(a) If the department determines that it is unable to continue operating a state-owned hatchery or that it is in the best interest of the state to provide for the operation of the hatchery by another person or by another person in cooperation with the state, the department may enter into a contract for the operation or cooperative operation of the hatchery.

(b) Notwithstanding AS 36.30, when selecting a contractor under (a) of this section, the department shall give a preference to the regional association organized under AS 16.10.380 that is located in the region in which the hatchery is located. If the department determines that the preferred regional association does not meet the criteria established by the department for the contract, the department may not award the contract to the preferred regional association and shall procure the contract under AS 36.30 after considering the recommendations of the preferred regional association.

(c) Except as otherwise provided in this section, a contract entered into under this section must provide that the hatchery will be operated under AS 16.10.400 - 16.10.470 and the regulations adopted under those sections.

(d) The department may issue to a contractor who operates a hatchery under this section a permit to harvest adult salmon during the term of the contract at locations designated by the department. The contractor shall use funds received from the sale of adult salmon harvested under the permit to recover all or part of the costs of operating the hatchery and may use the remaining funds for improvements to the hatchery or other salmon enhancement or rehabilitation projects, fisheries research, or the contractor's reasonable operating or administrative costs in the region in which the hatchery is located including debt retirement or for other fisheries activities of the contractor.

(e) A contract under this section for the operation of a hatchery may not affect the state's ownership of the hatchery and does not affect the state's responsibility to manage the resource.

(f) The operation of a hatchery under a contract authorized by this section shall be conducted in accordance with the fisheries management and production goals of the department, and must be consistent with the comprehensive regional salmon plan approved under AS 16.10.375. During the term of the contract, the department may order changes in the operation of the hatchery that are necessary to ensure consistency with the production goals of the comprehensive regional salmon plan. The contract must specify the species to be raised and the production goals for each species, and these specifications must comply with the comprehensive regional salmon plan. The department may terminate a contract if the contractor fails to operate the hatchery in accordance with the requirements established by and under this subsection.