August 10, 2012 • Vol. XXXV, No. 14

Serene Setting above Skagway

Upper Dewey Lake as seen from the Devil’s Punch Bowl trail on a rare sunny day in July. See more of intern reporter-photojournalist Kile Brewer’s favorite photos and a farewell to Skagway on page 12 of our print edition.

Photo by Kile Brewer

AIDEA not impressed with tidelands lease proposal
Borough Assembly wants tonnage fee, limits on truck traffic – along with rent

By KATIE EMMETS

The Skagway Borough Assembly will see the second reading of a proposed Alaksa Industrial Development and Export Authority waterfront lease at an August 16 assembly meeting. If passed, Ordinance No. 12-18 would put the lease on the ballot for the regularly scheduled October 2 election.
However, AIDEA has “grave” concerns about what was just given them.
According to the ordinance, the lease would begin March 19, 2023 and last 35 years. The initial rent would be 10 percent of fair market value with a possibility of adjustment after the first two years.
The proposed lease would also require AIDEA to pay $15.65 to the municipality for each ton of mineral ore that passes through the ore terminal and ship loader to be exported. There would also be a $0.35 per ton charge for an environmental escrow account, which would cover any damage to Skagway’s environment caused by ore haul.
If adopted as is, the lease would restrict the amount of Skagway highway traffic by placing a 650,000 tons per year limit on truck transportation and allowing trucks to deliver ore only from 7 p.m. to 7 a.m. from May 1 to October 1.
The lease was developed at AIDEA’s request and would allow the agency to lease the Skagway Ore Terminal property after its sublease with the White Pass and Yukon Route railroad expires in 2023.
Since 1968, White Pass has leased Skagway’s waterfront tidelands on the west side of the harbor. In 1990 AIDEA purchased the ore terminal and ship loader from the railroad and entered into a sublease with White Pass for the land the ore terminal occupies.
“It is important to be able to provide long-range certainty to Yukon mining operations that desire to use the Port of Skagway to export their product,” AIDEA spokesman Karsten Rodvik wrote in an earlier e-mail. “These new mines have potential operating lives of more than 30 years, which requires that AIDEA's ore terminal be operational beyond 2023.”
Karsten also wrote that AIDEA cannot issue bonds to fund a significant investment into a Skagway Ore Terminal unless it has control of the asset over the term of the bonds, adding that AIDEA would not be able to issue a bond for 30 years when the current lease says they can only use the site for ten more years.
The Skagway Borough Assembly and borough attorney Bob Blasco have been working on the proposed lease in closed-door executive sessions since the spring.
“The AIDEA lease negotiations came out of the failed efforts to renegotiate the White Pass lease, which resulted in some concern of potential litigation,” said Mayor Stan Selmer. “At that point, the assembly followed state law and the borough code to go into executive session as to the White Pass lease and any efforts to negotiate with the subleases, including AIDEA.”
In addition, Selmer said, when Selwyn Chihong Mining Ltd. and other private companies approached the municipality, they raised confidentiality aspects that fell under Skagway code section 3.01.072.A.1.a, which states subject matters that can be considered in executive session are matters that “the immediate knowledge of which would clearly have an adverse effect upon the finances of the public entity."
The proposed lease became available after a July 26 executive session, and AIDEA received the lease proposal on August 1.
“There are a couple of issues I would characterize as grave,” said Jim Hemsath, AIDEA’s deputy director of operations.
Hemsath said the authority briefed the lease proposal in its entirety the day the lease was received and has been reviewing specific details since.
“We’re seeing a new aspect where the municipality wants to charge a fee per ton of ore,” he said.
Hemsath said the collective $16 fee could have the potential to make ore terminal operations uneconomic.
As per its current 1990 lease with White Pass, AIDEA has never paid any fees per ton of mineral ore passing through the terminal.
But White Pass did attempt to charge an additional fee for the movement of ore in the form of wharfage five years ago when Minto Mine began shipping copper through Skagway’s ore terminal.
In 2007, White Pass delivered an invoice for a $2-per-ton-of-ore wharfage charge to the mining company.
In March 2011, Minto filed three motions in federal court alleging breach of contract, discrimination, and a claim of declaratory judgment, and the matter was argued before the judge on Aug. 4 in Anchorage.
On August 12, 2011 a federal judge ruled that White Pass was not justified in charging the mining company for wharfage.
“It also appears that the limitation the municipality has put on the amount of ore that can be shipped each year is not consistent with the Gateway Project,” Hemsath said, adding the Gateway Project lists the yearly ore shipping limitation as one million tons per year.
Hemsath said one Yukon mining company, in the early discussion stages, expressed having the capacity to ship 700,000 tons through Skagway.
That number has since gone down, he said, but the mining company said it could have the potential to build up to 700,000 per year in its later stages.
“It all depends on how much business the city wants to have,” Hemsath said.
Mayor Stan Selmer said the ore limit, which is only for trucks, does not include ore brought in by rail.
“It’s no secret that the borough wants the railroad to be a major mover of ore in the future,” Selmer said, adding that a railroad ore haul would bring more year-round jobs to Skagway. “We want more than one million tons of ore to come through here, but we don’t want it to come through by truck.”
Hemsath said AIDEA is not going to get mad or go stomping out the door over the issues it believes to be serious.
“We’re here to work with the municipality to achieve something that’s in the best interest of everybody,” he said.
Hemsath said he was completely unaware that the lease became public before AIDEA received it, and was also shocked that the assembly voted on the first reading of it before the authority had a chance to respond with concerns.
In an August 2 meeting, the assembly passed the first reading of the AIDEA lease ordinance without any discussion.
The vote was 4 to 2 with Assemblymen Dave Hunz and Mark Schaefer voting no.
Hunz said he couldn’t support the ordinance the way it was written with limitations on trucking and tonnage.
He added that he thinks it would be economically beneficial for Skagway if it allowed more than 650,000 tons of ore via truck per year and expanded it’s allowable trucking hours of 7 p.m. to 7 a.m. in order to accommodate more trucks to generate more revenue.
Hunz, whose company Mineral Services is the terminal’s operator, also said that by limiting the amount of trucks, the municipality is discriminating against only one entity, as it would not restrict buses, tour vans or privately owned vehicles.
Hunz noted that his contract currently is with the Minto Mine, and not with AIDEA, and that there was no direct conflict of interest for him to be part of the AIDEA lease discussions and voting.
In order for the proposed lease to be enacted, Skagway residents will have to vote on it.
According to Skagway Municipal Code 16.02.025, “Ratification of the ordinance by the voters shall be required when the value of the lease payments over the entire term of the lease payments over the entire term of the lease exceed $250,000.”
Selmer said he is anticipating a response from AIDEA this week, and added that he hopes to hear the authority’s needs for the lease.
If the lease needs to be amended after hearing from AIDEA and it’s not in its final form by the August 16 assembly meeting, members will have the option of voting the ordinance down in order to give themselves more time to work on lease details, said Skagway Borough Clerk Emily Deach.
But for the AIDEA lease to be on the October 2 ballot, the ordinance would have to be passed by August 17 the date the ballot goes to print.
If the ordinance does not pass on August 16, there would need to be a special election at a later date, Deach said, adding that this is the first time a lease has been forwarded to Skagway voters.

EPA holds off on action, alternative fuels explored

By KILE BREWER

The Environmental Control Area rule, which requires ships to run on 1 percent sulfur diesel, went into effect on August 1, but there may be a cost-effective alternative for some in the shipping industry.
The Totem Ocean Trailer Express (TOTE) company, a shipping company based in Tacoma, Washington, has found a way around the ECA with Liquefied Natural Gas, according to a TOTE press release.
The company received a conditional waiver from the Environmental Protection Agency and the United States Coast Guard that will allow them five years to convert their ORCA-class ships to LNG, instead of the low-sulfur diesel required of every other ship travelling along the coast.
This would be the first conversion in the world of this type of ship to LNG, according to TOTE, which will require the creation of large-scale LNG trade and advance technology so that other large ships can also make the switch.
Alaskan Senator Mark Begich sent out a press release praising the agreement between TOTE and the EPA.
“The permit will help protect Alaskans from increased shipping costs, expand the market for natural gas and ultimately lead to even cleaner air than ECA requires,” Begich said. “TOTE’s project will be the first major use of LNG as a ship fuel in the United States, and others in the maritime industry are sure to follow.”
LNG is cheaper and cleaner than 1 percent sulfur diesel, and when TOTE finishes converting their boats they will be the cleanest burning ships in the world, not only reducing sulfur emissions, but also drastically reducing carbon dioxide and other harmful fumes from polluting the coastal air. If things go according to plan for TOTE and Begich, LNG will become a widely used alternative to current maritime fuels.
Unfortunately for the cruise industry, LNG isn’t a practical option on passenger ships, said Alaska Cruise Association President John Binkley.
In an interview this week, Binkley said aside from the physical limitations of cruise ships that wouldn’t allow for large LNG tanks, the passenger vessels won’t be able to find enough LNG at the ports where they refuel.
TOTE’s ships follow the same path, stopping in Tacoma and Anchorage.
These ports will have LNG in large enough quantities, but the ports in Southeast Alaska where cruise ships get fuel won’t, he noted.
As for other ships, the ECA officially went into effect August 1, although no formal enforcement actions have been taken, said an EPA representative in an e-mail.
The only exceptions to the rule are ships that can’t find the fuel, which can make a non-availability claim to the EPA.
“To my knowledge (cruise ships) are all complying with the law,” Binkley said, “But the cost is significantly more than they had anticipated.”
The reason for the increase in cost is an overlooked logistical issue with refineries who don’t make 1 percent sulfur diesel, Binkley said. They’re having to blend regular maritime fuel with ultra-low sulfur diesel to create fuel in the 1 percent range, this makes for a 35 percent increase in fuel costs for the ships using blended fuel.
“Refiners don’t really want to make this fuel, because at the end of 2014 they’ll have to switch to the 0.1 percent” Binkley said.
Not only is the ECA-required diesel more expensive, but also the blending of other fuels has decreased their supply, raising those costs as well.
The Skagway Borough Assembly recently voted to oppose the new ECA rule, and the state has sued to try and stop them from being implemented.

Hunz, Brown to run again; Cochran, Ellis will not seek reelection on October 2

By KATIE EMMETS

Skagway residents have until Monday, Aug. 13 to file for two Skagway Borough Assembly seats and two Skagway School Board seats, which will be voted on in the October municipal election.
Dave Hunz and Tim Cochran hold the two assembly seats up for election, but only one incumbent plans to run again.
Fifteen-year borough assembly veteran Dave Hunz said he has already filed for candidacy and will be running in the upcoming election.
Hunz said he enjoys contributing to the municipality where he’s lived in his whole life.
Hunz was the only candidate who had filed as of this paper’s deadline.
Tim Cocrhan said he would not be running again, as he would like to spend more time with his family this year.
Cochran’s son, Airk, will be a senior in high school and is an award-winning athlete. Cochran said he wants to attend as many of Airk’s sporting events as he can.
“I enjoy being on the assembly, and I plan to do it again,” he said. “But I want to take at least one year off.”
Cochran added that he would consider running as a write-in candidate if no one else files for candidacy.
The two Skagway School Board seats up for election belong to board president Christine Ellis and board member Stuart Brown.
After holding a seat on the school board for 12 years, Christine Ellis said she would not be running again in the upcoming election.
“Lots of new changes with technology are underway, and I feel like now is a good time for new, innovative people to get on the board and keep moving forward,” she said.
Ellis was the board president for nine years, and she said she thinks the school is in a good state.
“The staff is doing a great job; improvements are being made; and hopefully the worst of our enrollment issues and cuts are behind us.”
Stuart Brown, who has been on the Skagway School Board for three years, said he will be filing for candidacy for the October election.
“I am going to run again mostly because I want to see through and finish the things we’ve started,” Brown said.
For the past three years, Brown has voiced concerns with the current level of standards and curriculums set forth for Skagway students, and he said he thinks the board is about to make a lot of progress in those areas.
Skagway residents who wish to put their names on the ballot for any seat up for election are required to submit a declaration of candidacy by Monday at 5 p.m., and forms can be found at Skagway City Hall.
The terms of all four seats are for three years, and will expire in October 2015.
The regular election will be held on Tuesday, October 2 at City Hall.
More election information can be found at www.skagway.org .

Nadia White is all set to depart Coupeville, Washington in late May at the start of her journey to trace the route of her great grandmother Josephine. She paddled all the way to Juneau, before joining her parents on the ferry to Skagway. See link to her feature below. Courtesy of Nadia White

HISTORY FEATURE: Up the Inside Passage with Josie to meet The Stroller

BOROUGH DIGEST (complete report in print edition)

Assembly may return federal Denali grant
Local preference nets Hamilton boat harbor project
With a unanimous vote, the assembly awarded the contract for the Small Boat Harbor improvement project to Hamilton Construction, LLC, as soon as the municipality returns a $650,000 grant to the Denali Commission.
After receiving three total bids for the project, Hamilton Construction was $140,000 higher than the next highest bid, but, with the city’s 5 percent local preference, Hamilton was the lowest bidder.
The only problem was that the Denali Commission had awarded the municipality $650,000 of federal money for the project, and if it used those federal funds, it wouldn’t be able to allow the local preference.
Since Skagway already has $10 million in grants for a project that will cost $9.7 million, according to Hamilton’s bid, the municipality will be returning the money, or suggesting it be used on phase two of this project or other projects in the future. – KB

No change in legal services, annual review needed
The municipality’s legal services won’t change for the time being, after a brief assembly discussion at last week’s meeting.
After receiving a letter giving a quotation on legal advice for Skagway, Mayor Stan Selmer brought it to the assembly’s attention.
“This is not Stan making another run at getting rid of (Borough Attorney Bob) Blasco,” Selmer said. “I’m very, very comfortable with the relationship that I now have as Mayor with Mr. Blasco. I wasn’t comfortable initially when I was elected.”
Members of the assembly discussed legal issues they’ve seen in the past and how to avoid the same issues in the future.
“We need to review our legal services annually and decide if they’re meeting our needs,” said Assemblyman Dave Hunz. “We’ve had some hiccups here in the last two years where we’re asking for information and we’re not getting it in a timely fashion.”
Hunz explained that their needs to be some sort of recourse for failing to present legal advice when the borough needs it, hence the necessity for regular check-ups. – KB

SCHOOL REPORT (complete report in print edition)

School sees new Language Arts curriculum
The Skagway School Board on Aug. 7 adopted a new Language Arts curriculum that will be implemented starting this year.
After not having updated that particular curriculum since 1992, the school’s faculty and board members agreed that it was time for a change, and Language Arts was the first of four subjects to be updated.
The new Language Arts curriculum will align kindergarten through twelfth grades, and there will also be a program for the preschool to follow so students will be prepared when they enter kindergarten.
Superintendent Jeff Thielbar said Skagway students would benefit from the new curriculum, as it is aligned with the Common Core State Standards. According to its website, the Common Core State Standards Initiative is a “state-led effort coordinated by the National Governor’s Association Center for Best Practices and the Council of Chief State School Officers. The Standards were developed in collaboration with teachers, school administrators and exports to prepare children for college and the workforce.”
Although Alaska was not one of the 47 states to adopt the standards, Thielbar said he wanted the Skagway School curriculum to align with the Common Core Standards because he wants to give students the best education they can get.
The new curriculum was designed by five Skagway teachers, and will cost $18,214.
Teachers will begin implementing the program on August 15, the first day of school, but full implementation will not occur until the 2014 school year.
Because this is the is the first year for the curriculum, board member Cara Cosgrove wanted to ensure there was room for tweaking the programs if it was necessary. Thielbar said it would be easier to make amendments to this curriculum than ever before because it is written electronically, whereas it was always typed on paper in the past. – KE

Alcohol, drug and tobacco policy amended
At the Aug. 7 meeting, the school board discussed the Skagway Schools alcohol, drug and tobacco policy.
As of last year, if a student were found partaking in any alcohol, drugs or tobacco, on or off school grounds, he or she would be suspended from any school activity for a 30-day period.
Last year, however, several students were found in violation of the policy and were given an amended punishment.
While discussing current policy and practice, board members all expressed a desire for the policy to be changed.
Cara Cosgrove said she liked the way administrators handled it last year, with a 10-day suspension from extra-curricular activities, 20 hours of community service, and complete an Alaska Student Activities Association online course on the effects of alcohol, drugs and tobacco.
Cosgrove also added that students in violation should have the choice between the 30-day suspension and the amended punishment.
Board members agreed with this policy amendment, and Thielbar said he would draft a new policy in the next couple days so it will be in the handbook by the time school starts on August 15. – KE