AIDEA board approved foreclosure sale for failed Mustang project

Leaders of the state development bank approved a plan Aug. 12 to offload the foreclosed North Slope oil project where it has to date invested more than $70 million. With little discussion, the Alaska Industrial Development and Export Authority board of directors unanimously passed a resolution directing management to seek out a buyer for the partially complete Mustang oil project that faces “severe financial difficulties,” according to the resolution. AIDEA CEO Alan Weitzner said authority officials have been working with the creditors to Singapore-based Caracol Petroleum and its operating subsidiary, Anchorage-based Brooks Range Petroleum Corp., to optimize the Mustang project for a sale, which is currently in a cold shutdown, since foreclosing on it last December. The authority is actually selling Mustang Holding LLC, a company established to hold the foreclosed assets formerly run by Brooks Range, according to Weitzner. “It would be and has been proposed as a competitive sale process where we will engage with parties directly on these foreclosed assets and their interest in the field and be able to address their proposals and questions as they come,” he told the AIDEA board. AIDEA initially invested $70 million in two holding companies set up for the development of a road to the small oil prospect and its processing facilities. The Mustang field is adjacent to the southern portion of ConocoPhillips’ large Kuparuk River field and also near the Nanushuk oil project being developed by Oil Search. The field is estimated to hold about 22 million barrels of oil and could peak at production rates of about 12,000 barrels per day when fully developed. Brooks Range drilled test wells at Mustang in 2011 and 2012 that led AIDEA in December 2012 to make a $20 million investment in Mustang Road LLC. The $20 million funded the lion’s share of work to build a five-mile access road and a 19-acre drilling and facility pad. The gravel road and pad — in which AIDEA was an 80 percent owner — were finished in April 2013. At the time, Brooks Range leaders said they wanted to have the field in production by fall 2014 and credited incentives in the just-passed and industry-supported oil production tax structure under Senate Bill 21 for improving the economics of the project and spurring it forward. In April 2014, AIDEA committed another $50 million equity investment in the $225 million Mustang oil processing facility through MOC1. AIDEA held a 96 percent stake in the holding company as Brooks Range’s owners matched the authority’s equity with a $1 million investment of their own. By February 2016, management for the authority and Brooks Range agreed to put Mustang in “warm standby” as oil prices in the $30 per barrel range hampered the ability to secure other financing options. AIDEA leaders later attempted to jumpstart development by restructuring its investments into multiple iterations of a loan to Caracol that required the owner company to commit at least $60 million to the project by April 2019. Brooks Range eventually produced a small amount of oil from a single well at Mustang in November 2019 with temporary, modular facilities under new leadership, but it was not sustained. Caracol missed its first quarterly $3.1 million loan payment to AIDEA in late 2019 as well, which started pushing authority officials toward foreclosure last year. AIDEA Chief Investment Officer Morgan Neff noted that the project could still net the state upwards of $200 million in taxes and royalties if it is fully developed. The Mustang resolution also included a $500,000 increase to the authority’s budget for managing the project’s infrastructure this year. Ness said the increase from approximately $1.6 million to $2.1 million largely stems from unexpected remediation of the gravel pad and property tax payments to the North Slope Borough, which recently valued Mustang at $4.3 million, according to AIDEA. The local property tax bill for Mustang is $77,388 per year. Elwood Brehmer can be reached at [email protected]

Movers and Shakers for Aug. 22

Anchorage Bariatrics hired Dr. Maryna Chumakova-Orin. Orin joins Anchorage Bariatrics from the Duke University Medical Center, where she was a fellow in minimally invasive and bariatric surgery for one of the strongest fellowship programs in the world. She will be Alaska’s first female bariatric surgeon. Originally from Belarus, Orin completed her medical school training at Chicago Medical School of Rosalind Franklin University, earning a medical doctorate degree. She was worked at the world-renowned Cleveland Clinic Foundation for her general surgery training, where her passion for bariatric surgery only grew stronger as she worked with some of the leaders in the field. Dr. Pearl Brower will lead the development and implementation of diversity and inclusion strategies at the University of Alaska. Brower will be senior advisor for Alaska Native Success, Institutional Diversity and Student Engagement, and will report directly to the president. She has been tasked with coordinating recommendations developed through the Alaska Native Success Initiative and to foster partnerships between the UA system and the Alaska Federation of Natives, the 13 regional Native corporations and their foundation partners. Brower will be available to advise the president, chancellors and other university system leaders on these critical issues including engaging with the Alaska Native Studies Council, UA for Racial Justice, and other university affiliated groups to develop strategies for progress. Brower holds a Ph.D. in Indigenous studies with an emphasis on Indigenous leadership and has 13 years in higher education leadership, most recently as president of Alaska’s only Tribal College, Ilisagvik College. Prior to her tenure as president, Brower served as Ilisagvik’s Dean of Students and Institutional Development; Director of External Relations &Development; and, Special Assistant of External Affairs and Marketing for Ilisagvik. She also managed the college’s Foundation and was responsible for facilities planning capital campaign and facilities activities. Sen. Lisa Murkowski announced new staff members to both her Washington, D.C. and Anchorage offices. Joining Murkowski’s D.C. office are: Kate Williams Sterne; Aaron Thiele; Chris Griffin; Jamie O’Connor; Maya Becker; Abigail Hemenway; and Brian Dusek. Williams Sterne returns to the office as deputy chief of staff and legal counsel. She graduated from Juneau-Douglas High School and holds a bachelor’s degree in economics from the University of North Carolina at Chapel Hill as well as a juris doctor from the University of San Diego School of Law. She previously served as Legislative director for Sen. Ted Stevens, oil and gas counsel for the U.S. Senate Energy and Natural Resources Committee, deputy chief of staff and legislative director for Murkowski, and counsel for Majority Whip Sen. John Cornyn. Kate has also served in a number of roles in Alaska including as an associate attorney, Legal and Regulatory Affairs Manager for the Alaska Oil and Gas Association, business manager for a leading commercial construction company, and most recently assistant attorney general for the State of Alaska. Thiele joined the office in January as a legislative assistant handling Energy and Natural Resource issues. He previously served as a senior advisor in the Office of Congressional and Legislative Affairs at the Department of the Interior, where he worked on issues pertaining to United States Geological Survey, Bureau of Indian Affairs, Bureau of Indian Education, and the Bureau of Reclamation. Prior to joining the Department of Interior, Thiele previously worked in the House of Representatives and graduated with a bachelor’s degree in international relations from California Polytechnic State University-San Luis Obispo. Griffin joins the office as a legislative aide assisting with a portfolio of energy issues, including the Department of Energy, renewable energy, climate change, energy efficiency, and nuclear energy. Griffin previously served as a member of her U.S. Senate Energy and Natural Resources Committee staff, where he was also a legislative aide working on public lands and natural resource issues. He graduated with a bachelor’s degree in political science from Tufts University. O’Connor joined the office several months ago as a legislative assistant for fisheries, oceans, and sciences. O’Connor has a bachelor’s degree in journalism and public communication from the University of Alaska Anchorage. O’Connor previously served in the office of Sen. Dan Sullivan in 2015-16 as senior staff assistant and internship coordinator. O’Connor previously served as the Working Waterfronts Director for the Alaska Marine Conservation Council in Homer as well as serving on the Advisory Panel to the North Pacific Fishery Management Council. Becker joined the office as the 2021 National Oceanic and Atmospheric Administration Sea Grant Knauss Fellow. She earned a bachelor’s degree from Columbia University and a master’s degree from the Scripps Institution of Oceanography at the University of California-San Diego, both in earth sciences. She is currently a Ph.D. candidate at Scripps Oceanography, and her dissertation research is centered on ice–ocean interactions on Antarctica’s largest floating ice shelves. Hemenway recently joined the office as a legislative correspondent. Previously, she served as a staff assistant for the U.S. Senate Energy and Natural Resources Committee. She holds a bachelor’s degree in political science from the University of Miami. Dusek joined the office as deputy press secretary. He graduated from Colorado State University and holds a bachelor’s degree in business administration with a concentration in marketing and a bachelor’s degree in Communication Studies. Dusek previously was an intern for the CBS News communications team, an intern in Sen. Sullivan’s office in the summer of 2019, and an intern in Murkowski’s office in 2017. Joining Murkowski’s Anchorage office are: Cordelia Kellie; Hannah Ray; Leann Sommer; and Hannah McCue. Kellie joined the office as special assistant for Rural Affairs. Her career has included communications and external affairs, Tribal education, rural community development, legislative affairs on the state and federal levels, language and cultural instruction, and building regional and statewide rural and Alaska Native relationships through grassroots community organizing. She received her bachelor’s degree in English language and rhetoric and a minor in communications from UAA. She is a 2021 NANA Richard A. Baenen Award winner for outstanding service to the Northwest Arctic. For her work in language revitalization and community building, she has also received the 2020 AFN Eileen Panigeo Maclean President’s Award for Education and was 2020 Olgoonik Corporation Shareholder of the Year. Ray is relocating to the Anchorage office after being promoted to deputy Communications director. She has served in Murkowski’s D.C. office as press secretary since 2017. Ray has a bachelor’s degree in communication and public relations from the University of Central Arkansas Honor College. Prior to working in Murkowski’s office, Ray served as the Community Events manager for the American Cancer Society in Anchorage. Sommer joined the office as the Alaska state scheduler. Sommer holds a bachelor’s degree in business administration: tourism and hospitality management from Fort Lewis College. Most recently Sommer was the director of Sales at the Hyatt Place Anchorage-Midtown and received two awards during her time there: The 2020 National Center for American Indian Enterprise Development Native American 40 Under 40 and the Alaska Hotel and Lodging Association 2019 Sales Manager of the Year. McCue joined the office as a staff assistant. McCue recently graduated from Oregon State University with a bachelor’s degree in environmental science, specializing in conservation, resources and sustainability with a minor in chemistry. McCue previously interned in Murkowski’s Anchorage office in 2020 and the D.C. office in 2017. Penny Gage is the Tech Deployment Track lead at Launch Alaska, heading up Launch Alaska’s flagship program to help companies from across the world focused in food, water, energy, and transportation deploy their technologies in Alaska. Gage brings a diverse background in economic development, entrepreneur support and training, federal and state government, the nonprofit sector, energy policy and international affairs.

Last chance? Cook Inlet setnetters look to buyback as a way to save fishery

Editor’s note: This article is the second of a three-part series about the Upper Cook Inlet commercial fishery. Click here for the first part. The next article will be about the proposed closure of the federal waters to salmon fishing in Cook Inlet. In some ways, Cook Inlet’s East Side setnet fishery is the most desirable of commercial fisheries to get into: instead of having to fish remote sections of muddy beach, far from roads or towns, commercial fishermen can finish their sets for the day, jump up to the top of the bluff, and go to town for the night. The ones who live on the Kenai Peninsula can even go home, if they want to. In other ways, it’s one of the worst fisheries to be in. With unexpected closures and constant conflicts over salmon allocation, it’s not uncommon to find fishermen poring over the specific wording of management plans or frantically checking fish counts in the nearby Kenai River to see if they’ll be open. Many of them also listen in to the Board of Fisheries meetings, asking the members and department for changes or adjustments to management. That’s where Ken Coleman has found himself every three years since the 1980s: in the chairs at the Board of Fisheries meetings. A north Kalifornsky Beach, known as K-Beach, setnetter, Coleman said he’s watched the fishery ratchet back, with setnetters losing first the early season, then the late season, then gear, then time. “It just boggles your mind,” he said. Over time, it’s resulted in a fishery that can barely sustain itself. In 2020, the 468 permits that fished in the setnet fisheries around Cook Inlet earned a total of $3.1 million, or about $6,742 per permit, according to the Commercial Fisheries Entry Commission. Last year was the worst year in recent memory; in 2019, average gross earnings came back around $22,831 per permit, and at $10,886 in 2018. That includes all setnets in Cook Inlet, though, not just the East Side. With the seasons cut short and seemingly no management fix in sight, some of them are looking to a more long-term fix: asking the state to buy them out. Shortened seasons, shortened earnings Like the rest of Alaska, many of the fishermen are aging, and they’re working with their children and hired crew to man their sites each year. This year in particular was expensive; crew were harder to find, COVID-19 mitigations had to be put in place, gear to supply the sites was more expensive, and fuel prices had increased. Then, the entire fishery had an early closure on July 20. Despite plenty of sockeye jumping in the waters and entering the Kenai and Kasilof rivers, not enough large late-run king salmon are returning to the Kenai River. The setnet openings are tied to the in-river sportfishery restrictions on king salmon, so when the Alaska Department of Fish and Game closed the king salmon sportfishery, setnets closed, too. Two setnetters petitioned the board to reopen them on a limited basis, but the board denied the petitions on the grounds that they did not qualify as emergencies. Coleman says north K-Beach, which stretches from the mouth of the Kenai River southward, had nine openers this year, none of which had a full complement of gear. Chris Every, who also fishes on north K-Beach, was one of the petitioners to the board. He said the board and Commissioner Doug Vincent-Lang ignored data showing that the limited fishery the setnetters argued for caught very few kings and chose to keep them closed anyway. The late run of king salmon has missed its optimum escapement goal in the Kenai River three years running, and with the management structure for setnets pinned to that goal, many of the commercial fishermen fear this year is a harbinger of seasons to come. Every points to the declining number of processors in Cook Inlet. The once-competitive market of processors at the mouth of the Kenai has dwindled to two major players: Pacific Star Seafoods and Copper River Seafoods. Seattle-based E&E Seafoods, which owns Pacific Star, purchased Inlet Fish Producers from North Pacific Seafoods in 2020, adding that Kenai plant to its existing facilities there. “That’s the future of this fishery,” Every said. Coleman said he bought into the fishery when it was productive and has paid off his permits and lived off the earnings from the fishery for years. It’s hard to watch the young fishermen struggle by on the meager earnings from the fishery today, he said. “Paying my sites off were something I readily did because all my future was before and it seemed like the right thing to do,” he said. Dean Osmar, who has been fishing setnet sites near Clam Gulch for nearly five decades, said he remembers opening in late May and fishing into October, when there was no defined end to the season. “Because of the early ending of the set net season the past couple seasons, we have lost (approximately) 50 percent of our catch,” he said. A buyback plan There are approximately 440 setnet permits registered to the East Side out of the 732 setnet permits Inlet-wide. Though the East Side is a distinct subdistrict, a Cook Inlet setnet permit can be fished anywhere in the area. That means that, given the chance, setnetters can move their operations to regions which are more productive within Cook Inlet. The Kenai and the Kasilof rivers are the most productive sockeye systems other than the Susitna River, and after they started spiking in production in the 1980s and ‘90s. Some setnetters have been looking at possibilities of a permit buyback since the early 2000s. The first effort through the Cook Inlet Revitalization Association fizzled out, but a more recent effort is working its way through the Legislature now under Senate Bill 29. The bill, sponsored by Sen. Peter Micciche, R-Soldotna, does a few things to set up the opportunity for a buyback. First, it splits off the Upper Subdistrict—the official management name for the East Side setnet fishery—into an exclusive zone. Other Cook Inlet setnetters would not be eligible for the buyback. Second, it sets up a program that would allow qualifying permit holders to enter a lottery to have their permits bought back. That lottery would allow about half of the permits to be bought back at a fixed price of $260,000 per permit. To prevent speculation, permit holders have to have owned the permit since at least Jan. 1, 2018, and fished the last two years. The bill proposes using federal funding to finance the program. Coleman, who has been working closely with Micciche and advocating for this program for the past six years, said that number was derived from an average of several years of earnings for setnetters. The state is buying out businesses, which benefits the other participants in the fishery, he said, and gets the fishermen out “with a little monetary dignity.” On average, permit values have dropped since the fishery’s heyday in the early 1990s. Data from the CFEC shows that the value of Cook Inlet setnet permits peaked at about $100,000. They bottomed out in 2004 at about $7,000 and have inched back up to just less than $18,000 as of April 2021. The last thing the buyback program would do is close the tidewater lease associated with the purchased permit. The intent is to prevent other permit holders from just moving into the spot and defeating the purpose. The program has garnered support from some sportfishing groups, including the Kenai River Sportfishing Association, in the past. Setnets are not perfectly efficient; with gear reduced, more salmon will likely pass the commercial fishery and escape into the river. That benefits the sportfishery and personal use fisheries on the Kenai, which target both kings and sockeye. There are constitutional questions from past efforts, though. In 2008, the CFEC issued a memorandum outlining some potential legal ramifications about a salmon permit buyback program under the Limited Entry Act. Specifically, it notes that buybacks should be focused on the sustainability and economic health of a fishery, as well as the long-term well-being of its participants. However, it notes that “if the fishery were to become too exclusive under the Alaska Constitution, the State would have an obligation to put more permits back into the fishery.” SB 29 is currently in the Senate Finance Committee, and does not have a companion bill in the House. To go or to stay The buyback program is entirely elective. The fleet has to approve it, and entering the lottery is optional. The cabin on Sarah Frostad-Hudkins’ site on the Salamatof beach north of Kenai is a work of history. The cabin itself is built partially from wood reclaimed from the fish traps that lined the Cook Inlet coast in the 20th century; on the rafter hangs every commercial fishing permit the site has used for decades. Family pictures include one of her grandfather Ole Frostad who immigrated to Alaska and started fishing the site in the 1920s with a determined look on his face as he makes sourdough pancakes on a small stove. The same stove stands in the corner of the kitchen. Frostad-Hudkins said setnetting is a major part of her family’s lives; they have spent every summer for generations on the beach, hauling up salmon. They haven’t decided, but they don’t think they’ll go for the lottery themselves if it were approved. “We’ll probably just keep fishing,” she said. South of the Kenai, Every said he probably will. “Do you want to be bought out, or do you want to walk away one day and let it all rot on the beach?” he said. Not everyone in the fleet supports the program in its current form. Paul Shadura II, who fishes in the Kasilof region, said he was involved in the early 2000s effort and said he doesn’t care for this version of the buyback with the closed waters and the exclusivity of the Upper Subdistrict. “If that wasn’t in this bill particularly, I would be 100 percent supportive of it,” he said. Coleman said he’s heard a lot of support among the fleet for the buyback, though there are still a few who oppose it for various reasons. Without it, though, there doesn’t seem to be much of. future for the fleet. A gear reduction would allow the ones who stay to be more prosperous, supporting a commercial fishery in the future, he said; without it, they’ll have to struggle on the way they are and likely be starved out. “I want to see this survive into the future,” he said. “It has a rich history. It’s one of the oldest organized fisheries in the state. It’s highly emotional to me; I want to see my sons be able to fish it.” Elizabeth Earl can be reached at [email protected]

Lawsuit against former Furie owners seeks $100M

A lawsuit seeking more than $100 million from the former owners and executives of a once bankrupt Cook Inlet natural gas producer leads with allegations of defrauding investors and ends with claims of inflated reserve estimates and twice-committed state tax credits. Filed Aug. 6 in the Texas District Court of Harris County by the Virginia-based firm Clingman and Hanger Management, the litigation trustee in the bankruptcy case for Furie Operating Alaska, the suit names as defendants former Furie leaders Kay Rieck, Lars Degenhardt, David Elder, Thomas Hord, and Theodor van Stephoudtas well as companies owned by other ex-Furie executives who allegedly benefited from the schemes. Rieck, described in the complaint as the “de facto head of Furie,” and other defendants roughly between 2013 and 2018 executed “a brazen scheme to divert Furie’s cash (provided by outside lenders) to entities secretly owned by them,” the suit alleges. “Together, (Rieck and others) caused Furie to drill for fictitious gas using a company they secretly owned, sell gas at a loss to Owned-owned entities and pledge/transfer valuable tax credits to Owned-owned entities without consideration. At the same time, the defendants artificially inflated Furie’s ‘proved’ gas reserves estimates so they could continue drawing compensation from Furie,” the complaint states. Former Furie executives for whom the Journal could find contact information did not return calls in time for this story. A response to the complaint has not yet been filed in Harris County, according to court records. According to the complaint, the malfeasance largely started after the company invested hundreds of millions of dollars into drilling work and facilities that included the Julius R platform in the offshore Kitchen Lights field. It was the first new Cook Inlet platform in decades when it was installed in 2015. Attorneys for the litigation trustee in Furie’s 2019 Chapter 11 bankruptcy case claim Rieck and several of the defendants consistently formed new businesses and partnerships to stall creditors and regulators. For example, David Elder, once Furie’s chief financial officer, also filled the same role for Furie Drilling LLC, Furie Operating LLC, Furie Petroleum Co. LLC and Advanced Funding Capital LLC. Rieck is listed in the complaint as a German national living in the United Arab Emirates. He owned Deutsche Oel und Gas, a reported member of Furie. The company drilled its first exploration wells in Cook Inlet in 2011 and 2012 but mostly came up empty in their search for natural gas. The KLU-3 well drilled in 2013, however, struck commercial quantities of gas and spurred Furie’s subsequent development, according to the complaint and Journal reports from the time. Furie leaders followed their 2013 discovery with an aggressive drilling campaign for a small explorer while also installing the Julius R platform and an onshore production facility. A 2013 independent audit of the reserves discovered with the KLU-3 well concluded Furie had found nearly 60 billion cubic feet of gas with a net present value of $54 million. A reserve audit performed weeks later by Sierra Pine Resources International LLC, also a defendant in the suit, concluded Furie had 276 billion cubic feet of undeveloped gas worth roughly $315 million. Current Furie CEO and owner John Hendrix, who purchased the company out of bankruptcy for $5 million last year, estimated the development cost of the platform to be in the $200 million range. Then Furie Vice President Bruce Webb — also the public face of the company at the time — told the Journal in 2015 that approximately $500 million was invested by Furie in the Kitchen Lights Unit once the platform work was complete. Webb sued Furie in June 2018 alleging a hostile work environment, retaliation and bad-faith business dealings in a complaint that outlines similar business arrangements as the Aug. 10 filing. Webb dropped the suit in U.S. District Court of Alaska roughly two months later before attorneys for Furie formally responded to the lawsuit. According to the latest complaint, Furie originally borrowed $160 million from Energy Capital Partners in 2014 to build the platform, a gathering line and other gas production facilities but overspent its budget on the work by about $175 million, which was covered with another Energy Capital loan as well as one from ING Bank that was backed by State of Alaska tax credits earned for drilling and development work. Furie leaders in 2016 attempted to use tax credit certificates already held by Energy Capital and ING to secure a bond offering of up to $170 million but generated no revenue from the offering. The complaint also alleges Rieck used tax credit transfers that were supposed to be recorded with the state but weren’t as equity at his banks. Furie’s current owner Hendrix emphasized in an emailed statement that the new iteration of the company he leads is not impacted by the latest lawsuit. Longtime Alaska oil and gas attorney and industry analyst Brad Keithley wrote in an emailed response to questions about the case that he found three potential fraud claims for the State of Alaska to pursue if state officials believe they can recoup some of the tax credit money the state sent to Furie over the years. Company leaders claimed to be owed $103 million in unpaid tax credits when they filed bankruptcy in 2019 but it’s unclear exactly how much the state paid the company in total because of taxpayer confidentiality laws. Furie leaders largely blamed the unpaid credits — first partially vetoed by Gov. Bill Walker in 2015 — for the company’s struggles leading up to the bankruptcy filing. The company also had significant gas production issues in the winter and early spring of 2019 that kept it from meeting its contractual obligations to gas buyers. If the allegations are accurate, Furie likely committed fraud on the state by claiming reimbursable drilling costs incurred in a bad-faith effort; breached the implied obligation of good faith and fair dealing; and fraudulently sought tax credits for drilling costs beyond its actual expenses, according to Keithley. A major question for state attorneys, however, is whether or not the U.S.-based defendants have assets worthy of pursuing, he wrote. When asked about the suit and whether or not Department of Law officials believe the state could recoup tax credit funds based on the allegations, Law spokeswoman Grace Lee wrote via email that the attorney general’s office represented the state in Furie’s bankruptcy proceedings and “reserved all rights to audit and nullify tax credits that were not appropriately applied for under state law.” Elwood Brehmer can be reached at [email protected]

FISH FACTOR: New tech shows promise against bycatch; more relief grants open

Bycatch gives Alaska’s otherwise stellar fisheries management its biggest black eye. The term refers to unwanted sea creatures taken in trawls, pots, lines and nets when boats are going after other targeted catches. Bycatch is the bane of existence for fishermen, seafood companies and policy makers alike, yet few significant advances have been found to mitigate the problem. A simple fix has recently shed light on a solution. “Ten underwater LED lights can be configured to light up different parts of the fishing gear with six different colors, intensity and flash rates to attract, repel or guide fish through the gear while retaining the target catches,” said Dan Watson, CEO and co-founder of SafetyNet Technologies based in the U.K which provides its Pisces light system to fisheries around the globe. “The different light characteristics affect different species in different ways,” he added. “For instance, green light is really effective for reducing turtle bycatch in gillnets. Blue lights flashing at a particular rate can deter haddock and drive them away. This programmability means that you can use it for a number of different species and in different circumstances as well.” The Pisces lights are powered by a wireless charger, require no plugs or batteries, automatically turn on underwater only when needed, and they do not weaken or weigh down nets. Watson began working on the lights in 2009 when he was a student at Glasgow University and doing research with the Aberdeen Marine Laboratory. “They had a paper that had been in their library for about 40 years from a researcher who had been shining flashlights into fish tanks and seeing that some species would react quite strongly, some would come towards them, some would move away, and others just weren’t bothered at all,” he said. After working in partnership with scientists and fishermen, the first batch of Pisces lights was tested in 2015 in fisheries in Europe and the and usage has since spread to the U.S. and other regions. A 2015-18 study on small-scale fishing vessels in Peru, for example, showed that LED lights on gillnets reduced bycatch of sea turtles in gillnet fisheries by more than 70 percent and over 66 percent for dolphins and porpoises, while not reducing the take of target species. The lights also reduced bycatch of seabirds in gillnets by about 85 percent. The study, by the University of Exeter and the conservation organization ProDelphinus, concluded that “Sensory cues — in this case LED lights — are one way we might alert such species to the presence of fishing gear in the water.” In the scallop fishery in the Irish Sea, use of Pisces lights reduced bycatch of haddock by 47 percent and flatfish by 25 percent with no effects on the take of scallops. A 2020 study by Mark Lomeli of the Pacific States Marine Fisheries Commission in collaboration with the Northwest Fisheries Science Center showed that lights directed chinook salmon to escape panels in trawl nets in the Pacific hake fishery, the largest groundfish fishery on the West Coast. Eighty-six percent of escaped chinook used the well-lit, LED-framed openings and the data suggest the lights can increase salmon escapes overall. And since 2018, the Oregon Fish and Wildlife Commission has required the use of lighting devices on the footropes of shrimp trawls. Sea trials showed that bycatch of eulachon was reduced by over 90 percent by weight, juvenile rockfish takes dropped by 78 percent, flatfish bycatch was reduced by nearly 70 percent and the loss of targeted shrimp was statistically non-significant at 0.7 percent. “You don’t need the lights to cover the entire panel on a massive net, it might be that you put them along the foot rope or the headline or even potentially in the wings,” Watson explained. “We generally supply fishing vessels with around 10 lights and a couple of charging cases to keep them going. Rather than hundreds of lines, we’re talking in the order of 10s, so that you can cover a sufficient area in the right place for it to be effective.” Watson believes the lights will eventually be mandated in other fisheries around the world. “In Europe we’re working with agencies to try and get the required scientific evidence for them to start to legislate the use of lights,” he said. “It’s still sort of in the early days in that respect despite really compelling results since 2015. It takes a while to get into that adoption phase and that’s where we’re working at the moment. “I think the fishing sector has a massive part to play and how it’s shaped and actually introduced. We’re increasingly seeing that as technology is being developed and becoming more accessible, fishing crews are coming up with really great ideas to change how their fisheries are operating, and working collaboratively with science as well.” Since May, the SafetyNet Tech team has been collaborating with the Alaska Ocean Cluster, or AOC, a project of the Bering Sea Fishermen’s Association, to identify captains and vessel owners interested in bringing the light show to Alaska, particularly aboard Bering Sea trawlers. “They’re an amazing representative for us in Alaska, because not only can they help us learn more about the fishing industry there but introduce us to people and start those relationships going,” Watson said. “It’s kind of like having two extra people on our team, which is amazing when you’re a startup because we’re always looking for extra support and they’ve definitely offered it.” “SNTech is a great example of the opportunities we’re seeing across the seafood and marine technology landscape,” said Garrett Evridge, AOC managing director of research and administration. Taylor Holshouser, AOC managing director of business development, echoed that enthusiasm adding, “We’re excited to see what Dan and his team can do to help fishermen reduce fuel costs, save time, and reduce bycatch, particularly in the Bering Sea.” Questions? Contact [email protected] or [email protected] More COVID-19 funds Alaska fishermen and other businesses can soon apply for a new $90 million pool of COVID-19 pandemic money that will be distributed by the state. Grant money for the program comes from the federal American Rescue Plan Act. The Alaska Department of Commerce, Community and Economic Development announced last week that applications will open sometime this fall and recipients will be chosen “based on demonstrated need.” Eligible fishing businesses include commercial fishermen who held a limited entry permit or interim entry permit in 2019 and 2020. Applicants must be based in Alaska, have revenue between $10,000 and $50 million in 2019, filed taxes in 2019 and 2020, and be able to show they lost at least 50 percent of their net income as a result of the pandemic. Nonprofits are not eligible to apply. Applications will be split into three groups, based on the size of their businesses. Each group will be eligible for up to 80 percent of their documented income loss, up to $250,000, $500,000 or a cap of $1 million. All applicants will be required to say how they intend to spend the money, which will be distributed as a grant that does not have to be repaid. The funds must be spent on past, current, or future business costs and may not be retained or invested. Grant recipients also will be required to spend the funds by a certain unspecified date, likely by next fall, or return any unused money. Initial proposals called for a larger grant program, reported the Anchorage Daily News, but the Alaska Legislature instead used money from the act to fund infrastructure projects and make more money available for the 2021 Permanent Fund dividend, the amount of which has yet to be determined. Find more information at the state Commerce Department website. Fish board line up The state Board of Fisheries is planning on in person meetings this fall after months of delay due to the COVID-19 pandemic. By this past March, the board was scheduled to have finished up 275 proposals for Southeast Alaska, Prince William Sound and statewide shellfish fisheries. The meeting cycle addresses management issues for commercial, sport, subsistence and personal use fisheries in state waters for specific regions every three years. A work session is set for Oct. 20-21 at the Anchorage Egan Center, followed by a week-long meeting focusing on Prince William Sound and Upper Copper and Susitna Rivers from Nov. 30 to Dec. 6 at the Cordova Center. The Fish Board will move to Ketchikan from Jan. 4-15 to address Southeast and Yakutat fish and shellfish issues. It’s back to Anchorage for a March 10 hatchery committee meeting. The Board will conclude with a March 11-16 meeting on Cook Inlet, Kodiak, Westward and Arctic Shellfish, and Prince William Sound shrimp. The March meeting locations have yet to be announced. The deadline to make agenda change requests to the Board of Fisheries is Aug. 23. Laine Welch lives in Kodiak. Visit or contact [email protected] for information.

Port terminal project to open by year-end

If all continues going largely according to plan, the first major piece of a long-sought and badly needed overhaul to the Port of Alaska will be in service by year-end, according to officials. Construction crews are in their second year of work on the new petroleum and cement terminal, or PCT, located south of most of the city-owned port’s existing docks at a cost of about $200 million. “It’s on time and on budget,” spokesman Jim Jager said in an interview. The workers were able to drive the necessary support pilings into the sea floor before Cook Inlet’s endangered Beluga whales started frequenting the water near the port as they feed on late-summer salmon returning to nearby streams, according to Jager. The new PCT will replace a petroleum offloading terminal originally built in 1965 that sustained significant damage in the November 2018 earthquake, according to port officials. Handling jet fuel shipments for the world-scale cargo traffic at nearby Ted Stevens Anchorage International Airport is a primary line of business for the port. Representatives for fuel-handling companies and cement suppliers initially balked at tariff increases for offloading their products at the port proposed in 2019 and meant to fund the PCT work, contending the rate hikes could disrupt the highly competitive cargo business and would increase the cost of construction materials in the state. However, the Anchorage Assembly unanimously approved scaled-back tariff increases in late December 2019 shortly before PCT work began the following spring. Port and city officials repeatedly stressed through the months-long debate that the PCT needed to be done first, and soon, to start a flow of complex logistics and shuffling at the docks that would allow the port to remain open in the midst of a near total rebuild before inspectors deem the current facilities unsafe. The PCT also marks the first construction of new dock facilities at the aging port since 2010 when severe damage to installed sheet pile was discovered and the original port expansion project was halted. That project cost roughly $300 million of municipal, state and federal money with left little to show for it. Under the current Port of Alaska Modernization Program schedule, crews will begin attempting to stabilize the shoreline on the northern portion of the port grounds in the next couple years and start replacing the port administration building, which sits on the docks, next year. Design and permitting for replacing the port’s two general cargo docks — that carry the vast majority of consumer goods entering the state — will continue until 2024. Replacement work on Terminal 1 used by Matson is tentatively set for 2025, with construction starting on Terminal 2 used primarily by TOTE Maritime in 2028 under the current schedule. While much of the remaining work planned at the port is unfunded, the national focus on infrastructure development and rehabilitation will almost certainly result in additional federal funding avenues for port officials to follow. The U.S. Maritime Administration, which the city is currently suing for its role in leading the prior failed port expansion project, also awarded port officials a $25 million grant for the PCT in November 2019 that helped mitigate the tariff hikes. “We see lots of opportunities to pursue money for the Port Modernization Program,” Jager said of the Infrastructure Investment and Jobs Act that passed the Senate Aug. 10. According to figures provided by staff to Sen. Lisa Murkowski, who participated in negotiations with President Joe Biden on the bill that currently adds about $550 billion in new infrastructure spending over five years, includes $2.25 billion in new funding nationwide for the Port Infrastructure Development Program among its many funding provisions. Elwood Brehmer can be reached at [email protected]

Senate infrastructure bill passes with billions for Alaska

The $1 trillion infrastructure bill passed Aug. 10 by the Senate is being called a historic effort to invest in the nation’s roads, broadband and utilities. The bill must still pass the House, and there’s no specific timeline for when that will happen. The measure includes specific items for Alaska across a variety of categories, according to the bill’s language and details from Republican Alaska Sen. Lisa Murkowski, who was part of a bipartisan group of senators who helped create it. Road construction and repair • About $3.5 billion would be provided over five years to build, repair and maintain Alaska roads and highways. • Alaska should receive $225 million to address more than 140 bridges that are labeled “structurally deficient.” • Alaska should receive $362 million over five years for a mix of transit formula grants available under the Federal Transit Administration, which support public transportation systems. • Funding is available to help improve a portion of the Alaska Highway in Canada, between the Alaska border and Haines Junction, Yukon, and the Haines Cutoff that goes from Haines Junction to Haines in Alaska. Mining, oil and gas • The bill provides more than $4.7 billion to clean up old oil wells, such as those drilled by the federal government on the North Slope. About $150 million will be available to tribes involved in such clean-up, Murkowski said. • Projects to mine and develop critical minerals in Alaska, such as graphite used in lithium-ion batteries, will be eligible for federal loan guarantees to help them secure financing. • Some $6 billion will be available for battery processing and manufacturing, including grants for processing facilities, which could help firms looking to produce and refine battery materials such as graphite and rare earth elements in Alaska. • $18 billion in loan guarantees is available for the Alaska LNG project that seeks to tap long-stored natural gas from the North Slope for delivery in Asia. The guarantees could help the $38 billion project access funding. Water and wastewater system repair • The bill contains over $180 million for the state, an amount that will be spread across five years. • It approves $230 million for the EPA’s Alaska Native villages grant program, which supports new and improved wastewater and drinking water systems. About 245 communities in Alaska are eligible. The bill also increases the federal cost share from 50 percent to 75 percent. • The measure contains $3.5 billion for Indian Health Services sanitation facilities, with a portion available for Alaska villages without access to running water and sewer. • About $10 billion is available to states to address PFAS contamination through Clean Water and Drinking Water programs. The funding will focus on small and disadvantaged communities, such as those in Alaska. PFAS are manmade chemicals that have been widely used, including in foam to help fight fires, and have been found in the ground in some Alaska locations. They can damage the liver and immune system and cause birth defects. Ferry service • The bill creates a five-year, nationwide subsidy for ferry service in rural areas. The subsidy is about $200 million per year. A portion of that money will go to the Alaska Marine Highway System. • It changes federal law so the Alaska Marine Highway System can use federal highway-aid money to pay for operations and repairs. The exact amount of ferry funding will still be set by the governor and Alaska Legislature. • It allocates $250 million for a test program to build electric or “low-emitting” ferries that pollute less than a traditional ferryboat. The bill says at least one grant under the test program must be distributed in Alaska. • Alaska should receive $73 million under the Construction of Ferry Boats and Ferry Terminal Facilities Program, which includes support for operating costs. Alaska operators that have previously benefited under the program include the Alaska Marine Highway System, Ketchikan Gateway Borough, Inter-Island Ferry Authority, and Seldovia Village Tribe. Ports • $2.25 billion for the Port Infrastructure Development Program, which will provide funding for ports throughout Alaska. • Provides $250 million for remote and subsistence harbor construction, important in rural Alaska for delivery of supplies like diesel fuel to run power plants. • Provides $429 million on the Coast Guard’s unfunded priority list and for child care development centers. The money will support Coast Guard operations in Kodiak, Sitka and Ketchikan. Broadband • Alaska will get at least $100 million to improve internet access, part of $42 billion being provided nationally. • Alaska Native tribes will receive a share of $2 billion given to the national Tribal Broadband Connectivity Grant program, and another $1 billion is available for middle-mile broadband infrastructure grants. Railroads and airports • Alaska will get a share of three big nationwide grant programs. In the bill, those programs receive $25 billion, collectively. The state owned and operated 237 airports as of 2019, most in rural Alaska, according to state figures. Municipal airports, such as those owned by Juneau and Kenai, also stand to benefit. • Nationally, railroads will receive $5 billion through the Consolidated Rail Infrastructure and Safety Improvement Program; the Alaska Railroad will receive a share of that money. Other • About $215 million will be available over five years to help tribes adapt to climate issues. Of that, $130 million is for community relocation, which can help Alaska villages where land is eroding. • The Denali Commission, a federal agency created to develop rural Alaska infrastructure, receives $75 million in the bill. Some federal internet-infrastructure improvement programs require local communities to pitch in financially; the bill allows the Denali Commission to pay that local share. • Provides $146 million for hydropower and marine energy research, which will help support the the Alaska Hydrokinetic Energy Research Center at the University of Alaska Fairbanks. • Includes $264 million in funding for geothermal, wind, and solar energy projects, which will help support renewable energy projects in Alaska. • Provides over $34 billion for programs that support carbon capture and storage, hydropower, and other technologies that could benefit Alaska. • Provides more than $6 billion for energy efficiency measures such as the Weatherization Assistance Program that can help Alaskans reduce energy costs. • More than $3.3 billion is available for thinning and controlled burns to help create fuel breaks and reduce wildfire risk on Department of the Interior and Forest Service lands, including in Alaska. • More than $2 billion will go to the Department of the Interior and the Forest Service to restore the ecological health of lands and waters, including in Alaska. • Provides $20 million build, upgrade and operate public-use recreational cabins.

Analysts weigh in on Pikka after merger

Most people in Alaska would have paid little attention to last week’s announcement that two Australia-listed, publicly traded oil and gas corporations were going to become one, the combined company moving into the Top 20 among the world’s oil and gas producers. That’s if not for the fact that the smaller one, Oil Search, which accepted a buyout offer from the larger one, Santos, holds a 51 percent interest in the undeveloped Pikka unit on Alaska’s North Slope. Pikka and ConocoPhillips’ Willow development underpin hopes that Alaska’s oil production could enjoy a strong boost in crude flowing through the Trans-Alaska Pipeline System later this decade. Neither Santos nor Oil Search mentioned the Alaska prospect in their Aug. 2 announcements of the deal, though that did not stop speculation by industry analysts thousands of miles away from the North Slope about what the combined company would do with Pikka. Their comments started the day the deal was announced. Tom Allen, an analyst with UBS, told the Australian Financial Review that he expects a merged Santos-Oil Search will consider divesting itself of Pikka. Allen is head of Australian Energy and Utilities Equity Research at UBS, a Swiss-based multinational investment bank. Allen said he expects the combined company will focus its integration efforts in Asia, where Oil Search and Santos both hold interests in Papua New Guinea natural gas assets, including the ExxonMobil-led liquefied natural gas project in the island nation. The LNG project, developed at a cost of $19 billion, has been producing since 2014, often exceeding its nameplate capacity and generating healthy profits for its owners, which are looking at an expansion. Oil Search and Santos hold a combined 42.5 percent stake in Papua New Guinea LNG. Oil Search also owns a share of another proposed LNG project, led by French major TotalEnergies, that targets first production in Papua New Guinea in the second half of the decade. Santos holds an extensive gas portfolio in Australia, including stakes in the Gladstone LNG export facility in Queensland and the Darwin LNG plant in the Northern Territory. Pikka, near the Colville River and west of the Kuparuk River and Prudhoe Bay fields, is certainly a geographic outlier in the two companies’ Asia-focused assets portfolio. Another Australia-based analyst, Gordon Ramsay, said he sees the deal as “all about PNG.” Ramsay is a director and lead energy research analyst with RBC Capital Markets, part of the Royal Bank of Canada. Though he sees the gas as the main draw for the deal, Ramsay views diversification into Alaska as “a good counter-balance” to Oil Search’s overreliance on Papua New Guinea gas. He suggested Santos may retain Pikka. “We view Alaska as a ground-floor opportunity for Santos to become involved in a potentially very material asset with a substantial and growing reserve base,” Ramsay told the Australian Financial Review’s energy reporter. In public presentations, Oil Search has projected that Pikka’s first-phase development, estimated at $3 billion, would have capacity to produce up to 80,000 barrels per day. The company has said production could reach 120,000 barrels per day with additional investment in second and third phases. Oil Search and its 49 percent partner, Repsol, both have been looking to sell off a portion of their stakes in Pikka to reduce risk and help share the burden of development costs. Oil Search last year put some of its field work on hold as the pandemic was approaching its worst and oil prices were near their lowest. Several companies have expressed interest in buying into Pikka, then-CEO Keiran Wulff said in April at a conference in Australia. He said Oil Search had succeeded in cutting costs to the point that Pikka could return 10 percent on capital with oil at $40 per barrel. The company’s goal — not a deadline — has been a final investment decision on the first-phase development by the end of this year, with first oil production in 2025. Oil Search bought into Alaska in 2018 when it negotiated a $400 million purchase of North Slope leases from Armstrong Energy and GMT Exploration. It has kept busy since then with exploratory drilling, gravel road building and permitting. “We will work with our partner Repsol on achieving an appropriate funding structure for our Alaska project, prior to committing to FID,” Oil Search said in a July 19 briefing on the departure of the company’s CEO. “That includes the work we are currently doing on a possible joint selldown of equity in the (Pikka) project, consideration of the sale of midstream infrastructure within the project and reviewing relevant markets for an appropriate level of debt financing to support the project,” the company’s acting CEO Peter Fredricson said on the call. “It’s very much a matter of how and when we fund it to a point to go forward.” CEO Wulff resigned in July for health reasons, while on the same day the board strongly criticized his behavior and management style. In the context of financing future developments, combining Oil Search and Santos makes sense, Wood Mackenzie research director Andrew Harwood wrote in a commentary on the global consulting company’s website. “At current commodity prices, the combined entity will generate significant free cash flow through 2021 and 2022,” he wrote. “Combining with Oil Search would immediately increase Santos’ production by over one-third, to around 290,000 barrels of oil equivalent per day.” The merged company will be able to proceed with its efforts to take in new partners in Alaska and offshore Australia “from a position of strength,” he added. Less encouraging than Hardwood or Ramsay in his description of the Santos-Oil Search deal was Saul Kavonic, a Zurich-based analyst at Credit Suisse. Noting that Oil Search had rejected the first buyout offer from Santos, later saying yes to a richer deal, Kavonic told the London-based Financial Times that Oil Search was in a weak bargaining position to say no a second time. “Oil Search’s board has raised the white flag, having been weakened in the wake of management churn and governance concerns, and pressured into a merger by increasingly frustrated investors,” he was quoted the day the deal was announced. “The acceptance of the offer can essentially be viewed as a capitulation by Oil Search that their Alaska asset is not worth what they hoped it would be.” The merger agreement is to conditions including Oil Search shareholder approval and Papua New Guinea government approval. Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide. He can be reached at [email protected]

Movers and Shakers for Aug. 15

Kevin Fimon was appointed to the Alaska Mental Health Trust Authority Board of Trustees. Fimon received his bachelor’s degree in business from University of Minnesota Curtis L. Carlson School of Management. He has owned and operated Fimon Financial Services in Anchorage for the past 30 years. Fimon’s term is effective July 30 through March 1, 2025. Vitus Energy LLC announced three new hires: James Porcelli as systems manger; Kenneth Eickhoff as controller; and Tara Abbott as billing manager. Porcelli has more than 20 years of experience in data communications and enterprise level networking. He is Microsoft Certified System Engineer and has a bachelor’s degree in occupational education with an emphasis in information technology and management. Porcelli comes to Vitus Energy from an Alaska Native corporation where he implemented network security and established IT standards for hardware, software and network infrastructure. Eickhoff is a Certified Fraud Examiner with a bachelor’s degree and more than 20 years of experience in the financial industry. Most recently, he served as the controller for a local transportation company where he oversaw all accounting functions for multiple locations, conducted financial forecasting and budget monitoring and completed regulatory reporting for federal, state and local agencies. Eickhoff leads the invoicing, vendor payment, general ledger accounting, payroll processing, closing processes, and tax and audit preparation. Prior- Abbott recently moved to Anchorage from Kodiak where she worked for the City of Kodiak Harbor Department. as the fiscal specialist in charge of the harbor office and responsible for the monthly invoice billing, record management and budgeting. She has a bachelor’s degree in computer information systems with a concentration in business administration. She is responsible for Billing Department processes, including invoice production, cash collection, posting and sales tax submission activities.

‘Bleeding out’: Inlet setnetters feel pain of early closure as sockeye continue pouring in

Editor’s note: This story is the first of a three-part series about the Cook Inlet commercial fishery. Every few seconds, a bright salmon throws itself out of the water on the beaches of Cook Inlet and splashes back. Normally, that would be a sight to celebrate for the hundreds of commercial fishing sites up and down the west side of the Kenai Peninsula, but not this year. “I can’t even go to the bluff,” said Ted Crookston, who setnets on the Salamatof beach just north of the mouth of the Kenai River. Looking at the fish flopping in the water, unharvested, is too painful, he says. All the sockeye headed up the river past where setnets are usually harvesting them translates to thousands of dollars not going into a commercial fishery that has been bleeding out economically for more than a decade. He says he’s been fishing the beach for nearly six decades. This season is the earliest closure he remembers, with the last day of fishing on July 20. Since then, the East Side setnetters from Boulder Point north of Nikiski down to Ninilchik have been sitting on the beach, with many giving up and pulling their gear out for the season. The Salamatof fishermen say they had five openers in their whole season. It all hinges on king salmon, which aren’t coming back to the Kenai River in enough numbers. For the past three years, the late run of Kenai River king salmon has been too small to meet the lower end of its escapement goal, which means Alaska Department of Fish and Game biologists place restrictions on both the in-river sportfishery and the East Side setnets, also known as the ESSN, which operate close to shore. This management structure is known as paired restrictions, which scale back setnetters’ time and gear as the sportfishery’s gear is restricted. The Board of Fisheries said the structure was justified because the setnet fishery harvests more kings than the drift fishery, tying it to the sportfishery if in-river fishermen are restricted. The problem is that many setnetters say they have tools available to harvest sockeye without taking kings, and ADFG isn’t using them. The 600-foot fishery On July 20, East Side setnetters fished their last day for the season, restricted to the 600-foot fishery from Boulder Point to Ninilchik. In the 12 hours that day, they harvested 36,668 sockeye and 72 kings. According to ADFG estimates, 11 of those kings were large late-run Kenai River kings. Chris Every, a north K-Beach setnetter, said the fishermen in his area have been pushing for the 600-foot nets as a tool to allow the fishery to remain open when the king salmon run is low for years. “We have data from the last four years with the 600-foot fishery,” he said. “It’s been fished between the rivers, and it continually shows the data that we’re trying to prove.” He submitted a petition to the Board of Fisheries asking for ADFG to be allowed to reopen the setnetters to just the 600-foot fishery this summer, letting them continue to fish in a restricted manner while the in-river king salmon fishery is closed. The board rejected his petition 4-2, saying that the situation doesn’t qualify as an unforeseen emergency. ADFG Commissioner Doug Vincent-Lang wrote in his finding that this year is not an emergency because it has happened before and the board specifically made the regulation that provided for it. “Closure of the ESSN fishery has occurred in the past and is also not an unforeseen event,” he wrote. Several board members said they felt as though they hadn’t fully understood the implications of the regulations they made nor had the data on the small king harvest from the 600-foot fishery. The board ultimately voted down Every’s petition 4-2 and took no action on the other, a petition from the South K-Beach Independent Fishermen’s association, an ad-hoc advocacy group. Paul Shadura II, who submitted the petition on behalf of SOKI, said he felt slighted that that board didn’t discuss the petition, which differed in specifics from Every’s request. He said the group is interested in putting in an agenda change request, or ACR, this fall to the board related to this issue, but that doesn’t help the situation with all those sockeye headed up the Kasilof River now, which the fishermen think will end up damaging the sustainability of the run long-term. “(It’s hard) to watch hundreds of thousands of potential dollars go into the system that do nothing for the future,” he said. “The annihilation of the East Side setnet fishery takes out another component that’s been here since at least the 1940s.” The data Every contends that the commissioner’s decision does not take the new data into account. ADFG opened the 600-foot fishery five times this season, though the four previous openings were in the Kasilof and North K-Beach areas. Each time, the harvest of large Kenai River late-run kings was less than 10 fish. With that data in hand, the advocates argue, the tradeoff of kings for sockeye is a fair one. The other user groups are able to be in the water, while the setnetters lose all their opportunity. “I never want to be sitting here when the dippers are dipping, the flossers are flossing, and the drifters are drifting,” Every said. “We are a group of people that is being bankrupted.” Some of the setnetters also argue that the king goal is unreachably high. Andy Hall, a Kasilof-area setnetter and the president of the Kenai Peninsula Fishermen’s Association, said watching the goal increase while watching the setnetters’ fishing time be cut to achieve an escalating goal is frustrating. “The paired restrictions are not equitable,” he said. “The concept of managing a sockeye fishery based on its absurdly low exploitation rate on a struggling king stock that has had the highest escapement goal in 25 years placed upon it is profoundly flawed. The only comparable paired restriction would be if all (personal use) and sport fisheries on both the Kenai and Kasilof rivers were closed when a single targeted fishery was closed. I am not endorsing that by any means. It would be ridiculous, almost as ridiculous as the way the ESSN is managed.” During the Board of Fisheries meeting, Vincent-Lang said the data presented by the setnetters about the 600-foot fishery’s impact might be one instance, but may not accurately capture the exploitation rate on kings if it were prosecuted for more days and when more kings were in the water. During the meeting, no members of the Division of Commercial Fisheries were identified as being able to answer questions for board members; Forrest Bowers, assistant director of the division, said that was because he was traveling. Other staff were monitoring the meeting and able to answer questions, he said. Ben Mohr, the executive director of the Kenai River Sportfishing Association, agreed; the setnets may have a lower catch rate on kings when there are fewer kings moving through the water, but it may go up when there are more kings moving through the area. While the 600-foot fishery may have merit and he said he understands the pain the setnetters are going through, the middle of the season may not be the best time to make decisions about management strategies. “I think it’s really important that all sectors come together to talk about what we can do to come up with more selective harvest techniques,” he said. “I don’t think in the middle of the season is the time to do that. I don’t think in the middle of the season is the time to immediately call for experimentation.” The other side of the coin about the king goal is the coast-wide trend of king salmon declines. This year, several other large king salmon producing systems— the Yukon, the Nushagak, and the Copper rivers — all struggled to meet their king salmon escapements as well. Mohr noted that all three of those rivers have very little development along them, and they seem to be having the same trouble as the Kenai; that points to a problem in the kings’ ocean life component. Setting the king salmon goal higher can help provide differential levels of escapement in such a heavily used fishery, too, he said. If the goal is moved lower and lower, then the criticism might be that managers are just chasing a failing run down to make it look like they are meeting their goals. The closure costs the in-river guides as well; while some can rebook trips, king fishing trips are the most lucrative. The guides, and many in-river anglers, have gone to catch-and-release all the time for kings as a personal move to conserve the fish, too. “I don’t think anybody would want to be accused of catching the last king,” Mohr said. The future East Side setnetters, like most fishing user groups, aren’t a monolith. They vary in opinion from district to district, and sometimes even site to site. The Salamatof fishermen’s opinions about what should be done may come into conflict with the K-beach fishermen, and so on. One thing they all seem to agree on, though, is that this can’t go on without bleeding them dry. Crookston said the early closure has cost his site “hundreds of thousands of dollars.” “It is just horrible, what is going on,” he said. “There is tens of millions of dollars being squandered. To have opened the fishery would have been nothing. Everybody would have plenty of fish… there is no downside, only upside, and (Doug Vincent-Lang’s) true colors came out. We present you with a tool you say you want: harvest reds without harvesting kings.” Sarah Frostad-Hudkins’ family has been fishing the Salamatof Beach since the 1920s, when her grandfather Ole Frostad arrived there. In the past, the fishing has stretched from late May into September, or as her husband Jason Hudkins said, “until the nets froze.” Over the years, the season has been trimmed back into about six weeks. This season, their crew pulled their nets and stored their skiffs on the hill above the site just as July faded into August, after five openers total. “I feel like grieving is a good word (to describe the season),” she said. “We always grieve the end of the summer … this one is just earlier.” The next part in this series will cover the economic aspects of the closure of the Kenai River king salmon sportfishery, the East Side setnet fishery and the proposed buyback program for permits in the east side setnet fishery. Elizabeth Earl can be reached at [email protected]

Hydropower tax credits gaining bipartisan momentum

Federal legislation aimed at improving the nation’s hydropower infrastructure and led by members of the Alaska congressional delegation also has rare support from some of the leading industry and environmental players in the realm. Sens. Lisa Murkowski and Maria Cantwell, D-Washington, submitted the Maintaining and Enhancing Hydroelectric and River Restoration Act to the Senate June 24. Rep. Don Young and Reps. Annie Kuster, D-New Hampshire; Brian Fitzpatrick, R-Pennsylvania; and Suzan DelBene, D-Washington, introduced a mirror bill by the same name to the House July 16. At the core of the legislation is a 30 percent tax credit for investments in dam safety, environmental, such as fish passage, and corresponding grid resiliency improvements for hydro facility owners. The tax credit would also extend to wholesale dam removal projects. According to data compiled by a coalition of the bills’ backers, which includes the National Hydropower Association, the American Society of Civil Engineers, American Rivers and the Association of State Dam Safety Officials among others, the roughly 90,000 dams across the country average nearly 60 years old and the tax incentives should accelerate the rehabilitation and removal. Approximately 2,500 of those dams currently produce power. Young and Murkowski emphasized in separate statements that the legislation could lead to additional hydropower development in Alaska that directly displaces diesel-fired power relied upon in rural communities across the state. A particularly key provision for Alaska would allow nonprofit hydro facility owners, such as electric cooperatives, and municipal-owned utilities that are common across the state to capture the tax credit through a direct payment from the federal government that would cover up to 30 percent of an eligible investment. Overall, the legislation provides for up to $4.7 billion in tax credits for dam and grid improvements and another $4.5 billion in eligible tax credits for dam removals, according to the coalition of supporters. Duff Mitchell, executive director of the Alaska Independent Power Producers Association and a member of the National Hydropower Association’s legislative committee said the legislation is the result of an “uncommon dialogue” in which the leaders of historically opposed hydro and environmental interest groups debated ways to address the growing issues of aging infrastructure that often doesn’t meet what’s accepted today environmentally such as fish passage. “I think it’s a good bill for the industry; it’s good for recreation, the environment and grid resiliency. It’s a well thought out bill that supports our fish as well because it incentivizes dam owners to do the right thing,” Mitchell said of providing credits for environmental rehabilitation measures such as improving fish ladders or installing new turbines designed to mitigate impacts to aquatic life. He projected the benefits for Alaska to be in the “hundreds of millions of dollars” if the legislation passes. Homer Electric Association’s Grant Lake project on the Kenai Peninsula is one that stands to immediately benefit from the legislation, he added. Located in the mountains just east of Moose Pass, the 5 megawatt capacity hydropower project would utilize what HEA leaders describe as a three-foot “weir” at the outlet of Grant Lake to raise the water level, noting that the lake is not salmon habitat because of a downstream barrier falls in the outlet creek. HEA General Manager Brad Janorschke said in an interview that he believes the legislation would be “very applicable” to Grant Lake, which the utility secured a Federal Energy Regulatory Commission construction license for in August 2019. “We are still full-speed ahead on that project,” he said, while also acknowledging that despite having the qualities for a good hydro development, the economics of the estimated $58 million Grant Lake hydro facility are still cloudy, as is the case with many similar projects across the state. “We are really hopeful over the next 12 months that some legislation does pass in D.C.,” Janorschke said. As for seeing one of the bills through — never a small task even with support from the administration — Murkowski and Young’s co-sponsors appear to be in positions to at least jumpstart activity on the measures. Young’s spokesman Zack Brown noted that Washington’s Rep. DelBene is a member of the Ways and Means Committee where the House version currently resides and Young has a good working relationship with ranking Ways and Means Republican Kevin Brady of Texas. “There is no doubt that buy-in on hydropower from the administration is certainly helpful, especially for committee Democrats who would be needed to get this bill approved,” Brown wrote in an email. According to staff for Cantwell, the Washington Democrat recently received a renewed commitment from Senate Finance chair Ron Wyden, D-Oregon, who originally committed to including it in a committee markup last spring before, as often happens, the bill was delayed. This time, it’s likely to be included in the clean energy portion of the roughly $3.5 trillion — and highly partisan — budget reconciliation package Democrats are starting to push in the Senate, according to Cantwell’s office. Murkowski, who previously worked closely with Cantwell while they led the Energy and Natural Resources Committee for their parties, was highly critical of Democrats’ reconciliation spending plan in an Aug. 10, calling it a “blunt instrument.” She said Cantwell is in a good position as a majority member of Senate Finance to keep the hydro bill alive, but she won’t be voting for the budget reconciliation bill Democrats appear to be developing regardless of what’s attached. She also highlighted that Senate rules limit what can be included in a budget reconciliation package and some riders are rejected for not meeting the requirements, per the Senate parliamentarian. “There’s no way that I will be a ‘yes’ vote on the reconciliation measure when you’re talking close to $4 trillion all over the board,” Murkowski said. “The fact that there may be a bill in there that I think is good policy — that’s one small measure in a basket of initiatives that is almost unlimited in scope and spending.” Elwood Brehmer can be reached at [email protected]

FISH FACTOR: Pinks peaking, but chum runs mostly dismal around state

Alaska’s salmon landings have passed the season’s midpoint and by Aug. 7 the statewide catch had topped 116 million fish. State managers are calling for a projected total 2021 harvest of 190 million salmon, a 61 percent increase versus 2020. Most of the salmon being caught now are pinks with Prince William Sound topping 35 million humpies, well better than the projection of 25 million. Pink salmon catches at Kodiak remained sluggish at just more than 3 million so far out of a forecast calling for more than 22 million. Southeast was seeing a slight uptick with pink catches nearing 14 million out of a projected 28 million. The pink salmon harvest usually peaks in mid-August and the statewide catch was more than 57 million out of a projected 124 million humpies for the season. For chum salmon the harvest remains bleak with Prince William Sound and the Alaska Peninsula the only regions tracking well for catches. The statewide catch had barely topped 6 million out of a projected 15.3 million fish. The coho peak is typically in early September and harvests are climbing steadily, but at a pace less than half the five-year average. Just less than 700,000 cohos had crossed the Alaska docks, or about 14 percent of the projected catch of 3.8 million silver salmon. Alaska sockeye salmon catches of nearly 52 million so far have blown past the forecasted 46.6 million. More than 40 million are from Bristol Bay and more than 6 million from the Alaska Peninsula. The statewide chinook harvest had reached 173,000, or 64 percent of an expected 269,000 kings. Salmon slump No Alaska region has been hit harder by dismal salmon returns this summer than communities on the Yukon River, where the summer chum run of just 153,000 is the lowest on record. “This is really quite scary for everyone. These runs are low enough that no one on the river is subsistence fishing, and so it’s very dismal. Everybody in the communities on the full river drainage, are feeling the hardship,” Serena Fitka, director of the Yukon River Drainage Fisheries Association, told KYUK in Bethel. Nearly 10,000 pounds of chum and king salmon have been donated by Bristol Bay fishermen and processors with logistical assists by SeaShare and Kwik’pak Fisheries in Emmonak to send salmon to 11 villages. Kwik’pak, typically a top employer each summer, has been able to put only a handful of people to work for a few days helping with the distribution said General Manager Jack Schultheis. Gov. Mike Dunleavy also directed an additional $75,000 to purchase more salmon from Alaska processors for donations. The Tanana Chiefs Conference and the Association of Village Council Presidents are helping with distribution. More fish action As always, lots of other fisheries are going on across Alaska besides salmon. At Southeast, about 160 crabbers will wrap up a two-month Dungeness crab fishery on Aug. 15. State managers expect the catch to top 2.25 million pounds with another opener set for Oct. 1. A sablefish fishery opens in Northern districts on Aug. 15 for 73 shareholders with a catch of 1.13 million pounds. The Panhandle’s spot shrimp fishery remains open in some regions through Aug. 30 with a 400,000-pound harvest limit. At Prince William Sound, a sablefish fishery is ongoing through Aug. 30 with a 208,000-pound catch limit. Likewise, a lingcod fishery continues through year’s end with a 32,600-pound harvest. It’s been slow going for Prince William Sound’s shrimp fishery that opened in April and has been extended to Sept. 15. That catch limit is 70,000 pounds. Pot hauls for Kodiak’s Dungeness crab fishery were nearing 962,000 pounds by a fleet of 19 boats. Crabbers are dropping pots for nearly 6 million pounds of golden king crab along the Aleutian Islands. Alaska’s halibut landings are slightly ahead of last year at this time with nearly 9.9 million pounds crossing the docks by Aug. 7. That’s 53 percent of the roughly 19 million-pound catch limit. Halibut prices usually tank during the summer but that’s not the case this year and fishermen are fetching near or more than $6 per pound at most ports. Payouts at Homer were $7.25, $7.65 and $7.85 depending on halibut size, with Seward buyers paying a nickel less. Sablefish catches had topped 19 million pounds, or 44 percent, of the 43.4 million-pound quota. Homer also was paying the most for black cod with prices ranging from $1.10 for under two pounders to $6.25 for 7-ups with Sitka not far behind, according to the Fish Ticket by Alaska Boats and Permits in Homer. Fishing for scallops continued in regions from Yakutat to the Bering Sea where 345,000 pounds of shucked meats (the adductor muscle that keeps the shells closed) could be harvested this season. Fishing continued for cod, flatfish, pollock and more in the Bering Sea. Pollock fishing will reopen for Gulf of Alaska trawlers on Sept. 1. Mariculture means money Ninety new founding members responded to the call to help shape the new Alaska Mariculture Alliance, a private non-profit successor to a five-year task force formed in 2016 by former Gov. Bill Walker. Their goal is to create a sustainable industry for growing shellfish and seaweeds to benefit Alaska’s economy and communities. The group represents a diverse range of experienced growers to newcomers, said Julie Decker, executive director of the Alaska Fisheries Development Foundation, which administrated the task force and is doing the same for the AMA. It also includes reps from Alaska Native corporations, salmon hatcheries, the Central Bering Sea Fishermen’s Association and the Aleutian Pribilofs Community Development Association. Along with boosting shellfish and seaweed farming, a priority will be getting the Alaska Legislature to pass a bill to allow for more large-scale shellfish enhancement that models the state’s successful salmon hatchery programs. “There’s been some efforts looking at restoring and enhancing king crab, geoduck clams, sea cucumbers and razor clams but they’re mostly at an experimental level. And they’re not allowed to do larger scale projects until a regulatory framework is put into place,” Decker explained. “We’re very close to getting the bill passed and we’re hoping that it will be one of the first bills taken back up and moved along over the finish line in the next session. Sen. (Gary) Stevens of Kodiak and Rep. (Dan) Ortiz of Ketchikan have been very helpful with that.” Policy makers are starting to talk more about the positive potential for Alaska mariculture, Decker said, and she believes “we have turned a corner” as proven by several new state and federal hires. NOAA Fisheries has hired Alicia Bishop as its first ever Aquaculture Coordinator for the Alaska Region along with Jordan Hollarsmith as research lead, both based in Juneau. And the University of Alaska/Fairbanks has hired seaweed research specialist Schery Amanzor as a professor at its College of Fisheries and Ocean Sciences to provide even more expertise. The state also has added two positions to the Department of Natural Resources to review new mariculture lease applications to reduce the backlog. “They have now gone from an average review process of 572 days down to 274 days,” Decker said. There are 76 active aquatic farm and nursery permits in Alaska, plus 35 pending new applications that add up to over 1631.32 underwater acres. Only 28 growers are making sales so far. The ultimate goal of the AMA is to facilitate a $100 million mariculture industry by 2038 and many believe that’s very conservative due to increasing demand, especially for seaweeds. The North American market for commercial seaweed will exceed $9.5 billion by 2026 due to rising commercial seaweed consumption and demands in the pharmaceutical industry, while global revenue is projected to top $85 billion, predicts Global Market Insights Inc. Check out the new Alaska Mariculture Map launched in partnership with the Alaska Ocean Observing System, Axiom Data Science, APICDA Corp., The Pacific States Marine Fisheries Commission, Alaska Sea Grant and The Nature Conservancy/Alaska. Fish boosters The Alaska Seafood Marketing Institute is seeking members for its advisory committees to help develop global strategies for the Alaska seafood brand. Committees include Salmon, Halibut-Sablefish, Whitefish, and Shellfish, International Marketing, Domestic Marketing, Communications, Customer Advisory Panel and Seafood Technical. Deadline to apply is Sept. 24. Questions? Contact [email protected]/ Aug. 13 is the deadline to nominate small- and medium-sized seafood businesses to help shape a new National Seafood Council. Six to 8 seafood companies whose annual revenues are less than $20 million will be selected for cash scholarships based on their incomes. Apply at The call is still out for candidates for the state Board of Fisheries. The vacancy stems from the Alaska Legislature’s rejection on May 13 of Dunleavy’s appointment of Abe Williams, a regional affairs director for the Pebble Mine. According to Alaska statutes, Dunleavy was required to name a replacement within 30 days. Deputy Director of Communications Jeff Turner wrote in an email that, “The Governor is taking additional time to receive input from all stakeholders before making a selection” and that “he has committed to filling the seat before the next Board of Fish meeting in October.” Laine Welch lives in Kodiak. Visit or contact [email protected] for information.

Revenue Dept. presents options to close deficit under 50-50 plan

It’s a long way between here and new taxes, but Gov. Mike Dunleavy’s administration has taken the initial step towards generating the new revenue many in the Legislature have said is needed to pay for the “50-50” dividend plan he put forth earlier this year. Revenue Commissioner Lucinda Mahoney presented members of the Legislature’s joint Comprehensive Fiscal Plan Working Group with 10 conceptual options for oil tax changes and a state sales tax proposal she said Dunleavy could support along with other ideas such as legalized gambling or utilizing the state’s forests in carbon offset programs for generating state revenue. “We are trying to present you with many different options as well as options related to spending so that we can collaborate and come together on a fiscal plan,” Mahoney said during an Aug. 5 meeting that continued on Aug. 10 because of technical difficulties. Mahoney said the administration would like to “accelerate” the typical timeline for any tax changes to capture as much revenue in fiscal year 2022, which started July 1. “That helps us, first of all, balance the budget but it also starts building up reserves,” she said. The Legislature is set to convene Aug. 16 in Juneau after the leaders of all four caucuses requested more time from the governor to work on long-term budget solutions. The session was first set to begin Aug. 2. Topping the administration’s list of revenue suggestions is a cutting the maximum per-barrel tax credit oil companies are allowed to claim to $5 per barrel from the current $8 per barrel credit. Lowering the high end of the sliding scale per barrel credit, which is $8 per barrel at prices averaging less than $80, to $5 at market prices of less than $80 per barrel would generate between approximately $165 million and $330 million annually over the next five full fiscal years, according to Revenue’s calculations. Many Democrats have long pushed for wholly eliminating the per-barrel credit, which effectively reduces the 35 percent base production tax at prices less than $150 per barrel, and Senate President Peter Micciche has been among the Republicans of late to propose changing the credit along with possibly reducing the base production tax rate. The administration’s informal proposal would also include lowering the high-end price at which the credits phase out from $150 to $120 per barrel. Mahoney also laid out scenarios for statewide sales taxes of 4 percent that, depending on the exemptions, could raise between $600 million and nearly $1.3 billion per year. “We are looking at something broad and low with few exemptions,” she said. Revenue officials have also unofficially added $373 million to the oil revenue outlook for the current fiscal year and $176 million to the state’s projected 2023 total revenue based on mid-July prices in oil futures markets, according to Mahoney. The department now anticipates the price for Alaska North Slope crude will average $72 per barrel in 2022 and $67 next year, compared to the spring forecast prices of $64 and $62 per barrel, respectively. The new anticipated oil revenue means the state would have near-term deficits in the $800 million per year range if the Legislature approves Dunleavy’s plan to utilize half of the annual $3 billion-plus draw on the Permanent Fund for dividends, and half for government services, a split first proposed by his 2018 election opponent Mark Begich. Some lawmakers have questioned the administration’s prior revenue projections and statements that new taxes aren’t necessary given expected improvements in the state’s fiscal picture, claiming the actual deficits are likely to be in the $1 billion per year range or more if currently strong oil and financial markets decline. It’s also unclear how the tax concepts mesh with the governor’s proposal for a constitutional amendment requiring voter approval of all new state taxes. Elwood Brehmer can be reached at [email protected]

ANC cargo booms as supply chains shift

Some of the same supply chain challenges that are driving prices higher for everything from appliances to coffee beans are also pushing the Anchorage airport’s cargo business to new heights. Long one of the world’s most popular stops for freighter jets, Ted Stevens Anchorage International Airport moved up a spot to be the fourth-busiest cargo hub on the planet last year. The logistical problems that started more than a year ago with pandemic-induced shutdowns and business restrictions continue to ripple across the globe, according to Bill Popp, CEO of the Anchorage Economic Development Corp., which has studied and championed the air cargo activity at the city’s airport. “We’re seeing this shift in tonnage and this fairly significant spike in tonnage (through Anchorage) is because of what has been just a disastrous entanglement for West Coast U.S. and Asian ports,” Popp said in an interview. “Air cargo is becoming the option of choice for desperate retailers.” Logistics firms are regularly reporting quotes of $16,000 and greater to move a container across the Pacific via cargo ship; that’s for a 30- to 45-day trip that ran in the $1,500 range pre-pandemic, according to Popp. The increase in cargo is not unique to Anchorage, but the rate of the increase is. According to data from the Airports Council International, the aggregate tonnage among the world’s top 10 busiest cargo airports increased 3 percent in 2020, while the landings at Anchorage were up 15 percent year-over-year to more than 3.1 million tons of cargo. Anchorage overtook the UPS hub of Louisville, Ky., which saw a 4.6 percent growth in cargo business last year, for the fourth spot behind the Shanghai, Hong Kong and Memphis, Tenn., airports. In the first half of this year, cargo throughput was up 23 percent over 2020 at 1.73 million metric tons, according to Anchorage airport leaders. While Anchorage’s cargo business isn’t likely to keep growing at such a pace, it isn’t expected to stop growing anytime soon, either. AEDC is projecting 8 percent growth this year overall and annual tonnage increases in the 2 percent range thereafter. That’s in part because the current global and domestic logistic challenges aren’t likely to be overcome anytime soon. The pandemic also encouraged many more Baby Boomers to retire than otherwise would have, Popp said, which has exacerbated pre-existing labor shortages among truckers, longshoremen and other trades. “It was a system that was stressed to begin with and the ramifications of COVID go well beyond the shutdowns from outbreaks of the disease,” Popp said. It has all caused a significant increase in furniture, of all things, on the jumbo jets making a refueling stop in Anchorage. “How does that make sense?” he wondered. As more cargo continues to arrive from the air, developers are finally working to capture the benefits of when it’s on the ground. The man the airport is named after secured unique trade exemptions for Anchorage, Fairbanks and the Port of Anchorage in 2004 that allows cargo landed in the state on its way to and from the Lower 48 to be shuffled among planes and carriers at that time without being subject to federal regulations. Historically, Anchorage has simply been a refueling stop for the vast majority of carriers as stopping to refuel allows them to carry more cargo on trans-Pacific flights. The ability to freely transfer cargo between planes and carriers for years has been touted by airport leaders and others as a way for shippers to greatly increase the efficiency of their operations but it hasn’t been until now that air carriers, logistics firms and developers have all sought to utilize the exemptions at a large scale. Plans for up to five large projects collectively totaling approximately $700 million, according to AEDC, are in the works and two development groups have signed long-term leases at the airport in an ostensible commitment to develop. Rob Gillam, CEO of McKinley Capital, the Anchorage-based investment firm that is the majority owner in the 700,000 square-foot Alaska Cargo and Cold Storage, or ACCS, project, said in an interview that the logistics industry has been slow to capture the potential of Anchorage’s opportunities partly due to the fact that it takes a long time to change a complex system. Additionally, cargo airlines operating in a highly competitive industry are commensurately tight-lipped, meaning it’s often difficult to determine what’s being shipped now and what might be in the future to plan ground facilities accordingly. “If they don’t open the door they don’t have to tell you what’s on the plane, “Gillam said. “It could’ve been an empty airplane; it could’ve been an airplane filled with bricks or filled with iPads.” He also noted that there is an inherent hesitancy toward being the guinea pig in a major business venture. “Somebody has to go first. There’s no doubt in the economic value of cargo through Anchorage,” Gillam said. “No doubt.” The ACCS project is currently in the permitting stage and is envisioned as a three-phase development, he added. Anchorage Airport Director Jim Szczesniak said in an interview that airport officials have changed the focus of their efforts to market the airport’s potential from carriers and logistics firms to the developers that would actually invest in the necessary facilities. “We wanted to help (developers) with their business case,” Szczesniak said. “From our perspective it’s not a ‘build it and they will come’ scenario. They’re already here so it’s a matter of making what we have here more efficient for their operations,” he said of the carriers. Popp added that “sometimes ideas can stare you in the face for a long time before they become recognizable,” and emerging market opportunities, such as shipping South American produce to Asia, should continue to benefit Anchorage with revenue to the airport but most importantly with new jobs potentially measured in the thousands. Gillam said facilities like ACCS not only require cargo handlers but also more support service providers, including aircraft ground crews and others. “We’re excited about the potential investment because that’s what we’re in the business of doing, but we’re really hopeful about the knock-on benefit to the Anchorage economy,” Gillam said. Elwood Brehmer can be reached at [email protected]

More than supply and demand in play for oil prices

Predicting what the prices of oil and natural gas will be in the next few months requires the weighing of several factors besides just supply and demand. Oilmen Kirk Edwards and Frosty Gilliam, economist Ray Perryman and professor Dennis Elam say fluctuations of the pandemic, the whimsy of OPEC and OPEC+ and the policies of the Biden administration and the Environmental Protection Agency must also be considered. “The price of oil will do exactly what Saudi Arabia wants it to do,” Edwards said. “For some reason during the pandemic, they allowed themselves to keep oil off the market, which reduced inventories and steadily let the price go up from $30 a barrel at this time last year to close to $70 today. “They’re trying to limit how much product they put on the world market. With all the COVID setbacks that there have been in so many different countries and now with the new Delta variant coming around, we’re seeing Saudi Arabia produce half as much oil as they were a year ago and make the same amount of money.” Edwards said the Mideast nation “can drop the price right back down to $30 if they want to, but luckily we have hedging instruments to protect ourselves with, though only for a year or two.” He said gas prices have been just as volatile, falling to minus-zero last year but rebounding to around $4 per thousand cubic feet. Two years ago, the price was $1.30. “It’s been so low for the last four or five years, again because the world market was flooded,” said Edwards, whose Latigo Petroleum is heavily invested in gas production in the Texas Panhandle. “There’s not a lot of gas coming onto the market now and that has caused its price to increase.” The July 18 OPEC+ announcement that it would bump monthly production by 400,000 barrels per day fomented a drop from the mid-$70s to the upper $60s that had partly corrected to the low $70s by mid-week. “Anything they say is probably a lie,” Edwards said. “They’re just trying to keep the Permian in check so we don’t put out a bunch of rigs.” Asked if the domestic industry has considered cutting production to exert more control on prices, he said the Texas Railroad Commission called a meeting of representatives in March last year to discuss prorations, but before action could be taken, “The Saudis did it for us. “They took two million barrels a day off the market.” Thirteen nations belong to the Organization of Petroleum Exporting Counties. OPEC+ has 10 more, led by Russia. Gilliam said the coronavirus factor “will potentially continue to depress travel and projects and indirectly affect fuels and energy, which would cause supply to outgain the demand. “OPEC always tries to play the role of the leader and they’ll want to dictate what the price does,” he said. “The political realm certainly trumps a lot of the practical sciences of oil prices. “Supply and demand should dictate it, but historically attitude and the perception of what might happen end up weighing heavily. All that adds up to a real likelihood of lower prices.” Gilliam said the industry is very uneasy about the Biden administration. “The standard Democrat play is to limit drilling and increase regulations, which make the cost of doing business increase,” the AgHorn Operations president said. “Keeping drilling projects from occurring on federal lands and offshore adds up to a damper on supply and production.” Perryman, an Odessan whose consulting company is based at Waco, Texas, said the recent oil setback stemmed from the OPEC+ announcement and a spike in coronavirus cases domestically and abroad. “As always, there is a lot happening in oil markets that creates a lot of noise,” he said. “The virus is clearly the biggest wild card at the moment. If it reaches the point of substantially slowing global demand growth, then the price will likely fall for an extended period. We cannot get the economy fully on track till the health crisis is manageable. “Assuming we avoid another widespread surge, demand is growing faster than supply, even with the OPEC+ increase, and prices should enjoy an upward trend for the next few months. Global demand is back to about 97 percent of pre-pandemic levels and travel and production are both enjoying substantial growth.” Perryman said a new consumption record will happen next year if there isn’t another crisis with the virus. “Although the domestic rig count has approximately doubled, it remains below prior levels, and oil field service employment, despite impressive recent gains, has only recouped about 20 percent of the lost jobs,” he said. “There’s a lot of room for growth and the market outlook is positive; but as we have said about so many things for so long, it all depends on the virus.” Elam is an associate professor of accounting and finance at Texas A&M University-San Antonio and an Odessa American columnist who writes about the energy industry. “Demand for natural gas in the Far East is still on the rise, making that market stronger,” Elam said. “The fact that refiners like Valero are turning away from carbon-based oil to vegetable oil for so-called clean diesel may keep gasoline prices fairly high. “I expect oil to stage a 50 percent recovery, which is where it is today, and then fall to the lower $60s in August.” Elam said President Biden’s order to stop construction on the Keystone Pipeline from Canada caused more expensive rail shipping from the Dakotas. “The great irony is that Biden forced gasoline prices higher by shutting down Keystone, not to mention the EPA’s general war mongering,” he said. “So gasoline goes above $3 just as America comes out of COVID, when people want to travel. Now he has to ask the Mideast to export more oil and bang, we’re back to depending on that region again.” However, Elam said inflation and a rise in consumer prices may be held down if oil and stocks have peaked and are starting to decline. “That would be deflationary,” he said. “Which will it be? I’m seeing headlines that the economy slows from here and I’m guessing that stocks have topped.” Referring to options contracts that give owners the right to sell a certain amount of their underlying assets at a set price within a specific time, he said: “Many had sold puts and they had to either buy the puts back or sell futures. “It looks like they sold futures. Financial shenanigans have a lot more to do with oil price volatility than supply and demand.”


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