Alex DeMarban

Strained supply chains squeezing Alaska business owners

A surge of diners returning to restaurants are squeezing food supply chains, with impacts extending all the way to Alaska, where suppliers are short on stock and restaurant owners are scrambling to find ketchup, chicken and other items. Jerry Purcell, an owner of Sunday’s Caribbean Cuisine in northeast Anchorage, visited three restaurant supply stores on June 4. But even then, he couldn’t find all the right to-go containers. “Used to be one spot, you get everything,” Purcell said while shopping at Alaska Restaurant Supply in Midtown. “Not anymore.” Purcell said he couldn’t find the flat plastic lids he needed for the Caribbean and Hawaiian restaurant, soon to be renamed Sunday’s Loko Moko Deli. He’s covering the spicy oka, a raw fish salad like ceviche, with aluminum foil. He’ll top the island smoothies with domed lids, using whipped cream to fill the empty space so patrons feel like they got their full value. He also couldn’t find certain sizes of clamshell containers, so he had to use larger ones. He hasn’t seen anything like this after about two decades in the restaurant business, he said. “It’s a shortage all right,” he said. The COVID-19 pandemic altered consumer habits and worldwide shipping patterns as people stayed home, contributing to supply snarls for everything from lumber to laptops. Food, beverage and kitchen utensils, as well as appliances, are a current problem. The disruptions are the latest challenge for a hospitality industry struggling to recover from dine-in closures during the COVID-19 pandemic, and, more recently, contending with difficulties hiring available workers. Saint Coyote restaurant in South Anchorage hasn’t been able to buy lamb chops from its distributor for months, forcing owner Jesse Gallo to shop for them at stores around town. “It is a big frustration not having what you need,” he said. He can’t find certain brands of whiskey and tequila from suppliers, he said. And for about a month, Costco ran out of bulk containers of ketchup. “It was just like toilet paper at the start of the pandemic,” he said. “The only kind I could find at the store was organic ketchup in little jars.” Racheal Anaruk, manager at Alaska Restaurant Supply, said dishes, glasses, silverware and some pans are in short supply or out of stock. Items imported from overseas can be on back-order for long periods. The surge in restaurant activity is compounding the delays, she said. “Everyone is just getting back to work (all at once),” she said. “Seasonal places that didn’t open last year. We’re seeing those again.” The restaurant business has come “roaring back” and restaurants and bars across the U.S. suddenly need supplies, said Meghan Cieslak, with the International Foodservice Distributors Association, a trade group based in Washington, D.C. The supply chain is trying to catch up, she said. During much of the pandemic, food suppliers focused on getting retail products to grocery stores, where business was booming, Cieslak said. They turned their attention away from bulk products sought by restaurants and bars, where activity had slowed. Also, social distancing and other restrictions on food processing plants, plus occasional outbreaks of COVID-19, limited production of meats and other items. A lack of workers is slowing transportation and also affecting other companies along the food supply chain, she said. Adrianne Foltz is a former spirits and wine distributor in Anchorage who recently opened The Broken Blender, a cocktail bar and restaurant in Anchorage. She said Alaska is often the last state to receive shipments for alcoholic beverages, in part because of relatively low demand compared to other states and the logistical challenges of getting items here. She said her distributor hasn’t been able to find Crown Royal whiskey from Canada for weeks. She’s had to shop at Costco for it. There’s not enough Coors Light and Blue Moon beer to keep up with demand, she said. And specialty beers are hard to find. Companies aren’t making draft beer as much, she said, referring to beer from a keg or cask, rather than a bottle or can. Jay Ramras, owner of Pike’s Waterfront Lodge in Fairbanks, said he can usually buy chicken for biscuit sandwiches and orange juice in large quantities, for free breakfasts at the 180-room lodge. But the distributor, U.S. Foods, couldn’t obtain them in recent weeks, he said. One problem with the chicken shortage is that roosters with Tyson, one of the world’s largest meat processors, aren’t meeting breeding expectations, among other issues, Ramras said. “It’s a schizophrenic marketplace,” Ramras said. “Nothing is working like it’s supposed to work.” Instead of large deliveries to the restaurant’s back door, managers are buying retail-sized items from grocery stores. That adds pressure to the hotel’s bottom line, he said. “It takes time for a food and beverage manager to stand in a checkout line,” he said. “But we’re moving a whole lot more sandwiches than we were last year.” He added, “We’d rather have the problems we have this year, than the ones we had last year.”

Hilcorp leads in methane emissions, but not from North Slope

Nationally, oil company Hilcorp releases more methane, a potent greenhouse gas, than its much-larger U.S. peers, a new report shows. But a closer look at Hilcorp’s operations in Alaska shows its rate of methane emissions here is smaller compared to most of its Lower 48 operations. The report was commissioned by Ceres, an investment network targeting climate change, and Clean Air Task Force, an environmental group. It provides an unprecedented basis for comparing oil and gas companies’ greenhouse gas releases, officials with the groups said. Across its operations in Alaska and the Lower 48, Hilcorp had about 40 percent more methane emissions than ExxonMobil, the nation’s largest oil and gas producer, the report shows. Its overall greenhouse gas emissions were just behind ExxonMobil’s. Hilcorp is now Alaska’s second-largest oil producer, behind ConocoPhillips. But nationally in 2019, the year data in the report was collected, Hilcorp was the nation’s 19th largest oil and gas producer, behind ConocoPhillips, BP and others, the report shows. “They are punching above their weight and not in a good way when it comes to their emission intensity,” said Andrew Logan, senior director of oil and gas at Ceres. However, in Hilcorp’s North Slope fields in Alaska, the methane emissions associated with exploration and production were relatively tiny, according to the report. Its rate of carbon dioxide emissions on the Slope was more middle-of-the-road compared to its U.S. peers, said Lesley Fleischman, senior analyst with the Clean Air Task Force. Those emissions largely stem from turbines and engines used to power the North Slope oil field operations, she said. Hilcorp’s Cook Inlet operations show a fairly high rate of methane emissions, compared to many of the company’s U.S. counterparts, Fleischman said. But the rate is lower than other Hilcorp locations in the Lower 48. The findings are based on 2019 data the companies reported to the Environmental Protection Agency — before Hilcorp acquired BP’s North Slope assets in 2020. It looks at emissions related to exploration and production, not activities that come later, such as oil and gas processing and shipping. A factor in Hilcorp’s high rates of methane and other greenhouse gas emissions is its business model of acquiring aging fields, Logan said. The older equipment at those fields has a higher potential for releases, he said. “They can’t be responsible for the state of these assets when they brought them into their company,” Logan said. “But what they do with those assets once they own them is on them.” Hilcorp invests in older fields to safely extend their operational life, said Nick Piatek, a spokesman in Hilcorp’s headquarters in Houston, Texas. The company’s record of upgrading old equipment and improving operations is unique, he said. The report’s calculations do not account for the modernization and retrofits of that equipment, he said. Hilcorp has decreased emissions across its Alaska operations, including 24 percent at its offshore operations, Piatek said. In addition to its onshore North Slope fields, Hilcorp operates offshore production facilities in the Beaufort Sea, as well as Cook Inlet. Piatek said the report is designed to advance the agenda of the groups behind it. The report was written by consulting firm M.J. Bradley &Associates, an environmental consulting group, in collaboration with the two nonprofits. The nonprofit groups are pushing for policy changes, including a leak-detection and repair program to help clean up greenhouse gas releases in oil and gas fields, Fleischman said. In general, more regulations are needed to control releases of methane and other greenhouse gases, she said.

Projects on tap cementing Anchorage as cargo hub

Cargo traffic through Ted Stevens Anchorage International Airport surged during the COVID-19 pandemic, with scores of jets arriving daily from Asia. They brought with them computers, cell phones, pharmaceuticals and other products in high demand from homebound people in the Lower 48, airport officials said. Jets headed the other way hauled Canadian lobster, Washington state cherries and more, airport director Jim Szczesniak said during a recent airport tour. “There’s the lobster plane,” he said, nodding to a Sky Lease Cargo jet. Altogether, the airport landed 3.2 million metric tons of cargo last year, a 15 percent increase as e-commerce boomed along the world’s busiest trade route from Asia to the U.S. The Anchorage airport’s growth far outpaced the competition, making it the world’s fourth-busiest for cargo, up from sixth place. Despite that growth, the airport lacks the services of its competitors, Szczesniak said. It’s largely a fuel stop and crew-change site for the jumbo jets headed to other airports. But a series of projects proposed for the airport, valued at $1 billion, could help transform it into more of an all-purpose stop for cargo jets, he said. For the first time, giant new warehouses would allow any of the airport’s nearly 30 international carriers, such as China Airlines or Korean Air, to stockpile items for efficient shipment. As it is now, cargo jets occasionally meet on the tarmac to trade products, limiting options and requiring coordination, officials said. Another proposal for a cold-storage facility, part of a $200 million project, could increase shipments of frozen or perishable goods, including seafood from Alaska. FedEx and UPS, which operate freight-sorting hubs that move about one-fourth of the airport’s landed cargo, also plan large expansions, airport officials said. The projects were announced starting in 2019 as developers pursued leases for raw land around the airport. They are now in various phases of design and engineering, he said. They represent the airport’s most significant chance for growth in cargo services ever, he said. If built, they’d provide hundreds of jobs, serving as a potential counterweight to Alaska’s struggling economy. “We are full-throttle trying to maximize this asset to pull (Alaska) out of this decline,” Szczesniak said. A perfect spot Perched midway between Hong Kong and the Lower 48, the Anchorage airport is geographically blessed for cargo service, said Darren Prokop, an economist and logistics professor at the University of Alaska Anchorage. Cargo jets can fly right over Anchorage if they choose, he said. But they can instead gas up at the airport, allowing them to carry less fuel and more of the cargo they’re paid to haul. That aviation fuel is relatively cheap, because the airport is part of a foreign-trade zone administered by the nearby Port of Alaska where the fuel arrives. That means the fuel avoids duties that can boost prices elsewhere, said Prokop. The airport enjoys another advantage over competitors, Prokop said. Unlike airports elsewhere in the U.S., foreign carriers can legally transfer cargo between jets at the Anchorage airport. The exemption was secured by the late Ted Stevens in 1996 and enhanced in 2004, he said. Carriers have been reluctant to take advantage of that. They worry it might be illegal in Anchorage because it’s illegal elsewhere, he said. Also, it requires timing jets’ schedules. “Hence the cargo facilities,” Prokop said. If the new facilities are built, foreign jets can still transfer product without having to worry about making sure the other jet has arrived. And they can do it more efficiently, at more convenient times, at the cargo facilities. Prokop said that long term, the airport should see continued gains in cargo because of the strong demand in the U.S. for products from Asian countries. “We are the gateway city to the Lower 48,” he said. During the pandemic, cargo flights from a growing number of Asian cities began passing through Anchorage. To haul products to the Lower 48 faster, they bypassed big hubs such as Shanghai or Hong Kong, Szczesniak said. What will happen as the pandemic eases is uncertain. Szczesniak said he thinks changing route patterns and continued growth in e-commerce are factors that will help supplant the pandemic-related issues that boosted cargo to Anchorage. “The pandemic has cemented the importance of Anchorage in the global supply chain,” he said. A full-service stop John Tichotsky, a former chief economist for Alaska, is a partner in IC Alaska. The company plans to build a maintenance hangar to provide mechanical work for jumbo jets at the airport’s southern end. The hangar is part of a $500 million proposal that also includes new cargo storage and sorting space. Also, 14 “hard stands” would allow cargo jets to fuel up, plug into power and transfer freight. The project will change the airport from the equivalent of a standalone gas pump into a full-service station, Tichotsky said. Lease negotiations for the land at the airport are being finalized, he said. The hard stands could open as early as next year. “I can’t identify anything (in Alaska) that will come online faster and produce greater economic benefit than providing infrastructure at the airport,” Tichotsky said. Other projects are: • FedEx plans to expand its existing operation by 19 acres, building a new center to sort domestic freight, part of a $60 million project. International freight sorting will continue in the current transfer center. • 6A Aviation has proposed building a 195,000-square-foot warehouse and six parking spots for cargo jets, a $170 million project on the airport’s west side. • Alaska Cargo and Cold Storage plans its $200 million warehouse off the north-south runway, with cold storage. • UPS plans to expand its existing facility by 28 acres, and add space for three big cargo jets, a $110 million project. The UPS expansion will take up much of the northern portion of the airport, Szczesniak said. “This will all be one big, giant UPS campus,” he said during the tour, pointing to a stretch of raw land that extended to a hill. Construction for the cold-storage project could start later this year, officials said. Besides supporting international businesses, cold storage could help Alaska companies that want to ship seafood or peonies, said Joe Jacobson with McKinley Capital Management, a project partner. The plan is to capitalize on the traffic that currently exists at the airport. Any growth would be a bonus, he said. “Right now there is unrealized opportunity just with the existing traffic,” Jacobson said. A bright spot The cargo industry was a bright spot in Alaska last year, as the pandemic battered other sectors, said Bill Popp, head of the Anchorage Economic Development Corp. Among other benefits to Anchorage, it brings hundreds of cargo pilots daily who help fill hotels and support restaurants. (A cargo plane pilot was Alaska’s first confirmed positive case of COVID-19 on March 11, 2020.) Cargo activity is responsible for much of the employment at the airport. The airport supports about 10 percent of the jobs in Anchorage, he said. Recently, FedEx announced it is hiring more than 200 workers to create its first permanent night shift for package-sorting at the airport. Popp said there’s optimism that cargo in Anchorage will stay strong, increasing the odds the projects will be built, he said. Prokop, the logistics professor, said the new warehouses might one day support new manufacturing businesses in Anchorage. Parts stored at the airport could be assembled into final products that can be shipped elsewhere. “Ten or 20 years from now, we’ll see if this leads to value-added manufacturing,” he said.

Satellite-based broadband competition heats up in Alaska

A battle for space internet in Alaska is brewing as companies jockey for the right to deliver satellite broadband, in part to bridge the digital divide between villages and cities. Starlink, a subsidiary of Elon Musk’s SpaceX, is letting Alaskans sign up for inexpensive satellite internet service that it’s targeting for delivery next year. Rural Alaskans who are paying $99 to get in line say the broadband service will be revolutionary, replacing the slow, clunky internet they now receive, with its sky-high costs. But Starlink has competitors, and companies involved in similar efforts, including Alaska-based Pacific Dataport, argue that Starlink’s Arctic plans may not happen safely, if ever. Starlink, Amazon’s Kuiper Systems and OneWeb, owned partly by the U.K. government and working with Pacific Dataport, are just three of the projects hoping to deploy armies of small satellites circling the globe in low orbits, sending zippy internet to Earth. OneWeb, Kuiper Systems and other Starlink competitors have told the Federal Communications Commission that Starlink’s plans could potentially be unsafe and cause collisions that threaten other satellites with impacts from space debris. Starlink declined to comment for this article. The proposals could bring “broadband equality” to rural Alaska, putting internet speeds and costs more on par with urban areas, said John Wallace, who runs a technology support company in Bethel, a transportation hub for dozens of villages in Southwest Alaska. Wallace signed up for Starlink last week, shortly after the opportunity became available. He said many rural Alaskans are forced to use the internet sparingly, and sometimes not at all, because costs can run higher than $500 a month. Data caps lower the price, but can be too restrictive, he said. “Out here you have to pick and choose how you use the internet,” Wallace said. “If you use it for entertainment, you can’t use it for work, because it’s so costly. And it’s worse in villages.” “It will be so exciting when people can just watch a movie, take a class, do some office work at home,” he said. Feds limit how many satellites Starlink can deploy, for now Starlink plans deliver broadband to households and businesses for $99 per month, plus $549 in equipment and shipping, according to its website. In rural Alaska, the costs will quickly pay for themselves, Wallace said. Starlink has already deployed more than 1,000 satellites, and provides the broadband to about 10,000 people in the U.S. and internationally, the company told the Federal Communications Commission this month. But the agency in January declined to approve Starlink’s request to deploy 58 polar-orbiting satellites, a step toward its plan of delivering service in “high latitude geographic areas,” such as Alaska’s most remote areas. Starlink’s broader plans before the agency involve 348 polar-orbiting satellites. The agency, however, did allow Starlink to deploy 10 polar-orbiting satellites to test and develop the service. The partial grant of Starlink’s request gives the agency time to consider the arguments raised against Starlink’s proposal, the agency said in filings. Starlink has also proposed to use lasers to communicate between satellites and reduce the number of ground stations needed, Elon Musk said in a recent tweet. Starlink has a long way to go to meet its Alaska goals, said Shawn Williams, government affairs director at Pacific Dataport. Williams said Pacific Dataport welcomes the competition. “(But) anyone sending in $99 needs to know that legally, Starlink can’t serve Alaska at the moment, and technically they can’t serve Alaska at the moment, so this is all being done on a hope and promise,” said Williams, also a former assistant commissioner in the Alaska Department of Community, Commerce and Economic Development under Alaska Gov. Mike Dunleavy. Alaska competitors keeping a close eye on Starlink Williams said Starlink has applied with the Federal Communications Commission for many waivers and modifications. “It can be surmised that SpaceX is making decisions and developing its system on-the-fly,” Williams said. “If they figure out how to develop their (laser) technology affordably, then build and launch those in 2022, that would be the best-case scenario for rural Alaskans who want Starlink.” GCI, Alaska’s largest telecommunications company, is tracking efforts by Starlink and others, in part because they could be a competitor, said Heather Handyside, a spokeswoman with GCI. “We are watching this closely because it’s really a new technology,” she said. Handyside said about 80 percent of Alaskans, such as Anchorage residents, enjoy access to the same fast internet service available in the Lower 48, one gigabit per second for downloads. But about 20 percent of Alaska’s population, around 150,000 residents, live in remote, small communities where delivering the internet can be difficult, she said. GCI plans to keep working to improve connectivity in those areas, she said. Toward that goal, GCI later this year plans to provide fast, fiber-based broadband internet to Nome and Kotzebue, Western Alaska hub communities, in a partnership with Quintillion, she said. Pacific Dataport, founded by Alaska telecommunications company Microcom in 2017, also has a goal of providing more affordable satellite broadband internet in Alaska, Williams said. Unlike Starlink, it plans to sell broadband in wholesale amounts, such as to telecommunications companies or tribal entities that can then sell the service to individuals, he said. It can also be sold to large consumers like school districts and hospitals. The company has already signed some contracts with wholesale customers, he said. “The market demand has been healthy,” Williams said. A potential ‘game changer,’ says an Utqiagvik music teacher Pacific Dataport plans to sell OneWeb’s capacity. OneWeb has already launched more than 100 satellites, and plans to launch hundreds more to serve regions globally. To deliver broadband in Alaska, it needs to launch 144 more satellites, an effort scheduled to be completed by July, Williams said. OneWeb, recently emerged from bankruptcy in November, plans to deliver broadband to Alaskans this summer, Williams said. OneWeb has committed to delivering service in Alaska first, said Lesil McGuire, a consultant to OneWeb and a former Alaska state senator. Both OneWeb and Pacific Dataport are permitted to deliver service in Alaska, Williams said. Late this year, Pacific Dataport plans to launch the first of its own two satellites, part of what it calls the Aurora Network. The second will be launched in 2023, or earlier, he said. The technology will be next-generation, he said. But, as with more traditional satellites, they will remain positioned high above the equator. The two satellites will also provide fast, broadband internet to Alaska, he said. The OneWeb and Pacific Dataport broadband systems will complement each other, he said. Jake Calderwood, a music teacher at the elementary school in Utqiagvik, said he supports all the efforts to deliver satellite broadband in Alaska. But he paid $99 for Starlink because it has already exceeded expectations outside of Alaska, he said. “This is a game changer,” he said of Starlink. In December, Calderwood sent a letter to the Federal Communications Commission supporting Starlink’s Alaska plans. The agency cited the letter in its decision allowing a test program for Starlink. Calderwood told the agency that the high cost of internet service is why nearly all the school’s 700 students aren’t taking music courses during the pandemic; many families can’t afford the online instruction after the school canceled in-person classes. “In our town Utqiaġvik, Alaska internet is a luxury that many are barred from using,” he wrote. “Being the farthest north city in the United States presents many challenges to access. Everything is expensive here from $10 per gallon milk to internet bills in the hundreds. My own bill … runs in excess of $300 for 10 megabit speed and the cost varies depending on usage.” “Since hearing about SpaceX’s plan to offer affordable internet to the most rural areas of the world I have held out hope that relief may be coming for many in our community,” wrote Calderwood. “Especially that my students might all have equitable access to education during this time.

ConocoPhillips to cut 100 Alaska jobs

ConocoPhillips Alaska said Feb. 15 that close to 100 of its Alaska employees will either be laid off or accept voluntary severances. Somewhere around 95 of the company’s 1,100-member workforce in Alaska will be impacted, according to an email from Natalie Lowman, a spokeswoman with ConocoPhillips, the state’s largest oil producer. “Affected employees will receive severance, outplacement services, and other benefits offered under existing (human resources) policies,” Lowman said. The decision was related to the company’s $9.7 billion acquisition of Texas oil and gas company Concho Resources, according to Lowman. “This past year has emphasized the need for our company to stay focused on cost and become more efficient in what we do,” Lowman said. “With the acquisition of Concho Resources, we have revisited our overall structure and that has resulted in job losses company-wide.” Lowman said the workforce reduction is unrelated to recent court decisions. The 9th Circuit Court of Appeals on Feb. 13 halted winter work at ConocoPhillips’ large oil prospect in northern Alaska, the Willow field in the National Petroleum Reserve-Alaska. The halting of that work will affect 120 ConocoPhillips employees and contractors, the company has said. Alaska’s oil industry has had a tumultuous year. Oil giant BP’s exit from the state following the sale of its Alaska assets to Hilcorp resulted in the loss of hundreds of jobs. The onset of the COVID-19 pandemic meant some North Slope projects temporarily ground to a halt. Most recently, there was the court ruling stopping work on ConocoPhillips’ Willow project and a new, less oil-friendly presidential administration taking charge, impacting oil and gas lease sales and delaying at least one project. Oil prices have plunged and then steadily recovered during the nearly yearlong COVID-19 pandemic, but jobs in the oil industry have not recovered. Pre-pandemic, early last year, the state counted about 10,000 oil and gas jobs. In December, the job count was 6,800. The jobs that ConocoPhillips is cutting may be some of the best in Alaska’s oil patch, since large oil producers typically pay more than smaller oil companies or support companies. ”Those are a loss of quality jobs that are year-round, and in some cases, have been around for a while,” said Neal Fried, an economist with the Alaska Department of Labor and Workforce Development. But the cuts are relatively small compared to the losses the state has already faced, Fried said. The sale of BP’s Alaska assets to Hilcorp involved many more employees, he said. Lowman said she did not have information on how many of the impacted employees are Alaska residents, or how many of the positions being cut are jobs on the North Slope versus jobs in Anchorage. Alaska residents make up about 85 percent of ConocoPhillips Alaska’s workforce, she said. “The announcements began today,” Lowman said. “Workforce changes like this are always difficult, but we care about every employee affected and will assist them with out-placement services and other associated benefits.”

9th Circuit halts 2021 work at Willow

A federal appeals court has sided with conservation and Indigenous groups and halted winter work at a major ConocoPhillips oil project on Alaska’s North Slope. The 9th U.S. Circuit Court of Appeals on Feb. 13 issued the six-page decision, by 9th Circuit Judges William Canby and Michelle Friedland. The decision will halt on-the-ground work at Willow for the year, said Natalie Lowman, a spokeswoman with ConocoPhillips, in an email Feb. 14. Winter activity at developing projects on Alaska’s North Slope is supported by ice roads that melt in the spring, sharply reducing on-the-ground activity for all but a handful of months. The project, among the most promising North Slope prospects, was expected to employ about 120 people this year. Lowman did not say if the company plans to appeal the decision. Other questions must be answered later, she said. Sovereign Iñupiat for a Living Arctic, the Center for Biological Diversity, Friends of the Earth and other groups sued last fall to stop the project, not just in winter, but altogether. They argue that federal agencies under the former Trump administration did not follow environmental laws before approving the project. The Willow project is located in the National Petroleum Reserve-Alaska in northern Alaska, near the village of Nuiqsut. ConocoPhillips had planned to break ground at a mine site early this month, blasting away the surface to reach gravel, according to court records. The company had planned to haul gravel and start gravel road construction in mid-March. If developed, the field could produce 600 million barrels of oil over 30 years, boosting state revenues and jobs, estimates say. More recently, the groups sought a preliminary injunction to halt the winter activity approved by the Bureau of Land Management, while questions in the larger case continued. Early this month, the groups appealed to the 9th Circuit, asking it to overturn an original decision by U.S. District Court Judge Sharon Gleason that allowed the winter work to continue. After the groups appealed, Gleason put a short-term halt on the work, pending a decision by the 9th Circuit. Gleason said the work could “irreparably harm” the landscape and the ability of Rosemary Ahtuangaruak, a Nuiqsut resident with Friends of the Earth, to use the area in an undisturbed state. Ahtuangaruak and others have traditionally used the area for hunting, according to her testimony in the case. The 9th Circuit judges agreed the plaintiffs will be harmed without an injunction halting the work. “Our review of the record also convinces us that the appellants will suffer irreparable harm in the absence of an injunction, and that at least one of its NEPA claims is likely to succeed if timely,” the 9th Circuit judges said, referring to the National Environmental Policy Act. “We conclude that the balance of equities favors relief, that the balance of hardships tips sharply in appellants’ favor, and that an injunction pending appeal is in the public interest.” The 9th Circuit halted the winter activity until the court can rule on an appeal in the case. The court has expedited the appeal under a schedule that allows briefings to conclude in April, said Kristen Monsell, an attorney with the Center for Biological Diversity. Under that schedule, the court will likely not rule until at least sometime in May, she said. Winter activity in remote camps often ends in April, and may not resume again until December or January. Once the 9th Circuit decides on the preliminary injunction, the issue will head back to district court for a decision on the broader questions, Monsell said. Siqiñiq Maupin, executive director of Sovereign Iñupiat for a Living Arctic, said in a statement on Sunday that the group is grateful for the court’s decision to stop “destructive on-the-ground construction and blasting work while our lawsuit makes its way through court.” “Decision-makers and decision-making processes that impact the Arctic Slope must not just claim to include or consider us, but in fact prioritize our health and well-being,” Maupin said. ConocoPhillips is expected to decide later this year if it will pay billions of dollars to develop Willow for oil production. First oil is not expected to flow until the mid-2020s.

ConocoPhillips gets approval for massive Willow project

The Trump Administration approved ConocoPhillips’ large oil project called Willow in the National Petroleum Reserve-Alaska on Oct. 27. The decision sets the stage for construction near a prized conservation area in a largely undeveloped region on the North Slope, which has seen increased industry attention in recent years. The federal government’s record of decision was signed on Oct. 26 by Interior Secretary David Bernhardt. It will allow up to three drill sites, a processing facility and gravel roads and pipelines. Two more drill sites and additional roads and pipelines, also proposed by ConocoPhillips, can be considered later, the agency said. Conservation groups decried the proposal as a threat to the Teshekpuk Lake Special Area, a wetland complex in the 23 million-acre reserve that supports migratory birds and calving grounds for the Teshekpuk Lake caribou herd. The agency said in a statement that Willow could produce up 160,000 barrels of oil daily. Over 30 years, about 600 million barrels total could be produced, helping offset dwindling oil production and state revenues in Alaska, the agency said. Construction would produce more than 1,000 jobs, and lead to more than 400 jobs during operations, the agency said. “This decision will make a significant contribution to keeping oil flowing down the 800-mile trans-Alaska pipeline decades into the future while delivering federal and state revenue as well as important impact assistance to the affected native communities,” Bernhardt said in a written release. Willow, as well as the Pikka oil project that company Oil Search is pursuing, are new, large discoveries in a region west of Prudhoe Bay. The federal government set aside the petroleum reserve nearly a century ago for its energy potential, but did not hold lease sales there for many years. Construction at Willow could begin next year assuming all regulatory approvals are granted, said Natalie Lowman, a spokeswoman with ConocoPhillips. Oil production would begin about five years later. ConocoPhillips is reviewing the record of decision, a “key milestone” that allows planning to move ahead, the statement from Lowman said. Kristen Miller, conservation director for the Alaska Wilderness League, said the administration’s decision is a dangerous rush toward development. Polar bears could also be threatened, groups said. “Despite a national crisis that has drastically impacted Alaska’s rural villages and elevated health and food security concerns, the Trump administration is nonetheless forcing through a controversial proposal to greatly expand oil and gas drilling in our nation’s melting Arctic,” Miller said. “Administration officials saw an opportunity to check off another industry wish list box with the public’s attention diverted by coronavirus, and they took it.” The federal government’s approval defers a decision on two other drill sites and related gravel roads at the request of ConocoPhillips, so the company can conduct additional outreach to affected communities, the agency said. Those drills sites may be built in the years to come, the agency said. ConocoPhillips has said its development plans at Willow will likely be delayed if Ballot Measure 1 passes on Nov. 3. The measure would increase taxes on ConocoPhillips, as well as ExxonMobil and Hilcorp Alaska. Robin Brena, chair of the Ballot Measure 1 group, has said the measure targets only the three largest producing units in Alaska, not smaller or undeveloped oil fields like Willow. He has said he does not believe development at Willow will be delayed in part because the project has enormous value for the oil company.

BLM releases plan for ANWR seismic exploration

A Native village corporation has submitted plans to federal regulators to conduct seismic exploration this winter with an embattled company in the Arctic National Wildlife Refuge, a potential step before drilling can occur there. The plan, submitted by Kaktovik Inupiat Corp., an Alaska Native village corporation, will be sharply scaled back from an ambitious plan that KIC was involved in in 2018. That larger plan stalled after it was submitted to the federal government for approval. Congress in 2017 approved oil exploration and development in a portion of the 19-million-acre refuge. BLM is preparing to hold the federal government’s first-ever lease sale in the 1.6-million-acre coastal plain, allowing oil companies to acquire the rights to drill. Instead of a seismic program mapping 2,600 square miles in the coastal plain of the refuge, as the original plan proposed, the new plan will cover about 850 square miles and will be conducted primarily on land owned by the corporation, said Matthew Rexford, president of KIC. KIC represents Alaska Native shareholders from Kaktovik, the only Alaska Native village in the refuge. Exploration could lead to oil production that supports the economy in Alaska and Kaktovik, a village of about 250 people, Rexford said. A natural gas discovery could provide the village with affordable energy, he said. The community “looks forward to experiencing the same benefits every other community in America has available to them,” KIC said in a prepared statement. “Technology advancements over the decades, stringent controls, and careful planning of each program helps ensure that the land is left undamaged,” KIC said. The Bureau of Land Management released the plan on Oct. 23, setting a two-week public comment period through Nov. 6. That angered conservation groups opposed to oil drilling in the refuge that said the comment period is too short. The proposal is “a mad rush to create new facts on the ground before a potential change in presidential power,” Adam Kolton, executive director of the Alaska Wilderness League, said in a statement. Rexford said guides from the village will be part of the work, to help prevent harm to polar bears that den in the coastal plain in winter, and to caribou that will have migrated south when exploration occurs, Rexford said. An aerial infrared survey to find polar bear dens should begin in January 2021, KIC said in a statement. The seismic mapping of underground oil potential will begin as soon as permits are available. Snow and ice on the ground must be thick enough so vehicles can travel without damaging the tundra, Rexford said. Conservation groups said on Oct. 23 that a study of aerial infrared surveys in Alaska, published in the journal PLOS One in February, found that they failed to identify 55 percent of known polar bear dens. Bernadette Demientieff, executive director of the Gwich’in Steering Committee, said the seismic activity will damage the refuge and caribou and other animals needed to feed the villages, including Arctic Village, outside the refuge’s southern boundary. KIC says in the plan that its operator will be SAExploration, a seismic company currently in bankruptcy. Some of SAExploration’s previous leaders face federal fraud charges. Working with KIC and Arctic Slope Regional Corp., a regional Alaska Native corporation, SAExploration led the 2018 seismic proposal for ANWR that did not advance after it was submitted. Mike Faust, SAExploration’s new chief executive, has said SAExploration entered bankruptcy with a plan that strengthens its balance sheet and clears much of its debt. Faust has said the company has taken steps to prevent improper actions from happening again. Faust referred questions about the application to KIC.

‘Pebble tapes’ send project leaders into damage control mode

The Pebble Limited Partnership is trying to patch its battered image after secretly recorded videos last month caught its two top executives boasting about their influence over Alaska politicians and regulators. The controversial Pebble mine proposal faces new challenges after Alaska’s U.S. senators, the governor and the U.S. Army Corps of Engineers denounced the statements as false. But despite the blowback from the videos’ Sept. 21 release, the developer of the copper and gold prospect in Southwest Alaska continues its effort to win a key construction permit from the Corps. “The idea that Pebble is dead, no matter whose opinion it is, is just not accurate,” said Mark Hamilton, vice president of public affairs at Pebble Limited Partnership. “(Pebble) can go forward and it is going forward as we speak.” Amid the fallout: • Pebble’s chief executive, Tom Collier, resigned after he and Ron Thiessen, president of Pebble parent company Northern Dynasty Minerals, were recorded talking freely on the tapes. Thiessen has not resigned, a Pebble official said Oct. 5. • Democratic members of Congress have raised the possibility of investigations into what they say are discrepancies between the executives’ statements in the tapes and comments that Collier made before a House subcommittee. • Alaska Republican U.S. Sen. Dan Sullivan came out solidly against the project. Sullivan’s challenger in this year’s election, Democratic-nominated independent Al Gross, is using the leaked tapes in campaign ads against Sullivan. • Alaska’s speaker of the House has asked Gov. Mike Dunleavy not to support a mitigation plan Pebble needs to win the Corps permit. • House Minority Leader Lance Pruitt, R-Anchorage, said he would donate the $500 he received from Collier to charity. The group opposing Ballot Measure 2 said it would return Collier’s $2,500 donation. It retained donations from some current Pebble employees. Pebble opposition groups remain wary Collier’s resignation does nothing to eliminate the questions raised in the videotaped conversations about the credibility of the permitting process, said Nelli Williams, Alaska director of Trout Unlimited. “A full investigation by Congress is absolutely necessary — Alaskans and Americans deserve to know the truth,” she said in a prepared statement. If built, Pebble would be located about 200 miles southwest of Anchorage, near headwaters of the Bristol Bay salmon fishery. Pebble would like to secure a Corps permit soon, before entering a three-year permitting phase with the state. John Shively, Pebble’s interim CEO replacing Collier, released a statement Oct. 1 trying to distance the company from the statements made on the tapes. He reminded readers that Northern Dynasty has given an unconditional apology to Alaskans, while he personally apologized to Alaskans and Pebble staff. “The people working on the project, from our site staff to our corporate staff, have the utmost integrity — and I know all of them felt betrayed by what they saw expressed on those tapes,” Shively said. “Much of the content was boastful, embellished, insensitive and stretched credulity to its breaking point.” In the videos, secretly organized by an environmental group, Collier and Thiessen spoke with people hired to pose as potential Pebble investors from Hong Kong. Collier and Thiessen said in the recordings Alaska Republican U.S. Sens. Lisa Murkowski and Sullivan were just being political when they said in August that Pebble has not met the high bar for environmentally safe development and should not be permitted. They described friendly relations with Corps officials. They said they could call up Dunleavy, and he’d reach the White House on their behalf, whenever they want. The leaked conversations add to the uncertainty the mine faces, said Bob Loeffler, previously the director of Alaska’s Division of Mining, Land and Water under former Alaska Govs. Tony Knowles and Frank Murkowski. “It can’t be good for a project when so many politicians are going against it,” he said. The mine has lost its major mining partners over the years, including Anglo American in 2013. Pebble and Northern Dynasty, a small mining company from Canada, need investors to help cover enormous development costs. Finding an investor could be even harder now, said Bruce Switzer, former director of environmental affairs for Cominco, now Teck, in the early 1990s when the mining company owned the Pebble deposit. Teck Cominco left the project in 2005 because it’s not economically viable, despite what Pebble claims about the mine’s enormous value, Switzer asserted. Switzer is also a former mining consultant who advised Pebble opponents after he left Cominco. The leaked conversations underscore that Pebble is a politically motivated project, rather than one that can stand on its own financial merits, Switzer said. If Pebble is the world-class deposit the company touts, “why would you have these two promoters essentially lying” about the project’s relationships with politicians, said Switzer. Federal lawmakers raise specter of investigations After the tapes were leaked, Alaska’s U.S. senators have taken pains to emphasize their opposition to the project receiving a permit. Sullivan, facing pressure from challenger Gross, came out forcefully against the mine on Twitter, saying “No Pebble Mine.” Lisa Murkowski, who described herself as “absolutely, spitting furious” in reaction to the tapes, retweeted Sullivan’s message with three heart emoji for support. Sullivan later said in an interview with Alaska Public Media that he would not support the project even if it presented a satisfactory mitigation plan. Hamilton, with Pebble, said officials with any project in Alaska would like to have the vocal support of the state’s U.S. senators. But it’s the Corps that will decide whether to award a permit or not. “Everyone who was insulted by that display (in the videos) appropriately does not hold us in the highest regard,” Hamilton said. “But these are professionals at the Corps ultimately, and the Corps will do what the regulations tell them to do.” Other federal lawmakers are raising the specter of possible probes into Collier’s written testimony to a subcommittee of the House Committee on Transportation and Infrastructure in 2019, when he said, “Pebble has no current plans, in this application or in any other way, for expansion.” But while Pebble has submitted a 20-year plan to the Corps, Thiessen said in the video that the mine could potentially produce minerals for 200 years. He said expansion beyond 20 years will be unstoppable once development begins. Collier said “we,” presumably Pebble, will at some point request a mine expansion. As he had before, he said that will require a new state and federal permitting process. Longtime Pebble opponent U.S. Sen. Maria Cantwell, D-Wash., called for a Department of Justice investigation into the comments. U.S. Rep. Peter DeFazio, R-Oregon, chair of the House transportation committee, said Collier may have misled Congress in 2019. His investigative staff are reviewing the comments, he said in a recent statement. Thiessen and Collier did not say in the videos that Pebble has a “defined” plan for expansion beyond the 20-year proposal, according to a statement from Northern Dynasty last month. “What we have said consistently, and is reinforced in the ‘Pebble tapes’ released this week,” is there is no current “formal” plan for expansion, Northern Dynasty said. Pebble still aims to win the permit — and change minds The U.S. Army, the Corps’ parent agency, said in August that the project can’t be permitted as currently proposed. The land-use protection plan that Pebble is pursuing, showing how Pebble will compensate for damage to wetlands, will satisfy regulators and many critics of the mine, Hamilton said. “I expect that compliance (for the project) will switch the opinion of many individuals who have been insulted,” Hamilton said. It appears that the so-called compensatory mitigation plan will need to use state land, requiring state support, according to a letter to the governor last week from Alaska House Speaker Bryce Edgmon, an independent from Dillingham, and Rep. Louise Stutes, a Republican from Kodiak. The lawmakers asked Dunleavy in the letter to not support Pebble’s mitigation plan. Edgmon, in an interview, said the leaked videos raise serious doubts about the objectivity of the permitting process at both the state and federal level. Both the Dunleavy administration and the Corps have said they are committed to a fair and vigorous review process. In a three-page reply letter on Oct. 6, Dunleavy defended the economic argument for Pebble construction, though he does not expressly state support for it. As he has before, the governor did not express support for the mine, but said he does support a fair review process. “No serious person would disagree that accessing the mineral deposits within the Bristol Bay Mining District, if done in a way that protects the watershed, would transform the lives of Alaskans living in the region,” he wrote. “My role is to ensure that each project is subject to a fair and rigorous review process, and that every opportunity to create thousands of jobs is fully explored.” In the videos, Collier said Pebble plans to set aside state land for a preserve. He said the state has supported Pebble “behind the scenes.” Collier also said he recently met with the governor “to get his commitment that they would be there” to support the project. The governor’s office rejected that statement on Oct. 2. “The governor has not committed to any proposal, including a draft mitigation plan,” said Jeff Turner, a spokesman for the governor, in a statement. “As far as Mr. Collier goes, both Pebble and Northern Dynasty have said he embellished his statements.” Hamilton said Pebble has survived other challenges, including a threat by the Environmental Protection Agency during the Obama administration that essentially halted the mine’s progress in 2014. Those earlier challenges were based on what Hamilton calls a false narrative that the mine would destroy the Bristol Bay salmon fishery. That message has been more harmful to the mine over the years than the tapes, he said. Hamilton said the Corps has determined that the mine and the fishery can safely coexist, though conservation and fishing groups counter that the Corps’ determination is flawed. The opponents add that the Corps found that damage from the mine would be extensive, including permanent destruction of more than 100 miles of streams. The debate over the mine’s potential impacts to the Bristol Bay salmon fishery remains Pebble’s toughest challenge, Hamilton said. “The idea that someone acted out and insulted people is not trivial,” Hamilton said of the videos. “But it’s not the heavily advertised narrative of fear that has had people concerned about the actual workings of this mine.” “It’s bad, but this is not like the constant screaming that a mine will kill all the salmon,” he said. “That has been a powerful message of our opponents, but they are wrong.”

Pebble CEO Collier resigns after release of tapes

Pebble Limited Partnership CEO Tom Collier resigned on Wednesday after an environmental group released secretly recorded videos of Collier and Ron Thiessen, president of Pebble parent company Northern Dynasty Minerals, discussing their connections and influence with Alaska politicians and regulators. Northern Dynasty also issued an apology to “all Alaskans," according to a statement released by the company. Northern Dynasty’s senior management and board of directors accepted Collier’s resignation, the statement said. “Collier’s comments embellished both his and the Pebble Partnership’s relationships with elected officials and federal representatives in Alaska," the statement from Northern Dynasty said. The embellishments involved Gov. Mike Dunleavy, Sens. Lisa Murkowski and Dan Sullivan and senior representatives of the U.S. Army Corps of Engineers, among others, Northern Dynasty said. “The comments were clearly offensive to these and other political, business and community leaders in the state and for this, Northern Dynasty unreservedly apologizes to all Alaskans,” the statement said. Reached Wednesday, Collier declined to comment and said he would no longer speak with news media. The Environmental Investigation Agency, an environmental group, hired individuals in August and September to pose as potential investors in the project, in online video meetings with the Pebble executives. The group released the videos on Monday. In response, Dunleavy, Murkowski and Sullivan strongly denounced the statements by Collier and Thiessen as false and embellished. The Army Corps also issued a statement on Tuesday, noting that the executives had presented inaccuracies and falsehoods, including about the permitting process. The actors for the environmental group posed as representatives of a Hong Kong-based investment firm with links to a state-owned entity in China, Northern Dynasty said. “The unethical manner in which these tapes were acquired does not excuse the comments that were made, or the crass way they were expressed,” Thiessen said in the statement. “On behalf of the company and our employees, I offer my unreserved apology to all those who were hurt or offended, and all Alaskans.” Among other statements, Collier described Murkowski and Sullivan as merely making political points when they said in August that the Corps can’t permit the mine, statements the senators denied. Collier also described his close access to the governor’s office, and said he counted Dunleavy as a friend, prompting the governor’s office to broadly reject the statements made in the videos. Former Pebble Partnership CEO John Shively will serve as Pebble’s interim CEO while the company seeks a new leader, the statement said. The proposed copper and gold project would be built about 200 miles southwest of Anchorage, near headwaters of the valuable Bristol Bay salmon fishery. Critics say it will hurt the commercial fishing industry and subsistence fishermen there. The Army Corps of Engineers is in the final stages of determining whether to issue a permit for the project that could lead to its construction. A final decision could be issued soon. President Donald Trump recently tweeted about the project, saying there would be “NO POLITICS” in the permitting decision. The Alaska Miners Association on Wednesday also condemned Collier’s comments. “Mr. Collier’s comments were clearly inappropriate and we appreciate Northern Dynasty for swiftly handling this issue," said Deantha Skibinski, the group’s executive director. "Our mining operations and projects have a superb track record of meeting the high standards set forth in the regulatory process, and we do so with a commitment to safety and environmental protection.” Shively, the state’s former Natural Resources commissioner under Democratic Gov. Tony Knowles, served as Pebble’s chief executive until 2014, when Collier took his place. Collier, a former chief of staff to Interior Secretary Bruce Babbitt, led the Pebble project through tumultuous years, including a move by the Obama administration that essentially halted the project in 2014, followed by progress under the Trump administration. Collier was scheduled to receive about $4 million from Pebble if the Corps issued a permit decision favoring the mine, and roughly another $8 million if the project survives litigation, he has said. It was unclear on Wednesday what would become of that possible bonus. “We don’t comment on personnel or contract matters related to current or former employees,” said Sean Magee, a spokesman with Northern Dynasty Minerals. Thiessen remained in job on Wednesday, the company said. Major questions loom for the project, including how Pebble will meet steep requirements set by the Corps to compensate for the environmental damage the project will cause. The United Tribes of Bristol Bay, representing 15 tribes opposed to the mine, said Collier should not be the “scapegoat” for the project, according to Alannah Hurley, the group’s director. “His resignation does nothing to address the deep-seated flaws and issues with the Pebble mine’s rigged permitting processes and political influence,” Hurley said. Thiessen, like Collier, also made statements in the videos that drew strong rebukes from Alaska leaders. Thiessen says in the videos that the company can get Dunleavy to call White House chief of staff of Mark Meadows about the project. That statement and others by the Pebble executives are not true, Dunleavy’s office said. Thiessen said Pebble is trying to work with Sullivan so the senator doesn’t say anything that could harm Pebble’s effort to receive the permit from the Corps. Sullivan’s office on Tuesday called that “yet another fabrication.” Sullivan and Murkowski have both said the mine does not meet environmental regulatory standards. They have said a record of decision supporting a permit, or a ROD, should not be issued. Robin Samuelsen, an adviser for Commercial Fishermen for Bristol Bay, representing fishermen opposed to the project, said in a statement on Wednesday he often got hit with a rod as a kid, on his behind. “And that’s what I’m asking Senator Sullivan and Senator Murkowski to do,” he said. “Take out the rod, it’s time to spank 'em. They’ve lied to you, they’ve lied to us out in Bristol Bay, they’ve lied to Alaska and they’ve lied to the world.” Shively, recently the board chair for Pebble Mines Corp., general partner for Pebble Partnership, said in the statement on Wednesday that the project is too important not to be built. “My priority is to advance our current plan through the regulatory process so we can prove to the state’s political leaders, regulatory officials and all Alaskans that we can meet the very high environmental standards expected of us,” he said.

ConocoPhillips demobilizing North Slope drill rigs

Alaska’s largest oil producer announced this week that it will demobilize its drilling rig fleet at its North Slope fields to reduce the number of workers at risk of COVID-19. “(ConocoPhillips) announced yesterday that due to the heightened COVID-19 risk to our North Slope workforce, we are taking action to significantly reduce the number of personnel on the Slope in a managed fashion,” said Natalie Lowman, a spokeswoman with the company. “To do this, we are making the difficult decision to demobilize our rig fleet,” Lowman said in an email. “Given the high degree of uncertainty on how the situation plays out, we can’t say how long these measures will be in place.” While the rigs will be placed in long-term storage, Lowman said, wells already in production will continue to produce oil. ConocoPhillips and other oil companies in Alaska have taken unusual measures to prevent the virus from spreading at the oil fields, including extending multi-week shifts to reduce the number of replacement workers headed to the remote sites. As of Wednesday afternoon, state health officials have confirmed the existence of only one case of COVID-19 on the North Slope. The individual works at Prudhoe Bay, run by BP. Historically low demand during the coronavirus crisis has contributed to the plunge in oil prices, alongside an oil price war between Russia and Saudi Arabia. The low oil prices have hit Alaska producers hard. ConocoPhillips in March announced it would cut capital spending in Alaska by about $200 million, including by mothballing two rigs at the Alpine and Kuparuk fields. The company informed workers and contractors on Tuesday that ConocoPhillips will now demobilize its entire rig fleet, said Lowman. ConocoPhillips’ huge new drilling rig, nicknamed “The Beast," will not start drilling in April as originally planned, she said. Lowman said she could not specify the number of rigs and workers that will be impacted. She also could not immediately provide details on impacts to production. Each rig employs dozens of workers. “Up to five rigs" will be impacted, said Ed King, a private economist in Alaska who tracks oil companies. That does not include the “The Beast," which had not yet started drilling, he said. The decision will at least defer some oil production for a period of time because there will be fewer wells producing oil, King said. On the exploration side, it’s likely to delay the development of projects, King said. The president of Doyon Drilling, which provides rigs and services to ConocoPhillips and other oil companies, said in a letter to employees on Tuesday that the decision will be “severely felt” by all Alaskans and Doyon Drilling employees. “We understand that this volatile environment and (ConocoPhillips) directive is very concerning to our employees,” Ron Wilson wrote. “We are unable to predict how long it will take for the COVID-19 virus or the low oil prices to pass. In the meantime, we will demobilize our rigs in (a) safe and effective manner to ensure we are in position to resume drilling operations upon (ConocoPhillips') directive.” Doyon spokeswoman Sarah Obed declined to comment. BP, operator of the large Prudhoe Bay oil field, previously made a similar decision to lay down two drilling rigs to reduce the number of personnel working on the North Slope.

Oil price collapse draws more scrutiny for Hilcorp-BP sale

State regulators want more details about Hilcorp Alaska’s “access to capital” as it seeks to buy BP Alaska’s assets after the historic plunge in oil prices. The Regulatory Commission of Alaska issued an 18-page order on April 2 asking, among other questions, if recently altered market conditions have “impaired” Hilcorp’s ability to borrow money to finance the $5.6 billion deal. “Explain whether recent changes in the financial markets have impacted (Hilcorp Alaska and related companies’) access to the capital necessary to fund this transaction,” the state commission asked. As part of the blockbuster deal, the commission is weighing the proposed sale of BP’s stake in the 800-mile trans-Alaska pipeline and related pipelines. The agency expects to make a final decision by Sept. 28. The new order asks for additional details from Hilcorp and BP across a host of areas, including planned upgrades to pipelines, financial protections for “unplanned incidents” and other needs, as well as assurances surrounding funding for the trans-Alaska pipeline’s future dismantlement. The price of oil over the last month plummeted to levels not seen in nearly two decades. Alaska North Slope crude bottomed out at $21.80 a barrel on April 1 amid a price war between Saudi Arabia and Russia as well as the historic collapse in demand amid the economic shutdown caused by the coronavirus. North Slope prices briefly topped $70 a barrel at the start of the year. The plunge has hit oil companies hard, causing cutbacks in Alaska’s oil patch in recent weeks. Major credit rating agencies Moody’s Investors Service and Standard & Poor’s have previously questioned whether Hilcorp will take on too much debt to finance the deal. The agencies have put Hilcorp on notice for a potential credit rating downgrade. The company’s current rating is a good one, they have said. Luke Miller, a Hilcorp Alaska spokesman, did not immediately respond to a request for comment on April 6. BP said in a market update on April 1 that the timing for payments, under its plan to take in $10 billion before 2021, may be “revised” during volatile market conditions. “This includes the sale of our Alaskan business to Hilcorp which we continue to expect will complete during 2020, subject to regulatory approvals,” BP said. “We will provide further information on this transaction going forward, as appropriate.” BP and Hilcorp have previously said they hope to complete the transaction by June of this year. In its order, the commission asks how much “financial reserves” Hilcorp has set aside to fund Alaska operations. The agency raises the question in a section about Hilcorp’s “financial fitness.” “Have the recent turmoil in capital markets affected (Hilcorp Alaska and related companies’) anticipated ability to secure adequate financial reserves to fund Alaskan operations?” the commission asks. “If (Hilcorp Alaska and related companies) are not impacted by capital markets, is it because (they) independently have the capital necessary to fund obligations related to its Alaskan operations?” the commission asks. The Prince William Sound Regional Citizens’ Advisory Council sent a letter to the commission last week addressing the need for updated information from the companies amid the market turbulence. The Alaska Public Interest Research Group also raised those concerns in a letter on April 3. The agency wants a response from the oil companies by May 4.

Hilcorp finances to stay private; ratings agencies eye debt for deal

After months of review, Alaska state regulators on March 12 granted confidentiality to Hilcorp Energy’s finances, removing a hurdle for the company as it seeks to buy BP Alaska’s pipeline assets as part of a $5.6 billion deal. The Regulatory Commission of Alaska said the Houston, Texas-based company and its subsidiaries can keep their financial statements out of the public eye. Hilcorp in August announced it intended to buy BP Alaska’s assets, including the company’s 49 percent stake in the 800-mile trans-Alaska pipeline, and interests in related pipelines. The companies’ financial statements are declared to be “confidential as a matter of law,” the agency wrote in a 19-page order. More than 200 people have filed comments with the RCA, many concerned about Hilcorp’s request for privacy. Skeptics have expressed concern that privately owned Hilcorp, a small company compared to BP, may not have the financial capabilities to handle unexpected events such as cleanup costs for a major oil spill. They also have said the transaction involving the trans-Alaska pipeline is so important to the state’s economy that the public needs a greater understanding of Hilcorp’s finances. Hilcorp, known for buying and reviving aging oil and gas fields, has said it has provided unusually granular details of its operations at the agency’s request. The oil company has also cautioned that disclosing that and other financial information would hurt its competitive advantage. The five-member commission said its interpretation of state statute prevents it from releasing the documents because they are not required to be filed with the Federal Energy Regulatory Commission. Commissioner Stephen McAlpine was the lone dissenting member. He said the companies did not originally state, as required, that they were seeking the confidentiality protections of the statute. “With this in mind, I believe that airing these documents publicly and subjecting the entire transaction to intense debate far outweighs the petitioners’ interest in keeping them confidential,” McAlpine said in a two-page dissent. “Instead, Hilcorp has invited an unnecessary public relations nightmare over what may come of the lifeblood of our state. Now public scrutiny may well be based on speculation as to what the documents may or may not say rather than a complete airing of the facts as they exist,” he said. Hilcorp and BP filed for a transfer of the pipelines assets in September. The commission will decide on that larger issue by Sept. 28, the commission’s order said. Philip Wight, an analyst with Alaska Public Interest Research Group, which has taken a lead in questioning the deal, said the commission’s order sets a “regressive precedent.” He said the public interest group is considering legal action to reverse the commission’s decision. “By ruling on a murky technicality, the commission failed to do its job to protect the public interest,” Wight said in a statement. “Alaskans are being denied the information we need to be good stewards of our resources.” Agencies eye Hilcorp debt rating Because it is a privately owned company, little is publicly known about Hilcorp’s financial picture. For skeptics of the deal, a major question has been whether Hilcorp has the financial muscle to pull off the large acquisition without putting important obligations, such as infrastructure maintenance, at risk. Two major credit rating agencies, Moody’s Investors Service and Standard & Poor’s, have expressed concern that the oil company will take on large amounts of debt to finance the deal. Analysts with both agencies have described Hilcorp’s current rating as a good one. But if Hilcorp borrows too much, the agencies could downgrade the oil company’s rating. That would make it more expensive for Hilcorp to borrow money because investors will demand larger interest payments. If Hilcorp borrows too much, it could put itself and investors at financial risk, said Jim Posey, a former commissioner for the Alaska Public Utilities Commission, a precursor to the Regulatory Commission of Alaska. (The RCA is the state agency that will decide whether Hilcorp’s finances can be kept confidential.) “I think the rating agencies are looking at them and saying this is a big bite for them, and in an environment where oil is somewhat in decline, they’re rightfully asking, ‘What is the prospect of this investment?’” said Posey, also former general manager for Anchorage Municipal Light & Power. Hilcorp did not respond to requests for comment for this article, including how much money it might seek to borrow to finance the acquisition. Moody’s expressed concern about Hilcorp’s rising debt in a December report. Hilcorp has successfully invested in mature oil fields, exploiting under-performing wells and creating diversified operations across the U.S., the report said. “With a seasoned management team, (Hilcorp Energy) has continued to demonstrate a strong track record of replacing production and adding reserves through the drill bit and via targeted acquisitions,” Moody’s said in the report. But the company’s debt levels rose over the past year, the report said. While Hilcorp will grow significantly as it acquires BP Alaska’s oil production and reserves, it also has future expenses to account for, including retiring old assets, Moody’s said in the report. “If the BP acquisition were to be mostly debt funded, debt levels … could approach $6 billion from the roughly $2.6 billion outstanding at September 30,” Moody’s said. Hilcorp can avoid a rating downgrade by employing “a prudent mix of debt, an equity infusion, and/or alternative funding,” Moody’s report said. Hilcorp has done well under the leadership of its billionaire founder, Jeffery Hildebrand, the report said. “The singular control Mr. Jeffery Hildebrand wields over (Hilcorp Energy’s) operations through his ownership of (Hilcorp Energy’s) general partner is also considered in its credit profile; however, the company has prospered under his control and leadership, while maintaining a strong operating profile,” Moody’s said. Andrew Brooks, a Moody’s analyst, said in November that the credit rating agency needed to see Hilcorp’s financial plans for the acquisition as part of its credit review of the company. Brooks could not be reached for additional comment. Standard & Poor’s put Hilcorp on notice of a possible ratings downgrade in August, shortly after the deal with BP was announced. A review that could lead to a downgrade will be closed once the sale is complete, perhaps late this spring, the agency said. Ben Tsocanos, an analyst with Standard & Poor’s, said the agency has seen Hilcorp’s financial plan. The plan is not publicly available, he said. “We were of the opinion they’d go to market around now (to borrow money),” Tsocanos said. “In general, they are a pretty decent operator,” Tsocanos said of Hilcorp. The Wall Street Journal reported last month that Hilcorp plans to purchase BP Alaska’s assets entirely by using debt. But the newspaper said in that report that coronavirus fears had increased challenges for energy companies trying to borrow money. That could help put pressure on Hildebrand to contribute some of his own money to help pay for part of the deal, the newspaper reported. Denali Kemppel, general counsel for Hilcorp Alaska, told state lawmakers on Feb. 26 that Hilcorp, with its history of acquisitions, has built relationships with a sophisticated group of banks. The company is in discussion with those banks to help determine the best plan, she said. “We are currently still evaluating all options to finance the transaction,” she said, noting that Hilcorp has made two payments to BP for a total of $500 million, with future payments planned. BP and Hilcorp have addressed public concerns about Hilcorp’s financial capabilities in statements filed with the Regulatory Commission of Alaska. Hilcorp is not trying to avoid responsibility to prove it’s “sufficiently well-capitalized,” and is instead concerned that disclosing its finances will hurt its competitive advantage, the oil companies said in a document it sent to the commission in December. The oil companies have also said Hilcorp has provided all required documents to regulators overseeing the sale. Corri Feige, the Alaska Department of Natural Resources commissioner, has said the company has been transparent and forthcoming in providing information the state needs to oversee the transaction, including for a “stress test” to determine Hilcorp’s ability to respond to a major accident should one occur. The oil price crash could delay Hilcorp’s plans to borrow money, said Tsocanos with Standard & Poor’s. Prices plunged more than 20 percent, amid a price war between Saudi Arabia and Russia and depressed demand due to the coronavirus outbreak. Prices for North Slope crude fell to less than $35 a barrel on March 9, levels not seen in four years. For now, the lower prices could make it more difficult for Hilcorp to borrow cash at favorable terms, Tsocanos said. “I don’t think it’s realistic for them to go to capital markets with oil at $35 (a barrel), so I think they will wait for the dust to settle a little bit,” Tsocanos said. Monday’s oil price crash eroded a large chunk of Hildebrand’s wealth, according to Tom Metcalf, a reporter with Bloomberg. Hildebrand’s estimated wealth fell from $5.4 billion to $2.4 billion, pushing him off the list of the world’s 500 wealthiest people, Metcalf said in an email, citing calculations from the Bloomberg Billionaires Index.

JPMorgan Chase follows Goldman Sachs in Arctic exit

JPMorgan Chase says it will no longer finance new oil and gas projects in the Arctic. “JPMorgan Chase is expanding its commitment to a low-carbon economy and further supporting the clean energy transition,” the bank said in an email to reporters on Feb. 24. It is the second big U.S. lender to back away from potential support for projects such as drilling in the Arctic National Wildlife Refuge in recent months. Goldman Sachs in December said it would stop financing new oil exploration in the Arctic. Goldman Sachs’ announcement prompted Gov. Mike Dunleavy’s administration to retaliate, removing it from a billion-dollar plan to borrow money to pay tax credits to Alaska oil and gas drillers. On Feb. 24, groups opposed to drilling in the refuge celebrated news reports about JPMorgan’s plans. The bank has been the top funder of Arctic oil and gas projects in recent years, according to a report by the Rainforest Action Network, the Sierra Club and other advocacy groups. “We’re glad to see America’s largest bank recognize that the Arctic Refuge is no place for drilling, and we hope that soon other banks and the oil companies they fund will follow along,” said Bernadette Demientieff with the Gwich’in Steering Committee. The committee, which advocates for 15 Gwich’in communities in Alaska and Canada, has argued that drilling will hurt caribou and other subsistence foods. The Gwich’in Steering Committee and Sierra Club members have met with large U.S. banks in recent months, said Ben Cushing, a campaign representative with the Sierra Club in Washington, D.C. The groups argue the banks’ reputations could be damaged if they provide financial support for drilling in the Arctic. Several banks outside the U.S., including Barclays in London and Crédit Agricole in France, also have said they won’t support new oil and gas projects in the Arctic, Cushing said. “It’s been mostly firms outside the U.S. until recently,” he said. JPMorgan’s new climate change initiative will not allow “financing for new oil and gas development in the Arctic,” among other steps, according to a statement from the bank that was emailed to reporters Feb. 24. The bank’s plans will be announced at an annual investor day meeting on Feb. 25. Dunleavy in December said that he has “serious questions” about doing business with any company that isn’t willing to work with Alaska. Dunleavy told Fox Business in a December interview that drilling in the refuge is important to the state and national economy. The governor’s office did not immediately provide comment on JPMorgan’s decision on Feb. 24. The $67 billion Alaska Permanent Fund had about $950 million invested in JPMorgan funds in December, according to the Permanent Fund’s latest monthly report published online. Craig Richards, chair of the fund’s board, said the board will not get involved in political decisions to determine its investments. Richards is also a former Alaska attorney general who is now representing a group opposing the recall effort against the governor. Richards said as an Alaskan, it is personally “disappointing to me to see banks that are bowing down to political pressure by certain activists and that are making political decisions, not business decisions.”

Early release of Pebble report draws strong reactions

A new version of a federal environmental review for the proposed Pebble mine has angered the mine’s opponents and encouraged its developer. The Army Corps of Engineers will use the final review to decide whether to give the controversial mine a key permit it needs before it can be built. The Corps had provided the report to several cooperating agencies involved in the review process, such as state and federal agencies and tribal governments. The Anchorage Daily News obtained an executive summary of the Corps’ preliminary final environmental review that was leaked to reporters. The report could foreshadow what’s to come. Tom Collier, chief executive of developer Pebble Limited Partnership, is pleased. He said the report’s release, and its major conclusions, indicate the company will see a decision in its favor by mid-2020. Pebble opponents that have seen it are not happy. They say the proposed copper and gold mine in Southwest Alaska will threaten the Bristol Bay region’s valuable salmon fishery, and they will go court to stop it. On Feb. 11, groups from the Bristol Bay region issued statements saying the document does not address local concerns raised in Congress about shortcomings in the review process. U.S. Sen. Lisa Murkowski in particular criticized the process, previously saying the mine shouldn’t be permitted unless the Corps addresses data “gaps” raised by the Environmental Protection Agency and other entities. Very little has changed between the draft environmental review issued last year and the preliminary final review, said Alannah Hurley with the United Tribes of Bristol Bay, representing 15 tribes from the region. The Corps still has not analyzed a tailings dam failure, she said. “That’s outrageous,” she said. “That’s one of our biggest concerns, when you store toxic waste at the headwaters of the last great wild sockeye salmon fisheries on earth.” She said groups will sue to stop the mine. The United Tribes of Bristol Bay and other anti-Pebble groups have already sued the EPA to try to reestablish one roadblock against the mine. John Budnik, a Corps spokesman, said there have been several revisions to the draft report. He said it addresses three spill scenarios. But the report says the Corps did not model the effect of an “extremely unlikely” catastrophic failure of a tailings dam, like what occurred at the Mount Polley mine in Canada in 2014. Public commenters had requested such a review. Tailings are a mine’s finely ground waste material. The report says the Corps determined that modeling for such an event was “inappropriate.“ Pebble has proposed a design with “water-reduction measures” for the tailings, such as drainage and air flow. The facility would have less chance of failure compared to a breach of “water-inundated tailings,” such as at the Mount Polley mine, the report says. “The bulk (tailings storage facility) would remain in place in perpetuity in ‘dry’ closure, further reducing the long-term spill risk,” the report says. Commercial Fishermen for Bristol Bay also said the preliminary final report is insufficient. “The preliminary final EIS is more of the same; this administration’s priority is a purely political process that completely ignores well-documented science and the voices of Alaskans,” said Katherine Carscallen, director of the fishermen’s group, in a statement. She said the report severely underestimates the risks of the mine to salmon and other resources. Collier with Pebble said Tuesday it’s “absolutely false” to say there have been only small changes to the preliminary final document. The Corps has held numerous meetings and delayed a final decision to address concerns with the draft report, he said. Also, Pebble has changed the design of the proposed port facility and roads and bridges to reduce impacts to waters and wetlands, as spelled out a compensatory mitigation plan it has submitted to the Corps, he said. It has proposed plans to help protect waters in the region, including improving wastewater management in three communities and taking steps to improve salmon passage in 8.5 miles of streams. The Corps’ major conclusions remain the same, Collier said. The report shows the mine would not hurt the Bristol Bay salmon fishery, he said. He pointed to a section on commercial fishing. It says that under normal operations, development alternatives would “not be expected to have a measurable effect on fish numbers and result in long-term changes to the health of the commercial fisheries in Bristol Bay.” Collier pointed out a section on subsistence that says, “Overall, impacts to fish and wildlife would not be expected to impact harvest levels, because no population-level decrease in resources would be anticipated.” Carscallen, with the fishing group, said Collier is wrong to say there won’t be harm to the fishery, The report says the development’s footprint will harm 100 miles of salmon stream, she said. The report indicates the final decision will be in Pebble’s favor, Collier said. “That’s the only conclusion you can reach,” he said.

Tax increase debate back on as signatures filed

A group seeking to raise taxes on major oil producers in Alaska rolled a flatbed dolly stacked with boxes of signature books to the Alaska Division of Elections office in Anchorage on Jan. 17, setting the stage for what’s expected to be another costly political battle. Members of the “Vote Yes for Alaska’s Fair Share” group said they turned in 44,624 signatures, well beyond the amount needed to put the measure before voters. If it passes, the measure would bring the state close to $1 billion extra in oil-production taxes each year, supporters say. The money could be used to shrink the Alaska’s giant deficits while keeping state services in place, they say. “We have given away billions of dollars (to the industry),” said Robin Brena, an oil and gas attorney and chair of the group, speaking to a crowd of supporters at the elections office. The two-page text of the ballot measure explains it would affect the taxes applied to the state’s three largest oil fields, Prudhoe Bay, Kuparuk and Alpine. BP Alaska, ConocoPhillips and ExxonMobil Corp. are the major leaseholders at Prudhoe Bay. ConocoPhillips is the major owner at Kuparuk and the Alpine. A group called OneAlaska formed to fight the measure in November. It is led by small-business owners, a union leader, a Native corporation chair and others. Much of its funding so far is coming from oil companies, primarily ConocoPhillips and Hilcorp Alaska, the company that plans to buy BP’s assets in Alaska. The ballot measure would boost production taxes on the oil industry by more than 300 percent, OneAlaska said in a statement on Jan. 17. Such a spike would force any industry to cut back on its investment in the state, the group said. Gary Dixon, secretary and treasurer with Teamsters Local 959 and part of the anti-initiative group, said in a statement that his organization opposes the ballot measure. The union represents construction workers, truck drivers and others. “My job is to protect jobs for Alaskan workers, full stop,” said Dixon. “This ballot measure will make it harder for Alaskans to get and keep jobs, from Kotzebue to Ketchikan.” The state estimates the industry is expected to pay $381 million in production taxes this year. Total petroleum revenue from production tax, corporate tax, property tax and royalties is forecast to be $1.56 billion. Roger Marks, a former petroleum economist for the state who has no affiliation with the anti-initiative group, said if the measure was already in effect, the industry would pay about $1.4 billion this year. Ed Davis, a retired engineer for Alyeska Pipeline Service Co., was one of the supporters at the Division of Elections on Jan. 17 when “Vote Yes for Alaska’s Fair Share” turned in its petition books. Davis said the oil industry can afford to pay more. Davis collected more than 800 signatures in Fairbanks, during a cold streak when the worst temperatures plunged to about 40 degrees below zero. He stood outside near the solid waste facility where people bring their trash, he said. The oil industry does not deserve all the breaks and benefits it gets in Alaska, he said. Bill Popp, a co-chair of the anti-initiative group and president of the Anchorage Economic Development Corp., said the measure would hamper the state’s economic recovery. It would hurt profit margins in the state’s oil industry and force companies to look outside Alaska for better investments, he said. Oil companies are now investing in new fields in Alaska. But the “massive” tax increase will push investment away, he said, adding that will have devastating impacts on the state economy. “This (initiative) is another simplistic approach to a complex problem,” Popp said. “To once again say, ‘Tax the oil industry, it will solve all our problems,’ is such an ill-advised idea. It isn’t going to work.” Alaska is one of the most profitable places for the oil industry to operate, and will remain so if the initiative passes, members of the initiative group say. Jane Angvik, a primary sponsor of the measure and former Anchorage Assembly member, said ConocoPhillips has boosted dividends for its shareholders. Meanwhile, the state — now facing a $1.5 billion deficit — has reduced Permanent Fund Dividends paid to Alaskans. The extra money generated by the tax could support higher PFD payments, initiative supporters say. The last ballot fight over oil-production taxes in 2014 produced more than $14 million in political spending, with the oil industry vastly outspending opponents. The oil industry won that battle with 53 percent of the vote. Oil companies and partners spent about $145 for each supportive vote, according to a review of state records. The losing side spent about $7 per vote. In the current oil tax battle, the two sides have so far raised about $300,000, according to reports. Members of the “Fair Share” group said they expect the measure to go before voters in the November election. The Division of Elections still must certify that the group has 28,501 signatures from registered Alaska voters in at least 30 of the state’s 40 House districts, they said. The group said it met requirements in 36 House districts. The measure’s changes to taxes at the three major fields include: • The gross minimum production tax, which has gone into effect in recent years under low oil prices, would increase from 4 percent to between 10 percent and 15 percent, depending on the price of oil. • The net production tax, which has kicked in when oil prices are higher, would eliminate the per-barrel credit provided to oil producers. • Tax returns and other documents provided by oil and gas producers would be public information, instead of confidential documents. • Companies won’t be allowed to deduct costs at other fields from tax payments at the three major fields, Brena said.

Defense spending bill repeals 8(a) restrictions

The National Defense Authorization Act that is headed to the president’s desk after a Dec. 17 vote in the Senate includes a provision that will boost Alaska Native corporations’ access to high-dollar, no-bid contracts approved by the U.S. military, officials said. The new provision relaxes a 2010 limit that restricted Native corporations’ ability to secure large contracts that had brought billions of dollars to the companies in earlier years, Sen. Dan Sullivan said in an interview after the bill cleared the Senate. Those big, sole-source contracts were awarded under changes to the Small Business Administration’s 8(a) program, which were designed to benefit Indian tribes, Alaska Native corporations and Native Hawaiian organizations. Congress created the program to help thousands of Native shareholders that own the companies and disadvantaged Native communities, Sullivan said. Sullivan co-sponsored the new provision with Sen. Mazie Hirono, D-Hawaii, the senator’s office said. “This will have a positive impact for the state’s economy and its citizens, and for Native corporations that are a huge source of growth in our state,” Sullivan said by phone. The $738 billion defense spending bill for fiscal year 2020 passed the Senate 86-8 on Tuesday, after clearing the House last week. President Donald J. Trump is expected to sign it soon, Sullivan said. Rep. Don Young helped get the contracting provision passed in the House, Sullivan said. Native corporations are a major player in the government contracting business, thanks in part to the late Alaska Sen. Ted Stevens, who is credited with spearheading the Native contracting program’s creation in the 1980s. After Stevens lost his Senate seat in 2008, former Missouri Democrat Sen. Claire McCaskill and the late Arizona Republican Sen. John McCain took aim at the Native 8(a) program, Sullivan said. “This was essentially removed in kind of a sneaky provision,” Sullivan said. The limit enacted in the 2010 defense spending bill required federal contracting officers to justify no-bid contracts above $20 million, now $22 million, adjusted for inflation. It required approval from the top — the secretaries of the Army, Navy and Air Force, Sullivan said. With those limitations in place, only a small number of contracts above $20 million have been awarded to Native contractors, Sullivan’s office said. Contractors didn’t want to take relatively small contracts all the way up the military chain, Sullivan said. The new provision boosts the justification threshold for the no-bid contracts to $100 million. It allows approval from the head of the contracting activity, or their designee, instead of the secretaries. The Alaska Native Village Corporation Association, representing 177 Native village corporations, praised the change to the “overly burdensome” Department of Defense requirements. Undoing the provision has been a leading goal for the association, said Hallie Bissett, the group’s executive director. Only a handful of village corporations have benefited from the 8(a) program, with the 2010 provision a limiting factor, the group said in a statement. “This provision placed an onerous requirement on contracting agencies that worked with village corporations,” she said. “It created confusion for contracting officers, and resulted in overly high, undue levels of contract approval scrutiny for our village corporations that are inconsistent with the goals of lowering contract costs and reducing risks for the contracting agencies.” Chugach Alaska, a regional Native corporation in Southcentral Alaska, praised the change. It said 8(a) benefits are an “economic engine” to help Native corporations provide dividends, scholarship, jobs and other benefits to thousands of Native shareholders. “Beyond that, the Alaska Congressional delegation and their staff understand that the success of (Native corporations) echoes beyond our Alaska Native shareholders to help create jobs, inject capital and help strengthen the state’s economy,” said Sheri Buretta, interim president of Chugach. The Alaska Federation of Natives “appreciates that Senator Sullivan heard the concerns of these key Alaskan businesses,” said Julie Kitka, president of the group. “We commend him for getting the provision in the bill and Senator Murkowski and Congressman Young for voting in support of the (act).” The Native American Contractors Association in Washington, D.C., called the change a “milestone” that will create opportunities in Native communities across the U.S. “(The association) believes that the provision will increase business opportunities for Native 8(a) contractors and allow NACA members to continue their work enriching their communities with jobs, educational opportunities, dividends, and investments,” said Annette Hamilton, the association’s president.

Group forms to oppose oil tax hike initiative

A new group calling itself OneAlaska has formed to fight a ballot initiative that seeks to boost production taxes paid by Alaska’s largest oil companies. The group — consisting of small-business owners, a union leader, a Native corporation chair and others — filed with the Alaska Division of Elections this week, a statement from OneAlaska said Nov. 7. The Alaska Oil and Gas Association, a trade group representing the industry, is a leading contributor to the group. The chair is Chantal Walsh, former director of the state’s oil and gas division under previous Gov. Bill Walker. “With several significant, new development projects in the works, adding a punitive new tax on companies that are trying to invest in Alaska is the wrong idea at the wrong time,” Walsh said. OneAlaska will oppose Vote Yes for Alaska’s Fair Share, which registered as a campaign group with state regulators in August. That group must collect 28,501 signatures from across Alaska in support of its two-page proposed “Fair Share Act.” It hopes to get the measure on the ballot during next year’s election. The proposal would alter the state’s 2014 oil production tax. It would apply to the North Slope’s large, legacy fields — currently Prudhoe Bay, Kuparuk and Alpine — held by major oil companies, according to Robin Brena, a member of the initiative committee leading the effort and an oil and gas attorney who worked on Gov. Walker’s transition team. Brena has said the measure would bring in about $1 billion extra in production taxes, if approved by voters. BP, the current operator of the Prudhoe Bay oil field, has estimated it could cost companies up to an extra $2 billion. The industry paid $750 million in oil and gas production taxes in the 2018 fiscal year, according to state figures. In an interview Nov. 7, Brena said Alaska is not getting enough in production taxes from the state’s major oil companies. If voters approve the Fair Share initiative, Brena asserted the companies will still be very profitable in Alaska and more money will stay in the state, helping the economy, not hurting it. The measure would require that tax returns and other documents from oil and gas producers would be public information, instead of confidential documents. “Whether you agree with us, or disagree with us, that’s one thing,” he said. But Alaskans should have the chance to decide if they’re getting their fair share for oil production, he said. Vote Yes for Alaska’s Fair Share reported in early October that it had raised just more than $45,000. Brena is listed as the top donor with a $25,000 cash injection. Co-chairs of the new group that will fight the measure include Crawford Patkotak, chair of Arctic Slope Regional Corp., which represents Alaska Natives from the oil-rich North Slope; Nicholas Begich III, a nephew of former U.S. Sen. Mark Begich; former Anchorage Rep. Jason Grenn, who served in the Legislature as an independent; Bill Popp, president of the Anchorage Economic Development Corp.; and Gary Dixon with Alaska Teamsters Local 959, which represents more than 5,000 people, including airline pilots, construction workers and truck drivers. “The ballot box is the wrong place to enact complicated tax policy, especially policy that would damage our economy, both in Anchorage and statewide,” Popp said.

RCA will rule on release of Hilcorp finances

An increasing number of Alaskans are calling for greater financial transparency from Hilcorp, the privately owned company seeking to buy BP’s North Slope assets, in part to ensure it has the financial muscle to respond to a potentially costly accident if the deal goes through. Under the regulatory process to approve a key element of the transaction, Hilcorp has asked a state agency to keep its recent years of financial records from public view, citing concerns that disclosure will hurt its competitive advantage. Some think those records should be made public. “We need to see their finances because they will become the most important oil and gas company in Alaska, full stop,” said Phil Wight, who is studying the proposed deal for the Alaska Public Interest Research Group, a consumer rights group. BP, operator of the Prudhoe Bay oil field, announced in August that it will sell its Alaska assets to Hilcorp for $5.6 billion, setting the stage for what many say will be the largest North Slope deal in a generation. The sale includes BP’s share in wells, pipelines, oil tanks and other hardware, much of it built in the 1970s, including the 800-mile Trans-Alaska Pipeline System. The companies expect to finalize the deal next year. The Regulatory Commission of Alaska is overseeing the part of the transaction involving the trans-Alaska pipeline. It is holding a public comment period that’s set to end Nov. 8. Under state requirements, the RCA must decide whether to grant Hilcorp’s request to keep its financial records confidential, in a decision that will balance the public interest versus the company’s concerns over its bottom line. At least one powerful state lawmaker appears to support Hilcorp’s confidentiality request. Some Alaskans have applauded the deal in hopes that Hilcorp will boost Alaska’s economy by increasing exploration and squeezing more life out of the oil fields. The transaction, among other major changes, would give Houston, Tex.-based Hilcorp a 48 percent stake in the pipeline and operator Alyeska Pipeline Service Company. That’s a bigger share than pipeline co-owners ConocoPhillips and ExxonMobil. Skeptics of the proposal complain less is known about Hilcorp because it lacks the financial disclosure requirements of publicly traded companies such as BP, Conoco or Exxon. Those much larger companies regularly update shareholders on cash flow, debt and other data under federal reporting rules. Hilcorp’s finances are a black box, said Wight, speaking Nov. 6 to a small group in Anchorage at an event organized by the public interest group. He questioned whether Hilcorp can afford to clean up a costly major oil spill if one occurs. “We are not saying the deal should not go forward, but we want to make sure the public’s interest is protected,” he said. Hilcorp is known for revitalizing old fields, including in the small Cook Inlet province near Anchorage, where it’s become the dominant oil and gas producer after arriving in Alaska eight years ago. It’s been criticized for a string of accidents and violations, but praised for taking steps to improve that record. BP has told the RCA it will retain responsibility for the huge cost of dismantling the pipeline. Dozens of public comments have been submitted to the RCA so far. Many have asked for more information about Hilcorp’s finances, as well as more time for people to comment. The agency has extended the comment period once, adding an additional 21 days. Republican Senate President Cathy Giessel told the RCA that the sale, once complete, will bring “substantial positive benefits” in the form of Alaskan jobs, investment, oil production, and state and local revenue. With the “appropriate insurance and financial sureties” that will be required by the RCA and other agencies, Giessel said she believes Hilcorp is “highly fit and able to hold BP’s share of the (trans-Alaska pipeline) assets.” Giessel said she trusts the RCA and other state agencies will have full access to Hilcorp’s confidential financial records in order to “facilitate a responsible decision by the government.” “I would not like to think Alaska is willing to require, as a condition for any type of company undertaking business on our land or with our resources, disclosure of confidential financial information that could adversely impact a company’s competitive position as we seek their investment dollars,” she wrote. RCA spokeswoman Grace Salazar said the five-member commission will have 30 days after the end of the comment period to weigh Hilcorp’s confidentiality request and determine if the companies’ joint application for the ownership transfer is complete. The commission could take up to six months to determine if it will permit the transfer. Rep. Geran Tarr, D-Anchorage and co-chair of the House Resources Committee, told the RCA that not enough is known about the proposed transaction and the impact it will have on Alaska. She wants the agency to extend the comment period through the holidays. Tarr said the committee plans to hold an informational hearing on the proposed sale next year. Andrew Brooks, an analyst with Moody’s Investors Service, a major credit rating agency, said Hilcorp has a good rating for a company of its size. It typically does not heavily rely on debt and generates “positive free cash flow.” But Moody’s was concerned enough about the transaction to launch a “review for downgrade” of Hilcorp’s rating after the deal was announced. Hilcorp has not yet said how it will finance the deal. The ratings review can’t be completed until those details are known, Brooks said. Moody’s presumes Hilcorp will take on a “fair” amount of debt to buy the Alaska assets, Brooks said. Too much could help lead to a ratings downgrade. “It’s a very sizable acquisition for Hilcorp, certainly a much larger acquisition than they typically have undertaken,” Brooks said. Brooks directed questions about Hilcorp’s net worth to the company itself. Company officials on Nov. 8 did not respond to a request for comment. Former Alaska Senate President Rick Halford said there hasn’t been enough scrutiny and public input on the proposed deal. “It’s been amazingly quiet in my opinion,” Halford said on Thursday. In 2000, Halford, a Republican, chaired the legislative committee that helped oversee a previous blockbuster deal on the North Slope, resulting in ConocoPhillips predecessor Phillips Petroleum buying ARCO Alaska’s assets for $6.5 billion. “There needs to be a real economic analysis, from the state, of this transaction,” Halford said. It should include a review of the costs and responsibilities of dismantlement and cleanup of everything from the pipelines to wells to buildings, he said. “There are a lot of old wells up there,” he said. Halford said he’s worried Hilcorp may be too small to handle the potential liability associated with the North Slope’s aging infrastructure. The RCA should disclose as much as it possibly can about Hilcorp’s finances, he said. “This is a huge asset very much tied to the value of state revenue,” Halford said. “The company’s finances should not be protected from public view…any more than is absolutely necessary.”

Final EIS released for ANWR lease sale

A federal agency on Thursday recommended a plan to offer the entire coastal plain of the Arctic National Wildlife Refuge in Alaska for lease to oil and gas companies, rejecting more restrictive alternatives and setting the stage for the federal government’s first lease sale there by year’s end. The Bureau of Land Management plan, contained in its final environmental report of leasing in the refuge, could allow the oil industry to nominate tracts from the entire 1.6 million-acre coastal plain, about 8 percent of the refuge. The recommendation offers the most acreage available for petroleum extraction, compared to a list of options the agency proposed in a December draft report. But it would restrict surface use in many areas, such as near rivers and coastal areas, and land used by denning polar bears and caribou. Alaska leaders applauded the plan in a statement from BLM announcing the release. “This is a major step forward in our decades-long efforts to allow for responsible resource development in Alaska’s (coastal plain), and I thank Secretary (David) Bernhardt and his team for their thousands of hours of hard work,” said Sen. Lisa Murkowski, R-Alaska. “I’m hopeful we can now move to a lease sale in the very near future, just as Congress intended, so that we can continue to strengthen our economy, our energy security, and our long-term prosperity.” “Forty years after Congress selected the Arctic Coastal Plain for potential energy development, the Trump Administration is making good on that decades old potential,” Gov. Mike Dunleavy said. “I join with all Alaska governors since 1980 in assuring the nation and the world that we develop our natural resources responsibly. I look forward to the lease sale scheduled for later this year.” The Republican-led Congress in 2017 approved lease sales in the refuge in the tax-reform bill, and directed BLM to oversee them. Congress in 1980 set aside the coastal plain for possible development. The federal agency’s recommendation came as efforts continue in Congress to halt drilling in the ecologically important region in northeast Alaska, home to climate-threatened polar bears, migrating caribou and other important species. Bills to stop the drilling, including one passed in the House on Thursday, aren’t expected to clear the Republican-led Senate. The bigger question may be how much interest industry will show in the politically divisive and costly region near the Canadian border about which little is known by the oil industry. Major oil company BP recently announced it would sell its long-held stake in the only well ever drilled in the refuge, an effort that ended in 1986 under an exception allowed by Congress. The sale was part of BP’s decision to sell its Alaska assets to Hilcorp Alaska. Members of the Gwich’in Steering Committee, a voice for several Gwich’in communities in Alaska and Canada that oppose drilling in the refuge, criticized the BLM report on Thursday. The Gwich’in people live outside the refuge but have hunted caribou in the refuge for eons. “There is nothing final about this (environmental report) except that it demonstrates that this administration and the Alaska delegation will disregard our way of life, our food, and our relationship with the land, the caribou, and future generations to pander to industry greed,” said Bernadette Demientieff, the committee’s executive director. Conservation groups have argued that relatively little money will be generated by the lease sale, based on past sales in Alaska, countering a key rationale by the Trump administration that drilling in ANWR could be a boon for the U.S. and Alaska treasuries. The Defenders of Wildlife said about three-quarters of the coastal plain is designated critical habitat for Beaufort Sea polar bears that increasingly spend time ashore as sea ice melts, and whose numbers are declining. Development will lead to a spiderweb of airstrips, roads and pipelines, plus oil spills and increased pollution, the group said in a statement. “This Arctic National Wildlife Refuge leasing plan is another disgraceful example of the Trump administration’s continued rejection of environmental law, sound science and the wishes of the American people in protecting wildlife and wild lands," said Jamie Rappaport Clark, president of Defenders. “Selling off the entire coastal plain for oil development presents an existential threat to threatened polar bears and is opposed by 70% of Americans.” Members of the Alaska congressional delegation say that most Alaskans support development in the coastal plain. The report’s release marks the “culmination of decades of work,” said Rep. Don Young, R-Alaska. “I have fought for responsible oil and gas development on the coastal plain since ANWR was created, and I am immensely pleased that we have reached this stage.” “For decades, Alaskans have been urging their federal government to open the (coastal area) of ANWR for exploration,” said Sen. Dan Sullivan, R-Alaska. “At long last, Congress voted to allow it. Now, the administration is working diligently to fulfill Congress’ directions in a transparent and responsible process.” Chad Padgett, Alaska director of the Bureau of Land Management, said precautions under the recommended plan include areas along rivers where the surface would be off limits for use. The plan could allow rare exceptions, such as for a pipeline that must cross a stream. “For all the waterways, we have setbacks to provide for no surface occupancy to allow caribou to get away from insects,” he said. He said a strong leasing program could create as many as 2,500 direct jobs during peak years and generate hundreds of millions of dollars annually in federal and state royalties. The federal Energy Information Administration has estimated that about 3.4 billion barrels of oil would be produced in the refuge by 2050. The first drops of oil, if enough is discovered, aren’t expected to flow until at least 2027. The Interior Department could approve a final leasing plan next month. The BLM hopes to hold a lease sale before the end of this year, Padgett said.

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