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 seafoodnutrition.org/ 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 www.alaskafishradio.com 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.”

Why now isn’t a bad time to take out a car loan or mortgage

The pandemic knocked borrowers on their backs in the spring of 2020, but as the economy regained its footing, so, too, has the willingness of consumers to borrow. Consumer applications for auto loans, new mortgages and revolving credit cards all mostly returned to pre-pandemic levels by May 2021, according to a new report by the Consumer Financial Protection Bureau. Skyrocketing unemployment a year ago crushed demand for credit. Who wanted to take on a big car payment when they were unsure whether they could make the old car payment? Or if they weren’t driving to work but instead setting up shop at home? Auto loan inquiries, for example, plunged 52 percent by the end of March 2020. States in the Northeast and California, together with Michigan and Nevada, experienced the largest drops. Many are vaccinated and back to borrowing Going forward, economists say the outlook hinges on the path of the virus and vaccination efforts. The jobs picture improved after progress was made getting people vaccinated and we saw strong stimulus support programs roll out of Washington. But the economic recovery could still face stops and starts. The Federal Reserve policy committee moved July 28 to keep short-term interest rates at the near zero level as worries about the delta variant spread. The Fed noted: “The sectors most adversely affected by the pandemic have shown improvement but have not fully recovered.” Make no mistake, everyone isn’t finding ready access to low-cost loans. “Despite the overall trend toward a recovery, we find that consumers with deep subprime and subprime scores still have not recovered to their pre-pandemic levels, likely in part due to a tightening of credit for these consumers,” the Consumer Financial Protection Bureau noted. Other key trends from the CFPB brief include: • Mortgages: When it comes to shopping for mortgages, we’ve seen unusually high activity in the mortgage market throughout the pandemic following a brief initial dip. Inquiries have exceeded their usual, seasonally adjusted volume by 10 percent to 30 percent, reflecting low interest rates and a stronger housing market. • Credit cards: Consumers appeared to be the least willing to put another piece of plastic into their wallets. It took a full year — from March 2020 until March 2021 — for revolving credit card inquiries to recover back to their usual levels. • Car loans: Consumers with excellent credit or super prime scores surprisingly are not shopping for car loans at pre-pandemic levels. But the report noted that there could be a drop in demand for credit among this group of consumers, which may include workers who are able to work from home may not want to buy a new car if they’re not commuting. (The report didn’t note that a lack of cars and trucks may be coming into play or how the semiconductor squeeze cut into inventories and sales. But that, too, could be an issue.) Overall, the consumer’s willingness to take out an auto loan returned back to pre-pandemic levels by January 2021, according to data reviewed by the federal agency, which was established after the 2008 financial crisis. Low auto loan rates help offset high prices Jonathan Smoke, chief economist for Cox Automotive, said credit conditions have been favorable all spring and summer, supporting strong demand for car and truck sales. Credit to buy a car is easier to get than it was a year ago, he said, shifting back to where it was before the pandemic started. “Rates continue to be lower than a year ago,” Smoke said. “Spreads had widened last year during the pandemic, especially for lower credit tiers.” But now most car loan borrowers have seen lower rates, he said, especially subprime borrowers who have seen lower rates this spring and summer. “Now that bond yields are retreating from their early spring highs,” Smoke said, “it is likely that consumers will continue to see low and attractive rates on auto loans.” And lower auto loan rates can help to offset the impact of price increases since most people take out a loan to buy a car or truck. Not surprisingly, consumers are more willing to borrow if they’re feeling more secure about their jobs outlook and their finances. Total consumer credit shot up 10 percent in May, according to Federal Reserve Consumer Credit Report. That’s the biggest increase in five years. What’s a good deal on a car loan, mortgage, credit card? “The biggest factor in the renewed borrowing interest is the improved, and reopening, economy,” said Greg McBride, chief financial analyst for Bankrate.com. The fearful economic “what ifs” of 2020 are giving way to a greater confidence in a stronger economy, he said. Low rates also are helping fuel many purchases. The average fixed rate for a 30-year mortgage is 3.04 percent — down from 3.3 percent last year, according to Bankrate.com. An even better rate of 2.5 percent is available with no points. (Mortgage points amount to extra fees that a borrower pays a lender to reduce the interest rate and lower the monthly payment. The upfront cost can make sense if you plan to stay in the home or hold onto the mortgage for a long time.) When it comes to a five-year new car loan, the average rate is 4.15 percent now, down from 4.24 percent last year. McBride noted the best rates are in the low 2 percent range, but occasionally you’ll see credit union offer deals of 1.99 percent. Average rates on a four-year used car loan are around 4.71 percent — down from 4.99 percent a year ago. Again, he said, the best rates can be in the 2 percent range for borrowers with strong credit. When it comes to credit cards, the average rate is now 16.16 percent, according to Bankrate.com. That’s up a bit from 16.04 percent last year. But borrowers with strong credit can get much better deals. Some promotions are offering 0 percent for up to 18 months for purchases and balance transfers, McBride said. Credit card debt tumbled, as consumers paid down high-cost credit card debt and cut back on big vacation spending and other purchases for much of the past year. Credit card balances fell by $49 billion in the first quarter, the second largest quarterly decline in the history of the data since 1999, according to the Federal Reserve Bank of New York. Credit card balances are $157 billion lower than they had been at the end of 2019. By contrast, balances continued to increase for mortgages, student loans and auto loans. The Fed noted that auto loan balances grew for the past three quarters and increased by $8 billion in the first quarter of 2021, after a brief pause in the second quarter of 2020, when many dealerships were closed. The Fed noted that older consumers — particularly those age 60 and up — may continue to be more cautious about the risks of the virus itself and may be using their credit cards less frequently, while younger people resumed spending and their outside activities. Consumers, no doubt, found themselves on a firmer financial footing after three rounds of stimulus checks — and now many families are seeing hundreds of dollars in monthly advance payments from July through December for the child tax credit. Some of that extra cash — and extra confidence in the economy — clearly deserves some credit for the rebound in borrowing. Susan Tompor is the personal finance columnist for the Detroit Free Press. She can be reached at [email protected]

Industry groups, advocates applaud infrastructure bill’s broadband funds

Telecommunications industry groups and digital equity advocates reacted positively Aug. 2 to high-speed internet provisions in the Senate’s bipartisan infrastructure bill. The massive 2,702-page bill, introduced late Aug. 1 as a substitute amendment to the legislative vehicle, includes around $65 billion in spending for broadband. And though the bottom line for broadband spending is significantly less than the $100 billion originally sought by President Joe Biden and congressional Democrats, almost everyone has found something to like. Industry groups, for example, were quick to praise the lower overall funding level. The call for $100 billion in broadband spending had led to some concerns of “overbuilding.” “Early proposals from the administration indicated an intent to transform broadband into an old-fashioned utility through massive, wasteful overbuilding,” said Doug Brake, director of broadband policy at the Information Technology and Innovation Foundation. “Significant improvements … have brought it much closer to something ITIF could support.” The bulk of funding for high-speed internet would go toward broadband implementation grants. The grants would total about $42.5 billion that states and territories could use for broadband projects in unserved areas, with 10 percent of the funds set aside for projects in “high-cost” areas. The figure is about $2.5 billion more than what had been in earlier drafts of the agreement circulated last week. Advocates who say digital equity programs are key to closing the “digital divide,” which is especially damaging to low-income families and racial minorities, are applauding the inclusion of $2.75 billion to implement the Digital Equity Act. The bill would direct the Commerce Department to award broadband grants in historically underserved communities. “Just the idea that an infrastructure bill is including funding for digital equity and adoption is big,” said Heather Gate, the vice president of digital inclusion at Connected Nation, a Bowling Green, Ky.-based national nonprofit. Gate said she would have preferred a greater investment in digital equity, but the $2.75 billion is “significant considering we’re coming from zero for equity funding.” The digital equity funding would be awarded via two new Commerce Department grant programs: the State Digital Equity Capacity Grant Program, which would receive $1.5 billion, and the Digital Equity Competitive Grant Program, which would get $1.25 billion. The first of the two programs would disburse funding based on a state’s population, demographics and current broadband availability. The second would provide grants to specific projects aimed at digital equity and inclusion. Another $5 billion would be authorized for state grants that would go toward “middle mile” broadband projects to connect networks operated by major providers and smaller, rural networks operated by smaller providers. The “middle mile” provisions won plaudits from the Wireless Infrastructure Association, which said the money could be used to finance signal towers in rural or underserved areas where they would otherwise be too expensive to build. “This should be a boon for tower builders,” said the group’s president, Jonathan Adelstein. “Best of all, it includes an explicit priority we’ve advocated strongly, which is leveraging existing towers and other infrastructure rather than wasting taxpayer resources by overbuilding.” The bill also includes $2 billion for the Tribal Broadband Connectivity Program and $2 billion for rural broadband. “This unparalleled commitment will help community-based and Tribal providers of broadband bring more connectivity to Americans who lack internet access and enable those who cannot afford access to bridge that gap with government support,” said Mike Wendy, a spokesperson for the Wireless Internet Service Providers Association. Negotiators also agreed to expand the Emergency Broadband Benefit Program, which Congress established in the wake of the COVID-19 pandemic to help low-income families afford their monthly internet bill. The bill would extend the program past the end of the public health emergency but would lower the monthly stipend from $50 to $30. The bill also includes provisions increasing price transparency and ending the practice of “digital redlining,” which has resulted in lower-income areas being served slower internet speeds for higher prices. Both provisions were key priorities for the Biden administration. “Broadband internet is necessary for Americans to do their jobs, to participate equally in school learning, health care, and to stay connected,” the White House said last week. The deal “ensures every American has access to reliable high-speed internet.”

Boeing advances on first profit since 2019 as troubles ease

Boeing Co. earned a profit for the first time in nearly two years, surprising Wall Street and hinting at a potential turnaround after one of the worst financial crises in the planemaker’s century-long history. The shares jumped. Adjusted earnings of 40 cents per share weren’t the only sign of progress in the company’s second-quarter earnings report: the manufacturer burned through just $705 million, better than the $2.76 billion outflow that analysts had predicted. The July 28 results suggest that Boeing is starting to emerge from a deep slump caused by the COVID-19 outbreak and the company’s own quality lapses, which were tied to two deadly crashes of its best-selling 737 Max plane. With its business stabilizing, Boeing has halted large-scale job cuts well short of earlier plans to eliminate nearly 20 percent of its rolls, said CEO Dave Calhoun. “You will see our efforts gaining traction and our recovery accelerating, as reflected in improved revenue, earnings and cash flow, as well as stabilizing workforce levels,” Calhoun said in a message to employees. Boeing said it plans to hold employment steady at 140,000 jobs, representing a 13 percent reduction from pre-COVID-19 levels. Boeing jumped 5.6 percent to $234.77 at 9:32 a.m. in New York after advancing as much as 6 percent, the biggest intraday gain in four months. The shares had climbed 3.8 percent this year through July 27, trailing the 15 percent gain for the Dow Jones Industrial Average. The surprise second-quarter profit compared with an average loss of 81 cents expected by analysts surveyed by Bloomberg. Revenue rose 44 percent to $17 billion. Analysts had predicted $16.5 billion. “Today could be seen as a tactical victory for Boeing, but the strategic challenges remain,” said Robert Stallard, an analyst at Vertical Research Partners. Indeed, the Chicago-based company faces a long road to recovery, and a powerful rival in Airbus SE, which is looking to capitalize on its larger order backlog. Airbus, based in Toulouse, France, was slated to report its results on July 29. Another obstacle for Boeing is frayed U.S.-China relations, which have injected uncertainty into the company’s timetable for speeding production of the Max, which is meant to be a cash cow. The model, which was banned worldwide for 20 months, is still barred from flying in its largest overseas market. In the U.S., regulators lifted the grounding in November. Boeing is also wrestling with manufacturing flaws that have halted deliveries of its 787 Dreamliner aircraft, another key source of cash. The company has temporarily slowed output of the marquee wide-bodies as it searches for and repairs structural imperfections that are about the width of a coat of paint. The balance of deferred production costs still on Boeing’s books from the Dreamliner’s troubled start rose by $124 million in the quarter to $14.9 billion, reversing years of declines. Executives had warned earlier this year that cutting production below a pace of five jets a month could clip margins and force the 787 program into a reach-forward loss. But the company didn’t take the steep accounting charges that some analysts had predicted. Calhoun and Stan Deal, Boeing’s Commercial Airplanes chief, face a difficult juggling act as they try to get production running smoothly without adding to the stockpile of hundreds of undelivered planes, mostly wide-body 787 jets and narrow-body Max aircraft. The jetliner division pared its operating loss to $472 million from a deficit of $2.76 billion loss a year earlier, when the company wrestled with the worst of the Covid-19 crisis. Commercial revenue more than doubled to $6.02 billion as deliveries rose. Boeing is now manufacturing 16 737 Max jets per month and still plans to increase output to 31 per month by early next year. Inventories for the division declined by about $330 million to $70.7 billion during the quarter. “The big picture is: Defense, global services make up for commercial,” where sales were lighter than estimated, according to Bloomberg Intelligence analyst George Ferguson. He expects revenue to be affected near-term by a spate of 737 Max deliveries to Southwest Airlines Co., which used credits to lower its cash payments. The cash that would typically be generated by the Max has been depressed by low production volumes since U.S. regulators cleared the plane’s return last year after a 20-month grounding prompted by the two fatal crashes. Boeing isn’t netting much cash by clearing its inventory of the aircraft, either. Airlines are mostly using credits, both for advances already paid to the planemaker and compensation for the grounding, Agency Partners analysts Nick Cunningham and Sash Tusa said in a July 27 report.

Murkowski touts wins for Alaska in infrastructure bill; AK LNG left out

Sen. Lisa Murkowski was at the center of negotiations to craft the $550 billion infrastructure package that she says will make significant investments in Alaska, but it’s unclear at this point where one of the largest potential infrastructure projects in generations fits in. The Infrastructure Investment and Jobs Act includes roughly $400 billion in baseline formula spending for existing highway and airport programs among others, as well as roughly $550 billion in new spending that will largely go to existing federal grant and formula programs. Murkowski said the bipartisan package by 10 senators partly negotiated in direct talks with President Joe Biden focuses on rebuilding the country’s core physical infrastructure of roads, ports and bridges with additional investments in broadband and renewable energy and carbon capture technologies, for example. “It invests in legacy projects for the long-term,” Murkowski said in a July 30 call with Alaska reporters. “The overall benefit to a state like Alaska, I think, is going to be really, really considerable.” She acknowledged that hard numbers for the state’s share of the spending are difficult to calculate because so much of the funding is formula-driven. It won’t be doled out in lump sums. The bill currently under debate by the full Senate could have a particularly large impact in improving rural water and sanitation systems, according to Murkowski, who said it adds $180 million to Environmental Protection Agency drinking water and wastewater programs and $3.5 billion to the Indian Health Service for sanitation facilities nationwide. “This is really going to be a once-in-a-lifetime investment in sanitation facilities,” she said. The infrastructure spending bill also funds many of the programs established in Murkowski’s omnibus Energy Act of 2020, which passed late last year after six years of work. Absent from explicit inclusion in the bill is the state’s request for nearly $5 billion in federal funding to jumpstart construction of the Alaska LNG Project. In January Gov. Mike Dunleavy announced the state’s latest plan to fund the $38 billion Alaska LNG Project that centered on capturing federal infrastructure funding from a then-conceptual bill for 75 percent or about $4.5 billion, of the initial $5.9 billion phase one of the project to the first section of gas pipeline between the Point Thomson field and Fairbanks. The administration touted it as a way to improve air quality in the Interior — an ever-growing issue for the EPA — by replacing wood and oil burning with natural gas for home heating. The remaining portion of the overall 807-mile pipeline, the North Slope gas treatment plant and the Kenai LNG facility would be funded separately, according to Alaska Gasline Development Corp. officials. AGDC spokesman Tim Fitzpatrick wrote via email in response to questions about where Alaska LNG fits in the 2,700-page Infrastructure Investment and Jobs Act that the project “is clearly aligned with national climate, energy, and infrastructure objectives, and we’re closely watching the legislative process as we move this project forward.” Murkowski spokeswoman Karina Borger wrote that the senator was able to repeal a sunset provision from 2004 legislation that maintains the project’s access to up to $18 billion in federal loan guarantees when asked where the $5 billion request fit into the negotiations and subsequent legislation. Officials in the governor’s office said they requested an earmark for the project from the delegation but also noted the legislative process is not over. Senate leaders hope to move the bill to the House quickly, according to Murkowski. AGDC officials also insisted they didn’t expect a direct appropriation for the project and that it still has commercial interest without the prospect of a federal boost. AGDC leaders hope to secure commitments from developers, operators and investors in the LNG and gas treatment plants by this fall, with the project’s major financial agreements coming next year. In late June the Energy Department announced it would conduct a supplemental environmental impact statement on the project to determine its life-cycle impact greenhouse gas emissions. AGDC President Frank Richards said he believes the analysis will show the Alaska LNG Project would prevent up to 80 million tons of carbon emissions over its roughly 30-year life primarily by displacing coal for power generation in east Asian countries, long a selling point of the project for the state-owned corporation. Elwood Brehmer can be reached at [email protected]

Fate of the Furieous: Hendrix reflects on first year at Inlet producer

Retirement jobs are often meant to be time-fillers, an activity that is mostly enjoyable and provides some walking around money without unnecessary stress. They’re almost always part-time. John Hendrix, on the other hand, bought a bankrupt gas company. But it’s clearly more than a hobby. For him, it’s about what to do to not retire. “It’s fun,” Hendrix, 64, insisted in an interview. “If you’re an Alaskan and you’ve worked in oil and gas and you have an opportunity and you have one chance to strike, why not go for it? We made sure that we protected ourselves in regards to what we had in the bank — we could cover it, my wife and I — and we decided to go for it.” In a separate interview, his wife Candace Hendrix largely confirmed the simple enthusiasm that led to them buying Furie Operating Alaska last year. He learned of the opportunity through some consulting work he was doing for an area utility, according to Candace, who didn’t see much reason to object. “My daughter and I always felt like this was something John was meant to do,” she said. “I have a lot of faith in John because he is so high-energy and he’s capable of doing so many things at once. I knew it was risky…but we just couldn’t see John retire.” That mindset led the Hendrixes to bid on and ultimately win — with the help of a since bought-out silent partner — the Cook Inlet gas producer in a December 2019 bankruptcy auction. Disagreements between the parties involved in the complex bankruptcy stretched it out for nearly 11 months before the sale was complete. John took over as owner and CEO of the formerly Texas-based Furie in July 2020 under their new company Hex LLC. Furie leaders filed for bankruptcy in August 2019 when the company owed lenders approximately $440 million and while itself owed about $105 million in refundable tax credits from the State of Alaska, according to the bankruptcy petition. In 2015, Furie installed the Julius R platform over the Kitchen Lights gas field in the central portion of Cook Inlet at a cost of roughly $200 million, according to Hendrix; it was the first new development platform the Inlet built since the 1980s. However, the company’s financial challenges were significant; Furie absorbed a loss of $58.5 million in 2017 despite netting $25.4 million from gas sales, according to bankruptcy court filings. The situation worsened in 2018 when the company sold $42.8 million of natural gas but took a loss of nearly $152 million. Furie lost $21.4 million in the first quarter of 2019, when a freeze-up in a gas production pipeline kept the company from supplying Homer Electric Association and Enstar Natural Gas Co. with gas for more than a month. The hydrate freeze-up is what Hendrix and other industry experts familiar with the situation blame for ultimately pushing the company into bankruptcy. For one, it forced Furie leaders to buy approximately $17 million worth of gas from other Inlet producers to cover their supply contracts with regional utilities, he said. Getting back to basics About a month after taking over Furie, Hendrix told the Journal the company, which also sought to explore for oil under prior leadership, needed to get “back to basics” and focus revenue-generating natural gas production. Just more than a year in, optimizing Furie’s operations is for the most part going well, he said, reciting several instances in which he found what he concluded to be unnecessary or overly costly processes, equipment, or even operational approaches. He believes Furie’s onshore Nikiski gas processing facility is “way overbuilt” — he estimated it at about $50 million — for what the company was doing and currently does, for one. As a result, a generator meant to power the gas compressors can’t run full-bore as intended to maximize efficiency and is therefore ostensibly useless under normal operations. It currently costs about $50,000 per month to power the facility, according to Hendrix. “It’s cheaper for us, because the equipment is so inefficient — to buy electricity from Homer Electric than to generate it ourselves. So HEA buys our gas, (in periodic spot sales) generates electricity, and sells it back to us cheaper than we can do it,” Hendrix said. “We’re looking at a few things we need to do.” Furie leaders also recently added a desalinization unit to the Julius R platform so they could supply their own drinking water and cut out the steep delivery costs. “Every time a boat comes out it costs us between $12,000 and $22,000 one way, “ he said, later joking that he gave his operations crew an inspirational deadline to make sure the desalinizing unit is working. “I told them ‘we’re not delivering any more water after September.’” Alaska pride A petroleum engineer raised in Homer, Hendrix was general manager of Apache Corp.’s operations in Cook Inlet prior to becoming former Gov. Bill Walker’s oil and gas policy adviser in 2016. He wears his pride for Alaska on his sleeve and a major part of turning around Furie was overhauling its mostly imported workforce into one predominantly comprised of Alaskans, according to Hendrix. “We wanted to bring jobs to Alaskans and that’s what we’ve done. We’ve done everything we’ve said we were going to do and we’re proud of it,” he said. Since informing the small former Furie operations crew last fall that the company would no longer be paying for travel to and from Nikiski, Furie has gone from one Alaskan on payroll to nearly two dozen; one employee agreed to stay on under the new terms. It was that enthusiasm for Alaska and reinvesting in the Kenai Peninsula that coaxed Hendrix’s first hire, Kevin Smith, who is now Furie’s operations superintendent, out of comfortable retirement in Soldotna. The two were connected through mutual friends who thought they would work well together. “The thing that really hooked me was John wanted to make it local hire,” said Smith, who retired from BP when the British major sold its Alaska assets to Hilcorp in a deal that closed last year. “To be honest I really don’t want to work too much longer but I want to help him set this business up.” After having a pilot project to allow the company to discharge its produced water into the Inlet approved by state regulators, Furie has mostly alleviated the risk of future hydrate freezes aside from one minor event, according to Smith. “We definitely did our homework on all of that and were prepared so it wouldn’t take us down for a long time,” he explained. To that end, officials with Enstar Natural Gas Co., which holds Furie’s lone firm supply contract, said the producer has met all of its obligations under Hendrix’s ownership. Part of bringing Furie’s focus back to Alaska has also been an emphasis on using local, rather than Lower 48, vendors, Smith added. “We’ve had pretty good luck sourcing things; I’ve actually been mildly surprised,” he said. Hendrix emphasized the fundamental belief that hiring local in an industry such as oil and gas where employees are often transient can help workers gain a sense of pride in their jobs that translates to better performance, alluding to how the company now sends small but important samples 15 miles from the platform to shore via subsea pipeline instead of air. “They devised a way of sending water samples in for our produced water just like you use at the bank system. We put it inside a (pipeline) pig and we ship it to shore and get the sample delivered back at the facility. We don’t have to fly helicopters back and forth for samples. It cuts back on our production a little bit for the day but that kind of innovation is great,” he described, adding that the company’s total yearly helicopter charter bill is down from about $550,000 to $250,000 since he took over. “There’s just a lot of extra costs out there.” Tax hurdles The omnipresent hurdle to improving Furie’s position, according to Hendrix, has been the state, and specifically Alaska’s oil and gas property tax regime. As he explains it, Furie was purchased for $5 million in cash, with contingencies for former creditors, after first winning the auction with a $15 million bid. They put up $2.5 million and $5 million from the $7.5 million AIDEA loan that capitalized an account to provide initial operating cash for the company as required by Furie’s creditors, according to Hendrix. As part of the deal Furie must also pay $15 million to the creditors who currently hold $103 million in unpaid state exploration and development tax credits if the state does not pay them off by July 2025. “I’ve got to have development enough to pay the $15 million. We have to make sure that in due time — we’ve got that $15 million at a 7 percent note — that we’ve covered that by the year 2025. We have to set aside money for that and for future development but $1.6 million just came out so we’re back to square one,” he said. An AIDEA spokeswoman confirmed Hex’s loan is current. Hendrix noted that in addition to meeting its financial obligations, Furie went the last 12 months without a lost time injury or environmental incident as well. The $1.6 million is Furie’s annual oil and gas property tax bill from the state, according to Hendrix, and he can’t understand how it can be justified based on what the company was bought for last year. He claims state property tax assessors have valued Furie’s assets at $81.2 million. “I love this state. I want to support this state. I want to make sure that what we spend goes to the state, but I don’t want to be unfairly and unjustly tapped when we’re a struggling company coming out of bankruptcy,” Hendrix said. “What they had before was a lot of expenses they shouldn’t have had to pay, that’s some of why they went under before we picked them up. How in the hell do you buy something for $5 million and they assess just the tangible part at $81.2 million? It was a fair auction; anyone could come in and bid on it and we won the bid.” The crux of the issue is the state’s longtime method for valuing often unique oil and gas facilities in the state. Revenue officials could not speak directly to Furie’s taxes, but offered general information on the Tax Division’s process for assessing oil and gas facilities, which at the highest level relies on replacement cost valuation minus depreciation. That means the relatively new Julius R platform — built in 2015 — and the onshore facility still carry significant value. Former Furie officials estimated the value of the company’s assets at between $10 million and $50 million in their initial bankruptcy filings. “If I grow the company to where it’s worth $81 million I’m willing to pay it,” Hendrix said. “You would not put that platform out there for the resources out there today and that’s our problem with the property taxes. The question back is always, ‘well, what would you pay to do it now?’ and we wouldn’t do it.” After having an appeal to the little-known State Assessment Appeal Board rejected last spring, Hendrix said he sees no other option but to sue the state over the matter. “It’s going to cost us a lot of money and it’s going to impact our future on how we spend money, how we employ people but it’s another baseline foundational thing that we have to fix,” Hendrix said of the taxes. “Can you imagine paying 33 percent property tax on something you just bought? How do you make money? How do you employ people? “They’re treating our gathering line like it’s the Trans-Alaska Pipeline; it’s not, it’s a 10-inch pipeline that’s 15 miles long.” Despite the tax issue, and his clear frustration with it, Furie’s first solvent year has largely gone well, according to the Hendrixes. “He feels good about it,” Candace said. “Even when it’s stressful he still feels like it was the right decision; he’s just so happy to be back in Alaska.” Smith described it with the perspective of a 40-year Peninsula resident. “A guy from Homer, from East End road just bought a platform out in the Inlet,” he said. “That’s pretty cool.” Elwood Brehmer can be reached at [email protected]

COMMENTARY: ‘Buy American’ policy must start from the ground up

Since the start of the COVID-19 pandemic, the United States has lost roughly 500,000 good-paying manufacturing jobs. That’s a heavy toll for such an important part of the national economy. However, the Biden administration is working to rebuild U.S. manufacturing with a new rule intended to increase the American-made content of goods purchased by the federal government. Each year, the U.S. government spends roughly $600 billion on procurement, including everything from furniture and trucks to helicopter blades. Spending that money on American-made goods could provide a great boost for U.S. manufacturers. The key, though, is to make sure that this spending goes to domestic U.S. companies — not producers in China. However, China continues to massively subsidize its state-owned factories — including billions of dollars annually for everything from steel and electronics to solar panels and electric vehicles. This has helped to make China the world’s primary supplier for key industrial commodities, and also put many high-tech U.S. firms out of business. Under the Biden administration’s proposed rule change, the threshold for American-made content in goods purchased by the U.S. government would immediately rise to 60 percent, or 5 percent above existing standards. Further increases would be phased in, with a goal of 75 percent domestic content by the end of the decade. Higher domestic content requirements could greatly benefit new industries such as America’s burgeoning electric vehicle manufacturers. However, China is already far ahead in the EV industry, and is planning 107 lithium-ion battery mega-factories. In contrast, the U.S. has only nine such factories in the planning stages. Even if the Biden administration succeeds in directing more taxpayer money to American-made products, all of that planning could still fall short. That’s because the United States remains heavily dependent on China and other countries for the metals and minerals needed to manufacture EVs and other renewable energy technologies. That’s significant, since the International Energy Agency estimates the demand for critical minerals in the energy sector alone could increase roughly six times by 2040. Countries that can supply these important materials will enjoy a significant geopolitical and economic advantage. Unfortunately, the United States now relies on China for many of these resources, including 80 percent of its rare earth metal needs. Overall, America’s dependence on imported metals and minerals has doubled in just the past two decades. It’s deeply troubling that the United States is so reliant on China — a country that uses forced labor and toxic environmental practices — to supply the metals and minerals needed to manufacture advanced technologies. Getting the American-made effort right — and making the most out of the administration’s new industrial policy — will mean reducing this reliance on China. It’s time to bring these supply chains home, including mining and critical materials. Failing to do so will lead to taxpayer money slipping away to China. And that would mean an unfortunate loss of good jobs and national self-sufficiency. Michael Stumo is CEO of the Coalition for a Prosperous America. Follow him at @michael_stumo.

Board of Fisheries denies setnetters’ emergency petitions

Kenai Peninsula setnetters are likely to remain closed for the rest of the season after the Board of Fisheries denied two emergency petitions seeking a partial reopening. In an emergency meeting held Aug. 2, the Board of Fisheries voted 4-2 to deny a petition seeking a limited reopening of the East Side setnet fishery in Upper Cook Inlet. The petitioner, Chris Every, asked the board to reopen the East Side setnets within 600 feet of mean high tide, known as the 600-foot fishery. “We believe by utilizing the 600-foot fishery we can reduce both the economic and biological impact while conserving chinook salmon, which is our ultimate goal with this 600-foot fishery,” he wrote in the petition. The setnetters had a foreshortened and significantly restricted season because of low late-run king salmon returns to the Kenai River. The Alaska Department of Fish and Game estimates that 6,420 large kings have passed the sonar on the Kenai River since July 1, significantly less than the lower end of the escapement goal of 15,000 large kings. In response, the department placed progressively stronger restrictions on the sportfishery, going from no bait to catch-and-release, and finally to a complete closure. Because of the paired-restriction model the Board of Fisheries placed on the East Side setnetters, when the king salmon sportfishery is completely closed, they are too. Setnetters have not been in the water since July 20, and they have watched the peak weeks of the Kenai River sockeye run swim past. Aug. 2 saw the highest daily passage to date: 151,525 sockeye passed the sonar, according to ADFG. Every cited harvest data from ADFG showing that when the entire East Side was open to the 600-foot nets only on July 20, only 11 late-run large Kenai River king salmon were harvested. “We believe that the amount of kings that are impacted by the east set-net 600 foot fishery is equal to or less than the other user groups,” he wrote. “The total chinook harvest in each one of the 600-foot openers is very low.” Board of Fisheries member Gerad Godfrey, one of the members who called for the emergency meeting after hearing from stakeholders, said those numbers were what convinced him the situation is an emergency. “I may not have caught all this in public comment or deliberations,” he said. “That was obviously a very intense meeting with a lot of data.” Board policy makes it hard to qualify something as an emergency. It must be an unforeseen effect of regulations, an immediate threat to the stock or include new information that the board or department did not have on hand when making regulations. The setnetters argue that the harvest data on large kings qualifies as new information, quantifying their exact impact on the run. ADFG Commissioner Doug Vincent-Lang issued a response to the petitions over the weekend, just before the board meeting took place, finding that the situation didn’t qualify as an emergency because it was not unforeseen nor new information. During the meeting, he said the board instructed the department to prioritize meeting the lower end of the late-run king salmon escapement goal over keeping the sockeye run within its escapement goal range. The data from the 600-foot fishery on July 20 does show a small number of large Kenai River kings harvested compared to the approximately 36,000 sockeye harvested on the same day in the East Side setnet fishery, according to ADFG data. Vincent-Lang said that one day’s data may not be demonstrative of the effect of a 600-foot fishery long-term. “That 11 (king salmon) harvest is indicative of that day of fishing, but it may not be indicative of what you can expect in the harvest in the 600-foot fishery that is prosecuted in the area depending upon when king salmon are passing and how big of a run you have going by that site,” he said. Godfrey called the king harvest “de minimis” and said he felt he didn’t think he foresaw the full effect of the board’s actions on the setnet fishery while other fisheries remained open. Member John Wood agreed, saying he would like to see a temporary fix to allow the fishermen to harvest some of the sockeye run, but let the action expire after 120 days and consider permanent fixes in the future. However, the other board members did not agree. Member John Jensen said he thought the situation was serious in allowing that many fish to go by, but agreed with Vincent-Lang’s finding. Member Israel Payton said he agreed as well and cautioned against risking king runs for the sake of harvesting sockeye. “We don’t want to miss a goal more than three, four years in a row, because then it goes into stock of concern, and then we really have to take drastic measures,” Payton said. “My philosophy hasn’t changed that yes, my comfort level is more toward making a goal than exceeding a goal.” The board voted 4-2 to deny the emergency petition. There was a second petition from Paul Shadura II, a south Kalifornsky Beach-area setnetter, asking for openings in the Kasilof section, in the 600-foot fishery, and in the Kasilof River Special Harvest Area. The board voted to take no action on the petition without any further specific discussion. Shadura, who submitted the petition on behalf of the ad-hoc group the South K-Beach Independent Fishermen’s Association, said he felt “slighted” that the board had not taken up the Kasilof petition. He said he felt the board didn’t discuss any of the serious underlying issues in the situation, including overescapement of sockeye into both impacting the future of the runs and the increased amount of large king salmon in the Kenai being unattainable. “There’s a lot of discussion among folks,” he said. “We really have our doubts about the credibility of the escapement number. The target range for the kings in the Kenai River may at this current level exceed what was historically available in the first place.” Shadura has been participating in the Board of Fisheries process for years and commented in the 2017 meeting, when the Kenai River king salmon goals were converted from all fish to large fish only, that it would result in more closures of the setnet fishery. He said this result is not surprising to him, though the results are devastating to the local economy. Most Kenai Peninsula setnetters live in Alaska. “And to the processing industry, who’s really, from COVID … trying to survive in this situation with a reduction in harvest capacity,” he said. “All those fish that go up to the river are potential processing dollars that help the local community in multiple ways, and the national economy. It’s very, very shortsighted and the management system is not doing anything for the repair of our COVID economy.” The setnetters can submit an agenda change request, or ACR, ahead of the board’s October work session to be included in the upcoming cycle of regular meetings, with the hope that board members will accept any proposal under ACR requirements. Otherwise, they will have to wait until the Upper Cook Inlet cycle meeting, which is currently scheduled for 2024. The Upper Cook Inlet drift fleet is currently harvesting sockeye headed for the Kenai and Kasilof rivers, and so far has harvested about 668,269 sockeye. Across the area, commercial fishermen have harvested about 1.2 million salmon total. However, the United Cook Inlet Drift Association has also submitted an emergency petition to the Board of Fisheries, asking the board to suspend area restrictions during the first two weeks of August as well as the one percent rule. The petition states that the request is to help control escapement, which is increasingly coming in after Aug. 1, and the sockeye escapement goals in both the Kenai and Kasilof rivers have been achieved. ADFG is currently reviewing the petition. Elizabeth Earl can be reached at [email protected]

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