Commentary

Fair-undrum

lady of justice

The Lady of Justice weighing the economic production of Rome/Wikimedia Commons

News analysis

The commendable thing about humanity is that humans, at least many of them, believe in the fundamental, philosophical ideals of equality, justice and fairness.

But what happens in a complex economic situation where these concepts are not easily applied? This is one of the big issues facing fisheries management in the state of Alaska today and likely to become an even bigger issue as the state grows, and its economy evolves.

If the economy is allowed to evolve.

As it stands now, it is unfair that the food security of average Alaskans is restricted by the limited means by which they can harvest salmon from Cook Inlet to feed themselves, or that the state’s growing tourism industry can be hamstrung by competition from commercial fishermen who diminish angling opportunities that drive tourism.

That said, it is equally unfair that the commercial fishermen, who have historically caught 75 to 90 percent or more of Inlet salmon, are now expected to give up some portion of that harvest to satiate the demands of a growing population and a shifting economy.

Given the pains of economic evolution in almost every case (see the plight of mainstream media), the shifting economy might be the biggest issue as technology transforms Alaska as it has everything and everywhere else.

Commercial fishermen in the Inlet are not yet vestiges of the past, but they are on the road there. They are the horse and buggy businesses of the 21st Century.

There will always be a place for them. You can to this day grab a horse and buggy ride in bustling, modern New York City. But that’s not the normal way people get around the Big Apple because there are better ways.

Progress

Technology changes the way we live, and it is now causing radical alterations in the production of salmon. When Alaska banned salmon net-pen farming in 1990, thinking the state could corner the market on these fish, wild salmon owned about 70 percent of the global sales.

Today the wild-fish share is down to 25 percent – a significant portion of that Russian, not Alaskan – and the percentage is continuing to shrink steadily. Alaska is in a competition in which it holds the losing hand as University of Alaska Fairbanks (UAF) economist Keith Criddle explained in a 2014 study of the “Economic Importance of Wild Salmon.”

“Over the past three decades, consumers have been willing to purchase ever-increasing quantities of salmon, but only at lower prices,” he wrote. “At the same time, technological innovation in salmon farming has allowed unit production costs to fall fast enough to keep pace with market clearing prices and it has been profitable to increase total farmed production. This has been unambiguously bad news for the producers of wild salmon for two reasons.

“First, there are many impediments to increasing the total production of wild salmon. There appear to be carrying capacity constraints that operate at various scales and in various life-stages of wild salmon. While hatcheries can get around limits to the productivity of freshwater systems needed for the growth and survival of eggs and fry, hatcheries cannot increase the productivity of the nearshore or offshore environments used by smolts and juvenile and maturing salmon. Thus wild salmon-based social-ecological systems cannot compete with farm salmon systems by increasing production.

“Although there is opportunity for price competition based on product differentiation, differentiation does not unambiguously favor wild salmon.”

It is almost like Criddle saw the future. In the five years since the Criddle study was published, recirculating aquaculture system (RAS) salmon farms have exploded onto the scene.

Atlantic Sapphire, a Norwegian company, is well into completion of the first-stage of a massive, land-based salmon farm in Florida that the company projects will be able to meet 10 percent of U.S. demand for salmon by 2027.

And it is not the only company moving away from the sea in favor of salmon farms on land using filtered water and carefully selected feed stock in hormone-free, antibiotics-free artificial environments to, in the words of The Conservation Fund, “reimagine what local seafood looks like, and (provide) an important first step toward a transformed food system where all consumers have access to local, healthy, sustainably grown seafood.”

The Fund worked with Superior Fresh, a Wisconsin company, on a model RAS facility for producing salmon locally almost anywhere water is available in the lower 48. Superior Fresh went to market with its first fish last year.

A blogger for Festival Foods, the Wisconsin supermarket chain where Superior Fresh rolled out its first salmon, pitched the fish this way:

“Six reasons you need to try this delicious fish:

  1. “They’re grown right here in Wisconsin!
  2. “They are grown without any antibiotics or pesticides ever. No contaminants or pollutants like you’ll find in the ocean.
  3. “They’re high in Omega-3 fatty acids.
  4. “Superior Fresh received the Highest Sustainability Ranking of “Best Choice” by the Monterey Bay Aquarium Seafood Watch.
  5. “The fish are fed an organic diet.
  6. “Amazing flavor!”

Competition driving change

Criddle’s warning that “differentiation does not unambiguously favor wild salmon” now appears as if it might have been an understatement. Differentiation of fish marketed in the Superior Fresh-style could well undercut wild salmon pulled from an ocean polluted with, among other things, the microplastics now regularly showing up wild Pacific salmon. 

Were this not enough, the Chinese have entered the game with deep water, offshore aquaculture in the Yellow Sea. Who knows where those pioneering efforts to raise net-pen salmon wherever cold water can be found might lead the salmon-farming arms race while Alaska devotes its efforts to preserving its commercial salmon fisheries unchanged.

The situation is reminiscent of the Poles debating how to maintain their cavalry while Nazi Germany was busy building tanks in the 1930s. Poland, as those who know their global history are aware, was subsequently overrun and occupied.

The world is not an inherently fair place. Societies that fail to prepare for changes on the horizon often suffer severe consequences.

“The second reason that expansion of farmed salmon has been bad news for salmon-based economies has to do with institutional failures,” Criddle writes, “the choice to operate wild salmon fisheries under a race-for-fish allocation scheme. The consequence of which is that ephemeral increases in ex-vessel revenues spur additional capital investment (bigger or faster investment that may increase catches for individual fishermen but do not increase overall catch.

“To defend their individual shares of the overall catch, other fishermen also invest in additional capital and in the end, their costs rise to where they are only just offset by their revenues. When ex-vessel prices fall, fishermen find themselves with capital and operating costs in excess of their revenues with devastating financial consequences to individuals and economic disaster to their communities.

“The seeds of a coming salmon crisis are now being sown in the form of increased orders for new vessels fuelled by recent increases in ex-vessel price. This problem is most evident in the salmon fisheries of Alaska and Canada and to a lesser extent in Russia and Japan where alternative institutional structures lessen the incentive to over-capitalize fisheries and to race for shares of the allowable catch.”

The problem of over-capitalization is what spark pleas for “disaster assistance” almost every time an Alaska salmon run falters, as salmon runs are wont to do, in these times.

“The last few years of commercial fishing for Alaska have turned up poor for various regions of the state, resulting in disaster declarations and potential federal assistance,” writes Elizabeth Earl at the Alaska Journal of Commerce.

“The 2018 season proved no different, with at least two disaster requests in the works at the state level. A third is in process at the federal level, and yet another is finally distributing money to affected fishermen from the 2016 season.”

This is not a good business model, but change is as anathema to commercial fishermen as it is to most Alaskans. Commercial fishermen are now in the middle of a campaign to keep retired Anchorage Superior Court judge Karl Johnstone from returning to a seat on the Alaska Board of Fisheries because he has talked about the need to transition Alaska fisheries as times change.

The complaint from the United Fishermen of Alaska (UFA), one of the state’s most powerful political lobbies, and the United Cook Inlet Drift Association, the most powerful commercial fishing group in the Anchorage area, is that any sort of transition in the face of economic change is unfair to their members.

Reality

“It’s not personal,” Johnstone told the Senate Resources Committee; it’s about commercial fishing interests wanting to hold onto what they’ve got as long as they can because their personal economic survival is more important to them individually (and rightly so) than what is economically wise for the state of Alaska.

The economic picture, as Criddle observes, is complex.

“Commercial, sport, and subsistence fishing, and tourism associated with observing wild salmon and the predators they attract, (all) generate economic activity in salmon producing regions,” he wrote.

 

Only one of those activities – commercial fishing – is facing downward pressure from competition from a similar product in a new, technologically empowered market. The others – sport and subsistence/personal-use fishing and tourism viewing of fish or the bears feasting on them – are actually increasing in value and can be expected to increase in value as opportunities diminish elsewhere.

Proposed salmon harvest limits for all of Washington state are this year smaller than what anglers can be expected to catch in but one small corner of Alaska. The bottom tier of three options under consideration limits the Washington catch to “22,500 Chinook and 94,400 coho,” according to the  Chinook Observer. 

The 2017 Kenai Peninsula freshwater, Cook Inlet saltwater, and Susitna River system coho catch topped that by about 10,000 fish, according to the Alaska Department of Fish and Game, and it was not a great year.

The Chinook catch from the Inlet and Kenai freshwater in 2017 (the last year for which full figures are available) was about 33,000 of those big “kings” as Alaskans call them. And then there was a sockeye salmon harvest – the biggie in and around the Inlet – with a catch of about 350,000 salmon.

Where elsewhere salmon fishing opportunities for anglers are fading, they remain great in Alaska with large opportunities for growth if the state chose to shift salmon allocation from commercial fisheries – which now catch 98 percent or more of Alaska’s salmon and where values are capped by farmed fish – to sport fisheries – where values are uncapped and the fish are already, pound for pound, orders of magnitude more valuable than in the commercial fishery.

But such shift would be unfair – as are most market driven economic shifts – to commercial fishermen who also happen to believe they are owed their choice of livelihood because almost 50 years ago Alaskans voted to amend the state Constitution to allow limited entry in the commercial fisheries.

Commercial fishermen believe that Alaskan voters, having supported their livelihoods since 1972, cannot now withdraw that support. The UCIDA view is representative:

“Most of this increase in the sport and personal use salmon harvest has been taken directly out of the commercial harvest with no financial compensation to the Commercial Fishery Entry Commission (CFEC) permitted users, aquaculture associations or state and municipal governments that receive shared tax revenues. The commercial industry loses the economic benefit of this salmon harvest and the state loses revenue. These losses have never been accounted or considered.”

The state loss of revenue is irrelevant. The state already loses money on commercial fisheries because of the costs of management and policing. The data indicate the state would actually come out ahead if it closed down costly to manage commercial fisheries such as those in the Inlet, according to data from the University of Alaska’s Institute of Social and Economic Research (ISER).

Some Kenai Peninsula communities would lose significant revenue; others wouldn’t. The funds go predominately to communities with major fish processing plants. The City of Kenai gets $150,000 to $220,000 per year. The City of Homer, the so-called “Halibut Capital of the World” near the end of the Kenai Peninsula, gets $22,000 to $26,000. 

The numbers are dwarfed by the approximately $30.6 million in sales tax revenue collected by Kenai Peninsula Borough. About a quarter of that money, or more than $7.7 million, was attributed to visitor spending on the Peninsula in 2015.

Tourism and health care are now the Peninsula’s leading industries, according to a 2016 study prepared for the Kenai Peninsula Economic Development District by the University of Alaska Anchorage.

And there is room for growth in the former. But a sizable segment of the Kenai tourism industry – not to mention much of the Mat-Su tourism industry – is tied to sport fishing, and good sport fishing requires putting fish in the creeks and rivers to be caught.

There is no way to do that without helping the fish escape commercial nets, which means smaller catches for commercial fishermen, and there the issue is once again back to the question of fairness for a few verses future economic development for the many.

Alaskans have been hugely benevolent toward about 11,000 permitted commercial fishermen in the days since passage of the Limited Entry amendment. Does there come a time that they are rightly entitled to expect some sort of payback from the commercial fishing industry?

It’s not a simple question.

 

 

 

 

 

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21 replies »

  1. As a former commercial fisherman, I have to say I am getting tired of those who think the limited entry permit is somehow a guaranteed license to a specific number of fish…or worse yet a right bestowed upon only those worthy enough. “No exclusive right or special privilege of fishery shall be created or authorized in the natural waters of the State.” Article VIII Section 15 https://ltgov.alaska.gov/information/alaskas-constitution/ The permit is a license to harvest a shared and common resource, it provides the permit holder the opportunity to harvest this shared and common resource, and it sees to it that your competition to harvest this shared and common resource is limited. UCIDA and UFA need to rethink their leadership and approach to this issue, since it is where they make their livelihood…the position they are taking is not helpful to the conversation.

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  2. I found interesting the claim that farmed salmon are more biologically “clean” due to lack of exposure to ocean contaminants. I assume these fish farms need a water source and cannot recycle 100%. And that they must also have a wastewater discharge? Where do they obtain their water in Florida?
    I assume fish farms put downward pressure on wild-caught prices? If this continues and consumers more often prefer farm-raised to wild-caught, then the commercial-fishing industry will be forced to downsize or consolidate. Alternatively: become much more efficient by installing fish-traps at the mouths of rivers. The combined commercial and personal-use harvest would then be distributed through a permit system so you can just drive up to the loading dock and drop 25 into your coolers for personal use and 500 at a time for commercial processors.

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    • ‘Aquaponics is the symbiotic relationship between fish, beneficial bacteria, and plants. In an aquaponics system, water from an aquaculture system is fed to a hydroponic system where the by-products are broken down by nitrifying bacteria into nitrites then nitrates. After the nitrates are utilized by the plants the clean water is recirculated back to the aquaculture system with virtually zero waste. By creating optimum environments for all three of these living organisms, we are creating an efficient ecosystem that we benefit from beneficial bacteria.”

      http://www.superiorfresh.com/

      Atlantic Sapphire says this about its existing Denmark RAS operation: “The waste generated in our BluehouseTM is used as fertilizer and creation of renewable energy in the form of biogas.”

      And this about the Florida plant: “Our water source is naturally purified through limestone rock in a sustainable ancient artesian aquifer

      “The water is more than 20,000 years old and has never been exposed to man-made contamination such as microplastics

      “Water is a precious resource that should be used responsibly; we recycle 99% of the water

      “We use mostly salt water and help preserve the Florida source of drinking water.”

      it does not say how it is recycling the water in Florida, but i’d presume its through an operation similar to that of Superior Fresh. the Sapphire farm is in Homestead, Florida’s Dade County which has been called the nation’s “Salid Bowl.” http://www.dade-agriculture.org/p/dade-agriculture.html

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  3. In order of importance, here are the 3 things that can save Alaska economically:

    1. More oil in the pipeline (ie ANWR Drilling)
    2. Rail connector to lower 48 with a larger port that can handle real container vessels used in trans-Pacific shipping..
    3. Pebble mine

    Without these 3 or at least #1………….Alaska is doomed economically and half the population might as well pack up and leave.

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    • Mongo ! Awesome that you are presenting constructive ideas! It’s an interesting idea about a rail connection. Have studies been done ? I don’t see a real need as the ocean doesn’t need plowing, construction or maintenance. It’s a ready highway to our coast which is equal in size to lower 48 . Huge ships can move goods . Also our airports are well developed. So please explain how a rail saves money in the treacherous north conditions. Also why is pebble needed ? Exactly how much money will benefit Alaskans? I bet it’s a smalller amount than you expect. That said I’m hoping 99% of population picks up and leaves . = hunting galore.

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      • A rail link will take 2 days off the great circle route. MATSU would have 2 be the port. Pebble is worth billions to the state if maximized.

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      • Burt pebble is like a gauranteed investment. The value gets higher with age . No sense in tapping into it now . Do it later when worth way more and science/ engineering develops a safer mining method. Win win to wait.

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    • Pebble will provide a few jobs for a few years benefiting mostly foreign companies, and toxic waste for perpetuity waiting for the next big earthquake.

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      • I agree Doug . Do not mine now . Wait until Alaska legislators pass laws that maximize profits so they stay in state .

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  4. It is high time that the state starts looking into what will bring maximum value to the people of Alaska – especially in the Cook Inlet and PWS areas. With these 2 regions easily accessible to the general public, the amount of tourism revenue is not to be scoffed at by businesses nor the state. If I were a commercial fisherman looking at working 45 days during the summer to make my $50k, I would be very interested in trading in my boat for a 6 pack and hauling tourists out to catch a couple of halibut and / or salmon at $350 – $400 per person per day. Seems like a lot less work and you may be able to actually enjoy the scenery along with meeting some new people instead of stacking salmon like cordwood.
    Cheers all!

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  5. I’m from Outside. An anecdote for your digestion: Once a month I am required to purchase a product at out local food coop where all the beautiful intelligentsia go to purchase their food. I always make it a point to spend some time at the fish counter. It is run by a buff millennial who typically wears a kilt with an 18″ Bowie strapped to his belt. A nice guy and expert in his field. After asking him how his air flow is, we talk fish. Executive summary: The discriminating consumer is totally “on” to this issue. They know about the difference between pens and RAS, sea based foods vrs land based ,handling of fish at harvest, etc. His customers will routinely select the farmed over wild. Their decisions are not necessarily based on price alone. So maybe this whole evolution is happening faster than many of you can imagine.

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  6. It’s time for Alaska to use science and economic realities when choosing where to direct policy . I say Craig’s article holds important keys to our states economic future. It’s worth reading carefully. I am of an extreme anti farmed salmon stance. It’s time that stance changed . To hold in one place like a rock while the river flows against means to Be worn away. Time to flex and bend try and get ahead of the game . Let’s put onshore fish farming onto the ballot. There are only benefits. Financial benefits are overwhelming. I will let someone else state details. Perhaps it could even reduce pressure on the wild stocks alowing more for personal and sport consumption. Let’s face our states fiscal reality and get this opportunity on the ballot before we fall behind.

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  7. Wonder if the first farm raised cattle were faced with the same skepticism by market hunters away back when as farm salmon is being viewed now?

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    • to be a market hunter was my childhood dream, Gary. i knew state fisheries biologist who thought it should be allowed in Southeast when i lived in Juneau. Sitka blacktails were harvested way below MSY. there were often massive winter kills as a result.

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