Order 2012-9-25 

Served: September 28,2012 

UNITED STATES OF AMERICA 

DEPARTMENT OF TRANSPORTATION 

OFFICE OF THE SECRETARY 

WASHINGTON, D.C. 

Issued by the Department of Transportation 

on the 28tli of September, 2012 

Air Transportation to Noneligible Places 

DIOMEDE, ALASKA 

Under 49 U.S.C. 41736 

DOCKET DOT -OST -2009-0260 

ORDER SELECTING CARRIER 

Summary 

By this Order, the Department is selecting Evergreen Helicopters, Inc. (Evergreen), 1 to provide 

Air Transportation to Noneligible Places (ATNEP) at Diomede, Alaska, for $377,520.2 

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

applicable non-Federal party or parties (i.e., Kawerak, Inc., a relevant State of Alaska 

government entity, etc.) responsible for payment of its 50 percent share to ensure funding for 

ATNEP at Diomede based on 49 U.S.C. § 41736(a)(1)(B), in which the Department will only 

pay 50 percent of ea:ch monthly bill from Evergreen after the applicable non-Federal party or 

parties directly pays Evergreen the remaining 50 percent. The Department will continue to pay 

its 50 percent share as long as Evergreen maintains the established level of air transportation, 

Kawerak continues 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. 3 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([). Moreover, Evergreen may end, suspend, or reduce 

ATNEP at Diomede provided that it gives the Secretary, Alaska Department of Commerce, 

I Evergreen is a wholly-owned subsidiary of Evergreen International Airlines, Inc. 

2 Under 49 U.S.C. § 41736(a)(l)(B), one-half of the total subsidy Evergreen requests, $377,520, must be paid by a 

party other than the Federal government. Thus, the Department's share of the funding is $188,760. Such subsidy is 

calculated and distributed on a fiscal year basis, subject to the availability of appropriated funds. 

3 49 u.s.c. § 41736(d). 
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Community, and Economic Development, Division of Community 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 in providing compensation to an air carrier to provide air transportation to a 

community that is not eligible for Essential Air Service. The Department shall designate the 

community as eligible and approve a proposal for compensation if a party is willing and able to 

pay 50 percent of the compensation for providing the transportation, and if the Department 

determines the proposal to be reasonable. In determining whether a proposal is reasonable, the 

Department must consider, among other things, (1) the traffic-generating potential of the point; 

(2) the cost to .the Federal government of providing the proposed transportation; and (3) the 

distance from the point to the closest hub airport. 

By letter dated June 20,2012, the Alaska Department of Commerce, Community, and Economic 

Development, on behalf of Kawarak proposed "to the Secretary of Transportation that 

compensation be provided to an air carrier to supply air transportation to/from Diomede" per 49 

U.S.C. § 41736 and indicated that: 

The [State of Alaska's] FY13 operating budget has been signed and becomes effective 

July 1, 2012. The funding was included as part of the Department's base budget and 

would be subject to legislative appropriations and approvals by the Governor in 

subsequent years. The [State] is in the process of offering a grant to Kawerak,Inc.5 in 

the amount of $200,000. We have systems in place to provide the full amount of the 

grant as an advance payment. Kawerak, Inc., has indicated in the grant budget that they 

will be providing $190,476 in funding 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 ATNEP to Diomede, setting August 7, 2012, as the deadline for proposals. 

The Order noted the extreme isolation of Diomede 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 subsidy for a given service 

level. As the State has indicated, one round trip per week connecting the community to 

the national transportation system is the goal, but carriers are free to offer more service 

than that if they require the ceiling level of subsidy or less. Carriers may propose 

service for a one-year period.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 organization providing services to the twenty tribes in the 

Bering Straits Region, and that the Native Village of Diomede is one of the Tribes to which it provides services. 

6 Carriers should also recognize that in some undetermined periods of time 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 of time 

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 

that period helicopter service is not required. The carrier requests a total of $3 77,5 20 for this 

service. 

Umiaq Services, LLC 

Umiaq proposes to provide service by marine landing craft from Nome to Diomede and back once a 

week "with approximately 15 trips or more per season." The service would originate in Nome and 

from there hug the coast of Alaska until crossing the approximately 25 miles from the mainland to the 

island of Diomede. Umiaq does not provide the name for the specific type of landing craft it 

proposes to provide, but describes it as a 65-foot vessel with a cruising speed of up to 30 knots and 

authorized to transportup to 48 passengers and/or40,000 pounds of freight.8 9 

Requests for Comments 

By letter dated August 8, 2012, we requested comments by August 28, 2012, from the State and 

community on the two proposals. By letter dated August 10, 2012, the Mayor of Diomede stated 

the city supported the proposal of Umiaq. The Senior VP of the Native Village of Diomede 

provided an identical support letter. 

Disqualification of U miaq 's Proposal 

By letter dated August 10, 2012, Department staff indicated to the civic parties that our Office of 

General Counsel had ruled that the statute did not permit the Department to subsidize boat 

service. Thus, Umiaq's proposal could not be selected and Evergreen's proposal reflected the 

only option before us that could be considered. 

State of Alaska 

The State commented on August 27, 2012, as follows: 

"Normally the Alaska Department of Transportation & Public Facilities would not 

provide specific comments on air carrier selection or routing structure to EAS. But 

given thefact the State of Alaska is providing 50% match funding to subsidize this air 

service, I think it is appropriate that we provide input to the EAS selection process and 

contract particulars." 

7 If carriers wish, they can request 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 of service under the contract by 

assuming that an ice runway would be available for 8 weeks of the 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 concern by indicating that "Additional 

service may be provided with the remaining subsidy funding, or if there 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 of our fiscal year, flying at least once a week for 44 

weeks per year the Evergreen proposal should not be an issue as there are only 44 

weeks left in the 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 of Evergreen. Regarding the 

disqualification of Umiaq, it "understands this ruling, but proposes that Federally subsidizing 

boat service would be an additional way to improve access to Diomede." Kawerak shares the 

concerns expressed by the State of Alaska regarding year round access and funding for only 44 

weeks of service. 

"Perhaps the contract should specify a specific number of flights to complete and allow 

a wider window of time to complete the routes, rather than stating the contract would 

last precisely 44 weeks. 

Decision 

After carefully reviewing the proposals and all of the comments, we have decided to designate 

Diomede as a place eligible to receive compensation under 49 U.S.C. 47136. The community 

meets all of the requirements of 49 U.S.C. § 41736, including traffic-generating potential and 

isolation from the closest hub 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 closest regional hub airport. 

Diomede is an island so mountainous that a runway cannot be constructed. It is among the most 

isolated points in the U.S. and lacks air service or commercial access of any kind to the outside 

world for extended periods of time.! 0 

In terms of traffic-generating potential, we note that Diomede meets Postal Service standards for 

mail delivery, and that the Postal Service pays for mail service to the community under a direct 

air taxi contract. A gauge of Diomede's traffic-generating potential can be seen from the reports 

filed by fixed-wing operators for the periods when an ice runway forms. The T -100 Market 

I 0 For a fuller description of Diomede'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 of March, April, and May of 2012 indicates that 546 passenger equivalents 

(PEQs),ll deplaned at Diomede in that time period. This ranked the community 122 out of251 

communities in Alaska reporting traffic counts for those time periods. Between 108 and 128 

residents are reported to live at Diomede, and given the need of those residents for year-round 

access to the national transportation system, the required subsidy appears reasonable. 

Other Matters .:... Funding and Billing 

49 U.S.C. § 41736(a)(l)(B) states that the Department shall 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. Following issuance of this Order, the Department will enter into a 

contract with Evergreen and the applicable non-Federal party or parties responsible for payment 

of its 50 percent share detailing the roles and responsibilities of each 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 of service 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 of its 50 percent share. After the applicable non-Federal party or parties 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.l3 The Department is statutorily 

limited in its authority to 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 of air transportation, the 

applicable non-Federal party or parties 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 Department notes that the Secretary may withdraw designation of Diomede as 

eligible to receive compensation for ATNEP per 49 U.S.C. § 41736(t) if Diomede has received 

ATNEP "for at least 2 years and the Secretary decides the withdrawal would be in the public 

interest." Moreover, Evergreen may end, suspend, or reduce ATNEP at Diomede provided that 

it gives the Secretary, 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" per 49 U.S.C. § 41736(g). 

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 A TNEP. 

11 200 pounds of mail or freight is equivalent to one passenger, PEQ. 

12 The Postal Service 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 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 of service 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 expect Evergreen to strive to provide a minimum of 

one round trip per week. 

14 49 u.s.c. § 41736(d). 
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Evergreen Helicopters, Inc., is subject to the Department's continuing fitness requirements. The 

Department has contacted the Federal Aviation Administration, and it has raised no concerns that 

would negatively affect our fitness findings. The Department therefore 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 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 the applicable non-Federal party or parties in which 

the Department will only pay 50 percent of each monthly bill 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 of air transportation, the applicable non-Federal party or parties continues to 

pay its 50 pe:t;cent share, and the Secretary of Transportation 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 manner that readily permits its audit and examination by representatives 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 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 terms of this Order; 

5. We make specific note that Evergreen must retain records of all of its 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 to operate as a 

certificated carrier and capable of providing reliable Air Transportation to Noneligible Places at 

Diomede; 

7. This docket will remain open until further order of the Department; and 
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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, on Umiaq Services, Inc., and on 

Evergreen Helicopters, Inc. 

By: 

(SEAL) 

Susan L. Kurland 

Assistant Secretary for 

Aviation and International Affairs 

An electronic version of this document is available on the 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) 168 
Appendix B 

Air Transportation to Noneligible Places to be Provided to Diomede, Alaska, Docket 2009-0160 

Effective Period: Start of Service under this Order through June 30, 2013 

Scheduled Service: Nome to Diomede to Wales to Diomede to Nome 

Frequency: One round 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: The carrier understands that it may forfeit its compensation for any t1ights that it does not operate in conformance with the terms 

and stipulations of the 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 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 flight that 

has not been completed, such as certain weather cancellations, only completed t1ights are considered eligible for subsidy. In addition, 

if the carrier does not schedule or operate its t1ights 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 writing 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; tlights 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 goals 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 

requirements 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 location 

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 cessation 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 controvert the 

foregoing paragraph. 

Funds are not currently available for performance under this Order beyond September 30, 2012. The Government's obligation 

for performance under this Order beyond September 30, 2012, is subject to the availability of appropriated funds from which 

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, 2012, until funds are made available to the Department for performance. If funds 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 of the last day of service 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.