A new oversight board tasked with revitalizing Alaska’s state-run ferry system met for the first time last Friday (2-11-22). Members of the nine-person Alaska Marine Highway Operations Board heard about new opportunity from the promise of hundreds of millions in federal funds expected to flow into the system. But there will be some difficult decisions ahead on how best to invest the money.

Shirley Marquardt, a former executive director of the marine highway, was selected to chair the Alaska Marine Highway Operations Board. The board was created by unanimous consent of the Alaska Legislature last year.

The former Unalaska mayor remarked that the combination of federal funding and united support for the ferry system was an opportunity to finally modernize the fleet, which largely relies on ships built in the 1960s and ’70s and are decades past their service lives and frequently break down.

“But we keep putting in millions and millions and millions,” she said. “And in the time we’re doing that we’re leaving passengers sitting at the dock.”

The new board replaces the now-defunct Marine Transportation Advisory Board which had little practical authority. That looks less likely to be the case with the new group which includes appointees from both the House and Senate as well as the governor.

Board member Keith Hillard, a captain of the Matanuska ferry, was nominated by the three ferry unions. He complained of poor maintenance planning and a lack of coordination from shoreside management for keeping his ship in the yard for 17 weeks rather than the scheduled eight. 

“The chief engineer and I had no idea what was planned, what work was planned what was scoped going into the yard,” he said.

He says repairs are routinely delayed due to cost-cutting. That leads to deferred maintenance until it snowballs. The Matanuska’s problems stemmed from rotted steel that he says had been identified by engineers as early as 2016 but the work wasn’t authorized by management.

“Coast Guard saw it this year and said, ‘What’s this? Why didn’t you fix this? Can’t let it go like this anymore,'” he recalled. “So, we’re getting into the yard and then making the plan, versus having a plan before coming into shipyard.”

Vacancy rates remain high

Another challenge facing the ferry system is a crew shortage. More than 70% of entry-level stewards jobs are vacant.

Marine Highway general manager John Falvey told the board that the entire maritime industry is struggling with crew.

“We are working very hard to try to hire more vessel, vessel staff back, we’ve we’ve lost quite a few from COVID, things like that,” Falvey said. “We’ve got a pretty aggressive marketing campaign in place, we’re working very, very closely with the Department of Labor.”

Unlicensed crew members don’t have guaranteed work hours. And so when ships are laid up for cost-cutting or go into overhaul, Keith Hillard, the ferry captain, says they are left high and dry.

“They pretty much get a forced four-month layoff and unfortunately a lot of them find year-round jobs during that time and don’t come back,” Hillard said.

It’s possible that a shortage of trained crew could delay sailings when demand increases later this year.

“Staffing goals for the summer season will not be met at current recruitment rates. If staffing goals are not met by March 1, Columbia will not be available for operations on May 1,” the agency wrote in a memo to the board.

Governance reform models

Reforming the organizational structure of the marine highway is also something the oversight board may tackle. Previous proposals have been floated to create a public corporation or a ferry authority with more autonomy from the executive branch. It would also allow long-range funding rather than going to the legislature each year 

John Falvey, the marine highway’s top operations official for nearly 18 years, admitted these are all conversations worth having.

“I mean, we have processes, but are they the best way to be doing it?” he said. “And we’ve been doing it a certain way for a long time. But maybe we’ve got to retool, and try to do things differently – and I know that.”

Tough questions on how to invest federal windfall

Gov. Mike Dunleavy has proposed using $135 million in federal money to fund the ferry system in the coming year. That would effectively reduce the state’s contribution to zero. 

That idea is already receiving pushback. Southeast Conference, a regional civic and industry organization that advocates for economic development, passed a resolution earlier this month calling on the Dunleavy administration to primarily invest the federal funds into long-term needs of the ferry system.

Executive Director Robert Venables made that pitch to the operations board.

“We know that some of those funds should be and need to be used for operations,” Venables said. “But at the same time want to find that balance between just consuming those funds, and use those funds for long term investments.”

Ferry operations board members expressed interest in meeting frequently for shorter meetings. And it could hold its next session later this month.

The Alaska Marine Highway System is working to finalize the sale of its fast ferries to an overseas bidder. 

Trasmapi, a Mediterranean-based operator of catamarans offered about $4.6 million for the Fairweather and Chenega ferries. But that was less than half the $10 million reserve price set by the state. 

At the time bids were opened on January 13, a state procurement officer noted that a lower price could still be negotiated. 

“We do have a responsive bidder and we are continuing — as we speak today — to work through the process to close the sale, ” John Falvey, the state-run ferry system’s general manager, told the Senate Transportation Committee on Tuesday.

Trasmapi runs ferries between the Spanish mainland and the island of Ibiza. The Spanish company had also offered about $411,000 for a pair of diesel engines that had cost about $3 million new.

“The two swing engines which are in our warehouse and hermetically sealed containers, unused, they were also part of the sale,” Falvey said.

The state of Alaska had commissioned the fast ferries in the mid-2000s. And they were popular, completing a voyage in about half the time as a conventional ship. But they were taken out of service in 2015 and 2019. 

At the time, the marine highway cited rising fuel costs and poor performance in rough seas. It’s not clear how much the state is now asking for them. The two 235-foot catamarans cost $68 million new.

The Dunleavy administration commissioned the report last spring and received it in the fall. But the state wouldn’t release it until Wednesday’s Marine Transportation Advisory Board meeting (1-15-20).

That didn’t sit well with MTAB’s newest board member.

“I understand the administration has had the report for some time and chosen not to issue it,” Former Gov. Frank Murkowski, a Dunleavy appointee, said at the meeting. “If you’re an advisor you need the information before you hold can hold a meeting that’s meaningful such as this.”

Nobody from Northern Economics, the company that drafted the report, was at the meeting. But their report looked at 11 different scenarios — five of which involved some degree of privatization. Others looked at transferring responsibilities to new local agencies that would run regional routes.

While not explicitly stated, the Anchorage firm was tasked to see what kind of service it could deliver for $24 million a year. That’s the ferry subsidy Dunleavy proposed last year, which was only enough for a few months of operations.

The consultants answer was: not much. Its best scenario was splitting the Alaska Marine Highway System into two regional public entities. Fares would go up 25 percent. Wages would fall nearly 9 percent. And there’d also be deep cuts to service: no more stops at the Canadian port of Prince Rupert. And Prince William Sound, Homer and Kodiak Island would also get no winter ferries.

But the economic team concluded that cutting the ferry subsidy to the governor’s magic number of $24 million would be, in their words, “extremely difficult.” That is, if the system would continue a minimum level of service to coastal communities.

Of course, the governor’s $24 million ferry budget wasn’t to be. A legislative compromise last year approved a $46 million subsidy.

Even so, the Marine Highway’s General Manager John Falvey told the advisory board, it’s been hard to keep the system afloat. “You know what’s happened with the cut — it’s been so massive,” Falvey said. “it’s been very, very challenging.”

He added that four ferries are now laid up either waiting to be sold off or in need of expensive overhaul and offline.

Pelican Mayor Walt Weller says his Chichagof Island community has been virtually cut off. It’s turned to fishing boats and occasional floatplanes to deliver groceries and other supplies, and he says residents are extremely concerned.

“And I don’t know what to tell them — they feel like they’ve been cut off by the state,” he said.

The report also looked at the advantages of transforming the ferry system into a public corporation. That’s been a central aim of the Alaska Marine Highway Reform Project. Advocates of that effort want to insulate the ferry system from political meddling. As governors change every four or eight years, so do priorities, making long-term planning difficult.

The consultants also suggest renegotiating labor contracts to cut wages, but they acknowledge this could be difficult without legislative action. And they poured cold water on privatization. That’s because few of the routes break even. It found the most profitable route is the 45-minute trip between Ketchikan and Metlakatla. Even that would require a $370,000 subsidy.

No significant changes are planned for this year. The governor has proposed flat funding to the Marine Highway. Any big changes would need to be approved by lawmakers for 2021.

The Marine Transportation Advisory Board plans to schedule a future meeting to discuss the report’s findings in depth.

The ferry LeConte docks at Juneau’s Auke Bay terminal in 2013. A schedule change could add Sitka stops. (File photo)

Alaska Marine Highway officials have identified several ways to increase ferry service to Sitka next summer. It’s in response to community concerns about the fast ferry Fairweather being indefinitely tied up.

Without the Fairweather, Sitka ferry service will drop from this summer’s six to eight stops a week to next summer’s two a week.

Marine Highway General Manager John Falvey says the ferry LeConte is one option for boosting service.

“It is a possibility. That question has come up. We would have to run the route and spend the night, then route the route back,” he says.

The LeConte used to sail from Juneau to Sitka and back, with Angoon, Tenakee and Hoonah stops along the way.

But that was when the small ferry sailed around the clock. It reduced hours and port calls following a 2004 grounding blamed in part on crew fatigue.

Falvey says the shorter schedule could accommodate Sitka sailings with stops in Angoon. But it couldn’t include any other port calls.

He says adding the run would affect other parts of the schedule.

“That would potentially reduce service to some of the other communities, potentially the villages, or if the LeConte was doing any double duty up at the Lynn Canal,” he says.

He says the LeConte could sail longer hours if it expanded crew quarters and added staff. But that’s not in the current plan.

The ferry Matanuska sails into Juneau’s Auke Bay in 2012. Changing its route could help Sitka boost summer ferry service. (File photo)

Another option would add a Sitka stop to the large ferry Matanuska’s route.

“You could turn that boat in Juneau, not send it up (Lynn) Canal, then route it through Sitka and back again. That’s an option. But that reduces service going north to Lynn Canal, Haines and Skagway,” he says.

Falvey promised those attending an Oct. 23 ferry meeting in Sitka that he’d look at such options, as well as others suggested by the public.

But he stressed that scheduling options are limited by budget cuts related to a steep decline in state oil revenue.

A statewide hearing on the schedule is planned for Wednesday, Nov. 4. Officials plan to finalize next summer’s ferry schedule in December.

Fairweather crew members and shore staff get ready to tie up the fast ferry at Sitka’s terminal. The ship will resume service March 14 after undergoing inspection. Photo by Ed Schoenfeld.

The fast ferry Fairweather is returning to Southeast service a little later than expected. It had been scheduled to make its first 2013 sailing Feb. 28th. Instead, the Juneau-based ship will resume runs to Sitka, Haines and Skagway on March 14.

Marine Highway General Manager John Falvey says the Fairweather and its sister ship the Chenega needed detailed inspections before they could return to service this year.

“We had actually lost the operating certificates because of questions about the cylinders and the engines and whatnot,” he says.

Inspections are conducted by an international risk-management firm called DNV.

Engines on both ships had shown premature damage. (Scroll down for links to earlier reports.)

“We provided DNV-Oslo, Norway, with a lot of data regarding the current condition of the cylinders. We did a lot of ultrasound testing and DNV came to the conclusion that, for this season anyhow, both vessels would be safe to operate, and we’re going to go ahead and do so,” Falvey says.

Repair crews have bored out engine cylinders and inserted sleeves to keep them operating.

Falvey says too many repairs can weaken the lightweight engines.

A dedication plaque posted inside the fast ferry documents completion of the Fairweather’s hull.

“You need to be very careful that there is still enough metal and steel in those cylinder blocks so that you won’t have an accident with a piston potentially coming out the side of the engine,” he says.

“And we’re very confident that that will not happen, and DNV is very confident of that and so am I.”

The Chenega, a younger ship, returned to Prince William Sound service on schedule last month. It sails from Cordova to Valdez and Whittier.

The Fairweather was delayed because one engine was left unassembled. Falvey says that’s because the inspectors might have wanted additional testing. Reassembly and other work slowed the return to service.

The state last week announced a legal settlement with the manufacturers giving each ship a complete set of new engines.

The Fairweather will sail four days a week through June, splitting its time between the Juneau-Sitka run and the Juneau-Haines-Skagway sailing. In July, it increases service to seven days a week. It runs to Sitka six days a week and Petersburg one day a week.

Both fast ferries carry up to 250 passengers and 36 vehicles.

Hear earlier reports:

Marine highway plans to replace fast ferry engines 

Fast ferry builders, AMHS trade shots in dispute over engine problems

Fairweather could be out until spring