Catch Share System Challenged
by Laurie Schreiber
“This case is solely
whether Congress created
the statutory right
to vote and was that right
denied by the
federal defendants.”
BOSTON, Mass. – Oral arguments in the appeal of the lawsuit filed by the cities of New Bedford and Gloucester, Mass., and a number of East Coast fishing industry interests, against the federal government’s fisheries catch share system, were heard by the U.S. Court of Appeals for the First Circuit in Boston on Sept. 5.
The plaintiffs alleged that “the National Oceanic and Atmospheric Administration ignored important procedural and substantive provisions of law enacted by Congress to protect traditional fishing communities and to shield small businesses from arbitrary acts by the agency,” according to the office of New Bedford Mayor Jon Mitchell.
The sector-based catch share system was established by Amendment 16 to the federal groundfish management plan. Amendment 16 was implemented on May 1, 2010. A 2011 “Report on Economic and Scientific Conditions in the Massachusetts Multispecies Groundfishery” by the Massachusetts Division of Marine Fisheries and Massachusetts Marine Fisheries Institute said that the groundfish industry’s transition to the system over the ensuing year “caused unforeseen major shifts in the distribution of quota (and income) resulting in $21 million in direct economic losses and foregone yield of $19 million for the Massachusetts groundfish fishery.”
James Lovgren, a commercial fisherman in New Jersey, is a lead plaintiff in the case.
According to the brief for Lovgren, he “believes that the promulgation of ‘sectors’ under Amendment 16, as implemented by the federal defendants, denies Lovgren the statutory right to vote as provided by Congress and violates the Magnuson-Stevens Fishery Conservation and Management Reauthorization Act of 2007 (MSA).”
The brief says: “Lovgren filed this lawsuit because Amendment 16 created ‘sectors’ that for all practical purposes operate as an IFQ [individual fishing quota] program.
According to the brief, Congress has mandated that all commercial fishing regulations that create an IFQ program require that fishermen are given the right to vote.
“This is a right to vote case,” the Lovgren brief says. “It is not an environmental case or a natural resource conservation case. A favorable decision for Lovgren will not alter (up or down) the harvest levels of the fishery resources because the total quantity allowed to be harvested is set by a separate system….This case is solely whether Congress created the statutory right to vote and was that right denied by the federal defendants.”
According to the brief, federal regulators may not create an IFQ program unless such a system has been approved by more than two-thirds of those voting in a referendum among eligible permit holders and crew members.
“This appeal is about definitions and statutes,” says the brief. “Some are defined and legislated by Congress, while others defined and promulgated by two federal agencies,” NOAA and NMFS.
Policy statements published by NOAA and NMFS are at times inconsistent and other times mutually exclusive, the brief says.
According to the brief, the disputed policy statements are:
• The MSA does not define “catch share,” but NOAA and NMFS have a published policy statement on their website. “’Catch share’ is a general term for several fishery management strategies that allocate a specific portion of the total allowable fishery catch to individuals, cooperatives, communities, or other entities. Each recipient of a catch share is directly accountable to stop fishing when its exclusive allocation is reached. The term includes specific programs defined in law such as ‘limited access privilege’ (LAP) and ‘individual fishing quota’ (IFQ) programs, and other exclusive allocative measures,” the brief says.
• Amendment 16 defined sectors as associations consisting of potential sector contributions (PSCs). Each PSC represents “an individual permit’s share” of harvest, a quantity of fish. Amendment 16 says that each PSC represents a quantity of fish, and sectors are an aggregate of PSCs.
“Therefore, Lovgren avers that Amendment 16 sectors are an exclusive allocation of a portion of the allowable harvest of a fish species subject to a voting referendum as mandated by Congress,” the brief says.
According to the brief, if Lovgren is successful, there will be no adverse consequence on the fishery resource because the total allowable harvest will not be affected, since the right to vote has no impact on the science that determines the quantities of species to be harvested.
In 2010, Lovgren and other fishermen, along with municipal and fishery entities, filed a complaint challenging various parts of Amendment 16.
Federal district court Judge Rya Zobel rejected the complaint in June 2011. Lovgren and the other parties filed the appeal.
In its response to the appeal, the federal brief says that sectors are not limited access permit programs (LAPPs) or IFQs, and are exempted from any referendum requirement.
Among the federal brief’s points:
Sectors are voluntary, temporary contractual organizations of individual permit-holding fishermen. For purposes of the referendum requirement, the Magnuson Act provides that a sector is not an IFQ. The PSC is not an individual quota.
Congress has provided that sectors are not subject to the referendum requirement. Because the Magnuson Act does not unambiguously state whether sectors or PSCs qualify as LAPPs or IFQs, NMFS’ reasonable interpretation is entitled to “Chevron deference.” A “Chevron deference” is a legal tool that can be applied when a statute administered by an agency is ambiguous with respect to the specific issue.
In the appeal, attorney James Kavanaugh Jr., representing New Bedford, Gloucester, and fishing interests, said the case was not a challenge to the conservation measures, put in place by NOAA, to limit the amount of fish that can be caught.
Kavanaugh said the case was about NOAA’s “failure to protect” small fishing communities and small businesses. He said that protections specified by Congress, through the Magnuson Act , were ignored by NOAA.
“These are critical issues that the agency failed to address, with substantial likely harmful impacts to fishermen and communities,” Kavanaugh argued.
The New England Fishery Management Council (NEFMC) drafted, and NOAA approved, Amendment 16 to comply with the requirement to end overfishing. Amendment 16’s primary mechanism was the sector-based catch share system. As it turned out, when Amendment 16 was approved, 98 percent of the fishermen joined sectors.
But the plaintiffs charged that the sector system was improperly implemented. They said that sector management is a LAPP, which has built-in safeguards that were ignored.
“Under the sector system,
annual catch entitlement
can be traded,
so one mega fish company
can buy up all
annual catch entitlement.”
– Atty. Kavanuagh
In his oral argument, Kavanaugh said of the sector-based system, “It’s unambiguous that it’s a LAPP.”
Kavanaugh said the matter comes down to the risks of consolidation and the need to protect small-business fisheries and the communities that support them.
“Under the sector system, annual catch entitlement can be traded, so one mega fish company can buy up all annual catch entitlement,” Kavanaugh said. “But that’s not what Congress intended. It wanted safeguards for smaller fishermen.”
Stephen Ouellette, another plaintiff attorney, said, “One of our primary concerns is the preservation of the small business model we’ve had in this region for 375 years.” Ouellette argued that the sector system allows “entities” to form a sector, consolidate all permits, sell their boats, “and, basically, lease out quota on a speculative venture. That undermines everything local fishing communities have stood for,” Ouellette said. “The dangers of this were known to the agency [NOAA]. So small-boat owners are at a huge disadvantage at this point.”
Ouellette charged that LAPP safeguards were sidestepped in order to “speed through” a sector plan that was “politically favored at the time. There is a large political movement seeking to force a catch share system on all fisheries. It’s to privatize the fishery. It’s to say that individuals will have an ownership stake in the fishery to transfer, as opposed to saying, ‘I’m going to buy my boat and I’m going to fish.’ The fishery has turned into a commodity: You own so many pounds of fish that you can either catch yourself or lease to another boat and have them catch it. The fish now becomes a commodity that is traded. And that’s the primary concern.”
Ouellette said that Congress approved provisions specifically designed to prevent over aggregation of ownership of the fishery.
But Joan Pepin, the attorney who represented NOAA and NMFS, argued that the sector system was not a LAPP. The LAPP requires a federal permit that contains a portion of the catch for the exclusive use of the permittee, Pepin said. The sector program, she said, is not a LAPP because nobody receives a federal permit authorizing them to harvest a quantity of fish for their exclusive use.
“No fishermen or sector receives such a permit,” Pepin said.
Fishermen do receive a permit, she said, but not to harvest a quantity of fish for their exclusive use. Rather, she said, every permit gives the permit-holder a PSC. The PSC figure is based on the permit-holder’s landings during the qualifying period of 1996 to 2006.
“But the permit doesn’t authorize anyone to take that PSC and harvest it,” Pepin said. “It’s not a quota….It’s not an entitlement or a limit.”
The authorization that the sector receives, Pepin said, is an exemption from the effort control (days-at-sea) system. It does not convey a quantity of fish. The sector itself does not receive a permit.
“It’s just a collection of fishermen,” Pepin said. “They draw up a contract. It works like a miniature, privatized fishery management plan. They agree to be bound by a catch limit that is based on the combined sector contributions of members and, in return, they’re exempt form cumbersome effort controls.”
Pepin said the program separates the “privilege to fish,” which comes with a permit, from the option of participating in a catch share program.
“There’s been a suggestion that the agency is trying to do an end-run around the statutory requirements, Pepin said. But the sector program predated the LAPP option, she said. Development of the sector concept began in 2004, and the requirements applicable to LAPPs were enacted in 2007. The first sector was formed under Amendment 13, not Amendment 16.
“So it doesn’t make sense to think that this program was developed to evade requirements that didn’t exist,” Pepin said.
The sector program “came from fishermen who were looking for another way to fish…so they came up with this idea,” said Pepin.
Peter Shelley, an attorney with the Boston, Mass.-based environmental organization Conservation Law Foundation, spoke in agreement with NOAA and NMFS.
“We believed in 2010, and still believe today, that the sector allocation program was crucial for the groundfish fleet’s survival and that it met all legal requirements,”
“It was an open-enrollment program…that groups could access as they chose to,” Shelley said. “From the beginning, the New England Fishery Management Council structured this program so that the permit-holder who had the privilege to catch fish is never going to be the same person who had authority over a quantity of fish. Those attributes were vested in different people. The permit-holder had the harvest privileges, the quota right existed with another party who didn’t have a permit, and in all cases today, that’s the sectors.”
“No one’s in love with this program, but the alternative is so much worse,” Shelley said of the sector system. He added, “This program was designed specifically to not be a LAPP. This isn’t cleverness, this isn’t manipulation. The council has not reached the point where it can make that decision of how much consolidation it wants and how it should happen, so it designed a program that would give fishermen the most flexibility they can have in the interim.”