Commercial ‘fishing’ Alaska style circa 2023/Cook Inlet Aquaculture Association

Hatcheries harvesting ever more salmon

The long-ago fears of the late Wayne Alex, a commercial purse seine fishermen in Alaska’s Panhandle, have now come true nearly 600 miles to the north in the Cook Inlet region of Alaska.

It is there that the salmon ranchers of the Cook Inlet Aquaculture Association (CIAA) are moving in on the commercial fishermen who long roamed the area’s bays and inlets in search of salmon.

CIAA – like a variety of other state-sanctioned, private, nonprofit regional aquaculture corporations – was originally set up to be funded with an assessment, ie. tax, on the catches of area commercial fishermen who were to benefit from said hatcheries.

Alex never believed the scheme would work. He foresaw the hatcheries becoming nothing more than new businesses that would eventually squeeze out commercial fishermen.

Thus, he ended up the leader of a group of Southeast fishermen who went to court in 1982 to challenge the tax as illegal under state law. They won only to lose.

In the wake of the Alaska Supreme Court ruling the tax was unconstitutional, the Alaska Legislature simply rewrote it in a different form to teach Alex and his fellow fishermen an important lesson: It’s hard to fight city hall in the United States.

Most especially so in the state of Alaska where the leaders of the commercial fishing industry have long been the Boss Hoggs in the political arena.

The tax was soon back in play and ready for a real-world test of Alex’s predictions that Alaska’s scheme to free-range farm the ocean wouldn’t work as promised, and that hatchery operators would eventually abandon the idea of producing fish primarily for commercial fishermen in favor of catching the fish themselves to fund a new business:

Their business, the hatchery business.

The Evolution

Alex’s first fear – that the hatcheries would become nothing but a new form of business – was long ago confirmed.

The state of Alaska almost a decade bag amended its hatchery law to allow hatchery operators to conduct so-called “cost-recovery fisheries.” These were intended to help cover hatchery operating costs given the reality that the assessments imposed on fishermen under the original tax plan weren’t beginning to cover the costs of hatchery operations.

The new law directed the state Department of Revenue to annually determine how many salmon should be allocated to a hatchery operator to “provide sufficient revenue to cover debt service to the state, reasonable operating expenses, reasonable maintenance expenses, and development or maintenance of a reserve fund up to 100 percent of annual operating costs of the hatchery permit holder.”

The debt service clause was important because the state had loaned tens of millions of dollars to the hatchery-operating aquaculture associations to ensure their ocean farming worked

For the CIAA in particular, there had and has been more borrowing than paying back, and it now appears the number of hatchery fish going to the hatchery business for cost-recovery, rather than to help support hardworking commercial fishermen, could be described in three words: most of them.

They have made Alex’s second fear come true.

Outfishing the fishermen

As of July 26 in the Lower Cook Inlet fishing district, the Alaska Department of Fish and Game is reporting CIAA “has harvested 146,517 sockeye salmon, and approximately 539,400 pink salmon for cost recovery purposes.”

This tops the combined, reported catches of the 23 purse seiners and gillnetters permitted to fish the area by 46,000 sockeye and 450,000 pinks, or humpies as Alaskans usually call them.

In the Inlet’s Southern District, the fishermen have done better on sockeye, the state’s money fish, with the state reporting a “common property harvest” of 84,000 sockeye, but the have done way worse on pinks of which 77,000 had been reported cost.

CIAA, had caught only about 4,000 sockeyes, according to the state, but almost 540,000 humpies with the “anticipated number of salmon to be harvested from the Tutka Special Harvest Area for cost recovery (at) 28,700 sockeye and 1.3 million pink salmon.”

In the Eastern District, the state says, “CIAA has harvested 72,230 sockeye salmon for cost recovery from cost recovery seiners fishing in Resurrection Bay. An additional 11,401 sockeye have been harvested at the Bear Lake weir.”

What commercial fishermen have caught is unreported. The state says “harvest from the commercial common property fishery in Resurrection Bay is confidential as fewer than three permit holders reported deliveries.”

This is per a state law designed to protect commercial fishermen from the prying eyes of average Alaskans who might be curious as to just how much money they are making off a resource owned by all Alaskans. In this case, however, all indications are that the fishermen aren’t making much, if anything.

So adding this all up, CIAA cost-recovery operations have scooped up approximately 234,000 sockeye and about 1.1 million pinks while the hatchery contribution to the common-property fishery, nearly all of which is netted by commercial fishermen, is about 194,000 sockeye and 167,000 pinks.

Or, put another way, a hatchery program originally set up to benefit commercial fishermen working in the “common property” fishery is now netting 55 percent of the hatchery sockeye and about 87 percent of the hatchery pinks produced for that common property fishery.

Rock, meet hard place

CIAA has little choice but to do this, however, because it is in debt to the state to the tune of $18 million due to the loans it has taken out to stay in operation at an annual cost of what is now about $4.26 million per year, according to the nonprofit tracking website Cause IQ. 

The association’s approximately 1,400 members would each need to pony up more than $3,000 per year just to cover those operating costs, but a lot of them aren’t fishing this year because of commercial setnet closure to protect struggling Kenai River Chinook salmon.

CIAA’s filings with the IRS indicate that the 2 percent assessment collected from fishermen on every pound of fish they sell can’t begin to cover the organization’s costs.

IRS forms show that in 2021, the last year on file, the state passed along to CIAA $300,310 it collected for taxes on the Inlet salmon that year, or about 7 percent of what CIAA needed to cover expenses of 2021 expenses.

Another nearly $1.7 million in cost-recovery revenue helped the organization a lot, but it still ended up more than $2.2 million in the red at the end of the year.

How well it will do this year will depend a lot on what prices it gets paid for fish in a year when the bottom has fallen out on sockeye. Bristol Bay fishermen are getting a base of 50 cents a pound.

Prices are generally better in the Inlet, and CIAA might be expected to get $1 per pound for those fish. The average Inlet sockeye now weighs about 5 pounds, according to Fish and Game data. 

So if CIAA ended the season with a harvest of say 250,000 sockeye, it might collect about $1.25 million. What anyone is getting paid for low-value pinks this year is unclear, but it was 40 cents per pound in the Inlet last year.

Everyone expects it to be less this year, so figure maybe 30 cents for fish averaging 3.5 pounds, according to state data. This would make a cost-recovery catch of what might reach 2 million pinks worth about $2.1 million.

Figure a better year for the fishermen this year bringing in maybe $500,000 in enhancement taxes, add in $1.25 million worth of sockeye and $2.1 million worth of humpies, and CIAA might collect revenues of about $3.85 million this year.

That gets it closer to that $4.26 million in operating costs, but it’s  still about $410,000 short, and it’s not paying off those loans. This can, obviously, be fixed by the state permitting CIAA to take an even bigger bite out of the catch next year.

And given those state-backed loans, the state as a strong interest in seeing to it that CIAA eventually makes its fish farming business work. The only problem is that every time CIAA gets more fish for cost-recovery the fishermen who were supposed to benefit from CIAA operations get less.

How long the fishermen who pushed the state to ban net-pen salmon farming in 1990 will continue to support this sort of free-range farming of the sea when most of the benefit is going to the farmers will be interesting to see.

There is no doubt the hatchery business has been good for those working in the hatchery business.

The Alaska Seafood Marketing Institute’s (ASMI) 2022 report on “The Economic Value of Alaska’s Seafood Industry” revealed that the the 3,800 people involved in managing Alaska salmon and operating hatcheries in 2019 earned about $239 million, which works out to average annual earnings of about $62,895 per person. These are not quite oil-industry-size wages, but the earnings are almost twice the $36,787 the U.S. Census reports as the average for workers in Alaska in 2019.

The average earnings for Alaska commercial fishermen were in the same year reported to be just over $32,268 per person, about $4,520 less than that $36,787 the U.S. Census reports as the average for the state or about 51 percent of what the fishery managers and hatchery personnel were collecting on average.

It is ironic that in a state where fishermen long ago convinced the legislature to ban salmon farming, the salmon ranchers (farmers by another name) are doing better than the fishermen.

But Wayne Alex saw this coming decades ago.