Sharing the Fish Toward a National Policy on Individual Fishing Quotas (1999) / Chapter Skim
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G Individual Fishing Quota Case Studies
G Individual Fishing Quota Case Studies
Pages 280-365
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From page 280... ...
Prior economic and social conditions in the fishery; 4. Problems and issues that led to the consideration of an IFQ program; 5.
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From page 281... ...
ITQ Case Study Surf clams (SC: Spisula solidissima) and ocean quahogs (OQ: Arctica islandica)
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From page 282... ...
Finally, the commodity orientation of IFQs is appropriate because there have been no recreational or environmentalist claims for other values. Prior Regulatory Conditions in the Fishery In 1990, prior to IFQs, different regulations were applied to surf clams and ocean quahogs, to restrict the harvest of surf clams and encourage development of the ocean quahog fishery.
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From page 283... ...
Prior Biological and Ecological Conditions in the Fishery The population ecology of surf clams and ocean quahogs is distinctive, leading to "mining" rather than "sustainable resource" management strategies (cf. Muraw ski and Idoine, 1989~.
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From page 284... ...
For both clam species, there is no discernible relationship between the size of the spawning stock and the number of clams recruited, and harvesters rely substantially on a few large year classes to buffer interannual variability, leading to analogies to mining when talking about management strategies. This is why the TAC was set conservatively, using the figure of 10 years' sustainability or "supply years" for surf clams and 30 years for ocean quahogs in setting annual TACs.
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From page 285... ...
was also the year of the lowest recorded average prices for surf clams and ocean quahogs (see MAFMC, 1990~. Crew employment declined during the moratorium period, as vessel owners adapted to time restrictions by using the same crew members on more than one vessel (McCay and Creed, 1987, 1990; McCay et al., 1989~.
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From page 286... ...
was widely considered a success in preventing overharvest of surf clams and fostering development of the ocean quahog fishery, but it was a cumbersome regulatory system that was costly to monitor and enforce. It was characterized by numerous regulatory changes (seven amendments to the FMP between 1978 and 1987~.
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From page 287... ...
year classes of surf clams, (2) technological changes such as more and larger dredges and hydraulic hoses, (3)
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116~. This theme appeared and reappeared throughout debates in the 1980s about how to reform management of the surf clam fishery (the ocean quahog fishery was not seen as problematic)
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From page 289... ...
Initial Allocation. The initial allocation of quota share was divided among owners of all permitted vessels that harvested surf clams or ocean quahogs between January 1, 1979, and December 31, 1988.
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For ocean quahogs and New England surf clams, allocation was determined from the average historical catch for the years actually fished between 1979 and 1988, excluding the lowest-catch year. The average New England surf clam catch was then included in the total surf clam catch to calculate individual vessel ratios in the newly defined larger region, which incorporated both the MidAtlantic and New England stocks.
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From page 291... ...
12~. For surf clams, the OY range equals 1,850,000 to 3,400,000 bushels; for ocean quahogs, the OY range equals 4,000,000 to 6,000,000 bushels (DOC, 1996~.
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From page 292... ...
There was a shift northward in landing of surf clams and ocean quahogs during 1988-1996, partly in response to declining CPUE in waters off southern states (e.g., Virginia) as well as in heavily fished areas off southern New Jersey.
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From page 293... ...
of those who held surf clam ITQs did not fish for surf clams, presumably leasing out their quota; the figure was even higher for ocean quahogs (46%~. To some extent the high level of leasing or temporary transfers of cage tags was due to uncertainty about the future and about the market for ITQs on the part of people who were planning to leave the fishery.
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From page 294... ...
Being an "independent" or non-vertically integrated firm that owned only one or a few vessels had no significant effect on the chances of surviving in the fishery by the end of 1993 (Weisman, 1997~. The size of the initial allocation for ocean quahogs was directly proportional to the chance of remaining in the fishery until the end of 1993; there was no such effect for surf clams.
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From page 295... ...
For surf clams, concentration of ownership did not change significantly; in 1992, the largest firm held 22.6% of the surf clam quota share. The surf clam fishery tends to have a more bimodal distribution of large versus small operators, whereas the structure of the ocean quahog fishery tends to be more evenly distributed, with a middle class of shareholders as well as large operators (McCay and Creed, 1994~.
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From page 296... ...
The effect of ITQs on processor organization and concentration has not been shown in empirical economic studies; however, the vertically integrated processors had an advantage in the competition for clams over processors that did not own boats prior to ITQs. The vertically integrated processors obtained "free" quota shares during the initial allocation, whereas the others had to either purchase shares or bargain with vessel owners to supply them with clams, increasing the costs of their operations.
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From page 297... ...
. It has also proved difficult, if not impossible, to enforce a provision in the preamble to the final rule that the government would periodically monitor the number of quota shares owned by each person and advise the Department of Justice if any one had an "excessive share" (MacDonald, 1992~.
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From page 298... ...
estimates that British Columbia natives consumed more than 272 metric tons of halibut per year in the late 1880s. Development of large-scale commercial fisheries for halibut was stimulated by the completion of transcontinental railroads in the late 1880s.
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Annual limits on commercial catches of halibut are set for each IPHC regulatory subarea. Although the area boundaries have changed slightly over time, particularly in the Bering Sea and Aleutian Islands (Area 4)
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Even with trip limits, the commercial fishery exceeded the coastwide catch limit by an average of 812 metric tons (4.9%) between 1977 and 1994 (Figure Gab.
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Elsewhere in the Gulf of Alaska, longline fishermen are allocated 80% of the TAC. The use of pot gear for sablefish is prohibited in the Gulf of Alaska, but permitted in the Aleutian Islands and the Bering Sea.
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Canada, sablefish are not, and neither species is co-managed with Russia, Korea, Japan, or other principal harvesters. Although the estimated 1997 coastwide biomass of Pacific halibut (260,423 metric tons)
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Sport fishing has grown from 3% (857 metric tons) of the 1984 total catch to 11 % (3,514 metric tons)
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. Problems and Issues That Led to Consideration of an IFQ Program The problems and issues that led to consideration of an ITQ program for halibut and sablefish were allocation conflicts; gear conflicts; ghost fishing due to lost gear; bycatch loss in other fisheries; discard mortality for halibut, sablefish, and other retainable species in the halibut and sablefish fishery; excess harvesting capacity; product wholesomeness as reflected in real prices; safety; economic stability in the fishery and communities; and rural coastal community develop
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. South Central Bering Sea & Aleutian Islands Prince William Sound Kodiak Island , - Southeast r Other U.S.
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The IPHC estimated that 1,860 "skates" (roughly 1% of the gear fished) was lost in 1990 and that the lost gear accounted for about 900 metric tons of halibut mortality (3% of the commercial catch)
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Objectives of the IFQ Program The Environmental Assessment/Regulatory Impact Review identifies ten problems that the ITQ program was intended to address (NPFMC, 1991a) : Allocation conflicts; 2.
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The sablefish IFQ program is limited to longline and pot gear fisheries in federal waters off Alaska and does not apply to sablefish harvested in state waters or in the trawl fisheries. Although most of the sablefish harvests are from federal waters, fishing for sablefish also takes place in state waters along the Aleutian Islands, in Prince William Sound, and in the vicinity of Chatham Strait in Southeast Alaska.
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From page 309... ...
Area-specific shares were allocated based on the geographic distribution of landings during the years used to determine quota share. Sablefish quota shares were allocated to the 1,094 vessel owners and leaseholders who had verifiable commercial landings of sablefish during same eligibility years (1988-1990)
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From page 310... ...
was given to Bering Sea fishermen. Accumulation and Transfer of Quota Shares.
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Because it can be difficult to exhaust an individual' s IFQ exactly, the halibut and sablefish IFQ program has a provision for over- and underharvests. In the case of an overharvest, up to 10% of the fisherman's IFQ remaining at the time of the landing will be subtracted from the following year's IFQ.
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From page 312... ...
The IPHC estimates that halibut fishing mortality from lost and abandoned gear decreased from 554.1 metric tons in 1994 to 125.9 metric tons in 1995. The discard of halibut bycatch in the sablefish fishery is estimated to have dropped from 860 metric tons in 1994 to 150 metric tons in 1995.
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From page 313... ...
Without a comprehensive model of exvessel price formation that accounts for changes in landings, inventories, net exports, and exchange rate fluctuations, it is uncertain whether the observed price increase is due to the change in management regime or merely to continued declines in the sablefish TAC and hence supply. The effect of the IFQ program on halibut exvessel price is even more ambiguous.
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From page 314... ...
for halibut. However, although this result also supports the expectation that IFQs lead to price increases, the observed change in average per vessel exvessel revenues is likely to be due, at least in part, to increases in the average number of quota shares per fisherman.
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. TABLE G.4 Percentage Change in the Number of Sablefish Quota Shareholders Between the Initial Issuance and August 29, 1997 Region Quota Share (pounds)
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The regional economic impacts of reductions in crew size are unknown because information on crew participation in the pre-IFQ and IFQ halibut and sablefish fisheries is unknown as is information on crew demographics, residency, and opportunity costs. Administrative Outcomes and Enforcement.
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From page 317... ...
Similarly, there was dissatisfaction with the award of QS to persons who were active during the qualifying years but inactive in the years immediately preceding implementation. Crew members and processors are discontented that the initial allocation, in addition to rewarding vessel owners, also changed output and factor market power in favor of QS holders.
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The fishery was (and is) managed under the federal Spiny Lobster Fishery Management Plan (jointly by the Gulf and South Atlantic Fishery Management Councils)
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Development Process and Transition to the Tradable Permit System An outside consultant was solicited to facilitate the development and implementation of an alternative system to address the problems that were being experienced by the lobster fishery. Implementation of the project was encouraged by the State of Florida, the Gulf and South Atlantic Fishery Management Councils, and NMFS; industry expressed cautious interest.
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. Finally, the Gulf and South Atlantic Fishery Management Councils adopted the Florida program into the federal spiny lobster FMP The Tradable Permit System .
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The number of traps decreased from more than 1,000,000 prior to implementation of the program in 1992 to approximately 550,000 in 1996 due to reduced initial allocation of certificates and subsequent annual 10% reductions. Spiny lobster landings have remained stable and trap reductions are on hold for now.
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, which accounted for 12% of exports in 1996. In terms of total receipts of foreign currency, the fishing industry is less important but still accounts for more than half (52% in 1995~.
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Both world wars provided a temporary reduction in fishing pressure, as foreign fleets disappeared from the fishing grounds because of dangers to fishing vessels from military actions and the shift in manpower from fishing to fighting; when the wars were over fishing activities rebounded. The total catch of cod peaked in the mid-1950s, and cod became fully exploited and possibly overexploited as early as the late 1950s.
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From page 324... ...
The economic growth over most of the 40-year period from 1945 to 1985 was to a large extent driven by increases in fish catches and productivity in the fishing industry. Catches of cod, the most valuable groundfish, increased from about 200,000 metric tons per year in 1945-1948 to about 300,000 metric tons in 1954-1956.
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. The first serious limitations of Icelandic fishing effort were temporary bans on fishing on particular grounds.
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From page 326... ...
When the ITQ program was first implemented, each fishing vessel over 10 tons was allotted a fixed proportion of future TACs for cod and five other demersal fish species. Catch quotas for each species, measured in metric tons, were allotted annually on the basis of this permanent ITQ share.
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From page 327... ...
Quota allocations are of an indefinite duration and could be revoked by the Icelandic Parliament at any time, but the prices of permanent quota shares suggest that this is not considered a very high risk; in the summer of 1997, permanent quota shares for cod were trading at about eight times the cost of renting quota shares for a year. Leasing of quota shares cannot be repeated indefinitely; in order to retain their quota share allocations, quota shareholders must fish at least half of their quotas every second year.
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From page 328... ...
Catches have also increased gradually, from less than 20,000 metric tons in 1975 to about 140,000 metric tons in the 19941995 season, but they fell in the 1996-1997 season to about 100,000 metric tons.
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From page 329... ...
According to this rule, the TAC should be either 25% of the fishable stock or 155,000 metric tons, whichever is greatest. Except for the minimum of 155,000 metric tons, this appears to be a prudently conservative rule for a long-lived and slow-growing species such as cod.
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From page 330... ...
In 1996, there were 29 vessels participating in the herring fishery, a decrease from the peak participation year of 1980, when there were more than 200 vessels. At the same time, the total catch has increased, from 53,000 metric tons in 1980 to almost 140,000 metric tons in the 1994-1995 season.
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From page 331... ...
The total productivity of capital and labor in the fishing industry showed extreme sensitivity to changes in the size of the fish stocks in the period 1973-1985. This effect is expected; it is usually cheaper to catch a ton of fish from a plentiful stock than a depleted one.
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From page 332... ...
Figure G.16 shows distributional changes of quota shares among vessel owners for an 11-year period (excluding, for the sake of comparison, 6-10 GRT vessels that were incorporated into the system in 1991~. There is a steady decrease in the total number of quota holders.
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From page 333... ...
Many vessel owners have dropped out of the program, and a large majority of these were the smallest operators. At the same time, quotas are becoming concentrated in the hands of fewer vessel owners and companies.
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From page 334... ...
Figures G.18 and G.l9 show changes in the number of quota holders and the distribution of holdings since quotas became fully transferable. This time, the 6-10 GRT vessels that were incorporated into the system in 1991 are included.
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From page 335... ...
To give some indication of the extent of these devaluations, a vessel owner who controlled an ITQ share in cod of 0.1 % (the upper limit of a dwarf) was entitled to approximately 254 metric tons of cod in 1987, 200 metric tons in 1991, but only 106 metric tons in 1994.
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From page 336... ...
Vessel owners have been permitted to lease their ITQs from the onset of the program. ITQ leasing was originally proposed by administrators as a way for vessel owners to fine-tune their operation to meet short-term needs arising from unexpected "devaluations" of ITQ shares; fluctuations in local, regional, and national markets; and bycatch problems (for example, by trading haddock ITQs for cod ITQs)
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From page 337... ...
The Icelandic tax authorities have decided, one may note, that ITQs are to be reported as "property" on tax forms and that the selling of ITQs involves a form of "income." Some evidence indicates that in legal practice, quota shares are gradually acquiring the characteristics of full-blown private property, despite legal clauses to the contrary. Owners of quotas may write them off for tax purposes over five years.
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From page 338... ...
The Icelandic Supreme Court ruled on December 3, 1998 in favor of the woman, which may be seen as one further step to the formal recognition of quota shares as private property. Thus, the use rights of fish resources are becoming increasingly entrenched as private property while the resources themselves (i.e., the fish stocks)
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From page 339... ...
Once the opportunity for fishing has been sold (sometimes because the quota share is too small to provide available fishing operation) , the family as well as the fisherman becomes unemployed.
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From page 340... ...
Additionally, cod are plentiful in the winter, so fishing effort is concentrated then, despite the bad weather. There may also be pressure under the quota program for absentee owners to disregard crew safety.
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From page 341... ...
Often, heavily loaded feudal metaphors are used to describe this state of affairs. In public discussion, the large firms that have been accumulating quota shares are habitually referred to as "quota kings" or "lords of the sea." The lessor quota kings are likened to medieval landlords, and conversely, small-scale lessees become "tenants" or "serfs." In January 1994, fishermen went on a national strike, protesting against the ITQ program, especially the effects of the so-called tenancy system.
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From page 342... ...
For one thing, all transactions in quota shares should become transparent and pass through a quota market. Also, fishing and processing should be more clearly separated through the establishment of an office for registering the market prices of fish.
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From page 343... ...
In 1963, the inshore fishery was completely deregulated. During the period of open entry that followed, the federal government encouraged investment in the fishing industry through investment incentives, capital grants, allowances, and tax breaks.
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Initial TACs for most of the inshore finfish stocks were based on average reported landings during periods when the catches were considered to be sustainable. This was a largely qualitative rather than quantitative assessment.
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From page 345... ...
Within this management regime, ITQs were seen as the best mechanism for maintaining the balance between the harvesting sector and the fish stocks, delivering government restructuring assistance, and maintaining profit and equity within the industry. The government proposed a management policy with the following characteristics: · Future management of the inshore fishery would be by ITQs.
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From page 346... ...
3. In 1982, an enterprise allocation scheme for seven important species in the deepwater and offshore trawl fisheries was introduced.
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From page 347... ...
. Except for the species included in the enterprise allocation system introduced into the deepwater and offshore fisheries in 1983 that is described below, initial allocation was made on the basis of catch history, modified by the results of a buyback scheme and administrative reductions made to match effort more closely to the available resource.
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From page 348... ...
Because the reductions in catch levels would not have been spread evenly across the species, the historic catch mix of individual fishermen would have been upset, leading to economic and bycatch problems. The government provided adjustment assistance to the fishing industry by purchasing all or a portion of participants' quota shares.
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From page 349... ...
These upper limits were introduced to address concerns over monopolistic aggregation of quota. A minimum quota holding of 5 metric tons was specified for finfish species and 1 metric ton for shellfish.
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From page 350... ...
the quantity of fish caught for each species for which quota shares are owned or leased.
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From page 351... ...
Quota busting is known to occur in some fisheries, especially those for high-value species such as rock lobster, paua, snapper, and orange roughy. The illegal catch of rock lobsters in 1993 was estimated at 715 metric tons, about 25% of the total New Zealand TAC (Annala, 1994~.
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From page 352... ...
Where this approach is not successful, a charge of overfishing can be avoided if fishermen obtain quota shares to balance catch within a short period of time (before the fifteenth of the next month) using one of the following mechanisms: · Purchasing or leasing ITQ from other holders; · Fishing on behalf of another ITQ holder by either fishing against the other's quota or declaring catch against the other's quota; · Catching up to 10% in excess of their ITQ for a given species for a given year or carrying over up to 10% of their ITQ to the following year; and · Leasing to the Crown for the remainder of the fishing year an equivalent value of unfished ITQ of another species that has been approved by the Ministry of Fisheries for the QMA (the bycatch trade-off scheme)
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From page 353... ...
Fishery managers have worked in consultation with the fishing industry to fine-tune the use of the overfishing provisions on an annual basis to reduce the amount of overcatch. Complicated Nature of the Quota Management System.
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From page 354... ...
One of the glaring gaps in the New Zealand ITQ program is the lack of any systematic, quantitative evaluation of the benefits and costs of the program either by government agencies or by the fishing industry. There is not much in the way of objective, quantitative information available, but there is a great deal in the way of perceptions.
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From page 355... ...
· The price of compensation was to be agreed between the government and the fishing industry, and failing agreement, was to be arbitrated. · A TAC reduction of 4,000 metric tons for orange roughy on the Chatham Rise was agreed to, and other TAC reductions were to be discussed with industry.
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From page 356... ...
. Resource rentals were paid on quota shares held until the end of the compensation period.
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From page 357... ...
The fishing industry has introduced a voluntary logbook program for some of the adaptive management Fishstocks to collect
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From page 358... ...
During the 1997 stock assessment and management consultative meetings, criteria were developed by the Ministry of Fisheries, in conjunction with stakeholders, to determine the suitability of the TAC increases that had been granted under the adaptive management program. Criteria included the determination of whether or not the TAC increases were sustainable, based on the available information, and whether effective monitoring programs had been put in place by the industry.
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From page 359... ...
Most of the major Fishstocks that are below BMSY are now being rebuilt. The TAC for the largest orange roughy fishery on the Chatham Rise has been reduced from about 38,000 metric tons for the 1988-1989 fishing year to 7,200 metric tons for 1997-1998.
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From page 360... ...
The allocation of quota shares in perpetuity has guaranteed security of access to the resource. When rock lobsters were introduced into the QMS in 1990, court action taken by Maori was settled when the government agreed to rock lobster ITQ being issued for a 25-year term.
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From page 361... ...
Other market developments have been attributed at least partly to the security conferred by ITQs. The export of live rock lobsters has increased from 1,947 metric tons in 1990 to 2,722 metric tons in 1993.
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From page 362... ...
Some examples follow: · Quota shareholders in three of the rock lobster Fishstocks are funding two full-time scientific staff members to carry out research in their areas that will contribute to stock assessment. · Quota shareholders in one of the paua Fishstocks have asked for and taken a voluntary 10% reduction in TAC because of their concern about the state of the Fishstock.
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From page 363... ...
For the six years from 1986-1987 to 19911992 the returns on assets (after interest, rentals, and tax) for the major quota holders in the survey were 11.1%, 3.0%, 10.2%, 10.8%, 6.6%, and 11.5%, respectively.
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From page 364... ...
For most species, quota will be allocated on the basis of catch history. There will be an appeals process for quota allocations, but the process will be stricter than previously.
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From page 365... ...
, the transfer of fisheries stock assessment research into a Crown Research Institute, and the establishment of a stand-alone Ministry of Fisheries. The role of the Ministry of Fisheries is being reduced to one of policy advice; determining the standards and specifications for and purchasing, monitoring, and auditing the contestable services; liaison and facilitating conflict and dispute resolution; and enforcement, compliance, and prosecutions.
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