Salmon farmers in Norway have proven so successful that the Norwegian government is now proposing to treat them like most other resource extraction industries in a move that is roiling the aquaculture business.
Around the world, fishing industries have largely been given special treatment as if their environmental impacts, which can be large, were somehow insignificant.
Norway’s center-left government has concluded that is foolishness and wants to impose on the farmers a tax of the sort paid by the mining and petroleum industries.
The Norwegian Ministry of Finance calls this a “resource rent tax” or what would be known in Alaska as a “net profits tax” as is imposed on oil and gas producers in the 49th state.
“Resource rent (ie. profit) in aquaculture has risen strongly since 2012 and for the period 2016 to 2018 it has totaled just over NOK 20 billion ($1.9 billion), which is on a par with hydropower,” according to a ministry statement. “The resource rent (ie. profit) for 2021 is estimated at NOK 11.8 billion ($1.1 billion).
“It is therefore reasonable for society to receive a share of the extraordinary return generated through the exploitation of these resources.”
The ministry believes a 40 percent cut is a fair and equitable share for the Norwegian citizenry. The government projects such a tax would haul in about $35 million next year.
The implication of the tax for Alaska commercial fishermen is unclear, but if it raises the cost of farmed salmon they would likely see some benefit. Farmed salmon now dominate the global market, and wild salmon prices generally rise or fall in line with prices for farmed fish.
The Norwegian tax on profits would net the country’s government about three times what the state of Alaska’s flat tax on salmon landings generally collects from commercial salmon fishermen rich or poor. They are all hit with the same 1 to 3 percent “fisheries resource landing tax” when selling their fish to 49th state processors. The rate varies depending on whether the fishery is new or established.
The response of the now well-established Norwegian farmers to their government’s plan to take a bite out of their profits has been announcements of plans to reduce or curtail investments in Norway.
Real or empty threats?
“Mowi scraps $17.5 million biomass increase, saying new tax is biggest setback in Norwegian aquaculture’s history,” Intrafish, a website covering the fishing industry headlined Tuesday. “The company advised the Norwegian government to rethink its position.”
“Spectre of salmon tax causes Cermaq to freeze Norwegian investments,” The Fish Site headlined the same day.
“Norwegian salmon farmer Masoval is the latest company to freeze planned ($94 million) investments in the country in light of a proposed 40 percent natural resources tax, part of a coordinated effort to pressure the government to re-evaluate its plans,” Intrafish added yesterday.
The tax plan was then still a proposal. The official tax announcement was to come in the announcement of the Norwegian budget this week. As proposed, the tax did exempt land-based salmon farms, which are not engaged in “the exploitation of these (marine) resources” as the Norwegians put it.
Land-based farms using recirculating aquaculture system (RAS) technology are looking to be the next wave in the technological storm unleashed by salmon farmers in the 1990s.
Alaska banned salmon farming at the start of that decade believing that if farming could be prevented in the state’s many fiords and bays ideal for such operations the international market competition for salmon could be controlled.
The plan failed. The price of Bristol Bay sockeye salmon then trading at about $4.25 per pound in current dollars was destined to fall by 65 percent as farmed Atlantic salmon entered the market.
Prices have never recovered.
Norway’s limited entry
When it comes to salmon production in Norway, the Scandinavian country treats its fish farmers a lot like Alaska treats its commercial salmon fishermen while recognizing that people in the fishing business are by definition business people.
In Norway, limited-entry-permit-like licenses are issued to individual Norwegian farms, and those licenses provide farmers the opportunity to operate indefinitely.
Most of the farmers, like some Alaska commercial fishermen, have benefitted greatly from the system.
Once a minor player in the salmon business, Norway now produces about a third of all salmon eaten around the globe. It last year exported 1.3 million metric tonnes of the fish, according to the Norwegian Seafood Council.
That’s almost three and a half times the volume of Alaska’s 2021 harvest of wild and hatchery fish, and Alaska fishermen had a very good season last year with a catch that was the “third highest on record for both total fish harvested and total pounds harvested,” according to the Alaska Department of Fish and Game.
In Alaska, however,57 percent of that Alaska poundage was in low-value pink salmon. According to the state data, pinks were last year worth $1.11 each on average.
That is about one-sixth the value of the average sockeye, or about a third the value of a pound of Norwegian farmed salmon, which is now reported to be trading at a wholesale price of between $7.45 and $8 per kilogram.
At that price, an 8-pound, farmed, Atlantic salmon would be worth about $28 to the farmer who netted it and pulled it out of its pen. These salmon, which are largely sold fresh as filets, are a high-value product.
Pinks are the opposite. Many go into cans or pouches where they compete in the market with tuna. Sockeyes, which are booming in Bristol Bay, are the main Alaska competition for Atlantic salmon farmed by the Norwegians and coho salmon farmed by the Chileans near opposite ends of the globe.
“Norway has some of the best climatic conditions for salmon farming in the world,” according to the country’s Finance Ministry. “(And) the aquaculture industry utilizes fjords and sea areas that belong to (Norwegian) society.”
The invisible farmers
Alaska, too, farms salmon but it uses not just state waters and U.S. waters but also the international waters in the Gulf of Alaska which, as a practical matter, belong to no one.
Alaska salmon farming, or “ranching” as Alaska commercial fishermen prefer to call it, also differs from Norwegian farming in that the fish are turned loose in the sea to grow and fatten instead of being contained in net pens.
The Alaska farms, or ranches, provided 28 percent of the 2021 Alaska salmon harvest, according to Fish and Game, which tallied a catch of “64 million hatchery-produced salmon worth an estimated $142 million dollars
in ex-vessel value.”
Ex-vessel value is based on the price fishermen are paid for their catch at the dock. The state has no tally on the resource rent (ie. profit) made off this catch, 87 percent of which was comprised of pink salmon last year.
Another 15 percent of the farmed/ranched catch is made up of chum salmon, long known in Alaska as dog salmon but often marketed as keta salmon. Alaska chums average about 7 pounds, according to Fish and Game data.
Most of them are big enough to produce marketable filets, which is where the best money is in the salmon business. The hatchery chum catch helped boost the average value of a hatchery salmon to $2.21 per fish last year, almost twice the value of the average pink.
“Pink and chum salmon are the bulk of Alaska hatchery production because they have the highest return on investment for the cost of production,” according to the state.
“Pink salmon are the most economical to rear because they have a short rearing time – one winter in the hatcher – and have the shortest life cycle of Pacific salmon, two years. This means pink salmon provide a quick return on investment and provide the highest economic return for the production costs.
“Chum salmon have the same rearing time in the hatchery but have a longer life cycle (three to four years); therefore, they have a longer return on investment. Pink and chum salmon are the bulk of Alaska hatchery production because they have the highest return on investment for the cost of production.”
Hatchery ranching/farming of sockeye, coho (silver) and Chinook (king) salmon – the fish preferred by anglers – has nowhere proven economically successful though it was once a great marine hope.
British Petroleum, Union Carbide and the Weyerhaeuser Co. all jumped into the Alaska-style farming business in Oregon in the 1970s.
“Private commercial salmon ranching is an idea that looked great on paper, but its promise of big profits and revitalized commercial fishing industry has been stranded by economics, biology and plain bad luck,” the UPI reported a dozen years later.
“The Pacific Ocean was seen as a kind of rangeland where corporate-spawned fish would ‘graze’ for a year or two and then follow their legendary instincts back to hatcheries….Now, after 12 years and investments of millions of dollars, none of Oregon’s 11 private salmon-breeding farms have made a profit.”
The farmers in Oregon appear to have picked the wrong crops to grow with their focus on 8- to 12-pound coho salmon and 30-pound Chinook.
Those fish are preferred table fare but, as the state of Alaska notes, much more costly to raise than short-lived pink salmon of three and half to five pounds.
This was the case in the 1970s and 1980s, but might be even more so the case now. A warming North Pacific Ocean appears to have been especially friendly to pinks, the numbers of which have exploded in the new millennium with help from salmon-breeding farms in Alaska and Russia.
There are now so many of pinks on the ocean that the North Pacific Anadromous Fish Commission – an intergovernmental organization involving the U.S., Canada, Russia, Japan and South Korea – has begun to ponder whether there are too many.
Biologists in January reported to the Commission that nearly three out of every four salmon now in the ocean are voracious pinks.
It has been theorized they are something of the sheep of the ocean grazing the food supply down to where some of their bigger cousins (the cattle) start starving to death. The theory is hard to prove although both the size and numbers of other salmon have been trending downward since pink numbers exploded.
Norway’s pink problem
Thanks to a Russian hatchery, the fish are even flourishing in Norway where they are not wanted. A Pacific Ocean species, pinks are not native to the Atlantic Ocean but were introduced there by a now-defunct Russian hatchery on the edge of the White Sea just east of the Finnish border.
Unlike Atlantic salmon, which have failed to take hold in the Pacific Ocean despite repeated attempts to introduce them there over the course of the last 100 years, pinks have gone wild in the Atlantic and started exploding in number there, too.
The Norwegians have reported pink salmon now effectively reproducing in most of that country’s rivers where they have in the northern part of the country “become the dominant species in odd-(numbered) years.”
With numbers increasing in the country’s southern streams, the Norwegians have warned that the species could be well on their way to colonizing other Atlantic countries. Pinks have already shown up in rivers in Iceland, Denmark, Germany and Scotland with the latter reporting “unprecedented numbers” of the fish in its waters in odd-numbered years since 2017.
Fisheries Scotland has been trying to eliminate what it considers an invasive species using electrofishing equipment, nets and spearguns. The agency reported that getting rid of the fish is not as easy as it might at first appear:
“High water levels (as experienced in 2017) are likely to hamper the ability to detect these fish and successfully capture them. At a local level, the topography and characteristics of the river will determine whether capture
is feasible and will dictate what methods may be most effective.
“A significant issue for consideration is resourcing of future management action. The financial and logistical challenges should not be underestimated. The opportunities presented for recapture will very much depend on active surveillance for these fish and the ability to respond quickly to local incidences.”
The Norwegians are now studying the possibility of blocking their rivers with fish traps or weirs that will enable them to sort fish and allow only Atlantic salmon, currently being displaced by pinks, to spawn.
Though thriving in hatcheries, Atlantics are not doing well in the natural world.
“Adult returns to many Atlantic salmon wild and hatchery stocks of the North Atlantic have declined or collapsed since 1985,” according to the latest research published in Reviews in Fisheries Science & Aquaculture earlier this year. “Enhancement, commercial fishery closures, and angling restrictions have failed to halt the decline. Human impacts such as dams, pollution or marine overexploitation were responsible for some stock declines in the past, but adult returns to river and hatchery stocks with no obvious local impacts have also declined or collapsed since 1985.”
The study by scientists from Canada, the United Kingdom and Ireland ruled out climate change, salmon farming, food availability at sea, or marine predators and suggested the salmon are most likely falling victim to illegal fisheries.
Other “possibilities are unsupported by stocks that persist near historic levels, loss of stocks remote from farm sites, a diverse marine prey field, and scarcity of large offshore predators,” the authors of the study wrote.
They argued that “a flatline of adult abundance and reduction in adult mean size are common characteristics of many overexploited fish stocks and suggest illegal, unreported, and unregulated (IUU) fisheries exploitation at sea….
“Distribution in time and space of former, legal high-sea fisheries indicated fishers were well acquainted with the ocean migratory pattern of salmon and combined with lack of surveillance since 1985 outside Exclusive Economic Zones or in remote northern regions may mean high at-sea mortality occurs because of IUU fisheries. The problem of IUU ocean fisheries is acute, has collapsed numerous stocks of desired species worldwide, and is probably linked to the decline and impending collapse of the North Atlantic salmon population.”
There could come a time when Atlantic salmon are largely a domestic species, like cattle, and pinks rule the ocean.
In 1984, tax was proposed in Oregon for private salmon ranchers using the wild pastures as their private feed lot . Alaska’s pink ranches definitely needs a tax for the intensive use and abuse of these wild pastures removing from the table fare fish
A tax? Really?
That would run so counter to how the whole system has operated from the beginning.
Consider that the state built most of the hatcheries, which were supposed to produce salmon for the “common property,” then turned them over the private, non-profit aquaculture associations and gave them permission to take fish out of the “common property” in the form of “cost recovery” to finance their operations.
But, of course, they are non-profit, which legally means you can make money; you just can’t report it as profit. You have to find a way to stash it: https://www.councilofnonprofits.org/myths-about-nonprofits
Have often wondered why our “natural resources” (which according to our state constitution are required to be managed for the maximum benefit of the citizens) are taxed so differently. Makes no sense to me.
That was a rhetorical observation, right? I think you know why.
Commercial fishermen are special. That’s why the state created limited entry instead of setting up a permit leasing system to lease fish the way we lease minerals or oil.
Same for the salmon “ranching.” That way commercial fishermen can continue to be cowboys instead of farmers.
There’s a great mythology surrounding the cowboys of the sea.
I always enjoy reading your fisheries articles — however — I noticed areas that may not been explained well ( I could not understand) in this one.
In talking about ex-vessel value of salmon you mention 87% of which was made up of pink salmon, but in the very next paragraph you mention another 15% of the ranched/farmed catch is chum salmon: I am a bit confused — are you in both instances talking about ranched / farmed salmon? If so, why is the total more than 100% without even considering any ranched / farmed Chinook, coho, or sockeye also caught by Alaska commercial harvest?
What is the primary difference between ranched / farmed salmon and hatchery enhanced salmon — if any?
Concerning the statement:
“Hatchery ranching/farming of sockeye, coho (silver) and Chinook (king) salmon – the fish preferred by anglers – has nowhere proven economically successful though it was once a great marine hope.”
If this is true, why do private (aquaculture association) and State of Alaska hatcheries both continue to stock ocean-running sockeye, coho, and Chinook in Alaska waters?
Thank you for any help you can provide.
Sorry for any confusion, Andy. The 87 percent was the value of the pink salmon catch in the total harvest of hatchery fish – pinks, chums and sockeyes. The 15 percent was the actual catch of chums. That 15 percent was worth so much more than the rest of the catch that it actually caused a significant boost in the value of the average hatchery salmon, but the volume of hatchery pinks to all other hatchery salmon was great that they still accounted for 87 percent of the value.
In 2021, the hatcheries produced about seven pinks for every chum, about 53 pinks for every sockeye, more than 88 pinks for every coho, and more than 1,300 pinks for every Chinook.
As to your last question as to why the stocking of economically unsuccessful species continues, the answer is simple: The practice continues because the state can afford it thanks to federal funding. State stocking is funded by the federal excise tax on fishing gear matched by state license fees (thus it’s mainly free money coming primarily from Outside anglers who provide nearly all the excise tax money and most of the state licence revenue), and the private stocking is in part subsidized by the same funds.
The state pays private hatcheries to produce salmon for the “sport” fisheries, or as the state officially puts it:
“Hatcheries are also used to produce fish to provide additional opportunities to sport anglers in the Southeast region, but rather than being state owned and operated, are run by private operators under contract to the state.”
This is because the state itself largely got out of the hatchery business because it cost to much to subsidize, ie:
“Through the 1970s and 1980s FRED and Sport Fish Division collaborated on a number of projects statewide to improve opportunities for commercial and sport users. But because of continual budget declines and declining revenues across state agencies in the late ‘80s and early ‘90s, FRED Division was merged with the Commercial Fisheries Division in 1993. Eventually the operation of state-run hatcheries for commercial production of salmon was eliminated in 1995 because of continual declines in vital state funding. Nearly all the state-owned facilities were transferred to Private-Non-Profit (PNP) hatchery associations after the state ceased operations in 1995. The intent was to keep key programs going in order to sustain production needed (and depended on) by a myriad of users.” https://www.adfg.alaska.gov/index.cfm?adfg=wildlifenews.view_article&articles_id=449
The PNPs turned most of those into commercial production hatcheries for pinks and chums, which can be economically produced, and raised some state paid for coho and Chinook on the side with the exception of the Crystal Lake Hatchery in Petersburg:
“CLH historically has produced many king salmon, but the nature of the operation did not present any opportunities for cost recovery to cover annual operating expenses for the operator. Because of its production value to sport users, another approach was needed. CLH is now operated under contract by Southern Southeast Regional Aquaculture Association (SSRAA) using funds provided in part by Sport Fish Division.”
Which, of course, helps fund SSRAA.
The sole exception to all of this is actually the Prince William Sound Aquaculture Association which itself subsidizes some sockeye production in the Sound. It sort of has to do that to avoid a revolt of its members given that the hatchery produced sockeye at Main Bay help make up for the declining number of Copper River sockeye.
The latter decline has also been linked to the huge production of pinks in the Sound, but PWSAA members appear willing to go along with this as long as they can catch sockeye at Main Bay. Who knows how many of those end up sold Outside as “Copper River” sockeye but the sales of Copper River sockeye are usually greater than the number of Copper River sockeye caught off the mouth of the river.
Norway- a borderline socialist country who was one step of genuine nazi collaborator.
They make it hard for their citizens to own guns for self defense. Only hunters and shooting clubs have a little lee way . If you dont have a immediate need to hunt or shoot targets for competition good luck . Police get to come into your private home and inspect your gun safe .
What the heck happened to the vikings ?
Tax away Norway. . We will come to your aid again after you fall on your face from some invasion. ( if biden and his associates don’t destroy our country first)
Biden is doing nothing to resolve our problems with Russia except adding fuel to fire and now every one is bracing for possible nukes ! Thanks Democrats. Your leadership is impeccable.
Back to the issue of pinks – obviously our policy that supports a barely edible fish at the risk of reds kings ect is a future disaster. Our voters need to step up and legaize on shore fish farms to solidify our very fragile Alaska economy. 3 legged stool . Families need reliable jobs near their communitys . Fish farms would provide year round work and keep us competitive with socialist countries like Norway ect 😉
How is it that Commercial fishers do not have to pay the State for their harvest of the millions and millions of fin fish and shell fish. When other resources that belong to the state are mined or pumped ( oil and gas ) the State gets paid. Lots!
But when for example the few salmon permit holders in Bristol harvest 40 or 50 million sockeye salmon, the State gets almost nothing. Instead the State spends millions managing the resource, providing enforcement, rescue operations and yet gets little in return. The fish are common property owned by Alaskans according to Alaska’s constitution. But only a small group, most of whom are non residents benefit from the harvest and sale of this resource. Miners, oil and gas producers all pay a tax or something like a royalty for what they take from Alaska. Does that sound fair? If Fishers paid a use tax for all the benefit the State provides and a tax on their harvest it would mean millions and millions going to the State. Why not?