Alex DeMarban

Justice Dept. files allegations in $350M Jones Act seafood case

Attorneys with the U.S. Department of Justice are accusing companies Kloosterboer International Forwarding and Alaska Reefer Management of secretly using a specially built rail track in Canada for years, in order to evade the requirements of a maritime shipping law called the Jones Act. The accusation surfaced in a filing submitted Sept. 17 in a case involving the two companies, which help transport Alaska seafood to the East Coast. The companies potentially face massive fines, imposed by the U.S. Customs and Border Protection. The government’s 43-page response is its first public explanation in the case brought by Kloosterboer and Alaska Reefer Management early this month in U.S. District Court in Anchorage. The two companies provide transportation and logistics services as part of the American Seafoods Group family. The companies are suing the Department of Homeland Security and its division, Customs and Border Protection, to stop the large penalty notices, which they say arrived without warning. The penalties for Kloosterboer alone total $25 million, the companies’ complaint says. Numerous other companies in the plaintiffs’ supply chain have also received notices totaling more than $325 million, their complaint says. The companies argue that the seafood has been properly shipped from Dutch Harbor in Western Alaska to the Eastern U.S. for more than 20 years, passing through the port of Bayside in Canada near the border with Maine. The companies say the penalty notices have threatened the distribution of that seafood — typically pollock caught in the Bering Sea, bound for fast-food restaurants and other outlets. Kloosterboer and Alaska Reefer say they comply with the Jones Act. The Jones Act requires that vessels carrying goods between two U.S. points be American-made and American-flagged. The companies use foreign-flagged vessels. But they say they meet a Jones Act exemption because the seafood travels briefly by rail in Canada. At issue is the rail line used to meet that exemption. The U.S. Department of Justice says “all was good” before 2012. In those years, the companies complied with the Jones Act by using the New Brunswick Southern Railway to transport their seafood in Canada, a journey of more than 30 miles, the federal response says. But in 2012, the companies “radically” altered the movement of the seafood because they believed using the New Brunswick railway was too expensive, the federal response says. Instead of using the established New Brunswick railway and moving product from one destination to another using a “through route,” the companies decided to use “a specially-built mini-railtrack, approximately 100 feet in length, that goes nowhere,” the federal government argues. That rail line is called Bayside Canadian Railway. The seafood is loaded into trucks that travel on a flat rail car, back and forth on the track, for a total of 200 feet. It’s then driven into the U.S. The “actions were not a one-time error or oversight, but rather part of a calculated and secret scheme to find a loophole in the Jones Act, which was only revealed when the government received a tip from a third party,” the federal government argues. Officials with Kloosterboer and Alaska Reefer declined a request for an interview, citing the ongoing litigation. According to a 48-page response filed on Wednesday, Kloosterboer and Alaska Reefer say the newer Bayside Canadian Railway meets the Jones Act exemption and complies with Customs and Border Protection ruling letters. The rail line is “indisputably a registered Canadian rail line; the goods are loaded onto it and travel a short distance,” the companies say. Customs and Border Protection has never said the rail line must be a certain length or connect two distant points, the companies argue. The line is part of the “through route” from Dutch Harbor to the Eastern U.S., the companies argue. “There is no practical difference between the (original railway and the newer one),” the companies argue. The only difference is the location and length, they say. The federal government says the prior ruling letters from Customs and Border Protection predated the existence of the Bayside Canadian rail line and “never sanctioned” it. It asserts that the companies did not provide adequate documentation to note the change in rail lines. The companies say they have “been transparent” about the rail line’s use. They say Customs and Border Protection has been “on notice” about the newer line since 2012. Receipts provided to the agency during those years have described thousands of shipments along the rail line, the companies say. The companies say the penalty notices themselves are unjustifiably large and were issued without proper notice. The federal government argues that the penalty notices are the size they are in part because of the length of the violations. The companies can challenge the penalty notices and explain their position through an administrative process, the federal government says. A spokesperson with Customs and Border Protection said the agency does not comment on pending litigation.

Seafood logistics groups sue to halt $350M in Jones Act fines

U.S. Customs and Border Protection has issued more than $350 million in penalty notices to several companies involved in shipping seafood from Dutch Harbor in Western Alaska to the eastern United States, according to a complaint filed in court from two of those companies. The federal agency is alleging violations of the Jones Act, according to documents filed in the case. The law requires that vessels carrying goods between two U.S. points be American-made and American-flagged. Kloosterboer International Forwarding and Alaska Reefer Management, providing transportation and logistics services as part of the American Seafoods Group family, filed the 35-page complaint in U.S. District Court in Anchorage on Sept. 2. The two plaintiffs are suing to stop the penalties. They contract with ship owners, cold storage operators and trucking and fishing companies to transport frozen seafood. American Seafoods is a frozen-at-sea processor of Alaska pollock and other fish. The supply chain works like this: The frozen fish leaves on ships from Dutch Harbor to the Lower 48, traveling through the Panama Canal to a port in eastern Canada near the U.S border. From there, the fish is loaded onto trucks that are temporarily loaded onto flat rail cars along 100 feet of track before they drive into Maine. The seafood eventually reaches fast food restaurants and other outlets in several states. The East Coast supply chain uses foreign-flagged vessels to deliver the seafood. But the companies claim they comply with the Jones Act because of a provision allowing an exemption, in part because the frozen seafood makes the brief trip from Canada by rail before it reaches Maine, the complaint says. However, penalty notices have apparently been issued because the Canadian rail route is used, even though the agency has supported the route in its published interpretative rulings, the complaint says. The suing companies say the notices threaten that long-established supply chain and jobs in Alaska and the Lower 48, according to the complaint. “CBP’s penalty notices effectively have shut down a critical shipping route that — for over 20 years — has been approved by CBP as complying with the Jones Act, and which is essential to the delivery of frozen seafood to consumers, fast food chains, and school lunch and food bank programs throughout the United States,” the complaint asserts. Customs and Border Protection “does not comment on matters under litigation,” the agency said in an emailed statement. “Nonetheless, lack of comment should not be construed as agreement or stipulation with any of the allegations,” the statement said. The penalties for Kloosterboer alone total $25 million, the complaint says. Numerous other companies in the plaintiffs’ supply chain have also received notices totaling more than $325 million, the complaint says. “We are reeling from crippling penalties, Customs has not been forthcoming to share specifics, and Customs’ long-standing guidance tells us we are operating in compliance,” said Per Brautaset, president of Alaska Reefer Management, in a prepared statement on Sept. 2. “We just didn’t have a choice but to try and save our business and our partners’ businesses, and all the jobs in Alaska and other communities that will be lost.” The fines are large, more than twice the annual value of frozen Alaskan seafood transported through the Bayside port to U.S. destinations, the statement said. Dutch Harbor, in the Aleutian Islands, is home to the nation’s top fishing port in terms of landed volume. Close to 800 million pounds of fish, valued at $190 million, were landed there in 2019. “This unjustifiable agency overreach is crippling and threatens to destroy plaintiffs’ businesses, along with an entire supply chain transporting frozen seafood from Alaska to the eastern United States through (the port of Bayside in New Brunswick, Canada),” the complaint says. “Moreover, the penalty notices are threatening hundreds of jobs in Alaska and throughout the U.S. in the frozen seafood shipping industry, and unless they are withdrawn, will likely result in higher prices and shortages of frozen seafood across the eastern United States.” The companies are suing the U.S. Department of Homeland Security, the border protection agency, which falls under Homeland Security, and Troy Miller, acting commissioner of border protection.

‘Burnout city’: Labor shortage leaves workers, owners exhausted

The ongoing labor shortage in Alaska, compounded in part by an unexpected surge in tourism and consumer spending, is having widespread impacts on the economy. Some restaurants that closed earlier in the pandemic are staying shut, uncertain they’ll find enough employees to provide service. Construction companies and other businesses are experiencing project delays. And a number of hospitality businesses are shutting their doors periodically, to give shorthanded staffs a much-needed break. “During the pandemic, I went from the frying pan and into the boiling water,” said Jack Lewis, a franchise owner of Krispy Kreme doughnut shop and other dining establishments in Anchorage. “I went from no sales and looking at going out of business, to plenty of sales and no labor,” he said. As the economy recovers from the depths of the pandemic, employers say they’re grateful for the business but frustrated by a months-long labor shortage that continues to drag on. They say the shortage is slowly easing but remains a giant obstacle that has kept them from fully reopening after the COVID-19 pandemic gutted the economy last year. They’re offering more pay, overtime and flexibility to hire new workers and retain the exhausted staff they do have, with an eye toward long-term sustainability. Lewis said that counting his other operations that include Firetap Alehouse and Restaurant in South Anchorage and BurgerFi in Midtown, he’s about 50 workers short. That’s putting strain on his existing employees, who are pulling extra shifts, he said. On Aug. 24, BurgerFi was closed to give employees a break. He’s planning to close additional businesses over Labor Day weekend. “I’m going to lose money being closed that Sunday and Monday, but I’m doing it to give my good, hard-working people a day off,” he said. Mark Kotalik, a cook and supervisor at the Peanut Farm, said this summer was his busiest in a decade at the sports bar. He often clocked 12-hour shifts, six days a week. He’s close to 60 years old, and the extra work was hard, he said. “My knees were killing me, my feet were killing me,” he said. “You go home, you rest and you get up all over again. It wears on you.” His boss, Travis Block, said he couldn’t get enough applicants to show up for interviews or start working as planned. He dangled higher pay, including a $500 bonus for staff who found employees that worked through summer. Many people don’t seem ready to start working after the pandemic sparked widespread layoffs, he said. Kotalik and other core employees “saved” the restaurant this summer, putting in 60-hour weeks. “I’ve never been as stressed out in 35 years as I have been this summer,” Block said. “Every day, you ask if you’ll have enough staff, will you find new people, and then those people need training. It’s been a constant challenge.” Last month, Block took the unusual step of closing the first three Mondays, to give workers an extra day off. “I felt horrible these guys were working so hard,” he said. The pandemic forced more than 65,000 people onto Alaska’s unemployment rolls last year, or one in five workers. It will take a long time to recover from that disruption, experts say. In July, some 20,000 people continued to collect unemployment benefits in Alaska, about three times as much as pre-pandemic levels. And there were 30,000 fewer jobs than in July 2019. Employers often blame the labor shortage on generous federal benefits. Bill Popp, head of the Anchorage Economic Development Corp., said he believes that’s less of an issue than people think. Gov. Mike Dunleavy ended a $300 boost to Alaska unemployment checks in June, so that aid is gone, Popp said. Other benefits, including rental relief that thousands of Alaskans are collecting, could be a factor in why some workers are staying on the sidelines, Popp said. But more important is the lack of available child care and a limited influx this summer of Lower 48 and foreign workers, Popp said. People also continue to leave Alaska, adding to the problem, he said. The situation will improve a lot if those migrant workers return next summer, he said. “It will be next year before we see significant improvement in our current situation,” he said. The Alaska branch of PeopleReady, a nationwide temporary employment agency, is experiencing its best year in at least five years, said Sarah Houck, Alaska manager for the company. She said more companies across many sectors are increasingly turning to the agency for help finding workers after their job ads failed to produce enough candidates. “People are thinking outside the box when traditional hiring is not working,” she said. On some days, the agency might need to fill 150 openings, but only half the number of needed workers is available, she said. Many people say they’ll show up for work but don’t, which is partly why businesses are increasingly turning to the agency for help, she said. “It’s been a good year for us, but it’s been a lot of work,” she said. “For every five people you hire, maybe one or two go to work. And everyone is seeing that across the board, so you have to work extra hard for every employee you get.” The shortage is affecting a wide swath of industries in Alaska and nationwide, from government to the service sector to construction. Betsy Holley, a spokeswoman with Alaska Department of Corrections, said the state agency is advertising $5,000 sign-up bonuses for new correctional officers. The job, available to applicants with minimal educational requirements, starts at about $60,000 annually. The lack of Alaska applicants following through forced Candice McDonald, owner of the 15-room Copper Whale Inn in Downtown Anchorage, to hire one woman from the Lower 48. Hiring Outside is something she never does, McDonald said. McDonald bought a condo in Downtown Anchorage to provide housing for the new worker, after she couldn’t find an available apartment that was reasonably priced. McDonald also flew the woman to Alaska and purchased a bike and helmet for transportation. Business exploded in May, but the inn made it through the summer with a few employees, she said. She needed a few more. At times she recruited her parents and other family members to help, she said. Early this month, McDonald stopped taking most new bookings for the rest of August so she doesn’t wear out her staff. But she’s taking bookings again in September and beyond, she said. Raul Villa Rojas, the longtime head housekeeper at the inn, said tourism will soon slow down, providing some breathing room after a busy summer. “The last week is like ‘OK, I’m ready for vacation,’” he said, as he snapped clean sheets onto a bed. Fire Island Rustic Bakeshop recently began closing on Sundays, mainly because it’s been slammed with business. “Basically we went down to four days a week to preserve employee wellness,” said Rachel Pennington, who owns the bakery with her parents, Jerry Lewanski and Janis Fleischman. “We want to survive this period with our staff intact and it was starting to feel like burnout city.” It’s uncertain how long the Sunday closure will last, said Tyler Murphy, general manager at the bakery. The bakery typically had the workforce it needed, though it was shorthanded a couple of times this summer as college-student workers transitioned in and out of Alaska, he said. Finding employees this summer was harder than normal, Murphy said. The bakery advertised on since it couldn’t find all its employees through word-of-mouth, as it usually does. “That was a first, we never had to reach out and use traditional marketing means to get employees in the past,” he said. Andre Spinelli, with Spinell Homes, one of the state’s biggest residential builders, said labor shortages in the construction industry this summer have delayed projects. He said the workforce is coming back, slowly. “But overall as a whole, all my subcontractors are all looking for help and they can’t find it,” he said. Orso restaurant in downtown Anchorage is among the restaurants that have not reopened since shutting down earlier in the pandemic. Launching a restaurant at any time is challenging, said Chris Anderson, an owner with Orso. The “incredible” lack of employees and continued uncertainty in the economy as COVID-19 numbers rise complicates the picture, he said. “It’s labor, and it’s do we have enough guests in town to fill restaurants?” he said. “It’s will we have more mask mandates, and get closed down again? It’s how much risk do you want to take?” Frank Perez, owner of Alaska Porta Potty, said he has unsuccessfully tried to hire an employee since April to service portable toilets. He acknowledged it’s a job most people don’t want, though he said it’s sanitary thanks to equipment, sterilizer and other gear. He added an extra $2 an hour, bumping the starting pay to as much as $44,000 annually, depending on experience. Six people accepted the job, then didn’t show up, he said. Two others left soon after starting. On Aug. 27, he serviced portable toilets in the rain after his work kept him in Palmer so late that he slept in his truck at a gas station there. In better times, he’d have enough employees so everyone could work stable hours. He’s had one day off since April, on Father’s Day, he said. “This is not normal, not even a little bit,” he said.

Senate infrastructure bill passes with billions for Alaska

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

Used car prices soar 47% amid national shortage

The global slowdown in auto manufacturing has left many showroom floors and car lots in Alaska nearly empty. Auto dealers say the situation follows a national trend that has boosted demand for used cars and trucks, causing prices of those vehicles to skyrocket. They say the problem is unprecedented, and rooted in pandemic-related supply snarls that reduced the availability of microchips and other parts for new cars. The situation is so dire that some dealerships along the Old Seward Highway in Anchorage have lined up their remaining new vehicles bumper to bumper along the road, highlighting what they have left. Behind the cars are mostly empty parking lots. That includes Continental Auto Group, which sells several brands at four lots in Anchorage. “It is definitely the first time any of us have experienced something like this,” said Marten Martensen, Continental Auto owner, on July 23. Anomalies like the Japanese tsunami in 2011 disrupted auto manufacturing, but not to this degree, he said. “And this is worldwide so everybody is facing the same dilemma,” he said. “And the crazy thing is there is absolutely no light at end of tunnel.” The company usually has about 700 new vehicles on its lots. This past week, it’s been down to about 40, he said. He’s all sold out of Subarus. There’s one Honda left, four Acuras and about a dozen Nissans. Some new cars and trucks are trickling into Alaska, but not many, he said. And with those vehicles in short supply, Continental is scrambling to buy used cars it can sell. “We put a lot of focus on trade-ins, asking every customer if they’d be willing to trade their car in,” he said. “And we’re paying a lot of money to get trade-ins.” The shortage of new cars is prompting more people to keep their used cars longer, adding to the limited supply of those vehicles, said Neal Fried, an economist with the Alaska Department of Labor and Workforce Development. New car prices rose about 5 percent over the last 12 months, he said. Used car prices in Alaska jumped an astounding 47 percent. “That is pretty dramatic,” Fried said of the used car prices. “You usually just don’t see that kind of number for anything.” The higher vehicle prices helped cause consumer prices in Alaska to rise by 6.2 percent over the last 12 months, the highest rate in three decades, he said. Demand for used cars is up, Fried said. That’s due in part to low interest rates and federal stimulus checks that boosted income during the pandemic. Fried says he’s spent several months looking for a relatively new Chrysler minivan to replace his 1998 model, without success. There’s not much to buy. “I may be waiting for a while,” he said. Jose McPherson, owner of Good Guys Auto Sales in downtown Anchorage, said he’s buying cars at auctions in the Lower 48, something he didn’t need to do before the pandemic. Shipping the cars to Alaska adds expense, but there are more options Outside, he said. He’s keeping his lot full, including by selling some used cars on consignment. “I’m buying cars where I can get them,” he said. Alaska’s topsy-turvy rental market also reduced the availability of used cars, said Steve Sautner, owner of Dealers Auto Auction of Alaska, where dealers often acquire used cars. Early last year, the rental companies thinned their inventory as it became clear the pandemic would halt tourism in Alaska, he said. Last fall, they had relatively few cars to sell into the used market, he said. With tourism surging back, some car rental companies have snatched up used vehicles, along with Alaskans who rent out cars through Turo, the online car-sharing service, he said. Everyone is paying more for used cars, including his company. Still, sales are up at his twice-weekly auctions, he said. “I’ve never seen this drastic of a swing in car prices,” Sautner said. Used cars that aren’t very old can now fetch higher prices than their brand-new counterparts, said Martensen, at Continental Auto. “I mean cars appreciating in value, that just does not happen,” he said. “It has never happened in the 25 years that I have been in this business.” Martensen said the low inventory at Continental has forced him to carefully spread out his sales staff throughout the week so they all have opportunities to sell. He’s reduced hours at his lots as he waits for things to improve. “At some point the inventory will return, so keeping our staff is really important to us,” he said. It could be several months before auto manufacturing bounces back, said Les Nichols, owner of Fairbanks Nissan. But even if production reaches full capacity, it will take a while to refill the new car market across the U.S. Nichols said he has a strong inventory of used cars, after stocking up over the winter. He has only 24 new Nissans left. Normally, he has about 60. “If you look at the math, I could be out of (new) cars in two months,” he said.

Questions over Pikka after CEO resignation

The managing director of an oil company pursuing a major project on Alaska’s North Slope has resigned, raising questions about the future of the project. Keiran Wulff ran Oil Search’s Pikka project on Alaska’s North Slope for the last three years. He is resigning due to medical issues, but also amid a whistleblower’s complaint about his behavior, according to Rick Lee, Oil Search chairman, in a call with financial analysts on July 19. A whistleblower’s complaint into his behavior in June prompted the company to begin an internal investigation, Lee said. “The board entered into discussions with Dr. Wulff following the receipt of recent concerns and complaints about his behavior,” Lee said. “In (the) view of the board, this unacceptable behavior was inconsistent with the standards required under the company’s code of conduct.” Wulff has been managing a medical condition that recently deteriorated and prompted his resignation, Lee said. The company did not give details on the nature of Wulff’s medical condition. Oil Search, based in Papua New Guinea with much of its management in Australia, has been working with Spanish oil company Repsol on the Pikka project. The companies have estimated the Pikka project could produce 80,000 barrels of oil daily in the first phase of development in 2025. That amount would significantly boost the oil flowing through the trans-Alaska pipeline. The project is located on state land, east of the National Petroleum Reserve-Alaska and ConocoPhillips’ major Willow oil prospect. Oil Search has been expected to make a final investment decision before the end of this year, determining whether to commit funding to the multibillion-dollar project. “If the market has felt that that was the case in the past, it’s certainly not the case today,” Lee said. Lee told financial analysts on July 19 that there is now no specific date for when Oil Search makes the final decision to fund the project. Among other steps, Oil Search and Repsol must come to agreements with other investors to ensure there is an appropriate level of funding and risk for the project, Lee said. However, Amy Burnett, a spokeswoman for Oil Search in Alaska, said in a statement that a final investment decision is still targeted for 2021. “We are continuing to advance Pikka toward a final investment decision, targeted for later this year,” Burnett said. “We have consistently outlined that we are assessing a range of funding options to give Oil Search flexibility to make a (final investment decision) later this year. We’ve also noted that this is a high quality asset and that if there is not a clear value proposition for shareholders or market conditions don’t support a (final investment decision), we will adjust accordingly.” Oil Search as a company has the same level of passion for the Alaska project that Wulff had, Lee said. “For us, it’s very much a matter of how and when we fund this project going forward,” he said. Wulff thanked Oil Search staff for their efforts during a challenging time that saw oil prices plunge during the COVID-19 pandemic, according to a statement from the company. Oil prices have in recent months rebounded to pre-pandemic levels. “It has been a great privilege to work at Oil Search and I believe the company is very well-positioned for the future,” Wulff said. “It has however, become apparent to me that due to my health challenges, it is becoming increasingly difficult for me to perform at the level required of the position. After considerable reflection and consultation with my family and others including my medical advisers, it is an appropriate time to leave to focus on my health.”

Dunleavy administration sued over Power Cost Equalization policy

The state’s largest Alaska Native organization and several other groups are suing the Dunleavy administration over the Power Cost Equalization fund that lowers high rural energy prices for some 80,000 Alaskans in nearly 200 communities. The Alaska Federation of Natives, electric cooperatives, rural communities and others argue that Gov. Mike Dunleavy’s administration violated the Alaska Constitution when in 2019 it determined the Power Cost Equalization Endowment Fund must automatically be swept into the Constitutional Budget Reserve, a key state savings account. The effect of that move this year is that the program has not been funded for the fiscal year that began on July 1. Moving the rural power fund out of the savings account requires a three-quarters vote of each chamber in the Alaska Legislature, a high hurdle that the Legislature has so far not met. The lawsuit was filed in Anchorage Superior Court on July 19. The Legislature created the $1.1 billion fund in 2000 to help equalize power prices in rural areas that don’t benefit from state-funded power projects such as dams that help reduce power costs in the state’s larger cities. The power cost equalization program was created in the mid-1980s. The lawsuit asserts that without appropriate explanation, the Dunleavy administration in 2019 took a “very expansive view” of the Power Cost Equalization fund and other funds, deciding they should be swept into the Constitutional Budget Reserve. The lack of funding in July is impacting dozens of utilities across the state that must cover the costs for a program that usually supports much of their budget, utility representatives say. If the situation remains unresolved, rural residents will ultimately face much higher bills, they say. “We are essentially giving away free power, unless we turn back around and add those additional costs to our consumer bases,” said Bill Stamm, chief executive at Alaska Village Electric Cooperative, a plaintiff in the lawsuit. “So next month, that would be the full cost of energy and whatever we didn’t charge for the previous month.” The Alaska Village Electric Cooperative, which provides power to 59 rural communities, must cover funds amounting to about $800,000 this month that had traditionally covered by the state, Stamm said. The Legislature and the governor have approved $32 million in subsidies for the program this year. The money will be available if the Legislature reverses the sweep, or if the plaintiffs are successful. A similar situation played out in 2019. Then, the rural power fund was not funded for a month, but the Legislature later found enough votes to undo the sweep. They also retroactively covered costs, utility representatives say. The lawsuit argues that the power fund is not part of the general fund that’s subject to be moved into the savings account, Stamm said. Instead, Stamm argued the fund is a unique account placed into the Alaska Energy Authority, a quasi-independent state agency, to spin off revenue for power cost equalization. Dunleavy said in a statement on July 19 that he has asked his administration to pursue a quick decision in the case. “This issue is too important to delay any further,” the governor said. “A decision by the court will help clarify what is in the general fund and what is not to determine what gets swept into the Constitutional Budget Reserve to repay it. In order for us to fulfill our constitutional duties, both the executive and legislative branches need to know if the PCE is subject to the sweep.” The Alaska Federation of Natives said in a statement on July 19 that the rural power fund should not be swept in the savings account. “Affordable energy is essential to the survival of Alaska’s rural, Native communities, particularly as our families and individuals recover from the pandemic,” said AFN President Julie Kitka. Dunleavy has proposed a plan that he says will protect the Power Cost Equalization fund, by placing it in the $81 billion Alaska Permanent Fund, the statement from the governor’s office said. Helping bring the lawsuit are top former staffers under former Alaska Gov. Bill Walker. Jahna Lindemuth, Walker’s attorney general, and Scott Kendall, Walker’s former chief of staff, are two of the lawyers with Holmes, Weddle and Barcott that filed the case. Lindemuth and Kendall last year provided legal counsel to the campaign to recall the governor.

Fewer J-1 student workers add to employee shortage

Foreign college students who once flocked to Alaska for summer work are in short supply this season, adding to the state’s labor shortage and creating another complication for local businesses trying to get back on track as the pandemic ebbs. The employees, part of the U.S. State Department’s J-1 Summer Work Travel cultural exchange program, have traditionally worked in restaurants, hotels and other businesses during Alaska’s busy summer tourism seasons. Before the pandemic, they came to Alaska in outsized numbers compared to other states. But last year, the program was virtually nonexistent after President Donald Trump implemented a ban on the J-1 and other visa programs during the pandemic. And their numbers remain low this summer, as understaffed U.S. embassies and consulates work through a backlog of visa applications, a State Department official said. Also, Anchorage employers say affordable housing for the students is hard to find. More than 200 J-1 workers have arrived in Alaska so far this summer, more than last year. But that’s a fraction of the 2,000 that came in 2019, according to State Department data. The lack of foreign student workers is a big reason why the 49th State Brewing Co. in downtown Anchorage has closed on Mondays and Tuesdays, said co-owner David McCarthy. The restaurant is employing about 20 of the workers this summer, about one-fourth of their numbers in a normal year. “It’s having a huge impact, not just on our business but lots of businesses,” McCarthy said. The shortfall comes atop the broader challenge restaurants and other employers have had finding enough workers this season. The restaurant is employing and training about 175 people. But it still needs about 80 employees to return to pre-pandemic staffing levels, McCarthy said. Another pandemic-related problem: It’s been hard finding housing in Anchorage that the students can afford, he said. The Aviator Hotel Anchorage housed J-1 workers before the pandemic, but the city has contracted with the hotel to house homeless residents there as overflow from the Sullivan Arena mass shelter. The hotel is also getting remodeled, leaving no space for the workers. Other landlords who also once rented apartments to the summer workers have instead signed up long-term tenants, amid uncertainty over tourism and the J-1 program earlier this year, McCarthy said. 49th State Brewing is employing workers from Thailand and Jamaica this year. They prep food, clear tables and do other important jobs, McCarthy said. They’re paid the same as their Alaska counterparts for the same work, he said. Starting pay ranges between Alaska’s minimum wage of $10.34 an hour and $18 an hour, he said. On Tuesday, five young women from Thailand sliced vegetables and spread a crab mixture on bread, pre-staging food for cooks who would arrive on Wednesday. Bangkok college student Baiya Thongruksanit, 23, said she and a few other friends came to Alaska to make money and experience a new country. They’d heard stories of Thai students who had trouble getting J-1 visas, she said. But they found lodging in Anchorage they could afford — six people in a three-bedroom place — thanks to a landlord who is originally from Thailand. Thongruksanit said she’s taken a second job at Polar Bear Gifts to help save money. Despite the hard work, it’s fun, she said. “It’s a new culture, and you get to do so many different things,” she said. Nationally, J-1 numbers plummeted to 5,000 last year, from more than 100,000 annually before the pandemic, a State Department official said in an email. The State Department knows the delays are creating difficulties for employers, and the official said the agency is trying to process visas as quickly as possible. Criticism of the program has centered on questions surrounding whether the J-1 workers are getting a true cultural experience when they work so much, and whether they’re a cheap source of labor for jobs that Americans could fill. Student workers can also be burdened with costs, such as their flight to the U.S. and fees required by placement agencies that connect the workers with employers. The J-1 workers, in part because several take multiple jobs, are often a visible presence in Alaska in summer, said Mouhcine Guettabi, an economist with the Institute of Social and Economic Research at the University of Alaska Anchorage. “They represent part of what summer is all about in Alaska,” he said. Mike Middleton, manager for a restaurant group that includes Humpy’s Great Alaskan Alehouse and Flattop Pizza and Pool, said the sponsor companies that typically connect Alaska businesses with J-1 prospects haven’t called this summer. He said he’d normally have an 8-inch-high stack of applications from J-1 students who come to Humpy’s looking for their second job. Only a few J-1 workers have applied this year, and he’s hired one, from Jamaica. “She works very hard,” he said. He’d hire several more this summer if he could. The restaurant is open daily but it could increase sales with more staff, he said. Jay Green, owner of Polar Bear Gifts in downtown Anchorage, said he normally employs about 20 J-1 workers, roughly his half usual summer workforce. This year, working with the sponsor company, he has hired only three J-1 workers, from the Dominican Republic. He’s also signed up a couple of others who are working a second job after another employer brought them to Alaska, including Thongruksanit. Green said he could have brought more foreign workers to the state. But he’s also had trouble finding affordable lodging for the students, he said. To deal with his shortage of workers, the gift shop has shaved four hours off its morning and evening schedule, he said. It’s still open 12 hours a day. Customers returned “instantly” in early May after pandemic restrictions loosened and tourists began returning, he said. Business is going well — but it could be better, he said. “We’d do better if we were open more and had more employees, and things were stocked and ready to go,” he said.

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.


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