Data-driven minds descend on Anchorage

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

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

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

LNG trucking expands as option in absence of pipelines

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

Movers and Shakers for Aug. 11

Northrim Bank announced new hires and the promotion of a variety of employees. Paula Duracinski was promoted to Facilities manager; Mark Edwards was promoted to executive vice president, chief credit officer and bank economist; Jaime Kissner was hired as vice president, commercial loan officer; James Larson was hired as special credits officer; Stephanie Love was promoted to Marketing and Sales manager; Andy Ray was promoted to Facilities maintenance manager; and Mhay Sy was promoted to vice president, loan servicing and special credits manager. Duracinski has been with Northrim Bank for more than 19 years. The majority of her time has been in the Facilities department. She holds a bachelor’s degree in English from the University of Hawaii. In 2016, Duracinski was honored with the President’s Award. Edwards has been with Northrim Bank since 2007. Prior to that, he was the director of the Office of Economic Development for the State of Alaska and economist for the Department of Revenue. Edwards has a bachelor’s degree in economics from the University of Virginia and a master’s degree from Thunderbird Graduate School of International Management. He received Northrim Bank’s President’s award in 2010. Kissner joins Northrim with 15 years of experience in the financial industry, including three years in retail management, 10 years in commercial lending, and two years as a licensed financial advisor. He holds bachelor’s degree from Northwestern State University, as well as Series 7 and 66 security licenses. Larson comes to Northrim Bank with six years of experience in the financial industry. He has worked at institutions in Alaska and Nevada. Larson attended the University of Alaska Anchorage. Love has been with Northrim Bank and Residential Mortgage for the past three years and has more than 15 years of experience in the financial industry. She holds a bachelor’s degree from the University of Maine. Ray has been with Northrim Bank for more than four years. Prior to his work at Northrim, he has held management positions in construction and customer service. Ray holds a master’s degree in project management from University of Alaska Anchorage. Sy has been with Northrim for 13 years and has 21 years of experience in the financial industry. She holds a bachelor’s degree and is a graduate of Pacific Coast Banking School at the University of Washington. Credit Union 1 promoted Kelly Smith to Friction Free Finance manager. Originally hired in 2005, Smith began as a CU1 teller and later held numerous positions such as member service officer, branch manager, regional branch manager and roaming branch manager, the position he held prior to this promotion. In his new position, Smith will be responsible for continuing to expand the credit union’s unique Friction Free Finance program as new dealerships are added that fit the organization’s “people first” values. The National Federation of Independent Businesses announced that Emily Carlson is the new senior media manager for 11 states, including Alaska. Carlson grew up in has a degree in broadcast journalism from the University of St. Thomas in St. Paul, Minn. After moving to Alaska, she was an anchor and reporter at KTVA in Anchorage. She was nominated for an Emmy award for her work on a half-hour special about how a subsistence challenge transformed a community in rural Alaska. She was honored by the Alaska Broadcasters Association for a special about opioid abuse and also won numerous awards from the Alaska Press Club. Alaska Humanities Forum announced that George Martinez has been hired as its new director of Leadership Programs. In this role, Martinez will be the lead for Leadership Anchorage and he will oversee leadership programming across the organization. Martinez comes to the Forum from the Municipality of Anchorage where he has spent the past four years as Special Assistant to Mayor Ethan Berkowitz, focusing on economic development, youth development, education, and diversity. Leadership Anchorage is one of the Forum’s flagship programs, entering its 23rd year this fall. The 8-month-long program brings together a diverse, cross-sector cohort each year for experiential learning designed to guide participants in developing the skills, knowledge, perspective, and networks needed to be effective and compassionate leaders for the city and state. First Alaskans Institute, a statewide Alaska Native nonprofit focused on advancing Alaska Natives for the next 10,000 years, announced that Barbara ‘Wáahlaal Gíídaak Blake (Haida/Tlingit/Ahtna Athabascan) has recently been hired as Alaska Native Policy Center director. She earned her master’s degree from University of Alaska Fairbanks in rural development, focused on fisheries development in rural Alaska. She also has a bachelor’s degree in rural economic development, as well as an associate’s degree in Tribal management from UAF. She also has a certificate in Tribal governmental business law from Seattle University. Evergreen Business Capital announced the promotion of Theo Ransum to associate vice president/loan officer. In addition to administering Evergreen’s SBA Community Advantage Program, Ransum will now also take the lead on connecting Alaskan small businesses with access to capital under Evergreen’s SBA 504 Loan Program. Since 2016, Ransum has served as Evergreen’s programs loan officer, where he educated small businesses on the benefits of the Community Advantage Program that helps entrepreneurs receive funding to start or expand their business. In May 2019, Theo was awarded with the SBA Alaska District Director Award for his dedication to the education and empowerment of small businesses throughout the state.

AEDC outlook darkens over gridlock, spending cuts

Prolonged indecision in Juneau is stifling economic recovery in Anchorage, according to the Anchorage Economic Development Corp. CEO Bill Popp recalled that at the start of the year AEDC officials thought the city’s economy would finally be pulling out of what has been a three-plus year recession by midsummer; however, the data indicates that’s not the case, he said at the group’s three-year economic forecast presentation July 31. According to figures compiled by AEDC, Anchorage’s economy — which usually reflects what’s happening statewide — has lost roughly 100 jobs in the first half of 2019. Popp acknowledged the number is on the edge of the margin of error, but said other indicators support the belief that the economy has again turned for the worse. “We should’ve been in positive territory at this point by about a few hundred jobs, but we’ve seen the start of a significant decline that’s got us very, very concerned,” Popp said. While the long-struggling construction industry has added roughly 600 jobs in the first half of 2019, Popp attributed most of the growth to repairs from the November 2018 earthquake and much of that work will fade after next year, he said. The historically strong health care sector added just 100 jobs so far this year, the slowest growth in about 15 years and likely a response to cuts to the state’s Medicaid funding, according to Popp. On a positive note, companies in the professional and business services sector — engineering, architectural, financial, law firms and the like — are finally slowing their job reductions. The sector lost about 200 jobs in 2018 after shedding about 3,000 jobs since late 2014. According to AEDC, early data for this year shows the losses are continuing at a reduced rate. “To reach a point where they’re flattening out, that is great news for a sector that provides great jobs for our economy,” Popp said of professional and business services. “Hopefully, we will see this flat turn into growth with new investment in the oil patch and federal military spending in our state.” AEDC leaders have and other economists have previously said the recession that cost Anchorage more than 5,000 jobs and nearly 12,000 statewide started when North Slope oil companies responded to the oil price crash of late 2014 by cutting their labor force about a year later. But it was extended and deepened by the inability of state lawmakers to agree on a long-term fix for the state’s budget deficits that exceeded $3 billion annually in recent years, they contend. Popp said economic optimism generated a year ago by rebounding oil prices and the Legislature’s move to approve a long-debated annual endowment-style draw from the Permanent Fund to provide a new, steady source of revenue for government services has mostly evaporated in a new political climate. “We are on the precipice of taking a three-and-a-half-year recession that is now fully fledged as a policy-driven recession and we are talking about extending it another three years, maybe more, because this does not take into account potential cuts in next year’s budget cycle that have been talked about,” he said, noting the conclusions also assume the Legislature ultimately doesn’t override Gov. Michael J. Dunleavy’s $444 million of vetoes to the state operating budget. Dunleavy has repeatedly said the roughly $650 million in budget cuts this year — his vetoes combined with about $200 million in reductions passed by the Legislature — get the state roughly halfway towards closing its ongoing deficit while paying Permanent Fund dividends and via the traditional formula and he hopes to enact further cuts next year. The final tally indicates Anchorage lost about 900 jobs last year and AEDC expects the city will shed another 700 this year and about 1,000 next year as the budget cuts take full effect. Another 200 job losses could be seen in 2021 as the negative trend flattens, according to Popp. If AEDC’s forecast is correct, Anchorage would end up losing nearly 8,000 jobs, or about 5 percent off the city’s 2013 employment peak of 156,100 jobs. University of Alaska Anchorage economist Mouhcine Guettabi estimated in early July that the state budget cuts would cost Alaska’s economy as a whole more than 4,000 jobs over the coming years. Economist Ed King, who worked in the Dunleavy administration for a brief time, wrote July 10 that he believes the Alaska will add approximately 800 jobs over the coming year primarily due to growth in the oil and gas sector from new, large North Slope projects. If AEDC’s forecast proves true, the Anchorage economy would regress to 2007 job levels over the next three years. Dunleavy has stressed a belief that cutting government spending will spur growth in the private sector and paying larger PFDs will inject money into the Alaska economy as well. The “full,” statutorily calculated 2019 PFD of approximately $3,000 per person would transfer $1.9 billion from the Permanent Fund to Alaska residents. However, economists, including King, have said they cannot find a significant link between the size of the PFD and job growth in the state. Popp said the PFD provides a short-term boost to the retail sector each fall, but little more, a sentiment shared by UAA’s Guettabi. “The PFD has had little or no appreciable effect in terms of major employment bumps in our community,” he said. “From our view that proposition (of the PFD supporting job growth) is a canard; it is a false premise.” AEDC’s predicts the job losses will coincide with continued population loss for Alaska’s largest city as those searching for new job opportunities continue to migrate to the Lower 48. Popp said the long-term trend of Anchorageites seeking more affordable housing options in the Mat-Su Borough is starting to slow, but the city has experienced a net loss of approximately 4,000 residents to the Lower 48 each of the past five years. “We’ve got a pretty good sense that a substantial portion of that 20,000 is adult, working-age individuals. It’s a brain-drain for our city; it’s an absolute brain-drain,” he said. Births have largely offset the outmigration, leading to less population decline. The belief that many working-age adults are leaving Anchorage is supported by the fact that the city’s unemployment rate has stayed fairly steady in the 5 percent range throughout the recession. Those in need of jobs are often moving south rather than applying for unemployment benefits and looking for work locally. Further, many employers still cite a lack of qualified workers as an impediment to growth despite the mediocre to poor economic conditions, according to Popp. “We are not competing effectively to retain the workforce that we have or to attract the workforce that we need to fill the jobs that we need for our community,” he said. Overall, Anchorage’s population is likely to shrink back to less than 293,000 residents before in 2021 after peaking at more than 301,000 in 2013, according to AEDC. If the projection proves true, it would take the city back to a population level not seen since 2010. In addition to the hard numbers, Popp said AEDC leaders are also very concerned about consumer confidence in the Anchorage economy, given it is service-driven and therefore very sensitive to consumer spending. The group’s second quarter 2019 consumer optimism survey conducted by Alaska Survey Research in conjunction with Northern Economics indicates a sharp decline in residents’ confidence in the Anchorage economy, with respondents most concerned about the future as opposed to the immediate situation. “We’re now in what we believe is the ‘we’re not sure territory’ of 45-55 (on a scale of 0-100) but the trending is definitely towards the negative,” Popp said of consumer economic confidence, which is now measured at 53 compared to 59.3 a year ago. The “future expectations” response dipped to 49.3, a drop of more than 8 points compared to 57.7 in the third quarter of 2018. The turn towards the negative comes just a year after a near-term peak in the third quarter of last year when oil prices were higher and the state had just approved the structured use of Permanent Fund income to support government services, an action that drastically reduced the budget deficit. ^ Elwood Brehmer can be reached at [email protected]

GUEST COMMENTARY: The private sector, not the government, is what drives an economy

Despite what you might read in some recent media publications, Alaska’s economy is recovering. Jobs have increased every month since last year’s election, GDP is up by more than 3 percent, wages are climbing, and the private sector is showing a willingness to invest in Alaska. If you believed some of the recent doom and gloom headlines that have come out you’d think that state government is truly the economic driver of a state’s economy and without it, we are destined to fall off the cliff. In reality when looking at the entire operating budget and all fund sources, the reductions equate to about a 6 percent reduction from fiscal year 2019 …hardly fiscal Armageddon for a state government that has been living comfortably for several decades. Fortunately, most Alaskans understand that the private sector, not the government, is what drives an economy. It’s true that Alaska’s private sector has been through the wringer the past four years but businesses large and small are starting to get back on their feet. A smaller, leaner more efficient government will help build confidence as these businesses make investment decisions in Alaska. While there has been a bit too much “the economy may never recover” rhetoric, it was good to see that Anchorage Economic Development Corp. recognized some of the great things that are happening in our economy. Some of the highlights include statewide cruise volumes increasing by 16.5 percent as well as new developments on the North Slope adding an estimated 350,000 barrels per day in the next few years. Alaska is and will continue to be a resource state and AEDC nailed it when they reported North Slope investment is “an encouraging sign of optimism among producers.” Overall investment on the North Slope has increased from $4.4 billion in fiscal year 2018 to a projected $5.5 billion in 2020. However these new developments will require multi-billion dollars of additional investments by the private sector. We are realizing this rebound in investments is due in large part to the fiscal stability we’ve had in place for the past five years. Make no mistake, Alaska does not have the expertise or balance sheet to develop these resources. We will continue to rely on private sector investment to get our resources to market. They in turn must count on the state to put in place a stable budget that lives within its means. There was a substantial disconnect between how private sector and government reacted to the recent recession. The private sector was forced to react swiftly and immediately while government refused to face the reality of the recession. How can I say this? Just look at the actions taken over the past few years. Spending far outpaced annual revenue as we blew through $15 billion in our biggest savings account, the Constitutional Budget Reserve. At the same time family households and businesses small and large were forced to adjust their spending habits to adapt. During this time Alaska lost 12,000+ jobs of which a very small fraction were government jobs. Job losses are painful regardless of how they are funded but government was held harmless for the most part through the CBR spend down. It is more important than ever that we create a smaller governmental footprint to adjust to our new revenue realities. Alaska does hold nearly $70 billion of reserves, almost 25 percent of which is in unrestricted accounts. Those financial assets generate nearly $4 billion per year in earnings and represent a potential source of funding should a temporary reduction in revenues cause cash flow troubles. That’s on top of over $2 billion of other state revenues that covers nearly half of the cost of running our state government. This means we have a coverage ratio that is the envy of almost any other government. I met with all three rating agencies (Moody’s, S&P, Fitch) last week and they certainly recognize the vast financial and natural resources with which Alaska is blessed. They also give the previous legislature and Gov. Bill Walker kudos for passing Senate Bill 26 in 2018: the Percent of Market Value framework that accesses a portion of the Permanent Fund Earnings Reserve. However, they also correctly point to the statements made by those same politicians last year regarding SB 26 as only a “partial fix.” The PFD calculation has been faithfully followed for nearly 37 years. SB26 is a 12-month-old law and an incomplete by many legislators’ own admission. If there’s one thing that government can do to assist in this recovery it will be to get its fiscal house in order, which will allow the recovery to continue. Alaska is blessed with tremendous resources and will rely on private sector capital to monetize our resources. An unbalanced state budget will ultimately lead to confiscation of hard earned private sector dollars. It is imperative that we reduce the government footprint to put our state on solid footing for generations to come. Bruce Tangeman is the commissioner of the Department of Revenue.

Movers and Shakers for Aug. 4

R&M Consultants Inc. announced new professional designations for three employees. Taryn Oleson recently earned her American Institute of Certified Planners designation through the American Planning Association’s professional institute. The AICP certification is the only nationwide, independent verification of planner’s qualifications. Oleson has been with R&M since 2014 and specializes in land use, transportation and community planning, and is experienced in educating diverse publics on a wide range of issues and technical projects. Since joining R&M, she has provided land use planning, community involvement and steering committee facilitation for the City of Houston’s Community Impact Assessment and Comprehensive Plan Revision. Other projects include the Big Lake Pedestrian Improvements Study, Muldoon Park Master Plan Anchorage Metropolitan Area Transportation Solutions Travel Demand Model Update. Joe Horazdovsky received his professional engineering license. He passed the Principles &Practice of Engineering Exam, gaining his Alaska license in Civil Engineering. Over the past five years, Joe has gained a wide variety of experience working on transportation, waterfront and construction administration projects. As part of R&M’s Surface Transportation team, he has participated in pavement rehabilitation and new road construction projects, including the Seward Highway MP 100-105 Improvements, West Dimond Boulevard Upgrade and Peger Road Resurfacing. R&M’s newest Professional Land Surveyor David Brock successfully passed the required exams for licensure, including the National Council of Examiners for Engineering and Surveying Professional Surveying Examination and Alaska Land Surveying Examination. Brock joined R&M as a Survey Technician in 2012. Since joining the R&M team, he has worked as an instrument person, field surveyor and party chief, and supported a variety of airport, road, utility and harbor projects throughout Alaska. Recent projects Brock has been involved in include the West Romig Middle School Improvements, Chugach Foothills Northeast Connector and Sterling Highway MP 45 to 60. Alaska telecom and technology company MTA announced that Jessica Gilbert has been promoted to Public Relations manager, a new role for the company. She had previously served as marketing specialist, where she was a leader in MTA’s business growth and customer experience strategy. In her new role, she will manage MTA’s public image, develop partnerships and engage with the various communities that the company serves. She will also manage the MTA Foundation, which provides donations throughout the community and scholarships to students with the goal of pioneering technological growth throughout the MTA serving area. Bering Straits Native Corp. announced that Mary L. Pate has joined BSNC as vice president and general counsel. Pate brings many years of experience in legal matters, corporate governance, litigation, commercial transactions, Native and employment law, risk management and compliance. Pate joins BSNC from NANA where she served as vice president and deputy general counsel. At NANA, Pate oversaw all commercial subsidiary legal matters and risk management. Prior to her work at NANA, Pate worked as a partner for Honigman Miller Schwartz &Cohn LLP. Pate earned her undergraduate degree from the University of Kentucky, an MBA from University of Alaska Fairbanks, and her juris doctorate from the University of Puget Sound School of Law.

Juneau Assembly gives greenlight to on-site consumption

Editor’s note: This article has been updated to clarify the American Lung Association’s position on marijuana smoke. Cannabis retailers in Alaska’s capital city will soon be able to offer spaces for customers to consume cannabis in their stores. The City and Borough of Juneau Assembly approved an ordinance last week allowing licensed marijuana retail shops to legally open on-site consumption areas. Within Juneau, smoking will be allowed in outside areas only, while edibles can be consumed indoors or outdoors. The Assembly had been discussing it for a few months, following the Marijuana Control Board’s approval of a regulations package. Lt. Gov. Kevin Meyer signed the initial regulations into law in March, allowing retailers to work on their applications for on-site consumption endorsements to be added to their licenses. The regulations became effective April 11. However, no one has made it through the rigor of the application process yet. The Alcohol and Marijuana Control Office has received two applications so far, one of which from Fairbanks has gone to the board and was denied at its July meeting, wrote AMCO Executive Director Erika McConnell in an email. The board still has an open regulations project about on-site consumption, which is set to go before the members at the September meeting, she added. “Since the adoption of the initial regulations, some issues have arisen that need clarity, so the board has opened a new regulations project to do some ‘clean up’ to those regulations,” she wrote. “That project remains open and a revised draft will be provided to the board at the next meeting.” Under proposed regulations, any retailer can open a consumption space for edibles, but in order to have an outdoor smoking space, the building has to be freestanding. The applicant that was denied, the Fairbanks Cut, made a case to the board that its building is in fact freestanding, as it’s not supported by any other structure and the only other occupants are the landlords. Correspondence from AMCO staff noted that the application would be recommended as not meeting the freestanding requirement. “We have an agreement with them that our on-site consumption area will only be open when their office hours are closed,” wrote owner Lily Bosshart in a letter to the board. “As such, on-site would be open Monday-Friday from 5:30 p.m.–Midnight, Noon–Midnight Saturday and Sunday. We share the building in a collaborative way and are both on-board with a small on-site area to be built in the parking lot.” There are a number of other particulars with the on-site consumption endorsements as well, mostly for those who wish to open smoking areas. The regulations require that an outdoor smoking area also include a ventilation system, directing the air outside the building and eliminating the odor by the time it reaches the property line. But the practical application of a ventilation system for an outdoor facility that allows smoking is still a little unclear. The Legislature passed a statewide ban on smoking in workplaces in 2018 as well. That complicated the debate about whether an indoor smoking area for cannabis was legal, whether the business wanted to allow it or not. During the Juneau Assembly’s original debate, City Attorney Robert Palmer noted that if the assembly wanted to allow on-site cannabis smoking but not tobacco, the members would have to make a meaningful distinction between cannabis and tobacco. Before passing the ordinance on July 22, the Assembly members did have a fairly extensive debate to help clarify the differences. Palmer said he thinks the city is fairly clear, given that the memo outlines the various ways this ordinance differentiates marijuana from tobacco. The outlined points include items like consuming marijuana outdoors still protects workers, complies with indoor secondhand smoke laws in protecting the public, and serves the public interest by providing cruise ship passengers with a legal place to consume. Juneau’s sizeable cruise ship population currently has nowhere to go. “The big picture is that the assembly in Juneau decided that the smoking of marijuana at licensed retail stores is something lawful they want to allow,” he said. The main opposition to the legalization of on-site consumption came from the public health community and neighbors concerned about odor and smoke. The American Lung Association in Alaska says exposure to neither tobacco nor marijuana smoke is safe, said spokesperson Ashley Peltier in a written statement. “To fully protect our public health, we support and advocate for smokefree indoor and outdoor environments, and believe that everyone has the right to breathe smokefree air, which includes air free from marijuana smoke,” she wrote. Elizabeth Earl can be reached at [email protected]

ADFG left out of ‘reverse sweep’; Catch 49 ups offerings

As Alaska lawmakers continue their struggle to keep the state afloat, the Commercial Fisheries Division dodged a bullet that would have removed millions of dollars from its budget. An obscure procedural action within the capital budget called a “reverse sweep” prevents dozens of program-specific pots of money from being automatically drained into the Constitutional Budget Reserve, which happened this year after House Republicans would not provide the 30 votes needed to execute the move. “The sweep is money that is not spent in a single year. In this case, it comes from certain sources, such as test fish receipts, commercial crew licenses and sale of Commercial Fisheries Entry Commission permits and licenses,” explained Alaska Department of Fish and Game Commissioner Doug Vincent-Lang. “There is usually unexpended funds within the budget that typically carry over by the reverse sweep into next year’s budget, and they are integrated into the department’s operational budget as there is an expectation those moneys will be available.” There was a lot of confusion about what the sweeps swept up, he added. “From the ADFG perspective, there was an initial document that showed all of those different pots of money are sweepable. However, we have since learned that the actual budget that was signed by the governor and passed by the legislature included language that makes the test fish receipts, crew member licenses and the CFEC licenses non-sweepable.” Money from test fish receipts comes from sampling salmon or other species that are caught by the state to gauge run strength and collect other biological data and then are sold. Crew license sales and CFEC dollars from permits, vessel licenses and other fees go into separate savings accounts; more comes from General Fund program receipts, primarily from crew license sales. “The test fishing receipts are on the order of $2.5 million, crew licenses bring in $2.5 to $3 million and those are built into our management program for the next year,” Vincent-Lang said. “We use them for doing things like crab and shellfish management to herring management, conducting aerial surveys and running weirs and sonar operations.” Vincent-Lang said the Commercial Fisheries Division is working out the details of a nearly $1 million dollar budget cut, which he calls “not life threatening.” “There’s going to be impacts on some weir operations and sonar operations, but we we’ll be able to manage around them,” he said, adding that things would have been far worse if the test fishing and license receipts were swept away. “Not all of that would’ve been spent in a single year, but it would have meant somewhere on the order of $2.5 to $4 million worth of unexpected budget impacts to the division of commercial fisheries,” Vincent-Lang said. The approved fiscal year 2020 budget for the commercial fisheries division is about $71 million, of which $52 million is from general funds. Catch 49 grows fish sales The Catch 49 program that delivers locally caught seafood to Alaskans across the state has expanded its 900 customers to include a growing wholesale base and a retail store. Princess Holland America lodges in Denali are now one of its biggest buyers for jig caught rockfish and Tanner crab from Kodiak. The Bridge Restaurant in Anchorage and the Muse Restaurant at the Anchorage Museum are clients, as is North Star Quality Meats, the protein supplier for all of the AC stores in rural Alaska. “We are really proud to be one of the first people to supply Alaska caught seafood to those rural communities. It’s kind of shocking they weren’t getting that before, but we’re happy to be filling that gap,” said, Katy Rexford, director of Catch 49, which is an arm of the non-profit Alaska Marine Conservation Council. It’s the eighth year for the “boat to table” program described as a community supported fishery. Customers pre-order their seafood favorites in advance and pick it up at distribution hubs across the state a few weeks later. Up to 15 boats fish for Catch 49 products now, Rexford said, and they are always on the lookout for more fishermen across the state. The group offers sockeye salmon from Bristol Bay and Copper River, halibut, Tanner crab, king crab from Norton Sound, Kodiak rockfish, shrimp from Prince William Sound, octopus, sablefish, smoked products and “just about anything you can pull out of the water.” Rexford said when the seafood arrives at the various distribution centers, it’s like “fishmas!” “I get to hand customers these big beautiful bags of gorgeous fillets or shrimp and people are so happy to be able to buy the best seafood in the world and to know they are supporting fishing families and the fishing way of life in our small Alaska coastal communities,” she said. “One hundred percent of our proceeds is supporting policy work and conservation programs that buoy our fisheries and keep them sustainable and productive for generations to come.” Catch 49 summer orders are being taken through Aug. 5 at www.catch49.org; drop offs will take place a few days later in Fairbanks, Seward, Homer and the Mat-Su Valley. Anchorage customers can now pick up seafood every Thursday from 12 p.m. to 6 p.m. at a new retail location at 636 E. 15th Avenue. “Instead of four or five times a year, people in the Anchorage area can now order seafood year round. We’re trying to position ourselves as a more regular source of sustainable seafood,” Rexford said, adding that Catch 49 hopes to expand the opportunity to other regions. Fraser salmon stuck There could be fewer wild salmon from British Columbia competing with Alaska this year due to a rockslide 250 miles up the Fraser River that is keeping the fish from their spawning grounds. “All that rock on top of that face has fallen into the river which is confining passage for fish. I’ve never seen anything to this degree on this side of the river,” Dale Mickey, a manager with Fisheries and Oceans Canada, told CTV News Vancouver. Nearly 80 percent of the sockeye runs from eight tributaries head up the Fraser River, which this year is expected to be 3.5 million fish. A run of 180,000 reds a day is starting to arrive and a sense of urgency has rescuers resorting to a temporary solution: flying the fish upriver by helicopter. Crews have begun air-lifting the fish from a holding pond below the rockslide where the sockeyes are netted, tagged and put in oxygenated aluminum tanks for transport and release upriver. They also are working nearly round the clock to secure the canyon and create a “natural fishway” using artificial salmon ladders inserted into the river. Another assist could come from pressurized tubes called fish cannons created by Seattle-based Whooshh Innovations. The cannons literally shoot the fish up and over dams or other obstructions blocking their migrations. Company CEO Vince Bryan said results have shown that the cannons provide far less stress on the fish than other transports, like trucks and helicopters. “People have asked us how we know it’s okay for the fish, and we tell them because when they come out of the tube, they turn their heads and look back at us waving their tail and saying thanks,” he said in a phone interview. “In all seriousness, studies we did on the fish cortisol (stress) levels as they were going into the tube were not raised.” Cohos will arrive later and the Fraser produces more chinook salmon than all the rivers of Puget Sound combined. Canada’s provincial and federal governments say they will do everything possible to make sure the salmon are able to reach their spawning grounds. Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

GUEST COMMENTARY: Governor’s vetoes don’t reflect Alaska’s values

Over the past month, Rasmuson Foundation’s board of directors has urged our elected leaders to compromise and seek solutions that are best for Alaska when addressing the state’s $1 billion plus budget gap. We have stated our belief that a solution relying primarily on cuts will negatively impact critical services throughout the state, causing harm to many Alaskans. The Alaska Legislature responded with a budget that included $190 million of cuts, which was the largest decrease in year-on-year spending in state history, while preserving a high quality of life for our citizens. The governor’s vetoes announced June 28 will harm Alaska’s most vulnerable citizens and have a significant and detrimental impact on our state’s economy. The impact of these decisions will carry negative consequences well beyond this year, impacting generations to come. The budget he signed into law has set off a battle that addresses the soul of Alaska, who we are and what we represent, and the kind of state we hope to leave to future generations. Since 2016, Rasmuson Foundation has been conversing with Alaskans about the budget through townhalls, community meetings and online discussions. Research shows that a majority of Alaskans prefer a multifaceted approach to balancing our state budget. Yes, this includes reducing spending, but it also means exploring new ways to generate revenue and the use of Permanent Fund earnings will need to be part of the solution. The vetoes must be closely examined by our elected officials: • The defunding of housing and services for families and individuals experiencing homelessness is inhumane. It’s estimated that the cuts to Brother Francis Shelter, Clare House, Covenant House and AWAIC in Anchorage will put hundreds of people out on the street adding to an already intolerable homeless population of 1,100. • Very low-income seniors will be pushed into homelessness with the loss of their senior benefits. • The closing of Head Start programs for low-income families will decimate the childcare now available to working parents and force many into public assistance. • Seven hundred professionals will be laid off from the University of Alaska Anchorage and 40 student programs will be shuttered. It’s estimated that 3,000 students will be directly affected. Whether a local government, business, nonprofit or individual, we all benefit when we are able to plan. Businesses want certainty in regulation and taxation, which in turn allows them to build strategy. Individuals base decisions like buying a house on what they expect their annual household income to be. Dramatic changes — the sudden repeal of a law or elimination of a job — can cause chaos, not just on an individual level, but across entire communities. Nonprofits are no different. They build their budgets each year using the best available data. When you cut expenditures for homeless services, housing, legal assistance, telecommunications and healthcare as dramatically as was proposed by Gov. Mike Dunleavy, our nonprofits will have to drastically change the way they do business, and they’ll have to do it overnight. It will be the financial equivalent of the 7.1 earthquake that hit Southcentral last November. But this time, there is no state or federal agency to step in and help handle the emergency. That’s because Alaska’s nonprofits handle emergencies on a daily basis as they are the stopgap between homelessness and having a place to rest your head. Between hunger and having a warm meal. The place that houses women and children who need a safe haven. Total state general fund spending has been cut from almost $7.8 billion in fiscal year 2013 to about $4.5 billion in fiscal year 2018. It is change that has been painful but measured in annual steps. As a result, systems in healthcare, education, resource management and the arts continue to serve Alaskans while adapting to our new reality. Massive cuts will dismantle, in just one year, services, organizations, and programs that took decades to build. These cuts are a priority of the governor, but what about Alaskans? Do these cuts represent the philosophies and beliefs of Alaskans? Given the high level of community support across the state for nonprofits and education, from the arts to services for the poor and vulnerable, it seems unlikely that the depth of these cuts represents Alaska residents’ beliefs. Rasmuson Foundation promotes a better life for Alaskans. Our mission guides us every day to be part of a solution that improves the quality of life for all Alaskans. We believe notice is critical for Alaskans to plan, make the hard decisions and adjust. Reducing spending — dramatically and on such short notice — will significantly diminish certainty and confidence in Alaska. We can and must do better. The budget, as reduced by the governor’s vetoes, does not embody the values of the Alaska we all support and love. Diane Kaplan is the president and CEO of the Rasmuson Foundation.

GUEST COMMENTARY: The self-destructive fight over the PFD

Like many Alaskans, I’m dismayed at how the debate over the size of the Permanent Fund dividend has degenerated into cutthroat politics, pitting Alaskans against each other. I’ve always felt the small-town character of our state, where many people know each other, would allow us to work out our disagreements in a more reasoned manner. No more, it seems. Former Gov. Jay Hammond, who passed away in 2005, would be dismayed at how the PFD has divided Alaskans and corrupted our politics. Civil debate is no longer how to improve schools or solve homelessness, but about the size of the annual dividend check. It’s obvious, too, that many Alaskans, a lot of legislators and possibly our governor, have little knowledge of the history of the Permanent Fund and the dividend, and how they work. I forgive ordinary people who are busy earning a living for this, but I’m not so forgiving to elected officials who should know better. I was around the Legislature when the Fund was created by the Legislature and the voters in 1976, as well as in 1980, when the dividend was approved by the Legislature. You wouldn’t know it now listening to those who see the PFD as an entitlement, but the dividend was actually quite controversial when it was created, and almost didn’t pass the Legislature. Many Alaskans were true conservatives in those days and were dubious about the state handing out checks. Gov. Jay Hammond and a group in the state House pushed the dividends, but there was a lot of opposition from other legislators, particularly in the Senate, where there were worries about the dividend diverting money from sorely-needed public infrastructure. Hammond had to strong-arm senators with threats to veto the state capital budget to get the votes, and even then the margin was narrow. When the Permanent Fund was created in 1976, there was no discussion about a dividend. The idea was mentioned once during a legislative hearing by a consultant, but there was no public discussion. I served on an advisory board to Hammond and in a long series of public forums we held in the late 1970s on how Alaska should handle policy issues, including our new oil wealth, I don’t recall any mention of a PFD. All that was years ago, however. Memories fade and myths develop. One myth I heard a lot of during public meetings on the PFD this spring and early summer was that the dividend is the “people’s share” of state oil wealth. In a symbolic sense, that can be true — people are free to believe it because the PFD does represent a public sharing of some of the Permanent Fund’s income, but there is no legal basis of a private right to this public resource or that the PFD is guaranteed. In fact, when Congress passed the Alaska Statehood Act in 1959, our new state was given a generous land endowment, including mineral rights (the basis of future oil wealth), but the state was forbidden to sell or privatize its mineral rights. Leasing of extraction rights was allowed, however. which we do. This prohibition in the statehood act cuts against any notion of a private right, through the PFD, to an individual’s direct share of oil ownership. Congress’s reasoning for this is buried in the committee records, but the common belief was that congressmen were worried about the young state’s ability to support itself and wanted to encourage natural resource development to provide revenue for public services. The prohibition was inserted to forestall any temptation by Alaskans to sell off resources, other than through orderly leasing programs, to get quick bucks. In its wisdom, Congress was protecting us from ourselves. But while the state can’t legally grant a private right to oil income the Legislature, which has the sole authority to appropriate funds, can certainly develop a mechanism to share the wealth, which it did in creating the PFD in statute. However, our constitution gives the Legislature the flexibility to change any statute any time, including that for the dividend. The PFD also requires an appropriation every year in the budget, and despite the existence of a 1980s-era statute that guides the calculation of the dividend the amount is purely up to the Legislature. The existing formula was designed at a time when the Permanent Fund consisted mainly of investments in bonds and it worked well at the time. When the Fund diversified into stocks and other equities distortions began to appear but legislators essentially followed the formula over the years because the Permanent Fund was small at the time and the PFDs relatively modest, but most important because state oil revenues were ample. State leaders were preoccupied with other issues that were more important at the time and left the PFD formula alone. Then came 2016, when state oil revenues dived, and the Permanent Fund, its earnings and the PFDs had grown. The need to use some Fund earnings became apparent. Reducing the PFD was part of that, even though the dividend remained high by historical standards. We certainly face a political collision over this now. As he campaigned, Gov. Mike Dunleavy promised a “fully-funded” PFD under the old formula, which works out to about $3,000 this year. There is strong pushback from most legislators and many in the public, however. To pay for the large dividend, the governor has effectively cut the state budget through vetoes. Critics feel huge cuts to the University of Alaska and social services for needy Alaskans, through vetoes, aren’t worth the $3,000 PFD. Others, however, argue their families need the large dividends to help ends meet. It’s hard not to be sympathetic. It was interesting to me, however, that in hearings by the House Finance Committee on the PFDs last week, many who argued for the larger checks also said they would be willing to pay modest state taxes to help support public services. One person said she arrived in Alaska in 1977 and paid a hefty state income tax. If the taxes Alaskans paid then were adjusted for inflation, she said, they would bring $1.4 billion yearly into the state treasury. That’s easily enough to cover the budget deficit and even pay for the PFD. Alaskans now essentially pay no state taxes as individuals. The state is still supported by oil revenues and, now, a portion of Permanent Fund earnings. Other Americans look at our political fight over the PFDs and think Alaskans are nuts. They’re right. ^ Tim Bradner is co-publisher of the Alaska Economic Report and Alaska Legislative Digest.

Anchorage Assembly approves $42M contract for first new port dock

The Anchorage Assembly has approved funding to start a total rebuild to the docks at the city’s beleaguered port a decade after construction problems halted prior efforts to upgrade the essential infrastructure. An 8-3 Assembly vote at a July 30 special meeting allows city officials to award a $42.1 million contract to Seattle-based Pacific Pile and Marine to build the first phase of a new, roughly $220 million petroleum and cement terminal at the city-owned Port of Alaska. The Assembly had delayed the vote twice before at its regular bi-weekly meetings on the hope officials in Mayor Ethan Berkowitz’s administration could reach an agreement over the work with a consortium of eight Port of Alaska customers, who object to the plan, primarily because of its cost. The port user group is comprised of the general cargo shippers Tote Maritime and Matson Inc.; five fuel supplier and distribution companies; and Alaska Basic Industries, which is a primary cement distributor in the state. Representatives of the user companies have stressed at numerous Assembly committee meetings and work sessions over the past few months that city and port officials do not have a plan to finance the rest of the petroleum and cement terminal, or PCT, and cannot explain how the cost of the project went from $38 million in 2014 to more than $200 million today. Millions of dollars have already been spent on preconstruction dredging in front of the docks and other soil stabilization work. They have urged the city to stop work to advance the port modernization project and reexamine the whole scope of the project to replace all of the five cargo and fuel terminals at the port, which is now estimated to cost $1.9 billion, a price tag no one sees as viable. A significant portion of the $1.9 billion cost is for removing what’s left over from the original port expansion project, which stopped in 2010 after large sections of sheet piling meant to support the new docks were found to have been damaged during installation. Anchorage Municipal Manager Bill Falsey acknowledged during the July 30 meeting that the city is still about $100 million short of finishing the PCT, but said the city’s plan “is to responsibly make incremental progress” on port work while ways to bring down the cost of the rest of the dock replacement are examined. Falsey also noted the PCT needs to be built first, as it’s location south of the existing facilities will open up space for work on the rest of the docks while vessels continue to call on the port. He has long insisted that city officials recognize the $1.9 billion plan is wholly unaffordable, even though the PCT is the first part of that plan. However, ongoing examinations of the badly corroded steel piles that support the current docks — many of which are more than 50 years old — continue to reveal damage from the November 2018 earthquake, adding to the urgency of the matter, according to port officials. Their experts contend the port has less than 10 years before some of the docks will have to be de-rated for weight capacity or closed altogether if they are not rebuilt. The $42.1 million contract to build a PCT trestle and dock platform next year “begins to put petroleum and cement deliveries back on reliable footing,” Falsey said. Dave Karp, a senior vice president with Tote Maritime’s parent company Saltchuk, said before the vote that the user group and city officials met multiple times over the past week but were unable to reach a compromise path forward. He emphasized the users do not want to obstruct progress on rebuilding the port as they agree the work needs to be done; they just don’t believe it is so pressing that it needs to happen before a comprehensive look at the project costs is complete. “Do we really want to risk history repeating itself?” Karp asked Assembly members, in reference to the failed port expansion project that cost roughly $300 million and produced little viable infrastructure. Consultants hired by the Assembly to review the project for cost saving measures have said alignment between the city and the users will be critical to move the project forward successfully. Falsey said the city will “wring out the big costs from the rest of the project while making incremental progress” on the PCT. The users have suggested repairing one of the existing petroleum terminals but the viability of that is unclear at this point. Adding to the pressure, Pacific Pile and Marine representatives have said the contract needs to be approved by Aug. 1 in order to ensure the massive steel pilings can be ordered and fabricated in time for the 2020 construction season and to get the best price. Assemblyman John Weddleton, who voted against the contract, said it’s difficult to stop a major project once it is started and questioned when the current Assembly members — none of whom were a part of the body at the time — would’ve stopped the failed expansion project. “I don’t want to get stuck with something else we don’t need,” Weddleton said. “I’m ready to pause. I’m going to say, ‘let’s look.’” Assemblywoman Meg Zaletel said the city needs to move forward with the PCT, contending the debate over it has served as a catalyst to bring the city and users to the table for important discussions about the rest of the project despite the disagreement over how and when to move forward. “I understand there’s debate but I’m convinced there’s critical need for this infrastructure,” she said. The Assembly also approved the formation of a formal five-member port working group to facilitate better communication between the city, users, and the Assembly on major port reconstruction decisions. The group will have two members nominated by the users and approved by the Assembly, two city officials and one Assembly-selected member, likely the Assembly’s consultant hired earlier this year to examine the overall scope of the port work for cost savings. Assemblyman Fred Dyson, who voted against awarding the contract, said he doesn’t expect major savings will result from the meetings, but he commended the users and the city for making good-faith efforts to reach a compromise. Assemblywoman Crystal Kennedy was the third “no” vote. Karp reiterated after the vote that the users will continue to work with the city on ways to improve the final port project. Falsey also emphasized again that the administration is open to hearing from anyone who can help produce a better, less costly, port modernization plan.

Alaska Air Group rebounds to solid second quarter profit

Alaska Air Group Inc. executives said the company is returning to its core business principles following a strong second quarter that netted the company a $262 million profit. Seattle-based Alaska Air Group Inc. operates Alaska Airlines and regional carrier Horizon Air. Air Group leaders have long stressed fundamental business principles to achieve an investment-grade balance sheet with modest debt levels; ideals that led the company to seven consecutive years of record profits earlier this decade. The streak of profitability provided Alaska Airlines the financial wherewithal to purchase Virgin America, one of its primary West Coast competitors, in an April 2016 deal that cost the company roughly $4 billion. The complexities of merging two large airlines have since eaten into company profits, but the airline is poised to return to its strong moneymaking ways, CEO Brad Tilden said in a July 25 conference call with investors. “We are well set up to move towards our targeted annual growth and our targeted pretax margin of 13 to 15 percent over the business cycle,” Tilden said. “Our results for the first half of the year make us optimistic for the rest of 2019 and beyond.” Company officials generally said their focus in 2019 is on managing costs — which was done better than expected in the first half of the year — and the coming years will be about beginning to realize the benefits of the larger network the Virgin America acquisition can provide. Alaska Air Group produced a profit of just $4 million in the first quarter, but executives blamed the relatively small profit on unusually bad winter weather in the Pacific Northwest. The $262 million in second quarter earnings was a 26 percent improvement over its $193 million profit for the same period in 2018. The $262 million profit also translated into a net of $2.11 per share. Alaska Air Group stock closed trading July 25 at $63.83 per share. The company paid a dividend of 35 cents per share in the second quarter and repurchased approximately $25 million worth of shares in the first half of 2019, according to the quarterly report. “We set a plan to return $220 million to shareholders this year and we’ll hit it,” Chief Financial Officer Brandon Pedersen said during the earnings call. The $262 million profit was on the back of nearly $2.3 billion in operating revenue, which correlates to 6 percent year-over-year growth. Chief Commercial Officer Andrew Harrison said that the second quarter revenue growth of was the best year-over-year per unit improvement the company has seen in seven years. Pedersen noted the company also enjoyed its second consecutive year-over-year improvement in quarterly margins. “It’s evidence that our plan to improve revenues is working,” Pedersen said. Air Group ended the quarter holding more than $1.6 billion in cash and short-term investments. The company, which holds nearly $13 billion in assets, generated cash flow from operations totaling roughly $1.1 billion during the first half of the year. After $330 million in capital expenditures, Air Group was left with $735 million in free cash flow, which Pedersen said was nearly $400 million more than 2018 year-to-date. The extra available cash is the result of a calculated decision last year to reduce capital investments in order to have more money on-hand, he said. In Alaska, the company completed a new $50 million hangar at Ted Stevens Anchorage International Airport last November. The Anchorage maintenance facility was the largest of numerous new construction and renovation projects Alaska Airlines began across the state in 2016. It also spent $30 million to remodel and expand several of the terminals it owns at rural Alaska airports it serves. The airline also participated in several terminal upgrade projects at some of its West Coast hubs, such as Los Angeles International Airport, in recent years. The airline also finished launching three new cargo aircraft dedicated to serving the state of Alaska last year. Additionally, Pedersen said Air Group has repaid about $280 million in debt this year and is trying to refinance some of its outstanding obligations to fixed-rate debt to take advantage of currently low borrowing costs. He noted the company has repaid $1.2 billion of the roughly $2 billion it borrowed to purchase Virgin America and is on pace to reduce its debt balance by about $350 million this year. Including aircraft leases, Alaska Air Group’s debt-to-capitalization ratio currently sits at about 45 percent and is on track to be 42 percent by the end of the year. The company should return to its 40 percent debt-to-cap target next year, according to Pedersen. “A fortress balance sheet has been the hallmark of this company for many years and we’re moving quickly back to that position,” he said. On the operations side, Pedersen said Horizon Air’s productivity — measured as passengers per full-time equivalent employees — improved 3.3 percent in the second quarter and the regional carrier’s passenger traffic increases 17.4 percent on a 15.3 percent increase in capacity, according to the quarterly report. Chief Operating Officer Ben Minicucci added that Horizon, which for years had dealt with on-time performance issues related to an industry-wide pilot shortage, according to company leaders, is now among the top-performing regional carrier in the country. “I want to give a shout out to the people of Horizon for a complete turnaround in their performance over the past couple of years,” he said. During the quarter Alaska Airlines also reached a two-year contract extension with its mechanics represented by the Aircraft Mechanics Fraternal Association, which allows Alaska mechanics to work on all of the airline’s mainline aircraft, according to Tilden. Alaska Airlines historically flew Boeing 737 aircraft exclusively, while Virgin America operated Airbus planes. Alaska also reached a tentative five-year agreement with its roughly 5,200 office, passenger service and ramp employees represented by the International Association of Machinists, which Tilden said he hopes will be ratified by the union in the coming weeks. Alaska does not have any of the currently grounded Boeing 737 MAX series aircraft. The airline was scheduled to take three 737 MAX planes later this year, but those deliveries will likely be cut to one MAX this year, according to Pedersen, with two more coming early in 2020. The new labor deals will add about $50 million in wage and benefit costs annually, and about $40 million in the second half of this year due to $24 million in signing bonuses that will be paid in the third quarter, according to executives. Pedersen said even with the new labor costs the company expects to keep its cost growth at about 2 percent per unit for the year, excluding fuel, which is in line with earlier projections. “We’re delivering industry-leading performance and our customer service is award winning,” Pedersen said. “On the financial side we have revenue and cost momentum and our balance sheet is strong. If we continue to execute our plan we’ll be in the top quartile of the industry for profit margins, balance sheet and free cash flow generation.” Elwood Brehmer can be reached at [email protected]

Legislature sends capital budget, $1,600 PFD and spending bills to gov

JUNEAU — The Alaska Legislature has approved legislation fixing the state’s four immediate fiscal problems, and now the final decision is up to Gov. Michael J. Dunleavy. On July 29, lawmakers passed two pieces of legislation that address this year’s Permanent Fund dividend, the governor’s operating budget vetoes, the capital budget and reverse sweep. • House Bill 2001 sets this year’s dividend at $1,600 per person and reverses all but $23.29 million of the $444 million in vetoes Dunleavy made to the state’s operating budget in June. The remaining vetoes include $20 million from the University of Alaska and travel reductions to many state agencies and departments. • Senate Bill 2002 funds the state’s capital budget with money from the Constitutional Budget Reserve and includes the “reverse sweep,” a procedural matter that prevents 54 state savings accounts from being automatically drained into the budget reserve. It also contains permission for the Legislature to spend $250 million from the Constitutional Budget Reserve on as-yet-undefined projects, such as wildfire fighting. The Legislature would be required to specify the spending at a future date. Legislation is not sent to the governor’s desk immediately when it passes the Legislature. Legislative drafters, lawyers and clerks first examine the bill before transmitting it to the governor. In addition, the leaders of the House and Senate have the final word on when a bill is transmitted, and they can hold on to legislation (though not indefinitely) before sending it to the governor. It remains unclear when the bills will be transmitted. “The Senate has every intent of getting the capital budget to the governor’s office as soon as possible,” Senate President Cathy Giessel, R-Anchorage, said by text message. “The money for roads, and funding for our UA scholars less than a month from classes starting, is too important, and will not be held up.” A spokesman for Speaker of the House Bryce Edgmon, I-Dillingham, was unable to answer questions before the end of the day on July 30. The current special session adjourns Aug. 6. According to the Alaska Constitution, if the Legislature is not in session, the governor has 20 days (Sundays excluded) to sign a bill, veto it, or allow it to become law without his signature, once it is transmitted to him. In a July 29 phone call with reporters, the governor said of the capital budget bill and reverse sweep that “we’re glad for that, and we’re glad because … it helps Alaskans.” The governor was less positive about the legislation setting the PFD amount and reversing many of his budget vetoes. In the same call, he referred to the bill as a “disappointment because the PFD was now taxed by almost 50 percent for every man, woman and child.” The governor has consistently maintained his view that the state’s budget should be balanced by cutting services and not raising taxes or reducing the dividend. In February, he introduced a proposal to do so in one year. He now believes that proposal should be implemented over two years. Even if the governor were to re-veto all of the budget items he vetoed in June, the state would not have a balanced budget if a full dividend were paid this year. The governor has said he will propose additional cuts next year.

ConocoPhillips posts seventh straight quarterly profit

Lower global LNG and natural gas prices took a small bite out of ConocoPhillips’ profits, but the major producer still generated a healthy profit of nearly $1.6 billion in the second quarter. Company executives released the quarterly earnings report July 30. Chairman and CEO Ryan Lance said in a statement accompanying the report that the period was the seventh consecutive quarter the company was able to generate free cash flow and pay for capital investments, share buybacks and dividends out of cash from operations while meeting its operational and financial targets. “ConocoPhillips has embraced an approach to our cyclical industry that we believe will deliver superior returns and create value across a range of commodity prices,” Lance said. “This quarter represents a continuation of strong performance on our business model that prioritizes financial returns, discipline, resilience with upside and shareholder distributions.” The companywide profit was generated from more than $8.3 billion in revenue and translated into earnings of $1.40 per share. ConocoPhillips stock closed trading July 30 at $59.56 per share, up 4.2 percent from the pre-earnings report start to the day. Lance added that company leaders will present a plan detailing their ability to continue the strong returns over the long term at a November investor meeting. ConocoPhillips had achieved profits greater than $1.8 billion for three quarters in a row before the $1.6 billion second quarter net. ConocoPhillips’ total realized price for all of the oil and natural gas it sold during the first half of the year was $50.55 per barrel of oil equivalent, compared to $52.37 in the first six months of 2018, according to the report. The company also continued to realize strong returns from its North Slope Alaska operations, which netted a $462 million profit during the period. However, several special item costs “predominately related to non-cash adjustments for certain state and federal tax adjustments” totaling $81 million resulted in $381 million in adjusted quarterly earnings for ConocoPhillips’ Alaska business segment, spokeswoman Natalie Lowman wrote in an email. ConocoPhillips paid $278 million in State of Alaska taxes and royalties during the quarter as well, according to Lowman. She added that the company has reinvested all of its adjusted Alaska earnings totaling $765 million so far in 2019 back into projects in the state. ConocoPhillips Alaska spent $370 million on capital investments during the quarter. The second quarter also marked the end to one of the company’s largest Alaska exploration seasons, in which eight exploration wells were drilled and tested, Lowman wrote via email. A slide presentation accompanying the earnings report states ConocoPhillips had “encouraging” results from the wells drilled at its North Slope Willow and Narwhal prospects, but the company has not released additional information on the exploration results. ConocoPhillips also announced a deal to purchase the mid-sized Nuna prospect on the North Slope from small independent Caelus Energy, but a purchase price has not yet been disclosed. The $462 million Alaska profit accounted for 29 percent of ConocoPhillips global earnings for the quarter, while the company’s production from the state — dominated by high-value oil — accounted for 16 percent of its total combined oil and gas production. Alaska has also accounted for 23 percent of the company’s overall year-to-date capital spend of $3.4 billion. Elwood Brehmer can be reached at [email protected]

EPA rescinds proposed action to stop Pebble mine

A July 30 announcement from the Environmental Protection Agency means it won’t stand in the way of Pebble Partnership receiving the key federal permit it needs to construct what has become one of the most controversial development projects in the country. EPA Region 10 Administrator Chris Hladick on July 30 signed a 28-page notice at the direction of agency leaders that formally removes the agency’s proposed “preemptive veto” that loomed over the Pebble mine project since it was initiated under former President Barack Obama’s administration in 2014. In an interview Pebble CEO Tom Collier said, “This is a good day for Pebble. It’s a day I wish had happened much sooner, but it’s a good day for Pebble.” The EPA retains its power to eventually prohibit the Pebble mine project under the Clean Water Act. Hladick also wrote that the EPA has other avenues to scrutinize the project such as the 404(q) process, which “elevates” the environmental analysis of projects the EPA believes could have significant environmental impacts through a longstanding agreement the EPA has with the Corps of Engineers. Traditionally, the 404(q) has been used before any final actions regarding a wetlands permit are made, according to Hladick. “EPA believes these processes should be exhausted prior to EPA deciding, based upon all information that has and will be further developed, to use its Section 404(c) authority,” he wrote. Collier added he doesn’t see why the EPA would use the 404(q) and potentially go back to a 404(c) veto in roughly a year — when the Pebble EIS is scheduled to be done — after rescinding it now. Formal statements from Pebble and its parent company, Vancouver-based Northern Dynasty Minerals Ltd., thanked Gov. Michael J. Dunleavy for pushing President Donald Trump’s administration to rescind the proposed restriction. Dunleavy has avoided taking a formal stance on the hotly contested project, but said the EPA’s unusual actions to preclude its development send a bad signal to prospective investors in other projects across Alaska. The Pebble deposit is on State of Alaska land. Hladick is a former commissioner of the Alaska Department of Commerce, Community and Economic Development under former Gov. Bill Walker, who opposed the Pebble mine, and has served as manager to several local governments across Alaska, including the City of Dillingham, a commercial fishing hub in the Bristol Bay region. Pebble’s opponents, which include conservation groups, area fishing lodges, Bristol Bay tribes and Bristol Bay Native Corp., said in statements that the EPA’s latest action disregards the agency’s namesake responsibility, insisting the mine would endanger the salmon area residents rely on for jobs and subsistence harvests. BBNC President Jason Metrokin stressed that the move is inconsistent with the comments EPA Region 10 officials sent to the U.S. Army Corps of Engineers July 1 on the Pebble draft environmental impact statement. Those lengthy written comments —signed by Hladick — stated the project as proposed could have significant adverse environmental impacts and the draft review document lacked important analysis of the project’s downstream impacts, among other things. “A large majority of BBNC shareholders, more than 80%, are concerned about the risks Pebble poses to the region and its fisheries and are opposed to the project. BBNC will always advocate for its shareholders’ best interests and will continue to oppose this inherently dangerous proposal,” Metrokin said. “One thing is certain: the people of Bristol Bay will not stand down. Bristol Bay’s commercial fishery is once again on pace for a record sockeye salmon harvest, but the people, the economy and a way of life that is dependent on these incredible fish are put at risk by today’s decision.” He also asserted that the EPA’s move comes just weeks after agency officials said they had no timeline for revisiting the proposed restriction. Pebble’s Collier said the concerns listed in EPA’s comments on the project review and those from other federal and state agencies were largely the result of overlooked information that is in fact in the roughly 1,400-page EIS. “For the most part the issues that have been raised aren’t of great surprise and aren’t of great significance. I think they’ll be dealt with by the Corps and the third party contractor (working on behalf of Pebble) and we’ll march ahead towards getting our permit,” Collier said. “There’s a reason they call it a ‘draft,’” he added. EPA General Counsel Matthew Leopold directed Hladick in a June 26 memo to reconsider the agency’s proposed 404(c) restriction. Hladick wrote in his 404(c) lifting notice that the Pebble EIS provides an analysis of Pebble’s actual plan, instead of relying on the 2014 Bristol Bay Watershed Assessment, which contemplated several hypothetical mine projects and Pebble claims was written to justify stopping the project. The allegation that the watershed assessment was biased formed the basis for Pebble’s lawsuit against the EPA but it was not invalidated in the 2017 settlement. A January 2016 EPA Inspector General report supported the validity of the assessment, but scolded the agency for months’ worth of missing emails and other procedural missteps related to evaluating the prospective Pebble project. Collier said he doesn’t see a need to invoke the more stringent but somewhat nebulous 404(q). “Sometimes a project just becomes one where decisions are being made at the highest levels of the agency in Washington, D.C.; I think that’s where we are,” Collier said. “So I’m not sure elevation would change a damn thing. You saw that the highest level person at EPA who has not rescued himself and that’s the general counsel (Leopold), was involved in this decision essentially in-lieu of the administrator.” EPA administrator Andrew Wheeler has rescued himself from anything relating to Pebble to prevent a potential conflict of interest stemming from business at a law firm where he previously worked. Leopold sent a letter to Army Corps of Engineers leadership July 25 asking for an extension to the deadline in the 1992 working agreement by which the EPA was supposed to request the 404(q) process be started. That deadline was July 26. Specifically, Leopold asked for EPA officials to have 30 days after the Corps drafts preliminary decision documents for Pebble’s permits before the EPA has to make its decisions regarding the project. That would likely be sometime next year. The EPA began the process to withdraw the proposed Section 404(c) veto — named for where it is found in the Clean Water Act — in July 2017 following the settlement of a lawsuit earlier that year by Pebble against the agency that directed EPA officials to take steps to lift the proposed development prohibition. The settlement, however, did not mandate the proposed veto be lifted, as the EPA has now done, but the action needed to happen before the U.S. Army Corps of Engineers could issue a final wetlands fill permit for the project. The Army Corps of Engineers adjudicates wetlands fill permits on behalf of the EPA for development projects across the country, but the Clean Water Act gives the EPA the authority to override wetlands fill permits the Army Corps issues if it determines the project would have unacceptable impacts to the environment. The EPA has used that authority very sparingly over the decades since the Clean Water Act was passed, but Pebble was the first instance in which it had been invoked prior to a wetlands fill permit being applied for. Pebble applied for its 404 wetlands fill permit in December 2017. In January 2018 in an unexpected move, former EPA Administrator Scott Pruitt suspended the 404(c) withdrawal process after the agency took public comments on the move citing “serious concerns” he had regarding the impacts the large Pebble mine and infrastructure project could have on the area’s salmon fisheries, which support an estimated 14,000 commercial fishing jobs in an otherwise economically depressed region. Pebble has long touted that it would provide roughly 2,000 jobs to Alaska, many of which would be high-paying opportunities in inland parts of the Bristol Bay region that see less benefit from the commercial fishing industry. Elwood Brehmer can be reached at [email protected]

Kenai River sockeye push liberalizes bag limits; commercial catches rise

SOLDOTNA — After a slow start to their season, things are looking up for Upper Cook Inlet’s commercial fishermen. Total salmon landings reached 1.4 million after the July 29 fishing period, with more than 1.1 million sockeye so far. The majority of those landings have come from the Central District drift gillnet fleet and east side setnets, with setnetters on the west side, Kalgin Island and in the Northern district bringing in about 150,000 salmon between them, according to the Alaska Department of Fish and Game. It’s hard to say whether the forecast of 6 million sockeye across all the systems of Upper Cook Inlet will materialize yet, but it’s definitely looking better than it was a few weeks ago, when Upper Cook Inlet fishermen were lagging significantly behind even their 2018 catch by this date. Last year was one of the worst years in recent memory for sockeye harvest for fishermen across the Gulf of Alaska, Cook Inlet included. On July 26, fisheries managers in Soldotna estimated that the Kenai River run is 2 to 4 days later than usual, but that it will likely be greater than 2.3 million. That’s on track with the preseason forecast of about 3 million. That’s much more on time than last year, when the run turned out to be at least a week later than usual. Even a run four to five days late can significantly interrupt fishing management plans in Upper Cook Inlet, where the interlocking user groups and their management plans keep operations fairly tight. The Kasilof River, about 12 miles to the south of the Kenai, is getting close to the upper end of its own escapement goal of 340,000 sockeye. As of July 29, 306,812 sockeye had passed on the sonar on that river. Commercial area management biologist Brian Marston said the managers will likely start opening up more hours in the Kasilof area to help control that escapement, with an eye toward not having to open the Kasilof Special Harvest Area. “We have several steps that we’re supposed to take before that, which is to use more hours than the management plans normally allow and also to not adhere to the (mandatory closure) windows,” he said. “The SHA is a last resort. The management plans actually state that you shall do extra hours and step on the windows before you do the SHA. Although it’s a good idea, it doesn’t function to really stop the river that well.” The SHA is a constrained terminal harvest area around the mouth of the Kasilof River, functioning as a last effort to control escapement to that river. Because of the tidal flats and constrained area, it’s relatively hard to fish. During the 2017 Upper Cook Inlet Board of Fisheries meeting, the board members took several steps to help managers avoid having to use the SHA to control escapement, including expanding opportunities for the use of the 600-foot setnet fishery along the nearby beaches. The Kenai River is already within its sustainable escapement goal range, and as of Monday was within the inriver goal range of 1 million to1.3 million sockeye. The sustainable escapement goal is set for spawning; the in-river goal is designed to account for sportfishing harvest. Now it’s a game of controlling escapement to not exceed the upper end of the escapement goal using the commercial and sport fisheries. But one confounding factor is the king salmon run there. The kings are still returning to the Kenai, but only 8,615 large kings had passed the sonar as of July 29. The lower end of the escapement goal for late-run kings is 13,500. In trying to protect kings, the commercial area managers are somewhat hamstrung when trying to open setnets to harvest sockeye salmon in the Kenai River area. After Aug. 1, the managers get more hours as the restrictions on commercial fishing hours through the Kenai River Late-Run King Salmon Management Plan are lifted, Marston said. “As soon as we get out of the king plan at the end of the month, we have to still pay attention to the escapement of king salmon,” he said. The Kenai River personal-use dipnet fishery closes on July 31 at 11:59 p.m. as well. Sport anglers will keep fishing, and ADFG sport fishing managers doubled the bag and possession limits to six per day with 12 in possession for the Kenai River downstream of Skilak Lake effective Sunday. They also increased the bag limits for sockeye in the Kasilof River Effective July 24 to six per day with 12 in possession. The personal-use dipnet fishery there will continue as well until Aug. 7. Pink and coho salmon are starting to show up as well, though this year is set to be a relatively weak pink year, as odd-numbered years are in Upper Cook Inlet. As of July 29, commercial fishermen had landed 83,307 coho salmon across Upper Cook Inlet, and though there are no escapement goals for coho salmon south of the Deshka River, Marston said there were signs the run could be strong this year. The Deshka River weir has counted 826 coho salmon as of July 29, ahead of last year on the same date. The northern streams are on target for their coho runs so far, and strong numbers have been showing up at Fish and Game’s weirs since the rain began last week. The run could still turn out to be unexceptional, as coho didn’t show up strongly in the test fishery numbers, but it could also be another excellent year, he said. ^ Elizabeth Earl can be reached at [email protected]

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