Dunleavy proposes dividend back pay over 3 years

Alaska Gov. Mike Dunleavy on Wednesday proposed paying residents $3,678 over three years to make up for years that oil-wealth fund checks were capped. The money would be paid on top of whatever the annual dividend otherwise would be for this year, 2020 and 2021. Under Dunleavy's proposal, the money would come from Alaska Permanent Fund earnings. Most Alaskans receive an annual check with payouts that reached as high as $2,072 in 2015. The following year, amid gridlock over how to address a state budget deficit, then-Gov. Bill Walker cut the amount available for dividends roughly in half, an action ultimately upheld by the Alaska Supreme Court. Lawmakers subsequently limited payouts, with $1,600 settled on as last year's amount because it was what could pass the politically divided House. Dunleavy campaigned with a pledge to follow the traditional dividend calculation, which has not been used since 2016, and paying Alaskans the amount they missed out on when checks were capped. Preliminary budget figures suggested a full dividend this year and back pay for the three years would cost about $4.3 billion. As of Dec. 31, the fund's earnings reserve was valued at $16.6 billion, according to the Alaska Permanent Fund Corp. Some legislators want to limit the amount taken from earnings and not allow it to become a piggy bank of sorts amid an ongoing deficit. The Legislature last year passed a bill seeking to limit how much could be drawn each year from earnings for government costs and dividends. The law calls for a draw of $2.9 billion for the coming fiscal year. Dunleavy has eyed $1.9 billion of that for a so-called full dividend, in line with the traditional formula, and the rest for the budget. Under his new proposal, Senate Bill 23 and Senate Bill 24 , Alaskans who received a permanent fund dividend in 2016 and are eligible for this year's check would get an extra $1,061 this year. Those who got a dividend in 2017 and are eligible for one in 2020 would get an additional $1,289 next year, and those who got a 2018 dividend and are eligible for a 2021 dividend would get an extra $1,328 in 2021. Democratic Sen. Bill Wielechowski separately has proposed legislation that calls for paying the money missed as a lump sum. Meanwhile, the Alaska House hoped to find a workaround to keep staff on the job while lawmakers try to organize a majority. The Legislature's human resources manager, Skiff Lobaugh, warned last week that a temporary staffing authorization would expire on the first day of session, which was Tuesday.

Microcom founder launches new satellite broadband project

If everything goes according to Chuck Schumann’s plans it will soon be easier to do everything from providing health care to running an oil field to streaming a favorite movie in rural Alaska. Schumann founded the Anchorage-based satellite telecom provider Microcom in 1984. Now he’s parlaying that success — Microcom has expanded to Hawaii and Lower 48 markets — into a project to provide up to 40 gigabytes of broadband Internet capacity across Alaska. “We’re working hard to solve the problem of access to broadband in rural Alaska. In following the industry we were always hearing people talk about solving the problem in Africa or South America or the Middle East and countries around the world and they weren’t focused on solving the problem in Alaska,” Schumann said in an interview. Schumann’s plans started with founding Microcom subsidiary Pacific Dataport Inc., or PDI, in 2017. Pacific Dataport has since partnered with San Francisco-based satellite developer Astranis Space Technologies Corp. to build and launch one, and eventually several, “microsatellites” to support The Aurora System broadband network. "We really couldn't have asked for a better first customer and a better partner," Astranis CEO John Gedmark said in a Pacific Dataport announcement about the project. "Not just because of PDI's vision and dedicaiton to bridging Alaska's digital divide, but also becasue this is a perfect opportunity to showcase our phased approach to bringing online the more than 4 billion people in the world without reliable internet access." Phase one of the Aurora project is set to launch in 2020 and offer up to 7.5 gigabytes of broadband capacity across Alaska, according to Schumann. If successful, subsequent expansions to The Aurora System and a second satellite launch in 2021 will grow that capacity up to 40 gigabytes, he said. His companies have heard from large resource developers in rural parts of the state that broadband service now is too expensive and unreliable, which just adds another layer of challenges to an already technically challenging industry. Rural Alaska health care providers have also expressed a widespread need for better Internet access to aid in providing telehealth other information sharing needs. Currently, Alaska has about 2.5 gigabytes per second of satellite bandwidth across multiple broadband providers, according to PDI. The broadband tracking website BroadbandNow lists Alaska as being 80 percent covered by some sort of broadband service at an average speed of 25.8 megabytes per second. Alaska is the 44th most connected state when it comes to broadband availability, according to the site. “A couple of years ago we were just fed up with being left out of everything because satellite platforms covering Alaska just are too low on the horizon; we were just left out of things,” Schumann said in describing a common challenge with Alaska satellite connections. “They don’t cover Alaska. (We’re) always at the mercy of taking the scraps that someone would give us.” That is, satellite-based systems used in extreme latitudes are often obstructed by objects on the ground, or even the curvature of the earth, because they must be pointed at low-earth orbit, or LEO, satellites circling the earth at the equator. The Aurora System will overcome that issue by utilizing geosynchronous equatorial orbit, or GEO, satellites that are launched into an orbit thousands of miles above Earth and mirror the planet’s rotation. Schumann said the Aurora satellites will be positioned roughly over Hawaii “to give the best possible look angle” to Alaska. They will be able to provide broadband service up to 500 miles north of the North Slope, he said. “We’ll be able to serve cruise ships transiting the Arctic Ocean with a large amount of capacity that’s being demanded by the cruise ships of the future,” he added. The Aurora System will be run by Pacific Dataport. Microcom will offer small business and residential retail broadband from the system and Pacific Dataport will handle business-to-business and wholesale broadband contracts, according to Schumann. While the project is still in its early stages, a Pacific Dataport release states Aurora System service should initially be available for about one-third the average cost of current broadband rates for residential and wholesale customers in the state with three times the current satellite capacity. Schumann said the first phase, which will be “in the tens of millions of dollars” of investment, is as much of a sure thing as it can be because it is already fully funded. “We’re already building; we’re already ordering. We’ve been in progress now for well over a month in getting the project underway so the decision was made to let the word out that we’re underway,” Schumann said, adding “that we needed to give rural Alaskans hope that we were underway.”   Elwood Brehmer can be reached at [email protected]  

AGDC audit recommends minor changes, additional report forthcoming

Alaska Gasline Development Corp. officials by and large have spent $433.3 million in line with the requirements tied to that money but missed the mark on other, smaller legislative mandates and in-house rules, according to a special Legislative Audit Division review of the state-owned corporation. Released Jan. 14, the audit determined that AGDC had spent all but $150,000 of the $433.3 million in accordance with legislative intent for the appropriations. The misstep occurred when seven invoices from the Bureau of Land Management were charged to the corporation’s Alaska LNG Project fund instead of its Alaska Standalone Pipeline, or ASAP, project fund as they should have been. The charges were made after a new working agreement was signed with BLM and “were coded incorrectly to the AK LNG fund,” according to the audit report. AGDC staff subsequently corrected the errors when they were flagged by the auditor, the report states. Accounting for a $157 million re-appropriation of gasline funds to an education account in 2015, AGDC has received $479.8 million from the Legislature since 2010; $225 million of which was meant for the smaller, in-state ASAP project and another $254.8 million to further the $43 billion Alaska LNG Project. AGDC has exhausted its ASAP money and had $39.7 million left in Alaska LNG funds remaining at the end of November, according to figures presented at the corporation’s Jan. 10 board of directors meeting. A joint permitting record of decision for the ASAP project is expected from the U.S. Army Corps of Engineers and BLM as soon as the federal government shutdown is over. ASAP is a gasline project for in-state use estimated to cost approximately $10 billion. The finance review covered the period from July 1, 2014, to March 31, 2018. AGDC’s administrative support was handled by the Alaska Housing Finance Corp. prior to July 2014. AGDC started as an arm of AHFC and the Legislature separated the two in 2013. Some legislators have questioned whether AGDC had kept its project spending segregated during a time of severe overall state budget challenges given development of the long-sought Alaska LNG Project could benefit from additional money. The audit additionally concluded that AGDC had not complied with statutory language requiring its hiring procedures to include an Alaska veterans’ preference and recent corporate budgets and large contracts had not been approved by the board of directors as called for in the corporation’s bylaws. AGDC’s annual operating budget has been static at $10.3 million for several years. Then-AGDC board chair Dave Cruz wrote in a Jan. 2 formal response to the audit that the board approved a veterans’ preference policy in August and that staff would notify the board of future contracts of more than $1 million and seek board approval for contracts in excess of $5 million. Management will also seek full board approval for future operating budgets, according to Cruz. “AGDC is a dynamic organization that has successfully navigated through considerable organizational change,” he wrote. “AGDC is committed to continuously monitoring operations to ensure current processes are in alignment with established policy and good corporate governance. AGDC is committed to continuous improvement.” AK LNG report, financing Legislative Budget and Audit Committee chair Sen. Bert Stedman announced during a Jan. 14 meeting that the committee is working on a report with consultants hired to evaluate the overall potential fiscal impacts of Alaska LNG development on the state’s finances. Stedman said he originally wanted the Alaska LNG fiscal report — spanning everything from broad construction costs to the implications of specific lease expenditures by the North Slope producers — to be available by the Jan. 14 meeting as to apprise the incoming committee chair from the House of the work the committee has been doing to evaluate the gasline project. As of this writing a majority caucus had not been formed in the House and it was unclear who would chair the LBA Committee. However, the committee was told in mid-December that the flow information from AGDC and other relevant state agencies had been “highly restricted,” which delayed completion of the document, according to Stedman. He noted the Legislature didn’t approve AGDC’s request last year for unlimited authority to accept outside funding in large part because legislators weren’t comfortable with the amount of information the corporation was providing them. “We’re hopeful that we’ll have a smooth transition (to House leadership) and this document will help sitting members in the Legislature and staff and the public better understand the scope and realm (of fiscal issues) that we’re dealing with,” he said. Randy Ruaro, a member of Stedman’s staff said the report could be done in late January. Outgoing Rep. Paul Seaton of Homer also voiced concerns he has regarding the financing structure for Alaska LNG that AGDC is contemplating during the meeting. According to Seaton, AGDC Commercial Vice President Lieza Wilcox said negotiations with the Bank of China and Sinopec — two of the three state-owned Chinese companies AGDC has been negotiating with as a possible anchor customer and financier for the project — include the possibility of Sinopec receiving cheaper gas than other customers for 1 percent to 2 percent debt financing in return. Wilcox was part of mid-December meetings in Houston with LBA consultants, committee members and administration officials. Seaton participated via teleconference. The November 2017 joint development agreement AGDC signed with the Bank of China, Sinopec and China Investment Corp. contemplates Sinopec buying up to 75 percent of the project’s LNG capacity in exchange for the Bank of China funding up to 75 percent of the estimated $43 billion Alaska LNG Project. The remaining project funding would be raised through equity investments, according to AGDC officials. “What disturbed me was they said the Chinese are interested in this project because they could get cheap gas. They mentioned $5 (per million British thermal units) if things worked out,” Seaton said in an interview. “When you have a national bank and a national oil company working together on a project — heck, they could have 0 (percent) or 1 percent money and they’re going to make those payments and all of a sudden that’s where it could be really cheap.” Those comments caught his attention because corporation leaders have previously estimated building and operating Alaska LNG infrastructure would cost more than $6 per mmBtu, which does not account for feedstock gas and shipping costs, Seaton said further. He’s worried it could leave the state with LNG priced on equity financing with 8 percent to 9 percent returns that would be too costly to sell on world markets. “The whole plan has been 75 percent Chinese but this financing model means that it’s no longer one project; it’s two separate projects because the financing for the projects are totally separate and therefore one can be economic and one can be noneconomic,” Seaton described. AGDC officials disputed the $5 gas price reference but noted volume discounts are common in markets for many products. AGDC communications Vice President Tim Fitzpatrick said “pricing for gas from the project is still in the negotiation process” and also pointed out that in-state gas from the project would not have liquefaction and shipping costs added to it. Elwood Brehmer can be reached at [email protected]

USPS cancels Bypass Mail pilot project at last moment

A pilot program aimed at finding cheaper ways to deliver goods and mail to North Slope communities has been scrapped just before it was set to launch. The U.S. Postal Service had partnered with Lynden Transport Inc. and planned to use multiple modes of transportation to make Bypass Mail and non-priority mail deliveries around the North Slope hubs of Deadhorse and Utqia’vik, formerly Barrow. The pilot program was set to start Jan. 15 and run for one year. USPS officials went as far as to inform other mail carriers that could see their business impacted by the plan. Jodi McDermott, a commercial air network manager with the Postal Service, wrote in a Dec. 7 letter to Anchorage-based Northern Air Cargo leadership that Lynden Transport would deliver the same mail at the same frequency as before, but would use tractor-trailers traversing the tundra during winter, marine landing craft in summer and aircraft only during the spring and fall shoulder seasons. The belief, according to McDermott, was that Lynden would be able to achieve as good or better on-time service compared to the air service primarily used today. A major freight carrier in Alaska with corporate offices in Anchorage and Seattle, Lynden Transport is the parent company to 16 air, marine, ground and logistics subsidiaries. “The Postal Service expects substantial savings during the one-year pilot test. If the pilot test is successful, the annual savings are expected to increase due to continual Department of Transportation airline rate cost increases. These transportation savings come at a critical time for the Postal Service, as we continue to experience financial losses every year,” McDermott wrote. Established in 1972 as a way to ease demand on postal facilities that were running over capacity, the Bypass Mail program supplies a large portion of the consumer goods used in rural Alaska. The program uses a complex system of rate and aircraft classifications depending on the route served to determine freight fees. Those rates are established by the Department of Transportation and imposed on the Postal Service. Air carriers transport the freight orders that could be anything from food to power tools to household items, directly to their destination without going through a postal facility. The carriers are paid by the Postal Service. The Alaska Congressional Delegation successfully fought off changes to the Bypass Mail rate structure proposed by Rep. Darrell Issa, R-Calif., in 2014. At the time, officials with the Postal Service inspector general’s office said during a House committee meeting regarding Issa’s legislation that the Alaska-specific program lost $76 million in 2013, or 70 cents for every dollar of the $108 million the post office invested. Issa’s bill would have required the Postal Service to recover up to half of its Bypass Mail costs by 2020 through incremental rate increases. It’s unclear exactly why the Postal Service suddenly changed course and canceled the multi-modal test. USPS Alaska spokesman Brian Sperry said Jan. 14 via email that the program had been withdrawn and was no longer being pursued and he could not elaborate further on the reasons why. A spokesman for Lynden Transport also did not respond to questions about the program and why it was nixed. Alaska Air Carriers Association leaders sent a letter to McDermott Dec. 13 requesting the Postal Service pause the program until the potential impacts to contracted mail carriers could be identified. The letter also suggests that if the pilot program meets the requirements of federal Bypass Mail statutes and regulations the Postal Service should issue a request for proposals “to all eligible air carriers for the services requested.” AACA Executive Director Jane Dale said in a brief interview that it was subsequently determined the Postal Service has the legal authority to launch the pilot without going through a standard RFP process. She stressed the association does not want to meddle in any one company’s business, but seeks transparency and open competition for opportunities available to its members. Dale could only speculate as to why the program was canceled. ^ Elwood Brehmer can be reached at [email protected]

Disaster declarations, relief in limbo for multiple fisheries

The last few years of commercial fishing for Alaska have turned up poor for various regions of the state, resulting in disaster declarations and potential federal assistance. The 2018 season proved no different, with at least two disaster requests in the works at the state level. A third is in process at the federal level, and yet another is finally distributing money to affected fishermen from the 2016 season. The three in process still have to be approved before going to Congress, where funds can be appropriated to assist fishermen. The process is affected by the federal government shutdown, as most of the National Marine Fisheries Service employees are furloughed until a resolution is reached. The pink salmon disaster, which was requested in 2016 after catches across the Gulf of Alaska came in dismally below expectations, is awaiting a finalized plan for distributing $56 million in relief funds. The plan is currently being reviewed by the National Oceanic and Atmospheric Administration before the fund distribution is coordinated by the Pacific State Marine Fisheries Commission, according to the Alaska Department of Fish and Game. Chignik The fishermen in the communities of Chignik Lagoon, Chignik Bay and Chignik Lake sat on the docks for the majority of the summer watching dismally as the sockeye salmon run to the Chignika River failed to materialized. The fishermen that normally catch more than a million sockeye among them walked away with 128. Former Gov. Bill Walker declared an economic disaster for the fishery on Aug. 23, 2018, to start the process of distributing relief to the area’s residents. The three villages on the Alaska Peninsula are subsistence-dependent and obtain most of their cash income as well as winter food supplies from the fishery and wrote in deep concern for the residents this winter. Walker’s initial disaster declaration stated that relief would be distributed in the form of capital projects in the village and hiring preference for locals. That didn’t solve the villagers’ immediate concerns, according to a letter from the Chignik Coalition to Walker’s administration in October. “While we appreciate and look forward to building much needed infrastructure in our region, we are in dire need of immediate relief,” the letter states. The letter stated that the coalition requested a refund of permit renewal fees for 2018 from the Commercial Fisheries Entry Commission, a deferment on payments to the state’s commercial fisheries revolving loan program and a declaration of a federal disaster to make assistance available. The CFEC planned to send out letters to individual fishermen for potential refunds in November after reviewing the fishery circumstances, according to the Native Village of Chignik Lagoon’s website. A representative from Chignik could not be reached by press time for comment. Upper Cook Inlet The fishermen of Upper Cook Inlet’s drift gillnet fishery are also seeking assistance for their poor sockeye salmon harvest in 2018. Though the run met its escapement goals and the fishermen did have a number of openers, they walked away with only about a third of the average ex-vessel value. Fishermen in the drift gillnet fleet complained of not being able to make boat or loan payments, adding another poor year atop two below-average sockeye salmon years in 2016 and 2017. Though the fishermen haven’t received a disaster declaration from the governor’s office, they’ve found support with local governments on the Kenai Peninsula. The city councils of Homer and Kenai have both passed resolutions supporting a disaster declaration for the drift gillnet fishery, as has the Kenai Peninsula Borough Assembly. The request was sent to the governor’s office before the transition between administrations, but the fishermen haven’t heard anything about it since, said Erik Huebsch, the vice president of the United Cook Inlet Drift Association board. “It sounds like that was pushed forward in the last few days or weeks of the Walker administration,” he said. “We’re working on that, waiting to see if it fell through the cracks somewhere.” Gov. Michael J. Dunleavy’s office had not returned a request for comment by press time on the disaster declaration request for Upper Cook Inlet. Pacific Cod Walker’s administration filed a request for a federal disaster declaration in the Gulf of Alaska’s 2018 Pacific cod fishery in March 2018. A drastic cut in the quota due to a forecasted decline in abundance in the gulf led the North Pacific Fishery Management Council to cut the fishery’s quota by about 80 percent between 2017 and 2018. Others were closed outright, and the remaining fishery performed poorly. “Throughout the Gulf of Alaska, direct impacts will be felt by vessel owners and operators, crew and fish processors, as well as support industries that sell fuel, supplies, and groceries,” Walker wrote in his request letter to the Department of Commerce. “Local governments will feel the impact to their economic base and the state of Alaska will see a decline in fishery related tax revenue.” As of Jan. 15, no determination had been made on the Pacific cod fishery disaster request. Some disaster determinations take longer than others; while the 2016 Gulf of Alaska pink salmon disaster declaration only took three months until a determination was granted, the Washington state coho and pink salmon 2015 tribal disaster request was filed in 2016 and took more than two years to attain a determination of disaster. Elizabeth Earl can be reached at [email protected]

Hilcorp plans $340M investment in Alaska for 2019

HOMER – After completing its Cook Inlet pipeline project in 2018, Hilcorp is planning to keep its monetary investment about the same in Alaska going into 2019. More of the investment will be in drilling now that the $90-million Cook Inlet pipeline project is complete, said Hilcorp Senior Vice President Dave Wilkins in a presentation at the Kenai Peninsula Economic Development District’s Industry Outlook Forum on Jan. 9. “We run things year to year fairly steady,” he said. “We don’t like wild swings … in 2019, we’re going to drill more wells.” Hilcorp’s Alaska operations are split between Cook Inlet and the North Slope, where it’s spent a lot of time and money rehabilitating old assets purchased from Marathon, XTO and BP. On the North Slope, Hilcorp operates Milne Point, a field the company purchased from BP, and is working on permitting for the new Liberty offshore project in the Beaufort Sea. Of the $340 million the company plans to spend in 2019, about 55 percent of it will go to projects on the North Slope, with the remaining 45 percent going to Cook Inlet, said Hilcorp External Affairs Manager Lori Nelson in an email. The company’s normal mode of operation is to rework old wells, Wilkins said. Some of the planned investment is also set aside for maintaining the older equipment the company operates. “I like to say we recycle old oil fields,” he said. “When other companies are done with assets, we come in and we put new capital into it and reinvent it extend the life of those oil and gas assets.” Most of Hilcorp’s Alaska assets are in the Cook Inlet region, with a number of offshore platforms and onshore wells. Four new onshore wells in the area are planned for 2018: one in the Beaver Creek field, two in the Swanson River unit and one in the Happy Valley unit. The Beaver Creek well is targeting oil, the Happy Valley well is targeting gas and the Swanson River wells are targeting both. The company completed a cross-inlet pipeline project in fall 2018, facilitating the decommissioning of the Drift River oil terminal. The terminal is sited at the foot of Mount Redoubt, an active volcano on the west side of Cook Inlet, and has long been controversial because of the risk of oil spills during volcanic activity. Wilkins said the pipeline is currently transporting about 15,000 barrels of oil per day and will allow Hilcorp to fully decommission the Drift River terminal. The company is working on a plan now to complete the work there. “Our intent is to decommission Drift River as urgently as we did the cross-inlet pipeline,” he said. “We don’t want to just let it sit there — we want out of it … what’s happening now is we’re pushing the oil to Drift River, and cleaning up all the sludge and dirt at the tank bottoms and get them out.” Though the company’s planned investment is slightly down from about $360 million in 2018, it’s up from a low of $200 million in 2016, when oil prices hit a crippling bottom of less than $30 per barrel. Hilcorp has continued to purchase assets and drill new wells, including several new wells in the Ninlchik and Anchor Point areas. The newest, the Seaview pad just outside Anchor Point, was finished in December 2018. HIlcorp is still deciding what to do with that well, with possible stratigraphic testing this year, Wilkins said. In addition to its onshore wells, the company plans to drill a new well at the Monopod platform and to bring a jack-up rig to upper Cook Inlet to work at the Granite Point platform. The company is also planning seismic work in Lower Cook Inlet, where it won bids on federal oil and gas leases offshore in the Ninlichik and Cosmopolitan units and in the middle of the inlet outside Kachemak Bay. Hilcorp’s leases, purchased in 2017 for $3.03 million, were the first federal leases that attracted any industry attention since 2008. Wilkins said the company is planning seismic exploration in about 175 square miles for April 2019 and will work with the community to reduce impacts. No oil and gas resources have been developed in the federal waters of Lower Cook Inlet before. “In the Cook Inlet, as an industry, we have been responsibly developing oil and gas for over 60 years,” he said. “We can still do this, we can still do it responsibly the right way without upsetting the fishing, the water or the air.” Though companies are continuing to invest in infrastructure and exploration, Alaska continues to lag in oil production behind other states. Alaska Oil and Gas Association President and CEO Kara Moriarty said in her presentation at the Industry Outlook Forum that Texas far and away leads the U.S. in oil and production, with about 4.3 million barrels of oil produced per day. “If you looked at production today, it is up over 500,000 barrels per day, so we are definitely in fifth (place),” Moriarty said. “But we’ve been hanging onto fifth for over a year, probably, so we have lots of it, we are sitting fifth, and right now we’re producing about 5 percent of that record-breaking U.S. production.” Some of the slowing may have been connected to the legislative debates over oil and gas tax policy in the state, Moriarty said. However, the new administration of Gov. Michael J. Dunleavy has indicated that they have no intent of altering oil and gas tax policy, she said. “It’s very encouraging that we have an administration that is saying they want to be open for business and they’re sending that signal,” she said. ^ Elizabeth Earl can be reached at [email protected]

Texas, ND grapple with gas flaring

Though Alaska has strong laws against venting or burning off natural gas — flaring — except for safety and emergencies, the rules are far less stringent in the nation’s top two oil-producing regions. Blaming a lack of pipelines and processing facilities, oil and gas producers in North Dakota’s Bakken shale and the Permian Basin in Texas and New Mexico this fall flared more than 900 million cubic feet of gas per day. At that rate over a full year, it would be enough to fill almost 100 good-sized liquefied natural gas carriers. Overall, U.S. producers vented or flared 235 billion cubic feet, or bcf, of gas in 2017, according to the U.S. Energy Information Administration, or EIA. Alaska was responsible for 7.6 bcf, with Texas at 101 bcf and North Dakota second at 88.5 bcf. The Texas and North Dakota numbers are up almost 25 percent from 2016. Full-year totals for 2018 are not available yet. It’s gotten so bad that the Dallas Morning News, in a Jan. 10 editorial, commented: “Wasting this resource should depress all of us, because it has great value.” The gas could be used as heating fuel, to generate electricity, make petrochemicals or plastics. Instead, “discarding it is wasteful and potentially harmful to the environment,” the editorial said. Whether vented or burned, it adds to greenhouse-gas emissions. But without enough processing plants and pipelines to move the gas to market, it can be a worthless byproduct. Or worse than worthless when producers have to pay another company to take the gas. Gas prices in parts of the Permian Basin hovered near zero in November, while some trades cost producers a negative 25 cents per million Btu, according to price-reporting agency S&P Global Platts, which said it was the first time on record that gas traded for less than zero at the Waha hub in West Texas. The zero pricing could continue in the Permian this year, as more oil pipelines get built and companies ramping up their oil production get stuck with more associated gas. The EIA estimated December gas output would top 12 billion cubic feet a day in the Permian, up about 34 percent from a year earlier. Flaring reached record highs in the Permian in the third quarter of 2018, when companies lit up an average 407 million cubic feet per day, said Rystad Energy, an energy consulting firm. The resulting greenhouse gas emissions are equivalent to the daily exhaust of about 2.7 million cars, according to estimates from the World Bank and U.S. Environmental Protection Agency. In October, flaring in North Dakota averaged 527 million cubic feet per day — enough to heat 4.25 million average U.S. homes. That’s enough to have met the natural gas needs for all of North and South Dakota, including industrial and commercial demand, according to a report in the North Dakota Bismarck Tribune. The flaring represented more than 20 percent of October’s North Dakota gas production of 2.56 billion cubic feet per day. As oil production reached a record 1.39 million barrels per day, the additional associated gas overwhelmed processing and pipeline capacity — and ended up in smoke. Though 2018 was a bad year for flaring, it was still far short of North Dakota’s record in 2014, when producers burned off almost 130 bcf of gas; that’s more than any state ever in the EIA records that go back to 1967. It was a measly 1 bcf in 1982, a quarter-century before the Bakken shale boom. Industry is hopeful North Dakota will make significant progress on gas capture in 2019. Several gas processing plants and pipelines were announced or under construction in 2018, totaling more than $3 billion in investment, said Justin Kringstad, director of the North Dakota Pipeline Authority. But as oil and gas production continues to grow, more investment will be needed to move gas to market. “We’re probably going to need at least another $10 billion or more,” said Ron Ness, president of the North Dakota Petroleum Council. “Our productivity has just outpaced expectations.” Alaska statute prohibits “the waste of oil and gas” in production. State regulation, enforced by the Alaska Oil and Gas Conservation Commission, defines waste as “gas released, burned, or permitted to escape into the air,” with the exclusion of necessary emergency and operations-related emissions. North Dakota’s current gas-capture rules, adopted in 2014 and revised in April 2018, require operators to capture 88 percent of Bakken gas. That’s up from an 85 percent requirement earlier in the year and 76 percent in 2014. The North Dakota Industrial Commission, with much the same job as Alaska’s AOGCC, can require operators to restrict oil production if they fall below the gas-capture percentage, but the penalty is rarely imposed, the Bismarck Tribune reported in October. In August 2018, the industry captured less than 85 percent of its gas production for a fourth month in a row. For at least three of those months, the state declined to restrict production. North Dakota allows producers to flare as much gas as they want for the first year of a well’s production. After that, a producer may obtain an exemption on flaring limits if it can show “that connection of the well to a natural gas gathering line is economically infeasible at the time of the application or in the foreseeable future or that a market for the gas is not available and that equipping the well with an electrical generator to produce electricity from gas or employing a collection system … is economically infeasible.” The rules in Texas are more stringent than in North Dakota, and the increase in flared volumes is a result of the boom in Permian shale oil production, which grew from 1 million barrels per day in 2010 to almost 3.8 million by the end of 2018. Texas allows producers to seek a 45-day permit for flaring of associated gas, with extensions allowed to 180 days. Anything longer requires a full hearing by the Texas Railroad Commission, which governs oil and gas production. State law requires a cost-benefit analysis for a permanent exemption. The 45-day permits are easy to get. As of the end of November, state regulators hadn’t denied a single permit request in more than five years, the Wall Street Journal reported in December. ^ Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide.

Vincent-Lang to focus on sustainability, trust and state control as commissioner

As the state administration turns over, most departments have a new face in the commissioner’s office. At the Alaska Department of Fish and Game, that’s only half true. Though Acting Commissioner Doug Vincent-Lang is new to the commissioner’s office, he’s hardly new to the agency. He led the Division of Wildlife Conservation from 2012-14 and worked in various capacities with the department dating back to 1981. As soon as Gov. Michael J. Dunleavy was inaugurated, he named Vincent-Lang as his acting commissioner pending the approval of the joint boards of Fisheries and Game, who were scheduled to interview him on Jan. 16. Unlike other cabinet-level positions, commissioners of the departments of Fish and Game and Education must be recommended as qualified by the respective boards. Dunleavy is retaining Dr. Michael Johnson as the commissioner of Education. Although Dunleavy said he had “no clear preference” for commissioner, Vincent-Lang was the only applicant for the position. Should the board approve his candidacy, his name will be forwarded to the governor for confirmation by the Legislature. Stepping into the commissioner’s office isn’t necessarily a career move for Vincent-Lang, he said. “This is a challenging job,” he said. “I’m looking forward to the challenge. I have two new grandkids and I enjoy spending quality time with my grandkids … I hope to find the best work-life balance.” As the commissioner, all decisions boil down to sustainable management of animals, Vincent-Lang said. One of the biggest challenges moving forward will be how to continue the department’s operations and management with declining funds from the state general fund, he said. ADFG has not taken as steep a general fund cut as other departments, but as oil prices remain low and the Legislature turns down other revenue options, departments are having to get creative on maintaining operations. At ADFG, that has meant reducing surveys and research projects and reducing some staff positions. On the sport fishing and hunting side, that decline has been buffered some by an increase in hunting and fishing licenses, allowing the department to draw down more federal dollars to support operations like weirs and boat launch maintenance. Vincent-Lang was involved in the push to increase in sport hunting and fishing license fees in 2015 and 2016. The effort was unique because it came from the stakeholders themselves, he said; it saw little opposition because the users saw the need to increase funding for management. “As we move forward, we’re going to have to figure that out on the commercial fishing side,” Vincent-Lang said. In the long term, the department also faces the challenge of how to draw more young people into hunting and fishing, both on the commercial and sport sides. Millennials purchase fewer sportfishing and hunting licenses than their elders; the American Sportfishing Association found that sportfishing licenses sales nationwide declined among people 18 to 34 between 1980 and 2011. That decline has affected Alaska, too, which is something the department needs to consider for the future, Vincent-Lang said. That also applies to the commercial fisheries, which are broadly experiencing a “graying of the fleet” as the average age of permit holders increases because the financial threshold of entry is too expensive for young fishermen. The commissioner also holds the responsibility of connecting the department staff to the boards of Fisheries and of Game. In his application letter to the joint boards, Vincent-Lang wrote that he supports the boards’ role in management and their citizen Advisory Committees, ensuring that they have “the best available information to inform their resource allocation decisions” and not impact sustainability. He also wrote that while science plays an important role in management decisions, it is not the only consideration. “These are public trust resources,” he said. “We’re scientific experts, but we can’t do that in a vacuum without gaining people’s trust. It’s a two-way street.” To that end, Vincent-Lang has already delegated a staff member specifically to help build relationships with the public on sportfishing and hunting issues: Rick Green, widely known as Rick Rydell, a longtime conservative radio host and former Anchorage Advisory Committee member. A major theme that Dunleavy heard while campaigning was a lack of public trust and frustration with ADFG’s decisions. Green was appointed a special assistant to the commissioner to work on that problem, Vincent-Lang said. “(Green) has a lot of different people that he knows across the state,” he said. “(He’ll work on) trying to rebuild that trust.” On the hunting side, one major issue the department will continue to press on is state control over regulations on game management. The state sued the federal Interior Department in January 2017 over new regulations restricting certain hunting methods on federal lands in national parks and preserves and specifically on the Kenai National Wildlife Refuge. The state felt the rules interfered with the Board of Game’s ability to regulate game populations and, after pressure from Rep. Don Young in Congress in May 2017, the federal government began the process of reconsidering the regulations. If he’s confirmed as commissioner, Vincent-Lang said he would continue to press for state control over game management. “We are going to continue that battle, because we think they’re intruding on the state’s right to manage,” he said. Elizabeth Earl can be reached at [email protected]

Movers and Shakers for Jan. 20

The Anchorage Economic Development Corp. announced Lynn Rust Henderson, who is vice president of sales and service for Premera Blue Cross Blue Shield of Alaska, is now chair of AEDC’s board of directors. Joining her on the board’s executive team are BP Alaska Head of Control David Knapp as vice chair; Northrim Bank Executive Vice President and Chief Lending Officer Michael Huston as secretary and treasurer; Vice President of Operations for the Hotel Captain Cook Raquel Edelen as as immediate past board chair; and DOWL Vice President of Alaska Operations Steve Noble as at-large executive committee member. Four new Alaska business leaders will join AEDC’s 15-member board of directors. New members include: Furniture Enterprises of Alaska President Dave Cavitt; Bering Straits Native Corp. Senior Vice President and CFO Laura Edmondson; Signature Flight Support General Manager Marty Bettis; and Capital Management Benefits Corp. Director Garret Wong. Ahtna Environmental Inc. hired Matthew White, PE, CIH, whose responsibilities will include directing and managing environmental scientists, chemists, industrial hygienists, and environmental inspectors for the goal of applying OSHA, EPA, and USACE regulations for workplace safety and environmental compliance. White is a Certified Industrial Hygienist with more than 30 years of professional experience. White has a bachelor’s degree in mechanical engineering from the University of Alaska Fairbanks. Bob Allen joins Ahtna Engineering Services LLC as a senior environmental engineer. Allen has 30 years of professional experience and has been involved in all phases of contaminated site management including site investigations, feasibility studies, and remedial design. He earned his master’s degree in civil engineering from Colorado State University and his bachelor’s degree in civil engineering from Montana State University. MTA announced the appointment of Alaska business and real estate veteran Ken Kincaid to its board of directors. Kincaid, a 35-year MTA member, has most recently served on the board for the Mat-Su Health Foundation, where he was brought on to help navigate the complex purchase of an additional ownership stake in the Mat-Su Regional Medical Center. He serves on MSHF’s committees for Governance, Program, CEO Evaluation, and is the chair of its Finance committee. Since joining in 2012, MSHF’s long-term investments, investments from joint ventures, and grants to the community have more than doubled. Kincaid previously worked for 18 years at the Anchorage office of commercial real estate appraisal company Shorett &Riely, which later became Kincaid &Riely after he became the sole proprietor. Kincaid has also served on the Alaska Board of Real Estate Appraisers, the Mat-Su Borough Board of Equalization and numerous church and school leadership boards. Mark Corsentino was appointmented as the new general manager of the Anchorage Water and Wastewater Utility. Corsentino will replace Brett Jokela, who is retiring after serving as AWWU’s GM for six years. Corsentino has worked for AWWU since 2007. He served as project management engineer and supervisor from 2007-16, and as director of Operations and Maintenance since 2016. In his most recent position, Corsentino led and managed 95 employees, served as a member of AWWU’s leadership team, and was instrumental in the development and execution of the utility’s strategic plan. Corsentino holds a master’s degree in civil engineering and a bachelor’s degree in biomedical engineering from Marquette University. He has more than 18 years of professional experience in the industry. He begins full-time as GM of AWWU in early February. The Alaska Chamber announced the hiring of Albert Fogle as vice president, where he will focus on advocacy, legislative issues, as well as operations and financial management. Before joining the chamber, Fogle worked for RISQ Consulting as an employee benefits and business consultant. He is a licensed life and health insurance producer and past president of the Alaska Association of Health Underwriters. Prior to RISQ, Albert served in the U.S. Army as an Infantry Team Leader and Communications Operator where he supervised deployment logistics valued in excess of $2 million under security access controls. His years of military service include a tour in Iraq. Fogle has a bachelor’s of business administration degree in finance, with a minor in criminal justice from the University of Alaska Anchorage. Fogle replaces Ben Mulligan, who recently left the Chamber to serve as the deputy commissioner for the Alaska Department of Fish and Game. Long-time Alaska fisheries analyst Rachel S. Baker will join the Alaska Department of Fish and Game as deputy commissioner beginning Feb. 1. Also joining the department is Rachel Hanke who started work as legislative liaison earlier this month. Baker brings 15 years of experience as an analyst and policy advisor in state and federal fisheries management to her role at the department. She began her fisheries career in 2003 as an economist with ADFG. She joined the National Marine Fisheries Service in 2008 where she most recently worked as Supervisory Fishery Management Specialist in Silver Spring, Md. She will be based in Juneau. As deputy commissioner she will represent the state’s interests in federal fisheries management issues, including representing the department with the North Pacific Fishery Management Council on behalf of the commissioner. She will also coordinate state and federal fisheries policies and management programs to benefit the state and Alaska’s coastal communities. Hanke started at the department on Jan. 7. She worked in the Legislature for five years prior to joining the ADFG. Her background includes stints as staff to Sen. Peter Micciche and Rep. Kurt Olson. The RSA board of directors has elected Roger Weese as the new president. Channing Lillo has been promoted to vice president and principal electrical engineer. Mark Frischkorn will remain as vice president and principal mechanical engineer, and will continue to lead the Mechanical Department. Tim Hall, who has served as president for the past four years, will remain a principal electrical engineer and will continue to work on a part-time basis.

FISH FACTOR: Studies link fewer premature births to fishy omega-3s

Eating seafood can save lives. Premature birth is the leading cause of death for children younger than 5 years old worldwide, accounting for nearly one million deaths annually. Now there is proof that eating seafood or marine oils can significantly reduce that number. The lifesaving ingredient? Omega-3 fatty acids. The conclusion of a new Cochrane Review of 70 studies worldwide on nearly 20,000 pregnant women stated that omegas from marine sources reduce early premature birth by a whopping 42 percent. “The effect really has to be strong to see it in a Cochrane Review and I am very impressed that it has come out as significant as it has,” said Dr. Tom Brenna, a professor of pediatrics, chemistry and nutrition at Dell Medical School at the University of Texas. Research on marine omega-3s and pregnancy has been going on since at least 1992, Brenna said, who called the formal medical global collaboration and conclusions in the Cochran Review a “blunt instrument.” “The number of studies and the number of women studied is large enough so that it is very difficult to imagine that future studies are going to affect these results. We really are looking at something that may well be the final word,” he said. The results also included a 10 percent reduction in low birth weight babies of less than 5.5 pounds. Premature babies are at higher risk of a range of long-term conditions including developmental delay, learning difficulties and visual impairment. Brenna said marine-based omega-3 fatty acids also improve those problems. “Many of us believe that omega-3s are important for continuing development of the neural system and of the eye,” he said. “The brain and the retina in the eye are really omega-3 organs. You can say that as calcium is to the bones, omega-3 is to the brain.” A challenge now, Brenna said, is to translate the marine omega 3 findings on premature birth prevention and other positives into health policy and wider educational outreach. “I think that we have a major effect here that ought to be heralded from the rooftops far and wide,” he said. Fish smell snuffed Fish scientists proved years ago that the tiniest traces of copper in water can affect a salmon’s sense of smell. New research shows that increasing levels of acidity in the oceans does the same thing. Fish use their sense of smell to find food, avoid predators, find spawning areas, even to recognize one another. Losing it could threaten their very survival. “In the environment that has some serious implications,” said Jason Sandahl, whose research team at Oregon State University was one of the first to show how contaminants can disrupt the chemical balance of sea creatures, and that copper levels at just two parts per billion impaired small coho salmons’ sense of smell. “If there are predators around and the fish are not able to response to these danger signals in the water, they would likely be the next snack for these larger predators in the water,” he added. Oceans that are becoming more acidic have the same effect. Research at the University of Washington and NOAA’s Northwest Fisheries Science Center is the first to show that high levels of carbon dioxide impair the sense of smell in salmon. “We did this study because over the past 10 years there’s been a lot of research coming out of Australia on tropical reef fish and other places in the world looking at the effects of elevated CO2 in fish behavior,” researcher Chase Williams told KBBI in Homer. Williams and his colleagues exposed young coho salmon in tanks for two weeks to different acidity levels from today and predicted at 50 and 100 years out. Ground up fish scales were added to indicate a predator attack, which usually prompts the salmon to hide or swim away. The juvenile cohos exposed to the higher acidity levels did not appear to even detect the smell. The UW team also looked into where in the sensory-neural system the ability to smell erodes, and how it changes fish behavior. “We found that the salmon are still likely still smelling the odors, so there are no changes in the way their nose is detecting them,” Williams said. “But we did pick up changes in the way that their brain was potentially processing those odor signals. So that’s what is likely driving the behavioral changes.” The researchers said they hope their findings on such an iconic fish as Pacific salmon will alert more people to the consequences of carbon emissions being absorbed by our oceans. Fish watch Lots of winter fishing is going on and gearing up across Alaska. Boats have been out in the Gulf and Bering Sea since Jan. 1 targeting cod. Openers for pollock, flounders and various other whitefish kick off on Jan. 20. The snow crab fishery gets going in earnest around this time of year in the Bering Sea. In Southeast Alaska, mostly small boats using jig or hand troll gear are targeting black rockfish and lingcod. Divers are still tapping away on the last bits of Southeast’s 1.7 million-pound sea cucumber quota in just one open region. Divers also are still going down for more than 700,000 pounds of giant geoduck clams. The winter king salmon season for Southeast trollers opened on Oct. 1 and it’s been slow going. Fewer than 6,000 kings have been taken since the fishery opened; the five-year average is closer to 16,000 fish. Based on new treaty agreements with Canada, Southeast’s winter troll catch rate will determine the takes for commercial and sport users this year and that will likely mean more cutbacks. The state also has announced a full closure for king salmon in the Northern Cook Inlet region and Susitna River due to extremely poor returns. Boats at Kodiak, Chignik and the South Alaska Peninsula are fishing for rockfish and a half million pound Tanner crab fishery opened at Kodiak on Jan. 15. Turning to fish meetings, the state Board of Fisheries will meet from Jan. 15-19 in Anchorage to take up more than 60 proposals for Arctic/Yukon/Kuskokwim fish issues. Stakeholders will learn later this month how much halibut will be available for this year’s fishery that begins in March. The International Pacific Halibut Commission will announce the catch numbers and other management updates when it meets Jan. 28 through Feb. 1 in Victoria, British Columbia. Fish and ships While the Trump Administration and some of the nation’s biggest food producers push for industrialized fish farms off the coasts of the U.S., others are taking the technology inside. A German engineering company called Next Generation Cargo is planning to farm Atlantic salmon aboard the world’s largest sailboats by the year 2023. Each of five 540-foot sailboats will be able to produce 5.5 million pounds of salmon per year. Undercurrent News reports that the first vessel — called the Quadriga — is already being built at a Chinese shipyard. The big ship will receive fingerlings from European salmon hatcheries and raise them to harvest size in sea cages contained within the vessel. Because the vessels will sail in international waters, they do not require a license to farm. The Quadriga will operate on solar and wind power and will choose routes which best cater to fish growing. Next Generation also claims the vessels will use controlled feeding and incur “no feed losses” into the ocean. A promotional video describes the Quadriga as a “first in the Ecoliner class,” and says it will include luxury passenger cabins on board. A Norwegian company called Pure Atlantic AS is planning an even bigger fish growing ship measuring 1,600 feet in length. Fish Farming Expert reports it will be powered by wind turbines mounted on the back of the vessel and water will flow through the ship into built-in channels in the fish cages. Both the German and Norwegian companies hope their designs will revolutionize freight and shipping as well as aquaculture. Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

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