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Flooded by debt, Kake salmon hatchery to close

Posted: May 20, 2014 - 11:02pm
Gunnuk Creek Hatchery manager John Oliva stands in front of the Kake hatchery with his son, Thomas. The Olivas will move to Arizona after the hatchery's closure on June 30.   MARY CATHARINE MARTIN | JUNEAU EMPIRE
MARY CATHARINE MARTIN | JUNEAU EMPIRE
Gunnuk Creek Hatchery manager John Oliva stands in front of the Kake hatchery with his son, Thomas. The Olivas will move to Arizona after the hatchery's closure on June 30.

KAKE — Kake’s Gunnuk Creek Hatchery will be closing in a little more than a month, something Kake residents and leaders say is a calamity for the town’s economy and access to fish.

Kake Mayor Henrich Kadake Sr. said he’s been involved with the hatchery since “day one,” almost 40 years. It started as a high school project in 1973 and incorporated in 1976.

“It’s going to be a real blow to the community,” he said.

The hatchery, owned and operated by the Kake Nonprofit Fisheries Corporation, owed the state $13.75 million when it was denied its 42nd loan. The denial of that loan meant it was unable to operate, and it defaulted in January, leading the state to foreclose.

Hatchery Manager John Oliva is resignedly realistic about the situation. “It is what it is, especially in black and white on paper,” he said.

Oliva and Kadake attribute much of the hatchery’s downfall to the failure of a dam above the hatchery in summer 2000.

It caused “a major setback” in operations, Oliva said.

A new dam was completed in the mid-2000s, but that construction was a bit of a “fiasco,” he said. It stopped water flow, killing all the fish in the building.

In 2007, an improved dam was finally completed, but years of operating without a well-functioning dam had taken their toll, and returns weren’t good enough to recover operating costs. The hatchery had to take operating loans from the state.

“It wasn’t ideal,” Oliva said. “Nobody seemed to really want to have to do the loans.”

Last year was the first year since the dam’s demise that fish returned in large numbers, but it was such a hot, dry summer that many couldn’t make it up the creek.

Nevertheless, Oliva said, the hatchery was about 100,000 fish away from recovering its operating costs last year. They were expecting a good run this year. Things were looking up. But they were unable to get “one last loan” at a time the state had a budget crunch.

“They’re looking at ways they need to cut back,” he said. “They said, ‘We can’t give you one more loan.’ If we can’t get the loan, we don’t have the operating costs, so we have to stop. … Basically everything just fell in the wrong place at the wrong time. If it wasn’t for the budget crunch, we probably wouldn’t be in this boat.”

Kadake and Oliva said the nonprofit owed about $22 million. The state became the owner of the hatchery land before foreclosure, Oliva said.

 

Economic impact

Kadake said the closing will take about 30 jobs from the community.

There are the five year-round and 15 seasonal jobs at the hatchery, plus associated jobs in harvesting, he said.

All of Gunnuk Creek’s fish are incubated in the hatchery. Chum are taken to Southeast Cove, about eight miles away. They’re placed in net pens and eventually released. Coho and pinks are released either in Gunnuk Creek, in Kake, or in front of the town.

Gunnuk Creek Hatchery was permitted to produce 65 million chum, 20 million pinks, and 500,000 coho, Oliva said. The hatchery website says the hatchery contributes $700,000 to the Kake economy each year.

“The whole premise of the hatchery system — producing fish, contributing to the economy of the state and the town — is a balancing act trying to weigh what’s coming and going out,” Oliva said. “The fish coming out of here getting caught by the commercial fisheries … are a direct benefit to the community.”

Before it closes, the hatchery will release about a million coho — around 492,000 smolt and 500,000 fry — into Gunnuk Creek.

 

Foreclosure

The private, nonprofit Northern Southeast Regional Aquaculture Association (NSRAA) has agreed to purchase the hatchery’s equipment from the Alaska Department of Commerce and is conducting an engineering review of the hatchery itself, said NSRAA General Manager Steve Reifenstuhl.

It will use the equipment in Southeast Cove, where where NSRAA has been releasing chum salmon alongside the Gunnuk Creek Hatchery for the last two years.

The hatchery will release the last of its chum there around May 23. NSRAA plans to release many more there in the years to come.

Reifenstuhl said despite some negative feeling in Kake, the nonprofit is following standard procedures.

“If a nonregional hatchery program defaults on a loan which is through the state of Alaska Department of Commerce, we have first right of refusal,” he said.

NSRAA’s engineering study will determine if Gunnuk Creek hatchery is still viable — or if the shutdown will be permanent. That study should be complete in one to two months; NSRAA has until the end of the year to decide if it wants to operate the hatchery under a purchase agreement.

It doesn’t look good. Reifenstuhl said the hatchery would cost more than any of the nonprofit’s other hatcheries to operate.

“Gunnuk Creek is a very poor water source,” he said. “It’s extremely hot in the summer time. The watershed has been logged, which drives extremes in temperature. It’s hot in the summer and extremely cold in the winter.”

The surface water also has a large amount of tannins and is subject to floods and high organic loads, he said.

It would probably cost at least “a couple million in infrastructure” to address stream debris and temperature, he said, adding that the only reason NSRAA is considering it at all is because NSRAA is so dependent upon its Hidden Falls Hatchery.

Should NSRAA use Gunnuk Creek, it will have to negotiate with the Department of Commerce for the land and the building. They’re paying less than $1 million for the equipment, Reifenstuhl said, adding that the Alaska Department of Commerce is unlikely to recover all of its investment regardless of whether or not NSRAA decides to use the location.

 

Future

With or without Gunnuk Creek, NRSAA intends to keep stocking Kake with fish.

“Our intention is … to conduct a vibrant fisheries enhancement program in Kake’s backyard (Southeast Cove),” said Reifenstuhl.

With 55 million chum in the cove, it would have a dollar value of around $5 million to $6 million annually, he said.

Reifenstuhl said NSRAA is “really excited” about its program there.

“It’s a tremendous benefit for the commercial fisheries of Southeast to be able to increase production at this level,” he said.

He said he expects around 100,000 or 200,000 chum to return to Southeast Cove by 2016.

Reifenstuhl acknowledged difficulty in Kake “accepting the situation as it is.”

“But I believe in three or four years when we start having major returns of salmon (in Southeast Cove), that will all dissipate,” he said, adding that NRSAA will buy fuel, move crew in and out of Kake, and use the town’s harbor for its barge.

It also plans to rear and releasing Chinook at the mouth of Gunnuk Creek, primarily “to show a benefit to the community of Kake.”

The hatchery’s closing is a blow to the community’s access to fish.

NRSAA’s Southeast Cove production will help some, especially if fish are processed in Kake, Kadake said.

This year, fishermen will try to catch all the returning fish before they get up Gunnuk Creek.

As for what will happen to the hatchery if NSRAA doesn’t decide to operate it, “ideas are thrown around, but there’s nothing definite,” Kadake said.

The school is considering turning the hatchery into a residential area for its teachers. Some are considering putting an oyster farm there.

“As of right now, they want me to board everything up by June 30,” Oliva said. “It will be sitting vacant. By the end of the year, maybe someone will operate it. Or it could just rot away.”

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