Order 2012-9-25 Served: September28,2012 

### UNITED STATES OFAMERICA DEPARTMENT OFTRANSPORTATION OFFICE OFTHE SECRETARY WASHINGTON, D.C.

Issued bythe Department ofTransportation
onthe 28tli ofSeptember, 2012
Air Transportationto Noneligible Places 

### DIOMEDE, ALASKA Under 49 U.S.C. 41736 

### DOCKETDOT-OST-2009-0260

ORDERSELECTING CARRIER Summary By this Order, the Department is selecting Evergreen Helicopters, Inc. (Evergreen), 1to provide AirTransportation to Noneligible Places (ATNEP) at Diomede, Alaska, for $377,520.2 Following this Order, the Department will enterinto a contract with Evergreen and the applicable non-Federal party orparties (i.e., Kawerak, Inc., a relevant State ofAlaska government entity, etc.) responsible for payment ofits 50 percent share to ensure funding for ATNEP at Diomedebased on49 U.S.C. §41736(a)(1)(B), in which the Department will only pay 50 percent ofea:ch monthly bill from Evergreen

### after the applicable non-Federal party or parties 

### directly pays Evergreen the remaining 50 percent. TheDepartment will continue to pay its 50percent share as long as Evergreen maintains the established level ofair transportation, Kawerak continues to pay its 50 percent share, and the Secretary ofTransportation (Secretary) decides that the Department's 50 percent compensation is necessary to maintain transportation at Diomede.3 The Secretary may also withdraw the designation ofDiomede as·eligible to receive compensationfor ATNEP after at least 2 years ifthe Secretary decides the withdrawal is inthe public interestper49 U.S.C. § 41736([). Moreover, Evergreen may end, suspend, or reduce ATNEP at Diomedeprovided that it gives the Secretary, Alaska Department ofCommerce,

I Evergreen is a wholly-owned subsidiary ofEvergreen International Airlines, Inc. 2 Under 49 U.S.C. § 41736(a)(l)(B), one-halfofthe total subsidy Evergreenrequests, $377,520, must be paid by a party other than the Federal government. Thus, the Department's share ofthe funding is $188,760. Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability ofappropriated funds. 349

### u.s.c. § 41736(d).

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Community, and Economic Development, Division ofCommunity and Regional Affairs and Kawerak, Inc. (Kawerak) at least 30 days' notice before ending, sus,pending, or reducing the transportation.4
Background In accordance with 49 U.S.C. § 41736(a), a State or local government may propose that the Department assist inproviding compensation to an air carrier to provide air transportation to a communitythat is not eligible for Essential Air Service. The Department shall designate the community as eligible and approve a proposal for compensation ifa party is willing and able to pay 50 percent ofthe compensationfor providing thetransportation, and ifthe Department determines the proposal to bereasonable. In determining whether a proposal is reasonable, the Departmentmust consider, among other things, (1) thetraffic-generating potential ofthe point; 

### (2) the cost to.the Federal government ofproviding the proposed transportation; and (3) the distance from the point to the closesthub airport. By letter dated June 20,2012, the AlaskaDepartment ofCommerce, Community, and Economic Development, onbehalfofKawarak proposed "to the Secretary ofTransportation that compensationbeprovided to an air carrier to supply air transportation to/from Diomede" per49 U.S.C. § 41736 and indicated that:
The [State ofAlaska's] FY13 operatingbudgethas been signed and becomes effective July 1, 2012. The funding was included as part ofthe Department's basebudget and would be subject to legislative appropriations and approvals bythe Governor in subsequent years. The [State] is in the process ofoffering a grant to Kawerak,Inc.5 in the amount of$200,000. Wehave systems in placeto provide the full amount ofthe grant as an advance payment. Kawerak, Inc., has indicated in the grantbudgetthat they will beproviding $190,476 infunding directly to the U.S. DOT for use in the project."
Based on that letter, by Order 2012-7-9, July 9, 2012, the Department requested proposals to provide service under ATNEPto Diomede, setting August 7, 2012, as the deadline for proposals. The Order noted the extreme isolation ofDiomede and the community's need for air service. The Order stated that:
"With specific respect to Diomede, we expect proposals that request no more than $380,952 annual subsidy. Carriers are free to request less subsidyfor a given service level. As the Statehas indicated, oneround trip per week connecting the communityto the national transportation system is the goal, but carriers are free to offer more service than that ifthey require the ceiling level ofsubsidy orless. Carriers maypropose service for a one-yearperiod.6 Consistent with the State's letter, a typical two-year

4 49

## u.s.c. § 4l736(g). 5 Kawerak indicates it is the regional Native non-profit organizationproviding services to the twenty tribes in the Bering Straits Region, and that the Native Village ofDiomede is one ofthe Tribes to which it provides services. 6 Carriers should also recognize that in some undetermined periods oftime during the winter an ice runway may or may not form, which would obviate the need for helicopter service. As shown in Appendix B, that period oftime varies from year to year.

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contract may be proposed, with service in the second year contingent on funding being avaHable-fromthe State.?" Proposals Evergreen Helicopters, Inc. Evergreen proposed to provide 44 round trips a year, generally once a week, routed Nome to Diomede toW ales to Diomede to Nome. The carrier would provide the service with B0-105 helicopters, a four-seat, twin-engine aircraft. The carrier notes that for approximately eight weeks per year an ice-runway forms at Diomede, permitting fixed-wing operations, and during thatperiodhelicopter service is not required. The carrierrequests a total of$377,520 forthis service. Umiaq Services, LLC Umiaqproposes to provide servicebymarine landing craft from Nome to Diomede and back once a week "with approximately 15 trips ormore per season." The service would originate in Nome and from there hug the coast ofAlaska until crossing the approximately 25 miles from the mainland to the island ofDiomede. Umiaq does not provide the name for the specific type oflanding craft it proposes to provide, but describes it as a 65-foot vessel with a cruising speed ofup to 30 knots and authorized to transportup to 48 passengers and/or40,000 pounds offreight.8 9 Requests for Comments Byletter dated August 8, 2012, we requested comments byAugust 28, 2012, from the State and community on the two proposals. By letter dated August 10, 2012, the Mayor ofDiomede stated the city supported the proposal ofUmiaq. The Senior VP ofthe Native Village ofDiomede provided an identical support letter. Disqualification ofUmiaq's Proposal By letter dated August 10, 2012, Department staffindicated to the civic parties that our Office of General Counsel had ruled that the statute didnotpermit the Department to subsidizeboat service. Thus, Umiaq's proposal could notbe selected and Evergreen's proposal reflected the only option before us that couldbe considered.
State ofAlaska The State commented onAugust 27, 2012, as follows: "Normallythe AlaskaDepartment ofTransportation & Public Facilities would not provide specific comments on air carrier selection or routing structure to EAS. But given thefactthe State ofAlaska is providing 50% match funding to subsidize this air service, Ithink it is appropriate that we provide input to the EAS selection process and contract particulars."

7 Ifcarriers wish, they canrequest contract periods longer than the typical two-year period. 8 Umiaq describes the service from Nome to Diomede as "Route 1" and service in the opposite direction, Nome to Topcock as "Route 2." We are requesting service to Diomede only. Thus, Route 2 service would be permitted but not required. 9 The proposal shows a "gang-plank" on its vessel that**~ould** apparently allow landings at beaches as well as docks.

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The State is concerned that Evergreen proposes 44 weeks ofservice under the contract by assuming that an ice runway would be available for 8 weeks ofthe year, allowing for service with fixed-wing aircraft during that 8-week period and obviating the need for helicopter service. The State notes that Evergreen's proposal addresses this concernbyindicating that "Additional service maybe provided with the remaining subsidy funding, or ifthere were instances in which flight legs were cancelled due to weather." The State endorsed this idea.
The State is also concerned that its funds would only be available this year from July 1, 2012, to June 30, 2013.
"Given we are now in week eight ofour fiscal year, flying at least once a week for 44 weeks per year the Evergreenproposal should not be an issue as there are only44 weeks left inthe State's fiscal year.
....Next year's State grant would be effective July 1, 2013, to June 30, 2014, assuming the appropriation gets signed next year."
Kawerak, Inc. In its letter dated August 23, 212, Kawerak endorses the selection ofEvergreen. Regarding the disqualification ofUmiaq, it "understandsthis ruling, butproposes that Federally subsidizing boat service would be an additional way to improve access to Diomede." Kawerak shares the
concerns expressedby the State ofAlaska regarding yearround access and funding for only44 weeks ofservice. "Perhaps the contract should specify a specific number offlights to complete and allow
a wider window oftime to complete the routes, rather than stating the contract would last precisely 44 weeks.
Decision After carefullyreviewing the proposals and all ofthe comments, we have decided to designate Diomede as aplace eligible to receive compensationunder49 U.S.C. 47136. The community meets all ofthe requirements of49 U.S.C. § 41736, including traffic-generating potential and isolation from the closesthub airport.
Diomede is a small island 2.5 miles from Russia, 28 miles from the nearest community with air. service, Wales, Alaska, and 135 miles from Nome, Alaska, the closestregional hub airport. Diomede is an island so mountainous that a runway cannotbe constructed. It is among the most isolated points in the U.S. and lacks air service or commercial access ofany kind to the outside world for extended periods oftime.!0
In terms oftraffic-generating potential, we note that Diomede meets Postal Service standards for mail delivery, and that the Postal Service pays for mail serviceto the communityunder a direct airtaxi contract. A gauge ofDiomede's traffic-generating potential canbe seen from the reports filed by fixed-wing operators for the periods when an ice runway forms. The T-100 Market

I0 For a fuller description ofDiomede's extreme isolation and the difficulty this imposes on the residents, see the October 5, 2009, comments filed by Kawerak, Inc., available at http://www.regulations.gov.

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report for the months ofMarch, April, and May of2012 indicates that 546 passenger equivalents (PEQs),ll deplaned at Diomede in that time period. This ranked the community 122 out of251 communities in Alaskareporting traffic counts for those time periods. Between 108 and 128 residents are reported to live at Diomede, and given the need ofthose residents for year-round
access to the national transportation system, the required subsidy appears reasonable.
Other Matters .:... Fundingand Billing 49 U.S.C. § 41736(a)(l)(B) states that the Department shall approve a proposal under ATNEP "

...ifthe State or local government or a person is willing and able to pay50 percent ofthe compensation for providing the transportation." The Departmentis responsible for paying the remaining 50 percent. Following issuance ofthis Order, the Department will enter into a contract with Evergreen and the applicable non-Federal party orparties responsible for payment ofits 50 percent share detailing the roles and responsibilities ofeach party. The Department will not authorize payments for air service until the contract is executed. Evergreen must file a monthly claim with the Department indicating the level ofservice it has provided as described in Appendix B.12 The Department will then review Evergreen's monthly claim for accuracy and conformance with Appendix B and will immediately notify the applicable non-Federal party or parties ofits 50 percent share. After the applicable non-Federal party orparties has made payment to Evergreen and supplies the Department with proofofsuch payment, the Department will pay its own 50 percent share ofthe total monthly claim.l3 The Department is statutorily limited in its authorityto pay for air service under this provision and will only continue to pay its 50 percent share as long as Evergreen maintains the established level ofair transportation, the applicable non-Federal party orparties continues to pay its 50 percent share, and the Secretary decides that the Department's 50 percent compensation is necessary to maintain transportation at Diomede.l4 The Departmentnotes that the Secretary may withdraw designation ofDiomede as eligible to receive compensation for ATNEP per49 U.S.C. § 41736(t) ifDiomedehas received ATNEP "for at least 2 years and the Secretary decides the withdrawal would be in the public interest." Moreover, Evergreen may end, suspend, orreduce ATNEP at Diomedeprovided that it gives the Secretary, Alaska Department ofCommerce, Community, and Economic Development, Division ofCommunity and Regional Affairs and Kawerak "atleast 30 days' notice before ending, suspending, orreducing the transportation" per49 U.S.C. § 41736(g).
Carrier Fitness 49 U.S.C. §§ 41737(b) and 41738 require that the Department find an air carrierfit, willing, and able to providereliable service before the Department may subsidize itto provide ATNEP.

11 200pounds ofmail or freight is equivalent to one passenger, PEQ. 12 ThePostal Servicehas a direct air taxi contract with Evergreen for delivery ofmail to Diomede. The service provided by that contract is designed to transport mail, but passengers orfreight may be transported on a spaceavailable basis. Under this ATNEP contract, passenger service comes first, but mail and freight may be transported
on a space available basis. In order that the two kinds ofservice are not double counted, we will require Evergreen to submit with its monthly claim the entire service it provided to Diomede in that month, and distinguish between the service provided pursuant to the Postal Service contract and that provided under this contract. 13 We typically establish weekly ceilings for billing purposes to ensure reliable, consistent service. However, because Diomede is so isolated and its air service needs may be somewhat unpredictable

-- e.g., for medical emergencies, we will establish only an annual ceiling. We still expectEvergreen to strive to provide a minimum of
one round trip per week. 1449 

### u.s.c. §41736(d).- 6-

Evergreen Helicopters, Inc., is subject to the Department's continuing fitness requirements. The Departmenthas contacted the Federal AviationAdministration, and it has raised no concerns that would negatively affect our fitness findings. The Departmenttherefore concludes that the carrier remains fit to conduct the operations proposed here.
This Order is issued under authority delegated in 49 CPR part 1.56a(t). 

### ACCORDINGLY,

1. We selectEvergreen Helicopters, Inc., to provide AirTransportation to Noneligible Places at Diomede, Alaska;
2. We set the final rate ofcompensationfor Evergreen Helicopters, Inc., for the provision ofAir Transportation to Noneligible Places at Diomede, Alaska, as described in Appendix B upon execution ofa contract with Evergreen and the applicable non-Federal party orparties in which the Department will onlypay 50 percent ofeach monthlybill from Evergreen after Kawerak directly pays Evergreen the remaining 50 percent;



# . 1. The Department will only continue to pay its 50 percent share as long as Evergreen maintains the established level ofair transportation, the applicable non-Federal party orparties continues to pay its 50 pe:t;cent share, and the Secretary ofTransportation decides that the Department's 50 percent compensation is necessary to maintain transportation at Diomede ;
4. We direct Evergreen Helicopters, 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 mannerthat readily permits its audit and examinationbyrepresentatives of the Department. Such documentation shall be retained for seven years from the service data of this Order, or until the Department indicates that the records may be destroyed, whichever comes first. Copies offlight logs for aircraft sold or disposed ofmust be retained. The carrier may forfeit its compensation for any claim that is not supported under the terms ofthis Order;
5. We make specific note that Evergreen must retain records ofall ofits service to Diomedeboth that provided for under this order, as well as that provided under the Postal Service contract, as well as any charter or other service not so required;

6. We find that Evergreen Helicopters, Inc., continues to be fit, willing and able tooperate as a certificated carrier and capable ofproviding reliable AirTransportation to Noneligible Places at Diomede;

7. This docket will remain open until further order ofthe Department; and

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8. We will serve copies ofthis Order onthe civic officials ofDiomede, Alaska, Kawerak, Inc., the AlaskaDepartment ofTransportationandPublic Facilities, onUmiaq Services, Inc., and on Evergreen Helicopters, Inc. By:

(SEAL) Susan L. Kurland Assistant Secretary for Aviation and International Affairs

Anelectronic version ofthis document is available onthe World Wide Web at http://www.regulations.gov

### Appendix A

Nonstop Great Circle Miles Diomede (DIO) to Wales (WAA) 28 Diomede (DIO) to Nome (OME) 134 Wales (WAA) to Nome (OME) 109 Wales (WAA) to Gambell (GAM) 168Appendix B

Air Transportation to Noneligible Places to beProvided to Diomede, Alaska, Docket 2009-0160
Effective Period: Start ofService under this Order throughJune 30, 2013 Scheduled Service: Nome to Diomede to Wales to Diomede to Nome Frequency: Oneround trip per week Aircraft Type: B0-105,4-seat, twin-engine helicopter
DOT Kawerak Total Total Subsidy $188,760 $188,760 $377,520 Rate per Flight: 1

DIO-OME $1,609 $1,609 $3,218 DIO-WAA $536 $536 $1,072

Note: Thecarrierunderstands that it may forfeit its compensation for any t1ights that it does not operate in conformance with the terms and stipulations ofthe rate Order and the requirements in 49 U.S.C. 41736(t) and (g), including the service plans outlined in the Order and any other significant elements ofthe required service, without prior approval. The carrier understands that an aircraft take-offand landing at its scheduled destination constitutes a completed flight; absent an explanation supporting subsidy eligibility for a flight that has not been completed, such as certain weather cancellations, only completed t1ights are considered eligible for subsidy. In addition, ifthe carrier does not schedule oroperate its t1ights in full conformance with the Order for a significant period, it mayjeopardize its entire subsidy claim for the period in question. Ifthe carrier contemplates any such changes beyond the scope ofthe Orderduring the applicable period ofthis rate, it must first notify the Office ofAviation Analysis in writing and receive written approval from the Department to be ensured offull 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; tlights that overfly points for lack oftraffic 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 goals ofthe program are met and the extent ofaccess to the national air transportation system provided to the community.

Ifthe Department unilaterally, either partially orcompletely, terminates orreduces payments for service orchanges service requirements at a specific location provided for under this Order, then, at the end ofthe 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 location without regard to any requirement for notice ofsuch cessation. Those adjustments in the levels ofsubsidy and/or service that are mutually agreed to in writing by the Department and carrier do not constitute a total orpartial reduction orcessation ofpayment. Subsidy contract are subject to, and incorporate by reference, relevant statutes and Departmentregulations, as they may be amended from time to time. ·However, any such statutes, regulations, or amendments thereto shall not operate to controvert the foregoing paragraph.
Funds are not currently available for performance under this Orderbeyond September 30, 2012. The Government's obligation for performance under this Orderbeyond September 30, 2012, is subject to the availability ofappropriated funds from which payment for services can be made. No legal liability on the part ofthe Government for any payment may arise for performance underthis Order beyond September 30, 2012, until funds are made available to the Department for performance. Iffunds are not made available for performance beyond September 30, 2012, the Department will provide notice in writing to the carrier.
All claims for payment must be submitted within 60 days ofthe last day ofservice provided under this Order.

I $188,760**~** 44 trips + 2 directions= $2,145. Allocated by time: 20 minutes DIO-WAA; 60 minutes DIO-OME. $2,145 +(60+20) = $26.8125 per minute. DIO-WAA:$26.8125 x 20 = $536; DIO-OME, $26.8125 x 60 = $1,609.