Friday, March 19, 2010

Cruise in Alaska? - Probably Not...An Environmentalist's Perspective

I write this post as a Life Member of the Sierra Club, a 20+ year member of the Nature Conservancy, a college graduate with an bachelor of science with honors in biology...and, of course, as an avid boater and cruiser.

During the Seatrade Cruise Shipping Conference, at the State of the Industry program, it was announced at the outset that the Governor of Alaska and a large contingent from Alaska was present.  As the morning progressed, with the heads of most larger cruise lines discussing a particular topic, it was time for Stein Kruse, President of Holland America, to speak about the issues with cruising in Alaska.

Mr. Kruse pointed out that the demand for cruising in Alaska has dropped dramatically and that was related more to the pricing and taxing by Alaska then it was to an inherent reduced interest by the cruising public.  Emphasis was made that Alaska is a fantastic cruising and land tour area and that the satisfaction of cruise passengers as to the substance of their trips is high.

The problems, he pointed out, is that Alaska not only has included the now infamous $46 per person tax (which, by the way, has most of its funds - over $200,000,000 sitting in a fund unused...because Alaska hasn't figure out how to use the funds for its  mandated purpose - essentially developing and supporting the cruise industry infrastructure), but that Alaska has developed a complicated and disjointed set of regulations and requirements that make operating in Alaska, shall we say:  frustrating.

In addition to the aforementioned tax, Alaska has targeted the cruise lines with a special targeted income tax, a gaming tax, a mandatory Ocean Ranger program with attendant fees...in addition to local taxes assessed by the various cruise ports.

But it gets worse because Alaska has created discharge regulations that actually require the water discharged from the ships to be cleaner than the water that it require be discharged from land (and there is significantly more land-based discharge than ship-based discharge.)  Mr. Kruse pointed out that in some instances the cruise ships cannot take on the fresh water being delivered to the local population because if fails to meet the "cruise line only" standards for copper discharged in water.  What this means is that the water that is acceptable before being used for land-based operations fails the standard before it even gets on the ship!

There is a cost-benefit analysis that must be runf or any business...which includes environmentally sensitive ones.  Here there obviously was a very simplistic and unrealistic analysis done by the State of Alaska.  As reported on March 31, 2009 (one year ago) by the Juneau Empire newspaper, so it is clear that what Mr. Kruse says is accurate:

Voters in 2006 passed a cruise ship ballot initiative that imposed new taxes on the large ships. Each passenger pays a $50 head tax, technically an excise tax. The initiative imposed on the companies themselves a corporate income tax and a 33 percent tax on gambling income. It also set strict new environmental pollution rules.


Chip Thoma and Joe Geldhof, two Juneau residents who helped pass the initiative, said they thought it was misleading to identify the taxes as the problem. They blame the economy, and say the head taxes are minor in the whole price of an Alaska cruise vacation, including airfare, hotel, gifts and excursions. "It's the worst kind of cheesy scapegoating, because nobody really believes it," Geldhof said. Geldhof's evidence: Cruise numbers didn't go down in the first two years the head tax was levied.  Thoma said the head tax money is supposed to fund dock improvements that large ships need, so it's counterproductive for them to fight it.

Now, let's do that "cost benefit analysis".  If the cost of a cruise is, on average, $800 (the concept of airfare, hotels, gifts and excursions don't truly enter into the analysis...and for many, if not most, these items do not generate income for the cruise lines, but the local or other economies) and there is a $46 tax, plus a corporate tax, plus a gaming tax, plus the Ocean Rangers fees, plus the very stringent and expensive pilotage fees (in Alaska it is essentially a full time operation, not just in and out of ports), it quickly becomes clear that the profit margins are very slim.

On the environmental side of things, I am a firm believer in "Leave only footprints.  Take only memories." but understand that everything that we do has some sort of environmental impact.  The question is:  What is the impact and do those impacts allow for more benefits than the obvious detriments? 

Here, there are no studies showing the impact of the cruise ships is greater than the fishing fleets (it is far less) or the tanker fleet (it is far less) or the recreational boaters (it is far less).  Science cannot be skewed by the size, financial impact or personal perceptions of the cruise industry.  Nor can the economic benefits to Alaska of those hotels, excursions and gift incomes...and the use of those revenues to fund environmentally beneficial projects be ignored.  (Now what is the discharge standard for those hotels...and those excursion boats???)

And, alas, what would be the environmental impact of those port improvements - whatever they might be - if they ever come into existence?

The fact is that the State of Alaska saw (whether true or not) a bunch of big fancy cruise ships filled with tourists with big fat wallets and said, "We want some.  In fact, we want more than some."  And the economies of those passengers with the purported big fat wallets said, "I will pay $800 for my cruise, but not $1,000" so the cruise lines have been eating much of the expense...not to appease Alaska, but its passengers.

However, the cruise lines will not operate at a loss or walk away from profits if there are sufficient passengers to fill the ships at higher profits margins in the Caribbean or Europe...because they are in business to make money.

So, if the concept in Alaska is merely to protect the environment by instituting something akin to cigarette taxes (i.e. making the tax so high it uses the economy to force people to quit smoking) it has been successful in at least slowing the sales.  What it hasn't done is show that its actions are net better for the environment(balancing environmental programs that the economic boost pays for and are implemented versus the environmental impact of the ships).

If there were validated scientific studies that show the net environmental impact of cruise industry was a negative, they would be published...but they do not exist.

If there was a nexus between all the taxes and a benefit to the environment, it would be published...but it does not exist.

If it were untrue that Alaska has singled out the cruise industry and sought to gouge it, it would show how the State treats other industries in comparison...but it does not exist.

And with that, we must remember, there is no birthright to have the presence of a Holland America or Princess or Silversea ship in Alaska and Alaska cannot demand it.  Ships move and so do their economies.

So Alaska it is time to stop trying to make what I believe is a deplorable situation , both economically and environmentally, into a public relations issue.  By penalizing the cruise industry I am very confident Alaska is are negatively affecting the Alaskan environment, economy and people.