Bering Sea Fisheries Conference Recap
June 1, 2017
The seventh annual Bering Sea Fisheries Conference was held in Seattle, Washington on April 20, 2017. The conference was produced by Fishermen’s News and the Philips Publishing Group. This year’s focus was on the financing and technological considerations of upgrading older fishing vessels as well as policy changes in fisheries operations and management.
The new build market is tremendous, Peter Philips, publisher of the Fishermen’s News, said in his opening remarks. There is a potential for $15 billion dollars over the next 20 years in new vessel construction, conversion and retrofit. All these vessels must be built in the US, he said, and the intention of the conference, the largest to-date, is to help facilitate construction of these vessels in the Pacific Northwest.
The first of the four panels was on new vessel construction and the conversion of existing vessels, moderated by Garth Wilcox, senior naval architect at Glosten. Wilcox is the project manager and lead naval architect for the design of the 330-foot passenger ferry that will replace the Alaska Marine Highway System’s M/V Tustumena.
Glosten’s recent projects included the refurbishment of the 367-foot factory processor Excellence, updated design of a Vigor longliner and a detail design and production engineering of F/V Arctic Prowler.
Wilcox discussed ways of making vessels more fuel-efficient. One way is through hull optimization, as Glosten applied to the new Washington state Olympic class ferry. They were able to achieve a 40-percent decrease in resistance by using a computer model that let them vary different aspects of the vessel design. For the Alaska Marine Highway System ferry Tustumena replacement, they varied 14,000 designs. Main design variables were the bow bulb length, the section shape and the volume distribution. The result was a 20-percent fuel savings.
Wilcox also pointed out that selecting the right machinery to generate electricity on the vessel is just as important for fuel efficiency as hull optimization.
Bob Desautel, co-founder and CEO of Global Seas, said his company started modernizing its fleet about 8 years ago. In the past, the company had boats that fished multiple fisheries. Some East Coast fishery boats, for example, were retrofitted to participate in Alaska fisheries. Now Global Seas is purpose-retrofitting boats for specific fisheries for greater fuel efficiency.
For their newest class boat Defender, they decided on pumping pollock instead of landing the codend on deck. By switching to pumping, they are no longer squishing the fish. They can pump up to 700 tons per hour, although their normal operating speed is 300 tons per hour.
John Fisker-Andersen, port engineer with Coastal Transportation, showcased their first new-build vessel Coastal Standard, for which he was the project manager.
The company also settled on the side loaders for speed and efficiency. Electrical forklifts load the cargo inside the ship onto the onboard elevator platform. The elevator platform moves the cargo onto the dock where the dock forklifts pick it up. With this method, there is no wasted space on the dock, which is a benefit especially at smaller ports. It’s a quick and efficient way to offload the cargo, Fisker-Andersen said, and they can offload up to 20 pallets per hour.
Kenny Down, president and CEO of Blue North Fisheries, showcased their new longliner Blue North built by Dakota Creek Industries in 2016 in Anacortes, Washington. It’s a DNV ice-classed load-lined vessel that boasts increased safety, fuel efficiency, and product yield and quality.
The vessel utilizes a moon pool hauling system, in which the longline gear comes up through the bottom of the vessel and the deck workers stay indoors, safe and protected in a climate-controlled space. There is an anti-roll tank to make the platform very stable.
All Pacific cod coming onboard are stunned with electricity, eliminating the need to gaff the fish. This eliminates pain and stress for the fish and increases the quality of the fish, Down said. The result is a fillet that has a longer shelf life, better taste quality and value.
When designing the boat, Blue North invested in fuel-saving technologies, and the company expects the efforts to pay off in the sustainability of these fisheries in the future.
The second panel of the conference was on the changes in regulation governing refrigerants, moderated by Amy Duz, president of iWorkWize.
Duz explained that the regulations on refrigerants are in flux. Earlier refrigerants were chlorofluorocarbons (CFCs), which contain chlorine, fluorine, and carbon. Chlorine destroys the ozone in the stratosphere, so there is now a mandate to phase-in less harmful refrigerants.
The hydrochlorofluorocarbons (HCFCs) were the next generation of refrigerants. They still deplete the ozone, but at a much slower pace than CFCs.
The following generation of refrigerants was hydrofluorocarbons (HFCs). They do not deplete the ozone layer but do contribute significantly to global warming. HCFCs and HCFs were meant as a temporary, transitional substitute.
The phase-in of better refrigerants was initiated in 1987, when the countries of the United Nations signed on to the Montreal protocol. The efforts from this protocol resulted in a drastic reduction of the ozone hole, considered one of the most successful environmental stories ever. By 2064, Duz said, we are on track to totally repair the ozone hole.
The EPA is the agency enforcing American participation in the Montreal protocol treaty. They can impose fines up to $37,000 a day for each violation. These fines can be imposed for poor recordkeeping, failure to comply with leak repair requirements and failure to do the verification. These fines have been in the six to seven figures.
The replacements for HFCs being considered are propane, ammonia and CO2, but each has its own problems. Propane is explosive, CO2 is an oxygen displacer and ammonia is toxic even in small quantities.
Lars Matthiesen, of Highland Refrigeration, continued the discussion, noting that chlorofluorocarbons make the best refrigerant in terms of their cooling capacity, but due to their effect on the ozone layer must be phased out by 2030. In response to the phase out, Highland Refrigeration is using other refrigerants, including carbon dioxide.
To use CO2, vessels must have the ability to contain the gas under relatively high pressure. The gas is inexpensive, doesn’t smell and is not toxic, but can be a silent killer. It displaces oxygen and makes blood slightly acidic, so proper ventilation, alarms and CO2 detectors are very important.
Ammonia is another alternative. It’s an efficient, inexpensive, and familiar substance, but it’s also explosive in certain mixes with air.
Propane is another refrigerant on the market. An excellent natural refrigerant, similar to the chlorofluorocarbons in terms of its cooling capacity, propane is, however, highly flammable, and there is an increased risk of explosion, so it requires ventilation, sensors and alarms. It is widely used as a refrigerant in Canada and Europe.
Steve Becker, project manager of F/V Ocean Peace, said the basic problem with older condenser systems was their inefficiency and large size, and that they required a tremendous amount of cooling.
Modern systems, Becker said, use flash economizers. The newer systems can stabilize the liquid flow and the temperature in the low-pressure receivers, and stabilize the time the product stays in place. They are also able to reduce the amount of liquid needed to be maintained in the system.
Bob Donegan, President of Ivar’s, was the luncheon speaker, and described the company’s history and successful marketing programs.
Ivar’s restaurants were founded by Ivar Haglund who opened one of Seattle’s first aquariums on Pier 3 (now Pier 54) in 1938, along with a fish and chips and chowder bar next door. When Haglund died in 1985, he had about 15 restaurants but no heirs, so he left half of his estate to the University of Washington Business School, from which he had graduated in 1928, and half to the school of Hotel and Restaurant management at Washington State. His 5 senior lieutenants bought the company from the estate in May 1985.
After his death, the company organized into five different divisions – a group of three full-service restaurants, a group of 25 seafood bars, made-to-order hamburger chain Kidd Valley, a stadiums group and a soups and sauces group.
Donegan said they buy a million and a half pounds of seafood every year, He emphasized that Ivar’s is a data-driven restaurant company that relies heavily on their data to detect trends and make decisions Their typical customer visits them, on average, every 10 days. In quick service restaurants, a typical customer visits 10 times a year, so Ivar’s has enormous loyalty. They get half of the customers’ dining-out share, while other restaurants get only 12 to 16 percent.
Donegan said Ivar’s customers skew high in education and income. Their customers are not millennials or kids, but a 45-year-old mom or dad with kids or friends along.
seafood consumption per capita was 16 lbs. in 2016 and last year grew by 6 percent. Shrimp has always been the number one category consumed, about 4 lbs per person per year, while salmon is the second most popular fish bought. Donegan said 80 percent of meals are now consumed at home. For instance, what used to be a restaurant meal is now a meal bought ready-to-eat at a grocery store.
There are about six different restaurant formats in the Ivar’s group, and the segment that has grown the fastest is the quick service.
Among restaurant menus, the most common entrée is a combination plate.
Chicken is the second most common served entrée at restaurants.
Fish and shellfish items are sixth and 8th in ranking.
salmon has grown in popularity at about 2 percent per year over the last four years, and roughly 60 percent of restaurants offer it. cod is a little bit favorable in terms of consumption growth. Halibut is down 60 percent, perhaps because costs have been so high the past few years.
For shellfish, 66 percent of menus feature shrimp. The fastest growing shellfish that has been gaining popularity over the past four years is octopus.
Spicy, ethnic and exotic is the trend for fish sauces. People want exotic food.
Cost matters a lot, Donegan said, explaining the decrease in popularity of halibut.
A few factors affect these trends.
• Fewer people are working.
• More people are retired, and they don’t eat out as much.
Single-person households are growing and they tend not to eat out as much.
• Millennials don’t seem to eat out as much – food doesn’t seem to matter as much to them.
• More people are also telecommuting for work, and those people tend not to eat out as much.
In terms of trends, Alaska is still a premium brand, Donegan said. If consumers don’t recognize a fish, they ask where it came from. If it came from a place they know and trust, they buy it; otherwise, they don’t.
Donegan said their market research shows sustainability is not a top priority for consumers. It’s below every other decision-making marker. Wild is more important than sustainable. It could be that sustainability is assumed in Seattle, where everyone has a fisherman in the family or next-door. Because so much of Ivar’s seafood comes from Alaska, it is overwhelmingly sustainably harvested and grown.
After lunch, the third panel of the conference focused on the federal regulatory environment. Moderated by Marcus Hartley, president and principal economist of Northern Economics, the panel was a question and answer discussion between the moderator and the three panelists – Brent Paine, executive director of the United Catcher Boats, Chad See, executive director of Freezer Longline Coalition and Chris Woodley, executive director of Groundfish Forum.
Hartley: How might the new administration affect the fisheries?
Panelists: We have not yet seen any impacts from the new administration, but on policy issues we’re still waiting to see what will happen. The biggest worry is who will be the next NOAA administrator.
Chris Oliver is currently the Executive Director for the North Pacific Fishery Management Council and is one of two top candidates to head up NOAA Fisheries. The other candidate, Robert Barham of Louisiana, appears to have a much greater focus on recreational fisheries. If it’s Chris Oliver, it’s probably going to be the status quo from the previous administration.
Woodley said that Oliver understands federal fisheries and the rationalization and the complexities. Barham knows state fisheries from the Gulf States, so it is concerning what kind of an administrator he would be for the Alaska fisheries.
Hartley: What about the new rule that for every new federal regulation two need to be eliminated?
Panelists: So much of the federal fishery management is regulatory. This rule doesn’t make sense. We communicated our concerns to the Alaska Delegation. We think our concerns will be communicated to the top level and hope this rule won’t apply to the federal fisheries.
Hartley: Budget issues – what are some of your concerns about the initial budget from the Trump administration, like elimination of the Sea Grant, cuts to NOAA Oceans.
Panelists: Stock surveys for the North Pacific are the backbone for stock assessments and understanding of the health of the fisheries. Further cuts in funding for the survey in FY 2018 might result in the cancellation of the bering sea slope survey. This is a real concern.
Washington Sea Grant has been an essential partner for us. They allow the fishery industry to engage with the university researchers. We might not be able to do these research projects internally without the Sea Grant. For example, Sea Grant has helped develop methods to reduce bird interactions with our longline gear.
Our top priorities are stock surveys and assessment for the West Coast and the Alaska fisheries. NMFS facility costs and staff costs are going up, so there is less money for program expenditures, like the surveys. And that’s a problem.
Hartley: NOAA Oceans weather reporting?
Panelists: The research component of NOAA is extremely important. There is now a gag order for researchers working on climate change in NOAA and NOAA Fisheries to talk about climate change. That might have some impact on the fisheries.
Hartley: Strong dollar, is that a good thing?
Panel: Strong dollar is not good if you’re an exporter.
Hartley: State of Alaska financial crisis?
Panelists: For the Eastern bering sea pollock fishery, there is a cap on the herring bycatch. If the fleet goes over the herring cap, it pushes the fleet out from good fishing grounds. Two years ago, ADF&G’s budget was cut and they stopped doing aerial surveys and stock assessment for herring for Togiak and Norton Sound. Instead, they now take historical catch average for the past 10 years and use these data to set the catch limits. This has resulted in a lower number for the herring bycatch limit.
The last panel of the conference addressed state and federal public sector financing initiatives, and was moderated by Peter Philips.
Mike Catsi, Business Development and Communications Director for the Alaska Industrial Development and Export Authority (AIDEA), explained the role of his organization. Catsi said they are a public corporation of the State of Alaska created about 50 years ago. Their mission is “to advance economic growth and diversification in Alaska by providing various means of financing and investment”. AIDEA helps arrange financing to support economic development.
The corporation is a semi-autonomous entity, overseen by a seven-member board. Their investment decisions are not made through political process, but through traditional, commercial due diligence.
They are self-funded, don’t receive any money from the legislature, and provide dividends back to the state.
They have investments and loans through most sectors in the state outside of housing.
Maritime is about 12 percent of their portfolio. They also help finance projects through the permitting process. They do long-term financing.
AIDEA can finance a variety of fisheries-related capital projects, such as on-shore processing plants, cold storage facilities, ports, harbors and docks, vessels home-ported in Alaska, shipyards and machine shops.
Some of their recent projects include the Icy Strait Point cruise ship dock, small cruise vessels built by Allen Marine, Ketchikan Shipyard and a Kodiak fishmeal plant.
Rodney Wendt, Executive Director of the Washington Economic Development Finance Authority (WEDFA), explained that the authority only engages in conduit bond financing. WEDFA issues bonds in the name of their organization and sells them generally to commercial banks, loaning the proceeds to companies that can benefit from this type of financing. The real credit risk is taken by commercial banks. The beneficiaries are the borrowers.
The authority is governed by an independent board, the majority of which is appointed by the governor of the State of Washington. The biggest reason WEDFA exists, Wendt said, is to cut the service cost. The entity is also self-financed and charges finance and maintenance fees, which are their sole source of income.
Their primary focus is on small manufacturing facilities, solid waste disposal projects and nonprofit projects with desirable economic development impacts. They have financed shipyards and on-shore fish-processing facilities.
Wendt said he is excited about the projects that might exist in the bering sea fishing fleet that are housed in Washington. There may be some potential use of the financing that they provide.
The particular projects that they can do are shipyards, companies that manufacture marine parts, shore-based fish processing, and they are also interested in figuring out if they can do at-sea fish processing facilities. These have to be small projects – no less than $2.5 million and no more than $10 million.
Scott Houghtaling, with Fisheries Finance Program at NOAA Fisheries, was the last speaker of the conference. Houghtaling said they have three regional offices. The one in Seattle covers the West Coast, Alaska and Hawaii. Their program had a role in rationalization and managed the boat buy-back program.
They are a direct government loan program that provides long-term loans to commercial fisheries, and have a $100 million fund for this fiscal year. Their traditional lending is to fishing vessels and processors. The loans they make are both for purchases and refinancing. On top of the $100 million fund, they also lend $24 million in Alaska to the halibut, sablefish and crab fisheries.