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Permit Stacking and Leasing Move
Forward in Sea Scallop Fishery by Laurie Schreiber
The alternatives will be included in draft Amendment 15 to the scallop management plan. Stacking and leasing generated considerable debate from fishermen for and against the options. Steve Ouellette said there will be a cost to stacking and leasing, and that cost will fall onto individual boat owners who don’t consolidate. Ouellette represents 51 independent scallop boat owners; 37 are individual boat owners and 14 own from two to five boats. The boat owners are not interested in the leasing or consolidation proposals, Ouellette said. Consolidation of days-at-sea (DAS) through leasing could result in overall fishing to increase as much as 25 percent, said Ouellette. In addition, Ouellette said, the consolidated days will move to more efficient vessels and captains. The net effect, he said, is going to be more and faster harvesting by the larger businesses, which will lead to the entire fleet being forced to take an across-the-board cut. “Non-consolidated vessels are going to pay the cost for this,” Ouellette said. New Bedford Seafood Consulting executive director Jim Kendall said that, in his 32 years in the fishery, he’s found that if there’s a way to improve the fishery, it will happen. The NEFMC is abetting consolidation, he said, but there are people who will choose not to, or are unable to, participate in stacking. “People are scared to death that they’re not going to be able to survive because the pack mentality will overtake them,” Kendall said. Efficiency, Kendall said, is not something to strive for and, in this case, it will come back to reductions of fishing power across the board. “These are business decisions you’re making for an industry,” Kendall said, “and for a way of life that will no longer be able to exist if this turns into corporate fishing.” But Jeff Pike, representing the Sea Scallop Capacity Reduction Coalition, which comprises about 100 limited access permits, said his coalition supports the stacking and leasing options. In 2007, Pike said, a number of the coalition’s members sought to address capacity through the sector process. They sought to have limited access sectors in Amendment 11. At the start of the development of Amendment 15, in 2008, when NEFMC identified capacity reduction as a primary issue to address, the options at the time included individual transferable quotas (ITQs), individual fishing quotas (IFQs), sectors, and cooperatives. All were rejected, Pike said, leaving only stacking and leasing to address capacity reduction. “There is excess capacity,” Pike said. “Our boats are capable of catching a heck of a lot more scallops than they do. They fish 80 days out of the year, and for 285 days, they sit at the dock.” Permit stacking is not a new concept, Pike noted. The coalition, Pike said, has advocated for effective stacking and leasing programs that allow vessel owners to “eliminate steel” while also not disadvantaging other boat owners. Stacking and leasing, said Pike, are most applicable to multi-vessel owners—those who seek to increase fishing opportunity. Multi-vessel owners, Pike said, are the ones who are paying most for excess capacity today. “They have multiple vessels tied to the dock three-quarters of the year,” Pike said. Those who seek the stacking option have been subjected to rude public criticism, Pike said. “We’re called greedy. Our motives have been challenged. And some believe we only seek to put individual vessel owners out of business,” said Pike. “Nothing could be further from the truth. If these accusations were true, our members would want to stack more than two permits. They would oppose a power adjustment. They would oppose a mortality adjustment. They would oppose the application of a 5 percent ownership restriction to leasing.” Although it is argued that the permits from smaller boats will be stacked onto larger boats and will therefore create more fishing effort, power adjustments, or a “power tax,” would create enough of a disincentive to make that scenario unlikely, Pike said. The permit from a 500-horsepower boat stacked onto a 1,500-hp boat would result in the loss of 30 percent of the DAS that were assigned to the smaller boat. With a 28 percent power adjustment, 51 days would adjust to 36 days on the larger boat. A 9 percent mortality adjustment would come out to 34 days. The cost of the adjustments, said Pike, would be in the hundreds of thousands of dollars. “No vessel owner in their right mind would forfeit so much just to get rid of a 500-horsepower boat,” Pike said. In reality, Pike said, stacking and leasing will occur among similar-size vessels to avoid the power adjustment, leaving only the mortality adjustment to deal with.
A15 contains the necessary components for success, Pike said. In addition to reducing fleet size, effective capacity reduction leads to other benefits, Pike said, including the creation of new opportunities for single vessel owners who don’t have the money or the desire to purchase an entire boat or permit. They will be able to lease days or trips. In addition, good boats from which permits are stacked will be cycled through the fleet, resulting in the retirement of older vessels and improvement to overall safety, Pike said. “We hope the entire fleet will be upgraded,” Pike said. Capacity reduction will also reduce port congestion and soften the impacts of derby fishing in closed areas, due to the reduction in the number of boats, Pike said. And the proposal will provide a vessel owner with the opportunity to continue to earn income from leased trips or days at sea (DAS) in the event of a catastrophic incident to his own boat, Pike said. A NEFMC analysis shows the potential impacts of consolidation are both negative and positive. These could include, on the one hand, the reduction of shoreside businesses and crew losses under different stacking levels, and on the other hand, increased profits, increased technical efficiency that will result in reduced operational costs and increased profits, reduced dock congestion, reduced fuel and electrical maintenance, and increased safety as older vessels are cycled out. The maximum stacking scenario has one-half of the fleet stacking onto the other half, although that’s not expected to happen. In this scenario, the fixed cost of vessels will decline 24 percent, trip costs will decline 6 percent, and overall profits will rise 26-30 percent. The NEFMC analysis shows that vessels that don’t stack could be adversely affected because, if stacked vessels catch more, cutback will have to be made fleet-wide. Under the maximum scenario, there could be 250 job losses, mostly crew and related vessel support jobs. Currently, it is estimated there are 1,068 crew jobs; that number could decline to 851 under the maximum scenario. However, the numbers are unclear because, it is estimated, three-quarters of vessels already share crew. Eric Hanson, who owns one boat, said the question of overcapacity is already addressed by effort controls. Capacity reduction, he said, is a smokescreen to save on capital investments that some boats owners have already made. Ouellette said the owners in the group he represents are “concerned about the specter of consolidation.” Fifteen years ago, said Ouellette, decisions were made to discourage this type of consolidation and maintain a fleet of smaller businesses that was based on the family business concept but allowed for some expansion. The capacity reduction proposal, said Ouellette, will not actually reduce capacity. Instead, it merely provides flexibility for boat owners to become more efficient, to move fishing effort from two vessels to a larger number of vessels. The concern for small business owners, said Ouellette, is that consolidation will create stark inequities. As larger vessel owners increase profits by millions of dollars, said Ouellette, they will get more hold not only on the scallop fishery in general but also on the secondary market. “Employment is an important aspect of the fishery,” Ouellette said. “And when you’re balancing jobs against owner’s profit in a fishery that by all accounts now is very profitable, you need to be very careful.” But Pike, in support of consolidation, said that stacking will allow owners of multiple vessels to halve that number. “Our vessels now are paying for overcapacity,” Pike said. “Single-vessel owners are not paying nearly as much as multiple-vessel owners when it comes to waste. We’re paying for the waste and the excess now.” The alternative, Pike said, provides safeguards such as power and mortality adjustments.
“This is a major change,” said Diedricksen. “You’re never going to return from this.” The concept will take permits off older, less-efficient boats and put them on new, more efficient boats, and individual permit holders will pay the biggest price, Diedricksen said. Peter Hughes, from Atlantic Cape Fisheries in Cape May, N.J., supported the concept. He said that owning multiple boats is not a bad thing. But the boats end up staying tied to the dock three-quarters of the year. “That’s over-capacity,” Hughes said. “That’s what we’re trying to eliminate.” Amendment 15 also contains alternatives that would make the scallop and groundfish essential fish habitat closed areas consistent with each other. Other changes under consideration could modify the general category fleet management program and change to the start date of the fishing year. |
