The Morning Headlamp — Busy week in AK politics and potential job loss looming

February 1, 2016 | Posted in : News

More AK jobs at risk. A 2016 economic forecast prepared for the Anchorage Economic Development Corp. projects a loss of 1,600 jobs in Alaska’s largest city, including 600 in the oil and gas sector. Alaska petroleum jobs are expected to follow a national decline because of persistent low prices and global oversupply. For much of 2015, Anchorage had 3,700 people employed by oil companies. By December, that already had fallen by 300, said Bill Popp, president and chief executive officer of the nonprofit group formed to encourage growth and diversity in the Anchorage economy.

In addition to the AEDC report, new analysis from the Alaska Department of Labor showed that in December unemployment claims by former oil and gas industry workers has doubled from the year before. There are now over 1,020 Alaskans who had previously been working in the oil and gas industry collecting unemployment benefits, as compared to 518 in December 2014. As noted in the article, the departure of Shell from Alaska’s Arctic is set to affect 400 jobs in Anchorage alone. Many Alaskan businesses that make up the backbone of the state’s economy are suffering. Following Shell’s exit, ASRC Energy Services Response Operations had to let 30 employees go. ASRC’s general manager, Gary Schliesing, said the situation “is having a devastating impact” on the company’s business operations.

The loss of these jobs will have a trickledown effect across Alaska’s economy. We know that Alaska’s core industry is reeling in the face of exceptionally low oil prices. More job cuts will continue if we don’t encourage our lawmakers to incentivize sustained investment from the private sector. Policies that restrict or dissuade business from believing in AK’s future will naturally leave industry with no choice but to make tough decisions.

AKLNG buoys local economy. According to the Alaska Dispatch News, AKLNG’s industry partners have reportedly acquired more than 150 tracts of land on the Kenai Peninsula as they piece together an expanse that could one day house a massive plant and shore side facility where liquefied natural gas would be processed and exported. The purchases have led to increased activity in the small real-estate market in Nikiski, population 4,500, and the nearby area, said Fred Braun, a broker at Jack White Real Estate in the nearby city of Kenai. “I’d say the LNG project has already been a mini-economic boom to a lot of people,” Braun said. Although the size of the plant is still being determined, Alaska LNG officials have said the large amount of land is needed in part to create a large buffer between the facility and other properties, providing a safe distance that reduces impacts from noise and emissions. Headlamp has stressed the benefits of this megaproject for months. AKLNG, and the billions in investment it represents, will be able to support an Alaskan economy that needs propping up. The boom occurring in Nikiski is a perfect microcosm of the economic impact the megaproject will have. Headlamp hopes the progress made on AKLNG continues in 2016.

A busy week in Juneau. Alaska lawmakers have their work cut out for them this week with several substantive issues to discuss. The focus on Medicaid will shift this week from the Capitol to a courtroom during an ongoing fight over expanded coverage in Alaska. Also, legislators plan to revive a bill calling for the federal government to transfer lands to the state. And a House committee is set to begin reviewing Gov. Bill Walker’s plan to overhaul oil and gas tax credits. On Wednesday, House Resources plans to begin hearing Walker’s proposed tax credit overhaul, which includes raising the minimum tax rate on North Slope oil and not allowing credits to be used to lower the tax rate below the minimum level. The bill repeal certain credits, among other things. Legislators plan to meet this week on bills aimed at curbing and containing costs within Medicaid. Meanwhile, on Thursday, a judge in Anchorage plans to hear arguments in a lawsuit challenging Walker’s authority to expand Medicaid without legislative approval. The Senate Resources Committee on Wednesday plans to hear a bill from House Speaker Mike Chenault calling for the federal government to turn over to the state the title to lands it holds by Jan. 1. The bill would exclude national park lands, land used for military purposes and land to which title is held by a person. Stick with Headlamp this week as we help unpack a very important week in Alaskan politics.

Governor’s fiscal plan lobbyists questionable meetings. According to the Alaska Dispatch News, consultant Art Hackney—contracted by Gov. Bill Walker—has been billing the state for meetings that never took place. Hackney’s invoices include charges for dozens of meetings with lobbyists, business owners and key political figures. But several disputed the details, and one said he never met with Hackney. “I don’t recall having a meeting with Art at all,” said Mike Dubke, another Republican political consultant, based in Virginia.  ADN publisher Alice Rogoff denied ever discussing the Governor’s fiscal plan with Hackeney. Walker, in the phone interview, said he wasn’t intimately involved with the details of Hackney’s work since the consultant didn’t report directly to him.  A KTUU report appeared to dispute this line of events, with Hackney telling KTUU that Rogoff had changed her tune: “I just contacted her, and now she quite clearly remembers.” Rogoff went on to request that KTUU refer to ADN reporter Nat Herz for additional reporting on the story. For now, it is clear that the Governor has retained Hackney, but there is some dispute over whom Hackney met with, and whether he discussed or advocated for the Governor’s fiscal plan. Headlamp is frustrated to hear that not only has Gov. Walker spent money on expensive consultants, but these consultants have been hired to promote a plan which grows state government and imposes new taxes on Alaskans. How will the Alaskan people ever be able to determine if these meetings occurred? Accountability, ethics, trust in government, and the truth matter. Our readers can trust in Headlamp to continue shining a light on this issue. Hopefully more answers – from both Hackney and ADN publisher Rogoff – come to light.

Murkowski spearheads America’s energy future. The first major energy bill in more than eight years is primed for passage in Senate—all thanks to Alaskan Sen. Lisa Murkowski. “I want to change energy policy and you can’t do that without the legislation becoming law,” Murkowski said in an interview last week. “And so not only do we need the support of the House, we need to have the president support it as well.” To make that happen, Murkowski worked with the committee’s top Democrat, Sen. Maria Cantwell of Washington. Murkowski’s pet legislation — to lift the decades-old ban on exporting U.S. crude oil — was introduced separately, and passed along with extended solar and wind tax credits in December as part of the government spending bill. Amendments of interest to Alaska so far include a bill focused on supporting Indian energy, which Murkowski said would help Alaska Natives, and an amendment that encourages new technologies for wastewater treatment, which Murkowski said could be a positive develop for some rural Alaska villages. Headlamp applauds Sen. Murkowski’s ability to reach across the aisle to secure a sustainable energy bill for America. Despite a less than ideal climate to be investing in energy, Sen. Murkowski clearly intends to focus on the future of energy in America. Hopefully Alaska state lawmakers can follow in her footsteps and pass laws that ensure a robust resource development future for Alaska.


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First Reads

Alaska LNG snatches up land, buoying a local economy
Alaska Dispatch News, Alex DeMarban, January 31, 2016

Murkowski takes aim at the middle ground on major energy bill
Alaska Dispatch News, Erica Martinson, January 31, 2016

Consultant to Gov. Walker appears to have billed for ‘phantom’ meetings
Alaska Dispatch News, Nathaniel Herz, January 29, 2016

Business group projects 1,600 job loss in Anchorage in 2016
Associated Press, Dan Joling, January 29, 2016

Medicaid lawsuit, tax credit hearings ahead for Alaska lawmakers
Associated Press, Becky Bohrer, January 31, 2016


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Friday’s Fast Five

January 29, 2016 | Posted in : News

Headlamp wants our followers to always be up to date with the developments in Alaska’s economy, politics, and industry. Check out this week’s rundown of the stories effecting you.

Top Story of the Week

Governor Bill Walker claims to be growing “increasingly concerned” with the megaproject’s status in a letter to AKLNG industry partners BP, ConocoPhillips, and ExxonMobil. Gov. Walker stated that he wants agreements, including complex gas balancing terms, completed by the end of the session in April. The full letter can be viewed here.

Top Reads of the Week

Senators Probe Gov. Walker’s Plans for the Permanent Fund
Alaska Commons, Craig Tuten, January 28, 2016
Members of the Senate State Affairs Committee demonstrated Thursday they are not yet sold on Gov. Walker’s plan to “re-plumb” the Permanent Fund. Questions about the plan’s constitutionality remain unresolved.

Alaska job forecast holds steady despite plunging oil prices
Alaska Public Radio News, Rachel Waldholz, January 26, 2016
As oil prices have dropped to levels that were unthinkable just a year ago, many Alaskans are wondering whether the state is facing economic calamity.

Two BC LNG plans gaining ground
Petroleum News, Gary Park, January 29, 2016
The Petronas-led Pacific NorthWest LNG consortium has edged closer to a sanctioning decision, with federal scientists determining the project poses little environmental risk.

Quote of the Week

“Something is different this morning, different in a good way. Something is genuinely different, and I think it’s genuinely fabulous.”—Sen. Lisa Murkowski


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The Morning Headlamp — Poll problems and Senators question Walker’s plan

January 29, 2016 | Posted in : News

More Polls. A new poll by Alaska Dispatch News shows majority support for Gov. Bill Walker’s plan to close the state’s budget gap — though the proposal, which would reduce Alaskans dividend checks, is opposed by Republicans, according to the poll, and comes amid a drop in Walker’s approval rating. The poll, conducted by Ivan Moore Research, had a 3.8 percent margin of error — meaning that at the time the poll was conducted, it is nearly certain that the results are within 3.8 percent of the true proportion of opinions held by Alaskans. In the poll of 651 registered voters, conducted this month, 52 percent of respondents said they supported Walker’s plan and would be more likely to support a legislator who voted for a proposal like it, while 43 percent said they opposed the plan. The poll, conducted in the second week of January, is the latest in a series of surveys of Alaskans’ ideas about solutions to the state’s financial crisis — though entities that commissioned the other two surveys, the Rasmuson Foundation and a group called Alaska’s Future, are also pushing lawmakers to take specific actions in response.

Among Republicans polled, 58 percent oppose Walker’s plan, which would reduce Permanent Fund dividends and levy a small income tax, compared to 35 percent who support it — which is perhaps one explanation for the skepticism expressed by many of the Republicans who control the state Legislature. Even so, 71 percent of GOP poll respondents said it was very important that lawmakers enact a plan of the same sort as Walker’s, and another 22 percent said it was somewhat important. Anchorage Rep. Craig Johnson, said his decisions on the state’s budget crisis would be “based upon the facts as they are in committees…I will not be anywhere based on a poll,” he said.” He dismissed the poll’s data on Walker’s fiscal plan, saying one of the questions was misleading by painting the proposal in a favorable light. Rep. Johnson and a staff member noted that the question refers to the package as “continuing to reduce government spending” and stabilizing dividends at “about $1,000.” “Go back and read that question in the context of reality,” Johnson said. “There are no cuts.” While Walker’s plan would cut $100 million from the state’s agency operating budget, the state’s total spending for next year would, in fact, increase by 1.2 percent. And the plan only guarantees dividends at $1,000 for one year; without that guarantee, dividends could be $500 or lower and would remain low unless oil prices rise.

Headlamp is glad to hear that at least one Alaskan lawmaker will base their policy making off facts, rather than ambiguous poll results. Furthermore, while polling isn’t an exact science, it’s worth noting that Ivan Moore’s polls have not traditionally been seen as the gold standard in Alaska. During the 2014 Senate race between Dan Sullivan and Mark Begich, Moore predicted Begich would win by six points. Sullivan went on to win by nearly three points. While successful polling can be a valuable tool from a public policy standpoint, a poorly done poll can be just as counterproductive.

Yesterday, Senate State Affairs Committee unpacked Gov. Bill Walker’s plan for the Permanent Fund as questions ranged from feasibility to constitutionality. The Legislative Finance Division expressed concern that co-mingling royalties and taxes intended for appropriations with the protected interest of the Permanent Fund changes the nature of the earnings reserve. Appropriations from the CBR require the support of three-fourths of each legislative chamber, raising the possibility that at least 45 legislators would have to vote to fund the budget every year. Senate State Affairs Chair Bill Stoltze said Thursday he was having a hard time reconciling the administration’s desire to protect the State’s savings, while moving CBR money protected by the three-quarter vote to the earnings reserve from which a simple majority can vote to appropriate. He described SB 128 as an effort to sidestep the constitution.

State Affairs members also questioned the fiscal sense behind Walker’s plan. Sen. Charlie Huggins called for additional cuts, and Sen. Lesil McGuire noted that while Wyoming’s population is slightly larger than Alaska’s, its budget is half the size. “The governor’s proposed budget is an increase,” House Rules Chair Craig Johnson said Thursday, “I find it hard to go back to my constituents and say, ‘We’re going to increase the budget and tax you.”

If Walker’s plan were in place this year and the PFD were tied to mineral royalties instead of investment returns as he proposes, the payout would be between $300 and $500. “I see a real problem there,” reacted Senate Majority Leader John Coghill. Coghill said Walker’s plan shifts risk from government to the people of Alaska.

If yesterday’s questions are an indication of what’s to come, it looks like Gov. Walker’s plan will go through quite the review process during this session—and Headlamp is happy to hear it. We know Alaska is facing quite the fiscal conundrum, but the Governor’s plan is not an option we think most Alaskans would be pleased with down the road. To remind our readers, the Governor’s plan does not balance the budget this year, it in fact leaves the state over $400 million in the hole. Likewise, it opens the door to taxing Alaskans income in perpetuity. The natural tendency of government over time is to grow; thus necessitating the need for more revenues being extracted from the private economy. If we fail to rein in government spending, and instead burden future generations of Alaskans with taxes, we should be ashamed. Headlamp applauds the lawmakers who are addressing the failings of Gov. Walker’s proposed plan.

According to Politico, Sen. Murkowski has nabbed Energy Secretary Ernie Moniz for a trip next month to Alaska that will include a Feb. 15 field hearing she will chair in Bethel to “examine opportunities for energy innovation and technology deployment in high-cost areas in Alaska and around the country.” The trip will also include a visit to Cook Inlet “to look at some of the offshore platforms there.” Other senators scheduled to make the trip are John Barrasso, Shelley Moore Capito, Angus King and Steve Daines. What a week for Sen. Murkowski! Headlamp looks forward to more US officials exploring the energy opportunities Alaska has to offer this month! We hope there is an emphasis on unlocking Alaska’s energy potential, especially in the Arctic.


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First Reads

New poll: Alaskans support Gov. Walker’s plan to close budget gap
Alaska Dispatch News, Nathaniel Herz, January 28, 2016

State oil income could hit zero if prices remain where they are
Alaska Dispatch News, Dermot Cole, January 28, 2016

Senators Probe Gov. Walker’s Plans for the Permanent Fund
Alaska Commons, Craig Tuten, January 28, 2016

Morning Energy: Senate gets to work on energy bill
Politico, Eric Wolff, January 29, 2016


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The Morning Headlamp — Managing Walker’s AKLNG expectations

January 28, 2016 | Posted in : News

Governor Walker’s AKLNG letter: Is this how a business partner would act? In a letter to BP, ConocoPhillips, and ExxonMobil last week, Governor Bill Walker said he’s growing “increasingly concerned” with the slow progress developing project contracts and agreements on AKLNG that he wants finished during the 2016 regular Legislative Session. Walker, threatening “unspecified action” if key agreements are not reached stated the following, “if the parties do not reach alignment on these important contracts and issues, then I will have no other choice but to consider other options for commercializing Alaska’s gas.” Asked how Walker would proceed if the agreements aren’t reached by the end of the legislative session, his spokeswoman, Katie Marquette, emailed a prepared statement: “We will need to consider all of our options going forward.” If terms are not agreed upon, progress on the project would be delayed until 2018. “That is precisely the fear,” said Marty Rutherford, deputy natural resources commissioner. State officials and oil company employees explained at a Senate Resources Committee hearing, that one area of focus is what’s called a “gas balancing agreement” — a key pact between the oil companies that Rutherford described as “foundational” to the project. One BP executive, David Van Tuyl, described the balancing agreement in an interview as “amazingly complex.” Rep. Craig Johnson was not overly concerned with Walker’s letter, but he pointed out that the gas balancing agreement being negotiated is so complicated that it’s “precedent-setting.”

This is certainly an interesting negotiating tactic for a business partner. As a quick reminder, the State of Alaska is already running behind on finalizing plans for property taxes for future AKLNG infrastructure and in identifying communities for gas off-takes from the future project.  Governor Walker appears to be putting the industry—Alaska’s partners in the project—in a corner amidst near record low oil prices and industry-wide cutbacks in capital investment. If Walker wants Alaska to be respected as a partner on the AKLNG megaproject he has to have realistic expectations of the economic climate, industry megaprojects, and his own administrations delays. In his letter Walker makes vague threats about bringing back the gas reserves tax, and acting on his own to commercialize Alaska’s gas should our partners not achieve his wish list. Headlamp ponders where Gov. Walker thinks Alaska will get the billions of dollars, and experience necessary to complete a project on our own?

Ending more than six months of speculation, on January 19, Senate Bills 129 and 130 were read across the floor of the Senate for the first time. Alaska finally got its first look at Gov. Walker’s solution for what he calls an “unsustainable” oil and gas industry incentive program. What started as a $10 million per year tax credit program in 2003 has grown to a $700 million obligation this year and that payment could eventually hit $1.2 billion if left untouched, the governor contends. SB 130, if enacted, would significantly trim the current credit program and nearly immediately save the state an estimated $500 million at a time when oil prices below $30 per barrel have edged the state’s budget deficit ever closer to $4 billion. Senate Bill 129 would form an Oil and Gas Infrastructure Development Program within the Alaska Industrial Development and Export Authority. A $200 million appropriation would be needed to jumpstart the fund, which would finance oil and gas infrastructure development projects on proven reserves for small and medium-sized companies in lieu of some credits.

Alaska Oil and Gas Association President Kara Moriarty said in an interview that she understands the fiscal pickle the state is in, but changing the tax credit system at a time when the companies are also cash-strapped brings about the ever-dreaded political uncertainty. “Policymakers cannot control the price of oil, so you want to have policies that attract investment even when the price of oil is low,” Moriarty said.

Headlamp agrees. We know that Alaska is facing tough economic times, but lawmakers need to think big picture and not so reactionary. Remember: while the state of Alaska has traditionally relied on oil production taxes for 90% of its revenues, the oil and gas industry relies on the price of their products for 100% of their revenues.  Increasing taxes risks accelerating jobs cuts and reduced investment. During the oil and gas tax credit panel held at the Alliance’s Meet Alaska 2016 conference and industry tradeshow, Kenai Peninsula Borough oil and gas expert Larry Persily noted that incentivizing Cook Inlet gas production helped stave off the natural gas shortages that were feared in Southcentral just three years ago. Persily went on to say, “There’s no question that tax credits have been good for Cook Inlet, good for utilities, good for customers, good for production — certainly good for the local economy and jobs.” Alaskans have directly benefitted, through jobs, and money returned to state coffers, from the oil and gas tax credit program. Gutting the program now won’t just harm oil and gas companies, but will no doubt trickle down to other Alaskan businesses. Our foremost concern with Gov. Walker’s proposal to gut the program are the negative effects that will occur downstream and out of the headlines to Alaskans during these already difficult economic times.


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First Reads

Walker issues ultimatum to oil companies on pipeline project
Alaska Dispatch News, Nathaniel Herz, January 27, 2016

State Senate Majority Releases Poll Results
The Midnight Sun, January 27, 2016

Walker bills would shift tax credits to development loans
Alaska Journal of Commerce, Elwood Brehmer, January 27, 2016

Walker’s Permanent Fund plan gets first Senate hearing
Associated Press, Becky Bohrer, January 27, 2016

S&P finds Alaska with ‘unique exposure’ to oil prices
Alaska Journal of Commerce, DJ Summers, January 27, 2016

Senate starts debate on broad energy bill
Reuters, Valerie Volcovici, January 27, 2016


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The Morning Headlamp — Walker’s new gas tax and international arctic investment

January 27, 2016 | Posted in : News

So it begins. The first component of Gov. Bill Walker’s plan to balance the state budget, a doubling of the state’s gasoline tax, received a quiet hearing from a joint session of the Alaska Senate’s transportation committee and transportation finance subcommittee on Tuesday afternoon according to the Juneau Empire. The bill, which would raise the state’s gasoline tax from 8 cents to 16 cents per gallon, and more than double the tax on jet fuel, was received with far more aplomb than a bill last session that raised the gas tax by less than one cent. “No one likes the idea,” said Sen. Peter Micciche chairman of the Senate Transportation Committee. “We spend our careers trying to keep the cost of being an Alaskan low…and we suddenly find ourselves facing some very challenging times.” Now that Alaskans are finally seeing the benefit of low oil prices at the pump, Headlamp wonders if legislators are considering the harmful impact the Governor’s proposal to hike gas taxes will have on low income, and rural Alaskans. Furthermore, independent pilots and small charter companies flying throughout rural Alaska will have their bottom lines impacted if the price of jet fuel jumps due to Gov. Walker’s tax hike proposal. Instead of raising taxes on Alaskans, Headlamp encourages legislators to find efficiencies in the Department of Transportation’s budget in which unrestricted general fund spending (UGF) has increased from $98.91 million in FY2005 to $244.02 million in FY2016.

Arctic investment still remains a priority—for other countries. Despite slipping gas prices, many foreign companies are investing in the Arctic in a big way. According to the Alaska Dispatch News, Korea’s Daewoo Shipbuilding and Marine Engineering launched the world’s first Arctic-class LNG tanker to serve Russia’s Yamal LNG project. That project, a large natural gas field in Russia’s Arctic, is on schedule to begin producing next year and has brought in $15 billion in investment so far. Meanwhile, Norway’s Arctic oil prospects will continue to see substantial investment too, with Statoil green-lighting a $7 billion boost in investment to develop prospects in Norwegian waters in the Barents Sea. As we consistently remind our readers, AKLNG is a global opportunity. Countries around the world are prepping their economies for major LNG projects in the Arctic and Alaska is slowly being left behind. Alaskans must do a better job communicating to the rest of the country that the U.S. is an Arctic nation, and that for a vast number of both national security and economic reasons we must expand our role and presence in the Arctic.

Holding steady for now. According to an interview with Alaska Public Radio News, economist with the Department of Labor Neal Fried argues that despite oil prices, Alaska’s oil and gas employment is still faring pretty well. In fact, oil and gas employment reached a record high in 2015. According to Fried, “We appear to be more project-based. When you undertake a project in Alaska, it’s usually a pretty big one. So if you’re in the middle of it, or a third of the way through, you’re not going to just probably quit.” It’s convenient that Alaska happens to have an ongoing megaproject then. As Headlamp has said before, AKLNG has the capacity to normalize and energize Alaska’s economy through sustained employment and investment. Furthermore, thanks to smart tax policies kept in place by Alaskan voters in 2014, investment by oil and gas companies has remained strong in the face of low oil prices. Headlamp cautions lawmakers from undertaking dramatic changes to the state’s current tax structure. To foster the creation of a strong economy in the future, Alaska must remain a competitive and attractive place to invest. Accomplishing these goals requires that we ensure stability in our regulatory, fiscal, and taxation regimes. Likewise, Headlamp reminds lawmakers to ease into any changes of the oil and gas tax credit program which has helped revitalize Cook Inlet production, ensured a strong supply of natural gas for Southcentral Alaska, and brought new producers to the North Slope.

Alaska’s Department of Education announced Tuesday that it will get rid of the new statewide standardized test less than a year after students in grades 3 through 10 took the exam for the first time. “After careful consideration, I believe that it is in the best interest of Alaska to consider new assessment structures that better align to instructional needs and are allowable due to changes in federal law,” Education Commissioner Mike Hanley said in the statement. Alaska must do better when it comes to education. The state spends more money on K-12 education, per pupil, than any other state, and yet we consistently see poor results in reading and math at the 4th and 8th grade levels. Headlamp questions the original cost of developing the Alaska Measures of Progress test. Why was it developed at the University of Kansas, and not in Alaska? We cannot afford to spend $25 million on the creation of a new standardized test, and then discard that test one year after implementing it. How do we even know how much was actually spent on developing this test, when the state checkbook for FY2016 is not online? This AMP mess is a disservice to both taxpayers, and students. Headlamp hopes a new test is developed quickly, cost effectively, and will fit Alaska’s needs for years to come.

“Genuinely different, and genuinely fabulous.” Following a blizzard that brought our nation’s capital to a standstill, Sen. Lisa Murkowski was one of only a few lawmakers who came into work when the capital building reopened. Furthermore, the Senator astutely pointed out that every lawmaker, page, and government employee in the chamber was a woman—something the Ketchikan lawmaker was extremely proud of. Headlamp continues to applaud Senator Murkowski for her dedication to her work and the people of Alaska.


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First Reads

Alaska job forecast holds steady despite plunging oil prices
Alaska Public Radio News, Rachel Waldholz, January 26, 2016

Post-blizzard, Sen. Murkowski notes that only women turned up to run the Senate
Washington Post, Emily Heil, January 26, 2016

This week in the Arctic: Energy investment and indigenous education
Alaska Dispatch News, January 26, 2016

Gas tax bill gets hearing, first of governor’s plan
Juneau Empire, James Brooks, January 27, 2016

Coalition calls for use of Permanent Fund earnings to close budget deficit
KTUU, Paula Dobbyn, January 26, 2016

Is this ethical? A look at concerns raised by legislators, staffers in 2015.
KTUU, Austin Baird, January 26, 2016

Alaska education department will replace new statewide standardized test
Alaska Dispatch News, Tegan Hanlon, January 26, 2016


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The Morning Headlamp — More pricey consultants for Walker

January 26, 2016 | Posted in : News

John Tichotsky, chief economist for the Tax Division of the Alaska Department of Revenue, told legislators that global oil production outpaced demand by almost 2 million barrels per day in 2015, but 2 million barrels isn’t what it used to be. Today, the world consumes almost 95 million barrels of oil per day, close to the highest consumption rate in world history. Even though 2 million barrels represents a big surplus on global markets, it’s a relatively small margin — about 3 percent — of global demand. With margins tighter, small changes in the global picture — a field running low, a pipeline offline, regional conflict — can swing prices wildly. “Volatility, I think, is the long term and short term name of the game,” Tichotsky said. Headlamp is glad that someone is advising lawmakers on the big picture. Global energy markets are multifaceted and fluctuations in prices are to be expected. This is why Alaska needs to develop policies that are not reactionary to present circumstances. In 2016, Headlamp hopes lawmakers focus on implementing policies that create a sound fiscal future for decades to come, and energy policies that can weather any global turbulence.

A year older, still on track. The state’s project for a natural gas pipeline, known as AKLNG, is one year older. On Monday, AKLNG project manager Steve Butt told legislators 2016 fieldwork on the project is going according to schedule and is, so far, currently under budget. Last month, the state and the project’s three oil company partners — BP, ConocoPhillips, and ExxonMobil – voted to fund another year’s work on the gasline. Butt said expenses include determining the types of materials and labor that will be necessary for the project’s success and gauging its overall feasibility. This is excellent news for Alaska’s checkbook, and businesses involved with the AKLNG project! Not only should the megaproject be applauded for staying on schedule, but under budget as well! In the current economic climate, with many projects of similar scope needing billions in extra funding, AKLNG is beginning to look like the gold standard for energy megaprojects.

Sounds familiar. Gov. Bill Walker spent $100,000 on two consultants last fall to help make a sales pitch for his proposed solutions to the state’s fiscal crisis, a plan that includes several new taxes, $100 million in cuts to the operating budget, and using Permanent Fund earnings to pay for government. Political communications specialist Art Hackney, known to many for his role in opposing Pebble Mine, joined the governor’s team in September to help advocate to “legislators, business leaders, and the public to advance the proposed plan.” Washington-based lobbyist Jack Ferguson was also hired by the governor. Ferguson is a former staffer of Rep. Don Young and Sen. Ted Stevens who now runs a firm that focuses on Alaska interests. His contract ran from August 5 to October 12 and paid $20,000 per month plus $1,500 per month in travel expenses. A nine-month contract approves pay of $200 per hour and must be renewed if Hackney bills the state more than $50,000. Anchorage Sen. Bill Wielechowski, a member of the Democratic minority, said the money could be better spent. “There’s probably a better use of money for those types of things,” he said. “I think the governor’s got a good press team, a good communications team. I don’t know why he needs to go with outside contracts to try to convince the public about that.”

Headlamp is dismayed by this news. The hiring of additional consultants is exactly the type of overspending that got Alaska in trouble in the first place. Walker should know better by now. The hiring of lobbyists to try and convince Alaskans that state government cannot be shrunk any further, and that punitive taxes are necessary, is wrong. For the Governor to hire lobbyists, with taxpayer money, who then go around selling a plan that extracts hundreds of millions of dollars from Alaskan taxpayers is astounding. Headlamp would also like to remind readers that Gov. Walker has been down this road before. During last fall’s special session on the gasline, Walker brought in Rigdon Boykin as a state negotiator, and gave him a hefty paycheck. Headlamp recognizes that all knowledgeable sources should be used to help fix the state budget. However, it is our belief that the Governor and his current team, of well-paid state employees, should be competent enough to advocate their own positions.

The Kenai Fire Department and Enstar Natural Gas are conducting separate reviews of the gas leaks, explosions and fires that destroyed four houses in Kenai following Sunday’s 7.1-magnitude earthquake centered 60 miles west of Homer. Enstar is conducting a standard review, said Lindsay Hobson, a spokeswoman for the company. The purpose of the effort is “to see if there’s anything that can be learned or improved,” she said. “That’s just part of the process. We haven’t drawn any conclusions at this point.”  The company that delivers natural gas to about 140,000 customers across much of Southcentral Alaska is keeping regulatory agencies informed of its efforts, including the U.S. Pipeline and Hazardous Materials Safety Administration that regulates the transportation of hazardous materials. Headlamp is happy to hear the appropriate entities are investigating any oil and gas issues as a result of any environmental complications. We hope everyone is okay following the earthquake, and are taking the necessary precautions to prepare themselves and their families for future natural disasters. To learn more about how to be prepared in the case of an earthquake, or other disaster, Headlamp encourages readers to check out the State’s Division of Homeland Security and Emergency Management website.


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First Reads

Governor hires consultants to help sell fiscal plan
KTUU, Austin Baird, January 26, 2016

Alaska gasline project on time, under budget according to manager
KTVA, Liz Raines, January 25, 2016

State’s top tax economist warns that volatility is the new normal
Juneau Empire, James Brooks, January 26, 2016

Earthquake led to surge in gas-leak calls, review of Enstar system
Alaska Dispatch News, Alex DeMarban, January 25, 2016


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The Morning Headlamp — Budget talks and Sen. Murkowski’s global energy plan

January 25, 2016 | Posted in : News

And so it begins. The first week of the new legislative session ended with Gov. Bill Walker and legislative leaders agreeing on a need to work together to confront the state’s multibillion-dollar budget deficit. Now, the work begins. Gov. Walker last week urged lawmakers to work with him to cut the state’s growing multibillion-dollar budget deficit by reducing spending, imposing new taxes and changing the way the state’s oil money is used. At a House Finance Committee hearing last week, Legislative Finance Director David Teal cautioned that after decades of relying on oil money to fund the state government, “now it appears the free ride is over.” Noting that the state’s oil revenues and other income will cover less than 30 percent of this year’s proposed budget expenditures, Teal said lawmakers are quickly depleting Alaska’s oil savings. Without immediate legislative action to fix the state’s fiscal problems, he warned, Alaska faces “the proverbial ‘falling off a cliff’ scenario.” Republican Steve Thompson of Fairbanks, said Walker’s plan has a lot of moving parts. “Most of them, none of us like – taxes, permanent fund spending,” he said. “But it’s our job to figure out which one of those are going to be able to help us into the long-term future.” Headlamp would agree with Rep. Thompson, Alaska needs to focus on policies that work today, tomorrow, and a decade from now. If we can’t look at the big picture, Alaska will continue to fall victim to its own fiscal shortcomings.

AK tops the list. Business Insider recently covered the impact falling oil prices have had on individual states across the country, arriving at the conclusion most Alaskans already know—Alaska is being hit hardest. In a note on Monday, Morgan Stanley’s municipal bond team looked at the revenue shortfall facing Alaska, Louisiana, Oklahoma, and Texas as a result of lower oil prices and less business activity. While Texas is often the state headlined when we talk about bad news for US oil companies, no state has a larger percent of GDP — or is facing a bigger decline in tax revenue — than Alaska. In the face of budget crippling low oil prices, lawmakers this session must produce real results to Alaska’s fiscal problems. Headlamp believes lawmakers who want to solely rely on the ineffective method of trying to tax the state out of a hole, are misguided in their approach to this unprecedented fiscal crisis. Rather than pulling money out of the private economy to prop up state government, lawmakers should focus on crafting policies that help increase oil production and extend the life of TAPS. There would be nothing more helpful to Alaska’s economy and budget deficit, than to increase the number of barrels of oil flowing through TAPS.

According to The Hill, Alaska Sen. Lisa Murkowski, chairwoman of the Senate Energy and Natural Resources Committee, has included liquefied natural gas (LNG) export legislation in a broader energy package that the Senate is expected to consider shortly. An energy package incorporating LNG export legislation modeled after the oil export bill and which includes provisions allowing for emergency suspensions, sanctions and exemptions for “trading with the enemy,” and certainty for industry on permitting, would strengthen our environment, grow our economy and enhance our national security. It would also do the same across the globe. The authors calculate that under the various scenarios, on average, prices will rise by approximately 4.5 percent, or 25 cents, for natural gas in the United States and drop an average of 7.5 percent, or $1.30, for LNG in Asia. Since Europe is dependent on Russian gas, North Sea production and LNG imports, there is no predicted change in its prices. But these calculations do not factor in Asia’s dependency on Russian gas and the potential disruption to gas supplies. Further, the report, which was written before the U.N. climate meetings in Paris, presciently notes that a primary driver in support of U.S. LNG imports to Asia, in particular China, India and South Korea, is a forced shift from coal to natural gas or LNG to help the region achieve its climate goals. But the report does not calculate for the economic benefits of cushioning this transition. This is great news! Headlamp applauds Sen. Murkowski’s commitment to America’s global energy future despite less than ideal market prices. As Headlamp has routinely stressed, the global implications for AKLNG are too good to ignore. Alaska lawmakers should take note of Sen. Murkowski’s efforts, and continue progress on the AKLNG project throughout 2016.

The Interior Department has proposed new rules aimed at reducing methane emissions from the oil and gas industry. The proposed new rules won’t have much impact in Alaska. They apply to operations on federal land, while the vast majority of drilling here takes place on state land. Cathy Foerster, chair of the Alaska Oil and Gas Conservation Commission, said the state already has this issue under control.

Every month, every operator has to account to my agency for every puff of gas they produce,” she said. The Department of the Interior still hasn’t dealt with the so-called legacy wells drilled on federal land decades ago – including one that has been leaking methane for years. Headlamp commends the strong partnership and commitment to responsible resource development and stewardship of our lands between the State of Alaska and industry. We wish the federal government managed and tended to public land in Alaska with the same level of care as the private sector and state have done for decades. As this article demonstrates, Alaskans clearly know how to responsibly develop our resources, while also ensuring high environmental standards that protect public health and safety. It’s time for bureaucrats in Washington, D.C. to clean up the legacy well mess on the North Slope, and allow Alaska to unleash our tremendous resource potential on our public land.


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First Reads

Liquefied natural gas policy overdue for an update
The Hill, Mark Maddux, January 25, 2016

Legislators mull what to do now that oil’s ‘free ride is over’
E &E News, Margaret Kriz Hobson, January 25, 2016

US strategy for Arctic includes the Aleutians and Bering Sea
Alaska Dispatch News, Yereth Rosen, January 25, 2016

The oil crash is crushing Alaska
Business Insider, Myles Udland, January 25, 2016

Alaska legislators to focus on budget, Medicaid this week
Associated Press, Becky Bohrer, January 25, 2016

On methane, Alaska tells feds to clean up their act first
KTOO, Liz Ruskin, January 25, 2016


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Friday’s Fast Five

January 22, 2016 | Posted in : News

With a new legislative session, a budget to agree on, and a megaproject underway it’s hard to keep tabs on everything that happens during a week in Alaska. Headlamp wants our followers to always be up to date with the developments in Alaska’s economy, politics, and industry, thus, we are proud to launch Friday Fast Five. A quick rundown of the week’s biggest stories effecting you. Headlamp knows that a more informed Alaska makes for an innately stronger Alaska. Check out what happened this week!

Top Story of the Week

Alaska’s lawmakers returned for the opening of the new legislative session and Governor Bill Walker delivered his second State of the State. Everyone agrees that the most pressing concern at this juncture is addressing the state’s contentious budget.

Top Reads of the Week

Governor calls for Alaskans to set aside politics, pull together on fiscal crisis during State of the State address
Fairbanks Daily News Miner, Matt Buxton, January 22, 2016
Gov. Bill Walker’s second State of the State address, made when the lifeblood of Alaska’s budget, oil, is trading at $70 per barrel lower than when he took office, referenced a photograph given to him by Lt. Gov. Byron Mallott.

Oil Slump Seen Delaying $380 Billion Worth of Developments
Bloomberg, Stephen Stapczynski, January 14, 2016
Oil’s collapse has delayed $380 billion worth of investment on 68 major upstream projects, according to industry consultant Wood Mackenzie Ltd.

Exclusive: The world’s most expensive LNG projects
LNG World Shipping, Mike Corkhill, January 22, 2016
The second infographic in our exclusive two-party study on LNG project costs lists the world’s ten most expensive projects in terms of total costs and costs per tonne and shows which regions’ LNG projects are, on average, cheapest and most expensive.

Quote of the Week

“I am not flexible, however, on the need to get there this year. It’s time to fix the hole in the boat.”—Alaska Governor Bill Walker (I)


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The Morning Headlamp — State of the State Reactions

January 22, 2016 | Posted in : News

“The budget, the budget and the budget.” Governor Bill Walker delivered his second State of the State address last night and focused on the deep fiscal hole Alaska faces this year amid concerns that historically low oil prices are not going to change anytime soon. On the table for the Legislature are, as Walker acknowledged, nearly universally unpopular fixes such as taxes, deep cuts, higher fees and a reworking of the Permanent Fund that would divert a large chunk of dividends to state government. His proposal is called the “New Sustainable Alaska Plan.” “None of the pieces of the plan are politically popular. I realize that,” he said. “What my team and I strived to do was ensure the process was inclusive and that the final package was fair. At the end of every discussion, we asked ourselves, ‘Is this fair?’ That has been, and continues to be, our internal test of the plan.” Walker is asking lawmakers to approve comprehensive financial reforms this year; without them, the state is projected to spend one-third of its savings. He’s flexible on the details, he told legislators. “I am not flexible, however, on the need to get there this year,” he added. “It’s time to fix the hole in the boat.” Headlamp knows there is nothing easy about overcoming a multibillion dollar deficit. However, low income Alaskans, young Alaskans, workers in the oil, gas, and mining industries, commercial fisherman, and our fellow Americans who travel to see Alaska’s wonders will be impacted by Gov. Walker’s plan to address the budget deficit. In determining if this plan is fair Headlamp urges lawmakers to take into consideration the real struggles of those least fortunate among us who cannot afford the burden of a bloated state government.  

Lawmakers were happy Gov. Walker has positioned his administration to take the reins of budget issues, but not all are convinced his methods are appropriate for Alaska. “What he said tonight sounded less like a vision for the future, and more like a vision of bigger, bloated government,” said Alaskan republicans. Headlamp is glad Gov. Walker is willing to treat the budget as his number one priority, we just hope that his promises of cooperation remain sincere. As Alaskans anxiously wait for budget specifics, lawmakers need to find real results as soon as possible.

Time for a course correction. According to Forbes, a recent S&P report highlights Alaska as one of several states hit hardest by the prolonged dip in oil prices. In a report titled “Collapsing Oil Prices Seep Into State Credit Profiles,” S&P credit analyst Gabriel Petek writes that bottoming oil prices are wreaking havoc on states like Alaska, Louisiana, North Dakota and Wyoming. In the report’s summation of Alaska’s situation, the credit agency highlights the fact that there would still be a $427 million gap after Governor Walker’s measures, a sum equivalent of 9% of Alaska’s projected expenditures in 2017. “Absent a course correction,” says Petek, “we believe the state’s present fiscal trajectory points to potentially weaker credit quality.” As the session progresses, Headlamp hopes more Alaskans realize that Gov. Walkers plan is not the only option lawmakers have to overcome the budget deficit. Even after it would impose $400 million in new taxes Gov. Walker’s plan leaves the state substantially short. We can, and must do better.

Thankfully AKLNG makes the cut. According to a report by LNG World Shipping, AKLNG is not one of the world’s most expensive LNG projects. In fact, the Alaskan megaproject does not even land within the top ten most expensive projects. This is great news for AKLNG! Headlamp has long stressed putting the AKLNG megaproject within the global market context and this is yet another example of why. Thanks to smart policies and cost containment, AKLNG is not on this list. Headlamp applauds the work that has been done on the megaproject but calls for sustained efforts to move the project forward.


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First Reads

Alaskans deserve budget-cut specifics from lawmakers, not empty phrases
Alaska Dispatch News, Dermot Cole, January 21, 2016

Governor calls for Alaskans to set aside politics, pull together on fiscal crisis during State of the State address
Fairbanks Daily News Miner, Matt Buxton, January 22, 2016

Exclusive: The world’s most expensive LNG projects
LNG World Shipping, Mike Corkhill, January 22, 2016

Alaska, Louisiana And The Other States Getting Squeezed By Oil’s Bust
Forbes, Maggie McGrath, January 21, 2016

Walker’s State of the State: ‘The budget, the budget and the budget’
Alaska Dispatch News, Nathaniel Herz, January 21, 2016


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The Morning Headlamp — Govt. Getting Smaller, or Is It? And Gov. Walker’s State of the State tonight

January 21, 2016 | Posted in : News

Shell Games with Government Reductions. State budget director Pat Pitney said Gov. Bill Walker proposes to cut 185 jobs in the next fiscal year, which begins July 1. Those cuts would leave the state with just over 24,000 workers across all agencies, the smallest figure since 2007. Sen. Anna MacKinnon, co-chair of Senate Finance, said the governor’s proposal “hasn’t really reduced spending overall in the state’s budget” because programs including Medicaid Expansion are benefiting from federal payments that reduce the need for state funds. “I’m not sure we’re really reducing state government,” she said. “We’re just moving the shell.” Other senators appeared upset that the governor’s proposal assumes the legislature will completely restructure Alaska’s oil and gas tax credit program and pass the Permanent Fund Protection Act, which would use the earnings of the Permanent Fund to pay for government services and link Permanent Fund Dividend payments directly to oil and gas prices. “You simply cannot cut your way out of the deficit,” David Teal, director of the Legislature’s finance division, told House Finance. While Headlamp recognizes that lawmakers cannot cut their way out of the deficit, we also contend that taxing our way out of it is just as infeasible. The budget put forward by Gov. Walker is not what we had in mind when Headlamp advocated for a smaller government. Real spending cuts, and fundamental reforms to formula driven programs are what Alaska needs, not income taxes and minor tweaks to state government. Sen. MacKinnon accurately pointed out during yesterday’s presentation that the Governor’s budget is using funny math, while Headlamp believes he may be shuffling money around in an attempt to make it look as if he’s cutting the budget.

Cuts won’t cut it. As the legislature gets back into full swing, lawmakers have begun to tackle the budget hurdles facing Alaska. Three Republican senators — Senate President Kevin Meyer, Finance Co-chair Anna MacKinnon and Resources Chair Cathy Giessel — say some combination of budget cuts and new revenues such as use of Permanent Fund earnings for this year are needed to solve the problem. We can’t cut our way out of this. Even if we were to cut $1 billion, we’d still have a multi-billion-dollar deficit, so cuts aren’t the total answer,” said Sen. Cathy Giessel, who chairs the Senate Resources Committee. Giessel’s comments came during a briefing of the Alaska Support Industry Alliance, a contractor group, on Jan. 14. “We have to do this a piece at a time, in a predictable manner that will preserve stability. To make radical changes too suddenly would not be good,” Giessel told the Alliance. Only after government is “right-sized” should taxes be considered, she said. Cuts are the first step Alaska must take to pull itself out of the current fiscal hole. Headlamp also recognizes that fundamental changes to long-term policies will be essential to reigniting substantial economic growth. Lawmakers need to address policies that will incentivize investment in our economy for the future.

Gov. Walker will be the center of attention once again as he prepares for tonight’s State of the State. Interested in what Headlamp thinks he should be addressing? Check it out here. Don’t forget to stick with @AKHeadlamp for rapid updates on Gov. Walker’s plan for Alaska.

As mayors of the boroughs along the proposed Alaska LNG Project corridor debated the appropriate allocation of $15.7 billion the state and local governments could get in-lieu of traditional property tax revenue on the project’s infrastructure, emotions ran high. However, it looks as though the tension may not be completely quelled. FNSB Mayor Karl Kassel has made it clear that he would not accept a scenario in which the borough received a PILT allocation based solely on infrastructure value within local government boundaries. Revenue Commissioner and board chair Randy Hoffbeck offered an allocation matrix at a December meeting that would split the PILT money based on infrastructure valuation, while leaving a small portion for distribution to local governments statewide based on population. Kassel suggested a 50-50 split of the pipeline portion of the PILT based on the location of assets and the population of the jurisdictions within the pipeline corridor. The legislature will make the final decision during the current session, regardless of what is recommended to the Governor. Headlamp hopes that all parties can come to an amicable resolution concerning PILT allocation, and that the AKLNG project continues to move forward without running into politically caused delays.

The people have spoken? The Rasmuson Foundation on Wednesday released the results of a new public opinion poll on the state’s fiscal crisis showing that a solid majority of Alaskans want the Legislature to take steps to fix the problems. The foundation, one of Alaska’s largest nonprofits with $625 million in assets, is promoting a plan to help balance the state’s $3.8 billion deficit that would rely on both cuts and new revenue — two elements that many experts say are necessary, even though legislators have been skeptical about levying taxes or reducing Alaskans’ Permanent Fund dividends. The poll results support the plan promoted by the foundation. 83% percent of respondents said they were less likely to support legislators who take no action to fix the budget crisis. And 55% of people who had heard about Gov. Bill Walker’s proposal to close the budget gap, which involves an income tax and smaller dividends, said they would support it, compared to 32 % who were opposed and 13 % who weren’t sure.  The poll also found that Alaskans oppose implementing a statewide personal income tax by a 15 percent margin. Furthermore, by a 19 percent margin, Alaskans support cutting the state operating budget by another $500 million, knowing it would reduce services currently available to Alaskans. To ensure the most accurate representation of the Alaskan people, Headlamp hopes more polling and robust data is collected from citizens on their views of how the state should deal with the deficit. Overall, we are encouraged to hear that Alaskans are becoming more concerned and aware of the state’s fiscal problems.

There’s a durable sense of weakness in the oil economy and, while recovery is expected, it’s uncertain when, Royal Dutch Shell said yesterday. A spokesperson for Shell said the company was positioning itself for a sustained downturn by cutting capital investments. The company is planning to merge with British counterpart BG Group. Combined spending of $33 billion for the year will mark a 45 percent reduction from its peak. “These actions will include a reduction of some 10,000 staff and direct contractor positions in 2015-16 across both companies, as streamlining and integration of the two companies continue,” he said in a statement. Headlamp hopes that one day in the future, with the right market conditions and policies in place, Shell is able to develop Alaska’s massive offshore oil and gas resources.


Help us spread the word. AK Headlamp is growing quickly, but we need your help to spread the word.  Tell your friends, colleagues, family and more to sign up today for the latest in AK energy, politics and industry.  Subscribe here:


First Reads

State budget calls for fewest gov’t workers since 2007
Juneau Empire, James Brooks, January 21, 2016

Lawmakers begin digging into Walker budget plan
Associated Press, Becky Bohrer, January 21, 2016

Buckling down in face of budget deficit
Alaska Journal of Commerce, Tim Bradner, January 20, 2016

Fairbanks wants bigger slice of $15.7B PILT pie
Alaska Journal of Commerce, Elwood Brehmer, January 20, 2016

Budget expert to lawmakers: ‘The free ride is over’
Alaska Dispatch News, Nathaniel Herz, January 20, 2016


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