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Improving The Catch Share Proposal For West Coast Trawl Fisheries

by the Fish Site Editor
09 June 2010, at 1:00am

In this report, Ecotrust lays out ten programme features that the Council should address to improve the design of the Pacific Fishery Management Council's proposed catch share programmeme for the West Coast Trawl Fishery.

The Pacific Fishery Management Council is advancing a catch share programme to rationalise the West Coast non-whiting trawl fleet with an implementation deadline of January, 2011.

EcoTrust believes that the proposed programme would downsize the existing trawl fleet and assign quota shares in the fishery to remaining members with the goals of “increase[ing] economic efficiency within the Pacific coast groundfish trawl fishery and reduc[ing]” bycatch.

The programme fails to address critical economic, social and ecological objectives, and currently stands to disadvantage crews, small owner operators, fishing communities and new entrants, says EcoTrust.

Economic Recommendations

Foster an affordable fishery

The Council should limit eligibility for quota ownership to active fishermen, thereby moderating the market value of quota and ensuring quota purchasing and leasing remains affordable for new entrants, fishing communities and small operators. An owner-on-board rule is one option.

However, the requirement would be temporarily suspended in extenuating circumstances such as injury, illness or the sudden death of a fisherman. A sunset clause would require non-fishing interests that receive initial allocations to sell their quota or become active fishermen within a set time period.

Regulate quota leasing

As part of a catch share proposal, an owner-on-board rule would help keep quota values — and in turn lease costs — affordable. However, recognising that active fishermen would need to lease some quota among themselves to facilitate fishing flexibility and to meet bycatch needs, caps could be placed on the percentage of quota that a fisherman could lease or the percentage of leased quota that could be fished on a given vessel. The exact cap — either on the owner or leaser or both — would need to be designed to meet the need for fishing flexibility while restricting fishermen from unfairly profiting from absentee quota ownership.

Increase market transparency

As shares in public companies are traded on government-regulated exchanges, so too should fishing quota shares of a public resource be traded on an official exchange. In fact, as originally enacted in 1996, the Magnuson-Stevens Act (Section 305h) mandates the creation of “an exclusive central registry system.”

In its draft catch share policy, NOAA too calls a central registry “an extremely useful service to provide to fishermen interested in buying, selling, leasing or collateralising catch shares.”

The establishment of an online Groundfish Quota Exchange (GQX) would increase market transparency, facilitate trading and create more perfect information between all buyers and sellers.

The GQX could also be used to levy resource royalties on quota, collect management fees and facilitate auctions of fixed-term quota allocations. It could also collect mandatory socio-economic and other data needed for the performance evaluation of the programme, monitor vessel and control limits on ownership, and register financial liens on quota.

Improve market liquidity

Besides creating an online quota exchange, the Council should auction a portion of the quota for fixed terms. This would improve the liquidity of the quota market, ensuring full efficiency gains from the IFQ programme. Auctions would also foster efficient price discovery and transparency.

In determining the portion to be auctioned, the Council will need to weigh the need for secure allocations for fishermen against the need for liquidity in the marketplace. Revenues generated from auctions could be provided to the public as resource royalties. Auctions could also be used to generate revenue from crew and community allocations, or to distribute overfished species.

Social recommendations

Invest in fishing communities

Because of their financial value, initial allocations are a form of investment. Through eligibility rules and allocation formulas, the Council selects individuals and corporate entities to invest in and thereby transfers resource wealth from the public trust to private capital assets.

The Council should consider investing in fishing communities, as defined by the Magnuson-Stevens Act. The Council should reconsider its initial allocation policy in light of the adverse community impacts of IFQs and the need for long-term community investment and stability as envisioned in the MSA and NOAA’s draft catch share policy.

Besides an initial allocation to fishing communities, the Council should establish specific rules that would allow Community Fishing Associations, as defined in the MSA, to purchase further quota, while protecting against excessive quota concentration. Rules could restrict quota purchases to within a specific geographic range of a given community.

Furthermore, the Council could require that fishing communities auction their quota to local fishermen through fixed-term allocations, thereby improving the transparency and liquidity of the quota market, and ensuring that all fishermen have an equal opportunity to access their local community quota. A portion of the community quota could also be earmarked for new entrants.

Safeguard crew earnings

The Council should provide an initial allocation to captains and crewmembers, which would provide compensation to those who will lose their jobs from fleet consolidation and protect crew earnings for those remaining in the fishery.

The Council should consult with stakeholders regarding the level of allocation, which would need to balance the interests of crewmen, vessel owners (permit holders) and fishing communities. Because of owner-on-board rules, crewmen who initially lose their jobs due to rationalisation would need to sell their quota or find active fishing jobs within a period established by a sunset clause.

The allocation among crewmen should be determined through a consultation process with captains and crewmembers themselves. Initial allocations could be given to individual crewmen, held in trust by a crew association that could generate revenues through fixed-term auctions or a combination of both. A crew association could also fund pension and medical plans, life insurance, training and professionalisation for its members.

Support new entrants and small operators

Besides establishing owner-on-board rules to contain quota costs, the Council should provide an initial allocation for new entrants. This set-aside could be folded into the initial allocation for fishing communities and earmarked for new entrants. The Council should also revisit how on-board and dockside monitoring is financed to reduce the burden on small operators.

Ecological Recommendations

Provide incentives for low-impact, low-carbon fishing gear

The Council should revisit its intersector allocations and gear-switching rules to provide a more equitable basis and incentives for fixed-gear vessels to harvest trawl quota.

Prohibit hoarding and profiteering on overfished species

The Council should put in place initial allocation policies and other rules that would penalise fishermen who catch overfished species, but protect against hoarding of and profiteering on this scarce quota.

Instead of a cap-and-trade system that lets individuals profit from the initial allocation of overfished species, the Council should place overfished species quota in a public conservation trust that leases the quota to fishermen each season at prorated fees: the more overfished species that a fisherman catches the higher the incremental lease fee.

In this way, the Council would maintain a market incentive to avoid overfished species, but protect against profiteering on the scarcity of this quota. A fixed price for overfished species would also create certainty for fishermen.

Another alternative would be for the Council to provide fishermen with the opportunity to lease a portion of their overfished species at prorated lease rates and then to auction off the rest each season. The auctions could be used to determine the price of the fixed rates for the coming fishing season.

Furthermore, the Council could require that fishermen relinquish earnings on overfished species, thereby completely removing any economic incentive to catch these weak stocks. Revenue from the lease fees and relinquished earnings could be distributed equitably back to fishermen, provided as royalties to the public or used for conservation initiatives.

The Groundfish Quota Exchange would be tasked with leasing and/or auctioning overfished quota. This would be similar to the “cap and dividend” system currently being discussed by Congress for the carbon market.

Prevent inter-fleet spillover

The Council should implement policies that will prevent, or at least significantly mitigate, the negative effects of the spillover of trawl vessels into the Dungeness crab, pink shrimp and other fisheries. The Council should engage other fishing sectors and levels of government to solve this dislocation of effort, including the implementation of a policy to retire or buyback latent permits in state fisheries.

Conclusion

In order to balance the interests of all affected parties, the Council needs to address several weaknesses in the program design. Economic flaws should be addressed through the inclusion of owner-on-board rules and caps on leasing, which would keep quota and lease costs affordable. In addition, an online quota exchange would increase market transparency, while auctions would improve quota market liquidity.

To address social shortcomings, the Council’s proposal should invest in fishing communities by including them in initial allocations and facilitating the ability of communities and new entrants to purchase quota. Captains, crew and small operators should also be protected by being included in initial allocations, and monitoring costs should be revisited to ensure small operators are not unduly burdened.

On the ecological front, the Council should create a system that allows fixed-gear vessels to harvest trawl quota through more equitable intersector allocations and gear-switching rules. Further, policies should be included to protect against the economic and ecological impacts of hoarding overfished species quota, and the spillover of trawl vessels into crab, shrimp and other fisheries.

June 2010

the Fish Site Editor