Order 2013

- 6

- 11 Served: June 11, 2013



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION



### OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 11 th of June, 2013

Air Transportation to Noneligible Places

DIOMEDE

, ALASKA

Under 49 U.S.C. 4173 6 DOCKET DOT

- OST

- 2009

- 0260

ORDER RE

- SELECTING CARRIER Summary By this Order

, the Department is re

- selecting Evergreen Helicopters, Inc. ( Evergreen ), 1 to provide Air Transportation to Noneligible Places ( ATN E P ) at Diomede

, Alaska , with an annual subsidy of $ 377,520 2 per year for the period July 1, 2013, through June 30, 201 4 . Service is to consist of one round trip per week , 44 weeks per year, 3 routed Nome to Diomede to Wales to

Diomede to Nome with 4

- seat B

- 105 helicopters.

Background By Order 2012

- 9

- 25, September 28, 2013, the Department selected Evergreen Helicopters, Inc., to provide ATNEP to Diomede, Alaska, through June 30, 2013. 4 The rate was set at $377,520 from the start of service through June 30, 2013, with half of that amount, $188,760, funded by the Department and the other half by Kawerak , Inc. (Kawerak), Diomede’s community representative, through funding from the State o f Alaska. The level of service was set at one nonstop round trip per week to

1 Evergreen is a wholly

- owned subsidiary of Evergreen International Airlines, Inc.

2 Under 49 U.S.C. § 41736(a)(1)(B), one

- half of the total subsidy Evergreen requests, $377,520, must be paid by a party other than the Federal government. Thus, the Departme nt’s share of the funding is $188,760. Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of funds.

3 The subsidized service is not required during the winter periods when an ice

- runway forms, permitting the ser vice

of subsidy

- free

, fixed

- wing aircraft.

4 The State’s annual fiscal period end s on June 30 of each year.- 2

-

Nome and one nonstop round trip per week to Wales, Alaska, with 4

- seat, BO

- 105 twin

- engine helicopters.

Because we are nearing the end of the current contract on June 30, 2013 , and because State funding is a prerequisite to our paying compensation, we contacted the State of Alaska to ask if funding would be available in future years for Alaska/Kawerak to continue payment of its

50 percent share of the costs to provide ATNEP at Diomede. On February 4, 2013, we received an email from Scott Ruby, Director of Community and Regional Affairs for the Alaska Department of Commerce . Mr. Ruby indicates that:

“The [State’s contribution for Diomede] is funded through General funds and is embedded in our operating budget. This means that unless the legislature specifically removed it, it will continue to be available. The Governor’s budget kept the Division’s GF budget at status quo. I do not anticipate that this funding will be an issu e.”

Based on the above, Order 2013

- 2

- 20, February 21, 2013, requested proposals for a new contract

term , with proposals due March 21, 2013

. On March 20, 2013, Pathfinder Aviation, Inc., requested an extension of the deadline for proposals to April 4, 20 13. The carrier ultimately did not submit a

bid.

Propos al of Evergreen Only Evergreen submitted a proposal, and it submitted only one option. The carrier proposes to continue to provide the same level of service and subsidy set by Order 2012

- 9

- 25.

Community Comments

We received comments from Kawerak on April 8 , 2013 . Kawerak urges the Department to reselect Evergreen as soon as possible because that carrier’s service significantly improves

access to routine health services, supplies, medicine, and basic necessities while improving general economic welfare for the community. It notes that Diomede is a remote and economically distressed Alaska native community , and that p oor access makes it difficult for

residents to live there and feel secure.

Decision

49 U.S.C. § 41736 (a)(1)(B) states that the Department may approve a proposal under ATNEP “...if the State or local government or a person is willing and able to pay 50 percent of the compensation for providing the transportation.” The Department is responsible for paying the remaining 50 percent.

On April 18, 2013, Mr. Ruby updated the State’s position on funding, indicating that :

“the legislature recently passed the state operating budget. Within the Department of Commerce, Community, and Eco nomic Development, Division of Community and Regional Affairs funding in the amount of $200,000 was included to provide a grant to Kawerak, Inc., for matching payment for the Diomede contract.- 3

-

Thus

, t he selection of Evergreen is straightforward. The level of service and subsidy is the same as that set by Order 2012

- 9

- 25, and the community strongly supports the carrier’s service. The proposed level of subsidy is reasonable for the service provided, and the level of service and subsidy is the same as established by Order 2012

- 9

- 25.

Special ATNEP Provisions

Contract Following issuance of this Order, the Department will enter into a contract with Evergreen and

Kawerak , as provided for by § 41736(a)(1)(B) . Kawerak is the applicable non

- Federal party responsible for payment of the 50 percent local share , while t he Department is responsible for paying the remaining 50 percent share. The Department will not authorize payments for air

service until the contract is executed.

The Department will continue to pay its 50 percent share as long as Evergreen maintains the established level of air transportation, Kawerak cont inues to pay its 50 percent share, and the Secretary of Transportation (Secretary) decides that the Department’s 50 percent compensation is necessary to maintain transportation at Diomede. 5 The Secretary may also withdraw the designation of Diomede as eligible to receive compensation for ATNEP after at least 2 years if the Secretary decides the withdrawal is in the public interest per 49 U.S.C. § 41736(f). Moreover, Evergreen may end, suspend, or reduce ATNEP at Diomede provided that it gives the

Secre tary, Alaska Department of Commerce, Community, and Economic Development, Division of Community and Regional Affairs and Kawerak at least 30 days’ notice before ending, suspending, or reducing the transportation. 6

B i lling s Evergreen must file a monthly cl aim with the Department indicating the level of service it has provided as described in Appendix B. 7 The Department will t h e n review Evergreen’s monthly

claim for accuracy and conformance with Appendix B and will immediately notify Kawerak of

the 50 percent share it is obligated to pay . After Kawerak has made payment to Evergreen and supplies the Department with proof of such payment , the Department will pay its own 50 percent share of the total monthly claim. 8

5 49 U.S.C. § 41736(d).

6 49 U.S.C. § 41736(g).

7 The Postal Service (USPS) has a direct air taxi contract with Evergreen for delivery of mail to Diomede. The service provided by that contract is designed to transport mail, but passengers or freight may be transported on a

space

- available basis. For service compensable under this order , passenger service comes first, but mail and freight may be transported on a space available basis. In order that the separate USPS and ATNEP service not be double counted, we will require Evergreen to submit with its monthly claim the entire service it provided to Diomede in that month, and to distinguish betwee n the service provided pursuant to the USPS contract and that provided under this

O rder

. 8 We typically establish weekly ceilings for billing purpose s to ensure reliable, consistent service. However,

because Diomede is so isolated and its air service need s may be somewhat unpredictable

-- e.g., for medical emergencies, we will establish only an annual ceiling. We still expect Evergreen to strive to provide a minimum of one round trip per week under ATNEP

.- 4

-

Carrier Fitness

49 U.S.C. §§ 41737(b) and 41738 require that the Department find an air carrier fit, willing, and able to provide reliable service before the Department may subsidize it to provide AT NEP

. Evergreen Helicopters, Inc., is subject to the Department’s continuing fitness r equirements

. The Department has contacted the Federal Aviation Administration, and it has raised no concerns that would negatively affect our fitness finding s

. The Department therefore concludes that the carrier

remain s fit to conduct the operations prop osed here.

This Order is issued under authority delegated in 49 CFR part 1. 25a(b)

.

ACCORDINGLY,

1. We select Evergreen Helicopters, Inc., to provide Air Transportation to Noneligible Places at
Diomede

, Alaska ;

2 . We set the final rate of compensation for Evergreen Helicopters, Inc., for the provision of Air Transportation to Noneligible Places at Diomede

, Alaska

, as described in Appendix B upon execution of a contract with Evergreen and Kawerak in which the Department will only pay 50 percent of each monthly bill from Evergreen after Kawerak directly pays Evergreen the remaining 50 percent ;

3

. T he Department will only continue to pay its 50 percent share as long as Evergreen maintains

the estab lished level of air transportation, Kawerak continues to pay its 50 percent share, and the Secretary of Transpo rtation decides that the Department’s 50 percent compensation is necessary

to mai ntain transportation at Diomede ;

4 . We direct Evergreen Helic opters , Inc., to retain all books, records, and other source and summary documentation to support claims for payment, and to preserve and maintain such documentation in a manner that readily permits its audit and examination by representatives of the Depar tment. Such documentation shall be retained for s even years from the service data of this Order, or until the Department indicates that the records may be destroyed, whichever comes first. Copies of flight logs for aircraft sold or disposed of must be retained. The carrier may forfeit its compensation for any claim that is not supported under the te rms of this Order ;

5 . We make specific note that Evergreen must retain records of all of its service to Diomede

– both that provided for under this order, as well as that provided under the Postal Service contract, as well as any charter or other servi ce not so required;

6 . We find that Evergreen Helicopters , Inc., continue s to be fit, willing and able to operate as a certificated carrier and capable of providing reliable Air Transportation to Noneligible Places at
Diomede ;

7

. This docket will remai n open until further o rder of the Department; and- 5

-

8 . We will serve copies of this Order on the civic officials of Diomede, Alaska, Kawerak, Inc., the Alaska Department of Transportation and Public Facilities, and on Evergreen Helicopters,

Inc.

By:

Susan L. Kurland Assistant Secretary for

Aviation and International Affairs (SEAL)

An electronic version of this document is available on the World Wide Web at http://www.regulations.govAppendix A

Nonstop Great Circle Miles to Diomede Wales (WAA) 28 Nome (OME) 134 Bethel (BET) 410 Barrow (BRW) 491 Kotzebue (OTZ) 193

Wales (WAA) to Nome (OME) 109Appendix B

Air Transportation to Noneligible Places to be Provided to Diomede

, Alaska , Docket 2009

- 0160

Effective Period : July 1, 2013, through June 30, 201 4

Scheduled Service : Nome to Diomede to Wales to Diomede to Nome Frequency : One round trip per week Nome and one to Wales. Aircraft Type : B O

- 105 , 4

- seat , twin

- engine h elicopter

US

- DOT Kawerak Total Subsidy $188,760 $188,760 $377,520
Rate per Flight : 1

DIO

- OME $1, 609 $1, 609 $3,2 18

DIO

- WAA $5 36 $ 536 $1,0 72

Note: The carrier understands that it may forfeit its compensation for any flights that it does not operate in conformance with the terms and stipulations of the rate Order, including the service plans outlined in the Order and any othe r significant elements of the required service, without prior approval. The carrier understands that an aircraft take

- off and landing at its scheduled destination constitutes a completed flight; absent an explanation supporting subsidy eligibility for

a f light that has not been completed, such as certain weather cancellations, only completed flights are considered eligible for subsidy. In addition, if the carrier does not schedule or operate its flights in full conformance with the Order for a significant period, it may jeopardize its entire subsidy claim for the period in question. If the carrier contemplates any such changes beyond the scope of the Order during the applicable period of this rate, it must first notify the Office of Aviation Analysis in w riting and receive written approval from the Department to be ensured of full compensation. Should circumstances warrant, the Department may locate and select a replacement carrier to provide service on these routes. The carrier must complete all flights that can be safely operated; flights that overfly points for lack of traffic will not be compensated. In determining whether subsidy payment for a deviating flight should be adjusted or disallowed, the Department will consider the extent to which the goa ls of the program are met and the extent of access to the national air transportation system provided to the community.

If the Department unilaterally, either partially or completely, terminates or reduces payments for service or changes service requireme nts at a specific location provided for under this Order, then, at the end of the period for which the Department does make payments in the stipulated amounts or at the stipulated service levels, the carrier may cease to provide service to that specific lo cation without regard to any requirement for notice of such cessation. Those adjustments in the levels of subsidy and/or service that are mutually agreed to in writing by the Department and carrier do not constitute a total or partial reduction or cessati on of payment.

Subsidy contract are subject to, and incorporate by reference, relevant statutes and Department regulations, as they may be amended from time to time. However, any such statutes, regulations, or amendments thereto shall not

operate to cont rovert the foregoing paragraph. Funds may not be available for performance under this order beyond September 30, 2013

. The Government’s obligation for performance under this order beyond September 30, 2013 , is subject to the availability of funds from wh ich payment for services can be made. No legal liability on the part of the Government for any payment may arise for performance under this order beyond September 30, 2013 , until funds are made available to the Department for performance. If funds are no t made available for performance beyond September 30, 2013 , the Department will provide notice in writing to the carrier.

All claims for payment must be submitted within 60 days of the last day of service provided under this Order.

1 $188,760 ÷ 44 trips ÷ 2 directions = $2,145

. Allocated by time : 20 minutes D IO

- WAA ; 60 minutes DIO

- OME. $2,145 ÷( 60 + 20 ) = $ 26.8125 per minute

. DIO

- WAA : $ 26.8125 x 20 = $5 36; DIO

- OME, $ 26.8125 x 60 = $ 1,609

.