1. Lawmakers spin their wheels on fiscal solutions through four special sessions
The year started with sincere hope among many Alaska lawmakers that it would finally be the time for a grand fiscal compromise that would end years of fighting over Permanent Fund dividend checks and a decade-long run of budget deficits. However, as Gov. Mike Dunleavy tried, and tried again, and again, and again and again — over the regular legislative session and four special ones — it became increasingly clear the factions that have kept the state mired in the same budget debates for years would push the issue into the next year once more.
The initial optimism for a long-term fiscal solution stemmed from the fact that it looked like the state would be out of savings, or very close to it, by year’s end, giving entrenched lawmakers no choice but to compromise. Projections at the beginning of the calendar year from the nonpartisan Legislative Finance Division said the Constitutional Budget Reserve, or CBR, Alaska’s lone active savings account at the time, would be down to less than $600 million when the 2021 state fiscal year ended June 30. With Department of Revenue and budget officials in the administration stressing the need to maintain a balance of at least $500 million, but ideally more, in the CBR for managing the state’s day-to-day cash flow needs and anemic near-term revenue projections, there appeared to be no way out but to reach some sort of major budget-cut-tax-and-spend agreement.
It was mostly downhill from there.
Dunleavy moderated his position from demanding “full” PFDs based on the traditional formula still in law to a 50-50 split of the Permanent Fund’s spendable earnings between government and dividends each year at the end of the regular session in mid-May. He announced his compromise plan at a press conference in the Capitol while backed by a large group of legislators, many of whom previously opposed much of the governor’s fiscal agenda, saying it was an important first step towards a solution.
Despite that, Dunleavy’s insistence on enshrining the PFD in the Alaska Constitution remained a hard line many legislators were not willing to cross. They say putting the PFD on par with funding for education, public safety and other core services the state is responsible for could lead to serious problems in times of low revenue.
Another group of legislators was willing to work with Dunleavy on the constitutional amendment, so long as the administration provided a way to fill the $1 billion to $1.5 billion annual deficits the governor’s plan was projected to create. New taxes or a less than 50-50 PFD again proved to be things Dunleavy could not commit to; his past proposal for major cuts to balance the budget started a recall effort and turned part of his own party against him.
This year, administration officials testified in front of legislators numerous times that the governor would be open to carefully crafted new taxes to fill part of the deficit, but the idea was largely dismissed by Dunleavy in public statements.
The stalemate over the PFD — this year’s and long-term — again pushed Alaska towards a government shutdown; this time within 2 days, the closest ever.
After he signed the budget, Dunleavy persisted with two more special sessions in August and October, though by then it was clear little was likely to be achieved.
Consistently rising oil prices throughout most of the year provided for increasingly optimistic revenue and budget forecasts, which most legislators eventually used as a way to avoid a solution this year and the administration used as evidence Alaska doesn’t need new taxes to pay bigger dividends.
In the end, eligible Alaskans received a PFD of $1,114, slightly larger than 2020.
— Elwood Brehmer
2. $10B+ in North Slope work on hold
There was renewed optimism among those with a vested interest in Alaska’s oil industry to start 2021. Drilling was resuming after the early pandemic shutdown and two major projects totaling more than $10 billion in North Slope investments were on the horizon, but that began to change quickly.
The year is going to end with both the Willow and Pikka oil projects on hold indefinitely for separate reasons.
ConocoPhillips appeared to score a small court victory Feb. 1 when U.S. District Court Sharon Gleason denied an injunction attempting to stop ruled early gravel work the company planned to do last winter for its $8 billion Willow project. Gleason concluded the activity was unlikely to harm polar bears and other wildlife in the National Petroleum Petroleum Reserve-Alaska until the broader merits of two suits challenging federal approvals for the project were determined.
The company could move ahead, but only briefly.
The 9th Circuit Court of Appeals overturned Gleason’s decision less than two weeks later on an expedited appeal. The three-judge 9th Circuit order halted work on Willow for the winter and sent the case back for Gleason to reconsider.
Through early summer, ConocoPhillips attorneys and representatives expressed hope the issues over the temporary injunction could be resolved, allowing work to resume this winter. That was until Gleason invalidated significant portions of the Interior Department’s environmental analysis of Willow.
The company did not appeal the ruling by an October deadline. ConocoPhillips Alaska leaders said they remain committed to the project and the best path forward is to remedy the issues identified by Gleason — likely a multi-year endeavor — rather than continue a potentially longer court fight.
Meanwhile, Oil Search Alaska leaders said they were hopeful the company would sanction the first, $3 billion phase of its Pikka oil development between the large Alpine and Kuparuk North Slope fields until this fall when documents filed with the state indicated a likely takeover of the company would delay the decision until at least next year.
Oil Search shareholders approved the company’s purchase by Australian-based producer Santos Ltd. in early December.
Both projects were once expected to start production by late 2025 after several years of construction.
Alaska-based leaders of Papua New Guinea-based Oil Search also acknowledged the mid-sized explorer and producer was having difficulty financing the project as more and more investment banks turn away from Arctic oil and gas projects.
— Elwood Brehmer
3. Bristol Bay breaks sockeye run record
Sockeye flooded into Bristol Bay this year, topping the all-time run record with 66.1 million sockeye attempting to return to the region’s large river systems.
It blew away the preseason forecast and topped the previous record of 62.9 million, which was set in 2018. It’s only the third time the total inshore run has topped 60 million in the bay’s history. It wasn’t the only record set, either — the Nushagak district also saw its two largest single-day harvests ever, with more than 1.8 million sockeye harvested in a single day in July.
Prices were also somewhat higher than last year, and competitive — Peter Pan Seafoods announced a pre-season price of $1.10 per pound and raised it to $1.25 per pound in July, competing with OBI, which also announced a $1.25 per pound base price with a 15-cent postseason adjustment.
However, it wasn’t all rosy news about the run. Overall fish size was down by about a pound. Managers noted that the fish were younger on average, with three-year-olds as the dominant age class. Managers aren’t sure why yet.
The overall ex-vessel value reached about $247.7 million before post-season adjustments, which is the fourth largest in the bay’s history. It’s one of the only regions in Alaska that did well for salmon value this year — others struggled to even get fishing periods, if they fished at all. Next year’s run is predicted to break even this year’s record, with a forecast of 71.9 million sockeye for the various systems, according to the Alaska Department of Fish and Game. Some of that has to do with the large sizes of the sibling class related to next year’s run, with exceptional returns projected for all major Bristol Bay systems.
— Elizabeth Earl
4. Delegation salvages Southeast cruise season
Canada dealt another blow — albeit unintended — to Alaska’s tourism industry in early February when leaders of the Canadian Transportation Ministry announced the country’s ports would again be closed to foreign passenger vessel traffic in 2021.
The members of Alaska’s congressional delegation said the closure came as a complete shock and were critical of Canadian officials for not notifying them ahead of time.
The news effectively killed the start of the 2021 Alaska cruise season, as the 19th century-era Passenger Vessel Services Act requires all foreign-flagged and built passenger ships to stop in a foreign port on their way between domestic destinations. Cruise ships traveling to Alaska from the West Coast typically used Vancouver as their PVSA compliance stop.
For their part, the members of Alaska’s congressional delegation used their outsized collective influence to push an Alaska-specific PVSA exemption bill through Congress and to President Joe Biden’s desk before Memorial Day. That allowed large cruise companies to resume service to the state by late July, providing some additional business for Southeast tourism businesses reeling from no large ships in 2020.
The PVSA exemption coincided with action from the federal Centers for Disease Control and Prevention to approve COVID-19 mitigation plans for cruise vessels and port towns.
Southeast tourism industry leaders estimate more than 110,000 cruise passengers visited the region last year, which is about 10 percent of pre-pandemic passenger volumes.
Sen. Lisa Murkowski introduced legislation in September to permanently exempt Alaskas from the PVSA, as the prior bill was only effective for this year.
— Elwood Brehmer
5. Crab stock crashes lead to deep cuts, closures in Bering Sea
It was tough for crab in Western Alaska this year.
Surveys revealed a terrible surprise for crab fishermen: a roughly 90% drop in snow crab stocks in the Bering Sea, leading to drastically reduced crab catch limits. The Alaska Bering Sea Crabbers Association estimates it to result in about a $200 million loss for the fishery.
Scientists aren’t exactly sure what happened to the crab. If they’re alive, they’ve moved far away from the survey area and were missed entirely; if they’re dead, there could be a variety of causes. The North Pacific Fishery Management Council is moving to start a process to study how to minimize bottom contact for pelagic trawl gear in crab protection areas, in part to see if that will help conserve crab stocks.
Snow crab aren’t the only stock in trouble, though they’re the most surprising. In recent years, managers were actually able to increase the total catch limit for snow crab because the recruitment looked promising, but that seems to have reversed this year. One decline that wasn’t really a surprise was the Bristol Bay red king crab fishery, which will be closed completely due to low stock abundance this year.
This will be the first closure for the fishery since 1995, but the stock has been declining for some years with gradually smaller catch limits. However, the closure is still a serious impact for the affected harvesters and communities that depend on Bristol Bay red king crab for a living. The North Pacific Fishery Management Council also moved to study if extending the closure area for the stock in Bristol Bay could help, in part because the crab in the bay may be moving northward from their older, traditional areas.
— Elizabeth Earl