more basic market factors could challenge Alaska’s oil industry for the long-term. The development hurdles of high upfront capital requirements and in some cases decade-long lead times from first discovery to production that have always challenged North Slope operators are likely to become ever-more apparent as the future of oil demand gets increasingly blurry, according to Keithley. He expects ConocoPhillips to see its Willow project and others through as the oil major has bet big on the state in recent years, but he’s unconvinced current prospects are as likely to become producing fields. “We’re getting good geology announcements. What I’m waiting on is financial announcements,” Keithley said. Elwood Brehmer can be reached at [email protected]

Movers and Shakers for April 25

Peter Pan Seafood Company LLC recently added Shannon Grant to its team as director of human resources. Grant will not only be an advocate and resource for current employees, but she will also establish programs to draw the best talent to Peter Pan every season. John Burnett, a 40-year veteran in the Alaska cable and telecommunications industry, has relocated to Unalaska to facilitate local work for GCI’s Alaska United Aleutians Fiber Project. Burnett will also serve as a resource for local community members for the duration of the ambitious $58 million high-speed internet project. The Aleutians Fiber Project is a two-year plan to close the digital divide in the Aleutians by deploying an 860-mile subsea fiber system to Unalaska, Akutan, King Cove, Sand Point, Chignik Bay and Larsen Bay.

FISH FACTOR: Demand jump, tight supply leading to record crab prices

“Insatiable” is the word being used to describe the demand for snow crab as the world’s largest fishery got underway on April 5 in Eastern Canada. And while more snow crab will be available this year, buyers expect a tight supply. Global seafood supplier Tradex said snow crab and other “premium crab” saw huge growth at retail in 2020 and demand is even greater this year. Seafood like crab and lobster are now perceived as being affordable to buy and cook at home compared to the cost in restaurants. Tradex spokesperson Tasha Cadence said that shift has spawned a new pandemic-inspired word by market experts. “It’s ‘premium-ization,’ or customers recognizing a higher value for a product and paying a higher price,” she said, referring to comments by industry veteran Les Hodges in his April Crab Update. The combined Canadian catch for snow crab through September, most of which is sold to the U.S., tops 157 million pounds, 11 million pounds higher than 2020. The Canadian crab comprises 62 percent of the U.S. market share, according to Urner-Barry, which has provided information for the food industry since 1858. Prices for snow crab to Canadian fishermen were reported by Undercover News at a record $4.56 (U.S.), adding that they could top $7 per pound. Russia is the second-largest snow crab producer with a harvest of nearly 98 million pounds in its year round fishery this year. Much of the product goes to markets in China, Korea, and the U.S., where imports in 2020 were up by 80 percent to 42 million pounds valued at nearly $341 million. “And with the Russian quota increasing almost 35 percent in 2021, there is anticipation that even more snow crab from Russia will come into the U.S.,” according to Urner-Barry in its spring report. Alaska is the world’s third-largest snow crab producer with a catch this year of 45 million pounds for the fishery that began last Oct. 15 and ends in mid-May. The crab, which weigh 1.2 pounds on average, are sold primarily in frozen leg clusters to markets in the U.S., Japan and China for reprocessing. Advance prices to fishermen for Alaska snow crab were reported at $3 per pound but lengthy sales negotiations are likely to push that higher. Alaska’s snow crab fleet of about 60 boats received a record average advance price last year of $3.15 per pound for a 34 million-pound harvest valued at nearly $106 million. If all the snow crab catches come in as planned, it will add up to more than 300 million pounds for global markets this year, a 13 million-pound increase over 2020. And while Alaska is deservedly famous for its crab – meaning snow, king crab, Tanners and Dungeness – it’s a small player providing just 6 percent of global supply. Herring hauls The roe herring fishery at Sitka Sound ended on April 9 after two weeks of daily fishing. A fleet of about 20 seiners took an estimated 32 million pounds, less than half of the allowable harvest. Herring fishing at Kodiak began on April 1, two weeks earlier than usual, due to an earlier spawn across the island’s five fishing districts. By last week, 13 boats had taken less than half of the 16 million-pound harvest limit, the largest ever. The fish were looking good although the fleet was standing down for a few days to let more of the roe ripen, said James Jackson, area manager for the Department of Fish and Game at Kodiak. He added that up to nine tenders also are on the ground and five processors are buying herring. Word on the docks is that the herring are fetching $300 per ton for fishermen, or about 6 cents per pound. The earlier start at Kodiak means that more boats could head to Togiak at Bristol Bay when that herring fishery gets underway, usually in early May. It will depend on how many processors show up to buy. Togiak is Alaska’s largest roe herring fishery, this year with a whopping harvest guideline of more than 85 million pounds, the highest since 1993. Last year only 3 boats and one buyer showed up there for the fishery that ran from May 4 to 16 when the boats dropped out. In 2020 the total Alaska roe herring harvest of 17.3 million pounds was valued at just less than $8 million. Water watchers A state judge recommended last week that the state Department of Environmental Conservation was wrong to issue a Clean Water Act certificate to Donlin Mine, the world’s largest gold mine planned upstream from villages along the Kuskokwim River. The state initially issued a “certificate of reasonable assurance” to Donlin in August 2018, saying it believed Donlin’s operations would comply with state water standards, reported KYUK in Bethel. The certificate is a precursor to one of the biggest state permits Donlin needs before it can begin constructing and operating its gold mine, which requires more than 100 state permits. “The Orutsararmiut Native Council challenged the certificate, contending the state cannot have “reasonable assurance” the mine won’t violate water standards. Specifically, the tribe said the state can’t guarantee Donlin will maintain Alaska’s environmental standards for mercury levels, water temperature and fish habitat,” KYUK said. DEC’s water division may respond to the proposed decision by May 5 along with the tribal council and Donlin Mine. The final decision will rest with DEC Commissioner Jason Brune when the administrative law judge’s proposed decision and all responses to it are before him. More than 1,000 Alaskans spoke out against the state’s plans to change the rules that regulate the use of water in salmon streams during a public comment period that ended on April 2. The Department of Natural Resources claims the changes are needed “to provide clarity and consistency in the Division of Mining, Land and Water’s processes.” The changes would give developers the rights to take water from streams but would not allow other entities to hold instream water reservations to protect fish stocks. The Alaska Miners Association in 2018 blamed “anti-development entities” for using instream flow reservations to stop projects, claiming the solution is to “place an immediate moratorium on processing applications and pursue regulatory changes to ensure that only state agencies can hold reservations of state water.” A legislative hearing has been requested. Finally, the Japanese government announced it will dump 250 million gallons of treated but still radioactive water into the Pacific Ocean that has been stored in massive tanks at the Fukushima nuclear plant that was badly damaged by an earthquake in 2011, calling it “the most practical solution.” The release will begin within two years and the government said it “will do its utmost to provide compensation to fishermen for any damages.” Big NOAA budget boost President Biden has proposed a 25 percent budget increase to nearly $7 billion in funding for the National Oceanic and Atmospheric Administration that would be the biggest in the agency’s history if it gets congressional approval. That is $1.4 billion more than NOAA received for this current budget year. National efforts to fight climate change served as a primary motivator for the budget boost. “This increase includes $800 million to expand investments in climate research, support regional and local decision-making with climate data and tools, and improve community resilience to climate change,” said an April 9 budget document. “These investments would support an expanded and improved drought early-warning system, as well as competitive grants to build coastal resilience to help reduce the costly economic and environmental impacts of severe weather events on communities.” This would help protect communities from the economic and environmental impacts of climate change, and invest in modern infrastructure to enable these critical efforts. NOAA’s responsibilities include weather forecasting, climate research, ocean research, maintaining the health of U.S. fisheries and protection of endangered marine species. Laine Welch lives in Kodiak. Visit or contact [email protected] for information.

Cook Inlet fishermen face poor forecast, federal uncertainty

Cook Inlet’s commercial fishermen are facing pressure from two directions in the upcoming season: one is the looming potential for a complete federal waters closure, and the other is another poor projection of sockeye returns. The Alaska Department of Fish and Game’s sockeye forecast issued April 8 predicts a total return of 4.4 million sockeye to the upper Inlet, which includes major salmon-producing waterways like the Kenai, Susitna, and Kasilof rivers A return that size would allow for a commercial catch of about 1.6 million sockeye, a little more than half of the average in the last 20 years. The Kasilof River’s run is projected to be about 881,000 sockeye, about 12 percent less than average, while the Susitna River is forecast at 436,000, or 16 percent better than average. Fish Creek is also projected slightly above the average, with 92,000 expected to return. The Kenai is the largest producer of sockeye in the Inlet, with about 2.3 million projected to return there this year. However, that’s about 1.3 million fish less than the average in the last 20 years, and means a significant decrease in the number of sockeye available for commercial harvest. Added to the allocation to the large sportfishery and personal use fishery on the Kenai, and the commercial harvest in Cook Inlet would be much smaller than in past years. That’s even if they get a chance to harvest it. Last year, setnetters on Cook Inlet’s East Side spent fewer hours in the water than usual in July, the height of the season, because of extremely poor king salmon runs to the Kenai River. Part of the management plan says that if the king salmon runs aren’t projected to meet escapement goals, an increasingly stringent set of management measures go into place, removing bait and retention from the sportfishery, reducing the number of hours allowed in the setnet fishery, and restricting the area in which the drift gillnet fleet is allowed to fish. The late run of kings to the Kenai is forecast at 18,046 fish. That’s just more than the lower end of the escapement goal of 15,000 to 30,000 for the late run. It’s very low — the fifth-lowest in the last 36 years, according to Fish and Game — but it would still be better than 2020’s poor return of about 12,216 kings. “Based on the forecasted run size and if harvest rates are average in both sport and commercial fisheries, the Kenai River late-run king salmon large fish (optimum escapement goal) may not be met without a reduction in sport and commercial harvest of this stock,” the department states in the outlook. The Northern District, which starts north of Nikiski and covers up to the area around the Susitna River, is facing a similar restriction. The king salmon run to the Deshka is projected to be around 11.464 fish, which is just above the lower end of the escapement goal. ADFG notes that harvest will probably need to be reined in to make sure that run makes its goal. Sportfishermen can’t keep king salmon in the Susitna or Little Susitna rivers, and setnetters will only get 6-hour fishing periods targeting kings in May up through June 21. “If the run is stronger than expected and retention of king salmon is allowed in the Deshka River sport fishery, reestablishing 9 or 12 hour openings in the directed king salmon commercial fishery may occur,” the department states in its outlook. The Northern District is scheduled to open May 31; the drift gillnet fishery on June 21, and the East Side setnet fisheries at varying times after June 28, with the exception of the Kasilof section, which can open as soon as June 20. The fishermen are facing the potential that this could be their last Cook Inlet salmon season in federal waters, too. In November, the North Pacific Fishery Management Council approved an amendment to the Cook Inlet salmon fishery management plan that would close all the federal waters in the inlet to salmon fishing. The decision came after a prolonged lawsuit and stakeholder process that resulted in the state refusing to accept delegated management under federal oversight, and the council voting to close the fishery with the potential open for further discussion from the federal government. If the amendment to the FMP goes forward, all the waters more than three nautical miles offshore in Cook Inlet would be closed to salmon fishing, primarily affecting the drift gillnet fleet. In some years, more than half of the drift fleet’s salmon harvest comes from the federal waters. The United Cook Inlet Drift Association and the Cook Inlet Fishermen’s Fund, whose lawsuit over the council’s decision in 2012 to remove Cook Inlet from the federal salmon FMP in the first place, have argued that this decision is illegal as well. In a March 2021 statement, the organization stated that none of the four options considered by the council were acceptable. “The real problem for the State and ADFG was the fact that a proper process and delegation of authority under the Council’s scrutiny, or (National Marine Fisheries Service’s) scrutiny, would expose the reality that none of the Cook Inlet management plans, escapement goals and in-season management practices comply with the (Magnuson-Stevens Act) or national standard requirements,” the group said in its statement. “None of these plans, goals or practices will meet the requirements of federal law, because they are so flawed, unsustainable and scientifically invalid.” The decision is under review by the National Marine Fisheries Service prior to publication in the Federal Register, when it will be available for public comment. The Upper Cook Inlet salmon fishery has been worth an average ex-vessel value of $27 million in the last decade, with the vast majority of that coming from sockeye. However, last year’s was the worst ex-vessel value on record at only about $5.2 million, less than a fifth of the average. Elizabeth Earl can be reached at [email protected]

GUEST COMMENTARY: A campaign For Alaska

The University of Alaska is focused on taking charge of its destiny. On March 25, the university launched its “For Alaska” philanthropic campaign: the largest public fundraising effort in the university’s history with a goal to raise $200 million by 2024. The fundraising campaign involves all three universities — UA Anchorage, UA Fairbanks, UA Southeast — all 16 community campuses, and the University of Alaska Foundation. This coordinated fundraising and public outreach effort is an opportunity to further position higher education as a catalyst for a thriving Alaska. The campaign invites alumni, community partners, businesses and neighbors to invest in delivering high-quality education to meet the needs of Alaska. The campaign is also about allowing each of us to imagine the possibilities in building the future of Alaska while serving the needs of all Alaskans through the university. Our university community has been working hard to increase philanthropic giving in support of students, academics and research For Alaska. We are committed to expanding the number of scholarships available for all students, enhancing the hundreds of academic and training programs, growing our Alaska Native studies programs, and Arctic and other research. To date, more than 16,000 Alaskans have contributed to this campaign raising more than $135 million for these important initiatives at UAA, UAF and UAS. The goal of the For Alaska campaign is broader than philanthropic giving. It is also designed to promote Alaskan ownership of the state’s extraordinary university system, and to build a vibrant bold tomorrow for all Alaskans by empowering opportunity through higher education. At the campaign launch, hundreds of Alaskans, including students, alumni, community members, supporters and business leaders, joined us to hear more about the For Alaska campaign. Four key messages summarize the campaign’s priorities: 1. Expand the culture of education in Alaska by increasing college graduation, and ensure broad access for the success of our students while ensuring educational equity; 2. Provide Alaska with a skilled workforce; 3. Grow world class research by leading research relevant to Alaska and to the Arctic region; and, 4. Contribute to a more diversified economy by expanding Alaska’s knowledge base. The impact of the For Alaska campaign will help write the next chapter in Alaska’s history. It will highlight Alaska’s leadership in higher education, research, innovation and economic development. By combining efforts across the university system, and with all Alaskans, we will raise the profile and awareness of the University of Alaska and its importance to our entire state. But more so, the campaign is about imagining possibilities and dreaming about creating a brighter future For Alaska. A strong University of Alaska system is key to providing a better future for all Alaskans. The University of Alaska system belongs to every Alaskan. Won’t you join us? Sheri Buretta is the chair of the University of Alaska Board of Regents; Cynthia Cartledge is the chair of the University of Alaska Foundation Board of Directors.

S&P outlook expects Alaska to trail oil peers in recovery

A newly published Outside economic outlook for oil and gas-heavy states backs up what local forecasters have been saying: It’s going to be a long slog back for Alaska. The April 15 S&P Global report entitled, “U.S. Oil and Gas-Dependent States Are Out Of The Woods (For Now),” concludes that Alaska’s economic recovery from the pandemic is likely to be amongst the slowest in the nation, with Texas being the only traditional oil state to be among the national leaders in near-term growth. The international market analysis firm believes the national economy will see gross domestic product, or GDP, growth of 6.5 percent this year and 3.1 percent in 2022 after contracting by 3.5 percent last year, but the recovery will be “uneven,” according to the report. “Without exception, all mineral-producing states were affected by the dual-shock of the pandemic-induced recession and the global energy rout last year, with five of them in the bottom 20 percent of all states in 2020 for economic growth,” the S&P report states. Alaska’s economy contracted by 4.9 percent last year based on state-specific GDP, putting it 42nd nationally and ahead of other oil states like Louisiana, Texas and Wyoming, but behind the likes of North Dakota, New Mexico and Texas. According to figures from the Federal Reserve Bank of St. Louis, Alaska lost $4.1 billion, or 7.5 percent of its total economic output last year compared to 2019. S&P’s authors have pegged Alaska’s growth this year at about 5.1 percent, which would put it 33rd nationally based on the analysts’ projections. That growth is expected to taper to just more than 3 percent in 2022, which would be amongst the slowest growth nationwide. “By 2022, only Alaska and West Virginia (among resource states) are forecast to rank in the bottom 10 states,” the authors conclude. “States that have a high reliance on mining activity and less diversified economic portfolios may see prolonged economic recovery compared to the rest of the sector.” University of Alaska Anchorage economist Mouhcine Guettabi said in a presentation earlier this month that the state’s labor market remains “ugly” with little optimism for significant organic growth in the coming years. The state Labor Department forecasted in January that Alaska this year will recover about 30 percent of the approximately 27,200 jobs lost in 2020 and full recovery to 2019 levels will take several years. Guettabi and other economists also routinely note that prior to the pandemic Alaska was just starting to recover from a three-year recession when most of the Lower 48 economy was strong as well. S&P analysts maintained Alaska’s AA- general obligation credit rating with a negative outlook in the report, a rating issues roughly a year ago when pandemic restrictions were tightest and domestic oil prices briefly went negative. A summary of the state’s fiscal situation notes that improved oil prices are helping the state’s immediate revenue situation, but emphasizes that “Over the long term, the state continues to grapple with sustainable budgeting. While total reserves remain very strong, additional revenue sources will be needed as expenditure reductions have been virtually exhausted over the past several years. The governor’s (10-year) plan recognizes a need for new revenues in fiscal 2023, but it is unclear what that may entail.” Elwood Brehmer can be reached at [email protected]

AK LNG strikes out on Biden’s infrastructure pitch

It appears officials in Alaska’s gasline agency are starting from scratch in their effort to secure more than $4 billion in federal money to jumpstart the Alaska LNG Project. While still in concept only, the $2 trillion-plus infrastructure plan unveiled by President Joe Biden at the end of March makes no mention of pipelines and discussion about natural gas infrastructure is limited to $16 billion for plugging and abandoning orphaned oil and gas wells and mines. The latest plan to develop an LNG export project for North Slope natural gas backed by Gov. Mike Dunleavy’s administration hinges, at least initially, on a federal subsidy to cover 75 percent of the nearly $6 billion Alaska Gasline Development Corp. officials believe it would cost to construct a large-diameter gasline from Prudhoe Bay to Fairbanks. AGDC President Frank Richards said when the idea was formally pitched to the corporation board of directors in early February that leaders of the state-owned corporation were in confidential negotiations with a “world-class pipeline operator” to potentially lead the pipeline portion of the integrated North Slope gas-to-pipeline-to-LNG effort and also contribute the remaining roughly $1.5 billion for construction of the first pipeline phase. Along with a yet-to-be-built, approximately 60-mile feeder pipeline to draw gas from the Point Thomson field, installing the first few hundred miles of the 807-mile pipeline would provide access to lower-cost natural gas to communities along the pipeline corridor and the Fairbanks area — where the focus is as much on cleaner heat sources as it is cheaper energy — first, and greatly de-risk the rest of the project for private investors, according to the Dunleavy administration. By late January AGDC had identified “likely” lead parties for the North Slope gas treatment plant and pipeline, and corporation officials were working to get the attention of a firm to lead development of and own the LNG plant, which accounts for roughly half of the overall $38 billion Alaska LNG price tag, Richards said at the time. AGDC officials had also informed the members of Alaska’s congressional delegation of their desire to participate in a federal infrastructure and stimulus program and briefed Biden’s transition team on the potential benefits of the project, according to Richards. Approximately two weeks after the president first presented his American Jobs Plan, AGDC spokesman Tim Fitzpatrick wrote via email that corporation officials had no updates on progress to get the Alaska LNG Project included in the massive spending plan because it was still so early in the legislative process and bills have not yet been filed. “We’re confident the project meets the jobs, energy and environmental goals on the table and that we have a number of different legislative paths forward,” Fitzpatrick wrote. Dunleavy spokesman Corey Young wrote in an emailed response to questions about lobbying efforts for the project from the administration that the governor has advocated for the gasline to elected leaders nationwide. “The governor will continue to fight for Alaska resource projects including Alaska LNG as federal legislative opportunities develop and evolve. No one in the world knows how to effectively develop their resources for the benefit of our citizens as well as Alaskans do,” Young wrote. However, congressional delegation staffers working on getting funding for Alaska’s infrastructure priorities said in interviews that securing a $4 billion to $4.5 billion grant for Alaska LNG is an immensely challenged endeavor on several fronts, some more obvious than others. First, the Biden administration has shown little interest in promoting anything related to fossil fuels; it suspended the federal oil and gas leasing program shortly after taking office. And though AGDC leaders have pitched the project as a cleaner source of energy to displace coal, particularly in Asian markets, Dunleavy has taken a highly adversarial approach to addressing his dislike of the Biden administration’s energy policies while at the same time seeking billions of dollars in construction funding for the pipeline. Even if leadership in Alaska and Washington, D.C., can reach a philosophical compromise over what energy is clean enough to warrant federal support, there currently is no legislative avenue to fund the Alaska LNG pipeline — absent an earmark newly revived by Congress last month— because there is no existing federal pipeline development program, according to delegation staff. Some of the earmark appropriations secured by Alaska’s congressional delegation through much of the 2000s drew nationwide scrutiny and provided momentum for a prohibition on earmark funding that lasted roughly a decade before the rule was rescinded by Congress in March. According to the staffers, Alaska Natural Gas Pipeline Act passed in 2004 still contains $18 billion in federal loan authority for an Alaska gas pipeline, but it is only for a project through Canada as currently written, the export route preferred at the time. State level lawmakers consumed by navigating the pandemic and the state’s structural budget problems have spent little time evaluating the most recent Alaska LNG funding scheme since it was first publicized but the federal subsidy request was met with skepticism in the one Senate hearing that covered the topic. Republican legislators who have supported Dunleavy’s desire to pass the project back to the private sector also questioned the realism of the plan to get more than $4 billion in federal funds for a fossil fuel project given the political realities. Elwood Brehmer can be reached at [email protected]

Union appeals Amazon election in complaint to NLRB

Accusing Inc. of misconduct, the retail union that lost a hotly contested election at the company’s Alabama warehouse has asked federal officials to set aside the results. In a complaint filed late April 16 with the National Labor Relations Board, the Retail, Wholesale and Department Store Union alleged that Amazon “prevented a free and uncoerced exercise of choice by the employees,” including threatening employees and retaliating against union supporters. The RWDSU provided a copy of the filing, which was not yet visible on the agency’s docket. According to the union, Amazon interrogated employees about their views of the RWDSU and issued a series of threats, including that it would shutter the warehouse if they unionized. The union accuses the company of discouraging union supporters from discussing the proposal to join the RWDSU during work hours, while allowing anti-union employees to agitate against the union while on the clock. Workers who questioned the company’s claims during mandatory anti-union meetings were called up and then kicked out in front of hundreds of co-workers, the union said, while pro-union employees were reassigned to roles where they would be isolated from colleagues while at work. The union also accused Amazon of firing a union supporter for distributing union cards and punishing an employee for challenging the company’s claims during the mandatory sessions. In the filing, the union didn’t identify specific people fired or punished but pledged to submit evidence to the labor board. The RWDSU accused the company of pressuring local officials into changing the time of a nearby traffic light so organizers would have less time to talk to employees on their way home. The union also said Amazon defied the labor board’s mail-in ballot directive by pressuring workers to cast their votes in a mailbox the company got installed in a tent on its property, in view of surveillance cameras. “Rather than accepting these employees’ choice, the union seems determined to continue misrepresenting the facts in order to drive its own agenda,” an Amazon spokesperson wrote in an email. “We look forward to the next steps in the legal process.” The RWDSU received 738 “yes” votes in the seven-week mail-in ballot election, while Amazon garnered 1,798 “no” votes on whether to unionize. Contested ballots, most of them disputed by Amazon, according to the union, totaled 505 and weren’t opened. The labor board has the authority to invalidate election results in response to conduct that could have changed the outcome and prevented employees from making a free choice about whether to unionize. Challenges to election results are considered by regional labor board officials, whose rulings can then be appealed to board members in Washington. The NLRB has five seats, with staggered terms; Republicans are slated to hold a majority of them until August. A successful appeal by the union would likely lead to a new election. Failing that, the RWDSU would have to wait at least 12 months and also sign up enough employees to again demonstrate substantial support for the proposed bargaining unit. Employees, lawmakers and the broader public will be watching the appeal closely because the outcome could affect how workers organize elsewhere and inform congressional debate over the labor movement’s push to overhaul federal labor laws.

OPINION: Refusal to back Bronson is a bad look for Bill Evans

Who will square off in the Anchorage mayoral runoff has been clear since the first large batch of votes were reported the day after the April 6 election, but one question remaining unanswered is whether Bill Evans meant it when he said the most important thing was to beat Assembly member Forrest Dunbar. Evans built his campaign around the premise that he was the only one of the three candidates on the right side of the spectrum who had a chance to beat Dunbar among a liberal-leaning Anchorage electorate. He finished ahead of Mike Robbins, who was largely competing for the same votes as front-runner Dave Bronson, but well behind the 24,537 votes garnered by the conservative favorite who topped all candidates with 33 percent of the 74,245 ballots tabulated as of April 19. In sum, the three Republican candidates ended up with just more than half, or 50.3 percent, compared to 47.5 percent earned by the progressive candidates Dunbar, Bill Falsey and George Martinez. That should give some hope to anybody yearning for change after a year of pandemic management malfeasance by the leftist-dominated Assembly and two mayors who have kept the city under strict lockdowns and played shell games with CARES Act funds that prioritized their ideologies above the economic relief it was intended for. Yet while Robbins was quick to endorse Bronson, and Falsey and Martinez threw their support to Dunbar, Evans is choosing to stay on the sidelines and won’t encourage those who voted for him to back Bronson in this pivotal election for the future of Anchorage. His refusal to endorse Bronson may be irrelevant in an environment where his voters obviously had a chance to choose Dunbar and didn’t. Still, it isn’t a good look for someone who ran his race based on the argument that conservatives should choose him over someone more aligned with them politically because defeating Dunbar trumped all else. Evans’ silence regarding a runoff when every vote matters reads like the latest chapter in the long-running story of how Republicans who populate what can best be described as “the establishment” are often unwilling to embrace the outcome of elections that don’t favor their wing of the party. Conservatives held their noses and voted for the likes of John McCain and Mitt Romney, who were also sold as the bipartisan, “electable” candidates. But when the GOP voters decided to ignore the establishment consensus of lovable losers and instead chose the unlikable winner Donald Trump, it sparked a revolt among the elites of the Republican Party who couldn’t get over not only being rejected, but being wrong. Bronson didn’t run a campaign based on a socially conservative agenda that would collide with a brick wall of resistance on the Assembly. He ran on getting the economy moving again by using his powers as mayor to lift the mandates choking the life out of Anchorage. Literally millions of dollars in commerce has been flowing for months into the Valley of the Free, which is the only place where Dunbar’s policies have been creating jobs. Dunbar, meanwhile, is also running on a promise to get the economy going with plans he could have introduced at any time in the past year backed by seven or eight votes on the Assembly yet never did, nor did he ever vote to rescind the destructive mandates that have made economic recovery the No. 1 issue of this race. The candidate who will do the best job of bringing back jobs and business to Anchorage will be the decisive factor for many voters. If Evans doesn’t want to endorse Bronson as that person it can rightly be perceived as evidence that he ran a campaign that wasn’t really about beating Dunbar after all. Andrew Jensen can be reached at [email protected]

2021 Top Forty Under 40 announced

The Alaska Journal of Commerce and the Anchorage Daily News are pleased to once again recognize a group of outstanding young professionals in the 2021 Top Forty Under 40.  This year we considered 114 nominees and 750 pages of supporting documentation, with members of the selection committee ranking each individual on a scale from 1 to 5 and the best 40 scores joining the 2021 class.  The selection committee was made up of Elevate Alaska President Kea Cuaresma; Peak 2 Peak Alaska Vice President Sarah Boice; Anchorage Daily News Advertising Director Brandi Nelson; Alaska Journal of Commerce Sales Manager Jada Nowling; and Alaska Journal of Commerce Managing Editor Andrew Jensen.  “As we emerge from one of the most difficult years in our history, we are happy to highlight some of the best and brightest representing a diverse cross section of young people from many backgrounds, regions and the private, public and nonprofit sectors,” Jensen said.  The 2021 awards event will be Oct. 29 at the Hotel Captain Cook in Anchorage. A cocktail hour will start at 6 p.m. and the dinner will begin at 7. Tickets will be available at 5 p.m. on April 16 at Individual seats are $145 and tables can be purchased for $1,450. The 2020 awards event is scheduled for Sept. 17, also at the Captain Cook.  Our magazine featuring the 2021 class will be released in the June 20 edition of the Alaska Journal of Commerce. For information on event sponsorships, tickets or advertising in the special publication please contact Jada Nowling at [email protected]  The 2021 Top Forty Under 40: Zachary Aregood, 27, President/CEO, ARM Creative LLC, Anchorage Erin Baca, 37, Director, 49th State Angel Fund, Anchorage Edwin Bifelt, 36, Founder/CEO, Alaska Native Renewable Industries, Husila Dr. Lindsey Cobb, 39, Chief of Staff, Providence Alaska Medical Center, Anchorage Jeremy Conkling, 39, President, Anchorage Police Department Employees Association Jenny Di Grappa, 34, Director of Donor Relations and Communications, Food Bank of Alaska, Anchorage Arran Forbes, 33, President, Arctic Entries, Anchorage Nyabony Gat, 24, Health Education Coordinator, Alaska Primary Care/Southcentral Alaska Area Health Education Center, Anchorage Garret Gladsjo, 34, Principal Engineer/Owner, proHNS LLC, Juneau Aaron Helmericks, 39, Senior Director of Energy and Mining, GCI Liberty, Anchorage Lauren Hendrix, 32, Director of Marketing and Proposals, ASRC Energy Services LLC, Anchorage Alisha Hilde, 38, Anchorage School Board Matt Holta, 39, Director of Business Development, BDO USA LLP, Anchorage K.C. Hostetler, 31, Sales and Community Marketing Manager, Alaska Airlines, Anchorage Heidi Huppert, 39, Chief Program Officer, Covenant House Alaska, Anchorage Kyle Kaiser, 35, President/Founder, VIPER AK Inc., Chugiak Tanya Kaquatosh, 39, Senior VP of Administration, Doyon Ltd., Fairbanks Angie Kemp, 39, Juneau District Attorney, State of Alaska, Juneau Lessie Kincaid, 36, VP of Sales, Coca Cola Bottling of Alaska/Odom Corp., Anchorage Carlene Liesch, 26, Lead Instructor, Alaska EXCEL, Anchorage John Lincoln, 39, VP of External Affairs, NANA Regional Corp., Kotzebue Tessa Walker Linderman, 36, Co-Lead Alaska Vaccine Task Force, State of Alaska, Anchorage Christina Love, 34, Senior Specialist, Alaska Network on Domestic Violence and Assault, Juneau Isaiah Mangum, 39, Founder/Executive Creative Director, Fairbanks Brand Studio, Fairbanks Ryan Muspratt, 37, CFO, Petro Star, Anchorage Elizabeth Nicolai, 38, Youth Services Coordinator, Anchorage Public Library, Anchorage Joshua Norum, 33, Director of Operations, Sourdough Express Inc., Fairbanks Sheron Patrick, 39,Public Relations and Communications Manager, Better Business Bureau, Anchorage Lance Penhale, 33, District Advisor, First Command, Anchorage Michael Rovito, 38, Deputy Director, Alaska Power Association, Anchorage Milena Sevigny, 39, Community Relations Program Manager, TOTE Maritime-Alaska, Anchorage Natasha Singh, 38, General Counsel, Tanana Chiefs Conference, Fairbanks Sharity Sommer, 35, Former Program Officer, Rasmuson Foundation, currently enrolled at University of Alaska Anchorage majoring in dietetics and nutrition Dr. Claire Stoltz, 38, Medical Director-Family Medicine, Tanana Valley Clinic, Fairbanks Miranda Strong, 36, Counsel, Lane Powell, Anchorage Tosha Swan, 37, Manager of Programs and Communications, Anchorage Chamber of Commerce Bryce Ward, 34, Mayor, Fairbanks North Star Borough, Fairbanks Renee Wardlaw, 34, Senior Director of Corporate Compliance/Associate General Counsel, Bristol Bay Native Corp., Anchorage Varina Zinno, 39, Senior Geologist, Calista Corp., Anchorage Liam Zsolt, 31, Director of Technology, ASRC Energy Services LLC, Anchorage


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