Pandemic startups: Two Alaska entrepreneurs take the leap

At a time when businesses across the state are forced to close their doors or are scaling back operations, it seems counterintuitive to launch a business. But is it? As our economy dives back into a recession caused by the combined global forces of COVID-19 and the low price of oil, new businesses are more important than ever. High rates of business closures leave gaps in the market for newcomers ready to fill them, and for those that find themselves suddenly unemployed and facing an uncertain future, launching a business may be a good option. Startups have long been an essential part of Alaska’s economy, responsible for 89 percent of net employment growth in the private sector. Over the last decade, startups in our state consistently added 4,000 to 6,000 jobs to the economy each year. Although experts caution that accessing traditional capital will be more difficult than ever, many founders can launch lean, test the market, and look for funding in the future when they’re ready to grow. And, with unemployment rates at an all time high, there’s no shortage of workers looking for new jobs. Nationally recognized startup accelerator Y Combinator is reporting 15 to 10 percent increase in applications for its summer program, which serves early stage entrepreneurs launching and growing their businesses. In Alaska, the opposite is true: economists are seeing rates of businesses hiring for the first time (most likely startups) declining by a third when comparing April 2019 to April 2020. Entrepreneurship comes in many flavors, but can be sorted into two primary categories: necessity and opportunity. To date, 85 percent of entrepreneurs in Alaska are “opportunity” entrepreneurs, which is about average compared to other states. However, economic downturns are associated with more necessity entrepreneurship, and rates of startups launched because of need may begin to increase. Entrepreneurship born of necessity Like many Alaskans, Seth Stetson was laid off from his job in March. Although returning to his position as director of Marketing and Business Development for Kaladi Brothers Coffee in Anchorage might be a possibility in the future, he didn’t want to wait to find out. Instead, Stetson launched Anchorage Grocery, a special order, bulk food delivery service. Customers place online or phone orders throughout the week, and Stetson delivers their groceries to their doorsteps every Friday. Anchorage Grocery is Stetson’s first business and is a direct result of the pandemic: he needed an income and a way to satisfy his creative drive. While watching consumer behavior change during quarantine, he determined that delivery is the future of grocery shopping. Along with bulk online ordering and delivery, Stetson provides packaging and sanitation services with each order. “I’m giving customers peace of mind by limiting the risk that their food is exposed to COVID-19 and other infectious diseases, bacteria and germs found in traditional public grocery stores,” Stetson said. Before launching, Stetson thought that starting a business took years of planning, saving capital and working with banks. After he was laid off, he decided he was just going to launch and figure it out. It took him 2½ weeks to create a Shopify website, set up an LLC, get an EIN number, open a Sysco account, figure out product margins, and populate the website. “It was really interesting to start a business this way, without having prior experience and doing it in such a short time period,” Stetson said. “I just keep moving forward and getting things done, picking off what I need to do next. And, I’m still adjusting to the fact that if I stop, the business stops. It’s just me keeping it going.” Stetson says he’s getting a lot of feedback from customers that want more Alaska Grown options, which he intends to explore in future. Currently his local partners include Arctic Harvest, Copper River Seafoods, Kaladi Brothers Coffee and Molly B’s Bingerz cookies. He also closely tracks website activity to discern customer interest. “Right now it’s all about the meat — ribeye, ground beef, seafood — along with rice, and some fruit and vegetables,” Stetson said. “These aren’t your grocery store quantities, this is stocking up: 15 pounds of ribeye, 50 pounds of rice. My customers want to fill their freezers and their pantries.” Entrepreneurship born of opportunity When Ross Johnston of Anchorage noted images of sourdough starter and bread flooding social media during quarantine — combined with a nationwide shortage of packaged yeast — he quickly launched a new venture: Ötzi Premium Sourdough Starter. Sourdough, made by the fermentation of a flour and water mixture using the flour’s naturally occurring yeast, is a lengthy process of “feeding” the starter with additional flour and water for hours or days before mixing in other ingredients and allowing several hours of rising time before baking. When store-bought yeast is unavailable for bread, sourdough provides a tasty alternative and has captivated home bakers’ attention in recent months. “I got really into sourdough sometime near the end of summer 2019, and toyed with the idea of selling starter at a Saturday market booth,” says Johnston. “But then I started thinking about how people pay more for unique and novel products, and how sourdough bakers are fascinated by the origin story of their yeast.” Hence Ötzi, named after a mummified man who lived between 3400 and 3100 BCE discovered in a glacier in the Ötzal Alps between Austria and Italy. Ötzi’s stomach contents included processed wheat brain, believed to possibly have been eaten in the form of bread. Johnston thinks the market is ripe for a premium product and likens sourdough to wine, with many varieties and prices points available. Hoping to tap into a customer segment attracted to a high-end product, his starter sells online for $24.99 on its own, or $49.99 for a kit that includes starter, water from glacial ice melt, and stone ground flour, along with instructions for upkeep and how to bake sourdough bread and pancakes. Johnston hopes his products will appeal to people in the Lower 48, hungry for a taste of Alaska’s wide open spaces, pristine wilderness and good bread. He’s already reached a few out-of-state customers and continues to refine his product based on their purchasing preferences and product feedback. Ötzi is one of Johnston’s many entrepreneurial endeavors. As he gauges whether or not the market opportunity he suspects exists is real, he’ll scale the company accordingly. “This specific type of business is fantastic for right now. People are finding time to engage in lengthier rituals like baking sourdough bread and seem to have a greater affinity for the creative process,” says Johnston. “But any time you launch a business, whether you’re in the midst of a global pandemic or not, it’s risky.” Both Johnston and Stetson are gambling that their risks will pay off. For Johnston, that means seeing an idea scale to outside markets. For Stetson, it’s being in control of his future and providing for his family. And for Alaska, it’s the beginning of an economic rebuilding, the glimmering hope of a prosperous future. You can watch Seth Stetson and Ross Johnston present more information about Anchorage Grocery and Ötzi on Wednesday, May 26, at 9 am via Zoom: https://alaska.zoom.us/j/92204612024. Gretchen Fauske is the associate director for the University of Alaska Center for Economic Development, Board President for Launch Alaska, Vice Chair for Anchorage Downtown Partnership, and a Gallup-certified CliftonStrengths coach.

GUEST COMMENTARY: Keep energy affordable during COVID recovery

In the wake of nearly 40 million jobless claims in recent weeks, Americans are clearly struggling to pay the bills. In fact, a new national poll found that nearly 50 percent of registered voters are increasingly worried about paying for household expenses, including electricity. This isn’t surprising given the havoc that the coronavirus pandemic has wreaked on the country. But it reinforces the fragility of the U.S. economy, and why careful decision-making will be needed to get the nation back on its feet. So, what to do when millions of Americans are hurting in a way not seen in generations? One step is to ensure that the basic necessities of life do not become unnecessarily more expensive. And that starts with families being able to pay for the electricity needed to keep their homes livable during lockdown this summer. A pandemic requires exactly this type of blunt, realistic thinking: “How do we make sure families can stay in their homes? How do we hold down costs and make sure budgets aren’t stretched beyond the breaking point?” It’s likely that we’re only in the early stages of the pandemic and recovery. But the financial toll to date suggests that we’re already facing several years of a potentially serious economic downturn. And so, common sense dictates that we start planning right now to ensure families can keep paying for basic expenses over the next few years. Here’s one approach that public officials should consider: Right now, we simply don’t have the luxury of tinkering with the nation’s power grid. In recent years, there’s been plenty of well-intentioned talk about emissions targets and renewable energy mandates. But lawmakers, utilities, and public service commissions will need to change how they think about energy for the foreseeable future. Their priority must shift toward ensuring that the American people still have access to affordable, reliable power. What will that mean? For starters, families can’t afford to see their electric bills start climbing simply because baseload power plants — like reliable coal plants that have kept their electricity bills steady and manageable — are pushed into premature retirement to meet arbitrary renewable energy targets. Yet that’s already happening across the nation, with utilities marking up their rates and raising consumer prices to cover the expense of building new energy infrastructure. Even before the current pandemic the U.S. Energy Information Administration warned that one-third of U.S. homes were facing challenges in paying for electricity. Does anyone doubt that this burden will now increase? Compassion for our fellow Americans means recognizing that literally millions of families can’t afford to have their electricity bills rise by even a few dollars a month. And they certainly can’t face power outages or brownouts during peak demand. Reliability and affordability have suddenly become more important than ever in the shadow of an epidemic that has turned the U.S. economy upside down. The nation must pursue an energy policy that ensures balanced, secure, and affordable electricity. Matthew Kandrach is the president of Consumer Action for a Strong Economy, a free-market oriented consumer advocacy organization.

Alaska businesses receive $1.2B in PPP loan with funds still available

There is still nearly $150 billion left in the federal government’s primary program to help small businesses through the worst of the COVID-19 pandemic. The Small Business Administration handled 4.4 million loan approvals totaling $511 billion nationwide through May 23 from the $660 billion Paycheck Protection Program, according to a summary report provided by the agency. Intense demand caused the initial $350 billion approved by Congress to jumpstart the program in the CARES Act to be exhausted in mid-April after being available for just two weeks as small businesses across the country applied for the financial relief. Congress subsequently approved another $310 billion in PPP loan funds April 24. Michael Huston, chief lending officer for Northrim Bank said the Anchorage-based lender has processed more than 2,400 PPP loan applications and continues to but demand has waned. “There is money available. Those applications have slowed significantly since the first few weeks of the program but we do stand ready to help businesses that need the assistance,” Huston said in an interview. Across Alaska, the SBA tallied 10,040 PPP loan approvals totaling just more than $1.2 billion before Memorial Day weekend, according to the report. The program is meant to provide small employers — primarily those with less than 500 workers, with some exceptions — payroll funding for up to eight weeks following the receipt of the loan. Sen. Dan Sullivan has stressed the desire in Congress to maintain the employer-employee relationship as much as possible through the worst of the pandemic-induced economic restrictions in multiple interviews and briefings following the passage of the CARES ACT and the PPP loans are meant to be a vehicle for that. Huston said there are very few “fine print” restrictions as to what small businesses — and 501(c)3 nonprofits and Tribal organizations as well — qualify for a loan. “For the most part it’s one-size-fits-all as long as you are an eligible business,” he said. Seasonal employers, who make up a major portion of Alaska’s economy, can now choose to use any 12-week period between May 1 and Sept. 15, 2019, to calculate their PPP loan amount instead of the prior limitation of Feb. 15 to June 30, according to updated SBA rules. The change is especially important for businesses that have peak activity in the summer, such as many tourism businesses in the state, as many do not have a full complement of staff early in the year but will still be hit hard by virus-related travel restrictions and consumer fears throughout the year. There are a few more hurdles to get the loan forgiven, such as using at least 75 percent of the money for payroll or other fixed costs, but generally businesses that were eligible for a loan should be eligible to have some portion of it forgiven, as Congress intended, Huston said. “Whether they’ll be able to get all of the amount forgiven is directly tied to how they used the funds,” he added. Employers can also have their total of forgiven funds reduced if they have fewer employees on June 30 than during their reference period used to tally the loan amount, but SBA rules indicate exceptions for laid off employees who did not accept rehire and other circumstances. Huston described the SBA’s 11-page PPP loan forgiveness application as being “a little bit like completing your 1040 tax return. They walk you through it and sure there’s going to be some questions that aren’t answered, but as the SBA and as the financial institutions are running into them on a consistent basis they’ll be able to get some answers to those FAQs that will help everybody else as they continue the process,” he said. He also noted ongoing discussions in Congress regarding extending the loan forgiveness period beyond eight weeks along with changes to the repayment terms and 75 percent payroll expense threshold. Currently, payments on unforgiven PPP loan amounts are deferred for six months and the loans have a maturity of two years with a 1 percent interest rate, according to the SBA. Elwood Brehmer can be reached at [email protected]

Alaska LNG Project gets major federal approval

Alaska has cleared the biggest regulatory hurdle to developing a long-sought North Slope natural gas pipeline project. The Federal Energy Regulatory Commission on Thursday issued a record of decision authorizing construction of the state’s plan for the many-billion-dollar Alaska LNG Project, concluding a three-year-plus environmental impact statement process. AGDC President Frank Richards called it a “momentous day for the project” and thanked FERC for largely sticking to its timeline for the EIS during a Thursday morning meeting of the AGDC board. AGDC submitted its application for the massive project to FERC in April 2017. “As anybody in the infrastructure development process knows, to go through the (National Environmental Policy Act) process in three years is an exceptionally fast time,” Richards said. Since the current iteration of the project began in 2013, the three major Slope producers and the state have spent more than $600 million to reach this point, with the state share about $240 million of that total. At its core, the project consists of a large North Slope gas treatment plant; an 807-mile buried natural gas pipeline from the Slope to the Kenai Peninsula; offtake points for state use, and a three-train liquefaction plant at Nikiski capable of producing up to 20 million metric tons of LNG per year for export to Asian markets. If developed, the project would generate upwards of 18,000 jobs during construction and roughly 1,000 new jobs during its 30-year operational life, according to AGDC and state Labor Department estimates. It would also provide natural gas to the Fairbanks area and other communities along the pipeline route that currently rely on fuel oil for heating and in some cases power generation. Gov. Mike Dunleavy and the members of Alaska’s congressional delegation commended AGDC for securing the construction permit in formal statements. Sen. Lisa Murkowski, who chairs the Senate Energy and Natural Resources Committee, called it a “capstone moment” for the project and said the FERC certificate and order are extremely valuable assets for the state. Sen. Dan Sullivan, who was Department of Natural Resources commissioner when the state, BP, ConocoPhillips and ExxonMobil began early-stage work on the project, said getting North Slope gas to world markets through the LNG export plan would benefit not only Alaska but also the entire country. “Producing more energy responsibly strengthens our economy, is good for the environment, and dramatically increases our country’s national security. I thank FERC for their diligence in completing this work, and thank all of the Alaskans who, throughout the years, have worked to move this project forward,” Sullivan said. The Alaska LNG Project is the latest attempt to commercialize the large volumes of North Slope natural gas. State and energy company officials have tried since the late 1970s to put together a plan to produce and sell the gas that is considered “stranded” based on the location lacking infrastructure to access global or even local markets. However, frequently changing market and political conditions and the tremendous expense of developing a North Slope gas project — the cost of the pipeline — have scuttled prior efforts. To that end, it’s also unclear at this point if the Alaska LNG Project is economically viable, especially at current low prices amid a global oversupply. While Alaska Gasline Development Corp. officials still have several other state and federal authorizations to secure, the favorable record of decision, or ROD, means confirming Alaska LNG’s economic viability is the next major task for the state-owned corporation. Dunleavy said an ongoing economic review of the project will go a long way toward determining where it goes from here. The governor has been sharply critical of the state leading the project through AGDC — a structure championed by former Gov. Bill Walker — but has followed the recommendation of the large North Slope producers and others who urged the administration to finish the permitting that was already well underway when Dunleavy took office in late 2018. Many observers and insiders view securing the FERC construction license as a way to de-risk the project for potential investors and developers. In April AGDC board approved a strategic plan calling for the state to find a new project sponsor by 2021 or put the project assets, such as its permits and engineering work, up for bid. According to Richards, Flour, an international engineering and construction firm, has completed an updated class 4 cost estimate for the project, which AGDC — with help from BP and ExxonMobil — is running through economic models. In 2016 AGDC pegged the project at about $43 billion including significant contingencies. Many industry experts believe the $43 billion estimate to be high given the rapid expansion and technological evolution of the LNG industry. A better picture of the project’s economic viability should be available in June, Richards said. Elwood Brehmer can be reached at [email protected]

Donlin owners hope to resume drilling soon

Update: Donlin Gold workers will begin returning to the project site May 22, accoridng to spokeswoman Kristina Woolston. Donlin with have "an aggressive and measured approach" to prevent the spread of COVID-19 that will include testing for the virus. About 120 people were working there before the camp was shut down in early April. The owners of the Donlin gold project hope to soon resume drilling work paused in response to the COVID-19 pandemic at the remote mine site and are starting to prepare an updated assessment of the project’s viability. NOVAGold Resources Inc. CEO Gregory Lang said Donlin Gold started its 2020 drilling campaign in February and worked through March before closing down the camp in early April to comply with state health recommendations and travel restrictions. Crews used three drilling rigs to complete six boreholes prior to April, according to Lang. NOVAGold is a 50 percent owner of Donlin Gold in Western Alaska along with mining industry giant Barrick Gold Corp. He said he believes Donlin’s ambitious drilling program — with 80 holes totaling approximately 22,000 meters — can still be completed this year but when it will resume is unclear. Company leaders are currently evaluating when workers can pick up where they left off, Lang said during NOVAGold’s annual shareholder meeting call on May 14 . “They will not return to site until it is safe to do so,” he stressed. Lang noted that Donlin donated its food supplies to food banks and shelters in area villages when the camp was closed. Donlin Gold secured several state permits and land-use approvals for an access road, fiber optic cable and other facilities in January. The company is also continuing a multi-year program started last year for the project’s key dam safety permit from the Department of Natural Resources, which is one of the last major approvals on Donlin’s list. The drilling work, along with engineering and geologic refinements in the project will be added to an updated feasibility study, according to Lang. “A lot of inputs have gone down since the last study, not very many have gone up,” NOVAGold chairman Tom Kaplan said. Kaplan said he does not believe the COVID-19 pandemic has pushed gold to more than $1,700 per ounce in recent days, noting it was at roughly $1,600 before the global crisis began. “It’s accelerating trends which were already in place,” he said. The price of gold is likely to double or triple from where it is currently, Kaplan contends. He said there is no defined price that will trigger development of Donlin. “When Barrick’s ready to move forward, we’ll be ready to move forward,” Kaplan said. Donlin Gold last performed a comprehensive analysis of its massive project in 2011 when it was concluded the complex undertaking would cost $6.7 billion to complete. As proposed, the open-pit mine in the upper Kuskokwim River drainage would be one of the world’s largest, producing more than 33 million ounces of gold over an initial 27-year life. A 315-mile natural gas pipeline from the west side of Cook Inlet would fuel a power plant at the mine and fuel storage tanks would be built at Dutch Harbor, in addition to the very large-scale operation at the mine site. Lang said with 39 million ounces of measured and indicated resources Donlin is roughly five times larger than the average large-scale development-stage gold mines worldwide. The deposit’s average grade of 2.25 grams per ton is also more than double the industry average, which continues to decline, he added. Additionally, the 39 million-ounce resource is contained to roughly three kilometers of an eight-kilometer mineralized trend, NOVAGold leaders highlighted. “It’s clear how hard it is to find a resource comparable to what we have at Donlin,” Lang said. The deposit is on a parcel owned by The Kuskowkim Corp., a Native village corporation and the mineral rights are held by the regional Native corporation Calista Corp, both of which have been strong supporters of the project, although some local village organizations and Tribal governments have become more vocal in their opposition to the mine in recent years. Opponents contend a mine the size of Donlin adjacent to the Kuskokwim poses an unacceptable risk to the river’s fishery, particularly the salmon runs that are widely depended upon for subsistence harvests. A group of 13 village and Tribal leaders from the area sent a letter to NOVAGold and Barrick executives May 13 noting the Association of Village Council Presidents formally opposed the project last year and they did not reach the decision lightly. “We are of course open to responsible resource development in our region when applicants can demonstrate through science that our waters and lands will not be threatened, the Donlin project has failed to meet this bar and thus it is our responsibility to future generations to say no to this risky project,” the letter states. Donlin and NOVAGold leaders often tout the support they have from The Kuskokwim Corp. and Calista for developing the project. The mining companies have partnered with the Native corporations on workforce development and scholarship programs among other things. Elwood Brehmer can be reached at [email protected]

Movers and Shakers for May 24

Steve Rieger was appointed to the Alaska Permanent Fund Corp. Board of Trustees. Rieger, a former Alaska State Legislator, fills the vacancy left by the passing of Carl Brady. Rieger grew up in Palmer and received his bachelor’s degree in economics from Harvard College, and his MBA from the Harvard Graduate School of Business Administration. He later returned to Alaska, competed in the 1983 Iditarod Sled Dog Race, and was elected to the Alaska State House of Representatives in 1984, where he served six years. In 1992, Rieger was elected to the Alaska State Senate, where he served four years. From 2009 to 2013 he served as trustee of the Alaska Permanent Fund Corp., and currently serves on the Alaska Community Foundation Investment Committee, and as chairman of the Municipality of Anchorage Salaries and Emoluments Commission. Sheila Lomboy was promoted to Lending Unit team leader at the First National Bank Alaska U-Med Branch. With more than a decade of local experience in commercial lending, Lomboy specializes in Small Business Administration 504 loans, Bureau of Indian Affairs Guaranty Loans, and meeting the financial needs of Alaska Native entities and nonprofit organizations. Lomboy’s expertise in the medical industry will be a great asset in her new role at the U-Med Branch located in the heart of Anchorage’s medical community. Five Alaska business leaders will join the Alaska Business Hall of Fame at the annual Junior Achievement recognition event in January 2021. Business peers recently selected Dave Allen, president and CEO of Allen Marine Tours and Alaska Dream Cruises; Randy and Chanda Mines, owners of Bagoy’s Florist &Home; Rich Owens, owner of Jewel Lake Tastee Freez; and Rex A. Rock, Sr., president and CEO of Arctic Slope Regional Corp. These business leaders are honored for their direct impact toward furthering the success of Alaska business, demonstrated support and commitment to Junior Achievement’s programs, and demonstrated commitment to Alaska business. The induction ceremony into the Alaska Business Hall of Fame will be held Jan. 21, 2021 at the Dena’ina Civic and Convention Center.

New analysis of Livengood underway with improving markets

The Livengood gold project has renewed life amid rock-bottom oil prices and vastly improved expectations for gold. Marcelo Kim, chairman of Vancouver-based International Tower Hill Mines Ltd., which owns the Interior Alaska prospect, stressed that company leaders and many outside analysts believe the economic stimulus efforts being employed by governments worldwide to mitigate the impact of the COVID-19 pandemic will bring about a resurgence in gold markets. The Federal Reserve’s recent moves to cut interest rates in combination with widespread credit backstops and the loosening of banking requirements all add up to a very favorable outlook for gold producers and sellers, according to Kim. Kim said in a May 12 conference call that expectations for rising inflation following the federal stimulus package of the Great Recession in 2009 largely didn’t materialize because banks didn’t expand their credit offerings following the financial crisis. This time, however, much of the $2.2 trillion Congress approved under the CARES Act is intended to be quickly spent on businesses and individuals instead of keeping banks afloat. “We believe that these are signs that we are in the early innings of a new market for gold,” Kim said. He cited a late April report from Bank of America analysts that forecasts gold prices will rise to upwards of $3,000 per ounce over the next 18 months. Gold is currently trading for about $1,700 per ounce following a steady climb in price that started last year and hasn’t stopped. Gold prices peaked in late 2011 at nearly $1,900 per ounce but spent much of the intervening years fluctuating between $1,100 and $1,300 per ounce before starting to climb again last year. International Tower Hill Mines is sanctioning an updated pre-feasibility study that will build off of a similar study published in late 2016 and incorporate the metallurgical and optimized engineering work done since then, according to Kim. The junior mining firm, which holds 100 percent of Livengood, downsized its operational plans by nearly half following the 2016 study. That work concluded that a mine capable of milling 52,000 tons of ore per day over a 23-year life would cost approximately $1.8 billion to develop and have significantly reduced operating costs versus the company’s original plan from 2013 for a $2.8 billion, 14-year mine processing about 100,000 tons per day. The current mine plan calls for producing 6.8 million ounces over the 23-year mine life with an all-in cost of $1,247 per ounce. The Livengood prospect holds nearly 9 million ounces of proven and probable gold reserves at a market price of $1,250 per ounce and approximately 11.5 million ounces of measured and indicated resources, according to International Tower Hill. Kim said he expects much of the gold resources to become reserves as prices rise. As proposed, Livengood would be a conventional, open-pit mine near the Dalton Highway about 70 miles north of Fairbanks. International Tower Hill expects the mine will generate about 1,000 jobs during construction and 350 long-term jobs during operation if it is developed as currently planned. CEO Karl Hanneman said drilling has shown significant resource potential immediately beneath the pit deposit as well as elsewhere on the property. Historical placer deposits to the northeast of the pit resource reflect the need for additional drilling as well, Hanneman said. “Over the last several years, we have quietly remained laser-focused on improving our geological and metallurgical understanding of the Livengood gold deposit,” he said. That work will be incorporated into the new pre-feasibility study and a timeline for that work should be available in the coming weeks, according to Hanneman. ITH director Stephen Lang said during the call that Livengood is a deposit requiring an average of 140 tons of ore to recover an ounce of gold, which is a good “strip ratio” for a mine of its size. “The mine and the mill are both large enough to give a considerable economy of scale but not in the very, very large range, which adds quite a bit of complexity in the operations and scheduling,” Lang said. The relatively low mining requirement helps relieve cost pressures on the project and is “particularly helpful in offsetting any long-term oil price increases,” Lang added. While being on the road system limits some of the development and logistics costs incurred by more remote mines in Alaska, Livengood and other mines in the state are susceptible to changes in oil prices because diesel is used to power mine operations. Elwood Brehmer can be reached at [email protected]

FISH FACTOR: Efforts at seafood industry relief continue in Congress

Giving COVID relief funds to the seafood industry and stepping on the gas for offshore fish farming are two big takeaways from the executive orders and congressional packages coming out of the nation’s capital. Recent news that Alaska would receive $50 million from the $300 million fisheries relief funds in the Coronavirus Aid, Relief, and Economic Security Act was well received by industry stakeholders and it’s likely to be followed by more. A May 15 hearing titled “COVID 19 impacts to American Fisheries and the Seafood Supply Chain” was scheduled by the U.S. House Natural Resources Committee to focus on the lack of assistance for harvesters and processors. A bipartisan group of 49 House members also has pushed for at least $2 billion for the U.S. Department of Agriculture to purchase domestically caught and processed seafood and to distribute it through food assistance programs, as the agency does for agricultural products. Likewise, a group of 25 Senators is trying to get an additional $3 billion for the seafood industry from the next relief package. A new bill called the Health and Economic Recovery Omnibus Emergency Solutions Act would add another $3 trillion to overall relief assistance. While it builds on the CARES Act, critics claim it does little for the seafood industry except to give NOAA another $100 million to aid fishery participants. Undercurrent News reported that President Trump called the HEROES bill “dead on arrival” saying it contains too many unrelated priorities, such as expanding access to mail-in ballots. Somewhat lost in the particulars about relief payouts is the federal government’s renewed push and strict guidelines for expanding U.S. aquaculture. The May 7 executive order by Trump that cut loose the first batch of fishing funds also calls for an update to the 2017 National Aquaculture Development Plan in order to “strengthen domestic aquaculture production and improve the efficiency and predictability of permitting.” It states that “more than 85 percent of the seafood eaten in the U.S. is imported” and outlines rigorous ways and timelines to turn that around. It also designates the National Oceanic and Atmospheric Administration as the lead agency for aquaculture projects from three to 200 miles offshore. Among other things, the order calls for a “guidance document” within eight months that describes regulatory requirements for aquaculture operations and identifies grant programs. It also removes barriers to permitting and calls for a proposed U.S. Army Corps of Engineers “nationwide permit authorizing finfish aquaculture activities” within 90 days. Within one year, federal agencies, fishery management councils and states are required to identify at least two “Aquaculture Opportunity Areas” suitable for commercial operations. And within two years of identifying those areas, agencies must complete an environmental impact statement, and come up with two additional opportunities to be developed in the following four years. Finally, Trump’s order calls for the establishment of a new Seafood Trade Task Force that will, within 30 days, create a new agency to promote American seafood internationally, resolve technical barriers to U.S. seafood exports, and support fair market access for US products. (Suggestion: start with the seafood trade imbalance with Russia. Russia has not purchased a single pound of U.S. seafood since 2014, yet the value of Russian imports to the U.S. has grown 70 percent since 2014. The amount has tripled to nearly $670 million since 2016.) Tim Bristol, director of SalmonState, agreed with the need to maximize the value of our country’s seafood industry, but called Trump’s order “the wrong approach.” “It ignores the fact that America already has healthy wild fisheries generating billions of dollars in revenue and providing hundreds of thousands of jobs. We should be investing our resources in what we already have and better maximizing the value of our fisheries to American communities rather than displacing hard-working fishing families with open-water feedlots and fooling ourselves into believing that farmed fish will solve all of our problems,” he said in a statement. Fish farming is banned in Alaska although growing shellfish and seaweeds is permitted. At a U.S. Department of Commerce hearing in 2018, Sam Rabung, director of the Alaska Department of Fish and Game’s commercial fisheries division, said: “I think it’s safe to say that we’re going to fight pretty hard to maintain the state’s opt-out option and maintain the ability to prohibit finfish farming off of Alaska.” Copper River salmon slump It was slow going for the May 15 fishery at Copper River, which marks the official start of Alaska’s salmon season. Just more than 3,000 fish crossed the docks (1,491 sockeyes; 1,646 Chinook) by 337 deliveries in a 12 hour opener. Prices tanked for the famous “first fish” that usually fetch the highest prices of the year. Fishermen reported a base of $3 per pound for sockeye salmon and $6 per pound or slightly more for kings, for starters. That compares to record prices in 2019 of $10 for sockeyes and $14 for kings, respectively. Instead of the usual diners at high-end restaurants getting the first tastes, front line workers at Seattle’s Swedish Hospital were the first to be treated to the prized fish the day after the fishery. A partnership of Seattle chef Tom Douglas, Alaska Airlines, Trident Seafoods, Ocean Beauty Seafoods and the Copper River Marketing Association provided 200 salmon meals to the nurses, doctors, and other medical professionals, reported SeafoodNews.com. On May 17, the same group organized a Grilling for Goodwill event in Ballard, featuring a special $45 Copper River salmon meal for pick up with 100 percent of the proceeds donated to Food Lifeline. Letter to the fleets As thousands of boats head to the salmon grounds, everyone knows it’s not business as usual. United Fishermen of Alaska has penned a letter to the fleets with a concise list of the new rules in place during the COVID plague. Above all, you must know what is required of you and have a plan to implement the protocols, wrote UFA president Matt Alward of Homer, adding: “As a vessel operator, you are responsible for your crew’s compliance with the mandate.” “We also need to understand if there’s any local rules in the communities that we’re fishing in, and on top of that, if some of the boat yards or harbors or even the supply stores and whatnot have their own rules that we should follow,” Alward said in a phone interview. “If your crew’s coming from out of state, it’s important to have already figured out how and where you’re going to quarantine and how you’re going to get food and supplies without breaking quarantine. The quarantine part for those coming from out of state I think is by far the most important thing to really protect our communities and ourselves from bringing the virus in.” What about those who refuse to wear masks? Alward said contracts with his crew require that they follow all mandates and not doing so is grounds for termination. “They don’t have troopers running around making sure everyone’s following this. It’s really upon ourselves to self-regulate,” he said. “If someone sees crew members from another boat running around town without masks and violating the rules, it’s going to get the whole industry in trouble with the community. Fishing is a privilege, not a right, and we have to respect the community we fish in. The hope is everyone will comply.” Find the UFA letter and get COVID fishing updates at www.ufafish.org. Laine Welch lives in Kodiak. Visit www.alaskafishradio.com or contact [email protected] for information.

Copper River closes for a week after poor sockeye showing

It’s been a very rough start to what was already a harried season for Copper River salmon fishermen. Alaska Department of Fish and Game managers announced the Copper River District will be closed for commercial fishing during the regular 12-hour period scheduled for May 21 due to very low initial sockeye catches indicating a lack of fish. Early indications for the May 18 opener show fishermen harvested 1,698 chinook, which Area Management Biologist Jeremy Botz described as “low,” but just 4,550 sockeye, which Botz called “dramatically low.” Subsistence gillnetting will remain open during the commercial closure, but waters inside the expanded Chinook closure area will be closed to all harvest. Botz said that while it has been a late and cold spring and weather deterred some fishing May 18, department officials expected a harvest of more than 28,000 sockeye based for that day based on the overall forecasted run. The total harvest from the first two 12-hour openers was 3,250 chinook, 6,023 sockeye and a handful of chum. Botz said May 19 that the sonar at Miles Lake used to enumerate Copper River sockeye had just been installed and was up and running. Managers expect fishing to resume May 25 with the time and area being announced May 22, according to the closure announcement. ADFG biologists initially forecasted a smaller Copper River sockeye run of 1.5 million fish this year compared to a 10-year average of 2.1 million wild fish. The Gulkana Hatchery supports a small portion of the annual Copper River sockeye run. The department’s official forecast estimated a commercial sockeye harvest of 771,000 fish versus a harvest of 1.2 million sockeye last year. The Copper River chinook return and harvest was initially expected to be strong with a total run of 60,000 fish and an all-fishery harvest of up to 36,000 fish possible. The early harvest figures this year are reminiscent of 2018 when the sockeye harvest averaged just 8,660 fish over the first three periods. Subsequent fishing closures limited the commercial catch to 44,400 fish in 2018; however they allowed the run to surpass minimum escapement goals with 701,577 sockeye counted at Miles Lake that year. Adding to the challenge for fishermen are lower prices for the salmon they do catch, a direct result of the restaurant closures largely in the Seattle area imposed to limit the spread of COVID-19. Botz said ground prices for the first period May 14 was $3.25 per pound for sockeye and $6.25 per pound for chinook. In recent years the price for famed Copper River chinook has been significantly higher; Botz noted it was around $10 per pound last year and the ex-vessel price averaged nearly $13 per pound in 2018. Botz said there is speculation that an improving retail market could boost prices for subsequent periods. Pike Place Fish Market in Seattle was advertising Copper River king salmon for $74.99 per pound at the time of this writing. Copper River sockeye was selling for $49.99 per pound at the renowned market. On May 20, 10th and M Seafoods in Anchorage had no kings for sale but was selling sockeye for $30.95 per pound. Botz and Cordova District Fishermen United Executive Director Chelsea Haisman both said participation in the fishery was down slightly from previous years but not much. Botz estimated it was 85 percent of normal and Haisman surmised about 70 fewer boats than last year participated in the first openers based on delivery totals. There were 372 deliveries made May 14 and 412 made May 18. Haisman said logistics complications delayed some fishermen from fishing and others have been slow to participate because of the cool spring. She said there is still some ice flowing downriver from Miles Lake. “Our hope is that it’s just early and time will tell,” she said. ^ Elwood Brehmer can be reached at [email protected]

GUEST COMMENTARY: A stable economic future follows the Ambler Road

As COVID-19 continues to create global economic hardship, it is reassuring to see steady progress on a project offering immediate and long-term benefits to Alaska’s economy. The Ambler Mining District Industrial Access Project, or Ambler road, would help bring jobs and new revenues for the Northwest Arctic Borough and the State by lowering the cost to explore, build and operate future mines in the area. We have known of the Ambler district’s vast copper and base metal deposits since the 1950s. Congress recognized the value of developing them, including specific guarantees in the 1980 Alaska National Interest Lands Conservation Act, or ANILCA, for a road to link them with the Dalton Highway. In 2009, state transportation planners identified an initial route, and in 2013 the Alaska Industrial Development and Export Authority took over as project lead, hoping to replicate its success with the DeLong Mountain Transportation System, which provides access to Northwest Alaska’s Red Dog mine. One of the world’s largest zinc mines, Red Dog has contributed significant revenues to the Northwest Arctic Borough and NANA Regional Corp., and provided family-wage jobs and other opportunities to rural Alaskans since 1989. The Ambler Road proposal is for a 211-mile gravel industrial road branching west from the Dalton Highway near Prospect Creek, crossing state, federal, and Native corporation land, ending in the Ambler Mining District. Access would be restricted to industrial and commercial uses. While it would be closed to the general public, the road would allow deliveries of commercial goods to local communities and access for emergency responders. Since first submitting applications in 2015, AIDEA has progressed this project through the extensive federal environmental review and permitting process. Over the past five years, federal agencies developed economic and environmental analyses, evaluated alternatives, and solicited and incorporated extensive public input. The draft environmental impact statement, or DEIS, was published Aug. 23, 2019, the final EIS on March 27, and the final record of decision is due in mid-May. These studies clearly describe the project’s benefit to Alaska’s economy: 365 jobs and from $280 million to $380 million in road construction spending, plus 80 year-round road maintenance jobs. Development of the Ambler district’s four major deposits would bring 2,777 direct jobs carrying a $286 million annual payroll, plus 2,034 indirect jobs carrying $108 million in payroll. AIDEA would finance road construction and maintenance by issuing bonds, earning back between $988 million and $1.1 billion – a positive return on investment for Alaskans. The Ambler Road would greatly improve the possibility of developing known deposits of copper and other minerals in the Arctic and Bornite prospects and would support exploration for and discovery of new deposits. Deposits in the Ambler District hold key strategic minerals that are increasingly important to Alaska and the nation. Without the Ambler road, those minerals would remain stranded in the ground. Like most Alaska development projects, the road inspires different opinions. Opponents claim a road would decimate caribou; that mines would poison water; that access would destroy Native culture; or that progress would drive out wilderness. Supporters note building roads brings jobs and a lower cost of living that benefits all area residents; mines could offer steady jobs and paychecks that compliment subsistence activities and allow local residents to stay in their communities; caribou thrive near existing construction and industrial projects; and millions of acres of nearby wilderness will remain untouched. AIDEA has carefully followed the process and requirements laid out in ANILCA, the National Environmental Policy Act, the Clean Water Act, and other applicable federal laws. On the state side, the Alaska Department of Natural Resources’ Office of Project Management and Permitting has closely coordinated with federal and state agencies and other authorities to ensure the process meets legal, procedural and practical standards and milestones. Following completion of the federal process, DNR will work with other state agencies to evaluate the proposed Ambler road under Alaska’s robust regulatory programs. Through this process, we will again hear from Alaskans as the agencies work to balance the possible impacts and benefits of the project. Advancing the Ambler road project would fulfil both the state’s constitutional responsibility to develop Alaska’s economy, and AIDEA’s mission to promote, develop and advance economic growth and diversification in the state by providing financing and investment options. I encourage all Alaskans interested in economic growth and diversification for our state to join me in supporting the continued progress on this important development project. Corri A. Feige is Commissioner of the Alaska Department of Natural Resources

New deal for idled North Slope oil project in the works

A cash-starved North Slope oil project could again have new owners with hopes of resuming production later this year. Majid Jourabchi, CEO of Houston-based Thyssen Petroleum, said May 20 that he is part of a team attempting to buy majority ownership in the long-delayed Mustang oil project from investors in Caracol Petroleum, the primary owner. Alpha Energy, through its subsidiary Caracol, has failed to make good on payment commitments to the Alaska Industrial Development and Export Authority for months. Singapore-based Alpha most recently missed an April 15 deadline to put a $60 million investment into Mustang, according to AIDEA spokesman Karsten Rodvik. The cash infusion into the project was part of a loan agreement the AIDEA board approved changes to in January after Caracol missed its first two quarterly loan payments starting last year. The loan was a modification of AIDEA’s $70 million total investment made in two tranches in 2012 and 2014 in the holding companies set up for the Mustang project’s infrastructure development. Rodvik wrote via email that the current volatility of oil markets has caused additional challenges for the project and the authority is reviewing its alternatives as a creditor to Mustang. The AIDEA board of directors discussed the project in an executive session during its May 20 meeting. Anchorage-based Brooks Range Petroleum — jointly owned by Thyssen and Caracol — operates the project. The current ownership group is the latest in a series of convoluted structures since oil prices first fell in 2014 and funding for the project became scarce. Brooks Range briefly started production from the small field in early November through temporary modular facilities after years of delays brought on by collapsed oil prices and other financing challenges. Alaska Oil and Gas Conservation Commission records show Brooks Range produced an average of 478 barrels of oil over 23 days from the well in November. However, production has been shut in since. The Mustang project is adjacent to the southern portion of ConocoPhillips’ large Kuparuk River field and also near the Nanushuk 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. Jourabchi, who said he is a shareholder in Alpha and is on the investment firm’s board of directors, said his group has plans to resume work at Mustang in the coming months and restart production late in the year if they are able to buy the project from Caracol and oil prices continue to recover. He declined to provide more information on the situation, saying it could compromise the negotiations. “We’re trying to bring ownership back to the North Slope,” he said. Alaska North Slope crude is selling for about $30 per barrel and prices are generally starting to recover following the market shocks of the COVID-19 pandemic and the Saudi-Russia price war. Representatives for Alpha and Caracol could not be reached. Elwood Brehmer can be reached at [email protected]

OPINION: Dunleavy rewarded for faith in Alaskans

Across the country from Huntington Beach to the Jersey Shore, protests against lockdowns, civil disobedience and court cases striking down governors’ orders are spreading. Here in Alaska all has been relatively calm other than a single drive-through rally in Anchorage on April 22 targeting Mayor Ethan Berkowitz. Now, as the state stands ready for nearly a full reopening on the eve of Memorial Day weekend, Gov. Mike Dunleavy deserves tremendous praise for his leadership style throughout this 100-year pandemic event that has and will continue to wreak long-lasting damage on the state economy. While there has been much fawning (often deservedly) over Chief Medical Officer Dr. Anne Zink’s performance, there has been relatively little credit paid to Dunleavy’s steady and optimistic tone since the very beginning. Dunleavy incessantly repeated his trust in Alaskans to do what was being asked of them from social distancing to accepting the need to shutter most businesses temporarily as health care capacity and testing were ramped up. He emphatically and consistently resisted every question or call to use tools such as state inspectors or State Troopers to patrol businesses or the highways to enforce his mandates. Unlike many governors and health officials around the country, he also refused to move the goalposts of what the closures were intended to achieve: lowering the rate of cases and having health care capacity in place to handle any increase. Dunleavy’s faith in Alaskans turned out to be well-founded. The state leads the nation in any metric you can choose from deaths (even inflated as they are by out-of-state numbers and questionable accounting) to cases to hospitalizations to testing per capita. On May 18, more than three weeks after Dunleavy first gave the go-ahead for limited openings on April 24, there were more than 630 tests reported with zero positive results and only a few dozen active cases. In the state’s largest city of nearly 300,000 people, where Berkowitz has acted reluctantly in following Dunleavy’s lead, there were just 22 active cases as of May 19 and barely more than couple hundred cases in total. Those of us who live in Anchorage, whether average citizens or small business owners, owe a great deal of thanks to Dunleavy for getting the state moving far ahead of Berkowitz’s “hunker down” order that he gave every indication of keeping in place until at least May 5. Although Berkowitz repeatedly claimed his orders would be driven by data and not dates, his reopening plan released April 20 had crippling and arbitrary timelines of 14 and 42 days for the first two phases that crushed the hopes of owners who’d been following the shrinking case numbers closely and waiting for any indication from the mayor there was a light at the end of this tunnel that wasn’t an oncoming train. Instead, it has been Dunleavy and his administration that are using data and not dates to open as much as possible as quickly as possible always guided by the principle that we are a free state in a free country ruled above all by personal responsibility. Dunleavy understands that governments derive their power from the consent of the people, and by treating Alaskans with respect and confidence he received the buy-in that other leaders in places like Michigan, New York, California and New Jersey have squandered through excessive restrictions, outright contempt for citizens and the use of police power to enforce their orders. Describing Dunleavy’s less than two years in office as tumultuous is an all-time understatement. Apart from self-inflicted wounds, he has also had to face earthquakes, devastating wildfires and now a pandemic that has driven down oil prices and production, crushed fishing markets and all but eliminated the 2020 tourism season. Tens of thousands are still on unemployment and monumental budget challenges loom that will continue to test his leadership. Leaders accept blame and share credit, so don’t expect Dunleavy to start patting himself on the back. But as we enjoy a three-day weekend that honors those who have given all for this nation among our family and friends whether in the backyard, in the beautiful Alaska outdoors or at our favorite local watering hole, don’t forget how we got to a point that is the envy of most states. We have a governor who didn’t just say we were in this together. He believed it. Andrew Jensen can be reached at [email protected]

State seeks new sponsor for AK LNG, or it will sell off the assets

The state corporation that has been leading the proposed multibillion-dollar Alaska North Slope natural gas project since late 2016 wants someone else to take over the development effort. The corporation’s plan assumes that an economic analysis currently underway determines the project is economically viable. If no one steps up to take over from the state, which has been paying just about all the bills the past four years, the Alaska Gasline Development Corp. board of directors appears ready to sell off the project’s assets — which could include permits, studies and engineering work — in a formal bidding procedure. The first step in the unfolding process is an update to the 3-year-old $43 billion cost estimate for the Alaska LNG project that would transport North Slope gas through more than 800 miles of pipeline to a liquefaction plant and marine terminal in Nikiski. Fluor, a 108-year-old global engineering and construction company, is under contract to AGDC to prepare the update. The state corporation expects to receive Fluor’s numbers later this month and, after review by its own team, will present them at its June board meeting. Fluor, based in Texas, is experienced in LNG plant construction. It’s part of a joint venture that was awarded the engineering, fabrication and construction contract for the $30 billion Shell-led LNG Canada project under construction in Kitimat, British Columbia, about 100 miles southeast of Alaska’s southern border with Canada. The AGDC board on April 9 approved a resolution adopting a strategic plan to direct state involvement in the Alaska LNG project through June 2021. The document itself is confidential, but the board reviewed in public session the underlying assumptions of the plan. • The updated cost estimate is complete by June. AGDC has been working — with help the past year from BP and ExxonMobil — to reduce construction costs in hopes of making the project economically viable, and has talked up Fluor’s upcoming estimate as potentially validating its work. Project construction and operation costs, and the price of gas going into the liquefaction plant, are the biggest drivers of the final sales price for the LNG. • The next assumption is that the cost update and economic analysis show the project “has a potential to deliver LNG to markets at a competitive price.” The state has been looking to Asia as the best market for Alaska gas. Though current spot-market and long-term contract prices in an oversupplied Asian market are far below break-even costs for an Alaska LNG venture, they could increase later this decade if demand returns to a strong growth rate. But competition from other suppliers will be intense. • The plan assumes that whichever partner(s) step forward to take over as lead sponsor will “recommend moving forward with further development of the Alaska LNG project.” • The Federal Energy Regulatory Commission stays on schedule and approves the Alaska project. The commission issued its final environment impact statement in March and is due to vote in early June on AGDC’s application to construct the gas treatment plant at Prudhoe Bay, the pipeline, LNG plant and marine terminal. FERC does not consider a project’s economic viability — only its environmental impact and safety issues. The assumptions that went into the strategic plan also included a timeline for the state to get out as lead sponsor of the project. That included: • AGDC will continue looking for partners, and a transition to a new project sponsor will be underway by Jan. 1, 2021, as the AGDC board of directors “does not support” the state continuing as the sole project sponsor past Dec. 31, 2020. • The board, working with the Legislature and the administration of Gov. Mike Dunleavy, “will define an acceptable role, if any,” for the state in the project. • If “there is not sufficient interest from strategic parties” to lead the development effort, AGDC will publicly solicit interest from others to take over the project. • And if that doesn’t attract a new leader for the project, “AGDC will put the Alaska LNG project assets up for sale” in a formal bidding process, according to the staff presentation at the April 9 board meeting. The corporation has the authority under state law to sell the project assets. The approximately 600 acres for the LNG terminal in Nikiski, however, is not owned by AGDC. ExxonMobil, BP and ConocoPhillips bought the privately owned parcels several years ago — when the companies were leading the effort — and the state never reached a deal to take control of the property. After the three major North Slope oil and gas producers declined in late 2016 to spend more money on the Alaska LNG project, AGDC took over as lead, funding the application process and environmental review at FERC. The producers cited economic reasons in their decision to opt out of the development effort. In the past decade, the Alaska Legislature has appropriated almost $480 million toward the LNG project and the smaller, so-called “backup” plan of a $10 billion North Slope gas project to serve Alaska, without an LNG export component. Most of the state money was spent on engineering and permitting for that Alaska Stand Alone Pipeline, or ASAP. Between the two projects, the corporation has spent about $460 million of the state appropriations. ExxonMobil and BP have been contributing to the Alaska LNG effort the past year, limiting their spending to no more than $10 million each toward finishing the FERC process and other work. As the work on the FERC-led environmental statement is nearing its finish, AGDC’s spending has slowed down. The corporation spent about $9.5 million in the first nine months of the fiscal year that ends June 30. The corporation has legislative authorization to use its available funds through the end of the next fiscal year in June 2021. Dunleavy, now about 18 months into his four-year term, has steadfastly advocated that the state step away from leading the effort and look for private companies to take over the LNG project. Just as the larger, export-driven project has been unable to pass the economics test in a highly competitive global marketplace, so too has the ASAP line proven to be unaffordable for the small in-state market. Among the assumptions that went into AGDC’s strategic plan is the statement that the ASAP project “has been determined to not be economically viable.” The Legislature created the state corporation in 2010 in hopes of developing a North Slope gas project (the ASAP line) to reduce Southcentral Alaska’s dependence on Cook Inlet natural gas supplies, which had become uncertain as producers stopped exploring for new supplies. Legislators’ hopes also included getting North Slope gas to Fairbanks. Since then, Cook Inlet legacy producers pulled out of the basin and sold their assets to Houston-based independent Hilcorp, which invested heavily in production to meet local needs and now produces more than 80 percent of Southcentral Alaska’s gas supply.

Tourism operators across Alaska ponder how to salvage season

The ice is going out on the teal surface of Kenai Lake, the centerpiece of Cooper Landing and the source of the Kenai River. In a normal year, gaggles of early-season fishermen are there with their drift boats ready to take advantage of it. After all, the local get first chance at the famous Kenai River rainbow trout, and they may not want to compete with the cosmopolitan crowds of tourists that pack the lodges, bed and breakfasts, and campgrounds of the small Kenai Peninsula town from Memorial Day through the late fall. But 2020 isn’t like most years. The coronavirus pandemic has changed virtually every aspect of the Alaskan economy over the last two months, but perhaps none more so than the tourism industry. The summer tourism season is short but profitable across the state and particularly concentrated in Southeast and Southcentral, where many travelers head to communities like Cooper Landing to get a wilderness experience like fishing, bear viewing, or backcountry hiking. For many of these communities, tourism is the only major industry, with year-round jobs scarce and little permanent industry in the area. “We’re getting a couple bookings every day, but we are getting a couple cancellations every day, too,” said Bob Rima, owner of Drifter’s Lodge in Cooper Landing. “(Our clients) are from the Lower 48, and they’re unsettled. They are scared. They don’t want to fly.” Normally booked out months ahead, Drifter’s Lodge has watched its May and June bookings dwindle. Some clients are holding out, hoping the restrictions will be relaxed and the mandatory quarantine for out-of-state travelers will be lifted, but others are cancelling or rescheduling. For some clients, it’s the second rescheduling. Last year, heavy smoke from the Swan Lake Fire on the Kenai National Wildlife Refuge limited business in Cooper Landing as well. Like some other businesses, Drifter’s Lodge has chosen to stay open with the hope of some level of visitation this season. With assistance from the federal Paycheck Protection Program, part of the CARES Act providing financial relief to businesses affected by the pandemic, the lodge hired on staff and plans to continue providing services. But the program is designed to stop employers from laying off employees and so covers their pay, but only that. Figuring out how to get employees from the Lower 48 to Alaska has been a challenge, too, as they have to quarantine when they get to the state. It’s not entirely clear who is responsible for paying for the quarantine, Rima said. Getting a loan is tough right now, too, with little to no income available with very few clients able to come, Rima said. “This is going to be a tough year for a lot of people on the (Kenai) Peninsula for sure,” he said. “Most places, you’re lucky to have one or two months of reserves.” There are still some bookings coming in, but there remain a lot of questions for businesses in the area. At the Inn at Tern Lake, near Moose Pass, most of the June bookings have been cancelled or moved, but some others have come in for later in the season, said Jeff Hetrick, who owns the Inn at Tern Lake near Moose Pass with his wife Rose. “We don’t know,” he said. “We’re optimistic by nature, but we’re on standby, just like everybody else. Hopefully by 2021, we’ll be back to normal.” Cooper Landing, with its predominantly outdoor recreation-based tourism economy, is far from alone in its economic struggle this year. Talkeetna is facing the dual hits of an anemic visitor season and the cancellation of the 2020 Denali climbing season, for which Talkeetna serves as the primary base camp. Guides and tour companies in Girdwood, the hub for visitors at the edge of the Chugach National Forest, are facing a very slow season, and the Hotel Alyeska is temporarily closed until May 31, 2020. Operators in other communities, like Seward and Valdez, are planning for abridged seasons or are working on deals to attract Alaskans until out-of-state visitors may be able to come. While the loss of the majority of cruise traffic has been a major hit for the communities of Southeast Alaska, the region does have its independent travelers and still hopes to see some later in the season, said Dan Kirkwood, general manager of Pack Creek Bear Tours in Juneau. “Despite (the COVID-19) concerns, we still have this incredibly awesome state that we live in that people want to come see,” he said. “We are tracking the state mandates on mitigating the spread, and we are hopeful that we will find a way to do right by our community.” Pack Creek Bear Tours transports clients from Juneau to Pack Creek on Admiralty Island by float plane. The company is still figuring out the logistics of how to transport and serve clients while following social distancing guidelines. Even if the state lifted the mandatory quarantine policy and visitors were able to come again this summer, it wouldn’t be the same season it was going to be before the outbreak of the pandemic in March. For one, the loss of the bulk of cruise ship passengers significantly scales back the number of tourists coming to the state overall; second, even if Alaska relaxes its restrictions, other states may not, and people may still not feel comfortable traveling. Adding that to the economic harm done by the pandemic shutdowns, which will likely leave people with less disposable income to take vacations for some time, the Alaska tourism industry may have to tighten its belt for more than just this season. Some of the members of the outdoor industry are looking for a little more support to make it through, though not just in grants. In a letter to Alaska’s congressional delegation sent in late April, a group of businesses through the Alaska Outdoor Alliance requested a $2 billion aid package spread over five years specifically targeted toward the Alaska outdoor industry. “We know there’s a lot of furloughed employees, and we know things aren’t going to bounce back; the cruise ships aren’t coming, so they’re not going to bounce back to even last year’s levels,” said Lee Hart, the AOA’s executive director. “We just want to get people back to work, with real wages (so) that they can pay rent, buy groceries.” Modeled on the Civilian Conservation Corps, an outdoor work program developed during the Great Depression, the stimulus would pay living wages to workers who worked on recreation and restoration projects in the state. Guides and outdoor industry companies, who know their areas well and are currently short on work, would be able to use their equipment and expertise to improve trail projects in their areas while being paid for work, Hart said. The request is for the conservation corps portion to last three years and provide $750 million. The other part of the request, spread over five years, would focus on deferred maintenance projects. The organization is looking to existing grant infrastructure for its requests to speed up the process, Hart said. In planning for the program, the federal agencies said they had desire to scale up the work if they had the funding, she said. Kirkwood said the program’s use of local guides and operators would make sense, as they have knowledge of the areas in which they operate and a stake in the outcome. In the case of Pack Creek Bear Tours, the guides are comfortable working in close proximity to brown bears in a remote area. “I think that’s where the local knowledge (comes in),” he said. “To a lesser extent, if your company runs a tour on the trails, then your company has a real investment in that infrastructure.” Elizabeth Earl can be reached at [email protected]

New Hilcorp-Enstar gas deal adds up to rate savings

Southcentral natural gas customers could collectively save $53.6 million under the latest contract between Enstar Natural Gas Co. and Hilcorp Alaska. According to a letter containing the amended contract terms filed with the Regulatory Commission of Alaska, Enstar customers should save approximately 7 percent in gas costs from June 1 through March 2023, when the utility’s prior contract with the Cook Inlet producer was set to expire. The new terms also extend the agreement through March 2033. According to Enstar’s filing, Hilcorp “reliably delivered” 82 percent of the utility’s gas in 2019 and is expected to cover 80 percent this year. Enstar could purchase anywhere from 64 percent to 97 percent of its annual gas requirement under the new terms. The utility expects its demand to remain at roughly 33.6 billion cubic feet, or bcf, per year through 2025. The contract has a base firm quantity of 25 bcf per year. Enstar officials noted that multiple Cook Inlet producers have filed for bankruptcy in recent years. Furie Operating Alaska had its gas production halted in early 2019 when a production line froze, causing Enstar and other utilities to purchase gas elsewhere and draw on stored reserves for several months. Furie filed for Chapter 11 bankruptcy last August. “This gas supply certainty is vital at a time of growing scarcity,” the letter states. Enstar supplies gas to approximately 148,000 customers. Gas will be sold at $7.55 per thousand cubic feet, or mcf, in the first year of the contract but will vary afterwards. According to Enstar’s filing, the price for gas in subsequent years will be set through a calculation based on three price indices published by the Bureau of Labor Statistics. However, the price cannot increase more than 1.5 percent or decrease more than 1 percent in any given year, meaning the deal has an effective price ceiling of $8.89 per mcf in 2033. Prior contracts between the two had fixed price inflation rates of 2 percent to 4 percent, but “Enstar does not believe that an inflexible, always-positive inflation factor appropriately reflects how production costs increase and decrease over time,” the letter states. The agreement amends and extends a contract signed in 2016. At the time most gas contracts in Cook Inlet were five years or less. In 2018, the first year of that deal, Hilcorp sold to Enstar for an average price of $7.56 per mcf. State Sens. Josh Revak, Shelley Hughes and Senate President Cathy Giessel all urged RCA to approve the contract in comments to the commission. Hughes and Revak noted the combination of price reductions and long-term supply as needed benefits during a highly uncertain economic period and Giessel highlighted that it will ensure Alaska is developing and utilizing its own resources. “When Alaska gas is on relative price parity with imports, this use of our own resource will support the direct and indirect jobs in the resource development industry that in turn support our communities,” Giessel wrote in her comments. A public comment period for the contract is open through May 20 on the RCA website. Elwood Brehmer can be reached at [email protected]

Alaska Air starting Bristol Bay, Unalaska service with regional help

Alaska Airlines is doing what it can to fill the void in air service to Western Alaska created when Ravn Alaska suddenly grounded its fleet earlier this spring. The major domestic airline is partnering with regional carrier Grant Aviation to provide twice-weekly scheduled service to Unalaska through Cold Bay starting May 16, Alaska Airlines Regional Vice President Marilyn Romano said. Regular passenger service between Anchorage and Dillingham and King Salmon — where Alaska has historically offered seasonal jet service — will also start earlier this year. The first flights to the Bristol Bay hub communities are scheduled for May 18, according to Romano. Dillingham, King Salmon and Unalaska-Dutch Harbor are just three of the 115 communities across the state that used to be served by Ravn Alaska and its subsidiary carriers. Ravn filed for Chapter 11 bankruptcy protection April 5, grounding its fleet of 72 aircraft, following a 90 percent drop in its passenger revenue as travel halted due to the COVID-19 pandemic, according to a company statement. Alaska Airlines had partnerships with Ravn at hubs across the state and Romano said it is very difficult to watch the company suffer largely as a result of the health crisis. “It’s hard to think about the 1,300 employees for Ravn that are currently out of work and I know they’re working hard still today, as far as I’ve been told, to see how they could possibly get their operation up and running,” she said in a May 12 interview. Alaska’s moves to backfill Ravn’s service are just part of a larger effort from multiple carriers statewide, Romano noted. “Very quickly, not just Alaska Airlines, the aviation community as a whole really stepped up from both the passenger and cargo side to quickly see how these markets could be served in some way and I think what we’ve got today is most of the markets, whether they’re a (larger) Part 121 market or a Part 135 (air taxi) market, are being covered in some form or fashion,” she said, adding that many of the smaller airports Ravn served are inaccessible to Alaska’s fleet of Boeing 737 jets. That is the case for Unalaska, so Alaska Airlines is flying to the Alaska Peninsula community of Cold Bay, which has a 10,000-foot runway from its days as a military airfield during WWII. From there, Grant Aviation will take passengers the remaining roughly 150 miles to Unalaska. The Cold Bay airport has periodically been used as an emergency landing site for international flights with mechanical or other issues. The Cold Bay stop will be part of Alaska’s service to Adak farther out the Aleutian Chain, according to Romano. She said preparing for the coordinated service to Unalaska — the largest seafood port in the country — has been “a real collaboration” between the communities, airlines and state and federal Transportation officials. While the travel restrictions imposed to limit the spread of COVID-19 have decimated the airline industry worldwide, Romano said the period of very low passenger demand has provided a window for Alaska and other carriers to work out solutions to serve rural communities. “It’s been relatively calm but you never want to, if you can help it, have a community with no access to travel. There are critical needs to travel,” she said. As for Bristol Bay, Alaska first had to arrange to sublease Ravn’s ground facilities at the King Salmon and Dillingham airports before it could start service, as the airlines shared space when they both flew to the communities in years past. “We’re ready to go,” Romano said. “We’ve got our plan for moving employees around filed with the state and the communities.” Alaska will start fly to Dillingham three times per week and King Salmon twice per week briefly before ramping up to daily flights in June along with activity in the region’s commercial salmon fishery. Many Bristol Bay-area residents have long pled for Alaska Airlines to provide year-round passenger service to the region and Romany said the airline currently plans to do so this year. “They seem really happy about that in those communities,” she said. Romano added that Alaska will be flying additional charter flights in and out of Bristol Bay to move commercial fishermen and salmon processor workers as safely as possible. Many leaders and residents in rural fishing towns have expressed serious concerns about the ability to safely move seasonal workers in and out of their communities amid the pandemic. “Some of those seafood workers will actually move from a quarantine situation right onto a charter flight as opposed to scheduled service. Any level of safety that any of us can do together is going to help,” she said. Elwood Brehmer can be reached at [email protected]

Alaska delegation signs on to effort against banks shunning Arctic

Alaska’s congressional delegation is at the center of a growing cadre of Republican lawmakers pushing back on big banks that have decided not to invest in Arctic oil and gas projects. Three dozen senators and representatives signed a May 7 letter to President Donald Trump that first thanked his administration’s pursuit of American “energy dominance,” which has largely focused development of coal, natural gas and oil resources nationwide. The U.S. was the top oil producer in the world immediately prior to the onset of the global COVID-19 pandemic, with companies producing just more than 13 million barrels per day in early March, according to the Energy Information Administration. But the letter mostly urged the Trump administration to look into how the federal government can counter the group of large banks that have recently publicized policies against financing oil projects in the Arctic and select other parts of the country. Many of the same institutions are also shying away from investments in coal as well. In recent months Goldman Sachs, JPMorgan Chase, Citigroup, Morgan Stanley and Wells Fargo have all confirmed that to varying degrees they would not be supporting future Arctic oil projects. Most of the statements have been made through the banks’ social and environmental policies. The decisions have been praised by numerous congressional Democrats, conservation groups and renewable energy advocates across the country but have made the banks a target for lawmakers from oil, gas and coal producing states. “Scoring cheap political points at the expense of American energy workers is an affront to our economic success and it must be confronted,” the May 7 letter states. The signatories included Sens. Dan Sullivan and Lisa Murkowski and Rep. Don Young. The lawmakers also questioned why lending institutions that received federal support during the 2008-09 financial crisis and will potentially benefit from participating in CARES Act programs should be allowed “to pick energy winners and losers in order to placate the environmental fringe.” “As every sector of our economy struggles to survive the COVID-19 pandemic and seeks financial stability from the federal government, environmental extremists are using the pandemic to accelerate their goal of putting American energy jobs in the grave,” the letter states. “We urge you and your administration to use every administrative and regulatory tool at your disposal to prevent America’s financial institutions from discriminating against America’s energy sector while they simultaneously enjoy the benefit of federal programs.” Sullivan helped get the ball rolling for Republicans while participating an April 24 signing ceremony for legislation to add funding to the Small Business Administration’s Paycheck Protection Program in the Oval Office. Sullivan first said the COVID-19 response aid would help many Alaskans, including those working in the oil and gas, fishing and tourism industries, through this exceptionally difficult period. He said further that he doesn’t believe the banks should be allowed to receive federal support and at the same time “discriminate against a critical sector of the U.S. economy.” “I like the idea of looking into that; you’re right. You know, that got (to) where they were pushed by the radical left, and so they’re afraid of the radical left,” Trump responded. Sullivan said in an interview with the Journal prior to the letter that it is the “irony and hypocrisy” that some of the same banks kept afloat by federal aid roughly a decade ago “still find it OK to discriminate against the energy sector, particularly our state” that goes beyond free market principles and at a minimum warrants congressional attention. He acknowledged that it’s currently unclear exactly what Congress or the administration could do regarding the banks but said his staff is working with administration officials and other congressional offices as well to find possible remedies to the situation. “If you implemented what the national Democrats want, America, as the energy superpower of the world, which we have achieved and is now being threatened, wouldn’t have a chance and the dominant powers would be Saudi Arabia, Russia; and somehow they think that would be good for our country. It’s remarkable and fundamentally frightening to me,” he told the Journal. In January, 16 Democrat senators wrote to Wells Fargo CEO Charles Scharf asking that the bank commit to not financing oil and gas exploration in the Arctic National Wildlife Refuge. Similar letters from congressional Democrats have been sent to other major bank executives as well. Alaska Oil and Gas Association CEO Kara Moriarty said Sullivan made “a really valid point” to Trump while noting that the banks have generally stated a prohibition on direct Arctic oil project financing, which does not preclude general lending to oil and gas companies that work in the region. How exactly the individual banks will decide which oil projects are acceptable and which aren’t is just one question they need to answer, she said, adding that how each institution defines “Arctic” is another. The bans on Arctic oil investments likely apply to the North Slope, as it is within the technical definition of the Arctic, Moriarty said, while also pointing out that the Arctic Council classifies the Aleutians as Arctic — and some federal agencies — have even broader definitions. “I do think it is frustrating to see these huge financial institutions in my mind arbitrarily decide that projects and financing in the Arctic is too risky because some of them have listed care for the environment and things of that nature (in policy statements) and yet they’re still investing in companies and projects in countries that have a way worse environmental record than America does and certainly Alaska,” she said. “If a bank’s risk profile doesn’t view that projects in the Arctic are going to meet their risk criteria, that’s fine, but making blanket statements that ‘we won’t be investing’ even without giving a project the benefit of the doubt is sort of like agencies saying ‘we’re never going to permit a project in the Arctic.’ How can you say that?” Wells Fargo interprets the Alaska Arctic to be the North Slope, according to spokesman David Kennedy. He wrote in an email that the bank did not have a comment on letter to Trump but clarified the bank’s policy regarding working with the oil and gas industry in the state, noting that the decision to forgo funding Arctic oil projects was part of a larger move away from all project-specific transactions in the region. The bank, which has branches in Alaska, will continue to offer general corporate credit facilities for oil and gas companies in Alaska, according to a statement from Wells Fargo. “Wells Fargo is a leading provider of credit to Alaska Native Corporations and responsible oil and gas exploration and production companies doing business in Alaska, and we want to continue those relationships long into the future,” the statement said. Moriarty said she hasn’t heard of any companies in Alaska struggling to find financing as a direct result of the banks’ decisions but that’s mostly because funding isn’t something oil companies often disclose. “We operate under some pretty strict anti-trust rules. Price and investors and who they’re getting money from and how they’re getting money for projects — that just isn’t stuff we talk about, but it doesn’t mean it’s not happening,” she said. First National Bank Alaska CEO Betsy Lawer said the large oil companies operating on the North Slope typically have lines of credit with other financial institutions to fund portions of their work. FNBA, as a community bank, instead focuses its oil industry lending on Alaska-based companies in the support service sector, Lawer said. A JPMorgan Chase spokesman declined to comment on the May 7 letter and other banks did not respond to questions in time for this story. ANWR lease sale Bureau of Land Management officials continue to inch ahead with plans for an oil and gas lease sale in the ANWR coastal plain despite historically bad dynamics in world oil markets but it remains unclear when the controversial silent auction-style sale will finally be held. BLM Alaska officials released the final version of the environmental impact statement in mid-September and BLM State Director Chad Padgett said at the time he hoped to hold a lease sale for the entire 1.6 million-acre coastal plain before the end of the year, reiterating a common theme heard from other Interior Department leaders. While a record of decision — a prerequisite to a lease sale — could have been signed by agency officials as soon as 30 days after the official Sept. 20 final EIS notice was published in the Federal Register, but 2019 ended with little word from BLM or Interior leaders about it. BLM Alaska spokeswoman Lesli Ellis-Wouters noted in an emailed response to questions that it is not uncommon for a record of decision to be issued up to several months after a final EIS is made public. “This decision will take into consideration the many important issues and potential impacts we heard during our multi-year scoping and public comment process which resulted in almost 2 million comments received,” Ellis-Wouters wrote. The commenters largely expressed concerns about impacts to subsistence lifestyles, the migratory patterns of the Porcupine caribou herd that uses the coastal plain for calving and opportunities for increased jobs and economic opportunities in the state, she added. Ellis-Wouters also noted that to comply with the 2017 tax bill, which opened the Coastal Plain to oil and gas exploration, BLM does not have to hold the first lease sale until December 2021. However, many supporters of drilling in ANWR have pushed for a sale before the end of President Donald Trump’s first term to make sure Republicans maintain control of the process. Bloomberg reported May 11 that Interior Secretary David Bernhardt said he does not think the immediate collapse of oil markets will dampen industry interest in an ANWR lease sale, which he believes will likely be held this year. Moriarty said it’s too tough to tell what industry’s response to a lease sale would be as uncertainty from the COVID-19 pandemic has made even very near-term predicting in the historically volatile industry impossible. “You’ve got to let the process work. You’ve got to make sure the EIS is defensible in court because those that oppose development of the coastal plain are going to say, ‘well, the reason they didn’t show is because of low prices’ or ‘the reason they didn’t show is because of high prices’ or ‘the reason they didn’t show is’ — it just doesn’t matter,” Moriarty said. “There’s always a reason fabricated as to why we’ll never have a successful lease sale in this price environment so the process has to continue.” It’s widely believed that a record of decision authorizing a lease sale will be challenged in court. If a record of decision advancing a sale is approved, BLM will issue a Call for Nominations to industry, which usually takes 30 days and then a Notice of Sale announcing the date will be issued following a review of industry’s submissions, according to Ellis-Wouters. ^ Elwood Brehmer can be reached at [email protected]

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