Rising costs for most everything, from fuel to maintenance to ship construction, are eating into the budgets at the Alaska Marine Highway System and the Inter-Island Ferry Authority which operates between Ketchikan and Prince of Wales Island.

Craig Tornga, marine director for the state ferry system, focused on the escalating costs of building new ships in his presentation at last month’s annual Southeast Conference meeting in Ketchikan.

He showed a slide depicting inflation in the shipyard sector, showing a 73% cost increase from January 2021 to September 2026.

This affects the cost of ferry maintenance, renovation and new construction, he said. “I get a lot of comments, ‘Tornga, are you putting gold toilets in these? What’s going on?’”

Ron Curtis, general manager of the Inter-Island Ferry Authority, pointed to higher fuel costs in his presentation. “Fuel expense is currently 71% higher today than it was one year ago today,” he said.

“And then same as what (Tornga) talked about, right? Increasing cost of parts, maintenance, shipyard, IT, and then maintaining an aging fleet,” Curtis said. “Our boats are in their 20s. … Not quite where we are on the Blue Canoes (state ferries, three of which are in their 50s and 60s).”

The 24-year-old shuttle ferry service between Ketchikan and Hollis on Prince of Wales Island owns two ships, the oldest of which, the Prince of Wales, is undergoing renovations at the Ketchikan Shipyard. Curtis said the work includes exterior hull paint, along with propulsion and electrical upgrades, replacing carpets and seat coverings. 

He underscored the challenge for the small operation with a budget of about $6 million, transporting about 50,000 passengers a year.

“We try like heck to get as close to breakeven as possible, and we do fairly good at it.” A state subsidy helps cover expenses. This year’s legislative appropriation for operating expenses was $250,000, with additional state funding for refurbishment work on the ships.

Tornga shared information with the conference about the state ferry system’s plans to replace its own aging fleet. In early July, the state received a $349 million bid from Louisiana-based Thoma-Sea Marine Constructors to build the long-planned replacement vessel for the 296-foot-long oceangoing ferry Tustumena that began service in 1964 and continues to serve communities in Southcentral Alaska, Kodiak Island and the Aleutian Islands.

The new ferry is federally funded, which means it must comply with the Buy America Act purchasing rules for material such as steel, fixtures and equipment.

“They’re right now going through the Buy America audit,” Tornga said. “They started that on the 17th of August. Everything with the fed requirement takes a little bit of time. I did see the numbers last night. They’re looking really good, so I don’t see us having a problem getting there.”

Adding crew quarters to the ferry Tazlina — also federal funded — has its own Buy America Act requirements, he said.

The Tazlina began service in 2019, followed by the Hubbard in 2023. Neither ship was built with crew quarters, which were later added to the Hubbard before it entered service. Crew quarters would allow staffing for longer voyages without parking for an overnight stay.

The Alaska Marine Highway System project to add quarters to the Tazlina is facing inflationary pressures.

“(When) they put the crew quarters on the Hubbard. It was $22 million to $25 million,” Tornga said. “But we’re seeing this over $40 million now, and that’s exactly what that inflation is.”

He said the bid deadline on the Tazlina crew quarters has been extended at the request of potential bidders and were due Oct. 13. “They’re struggling with the Buy America side of it.” While the Tustumena replacement project has a 70% Buy America requirement, the Tazlina project has a 100% requirement, he said. “That makes it very hard.”

Another project on the ferry system’s long-range plan is a diesel-electric hybrid shuttle, which was allocated a $57 million federal grant in 2022. “It’s not enough funds to build it,” Tornga said. “We’re about $20 (million), $24 million short for this.”

He said the design work is more than 75% complete. “The little shuttle ferry, I can see that one maybe sliding … we’re short on funds,” he said. “We’ll have to see where that next $20 million would come from.”