What would Alaskans think if the state dealt fiscally with the oil industry the way it does with the fishing industry?
The question begs to be asked with the issuance of the latest Alaska Department of Fish and Game report on wildlife and fish harvests in the 49th state.
Of all the fish and wildlife killed for food in Alaska in 2017, the report says the commercial fishing industry accounted for 98.6 percent by volume. About 85 percent of the remaining 1.4 percent went to individual Alaskans.
Less than half a percent – 0.2 percent to be specific – was harvested by nonresident hunters and fishermen. Those are the folks sometimes criticized for dragging full coolers through Anchorage’s Ted Stevens International Airport on their way out of Alaska though their harvests are lost in the noise of the 98.6 percent share of commercial fish shipped Outside or to China to be processed before being shipped to the Lower 48.
Since fisheries overall are a money loser for the state, according to a study by the University of Alaska’s Anchorage Institute of Social and Economic Research (ISER), individual catches and kills of fish and wildlife by Alaskans are the only general public return on the resource except in the approximately 95 communities entitled to a 40 percent share of the state-collected “shared fisheries business” and “fishery resource landing” taxes.
Those payments in 2018 ranged from a low of zero for the villages of Koyuk, Elim, White Mountain and Teller on the Seward Peninsula to almost $9 million for the city of Unalaska midway along the chains of Aleutian Islands.
A focus for the mass of offshore Alaska fishing, Unalaska pockets about 60 percent of the shared state revenue from fish taxes. Other fishing ports don’t do nearly as well.
And most individual Alaskans benefit from the fish and wildlife resources only if they managed to kill some to eat. To simplify the comparison to oil, let’s call those harvests the “Royalty Owed Alaska Residents.” (ROAR).
Royalties from oil and gas found on state lands are one of the several ways oil revenue flows to state coffers. Many Alaskans have a minimal or no understanding of the various forms of state oil revenue.
There have been Alaska journalists who didn’t understand. When oil prices were falling and along with them state taxes, at least one thought oil revenue could go to zero. But it doesn’t work that way because of the royalty agreements covering oil found beneath state land.
Basically what this means is that for every 100 barrels of oil pumped out of the ground and shipped south, Alaska gains title to 12.5 to 20 barrels and collects the revenue due on the sale of that oil.
There is no royalty in the fisheries. If there was a similar royalty, Alaska might get the revenue from 12.5 to 20 of every 100 fish caught. The commercial harvest of salmon alone amounted to 114.5 million fish worth $595 million last year.
Some quick and dirty math would indicate an oil-size royalty share of those fish would have delivered the state $74 million to $119 million in 2018 if the state took its royalty at the dock. The price there is what is called the “ex-vessel” value for salmon.
It is the lowest value placed on the fish. By the time a salmon leaves Alaska, it’s trading at various prices for “first wholesale value.” If the fish is simply headed and gutted (H&G), the price per pound about triples.
Theoretically, the state could go all Norwegian, create its own fish processing company, run its royalty share of salmon through an H&G processing plant, and significantly increase that $74 million to $119 million in revenue while adding some jobs.
But salmon are just part of the harvest. There are crab, shrimp, bottomfish, herring and more. The McDowell Group, a respected economic firm, has pegged the first wholesale value of all Alaska seafood at more than $4 billion.
If Alaska were to claim 12.5 to 20 percent of that as royalty – think Alaska’s Clear and Equitable Share (ACES) as former Gov. Sarah Palin and her cronies once described this sort of fiscal management of common property resources – the revenue stream would swell to something in the range of $500 million to $800 million.
The people’s fish
Instead of imposing a royalty on the common-property resources that can be caught or shot in order to collect money that can be used to benefit all residents, the state offers individual Alaskans the opportunity to partake of the common property resource on their own in some strictly regulated ways.
In Cook Inlet, for instance, permit-holding commercial fishermen catch salmon with 150 fathoms (900 feet) gillnets while ordinary Alaskans are restricted to use of a dipnet no larger than 5-feet in diameter, or a rod and reel.
The comparison with oil would be this:
Rather than the state taking cash for the royalty share, individual Alaskans are allowed a season during which they can daily take from the pipeline a 16-ounce shot of oil or a thimble full while the industry is shipping south approximately 500,000 barrels per day.
The size of the helping depends on the status of the user. A subsistence fisherman on the Kuskokwim River entitled to a subsistence priority and the use of a gillnet would get the 16-ouncer. Share sizes would range downward from there through the dipnetters to an angler reduced by regulation to fishing with a single hook and required to release any fish hooked elsewhere than in the mouth.
Urban Alaskans, the most retrained of these individual harvesters, collected on average 19 pounds of wild resource per person in 2017, according to that state study. The take grew to 276 pounds per person for rural Alaskans entitled to the subsistence priority.
Predictably, harvests were lowest in Anchorage – where people have access to the greatest range of alternative resources – and highest in the Arctic – where fish, caribou and marine mammals remain staples of the diet. Anchorage residents harvest 15 pounds per person on average; Arctic residents some 402 pounds, according to the report.
“The annual (average) rural harvest of 276 pounds per person contains 176 percent of the protein requirements of the rural population (that is, it contains about 81 grams of protein per person per day; about 46 grams is the mean daily requirement),” the authors of the report wrote. “The subsistence harvest contains 25 percent of the caloric
requirements of the rural population (that is, it contains about 518 kcal daily, assuming a 2,100 kcal/day mean daily requirement).”
The state valued all this food at just over $227 million based on a value of $5 per pound.
“…If families did not have subsistence foods, substitutes would have to be purchased,” the report says. “If one assumes a replacement expense of $5.00–$10.00 per pound, the simple ‘replacement value’ of the wild food harvests of communities outside nonsubsistence areas may be estimated at $170–$340 million annually, and at $227–$454
million for all Alaska communities.”
Alaskans can have a lovely debate about “replacement value.” A lot depends on the price of alternative food supplies, and/or equipment purchases and amortization.
Someone living in the city of Kenai within walking distance of the mouth of the Kenai River might be able to stock up on dipnetted salmon for the cost of a dipnet and a backpack. The salmon has a relatively low value under that scenario.
The value would increase, but not by all that much, for a couple people driving a long-ago paid off diesel pickup from Anchorage to Kenai to net fish with gear purchased 20 years ago and used every year since.
And the value could skyrocket for someone just getting into the dipnet fishery in the most expensive way: A powerboat to make the fishing easier, a truck to tow the boat, a boatload of new gear, and more.
“Outside Alaska’s nonsubsistence areas, subsistence is part of an economic system called a ‘mixed, subsistence-market’ economy,” the report says, but some elements of that mixed economy exist in parts of almost every community in the state.
As the report notes, “families invest money into small-scale, efficient technologies to harvest wild foods, such as fish wheels, gillnets, motorized skiffs, and snowmachines. Subsistence food production is directed toward meeting the self-limited needs of families and small communities, not market sale or accumulated profit as in commercial market
“Families follow a prudent economic strategy of using a portion of the household monetary earnings to capitalize in subsistence technologies for producing food. This combination of money from paid employment and subsistence food production
is what characterizes the mixed, subsistence–market economies outside nonsubsistence areas.”
The biggest difference in the nonsubsistence areas – which basically means urban Alaska – is that some people have a lot more cash to spend on technology. Equipment investments sometimes go well past “small-scale” into the world of small planes costing $50,000 and up with the sky the only limit.
These large-scale investments to harvest wild food do help drive a segment of the economy devoted to the sale of outdoor gear. The state report doesn’t get into those economics.
Neither does it explore the costs of managing these resources to provide for Alaska individual and/or commercial harvests.
Resource management costs money, and the closer managers push to the edge of maximum sustainable yield, the more it costs. Alaskans are lucky in that a part of this management is paid for by non-residents.
The Sport Fish Division of Fish and Game is funded by the Federal Aid in Sportfish Restoration Act, which imposes an unseen excise tax on sportfishing gear and motorboat fuel. The federal government redistributes that money to the state in the form of matching grants. The states get $3 for every dollar they pony up.
Alaska uses license fee revenues, most of which come from non-residents, to match the federal funds to cover the cost of sport-fishery management.
A similar program – the Federal Aid in Wildlife Restoration Act – funds the Division of Wildlife Conservation in a similar way. The federal funds there come from excise taxes of 11 percent on long guns and ammunition, and 10 percent on handguns, paid by manufacturers, producers, and importers of firearms. The same 75 percent to 25 percent federal to state match applies to funding.
Needless to say, Alaska – because of its size-limited purchasing power – contributes little to these funds, but collects a lot. The two funds funneled more than $51 million to ADF&G last year, according to the Department of the Interior. Only Texas at 54 million collected more. A majority of states received half or less of the Alaska and Texas payments.
There is no federal program to pick up the cost of commercial fishery management in Alaska, and that cost is the biggest item in the Fish and Game budget. The Division of Commercial Fisheries does, however, receive some federal funding, and there are a variety of state taxes imposed on the commercial industry, but several of them were set up only to help fund the industry.
Thirty-three percent of the taxes on commercial fishermen from 2010 through 2014 were “pass-through taxes” to support marketing, hatcheries, seafood development and more, according to that ISER study. The state has been scaling back support of the industry, but the numbers indicate it is still spending more to manage fish than it collects in taxes.
The ISER report specifically noted “the commercial fishing industry is not managed for maximum revenue to the state” and warned against comparing it to the oil industry because “industries vary, with differing ability to pay, and different management objectives.
“…The State of Alaska has different taxing and management objectives for the commercial fishing industry than it has for other industries. For oil, the state’s objective is arguably to maximize long-term revenue.
“For fish, the objective appears to be to maximize employment, fishing incomes,
community health, and other social objectives. Indeed, the state restricts efficiencies in the fishing industry by prohibiting boats or nets above a certain size.
“The goal of these restrictions appears to be to increase employment. Our point is not that commercial fishery fees and taxes are set correctly. We have no opinion on that point. We believe an understanding of costs and revenue is useful for discussion of management of any industry, but there is no implication by the authors that because state revenue is less than state costs, state policy is necessarily wrong.”
Unfortunately, that conclusion begs the fundamental public policy question:
What use or uses of state fisheries resources best serve Alaskans?
There was a time in territorial days when salmon was Alaska’s oil. Salmon taxes once covered 80 percent of the territorial budget. Salmon processors complained the way the oil industry does today:
Sadly, however, the days of an Alaska supported by the fishing industry ended long before oil became the state’s golden goose. Despite this, Alaskans have gone on managing state fisheries as if nothing changed.
Today the fisheries appear to be run in significant part to benefit a handful of Pacific Northwest-based processors and a maybe a third of the state’s reported 30,000 commercial fisherman – about 43 percent of whom are non-residents.
“Alaska fisheries employed an average of 29,200 commercial fishermen in
2015/2016, including 16,500 Alaska residents,” according to an economic analysis completed by the McDowell Group, a respected economics firm, for the Alaska Seafood Marketing Institute.
Even fewer Alaskans – “an estimated 7,200” – were employed in the processing industry, according to McDowell. That amounted to less than 30 percent of the workforce. There are reasons.
Working conditions are difficult in cold, wet environments sometimes with long hours, and only one in 10 people earn more than $50,000 per year, according to the McDowell report. Processors have been forced to turn to Eastern Europe and Latin America for workers and are shipping more and more salmon to China for processing.
The state continuing to subsidize the fishing industry to support what jobs are left might remain a good idea, but it’s long past time Alaskans had a serious discussion about what is the wisest use of the state’s fish socially, culturally and most of all economically.
Consider this: If you buy the Fish and Game claim that wild resources are worth $5- to $10-pound to the average Alaskan – a sockeye salmon caught in the much-debated Kenai dipnet fishery is worth three to seven times as much as a Kenai salmon caught in a commercial gillnet in Cook Inlet.
CORRECTION: An early version of this story failed to note the Division of Commercial Fisheries does receive some federal funding and underreported the revenue flowing to Unalaska.