Groundfish Industry Aims to Prevent Big-Biz Consolidation
by Laurie Schreiber
NEFMC member Terry Alexander proposed an additional alternative that would impose a 15.5 percent aggregate cap on sector accumulation. © Photo by Sam Murfitt
MYSTIC, Conn. – The New England Fishery Management Council (NEFMC) is working out its latest groundfish fishery management measures, aimed at promoting a diverse fleet and preventing consolidation of fishing opportunities.
Amendment 18 to the Groundfish Management Plan is designed to address concerns related to the potential for decreased fleet diversity and increased consolidation in the fishery resulting from the sector-based catch shares program implemented in 2010, combined with currently low catch limits.
The amendment cites a “diverse” fishery as one that includes different gear types, vessel sizes, ownership patterns, geographic locations, and levels of participation through sectors and permit banks.
Final action is currently scheduled for November, with implementation in May 2015.
According to the draft document, “Because of concerns related to maintaining the diverse makeup of the fleet, as well as an interest in keeping active and thriving fishing ports throughout New England, the council has considered measures in this action that would impose limits on the amount of allocation that individuals or groups of individuals may control.”
At NEFMC’s request, the National Marine Fisheries Service (NMFS) set a control date of April 7, 2011 in relation to the potential action. The control date alerts the fishing industry that any present or future accumulation of fishing privileges may be limited or may not be allowed after or prior to the date. It also is intended to discourage speculative behavior in the market for fishing privileges while NEFMC considers whether and how such limitations on accumulation of fishing privileges should be developed.
Correspondence and scoping sessions with NEFMC have yielded differing points of view on accumulation caps. On the one hand, the lack of caps, some commenters said, have allowed stocks with low allocations to be controlled by a small number of individuals who are able to buy up the quota. On the other hand, the ability to buy up quota has allowed some groundfishermen to stay in business.
The accumulation limit alternatives apply to the holdings of “individual human persons” and permit banks.
“Establishing accumulation limits at the individual person level rather than the business entity level could be a more effective approach to achieving the Amendment 18 goal of preventing excessive shares, as business entities can form and reform with different configurations of owners, perhaps to avert an accumulation limit,” the draft document says.
Measures are proposed to limit either the amount of stock or the number of permits a person or permit bank can hold.
Alternatives under consideration to limit stock amounts that may be accumulated include:
• for any fishing year, a person or permit bank shall be assigned no more than the maximum percent of their sector share as of the control date;
• a person or permit bank shall be assigned no more than 15.5 percent of the sector’s share for a stock;
• a person or permit bank shall be assigned no more than the following of the sector’s share: 15 percent of the Gulf of Maine, Cape Cod, Southern New England, and Mid-Atlantic stocks, 20 percent of the unit stocks, and 30 percent for the Georges Bank stocks;
• or a person or permit bank shall be assigned no more than the following of the sector’s share: 30 percent of Georges Bank winter flounder and 20 percent for all other stocks in the fishery.
A cap of 5 percent is proposed on permits. With 1,400 permits in the fishery, that’s about 70 permits.
At the NEFMC’s April meeting, NEFMC member Terry Alexander proposed an additional alternative that would impose a 15.5 percent aggregate cap on sector accumulation.
“This gives us a formulaic way of people moving around fish inside the sectors,” Alexander said. “As ACLs [annual catch limits] go up and down, it gives room to purchase another permit.”
Speakers at the NEFMC’s April meeting noted that the accumulation caps address market control, but don’t necessarily pertain to fleet diversity.
“Market power is one component of these considerations, but there are a lot more aspects of fleet diversity,” said Northeast Coastal Communities Sector Manager Aaron Dority, who added that it made sense to include an alternative that has an aggregate cap, but said 15.5 percent was on the high side.
Chris Brown, president of the Rhode Island Commercial Fishermen’s Association, said that sectors themselves have the authority to control market share.
Northeast Coastal Communities Sector Manager Aaron Dority, who added that it made sense to include an alternative that has an aggregate cap, but said 15.5 percent was on the high side. © Photo by Sam Murfitt
“It’s a reoccurring theme that the council underestimates the authority and power within the sectors themselves,” said Brown. “The possibility of someone accumulating ACE [annual catch entitlement] and acting out in such a way that was inconsistent with the overall tenor of everyone’s opinion of what’s good for the sector, for the community, is not going to happen. I can tell you, we’ve had incidents already where people have tried to exercise their ACE at a disproportionate rate to the rest of the community, and we stepped on that. We have the authority to do that and I think accumulation caps are unnecessary.”
The discussion made use of a study commissioned by NEFMC in the summer of 2013, and employing Compass Lexecon, an international economic consulting firm with an office in Boston, Mass.
The final report recommended the 15.5 percent accumulation cap. Received by NEFMC in December 2013, the report said “There has been no common pattern within the groundfish fishery since 2010 despite there being no excessive-share cap. Nevertheless, it is possible that a great deal of consolidation could occur – but our analysis leads us to conclude that even a great deal of consolidation would not lead to the ability to exercise market power, provided no market participant controlled more than 15.5 percent of the PSC for a given stock.”
Currently, the report said, there is no evidence of market control in the sales of fish or transfers of permits.
An understanding of the situation is hampered by insufficient data, the report said: “NMFS has sufficient information on permit ownership to implement an excessive-share cap based on groups of permits with common ownership. However, this grouping of permits does not reliably indicate the entity that controls a particular permit, which is the economically relevant owner. Use of the broad measure of common ownership NMFS currently tracks could lead to unfair application of an excessive-share rule and to economic inefficiencies. We also note that the NMFS would need to have information on long-term (multiple-season) lease transactions, unless such transactions remain prohibited.”
Although a cap of 15.5 percent would prevent market control, the report said, “We do not find any evidence that an excessive-share cap is an effective means to achieve progress promoting diversity, enhancing sector management, or encouraging diversification.”
Maggie Raymond, executive director of the Associated Fisheries of Maine, said the latter spoke to the need for Amendment 18 to spell out how accumulation caps will address fleet diversity.
“The document also doesn’t define ‘fleet diversity,’ so it’s hard to say how any of the proposals in the document address fleet diversity,” Raymond said. “It has been said many times by the agency [NMFS] that putting accumulation limits on this fishery is a discretionary act…Because it is discretionary, I would argue that a rationale needs to be at a higher level: Why are you proposing to do this, what are you trying to achieve?”
Among related matters, the NEFMC considered a proposal to create a sub-ACL (annual catch limit) for folks who hold a Handgear A permit. The proposal was outlined last year by the Northeast Hook Fishermen’s Association, so that Handgear A permit-holders do not have their quota harvested by other gear types. According to the proposal, this could help protect the fishery, which goes back 400 years. Holders of Handgear A groundfish permits currently have the choice of enrolling in the common pool or a groundfish sector.
According to NEFMC member Doug Grout, “In the case of Handgear A permits, the vast majority are still in the common pool. They find it’s very difficult to work, because they’re mixed in with many other gear types, and the catches of the other types are affecting their ability to utilize their fishery. Right now, there are 20 permits within sectors, and only one is fishing; the rest are leasing. Of the 83 in the common pool, 21 are fishing now. But they’re struggling to be able to work within the common pool.”
Marc Stettner, of the Northeast Hook Fishermen’s Association, said, “We’re at the cusp here. Years ago, there were hundreds of handgear fishermen. Due to regulations, we are the fastest-declining gear fishery in the groundfishery. It’s very disturbing to me that there are 100-plus handgear limited-access permits and only 19 or 20 actively groundfishing. That’s a huge drop for this fishery, more than any other gear type….This proposal preserves the history of the handgear fishery for the future.”
Also on the table for discussion were ideas for a buyback or buyout, in relation to the $32.8 million in disaster relief approved by Congress in February.