Proceedings of the Standing Senate Committee on
Fisheries
Issue 6 - Evidence for April 28, 1998
OTTAWA, Tuesday, April 28, 1998
The Standing Senate Committee on Fisheries met this day at 4:20 p.m. to consider the questions of privatization and quota licensing in Canada's fisheries.
Senator Gerald J. Comeau (Chairman) in the Chair.
[English]
The Chairman: Our witness today is Mr. Bruce Turris.
Welcome, Mr. Turris. Please proceed.
Mr. Bruce Turris, Executive Director, Pacific Black Cod Fishermen's Association: I thought I would begin today by telling a joke about individual quotas.
The Chairman: Is it clean?
Mr. Turris: Very clean. Perhaps my clients would not appreciate me telling it.
I came up with this joke when I was working for the Department of Fisheries and Oceans (DFO):
The fisheries manager is sitting in his office. They have just implemented a new fisheries management regime called "individual vessel quota" (IVQ) in this groundfish fishery. One of the fishermen comes walking in and he is quite upset. He talks to the manager and explains how this individual quota program just does not work. The manager sits back and goes through all the benefits and the problems with the old system -- better prices and better supply, safer fishing and reduction of over-capacity. The fisherman gets madder as he speaks and storms out the door and slams it. The manager looks at him and says, "That guy just doesn't get it; he's not very smart."
Another fisherman comes in and the exact same thing happens. The manager explains it all. The fisherman storms out. It happens again with another fisherman later that day. Each time a fisherman leaves, the manager says, "Well, he's not very smart. He just doesn't understand."
Well, another fisherman comes in and it happens again. After that, the manager is becoming a little bit perplexed. He walks over to his director, and he says to his director, "We have this new IQ program, and it is working very well. The prices are better. Better supply. It is a much safer fishery. We are managing to our Total Allowable Catch (TAC). It is working very well, but the fishermen aren't happy. I've had four fishermen come into my office today and they are irate with us. They are all so stupid."
The director says, "No, no, they are not stupid at all. They just have a low IQ."
It became an allocation dispute.
Honourable senators, thank you for providing me with the opportunity to speak to the issue under consideration today. I work on behalf of the Pacific Black Cod Fishermen's Association. For the previous 14 years, I worked for the DFO. I managed the groundfish fishery on the West Coast -- including sablefish, I might add.
The Pacific Black Cod Fishermen's Association, a legally constituted organization, formed in 1987, is comprised of 48 licence holders. The purpose of the association is to protect its members' investments in the fishery. Part of their constitution includes ensuring the protection and conservation of the sablefish resource.
I use the terms "blackcod" and "sablefish" interchangeably; they are one and the same. In the marketplace, the term "blackcod" is generally used to describe the product. It is bought mostly in Japan. In the world of management and the general discussion of fishery, the term "sablefish" is generally the term used. I will use them both throughout my presentation.
The Black Cod Fishermen's Association has worked very closely for a long period of time with the DFO on the management, research, monitoring and conservation of the sablefish fishery.
The blackcod fishery has been around for more than 40 years. It was initially targeted by the Japanese longline fleet off the west coast of British Columbia. They harvested substantial quantities of what was then an unknown or undefined allowable catch of sablefish on the West Coast.
In 1977, after about 15 or so years of foreign harvest, with the introduction of extended jurisdiction and the 200-mile limit, foreign fishing was eliminated from the west coast of British Columbia. For a couple of years, the only catch of sablefish was as a by-catch in some of the other groundfish fisheries, the trawl fishery and the hook-and-line fishery.
Around 1979, a number of Canadian fishermen attempted to establish a market for sablefish in Japan and some other foreign countries, as well as experiment with a new fishing method that was believed to be more productive: trap fishing.
Both proved successful. The markets were there. Canadians did find access to the Japanese market. Trap fishing proved to be about six to 10 times more productive than traditional methods of harvesting sablefish.
Seeing this, in 1981 the department took measures to limit access to the fishery through limited entry licensing. Their concern was that it was becoming more difficult for them to control and manage the fishery within the TAC, with a growing market, new gear and advancing technology. They tried to restrict access, as they had in a number of other fisheries, dating back to 1969.
Forty-eight limited entry licences were created in 1981, and they have existed since that time. The traditional method at that time for managing the fishery was simply to open the fishery at a specified date, estimate how long it would last based on the fishing power and capacity on the grounds or in the fleet, and then close the fishery when the TAC was estimated to be taken.
It is what we call in management circles a shotgun management system, where you blow the whistle and everybody races out to catch as much as they can. When you estimate that the catch is taken you close it down for the rest of the year.
It did not take long for the department, nor for the industry, to realize that limited entry was not solving the problems of the common property race for the fish.
Sablefish licences, when they became limited, took on increasing values as they reflected an opportunity to catch a substantial quantity of fish and make money. When those permits were traded amongst other participants in the marketplace, the people who purchased them fished much harder than those who had held them before because their investments in them were much larger.
They also invested heavily in vessels and gear, crew and new technology, all in an effort to out-race or out-compete the other participants in the fishery. Using whatever means they had, they were very successful. They used bigger boats, more crews, and fished 24 hours around the clock. They used packers to bring out the extra gear that they were going to use, even though the vessels themselves could not haul them. They used Loran, Loran-C, better fish-finding technology, advanced sonar, sounders, and began to bait-load the traps using extra bait to attract more fish. All of this became necessary just to maintain the share of the catch they had been expecting each and every year and upon which they were relying, given their investment in the fishery. It resulted in a vicious circle of increased fishing effort and capacity.
The fishery in 1981 was 245 days long. It shrank over the subsequent years in 1989 to 14 days in duration. At the same time, the fishery had realized a 42 per cent increase in the TAC. It still fell considerably in terms of fishing time.
The quality of the fish diminished rapidly. Sablefish is a fish that needs to be handled very quickly after landing to maintain its quality, otherwise it degrades fast. It needs to be bled, iced or frozen, and stored properly. Quality diminished as fishermen were more interested in the race to catch as much fish as possible. Bleeding and freezing became secondary. Fish sat on deck as gear was hauled; in fact, far too much gear for the vessel to haul successfully. When they all came to land at the same time after the fishery closed, you would have millions of pounds of fish being landed all at the same time. Some of it sat on the dock or boat for days before it could be off-loaded, properly frozen and shipped to the market.
Economic grants in the fishery were quickly dissipated. This happened not only because of increased harvesting cost through vessels and gear and labour, but also because of decreasing prices as supply gluts became more prominent and as quality decreased over time.
Also, as the openings became shorter and shorter, financial losses associated with vessel breakdown, sickness and poor weather became more of a concern and a greater risk to the vessel operators. You can imagine that with only a 14-day opening, a vessel breakdown for the most part meant that the fishers missed either the whole opening or the rest of the opening. Sickness or injury might mean that a fishing vessel would have to bring the crew or crewmen into shore, and four or five days might be lost in the fishery. Four or five days out of 14 represents a substantial amount of the annual income from the fishery. Fishing costs are increasing rapidly. Landed prices were decreasing. There was no flexibility. All in all, the picture for the fishermen in the fishery was very bleak.
On the other side of the equation was the DFO, and the picture was not looking much better for the DFO at the same time. I really want to stress that I am here giving a presentation regarding the sablefish fishery, not any other fishery.
In the DFO it was becoming very difficult to manage the fishery from 1981 all through 1990, the last year of the shotgun management approach prior to the establishment of IVQs. In every one of those eight years, the fishery had exceeded the TAC. It was not impossible to maintain the fishing capacity within the TAC allocated to the fleet, or allocated to the commercial fishery and caught by the fleet.
Indeed, in the last two years, as the fishery openings became shorter, it became even more difficult to estimate the capacity and how short the season would be. In 1988 and 1989 respectively, the TAC overages were 26 and 18 per cent.
I will give you a better picture of how quickly the fishery was decreasing in time and how difficult it was for the managers -- and I was one of the managers so I lived through that exercise -- in the three preceding years. In 1987 we estimated that it would take 45 days to harvest, down from a 70-day fishery in the year before. In 45 days we overshot the quota. We went down to 20 days in 1988. We overshot the quota by 26 per cent. We went down to 14 days, and the industry was saying that there was no way that they were going to be able to catch that fish in 14 days. We overshot the quota by 18 per cent. We were projecting an eight-day fishery for 1990, had we not adopted the IVQ program.
It was the start of a significant change in terms of the financial structure and availability of resources to the department. Budget cuts within the DFO and priorities within the Pacific region meant that the sablefish industry was not receiving a lot of financial and human resources to manage itself at a time when the fishery was becoming more difficult to manage. The priorities were generally salmon and herring, and groundfish did not receive much in the way of resources as well.
In fact, there was no project for monitoring sablefish landings. We relied on the goodwill of fishermen to provide logbook and sales slip data, which we knew they had a lot of problems with in terms of misreporting and the lack of sales slip data being submitted. There was no enforcement. There was no dedicated enforcement to sablefish; there was very little to groundfish in general. The only enforcement that was given to sablefish was generally just tacked onto some general groundfish patrols or over-flights. Generally the compliance level in the sablefish industry was unknown during the 1980s and as late as 1989.
In 1989, after the season concluded, the Black Cod Fishermen's Association initiated discussions with the DFO on alternative management regimes. The focus of the discussion was on IVQs. After several months of consultation between the Department and the industry they agreed to put in place a pilot IVQ program. As in all other individual quota programs of which I am aware, in Canada at least, shares of the annual TAC are allocated each year to fishermen involved with the fishery, to vessel operators in the fishery.
The idea was to try to address and remove most of the negative attributes associated with the common property race for fish. It was to change the incentive from one of catching as much as you can, as quickly as you can, trying to out-compete everyone else involved. The goal was to instil a conservation ethic within the fishing community and to encourage the department to manage to a conservation goal. The conservation ethic was just not there.
I have given you a very brief background of the development of the fishery, focusing on how it went from limited entry to individual quotas. I would like to try to address some of the issues that I see in the social and economic biological effects of individual quotas.
What has been the impact on the fishery resource? I noted that in the years 1981 through 1989, since limited entry, that the TAC had been exceeded each and every year, and exceeded by a large amount in 1988 and 1989. Since the implementation of IVQs eight years ago, only one year has had an overage. That was in the first year of the program and the overage was half of one per cent. Every year since that time the catch by the commercial sector has been less than the TAC, generally between one and five per cent.
The trap gear has proven itself to be a very, very conservation-minded method of catching fish. It is extremely selective, with very little by-catch. It brings the fish up generally in a live state to the boat. It has in the past allowed for a very good release of juveniles, or in the odd case of by-catch. More recently the implementation of trap rings within the traps means that very, very few juveniles are being caught.
I am not going to suggest that conservation drives each and every fishermen. Clearly economics does that. It is now very much a direct and a tangible issue for the fishermen. If they over-harvest their individual allocation it comes off their following year's individual allocation. There is a direct payment by each vessel for overharvesting.
If others are practising non-sustainable fishing practices, which does not necessarily show up in the landed catch, but which show up over time in the yield levels and the assessment and sustainability of the stock, each fisherman realizes that it will have an impact on his individual allocation. This generally results in some type of action being taken collectively by the group.
In addition, under the old system of race for the fish, the value of individual participants' investment was measured more by their annual catch and their direct investment in vessel and gear. That changes considerably under individual quotas (IQs).
You still have those sizable investments, especially in sablefish, which is a very, very expensive fishery in terms of the investments needed to capitalize and operate viably in it, but the value of the asset is largely in the value of the IQ. The value of that asset, which is significant, is dependent on the health of the resource. So if the health of the stocks is declining, it will be reflected in the value of their asset as well. This is very different from the shotgun approach, where the health of the resource was really very meaningless to the individual fishermen.
In addition, the Black Cod Association has taken a very active role in the science, stock assessment and research of the fishery. I want to stress that that role funds 100 per cent of all the stock assessment work done by the DFO, which includes funding the salaries and benefits, the operating expenditures and capital expenditures of all DFO staff, science and research staff.
They have also hired independent scientists, Dr. Ray Hilborn and Dr. Carl Walters, who worked closely with the DFO science staff.
Indeed, Dr. Hilborn is a co-author of the annual assessment with the DFO. The Black Cod Association has also hired an independent stock assessment biologist technician who works closely with the DFO science staff to coordinate the annual research requirements for the fishery, including charters and data collection and analysis.
The cost for the DFO science staff alone is about $300,000 and about another $150,000 is spent by the association annually for the independent science work it does in concert with the DFO.
A finance committee approves annual budgets for stock assessment, work programs and work plans. In addition, the association does all of the charter work for the science program, most of its tagging work, 10,000 to 15,000 tags each year. They also fund some basic research that's being done by the DFO on productivity regime shifts. This is very basic science work.
The idea is that over time, by knowing the productivity of the ocean's environment, that you can help predict the trajectory of stocks, and determine whether you are on the upswing or a downswing in a productivity regime. It can tell you whether or not you are going to have a good recruitment of juveniles.
More directly and more recently, they have been funding some very positive escape ring work. It has led to all the vessels adopting escape rings in 1998, which, again, as I mentioned earlier, helps ensure juvenile releases and the greater survival of juveniles for recruitment.
On the issue of the profitability of the fishing operations, the IVQ program has clearly improved the profit of the sablefish fishery. The DFO has analyzed this. Using their own cost and earnings surveys from 1988, which is two years prior to IVQs, and from 1991, which includes the first two years of the program, their analysis showed a $2.7 million increase in net economic return from the fishery.
I note that their own report says that this does not take into account cost recovery for all the research assessment, monitoring, enforcement and management cost of the fishery, nor does it take into account fixed costs, repairs and maintenance net and gear expenses, interest expense and return on capital; but it does show that there is an increased net return from the sablefish fishery.
Fishermen acknowledge this themselves. They believe that most of the reasons for this have to do with the increased product quality, the ability to freeze fish at sea and the ability and the flexibility to meet the market demand and fish within a 12-month season. Since the IVQ program began, it has been a 12-month season, opening January 1 and closing December 31.
In terms of access to fisheries resources, there are 48 limited entry licences. However, there has been rationalization; this was one of the objectives of both the DFO and of the industry itself. Today there are 48 active licences, so there has been a 50 per cent reduction in the active fleet. The fishery subscribes fully to the TAC. The TAC is harvested for the most part to its full extent each and every year.
Access to the fishery has not changed. It was very difficult to gain access to it in the 80s and it is still difficult in the 1990s. This has a lot to do with the fishery's capital requirements. A typical sablefish vessel is 75 feet long, would carry a crew of nine and would fish on the edge of the continental shelf using about five to six hundred traps at a depth of around 1200 to 3600 feet. It is a very capital intensive operation and entry is expensive.
Although the licence fee has gone up from about $10 to $10,000, that hasn't really been an issue in terms of access. The people who were there in 1981 are there today for the most part. There has been some rationalization. Those who are left were there at the beginning of the fishery, and they are predominantly independent owner-operators. There is no significant foreign ownership. No large processing companies hold blackcod licences.
I will now discuss incomes, employment and fishing communities. Referring back to the DFO cost and earnings surveys done in the late 1980s and early 1990s, crew income has increased by about $2.7 million under the IVQ program, and crew employment has declined. This is predominantly due to fleet rationalization. This decrease in crew employment was expected, for we went from a system that promoted excessive capital and labour investment, with fishing 24 hours around the clock over a 14-day period. It was not sustainable in terms of conservation, economics or viability.
Crew member participation declined about 40 per cent, from approximately 332 down to 198 between 1989 and 1997. But those who remain have much more stable, longer term and better-paid employment.
There has been a significant change in the regional distribution of the landings. Prior to the IVQ, about 77 per cent of the landings were made in Vancouver, which is the largest metropolitan area in British Columbia. About 18 per cent were done on the southern west coast of Vancouver Island, out of generally the Ucluelet-Tofino area.
That has changed substantially over the last seven or eight years. In 1997, the lower mainland-Vancouver area only accounted for 46 per cent of the landings, down from 77 per cent. Prince Rupert went from 4 per cent prior to the establishment of the IQs to 29 or 30 per cent of the landings currently. Northern Vancouver Island, which is Port Hardy, Coal Harbour, Zeballos, Winter Harbour area went from zero per cent of the landings to 20 per cent at this time, and the west coast of Vancouver Island, Ucluelet-Tofino and the Port Alberni area, has dropped from 18 per cent to approximately 5 per cent of the landings in 1997.
I want to add that the total value of the fishery was about $30 million in 1997. We estimated it would be about $24 million in 1998, due to the Japanese and Asian economic crises. The average is about $24 to $30 million: it has fluctuated in that range over the last four or five years. The money represents almost exclusively foreign currency coming into the country, because nearly all of the sablefish is exported to Japan, Korea and Taiwan.
As for the overall fishing effort, I noted earlier that we had gone from a 245-day fishery to a 14-day fishery. One of the department's objectives was to remove a considerable amount of excess fishing effort and harvesting capacity, and this was to be done by removing vessels, gear and some of the labour from the annual fishery.
The fleet has shrunk 50 per cent, down to 24 vessels. It is now a year-round fishery, and the number of days actually fished by the fleet has gone up fivefold. The entire fleet fished 672 days in 1989. There were 1775 fishing days or about 74 days per vessel in 1997.
There are fewer traps fishing and this is part of the reduction in fishing effort. There were 800 to 1,000 traps per vessel, but now there are about 500 to 600 at most.
Regarding industry structure and the degree of concentration of ownership, I noted earlier that the industry is composed of independent owner-operators who were involved in the fishery, or who started the fishery, in 1981 or before that time. The people involved back then still are involved with the fishery, and there is no significant foreign ownership.
On surveillance, monitoring, enforcement and compliance, we went from zero monitoring of the fishery and no dedicated enforcement, with very little known about the compliance within the fishery, to a considerable change under the IVQ program. Today 100 per cent of the sablefish landed goes through dockside monitoring, which costs about $200,000 a year and is paid for by the fishermen. This contributes to compliance within the fishery, gives information to the managers for individual quota management and for stock assessment purposes.
The program also includes a hail out and a hail in requirement, the scheduling of observers, a computer program and mainframe system which are all paid for by the association. They allow the DFO managers to print or call up the reports that they need to manage the fishery.
The association and the licence holders also pay the partial salaries of six enforcement officers, who are employed at various times of the year in the sablefish fishery. Their salaries, operating costs and benefits are funded through our cost-recovery program.
On the compliance side, of course fishermen take a much greater interest in it, not only within the sablefish fishery but within the other fisheries that are catching sablefish as either a directed species or as a by-catch species. Fishermen have worked with the DFO on numerous enforcement activities.
In industry-funded and cost-recovery activities, there is a more responsible attitude and incentives. Dedicated enforcement and increased monitoring in the fishery has resulted in significantly improved compliance, as reported by the department itself in a number of audits done over the last six or seven years.
The cost of managing the fishery skyrocketed. We went from a shotgun fishery where the department did not enforce, monitor or focus on managing the sablefish fishery. They opened it. They closed it. That was it.
They have gone to a year-round fishery now that requires considerable management on an individual vessel basis, and a lot of administrative processes are needed. The good side to this is that the cost of the work in terms of consultation, IVQ calculations and transfers, hail outs and hail ins and monitoring programs are all recovered. They cost the Government of Canada and the taxpayers nothing.
These programs are all funded either directly or through a cost recovery mechanism, which has been set up with Treasury Board, whereby the association pays the funds directly to the department.
In addition, the department has actually contracted with the DFO and the Black Cod Association to carry out a number of management responsibilities. The association is responsible for drafting annual and long-term commercial sablefish management plans for inclusion in the department's integrated management plans.
The association conducts regular consultation with the DFO and with the commercial industry participants to discuss departmental objectives and operational requirements. We coordinate, oversee and conduct the dockside monitoring program, biological sampling program, stock assessment tagging program and the sablefish IVQ transfer program.
We coordinate the sablefish finance committee, which involves meetings to approve the annual work plans for science and enforcement and management. We approve the budgets for sablefish research and stock assessment. The association is responsible for funding all aspects of the commercial fishery, including research, stock assessment, monitoring enforcement and management. In total the annual cost of these activities is about $1.2 million.
Finally, I would like to end my presentation by addressing the issue of privatization of the resource. I realize that over the next several months you will hear from a number of speakers who oppose individual quotas. I do not for a minute want to suggest that individual quotas are a panacea. They are a tool and they have their shortcomings, as do any management measure. People will tell you that they believe IQs privatize the resource. That is clearly not the position of the Black Cod Fishermen's Association.
We feel that IVQs do not privatize the resource. They restrict access, and without that, you will not have a manageable fishery, one that provides economic rents that can pay for the needs of the fishery, whether they be research or management needs, or for the viability of the commercial sector.
The decision to restrict access to the commercial fishery was made a long time ago, before IVQs. Restricted access began with limited entry. On the West Coast of Canada, that came in 1969 with the Davis plan and the implementation of limited entry salmon licences, which required a significant amount of capital investment.
Limited entry created significant value in commercial licences. It was viewed as a necessary step by the DFO to properly manage the fishery.
Nobody will suggest that we should get rid of limited entry access and just let anybody who wants to go and fish. That would create chaos for the management of the resource. From an economic prospective, it would quickly dissipate the rents and benefits that the fishery can accrue.
Limited entry didn't solve the common property problem, the race for the fish. In fact, it showed that without other tools being used along side of it, limited entry only precipitates a quicker crippling of the fishery as the race for the fish intensifies.
Without the implementation of IVQs, the sablefish fishery would have continued to increasingly overharvest the TAC, and would have lost more vessels and gear and crew at sea in accidents as the fishery became more intense and fishermen couldn't stay by for bad weather days or for vessel breakdowns, given the sizeable income investments and the need to continue to fish.
It would have spawned growing illegal fishing activity as fishermen became more desperate to maintain their share of the catch. Eventually the fishery would have collapsed. In a legal sense IVQs, as structured under the current regime and with the legislation that is in place under the act and the way the minister has allocated the shares of the TAC, is not privatization of the common property resource.
Commercial sablefish fishing licences are privileges, and they are maintaining that status even under IVQs. The minister issues them annually at his discretion and they allow fishermen the privilege of harvesting a set percentage of the TAC on an annual basis. This is different from a race to catch as much as you can of the total share. The issuance of a share of the total TAC lends a quasi proprietary nature, and brings with it the attributes that I talked about in my presentation. It removes the incentive to race and gives instead the incentive to make as much as you can with the catch that you have been allocated.
Traditional management attempts to control fishing inputs, gear, crew, vessels, size of vessels, and time of fishing have always been one or two steps behind the incredible ingenuity of the fishing fleet and the fishermen involved. IVQ management attempts to control the outputs: to change the incentives, to get fishermen to think about how to make the most of the catch, not about catching more.
The fishermen focus their creativeness, their ingenuity, on what they have been allocated. This has led to better product quality, better supply, safer fishing, improved landed prices, more efficient operations, more viable operations, improved TAC management and better communication and cooperation between the DFO and the industry.
I think more importantly, under the system in the sablefish fishery, the fishermen are much more aligned with the DFO regarding the importance for good science, research and management for the long-term benefit of the fishery.
IVQs are a valuable tool, but they are only a tool. They have to be properly used with other regulatory and policy requirements for the fishery. They have to be done through meaningful consultation with the industry, which is what the Black Cod Association has been trying to achieve in its work with the DFO over an extended period of time.
IVQs have turned the sablefish fishery around. It was a classic example of a common property race. It was going in the wrong direction fast. Today, I think many in the department would concede it is one of the best managed fisheries on the west coast of Canada, if not in the world.
The Black Cod Association and the fishermen in the fishery have consistently helped lead the way on many progressive changes, whether they be IVQs, dockside monitoring, cost recovery, direct industry funding and co-management partnering type arrangements. We believe we have demonstrated time and again our ability to work cooperatively with the DFO and that we can act responsibly on behalf of the commercial sector regarding to the management of the sablefish resource.
I thank you again and I would be open to answer any questions that you may have.
The Chairman: Thank you very much for the presentation, Mr. Turris, and yes indeed we will have some questions. Our first question will be from Senator Stewart.
Senator Stewart: Thank you, Mr. Chairman.
As I understand it, your history starts off with 48 vessel licences, and then after the introduction of the quota system the number of vessels drop. Let me read a sentence or two from your brief:
While there remains 48 limited entry permits issued each year, the active fleet has shrunk by 50% from 48 vessels in 1989 (the year immediately preceding the introduction of IVQs) to 24 vessels in 1997.
Does this mean that the number of persons to whom these permits are assigned has shrunk from 48 to 24? And I am using persons in the legal sense.
Mr. Turris: No, it doesn't, sir.
I am going to have to step back. The bureaucracy, the rules of the department, are what creates the difference between the number of active vessels and the number of permits.
A rule that was established prior to IVQs and which has remained since that time permits only one sablefish licence per vessel. Now, even prior to IVQs, there were 48 vessel licences, but there weren't 48 different persons in the legal sense: 39 or 40 entities held the privileges.
With the introduction of IVQs came the ability to transfer and consolidate quota onto fewer vessels, to rationalize the fleet. The department maintained two things: that there could only be one sablefish licence per vessel; and secondly that transfers could only be temporary, for one year.
You could transfer the quota from a permit to another vessel permit for the year, but not on a permanent basis. At the end of the year it has to return to the original licence, and that licence must be held on a separate vessel, because only one vessel can have one licence.
Under the objections of the association, which has requested that they allow for permanent transfers of quota and/or of permits, that has not happened. You still need to have 48 licences on 48 different vessels, but those permits are then transferred annually under the rules that allow for that, so that you have fewer than 48 vessels fishing. As a result, there are 24 of those vessels fishing. Today, I believe there are about 33 legal entities holding those 48 permits.
Senator Stewart: Are you telling us that there are nominal vessels?
Mr. Turris: Yes, I am.
Senator Stewart: There are fictitious vessels.
Mr. Turris: They are not fictitious in that they are probably active in other fisheries. They may have more than one licence. They may have a trawl licence, a salmon licence, a sablefish licence, but they are not active in the sablefish fishery.
Senator Stewart: In any case, as far as active vessels are concerned, there has been a reduction in the number of vessels and in the number of legal entities holding licences; is that correct?
Mr. Turris: Yes, it is.
Senator Stewart: You understand why I am asking this question. You are recommending the system and you have adduced various reasons why you believe it is a very good system. I come from the East Coast, from Nova Scotia, and the fear there is that there will be a concentration of ownership of access. Of course, you know that the big companies, for one reason or another, do not have a good reputation. They are alleged to have raped the fisheries, particularly the ground fisheries.
The fear is that those companies will accumulate licences. The result of this rationalization -- and that is a balanced word. When you hear a bureaucrat talk about rationalization, be very careful -- will be that a relatively small number of corporate entities will control the fishery. The people who now are independent entrepreneurs will be no more than deck hands. That is the fear. Now given your experience with this fishery, which I realize is a very special case as you have relatively small numbers, do you see any good reason why this fear is not well-founded?
Mr. Turris: That is a good question, Senator Stewart.
I have a lot of experience in IVQ fisheries. I was involved with the implementation of the halibut IVQ program, the geoduck IVQ program, the groundfish trawl IVQ program, all on the West Coast. I have managed them for a number of years. When the programs are being discussed and designed, that is always the predominant fear of the fishermen.
I think a lot has to do with where you start from, because I have researched a number of other fisheries that had those similar concerns. On the West Coast, fisheries that were predominantly owner/operator fisheries to begin with went to IVQs. The halibut fishery is the best example. There were 435 licence holders, all small boat, trawl type operators. They were very independent, and were often family operations. Their greatest fear when they were discussing individual quotas was that they were going to be bought out by B.C. Packers or by the large fishing companies that buy their halibut.
They wanted to have controls on quota concentration, so they put in controls on how much quota can be consolidated. In fact, there can be no more than two quotas on a boat, and the vessel must have a licence.
The fishers' fears have not materialized in that fishery. Only about five per cent of the licences were held by large processing companies at the time. For the most part they have divested themselves of them.
My reasoning for this is that it became too expensive for those companies to actually get in there and take control of the fishery, given that they started with virtually nothing to begin with, as the industry was mostly owner-operated.
The groundfish trawl fishery on the West Coast has a lot of investment by the processing sector. I think that it is a fishery that the potential to become more controlled by processors after IVQs, The consolidation of quota is much greater than it was prior to IVQs.
Measures have been put in place which attempt to restrict that. Only time will tell whether or not they will be successful, because the fishery is only into its second year now under IVQs. In the case of New Zealand, you have seen a considerable increase in corporate ownership of the quotas. They started with large holdings, and the initial allocation saw Fletcher Challenge and others receive enormous quotas. It depends on the starting point.
In the case of sablefish and halibut, there are independent owner/operator systems. Sablefish is a very specialized fishery, requiring significant initial investment. Those already in the fishery have a natural advantage. If the large processing sector does not make a lot of initial investment, they are not going to get into the fishery.
In 1989 or 1990, one processor could have purchased the licenses of the entire halibut fleet for far less than it would cost to buy 20 per cent of the quota today.
Senator Butts: Could I buy a boat and get the IVQ?
Mr. Turris: The licences for all of the fisheries trade independently. A vessel owner may sell you his vessel and licence with the quota, or you may buy the vessel separately.
Senator Butts: It is transferable?
Mr. Turris: Yes, the licence is transferable.
Senator Butts: Why is the term not ITQ, as it is in the rest of the world?
Mr. Turris: There is a reason for that. In 1988, I took the geoduck program, which was an ITQ proposal, to the director of operations. At the time there was a negative connotation to the term, and the regional director did not want the "t" in the acronym. In order to take the proprietary aspect out of the term, it was decided to refer to "individual vessel quotas." Since that time, every program has carried the IVQ acronym.
Senator Butts: One of the problems is that, if the vessel moves somewhere else, the quota goes with it.
Mr. Turris: I think your concern is a larger issue on the East Coast than it is on the West Coast.
Senator Butts: You can afford to be ethical on the West Coast, can you not?
Mr. Turris: Economics is an important issue to the members, and their ethics can be challenged, just like anybody else's.
Senator Butts: You are giving this to us as a model?
Mr. Turris: It is a model that has worked very well in sablefish. There are certainly examples of individual quota programs that have failed. The West Coast abalone fishery failed because, while it did implement a system, there was no enforcement of it. A lack of proper management and monitoring of the catches, as well as poor stock assessment and over-harvesting, were all associated with it. While IVQs are an important tool, they are just one of the tools needed in an entire package for management of the fishery.
Senator Butts: You referred to the entry of new participants, and I wonder how new participants come in. Would they buy out a licence, or are licences retired?
Mr. Turris: They would buy a licence.
Mr. Turris: The department recognizes change of vessel ownership and even change of the licence privilege. In the market, it is an actual purchase of the licence.
Senator Butts: All of the problems to which you refer were due to common property theory.
Mr. Turris: Yes.
Senator Butts: The only problem you have not solved is unemployment.
Mr. Turris: There are still many problems in the fisheries.
Senator Butts: The system may do wonderful things, but it cuts down on employment.
Mr. Turris: There are ongoing problems in the management of the fisheries, and I do not claim that this is a panacea.
Senator Butts: It is not a panacea, but it is doing away with common property for private property.
Mr. Turris: Without implementing private property, it is trying to provide the tools that private property would provide the management resources if private property were implemented. Quasi property.
Senator Butts: Do these people police themselves?
Mr. Turris: No. They hire 30 or 40 independent monitors along the coast. They also provide funding for dedicated enforcement to the department.
Senator Butts: Who is responsible for punishment when quotas are exceeded?
Mr. Turris: It is an administrative process.
Senator Butts: That is your job, then.
Mr. Turris: With the department, of course. The minister issues the licences annually. If a vessel were to go over by 2,000 pounds, I would prepare the documentation, and the quota for the next year would be reduced by 2,000 pounds. The minister would then issue the licence with the reduced quota.
Senator Butts: You talked about the size of the area; from Prince Rupert in the north all they way down. This is a tremendous policing operation for this small fishery.
Mr. Turris: Yes, and it is paid for by the industry.
Senator Butts: Can they make a living in 14 days, or in the case of the other figure, 74 days?
Mr. Turris: Yes. The economic situation of the fishery has greatly improved, and there are only 24 active vessels.
Senator Butts: It is tremendous that they can make a living in 14 days.
Mr. Turris: They did not make a living in 14 days. The fishery was on the verge of collapse.
Senator Butts: They are making it in 74 days?
Mr. Turris: That is the average per vessel. Depending on the quota that they are trying to capture in the year, some vessels actually fish for well over 150 days. The average across the active fleet is 74 fishing days, however.
Senator Butts: What is the role of the DFO in all this? The mistakes were obviously made by the DFO before.
Mr. Turris: I did not intend to leave that impression. I do not want to suggest that there were mistakes. The best efforts were made by fisheries managers and the DFO to maintain proper management of the fishery. This is a logical progression in the management of the fishery.
The role of the DFO is a complicated issue. The task of the department is to preserve the resource; conservation is front and centre. The role is far greater than that, however. If conservation were the only issue, the department would not have a commercial fishery; it would leave all of the fish in the water.
The department is obviously also in the business of creating economic opportunity. They are trying to create wealth for the participants, and some type of return on this public resource for the people of Canada. Over time, measures will hopefully be taken to allow the fishery to move away from subsidies, and towards maintained self-sufficiency. It clearly goes beyond conservation.
Senator Stewart: We started off with 48 fishing vessels, and we are now down to 24. The average crew on a vessel is nine, so there are 216 people in the fleet. Were there then 432 people working on the original 48 vessels?
Mr. Turris: No. Those vessels did not carry nine people. On those vessels, freezing was not being done on board, and the fish were not being properly handled, in terms of heading and gutting. The fish were just being caught and tossed in.
Senator Stewart: I am trying to see the impact on employment that the change has had. How many served on those 48 vessels?
Mr. Turris: We have gone from 332 to 198.
[Translation]
Senator Robichaud: I understand that your system has a great deal going for it. You have considerable control over who is allowed to fish and when and how much they are allowed to catch. This system serves the interests of resource conservation as well as the interests of boat and license owners. Would you not agree? You say that you are now up to 24 boats with revenues of between $24 and $30 million, meaning that each operation takes in between $1 million and $1.2 million a year. Is that right?
[English]
Mr. Turris: In terms of gross value, yes.
[Translation]
Senator Robichaud: Yes.
Mr. Turris: Yes.
Senator Robichaud: What if the minister were to say to your association: "We have some problems. Some fishers work in certain areas of the fishery where the resource is not as plentiful and we would like to issue new licenses". How many new licenses could the department reasonably issue if fishers are to maintain a certain profit margin?
[English]
Mr. Turris: Obviously I am not.
Senator Robichaud: I know that it is a loaded question.
Mr. Turris: Senator Robichaud, clearly the members of the Black Cod Association would argue against that.
Senator Robichaud: They would resist.
Mr. Turris: Yes, they would resist. They would argue strenuously against increasing the number of participants in the fishery. They have heavily invested in the process of improving the management of the fishery, and of rationalizing the fleet. They would resist increasing the number of participants because of problems in the management of other sectors of the commercial fishery.
[Translation]
Senator Robichaud: The resource belongs to all coastal communities, would you not agree?
[English]
Mr. Turris: It is a public resource, and it belongs to the taxpayers of Canada. There are many ways for the Government of Canada to access proper returns to the people of Canada. Those benefits should not necessarily go just to the communities who already benefit from their association with the fishery, and from the various landings. The Government of Canada should take up policies on issues like resource rent, and the capture of those rents.
To my knowledge, the sablefish fishery is the only one in Canada that actually pays rent. In other words, it covers all of the costs of managing the fishery. Through the licence fees, that would reflect rent over and above the cost of the fishery.
Senator Robichaud: I am not interested in receiving rent. I am interested in redistributing this resource so that more people can participate in it and earn a decent living from it. I do not want to cause problems for the people who are currently in the fisheries, but I have a problem when the Government of Canada acts as the protector of millionaires. I use that term very freely, but you can see my problem.
Mr. Turris: If the Government of Canada wants to reallocate the resource by giving it to 50 more participants, it has the authority and the ability to do so.
Senator Robichaud: I realize that. I would not like to see anything done recklessly, but there could be room for more people in the fishery.
Mr. Turris: If the Government of Canada were to consider bringing in more people, it would have to measure the impact and consequences of such actions. It would have to enter into consultations and discussions to see if those actions would disrupt the positive attributes of the present fishery.
Senator Robichaud: You almost sound like a snow crab fisherman.
Mr. Turris: That forum has not taken place, although it is one with which both the Government and my association will have to deal. You know what is going to happen, just as you know what happened in the snow crab fishery.
Senator Robichaud: I do know the answer, but sometimes the answers are not applicable unless you have some cooperation from within the industry, and from the people who exercise the privilege. Sometimes greed gets in the way, and governments are forced back.
I am looking to redistribute this wealth, because it is wealth. Governments are having difficulty finding ways to provide productive employment for people. It is certainly a problem in Newfoundland. You heard George Baker say that people were on the shore watching all those boats catching their fish. They could not do a thing.
Mr. Turris: All I can tell you is that the Black Cod Association has been very cooperative, and we have worked closely with the DFO for well over a decade. Whether it was cost recovery, different management techniques, or paying for a DFO science and enforcement, we have always been able to find a mutually acceptable solution.
Senator Robichaud: Should I make the suggestion to the minister that he look at increasing the number of people in the fishery?
Mr. Turris: I am not going to respond, because I do not want to influence what you recommend to him.
Senator Adams: You talked about quotas for your member fishermen. How does that system work? Is every ship and boat allowed to catch so much of the quota?
Mr. Turris: There is a formula that was agreed to by the department and the industry in 1989. It is applied against the commercial share of the TAC, and it is based 70 per cent on historical catches during the 1988-1989 period, and 30 per cent on the vessel's length.
That formula is applied to the annual share that the sablefish fleet receives, and then is allocated to each vessel. The amount is printed on the vessel's licence. The vessel must fish within that allocation, and it must adhere to the restrictions that are attached to the licence. Those conditions will say that dockside monitoring must be done. The vessel must hail out and hail in, and it must have all the product identified in a certain way. The fish must be landed in a certain form, and information such as the location of the catch must be provided to the department when the quota has been captured and landed. Scientific information is also required, as is other information which will be used for stock assessment.
Senator Adams: You mentioned the Japanese. Was anybody policing the 200-mile limit? Were the Japanese crossing it? How does the system work now? You mentioned Japanese trawlers going through there.
Mr. Turris: At the time, we did not have a 200-mile limit. The Japanese would come right to the edge of the continental shelf with dedicated long-line vessels which were 250 feet long. Some estimate that they caught up to 20,000 tonnes in some years, which they would process and freeze on board, and then take back to Japan. The annual allocation this year is about 4,500 tonnes. There was no enforcement and very little regulation. The catch data that was requested by Canada is sparse and incomplete. When the foreign fishery was in place off the West Coast, there was very little monitoring and regulation of it. With increased management of the commercial domestic fishery since 1981, that has changed considerably.
Senator Adams: It was only the Japanese?
Mr. Turris: That was the only foreign fleet that fished sablefish. A number of foreign fleets came into the zone at the time, including American, Russian, and Polish vessels. They were constantly fishing off our coast for various species.
Senator Butts: Do fishing zones exist for the boats?
Mr. Turris: No. The sablefish is generally viewed as one stock, and it can be caught anywhere from the Washington/British Columbia border all the way up to the Dixon entrance.
Senator Butts: Once you have a licence, you can go anywhere you want?
Mr. Turris: You can find sablefish all over the west coast, at a depth of at least 200 fathoms. You do not find them in congregations or commercial quantities until you get to depths of 200 fathoms.
Senator Butts: Do these fish migrate to different zones and areas?
Mr. Turris: They do migrate. There is a debate over how much migration there is between Canada and the U.S., both between Alaska and northern B.C., and between southern B.C. and Washington.
Senator Butts: I can chase the fish anywhere?
Mr. Turris: You cannot fish across the border.
Senator Robichaud: This quota was distributed on the basis of historical catch and the length of the boat. Some operators obviously get a certain quantity, and others get more. What would the gross of a smaller operation be, versus the gross of a larger one?
Mr. Turris: The smallest allocation is around 100,000 pounds of sablefish. In 1998, the gross on 100,000 pounds would be around $450,000 to $500,000. The largest individual allocation is about 700,000 pounds, which would have a gross of $2.8 million to $3 million.
Senator Robichaud: How many of these operators also fish for other species?
Mr. Turris: Of the 24 active licences, approximately 14 would be dedicated to sablefish. The remaining ten would actively fish in other fisheries, usually halibut and salmon, with a few in groundfish trawl.
Senator Robichaud: These operators are doing very well?
Mr. Turris: They are doing much better than they were in 1989.
Senator Stewart: Where is the bulk of the processed catch sold? Where is the market?
Mr. Turris: Approximately 80 per cent of the product goes to Japan. Some years that figure might be even higher.
Senator Stewart: Will the financial and economic situation in Japan have any impact on the demand for fish?
Mr. Turris: It is already having an impact. The price is down almost 20 per cent already because of the slowdown in the Japanese economy over the last couple of years. We have not felt the effects of the recent Asian crisis yet, because this year's fishery has not sold into the market yet. We do anticipate some real impacts this year as well, however. We just do not know how great those impacts will be.
The Chairman: I have an article from the 1998 National Fisherman called "The Sable Fish: Hungry Japanese Market Keeps Demand and Prices High for Alaska Product." I think that it also applies to the Canadian product.
Mr. Turris: I am not sure if that article talks about the decrease in supply in the Alaskan and Washington fisheries.
The Chairman: It does, yes.
Mr. Turris: It is probably talking about the offset of the decreased supply also coming out of Alaska.
The Chairman: It does mention that.
You make a very strong case for what is in place for the blackcod. What this committee is trying to do, however, is to apply the experience of some fisheries to those of other fisheries. We want to come up with some general ideas about whether or not privatization is the way to go.
You talk about the elimination of the race for fish as being one of the most beneficial results of the IVQ. One of the problems that can come up with IVQs is that in-season management becomes almost impossible. In other words, once the tack is set for the season, changing it mid-season would cause all kinds of harm to that particular fishery. The benefits of eliminating the race for the fish are themselves eliminated.
This creates pressure on DFO managers not to do any kind of mid-season or end-season changes which could be caused by new information.
A secondary problem is that people with licences would resist any kind of end-season change, because it would impact on the value of their quotas. I am talking about the arm chair fisherman here who may want to sell his quota to his colleagues in the fishery. If there is any kind of mid season change it is going to place a downward pressure on the value of his quotas.
Is the sablefish immune to such end-season changes of courses.
Mr. Turris: You are probably referring to what happened on the East Coast with the in-season closure of a fishery that had IVQs.
In terms of resource to management, some fisheries, such as sablefish, are in a good situation, so that in-season changes do not have to be made. A TAC is estimate, and only 5 to 10 per cent of the estimated biomass is harvested. Blackcod is a very long-lived species, and it would be exceptional to anticipate the closure of such a fishery.
The Chairman: I was not referring to closure, but rather to mid-season changes, to reducing the TAC.
Mr. Turris: In terms of the reaction that it would provoke, a reduction would be similar to closure. You would not anticipate a TAC reduction in the sablefish fishery. Even if the TAC were significantly over-estimated, the harvest rate is so low that the rate could be adjusted the following year to make up for the error. In some fisheries, the harvest rate is too high, and an incorrect estimate of the TAC means that drastic measures must be taken.
The Chairman: You do quite a bit more processing on the vessel now -- gutting, filleting, and icing. We have not talked about onshore jobs at all. Once the catch is landed, is there any further processing?
Mr. Turris: In 1989, when the fish was being landed almost exclusively in a fresh form, it would be processed and frozen on shore. It was almost always headed and J-cut offshore. Some onshore employment has been lost because the fish is frozen at sea. Now, when the product comes in frozen, it is reglazed, boxed, and shipped onshore.
The Chairman: There is almost no onshore processing?
Mr. Turris: The only additional processing would have been the freezing.
The Chairman: You could land it in Vancouver and ship it away. There would be no real impact on the coastal communities that used to depend on this fish?
Mr. Turris: There would not be the impact that you would have in salmon or other fisheries.
The Chairman: I will refer to the article to which I brought your attention earlier. Based on the difficulty of finding the fish, the Americans have cut their quota by one third in Alaska. In Canada, we have actually increased the quota.
Generally speaking, the U.S. has not shown as much interest in conserving the fish as Canada has. In this case, however, the Americans are reducing their quota, and we are increasing ours. I find it hard to believe that this would be happening, but you do not seem to be as concerned as the Americans are.
Mr. Turris: That would be a terribly incorrect interpretation of that article. First of all, your information is not fully accurate. This year's TAC is identical to last year's.
The Chairman: That is in Canada?
Mr. Turris: In Canada. It is down in Alaska, Washington, and Oregon.
The Chairman: It has gone from 78,000 tons to 5, 200 tons.
Mr. Turris: Yes. This information would best come from science staff at the DFO. I do not want to speak for them, but I am going to. With our TAC, we have been managing conservatively for the last decade, and the science staff have always set a conservative TAC. We have a lower harvest rate than other fisheries, and we generally make more conservative assumptions in the annual assessment.
Our stock assessment is driven by entirely different information than is the U.S. assessment. Over the last 15 to 20 years, in fisheries other than salmon, most of the assessments have been based on the catch per unit effort. The commercial fishing catch is taken, and the amount of effort that went into catching the fish, along with the efficiency of the catch, is used to estimate the abundance of the resource. Owing to the cod issue on the East Coast, it has recently been realized in Canada that the catch per unit effort is terribly flawed.
Five or six years ago, we moved away from using catch per unit effort to establish a TAC, and went instead to tagging. Some 10,000 to 15,000 tags are issued annually, and the returned tags are used to estimate the abundance of the resource. Over time that has proved to give us a better estimate.
Alaska has continued to use a catch per unit effort, as have Washington and Oregon. I have read those assessments. They are realizing that, in terms of matching what they are seeing to what their catch per unit effort data is telling them, there are a lot of holes in their assessment process.
Their catch per unit effort data keeps going up, but the fishermen are having a tougher time finding the fish. They do not match. The reason that they do not match is because fishermen can increase their effort and their catch through technological changes. Their assessments do not reflect the use of technology.
In my opinion, the science staff at the Pacific Biological Station will stand by their assessment. They believe it to be conservative, they believe it to be representative, and it is using a different technique.
The Chairman: I would like to get back to the question of consolidation of the quota.
You mention in your report that the industry is primarily made up of independent vessel owners. I assume that there are those who are not independent vessel owners. Who would those people be?
Mr. Turris: I think that they are all legal entities, although there might be one or two individuals who hold it by name. Two licences are held by B.C. Packers. This is part of the concentration that I said has occurred. The licence is attached to the vessel, and the quota is issued as part of the privilege of the vessel. There are agreements between B.C. packers and other industry participants as to where the quota has been sold, but the licence is still attached to a vessel that is held by a large processing company.
There is a company started by a fisher who began as an independent operator. His operation has grown, and he has established his own groundfish trawl processing company. He also holds three or four sable fish licences.
The Chairman: In this scheme there is nothing to stop the consolidation of the quotas into fewer and fewer hands?
Mr. Turris: No.
The Chairman: In fact, a very rich individual could go in, buy out the quotas, and hire staff to work on individual vessels?
Mr. Turris: Yes.
The Chairman: That person could land wherever he pleased, and do what he like with the fish.
Mr. Turris: A very rich individual could do that in any West Coast fishery right now.
Senator Robichaud: In your opinion, is it a good thing that anybody could come in and buy the quotas?
Mr. Turris: No, it is not a good thing.
The Chairman: In one of your responses you said that there was no significant foreign ownership. My impression was that there was not supposed to be any foreign involvement in our fisheries.
Mr. Turris: I am being very comprehensive in my view of foreign ownership. The licences and the vessels are held by corporations. The majority owner of that corporation has to be Canadian, but that does not mean that the minority owner or participant has to be a Canadian. As well, in large processing companies such as B.C. Packers, J.S. McMillan, or Ocean Fisheries, there are foreign shareholders.
The Chairman: They must, however, be minority interests.
Mr. Turris: Yes. The policy of the department is that the licence has to be held by a Canadian corporation or by a Canadian citizen.
The Chairman: I have a problem with the word "ownership". If you own something, you are the majority owner. You control it.
Mr. Turris: The vessel is what is owned, not the licence. The vessel has 64 shares in the ship's registry. Majority ownership is 33 shares. In all sablefish cases that I am aware, majority ownership is held by a Canadian company or by a Canadian individual. Therefore, the licence is issued to the vessel.
Senator Robichaud: Could we refuse to issue the licences if an American interest were to buy a majority stake in an operation? Would free trade not enter into it?
Mr. Turris: I do not know the answer to that question.
The Chairman: At the present time a foreign owner cannot own more than 49 per cent of the shares of a fishing licence.
Mr. Turris: There are two forms of licences on the West Coast. Some, as is the case with herring, are issued to individuals. That is not the case with sablefish. The majority of licences, however, are vessel based licences. Perhaps the rules to which you refer would apply to licences which can be issued to the individual, or to the individual corporation.
The Chairman: We will now go in camera.
The committee continued in camera.