Gas-starved Europe can’t look west as US faces its own crunch

If there’s any country that might’ve been in a position to rescue Europe from its energy crisis, it’s the U.S., which is home to vast shale fields holding a seemingly endless supply of natural gas and giant terminals capable of liquefying it and shuttling it abroad. Instead, for a multitude of reasons, U.S. shale is in no position to bail out Europe. Indeed, supplies are so tight that Americans are staring down their own supply squeeze, and the accompanying sky-high utility bills. U.S. stockpiles haven’t been replenished as much as usual in recent months after summer heatwaves sent energy demand soaring and the post-pandemic industrial recovery diverted fuel to power plants and factories. Meanwhile, many major shale drillers have been funneling cash to shareholders and focusing on climate goals rather than boosting production. The result: There’s very little supply cushion in the U.S., and whatever is available for export as liquefied natural gas is going to be fought over, not just by desperate European importers, but also by buyers in Asia, who face an energy crunch of their own and are willing to pay a premium. This reality is a stark change from recent years that saw a steady domestic surplus and government efforts to promote exports as “molecules of U.S. freedom.” Americans are likely to face some of their highest energy bills in years. New York-traded gas futures have more than doubled so far in 2021, and the peak-demand season hasn’t even begun. The U.S. benchmark price jumped to a seven-year high this week, and it could more than double in the next few months, according to research firm BTU Analytics. “In theory, the U.S. is the Saudi Arabia of natural gas, but the reality is we have no new gas coming online,” said Campbell Faulkner, the chief data officer at OTC Global Holdings LP who formerly worked in risk-management and analysis at Royal Dutch Shell Plc and JPMorgan Chase &Co. “These prices tell you how worried people are about not having enough gas.” The consequences could go well beyond household heating bills. Europe stands as example of what could unfold, with its disastrous supply shortage leading to record prices, widespread corporate failures in the U.K. power market and the continent’s biggest chemicals producer BASF SE cutting output as its feedstock costs soar. And of course, prolonged gains for energy prices are compounding concerns about inflation and adding to the rising costs businesses are already shouldering for raw materials. New York natural gas futures are on track for their steepest annual jump since 2000, when an early winter sparked massive consumption at a time when domestic energy production was stagnating. Prices more than quardrupled that year. Shale-extraction techniques advanced in the two decades that followed, opening up vast new resources and transforming the U.S. into a global exporter.Makers of plastics, fertilizers and other gas-derived products seized on the flood of cheap, reliable shale gas, spending billions of dollars to build or expand manufacturing plants. Concurrently, climate-conscious regulators, activists and investors pushed for the closure of much of the nation’s coal-fired electricity fleet, inadvertently increasing the grid’s reliance on gas-fueled generators. But then the steady expansion for production in U.S. shale fields suddenly slowed. Among U.S. shale executives, “there’s been a dramatic shift in sentiment away from production growth and toward shareholder returns and ESG initiatives,” Connor McLean, an analyst at BTU, said in an interview, referring to environmental, social and governance goals. Gas stored in underground U.S. salt caverns and depleted water aquifers — a crucial source of fuel to augment pipelined supplies during the peak demand of winter months — is 21 percent less than the 10-year average for this time of year, according to research firm Vortexa Ltd. That helps explain why U.S. prices are surging. On the New York Mercantile Exchange, gas for October delivery on Oct. 4 jumped 11 percent and topped $5.50 per million British thermal units for the first time since early 2014, when the Polar Vortex enveloped much of the U.S. in record-breaking cold. Prices for December through February deliveries were even higher, signaling traders’ concern about the sufficiency of supplies. In California, which is dealing with a unique set of challenges that include a scarcity of hydro power and summer-driven demand for electricity to run air conditioners, prices already are surging. Gas traded at the Southern California border reached $7.40 last week, while in the Los Angeles area it was almost $11, according to OTC Global Holdings LP. U.S. gas output is only expected to rise by 1.1 percent during the second half of this year compared with the first six months, the Energy Information Administration said on Sept. 8. The residential, commercial and industrial sectors all will burn more gas this year than last, although overall demand may slip by 0.9 percen as soaring prices for the fuel prompt some electricity generators to switch to coal, according to the EIA. Even if an unexpected spell of mild weather frees up some U.S. supplies in coming months, gas exporters will almost certainly shun Europe and instead ship those cargoes to Asia where prices are higher, said Anna Mikulska, an energy-studies fellow at Rice University’s Baker Institute of Public Policy in Houston. “Europe can’t lean on the U.S. for gas this winter,” said McLean of BTU. `Winning the arbitrage’ As alarming as $7.40 gas is to U.S. buyers, prices in Europe and Asia are magnitudes higher: A key gas-import benchmark for Japan and Korea is approaching $30, while Europe is seeing the fuel command the equivalent of $25. Citigroup Inc. warned prices may hit $100 during the final three months of the year as power producers, utility companies and manufacturers around the northern hemisphere vie for supplies. That’s more than double the bank’s previous forecast. Those regional price dislocations also explain why any spare gas that American drillers manage to eke out this winter will probably head for Asia aboard liquefied gas tankers rather than remain home or traverse the Atlantic Ocean to Europe. “Asia is winning the arbitrage,” said Rice University’s Mikulska. On the supply front, drillers haven’t responded to this year’s price gains by increasing investment in new North American discoveries because earlier this year they hedged most of their expected 2021 output, which locked them into selling supplies at lower prices, said Raoul LeBlanc, North American shale analyst at IHS Markit Ltd. Management teams also have little incentive to expand output after investor pressure to focus on financial returns and debt reduction prompted boards of directors to remove production-based metrics from compensation packages, said BTU’s McLean. “Shareholders have been very clear that that money is theirs and they don’t want them to spend it on growing supply,” LeBlanc said. Then there are the temporal and physical barriers.Anyone erecting a rig and beginning to drill a gas well today can’t realistically hope to see any fuel begin to flow for five or six months — or longer, depending on the jurisdiction. And with domestic liquefaction plants that prepare gas for shipment overseas already running close to full capacity, there’s no room to export more fuel even if supplies were on hand, according to Rystad Energy Vice President of Markets Sindre Knutsson. “Gas producers looing at the strong forward curve really don’t have time to bring any new supplies online before the end of the winter,” said Jen Snyder, a managing director at research house Enverus.

Gas prices reach at highest point in 7 years

President Joe Biden’s administration has said it is considering releasing oil from emergency reserves, among other things, to help bring down costs as gas prices surge in the United States. Gas prices reached a national average of $3.24 on Oct. 7, according to AAA. That’s up from $3.20 on Monday, which is a level AAA said hasn’t been seen since October 2014. An increase in demand and the high cost of crude oil, which AAA said has stayed above $73 a barrel, are likely driving the price increases at the pump. Presidents don’t control gas prices. But the Biden administration has recently said it is looking at every tool it has to address the costs of oil, including the Strategic Petroleum Reserve and working with international partners. Surging gas prices The Oct. 4 national average of $3.20 for a gallon of gas is 2 cents higher than last month and $1.02 high than this time last year, according to AAA. Patrick De Haan, an analyst at GasBuddy, tweeted that GasBuddy is showing an average of $3.26 per gallon and that the increases “won’t stop yet.” He predicted prices could hit $3.30 a gallon or more. High demand, supply constraints and the COVID-19 pandemic are likely factoring into the increased costs. During most of 2021, as the country recovered economically from the pandemic, higher gas prices were mostly a result of increasing demand as Americans started to go out or travel more, McClatchy News reported in June. Last week, gasoline demand rose more than 5 percent, AAA said. But the Energy Information Administration said oil and natural gas production was lower than pre-pandemic levels. That “tightened supply” is part of the reason crude oil prices have stayed above $73 and is preventing gas prices from “taking their usual seasonal swoon.” “Global economic uncertainty and supply chain concerns caused by the lingering COVID-19 pandemic could be playing a role in keeping crude oil prices elevated,” Andrew Gross, AAA spokesperson, said Oct. 4 What Biden’s administration is doing White House Press Secretary Jen Psaki said last week that the administration did not have any “near-term” solutions to announce but that it is “looking at every means we have to address the cost of oil.” She said that includes discussions with international partners — including the Organization of the Petroleum Exporting Countries, or OPEC — on “the importance of competitive markets and setting prices” and on doing more to support recovery of oil supply. This week, OPEC, Russia and other oil suppliers announced they would stick with their deal reached in July to only increase oil production by 400,000 barrels a day in November, which is less than 0.5 percent of worldwide demand, despite pressure to ramp up production, The New York Times reported. Psaki also said that last month, National Economic Council Director Brian Deese sent a letter Federal Trade Commission Chairperson Lina Khan asking that the FTC “use all of its available tools to monitor (the) U.S. gasoline market and address any illegal conduct that might be contributing to price increases.” She said the FTC responded and committed to “take specific actions to identify, deter and investigate.” On Oct. 6, U.S. Secretary of Energy Jennifer Granholm said during a Financial Times summit that “presidents don’t control the cost of gasoline” and that the “market is what the market is.” But she said releasing oil from the Strategic Petroleum Reserve, or SPR, is a “tool that’s under consideration.” The federally owned SPR is the “world’s largest supply of emergency crude oil” and was established to lessen the impact supply disruptions, according to the Energy Department. It is stored in underground salt caverns at four sites along the Gulf of Mexico. “SPR oil is sold competitively when the president finds, pursuant to the conditions set forth in the Energy Policy and Conservation Act, that a sale is required,” the department said. “Such conditions have only existed three times, most recently in June 2011 when the president directed a sale of 30 million barrels of crude oil to offset disruptions in supply due to unrest in Libya.” The energy secretary can also “authorize limited releases in the form of exchanges with entities that are not part of the Federal Government,” it said. De Haan tweeted Oct. 6, however, that “we would need a significant release” to bring gas prices down much.

Alaska snow crab harvest slashed by nearly 90%, tanners by 53%

The snow crab is a mainstay of the Alaska crab boat fleet — much of it based in Washington — and the 2021-22 catch limit of 5.6 million pounds, announced Oct. 8, is down 88 percent from the previous season. The 2021 fall harvest of Bristol Bay red king crab, another important source of revenue for that fleet, was canceled for this year because of too few females. The combined impacts of the closure and snow crab cutbacks are a big financial hit to crabbers who in past years have grossed more than $200 million from the two harvests. At a meeting of the North Pacific Fishery Management Council this week, crabbers called for additional restrictions in other harvests. “I implore you to do whatever is necessary to keep the crab fisheries sustainable,” said Jenny Gore Dwyer, whose family owns three North Pacific crab boats, in Oct. 6 testimony before the council. “First and foremost we are a business based on fishing crabs in the Bering Sea … But for us, it’s not just a business, it’s a way of life.” Scientists who study the snow crab are scrambling to understand what happened to them in the aftermath of dire summer survey results that included a more than 99 percent drop in immature females compared to those found three years earlier, as well as substantial drops in mature males and females. The changes in the Bering Sea include dramatic declines in winter ice cover in 2018 and 2019, which resulted in reduced size of a cold pool on the bottom favored by young crab. Some of the causes for the population decline likely include increased predation of the young snow crab by cod which typically stay out of the cold pool as well as overall stress caused by the higher temperatures, according to federal and Alaska state scientists who spoke during the virtual council meeting. Researchers also have tracked increased disease. As the sea bottom warmed, snow crab also appear to have moved much farther to the northwest and in deeper waters than in years past. But scientists, in testimony to the council, said the evidence indicates a big downturn in the population — not just a migration out of the survey zone. “We really do think that … some sort of mortality event did occur,” said Katie Palof, an Alaska Department of Fish and Game biologist who advises the North Pacific council about crab. Formed by a landmark 1976 federal law that extended U.S. control over the 200-mile fishery zone off the nation’s coasts, the council — composed of state, industry and federal officials — develops harvest plans in the Bering Sea and the Gulf of Alaska. In an Oct. 6 vote, the council approved a maximum allowable snow crab harvest of 12.4 million pounds for 2021-22. The State of Alaska, which sets the final quota, opted for a considerably lower 5.6 million pounds. Also on Oct. 8, the state set a quota of 1.1 million pounds for Bering Sea bairdi crab, down 53 percent from the previous season. The crab and fish harvests in the Bering Sea collectively rank as the most valuable fisheries in North America, and the federal council, when it resumes meeting next week, is expected to consider additional restrictions in some other harvests because of the low number of snow and king crab. Bycatch and trawlers The accidental, or bycatch, of crab by other fleets has come under increased scrutiny, although biologists at the council meeting did not find that was a big contributor to the crabs’ decline. The biggest bycatch of red king crab has come from crews who harvest fish with steel, baited traps set along the sea bottom. A significant portion of these fishermen also are crabbers. Since 2008, estimates based on observers aboard some of those vessels indicate the pot-fisheries bycatch has varied from as few as 804 king crab in 2008 to 243,469 in 2018 and 235,607 so far in 2021. Pot fishers must throw back all these red king crab, but biologists estimate only half survive. Jamie Goen, executive director of the Alaska Bering Sea Crabbers association, said the bycatch is concerning but noted pot fishers have been testing promising new gear that could reduce bycatch. Crabbers also are seeking more restrictions on the bottom-trawling fleets that while targeting fish also scoop up king crab. Biologists who help assess the stocks estimate that 80 percent of those crab die when they’re returned to the sea as required. During the past 13 years, the bottom-trawl bycatch of king crab has ranged from a high of 85,541 in 2008 to a low of 12,725 in 2018. This fleet has observers on board all vessels, and has a hard cap of the number of king crab they can net. This year, the cap was set at 97,000, and the bycatch so far has been less than 15,500 crab. Next year, that cap will lowered to 32,000, according to Mary Furnuness, a National Oceanic and Atmospheric Association Fisheries official who’s involved in managing the harvests. Under the current regulations, a king crab conservation area of the Bering Sea that is off-limits to bottom trawling will be expanded south for 2022. Crabbers are pressing for the council to make an additional expansion to the north to an area that may now be used by more king crab. “What we are proposing with an emergency closed area and requested voluntary actions from all fishing sectors should help crab stocks rebound and hopefully allow us to have a (king crab) fishery next year,” Goen said. That move is opposed by Chris Woodley, executive director of the Groundfish Forum, a Seattle organization that represents most of the largely Washington-based bottom-trawl fleet. “Crab are moving in unprecedented ways and new closure areas would be an uneducated guess with high potential for unintended impacts,” Woodley said. Woodley said the closure might move bottom trawlers into other areas used by king crab. The North Pacific council also is being asked to do more to protect the accidental harvest of salmon by Bering Sea trawlers. This plea comes in the aftermath of disastrous returns of chinook and chum to the Yukon and Kuskokwim rivers that severely impacted Alaska Natives in the region who depend on these fish for subsistence. The cause for the decline in these salmon runs is not well understood. Warming trends in the Bering Sea and freshwater are one factor researchers are exploring. Farther south, sockeye salmon runs returning to Bristol Bay hit record levels in 2021. “For the first time in our history, we were not able to harvest salmon. We were not able to throw our nets in the river,” said Serena Fitka, executive director of the Yukon Drainage Fisheries Association, which represents 42 rural communities, in Oct. 6 remarks to the council. “Our fishing traditions are fading. Is this the beginning of the end to the Yukon River salmon … “We are in crisis.”

Banks would have to give IRS data on accounts with more than $600 under proposal to catch tax cheats

As Congress negotiates the details of the reconciliation bill, a big question is how to pay for all the new spending. One proposal would give the IRS a better chance to track down tax cheats. It would require banks to report to the IRS all accounts with a balance of $600 or more or that have $600 or more in transactions. The IRS would then be able to compare the bank account information to the information on tax returns to see if there may be unreported income. The banks would not report the details on individual transactions — like whether you went to Wawa or the liquor store, booked a massage or a vacation to Aruba — but instead report the total amounts going into and out of the accounts. The Biden Administration said the information would help the IRS find unreported income from rich individuals and businesses and help it close a tax gap of more than $160 billion — taxes owed on earnings that have never been paid. Indeed, over the past decade, the IRS has been auditing fewer and fewer tax returns. In 2010, the agency audited 1.11 percent of returns. In 2019, that number was down to 0.45 percent. Treasury Secretary Janet Yellen told a Senate committee that the proposal would add two additional pieces of information onto the 1099-INT, a form that banks already file with the IRS. “I think it’s important to recognize that we have a tax gap that’s estimated at $7 trillion over the next decade,” she said. “That is taxes that are due and are not being paid to the government that deprive us of the resources we need to do critical investments to make America more productive and competitive.” But critics say the move would be an invasion of privacy and overly burdensome. The American Bankers Association, in a letter to Congressional leaders, said the move would require financial institutions “to develop the necessary technology and processes to identify the accounts, report to the IRS and customers, and educate customers and bank staff on what the information does (and does not) mean.” It also said that while the proposal is meant to go after high-dollar tax cheats, it would also have an impact on the little guy. For example, it cited self-employed contractors who typically buy materials for construction jobs, saying they will commonly have gross inflows and outflows that exceed their actual income. The additional reporting could make innocent people come under scrutiny, it said. “In the end, whether it is average workers or self-employed citizens, virtually all Americans will be subject to this new reporting,” ABA said. “The taxable portions of this activity are already generally captured by existing reporting, and it is unclear how these additional details will help the IRS target tax cheats in the top 1 percent of reporters.” Rep. Jeff Van Drew, R-N.J., last week introduced a bill that would block the proposal if it became law, calling it “government overreach.” “This useless proposal by the Administration is an invasion of Americans’ privacy rights and allows the government to have expanded access to individuals sensitive bank information,” Van Drew said in a statement. ”The vast majority of Americans are law-abiding taxpayers and we, as members of Congress, should be treating them as such.” Yellen disputed the privacy concerns, noting that the proposal would not report individual transactions, and she said it would not be burdensome on banks. “Banks already report directly to the IRS the interest that they pay on accounts when it exceeds $10, and this is not a proposal to provide detailed transaction-level data by banks to the IRS,” she told CNBC.

COVID-related event cancellations cost Anchorage $39M

As Alaska contends with a COVID-19 surge that swelled in recent weeks, several local groups have canceled or postponed conferences and meetings during Anchorage’s typically busy fall convention season. As the coronavirus has continued to hamper international travel, one international group has also canceled. The shifting plans have heaped more pain atop the Anchorage event industry, experiencing its second straight year of tough times after the pandemic canceled travel and social gatherings. And it could continue. Alaska organizations that have recently rescheduled conferences say they’re eyeing COVID-19 numbers in the state and could delay events once again if things don’t improve. In-person meetings and events this year were on the rise partway through summer as the economy was bouncing back, said Greg Spears, general manager for the Egan and Dena’ina convention centers. The Foo Fighters show at the Dena’ina Center in mid-August sold out rapidly and saw heavy sales for merchandise, he said. It showed people are ready to get out and be together. Cancellations and postponements for 2021 have occurred all year because of COVID-19, Spears said But the number increased starting in August as COVID-19 cases in Alaska were rising due to the more contagious delta variant, he said. Events set for as far out as December, or even early next year, have been canceled or postponed, he said.Anchorage-wide, at least 114 meetings or events have been canceled or put off this year due to the pandemic, said Jack Bonney with Visit Anchorage. The cancellations have affected hotels, convention centers and other venues. The events would have generated about $39 million in spending in Anchorage, he said. Twenty-four of those have been canceled or delayed since Aug. 1, he said. “Traveler enthusiasm and optimism is starting to flag as COVID has reared its ugly head again,” Bonney said. ‘Ready to meet in-person, but not until it’s safe’ On the plus side, at least 60 meetings, conferences and events have been held in Anchorage this year, pumping about $12 million into the economy, Bonney said. The figure doesn’t include smaller meetings organized by local groups on short notice, he said. Things have improved since March 2020, but the number of events is still well below 2019 levels, Bonney said. Visit Anchorage has been able to rebook most large events and groups for future years, Bonney said. The canceled and postponed events have hurt restaurants, food suppliers, event support companies and others, said Bill Popp, head of the Anchorage Economic Development Corp. “It’s disappointing for many businesses,” Popp said. The Alaska Oil and Gas Association had planned to hold its annual one-day conference at the Dena’ina Center in early September after a year and half of postponing it, said Kara Moriarty, the group’s president. But with the state’s COVID-19 cases rising, she reached out to Alaska health officials and Providence Alaska Medical Center for advice. There was no way to keep 500 people socially distanced, she said. “I realized, ‘Yeah, this is not safe,’ ” she said. The meeting is now reset for Jan. 12. That plan will be reassessed shortly before the event to make sure it’s safe, she said. The date can be pushed off again if needed. “We are ready to meet in-person, but not until it’s safe,” she said. The Alaska Federation of Natives delayed its annual convention by two months, moving it to Dec. 13-15 at the Dena’ina Center. The group took the step after consulting with medical experts, including Dr. Anne Zink, Alaska’s chief medical officer, said Sheri Buretta, chair of AFN’s Convention Committee. The Alaska Federation of Natives convention is typically the largest in the state. Thousands of delegates and relatives pour in from across Alaska, spending millions of dollars at hotels, shops and grocery stores. In particular, AFN doesn’t want its delegates to contract COVID-19 in Anchorage and bring it back to villages without hospitals or much medical support, she said. “We have a vulnerable population and medical facilities,” she said. “Getting together (in October) would really increase the risk, so we didn’t want to do that to our population.” The convention was held virtually last year for the first time ever. The Alaska Federation of Natives convention brings together friends and family from across Alaska, so it was difficult not to meet in-person, she said. This year’s plans for a fully in-person meeting could change, she said. The group’s board will meet again to decide if a virtual or partially virtual event will be safer. “There is hope that maybe the numbers will go down in December,” Buretta said. “There’s something about being together that everyone wants so badly. But we have to do the right thing and protect our people.” Impact on small business The thought of the AFN convention canceling again this year is “terrifying,” said Karin Johnson, an owner at Dark Horse Coffee, across the street from the Dena’ina Center. Business from that convention, along with holiday bazaars and other fall events, usually provides a financial boost for winter, she said. “AFN is like my Black Friday,” she said. “And it’s like a family reunion, so we were sad to miss it last year.” After a strong surge from tourists in Anchorage this summer, business has dropped again at the coffee shop, she said. Small civic and community meetings seem to be the only thing happening in the Dena’ina Center, she said. Sales at Dark Horse are about half what they were in 2019, she said. But Johnson said she understands the reason for the cancellations, because they keep people safe. “I may suffer from it, but it is the right thing,” she said. The Alaska Chamber planned to hold its annual forum over three days late last month at the Hotel Alyeska in Girdwood. But it canceled those plans. It’s now holding the policy forum online on Oct. 12 to set its annual advocacy agenda. The group is still planning a business conference for Dec. 8-9 at the Hotel Alyeska with about 200 participants. The plans for the December event could change if the stress on the state’s hospitals from COVID-19 doesn’t ease, said Kati Capozzi, president of the Alaska Chamber. The group will communicate with state health officials before making a final decision. “If we are like what we have now, we’re not having it,” Capozzi said of the currently high number of COVID-19 hospitalizations in Alaska. If the December event has to be canceled, it will be postponed until it can be held safely in person, she said. People want to network and personally interact, she said. “We’ve been doing virtual conferences and meetings for 18 months,” she said. “It gets to be tough to be sitting at computers.” The Alaska Miners Association canceled its five-day conference, set to start Nov. 1 at the Dena’ina Center. It attracts more than 1,000 people, said Deantha Skibinski, the group’s executive director. A new date has not been set, she said. The cancellation of the event last fall was no surprise, given that there was no COVID-19 vaccine available at the time, she said. But this year’s cancellation is frustrating since many Alaskans have not taken advantage of the vaccines, she said. “The fact that we’re here again is super disheartening,” she said. International events have also been canceled or postponed. The IEEE Signal Processing Society canceled its large international technology conference on image processing, planned for four days in mid-September at the Dena’ina Center, said Kenrick Mock, a group member and organizer of the event. The conference was instead held virtually. It’s now planned for Anchorage in 2025, said Mock, dean of the College of Engineering at the University of Alaska Anchorage. The group decided in August to cancel, he said. COVID-19 rates were rising nationally at the time. More than 1,000 people were expected to visit Anchorage from all over the world, but pandemic travel requirements made flying difficult for many participants. “It was disappointing,” he said. The Resource Development Council still plans to hold its annual conference Nov. 17-18 at the Dena’ina Center. But plans could change depending on the path of the pandemic, the group’s website says. “While we will do all we can to bring our members and supporters together in November, we may be forced to shift to virtual or hybrid event,” the website says.

Judge allows millions of pounds of Alaska seafood to move

Companies that haul fish from Alaska to the eastern U.S. can resume shipping what they say is an estimated 26 million pounds of frozen fish that has been stranded in Canada in a battle over a federal maritime shipping law known as the Jones Act, a federal judge ruled on Oct. 10. The decision is a temporary victory for Kloosterboer International Forwarding and Alaska Reefer Management. The companies last month sued U.S. Customs and Border Protection, asserting that the agency has wrongfully issued more than than $350 million in penalty notices to Kloosterboer and other companies in the transport chain. The federal government claims the companies since 2012 have secretly used a specially built, 100-foot rail track at the port of Bayside in New Brunswick, near the border with Maine, in an illegal attempt to take advantage of an exemption in the act. Customs and Border Protection cannot issue new penalties for seafood moved through the Bayside rail line until the case is resolved, U.S. District Court Judge Sharon Gleason in Anchorage said in the 24-page decision. Not allowing the seafood distribution would close factories, hurt jobs and disrupt the supply chain for the U.S. Department of Agriculture food bank and school lunch programs, Gleason said in the order. The seafood, mostly pollock, is caught by fishermen working from Dutch Harbor in Alaska’s Aleutian Islands. It reaches stores and restaurants on the East Coast. “We were forced to halt shipping over 50 days ago,” said Jennifer Adamski, Kloosterboer’s director of logistics and operations, in a prepared statement. “As a result, 26 million pounds of Alaska produced seafood products remain in the Bayside cold storage, unable to reach U.S. seafood manufacturers at a time when the supply chain is severely strained.” The companies say they have recently taken steps that Gleason required in an earlier round in the case, including filing a petition seeking administrative remedies with Customs and Border Protection, Gleason’s decision said. The two seafood shipping companies provide transportation and logistics services as part of the American Seafoods Group family. The Jones Act requires that vessels carrying goods between two U.S. points be American-made and American-flagged. The companies use foreign-flagged ships. But they say they meet a Jones Act exemption because the seafood travels briefly by rail in Canada. The U.S. Department of Justice asserts that before 2012, the companies legally used the New Brunswick Southern Railway to transport their seafood in Canada, a journey of more than 30 miles along an established railway that moved the seafood from one point to another. But in 2012, the companies began using the 100-foot mini-track that goes nowhere, which the Justice Department argues is unlawful. The companies briefly roll the seafood-filled trucks on the track in an effort to save money and find a loophole in the Jones Act, the agency asserts. Kloosterboer and Alaska Reefer argue that the short track is a registered Canadian rail line and a legal part of the shipping route between Alaska and the East Coast.

Trawler bycatch debate heats up after dismal 2021 returns

Fishermen are calling for state and federal fisheries managers to make changes to salmon bycatch limits for trawlers as chinook salmon numbers plummet across Alaska. Chinook salmon returns were dismal virtually everywhere in Alaska this year, from Southeast to the Bering Sea, with few exceptions. That follows a trend, as abundance has declined over roughly the last decade. Commercial fishermen have lost most of their opportunity to harvest kings, and sport fisheries have been restricted. Now subsistence fisheries are being reined in to help preserve the runs. The North Pacific Fishery Management Council is debating changes in its meeting this month. Trawlers, which use weighted nets to drag either along the bottom or in midwater, are permitted a certain amount of bycatch as they fish for their target species, the largest of which is pollock. Bycatch is always a heated issue, but it is especially so now. The Alaska Department of Fish and Game informed the council in a letter dated Sept. 23 that three index species that it uses to track king salmon runs in the Bering Sea—the Unalakleet, Yukon, and Kuskokwim rivers—didn’t reach a threshold necessary to maintain the current bycatch allowances. That threshold is set at 250,000 fish between the three rivers; this year, there were 165,148. The Kuskokwim’s run came within its forecasted range, but the other two fell short. The shortfall in salmon this year hit fishing communities hard, particularly among subsistence fishermen. Amos T. Philemenoff, Sr., president of the Aleut Community of St. Paul Island, wrote to the board that the salmon shortages in the Arctic-Yukon-Kuskokwim region this year have impacted the island’s subsistence traditions. Donations of salmon from commercial harvesters to replace the lost food do not replace the traditions, he said. “Our communities have experienced physical, mental, emotional, and spiritual hardship due to the impacts of over-harvest and mismanagement that characterize these Alaska fisheries,” he wrote. “The burden of conservation has fallen on Indigenous (e.g., subsistence) users who are not part of the salmon population collapse.” Philemenoff said the island community has been bringing up concerns about the Bering Sea ecosystem for years and pointed to a combination of factors, including trawl over-exploitation of the fishery resources and climate change. Sea ice has become increasingly rare, not surrounding St. Paul Island since 2011 and 2012, and seabird die-offs have become increasingly common in the region. “The population declines of northern fur seals, Steller sea lions, Pribilof Islands blue king crab, and Pacific halibut, to name a few, have been devastating to the livelihoods, wellbeing, and future of our tribal and community members,” he said. “We have carried these concerns to this Council for years, decades.” He requested that the council drop salmon bycatch allowances to zero for the 2022 Bering Sea pollock fishery, that it seek federal disaster aid and research funding and that the council seek tribal consultation on salmon bycatch and management. The Kuskokwim River Inter-Tribal Fish Commission asked for the same measures in its letter, noting that because of the lack of information on the reason for the salmon collapse, “sustainable fishery management requires that the Council limit salmon bycatch in the Bering Sea pollock fishery to ensure that NO salmon are taken as bycatch in the Bering Sea pollock fishery in 2022.” Kawerak, Inc., the Ocean Conservancy, the Yukon River Inter-tribal Fish Commission, the Yukon Drainage Fisheries Association and the Bering Sea Fishermen’s Association submitted the same requests. Several commenters are asking for similarly tough actions on the Bering Sea pollock fishery, but others are noting that significant cuts could also heavily impact Native coastal communities because they hold interest in that fishery through their CDQ groups. Fishermen with the Coastal Villages Region Fund, which represents the villages around the Kuskokwim River Delta and surrounding areas, caught about 102 million pounds of pollock in 2019, according to CVRF’s annual report from that year. Others are asking for changes to the bycatch management in the trawl fisheries. A letter from the Salmon Habitat Information Partnership program signed by 300 commercial fishermen asks the council to reconsider a decision it made regarding apportionment of Chinook salmon bycatch in the Gulf of Alaska pollock fisheries. In August, the National Marine Fisheries Service published a rule moving 1,350 Chinook from the Gulf of Alaska pollock fishery to the non-rockfish program catcher vessel sector in the Gulf. Those 1,350 Chinook are a projected unused part of the prohibited species catch limit — essentially, some that the pollock fleet didn’t catch that they were allowed. The fishermen in the letter, from everywhere from Ketchikan to Dutch Harbor, protested this move, saying the fish should be left in the Gulf rather than be allowed to be caught by another sector as bycatch. “Alaskans are making huge sacrifices to protect Chinook; the federal government via the NPFMC needs to do the same,” the letter states. “Chinook bycatch being rolled over to another trawl sector to kill and discard is unconscionable when many Alaskans are foregoing subsistence, sport and commercial harvest.” Salmon fishermen across the Gulf of Alaska, from Southeast to Bristol bay, saw restrictions this year due to low king salmon runs. In Bristol Bay, early-season commercial fishing in the Nushagak District was restricted because of the slow king salmon return there. In Cook Inlet, setnetters were shut down completely in mid-July because of a poor king salmon run, along with a complete sportfishery closure for the Kenai River king salmon. In Southeast, sport anglers were restricted starting in June to protect the kings returning to the rivers there. In the letter, the fishermen argue that the rollover policy needs to be reversed while the council takes more long-term action to address king salmon bycatch in the trawl fisheries in the Gulf. The North Pacific Fishery Management Council is meeting this week via Zoom. The link to the meetings can be found on its website at npfmc.org. Elizabeth Earl can be reached at [email protected]

Former Brooks Range executives seek second shot at Mustang

Some of the players in a failed North Slope oil project want to revive the state-backed field under a new name. Alaska Division of Oil and Gas officials in mid-September approved the transfer of state leases from Brooks Range Petroleum Corp. to Finnex LLC, according to documents recently published on the division’s website. Finnex is led by CEO Majid Jourabchi and Chief Operating Officer Harry Bockmeulen, who previously held the same positions at Brooks Range. Finnex was formed in June 2020 and is located in the same South Anchorage offices as Brooks Range, according to records filed with the state Division of Corporations, Business and Professional Licensing. Brooks Range was the Anchorage-based oil junior that, under a prior management team, first attempted to produce oil from the small Mustang project with $70 million of help from the Alaska Industrial Development and Export Authority, the state-owned development bank. AIDEA took control of the Mustang project in December 2020 following years of fits and starts by Brooks Range that ultimately led the authority to foreclose on the project assets in an attempt to recoup the $70 million authority officials invested in the Mustang development between 2012 and 2014. Division of Oil and Gas officials also issued a notice to Brooks Range on Sept. 9 that they had terminated two of the company’s North Slope leases for failing to pay rent on the acreage that was due Sept. 1. AIDEA officials have said they are working to eventually sell its share of Mustang assets. The authority has a 90 percent working interest ownership in the Southern Miluveach Unit that contains the oil prospect. The tipping point was when Brooks Range’s majority owner, Singapore-based Alpha Energy Holdings, failed to make good on loan payments to AIDEA stemming from a prior refinancing of the investment firm’s obligations to the authority. Jourabchi is also president of Houston-based Thyssen Petroleum, once a minority owner in Anchorage-based Brooks Range. Jourabchi told the Journal in May 2019 that he was part of a team of investors attempting to buy a majority stake in Mustang from Caracol Petroleum, a subsidiary of Alpha Energy. The Mustang field is adjacent to the southern portion of ConocoPhillips’ large Kuparuk River field and also near the Pikka oil project being developed by Oil Search. The field is estimated to hold about 22 million barrels of oil and could peak at production rates of about 12,000 barrels per day when fully developed. Brooks Range drilled test wells at Mustang in 2011 and 2012 that led AIDEA in December 2012 to take a stake in Mustang. The state oil lease interests approved for transfer to Finnex by TP North Slope Development, Brooks Range and Caracol are outside of the Southern Miluveach Unit, which holds the Mustang facilities, but Jourabchi said in an Oct. 12 interview with the Journal that Thyssen Petroleum submitted a proposal to AIDEA to purchase the Mustang assets with the intent of producing from the field quickly. Thyssen owns 85 percent of Finnex. “We feel it’s very credible,” Jourabchi said of the proposal. He also said Finnex has secured $35 million in financing to restart development of Mustang. “We feel we can get (Mustang) to production very quickly, but if it doesn’t happen, we have other ideas that clearly will take much longer,” Jourabchi said. Brooks Range briefly produced oil from Mustang in 2019 but a lack of funding prevented sustained production operations. A spokeswoman for AIDEA did not respond to questions about Mustang in time for this story. Full development of the field was initially estimated to cost about $580 million and included drilling 11 production and 20 more gas and water injection wells, according to AIDEA’s project documents. Brooks Range later changed its plans to utilize smaller, modular production facilities to spur development. Brooks Range leaders said when AIDEA made its first investment that they hoped to have Mustang in production by late 2014, and said when AIDEA made its second payment to the project oil would start flowing in late 2015. Thyssen has producing assets in Louisiana. Elwood Brehmer can be reached at [email protected]

Movers and Shakers for Oct. 17

Rhonda Lamp has been appointed as the new Human Resources director for Coastal Villages Region Fund. Lamp has more than three decades of experience in human resources. Previously, she was the benefits manager of Chugach Government Solutions and the senior Human Resources manager for Bristol Bay Resource Solutions. Jerel Humphrey has been appointed interim CEO of Bartlett Regional Hospital, effective Oct. 18. Humphrey takes over from Kathy Callahan, who came out of retirement to temporarily serve as interim CEO. Humphrey will serve through the search process and hire of a permanent CEO. Humphrey has served as an interim leader across the country, most recently with a hospital in Pennsylvania. Humphrey’s appointment follows the recent departure of former CEO Rose Lawhorne. The NANA board of directors named John Agnaqłuk Lincoln as president and CEO, based in Kotzebue. Lincoln has served a combined 18 years working for NANA and the Maniilaq Association, the two largest employers of shareholders in the NANA region. He joined NANA in 2016, and most recently served as vice president for external affairs where he worked to ensure the protection of corporate, regional and shareholder interests. Lincoln also served as an Alaska state representative from 2018-21, where he was an original member of the House Special Committee on Tribal Affairs. Lincoln earned his bachelor’s degree in management science and public policy from Stanford University. In 2021, Lincoln was named a “Top Forty Under 40” leader by the Alaska Journal of Commerce.

Report highlights how Bristol Bay locals are losing access to commercial fisheries

Alaska’s limited-entry commercial fisheries system may be pulling access to fisheries away from the coastal communities where they take place. A series of research projects in the past decade has increasingly shown that limited-entry systems like Alaska’s commercial fishing permitting system or the federal-state individual fishing quota system are systematically pulling permits away from the coastal communities that traditionally depend on those industries. The most recent installment in that line of projects focuses specifically on Bristol Bay — today, the state’s most successful salmon fishery. The report, commissioned for The Nature Conservancy, found that in the 46 years since Alaska’s limited-entry system went into place, residents in Bristol Bay’s rural communities now own 50 percent fewer permits. The decline is similar among younger permit holders, contributing to the overall trend: commercial fishing permit holders in the state are increasingly older and from regions other than where they fish. Dr. Rachel Donkersloot, the lead researcher on the study, has been conducting research on the effects of limited-entry on rural communities since at least 2016, as well as on the increasing average age of commercial fishermen, known as “the graying of the fleet.” While limited-entry has served fisheries conservation well in the past five decades, she said she was focusing on the human impact of the system in this report. “It’s very clear we need to do better,” she said. “How can we improve, and how can we change it?” When limited-entry was established, the designers primarily focused on implementing a program that would keep more fishing power in the hands of Alaskans while creating a transferable permit system. Permits are freely transferable, though, which creates market value. Depending on the success of a particular fishery, permits can cost hundreds of thousands of dollars. On average, a Bristol Bay driftnetting permit cost more than $180,000 in 2021, according to the Commercial Fisheries Entry Commission. That price creates a huge barrier for residents of rural communities, where cash income is limited. Gradually, those permits have made their way out of rural communities and increasingly into the hands of urban Alaskans and nonresidents. Limited-entry was passed in 1975; by 1983, 288 permits had already left the hands of Alaska Natives in Bristol Bay, a 21 percent decline, the report found. “This rural-to-urban outflow of fishing rights robs rural Alaska of its economic base, erodes rural economic opportunity, degrades rural infrastructure, and negatively impacts coastal community health, fishing heritage, and food security,” the report notes. The effect is not unique to Bristol Bay. In Southeast, for example, the villages of Angoon, Kake, Metlakatla and Hydaburg lost about 60 percent of their salmon fishing permits. Some of the smallest communities in Bristol Bay, including Pedro Bay, Egegik, and Pilot Point lost more than 75 percent of their permit holdings, according to the report. Meanwhile, the Bristol Bay sockeye salmon fishery has been a blockbuster success, breaking its all-time record for returning sockeye this summer. “The impacts of limited entry are devastating, but it’s almost eclipsed by the success of this phenomenal fishery,” Donkersloot said. The reasons the permits are bleeding out of the Bay are complicated. Norm Van Vactor, president and CEO of the Dillinghman-based Bristol Bay Economic Development Corporation, said it’s a combination of different factors, including migration out of the watershed, attrition and some fishermen selling their permits rather than bequeathing them to their children. For about a dozen years, the BBEDC has run a loan program to help aspiring fishermen purchase permits in the region. But even that has only slowed the bleed, not stopped it, Van Vactor said. “At the end of the day, it almost cut the cost in half for a program participant to participate in it,” he said. “We’ve cut the loss numbers,” he said, but it’s not enough. The loss radiates economically. Not only do local permit holders make more money and hand down their expertise, they also train up local deckhands and younger commercial fishermen in the region. With them gone, Bristol Bay locals have a harder time getting onto vessels as deckhands. A generation of role models has disappeared, he said. What’s more, the locals notice the change, and the attitude tends to become negative. Outsiders bring a different approach to fishing than the locals and Native communities that have traditionally fished the Bay, he said. “It doesn’t really matter if you’re from Soldotna or San Francisco — you’re still an outsider,” he said. Fixes to the problem have been slow to come. Van Vactor said he worked with the Legislature in 2017 and 2018 on a bill to establish Regional Fisheries Trusts, which would have allowed a regional entity to hold permits that coastal communities could use, essentially tying a certain percentage of the salmon fishing permits in a region to that geographic area. After a series of amendments and versions, the bill finally languished in the House Fisheries Committee, which Van Vactor said is “disappointing.” Donkersloot also said the Legislature has a role to play in fixing this problem, trying to shift the permit system away from an open-market system where the cash-poor communities that depend on the fisheries cannot reasonably compete with more affluent permit holders from urban areas of Alaska or the Lower 48. In the report, the authors also highlight the potential for fisheries trusts as well as other suggested programs, like apprenticeship permits, small-scale access provisions and locally designated permits. “We’ve seen the impact of limited-entry on our communities, in villages,” Donkersloot said. “I think the goal here was to restart that conversation.” Elizabeth Earl can be reached at [email protected]

Alaska LNG would cut C02 emissions by 50% over coal, report says

Exporting Alaska’s natural gas to power-generating customers in Asia would roughly halve carbon dioxide emissions versus burning coal, according to a study commissioned by the agency leading the Alaska LNG Project. The 16-page report made public at the Alaska Gasline Development Corp.’s Oct. 7 board of directors meeting also concludes exports from the $38 billion Alaska LNG Project would ultimately result in fewer carbon dioxide emissions than Gulf Coast-based LNG projects for several reasons. AGDC leaders previously said they expected a pending review of the mega-LNG project’s lifecycle greenhouse gas emissions by the Department of Energy to show using Alaska’s gas overseas to displace coal-fired power generation would significantly reduce overall carbon emissions over what is largely the status quo. AGDC President Frank Richards said in an interview that the study largely confirms what he and other proponents of Alaska LNG have long said: North Slope natural gas is one of the cleanest sources of hydrocarbon fuel on the planet. Project officials wanted to get a head start on the DOE evaluation that is being done by the National Energy Technology Laboratory, which will come in the form of a supplemental environmental impact statement, or SEIS. Officials in the DOE office expect to publish a draft SEIS in early May, with a final order coming in mid-December 2022, according to a schedule published by the Office of Fossil Energy and Carbon Management. “We’re very pleased at the outcome that shows, using publicly available sources and the same (DOE) methodologies that have been used to evaluate other LNG projects around the world, we are a lower-greenhouse-gas project,” Richards said. The Energy Department announced in early July it would conduct the SEIS following a petition by the Sierra Club urging DOE officials to withdraw their approval of the project, which is based on the Federal Energy Regulatory Commission’s 2020 final Alaska LNG environmental impact statement. Representatives from the Sierra Club, the Fairbanks-based Northern Alaska Environmental Center and other environmental groups have been critical of the Alaska LNG Project for the carbon dioxide it would emit; instead insisting coal and other carbon-based fuels should be replaced with renewable energy sources. LNG industry players tout their product, relative to coal and oil, as a cleaner-burning “bridge fuel” that can support a longer energy transition as new renewable technologies and infrastructure are developed. Richards said FERC conducted a “project specific” carbon emissions analysis while the study commissioned by AGDC and the DOE review encompasses all of the potential project-related carbon sources. “What the DOE is saying is they want to go beyond Prudhoe Bay,” he said. AGDC’s study was compiled over about six weeks by three independent consulting firms that had all previously done similar work for the National Energy Technology Laboratory, according to Richards. It cost AGDC approximately $30,000. According to AGDC’s report, operating the 20 million tonnes per year Alaska LNG Project would emit approximately 13.5 million tonnes of carbon dioxide-equivalent greenhouse gases per year, with more than half of the total coming from processing the gas through the North Slope gas treatment plant and operating the massive three-train, gas-fired liquefaction facility. The gas treatment plant is largely needed to strip carbon dioxide, which is about 10 percent of North Slope natural gas, off of the methane that is pure natural gas. The carbon dioxide removed from the gas would be reinjected into the Prudhoe Bay reservoir. When greenhouse gas emissions from project operations are added to the emissions from shipping, regasification of the LNG and ultimately burning the fuel the project’s total supply-chain emissions would be roughly 77 million tonnes of carbon dioxide-equivalent gases per year, according to AGDC’s report. That’s almost exactly half of the greenhouse gases emitted from burning coal in China to produce the same amount of power in 2019. Burning coal accounted for nearly 60 percent of China’s primary energy consumption in 2019, according to the U.S. Energy Information Administration. The report also concludes that producing and shipping LNG from Gulf Coast projects — the primary competitors to Alaska LNG — is significantly more greenhouse gas-intensive than North Slope-sourced LNG, Richards noted. That’s due to longer shipping routes through the Panama Canal, and the fact that the existing wells in the Prudhoe Bay and Point Thomson fields from which gas would be drawn versus the energy needed to drill the many shale gas wells to supply most Lower 48 LNG projects. He added that Lower 48 gas frequently changes hands and goes through multiple systems that increase the possibility of “fugitive emissions” from potential gas leakage. Richards further highlighted that utilizing Prudhoe Bay gas in the LNG project would eliminate the need to run the gas-fired compressors currently used to reinject the gas back into the field. The report gives AGDC leaders an understanding of what the results of the SEIS will likely be, but also provides valuable information for marketing the project to potential customers and investors interested in reducing global emissions, he said. “They’re looking for products with low carbon footprints,” Richards said. “We want to position ourselves as a low-carbon LNG product.” AGDC leaders have said they have reached preliminary agreements with private parties to lead the pipeline and gas treatment facilities and hope to reach a similar spot with a lead LNG party soon to move toward the detailed front-end engineering and design stage sometime next summer. Elwood Brehmer can be reached at [email protected]

A sign of the times: Ships lined up at US ports

If you want to understand the state of the economy, both the good and the bad, Savannah, Ga.’s port offers a vivid snapshot. The queue of 22 ships waiting to unload Sept. 27 signaled strong demand for goods and the scramble by retailers to stock up as the holiday season approaches. But the nautical backlog — virtually non-existent a few months ago — was also a warning that consumers could see shortages and higher prices, according to supply chain experts. A few months ago, the port was busy enough, but there were often no ships waiting, said Griff Lynch, executive director of the Georgia Ports Authority. “In the spring, it was nothing like this,” he said. In August, the Port of Savannah had its second-busiest month on record, handling 485,595 containers. That was 10 percent higher than the same month a year ago, which was then a record for August. About 65 percent of containers passing the port are imports bound for American companies and consumers. Much of the demand now is pegged to the approaching holidays. But moving all of that cargo isn’t easy. Many other U.S. ports also are backed up. At the giant West Coast ports of Los Angeles and Long Beach, more than 60 ships have been lined up at times this month, part of an unprecedented global bottleneck in moving goods. When ships and trucks and people have to wait, the whole system becomes less efficient and more costly. “The backlogs and delays in ports are very worrisome,” said Pinar Keskinocak, a professor in Georgia Tech’s Stewart School of Industrial and Systems Engineering. With the overall economy growing, incomes up for most people, and discretionary travel still subpar, there is a lot of money for holiday buying, economists say. Despite a still-uncontrolled coronavirus, many retailers are betting on a robust holiday season, and that means trying to stock up in advance. But those efforts are complicated since the world’s supply chain is still struggling to rebalance itself after repeated disruptions more than 18 months into a pandemic. One of the casualties is “just in time” inventories: the pre-pandemic practice in which businesses kept little stock on hand to keep costs down and were able to quickly replenish that stock as needed. “We used to have an efficient system where everything on the supply chain was synchronized,” said Nikolay Osadchiy, an associate professor who teaches supply chain management at Emory’s Goizueta Business School. “Right now, it’s not predictable at all.” The rush to stock up has its own danger, Osadchiy said. What if retailers buy the wrong goods? What if each of their efforts adds up to too much buying? That could mean dropping prices, layoffs and more disruption in the supply chain. The past few months, the highest-profile shortage has been in production of vehicles, which cannot get enough of the silicon chips used in the on-board computers. That scarcity has meant shutdowns in auto assembly plants, including the massive Kia plant in West Point. This holiday’s shortages are least likely in products made in the United States, said Osadchiy. Among foreign-made goods, the most likely shortages are in goods that depend on silicon chips. “With the more complex toys and electronics, we may have shortages,” he said. Yet if ever in the year retailers want to minimize disruption, this is it, said Aleksandar Tomic, associate dean for strategy, innovation and technology at Boston College. “Holidays kind of have a ‘hard deadline’ in the sense that a holiday gift delivered late simply will not do,” he said. “So, retailers are building safety stock. That gives them one less issue to manage come the shopping season.” But much is out of their control. Factories in some parts of Asia are still being shut down to stifle the virus. Some Americans are still stay-at-home employees, which changes their purchases. Meanwhile, front-line workers have been hard to find, making it harder and more costly to handle goods in warehouses or move them by truck. While Savannah isn’t the only port being overwhelmed with shipments, it is one of the few with room to expand. The port is already developing 145 acres to handle containers, and officials announced Sept. 28 that it is investing $34 million to add 230 acres more. But the expansion will take months, and, moreover, the imbalances in the supply chain are global. In the meantime, consumers will likely see the effects of the continued ebb and flow in trade, said Nada Sanders, professor of supply chain management at Northeastern University. “We are going to see rolling bottlenecks for a long time,” she said. “We are going to see shortages. We are going to see higher prices. And we are going to see less choice in product variety.”

Fed signals plans to start reversing some stimulus programs

WASHINGTON — Despite a still-menacing pandemic and a cascade of other domestic and international threats to the U.S. economy, Federal Reserve policymakers on Sept. 29 expressed confidence in the recovery and said they could soon start withdrawing stimulus programs supporting financial markets and the economy. Fed officials, however, were split in their thinking about when they would start raising interest rates, with about half predicting liftoff next year and the other half in 2023. The Fed’s decisions were broadly welcome in the business community, with stocks rising after days of losses. Nonetheless, Fed policies showed the limitations of the central bank’s weapons for attacking the economic problems of less affluent, less well-educated and less highly skilled Americans. And the sagging incomes and COVID-19-related job losses of that segment of the population remain a major drag on recovery. Low interest rates, supporting prices of stocks and bonds, and other staples of central bank monetary policy make it cheaper and easier for companies to expand their operations and for start-ups to try new ventures. That in turn can gradually open the way for new jobs and other opportunities, often for the well-educated and highly skilled segment of the population, much of which has largely avoided the economic damage inflicted by the pandemic. But monetary policy has proved to have only indirect and slow-acting effect on the less affluent segments of the population, including Black and Latino Americans whose unemployment rates are considerably higher. “We have famously broad and blunt tools,” said Jerome H. Powell, the Fed’s chairman, speaking at a virtual news conference Sept. 29. “I think eliminating inequality and racial discrimination and racial disparities and that kind of thing is really something that fiscal policy and other policies frankly — education policies and that kind of thing — are better at focusing on.” Fed officials, at the conclusion of their two-day meeting, kept their main interest rate near zero, where it has been since the pandemic hit the U.S. in March 2020. The Fed had been contemplating plans to start reversing its nontraditional stimulus program: large-scale government bond purchases meant to spur lending and investment. Some officials have wanted a faster withdrawal in response to higher inflation. On Sept. 29, the Fed said moderating those bond purchases “may soon be warranted,” which analysts interpreted as probably occurring later this fall. At the top of Fed officials’ concerns is the virulent Delta variant of the coronavirus, which appears to be slowly trending down in terms of new cases but has hit parts of the country very hard. Overall the variant has damped consumer sentiment and economic activity, including hiring. Adding to policymakers’ worries are uncertainties over the perennial Washington problem of the debt limit, which could lead to a U.S. government default by the end of October if the U.S. Treasury is unable to borrow more and can’t pay its bills. That’s never happened, and chances are that lawmakers won’t allow such a catastrophic event to occur now. But in the past, even taking it close to the wire has been costly to markets and the economy. Investors also have been anxious about how China will deal with the world’s most-indebted property developer, Evergrande, and the potential damage to global financial markets if it should default on repaying billions of dollars in loan debts. The private company’s travails have sparked protests in China and reflect Beijing’s decision to move away from an economic model based on growth through real estate development. In its place, Beijing has moved toward policies that would foster more productive and sustained growth in other areas of China’s economy. But the new strategy, partly reflecting its desire to be less reliant on U.S. and Western technologies, is certain to cause short-term pain and will likely slow China’s growth, which will be felt broadly as China is the world’s second-largest economy. Moreover, the U.S. economy is still struggling with supply bottlenecks and various hiring constraints, adding to inflationary pressures all as support from the massive COVID-19 federal relief program is ebbing. Fed officials, in their policy statement Sept. 29, focused on the Delta variant, saying: “Progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy, but risks to the economic outlook remain.” The Fed, like most private analysts, marked down economic growth for this year. It now expects gross domestic product to expand 5.9 percent this year, from 7 percent in its June projections. Its GDP growth forecast for 2022, however, was raised to 3.8 percent, compared with 3.3 percent earlier. The Fed also tempered the expected progress in lowering unemployment. It now sees the jobless rate at 4.8 percent at the end of the year, whereas its previous forecast was at 4.5 percent. The latest unemployment rate, for August, was 5.2 percent. Despite the array of challenges, the economy has some important things going for it. There were 10.9 million job openings at the end of July, by far the highest number recorded by the Labor Department. That suggests employers expect consumer demand to be strong, and although businesses are struggling to recruit workers — due to lack of childcare, COVID concerns and early retirements, among other factors — analysts expect most of the openings to be filled over time. Another plus for the economy is the enormous amount of savings accumulated by households over the last 18 months of the pandemic. Moody’s Analytics estimates excess savings at around $2.4 trillion as of the first quarter. Most of that is held by higher-income households, but the extra cushion has sustained many people without jobs and means there’s a large reservoir of cash available to support spending in the future, especially if consumers feel more comfortable going out and traveling.

Biden’s infrastructure plan stalls, leaving agenda in limbo

WASHINGTON — President Joe Biden’s sweeping economic agenda faces an uncertain future in Congress after he failed last week to unify his own party around a strategy to pass a bitterly contested infrastructure plan that’s one of his top priorities. Biden seeks the $550 billion investment in U.S. roads, railroads, bridges and other public works to fulfill a signature piece of the economic revival he promised in his 2020 campaign. And its passage would provide a much-needed victory after months of setbacks. But now, going home to face voters without enacting the president’s economic agenda has become an underlying fear for some congressional Democrats. After passing the Senate to fanfare in August, the bipartisan infrastructure bill hangs in the balance as Democrats quarrel over a $3.5 trillion tax-and-spending package that forms the heart of his economic agenda. A House vote on the public works bill was postponed again on Oct. 1, and Biden visited the Capitol to tell lawmakers to take their time: a disappointing message for centrists eager to boast about the legislation for the midterm elections. The roads-and-bridges plan has become a “legislative pawn, which is regrettable,” said Tom Daschle, a former Senate majority leader. “The thing that gives me some hope and optimism is there is a realization on the part of Democrats that this is essential. If we fail to do this, we might as well just go home.” The infrastructure package alone would do more for the nation’s roads and bridges, water and internet access than has been done since the New Deal, said D.J. Gribbin, who was President Donald Trump’s top aide on infrastructure issues. Biden himself has lashed together the fate of the infrastructure plan and the much larger social-spending and tax package. He’ll continue engaging with lawmakers over the weekend and plans to take his case to the American public, White House Press Secretary Jen Psaki said in a statement on Oct. 2. “I’m going to be going around the country this week making the case why this is so important,” Biden told reporters at the White House. “I think we will get it done with plenty of time for it to be part of changing the tax code for people next year.” The president’s public approval rating has eroded in recent weeks, after the coronavirus delta variant touched off a resurgence of the pandemic he’d declared all but defeated, the chaotic and deadly U.S. withdrawal from Afghanistan and the appearance of thousands of Haitian migrants on the Texas border. Just 43 percent of Americans approved of Biden’s performance in September, down 14 points from his high-water mark in April, according to Gallup. “Afghanistan is a loser for Biden. So is immigration,” said Frank Luntz, a pollster who typically works for Republicans. “We won’t know about COVID until this winter, but he has done everything humanly possible to get people vaccinated, so he will not be responsible if things go badly.” Celinda Lake, who runs Lake Research Partners and served as one of the leading pollsters for Biden’s 2020 campaign, said that voters are hearing too much about congressional procedure and too little about what Biden’s economic plans would do. “Americans feel like we are not getting anything done, and the biggest point people make is they want something done,” she said in an interview. “Honestly, all of this process talk, including the discussion of the amounts of money, is nonsensical to voters. It is amazing we are talking about the amount of money instead of what it buys.” Yet that’s a consequence of the thorny negotiations Biden’s had to navigate, which require finding a topline cost for the social spending plan that’s acceptable to two centrist Democrats in the Senate: Kyrsten Sinema of Arizona and Joe Manchin of West Virginia. House progressives say they won’t support the public works bill until Sinema and Manchin agree to pass the larger legislation — a collection of education and support programs for low- and middle-class families as well as new measures to fight climate change. On Oct. 1 at the Capitol, Biden told House Democrats that if he had the votes to pass the infrastructure plan now, he and Speaker Nancy Pelosi would do it and move on to the social-spending bill, according to a person familiar with his closed-door remarks. But they don’t, he said, so he sided with progressives who want to keep the two measures connected. “He is the president of the United States and he says that he wants to get this done. And he basically linked them together,” Rep. Henry Cuellar of Texas said afterward. In his talks with Manchin and Sinema, Biden said, the upper limit of the social-spending plan has ranged as high as $2.3 trillion over 10 years, or more than $1 trillion less than liberals desire, but enough, Biden insisted, to make a profound difference in Americans’ lives. Manchin told Senate Majority Leader Chuck Schumer in July that he wanted the measure limited to $1.5 trillion. Biden told Democrats on Oct. 1 that he’s spent 100 hours with Manchin and Sinema reviewing the two bills program-by-program. The machinations on Capitol Hill have made for a confusing week, with the prognosis for Biden’s agenda changing hour-by-hour. White House aides have tried to cast the maneuvering as the usual legislative process, though allies say that in private, they express anxiety about the president’s economic agenda failing. As Biden left the Capitol on Oct. 1 without any clear plan to finish either piece of legislation, he gave reporters a thumbs-up sign. “We’re going to get it done,” he said.

Fourth special session begins without budget, PFD fixes in sight

JUNEAU — The Alaska Legislature began its fourth special session on Oct. 4 with low expectations and little hope that legislators will be able to end their annual struggle over the Permanent Fund dividend. For the past six years, lawmakers have debated the size of payments from Alaska’s trust fund, turning the issue into an annual battle that has consumed legislative attention and repeatedly brought Alaska to the brink of a government shutdown. Gov. Mike Dunleavy convened this session, asking legislators to pass a constitutional amendment that would guarantee future dividends and pay them according to a new formula. “In the end, if there was ever a time to settle this issue, it’s now,” Dunleavy said. But that seems unlikely. “I don’t think the session is going to be very productive,” said Senate Minority Leader Tom Begich, D-Anchorage. It takes 27 votes in the House and 14 in the Senate to send a constitutional amendment to voters in the November 2022 election. Right now, legislators say there aren’t enough votes to pass the governor’s proposal or any of the alternative amendments proposed by legislators themselves. That’s because most of those amendments call for larger dividends and require additional money. Lawmakers could overspend from the Alaska Permanent Fund, breaking a limit installed in 2018. They could cut state services, freeing more revenue for the dividend. They could pass tax increases or install new taxes that generate additional revenue for the dividend. Senate President Peter Micciche, R-Soldotna, is among a group of legislators who has promoted an “all-in” idea that uses multiple options simultaneously. He frequently analogizes the situation to a machine with a variety of control levers, each representing a different option. When it comes to a constitutional amendment, he said, there isn’t a way to move the levers in such a way that gets 14 votes in the Senate. In the state House, Rep. Andy Josephson, D-Anchorage, said the “politics are nearly insurmountable.” A bipartisan, bicameral working group made some progress this summer. It agreed on what the state should expect for revenue and expenses in the next several years, what a proposed dividend would cost, and on the available options to pay for it. But because the House and Senate are divided about which options are best, no one idea has the needed votes. “I really don’t think anything is going to come out of this session because we’ve had a lot of this stuff with us here for the past seven months,” said Rep. Mike Cronk, R-Tok. Any constitutional amendment wouldn’t be put into place until after next year’s election, so the governor has proposed to increase this year’s dividend to what it would be under his proposal. If Dunleavy’s proposed formula were in place this year, it would result in a $2,350 dividend instead of the $1,114 Alaskans will receive starting this month. That increase would cost roughly $791 million. New taxes would take at least a year to implement, Department of Revenue officials have previously testified, and budget cuts would also take time to implement. That leaves overspending from the Permanent Fund. The earnings of the Alaska Permanent Fund are now the largest source of revenue for state services, accounting for roughly two-thirds of the state’s budget. Spending more from the fund today means less money invested and lower returns in the future, which has caused lawmakers to reject overspending. Dunleavy argues the fund gained a record $16 billion in value during the last fiscal year. He says larger dividends will aid the state’s economy, which is continuing to suffer from the COVID-19 pandemic. ”You never hear that when it comes to taking the PFD and cutting it severely out of the hands of children and elders, that has a detrimental effect, especially in the environment that we’re experiencing today, with supply chain disruptions, inflation, uncertainty, people whose hours were cut,” Dunleavy said. When it comes to the budget, he said legislators should see that holding a “no-overspend” position has political consequences. ”If they can’t see that, maybe to some extent, that’s at the root cause of the inability to come up with a decision,” Dunleavy said. Democratic legislators say Dunleavy’s reluctance to consider new revenue without a statewide vote is contributing to the problem. ”You know, then the Legislature would really love to have him engaged in robust conversation during this fourth special session,” said Rep. Ivy Spohnholz, D-Anchorage. Dunleavy said that if a revenue bill were included in a package of legislation to deal with the dividend issue, he will reserve judgment until he sees it. “I would take a look at the components within the framework of a full solution. And if there is a viable, coherent, sustainable long-term solution, I would take a look at that package very seriously. But again, it’s not sitting in front of me right now. So I need to see what that looks like,” he said. As an alternative to a constitutional amendment, lawmakers could pass a new law. Doing so would require 21 votes in the House and 11 in the Senate, but there’s no guarantee that future legislators would follow that new formula. In 2017, the Alaska Supreme Court ruled that the formula in place at the time — one used since the 1980s — was “subject to normal appropriation and veto budgetary processes.” In other words, the governor and Legislature could choose to follow it or not. A new formula in state law would face the same problems. “I can tell you, that a statute is not going to engender the confidence of Alaskans. They won’t buy it,” Dunleavy said. In the state Senate, lawmakers proposed a formula change at the end of the third special session. That bill proposed to gradually raise the dividend over several years, reaching Dunleavy’s preferred level if the state raises $700 million in additional revenue. That bill was debated but failed to pass the Senate before the end of the third special session. Micciche said that with adjustments, it could be a first step toward an eventual solution. “I think once people are comfortable with (the bill), then I think you have a higher probability of the level of support it would take for a constitutional amendment,” he said. “Right now, I don’t know if you have 11 votes to get the PFD under the constitution. Once people are comfortable with the new calculation, that becomes a lot more likely,” Micciche said.

Alaska-based startup plans for Asian, Lower 48 destinations

A new Alaska-based carrier that plans to provide daily passenger flights between Asia and the Lower 48 bought its first Boeing 757-200 jet on Sept. 30. The acquisition is a key step for Northern Pacific Airways as it begins to build its fleet, said chief executive Rob McKinney. The company plans to begin service next year from Anchorage, with year-round travel to destinations such as Tokyo, Seoul, Orlando and Los Angeles. “From Anchorage you could go to Tokyo for the weekend,” McKinney said. Northern Pacific plans to buy a dozen of the Boeing 757-200s, which can carry more than 200 passengers apiece, separated by a single aisle, McKinney said. The business plan is modeled after the success of air cargo service at the Ted Stevens Anchorage International Airport, he said. The airport has become the world’s fourth busiest for cargo, with Anchorage typically a stop for refueling and crew changes as jumbo jets hop between Asian cities and the Lower 48. “We plan to replicate that model with passengers,” McKinney said. It’s an ambitious plan for the startup company. Northern Pacific is a sister brand to Ravn Alaska that now provides service to rural Alaska on turboprop planes typically seating up to 37 passengers. The brands are owned by FLOAT Alaska. Leadership with FLOAT purchased the assets of RavnAir Group out of bankruptcy last year, launching Ravn Alaska. McKinney, a pilot with experience flying in Alaska, is also chief executive for both Ravn Alaska and FLOAT Alaska. Ravn Alaska has other future plans, including purchasing small hybrid-electric aircraft in the future. Northern Pacific recently announced that it had agreed to buy the first of six Boeing 757-200s. The jets were retired from service last year, after they flew for American Airlines, McKinney said. The first jet, after the sale closes on Sept. 30, will leave a storage yard in New Mexico next month, McKinney said. It will receive several weeks of “intensive” maintenance through Certified Aviation Services, a company in San Bernardino, California. The jet will then be painted and receive its Northern Pacific design, and arrive in Alaska in December. “We’ll keep the process going one after the other,” he said. Northern Pacific is working with a broker to buy the jets and engines, McKinney said. The price of the first two jets will run about $10 million apiece, on average, he said, and Northern Pacific is raising money from private sources to cover the costs of its business plan. “We have a reasonable target for capital expenditures and there’s a lot of talent out there,” he said. “We are bringing talent from all over the world that knows how to do this type of operation.” About 15 full-time workers have been hired so far to help get Northern Pacific started, he said. That brings the Ravn and Northern Pacific workforce to about 400. The number is expected to double once Northern Pacific is fully operating, he said. The company hopes to receive approval from the Federal Aviation Administration after conducting proving runs in the spring. It hopes to be by operating by September, McKinney said.

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