Elwood Brehmer

LNG export deal would end AGIA in-state transport limit

The agreement Gov. Sean Parnell’s administration signed for a large commercial liquefied natural gas project could have a major impact on the state’s separate push to develop a smaller gas project, Alaska Gasline Development Corp. President Dan Fauske said during a Jan. 24 presentation. Senate Bill 138, which Parnell’s office introduced to the Legislature the same day, not only outlines the state’s share of an LNG export project with the “big three” North Slope producers and TransCanada, but would also terminate the Alaska Gasline Inducement Act license the state has had with TransCanada since 2009. Ending AGIA would lift the 500 million cubic feet per day transport limit on Alaska Stand Alone Pipeline that AGDC is working on, Fauske said. Originally designed as a 24-inch, high-pressure line from the North Slope to Enstar Natural Gas Co.’s Beluga Southcentral distribution facility, the $7.7 billion, in-state pipeline project has morphed to a 36-inch, low-pressure line. “The design that we’re continuing to work on is at 500 million cubic feet per day. The pipeline can certainly haul more gas than that,” Fauske said. Current peak demand in the state is for about 240 million cubic feet, or mmcf, of gas per day. Numerous options remain for surplus gas, even with the 500 mmcf daily cap, Fauske said. Agrium Inc. has begun a long process to restart its fertilizer plant on the Kenai Peninsula, a possible large gas consumer. Additionally, Donlin Gold’s mine plan calls for a 300-mile gas pipeline from Cook Inlet to its Donlin Creek mine site where a natural gas-fired power plant would be built to power the mine. Even if the AGIA transport limit remains in place, Fauske noted that it is for gas produced north of the 68th parallel. Gas produced south of the line delineating the North Slope from the rest of the state could be added to the pipeline to exceed the 500 mmcf limit. Outside of Cook Inlet, Doyon Ltd. is exploring for oil and gas in the Interior near Nenana. Fauske said SB 138 is a “double-edged sword” for AGDC, as Parnell has urged the state corporation to align the small and large projects, adding to the goal of “getting gas to Alaskans.” Under the “Heads of Agreement” statement signed by the commercial gas players Jan. 14, an AGDC subsidiary would finance the state’s share of an LNG facility near Nikiski. TransCanada would finance the state share of the pipeline and the Slope processing plant. In addition to using a larger diameter line, the stand-alone project has changed from an enriched gas to lean gas design, Fauske said. “Lean gas is energy rated for delivery to and consumption by consumers,” he said. The lean gas design means two gas separation facilities — at roughly $250 million apiece — wouldn’t be needed to separate out liquids from the methane that largely comprises natural gas. While the liquids would offer a wider range of commercial possibilities, Fauske said studies by AGDC concluded that LNG offers the most reliable commercial market when compared with natural gas liquids or gas-to-liquid options. The state’s contribution in the stand-alone project would likely be in the $400 million range, about 5 percent of the total cost, Fauske said. The rest would be financed through bonds. He said putting additional state money into the project wouldn’t impact the final price of gas significantly. AGDC calculated that for every additional $1 billion the state spent, the gas tariffs would drop only about 50 cents per thousand cubic feet, or mcf, of gas. According to AGDC estimates, gas would be delivered to Fairbanks consumers in the $9 range per mcf and to Anchorage at around $10 per mcf. The Fairbanks estimate is less than earlier projections because a separation plant at the 30-mile Fairbanks spur takeoff point is no longer needed. “We’ve always had a mantra that if you can’t beat the price of imported LNG it’s a fools errand,” Fauske said. He emphasized that every year the project is delayed the $7.7 billion cost estimate — in 2012 dollars — grows by $210 million. That added cost would be carried into the final gas tariffs. The current design also includes about 1.5 percent propane in the gas mixture, he said, about 4,000 barrels per day. Propane could be used as an easily transportable energy option for rural communities currently relying on fuel oil outside of the natural gas pipeline corridor. To make it all go, a two train, $2.8 billion gas conditioning facility would be built at the head of the 727-mile pipeline at Prudhoe Bay. First gas would reach Fairbanks in 2020 on AGDC’s current project timeline. Fauske said a recourse tariff should be filed with the Regulatory Commission of Alaska in August. Shortly after, AGDC plans to complete its Section 404 wetlands application with the U.S. Army Corps of Engineers, he said. If those steps are reached in the coming year, the corporation will go to an open season in 2015 to solicit bids from prospective partners and gas customers, according to Fauske. Construction would then begin in 2017 on a three-year, winter-summer build cycle. Elwood Brehmer can be reached at [email protected]

AEA recommends 26 projects for seventh round of grants

The Alaska Energy Authority is recommending the Legislature fund 26 heat and power projects through round seven of the state Renewable Energy Fund. If legislators choose to match Gov. Sean Parnell’s fiscal year 2015 proposal for the grant program, the projects would receive a total of $20 million when the money is disbursed in July. The 26 projects were deemed to be highest priority by AEA staff. The authority found that 64 projects — totaling $41.5 million — of the 86 that submitted completed applications by the late September deadline warranted funding recommendations, however there isn’t always enough money to go around, said Sean Skaling, AEA’s deputy director for alternative energy and energy efficiency. “(The Legislature) has generally respected the opinion of AEA, and it’s generally a matter of how far down the list down the list they go before drawing the line,” Skaling said to the AEA board Jan. 14. “That’s the ultimate funding decision.” This year 17 heating and nine electric projects comprise the top 26. Of those, the funding recommended would complete 20, with four in the feasibility phase and two in design, according to AEA. The emphasis on heating is somewhat of a departure from previous years that saw a higher number of electrical generation projects chosen for funding. Skaling said the change is an attempt to help mitigate heating costs in areas of the state where electricity is disproportionately cheaper. Such is the case in much of Southeast Alaska where cheap hydropower is prevalent, but residents primarily use fuel oil for heat. Skaling said his team has seen a “huge” improvement in the quality of applications since the first submittal period, while the number of applications has decreased over the years. “I think (AEA) has become a lot more educated about what works and what doesn’t, and our evaluation is much more sophisticated,” he said. “At the same time the applicants, I believe, have gotten a sense of what works and what doesn’t — what we’re looking for.” Established in 2008, the Alaska Renewable Energy Grant Recommendation Program supports the development of renewable energy projects primarily in rural communities to offset often high energy costs. It was initially meant to provide a total of $250 million in renewable energy development grants over five years, but the Legislature renewed the program in 2012 for an additional 10 years. The state put $25 million towards the program in the current fiscal 2014. To date, $227 million has been appropriated to the Renewable Energy Fund. An October 2012 report evaluating the program done by the Vermont Energy Investment Corp. and the Alaska Center for Energy and Power found that the $96 million invested in operational projects at the time had produced a net benefit of $114 million to participating communities — with a 1.73-to-1 benefit-to-cost ratio. Those projects had also produced more than 23,000 megawatts of power and displaced more than 1.75 million gallons of diesel fuel. After going through technical and economic evaluations by AEA with the help of the Department of Natural Resources and independent economists to ensure their feasibility, the projects are ranked based on weighted criteria, Skaling said. The current cost of energy in the given area is the largest factor, followed by a project’s economic and technical feasibility and the matching funds a community or company can offer. The communities with the top three ranked projects this year — Atka, Chignik and Venetie — all have power costs between 69 cents and 90 cents per kilowatt-hour, according to AEA. Once money is awarded to a project, Skaling said each grantee is required to report to AEA on their progress, monthly during construction and quarterly after a project is completed. Further, he said AEA tracks the energy generation and operation of each project and tabulates those numbers against preconstruction statistics. This allows the authority to measure the net benefit of a project and better calculate its viability, he said. If the Legislature adds to Parnell’s $20 million allocation for the program, two partially funded projects will get full funding, Skaling said, per a Renewable Energy Fund Advisory Committee request. “Their primary recommendation was to take two rather large dollar-figure projects that are in lower cost areas, specifically Stetson Creek and Allison Creek in the Railbelt and Chugach regions, and partially fund those in order to fit in six more projects,” he said. Stetson Creek is a $21.9 million diversion project being done by Chugach Electric Association, which pipes water from Stetson Creek into Cooper Lake on the Kenai Peninsula to increase power production at the site’s hydroelectric facility. AEA recommended a total of more than $3.4 million go to Stetson Creek work. Chugach Electric is expected to complete the project in late 2014. Allison Creek is a run-of-the-river project near Valdez that Copper Valley Electric Association has said it hopes to have in production sometime in 2015. If fully funded, it will receive about $5.9 million from the state in fiscal 2015 and has a total cost estimated of around $22 million. The full list of Round VII Renewable Energy Fund recommendations can be viewed on AEA’s website at akenergyauthority.org/refund7.html. Elwood Brehmer can be reached at [email protected]

Arctic issues will be hot topic as Legislature convenes

The Arctic will be a hot topic in the months ahead for state legislators. Co-chairs of the state Arctic Policy Commission, Sen. Lesil McGuire, R-Anchorage, and Rep. Bob Herron, D-Bethel, said Jan. 16 that they have plans to enter the 2014 legislative session “armed with an Arctic legislation package,” according to a commission release. In addition to the bill Herron introduced last session to establish an Arctic Port Authority and Development, House Bill 165, McGuire is drafting legislation that could serve as a foundation to fund the estimated $100 billion worth of Arctic infrastructure in need of private investment, the release states. “The Alaskan Arctic is in great need of investment in infrastructure, to improve the lives of those who live there, and for responsible resource development. Our two infrastructure bills are designed to help kick-start that investment,” Herron said in a formal statement. McGuire’s Arctic funding mechanism would resemble the Sustainable Energy Transmission and Supply, or SETS, fund and give the Alaska Industrial Development and Export Authority the ability to form partnerships between the state and private investors. It was McGuire, who is running for the Republican nomination for lieutenant governor against Anchorage Mayor Dan Sullivan, who first introduced SETS legislation in early 2011. The state energy fund was formed in 2012 and is an integral part of AIDEA’s effort to get North Slope natural gas to the Interior, providing low-interest state loans to multiple project partners. “The next important step in the evolving Arctic arena is infrastructure development in the region,” McGuire said. “With increased activity in the Arctic, it will be paramount that Alaska is prepared not only to deal with the activity, but also to capitalize on it. In order to do that, Alaska must have the capacity to respond to emergencies, lend logistical expertise, harbor ships, and monitor changing weather and ice conditions. This requires not only a deep draft Arctic port and roads, but also increased telecommunications and energy infrastructure. We need to ensure that our natural resources are developed in a responsible way, but also that tourism can flourish and that local economies can take advantage of the new Arctic.” On Jan. 30, the Arctic Policy Commission is slated to release its report to the Legislature with advice on what the state should do to prepare for and foster Arctic development. The 26-member commission was formed out of the Alaska Northern Waters Task Force and has been convening stakeholder meetings about Arctic issues to generate its report since March 2013. The report is expected to highlight management strategies for offshore oil and gas development and mining in the region as well as ways to secure shipping lanes as melting ice continues to open the Northern Sea Route. U.S. Army Corps of Engineers officials have said their report recommending a plan for deep-water port infrastructure on the Seward Peninsula near Nome should be ready in March. Last March the Corps of Engineers released a study that preferred several Seward Peninsula locations for a deep-water port to serve as a hub for Arctic maritime operations out of 14 sites along Alaska’s Northern and Western coasts. The report cited existing onshore infrastructure and proximity to deep water as primary reasons for selecting the Seward Peninsula options. Additionally, Herron and McGuire have plans introduce a resolution to promote the state’s priorities when the U.S. begins its two-year term as chair of the Arctic Council in 2015. Canada currently heads the eight-nation international policy coalition. The resolution would also request the State Department to hear Alaska’s voice when the time comes to choose an individual to represent the country in the council’s head seat. State Arctic Policy Commission member Sen. Cathy Giessel, R-Anchorage, said at a December Commonwealth North forum that an Alaskan should lead the U.S. Arctic contingent. Herron shared Giessel’s sentiment and that of Alaska’s congressional delegation in his statement. “We’ve said it 735,000 times: Alaska is America’s Arctic and as such we must have a large say in Arctic Council Priorities when the United States is chair,” he said. In the state Legislature, McGuire is expected to introduce a mirror bill to Herron’s HB 165 in the Senate. The House bill is awaiting action in the Labor and Commerce Committee. Elwood Brehmer can be reached at [email protected]

Arctic activity, tight funding for transportation in 2014

The coming year will likely see an ongoing discussion between the feds and the State of Alaska as to how an increasingly-active Arctic will be managed going forward. Sen. Cathy Giessel, R-Anchorage, previewed a draft version of the report the state Arctic Policy Commission is set to release to the Legislature Jan. 30 at a December Commonwealth North meeting. The 26-member commission consists of 10 legislators; representatives from the fishing, mining, oil and gas industries; officials from Arctic region communities and Alaska Native corporations; and Interior Department Special Assistant for Alaska Affairs Pat Pourchot, among others. Giessel said one of the state commission’s top priorities is ensuring an Alaskan heads the U.S. delegation of the international Arctic Council. The U.S. will chair the eight-nation policy forum for two years beginning in 2015. Getting an Alaskan in the prominent position would be a big step towards making the state’s Arctic priorities heard, she said. Giessel noted her view of the federal government’s view of Arctic issues by echoing a sentiment often heard from Alaska’s congressional delegation. “Our federal government has only recently realized that we’re an Arctic nation,” she said. The White House and Defense Department each released Arctic policy guidelines in 2013, but the documents lacked specifics in many areas. Giessel added that the 16-page Defense Department report mentions Alaska a total of five times. While final numbers are waiting to be tallied, Defense Secretary Chuck Hagel said in November that Northern Route shipping traffic was expected to have increased tenfold in 2013 over the previous year. In meetings with Northern Route community leaders, Giessel said the Arctic Policy Commission heard that the state should work to establish a form of revenue sharing between development operations and villages. Assuring villages have proper infrastructure and the public safety capacity to handle more traffic needs to be addressed as well, she said. “One of the things we heard from communities is, ‘We’ve got resource development going on but we as a community don’t benefit from that,’” Giessel said. Throughout the commission’s roughly 10 months of work to date, the top priorities from potential Alaskan stakeholders in an Arctic future were environmental protection and economic growth, she said. The commission worked out four guiding principles for the federal government’s Arctic policy in a two-day mid-December work session, she said. The guidelines from the draft state that Alaska envisions an Arctic that values community sustainability and thriving culture, economic development in a healthy environment, public safety and security, and transparency and inclusion in decision making. After making its recommendations to the Legislature in later this month the Arctic Policy Commission will continue its work until it expires in 2015, unless further legislative action extends the commission’s duties. Infrastructure Funding might be hard to come by for a number of state transportation projects. In his budget proposal released Dec. 12, 2013, Gov. Sean Parnell cut unrestricted general fund spending 66 percent from the current capital budget. He appropriated $55 million for the Knik Arm Bridge and Toll Authority to continue its work on the Knik Arm Crossing. If the state can figure out a funding mechanism for the bridge, KABATA officials have said construction could begin sometime in 2015. Final right-of-way acquisitions on the Point MacKenzie side of the project should be made this year. Near where a Knik Arm Bridge would land across from Anchorage, the Matanuska-Susitna Borough’s Port MacKenzie Rail Extension project will continue. The 32-mile rail line to the deepwater commodity port needs about $100 million to be finished on schedule in 2016, according to borough officials. Parnell appropriated $5 million for it in his budget. A 7 million-gallon fuel storage facility built by Central Alaska Energy LLC is set for construction at Port MacKenzie this year. The Northern Rail Extension and bridge across the Tanana River east of Fairbanks should be completed on time later this year, Alaska Railroad Corp. officials have said. Federally, the Army Corps of Engineers will continue work on its plan for a deepwater port in Western Alaska, according to Lorraine Cordova, project manager for the Corps. The port would serve as a base of operations for maritime emergency response in the Arctic and potentially as a hub for offshore oil and gas exploration in the region. After starting with 14 possible port sites along the state’s Northern and Western coasts, the Corps of Engineers has narrowed its options to a handful of locations on the Seward Peninsula. A final port design is expected to move to Washington, D.C. for approval by Corps of Engineer leadership late this year and possibly on to Congress for budgeting in early 2015. Elwood Brehmer can be reached at [email protected]

Labor Department program recognizes workplace safety

Workplace safety is a topic that can rear its head for all the wrong reasons — typically after an accident. A partnership between the State of Alaska and the federal Occupational Health and Safety Administration tries to make workplace safety a positive subject matter. The Department of Labor and Workforce Development Voluntary Protection Program, or VPP, certifies companies with exemplary safety records. The latest to be recertified was BP’s Exploration Alaska Central Power Station facility in Prudhoe Bay. “The VPP Star recertification is a testament to our team’s proactive commitment to safety. We have embedded this culture into the fabric of our facility and the team members are very proud of their accomplishment,” station managers Art Milan and Michael Dobesh said in a formal statement. VPP Star-rated sites are exempt from random workplace inspections for five years, program coordinator Dave Guinn said. Merit-rated sites are exempt from such inspections for three years. Companies still need to file annual reports with the department, he said. “We don’t just walk away for five years,” he said. The program is a “partnership” between the employer and the state that can improve already strong safety programs, Guinn said. “The whole ideas is to focus on hazard prevention and control,” he said. According to the state Division of Labor Standards and Safety, VPP certified companies average 52 percent fewer jobsite accidents than their industry counterparts. The State of Alaska adopted the OSHA-supported program in 1997. The federal program was started in 1982. To qualify, an employer must first maintain injury and illness rates below Bureau of Labor Statistics standards for their industry, Guinn said. A Labor Department team then reviews the applicant’s workplace safety program and conducts a site visit prior to ruling on the application. Guinn said full company commitment from management through every employee is required to meet VPP standards, along with an effective safety policy. “VPP is no small thing. The kind of things we’re asking for involve quite the commitment,” he said. Currently, 12 companies are certified at the Star level, the majority of which are ancillary groups of oil and gas companies. Guinn said the reason for that is twofold: The inherent dangers of the oil and gas industry require a strong safety culture and formal safety guidelines, and the typically large companies in the industry have the resources to devote to safety programs that meet VPP standards. Other VPP Star certified organizations include Air Logistics of Alaska Inc.; environmental services firm Alaska Clean Seas; Insulfoam Inc; Fairbanks Memorial Hospital; and seafood processor UniSea Inc. Elwood Brehmer can be reached at [email protected]

State, small businesses weigh in on health care strategies

While the battle over the Affordable Care Act had the federal government shut down, health care industry experts and affected groups gathered in Anchorage Oct. 4 to the future of discuss health care in Alaska. The State of Reform health policy conference began with an overview of the state’s AlaskaCare and Union Health Trust insurance plans for its employees by Department of Administration Commissioner Becky Hultberg. In total, Hultberg said the State of Alaska has spent approximately $700 million annually to fund health insurance plans for its active and retired workers in recent years. The cost of providing coverage to the state’s roughly 17,000 active employees and their families has more than doubled over the past decade from $117 million in fiscal year 2003 to $256 million in 2012, she said. In fiscal year 2014, which began July 1, Hultberg said the state is expected to spend $16,600 per employee on health care. Part of that cost, she said, is due to the benefits some state workers receive under their insurance plans. Nationwide, private employers pick up about 70 percent of the health insurance cost burden for their employees. For public employers the number is near 80 percent, according to health insurance studier and nonprofit the Kaiser Family Foundation. For some State of Alaska employees, it’s even higher. “Our employees on a basic plan have no premium share,” Hultberg said. As Baby Boomers continue to retire the cost to Alaska will grow as well. The number of retirees insured by the state is expected to increase 50 percent from 40,000 to nearly 60,000 over the next 10 years. Hultberg said the final tally for the state’s retiree insurance bill this calendar year will likely exceed the half-billion dollar mark for the first time. That cost multiplies over time. “(Alaska) has a $12 billion — that is billion with a ‘B’ — unfunded pension and health insurance liability for our retiree pension and health plans,” she said. “Of that $12 billion liability, $4 billion is related to our health plan.” The state is looking at ways to curb those costs down the road, Hultberg said, by revamping portions of the health plans it provides. Beginning in January 2014, the state will be working wellness and disease management programs into its health insurance plans in an effort to reduce high-cost claimants and those individuals who need extensive medical care. Hultberg said the state experienced a roughly 20 percent spike in claims in the thousands of dollars in 2012, and with an aging population, that is not viewed as a fluke. The wellness program will encourage healthy lifestyle choices for plan participants common to such programs. Ending tobacco use, well-rounded diets and stress and weight management, among other areas of health will be emphasized, Hultberg said. Wellness is seen as a form of preventative care, she said. The disease management program will offer help in dealing with 42 long-term conditions, including prolific types of cancer, arthritis and other health challenges often incurred later in life. To further educate state plan participants on how to best spend their health care dollars, Hultberg said the health insurance call center’s role would gradually be expanded to a “concierge services approach.” The goal is to help callers make cost-effective decisions regarding their medical care providers by having trained staff with easy access to participants’ profiles, she said. “We want to transform our call center from just being a place where you call and get answers to questions to really a decision support tool,” Hultberg said. Also in January, the state will offer use of the iTriage smartphone app to its health coverage participants. Hultberg said the app provides information that can help users identify symptoms and take the appropriate treatment measures, as well as highlighting in-network doctors and medical facilities. By providing individuals with as much information as possible, iTriage will help those with questions make the most informed, cost-conscious decision they can, she said. “We need members to have really good tools right at the point where they’re making that decision about what care to seek,” Hultberg said. Looking ahead, the state wants to offer a consumer-driven health plan, or CDHP, by early 2015, she said. The hope is that by changing health plan designs and giving plan participants more direct control over their health care dollars individuals will be more aware of the money they’re spending at the doctor, according to Hultberg. While the details are still in flux, she said the outline of the plan comes with a higher deductible, but allows plan-provider money to be “banked” by participants in health savings accounts. “We’re going to give (participants) the resources to pay for a higher deductible, but then we’re going to ask them to be accountable because those dollars can carry over,” Hultberg said. “Those dollars are in their hands and those dollars can be saved.” According to the Department of Administration, the “Economy” health care plan offered by the state for the 2013 fiscal year, which ended June 30, had a $500 deductible for an individual plan and a $1,000 deductible for families. Hultberg said Alaska may look to model its CDHP after one Indiana first implemented in 2006. Per Indiana’s plan, the state contributed 45 percent of a $2,500 deductible for individuals and $5,000 deductible for families to a health savings account. By 2010, she said Indiana’s yearly savings averaged 10.7 percent, employees were collectively saving up to $10 million, and health savings accounts had an average balance of about $2,000. Small business strategies As the Jan. 1, 2014, full-implementation date for the Affordable Care Act draws closer, Josh Lewis, senior manager for the Seattle-based accounting firm Moss Adams, said there are opportunities for small employers to take advantage of the complex law. Some small business owners may try to save money by actually dropping insurance and incurring the subsequent penalty, he said. “If you currently have health insurance and you decide to drop it, you will likely save money, whether that’s the right decision or not,” he said. Employers with 50 or more full-time equivalent employees, those that work an average of 30 hours or more per week, are mandated to provide health care to full-time workers under the law, although that requirement has been delayed until 2015. The penalty for not buying a group health plan often calculates out to be less than the insurance, Lewis said. The tax for not offering coverage for up 95 percent or more of a qualified workforce is $2,000 per full-time employee, minus the first 30 employees. For instance, a business with 100 employees and no insurance plan on Jan. 2 would incur a $2,000 penalty for 70 employees totaling $140,000. While the penalty is $2,000 per employee, the national average employer premium contribution for a basic family health insurance plan in 2012 was $10,700, according to The Kaiser Family Foundation. The charge is similar for non-qualifying health plans where the employer covers less than 60 percent of the premium or an employee must pay at least 9.5 percent of their income towards their health insurance premium. Under the non-qualifying plan penalty, the per employee charge increases to $3,000 for every worker that receives a subsidy through a state or federal exchange. Terry Allard, a senior advisor for the benefits consulting firm The Wilson Agency said some employers who are choosing not to enroll in a health plan may rather offer a stipend to employees for purchasing individual insurance. In most cases, the money would be a portion of the difference saved by not offering health insurance and instead incurring a penalty. In January, “you don’t have the risk as an employer of having someone with a preexisting condition that can’t get coverage,” Allard said. Not offering coverage may be a money-saver in 2014, but increasing penalty charges could change that in future years, Lewis said. Very small businesses could benefit from a tax credit that is already in place, but will be adjusted after the New Year. The small business tax credit has been available since 2010 and offers up to a 35 percent credit this year on health insurance costs for employers with less than 25 full-time equivalent employees. In 2014, the available credit increases to 50 percent. Further, those employees must have an average salary of no more than $50,000 and half of the insurance premium must be paid by the business. Also, next year a health plan must be purchased through the federal small business health option, or SHOP exchange to qualify for the tax credit. Elwood Brehmer can be reached at [email protected]

Interior Department pilot payment system a success so far

A revised payment system implemented in May for Department of the Interior vendor pilots in Alaska seems to have done its job — it’s kept the pilots paid and flying. “Most of the vendors were paid within 72 to 96 hours from the time we got the invoice,” during this flying season, said Mark Vaughn, a National Park Service contract administrator in Anchorage. Vaughn said it was a rare exception for a vendor pilot to wait up to 15 days to be paid after the Park Service received an invoice for work. Last year, a complex electronic payment system within the department largely failed and left some small Alaska flight services being owed upwards of $250,000 by Interior Department agencies. Alaska Air Carriers Association Executive Director Joy Journeay said at the peak of the problem the number of vendors owed thousands of dollars was in the “dozens.” Changes in the payment system cut out procedures that sent paperwork and money to the Interior Department offices in Denver and Boise, Idaho. With money for Alaska operations being kept in state, Vaughn said Interior agency staff that handle the transactions, such as himself, were able to be more responsive to their vendors’ needs. Additionally, Vaughn said a big improvement in the system was allowing work invoices to be flexible, rather than for specific flight times, as had been done in the past. “We stopped going day-of-flight and started doing timeframes, which was better for the vendors and much better for us,” Vaughn said. “That way we could say we need to fly sometime ‘in here’ and when we had a weather break we could fly rather than saying we need to fly on the 25th, for instance.” Some flight services changed their business practices and stopped flying for the department prior to having office work completed after what happened last year, a move that also helped remove confusion from the system, Vaughn said. Journeay said she spoke recently with the officials in the Alaska Region office of Interior’s Office of Aviation Services and was told that the department had no long-term outstanding payments. After performing an informal survey of Association members, Journey wrote in an email that there are lingering issues with entering data into the electronic payment system, but vendors are getting paid in a timely fashion. The changes to the payment system were made specifically in Alaska after Interior agency directors in the state sent a letter in September 2012 to Interior Business Center officials in Denver requesting a procedural changes similar to the ones made. The letter stated that the “Alaska DOI bureaus spend $29 million annually, or approximately 47 percent of all DOI aviation expenditures nationwide.” At the time it noted that some vendor payments were as much as two years behind. Further, the letter noted that some pilots had flown in “good faith on verbal approval” that they would get paid when the payment system went awry and that the blanket system had damaged Interior’s credibility in Alaska. The high demand for aircraft services, combined with unpredictable Alaska weather prompted the Alaska-specific trial program. By “Alaskanizing” the system, Vaughn said everyone involved is now on the same page. After learning of the payment delays last fall, Sen. Mark Begich wrote a letter to then-Interior Secretary Ken Salazar requesting prompt action to get Alaska pilots paid. After involvement from the state’s whole congressional delegation on the issue, the department reported it was caught up on payments in April.  Vaughn said money had been appropriated to pay vendors for late summer work in preparation for the federal government shutdown that began Oct. 1. The next step is to determine whether the program becomes moves from trial status to standard procedure in Alaska. When the government restarts and Interior officials get back to work he said they would meet and discuss the 2013 flying season and how the system can be further improved. He hopes it stays in place, Vaughn said, and he’s encouraged by the positive responses his agency has received from vendors this year. “One of the measures is kind of how much do you get yelled at and this year I didn’t get yelled at at all so that’s good,” he said. “Last year I couldn’t say the same thing.” Elwood Brehmer can be reached at [email protected]

Material cost, limited land makes tight commercial market

The demand for commercial real estate in Anchorage is high and the availability is low was commercial broker Brandon Spoerhase’s message to the Anchorage Chamber of Commerce at its Aug. 5 Make It Monday forum. Spoerhase, a broker for Jack White Commercial, told the chamber that the current vacancy rate for large industrial space is at 3 percent, with about 580,000 square feet available for lease in the city. “Industrial (space) is by far the tightest product on the market, and it’s a direct result of the fact that it’s difficult to find quality clear-span, clear-height space for tenants,” Spoerhase said. He said new industrial developments are slow to materialize because of a lack of available land in the Anchorage Bowl and the cost of building materials. For building new industrial space to be feasible, a property owner would generally have to charge more than $1.50 per square foot on a triple net lease, or an agreement where the tenant pays the facility’s taxes, insurance and maintenance in addition to standard rent and utility costs. Class A office space is running at 5.3 percent vacancy and Class B is harder to come by with 3.5 percent of the market space available, Spoerhase said. “There are very few options left in excess of 10,000 square feet (of office space),” he said. Nearly 750,000 square feet of “flex” office and warehouse space is available in Anchorage, Spoerhase said, meaning that market is at 4.3 percent vacancy. Citywide there is about 930,000 square feet worth of office space in various stages of development, but not all of it will be available for lease, he said. Cook Inlet Region Inc., which recently announced it would be moving its corporate headquarters to a new office complex on the corner of Fireweed Lane and the Seward Highway in Anchorage’s Midtown, will occupy about 40,000 square feet of the 60,000 square feet available. The remaining space will be leased out, Spoerhase said. With the movement of wholesale retailer Sam’s Club from its Penland Parkway location to the Tikahtnu Commons development in Northeast Anchorage, the former Sam’s Club building on Penland has been purchased by the State of Alaska for $16.1 million, he said. When revamped, the property will house the state Geological Materials Center and provide 30,000 square feet of office space. The total project cost is estimated at $24 million, Spoerhase said, and Wal-Mart Stores Inc., Sam’s Club’s parent company, donated $2.5 million to the project. Despite a squeeze on easily developable land, Spoerhase predicted growth in commercial development. “I think we’re going to see a big commercial bounce from oil tax reform in the next two years. There are several groups looking to develop six to eight-acre sights as a direct result of the tax reform,” he said. Adding quality fill to sites with marginal soil is becoming an increasingly common way to expand developable acreage in the city, he said. Replacing poor, highly organic soil with buildable fill averages about $1.35 per square foot, Spoerhase said. Retail The market for existing retail space is running about $1.50 per square foot triple net, Spoerhase said. New retail is commonly being leased for $2.65 per square foot triple net and space in Tikahtnu Commons is going for upwards of $3 per square foot, he said. Spoerhase announced that Walgreens pharmacy company has plans to open a fourth Anchorage location on the corner of Lake Otis Parkway and 88th Street and that national restaurant chain Texas Roadhouse will be opening its first Alaska location in Tikahtnu Commons around the end of the year. Construction of sporting goods giant Cabela’s new 100,000 square-foot store on C Street in South Anchorage has spurred nearby projects. According to Spoerhase, the 27-acre parcel of undeveloped land on the west side of C Street, across from the Cabela’s location, is in the early planning stages for retail development. The Cabela’s store is set to open in the spring of 2014, according to the company. Bass Pro Shop’s, which is opening its first Alaska store in Northeast Anchorage’s Glenn Square, has moved its opening date back again, Spoerhase said. The store was original planned opening in June of this year was first revised to this coming October. “(Cabela’s) main competitor Bass Pro is pushing back their opening at Glenn Square until early 2014 as their construction schedule of opening this fall was, I think, a little aggressive for construction in Alaska,” he said. Elwood Brehmer can be reached at [email protected]

FAA radio rules in area of 2011 crash nearly standardized

Uncertainty amongst pilots over proper radio frequencies west of the Susitna River is being resolved more than two years after a midair collision involving aircraft using different frequencies killed a family of four. “The confusion over (Common Traffic Advisory Frequencies) CTAFs has been that small airports west of the Susitna were given different frequencies about five years ago, and the areas of differing frequencies overlap,” Alaska Air Carriers Association Executive Director Joy Journeay said. The issue had tragic consequences July 30, 2011, over Sister Lake, near Trapper Creek when a Cessna 206 taking off from Sister Lake Collided with a Cessna 180. The Cessna 180 crashed and all four onboard were killed. The pilot of the Cessna 206 was able to fly to Anchorage for help after radioing to report the collision. A May 2013 National Transportation Safety Board report on the incident found that the pilot of the 206 was on CTAF 122.8, while the 180 pilot was using CTAF 122.9. The report does not assign fault to either pilot. Both were headed to land on Amber Lake, less than a mile from the crash. A review of the Federal Aviation Administration’s Supplement Alaska handbook and official chart for the area show conflicting instructions as to the correct radio frequency to use. The handbook and charts are both required to be onboard an aircraft during flight to comply with FAA regulations. The chart calls for CTAF 122.9 to be used over much of the flat west of the Susitna and specifies the frequency to be used May 15 to July 15 around the Deshka River Recreation Area, a popular flight path during king salmon season. Several private airports in the area are assigned CTAF 122.8, according to the chart. Page 402 of the Supplement Alaska reads as follows for the Matanuska-Susitna Borough: “CTAF assignment generally is accomplished according to the following: Airports south and west of the Parks Highway are assigned 122.8. Airports north and east of the Parks Highway are assigned 122.9.” Journeay said she’s been told by FAA officials that page 402 of the handbook, which is updated quarterly, will be removed in future printings and that future charts will be corrected. Until then, the discrepancy will still exist. FAA officials did not respond to requests for comment in time for this story. Air Carriers board member Danny Davidson said for years the area was understood to be a 122.9 area. Davidson operates his flight service, Davidson Aviation, out of Anchorage and lives near Trapper Creek. “The confusion, today, is still in effect. Pick a number,” Davidson said. Journeay said the Air Carriers Association brought the issue to the FAA’s attention shortly after the 2011 crash, and began taking action again this spring when association members said it had not been resolved. She added that the association’s members have been in consensus for two years that the area west of the Susitna River should be a 122.9 area. When it was brought to the attention of Anchorage FAA officials in the Airports and Flight Service divisions this spring that nothing had been done regarding the CTAFs, Journeay said action began immediately. She attributed the lack of response to “red-tape and inner-government process.” Elwood Brehmer can be reached at [email protected]

Pitch-on-a-Train brings entrepreneurs, investors together

The summer scenery of Turnagain Arm, plus the nostalgia of a train ride, plus lunch at a world-renowned resort equals what? Undoubtedly the perfect setting for conducting business. The Anchorage Economic Development Corp. team combined those elements with investors and some of Alaska’s most promising entrepreneurs to form the first annual Pitch-On-A-Train business competition. The Aug. 1 event was the third leg of the group’s four-part Alaska Entrepreneurship Week, which ran from July 25 to Aug. 4. Five emerging startups were invited to present their ideas to a panel of eight Alaska business leaders and investors in the friendly competition as the Alaska Railroad train headed from Anchorage to Portage. Each person or pair was allotted five minutes to make their pitch. Altogether, 80 people gathered to take a train ride and do a little networking. Anchorage’s Brian McKinnon, with his company Aknuna Technologies and patent-pending design for a sealed high volume industrial fueling system, won the Pitch. In addition to the $5,000 business startup package, which included internet and phone plans and free advertising consulting, McKinnon said he came away with something even more valuable — dozens of business connections. “I think every single person that was involved is going to make it,” McKinnon said. “There were no losers (in the competition).” Other participants had beginning ventures in ranging fields. ArXotica is a Bethel-based is a company with skin-care products that incorporate salmon oils and extracts from native Alaska plants. Airlite Inflatable Snowshoes of Anchorage offers a patented inflatable snowshoe designed to be packed away for backcountry emergency situations. GearSpoke is an online gear rental startup that provides individuals with outdoor gear with a marketplace to rent their canoes, tents or skis when they aren’t in use. Finally, RLB Productions presented an idea for a reality TV show centered on what Alaska bed and breakfasts and resorts prepare for their guests. McKinnon said he had several contacts that could help his fellow participants and that their connections circled around. “We’re all going to be supportive of each other,” he said. AEDC Vice President John Bittner said the goal of the morning-long event was to enable the participants and spectators alike to make new connections. “What we were hoping would come out of this was, with putting the participants in the room with that collection of investors and business leaders and bankers — that they would really be able to hone in on, ‘OK, here’s what I’m good at, here’s where I need a little work and here are the people who can help me.’ And I think that is really what came out of this,” Bittner said. The format, with each pitch being made in front of the investor group gathered around a long table, mimicked an investor meeting or sales pitch to a large company, McKinnon said. After being the keynote speaker at AEDC’s economic forecast luncheon the day prior, Gallup Inc. CEO Jim Clifton rode the train to Portage and hopped the bus to Girdwood for lunch at Alyeska Resort with the rest of the group. Clifton said he has no doubt all five ideas can be successful, it’s whether or not the entrepreneurs are able to survive the tough beginning, or “winter season,” as he called it, that every business faces. He noted that AEDC’s encouragement of startup businesses could go a long way towards their eventual success. “I think what you see here is what every city’s got to do,” Clifton said. “It’s more about the energy and the engagement of the leaders because what you’re really trying to do is grow the entrepreneurial spirit.” Longtime Alaskan entrepreneur and head of angel investment firm Alaska Venture Partners, John Wanamaker was one of the panel of eight that judged the Pitch participants. Simply meeting and brainstorming with like-minded individuals is extremely beneficial for early-stage entrepreneurs, he said. “(The train) was a good environment. People were mixing and that in and of itself creates an environment for collaboration,” Wanamaker said. The participants were chosen because they had won or finished high in local or state emerging business competitions, Bittner said. McKinnon won the 2013 Alaska Business Plan competition in April with Aknuna Technologies. The ArXotica team recently received a $5,000 investment from Kiva, a crowdfunding website. His next step is finding investors that fit with his vision, McKinnon said. If he can raise the $400,000 he estimates he needs to start producing the fueling system, McKinnon hopes to be selling them to North Slope producers within six months, he said. “It’s a matter of finding the correct investors,” he said. “I’m going to spend the rest of my life with these people. I’d really like to find the right ones.” Wanamaker said he applauds what AEDC has done to showcase Alaska’s innovative and daring entrepreneurs. “I think (AEDC has) done more for entrepreneurs in the last year, year-and-a-half in particularly technology fields — they’ve brought a certain velocity to the environment that hadn’t existed before,” Wanamaker said. Elwood Brehmer can be reached at [email protected] 

Zender wins environmental training grant for rural cleanup

June 20, 2013 A $200,000 Environmental Protection Agency grant will allow Zender Environmental Health and Research Group continue its environmental technician training program for unemployed rural Alaskans. Lynn Zender is the founder and executive director of the Anchorage-based nonprofit. “We recruit residents from rural Alaska villages to train them as environmental technicians to work within their communities,” Zender said. The training is focused on protecting local environmental health, she said. Trainees are instructed in proper contaminated site cleanup procedures, oil spill response and home and bulk fuel tank inspection. A large portion of the training is centered on solid waste disposal and landfill compliance. Zender said the isolation of many rural communities presents challenges for proper trash handling. “Rural Alaska villages deal with landfill issues not found anywhere else in the country,” she said. The 32 students are chosen after completing a detailed written application and a phone interview, Zender said. From there the applicants’ files are reviewed by a panel of EPA and Zender officials for final approval. “It’s a pretty arduous (application) process,” Zender said. A thorough application process is needed to assure those selected will complete the training, which can get challenging. The training consists of two intense two-week periods conducted over six weeks with a two-week break during which students can return home or stay in Anchorage where the courses are held. Zender said to get 168 hours of training into four weeks courses are conducted for up to 10 hours a day, six days a week if necessary. The application process for this round of training will begin in fall and courses will start in February 2014, Zender said. The group was awarded a similar grant in 2012 and conducted two rounds of training in 2012 and early this spring, she said. “Part of our program is to follow-up with our graduates for a year afterwards and help them with job placement,” Zender said. Most graduates gain employment with local governments or regional corporations, she added, in jobs with an average wage of about $18 per hour. Travel expenses for the students covered through the state Department of Labor and Workforce Development’s State Training and Employment Program, or STEP. Zender Environmental was officially awarded the grant on June 13 as a part of more than $3.2 million in EPA Environmental Workforce Development and Job Training grants awarded nationwide, according to an EPA press release. Zender was one of 16 groups throughout the country to receive such a grant, part of the agency’s larger Brownfields Grant Program. “These grants are provided to local community job training organizations that have demonstrated partnerships with employers who have expressed a willingness to interview and hire graduates,” EPA Assistant Administrator Mathy Stanislaus said in a release. “I am happy to continue to support this important and tremendously successful EPA program that has successfully placed more than 71 percent of program graduates in environmental careers since the program’s inception in 1998.” Mary Goolie, EPA project officer for Zender Environmental, said Zender’s job placement rate is higher still, at 88 percent for the program about to enter its third year. She added that such a high percentage of the 35 graduates from the two previous training courses found work because Zender Environmental did its homework ahead of time. “(Zender Environmental) surveyed Alaska employers as to what kind of training they needed to hire people in their communities,” Goolie said. She added that the preparation helped the organization win what she called a “highly competitive” grant. Elwood Brehmer can be reached at [email protected]  

Insurance rates drive high costs for state workers' comp

June 23, 2013 A team from the Alaska Workers’ Compensation Board traveled the state June 17 to 20 holding public meetings to discuss rising medical costs associated with on-the-job injuries. “At our main meeting our board decided it wanted to get out in the community and get feedback from employers, employees, from doctors, from attorneys — from the stakeholders in the workers’ compensation system,” state Division of Workers’ Compensation Director Mike Monagle said at the June 18 Anchorage meeting. Other meetings were held in Fairbanks, Kenai and Juneau. Alaska’s total workers’ compensation system costs were $270 million last year, according to division statistics. A biannual study done by the state of Oregon found that Alaska carries the highest workers’ compensation insurance premium rates in the country, despite a 3 percent drop in premiums in 2012. In 2000, Alaska ranked 28th in workers’ compensation premium rates, but by 2006 it was the most expensive state in the country. Since then, Alaska has been first or second. Monagle said rising insurance costs are not related to incident rates, which have dropped from more than 30,000 reported workplace incidents in 1994 to less than 20,000 last year. Over the same period employment grew by nearly 90,000 jobs to roughly 320,000 statewide, he said. “Employment’s going up, (incident) frequency rate is going down. This frequency rate is really important because it’s the only thing that has been keeping Alaska’s premium rates in check,” Monagle said. The Oregon study found Alaska’s premiums to be 160 percent of the national median. Premium rates for workers’ compensation insurance tend to be cyclical, Monagle said, and nationally rates have increased over the last two years. So the 3 percent in-state decline may not become a trend. Despite being cyclical, rates never return to their previous bottom, he said. Monagle reported that nearly 75 percent of “total lost costs” in 2012 associated with benefit claims were medical costs. Of the $260.7 million paid out in Alaska during 2011, $160.4 million, or 62 percent, was for medical benefits. Nationwide, medical benefits make up 59 percent of total costs, with indemnity, or lost work time accounting for the remainder, Monagle said. He called the annual 8 percent-plus increase in premiums nationwide “unsustainable.” “Today, in all states, medical is the big cost driver,” he said. Monagle broke medical costs down into three categories: fees, over-utilization and prescription drugs. He said specialty medicine costs are disproportionately high in Alaska. This includes treatments such as physical therapy and chiropractor visits. Some states have mitigated medical fees by implementing fee schedules, which help regulate what clinics and hospitals charge. Most states that have fee schedules are on the lower end of the cost spectrum, Monagle said. Alaska, which has a fee schedule, doesn’t follow the trend. He likened a fee schedule to car shopping. “You don’t go into a car dealership and offer to pay full retail, nobody does,” Monagle said. High treatment cost and high insurance premiums go hand-in-hand, he said. He declined to offer specific suggestions for further regulatory measures to curb premium costs but said Montana, which had been battling Alaska for the highest workers’ compensation costs in the country, recently instituted legislation that dropped it in the rankings. In 2010, Montana was first in total cost and by last year it had dropped to eighth, according to the Oregon study. Other states have also looked at ways to mitigate the over-use of expensive treatments to mitigate medical costs, Monagle said. “Most states are moving towards utilization guidelines,” he said. “For example, ‘for this diagnosis, this is the recommended treatment.’” He added that many of the doctors his division consults with do not receive workplace injury treatment training, thus they don’t view workplace injuries differently. Monagle gave the example of an individual with a broken ankle being told to stay home for several weeks to allow the injury to heal. While that may be an effective treatment, he said, it is possible someone in that situation could receive a boot or air cast and return to work in some capacity “off their feet” and save thousands of dollars in indemnity costs. Monagle said costs associated with prescription drugs account for 20 percent of medical benefits paid in compensation claims. He said strong, opioid painkillers such as Oxycodone can have a debilitating effect on injured workers prescribed them for intense pain. Monagle said the drugs were never intended for general use, rather they were designed as “end of life” treatment. The drugs are of particular concern in workers’ compensation cases because patients are highly susceptible to dependency and subsequent depression and other mental health issues, Monagle said. While a worker may be physically healed, they are then mentally unfit for work, he said. Monagle noted programs that require patients who have been on opioids for more than 60 days without signs of physical improvement to enter treatment programs to prevent dependency. On the flipside, several states have also instituted drug testing to assure patients prescribed powerful painkillers are actually taking them and not selling them “on the street for $100 a pill,” Monagle said. Alaska does not have such programs. He cited state figures that estimate prescription painkillers account for 40 percent of all drug costs in Alaska. Elwood Brehmer can be reached at [email protected]

Qualified mortgage rule still worries lenders after revisions

Despite federal agencies taking steps to tweak and adopt the qualified mortgage and ability-to-repay rules set to go into effect in January 2014, private industry officials are nervous about the impact they will have. Fannie Mae and Freddie Mac, the Federal Housing Finance Agency-run mortgage buyers announced in a May 6 agency statement that they will only purchase loans that meet the requirements for a qualified mortgage, or QM, when the rule is implemented. The pending regulatory changes are part of the Dodd-Frank Wall Street Reform and Consumer Protection Act passed in 2010 in response to the housing market crash of 2008. To meet general QM requirements loans must be fully amortizing, or have a set pay-off timeline; have a term of 30 years or less; and have borrower fees less than 3 percent of the total loan amounts. Under nearly all circumstances “balloon loans,” or loans that must be paid off or refinanced before the loan term ends, do not meet QM requirements. “Adoption of these new limitations by Fannie Mae and Freddie Mac is in keeping with FHFA’s goal of gradually contracting their market footprint and protecting borrowers and taxpayers,” the Housing Finance Agency stated May 6. Denali Alaskan Federal Credit Union Vice President of Home Loans Jim Picard said some of the finer points of the regulations have changed after the Consumer Financial Protection Bureau, or CFPB, the regulatory agency in charge, put them out for public comment in late April. “What just changed, or was reinterpreted was the elimination of counting certain fees twice in the 3 percent (borrower fee) cap,” Picard said. “That seems pretty intuitive and pretty obvious, but we’re talking about a federal agency that’s making rules and putting them out for comment and seeing these rules aren’t practical and don’t work.” While lenders will not be required to issue loans under QM guidelines, loans that meet the requirements are referred to as “safe harbor” loans, which all but insulate lenders from possible predatory lending accusations. The rules will further constrict an already conservative lending market, Picard said. Changes could be coming to the ability-to-repay requirements as well. As the future regulation is currently comprised a borrower must prove a debt-to-income ratio of no greater than 43 percent. The basis of the requirement will still stand. The CFPB’s proposed revisions awaiting confirmation include removing requirements forcing creditors to determine the probability of a borrower’s continued employment. Rather, a creditor would just need to examine past and current employment status. A rule limiting income in-residence, or “roommate” rental income counted towards the 43 percent ratio to roommates “related by blood, marriage, or law” is also up for elimination, according to CFPB amendment documents. When the QM rules initially go into effect, a loan approved using Fannie Mae or Freddie Mac’s delegated underwriting may exceed the 43 percent debt-to-income cap, Picard said. However, that exemption is set to expire in 2021 and is an issue he called a “sleeping giant down the road.” “I don’t think a lot of people are getting concerned about something that will be taken away from us in seven years,” Picard said. Officials on the real estate side of the housing market have said the QM and debt-ratio rules will be devastating to a slowly rebounding but still fickle housing market. Picard said the reduced volumes of loans being handled now compared with several years ago will only diminish further with QM. The announcement that Fannie Mae and Freddie Mac will only accept QM loans adds to the challenge for individuals with good credit looking for loans that fall outside the debt or QM limitations. “If the demand is out there for QM loans, why would you stick your neck out there and do a non-QM loans that are going to challenge by the regulatory agency and the borrowers if they run into trouble down the road,” Picard said. He added that all of the private mortgage purchasers Denali Alaskan deals with have indicated they will not service non-QM loans in the near future. Some credit unions, such as Denali Alaskan, may continue offering portfolio loans, but those will be “few and far between,” he said. A portfolio loan is one that is kept on the originator’s books and not sold to a mortgage investment firm. The current low-interest rate climate makes issuing portfolio loans even more difficult, Picard noted. “We have to do what we can to lessen the impact of (QM) so we can still give loans to people with credit of good quality that may go over the 43 percent ratio,” Picard said. He estimated that about 10 percent of loans issued industry-wide currently don’t meet QM guidelines — something that will change and affect first-time homebuyers the most, Picard said. The 10 percent non-QM figure represents about 40 people per year not getting home loans through Denali Alaskan that would have previously, he said. At larger institutions the number of loan applications turned away could be in the hundreds to thousands a year, he said. “Ten percent is a big number given the fact that we’re nationally still trying to recover our housing market,” Picard said. “Another 10 percent is a few more nails in the coffin, so to speak.” Elwood Brehmer can be reached at [email protected]

Defendants in port suit hold their ground

All three defendants in a lawsuit the Municipality of Anchorage filed March 8 over the bungled Port of Anchorage expansion project have firmly denied liability and asked for dismissal in court responses to the municipality’s claims. PND Engineers, Inc., designer of the Open Cell Sheet Pile dock system at the center of the controversy, and CH2M Hill, owner of former port consultant VECO Alaska, filed responses April 17. Integrated Concepts and Research Corp., or ICRC, filed a motion for dismissal in U.S. District Court in Anchorage April 15. ICRC was hired by the U.S. Maritime Administration, or MARAD, in 2003 to oversee the port construction. The Port of Anchorage project was at the time the first large construction project MARAD had led. CH2M Hill recently released two studies that claim PND’s sheet pile design is inadequate for use at Anchorage’s port and offer construction alternatives. The engineering firm was engaged by the municipality to conduct the studies for about $2.6 million. PND has refuted CH2M Hill’s findings claiming that the firm did not follow the same engineering criteria that PND was ordered to follow when it fabricated the sheet pile design for the port. PND’s stance continues to be that shoddy installation of the sheet piles by subcontractors caused the dock structure to not meet seismic and stability standards. The municipality originally filed suit in state court but the case has since been moved to federal District Court. Federal Judge Ralph Beistline is presiding over the case. While the suit does not specify specific damage amounts, it states the municipality has suffered “damages in excess of $100,000” because of actions by each of the defending parties. CH2M Hill and PND both ask for the case counts of negligence against them to be thrown out and request the municipality be required to pay all legal fees they incurred as a result of the suit. CH2M Hill claims it is no longer liable under VECO’s 2006 contract with PND because the statute of limitations on such an agreement has expired. Alaska law requires action over a disputed work contract be taken within three years under most circumstances. In its motion, ICRC disputes the municipality’s claim of a breach of contract by stating that it never actually entered into a contract with the municipality. Rather, ICRC purports that its role was to “provide discrete contract management assistance in support of the project,” the document states. ICRC adds that it never stepped outside the bounds of the contract it signed with MARAD. The municipality entered into a memorandum of understanding with MARAD to manage the engineering and construction of its port shortly before MARAD brought ICRC into the fold. ICRC also contends the municipality did not follow proper procedure by leaving MARAD out of the suit. “If the claims against ICRC are allowed to continue, MARAD would be a party to this litigation all but in name and in right,” the motion asserts. According to the ICRC, MARAD is obligated to pay its legal fees in accordance with the contract between the two. Lastly, ICRC states that because MARAD is largely immune from litigation because of its standing as a sovereign government agency unless a contract or law was broken. This means, from ICRC’s view, that because the municipality cannot go after MARAD for damages, ICRC is also safe. Elwood Brehmer can be reached at [email protected]

Volunteers help seniors, low income residents prepare taxes

Despite a spring snowstorm, Anchorage residents assembled at the Crosspoint Community Church on the city’s west side April 6 for the opportunity to have their taxes done free of charge. Three such “Super Saturday” events are held each year in Anchorage during tax season when Internal Revenue Service-certified AARP tax aide volunteers are made available to the city’s low income and senior populations. During the 2011 tax season, AARP volunteers helped more than 5,600 Anchorage residents not only save an estimated $860,000 in tax preparation costs but also pocket more than $9 million in refunds, according to United Way of Anchorage, which coordinates the events. “The tax preparers are very in tune with making sure the taxpayers that they’re helping get all the tax credits they deserve,” said United Way Director of Community Action Maureen Haggblom. While the snow may have deterred some individuals, there were 25 to 30 people waiting for help from one of six AARP volunteers throughout most of the six-hour, April 6 event. Balloon tiers and face painters volunteered to help children pass the time as their parents worked on their 1040s and W-2s.  United Way tracks the demographics of those who have their taxes done at the events, Haggblom said, and the majority of people seeking help have an income of between $20,000 and $25,000 per year, or are senior citizens. Several years ago, Rene Leach went to a similar event in Palmer; now she volunteers for AARP in Anchorage. Leach said she was a new widow at the time. “I had shattered nerves because my husband had taken care of that stuff and I’m in my 60s,” she said. “I went in very nervous, very unable to do anything really and the gal said, ‘It’s OK, we can do it for you. Tell me your name.’” Leach said the simple reassurance provided her with the knowledge that her someone was there to help her. This year marked her fourth year of volunteering as a greeter and coordinator for AARP. Leach said she tries to calm down those people who may be uneasy or unsure about what they should and who is going to help them with something as important as their taxes. “If you smile at them and get them to smile back it usually helps,” she said. IRS Senior Tax Consultant Kris Ashley has been working at the tax preparation days for nearly 25 years, she said. “It’s really a great program. It’s all volunteers on a shoestring,” Ashley said. Coinciding with tax season, April is national Financial Literacy Month. Haggblom said United Way tries to maximize the opportunity provided by people gathering to have their taxes done by inviting other organizations that offer financial management advice and programs tailored to those who may not have had anyone offer sound money advice to them in the past. Rick Thomas is a counselor for Money Management International, a nonprofit credit counseling firm with locations in 26 states across the country. His organization offers debt management options and helps people solve issues with their credit history that they may not know exist or how to handle properly. On this day, Thomas was offering free credit reports. “We’re here to help support the tax preparation and it helps us get more involved in the community,” he said. “It also helps us gain exposure when we’re at these kinds of wonderful events.” Elwood Brehmer can be reached at [email protected]  

State releases draft of amended Bristol Bay land use plan

Groups opposing Pebble Mine are not happy with an amended 2005 Bristol Bay Area Plan released Jan. 4 by the Department of Natural Resources. The amended land use plan is the result of a 2009 joint lawsuit filed in state court by Trout Unlimited, the Alaska Independent Fisherman’s Marketing Association and five Bristol Bay area village and tribal councils against the Department of Natural Resources, or DNR. The 2005 Bristol Bay Area Plan designated use for more than 19 million acres of land in the Bristol Bay region. Trout Unlimited Alaska Director Tim Bristol said an agreement was reached in August between the two parties to settle the dispute rather than continue in court. The settlement outlined proposed changes to the Bristol Bay plan that DNR agreed to consider. “We just thought that it was better to go out to the public again and gather as much information and disseminate as much information as possible and leave it up to DNR to do the right thing,” Bristol said. DNR Deputy Commissioner Ed Fogels said the lawsuit was an unnecessary avenue to attempt to make changes to the 2005 Plan because all area plan adjustments go through what he called “administrative channels” that give an opportunity for public input. A 90-day public comment period on the amended plan is now open until April 4. “We think the State has a lot more work to do to get this thing right,” Bristol said. Fogels said DNR takes public comments seriously. “I venture to say it’s very, very rare that we go through a public comment period and don’t make any changes (to a plan) as a result of the comments,” Fogels said. The petitioners will use take full advantage of the comment window, Bristol said, and assert their concerns “vigorously.” Pebble Limited Partnership joined DNR as a voluntary defendant intervenor against the suit. Officials at Pebble declined to comment on the amended BBAP. According to court documents, the original complaint included eight “causes of action.” It alleges the DNR did not follow its own regulations in defining wildlife habitat land and that the Area Plan or, BBAP, land classifications that include Pebble planning units “violate sustained yield and are arbitrary, capricious and abuse discretion.” DNR defines wildlife habitat as “land which is primarily valuable for fish and wildlife resource production.” The 2005 BBAP was a revision of a 1984 plan. The 1984 BBAP classified about 11.5 million upland acres as wildlife habitat land. In 2005, land classified as wildlife habitat was revised to 786,000 acres, a 93 percent reduction. All of Pebble’s planning units were reclassified from habitat to mineral land under the 2005 BBAP. The amended BBAP reclassifies 723,000 acres of land primarily in the upper Nushagak and Mulchatna river drainages to wildlife habitat. Plan changes turn land next to the mineral land in the Koktuli River valley, a Mulchatna tributary, to wildlife habitat. The changes do not alter any of the mineral land designations made in 2005 surrounding the Pebble area. The complaint states that 9.1 million acres co-classified as habitat and recreation land prior to 2005 were changed to resource management land. Habitat and recreation areas are required to be retained in public ownership; resource management lands are not. Land use designation was changed on such a large area in 2005 because the 1984 BBAP forced land managers to work with a “black map,” Fogels said. What resulted, he said, was the 2005 BBAP that focused on designating land for its greatest value. “It’s indentifying key resources on that land. If the Pebble area is staked with mining claims and there’s obviously high mineral values there, then (miner land) is an appropriate classification for that land,” Fogels said. He also noted that just because land is designated a certain way doesn’t mean it must be used for that purpose. Tom Tilden, chief of the Curyung Tribal Council in Dillingham said in a press release that DNR needs to reach out further than a comment period. “DNR must start listening to the people, and it should hold multiple public hearings in the region before the end of the public comment period. Salmon and wild game are the lifeblood of Bristol Bay communities,” Tilden said. A DNR press release announcing the amended BBAP stated that the request to “reclassify nearly all of the Bristol Bay planning area for wildlife habitat and reclassify much of the planning area to public recreation” was denied. Additionally, it stated the principle of and area plan is to offer “opportunities for multiple use of state land, not just one or two uses.” That portion of the press release was “highly inaccurate,” Bristol said. The goal of the reclassification request was to establish “even footing” between fish and wildlife and related activities and mining. According to Bristol, DNR had tilted the playing field in favor of mining with the 2005 BBAP and the petitioners wanted to return to the 1984 version. In the amended plan DNR notes that the 1984 BBAP used 22 management units to cover over 19 million acres of upland and tidelands, while the 2005 BBAP is broken into 276 management units. Accordingly, designated use classifications are more specific in the 2005 version.  Much of the land classified as wildlife habitat and public recreation areas in the 1984 plan was co-classified for other uses such as forestry, settlement, and transportation corridors, according to DNR. The petitioner’s third cause of action requested that the requirement for anadromous, or salmon, streams be navigable in order to qualify as wildlife habitat be removed from the 2005 BBAP. That request was denied in the amended version. It states: “DNR uses navigability and the presence of anadromous or high-value resident fish in determining those streams to classify as wildlife habitat, but the habitat values of all anadromous streams, navigable and non-navigable, are protected through other Plan provisions.” Bristol said the amended plan doesn’t properly explain the other protections. “I don’t think there’s enough protection in there for fish. Salmon end up going places that aren’t necessarily accessible by boat. The fact that you just stop protections where the boat would run aground doesn’t make any sense,” he said. Fogels said even though DNR may not list the small anadromous streams as habitat, any development done that might affect them requires permitting from Department of Fish and Game. DNR granted a request to add sport hunting and fishing to the definition of recreation activity. It also adjusted BBAP language to clarify that wildlife habitat includes an entire navigable water body, not just spawning and rearing grounds. Streams in Mineral Closing Order 393 are now classified as wildlife habitat if they weren’t already. This includes the Nushagak and Mulchatna river drainages and those flowing into Iliamna Lake. A Mineral Closing Order closes the designated area to mineral entry. Elwood Brehmer can be reached at [email protected]

State energy audit shows potential savings

An energy audit of Alaska public facilities uncovered some of the most, and least, energy efficient buildings in the state. The study, conducted by Alaska Housing Finance Corp., evaluated 327 investment grade audits performed on public facilities. The study estimates there are 5,000 public buildings in Alaska, spending more than $641 million on energy every year. If appropriate measures are taken, the study calculates a potential energy cost savings of  $125 million yearly to the State. An investment grade audit examines a building’s energy use history, design, location and includes a cost-benefit analysis of options to make the building more energy efficient, according to Nathan Wiltse, a project manager and building energy economist for the Cold Climate Housing Research Center. It found Anchorage School District buildings average an energy use index, or EUI, of 121,000 British thermal units per square-foot per year, while Fairbanks North Star Borough buildings average 70,000 EUI. This is despite Fairbanks being in a much colder climate. Factoring in climate differences increases the heating energy use gap. That is done with what is called a heating degree-day: the number of degrees a day’s average temperature is below 65 degrees Fahrenheit. Fairbanks has roughly 14,000 heating degree-days per year, and Anchorage about 10,000, Wiltse said. When climate is factored in, the gap widens. Fairbanks North Star, or FNSB, district buildings average 4.8 EUI per heating degree-day. Buildings in the Anchorage School District, or ASD, average a use of slightly more than 11 EUI per heating degree-day. The average for public buildings audited in the study is 9.7 EUI per heating degree-day. Mike Abbott, assistant superintendant of support services for ASD, agreed that the numbers show a clear gap in heating energy use between the two districts, but said they don’t tell the whole story. “The comparison with (FNSB) is useful, in that it definitely will help us identify opportunities for further improvement, but because of the way the analysis was conducted it might lead you to believe we use twice as much energy per square-foot as Fairbanks, and that’s not necessarily the case,” Abbott said. He noted that a disparity in the number of school buildings in Anchorage and FNSB could account for at least part of the energy-use difference. Abbott said about 30 schools were audited in each district, accounting for roughly 75 percent of schools in FNSB and only 25 percent in ASD, leading to a partially complete data set. Wiltse, who helped prepare the data, concurred. He also said FNSB schools had a “tight range” of EUIs providing a reliable average and Anchorage schools had a “very wide range,” possibly skewing the final average. Despite using less energy in the audited buildings, FNSB still pays more for it, at a cost of $2.38 per square-foot per year, than ASD at $1.92. This is due to much higher fuel prices in Interior Alaska. “There are boilers in some (ASD) schools that have not received maintenance in several years because they just don’t have the money for it,” Wiltse said. The report comes at a time when ASD is facing large budget shortfalls. The district recently announced plans to cut or leave vacant 100 administrative and support positions, saving approximately $4 million. Abbott said the district has an incentive-based program already in place in which schools can reduce energy bills over the prior year and receive a check for 25 percent of the savings. That money then goes directly into the school’s supply budget. “It gives the school a chance to buy textbooks or other instructional supplies,” he said. The program usually returns money to about 20 schools a year, Abbott said. Statewide, Arctic and Northwest region schools spend the most on energy per student with yearly costs approaching $3,000. Interior and Southeast schools spend slightly less than $2,000 and Southcentral and Kodiak schools pay about $1,500 per child. Climate, energy prices, building size and school enrollment all play a large part in those costs, according to the report. The real problem for ASD may be a lack of money to invest in energy, and subsequent cost-saving, upkeep, according to Wiltse Alaska Housing Finance Corp.’s Energy Program Information Manager Jimmy Ord said the audits were done with specific criteria in mind. “This is a biased, non-random sample of public buildings. We chose the higher energy users and the ones that had a higher square-footage to them,” Ord said. “The audits were focused on some of the high energy users to identify some of the problems and where we could make our buildings more efficient.” The report, funded by 2009 American Recovery and Reinvestment Act dollars, provides “benchmarking data” that had not been available before, Ord said. The study makes more than 50 recommendations for increasing energy efficiency. Above all else it pushes for education in proper energy-saving procedures. “Auditors found controls bypassed and operating in the ‘hand’ and manual mode to make them operational. This occurs simply because the technician has not been trained in building operations or the trained technician has moved on and (the) replacement does not know how to operate the systems,” the report states. It also encourages building managers to look for “low-hanging fruit,” or quick and inexpensive ways to reduce energy usage. This could include shutting down appliances seasonally when they are not needed or reducing ventilation when buildings are vacant to prevent unnecessary heat loss. Abbott says ASD is evaluating all of the findings and will move forward with proposals to the school board on how to improve its energy efficiency within a few weeks. Elwood Brehmer can be reached at [email protected]

Born from community effort, Hilltop celebrates 30 years

Mountains and skiing go together like kids and snow. Hilltop Ski Area combines all four. Situated on the edge of Anchorage where the city meets the Chugach, Hilltop is a place for novice skiers to practice the downhill craft. “We do a lot of after school programs — Kinder Ski, Hotdoggers, that sort of thing. We’re a beginner area,” Hilltop CEO Steve Remme said. The Kinder Ski and Hotdoggers programs offer after school lessons for kids from ages 4 to 16 years old. A lifelong skier himself, Remme said he never envisioned running a ski area as his career, but he said it has its own built-in rewards. “There’s a certain amount of gratification standing out there and watching these little four and five year-olds coming down the hill for the first time just grinning ear to ear,” he said. “It’s such a pleasure to know that those kids probably are never going to stop doing that.” A nonprofit, Hilltop is owned by Youth Exploring Adventure Inc. This winter marks 30 years for the ski area, but its origin goes back to the late 1960s, Remme said. It was then that a group of parents from the Hillside neighborhood formed Hilltop Youth Inc. “Mostly, along the Hillside here, it was all homesteads and they were all pretty far apart and there wasn’t really any organized activities for all the kids,” he said. Hilltop Youth Inc. began with a donated milk truck that parents filled with books to make what Remme called a “roving library.” Shortly after, a neighborhood playground was constructed and a towrope was installed near the entrance to what is now the ski area. Remme said the 160-acre parcel that makes up Hilltop Ski Area was originally a military tract, donated to the Anchorage Municipality in the late 1970s. In 1982, with the state “flush with oil money,” Remme said Hilltop Youth Inc., the precursor to Youth Exploring Adventure Inc., received grant money to purchase the chair lift, which allowed Hilltop Ski Area to come into being. The following year another grant was awarded to complete construction and that’s when Remme joined the organization. Installing the chair lift left Hilltop Youth Inc. at a crossroads, Remme explained. What had been a towrope overseen by volunteer parents on weekends was about to become a seven day-a-week operation. “We wanted to have rentals so people could rent some gear, go out and get a lesson and learn a lifelong sport,” Remme said. “In addition to that, something unexpected, was we created all these jobs.” Hilltop Ski Area employs more than 100 people every winter. Most are high school and college-aged; some have never worked before. “For a lot of my employees — and I’ve been here 30 years — it’s their first job ever, but they love it. We try to create a pretty good atmosphere for people that have never worked before and instill good work habits from the very beginning,” he said. Hilltop operates on an annual budget of about $1.2 million. Remme said roughly half of that goes out in employee compensation. The remainder goes into updating rental inventory, and when conditions require, making snow to cover 33 acres of runs. Remme said years with little snow accumulation, such as this year so far, can be a challenge for Hilltop. “The poor snow years do affect us even though we make our own snow because it’s top of mind. When (people) don’t go out to their driveway and shovel their walk they don’t think about all the snow and going skiing,” he said. Hilltop’s youth oriented nature and its location on the edge of the city make it a perfect “babysitter,” Remme said. Parents often drop their kids off for a day of skiing and then head into Anchorage to run errands. Others stay and get some exercise themselves. The Nordic Ski Association of Anchorage maintains a network of cross-country trails that begin right alongside Hilltop’s driveway. “I see it all the time. Parents come in and drop off their kids, put them in a lesson, go back to the car and put on the cross country gear and take off and do like a 10K and come back and have hot chocolate with their kids and go,” Remme said. Hilltop offers 12 different programs for parents who want to get their kids involved in downhill skiing, or who want to learn themselves. The programs are broken down by age and ability level. Mark DeHertogh is the ski school director at Hilltop. He said the full-day ski camp, run on weekends and over the holidays, will usually include up to 100 kids learning how to ski. Hilltop also offers private lessons for children and adults every day of the week along with its after school programs. For him, Hilltop is a way to get active during a long winter, DeHertogh said. “The reason I like it is, living in Alaska, if you don’t get out and do something in the winter you’re going to go stir-crazy,” he said. DeHertogh began his tenure there when Special Olympics Alaska moved its training program from Alyeska to Hilltop seven seasons ago. He was coaching Special Olympics skiers at the time. “We do five days a week with Special Olympics,” he said. Special Olympics Alaska holds its annual ski and snowboard competitions at Hilltop and in 2001 it was the site for the ski and snowboard events in the winter Special Olympics World Games. Remme said hosting the World Games provided Hilltop an opportunity to update its facilities. The ski area received a $1.3 million grant from the U.S. Department of Housing and Urban Development through the efforts of Special Olympics to build its current pro shop. “We hosted the snowboard venue for the first time that it was ever in the games,” Remme said. “It was a real exciting thing for us. We got a new building, we upgraded our lift from a double to a triple, and we had people from all over the world come here.” Elwood Brehmer can be reached at [email protected]

Anchorage, Fairbanks recognized as top winter destinations

Alaska has long been an iconic tourist destination in summer. Now, the state’s largest cities are garnering attention for their winter attractions. Anchorage was ranked No. 1 on a list of “America’s Hottest Cold Cities” by Livability, an online travel magazine. According to its mission, Livability’s goal is to find “the good stuff in small to medium-sized communities all across America.” The Fairbanks area recently received similar honors from two travel information outlets. National Geographic magazine listed the Chena River State Recreation Area as a top 10 winter trip for 2013. The nearly 400 square-mile area of primarily wilderness begins about 30 miles east of Fairbanks near the end of Chena Hot Springs Road. Travel guide website Lonely Planet named Fairbanks its No. 2 domestic destination for 2013. “A lot of it is about the aurora, that’s what really captured their attention,” said Deb Hickok, president and CEO of the Fairbanks Convention and Visitors Bureau. Lonely Planet noted that this year ends an, “11-year (aurora) cycle, when sunspots are particularly feisty, making for a big show in the Fairbanks sky.” Hickok said preliminary numbers she’s seen from the State of Alaska estimate about 50,000 people traveled to the Interior last winter with roughly 17,000 of those being vacationers. That marks a 6 percent increase from the last survey done in the winter of 2006-07 she said. “I personally think that’s a little low, because we know on the Japan Airlines charters we got 7,800 (visitors) alone,” Hickok said. In addition to viewing the northern lights she said visitors head to Fairbanks for the Chena Hot Springs, dog mushing and the World Ice Art Championships beginning in late February and running through March. The ice sculpting competition features about 100 exhibits produced by artists from around the world every year. Fairbanks winter temperatures can be a deterrent to some prospective travelers, Hickok said, but for those who embrace the weather she calls it a “notch in their travel belt.” She said guided tours and mushing outfitters often provide gear for those who might not otherwise be prepared for a sub-Arctic winter excursion. “We advise people to dress in layers. If you’re out at the ice park and it’s minus-30 you go around for a half-hour, an hour, and then you go inside and have a cup of hot chocolate and you go back out again,” Hickok said. “It’s just getting over that perceived notion of what the cold is like.” Anchorage Convention and Visitors Bureau spokesman Jack Bonney said late winter offers visitors a number of unique winter attractions. The Fur Rendezvous Festival begins in mid-February and bills itself as a “10-day celebration of life in Alaska.” The festival was named as a top winter event by National Geographic Traveler in January 2012. Shortly after the Iditarod begins in Anchorage and the Tour of Anchorage cross-country ski marathon happens in early March. “We kind of package those as a tour when we talk about winter visitation,” Bonney said. “They’re right next to each other in that same couple of weeks, so it makes a really good time to visit Anchorage.” Bonney pointed to traditional summer activities such as hiking and sightseeing flights as options for winter activities when conditions allow. An Alaska Department of Commerce, Community and Economic Development economic impact study of the state’s tourism industry reported that in the fall and winter of 2008-09 visitors spent $197 million in Alaska. $128 million was spent in Southcentral and nearly $37 million was shelled out in the Interior. That compares with $1.3 billion spent by visitors to Alaska in the summer of 2009. Elwood Brehmer can be reached at [email protected]

Port MacKenzie project back on track

Marc Van Dongen is a big man with bigger plans. As director of Port MacKenzie he oversees all operations across Knik Arm from Anchorage, including the largest project at the port since it was built in 1999: the rail extension from Houston to Port MacKenzie. Work on the rail line had been suspended due to an Oct. 1 stay issued by the U.S. 9th Circuit Court of Appeals. On Nov. 28 the three-judge panel reversed the stay, allowing work to resume and denying a petition for review filed jointly by the Sierra Club and Cook Inletkeeper. The groups questioned the Surface Transportation Board’s 2011 finding that the rail extension project met all National Environmental Policy Act, or NEPA, guidelines. The court’s written opinion states that “the (Surface Transportation Board’s) ‘purpose and need’ statement complied with NEPA and that the Petitioners no longer raise ‘serious questions’ on this point.” The ruling also cited an estimate — provided by Alaska Railroad Corp. and the Matanuska-Susitna Borough — of $10 million to $12 million added to the cost of the publicly funded project if the work stoppage continued as a reason to lift the stay. “There’s a lot of false claims out there about how we’re hurting wetlands and the fish, and by what they’ve got planned it’s anything but that,” Mat-Su Borough Public Affairs Director Patty Sullivan said. With the ruling, Sullivan said the borough can resume advertising contracts for the project and 200 construction workers will be able to return to work at winter’s end. The quicker-than-expected ruling allowed the project to stay on track. “By the end of 2016, that’s what our goal is, to have the rail line completed,” Van Dongen said. “So far, we’ve received 54 percent of the funding for the project. We’re asking for the full amount in the next legislative cycle. If we get it, we can get the project done faster.” The borough needs $126 million to fully fund the 32-mile, $272.5 million undertaking. Over a 50-year period, the rail line is expected to provide a 23-fold return on invested state dollars if it’s fully utilized, according to a University of Fairbanks study. Van Dongen said that filling the rails won’t be an issue and he believes adding a new export route will spur mine development along the rail corridor. Talk of limestone and gold expansion near Livengood and Fairbanks is well under way, he said. “It’s going to impact the Interior more than it impacts the (Mat-Su) Borough. These mines, as they’re developed, there’ll be a lot more jobs created in the Interior from that,” Van Dongen said. “That’s where the jobs are going to be, and on the railroad. It’s a positive thing what we’re doing here. It’s a makes-sense sort of thing.” A 2011 University of Alaska Fairbanks study of the rail line looked at revenue generated by shipping 3 million tons of materials yearly to Port MacKenzie. Estimating 3 million tons of exports yearly is based on port operating capacity with current infrastructure, one deep-draft dock. Van Dongen said the next project in line is adding a second deep water landing. The study estimates State of Alaska revenue at $70 million per year in royalties and fees, with another $72 million being generated by the Alaska Railroad. For the railroad, that represents a nearly 40 percent increase total revenue over 2011. Port income is projected at roughly $5 million per year. Van Dongen said he has briefed the legislature and the governor as to the benefit the rail line will provide Alaska. “They understand the benefits, the jobs, revenue and economic development available to the state by having a rail line come down to our port.” When finished, Van Dongen said the rail line will terminate with a mile-long loop at the port where companies “can stockpile commodities on both sides of the rail.” Port MacKenzie offers 14 square-miles of land available for development and material storage. Van Dongen noted that large quantities of material could be accumulated to wait for large ships or optimal shipping times. Vitus Marine, the company that coordinated the emergency fuel shipment to Nome last winter, is set to construct tanks for storing 5 million gallons of fuel at the head of the Port MacKenzie rail loop. Initial exports shipped down the rail will be coal from the Usibelli coal mine near Healy, Van Dongen said. Lorali Simon, spokeswoman for Usibelli, said the company currently ships about 1 million tons of coal out of Seward every year, and is excited about the chance for expansion. “We would love to be able to use Port MacKenzie as a supplemental port for Healy coal. We don’t have any intention of dropping the Seward facility and only using Port Mackenzie, but we would like to use both. That certainly gives us the opportunity to increase our export,” she said. Though large ships have delivered to Port MacKenzie, the current dock and conveyor system is designed primarily for exporting raw materials. Adding to the existing infrastructure would ease the importing of goods and make future port operations nearly limitless, Van Dongen said. Plans for the expansion add 1,450 feet to the current 1,200-foot deep-draft dock. A 20-acre gravel pad and second conveyer will make additional exporting or roll-on roll-off importing simple exercises, he said. “It’s eight to 10 years down the road before I’d expect to have that project completed,” Van Dongen said. “I intend to be retired, sipping mai tais somewhere, but I intend to get the permit for it.” Despite the long-range timeline for completing a second deep-draft dock, Van Dongen said the need for it is obvious when one looks at the potential it holds for Alaska with goods both coming and going. The need magnifies if the Alaska Stand Alone Pipeline is built. If built, the pipeline would terminate at a site roughly 20 miles from Port MacKenzie. The line would carry twice as much LNG as Southcentral initially needs, providing export opportunities. “There’d be a long-term export of natural gas liquids, that’s a reason I’m trying to get a permit to expand our dock because we could bring in LNG ships to export,” Van Dongen said. The port commission sees the space at Port MacKenzie as a prime location to build a gas processing plant if the pipeline comes down from the North Slope, he said. Van Dongen pointed to a partnership with Klondike Concrete to import cement as a glimpse of what expanded port operations could mean for Alaska. “Three years ago we started importing cement. With the first ship we brought in, guess what happened to the price of cement. It went from $176 a ton down to $125 a ton,” he said. In early November the port proved it could move scrap steel, a commodity spread throughout Alaska. When the Thai ship Billesborg left Port MacKenzie with 8,000 tons of steel for South Korea, it was the first time a deep-draft vessel had carried scrap steel from Southcentral and the first time the steel went directly to its destination. Previous exports of steel left Anchorage and barged to Seattle, where they were consolidated before being sent to the West, Van Dongen said. “They proved that we could do it. I expect future shipments — you’ll see bigger ships,” he said. “You save over a quarter to a half-million dollars (shipping direct) versus bringing it down to Seattle.” NPI LLC is one of several companies currently leasing property at Port MacKenzie. NPI spent $7 million to build the half-mile long, multi-use conveyor system at the port prior to exporting wood chips to South Korea in 2005. In 2010, the company coordinated a test-run coal shipment from the port, as well. Van Dongen said the partnership with NPI to build the conveyor benefits everyone involved. NPI has exclusive rights to move materials on its conveyor and leases it out to other companies with materials to export. Usage fees are set by a group of five Mat-Su Borough and NPI individuals, with the borough holding the majority. It’s an example of the efficiency of the port and how to best utilize your assets, he said. NPI Manager Dane Crowley said his company invested in the port because operations there look promising. “(Van Dongen) has done a fantastic job in developing the infrastructure of the port. His future plans that he’s got laid out are all very well thought-out and certainly the rail extension to Port MacKenzie is going to be a huge driver,” Crowley said. “I really expect that we’ll see Port MacKenzie grow significantly in the next few years.” Elwood Brehmer can be reached at [email protected]


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