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Meeting Report: Gunnar Knapp, Professor of Economics, Institute for Social and 

Economic Research, University of Alaska., Anchorage, AK. 

8/10/10 

8:00 – 9:20 AM 

Participants 

Gunnar Knapp University of Alaska Don Anderson U.E. EPA, Washington, DC

 Betsy Bicknell ERG

Kathleen Wu ERG, Chantilly, VA

Anne Jones ERG, Lexington, MA

Betsy Bicknell (ERG) met with Gunnar Knapp in person on Tuesday morning, August 10, 2010. 

Other participants listed above joined the meeting by phone. At the start of the meeting, Dr. 

Knapp provided files for several presentations: 

— Alaska Fisheries Harvest Trends Overview 01 

— Alaska Fisheries Harvest Trends Overview 

— Alaska Fisheries Prices & Value Overview 01 

— Alaska Fisheries Prices & Value Overview 

— Alaska Fisheries Short Management Overview 

— Alaska_Major_Fisheries_Overview 02 

— Knapp_IFFO08_Fishmeal_&_Fish_Oil_from_Food_Fishery_Byproducts 

— Knapp Value Added 02 

— Role of Seafood in Alaska Economy 

Don Anderson (EPA/OW/EAD) began the meeting by providing a retrospective of the 

national regulations that apply to seafood processing facilities in Alaska. In 1974-5, EPA 

established regulations for seafood processing in the U.S., including regulations that were 

specifically crafted for Alaska. For certain parts of the Alaska seafood processing industry, EPA 

set two levels of limits. Less stringent limits required that waste be ground to less than 0.5” prior 

to discharge. For seafood processing or population centers, called “non-remote” areas in the 

regulations, EPA set limits for TSS and oil and grease, based on screening solids from the 

wastewater and their off-shore disposal. 

Mr. Anderson explained that Alaskan seafood processing industry representatives challenged the 

regulations in court. The court upheld EPA. In 1980, exercising its right to petition, industry 

petitioned EPA to change the regulations because they were too costly. EPA suspended the 

regulations in June 1980, while considering the petition, and has never lifted the suspension. In 

January 1981, EPA published a proposed a response to the petition. While evaluating the petition, 

EPA analyzed two alternatives for managing the seafood processing wastes: 1) screening and 

barging for ocean disposal and 2) byproduct recovery. EPA found that costs were higher for 

Juneau. For this reason, in the proposed response to the petition, EPA found that Juneau should 

be reclassified as “remote,” while Anchorage, Ketchikan, Petersburg, and Cordova should retain 

the classification of non-remote and the more stringent regulations. In the proposed response to 

the petition EPA also indicated its preference for byproduct recovery as the method for 

management of screened solids. EPA also noted that it was considering adding Dutch Harbor and 

the Kenai Peninsula to the list of “non-remote” locations. 

EPA Region 10 developed a General Permit for seafood processing industry in 2001, noting that 

EPA would re-evaluate the suspended regulations. EPA has started the re-evaluation process, 
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beginning with collecting information reflecting the current state of the industry. In April 2010, 

EPA sent a questionnaire to nine seafood processing companies with operations in Anchorage, 

Ketchikan, Petersburg, Cordova, Juneau, Dutch Harbor and the Kenai Peninsula. Mr. Anderson 

noted that at the industry’s request, the deadline for responding has been delayed from 45 after 

receipt until October 1, 2010. Early in 2011, EPA will publish a Notice of Data Availability, with 

an explanation of what it means with regard to the petition response. 

Dr Knapp suggested the following agenda for the meeting: 

- 10 minutes of an economists’ view of waste disposal and byproduct recovery; 

- 30 minutes about the Alaska seafood industry, focusing on issues related to waste 

disposal; 

- Time for questions and discussion. 

After this introduction, he emailed several small files to Don Anderson, Kathleen Wu, and Anne 

Jones. Betsy Bicknell viewed the files on Dr. Knapp’s office PC. 

Economist Introduction to Seafood Processing Wastes 

Seafood processors buy fish and make multiple products which they sell into multiple markets. 

In the Alaska, unlike other areas, the seafood processing industry is independent from the 

harvesters. That is, the fishermen are independent businesses, free to sell their catch to whomever 

they choose. The exception is the pollock industry, which features harvester/processers that 

operate in the Bering Sea. In the salmon industry, processors buy fish from the fishermen. It is 

far from a simple industry. It is distinguished by considerable variability and uncertainty in the 

harvest. From year to year, fishermen and processors do not know how many fish will be caught. 

Dr. Knapp reviewed a slide from a presentation he gave at this May’s seafood technology 

conference. It provided eight basic points about the Alaska seafood industry. 

1) Not all value adding is profitable or optimal for a fish processor. 

2) Where and how fish are produced in wild fisheries and aquaculture has important 

implications for the economics of value-adding. 

3) The choices which maximize the profitability of the processing industry are not 

necessarily optimal for byproduct utilization. 

4) The most profitable locations for value-adding are not necessarily where the fish are 

produced. 

5) Different groups within a region may be affected in different ways by value-adding. 

6) A variety of policies may be used to promote value-adding within a region. 

7) Opportunities and challenges associated with value-adding may change significantly over 

time. 

8) Marketing is critical to successful value-adding. 

In particular, Dr. Knapp emphasized point #2: Where and how fish are produced is important. 

He explained that in some processing areas production volumes are small while in others they are 

very large. This is important because byproduct recovery is capital intensive and may not be 

economical for small production volumes. Further, in some areas the fishing season is almost 

year-round (e.g., the Alaska pollock fisheries) while in other areas the season is only 4 to 8 

weeks. Dr. Knapp pointed out that the more seasonal the production is, the worse the economics. 

That is because the processing equipment must be sized for the lbs/day produced in the season, 

but it will sit idle for most months of the year. Other features of the Alaska fishing industry that 

impact waste management alternatives are that the size of the catch varies from year to year; the 

distance to markets (Seattle, Asia) and the distance from the fisheries. The most profitable places 
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to do the processing are not necessarily where the fish are. Other important variables include the 

rapidly changing technologies and markets, fluctuating prices, and fluctuating energy costs. What 

is economic one year might not be in another year. 

File Alaska Major Fisheries 02 

After this introduction, Dr. Knapp provided background of the Alaska fishing industry, taken 

from materials he uses in an introductory-level college class on the Alaskan economy. 

There are five major fishing industries in Alaska 

1. salmon 

2. herring 

3. halibut 

4. shellfish 

5. groundfish (including pollock) 

Each of these fisheries has different seasons, locations, and types of gear used to harvest the fish. 

Larger processing plants will process all types of fish but at different times of the year. The 

economics vary depending on whether a plant processes one or a mix of species. Smaller 

operations focus on one fishery. The processors in the southeast mainly harvest salmon. Halibut 

and shellfish are high value (fetch high $/lb in the market). 

Alaska harvests five different species of salmon, each of which has at least two common names. 

The species vary in size and how they are used/processed. The salmon types, from the largest to 

smallest are: 

1. Chinook (king); 

2. Chum (dog or keta). 

3. Coho (silver); 

4. Sockeye (red); 

5. Pink (humpy); 

Products vary in the price they will fetch in the marketplace, from lower value canned salmon 

(mostly pink salmon), to higher value frozen salmon, to the highest value fresh salmon. Only a 

small volume of salmon is shipped as fresh product, due to shipping costs (it must be transported 

by air). Sockeye value is 3-4 times greater than pink. (note on slide 12, Overview of Selected 

Alaska Salmon Fisheries, 2000 the earnings per permit fished are per year, while the average

permit value reflects a one-time cost. With a few exceptions, it appears that the fishermen are 

willing to pay a price for a permit reflecting about a 1.5 to 4-year payback period). 

The Alaska salmon industry went through an economic crisis in the 1990s with the emergence of 

the farmed salmon industry1. Salmon are farmed in Norway, Chile, Scotland, Canada (both 

British Columbia and eastern Canada), and Maine. Regardless of the farm location, the species 

farmed is Atlantic salmon. As a result of the increased supply from the salmon farms, the price 

paid to fishermen dropped from $2/lb to $0.4/lb. 

 

1 Alaska laws prohibit Salmon farming. The closest farm is a single solitary salmon farm in 

Washington State. Alaska has a large fish hatchery industry to increase the number of wild 

salmon available for harvest. 
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As a result of this economic crisis, many processing plants closed. With the emergence of the 

market for “wild Alaska salmon” there has been some recovery of the industry. 

Herring. The herring fishery is the least significant of the Alaska fisheries. It is centered in Sitka 

and has a very short season (early summer, May). Dr. Knapp reported that most herring were 

frozen in the round (as whole fish), so there is little waste. 

Halibut is headed and gutted at sea, so the processors generate little waste (maybe frames, if they 

are producing filets). 

Shellfish: this is a small fishery, relative to the others in Alaska. There was a shellfish boom 

between 1960 and 1980. During that time, Kodiak was the “crab capital.” After 1980, harvests 

fell. Shrimp and king crab harvests haven’t recovered. Dungeness crab are harvested in SE. Most 

snow crabs and King Crab are harvested in the Bering Sea. Volumes of waste associated with 

shellfish are relatively small. 

Groundfish, including pollock this is a very large volume fishery. Groundfish are typically 

harvested by trawlers. Kodiak and Dutch Harbor are the major landing ports. Trawling is 

indiscriminant and can result in by-catch (non-target species). According to law, the by-catch 

cannot be processed and sold and must be discarded at the processor. The percentage of by-catch 

varies, depending on the fishery, and the location of the fishery. 

Prior to 1980, the groundfish industry was foreign. After the change in the economic exclusion 

zone, there was a tremendous growth in the pollock harvested and processed by U.S. interests. 

By-catch is not so much of a problem with shellfish and halibut because shellfish and halibut 

(along with the by-catch) are generally caught live and are sorted on the fishing boat. Small crabs 

can’t be delivered to the processor and must be released. Sometimes they are sorted by sex as 

well as size. Therefore by-catch is released and not brought back as waste. 

File Harvest Trends Overview 01

Dr. Knapp presented several slides depicting the amount of fish landed by year. From year to 

year, harvest can vary by as much as 50%. There are also longer cycles in fish productivity, 

called “regimes.” Fisheries biologists aren’t sure of the cause of the ocean regime shifts, but do 

not believe they are a result of over-fishing. The regime shifts are believed to be a nonanthropogenic phenomenon. 

Alaska Hatchery Program 

A large percentage of chum and pink salmon come from hatcheries. Hatcheries have their own 

waste disposal problems. The mature fish which have reached their spawning stage are may be 

poor quality, inedible flesh (too dark, or old). Salmon close to spawning are generally considered 

inedible regardless of whether they are hatchery or wild fish. These mature fish must be disposed 

of: They are hatchery waste. Also, the fry from a hatchery are placed in a stream. When they 

mature, they return to the stream all at once. If too many of the hatchery fish survive, there may 

be more fish than the processor can use and these excess fish become waste. There are numerous 

hatcheries, including the Douglas Island Pink & Chum Hatchery in Juneau, and others in more 

remote areas of southeast Alaska. 
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Shell fish Dr. Knapp pointed out features of the shellfish production trend graph. He noted booms 

and busts in the crab industry. Kodiak had a huge crab boom in the late 1960’s, which vanished 

(not related to overfishing). This cycle also affects the Bering Sea catch. The crab fishery there 

comes and goes. 

Groundfish Populations of groundfish are more stable than salmon populations. Ground fish live 

10 to 40 years. They can be reasonably well managed using estimates of biomass. For example, 

permits might be set using a limit set at 10% of the biomass estimated. There are, however, some 

trends evident. The pollock population declined a little in the last 2-3 years. 

File Alaska Fisheries Prices and Value Overview 01

Chinook (king) salmon represent only 1% of the salmon catch. 

Coho (silver) are also a small portion of the catch. 

Sockeye, pink, and chum make up the majority of the catch. 

Prices fell in the 1980s through 2000, they have rebounded some since then. Prices are up in 

2010. 

The major Pollock fisheries are in the Bering Sea and Kodiak. 

Processors make three products from the pollock: fillets, surimi (fish paste, sold to Asia, and 

used in the U.S. to make imitation crab products), and roe (high value but represents a very small 

volume of the pollock processed). 

Processors pay several taxes, including fisheries business tax; landing tax, property taxes. The 

fisheries taxes are turned over to the general fund, but are typically returned to the community, 

File Knapp_IFFO08_Fishmeal_&_Fish_Oil_from_Food_Fishery_Byproducts

IFFO (international fish meal and fish oil organization http://www.iffo.net/ ) 

This organization keeps statistics on fish meal and fish oil prices and production. World wide, 

most fish meal is produced from whole fish (anchovies in Chile and Peru; menhaden in the Gulf 

of Mexico and eastern U.S.) Some is produced from byproducts. 

There are good data on the fishmeal and fish oil produced from pollock, less for other species. 

Pollock harvests vary by month. There is wide seasonal variation in Alaska pollock harvests, with 

distinct winter and summer seasons driven by roe content and market factors. Fish oil yields are 

much lower in the winter (1-2%) than in the summer (3-4%) because fish have a higher oil 

content in summer than winter. 

. 
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Reprocessing in China

A new trend in the last 6-7 years is to head and gut fish in Alaska, freeze them, and then ship the 

frozen fish to China, where low-cost labor makes value-added products from the frozen whole 

fish. 

Questions and Discussion 

Anne Jones asked if processors compete with each other to obtain fish. Dr. Knapp explained this 

varies year to year and in the various communities (# of plants) and depending on the state of the 

market and how valuable the fish. Fishermen depend on the processors. Processors depend on 

fishermen (they can’t compel the fisherman to sell them fish). This is a very sensitive price 

formation issue. 

Processors are middlemen. They are in a very risky business. When there are strong wholesale 

prices, processors will bid up the price they pay to fishermen. When there is a big harvest, with 

more fish than processing capacity, the processors may put the fishermen on limits (limit the 

amount of fish that they will purchase). When there is a small harvest, the processors compete 

for the fish and bid the price up. Also, if the run is good floating processors can come in to an 

area and take the harvest. This can change the economics in the area. 

Some processors use tenders to pick up fish. For example, in Cordova, the fishermen bring the 

fish in, but tenders might also come out to the fishermen to pick up the fish to deliver elsewhere. 

To reduce the uncertainties, fishermen typically line up with a processor, making agreements to 

supply only that processor and the processor agrees to buy the fisherman’s catch, although they 

also break those agreements, and some never make agreements. Dynamics have changed with the 

change in the number of processors. In the 1990s, when many plants closed, the industry became 

less competitive, in some cases there was only one buyer per town. In Ketchikan and Bristol Bay, 

however, there is a lot of competition. 

The fishermen and processors have a long-standing debate about whether the price paid for fish is 

fair. 

In the past, processors were sued for collusion on prices. As a result, they are now supersensitive 

about communication with other processors in the same community. Dr. Knapp wondered if this 

sensitivity has played a part in their hesitance to form cooperative facilities for managing seafood 

processing waste. 

As the discussion wrapped up, Don Anderson asked if EPA could ask for further clarification of 

issues at a later date. Dr. Knapp was agreeable but pointed out that he would be on sabbatical the 

coming year and would be traveling 2/5 of the year and would not necessarily be in his office 

when he is in Alaska. He indicated that email would be a good way to contact him. 

Dr. Knapp opined that the seafood processing industry wants less regulation, or at the least no 

changes to existing regulations. In the communities, the local environmentalists will be in the 

minority. He expects that Alaska’s congressional delegation will weigh in on behalf of the 

industry. 

He also expected that the industry would ask if there is an environmental problem with current 

waste management practices. (if it ain’t broke, why fix it?) He suggested that as we visit plants, 

we should keep their violations history in mind.