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Last month we offered a critique of the amendments adopted by the Pacific Fishery Management Council to its Groundfish Fishery Management Plan for sector allocation and individual fishing quotas (see "And the Big Fool Said 'March On,'" FN August 2009, www.pcffa.org/fn-aug09.htm). That criticism was, we felt, fair and deserved. But it's not enough just to offer criticism; with it must come constructive alternatives to that which we decry.
This month we'd like to offer some recommendations on how to make catch share programs actually work for fishermen, along with the fish, communities and the public. The timing is opportune given the appointment in June by National Oceanic & Atmospheric Administration (NOAA) Administrator Dr. Jane Lubchenco of a NOAA Catch Share Task Force. The Task Force is set to have its initial work completed by the end of August. We should be seeing some of the preliminary results of that work this month.
PCFFA has been critical of transferable individual fishing quotas (IFQs) in the past, concerned with the privatization of public trust resources. IFQs are used sometimes synonymously with the term "catch shares" and as a result we have been wary of both. That wariness has nothing to do with fear of change -- PCFFA and IFR have been active messengers of change in the fishing industry for decades.
The concern with these systems, rather, is born of the experience with the privatization of another public resource -- western water -- together with the facts of what has actually resulted from other IFQ systems (see "Independence Lost: ITQs and Privatization May Be Deadly," FN July 2008, www.pcffa.org/fn-jul08.htm).
Folks have not "lived happily ever after" from the imposition of IFQ systems. IFQ and catch share proponents have offered up glossy pieces about the winners in systems that give quotas to individuals or corporations, but few talk about the costs, including those who lost. The price of entry for new fishermen into these programs and the untenable choice of being highly leveraged, or cast to work the quota of another as a form of sharecropping, is never discussed.
The consolidation of ownership or control that results from these systems is nearly always skirted or discussed in glowing terms. The loss of jobs, the decline in crew pay, or denial of access of many communities to their historic resources has been ignored by most catch share proponents.
Both Ecotrust and Food & Water Watch have reported on problems with existing IFQ systems. They should be reviewed by regional fishery councils and NMFS prior to proceeding any further down the catch share road. (The Food & Water Watch reports and press releases can be found at: www.foodandwaterwatch.org).
PCFFA, however, is not anti-IFQ or "catch share" per se. Nor do we believe the status quo is satisfactory. A carefully constructed catch share program could work for some fisheries, mindful that we're dealing with a public trust resource -- the fish -- that must be conserved, all the while protecting the community and broader public interest in the fishery.
Based on that policy, and given the flaws we've already seen with current IFQ or "catch share" programs, including the problematic plan just put forth by the Pacific Council, we'd like to offer up 10 steps for achieving successful "catch share" programs as NOAA and the regional fishery Councils grapple with how to design and utilize this tool.
Here are our 10 steps for success in any "catch share" program:
To begin with, it needs to be clear just what the catch share program is to entail. As mentioned above, the term has often been used to refer to IFQ systems. IFQs are one form of catch share, but catch shares do not necessarily have to involve individual quotas.
For example, a catch of a particular species or complex of species (e.g., groundfish) may simply involve dividing quota up by sectors -- which are usually gear types (e.g., trawl and hook-and-line), or fishery purpose (e.g., food fish and reduction), group (e.g., Tribal and non-Tribal), or even area. A catch share sector may even involve whole communities -- however they are defined. Thus at the outset it should be made clear whether a catch share program is for the purpose of establishing individual quotas, allocating catch between sectors, or some combination of both.
It is useful to remember that Dr. Lubchenco, who is an advocate for catch shares, has also admonished that 1) they're not a panacea; 2) they're not for every fishery, and; 3) they have to be carefully written.
Nor do catch share programs equate to conservation of a particular species. The biological conservation of a fishery is dependent on a sound and well enforced total allowable catch (TAC) or, for fisheries not managed by a TAC, sound and proven fishing regulations. Catch share systems can and have resulted in overfishing; conservation doesn't depend on how the quota is divided but on how the quota level is set.
At the outset it must be clearly and unambiguously stated in any catch share program what purposes are to be served by it. Catch share programs cannot be seen as dividing up the allowable catch to ensure the profits (or provide windfall profits) for some or all of the current participants in a fishery through a quasi-privatization scheme. And, we have to remember they're not for every fishery. Salmon are managed by seasons, gear and closures, Dungeness crab regulated by size, sex and season, and albacore, for example, are not good candidates for a catch share program. Even where a fishery may be a good candidate, such as groundfish, the program must be carefully written.
Purposes for a catch share program must include:
Conservation. Conservation need not be the sole purpose of a catch share program, but the program should not thwart conservation either. The halibut and sablefish fishery in Alaska, for example, was well-managed to conserve stocks before IFQs. There, the purpose for an IFQ system was to prevent "the race for fish" which was making those fisheries unsafe and the catch less valuable.
Despite claims by some catch share proponents, ownership is not the same as stewardship. We've have good stewardship by some fishermen (e.g., salmon) for more than a half century without any catch share programs or claims to ownership. On the other hand, look at Pacific Lumber Company (MAXXAM) for an example of an owner that trashed its property (and a lot of salmon with it) to pay down Wall Street junk bonds.
Programs that significantly increase entry costs can act to thwart conservation where individuals become heavily leveraged financially -- thus concerned only with their debt load, not fishery stewardship. Likewise, programs that allocate quota to fisheries with large bycatch, or whose gear harms habitat, when there are cleaner gears available capable of taking those same species, are not fostering conservation but foiling it.
Observer coverage, too, is not the only means for enforcing conservation. We're not sold on any plan that makes its conservation claim on "100 percent observer coverage," particularly when there may be less expensive ways to monitor catching and sorting than having an additional person on board each vessel.
For smaller vessels, partial observer coverage, supplemented by instrumentation (e.g., cameras) on all vessels, may do the job as well and with much less expense. The issue to be considered here when testing the efficacy of the conservation claims for a catch share program is to look at the end product, the result (e.g., is conservation being enforced?), not the tool.
Ideally, a catch share program should foster conservation. The test then is whether a program will help conserve fish stocks or, at minimum, not hinder conservation.
Flexibility and Markets. Catch shares are touted as a way of giving fishermen more flexibility in their operations -- i.e., getting government out of the day-to-day business of fishing. Given that, a second test to be asked is will the program provide maximum flexibility -- allowing market forces to work -- while remaining true to its conservation and social purposes?
What purpose, for example, is served once a program of individual quotas is established to maintain the status quo on the types of gear used if other gears can fish cleaner, with less impact on the environment, or whose catch will bring a higher value? Nor does it seem to make much sense, where switching gears is allowed, to then require quota only be taken by a particular type of vessel (e.g., a vessel with a trawl permit). At that point the regulation restricting flexibility or markets is not for conservation, but to arbitrarily enhance some vessel owners' assets to the detriment of others.
In providing for flexibility, it is also necessary to exercise foresight. When allowing for gear switching, e.g., from trawl to fixed gear for groundfish, we don't want to eliminate trawling altogether. Remember that the catch of species such as sole and flounder are nearly all the exclusive province of the trawl fishery. Thus, trawlers will be needed in the future for access to those stocks, although the vessels could be smaller -- utilizing gear with a lesser footprint -- which would allow for more of them more evenly spread along the coast, and thus better conservation.
The test here is to protect against rules that artificially restrict flexibility or market operation unless required for conservation of stocks or the protection of the greater fishing community.
Safety. One of the other claims made for catch shares, or at least IFQs, is that they increase fleet safety by removing the "race to fish" -- where competition to catch an overall quota is so great that safety concerns are ignored. Fleet safety has certainly improved in the North Pacific halibut and sablefish fishery. However, a catch share program is not the only way to increase safety at sea, and under the wrong circumstances could set the stage for more reckless operations.
It is important that decisions about equipment on board the vessel, the condition of the vessel and when it goes to sea, and how long it stays there needs to be made by the captain alone, or in consultation with the crew aboard, not a distant owner -- whether it be a processor, banker, venture capitalist or speculator. Taking the decisions of vessel operations, particularly vessel and weather conditions, out of hands of those on board the vessel is likely to make operations more dangerous, not safer.
The test here is to ensure that the elements of a catch share program will enhance vessel and crew safety, not endanger them.
Value. Another reason claimed by proponents for catch shares is that they increase the value of the catch. The theory is that quota holders will fish when markets are best and tie-up when prices are down. That's the theory. But, as you all know, it can be a bit more complicated.
The decision when to fish is not always based on when the price is best, but what other fisheries a quota holder -- whether a fisherman or processor -- may be engaged in. Thus a quota holder may be willing to fish for a lower price in order to finish one fishery in time to begin another. Moreover, if a fisherman is either indebted to a processor (e.g., a processor who provided the loan to buy the quota) or fishing a processor's quota, that fisherman will not have the option of fishing when the price is best for him/her, but must fish when that processor wants the fish.
In addition to the ex-vessel price paid to fishermen or the market conditions for a processor, the other value that has to be considered is that to the community. What value is there to a community, for example, if a catch share program results in vessel consolidation with no more vessels for that fishery in a port? What value is gained when a processor in a catch share fishery, knowing exactly how much fish and when it is available to the operation, turns around and outsources the processing to another country?
The test for a good catch share program then is whether it will increase the value of the fish caught, based on the type of gear used, the number of vessels that can be utilized pursuing the catch that is economically viable, the handling of the fish, market optimization and labor opportunity.
Accessibility. Increasing accessibility by communities and the broader public to their public trust resources is not a claim made by catch share proponents. It must, however, be a consideration in designing such a program. If, in fact, as proponents claim, catch shares or fish quota are not private property, than it's important that they be treated as a public resource, not private assets. A key issue here is to be sure communities that have a historic dependence on the fish offshore their ports have continued access to those resources. The consuming public, too, has a right to access high quality, fresh and locally-caught fish over the course of each year, consistent with conservation considerations.
The test here is to ensure communities' and the public's access to its fish is protected or enhanced in any catch share program.
In designing a system that allocates quota among sectors, communities and individuals it is critical that initial allocations be as inclusive as possible. If markets are allowed to work, let them afford participants the decision as to who is in, and for how much, and who is out.
If historical participation is to be the determinant, and not an auction system, of who is to be allocated quota and how much, then let's use history and not engage in the revisionism we've seen at the outset of some current systems where window periods were manipulated to favor one group over another, often disenfranchising historic participants for initial inclusion.
History is longer than two or five years, particularly in many of our fisheries where conservation closures were enacted over a decade ago or more, effectively denying access to whole sectors. What is critical is that those who have had a history of participation in the past, which could be as long as a score of years ago, but whose participation may have been more cut-off, directly or indirectly, by regulatory actions related to conservation or management, be eligible for some level of initial quota allocation.
The qualifying level for quota should not be based on some arbitrary figure an economist or fishing association has deemed the minimum amount to pursue a fishery, but a nominal amount allowing an individual or entity to then access other quota during an adjustment period (see below) or to at least receive some compensation from another quota holder seeking to increase their shares.
The idea of utilizing very short historic window periods and putting in large minimum landing requirements to skew the qualifying pool to a small select group cannot be tolerated. There is nothing market-based in that, and it is antithetical to the best use of public resources.
Ideally, the pool of those qualifying for initial allocation of quota should be large -- encompassing those who have an interest in utilizing (as well as conserving) the quota and some past history in the fishery to go with it.
Individual quota or some form of catch shares are much like a fishing license. They are an authorization to fish. The difference here is the access to the privilege is limited. That privilege is not simply to be able to fish, but to fish for a percentage of the total allowable catch from a fishery. These are not securities or Wall Street financial instruments and should not be treated as such. They should be restricted solely to those engaged in fishing on board a vessel, as captain or crew. This is what was done in the North Pacific halibut and sablefish fisheries.
There is no reason for allocating quota to others than those engaged on board the vessel in the fishery. Allowing non-fishermen to hold quota or shares serves no purpose but to invite speculation and the creation of a plantation style fishery. Moreover, the creation of community fishing associations protects against the "stranded capital" of processors, removing any rationale for processor quota.
Restricting quotas or shares to those engaged in fishing does a number of things.
First, by restricting the market to captains and crew, it helps to keep the price down and makes quotas or shares more affordable. Fishermen then do not have to compete with processors, bankers, speculators or others for quota. It also lessens the prospect of fishermen entering the fishery already heavily leveraged due to inflated quota prices.
Second, it prevents "sharecropping." Under such restrictions, fishermen do not have to pay rent to others (or at least non-fishermen) for working a quota or share, nor are they likely to have to follow orders of a third party on how the fishery is conducted.
Third, it keeps ownership of the fishery in the fishery, preventing bankers, venture capitalists, or non-fishing interests from controlling a fishery.
Fourth, the goal of fostering conservation, flexibility, safety at sea, enhanced value and access is more likely to be achieved by restricting the holding of quotas or shares to those actually engaged in fishing on board the boat.
The one exception to this rule should be an allowance for a community fishing associations to hold quota or shares in trust on behalf of fishermen belonging to that community to ensure that a community's long-term interest, including that of buying stations and processing plants, in a fishery is protected.
Processor ownership of vessels qualifying for quota or shares at the outset of a program is not really a problem. Processors, or a non-fishing qualifying vessel owner, could be grandfathered in and allowed to hold quota as long as they operate a vessel -- provided the quota or shares do not exceed that established for the fishery (see below). There are only two stipulations: one, is that a non-fishing party, including a processor, could not purchase or rent quota from another; and two, is that the quota held by that non-fishing entity could only be transferred to a fisherman/fishermen engaged onboard in the fishery or to a community fishing association. This will prevent over-concentration of quota in the hands of processors, with all the anti-trust problems that would entail for rank-and-file fishermen.
A definition of a community fishing association, beyond the language in the Magnuson-Stevens Act, is much needed. There has been considerable discussion about their formation over the last year (see "Community Fishing Associations: A New Way Forward," FN March 2009, www.pcffa.org/fn-mar09.htm). But before they can be formed they have to be defined and standards for their operation put in place, lest the concept be corrupted by a single processor or small group of vessels getting together claiming to be such a community.
The promise of a community fishing association is significant -- allowing fishermen and processors and other fishery dependent businesses, even local government, to coalesce to protect the interest of a "community" in a fishery or fisheries within a defined geographic area.
Community fishing associations, as we imagine Congress envisioned, have the potential for rectifying a serious problem associated with IFQ programs, where quota or shares can simply leave a community -- and with that leaving, end that community's access to the fish.
Two things need to happen. The first, mentioned above, is that definitions, rules and standards have to be established for community fishing associations. We are not optimistic about NMFS doing this on its own. Keep in mind NMFS never did develop standards for IFQ systems that Congress mandated in the 1996 MSA reauthorization. Nor has NMFS, to date, developed rules for Limited Access Privilege Programs (LAPPs) which include regional fishing associations and communities fisheries in the 2007 MSA reauthorization. It may fall on fishing groups and the affected communities to develop these definitions, rules and standards.
Second, community fishing associations should be entitled to an initial allocation of quota. Without this it may become impossible to establish them, and those that would be formed could end up being heavily leveraged. At minimum 10 percent, and we'd prefer 20 percent, of the overall quota should initially be set aside and available for community fishing associations as they form.
To protect against massive consolidation in a fishery and promote broad participation in a fishery, caps need to be set on the amount of quota any one entity can hold or control. We suggest a "one percent rule," i.e., no one person can hold or control more than one percent of the quota for any fish stock or in any fishery. We think this is fair, ensuring that there are no less than 100 vessels participating in a given fishery.
On the other hand, we recognize that there are some exceptions. There are some fisheries that have historically had many fewer participating vessels (or individuals as in the case of dive fisheries) and that because of the nature of those fisheries they could not support 100 or more participating fishing units. Thus a one-percent rule would be unworkable in these cases. In those instances, a fishery Council developing a catch share program should be required to provide written findings on why an exception to a one percent rule is necessary for the fishery in question.
Lastly, community fishing associations, designed to hold in trust quota for numerous participants, should not be subject to a one-percent rule. However, some cap may need to be placed on how much quota any one community can hold to protect the interests of other communities.
A one percent rule, or another other form of quota cap, will result in some individuals or entities, based on their fishing history, qualifying for more quota then they will be permitted to use. We'd suggest they be given a two-year grace period in which to transfer their quota to another qualifying fisherman or fishermen who are below the one-percent rule or cap that is established. However, during that grace period they should not be allowed to use that excess quota or shares, thus there is no incentive for anyone to hold more than the catch share program allows them to use.
With this, we'd also recommend there be an adjustment period -- probably three years -- restricting quota transfers to only those who qualified for quota initially, including community fishing associations. This allows for the industry to sort out the program among the initial qualifiers before opening it up to new entrants. This is especially important for those whose initial quota or share allocation was small to find additional amounts to purchase -- most likely from those holding excess quota -- in order to assure there they have sufficient fish for their operation. It will also give community fishing associations a period to become established.
After the three year adjustment period, restrictions could be eased then to allow anyone with a commercial fishing license and owning/operating or employed on a fishing vessel to buy quota or shares in a new fishery.
Although Congress provided for a longer period in its 2007 MSA reauthorization, we'd suggest a term of five years for holding quota with an automatic renewal, provided the fisherman holding the quota complied with the quota, or shares, conditions. Five years is the term the federal government applies to much of its rented property.
That does not thwart investment, but keeps it clear that the shares are not private property but remain in public trust. Indeed, regular review periods of five-years should help to act as an incentive for conservation, letting a quota holder know that their renewal is dependent on their good stewardship.
Some have complained that this is too short a period, that it does not provide them the certainty that lenders need. That's really not the case, since there is very little certainty in fisheries right now anyway. Catch shares are not a career beginning to retirement welfare program. A five-year limit, with the option of automatic renewal for compliance (stewardship), is much more of a guarantee for any lender than presently exists.
An eighth step, or element, that requires inclusion in a catch share program is capital formation and access to it. In order to provide capital at low interest rates to participants in a catch share fishery there should be a mechanism for accumulating capital from the fishery, either from some form of assessment or fee on quota transfers, that can be controlled by the fishery. This possibly could be done through community fishing associations to provide low interest loans for those seeking to buy quota once a system is running. This would also act to control entry costs and keep capital within and under the control of those in the program, especially the community fishing associations. The entity for holding and lending the capital could take a number of forms, including a revolving loan fund or a local credit union.
Capital held by the program in whatever form participants selected would not have to be restricted solely to quota or share purchases, but could be expanded -- depending on a decision by the participants -- to include infrastructure improvements, upgrading vessels or gear (e.g., for safety or cleaner operations), or even formation of health insurance cooperatives.
Coupled with this, a system-operated quota exchange should be part of any catch share program to provide transparency in the system and protect against third parties or middlemen inserting themselves in transactions among fishermen.
Such an exchange would allow for accurate reporting of values associated with quota, providing a mechanism for fairly collecting fees on transfers. Those fees could then be assigned to either help with capital formation or fund a portion of the operating costs of the catch system.
A catch share program has to be financially sustainable, i.e., it must pay its own way. It cannot be subsidized by fishermen who are not part of the program or by other fisheries. Nor should it be paid for by government when so many other fisheries needs are going unmet, including research and data collection necessary to ensure the annual catch limits are based on sound science.
Funds for managing a catch share program can come from a form of royalties or assessments, as is now the case in some existing programs, coupled perhaps with fees on transfers in an exchange system. In other words, it's totally reasonable to require these programs to be self-funding and financially sustainable.
Finally, before any catch share program is adopted, it has to have the support of the stakeholders. The decision by the Pacific Council, for example, not to proceed with a referendum (because they felt it would lose) is egregious. What is the point of putting these systems in place if those who are subjected to them don't believe in them? Whatever happened to Democracy?
Requiring a referendum vote by those who have participated in a fishery, or would otherwise be eligible for quota allocation, is not radical -- it's American. Moreover, a required one-man, one-vote among the broad scope of members of a fishery will help to ensure that Councils carefully draft plans in order to win approval.
For all the rhetoric about flexibility and getting government out of the day-to-day business of fishing, putting one of these systems in place without approval of those affected is outrageous, hypocritical and an affront to our system of American values.
The overall test is the larger picture of developing systems that will provide America with a secure food supply from our own oceans and also provide our coastal communities with the optimal economic stimulus of providing jobs for the fishing families. What we have seen so far with the new Administration is their willingness to have an open dialogue on these challenging issues. This is a good first step.
We as fishermen know all too well that without this dialogue no one would listen, and many of our jobs could be needlessly consolidated and perhaps eliminated. We have given you in the past our criticisms of catch share programs generally. Here we've offered up 10 steps to take to make these systems work right.
What are your thoughts? What other recommendations should be forwarded to the NOAA Catch Share Task Force to be required in future catch share programs? Let us know so that your ideas have an impact. It is, after all, your future and the future of your fishery that is at stake.
Pietro Parravano is a Half Moon Bay commercial fisherman, harbor Commissioner, President of the Institute for Fisheries Resources and a Board member of the Commercial Fishermen of America. He served on the Pew Oceans Commission and is currently a member of the Joint Oceans Commission Initiative (JOCI). Zeke Grader is Executive Director for the Pacific Coast Federation of Fishermen's Associations with offices in San Francisco. He is also an attorney and serves on the Advisory Board of the Marine Fish Conservation Network. PCFFA can be reached at its San Francisco Office at PO Box 29370, SF CA 94129-0370, (415)561-5080; at its Northwest Office at PO Box 11170, Eugene, OR 97440-3370, (541)689-2000; or by email to fish1ifr@aol.com.