The red-ink books of the Cook Inlet Aquaculture Association/CIAA

AK fish farm bleeds state money

The Cook Inlet Aquaculture Association may have become the Alaska leader in putting the “non” in non-profit.

Having lost an average of about $1.5 million per year for the past 10 years, the state-sanctioned, salmon-farming business is again borrowing state money to stay afloat with no plan to achieve solvency other than to keep trying to produce more fish.

So far, that hasn’t worked, and the association long ago abandoned the idea behind a 1974 state law that encouraged commercial fishermen to form associations to run private, nonprofit hatcheries “for the purpose of contributing by artificial means to the rehabilitation of the state’s depleted and depressed salmon fishery.”

The focus of these businesses, according to a 2018 Alaska Department of Fish and Game briefing paper was to be on:

1. “Production hatcheries operated by PNP corporations to fulfill regional harvest objectives to benefit all common property fisheries and primarily to benefit commercial fisheries.”
2. Provide for the ability of Fish and Game to contract “additional production to PNPs, to fulfill the statewide sport fish stocking plan objectives for the primary benefit of sport fishers. Harvest of these fish by other user groups is incidental.”

Providing a benefit to “all common property fisheries” is now all but gone from CIAA operations as the corporation tries to scoop up every returning hatchery salmon so it can try to pay its bills and keep its massive debt from growing.

ProPublica’s nonprofit tracker put CIAA $16.3 million in debt in 2022 with its $2.02 million in revenue that year less than half of its $4.26 million costs. The business claimed assets of $9.07 million, but those familiar with CIAA say the assets are vastly over-valued.

They include, among other things, a hatchery in the remote village of Port Graham that CIAA took over in 2014 after the Port Graham Hatchery Corporation shut it down seven years earlier because it was a financial loser, which even CIAA’s public relations (PR) machine concedes. 

CIAA believes it can make the operation someday profitable by, among other things, raising young salmon in net pens just like the rest of the world’s salmon farmers. But to date, the company has done nothing but lose money and stays alive only thanks to continual loans from the state Department of Commerce’s hatchery revolving loan fund.

CIAA claims the Port Graham asset is worth about $6 million even though it is doubtful anyone would buy it for even a fraction of that.

Alaska salmon farms

Those unfamiliar with the Alaska salmon business might be unaware the 49th state is massively into salmon farming given that it in 1990 banned the growth of salmon to maturity in net pens as is done in the rest of the world.

Alaska’s salmon farmers play word games and call their business “ranching” because they only keep their salmon in pens for a short time before sending them to sea.

While the rest of the world’s salmon farmers are trying to keep the salmon in the pens to limit interactions between domestic and wild fish, the Alaska farmers are raising young salmon in pens only until they are big enough to enjoy a competitive advantage over their wild cousins and then releasing them from the pens.

A tiny percentage of these domestic salmon – from less than 2 percent to at best more than 10 percent –  return to be harvested and sold as “wild caught” – another word game – Alaska salmon.

Wild-caught salmon returning to 26 facilities run by PNPs – 11 of them state-financed and still-state-owned hatcheries the Alaska Department of Fish and Game bills as “operated by PNPs on the state’s behalf at no cost to the state” – in 2021 accounted for 28 percent of the Alaska salmon harvest, according to the state.

Year to year, these farming operations account for between a quarter to a third of the commercial catch, but the claim there is “no cost to the state” isn’t quite true. The state helps subsidize hatcheries by paying the PNPs to produce salmon for sport fishermen or provide other services.

CIAA, for instance, has contracts with the state to suppress northern pike in the Yentna River basin, and Fish and Game’s Division of Sport Fish this year reported providing “nearly $1.2M in funding to regional aquaculture and private-non-profit organizations to
contractually raise and release salmon for enhancing recreational fishing opportunities in coastal areas.”

In most cases, this involved paying the PNPs to raise fish for “common property” harvests in hatcheries paid for by the state before being turned over to the PNPs to run as money-making operations.

Great success

Some of these PNP’s have thrived at making money for both hatchery employees and commercial fishermen.

In Prince William Sound, the PNP hatcheries boosted the region’s natural production of low-value pink salmon from an average of 3 million per year from 1951 to 1979 to a now 10-year average of more than 58 million “humpies”, as Alaskans commonly call the smallest of the Pacific salmon, per year. 

And in the state’s Panhandle, the PNPs succeeded in upping the harvest of more valuable chum salmon “dramatically in the 1990s, including a peak total harvest of 16.0 million fish in 1996,” according to a Fish and Game report . But that was then and this is now:

The “annual common property harvest,” according to Fish and Game’s latest information, has fallen to 7.7 million fish per year since 2010; (and) hatchery-produced fish accounted for an average 86 percent of that harvest.

Hatchery chums have largely replaced wild chums in a region which supported wild chum harvests of 4 to 9 million per year from the 1910s through the 1950s. The harvest of wild fish is now down to about 1 million per year.

“Annual harvests of wild chum salmon have recently declined to the low levels previously observed in the late 1970s,” the state report said. An unusually unproductive North Pacific Ocean made the ’70s the nightmare years for Alaska salmon fisheries.

Still, there are more than enough chums returning to the non-profit hatcheries of the Panhandle to support the “cost recovery” fisheries that keep these private businesses in business although this is not the way the PNP scheme was originally intended to work.

As first envisioned, the plan was for the commercial fishermen in the hatchery associations to catch all the hatchery salmon in the “common property” fisheries where wild fish have always been harvested in Alaskan with an “assessment,” ie. tax, on their catches then used to cover the cost of hatchery operations.

The high costs of operating hatcheries, however, quickly led to the realization that the state would have to impose a huge tax on fishermen to raise enough money to cover hatchery costs. So the hatcheries were allowed to get into the fishing business themselves thanks to the creation of “special harvest areas” for cost recovery while the state continued to impose a 2 to 3 percent tax on the catches of commercial fishermen to provide some additional revenue.

The tax amounted to less than $3.5 million in fiscal year 2023, according to a legislative budget analysis.

As an illustration of how costly hatcheries, this $3.5 million would cover only about 60 percent of the $6 million per year cost of operating the two hatcheries the state still runs. Alaskans are fortunate that more than 90 percent of the operating costs for those facilities is paid by sport fishermen in the Lower 48 thanks to a federal excise tax on the sale of fishing equipment the federal government collects and distributes to the states.

Because of the costs of hatchery operations, the size of Alaska’s cost-recovery fisheries steadily increased over the years as the pen-raised version of salmon took over the market for salmon in the new millennium. Competition from the pen-raised, farmed salmon drove down the value of Alaska’s “wild-caught” salmon and thus the hatchery tax revenue generated by Alaska’s commercial fishermen shrank.

By the early 2000s, the University of Alaska’s Institute of Social and Economic Research (ISER) was reporting a growing need for hatcheries “to rely on cost-recovery catches for a greater share of their revenues.

“…Because (salmon) prices are lower, hatcheries need to catch more fish in the cost-recovery fisheries to meet any given revenue target,” ISER said. “As a result, as prices decline an increasing share of the hatchery returns have been caught in cost-recovery fisheries rather than by commercial fishermen in the common property fisheries.

“This trend is particularly evident for chum salmon, for which the cost-recovery share of
catches increased from less than 30 percent in the early 1990s to more than 51 percent in 2003.”

Almost two decades ago, the ISER analysis also cautioned the growing size of cost-recovery fisheries “may create a political problem for the hatcheries, which depend upon enhancement taxes paid by fishermen on all catches – not just catches of hatchery fish – and which also depend upon the political support of commercial fishermen to address other issues which they face.”

A well-crafted PR campaign and an inherent human belief that anything nature can do man can do better has helped them keep this potential problem under control but hints of discontent are now popping up.

Commercial salmon seiner Tom Buchanan in Seward last fall launched a campaign to cut off further state financing for CIAA, warning that should the corporatoin eventually fail the fishermen in the association are liable for a debt he pegged at closer to $20 million than the ProPublica reported $16 million.

He also noted the loss of common property harvests in favor of propping up CIAA’s hatchery business, writing that “in 2010 CIAA asked for 100 percent of the Resurrection Bay sockeye run and even sought to halt SPORT fishing. From that day forward they have BATTLED local fishermen for OUR resource.

“The weir at Bear Creek is mismanaged, the fish are mistreated, the escapement is far too low, and ADF&G has wrongly allowed the entity to have FAR too much control over our local salmon resources.”

Buchanan’s campaign has, however, gained little support with most CIAA members appearing to share the view of Salmon Hatcheries for Alaska, an amorphous group that claims “hatchery production in Alaska is designed to supplement – not replace -wild stock production…(and)proudly provide millions of dollars of annual economic output in-state, nearly one billion meals per year worldwide, and stability to coastal communities, fisheries, and user groups across the state.”

Salmon Hatcheries for Alaska says on its Facebook page that it is a nonprofit entity, but there is no record for any nonprofit with that name registered in Alaska. The group’s webpage lists no executive director, mentions no board of directors, provides the name of no human contact, and lacks for any information on where the group is based.

A search of the internet links the group to The Alaska Salmon Hatchery Alliance, which represented itself as Salmon Hatcheries for Alaska in an appearance before the State House Fisheries Committee in 2019. At that time, the group described itself as representative of the state’s eight largest PNP hatcheries. 

Deck Boss, a fisheries trade publication, in 2021 reported the group was “paying power lobbyist Kent Dawson an annual fee of $60,000” to represent it in the state capital. 

Wild salmon losing

The situation with chum salmon in Southeast Alaska raises serious questions about the group’s claim that “hatchery production in Alaska is designed to supplement – not replace -wild stock production.”

The numbers also would indicate some hatchery chums almost have to have replaced some wild chums in that region, but the latest state reports says few firm conclusions can be drawn because “our knowledge of the harvest of wild chum salmon, particularly summer-run fish, is imprecise because of the high abundance of hatchery fish in mixed-stock commercial fisheries since the early 1990s.”

“Major increases of stray Crawfish Inlet hatchery fish in two of the nine Northern Southeast Outside Subregion index streams present challenges for monitoring wild stock escapements and assessing escapement goal performance as required by the sustainable salmon fisheries policy,” the report adds.

The Alaska Legislature early in this century approved “sustainable fisheries management” law specifically directed at protecting wild salmon.

Among other things, the law says that “effects and interactions of introduced or enhanced salmon stocks on wild salmon stocks should be assessed; wild salmon stocks and fisheries on those stocks should be protected from adverse impacts from artificial propagation and enhancement efforts.”

A case can be made wild chum in the Panhandle are now experiencing “adverse impacts,” be they big or small, “from artificial propagation and enhancement efforts.” In other states, what is happening might lead an environmental groups to file suit, but Alaska environmental groups have long been in an unholy alliance with commercial fishermen in the north where the fishing business is treated not as a business, but as a “lifestyle.”

It is notable that with Alaska Chinook salmon – the largest and most valuable of the Pacific salmon, not to mention the official Alaska state fish – in serious decline it was an Outside group, the Wild Fish Conservancy, that asked the National Oceanic and Atmospheric Administration (NOAA) to consider whether the fish warranted Endangered Species Act protection.

NOAA questioned some of the claims the Conservancy made in asking for such an examination but concluded that impossible-to-ignore declines in both the size and number of Alaska Chinook over the past two decades warrant at least an examination of what is happening.

The agency announced in late May that it would undertake an “in-depth review to determine whether a listing is warranted.”

This brought an angry response from the state’s political leaders, who didn’t think federal officials should be meddling in Alaska salmon management and dead silence from the state’s major environmental groups.

The Southeast Alaska Conservation Council (SEACC), the major environmental player in the Panhandle since the 1970s, proclaims on its webpage that “we are commercial fishermen,” which might help explain why not only has the organization failed to note the conflicts between hatchery and wild fish in the Panhandle but has remained silent about state hatcheries fighting the efforts of the Alaska Department of Environmental Conservation (DEC) to make them clean up the crap beneath their salmon net pens. 

Meanwhile, the Alaska Center (formerly the Alaska Center for the Environment) is so deeply embedded with commercial fishermen in trying to stop the long-proposed Pebble Mine in Southwest Alaska and join the trendy, national environmental issue of the day – dam removal – that it could care less about wild salmon, especially when caring might complicate relationships with commercial fishermen and commercial fishing interests opposed to mine development and supportive of dam removal.

Thus Alaska’s hatchery juggernaut rolls on even when, as in the case of the CIAA, a hatchery association turns out to be a giant loser.