GUEST COMMENTARY: Airlift frees old bus from tragic past, offers positive future

For decades, the 1940s-era city bus abandoned on a remote trail 25 miles west of Healy has served variously as shelter, symbol, shrine, siren song, and even a place of death. June 18 marked the start of a new chapter in the life of Bus 142. On June 18, at the request of the Alaska Department of Natural Resources, a Alaska Army National Guard CH-47 Chinook helicopter removed the so-called “Into the Wild” bus from the Stampede Trail so it could be transferred to safe, secure storage while DNR considers the next step in the story of Alaska’s most famous bus. After its service with the Fairbanks City Transit System ended in the 1950s, the Yutan Construction Co. bought the now-famous bus to house employees during construction of a pioneer road between Lignite and Stampede. It was abandoned upon completion of the road in 1961, and began quietly rusting away in a small clearing on the state-owned Stampede Trail, west of the Parks Highway. Used by hunters and hikers as an occasional emergency shelter, the bus became famous after Jon Krakauer’s 1996 book “Into the Wild” and a 2007 movie of the book popularized the story of 24-year-old wanderer Chris McCandless, who, sadly, died there alone in 1992 after a 114-day stay which he characterized in a journal as an escape from the constraints of civilization. Since McCandless’ death, increasing numbers of travelers have tried literally to retrace McCandless’ steps, hiking a rugged trail in often-harsh weather and fording the Teklanika and Savage rivers to reach the bus site. While many of them have had satisfying, if uneventful, experiences, too many became lost or injured, or required rescue. Tragically, since 2010 two women have drowned during such trips, fueling public calls to reduce or eliminate the hazards. As the bus is a long-term abandoned vehicle present on state land managed by DNR, it is technically state property, and legally the responsibility of my department. However, determining what to do with the bus has required the balancing of interests. On the one hand, Alaska welcomes residents and visitors for whom the real challenges and risks of recreating in our wild areas heighten their enjoyment. On the other hand, this bus had been attracting far too many visitors unprepared for the rigors of the challenge. They were risking harm to themselves or others, requiring search and rescue teams to put themselves in harm’s way, consuming limited public resources, and in some cases losing their lives. Some voices have called for eliminating the attraction entirely by destroying the bus. Others wanted to make access safer by building bridges or improving trails. Some wanted to capitalize on its mystique, moving it to the road system as a tourist attraction. Still others wanted to see it preserved as a shrine to the kind of rugged individualism that shuns civilization’s strictures. In the end, DNR’s decision to move the bus was based on a few essential factors. First, it had become an attractive nuisance posing unacceptable risk to visitors too often unprepared for the rigors of the journey. Second, the Alaska Army National Guard graciously agreed to remove it as a way to practice its skills at rapid air-mobile movement of equipment under wilderness conditions. Third, the bus was imposing financial burdens on the Denali Borough, Alaska State Troopers, DNR and other agencies. Finally, and most importantly, we simply could not ignore that the bus was a factor in more, and more frequent, injuries, accidents and deaths. Recognizing news about the bus might reopen old wounds in the families of those who had died — and balancing that with a need to preserve the safety and integrity of the operation — as soon as the bus was on the move, I personally reached out and spoke with a member of the McCandless family to share the news, and to express my hope this action might save others from the kind of pain their families have experienced. Where time differences would have meant disturbing late-night phone calls to other survivors, my staff provided advance notice by email, and invitations to call back when convenient. As Bus 142 will likely remain a potent symbol and attractive artifact, DNR plans to keep it safe in secure storage while considering options for its long-term future, in Alaska. While we will continue to consider public input, it is my strong intent to prevent the bus and its legacy from being exploited for publicity, profiteering or any other disrespectful use. Decisions on its final disposition will reflect our responsibility for the health, safety and well-being of our residents, our visitors, and our land and resources. Bus 142 has had a long and fascinating past. By respectfully, efficiently and safely moving it, we are preserving the opportunity for this piece of history to have a long-term future as well; not only in Alaska, but also in the hearts, minds and memories of adventurers and seekers around the world. ^ Corri A. Feige is commissioner of the Alaska Department of Natural Resources.

GUEST COMMENTARY: Time needed to ensure best use of CARES Act funds

It’s too early to ask where CARES Act funding has gone, or what impact it has had. We know the various priorities it was allocated to, each at various stages now in their distribution. What’s been common across implementation is that it takes time to design effective programs and ensure that funds meet Alaskans’ needs. That’s where most Alaska municipalities are: reviewing grant agreements and budgets, developing a common-sense plan to appropriately manage this federal assistance, and listening to local businesses and residents to learn where priorities lie. Taking on $568 million in liability is not something that local governments do lightly. There is a clear understanding that until everyone has worked through what is allowable and then what is necessary there cannot be action. Ultimately, there can’t be quick action when local governments are working carefully through federal and state restrictions on how funds can be spent. So where is local government CARES Act funding? Right now, the state has distributed about a fifth of it — and expect as much as half very soon — to nearly 100 local governments. Those local governments are very often placing these funds in separate accounts to ensure proper accounting; they are implementing separate accounting to track expenditures. Local governments are acting as good stewards, ensuring that they can report back to the state, federal government, and ultimately Alaskans, that these funds have been carefully managed. While it may not seem like there is quick action, there is definitely action. And it’s really kind of exciting to see cities and boroughs stand up to this challenge. What makes implementation of the CARES Act funding different than other types of funding is that much of it can’t simply help local governments meet their own needs. Those needs during the public health crisis include significant lost revenues, which isn’t an allowable expenditure. They are able to use these funds on some limited items that will help with public health and safety, and measures that help with mitigating the spread of coronavirus. This means that for the remainder of the funds, local governments are determining how to meet community needs. We know that many businesses are struggling or at risk of failing, an increased number of residents may be unemployed or furloughed, nonprofits may have been limited in their operations or expanded them; hospitals, schools, the university and so many other essential community assets have been impacted. Municipal officials are assessing these impacts and developing processes to distribute funds in support of keeping the lights on, at least. It’s also a time to invest in programs like childcare, food and support for vulnerable populations. Across the state we’re seeing innovative programs that are new and different to many local governments. An estimated 40 cities and boroughs will implement some kind of grant program, redistributing their funds to businesses, nonprofits, and other organizations in the community. As many as 100 more may be considering ways to help offset utility bills, providing subsidies to residents to maintain water, sewer, and electric connections. Some may be looking at working with AHFC or offering their own rent and mortgage relief programs. Municipalities are assessing barriers to reopening, including childcare, and looking at how to provide funds for those operations. There are discussions of providing incentives for face coverings, testing, and other public health compliance. Public facilities may undergo transformations so that they can operate and ensure community members can stay safe; that includes pools, community centers, city halls, and libraries. Communities may need to build or purchase facilities for quarantine or emergency operations. Yes, these will all take time to implement. But local governments are moving decisively to meet the immediate needs of residents and the overall interests of communities. It’s also true that the public health emergency isn’t over; many are preparing to be able to meet additional needs over the course of this year. There’s a common acknowledgement that while CARES Act funds won’t meet all the needs of local governments and their budgets, right now the priority is to leverage these funds in a way to meet the needs of communities. Keeping communities whole during this crisis — businesses operational, services provided, residents employed, families supported — is how we’ll measure success. Nils Andreassen is the Executive Director of the Alaska Municipal League, a service organization for 165 city and borough members. AML’s mission is to strengthen local governments. He is also a member of the Juneau Downtown Rotary, a board member of Commonwealth North, and a Commissioner at the Denali Commission.

Upstream portion of BP-Hilcorp sale on track for state approval

BP and Hilcorp are hoping to close the upstream portion of their $5.6 billion Alaska deal by the end of the month while state regulators continue to evaluate Hilcorp’s financial wherewithal to take a large stake in the Trans-Alaska Pipeline System. State Natural Resources and Environmental Conservation department officials said they are also on track with their reviews of the sale to hit the companies’ preferred closing date during a June 19 meeting of the Governor’s Oversight Committee on the transaction. DNR Commissioner Corri Feige said staff in her department should finish their fit, willing and able test of Hilcorp’s ability to operate the large Prudhoe Bay oil field that is the heart of the deal by June 26. “We still do in DNR’s shop have the secondary liability of upstream guarantee for both DEC and their contaminated sites and DNR’s (removal and restoration) obligations pending so that one is still very much active,” Feige said. Companies that develop infrastructure on state oil and gas leases are required to maintain a financial assurance with the state that they will be able to restore the parcel back to a condition deemed acceptable by DNR officials, commonly known as dismantlement, removal and restoration, or DR&R. Under its deal with Hilcorp, BP will retain its secondary liability for the upstream North Slope facilities it is selling to the Houston-based independent as well as for BP’s portion of TAPS, which the company holds a 48 percent stake in. The total cost to restore the Prudhoe Bay leases or the TAPS corridor is unclear given the exact requirements could vary depending on the individuals in leadership at the time, but a 2002 U.S. General Accounting Office report put the cost to restore areas of the North Slope developed for industry “in the billions of dollars” at the time. Reports evaluating the cost to close down and clean up TAPS have come to similar conclusions. A third-party estimate of the DR&R obligation is submitted to DNR every three years but kept confidential, according to DNR officials. BP spokeswoman Meg Baldino wrote via email that the companies do not expect to hold any sort of event at Prudhoe when the deal is final and are instead focused on a smooth transition. A Hilcorp spokesman declined to comment. DEC Commissioner Jason Brune said during the meeting that his department is also evaluating BP’s guarantee to back up Hilcorp in addressing existing contaminated sites. Hilcorp has asked to incorporate the Prudhoe Bay facilities it will take over into its current oil spill response contingency, or C-plan, and submitted a list of the facilities that would be added to the plan to DEC on June 15, according to Brune. The department is also targeting a June 30 decision on Hilcorp’s proposed C-plan amendments. DEC received no comments on the changes to the spill response plan during a 10-day comment period that closed June 19, according to spokeswoman Laura Achee. The companies had originally hoped to close the entire transaction at about this time, but the Regulatory Commission of Alaska has spent considerable time evaluating Hilcorp’s finances in relation to it taking BP’s 48 percent share of TAPS. John Ptacin, a state attorney for the RCA, said the pipeline and utility oversight agency received a substantial amount of data from the companies specific to the TAPS transaction May 4 and a request for confidentiality of that information is currently being reviewed. The City of Valdez in April appealed the RCA’s March decision to keep Hilcorp’s financial records private in state Superior Court. Feige said the next transaction oversight meeting is likely to be held in late August to update work on the upstream close if it does not happen June 30 or evaluate where the TAPS portion of the deal stands; it is currently on pace to close in fall, according to state officials at the meeting. ^ Elwood Brehmer can be reached at [email protected]

OPINION: Redlining the Arctic

The biggest bank in Alaska is redlining its biggest employer. At just more than $6 billion as of June 30, 2019, Wells Fargo holds more deposits in Alaska than every other bank combined with 51 percent of the market share according to the most recent Federal Deposit Insurance Corp. data. That is just a tiny fraction of the San Francisco-based bank’s more than $1.2 trillion in deposits nationwide, which is probably why the company’s board of directors cares not a whit about its policy of refusing to finance oil and gas projects on Alaska’s North Slope. Along with Citigroup, Goldman Sachs, JP Morgan and Morgan Stanley — who have also announced they will not finance oil and gas projects in the state — perhaps they should be made to care. Rather than gerrymandered borders of neighborhoods drawn in the past to exclude entire populations of disadvantaged people from credit services, these mega banks that were all bailed out by the federal government after the 2008 financial crash have taken advantage of the existing line at 66 degrees North otherwise known as the Arctic Circle. Above this line are thousands of Alaska’s first people that the United States government made a deal with in 1971 through the Alaska Native Claims Settlement Act to exchange millions of acres of land in order to facilitate construction of the Trans-Alaska Pipeline System. That contract guaranteeing Alaska Natives the rights of economic opportunity and self-determination is in jeopardy from these federally-backed banks that are pandering to Green New Dealers with a redlining policy that harkens back to the original New Deal of 1933. Alaska’s congressional delegation is therefore on to something with its recent letter to Federal Reserve Chairman Jerome Powell, Comptroller of the Currency Brian Brooks and FDIC Chair Jelena McWilliams that calls out these banks’ anti-Arctic policy for what it is: discrimination against Alaska Natives. That is no stretch. These banks are declaring they will help deny billions of dollars in potential royalties to Alaska Natives from the National Petroleum Reserve and the Arctic National Wildlife Refuge Coastal Plain that are both explicitly designated by Congress for development, as well as the state lands from which shareholders in Arctic Slope Regional Corp. and the village of Nuiqsuit would benefit. Doyon Drilling, a subsidiary of the Interior Native regional corporation, works extensively on the North Slope and was forced to lay off more than 300 employees as ConocoPhillips shut down exploration amid the pandemic and then curbed production by some 100,000 barrels per day as prices briefly turned negative. As of December 2019, Doyon shareholders numbered 226 at Doyon Drilling and earned $21 million in wages last year. The Green New Dealers may believe they are only screwing with evil big oil companies, but stopping Arctic projects by turning off financing spigots will disproportionately hurt companies like Doyon that are led from top to bottom by its Native shareholders. More broadly, these banks’ discriminatory policies hurt all Alaska Natives that would receive revenue sharing from North Slope development and the state as a whole that relies on oil revenue to pay for health care and education. Quite simply, banks that are still in existence today thanks to the extraordinary rescue measures taken 12 years ago and who are now borrowing from the Fed at essentially 0 percent should not be allowed to discriminate against any group of people, let alone an entire state or industry. Wells Fargo and its too-big-to-fail cohort are literally anti-Alaska. To be clear, this is not a reflection on the bank’s state leadership or its staff, who have made overwhelmingly positive contributions to Alaska and in particular the nonprofit community. But they have no sway in San Francisco. This is not to suggest that banks should be forced to finance Arctic oil projects, although extending loan services into economically distressed areas was and is mandated as a remedy to historic redlining practices. They may even have their own internal reasons for not participating in Arctic projects. However, no bank should be allowed to publicly declare and even boast about a discriminatory policy against sovereign people, an entire state or an industry that is vital to national security while still enjoying the benefits and backing of the federal government. Even absent a federal solution, Alaskans have other options for their money with banks and credit unions that are based here and are far more invested in the state’s future than Wells Fargo has decided to be. Andrew Jensen can be reached at [email protected]

Donlin co-owner NOVAGold issues rebuttal to short-sale report

Investors will now decide who’s right and who’s wrong. NOVAGold Resources Inc. responded sharply on June 8 to a short-sale report calling the company’s massive Donlin gold project “fool’s gold” and a “pipe dream,” in reference to the lengthy natural gas pipeline that is planned to help power what would be one of the largest open-pit gold mines on Earth. Executives for NOVAGold said the May 28 short-sale report compiled by J Capital Research USA LLC is “error-ridden” and a “sucker punch” aimed at artificially degrading NOVAGold’s stock value. “When I first read JCAP’s report, my first reaction was to chuckle because the piece was clearly so fallacious that I initially assumed it had been written by a child — cooped up kids have far too much time on their hands these days — or, more likely, a disgruntled short-seller,” Thomas Kaplan, chairman of Vancouver-based NOVAGold wrote in a 17-page personal rebuttal. NOVAGold CEO Greg Lang said in a formal statement that the company has thoroughly reviewed the report and is evaluating its legal options against JCAP. Leaders of JCAP acknowledge on the firm’s website that they hold a “short” position in NOVAGold stock, meaning they stand to profit if the mining company’s stock loses value, but insist their report is fact-based and lays out a compelling argument as to why Donlin is “the deposit that will never be mined.” NOVAGold stock sold for $10.65 per share on the New York Stock Exchange at the close of trading May 27 before the short-sale report was released. It has since traded between $8 and $9 per share and closed trading June 23 at $8.77 per share. The JCAP report largely hinges on a common and often accurate refrain for Alaska resource projects: that despite its size, the 33 million-ounce Donlin gold deposit is simply too remote and technically challenging to be economically viable. “(NOVAGold) management’s game is clear: keep investors interested in the stock while they rake in huge salaries,” the JCAP report alleges. “Construction of the Donlin mine was originally expected to start in 2008. Now, 12 years later, management’s best guess is that construction may start in 2022 and production in 2028.” Donlin Gold, the joint-venture project company owned 50-50 by NOVAGold and mining giant Barrick Gold Corp., received a record of decision approving the project’s environmental impact statement from the Army Corps of Engineers in August 2018. Barrick Gold Corp. has not commented on the JCAP report. Donlin officials for years have acknowledged the project will require strong gold prices to be profitable but have declined to specify what the market conditions must be to sanction the mine even as gold prices have risen steadily from about $1,400 per ounce to more than $1,700 per ounce over the past year. Gold peaked at nearly $1,900 per ounce in mid-2011. According to the report, NOVAGold leaders “might have the cushiest job in mining” because CEO Lang has been paid approximately $8.3 million in cash and taken over 1.8 million shares in the company over the past five years despite leading a junior mining firm with no operating income. NOVAGold executives and directors have cumulatively netted about $35 million from share sales over that time as well. About 70 percent of NOVAGold insider share sales have occurred in the past year while the company’s stock has increased in value by roughly 300 percent, according to JCAP figures. Over that time, Chief Financial Officer David Ottewell sold more than half his shares in NOVAGold and Lang reduced his position by 26 percent. “Clearly, the insiders have voted with their feet,” the report concludes of the stock sales. NOVAGold responded that management’s compensation is established by a committee of the company’s board of directors and is regularly measured against a group of peer companies. NOVAGold held $59.7 million in cash and $108 million in total liabilities at the end of February, according to the company’s filings with the Securities and Exchange Commission. JCAP fundamentally contends the 2011 capital cost estimate of $6.7 billion for Donlin was far too low at the time and only grown with inflation since. NOVAGold leaders said in April that the company is working to update its feasibility study this year. The report focuses on the 315-mile, 14-inch natural gas pipeline Donlin plans to build from the west side of Cook Inlet to the mine site near Crooked Creek in the upper Kuskowkim River drainage, which JCAP calls a “project killer.” It references a prior $1 billion cost estimate for the pipeline and asserts a more accurate cost considering inflation would be more than $3.8 billion. According to the report, JCAP consulted with a pipeline expert who confirmed the traders’ rough calculations that the Donlin pipeline would cost 200 to 400 percent more than NOVAGold has stated. “The proposed natural gas pipeline central to powering the project is dead on arrival. The terrain around the Donlin deposit is among the most inhospitable on the planet,” the report states of the pipeline that would cross the Alaska Range. JCAP also discounts the option of barging diesel nearly 200 miles up the Kuskokwim as an alternative fuel source to the pipeline given the sheer volume of fuel that would be needed to power the mine facilities as also being a “bust.” At its planned size to produce 1.1 million ounces of gold per year, Donlin would need more than 1 million liters, or about 264,000 gallons of diesel per day, but the project only has permits to barge a little more than half of that for mine vehicle fuel, according to the report. “Under the most optimistic scenario, cutting production to half of what is now planned, the diesel barged in would be sufficient for at most seven months of operations per year, essentially reducing output to a quarter of what is now planned,” the report sates. However, NOVAGold’s 40-page line-by-line rebuttal to JCAP calls the report’s conclusions on the pipeline simply “inaccurate,” noting references to anonymous engineers and pipeline experts also lack the individuals’ credentials. NOVAGold stresses that the capital costs specified in the 2011 Donlin feasibility study were compiled in accordance with U.S. Generally Accepted Accounting Principles, or GAAP, and the pipeline design and development costs were put together in 2013 by the international engineering firm CH2M Hill (now Jacobs Engineering). NOVAGold management also discounted a comparison of the Donlin pipeline to the 750-mile, 30-inch Mackenzie River pipeline project in Canada that was stopped in 2017 with an estimated cost of $16 billion Canadian. Similar to several Alaska North Slope gasline proposals, the Mackenzie River pipeline was planned to move large quantities of gas from the river delta and near shore Beaufort Sea south to infrastructure and markets in Alberta. “The Mackenzie pipeline project uses different materials in a different location with a different climate and environmental concerns. It is not an appropriate comparison,” states the NOVAGold rebuttal. NOVAGold also insists the amount of diesel needed to run the entire operation could be supplied via the Kuskowkim if needed just by increasing the number of fuel barge tows beyond what is planned for the mine vehicles; but the company does not address the logistical and storage issues that would come with using solely diesel fuel during the months when the river is frozen. Finally, NOVAGold leaders picked apart several inaccuracies in statements about Donlin’s 227-megawatt power plant. The JCAP report asserts that the planned Donlin power plant would be the largest in Alaska, would increase power generation in the state by 40 percent and would produce enough electricity to power a city of 500,000 residents. However, the NOVAGold response notes that the Beluga power plant owned by Chugach Electric Association is 332 megawatts and average generation in Alaska is about 800 megawatts, meaning the 227-megawatt plant run full bore would instead increase statewide power generation by about 28 percent. NOVAGold called the city comparison “exaggerated and irrelevant.” Donlin officials have said the plant would average 153 megawatts of output, which would be about 20 percent of the power currently produced in the state. Elwood Brehmer can be reached at [email protected]

Hilcorp lone bidder once again at Cook Inlet lease sale

For the fourth year running Hilcorp was the only player in the state’s annual Cook Inlet oil and gas lease sale. The Division of Oil and Gas received three bids from the Houston-based producer, netting the state nearly $179,000 for 7,146 acres. Hilcorp’s bids averaged $26.76 per acre. Hilcorp is the primary operator in the basin and has been the only company to bid in the state’s spring Cook Inlet leases sale since no bids were submitted in 2016. The company acquired 17 tracts from 2017-19. The Alaska Peninsula lease sale garnered no bids as usual. Division of Oil and gas officials released the bid results June 17. Hilcorp won the rights to one tract adjacent to the oil-bearing Cosmopolitan Unit, which also contains gas, on the southern Kenai Peninsula. The two other tracts are on the west side of Cook Inlet on the Iniskin Peninsula. Oil production from the Inlet has averaged roughly 15,000 barrels per day in recent years, but the basin is most known for being the lone supply of natural gas for Anchorage and the rest of Southcentral Alaska. Division of Oil and Gas Director Tom Stokes noted the auction was also the state’s first online-only lease sale. “We have been working hard to update the way the division does business, including providing scientific data, making lease offerings available globally, and conducting auctions online. (This) experience, including sale results, validates our investment in this new way of doing business,” Stokes said. “It bodes well for our ability to conduct larger, more complex sales in the future that operate efficiently at lower state cost.” Division officials contracted with EnergyNet Services LLC, a Texas-based firm that specializes in commodities and oil and gas property auctions for the sale. The business relationship should enhance the state’s ability to offer prospective oil and gas acreage to broader markets worldwide, according to a division statement.

Mat-Su Borough keeps up fight over LNG site

The Matanuska-Susitna Borough has asked the Federal Energy Regulatory Commission to redo the final environmental impact statement and reconsider its decision for the proposed Alaska LNG Project, correcting what the borough alleges are factual errors and deficiencies that prevented fair consideration of municipally owned Port MacKenzie property for the gas liquefaction plant and marine terminal. “The order is based on a procedurally and substantively deficient final environmental impact statement, is in violation of the National Environmental Policy Act … and therefore does not provide the commission or the public with all relevant information for the Alaska LNG Project,” the borough said in its June 19 motion for a rehearing, filed by the municipality’s contract attorneys in Washington, D.C. The final EIS “does not contain a full analysis of the environmental impacts associated with the Port MacKenzie alternative,” said the borough, which has long promoted the property across Knik Arm from Anchorage for industrial development. The borough asked FERC to prepare a supplemental EIS and then, after a fair review of the Port MacKenzie alternative for the LNG terminal, issue an amended order based on the updated EIS. The final EIS, issued March 6, accepted Nikiski, on the Kenai Peninsula, as the project’s preferred site for an LNG terminal at the end of an 807-mile gas pipeline from the North Slope. On May 21, FERC issued an order granting authority to the Alaska Gasline Development Corp. to proceed with the development after numerous other permits and regulatory requirements have been met. The Matanuska-Susitna Borough is one of several intervenors in the FERC docket, along with the Kenai Peninsula Borough, which has defended the choice of its own community, Nikiski, and the city of Valdez, which has promoted its community as the better alternative for the LNG terminal. Only an intervenor may file a motion for a rehearing with FERC. If an intervenor is not satisfied with the outcome of a rehearing request, its next option would be to file in federal court. The municipalities are arguing over a state-led multibillion-dollar development effort that lacks equity partners, construction financing and LNG customers, with uncertainty over whether the project is even economically viable. AGDC, the state corporation created 10 years ago to support development of North Slope natural gas resources, is looking for someone else to take over the project that it has shouldered alone for almost four years after ExxonMobil, BP and ConocoPhillips elected not to proceed with the FERC application. AGDC filed the project application with FERC in April 2017. After receiving the final EIS, the corporation in April adopted a strategic plan that calls for removing the state as the sole project sponsor by Dec. 31. If AGDC cannot interest anyone in taking over the lead and helping to pay the bills, the corporation plans to “put the Alaska LNG project assets up for sale” in a formal bidding process, according to a staff presentation at the April 9 board meeting. The corporation has the authority under state law to sell the project assets. In the past decade, AGDC has spent about $460 million toward engineering and permitting work for the LNG export project and the smaller, so-called “backup” plan of a $10 billion North Slope gas project to serve Alaska, without an LNG component. The corporation board is scheduled to meet June 25 and is expected to review updated cost projections for the project, last estimated three years ago at $43 billion for the gas liquefaction plant and marine terminal, a treatment plant at Prudhoe Bay to remove carbon dioxide and other impurities from the gas stream, the main pipeline to Nikiski, and 62 miles of pipeline from the Point Thomson field to Prudhoe Bay. Though global demand for LNG had been on the upswing, the coronavirus pandemic and subsequent economic shutdowns worldwide have cut deeply into demand for the fuel, with 2020 expected to come in below 2019 levels. It would be the first year of demand shrinkage in more than a decade. Even before the coronavirus shutdowns, an oversupply of LNG had brought down prices to record lows in Asia and Europe this year, with investment decisions postponed for several projects on the U.S. Gulf Coast, in Mozambique, Canada and elsewhere. “We don’t see any additional North American export capacity getting sanctioned in the next decade,” Ross Wyeno, an LNG analyst at S&P Global Platts, said last month. In its motion to FERC, the Matanuska-Borough said the EIS “erred by defining the project’s objectives so narrowly that only the applicant’s preferred site for the liquefaction facility (Nikiski) could fulfill them.” The borough alleged, “As a result, the commission did not take a ‘hard look’ at the Port MacKenzie alternative or any other liquefaction facility site alternative.” The borough has battled with AGDC for the past three years, arguing that the state corporation failed to adequately consider Port MacKenzie. In December 2017, the borough alleged that AGDC and FERC may have violated the National Environmental Policy Act and federal Clean Water Act by “improperly and intentionally excluding” Port MacKenzie as a “reasonable alternative” for the LNG plant. The project leadership team selected Nikiski in 2013, when the venture was led by the three major North Slope producers. In its June 19 filing with FERC, the borough again reiterated its past claims that the EIS “contains substantive errors and selective data gaps,” in particular overstating the volume of dredging required for vessel traffic to access the site across from Anchorage, and misrepresenting issues of air quality, wetlands, winter ice conditions, pipeline connections for gas distribution in Alaska, and whether building the LNG plant at Port MacKenzie instead of Nikiski would cause shipping delays. “The order is based upon a ‘bald assertion’ that ‘the Port Mackenzie alternative would not provide a significant environmental advantage over the proposed Nikiski site,’” the borough said. In the case of pipeline interconnections to pull out gas for use in Alaska, the borough argues that could be accomplished with the Port MacKenzie alternative and “there is no inherent reason why one of these interconnections needs to be located” at the Nikiski site. The borough’s motion concluded: “At a minimum, FERC must revisit its analysis of the Port MacKenzie alternative and include all information necessary to understand how its environmental impacts compare to Nikiski. Failure to do so not only violates the National Environmental Policy Act, but also would constitute an arbitrary and capricious decision.” While the borough continues its fight at FERC, other federal regulatory agencies are continuing their review of the project and issuing opinions of environmental impacts. The U.S. Fish and Wildlife Service on June 17 issued its Endangered Species Act biological opinion of the project’s impacts, matching up with the analysis in the final EIS. “The service has determined the proposed action may affect, but is not likely to adversely affect Alaska-breeding Steller’s eiders, short-tailed albatross, northern sea otters, or designated critical habitat for Steller’s eiders and northern sea otters. The service has also determined the proposed action may adversely affect spectacled eiders and polar bears. “Following review of the status and environmental baseline of spectacled eiders and polar bears, and analysis of potential effects of the proposed action to these species, the service has concluded the proposed action is not likely to jeopardize the continued existence of spectacled eiders or polar bears, and is not likely to destroy or adversely modify designated polar bear critical habitat.” ^ 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]

Copper River counts keep commercial fishing closed

There seems to be a decent chance commercial fishing in the Copper River District could resume soon despite a dismal start to the famed early season salmon fishery. “I’m optimistic about having some opportunity at this point,” Cordova Area Management Biologist Jeremy Botz said June 16. Botz attributed the more positive sentiment to the facts that recent counts of sockeye at the Miles Lake sonar in the Copper River have been greater than expected and the sockeye that move through the river in May and early June are not headed to the same spawning tributaries that the fish entering the Copper in late June and July are. “We are definitely managing for a different set of stocks than we were before,” Botz said, noting there are more than 100 distinct sockeye stocks throughout the Copper drainage and nearby systems that contribute to the overall fishery. The diversity of the stocks means managers are not trying to “make up” for fish that did not show up early in the run by restricting opportunity the rest of the season, Botz explained. However, exactly when the commercial fishery might reopen is unclear as ADFG managers are still compiling run data from across the system. As of June 15, the Alaska Department of Fish and Game had counted 245,645 sockeye at the Miles Lake sonar and approximately 53,000 of those fish, or more than 20 percent of the total escapement, had been counted in the past four days. While the counts are improving, the total escapement was still just less than half of 2019 when 502,000 sockeye had been counted as of June 15 — with much more commercial fishing time. ADFG’s sustainable escapement goal range for the Copper River is 360,000 to 750,000 sockeye. Fishing time in the Copper River District was halved from two 12-hour openers per week to one for multiple weeks following mid-May openers the first week of the season that cumulatively netted just 6,071 sockeye compared to managers’ expectations of harvests in the 25,000-fish range each day. More than 30,000 sockeye were harvested in each of the two following openers, but the typical early season peak in daily sockeye escapement counts never materialized, which has forced managers to close commercial fishing since June 1. Overall, 71,370 sockeye have been harvested so far this year from the Copper River District, about 10 percent of the overall preseason forecast of a 771,000-fish harvest and a total run of about 1.5 million fish. The Copper River District fleet harvested approximately 1.2 million sockeye last year. The Copper River king salmon harvest has also been lower than expected with 5,751 fish caught over the four openers. The lack of a significant restaurant market this year has also depressed ground prices for Copper River salmon, which traditionally fetch high prices in-part because it is the first large-scale Alaska salmon fishery of the year, based on reports from Botz and other observers. Prices for during the early openers were in the $3.50 per pound range for sockeye and approximately $6.50 per pound for king salmon. The price for kings was about $10 per pound last year. As for some of the other Prince William Sound gillnet fisheries, Botz called it a “mixed bag” of early results. Through June 15 nearly 5,000 sockeye and 42,000 chum had been harvested at the Coghill River and another 41,000 had been caught in the Eshamy-Main Bay District, according to ADFG figures. According to all-gear harvest data compiled by the research firm McDowell Group for the Alaska Seafood Marketing institute the overall Prince William Sound sockeye harvest — including the Copper River District — was off 82 percent from last year with approximately 114,000 fish caught through June 14, compared to a harvest of 646,000 sockeye by the same date a year ago. The Prince William Sound chum harvest of 221,000 fish was off 14 percent from 2019 as of June 14 as well, according to the ASMI data. Elwood Brehmer can be reached at [email protected]

Fed chair: ‘significant uncertainty’ over recovery

WASHINGTON (AP) — Federal Reserve Chairman Jerome Powell warned June 16 that the U.S. economy faces a deep downturn with “significant uncertainty” about the timing and strength of a recovery. He cautioned that the longer the recession lasts, the worse the damage that would be inflicted on the job market and businesses. In testimony to Congress, Powell stressed that the Fed is committed to using all its financial tools to cushion the damage from the coronavirus. But he said that until the public is confident the disease has been contained, “a full recovery is unlikely.” He warned that a prolonged downturn could inflict severe harm — especially to low-income workers who have been hit hardest. Powell delivered the first of two days of semi-annual congressional testimony to the Senate Banking Committee before he addressed the House Financial Services Committee on June 17. Several senators highlighted the disproportionate impact of the viral outbreak and the downturn on African-Americans and Latinos. Powell expressed his agreement. “The way the pandemic has hit our economy… has been a real inequality-increaser,” the chairman said, because low-wage service jobs have been hardest hit and are disproportionately held by minorities. “That’s who’s bearing the brunt of this.” He noted that the pandemic also poses “acute risks” for small businesses and their employees. “If a small or medium-sized business becomes insolvent because the economy recovers too slow, we lose more than just that business,” he said. “These businesses are the heart of our economy and often embody the work of generations.” Several Democratic senators used their questions to Powell to press for a new congressional rescue bill that would provide increased aid for state and local governments, which face the prospect of mass layoffs because of diminished tax revenue, as well as an extension of enhanced unemployment benefits. Powell agreed that while both Congress and the Fed have supplied record-high support, the severity of the downturn may require more. “The shock that the economy received was the largest in memory,” he said, noting that the congressional response and the Fed’s response were also the largest on record. “Will it be enough? I would say that there is a reasonable probability that more will be needed both from (Congress) and the Fed.” Without further help, states and cities could be forced to lay off more employees, Powell said, which also happened after the 2008-09 recession and which, he added, slowed the recovery after that downturn. Similar layoffs now could “weigh on” the economy, he said. Powell agreed that Congress should consider extending unemployment benefits beyond their typical six-month period, on the assumption that unemployment would likely still be quite high by the end of the year. He did not weigh in on the debate over whether the extra $600 in weekly federal unemployment benefits should be extended beyond its current July 31 cutoff date, as House Democrats have proposed. “Some form of support for those people going forward is likely going to be appropriate,” he told the committee. “There are going to be an awful lot of unemployed people for some time,” he said, suggesting that workers in the travel and hotel industries, among others, will likely have to find work in different industries. Kathy Bostjancic, a senior economist at Oxford Economics, noted that Powell reiterated the cautious message he had expressed at a news conference last week. “While the economy seemingly has turned the corner, the road to full recovery is long and contingent on the public gaining confidence that the virus is contained,” Bostjancic said. “The outlook remains cautious despite … initial signs of rehiring and a bounce-back in consumer spending.” In his remarks to the lawmakers, Powell said he remains confident about the economy’s future: “Long run, I am confident we will have a full recovery.” Since March, the Fed has slashed its benchmark short-term rate to near zero, bought $2.1 trillion in Treasury and mortgage bonds to inject cash into markets and rolled out numerous lending programs to try to keep credit flowing smoothly. On June 15, the Fed announced that it will begin buying corporate bonds as part of a plan to ensure that companies can borrow during the pandemic. The Fed’s policymakers have also forecast that their key rate will remain near zero through 2022. Collectively, the central bank’s actions are credited with helping fuel an extraordinary rally in the stock market, which has nearly regained its pre-pandemic highs after a dizzying plunge in March. On June 16, Powell suggested that the drop in economic output during the current April-June quarter, as measured by the gross domestic product, will likely be the most severe on record. Many economists are forecasting that GDP could shrink at a record-setting 40 percent annual rate this quarter. While the Trump administration is forecasting a V-shaped recovery with strong growth in the second half of this year, Powell was more cautious and sought to focus concerns on low-wage workers. In a semi-annual monetary report accompanying the testimony, the Fed noted that workers with lower earnings, including minorities, were being hit especially hard by the job market disruptions. Employment has fallen nearly 35 percent for workers who were previously earning wages in the bottom fourth of wage earners, the Fed said. By contrast, employment has declined 5 percent for higher-wage earners. Because lower-wage earners are disproportionately African-American and Hispanic, unemployment has risen more sharply for those groups. Powell had said last week at a news conference that a recovery could be painfully slow, with “well into the millions” of laid-off Americans unable to regain their old jobs. That downbeat assessment had helped trigger a plunge in stock prices and prompted President Donald Trump to issue a tweet criticizing the Fed’s views. “The Federal Reserve is wrong so often,” Trump tweeted. “We will have a very good Third Quarter, a great Fourth Quarter, and one of our best ever years in 2021.” In its projections, the Fed is predicting that the economy will shrink 6.5 percent this year before growing 5 percent next year, an assessment in line with the forecasts of private economists.

Pebble Partnership pitches payments to area population

Pebble Partnership leaders announced a plan June 16 to pay Bristol Bay residents if the controversial mine project that has sharply divided many communities in the area reaches construction and eventually production. Pebble CEO Tom Collier said in a prepared statement that the revenue sharing program dubbed the “Pebble Performance Dividend” makes good commitment he offered in late 2017 when its new plan for a smaller, 20-year copper and gold mining operation was unveiled. The U.S. Army Corps of Engineers is currently evaluating Pebble’s Clean Water Act Section 404 wetlands fill permit application for the 20-year mine and drafting the corresponding environmental impact statement, or EIS. A final EIS should be released sometime this summer, according Corps Alaska officials. “While not everyone will want to work at the mine, this (dividend) ensures a direct way for everyone to participate. Whether a resident supports the project, opposes it, or is neutral, anyone who is a year-round resident can participate,” Collier said. Collier and other Pebble leaders have long touted the mine as a way to improve the economics of the region that currently relies on commercial fishing and tourism as its primary industries. The mine is expected to support up to 2,000 jobs during construction and between 750 and 1,000 jobs once it is developed, according to Pebble. The company says it will allocate $3 million per year for the dividend during the multi-year construction phase of the project. Once the mine is operating and profitable Pebble will distribute 3 percent of the net profits from the mine to Bristol Bay-area residents that have signed up for the dividend. As of last year the 31 communities in the area Pebble has made eligible for the dividends — in the Dillingham Census Area and the Bristol Bay and Lake and Peninsula boroughs — had a combined population of 7,378 residents, according to the state Labor Department. The mine site would be in the Lake and Peninsula Borough. Bristol Bay residents must have lived in the region for 12 months prior to enrolling in the dividend program. An online portal through which residents can enroll in the dividend program will be open through Aug. 31, according to Pebble. Opponents of the mine have characterized the dividend proposal as an attempt to buy support for a project that has widespread opposition in the region, primarily due to the concern that the mine would pose major, multifaceted risks to the salmon fisheries in the large Nushagak and Kvichak river systems. Jason Metrokin, CEO of Bristol Bay Native Corp., which has led the opposition to Pebble, said in a formal statement that the dividend proposal is another tactic “to try to sway public opinion on this vastly unpopular project.” He also questioned why Pebble would open a two-and-a-half-month enrollment period now when construction of the mine is at least three or four years away. While Pebble is nearing the end of the EIS process, it still must receive numerous other state and federal permits before construction can start and several of those permit applications typically take multiple years for officials to review and approve. “BBNC’s opposition to the proposed Pebble mine is rooted in our shareholders’ culture and subsistence way of life and is strengthened by the good science that concludes that the proposed mine would cause unacceptable and irreparable adverse impacts to the Bristol Bay region. We will not trade salmon for gold, and we will not be swayed by promises of cash payments from a proposed mine that cannot and should not be built,” Metrokin said. A 2019 poll commissioned by BBNC found that 76 percent of its shareholders were against the mine and 83 percent living in the Bristol Bay region opposed it at the time. In early May Pebble offered to have BBNC administer its Performance Dividend program through the Native regional corporation’s own shareholder dividend distribution program; the offer was unanimously rejected by the BBNC Board of Directors. Metrokin wrote to Collier May 22 in response to the offer that it lacked the detail that would be needed to support it. He continued to write that Pebble has not provided sufficient information about the economics of the company’s plan, regardless of the dividend proposal. “Consequently, your offer to share a portion of revenue from Pebble is too speculative to consider and highly unlikely,” Metrokin wrote to Collier. BBNC and other Bristol Bay stakeholders have asked (Pebble) to produce an economic feasibility study for its mine proposal for years and (Pebble) has repeatedly failed to do so. We do not believe that your 20-year mine plan is economically viable at all.” Collier has said Canadian finance laws prevent Pebble’s parent company, Vancouver-based Northern Dynasty Minerals Ltd. from releasing an economic analysis of the 20-year plan at this point. When asked about the allegation that Pebble is trying to buy support, spokesman Mike Heatwole wrote in an email that the company simply wanted to provide an additional way for residents who won’t end up working at the mine to share in its benefits. Elwood Brehmer can be reached at [email protected]

OPINION: A fair share of deception

This week we publish an “explainer” from Robin Brena of the “Fair Share Act” campaign for no other reason than to illustrate the depths he and his cohort are going to deceive Alaskans into raising oil taxes. The only thing the campaign is being honest about is the fact they want to dramatically jack up taxes by at least $1 billion per year according to their own estimate. How they are trying to convince Alaskans to do so is a litany of outright lies or misleading claims being made by people who are still fighting the outcome of the 2014 referendum they lost over the current oil tax structure. The first falsehood they are basing their campaign around is that the tax increase will only be charged against the three large “legacy” fields and “As a result, it will not impact the development of new fields in Alaska.” This is pure garbage. Because ConocoPhillips is required by the Securities and Exchange Commission to break out its Alaska operations in its quarterly and annual tax filings, we know that in 2019 the company made profits of $1.5 billion in Alaska while spending $1.5 billion on capital investments on the North Slope. Every nickel of the company’s income last year was matched on building projects such as Greater Mooses Tooth-2 and exploration development at its massive prospect dubbed Willow. ConocoPhillips executives have stated that while its board sets a global capital budget, its Alaska operations are essentially self-contained in that profits in Alaska are reinvested in Alaska. Even when the company was losing $4.4 billion in 2015, its capital budget in Alaska remained essentially unchanged at about $1 billion and went from 5 percent of its global total to about 20 percent. To argue that raising taxes on legacy fields will not impact the development of new fields is a naked attempt to fool voters. Brena also attempts to mislead Alaskans by describing a “pre-tax profit” on a barrel of oil from Prudhoe Bay he calculates at $40.61 in 2018. Investopedia defines “profit” as “the financial benefit realized when revenue generated from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity in question.” (emphasis added) A gross, “pre-tax” profit may be useful to a business owner, but only insofar as it helps them determine what their tax liability will be. A picture of profits without accounting for taxes is less informative than trying to interpret a three-year-old’s finger paintings. Brena then combines a lie with another incomplete claim when he writes that Alaska “paid the producers more in cashable credits than we have received in production revenues” since Senate Bill 21 took effect for a full year in 2015. Brena well knows that the major, “legacy” producers have never, ever received “cashable” credits that were only delivered to small companies with either no production or daily output of less than 50,000 barrels per day. A favorite omission by the tax raisers when they talk about only production tax revenue is to never mention the record low oil prices that hammered companies — and the state’s budget — from 2015 to 2017. By conflating the cash credits that predated SB 21 with production tax revenue, Brena et al claim that Alaska’s “share of production revenues after credits collapsed from $19 billion (2009-2013) before SB21 to less than $0 (2015-2019) after SB21.” They don’t tell you what is in the most recent state revenue forecast, which also summarizes historic petroleum revenue from all sources. According to the 2020 figures, from 2015 to 2019 the state collected $10.75 billion in unrestricted and restricted petroleum revenue. At the same time, ConocoPhillips lost billions for three years from 2015 to 2017. During 2016, BP reported that it lost about $1 million per day from its North Slope operations. Nevertheless, they still owed production tax thanks to the gross minimum in SB 21 (that would have collected zero under the previous ACES), they owed property tax and they owed royalty payments. Corporate taxes, which are calculated on net income versus gross (production tax and royalty), were negative but have rebounded to positive territory since 2018 as prices recovered. Here we are again with another price collapse that has crushed revenue, production and jobs, yet the Fair Sharers blithely march along trying to appeal to Alaskans’ rightful concern over the budget and smaller dividends with a self-destructive solution that would drive a stake through the state’s economic engine. We didn’t fall for it in 2014, and it is even more vital to see through another dishonest campaign in 2020. Andrew Jensen can be reached at [email protected]

FISH FACTOR: All systems are ‘go’ for Alaska’s fisheries

All systems are go for keeping close tabs on fish and crab stocks in waters managed by the state, meaning out to three miles. While constraints from the coronavirus resulted in nearly all annual stock surveys being cut in deeper waters overseen by the federal government, it’s “closer to normal” closer to shore. “While it’s not business as usual, we are conducting business in as close to normal fashion as we can,” said Forrest Bowers, deputy director of the commercial fisheries division of the Alaska Department of Fish and Game. “We have kept all of our area offices open and all of our field projects in place to monitor salmon stocks around the state this summer, as well as our projects and support for other fisheries,” Bowers said, adding that ADFG has responded to the COVID-19 pandemic “very seriously” and has had strict protection plans in place since March. The state surveys a wide range of fish and shellfish stocks each summer throughout waters in the Gulf and Bering Sea, all the way up to the Arctic regions of Norton Sound for red king crab. “We do all we can in support of the fisheries around the state because we recognize the importance to the people in Alaska and our primary objective is to keep our staff safe and protect the public as well,” Bowers added. It’s good news for fishery biologists at Kodiak who are heading out for the summer-long Tanner crab survey throughout the westward region. “We’ve modifying the schedule somewhat,” said Nat Nichols, area shellfish and groundfish manager at ADFG in Kodiak. “We’re doing two legs instead of five to minimize the number of times that the crew comes in. We also won’t be doing any of our normal ports of call into Sand Point, Dutch Harbor, King Cove, Chignik or Alitak.” The crew and three scientists, which usually totals about 10, do the surveys aboard the state-owned 95-foot stern trawler M/V Resolution and assess more than 300 stations each year at a rate of eight to 10 per day. “We came out of the shop two years ago 10 feet wider. So now we’re 95 by 36. It is a very capable platform,” Nichols said. “We tow a standard grid that has been fixed for years, and we’ve developed a really good time series since 1988.” The annual survey gets some federal funding to assess weights and lengths of any groundfish such as cod, halibut, rockfish or pollock that are hauled up but the primary focus is Tanner crab. The team is tracking the largest recruitment of Tanners they’ve ever seen, estimated at a whopping 270 million crabs. “By the time we see them in the survey they’re maybe the size of a quarter and about a year old, maybe year two even,” Nichols explained. “It’s typically about four years until we see them at legal size. Using that timing, we first saw these Tanner crab in 2018, so this group would be seen in a survey at a legal size in 2022 for a 2023 fishery.” Lots of the crab appear to be growing faster than normal and Nichols said the bulk of the pack could be ready sooner. “I think we could be seeing a good chunk, or at least the leading edge of them, legal in a 2021 survey. So that’s next summer for a 2022 fishery and it is not unlikely.” Fishing updates Salmon fisheries are popping open across the state but catches are barely registering so far. At Copper River, after four dismal fishing periods since mid-May, managers have officially called it a bust with low catches of sockeyes and kings at 69,000 and 4,000 respectively. “Most likely our next fishing period for sockeye will be in May 2021,” said Bill Webber of Paradigm Seafoods as he headed west to “the only game in town”: the Prince William Sound gillnet fisheries. Meanwhile, the reduced Copper River catch fetched record prices for its first delivery of salted sockeye salmon roe. A batch of 36 boxes (11 pounds per box) sold on June 6 for between $47.75 to $51.43 per pound at Sendai Market depending on grade, reported That’s 36 percent higher than last year. “Under the coronavirus situation, I was prepared for zero arrival, but local packers, technicians, and workers have carried a big risk of life to process the salmon roe. The price is a celebration and appreciation for their work,” a Sendai spokesman said. “In the midst of coronavirus pandemic, the demand for salted salmon roe for home consumption has increased and the carryover inventory from the previous season has already sold out. The sales environment is not bad, and we can expect good sales once the quantity and price become stable,” he added with an eye towards Bristol Bay. Elsewhere, Kodiak crabbers were still pulling up Dungeness crab although prices had reportedly dropped by more than a dollar from last year’s average of $2.65 per pound. That had several crabbers selling Tanners direct from the docks at $10 a pop. Southeast Alaska’s summer Dungeness fishery opens on June 15. Last year’s catch of 4.2 million pounds was the best in a decade for 200 permit holders and combined summer and fall openers set a record for fishermen at $16.3 million. Norton Sound opened for red king crab on June 15 for a 150,000-pound fishery; more will be taken during the winter season. A 5,000-ton herring food and bait fishery also is underway through June near Shaktoolik at Norton Sound. A lingcod fishery is ongoing in parts of Southeast and divers are still bringing up geoduck clams. A spawn-on-kelp fishery at Craig and Klawok yielded nearly 600,000 pounds of product for 147-pounders, the highest ever numbers for both. They won’t know the value of the unique delicacy until the fall. Halibut landings were approaching 5 million pounds out of a nearly 17 million-pound catch limit with Homer, Sitka and Kodiak the top ports for deliveries. For sablefish, the catch was pushing 10 million pounds out of a 32 million-pound quota. Sitka was way ahead of all other ports for landings followed by Kodiak and Cordova. Out in the Bering Sea, the nation’s largest food fishery — Alaska pollock — reopened for the “B” season on June 10. Fishing for cod also reopened in the Bering Sea that same day. Marine economy outpaces others A first ever analysis has measured the economic force of the nation’s marine economy, including contributions from recreation, commercial fishing, shipbuilding, seaports, beachfront hotels and other activities dependent on the oceans. A team from National Oceanic and Atmospheric Administration, the Department of Commerce and the Bureau of Economic Analysis looked at 10 business sectors that work on the nation’s oceans, coasts and Great Lakes between the years 2014 and 2018. Their report shows that the marine-related gross domestic product grew 5.8 percent from 2017 to 2018, and outpaced growth of the overall national economy over the five years of the study. The “ocean economy” contributed nearly $373 billion to the nation’s GDP in 2018 and “blue” businesses supported 2.3 million jobs. In announcing the report last week, NOAA said: “The statistics clarify just how dependent America is on our waters,” adding, “It is nearly impossible for most Americans to go a single day without eating, wearing or using products that come from or through our coastal communities.” Tourism and recreation, including sport fishing, topped the list of GDP contributors at $143 billion, followed distantly by national defense and offshore minerals. Commercial fishing and aquaculture ranked fifth at $13 billion to the GDP. Power generation, and research and education contributed a paltry $4 billion and $3 billion, respectively. Marine industries “poised for growth” include offshore wind energy, marine robotics, aquaculture and ocean pharmaceuticals, NOAA said. Now, for the first time, the US has ocean data that can be compared with statistics on other U.S. industries and with the ocean economies of other nations, a BEA spokesperson said, adding that “businesses, policymakers, and coastal communities can use the data as a compass as they chart the way forward.” The current report ranks sectors making the largest contributions to the nation’s gross domestic product: • Tourism and recreation, including recreational fishing ($143 billion) • National defense and public administration ($124 billion) • Offshore minerals ($49 billion) • Transportation and warehousing ($25 billion) • Living resources, including commercial fishing and aquaculture ($13 billion) • Ship and boat building ($9 billion) • Power generation ($4 billion) • Research and education ($3 billion) • Construction ($2.5 billion) • Professional and technical services ($31 million) Laine Welch lives in Kodiak. Visit or contact [email protected] for information.

Poor Kenai king returns will restrict start of Cook Inlet fishery

Segments of the Upper Cook Inlet commercial sockeye fishery will again start with restrictions to limit the harvest of late-run Kenai kings. Alaska Department of Fish and Game managers issued an Emergency Order June 15 restricting the late-run Kenai king sport fishery, which starts July 1, to fishing without bait and all kings longer than 34 inches must be released. That means the fishing time for East Side Cook Inlet setnetters will be no more than 36 hours per week, as long as the sport gear and harvest restrictions remain in place, per the Board of Fisheries paired restrictions plan for the sport and commercial fisheries that are often in conflict. This year the time restrictions on the setnetters kick in earlier as well because the Board of Fish broadened the paired restrictions to also include the Kasilof Section, where fishing will start June 25 or before if the number of sockeye into the Kasilof is sufficient to warrant an early opening. ADFG’s late-run Kenai king forecast estimates a total return of 22,707 large kings greater than 34 inches, which is within the sustainable escapement goal, or SEG, range of 13,500 to 27,000 large fish but would be the sixth-smallest return in the past 35 years, according to the department. However, it would still be nearly double last year’s total return of just 12,780 of the famed large, late-run Kenai kings. The average return over the past 35 years is approximately 43,000 large fish but over the past five years it’s fallen to an average of about 21,600 large kings, according to the department. The Board of Fish also established an optimal escapement goal of 15,000 to 30,000 late-run Kenai kings — a win for sport interests — in a further attempt to get more fish into the river. Kenai-area Sport Fish Management Biologist Colton Lipka said the preseason Kenai late-run restriction was implemented in part because of the low forecast and also because the early-run of Kenai kings has been extremely poor. Through June 15 just 1,165 large kings had been counted on the Kenai, much less than the minimum optimal escapement goal of 3,900 fish. Early-run fishing was closed June 8 by Emergency Order. Lipka said there is some correlation in the performance of the two stocks; the early-run Kenai kings generally spawn in tributary streams while the late-run fish spawn in the main stem of the Kenai. The king fishing restrictions on the Kenai also trigger regulation changes in the nearby Kasilof king fishery to limit the effect of likely increased fishing pressure. The Kasilof will continue with single-hook and no bait limitations through the July 31 close of the season or until the restrictions on the Kenai are lifted. For all interests, the slow start to another Kenai salmon season is beginning to feel less like an exception and more like the norm. For the setnetters, the time restrictions come on top of a less-than-stellar forecast for sockeye on the Kenai Peninsula. The Kenai sockeye return is forecast at roughly 2.2 million fish, which is 38 percent less than the 20-year average of 3.6 million. About 723,000 sockeye are expected to return to the Kasilof, which would be 26 percent less than the average of 971,000 fish. While better than average returns are forecasted for the Fish Creek and across the Susitna River drainage, the low expectations on the two most productive sockeye systems in Upper Cook Inlet mean the total commercial sockeye harvest is forecast at 1.7 million fish this year, which would be approximately 40 percent less than the 20-year average of 2.8 million sockeye caught. The small harvest forecast comes on the heels of two consecutive low-harvest years for the Upper Cook Inlet sockeye fishery as well. As a result, this year Pacific Star Seafoods in Kenai will be the only processor in the area, according to multiple sources. Representatives at Pacific Star did not respond to requests for comment. Upper Cook Inlet commercial fishermen contend the processor situation exemplifies the broader economic activity lost in the region as restrictions are placed on commercial salmon harvests, largely in attempts by the Board of Fish to provide more fish to other user groups. The small expected returns also come in the first year of an increased SEG for the Kenai and a lower optimum goal for the Kasilof. The board increased the Kenai goal range from 700,000 to 1.2 million sockeye to 750,000 to 1.3 million based on the department’s recommendation and moved the lower bound of the Kasilof goal down by 20,000 fish to 140,000 sockeye and the upper bound up by 30,000 to 370,000 sockeye. Upper Cook Inlet Commercial Fisheries Area Manager Brian Marston said it’s unlikely the Kasilof will meet the threshold of 30,000 escaped sockeye to open the Kasilof Section before at least June 22, but noted that assessment was based on just the first day of counts, June 15, in which 3,942 sockeye passed the Kasilof sonar. The Kasilof Section is otherwise scheduled to open June 25. Elwood Brehmer can be reached at [email protected]

GUEST COMMENTARY: The Fair Share Act explained

The Fair Share Act will be Ballot Measure No. 1 this November. It will (1) only apply to our three largest and most profitable oil fields, (2) increase Alaskans’ share of revenues from our three major fields, (3) limit cost deductions from our share of our three major fields to the costs of producing oil from them, and (4) require production tax filings for our three major fields to be public. This article details these provisions and explains why they are important for Alaska’s future. Applicability. The Fair Share Act will only apply to the Prudhoe Bay Unit, the Kuparuk River Unit, and the Colville River Unit. These three major fields are low-cost, high-profit fields that should be paying Alaskans a fair share. In 2018, for example, when oil was $63.61 per barrel, Prudhoe Bay produced oil for $13 per barrel in operating costs, $2 per barrel in capital costs, and $8 per barrel in transportation costs, or about $23 per barrel in total. The resulting $40.61 per-barrel, pre-tax profit is more than the major producers made anywhere else in the world with major reserves. Importantly, the Fair Share Act will not apply to other fields until they produce 40,000 barrels per day and 400 million barrels in cumulative total. As a result, it will not impact the development of new fields in Alaska. Increases Alaskans’ Share. The Fair Share Act increases Alaskans’ share of production revenues from our three major fields by about $1 billion per year when oil prices are normalized in the $55 to $65 per barrel range. Under the current law, Senate Bill 21, Alaska is getting a smaller share of production revenues than ever in our history and a smaller share than any other major resource owner in the world. Alaskans’ share of production revenues after credits collapsed from $19 billion (2009-2013) before SB21 to less than $0 (2015-2019) after SB21. Since SB21, Alaskans have paid the producers more in cashable credits than we have received in production revenues. A $1 billion per-year increase is more than fair to the major producers. With this increase, the major producers will actually be paying less on average than they have paid for the past three decades before SB21. Production revenues are the greater of a gross or a net calculation. The gross calculation is based on a percentage of the gross value at the point of production after subtracting transportation costs and profits to the West Coast. The Fair Share Act makes two changes to the SB21 gross calculation for our three major fields. First, it increases Alaskans’ minimum share from 0-4 percent to 10 percent. Second, it makes the new 10 percent rate progressive by adding an additional 1 percent for each $5 increase in the price of oil beginning at $50 per barrel, up to a maximum of 15 percent when the price of oil reaches $70 per barrel or more. The net calculation is based on a percentage of the production tax value (gross revenues less allowed costs and credits) realized at the point of production, less transportation costs and profits to the West Coast. The Fair Share Act makes two changes to the SB21 net calculation for our three major fields. First, it increases Alaskans’ share by eliminating the $8-per-barrel credit. Second, it makes the current 35 percent rate progressive by adding an additional 15 percent when producers’ profits reach $50 per barrel or more. Limits Deductions. The Fair Share Act requires that the costs deducted from the revenues of our three major fields be related to producing oil from them. Under SB21, the major producers are deducting unrelated costs for developing future prospects on federal lands from our share of our three major fields. As a result, our share will decline and the state deficit will increase by $300 million per year for most of the next decade. The Fair Share Act will put legacy producers in the same competitive position as new producers and require the costs of the new fields to be deducted from the revenues of new fields. Transparency. The Fair Share Act requires production tax filings for our three major fields to be public and transparent. Under SB21, Alaskans are kept in the dark while the wealth from our three major fields is being taken from Alaska. As owners, Alaskans are the stewards of hundreds of billions of dollars of oil resources, and we have the right to know the revenues, costs, and profits from our three major fields. A Necessary Part of Any Deficit Solution. To more fully fund PFDs, jobs, education, universities, ferry service, police and fire, and essential services, Alaska needs additional revenues. Recovering a fair share from our oil is the first place Alaskans should look to provide those revenues. It makes no sense whatsoever to continue to give away our oil to major international oil companies and then tax ourselves to get back the revenues we just gave away. The Fair Share Act is a fair and necessary part of any long-term solution to the state deficit. Vote “Yes” on Ballot Measure No. 1, the Fair Share Act.

GUEST COMMENTARY: Our university needs us

The Board of Regents of the University of Alaska met recently and adopted a budget for the fiscal year beginning July 1. This budget eliminates about 40 long-standing academic programs at Alaska’s three universities, UA Anchorage, UA Fairbanks, and UA Southeast. These dramatic cuts were the direct result of the Governor’s budget vetoes that the Legislature did not override. The word used most frequently at the Regents meeting and during the discussions leading up to it was “transformation”. In my world, transformation is a good word. When the Alaska recession crashed into Craig Taylor Equipment in the fall of 2015, my business partner and I had to reinvent our company. After three exhausting and painful years, our company emerged as a much stronger entity. One huge benefit of our commitment to transformation was our creation of Flyntlok, a software company now serving customers throughout the West. Like our company, our university can emerge from its transformation as something more efficient, more focused, different, and better. However, this will not occur unless citizens rally to the aid of our university system. We should rally because the university is one of the most critical elements of our Alaska public infrastructure. What can we do to assure a positive transformation of our university? 1. As the citizen owners of the universities, we all need to insist that they innovate rapidly in order to operate as efficiently and effectively as possible. 2. As Alaskans who care about future generations, we need to demand that the university budget cuts end. General fund cuts began six years ago and began accelerating rapidly last year. The state government truly faces a tough fiscal environment, but why should we put the university on the chopping block first? In FY ’21, we will spend 20 percent more state money on jails than on the university system. That is incredibly short sighted and defies common sense. If we diminish the quality of our universities, the brain drain out of Alaska will turn into a stampede. We need to set budgets with a courageous focus on building our future economy, not with a cowardly short-term focus on politics. 3. As employers, community leaders and workers, we should look for new and creative ways to use university resources and to partner with the universities. After being out of school for decades, I took two courses at UAA each semester over the last academic year and got huge value for the time and money invested. The quality of instruction was first class, in many ways providing a better experience than I had as a student in college and graduate school at Harvard. As an adjunct instructor for many years, I saw the great potential for the university to build stronger communities. For that potential to be realized, we need to look to university resources to build our businesses and communities. Our university system is a foundational element in our Alaskan culture and economy. It fosters lifelong relationships, builds a strong permanent workforce, and enhances the economy. We all need to stand up and do our part to transform a strong university system into an even stronger one. Our future depends on it. David Hoffman is the founder and former CEO of Alaska Growth Capital and CEO of other Alaska businesses. He and his business partner Sean McLaughlin own Craig Taylor Equipment, a 65-year-old Alaskan company that operates four branches statewide.

Salmon set to return, but market questions loom

The start of the massive Bristol Bay commercial sockeye fishery is fast approaching but this year is bringing with it a level of uncertainly rivaled by few others even in the volatile fishing industry. Fishery participants and observers generally expect a softer market and lower prices for Bristol Bay sockeye due to several factors, though it’s difficult to predict how the market influences will interact, according to Bristol Bay Regional Seafood Development Association Executive Director Andy Wink. The COVID-19 pandemic has all but evaporated traditional restaurant markets for Alaska salmon and other seafood, which has resulted in lower-than-normal prices for the Copper River sockeye and king fishery that started in mid-May, Wink noted. However, he added that poor returns and a corresponding small harvest at the Copper could help buoy demand for salmon from Bristol Bay. Adding to the complexity of the situation, Wink also cited news reports indicating an increase in retail seafood sales and that could be a boost for the fishery that sends a large portion of its harvest to supermarkets. Bloomberg reported June 12 that generally homebound consumers had increased retail seafood sales by 27 percent nationwide since early March compared to last year. “Although Bristol Bay salmon is more commonly sold in grocery stores, which have seen a bump in seafood sales, massive spikes in unemployment and a standstill in restaurant traffic could also affect pricing,” Wink wrote via email. “However, we do expect continued strong demand for one of the healthiest proteins available, all things considered.” On top of that, Wink said the strength of the U.S. dollar could hurt Alaska fishermen in export markets and lower prices for farmed salmon worldwide aren’t likely to help either. “On the plus side, lower predicted harvests for sockeye and other salmon species globally could provide some support for pricing in 2020 as well as potentially more demand for canned product,” he said. The final price for Bristol Bay sockeye has averaged between approximately $1 per pound and $1.60 per pound in recent years following a sudden drop to 64 cents per pound in 2015, according to data compiled by BBRSDA. A large sockeye return last year led to a preliminary ex-vessel harvest value of $306.5 million, which is the highest initial value ever for the fishery, according to the Alaska Department of Fish and Game. The initial base price for Bristol Bay sockeye averaged $1.35 per pound last year. ADFG managers are expecting another strong return of sockeye to Bristol Bay. The department’s preseason forecast estimates a total return of nearly 49 million fish and a harvest of 34.5 million sockeye. Last year’s run of 56.5 million fish was the fourth-largest ever and also marked the fifth consecutive year the Bristol Bay sockeye return exceeded 50 million fish. The 20-year average return is approximately 39 million sockeye to the region, according to ADFG. And even if it goes off without a significant outbreak of COVID-19, the impact of the virus are still likely to ripple through the Bristol Bay fishery in the form of more expenses for processing companies paying for extra health precautions for their workers, such as COVID-19 tests and chartered flights in some instances, according to Wink. He said it’s unknown at this point to what extent the industry will be able to recoup those costs and without government aid, they could result in lower prices for fishermen. Through the federal CARES Act, the fishing industry in Alaska was allocated $50 million and the state appropriated $100 million from the block grant in the same bill. “The processing companies which buy Bristol Bay salmon are also very involved in other Alaska regions and species. Some of those species have struggled with a combination of low prices and/or lower biological production,” he wrote. “So even if the Bay is doing well, from a consumer demand standpoint, the fishery’s ex-vessel value could be affected by worse performance in processors’ other business segments.” Operationally, Wink and Dillingham-based ADFG Nushagak Area Manager Tim Sands said they expect fishery to go off as close to usual as could be expected this year, barring an outbreak of COVID-19 among participants or sudden changes to government mandates. “By and large we expect processing and harvesting capacity to be pretty normal,” Wink said, a conclusion Sands echoed. In most years processors are able to handle daily harvests of slightly more than 2 million fish during the peak of the season before the system starts to back up, according to Sands. As for the fish, Sands said ADFG’s Nushagak River sonar has been operating since June 6 as normal and had counted roughly 10,000 fish as of June 15, but department personnel had not been able to apportion the numbers of fish passing the sonar to get species-specific data. However, anecdotal reports from subsistence harvests near the mouth of the Nushagak around Dillingham indicate early king returns have been poor, which is something managers are “very concerned about,” Sands said. Poor king returns often lead to reduced opportunity for fishermen targeting sockeye as managers try to allow more kings into the river. “I feel like we were catching more fish just in general at this point in the season with subsistence nets over the last several years so things might be a little bit later in general,” Sands said. He also noted that sockeye harvested by subsistence users have generally been smaller than normal, but it’s too soon to tell yet if that means an overall larger run is coming or something else. The commercial fishery is opened when certain river escapement thresholds are met. Fishing activity traditionally peaks around July 4. Elwood Brehmer can be reached at [email protected]


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