Commentary

Fighting the tide

gillnet jackpot

The winners with a boatload of Bristol Bay sockeye/Wikimedia Commons

News analysis

After three years of work, a University of Alaska Fairbanks study of the state’s commercial fishing industry has reached one conclusion nobody in the 49th state wants to talk about and another that not even the authors of the report seem willing to confront.

The first conclusion is barely disguised in the report:

“Since limited entry programs were implemented in state commercial fisheries, permit holdings by rural residents local to their fisheries have declined by 30 percent. Some
regions like Bristol Bay have lost over 50 percent of their local rural permits.”

In simple English, a system that has proven a bonanza for some individual fishermen has proven a bust for communities in rural Alaska.

Limited entry was established by Alaska voters who in 1972 approved an amendment to the state Constitution to save the state’s over-crowded fishing industry. The amendment allowed the state to establish a fixed number of permits for the various salmon fisheries. It then handed permits out to individual fishermen to do with as they wished.

Permits have been freely sold and bought ever since, and the free market has ruled for better or worse.

“In some regions like Bristol Bay, permit transfer has resulted in a large loss of local
access. Of the 692 local rural salmon drift and setnet permits lost to the Bristol Bay region between 1975 and 2016, over 60 percent (439 permits) have been transferred or sold out of the region,” the report says. “Similar trends are evident in the smaller Southeast salmon seine fishery where permit transfers account for more than 60 percent (30 of 49 permits) of the loss of rural local permits.”

Lifestyle choices

But the problem with limited entry isn’t just the sale of permits to non-residents. It’s also the decisions made by some resident permit holders.

“While a quarter of all state permits are (now) held by non-residents of the state, the increase in permits among this group is not due to sale as is commonly assumed, but rather to the migration of permit holders out of the state,” the report says.

Why would people do this?

Because they can. Because limited entry in some areas of the state did exactly what it was intended to do.

In places like Bristol Bay, it made commercial fishing into a viable business in which one could produce a year’s income in a couple of months. And for some number of people, that sort of economic reality led to a simple, lifestyle question:

Where do I want to spend the fall, winter and spring if I don’t have to work?

For most salmon high-liners, the answer to the question wasn’t Dillingham, Naknek, King Salmon or any other community around the Bay,  or for that matter Anchorage, the largest community in Alaska. For most of the top-earning permit holders, home became an Outside city in a warmer and brighter place.

They took their money and ran.

Outside owned

Of the $72.7 million (after expenses) earned by limited entry permit holders in Bristol Bay in 2010, only 31 percent stayed in Alaska, according to a report prepared for the Bristol Bay Regional Seafood Development Association by the University of Alaska’s Institute of Social and Economic Research (ISER). Almost as much, 26 percent, went south with Washington state fishermen. Residents of Oregon and California near equally split another 8 percent. And 8 percent was spread among residents of other Lower 48 states.

All told, about $50.3 million of the $72.7 million went south. Earnings for fishing crews were similarly apportioned, and those of processing workers were even more weighted toward the Lower 48 because only about an eighth of processing employees working the Bay were Alaskans.

“Even though fewer Washington (state) residents worked in Bristol Bay, Washington residents earned almost as much income working in Bristol Bay—almost $50 million—as Alaska residents,” the reported concluded. “This is because Washington residents earned much more on average from fishing than Alaska residents.”

After the direct output value of the combined fishing and processing was calculated, the report concluded, the split was $263 million for Outside business interests to $126.7 million for those in Alaska.blurb

Pricepoint

Gunnar Knapp, the dean of economic fishery research in Alaska and the now retired director of ISER, once suggested there is a profitability sweet-spot in salmon fisheries that tends to keep permits in Alaska. It could be seen, he said, in the prices at which permits were being traded. Those prices tend to pretty directly reflect the value of various fisheries.

High-priced permits, he said – permits which define big-money fisheries – tend to end up with professional fishermen from the lower 48, and low-priced permits – which indicate low-profit fisheries – start moving to hobbyists from the Lower 48 or Alaska’s major cities who find commercial fishing a fun way to spend the summer in the north.

Bristol Bay drift gillnet permits and Southeast Alaska seine permits are among the high-priced permits. After this year’s record sockeye season in the Bay, drift permits there are going for about $150,000. Southeast seine permits are worth even more.

A 2015 report to the Alaska Legislature put the average price at $307,500 at that time, and said 53 percent of the permits were already owned by non-residents. The report from the state’s Commercial Fisheries Entry Commission (CFEC) also warned that the calculation of Outside ownership was likely low.

“It’s worth noting these are probably conservative representations of the true number of
out of-state-residents,” the report said. “CFEC residency is self-reported, and there’s a significant financial incentive to declare Alaska residency, with few checks or audits.”

 

Nonresident residents

Former Alaska Board of Fisheries member Roland Maw, once the executive director of the United Cook Inlet Drifters Association – the most powerful commercial fishery lobby in Cook Inlet – for years made off-and-on claims to Alaska residency while teaching full-time at Lethbridge Community College in Alberta, Canada.

After retiring as a college prof, he split his time between homes and Dillon, Mont., and Kasilof, and claimed to be a resident of both states. Some serious problems arose after Alaska State Troopers were informed of this dual citizenship. It is illegal to claim residency in two states at the same time.

Maw became the poster boy for bad behavior.

He was found guilty of seven times illegally claiming to be a Montana resident to obtain state hunting and fishing licenses and was fined $7,245 in 2015. The state of Alaska subsequently charged him with 12 felonies for illegally claiming Permanent Fund Dividends, a resident-only benefit in Alaska.

His oft-delayed trial is now tentatively set for early next month in Juneau, but looks as if it could be delayed yet again. Having managed to quash Maw’s first indictment, his attorney is now trying to sink the second.

Maw was never charged in connection with his claims of Alaska residency for commercial fishing purposes. The requirements for a resident commercial fishing license are significantly more liberal than those required to obtain a PFD, and once a resident fishing license is obtained, there are no stipulated standards that must be met to maintain residency.

Being an Alaska resident now saves a Cook Inlet commercial fisherman $215, the non-resident surcharge attached to a 2018 fishing permit. The base fee for the gillnet permit itself is $150. The fee for setnetters is $75.

Cook Inlet is one of the places in the state where the UAF report says the number of permits owned by residents has actually been increasing even though CFEC reports that the earnings per permit have been falling since the start of the decade.

Fishery mobility

According to CFEC records, Dan Anderson, the second vice-president of UCIDA, has been an Alaska resident since 2004, although the Milwaukee Journal in 2011 reported “Dan is planning to move his wife and three kids – the oldest will be a freshman in high school this fall – to Alaska in the coming months.

“He’s got a boat in Alaska, and after years of jetting up there for several weeks each summer, he is ready to make the place home. He says this is the only choice he has because he can catch more fish in one day in Alaska than he can catch all winter off Milwaukee.”

Anderson used to fish Lake Michigan. The Journal could be wrong about when he took up residence in Alaska.

And those most familiar with the Inlet fishery say the biggest change in modern times hasn’t been an influx of professional fishermen from elsewhere – whether new residents or visiting non-residents – but with a shift from professional fishermen to hobbyists.

On one level, the Inlet fishery is reflective of  the graying of the fishing business. There are a lot of old-time Alaskans in the fishery who’ve spent their lives fishing.

But on another level, the fishery is a reflection of the new Alaska order.

Modern world

UCIDA secretary/treasure Dino Sutherland is the general manager at The Alaska Dome in Anchorage, and one of the stars of the former National Geo reality TV show “Alaska Fish Wars.” Before the Dome, Sutherland was the community relations coordinator for the Matanuska Electric Association.

Sutherland has held a series of management jobs over the years. He moonlights as a commercial fishermen because in many, if not most, of the Alaska’s fisheries of today, no one can actually make a living.

The seine fisheries, the Bristol Bay gillnet fisheries, and a handful of others are the exceptions, not the rule.

A whole lot of commercial fishermen in Alaska fish for the same reason sport fishermen do; they think it’s fun, and if they can make a little money on the side all the better.

This is the business into which the state is studying ways to entice young fishermen.

“The geographic and demographic shifts in access to Alaska fisheries are the result of several factors,” says the report on Alaska’s Next Generation of Fishermen. “In our study of fishing communities in Bristol Bay and the Kodiak Archipelago, we found that privatizing fisheries access has created large financial and other barriers to entry into commercial fisheries for the next generation of fishermen and has especially
impacted small rural fishing communities.”

That’s clearly part of what is preventing young people from owning more fishing permits.

But the problem is bigger than that, and it isn’t just because of the declining value of many fisheries. Cook Inlet fisheries values have decreased steadily from a worth of about $55 million in 2011 to $25 million in 2016. 

There are now too many permits and too few fish in the Inlet for anyone to make much money in a market that is overwhelmingly dominated by farmed fish that produce a constant downward pressure on price.

Salmon prices dictated by farmed salmon are the sad new reality for Alaska fishermen, but even this might not be the biggest problem facing the state’s remote communities.

There is that issue no one in Alaska really wants to confront.

Rural flight

The world today is evolving at a digital speed, and everywhere people are abandoning rural areas for urban areas because that is where the opportunities of tomorrow are going to be found.

From Europe, Tobias Buck of The Financial Times writes of a “Spanish exodus to the cities (that) leaves a desert in its wake.

“All around Motos, in Spanish inland provinces such as Teruel, Guadalajara and Soria, villages are gradually being abandoned. A process of depopulation and rural flight that has lasted more than five decades is drawing to its seemingly inevitable conclusion.

“What is left behind is a region twice the size of Belgium but so devoid of people that it rivals the Arctic provinces of Lapland as the least populated zone in Europe. For every square kilometre, there are fewer than eight inhabitants.”

Type the words “rural flight” into Google and headlines pop up from around the world.

“The Rural Exodus: A challenge for developing countries” “States Try to Counter Rural Flight”  “Mismanaging China’s rural exodus”  “India’s urban migration crisis” “Russia’s Ghost Towns”

The stories go on and on. Google counts 6.7 million hits for the term “rural flight.” There are good reasons to believe the economic problems of rural Alaska fisheries are bigger and more fundamental than limited entry simply pricing young people out of the fishing business.

There are reasons to believe that some number, possibly a significant number of people, would move to larger urban areas anytime they could afford to move. Paula Cullenberg, the lead author on the Next Generation report, counters that “the villages are still growing.”

Some are; some aren’t. Dillingham’s population is down about 3 percent since 2000; Nanek’s population is down 20 percent.The two communities are focal points for the Bristol Bay fishery.

To the north on the Yukon-Kuskokwim River delta, Hooper Bay has grown steadily since 2000. It is now significantly bigger than Naknek. But most of the growth has come from a high birth rate in recent years. The average age in the community is 19.

The village doesn’t have any Bristol Bay-size resources nearby to support it, either. Fishing opportunities are limited. Almost 30 percent of the population is living below the poverty line.

A systemic fail?

The problems in rural Alaska are not simple and have no simple solutions. Tweaking the existing system to provide access to some commercial fishing might help a few people in a few places, but it’s legitimate to ask whether it’s worth the cost.

“Is the system we have the best way to keep these communities?” Cullenberg asks.

The evidence would appear to say no, but there are other questions to be asked:

“Would any other system be all that much better? Is any other system feasible?”

Especially to a lot of people in rural Alaska, limited entry might look like a failed experiment, but “I think the people who created that system wouldn’t agree,” Cullenberg admitted. Some of those people are still deeply imbedded in Alaska politics.

Some of them will only reluctantly concede that maybe, maybe, limited entry suffered somewhat from what Cullenberg termed “unintended consequences.” There does seem to be agreement that the commercial fishing business is in need of new blood.  The average Alaska commercial fisherman is now in his or her 50s.

The problem is that there aren’t many in the AARP who want to give away their permits. Resident or non-resident, they are holding a valuable commodity. They understandably want money for it. And it is doubtful there are many among them who would want the state do anything that diminishes the value of their permit or decreases their fishing opportunities.

There are legitimate reasons to wonder if any the reforms suggested to date would do anything but take Alaska on a long journey back to where it is now. The Cullenberg-led study suggests creating “limited community quota freely accessible for fishing community residents and quota-free fisheries restricted by landings and seasons.”

But if those fisheries are “limited,” how would they produce enough revenue to support anyone? And if they are simply “quota-free and restricted by landings and seasons,” the state is back to where it was before limited entry only with limited entry, too.

Certainly, there are a lot more fish to go around these days then back in the pre-entry days. Limited entry arose in the midst of a salmon fishery collapse. The 1972 harvest was only 30 million fish. The harvest this year was 225 million.

The state has now gone 30 years with harvests above 100 million salmon per year, and the decadal average appears to be somewhere in the range of 150- to 160-million. But most of these fish are already fully allocated between commercial, sport and subsistence fishermen.

It’s hard to imagine the Alaska Board of Fisheries agreeing to create new fisheries in places where fishermen are already fighting with each other over every fish. It’s even harder to imagine the limited-entry permit holders in the United Fishermen of Alaska, who have a history of going to court, welcoming the creation of new commercial fisheries.

There is no doubt the Alaska fishing business needs radical reform. It is a 21st Century business using 19th Century tools and harvest techniques. The very top of spawning goals were exceeded by more than 5 million salmon in the Bay this year because the system for catching and processing salmon couldn’t handle the return.

At the average weight of 5.5 pounds, the rivers of the bay were “over-ecaped” to the tune of 27.5 million pounds of salmon. At $1 per pound, that’s $27.5 million gone for no reason other than that the technology couldn’t handle the return.

That would seem to offer a big incentive to do things differently, but change is hard. Very, very hard.

 

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26 replies »

  1. Craig,
    How much capital does the state of Alaska have tied up in their commercial lending program for the fishing industry up here?
    These figures are not talked about…
    Obviously, this money could be spent in other arenas…
    When did the state of Alaska become a bank for fishermen and women?
    Can we the citizens vote on the future of this program or is it “Clandestine” like most of Walker’ s budget decisions?
    Seems like if this industry is too risky for regular commercial bank loans then we should not be involved with financing it’s future with state of Alaska held funds.
    Most boats out in the fleet are in debt to the state for new vessels,permits, engine over hauls, new nets…all kinda stuff.
    The only thing the state is not paying for these days is the fuel in the tanks.
    Seems like a government controlled industry and not the free market economy at work these days.

    Like

    • What is your reasoning for such a change?
      Just my opinion, here but the courts would crush anything like that in a NY minute. This is a Commerce issue and there would need to be a good reason IMO. We not only have other Americans in the fishery, but also non US residents participating.
      It’s been some time now but the State for years collected much larger permit fees for non-Alaskans (three times resident fees if I recall). The courts objected and the larger fees needed justification. They still collect additional fees but not nearly as much.

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      • Actually Bill,
        It would have been the wealthy non resident permit owners who objected to the “tax”…they in turned hired expensive lawyers who in turn fought their positions in the state courts.
        The judge usually sides with the more affluent attorney in the “justice system”.
        This paradigm is the reason our state’s economy is in the shape it is in.
        The Attorney General has stated her office does not have time to prosecute criminal offenses because they are burdened by such unessacary commercial litigation in throughout this state.

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      • https://www.adn.com/economy/article/state-appeals-latest-ruling-1984-fishing-license-suit/2010/03/24/
        Nothing in here suggests anything like “wealthy non resident permit owners” were responsible in the class-action situation and further, your “expensive lawyers” is a bit redundant IMO.
        Basically the State couldn’t justify the three-times multiplier for the permit fees and the courts agreed.
        So the AG is upset about the State making laws it can’t back up causing her to run short of time??? Well governments do this all the time which is exactly why the courts are necessary IMO. Why, just imagine this US administration running amok without the courts-they’ll just have to make the time, or crime will get out of hand. Heheh!

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      • Bill,
        You actually proved my idea well.
        After 5 appeals of the same case, the state was worn out.
        The Attorneys were awarded 7.5 million out of the state coffers which was quite a lot in 1984.
        How are we allowed to charge more for out of state hunting and sport fishing licenses, but when big money is in play, all bets are off the table?
        Seems like special interest groups pulling the strings in Alaska once again.

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      • I’m not sure what it is that you are outraged about, Steve. Outside interests have always been allowed relief, through the courts, as its a constitutional right (both state and federal).
        As far as whether/not our hunting and sport fishing licensing fees for non-residents would hold up is something that I suspect has not been tried, as yet. Not sure but I suspect our laws here are similar to other states treatment of non-residents. It’s clear that additional fees can be collected but there must be some reasonable justification for them. Of course, the definition of “reasonable” might be different for you.
        Sort of like how “reasonable” gun-control laws differ for different people.

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      • I guess it all comes down to who should make the rules in Democracy…the majority of the people who live there or the wealthy foreign merchants entitled to the resources of the land.
        Unfortunately our state and country has a history of siding with the later group here.

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      • While you might think majority rule is the way to go on these constitutional issues my guess is that is foolish and a look at what Don Trump is attempting (immigration for example) is my reasoning. Certainly possible that Trump doesn’t have a majority but to ask him he does (Congress agrees with him, for now).
        At any rate, this isn’t rocket science IMO. You think majority should be able to put their boot to the throat of the minority-the courts tend to disagree. The only way I get on board your thinking is if I’m specifically on any/all committees deciding the rules.

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  2. Well we can’t thank Alaska State fisheries managers enough since statehood for managing our publicly owned resources, fish, for abundance. Otherwise we wouldn’t get to engage in this fight over who gets to reap the rewards, the public who own the fish or the commercial fleet who catch and sell the fish to us? I get a kick out of hearing Alaska Board of Fisheries members declare “the fish are already fully allocated”, like that allocations can’t be reshuffled. Welcome to the 21st Century.

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  3. So the government restricts the number of used cars (other than the Obama buy back cash for clunkers) and other commodities? The market for fishing permits is limited, just like the recent taxi issue in los anchorage, that is the primary driver in cost. When you upset supply and demand by restricting the supply prices will rise unnaturally. While permit holders can freely sell their permits it is not a free market.

    I’m not sure buying a permit is worth the cost for 25+ fish but to ech their own. Now if you were to get your food handlers card, or whatever it is you need to sell directly, you could probably make a good deal of money selling to disenfranchised dippers and they could save time and money.

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    • and both of the Tom Tomrdle’s, junior and senior, are commercial fishermen and driftnet permit holders. and sadly this is the kind of comment critics of the whole Alaska salmon management scheme would expect of commercial fishermen. joining the discussion just to call other people names because you don’t like the realities of the situation reflects badly on all commercial fishermen. so as a note to anyone else reading here, the Tomrdles (whichever one posted) appear to be the exception not the rule among Alaska commercial fishermen. most commercial fishermen appear to recognize all or some of the problems, which is one of the reasons they convinced Congress to set up a permit buyback program in Southeast. one can have an interesting debate about whether that was in the state’s best interest or not, but it did increasing fishing efficiency. and if the existing styles of fishing are going to survive as businesses going forward they need to get more efficient because the salmon farmers have taken over the market. http://www.nmfs.noaa.gov/mb/financial_services/southeast_alaska_purse_seine_salmon_buyback.html

      Liked by 1 person

  4. “Permits have been freely sold and bought ever since, and the free market has ruled for better or worse.”

    How exactly could a limited entry system ever be conflated with a free market system?

    I really need to remember to buy a permit (especially if I can get one from an out of stater) the next time prices are down, sounds like Cook Inlet might be heading in that direction.

    Liked by 1 person

    • because the permits are freely traded, like used cars or any other commodity. prices go up and down precisely because the market is free to determine what they are worth based on market conditions. north end cook Inlet permits are pretty cheap now, but the fishermen there also don’t catch much. the prices are almost low enough i’ve had friends consider a buying one rather than dipnetting.

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    • Since there’s no such thing as a free market, Craig’s obviously talking about a free market in one particular limited resource (which seems to have similarities to NYC’s taxi medallions).

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  5. Craig, your mentioning “catching” the salmon as one of the problems with this year’s BB over escapement is the first I’ve heard that this had anything to do with it. Most fishermen were put on limits, due to processing capacity was maxed out. Where was the catching any of the problem?
    For years the fishermen have pursued foreign processing, to take care of this situation, and the domestic processors have insisted they were capable of the catch. I suspect there will be some additional push for offshore processing capacity being done after this loss ($27.5 million is serious money IMO).

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    • Bill: didn’t you just answer your own question? once someone on limit reaches their limit, they stop fishing; they’re not catching anything. that’s a catching problem. and yes, it’s mainly a processing problem, but as you clearly know, the question of how to fix that gets complicated.

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      • Boy, who would have thought that things like coal production slowing down was due to those coal miners being laid off (if they’re laid off they aren’t mining coal).
        Yessir, up is down sometimes and it gets complicated.

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  6. Not mentioned by the UAF study or in this article is a basic reason why permits have left rural areas since the limited entry program started. And that reason is the State of Alaska made a big mistake by giving large liquid assets to people with little education and no money management skills. Just like the disasters that have been seen when, for example, Appalachian illiterate and inbred hillbillies win a state lottery, the same happened all over Bristol Bay and other areas of Alaska. When many Native Alaskans got an asset that could be converted to $100,000 or more in cash, many quickly and stupidly cashed out. Often for way less than the permit was worth. And instead of keeping an asset that could feed and house them for decades, they traded it for booze and a trip to Las Vegas.

    Though it is not politically correct to point this basic fact out, it happens a lot in Alaska. A classic was when CIRI, in the Carl Mars days, made a windfall profit with Spectrum Wireless stock (just before the dot com bust). A one-time distribution of $60,000 was made to all CIRI members (but of course, Mars and his cronies pocketed millions). Anyway, most of this money was quickly passed on to truck dealerships and vacation destinations. Most likely very little was ever invested wisely. And that is no surprise. Because the people that got the money had no money management skills. But then again, in Alaska you can’t just pick on Natives for not having money management skills. Our governor and politicians share in this money-management-clueless Alaskan tradition too.

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    • Another reason, you didn’t touch on James, was some folks (with permits) felt that the new limited entry law would be thrown out by the courts. Had this situation occurred, those that sold out would have pocketed the money and just gone back to fishing, as usual. Unfortunately for them, the courts upheld the new law.

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    • it’s not a race issue, James. i’ve known plenty of white boys who did the same thing, and i knew a legion of them who made more money than they ever imagined working on the construction of the Alaska oil pipeline and managed to piss it all away in a very short amount of time.

      Liked by 1 person

  7. The author is confused. The commercial fisheries are alive and well.
    The issue is the politics want this industry to stay in the 1900s.
    Thats like keeping phones hooked to party lines and only dial up.
    Or having doctors make house calls only with a black bag.
    No it would be great to have fishing stay in the 1900s but the rest of the worlds fishing fleets will modernize and put
    us out of business.

    Our fishing industry now has a bankable asset, permits and ifq. We can get loans now to upgrade and compete in the world markets.

    The price of boats and gear will not stay in the 1900s cost level of a couple of hundred thousand. They run from 500,000 for a bristol bay gillnetter to 3 million for a 58 foot combination boat.
    To stay in the mentality of the 1900s era and try to socialize a free enterprise system will only kill a viable industry.

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    • if only it was so simple, Bill. you’re right that we’re mired in the past, as the story notes. but if you think the path forward is as simple as just injecting more capital into the system so you can buy a better boat, you’re just being naive.

      Like

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