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Commercial Fisheries News
Volume 33 Number 10
June 2006
Industry group floats groundfish buyout proposal
BOSTON, MA - A new groundfish buyout proposal is in the works, and the people behind it – all industry members – are looking for input from the region’s limited-access multispecies permit holders.
These individuals have been meeting as the Multispecies Capacity Reduction Steering Committee since late last year to figure out how an industry-funded buyout provision in the Magnuson-Stevens Fishery Conservation and Management Act (MSA) could be used to reduce fishing capacity in the groundfish industry.
The steering committee, which represents a cross-section of the fishery from Maine to New Jersey, lists the following as one of its stated objectives:
“To preserve the essential character of the New England groundfish fleet. … The provisions of this buyout will not intentionally advantage or disadvantage any particular portion of the industry. …”
Steering committee members have been meeting on their own and paying their own expenses. The only paid people involved are three part-time staffers, including David Borden, who is acting as moderator for the group. The Massachusetts Division of Marine Fisheries is covering staff costs, according to Borden.
In mid-June, committee members will be conducting a series of meetings in 10 ports along the coast to explain what they’re trying to do and how fishermen can get involved.
To give the meetings a focus, the committee has drawn up a detailed discussion document that describes how an industry-funded buyout could work and the steps that have to be taken to make it happen. The steering committee is stressing that the document is not final and will likely change in response to industry comments during the meetings.
Why?
The primary objective of the buyout is to reduce fishing capacity in the groundfish fishery. The discussion document points out that studies show that the fishery currently only operates at about 59% of its total capacity – not counting unused permits and assuming that “full capacity” is permitted boats fishing only 70 days a year.
The document goes on to say that there are now more than 1,400 vessels with limited-access groundfish permits and more than 1,000 of them have A- and B-days-at-sea. Yet, according to National Marine Fisheries Service estimates, it would take only 500 boats fishing only about 70 days per year to catch the entire groundfish total allowable catch for 2007 – about 127 million pounds.
The steering committee has concluded that something has got to change and believes an industry-funded buyout is the only way both to secure the future financial viability of boats that remain in the fishery and provide some level of compensation for those fishermen who will not be able to hold on much longer.
The Sustainable Fisheries Act, which amended the MSA in 1996, set up a mechanism for a public-private partnership that enables industry-funded buyouts.
Basically, it authorizes a government-backed loan to buy the vessels and permits of people who volunteer to get out of the fishery.
For discussion purposes, the steering committee is estimating that $100 million will be the amount of the loan needed to buy out at least 30% of the fishing capacity in the groundfish industry. The actual loan amount will probably be somewhere between $75 million and $150 million.
The loan would be repaid over the longest period possible, which is assumed to be 30 years, by the people who remain in the fishery. The money would be handled through a fee on groundfish landings collected by dealers and placed by dealers into a separate government-owned, deposit-only account.
The fee would be between 1% and 5% of the gross revenues on all groundfish trips depending on the total amount of the loan and the prevailing interest rate.
Reverse bid system
The steering committee discussion document describes a process in which all limited-access groundfish permit holders would vote and, if more than 50% of the votes received are in favor, the buyout would become a reality.
The buyout program then would use a reverse-auction bidding system, where bids would be ranked based on the ratio of a permit’s capacity to the bid submitted by the permit holder.
A-day and B-day permit holders would participate in the bid process. Details of how to calculate these will be available on the steering committee’s web site at <www.nebuyout.org>.
Accepted bids would be paid. Bids that were too high would not be paid, leaving the bidder with the option of remaining in the fishery or selling his operation privately.
Capacity reduction options
The details of the bid system will be figured once one of the following capacity reduction options is selected.
1) Surrender of groundfish permit – Under this option, bidders would be required to surrender only their groundfish permit upon acceptance of their bid. Monkfish Category C permits held by bidders would be converted to Category A permits and monkfish Category D permits would be converted to Category B permits.
2) Threshold for surrender of all permits – Under this option, if less than 25% of a permit holder’s reported gross revenue between 2003 and 2005 was derived from groundfish trips made on days-at-sea, or if less than 15 A-days are allocated to that permit, bidders would be required to surrender their groundfish permits. Monkfish Category C permits held by bidders would be converted to Category A permits.
And, if more than 25% of reported gross revenue between 2003 and 2005 was derived from groundfish trips made on days-at-sea, bidders would be required to surrender all federal fishing permits. Permits for state water fisheries would be revoked by the appropriate state agency.
3) Surrender of all permits – Under this option, bidders would be required to surrender all federal permits upon acceptance of their bid. Permits for state waters fisheries would be revoked.
Regardless of the option chosen, all permit holders with accepted bids would receive payment in addition to their bid amount for the surrender of nongroundfish moratorium permits in a number of fisheries, including lobster, monkfish, scup, squid, and summer flounder.
Vessel disposition options
The discussion document includes several options for what to do with vessels once permits are surrendered. These include:
Unrestricted future use;
Use for nonfishing purposes only, with the vessel being permanently prohibited from holding a fishing permit in any fishery, domestic or international;
Scrapping voucher program in which a vessel owner with an accepted bid could sell his boat as a replacement vessel to someone who agrees to scrap the vessel being replaced; or
Voluntary scrapping in which a permit holder with an accepted bid would receive an additional lump sum payment in the amount of $500 for every foot of registered vessel length as long as he held a federal fishing permit for at least the last three years and had documented landings greater than 5,000 pounds in any federally permitted fishery in two of those three years.
C-days
A permit holder with only C-days would have the option of accepting a lump sum payment in exchange for surrendering his groundfish permit. The discussion document suggests the amount would be $150 per C-day held.
C-day permit holders who didn’t want to participate could retain their groundfish permits.
However, the program would include a requirement that C-days not be re-activated or otherwise used for groundfish fishing until the total buyout loan was repaid to the federal government.
Long process
It’s important for groundfish industry people to obtain and read the discussion document, attend the public meetings, and participate now. The steering committee hopes to complete a series of complex steps by the summer of 2007.
Still, the whole project really is at an early stage.
Following the public meetings, committee members will review what fishermen had to say. If they decide there is support for a buyout, they will conduct a nonbinding referendum – probably this summer. All groundfish permit holders will receive a copy of the buyout prospectus and a ballot by mail.
If that referendum is approved, the committee will begin to work with federal lawmakers to craft legislation to implement the buyout. Once that legislation is signed into law, a copy of the final prospectus will be mailed along with a binding bid submission package. All bids will have to be submitted prior to the mailing of the second referendum, which will be the final, binding vote.
All groundfish permit holders will have the right to vote, but because the loan will be repaid based on an assessment on groundfish landed from A-day and B-day trips, the votes will be weighted. The discussion document proposes that votes be weighted according to the number of A-, B-, and C-days a permit holder has, with each A-day counting as four votes, each B-day counting as two votes, and each C-day counting as one vote.
Get more info
At press time, the details of the public meetings on the discussion document were still being worked out. An initial meeting was scheduled for Gloucester on May 30. The rest will be held in mid-June in the following ports: Portland, ME; Portsmouth, NH; Scituate, Chatham, and New Bedford, MA; Point Judith, RI; Montauk, NY; and Point Pleasant, NJ.
A notice of the meeting dates, times, and locations, along with an executive summary of the discussion document, will be mailed to all limited-access groundfish permit holders.
The committee also has set up a web site that includes more information on its motivations and objectives, the meetings, and how to calculate a bid, as well as background documents explaining the buyout effort and summary minutes of the meetings held to develop the discussion document.
Again, the web site address is <www.nebuyout.org>. Fishermen with questions may contact the steering committee member in their area, or call David Borden at (508) 910-6357, or call Chad Demarest at (508) 495-2237.
Lorelei Stevens
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